Ranchers-Cattlemen Action Legal Foundation v. U.S.

• Decision Date: 05 November 1999
• Docket Number: Court No. 99-02-00103.,Slip Op. 99-122.
• Citation: 74 F.Supp.2d 1353
• Parties: RANCHERS-CATTLEMEN ACTION LEGAL FOUNDATION, et al., Plaintiffs, v. UNITED STATES, Defendant, and Confederación Nacional Ganadera, Defendant-Intervenor.
• Court: U.S. Court of International Trade

74 F.Supp.2d 1353

RANCHERS-CATTLEMEN ACTION LEGAL FOUNDATION, et al., Plaintiffs, v. UNITED STATES, Defendant and Confederación Nacional Ganadera, Defendant-Intervenor.

Slip Op. 99-122.

Court No. 99-02-00103.

United States Court of International Trade.

November 5, 1999.

COPYRIGHT MATERIAL OMITTED

Stewart and Stewart (Terence P. Stewart, James R. Cannon, Jr., Eric P. Salonen), Washington, D.C., for plaintiffs.

Lyn M. Schlitt, General Counsel, James A. Toupin, Deputy General Counsel, U.S. International Trade Commission (Robin L. Turner), Washington, D.C., for defendant.

Shearman and Sterling (Thomas B. Wilner, Jeffrey M. Winton and Perry S. Bechky), Washington, D.C., for defendant-intervenor.

OPINION

CARMAN, Chief Judge.

Pursuant to Rule 56.2 of the Rules of this Court, plaintiffs, Ranchers-Cattlemen Action Legal Foundation (R-CALF), move for Judgment Upon An Agency Record. Plaintiffs contest the negative preliminary injury determination concerning live cattle from Mexico of the United States International Trade Commission (ITC or Commission) in its investigation in Live Cattle from Canada and Mexico, 64 Fed.Reg. 3716 (Jan. 25, 1999). This Court has jurisdiction pursuant to 28 U.S.C. § 1581(c)(1988).

BACKGROUND

On November 12, 1998,¹ plaintiffs, R-CALF, filed petitions with the ITC and the United States Department of Commerce alleging that the U.S. cattle industry was materially injured by reason of subsidized imports of live cattle from Canada and by reason of less than fair value imports of live cattle from Canada and Mexico. In response to the plaintiffs' petition, the ITC conducted preliminary investigations into these matters.

On January 19, 1999, the Commission reached a negative preliminary injury determination with respect to less than fair value imports from Mexico. The ITC's negative determination regarding Mexican cattle and a public version of its staff report are set forth in Live Cattle from Canada and Mexico, USITC Pub. 3155, Invs. Nos. 701-TA-386 (Prelim.) and 731-TA-812-813 (Prelim.) (Feb.1999) (Live Cattle from Mexico). The ITC made affirmative preliminary determinations in the investigations concerning live cattle from Canada, and plaintiffs do not appeal from those determinations.

The imports at issue here concern live cattle from Mexico. There are, in general, three developmental stages for cattle prior to slaughter: (1) calves, which are raised and then weaned from their mothers at five to ten months; calves weigh up to 400-650 pounds; (2) yearling/stocker cattle, which have been weaned from their mothers and are fed on forage and roughage feeds or grazed on pasture until they are about 12-20 months old; yearling/stocker cattle generally weigh between 400 to 650-750 pounds; and (3) feeder cattle, which are kept in confined areas for 90 to 150 days and fed on finishing and high-energy rations; feeder cattle weigh up to 1,100 to 1,300 pounds. Once the cattle are sufficiently fed, they are considered fed, fat, or slaughter cattle. Fed, fat, and slaughter cattle are cattle ready for immediate slaughter.²

In making its preliminary injury determination concerning live cattle from Mexico, the ITC considered, among other things, issues regarding domestic like product, domestic industry, cumulation, conditions of competition, and reasonable indication of material injury or threat of material injury by reason of the subject imports from Mexico. In consideration of the domestic like product determination, the ITC considered whether live cattle in the primary stages of development should be defined as separate domestic like products from the cattle at more advanced stages of development. The ITC used a semifinished like product analysis³ to determine whether the cattle at earlier stages of development are "like" the cattle at more advanced stages of development.

