[Federal Register Volume 63, Number 250 (Wednesday, December 30, 1998)]
[Notices]
[Pages 71886-71889]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-34468]


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DEPARTMENT OF COMMERCE

International Trade Administration
[A-122-833, A-201-824]


Initiation of Antidumping Duty Investigations: Live Cattle from 
Canada and Mexico

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

EFFECTIVE DATE: December 30, 1998.

FOR FURTHER INFORMATION CONTACT: John Brinkmann, at (202) 482-5288, or 
Gabriel Adler, at (202) 482-1442; Import Administration, International 
Trade Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue, N.W., Washington, DC 20230.

Initiation of Investigations

The Applicable Statute and Regulations

    Unless otherwise indicated, all citations to the statute are 
references to the provisions effective January 1, 1995, the effective 
date of the amendments made to the Tariff Act of 1930, as amended (the 
Act) by the Uruguay Round Agreements Act (URAA). In addition, unless 
otherwise indicated, all citations to Department of Commerce 
(Department) regulations refer to the regulations codified at 19 CFR 
Part 351 (April 1998).

The Petitions

    On November 12, 1998, the Department received petitions filed in 
proper form by the Ranchers-Cattlemen Action Legal Foundation (R-Calf, 
referred to hereafter as ``the petitioner'').
    The petitioner had filed similar petitions on October 1, 1998 
(hereafter referred to as the ``original petitions''), but withdrew 
them on November 10, 1998. In refiling the petitions on November 12, 
1998, the petitioner requested that the Department incorporate into the 
record all submissions made in connection with the original petitions. 
In addition to the original petitions, the documents incorporated by 
reference include the following: (1) a letter of October 2, 1998, 
clarifying the scope of the petitions; (2) letters dated October 15, 
16, and 21, 1998, responding to the Department's requests for 
clarification of calculation methodologies in the petitions; and (3) 
letters dated October 14 and 22, and November 2, 6, 9, and 10, 1998, 
providing additional information with respect to industry support. The 
Department also incorporated into the record all submissions made by 
other interested parties in connection with the original petitions.\1\
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    \1\ The Government of Mexico, the Government of Canada and the 
Government of Quebec raised issue with the refiling of these 
petitions. We note, however, that there is no statutory bar to 
refiling a petition which has been withdrawn. While the Department 
possesses the inherent authority to prevent a party from improperly 
manipulating its procedures, we have no reason to exercise that 
discretion in this case, particularly given the highly fragmented 
nature of the live cattle industry and the resulting complexity for 
this industry in expressing views on these petitions.
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    After refiling the petitions, the petitioner made several 
additional filings with respect to industry support. The Department 
also received additional submissions on the issue of industry support 
from other interested parties.
    The petitioner alleges that imports of live cattle from Canada and 
Mexico are being, or are likely to be, sold in the United States at 
less than fair value within the meaning of section 731 of the Act, and 
that such imports are materially injuring, or threatening material 
injury to, a U.S. industry.
    The Department finds that the petitioner has standing to file the 
petitions because it is an interested party as defined in section 
771(9)(E) of the Act. Further, the Department's efforts with respect to 
its determination of industry support indicate that the petitions in 
fact have sufficient industry support (see discussion below).

Scope of Investigations

    For purposes of these investigations, the product covered is all 
live cattle except imports of dairy cows for the production of milk for 
human consumption and purebred cattle specially imported for breeding 
purposes and other cattle specially imported for breeding purposes.
    The merchandise subject to these investigations is classifiable as 
statistical reporting numbers under 0102.90.40 of the Harmonized Tariff 
Schedule of the United States (HTSUS), with the exception of 
0102.90.40.72 and 0102.90.40.74. Although the HTSUS subheadings are 
provided for

[[Page 71887]]

convenience and customs purposes, the written description of the 
merchandise is dispositive.
    During our review of the petitions, we discussed with the 
petitioner whether the proposed scope was an accurate reflection of the 
product for which the domestic industry is seeking relief. We noted to 
the petitioner that the scope in the petitions appeared to exclude all 
purebred cattle. The petitioner subsequently notified the Department 
that only purebred cattle intended for breeding purposes should be 
excluded from the scope of the investigations. We revised the scope 
accordingly. The petitioner has since indicated that this revised scope 
accurately describes the product for which the domestic industry is 
seeking relief.
    Consistent with the preamble to the new regulations, we are setting 
aside a period for interested parties to raise issues regarding product 
coverage. See Antidumping Duties, Countervailing Duties: Final Rule, 62 
FR 27296, 27323 (May 19, 1997). This period of scope consideration is 
intended to provide the Department the opportunity to amend the scope 
of the investigation, if warranted, such that the International Trade 
Commission (ITC) may be able to take the refined scope into account in 
defining the domestic like product for injury purposes. In addition, 
early amendment can partially alleviate the reporting burden on 
respondents and avoid suspension of liquidation and posting of 
securities on products of no interest to the petitioner. The Department 
encourages all interested parties to submit such comments within twenty 
days after the date of publication of this notice in the Federal 
Register.

