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

DEPARTMENT OF COMMERCE

International Trade Administration

[C-122-404]

Live Swine from Canada; Final Results of Countervailing Duty

Administrative Review

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

ACTION: Notice of final results of countervailing duty administrative

review.

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SUMMARY: On April 30, 1998, 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, 1996 through March 31, 1997 (63 FR

23723). 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, please see the Final Results of

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

Service (``Customs'') to assess countervailing duties as detailed in

the Final Results of Review section of this notice.

EFFECTIVE DATE: September 4, 1998.

FOR FURTHER INFORMATION CONTACT: Gayle Longest or Lorenza Olivas,

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

The Department has determined that it is not practicable to conduct

a company-specific review of this order because of the large number of

producers and exporters which requested the review. Therefore, pursuant

to section 777A(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 covers 27 programs.

Since the publication of the preliminary results on April 30, 1998

(63 FR 23723), the following events have occurred. We invited

interested parties to comment on the preliminary results. On June 10,

1998, case briefs were submitted by the Government of Quebec (``GOQ''),

and the National Pork Producers Council (``petitioner''). On June 17,

1998, rebuttal briefs were submitted by the Government of Canada

(``GOC''), GOQ, and the Canadian Pork Council (``CPC''). At the request

of the GOQ, the Department held a public hearing on July 9, 1998.

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. In addition, unless

otherwise indicated, all citations to the Department's regulations are

to the regulations codified at 19 CFR Part 351, published in the

Federal Register at 62 FR 27296 (May 19, 1997).

Scope of the Review

The merchandise covered by this order is live swine, except U.S.

Department of Agriculture (``USDA'') certified purebred breeding swine,

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

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

to the order is classifiable under 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 of the scope remains dispositive.

Allocation Methodology

In the past, the Department has relied on information from the U.S.

Internal Revenue Service (``IRS'') on the industry-specific average

useful life of assets in determining the allocation period for

nonrecurring grant benefits. See General Issues Appendix appended to

the Final Countervailing Duty Determination; Certain Steel Products

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

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

Steel), the U.S. Court of International Trade (``the Court'') ruled

against this allocation methodology. In accordance with the Court's

remand order, the Department calculated a company-specific allocation

period for nonrecurring subsidies based on the average useful life

(``AUL'') of non-renewable physical assets. This remand determination

was affirmed by the Court on June 4, 1996. See British Steel, 929 F.

Supp. 426, 439 (CIT 1996).

The Department has not appealed the Court's decision and, we intend

to determine the allocation period for nonrecurring subsidies using

company-specific AUL data where reasonable and practicable. In Live

Swine from Canada; Preliminary Results of Countervailing Duty

Administrative Review (62 FR 52426; October 7, 1996) and Live Swine

from Canada; Final Results of Countervailing Duty Administrative Review

(62 FR 18087; April 14, 1997) (Swine Tenth Review Results), the

Department determined that it is not reasonable and practicable to

allocate nonrecurring subsidies using company-specific AUL data because

it is not possible to apply a company-specific AUL in an aggregate case

(such as the case at hand). Accordingly, in this review, the Department

has continued to use as the allocation period the average useful life

of depreciable assets used in the swine industry, as set forth in the

U.S. IRS Class Life Asset Depreciation Range System (see Swine Tenth

Review Results), which is a period of three years.

The GOQ submitted a comment on the allocation period. The GOQ

agreed with the Department that the IRS tax tables are appropriate for

allocating nonrecurring grants in this review. However, because better

sources of information may be available in future reviews of this case,

the GOQ argues that the Department should accept suggestions from

interested parties in future reviews regarding more appropriate sources

to calculate the allocation period. In future reviews, the Department

will allow interested parties to submit information and comment on any

other reasonable and practicable approaches for complying with the

Court's ruling with respect to the appropriate allocation period.

Analysis of Programs

Based upon the responses to our questionnaire, and written comments

from the interested parties, we determine the following:

I. Programs Conferring Subsidies

In the preliminary results, we found that the following programs

conferred countervailable benefits on the subject merchandise. We did

not receive any comments on these programs from the interested parties,

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

calculations. Accordingly, the net subsidies for each of these

[[Page 47236]]

programs (less than Can$0.0001 per kilogram, except for the National

Transition Scheme for Hogs Program, which is Can$0.0041 per kilogram),

remain unchanged from the preliminary results.

