DEPARTMENT OF COMMERCE
International Trade Administration
[C-122-404]
Live Swine From Canada; Final Results of Countervailing Duty
Administrative Review
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
ACTION: Notice of final results of countervailing duty administrative
review.
SUMMARY: On September 9, 1997, the Department of Commerce published in
the Federal Register its preliminary results of administrative review
of the countervailing duty order on live swine from Canada for the
period April 1, 1995 through March 31, 1996 (62 FR 47460). The
Department has now completed that administrative review in accordance
with section 751(a) of the Tariff Act. For information on the net
subsidy, please see the Final Results of Review section of this notice.
We will instruct the Customs Service to assess countervailing duties as
detailed in the Final Results of Review section of this notice.
EFFECTIVE DATE: January 14, 1998.
FOR FURTHER INFORMATION CONTACT: Rick Herring or Gayle Longest, Office
of CVD/AD Enforcement 6, Import Administration, International Trade
Administration, U.S. Department of Commerce, 14th Street and
Constitution Avenue, N.W., Washington, D.C. 20230; telephone: (202)
482-2786.
SUPPLEMENTARY INFORMATION:
Applicable Statute and Regulations
Unless otherwise indicated, all citations to the statute are
references to the provisions of the Tariff Act of 1930, as amended by
the Uruguay Round Agreements Act (URAA), effective January 1, 1995 (the
Act). In addition, unless otherwise indicated, all citations to the
Department's regulations are to the regulations codified at 19 CFR
Sec. 355 (1997). The Department has conducted this administrative
review in accordance with section 751(a) of the Act.
Background
Pursuant to 19 CFR Sec. 355.22(a), this review should cover only
those producers and/or exporters of the subject merchandise for which a
review was specifically requested. However, as explained in the
preliminary results, the Department of Commerce (the Department) has
determined that it is not practicable to conduct a company-specific
review of this order due to the large number of producers and/or
exporters that requested a review. See Live Swine from Canada;
Preliminary Results of Countervailing Duty Administrative Review, 62 FR
47469 (September 9, 1997) (preliminary results). Therefore, pursuant to
section 777(e)(2)(B) of the Act, we are conducting a review of all
producers and/or exporters of subject merchandise covered by this order
on the basis of aggregate data. This review covers the period April 1,
1995, through March 31, 1996, and 31 programs.
Since the publication of the preliminary results on September 9,
1997, the following events have occurred. We invited interested parties
to comment on the preliminary results. On October 23, 1997, the
Government of Canada (GOC), the Government of Quebec (GOQ), and the
Canadian Pork Council (CPC) (respondents) submitted case briefs. On
October 30, 1997, the National Pork Producers Council (petitioner)
submitted a rebuttal brief. We requested a revised brief from the GOQ
because the initial case brief contained untimely new factual
information. See Letter from Barbara E. Tillman to Pepper, Hamilton and
Scheetz dated November 4, 1997 (public document on file in the Central
Records Unit, Room B-099 of the Main Commerce Building). See also 19
CFR Sec. 355.31(a)(1)(ii). The Department has not considered the
returned new factual information for these final results of review. See
19 CFR Sec. 355.3(a). On November 7, 1997, the GOQ submitted a revised
case brief. The comments addressed in this notice are those presented
in the revised case brief. At the request of the respondents, the
Department held a public hearing on November 17, 1997.
Scope of the Review
The merchandise covered by this order is live swine, except U.S.
Department of Agriculture certified purebred breeding swine, slaughter
sows and boars, and weanlings (weanlings are swine weighing up to 27
kilograms or 59.5 pounds) from Canada. The merchandise subject to the
order is classifiable under Harmonized Tariff Schedule (HTS) item
numbers 0103.91.00 and 0103.92.00. The HTS item numbers are provided
for convenience and customs purposes. The written description of the
scope remains dispositive.
Verification
We verified information provided by the GOC and the GOQ related to
their claim, pursuant to section 771(5B)(F) of the Act, for ``green
box'' treatment of the programs covered by the Canada/Quebec Subsidiary
Agreement on Agri-Food Development (Agri-Food Agreement). We followed
standard verification procedures, including meeting with government
officials, and examining relevant accounting and original source
documents. Our verification results are outlined in the public version
of the verification report, which is on file in the Central Records
Unit.
Allocation Methodology
In the past, the Department has relied on information from the U.S.
Internal Revenue Service (IRS) on the industry-specific average useful
life of assets in determining the allocation period for nonrecurring
grant benefits. See General Issues Appendix appended to Final
Countervailing Duty Determination; Certain Steel Products from Austria,
58 FR 37063, 37226 (July 9, 1993). However, in British Steel plc. v.
United States, 879 F. Supp. 1254 (CIT 1995) (British Steel), the U.S.
Court of International Trade (the Court) ruled against this allocation
methodology. In accordance with the Court's remand order, the
Department calculated a company-specific allocation period for
nonrecurring subsidies based on the average useful life (AUL) of non-
renewable physical assets. This remand determination was affirmed by
the Court on June 4, 1996. See British Steel, 929 F. Supp. 426, 439
(CIT 1996).
The Department has not appealed the Court's decision and, as such,
we intend to determine the allocation period for nonrecurring subsidies
using company-specific AUL data where reasonable and practicable. In
Live Swine from Canada; Preliminary Results of Countervailing Duty
Administrative Review, 62 FR 52426 (October 7, 1996) and Live Swine
from Canada; Final Results of Countervailing Duty Administrative
Review, 62 FR 18087 (April 14, 1997) (Swine Tenth Review Results), the
Department determined that it is not reasonable or practicable to
allocate nonrecurring subsidies using company-specific AUL data because
it is not possible to apply a company-specific AUL in an aggregate case
(such as the
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case at hand). Accordingly, in this review, the Department has
continued to use, as the allocation period, the average useful life of
depreciable assets for the swine industry, as set forth in the U.S. IRS
Class Life Asset Depreciation Range System. See Swine Tenth Review
Results. We invited interested parties to comment on the selection of
this methodology and to provide any other reasonable and practicable
approaches for complying with the Court's ruling. The GOQ submitted
comments on this issue. The GOQ agreed with the Department that it is
not feasible to allocate nonrecurring grants using company-specific
data in aggregate cases, and the IRS tax tables are appropriate for
allocating nonrecurring grants in this review.
