root cause of the fishery export-subsidy program. We request that this letter and its attachments be made a part of the record in this proceeding. As indicated previously, the emphasis of the Canadian subsidy program is shifting away from the direct emergency payments toward building up the fishing industry infrastructure to the point where it will be able, with government coordinated marketing, to sell in the United States without direct support: subsidizing the capital cost of vessels, new fisheries, handling, icing, freezing and marketing. This investigation must quantify such subsidies and lead to the imposition of countervailing duties of sufficient magnitude and duration to neutralize their impact on the American fisherman. DUTTABLE ITEMS NOT COVERED BY T.D. 77-107 AND T.D. 77-108 In this category we are concerned primarily with fresh or frozen whole (bled and gutted) Atlantic Ocean perch and flounders and fresh or frozen filleted groundfish including cod but excluding flounders: The complete lack of rhyme or reason to the tariff schedules becomes immediately apparent and complicates the process of analyzing the Canadian subsidy program, since the Canadian government has not chosen to pay its subsidies along the same illogical lines. While the basic conclusions of T.D. 77-107 apply equally to all categories of dutiable fish imports from Canada, it is essential that the Treasury Department clearly understand how the Canadian subsidies relate to specific tariff items. Classification 110.35 (sub 50 55 60 65 70 + 75): Fishermen receive poundage payments, under the Groundfish Temporary Assistance Program, currently 2 ¢, ostensibly not paid on exports, but there are 10,000 Atlantic groundfish vessels independently owned and it is impossible to determine whether any specific catch is landed for domestic consumption or export. Presumably, if the product is gutted and bled, payment is made up to 1975 landing level by species. According to Department of External Affairs letter of September 15, 1976 to U.S. Embassy Ottawa, payments to fishermen from May 1, 1975 through July 31, 1976 under the earlier Bridging Program and the Groundfish Temporary Assistance Program totaled $22,689,335. Total payments for 1977-78 appropriation through March 1978 cannot be anticipated but should equal or exceed 1976-77 payments, since 1976-77 production levels are not likely to be met. Therefore, support payments will not cut off as early as last year. Classification 110.50 (sub 25 + 30, 45 + 50, 65+ 70) and Processors, both under the Bridging Program and the Groundfish Temporary Assistance Program, receive poundage payments on frozen fillets for export as well as domestic consumption, and fresh fillet for domestic consumption. Rates of payment have varied from 2 1/2 to 8 and now 6 per pound. Total payments as reported by the Canadian government include blocks and it is therefore not possible to break out the amount attributable to fillets. Total payments on fillets and blocks amounted to $17,601,918 through July 1976. Since the same exporters of frozen fillets market frozen and fresh fillets for consumption in Canada, petitioners believe the entire subsidy to be an export bounty within the provisions of the Tariff Act, 1930 as discussed in detail with respect to T.D. 77-108. Indirect subsidies including federal and provincial vessel construction and conversion grants, loans and guarantees as well as similar assistance for shore based processing, freezing and marketing facilities account for a large share of the total subsidy package available to Canadian fishermen and processors. The federal programs are described in detail in the various attachments hereto and in the supporting attachments to the Canadian government letter of September 15, 1976 to the U.S. Embassy Ottawa, a part of the record in T.D. 77-107. Very little analysis of the provincial subsidies has been performed to date. Clearly, the Treasury Department failed to take them into account in T.D. 77-107 and T.D. 77-108, as well as underestimating the relative and growing importance of federal assistance in this area. Petitioners believe that federal and provincial indirect subsidies account for at least 50 percent of the total package at this time and will grow rapidly in relation to direct poundage payments in the future. The level of dutiable imports of 110.35 category groundfish has risen by 50 percent in 10 years from 2,498,000 lbs. in 1968 to 3,766,000 lbs. in 1976. The level of 110.50 and 110.55 category groundfish imports from Canada has remained relatively constant over this ten year period at around 92 million pounds per year. As of June 30, 1977 fillet imports from Canada were running at an annual rate of over 100 million pounds. Canada is the largest single exporter of groundfish fillets to the United States supplying between 35 and 40 percent of the 228 million pounds in 1976. By contrast, U.S. production of groundfish in the 110.50 and 110.55 categories was about 45,300,000 Ibs. in 1976. Domestic production in these categories has declined from 43% of U.S. supply to 16.6% between 1967 and 1976. In absolute terms U.S. production has declined from 71 to 45 million pounds during this period. By contrast U.S. production in 1951 was 205 million pounds. It should be noted that Canadian fishermen were confronted during this same ten year period with massive foreign