[Federal Register Volume 69, Number 202 (Wednesday, October 20, 2004)]
[Notices]
[Pages 61639-61649]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E4-2731]
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DEPARTMENT OF COMMERCE
International Trade Administration
[A-122-850]
Notice of Preliminary Determination of Sales at Less Than Fair
Value and Postponement of Final Determination: Live Swine From Canada
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
ACTION: Notice of preliminary determination of sales at less than fair
value.
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SUMMARY: We preliminarily determine that live swine from Canada are
being, or are likely to be, sold in the United States at less than fair
value, as provided in section 733(b) of the Tariff Act of 1930, as
amended (``the Act'').
Interested parties are invited to comment on this preliminary
determination. Since we are postponing the final determination, we will
make our final determination within 135 days of the date of publication
of this preliminary determination in the Federal Register.
EFFECTIVE DATE: October 20, 2004.
FOR FURTHER INFORMATION CONTACT: Cole Kyle, Ryan Langan, or Andrew
Smith, Import Administration, International Trade Administration, U.S.
Department of Commerce, 14th Street and Constitution Avenue, NW.,
Washington, DC 20230; telephone: (202) 482-1503, (202) 482-2613, or
(202) 482-1276, respectively.
SUPPLEMENTARY INFORMATION:
Background
Since the initiation of this investigation (Notice of Initiation of
Antidumping Duty Investigation: Live Swine from Canada, 69 FR 19815
(April 14, 2004) (``Initiation Notice''), the following events have
occurred:
On April 26, 2004, we solicited comments from interested parties
regarding the criteria to use for model-matching purposes. We received
comments from all interested parties on our proposed matching criteria
in April and May, 2004.
On May 4, 2004, the Government of Canada (``GOC'') submitted a
scope exclusion request. On August 4, 2004, the petitioners submitted
comments on the GOC's scope exclusion request. See ``Scope Comments''
section, below. We held discussions on the issue of model matching with
officials from the United States Department of Agriculture (``USDA'')
and industry experts on May 6 and 11, 2004, respectively.
On May 14, 2004, we selected Excel Swine Services, Inc.
(``Excel''), Ontario Pork Producers' Marketing Board (``Ontario
Pork''), Hytek, Inc. (``Hytek''), and Premium Pork Canada, Inc.
(``Premium Pork'') as mandatory respondents in this proceeding. For
further discussion, see Memorandum to Jeffrey May, ``Respondent
Selection'' dated May 14, 2004 (``Respondent Selection Memorandum''),
which is located in the Department of Commerce's (``the Department'')
Central Records Unit, located in Room B-099 of the main Department
building (``CRU''), and the ``Respondent Selection'' section below.
On May 17, 2004, the United States International Trade Commission
(``ITC'') preliminarily determined that there is a reasonable
indication that imports of live swine from Canada are materially
injuring the United States live swine industry (see ITC Investigation
Nos. 701-TA-438 and 731-TA-1076 (Publication No. 3693)).
We issued the antidumping questionnaire to Excel, Ontario Pork,
Hytek, and Premium Pork on May 27, 2004. Also, on May 27, 2004, the
Department adopted the model match criteria and hierarchy for this
proceeding. See Memorandum to Susan Kuhbach, ``Selection of Model
Matching Criteria for Purposes of the Antidumping Duty Questionnaire,''
dated May 27, 2004, which is on file in the CRU.
On June 4, 2004, Ontario Pork submitted comments regarding the
selection of companies to respond to the Department's cost
questionnaire. On June 16, 2004, we solicited comments from 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\ (hereinafter ``the petitioners''), Excel, and Ontario Pork on the
methodology for selecting cost respondents. We received parties'
comments on June 21, 2004, and rebuttal comments on June 24 and June
30, 2004.
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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 Wieners, 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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On June 21, 2004, Premium Pork submitted a request to the
Department that it use Premium Pork's transfer price as the constructed
export price rather than deriving a constructed export price. On June
29, 2004, the petitioners submitted comments on Premium's request. The
Department rejected this request.
On July 2, 2004, the Office of Accounting notified Ontario Pork and
Excel of the companies selected to respond to the Department's cost
questionnaire. This selection is described in a July 15, 2004
Memorandum to Jeffrey May, entitled ``Cost Respondent Selection Memo.''
In June and July, 2004, the Department received responses to
sections A, B, and C of the Department's
[[Page 61640]]
original questionnaire from Excel, Ontario Pork, Premium Pork, and
Hytek. The Department issued supplemental questionnaires to the
respondents in July, August, and September 2004, and received responses
in September and October 2004.
Pursuant to section 733(c)(1)(B) of the Tariff Act of 1930, as
amended by the Uruguay Round Agreements Act effective January 1, 1995
(``the Act''), we determined that this proceeding is extraordinarily
complicated and that additional time was necessary to make our
preliminary determination. Therefore, on August 9, 2004, we postponed
the preliminary determination until no later than October 14, 2004. See
Notice of Postponement of Preliminary Antidumping Duty Determination:
Live Swine from Canada, 69 FR 48201 (August 9, 2004).
In September and October, 2004, the Department received pre-
preliminary determination comments from Excel, Ontario Pork, Hytek,
Premium Pork, and the petitioners regarding the Department's
calculation methodologies for the preliminary determination.
Postponement of Final Determination
Section 735(a)(2) of the Act provides that a final determination
may be postponed until not later than 135 days after the date of the
publication of the preliminary determination if, in the event of an
affirmative preliminary determination, a request for such postponement
is made by exporters who account for a significant proportion of
exports of the subject merchandise. Section 351.210(e)(2) of the
Department's regulations requires that exporters requesting
postponement of the final determination must also request an extension
of the provisional measures referred to in section 733(d) of the Act
from a four-month period until not more than six months.
On September 21, 2004, we received requests from Excel, Ontario
Pork, Hytek, and Premium Pork to postpone the final determination to
135 days after the date of publication of this preliminary
determination notice. In their requests, the respondents consented to
the extension of provisional measures to no longer than six months.
Since this preliminary determination is affirmative and the request for
postponement is made by exporters who account for a significant
proportion of exports of the subject merchandise we have extended the
deadline for issuance of the final determination until the 135th day
after the date of publication of this preliminary determination in the
Federal Register.
Scope of Investigation
The products covered by this investigation are all live swine from
Canada except breeding 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
0103.91.0010, 0103.91.0020, 0103.91.0030, 0103.92.0010,
0103.92.0090.\2\
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\2\ Prior to June 30, 2003, HTSUS subheadings 0103.91.0010,
0103.91.0020, and 0103.91.0030 were all included under one heading,
HTSUS 0103.91.0000.
