69 FR 47081, August 4, 2004

DEPARTMENT OF COMMERCE

International Trade Administration

[A-351-838]

Notice of Preliminary Determination of Sales at Less Than Fair Value 
and Postponement of Final Determination: Certain Frozen and Canned 
Warmwater Shrimp From Brazil

AGENCY: Import Administration, International Trade Administration, 
Department of Commerce.

ACTION: Notice of preliminary determination of sales at less than fair 
value.

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SUMMARY: We preliminarily determine that certain frozen and canned 
warmwater shrimp from Brazil are being, or are likely to be, sold in 
the United States at less than fair value, as provided in section 
733(b) of the Tariff Act of 1930, as amended (the Act).
    Interested parties are invited to comment on this preliminary 
determination. Because we are postponing the final determination, we 
will make our final determination not later than 135 days after the 
date of publication of this preliminary determination in the Federal 
Register.

EFFECTIVE DATE: August 4, 2004.

FOR FURTHER INFORMATION CONTACT: Kate Johnson or Rebecca Trainor, 
Import Administration, International Trade Administration, U.S. 
Department of Commerce, 14th Street and Constitution Avenue, NW., 
Washington, DC 20230; telephone: (202) 482-4929 or (202) 482-4007, 
respectively.

Preliminary Determination

    We preliminarily determine that certain frozen and canned warmwater 
shrimp from Brazil are being sold, or are likely to be sold, in the 
United States at less than fair value (LTFV), as provided in section 
733 of the Act. The estimated margins of sales at LTFV are shown in the 
``Suspension of Liquidation'' section of this notice.

Background

    Since the initiation of this investigation (see Initiation of 
Antidumping Duty Investigations: Certain Frozen and Canned Warmwater 
Shrimp from Brazil, Ecuador, India, Thailand, the People's Republic of 
China and the Socialist Republic of Vietnam, 69 FR 3876 (January 27, 
2004) (Initiation Notice)), the following events have occurred.
    On February 17, 2004, the United States International Trade 
Commission (ITC) preliminarily determined that there is a reasonable 
indication that imports of certain frozen and canned warmwater shrimp 
from Brazil are materially injuring the United States industry. See ITC 
Investigation Nos. 731-TA-1063-1068 (Publication No. 3672).
    On February 20, 2004, we selected the three largest producers/
exporters of certain frozen and canned warmwater shrimp from Brazil as 
the mandatory respondents in this proceeding. See Memorandum to Louis 
Apple, Director Office 2, from The Team dated February 20, 2004. We 
subsequently issued the antidumping questionnaire to Empresa de 
Armazenagem Frigorifica Ltda. (EMPAF), Central de Industrializacao e 
Distribuicao de Alimentos Ltda. (CIDA), and Norte Pesca S.A. (Norte 
Pesca) on February 20, 2004.
    During the period February through June 2004, various interested 
parties, including the petitioners, submitted comments on the scope of 
this and the concurrent investigations of certain frozen and canned 
warmwater shrimp concerning whether the following products are covered 
by the scope of the investigations: a certain seafood mix, dusted 
shrimp, battered shrimp, salad shrimp sold in counts of 250 pieces or 
higher, the species Macrobachium rosenbergii, organic shrimp, and 
peeled shrimp used in breading.\1\ In addition, the Louisiana Shrimp 
Alliance (LSA), an association of domestic shrimp harvesters and 
processors, requested

[[Page 47082]]

