(Cite as: 64 FR 57040, *57051)
will not rise commensurately. (See The CWB and Barley Marketing by Schmitz, et al., in verification exhibit CWB-7.) As a result,
farmers, who might otherwise attempt to take advantage of the higher prices, might not offer their barley to the CWB to be sold in
the export market. Under these circumstances, the impact on the market would be the same as an overt export restriction: more
feed barley will be supplied to the domestic market and domestic feed barley prices will be potentially lower.
In general, some economists maintain that the heavily regulated nature of the Canadian marketing system for grain has slowed
productivity in grain handling, increased marketing costs and reduced farm returns. They argue that the CWB does not pursue
improvements in the marketing and handling system the same way that private entities would in response to market forces. (See,
for example, Carter and Loyns, The Economics of Single Desk Selling of Western Canadian Grain, attached as Exhibit 5k, to the
R-Calf petition.) A 1995 study by KPMG Management Consulting estimated that up to twenty percent of operational costs could be
saved annually through reduced regulation, the introduction of transparent incentives, and improved accountability (See Rapid
Grain Flow- Transfoming Grain Logistics prepared for the Western Grain Elevator Association, April 1995). If unnecessary or
additional costs are imposed on the farmer when he seeks to export, the impact on the market would be the same as an overt
export restriction: more feed barley will be supplied to the
(Cite as: 64 FR 57040, *57051)
domestic market and domestic feed barley prices will be potentially lower.
Some economists also argue that the "selection rate" for malting barley is lower in Canada relative to other countries. (The
"selection rate" is the percentage of malting barley that is actually sold as malting barley; malting barley not selected for malting is
sold as feed barely.) As a result, more barley grown as malting barley is sold as feed barley in both the domestic and export
markets. (See, for example, D. Demcey Johnson, Single Desk Selling of Canadian Barley, in the petitioner's July 29,1999
submission at Exhibit 6.) Arguably, this scenario might also depress feed prices in the domestic market. The CWB argues that the
determination of what qualifies as malting barley is made by private entities and other public entities of the Canadian government.
However, while the record indicates that the CWB is not directly involved in the selection of malting barley, the CWB does seek to
ensure that barley it sells as feed barley is not re-sold in another market as malting barley.
Pricing Analysis
To determine if the operations of the CWB have provided a benefit to the producers of live cattle in Canada during the POI, we
made numerous price comparisons between Canadian domestic prices, several U.S. domestic prices (some of which are
representative of the largest feed barley consumer markets
(Cite as: 64 FR 57040, *57051)
in the world), and the CWB export price to the United States. Specifically, the benchmark prices we used were the prices in
Portland, an average price in the U.S. based on several different price series, and CWB export prices to the United States. We did
not make any adjustments to the reported prices other than freight, where appropriate. *57052
(Cite as: 64 FR 57040, *57052)
First, we compared the domestic and export marketing options that would be available to a barley farmer in Saskatoon,
Saskatchewan in an open market. We used a farmer in Saskatoon as representative of Canadian barley farmers because Saskatoon
is located in the center of the Canadian barley growing area and because the best data we have for freight adjustments pertain to
Saskatoon. We compared domestic and export opportunities, as represented by Lethbridge and Portland, respectively. We used
Portland prices because these prices are representative of export prices to large, traditional global consumers of feed barley (e.g.,
Saudi Arabia and Japan) (see September 22, 1999, Memorandum to File, "Portland and Pacific Northwest (PNW) prices").
We adjusted both the domestic and export prices back to Saskatoon by freight (rail freight for export, truck freight for domestic).
See October 12, 1999, Memorandum to Susan Kuhbach, "Pricing Analysis for the Canadian Wheat Board (CWB) for the Final
Determination" ("CWB Analysis Memorandum") and Final Calculations. We observed that, during the POI the export prices in
Portland were similar to those in Lethbridge. Although Lethbridge prices have been
(Cite as: 64 FR 57040, *57052)
lower historically, especially in the 1995-1996 crop year, there is no consistent pattern of the Portland prices significantly
exceeding the Canadian price. Beginning in November 1997, the Canadian domestic price has been higher.
Second, we compared the CWB export price to the U.S. with the domestic price in Lethbridge. We observed the same price
relationships described above during the POI and the prior two years.
