[Federal Register Volume 67, Number 209 (Tuesday, October 29, 2002)]
[Notices]
[Pages 65951-65953]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-27515]


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DEPARTMENT OF COMMERCE

International Trade Administration

[C-122-846 and C-122-848]


Notice of Initiation of Countervailing Duty Investigations: Durum 
Wheat and Hard Red Spring Wheat From Canada

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

ACTION: Initiation of countervailing duty investigations.

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SUMMARY: The Department of Commerce is initiating countervailing duty 
investigations to determine whether manufacturers, producers, or 
exporters of durum wheat and hard red spring wheat from Canada receive 
countervailable subsidies.

EFFECTIVE DATE: October 29, 2002.

FOR FURTHER INFORMATION CONTACT: Craig W. Matney, AD/CVD Enforcement, 
Group I, Office 1, Import Administration, International Trade 
Administration, U.S. Department of Commerce, Room 3099, 14th Street and 
Constitution Avenue, NW., Washington, DC 20230; telephone (202) 482-
1778.

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 (``the Act'') by 
the Uruguay Round Agreements Act. In addition, unless otherwise 
indicated, all citations to the Department of Commerce's (``the 
Department'') regulations are references to the provisions codified at 
19 CFR part 351 (April 2002).

The Petitions

    On September 13, 2002, the Department received petitions filed in 
proper form by the North Dakota Wheat Commission (hard red spring 
wheat), Durum Growers Trade Action Committee (durum wheat), and the 
U.S. Durum Growers Association (durum wheat) (collectively, ``the 
petitioners'').\1\ The Department received petition supplements from 
September 24 through October 21, 2002.
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    \1\ In the September 13, 2002 petitions, the petitioners 
identified the North Dakota Wheat Commission as a petitioner for 
both the durum wheat and hard red spring wheat petitions. However, 
in a petition supplement dated September 24, 2002, the petitioners 
informed the Department that, with respect to the petition on durum 
wheat, the petitioners were replacing the North Dakota Wheat 
Commission with the Durum Growers Trade Action Committee.
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    In accordance with section 702(b)(1) of the Act, the petitioners 
allege that manufacturers, producers, or exporters of durum wheat and 
hard red spring wheat, the subject merchandise, from Canada receive 
countervailable subsidies within the meaning of section 701 of the Act, 
and that such imports are materially injuring, or threatening material 
injury to, an industry in the United States.
    The Department finds that the petitioners filed these petitions on 
behalf of the respective domestic industries because they are 
interested parties as defined in sections 771(9)(E) and (F) of the Act 
and they have demonstrated sufficient industry support with respect to 
each of the countervailing duty investigations that they are requesting 
the Department to initiate. See infra, ``Determination of Industry 
Support for the Petitions.''

Scope of Investigations

    For purposes of these investigations, the products covered are (1) 
durum wheat and (2) hard red spring wheat.
1. Durum Wheat
    Imports covered by this investigation are all varieties of durum 
wheat from Canada. This includes, but is not limited to, a variety 
commonly referred to as Canada Western Amber Durum. The merchandise 
subject to this investigation is typically classified in the following 
Harmonized Tariff Schedule of the United States (``HTSUS'') 
subheadings: 1001.10.00.10, 1001.10.00.91, 1001.10.00.92, 
1001.10.00.95, 1001.10.00.96, and 1001.10.00.99.
2. Hard Red Spring Wheat
    Imports covered by this investigation are all varieties of hard red 
spring wheat from Canada. This includes, but is not limited to, 
varieties commonly referred to as Canada Western Red Spring, Canada 
Western Extra Strong, and Canada Prairie Spring Red. The merchandise 
subject to this investigation is typically classified in the following 
HTSUS subheadings: 1001.90.10.00, 1001.90.20.05, 1001.90.20.11, 
1001.90.20.12, 1001.90.20.13, 1001.90.20.14, 1001.90.20.16, 
1001.90.20.19, 1001.90.20.21, 1001.90.20.22, 1001.90.20.23, 
1001.90.20.24, 1001.90.20.26, 1001.90.20.29, 1001.90.20.35, and 
1001.90.20.96.
    Although the HTSUS subheadings provided for durum wheat and hard 
red spring wheat are for convenience and customs purposes, our written 
description of the scope of these proceedings is dispositive.
    As discussed in the preamble to the Department's regulations (see 
Antidumping Duties; Countervailing Duties; Final Rule, 62 FR 27296, 
27323 (May 19, 1997)), we are setting aside a period for parties to 
raise issues regarding product coverage. The Department encourages all 
parties to submit such comments within 20 days of publication of this 
notice. Parties should submit any comments on the file of each (durum 
wheat and hard red spring wheat) case. Comments should be addressed to 
Import Administration's Central Records Unit, Room 1870, U.S. 
Department of Commerce, 14th Street and Constitution Avenue, NW., 
Washington, DC 20230. The period of scope consultations is intended to 
provide the Department with ample opportunity to consider all comments 
and consult with parties prior to the issuance of our preliminary 
determinations.