that the Department expand the scope to include fresh (never frozen) 
shrimp. See ``Scope Comments'' section of this notice.
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    \1\ Specifically, Ocean Duke Corporation (Ocean Duke), an 
importer and wholesaler of the subject merchandise, requested that 
the following products be excluded from the scope of this and the 
concurrent investigations on certain frozen and canned warmwater 
shrimp: (1) ``dusted shrimp,'' (2) ``battered shrimp,'' and (3) 
``seafood mix.'' Another importer, Rubicon Resources LLP, supported 
Ocean Duke's request regarding dusted and battered shrimp. Eastern 
Fish Company and Long John Silver's, Inc. also requested that dusted 
and battered shrimp be excluded from the scope of the 
investigations. Furthermore, the Seafood Exporters' Association of 
India requested that the Department find that warmwater salad shrimp 
in counts of 250 pieces or higher are not within the scope, and that 
the species Machrobachium rosenbergii is a separate class or kind of 
merchandise. Also, Exportadora de Alimentos S.A., one of the 
respondents in the Ecuador case, requested that the Department find 
that farm-raised organic shrimp is not covered by the scope of the 
investigations. Finally, the American Breaded Shrimp Processors 
Association, comprised of importers of peeled shrimp which they 
consume in the production of breaded shrimp products, requested that 
peeled shrimp imported for the sole purpose of breading be excluded 
from the scope of the investigations.
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    We received section A questionnaire responses from the three 
respondents in March 2004, and section B and C questionnaire responses 
from CIDA and EMPAF, as well as section C and D questionnaire responses 
from Norte Pesca, in April 2004. We issued and received responses to 
our supplemental questionnaires from April through June 2004.
    On April 30, 2004, the petitioners\2\ alleged that CIDA made third 
country sales below the cost of production (COP) and, therefore, 
requested that the Department initiate a sales-below-cost investigation 
of CIDA with respect to its third country sales in France.\3\ On June 
7, 2004, the Department initiated a sales-below-cost investigation of 
CIDA, and required it to respond to section D of the Department's 
questionnaire. See Memorandum to Louis Apple, Director Office 2, from 
The Team Re: Petitioners' Allegation of Sales Below the Cost of 
Production for Central de Industrializacao e Distribuicao de Alimentos 
Ltda.
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    \2\ The petitioners in this investigation are the Ad Hoc Shrimp 
Trade Alliance (an ad hoc coalition representative of U.S. producers 
of frozen and canned warmwater shrimp and harvesters of wild-caught 
warmwater shrimp), Versaggi Shrimp Corporation, and Indian Ridge 
Shrimp Company.
    \3\ Although the petitioners' sales below cost allegation 
pertained to third country sales in both Spain and France, we only 
analyzed the allegation with respect to France, which is the largest 
third country market reported by CIDA.
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    On June 7, 2004, the petitioners alleged that EMPAF made home 
market sales below the COP and, therefore, requested that the 
Department initiate a sales-below-cost investigation of EMPAF. On June 
15, 2004, the Department initiated a sales-below-cost investigation of 
EMPAF, and required it to respond to section D of the Department's 
questionnaire. See Memorandum to Louis Apple, Director Office 2, from 
The Team Re: Petitioners' Allegation of Sales Below the Cost of 
Production for Empresa de Armazenagem Frigorifica Ltda. With respect to 
CIDA and EMPAF, we received original section D responses in June 2004, 
and supplemental section D responses in July 2004.
    On May 18, 2004, pursuant to sections 733(c)(1)(B) and (c)(2) of 
the Act and 19 CFR 351.205(f), the Department determined that the case 
was extraordinarily complicated and postponed the preliminary 
determination until no later than July 28, 2004. See Notice of 
Postponement of Preliminary Determinations of Antidumping Duty 
Investigations: Certain Frozen and Canned Warmwater Shrimp from Brazil 
(A-351-838), Ecuador (A-331-802), India (A-533-840), Thailand (A-549-
822), the People's Republic of China (A-570-893), and the Socialist 
Republic of Vietnam (A-503-822), 69 FR 29509 (May 24, 2004).
    On May 21, 2004, the Department denied LSA's request to amend the 
scope to include fresh (never frozen) shrimp. See Memorandum from 
Jeffrey A. May, Deputy Assistant Secretary, AD/CVD Enforcement Group I, 
and Joseph A. Spetrini, Deputy Assistant Secretary AD/CVD Enforcement 
Group III, to James J. Jochum, Assistant Secretary for Import 
Administration Re: Antidumping Investigations on Certain Frozen and 
Canned Warmwater Shrimp from Brazil, Ecuador, India, the People's 
Republic of China, Thailand and the Socialist Republic of Vietnam: 
Scope Determination Regarding Fresh (Never Frozen) Shrimp, dated May 
21, 2004 (Scope Decision Memorandum I).
    On June 29, 2004, EMPAF requested that the Department allow it to 
report its COP based on its fiscal year rather than the period of 
investigation (POI) because its fiscal year ended within three months 
of the POI. On July 6, 2004, EMPAF provided information that the 
Department requested in a July 1, 2004, letter addressing the impact of 
such a period shift on its cost reporting. On July 8, 2004, the 
Department granted EMPAF's request because it appeared, based on the 
information provided, that shifting the cost reporting period would not 
materially impact the antidumping duty analysis.
    Pursuant to the Department's solicitation, on June 7, 2004, various 
interested parties, including the petitioners, submitted comments on 
the issue of whether product comparisons and margin calculations in 
this and the concurrent investigations of certain frozen and canned 
warmwater shrimp should be based on data provided on an ``as sold'' 
basis or data converted to a headless, shell-on (HLSO) basis.\4\ 
Additional comments were subsequently submitted on June 15 and 25, 
2004. See ``Product Comparison Comments'' section below.
    On July 2, 2004, the Department made preliminary scope 
determinations with respect to the following shrimp products: Ocean 
Duke's seafood mix, salad shrimp sold in counts of 250 pieces or 
higher, Macrobrachium rosenbergii, organic shrimp, peeled shrimp used 
in breading, dusted shrimp and battered shrimp. See Memorandum from 
Edward C. Yang, Vietnam/NME Unit Coordinator, Import Administration to 
Jeffrey A. May, Deputy Assistant Secretary for Import Administration 
Re: Antidumping Investigation on Certain Frozen and Canned Warmwater 
Shrimp from Brazil, Ecuador, India, Thailand, the People's Republic of 
China and the Socialist Republic of Vietnam: Scope Clarifications: (1) 
Ocean Duke's Seafood Mix; (2) Salad Shrimp Sold in Counts of 250 Pieces 
or Higher; (3) Macrobrachium rosenbergii; (4) Organic Shrimp; and (5) 
Peeled Shrimp Used in Breading, dated July 2, 2004 (Scope Decision 
Memorandum II); and Memorandum from Edward C. Yang, Vietnam/NME Unit 
Coordinator, Import Administration to Jeffrey A. May, Deputy Assistant 
Secretary for Import Administration Re: Antidumping Investigation on 
Certain Frozen and Canned Warmwater Shrimp from Brazil, Ecuador, India, 
Thailand, the People's Republic of China and the Socialist Republic of 
Vietnam: Scope Clarification: Dusted Shrimp and Battered Shrimp, dated 
July 2, 2004 (Scope Decision Memorandum III). See also ``Scope 
Comments'' section below.
    On July 7, 2004, the petitioners filed comments on various company-
specific issues for consideration in the preliminary determination. On 
July 8, 2004, CIDA responded to these comments as they pertained to 
CIDA's reported data. On July 12, 2004, EMPAF submitted revised U.S. 
and home market databases to correct clerical errors in previously 
submitted data.
    On July 9, 2004, the Department found it appropriate to select 
France as the third country comparison market for CIDA. See Memorandum 
to Louis Apple, Director Office 2, from The Team Re: Selection of Third 
Country Market for Central de Industrializacao e Distribuicao de 
Alimentos Ltda. (CIDA)