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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 subheadings 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
countervailing duty (``CVD'') 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 antidumping (``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 ITC to modify the HTSUS by adding a
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) the
``physical description'' language provides an important clarification
that all live
[[Page 61641]]
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 revised the scope in both the AD and companion
CVD proceedings based on the above scope comments. The revised scope
language is included in the ``Scope of Investigation'' section, above.
Period of Investigation
The period of investigation (``POI'') is January 1, 2003, through
December 31, 2003. This period corresponds to the four most recent
fiscal quarters prior to the filing of the petition on March 5, 2004.
Selection of Respondents
Section 777A(c)(1) of the Act directs the Department to calculate
individual dumping margins for each known exporter and producer of the
subject merchandise. However, section 777A(c)(2) of the Act gives the
Department discretion, when faced with a large number of exporters/
producers, to limit its examination to a reasonable number of such
companies if it is not practicable to examine all companies. Where it
is not practicable to examine all known producers/exporters of subject
merchandise, this provision permits the Department to investigate
either: (1) A sample of exporters, producers, or types of products that
is statistically valid based on the information available at the time
of selection, or (2) exporters and producers accounting for the largest
volume of the subject merchandise that can reasonably be examined.
After consideration of the complexities expected to arise in this
proceeding, including the industry practice of sourcing subject
merchandise from multiple producers, the intricate corporate structures
of exporters and producers, and the potential for collapsing
respondents with multiple affiliated producers/exporters, as well as
the resources available to the Department, we determined that it was
not practicable in this investigation to examine all known producers/
exporters of subject merchandise. Therefore, we selected the four
producers/exporters with the greatest export volumes to receive
antidumping duty questionnaires and, as such, to be mandatory
respondents.
As discussed in the Respondent Selection Memorandum, we selected
these companies because they were the largest Canadian exporters of
subject merchandise who also had their own, or affiliated party,
production of the merchandise under investigation. In addition, we did
not select as respondents trading companies that did not produce (or
have affiliated producers that produced) live swine because of the need
to gather information from unaffiliated producers that supplied these
trading companies. Further, we did not select M&F Trading, Inc.
(``M&F'') and Maximum Swine Marketing, Inc. (``Maximum'') as
respondents because they were not engaged in the production of live
swine. Instead, M&F and Maximum acted merely as brokers between the
customer and supplier (i.e., producer), and the customer and supplier
set the terms of sale independently of M&F or Maximum. We noted that
this selection methodology was consistent with that used in the
previous antidumping duty investigation of live cattle from Canada. See
Notice of Preliminary Determination of Sales at Less than Fair Value:
Live Cattle from Canada, 64 FR 36847 (July 8, 1999), citing a
memorandum on the official file, ``Selection of Respondents,'' dated
March 1, 1999, affirmed in the Notice of Final Determination of Sales
at Less than Fair Value: Live Cattle from Canada, 64 FR 56739 (October
21, 1999).
Excel was included in the list of producing exporters and, after
excluding M&F and Maximum, Excel was among the four largest exporters.
We believed that Excel was a producing exporter because Excel reported
that it was ``partly'' a producer of the merchandise under
investigation because of common shareholders among Excel and its
suppliers. Excel also reported that it was a ``cooperative-like''
company. Based on our understanding of Excel's situation at the time of
our respondent selection, Excel was included as a mandatory respondent.
The Department believed that the selection of Excel as a mandatory
respondent would allow the Department to collect complete data for the
``largest volume of subject merchandise from the exporting country that
can reasonably be examined.'' See Respondent Selection Memorandum at 5.
However, given the information we obtained from Excel after its
selection as a mandatory respondent, we preliminarily determine that
Excel should not have been included in the list of producing exporters
nor should we have selected Excel as a mandatory respondent.
The record evidence shows that Excel's role in sales of merchandise
produced by unaffiliated producers is that of a broker rather than that
of a central selling unit in a ``cooperative-like'' company. We have
reached this conclusion because the information on the record indicates
that for sales of merchandise produced by unaffiliated companies, Excel
merely generates sales invoices and arranges transportation in
accordance with the terms of the sales contracts. These sales contracts
are between swine producers unaffiliated with Excel and customers (also
not affiliated with Excel). Excel is not a signatory to these sales
contracts. Consequently, Excel does not determine or influence the
pricing or other terms of sale for sales of merchandise produced by
companies that are not affiliated with Excel. We also preliminarily
determine that the unaffiliated suppliers who sold their merchandise
through Excel knew, at the time of the sale, that the merchandise was
destined for the United States. Therefore, Excel cannot be considered
the exporter for these sales.
Excel's remaining sales to the United States, i.e., Excel's sales
of live swine produced by affiliated suppliers, are extremely small
such that Excel does not fall among the largest exporters of live swine
to the United States. Had we known at that time of our selection of
respondents that Excel's volume of sales to the United States was so
low, we would not have selected Excel as a mandatory respondent.
Excel's situation is further complicated by the fact that, based on
our understanding of Excel's ``cooperative-like'' relationship to its
unaffiliated suppliers, we selected a subset of those suppliers to
respond to our cost questionnaires. See ``Background'' section, above,
and Cost Respondent Selection Memo. None of the selected suppliers is
affiliated with Excel and, as explained above, all had knowledge that
their swine sales were destined for the United States. Therefore, we
preliminarily determine that section 773(b) of the Act precludes us
from using those suppliers' costs in analyzing whether sales made by
Excel in Canada of live swine produced by its affiliated suppliers are
below cost.
Given the very small volume of Excel's sales to the United States
of merchandise produced by affiliated producers, plus our inability to
perform a cost test on its home market sales, we are rescinding our
selection of Excel as a mandatory respondent. Consequently, we do not
plan to verify Excel's response and we are assigning Excel the ``all-
others'' rate, the rate Excel would have received had it not initially
been selected as a mandatory respondent. This is not intended to be
punitive to Excel. Instead, the rescission merely restores Excel to the
position it would have been in, had all of the information
[[Page 61642]]
now on the record about its organization and sales processes been known
to the Department at the time of the respondent selection. Nor do we
believe that adverse, punitive, action is required in this situation
because there is no record evidence that Excel deliberately misled the
Department.
Although we are eliminating Excel from our analysis, we
preliminarily determine that the Department is meeting the statutory
obligation to examine exporters and producers accounting for the
largest volume of the subject merchandise that can reasonably be
examined under section 777A(c)(2) of the Act by investigating the sales
of the remaining respondents, Ontario Pork, Hytek and Premium Pork.
That is because the volume of sales for which Excel is the exporter is
very small, so that its elimination has little effect on the coverage
of our investigation. We also note that the products exported by the
remaining respondents during the POI cover the entire scope of the
subject merchandise. Therefore, the ``all-others'' rate will reflect
sales of all of the subject merchandise.
