Hard Red Spring Wheat From Canada

Investigation Nos. 701-TA-430B and 731-TA-1019B (Remand)

Publication 3806 October 2005

U.S. International Trade Commission

Robert A. RogowskyDirector of Operations

COMMISSIONERS

Address all communications toSecretary to the Commission

United States International Trade CommissionWashington, DC 20436

Staff assigned

Christopher J. Cassise, InvestigatorJohn Reeder, Industry AnalystWilliam Deese, EconomistRon Babula, Economist

John Ascienzo, AccountantMichael Diehl, Attorney

Douglas Corkran, Supervisory Investigator

Jennifer A. HillmanDeanna Tanner Okun, Vice Chairman

Stephen Koplan, Chairman

Charlotte R. Lane

Daniel R. PearsonShara L. Aranoff

U.S. International Trade CommissionWashington, DC 20436

October 2005

www.usitc.gov

Publication 3806

Hard Red Spring Wheat From Canada

Investigation Nos. 701-TA-430B and 731-TA-1019B (Remand)

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CONTENTS

Page

Views of the Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1Dissenting views of Commissioner Jennifer A. Hillman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Part I: Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-1Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-1Summary of proceeding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-1

Part II: Market considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II-1Channels of distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II-1Market structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II-2Transmission of supply and demand shocks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II-3Supply and demand factors and the MGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II-4Price determination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II-6Factors influencing prices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II-7Imports from Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II-8Export markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II-9Farm crop yields . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II-11

Part III: Pricing and related information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III-1Selected public data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III-1Price data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III-7Statistical analysis of prices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III-9

AppendixA. Federal Register notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1B. Review of selected literature regarding U.S. market impacts from imports . . . . . . . . . . . . . . . B-1C. Variance analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C-1

Note.--Information that would reveal confidential operations of individual concerns may not bepublished and therefore has been deleted from this report. Such deletions are indicated byasterisks.

1 Hard Red Spring Wheat from Canada, Secretariat File No. USA-CDA-2003-1904-06 (Panel Decision of June7, 2005) (Panelist Maureen Irish dissenting in part). 2 Commissioner Jennifer A. Hillman dissenting. See Dissenting Views of Commissioner Jennifer A. Hillman. Commissioner Shara L. Aranoff is recused from this remand determination. 3 Durum and Hard Red Spring Wheat from Canada, Inv. Nos. 701-TA-430A and 430B and 731-TA-1019A and1019B (Final), USITC Pub. 3639 (October 2003) (USITC Pub. 3639). Commissioners Hillman and Miller votedin the affirmative. Chairman Koplan and Vice Chairman Okun dissented. Commissioner Lane did not participate. 4 Two parties filed complaints with the NAFTA Secretariat the Canadian Wheat Board and the NorthAmerican Millers Association. 5 70 Fed. Reg. 38981 (July 6, 2005). 6 At the time of the original determination, Chairman Koplan was serving as a Commissioner, and ViceChairman Okun was serving as Chairman. While Commissioners Lane and Pearson did not participate in theoriginal determination, they participate in this remand determination. 7 The adoption of the dissenting views and portions of the majority views from the original investigations doesnot extend to any statements that are inconsistent with the additional explanation provided in these remand views.

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VIEWS OF THE COMMISSION

By a decision dated June 7, 2005, a Binational Panel constituted under Article 1904 of the NorthAmerican Free Trade Agreement (NAFTA) remanded the Commissions determination in Hard RedSpring Wheat from Canada, Inv. Nos. 701-TA-430B and 731-TA-1019B (Final), USITC Pub. 3639(October 2003). The Panel ordered the Commission to issue a new determination consistent with a nine-part set of instructions.1 Upon consideration of the record, the Panels decision, and its remandinstructions, we determine that an industry in the United States is not materially injured, or threatenedwith material injury, by reason of imports of hard red spring wheat (HRS wheat) from Canada found tobe subsidized and sold in the United States at less than fair value (LTFV).2

I. Background

In October 2003, the Commission determined that an industry in the United States was materiallyinjured by reason of imports of HRS wheat from Canada found to be subsidized and sold in the UnitedStates at LTFV.3 Respondent parties subsequently challenged the Commissions final determinationbefore a NAFTA Article 1904 Binational Panel.4 After receiving the Panel decision, the Commissiongave notice of its intention to re-open the record to gather data responsive to the Panels instructions.5 The Panel subsequently granted the Commissions request to extend the period for completion of theremand views by 30 days to October 5, 2005.

II. Adoption and Summary of Portions of Prior Views

Each Commissioner participating in this remand investigation has reviewed the entire record, assupplemented, in light of the Panel decision and instructions on remand. Based on that consideration, theCommission determines to adopt and incorporate by reference the Dissenting Views of ChairmanDeanna Tanner Okun and Commissioner Stephen Koplan,6 as well as sections I, II, III.A, and III.B of theCommission majoritys original views.7

We provide additional explanation of our determination here as well. For the most part, therecord as supplemented on remand is not materially different than the record before the Commission inthe original investigations. Nevertheless, some of the newly gathered data merits discussion for the sake

8 68 Fed. Reg. 52741, 52742 and 68 Fed. Reg. 52747, 52748 (September 5, 2003). 9 USITC Pub. 3639 at 12. 10 All Commissioners participating in the original investigations joined the discussion of the domestic likeproduct, the domestic industry, and the conditions of competition. USITC Pub. 3639 at 3 n.1. 11 USITC Pub. 3639 at 4-12. 12 USITC Pub. 3639 at 12. 13 USITC Pub. 3639 at 51, 14-19. 14 USITC Pub. 3639 at 51, 21-23. 15 USITC Pub. 3639 at 51, 19-20. 16 USITC Pub. 3639 at 51. 17 USITC Pub. 3639 at 51-52. 18 USITC Pub. 3639 at 52.

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of completeness. We also provide explanation pertaining to the remand instructions issued by the Panel. While

these instructions were directed to the Commissions affirmative material injury determination in theoriginal investigations, certain aspects of them could be understood to warrant additional explanation ofthe dissenting views as well. Generally, however, the Panels instructions pertain to aspects of themajoritys determination that are not in question here given our negative determination.

In order to establish the context in which the additional explanation is provided, we summarizebriefly the findings adopted and incorporated by reference here. However, the omission of facts oranalysis here does not signal an intent to narrow the basis of our determination.

The Department of Commerce defined the merchandise subject to these investigations as allvarieties of hard red spring wheat from Canada. This includes, but is not limited to, varieties commonlyreferred to as Canada Western Red Spring, Canada Western Extra Strong, and Canada Prairie SpringRed.8 The Commission defined the domestic like product corresponding to the subject merchandise ashard red spring wheat.9 10 The Commission declined to define the like product to include hard red winterwheat, based on differences between the two classes of wheat in terms of physic