[[Page 47083]]

(Third Country Comparison Market Selection Memorandum).
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    \4\ Specifically, the Department received comments from the 
following interested parties, in addition to the petitioners, on 
June 7: the Brazilian Shrimp Farmers' Association and Central de 
Industrializacao e Distribuicao de Alimentos Ltda.; Empresa De 
Armazenagem Frigorifica Ltda.; Camara Nacional de Acuacultura 
(National Chamber of Aquaculture) of Ecuador; the Rubicon Group 
(comprised of Andaman Seafood Co., Ltd. Chanthaburi Seafoods Co., 
Ltd. And Thailand Fishery Cold Storage Public Co., Ltd.), Thai I-Mei 
Frozen Foods Co., Ltd. and its affiliated reseller Ocean Duke; the 
Seafood Exporters of India and its members Devi Sea Foods Ltd., 
Hindustan Lever Limited, and Nekkanti Seafoods Limited; the VASEP 
Shrimp Committee and its members; and Shantou Red Garden Foodstuff 
Co., Ltd. In addition to addressing the ``as sold''/HLSO issue, some 
of these parties also commented on the significance of species and 
container weight in the Department's product characteristic 
hierarchy.
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    On July 21, 2004, CIDA and EMPAF submitted revised U.S. and 
comparison market databases as a result of refinements to the COP 
databases, also submitted on this date, and to correct minor errors in 
the sales listings previously submitted to the Department. The revised 
sales databases were not submitted in time to be fully analyzed for use 
in the preliminary determination, except where the revised data was 
solicited by the Department in the context of the section D 
supplemental questionnaire issued in July 2004.

Postponement of Final Determination

    Section 735(a)(2) of the Act provides that a final determination 
may be postponed until not later than 135 days after the date of the 
publication of the preliminary determination if, in the event of an 
affirmative preliminary determination, a request for such postponement 
is made by exporters who account for a significant proportion of 
exports of the subject merchandise, or, in the event of a negative 
preliminary determination, a request for such postponement is made by 
the petitioner. The Department's regulations, at 19 CFR 351.210(e)(2), 
require that requests by respondents for postponement of a final 
determination be accompanied by a request for extension of provisional 
measures from a four-month period to not more than six months.
    Pursuant to section 735(a)(2) of the Act, on June 16, 2004, CIDA, 
EMPAF, Norte Pesca, and the Association of Brazilian Shrimp Farmers 
requested that, in the event of an affirmative preliminary 
determination in this investigation, the Department postpone its final 
determination until not later than 135 days after the date of the 
publication of the preliminary determination in the Federal Register, 
and extend the provisional measures to not more than six months. In 
accordance with 19 CFR 351.210(b), because (1) our preliminary 
determination is affirmative, (2) the respondents account for a 
significant proportion of exports of the subject merchandise, and (3) 
no compelling reasons for denial exist, we are granting respondents' 
request and are postponing the final determination until no later than 
135 days after the publication of this notice in the Federal Register. 
Suspension of liquidation will be extended accordingly.