Determination of Industry Support for the Petitions

    Section 732(c)(4)(A) of the Act requires that the Department 
determine, prior to the initiation of an investigation, that a minimum 
percentage of the domestic industry supports an antidumping petition. A 
petition meets these minimum requirements if the domestic producers or 
workers who support the petition account for: (1) at least 25 percent 
of the total production of the domestic like product, and (2) more than 
50 percent of the production of the domestic like product produced by 
that portion of the industry expressing support for, or opposition to, 
the petition. Under section 732(c)(4)(D) of the Act, if the 
petitioner(s) account for more than 50 percent of the total production 
of the domestic like product, the Department is not required to poll 
the industry to determine the extent of industry support.
    To determine whether a petition has the requisite industry support, 
the statute directs the Department to look to producers and workers who 
account for production of the domestic like product. The ITC, which is 
responsible for determining whether ``the domestic industry'' has been 
injured, must also determine what constitutes a domestic like product 
in order to define the industry. However, while both the Department and 
the ITC must apply the same statutory definition of domestic like 
product, they do so for different purposes and pursuant to separate and 
distinct authority. In addition, the Department's determination is 
subject to limitations of time and information. Although this may 
result in different definitions of the like product, such differences 
do not render the decision of either agency contrary to the law.\2\
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    \2\ See Algoma Steel Corp., Ltd. v. United States, 688 F. Supp. 
639, 642-44 (CIT 1988); High Information Content Flat Panel Displays 
and Display Glass Therefor from Japan: Final Determination; 
Rescission of Investigation and Partial Dismissal of Petition, 56 FR 
32376, 32380-81 (July 16, 1991).
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    Section 771(10) of the Act defines domestic like product as ``a 
product that is like, or in the absence of like, most similar in 
characteristics and uses with, the article subject to an investigation 
under this title.'' Thus, the reference point from which the like 
product analysis begins is ``the article subject to an investigation,'' 
i.e., the class or kind of merchandise to be investigated, which 
normally will be the scope as defined in the petition.
    The petitions define the single domestic like product as live 
cattle (Bos taurus and Bos indicus) (including calves, stocker/
yearlings, feeder steers and heifers, slaughter steers and heifers, and 
cull cows and bulls) which are raised and fed for the purpose of the 
production of beef. The domestic like product does not include purebred 
cattle that are used for breeding, unless and until these cattle are 
culled. The domestic like product also does not include dairy cows used 
to produce milk for human consumption.
    No party has commented on the petitions' definition of domestic 
like product, and there is nothing on the record to indicate that this 
definition is inaccurate. Therefore, we have found no basis on which to 
reject the petitioner's representations that all cattle intended for 
slaughter should be included in the domestic like product. The domestic 
like product is functionally the same as the scope of the 
investigations, with the clarification that culled cattle are to be 
included. The Department has, therefore, adopted the like product 
definition set forth in the petitions, as clarified in the petitioner's 
letter of October 2, 1998.
    With respect to the above-cited industry support requirements, our 
initial review of the production data in the petitions indicated that 
they did not account for more than 50 percent of the total production 
of the domestic like product. Therefore, in accordance with section 
732(c)(4)(D) of the Act, we determined that it was necessary to poll or 
otherwise determine support for the petitions by the live cattle 
industry. Pursuant to section 732(c)(1)(B) of the Act, we extended the 
deadline for initiations until December 22, 1998, in order to allow 
sufficient time for this determination.
    Due to, among other factors, the extraordinarily large number of 
individual producers of live cattle in the United States, as well as 
the lack of a comprehensive listing of such producers, we determined 
that it would not be feasible to conduct a traditional sampling of 
producers. We also determined that it would not be feasible to poll all 
individual producers. Instead, we examined more than 150 cattle and 
cattle-related associations and requested that they report the views of 
their cattle-producing members. Where individual producers contacted 
the Department directly to express their views, we included those views 
in our calculations after making adjustments to account for overlap of 
production between associations and their members. For a full 
description of the Department's industry support methodology, see 
memorandum from Susan Kuhbach and Gary Taverman to Richard W. Moreland, 
``Live Cattle from Canada and Mexico: Determination of Industry 
Support'' (December 22, 1998).
    The Department found that the domestic producers or workers 
supporting the petitions account for both (1) at least 25 percent of 
the total production of the domestic like product, and (2) more than 50 
percent of the production of the domestic like product produced by that 
portion of the industry expressing support for, or opposition to, the 
petition. Therefore, we find that there is sufficient industry support 
for the petitions.