Calculation Methodology for Assessment and Cash Deposit Purposes
For the period of review (POR), we calculated the net subsidy on a
country-wide basis by determining the subsidy rate for each program
subject to the administrative review in the following manner. We first
calculated the subsidy rate on a province-by-province basis; we then
weight-averaged the rate received by each province using the province's
share of total Canadian exports to the United States of market hogs. We
then summed the individual provinces' weight-averaged rates to
determine the subsidy rate of each program. To obtain the country-wide
rate, we then summed the subsidy rates from all programs.
Analysis of Programs
I. Programs Conferring Subsidies
Based upon the responses to our questionnaires, the results of
verification, and written comments from the interested parties we
determine the following:
Programs Previously Determined to Confer Subsidies
In the preliminary results, we found that the following programs
conferred countervailable benefits on the subject merchandise. We did
not receive any comments on these programs from the interested parties,
and our review of the record has not led us to change any findings or
calculations. Accordingly, the net subsidy for each of these programs
(less than Can$0.0001 per kilogram, except for the Saskatchewan Hog
Assured Returns Program, which is Can$0.0015 per kilogram), remains
unchanged from the preliminary results.
1. Feed Freight Assistance Program
2. Saskatchewan Hog Assured Returns Program (SHARP)
3. Alberta Crow Benefit Offset Program (ACBOP)
4. Ontario Livestock and Poultry and Honeybee Compensation Program
5. Saskatchewan Livestock Investment Tax Credit
6. Saskatchewan Livestock Facilities Tax Credit
7. Ontario Bear Damage to Livestock Compensation Program
8. New Brunswick Livestock Incentives Program
9. New Brunswick Swine Industry Financial Restructuring and
Agricultural Development Act--Swine Assistance Program
10. New Brunswick Swine Assistance Policy on Boars
11. Nova Scotia Improved Sire Policy
12. Nova Scotia Swine Herd Health Policy
In the preliminary results, we also found the following programs
conferred countervailable benefits on the subject merchandise. Our
review of the record and our analysis of the comments submitted by the
interested parties summarized below, have led us to modify our
calculation methodology from the preliminary results for the following
three programs:
13. National Tripartite Stabilization Program for Hogs (NTSP)
We have changed the methodology to calculate the benefit resulting
from the distribution of the surplus after the termination of this
program. This methodological change is discussed in the Department's
Position on Comment 9, below. As a result of this change, the net
subsidy for this program is now less than Can$0.0001 per kilogram.
14. National Transition Scheme for Hogs
We have changed the calculation methodology for this program as
discussed in the Department's Position on Comment 9, below. As a result
of this change, the net subsidy for this program is now Can$0.0047 per
kilogram.
15. Quebec Farm Income Stabilization Insurance Program (FISI)
We have changed the calculation methodology for this program as
discussed in the Department's Position on Comment 6, below. As a result
of this change, the net subsidy for this program is now Can$0.0008 per
kilogram.
II. Programs Found Not To Confer Subsidies
In the preliminary results, we found that this program did not
confer countervailable benefits during the POR. Our analysis of the
comments submitted by the interested parties, summarized below, has not
led us to change our findings from the preliminary results.
1. Research Program Under the Canada/Quebec Agri-Food Agreement
III. Programs Found To Be Not Used
In the preliminary results, we found that the producers and/or
exporters of the subject merchandise did not apply for or receive
benefits under the following programs:
1. Western Diversification Program
2. Federal Atlantic Livestock Feed Initiative
3. Agricultural Products Board Program
4. Ontario Export Sales Aid Program
5. Ontario Rabies Indemnification Program
6. Ontario Swine Sales Assistance Policy
7. Newfoundland Hog Price Support
8. Newfoundland Weanling Bonus Incentive Policy
9. Newfoundland Hog Price Stabilization Program
We did not receive any comments on these programs from the
interested parties, and our review of the record has not led us to
change our findings from the preliminary results.
IV. Programs Found To Be Terminated
In the preliminary results, we found the following programs to be
terminated and that no residual benefits were being provided. We
received no comments on our preliminary results with respect to these
programs, and our findings remain unchanged in these final results.
1. Prince Edward Island Hog Price Stabilization Program
2. Canada/British Columbia Agri-Food Regional Development Subsidiary
Agreement
3. Canada/Manitoba Agri-Food Development Agreement
4. New Brunswick Agricultural Development Act-Swine Assistance Program
V. Other Programs Examined
On November 5, 1996, the GOQ made a submission, pursuant to section
771(5B)(F) of the Act, claiming that the Agri-Food Agreement met the
criteria for ``green box'' treatment under Annex 2 of the Agreement on
Agriculture of the World Trade Organization (WTO). On January 21, 1997,
the GOQ indicated that the GOC also supported the green box claim.
Under section 771(5B)(F) of the Act, domestic support measures
provided with respect to the agricultural products listed in Annex 1 to
the 1994 WTO Agreement on Agriculture shall be treated as
noncountervailable if the Department determines that the measures
conform fully with the provisions of Annex 2 to the same
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agreement. Accordingly, the GOQ and the GOC posited that funding under
the Agri-Food Agreement should be noncountervailable pursuant to
section 771(5B)(F) of the Act.
During the POR, producers of the subject merchandise received
assistance under the three component programs of the Agri-Food
Agreement for which the GOC and the GOQ have requested green box
treatment: (1) Research, (2) Technology Innovations, and (3) Support
for Strategic Alliances.
