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

DEPARTMENT OF COMMERCE

Internal Trade Administration

[C-122-404]

Live Swine From Canada; Final Results of Countervailing Duty

Administrative Review

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

ACTION: Notice of Final Results of Countervailing Duty Administrative

Review.

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SUMMARY: On October 7, 1996, the Department of Commerce (the Department

) published in the Federal Register its preliminary results of

administrative review of the countervailing duty order on live swine

from Canada for the period April 1, 1994 through March 31, 1995 (61

FR52426). The Department has now completed this administrative review

in accordance with section 751(a) of the Tariff Act of 1930, as

amended. For information on the net subsidy, see the Final Results of

Review section of this notice. We will instruct the U.S. Customs

Service to assess countervailing duties as detailed in the Final

Results of Review section of this notice.

EFFECTIVE DATE: April 14, 1997.

FOR FURTHER INFORMATION CONTACT:

Stephanie Moore or Cameron Cardozo, Office of CVD/AD Enforcement VI,

Import Administration International Trade Administration, U.S.

Department of Commerce, 14th Street and Constitution Avenue, N.W.,

Washington, D.C. 20230; telephone: (202) 482-2786.

SUPPLEMENTARY INFORMATION

Background

Pursuant to 19 C.F.R. section 355.22(a), reviews should cover only

those producers or exporters of the subject merchandise for which a

review was specifically requested. However, as explained in the

preliminary results, the Department has determined that it is not

practicable to conduct a company-specific review of this order because

a large number of producers and exporters requested the review.

Therefore, pursuant to section 777(e)(2)(B) of the Tariff Act of 1930,

as amended, we are conducting a review of all producers and exporters

of subject merchandise covered by this order on the basis of aggregate

data. This review also covers the period April 1, 1994 through March

31, 1995, and 33 programs. On May 1, 1996, we extended the deadline for

the final results of this review to no later than 180 days from the

date of publication of the preliminary results. See Live Swine from

Canada; Extension of Time Limit for Countervailing Duty Administrative

Review (61 FR 19261).

Since the publication of the preliminary results on October 7, 1996

(61 FR 52426) the following events have occurred. We invited interested

parties to comment on the preliminary results. On November 6, 1996,

case briefs were submitted by the Government of Canada (GOC), the

Government of Quebec (GOQ), and the Canadian Pork Council (CPC),

(respondents), and the National Port Producers' Council (petitioners).

On November 13, 1996, rebuttal briefs were submitted by the petitioners

and the respondents. At the request of the GOQ and the CPC, the

Department held a public hearing on December 11, 1996.

Applicable Statute

Unless otherwise indicated, all citations to the statute are

references to the provisions of the Tariff Act of 1930, as amended by

the Uruguay Round Agreements Act (URAA) effective January 1, 1995 (the

Act). The Department is conducting this administrative review in

accordance with section 751(a) of the Act.

Scope of the Review

On August 29, 1996, the Final Results of Changed Circumstances

Countervailing Duty Administrative Review, and Partial Revocation were

published (61 FR 45402), in which we revoked the order, in part,

effective April 1, 1991, with respect to slaughter sows and boars and

weanlings from Canada, because this portion of the order was no longer

of interest to domestic interested parties. As a result the merchandise

now covered by the order and by this administrative review is live

swine except U.S. Department of Agriculture certified purebred breeding

swine, slaughter sows and boars and weanlings (weanlings are swine

weighing up to 27 kilograms or 59.5 pounds). The merchandise subject to

the

[[Page 18088]]

order 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.

Verification

As provided in section 782(i) of the Act, we verified information

submitted in the questionnaire responses. We followed standard

verification procedures, including meeting with government and company

officials, and examination of relevant accounting and original source

documents. Our verification results are outlined in the public version

of the verification report (Verification Report), which is on file in

the Central Records Unit (Room B-009 of the Main Commerce Building).

Allocation Methodology

In the past, the Department has relied upon information from the

U.S. Internal Revenue Service (IRS) on the industry-specific average

useful life (AUL) of assets in determining the allocation period for

non-recurring grant benefits. See General Issues Appendix appended to

Final Countervailing Duty Determination; Certain Steel Products from

Austria, 58 FR 37063, 37226 (July 9, 1993). However, in British Steel

plc. v. United States, 879 F. Supp. 1254 (CIT 1995) (British Steel),

the U.S. Court of International Trade (the Court) ruled against this

allocation methodology. In accordance with the Court's remand order,

the Department calculated a company-specific allocation period for non-

recurring subsidies based on the AUL of non-renewable physical assets.

This remand determination was affirmed by the Court on June 4, 1996,

British Steel, 929 F. Supp. 426, 439 (CIT 1996).

The Department has decided to acquiesce to the Court's decision

and, as such, we intend to determine the allocation for non-recurring

subsidies using company-specific AUL data where reasonable and

practicable. In this proceeding, the Department preliminarily

determined that it is not reasonable and practicable to allocate

nonrecurring grants using company-specific AUL data because it is not

possible to apply a company-specific AUL in an aggregate case (such as

the case at hand). We invited the parties to comment on the selection

of this methodology and provide any other reasonable and practicable

approaches for complying with the Court's ruling. The GOQ submitted

comments on this issue. The GOQ agreed with the Department that it is

not feasible to allocate nonrecurring grants using company-specific

data in aggregate cases and that the U.S. Internal Revenue Service tax

tables are appropriate for allocating nonrecurring grants in this

review. However, the GOQ also stated that, in future proceedings

conducted on an aggregate basis, the Department should seek suggestions

from the parties as to more appropriate methodologies for calculating

the allocation period. Accordingly, in this review, the Department is

using the allocation period assigned to each grant in prior reviews of

this order.

Calculation Methodology for Assessment and Cash Deposit Purposes

For the review period, we calculated the net subsidy on a country-

wide basis by first calculating the subsidy rate for each program

subject to the administrative review. We calculate the rate on a

province by province basis. We then weight-averaged the rate received

by each province using as the weight the province's share of total

Canadian exports to the United States of market hogs. We then summed

the individuals provinces' weighted-average rates to determine the

subsidy rate from each program. To obtain the country-wide rate, we

then summed the subsidy rates from all programs.

Analysis of Programs

Based upon the responses to our questionnaires, the results of

verification, and written comments from the interested parties, we

determine the following:

I. Programs Conferring Subsidies

A. Programs Previously Determined to Confer Subsidies

I. Feed Freight Assistance Program: In the preliminary results, we

found that this program conferred countervailable subsidies on the

subject merchandise. Our review of the record and our analysis of the

comments submitted by the interested parties, summarized below, has led

us to modify our findings from the preliminary results for this

program. We have determined that the proper calculation methodology

with respect to FFA benefits is the one that the Department has used to

determine the benefit for the only other ``federal'' program, NTSP, in

this review. Therefore, we are first calculating a benefit per kilogram

of live swine within each province eligible for FFA assistance using

each province's total production. Next, we are adjusting each

province's rate per kilogram based on each province's share of exports

to the United States of the subject merchandise. Finally, these

individual provincial rates are summed to obtain a total national rate

for the FFA program. Accordingly, the net subsidy for this program has

changed from Can$0.0006 per kilogram to less than Can$0.0001 per

kilogram.

2. National Tripartite Stabilization Scheme for Hogs (NTSP): In the

preliminary results, we found that this program conferred

countervailable subsidies on the subject merchandise. Our review of the

record and our analysis of the comments submitted by the interested

parties, summarized below, has led us to modify our findings from the

preliminary results for this program. In our calculation of NTSP

benefits to hog producers, we have excluded payments related to other

NTSP commodity plans which, in our preliminary results, were

inadvertently cumulated with those for hogs. We have recalculated the

NTSP benefit applicable only to hog producers during the POR using the

same methodology described in the Preliminary Results (61 FR at 52428).

Accordingly, the net subsidy for the residual NTSP payments and the

retroactive NTSP surplus has changed from Can$0.0172 to Can$0.0004 per

kilogram. Also, the cash deposit for this program has been adjusted to

zero to reflect that this program has been terminated and there are no

residual benefits. See Final Affirmative Countervailing Duty

Determination: Certain Pasta from Turkey, 61 FR 30366, 30370 (June 14,

1996) (Pasta from Turkey).

3. British Columbia Farm Income Insurance Program (FIIP): In the

preliminary results, we found that this program conferred

countervailable subsidies on the subject merchandise. We did not

receive any comments on this program from the interested parties, and

our review of the record has not led us to change any findings or

calculations. Accordingly, the net subsidy for this program of less

than Can$0.0001 per kilogram remains unchanged from the preliminary

results.

