[Federal Register Volume 63, Number 250 (Wednesday, December 30, 1998)]
[Notices]
[Pages 71889-71892]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-34469]


-----------------------------------------------------------------------

DEPARTMENT OF COMMERCE

International Trade Administration
[C-122-834]


Initiation of Countervailing Duty Investigation of Live Cattle 
From Canada

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

EFFECTIVE DATE: December 30, 1998.

FOR FURTHER INFORMATION CONTACT: Zak Smith, James Breeden, or Stephanie 
Hoffman, Import Administration, U.S. Department of Commerce, Room 1870, 
14th Street and Constitution Avenue, NW, Washington, D.C. 20230, 
telephone (202) 482-0189, (202) 482-1174, or (202) 482-4198, 
respectively.

Initiation of Investigation

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 (the Act) by the 
Uruguay Round Agreements Act (URAA). In addition, unless otherwise 
indicated, all citations to Department of Commerce (the Department) 
regulations are to the provisions codified at 19 CFR Part 351 (April 
1998).

The Petition

    On November 12, 1998, the Department of Commerce received a 
petition filed in proper form by the Ranchers-Cattlemen Action Legal 
Foundation (R-Calf, referred to hereafter as the ``petitioner'').
    The petitioner had filed a similar petition on October 1, 1998 
(hereafter referred to as the ``original petition''), but had withdrawn 
it on November 10, 1998. In refiling the petition on November 12, 1998, 
the petitioner requested that the Department incorporate into the 
record all submissions made in connection with the original petition. 
The Department granted this request, and also incorporated into the 
record all submissions made by other interested parties in connection 
with the original petition.1
---------------------------------------------------------------------------

    \1\ The Government of Canada and the Government of Quebec 
contested the refiling of the petition. 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is no statutory bar to refiling a petition which has been withdrawn.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 the 
petition.
---------------------------------------------------------------------------

    After refiling the petition, 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.
    In accordance with section 702(b)(1) of the Act, the petitioner 
alleges that manufacturers, producers, or exporters of the subject 
merchandise in Canada receive countervailable subsidies within the 
meaning of section 701 of the Act.
    The Department finds that the petitioner has standing to file the 
petition because it is an interested party as defined in section 
771(9)(E) of the Act. Further, the Department's analysis underlying its 
determination of industry support indicates that the petition in fact 
has sufficient industry support (see discussion below).

Scope of the Investigation

    For purposes of this investigation, 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 this investigation is classifiable under 
subheading 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 convenience and Customs 
purposes, the Department's written description of the merchandise is 
dispositive.
    During our review of the petition, 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 petition 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 investigation. 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.

[[Page 71890]]

    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 is intended to provide the 
Department with the opportunity to amend the scope of the 
investigation, if warranted, such that the International Trade 
Commission (ITC) may be able to take the revised 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.

Consultations

    Pursuant to section 702(b)(4)(A)(ii) of the Act, the Department 
invited representatives of the Canadian government for consultations 
with respect to the petition. These consultations were held on November 
20, 1998. The Department also held consultations regarding the original 
petition with the Government of Canada on October 15, and November 4, 
1998. We have incorporated all materials relating to those 
consultations into the administrative record of this proceeding.

Determination of Industry Support for the Petition

    Section 702(c)(1)(A)(ii) of the Act requires that the Department 
determine, prior to the initiation of an investigation, that a minimum 
percentage of the domestic industry supports a countervailing duty 
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 702(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 
law.2
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

    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 petition defines the 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 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 petition's definition of domestic 
like product, and there is nothing in the record to indicate that this 
definition is inaccurate. Therefore, we have found no basis on which to 
reject the petitioner's representation 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 single like 
product definition set forth in the petition, 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 petition indicated that 
the petitioner (and supporters of the petition) did not account for 
more than 50 percent of the total production of the domestic like 
product. Therefore, in accordance with section 702(c)(4)(D) of the Act, 
we determined that it was necessary to poll or otherwise determine 
support for the petition by the live cattle industry. Pursuant to 
section 702(c)(1)(B), we extended the deadline for initiation 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 contacted 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) (Domestic Support Memorandum).
    The Department found that the domestic producers or workers 
supporting the petition 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 petition. (See Domestic Support Memorandum.)

