Live Swine From Canada; Final Results of Countervailing Duty Administrative Review

DEPARTMENT OF COMMERCE

[C-122-404]

Live Swine From Canada; Final Results of Countervailing Duty

Administrative Review

AGENCY: International Trade Administration/Import Administration

Department of Commerce.

ACTION: Notice of Final Results of Countervailing Duty Administrative

Review.

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SUMMARY: On October 20, 1993, the Department of Commerce (the

Department) published the preliminary results of its administrative

review of the countervailing duty order on live swine from Canada (58

FR 54,112). We have now completed that review and determine the total

subsidy to be Can$0.0295 per kilogram for all live swine.

EFFECTIVE DATE: March 16, 1994.

FOR FURTHER INFORMATION CONTACT: Dana Mermelstein or Stephanie Moore,

Office of Countervailing Compliance, International Trade

Administration, U.S. Department of Commerce, Washington, DC 20230;

telephone: (202) 482-2786.

SUPPLEMENTARY INFORMATION:

Background

On October 20, 1993, the Department of Commerce (the Department)

published in the Federal Register (58 FR 54,112) the preliminary

results of its administrative review of the countervailing duty order

on live swine from Canada (50 FR 32,880; August 15, 1985). The

Department has now completed that administrative review in accordance

with section 751 of the Tariff Act of 1930, as amended (the Act).

Case briefs were submitted by the National Pork Producers' Council,

Petitioner, the Government of Canada (GOC), the Gouvernement du Quebec

(GOQ), the Canadian Pork Council (CPC), Pryme Pork, Ltd. (Pryme), P.

Quintaine & Son (Quintaine), and Earle Baxter Trucking LQ (Baxter).

Rebuttal Briefs were submitted by Petitioner, the GOC, the GOQ, and the

CPC. On December 1, 1993 the Department held a public hearing at the

request of Petitioner and the GOQ.

In response to the comments made by the parties, the Department has

recalculated benefits under the Alberta Crow Benefit Offset Program,

the Feed Freight Assistance Program, and the Saskatchewan Hog Assured

Returns Program. The total subsidy determined in the preliminary

results of review, Can$0.0289/kg, has been recalculated. The Department

now determines the total subsidy to be Can$0.0295/kilogram.

Scope of Review

The merchandise covered by this review is all live swine, except

breeding swine, from Canada. Such merchandise is classifiable under the

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 remains dispositive. The

review covers the period April 1, 1990 through March 31, 1991 and the

following programs: (1) Feed Freight Assistance Program; (2) National

Tripartite Stabilization Scheme for Hogs (Tripartite); (3) Quebec Farm

Income Stabilization Insurance Program (FISI); (4) Saskatchewan Hog

Assured Returns Program (SHARP); (5) Alberta Crow Benefit Offset

Program (ACBOP); (6) Alberta Livestock and Beeyard Compensation Program

(Livestock Predator Sub-Program); (7) Ontario Farm Tax Rebate Program;

(8) Livestock Improvement Program for Northern Ontario; (9) Ontario

Pork Industry Improvement Plan (OPIIP); (10) Ontario Rabies

Indemnification Program; (11) Saskatchewan Livestock Investment Tax

Credit; (12) Saskatchewan Livestock Facilities Tax Credit Program; (13)

Canada/British Columbia Agri-Food Regional Development Subsidiary

Agreement; (14) Canada/Quebec Subsidiary Agreement of Agri-food

Development; (15) Canada/Manitoba Agri-Food Development Agreement; (16)

Western Diversification Program; (17) Agricultural Products Board

Program; (18) Canada/Alberta Swine Improvement Programs Study; (19)

Canada/Ontario Canadian Western Agribition Livestock Transportation

Assistance Program; (20) British Columbia Swine Herd Improvement

Program; (21) Ontario Export Sales Aid; (22) Ontario Bear Damage to

Livestock Program; (23) Ontario Dog Licensing and Livestock and Poultry

Compensation Program; (24) New Brunswick Agriculture Development Act--

Swine Assistance Program; (25) New Brunswick Swine Industry Financial

Restructuring Program; (26) British Columbia Farm Income Insurance

Program; (27) New Brunswick Livestock Incentives Program; (28) New

Brunswick Hog Marketing Program; (29) New Brunswick Hog Price

Stabilization Program; (30) New Brunswick Swine Assistance Policy on

Boars; (31) Prince Edward Island Hog Price Stabilization Program; (32)

Prince Edward Island Swine Development Program; (33) Prince Edward

Island Interest Payment on Assembly Yard Program; (34) Nova Scotia

Swine Herd Health Policy; (35) Nova Scotia Improved Sire Policy; (36)

Newfoundland Farm Products Corporation Hog Price Support Program; (37)

Newfoundland Weanling Bonus Incentive Policy; (38) Canada-Saskatchewan

Agri-Food Development Agreement; (39) British Columbia Feed Grain

Market Development Program; (40) Ontario Soil Conservation and

Environmental Assistance Program; (41) Ontario Weaner Pig Stabilization

Plan; (42) Nova Scotia Natural Products Act--Pork Price Stabilization

Program; and, (43) Quebec Productivity and Consolidation of Livestock

Production Program. Of the above-listed programs, we found subsidies

were provided to live swine producers during the review period under 12

programs. See Final Results of Review section below.

Analysis of Comments

Comment 1: Petitioner urges the Department to reexamine its

practice of not finding a program de jure specific based on its

availability only to the agricultural sector. Petitioner argues that

the Department's practice with respect to agricultural subsidies is

inconsistent with its treatment of subsidies bestowed upon other

sectors of the economy, and is reminiscent of the discarded ``general

availability test,'' presuming that a program available to all of

agriculture is somehow ``generally available.'' Petitioner cites both

Federal Circuit and Court of International Trade opinions in advancing

the argument that the Department has considerable discretion in

determining when a subsidy program is de jure specific and what

practices are countervailable. Petitioner argues that the Department

should exercise its discretion, and focus on factors such as the size

of the agricultural sector relative to the economy as a whole, and

therefore conclude that Tripartite is de jure specific because it is

limited, by law, to an enterprise or industry or group of enterprises

or industries.

Both the GOC and the CPC argue that it would be inappropriate for

the Department to now reverse a longstanding practice with regard to

agricultural programs, and to do so would be tantamount to rulemaking.

The GOC states that ``[b]y any standard, the agricultural sector is too

broad to constitute a `specific * * * group of enterprises or

industries' as required by the statute.'' The CPC states that what

Petitioner refers to as ``misguided policy'' has been upheld by the

Court of International Trade as a reasonable exercise of the

Department's discretion. See Roses Inc. v. United States, 774 F. Supp.

1376, 1383 (CIT 1991).

Department's Position: The Department's policy with respect to

agricultural programs has been incorporated into the proposed

regulations, which provide that the Department ``will not regard a

program as being [de jure] specific * * * solely because the program is

limited to the agricultural sector.'' Notice of Proposed Rulemaking and

Request for Public Comments (54 FR 23,366, 23,380; May 31, 1989)

(Proposed Regulations), at section 355.43(b)(8). See, e.g., Fuel

Ethanol from Brazil (51 FR 3361; 1986). Although these proposed

regulations are not final, we have determined that, for the present, it

is appropriate to maintain the current policy with respect to subsidies

provided to the industries within the agricultural sector. We

recognize, however, that certain policies such as this one may warrant

reconsideration in the future, and we agree with Petitioner that the

Department's discretion permits it the authority to reverse such

policies by way of the proper procedure, depending upon the policy in

question.

We note, in addition, that, as with other subsidy programs, in

publishing the proposed regulation relating to the current agricultural

sector exception, the Department emphasized in its commentary that ``an

agricultural program may be deemed specific if, for example, benefits

under the program are limited to, or provided disproportionately to,

producers of particular agricultural products.'' 54 FR at 23,368

(emphasis added). The use of the disjunctive ``or'' demonstrates the

Department's recognition that an affirmative finding based upon a

single factor could reasonably support a determination of de facto

specificity within the meaning of section 771(5) of the Act.

Comment 2: Petitioner argues that the Department should conduct its

de jure specificity analysis of the Tripartite program by focusing on

the individual Tripartite plans and their implementing subsidiary

agreements, rather than on the implementing legislation, Canada's

Agricultural Stabilization Act (ASA), as amended by Bill C-25 to

provide for Tripartite agreements. Petitioner argues that this approach

is appropriate because the Tripartite Agreement for Hogs is not

integrally linked with any of the other Tripartite agreements. Contrary

to the Department's determination in the fourth review of this order,

Petitioner argues that all Tripartite schemes were not part of one

program because they are ``structured pursuant to the enabling

legislation and basic principles in Bill C-25 * * *'' Final Results of

Countervailing Duty Administrative Review; Live Swine from Canada (56

FR 28,531; June 21, 1991) (Fourth Review Final).

According to Petitioner, the basis of the Department's

determination appears to have been its consideration of only one

factor, the purpose of the program as stated in the enabling

legislation. Petitioner argues, however, that there is no evidence of a

government policy to treat industries equally under the agreements

because each individual agreement specifies the manner in which

benefits are calculated and paid, thereby describing the class of

eligible producers. Petitioner cites Certain Fresh Atlantic Groundfish

from Canada; Final Affirmative Countervailing Duty Determination (51 FR

10,041, 10,049; March 24, 1986) (Groundfish), aff'd, Comeau Seafoods v.

United States, 13 CIT 923, 724 F. Supp. 1407, 1416 (1989), in which the

Court of International Trade (CIT) affirmed the Department's

determination to examine the specificity of the Canadian Economic and

Regional Development Agreements by focusing on the terms of the

individual ERDA subsidiary agreements.

Petitioner also argues that even if the Department examines the

Tripartite schemes collectively, they are de jure limited to a specific

group of industries, namely the eleven commodities covered by

Tripartite agreements during this review period.

Respondents counter that it is appropriate for the Department to

employ an integral linkage analysis when the Department is determining

whether to examine two or more programs as one. Applying the integral

linkage policy here shows that the Tripartite agreements meet all of

the integral linkage criteria and should therefore be considered as one

program, consistent with the Department's practice in reviewing this

program. According to the GOC and the CPC, the analogy which Petitioner

draws between Tripartite and the regional development agreements in

Groundfish provides no support for the approach endorsed by Petitioner.

The GOC and the CPC also object to Petitioner's arguments on the basis

that the Department has already determined Tripartite to be de jure not

specific in earlier reviews of this order, and Petitioner has presented

no new facts or evidence of changed circumstances which would justify

reconsideration of this determination. Therefore, the Department should

not revisit the question of de jure specificity.

Department's Position: For purposes of the Department's de jure

specificity analysis, we have continued to treat Tripartite as a single

subsidy program providing benefits to several identifiable

beneficiaries through individual agreements reached between the federal

government, the provincial governments and the various agricultural

commodity producers.

Petitioner's reliance on Groundfish and Comeau Seafoods is

misplaced. In upholding the Department's determination in Comeau

Seafoods, the CIT correctly identified the determinative issue as being

``at what level Commerce may apply the specificity test.'' Comeau

Seafoods, 724 F. Supp. at 1416 (emphasis in original). As the CIT

found, the individual Economic and Regional Development Agreements

(ERDAs) at issue there were ``designed to `establish programs,

delineate administrative procedures and set up the relative funding

commitments of the federal and provincial governments.''' Id. at 1415

(quoting Groundfish From Canada, 51 FR at 10,049). In addition, the

ERDAs were designed to provide only a procedure for ``the establishment

of economic development programs with stated general economic

development goals.'' Id. at 1415 n. 13. For these reasons, the

``agreements'' in Groundfish were effectively separate subsidy

programs, making the proper level of specificity analysis the

agreements themselves.

By contrast, as the Department found in the fourth administrative

review, Tripartite's enabling legislation, Canada's ASA, as amended by

Bill C-25, provides for established administrative procedures and

funding commitments. Fourth Review Final, 56 FR at 28,532. Moreover,

Tripartite's enabling legislation creates a framework for providing

only one type of assistance, income stabilization to producers of

agricultural commodities which establish agreements. See id. Therefore,

although the record is not clear as to whether the Government of Canada

retains discretion regarding when to enter into particular agreements,

it is clear that Tripartite is a single program, of which the

Tripartite agreements, or product-specific schemes, are ``integral

parts.'' Accordingly, the appropriate level for the Department's

specificity analysis is not the individual agreements but the

Tripartite program itself. In reaching this determination, we note

that, contrary to the arguments of Respondents, the Department did not

conduct an integral linkage analysis of Tripartite in the fourth

administrative review or at any other time. See id.

Finally, as we found in the preliminary results, Petitioner has not

presented any new facts or evidence of changed circumstances during the

present review which would warrant reconsideration of the issue of

whether the Tripartite is de jure specific. Preliminary Results at

54,116. Therefore, we have declined to reconsider the Department's

determination that Tripartite is not de jure specific.

Comment 3: The GOC disagrees with the Department's preliminary

determination that Tripartite is not integrally linked to the other

provisions of the Agricultural Stabilization Act (ASA), in accordance

with the Department's proposed regulations, and that the programs

examined together are not de facto specific. Furthermore, the GOC

considers unreasonable the Department's reliance on non-regulatory

factors such as ``a documentary statement of an overall government

policy to treat industries equally'' and the expectation of identical

treatment and benefits among the different programs at the operational

level. In relying on these factors, the Department is introducing a

more stringent standard than is required by the proposed regulations

and is, therefore, acting contrary to law.

More specifically, the GOC argues that the relationship between

Tripartite and the named and designated commodity provisions of the ASA

satisfies all of the Department's regulatory factors for finding

integral linkage. According to the GOC, there is one statute which

provides the same benefits, for the same purpose, under a centralized

administration ``to the producers of all agricultural commodities in

Canada.'' The GOC further states that the Department errs by equating a

policy to treat industries equally with a requirement that benefits,

purposes, and administration be identical; a policy to treat industries

equally is evident under the ASA, the GOC argues, because it provides

every Canadian agricultural producer access to stabilization payments,

when needed, in the amounts required, without regard to regional

differences in a complementary fashion.