1. National Transition Scheme for Hogs Program

2. Alberta Crow Benefit Offset Program (ACBOP)

3. Ontario Livestock and Poultry and Honeybee Compensation Program

4. Saskatchewan Livestock Investment Tax Credit

5. Saskatchewan Livestock Facilities Tax Credit

6. New Brunswick Livestock Incentives Program

7. New Brunswick Swine Industry Financial Restructuring and

Agricultural Development Act--Swine Assistance Program

II. Programs Found Not To Confer Subsidies

In the preliminary results, we found the following 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.

1. Research Program under the Canada/Quebec Subsidiary Agreement on

Agri-Food Development

III. Programs Found To Be Not Used

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

exporters of the subject merchandise did not apply for or receive

benefits under the following programs:

1. Western Diversification Program

2. Farm Income Stabilization Insurance

3. Federal Atlantic Livestock Feed Initiative

4. Agricultural Products Board Program

5. Newfoundland Farm Products Corporation Hog Price Support Program

6. Newfoundland Hog Price Stabilization Program

7. Newfoundland Weanling Bonus Incentive Policy

8. Nova Scotia Improve Sire Policy

9. Ontario Bear Damage to Livestock Compensation Program

10. Ontario Rabies Indemnification Program

11. Ontario Swine Sales Assistance Policy

We did not receive any comments on these programs from the

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

change our findings from the preliminary results.

IV. Programs Found To Be Terminated

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

terminated and that no residual benefits were being provided. Our

analysis of the comments submitted by the interested parties,

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

preliminary results.

1. New Brunswick Swine Assistance Policy on Boars

2. Ontario Export Sales Aid

V. Other Programs Examined

On November 17, 1997, the GOC and the GOQ requested ``green box''

treatment for the Agri-Food Agreement. Under section 771(5B)(F) of the

Act, domestic support measures provided with respect to the

agricultural products listed in Annex 1 to the 1994 WTO Agreement on

Agriculture shall be treated as noncountervailable if the Department

determines that the measures conform fully with the provisions of Annex

2 of that same Agreement. The GOQ and the GOC claimed that the Agri-

Food Agreement met these criteria, and therefore, funding under the

Agri-Food Agreement should be noncountervailable pursuant to section

771(5B)(F) of the Act.

The initial Agri-Food Agreement was signed on February 17, 1987 and

remained in effect from 1987 to 1991. On August 26, 1993, a new Agri-

Food Agreement was enacted by the governments of Canada and Quebec

covering the period April 1, 1993 through March 31, 1998. Funding for

this agreement is shared 50/50 by the federal and provincial

governments. Through this Agreement, grants are made to private

businesses and academic organizations to fund projects under the

following program areas: (1) Research, (2) Technology Innovations, and

(3) Support for Strategic Alliances.

The Department has previously examined each of the three components

under the Agri-Food Agreement (Research, Technology Innovation, and

Support for Strategic Alliances) as three separate programs. See Swine

Tenth Review Results. During the POR, producers of the subject

merchandise received assistance under the three component programs of

the Agri-Food Agreement for which the GOC and the GOQ have requested

green box treatment.

Specifically, with regard to the Research program, we have

determined that this program does not confer countervailable benefits

because the results of the research are publicly available. As such,

there is no need to address whether it is non-countervailable in the

context of section 771(5B)(F) of the Act. With regard to the Technology

Innovations program and the Support for Strategic Alliances program,

any benefit to the subject merchandise under either program or both

programs combined is so small (Can$ 0.0000013 and Can$ 0.0000008 per

kilogram, respectively) that there is no cumulative impact on the

overall subsidy rate. Accordingly, because there is no impact on the

overall subsidy rate in the instant review, we have not included the

benefits from Technology Innovations program and the Support for

Strategic Alliances program in the calculated subsidy rate for the POR,

and do not consider it necessary to address the issue of whether

benefits under these programs are noncountervailable as green box

subsidies pursuant to section 771(5B)(F) of the Act. See, e.g., Final

Affirmative Countervailing Duty Determination: Steel Wire Rod from

Germany, 62 FR 54990, 54995 (October 22, 1997); Certain Carbon Steel

Products from Sweden; Preliminary Results of Countervailing Duty

Administrative Review, 61 FR 64062, 64065 ( December 3, 1996) and

Certain Carbon Steel Products from Sweden; Final Results of

Countervailing Duty Administrative Review, 62 FR 16549 (April 7, 1997);