4. Saskatchewan Hog Assured Returns Program (SHARP): In the

preliminary results, we found that this program conferred

countervailable subsidies on the subject merchandise. Our review of the

record and our analysis of the comments submitted by the interested

parties, summarized below, has led us to modify our findings from the

preliminary results for this program with regard to the cash deposit.

The net subsidy for this program of Can$0.0028 per kilogram remains

unchanged from the preliminary results. However, the cash deposit for

this program has been adjusted to zero to reflect that this

[[Page 18089]]

program has been terminated and there are no residual benefits. See

Pasta from Turkey.

5 Saskatchewan Livestock Investment Tax Credit: In the preliminary

results, we found that this program conferred countervailable subsidies

on the subject merchandise. We did not receive any comments on this

program from the interested parties, and our review of the record has

not led us to change any findings or calculations. Accordingly, the net

subsidy for this program of Can$0.0001 per kilogram remains unchanged

from the preliminary results.

6 Saskatchewan Livestock Facilities Tax Credit: In the preliminary

results, we found that this program conferred countervailable subsidies

on the subject merchandise. We did not receive any comments on this

program from the interested parties, and our review of the record has

not led us to change any findings or calculations. Accordingly, the net

subsidy for this program of Can$0.0001 per kilogram remains unchanged

from the preliminary results.

7 Saskatchewan Interim Red Meat Production Equalization Program: In

the preliminary results, we found that this program conferred

countervailable subsidies on the subject merchandise. We did not

receive any comments on this program from the interested parties, and

our review of the record has not led us to change any findings or

calculations. Accordingly, the net subsidy for this program of

Can$0.0011 per kilogram remains unchanged from the preliminary results.

8. Alberta Crow Benefit Offset Program (ACBOP): In the preliminary

results, we found that this program conferred countervailable subsidies

on the subject merchandise. We did not receive any comments on this

program from the interested parties, and our review of the record has

not led us to change any findings or calculations. Accordingly, the net

subsidy for this program of Can$0.0010 per kilogram remains unchanged

from the preliminary results.

9. Ontario Livestock and Poultry and Honeybee Compensation Program:

In the preliminary results, we found that this program conferred

countervailable subsidies on the subject merchandise. We did not

receive any comments on this program from the interested parties, and

our review of the record has not led us to change any findings or

calculations. Accordingly, the net subsidy for this program of less

than Can$0.0001 per kilogram remains unchanged from the preliminary

results.

10. Ontario Export Sales Aid Program: In the preliminary results,

we found that this program conferred countervailable subsidies on the

subject merchandise. We did not receive any comments on this program

from the interested parties, and our review of the record has not led

us to change any findings or calculations. Accordingly, the net subsidy

for this program of Can$0.0001 per kilogram remains unchanged from the

preliminary results.

11. Ontario Bear Damage to Livestock Compensation Program: In the

preliminary results, we found that this program conferred

countervailable subsidies on the subject merchandise. We did not

receive any comments on this program from the interested parties, and

our review of the record has not led us to change any findings or

calculations. Accordingly, the net subsidy for this program of less

than Can$0.0001 per kilogram remains unchanged from the preliminary

results.

12. New Brunswick Livestock Incentives Program: In the preliminary

results, we found that this program conferred countervailable subsidies

on the subject merchandise. We did not receive any comments on this

program from the interested parties, and our review of the record has

not led us to change any findings or calculations. Accordingly, the net

subsidy for this program of less than Can$0.0001 per kilogram remains

unchanged from the preliminary results.

13. New Brunswick Swine Industry Financial Restructuring and

Agricultural Development Act--Swine Assistance Program: In the

preliminary results, we found that this program conferred

countervailable subsidies on the subject merchandise. We did not

receive any comments on this program from the interested parties, and

our review of the record has not led us to change any findings or

calculations. Accordingly, the net subsidy for this program of less

than Can$0.0001 per kilogram remains unchanged from the preliminary

results.

14. New Brunswick Swine Assistance Policy on Boars: In the

preliminary results, we found that this program conferred

countervailable subsidies on the subject merchandise. We did not

receive any comments on this program from the interested parties, and

our review of the record has not led us to change any findings or

calculations. Accordingly, the net subsidy for this program of less

than Can$0.0001 per kilogram remains unchanged from the preliminary

results.

B. New Programs Determined to Confer Subsidies

1. National Transition Scheme for Hogs: In the preliminary results,

we found that this program conferred countervailable subsidies on the

subject merchandise. Our review of the record and our analysis of the

comments submitted by interested parties, summarized below, has led us

to modify part of our preliminary determination on this program. The

change concerns the cash deposit. The net subsidy for this program of

Can$0.0042 per kilogram remains unchanged from the preliminary results.

However, the cash deposit for this program has been adjusted to zero to

reflect that this program has been terminated and there are no residual

benefits. See Pasta from Turkey.

2. Technology Innovation Program Under the Canada/Quebec Subsidiary

Agreement on Agri-Food Development: In the preliminary results, we

found that this program conferred countervailable subsidies on the

subject merchandise. Our analysis of the comments submitted by the

interested parties, summarized below, has not led us to change our

findings from the preliminary results. Accordingly, the net subsidy for

this program of less than Can$0.0001 per kilogram remains unchanged

from the preliminary results.

II. Programs Found Not to Confer Subsidies

Research Program under the Canada/Quebec Subsidiary Agreement on

Agri-Food Development: In the preliminary results, we found that this

program did not confer subsidies during the POR. Our analysis of the

comments submitted by the interested parties, summarized below, has not

led us to change our findings from the preliminary results.

III. Programs Found To Be Not Used

In the preliminary results, we found that the producers and/or

exporters of the subject merchandise did not apply for or receive

benefits under the following programs:

A. Quebec Farm Income Stabilization Insurance Program (FISI);

B. Support for Strategic Alliances Program under the Canada/Quebec

Subsidiary Agreement on Agri-Food Development;

C. Agricultural Products Board Program;

D. Federal Atlantic Livestock Feed Initiative;

E. Western Diversification Program;

F. Newfoundland Hog Price Support Program;

G. Newfoundland Hog Price Stabilization Program;

H. Newfoundland Weanling Bonus Incentive Policy;

I. Nova Scotia Improved Sire Policy;

J. Nova Scotia Swine Herd Health Policy;

K. Ontario Swine Sales Assistance Policy; and

L. Ontario Rabies Indemnification Program.

Our analysis of any comments submitted by the interested parties,

[[Page 18090]]

summarized below, has not led us to change our findings from the

preliminary results.

IV. Programs Found To Be Terminated

In the preliminary results, we found the following programs to be

terminated and that no residual benefits were provided:

A. Alberta Livestock and Beeyard Compensation Program;

B. British Columbia Special Hog Payment Program; and

C. British Columbia Swine Herd Improvement Program.

We received no comments on our preliminary results and our findings

remain unchanged in these final results.

Analysis of Comments

Comment 1: The GOC and the CPC argue that the Department

erroneously concluded that NTSP payments were made to hog producers

during the period of review (POR). They argue that in calculating a

benefit for this program, the Department mistakenly used the payout

figure for all NTSP plans, which included miscellaneous post-

termination adjustments under the NTSP for the Hogs' plan, adjustments

under the other terminated NTSP plans, payouts under the active NTSP

plans, and all surplus distributions to producers under all the various

terminated plans categorized as ``tripartite payments'' in the Farm

Cash Receipts (FCRs) data. They also argue that the adjustments to the

NTSP for hogs resulted in the GOC collecting a net of Can$41,000 from

hog producers during the POR. Therefore, they argue that the Department

should find that there were no benefits to hog producers under the NTSP

for hogs during the POR.

The petitioners contend that the GOC's supplemental questionnaire

response dated June 3, 1996 at page 3 indicates that tripartite

payments that had been held over from earlier fiscal years had been

paid to live swine producers during the POR, and were accounted for in

the FCRs. The petitioners also contend that the Department's September

23, 1996 Verification Report at page 4 states that representatives of

Agriculture Canada explained not only that NTSP payouts had been made,

but also that some NTSP payments remained outstanding. Thus, the

petitioners contend that the Department verified that hog producers

received NTSP payouts during the POR based on program activities that

occurred throughout the life of the program. Therefore, the petitioners

contend that the record established that hog producers received NTSP

payouts during the POR and, further, that these payouts were

substantial. Furthermore, the petitioners contend that because the GOC

has failed to submit the NTSP Annual Report for the review period,

which represents the official document that presumably would outline

the nature and extent of the hog account closeout adjustments and their

effect on NTSP payouts, the GOC's argument is deficient.

Department's Position: We agree, in part, with the GOC and the CPC,

and, in part, with the petitioners. At verification, we reviewed the

``Tripartite Payments'' line item in the FCRs, which showed an

aggregate figure for payments received by producers under all NTSP

plans in each province. There was no breakdown by commodity. Therefore,

we examined a GOC internal document entitled ``Tripartite Payments,''

which shows the payments to producers of all commodities covered by an

NTSP plan in each province (Exhibit GOC-5 to the Verification Report).