Export Price and Normal Value

    The petitioner calculated the export price and normal value as 
follows:
I. Canada
    To determine the export price, the petitioner calculated a 
weighted-average price of imported Canadian cattle based

[[Page 71888]]

on existing U.S. Census import data covering the period October 1997 
through July 1998. These pricing data are on a free along side (FAS) 
basis (i.e., the declared value of the cattle before loading onto 
freight carriers in Canada).
    With respect to normal value, the petitioner obtained home market 
sales data from weekly Canadian price reports published by the USDA 
Agricultural Marketing Service. The petitioner alleged that these home 
market prices were below the cost of production (i.e., the sum of the 
cost of manufacturing (COM), selling, general and administrative (SG&A) 
expenses, and packing costs), and therefore they could not be used as 
the basis for normal value. Instead, the petitioner based normal value 
on constructed value (CV). The petitioner calculated the CV as the sum 
of the COM, SG&A, packing, and profit. To calculate profit, the 
petitioner relied on 1996 average profits for a variety of non-cattle 
livestock products, as compiled by Statistics Canada.
    Our review of the petition's calculation of export price did not 
indicate the need to make revisions to that price. With respect to 
normal value, we first examined the petitioner's cost test methodology. 
We found that the petitioner had based the cost of production (COP) for 
four cattle types on actual cost data taken from a report published by 
CanFax, a division of the Canadian Cattlemen's Association. For these 
cattle types, we analyzed the sales-below-cost allegation, as explained 
below. With respect to the other nine cattle types for which sales 
information was provided, we did not rely on the petitioner's submitted 
cost data. Since we had actual cost data available for four cattle 
types, we disregarded the cost data for these nine cattle types and 
relied on the home market prices set forth in the petition.
    We compared the home market sales prices of the four cattle types 
for which we had reliable cost data to the COP data supplied in the 
petition for each such cattle type, and found that home market prices 
in every instance were below the cost of production. This finding 
constitutes ``reasonable grounds to believe or suspect'' that sales of 
these foreign like products were made below their respective COP within 
the meaning of section 773(b)(2)(A)(i) of the Act. See Initiation of 
Cost Investigation, below.
    For these cattle types, we based normal value on CV. Except for a 
minor correction of exchange rates, we relied on the submitted COM and 
SG&A data for the four types of cattle in question. We revised the 
profit calculation to include only the profit on cattle livestock 
products as compiled by Statistics Canada.
II. Mexico
    To determine the export price, the petitioner calculated a 
weighted-average price of imported Mexican cattle based on existing 
U.S. Census import data from June 1997 through July 1998. These pricing 
data are on a FAS basis, and are specific to the age and sex of the 
cattle.
    With respect to normal value, the petitioner reported price data 
from three sources: (1) the Mexican government publication ``Current 
Situation and Outlook for Beef Production in Mexico''; (2) an ITC 
report containing quarterly 1996 prices for live steers in Mexico City 
and (3) a Mexican web site, the Daily Bulletin from the National 
Service of Market Information (SNIM), which contained August 19, 1996 
prices broken down by region and age of cow. The petitioner claimed, 
however, that because these home market prices were below the cost of 
production they could not be used as the basis for normal value. 
Instead, the petitioner based normal value on CV. The petitioner 
calculated CV as the sum of the COM, SG&A, packing costs and profit. 
Except for profit, these figures were based on published USDA 
information on the costs of U.S. cow-calf operations in 1997. Cow-calf 
operation costs were considered to be those that most accurately 
reflected the cost of raising the calves and steers that constitute the 
majority of Mexican cattle exported to the United States. The 
petitioner adjusted the U.S. costs for known differences between costs 
incurred to produce live cattle in the United States and costs for 
producing the subject merchandise in Mexico. The petitioner was unable 
to obtain any information regarding the profitability of Mexican 
ranchers, and thus conservatively assumed profit to be zero.
    Our review of the petition's calculation of export price did not 
indicate the need to make revisions to that price. With respect to 
normal value, we did not use the home market prices included in the 
petition because we found that these prices were not of products 
comparable to those used by the petitioner as the basis for export 
price. Instead, we reviewed the calculation of CV, and accepted the 
underlying cost data contained in the petition except in the following 
instances: (1) we eliminated imputed costs for operating capital, other 
non-land capital and land, because these amounts do not represent 
actual expenses; (2) we did not accept the inflation adjustment made by 
the petitioner, since the petition contained 1997 cost data and 1997-98 
prices; (3) we converted U.S. dollars to pesos using the average 1997 
exchange rate, as published by the Federal Reserve, and we used the 
same rate when converting pesos back to dollars for comparison to 
export prices; and (4) we revised the miscellaneous cost figure shown 
in the USDA statistics by applying the ratio of U.S. to Mexican feed 
costs.