The GOC further argues that, because identicality should not be

expected or required, the Department's conclusion is unwarranted that

the existence of Tripartite Stabilization Committees indicates that the

programs are not administered in common. Equally unwarranted is the

Department's distinction between Tripartite (which requires producer

contributions) on the one hand, and named and designated commodities on

the other (which require no producer contributions). According to the

GOC, the Tripartite producer contribution requirement does not

disadvantage producers because producers enter Tripartite agreements

only if the benefits, such as flexibility in negotiating a payment

schedule, outweigh the drawbacks.

Petitioner agrees with the Department's finding that Tripartite is

not integrally linked to any other support program. Citing Carbon Steel

Wire Rod from Saudi Arabia; Final Results of Countervailing Duty

Administrative Reviews (57 FR 8303; March 9, 1992), Petitioner argues

that the GOC has failed to demonstrate that the factors considered by

the Department are outside the Department's scope of authority under

its proposed regulations, or otherwise not in keeping with earlier

determinations. Petitioner argues that, unless the Department

interprets the integral linkage standard in a strict fashion, despite

the GOC's claim that the Department's interpretation is ``more

stringent'' than that which is required by the proposed regulations,

any government would be able to immunize its support programs against

findings of specificity by merely articulating a very broad purpose

which encompasses all programs.

Petitioner also argues that the analysis of equal treatment applied

by the Department is neither extraregulatory nor unreasonable. Contrary

to the GOC's allegations, neither the Department's analysis in this

case, nor the linkage test in general, requires identical treatment,

but rather equality in receipt of benefits.

Department's Position: We disagree with Respondents and affirm our

preliminary determination that the ``named'' and ``designated''

provisions of the ASA are not integrally linked to the Tripartite

provision of the ASA. Contrary to the contention of Respondents, the

Department's interpretation of the integral linkage policy, and the

Department's integral linkage analysis in this case, are not more

stringent than permitted by the Department's authority. The integral

linkage policy is only an exception to the normal application of the

specificity test. As the drafting of the integral linkage provision in

the proposed regulations indicates, the policy was created to permit

evaluating whether, in particular circumstances, the Department should

deviate from its normal approach to analyzing de facto specificity in

order to consider the coverage of two or more programs together instead

of just one. See Proposed Regulations at Sec. 355.43(b)(6). Considering

the purpose of the specificity test as a whole, we have interpreted the

standard narrowly for granting an affirmative integral linkage

determination.

The specificity test was designed to avoid carrying the

countervailing duty law to absurd results by countervailing government

actions or programs such as public highways and bridges which clearly

benefit the economy at large, as opposed to identifiable and specific

segments of the economy. See, e.g., Carlisle Tire & Rubber Co. v.

United States, 564 F. Supp. 834, 838 (CIT 1983). In implementing the

appropriate standard to determine whether to permit a particular

exception to the specificity test, however, such as an affirmative

integral linkage finding, the Department cannot create a loophole which

would allow de facto specific subsidy programs benefiting only

particular segments of the economy--or particular segments of the

agricultural sector--to escape the imposition of countervailing duties.

Permitting respondent governments to loosely connect two or more

programs which are otherwise designed to serve different purposes would

create just the type of loophole the Department seeks to avoid. Besides

being contrary to the Department's specificity practice, doing so would

also be contrary to Congress' express requirement in the legislative

history that Commerce avoid taking an ``overly narrow'' or ``overly

restrictive'' view of its authority to determine specificity. S. Rep.

No. 71, 100th Cong., 1st Sess. 123 (June 12, 1987). This statement,

implies that Congress intended the Department to view its authority to

find specificity broadly and its authority to create exceptions to its

normal approach narrowly. The very fact that the programs at issue must

be found to be ``integrally linked'' rather than merely ``linked''

demonstrates the limited circumstances which would warrant an

affirmative finding.

The evidentiary standard for establishing that two or more programs

are integrally linked is two-fold. First, as we explained in the

preliminary results, the government must point to an express statement

in the statute or elsewhere, either at the time the first program was

created or later when the additional programs were added, which

reasonably documents the government's underlying intent to develop two

or more programs designed as ``complementary parts of an overarching

governmental policy directive.'' Integral Linkage Analysis Memorandum,

October 13, 1993 (on file in Room B-099, Department of Commerce)

(quoting Carbon Steel Wire Rod From Saudi Arabia, 57 FR at 8303)

(Integral Linkage Memo). The need to provide this type of objective

legal evidence relates to all of the integral linkage factors set forth

in the proposed regulations. The government must also provide factual

evidence documenting that its original intent has been implemented, and

that the programs are actually functioning in a complementary manner.

This type of evidence also relates to each of the proposed factors and

other relevant evidence.

Contrary to the claim of the GOC, the Department does not require

that the programs be ``identical'' in order to prevail on a claim of

integral linkage. As petitioner correctly notes, however, the

supporting evidence must go beyond simply identifying a broad

underlying purpose encompassing several otherwise distinct programs

which provide access to benefits to all or most eligible industries.

For instance, in this case, the Department's linkage standard requires

more than the GOC's broad statement that Tripartite and the other ASA

provisions are each designed to provide income stabilization to all

agricultural industries. See Integral Linkage Memo at 4.

As stated above, the respondent government must demonstrate through

objective record evidence that, due to an ``overall policy or national

development plan,'' it created two or more programs with the express

purpose that they complement one another, not only in terms of breadth

of availability and coverage, but in similarity of intent, purpose, and

administration as well. Preliminary Results at 54,115 (quoting Carbon

Steel Wire Rod from Saudi Arabia). Furthermore, the evidence must

establish that any differences between the nature and administration of

the programs are necessary because of differences in the nature of the

industries being offered benefits; and despite these differences, the

recipient industries are actually treated equally in terms of

availability, type, and receipt of benefits.

As the Department indicated in the preliminary results, the GOC was

unable to point to the necessary documentation demonstrating the

existence of an overall policy or development plan to create two or

more complementary programs. That fact alone renders a claim of

integral linkage insupportable. See id.; Integral Linkage Memo at 3-4.

The Department also found that the information in the record does not

establish that the named, designated, and Tripartite provisions of the

ASA are administered in an equal or complementary manner. Id.

In light of these basic, essential requirements, the Department's

interpretation of the integral linkage policy in the preliminary

results, is fully consistent with the Department's practice, proposed

regulations and the legislative guidance regarding the appropriate

approach to specificity analysis in general. See, e.g., Groundfish.

Comment 4: The GOC and the CPC disagree with the Department's

determination that Tripartite is de facto specific. They argue that the

Department's reliance on its finding that there are ``too few users''

of Tripartite is legally insufficient. According to Respondents, the

statute and proposed regulations require consideration of all four

factors enumerated in the proposed regulations at section 355.43(b)(2)

before the Department can determine whether benefits under this program

are provided to a specific enterprise or industry or group of

enterprises or industries. The GOC argues that in reaching its

preliminary results, the Department misinterpreted and misapplied Final

Results of Review: Carbon Black from Mexico, 51 FR 30,385 (1986) and

Cabot Corp. v. United States, 620 F. Supp. 722 (CIT 1985) (Cabot).

According to the GOC, Cabot does not stand for the proposition that the

Department may halt its specificity analysis upon finding ``too few

users'' without consideration of the other regulatory factors and

relevant evidence. As support, Respondents argue that a single-factor

specificity test has been consistently rejected by the CIT, the Court

of Appeals for the Federal Circuit, and several United States Canada

Free Trade Agreement (FTA) binational panels. See Live Swine from

Canada, USA-91-1904-03, at 25 (October 30, 1992) (Second Swine IV Panel

Decision); In the Matter of Softwood Lumber from Canada, USA-92-1904-01

(May 6, 1993); see also Roses, Inc. v. United States 774 F. Supp. 1376

(CIT 1991) (Roses II); and Roses, Inc. v. United States, 743 F. Supp.

870 (CIT 1990) (Roses I).

Respondents point out that although the binational panel reviewing

the fifth administrative review of live swine from Canada upheld the

Department's specificity finding with regard to Tripartite, it did not

uphold the use of a single-factor specificity test. In fact, the panel

rejected the Department's finding that Quebec's Farm Income

Stabilization Insurance scheme is specific based upon only one factor.

Petitioner argues that the sequential application of the

specificity test is not inconsistent with U.S. law and has been held

repeatedly to be a reasonable interpretation of the statute.

Furthermore, according to Petitioner, Cabot supports a de facto

specificity finding based solely on the existence of too few users,

with no inquiry into policy or discretion. On the other hand, the

binational panel decisions on which the GOC relies have no precedential

value, and are only to be considered if they are ``intrinsically

persuasive.'' Accordingly, they do not supersede the binding case law

which uniformly supports the Department's sequential application of the

specificity test. Petitioner also notes that binational panel decisions

on this issue directly contradict one another. Compare Second Swine IV

Panel Decision; In the Matter of Live Swine from Canada, USA-91-1904-04

(August 26, 1992) (Swine V Panel Decision); and In the Matter of Pure

and Alloy Magnesium from Canada, USA-92-1904-03 (August 16, 1993)

(Magnesium). Petitioner also disagrees with the claim of the GOC and

the CPC that the Department did not consider all factors in its

analysis.

Department's Position: The test for determining de facto

specificity requires that the Department ``consider, among other

things,'' several particular factors. Proposed Regulations at section

355.43(b)(2). Respondents misinterpret the purpose of the Department's

inquiry, as set forth in the proposed regulations, when they

incorrectly argue that the Department's practice ``plainly calls for a

finding on all four factors.'' As the Department has stated previously,

and as the Court of Appeals for the Federal Circuit has agreed, we

``must consider all of these factors in light of the evidence on the

record in determining specificity in a given case.'' PPG Indus. v.

United States, 928 F.2d 1568, 1577 (Fed. Cir. 1991) (PPG I). Moreover,

while decisions of binational panels may be considered intrinsically

persuasive, they are not binding on the Department. We have carefully

reviewed the panel decisions cited by the GOC and do not consider them

intrinsically persuasive for the reasons set forth below. See also the

Department's response to Comment 12, below, regarding the specificity

of Quebec's FISI program.

The GOC's reliance on the CIT's two Roses decisions is misplaced as

well. In Roses, the CIT did not reject an affirmative de facto

specificity determination based upon evidence relating to only one

factor. Instead, the CIT rejected a finding of non-specificity which

was reached without considering evidence relating to all four factors.

It was in this context, after examining the Department's determination

that a program was not specific based on the large number of users,

that the Court properly held that the Department ``does not perform a

proper de facto specificity analysis if it merely looks at the number

of companies that receive benefits under a program; the discretionary

aspects of the program must be considered from the outset.'' Roses II,

774 F. Supp. at 1380. Although the CIT did not rule on the question of

whether the Department could properly base an affirmative specificity

determination on evidence related to only one factor, the context of

the two decisions supports the Department's interpretation. See id.;

see also Magnesium at 35 (cited in the Preliminary Results at 54,116).

In this review, the Department determined that Tripartite provided

de facto specific benefits to swine producers based upon its

examination of evidence related to the first factor, the number of

actual users or beneficiaries. We considered the evidence in the record

regarding dominant users and disproportionate use, and the exercise of

government discretion. We determined that this evidence did not detract

from an affirmative de facto specificity determination on the basis of

too few users. Preliminary Results at 54,116-17. Accordingly, the

Department's determination is based upon substantial evidence and is

otherwise in accordance with law.

Comment 5: The GOC contests the Department's failure to

specifically identify, and reach a finding regarding, ``a discrete,

selective, targeted'' class, industry or group of industries

benefitting from Tripartite. The GOC cites PPG I, 928 F.2d at 1577 and

PPG Indus., Inc. v. U.S., 978 F.2d 1232, 1240 (Fed. Cir. 1992) (PPG

II), in support of its claim that the Department must identify a

beneficiary class or industry which includes live swine producers

before concluding that Tripartite is specific.

Petitioner argues that neither the statute nor the regulations

require governmental targeting or intent as a precondition for

determining de facto specificity; the fact that the Department declined

to make this finding is reasonable and in accordance with law.

Department's Position: We disagree with the GOC's contention that

absent a finding that a bestowing government intended to benefit a

``discrete, selective or targeted class,'' we may not properly find a

program de facto specific regardless of how few users there are or

other relevant evidence. The statute does not require and the

Department's policy has not established that the Department must

ascertain, or base its specificity determinations upon, the intent of

the bestowing government. See 19 U.S.C. Sec. 1677(5)(B); Proposed

Regulations at section 355.43(b)(2). The Department's interpretation of

the statute has been expressly upheld by the CIT. Saudi Iron and Steel

Co. (Hadeed) v. United States, 675 F. Supp. 1362, 1367 (1987), appeal

after remand, 686 F. Supp. 914 (CIT 1988); see also Cabot, 620 F. Supp.

at 732. Moreover, a binational panel in an earlier review of this order

cited the legislative history underlying section 771(5)(B) of the Act

to reject the GOC's same basic argument: ``Under the statutory scheme,

the pertinent inquiry is not whether Canada has intentionally targeted

benefits to swine producers, but rather whether it has done something,

intentionally or otherwise, that confers a benefit upon a `specific

enterprise or industry or group of enterprises or industries.''' In the

Matter of Live Swine From Canada, USA-91-1904-03, at 19-20 (May 19,

1992) (First Swine IV Panel Decision).

Similarly, the Court of Appeals for the Federal Circuit did not

hold, in either PPG I or PPG II, that the Department must find intent.