Fair Value Comparisons
To determine whether sales of live swine from Canada to the United
States were made at less than fair value (``LTFV''), we compared the
export price (``EP'') or constructed export price (``CEP'') to the
normal value (``NV''), as described in the ``Export Price and
Constructed Export Price'' and ``Normal Value'' sections of this
notice, below. In accordance with section 777A(d)(1)(A)(I) of the Act,
we compared POI weighted-average EPs and CEPs to NVs. Any specific
adjustments to the EP, CEP and NV calculations are discussed in the
October 14, 2004, respondent-specific calculation memoranda
(``Calculation Memoranda''), which are on file in the CRU.
In an October 1, 2004, submission, Ontario Pork requested that the
Department compute monthly weighted-average EPs and NVs, rather than
POI averages, for comparison purposes. Ontario Pork states that as a
result of fluctuations in prices in the U.S. and home markets, and
skewed sales volumes during the POI, the Department's normal
methodology will lead to a severely distorted measure of dumping.
Ontario Pork contends that the Department has the authority to
deviate from its normal practice ``when normal values, export prices,
or constructed export prices differ significantly over the course of
the period of investigation,'' under section 351.414(d)(3) of the
Department's regulations. Ontario Pork points to Antidumping Duties;
Countervailing Duties, 62 FR 27296, 27373 (May 19, 1997)
(``Preamble''), in which the Department explained that ``[i]n general,
we believe it is appropriate to average prices across the period of
investigation, though there are circumstances in which other averaging
periods are more appropriate. Accordingly, the proposed rule is
designed to ensure that the time periods over which price averages and
comparisons are made comports with circumstances of the case, while
maintaining a preference for period wide averages.'' Ontario Pork also
cites United States--Antidumping Measures on Stainless Steel Plate in
Coils and Stainless Steel Sheet and Strip from Korea, WTO/DS179/R
(December 22, 2000) (``WTO Ruling''), in which the WTO Panel provided
an example of how averaging on a POI basis, where price and volume
fluctuations occur in both the export and home markets, can distort
dumping margin calculations.
The petitioners responded to Ontario Pork's comments on October 6,
2004. They argue that there is no basis for using monthly averages in
this case, particularly given that the Department rarely exercises its
authority to deviate from POI averages, and only does so in extreme
cases. One such case occurred when the value of the Korean won fell
precipitously against the U.S. dollar during the period of
investigation in Stainless Steel Sheet and Strip in Coils from Korea;
Final Determination of Sales at Less Than Fair Value, 64 FR 30664,
30676 (June 8, 1999) (``Stainless Steel''). In Stainless Steel the
Department averaged prices for two distinct periods, before and after
the precipitous decline in the won-dollar exchange rate. In this case
however, the petitioners contend, there is no compelling reason to
average prices on a monthly basis, particularly given that U.S. and
home market prices are tied to the same daily USDA market price
benchmarks. In addition, the petitioners argue that Ontario Pork's
prices varied on many bases--annually, monthly, weekly and daily--and
that these variations do not constitute an extreme case that
necessitates a departure from the Department's preferred averaging
period.
We note that Ontario Pork did not raise this issue with the
Department until shortly before the deadline for this preliminary
determination and, therefore, we have not had sufficient time to
consider the implications of Ontario Pork's proposal. In addition,
while the petitioners have commented on this issue, other interested
parties have not had sufficient time or information to provide the
Department with comments on Ontario Pork's proposal. Therefore, we have
not adopted monthly averaging periods in our analysis of Ontario Pork's
sales for this preliminary determination.
While we acknowledge the Department's authority to calculate
averages over shorter periods than the POI, our practice is generally
to calculate POI averages except in certain situations, such as when
there are external events that clearly define distinct periods for
which different market conditions prevailed. Also, with the exception
of our use of monthly averages in situations with high inflation, we
have not used monthly averaging periods.
Therefore, we intend to consider this issue further for the final
determination and invite parties to comment further on the
circumstances in which it would be appropriate for the Department to
select shorter averaging periods, and whether the use of shorter
averaging periods should be limited to situations where the shorter
periods are defined by external events.
Selection of Comparison Market
Section 773(a)(1) of the Act directs that NV be based on the price
at which the foreign like product is sold in the home market, provided
that the merchandise is sold in sufficient quantities (or value, if
quantity is inappropriate), that the time of the sales reasonably
corresponds to the time of the sale used to determine EP or CEP, and
that there is no particular market situation that prevents a proper
comparison with the EP or CEP. The Act contemplates that quantities (or
value) will normally be considered insufficient if they are less than
five percent of the aggregate quantity (or value) of sales of the
subject merchandise to the United States.
We found that Ontario Pork and Hytek each had a viable home market
for sales of subject merchandise. In deriving NV, we made adjustments
as detailed in the Calculation of Normal Value Based on Home Market
Prices and Calculation of Normal Value Based on Constructed Value
sections below.
For Premium Pork, we preliminarily determine that the home market
is not an appropriate comparison market because a particular market
situation exists with respect to Premium Pork's sales in Canada.
Premium Pork is in the business of producing isoweans for export to the
United States and raising live swine for sale as market hogs in the
United States. On the other hand, Premium Pork's home market sales
[[Page 61643]]
overwhelmingly consist of substandard and defective swine, and spent
sows and boars (i.e., sows and boars that are no longer useful in
producing isoweans for raising market hogs). Therefore, the company's
sales in Canada are incidental to the respondent and, moreover, are not
appropriate for comparison with the U.S. sales. As further evidence of
Premium Pork's focus on the U.S. market, the company did not have sales
to any third country market during the POI. Therefore, because a
particular market situation exists with respect to Premium Pork's home
market sales and because Premium Pork did not have third country sales
during the POI, Premium Pork's NV is based on constructed value
(``CV''). See Memorandum to Jeffrey May, ``Appropriateness of Canadian
Market as a Comparison Market for Premium Pork,'' dated October 14,
2004.
Product Comparisons
In accordance with section 771(16) of the Act, we considered all
products produced and sold by Ontario Pork and Hytek in the home market
during the POI that fit the description in the ``Scope of
Investigation'' section of this notice to be foreign like products for
purposes of determining appropriate product comparisons to U.S. sales.
For the reasons discussed above, we did not consider products produced
and sold by Premium Pork in the home market. We compared U.S. sales to
sales of identical merchandise made in the home market, where possible.
Where there were no sales of identical merchandise in the home market,
made in the ordinary course of trade, to compare to U.S. sales, we
compared U.S. sales to sales of the most similar foreign like product
made in the ordinary course of trade.
To identify identical and similar merchandise for purposes of
comparing U.S. and home market sales, we considered several product
characteristics. Specifically, we asked the respondents to report
information on type (e.g., gilt/barrow, sow or boar), weight, and
weight band, for each sale made during the POI.
