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 September 9, 1997, the Department of Commerce published in

the Federal Register its preliminary results of administrative review

of the countervailing duty order on live swine from Canada for the

period April 1, 1995 through March 31, 1996 (62 FR 47460). The

Department has now completed that administrative review in accordance

with section 751(a) of the Tariff Act. For information on the net

subsidy, please see the Final Results of Review section of this notice.

We will instruct the Customs Service to assess countervailing duties as

detailed in the Final Results of Review section of this notice.

EFFECTIVE DATE: January 14, 1998.

FOR FURTHER INFORMATION CONTACT: Rick Herring or Gayle Longest, Office

of CVD/AD Enforcement 6, Import Administration, International Trade

Administration, U.S. Department of Commerce, 14th Street and

Constitution Avenue, N.W., Washington, D.C. 20230; telephone: (202)

482-2786.

SUPPLEMENTARY INFORMATION:

Applicable Statute and Regulations

Unless otherwise indicated, all citations to the statute are

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

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

Act). In addition, unless otherwise indicated, all citations to the

Department's regulations are to the regulations codified at 19 CFR

Sec. 355 (1997). The Department has conducted this administrative

review in accordance with section 751(a) of the Act.

Background

Pursuant to 19 CFR Sec. 355.22(a), this review should cover only

those producers and/or exporters of the subject merchandise for which a

review was specifically requested. However, as explained in the

preliminary results, the Department of Commerce (the Department) has

determined that it is not practicable to conduct a company-specific

review of this order due to the large number of producers and/or

exporters that requested a review. See Live Swine from Canada;

Preliminary Results of Countervailing Duty Administrative Review, 62 FR

47469 (September 9, 1997) (preliminary results). Therefore, pursuant to

section 777(e)(2)(B) of the Act, we are conducting a review of all

producers and/or exporters of subject merchandise covered by this order

on the basis of aggregate data. This review covers the period April 1,

1995, through March 31, 1996, and 31 programs.

Since the publication of the preliminary results on September 9,

1997, the following events have occurred. We invited interested parties

to comment on the preliminary results. On October 23, 1997, the

Government of Canada (GOC), the Government of Quebec (GOQ), and the

Canadian Pork Council (CPC) (respondents) submitted case briefs. On

October 30, 1997, the National Pork Producers Council (petitioner)

submitted a rebuttal brief. We requested a revised brief from the GOQ

because the initial case brief contained untimely new factual

information. See Letter from Barbara E. Tillman to Pepper, Hamilton and

Scheetz dated November 4, 1997 (public document on file in the Central

Records Unit, Room B-099 of the Main Commerce Building). See also 19

CFR Sec. 355.31(a)(1)(ii). The Department has not considered the

returned new factual information for these final results of review. See

19 CFR Sec. 355.3(a). On November 7, 1997, the GOQ submitted a revised

case brief. The comments addressed in this notice are those presented

in the revised case brief. At the request of the respondents, the

Department held a public hearing on November 17, 1997.

Scope of the Review

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

Department of Agriculture certified purebred breeding swine, slaughter

sows and boars, and weanlings (weanlings are swine weighing up to 27

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

order is classifiable under Harmonized Tariff Schedule (HTS) item

numbers 0103.91.00 and 0103.92.00. The HTS item numbers are provided

for convenience and customs purposes. The written description of the

scope remains dispositive.

Verification

We verified information provided by the GOC and the GOQ related to

their claim, pursuant to section 771(5B)(F) of the Act, for ``green

box'' treatment of the programs covered by the Canada/Quebec Subsidiary

Agreement on Agri-Food Development (Agri-Food Agreement). We followed

standard verification procedures, including meeting with government

officials, and examining relevant accounting and original source

documents. Our verification results are outlined in the public version

of the verification report, which is on file in the Central Records

Unit.

Allocation Methodology

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

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

life of assets in determining the allocation period for nonrecurring

grant benefits. See General Issues Appendix appended to Final

Countervailing Duty Determination; Certain Steel Products from Austria,

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

United States, 879 F. Supp. 1254 (CIT 1995) (British Steel), the U.S.

Court of International Trade (the Court) ruled against this allocation

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

Department calculated a company-specific allocation period for

nonrecurring subsidies based on the average useful life (AUL) of non-

renewable physical assets. This remand determination was affirmed by

the Court on June 4, 1996. See British Steel, 929 F. Supp. 426, 439

(CIT 1996).

The Department has not appealed the Court's decision and, as such,

we intend to determine the allocation period for nonrecurring subsidies

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

Live Swine from Canada; Preliminary Results of Countervailing Duty

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

from Canada; Final Results of Countervailing Duty Administrative

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

Department determined that it is not reasonable or practicable to

allocate nonrecurring subsidies using company-specific AUL data because

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

(such as the

[[Page 2205]]

case at hand). Accordingly, in this review, the Department has

continued to use, as the allocation period, the average useful life of

depreciable assets for the swine industry, as set forth in the U.S. IRS

Class Life Asset Depreciation Range System. See Swine Tenth Review

Results. We invited interested parties to comment on the selection of

this methodology and to provide any other reasonable and practicable

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

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

not feasible to allocate nonrecurring grants using company-specific

data in aggregate cases, and the IRS tax tables are appropriate for

allocating nonrecurring grants in this review.

Calculation Methodology for Assessment and Cash Deposit Purposes

For the period of review (POR), we calculated the net subsidy on a

country-wide basis by determining the subsidy rate for each program

subject to the administrative review in the following manner. We first

calculated the subsidy rate on a province-by-province basis; we then

weight-averaged the rate received by each province using the province's

share of total Canadian exports to the United States of market hogs. We

then summed the individual provinces' weight-averaged rates to

determine the subsidy rate of each program. To obtain the country-wide

rate, we then summed the subsidy rates from all programs.

