[Federal Register Volume 63, Number 9 (Wednesday, January 14, 1998)]
[Notices]
[Pages 2204-2212]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-945]


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DEPARTMENT OF COMMERCE

International Trade Administration
[C-122-404]


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

AGENCY: Import Administration, International Trade Administration, 
Department of Commerce.

ACTION: Notice of final results of countervailing duty administrative 
review.

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SUMMARY: On September 9, 1997, the Department of Commerce published in 
the Federal Register its preliminary results of administrative review 
of the countervailing duty order on live swine from Canada for the 
period April 1, 1995 through March 31, 1996 (62 FR 47460). The 
Department has now completed that administrative review in accordance 
with section 751(a) of the Tariff Act. For information on the net 
subsidy, please see the Final Results of Review section of this notice. 
We will instruct the Customs Service to assess countervailing duties as 
detailed in the Final Results of Review section of this notice.

EFFECTIVE DATE: January 14, 1998.

FOR FURTHER INFORMATION CONTACT: Rick Herring or Gayle Longest, Office 
of CVD/AD Enforcement 6, Import Administration, International Trade 
Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue, N.W., Washington, D.C. 20230; telephone: (202) 
482-2786.

SUPPLEMENTARY INFORMATION:

Applicable Statute and Regulations

    Unless otherwise indicated, all citations to the statute are 
references to the provisions of the Tariff Act of 1930, as amended by 
the Uruguay Round Agreements Act (URAA), effective January 1, 1995 (the 
Act). In addition, unless otherwise indicated, all citations to the 
Department's regulations are to the regulations codified at 19 CFR 
Sec. 355 (1997). The Department has conducted this administrative 
review in accordance with section 751(a) of the Act.

Background

    Pursuant to 19 CFR Sec. 355.22(a), this review should cover only 
those producers and/or exporters of the subject merchandise for which a 
review was specifically requested. However, as explained in the 
preliminary results, the Department of Commerce (the Department) has 
determined that it is not practicable to conduct a company-specific 
review of this order due to the large number of producers and/or 
exporters that requested a review. See Live Swine from Canada; 
Preliminary Results of Countervailing Duty Administrative Review, 62 FR 
47469 (September 9, 1997) (preliminary results). Therefore, pursuant to 
section 777(e)(2)(B) of the Act, we are conducting a review of all 
producers and/or exporters of subject merchandise covered by this order 
on the basis of aggregate data. This review covers the period April 1, 
1995, through March 31, 1996, and 31 programs.
    Since the publication of the preliminary results on September 9, 
1997, the following events have occurred. We invited interested parties 
to comment on the preliminary results. On October 23, 1997, the 
Government of Canada (GOC), the Government of Quebec (GOQ), and the 
Canadian Pork Council (CPC) (respondents) submitted case briefs. On 
October 30, 1997, the National Pork Producers Council (petitioner) 
submitted a rebuttal brief. We requested a revised brief from the GOQ 
because the initial case brief contained untimely new factual 
information. See Letter from Barbara E. Tillman to Pepper, Hamilton and 
Scheetz dated November 4, 1997 (public document on file in the Central 
Records Unit, Room B-099 of the Main Commerce Building). See also 19 
CFR Sec. 355.31(a)(1)(ii). The Department has not considered the 
returned new factual information for these final results of review. See 
19 CFR Sec. 355.3(a). On November 7, 1997, the GOQ submitted a revised 
case brief. The comments addressed in this notice are those presented 
in the revised case brief. At the request of the respondents, the 
Department held a public hearing on November 17, 1997.

Scope of the Review

    The merchandise covered by this order is live swine, except U.S. 
Department of Agriculture certified purebred breeding swine, slaughter 
sows and boars, and weanlings (weanlings are swine weighing up to 27 
kilograms or 59.5 pounds) from Canada. The merchandise subject to the 
order is classifiable under Harmonized Tariff Schedule (HTS) item 
numbers 0103.91.00 and 0103.92.00. The HTS item numbers are provided 
for convenience and customs purposes. The written description of the 
scope remains dispositive.

Verification

    We verified information provided by the GOC and the GOQ related to 
their claim, pursuant to section 771(5B)(F) of the Act, for ``green 
box'' treatment of the programs covered by the Canada/Quebec Subsidiary 
Agreement on Agri-Food Development (Agri-Food Agreement). We followed 
standard verification procedures, including meeting with government 
officials, and examining relevant accounting and original source 
documents. Our verification results are outlined in the public version 
of the verification report, which is on file in the Central Records 
Unit.

Allocation Methodology

    In the past, the Department has relied on information from the U.S. 
Internal Revenue Service (IRS) on the industry-specific average useful 
life of assets in determining the allocation period for nonrecurring 
grant benefits. See General Issues Appendix appended to Final 
Countervailing Duty Determination; Certain Steel Products from Austria, 
58 FR 37063, 37226 (July 9, 1993). However, in British Steel plc. v. 
United States, 879 F. Supp. 1254 (CIT 1995) (British Steel), the U.S. 
Court of International Trade (the Court) ruled against this allocation 
methodology. In accordance with the Court's remand order, the 
Department calculated a company-specific allocation period for 
nonrecurring subsidies based on the average useful life (AUL) of non-
renewable physical assets. This remand determination was affirmed by 
the Court on June 4, 1996. See British Steel, 929 F. Supp. 426, 439 
(CIT 1996).
    The Department has not appealed the Court's decision and, as such, 
we intend to determine the allocation period for nonrecurring subsidies 
using company-specific AUL data where reasonable and practicable. In 
Live Swine from Canada; Preliminary Results of Countervailing Duty 
Administrative Review, 62 FR 52426 (October 7, 1996) and Live Swine 
from Canada; Final Results of Countervailing Duty Administrative 
Review, 62 FR 18087 (April 14, 1997) (Swine Tenth Review Results), the 
Department determined that it is not reasonable or practicable to 
allocate nonrecurring subsidies using company-specific AUL data because 
it is not possible to apply a company-specific AUL in an aggregate case 
(such as the

[[Page 2205]]

case at hand). Accordingly, in this review, the Department has 
continued to use, as the allocation period, the average useful life of 
depreciable assets for the swine industry, as set forth in the U.S. IRS 
Class Life Asset Depreciation Range System. See Swine Tenth Review 
Results. We invited interested parties to comment on the selection of 
this methodology and to provide any other reasonable and practicable 
approaches for complying with the Court's ruling. The GOQ submitted 
comments on this issue. The GOQ agreed with the Department that it is 
not feasible to allocate nonrecurring grants using company-specific 
data in aggregate cases, and the IRS tax tables are appropriate for 
allocating nonrecurring grants in this review.

