[Federal Register Volume 69, Number 162 (Monday, August 23, 2004)]
[Notices]
[Pages 51800-51811]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-19278]


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DEPARTMENT OF COMMERCE

International Trade Administration

[C-122-851]


Preliminary Negative Countervailing Duty Determination and 
Alignment of Final Countervailing Duty Determination With Final 
Antidumping Duty Determination: Live Swine From Canada

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

ACTION: Notice of preliminary negative countervailing duty 
determination and alignment of final countervailing duty determination 
with final antidumping duty determination.

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SUMMARY: The Department of Commerce preliminarily determines that 
countervailable subsidies are not being provided to producers or 
exporters of live swine from Canada. We are also aligning the final 
determination in this investigation with the final determination in the 
companion antidumping duty investigation of live swine from Canada.

DATES: Effective August 23, 2004.

FOR FURTHER INFORMATION CONTACT: Melani Miller or S. Anthony Grasso, 
Office of Antidumping/Countervailing Duty Enforcement, Group 1, Import 
Administration, U.S. Department of Commerce, Room 3099, 14th Street and 
Constitution Avenue, NW., Washington, DC 20230; telephone (202) 482-
0116 and (202) 482-3853, respectively.

Petitioners

    The petitioners in this investigation are the Illinois Pork 
Producers Association, the Indiana Pork Advocacy Coalition, the Iowa 
Pork Producers Association, the Minnesota Pork Producers Association, 
the Missouri Pork Association, the Nebraska Pork Producers Association, 
Inc., the North Carolina Pork Council, Inc., the Ohio Pork Producers 
Council, and 119 individual producers of live swine \1\ (collectively, 
``the petitioners'').
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    \1\ Alan Christensen, Alicia Prill-Adams, Aulis Farms, Baarsch 
Pork Farm, Inc., Bailey Terra Nova Farms, Bartling Brothers Inc., 
Belstra Milling Co. Inc., Berend Bros. Hog Farm LLC, Bill Tempel, BK 
Pork Inc., Blue Wing Farm, Bornhorst Bros, Brandt Bros., Bredehoeft 
Farms, Inc., Bruce Samson, Bryant Premium Pork LLC, Buhl's Ridge 
View Farm, Charles Rossow, Cheney Farms, Chinn Hog Farm, Circle K 
Family Farms LLC, Cleland Farm, Clougherty Packing Company, Coharie 
Hog Farm, County Line Swine Inc., Craig Mensick, Daniel J. Pung, 
David Hansen, De Young Hog Farm LLC, Dean Schrag, Dean Vantiger, 
Dennis Geinger, Double ``M'' Inc., Dykhuis Farms, Inc., E & L 
Harrison Enterprises, Inc., Erle Lockhart, Ernest Smith, F & D 
Farms, Fisher Hog Farm, Fitzke Farm, Fultz Farms, Gary and Warren 
Oberdiek Partnership, Geneseo Pork, Inc., GLM Farms, Greenway Farms, 
H & H Feed and Grain, H & K Enterprises, LTD, Ham Hill Farms, Inc., 
Harrison Creek Farm, Harty Hog Farms, Heartland Pork LLC, Heritage 
Swine, High Lean Pork, Inc., Hilman Schroeder, Holden Farms Inc., 
Huron Pork, LLC, Hurst AgriQuest, J D Howerton and Sons, J. L. 
Ledger, Inc., Jack Rodibaugh & Sons, Inc., JC Howard Farms, Jesina 
Farms, Inc., Jim Kemper, Jorgensen Pork, Keith Berry Farms, Kellogg 
Farms, Kendale Farm, Kessler Farms, L.L. Murphrey Company, Lange 
Farms LLC, Larson Bros. Dairy Inc., Levelvue Pork Shop, Long Ranch 
Inc., Lou Stoller & Sons, Inc., Luckey Farm, Mac-O-Cheek, Inc., 
Martin Gingerich, Marvin Larrick, Max Schmidt, Maxwell Foods, Inc., 
Mckenzie-Reed Farms, Meier Family Farms Inc., MFA Inc., Michael 
Farm, Mike Bayes, Mike Wehler, Murphy Brown LLC, Ned Black and Sons, 
Ness Farms, Next Generation Pork, Inc., Noecker Farms, Oaklane 
Colony, Orangeburg Foods, Oregon Pork, Pitstick Pork Farms Inc., 
Prairie Lake Farms, Inc., Premium Standard Farms, Inc., Prestage 
Farms, Inc., R Hogs LLC, Rehmeier Farms, Rodger Schamberg, Scott W. 
Tapper, Sheets Farm, Smith-Healy Farms, Inc., Square Butte Farm, 
Steven A. Gay, Sunnycrest Inc., Trails End Far, Inc., TruLine 
Genetics, Two Mile Pork, Valley View Farm, Van Dell Farms, Inc., 
Vollmer Farms, Walters Farms LLP, Watertown Weaners, Inc., Wen Mar 
Farms, Inc., William Walter Farm, Willow Ridge Farm LLC, Wolf Farms, 
Wondraful Pork Systems, Inc., Wooden Purebred Swine Farms, Woodlawn 
Farms, and Zimmerman Hog Farms.
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Case History

    The following events have occurred since the publication of the 
notice of initiation in the Federal Register. See Notice of Initiation 
of Countervailing Duty Investigation: Live Swine From Canada, 69 FR 
19818 (April 14, 2004) (``Initiation Notice'').
    On May 3, 2004, the Government of Canada (``GOC'') notified the 
Department of Commerce (``the Department'') that certain programs under 
investigation in this proceeding were not countervailable because they 
qualified for ``green box'' status under Article 13 and Annex 2 of the 
World Trade Organization (``WTO'') Agreement on Agriculture 
(``Agriculture Agreement''). See also section 771(5B)(F) of the Tariff 
Act of 1930, as amended by the Uruguay Round Agreements Act effective 
January 1, 1995 (``the Act''), and 19 CFR 351.522. On May 6, 2004, the 
petitioners submitted comments on the GOC's green box filing. See 
infra, section on ``Green Box Claims.''
    On May 4, 2004, the Department received a request from the GOC to 
amend the scope of this investigation to exclude hybrid breeding stock. 
On August 4, 2004, the petitioners submitted comments on the proposed 
exclusion. On August 9, 2004, both the respondent companies (identified 
below) and the GOC responded to the petitioners' August 4, 2004 
submission. The petitioners filed further comments on August 12, 2004. 
See infra, section on ``Scope Comments.''
    On May 5, 2004, we issued the countervailing duty (``CVD'') 
questionnaires in this proceeding. Due to the large number of producers 
and exporters of live swine (``swine'' or ``subject merchandise'') in 
Canada, we decided to limit the number of respondents. See May 4, 2004 
memorandum to Jeffrey May entitled Respondent Selection or Aggregation 
(``Respondent Selection Memo''), which is on file in the Department's 
Central Records Unit in Room B-099 of the main Department building 
(``CRU''). As discussed in the Respondent Selection Memo, we issued 
questionnaires to producer/exporters Premium Pork Canada Inc. 
(``Premium'') and Hytek Ltd. (``Hytek''), as well as the two largest 
suppliers of each M & F Trading Inc. (``M&F''), Maximum Swine Marketing 
(``Maximum''), and Excel Swine Services (``Excel'') (all of which are 
trading companies or cooperatives). Thus, in addition to Hytek and 
Premium, the Department issued questionnaires to Hart Feeds Limited 
(``Hart''), Elite Swine Inc. (``Elite'')/Maple Leaf Foods Inc. (``Maple 
Leaf'') (collectively, ``Maple Leaf/Elite''), Sureleen-Albion Agra Inc. 
(``Sureleen'')/Bujet Sow Group (``BSG''), Park View Colony Farms Ltd. 
(``Park View''), and Willow Creek Colony Ltd. (``Willow Creek''). We 
also issued separate questionnaires to M&F, Maximum, and Excel in order 
to confirm that they did not receive any of the subsidies alleged in 
this investigation.
    In our questionnaire that was issued to the GOC on May 5, 2004, we 
indicated that, because the company respondents' operations were 
located only in Manitoba, Ontario, Saskatchewan, and Alberta according 
to record information, we were limiting our requests for information to 
GOC programs, joint federal/provincial