Export Price and Constructed Export Price
For the price to the United States, we used, as appropriate, EP or
CEP, as defined in sections 772(a) and 772(b) of the Act, respectively.
Section 772(a) of the Act defines EP as the price at which the subject
merchandise is first sold before the date of importation by the
producer or exporter outside of the United States to an unaffiliated
purchaser in the United States or to an unaffiliated purchaser for
exportation to the United States, as adjusted under subsection 722(c)
of the Act.
Section 772(b) of the Act defines CEP as the price at which the
subject merchandise is first sold in the United States before or after
the date of importation by or for the account of the producer or
exporter of such merchandise or by a seller affiliated with the
producer or exporter, to a purchaser not affiliated with the producer
or exporter, as adjusted under subsections 772(c) and (d) of the Act.
For all respondents, we calculated EP and CEP, as appropriate,
based on the prices charged to the first unaffiliated customer in the
United States or for shipment to the United States. We found that all
the respondents made EP sales during the POI. These sales are properly
classified as EP sales because they were made outside the United States
by the exporter or producer to unaffiliated customers in the United
States, or to unaffiliated customers in Canada for exportation to the
United States, prior to the date of importation. Moreover, the
constructed export methodology was not otherwise warranted based on
record evidence. We also found that Hytek and Premium Pork made CEP
sales during the POI. These sales are properly classified as CEP sales
because they were made through the respondents' respective U.S.
affiliate(s).
In accordance with section 772(c)(2) of the Act, we made deductions
from the starting price for movement expenses, and export taxes and
duties, where appropriate. Section 772(d)(1) of the Act provides for
additional adjustments to calculate CEP. Accordingly, where
appropriate, we deducted the cost of further manufacturing, and direct
and indirect selling expenses incurred in selling the subject
merchandise to the United States. Pursuant to section 772(d)(3) of the
Act, where applicable, we made an adjustment for CEP profit.
(1) Ontario Pork
Ontario Pork is, by law, the only entity permitted to sell
slaughter hogs produced in Ontario, and Ontario Pork controls the
pricing and terms of sale for all of these sales. Therefore, we have
treated Ontario Pork as the exporter for these sales.
We based EP for Ontario Pork on the delivered price to unaffiliated
purchasers in the United States, as adjusted upon receipt to reflect
grading by the customer. We made deductions for movement expenses in
accordance with section 772(c)(2)(A) of the Act. These expenses
included, where appropriate, foreign inland freight (trucking from farm
to assembler), warehousing/assembling fees, international freight,
freight insurance, and brokerage and handling (including U.S. duties,
customs fees, and fees mandated by the U.S. Pork Promotion Research and
Consumer Information Act of 1985). See Calculation Memoranda.
(2) Hytek
As stated above, Hytek made both EP and CEP sales during the POI.
We treated Hytek's sales to Canadian trading companies not affiliated
with Hytek as EP sales because Hytek knew, at the time of the sale to
the trading companies, that the merchandise was destined for the United
States. We calculated a CEP for sales made by Hytek's affiliated
reseller or affiliated further processor after the importation of the
subject merchandise into the United States. We disregarded sales by
Hytek of live swine from producers not affiliated with Hytek because
those producers knew that the merchandise was destined for the United
States at the time of sale through Hytek. Therefore, the U.S. sales
analyzed for Hytek consist of subject merchandise that was produced by
Hytek or one of its affiliates.
For EP and CEP transactions, we made deductions from the starting
price for billing adjustments and movement expenses in accordance with
section 772(c)(2)(A) of the Act. The billing adjustments were made,
where appropriate, for invoice corrections, end-of-month accounting
adjustments, quantity discrepancies, product quality, under-weight
pigs, errant products, incorrect weight-band, insurance premiums,
breeder adjustments, and farrowed pigs. Movement expenses included
inland freight (including insurance) in Canada and in the United
States, international freight, brokerage fees, U.S. customs duties and
fees (including USDA vet fees).
For CEP sales, in accordance with section 772(d)(1) of the Act, we
also deducted from the starting price those selling expenses that were
incurred in selling the subject merchandise in the United States,
including direct expenses (National Pork Producer's Council (``NPPC'')
fees,\3\ bank charges and credit expenses), the cost of further
manufacturing, and indirect selling expenses incurred by the affiliated
further processor in the United States. We also deducted from CEP an
amount
[[Page 61644]]
for profit, in accordance with section 772(d)(3) of the Act.
---------------------------------------------------------------------------
\3\ Despite Hytek's claim that NPPC fees were used to fund the
antidumping duty case against live swine from Canada, the record
evidence does not demonstrate that NPPC fees collected during the
POI were spent for that purpose. Therefore, we have deducted NPPC
fees as a direct selling expense.
---------------------------------------------------------------------------
(3) Premium Pork
As stated above, Premium Pork made both EP and CEP sales during the
POI. We disregarded sales by Premium Pork of subject merchandise from
producers not affiliated with Premium Pork because those producers knew
that the merchandise was destined for the United States at the time of
sale to Premium Pork. Therefore, the U.S. sales analyzed for Premium
Pork consist of sales of subject merchandise produced by Premium Pork's
affiliates.
For EP and CEP transactions, we made deductions from the starting
price for movement expenses in accordance with section 772(c)(2)(A) of
the Act. Movement expenses included inland freight (including
insurance) in Canada and in the United States, international freight,
brokerage fees incurred in Canada and in the United States, and U.S.
customs duties and fees.
For CEP sales, in accordance with section 772(d)(1) of the Act, we
also deducted from the starting price those selling expenses that were
incurred in selling the subject merchandise in the United States,
including direct expenses (pork check-off fees \4\ and credit
expenses), and the cost of further manufacturing incurred by the
affiliated further manufacturer in the United States. Because no profit
was earned on these sales, none was deducted. See Statement of
Administrative Action, H. DOC. No. 103-465, Vol. 1 at 669 (1994)
reprinted in U.S.C.A.N. 3773, 4163 (hereinafter, ``SAA'').
---------------------------------------------------------------------------
\4\ Despite Premium Pork's claim that the ``pork check-off''
fees (i.e., NPPC fee) were used to fund the antidumping duty case
against live swine from Canada, the record evidence does not
demonstrate that NPPC fees collected during the POI were spent for
that purpose. Therefore, we have deducted NPPC fees as a direct
selling expense.
---------------------------------------------------------------------------
Among its sales of further manufactured products, Premium Pork
reported sales of substandard or defective merchandise. Because (1) the
matching criteria for this investigation do not currently account for
substandard or defective merchandise; (2) no interested parties have
provided comments on the appropriate methodology to match these sales;
and (3) the quantity of such sales does not constitute a significant
percentage of Premium Pork's U.S. sales, we have excluded these sales
from our analysis for purposes of the preliminary determination. We
invite comments from the interested parties regarding our treatment of
these sales for our consideration in the final determination.