Specifically, with regard to the Research program under the Agri-
Food Agreement, as discussed above in section II, we have determined
that this program does not confer countervailable benefits because the
results of the research are publicly available. See e.g., Certain
Carbon Steel Products from Sweden; Preliminary Results of
Countervailing Duty Administrative Review, 60 FR 44014 (August 24,
1995) and Certain Carbon Steel Products From Sweden; Final Results of
Countervailing Duty Administrative Review, 61 FR 5378 (February 12,
1996). As such, there is no need to address whether benefits provided
under the Research program are noncountervailable in the context of
section 771(5B)(F) of the Act. With regard to the Technology
Innovations program and the Support for Strategic Alliances program,
any benefit to the subject merchandise under either program would be so
small (Can$0.00000045 and Can$0.00000055 per kilogram, respectively)
that there would be no impact on the overall subsidy rate. Accordingly,
because there is no change to the overall subsidy rate in the instant
review, we have not included the benefits from TI and SSA in the
calculated subsidy rate for the POR, and do not consider it necessary
to address the issue of whether benefits under these programs are
noncountervailable as green box subsidies pursuant to section
771(5B)(F) of the Act. See, e.g., Final Affirmative Countervailing Duty
Determination: Steel Wire Rod from Germany, 62 FR 54990, 54995 (October
22, 1997); Certain Carbon Steel Products from Sweden; Preliminary
Results of Countervailing Duty Administrative Review, 61 FR 64062,
64065 (December 3, 1996); Certain Carbon Steel Products from Sweden;
Final Results of Countervailing Duty Administrative Review, 62 FR 16549
(April 7, 1997) (Certain Steel from Sweden); Final Negative
Countervailing Duty Determination: Certain Laminated Hardwood Trailer
Flooring (LHF) from Canada, 62 FR 5201 (February 4, 1997); Industrial
Phosphoric Acid from Israel; Preliminary Results of Countervailing Duty
Administrative Review, 61 FR 28845 (June 6, 1996); and Industrial
Phosphoric Acid from Israel; Final Results of Countervailing Duty
Administrative Review, 61 FR 53351 (October 11, 1996) (IPA from
Israel).
Analysis of Comments
Comment 1: Green Box Claim. The GOC argues that, although the
Department declined to make the ``green box'' determination on the
three component programs under the Agri-Food Agreement based on there
being no impact on the overall subsidy rate, we still treated these
programs as actionable and thereby made prejudicial findings. These
prejudicial findings include the Department's preliminary determination
that the Technology Innovations (TI) program was specific and conferred
a countervailable benefit, and that the Support for Strategic Alliances
(SSA) program was used in the review period. The GOC argues that, if
the Department wishes to decline making a green box decision on the
three component programs under the Agri-Food Agreement because of the
very small level of benefits, then it must also decline making
prejudicial rulings on these programs' countervailability. Furthermore,
the GOC claims that when an agency declares a particular policy, it is
required to follow that policy in order to maintain administrative
consistency, citing Hussey Copper, Ltd. v. United States, 834 F. Supp.
413, 418 (CIT 1993). The GOC contends that, once the Department
determines programs under the Agri-Food Agreement to have no impact on
the overall subsidy rate, the Department should omit all findings on
these programs from the final results, and thereby treat them as
programs determined not to have been used during the POR. In the case
that the Department does not apply the ``no impact policy''
consistently, then the GOC argues that the Department is required to
consider their green box claim.
Similarly, the GOQ argues that the Department cannot refuse to
consider the green box claim on the grounds that TI and SSA would have
no effect on the overall subsidy rate in this review. This criterion of
no impact, according to the GOQ, cannot be found anywhere in U.S. or
international law. The GOQ further claims that the verified record
demonstrates that the three component programs under the Agri-Food
Agreement meet the green box criteria. The GOQ argues that the
Department cannot countervail TI without first having considered the
program for green box treatment; neither the law nor the cites used in
preliminary determination support the Department's decision.
Petitioner raised three arguments in support of the Department's
preliminary determination. First, petitioner argues that the
Department's countervailability findings with respect to the Agri-Food
program were not prejudicial because only the TI program was found to
confer a countervailable subsidy, which was less than Can$0.0001 per
kilogram. Under these circumstances, petitioner argues that respondents
did not suffer any practical harm by the Department's decision not to
conduct a green box analysis, citing Sharp Elecs. Corp. v. United
States, 720 F. Supp. 1014, 1016-17 (CIT 1989) in support of its
argument. Second, petitioner notes that the Department is not required
by law to consider a green box claim. Finally, petitioner asserts, that
contrary to the GOQ's claim, the results of the Department's
verification do not conclusively prove that the programs under the
Agri-Food Agreement meets the green box criteria.
Department's Position: Based on the particular facts of this case,
the Department appropriately determined that a green box determination
on the programs under the Agri-Food Agreement was unwarranted in this
review. Neither the statute (section 771(5B)(F)) nor the Statement of
Administrative Action Accompanying the Uruguay Rounds Agreement Act
(SAA) mandates the Department to make a green box determination each
time an interested party raises such a claim. The statute simply
codifies the ``due restraint'' obligations under the WTO Agreements on
Agriculture, and Subsidies and Countervailing Duty Measures, that
certain domestic support measures be exempt from the imposition of
countervailing duties, i.e., non-actionable. The omission of an
explicit mandate to make green box determinations provides the
Department with considerable discretion to determine whether such an
examination is warranted in each particular case.
In the instant review, the Department has determined that, because
the benefit provided under the TI and SSA programs (the benefit
provided under the Research program was found noncountervailable) has
no impact on the overall subsidy rate attributable to the subject
merchandise during the POR, a green box determination is not warranted
because neither program has benefit amounts that would be subject to
countervailing duties. In making this determination, the Department has
not violated either the statute or the WTO ``due restraint''
obligations, and the GOC and GOQ have suffered no
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practical harm. See Georgetown Steel Corp. v. United States, 810 F.
Supp. 318 (CIT 1992) (denying judicial review of the respondent's
challenge to the Department's specificity determination on the grounds
that no duties or cash deposits were imposed).
