[Federal Register Volume 61, Number 195 (Monday, October 7, 1996)]
[Notices]
[Pages 52408-52426]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-25648]
-----------------------------------------------------------------------
DEPARTMENT OF COMMERCE
[C-122-404]
Live Swine from Canada; Final Results of Countervailing Duty
Administrative Reviews
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
ACTION: Notice of Final Results of Countervailing Duty Administrative
Reviews.
-----------------------------------------------------------------------
SUMMARY: On May 29, 1996, the Department of Commerce (the Department)
published in the Federal Register its preliminary results of three
administrative reviews of the countervailing duty order on live swine
from Canada. We have completed these reviews and determine the net
subsidy to be Can$0.0601 per kilogram for the period April 1, 1991
through March 31, 1992, Can$0.0613 per kilogram for the period April 1,
1992 through March 31, 1993, and Can$0.0106 per kilogram for the period
April 1, 1993 through March 31, 1994. We will instruct the U.S. Customs
Service to assess countervailing duties as detailed in the Final
Results of Reviews section of this notice.
EFFECTIVE DATE: October 7, 1996.
FOR FURTHER INFORMATION CONTACT: Stephanie Moore or Cameron Cardozo,
Office of CVD/AD Enforcement, 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
On May 29, 1996, the Department published in the Federal Register
the preliminary results of three administrative reviews of the
countervailing duty order on live swine from Canada (61 FR 26879). We
invited interested parties to comment on the preliminary results. On
June 3, 1996, the Canadian Pork Council requested an extension of the
time limit for submission of the case briefs from June 28, 1996 until
July 8, 1996. We granted this request and on July 8, 1996, case briefs
were submitted by the National Pork Producers' Council, petitioners,
and by the Government of Canada (GOC), the Government of Quebec (GOQ),
and the Canadian Pork Council (CPC), respondents. Rebuttal briefs were
submitted by petitioners, the GOC, the GOQ, and the CPC. On June 13,
1996, the GOQ requested a public hearing. The Department denied the
request for the hearing because the request was untimely. The
Department has now completed these administrative reviews in accordance
with section 751 of the Tariff Act of 1930, as amended (the Act).
The periods covered by these administrative reviews are April 1,
1991 through March 31, 1992, April 1, 1992 through March 31, 1993, and
April 1, 1993 through March 31, 1994. These reviews were conducted on
an aggregate basis and involve 43 programs.
Applicable Statute and Regulations
The Department is conducting these administrative reviews in
accordance with section 751(a) of the Act. Unless otherwise indicated,
all citations to the statute and to the Department's regulations are in
reference to the provisions as they existed on December 31, 1994.
However, references to the Department's Countervailing Duties; Notice
of Proposed Rulemaking and Request for Public Comments, 54 FR 23366
(May 31, 1989) (Proposed Regulations), are provided solely for further
explanation of the Department's countervailing duty practice. Although
the Department has withdrawn the particular rulemaking proceeding
pursuant to which the Proposed Regulations were issued, the subject
matter of these regulations is being considered in connection with an
ongoing rulemaking proceeding which, among other things, is intended to
conform the Department's regulations to the Uruguay Round Agreements
Act. See 60 FR 80 (Jan. 3, 1995).
Scope of the Reviews
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 these administrative
reviews 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 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.
[[Page 52409]]
Calculation Methodology for Assessment and Cash Deposit Purposes
For each review period, we calculated the net subsidy on a country-
wide basis by first calculating the subsidy rate for each province
subject to the administrative review. 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 subject merchandise. We
then summed the individual provinces' weighted-average rates to
determine the subsidy rate from all programs benefitting exports of the
subject merchandise to the United States. In prior proceedings, a
separate rate was calculated for sows and boars and for all other live
swine. Due to the partial revocation with respect to slaughter sows and
boars, we are only calculating a rate for live swine.
Analysis of Programs
Based upon our analysis of the questionnaire responses, our
verification, and written comments from the interested parties, we
determine the following:
I. Programs Conferring Subsidies
1. Feed Freight Assistance
In the preliminary results, we found that this program conferred
countervailable benefits on the subject merchandise. We received no
comments on our preliminary results, however, we found an error in our
calculations which we have corrected. See Calculation Memorandum on
file in the Central Records Unit, Room B099, of the Main Commerce
Building. On this basis, the net subsidies for this program are
Can$0.0006 per kilogram for the 1991-92 review period, Can$0.0004 per
kilogram for 1992-93 review period, and Can$0.0004 per kilogram for the
1993-94 review period.
2. National Tripartite Stabilization Program (NTSP)
In the preliminary results, we found that this program conferred
countervailable benefits 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. On this
basis, the net subsidies for this program are Can$0.0508 per kilogram
for the 1991-92 review period and Can$0.0578 per kilogram for 1992-93
review period. The program was not used during the 1993-94 review
period.
3. Quebec Farm Income Stabilization Insurance Program (FISI)
In the preliminary results, we found that this program conferred
countervailable benefits 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. On this
basis, the net subsidies for this program are Can$0.0050 per kilogram
for the 1991-92 review period, Can$0.0001 per kilogram for the 1992-93
review period, and Can$0.0003 per kilogram for the 1993-94 review
period.
4. British Columbia Farm Income Insurance Program (FIIP)
In the preliminary results, we found that this program conferred
countervailable benefits on the subject merchandise. We received no
comments on our preliminary results and our findings remain unchanged
in these final results. On this basis, the net subsidies for this
program are less than Can$0.0001 per kilogram for the 1992-93 review
period, and Can$0.0004 for the 1993-94 review period. British Columbia
did not export live swine to the United States during the 1991-92
review period.
5. Saskatchewan Hog Assured Returns Program (SHARP)
In the preliminary results, we found that this program conferred
countervailable benefits on the subject merchandise. Our analysis of
the comments submitted by the interested parties, summarized below, has
led us to change our findings from the preliminary results. We are
adding interest accrued during the ninth review period to the amount of
the deficit written off to calculate the amount of the SHARP grant.
Also, in line with our preference to use commercial lending rates
rather than government lending rates, we recalculated the benefit from
the SHARP grant by using the monthly average medium-term corporate bond
rate from the Bank of Canada Review as the discount rate in our
allocation methodology. On this basis, the net subsidies for this
program are Can$0.0010 per kilogram for the 1991-92 review period,
Can$0.0007 per kilogram for the 1992-93 review period, and Can$0.0055
per kilogram for the 1993-94 review period.
6. Alberta Crow Benefit Offset Program (ACBOP)
In the preliminary results, we found that this program conferred
countervailable benefits 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. On this
basis, the net subsidies for this program are Can$0.0023 per kilogram
for the 1991-92 review period, Can$0.0019 per kilogram for the 1992-93
review period, and Can$0.0017 per kilogram for the 1993-94 review
period.
7. Alberta Livestock and Beeyard Compensation Program
In the preliminary results, we found that this program conferred
countervailable benefits on the subject merchandise. We received no
comments on our preliminary results and our findings remain unchanged
in these final results. On this basis, the net subsidy for this program
is less than Can$0.0001 per kilogram for the 1991-92, 1992-93, and
1993-94 review periods.
8. Ontario Rabies Indemnification Program
In the preliminary results, we found that this program conferred
countervailable benefits on the subject merchandise. We received no
comments on our preliminary results and our findings remain unchanged
in these final results. On this basis, the net subsidy for this program
is less than Can$0.0001 per kilogram for the 1991-92, 1992-93, and
1993-94 review periods.
9. Ontario Livestock and Poultry and Honeybee Compensation Program
In the preliminary results, we found that this program conferred
countervailable benefits on the subject merchandise. We received no
comments on our preliminary results and our findings remain unchanged
in these final results. On this basis, the net subsidy for this program
is less than Can$0.0001 per kilogram for the 1991-92, 1992-93, and
1993-94 review periods.
10. Saskatchewan Livestock Investment Tax Credit
In the preliminary results, we found that this program conferred
countervailable benefits on the subject merchandise. We received no
comments on our preliminary results and our findings remain unchanged
in these final results. On this basis, the net subsidy for this program
is Can$0.0002 per kilogram for the 1991-92, 1992-93, and 1993-94 review
periods.
[[Page 52410]]
11. Saskatchewan Livestock Facilities Tax Credit Program
In the preliminary results, we found that this program conferred
countervailable benefits on the subject merchandise. We received no
comments on our preliminary results and our findings remain unchanged
in these final results. On this basis, the net subsidy for this program
is Can$0.0001 per kilogram for the 1991-92, 1992-93, and 1993-94 review
periods.
12. Saskatchewan Interim Red Meat Production Equalization Program
In the preliminary results, we found that this program conferred
countervailable benefits on the subject merchandise due to allegations
of new subsidies by the petitioner during the 1992-93 review period. We
received no comments on our preliminary results and our findings remain
unchanged in these final results. On this basis, the net subsidies for
this program are Can$0.0002 per kilogram for the 1992-93 review period
and Can$0.0021 per kilogram for the 1993-94 review period.
13. Ontario Export Sales Aid Program
In the preliminary results, we found that this program conferred
countervailable benefits on the subject merchandise. We received no
comments on our preliminary results and our findings remain unchanged
in these final results. On this basis, the net subsidy for this program
is less than Can$0.0001 per kilogram for the 1991-92 and 1993-94 review
periods. The program was not used during the 1992-93 review period.
II. Programs Found Not to Confer Subsidies
In the preliminary results, we found the following programs to be
non-countervailable:
A. Canada/British Columbia Agri-Food Regional Development
Subsidiary Agreement;
B. Canada/Manitoba Agri-Food Development Agreement;
C. Canada/Quebec Subsidiary Agreement on Agri-Food Development;
D. Net Income Stabilization Accounts (NISA);
E. Saskatchewan Livestock Cash Advance Program;
F. Ontario Farm Tax Rebate Program;
G. Prince Edward Island Pro Pork Assistance Program;
H. Cash Flow Enhancement Program.
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 Not to be 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. Agricultural Products Board Program;
B. Federal Atlantic Livestock Feed Initiative (New Brunswick,
Newfoundland, Nova Scotia, and Prince Edward Island);
C. Western Diversification Program;
D. British Columbia Special Hog Payment Program;
E. New Brunswick Development Act--Swine Assistance Program;
F. New Brunswick Livestock Incentives Program;
G. New Brunswick Swine Assistance Policy on Boars;
H. New Brunswick Swine Industry Financial Restructuring Program;
I. Newfoundland Farm Products Corporation-Hog Price Support;
J. Newfoundland Weanling Bonus Incentive Policy;
K. Nova Scotia Improved Sire Policy;
L. Ontario Bear Damage to Livestock Compensation Program; and
M. Ontario Swine Sales Assistance Policy.
Our analysis of the comments submitted by the interested parties,
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 during the
review periods:
A. New Brunswick Hog Price Stabilization Plan;
B. Canada/Alberta Swine Improvement Program Study;
C. Canada/Ontario Western Agribition Livestock Transportation
Assistance Program;
D. Canada/Ontario Stabilization Plan for Hog Producers;
E. Alberta Red Meat Interim Insurance;
F. Ontario Livestock Improvement Program for Northern Ontario;
G. Ontario Pork Industry Improvement Plan;
H. Prince Edward Island Interest Payments on Assembly Yard Loan;
and
I. Prince Edward Island Swine Incentive Policy.
Our analysis of the comments submitted by the interested parties,
summarized below, has not led us to change our findings from the
preliminary results.
Analysis of Comments
Comment 1: Petitioners argue that the Department should revise its
preliminary determination that NISA's farm-fed grain provision does not
provide a countervailable benefit to hog producers. They state that the
farm-fed provision is a discrete and independent sub-program of NISA
and, thus, the Department should analyze NISA's countervailability in
the narrower context of the farm-fed grain provision. According to
petitioners, such an approach is justified because hog farmers would be
ineligible for NISA assistance without this provision. Therefore, the
farm-fed grain component of the broader NISA program is sufficiently
unique and circumscribed to warrant consideration on an independent
basis. Petitioners maintain that this approach is consistent with the
Department's analysis of the countervailability of particular subsidies
on a sub-program basis in Small Diameter Circular Seamless Carbon and
Alloy Steel Standard, Line and Pressure Pipe from Italy, 60 FR 31992
(June 19, 1995) (Italian Pipe).
The petitioners contend that the farm-fed provision is
countervailable because it provides a direct transfer of funds to hog
producers and it expressly limits eligibility for the program to
livestock producers and hence, is de jure specific. Also, the NISA
farm-fed grain provision is virtually identical to the ACBOP program,
which the Department has recognized as a countervailable subsidy.
According to petitioners, both programs share the same basic goal of
subsidizing hog farmers who also grow grains. The record contains no
compelling legal or factual basis for treating ACBOP as countervailable
while allowing NISA to escape the purview of U.S. countervailing duty
law. Finally, petitioners state that the farm-fed grain provision
constitutes an express mechanism for subsidizing hog farmers by
providing these farmers benefits that they otherwise would not be
entitled to receive.