Final Negative Countervailing Duty Determination: Certain Laminated

Hardwood Trailer Flooring (``LHF'') From Canada, 62 FR 5201 (February

4, 1997); Industrial Phosphoric Acid From Israel; Preliminary Results

of Countervailing Duty Administrative Review, 61 FR 28845 (June 6,

1996) and Industrial Phosphoric Acid From Israel; Final Results of

Countervailing Duty Administrative Review, 61 FR 53351 (October 11,

1996).

In addition, some farmers in Prince Edward Island received payments

during the POR under the Agricultural Disaster Insurance Program

(ADIP), which is authorized under section 12(5) of the Farm Income

Protection Act (FIPA) and a provincial statute. The GOC stated that

this program was designed to meet the ``green box'' criteria under the

1994 WTO Agreement on Agriculture. With regard to the ADIP program, any

benefit to the subject merchandise under this program is so small (Can$

0.0000081 per kilogram) that there is no impact on the overall subsidy

rate, even when taking into account the assistance provided under the

Technology Innovations program and the Support for Strategic Alliances

program. In other words, when the benefits from the Technology

Innovations program, the Support for Strategic Alliances program and

the

[[Page 47237]]

ADIP program are summed, the aggregate benefit from these three

programs has no impact on the overall subsidy rate. Accordingly,

because there is no impact on the overall subsidy rate in the instant

review, we have not included the benefits from ADIP in the calculated

subsidy rate for the POR, and do not consider it necessary to address

the issue of whether benefits under this program are countervailable in

this review.

Analysis of Comments

Comment 1: Treatment of the Ontario Export Sales Aid Program--

Termination

According to the petitioners, the Ontario Export Sales Aid Program

should not be treated as a terminated program. The petitioners cite

section 355.50(b)(2) of the Department's 1989 Proposed Regulations and

claim that it is the Department's practice not to recognize a subsidy

program as terminated unless there is an official law, decree, or

regulation that has been enacted that terminates the program. (See

Notice of Proposed Rulemaking and Request for Public Comment, May 31,

1989). In addition, the petitioners cite various cases and assert that

the Department has only treated programs as terminated when the

respondent has presented evidence of the termination with official

documentation and, if possible, when the Department has verified that

the program was actually terminated.

The petitioners contend that with respect to the Ontario Export

Sales Aid program, the evidence on the record does not meet the

standard for this program to be treated as a terminated program.

According to petitioners, the only document on the record pertaining to

this program, the ``Background Document'' issued by the Ontario

Ministry of Economic Development, Trade and Tourism, is insufficient to

support the conclusion that the Export Sales Aid program is terminated

for purposes of this review, because this document only establishes

that the program is being eliminated and does not reflect the official

legal status of the program.

The petitioners further argue that the Department's treatment of

the Ontario Export Sales Aid program is not consistent with its

treatment of the Farm Products Board Hog Price Stabilization Program

which has a similar status but the Department treated as not used. The

petitioners maintain that the Government of the Province of

Newfoundland submitted a budget document issued by the Newfoundland

Ministry of Finance that clearly shows that subsidies under the Hog

Price Stabilization Program had been ``eliminated'' and that this

documentation is of a similar nature to the documentation presented

with regard to the Ontario program. Therefore, to be consistent with

the record evidence and with other findings in this review, the

petitioners argue that the Department should revise its finding with

respect to the Ontario Export Sales Aid program and find the program to

be not used in these final results.

In rebuttal, the GOQ and the CPC argue that the Department's

determination that the Ontario Export Sales Aid program was terminated

is correct. The GOQ asserts that the petitioners have not cited any

facts to dispute the Department's finding that the program was

terminated. Moreover, the CPC claims that the documentation on the

record provided by the Government of Ontario supports the decision and

cites Live Swine from Canada; Preliminary Results of Administrative

Review, 62 FR 47460 (September 9, 1997) and Live Swine from Canada;

Final Results of Administrative Review, 63 FR 2204 (January 14, 1998)

(Swine Eleventh Review Results) in which the Department made a

determination that the Hog Price Stabilization program was terminated

based on an announcement from the Government of Prince Edward Island's

Department of Agriculture. The CPC also cites Swine Tenth Review

Results in which the Department found the Livestock and Beeyard Damage

Compensation Program terminated based on the Government of Alberta's

submission of a memorandum from the program's administrator regarding

the program's termination. The CPC asserts that the petitioners did not

contest either of these determinations.