Injury Test

    Because Canada is a ``Subsidies Agreement Country'' within the 
meaning of section 701(b) of the Act, section 701(a)(2) applies to 
these investigations. Accordingly, the ITC must determine whether 
imports of the subject merchandise from these countries materially 
injure, or threaten material injury to, a U.S. industry.

[[Page 71891]]

Allegations and Evidence of Material Injury and Causation

    The petition alleges 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 subsidized 
imports of the subject merchandise. The allegations of injury and 
causation are supported by relevant evidence including United States 
Department of Agriculture (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 ``Countervailing Duty 
Initiation Checklist for Canada.''

Allegations of Subsidies

    Section 702(b) of the Act requires the Department to initiate a 
countervailing duty proceeding whenever an interested party files a 
petition, on behalf of an industry, that (1) alleges the elements 
necessary for an imposition of a duty under section 701(a), and (2) is 
accompanied by information reasonably available to petitioners 
supporting the allegations.

Initiation of Countervailing Duty Investigation

    The Department has examined the petition on live cattle from Canada 
and finds that it meets the requirements of section 702(b) of the Act. 
Therefore, in accordance with section 702(b) of the Act, we are 
initiating a countervailing duty investigation to determine whether 
manufacturers, producers, or exporters of live cattle from Canada 
receive subsidies.
    We are including in our investigation the following programs 
alleged in the petition to have provided subsidies to producers and 
exporters of the subject merchandise in Canada:

1. Canadian Wheat Board's Control of Feed Barley Exports
2. Ontario Feeder Cattle Loan Guarantee Program
3. Alberta Feeder Associations Guarantee Program
4. Saskatchewan Feeder Associations Loan Guarantee Program
5. Saskatchewan Breeder Associations Loan Guarantee Program
6. Manitoba Cattle Feeder Associations Loan Guarantee Program
7. British Columbia Livestock Feeder Loan Guarantee Program
8. Farm Improvement and Marketing Cooperative Loans Act (FIMCLA)
9. Northern Ontario Heritage Fund Corporation Agriculture Assistance
10. Net Income Stabilization Account
11. Saskatchewan Beef Development Fund
12. Ontario Livestock Programs for Purebred Dairy Cattle, Beef and 
Sheep Sales Assistance Policy/Swine Assistance Policy
13. Canada-Alberta Beef Industry Development Fund
14. Manitoba Tripartite Cattle Stabilization/Industry Development 
Transition Fund
15. Canadian Adaptation and Rural Development (CARDS) Program in 
Saskatchewan
16. Quebec Farm Financing Act
17. Alberta Public Grazing Lands Improvement Program
18. Saskatchewan Crown Land Improvement Policy
19. Technology Innovation Program Under the Agri-Food Agreement
20. Feed Freight Assistance Adjustment Fund (FFAF)
21. Western Diversification Program
22. Ontario Livestock, Poultry and Honey Bee Protection Act
23. Ontario Bear Damage to Livestock Compensation Program
24. Ontario Rabies Indemnification Program
25. Quebec Farm Income Stabilization Insurance Program (FISI)
26. Ontario Artificial Insemination of Livestock Act
27. Saskatchewan Livestock and Horticultural Facilities Incentives 
Program
28. The Prairie Farm Rehabilitation Community Pasture Program
29. Provincial Crown Lands Program
30. Ontario Export Sales Aid Program