Calculation Methodology for Assessment and Cash Deposit Purposes

    For the period of review (POR), we calculated the net subsidy on a 
country-wide basis by determining the subsidy rate for each program 
subject to the administrative review in the following manner. We first 
calculated the subsidy rate on a province-by-province basis; we then 
weight-averaged the rate received by each province using the province's 
share of total Canadian exports to the United States of market hogs. We 
then summed the individual provinces' weight-averaged rates to 
determine the subsidy rate of each program. To obtain the country-wide 
rate, we then summed the subsidy rates from all programs.

Analysis of Programs

I. Programs Conferring Subsidies

    Based upon the responses to our questionnaires, the results of 
verification, and written comments from the interested parties we 
determine the following:

Programs Previously Determined to Confer Subsidies

    In the preliminary results, we found that the following programs 
conferred countervailable benefits on the subject merchandise. We did 
not receive any comments on these programs from the interested parties, 
and our review of the record has not led us to change any findings or 
calculations. Accordingly, the net subsidy for each of these programs 
(less than Can$0.0001 per kilogram, except for the Saskatchewan Hog 
Assured Returns Program, which is Can$0.0015 per kilogram), remains 
unchanged from the preliminary results.

1. Feed Freight Assistance Program
2. Saskatchewan Hog Assured Returns Program (SHARP)
3. Alberta Crow Benefit Offset Program (ACBOP)
4. Ontario Livestock and Poultry and Honeybee Compensation Program
5. Saskatchewan Livestock Investment Tax Credit
6. Saskatchewan Livestock Facilities Tax Credit
7. Ontario Bear Damage to Livestock Compensation Program
8. New Brunswick Livestock Incentives Program
9. New Brunswick Swine Industry Financial Restructuring and 
Agricultural Development Act--Swine Assistance Program
10. New Brunswick Swine Assistance Policy on Boars
11. Nova Scotia Improved Sire Policy
12. Nova Scotia Swine Herd Health Policy

    In the preliminary results, we also found the following programs 
conferred countervailable benefits on the subject merchandise. Our 
review of the record and our analysis of the comments submitted by the 
interested parties summarized below, have led us to modify our 
calculation methodology from the preliminary results for the following 
three programs:

13. National Tripartite Stabilization Program for Hogs (NTSP)

    We have changed the methodology to calculate the benefit resulting 
from the distribution of the surplus after the termination of this 
program. This methodological change is discussed in the Department's 
Position on Comment 9, below. As a result of this change, the net 
subsidy for this program is now less than Can$0.0001 per kilogram.

14. National Transition Scheme for Hogs

    We have changed the calculation methodology for this program as 
discussed in the Department's Position on Comment 9, below. As a result 
of this change, the net subsidy for this program is now Can$0.0047 per 
kilogram.

15. Quebec Farm Income Stabilization Insurance Program (FISI)

    We have changed the calculation methodology for this program as 
discussed in the Department's Position on Comment 6, below. As a result 
of this change, the net subsidy for this program is now Can$0.0008 per 
kilogram.

II. Programs Found Not To Confer Subsidies

    In the preliminary results, we found that this program did not 
confer countervailable benefits during the POR. Our analysis of the 
comments submitted by the interested parties, summarized below, has not 
led us to change our findings from the preliminary results.

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

III. Programs Found To Be Not Used

    In the preliminary results, we found that the producers and/or 
exporters of the subject merchandise did not apply for or receive 
benefits under the following programs:

1. Western Diversification Program
2. Federal Atlantic Livestock Feed Initiative
3. Agricultural Products Board Program
4. Ontario Export Sales Aid Program
5. Ontario Rabies Indemnification Program
6. Ontario Swine Sales Assistance Policy
7. Newfoundland Hog Price Support
8. Newfoundland Weanling Bonus Incentive Policy
9. Newfoundland Hog Price Stabilization Program

    We did not receive any comments on these programs from the 
interested parties, and our review of the record has not led us to 
change our findings from the preliminary results.

IV. Programs Found To Be Terminated

    In the preliminary results, we found the following programs to be 
terminated and that no residual benefits were being provided. We 
received no comments on our preliminary results with respect to these 
programs, and our findings remain unchanged in these final results.

1. Prince Edward Island Hog Price Stabilization Program
2. Canada/British Columbia Agri-Food Regional Development Subsidiary 
Agreement
3. Canada/Manitoba Agri-Food Development Agreement
4. New Brunswick Agricultural Development Act-Swine Assistance Program

V. Other Programs Examined

    On November 5, 1996, the GOQ made a submission, pursuant to section 
771(5B)(F) of the Act, claiming that the Agri-Food Agreement met the 
criteria for ``green box'' treatment under Annex 2 of the Agreement on 
Agriculture of the World Trade Organization (WTO). On January 21, 1997, 
the GOQ indicated that the GOC also supported the green box claim.
    Under section 771(5B)(F) of the Act, domestic support measures 
provided with respect to the agricultural products listed in Annex 1 to 
the 1994 WTO Agreement on Agriculture shall be treated as 
noncountervailable if the Department determines that the measures 
conform fully with the provisions of Annex 2 to the same