The court recognized that the statute provides a two-part test for

specificity and that the de facto aspect is purely an inquiry into the

factual question of whether, ```in its application, the program results

in a subsidy only to an enterprise or industry or specific group of

enterprise or industries.''' PPG II, 978 F.2d at 1239 (quoting PPG I,

928 F.2d at 1576) (emphasis in original). While the court certainly did

not attempt to foreclose the possibility that intent might be shown,

see PPG II at 1240 n. 12, nowhere did the court indicate that the

statute requires an express finding of intent in order to support an

affirmative de facto specificity determination. In both decisions, the

court merely used the phrase ``discrete, selective, or targeted

industry'' to describe the industry, enterprise or group thereof that,

as a factual matter, was eligible for (or should have been eligible

for) or had actually received a benefit under the programs at issue.

PPG II at 1240; PPG I at 1577.

In this regard, we note the decision of yet another binational

panel which rejected the GOC's argument by finding that the authorities

cited by the GOC ``generally use the term `targeting' as a synonym for

`specific' or `exercise of discretion.''' Swine V Panel Decision at 16

n. 17. Similarly, we have interpreted the Court of Appeals' use of the

same term in PPG as a synonym for ``specific'' or the ``exercise of

discretion.'' Therefore, no further findings are required by law to

determine specificity in this review.

Comment 6: Petitioner argues that the Department's determination

that there are ``over 80 agricultural commodities'' produced in both

Canada and Quebec understates the actual number of agricultural

commodities which are eligible for benefits under the Tripartite and

FISI programs, respectively. Petitioner states that the 1991

Agricultural Profile of Canada, provided to the Department by the GOC,

represents the best quantification of agricultural commodities produced

in Canada. It lists 131 commodities and supports the Department's

determination in previous reviews that there are over 100 agricultural

commodities produced in Canada.

Petitioner further argues that the Department found in its

memorandum on The Universe of Agriculture in Canada and Quebec,

Memorandum from Dana Mermelstein to Barbara Tillman, dated October 12,

1993 (Agricultural Universe Memo), that ``the GOC has provided no

indication of the criteria it applies to determine how and when a

product should be listed in the [Farm Cash Receipts],'' and ``it is not

possible to determine * * * how the GOC would reasonably and

objectively determine which of the 131 commodities listed in the

Profile meet these criteria.''

According to Petitioner, this uncertainty is a result of the

failure by the GOC to provide information regarding Tripartite

eligibility criteria. Therefore, Petitioner argues, the Department

should draw an adverse inference and base its determination of the

extent of the agricultural universe for purposes of the de facto

specificity analysis on the 1991 Profile.

Petitioner makes the same argument with regard to Quebec's FISI

program, alleging that the Government of Quebec's failure to provide

information about FISI eligibility requires the Department to rely on

the Profile, and to make adverse inferences in determining the number

of agricultural commodities produced in Quebec.

The GOC counters that Petitioner's criticisms of the Department's

reasoning are invalid especially in light of the Petitioner's failure

to provide substitute criteria for determining which products to

include in the universe, a substitute list of products, or a definite

final tally. The GOC and the CPC argue that the shortcomings in the

explanation of how the Profile and the FCRs are compiled do not relate

to Tripartite eligibility, nor would the law allow the Department to

make the adverse assumptions Petitioner urges.

The GOQ responds with three points: first, there is ample record

evidence explaining and illustrating the ``reasonable limitations'' on

FISI eligibility; second, adverse inferences are unwarranted in light

of Quebec's responsiveness to the Department's inquiries; and third,

the Profile lists products at a level of aggregation which is not

appropriate for defining the universe of products eligible for FISI.

Department's Position: We agree with the GOC, GOQ and CPC that

Respondents' failure to provide information regarding the eligibility

requirements for Tripartite and FISI is not a basis for the Department

to draw an adverse inference with regard to the number of agricultural

commodities produced in Canada and Quebec, which are eligible for

coverage. As the Department stated in the preliminary results, the goal

of determining the number of commodities produced in Canada and Quebec

is to approximate the extent of the relevant agricultural universes and

thus evaluate the coverage of the programs under consideration for the

purpose of performing the de facto specificity analysis. We fully

explained in the Agricultural Universe Memo how we evaluated the

various sources of information in reaching the determination that there

are over 80 agricultural commodities produced in both Canada and

Quebec.

Comment 7: The GOC argues that substantial record evidence does not

support a finding that there are ``too few users'' of Tripartite;

therefore, Tripartite is de facto non-specific. According to the GOC,

benefits under Tripartite were provided during the review period to a

``sizeable portion of the agricultural universe.''

With regard to the number of Tripartite users, the GOC argues that

the Department's counting of the products shows that at least 9

industries or groups thereof, or 11 percent of the universe by number

of products is covered by Tripartite. The GOC avers that a program need

not reach all eligible users to be found not specific. The GOC points

out that the binational panel ruling on the final results in the fourth

review refused to sustain the Department's finding that Tripartite was

specific based upon ``too few users.'' In this review period, the

Department's determination of specificity on the same grounds is all

the more inappropriate because there are two more Tripartite agreements

covering two additional commodities.

Because Tripartite reaches more than a ``trivial'' number of users

but less than the entire agricultural universe, the GOC claims that the

Department's inquiry should extend into non-statistical factors, such

as the availability of other stabilization options, and the length and

complexity of the Tripartite negotiating process, to understand the

reason for the limited number of Tripartite agreements. The GOC also

reiterates its argument that Tripartite is an expanding program;

products were added through the fifth review period, and enrollees were

added in the current (sixth) review period.

In addition, the CPC argues that in analyzing whether Tripartite is

de facto specific, the Department must also consider the fact that

commodities participating in Tripartite accounted for 33 percent of the

total value of Canadian agricultural production during the review

period. The Department asked for this information and, according to the

CPC, cannot now simply ignore it.

Petitioner rebuts that Respondents are attempting to inject into

the specificity analysis several criteria that do not exist. Petitioner

claims that the Department has consistently used statistical analyses

in determining whether a program is de facto specific by virtue of the

number of program users; in fact, the regulations require the

Department to consider the number of users. Moreover, Petitioner,

citing the Department's redetermination in the fifth review of this

order, notes that the Department correctly does not consider that a

program covering a variety of industries is necessarily de facto not

specific. Petitioner further agrees with the Department's

redetermination regarding the number of industries currently using

Tripartite: it does not represent a variety of different types of

agricultural commodities.

Department's Position: We disagree with the GOC. As we explained in

the preliminary results, the Department determined that there were 11

beneficiaries of Tripartite during the review period (which the GOC now

disaggregates into 13 beneficiaries), covered by eight agreements.

Preliminary Results at 54,116. Tripartite's enabling legislation, Bill

C-25, an amendment to the ASA, states that Tripartite benefits are

available to ``all natural or processed products of agriculture,'' thus

requiring a determination that the program is not de jure specific

under the Department's current policy toward agricultural subsidy

programs. For purposes of its de facto specificity analysis, the

Department has determined the appropriate universe of potential users

in Canada against which to evaluate the number of actual users of

Tripartite. That universe was comprised of over 80 agricultural

commodities during the period of review. See Agricultural Universe

Memorandum. Based on the Department's comparison of this evidence, we

have reasonably determined that only 11 (or 13) out of over 80 is a

sufficiently small number of actual beneficiaries so as to warrant a

determination that Tripartite benefits a ``specific enterprise or

industry or group thereof'' within the meaning of section 771(5)(B) of

the Act.

The Department disagrees with the GOC's claim that comparing the

number of users to the number of potential users of a subsidy program

is not probative of de facto specificity. This analysis is more than

mere counting, as asserted by the GOC. The proposed regulations

correctly provide that the Department will examine the number of

enterprises or industries actually benefitting from a program in

determining de facto specificity. See Proposed Regulations at section

355.43(b)(2). That is what the Department did here. In addition, the

GOC itself acknowledges that, based upon the number of agricultural

commodities, only 11 percent of the agricultural universe in Canada is

covered by Tripartite. Such a finding would certainly not detract from

a determination that Tripartite is de facto specific based upon the

small number of users.

In this same regard, we have considered the CPC's argument that the

agricultural commodities participating in Tripartite accounted for 33

percent of the total value of Canadian agricultural production during

the review period based on FCRs. This evidence also does not detract

from a determination that Tripartite is de facto specific based upon

the small number of only 11 (or 13) actual users. The statute states

that a domestic subsidy is countervailable if it is limited to a

specific enterprise or industry or group thereof, and the Department's

proposed regulations provide that the Department will examine the

number of actual beneficiaries, whether industries or enterprises, in

determining de facto specificity. The Department has previously not

engaged in an analysis of the percentage of production value covered by

a program in making specificity determinations. However, because the

CPC has raised this issue and because the proposed regulations provide

that other factors may be considered, we have now considered this

information in our specificity analysis. As discussed below, the

Department determines that in the context of Tripartite this

information has little, if any significance, in light of the relatively

small number of actual beneficiaries compared to the relatively large

number of eligible beneficiaries.

The Department found that several of the relatively few commodities

benefiting from Tripartite were produced in very small quantities

during the review period. Thus, each accounted for a relatively small

percentage of the total value of Canadian agricultural production. At

the same time, certain Tripartite beneficiaries (e.g., swine and

cattle) accounted for relatively large percentages of total

agricultural production. Similarly, of the relatively large number of

remaining commodities in the agricultural universe which did not

receive Tripartite, some accounted for a small percentage of production

value while others accounted for a large percentage. Because the

relative value of agricultural production accounted for by a particular

commodity is apparently, and properly, not determinative of whether it

may receive Tripartite benefits, it follows that each of these non-

covered commodities, whether large or small, must be equally eligible

for Tripartite benefits. Accordingly, the fact that the relatively

small number of commodities receiving Tripartite benefits happened to

account for 33 percent of the total agricultural production value

during the review period is of little, if any, significance when viewed

alongside the fact that a far greater number of both large and small

commodities in Canada did not receive Tripartite benefits. Finally, we

note that 33 percent of production value, viewed alone, still

represents only a small percentage of the eligible universe, and if

that were the sole factor that we had considered, the Department would

find Tripartite de facto specific.

In addition, we have determined that Tripartite is not integrally

linked to other income stabilization programs in Canada. Therefore, the

Department is precluded from examining evidence such as that regarding

the availability of other stabilization programs, which may or may not

explain why there were a small number of Tripartite agreements during

the review period.

Similarly, we do not consider the growth of the Tripartite program

during past review periods to be relevant to an analysis of whether

Tripartite is de facto specific during this review period. We

acknowledge that commodities were added during the fifth review period.

The Department found that Tripartite was de facto specific during that

review, however, based upon evidence related to the small number of

users, among other things. That determination was upheld by the

binational panel reviewing the Department's findings following remand.

Swine V Panel Decision at 17-19. Had additional agricultural

commodities been added to Tripartite's coverage during this review

period, the Department would have considered that evidence and

reevaluated the determination that there are too few users of

Tripartite to find it not de facto specific. Furthermore, although

Tripartite may have added enrollees during this review period, this

evidence does not detract from the Department's finding, which properly

focused upon the industries, or agricultural commodities, receiving

benefits. The additional enrollees produce the same 11 (or 13)

commodities that we have determined comprise a specific group of

enterprises or industries.

Based upon this analysis, we determine that substantial evidence

supports the Department's determination that there were too few

beneficiaries of Tripartite during the review period to warrant finding

the program not de facto specific.

Comment 8: The GOC argues that the Department's determination that

live swine producers benefit disproportionately from Tripartite

improperly ignores the nature of payments under the program. The GOC

claims that dollar payout levels do not show dominant or

disproportionate use. First, because payouts are determined by market

forces, there will always be variations in the amount of payouts to

different commodities and even to the same commodity at different

times. Second, the percentage of payouts received by hog producers

declined substantially during the review period, suggesting that over

time, the percentage of Tripartite benefits received by hog producers

will return to relatively low levels. In addition, the GOC questions

the value of the dominant or disproportionate use criteria in

evaluating Tripartite. Because the benefits are determined by market

forces, the dominant use test yields inconsistent findings regarding

Tripartite's specificity.

Petitioner argues that the Department's analysis of dominant or

disproportionate use is supported by substantial evidence in the

record, and is otherwise in accordance with law. The GOC's argument, on

the other hand, is unsupported by law. Petitioner contends that the

Department has previously considered arguments regarding the role of

market forces in triggering payments and has concluded that these

effects relate to whether a particular industry receives benefits

rather than the de facto specificity of a program.

Department's Position: We disagree with the GOC. First, we note

that in the preliminary results, the Department determined that

Tripartite was de facto specific solely on the basis of the small

number of actual beneficiaries during the review period in relation to

the large universe of eligible beneficiaries. Preliminary Results at

54,116. We also found that swine producers were dominant users of

Tripartite based upon the fact that they have received 70 percent of

the benefits over the history of the program. In making this dominant

use finding, the Department intended to demonstrate only that, assuming

the Department had made no finding regarding the number of users,

Tripartite could still have been found de facto specific. Id. at

54,117. Therefore, because we reasonably determined that the number of

actual Tripartite users was small, no dominant use finding was required

by the statute. Accordingly, inasmuch as the Department's dominant use

finding was not necessary in order to support our affirmative de facto

specificity finding on the basis of the small number of users, we have

considered the parties' dominant use arguments only to determine

whether they identify evidence in the record which would somehow

detract from the Department's affirmative determination. We have

determined that no such evidence has been identified.

Contrary to the argument of the GOC, a dominant or disproportionate

use finding could well be relevant to an income stabilization program

such as Tripartite if we were unable to make a specificity finding

based upon the small number of users. However, the question of whether

the subject merchandise happens to constitute a large or small industry

(agricultural commodity) is immaterial to the Department's specificity

analysis when the Department has already determined that a program is

de facto specific based on the small number of users. Assuming the

number of users in a case was not small, which is not the situation

here, the Department could very well determine that the subject

merchandise was a dominant user regardless of its relative size.