Third, we compared the weighted average price in the designated area with the average price of barley in the United States during
the POI without making any adjustments for freight. To calculate the designated area price, we took various Canadian "Off-Board"
prices in the designated area (Lethbridge, Calgary, Saskatoon, Melfort and Winnipeg) and weighted them by cattle production in
the different areas. We used cattle production as a proxy for barley consumption because the majority of barley consumed in
Canada is consumed by cattle. For U.S. prices, we calculated a simple average of prices for feed barley at various locations
(Duluth, Bottineau, Cando, Churchs Ferry, Rugby, Stanley, Great Falls, Golden Triangle, Northcentral, and Portland). We used all
U.S. pricing points on the record except Minneapolis, East Coast (Norfolk Terminal) and PNW. We did not include the Minneapolis
price series as those prices are for malting barley. East Coast prices were omitted because no data is reported for most months
during the POI. We did not have sufficient
(Cite as: 64 FR 57040, *57052)
information to weight average the U.S. prices by consumption. We observed that, during the POI, the average price in the U.S. was
usually lower than the average price in the designated area.
Finally, we compared an average price in the two primary growing areas in Canada with geographically comparable growing
areas in the United States which are approximately the same distance from export ports. Specifically, we compared an average
price in Alberta with an average price in Montana, and an average price in Saskatchewan with an average price in North Dakota. In
both of these comparisons, we observed that, during the POI (the only period for which we have all the needed data), the Canadian
price was often higher than the U.S. price.
Thus, based on the above price comparisons, we determine that the operations of the CWB did not provide a benefit to the
producers of live cattle during the POI. Therefore, we determine that the operations of the CWB during the POI did not provide an
indirect countervailable subsidy.
Provision of Goods or Services
B. Saskatchewan Pasture Program
The Saskatchewan Pasture Program has been in place since 1922. It is designed
(Cite as: 64 FR 57040, *57052)
to provide supplemental grazing to Saskatchewan livestock producers and to maintain grazing and other fragile lands in
permanent cover to promote soil stability. Saskatchewan Agriculture and Food operates 56 provincial community pastures
encompassing 804,000 acres. At these pastures, the SAF offers grazing, breeding, and health services for fees established by SAF.
Fees are based upon recovery of the costs associated with the grazing and breeding services of each pasture.
The provision of a good or service is a financial contribution as described in section 771(5)(D)(iii) of the Act. As discussed above
in connection with the PFRA, a benefit is conferred in the provision of a good or service when the prices charged for
government-provided goods or services are less than the prices charged by private suppliers. In the case of the Saskatchewan
Pasture Program, a simple comparison of the fees charged would not be appropriate because the pasture services being offered by
the SAF differ from those offered by private providers. In this regard, the GOS has provided a quantifiable adjustment.
Specifically, we adjusted the private price downward by deducting costs associated with the timing of the sale of cull cows.
Although the GOS argued that there were other differences that should be taken into account for such things as commingling,
pasture condition, delivery and pickup periods, we have not made adjustments for such costs because either the GOS did not
establish that such costs were faced solely by public pasture patrons or
(Cite as: 64 FR 57040, *57052)
because the GOS was unable to quantify them.
Comparing the public pasturing price to the adjusted private pasturing price, we determine that the price for private pastures is
lower than the price for public pastures. Therefore, we determine that the government is adequately remunerated for its
provision of pasture services. Thus, no countervailable subsidy exists.
C. Alberta Grazing Reserve Program
Like the federal government's PFRA Community Pasture Program, Alberta developed community pastures (reserves) on which
multiple ranchers' herds can graze. Grazing reserves also provided multiple-use opportunities to other users.
Traditionally, government employees supervised and managed the animals on the reserves, and maintained and built range
infrastructure. However, as of April 1, 1999, the GOA ceased to perform management activities on 32 of its 37 grazing reserves as
a result of a privatization initiative. Under the privatization initiative, livestock management responsibilities were shifted to
grazing associations and new, negotiated fees have been established. However, during the POI, the government operated 20
reserves, accounting for approximately 170,000 AUMs. The 17 remaining reserves were privately operated
(Cite as: 64 FR 57040, *57052)
and accounted for approximately 150,000 AUMs.