Analysis of Programs

I. Programs Conferring Subsidies

Based upon the responses to our questionnaires, the results of

verification, and written comments from the interested parties we

determine the following:

Programs Previously Determined to Confer Subsidies

In the preliminary results, we found that the following programs

conferred countervailable benefits on the subject merchandise. We did

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

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

calculations. Accordingly, the net subsidy for each of these programs

(less than Can$0.0001 per kilogram, except for the Saskatchewan Hog

Assured Returns Program, which is Can$0.0015 per kilogram), remains

unchanged from the preliminary results.

1. Feed Freight Assistance Program

2. Saskatchewan Hog Assured Returns Program (SHARP)

3. Alberta Crow Benefit Offset Program (ACBOP)

4. Ontario Livestock and Poultry and Honeybee Compensation Program

5. Saskatchewan Livestock Investment Tax Credit

6. Saskatchewan Livestock Facilities Tax Credit

7. Ontario Bear Damage to Livestock Compensation Program

8. New Brunswick Livestock Incentives Program

9. New Brunswick Swine Industry Financial Restructuring and

Agricultural Development Act--Swine Assistance Program

10. New Brunswick Swine Assistance Policy on Boars

11. Nova Scotia Improved Sire Policy

12. Nova Scotia Swine Herd Health Policy

In the preliminary results, we also found the following programs

conferred countervailable benefits on the subject merchandise. Our

review of the record and our analysis of the comments submitted by the

interested parties summarized below, have led us to modify our

calculation methodology from the preliminary results for the following

three programs:

13. National Tripartite Stabilization Program for Hogs (NTSP)

We have changed the methodology to calculate the benefit resulting

from the distribution of the surplus after the termination of this

program. This methodological change is discussed in the Department's

Position on Comment 9, below. As a result of this change, the net

subsidy for this program is now less than Can$0.0001 per kilogram.

14. National Transition Scheme for Hogs

We have changed the calculation methodology for this program as

discussed in the Department's Position on Comment 9, below. As a result

of this change, the net subsidy for this program is now Can$0.0047 per

kilogram.

15. Quebec Farm Income Stabilization Insurance Program (FISI)

We have changed the calculation methodology for this program as

discussed in the Department's Position on Comment 6, below. As a result

of this change, the net subsidy for this program is now Can$0.0008 per

kilogram.

II. Programs Found Not To Confer Subsidies

In the preliminary results, we found that this program did not

confer countervailable benefits during the POR. Our analysis of the

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

led us to change our findings from the preliminary results.

1. Research Program Under the Canada/Quebec Agri-Food Agreement

III. Programs Found To Be Not Used

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

exporters of the subject merchandise did not apply for or receive

benefits under the following programs:

1. Western Diversification Program

2. Federal Atlantic Livestock Feed Initiative

3. Agricultural Products Board Program

4. Ontario Export Sales Aid Program

5. Ontario Rabies Indemnification Program

6. Ontario Swine Sales Assistance Policy

7. Newfoundland Hog Price Support

8. Newfoundland Weanling Bonus Incentive Policy

9. Newfoundland Hog Price Stabilization Program

We did not receive any comments on these programs from the

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

change our findings from the preliminary results.

IV. Programs Found To Be Terminated

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

terminated and that no residual benefits were being provided. We

received no comments on our preliminary results with respect to these

programs, and our findings remain unchanged in these final results.

1. Prince Edward Island Hog Price Stabilization Program

2. Canada/British Columbia Agri-Food Regional Development Subsidiary

Agreement

3. Canada/Manitoba Agri-Food Development Agreement

4. New Brunswick Agricultural Development Act-Swine Assistance Program

V. Other Programs Examined

On November 5, 1996, the GOQ made a submission, pursuant to section

771(5B)(F) of the Act, claiming that the Agri-Food Agreement met the

criteria for ``green box'' treatment under Annex 2 of the Agreement on

Agriculture of the World Trade Organization (WTO). On January 21, 1997,

the GOQ indicated that the GOC also supported the green box claim.

Under section 771(5B)(F) of the Act, domestic support measures

provided with respect to the agricultural products listed in Annex 1 to

the 1994 WTO Agreement on Agriculture shall be treated as

noncountervailable if the Department determines that the measures

conform fully with the provisions of Annex 2 to the same

[[Page 2206]]

agreement. Accordingly, the GOQ and the GOC posited that funding under

the Agri-Food Agreement should be noncountervailable pursuant to

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

During the POR, producers of the subject merchandise received

assistance under the three component programs of the Agri-Food

Agreement for which the GOC and the GOQ have requested green box

treatment: (1) Research, (2) Technology Innovations, and (3) Support

for Strategic Alliances.

Specifically, with regard to the Research program under the Agri-

Food Agreement, as discussed above in section II, we have determined

that this program does not confer countervailable benefits because the

results of the research are publicly available. See e.g., Certain

Carbon Steel Products from Sweden; Preliminary Results of

Countervailing Duty Administrative Review, 60 FR 44014 (August 24,

1995) and Certain Carbon Steel Products From Sweden; Final Results of

Countervailing Duty Administrative Review, 61 FR 5378 (February 12,

1996). As such, there is no need to address whether benefits provided

under the Research program are noncountervailable in the context of

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

Innovations program and the Support for Strategic Alliances program,

any benefit to the subject merchandise under either program would be so

small (Can$0.00000045 and Can$0.00000055 per kilogram, respectively)

that there would be no impact on the overall subsidy rate. Accordingly,

because there is no change to the overall subsidy rate in the instant

review, we have not included the benefits from TI and SSA in the

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

to address the issue of whether benefits under these programs are

noncountervailable as green box subsidies pursuant to section

771(5B)(F) of the Act. See, e.g., Final Affirmative Countervailing Duty

Determination: Steel Wire Rod from Germany, 62 FR 54990, 54995 (October

22, 1997); Certain Carbon Steel Products from Sweden; Preliminary

Results of Countervailing Duty Administrative Review, 61 FR 64062,

64065 (December 3, 1996); Certain Carbon Steel Products from Sweden;