Similarly, the fact that Tripartite payments are triggered by

market forces cannot be considered in determining whether the program

is de facto specific. It may be that swine producers consistently

receive a disproportionate share of benefits because they happen to

experience consistently bad years which trigger higher payouts.

Subsidies are often provided when companies or industries experience

downturns in their markets, and it would be unreasonable for the

Department to find that such market forces render subsidies not

specific and thus not countervailable. Neither the statute nor the

proposed regulations permit the Department to alter its specificity

analysis on this basis.

Comment 9: The GOC also takes issue with the Department's findings

that the ``government of Canada may exercise discretion in the

administration of'' Tripartite, and that this evidence does ``not

detract from [our] finding of specificity'' based on evidence relating

to the small number of users. The GOC argues first that in relying on

the legislative history of the Tripartite program to show that the

Minister of Agriculture has a great amount of discretion, the

Department has improperly relied on non-record evidence. According to

the GOC, documents submitted by Petitioner as Tripartite legislative

history were stricken from the record, and may not be considered in the

Final Results.

The GOC argues that, as a matter of law, the Department's proposed

regulations require the Department to consider ``the extent to which a

government exercises discretion in conferring benefits under a

program.'' The Department's consistent practice has been to look for

the actual exercise of discretion, and the Swine V panel specifically

declined to sustain the Department's approach to the contrary.

Therefore, according to the GOC, the Department's finding that the

government ``may retain'' discretion is erroneous.

The GOC claims that the record on Tripartite fails to show that the

GOC has ever exercised the relevant discretion, and the verification

report establishes that there have been no actions limiting the

availability of Tripartite agreements. Moreover, the Department

persists in overlooking the extensive criteria provided in the ASA for

evaluating Tripartite agreement requests. The GOC urges the Department

to consider the nature of the program, which in the case of Tripartite

precludes government manipulation. The government cannot control the

market factors which dictate when payouts are made. Neither can the

government control which producer groups will seek Tripartite

agreements, and which producers will enroll once an agreement is

reached. Therefore, there is no opportunity for the GOC to influence,

or use its discretion in, the granting of benefits under Tripartite.

The absence of evidence of government discretion must weigh against a

de facto specificity determination.

Petitioner claims that it is not improper for the Department to

rely on the legislative history of the ASA in analyzing whether the

government retains discretion. Petitioner cites the CIT decision in

Central Soya Co. v. United States, 15 CIT 35, 13 ITRD 1085, 1087

(1991), which held that ``the court has broad power or discretion to

take judicial notice of legislative facts.''

Moreover, Petitioner argues that record evidence indicates that

Tripartite benefits may be awarded in a discretionary manner; the

negotiating process is discretionary in and of itself. The government

does not automatically establish a Tripartite agreement for any

producer group interested in obtaining one. Therefore, Petitioner

argues that the Department's finding with regard to discretion is

supported by substantial evidence in this review. Petitioner concludes

that, regardless, a flawed discretion finding does not nullify the

Department's specificity determination since the Department stated in

the preliminary results that it ``historically has not placed great

emphasis on this factor.''

Department's Position: We disagree with the GOC regarding the

Department's approach to the evidence relating to the exercise of

government discretion during this review. The Department found that the

Government of Canada ``may exercise discretion'' in the administration

of Tripartite. The Department did not base its determination of

specificity on this evidence, however. As explained in the previous

comments, the Department determined that Tripartite was de facto

specific solely on the basis of the small number of only 11 (or 13)

actual beneficiaries during the review period in relation to the

universe of eligible beneficiaries. Preliminary Results at 54,116. At

the same time, after reviewing all the information in the record, we

were not able to identify an established, publicized and consistent

review process leading to Tripartite agreements. The fact that

negotiations are involved appears to indicate that the outcome may be

unpredictable and inconsistent from one agreement to another. Thus, the

resulting Tripartite agreements do not necessarily reflect identical

terms or conditions. Preliminary Results at 54,117.

We also disagree with the GOC that the Department may not rely upon

the Canadian legislative history relating to the Tripartite program.

First, the legislative history is arguably publicly available,

published information and it may be relied on at any time during the

proceeding. We determined earlier in the review, however, that it was

not appropriate to permit Petitioner to add this information to the

record after the deadline provided for in the Department's regulations

for submitting factual information. See 19 CFR 355.31(a)(1)(ii).

Regardless, the Department's regulations do not preclude the Department

from adding factual information to the record at any time during a

proceeding, id. at Sec. 355.31(b)(1), especially prior to the

preliminary results.

Therefore, the fact that the Department did not permit Petitioner

to add this information to the record did not preclude the Department

from adding it to the record itself and relying upon the same

information in reaching its determination. Because it was plain that

the Department had indeed relied upon this information, the parties had

an adequate opportunity to comment upon it substantively.

Comment 10: The GOQ argues that the Department's reexamination of

the FISI program, notwithstanding the decisions of two binational

panels, is inconsistent with administrative practice and with the

international obligations of the United States. According to the GOQ,

the panels reviewing the fourth and fifth administrative reviews held

that the evidence on the record did not support a determination of

countervailability. By reinvestigating FISI, the Department is

departing from its administrative practice not to revisit a decision

absent new evidence or facts which indicate a change in the program.

There is no new evidence regarding FISI; the program has remained

essentially unchanged from prior reviews. The GOQ also maintains that

the Department is reexamining FISI because it has never managed to

compile a record sufficient to find FISI countervailable. This

continuous and unjustifiable examination of FISI constitutes a

restraint of international trade in violation of U.S. obligations under

the General Agreements on Tariff and Trade and the FTA.

Petitioner responds that the countervailability of FISI has neither

been explicitly affirmed by a reviewing binational panel, nor

explicitly rejected. The panel in Fresh, Chilled and Frozen Pork from

Canada, USA-89-1904-06, at 19 (March 8, 1991), and Fresh, Chilled and

Frozen Pork, USA-89-1904-06, at 2 (June 3, 1991) (collectively Pork),

concluded that the evidence on the record was insufficient to sustain

the Department's countervailability determination regarding FISI. The

binational panel in the fifth review of the order on live swine ordered

the Department to remove FISI benefits from its calculation for the

review period because of defects in the supporting record. Thus, by

examining FISI in this review, the Department has not violated its own

practice of not reinvestigating a program previously found not

countervailable.

Department's Position: The Department's practice is not to

reexamine a specificity finding made in the investigation or in a

subsequent review absent new facts or evidence of changed

circumstances. In this review, however, as we explained in the

preliminary results, the Department's determination to reexamine FISI

is reasonable in light of new evidence compiled by the Department

regarding the number of potential beneficiaries of the program and

other evidence. Preliminary Results at 54,117-18. In each proceeding

reviewed by a binational panel, the panel highlighted what it

considered to be deficiencies either in the supporting evidence or in

the Department's analysis. For instance, the Swine V panel found that

the Department had failed to provide a ``properly articulated rationale

for determining that FISI was countervailable'' based on record

evidence, and ordered the Department ``to remove FISI benefits from its

duty calculations for that review period.'' The Pork panel's holding

was the same. Therefore, in this review, as explained above and in the

preliminary results, we have compiled new evidence.

Comment 11: If the Department does not rescind its investigation of

FISI, the GOQ urges the Department not to consider FISI in isolation

but together with two other Quebec programs: Crop Insurance and Supply

Management. According to the GOQ, these programs serve jointly to meet

the province-wide objective of stabilizing farm income. Taken together

they cover 81.2 percent of the value of Quebec's agricultural

production; they also meet the differing needs of the agricultural

sector, covering each farmer's most significant risk. Furthermore, this

common purpose is best demonstrated by the administrative overlap

between FISI and Crop Insurance, which are both administered by the

Regie des Assurances Agricoles du Quebec (the Regie). These facts

illustrate a unified provincial objective, fulfilled through

complementary activities which reflect the diverse production and

market risks faced by Quebec's farmers. On this basis, the Department

must conclude that FISI benefits are not de facto specific.

Petitioner counters that the GOQ is really arguing that these

various programs are integrally linked. Therefore, Petitioner argues,

the Department should reject this argument because, having been raised

only at the briefing stage of the administrative review, it is

untimely. Should the Department entertain the GOQ's argument,

Petitioner argues that there is insufficient record evidence to support

a claim that the programs should be considered together. At the very

least, the GOQ's arguments fail to address two of the factors the

Department must consider when examining an integral linkage argument:

funding and equality of treatment.

Department's Position: Although the GOQ did provide timely

information about the programs which it now appears to contend are

integrally linked to FISI, the GOQ did not present a timely allegation

that these programs were integrally linked. Without a timely allegation

during the investigation or administrative review that a program is

integrally linked to other programs, the Department is unable to

solicit and consider evidence relating to this question, and other

parties are unable to comment on any determination the Department might

reach. Therefore, for purposes of the Department's de facto specificity

analysis, we have continued to base our determination of the

specificity of FISI on the availability and use of that program

standing alone. See Proposed Regulations at section 355.43(b)(6).

Comment 12: Like the GOC, the GOQ takes issue with the Department's

interpretation of the statute that a de facto specificity determination

may be based on only one of the factors listed in the proposed

regulations. Consequently, the GOQ contests the Department's

determination that FISI is de facto specific based only upon the small

number of users participating in the program. It is the GOQ's view that

the Department only briefly mentioned the other factors in its

preliminary results, determining summarily that no other factors

detracted from the specificity finding.

The GOQ maintains that the Department must collect and fully

evaluate all reasonably available evidence, and that it ``may not rely

on isolated tidbits of data which suggest a result contrary to the

clear weight of the evidence.'' USX Corporation v. United States, 655

F. Supp. 487, 489 (CIT 1987). See also Universal Camera Corp. v. United

States, 340 U.S. 474 (1950). In addition, the GOQ states that every

binational panel, except one, which has examined this issue has agreed

that the Department cannot find specificity after examining only a

single factor. The GOQ argues that the Magnesium panel, which held that

the Department may find specificity after examining only one of the de

facto specificity criteria, did not face this issue squarely because it

found that the Department had considered three of the four specificity

criteria, and there was evidence in the record indicating specificity

under the fourth. The GOQ also argues that because there are different

bases for analyzing de jure and de facto specificity, the Department

may not properly rely upon its practice of basing a specificity finding

on the single de jure factor as a justification for relying upon a

single factor to determine de facto specificity.

In rebuttal, Petitioner cites Alberta Pork v. United States, 669 F.

Supp. 445, 451-52 (CIT 1987), the CIT decision which held that FISI is

countervailable expressly because of the limited number of program

users.

Department's Position: We disagree with the GOQ's interpretation of

the Department's statutory and regulatory requirements as well as the

GOQ's assessment of how the Department conducted its analysis of FISI.

Under Universal Camera (and USX Corp.), the Department and other

administrative agencies are required to base determinations upon

substantial evidence ``when viewed in the light that the record in its

entirety furnishes, including the body of evidence opposed to the

[agency's] view.'' Universal Camera, 340 U.S. at 488.

Like the GOC, the GOQ implies that in a situation like the present

one, in which the Department considers evidence regarding several

evidentiary factors in reaching a determination, we are somehow

required to reach affirmative findings on two or more of those factors

in order to support an affirmative determination.

This reading of the statute and applicable case law is mistaken.

The holding of the Supreme Court in Universal Camera and other cases

requires only that the Department consider all evidence.

In addition, the statute does not draw a distinction between

consideration of de jure and de facto evidence, as the GOQ claims. As

with de facto specificity, when determining whether a program is de

jure specific, the Department will consider any evidence in the record

which fairly detracts from an affirmative determination. As a matter of

practice and logic, however, once the Department determines that a

program is de jure specific on the basis of a finding relating to

certain evidence, the Department is not required to reinforce that

finding with additional findings supporting an affirmative

determination. Similarly, when the Department determines that a program

is de facto specific based upon too few users (or evidence relating to

a different factor), that finding alone warrants an affirmative

specificity determination, provided the Department views the evidence

``in the light that the record in its entirety furnishes, including the

body of evidence opposed to the [Department's] view.'' Universal

Camera, 340 U.S. at 488.

In the present review, the Department correctly applied this

standard. As the preliminary results demonstrate, we considered

evidence related to all four factors outlined in the proposed

regulations. As with Tripartite, we concluded that FISI was defacto

specific during the review period based upon the small number of actual

beneficiaries in relation to the very large number of eligible

beneficiaries. Preliminary Results at 54,117-18. No evidence in the

record fairly detracts from this determination. Thus, it is clear that

the Department properly examined and considered all relevant evidence

in the record, and its determination that FISI was de facto specific

based upon the small number of users is supported by substantial

evidence and is otherwise in accordance with law.

Comment 13: The GOQ challenges the Department's determination that

FISI is de facto specific based upon what the Department found to be

the small number of users. According to the Department's findings, FISI

covered 15 products out of an eligible universe of over 80 during the

review period. The GOQ states that this conclusion is flawed.

First, the Department's finding that there are ``over 80

agricultural commodities produced in Quebec'' is based on incorrect

assumptions and is not consistent with other information in the record.

While the Department defined Quebec's agricultural universe with

reference to the combined product listings applicable to both FISI and

Crop Insurance, the Department never determined whether products

covered by Crop Insurance are defined at the same level of aggregation

as those covered by FISI.

Further, the list provided by the Department in its November 4,

1993 memorandum includes 66 products and appears to have aggregated

some products listed in the original documents but not others. This

list includes certain products which were not produced in Quebec during

the review period, while not providing an accounting of this

aggregation or the basis for combining various products. It also

includes certain other products on the basis that they were produced in

quantities and values similar to other livestock covered by FISI.

However, there is no information about the value of production in the

1991 Agricultural Profile, and the fact that certain livestock were

produced in similar quantities is not relevant to whether the products

were produced at commercially comparable levels. In addition, in at

least two instances, the Department double-counted: the Department

should not have listed ewes and wethers separately because the Profile

doesn't indicate whether both were produced in Quebec; and the

Department should not have listed bee colonies because it already

counted honey (and bee colonies are not a commercial product).