We also reviewed an internal document entitled ``Surplus Distribution--

Producer,'' which shows the NTSP surplus distribution for all

commodities in each province (Exhibit GOC-6 to the Verification

Report). We selected provinces from Exhibit GOC-5 and GOC-6 to trace to

the FCRs, because the totals from both of these documents were recorded

in the FCRs ``Tripartite Payments'' line item. However, when

calculating the NTSP benefit for the subject merchandise for the

preliminary results, we inadvertently used the total tripartite

payments listed in the FCRs. Therefore, in these final results, we have

recalculated the NTSP benefit applicable only to hog producers during

the POR using the same methodology described in the Preliminary Results

(61 FR at 52428). To obtain the payouts made to hog producers during

the POR, we summed the payments listed for hog producers in each

province in Exhibit GOC-5 to the Verification Report.

However, consistent with the Department's practice, we did not

offset the NTSP benefit to the hog producers by the premiums the hog

producers paid during the POR, as argued by the respondents. In prior

administrative reviews of Live Swine, we only countervailed two-thirds

of the payments made to swine producers because the federal government

and the provincial government contributed two-thirds of the premiums

from which payments were made to the hog producers. We did not

countervail the remaining one-third because it represented the

producers premiums. Because we only countervail two-thirds of the

payments, there is no reason to make any further adjustments to the

payments to hog producers. See, Live Swine from Canada; Notice of

Preliminary Results of Countervailing Duty Administrative Reviews;

Initiation and Preliminary Results of Changed Circumstances Review and

Intent to Revoke Order in Part, 61 FR 26879, 26883 (May 29, 1996) and

Live Swine from Canada; Final Results of Countervailing Duty

Administrative Reviews, 61 FR 52408 (October 7, 1996).

We agree with the petitioners that payments for closing entries of

the NTSP hog plan were made during the POR, and we have calculated the

benefit from these payments. However, we disagree with the petitioners

that the GOC official's comment, Verification Report at 4, that some

NTSP payments remained outstanding necessarily means payments to hog

producers. There are NTSP plans for other commodities, which were still

in effect, and for which there could be payments due in the future.

However, we verified that the plan for hogs was no longer in effect and

that there will be no payments made in the future under that plan.

Comment 2: The CPC contends that the Department stated in the

preliminary results that it intended to calculate a benefit from the

Feed Freight Assistance Program (FFA) using the same methodology

applied in the sixth review (See Live Swine from Canada; Final Results

of Countervailing Duty Administrative Review: 59 FR 12243 (March 16,

1994), (Swine Sixth Review Results)). However, the CPC claims that the

methodology used in the instant review is inconsistent with that used

in Swine Sixth Review Results, and constitutes a ministerial error. In

Swine Sixth Review Results, the Department calculated ``production in

kilos'' based on the total production of live swine in provinces

eligible for FFA. In the preliminary results of this review, however,

the Department calculated ``production in kilos'' for three provinces

using only the live swine produced in the FFA eligible areas of the

three provinces: British Columbia, Quebec, and Ontario. The CPC also

states that the same ministerial error was made in Swine Seventh,

Eighth and Ninth Review Results, which the Department corrected in an

amended final notice (Live Swine from Canada; Amended Final Results of

Countervailing Duty Administrative Reviews, 61 FR 58383; (November 14,

1996) (Amended Swine Seventh, Eighth, and Ninth Review Results)). As a

result, the CPC contends that the Department should also correct this

alleged error in the preliminary results of the current review.

[[Page 18091]]

The petitioners argue that the Department should affirm the

calculation methodology that it used in the preliminary results because

it correctly ``ties'' FFA receipts to the merchandise actually

benefiting from the subsidy. In Ontario, Quebec, and British Columbia,

only certain counties, and, therefore, only a percentage of swine

production, are eligible to receive FFA assistance. Therefore, the

petitioners argue that the Department should divide the amount of FFA

assistance by the total weight of live swine produced in FFA-eligible

areas rather than by total production in each province. According to

the petitioners, tying FFA benefits that can only be received by a

subset of producers in certain provinces to all production in those

provinces would yield the same absurd result as tying provincial

benefits to national production.

In rebuttal, the CPC argues that should the Department decide to

revise its methodology, any revision must be consistent with the

Department's calculation of the benefit from other ``national''

programs providing varying benefits to individual provinces, correctly

tie the benefits to eligible production and exports. According to the

CPC, the revised methodology, applied by the Department to all other

programs available in more than one province, should calculate a

benefit per kilo per province, and then calculate a weighted average

rate per kilo based on each province's share to total exports. These

individual provincial rates should then be added up to obtain a total

national rate. The CPC submits that any revision to the FAA benefit

calculation should conform to this standard methodology.

Department's Position: In consideration of the comments received on

this issue, we have reexamined our FFA calculation methodology. We have

determined that the proper calculation methodology to follow with

respect to FFA benefits is the one that the Department has used in this

review to determine the benefit for the only other ``national''

program, NTSP. Therefore, we first calculated a benefit per kilogram

for each province eligible for FFA assistance using the provinces'

total production of live swine. Next, we weighted each province's

benefit by each province's share of total exports of the subject

merchandise to the United States. Finally, these weighted provincial

rates are summed to obtain the benefit for the FFA program on live

swine.

We disagree with the petitioners regarding the use of an adjusted

production figure in the denominator for Ontario, Quebec, and British

Columbia. This review is conducted on an aggregate basis. In this case

we have treated the provinces as we treat companies in a typical case.

To calculate a country-wide rate, we weight-average each province's

rate by its share of exports to the United States. To calculate the

province's rate for the FFA program, we obtain the same result using

two different methods: (1) We can calculate a rate for the counties

receiving FAA benefits and a rate for the counties that received no FAA

benefits, and then derive the weighted-average rate for the province,

or (2) simply calculate a rate for the province by using the amount of

FAA assistance in the numerator and total swine production in the

denominator. We have adopted the latter method to calculate the FFA

rate for each province.

Also, we addressed this same comment in Swine Sixth Review Results

where we stated that ``[a]lthough we recognize that FAA availability is

limited to certain areas within the participating provinces, we

determine it is not appropriate to adjust provincial production

downward. * * * We determine that adjusting the denominator as we did

in the past results is overstating the FAA benefit.'' Id. at 12261.

Therefore, for these final results, we have calculated FAA benefits as

described above.

Comment 3: The GOQ argues that the Department's preliminary

determination to countervail a portion of the Canada/Quebec Subsidiary

Agreement on Agri-Food Development (Agri-Food Agreement) is contrary to

the Department's administrative practice. The GOQ claims that in the

last five administrative reviews of this order, the Department has

found the Agri-Food Agreement, in its entirety, not countervailable

because it is a research program in which the results are made publicly

available. The only possible change with respect to the Agri-Food

Agreement is the expiration of the original Agri-Food Agreement in 1991

and its replacement in 1993 with the current Agri-Food Agreement.

According to the GOQ, this change cannot justify the Department's

reconsideration of the Agri-Food Agreement in this review because the

current Agri-Food Agreement was already in place during the ninth

administrative review when the Department found the Agri-Food Agreement

non-countervailable. The GOQ asserts that the Department's long-

standing policy has been not to re-examine programs previously found

not countervailable absent new information or evidence of changed

circumstances. Because the Department found the Agri-food Agreement

non-countervailable in the ninth review and no party submitted new

information in this proceeding, the GOQ contends that the Department

should have continued to find it not countervailable.

The GOQ claims that, although the Department erred in investigating

the Agri-Food Agreement after finding it non-countervailable in all

prior administrative reviews, the record evidence once again

demonstrates that the Agri-Food agreement is not countervailable.

Section 355.44(1) of the 1989 Proposed Regulations reflects the

Department's long-term practice that research and development programs,

such as the Agri-Food Agreement and its components, are not

countervailable if the research results are made publicly available.

According to the GOQ, the Agri-Food Agreement is a single program and

each of its components individually meet the requirements of section

355.44(1). Thus, the GOQ argues that, in the final results of this

review, the Department should not find the Agri-Food Agreement or any

of its components countervailable.

