National Pork Producers Council v. US

• Decision Date: 28 May 1987
• Docket Number: Court No. 85-09-01209.
• Citation: 661 F. Supp. 633
• Parties: The NATIONAL PORK PRODUCERS COUNCIL and Wilson Foods Corporation, Plaintiff, v. UNITED STATES, Defendant, Canadian Meat Council, et al., Defendants-Intervenors.
• Court: U.S. Court of International Trade

661 F. Supp. 633

The NATIONAL PORK PRODUCERS COUNCIL and Wilson Foods Corporation, Plaintiff, v. UNITED STATES, Defendant Canadian Meat Council, et al., Defendants-Intervenors.

Court No. 85-09-01209.

United States Court of International Trade.

May 28, 1987.

Thompson, Hine and Flory, Mark Roy Sandstrom and Kathryn A. Dobbs, Washington, D.C., for plaintiff.

Lyn M. Schlitt, Gen. Counsel, U.S. Intern. Trade Com'n, Randi S. Field, Washington, D.C., for defendant.

Arnold & Porter (Lawrence A. Schneider, Douglas A. Dworkin and David E. Green, Alan O. Sykes, Washington, D.C., of counsel), 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)(2)(B)(ii) (Supp. III 1985) challenging the final negative injury determination by the United States International Trade Commission (Commission) in Live Swine and Pork From Canada, Inv. No. 701-TA-224, USITC pub. 1733 (1985). The Court has jurisdiction under 28 U.S.C. §§ 1581(c) and 2632(c) (1982). The Court holds that the challenged determination is supported by substantial evidence and in accordance with law.

I. Background

The National Pork Producers Council (NPPC) representing domestic producers of live swine filed a petition with the Department of Commerce, International Trade Administration and the Commission seeking the imposition of countervailing duties on imports of live swine and fresh, chilled or frozen pork from Canada. The Wilson Foods Corporation later joined in the petition as a co-petitioner representing pork packers.

In its final determination, the Commission reversed a preliminary decision that swine growers and unprocessed pork packers should be treated as a single industry in determining material injury. USITC pub. 1733 at 3-7; see Live Swine and Pork From Canada, Inv. No. 701-TA-224, USITC pub. 1625 (1984). The final determination held that live swine and fresh, chilled or frozen pork are two distinct products, that growers constitute the domestic industry producing live swine, and that only pork packers constitute the domestic industry producing fresh, chilled or frozen pork because there is not sufficient economic integration between swine growers and pork packers to justify including the growers in the domestic industry producing unprocessed pork. The Commission found that the domestic industry producing live swine is materially injured by reason of Canadian imports of live swine, but that the domestic industry producing unprocessed pork is not materially injured or threatened with material injury, and such industry is not materially retarded, by reason of imports from Canada of fresh, chilled or frozen pork. USITC pub. 1733 at 1-18.

Plaintiffs move pursuant to Rule 56.1 of the rules of this Court for judgment upon the agency record. The questions presented are (1) whether the Commission erred in its determination that the domestic unprocessed pork producing industry consists only of the domestic pork packers and does not include the domestic swine growers because of a lack of sufficient economic integration between swine growers and pork packers, (2) whether the finding of no material injury to a domestic pork producing industry, consisting solely of pork packers, by reason of Canadian imports of fresh, chilled or frozen pork is supported by substantial evidence and (3) whether the finding of no threat of material injury to such domestic pork producing industry by reason of Canadian pork imports is supported by substantial evidence.

II. Discussion

A. Determination of the Domestic Industry

In deciding whether to include swine growers within the domestic industry producing fresh, chilled or frozen pork, the Commission noted that in several prior agricultural investigations growers of a raw agricultural product and producers of a processed agricultural product were treated as a single industry when certain criteria were met:

First, the Commission has considered the extent to which the raw product enters into a single line of production resulting in the processed product. Second, the Commission has examined the degree of economic integration between growers and packers, often looking at the legal relationship between the two groups. For example, if there is substantial interlocking ownership, if there are shared revenues, or if, contractually, the prices paid to producers directly control the prices to growers, then both groups can be more certainly affected in a like manner.