Priority in issuing permits for use of the reserves is given to residents who operate a ranch or farm. The Minister of Lands and
Forests establishes the amount to be paid for stock grazing on each pasture operated by the GOA. The GOA reported that the
grazing revenues obtained from this program exceed the cost of the grazing aspects of the program and cover many of the
multiple-use functions of the land.
The provision of a good or service is a financial contribution as described in section 771(5)(D)(iii) of the Act. As discussed above
in connection with the PFRA, a benefit is conferred in the provision of a good or service when the *57053
(Cite as: 64 FR 57040, *57053)
prices charged for government-provided goods or services are less than the prices charged by private suppliers. In the case of the
Alberta Grazing Reserve Program, we determine that the government is charging more than the private providers of the same
services. Specifically, the fees charged by the private grazing associations to its members were lower than those charged by the
government. Based on the above, we determine that the government is receiving adequate remuneration for its provision of
grazing services. Thus, no countervailable subsidy exists.
We also examined whether the amount charged by the GOA to the private grazing associations for the reserves they operate
provided adequate remuneration tot he GOA. We found that the fee charged is comparable to the adjusted private
(Cite as: 64 FR 57040, *57053)
grazing lease price discussed under the "Alberta Crown Lands Basic Grazing Program" section above. Therefore, we determine that
the government is being adequately remunerated for its provision of grazing land to grazing associations. Thus, no
countervailable subsidy exists.
Green Box Programs
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 ("Agriculture Agreement") shall be treated as noncountervailable if the
Department determines that the measures conform fully with the provisions of Annex 2 of the Agriculture Agreement. Our New
CVD Regulations further state that we will determine that a particular domestic support measure conforms fully to the green box
criteria in the Agriculture Agreement if we find that the measure (1) is provided through a publicly-funded program (including
government revenue forgone) not involving transfers from consumers; (2) does not have the effect of providing price support to
producers; and (3) meets the relevant policy-specific criteria and conditions laid out in Annex 2 of the Agriculture Agreement. As
was noted above in the Applicable Statute and Regulations section, although Subpart E of 19 CFR Part 351 of our New CVD
Regulations does not apply to this investigation, Subpart E
(Cite as: 64 FR 57040, *57053)
represents the Department's interpretation of the requirements of the Act and is, thus, referenced here.
The GOC requested "green box" treatment for three programs in this investigation: The Canada-Alberta Beef Industry
Development Fund ("CABIDF"), the Feed Freight Assistance Adjustment Fund ("FFAF"), and the Saskatchewan Beef Development
Fund ("SBDF"). Because the FFAF was not used during the POI, we do not reach the issue of green box treatment for FFAF. See the
Programs Preliminarily Determined To Be Not Used section, below. The claims made relating to CABIDF and SBDF are discussed in
detail below. A more detailed discussion of the Department's analysis of this issue can be found in the Department's Memorandum
to Richard Moreland: "Green Box Claims Made by the Government of Canada," dated May 3, 1999, which is on file in the
Central Records Unit.
D. Canada-Alberta Beef Industry Development Fund
CABIDF, which was established by the GOC and the GOA in April 1997, supports research, development, and related activities
connected to the beef industry in Alberta. It is administered by the Alberta Department of Agriculture, Food, and Rural
Development and run by the Alberta Cattle Commission and the Alberta Agricultural Research Institute. To receive funding
through this program,
(Cite as: 64 FR 57040, *57053)
applicants must submit a series of research proposals that are evaluated on the basis of the project's relationship to the Funds's
research priorities (which are discussed in the Preliminary Determination), its scientific merits, and the usefulness of the project
results to the beef industry, directly or indirectly. Final proposals are evaluated for technical merit by a scientific committee
consisting of industry experts and scientists, and are then approved or rejected based on these evaluations by CABIDF's
governing committee.
In order to determine whether CABIDF qualifies for green box treatment under section 771(5B)(F) of the Act, we examined
whether CABIDF met the criteria specified in the Act and further detailed in the Agriculture Agreement. With regard to the first
criterion noted above, in the original and supplemental questionnaire responses, the GOC and the GOA stated that all monies used
to fund this program came directly from the government, whether on a provincial or on a federal level. We verified that no funds
for this program were received from any entity other than federal and provincial governments during the POI. The funds went
directly to CABIDF applicants. No transfers from consumers were involved.