In comments submitted to the Department on September 28, 2004, the
petitioners assert that the Department should reduce Premium Pork's
U.S. sales prices for CEP transactions to account for rejects. However,
Premium Pork reported that it excluded rejected hogs from the sales and
production quantities reported to the Department. Therefore, we did not
make a downward adjustment to Premium Pork's U.S. sales prices. We
intend to confirm the quantities reported at verification.
Normal Value
A. Cost of Production Analysis
As noted in the initiation notice, we found that there were
reasonable grounds to believe or suspect that sales of live swine in
the home market were made at prices below their cost of production
(``COP''). Accordingly, pursuant to section 773(b) of the Act, we
initiated a country-wide sales-below-cost investigation to determine
whether sales of live swine were made at prices below their COP.
As discussed above, Ontario Pork is the sole marketer of slaughter
hogs produced in Ontario. Because there are nearly 3,000 slaughter hog
producers in Ontario, it was not possible for the Department to examine
the costs of all Ontario Pork suppliers. Therefore, the Department
developed a methodology to calculate a representative COP and CV for
the merchandise sold by Ontario Pork.
To do this, we excluded all producers with 1,000 or fewer hogs
delivered per year and producers with more than 200,000 hogs delivered
per year. We then stratified the remaining producers of live swine into
large (i.e., delivered 10,000 or more hogs annually) and small (i.e.,
delivered less than 10,000 hogs annually) producers. Pursuant to this
methodology, we selected four producers from the list of Ontario Pork's
hog suppliers, two of which are small producers and two of which are
large producers. For further discussion, see Cost Respondent Selection
Memo.
1. Calculation of COP
In accordance with section 773(b)(3) of the Act, we calculated a
single weighted-average COP based on the sum of the cost of materials
and fabrication for the foreign like product, plus amounts for general
and administrative (``G&A'') expenses, interest expenses, and home
market packing costs for the selected cost respondents. To calculate
the weighted average COP for Ontario Pork, we first took a simple
average of the COPs within each stratum (i.e., size group). Then, we
weight averaged each stratum's simple average cost by the total
respective volume of hogs delivered within each stratum.
2. Cost Respondent Adjustments
We relied on the COP data submitted by each cost respondent in its
cost questionnaire response, except in specific instances where the
submitted costs were not appropriately quantified or valued, or where
the costs otherwise required adjustment, as discussed below:
a. Common to All Swine Producers for All Respondents
1. Some of the producers expensed in their entirety the acquisition
cost of the sows and boars used for breeding purposes during the POI.
Other producers treated the sows and boars used for breeding purposes
as productive assets and amortized the acquisition cost over the
breeding life of the hogs. For the preliminary determination, we
capitalized the cost of acquiring the sows and boars used for breeding
purposes (net of salvage values) and amortized the cost over their
productive breeding life. The amortization expenses and all other costs
incurred in the sow barns during the POI were allocated to the
weanlings produced during the POI. See Memorandum to Neal M. Halper,
``Cost of Production and Constructed Value Adjustments for the
Preliminary Determination,'' dated October 14, 2004 (``COP/CV
Adjustments Memorandum'').
2. As we are treating the sows and boars as productive assets and
we have assigned the portion of the cost that is recovered at the end
of their productive life, the salvage value (i.e., sales value), to the
cost of the culled sows and boars. See COP/CV Adjustments Memorandum.
b. Respondent Specific Adjustments
If a particular cost respondent is not mentioned below, we only
made the common cost adjustments, discussed above, for that cost
respondent.
Ontario Pork: \5\
---------------------------------------------------------------------------
\5\ Due to the proprietary nature of the name of each producer,
we have assigned an alphabetic character to each farmer (``cost
respondent'') that will be used throughout this notice when
referring to that specific farmer. A list or code key identifying
the name associated with each cost respondent number can be found in
the COP/CV Adjustments Memorandum.
---------------------------------------------------------------------------
Farm A
1. We allocated Farm A's indirect costs based on the direct costs
incurred in each of the different farm operations. We did not include
the cost of feeder purchases or the labor costs imputed for
[[Page 61645]]
the owners of Farm A in the direct costs used in the allocation ratio.
2. We adjusted the reported financial expense ratio to include an
imputed interest expense on the interest free loan obtained from an
affiliated party.
3. We decreased the cost of goods sold denominator used in the
following calculations by the value of purchased swine: (1) The G&A
expense ratio; (2) the interest expense ratio; and (3) the income
offset for net income stabilization account (``NISA''). In addition, we
increased the cost of goods sold denominator by the breeding stock
amortization expense in the same three calculations. We also removed
from the cost of goods sold denominator the salvage value of sows and
boars sold from breeding stock.
Farm B
1. We revised the G&A expense ratio to reflect a gain on the
disposal of sows.
2. We excluded the investment income claimed by Farm B as an offset
to its reported interest expense.
3. Following the productive asset methodology for sows and boars,
we allocated the general expenses and NISA income offset to market hogs
only.
Farm D
1. The cost respondent submitted two cost of production
calculations. The first calculation included each affiliate's cost of
inputs supplied to Farm D. The second calculation reported the transfer
price between Farm D and its affiliates for the inputs. For the
preliminary determination, we applied section 773(f)(3) of the Act, the
major input rule. In accordance with the major input rule, we adjusted
the reported costs to the higher of the affiliated supplier's cost of
production, the transfer price charged to Farm D or the market value of
the input or service provided. See COP/CV Adjustments Memorandum.
2. The cost respondent allocated a portion of labor for an
individual's management services between Farm D and the individual's
own operations. For the preliminary determination, we revised the
allocation methodology based on the ratio of expenses incurred by Farm
D and the individual's own operations.
Hytek:
1. For purposes of reporting costs, Hytek collapsed all of its
affiliated producers, suppliers and management companies. We have
revised Hytek's reported costs by collapsing only the producing
companies. For the remaining affiliates we applied the transactions
disregarded rule or the major input rule, in accordance with section
773(f)(2) and (3) of the Act, respectively.
2. We revised the reported costs to allocate feed based on weight
and all other costs based on the number of head produced.
3. In accordance with the major input rule, section 773(f)(3) of
the Act, we have examined the major inputs (i.e., feed and contract
barns) received by Hytek (i.e., the collapsed entities as a whole) from
its affiliated parties and have revised the cost of the feed and
contract barns to reflect the higher of the transfer price, COP, or
market price (where available).
4. We increased Hytek's reported total G&A expenses by including
certain non-operating expenses.