USITC pub. 1733 at 5-6.

Applying these factors in the live swine and pork investigation, the Commission concluded:

Initially, we note that the "single, continuous line of production" standard has been met in that the raw product is primarily sold in only one market, and the primary purpose of raising slaughter hogs is to produce pork meat. The requisite integration of economic interest in this investigation, however, is lacking. Less than 5 percent of packing facilities are owned by the growers. Virtually none of the grower facilities are owned by packers. Further, the petitioners have conceded that the prices for hogs are not linked by contract to the prices received by the packers.

While the absence of a legal relationship between growers and packers is not determinative of the absence of economic integration, we are unpersuaded by the petitioners' contention that an integration of economic interest can be reflected solely by a high price correlation between live swine and fresh, chilled, or frozen pork. We, therefore, cannot find that growers should be included into a single industry with packers producing pork.

Id. at 6-7 (footnotes omitted).

Plaintiffs argue that the Commission's exclusion of the swine growers from the unprocessed pork industry on the basis that there is a lack of sufficient economic integration between swine growers and pork packers is contrary to congressional intent and claim that a finding of a single continuous line of production has been sufficient in prior Commission investigations for including growers of a raw agricultural product with the producers of the processed product when the processing added only minimal value to the processed product investigated. Plaintiffs assert alternatively that even if economic integration may be required, it was demonstrated in this case.

In reviewing final Commission determinations in countervailing duty investigations, the Court is directed by Congress to hold unlawful those determinations found "to be unsupported by substantial evidence on the record, or otherwise not in accordance with law." 19 U.S.C. § 1516a(b)(1)(B) (1982). 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 (Fed.Cir.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 (1965)).

The initial issue raised by plaintiffs is whether the Commission violated congressional intent. In support of their argument that it did violate the intent of Congress, plaintiffs cite the Senate Finance Committee Report on the Trade Agreements Act of 1979 where the Committee stated:

Because of the special nature of agriculture, including the cyclical nature of much of agriculture production, special problems exist in determining whether an agricultural industry is materially injured. For example, in the livestock sector, certain factors relating to the state of a particular industry within that sector may appear to indicate a favorable situation for that industry when in fact the opposite is true. Thus, gross sales and employment in the industry producing beef could be increasing at a time when economic loss is occurring, i.e., cattle herds are being liquidated because prices make the maintenance of the herds unprofitable.

S.Rep. No. 249, 96th Cong., 1st Sess. 88, reprinted in 1979 U.S.Code Cong. & Admin.News 381, 474. Plaintiffs assert Congress intended through this example involving livestock that producers of the live animal be included in the industry producing unprocessed meat products from the animal, and argue that by requiring economic integration between swine growers and pork packers the Commission violated this clear congressional intent and erred as a matter of law.

Under the statutory framework provided by Congress, the Commission is directed in certain countervailing duty investigations to reach a final determination as to whether the domestic United States industry is materially injured by reason of foreign imports. See 19 U.S.C. § 1671d(b) (1982 & Supp. III 1985). In determining what constitutes the domestic industry in an investigation, the Commission is guided by certain statutory definitions. The term "industry" is defined as "the domestic producers as a whole of a like product, or those producers whose collective output of the like product constitutes a major proportion of the total domestic production of that product...." 19 U.S.C. § 1677(4)(A) (1982 Supp. III 1985). The term "like product" is defined as "a product which is like, or in the absence of like, most similar in characteristics and uses with, the article subject to an investigation." 19 U.S.C. § 1677(10) (1982). This statutory design does not prohibit the Commission from requiring economic integration before including swine growers in the industry producing unprocessed pork.

The passage from the Senate Finance Committee Report, furthermore, is not a clear expression of legislative intent that the growers of animals be included as part of the domestic industry in an investigation of a product made from the animal. That passage appears in the Committee's discussion of what factors are to be considered by the Commission in making a determination as to...