Final Results of Countervailing Duty Administrative Review, 62 FR 16549

(April 7, 1997) (Certain Steel from Sweden); Final Negative

Countervailing Duty Determination: Certain Laminated Hardwood Trailer

Flooring (LHF) from Canada, 62 FR 5201 (February 4, 1997); Industrial

Phosphoric Acid from Israel; Preliminary Results of Countervailing Duty

Administrative Review, 61 FR 28845 (June 6, 1996); and Industrial

Phosphoric Acid from Israel; Final Results of Countervailing Duty

Administrative Review, 61 FR 53351 (October 11, 1996) (IPA from

Israel).

Analysis of Comments

Comment 1: Green Box Claim. The GOC argues that, although the

Department declined to make the ``green box'' determination on the

three component programs under the Agri-Food Agreement based on there

being no impact on the overall subsidy rate, we still treated these

programs as actionable and thereby made prejudicial findings. These

prejudicial findings include the Department's preliminary determination

that the Technology Innovations (TI) program was specific and conferred

a countervailable benefit, and that the Support for Strategic Alliances

(SSA) program was used in the review period. The GOC argues that, if

the Department wishes to decline making a green box decision on the

three component programs under the Agri-Food Agreement because of the

very small level of benefits, then it must also decline making

prejudicial rulings on these programs' countervailability. Furthermore,

the GOC claims that when an agency declares a particular policy, it is

required to follow that policy in order to maintain administrative

consistency, citing Hussey Copper, Ltd. v. United States, 834 F. Supp.

413, 418 (CIT 1993). The GOC contends that, once the Department

determines programs under the Agri-Food Agreement to have no impact on

the overall subsidy rate, the Department should omit all findings on

these programs from the final results, and thereby treat them as

programs determined not to have been used during the POR. In the case

that the Department does not apply the ``no impact policy''

consistently, then the GOC argues that the Department is required to

consider their green box claim.

Similarly, the GOQ argues that the Department cannot refuse to

consider the green box claim on the grounds that TI and SSA would have

no effect on the overall subsidy rate in this review. This criterion of

no impact, according to the GOQ, cannot be found anywhere in U.S. or

international law. The GOQ further claims that the verified record

demonstrates that the three component programs under the Agri-Food

Agreement meet the green box criteria. The GOQ argues that the

Department cannot countervail TI without first having considered the

program for green box treatment; neither the law nor the cites used in

preliminary determination support the Department's decision.

Petitioner raised three arguments in support of the Department's

preliminary determination. First, petitioner argues that the

Department's countervailability findings with respect to the Agri-Food

program were not prejudicial because only the TI program was found to

confer a countervailable subsidy, which was less than Can$0.0001 per

kilogram. Under these circumstances, petitioner argues that respondents

did not suffer any practical harm by the Department's decision not to

conduct a green box analysis, citing Sharp Elecs. Corp. v. United

States, 720 F. Supp. 1014, 1016-17 (CIT 1989) in support of its

argument. Second, petitioner notes that the Department is not required

by law to consider a green box claim. Finally, petitioner asserts, that

contrary to the GOQ's claim, the results of the Department's

verification do not conclusively prove that the programs under the

Agri-Food Agreement meets the green box criteria.

Department's Position: Based on the particular facts of this case,

the Department appropriately determined that a green box determination

on the programs under the Agri-Food Agreement was unwarranted in this

review. Neither the statute (section 771(5B)(F)) nor the Statement of

Administrative Action Accompanying the Uruguay Rounds Agreement Act

(SAA) mandates the Department to make a green box determination each

time an interested party raises such a claim. The statute simply

codifies the ``due restraint'' obligations under the WTO Agreements on

Agriculture, and Subsidies and Countervailing Duty Measures, that

certain domestic support measures be exempt from the imposition of

countervailing duties, i.e., non-actionable. The omission of an

explicit mandate to make green box determinations provides the

Department with considerable discretion to determine whether such an

examination is warranted in each particular case.

In the instant review, the Department has determined that, because

the benefit provided under the TI and SSA programs (the benefit

provided under the Research program was found noncountervailable) has

no impact on the overall subsidy rate attributable to the subject

merchandise during the POR, a green box determination is not warranted

because neither program has benefit amounts that would be subject to

countervailing duties. In making this determination, the Department has

not violated either the statute or the WTO ``due restraint''

obligations, and the GOC and GOQ have suffered no

[[Page 2207]]

practical harm. See Georgetown Steel Corp. v. United States, 810 F.

Supp. 318 (CIT 1992) (denying judicial review of the respondent's

challenge to the Department's specificity determination on the grounds

that no duties or cash deposits were imposed).

We also disagree with the GOC's and GOQ's assertions that our

decision was inappropriate because the Department made ``prejudicial

findings'' with respect to TI and SSA. In the case of TI, the

Department did not make a new specificity finding in this POR. In the

case of SSA, based upon the verified record evidence, the Department

determined that the program was used during the POR. In both instances,

the preliminary results reflect the Department's normal practice, e.g.,

reiterating a previous specificity finding and determining a program's

usage during the POR. Neither of these findings trigger an obligation

to make a green box determination when we have determined that the

benefits provided under these programs are so small that they will not

be subject to countervailing duties.