5. We revised Hytek's allocation of its reported further
manufacturing labor costs. Hytek allocated labor costs solely based on
the average number of growing weeks (e.g., the number of weeks it takes
an isowean to grow to market weight). We revised Hytek's allocation by
first determining the total growing weeks for the total head produced
for each type of swine (i.e., average number of weeks multiplied by the
total number of head produced). We then determined the relative labor
costs for each type of swine based on the proportion of total growing
weeks for each type of swine to the total number of growing weeks for
all swine produced. For further discussion of the adjustments above see
each respondent's COP/CV Adjustments Memorandum.
3. Test of Home Market Sales Prices
On a product-specific basis, we compared the adjusted weighted-
average COP to the home market sales of live swine, as required under
section 773(b) of the Act, in order to determine whether the sale
prices were below the COP. The prices were adjusted for any applicable
freight revenue, interest charges/allowances, cleaning allowances, cost
of moving charges, late shipment storage charges, rail freight
allowances, movement charges, billing adjustments, and direct and
indirect selling expenses. In determining whether to disregard home
market sales made at prices less than their COP, we examined whether
such sales were made (1) within an extended period of time in
substantial quantities, and (2) at prices which did not permit the
recovery of all costs within a reasonable period of time.
With respect to testing home market sales prices, Ontario Pork
maintains that live swine are highly perishable agricultural products
and, thus, the Department should perform the substantial quantities
test in accordance with section 773(b)(2)(C)(ii) of the Act (i.e.,
compare the weighted average home market sales prices to weighted
average COPs). In support of its position, Ontario Pork explains that
market hogs have a very short ``shelf life,'' because they must be
delivered within a 5 to 10 day window and if they are not sold within
this window period, they lose significant value. In addition, Ontario
Pork argues that live swine producers are price takers who cannot slow
production or store inventory.
The petitioners claim that live swine are not highly perishable
products and accordingly, the Department should not apply the weighted-
average price-to-cost test in this case. The petitioners note that
Ontario Pork has provided no evidence that its prices were actually
affected by having to make deliveries outside the optimum window
period. In addition, the petitioners note that Ontario Pork has
provided no information as to how rapidly and significantly prices
decline when sales are made outside the optimum window period.
For the preliminary determination, we have denied Ontario Pork's
request to perform the substantial quantities test in accordance with
section 773(b)(2)(C)(ii) of the Act. While the scenario discussed by
Ontario Pork might support the alternative application of the
substantial quantities test, there is not enough factual information on
the record to support treating live swine as a highly perishable
agricultural product. For example, more information is needed
concerning the precise optimum sales window period, how quickly and
significantly the swine loses value when sales are made outside this
window period, and the extent to which home market prices were driven
by this window period concern versus other factors. We will solicit
more information from parties after the preliminary determination and
will continue to analyze the issue for the final determination.
4. Results of the COP Test
Pursuant to section 773(b)(1), where less than 20 percent of the
respondent's sales of a given product in the home market are at prices
less than the COP, we do not disregard any below-cost sales of that
product, because we determine that in such instances the below-cost
sales were not made in ``substantial quantities.'' Where 20 percent or
more of a respondent's sales of a given product are at prices less than
the COP, we determine that the below-cost sales represent ``substantial
quantities'' within an extended period of time, in accordance with
section
[[Page 61646]]
773(b)(1)(A) of the Act. In such cases, we also determine whether such
sales were made at prices which would not permit recovery of all costs
within a reasonable period of time, in accordance with section
773(b)(1)(B) of the Act. If so, we disregard the below-cost sales.
We found that, for certain live swine producers, more than 20
percent of the home market sales within an extended period of time were
at prices less than the COP and, in addition, such sales did not
provide for the recovery of costs within a reasonable period of time.
We therefore excluded these sales and used the remaining sales, if any,
as the basis for determining NV, in accordance with section 773(b)(1)
of the Act.
B. Calculation of Normal Value Based on Home Market Prices
We determined price-based NVs for Ontario Pork and Hytek as
follows. For these respondents, we deducted home market movement
expenses pursuant to sections 773(a)(6)(A) and 773(a)(6)(B)(ii) of the
Act. In addition, where applicable in comparison to EP and CEP
transactions, we made adjustments for differences in circumstances of
sale (``COS'') pursuant to section 773(a)(6)(C)(iii) of the Act.
The company-specific COS adjustments are described below.
1. Ontario Pork
We made COS adjustments for Ontario Pork's EP transactions by
deducting direct selling expenses incurred for home market sales
(credit expenses, advertising expenses, and grading fees) and adding
U.S. direct selling expenses (credit expenses). We also made
adjustments by adding or subtracting billing adjustments reported as
``window pricing adjustments'' which Ontario Pork makes pursuant to
cash flow clauses in certain supply agreements. For matches of similar
merchandise, we made adjustments, where appropriate, for physical
differences in the merchandise in accordance with section
773(a)(6)(C)(ii) of the Act.
Ontario Pork reported sales of organic slaughter hogs, which it
made exclusively in the home market during the POI. To determine if
these sales were made in the ordinary course of trade, within the
meaning of section 771(15) of the Act, we compared organic sales to
Ontario Pork's sales non-organic merchandise. Specifically, we compared
the volume of sales, prices, types of customers, and customers' and
end-users' expectations. We found that Ontario Pork's organic hog sales
(1) constituted a negligible volume in comparison to non-organic hogs
sold in the home market; (2) were priced significantly higher than non-
organic hogs; (3) were sold to a single Canadian customer who
specializes in processing and distributing organic products; and (4)
were eventually sold to organic food retailers whose customers/end-
users perceive the organic swine products to provide health benefits
from the organic raising, feeding and production of the end-product.
For these reasons, we preliminarily determine that Ontario Pork's sales
of organic hogs were made outside the ordinary course of trade.
Therefore, we have disregarded these sales for purposes of calculating
normal value.
2. Hytek
For comparison to Hytek's EP sales, we made COS adjustments to
Hytek's home market prices by deducting direct selling expenses
incurred for home market sales (credit expenses, Provincial Pork
Council fees, and Canadian Food Inspection Agency fees) and adding U.S.
direct selling expenses (credit expenses and bank charges). For
comparisons made to CEP sales, we deducted home market direct selling
expenses, but did not add U.S. direct selling expenses. When comparing
U.S. sales to home market sales of similar merchandise, we made
adjustments, where appropriate, for physical differences in the
merchandise in accordance with section 773(a)(6)(C)(ii) of the Act.
C. Calculation of Normal Value Based on Constructed Value
Section 773(a)(4) of the Act provides that, where NV cannot be
based on comparison-market sales, NV may be based on CV. Accordingly,
for live swine for which we could not determine the NV based on
comparison-market sales because there were no sales of a comparable
product or because all sales of the comparison products failed the COP
test, we based NV on CV.