Period of Investigation

    The POI is October 1, 2002, through September 30, 2003. This period 
corresponds to the four most recent fiscal quarters prior to the month 
of the filing of the petition (i.e., December 2003).

Scope of Investigation

    The scope of this investigation includes certain warmwater shrimp 
and prawns, whether frozen or canned, wild-caught (ocean harvested) or 
farm-raised (produced by aquaculture), head-on or head-off, shell-on or 
peeled, tail-on or tail-off,\5\ deveined or not deveined, cooked or 
raw, or otherwise processed in frozen or canned form.
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    \5\ ``Tails'' in this context means the tail fan, which includes 
the telson and the uropods.
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    The frozen or canned warmwater shrimp and prawn products included 
in the scope of the investigation, regardless of definitions in the 
Harmonized Tariff Schedule of the United States (HTSUS), are products 
which are processed from warmwater shrimp and prawns through either 
freezing or canning and which are sold in any count size.
    The products described above may be processed from any species of 
warmwater shrimp and prawns. Warmwater shrimp and prawns are generally 
classified in, but are not limited to, the Penaeidae family. Some 
examples of the farmed and wild-caught warmwater species include, but 
are not limited to, whiteleg shrimp (Penaeus vannemei), banana prawn 
(Penaeus merguiensis), fleshy prawn (Penaeus chinensis), giant river 
prawn (Macrobrachium rosenbergii), giant tiger prawn (Penaeus monodon), 
redspotted shrimp (Penaeus brasiliensis), southern brown shrimp 
(Penaeus subtilis), southern pink shrimp (Penaeus notialis), southern 
rough shrimp (Trachypenaeus curvirostris), southern white shrimp 
(Penaeus schmitti), blue shrimp (Penaeus stylirostris), western white 
shrimp (Penaeus occidentalis), and Indian white prawn (Penaeus 
indicus).
    Frozen shrimp and prawns that are packed with marinade, spices or 
sauce are included in the scope of the investigation. In addition, food 
preparations, which are not ``prepared meals,'' that contain more than 
20 percent by weight of shrimp or prawn are also included in the scope 
of the investigation.
    Excluded from the scope are (1) breaded shrimp \6\ and prawns 
(1605.20.10.20); (2) shrimp and prawns generally classified in the 
Pandalidae family and commonly referred to as coldwater shrimp, in any 
state of processing; (3) fresh shrimp and prawns whether shell-on or 
peeled (0306.23.00.20 and 0306.23.00.40); (4) shrimp and prawns in 
prepared meals (1605.20.05.10); and (5) dried shrimp and prawns.
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    \6\ Pursuant to our scope determination on battered shrimp, we 
find that breaded shrimp includes battered shrimp as discussed in 
the ``Scope Comments'' section below. See Scope Memorandum III.
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    The products covered by this scope are currently classifiable under 
the following HTSUS subheadings: 0306.13.00.03, 0306.13.00.06, 
0306.13.00.09, 0306.13.00.12, 0306.13.00.15, 0306.13.00.18, 
0306.13.00.21, 0306.13.00.24, 0306.13.00.27, 0306.13.00.40, 
1605.20.10.10, 1605.20.10.30, and 1605.20.10.40. These HTSUS 
subheadings are provided for convenience and Customs purposes only and 
are not dispositive, but rather the written description of the scope of 
this investigation is dispositive.