[[Page 2206]]

agreement. Accordingly, the GOQ and the GOC posited that funding under 
the Agri-Food Agreement should be noncountervailable pursuant to 
section 771(5B)(F) of the Act.
    During the POR, producers of the subject merchandise received 
assistance under the three component programs of the Agri-Food 
Agreement for which the GOC and the GOQ have requested green box 
treatment: (1) Research, (2) Technology Innovations, and (3) Support 
for Strategic Alliances.
    Specifically, with regard to the Research program under the Agri-
Food Agreement, as discussed above in section II, we have determined 
that this program does not confer countervailable benefits because the 
results of the research are publicly available. See e.g., Certain 
Carbon Steel Products from Sweden; Preliminary Results of 
Countervailing Duty Administrative Review, 60 FR 44014 (August 24, 
1995) and Certain Carbon Steel Products From Sweden; Final Results of 
Countervailing Duty Administrative Review, 61 FR 5378 (February 12, 
1996). As such, there is no need to address whether benefits provided 
under the Research program are noncountervailable in the context of 
section 771(5B)(F) of the Act. With regard to the Technology 
Innovations program and the Support for Strategic Alliances program, 
any benefit to the subject merchandise under either program would be so 
small (Can$0.00000045 and Can$0.00000055 per kilogram, respectively) 
that there would be no impact on the overall subsidy rate. Accordingly, 
because there is no change to the overall subsidy rate in the instant 
review, we have not included the benefits from TI and SSA in the 
calculated subsidy rate for the POR, and do not consider it necessary 
to address the issue of whether benefits under these programs are 
noncountervailable as green box subsidies pursuant to section 
771(5B)(F) of the Act. See, e.g., Final Affirmative Countervailing Duty 
Determination: Steel Wire Rod from Germany, 62 FR 54990, 54995 (October 
22, 1997); Certain Carbon Steel Products from Sweden; Preliminary 
Results of Countervailing Duty Administrative Review, 61 FR 64062, 
64065 (December 3, 1996); Certain Carbon Steel Products from Sweden; 
Final Results of Countervailing Duty Administrative Review, 62 FR 16549 
(April 7, 1997) (Certain Steel from Sweden); Final Negative 
Countervailing Duty Determination: Certain Laminated Hardwood Trailer 
Flooring (LHF) from Canada, 62 FR 5201 (February 4, 1997); Industrial 
Phosphoric Acid from Israel; Preliminary Results of Countervailing Duty 
Administrative Review, 61 FR 28845 (June 6, 1996); and Industrial 
Phosphoric Acid from Israel; Final Results of Countervailing Duty 
Administrative Review, 61 FR 53351 (October 11, 1996) (IPA from 
Israel).

Analysis of Comments

    Comment 1: Green Box Claim. The GOC argues that, although the 
Department declined to make the ``green box'' determination on the 
three component programs under the Agri-Food Agreement based on there 
being no impact on the overall subsidy rate, we still treated these 
programs as actionable and thereby made prejudicial findings. These 
prejudicial findings include the Department's preliminary determination 
that the Technology Innovations (TI) program was specific and conferred 
a countervailable benefit, and that the Support for Strategic Alliances 
(SSA) program was used in the review period. The GOC argues that, if 
the Department wishes to decline making a green box decision on the 
three component programs under the Agri-Food Agreement because of the 
very small level of benefits, then it must also decline making 
prejudicial rulings on these programs' countervailability. Furthermore, 
the GOC claims that when an agency declares a particular policy, it is 
required to follow that policy in order to maintain administrative 
consistency, citing Hussey Copper, Ltd. v. United States, 834 F. Supp. 
413, 418 (CIT 1993). The GOC contends that, once the Department 
determines programs under the Agri-Food Agreement to have no impact on 
the overall subsidy rate, the Department should omit all findings on 
these programs from the final results, and thereby treat them as 
programs determined not to have been used during the POR. In the case 
that the Department does not apply the ``no impact policy'' 
consistently, then the GOC argues that the Department is required to 
consider their green box claim.
    Similarly, the GOQ argues that the Department cannot refuse to 
consider the green box claim on the grounds that TI and SSA would have 
no effect on the overall subsidy rate in this review. This criterion of 
no impact, according to the GOQ, cannot be found anywhere in U.S. or 
international law. The GOQ further claims that the verified record 
demonstrates that the three component programs under the Agri-Food 
Agreement meet the green box criteria. The GOQ argues that the 
Department cannot countervail TI without first having considered the 
program for green box treatment; neither the law nor the cites used in 
preliminary determination support the Department's decision.
    Petitioner raised three arguments in support of the Department's 
preliminary determination. First, petitioner argues that the 
Department's countervailability findings with respect to the Agri-Food 
program were not prejudicial because only the TI program was found to 
confer a countervailable subsidy, which was less than Can$0.0001 per 
kilogram. Under these circumstances, petitioner argues that respondents 
did not suffer any practical harm by the Department's decision not to 
conduct a green box analysis, citing Sharp Elecs. Corp. v. United 
States, 720 F. Supp. 1014, 1016-17 (CIT 1989) in support of its 
argument. Second, petitioner notes that the Department is not required 
by law to consider a green box claim. Finally, petitioner asserts, that 
contrary to the GOQ's claim, the results of the Department's 
verification do not conclusively prove that the programs under the 
Agri-Food Agreement meets the green box criteria.
    Department's Position: Based on the particular facts of this case, 
the Department appropriately determined that a green box determination 
on the programs under the Agri-Food Agreement was unwarranted in this 
review. Neither the statute (section 771(5B)(F)) nor the Statement of 
Administrative Action Accompanying the Uruguay Rounds Agreement Act 
(SAA) mandates the Department to make a green box determination each 
time an interested party raises such a claim. The statute simply 
codifies the ``due restraint'' obligations under the WTO Agreements on 
Agriculture, and Subsidies and Countervailing Duty Measures, that 
certain domestic support measures be exempt from the imposition of 
countervailing duties, i.e., non-actionable. The omission of an 
explicit mandate to make green box determinations provides the 
Department with considerable discretion to determine whether such an 
examination is warranted in each particular case.
    In the instant review, the Department has determined that, because 
the benefit provided under the TI and SSA programs (the benefit 
provided under the Research program was found noncountervailable) has 
no impact on the overall subsidy rate attributable to the subject 
merchandise during the POR, a green box determination is not warranted 
because neither program has benefit amounts that would be subject to 
countervailing duties. In making this determination, the Department has 
not violated either the statute or the WTO ``due restraint'' 
obligations, and the GOC and GOQ have suffered no

