OVERVIEW OF LIVE SWINE FROM CANADA
COUNTERVAILING DUTY AND DUMPING CASE

On March 5, 2004, the National Pork Producers Council, 20 state pork associations, and 101 individual pork producers (the "petitioners") filed a petition with the U.S. International Trade Commission (ITC) claiming that imports of live swine from Canada are being subsidized and sold at less than fair value ("dumped") in the United States, and that this was causing injury to the U.S. hog producing industry. The ITC made a preliminary determination on May 7, 2004 that the case should go forward. The U.S. Commerce Department was then tasked with making determinations as to whether Canadian live swine imports were being illegally subsidized and/or dumped and if so, to determine the amount of the subsidy and dumping margins.

In a preliminary ruling on August 17, 2004, the Commerce Department announced that it had found that there are no illegal subsidies in this case, determining that Canadian swine industry farm support payments are fully in compliance with both U.S. law and international trade rules.

The petitioners claim dumping margins as high as 66.48 percent. Their goal is to force U.S. farmers to pay a tax (duty) on all live swine imports from Canada, which were valued at $400 million in 2003. Revenues from this tax would go into the pockets of the petitioners because of the Byrd Amendment, a law passed by the U.S. Congress in 2000 that the World Trade Organization (WTO) recently ruled in violation of U.S. international trade obligations.

In 2003, U.S. imports of Canadian live swine totaled only 3.3% of the U.S. market by weight. Two-thirds of the live swine imports from Canada are baby pigs raised to market weight by U.S. farmers. These pigs are a critical element of many U.S. farmers' operations, allowing them to remain competitive in a U.S. industry in which some large, integrated packers (the companies that slaughter the hogs and turn them into pork products) own a significant portion of the hog supply.

Because there is more capacity to slaughter and process hogs than the total supply of U.S.-born hogs, Canadian imports allow more hogs to be slaughtered, therefore increasing the efficiency of the packers' production lines. These farmers cannot otherwise obtain the quality or quantity of pigs needed from U.S. sources. Once raised to market weight, the pigs imported from Canada allow those packers who import to keep their costs down and fill their capacity. Much of the remaining imports are slaughter hogs, which also help smaller, independent U.S. packers fill their capacity and meet the combined demand for pork in the U.S. and in export markets that the U.S. has been able to develop.

With current record high pork prices and healthy profits, the U.S. pork industry does not deserve or need protection. Imposing duties on Canadian swine imports will not help the industry, but will instead threaten the livelihoods of thousands of family farms in the U.S. that feed Canadian pigs. If the U.S. market is closed to Canadian pig farmers, these farmers will raise the pigs to market weight in Canada and sell them to Canadian packers. This will result in reduced U.S pork production and smaller U.S. pork exports.

The Commerce Department will make a preliminary determination on the dumping claim on October 15. 2004. If this preliminary determination finds dumping margins, duties will be imposed on all Canadian swine imports after October 15. The Commerce Department will make final subsidy and dumping determinations in early 2005. Shortly thereafter, the U.S. International Trade Commission will make a final determination as to whether imports of Canadian swine have injured the U.S. industry. Duties can only be permanently imposed if after the Commerce Department determines that there are dumping margins, the ITC then finds that the imports have caused or threaten to cause injury.