According to the GOQ, the 29-product listing which it provided

defines the agricultural universe at the same level of aggregation as

the FISI-covered products. Based on this list, FISI covered 15 out of

the 29 products produced in Quebec, which would render the program not

specific based on the number of users.

In addition, this simple comparison is an inadequate evidentiary

basis for finding de facto specificity. The Department must examine the

program coverage in terms of other factors such as the percentage of

the total farm production. Agricultural commodities covered by FISI in

this review accounted for 38.6 percent of the total value of

agricultural production. The GOQ maintains that coverage of over a

third of Quebec's farm sector contradicts the Department's conclusion

that FISI covered too few users.

Petitioner responds that the assumptions the Department made with

regard to Quebec's agricultural universe are based on record evidence,

and that in assessing the number of FISI-eligible products, the

Department conducted extensive analysis, consulting three different

alternative sources in addition to examining the undocumented list

provided by the GOQ. Petitioner asserts that the GOQ's claim that the

Department's classification methodology is imprecise is without merit,

because the GOQ itself neglected to provide adequate guidelines to the

Department. Finally, Petitioner states that the GOQ's suggested product

aggregations themselves demonstrate the absurdity of their complaints.

Department's Position: We disagree with the GOQ. It is undisputed

that during the period of review, FISI covered only 15 agricultural

commodities under 11 schemes. As the Department explained at length in

the preliminary results, in order to estimate the universe of eligible

agricultural commodities in Quebec, we examined the two different lists

provided by the GOC (Farm Cash Receipts (FCRs)) and the GOQ, both of

which listed 29 commodities. We determined that these estimates were

not sufficiently reasonable because they disaggregated commodities much

too broadly and contained unexplained inconsistencies. For instance,

while listing ``all vegetables for processing'' as one category, the

GOQ listed feeder hogs and piglets as two categories. By contrast, the

actual coverage of FISI is disaggregated on a much more reasonable and

consistent individual commodity basis, providing FISI schemes for such

narrowly defined commodities as grain corn, sugar beets and silage

wheat. See Agricultural Universe Memorandum.

Therefore, as Petitioner notes, the Department relied upon several

independent sources of information, including the 1990-91 Annual Report

of the Regie des Assurances Agricoles du Quebec (Regie Report) and the

1991 Agricultural Profile of Canada, and found that there are over 80

agricultural commodities in Quebec which should reasonably be eligible

for FISI schemes. We determined that compared to this relatively large

number of eligible recipients, the 15 agricultural commodities actually

receiving FISI benefits was a small number of recipients.

In this regard, we noted that the Department considers FISI de jure

not specific because, according to the FISI Act, it is supposed to be

available to all ``farm products'' in Quebec. The GOQ's arguments above

demonstrate the difficulty of agreeing on what is the appropriate

definition of ``farm products'' (or ``agricultural commodities'') for

the purpose of assessing which farm products reasonably should be

eligible for FISI. For instance, the GOQ appears to argue in its brief

that a commodity's level of ``commercial significance'' bears on

whether it should be eligible for FISI. However, record evidence

indicates that although sugar beets remained covered by a FISI scheme

during the review period, none were actually produced in the province.

Similarly, the GOQ's arguments regarding wethers and ewes and bee

colonies are largely unsupported in the record. Even if the GOQ is

correct, the Department stressed that its estimate of the agricultural

universe in Quebec (and Canada) could not be expected to be an exact

count. We also stressed, however, that the Department's estimate was

conservative.

Agricultural Universe Memorandum

Finally, we have considered the GOQ's argument that commodities

covered by FISI accounted for 38.6 percent of the total agricultural

production value in Quebec during the review period. We determine that

this evidence does not detract from a determination that FISI is de

facto specific based upon the small number of only 15 actual users. The

statute provides that a domestic subsidy is countervailable if it is

provided to a specific enterprise or industry or group thereof, 19

U.S.C. 1677(5)(B), and the Department's proposed regulations provide

that the Department will examine the number of actual beneficiaries,

whether industries or enterprises, in determining de facto specificity.

Thus, although the Department has not previously engaged in an analysis

of the percentage of production value covered by a program, as we

explained in Comment 7 above with regard to Tripartite, we have done so

here pursuant to the GOQ's argument. As discussed below, the Department

has determined that, in the context of FISI, as with Tripartite, it has

little, if any, significance in light of the relatively small number of

actual beneficiaries compared to the relatively large number of

eligible beneficiaries.

Like Tripartite, FISI benefits are apparently granted and

administered on an equal basis, without consideration of the

commodity's relative production value. The production value of some

commodities receiving FISI is small, while that of others is large. The

same holds for commodities not receiving FISI. Therefore, it is

reasonable to assign roughly equal significance to each beneficiary for

the purpose of determining whether the actual coverage of FISI is

small. Accordingly, the fact that the relatively small number of

commodities receiving FISI benefits happened to account for 38.6

percent of the total agricultural production value during the review

period is of little, if any, significance when viewed alongside the

fact that a far greater number of both large and small commodities in

Quebec did not receive FISI benefits. Finally, we note that 38.6

percent of production value, viewed alone, still represents a small

percentage of the eligible universe, and if that were the sole factor

that we had considered, the Department would find FISI de facto

specific.

In conclusion, the Department has determined that Quebec's

arguments are unpersuasive. Accordingly, the Department determines that

the relatively small number of 15 actual FISI users out of over 80

eligible agricultural commodities is small and, on that basis, FISI is

de facto specific within the meaning of section 771(5)(B).

Comment 14: The GOQ argues that live swine producers are not

dominant users of the FISI program, nor did they receive

disproportionate benefits. The Department used ``insured value'' as the

measure of dominant use when, in fact, this data provides no measure of

the benefits which FISI participants actually receive. According to the

GOQ, the fact that the insured value of live swine is greater than the

insured value of other FISI-covered products does not indicate anything

more than that the actual value of live swine is greater than the value

of other relevant products. The actual benefit is the provincial

government's share of the payouts, not the relative insured values of

the products. The Regie Report shows that live swine received less than

20 percent of the payouts made under FISI during the review period;

thus, according to the GOQ, live swine producers are clearly not

dominant users of FISI.

The GOQ further argues that swine producers did not receive

disproportionate FISI benefits during the review period. Although the

Department did not address the issue of disproportionality in its

preliminary results, the GOQ asserts that it must do so now, assuming

the Department finds that swine producers are not dominant users of

FISI. Having received less than 20 percent of total FISI payouts during

the review period, the GOQ claims that swine producers received far

less than their proportional share of the payouts.

Department's Position: We agree with the GOQ that the insured value

of a product is not an appropriate measure of whether a particular

beneficiary is a dominant or disproportionate user of the program in

question. Contrary to the assertion of the GOQ, however, it would be

equally inappropriate to compare the percentage of FISI benefits

received by swine producers during the review period (approximately 20

percent) to the total FISI-insured production value of live swine

(approximately 51 percent) in an effort to determine whether swine

producers received a disproportionate share of benefits. Most

importantly, this is because FISI only benefited a small segment of the

relevant universe, rendering it unnecessary to also determine whether

live swine or any other beneficiary was a dominant user or received a

disproportionate share of benefits. If live swine were one of two

actual beneficiaries, the Department would not need to determine that

one of the two was a dominant or disproportionate user in order to

reasonably determine that the program provided de facto specific

benefits. Similarly, even in light of all of the other evidence in the

record, the fact that swine producers are one of only fifteen actual

beneficiaries out of a much larger universe of over 80 eligible

beneficiaries warrants a determination that FISI is de facto specific.

Accordingly, inasmuch as no dominant use finding was necessary in order

to support our affirmative de facto specificity finding on the basis of

the small number of users, we have considered the GOQ's dominant use

arguments only to determine whether they identify evidence in the

record which would somehow detract from the Department's affirmative

determination. We have determined that no such evidence has been

identified.

Only if the number of beneficiaries of a program is sufficiently

large so as to call into question a determination of de facto

specificity based upon the number of users would it be necessary to

determine whether one or more of the beneficiaries was a dominant or

disproportionate user. See Final Affirmative Countervailing Duty

Determinations: Certain Steel Products from Brazil, 58 FR 37,295,

37,299 (1993). In other words, a comparison similar to that advocated

by the GOQ could be meaningful in the context of ``a program in which

virtually every segment of the economy [or the agricultural sector] in

the market naturally participates to some extent.'' Final Affirmative

Countervailing Duty Determinations and Negative Critical Circumstances

Determinations: Certain Steel Products from Korea, 58 FR 37,338, 37,343

(1993). That is not the case here, and it would not be meaningful to

compare swine producers' share of FISI benefits to their proportionate

share of FISI production coverage because FISI covered so few

industries.

Comment 15: The GOQ argues that there is no evidence that the

government exercised discretion in administering FISI: each of the

propositions on which the Department relied in concluding that the FISI

Act ``appears to allow the GOQ considerable discretion in determining

which products receive schemes'' is taken out of context, inaccurate

and must be reexamined.

As for the Department's conclusion that discretion is evident

because ``schemes are established for any product * * * which the

Gouvernement `indicates,''' the GOQ argues that the producers

themselves request the Regie to create a FISI scheme. Moreover, the GOQ

claims that the Department's determination that the FISI Act contains

no explicit criteria for the establishment of a scheme is clearly

erroneous. For one, only farm products which are marketed under a joint

plan created at the producers' discretion, and products derived from

the participant's own operations are eligible for FISI.

The GOQ also argues that in citing the possibility of regional FISI

schemes as evidence of possible government discretion, the Department

overlooked the fact that the producers themselves, not the GOQ,

determine the geographic scope of a FISI scheme. Moreover, the fact

that the FISI Act permits the establishment of regional FISI schemes

merely ensures that all joint plans created under the Farm Products

Marketing Act, even plans reflecting a collection of producers grouped

by region, are eligible for FISI if the producers so desire. Finally,

the record demonstrates that no regional FISI scheme has ever been

created.

The GOQ also contests the Department's finding of discretion on the

basis that the FISI hog scheme was the only scheme during the review

period which did not set a limit on the maximum level of insurance

available. The GOQ contends that the ceilings were administratively

burdensome and had virtually no economic impact, and that it eliminated

the ceiling for the hog scheme in August 1988. Ceilings under other

FISI schemes were deemed burdensome as well, and by 1992 most of them

had been eliminated. Thus, the absence of a ceiling for the hog scheme

during the review period, which the Department deemed to be evidence of

discretion, was merely an administrative matter; its elimination cannot

be cited as evidence of discretion.

Finally, the GOQ argues that differences among FISI schemes in the

method of computing net annual income and stabilized net annual income,

and differences in eligibility and participation requirements are not

evidence of discretion. The GOQ argues that these differences are

necessitated because each FISI scheme experiences a unique cycle of

income fluctuation, and each scheme must be self-sustaining over the

life of the program. In addition, the self-sustaining level which must

be achieved reflects the same income level for all of Quebec's farmers

as reflected in the average farm worker's salary in Quebec. The GOQ

argues that this is not evidence of discretion, but illustrates the

non-discriminatory provision that, over the long term, all schemes will

render the same degree of protection.

Department's Position: Like the GOC, the GOQ mischaracterizes the

Department's findings in the preliminary results with regard to

government discretion in the administration of FISI. The Department

found that the FISI Act ``appears to allow the GOQ considerable

discretion in determining which products receive schemes.'' Preliminary

Results at 54,118. We did not base our determination that FISI is de

facto specific on this evidence, however. As explained in the previous

comments, the Department determined that FISI was de facto specific

solely on the basis of the small number of only 15 actual beneficiaries

during the review period in relation to the universe of over 80

eligible beneficiaries. Id. At the same time, after reviewing all the

information in the record, we were not able to identify an established,

publicized and consistent review process leading to FISI schemes. Thus,

the resulting FISI schemes do not necessarily reflect identical terms

or conditions. Id.

Comment 16: The GOQ argues that the Department has incorrectly

calculated FISI benefits by aggregating FISI payments paid to hog

producers with those paid to piglet producers. The GOQ points out that

during the review period, Quebec exported no piglets to the United

States. In addition, there is no evidence in the record which indicates

that benefits paid to piglet producers are passed on to hog producers.

Citing the upstream subsidies test provided for in section 771A of the

Act (19 U.S.C. 1677-1(a)), the GOQ argues that the majority of piglets

raised in Quebec are sold to hog producers at arm's-length market

prices. There is no evidence to support the assertion that payments

received by piglet producers under the FISI piglet scheme have any

effect on the price at which these piglets are sold. Therefore, the

piglet payments provide no ``competitive benefit'' to the exported

hogs, as required by 19 U.S.C. 1677-1(a), and this analysis fails on

the second and third prongs of the upstream subsidies test. Should the

Department determine in the final results that FISI bestows

countervailable benefits on live swine, the Department should eliminate

the payments under the piglet scheme and only countervail the payments

under the hog scheme.

Petitioner counters that payments under the piglet scheme are not

upstream subsidies, but rather payments which directly benefit

producers of market hogs, the merchandise which is subsequently

exported. Because payments under the piglet scheme reduce the

production costs in farrowing operations, the costs of producing market

hogs are thus reduced. Furthermore, Petitioner rejects the GOQ's

argument that ``arm's-length, market price'' transactions negate the

benefits to hog producers from the piglet scheme: If there were no

subsidies to piglets, fewer would be produced, driving up the price and

therefore increasing the cost of hog production. Therefore, the

Department has correctly countervailed payments to hog producers at all

phases of production regardless of whether pigs are exported in all

phases of development.