[[Page 2207]]

practical harm. See Georgetown Steel Corp. v. United States, 810 F. 
Supp. 318 (CIT 1992) (denying judicial review of the respondent's 
challenge to the Department's specificity determination on the grounds 
that no duties or cash deposits were imposed).
    We also disagree with the GOC's and GOQ's assertions that our 
decision was inappropriate because the Department made ``prejudicial 
findings'' with respect to TI and SSA. In the case of TI, the 
Department did not make a new specificity finding in this POR. In the 
case of SSA, based upon the verified record evidence, the Department 
determined that the program was used during the POR. In both instances, 
the preliminary results reflect the Department's normal practice, e.g., 
reiterating a previous specificity finding and determining a program's 
usage during the POR. Neither of these findings trigger an obligation 
to make a green box determination when we have determined that the 
benefits provided under these programs are so small that they will not 
be subject to countervailing duties.
    Further, we find no inconsistency between these findings and a 
finding that the cumulative benefit provided under these programs has 
no impact on the overall subsidy rate because the amount of the benefit 
provided is unrelated to whether a program is specific or used during 
the POR. The Department has always conducted these analyses 
simultaneously (specificity and usage). However, until we actually 
complete the calculation (i.e., determining the amount of benefit 
provided and dividing it by the relevant production figures) it is not 
possible to determine whether the benefit under a particular program 
will have any impact on the overall countervailing duty rate. As such, 
there is nothing unusual in the Department making a determination that 
a program is used or specifically provided, but then, finding that the 
benefit provided is too small to have any impact on the overall net 
subsidy rate (e.g., IPA from Israel and Certain Steel from Sweden). 
Further, those determinations are in no way prejudicial with respect to 
any green box claims the parties might make in future administrative 
reviews. Thus, we find no basis to deviate from our practice by 
omitting such findings as suggested by the GOC.
    Comment 2: Whether the Agri-Food Programs are Research Programs. 
The GOQ claims that the evidence on the record for this review proves 
that all three component programs (Research, TI, and SSA) under the 
Agri-Food Agreement are noncountervailable because each component is a 
research program and the results are publicly available. Of the three 
component programs, the GOQ agrees with the Department's determination 
that the Research program has been determined to be a research and 
development program, and therefore is noncountervailable. In the case 
of TI, the GOQ contends that the Department's determination in the 
Swine Tenth Review Results that TI did not constitute a research 
program, which contradicts findings in six previous reviews, is 
unfounded. The GOQ urges the Department to reexamine its 
countervailability finding on TI in this review.
    The GOQ claims that the Department did not conduct an analysis of 
the new information regarding TI in the record of this review, and has 
instead adopted the conclusion made in the tenth review that TI is a 
regionally-specific federal program. The GOQ argues that, even if TI is 
regionally specific, the program is noncountervailable as a research 
program since research results under the TI program are publicly 
available. The GOQ further argues that new and verified information in 
this review demonstrates that the TI program funds publicly available 
research.
    Also, the GOQ argues that TI is similar to other programs the 
Department has determined to be research programs. (See Final 
Affirmative Countervailing Duty Determinations: Certain Steel Products 
from Mexico, 58 FR 37352, 37360 (July 9, 1993) (Certain Steel from 
Mexico). The GOQ claims that Certain Steel from Mexico confirms that 
non-laboratory applied research constitutes research, and when results 
are publicly disseminated, such programs are not countervailable. 
Similarly, the GOQ argues that in Final Affirmative Countervailing Duty 
Determinations; Certain Carbon Steel Products from Sweden, 50 FR 33375, 
33379 (August 19, 1985) the Department found that the testing of 
laboratory concepts in two pilot plants partially funded by the Swedish 
Government was noncountervailable research because the results were 
publicly available. Therefore, the GOQ argues, the Department's past 
practice requires a finding that applied research in the field, such as 
research funded under TI, is research, which is noncountervailable when 
the results are publicly available. Further, the GOQ argues that, at 
verification, the GOC demonstrated that SSA is a research program with 
publicly disseminated results.
    Department's Position: We disagree that the Department should 
reconsider its finding on TI. In the cases cited by the GOQ (Certain 
Steel from Mexico and Steel Products from Sweden), the only issue was 
whether the programs were countervailable (i.e., whether results were 
publicly available), not whether the program funded ``research.'' As 
outlined in the Swine Tenth Review Results, the latter issue entails a 
more complex analysis. We analyzed TI in detail and determined that its 
application review process, eligibility requirements, purposes, and 
types of projects funded were more typical of a technological 
assistance program than that of a research and development program. We 
continue to find that TI is appropriately classified as a technical 
assistance program, which accommodates products already existing in the 
market and which tests them for their usage in a specified geographic 
area, Quebec.
    We find that the GOQ has presented no new information or evidence 
of changed circumstances that warrant the Department's reexamination of 
the countervailability of TI. Therefore, consistent with long-standing 
practice, the Department did not reexamine the countervailability of TI 
in this administrative review. With regard to SSA, as discussed above, 
because the benefit from this program is so small that it has no impact 
on the overall subsidy rate, a determination of whether this program is 
countervailable was not warranted.
    Comment 3: Reexamination of Programs found Noncountervailable. The 
GOQ asserts that, if the Department determines a program does not 
confer countervailable benefits, the Department should then determine 
the program noncountervailable, and thus should not reinvestigate this 
program in future reviews. This implies that, since the Department 
found Research and SSA to not confer countervailable benefits, these 
programs are not countervailable. With regard to Research, the GOQ 
further argues that once the Department determines that research 
results are publicly available, the program is noncountervailable and 
there is no justification to revisit this program in future reviews.
    Department's Position: We disagree with the GOQ that reexamination 
of the Research and SSA programs is not warranted in future reviews. 
The Department's current practice with regard to research and 
development programs is that research results must be publicly 
available with no restrictions. Since the verified standard contracts 
under the Research program of the Agri-Food Agreement contain a patent 
clause authorizing non-