Furthermore, the CPC argues that these examples show that the

Department has never articulated a blanket rule requiring an official

law, decree or regulation before finding a program terminated. The CPC

argues that when a provincial program is of a limited size and involves

a limited number of users, the termination of the program may be

carried out administratively without the passage of a separate law. In

these cases, the CPC argues, if the Department were to require an

official law, these programs, which are terminated and providing no

benefits, would be reinvestigated year after year because their

termination had been accomplished by means other than an official law.

The GOQ and the CPC contend that the result would be a burden on the

Department to continue investigating terminated programs that were

providing no benefits. Therefore, the GOQ and the CPC assert, that the

Department's preliminary findings that the Ontario Export Sales Aid

program is terminated is correct and should be maintained in these

final results.

Department's Position: The Department's practice is to treat a

program as terminated when the respondent presents satisfactory

documentation to demonstrate that the program is terminated and not

merely suspended. See e.g., Final Affirmative Countervailing Duty

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

1996); Certain Iron-Metal Castings from India; Final Results of

Administrative Review, 60 FR 44843, 44844 (August 29, 1995). In this

instance, the GOC submitted official documentation from the Ontario

Ministry of Economic Development demonstrating that the Export Sales

Aid program has terminated as a consequence of a provincial-wide

initiative to eliminate certain forms of direct monetary assistance to

Ontario businesses. Because this official report was prepared by the

authority responsible for administering the subsidy program, we are

satisfied that the Export Sales Aid program was terminated on March 31,

1996 and not merely suspended. Therefore, our determination that the

Ontario Export Sales Aid program is terminated remains unchanged in

these final results.

In the case of Newfoundland's Farm Products Board Hog Price

Stabilization program, there were no exports of the subject merchandise

from Newfoundland during the POR. Therefore, we did not find it

necessary to make a finding regarding the termination of this program

during the POR.

Comment 2: Green Box Claim

The petitioners assert that, although the Department did not

address the countervailability of two components of the Agri-Food

Agreement and the Agricultural Disaster Insurance Program (ADIP), these

programs are providing potentially countervailable benefits to live

swine producers. The petitioners contend that because these benefits

could increase in the future, the Department should treat the ADIP

program and these Agri-Food programs as not used to preserve the

Department's ability to address the countervailability of these

programs should the level of benefits increase in subsequent reviews.

Department's Position: The Department's practice is to treat

programs under which producers of the subject merchandise receive no

[[Page 47238]]

assistance during the POR as not used. (See Swine Eleventh Review

Results). During this POR, producers of live swine received benefits

under the Technology Innovations and Support for Strategic Alliances

programs under the Canada/Quebec Subsidiary Agreement on Agri-Food

Development and the ADIP program. Therefore, treating these programs as

``not used'' would be inconsistent with our longstanding practice. We

note, however, that we will continue to examine these programs in

future reviews.

Comment 3: The Countervailability of Benefits under the Research

Program Under the Canada/Quebec Subsidiary Agreement on Agri-Food

Development

The petitioners assert that the Department should not rely upon the

public availability test as the basis for finding that the Research

program under the Canada/Quebec Subsidiary Agreement on Agri-Food

Development (``Research program'') is noncountervailable. The

petitioners point out that under the URAA, the countervailability of

research subsidies are analyzed under the ``green light'' provision,

and thus, the public availability test is outdated.

The petitioners further argue that during this proceeding neither

the GOC nor the GOQ has shown that the projects carried out under the

Research program satisfy the criteria for noncountervailability. The

petitioners contend that the public availability test is no longer

sufficient to avoid a finding of noncountervailablity for research

subsidies. Therefore, the petitioners argue that the Research program

can only satisfy the test for noncountervailability if it meets all of

the statutory green light criteria.