[[Page 51801]]

programs, and provincial programs relating to these four provinces only 
and were not requesting information about programs administered by New 
Brunswick, Prince Edward Island (``PEI''), or Quebec which were 
included in our initiation. On May 19, 2004, all of the above company 
respondents confirmed that none of their companies that could be 
considered to be ``cross-owned'' under 19 CFR 351.525(b)(6)(vi) were 
located in New Brunswick, PEI, or Quebec. (Maple Leaf/Elite filed 
follow-up comments on its May 19, 2004 submission on May 28, 2004.) 
Thus, we have not investigated the following programs included in our 
Initiation Notice: Quebec Farm Income Stabilization Insurance/
Agricultural Revenue Stabilization Insurance Program, La Financiere 
Agricole du Quebec Loans (Preferred Rate Loans, Secure Rate Development 
Loans, and Advantage Rate Loans), New Brunswick Livestock Incentive 
Program, PEI Hog Loan Programs (Bridge Financing Program, Expansion 
Loan Program, and Depop-Repop Loan Program), and PEI Swine Quality 
Improvement Program.
    On May 21, 2004, we published a postponement of the preliminary 
determination in this investigation until August 16, 2004. See Live 
Swine From Canada: Postponement of Preliminary Countervailing Duty 
Determination, 69 FR 29269 (May 21, 2004).
    We received responses to the Department's questionnaire from the 
companies on June 18, June 30, and July 2, 2004; and from the GOC 
(which included responses from the Governments of Alberta, Manitoba 
(``GOM''), and Saskatchewan (``GOS'')) on June 30, 2004. On July 13, 
2004, the petitioners submitted comments regarding these questionnaire 
responses. The Department issued supplemental questionnaires to the 
governments and the companies in June and July 2004 and received 
responses to those questionnaires in July and August 2004.
    In their July 13, 2004 comments on the questionnaire responses, the 
petitioners submitted a new subsidy allegation. Specifically, the 
petitioners claimed that information from the Ontario Pork Production 
Marketing Board submitted in the companion antidumping duty (``AD'') 
case to this proceeding indicated that the provincial marketing boards 
have been the recipients of large government subsidies to the pork 
industry. Under 19 CFR 351.301(d)(4)(A), new subsidy allegations are 
due no later than 40 days prior to a preliminary determination, a 
deadline which had passed by July 7, 2004. Therefore, this allegation 
is untimely. Beyond the untimeliness of this allegation, the 
petitioners have not identified a financial contribution or a benefit 
provided by the GOC or any of the provincial governments to any of the 
respondents in this proceeding pursuant to sections 771(5)(D) and (E) 
of the Act. The provincial marketing boards to which the petitioners' 
allegation relates are not respondents in the CVD proceeding. Moreover, 
the petitioners have not alleged that any program through which 
benefits were conferred was specific according to section 771(5A) of 
the Act. Consequently, the petitioners have not properly alleged the 
elements necessary for the imposition of countervailable duties as 
required by section 701(a) of the Act and we have no basis to initiate 
an investigation with regard to this allegation. Finally, we note that, 
even if the allegation were timely and the elements of a 
countervailable subsidy were properly alleged, we would not examine the 
alleged subsidy because the Ontario Pork Production Marketing Board is 
not a respondent in this proceeding. See Respondent Selection Memo.
    On August 6 and August 9, 2004, respectively, the GOC and the 
petitioners submitted comments on the upcoming preliminary 
determination. The GOC submitted further comments on August 10, 2004.
    Finally, on August 12, 2004, the petitioners requested that the 
Department align the final determination in this investigation with the 
final determination in the companion AD investigation of live swine 
from Canada. For further information, see infra section on ``Alignment 
with Final Antidumping Duty Determination.''

Period of Investigation

    The period for which we are measuring subsidies, or the period of 
investigation (``POI''), is calendar year 2003.

Scope of Investigation

    The merchandise covered by this investigation is all live swine 
from Canada except breeding stock swine. Live swine are defined as 
four-legged, monogastric (single-chambered stomach), litter-bearing 
(litters typically range from 8 to 12 animals), of the species sus 
scrofa domesticus. This merchandise is currently classifiable under 
Harmonized Tariff Schedule of the United States (``HTSUS'') subheadings 
0103.91.00 and 0103.92.00.
    Specifically excluded from this scope are breeding stock, including 
U.S. Department of Agriculture (``USDA'') certified purebred breeding 
stock and all other breeding stock. The designation of the product as 
``breeding stock'' indicates the acceptability of the product for use 
as breeding live swine. This designation is presumed to indicate that 
these products are being used for breeding stock only. However, should 
the petitioners or other interested parties provide a reasonable basis 
to believe or suspect that there exists a pattern of importation of 
such products for other than this application, end-use certification 
for the importation of such products may be required.
    Although the HTSUS headings are provided for convenience and 
customs purposes, the written description of the merchandise under 
investigation is dispositive.

Scope Comments

    In the Initiation Notice, we invited comments on the scope of this 
proceeding. As noted above, on May 4, 2004, we received a request from 
the GOC to amend the scope of this investigation and the companion AD 
investigation. Specifically, the GOC requested that the scope be 
amended to exclude hybrid breeding stock. According to the GOC, 
domestic producers use hybrid breeding stock instead of purebred stock 
to strengthen their strains of swine. The GOC stated that no evidence 
was provided of injury, or threat of injury, to the domestic live swine 
industry from the importation of hybrid breeding stock. Furthermore, 
the GOC noted that the petition excluded USDA certified purebred 
breeding swine from the scope of the above-mentioned investigations. 
The GOC argued that the documentation which accompanies imported hybrid 
breeding swine makes it easy to distinguish hybrid breeding swine from 
other live swine.
    On August 4, 2004, the petitioners submitted a response to the 
GOC's scope exclusion request and proposed modified scope language. The 
petitioners stated they do not oppose the GOC's request to exclude 
hybrid breeding stock, but are concerned about the potential for 
circumvention of any AD or CVD order on live swine from Canada through 
non-breeding swine entering the domestic market as breeding stock. 
Thus, the petitioners proposed modified scope language that would 
require end-use certification if the petitioners or other interested 
parties provide a reasonable basis to believe or suspect that there 
exists a pattern of importation of such products for other than this 
application. Moreover, on July 30, 2004, the petitioners submitted a 
request to the International Trade Commission (``ITC'') to modify the 
HTSUS by adding a

[[Page 51802]]

statistical breakout that would separately report imports of breeding 
animals other than purebred breeding animals, allowing the domestic 
industry to monitor the import trends of hybrid breeding stock.
    On August 9, 2004, both the GOC and the respondent companies 
submitted comments to respond to the petitioners' proposed revised 
scope. Both the GOC and the respondent companies stated that they 
generally agree with the petitioners' modified scope language, with the 
two following exceptions: (1) They contend that the petitioners' 
language setting forth the mechanics of any end use certification 
procedure is premature and unnecessary, and (2) they argue that the 
petitioners' language stating that ``all products meeting the physical 
description of subject merchandise that are not specifically excluded 
are included in this scope'' is unnecessary because the physical 
description of the merchandise in scope remains determinative.
    On August 12, 2004, the petitioners submitted a response to the 
August 9, 2004 comments from the GOC and the respondents. The 
petitioners reiterated their support for their proposed modification to 
the scope language. They argued that (1) their proposed language has 
been used before by the Department in other proceedings; (2) since U.S. 
importers bear the burden of paying the duties, the importers should be 
required to certify to the end use of the product; and (3) with the 
petitioners' concerns about circumvention, the ``physical description'' 
language provides an important clarification that all live swine except 
for the excluded products are included in the scope.
    As further discussed in the August 16, 2004 memorandum entitled 
``Scope Exclusion Request: Hybrid Breeding Stock'' (on file in the 
Department's CRU), we have preliminarily revised the scope in both the 
CVD and companion AD proceedings based on the above scope comments. The 
revised scope language is included in the ``Scope of Investigation'' 
section, above.

Injury Test

    Because Canada is a ``Subsidies Agreement Country'' within the 
meaning of section 701(b) of the Act, the ITC is required to determine 
whether imports of the subject merchandise from Canada materially 
injure, or threaten material injury to, a U.S. industry. On May 10, 
2004, the ITC transmitted to the Department its preliminary 
determination that there is a reasonable indication that an industry in 
the United States is being materially injured by reason of imports from 
Canada of the subject merchandise. See Live Swine From Canada, 69 FR 
26884 (May 14, 2004).

Alignment With Final Antidumping Duty Determination

    On August 12, 2004, we received a request from the petitioners to 
postpone the final determination in this investigation to coincide with 
the final determination in the companion AD investigation of live swine 
from Canada.
    The companion AD investigation and this countervailing duty 
investigation were initiated on the same date and have the same scope. 
See Initiation Notice and Notice of Initiation of Antidumping 
Investigation: Live Swine from Canada, 69 FR 19815 (April 14, 2004). 
Therefore, in accordance with section 705(a)(1) of the Act, we are 
aligning the final determination in this investigation with the final 
determination in the companion AD investigation of live swine from 
Canada.

Green Box Claims

    According to section 771(5B)(F) of the Act, domestic support 
measures that are provided with respect to products listed in Annex 1 
of the WTO Agriculture Agreement, and that the Department determines 
conform fully to the provisions of Annex 2 of that same agreement, 
shall be treated as noncountervailable. The Department's regulations at 
19 CFR 351.522(a) further elaborate, stating that the Department will 
determine that a particular domestic support measure conforms fully to 
the provisions of Annex 2 if the Department finds that the measure (1) 
is provided through a publicly-funded government program (including 
government revenue foregone) not involving transfers from consumers; 
(2) does not have the effect of providing price support to producers; 
and (3) meets the relevant policy-specific criteria and conditions set 
out in paragraphs 2 through 13 of Annex 2. According to 19 CFR 
351.301(d)(6), a claim that a particular agricultural support program 
should be accorded ``green box'' status under section 771(5B)(F) of the 
Act must be made by the competent government with the full 
participation of the government authority responsible for funding and/
or administering the program.
    As noted above, on May 3, 2004, the GOC notified the Department 
that certain programs under investigation in this proceeding qualified 
for green box treatment. Specifically, the GOC has requested green box 
treatment for the following programs: the Canadian Farm Income Program 
(``CFIP'')/Agricultural Income Disaster Assistance (``AIDA'') Program, 
the Alberta Hog Industry Development Fund, the Producer Assistance 2003 
Program/Canadian Agricultural Income Stabilization (``CAIS'') Program, 
and a portion of the Transitional Assistance Program. In its 
notification, the GOC indicated that, in accordance with 19 CFR 
351.301(d)(6), it was filing these claims with the full participation 
of the provincial governments that share in the funding and/or 
administration of the programs for which the green box claims were 
made.
    The green box issues with respect to the CFIP/AIDA Program and the 
Transitional Assistance Program are discussed in the relevant program-
specific sections, below. However, because we have preliminarily found 
that the Alberta Hog Industry Development Fund and the Producer 
Assistance 2003 Program/CAIS Program were not used during the POI, we 
have not addressed the issue of whether these two programs should be 
accorded green box status in this preliminary determination.