[[Page 2208]]

disclosure of research results with commercial value, the Department 
cannot make a determination on the public availability of research 
results until projects are completed in subsequent reviews. Therefore, 
we will continue to examine the Research program in future reviews. In 
addition, we have never made a finding on the countervailability of the 
SSA program. Therefore, we will continue to examine the SSA program in 
subsequent reviews.
    Comment 4: Whether FISI is Countervailable. The GOQ claims that the 
Department may not rely upon its prior countervailability determination 
for FISI in the sixth review as the basis for finding FISI 
countervailable in this review. (FISI--Farm Income Stabilization 
Insurance--is an income insurance program for farmers, financed by the 
provincial government, Quebec and the producers.) The GOQ argues that, 
because in the two review periods prior to the sixth review and also in 
the pork investigation, three binational panels found FISI 
noncountervailable, collateral estoppel precludes the Department from 
continuing to investigate FISI. See Live Swine from Canada; Amendment 
to Final Results of Countervailing Duty Administrative Review, 58 FR 
26115, 26116 (April 30, 1993); Live Swine from Canada; Amendment to 
Final Results of Countervailing Duty Administrative Review, 58 FR 47123 
(September 7, 1993); In the Matter of Fresh, Chilled and Frozen Pork 
from Canada, 13 I.T.R.D. 1655, 1661-1662 (March 8, 1991). The GOQ 
contends that reconsideration of the facts on the record in the instant 
review demonstrates that FISI is not countervailable based on the 
number of users, no dominant/disproportionate use, no GOQ discretion in 
conferring benefits, and integral linkage with crop insurance.
    Petitioner asserts that the GOQ has made the same arguments 
regarding the countervailability of FISI in previous reviews. Because 
the record in this review does not provide evidence that FISI is not 
countervailable, petitioner maintains that the Department should 
continue to treat this program as a countervailable subsidy.
    Department's Position: We agree with petitioner that FISI is 
countervailable. A full analysis of the Department's countervailability 
determination is discussed in Live Swine from Canada; Final Results of 
Countervailing Duty Administrative Review, 59 FR 12243 (March 16, 1994) 
(Swine Sixth Review Results). As we explained in Live Swine from 
Canada; Final Results of Countervailing Duty Administrative Reviews, 61 
FR 52408 (October 7, 1996) (Swine Seven, Eight, and Nine Review 
Results), the remand determinations issued pursuant to panel decisions 
in prior reviews requested the Department to reconsider certain aspects 
of the underlying methodology used in those determinations. Because 
panel decisions are binding only on the proceeding of that respective 
review, none of these remand determinations require the Department to 
establish a policy affecting all subsequent reviews, as they are based 
on different administrative records.
    Furthermore, as explained in Swine Seven, Eight, and Nine Review 
Results, where the Department has determined a program to be 
countervailable, it is the Department's policy not to reexamine the 
issue in subsequent reviews unless new information or evidence of 
changed circumstances is submitted which warrants reconsideration. In 
this review, the GOQ has presented the same arguments as in previous 
reviews but provided no new information or evidence of changed 
circumstances concerning the countervailability of FISI. Therefore, the 
Department has not reexamined the countervailability of FISI in this 
administrative review.
    Comment 5: Whether FISI, Crop Insurance, and Supply Management are 
Integrally Linked. The GOQ argues that FISI, Crop Insurance, and Supply 
Management work together to meet a common objective of providing income 
insurance, and are therefore, integrally linked even though they may 
not meet the current standard set by the Department. Because the 
integral linkage test is so narrowly defined and constantly being 
refined, the GOQ contends that the standard for integral linkage can 
never be met. Nevertheless, the GOQ maintains that these three programs 
should be found to be integrally linked in this review because the 
legislative history demonstrates that the intention of Quebec's 
National Assembly was to create a scheme of income protection.
    Petitioner contends that the same arguments were raised by the GOQ 
in several previous proceedings where the Department correctly 
determined that these programs were not integrally linked. Therefore, 
petitioner maintains that the Department should continue to countervail 
FISI benefits in full.
    Department's Position: We disagree with the GOQ that FISI, Crop 
Insurance, and Supply Management are integrally linked. In Swine Seven, 
Eight, and Nine Review Results, we explained in detail our integral 
linkage analysis of FISI, Crop Insurance, and Supply Management. In 
these previous reviews, we found the programs were not integrally 
linked because of differences in the purposes of the programs, manners 
of funding, and the lack of conclusive evidence of a government policy 
to treat industries equally. There is no new evidence on the record of 
this review that would warrant the reconsideration of our finding that 
these programs are not integrally linked.
    Comment 6: Whether the Department Double-Counted Benefits under 
FISI. The GOC, the GOQ, and the CPC argue that the Department double-
counted Transition Scheme benefits paid by the GOC and the GOQ into 
Quebec's FISI fund. Furthermore, according to the GOQ and the CPC, 
after the liquidation of NTSP (National Tripartite Stabilization 
Program is a federal program which provided price support payments), 
the GOQ transferred their share of the NTSP surplus to the FISI account 
using this to match the additional assessment paid into FISI by 
producers. The GOQ contends that the Farm Income Stabilization Act 
dictates that the GOQ shall pay into FISI an amount double that of the 
amount paid by insured farmers, no more and no less. Since the 
Department did not countervail the NTSP surplus payouts for producers 
enrolled in FISI that were transferred into the FISI account in Swine 
Tenth Review Results, CPC argues that the Department should apply this 
same practice and only countervail FISI payouts to producers.
    When the National Transition Scheme for Hogs (Transition Scheme), a 
temporary successor program to NTSP funded by the federal and 
provincial governments, provided payments to hog producers during the 
POR, the producer members of FISI decided that their payouts should be 
transferred to the FISI account and become a portion of their required 
contribution. Thus, the GOC and the CPC contend that this transfer of 
funds should not be countervailed until the producers receive FISI 
payouts. In sum, respondents argue that the producers' contribution is 
being countervailed twice, once going into the FISI account and the 
second time going out of the FISI account to the producers.
    Petitioner claims that, although Quebec producers did not receive a 
tangible contribution from the Transition Scheme in the form of a cash 
payment, they benefitted from these funds because they were not 
required to make their normal contribution to FISI out of their own 
monies. Petitioner further argues that the decision by Quebec's hog 
producers to use their Transitions Scheme payments to meet their 
financial obligation to FISI was a

