Canadian Meat Council v. US

• Decision Date: 15 May 1987
• Docket Number: Court No. 85-09-01168.
• Citation: 661 F. Supp. 622
• Parties: The CANADIAN MEAT COUNCIL And Its Members, Including Canada Packers, Inc., Plaintiffs, Alberta Pork Producers' Marketing Board, et al., Plaintiffs-Intervenors, v. UNITED STATES, Defendant, National Pork Producers Council, et al., Defendants-Intervenors.
• Court: U.S. Court of International Trade

661 F. Supp. 622

The CANADIAN MEAT COUNCIL And Its Members, Including Canada Packers, Inc., Plaintiffs Alberta Pork Producers' Marketing Board, et al., Plaintiffs-Intervenors, v. UNITED STATES, Defendant National Pork Producers Council, et al., Defendants-Intervenors.

Court No. 85-09-01168.

United States Court of International Trade.

May 15, 1987.

Arnold & Porter, Alan O. Sykes and Lawrence A. Schneider, Washington, D.C., for plaintiffs.

Cameron, Hornbostel & Butterman, William K. Ince and Caren Z. Turner, Washington, D.C., for plaintiffs-intervenors.

Richard K. Willard, Asst. Atty. Gen., David M. Cohen, Director, Dept. of Justice, Commercial Litigation Branch, Elizabeth C. Seastrum, Douglas Riggs, Gen. Counsel, U.S. Dept. of Commerce, Washington, D.C., for defendant.

Thompson, Hine & Flory, Mark R. Sandstrom, Washington, D.C., for defendants-intervenors.

MEMORANDUM OPINION AND ORDER

DiCARLO, Judge:

Plaintiffs bring an action under section 516A of the Tariff Act of 1930, as amended, 19 U.S.C. § 1516a(a)(3) (Supp. III 1985), contesting the final affirmative subsidy determination of the United States Department of Commerce, International Trade Administration (Commerce) in Live Swine and Fresh, Chilled and Frozen Pork Products from Canada, 50 Fed.Reg. 24,097 (June 17, 1985). The Court has jurisdiction under 28 U.S.C. §§ 1581(c) and 2631(c) (1982). Pursuant to Rule 56.1 of the Rules of this Court, plaintiffs move for judgment upon the agency record. The action is remanded.

I. Background

In response to a petition by the National Pork Producers Council (defendant-intervenor), Commerce initiated a countervailing duty investigation concerning imports of live swine and fresh, chilled and frozen pork from Canada. 49 Fed.Reg. 47,079 (1984). Virtually all of the programs alleged to confer subsidies were programs which conferred benefits directly upon growers of live swine.

Plaintiffs, Canadian Meat Council and its members, are pork packers that produce and export fresh, chilled and frozen pork from Canada. Plaintiffs filed requests for exclusion from the Commerce investigation on the ground that subsidies to swine growers do not benefit pork packers. They argued 1) that in order to find subsidies received by swine growers pass through to pork packers, Commerce must initiate an investigation under section 613 of the Trade and Tariff Act of 1984, 19 U.S.C. § 1671(g) (Supp. III 1985) (upstream subsidy provisions), and 2) an upstream subsidy investigation would reveal that no competitive benefit passes from swine growers to pork packers since packers buy swine from unrelated farmers in arms-length transactions.

Commerce refused to conduct an upstream subsidy investigation, denied plaintiffs' requests for exclusion, and made affirmative subsidy findings as to both live swine and fresh, chilled and frozen pork in its preliminary and final determinations.

Plaintiffs commenced this action seeking an order from the Court remanding the action to Commerce with directions 1) to grant their requests for exclusion from any countervailing duty determination, or 2) to initiate an investigation under section 1671(g) to determine whether subsidies to swine growers confer an upstream subsidy on fresh, chilled and frozen pork from Canada. A motion by defendant and defendant-intervenors to dismiss the action for lack of jurisdiction was denied by the Court in an earlier opinion. Canadian Meat Council v. United States, 10 CIT ___, 644 F.Supp. 1125 (1986).

II. Discussion

19 U.S.C. § 1671(g) states:

Whenever the administering authority has reasonable grounds to believe or suspect that an upstream subsidy, as defined in section 1677-1(a)(1) of this title, is being paid or bestowed, the administering authority shall investigate whether an upstream subsidy has in fact been paid or bestowed, and if so, shall include the amount of the upstream subsidy as provided in section 1677-1(a)(3) of this title.

Section 1677-1(a) states in part:

The term "upstream subsidy" means any subsidy described in section 1677(5)(B)(i), (ii), or (iii) of this title by the government of a country that —

(1) is paid or bestowed by that government with respect to a product (hereafter referred to as an "input" product") that is used in the manufacture or production in that country of merchandise which is the subject of a countervailing duty proceeding;

(2) in the judgment of the administering authority bestows a competitive benefit on the merchandise; and

(3) has a significant effect on the cost of manufacturing or producing the merchandise.