We also disagree with the GOC's and GOQ's assertions that our
decision was inappropriate because the Department made ``prejudicial
findings'' with respect to TI and SSA. In the case of TI, the
Department did not make a new specificity finding in this POR. In the
case of SSA, based upon the verified record evidence, the Department
determined that the program was used during the POR. In both instances,
the preliminary results reflect the Department's normal practice, e.g.,
reiterating a previous specificity finding and determining a program's
usage during the POR. Neither of these findings trigger an obligation
to make a green box determination when we have determined that the
benefits provided under these programs are so small that they will not
be subject to countervailing duties.
Further, we find no inconsistency between these findings and a
finding that the cumulative benefit provided under these programs has
no impact on the overall subsidy rate because the amount of the benefit
provided is unrelated to whether a program is specific or used during
the POR. The Department has always conducted these analyses
simultaneously (specificity and usage). However, until we actually
complete the calculation (i.e., determining the amount of benefit
provided and dividing it by the relevant production figures) it is not
possible to determine whether the benefit under a particular program
will have any impact on the overall countervailing duty rate. As such,
there is nothing unusual in the Department making a determination that
a program is used or specifically provided, but then, finding that the
benefit provided is too small to have any impact on the overall net
subsidy rate (e.g., IPA from Israel and Certain Steel from Sweden).
Further, those determinations are in no way prejudicial with respect to
any green box claims the parties might make in future administrative
reviews. Thus, we find no basis to deviate from our practice by
omitting such findings as suggested by the GOC.
Comment 2: Whether the Agri-Food Programs are Research Programs.
The GOQ claims that the evidence on the record for this review proves
that all three component programs (Research, TI, and SSA) under the
Agri-Food Agreement are noncountervailable because each component is a
research program and the results are publicly available. Of the three
component programs, the GOQ agrees with the Department's determination
that the Research program has been determined to be a research and
development program, and therefore is noncountervailable. In the case
of TI, the GOQ contends that the Department's determination in the
Swine Tenth Review Results that TI did not constitute a research
program, which contradicts findings in six previous reviews, is
unfounded. The GOQ urges the Department to reexamine its
countervailability finding on TI in this review.
The GOQ claims that the Department did not conduct an analysis of
the new information regarding TI in the record of this review, and has
instead adopted the conclusion made in the tenth review that TI is a
regionally-specific federal program. The GOQ argues that, even if TI is
regionally specific, the program is noncountervailable as a research
program since research results under the TI program are publicly
available. The GOQ further argues that new and verified information in
this review demonstrates that the TI program funds publicly available
research.
Also, the GOQ argues that TI is similar to other programs the
Department has determined to be research programs. (See Final
Affirmative Countervailing Duty Determinations: Certain Steel Products
from Mexico, 58 FR 37352, 37360 (July 9, 1993) (Certain Steel from
Mexico). The GOQ claims that Certain Steel from Mexico confirms that
non-laboratory applied research constitutes research, and when results
are publicly disseminated, such programs are not countervailable.
Similarly, the GOQ argues that in Final Affirmative Countervailing Duty
Determinations; Certain Carbon Steel Products from Sweden, 50 FR 33375,
33379 (August 19, 1985) the Department found that the testing of
laboratory concepts in two pilot plants partially funded by the Swedish
Government was noncountervailable research because the results were
publicly available. Therefore, the GOQ argues, the Department's past
practice requires a finding that applied research in the field, such as
research funded under TI, is research, which is noncountervailable when
the results are publicly available. Further, the GOQ argues that, at
verification, the GOC demonstrated that SSA is a research program with
publicly disseminated results.
Department's Position: We disagree that the Department should
reconsider its finding on TI. In the cases cited by the GOQ (Certain
Steel from Mexico and Steel Products from Sweden), the only issue was
whether the programs were countervailable (i.e., whether results were
publicly available), not whether the program funded ``research.'' As
outlined in the Swine Tenth Review Results, the latter issue entails a
more complex analysis. We analyzed TI in detail and determined that its
application review process, eligibility requirements, purposes, and
types of projects funded were more typical of a technological
assistance program than that of a research and development program. We
continue to find that TI is appropriately classified as a technical
assistance program, which accommodates products already existing in the
market and which tests them for their usage in a specified geographic
area, Quebec.
We find that the GOQ has presented no new information or evidence
of changed circumstances that warrant the Department's reexamination of
the countervailability of TI. Therefore, consistent with long-standing
practice, the Department did not reexamine the countervailability of TI
in this administrative review. With regard to SSA, as discussed above,
because the benefit from this program is so small that it has no impact
on the overall subsidy rate, a determination of whether this program is
countervailable was not warranted.
Comment 3: Reexamination of Programs found Noncountervailable. The
GOQ asserts that, if the Department determines a program does not
confer countervailable benefits, the Department should then determine
the program noncountervailable, and thus should not reinvestigate this
program in future reviews. This implies that, since the Department
found Research and SSA to not confer countervailable benefits, these
programs are not countervailable. With regard to Research, the GOQ
further argues that once the Department determines that research
results are publicly available, the program is noncountervailable and
there is no justification to revisit this program in future reviews.
Department's Position: We disagree with the GOQ that reexamination
of the Research and SSA programs is not warranted in future reviews.
The Department's current practice with regard to research and
development programs is that research results must be publicly
available with no restrictions. Since the verified standard contracts
under the Research program of the Agri-Food Agreement contain a patent
clause authorizing non-
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disclosure of research results with commercial value, the Department
cannot make a determination on the public availability of research
results until projects are completed in subsequent reviews. Therefore,
we will continue to examine the Research program in future reviews. In
addition, we have never made a finding on the countervailability of the
SSA program. Therefore, we will continue to examine the SSA program in
subsequent reviews.