Section 773(e)(1) of the Act provides that CV shall be based on the
sum of the cost of materials and fabrication for the imported
merchandise plus amounts for selling, general, and administrative
expenses (``SG&A''), profit, and U.S. packing expenses. We calculated
the cost of materials and fabrication for Ontario Pork and Hytek based
on the methodology described in the COP section of this notice. We
based SG&A and profit on the actual amounts incurred and realized by
the respondents in connection with the production and sale of the
foreign like product in the ordinary course of trade, for consumption
in the comparison market, in accordance with section 773(e)(2)(A) of
the Act, where possible.
For Premium Pork, we followed the methodology described in the
``Cost Respondent Adjustments: Common to All Swine Producers for All
Respondents'' section, above. Additionally, we made the following
adjustments to Premium Pork's reported costs:
1. For reporting purposes, Premium Pork collapsed all of its
affiliated producers, suppliers and management companies. We have
revised Premium Pork's reported costs by collapsing only the producing
companies. For the remaining affiliates, we applied the transactions
disregarded rule or the major input rule, in accordance with sections
773(f)(2) and (3) of the Act, respectively.
2. We revised the reported costs to reflect the higher of transfer
or market price for purchases of semen inputs and leased facilities
from affiliated companies in accordance with section 773(f)(2) of the
Act. In the absence of a market price, we compared the transfer price
to the affiliate's cost of production.
3. We weight-averaged the gross unit prices for Premium Pork's
sales of culled sows and boars to calculate the salvage value for
culled sows and boars.
4. We revised the reported costs to allocate feed based on weight
and all other costs based on the number of head produced.
5. We revised the G&A expense ratio to exclude the costs of the
affiliated management companies. Instead, we included the fees paid by
the collapsed production companies to the affiliated management
companies.
6. We revised the financial expense ratio to exclude the expenses
incurred by the affiliated management companies. Instead, we included
the expenses paid by the collapsed production companies to the
affiliated management companies and shareholders.
7. We revised the reported further manufacturing G&A expense ratio
to exclude costs of the affiliated management companies. Instead, we
included the fees paid by the production companies to the affiliated
management companies.
8. We revised the further manufacturing financial expense ratio to
exclude the expenses incurred by the affiliated management companies.
Instead, we included the expenses paid by the production companies to
the affiliated management companies.
9. Because we preliminarily determine that a ``particular market
situation'' exists with respect to Premium Pork's home market, the
Department cannot determine the company's profit under section
[[Page 61647]]
773(e)(2)(A) or (B)(i) of the Act. Therefore, we calculated profit
based on the weighted average actual profit incurred and realized by
Ontario Pork and Hytek, the other two producers and exporters of the
subject merchandise in this investigation, in accordance with section
773(e)(2)(B)(ii) of the Act. We used the weighted average, instead of a
simple average, because a simple average would reveal proprietary
information.
10. We based Premium Pork's CV selling expenses on the weighted
average selling expenses incurred and realized by Ontario Pork and
Hytek.
For Ontario Pork and Hytek, we made adjustments to CV for
differences in COS in accordance with section 773(a)(8) of the Act and
section 351.410 of the Departments regulations.
Company-specific adjustments are described below.
(1) Ontario Pork
For EP comparisons, we deducted direct selling expenses incurred
for home market sales (credit expenses, advertising expenses, and
grading fees) and added U.S. direct selling expenses (credit expenses)
to the NV.
(2) Hytek
For CEP and EP comparisons, we deducted direct selling expenses
incurred for home market sales (credit expenses, Provincial Pork
Council fees, and Canadian Food Inspection Agency fees). For EP sales,
we added U.S. direct selling expenses (credit expenses, and bank
charges) to the NV.
(3) Premium Pork
Because we are disregarding Premium Pork's home market sales, we
weight-averaged the home market direct selling expense ratios for
Ontario Pork and Hytek to calculated a proxy for Premium Pork's COS
adjustments. Using this proxy, we deducted direct selling expenses
incurred for home market sales for CEP and EP comparisons. For EP
sales, we added U.S. direct selling expenses (credit expenses) to the
NV.
D. Affiliated-Party Transactions and Arm's Length Test
(1) Ontario Pork
Ontario Pork does not have any affiliates and, therefore, Ontario
Pork did not report home market sales to affiliates. However, in some
instances during the POI, Ontario Pork sold slaughter hogs in the home
market to customers affiliated with producers of the merchandise sold
by Ontario Pork.
Ontario Pork is a non-profit organization established by the Farm
Products Marketing Act and the Agricultural Products Marketing Act to
market and sell all slaughter hogs produced in Ontario. Pursuant to
these Acts, all sales of Ontario-produced slaughter hogs, including
sales to producers' affiliates, are controlled by Ontario Pork in terms
of invoicing, pricing, quantity, quality, payment terms, delivery and
other essential terms of sale. Therefore, we preliminarily determine
that all of Ontario Pork's home market sales of the foreign like
product were sales to unaffiliated customers, and we have treated them
accordingly.
(2) Hytek
Hytek did not report home market sales of the foreign like product
to affiliates because all of its sales to affiliates that were
subsequently resold in the same form were sales of breeding swine,
which have been excluded from the scope of investigation, or were
substantially transformed (e.g., from a feeder hog to a full-weight
market hog) by the affiliate before being resold. In the latter
instances, Hytek has reported the affiliate's sale to the unaffiliated
customer.
(3) Premium Pork
As stated above, we preliminarily determine that a ``particular
market situation'' exists with respect to Premium Pork's home market
and we have disregarded the company's home market sales. Therefore, we
have not analyzed whether Premium Pork's home market prices were at
arm's length.
E. Level of Trade/CEP Offset
In accordance with section 773(a)(1)(B) of the Act, to the extent
practicable, we determine NV based on sales in the comparison market at
the same level of trade as the EP or CEP transaction. The NV level of
trade is that of the starting-price sale in the comparison market or,
when NV is based on CV, that of the sale from which we derive SG&A
expenses and profit. For EP sales, the U.S. level of trade is also the
level of the starting-price sale, which is usually from exporter to
importer. For CEP transactions, it is the level of the constructed sale
from the exporter to the importer.
To determine whether NV sales are at a different level of trade
than EP or CEP transactions, we examine stages in the marketing process
and selling functions along the chain of distribution between the
producer and the unaffiliated customer. If the comparison market sales
are at a different level of trade and the difference affects price
comparability, as manifested in a pattern of consistent price
differences between the sales on which NV is based and comparison-
market sales at the level of trade of the export transaction, we make a
level-of-trade adjustment under section 773(a)(7)(A) of the Act. For
CEP sales, if the NV level is more remote from the factory than the CEP
level and there is no basis for determining whether the difference in
the levels between NV and CEP affects price comparability, we adjust NV
under section 773(a)(7)(B) of the Act (the CEP-offset provision). See
Notice of Final Determination of Sales at Less Than Fair Value: Certain
Cut-to-Length Carbon Steel Plate from South Africa, 62 FR 61731, 61733,
61746 (November 19, 1997).