The GOC and the CPC counter that the Department properly concluded
that NISA is not specific and that petitioners have not challenged this
determination. The GOC and the CPC contend that the farm-fed provision
cannot be examined separately because of the whole farm nature of the
NISA program. Contributions are based on the entire farm's total net
sales of all eligible products, and withdrawals are based on overall
farm income rather than the income of particular products. Thus, NISA-
eligible products cannot be examined separately for purposes of
[[Page 52411]]
calculating NISA withdrawals. The purpose of the provision is to
provide the same coverage to grain farmers that feed some of their
grain to livestock and to grain farmers that sell their grain and thus
generate sales of an eligible product. By providing this coverage,
according to respondents, NISA avoids creating an artificial incentive
to farmers to sell their grain rather than feed it on-farm. Thus, any
benefit the farm-fed provision may provide to farmers who produce hogs
and grow grain is like any other benefit farmers may receive on NISA-
eligible products and is, thus, not countervailable.
The GOC and the CPC continue that, contrary to the petitioners'
``sub-program'' theory, the record actually shows that the feed
equivalent is one line in the NISA eligible net sales calculation. This
one line is blended into a single total eligible net sales number on
which the matchable producer contributions are calculated. The GOC and
the CPC state that there simply is no separate existence of the farm-
fed equivalent provision as a NISA ``sub-program'' in any respect.
However, even if the Department were to accept the petitioners'
argument, they argue that NISA and its feed equivalent would have to be
considered a single program. NISA makes all farmers eligible, offers
only one type of benefit, one set of eligibility requirements, one
administering agency, one legislative source, and no administrative
discretion. Therefore, NISA must be examined as a whole and found not
specific.
Finally, the GOC and the CPC claim that the petitioners' attempt to
compare the farm-fed grain provision to ACBOP is also incorrect. ACBOP
is directed only at purchasers and producers of feed grain and its
benefits are tied to grain purchases and actual use in livestock feed
by livestock producers. NISA is a program for producers of numerous
products and whose ``whole farm'' concept eliminates any link between
contributions or withdrawals, on the one hand, and a farmer's purchases
of one input in production, such as grain, on the other.
Department's Position: We disagree with the petitioners that the
farm-fed grain provision of NISA should be analyzed separately for
purposes of our countervailing duty analysis. Rather than a separate
sub-component of the NISA program, the farm-fed grain provision is an
integral part of the NISA program designed to equalize treatment of
farm-fed grains and marketed grains. There are no separate eligibility
requirements for receiving NISA assistance under the farm-fed grain
provision. Eligible contributions under the farm-fed provision are
represented by a single line item in the NISA eligible net sales
calculation, which includes net sales of all other NISA-eligible
products. All of these net sales of eligible products are combined into
a single total eligible net sales number on which the matchable
producer and government contributions are calculated. In sum,
calculations of benefits under the farm-fed provision are
indistinguishable from the other NISA calculations.
Moreover, the NISA farm-fed grain provision is not like Law 675
which we analyzed in Italian Pipe. In that case, Law 675 was a single
law that encompassed six separate and discrete programs that provided
benefits to particular industries. Each program had distinct purposes,
types of benefits, application and approval procedures, and
administration. Italian Pipe, 60 FR 31995-96. The NISA program has one
purpose, one type of benefit, one set of eligibility requirements, and
one administering agency. For these reasons, we continue to analyze the
countervailability of the farm-fed provision within the context of the
overall NISA program.
Further, we do not agree that NISA's farm-fed provision is
virtually identical to the ACBOP program. ACBOP was found de jure
specific because it is limited to and directly benefits only purchasers
and producers of feed grain (Live Swine from Canada; Final Results of
Countervailing Duty Administrative Reviews, 48 FR 10410 (March 12,
1991)). Because hog producers benefit from a program found to be de
jure specific, we have countervailed those benefits under ACBOP in our
administrative reviews of this order. In the case of NISA, we have
found that the program is not de jure specific because the legislation
does not expressly limit the availability of the program. Furthermore,
we have found that NISA is not de facto specific because a large
majority and wide variety of all agricultural products are covered,
there is no evidence of dominant use or disproportionality of benefits
by a specific enterprise or industry, and there is almost no government
discretion in conferring benefits. Because we have determined that
NISA, including the farm-fed grain provision, is a single program, we
do not need to address the issue of specificity at the level of the
farm-fed grain provision.
Comment 2: Petitioners argue that in calculating the NISA farm-fed
grain benefit, the Department should include Farm Support and
Adjustment Measures (FSAMs) funds as part of the government's
contribution into the NISA program. According to petitioners, since
FSAMs reflect federal incentive contributions and federal bonuses for
early enrollment in NISA, they are an integral part of the total
benefits paid out under NISA. Also, FSAM contributions equaled more
than half of total federal government contributions to the NISA
program. Yet, in the calculations of estimated NISA benefits submitted
by the GOC, FSAM funds were not included. Petitioners state that by not
including FSAM contributions, the GOC's calculation fails to reflect
the true amount of benefits accruing to hog producers.
Respondents counter that the petitioners are inconsistent when they
argue that a line item in the NISA calculation, the farm-fed grain
provision, is a separate program, and then argue that FSAMs, which in
the respondent's view is a separate program, is one and the same with
NISA. In any case, respondents state that FSAMs are non-specific
whether viewed as a separate program or as part of NISA. FSAMs were a
temporary and transitional measure to assist in getting the NISA and
GRIP programs off the ground. As a separate program, FSAMs provided
benefits to all of the same products covered by NISA in its first year
of operation. Therefore, respondents argue that FSAMs are also non-
specific. On the other hand, according to respondents, if FSAMs are
integral to the NISA program, then FSAMs are still non-specific since
NISA is not specific.
Department's Position: FSAM benefits are indistinguishable from
those provided by NISA. Although provided for under additional
legislation, FSAMs can only deliver benefits through a previously
established program, NISA. Under the NISA program, a farmer can make
deposits, up to 2 percent of net eligible sales, into an individual
savings account and receive matching government deposits, up to 1
percent of net sales each from the provincial and federal governments.
As we stated in our verification report, through FSAMs the federal
government contributed to the NISA program in excess of this 1 percent
of net sales during NISA's initial year of operation. As a result, more
funding was available to farmers for withdrawals from their NISA
accounts. However, since we have determined that NISA is not specific,
any additional benefits provided under NISA via FSAMs are not
countervailable.
Comment 3: The petitioners state that the GOC has understated the
NISA farm-fed grain benefit for the eighth review
[[Page 52412]]
period. According to petitioners, given the verified data pertaining to
the seventh review, the Department should reject the GOC's information
and calculate farm-fed NISA benefits for the eighth and ninth review
using adjusted data from the seventh review.
The GOC responds that the farm-fed grain calculations provided are
admittedly complex and NISA's whole-farm approach makes it impossible
to account for payments on a product basis. Thus, any calculation
methodology necessarily will involve a number of allocations and
components. In any case, because NISA is non-specific, the GOC
maintains that delving back into these calculations in not necessary.
Department's Position: Since the Department has determined that
NISA is not countervailable, the issue of the accuracy of the GOC's
NISA benefit calculations is moot.
Comment 4: The GOC argues that the Department's preliminary
determination that FIPA does not constitute a single program does not
reflect any reasonably clear articulation of the standard to be
applied. According to the GOC, the Department's preliminary
determination mentions at least eight factors, but does not explicitly
identify which of the eight factors are important, which are reflective
of past Department decisions, or the priority by which the factors
should be considered. The GOC continues that the agency must articulate
with reasonable clarity the reasons for a decision, including the
standards being applied and the weight accorded to significant facts.
As a result, the GOC requests the Department to formulate an
appropriate ``single program'' standard based on factors relevant to
that inquiry and to redetermine whether FIPA is a single program under
that standard.
The petitioners reply that the agency's single program analysis is
not dictated by statute or regulation, but rather, constitutes a simple
factual analysis undertaken by the agency in its role as decision
maker. According to petitioners, when neither the statute nor the
regulations prescribe a particular methodology to be used, the agency's
decision will be considered a reasonable exercise of discretion as long
as it recognizes and considers the relevant facts. In this case, the
Department's explanation clearly references and discusses all of the
evidence relevant to its separate treatment of the FIPA programs.
Department's Position: Neither the countervailing duty statute nor
regulations mandate a specific standard to be used when determining
whether a program 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. See Hercules v. United
States, 673 F. Supp. 454, 463 (CIT 1987). The record shows that we
extensively analyzed the information submitted by the GOC, as well as
our determinations in prior cases, in reaching our determination that
we should examine the components of FIPA as separate programs. (See
Memorandum on Farm Income Protection Act, to Barbara E. Tillman from
CVD team dated April 13, 1994, which is on file in the Central Records
Unit, Room B099, of the Main Commerce Building, FIPA Memorandum.) The
FIPA Memorandum shows that the Department analyzed in great detail the
legislation, structure, and operation of FIPA and its component parts
and compared this set of facts with previous decisions of the
Department. Whether there is one program or multiple programs is a
question of fact, not a legal analysis. Thus, the question can only be
addressed through examination of the facts of record. Although a
comparison of the facts in this case with the facts of other cases in
which we examined the same issue may be part of that analysis, these
are case-by-case factual findings. The FIPA Memorandum clearly explains
the primary facts leading to our conclusion that FIPA encompasses
several separate programs: (1) the FIPA legislation authorizes
agreements between the GOC and the provincial governments to protect
the income of agricultural producers, (2) the federal/provincial
agreements that established the operations of NISA, Gross Revenue
Insurance Program (GRIP), Crop Insurance, and NTSPs retain significant
discretion with respect to FIPA's statutory authority in identifying
the type of beneficiary under each program, delineating administrative
procedures, and setting up funding commitments among the participants,
and (3) NISA, NTSP, GRIP and Crop Insurance have separate and different
eligibility criteria and application procedures.
The GOC does not dispute those facts but believes that the
Department should have reached a different conclusion given other
facts. Specifically, the GOC believes that a ``single legislative
enactment'' should assume an elevated role in our analysis. We disagree
(see Department's Position on Comment 5) and continue to find that the
facts support our conclusion that these are separate programs.
Matsushita Elec. Co. v. United States, 750 F.2d 927, 933 (Fed. Cir.
1984) (the possibility of two inconsistent conclusions does not warrant
reversal of the agency's reasonable determination).
Comment 5: The GOC proposes a new standard for the single program
inquiry which includes three prongs: whether the programs in question
stem from a single legislative enactment, whether the enactment
contains sufficient substantive detail to define the programs with
reasonable certainty, and whether the constituent programs involve at
least some common administrative oversight. By this standard, the GOC
maintains that FIPA should be judged to be a single program.
The petitioners respond that this ``single legislative enactment''
standard contravenes the basic purpose of U.S. countervailing duty law
since a critical component of the subsidy analysis is whether a
program, as applied, provides a specific benefit to an industry.
Moreover, even under the application of this standard, FIPA is not a
single program since, state petitioners, FIPA did not create the
assistance provided under NTSP and Crop Insurance, but attached to
these pre-existing programs the same label associated with the newly
created GRIP and NISA programs. Accepting the GOC's argument would mean
that virtually every time a government enacts a comprehensive
initiative to provide assistance to an industry, the Department would
be precluded from examining the elements of that initiative on an
individual basis.
Department's Position: We disagree with the GOC. As we explained in
Department's Position on Comment 4, there is no legal or regulatory
requirement that the Department develop a ``single program standard.''
In the Department's view, because of the complexity and variety of
subsidy programs, a case-by-case analysis represents a more reasonable
approach than the development of a standardized test for purposes of
this single program analysis. See e.g., Geneva Steel v. United States,
914 F. Supp. 563, 593 (CIT 1996) (``Commerce is afforded considerable
leeway in exacting and applying methodologies to interpret the
countervailing duty statute.'') In any case, the GOC's proposed
``three-pronged standard'' would not permit a full analysis of whether
there are multiple programs or a single program. A complete analysis
requires examining the details of the program--specific purposes of the
component parts, eligibility requirements, types of benefits, the
administering agency, application and approval procedures, and any
administrative discretion.
[[Page 52413]]
Apparently, the GOC also recognizes these additional factors since, in
its rebuttal argument in Comment 1, it argues that NISA and its farm-
fed grain provision are one program because NISA offers only one type
of benefit, one set of eligibility requirements, one administering
agency, one legislative source, and no administrative discretion. The
Department has also examined all of these factors with respect to FIPA
(see FIPA Memorandum) and determined, based on the facts on the record,
that FIPA's components should be treated as separate programs.