Comment 4: Whether FISI is Countervailable. The GOQ claims that the
Department may not rely upon its prior countervailability determination
for FISI in the sixth review as the basis for finding FISI
countervailable in this review. (FISI--Farm Income Stabilization
Insurance--is an income insurance program for farmers, financed by the
provincial government, Quebec and the producers.) The GOQ argues that,
because in the two review periods prior to the sixth review and also in
the pork investigation, three binational panels found FISI
noncountervailable, collateral estoppel precludes the Department from
continuing to investigate FISI. See Live Swine from Canada; Amendment
to Final Results of Countervailing Duty Administrative Review, 58 FR
26115, 26116 (April 30, 1993); Live Swine from Canada; Amendment to
Final Results of Countervailing Duty Administrative Review, 58 FR 47123
(September 7, 1993); In the Matter of Fresh, Chilled and Frozen Pork
from Canada, 13 I.T.R.D. 1655, 1661-1662 (March 8, 1991). The GOQ
contends that reconsideration of the facts on the record in the instant
review demonstrates that FISI is not countervailable based on the
number of users, no dominant/disproportionate use, no GOQ discretion in
conferring benefits, and integral linkage with crop insurance.
Petitioner asserts that the GOQ has made the same arguments
regarding the countervailability of FISI in previous reviews. Because
the record in this review does not provide evidence that FISI is not
countervailable, petitioner maintains that the Department should
continue to treat this program as a countervailable subsidy.
Department's Position: We agree with petitioner that FISI is
countervailable. A full analysis of the Department's countervailability
determination is discussed in Live Swine from Canada; Final Results of
Countervailing Duty Administrative Review, 59 FR 12243 (March 16, 1994)
(Swine Sixth Review Results). As we explained in Live Swine from
Canada; Final Results of Countervailing Duty Administrative Reviews, 61
FR 52408 (October 7, 1996) (Swine Seven, Eight, and Nine Review
Results), the remand determinations issued pursuant to panel decisions
in prior reviews requested the Department to reconsider certain aspects
of the underlying methodology used in those determinations. Because
panel decisions are binding only on the proceeding of that respective
review, none of these remand determinations require the Department to
establish a policy affecting all subsequent reviews, as they are based
on different administrative records.
Furthermore, as explained in Swine Seven, Eight, and Nine Review
Results, where the Department has determined a program to be
countervailable, it is the Department's policy not to reexamine the
issue in subsequent reviews unless new information or evidence of
changed circumstances is submitted which warrants reconsideration. In
this review, the GOQ has presented the same arguments as in previous
reviews but provided no new information or evidence of changed
circumstances concerning the countervailability of FISI. Therefore, the
Department has not reexamined the countervailability of FISI in this
administrative review.
Comment 5: Whether FISI, Crop Insurance, and Supply Management are
Integrally Linked. The GOQ argues that FISI, Crop Insurance, and Supply
Management work together to meet a common objective of providing income
insurance, and are therefore, integrally linked even though they may
not meet the current standard set by the Department. Because the
integral linkage test is so narrowly defined and constantly being
refined, the GOQ contends that the standard for integral linkage can
never be met. Nevertheless, the GOQ maintains that these three programs
should be found to be integrally linked in this review because the
legislative history demonstrates that the intention of Quebec's
National Assembly was to create a scheme of income protection.
Petitioner contends that the same arguments were raised by the GOQ
in several previous proceedings where the Department correctly
determined that these programs were not integrally linked. Therefore,
petitioner maintains that the Department should continue to countervail
FISI benefits in full.
Department's Position: We disagree with the GOQ that FISI, Crop
Insurance, and Supply Management are integrally linked. In Swine Seven,
Eight, and Nine Review Results, we explained in detail our integral
linkage analysis of FISI, Crop Insurance, and Supply Management. In
these previous reviews, we found the programs were not integrally
linked because of differences in the purposes of the programs, manners
of funding, and the lack of conclusive evidence of a government policy
to treat industries equally. There is no new evidence on the record of
this review that would warrant the reconsideration of our finding that
these programs are not integrally linked.
Comment 6: Whether the Department Double-Counted Benefits under
FISI. The GOC, the GOQ, and the CPC argue that the Department double-
counted Transition Scheme benefits paid by the GOC and the GOQ into
Quebec's FISI fund. Furthermore, according to the GOQ and the CPC,
after the liquidation of NTSP (National Tripartite Stabilization
Program is a federal program which provided price support payments),
the GOQ transferred their share of the NTSP surplus to the FISI account
using this to match the additional assessment paid into FISI by
producers. The GOQ contends that the Farm Income Stabilization Act
dictates that the GOQ shall pay into FISI an amount double that of the
amount paid by insured farmers, no more and no less. Since the
Department did not countervail the NTSP surplus payouts for producers
enrolled in FISI that were transferred into the FISI account in Swine
Tenth Review Results, CPC argues that the Department should apply this
same practice and only countervail FISI payouts to producers.
When the National Transition Scheme for Hogs (Transition Scheme), a
temporary successor program to NTSP funded by the federal and
provincial governments, provided payments to hog producers during the
POR, the producer members of FISI decided that their payouts should be
transferred to the FISI account and become a portion of their required
contribution. Thus, the GOC and the CPC contend that this transfer of
funds should not be countervailed until the producers receive FISI
payouts. In sum, respondents argue that the producers' contribution is
being countervailed twice, once going into the FISI account and the
second time going out of the FISI account to the producers.
Petitioner claims that, although Quebec producers did not receive a
tangible contribution from the Transition Scheme in the form of a cash
payment, they benefitted from these funds because they were not
required to make their normal contribution to FISI out of their own
monies. Petitioner further argues that the decision by Quebec's hog
producers to use their Transitions Scheme payments to meet their
financial obligation to FISI was a
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question of form that did not reduce or eliminate the benefit accruing
to the producers as a result of the Transition Scheme program.
Therefore, petitioner supports the Department's view in accounting for
this anomaly in the distribution mechanism of the subsidy.
With respect to the additional infusion of funds into the FISI
account by the Quebec government, petitioner argues that, despite the
GOQ's argument that these funds are the Quebec Government's regular
assessment, the language in the Regie's Annual Report is clear that
there are two separate contributions, the Quebec Government's regular
assessment for the fiscal year and these additional funds. Petitioner
further argues that the GOQ did not address the point that in making
the infusion, the government did not stipulate that these additional
Quebec Government funds would be repaid by producers, either by an
increase in producer premiums or a decrease in producer payouts.