In its final determination Commerce stated that an investigation under section 1671(g) was not initiated to determine whether pork packers received benefits by reason of subsidies bestowed on swine growers since swine are not an input to fresh, chilled and frozen pork.

Commerce found that the statute "gives little guidance on the meaning of the term `input'," and that "legislative history also does not provide decisive guidance." 50 Fed.Reg. at 25,098. It scrutinized the meaning of the term "input", stating:

We believe there are two characteristics which evidence that live swine should not be considered an `input' into fresh, chilled and frozen pork products. These characteristics are level of value added and the role of the producer.

Id. Commerce then held the upstream subsidies provisions inapplicable, based on findings that operations by packers have a value added of ten percent, which does "not contribute significantly to the value of the live swine," and that "substantially all of the raw agricultural product, live swine, is dedicated to the production of unprocessed pork" in what is "a single, continuous line of production." Id. at 25,099. According to Commerce swine are not an input into fresh, chilled and frozen pork, and benefits bestowed on live swine can result in the imposition of duties on pork without the necessity of conducting an investigation under section 1671(g) to determine whether benefits pass from swine growers to pork packers.

As further justification, Commerce discussed what it termed an "additional factor." It reasoned that unless countervailing duties were imposed on swine growers and pork packers alike, "subsidized growers could avoid the imposition of duties on their product by selling through pork packers, who simply slaughter and trim the swine, and then export the product to the U.S. in the form of pork meat." Id.

Plaintiffs say that Commerce has determined that subsidies received by swine growers presumptively pass through to pork packers. Plaintiffs argue that the upstream subsidies provisions are applicable to allegations that swine subsidies benefit pork packers, since swine are an input product within the meaning of section 1677-1:

Live swine are obviously an input product — indeed, the primary input product — for pork packing. Pork packers purchase live swine from growers, slaughter, bleed and eviscerate the swine, and transform the carcass into various cuts of fresh, chilled and frozen pork. It is hard to imagine any conceivable interpretation of the statute's straightforward language that would mask this basic economic relationship between growers (the upstream producers of the "input product") and packers (the downstream, arms-length purchasers of this input).

Brief for plaintiffs at 15-16.

The question presented is whether in this investigation Commerce lawfully may determine that the subsidies received by swine growers benefit pork packers without a finding that pork packers received an "upstream subsidy" as defined in section 1677-1(a).

A. Statutory Interpretation

In reviewing Commerce's interpretation of sections 1671(g) and 1677-1(a), the Court first must determine whether the statutory meaning is clear. "If the intent of Congress is clear, that is the end of the matter, for the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress." Young v. Community Nutrition Institute, ___ U.S. ___, 106 S.Ct. 2360, 2364, 90 L.Ed.2d 959 (1986) (quoting Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842, 104 S.Ct. 2778, 2781, 81 L.Ed.2d 694 (1984)). If the statute is silent or ambiguous with respect to a particular issue, the question is "whether the agency's answer is based on a permissible construction of the statute." Id. As stated by our appellate court, "a reviewing court must accord substantial weight to an agency's interpretation of a statute it administers." American Lamb Co. v. United States, 4 Fed.Cir. ___, 785 F.2d 994, 1001 (1986) (citing Zenith Radio Corp. v. United States, 437 U.S. 443, 450-51, 98 S.Ct. 2441, 2445, 57 L.Ed.2d 337 (1978); Udall v. Tallman, 380 U.S. 1, 16, 85 S.Ct. 792, 801, 13 L.Ed.2d 616 (1964)); see Carlisle Tire & Rubber Co. v. United States, 9 CIT ___, 622 F.Supp. 1071 (1985). But in determining the meaning of statutes, the Court may not ignore the limitations on the agency's role. "When an agency's decision is premised on its understanding of a specific congressional intent, however, it engages in the quintessential judicial function of deciding what a statute means. In that case, the agency's interpretation, particularly to the extent it rests on factual premises within its expertise, may be influential, but it cannot bind a court." Bureau of Alcohol, Tobacco and Firearms v. Federal Labor Relations Authority, 464 U.S. 89, 98 n. 8, 104 S.Ct. 439, 444 n. 8, 78 L.Ed.2d 195 (1983).

In determining whether Commerce's interpretation properly implements the countervailing duty laws, the Court looks first to the language of the statute. The relevant provision defines an input product as "a product (hereafter referred to as an `input product') that is used in the manufacture or production ... of merchandise that is the subject of a countervailing duty proceeding." The term "input product" is referred to subsequently in subsections 1677-1(b)(1) & (2). Subsection 1677-1(b)(1)...