The CPC argues that the Department preliminarily determined that

the Technology Innovation component of the Agri-Food Agreement is

countervailable without first examining whether the results of the

research generated by the funded projects are generally available, and

that this analysis is not in accordance with either U.S. law or the

Department's practice. The CPC claims that funding for this Agri-Food

Agreement is shared 50/50 by the federal government and the province,

and argues that in prior reviews the Department's analysis of similar

jointly funded agreements have begun with a determination as to whether

the research results were made publicly available. Only if research

results were not made available has the Department then gone on to

examine the source of funding. The CPC contends that this analysis is

as long-standing as the Department's 1989 Proposed Regulations, and as

recent as the preliminary and final results of the seventh, eighth and

ninth administrative reviews of this order. As a result, the CPC

concludes that the Department should analyze the Agri-Food Agreement in

accordance with U.S. law and its past practice, and should find that

none of the components of Agri-Food are countervailable.

The petitioners contend that in an effort to avoid the question of

the countervailability of the Technology Innovation component of the

Agri-Food

[[Page 18092]]

Agreement, the GOQ and CPC attempt to argue that the Department's past

treatment of the Agri-Food Agreement, as a whole, prevents the agency

from revisiting one particular component of the program in the present

review. The petitioners state that the Department's past findings of

countervailability are limited to instances where it has examined the

Agri-Food Agreement on an aggregate basis. However, the Department has

never found the Technology Innovation component of the Agri-Food

Agreement, by itself, to be not countervailable, and the Department's

finding in the present case does not conflict with its past treatment

of this subsidy. Also, the Department's prior finding of

noncountervailability was limited to the previous Agri-Food Agreement.

The petitioners allege that this review presents the first time that

the Department has examined the current Agri-Food Agreement at

verification. Thus, the petitioners claim the record in this review

provides the Department with ample basis to ``reinvestigate'' the

countervailability of the new Agri-Food Agreement.

The petitioners continue that the respondents are incorrect to

argue that the Technology Innovation program should be considered non-

countervailable because it constitutes a research program under which

research results are made publicly available. According to the

petitioners, U.S. law and past Department practice support the

Department's decision to treat the Technology Innovation component of

the Agri-Food Agreement as a regionally specific technical assistance

program provided by the Canadian federal government to the designated

geographic region of Quebec. In Final Affirmative Countervailing Duty

Determination; Fresh, Chilled, and Frozen Pork from Canada, 54 FR 30774

(July 24, 1989) (Pork Investigation), the Department examined the

separate components of the precursor Agri-Food program and determined

that the federal government's contributions to the Technology component

were countervailable because the program did not involve research and

was limited to the region of Quebec. Consistent application of agency

practice requires the Department to treat Technology Innovation as a

technical assistance subsidy for production aid. According to the

petitioner, the Technology Innovation program is designed principally

to provide production support. Given that the Technology Innovation

program does not constitute a research subsidy, the petitioners argue

that the Department has correctly not examined the public availability

of this program. Only when referring to the Agri-Food program in it

entirety can the program be characterized generally as a ``research''

program. However, the petitioners conclude that the Department

correctly rejected this approach and based its countervailability

finding on the theory that the program is regionally specific.

Department's Position: We disagree with the GOQ and CPC. The

Department's preliminary finding with respect to the countervailability

of the Technology Innovation program in not inconsistent with prior

Department practice. In fact, the Department examined the

countervailability of the predecessor Agri-Food Agreement in the Pork

Investigation. In that case, the Department also examined the separate

components of that agreement (Research and Development, Technological

Innovations and New Initiatives, Soil Conservation and Improvement) as

three separate programs and determined that the Technological

Innovations program was countervailable because the program did not

involve research, and the funding, provided by the federal government,

was limited to the region of Quebec. See Pork Investigation at 30779.

In Live Swine from Canada; Preliminary Results of Countervailing Duty

Administrative Review 55 FR 20812, 20814 (May 21, 1990) (Swine Second

and Third Review Results), we stated again that the Agri-Food Agreement

contained three programs: Research and Development, Technological

Innovations, and Soil Conservation, and that the federal government's

contributions were limited to Quebec, and therefore countervailable. We

examined the Agri-Food Agreement again in the fourth and seventh,

eighth, and ninth reviews (the program was not used in the fifth and

sixth review). Although we consistently described the Agri-Food

Agreement in terms of three programs under the same agreement, we

examined individual projects as if they all were financed under the

Research program rather than under the other two programs. See, e.g.

Swine Seventh, Eighth and Ninth Review Results at 26887. Our

understanding was inaccurate and does not reflect a determination that

the Agri-Food Agreement is one program totally related to research, as

the GOQ and the CPC suggest. Furthermore, the GOQ submitted no

information on the record of the ninth review showing that a new Agri-

Food Agreement was in effect. It was only during the instant review

that the Department learned that a new Agri-Food Agreement was in

force. The fact that a new Agri-Food Agreement is in force is

sufficient evidence of changed circumstances in warrant a reexamination

of our prior determinations. Because we determined that it was

appropriate to reexamine the Agri-Food Agreement in this review, we are

not constrained by our previous examinations in earlier reviews.

Moreover, the Department has discretion in determining whether to

re-investigate a program previously found to be non-countervailable.

The court of International Trade in affirming this discretion, stated

that the Department is ``entitled to draw upon its own knowledge and

expertise and facts capable of judicial notice.'' PPG Indus., Inc. v.

United States, 746 F. Supp. 119, 135 (CIT 1990). As a result, we

determined that it was appropriate to examine the countervailability of

the 1993 Agri-Food Agreement. In line with this decision, the GOQ was

offered an opportunity to claim green light or green box status under

section 771(5B) of the Act. (See Department's Questionnaire, September

25, 1995, Section III.4 at III.4-2).

We disagree with the respondents' claim that the Agri-Food

Agreement is nothing more than a research program. The language of the

Agreement conveys much broader goals than simply the research and

development of new products or processes. While research and

development constitute a portion of the activities under this

Agreement, the Agreement itself clearly denotes broader economic

development objectives. In fact, the Agreement focuses on the agri-food

industry, because ``agri-food development in Quebec continues to be a

priority in the economic and regional development strategies of both

governments.'' (See Canada-Quebec Subsidiary Agreement on Agri-Food

Development, attached as Exhibit J to the GOQ Questionnaire Response,

dated December 4, 1996, at 6.) According to the Agreement, the

objectives of the two governments are as follows: ``(A) to intensify

the economic and regional development of Quebec and to create an

environment in which Quebec and its regions can achieve their economic

potential..; (B) to consolidate and improve opportunities for

employment and income..; (C) to facilitate consultation and

coordination of the economic and regional development policies,

programs, and activities of both governments..''. (Id at 5-6). The

purpose of the Agreement is ``to promote cooperation and coordination

of the efforts of the governments of Canada and Quebec with a view to

strengthening the development,

[[Page 18093]]

competitiveness, and profitability of the agri-food industry.'' (Id. at

9).

As we stated in Memorandum on Canada/Quebec Subsidiary Agreement on

Agri-Food Development, to the Acting Assistant Secretary from CVD/AD

Team dated September 25, 1996, which is on file in CRU (Agri-Food

Memorandum), we recognize that the Research program is a research and

development program, and, therefore, we applied the public availability

criterion to our analysis. However, when we analyzed the Technology

Innovation program, we found that its application review process,

eligibility requirements, purposes, and types of projects funded were

more typical of a technological assistance program than of a research

and development program.

Under the Technology Innovation program, the applications are

reviewed by the Quebec Ministry of Agriculture (Ministere de

l'Agriculture, des Pecheries et de l'Alimentation du Quebec (MAPAQ)),

to see whether they meet the eligibility criteria and the objectives of

the program. (See Verification Report at 29.) Any organization,

agricultural operation, or individual associated with agricultural

production is eligible under Testing and Experimentation, except for

consulting firms, specialized educational institutions or research

establishments; only groups of farms are eligible under Testing

Networks. The type of project that can be funded deals ``with the

introduction, final adjustment, or full-scale field testing of tools,

specialized equipment, new techniques and practices, or agricultural

management tools based on proven technical expertise'' for the Testing

and Experimentation component; there is no specific requirement for the

Testing Networks component. When we then look at the project assessment

criteria, we find that ``Scientific and technical validity'' is only

one of nine criteria used, with no particular weight given to any one

of them. (See, Canada-Quebec Subsidiary Agreement on Agri-Food

Development--Technology Innovation Program, attached as Exhibit L to

the GOQ Questionnaire Response, dated December 4, 1996, at 14-15).

Furthermore, it appears unusual that research institutions would be

specifically excluded from applying for funds under this program, if it

is as claimed, a research and development program. More importantly, it

is not clear in this case whether the ``new technologies'' are newly

developed technologies or technologies that are new to Quebec but may

be widely used in other areas.

The GOQ contends that ``[t]he Technology Innovation component of

Agri-Food provides grants for applied research projects in which

concepts developed in laboratories are tested under actual farming

conditions.'' There is no evidence in the record indicating the

projects must be tied to ``concepts developed in laboratories'' or that

the tested product, technology or process be in the experimental stage.