Further, we find no inconsistency between these findings and a

finding that the cumulative benefit provided under these programs has

no impact on the overall subsidy rate because the amount of the benefit

provided is unrelated to whether a program is specific or used during

the POR. The Department has always conducted these analyses

simultaneously (specificity and usage). However, until we actually

complete the calculation (i.e., determining the amount of benefit

provided and dividing it by the relevant production figures) it is not

possible to determine whether the benefit under a particular program

will have any impact on the overall countervailing duty rate. As such,

there is nothing unusual in the Department making a determination that

a program is used or specifically provided, but then, finding that the

benefit provided is too small to have any impact on the overall net

subsidy rate (e.g., IPA from Israel and Certain Steel from Sweden).

Further, those determinations are in no way prejudicial with respect to

any green box claims the parties might make in future administrative

reviews. Thus, we find no basis to deviate from our practice by

omitting such findings as suggested by the GOC.

Comment 2: Whether the Agri-Food Programs are Research Programs.

The GOQ claims that the evidence on the record for this review proves

that all three component programs (Research, TI, and SSA) under the

Agri-Food Agreement are noncountervailable because each component is a

research program and the results are publicly available. Of the three

component programs, the GOQ agrees with the Department's determination

that the Research program has been determined to be a research and

development program, and therefore is noncountervailable. In the case

of TI, the GOQ contends that the Department's determination in the

Swine Tenth Review Results that TI did not constitute a research

program, which contradicts findings in six previous reviews, is

unfounded. The GOQ urges the Department to reexamine its

countervailability finding on TI in this review.

The GOQ claims that the Department did not conduct an analysis of

the new information regarding TI in the record of this review, and has

instead adopted the conclusion made in the tenth review that TI is a

regionally-specific federal program. The GOQ argues that, even if TI is

regionally specific, the program is noncountervailable as a research

program since research results under the TI program are publicly

available. The GOQ further argues that new and verified information in

this review demonstrates that the TI program funds publicly available

research.

Also, the GOQ argues that TI is similar to other programs the

Department has determined to be research programs. (See Final

Affirmative Countervailing Duty Determinations: Certain Steel Products

from Mexico, 58 FR 37352, 37360 (July 9, 1993) (Certain Steel from

Mexico). The GOQ claims that Certain Steel from Mexico confirms that

non-laboratory applied research constitutes research, and when results

are publicly disseminated, such programs are not countervailable.

Similarly, the GOQ argues that in Final Affirmative Countervailing Duty

Determinations; Certain Carbon Steel Products from Sweden, 50 FR 33375,

33379 (August 19, 1985) the Department found that the testing of

laboratory concepts in two pilot plants partially funded by the Swedish

Government was noncountervailable research because the results were

publicly available. Therefore, the GOQ argues, the Department's past

practice requires a finding that applied research in the field, such as

research funded under TI, is research, which is noncountervailable when

the results are publicly available. Further, the GOQ argues that, at

verification, the GOC demonstrated that SSA is a research program with

publicly disseminated results.

Department's Position: We disagree that the Department should

reconsider its finding on TI. In the cases cited by the GOQ (Certain

Steel from Mexico and Steel Products from Sweden), the only issue was

whether the programs were countervailable (i.e., whether results were

publicly available), not whether the program funded ``research.'' As

outlined in the Swine Tenth Review Results, the latter issue entails a

more complex analysis. We analyzed TI in detail and determined that its

application review process, eligibility requirements, purposes, and

types of projects funded were more typical of a technological

assistance program than that of a research and development program. We

continue to find that TI is appropriately classified as a technical

assistance program, which accommodates products already existing in the

market and which tests them for their usage in a specified geographic

area, Quebec.

We find that the GOQ has presented no new information or evidence

of changed circumstances that warrant the Department's reexamination of

the countervailability of TI. Therefore, consistent with long-standing

practice, the Department did not reexamine the countervailability of TI

in this administrative review. With regard to SSA, as discussed above,

because the benefit from this program is so small that it has no impact

on the overall subsidy rate, a determination of whether this program is

countervailable was not warranted.

Comment 3: Reexamination of Programs found Noncountervailable. The

GOQ asserts that, if the Department determines a program does not

confer countervailable benefits, the Department should then determine

the program noncountervailable, and thus should not reinvestigate this

program in future reviews. This implies that, since the Department

found Research and SSA to not confer countervailable benefits, these

programs are not countervailable. With regard to Research, the GOQ

further argues that once the Department determines that research

results are publicly available, the program is noncountervailable and

there is no justification to revisit this program in future reviews.

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

of the Research and SSA programs is not warranted in future reviews.

The Department's current practice with regard to research and

development programs is that research results must be publicly

available with no restrictions. Since the verified standard contracts

under the Research program of the Agri-Food Agreement contain a patent

clause authorizing non-

[[Page 2208]]

disclosure of research results with commercial value, the Department

cannot make a determination on the public availability of research

results until projects are completed in subsequent reviews. Therefore,

we will continue to examine the Research program in future reviews. In

addition, we have never made a finding on the countervailability of the

SSA program. Therefore, we will continue to examine the SSA program in

subsequent reviews.

Comment 4: Whether FISI is Countervailable. The GOQ claims that the

Department may not rely upon its prior countervailability determination

for FISI in the sixth review as the basis for finding FISI

countervailable in this review. (FISI--Farm Income Stabilization

Insurance--is an income insurance program for farmers, financed by the

provincial government, Quebec and the producers.) The GOQ argues that,

because in the two review periods prior to the sixth review and also in

the pork investigation, three binational panels found FISI

noncountervailable, collateral estoppel precludes the Department from

continuing to investigate FISI. See Live Swine from Canada; Amendment

to Final Results of Countervailing Duty Administrative Review, 58 FR

26115, 26116 (April 30, 1993); Live Swine from Canada; Amendment to

Final Results of Countervailing Duty Administrative Review, 58 FR 47123

(September 7, 1993); In the Matter of Fresh, Chilled and Frozen Pork

from Canada, 13 I.T.R.D. 1655, 1661-1662 (March 8, 1991). The GOQ

contends that reconsideration of the facts on the record in the instant

review demonstrates that FISI is not countervailable based on the

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

conferring benefits, and integral linkage with crop insurance.