Scope Comments

    In accordance with the preamble to our regulations, we set aside a 
period of time for parties to raise issues regarding product coverage 
and encouraged all parties to submit comments within 20 calendar days 
of publication of the Initiation Notice. (See Antidumping Duties; 
Countervailing Duties; Final Rule, 62 FR 27296, 27323 (May 19, 1997) 
and Initiation Notice at 69 FR 3877.) Throughout the 20 days and 
beyond, the Department received many comments and submissions regarding 
a multitude of scope issues, including: (1) Fresh (never frozen) 
shrimp, (2) Ocean Duke's seafood mix, (3) salad shrimp sold in counts 
of 250 pieces or higher, (4) Macrobrachium rosenbergii, (5) organic 
shrimp, (6) peeled shrimp used in breading, (7) dusted shrimp and (8) 
battered shrimp. On May 21, 2004, the Department determined that the 
scope of this and the concurrent investigations remains unchanged, as 
certain frozen and canned warmwater shrimp, without the addition of 
fresh (never frozen) shrimp. See Scope Decision Memorandum I.
    On July 2, 2004, the Department made scope determinations with 
respect to Ocean Duke's seafood mix, salad shrimp sold in counts of 250 
pieces or higher, Macrobrachium rosenbergii, organic shrimp and peeled 
shrimp used in breading. See Scope Decision Memorandum II. Based on the 
information presented by interested parties, the Department determined 
that Ocean Duke's seafood mix is excluded from the scope of this and 
the concurrent investigations; however, salad shrimp sold in counts of 
250 pieces or higher, Macrobrachium rosenbergii, organic shrimp and 
peeled shrimp used in breading are included

[[Page 47084]]

within the scope of these investigations. See Scope Decision Memorandum 
II at 33.
    Additionally, on July 2, 2004, the Department made a scope 
determination with respect to dusted shrimp and battered shrimp. See 
Scope Decision Memorandum III. Based on the information presented by 
interested parties, the Department preliminarily finds that while 
substantial evidence exists to consider battered shrimp to fall within 
the meaning of the breaded shrimp exclusion identified in the scope of 
these proceedings, there is insufficient evidence to consider that 
shrimp which has been dusted falls within the meaning of ``breaded'' 
shrimp. However, there is sufficient evidence for the Department to 
consider excluding this merchandise from the scope of these proceedings 
provided an appropriate description can be developed. See Scope 
Decision Memorandum III at 18. To that end, along with the previously 
solicited comments regarding breaded and battered shrimp, the 
Department solicits comments from interested parties which enumerate 
and describe a clear, administrable definition of dusted shrimp. See 
Scope Decision Memorandum III at 23.

Fair Value Comparisons

    To determine whether sales of certain frozen and canned warmwater 
shrimp from Brazil to the United States were made at LTFV, we compared 
the export price (EP) or constructed export price (CEP) to the normal 
value (NV), as described in the ``Export Price/Constructed Export 
Price'' and ``Normal Value'' sections of this notice, below. In 
accordance with section 777A(d)(1)(A)(i) of the Act, we compared POI 
weighted-average EPs and CEPs to NVs.
    As discussed below under the ``Home Market Viability and Comparison 
Market Selection'' section, we determined that CIDA did not have a 
viable home market during the POI and that Norte Pesca did not have a 
viable home or third country market during the POI. Therefore, as the 
basis for NV, we used third country sales to France for CIDA and 
constructed value (CV) for Norte Pesca when making comparisons in 
accordance with sections 773(a)(1)(C) and 773 (a)(4) of the Act, 
respectively.
    For purposes of the preliminary dumping calculation, we have 
treated EMPAF and Maricultura Netuno S.A. (Maricultura), an affiliate 
of EMPAF that is involved in the production of the subject merchandise, 
as one entity. These two producers are affiliated under section 
771(33)(E) of the Act and 19 CFR 351.102 based on EMPAF's level of 
ownership in Maricultura, and should be treated as one entity for 
dumping calculation purposes under 19 CFR 351.401(f). Specifically, 
EMPAF and Maricultura have production facilities for similar or 
identical products that would not require substantial retooling of 
either facility to restructure manufacturing priorities and there is 
significant potential for the manipulation of price or production. We 
also note that EMPAF and Maricultura presented themselves as one entity 
for purposes of responding to the Department's antidumping 
questionnaire.

Product Comparisons

    In accordance with section 771(16) of the Act, we considered all 
products produced and sold by the respondents in Brazil during the POI 
that fit the description in the ``Scope of Investigation'' section of 
this notice to be foreign like products for purposes of determining 
appropriate product comparisons to U.S. sales. We compared U.S. sales 
to sales made in the home market or third country, where appropriate. 
Where there were no sales of identical merchandise in the home market 
or third country made in the ordinary course of trade to compare to 
U.S. sales, we compared U.S. sales to sales of the most similar foreign 
like product made in the ordinary course of trade. Where there were no 
sales of identical or similar merchandise made in the ordinary course 
of trade, we made product comparisons using CV.
    In making the product comparisons, we matched foreign like products 
based on the physical characteristics reported by the respondents in 
the following order of importance: processed form, cooked form, head 
status, count size (on an ``as sold'' basis), shell status, vein 
status, tail status, other shrimp preparation, frozen form, flavoring, 
container weight, presentation, species, and preservative.