Subsidies Valuation Information

Allocation Period

    The average useful life (``AUL'') period in this proceeding as 
described in 19 CFR 351.524(d)(2) would be three years according to the 
U.S. Internal Revenue Service's 1977 Class Life Asset Depreciation 
Range System. No party in this proceeding has disputed this allocation 
period.

Attribution of Subsidies

    The Department's regulations at 19 CFR 351.525(b)(6)(i) state that 
the Department will normally attribute a subsidy to the products 
produced by the corporation that received the subsidy. However, 19 CFR 
351.525(b)(6) directs that the Department will attribute subsidies 
received by certain other companies to the combined sales of those 
companies if (1) cross-ownership exists between the companies and (2) 
the cross-owned companies produce the subject merchandise, are a 
holding or parent company of the subject company, produce an input that 
is primarily dedicated to the production of the subject merchandise, or 
transfer a subsidy to a cross-owned company.
    According to 19 CFR 351.525(b)(6)(vi), cross-ownership exists 
between two or more corporations where one corporation can use or 
direct the individual assets of the other corporation(s) in essentially 
the same ways it can use its own assets. This section of the 
Department's regulations

[[Page 51803]]

states that this standard will normally be met where there is a 
majority voting interest between two corporations or through common 
ownership of two (or more) corporations. The Preamble to the 
Department's regulations further clarifies the Department's cross-
ownership standard. (See Countervailing Duties; Final Rule, 63 FR 
65348, 65401 (November 25, 1998) (``Preamble'').) According to the 
Preamble, relationships captured by the cross-ownership definition 
include those where

the interests of two corporations have merged to such a degree that 
one corporation can use or direct the individual assets (or subsidy 
benefits) of the other corporation in essentially the same way it 
can use its own assets (or subsidy benefits) * * * Cross-ownership 
does not require one corporation to own 100 percent of the other 
corporation. Normally, cross-ownership will exist where there is a 
majority voting ownership interest between two corporations or 
through common ownership of two (or more) corporations. In certain 
circumstances, a large minority voting interest (for example, 40 
percent) or a ``golden share'' may also result in cross-ownership.

Thus, the Department's regulations make clear that the agency must look 
at the facts presented in each case in determining whether cross-
ownership exists.
    Furthermore, the Court of International Trade (``CIT'') has upheld 
the Department's authority to attribute subsidies based on whether a 
company could use or direct the subsidy benefits of another company in 
essentially the same way it could use its own subsidy benefits. See 
Fabrique de Fer de Charleroi v. United States, 166 F.Supp 2d, 593, 603 
(CIT 2001).
    The responding companies in this investigation have presented the 
Department with novel situations in terms of the relationships that 
exist between the exporters and their suppliers. Our preliminary 
findings regarding cross-ownership and attribution for individual 
respondents follow.
    Maple Leaf/Elite: Elite is a live swine management and marketing 
company. It is a wholly-owned subsidiary of Maple Leaf, a Canadian food 
processing company, and is part of Maple Leaf's Agribusiness Group (one 
of Maple Leaf's three main operating groups, along with the Meat 
Products and Bakery Products groups).
    In addition to Elite, Maple Leaf has other wholly-owned operating 
subsidiaries that are involved in the production of live swine, 
including Shur-Gain and Landmark Feeds Inc. (``Landmark''). These 
companies produce and sell animal feed and nutrients, including animal 
feed for swine production. Additionally, in September 2003, Maple Leaf 
signed an agreement to purchase the Schneider Corporation 
(``Schneider''), a Canadian food processing company. The acquisition of 
Schneider was not concluded until April 2004, subsequent to the POI. 
Finally, certain of Maple Leaf's wholly-owned subsidiaries have 
ownership positions in companies involved in the production of live 
swine. (For a more detailed discussion of these equity investments, 
whose details are proprietary, see the August 16, 2004 memorandum 
entitled ``Attribution Issues'' (``Attribution Issues Memo'') (which is 
on file in the Department's CRU).)
    Maple Leaf/Elite has reported that no subsidies were received by 
Maple Leaf, Elite, Shur-Gain, and Landmark. Therefore, there are no 
benefits to these companies that require attribution. With regard to 
Schneider, because this company's purchase was not completed until 
after the POI, we are preliminarily not including subsidies received by 
Schneider or Schneider's sales in our subsidy calculations. Also, for 
the reasons explained in the Attribution Issues Memo, we are not 
finding cross-ownership with respect to the companies owned, in part, 
by Maple Leaf subsidiaries other than Elite.
    Turning to Elite, as noted above, Elite is the principal operating 
subsidiary of Maple Leaf involved in live swine production. Elite holds 
an equity position in Genetically Advanced Pigs of Canada (Inc.) 
(``GAP''), a company which provides genetic services to Elite's 
suppliers and to other hog producers. Maple Leaf/Elite has reported 
that GAP received no subsidies. Therefore, we do not need to determine 
whether cross-ownership exists between Maple Leaf/Elite and GAP.
    Elite also has equity positions in many of its suppliers and, 
depending on the supplier, may also provide operations and/or financial 
management services. The details of these relationships are proprietary 
and are discussed further in the Attribution Issues Memo.
    For purposes of this preliminary determination, we are finding 
cross-ownership between Maple Leaf/Elite and those suppliers in which 
Elite both owns shares and provides operations and/or financial 
management. See Attribution Issues Memo. Consequently, we are 
attributing the subsidies received by these companies to their combined 
sales.
    Hytek: Hytek presents itself as a group of companies, including 
production operations, feed mills, genetics companies, and marketing 
companies, that are involved in swine production and sales. Hytek, 
which was created in 1994 by a small ownership group, has expanded its 
operations over time and has added new companies to the group each time 
an expansion occurred. In 2002, the ownership group reorganized its 
operations in order to simplify the company structure. In addition to 
the companies within the Hytek group, Hytek uses several contract 
suppliers in its production and sales of live swine. Hytek has no 
ownership in or control over these companies, which provide products or 
services to Hytek on a contract basis.
    Hytek has some level of equity interest in all of the companies 
within the Hytek group. According to Hytek, production and supply among 
group companies is captive based on long-term, exclusive contracts; 
most Hytek group companies sell their production to, or purchase their 
supplies from, Hytek and do business only with companies in the Hytek 
group. (The distribution companies are one exception to this.) Hytek 
makes all management decisions regarding the operations of the 
companies in the group, including what genetics are used, where and 
when the pigs move throughout the group, how they are raised and fed, 
and what veterinary services are used. Hytek managers and employees 
monitor barn management for the entire group and direct the operations 
of the group companies. Hytek also supplies all feed to the sow and 
finishing operations.
    Financial management of the companies within the group is largely 
centralized at the Hytek headquarters. A common accounting system for 
the companies is maintained on the Hytek server, with most of the books 
and finances managed by Hytek. All financial and company records are 
kept on Hytek's server. Employees throughout the group are paid through 
a payroll system on Hytek's server, and Hytek does the banking for 
almost all of the group companies.
    Whether we treat the Hytek group companies individually or 
collectively would not affect the results in this preliminary 
determination because, either way, the countervailable subsidy rates 
for the companies in the Hytek group are de minimis. Therefore, we have 
accepted Hytek's characterization of these companies as a group. Hytek 
reported its responses that almost all production in the Hytek system 
was sold to Hytek and/or its marketing

[[Page 51804]]