Petitioner asserts that the GOQ has made the same arguments

regarding the countervailability of FISI in previous reviews. Because

the record in this review does not provide evidence that FISI is not

countervailable, petitioner maintains that the Department should

continue to treat this program as a countervailable subsidy.

Department's Position: We agree with petitioner that FISI is

countervailable. A full analysis of the Department's countervailability

determination is discussed in Live Swine from Canada; Final Results of

Countervailing Duty Administrative Review, 59 FR 12243 (March 16, 1994)

(Swine Sixth Review Results). As we explained in Live Swine from

Canada; Final Results of Countervailing Duty Administrative Reviews, 61

FR 52408 (October 7, 1996) (Swine Seven, Eight, and Nine Review

Results), the remand determinations issued pursuant to panel decisions

in prior reviews requested the Department to reconsider certain aspects

of the underlying methodology used in those determinations. Because

panel decisions are binding only on the proceeding of that respective

review, none of these remand determinations require the Department to

establish a policy affecting all subsequent reviews, as they are based

on different administrative records.

Furthermore, as explained in Swine Seven, Eight, and Nine Review

Results, where the Department has determined a program to be

countervailable, it is the Department's policy not to reexamine the

issue in subsequent reviews unless new information or evidence of

changed circumstances is submitted which warrants reconsideration. In

this review, the GOQ has presented the same arguments as in previous

reviews but provided no new information or evidence of changed

circumstances concerning the countervailability of FISI. Therefore, the

Department has not reexamined the countervailability of FISI in this

administrative review.

Comment 5: Whether FISI, Crop Insurance, and Supply Management are

Integrally Linked. The GOQ argues that FISI, Crop Insurance, and Supply

Management work together to meet a common objective of providing income

insurance, and are therefore, integrally linked even though they may

not meet the current standard set by the Department. Because the

integral linkage test is so narrowly defined and constantly being

refined, the GOQ contends that the standard for integral linkage can

never be met. Nevertheless, the GOQ maintains that these three programs

should be found to be integrally linked in this review because the

legislative history demonstrates that the intention of Quebec's

National Assembly was to create a scheme of income protection.

Petitioner contends that the same arguments were raised by the GOQ

in several previous proceedings where the Department correctly

determined that these programs were not integrally linked. Therefore,

petitioner maintains that the Department should continue to countervail

FISI benefits in full.

Department's Position: We disagree with the GOQ that FISI, Crop

Insurance, and Supply Management are integrally linked. In Swine Seven,

Eight, and Nine Review Results, we explained in detail our integral

linkage analysis of FISI, Crop Insurance, and Supply Management. In

these previous reviews, we found the programs were not integrally

linked because of differences in the purposes of the programs, manners

of funding, and the lack of conclusive evidence of a government policy

to treat industries equally. There is no new evidence on the record of

this review that would warrant the reconsideration of our finding that

these programs are not integrally linked.

Comment 6: Whether the Department Double-Counted Benefits under

FISI. The GOC, the GOQ, and the CPC argue that the Department double-

counted Transition Scheme benefits paid by the GOC and the GOQ into

Quebec's FISI fund. Furthermore, according to the GOQ and the CPC,

after the liquidation of NTSP (National Tripartite Stabilization

Program is a federal program which provided price support payments),

the GOQ transferred their share of the NTSP surplus to the FISI account

using this to match the additional assessment paid into FISI by

producers. The GOQ contends that the Farm Income Stabilization Act

dictates that the GOQ shall pay into FISI an amount double that of the

amount paid by insured farmers, no more and no less. Since the

Department did not countervail the NTSP surplus payouts for producers

enrolled in FISI that were transferred into the FISI account in Swine

Tenth Review Results, CPC argues that the Department should apply this

same practice and only countervail FISI payouts to producers.

When the National Transition Scheme for Hogs (Transition Scheme), a

temporary successor program to NTSP funded by the federal and

provincial governments, provided payments to hog producers during the

POR, the producer members of FISI decided that their payouts should be

transferred to the FISI account and become a portion of their required

contribution. Thus, the GOC and the CPC contend that this transfer of

funds should not be countervailed until the producers receive FISI

payouts. In sum, respondents argue that the producers' contribution is

being countervailed twice, once going into the FISI account and the

second time going out of the FISI account to the producers.

Petitioner claims that, although Quebec producers did not receive a

tangible contribution from the Transition Scheme in the form of a cash

payment, they benefitted from these funds because they were not

required to make their normal contribution to FISI out of their own

monies. Petitioner further argues that the decision by Quebec's hog

producers to use their Transitions Scheme payments to meet their

financial obligation to FISI was a

[[Page 2209]]

question of form that did not reduce or eliminate the benefit accruing

to the producers as a result of the Transition Scheme program.

Therefore, petitioner supports the Department's view in accounting for

this anomaly in the distribution mechanism of the subsidy.

With respect to the additional infusion of funds into the FISI

account by the Quebec government, petitioner argues that, despite the

GOQ's argument that these funds are the Quebec Government's regular

assessment, the language in the Regie's Annual Report is clear that

there are two separate contributions, the Quebec Government's regular

assessment for the fiscal year and these additional funds. Petitioner

further argues that the GOQ did not address the point that in making

the infusion, the government did not stipulate that these additional

Quebec Government funds would be repaid by producers, either by an

increase in producer premiums or a decrease in producer payouts.

Petitioner asserts that absent such conditions, the Department's

decision to treat the infusion as a grant is lawful and should be

preserved in its final determination.