Comment 6: The GOC argues that the preliminary determination does
not meaningfully distinguish FIPA from prior cases in which the
Department has found a single program in a complex, multi-faceted
statute. The GOC cites Italian Steel, Mexican Roses and Malaysian Wire
Rod 1 as precedent in which the Department treated a complex set
of laws as a single program. In those cases, the programs provided
different types of benefits and delivered them in different forms. By
contrast, according to the GOC, the FIPA options provide far more
consistent benefits, namely income stabilization, than in the above
cases. Furthermore, the GOC argues that in the sixth review of this
order, the Department determined that the eight revenue insurance
options under the NTSP constituted a single program. Similarly, all
FIPA options derive from a single legislative enactment and provide one
type of assistance, income stabilization. The GOC concludes that these
parallels lead to the conclusion that FIPA is also a single program.
---------------------------------------------------------------------------
\1\ Final Affirmative Countervailing Duty Determination and
Countervailing Duty Order on Carbon Steel Wire Rod from Malaysia (53
FR 13303; April 22, 1988); Final Affirmative Countervailing Duty
Determinations on Certain Steel Products from Italy (58 FR 37327;
July 9, 1993); Results of Remand of Final Negative Countervailing
Duty Determination: Certain Fresh Cut Flowers from Mexico, pursuant
to Court Order in Roses, Inc. v. United States, No. 84-5-00632,
Slip. Op. 90-64 (CIT July 3, 1990).
---------------------------------------------------------------------------
According to petitioners, the GOC's attempts to place FIPA within
the context of the analysis used in Mexican Roses and in the sixth live
swine review are unavailing. For example, the Court reviewing the
Department's decision in Mexican Roses stated that ``[p]rograms
bestowing benefits on different enterprises or industries for different
policy reasons should not escape countervailability simply because the
programs are loosely grouped under one heading, here FIRA.'' 743 F.
Supp. at 880. And, regarding the Department's finding with respect to
NTSP, the GOC ignores that, without the individual Tripartite
agreements that comprise NTSP, the program would not exist. By
contrast, petitioners state that FIPA would clearly continue to exist
even if one of its individual component programs did not. Similarly,
the NTSP agreements operate the same way for each benefiting commodity,
while there are clear differences in the operation of the four FIPA
components.
Department's Position: We disagree with the GOC. In the FIPA
Memorandum, we clearly stated why we considered the fact pattern in
Malaysian Wire Rod and Italian Steel as dissimilar to the fact pattern
regarding FIPA. In both cases, an overarching program consisted of
several components. Companies could only obtain benefits from the
component programs by following the application and eligibility
requirements established at the overarching program level. Once
eligible and approved under the overarching program, there was no
restriction on the type of benefits that could be received under the
program components. FIPA, on the other hand, allows the federal/
provincial agreements to establish different application and
eligibility procedures. There is no general eligibility under FIPA,
which automatically confers eligibility under NISA, NTSP, GRIP, and
crop insurance. Agricultural producers subject to a NTSP agreement are
ineligible for either NISA or GRIP unless granted eligibility under the
relevant NTSP federal/provincial agreement. Furthermore, GRIP and crop
insurance do not cover hogs or other livestock because their acreage-
based calculations are inherently inapplicable to livestock.
Also, the GOC's cite to Mexican Roses is not persuasive support for
finding FIPA a single program. In that case, the Department reaffirmed
its position that the agricultural sector constitutes more than a
single group of industries for purposes of determining specificity and
then found that loans provided to Mexican flower producers granted
under the Funds Established with Relationship to Agriculture (FIRA)
were not specific since they were not targeted to exports, nor provided
to a specific industry or group of industries. Since Mexican flower
producers only used loans available under FIRA, we had no need to
address whether the other benefits available under FIRA constituted one
or several programs. We found that the assistance used by flower
growers was provided to more than a specific enterprise or industry or
group thereof. Also, in reviewing this case, the CIT stated that
individual programs should not escape countervailability simply because
they are loosely grouped under one heading. See Roses, Inc. v. United
States 743 F. Supp. 870, 880 (CIT 1990).
We have treated the eight revenue insurance plans that comprise
NTSP as one program because, unlike FIPA, we determined that the
relevant legislation established a framework for providing a single
type of benefit for a single purpose. Each of the insurance plans
offered the same types of benefits, had the same application
procedures, and the same funding mechanisms. Live Swine from Canada;
Final Results of Countervailing Duty Administrative Review, 59 FR 12243
(March 16, 1994) (Swine VI) at 12245. Likewise, as even the GOC
acknowledges, we determined that NISA and its farm-fed grain provision
were one program since they offered one type of benefit, one set of
eligibility requirements, one administering agency, one legislative
source, and no administrative discretion.
As we explained in the FIPA Memorandum, we determined that the
facts pertaining to the FIPA programs were more similar to several
cases where the Department determined to treat a program as several
components, e.g. Canadian Groundfish, Thai Bearings, and Canadian
Magnesium.2 For instance, the facts in the FIPA analysis are
similar to Canadian Groundfish where Economic and Regional Development
Agreements (ERDAs) provided the legal basis for departments of the
federal and provincial governments to cooperate in the establishment of
economic development programs. Pursuant to the ERDA, subsidiary
agreements were signed which established programs, delineated
administrative procedures and set up relative funding commitments of
the federal and provincial governments. We determined that the ERDAs
acted as umbrella legislation to achieve the broad goal of economic
development whereas the subsidiary agreements actually provided for the
operation and administration of the programs. Therefore, for purposes
of analyzing specificity, we examined each subsidiary agreement as a
separate program, which the CIT affirmed. See
[[Page 52414]]
Comeau Seafoods vs. United States, 724 F Supp. 1407, 1416 (CIT 1989).
---------------------------------------------------------------------------
\2\ Final Affirmative Countervailing Duty Determination on
Certain Fresh Atlantic Groundfish from Canada (51 FR 10041; March
24, 1986); Final Affirmative Countervailing Duty Determination and
Partial Countervailing Duty Order on Ball Bearings and Parts Thereof
from Thailand (54 FR 19130; May 3, 1989); and Final Affirmative
Countervailing Duty Determinations on Pure Magnesium and Alloy
Magnesium from Canada (57 FR 30946; July 13, 1992).
---------------------------------------------------------------------------
Thai Bearings and Canadian Magnesium are also similar to the
present case. In both cases, a number of different government
activities were authorized by a broadly encompassing statute. While the
statute outlined the broad goals and parameters of the legislation, the
individual component programs were much more specific regarding the
eligibility requirements, application procedures, and purposes. As a
result, the Department examined each component program under the
statute individually. Thus, while the overall goal of FIPA is income
stabilization, each component has its own specific purpose (e.g.,
NTSP--insurance against market price fluctuations, Crop Insurance--
insurance against weather related disasters, GRIP--gross revenue
insurance, and NISA--whole-farm income loss protection), its own
eligibility requirements, its own application and approval procedures,
and its own administration.
Thus, the GOC's arguments to the contrary notwithstanding, the
Department's decision that FIPA should be treated as several separate
programs is consistent with past cases.
Comment 7: The GOC argues that pervasive analytical flaws led the
Department to its incorrect preliminary finding that the FIPA options
are not integrally linked. First, the GOC argues that the Department
confuses FIPA's purpose with risk, delivery mechanisms and benefits.
The GOC argues that purpose is the end to be obtained, which in FIPA's
case is farm income stabilization. The risks addressed by the FIPA
options are the reason for stabilization. If the end is income
stabilization, then the means to that end are crop insurance, revenue
insurance, and net income stabilization accounts. The Department's
assertion that FIPA offers different types of benefits is incorrect.
FIPA offers one type of benefit which is income stabilization in the
form of financial payments keyed to historical performance. In Swine
VI, the Department recognized that NTSP, which is a FIPA option,
provided for ``only one type of assistance, income stabilization (59 FR
12245).''
Second, the GOC also argues that the Department translates FIPA's
policy of equitable treatment into a demand for proof of equal dollar
payouts. Because the Department could not find such proof on the
record, it concluded that evidence of FIPA's policy to treat
commodities equally is inconclusive. This demand for equal dollar
payouts misconstrues the meaning of FIPA's equitable treatment.
Furthermore, the GOC claims that equal dollar payouts is impossible
given the varied nature of the agriculture sector, it would lead to the
precise type of inequity that FIPA was designed to avoid, and it would
impose a burden of proof that would be impossible for the GOC to meet.
The GOC argues that the Department has interpreted the integral
linkage regulation as including an overriding requirement of explicit
proof that apparently complementary programs are connected to an
overall design, through an express statement in their enabling
legislation or other authoritative source. The GOC argues that in
applying this factor to FIPA, the Department focused on the
``complementary purpose'' aspect, and compared NTSP with the other
programs to ascertain whether basically the same type of assistance is
being provided to distinct users. The GOC further argues that the
Department's same program/different users paradigm is too limited and
that there is no logical or legal reason to limit the complementary
aspect of related programs to the user groups, and rule out the
paradigm of complementary programs/same users. Collectively, the FIPA
components supply what is lacking in each component, and thereby
produce the equivalent of a single program coverage. Therefore, argues
the GOC, the Department's view of the meaning of a complementary
program is more narrow than the term or the regulation warrants.
The GOC also argues that the Department's preliminary analysis of
the administration of the programs and the manner of funding
inappropriately focuses on the day-to-day operational details of each
option rather than their key design features, which is inconsistent
with the regulatory considerations. The Department has interpreted the
administrative and funding factors as calling for similar, if not
exactly identical, programs. As stated in Swine VI, the integral
linkage regulation ``does not require that the programs be identical.''
Swine VI (51 FR 10041, 10046). However, the Department does not account
for the fact that at the day-to-day operational level, the
administration of the FIPA options will necessarily have differences.
These differences are unavoidable in a program that keys benefits to
farm income, applies in a country as large and climatically varied as
Canada, and integrates certain preexisting administrative structures
into a comprehensive new scheme. They are also unavoidable given the
different product arrays on Canada's farms and the income risks to
which these arrays of production are exposed. Furthermore, the GOC
argues that the preliminary notice neither addresses the industry-
driven reasons for the differences in some program details nor the
Department's past statement that ``differences between the nature and
administration of the programs'' will not defeat an integral linkage
claim if they ``are necessary because of differences in the nature of
the industries being offered benefits * * *'' Swine VI (59 FR 12246).
In effect, the focus on operational details creates a different and
more stringent test than the regulation reasonably permits, and the
approach is contrary to basic tenets of administrative law.
Petitioners counter that the GOC's interpretation of the
Department's integral linkage analysis ignores the Department's well-
established practice, grounded in the legislative history, of
interpreting the integral linkage test in a stringent manner.
Petitioners further counter that the GOC's arguments are inconsistent
with the Department's established interpretation of specificity,
integral linkage, and the purpose factor in particular. For example, in
Swine VI, the Department stated that: ``[p]ermitting respondent
governments to loosely connect two or more programs which are otherwise
designed to serve different purposes would create just the type of
loophole the Department seeks to avoid. Besides being contrary to the
Department's specificity practice, doing so would be contrary to
Congress' express requirement in the legislative history that the
Department should avoid taking an `overly narrow' or `overly
restrictive' view of its authority to determine specificity . . . This
statement implies that Congress intended the Department to view its
authority to find specificity broadly and its authority to create
exceptions to its normal approach narrowly.''
Petitioners support the Department's finding that the record lacked
sufficient evidence demonstrating a policy of equal treatment across
all FIPA program options. The GOC's argument fails principally because
it ignores the threshold requirement of the integral linkage inquiry,
that is, that any allegation of linkage must be supported by objective,
documentary evidence. Given this standard, the Department is entitled
to demand more than theoretical statements and promises that a program
should or might, in practice, result in equal treatment.
Petitioners also counter that the Department is not asking that
each FIPA participant receive the same amount of benefits, but rather,
is merely requiring that program funding mechanisms and
[[Page 52415]]
levels establish similar burdens and offer similar rewards. This is a
reasonable demand given the stringent nature of the integral linkage
test. It is within the Department's discretion to elaborate on each
factor listed in the Proposed Regulation, and the integral linkage test
was intended to be interpreted stringently.
Finally, petitioners counter that the Department's analysis
reflects an understanding that the inevitable differences in the FIPA
programs necessarily require different administrative approaches that,
in turn, prevent the programs from being identical. Yet even allowing
for these differences, the Department has concluded that the
distinctions in program funding and administration are sufficiently
pronounced to preclude an integral linkage finding. Thus, the
Department has adequately balanced the record evidence.