companies for resale. Therefore, we are attributing any subsidies 
received only to the combined sales of Hytek and its marketing 
companies. See also Attribution Issues Memo.
    Premium: Premium consists of a group of companies organized into 
one system dedicated primarily to the production and sale of live 
swine. This production system has the following units: operations, 
multiplication, genetics, and commercial sow barns. The companies of 
the Premium group are contractually bound to each other through 
management contracts with Premium and production contracts with the 
operating companies of the Premium group. In addition, certain group 
companies manage the overall operations, sales, logistics, customer 
relations, exports, invoicing, accounting, and financing for the group. 
Premium is related with each of the companies in the group through 
direct ownership and/or common shareholders, officers, and directors. 
The details of these relationships are proprietary and are discussed 
further in the Attribution Issues Memo.
    As discussed in the Attribution Issues Memo, Premium has reported 
sales for the Premium group of companies, not for the individual 
companies that make up the Premium group. Therefore, for purposes of 
this preliminary determination, we are not able to calculate 
countervailable subsidy rates on an individual company basis and are 
accepting Premium's characterization of these companies as a group 
consistent with our treatment of other respondents who produce live 
swine as an integrated production unit. Because Premium reported in its 
responses that almost all production in the Premium system was sold to 
Premium's operating companies for resale, we are attributing any 
subsidies received only to the combined sales of these operating 
companies.
    BSG: BSG is a production cooperative made up of ten family-owned 
farms organized around a local management company, Sureleen. There is 
no common ownership or shared board members among the eleven BSG 
companies. There are no contracts or agreements establishing the terms 
of the BSG arrangement. Instead, BSG's operations are conducted based 
on verbal agreements among the members.
    The members of BSG use a common genetic line and multiplier barn, 
which ensures a uniform stock of swine among the farms of BSG. As noted 
above, the members of BSG are linked by common management under 
Sureleen. Specifically, Sureleen coordinates production, distribution, 
marketing, and pricing on behalf of the group. Sureleen organizes all 
bulk purchases of vaccines and makes available to the other BSG members 
goods such as feed ingredients, tattoo supplies, and other farm 
supplies. Sureleen also works with the other BSG members to fill in 
open spaces in the farrowing schedule. Sureleen collects the revenue 
from sales and allocates the pooled profits to each member on the basis 
of pigs supplied.
    Whether we treat the BSG companies individually or collectively 
would not affect the results in this preliminary determination because, 
either way, the countervailable subsidy rates for the companies in the 
BSG group are de minimis. Therefore, we have accepted BSG's 
characterization of these companies as a group and have attributed 
subsidies received by the BSG group companies to the combined sales of 
those companies.
    Hart: Hart is primarily engaged in the manufacture and marketing of 
livestock feed and, as discussed further below, is also involved in the 
production of live swine. Hart is a wholly-owned subsidiary of Unifeed 
Limited (``Unifeed''), which is also primarily a livestock feed 
producer. Unifeed, in turn, is a wholly-owned subsidiary of the United 
Grain Growers Inc., a grain handling and merchandising, crop production 
services, and livestock feed and services company which operates under 
the name of Agricore United (``AU''). AU also has an equity ownership 
interest in the Puratone Corporation (``Puratone''), a commercial hog 
and feed producer. Hart, Unifeed, and Puratone together comprise AU's 
livestock division.
    Hart has reported that neither it nor Unifeed received subsidies 
during the POI. Therefore, there are no benefits to these companies 
that require attribution.
    With regard to Puratone, Hart claims that cross-ownership does not 
exist with this company. AU has a minority equity interest in Puratone, 
and no other AU company has an equity interest in Puratone. Similarly, 
Puratone has no equity interest in any AU companies. AU has only two of 
six representatives on Puratone's six-person board. Neither AU nor any 
other company in the AU group supplies feed or live swine to, or 
purchases swine from, Puratone. Finally, Puratone's operations are in 
open competition with Hart's operations. Based on the above 
information, we preliminarily determine that cross-ownership does not 
exist with regard to Puratone because there is no indication that Hart, 
Unifeed, or AU can use or direct the assets of Puratone in the same way 
in which they can use their own assets (see 19 CFR 351.525(b)(6)(vi)).
    The swine sold by Hart are produced by two swine production groups, 
the Pro Vista Group and the Russ Fast Group. Companies within the Pro 
Vista Group are in the business of producing weanlings. The Russ Fast 
Group companies are dedicated to feeding weanling pigs. Hart does not 
have an equity interest in any of the ProVista or Russ Fast group 
companies and does not share or appoint managers or board members for 
either one of these groups. Instead, their relations are governed by 
long-term contracts and other mechanisms. The details of these 
relationships are proprietary and are discussed further in the 
Attribution Issues Memo.
    Whether we treat the Hart group companies individually or 
collectively would not affect the result in this preliminary 
determination because, either way, the countervailable subsidy rates 
for the companies in the Hart group are de minimis. Therefore, we have 
accepted Hart's characterization of these companies as a group and have 
attributed subsidies received by the Hart group companies to the 
combined sales of those companies.
    Park View: Park View, a producer of the subject merchandise, has 
responded on behalf of itself and the other companies in its group, 
i.e., the Park View Colony of Hutterian Brethren Trust (``the Trust''), 
Mountain View Holding Co. Ltd., Beresford Creek 93 Ltd., and P.V. Hogs 
Ltd. All of the Park View companies are wholly-owned by the Trust. We 
have thus attributed the subsidies received by these entities to their 
combined sales. See 19 CFR 351.525(b)(6).
    Willow Creek: Willow Creek, a producer of the subject merchandise, 
has responded on behalf of itself and the other companies in its group, 
i.e., Willow Creek Colony of Hutterian Brethren Trust (``the Trust''), 
Willow Creek Holding Co. Ltd., Stoney Hill 93 Ltd., and Canuck Trailer 
Manufacturing Ltd. All of the Willow Creek companies are wholly-owned 
by the Trust. We have thus attributed the subsidies received by these 
entities to their combined sales. See 19 CFR 351.525(b)(6).

Benchmarks for Loans

    Pursuant to 19 CFR 351.505(a), the Department will use the actual 
cost of comparable borrowing by a company as a loan benchmark, when 
available. According to 19 CFR 351.505(a)(2), a comparable commercial 
loan is one that, when compared to the loan being examined, has 
similarities in the structure of the loan (e.g., fixed interest rate v. 
variable interest rate), the maturity of the loan (e.g., short-term v.

[[Page 51805]]

long-term), and the currency in which the loan is denominated. In 
instances where a respondent has no comparable commercial loans to use 
as a benchmark, 19 CFR 351.505(a)(3)(ii) allows the Department to use a 
national average interest rate for comparable commercial loans.
    Companies being investigated in the instant proceeding reported 
receiving both long-term fixed and variable-rate loans that were 
denominated in Canadian currency under certain of the programs being 
investigated (with the one exception noted below). As benchmarks, in 
accordance with 19 CFR 351.505(a), we used the actual cost of 
comparable borrowing by a company, when available. In instances where 
no comparable commercial loans had been taken out by the recipient, we 
used a national average interest rate for comparable commercial loans 
as provided for under 19 CFR 351.505(a)(3)(ii).
    Where we relied on national average interest rates as benchmarks, 
for long-term fixed-rate loans, we used a simple average of the monthly 
long-term corporate bond rates published by the Bank of Canada 
(``BOC'') for the year in which the government loan was approved. For 
long-term variable-rate loans, we have used a previously verified 
benchmark interest rate charged by Canadian commercial banks on loans 
made to the farming sector. This rate is equal to the prime rate as 
published by the BOC plus one and one-half percentage points. See, 
e.g., Final Negative Countervailing Duty Determination; Live Cattle 
from Canada, 64 FR 57040, 57041 (October 22, 1999) (``Cattle from 
Canada'') and Live Swine From Canada; Preliminary Results of 
Countervailing Duty Administrative Review, 63 FR 23723, 23726 (April 
30, 1998) (unchanged in Live Swine From Canada; Final Results of 
Countervailing Duty Administrative Review, 63 FR 47235, 47236 
(September 4, 1998)).
    For the Saskatchewan Short-Term Hog Loan Program (``STHLP''), we 
have treated the amounts outstanding during the POI as series of short-
term loans. To measure the benefit from these loans, consistent with 
past proceedings, we used the prime rate as our short-term benchmark. 
See, e.g., Final Affirmative Countervailing Duty Determinations: 
Certain Durum Wheat and Hard Red Spring Wheat from Canada, 68 FR 52747 
(September 5, 2003). Under 19 CFR 351.505(a)(2)(iv), we will normally 
use an annual average of short-term rates as our benchmark. However, 
because these loans are advances and repayments on individual lines of 
credit throughout the POI, we have preliminarily determined that use of 
monthly benchmarks will yield a more accurate calculation of the 
benefits.

Analysis of Programs

    Based upon our analysis of the petition and the responses to our 
questionnaires, we determine the following:

I. Programs Preliminarily Determined To Be Countervailable

A. Farm Credit Canada Financing (``FCC''): Flexi-Hog Loan Program 
(``FHLP'')
    The FHLP program, administered by the FCC, was established in May 
2000. This program offered hog producers fixed or variable-rate, long-
term loans with flexible repayment terms. Specifically, swine producers 
had the option of deferring their principal repayments for these loans 
for as much as one year up to three separate times during the life of 
the loan. These deferrals helped the swine producers to deal with 
market fluctuations and to manage temporary downturns. Interest 
payments were required to be made during these ``principal holidays'' 
and could not be deferred under the program. FHLP loans were available 
for terms of up to fifteen years for new facilities construction. The 
FHLP program was merged into the FCC's Flexi-Farm product in December 
2003.
    Both Hart and BSG companies reported that they had loans through 
this program that were outstanding during the POI.
    We preliminarily determine that these loans are a direct transfer 
of funds within the meaning of section 771(5)(D)(i) of the Act. These 
loans are also specific as a matter of law within the meaning of 
section 771(5A)(D)(i) of the Act because they are limited to producers 
of live swine.
    Finally, we preliminarily determine that a benefit exists for these 
loans pursuant to section 771(5)(E)(ii) of the Act and 19 CFR 351.505. 
In order to determine whether loans under this program conferred a 
benefit, we used our long-term fixed-rate or variable-rate loan 
methodology, depending on the terms of the reported loans. For long-
term fixed rate loans given under this program, we found a difference 
between what the recipient would have paid on a benchmark loan during 
the POI and the amount paid on the government-provided loan (see 19 CFR 
351.505(a)(1)). For long-term variable-rate loans, in accordance with 
19 CFR 351.505(a)(5), we first compared the benchmark interest rate to 
the rate on the government-provided loan for the year in which the 
government loan terms were established, i.e., the origination year. 
This comparison showed that the government loan provided a benefit. 
Accordingly, we preliminarily find that these loans confer 
countervailable subsidies pursuant to section 771(5) of the Act.
    In order to calculate the countervailable subsidy rates, we divided 
the benefit received by each company during the POI by each company's 
total sales during the POI. To calculate the benefit from these loans, 
we computed the difference between the amount that would have been paid 
on the benchmark loans to the amounts actually paid on the government 
loans (see 19 CFR 351.505(c)(2) and (c)(4)). On this basis, we 
preliminarily determine the countervailable subsidy from the FHLP loans 
to be 0.14 percent ad valorem for Hart and 0.03 percent ad valorem for 
BSG.
B. Manitoba Agricultural Credit Corporation (``MACC'') Financing: 
Diversification Loan Guarantee (``DLG'') Program and Enhanced 
Diversification Loan Guarantee (``EDLG'') Program
    MACC administers both the DLG and the EDLG programs. The DLG 
program was introduced in December 1995 and was terminated on March 31, 
2001. The EDLG program replaced the DLG program on April 1, 2001. Both 
programs assist producers in diversifying their current operations and/
or adding value to commodities produced on the farm.
    The DLG program was initially open to all Manitoba individuals, 
corporations, partnerships, limited partnerships, and cooperatives 
engaged in agriculture production. In 1998, eligibility was extended to 
include non-residents of Manitoba that were Canadian citizens or 
permanent residents as long as the majority of care and control of the 
project was held by Manitoba agriculture producers. Under the DLG 
program, the GOM, through MACC, provided a loan guarantee for 25 
percent of the principal provided by private sector lenders for the 
lesser of the term of the loan or 15 years. The maximum amount of money 
that a participant could borrow under this program was C$3,000,000. 
Additionally, the maximum number of shareholders permitted per project 
was 25.
    The EDLG Program operates in much the same manner as the DLG 
Program with a few differences. Under the EDLG program, there are no 
limits on the amount of money that a participant in the program can 
borrow, and the limitation on the number of shareholders per project 
was eliminated.

[[Page 51806]]

However, applications for guarantees in excess of C$750,000 (25 percent 
of a C$3,000,000 loan) are subjected to additional review.
    Hytek, Premium, and Hart companies all reported that they had loans 
that were guaranteed under these programs outstanding during the POI.
    The GOM reported that hog farmers received approximately 62 to 73 
percent of all guarantees given under the DLG and EDLG programs from 
2000 through 2003. Based on this, we preliminarily determine that the 
swine industry received a disproportionate share of benefits from 2000 
through 2003, and, consequently, that these programs are specific under 
section 771(5A)(D)(iii)(III) of the Act.
    A loan guarantee is a financial contribution, as described in 
section 771(5)(D)(i) of the Act. Furthermore, these guarantees provide 
a benefit to the recipients equal to the difference between the amount 
the recipients of the guarantee pay on the guaranteed loans and the 
amount the recipients would pay for a comparable commercial loan absent 
the guarantee, after adjusting for guarantee fees. See section 
771(5)(E)(iii) of the Act and 19 CFR 351.506. Therefore, we 
preliminarily determine that these loan guarantees are countervailable 
subsidies, to the extent that they lower the cost of borrowing, within 
the meaning of section 771(5) of the Act.
    To calculate the benefit conferred by these programs, we used our 
long-term, fixed-rate or variable-rate loan methodology (depending on 
the terms of the reported loans) as specified in 19 CFR 351.505. See 19 
CFR 351.506(a). To calculate the POI subsidy amount, we divided the 
total POI benefit from these loan guarantees for each company by each 
company's total sales during the POI.
    On this basis, we preliminarily determine the countervailable 
subsidy from these programs to be 0.11 percent ad valorem for Hart, 
0.03 percent ad valorem for Hytek, and 0.01 percent ad valorem for 
Premium.
C. Saskatchewan Short-Term Hog Loan Program
    The STHLP was created by the GOS in October 2002 in order to assist 
Saskatchewan swine producers with high feed prices brought on by a 
severe drought in 2001 and 2002 and low market prices in 2002 and 2003. 
Under the program, hog producers could receive three-year, variable-
rate loans that did not require repayment until either (1) hog prices 
rose above C$150 per hundred kilograms or (2) no later than May 1, 
2004, with all loans and accrued interest going into repayment at that 
time. No payments were made on these loans by producers of mature hogs 
during the POI except during a single two-week period in June 2003; 
weanling producers began making continuous repayments starting at the 
time of the June 2003 trigger period.\2\
---------------------------------------------------------------------------

    \2\ Repayment schedules during the POI were triggered only once 
during a two-week period from June 1, 2003 to June 15, 2003 when 
market prices for slaughter hogs exceeded the base of C$150 per 
hundred kilograms. After prices went back below the base rate, 
mature hog producers were again allowed to defer payments until the 
next time prices exceeded the base rate or until May 1, 2004; 
weanling producers were required to continue making repayments 
followign the trigger period.
---------------------------------------------------------------------------

    In order to receive loans through this program, producers were 
required to complete a single application for a loan similar to a line 
of credit. Once approved, the producers could then submit invoices on 
hogs marketed monthly between September 3, 2002 and April 30, 2003 to 
draw down on their approved loan, with interest on the draw-down 
amounts accumulating monthly. The individual draw-down amounts were 
per-hog amounts based on sales of either weanlings or mature hogs 
(defined as slaughter hogs or breeding hogs) only, with the loan amount 
differing depending on whether it was a mature hog or a weanling. The 
last date that a company could apply for benefits under the program was 
June 15, 2003, in connection with hogs sold prior to April 30, 2003.
    Only companies that were part of the Hytek group had outstanding 
loans through this program during the POI.
    We preliminarily determine that these loans are a direct transfer 
of funds within the meaning of section 771(5)(D)(i) of the Act. These 
loans are also specific as a matter of law within the meaning of 
section 771(5A)(D)(i) of the Act because they are limited to producers 
of mature and weanling hogs.
    Because the recipients of these loans might have to begin repayment 
whenever the price of weanlings or mature hogs rose above pre-
established trigger prices during the POI, we have preliminarily 
determined to treat the drawdowns taken during the POI as short-term 
loans that were rolled over each time new amounts were taken out or 
interest accumulated. Comparing the interest charged on these loans to 
the interest that would have been paid on a short-term benchmark loan, 
we preliminarily determine that the STHLP conferred a benefit on the 
recipients (see 19 CFR 351.505(a)(1)).
    To calculate the POI subsidy amount, we divided the total POI 
benefit from these loans by Hytek's total sales of subject merchandise 
in the POI. On this basis, we preliminarily determine the 
countervailable subsidy from the STHLP loans to be 0.00 percent ad 
valorem for Hytek.
D. Saskatchewan Livestock and Horticultural Facilities Incentives 
Program (``LHFIP'')
    The LHFIP was created by the GOS in June 1997 to rebate the 
provincial sales tax (``PST'') paid on construction materials and 
equipment for livestock and horticultural facilities. Specifically, 
this program allowed for an annual refund of the PST (which was called 
the education and health tax at the time of the program's creation) 
paid on building materials and stationary equipment used in livestock 
operations, greenhouses, or storage facilities for vegetables, raw 
fruits, medicinal plants, herbs and spices. The purpose of this program 
was to assist in the diversification of Saskatchewan's rural economy by 
encouraging investment and job creation.
    In order to receive this tax rebate, producers in the above 
industries had to submit applications to the GOS along with all 
purchase receipts to verify the types of materials purchased and the 
amount of the PST paid at the time of the purchase. Once the GOS 
confirmed that the application was for materials for eligible 
facilities on which the PST had been paid, the GOS then refunded to the 
producer the amount of the PST paid. The LHFIP expired on December 31, 
2003, and the last date on which a producer could apply for benefits 
under this program was June 30, 2004.
    Only companies that were part of the Hytek group reported receiving 
assistance through the LHFIP during the POI.
    The Department found that LHFIP tax rebates were countervailable 
subsidies in Cattle from Canada (see 64 FR 57040, 57047). Specifically, 
the Department found that the tax benefits under this program were 
financial contributions as described in section 771(5)(D)(ii) of the 
Act which provided a benefit to the recipient in the amount of the tax 
savings. Also, because the legislation establishing this program 
expressly limited the tax benefits to the livestock and horticulture 
industries, we determined that the program was specific under section 
771(5A)(D)(i) of the Act. The facts on the record with respect to this 
program are the same as in Cattle from Canada.
    In the instant proceeding, the GOS has claimed that the LHFIP is 
integrally linked to the tax exemptions permitted under the Provincial 
Sales Tax Act. According to 19 CFR 351.502(c), unless the Department 
determines that two or