Department's Position: The Department agrees with the respondents,

in part, that there was double-counting with regard to the GOQ's

contribution into FISI of their share of the NTSP Surplus. However, the

Department disagrees that the Transition Scheme benefits to the

producers were incorrectly countervailed.

The FISI program, by law, must be funded one-third by the producers

enrolled in the program and two-thirds by the GOQ. Therefore, when FISI

payments are made to participating producers, the Department only

calculates a benefit equal to two-thirds of the payouts in order to

countervail only the portion of the payment contributed by the

government. During the POR, the producers and the GOQ made their

regular contributions into the FISI fund. FISI also received additional

assessments on behalf of both the producers and the GOQ. In the

preliminary results, we determined that the GOQ's additional

contribution to FISI was countervailable in full. After further

examination of the record evidence in this review, we have determined

that the GOQ's contribution represents the GOQ's share of NTSP surplus

funds. Any benefit that will result from the GOQ's portion of the NTSP

surplus will be countervailed when future payments are made to the

enrolled producers under FISI. Therefore, for the final results, we are

not countervailing the GOQ portion of the NTSP surplus.

With regard to the Transition Scheme, we have appropriately

countervailed payments due to the producers (both federal and

provincial portions), including payments due to producers enrolled in

FISI, as benefits under the Transition Scheme. The Transition Scheme

provided one-time payments to producers for hogs marketed between April

3, 1994, and December 31, 1994. Under the Transition Scheme, hog

producers received Can$1.50 from the GOC and a matching Can$1.50 from

the provincial governments. During the POR, producers in the provinces

of Alberta, Manitoba, New Brunswick, Ontario, Quebec (who were not

enrolled in FISI), and Saskatchewan received their Transition Scheme

payments directly. Quebec producers enrolled in FISI were also entitled

to a direct payment for each hog marketed during the applicable period.

As explained in the preliminary results, however, the portion of

Transition Scheme funds due to producers who participated in FISI was

transferred to FISI, rather than paid out directly to the producers as

was the case with non-participants in FISI. See, Regie des assurances

agricoles du Quebec 1995-1996 Annual Report, at 24, Exhibit F of the

December 20, 1996 Questionnaire Response of the Government of Quebec.

Because the Transition Scheme payouts were government funds which were

specifically provided to hog producers, the payments are

countervailable in full. Whether the producers received the money

directly (as non-FISI producers did), or whether they chose to have it

deposited in their FISI account to cover their required contribution to

FISI, this does not change the fact that the payments made under the

Transition Scheme constitute financial contributions which benefit hog

producers. Instead of receiving the money directly under the Transition

Scheme and using it to pay their FISI assessments, the producers simply

instructed the Government to deposit the money due to them into their

FISI account. Under either scenario, the Transition Scheme payments are

fully countervailable. Moreover, there is no double-counting of FISI

payouts because we are only countervailing two-thirds of the FISI

payouts, which reflects the portion contributed by the GOQ, and we are

not countervailing the one-third portion for which producers are

responsible.

Comment 7: Cash Deposit Adjustment for the National Transition

Scheme Program. The GOC and the CPC argue that the Department should be

consistent with its previous decision stated in the Swine Tenth Review

Results by adjusting the cash deposit for this program to zero ``to

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

benefits.'' The GOC and the CPC contest the Department's preliminary

determination in this review that residual benefits may continue to

accrue under this program even though the program has been terminated

and there was no new information or evidence of changed circumstances.

Department's Position: We disagree with the GOC and CPC that the

cash deposit rate for the Transition Scheme should be adjusted to zero

in this review. As we explained in the previous review, we adjust the

cash deposit rate only when there has been a program-wide change, such

as termination, and there are no residual benefits. In the tenth

review, we expensed the benefit received from this program and verified

that all the payouts under the Transition Scheme had been made prior to

our preliminary results in that review. On this basis, we did not

include the Transition Scheme in the cash deposit. (See Swine Tenth

Review Results.) In the instant review, however, we found that the

payouts made during this POR were greater than 0.5 percent of total

sales of swine for the POR, and, as such, must be allocated over time.

When a subsidy is allocated over time, there will, of course, be

benefits continuing under a program for the entire allocation period,

which in this case is three years. (See Allocation Methodology section

of this notice.) Because there will still be benefits accruing from

this program in two subsequent reviews periods (until March 1998) due

to the allocation period, we appropriately have not adjusted the cash

deposit rate to zero. This is consistent with our treatment of

adjusting the cash deposit rate for the SHARP program in Swine Tenth

Review Results.

Comment 8: De Minimis Calculation. The CPC disagrees with the

Department's new de minimis calculation and argues that (1) the

previous long-standing methodology was never challenged; (2) there is

no new evidence requiring reexamination of the Department's standard

practice; and (3) the Department failed to provide any explanation to

support its change in practice in its preliminary results.

Particularly, the CPC questions the new methodology used to calculate

the weighted-average selling price in which the Department had adjusted

the price to account for dressed weight (i.e., the prepared hog after

slaughter); whereas in previous reviews no adjustment, with

[[Page 2210]]

regard to dressed weight, had been made to the reported average selling

price.

The CPC cites several cases, (e.g., Secretary of Agriculture v.

United States, 347 U.S. 645, 653-54 (1954); Alhambra Foundry Co., v.