As for the second criterion, none of the projects that have been approved by CABIDF have the effect of providing price support to
producers.
With regard to the last criterion, the policy-specific criteria that must be met in this case are those listed under paragraph 2,
Annex 2 of the Agriculture
(Cite as: 64 FR 57040, *57053)
Agreement. Paragraph 2 focuses on policies that provide services or benefits to the agriculture or rural community. It includes
sub-paragraph (a), which covers projects for research, including general research, research in connection with environmental
programs, and research programs relating to particular products (sub-paragraph (a)).
According to its authorizing statute, the purpose of CABIDF is to "provide financial contributions in the form of grants to enhance
research and industry development activities with the objective of promoting and enhancing the competitiveness of the beef
industry in Alberta." Officials confirmed that each project approved through CABIDF is approved solely because of its potential
scientific research value to the Alberta beef industry, and that projects approved are all research-related projects. We verified
that all of the projects that have been funded by CABIDF since the program's inception in April 1997 have been related to
scientific research activities for the beef industry and the agriculture industry in general. All of the approved projects consisted of
grants, not revenue forgone, and we verified that none were paid directly to producers or processors.
Based on our analysis, we find that CABIDF is eligible for green box treatment under section 771(5B)(F) of the Act, and, thus, is
not countervailable.
E. Saskatchewan Beef Development Fund
(Cite as: 64 FR 57040, *57053)
SBDF, which is administered by the Agriculture Research Branch of the Saskatchewan Ministry of Agriculture and Food, supports
the development and diversification of Saskatchewan's beef industry through the funding of various projects related to production
research, technology transfer, and development and promotion of new products. The ministry-appointed, producer-run
governing board, the Saskatchewan Beef Development Board, meets once a year to review and approve project proposals that it
deems to be of general benefit to the cattle and beef industries. Priority is given to public research institutions conducting
research, development, and promotion activities that will be generally available to the industry.
In order to determine whether SBDF qualifies for green box treatment under section 771(5B)(F) of the Act, we examined whether
the SBDF met the criteria specified in the Act and further *57054
(Cite as: 64 FR 57040, *57054)
laid out in the Agriculture Agreement, which were described in detail above. With regard to the first criterion, in the original and
supplemental questionnaire responses, the GOS reported that all monies used to fund this program came directly from the
provincial government. We verified that no funds for this program were received from any non-public entity during the POI. The
funds went directly to SBDF applicants. No transfers from consumers were involved.
As for the second criterion, none of the projects that have been approved by
(Cite as: 64 FR 57040, *57054)
SBDF have the effect of providing price support to producers.
Finally, with regard to the last criterion, the policy-specific criteria that must be met in this case are also those which are listed
under paragraph 2, Annex 2 of the Agriculture Agreement. In particular, the relevant criteria are contained in sub-paragraphs
(a), (c), (d), and (f) of paragraph 2, which focus on programs relating to research, training services, extension and advisory
services, and marketing and promotion services.
The regulations governing SBDF state that the purpose of the program is to provide for the enhancement of the Saskatchewan beef
and beef cattle industry through research, development, and promotional activities that the board considers to be in the best
interests of the industry. We verified that each of the thirteen projects that received funding distributions through the SBDF
during the POI was either a research or an extension and advisory program. All of the approved projects consisted of grants, not
revenue forgone, and we confirmed that none were paid directly to producers or processors.
Based on our analysis, we find that SBDF is eligible for green box treatment under section 771(5B)(F) of the Act and, thus, is not
countervailable.
Other Programs
(Cite as: 64 FR 57040, *57054)
F. Net Income Stabilization Account
The Net Income Stabilization Account ("NISA") is designed to stabilize an individual farm's overall financial performance through
a voluntary savings plan. Participants enroll all eligible commodities grown on the farm. Farmers may then deposit a portion of
the proceeds from their sales of eligible NISA commodities (up to three percent of net eligible sales) into individual savings
accounts, receive matching government deposits, and make additional, non- matchable deposits, up to 20 percent of net sales.
The matching deposits come from both the federal and provincial governments.