Consultations

    Pursuant to section 702(b)(4)(A)(ii) of the Act, the Department 
invited representatives of the Government of Canada (``GOC'') for 
consultations with respect to the petitions filed in these proceedings. 
The Department held consultations with the GOC on October 1, 2002. The 
points raised in the consultations are cited in the Memorandum to the 
File, ``CVD Consultations with Officials from the Government of 
Canada,'' dated October 2, 2001, which is on file in the Department's 
Central Records Unit,

[[Page 65952]]

Room B-099 of the main Department of Commerce building (``CRU'').

Determination of Industry Support for the Petitions

    Section 702(b)(1) of the Act requires that a petition be filed on 
behalf of the domestic industry. Section 702(c)(4)(A) of the Act 
provides that the Department's industry support determination, which is 
to be made before the initiation of an investigation, be based on 
whether a minimum percentage of the relevant industry supports the 
petition. A petition meets this requirement 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. Moreover, section 702(c)(4)(D) of the Act 
provides that, if the petition does not establish support of domestic 
producers or workers accounting for more than 50 percent of the total 
production of the domestic like product, the Department shall either 
poll the industry or rely on other information in order to determine if 
there is support for the petition.
    Section 771(4)(A) of the Act defines the ``industry'' as the 
producers of a domestic like product. Thus, to determine whether the 
petition has the requisite industry support, the Act directs the 
Department to look to producers and workers who account for production 
of the domestic like product. The International Trade Commission 
(''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. While both the 
Department and the ITC must apply the same statutory definition 
regarding the domestic like product (section 771(10) of the Act), 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 domestic 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 Therefore 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 the 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 domestic 
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 domestic like products referred to in these petitions are the 
domestic like products defined in the Scope of Investigations section, 
above. Based upon our review of the petitioners' claims, we have 
accepted the petitioners' definitions of the domestic like products. 
For further discussion, see October 23, 2002 Memorandum from Team to 
Richard W. Moreland, ``Domestic Like Product and Industry Support'' 
(``Like Product/Industry Support Memo''), which is on file in the CRU.
    On October 3, 2002, the Department extended the deadline for the 
initiation determinations to no later than October 23, 2002 in order to 
establish whether the petitions are supported by the respective 
domestic industries, pursuant to section 702(c)(1)(B) of the Act. See 
October 3, 2002 Memorandum to Faryar Shirzad from Richard W. Moreland, 
``Extension of Deadline for Determining Industry Support.'' The 
Department has determined that, pursuant to section 702(c)(4)(A) of the 
Act, the petitions contain adequate evidence of industry support. See 
October 23, 2002 Import Administration AD/CVD Enforcement Initiation 
Checklist (``Initiation Checklist'') and Like Product/Industry Support 
Memo, both of which are on file in the CRU.
    We determined that the petitioners have demonstrated industry 
support representing over 50 percent of total production of the 
domestic like products. Therefore, the domestic producers or workers 
who support the petitions account for at least 25 percent of the total 
production of the domestic like products, and the requirements of 
section 702(c)(4)(A)(i) of the Act are met. The Department received no 
opposition to the petitions. Accordingly, we determine that these 
petitions are filed on behalf of the respective domestic industries 
within the meaning of section 702(b)(1) of the Act.

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 Canada materially injure, or 
threaten material injury to, a U.S. industry.

Allegations and Evidence of Material Injury and Causation

    The petitioners allege that the U.S. industries producing the 
domestic like products are being materially injured, or are threatened 
with material injury, by reason of the imports of subject merchandise. 
The petitioners contend that each industry's injured condition is 
evident in the declining trends in domestic prices, production volume 
and value, market share, income and wages, net sales volume and value, 
and, for durum wheat, increasing U.S. inventory levels. The petitioners 
further allege threat of injury due to increased import volumes and 
import penetration, excess production capacity in Canada, and because 
inventory levels in Canada exceed its demand for wheat. The allegations 
of injury and causation are supported by relevant evidence including 
U.S. Customs import data, reports from the ITC and United States 
Department of Agriculture, statistics compiled by the Canadian Wheat 
Board (``CWB'') and Statistics Canada, as well as independent academic 
and economic studies.
    We have assessed the allegations and supporting evidence regarding 
material injury and causation, and we have determined that these 
allegations are properly supported by accurate and adequate evidence, 
and meet the statutory requirements for initiation (see Initiation 
Checklist).

Initiation of Countervailing Duty Investigations

    The Department has examined the countervailing duty petitions on 
durum wheat and hard red spring wheat from Canada and found that they 
comply with the requirements of section 702(b) of the Act. Therefore, 
in accordance with section 702(b) of the Act, we are initiating 
countervailing duty investigations to determine whether manufacturers, 
producers, or exporters of certain durum wheat and hard red spring 
wheat from Canada receive countervailable subsidies.
    We are including in our investigations the following programs 
alleged in the petitions to have provided a countervailable subsidy to 
the CWB:
    1. Railcar Lease Subsidy
    2. Provision of Government-owned Railcars
    3. Rail Freight Revenue Cap Subsidy
    4. Maintenance of Uneconomic Branch Lines and Short Line Subsidies

[[Page 65953]]