United States, 685 F.Supp. 1252, 1258 (CIT 1988); Cinsa, S.A. de C.V.

v. United States, 966 F. Supp. 1230, 1238 (CIT 1997); Mantex v. United

States, 841 F. Supp. 1290 (CIT 1993) Micron Technology v. United

States, 893 F. Supp. 21 (CIT 1995); Queen's Flowers de Colombia, et al.

v. United States, Slip Op. 97-120 (1997 WL 633824) (CIT Aug. 25, 1997))

supporting their argument that the Department must conform to prior

decisions or explain its reason for departing from past practice. The

CPC also bolsters its arguments by citing a North American Free Trade

Agreement Binational Panel decision (In the Matter of: Live Swine from

Canada, Panel No. USA-94-1904-01, at 8 (May 30, 1995)) that states that

Commerce must provide ``a comprehensive and reasoned analysis for

reversing its former policy.'' Lastly, the CPC argues that principles

of administrative law require the Department to ``supply a reasoned

analysis indicating that prior policies and standards are being

deliberately changed, not casually ignored.'' Greater Boston Television

Corp. F.C.C., 44 F.2d 841, 852 (D.C. Cir. 1970), cert. denied, 403 U.S.

923.

If the Department decides to maintain the calculation methodology

used in its preliminary results, the CPC argues that the Department

must also then take into account an additional adjustment for a quality

premium. Otherwise, the Department must return to its prior de minimis

calculation methodology where no adjustment is made to the weighted-

average selling price of dressed weight.

Petitioner argues that changes in methodology are just minor

revisions of the Department's calculation methods in this review, and

the Department should continue to follow this adjustment in the final

results.

Department's Position: We disagree with the CPC that we have

inappropriately changed the de minimis calculation in this review. The

methodology used to calculate the de minimis level remains basically

the same as that applied in prior reviews, except for an adjustment

which has become necessary as a result of an inconsistency detected by

the Department in this review, related to the weight of the hog before

and after slaughter.

As duly noted by the CPC, since the fourth annual review of this

order, our calculation of the de minimis rate was as follows: (1) For

each province, we calculated an average selling price for the POR; (2)

we then multiplied the average selling price by the province's

percentage of total exports of market hogs to the United States; (3) we

then summed the provinces' weight-averaged prices to derive at a

Canada-wide weighted-average price for market hogs; (4) we finally

derived the de minimis rate by multiplying the weighted-average selling

price per kilogram by one half of one percent; and (5) we then compared

that per kilogram rate to the calculated per kilogram subsidy rate to

determine whether the calculated subsidy rate was above or below de

minimis.

However, until this review, we had overlooked the fact that,

although we had requested information on live swine (market hogs weigh

on the average 100 kilograms, according to industry standards) with

regard to average selling prices and average weights during the POR,

the data provided in the response was based on dressed weight (i.e.,

the weight of the prepared hog after slaughter, which is approximately

80 kilograms). Prices based on dressed weight are inappropriate for our

calculations because the benefit rate is calculated and applied on a

live swine basis. In preparing the preliminary results in this review,

we realized that in order to be consistent between the per kilogram

subsidy rate calculation and the de minimis calculation, we should have

been adjusting the selling price, provided in the response and clearly

labeled ``Canadian dollars per kilogram dressed weight,'' to align it

with the calculation of the per kilogram subsidy rate, which is based

on live swine. Therefore, as explained in the calculation memorandum

for the preliminary results, to make this adjustment, we multiplied the

weighted-average selling price per kilogram, (provided in the response)

by the weighted-average dressed weight of the market hog to obtain the

total price paid to the producer for one hog. We divided this amount by

100 kilograms to construct the average per kilogram price of a live hog

(as stated above, the average weight of a market hog is 100 kilograms).

As in prior reviews, we then derived the specific de minimis rate for

live swine by multiplying the adjusted weighted-average selling price

per kilogram by one half of one percent.

This change makes a necessary refinement in our methodology in that

the average prices used in our calculations are now congruous with the

basis of the subsidies reported. In fact, when we calculate the subsidy

rate per kilogram, we use the number of market hogs produced in Canada

multiplied by 100 kilograms which is the reported average weight of a

live hog. Similarly, in assessing the duties, the Customs Service

applies the applicable duty rate to the weight of the live swine

entering the United States. Therefore, the weighted-average prices used

in our calculations now appropriately correspond to the finding of

subsidization and imposition of countervailing duties.

In the final results of this review, we made two further minor

changes to our methodology to ensure consistency in the calculations.

The first change affects the average Canadian dressed weight of a hog.

In the preliminary results, the average Canadian dressed weight was

calculated as a simple average of the provincial average weights, even

though the selling price was calculated on a weighted-average basis. To

be consistent in the final results, both the Canada-wide weight and the

Canada-wide selling price are calculated on a weighted-average basis.

The second change affects the calculation of the value of total

Canadian production of live swine for purposes of determining whether

grants should be expensed or allocated. In the final results of review,

to derive the value of total Canadian production of live swine, we have

used the adjusted price rather than the dressed weight price used in

the preliminary results. This change did not result in a different

outcome for the expensing of grants received during the POR.

By making the adjustments described above, we corrected the

discrepancy between price and weight so that now the weighted-average

selling price used in the de minimis calculation and the grant

calculations reflects the weight of a live swine. This allows us to

make an apples-to-apples-comparison, i.e., the subsidy benefit, the

duty rate, the selling price used in calculating the de minimis rate,

and the grant calculations are now all based on the weight of a live

swine.

We are not persuaded by the CPC's arguments that if we adjust for

dressed weight, we must also make an adjustment for a quality premium.

In previous reviews, as in this review, the GOC has reported average

selling prices per kilogram and average weights for market hogs (based

on dressed weight) with no qualifications. We examined Table 29 ``Hogs:

Price Range of Sales at Marketing Boards'' in the Livestock Market

Review (Appendix 2 of the GOC's December 23, 1996 questionnaire

response) and determined that the average prices for the industry of a

hog correspond to the weighted-average

[[Page 2211]]

price provided in Appendix 14 of the GOC's December 23, 1996

questionnaire response, on which our de minimis calculation is based.