Petitioner asserts that absent such conditions, the Department's
decision to treat the infusion as a grant is lawful and should be
preserved in its final determination.
Department's Position: The Department agrees with the respondents,
in part, that there was double-counting with regard to the GOQ's
contribution into FISI of their share of the NTSP Surplus. However, the
Department disagrees that the Transition Scheme benefits to the
producers were incorrectly countervailed.
The FISI program, by law, must be funded one-third by the producers
enrolled in the program and two-thirds by the GOQ. Therefore, when FISI
payments are made to participating producers, the Department only
calculates a benefit equal to two-thirds of the payouts in order to
countervail only the portion of the payment contributed by the
government. During the POR, the producers and the GOQ made their
regular contributions into the FISI fund. FISI also received additional
assessments on behalf of both the producers and the GOQ. In the
preliminary results, we determined that the GOQ's additional
contribution to FISI was countervailable in full. After further
examination of the record evidence in this review, we have determined
that the GOQ's contribution represents the GOQ's share of NTSP surplus
funds. Any benefit that will result from the GOQ's portion of the NTSP
surplus will be countervailed when future payments are made to the
enrolled producers under FISI. Therefore, for the final results, we are
not countervailing the GOQ portion of the NTSP surplus.
With regard to the Transition Scheme, we have appropriately
countervailed payments due to the producers (both federal and
provincial portions), including payments due to producers enrolled in
FISI, as benefits under the Transition Scheme. The Transition Scheme
provided one-time payments to producers for hogs marketed between April
3, 1994, and December 31, 1994. Under the Transition Scheme, hog
producers received Can$1.50 from the GOC and a matching Can$1.50 from
the provincial governments. During the POR, producers in the provinces
of Alberta, Manitoba, New Brunswick, Ontario, Quebec (who were not
enrolled in FISI), and Saskatchewan received their Transition Scheme
payments directly. Quebec producers enrolled in FISI were also entitled
to a direct payment for each hog marketed during the applicable period.
As explained in the preliminary results, however, the portion of
Transition Scheme funds due to producers who participated in FISI was
transferred to FISI, rather than paid out directly to the producers as
was the case with non-participants in FISI. See, Regie des assurances
agricoles du Quebec 1995-1996 Annual Report, at 24, Exhibit F of the
December 20, 1996 Questionnaire Response of the Government of Quebec.
Because the Transition Scheme payouts were government funds which were
specifically provided to hog producers, the payments are
countervailable in full. Whether the producers received the money
directly (as non-FISI producers did), or whether they chose to have it
deposited in their FISI account to cover their required contribution to
FISI, this does not change the fact that the payments made under the
Transition Scheme constitute financial contributions which benefit hog
producers. Instead of receiving the money directly under the Transition
Scheme and using it to pay their FISI assessments, the producers simply
instructed the Government to deposit the money due to them into their
FISI account. Under either scenario, the Transition Scheme payments are
fully countervailable. Moreover, there is no double-counting of FISI
payouts because we are only countervailing two-thirds of the FISI
payouts, which reflects the portion contributed by the GOQ, and we are
not countervailing the one-third portion for which producers are
responsible.
Comment 7: Cash Deposit Adjustment for the National Transition
Scheme Program. The GOC and the CPC argue that the Department should be
consistent with its previous decision stated in the Swine Tenth Review
Results by adjusting the cash deposit for this program to zero ``to
reflect that this program has been terminated and there are no residual
benefits.'' The GOC and the CPC contest the Department's preliminary
determination in this review that residual benefits may continue to
accrue under this program even though the program has been terminated
and there was no new information or evidence of changed circumstances.
Department's Position: We disagree with the GOC and CPC that the
cash deposit rate for the Transition Scheme should be adjusted to zero
in this review. As we explained in the previous review, we adjust the
cash deposit rate only when there has been a program-wide change, such
as termination, and there are no residual benefits. In the tenth
review, we expensed the benefit received from this program and verified
that all the payouts under the Transition Scheme had been made prior to
our preliminary results in that review. On this basis, we did not
include the Transition Scheme in the cash deposit. (See Swine Tenth
Review Results.) In the instant review, however, we found that the
payouts made during this POR were greater than 0.5 percent of total
sales of swine for the POR, and, as such, must be allocated over time.
When a subsidy is allocated over time, there will, of course, be
benefits continuing under a program for the entire allocation period,
which in this case is three years. (See Allocation Methodology section
of this notice.) Because there will still be benefits accruing from
this program in two subsequent reviews periods (until March 1998) due
to the allocation period, we appropriately have not adjusted the cash
deposit rate to zero. This is consistent with our treatment of
adjusting the cash deposit rate for the SHARP program in Swine Tenth
Review Results.
Comment 8: De Minimis Calculation. The CPC disagrees with the
Department's new de minimis calculation and argues that (1) the
previous long-standing methodology was never challenged; (2) there is
no new evidence requiring reexamination of the Department's standard
practice; and (3) the Department failed to provide any explanation to
support its change in practice in its preliminary results.
Particularly, the CPC questions the new methodology used to calculate
the weighted-average selling price in which the Department had adjusted
the price to account for dressed weight (i.e., the prepared hog after
slaughter); whereas in previous reviews no adjustment, with
---- page 2210 ----
regard to dressed weight, had been made to the reported average selling
price.
The CPC cites several cases, (e.g., Secretary of Agriculture v.
United States, 347 U.S. 645, 653-54 (1954); Alhambra Foundry Co., v.