    We are not including in our investigation at this time the 
following programs alleged to be benefitting producers and exporters of 
the subject merchandise in Canada:
1. Beef Industry Development Fund
    The petitioner alleges that cattle producers receive 
countervailable subsidies through monies provided by the government for 
the promotion and enhancement of the beef industry. Specifically, the 
petition alleges that expenditures for beef industry promotion also 
benefit cattle production under the Department's attribution policy, 
whereby subsidies paid to a corporate entity benefit related products 
within that company. According to the petitioner, beef promotion funds 
received by a corporate entity that operates feedlots should be 
investigated to determine whether benefits under the program benefit 
cattle production.
    Despite the fact that the petitioner provides evidence of 
governmental assistance to the beef industry, the petition does not 
provide adequate information supporting its allegation of a benefit or 
financial contribution to the cattle industry. Rather, the petition 
refers to the Department's ``attribution'' policy, whereby benefits 
received for the production of an input pass onto the final product 
when received by the same corporate entity. See Final Affirmative 
Countervailing Duty Determination: Certain Pasta From Italy, 61 FR 
30287 (June 14, 1996).
    In this case, the petitioner has argued that subsidies attributable 
to a final product benefit the production of an input, but has not 
offered any evidence to support this contention. Therefore, based upon 
the lack of supporting information in the petition that the Beef 
Industry Development Fund provides a financial contribution or benefit 
to the producers of the subject merchandise, we are not including this 
program in our investigation.
2. British Columbia Farm Product Industry Act
    The petitioner alleges that cattle producers receive 
countervailable subsidies in the form of grants, loans and loan 
guarantees which are designed to encourage and assist the development 
and expansion of the agricultural industry in British Columbia. This 
program is allegedly de facto specific because British Columbia 
accounts for seven percent of the beef cows produced in Canada. 
However, the petition does not provide any further evidence or 
argumentation that the actual recipients are limited in number, that 
the cattle industry is a predominant user, that the cattle industry 
receives a disproportionately large amount of assistance, or that the 
government has exercised discretion in favoring one enterprise or 
industry over another. Furthermore, because this program is not limited 
to a particular enterprise or industry within British Colombia, this 
program does not qualify as a regional subsidy under section 
771(5A)(D)(iv) of the Act. Therefore, based upon the lack of supporting 
information in the petition that the British Colombia Farm Product 
Industry Act is specific on either a de jure, de facto or regional 
basis, we are not including this program in our investigation.
3. Transition Programs for Red Meats
    The petitioner alleges that countervailable subsidies were provided 
to cattle producers through a program titled, ``Transition Programs for 
Red Meats.'' As was alleged with the Beef Industry Development Fund 
(see above), the petitioner states that expenditures

[[Page 71892]]

on behalf of the beef industry also benefit cattle production under the 
Department's attribution approach. However, the petitioner does not 
provide adequate information supporting its allegation of a benefit or 
financial contribution either to cattle producers or the beef industry. 
Therefore, based upon the lack of supporting information in the 
petition that Transition Programs for Red Meats provides a financial 
contribution or benefit to the producers of the subject merchandise, we 
are not including this program in our investigation.
4. British Columbia Grazing Enhancement Special Account Act
    The petitioner alleges that cattle producers receive 
countervailable benefits through the government's maintenance and 
enhancement of British Columbia's public range resources. This program 
is allegedly de jure specific because it benefits only farmers with 
grazing livestock. However, the petition does not provide any evidence 
or argumentation of a financial contribution being provided directly or 
indirectly to cattle producers. Specifically, there is no evidence of a 
direct transfer of funds, the foregoing or non-collection of revenue, 
the provision of goods and services (other than general 
infrastructure), or the purchase of goods. Therefore, based upon the 
lack of supporting information in the petition that the British 
Columbia Grazing Enhancement Special Account Act provides a financial 
contribution to the producers of live cattle, we are not including this 
program in our investigation.