There was no mention in the response that further adjustments were

necessary to the figures provided. Moreover, in previous administrative

reviews, none of the parties made the argument or presented information

demonstrating that further adjustments should be made to the price. Any

such adjustments, if warranted, would have been appropriate regardless

of whether any adjustment from dressed weight to live weight is made.

As demonstrated above, the adjustment to the weighted-average

selling price in this review was a necessary methodological adjustment

to correct the identified discrepancy between our de minimis

calculation and calculation of subsidy benefits. It is a well-settled

principle of administrative law that an agency must be accorded

substantial flexibility to refine and reformulate its practice, and

that such methodological changes survive judicial scrutiny as long as

the agency provides an explanation for its departure from prior

practice and has not otherwise acted arbitrarily. See Cultivos

Miramonte S.A. v. United States, No. 96-09-02222, 1997 Ct. Intl. Trade

LEXIS 136, at *12 (CIT Sept. 17, 1997) (citing Davila-Bardales v. INS,

27 F.3d 1 (1st Cir. 1994)); British Steel plc v. United

States, 879 F. Supp. 1254, 1306-07 (CIT 1995); Mantex, Inc. et al. v.

United States, 841 F. Supp. 1290, 1302-03 (CIT 1993). In the instant

review, we explained the basis for our change in the preliminary

results, which enabled interested parties to comment on this change in

the context of the final results. We have fully considered these

comments, but as detailed above, we continue to find that the

adjustment to the weighted-average selling price used in our de minimis

calculation is a necessary refinement to ensure consistency in our

calculations. Moreover, our examination of the record evidence did not

reveal that an additional adjustment is necessary to account for

differences in quality premium. Unlike the cases cited by the CPC--all

of which are instances where the reviewing authority determined that

the agency failed to provide an explanation to support its deviation

from prior practice--we have fully explained the rationale for our

change in the calculation methodology, and this explanation is

supported by the record evidence of this case. Under these

circumstances, we have not arbitrarily changed our de minimis

calculation in violation of long-standing administrative principles.

See e.g., Cultivos Miramonte, at *13, n.7 (stating that an agency

arbitrarily changes its practice when (1) the factual findings

supporting the changes are not supported by record evidence, (2) the

rationale provided violates administrative law, or (3) the agency has

offended standards of procedural fairness.) Therefore, we are

continuing to apply the new methodology in calculating the de minimis

rate.

Comment 9: Change in Calculation Methodology for National

Transition Scheme Program. The CPC argues that the Department has

significantly changed its calculation methodology of the Transition

Scheme program whereby the grant amount received is no longer compared

to the total value of live swine sales in Canada but to the value of

live swine sales in only the provinces receiving grants during the POR.

Such major changes in methodology, the CPC asserts, either require new

information indicating the need for the change or an explanation.

Therefore, because the Transition Scheme is a national program, the CPC

argues that the calculation determining whether to expense grants

received or to allocate them to the year of receipt should compare the

grant amount received to the value of total live swine sales in Canada.

The CPC also contends that the Department's formula for allocation of

grants uses an incorrect national average selling price, Can$1.28, in

analyzing the Transition Scheme and the NTSP surplus.

In contrast, petitioner argues that the changes in methodology to

achieve a more accurate countervailing duty rate are nothing more than

minor revisions, which are not unlawful and are in the realm of the

Department's discretion. Thus, petitioner maintains the Department

should continue to follow the preliminary results methodology in the

final results.

Department's Position: We agree with the CPC, in part. Because the

Transition Scheme is a nation-wide program, the grant amount received

should be compared to the total value of live swine sales in Canada

which we have constructed for the POR. See Swine Tenth Review Results.

Accordingly, we have made the necessary adjustment in these final

results by comparing the benefit to the value of the total national

production during the POR. We made the same correction to the

calculations of the benefit received by producers from the distribution

of the NTSP surplus, which is also a nation-wide program. Therefore,

the grant amount received under this program is also compared to the

total value of live swine sales in Canada.

However, we do not agree with the CPC that we have used an

incorrect selling price of Can$1.28 to analyze whether the Transition

Scheme and the NTSP surplus should be allocated over time. In our

preliminary results, the selling price used for this calculation was

based on a live hog. In these final results of review, the Department

has determined that the Can$1.54 national weight-averaged selling price

based on dressed weight should be changed to Can$1.29 to reflect the

weight of a live swine. (See Department's Position in Comment 8 above).

The applicable provincial average selling price should likewise be

adjusted in the grant allocation calculations for provincial programs.

Therefore, for these final results, we have adjusted the selling price

to reflect that of a live hog rather than a dressed hog.

Final Results of Review

For the period April 1, 1995 through March 31, 1996, we determine

the net subsidy for live swine from Canada to be Can$0.0071 per

kilogram.

We will instruct the Customs Service to assess countervailing

duties of Can$0.0071 per kilogram on shipments of live swine from

Canada exported on or after April 1, 1995 and on or before March 31,

1996. The cash deposit is Can$0.0055 per kilogram, which is de minimis.

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

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

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

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

than the assessment rate because we have taken into account program-

wide changes in calculating the cash deposit rate. These program-wide

changes are the termination of the following programs with no residual

benefits: Feed Freight Assistance Program, SHARP, ACBOP, Saskatchewan

Livestock Investment Tax Credit, Saskatchewan Livestock Facilities Tax

Credit, and NTSP Surplus.

This notice serves as a reminder to parties subject to

administrative protective order (APO) of their responsibility

concerning the disposition of proprietary information disclosed under

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

return/destruction of APO materials or conversion to judicial

protective order is hereby requested. Failure to comply with the

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

[[Page 2212]]

This administrative review and notice are in accordance with

section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)).

Dated: January 7, 1998.

Robert S. LaRussa,

Assistant Secretary for Import Administration.

[FR Doc. 98-945 Filed 1-13-98; 8:45 am]

BILLING CODE 3510-DS-P