Instead, the eligibility requirements seem to accommodate products

already existing in the market and being tested for use in Quebec. The

types of projects financed under this program seem to support this

interpretation: ``Rotational grazing versus cow-calf production,''

``Strip grazing versus dairy farming,'' ``Enhancing the competitiveness

of the goat milk industry'' or ``Ventilation of pig barn using air

diffuser and low-level exhaust.''

Our reasoning becomes even more clear when we compare the

Technology Innovation program with the Research program. Under the

Research program, the Conseil des Recherches en Peche et en Agro-

Alimentaire du Quebec (CORPAQ) reviews the applications and administers

the projects. This committee, which includes three university

professors and a company researcher, is the same committee that

evaluates all scientific research funded by the government in Quebec.

CORPAQ screens a proposal for a project based on scientific merit; for

the projects that are deemed eligible, a more detailed description of

the project is requested which is evaluated by a second committee made

up of experts specifically ``in the fields or research disciplines

concerned.'' The scientific validity of the project appears to be the

only criterion for the selection of the projects receiving the funding.

Eligible applicants are universities under all three components of the

Research program; under the Support for Partnership Research also

private enterprises or associations may apply.

Testing obviously represents a stage in the research and

development process. Any new product or process developed in a

laboratory has to undergo testing to see whether or not the goals of

the research have been achieved. However, when testing is isolated from

the research process and conducted for other purposes, such as to adapt

existing technologies to specific weather conditions, it is still

testing, but it is no longer part of the research and development

process. The fact that the Technology Innovation program does not

emphasize the scientific value of the projects but seems to stress

technical expertise, further buttresses our determination that this is

a program providing technological assistance to farmers in order to

speed up the adoption of cutting-edge technologies in Quebec.

Moreover, we verified that during the POR, this program was funded

exclusively by the GOC. See Verification Report at page 29. Schedule C

of the Agri-Food Agreement shows how funds were allocated to the three

programs and clearly shows that, since its inception, the Technological

Innovation program has been funded solely by the federal government. As

a result, because assistance under the program is provided by the

federal government to industries located within a designated

geographical region of Canada (i.e., Quebec), we determined that the

federal contributions were countervailable. See section 771(5a)(D)(iv)

of the Act and Statement of Administrative Action accompanying the

URAA, reprinted in H.R. Doc. No. 316, 103d Cong., 2d Sess. 932 (1994)

at 262.

With respect to the Research program, we did examine the public

availability of the results of research projects for purposes of making

a finding that the program is not countervailable. (See Department's

Position on Comment 4). However, because we have determined that the

Technological Innovation program is not a ``research'' program, our

``public availability'' test is inapplicable. Therefore, we continue to

find that the Technological Innovation program of the Agri-Food

Agreement provided a countervailable subsidy to live swine during the

POR.

Comment 4: The petitioners allege that the Department erroneously

declined to countervail benefits received under the Research component

of the Agri-Food Agreement. The petitioners argue that the GOQ has

failed to provide sufficient evidence to establish that the results of

research projects will be published as required by the 1989 Proposed

Regulations. The petitioners also state that the respondents have not

shown that the results of the research projects must be made public in

all instances because the program allows recipients to obtain patent

protection for the results of their research. Citing to Final

Affirmative Countervailing Duty Determination: Fresh and Chilled

Atlantic Salmon from Norway, 56 FR 7678, 7682 (February 25, 1991)

(Norwegian Salmon), the petitioners assert that in instances where

research projects are ongoing, the Department has required that the

results are scheduled to be publicized. Petitioners argue that no such

evidence exists on the record for this review. The petitioners also

argue that the

[[Page 18094]]

Department's failure to countervail research grants under these

circumstances would be inconsistent with Department practice and would

create loopholes potentially allowing subsidizing governments to avoid

countervailability by delaying decisions to publish the results of

subsidized research until after the three-year allocation period has

expired.

The GOC and CPC counter that the petitioners' argument

inappropriately assumes that the GOC would fail to discharge its

domestic and its international obligations fully and in good faith. The

GOC cannot avoid or delay publication of Agri-Food Agreement research

results without violating the terms of the Agri-Food Agreement itself.

The GOC states that in the preliminary results, the Department found

that the research results are published ``upon completion.'' In prior

administrative reviews, the Department similarly has found that without

exception the swine-related research results under the Agri-Food

Agreement or its predecessor have also been made publicly available

upon completion. Also, the CPC argues that the Department has verified

that no researcher has ever exercised the option to patent research

results, and in so doing to limit the extent of their publication.

According to the CPC, the mere possibility of a future patent for one

research project is insufficient proof that no results of research

under this program will ever be made publicly available, citing Final

Affirmative Countervailing Duty Determinations: Certain Steel Products

from Germany, 58 FR 37315, 37321-22 (July 9, 1993) (German Steel).

Therefore, the GOC and CPC request that the Department affirm its

determination that the Research component of the Agri-Food Agreement is

not countervailable.

The GOQ argues that the Department's practice is not to countervail

an uncompleted research project unless it is known at the time of the

determination that the project results will not be disseminated

publicly. The GOQ continues that the petitioners' position is based

upon pure speculation about what might happen in the future. In any

case, leaving aside the Department's determination that the Research

component is a noncountervailable research program, the GOQ argues that

the Research component is neither regional, nor de jure or de facto

specific. As a result, the GOQ urges the Department to reject the

petitioners' argument and confirm that the Research component is not

countervailable.

Department's Position: We disagree with the petitioners. Although

there is no schedule for publication as in Norwegian Salmon, we

explained and documented in our Verification Report and Agri-Food

Memorandum that the results of research projects funded under the Basic

Research program are required by the terms of the Agri-Food Agreement

to be published in an annual report upon completion. The Agri-Food

Agreement states that ``the Government of Canada and the Government of

Quebec agree to announce jointly all authorized projects, as well as

project and program reports and results.'' However, no swine-related

research projects were completed during the POR. We find it

inappropriate to countervail these projects during the instant review

because there are no results to determine whether they were made

publicly available. The mere possibility of a future patent for the

results of a research project is not sufficient evidence to justify a

finding of countervailability of an entire research program, where

there is a general requirement that research results be made publicly

available. See, e.g., German Steel at 37321-22. Therefore, we reaffirm

our preliminary determination that the Research program did not confer

countervailable benefits on live swine during the POR. The

determination that benefits under this program are countervailable

could only be made if the swine-related projects were complete. It is

only upon completion that we can know whether the results of research

have been made publicly available. See, e.g., Final Affirmative

Countervailing Duty Determinations: Certain Steel Products from Sweden

58 FR 37385 (July 9, 1993).

Comment 5: The GOP argues that the Department preliminarily

determined to examine the Agri-Food Agreement as three separate

programs because it incorrectly assumed that there are distinct

differences in the purposes, funding, eligibility requirements, and

application and approval processes across the three components of the

Agri-Food Agreement. The GOQ states that the Agri-Food Agreement is a

single program with a single common purpose of ``strengthening the

development, competitiveness and profitability of the agri-food

industry.'' According to the GOQ, the agreement provides that funds may

be transferred among the various components of the agreement.

Therefore, the GOQ claims that since funds are fungible among the

various components of the agreement, those components in practice have

the same funding.

The GOQ further argues that the Agri-Food Agreement has a single

administration. According to the GOQ, the budget for administration of

the agreement is provided as a single component; there is no separate

administrative budget for each operative component. Further, the GOQ

claims that there are common eligibility requirements applicable to all

three components that are set forth in the main text of the Agri-Food

Agreement. The main text of the agreement establishes a single

management committee with ultimate authority over project and contract

approval for all three components.

Finally, the GOQ notes that in Swine Seventh, Eighth and Ninth

Review Results, the Department cited to the Final Affirmative

Countervailing Duty Determination on Certain Fresh Atlantic Groundfish

from Canada 51 FR 10041, 10061 (March 24, 1986) (Groundfish) to

distinguish between ``umbrella legislation'' and ``subsidiary

agreement'' in its single program analysis of Canada's Farm Income

Protection Act. The GOQ claims that, in Groundfish, the Department

examined each subsidiary agreement under Canada's Economic and Regional

Development Agreements (ERDA) as a single separate program. The GOQ

states that the Agri-Food Agreement is a ``subsidiary agreement'' under

the umbrella of ERDA. Therefore, the GOQ argues that pursuant to the

rationale established in Groundfish and ratified in Swine Seventh,

Eighth and Ninth Review Results, the Department should examine the

Agri-Food Agreement as a single program.