[[Page 2209]]

question of form that did not reduce or eliminate the benefit accruing 
to the producers as a result of the Transition Scheme program. 
Therefore, petitioner supports the Department's view in accounting for 
this anomaly in the distribution mechanism of the subsidy.
    With respect to the additional infusion of funds into the FISI 
account by the Quebec government, petitioner argues that, despite the 
GOQ's argument that these funds are the Quebec Government's regular 
assessment, the language in the Regie's Annual Report is clear that 
there are two separate contributions, the Quebec Government's regular 
assessment for the fiscal year and these additional funds. Petitioner 
further argues that the GOQ did not address the point that in making 
the infusion, the government did not stipulate that these additional 
Quebec Government funds would be repaid by producers, either by an 
increase in producer premiums or a decrease in producer payouts. 
Petitioner asserts that absent such conditions, the Department's 
decision to treat the infusion as a grant is lawful and should be 
preserved in its final determination.
    Department's Position: The Department agrees with the respondents, 
in part, that there was double-counting with regard to the GOQ's 
contribution into FISI of their share of the NTSP Surplus. However, the 
Department disagrees that the Transition Scheme benefits to the 
producers were incorrectly countervailed.
    The FISI program, by law, must be funded one-third by the producers 
enrolled in the program and two-thirds by the GOQ. Therefore, when FISI 
payments are made to participating producers, the Department only 
calculates a benefit equal to two-thirds of the payouts in order to 
countervail only the portion of the payment contributed by the 
government. During the POR, the producers and the GOQ made their 
regular contributions into the FISI fund. FISI also received additional 
assessments on behalf of both the producers and the GOQ. In the 
preliminary results, we determined that the GOQ's additional 
contribution to FISI was countervailable in full. After further 
examination of the record evidence in this review, we have determined 
that the GOQ's contribution represents the GOQ's share of NTSP surplus 
funds. Any benefit that will result from the GOQ's portion of the NTSP 
surplus will be countervailed when future payments are made to the 
enrolled producers under FISI. Therefore, for the final results, we are 
not countervailing the GOQ portion of the NTSP surplus.
    With regard to the Transition Scheme, we have appropriately 
countervailed payments due to the producers (both federal and 
provincial portions), including payments due to producers enrolled in 
FISI, as benefits under the Transition Scheme. The Transition Scheme 
provided one-time payments to producers for hogs marketed between April 
3, 1994, and December 31, 1994. Under the Transition Scheme, hog 
producers received Can$1.50 from the GOC and a matching Can$1.50 from 
the provincial governments. During the POR, producers in the provinces 
of Alberta, Manitoba, New Brunswick, Ontario, Quebec (who were not 
enrolled in FISI), and Saskatchewan received their Transition Scheme 
payments directly. Quebec producers enrolled in FISI were also entitled 
to a direct payment for each hog marketed during the applicable period. 
As explained in the preliminary results, however, the portion of 
Transition Scheme funds due to producers who participated in FISI was 
transferred to FISI, rather than paid out directly to the producers as 
was the case with non-participants in FISI. See, Regie des assurances 
agricoles du Quebec 1995-1996 Annual Report, at 24, Exhibit F of the 
December 20, 1996 Questionnaire Response of the Government of Quebec. 
Because the Transition Scheme payouts were government funds which were 
specifically provided to hog producers, the payments are 
countervailable in full. Whether the producers received the money 
directly (as non-FISI producers did), or whether they chose to have it 
deposited in their FISI account to cover their required contribution to 
FISI, this does not change the fact that the payments made under the 
Transition Scheme constitute financial contributions which benefit hog 
producers. Instead of receiving the money directly under the Transition 
Scheme and using it to pay their FISI assessments, the producers simply 
instructed the Government to deposit the money due to them into their 
FISI account. Under either scenario, the Transition Scheme payments are 
fully countervailable. Moreover, there is no double-counting of FISI 
payouts because we are only countervailing two-thirds of the FISI 
payouts, which reflects the portion contributed by the GOQ, and we are 
not countervailing the one-third portion for which producers are 
responsible.
    Comment 7: Cash Deposit Adjustment for the National Transition 
Scheme Program. The GOC and the CPC argue that the Department should be 
consistent with its previous decision stated in the Swine Tenth Review 
Results by adjusting the cash deposit for this program to zero ``to 
reflect that this program has been terminated and there are no residual 
benefits.'' The GOC and the CPC contest the Department's preliminary 
determination in this review that residual benefits may continue to 
accrue under this program even though the program has been terminated 
and there was no new information or evidence of changed circumstances.
    Department's Position: We disagree with the GOC and CPC that the 
cash deposit rate for the Transition Scheme should be adjusted to zero 
in this review. As we explained in the previous review, we adjust the 
cash deposit rate only when there has been a program-wide change, such 
as termination, and there are no residual benefits. In the tenth 
review, we expensed the benefit received from this program and verified 
that all the payouts under the Transition Scheme had been made prior to 
our preliminary results in that review. On this basis, we did not 
include the Transition Scheme in the cash deposit. (See Swine Tenth 
Review Results.) In the instant review, however, we found that the 
payouts made during this POR were greater than 0.5 percent of total 
sales of swine for the POR, and, as such, must be allocated over time. 
When a subsidy is allocated over time, there will, of course, be 
benefits continuing under a program for the entire allocation period, 
which in this case is three years. (See Allocation Methodology section 
of this notice.) Because there will still be benefits accruing from 
this program in two subsequent reviews periods (until March 1998) due 
to the allocation period, we appropriately have not adjusted the cash 
deposit rate to zero. This is consistent with our treatment of 
adjusting the cash deposit rate for the SHARP program in Swine Tenth 
Review Results.
    Comment 8: De Minimis Calculation. The CPC disagrees with the 
Department's new de minimis calculation and argues that (1) the 
previous long-standing methodology was never challenged; (2) there is 
no new evidence requiring reexamination of the Department's standard 
practice; and (3) the Department failed to provide any explanation to 
support its change in practice in its preliminary results. 
Particularly, the CPC questions the new methodology used to calculate 
the weighted-average selling price in which the Department had adjusted 
the price to account for dressed weight (i.e., the prepared hog after 
slaughter); whereas in previous reviews no adjustment, with