Product Comparison Comments

As Sold v. HLSO Methodology

    We received comments from various interested parties concerning 
whether to perform product comparisons and margin calculations using 
data provided on an ``as sold'' basis or on data converted to an HLSO 
basis.\7\
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    \7\ In this notice, we address only those comments pertaining to 
market-economy dumping calculation methodology. Any comments 
pertaining to non-market-economy dumping calculation methodology are 
separately addressed in the July 2, 2004, preliminary determinations 
in the antidumping duty investigations of certain frozen and canned 
warmwater shrimp from the People's Republic of China and the 
Socialist Republic of Vietnam. See Notice of Preliminary 
Determination of Sales at Less Than Fair Value, Partial Affirmative 
Preliminary Determination of Critical Circumstances and Postponement 
of Final Determination: Certain Frozen and Canned Warmwater Shrimp 
from the People's Republic of China (69 FR 42654, July 16, 2004), 
and Notice of Preliminary Determination of Sales at Less Than Fair 
Value, Negative Preliminary Determination of Critical Circumstances 
and Postponement of Final Determination: Certain Frozen and Canned 
Warmwater Shrimp from the Socialist Republic of Vietnam (69 FR 
42672, July 16, 2004).
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    The petitioners argue that using a consistent HLSO equivalent 
measure permits accurate product comparisons and margin calculations 
whereas the ``as sold'' measures do not. In particular, the petitioners 
emphasize that it is necessary to translate the actual sold volumes 
(weights) and count sizes to a uniform unit of measure that takes into 
account the various levels of processing of the different shrimp 
products sold and the allegedly large difference in value between the 
shrimp tail meat and other parts of the shrimp that may constitute ``as 
sold'' weight or count size, such as the head or shell. The 
petitioners'' contention is premised upon their belief that the shrimp 
tail meat is the value-driving component of the shrimp. The respondents 
disagree, maintaining generally that using HLSO-equivalent data 
violates the antidumping duty law and significantly distorts product 
comparisons and margin calculations. In particular, they argue that: 
(1) Shrimp is sold based on its actual size and form, not on an HLSO 
basis, and it is the Department's practice to use actual sales/cost 
data in its margin analysis; (2) the rates used to convert price, 
quantity and expense data to an HLSO basis are uncertain as they are 
not maintained by the respondents in the ordinary course of business, 
and are generally based on each individual company's experience rather 
than any accepted industry-wide standard; and (3) the HLSO methodology 
introduces a significant distortion through the incorrect assumption 
that the value of the product varies solely in direct proportion to the 
change in weight resulting from production yields, when in fact the 
value of the product depends also on other factors such as quality and 
form.
    Our analysis of the company responses shows that: (1) No respondent 
uses HLSO equivalents in the normal course of business, for either 
sales or cost purposes; and (2) there is no reliable or consistent HLSO 
conversion formula for all forms of processed shrimp across all 
companies, as each company defined its conversion factors differently 
and derived these factors

[[Page 47085]]

based on its own production experience. Therefore, we preliminarily 
determine it is appropriate to perform product comparisons and margin 
calculations using data ``as sold.'' This approach is in accordance 
with our normal practice and precludes the use of conversion rates, the 
accuracy of which is uncertain. Given the variety and overlap of the 
``as sold'' count size ranges reported by the respondents, we also 
preliminarily determine that it is appropriate to standardize product 
comparisons across respondents by fitting the ``as sold'' count sizes 
into the count size ranges specified in the questionnaire.
    EMPAF reported that certain of its home market sales were not made 
on the basis of count size, and thus it was unable to report an ``as 
sold'' count size for these sales because this information does not 
exist in its records. In response to the Department's request, EMPAF 
provided estimated average count sizes for certain count size ranges 
but stated that these ranges are simply estimates and are not reliable. 
Therefore, as facts available under section 776(a)(1) of the Act, we 
assigned count size code ``10'' (the mid-point of all of the count size 
ranges specified in the Department's questionnaire) to those home 
market sales. See Memorandum from Kate Johnson to The File dated July 
28, 2004, Re: Preliminary Determination Calculation Memorandum for 
Empresa de Armazenagem Frigrofica Ltd. (EMPAF) (EMPAF Calculation 
Memo). We will scrutinize this issue at verification for purposes of 
the final determination and revisit it if this investigation proceeds 
to an antidumping duty order and a subsequent review of the order.