NISA provides stabilization assistance on a "whole farm" basis. This means that a farmer's eligibility to receive assistance depends
on total farm profits, not the profits earned on individual commodities. A producer can withdraw funds from a NISA account
under a stabilization or minimum income trigger. The stabilization trigger permits withdrawal when the gross profit margin from
the entire farming operation falls below an historical average, based on the previous five years. If poor market performance of
some products is offset by increased revenues from others, no withdrawal is triggered. The minimum income trigger permits the
producer to withdraw the amount by which income from the farm falls short of a specific minimum income level.
In Live Swine From Canada; Final Results of Changed Circumstances
(Cite as: 64 FR 57040, *57054)
Countervailing Duty Administrative Review, and Partial Revocation, 61 FR 45402 (August 29, 1996), we found that
NISA is not de jure specific. Moreover, for hog producers, we found that NISA was not de facto specific. Therefore, the issue in this
investigation is whether NISA is de facto specific with respect to cattle producers.
To make our determination, we have examined whether cattle producers are dominant users of the program, or whether cattle
producers receive disproportionately large benefits under the program. We found no evidence that cattle producers are dominant
users or receive disproportionate benefits from the NISA program. Specifically, the GOC provided information on farmer
withdrawals of NISA funds during the POI and the two preceding years. Because NISA does not collect or maintain information
concerning withdrawals on a commodity-by-commodity basis, the GOC reported farmer withdrawals by categorizing farms by the
source of the majority of their revenues. That is, a farm with over fifty percent of its revenues from a particular commodity's sale,
such as cattle, was classified as a farm of that commodity. On this basis the GOC reported that, during the POI, cattle farms
accounted for 7.7 percent by value of total withdrawals from NISA.
We have also analyzed whether NISA is regionally specific because certain commodities, including cattle, in certain provinces are
not eligible commodities under the program. In that regard, we determine that NISA is not
(Cite as: 64 FR 57040, *57054)
limited to a particular region. While certain commodities are not eligible for matching funds within certain provinces, the
producers of these commodities elect not to participate at their own choice, not because the program is limited to an enterprise
or industry located in a particular region.
Based on the above analysis, we determine that NISA assistance is not limited to a specific enterprise or industry, or group of
enterprises or industries. Therefore, we determine that assistance received by cattle producers under the NISA program is not
countervailable.
G. Alberta Public Grazing Lands Improvement Program
Established in 1970 and terminated in 1995, this program provided a partial credit toward the payment of rent on a public grazing
land disposition if the lessee undertook certain pre-approved capital range improvement projects. The leaseholder was required
to pay for all the costs incurred for these capital improvements, and was reimbursed for 25 to 50 percent of these costs through
credits on the rental fees otherwise due annually. All improvements belong to the government and, once the improvements are
created, the lessee is required to maintain them at his or her own expense.
In order for a financial contribution to exist under this program, the GOA must forego rental fees, or a portion thereof, that are
otherwise due as
(Cite as: 64 FR 57040, *57054)
described in section 771(5)(D)(ii) of the Act. However, in this case the reduction in the rental fees corresponds to range
improvements on behalf of the government. Furthermore, the increased value of the land as a result of the improvements is
captured upon the next setting of rental fees. Based on the above analysis, we determine that this program does not provide a
financial contribution and, therefore, we determine that the program is not countervailable.
H. Saskatchewan Crown Land Improvement Policy
The Crown Land Improvement Policy is designed to provide rental adjustments when Crown land lease holders make capital
improvements to the land, such as clearing, bush removal, or breaking and reseeding. In return for the lessee's funding of these
improvements, Saskatchewan Agriculture and Food ("SAF") agrees not to increase the rental rate for a certain period of time,
depending on the length of the improvement project or may reduce the basis for rent. SAF is willing to reduce the rental rate or
freeze the rate because during the improvement project the actual stocking rate of the land is lower than the potential, the
improvements do not result in an immediate increase in the *57055
(Cite as: 64 FR 57040, *57055)
productive value of the land, and any improvements belong to the Crown.
(Cite as: 64 FR 57040, *57055)
In order for a financial contribution to exist under this program the GOS must forego rental fees, or a portion thereof, that are
otherwise due as described in section 771(5)(D)(ii) of the Act. However, in this case the reduction in the rental fees corresponds
to a reduction in the land's carrying capacity while improvements are undertaken. The increased value of the land as a result of
the improvements is captured upon the next setting of rental fees. Based on the above analysis, we determine that this program
does not provide a financial contribution and, therefore, we determine that the program is not countervailable.