[[Page 51807]]

more programs are integrally linked, the Department will determine the 
specificity of a program under section 771(5A)(D) of the Act solely on 
the basis of the availability and use of the program in question. This 
section of the Department's regulations states that the Department may 
find two or more programs to be integrally linked if (1) the subsidy 
programs have the same purpose; (2) the subsidy programs bestow the 
same type of benefit; (3) the subsidy programs confer similar levels of 
benefits on similarly situated firms; and (4) the subsidy programs were 
linked at inception. See 19 CFR 351.502(c).
    Based on a review of record information, we preliminarily determine 
that the LHFIP and the tax exemptions permitted under the Provincial 
Sales Tax Act are not integrally linked. Under the Provincial Sales Tax 
Act, all agricultural producers are exempt from paying the PST on 
select inputs (e.g., machinery and fertilizer) used in their 
production. In addition, livestock and horticultural operators receive 
PST refunds for materials used in the construction of new facilities. 
According to the GOS, this additional tax relief is given to livestock 
and horticultural operators because they do not benefit as much as 
other agricultural producers from the more broadly available tax 
exemption. Thus, the GOS is seeking to balance the treatment of all 
agricultural producers. Furthermore, the GOS deemed that it was too 
difficult to require that the vendors of construction materials 
identify if such purchases were for agricultural or non-agricultural 
use. Thus, the LHFIP was created to provide PST tax refunds on 
materials used to construct facilities for livestock and horticultural 
operators without requiring vendors to identify if the end-use of such 
facilities was for agricultural purposes.
    In accordance with 19 CFR 351.502(c)(1), the subsidy programs must 
have the same purpose to qualify for integral linkage treatment. 
Because the LHFIP provides tax refunds to a subset of users that can 
obtain the tax exemptions permitted under the Provincial Sales Tax Act 
for an activity that does not qualify for a tax exemption in the 
Provincial Sales Tax Act (i.e., the construction of facilities), the 
programs have different purposes.
    Additionally, in accordance with 19 CFR 351.502(c)(3), integrally 
linked programs must confer similar levels of benefits on similarly 
situated firms. Under the LHFIP, tax refunds are available for 
livestock and horticultural operators who make specified purchases in 
conjunction with building facilities. While PST exemptions are 
available to numerous consumers for purchases of specified items, there 
is no exemption or rebates of the PST for other companies purchasing 
construction materials. Thus, similarly-situated firms, i.e., those 
undertaking construction, are not receiving similar levels of benefits.
    Based on the above analysis, we preliminarily find that these 
programs are not integrally linked in accordance with 19 CFR 
351.502(c). Consistent with our findings in Cattle from Canada, 
discussed above, the current record indicates that the tax benefits 
under this program were financial contributions as described in section 
771(5)(D)(ii) of the Act which provided a benefit to the recipient in 
the amount of the tax savings. Also, the legislation establishing this 
program expressly limited the tax benefits to the livestock and 
horticulture industries. Thus, based on the record evidence, which 
provided no new information that would cause us to depart from our 
previous determination on this program from Cattle from Canada, we 
preliminarily find that LHFIP tax rebates are countervailable subsidies 
within the meaning of section 771(5) of the Act.
    In calculating the benefit, consistent with 19 CFR 351.524(c)(1), 
we treated the tax savings as a recurring benefit and divided the tax 
savings received during the POI by Hytek's total sales during the POI. 
On this basis, we determine that a countervailable benefit of 0.00 
percent ad valorem exists for Hytek for this program.

II. Programs Preliminarily Determined To Be Not Countervailable

A. Canadian Farm Income Program/Agricultural Income Disaster Assistance 
Program
    The CFIP and the AIDA program provided income support to 
agricultural producers in Canada. The AIDA program was in effect only 
for the 1998 and 1999 tax years; the CFIP replaced the AIDA program in 
2001, extending the assistance through the 2000, 2001, and 2002 tax 
years. These programs were national programs that were available in all 
provinces, and were jointly funded by the federal and provincial 
governments. The GOC directly administered these programs for producers 
in some provinces; in the remaining provinces, the provincial 
governments administered the programs on behalf of their own province 
(or another province) and the GOC. The last date that a company could 
apply for an AIDA program payment was September 29, 2000; the last date 
a company could receive an AIDA program payment was March 31, 2003 
(except for appeals). The last date that a company could apply for a 
CFIP payment was October 13, 2003; the last date a company can receive 
a CFIP payment is March 31, 2005.
    The purpose of these programs was to provide short-term income 
support to eligible applicants who, due to circumstances beyond their 
control, experienced a dramatic reduction in their farming income 
relative to previous years. To be eligible for these benefits, a 
producer's farming income for the year had to fall below 70 percent of 
the producer's average farming income level in a historical reference 
period (consisting of either the producer's average farming income over 
the three preceding years, or the average farming income in three of 
the preceding five years after eliminating the high and low years). 
Payments under the programs were intended to bring the producer's 
farming income back to 70 percent of the historical average, and were 
calculated by subtracting program year farming income from 70 percent 
of the historic average. If producers were also participating in the 
Net Income Stabilization Account (``NISA'') program,\3\ program 
payments under these programs were reduced by an amount equivalent to 
three percent of the applicant's claim year eligible net sales in order 
to eliminate duplicate support payments.
---------------------------------------------------------------------------

    \3\ The Department examined the NISA program in both Cattle from 
Canada, 64 FR 57040, 57054, and Live Swine from Canada; Final 
Results of Countervailing Duty Administrative Reviews, 61 FR 52408, 
52410 (October 7, 1996) (``Live Swine 91/92, 92/93, 93/94 Review'') 
and found that this program was neither de facto nor de jure 
specific in accordance with section 771(5A) of the Act separately 
with respect to the cattle and live swine industries and, thus not 
countervailable. As described in Cattle from Canada, NISA is 
designed to stabilize an individual farm's overall financial 
performance through a voluntary savings plan. Farmers can deposit a 
portion of the proceeds from their sales of eligible, enrolled NISA 
commodities (up to three percent of net eligible sales) into 
individual savings accounts, receive matching government deposits, 
and make additional, non-matchable deposits, up to 20 percent of net 
sales. A producer can withdraw funds from a NISA account under a 
stabilization or a minimum income trigger. The stabilization trigger 
permits withdrawal when the gross profit margin from the entire 
farming operation falls below an historical average, based on the 
previous five years. If poor market performance of some products is 
offset by increased revenues from others, no withdrawal is 
triggered. The minimum income trigger permits the producer to 
withdraw the amount by which income from the farm falls short of a 
specific minimum income level.
---------------------------------------------------------------------------

    All agricultural producers who filed a tax return with the Canada 
Customs and Revenue Agency (``CCRA''), had been actively engaged in 
farming for six consecutive months in the province for

[[Page 51808]]

which they were applying, and had completed one production cycle for an 
agricultural product could apply to receive funds under the CFIP and 
the AIDA program. In order to receive funds, participating producers 
were required to submit an application each time they wanted to receive 
a program payment. However, approval was automatic as long as the 
applicants met the eligibility criteria and the program requirements 
noted above and discussed in the program handbooks.
    Hytek, Maple Leaf/Elite, BSG, and Park View companies all received 
funds through the CFIP during the AUL period. Hytek, Maple Leaf/Elite, 
BSG, Premium, Hart, and Park View companies all received payments under 
the AIDA program during the AUL period.
    Under 19 CFR 351.524(c), the Department first looks to the 
illustrative list of recurring and non-recurring subsidies to determine 
whether a particular subsidy should be treated as recurring or non-
recurring. Income support payments are not included in the illustrative 
list. Therefore, we have turned to the test described in 19 CFR 
351.524(c)(2) for determining whether payments under CFIP and the AIDA 
program should be allocated over time or expensed in the year of 
receipt. First, although each program was in effect for a limited 
period of time, there is no information to suggest that agricultural 
income support payments would terminate. See 19 CFR 351.524(c)(2)(i). 
Second, according to the GOC, as long as producers met the pre-
established eligibility criteria, discussed above, they could expect to 
receive additional subsidies under these program on an ongoing basis 
notwithstanding the fact that an application was required. See 19 CFR 
351.524(c)(2)(ii). Finally, the subsidy was not provided to, or tied 
to, the recipients' capital structure or assets. See 19 CFR 
351.524(c)(2)(iii). Thus, we have preliminarily determined that these 
programs are recurring subsidies under 19 CFR 351.524(a).\4\
---------------------------------------------------------------------------

    \4\ The petitioners have argued that the income support payments 
can be likened to coverage for operating losses and, hence, should 
be deemed non-recurring subsidies. We disagree with the petitioners' 
analogy because the payments under the AIDA program and the CFIP are 
not based on operating losses. Instead, they are based on income 
and, as such, may be more analogous to price support payments, which 
are included on the illustrative list as recurring benefits. In any 
case, because income support payments are not included in the 
illustrative list, we have based our decision on 19 CFR 351.524(c).
---------------------------------------------------------------------------