United States, 685 F.Supp. 1252, 1258 (CIT 1988); Cinsa, S.A. de C.V.
v. United States, 966 F. Supp. 1230, 1238 (CIT 1997); Mantex v. United
States, 841 F. Supp. 1290 (CIT 1993) Micron Technology v. United
States, 893 F. Supp. 21 (CIT 1995); Queen's Flowers de Colombia, et al.
v. United States, Slip Op. 97-120 (1997 WL 633824) (CIT Aug. 25, 1997))
supporting their argument that the Department must conform to prior
decisions or explain its reason for departing from past practice. The
CPC also bolsters its arguments by citing a North American Free Trade
Agreement Binational Panel decision (In the Matter of: Live Swine from
Canada, Panel No. USA-94-1904-01, at 8 (May 30, 1995)) that states that
Commerce must provide ``a comprehensive and reasoned analysis for
reversing its former policy.'' Lastly, the CPC argues that principles
of administrative law require the Department to ``supply a reasoned
analysis indicating that prior policies and standards are being
deliberately changed, not casually ignored.'' Greater Boston Television
Corp. F.C.C., 44 F.2d 841, 852 (D.C. Cir. 1970), cert. denied, 403 U.S.
923.
If the Department decides to maintain the calculation methodology
used in its preliminary results, the CPC argues that the Department
must also then take into account an additional adjustment for a quality
premium. Otherwise, the Department must return to its prior de minimis
calculation methodology where no adjustment is made to the weighted-
average selling price of dressed weight.
Petitioner argues that changes in methodology are just minor
revisions of the Department's calculation methods in this review, and
the Department should continue to follow this adjustment in the final
results.
Department's Position: We disagree with the CPC that we have
inappropriately changed the de minimis calculation in this review. The
methodology used to calculate the de minimis level remains basically
the same as that applied in prior reviews, except for an adjustment
which has become necessary as a result of an inconsistency detected by
the Department in this review, related to the weight of the hog before
and after slaughter.
As duly noted by the CPC, since the fourth annual review of this
order, our calculation of the de minimis rate was as follows: (1) For
each province, we calculated an average selling price for the POR; (2)
we then multiplied the average selling price by the province's
percentage of total exports of market hogs to the United States; (3) we
then summed the provinces' weight-averaged prices to derive at a
Canada-wide weighted-average price for market hogs; (4) we finally
derived the de minimis rate by multiplying the weighted-average selling
price per kilogram by one half of one percent; and (5) we then compared
that per kilogram rate to the calculated per kilogram subsidy rate to
determine whether the calculated subsidy rate was above or below de
minimis.
However, until this review, we had overlooked the fact that,
although we had requested information on live swine (market hogs weigh
on the average 100 kilograms, according to industry standards) with
regard to average selling prices and average weights during the POR,
the data provided in the response was based on dressed weight (i.e.,
the weight of the prepared hog after slaughter, which is approximately
80 kilograms). Prices based on dressed weight are inappropriate for our
calculations because the benefit rate is calculated and applied on a
live swine basis. In preparing the preliminary results in this review,
we realized that in order to be consistent between the per kilogram
subsidy rate calculation and the de minimis calculation, we should have
been adjusting the selling price, provided in the response and clearly
labeled ``Canadian dollars per kilogram dressed weight,'' to align it
with the calculation of the per kilogram subsidy rate, which is based
on live swine. Therefore, as explained in the calculation memorandum
for the preliminary results, to make this adjustment, we multiplied the
weighted-average selling price per kilogram, (provided in the response)
by the weighted-average dressed weight of the market hog to obtain the
total price paid to the producer for one hog. We divided this amount by
100 kilograms to construct the average per kilogram price of a live hog
(as stated above, the average weight of a market hog is 100 kilograms).
As in prior reviews, we then derived the specific de minimis rate for
live swine by multiplying the adjusted weighted-average selling price
per kilogram by one half of one percent.
This change makes a necessary refinement in our methodology in that
the average prices used in our calculations are now congruous with the
basis of the subsidies reported. In fact, when we calculate the subsidy
rate per kilogram, we use the number of market hogs produced in Canada
multiplied by 100 kilograms which is the reported average weight of a
live hog. Similarly, in assessing the duties, the Customs Service
applies the applicable duty rate to the weight of the live swine
entering the United States. Therefore, the weighted-average prices used
in our calculations now appropriately correspond to the finding of
subsidization and imposition of countervailing duties.
In the final results of this review, we made two further minor
changes to our methodology to ensure consistency in the calculations.
The first change affects the average Canadian dressed weight of a hog.
In the preliminary results, the average Canadian dressed weight was
calculated as a simple average of the provincial average weights, even
though the selling price was calculated on a weighted-average basis. To
be consistent in the final results, both the Canada-wide weight and the
Canada-wide selling price are calculated on a weighted-average basis.
The second change affects the calculation of the value of total
Canadian production of live swine for purposes of determining whether
grants should be expensed or allocated. In the final results of review,
to derive the value of total Canadian production of live swine, we have
used the adjusted price rather than the dressed weight price used in
the preliminary results. This change did not result in a different
outcome for the expensing of grants received during the POR.
By making the adjustments described above, we corrected the
discrepancy between price and weight so that now the weighted-average
selling price used in the de minimis calculation and the grant
calculations reflects the weight of a live swine. This allows us to
make an apples-to-apples-comparison, i.e., the subsidy benefit, the
duty rate, the selling price used in calculating the de minimis rate,
and the grant calculations are now all based on the weight of a live
swine.
We are not persuaded by the CPC's arguments that if we adjust for
dressed weight, we must also make an adjustment for a quality premium.
In previous reviews, as in this review, the GOC has reported average
selling prices per kilogram and average weights for market hogs (based
on dressed weight) with no qualifications. We examined Table 29 ``Hogs:
Price Range of Sales at Marketing Boards'' in the Livestock Market
Review (Appendix 2 of the GOC's December 23, 1996 questionnaire
response) and determined that the average prices for the industry of a
hog correspond to the weighted-average
---- page 2211 ----
price provided in Appendix 14 of the GOC's December 23, 1996
questionnaire response, on which our de minimis calculation is based.
There was no mention in the response that further adjustments were
necessary to the figures provided. Moreover, in previous administrative
reviews, none of the parties made the argument or presented information
demonstrating that further adjustments should be made to the price. Any
such adjustments, if warranted, would have been appropriate regardless
of whether any adjustment from dressed weight to live weight is made.