Department's Position: We disagree with the GOQ. Both piglets and

market hogs are included within the class or kind of merchandise

subject to the order on live swine from Canada. When calculating the

benefits attributable to the FISI program, the Department has

consistently aggregated the benefits provided under the scheme for

piglets and the scheme for hogs. In this regard, the Swine IV

binational panel correctly stated that ``[a]n upstream subsidy inquiry

is only required when benefits are provided to an input producer that

does not produce the product under investigation.'' Swine IV Panel

Decision at 73.

The GOQ's argument that benefits provided by the piglet scheme

should be analyzed under the statute's upstream subsidy provision is

misplaced. An upstream subsidy analysis is concerned with determining

the effect of benefits received by producers of a product which itself

is not subject to a countervailing duty investigation or order, but

which is an input into the subject merchandise. 19 U.S.C. Sec. 1677-

1(a). For instance, in Final Affirmative Countervailing Duty

Determination; Steel Wheels from Brazil (54 FR 15,523, 15,525-28; April

18, 1989), the Department examined whether subsidies provided to the

Brazilian steel industry constituted upstream subsidies within the

meaning of section 771A. The steel was an input product; it was not

included in the class or kind of merchandise being investigated.

As noted, piglets are subject to the countervailing duty order on

live swine. Therefore, they cannot be considered recipients of an

``upstream subsidy'' and section 771A does not apply. Because FISI is a

domestic subsidy program, because the class or kind of merchandise

includes all live swine, and because live swine were exported to the

United States during the review period, the fact that Quebec did not

export piglets during the review period is not relevant to the

Department's analysis. Whether or not benefits to piglets benefited

market hogs, domestic subsidies conferred on the class or kind of

merchandise are countervailable. The benefits bestowed on the entire

class or kind of merchandise, including piglets, are appropriately

included in the Department's calculations.

Comment 17: The CPC, Quintaine, and Baxter argue that sows and

boars are a lawful subclass, and based upon its own practice and its

statutory authority, the Department should reconsider its preliminary

determination to eliminate the sows and boars subclass. According to

these respondents, in the first review of this order, the Department's

decision to calculate a separate rate for sows and boars was compelled

by what the Department referred to as ``exceptional circumstances'' and

the ``considerable'' differences between sows and boars and market

hogs. The Department also found that the ``distinction between

slaughter sows and boars and other live swine cannot be used as a means

to circumvent the countervailing duty order.'' Furthermore, Petitioner

did not object to the Department's decision. These circumstances and

differences still exist, as do the Department's statutory authority and

considerable discretion to establish a subclass. In the absence of a

change in circumstances, Respondents argue that the Department must

carefully consider whether such a change should be made sua sponte.

Respondents acknowledge the Department's determination that the

criteria adopted in Diversified Products v. United States, 572 F. Supp.

883 (CIT 1983), should only be used to distinguish between, not within,

a class or kind of merchandise. Respondents argue, however, that the

original sows and boars subclass determination was also based upon the

Department's comparative analysis of the amount of subsidies applicable

to sows and boars and the amount of subsidies applicable to the other

products within the class or kind. While the Department explained its

recent rejection of the Diversified Products criteria for

distinguishing among products within a class or kind, the Department

failed to explain its apparent repudiation of the second part of the

test, which the statute clearly supports. According to the CPC,

although the statute ``creates a presumption in favor of a country-wide

rate,'' it does provide for separate rates whenever a state-owned

enterprise is involved or when there are substantial differences

between companies in terms of subsidies received. Therefore, the law

requires the Department to take into account extreme differences in

subsidies received, and when necessary, to overcome the presumption in

favor of a country-wide rate.

Respondents cite section 355.47(a) of the proposed regulations to

argue that the Department's statutory responsibility requires it to

ensure that there is a rational connection between the countervailable

benefits received by a product, and the calculation of a countervailing

duty for that product. Quintaine and Baxter also cite U.S. v. Zenith

Radio Corp., 562 F. 2d 1209 (1977), affirmed 437 U.S. 443 (1978), in

which the Court of Customs and Patent Appeals held that

``countervailing duties should equate to the true bounty actually

conferred.''

Finally, the CPC argues that the Department's subclass methodology

has been contemplated in at least two previous investigations, Certain

Steel Products from the United Kingdom (47 FR 35,668; August 16, 1982)

(UK Steel), and Fresh Chilled and Frozen Pork from Canada (54 FR

30,774, 30,787; July 24, 1989) (Pork). Moreover, the binational panel

reviewing the Department's fourth administrative review of this order

determined that the Department's initial subclass analysis was

reasonable. The binational panel reviewing the fifth administrative

review of this order upheld the Department's determination that

information about the existence and value of benefits is necessary for

the agency to make a subclass determination.

Petitioner acknowledges that the Department's reconsideration of

the sows and boars subclass decision is consistent with the statute and

the regulations, which create the presumption in favor of country-wide

countervailing duty rates.

Department's Position: We disagree with Respondents. As we

explained in the preliminary results, the Department has determined

that the methodology relied upon to separate the class or kind of

merchandise into ``subclasses'' was inappropriate, and we will no

longer calculate a separate rate for sows and boars or any other

product on this basis. See Preliminary Results at 54,113; Memorandum on

Product-Specific Rates in Countervailing Duty Administrative Reviews,

from Barbara Tillman to Joseph Spetrini, July 19, 1993 (Subclass

Memorandum).

The decision during the first administrative review to grant sows

and boars a separate countervailing duty rate based upon the subclass

determination represented an exception to the Department's normal

practice of calculating one rate for the entire class or kind of

merchandise subject to a countervailing duty order. See 19 U.S.C.

Sec. 1677e(a). The Department based its finding of a subclass exception

upon a test consisting of two parts, each of which we considered

necessary to warrant granting the separate rate. See Preliminary

Results of Countervailing Duty Administrative Review; Live Swine From

Canada (53 FR 22,189; June 14, 1989); Preliminary Results at 54,113.

However, during the present review, we determined that the Diversified

Products criteria, the first part of the test, ``were designed to

differentiate between classes or kinds of merchandise, not among

products within a class or kind.'' Preliminary Results at 54,113. On

this basis, we determined ``that it was inappropriate to grant the

slaughter sows and boars`subclass' exception on the basis of a

Diversified Products criteria analysis.'' Id. Because the reversal of

the subclass exception was premised upon the Department's decision that

the Diversified Products criteria were not appropriate for this

purpose, it was not necessary to attempt to repudiate the second part

of the subclass test, i.e., the comparative analysis of the difference

in benefits granted to the producers of slaughter sows and boars vis-a-

vis those granted to the producers of other products within the class

or kind of merchandise. See id.

The CPC's reliance on UK Steel is misplaced. That investigation was

terminated when the petition was withdrawn. Therefore, the Department

never reached a final determination nor did it issue an order.

Accordingly, the Department neither reached a final determination

regarding the scope of that investigation nor fully considered the

scope issues referred to by the CPC.

Further, the fact that the statute provides exceptions to the

presumption in favor of country-wide rates does not imply that the

subclass exception should be continued simply because sows and boars

receive a different amount of subsidies. As we stated in the

preliminary results, the express exceptions under the statute recognize

differences between individual companies (and government ownership),

not between products within the class or kind of merchandise covered by

the order. See 19 U.S.C. 1671e(a)(c). Therefore, the Department is only

required to examine the possibility of a significant differential when

the producer or exporter is government-owned. Beyond government-owned

companies, the Department may examine, to the extent practicable, other

producers or exporters whose benefits differ significantly from the

country-wide rate. See id.; 19 CFR 355.22(d)(1).

Finally, Respondents misinterpret the Department's proposed

regulations with regard to the requirement that the countervailing duty

rate accurately reflect the benefits bestowed on the merchandise under

review. Section 355.47 of the proposed regulations only draws a

distinction between subject merchandise and non-subject merchandise,

and precludes the Department from countervailing benefits tied to non-

subject merchandise. Sows and boars are clearly merchandise subject to

the countervailing duty order on live swine from Canada.

Comment 18: Quintaine argues that the Department cannot discontinue

its recognition of the sows and boars subclass and its practice of

calculating a separate rate for the subclass for the following reasons.

First, because the Department specifically sought information in its

questionnaire with which to calculate a separate rate for the sows and

boars subclass, and this information was provided by the GOC, the

Department must use the information to calculate a separate rate.

Second, nothing in the proceeding prior to the preliminary results

indicated the Department's intention to abandon its established

practice of recognizing sows and boars as a subclass and granting them

a separate rate of duty on that basis. Third, the Department's

methodology for calculating the de minimis threshold specifically

contemplates the differences between sows and boars and the rest of the

class of live swine and uses sales data specifically pertaining to sows

and boars as the basis for achieving a weighted-average price for all

live swine.

Quintaine and Baxter also argue that in abandoning its subclass

practice, the Department has acted without notice and created an ex

post facto burden on trade not contemplated by the parties at the time

of export. Sows and boars which entered during the review period were

subject to a product-specific deposit rate substantially lower than the

rate for other live swine. The producers and exporters did not

contemplate that these entries would be liquidated at the much higher

live swine rate determined in the preliminary results in light of the

Department's recognition of the sows and boars subclass since the first

administrative review of the order. Therefore, Respondents claim that

the Department's abandonment of its subclass practice is unfair,

inequitable, unprecedented, and an arbitrary abuse of the Department's

discretion.

Quintaine, Baxter, and Pryme add that the implication in the

Department's Subclass Memorandum, that it may further analyze the use

of product-specific rates in future cases, will likely result in a

product-specific application of the countervailing duty law. Thus,

although sows and boars will no longer be entitled to subclass

treatment, other products may enjoy such treatment in the future.

Department's Position: We disagree with Respondents. Although the

Department collected the information necessary to calculate a separate

rate for sows and boars, we subsequently determined that doing so was

not appropriate for the reasons articulated in the Subclass Memorandum,

the preliminary results and the above comment. After the preliminary

results, all parties had ample opportunity to comment on the

Department's decision. Respondents provided comments, which we have

fully considered.

Respondents are also mistaken in claiming that the Department is

precluded from changing its policy in this area. ``The mere fact that

an agency reverses a policy, or a statutory or regulatory

interpretation, does not indicate the agency's decision is

unreasonable, arbitrary, or capricious.'' Mantex, Inc. v. United

States, Slip Op. 93-242 at 27 (CIT December 22, 1993) (citing Rust v.

Sullivan, ------ U.S. ------, 111 S. Ct. 1759, 1769 (1991)). The courts

have long recognized that agency policies must be permitted to evolve

under judicial supervision. See, e.g., Motor Vehicle Mfrs. Assn. of

United States v. State Farm Mutual Auto. Ins. Co., 463 U.S. 29, 42

(1983). An agency ``is not required to `establish rules of conduct to

last forever,''' Rust v. Sullivan, 111 S.Ct. at 1769 (citations

omitted), but rather ``must be given ample latitude to adapt [its]

rules and policies to the demands of changing circumstances.'' Motor

Vehicle Mfrs. Assn., 463 U.S. at 42. The Supreme Court has repeatedly

upheld the fundamental principle that an agency's ``revised

interpretation deserves deference because `[a]n initial agency

interpretation is not instantly carved in stone' and the `agency, to

engage in informed rulemaking, must consider varying interpretations

and the wisdom of its policy on a continuing basis.''' Rust v.

Sullivan, 111 S.Ct. at 1769 (citations omitted).

It is clear that this necessary decision-making process may be

accomplished on a case-by-case basis, permitting the Department to

adapt its policy during successive reviews, with the only limitation

being that it ``justi[fy a] change of interpretation with a `reasoned

analysis.''' Id. (citations omitted). As explained by the Department in

the previous comment and elsewhere, the record in this proceeding

reflects the Department's ``reasoned'' analysis and the justification

for its change of interpretation. See, e.g., Subclass Memorandum.

Furthermore, contrary to Respondents' claims, the Department's

change in policy does not create an unjustified ex post facto burden

for exporters and importers of slaughter sows and boars. It is not

uncommon for a product covered by an order to enter with a low (or

zero) cash deposit rate and to ultimately be assessed a much higher

rate as a result of an administrative review covering those entries.

Such entries are also routinely assessed interest as required by the

regulations. See 19 CFR 355.24. This is a reasonable contingency of

which importers and exporters are well aware when entering merchandise

under an order and making deposits of estimated duties.

Moreover, the Department's statement in the Subclass Memorandum

that we ``may further analyze the issue of granting product-specific

rates in future cases'' in no way qualified the Department's rejection

of the subclass policy. With this statement, the Department indicated

that it had not determined whether to consider product-specific rates

on some other basis, outside the framework of the rejected subclass

analysis. Therefore, we affirm our determination in the preliminary

results that one country-wide rate will be assessed on all subject

merchandise.

Finally, we also disagree with Quintaine regarding the de minimis

calculation methodology. Because countervailing duties on live swine

are calculated on a per-kilogram basis, rather than ad valorem, we must

determine what de minimis is on a per-kilogram basis. Our methodology

for determining this merely accounts for the price differences between

sows and boars and the rest of the class or kind of merchandise within

the order on live swine. We must recognize this difference, just as we

recognize and account for the difference in provincial prices of other

live swine, in order to establish an overall weighted-average price per

kilogram for the subject merchandise, from which we then determine the

de minimis value, in Canadian dollars (i.e., 0.5 percent of the

weighted average price per kilogram). The subject merchandise includes

slaughter sows and boars. Therefore price data for sows and boars must

be factored into that calculation. However, mere recognition that sows

and boars sell at a different price level for purposes of this

calculation does not require the Department to calculate a separate

rate for sows and boars, as Quintaine would suggest.