Fair Value Comparison

    Based on the data provided by the petitioner, as revised by the 
Department in the manner described above, we find that there is reason 
to believe that imports of live cattle from Canada and Mexico are 
being, or are likely to be, sold at less than fair value.
    The margin calculations in the petitions, as revised, indicate 
dumping margins ranging from 6.42 percent to 10.72 percent for live 
cattle from Canada, and 15.48 to 64.49 percent for live cattle from 
Mexico.
    If it becomes necessary at a later date to consider the petitions 
as a source of facts available under section 776 of the Act, we may 
review and, if necessary, further revise the margin calculations in the 
petitions.

Allegations and Evidence of Material Injury and Causation

    The petitions allege that the U.S. industry producing the domestic 
like product is being materially injured, and is threatened with 
material injury, by reason of the individual and cumulated imports of 
the subject merchandise sold at less than normal value. The allegations 
of injury and causation are supported by relevant evidence including 
USDA data and U.S. Customs import data. The Department assessed the 
allegations and supporting evidence regarding material injury and 
causation and determined that these allegations are sufficiently 
supported by accurate and adequate evidence and meet the statutory 
requirements for initiation. See Initiation Checklist for Canada and 
for Mexico.

Initiation of Antidumping Investigations

    We have examined the petitions on live cattle from Canada and 
Mexico and have found that they meet the requirements of section 732 of 
the Act, including the requirement concerning allegation of material 
injury or threat of material injury to the domestic producers of a 
domestic like product by reason of subject imports allegedly sold at 
less than fair value. Therefore, we are initiating antidumping duty 
investigations to determine whether imports of live cattle from Canada 
and

[[Page 71889]]

Mexico are being, or are likely to be, sold in the United States at 
less than fair value. Our preliminary determinations will be issued by 
May 11, 1999, unless the deadline for the determinations is extended.

Initiation of Cost Investigation

    As explained above, the Department has found that there are 
``reasonable grounds to believe or suspect'' that sales of live cattle 
from Canada were made below their respective COP within the meaning of 
section 773(b)(2)(A)(i) of the Act. Therefore, we are initiating a 
countrywide sales-below-cost investigation with respect to live cattle 
from Canada.
    With respect to the allegation that there were sales of Mexican 
cattle below cost, we were unable to consider the cost allegation 
because the cost data provided in the petition were not on the same 
basis as the home market sales data, and thus could not be meaningfully 
compared. Therefore, we are not initiating a sales-below-cost 
investigation with respect to live cattle from Mexico at this time. 
However, we note that in accordance with the Department's regulations 
at 19 CFR 351.301(d)(2)(i), the petitioner will have until 20 days 
after the date on which the Department issues its antidumping 
questionnaire to file a country-wide cost allegation; alternatively, 
the petitioner will have 20 days after the filing of sales 
questionnaire responses by individual respondents to file company-
specific cost allegations.

Distribution of Copies of the Petitions

    In accordance with section 732(b)(3)(A) of the Act, copies of 
public versions of the petitions have been provided to the 
representatives of the Governments of Canada and Mexico.

International Trade Commission Notification

    We have notified the ITC of our initiation of these investigations, 
as required by section 732(d) of the Act.

Preliminary Determination by the ITC

    The ITC will determine by January 18, 1999, whether there is a 
reasonable indication that imports of live cattle from Canada and 
Mexico are causing material injury, or threatening to cause material 
injury, to a U.S. industry. A negative ITC determination will result in 
termination of the investigations; otherwise, the investigations will 
proceed according to statutory and regulatory time limits.

    Dated: December 22, 1998.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 98-34468 Filed 12-29-98; 8:45 am]
BILLING CODE 3510-DS-P