The petitioners contend that the GOQ ignores that the shared

purpose of the programs is too broad to meet the Department's legal

standard. According to the petitioners, the Department has expressly

rejected this type of broad purpose as the basis for treating

independent subsidy programs as a single program, instead requiring

commonality at the program-specific level. Finally, the Department has

regularly examined component parts of subsidy programs similar to the

umbrella program found in the Agri-Food program on an independent

basis. See, e.g., Final Affirmative Countervailing Duty Determination

on Pure Magnesium and Alloy Magnesium from Canada 57 FR 30946 (1992);

Final Affirmative Countervailing Duty Determination on Small Diameter

Circular Seamless Carbon and Alloy Steel Standard Line and Pressure

Pipe from Italy 60 FR 31922 (1995).

[[Page 18095]]

Department's Position: We disagree with the GOQ. First, the

Department has examined the components of the predecessor Agri-Food

Agreement as separate programs in prior determinations. (See

Department's Position on Comment 3 above). Second, the instant review

represents the first opportunity for the Department to examine the new

Agri-Food Agreement. As extensively explained in the Agri-Food

Memorandum, in this review, we examined the components of the Agri-Food

Agreement as three separate programs because there are distinct

differences in the purposes, funding, eligibility requirements, and

application and approval procedures across the three components. The

fact that the three components stem from the same agreement between

federal and provincial government does not detract from this finding.

The GOQ claims that the Agri-Food Agreement has a single purpose of

``strengthening the development, competitiveness and profitability of

the agri-food industry.'' This is correct; however, when we examine the

program areas, we find that the purpose of each component is much more

specific, as we outlined in the Agri-Food Memorandum: the purpose of

the Research component is to create major leverage effects on research;

the purpose of the Technological Innovation component is to speed up

the rate of adoption and dissemination of technologies and production

systems; and the purpose of the Strategic Alliance Support component is

to stimulate cooperation and strageic alliances in the agri-food

industry (see Appendices K, L, and M of the GOQ's December 4, 1995

questionnaire response).

With respect to funding, we agree that at the agreement level, the

funding is contributed 50/50 by the two governments. However, at the

program level, Schedule C of the Agreement shows that the funding for

the Research program was provided by both the GOQ and the GOC, and the

funding for the Technological Innovation and Strategic Alliance Support

components was provided solely by the GOC.

With respect to the administration of these programs, while it is

correct that the Agreement is administered by the management committee,

individual ``management subcommittees'' were also established ``for the

purpose of managing and administering each program under this Agreement

. . .'' (Section 4.5(b) of the Agreement). With respect to the

application process, each program has distinct application forms,

application processes, and evaluation systems. As we have already

indicated, applications under the Research program are processed by

CORPAQ, applications under the Technological Innovation program are

processed by MAPAQ, and application for the Strategic Alliance Support

program are processed by Agriculture Canada. As outlined in the Agri-

Food Memorandum, each program has different eligibility requirements.

Each application is then reviewed by the management subcommittee for

the corresponding program for final approval.

We also disagree with the GOQ's argument that, pursuant to the

rationale established in Groundfish and ratified in Swine Seventh,

Eighth, and Ninth Review Results, the Department should examine the

Agri-Food Agreement as a single program. In Groundfish (at 10049), the

Department stated that: ``ERDA subsidiary agreements establish

programs, delineate administrative procedures and set up relative

funding committees of the federal and provincial governments.'' Under

both the Prince Edward Island subsidiary agreement and the New

Brunswick subsidiary agreement, we found multiple programs. As a

result, Groundfish does not support the GOQ's argument for treating

subsidiary agreements as single programs.

The countervailing duty law does not mandate a specific standard

for determining whether government actions under review should be

treated as a single program or several programs. Under these

circumstances, the Department has discretion and must base its

determination on a reasonable interpretation of the facts on the

record. The record shows that we extensively analyzed the information

submitted by the GOQ's, as well as our determinations in prior cases,

in reaching our determination that we should examine the components of

the Agri-Food Agreement as separate programs. Consequently, we reject

the GOQ's argument and reaffirm our position in the preliminary results

of the instant review.

Comment 6: The GOQ states that the Department concluded that the

Technology Innovation component of the Agri-Food Agreement is

countervailable because it is a federal program that is limited to a

single province and, thus, is regionally specific. The GOQ claims,

however, that the statutory provision provides that the determination

of whether a subsidy is regionally specific must be made in relation to

``the jurisdiction of the authority responsible for the subsidy * * *

'' 19 U.S.C. Sec. 1677(5A)(D)(iv). According to the GOQ, Quebec is the

authority responsible for the Basic Research and Technology Innovation

components. Both components are administered on a day-to-day basis

exclusively by Quebec even though the GOC also provides funding for the

program. Quebec is responsible for record keeping, application for

grants, and decisions regarding which projects receive funding.

Consequently, the GOQ states that Quebec, rather than Canada, should be

viewed as the authority responsible for the Basic Research and

Technology Innovation components of Agri-Food. Therefore, the GOQ

argues that neither of the program components are regionally specific

because they are available everywhere in Quebec.

The GOQ claims that because the Technology Innovation component is

not regionally specific, in order to determine specificity the

Department would have to determine whether the component is de jure or

de facto specific. The GOQ argues that the Agri-Food Agreement is not

de jure specific because the agreement provides that its benefits are

available to all sectors of Quebec's agricultural economy, including

food production, processing, storage and marketing. Also, the GOQ

argues that an analysis of the four factors as set forth in section

355.43(b)(2) of the 1989 Proposed Regulations show that the Technology

Innovation component of the Agri-Food Agreement is neither de jure nor

de facto specific. According to the GOQ, actual recipients are not

limited in number, live swine are not a dominant or disproportionate

user of the program, and there is no evidence that the authorities

exercised discretion so as to favor the live swine industry.

The petitioners state that U.S. law and past Department practice

support the decision to treat the Technology Innovation component of

the Agri-Food Agreement as a regionally specific technical assistance

program provided by the Canadian federal government to the designated

geographic region of Quebec. The petitioners contend the Department

examined the separate components of the precursor Agri-Food Agreement

and determined that the federal government's contributions to the

Technology Innovation component were countervailable because it did not

involve research and was limited to the region of Quebec. See Pork

Investigation at 30774, 30779. Thus, the petitioners contend that

because the instant case examines the same program, consistent

application of agency practice requires the Department to treat the

Technology Innovation component of the Agri-Food

[[Page 18096]]

program as a technical assistance subsidy for production aid. Also, the

GOQ is not ultimately responsible for administering the program.

According to the petitioners, the Department verified that while the

GOQ is responsible for administration, the critical issue of funding

lies exclusively within the jurisdiction of the federal government.

Therefore, it is irrelevant whether assistance is available everywhere

in Quebec. The petitioners state that the Department's regional

specificity inquiry in this case has focused correctly on the

availability of Agri-Food assistance vis-a-vis all of Canada, not

within particular provinces. The petitioners also contend that because

the Department has based its countervailability finding on the theory

that the Agri-Food Agreement is regionally specific, a de facto

specificity analysis is irrelevant.

Department's Position: We disagree with the GOQ that the Technology

Innovation program is not specific under section 771(5A)(D)(iv). The

SAA makes clear that this provision codifies the Department's regional

specificity test. It states that `` * * * subsidies provided by a

central government to particular regions (including a province or a

state) are specific regardless of the degree of availability or use

within the region.'' SAA, at 932. Although the Agri-Food Agreement

states that the GOC and the GOQ will each contribute 50 percent of the

total cost of the agreement, Schedule C of the agreement shows the

allocation of those funds to the three programs and clearly shows that

since its inception, the Technology Innovation program has been funded

solely by the federal government. Because the Department found that the

assistance under this program is being provided by the federal

government to industries located within a designated geographical

region of Canada (i.e., Quebec), we determine that the federal

contributions are specific under section 771(5A)(D)(iv), and therefore,

countervailable.

Contrary to the remainder of the GOQ's claim, section

771(5A)(D)(iv) does not require the Department to analyze the

specificity of a subsidy in relation to the authority responsible for

managing the subsidy program. The statutory language explicitly refers

to ``the jurisdiction of the authority providing the subsidy.'' As

discussed above, the record evidence demonstrates that the GOC not the

GOQ provided all funding for the Technology Innovation program during

the POR. Therefore, consistent with the statutory language, we have

examined the specificity language, we have examined the specificity of

the program from the perspective of the GOC as the source of funding.

Because we determine the program to be specific under section

771(5A)(D)(iv), there is no need to conduct a de jure or de facto

specificity analysis.

Comment 7: The GOQ argues that the Department should find that the

Support for Strategic Alliances component of the Agri-Food Agreement is

not countervailable because it funds studies with a view to developing

markets and improving competitiveness, or developing knowledge and

know-how, which is research. The GOQ claims that the research results

under this component are specifically conditioned upon the applicant

making available and disseminating the results of the projects.