I. Saskatchewan Breeder Associations Loan Guarantee Program
The Saskatchewan Breeder Associations Loan Guarantee Program was established in 1991 to facilitate the establishment of cattle
breeder associations, in an effort to promote cattle breeding in Saskatchewan. The program is administered by the Livestock and
Veterinary Operations Branch of the Saskatchewan Agriculture and Food Department. This agency provides a guarantee on 25
percent of the principal amount of loans to breeder associations for the purchase of certain breeding cattle. Eligibility is limited to
breeder associations which consist of at least twenty individuals who are residents of Saskatchewan and over the age of eighteen.
One hundred
(Cite as: 64 FR 57040, *57055)
and seven associations received guarantees on loans which were outstanding during the POI.
Breeding livestock is not covered by the order of this investigation. Therefore, we determine that this program does not provide a
countervailable subsidy to the subject merchandise because any potential subsidy would benefit merchandise other than that
covered by this investigation.
III. Programs Determined To Be Not Used
Based upon the information provided in the responses, we determine that the producers of the subject merchandise under
investigation did not apply for or receive benefits under the following programs during the POI.
A. Feed Freight Assistance Adjustment Fund
Of the four responding provinces in this investigation, only one, Ontario, participated in the Feed Freight Assistance Adjustment
Fund program. Specifically, in the year prior to the POI, the first year of the FFAF, a grant was provided to Ontario producers.
However, because the benefit was below 0.5 percent of the investigated provinces' total sales, we expensed this grant in the year
received. Thus, cattle producers received no benefit during the POI
(Cite as: 64 FR 57040, *57055)
from grants received prior to the POI. We verified that, during the POI, Ontario did not receive benefits under FFAF. Therefore, we
determine that the FFAF program was not used during the POI.
B. Canadian Adaptation and Rural Development (CARDS) Program in Saskatchewan
C. Western Diversification Program
IV. Programs Determined To Be Terminated
A. Ontario Export Sales Aid Program
V. Other Programs Reviewed
The GOC demonstrated that, for the following programs, any benefit to the subject merchandise would be so small that there
would be no impact on the overall subsidy rate, regardless of a determination of countervailability. In light of this, we do not
consider it necessary to determine whether benefits conferred under these programs to the subject merchandise are
countervailable.
A. Ontario Bear Damage to Livestock Compensation Program
(Cite as: 64 FR 57040, *57055)
B. Ontario Livestock Programs for Purebred Dairy Cattle, Beef, and Sheep Sales Assistance Policy/Swine Assistance Policy
C. Ontario Artificial Insemination of Livestock Act
Interested Party Comments
Canadian Wheat Board
Comment 1: Indirect Subsidies
The petitioner argues that, according to Georgetown Steel Corp. v. United States, 801 F.2nd 1308, 1315 (Fed. Cir. 1986), a subsidy
is defined as any action that distorts or subverts the market process and results in a misallocation of resources. In determining the
existence of a countervailable subsidy, according to Section 771(5)(C) of the Act, it is irrelevant whether the subsidy was
provided directly or indirectly.
The petitioner further contends that the SAA and Department precedent make clear that the Department intends to countervail
indirect subsidies, such as export restraints. As such, the GOC need not compel Canadian barley growers to
(Cite as: 64 FR 57040, *57055)
supply the cattle industry. According to the petitioner, it is sufficient that feed barley is produced and sold only to cattle and
other livestock producers. Specific end-use market control over exports, and the resulting depression of domestic prices, is
sufficient to direct lower-priced feed barley to Canadian cattle producers. The provision of goods, albeit by a private party, may
be countervailed when the price of those goods is the result of a government program distorting the market.