In implementing these principles in this investigation, we obtained
information from the respondents about the marketing stages involved in
the reported U.S. and home market sales, including a description of the
selling activities performed by the respondents for each channel of
distribution. In identifying levels of trade for EP and home market
sales, we considered the selling functions reflected in the starting
price before any adjustments. For CEP sales, we considered only the
selling activities reflected in the price after the deduction of
expenses pursuant to section 772(d) of the Act.
In conducting our level-of-trade analysis for each respondent, we
examined the specific types of customers, the channels of distribution,
and the selling practices of the respondent. Generally, if the reported
levels of trade are the same, the functions and activities of the
seller should be similar. Conversely, if a party reports levels of
trade that are different for different categories of sales, the
functions and activities may be dissimilar. We found the following with
respect to each respondent:
(1) Ontario Pork
Ontario Pork reported the same channel of distribution and one
level of trade for sales in the home market and to the United States.
For all of its home market and EP sales, the selling functions Ontario
Pork performed for its different customer categories were virtually
identical, differing only with respect to whether Ontario Pork arranged
transportation or the producer transported the merchandise sold.
Therefore, we preliminarily determine that Ontario Pork's EP and home
market levels of trade are the same and that none of the additional
adjustments described in section 773(a)(7)(B) of the Act are warranted
for Ontario Pork.
[[Page 61648]]
(2) Hytek
Hytek reported one channel of distribution for the home market
sales. Hytek sells to finishing barns, packers, and culled sow
coordinators and sausage producers. To determine whether separate
levels of trade exist in the home market, we examined the stages in the
marketing process, customer categories, and selling functions along the
chain of distribution between Hytek and its customers. Based on this
examination, we preliminarily determine that Hytek sold merchandise at
one level of trade in the home market during the POI because the
selling functions incurred for each product type and to each customer
category were identical.
In the U.S. market, Hytek reported two channels of distribution.
The channels of distribution are: (1) EP and CEP sales to U.S.
customers and (2) further manufactured CEP sales by Hytek's U.S.
affiliate to U.S. customers. Hytek's first channel of trade includes
feeder pigs sold directly, or through unaffiliated Canadian trading
companies, to U.S. finishers, and market hogs sold directly to U.S.
packers through unaffiliated Canadian trading companies or through
companies affiliated with Hytek.
To determine whether separate levels of trade exist for sales to
the United States, we examined the selling functions, the chains of
distribution, and the customer categories reported for sales to the
United States. With regard to the U.S. sales of further manufactured
products, which were all CEP sales, we considered only the selling
activities reflected in the price after the deduction of expenses and
profit covered in section 772(d) of the Act.
We preliminarily determine that EP and CEP sales by Hytek were made
at the same level of trade because they involve the same selling
functions for each customer category and channel of distribution. In
addition, we preliminarily determine that Hytek's home market and U.S.
sales were made at the same level of trade because the selling
activities were virtually identical in each market. Therefore, we
preliminarily determine that none of the additional adjustments
described in section 773(a)(7)(B) of the Act are warranted for Hytek.
(3) Premium Pork
We based Premium Pork's NV on CV because a particular market
situation exists in it's home market and Premium Pork did not have a
viable third country market. When NV is based on CV, the NV LOT is that
of the sales from which we derive SG&A expenses and profit. See Notice
of Preliminary Determination of Sales at Less Than Fail Value and
Postponement of Final Determination: Fresh Atlantic Salmon from Chile,
63 FR 2664 (January 16, 1998). Because we based the selling expenses
and profit for Premium Pork on the weighted-average selling expenses
incurred and profit earned by the other respondents in this
investigation, we are unable to determine the LOT of the sales from
which we derived selling expenses and profit for CV. Hence, there is
insufficient record information to determine whether there is a
difference between any U.S. sale by Premium Pork and CV. Therefore, we
did not make a LOT adjustment to NV or a CEP offset.
Currency Conversion
We made currency conversions into U.S. dollars in accordance with
section 773A(a) of the Act based on the exchange rates in effect on the
dates of the U.S. sales as certified by the Federal Reserve.
Verification
As provided in section 782(i) of the Act, we will verify all
information to be used in making our final determinations.
Suspension of Liquidation
In accordance with section 733(d)(2) of the Act, we are directing
the U.S. Bureau of Customs and Border Protection (``CBP'') to suspend
liquidation of all imports of subject merchandise from Canada, except
imports of subject merchandise produced and exported by Hytek, Inc.,
which has a de minimis rate, that are entered, or withdrawn from
warehouse, for consumption on or after the date of publication of this
notice in the Federal Register. We will instruct CBP to require a cash
deposit or the posting of a bond equal to the weighted-average amount
by which the NV exceeds the EP or CEP, as indicated in the chart below.
These suspension-of-liquidation instructions will remain in effect
until further notice. The weighted-average dumping margins are as
follows:
------------------------------------------------------------------------
Weighted-
average
Exporter/manufacturer margin
percentage
------------------------------------------------------------------------
Ontario Pork Producers' Marketing Board................... 13.25
Hytek, Inc................................................ *0.38
Premium Pork Canada, Inc.................................. 15.01
All Others................................................ 14.06
------------------------------------------------------------------------
*De minimis.
ITC Notification
In accordance with section 733(f) of the Act, we have notified the
ITC of our determination. If our final determination is affirmative,
the ITC will determine before the later of 120 days after the date of
this preliminary determination or 45 days after our final determination
whether imports of live swine are materially injuring, or threaten
material injury to, the U.S. swine industry.
Disclosure
We will disclose the calculations used in our analyses to parties
in these proceedings in accordance with section 351.224(b) of the
Department's regulations.
Public Comment
Case briefs for these investigations must be submitted to the
Department no later than 50 days after the date of publication of this
preliminary determination or one week after the issuance of the last
verification report, whichever is later. Rebuttal briefs must be filed
five days after the deadline for submission of case briefs. A list of
authorities used, 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 these investigations, the hearing will tentatively be held
two days after 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 number; (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.
As discussed in the ``Postponement of Final Determination''
section, above, we
[[Page 61649]]
have extended the deadline for issuance of the final determination
until the 135th day after the date of publication of this preliminary
determination in the Federal Register. These determinations are
published pursuant to sections 733(f) and 777(i) of the Act.
Dated: October 14, 2004.
Joseph A. Spetrini,
Acting Assistant Secretary for Import Administration.
[FR Doc. E4-2731 Filed 10-19-04; 8:45 am]
BILLING CODE 3510-DS-P