    Because none of the responding companies received AIDA benefits 
during the POI, we preliminarily find that no benefit was provided 
during the POI under the AIDA program. Thus, the AIDA program did not 
confer a countervailable subsidy.
    With regard to the CFIP, we examined whether this program was 
specific within the meaning of section 771(5A) of the Act. As noted 
above, any agricultural producer who filed a tax return with the CCRA, 
had been actively engaged in farming for six consecutive months in the 
province for which it was applying, had completed one production cycle 
for an agricultural product, and whose farming income for the year fell 
below 70 percent of its average farming income level in a historical 
reference period could receive funds under this program. According to 
19 CFR 351.502(d), the Department will not regard a domestic subsidy as 
being specific under section 771(5A)(D) of the Act solely because it is 
limited to the agricultural sector. Moreover, the funds provided under 
the CFIP were neither export subsidies nor import substitution 
subsidies according to sections 771(5A)(B) and (C) of the Act, nor is 
there any basis to find that assistance under the CFIP program is de 
jure specific within the meaning of section 771(5A)(D) of the Act.
    We next examined whether the CFIP was de facto specific according 
to section 771(5A)(D)(iii) of the Act. Based on record information, 
thousands of Canadian farmers across many different agricultural 
sectors received benefits under the CFIP. Thus, CFIP recipients were 
not limited in number within the meaning of section 771(5A)(D)(iii)(I) 
of the Act. As noted above, eligibility was based on established 
criteria and receipt was automatic as long as the above-noted 
requirements were met. Thus, the criteria in section 
771(5A)(D)(iii)(IV) of the Act are also not met.
    We also examined the sectoral distribution of benefits under these 
programs within the agricultural community in accordance with sections 
771(5A)(D)(iii)(II) and (III) of the Act. With regard to the usage data 
reported by the GOC for this program, the petitioners have argued that 
certain usage categories reported by the GOC were overly broad. The 
petitioners have also pointed to Cattle from Canada, where the 
Department found a program to be specific for certain years because the 
beef and pork industries together received a disproportionate share of 
the assistance provided under the program. See Cattle from Canada, 64 
FR 57040, 57042. In light of this precedent, the petitioners argue that 
the Department should not examine hogs separately and should instead 
classify hogs together with other livestock.
    We disagree with the petitioners' arguments and have based our 
specificity examination on the categories as they have been reported by 
the GOC. First, with regard to the categories that the petitioners 
claim are too broad, we have examined the record evidence and found 
that the types of category breakdowns used by the GOC in reporting 
usage data are used in the normal course of business and were not 
created for the purposes of this investigation. For example, we found 
in examining record evidence that the types of categories supplied by 
the GOC are also used in tax documents not related to these programs, 
program applications, annual reports, and other documents.
    We also disagree with the petitioners' arguments that we should 
combine categories and make our determination based on whether 
``livestock'' was a predominant user or a disproportionate beneficiary 
of this program. In Cattle from Canada, we examined specificity for the 
Farm Improvement and Marketing Cooperatives Guaranteed Loans 
(``FIMCLA'') program by looking at both hogs and cattle because, at the 
time, the FIMCLA administration did not keep separate records on the 
cattle industry and could not break out cattle separately. See Cattle 
from Canada, 64 FR 57040, 57042. Those categories are now separately 
broken out. Thus, our treatment of the FIMCLA program in Cattle from 
Canada should not be viewed as a preference for combining product 
categories and aggregating data. Indeed, as noted above, in that same 
case, the Department found that the NISA program was not de facto 
specific to cattle by examining cattle separately from other livestock. 
See Cattle from Canada, 64 FR 57040, 57054. Moreover, as also noted 
above, in a prior proceeding on live swine from Canada, the Department 
found that the NISA program did not benefit swine disproportionately. 
See Live Swine 91/92, 92/93, 93/94 Review, 61 FR 52408, 52410. Thus, 
where the data could be disaggregated, the Department has not combined 
different livestock categories for purposes of its specificity 
analysis.
    Finally, according to data from Statistics Canada, swine producers 
collected 9.94 percent of total agricultural cash receipts in 2003. See 
the August 16, 2004 proprietary memorandum entitled ``Specificity 
Issues for Certain Programs: Canadian Farm Income Program, Farm 
Improvement and Marketing Cooperatives Guaranteed Loans, and 
Transitional Assistance'' (``Specificity Memo''), which is on file in 
the Department's CRU. Because this

[[Page 51809]]

program is available to all agricultural producers, it may be 
reasonable to assume that the producers would receive benefits in 
amounts proportional to their role in the overall agricultural economy. 
In fact, based on the GOC's usage data, the swine industry actually 
receives less than 9.94 percent of the total benefits provided under 
this program.
    The petitioners' claim and the Department's position are discussed 
further in the Specificity Memo.
    Based on our analysis of the usage data for the CFIP (which is 
proprietary), we preliminarily find that the live swine industry was 
not a predominant user of the CFIP nor did it receive a 
disproportionately large share of the benefits under the CFIP. See 
sections 771(5A)(D)(iii)(II) and (III) of the Act. Thus, the CFIP is 
not de facto specific according to section 771(5A)(D)(iii). 
Consequently, because assistance under the CFIP is not specific as a 
matter of law or fact, we preliminarily determine that the CFIP does 
not confer a countervailable subsidy on live swine from Canada.
    The GOC has claimed that both the CFIP and the AIDA program are 
entitled to green box treatment under section 771(5B)(F) of the Act and 
are, therefore, not countervailable. However, because we preliminarily 
determine that neither program conferred a countervailable subsidy 
during the POI, we have not addressed the GOC's claim.
B. Transitional Assistance Program
    The Transitional Assistance program (also called Risk Management 
Funding), which was created in 2002, was a GOC-funded program that 
provided stop-gap assistance to the Canadian agricultural sector to 
transition producers from prior programs that had already expired 
(e.g., CFIP and the AIDA program) to the CAIS Program, which was still 
in the process of being implemented.
    Transitional Assistance was provided to producers in two tranches, 
each using a different delivery method. Most of the first tranche of 
funds was deposited into new or existing accounts held for producers 
under the NISA program; the remainder of the first tranche went to non-
NISA participating producers in Quebec as direct payments. The tranche 
one Transitional Assistance funds were deposited into NISA fund two 
(the government contribution fund). Once deposited, the tranche one 
payments were indistinguishable from the other NISA fund two monies.\5\ 
The second tranche of payments was made directly to producers. For 
administrative purposes, the payments were recorded as payments into 
and immediate withdrawals from NISA. However, unlike the first tranche, 
these payments were not subject to any NISA requirements and were paid 
directly to producers in the form of checks.
---------------------------------------------------------------------------

    \5\ NISA accounts consist of two funds. The first fund holds all 
producer deposits; the second fund holds all government matching 
contributions and earned interest. Withdrawals are taken first from 
fund two (the government matching funds) and then from fund one (the 
producer's own funds).
---------------------------------------------------------------------------

    All agricultural producers were eligible to receive Transitional 
Assistance except those whose products are subject to supply management 
(dairy and poultry producers). Producers with existing NISA accounts 
did not need to apply to receive benefits because the information 
needed to calculate the Transitional Assistance could be obtained from 
the NISA database. NISA account holders automatically received their 
payments under tranches one and two. Producers that did not have NISA 
accounts had to open one to receive benefits, except for producers in 
Quebec; producers in Quebec that did not have a NISA account had to 
submit an application to receive benefits under this program.
    The payment amounts for all producers were calculated as a 
percentage of eligible net sales (as computed under NISA) for the 
previous five years; for tranche one, the payment was 4.25 percent of 
the average of eligible net sales from 1997 through 2002, and for 
tranche two, the payment was 3.85 percent of the same sales for 1998 
through 2003. Approval for benefits under this program was automatic if 
producers met the above-noted criteria. The last date that a company 
could apply for or claim a payment under this program was December 31, 
2003.
    Hytek, Maple Leaf/Elite, BSG, Premium, Willow Creek, Hart, and Park 
View companies all reported receiving funds through the Transitional 
Assistance Program during the AUL period.
    As described above, producers of virtually all agricultural 
products were eligible to receive funds under this program. According 
to 19 CFR 351.502(d), the Department will not regard a domestic subsidy 
as being specific under section 771(5A)(D) of the Act solely because it 
is limited to the agricultural sector. Moreover, these Transitional 
Assistance funds were neither export subsidies nor import substitution 
subsidies according to sections 771(5A)(B) and (C) of the Act, nor is 
there any basis to find that Transitional Assistance is de jure 
specific within the meaning of section 771(5A)(D) of the Act.
    Next, we examined whether Transitional Assistance was de facto 
specific according to section 771(5A)(D)(iii) of the Act. According to 
record information, thousands of Canadian farmers across many different 
agricultural sectors received Transitional Assistance. Thus, recipients 
of Transitional Assistance were not limited in number within the 
meaning of section 771(5A)(D)(iii)(I) of the Act. As noted above, 
eligibility was based on established criteria and receipt was automatic 
as long as the above-noted requirements were met. Thus, the criteria in 
section 771(5A)(D)(iii)(IV) of the Act are also not met.
    Finally, we examined the sectoral distribution of benefits under 
these programs within the agricultural community in accordance with 
sections 771(5A)(D)(iii)(II) and (III) of the Act.\6\ According to data 
on the distribution of benefits under this program across producers of 
different agricultural products, we preliminarily find that the live 
swine industry was not a predominant user of the Transitional 
Assistance program, nor did it receive a disproportionately large share 
of the benefits under the Transitional Assistance program. See sections 
771(5A)(D)(iii)(II) and (III) of the Act. See also the Specificity Memo 
for our analysis of the proprietary usage data. Also, as noted above, 
while swine producers collected 9.94 percent of total agricultural cash 
receipts in 2003 their share of Transitional Assistance benefits was 
less than that. Thus, the Transitional Assistance program is not de 
facto specific under section 771(5A)(D)(iii) of the Act.
---------------------------------------------------------------------------

    \6\ The petitioners raised the same arguments as described above 
in connection with the CFIP and the AIDA program regarding the 
specificity of Transition Assistance. Our position is also described 
there.
---------------------------------------------------------------------------

    Consequently, because assistance under the Transitional Assistance 
Program is not specific as a matter of law or fact, we preliminarily 
determine that this program does not confer a countervailable subsidy 
on live swine from Canada. See section 771(5A) of the Act.
    The GOC has claimed that the funds disbursed as part of tranche two 
of the Transitional Assistance Program are entitled to green box 
treatment under section 771(5B)(F) of the Act and are, therefore, not 
countervailable. However, because we preliminarily determine that 
Transitional Assistance does not provide a countervailable subsidy 
during the POI, we have not addressed the GOC's claim.