Product Characteristics Hierarchy

    We also received comments from various interested parties regarding 
the significance of the species and container weight criteria in the 
Department's product comparison hierarchy.
    Various parties requested that the species criterion be ranked 
higher in the Department's product characteristic hierarchy--as high as 
the second most important characteristic, rather than the thirteenth--
based on their belief that species is an important factor in 
determining price. One party provided industry publications indicating 
price variations according to species type. Another party requested 
further that the Department revise the species categories specified in 
the Department's questionnaire to reflect characteristics beyond color 
(i.e., whether the shrimp was farm-raised or wild-caught). In addition, 
several parties requested that container weight, the eleventh 
characteristic in the Department's product characteristic hierarchy, be 
eliminated altogether as a product matching criterion, as they believe 
it is commercially insignificant and relates to packing size or form, 
rather than the physical attributes of the product.
    With respect to the arguments regarding the species criterion, the 
petitioners disagree, maintaining that there is no credible evidence 
that species drives pricing to such a significant extent that buyers 
consider it more important than product characteristics such as head 
and cooked status. Rather, the petitioners contend that once shrimp is 
processed (e.g., cooked, peeled, etc.), the species classification 
becomes essentially irrelevant. Therefore, the petitioners assert that 
while species type has some, not entirely insignificant effect on 
shrimp prices, it is appropriately captured in the Department's product 
matching hierarchy. Furthermore, with respect to the container weight 
criterion, the petitioners assert that, while the shrimp inside the 
container may be identical, in many cases the size of the container is 
an integral part of the product and an important determinant of the 
markets and channels through which shrimp can be sold. For this reason, 
the petitioners maintain that the Department should continue to include 
container weight as a product matching characteristic.
    Regarding the species criterion, we have not changed the position 
of this criterion in the product characteristic hierarchy for the 
preliminary determination. We agree that the physical characteristic of 
species type may impact the price or cost of processed shrimp. For that 
reason, we included species type as one of the product matching 
criteria. However, based on our review of the record evidence, we find 
that other physical characteristics of the subject merchandise, such as 
head status, count size, shell status, and frozen form, appear to be 
more significant in setting price or determining cost. The information 
provided by the parties, which suggests that price may be affected in 
some cases by species type, does not provide sufficient evidence that 
species type is more significant than the remaining physical 
characteristics of the processed shrimp. Therefore, we find an 
insufficient basis to revise the ranking of the physical 
characteristics established in the Department's questionnaire for the 
purpose of product matching.
    With respect to differentiating between species types beyond the 
color classifications identified in the questionnaire, we do not find 
that such differentiations reflect meaningful differences in the 
physical characteristics of the merchandise. In particular, we note 
that whether shrimp is farm-raised or wild-caught is not a physical 
characteristic of the shrimp, but rather a method of harvesting. 
Therefore, we have not accepted the additional species classifications 
proposed by the respondents. Accordingly, in those cases where the 
respondents reported additional species classifications for their 
processed shrimp products, we reclassified the products into one of the 
questionnaire color classifications. We made an exception for the 
shrimp identified as ``scampi'' (or Macrobrachium rosenbergii) and 
``red ring'' (or Aristeus alcocki), where appropriate, because they 
represent species distinct from those associated by color in the 
Department's questionnaire. Regarding this exception, we note that 
while scampi and red ring are sufficiently distinct for product 
matching purposes, they are not so distinct as to constitute a separate 
class or kind of merchandise (see Scope Memorandum II). We also made an 
exception for the shrimp identified as ``mixed'' (e.g., ``salad'' 
shrimp), where appropriate, because there is insufficient information 
on the record to classify these products according to the questionnaire 
color classifications.
    Regarding the container weight criterion, we have included it as 
the eleventh criterion in the product characteristic hierarchy because 
we view the size or weight of the packed unit as an integral part of 
the final product sold to the customer, rather than a packing size or 
form associated with the shipment of the product to the customer. 
Moreover, we find it appropriate, where possible (other factors being 
equal), to compare products of equivalent container weight (e.g., a 
one-pound bag of frozen shrimp with another one-pound bag of frozen 
shrimp, rather than a five-pound bag), as the container weight may 
impact the per-unit selling price of the product.

Broken Shrimp

    CIDA reported sales of broken shrimp in its U.S. market. Because: 
(1) The matching criteria for this investigation do not currently 
account for broken shrimp; (2) no interested parties have provided 
comments on the appropriate methodology to match these sales; and (3) 
the quantity of such sales does not constitute a significant percentage 
of the respondent's database, we have excluded these sales from our 
analysis

[[Page 47086]]

for purposes of the preliminary determination. Nonetheless, we are 
seeking comments from interested parties regarding our treatment of 
these sales for consideration in the final determination.
    Norte Pesca also reported sales of broken shrimp in its U.S. 
market. However, because the quantity of sales of broken shrimp to the 
U.S. market is significant and because we used CV as the basis for 
calculating NV, thereby eliminating the matching issue, we have 
included these sales in our analysis for purposes of the preliminary 
determination.

