[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