Comment 19: For many of the same reasons given above, Pryme argues

that the Department must recognize a subclass for weanlings. First, the

recognition of subclasses has been an established and consistent

expression of the Department's analysis since the determination in the

first administrative review to calculate a separate countervailing duty

rate for sows and boars. In the case of weanlings, in the fourth and

fifth reviews of this order, the Department concluded that it lacked

sufficient information in the record to calculate a subclass rate. See

Fourth Review Final at 28536; see also Final Results of Countervailing

Duty Administrative Review; Live Swine from Canada (56 FR 50,560,

50,564; October 7, 1991) (Fifth Review Final). Pryme argues that the

Department's statement in the Final Results of the fifth review that

``[t]he Department has considered Pryme's request, but determines that

further information would be required to reach a determination, and

that it would be inappropriate to delay the processing of the review to

solicit such information,'' indicates that a timely request and the

proper information could have resulted in the finding of a weanling

subclass in the fifth review. By virtue of Pryme's timely request in

this review, the Department solicited and Pryme and the GOC provided

information in order to establish a subclass for weanlings. Therefore,

provided the established subclass criteria are met, Pryme argues that

the weanling subclass should be granted.

Department's Position: As we determined in our preliminary results,

and as explained in Comments 17 and 18 above, we have determined that

it is inappropriate to establish subclasses within the class or kind of

merchandise covered by an order, as the Department previously did with

regard to sows and boars. The fact that the Department denied Pryme's

requests to establish a subclass for weanlings in two earlier reviews,

based on the untimeliness of the requests and insufficient information

with which to conduct the two-part analysis, is not relevant to the

issue of whether to grant weanlings a subclass in this review. The

Department may alter its practice provided it gives a reasoned analysis

for doing so, as explained above. Furthermore, as discussed in Comment

18 above, the Department is not required to establish a subclass for

weanlings merely because Pryme made a timely request and responded to

the Department's requests for information in this review.

Comment 20: Pryme argues that the Department's failure to recognize

the weanlings subclass results in an inaccurate assessment of

countervailing duties in contradiction of the purposes of the

countervailing duty law. Citing Zenith, Pryme argues that

countervailing duties must be equivalent to the benefits conferred.

Pryme argues that weanlings qualify for substantially different

benefits than the other live swine covered by this order because it

falls within the company-specific exception to the presumption in favor

of country-wide rates provided for in the statute. See 19 U.S.C.

1671e(a)(2). Pryme argues that benefits received by weanling exporting

companies as compared with those received by other exporters of live

swine demonstrate the significant difference in the subsidies received

by the companies.

Department's Position: We disagree with Pryme that the statute

requires the Department to calculate a separate rate for weanlings.

Pryme's reliance on the statute's language allowing the Department to

determine ``that there is a significant difference between companies

receiving subsidy benefits'' to support this argument is misplaced.

This provision requires the Department to consider whether to

distinguish among companies receiving different subsidies, not among

different products included in the class or kind of merchandise covered

by an order. Pryme's request for a weanling subclass is not premised

upon its status as a company, but upon its status as a weanling

exporter. See Department's Position at Comment 18, above.

Comment 21: Pryme argues that it has met all of the Department's

requirements for a company-specific rate. Pryme made a timely request

for an individual review, and provided the Department with information

with which to calculate a company-specific rate. Record evidence

indicates that Pryme received no benefits on its exports of live swine

during the review period, and any benefits which Pryme did receive

during the review period were de minimis. According to Pryme, in its

preliminary results, the Department improperly declined to calculate a

company-specific rate for Pryme based on what the Department referred

to as an ``incomplete'' or ``incorrect'' certification. Pryme argues

that this finding ignores the fact that there is no prescribed form of

certification in the statute or the regulations. See 19 CFR 355.22(a).

The Department's verification report states that the certifications

were accurate as presented with regard to weanlings, but notes that the

Department found that, during the review period, Pryme had received

Tripartite benefits on market hogs sold in the quarter prior to the

review period. Pryme argues that these benefits were de minimis;

therefore, the certifications were neither incorrect nor incomplete,

since Pryme received no cognizable benefits.

In addition, Pryme argues that the Department should not be

concerned with the Tripartite payment received by Pryme during the

review period because it was made on merchandise sold prior to the

review period. As support, Pryme cites the Department's regulations,

which provide that an ``administrative review * * * normally will cover

entries or exports of the merchandise during the most recently

completed reporting year of the government of the affected country.''

19 CFR 355.22(b).

Department's Position: We disagree with Pryme. In addition to the

subclass request addressed above, Pryme made two other requests. First,

Pryme requested what it referred to as a ``company-specific rate,''

i.e., ``individual rate'' in accordance with section 706(a)(2)(A) of

the Act and Sec. 355.22(d) of the Department's regulations. As we

explained to Pryme after receiving its request, because of the very

large number of exporters of live swine, the Department conducts

reviews of this order on an aggregate basis and does not collect

individual sales and export data. Therefore, we have determined that it

is not practicable to examine whether a significant differential exists

between the country-wide rate and the net subsidies received by

individual producers. See 19 CFR 355.22(d); 53 FR at 52,325-26

(December 27, 1988) (commentary to the proposed regulations).

In addition, Pryme requested an individual review, in accordance

with Sec. 355.22(a)(2) of the Department's regulations, which requires

that several conditions be met before the Department may review an

individual producer or exporter. First, a person requesting an

individual review must provide the Department with a certification that

the person did not apply for or receive benefits on the subject

merchandise from any programs which the Department had previously found

countervailable, and that the person will not do so in the future. The

person must also provide certifications from the government of the

affected country stating that no benefits were provided to the person

requesting the review or to any of the person's suppliers. Finally, the

person must provide the certifications of its suppliers of the subject

merchandise, and of the government regarding those suppliers, stating

that they did not apply for or receive benefits under the

countervailable programs, and that they will not do so in the future.

19 CFR 355.22(a)(2).

The Department must then verify that all certifications ``are

complete and accurate.'' Id. at Sec. 355.22(f)(2). If the Department

determines that the certifications are complete and accurate, that is,

there was no net subsidy received on the merchandise covered by the

request, as provided for in Sec. 355.22(f)(1), that person is assessed

a zero rate and a corresponding zero cash deposit rate.

Pending the verification required pursuant to Sec. 355.22(f)(1) of

the Department's regulations, we accepted Pryme's timely filed

certifications which stated that Pryme ``did not apply for or receive

any net subsidy on the merchandise, i.e., Weanlings, swine weighing

less than 40 kg., under the National Tripartite Scheme'' during the

review period. Although weanlings are part of, but not the entire class

or kind of merchandise, the Department accepted the certifications,

pending verification, based on the assumption that during the review

period, Pryme produced and sold only weanlings and had not received any

subsidies on any of the subject merchandise during the review period.

However, at verification, we found that during the review period, Pryme

had sold market hogs and had received benefits under the Tripartite

program, based on market hog sales prior to the review period. See

Verification Report at 4.

Pryme argues that because the Tripartite payments it received

during the review period were based on sales prior to the review

period, it is inappropriate for the Department to examine these

Tripartite payments. We disagree. The Department's standard practice is

to countervail benefits when they affect the cash flow of the company.

See Proposed Regulations at Sec. 355.48(a). In all reviews of this

order since the inception of the Tripartite program, the Department has

requested, and the GOC has provided information regarding Tripartite

payments made during the review period. The record shows that quarterly

payments are made based on hog sales and hog prices in the prior

quarter. Therefore, the payments made in the first quarter of the

review period regularly reflect sales and prices in the quarter prior

to the review period. Under the Department's methodology the benefits

associated with these payments are countervailed during this review

period. Similarly, Tripartite payments for hog sales in the fourth

quarter of a particular review period are made in the following

quarter, outside the review period. They are not examined by the

Department until the next review period. Accordingly, we properly

accounted for Tripartite payments Pryme received during this review

period and determined that Pryme's certifications were not complete and

accurate with regard to the subject merchandise.

In a memorandum on Pryme Pork's request for an individual review,

dated April 7, 1993 (on file in Room B-099, Department of Commerce), we

stated that ``although Pryme's certifications were accurate with regard

to weanlings [i.e., Pryme received no benefits on its sales of

weanlings], the discovery that Pryme did receive benefits on sales of

market hogs, other subject merchandise, rendered Pryme's certifications

* * * incomplete.'' In the preliminary results, we stated that Pryme's

certification was incorrect, effectively terminating the individual

review of Pryme. Preliminary Results at 54,113. In addition, although

we stated in the preliminary results that ``we found that, during the

review period, Pryme sold only weanlings'' (Preliminary Results at

54,113), we have reexamined the record evidence, and it shows that

weanlings were the subject merchandise exported by Pryme during the

review period, but that Pryme also sold market hogs in April, June and

November, 1990, and January and March, 1991 (Verification Report at 7).

The Department therefore concluded that Pryme's certifications did not

cover Pryme's sale of market hogs during the review period, or Pryme's

receipt of benefits on the sale of market hogs during the review

period.

Although Pryme argues that there is ``no prescribed form of

certification,'' the regulations clearly provide that the

certifications must state that the ``person did not apply for or

receive any net subsidy on the merchandise.'' 19 CFR 355.22(a)(2)

(emphasis added). Pryme's certifications, inasmuch as they only applied

to weanlings, when in fact, Pryme also sold market hogs, were

incomplete.

Furthermore, in reexamining the record pursuant to Pryme's

arguments after the preliminary results, we have determined that

ManitobaPork, est., which administers Tripartite in Manitoba, declined

to certify that Pryme had not received Tripartite payments during the

review period. Therefore, Pryme's request for an individual review was

not properly accompanied by the government certifications required

under Sec. 355.22(a)(ii) of the Department's regulations.

In the case of incomplete or inaccurate certifications, the

regulations make no provision for further examination of existing

benefits, thus precluding the Department from reaching the issue of

whether the benefits received by Pryme are de minimis. In objecting to

the Department's preliminary determination, which effectively

terminated the individual review of Pryme, Pryme contends that although

its certifications were not complete and accurate, they were close.

Therefore, in Pryme's view, the Department should have accepted them.

We disagree. The Department addressed this issue when promulgating the

regulations, and stressed that ``we must be reasonably satisfied that

the producer or exporter is entitled to a zero rate. Thus, we require

the requester's and the government's certifications that the requester

is so entitled.'' 53 FR at 52,328. As described above, the

certifications provided by Pryme were not complete and accurate, as

required by the regulations. On that basis, the Department should not

have initiated an individual review. Once it did, and once the

Department determined that Pryme's certifications were not complete and

accurate, we properly terminated, in effect, the individual review.

Comment 22: The CPC argues that the Department should reconsider

its determination that the Ontario Rabies Indemnification Program is

specific to livestock producers and therefore countervailable. The

benefits provided under this program reimburse livestock producers for

the value of animals which a federal inspector requires to be destroyed

because they are determined to be rabid. The CPC argues that such rabid

animals are destroyed in the interest of public health and safety; the

loss which livestock producers incur is in the interest of a larger,

more general good. The CPC cites the General Agreement on Tariffs and

Trade to support its proposition that this type of government action is

an exception to the countervailing duty laws of member countries:

``Nothing in this agreement shall be construed to prevent the adoption

or enforcement by any contracting party of measures: * * * necessary to

protect human, animal or plant life or health * * *.'' General

Agreements on Tariff and Trade, 1947, Art. XX, T.I.A.S. 1700.

Department's Position: We disagree. The reimbursements provided

under the Ontario Rabies Indemnification Program are limited by law to

livestock producers, and therefore, contrary to the CPC's argument,

this is a de jure specific program.

Once an animal is determined to have rabies, the producer has a

clear incentive to destroy the animal in order to protect the remaining

livestock. It is also in the interest of the public to have the animal

destroyed. However, it is unclear to the Department how the fact that

the government then compensates the producer could be viewed as also in

the interest of the public health and safety. Because the government

payment does not create an incentive to destroy the animal that is not

already present (i.e., since the payment is not necessary to ensure

destruction of the animal), we determine that the payment serves no

preventive health or safety purpose whatsoever. Payments for the value

of the animal cannot be construed to be ``necessary to protect human,

animal or plant life and health.'' The payment is, instead, a

countervailable benefit under U.S. law and GATT.

Comment 23: Petitioner argues that the Department should revise its

calculation methodology for the Alberta Crow Benefit Offset Program

(ACBOP) to account more accurately for grain consumed by swine in

Alberta. Specifically, Petitioner argues that the Department's current

methodology does not accurately account for grain eaten by breeding

sows and boars. The sows and boars adjustment which the Department

currently uses to determine the grain eaten by hogs only accounts for

an additional weight gain by a sow or boar of 2.1 kilograms; according

to Petitioner, this adjustment is insufficient to reflect the grain

eaten daily by sows and boars as an integral part of swine production.

Petitioner argues that the Department has the discretion to revise

its ACBOP calculations, and should do so using another Alberta

Agriculture study provided by the GOC in the questionnaire response.

Petitioner maintains that this study is a reliable source for feed and

grain consumption information because it is recent, comprehensive, and

published by Alberta Agriculture.

Petitioner has provided an alternative methodology using

information in this study, which Petitioner argues more accurately

accounts for grain consumed in the production of swine in Alberta.

Petitioner also argues that its methodology simplifies the Department's

attempt to account for the difference in weight between market hogs and

slaughter sows and boars by recognizing that the grain fed to sows and

boars to bring them up to market weight (which they surpass during

their breeding careers), as well as the grain they consume during their

breeding careers are inputs into the production of live swine.

The CPC counters that Petitioner's proposal is an unsupported and

illogical attempt to increase the ACBOP benefit by double-counting the

grain consumed by sows and boars. The CPC maintains that the production

figures used by the Department already account for grain consumed by

sows and boars. Petitioner's methodology also ignores the fact that the

Department has carefully examined the issue of average weights for

market hogs versus sows and boars in the first review of this order.

Those averages accurately reflect the much higher weights and much

lower production of sows and boars vis-a-vis market hogs.