Department's Position: As we stated in the preliminary results, to
determine whether these programs are integrally linked we examined the
purposes of each program, the administration of each program, evidence
of a government policy to treat industries equally, and the funding
mechanism of each program. In conducting this analysis, we must
determine whether the respondent government has demonstrated ``through
objective record evidence that, due to an overall policy or national
development plan, it created two or more programs with the express
purpose that they complement one another, not only in terms of breadth
of availability and coverage, but in similarity of intent, purpose, and
administration.'' Live Swine from Canada; Final Results of
Countervailing Duty Administrative Review (59 FR 12243, 12246; March
16, 1994). Moreover, because the integral linkage policy was created as
an exception to our specificity analysis, ``we have interpreted the
standard narrowly for granting an affirmative integral linkage
determination.'' Id. at 12245.
Linkage analysis is conducted on a program-by-program basis, to
determine whether two or more programs can be treated as one program
for purposes of specificity. The first factor calls for an analysis of
the purpose of the programs, as stated in the enabling legislation. The
GOC misconstrues the application of this factor because it claims that
the stated purpose of FIPA, which is income stabilization, necessarily
satisfies this criterion. However, in conducting an integral linkage
analysis, the Department's practice is to examine the stated purpose of
the alleged complementary programs not the purpose of the umbrella
legislation enacted to unify the programs. See, e.g., Canadian
Groundfish at 10041, 10046. Consistent with this practice, we have
analyzed the purpose of each separate program under FIPA.
The purpose of crop insurance and a component of GRIP is to protect
the farmer against the risks of weather-related losses. The purpose of
the other component of GRIP and NTSP is to protect the farmer against
the risk of market price fluctuations. The purpose of NISA is to
stabilize the farmer's overall financial performance. These covered
risks are prerequisite conditions that trigger the payment. They are
essential to the design of each separate program.
The GOC reminds us that in Swine VI, the Department recognized that
NTSP provided for ``only one type of assistance, income
stabilization.'' The GOC asserts that FIPA also offers one unique type
of benefit--income stabilization. As a result, the GOC states that FIPA
and NTSP offer the same type of benefit.
We disagree with the GOC. First, as discussed in the FIPA
Memorandum, FIPA does not directly provide benefits. The benefits are
provided at the level of NTSP and the other component programs under
FIPA. Second, the Department has never determined that FIPA and NTSP
have the same purpose. In Swine VI we accepted ``income stabilization''
as the purpose of NTSP because in that review we were examining the
specificity of NTSP as a single program. In that context, a critical
examination of the purpose of the program was not necessary. In this
review, we reexamined the purpose of NTSP in the context of linkage
analysis. In this analysis, the purpose of the program is a key factor
in determining whether two or more programs should be considered as
one. Therefore, the Department scrutinized this factor more thoroughly
and found that the purpose of NTSP is not income stabilization: the
purpose of NTSP is to protect the farmer from the risk of market price
fluctuations.
We disagree with the GOC's contention that the Department should
assess the complementary nature of programs under a ``complementary
programs/same user'' paradigm. If the purpose of the analysis was to
assess whether all of the farmer's needs were covered under several
programs, then a ``complementary programs/same user'' paradigm would be
appropriate. However, the purpose of the specificity test is to
determine how widely used are the benefits of a certain program. Thus,
the purpose of an integral linkage analysis is to determine whether two
or more programs providing the same type of benefit to different users
can be considered as one program in order to conduct a specificity
analysis. If the same type of benefit is being bestowed, the users of
the programs would have to be different. Therefore, for purposes of the
specificity analysis, we find that the paradigm of ``same benefit/
different users'' is appropriate in establishing whether two separate
programs should be considered as one for determining specificity. If
the purpose of the analysis was to assess whether all the farmers'
needs were covered under several programs, then we would probably use
the paradigm put forth by the GOC, i.e., ``complementary programs/same
user.'' However, that is not the nature of the inquiry we are
conducting here. For example, technology development programs might
include offering loans, grants and tax credits to companies purchasing
technology. These programs would complement each other because they
have the same general purpose and the same users, but a different type
of benefit would be provided, therefore, the Department would usually
analyze each program separately. Therefore, for purposes of linkage
analysis, we are continuing to look for similar programs with different
users. See, e.g., Zenith Radio Corp. v. United States, 437 U.S. 443,
450-51 (1978) (deference should be accorded to the Department's
reasonable interpretations of the countervailing duty statute).
The second factor calls for ``evidence of a government policy to
treat industries equally.'' Under this factor the Department examines
objective, documentary evidence of the existence of such policy. We
determined that there was insufficient evidence on the record to
ascertain whether such a policy exists. Far from requiring a ``proof of
equal dollar pay-outs'', the Department in this case examined the GOC's
policy statements contained in the FIPA legislation and in the
Parliamentary debates. We also examined the record for any data
supporting those policy statements. Such data could have been, for
instance, a preliminary study comparing different levels of premiums
with different level of benefits for the various programs, used by the
drafters of the legislation, or, alternatively, data showing how the
GOC actually evaluated ``equal treatment'' based on experience under
the new programs. The GOC could not provide such data. Absent such
data, the Parliamentary debates and the FIPA legislation cited by the
GOC fail to demonstrate a government policy of
[[Page 52416]]
equal treatment. As noted in Swine VI at 12246, the supporting evidence
must go beyond simply identifying a broad underlying goal encompassing
several otherwise distinct programs which provide access to benefits to
all or most eligible industries. In the seventh period of review, our
conclusion was that ``while we recognize that the Parliamentary Debates
language reflects an intent to treat commodities equally, we have no
evidence that such a policy has been implemented.''
We disagree with the GOC that in analyzing the third factor, the
administration of the programs, and the fourth factor, the manner of
funding, the Department wrongly focuses on day-to-day operational
details of each program rather than their key design features. In
analyzing the administration, we examine whether the administration of
the programs is consistent with a structure that would allow for the
same type of benefits to be provided to different users. In analyzing
the manner of funding, we examine whether the levels of funding and the
frequency of funding would allow for the same type of assistance to be
provided to different users in a consistent manner.
We find that although there are some common features in the
administration, and funding is provided by the same three sources, the
federal and provincial governments and the producers, there are
fundamental differences in the administration and funding mechanisms.
These differences are due to the diversity of the programs. Each
program is funded for a specific type of assistance but, more
importantly, each participant contributes different percentages.
Comment 8: Petitioners argue that in all three reviews the
Department should calculate the benefit from the SHARP program based on
the full outstanding balance in the SHARP fund plus accrued interest.
According to petitioners, the SHARP deficit accumulated over the life
of the program due to the chronic imbalance between contributions and
payouts. Although loans from the Government of Saskatchewan (GOS) to
finance the deficit were in theory to have been repaid, petitioners
claim that the size of the deficit makes it likely that deficits
existed every year, that the provincial government lent money to the
program every year, and that no repayment was ever made. Thus,
petitioners argue, the remaining deficit (i.e. the total fund deficit
minus the amount of the deficit countervailed in the various reviews)
constitutes a subsidy that has not been countervailed.
Petitioners further argue that the outstanding principal (deficit)
should be adjusted upwards to account for interest accrued since
October 31, 1989. In doing so, petitioners take issue with the
Department's statement in the preliminary results that ``when the
balance in the SHARP account was insufficient to cover payments to
producers, the provincial government provided financing on commercial
terms.'' On the contrary, petitioners point out, the SHARP annual
report states that no interest was charged on these loans subsequent to
October 31, 1989. Therefore, the Department should add accrued interest
to the outstanding principal amount.
The CPC counters that the same argument was made by petitioners and
rejected by the Department in the sixth review, and therefore should
also be rejected in these reviews, given that petitioners have
presented no new evidence on this topic. As a result, the Department
should continue to base its calculation of the SHARP benefit on one-
half of the outstanding deficit during the seventh and eighth reviews.
According to the CPC, the ninth review, during which a final decision
was made on the disposition of the deficit, is the first appropriate
point for an examination by the Department as to whether the loan
forgiveness constitutes a countervailable subsidy. With respect to this
issue, the CPC argues that the deficit represents payments already made
to hog producers and already countervailed.
Department's Position: We disagree with petitioners that the full
amount of the SHARP deficit should be countervailed in these reviews.
The deficit is a result of loans provided to SHARP by the provincial
government to cover payouts when the fund balance was at zero. As such,
the deficit amount represents payments already made to producers. We
have previously countervailed one-half of all SHARP payouts during
prior reviews of live swine. See e.g., Swine VI, at 12260. Thus, to the
extent that one-half of the payment amount (i.e., the amount attributed
to provincial government contributions) was countervailable under the
Department's methodology, the Department has in fact already
countervailed one-half of the deficit in previous reviews, when the
payments to the producers were made. To calculate the benefit in these
reviews based on the entire amount of the deficit, as petitioners have
suggested, would be to countervail twice the amount of provincial
government contributions. The CPC's argument not to countervail any of
the deficit amount is equally flawed. The CPC recognizes, based on its
own figures, that the Department has countervailed only half of the
previous payments made to hog producers that the deficit represents.
Therefore, our decision to calculate the benefit to swine producers
based on one-half of the deficit amount remains unchanged whether the
benefit is represented by the accumulated interest on the unpaid
deficit (seventh and eighth reviews) or by the forgiveness of the
outstanding deficit amount (ninth review).
Furthermore, we disagree with petitioners that interest accrued
since 1989 should be added to the outstanding principal amount (i.e.,
the deficit) to derive the full amount treated as a grant in the ninth
review. In previous reviews, the Department relied on the GOS's
statement that ``financing was provided on commercial terms.'' During
the sixth review, when it became clear that interest on the loans to
the SHARP fund stopped accruing in 1989, the Department countervailed
this interest benefit. Swine VI at 54118. However, when the Department
first examined the SHARP deficit in the sixth review, the disposition
of the principal remained uncertain, thus allowing for the possibility
that the loans would be repaid (See March 2, 1994 Memorandum for
Barbara E. Tillman from team regarding Calculation Methodology for
SHARP, on file in the public file of the CRU). For this reason, we
determined that conducting a benefit analysis of the deficit was
unwarranted. Swine VI at 12260. Therefore, the Department determined
that the most appropriate methodology to account for the interest
benefit was to treat the deficit as a non-interest bearing short-term
loan and to expense the benefit during the review period. Swine VI at
12260. We followed this methodology in the seventh and eighth review
periods because there had still been no final decision on how to deal
with the deficit. Adding accrued interest since 1989 to the outstanding
principal amount treated as a grant in the ninth review, other than the
interest which accrued during the ninth review period before the
deficit was written off, would be inconsistent with the methodology
followed in Swine VI and would countervail twice the interest benefit
for the period covered by the sixth, seventh, and eighth reviews.
Therefore, we determine that accrued interest since 1989 should not be
added to the outstanding deficit amount to calculate the amount of the
grant bestowed in the ninth review. However, we have added to the
written off deficit, treated as a grant in the ninth review, the amount
of
[[Page 52417]]
interest accrued from the beginning of that review period until the
date on which the deficit was written off. (See also, Department's
Position on Comment 10).
Comment 9: Petitioners argue that the Department should use a
medium-term interest rate to calculate the SHARP benefits for the
seventh and eighth review periods. According to petitioners, the
Department's choice of a short-term rate, normally defined as a rate
for a loan with a maturity of one year or less, is unsupported by the
record. To the contrary, state petitioners, evidence on the record in
the seventh and eighth reviews regarding the uncertainty of the
treatment of the SHARP deficit more readily supports the use of a
medium-term benchmark for calculating the respective interest benefits,
as it reflects more accurately that a range of possible outcomes
existed.
The CPC argues that the Department's selection of a benchmark
interest rate is consistent with the methodology followed in the sixth
review. Not until the ninth review was a final decision made on the
deficit. The CPC asserts that no new information was available to the
Department in the seventh and eighth reviews, and that nothing on the
record supports petitioners' suggestion that a medium-term rate would
be more accurate than the short-term rate the Department has chosen.
Department's Position: We agree with the CPC. To calculate the
benefit to hog producers from the outstanding balance of the deficit,
the Department has treated the deficit as a short-term loan Swine VI at
12260. As we stated in the Department's Position on Comment 8, it is
appropriate to use our short-term loan methodology for this purpose
because the possibility existed, from one review period to another,
that the GOS would make a final decision on the disposition of the
deficit. Indeed, petitioners correctly point out that there is no
information on the record in the seventh or eighth review indicating
what would happen to the deficit during the next review period.
Therefore, we determine that a short-term rate is still the most
appropriate benchmark to calculate the interest benefit on the deficit.
Comment 10: Petitioners argue that, if the Department continues to
use a short-term benchmark to calculate the SHARP benefit, it should
use rates published by the International Monetary Fund (IMF), rather
than by the Organization for Economic Cooperation and Development
(OECD), as OECD rates underestimate the benefit provided to swine
producers. Petitioners point out that IMF short-term lending rates
``that chartered banks charge on large business loans to their most
credit-worthy customers,'' presumably the most attractive rates
available, are consistently higher than the OECD rates used by the
Department. Therefore, according to petitioners, use of OECD rates is
inconsistent with the Department's expressed preference for relying on
``typical'' or commercially available rates.