    5. Government Guarantee of Borrowing and Lending

A discussion of evidence supporting our initiation determination on 
these programs is contained in the Initiation Checklist.
    At this time, we are not including in our investigations of certain 
durum wheat and hard red spring wheat the following programs alleged to 
benefit producers and exporters of the subject merchandise in Canada:
1. Railcar Allocation Subsidy
    The petitioners allege that the GOC has given the CWB the power to 
allocate railcars for the transportation of its grain, thereby 
eliminating the risk premium that grain companies would otherwise 
charge to cover the impact of competing with non-Board users for 
railcars. The petitioners assert that this railcar allocation subsidy 
is a financial contribution because the railroads are providing their 
transportation services at less than adequate remuneration.
    However, the petitioners have not identified the financial 
contribution being made (directly or indirectly) by the government. In 
the petitions, the petitioners state that the allocation authority 
granted to the CWB ``is a financial contribution in the form of the 
provision of a service at less than adequate remuneration.'' However, 
the GOC is not providing rail service. Instead, this service is 
provided by the private railway companies.
    Instead, it appears that the GOC has bestowed on the CWB certain 
authority with respect to the transportation of CWB grains. This 
authority originates in the CWB Act, which states that ``no person 
other than the Corporation [Board] shall transport or cause to be 
transported from one province wheat or products owned by a person other 
than the Board,'' and is further addressed in a June 2000 memorandum of 
understanding (``MOU'') between the GOC and the CWB.
    The MOU, refers to the CWB's railcar allocation power and states, 
inter alia, that the authority will be used only with respect to the 
grain that the CWB markets. Also, in describing this provision in the 
MOU, the petitioners have characterized this provision as permitting 
the CWB to negotiate car supply requirements with the railways.
    Although we do not have a clear understanding of what the CWB's 
authority is with respect to the allocation of railcars, the 
information provided by the petitioners appears to indicate that CWB 
negotiates the number of cars it will receive with the railways and 
that its allocation authority pertains only to cars for the grains it 
markets, so that it is not allocating cars away from non-Board users.
    Therefore, because the petitioners have not identified a financial 
contribution or a benefit, we recommend not including this alleged 
subsidy in our investigation.
2. Shipper of Record
    The petitioners allege that in November 2000 the CWB declared 
itself the ``shipper of record,'' enabling the CWB to receive multi-car 
discounts on freight movement, instead of the grain companies. The 
petitioners allege that the GOC accorded the right to the CWB to act as 
the ``shipper of record'' and, therefore, transferred the right to 
claim such discounts from the grain companies to the CWB.
    The petitioners have not identified the financial contribution 
being made (directly or indirectly) by the government. As with the 
allegation regarding railcar allocation, the petitioners point to 
authority granted to the CWB, which allows it to declare itself shipper 
of record. According to the petitioners, this results in the CWB being 
able to negotiate multi-car discounts with the railways, discounts that 
would otherwise be paid to the grain companies. If these discounts are 
the financial contribution, then they appear to be bestowed by the 
railways.
    Therefore, because the petitioners have not identified a financial 
contribution, we recommend not including this alleged subsidy in our 
investigation.
3. Noncommercial Provision of Forward Contracts
    The petitioners allege that, by establishing the CWB as the only 
legal purchaser of western Canadian wheat and by guaranteeing CWB's 
initial payments to producers, the GOC has removed all acquisition 
risks from the CWB. Accordingly, in the absence of such risk, the CWB 
is able to provide forward contracts to U.S. buyers at a lower price. 
The petitioners allege that the financial contribution ``is in the form 
of a government guarantee (which is equivalent to the cost of insurance 
that a private firm would have to pay to replicate the CWB's risk 
position) and the value of the CWB's monopsony status.''
    The petitioners have not provided sufficient evidence to support 
its contention that the GOC provided a financial contribution in the 
form of a guarantee that benefits the CWB. Additionally, the 
petitioners have not explained how the GOC grant of monoposony status 
to the CWB falls within the definitions of a ``financial contribution'' 
enumerated in section 771(5)(D) of the Act. Therefore, we recommend not 
investigating this alleged subsidy.

Distribution of Copies of the Petitions

    In accordance with section 702(b)(4)(A)(i) of the Act, a copy of 
the public versions of the petitions have been provided to the GOC. We 
will attempt to provide a copy of the public versions of the petitions 
to each exporter named in the petition, as provided for under section 
351.203(c)(2) of the Department's regulations.

ITC Notification

    We have notified the ITC of our initiations, as required by section 
702(d) of the Act.

Preliminary Determination by the ITC

    The ITC will determine no later than November 18, 2002, whether 
there is a reasonable indication that imports of durum and/or hard red 
spring wheat are causing material injury, or threatening to cause 
material injury to, a U.S. industry. A negative ITC determination will 
result in the investigation(s) being terminated; otherwise, the 
investigation(s) will proceed according to statutory and regulatory 
time limits.
    This notice is issued and published pursuant to section 777(i) of 
the Act.

    Dated: October 23, 2002.
Faryar Shirzad,
Assistant Secretary for Import Administration.
[FR Doc. 02-27515 Filed 10-28-02; 8:45 am]
BILLING CODE 3510-DS-P