overfishing of the groundfish stocks leading to severe restrictions on harvesting. These conditions lead to the drastic loss in U.S. harvest and yet the Canadians were able to maintain and in some respects even increase exports to the United States. Clearly, the Canadian subsidy program is responsible for this anomaly. Under these circumstances it is obvious that the Canadian groundfish industry subsidies have enabled the Canadian industry to achieve a dominant position in the American market which will not be altered merely by the elimination of direct poundage payments so long as the Canadian government is engaged in a massive program of indirect support which has the effect of substantially reducing capital costs in the industry. Petitioners believe the foregoing description of Canadian subsidies together with detailed supporting attachments provide a clear-cut case for the imposition of countervailing duties on all 110.35, 110.50 and 110.55 category imports. NONDUTTABLE IMPORTS FINFISH Three tariff classifications 110.15, 110.47 and 110.70 fall within this category. Item 110.15 (sub 85 + 89, 93 +97) fresh and frozen whole cod, cusk, haddock, hake and pollock and Item 110.70 (sub 33, 39, 40, 60) fresh and frozen flatfish fillets are identical for all purposes to the corresponding dutiable classifications, 110.35 and 110.50 + 110.55 respectively, from the standpoint of the Canadian subsidy programs discussed above. The various Canadian subsidies do not, of course, distinguish between various species along the lines of our tariff classifications. Specifically, the Groundfish Bridging Program, the Groundfish Temporary Assistance Program, the Fishing Vessel Assistance Program, and all applicable new forms of assistance as described in the 1977-78 programs (April 20, 1977 release and Leblanc speech, attached hereto) and provincial assistance (URI paper attached hereto) have been or are now available to fishermen and processors of 110.15 and 110.70 category products. As indicated above, petitioners believe that direct subsidies paid to fishermen and processors for domestically consumed fish are in reality export subsidies when spread over their entire catch and production. Further, petitioners believe that direct supports to fishermen are paid on all landings although not officially available for exports. Similarly, groundfish blocks, tariff classification 110.47 (sub 10, 26, 30, 40, 55, 60 and 65) produced from gutted and bled (all) fish of the varieties described in 110.47 benefit from the same assistance program to fishermen and processors. Processor payments under the Groundfish Temporary Assistance Program are specifically for exported blocks as is the case with frozen fillets previously discussed. Petitioners therefore conclude that the Treasury Department must find that the Canadian government is paying export bounties within the meaning of Sec. 303, Tariff Act of 1930, as amended with respect to 110.15, 110.47 and 110.70 category products. INJURY TO DOMESTIC INDUSTRY NONDUTTABLE IMPORTS OF FINFISH While Sec. 303 (b) does not require the Secretary of the Treasury to make any preliminary finding of injury to domestic producers in conjunction with a final determination under Sec. 303 (a) petitioners believe it will be helpful to the Treasury Department to set forth certain facts which clearly establish injury as defined in Sec. 303 (b) (A). Imports of Canadian groundfish in the 110.15 classification rose from 4.2 million pounds in 1958 to 11.6 million pounds in 1976 and are primarily fresh cod (110.15-85) and haddock (110.15-93). Cod and haddock are two of the three (the third, Yellowtail Flounder) primary stocks fished by the members of petitioner, Point Judith Fishermen's Cooperative. In addition to fresh whole cod and haddock, Canada exported 38 million pounds of fresh and frozen cod and haddock fillets to the United States in 1976 under tariff classification 110.55. Pursuant to the Fishery Conservation and Management Act of 1976, Public Law 94-265, the New England Regional Fishery Management Council has adopted a Management Plan for the Northeast Atlantic groundfish fisheries published at 42 F.R. 13998 together with Implementing regulations for cod, haddock and yellowtail flounder. This plan governs the taking of cod and haddock within the United States Fishery Conservation Zone where the entire harvest of these stocks by petitioners' members is conducted. The plan allows a directed cod fishery for 55.1 million pounds and a harvest of 13.7 million pounds of haddock as a nondirect by-catch only. The regulations impose severe restrictions on the amount of these stocks which can be landed in any single trip. Subsequent emergency regulations for the closing period of the 1977 fishing season altered the above catch quotas and landing restrictions but not their fundamental impact on the U.S. fishing industry. Accordingly, U.S. fishermen are limited by federal regulation to a total catch of Atlantic cod and haddock of approximately 68 million pounds which will in all likelihood be reduced in 1978. Canadian imports of whole and filleted cod and haddock, as indicated above, amounted to 49.6 million pounds in 1976, equal to 74 percent of domestic landings under the federal quotas. Through September 1977 Canadian imports were at an annual rate of over 55 million pounds or 80% of allowable domestic landings. |