The CPC points out that the Department has previously used OECD
rates (in the sixth review), which are provided to the OECD by the GOC
and are based on Bank of Canada statistics. Therefore, the CPC
concludes that petitioners' argument is without merit.
Department's Position: We have reexamined the OECD-published
interest rates for Canada used in our preliminary results and
determined that they are not appropriate to use as benchmark rates for
purposes of our calculations. Though provided by the Bank of Canada, as
the CPC correctly points out, the OECD rates that the Department used
represent chartered banks' interest rates payable on 90-day deposit
receipts. As such, they are not appropriate to use as benchmarks for
commercial loans. Petitioners are, therefore, correct in their
assertion that the lending rates published by the IMF are more
appropriate than the OECD deposit rates. Therefore, in the seventh,
eighth, and ninth review periods, we have modified our calculations,
using short term lending rates published by the IMF rather than the 90-
day deposit receipts rate published by OECD.
Comment 11: Petitioners claim the Department has underestimated the
benefit to hog producers resulting from the write-off of the SHARP
deficit at the end of the ninth review period. According to
petitioners, because the loans were forgiven on the last day of the
review period, the Department's treatment of the loan forgiveness as a
non-recurring grant, allocated over three years, does not account for
the additional benefit in the form of interest not accruing on the
outstanding loan balance. Petitioners argue the Department should
modify its calculations to reflect this additional benefit.
Department's Position: Section 355.44 (k) of the Proposed
Regulations states that the forgiveness by a government of an
outstanding debt obligation confers a countervailable benefit equal to
the outstanding principal and accrued unpaid interest at the time of
the forgiveness. Because the deficit represents, in effect, an interest
free loan, it is appropriate to include as part of the derived grant
value, the amount of interest accrued at the time when the deficit was
written off. Such an approach is consistent with our methodology in the
seventh and eighth reviews, in which we calculated as the benefit the
amount of interest which should have been paid. Accordingly, we have
modified our calculations for the ninth review period and are adding to
the deficit the amount of interest accrued during the review period up
to the date on which the SHARP deficit was written off. Consistent with
our prior practice in this case, and as explained in the Department's
Position on Comment 8, we are treating one-half of the deficit amount
as a non-recurring grant. We have allocated the total grant amount
(i.e., one-half of the deficit amount, which equals the provincial
government's contribution, plus the accrued interest) over three years,
the average useful life of assets in the live swine industry.
Comment 12: Petitioners disagree with the Department's source of
feed and grain consumption information used to calculate the benefit
from the ACBOP program. According to petitioners, the Department had
available on the record in the seventh review the C.R.D. study, a
recent comprehensive source of feed and grain consumption information
published by Alberta Agriculture. This document, assert petitioners,
provides a better reflection of feeding practices of hog producers in
Alberta than the unpublished survey relied upon by the Department,
which presumably represented more accurate information than that used
in prior reviews. The Department should therefore use data from the
C.R.D. study, which would allow it to calculate more accurately
complete swine diets, including the significant quantity of grain
consumed by sows and boars.
The CPC argues that the Department appropriately used specific and
detailed data on hog grain consumption that was verified extensively.
According to the CPC, petitioners have ignored this detailed and well-
documented record and have instead recycled an argument that the
Department rejected in the sixth review. The CPC maintains that
petitioners' preferred source, the C.R.D. study, does not contain all
of the information necessary for the calculations. The purpose of such
studies, argues the CPC, is to provide producers with data on possible
alternatives to standard practices. Accordingly, the Department should
continue to employ the ACBOP calculation methodology used in the
preliminary results.
[[Page 52418]]
Department's Position: The Department has analyzed the C.R.D. study
referred to by petitioners and determined that it is not as
comprehensive as petitioners assert. The study does not include
information about the composition of ``starter'' diets, which is
necessary to the ACBOP calculation. By contrast, the information relied
upon by the Department, taken from the Jaikaran study of hog diets and
feed consumption, contains data on feed consumed during both the
``creep'' and ``starter'' phases, as well as during the later stages of
hog growth. Indeed, the Department examined the summary of the results
of the Jaikaran study at verification and found that the document
reflects the feed consumed, pigs' weight gain, percentage of grain in
the feed, and feed-to-grain ratios for each stage of growth. See
Verification Report at 32. Thus, the study used by the Department
represents the most complete available source of information necessary
for the ACBOP calculation methodology. The Department's reliance on the
Jaikaran study as the source of feed and grain consumption information
therefore remains unchanged.
Comment 13: Petitioners argue that the Department's preliminary
determination to classify the New Brunswick Hog Price Stabilization
program as ``terminated'' is inconsistent with its decision to monitor
the program until 1999 using a ten-year allocation period as stated in
the Memorandum from The Live Swine Team to Barbara E. Tillman regarding
Termination of New Brunswick Hog Price Stabilization Program, May 15,
1996 (Stabilization Plan Memo). However, petitioners agree that three
years reflects the useful life of the assets in the hog industry and
that this period is the appropriate measure for allocating grants in
these reviews. To the extent the Department relies on the three-year
allocation period, its arguments do not apply.
Department's Position: We acknowledge the discrepancy between the
Stabilization Plan Memo and the Department's position in the
preliminary results. According to the Internal Revenue Service tables,
the average useful life of the assets in the hog industry is three
years; therefore, the correct allocation period is three years rather
than a ten-year period as indicated in the Stabilization Plan Memo.
Because the program was terminated on March 31, 1989, the last year in
which benefits could have been used by swine producers was 1991-92.
However, New Brunswick did not export to the United States during that
period. Therefore, as stated in our preliminary notice, we consider
this program to be terminated, and will not continue to monitor this
program.
Comment 14: Petitioners argue that the Department should reclassify
the Prince Edward Island Pro Pork Assistance Program (Pro Pork Program)
and the Cash Flow Enhancement Program (CFEP) from ``programs
preliminarily found not to confer subsidies'' to ``programs not
benefitting the subject merchandise.'' According to the petitioners,
the Pro Pork Assistance Program is de jure specific to hog producers,
and hence, countervailable as a matter of law. The program is similar
to the Ontario Pork Industry Improvement Program, which the Department
has countervailed in previous Live Swine reviews. (Swine VI at 54120).
However, to the extent the Department continues to view the program's
alleged emphasis on slaughter hogs as a reason for not countervailing
Pro Pork benefits in the seventh period of review, it should, at a
minimum, recognize that its decision is only factual, and conclude
merely that the program does not benefit the subject merchandise. This
classification of the Pro Pork program in this manner will allow the
Department to countervail the program in the future in the event that
it finds that benefits are available to live swine.
Likewise, petitioners argue that the Department improperly
determined that the CFEP advances do not provide countervailable
benefits to hog producers because the advances are tied to products
other than the subject merchandise. Petitioners contend that finding
that benefits are not tied to the subject merchandise is different from
finding that benefits are not countervailable per se. Indeed, the
Department did not engage in a definitive specificity analysis to
determine whether CFEP benefits could be countervailed. Under these
circumstances, the Department should not have classified CFEP advances
with programs for which it had expressly made a non-countervailability
finding.
The CPC rebuts petitioner's comments stating that the Department is
only required to determine whether or not subsidies are received by
producers of the subject merchandise. Once the Department has
determined that a program does not benefit the subject merchandise, its
practice is to conclude that the program is found not to confer
subsidies.
Department's Position: We disagree with petitioners with respect to
our classification of both programs. We determined that the Pro Pork
Program requires producers to have their entire swine production
slaughtered in Prince Edward Island or New Brunswick and payments are
made only on dressed pork after slaughter. Therefore, live swine
exported to the United States are not eligible for and cannot receive
assistance under this program. The Pro Pork Program is distinguishable
from the Ontario Pork Industry Improvement Program; this program
provided grants to Ontario live swine producers to enable them to
improve their productivity, profitability, and competitive position. As
such, live swine exported to the United States were not precluded from
receiving assistance under the program. Regarding the CFEP, cash
advances are limited by the statute to farmers who produce crops for
sale and not for consumption on the farm. Therefore, a farmer that uses
crops to raise hogs cannot qualify for or receive cash advances under
this program. Accordingly, we determined that CFEP did not provide a
countervailable subsidy to the subject merchandise. Thus, in accordance
with our practice, we determine that neither program confers
countervailable subsidies on the subject merchandise.
Comment 15: Petitioners argue that the Department has
underestimated the benefits received under FISI. According to the
petitioners, the Department's preliminary calculations fail to
recognize that payments to swine producers under FISI are not limited
to so-called ``compensations,'' but also include advances; both forms
of FISI payments provide the same overall type of benefit to Quebec hog
farmers. The Department should modify its FISI calculation methodology
to include both compensation payments and advances made to hog
producers during the period of review. Further, the petitioners argue
that the Department should countervail FISI payments on a cash basis
rather than on an accrual basis.
According to the GOQ, adding advances to compensation payments
would lead to double-counting, because advances are already accounted
for in the total compensation figures used in the calculations. The GOQ
states that the Department verified that the figures used in the
seventh review calculations include compensation and advance payments
to hog and piglet producers during the period of review. The GOQ
further states that the figures used in the eighth and ninth reviews as
FISI payouts in the calculations also account for advance FISI payments
to hog and piglet producers.
With respect to whether the Department countervails FISI payments
on a cash basis or on an accrual basis,
[[Page 52419]]
the GOQ counters that the Department has in fact used in its
calculations FISI payment figures recorded on a cash basis. Therefore,
the Department does not need to make any changes to the calculations of
the alleged FISI benefits to producers.
Department's Position: We disagree with the petitioners. At
verification in the seventh review, we noted that advance FISI payments
are accounted for in the total compensation figures. (See
Countervailing Duty Order on Live Swine from Canada: Verification
Report (Public Version) dated June 8, 1994, on file in the Central
Records Unit, Room B-099, of the Main Commerce Building (Verification
Report) at 47-48.) Similar figures were submitted in the eighth period
of review. Further, information submitted in the questionnaire
responses for the eighth and ninth reviews, indicates that to calculate
the amount to be paid out to producers covered under FISI at the end of
the period, the Regie subtracts FISI advances from total compensation.
FISI advances do not increase the total compensation amount. (See
February 28, 1994 Questionnaire Response at page III-10, 11; February
27, 1995 Questionnaire Response at VI-700.) Therefore, the Department
has appropriately accounted for advance FISI payments to swine
producers in the seventh, eighth and ninth reviews in its calculations.
With respect to the petitioners' claim that the Department should
countervail FISI payments on a cash rather than accrual basis, it is
the Department's normal practice to calculate FISI benefits using
figures recorded on a cash basis. In the seventh review, the Department
verified the cash-based figures reported in the questionnaire response.
The discussion at verification regarding cash versus accrual was only
for the purpose of reconciling data submitted in the questionnaire
responses to the Regie's financial statements which are maintained on
an accrual basis. (See Verification Report at 47.) In the seventh
review calculations, we used FISI payment figures on a cash basis as
provided in the questionnaire response. In the eighth and ninth
reviews, we were consistent and have used the cash basis figures as
provided in the record of those reviews. Therefore, the Department has
appropriately calculated the FISI benefits using figures reported on a
cash basis of accounting.
Comment 16: The petitioners argue that the Department has
underestimated the benefits from the FISI program because it failed to
address the accumulated deficit in the FISI account. According to the
petitioners, because payments to producers have exceeded ordinary FISI
scheme funds, the swine funds have incurred deficits financed by the
GOQ. Therefore, the petitioners state that the GOQ's funds have
accounted for well over two-thirds of the program funding, and the
producer funds for well under one-third of total payouts. The
petitioners argue that in order to derive the most accurate FISI
benefit calculation, it is essential that the Department not impute
more than the amount actually contributed by producers during the
instant reviews or any future review periods to the producer
contributions. The petitioners further argue that because the
Department has consistently assumed that one-third of all FISI payments
to producers have come from producer contributions, the deficit which
has been financed entirely by the GOQ, has only been partially
countervailed in past reviews. Thus, the petitioners urge the
Department to countervail as an additional amount of FISI benefits the
remaining portion of the deficit that has not been countervailed in any
previous reviews.
The GOQ states that it is the Department's well-established
practice not to investigate deficits in stabilization insurance plans
unless and until those deficits are forgiven or interest ceases to
accrue. According to the GOQ, the deficits to the hog and piglet FISI
accounts have not been forgiven, and there is no indication in the
records of the instant reviews that the deficits would be forgiven.
Further, the GOQ states that the FISI accounts in deficit continue to
accrue interest.