In rebuttal, the GOC and CPC contend that the petitioners'

arguments that the Research program should be examined under the green

light provisions are untimely. The GOC maintains that the Department's

policy since 1995, which is applied in this review, requires a

submission of ``green'' claims much sooner than the case brief stage.

The GOC and CPC contend that the questionnaire in the instant review

instructed respondents to make green light or green box claims within

two weeks. Moreover, the GOC and the CPC argue that petitioners had

ample time to make this claim which is extraordinarily untimely at the

case brief stage. The GOC cites several cases in which the Department

rejected allegations that were not raised until the case briefs. The

GOC and the CPC assert that the Department is not required to address

petitioners' green light claim at this late stage in the preceding.

The GOC also contends that even if the petitioners' green light

claim was timely, petitioners' arguments reflect analytical errors. In

rebuttal to petitioners' claim that the public availability test is

outmoded, the GOC, GOQ, and the CPC argue that the public availability

test is still U.S. law and administrative practice. The GOC and GOQ

maintain that there is nothing in the WTO agreements or U.S.

implementing legislation that repeals the Department's practice of

using the public availability test or preempts its application and

cites several cases in which the Department has applied the public

availability test under post-WTO cases. Although the Department's

proposed regulations omit the prior proposed regulation on public

availability, the GOC and the GOQ argue that no final regulations have

been issued that actually change the policy.

Furthermore, the GOQ maintains that the Department has found the

Research program noncountervailable in eight previous administrative

reviews and should no longer examine this program in future reviews.

The GOQ argues that in the Delverde case, the Department's practice not

to initiate investigations on programs previously found not to be

countervailable was affirmed, citing Delverde v. United States, No. 96-

08-01997, Slip Op. at 10 (CIT December 1, 1997). As an example of the

Department's practice, the GOQ cites the investigation in Fresh,

Chilled, and Frozen Pork from Canada, in which the Department did not

initiate on several programs previously found not to be countervailable

in an administrative review on live swine from Canada. (See Initiation

of the Countervailing Duty Investigation; Fresh, Chilled, and Frozen

Pork from Canada, 54 FR 5537 (February 3, 1989)). In addition, the GOC,

GOQ, and the CPC argue that the petitioner has provided no new

information or evidence of changed circumstances requiring the

Department to reconsider its analysis of the Research program during

the POR. Therefore, the GOC, GOQ, and CPC assert that the Department

should maintain its determination that the Research program is

noncountervailable in these final results.

Department's Position: We disagree with the petitioners that we

must analyze the Research program under the green light provisions.

Unless parties make a timely green light claim, the Department does not

examine whether a program meets the green light criteria for

noncountervailability. Absent such a claim, we followed our standard

practice for determining whether this program was countervailable. (See

Swine Eleventh Review Results, 62 FR 47460 at 47469 (September 9,

1997)).

However, we disagree with the GOQ's assertion that the Research

program does not warrant reexamination in future reviews. The

Department's current practice with regard to research and development

programs is that research results must be publicly available with no

restrictions. The standard contracts under the Research program contain

a patent clause authorizing non-disclosure of research results with

commercial value. As we explained in Swine Eleventh Review Results, the

ability to restrict disclosure of research results requires a

determination on the public availability of research results until

projects are completed. (See 63 FR 2204, at 2207 (January 14, 1998)).

Accordingly, we will continue to examine the Research program in future

reviews.

Final Results of Review

For the period April 1, 1996 through March 31, 1997, we determine

the net subsidy for live swine from Canada to be Can$0.0041 per

kilogram. This rate is de minimis.

We will instruct Customs to liquidate without regard to

countervailing duties all shipments of the subject merchandise from

Canada exported on or after April 1, 1996, and on or before March 31,

1997. The Department will also instruct Customs to waive cash deposits

on all shipments of live swine from Canada entered, or withdrawn from

warehouse, for consumption on or after the date of publication of the

final results of this review.

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 Sec. 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 issued and published in

accordance with section 751(a)(1) and 777(i)(1) of the Act (19 U.S.C.

1675(a)(1)).

Joseph A. Spetrini,

Acting Assistant Secretary for Import Administration.

[FR Doc. 98-23929 Filed 9-3-98; 8:45 am]

BILLING CODE 3510-DS-P