[[Page 2210]]

regard to dressed weight, had been made to the reported average selling 
price.
    The CPC cites several cases, (e.g., Secretary of Agriculture v. 
United States, 347 U.S. 645, 653-54 (1954); Alhambra Foundry Co., v. 
United States, 685 F.Supp. 1252, 1258 (CIT 1988); Cinsa, S.A. de C.V. 
v. United States, 966 F. Supp. 1230, 1238 (CIT 1997); Mantex v. United 
States, 841 F. Supp. 1290 (CIT 1993) Micron Technology v. United 
States, 893 F. Supp. 21 (CIT 1995); Queen's Flowers de Colombia, et al. 
v. United States, Slip Op. 97-120 (1997 WL 633824) (CIT Aug. 25, 1997)) 
supporting their argument that the Department must conform to prior 
decisions or explain its reason for departing from past practice. The 
CPC also bolsters its arguments by citing a North American Free Trade 
Agreement Binational Panel decision (In the Matter of: Live Swine from 
Canada, Panel No. USA-94-1904-01, at 8 (May 30, 1995)) that states that 
Commerce must provide ``a comprehensive and reasoned analysis for 
reversing its former policy.'' Lastly, the CPC argues that principles 
of administrative law require the Department to ``supply a reasoned 
analysis indicating that prior policies and standards are being 
deliberately changed, not casually ignored.'' Greater Boston Television 
Corp. F.C.C., 44 F.2d 841, 852 (D.C. Cir. 1970), cert. denied, 403 U.S. 
923.
    If the Department decides to maintain the calculation methodology 
used in its preliminary results, the CPC argues that the Department 
must also then take into account an additional adjustment for a quality 
premium. Otherwise, the Department must return to its prior de minimis 
calculation methodology where no adjustment is made to the weighted-
average selling price of dressed weight.
    Petitioner argues that changes in methodology are just minor 
revisions of the Department's calculation methods in this review, and 
the Department should continue to follow this adjustment in the final 
results.
    Department's Position: We disagree with the CPC that we have 
inappropriately changed the de minimis calculation in this review. The 
methodology used to calculate the de minimis level remains basically 
the same as that applied in prior reviews, except for an adjustment 
which has become necessary as a result of an inconsistency detected by 
the Department in this review, related to the weight of the hog before 
and after slaughter.
    As duly noted by the CPC, since the fourth annual review of this 
order, our calculation of the de minimis rate was as follows: (1) For 
each province, we calculated an average selling price for the POR; (2) 
we then multiplied the average selling price by the province's 
percentage of total exports of market hogs to the United States; (3) we 
then summed the provinces' weight-averaged prices to derive at a 
Canada-wide weighted-average price for market hogs; (4) we finally 
derived the de minimis rate by multiplying the weighted-average selling 
price per kilogram by one half of one percent; and (5) we then compared 
that per kilogram rate to the calculated per kilogram subsidy rate to 
determine whether the calculated subsidy rate was above or below de 
minimis.
    However, until this review, we had overlooked the fact that, 
although we had requested information on live swine (market hogs weigh 
on the average 100 kilograms, according to industry standards) with 
regard to average selling prices and average weights during the POR, 
the data provided in the response was based on dressed weight (i.e., 
the weight of the prepared hog after slaughter, which is approximately 
80 kilograms). Prices based on dressed weight are inappropriate for our 
calculations because the benefit rate is calculated and applied on a 
live swine basis. In preparing the preliminary results in this review, 
we realized that in order to be consistent between the per kilogram 
subsidy rate calculation and the de minimis calculation, we should have 
been adjusting the selling price, provided in the response and clearly 
labeled ``Canadian dollars per kilogram dressed weight,'' to align it 
with the calculation of the per kilogram subsidy rate, which is based 
on live swine. Therefore, as explained in the calculation memorandum 
for the preliminary results, to make this adjustment, we multiplied the 
weighted-average selling price per kilogram, (provided in the response) 
by the weighted-average dressed weight of the market hog to obtain the 
total price paid to the producer for one hog. We divided this amount by 
100 kilograms to construct the average per kilogram price of a live hog 
(as stated above, the average weight of a market hog is 100 kilograms). 
As in prior reviews, we then derived the specific de minimis rate for 
live swine by multiplying the adjusted weighted-average selling price 
per kilogram by one half of one percent.
    This change makes a necessary refinement in our methodology in that 
the average prices used in our calculations are now congruous with the 
basis of the subsidies reported. In fact, when we calculate the subsidy 
rate per kilogram, we use the number of market hogs produced in Canada 
multiplied by 100 kilograms which is the reported average weight of a 
live hog. Similarly, in assessing the duties, the Customs Service 
applies the applicable duty rate to the weight of the live swine 
entering the United States. Therefore, the weighted-average prices used 
in our calculations now appropriately correspond to the finding of 
subsidization and imposition of countervailing duties.
    In the final results of this review, we made two further minor 
changes to our methodology to ensure consistency in the calculations. 
The first change affects the average Canadian dressed weight of a hog. 
In the preliminary results, the average Canadian dressed weight was 
calculated as a simple average of the provincial average weights, even 
though the selling price was calculated on a weighted-average basis. To 
be consistent in the final results, both the Canada-wide weight and the 
Canada-wide selling price are calculated on a weighted-average basis.
    The second change affects the calculation of the value of total 
Canadian production of live swine for purposes of determining whether 
grants should be expensed or allocated. In the final results of review, 
to derive the value of total Canadian production of live swine, we have 
used the adjusted price rather than the dressed weight price used in 
the preliminary results. This change did not result in a different 
outcome for the expensing of grants received during the POR.
    By making the adjustments described above, we corrected the 
discrepancy between price and weight so that now the weighted-average 
selling price used in the de minimis calculation and the grant 
calculations reflects the weight of a live swine. This allows us to 
make an apples-to-apples-comparison, i.e., the subsidy benefit, the 
duty rate, the selling price used in calculating the de minimis rate, 
and the grant calculations are now all based on the weight of a live 
swine.
    We are not persuaded by the CPC's arguments that if we adjust for 
dressed weight, we must also make an adjustment for a quality premium. 
In previous reviews, as in this review, the GOC has reported average 
selling prices per kilogram and average weights for market hogs (based 
on dressed weight) with no qualifications. We examined Table 29 ``Hogs: 
Price Range of Sales at Marketing Boards'' in the Livestock Market 
Review (Appendix 2 of the GOC's December 23, 1996 questionnaire 
response) and determined that the average prices for the industry of a 
hog correspond to the weighted-average