Department Position: We disagree with the petitioners. The
Department's practice is to countervail a benefit only when it affects
the recipient's cash flow. Section 355.48(a) of the Department's
Proposed Regulations specifically states that ``the cash flow and
economic effect of a benefit normally occurs when a firm experiences a
difference in cash flows, either in payments it receives or the outlays
it makes, as a result of its receipt of the benefit.'' See also Final
Affirmative Countervailing Duty Determination: Grain Oriented
Electrical Steel from Italy, (59 FR 18357, April 18, 1994), and Final
Results of Reviews: Industrial Phosphoric Acid from Israel, (56 FR
50854; October 9, 1991).
The existence of a deficit in the FISI account balance does not
necessarily constitute a countervailable benefit to the producers. For
instance, when the Department found in the sixth review of this order
that the SHARP program terminated with a deficit and that interest on
the loans resulting in the deficit had stopped accruing, the Department
found that the only benefit to the producers at that time was accounted
for by the non-accrual of interest on the outstanding balance. See
Swine VI at 26884.
In these reviews, there is no evidence that demonstrates any cash
flow impact on the producers as a result of the deficit. The amount of
pay-outs received is not affected by the deficit. As indicated in
several record documents (see, e.g., the complementary notes to the
Regie's Financial Statements, February 27, 1994 questionnaire response
at VI-692) and discussed in the preliminary results of these reviews,
whenever the balance in the FISI account is insufficient to make
payments, the GOQ lends the needed funds to the Regie. These advances
are subject to repayment by the Regie and accrue interest (see, e.g.,
line item ``interest on loan'' in the income statements of the FISI
fund in the ninth review questionnaire response, February 27, 1994 at
VI-689). These loans are properly recorded on the books of the Regie,
because they represent a liability of the Regie. The record of each
review shows that premiums paid by producers are not reduced by these
loans. Premiums are adjusted each year to account for the debt burden,
including financing expenses, under each FISI scheme. These adjustments
permit the Regie to finance any debt and its related financing expense
one-third through producer assessments, and two-thirds through
provincial contributions. Thus, unlike the deficit in the SHARP
program, the FISI account deficit has not been written-off and interest
has not stopped accruing. Accordingly, we have not taken into
consideration the deficit in the FISI account in calculating the
benefit to swine producers in these three periods of review.
Comment 17: The GOQ argues that the Department cannot rely upon its
decision in the sixth review to determine that FISI is countervailable
in these reviews (seventh, eighth, and ninth). The GOQ argues that the
Department's sixth review results do not establish administrative
practice because the sixth review results are in direct conflict with
the administrative practice established in Final Affirmative
Countervailing Duty Determination; Fresh, Chilled and Frozen Pork from
Canada, 54 FR 30774, 30779 (July 20, 1989) and the fourth and fifth
reviews of Live Swine. In those proceedings the Department found in
remand determinations that FISI is not countervailable. One
determination that is in direct conflict with three other
[[Page 52420]]
prior determinations cannot, by itself, establish an administrative
practice.
The GOQ further argues that the Department's reasoning with respect
to FISI in the sixth review is based upon an irrational methodology
that is contrary to the record in these reviews. The finding that FISI
was specific in the sixth review was based entirely on the Department's
determination that Quebec's agricultural universe consisted of more
than 80 products. The mere counting of commodities is an irrational and
improper method for determining specificity and the methodology that
the Department used to derive the 80 commodities was completely
arbitrary. They also argue that any rational analysis of the evidence
on the record of the seventh, eighth and ninth reviews would indicate
an agricultural universe that is substantially smaller than ``more than
80 commodities'' in Quebec.
Finally, the GOQ claims that in the eighth and ninth reviews,
Quebec issued explicit guidelines with respect to creating FISI schemes
for new products that removes any discretion from the Regie that might
have existed and that may have led to the Department's conclusion that
FISI is specific and, therefore, countervailable.
Department's Position: The Department determined in Swine VI that
the FISI program was countervailable and that decision was not
challenged by any party to that proceeding. It is well-established that
where the Department has determined that a program is (or is not)
countervailable, it is the Department's policy not to reexamine the
issue of that program's countervailability in subsequent reviews unless
new information or evidence of changed circumstances is submitted which
warrants reconsideration. See, e.g., Industrial Phosphoric Acid from
Israel; Final Results of Countervailing Duty Administrative Reviews, 61
FR 28841 (June 6, 1996), and Industrial Phosphoric Acid from Israel;
Preliminary Results of Countervailing Duty Administrative Reviews, 61
FR 8255 (March 4, 1996). The United States Court of International Trade
(CIT) upheld this practice in PPG Industries, Inc. v. United States,
746 F. Supp. 119 (CIT 1990) (PPG Industries). In PPG Industries, the
court ruled that ``Commerce has discretion in deciding whether to
investigate a program previously found not countervailable (or
countervailable) in a final agency determination; in reaching its
decision Commerce is entitled to draw upon its own knowledge and
expertise and facts capable of judicial notice.'' Id. at 135.
The GOQ is aware of the Department's policy not to reexamine the
countervailability of a program absent new information or changed
circumstances. The Department has clearly communicated the application
of this policy throughout the seventh, eighth, and ninth reviews, in
which the Department's questionnaires stated clearly that, ``absent new
information or evidence of changed circumstances, we do not intend to
examine the countervailability of programs previously found to be
countervailable.'' This standard language, which reflects the
Department's practice, is included in every questionnaire used in CVD
administrative reviews.
The GOQ's claim that the Department's decision on FISI in the sixth
review is in conflict with the administrative practice established in
the remand determinations in Fresh, Chilled and Frozen Pork from Canada
and the fourth and fifth reviews of Live Swine is misplaced. In those
determinations upon remand, the Department complied with panel
decisions that requested the Department to reconsider certain aspects
of the underlying methodology used in those determinations,
respectively. The panel's decisions are binding only on the proceeding
which is under panel review and therefore are not of precedential
value. None of those remand determinations established any overriding
policy which was adaptable to other reviews based upon different
administrative records.
In the instant reviews, the GOQ has presented no new evidence on
the record which would warrant reconsideration of the Department's
determination in Swine VI that FISI is countervailable. Because there
is no new information or evidence of changed circumstances, the
Department has not reexamined the countervailability of the FISI
program. To do so would be inconsistent with the Department's long-
standing practice, which has been duly articulated in these reviews.
The GOQ's argument that specific guidelines issued by Quebec
removed any discretion from the Regie that might have existed with
respect to conferring FISI benefits is insufficient to reopen our
inquiry. As discussed in detail in Swine VI, we did not base our
determination that FISI is de facto specific on evidence that the GOQ
exercised discretion in determining which products receive schemes.
Swine VI at 12254. Rather, our determination, reached after an
examination of all factors, was based upon the small number of actual
users in relation to the universe of eligible beneficiaries. This
finding alone warranted an affirmative determination of de facto
specificity (Swine VI at 12252), and there has been no increase in the
actual number of users of FISI. Therefore, a change in the amount of
discretion exercised by the GOQ does not constitute new information
sufficient to warrant reexamination of our determination.
The GOQ has also made arguments that the Department's decision in
Swine VI was in error. While there are fora in which the GOQ could have
made such challenges, as noted above, the parties to that proceeding
did not avail themselves of that opportunity.
Comment 18: The GOQ disagrees with the Department's preliminary
determination that FISI, crop insurance and supply management are not
integrally linked. Citing the Proposed Regulations at section
355.43(b)(6), the GOQ notes that, because there is no prescription in
the regulations as to what the answers to each integral linkage
criterion ought to be, the Department should find programs to be
integrally linked if it determines that two or more programs are
intended to accomplish the same ultimate end and, in doing so, treat
industries equally, even if the means to accomplish those ends are
somewhat different. According to the GOQ, a requirement that the means
also be the same as the end would make the integral linkage provision
meaningless, because, in effect, such a requirement would mean that the
programs must be identical. The GOQ notes that this is in direct
conflict with explicit statements made by the Department that programs
need not be identical to be integrally linked. Such a requirement would
also directly conflict with the rationale for the integral linkage
regulation, which the GOQ states is to avoid finding programs that
benefit a broad section of the economy countervailable simply because,
for political or technical reasons, a government set out to accomplish
the same result through two or more complementary but not identical
programs. Using this test, the GOQ claims that FISI, crop insurance and
supply management are integrally linked because these three programs
provide comprehensive insurance against the risks to which Quebec
farmers are subject.
According to the GOQ, the Department found in the preliminary
results that the administration and manner of funding for FISI and Crop
Insurance are similar and that the evidence with respect to equal
treatment was inconclusive; the Department reached the conclusion that
FISI and Crop Insurance are not linked only because it improperly
determined that the purposes of the programs are
[[Page 52421]]
different. According to the GOQ, FISI and Crop Insurance serve exactly
the same purpose, stabilizing farmers' income, using different methods,
namely insuring farmers against the various risks inherent in farming.
The GOQ argues that the Department reached the wrong conclusion because
it confused method with purpose; the GOQ defines the purpose as the
``common result'' of FISI and Crop Insurance, i.e. income
stabilization.
To demonstrate that the two programs are ``complementary parts of
an overarching governmental policy directive,'' the GOQ cites to the
legislative history of FISI and Crop Insurance, pointing out that the
Quebec's legislature explicitly tied FISI and Crop Insurance together
as complementary parts of the government's overarching policy of
insuring income stability in the agricultural sector. According to the
GOQ, FISI and Crop Insurance accomplish this goal through similar
methods.
With respect to the other factors involved in linkage analysis, the
GOQ points out that the administration of FISI is identical to that of
Crop Insurance; that the two programs share the same source of funding,
accounting system, and personnel; and that each producer has
approximately the same ratio of its income at risk, whether they
participate in FISI or Crop Insurance, or both.
The GOQ also states that FISI and Crop Insurance are integrally
linked with Supply Management. All three plans share the same purpose
(farm income stabilization), similar methodology (per unit price based
on cost of production), and treat all farmers equally by insuring that
they all receive an income from agriculture that provides them a
reasonable rate of return over their cost of production.
Petitioners take issue with the GOQ's broad interpretation of the
purpose factor of the integral linkage provision; in the petitioner's
view, the GOQ ignores the Department's practice of interpreting the
integral linkage provision narrowly in order to prevent subsidizing
governments from creating a loophole to insulate otherwise actionable
programs. Petitioners also argue that the GOQ understates the
significance of the different risks associated with FISI, crop
insurance, and supply management, failing to recognize that such risks
are central to the purpose of the programs. Furthermore, petitioners
find that the GOQ overstates the significance of FISI's legislative
history when the GOQ concludes that statements made by Quebec
legislators regarding the similarities of FISI and crop insurance
render the programs complementary. Petitioners argue that such
statements do not constitute the type of documentary evidence
contemplated by the Department's regulations. See Swine VI at 12,246.
With respect to the funding and the administration of these programs,
petitioners state that the Department has reasonably weighed the
factual evidence relating to these factors and properly concluded that
such evidence is insufficient to meet the integral linkage test.
Department's Position: We disagree with the GOQ's argument that we
incorrectly analyzed whether FISI, Crop Insurance, and Supply
Management are integrally linked. The integral linkage policy
constitutes an exception to our specificity analysis. Swine VI at
12,246. The Proposed Regulations require the Department to ``determine
the specificity of a program * * * solely on the basis of the
availability and use of the particular program in question.'' The
specificity test was designed to avoid carrying the countervailing duty
law to absurd results by countervailing government actions or programs
such as public highways and bridges which clearly benefit the economy
at large. In implementing the appropriate standard to determine whether
to permit a particular exception to the program-by-program approach of
the specificity test, however, the Department cannot create a loophole
which would allow de facto specific subsidy programs benefitting only
particular segments of the economy--or particular segments of the
agricultural sector--to escape the imposition of countervailing duties.
``Permitting respondent governments to loosely connect two or more
programs which are otherwise designed to serve different purposes would
create just the type of loophole the Department seeks to avoid.'' Swine
VI at 12,246.
As we stated in the preliminary results, to determine whether these
programs are integrally linked, in accordance with the criteria
established in section 355.43(b)(6) of the Department's Proposed
Regulations, we examined the purpose of each program, the
administration of each program, the record evidence of a government
policy to treat industries equally, and the funding mechanism of each
program. See Memorandum for Paul J. Joffe from The Team on Farm Income
Stabilization Insurance--Integral Linkage, dated May 15, 1996, filed in
the public file in the Central Record Unit, Room B-099, Main Commerce
Building (Decision Memorandum).
With respect to the purpose of the programs, we clearly defined the
Department's interpretation of what constitutes the purpose of a
program and identified the two steps of our analysis: (1) we began by
looking at the purpose of each program as described in the enabling
legislation and (2) we then examined FISI, Crop Insurance, and the
Supply Management programs to ascertain whether they are complementary
programs within the meaning of the test articulated in the sixth
review, i.e. whether ``basically the same type of assistance is being
provided to distinct users/commodities or groups of users/
commodities.'' (emphasis added). (Decision Memorandum, at 5).