Applying the semifinished like product analysis, the ITC determined that cattle at each stage of development are dedicated to progression to the next stage and will ultimately develop into fed cattle ready for slaughter. Thus, cattle have no independent use or function other than being slaughtered. The ITC found, however, that cattle at different stages of production are not functionally or economically interchangeable since at each stage prior to their final stage, they have not reached their slaughter weight. Moreover, the ITC found that while some operations raise cattle from birth until they are ready for slaughter, it is more common for cattle to be sold at various stages of development. Based on these facts, the ITC defined the domestic "like product" as encompassing all stages of development for live cattle.

In determining the scope of the domestic industry, the ITC found that the domestic industry consists of all U.S. production of the domestic like product, live cattle.

In determining whether to assess cumulatively the volume and effect of imports from Mexico with the imports from Canada pursuant to 19 U.S.C. § 1677(7)(G)(i) (1994),⁴ the ITC considered whether the imports competed with each other and with the domestic like product⁵ in the United States. To determine whether the imports competed with each other, the ITC applied its traditional four-factor test: (1) the degree of fungibility between the imports from the two countries; (2) the presence of sales or offers to sell imports in the same geographic market from the two countries; (3) the existence of common or similar channels of distribution for imports from the two countries; and (4) whether the imports from the two countries were simultaneously present in the market.

In regard to the first factor, the ITC found there was not a sufficient degree of fungibility between the imports from Canada and Mexico. Based on measurement by weight, the ITC found that virtually all subject imports from Canada (95.4 percent by weight) in 1997 weighed over 320 kilograms, or more than 704 pounds, primarily fed cattle ready for immediate slaughter. In contrast, virtually all imports from Mexico (96 percent by weight) in 1997 weighed between 90-320 kilograms, or 198-704 pounds, primarily at the calf or yearling/stocker stages of development. The ITC found the live cattle that have not been fed to slaughter weight are not substitutes for cattle ready for slaughter. As the Commission found cattle in different stages of production are poor substitutes for each other, the ITC determined imports from Canada and Mexico were poor substitutes for each other. Further, the ITC found the cattle imported from Canada were more likely to be British breeds that are likely to produce higher-priced prime and choice quality grade meats. Cattle imported from Mexico, however, were usually Brahman or Brahman cross-breeds which were less likely to produce prime or choice-grade meats. For the reasons stated above, the ITC found limited fungibility existed between the imports of live cattle from Canada and Mexico.

In regard to factor two, geographic overlap, the Commission found there was limited overlap between the markets for the imports from Canada and Mexico. The majority of the subject imports from Mexico entered into four states: Texas, California, New Mexico, and Arizona. The majority of the subject imports from Canada entered into five states: Washington, Utah, Nebraska, Colorado, and Minnesota. The imports from Canada and Mexico overlapped in only five states. Therefore, the ITC found there was limited geographic overlap between the markets for the subject imports from Canada and Mexico.

In regard to factor three, channels of distribution, the ITC found the channels of distribution for the imported cattle depended on the stage of development at purchase. The primary channels of distribution for imports from Mexico were stocker/yearling operators. The primary channels of distribution for imports from Canada were slaughterhouses or packers. Thus, the ITC found there was an insufficient degree of overlap among the channels of distribution to support a finding of competition between the subject imports.

In regard to factor four, simultaneous presence in the U.S. market, the ITC determined live cattle from Mexico and Canada were simultaneously present in the U.S. market during the period of investigation. Based on the above factors, the ITC found the subject imports from Canada and Mexico did not compete with each other, and, therefore, the ITC decided not to cumulate the imports.

In the preliminary injury determination, the ITC found there was no reasonable indication of material injury of the domestic industry by reason of the subject imports from Mexico. The ITC found that the volume and market share of the imports from Mexico were too small throughout the period of investigation to significantly affect the domestic price pursuant to 19 U.S.C. § 1677(7)(C)(ii) (1994).⁶ Specifically, the ITC found, "[t]he volume and market share of the[] [Mexican] imports [were] declining and [were] at historical low levels." Live Cattle from Mexico at 24. Moreover, the prices for the cattle at the stocker and feeder stages of development in the United States "increased from 1996 to 1998." Id. Thus, the ITC found the small and decreasing volume and market share of imports from Mexico had not had a significant adverse impact on the domestic industry. The ITC attributed any weak performance in the domestic industry to the fact that the domestic industry was in the liquidation phase of the cattle cycle during the period of investigation.

Additionally, the ITC found there was no reasonable indication that the domestic industry was threatened with material injury by reason of the subject imports from Mexico. The volume of imports from Mexico was small and decreasing over the period of investigation, and there was no indication of excess production capacity in Mexico which could further the likelihood of an increase in imports from Mexico. Moreover, the ITC found no other adverse trends in relation to the...