[[Page 2211]]

price provided in Appendix 14 of the GOC's December 23, 1996 
questionnaire response, on which our de minimis calculation is based. 
There was no mention in the response that further adjustments were 
necessary to the figures provided. Moreover, in previous administrative 
reviews, none of the parties made the argument or presented information 
demonstrating that further adjustments should be made to the price. Any 
such adjustments, if warranted, would have been appropriate regardless 
of whether any adjustment from dressed weight to live weight is made.
    As demonstrated above, the adjustment to the weighted-average 
selling price in this review was a necessary methodological adjustment 
to correct the identified discrepancy between our de minimis 
calculation and calculation of subsidy benefits. It is a well-settled 
principle of administrative law that an agency must be accorded 
substantial flexibility to refine and reformulate its practice, and 
that such methodological changes survive judicial scrutiny as long as 
the agency provides an explanation for its departure from prior 
practice and has not otherwise acted arbitrarily. See Cultivos 
Miramonte S.A. v. United States, No. 96-09-02222, 1997 Ct. Intl. Trade 
LEXIS 136, at *12 (CIT Sept. 17, 1997) (citing Davila-Bardales v. INS, 
27 F.3d 1 (1st Cir. 1994)); British Steel plc v. United 
States, 879 F. Supp. 1254, 1306-07 (CIT 1995); Mantex, Inc. et al. v. 
United States, 841 F. Supp. 1290, 1302-03 (CIT 1993). In the instant 
review, we explained the basis for our change in the preliminary 
results, which enabled interested parties to comment on this change in 
the context of the final results. We have fully considered these 
comments, but as detailed above, we continue to find that the 
adjustment to the weighted-average selling price used in our de minimis 
calculation is a necessary refinement to ensure consistency in our 
calculations. Moreover, our examination of the record evidence did not 
reveal that an additional adjustment is necessary to account for 
differences in quality premium. Unlike the cases cited by the CPC--all 
of which are instances where the reviewing authority determined that 
the agency failed to provide an explanation to support its deviation 
from prior practice--we have fully explained the rationale for our 
change in the calculation methodology, and this explanation is 
supported by the record evidence of this case. Under these 
circumstances, we have not arbitrarily changed our de minimis 
calculation in violation of long-standing administrative principles. 
See e.g., Cultivos Miramonte, at *13, n.7 (stating that an agency 
arbitrarily changes its practice when (1) the factual findings 
supporting the changes are not supported by record evidence, (2) the 
rationale provided violates administrative law, or (3) the agency has 
offended standards of procedural fairness.) Therefore, we are 
continuing to apply the new methodology in calculating the de minimis 
rate.
    Comment 9: Change in Calculation Methodology for National 
Transition Scheme Program. The CPC argues that the Department has 
significantly changed its calculation methodology of the Transition 
Scheme program whereby the grant amount received is no longer compared 
to the total value of live swine sales in Canada but to the value of 
live swine sales in only the provinces receiving grants during the POR. 
Such major changes in methodology, the CPC asserts, either require new 
information indicating the need for the change or an explanation. 
Therefore, because the Transition Scheme is a national program, the CPC 
argues that the calculation determining whether to expense grants 
received or to allocate them to the year of receipt should compare the 
grant amount received to the value of total live swine sales in Canada. 
The CPC also contends that the Department's formula for allocation of 
grants uses an incorrect national average selling price, Can$1.28, in 
analyzing the Transition Scheme and the NTSP surplus.
    In contrast, petitioner argues that the changes in methodology to 
achieve a more accurate countervailing duty rate are nothing more than 
minor revisions, which are not unlawful and are in the realm of the 
Department's discretion. Thus, petitioner maintains the Department 
should continue to follow the preliminary results methodology in the 
final results.
    Department's Position: We agree with the CPC, in part. Because the 
Transition Scheme is a nation-wide program, the grant amount received 
should be compared to the total value of live swine sales in Canada 
which we have constructed for the POR. See Swine Tenth Review Results. 
Accordingly, we have made the necessary adjustment in these final 
results by comparing the benefit to the value of the total national 
production during the POR. We made the same correction to the 
calculations of the benefit received by producers from the distribution 
of the NTSP surplus, which is also a nation-wide program. Therefore, 
the grant amount received under this program is also compared to the 
total value of live swine sales in Canada.
    However, we do not agree with the CPC that we have used an 
incorrect selling price of Can$1.28 to analyze whether the Transition 
Scheme and the NTSP surplus should be allocated over time. In our 
preliminary results, the selling price used for this calculation was 
based on a live hog. In these final results of review, the Department 
has determined that the Can$1.54 national weight-averaged selling price 
based on dressed weight should be changed to Can$1.29 to reflect the 
weight of a live swine. (See Department's Position in Comment 8 above). 
The applicable provincial average selling price should likewise be 
adjusted in the grant allocation calculations for provincial programs. 
Therefore, for these final results, we have adjusted the selling price 
to reflect that of a live hog rather than a dressed hog.

Final Results of Review

    For the period April 1, 1995 through March 31, 1996, we determine 
the net subsidy for live swine from Canada to be Can$0.0071 per 
kilogram.
    We will instruct the Customs Service to assess countervailing 
duties of Can$0.0071 per kilogram on shipments of live swine from 
Canada exported on or after April 1, 1995 and on or before March 31, 
1996. The cash deposit is Can$0.0055 per kilogram, which is de minimis. 
Accordingly, the Department will also instruct the U.S. Customs Service 
to waive cash deposits on shipments of all live swine from Canada 
entered, or withdrawn from warehouse, for consumption on or after the 
date of publication of this notice. The cash deposit rate is different 
than the assessment rate because we have taken into account program-
wide changes in calculating the cash deposit rate. These program-wide 
changes are the termination of the following programs with no residual 
benefits: Feed Freight Assistance Program, SHARP, ACBOP, Saskatchewan 
Livestock Investment Tax Credit, Saskatchewan Livestock Facilities Tax 
Credit, and NTSP Surplus.
    This notice serves as a reminder to parties subject to 
administrative protective order (APO) of their responsibility 
concerning the disposition of proprietary information disclosed under 
APO in accordance with 19 CFR 355.34(d). Timely written notification of 
return/destruction of APO materials or conversion to judicial 
protective order is hereby requested. Failure to comply with the 
regulations and the terms of an APO is a sanctionable violation.

[[Page 2212]]

    This administrative review and notice are in accordance with 
section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)).

    Dated: January 7, 1998.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 98-945 Filed 1-13-98; 8:45 am]
BILLING CODE 3510-DS-P