The evidence in the record does show that FISI and Crop Insurance
are part of ``an overall government policy or national development
plan,'' (see Carbon Steel Wire Rod from Saudi Arabia; Final Results of
Administrative Review and Revocation of Countervailing Duty Order, 59
FR 58814, 58817). The legislative history of the Farm Income
Stabilization Act indicates that the Canadian government intended the
programs to serve as a means for achieving a broad goal of income
stabilization in the agricultural sector. However, in integral linkage
analysis, mere evidence of general legislative intent connecting
various programs is not dispositive. In fact, broad legislative goals
can be achieved through a wide variety of programs. Therefore, in
determining whether programs are ``integrally linked'' such that they
should be viewed as a single program for specificity purposes, we also
look to see whether a specific purpose, i.e., to provide a certain type
of assistance, is shared by several programs which complement each
other by reaching different users.
We concluded that there is no similarity of purpose between FISI
and Crop Insurance, providing, as they do, protection against different
types of risks (one against market-price fluctuations and the other
against weather-related disasters). However, there is some similarity
in purpose between FISI and the supply management programs in that they
both protect a farmer's income against losses due to fluctuations in
market price.
With respect to the administration of the programs, we found that
there are differences among the programs, which are directly related to
the different purposes of the programs themselves. We found that FISI
and Crop Insurance operated in similar but not identical ways, as the
GOQ states in its brief. Both FISI and Crop Insurance are structured
[[Page 52422]]
as insurance programs and are administered by the same agency; the
procedures to calculate the amount of compensation are similar, in some
instances even correlated. Differences appear to be related to the type
of coverage offered by each program. In contrast, Supply Management has
a totally different administration system. The Supply Management
Programs operate on a national, as well as provincial level, because
they require the cooperation of producers in all provinces, and are
administered independently of FISI and Crop Insurance.
With regard to the evidence of a government policy to treat
industries/commodities equally, we concluded that because of the
differences between the programs, often not quantifiable, our analysis
of the record evidence yielded inconclusive results. The actuarial
study submitted by the GOQ in support of the claim of equal treatment
was not sufficiently detailed to support this conclusion because the
data contained in that study was finalized only for ``vegetable
schemes''. The analysis of the livestock data was only preliminary and
did not break out information pertaining to live swine. Therefore, no
information on this factor was provided on the subject merchandise.
Furthermore, this study does not provide the basis for a meaningful
analysis of ``equal treatment'' of the agricultural commodities
produced in Quebec under this program for several reasons, among them
the fact that it does not provide information about individual
commodities. The study is based on an analysis of the amount that the
farmer has at risk; this can be one of the factors but not the only
factor we examine in this type of analysis. Additionally, the record
presents information inconsistent with the results of that study. For
instance, the GOQ's share of premium payments was not the same in the
two programs and GOQ officials acknowledged at verification that
benefits to producers under supply management were greater than those
provided by FISI. The GOQ's comment that under FISI and Crop Insurance
each producer has approximately the same ratio of its income at risk
relies on the same actuarial study and therefore presents the same
evidentiary deficiencies.
Finally, with respect to the manner of funding, we found that the
three programs use two different funding mechanisms: FISI and Crop
Insurance are premium funded, with the government and the producers
sharing the costs. Under the federal Supply Management programs, there
is no direct provision of government funds: farmers pay for the direct
costs of operating the program through levies on the sales of their
products.
Based on our detailed analysis, we concluded that although there
are some common features among the programs, the differences in the
purposes of the programs, manners of funding, and the lack of
conclusive evidence of a government policy to treat industries equally
warrant a finding that the programs are not integrally linked.
The GOQ's dispute with our determination is based on our analysis
of the ``purpose'' element. As indicated above, in examining the
purpose, while we look at the overall goals of the enabling
legislation, we focus on the specific purposes of the programs alleged
to be linked. As we stated in the Decision Memorandum, specificity
analysis must be focused at the program level. In this context, we must
examine the type of assistance provided when analyzing the purpose of
the program. Contrary to GOQ's claims, this interpretation does not
require identical programs, but it does ensure that our integral
linkage analysis comports with the countervailing duty law.
According to the GOQ, in determining that FISI and Crop insurance
do not share the same purpose, we are confusing method with purpose. We
disagree. We are not confusing method with purpose, we are requiring,
however, that given the narrow parameters of this type of analysis, the
purpose and the method (i.e., the type of assistance) be the same. This
does not mean that the programs need to be identical because the
programs bestowing the same type of assistance to different groups of
users may still be different in some ways to efficiently service
different types of users. In our analysis, for instance, we found that
FISI and Supply Management share similar purposes, because both
programs protect the farmer against fluctuations in market price . Yet,
they are very different programs.
The GOQ offers a different interpretation of the rationale
underlying the linkage policy. Rather than ensuring the
noncountervailability of programs that benefit the economy at large,
the GOQ proposes the following rationale: ``to avoid finding programs
that benefit a broad section of the economy countervailable simply
because, for political or technical reasons, a government set out to
accomplish the same result through two or more complementary but not
identical programs.'' (GOQ's case brief , July 8, 1996, at 43.) The
Department's formulation focuses on whether the multiple programs
alleged to be linked may constitute one program. In the GOQ's
formulation, the key factor appears to be the accomplishment of certain
objectives and whether the programs alleged to be linked, although
diverse, accomplish those objectives when grouped together. Clearly,
the GOQ's interpretation is inappropriate for purposes of this
analysis.
Based on this interpretation of integral linkage analysis, which we
do not share, the GOQ articulates a new test: programs are linked ``if
two or more programs are intended to accomplish the same ultimate end,
and in doing so, treat industries equally, even if the means to
accomplish those ends are somewhat different.'' The test the GOQ
proposes is inappropriate because it relies on a misinterpretation of
the rationale of the integral linkage analysis. If we were to use the
``ultimate end'' as the dispositive factor, together with equal
treatment, as the GOQ suggests, we would provide governments with the
type of loophole that the Department seeks to avoid. Swine VI at 12246.
Governments often pursue economic objectives, such as energy
conservation policies, using different types of programs. Under the
GOQ's proposed test many if not all such programs would be integrally
linked and would be analyzed jointly for specificity purposes. This
result contradicts the intent of Congress that the Department not adopt
an overly broad exception to our specificity analysis. Swine VI at
12246.
The GOQ's definition of purpose as ``ultimate end'' is
inappropriate for a more fundamental reason as well. The GOQ's
definition confuses the purpose of the program with the economic
effects of the benefits bestowed by the program. Income stabilization
is the economic goal of the Farm Income Stabilization Act, not the
purpose of FISI, nor of Crop Insurance, nor of the Supply Management
programs. The purpose of FISI and Supply Management on the one side and
of Crop Insurance on the other is to protect farmers against two
distinct risks, price fluctuations and weather-related disasters;
income stabilization is the economic effect of that protection. In
evaluating subsidies, the Department does not take into account the
results or the economic effects of the subsidy. See, e.g., Final
Affirmative Countervailing Duty Determination: Certain Steel Products
from Austria (General Issues Appendix) 58 FR 37217, 37260 (July 9,
1993).
The ``ultimate end'' is in fact of little consequence in linkage
analysis. The question posed is whether the two
[[Page 52423]]
programs, considered in isolation, have the same specific purpose and
bestow the same type of benefits on different users. If they do,
provided that the analysis of their administration and manner of
funding does not detract from this determination and that all necessary
documentation has been provided, treating them as a single program may
be appropriate for purposes of a specificity finding.
Comment 19: The GOQ argues that combining the records of the
seventh, eighth, and ninth reviews is contrary to the express rulings
of the Court of International Trade (CIT) that the record for each
section 751 review is limited to that particular review. The GOQ
contends that the Department is required to make its determination of
whether a given program is countervailable based upon facts specific to
the particular review period. The preliminary results reached
conclusions as to countervailability based upon all of the information
in the combined records, without any attempt to tie those conclusions
to the specific facts pertaining to each review period. Thus, the GOQ
concluded that it was deprived of its legal right to receive separate
determinations regarding the countervailability of its program based on
the record of reach review. Furthermore, the GOQ contends that a
reviewing court is required to assume that the Department has
considered all information on the record. Because the Department has
combined all of the information collected in three review periods into
a single record, the Department cannot ask a reviewing court to assume
that the Department considered only part of the record before it in
making its determination.
The GOQ also argues that the Department's inclusion of substantial
unverified information is contrary to the statutory requirement that
``all information relied upon in the determination'' be verified. The
Department's statutory obligation to verify all of the information used
in every third administrative review can no longer be satisfied once
the Department combines the records of the seventh, eighth and ninth
review periods. The verification that the Department conducted in the
seventh review period would satisfy this statutory requirement only as
long as the record of the seventh remains separate from the records of
the eight and ninth review periods. Although the Department
preliminarily calculated separate rates for each period, it made single
determinations applicable to all three review periods as to whether
programs were countervailable. Thus, the Department's results for the
seventh review must be considered to be based, at least in substantial
part, on the unverified information collected in the eighth and ninth
reviews.
The GOQ further argues that the combination of the records of three
administrative reviews unduly burdens the interested parties' right to
judicial review. The GOQ claims that it and other interested parties
should not be forced to appeal the results of the seventh, eighth and
ninth reviews in order to challenge the results, for example, of the
seventh review. Interested parties are entitled to separate
determinations that a court can review based solely upon the record
compiled for a particular review period.
Finally, the GOQ claims that the Department decided to combine the
records of the three reviews in secret, without providing interested
parties with notice and an opportunity to comment. The combination of
the records, contravening the rulings of the CIT, is not a mere
procedural adjustment; it violates the rights of parties and transforms
the proceedings.
Petitioners counter the GOQ's arguments stating that the Department
has thoroughly explained its reasons for proceeding with these reviews
on a consolidated basis. This is all that is required under the law.
The fact that the GOQ believes that the Department should have
solicited comments from interested parties prior to combining the
reviews does not render the Department's decision erroneous. On the
contrary, petitioners contend that the Department's decision to
consolidate the review streamlines the process, avoids duplication of
information that is the same across the review periods, and in turn,
makes it easier for the Department to identify and address the
differences that are relevant to each period.
Finally, the petitioners contend that even if the Department did
not inform the GOQ that it was considering the possibility of
consolidating the records, this fact does not preclude the Department
from doing so. The law is clear that the agency has the discretion to
implement whatever procedures are necessary to perform its statutory
mandate.
Department's Position: The GOQ misconstrues the manner in which we
have conducted the instant reviews. We are conducting concurrent
reviews of three different review periods, and we have based the
results of each administrative review solely on information submitted
for each such review period. We have relied on public information from
a preceding review period where that information is related to a common
issue in the review period under examination. The Department did not
take into account information filed for a subsequent review period to
render its decision in an earlier review period. For instance, a
decision made in the eighth review is based on information submitted
pertaining to the eighth review period, and, where appropriate, public
information pertaining to the seventh review period or earlier review
periods. This is consistent with the Department's practice and in no
way violated the rule that we must base our determinations on the facts
contained in the administrative record for each particular review.
While the record is combined, we were very careful in ensuring that
only information pertaining to a particular review period was used in
making determinations and calculating rates for that review period. We
did not rely on the record in the way the GOQ alleges. Therefore, we
have not combined the records in the manner that GOQ is arguing.
Rather, we combined the records to avoid duplication in the submission
of information from parties where the prior review had not been
completed, and to publish a single notice with separate results for
each review period.
In addition, the GOQ incorrectly argues that because the Department
combined a verified review, the seventh review, with the other
unverified reviews, the verified information no longer satisfies the
statutory requirement. This misinterpretation by GOQ also stems from
its misunderstanding of the manner in which the Department combined the
records and conducted the reviews.
The GOQ makes a blanket statement that the Department reached
conclusions as to countervailability based on the record of all three
reviews, without attempting to tie those conclusions to specific facts
pertaining to a specific determination. Furthermore, the GOQ does not
point to any specific errors the Department made as a result of
conducting these reviews concurrently. The GOQ's claim that we failed
to reach separate determinations with respect to the countervailability
of reviewed programs in each proceeding misinterprets our
administrative practice. As we have repeatedly stated and as the GOQ
well knows, where the Department has determined that a program is (or
is not) countervailable, it is the Department's practice not to
reexamine that program's countervailability in subsequent reviews
unless new information or evidence of changed circumstances has been
submitted which warrants
[[Page 52424]]
reconsideration. Therefore, we have not reconsidered previous
determinations of countervailability unless warranted by evidence on
the record of each review period.
Moreover, interested parties' right to judicial review is not
unduly burdened. Section 355.3(a) of the Department's regulations
states that ``for purposes of section 516a (b)(2) of the Act, the
record is the official record of each judicially reviewable segment of
the proceeding.'' The concurrent reviews constitute separate segments
of the proceeding for purposes of judicial review, and any or all of
the three reviews will be subject to judicial review. The Department
has conducted concurrent reviews in other proceedings which have been
subject to judicial review and this practice has not unduly burdened
appellate review. See generally, NEC Home Electronics, Ltd. v. United
States, Slip Op. 94-70 (CIT May 2, 1994) (judicial review of a final
notice that contained determinations for four review periods).