[[Page 51810]]

C. Farm Improvement and Marketing Cooperatives Guaranteed Loans
    Under FIMCLA, the GOC provides guarantees on loans extended by 
private commercial banks and other lending institutions to farmers 
across Canada. Enacted in 1987, the purpose of this program is to 
increase the availability of loans for the improvement and development 
of farms, and the marketing, processing, and distribution of farm 
products by cooperative associations. Pursuant to FIMCLA, any 
individual, partnership, corporation, or cooperative association 
engaged in farming in Canada is eligible to receive loan guarantees 
covering 95 percent of the debt outstanding for projects that are 
related to farm improvement or increased farm production. The maximum 
amount of money that an individual can borrow under this program is 
C$250,000. For marketing cooperatives, the maximum amount is 
C$3,000,000; however, any amount above C$250,000 is subject to prior 
approval by the GOC.
    BSG, Premium, and Maple Leaf/Elite companies all had loans 
outstanding during the POI that were guaranteed under FIMCLA.
    A loan guarantee is a financial contribution, as described in 
section 771(5)(D)(i) of the Act. Furthermore, these guarantees provide 
a benefit to the recipients equal to the difference between the amount 
the recipients of the guarantee pay on the guaranteed loans and the 
amount the recipients would pay for a comparable commercial loan absent 
the guarantee, after adjusting for guarantee fees. See section 
771(5)(E)(iii) of the Act and 19 CFR 351.506. In order to determine 
whether this program conferred a benefit, we used our long-term fixed-
rate or variable-rate loan methodology (depending on the terms of the 
reported loans) to compute the total benefit on the reported loans. See 
19 CFR 351.505 and 19 CFR 351.506(a). We preliminarily determine that 
the guaranteed loans under this program taken out in 1997, 1998, 1999, 
2000, and 2003 did not provide a benefit to the respondent companies. 
Therefore, we preliminarily determine that the FIMCLA loan guarantees 
issued on these loans do not provide a countervailable subsidy 
according to section 771(5)(B) of the Act. Because these loan 
guarantees did not confer a benefit on live swine from Canada during 
the POI, there was no need for the Department to further examine 
whether these guarantees were specific within the meaning of section 
771(5A) of the Act.
    The only other year for which respondents had FIMCLA-guaranteed 
loans was 2001. We preliminarily determine that these guarantees are 
not specific with regard to the swine industry in 2001 under section 
771(5A)(D) of the Act. As described above, the FIMCLA program is 
available to any individual, partnership, corporation, or cooperative 
association that is engaged in farming in Canada. According to 19 CFR 
351.502(d), the Department will not regard a domestic subsidy as being 
specific under section 771(5A)(D) of the Act solely because it is 
limited to the agricultural sector. Moreover, the guarantees under this 
program were neither export subsidies nor import substitution subsidies 
according to sections 771(5A)(B) and (C) of the Act, nor is there any 
basis to find that these guarantees were de jure specific within the 
meaning of section 771(5A)(D) of the Act.
    Next, we examined whether this program was de facto specific with 
regard to the swine industry in 2001 according to section 
771(5A)(D)(iii) of the Act. According to record information, thousands 
of Canadian farmers across many different agricultural sectors received 
guarantees under this program. Thus, recipients of these guarantees 
were not limited in number within the meaning of section 
771(5A)(D)(iii)(I) of the Act. Eligibility was based on established 
criteria and was automatic as long as the eligibility criteria were 
met. Thus, the criteria in section 771(5A)(D)(iii)(IV) of the Act are 
also not met.
    Finally, we examined the sectoral distribution of benefits under 
these programs within the agricultural community in accordance with 
sections 771(5A)(D)(iii)(II) and (III) of the Act.\7\ According to data 
on the distribution of benefits under this program across producers of 
different agricultural products, we preliminarily find that the live 
swine industry was not a predominant user of the FIMCLA program in 
2001, nor did it receive a disproportionately large share of the 
guarantees under the FIMCLA program in 2001. See sections 
771(5A)(D)(iii)(II) and (III) of the Act. See also the Specificity Memo 
for our analysis of the proprietary usage data. In this connection, 
while swine producers collected 10.54 percent of total agricultural 
cash receipts in 2001, their share of FIMCLA guaranteed loans in 2001 
was less than that. Thus, the FIMCLA program is not de facto specific 
with regard to the live swine industry in 2001 under section 
771(5A)(D)(iii) of the Act.
---------------------------------------------------------------------------

    \7\ The petitioners raised the same arguments as described above 
in connection with the CFIP and the AIDA program regarding the 
specificity of FIMCLA. Our position is also described there.
---------------------------------------------------------------------------

    Based on the above analysis, we find that FIMCLA loan guarantees 
did not confer a countervailable subsidy on live swine from Canada 
during the POI.

III. Programs Preliminarily Determined Not To Have Been Used

    Based on the information provided in the responses, we determine no 
responding companies applied for or received benefits under the 
following programs during the POI:

A. Producer Assistance 2003 Program/Canadian Agricultural Income 
Stabilization Program
B. Farm Credit Canada Financing: Enviro-Loan Program
C. Alberta Agricultural Financial Services Corporation Financing: 
Developing Farmer Loan Program
D. Alberta Disaster Assistance Loan Program
E. Alberta Hog Industry Development Fund Program
F. Alberta Livestock Industry Development Fund Program
G. Ontario Bridge Funding Program

    In October 2002, the Government of Ontario (``GOO'') established 
the Ontario Bridge Funding Program to provide one-time transition 
funding to Ontario producers to assist them in making the transition 
from the former set of safety-net programs to the new CAIS program. All 
agricultural producers participating in NISA in 2001 were eligible for 
payments as long as their eligible net sales totaled at least C$2,985. 
Payments were made automatically to NISA participants; no application 
was required to receive funding under this program. Payments were made 
for all commodities except for supply-managed commodities (dairy and 
poultry) and were calculated at a rate of 0.335 percent of eligible net 
sales. Both Maple Leaf/Elite and BSG companies received funds under 
this program in 2002.
    Pursuant to 19 CFR 351.524(b)(2), the Department will normally 
expense non-recurring benefits to the year in which benefits are 
received if the total amount approved under the program is less than 
0.5 percent of relevant sales during the year in which the subsidy was 
approved. Moreover, according to 19 CFR 351.524(a), the Department will 
allocate (expense) a recurring benefit to the year in which the benefit 
is received. If benefits under this program were treated as recurring 
benefits, under 19 CFR 351.524(a), they would have been allocated to 
2002, the year in

[[Page 51811]]

which the benefits were received, and would not have provided a benefit 
during the POI. If the Department treated these grants as non-
recurring, because the amount of the bridge funding grants approved by 
the GOO for these companies under this program was less than 0.5 
percent of each company's sales in the year in which the grants were 
approved, these grants would be expensed prior to the POI in accordance 
with 19 CFR 351.524(b)(2). Thus, regardless of whether they were 
treated as recurring or non-recurring, no countervailable benefit was 
provided to either Maple Leaf/Elite or BSG during the POI under this 
program.

Verification

    In accordance with section 782(i)(1) of the Act, we will verify the 
information submitted by the respondents prior to making our final 
determination.

ITC Notification

    In accordance with section 703(f) of the Act, we will notify the 
ITC of our determination. In addition, we are making available to the 
ITC all nonprivileged and nonproprietary information relating to this 
investigation. We will allow the ITC access to all privileged and 
business proprietary information in our files, provided the ITC 
confirms that it will not disclose such information, either publicly or 
under an administrative protective order, without the written consent 
of the Assistant Secretary for Import Administration.
    In accordance with section 705(b)(3) of the Act, if our final 
determination is affirmative, the ITC will make its final determination 
within 75 days after the Department makes its final determination.

Public Comment

    Case briefs for this investigation must be submitted no later than 
one week after the issuance of the last verification report. Rebuttal 
briefs must be filed within five days after the deadline for submission 
of case briefs. A list of authorities relied upon, a table of contents, 
and an executive summary of issues should accompany any briefs 
submitted to the Department. Executive summaries should be limited to 
five pages total, including footnotes.
    Section 774 of the Act provides that the Department will hold a 
public hearing to afford interested parties an opportunity to comment 
on arguments raised in case or rebuttal briefs, provided that such a 
hearing is requested by an interested party. If a request for a hearing 
is made in this investigation, the hearing will tentatively be held two 
days after the deadline for submission of the rebuttal briefs at the 
U.S. Department of Commerce, 14th Street and Constitution Avenue, NW., 
Washington, DC 20230. Parties should confirm by telephone the time, 
date, and place of the hearing 48 hours before the scheduled time.
    Interested parties who wish to request a hearing, or to participate 
if one is requested, must submit a written request to the Assistant 
Secretary for Import Administration, U.S. Department of Commerce, Room 
1870, within 30 days of the publication of this notice. Requests should 
contain: (1) The party's name, address, and telephone; (2) the number 
of participants; and (3) a list of the issues to be discussed. Oral 
presentations will be limited to issues raised in the briefs.
    This determination is published pursuant to sections 703(f) and 
777(i) of the Act.

    Dated: August 16, 2004.
James J. Jochum,
Assistant Secretary for Import Administration.
[FR Doc. 04-19278 Filed 8-20-04; 8:45 am]
BILLING CODE 3510-DS-P