Uncreditworthy Allegation

    The petitioner alleges that the Canadian cattle industry is not 
creditworthy. The petitioner bases this allegation essentially on two 
arguments: (1) The industry is selling below cost; and, (2) a segment 
of the industry, and the industry as a whole, has been unprofitable.
    Normally, the Department has required that any allegation of 
uncreditworthiness be made on a company-specific basis. (See, e.g., 
Countervailing Duties; Notice of Proposed Rulemaking and Request for 
Public Comments, (1989 Proposed Regulations), 54 FR 23366, 23380.) It 
is the Department's policy to find a company uncreditworthy if 
information at the time of the government-provided loan in question 
indicates that the firm could not have obtained long-term commercial 
financing from conventional sources during the period when government 
loans were allegedly available to them. With respect to the analysis of 
uncreditworthiness allegations in a petition, it has been the 
Department's long-standing practice to employ a heightened threshold 
for uncreditworthiness allegations. Specifically, the petitioner must 
supply information establishing a reasonable basis to believe or 
suspect that a company is uncreditworthy, rather than simply providing 
reasonably available supporting information. (See 1989 Proposed 
Regulations, 54 FR 23366, 23370, 23380 and Countervailing Duties; Final 
Rule, 63 FR 65348, 65368, 65409.)
    Although it is the Department's policy to require 
uncreditworthiness allegations on a company-specific basis, we have 
also recognized that such a requirement may be unreasonable in cases in 
which the number of respondents is very large. (See Final Affirmative 
Countervailing Duty Determination: Fresh and Chilled Atlantic Salmon 
From Norway, 56 FR 7678, 7683 (February 25, 1991).) In the instant 
case, we accept the petitioner's claim that the large number of 
Canadian cattle producers makes it difficult to compile company-
specific information with respect to a significant (or representative) 
number of producers. Therefore, we have analyzed whether the petitioner 
has provided a reasonable basis to believe or suspect that the Canadian 
cattle industry, in general, was unable to obtain long-term commercial 
financing from conventional sources.
    As noted above, the petitioner has provided information indicating 
that the Canadian cattle industry has been selling below its cost and, 
arguably, has been unprofitable in recent years. Although relevant, 
this information does not directly address the issue of whether the 
industry was unable to obtain commercial long-term 
financing.3 While we recognize that the Canadian cattle 
industry may be selling below cost and may have been unprofitable, it 
could be argued that such phenomena are not unusual for agricultural 
producers within an industry often subject to cyclical downturns. 
Furthermore, the petitioner has not provided specific evidence 
indicating that the current financial condition of the Canadian cattle 
industry will continue into the future or any other information 
directly supporting the conclusion that the industry has been unable to 
obtain long-term commercial financing.
---------------------------------------------------------------------------

    \3\ The only information that the petitioner has provided which 
may be directly relevant is a source note from a Canadian statistics 
report which indicates that interest costs are computed on the basis 
of monthly prime rates plus a premium. The petitioner alleges that 
this confirms that cattle producers can only get short-term 
financing because of their high risk of loss. Given that the report 
in question was intended to estimate a Canadian cattle producer's 
cost and that the use of a short-term interest rate appears to be an 
assumption rather than an empirically derived fact, we consider this 
information to be of little probative value.
---------------------------------------------------------------------------

Distribution of Copies of the Petition

    In accordance with section 702(b)(4)(A)(i) of the Act, copies of 
the public version of the petition have been provided to the 
representatives of the Government of Canada.

ITC Notification

    Pursuant to section 702(d) of the Act, we have notified the ITC of 
our initiation of this investigation.

Preliminary Determination by the ITC

    The ITC will determine by January 18, 1999, whether there is a 
reasonable indication that an industry in the United States is 
materially injured, or is threatened with material injury, by reason of 
imports of live cattle from Canada. A negative ITC determination will 
result in the investigation being terminated; otherwise, the 
investigation will proceed according to statutory and regulatory time 
limits.
    This notice is published pursuant to section 777(i) of the Act.

    Dated: December 22, 1998.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 98-34469 Filed 12-29-98; 8:45 am]
BILLING CODE 3510-DS-P