Therefore, the results are publicly available. According to the GOQ,

the Department should make a noncountervailable determination in the

instant review so as to avoid wasting resources reinvestigating this

component in future reviews.

Department's Position: We disagree with the GOQ. We reviewed the

Support for Strategic Alliance projects that were outstanding during

the POR, and verified that none were related to live swine. Because the

program was not used during the POR, we did not determine the

countervailability of the program. If we find in a future review that

projects related to live swine have been approved, we will examine the

countervailability of this program.

Comment 8: The GOQ agrees with the Department's preliminary

determination that the Basic Research components of the Agri-Food

Agreement did not confer countervailable benefits on live swine during

the POR. However, the GOQ argues that, because the Department

preliminarily determined that the Basic Research component does not

provide countervailable benefits to live swine, the Department should

not continue to investigate this component in future reviews. Because

the Department found that the Basic Research component was used during

the POR, the Department's determination not to countervail that

component is equivalent to a decision that the Basic Research component

is not countervailable. According to the GOQ, it is well-established

policy that the Department will not reinvestigate programs in future

reviews that did not confer countervailable benefits in prior reviews

absent new evidence or changed circumstances. The GOQ argues that the

Department has abandoned this well established policy in its

preliminary results of this review by announcing in advance that it

will continue to reinvestigate the Basic Research component of the

Agri-Food Agreement.

The GOQ states that the reason the Department gave for potentially

reinvestigating the program was that in the future there might be a

research project the results of which may not be published. However,

the GOQ argues that the Department has verified at least twice that the

results of Agri-Food projects are always published. Should a future

research project not be published, it would constitute a change in the

program and, according to the GOQ, it would be petitioner's burden to

allege a change in the program. The GOQ contends that the Department

cannot keep a noncountervaliable program open to investigation on the

possibility that the program might change. Therefore, the Department

should announce that it will not reinvestigate the program again absent

substantial allegations of a change in the program or evidence that the

results of a completed research program benefitting live swine were not

published.

The petitioners contend that the GOQ is wrong in suggesting that a

decision not to countervail a subsidy program in a particular review

constitutes a de facto finding of noncountervailability. This argument

ignores the fact-based nature of the Department's countervailing duty

inquiry and also entirely overlooks the fact that the Department

frquently delays making a countervailability finding when subsidy

programs are not used. The petitioners assert that the Department

should reject the GOQ's attempts to preclude the Department from

considering the countervailability of the Basic Research component.

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

Department's practice to continue to review those research and

development programs where there is an indication that all results may

not be made publicly avaiable. See e.g., Final Affirmative

Countervailing Duty Determinations: Certain Steel Products from Sweden,

58 FR 37385 (July 9, 1993). In the case of the predecessor Agri-Food

Agreement, we verified in the fourth and seventh administrative reviews

that research results were made publicly available. The instant review

provided the Department with its first opportunity to verify whether

research results are made publicly available under the new Agri-Food

Agreement. However, during the POR, none of the swine related projects

were completed; therefore, it will not be known whether the results of

the research are publicly available until completion of the project.

Also, in the instant case, we verified that under Section 8 of the

Research program

[[Page 18097]]

guidelines participants have the right to patent protection for the

results of the research, if divulging the information will reduce the

commercial value of those results. As a result, we will continue to

examine the countervailability of these research grants in future

reviews and upon completion will determine whether they are

countervailable.

Comment 9: The GOQ argues that the Department should find that the

Agri-Food Agreement was not used during the POR. The GOQ claims that

the Agri-Food Agreement only benefits swine produced in Quebec, and

there is no verified record evidence indicating that swine produced in

Quebec, that are subject to the order, were exported to the United

States during the POR. All market hogs must be sold through the Quebec

Federation of Pork Producers. According to the GOQ, the record shows,

and the Department verified, that no swine sold through the Federation

were exported to the United States during the POR. U.S. import

statistics that show imports from Quebec of 1,795 hogs include

nonsubject merchandise, such as weanlings, sows and boars. Therefore,

the GOQ argues that the Department should determine in its final

results of this review that the Agri-Food Agreement was not used during

the POR.

Department's Position: We disagree with the GOQ. The Department did

not state that there were no exports of subject merchandise from Quebec

to the United States during the POR. Official import statistics,

provided by the GOC, show that Quebec exported 1,795 animals to the

United States during the POR under the HTS numbers that cover live

swine. We were unable to verify that these imports did not include

imports of subject merchandise. Therefore, we have included exports

from Quebec in all appropriate program benefits calculations, except

FISI (see Department's Position on Comment 12 below). As a result, the

Department appropriately examined the Agri-Food Agreement during the

POR.

Comment 10: The CPC argues that the Department should adjust the

cash deposit rate to take into account the program terminations of the

NTSP, the National Transition Scheme for Hogs (Transition Scheme), and

the Saskatchewan Hog Assured Returns Program (SHARP). In the case of

SHARP, the CPC states that the last date producers received benefits

under SHARP was March 31, 1996, and the only other possible benefit

continuing beyond that date is a minor potential liability of $3,124 in

uncashed checks. Thus, they argue that this is a program-wide change

and there is no possibility that measurable benefits of any

significance will continue, therefore, the cash deposit rate should be

adjusted. Second, the CPC claims that the NTSP for Hogs was terminated

as of July 2, 1994, the entire NTSP surplus was distributed in two

fiscal years, 1994/95 and 1995/96, and that no residual benefits may

continue to be bestowed under this terminated program. They also claim

that all payments were made either in fiscal year 1994/95 or in 1995/96

under the Transition Scheme, which was a temporary support program.

Likewise, the CPC argues that these two programs meet the Department's

criteria for a program-wide change qualifying for an adjustment in the

cash deposit rate.

The petitioners state that according to section 355.50(d) of the

Department's 1989 Proposed Regulations, the cash deposit rate should be

adjusted if: (1) the termination of a program constitutes a program-

wide change and (2) no residual benefits can be bestowed under the

terminated program. The petitioners contend that while the three

programs have been terminated, record evidence clearly establishes that

residual benefits may be provided under these programs; therefore, they

do not meet the second condition that is required for a cash deposit

rate adjustment.

With respect to SHARP, the petitioners point out that the final

year in the SHARP three-year allocation period extends beyond the

current review period, meaning that residual benefits will continue to

be distributed to hog producers. In addition, even though there is a

current agreement to use a three-year allocation period for SHARP

benefits, there is no guarantee that this period will not be altered in

the future, thereby allowing residual benefits to continue beyond the

next review period. With respect to NTSP and the Transition Scheme, the

petitioners assert that the record also establishes that residual

benefits will continue past the current review period. Since the CPC

acknowledged that NTSP and Transition Scheme payments will be made in

the next review period, the petitioners state that it would be

premature to modify the cash deposit rate for these two programs.

Also, the petitioners argue that the CPC incorrectly implies that

since benefits under each of the three programs can be accounted for

during either the POR or the subsequent period (1995-1996), the

Department should find that no residual benefits exist. The petitioners

state that there is nothing in section 355.50 to suggest that the

Department should define residual benefits as anything other than

benefits that will be received after an instant proceeding. Also,

according to the petitioners, section 355.50(d) places a much more

stringent burden of proof on respondents, requiring respondents to

prove, with a degree of certainty, that residual benefits will not

continue to be bestowed under a particular program, rather than to

confirm all currently-planned future outlays.

Department's Position: We agree with the CPC. When a program that

provides countervailable benefits has been terminated and all benefits

have ceased to be bestowed prior to the preliminary results of review,

the Department's practice is to adjust the cash deposit rate, unless a

substitute program has been introduced. See e.g., Pasta from Turkey at

30370. The verified record evidence demonstrates that SHARP, NTSP, and

the Transition Scheme were all terminated prior to the preliminary

results of this review. See Preliminary Results at 52428-52429.

With respect to NTSP and the Transition Scheme, the information on

the record for this review demonstrates that all benefits were paid out

from these terminated programs during the 1994/95 and 1995/96 fiscal

years. The last day of the 1995/96 fiscal year is March 31, 1996. We

verified that the NTSP and the Transition Scheme programs paid out all

residual benefits prior to the publication of our October 7, 1996

Preliminary Results. Furthermore, there is no evidence on the record

that any substitute programs have been introduced for the NTSP and the

Transition Scheme. Accordingly, consistent with our practice, we are

adjusting the cash deposit rates for these programs.

With regard to SHARP, the last year of our three-year allocation of

the SHARP deficit corresponds with the 1995/96 fiscal year. We verified

that the only potential residual benefit are a contingent liability for

uncashed checks of $3,124. (Verification Report at page 38). As a

result, we determine that the residual benefit can be added to the

allocated SHARP deficit for the instant review, thus leaving no

residual benefits accruing after October 7, 1996, the date of the

publication of the preliminary results of the instant review.