The GOQ's argument that the Department decided to combine the
records of the three reviews in secret suggests that the Department is
obligated to solicit comments before conducting concurrent reviews. The
Department has full discretion to implement procedures that it deems
necessary to perform its statutory mandate. See e.g., PPG Industries,
Inc. v. United States, 928 F.2d 1568 (Fed. Cir. 1991) (Commerce ``has
been given great discretion in administering the countervailing duty
laws.'') The GOQ is well aware that the second and third administrative
reviews of this order were conducted concurrently. Furthermore, when
the seventh and eighth reviews were being conducted concurrently, the
GOQ did not raise any objections. The GOQ does not provide any evidence
that concurrently conducting the ninth review with the seventh and
eighth reviews corrupts the information submitted in any of the
reviews.
Comment 20: The GOQ argues that combining the records would
increase the risk of inadvertent disclosure of proprietary information
to individuals not entitled to receive that information. The GOQ also
argues that the Department incorrectly stated in its Memorandum for the
File from the Team regarding the GOQ's Objection to Combining the
Administrative Record for the 7th, 8th, and 9th Reviews of Live Swine
from Canada (Objection Memo) dated May 15, 1996, that the GOQ itself
has not submitted any BPI during these three reviews, and thus cannot
suffer any injury as a result of the ITA's handling of BPI during the
seventh, eighth, and ninth reviews.
Department's Position: The GOQ's argument that combining the
administrative reviews will result in unlawful disclosure of
proprietary information to parties not subject to an administrative
protective order (APO) is without merit. All parties to this proceeding
(Counsel for the GOC, Counsel for the GOQ, Counsel to the Petitioner,
and Counsel for the CPC) had APO's approval for each of the three
reviews, and subsequently requested a single ``blanket'' APO for the
consolidated proceeding. All information submitted in the three reviews
has been treated appropriately.
Comment 21: GOQ argues that the doctrine of collateral estoppel
precludes the Department from finding FISI countervailable because the
binational panel found that the Department's decision in the fifth
review was not based on substantial evidence and was not in accordance
with law. Therefore, GOQ argues that the Department is estopped from
claiming that FISI is countervailable in the current reviews.
GOQ claims that the binational panel process replaces judicial
review of final antidumping and countervailing duty determinations
pursuant to the U.S.-North American Free Trade Agreement (NAFTA Article
1904.1). The NAFTA parties have agreed that a binational panel
decision, such as the Swine V panel decision, shall be binding on the
involved Parties with respect to the particular matter between the
Parties that is before the panel. (In the Matter of Live Swine from
Canada, USA-91-1904-04; June 11, 1993). GOQ further argues that because
a binational panel decision is a final ruling that is not subject to
appeal to any higher tribunal, the decision should carry even more
weight than a CIT decision.
GOQ argues that the four conditions for collateral estoppel have
been met: (1) the issue previously adjudicated is identical, (2) the
issue was litigated in a prior review, (3) the previous determination
of that issue was necessary to the end-decision then made, and (4) the
party precluded was fully represented by counsel in the prior action.
Petitioners counter that GOQ's arguments fail primarily because
they rest on the incorrect premise that the Department previously has
found FISI non-countervailable. Contrary to GOQ's claims, the
Department has found FISI to be de facto specific and therefore
countervailable in the original investigation and all subsequent
reviews. See, e.g., Live Swine and Fresh, Chilled and Frozen Pork from
Canada, (50 FR 25097, 25104; June 17, 1985). Petitioners also counter
that the binational panel did not find FISI non-countervailable.
Rather, the panel reviewing the Swine V redetermination found only that
the evidence used by the Department was defective, and for that reason,
remanded the Department's finding with instructions for it to remove
FISI benefits from its duty calculation for that particular review
period.
Petitioners further contend that the GOQ's argument that ``a
binational panel decision should carry even more weight than a CIT
decision'' directly contradicts Congressional intent with respect to
the binational panel review process. According to petitioners, the law
is clear that decisions of binational panels carry relatively little
weight, and certainly could not supersede the CIT's binding decision
upholding that FISI is countervailable. See Alberta Pork Producers'
Marketing Board v. United States, 669 F. Supp. 445, 451-52 (1987).
Finally, petitioners counter that GOQ has offered no new factual
information requiring the Department to reexamine its previous finding
that FISI is de facto specific. Therefore, in this regard, it is GOQ's
attempt to re-litigate this well-settled issue without offering new
facts to compel a different result.
Department's Position: We disagree with the GOQ's argument that we
are collaterally estopped by the panel decision in Swine V from relying
on our determination in the sixth review that FISI is countervailable.
First, as recognized by the Swine V panel, its decisions are not
binding on subsequent administrative determinations. Panel decisions
are binding only on the particular matters presented which are based on
the particular administrative record subject to appellate review. Live
Swine from Canada, 14 ITRD 2388, 2403-04 (1992).
Second, the Courts have recognized that collateral estoppel is
inapplicable when the Department's determinations are based on
different administrative records. See PPG Industries v. United States,
746 F. Supp. 119, 133-34 (CIT 1990); PPG Industries v. United States,
978 F.2d 1232, 1239 (Fed. Cir. 1992). See also Live Swine from Canada,
at 2403 (rejecting use of collateral estoppel to bind panel to previous
panel proceedings). The Swine V panel decision was based on the record
developed in the fifth administrative review. During the sixth review,
the Department gathered additional information and reinvestigated the
countervailability of FISI. In Swine VI, the Department conducted a
complete analysis of whether FISI was specific
[[Page 52425]]
and determined, based on the record evidence in that review, that FISI
was specific. No parties challenged that determination.
Moreover, the CIT has stated that ``the burden on the party seeking
issue preclusion is and should be exacting.'' PPG, at 134, citing PPG
Industries Inc. v. United States, 712 F. Supp. 195 (CIT 1989). The GOQ
has failed to meet this standard because its arguments are based
entirely on a non-binding panel decision that reviewed an entirely
different administrative record than the record which served as the
basis for our determination that FISI is countervailable. Accordingly,
in accordance with our long-standing practice, we have relied on our
decision in the sixth review that FISI is countervailable and have not
reexamined the program because the GOQ has failed to present new facts
or evidence of changed circumstances to warrant a reexamination of the
program (see Department's Position on Comment 17).
Comment 22: The CPC argues that the Department's unexplained and
undocumented change in production figures in its calculation
methodology is not supported by any record evidence. The CPC states
that the Department has always used the total swine production data
published in the Supply-Disposition Balance Sheets (Balance Sheets) by
Statistics Canada. This data, which was verified in the seventh review
period, is calculated using three components of the Balance Sheets:
slaughter, international exports, and deaths and condemnations.
Therefore, the CPC argues that the Department should not exclude deaths
and condemnations, without a reasoned explanation. The CPC states that
it is well established that an agency must either conform to prior
decisions or explain its reason for departure from its past practice.
The CPC cites a recent Binational Panel convened under the North
American Free Trade Agreement, which ruled in similar circumstances
that ``Commerce must provide * * * a comprehensive and reasoned
analysis for reversing its former policy * * * Where no such basis of
decision appears, there is present the kind of arbitrary action that
this panel, like the United States courts, is charged with curbing.''
In the Matter of Live Swine from Canada, Panel No. USA-94-1904-01, at 8
(May 30, 1995 Decision of the Panel).
The CPC argues that the Department should continue to use
production figures that include dead and condemned animals because they
have been produced and marketed, and the scope of the order does not
restrict the subject merchandise to human consumption only. Therefore,
if the subject merchandise is produced and marketed in any way, it
should be included in the total produced and marketed figure. If
benefits are not allocated over total production, then any reduction in
the production figures used in the denominator of the duty calculation
would have to be accompanied by a concomitant reduction in the benefits
used in the numerator to include only benefits to those particular
animals actually included in the denominator. The CPC also argues that
the Department has consistently allocated NTSP benefits over all
Canadian production.
Petitioners counter that the CPC attempts to discredit the
Department's methodology on evidentiary grounds by claiming that the
Department ``apparently rejected verified data on live swine
production, and has instead produced its own, unsupported, production
figures for use in all benefit calculations.'' The calculations in
these reviews are also based on the data provided by the GOC, which the
Department verified.
Petitioners also counter that eliminating dead and condemned hogs
from the denominator renders the Department's calculations more
consistent with the scope of the order, which covers live swine, and
with the Department's normal practice of collecting data on live swine
produced and marketed or sold for slaughter. Because condemned swine,
like dead swine, are not produced and marketed for human consumption,
they should be excluded from the denominator. Furthermore, the
Department's approach is more consistent with its ``tying'' standard.
Under this standard, whenever possible, the Department attempts to tie
the countervailable benefit to the actual product or sale benefitting
from the subsidy. Petitioners do not dispute that the approach of tying
benefits to the merchandise supports including dead and condemned swine
in the denominator for ACBOP and the Ontario Rabies Indemnification
Program. However, to use multiple denominators for the large number of
countervailable programs would pose an administrative burden on the
Department. In that context, petitioners conclude that the use of one
consistent denominator makes the most sense.
Finally, petitioners state that the CPC's argument that the amended
methodology cannot be used for the final results because it represents
a change in the Department's practice is incorrect. According to
petitioners, the mere fact that an agency reverses a policy * * * does
not indicate the agency's decision is unreasonable, arbitrary or
capricious. It is well-settled that such reversals are entitled to
deference from the courts.
Department's Position: In the seventh review period, in a letter
dated August 30, 1993, petitioners challenged the inclusion of dead and
condemned swine in the production data. During verification, the GOC
said that ``these animals are not sold as live swine, but they are used
for some purpose, i.e., fertilizer or consumed on the farm.''
(Verification Report dated June 8, 1994, pgs. 61, 62.) Additionally,
the CPC states that ``deaths refer to losses on a farm after a hog has
been weaned and is being finished for slaughter, but before the hog is
marketed, and condemned hogs are condemned after slaughter.''
Contrary to the CPC's argument that the Department created its own,
unsupported production figures, we used data from the Supply-
Disposition Balance Sheets (Balance Sheets), which is a GOC publication
that the Department verified (Ibid., p. 61). In the preliminary
results, we deducted the number of dead and condemned animals provided
in that Balance Sheet from the total production figure, taken from the
same Balance Sheet.
The CPC incorrectly argues that the Department has consistently
allocated NTSP benefits over all Canadian production. On the contrary,
the Department has consistently allocated NTSP benefits over the
production of market hogs only, because only market hogs are eligible
to receive NTSP benefits. See, Live Swine from Canada; Preliminary
Results of Countervailing Duty Administrative Review (58 FR 54112,
54117; October 20, 1993 and Swine VI (12243).
However, after considering the CPC and petitioners' comments, we
have determined that we will continue to exclude dead and condemned
swine from the denominator in calculating NTSP, FISI and SHARP benefits
because these programs are tied to live swine that meet certain
criteria of size and eligibility. Dead and condemned hogs are not
eligible for benefits under those programs. We have now modified the
calculations for the other domestic subsidy programs to include dead
and condemned swine in the denominator because these programs are
provided to all swine, whether marketed as live swine, or dead or
consumed on the farm. This approach is more consistent with the
Department's practice of tying benefits to the production or sale of a
[[Page 52426]]
particular product(s), in accordance with 19 CFR 355.47(a) of the
Proposed Regulations.
Final Results of Reviews
For the period April 1, 1991 through March 31, 1992, we determine
the total net subsidy on live swine from Canada to be Can$0.0601 per
kilogram. For the period April 1, 1992 through March 31, 1993, we
determine the total net subsidy on live swine from Canada to be
Can$0.0613 per kilogram. For the period April 1, 1993 through March 31,
1994, we determine the total net subsidy on live swine from Canada to
be Can$0.0106 per kilogram.
The Department will instruct the U.S. Customs Service to assess
countervailing duties of Can$0.0601 per kilogram on shipments of live
swine from Canada exported on or after April 1, 1991 and on or before
March 31, 1992, Can$0.0613 per kilogram on shipments of live swine from
Canada exported on or after April 1, 1992 and on or before March 31,
1993, and Can$0.0106 per kilogram on shipments of live swine from
Canada exported on or after April 1, 1993 and on or before March 31,
1994.
The Department will also instruct the U.S. Customs Service to
collect a cash deposit of estimated countervailing duties of Can$0.0106
per kilogram 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.
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.
These administrative reviews 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: September 25, 1996.
Robert S. LaRussa,
Acting Assistant Secretary for Import Administration.
[FR Doc. 96-25648 Filed 10-4-96; 8:45 am]
BILLING CODE 3510-DS-P