The CPC also takes issue with Petitioner's proposal that ACBOP

benefits should be allocated on the basis of hog production rather than

hog marketings. The CPC argues that such a change in the Department's

calculation methodology requires the Department to examine the census

of the entire Canadian hog population during the review period rather

than relying on a simple accounting of all hogs marketed, as it did in

the calculations for the preliminary results and all other reviews. The

CPC further argues that Petitioner's proposed methodology misuses data

from two entirely different sources and is flawed by an inaccurate

conversion from pounds to kilograms. Finally, the CPC notes that the

ACBOP methodology has evolved over time; its present incarnation has

been upheld by the binational panel reviewing the fifth review of this

order and Petitioner has not advanced any evidence which warrants the

Department's reconsideration of the ACBOP methodology.

Department's Position: We agree with the CPC regarding the

alternative methodology Petitioner proposes. The Department fully

analyzed the record document relied upon by Petitioner before rejecting

it in favor of the source document which the Department has relied upon

in the past. We determine that the study relied upon by Petitioner is

not comprehensive, as Petitioner asserts, and therefore the Department

chose not to use it in the ACBOP calculation. Petitioner acknowledged

that its proposed alternative study does not include information about

the composition of ``starter'' diets, which is necessary to the ACBOP

calculation. The study on which the Department did rely, ``Diets for

Swine,'' includes complete information about hog diets at all stages of

growth. Moreover, we agree with the CPC that it is inappropriate to

``mix and match'' information from these two distinct sources, because

they are based on different underlying assumptions regarding the

composition of hog diets.

We also disagree with Petitioner regarding the manner in which the

ACBOP methodology accounts for all grain consumed in the production of

live swine in Alberta. The sow and boar weight adjustment, while

seemingly small, provides an average weight which accurately reflects

the much higher weight of sows and boars but the much lower production

level. This adjustment enables the Department to accurately account for

the additional grain consumed by sows and boars during their breeding

careers, and the Department's ACBOP methodology overall reasonably and

accurately accounts for grain consumed in the production of swine in

Alberta. In addition, we agree with the CPC that Petitioner's reliance

on production rather than marketings represents too great a departure

from the Department's methodology in this case for us to consider it at

this late stage in the review. Moreover, Petitioner's failure to

illustrate that the Department's methodology is flawed or unreasonable

further supports the Department's decision not to change its

methodology.

Comment 24: The CPC alleges that the Department's preliminary ACBOP

calculations contain significant clerical errors which must be

corrected: the Department must use the correct figures for the number

of live swine produced and for the amount of barley, wheat, and oats

grown in Alberta. The correct figures were reported in the

questionnaire response, and must be used.

Department's Position: After examining the CPC's allegation, we

found minor clerical errors, and have corrected our calculations

accordingly. We now determine that the ACBOP benefit is Can$0.0027 per

kilogram for all live swine.

Comment 25: Petitioner argues that the Department should adjust its

calculations for the Saskatchewan Hog Assured Returns Program (SHARP)

to account for the deficit in the stabilization fund accrued over the

life of the program. Petitioner maintains that because SHARP was

terminated during this review period, with a large cumulative deficit,

the Department must address additional benefits which should have been

accounted for in earlier reviews. The size of the deficit indicates

that in every year in which the program was operational, payouts to hog

producers exceeded contributions by the hog producers and the Province

of Saskatchewan. This deficit was financed by loans from the provincial

government to the stabilization fund; no repayments appear to have been

made. Petitioner argues that, in prior reviews of this order, the

Department should have countervailed total payouts to producers, net of

any producer contributions into the fund. Thus, the remainder of the

fund deficit (the total fund deficit minus the amount of the deficit

countervailed in this review) constitutes a subsidy that has never been

countervailed. Because the program has been terminated, there is now no

hope that the deficit will be repaid with future contributions.

Petitioner argues that the record shows that the Government of

Saskatchewan has decided to write off this deficit, and forgive the

loans which financed it.

Petitioner now urges the Department to treat the deficit amount,

less any amounts previously countervailed, as a grant to Saskatchewan

swine producers during the review period. Petitioner further argues

that this grant does not constitute the full benefit realized by swine

producers. The Department must also calculate the benefit attributable

to the apparently interest-free nature of this loan since October 31,

1989, the date of an Order-in-Council which provided that no interest

will accrue on the loans.

The CPC, in rebuttal, submits that there is no basis for the

Department to countervail the entire SHARP deficit. While the SHARP

account remains in deficit, without a final decision about the

resolution of the fund, there is clearly no benefit to any party,

including Saskatchewan live swine producers. The CPC further argues

that in its preliminary results, the Department has incorrectly

calculated SHARP benefits, by adopting a methodology, without

explanation, which is a departure from that established in earlier

reviews. The CPC argues that the facts support the Department's use of

the earlier established methodology: the Department countervailed one-

half of the total stabilization payments made to live swine producers,

which accurately reflected the equal contributions made by the

provincial government and the live swine producers into the SHARP fund.

Department's Position: Prior to its termination, SHARP provided

stabilization payments to hog producers in Saskatchewan at times when

market prices fell below a designated ``floor price.'' Hog producers

provided one-half of the funds for the SHARP program and the provincial

government provided the remaining one-half. Therefore, the Department's

practice, in past reviews, has been to countervail one-half of all

SHARP payouts to hog producers. In accordance with the establishment of

the Tripartite Scheme for Hogs, SHARP was terminated on March 31, 1991,

during the review period.

Whenever the balance in the SHARP account was insufficient to cover

stabilization payments to participants, the provincial government

loaned the needed funds to the program at terms consistent with

commercial considerations. As of its termination date, the SHARP fund

had a sizeable deficit, representing the cumulation over the operating

years by which SHARP payouts were greater than the producers' and

government's contribution to the SHARP fund. Therefore, the SHARP

deficit represents payments already made to hog producers, half of

which the Department has already countervailed in prior reviews.

The Department has reconsidered the calculation methodology used in

the preliminary results, and has determined that we will countervail

one-half of the SHARP payouts for the current review period, as in

previous reviews. While the SHARP account remains in deficit, however,

without a final decision on the resolution of the deficit, there is no

benefit to Saskatchewan live swine producers beyond the interest not

accruing on the deficit. Thus, there is no reason for the Department to

conduct a benefit analysis of the deficit as Petitioner suggests. If

the Department learns in a later review that the deficit has been

forgiven by the Government of Saskatchewan, it will at that time

determine whether the loan forgiveness constitutes a countervailable

benefit and apply the appropriate methodology to measure it.

However, we have information on the record indicating that

effective October 31, 1989, interest stopped accruing on this deficit.

We determine that interest not accrued constitutes a benefit to live

swine producers. To measure that benefit, we are treating the deficit

as a short-term loan. See Memorandum on SHARP Calculation Methodology,

from Swine Team to Barbara Tillman, on file in Room B-099, Department

of Commerce.

To determine the benefit, we first calculated the average amount of

the deficit during the review period by taking a simple average of the

balance of the deficit at the beginning and the end of the review

period. We then multiplied the benchmark interest rate by half of the

average deficit. We used as our benchmark interest rate the simple

average of the monthly rates (for the review period) reported as

``Typical Short-Term Interest Rates'' in the Financial Statistics

Monthly, Section 2, Domestic Markets--Interest Rates, published by the

Organization for Economic Cooperation and Development, February, 1991,

and January 1992. We then added this interest-related benefit to the

payout-related benefit (one-half of the SHARP payments to live swine

producers during the review period, consistent with our methodology in

previous reviews). We divided this amount by the total weight of live

swine produced in Saskatchewan. We then weight-averaged the benefit by

Saskatchewan's share of total Canadian exports of live swine to the

United States. On this basis, we preliminarily determine the benefit

from SHARP to be Can$0.0022 per kilogram for all live swine during the

review period.

Comment 26: The GOQ and the CPC allege that the Department

incorrectly allocated the benefits attributable to the Feed Freight

Assistance (FFA) program. According to Respondents, the Department

recognized, in the first part of its calculations, that not all swine

production in the provinces covered by FFA is eligible to receive

benefits under this program. However, when the Department weight-

averaged the per-kilogram benefit by the respective provinces' share of

total Canadian exports of live swine, the Department erroneously

assumed that all exports of swine from the FFA-eligible provinces were

eligible for assistance. To correct this error, Respondents urge the

Department to apply the same ratio it uses to determine FFA-eligible

production for the purpose of determining FFA-eligible exports. The

Department should then weight-average the per kilogram benefit by the

share of total Canadian exports accounted for by this adjusted export

figure.

Petitioner argues that the Department's calculation methodology

correctly translated the FFA benefits provided on a per-kilo basis of

hog production to the applicable proportion of exports of live swine to

the United States. Petitioner argues that following the Respondents'

methodology, which requires adjusting provincial exports downward,

results in the ``double-subtraction'' of the exports used to weight-

average the benefit.

Department's Position: We agree with Respondents that the

methodology used to calculate FFA benefits was flawed. However, we are

correcting the flaw using a different approach. Although we recognize

that FFA availability is limited to certain areas within the

participating provinces, we determine it is not appropriate to adjust

provincial production downward, as we did in the past. This adjustment

is not required because the appropriate denominator for this federal

program available in only some provinces is the total production in the

provinces in which FFA operates. We determine that adjusting the

denominator as we did in the past results in overstating the FFA

benefit.

To determine the FFA-benefit per kilo of live swine we first

divided the amount of feed transportation assistance to all live swine

producers by the weight of all live swine produced in all FFA-eligible

provinces. We then used the ratio of the total amount of exports from

the provinces in which the FFA is available to total Canadian exports

of live swine in order to calculate the weighted benefit. The result is

accurate because in doing the calculations we weight-averaged all the

benefits for each province by the total amount of exports from that

province. We then summed the resulting weighted benefits to determine

the country-wide rate. Having discontinued the adjustment in

production, there is no need to adjust the exports in the manner

Respondents suggest. Using this methodology, we have calculated the FFA

benefit to be Can$0.00018 per kilogram for all live swine.

Comment 27: The CPC argues that two provincial programs, the New

Brunswick Hog Price Stabilization Program, and the Prince Edward Island

Hog Price Stabilization Program should be added to the Department's

list of terminated programs. Proper documentation of these programs'

terminations was provided in the questionnaire response.

Department's Position: We agree with the CPC regarding the Prince

Edward Island Hog Price Stabilization Program. The GOC provided

documentation that this program was terminated, and that documentation

indicates that no residual benefits will accrue to hog producers.

Therefore, we will include this program in our list of terminated

programs and will no longer examine it.

However, we disagree with the CPC regarding the New Brunswick Price

Stabilization Program. While the New Brunswick provincial government

stated that the program was terminated, the GOC has provided neither

adequate documentation of the program's termination, nor information

regarding residual benefits. Therefore, we will continue to list this

program as ``not used'' until such evidence is provided in a future

review.

Comment 28: The CPC argues that the Department should issue a final

determination which, as in past reviews, directs Customs to use the

exchange rate in effect on the date of entry of the subject merchandise

for both deposit rates and final assessments. In the preliminary

results, the Department proposed using two different exchange rate

methodologies: for the cash deposit rate, Customs will convert the

assessment amount in Canadian dollars using the exchange rate in effect

on the date of entry; for the final assessment of entries made during

the period of review, Customs will convert using a simple annual

average exchange rate. To institute two different methodologies for

these calculations which have always shared the same methodology would

constitute a retroactive change in prior agency practice.

Petitioner argues that the use of a simple average exchange rate by

the Department is not contrary to its regulations. Petitioner claims

that pursuant to 19 CFR 353.60 there was no ``sustained change'' in the

prevailing exchange rate during the review period that would materially

distort the value of the Customs assessment. Consequently, the

Department's method is acceptable under the regulations and should be

retained in its final determination.

Department's Position: After consideration of the CPC's argument,

we will instruct Customs to assess duties on live swine during the

review using the appropriate exchange rate in accordance with Customs'

regulations. Petitioner has misapplied section 353.60(b) of the

Department's regulations, which guides the Department's use of exchange

rates in antidumping proceedings.

Final Results of Review

As a result of our review, we determine the net subsidy to be

Can$0.0295 per kilogram for the period April 1, 1990 through March 31,

1991. The net subsidy determined for each program is as follows:

------------------------------------------------------------------------

Rate per

Program kilo

------------------------------------------------------------------------

(1) Feed Freight Assistance Program....................... $0.00018

(2) National Tripartite Stabilization Scheme for Hogs..... 0.01910

(3) Quebec Farm Income Stabilization Insurance Program.... 0.00420

(4) Saskatchewan Hog Assured Returns Program.............. 0.00221

(5) Alberta Crow Benefit Offset Program................... 0.00268

(6) Alberta Livestock and Beefyard Compensation Program

(Livestock Predator Sub-Program)......................... 0.00000

(7) Ontario Farm Tax Rebate Program....................... 0.00000

(8) Livestock Improvement Program for Northern Ontario.... 0.00000

(9) Ontario Pork Industry Improvement Plan................ 0.00043

(10) Ontario Rabies Indemnification Program............... 0.00000

(11) Saskatchewan Livestock Investment Tax Credit......... 0.00045

(12) Saskatchewan Livestock Facilities Tax Credit......... 0.00028

-------------

Total............................................... 0.0295

------------------------------------------------------------------------

Therefore, the Department will instruct the Customs Service to

assess countervailing duties of $Can0.0295 per kilogram on all

shipments from Canada of the subject merchandise exported on or after

April 1, 1990 and on or before March 31, 1991.

Further, as provided for by section 751(a)(1) of the Act, the

Department will collect cash deposits of estimated countervailing

duties of $Can0.0295 per kilogram on all shipments of the subject

merchandise from Canada, entered, or withdrawn from warehouse, for

consumption on or after the date of publication of this notice. This

deposit requirement shall remain in effect until publication of the

final results of the next administrative review.

This administrative review and notice are in accordance with

section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)) and 19 CFR 355.22.

Dated: March 9, 1994.

Joseph A. Spetrini,

Acting Assistant Secretary for Import Administration.

[FR Doc. 94-6001 Filed 3-15-94; 8:45 am]

BILLING CODE 3510-DS-P