The GOC argues that the URAA added a definition of "countervailable subsidy" to U.S. law which requires that a "financial
contribution" and a resulting benefit be conferred before a "subsidy" can be said to exist. Further, a financial contribution may be
only one of four specifically enumerated forms of government action, including the "provision of goods," which is the allegation in
this case. This requirement may result from private action in situations in which the government "entrusts or directs a private
entity to make a financial contribution" such as the provision of goods. The GOC argues that neither the GOC nor the CWB
entrusted or directed Canadian barley producers to do anything. To the contrary, barley producers have complete discretion
over decisions concerning whether to offer barley to the CWB, to sell it to domestic cattle or other livestock producers, to use it as
feed on one's own farm, or, for that matter, to do nothing with it at all. Indeed, according to the GOC, barley producers remain free
to produce another product, or to change their
(Cite as: 64 FR 57040, *57055)
line of business altogether. According to the GOC, since the CWB is neither providing goods to cattle producers nor entrusting or
directing any private entity to do so, no financial contribution exists in this instance and, thus, no subsidy.
Department's Position: It is our position that indirect subsidies, such as export restraints, are potentially countervailable. In the
preamble of the New CVD Regulations, we stated that while export restraints "may be imposed to limit parties" ability to export,
they can also, in certain circumstances, lead those parties to provide the restrained good to domestic purchasers for less than
adequate remuneration" (at 65351). Thus, the provision of a good, whether provided directly or indirectly, for less than adequate
remuneration constitutes a financial contribution under section 771(5)(D) of the Act. In this case, although we have found no
benefit during the POI, record evidence indicates that the CWB is not immune to the interests of cattle producers in its policy
determinations. *57056
(Cite as: 64 FR 57040, *57056)
Comment 2: CWB Control, Inefficiency, and Market Distortions
The petitioner states that the CWB is legally and operationally in a position to control the barley market, restrain exports,
oversupply the domestic market, and thereby reduce the costs incurred by Canadian cattlemen.
(Cite as: 64 FR 57040, *57056)
The petitioner argues that, whether or not the CWB's control amounts to a direct and utter restriction on exports, the Canadian
marketing and handling system, of which the CWB is a key institution, prevents exports which otherwise would have occurred
because it creates a disincentive for Canadian barley farmers to offer feed barley for export.
Specifically, the petitioner suggests that the CWB system creates inefficiencies and increased marketing costs, which causes less
barley to be exported than would be in the absence of the CWB. The petitioner provides economic studies which show that the
CWB's control limits the ability of the Canadian market to arbitrage with export markets. The petitioner further argues that theory
and empirical evidence show that the CWB's control of exports lowers domestic feed barley prices.
The petitioner argues that the "direct and discernible effect" on prices caused by the CWB's control is that export price signals to
barley farmers (the PROs and EPRs) are distorted. Thus, because barley producers perceive export demand to be at price levels
far below actual export prices, less barley is offered to the CWB and more is available on the domestic market at lower prices. The
effect of the CWB barley export control is made evident in the long-term, substantial disparity between domestic and export
prices. The petitioner further argues that this price differential was not affected by the cessation of rail freight subsidies and that
the effects of U.S. Export
(Cite as: 64 FR 57040, *57056)
Enhancement Program (EEP) and E.U. subsidies are independent from the question whether the CWB's restraints on exports have
distorted barley prices in Canada.
The GOC states that the CWB system itself does not create a disincentive to offer barley as the petitioner alleges. Regarding the
argument that the CWB system is inefficient, the GOC points to other studies on the record that refute this conclusion. The GOC
also points to the fact that the allegedly inflated distribution costs that lead to inefficiencies relate to activities outside of the CWB's
jurisdiction. Nonetheless, the GOC claims, any effect of an alleged inefficiency cannot be equated with an export restriction and
cannot give rise to a subsidy.
The GOC further states that record evidence shows that PROs and EPRs do, in fact, provide adequate pricing signals to barley
farmers. There is nothing on the record to suggest that the pricing signals during the POI did not reflect the market realities in
export markets. Furthermore, any alleged price differentials are caused by the removal of freight subsidies and U.S. EEP and E.U.
subsidies, distortions which are outside of the CWB's control, according to the GOC.
Department's Position: As discussed above, we agree that certain aspects of the CWB system can be market-distorting and can
have the same result as an overt export restraint. For example, Canadian barley farmers are not able to respond to sudden
increases in export prices because of the rigidity of the
(Cite as: 64 FR 57040, *57056)
CWB's pricing system for barley. Regarding the alleged inefficiency of the system arising from increased marketing costs, the
evidence on the record is not necessarily conclusive. Nonetheless, as described in the CWB section above, we did not find
significant price differentials between prices inside the designated area and U.S. prices, some of which reflect prices to the major
consumers of feed barley in world markets. Thus, we determine that Canadian cattlemen did not receive a benefit during the POI.