As demonstrated above, the adjustment to the weighted-average
selling price in this review was a necessary methodological adjustment
to correct the identified discrepancy between our de minimis
calculation and calculation of subsidy benefits. It is a well-settled
principle of administrative law that an agency must be accorded
substantial flexibility to refine and reformulate its practice, and
that such methodological changes survive judicial scrutiny as long as
the agency provides an explanation for its departure from prior
practice and has not otherwise acted arbitrarily. See Cultivos
Miramonte S.A. v. United States, No. 96-09-02222, 1997 Ct. Intl. Trade
LEXIS 136, at *12 (CIT Sept. 17, 1997) (citing Davila-Bardales v. INS,
27 F.3d 1 (1^st Cir. 1994)); British Steel plc v. United
States, 879 F. Supp. 1254, 1306-07 (CIT 1995); Mantex, Inc. et al. v.
United States, 841 F. Supp. 1290, 1302-03 (CIT 1993). In the instant
review, we explained the basis for our change in the preliminary
results, which enabled interested parties to comment on this change in
the context of the final results. We have fully considered these
comments, but as detailed above, we continue to find that the
adjustment to the weighted-average selling price used in our de minimis
calculation is a necessary refinement to ensure consistency in our
calculations. Moreover, our examination of the record evidence did not
reveal that an additional adjustment is necessary to account for
differences in quality premium. Unlike the cases cited by the CPC--all
of which are instances where the reviewing authority determined that
the agency failed to provide an explanation to support its deviation
from prior practice--we have fully explained the rationale for our
change in the calculation methodology, and this explanation is
supported by the record evidence of this case. Under these
circumstances, we have not arbitrarily changed our de minimis
calculation in violation of long-standing administrative principles.
See e.g., Cultivos Miramonte, at *13, n.7 (stating that an agency
arbitrarily changes its practice when (1) the factual findings
supporting the changes are not supported by record evidence, (2) the
rationale provided violates administrative law, or (3) the agency has
offended standards of procedural fairness.) Therefore, we are
continuing to apply the new methodology in calculating the de minimis
rate.
Comment 9: Change in Calculation Methodology for National
Transition Scheme Program. The CPC argues that the Department has
significantly changed its calculation methodology of the Transition
Scheme program whereby the grant amount received is no longer compared
to the total value of live swine sales in Canada but to the value of
live swine sales in only the provinces receiving grants during the POR.
Such major changes in methodology, the CPC asserts, either require new
information indicating the need for the change or an explanation.
Therefore, because the Transition Scheme is a national program, the CPC
argues that the calculation determining whether to expense grants
received or to allocate them to the year of receipt should compare the
grant amount received to the value of total live swine sales in Canada.
The CPC also contends that the Department's formula for allocation of
grants uses an incorrect national average selling price, Can$1.28, in
analyzing the Transition Scheme and the NTSP surplus.
In contrast, petitioner argues that the changes in methodology to
achieve a more accurate countervailing duty rate are nothing more than
minor revisions, which are not unlawful and are in the realm of the
Department's discretion. Thus, petitioner maintains the Department
should continue to follow the preliminary results methodology in the
final results.
Department's Position: We agree with the CPC, in part. Because the
Transition Scheme is a nation-wide program, the grant amount received
should be compared to the total value of live swine sales in Canada
which we have constructed for the POR. See Swine Tenth Review Results.
Accordingly, we have made the necessary adjustment in these final
results by comparing the benefit to the value of the total national
production during the POR. We made the same correction to the
calculations of the benefit received by producers from the distribution
of the NTSP surplus, which is also a nation-wide program. Therefore,
the grant amount received under this program is also compared to the
total value of live swine sales in Canada.
However, we do not agree with the CPC that we have used an
incorrect selling price of Can$1.28 to analyze whether the Transition
Scheme and the NTSP surplus should be allocated over time. In our
preliminary results, the selling price used for this calculation was
based on a live hog. In these final results of review, the Department
has determined that the Can$1.54 national weight-averaged selling price
based on dressed weight should be changed to Can$1.29 to reflect the
weight of a live swine. (See Department's Position in Comment 8 above).
The applicable provincial average selling price should likewise be
adjusted in the grant allocation calculations for provincial programs.
Therefore, for these final results, we have adjusted the selling price
to reflect that of a live hog rather than a dressed hog.
Final Results of Review
For the period April 1, 1995 through March 31, 1996, we determine
the net subsidy for live swine from Canada to be Can$0.0071 per
kilogram.
We will instruct the Customs Service to assess countervailing
duties of Can$0.0071 per kilogram on shipments of live swine from
Canada exported on or after April 1, 1995 and on or before March 31,
1996. The cash deposit is Can$0.0055 per kilogram, which is de minimis.
Accordingly, the Department will also instruct the U.S. Customs Service
to waive cash deposits on shipments of all live swine from Canada
entered, or withdrawn from warehouse, for consumption on or after the
date of publication of this notice. The cash deposit rate is different
than the assessment rate because we have taken into account program-
wide changes in calculating the cash deposit rate. These program-wide
changes are the termination of the following programs with no residual
benefits: Feed Freight Assistance Program, SHARP, ACBOP, Saskatchewan
Livestock Investment Tax Credit, Saskatchewan Livestock Facilities Tax
Credit, and NTSP Surplus.
This notice serves as a reminder to parties subject to
administrative protective order (APO) of their responsibility
concerning the disposition of proprietary information disclosed under
APO in accordance with 19 CFR 355.34(d). Timely written notification of
return/destruction of APO materials or conversion to judicial
protective order is hereby requested. Failure to comply with the
regulations and the terms of an APO is a sanctionable violation.
---- page 2212 ----
This administrative review and notice are in accordance with
section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)).
Dated: January 7, 1998.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 98-945 Filed 1-13-98; 8:45 am]
BILLING CODE 3510-DS-P
The Contents entry for this article reads as follows:
International Trade Administration
NOTICES
Countervailing duties:
Live swine from--
Canada, 2204