The Department is satisfied that the verified information described

in the Verification Report and contained in the verification exhibits

demonstrates that there are no residual benefits under these programs.

All cash payments under NTSP and the Transition Scheme were made in

1994/95 and 1995/96. SHARP has a potential liability which

[[Page 18098]]

we have accounted for as discussed above. We disagree with the

petitioners' claim that the Department should define residual benefits

as any benefits received in the subsequent review. Because cash deposit

rates apply to future entries, we adjust the cash deposit rate to zero

only when we are satisfied that no residual benefits from a terminated

program will be paid out subsequent to the issuance of the notice which

establishes the new cash deposit rates. In this case, these conditions

have been met since the three programs were terminated and cannot pay

out residual benefits after the issuance of the Preliminary Results of

this administrative review. Therefore, we are adjusting the cash

deposit rate accordingly.

Comment 11: With respect to FISI, the GOQ argues that the

Department has the discretion to determine that a program it has

investigated is not countervailable, even when the Department concludes

that the program was not used during the POR. The GOQ claims that the

Department has used that discretion in past cases where it has

determined that an investigated program was both unused and

noncountervailable. See e.g., Certain Refrigerator Compressors from the

Republic of Singapore: Final Results of Countervailing Duty

Administrative Review, 61 FR 10315 (March 13, 1996) (Singapore

Compressors). The GOQ argues that the Department should have concluded

that FISI is not used and is not countervailable because the Department

has a complete record, including a verification, showing that FISI is

not countervailable.

The GOQ argues that the Department may not rely upon its decision

in Swine Sixth Review Results in order to find FISI countervailable in

this review or continue to investigate FISI in future reviews. The GOQ

states that three binational panels found FISI to be non-

countervailable. According to the GOQ, a binational panel decision is

the equivalent of a valid and final judgment of a court of competent

jurisdiction for the purpose of applying the doctrine of collateral

estoppel. Since the Department lost the issue of FISI's

countervailability before a binational panel, it is estopped from

claiming that FISI is countervailable in the current review. In any

case, the GOQ argues that the facts on the record in the instant review

demonstrate that FISI is not countervailable based on the number of

users, no dominant/disproportionate use, no GOQ discretion in

conferring benefits, and integral linkage with Crop Insurance.

The petitioners contend that the GOQ's arguments do not rest on new

factual information or evidence of changed circumstances that would

warrant the Department's reexamination of the countervailability of

FISI. Furthermore, the Department rejected the same collateral estoppel

argument made by the GOQ concerning FISI in Swine Seventh, Eighth, and

Ninth Review Results. The petitioners also contend that the GOQ has not

offered any arguments that are responsive to the Department's earlier

finding that FISI was not linked to crop insurance in Swine Seventh,

Eighth and Ninth Review Results.

Department's Position: We disagree with the GOQ. The record

evidence establishes that FISI was not used during the POR for exports

of the subject merchandise to the United States. Therefore, we follow

the Department's practice, which is not to examine the

countervailability of programs that are not used during the POR. See,

e.g., Live Swine from Canada; Final Results of Countervailing Duty

Administrative Reviews (56 FR 10410, 10411; March 12, 1991). For this

reason, all arguments advanced by the GOQ on the non-countervailability

of FISI, including collateral estoppel, are moot.

We disagree with the GOQ's contention that the Department has

exercised its discretion to determine that an investigated program was

both unused and noncountervailable in Singapore Compressors. In

Singapore Compressors, the program referred to by the GOQ did not

provide benefits to the subject merchandise, and we specifically stated

that ``the Department's regulations were not intended to require the

Department to discuss programs which do not apply to subject

merchandise.''

Comment 12: The GOQ states that the Verification Report does not

accurately reflect the effort made by GOQ officials at verification to

demonstrate that FISI and Crop Insurance are integrally linked. The GOQ

contends that its officials proved that Crop Insurance, working

together with FISI, is in fact an income insurance program. The two

insurance systems, FISI and Crop Insurance, are integrally linked to

work together to meet a common objective of providing income insurance.

However, much of this information was not reported in the Verification

Report. The GOQ requests that the Department amend its verification

report to reflect accurately and completely what occurred at

verification in this administrative review.

Department's Position: We disagree with the GOQ. The purpose of

verification is to confirm the accuracy of the information already

submitted on the record. This practice is clearly stated in the

verification outline that the Department provides to the interested

parties before conducting any verifications. During verification, the

GOQ deemed it appropriate to elaborate in great detail on generic

statements made in the response with respect to linkage. If this

information had been provided in the GOQ's questionnaire responses, the

Department might have issued a supplemental questionnaire and would

have checked at verification on the accuracy of this previously

submitted material. In this instance, however, the argumentation and

documentation presented at verification clearly went beyond what had

been stated and documented in the response. Verification is not

intended to be an opportunity for respondents to argue their position,

nor is it intended to be an opportunity for submission of new factual

information, as stated in our verification outline.

Furthermore, in this case, the record evidence establishes, and the

Verification Report documents, that the FISI program was not used

during the POR for exports of the subject merchandise to the United

States. Therefore, consistent with the Department's practice, we do not

examine the countervailability, and therefore integral linkage, of

programs that are not used in the POR by producers of the subject

merchandise (See Department's Position on Comment 11). As a result, the

issue of amending the Verification Report is moot as FISI was not used

during the POR.

Comment 13: The petitioners contend that the Department partially

relied on a finding that Quebec did not export live swine during the

POR as a basis for concluding that the FISI program was not used during

the POR. However, the petitioners state that review of the record

evidence shows that the two Canadian Government agencies responsible

for reporting Quebec export data have provided contradictory responses.

The GOQ identified Quebec as a province that exported 1,795 hogs to the

United States during the POR. Quebec, however, provided data suggesting

that no live swine were exported to the United States during the POR.

Since the Department has been unable to solve this discrepancy,

according to the petitioners, the record does not support the

conclusion that Quebec did not export live swine. Where a respondent

has submitted data that is contradictory, the Department routinely

makes assumptions about these data that are unfavorable to

[[Page 18099]]

respondents. The petitioners conclude that, under these circumstances,

the Department should assume that Quebec exported live swine to the

United States during the POR for purposes of analyzing the FISI

program.

The GOQ and the CPC argue that, contrary to the petitioners'

assertion, the Department's determination was not based upon a finding

that there were no exports of live swine from Quebec during the POR;

the determination was based on finding that FISI could not have

benefited any live swine that might have been exported to the United

States during the POR. The GOQ and the CPC state that the Department

verified that all market hogs that could have benefited from FISI

payments were sold to abattoirs in Canada. Therefore, the Department

correctly found the FISHI could not have benefited any subject

merchandise that might have been exported to the United States during

the POR.

Department's Position: We disagree with the petitioners. The

Department verified that all hogs receiving FISI payments during the

POR were slaughtered in Canada. See Verification Report at page 32. As

such, no live swine exported from Quebec received FISI payments.

Accordingly, we determined that this program was not used. However, we

also verified that there were exports of live swine from Quebec. As

such, for those programs where assistance was provided during the POR

to all live swine in Quebec, we properly calculated a subsidy rate for

the POR. (See Memorandum to the File from Team A regarding the Farm

Income Stabilization Program dated September 25, 1996, which is on file

in the CRU.)

Final Results of Review

For the period April 1, 1994 through March 31, 1995, we determine

the total net subsidy on live swine from Canada to be Can$0.0098 per

kilogram.

The Department will instruct the U.S. Customs Service to assess

countervailing duties of Can$0.0098 per kilogram on shipments of live

swine from Canada exported on or after April 1, 1994 and on or before

March 31, 1995.

The cash deposit is Can$0.0013 per kilogram, which is de minimis.

Accordingly, the Department will also instruct the U.S. Customs Service

to waive cash deposits on shipments of all live swine from Canada

entered, or withdrawn from warehouse, for consumption on or after the

date of publication of this notice. The cash deposit rate is different

than the assessment rate because, as explained above, we have taken

into account program-wide changes in calculating the cash deposit rate

(see Pasta from Turkey).

This notice serves as a reminder to parties subject to

administrative protective order (APO) of their responsibility

concerning the disposition of proprietary information disclosed under

APO in accordance with 19 CFR 355.34(d). Timely written notification of

return/destruction of APO materials or conversion to judicial

protective order is hereby requested. Failure to comply with the

regulations and the terms of an APO is a sanctionable violation.

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: April 7, 1997.

Robert S. LaRussa,

Acting Assistant Secretary for Import Administration.

[FR Doc. 97-9551 Filed 4-11-97; 8:45 am]

BILLING CODE 3510-DS-M