Comment 3: Canadian Barley Producers as a Private Entity
The GOC states that Canadian barley producers cannot qualify as a "private entity" under any normal meaning of the term. Thus,
the Department cannot conclude that they were "entrusted or directed" to provide an indirect subsidy.
The petitioner states that both Lumber and Leather, as well as Department practice, have shown that the term "private entity" is
and has been interpreted to encompass inducement of more than one private entity.
Department's Position: Although we have found that the CWB system did not provide a benefit to Canadian cattlemen during the
POI, we believe that barley farmers may be considered a private entity. We further note that both the SAA (at 926) and the
preamble to the New CVD Regulations (at 65350) make clear that
(Cite as: 64 FR 57040, *57056)
the Department considers the phrase "private entity" to include groups of entities or persons.
Comment 4: Cross-Border Comparisons
The petitioner states that the Department erred in its preliminary analysis of prices by relying on a comparison of Canadian
domestic prices to only U.S. interior prices in Great Falls. According to the petitioner, a rational exporter would not ship to Great
Falls, which is a surplus barley area, but would seek out the highest export prices (i.e., the U.S. PNW/Portland, Saudi Arabia or
Japan). Moreover, in prior cases such as Lumber, the Department has relied on prices from the most important export markets
for comparison purposes. Without this type of cross-border comparison, the petitioner argues, it would be impossible to measure
benefits conferred on the domestic industry.
The GOC argues that cross-border comparisons should not be used at all in this analysis. Any analysis should be made by looking
at prevailing market conditions for the good or service being provided in the country subject to the investigation, Canada.
The proper inquiry is the price cattlemen would otherwise pay in Canada, not alternate markets.
Department's Position: We agree with the petitioner that a comparison of only Great Falls and Canadian domestic prices does not
necessarily answer the
(Cite as: 64 FR 57040, *57056)
question of whether domestic feed barley prices in Canada are lower than prices outside of Canada. A thorough analysis
should also account for other U.S. and world market prices. As described in the CWB section above, we made several price
comparisons, some of which are similar to those suggested by the petitioner, and found no price differential.
We disagree with the GOC that cross-border comparisons are inappropriate to test whether Canadian domestic feed barley prices
are artificially low. When confronted with an adequate remuneration issue, the Department will normally seek to measure the
adequacy of remuneration by comparing the government price to market-determined prices within the country. However, in
certain circumstances, market prices may not exist in the country or it may be difficult to find a "market" price that is independent
of market distortions caused by government action. With respect to export restriction programs in particular, international
prices are not necessarily the benchmarks we use to determine if a benefit exists; in such cases, international prices are merely the
starting point of our analysis. See Lumber.
The only domestic barley prices on the record that may be independent of the CWB's influence are prices for barley grown in
Ontario. However, we verified that the Ontario barley market is very different from that in the *57057
(Cite as: 64 FR 57040, *57057)
designated area because the barley market in Ontario is very thin and is subject to significant price fluctuations. Additionally, to
the
(Cite as: 64 FR 57040, *57057)
extent that cattle are raised in Ontario, they are primarily fed corn rather than barley. Thus, we do not believe Ontario provides a
reliable comparison price.
Because there is not an appropriate market price within Canada, we used other prices against which to compare barley prices
in the designated area. Given that these price comparisons did not yield significant, consistent price differentials through the POI,
further analysis of whether Canadian domestic feed barley prices are lower than they would be absent the CWB is unnecessary.
Comment 5: The CWB's Producer Direct Sales ("PDS") Program
The petitioner argues that the PDS program eliminates any economic or rational incentive to export unless the exporter can
obtain an export price that is substantially higher than the Canadian domestic price and the PDS price. Thus, it acts as a
substantial restraint on exports.
The GOC argues that the PDS program is a safety valve for producers to allow them to pursue higher returns that they find through
export spot opportunities. Furthermore, the CWB actively assists producers in pursuing this option.
Department's Position: Based on our analysis, the PDS program does not encourage farmers to export independently. In theory,
the PDS program allows