Export Price/Constructed Export Price

    For CIDA and Norte Pesca we used EP price methodology, in 
accordance with section 772(a) of the Act, because the subject 
merchandise was sold directly to the first unaffiliated purchaser in 
the United States prior to importation by the exporter or producer 
outside the United States. We based EP on the packed FOB or CFR (Norte 
Pesca only) prices to unaffiliated purchasers in the United States.

CIDA

    We made deductions for movement expenses in accordance with section 
772(c)(2)(A) of the Act; these included, where appropriate, foreign 
warehousing, foreign inland freight, foreign inland insurance, and 
foreign brokerage and handling expenses. We did not allow CIDA's claim 
for a freight charge adjustment because there was no evidence on the 
record to suggest that such an adjustment was realized by CIDA. See 
Memorandum to Irene Darzenta Tzafolias from Rebecca Trainor dated July 
28, 2004, Re: Calculation Memorandum for the Preliminary Determination 
for Central de Industrializacao e Distribuicao de Alimentos Ltd. 
(CIDA).

Norte Pesca

    We made deductions for movement expenses in accordance with section 
772(c)(2)(A) of the Act; these included, where appropriate, foreign 
inland freight, foreign brokerage and handling expenses, ocean freight, 
U.S. brokerage and handling, U.S. customs duties, and U.S. inland 
freight expenses (i.e., freight from port to warehouse and freight from 
warehouse to the customer). We also made deductions, where appropriate, 
for the profit earned by Norte Pesca's unaffiliated U.S. consignee. 
(See Norte Pesca's June 8, 2004, supplemental questionnaire response at 
4-6.)

EMPAF

    We calculated CEP in accordance with section 772(b) of the Act for 
those sales where the merchandise was first sold (or agreed to be sold) 
in the United States before or after the date of importation by or for 
the account of the producer or exporter, or by a seller affiliated with 
the producer or exporter, to a purchaser not affiliated with the 
producer or exporter.
    We based CEP on the packed CFR or FOB prices to unaffiliated 
purchasers in the United States. We made deductions for billing 
adjustments and discounts, as appropriate. We also made deductions for 
movement expenses, in accordance with section 772(c)(2)(A) of the Act; 
these included, where appropriate, foreign inland freight, foreign 
warehousing expenses, brokerage and handling expenses, ocean freight 
(net of freight rebates), U.S. brokerage and handling, U.S. customs 
duties, U.S. inland freight expenses (i.e., freight from port to 
warehouse and freight from warehouse to the customer), and post-sale 
warehousing expenses. With respect to sales made on a CFR basis, we 
used the flat rate foreign inland freight expense reported in the 
original section B and C response because it appears to be less 
distortive than the destination- and sale term-specific expenses 
reported in the June 17, 2004, supplemental response. We did not deduct 
this expense from the starting price for FOB sales. See EMPAF 
Calculation Memo.
    In accordance with section 772(d)(1) of the Act and 19 CFR 
351.402(b), we deducted those selling expenses associated with economic 
activities occurring in the United States, including direct selling 
expenses (i.e., finance charges and imputed credit expenses), and 
indirect selling expenses (including inventory carrying costs and other 
indirect selling expenses).
    Pursuant to section 772(d)(3) of the Act, we further reduced the 
starting price by an amount for profit to arrive at CEP. In accordance 
with section 772(f) of the Act, we calculated the CEP profit rate using 
the expenses incurred by EMPAF and its affiliate on their sales of the 
subject merchandise in the United States and the profit associated with 
those sales.

Normal Value

A. Home Market Viability and Comparison Market Selection

    In order to determine whether there is a sufficient volume of sales 
in the home market to serve as a viable basis for calculating NV (i.e., 
the aggregate volume of home market sales of the foreign like product 
is equal to or greater than five percent of the aggregate volume of 
U.S. sales), we compared each respondent's volume of home market sales 
of the foreign like product to the volume of U.S. sales of the subject 
merchandise, in accordance with section 773(a)(1)(C) of the Act.
    In this investigation, we determined that EMPAF's aggregate volume 
of home market sales of the foreign like product was greater than five 
percent of the aggregate volume of U.S. sales of the subject 
merchandise. Therefore, we used home market sales as the basis for NV 
in accordance with section 773(a)(1)(B) of the Act.
    Furthermore, we determined that CIDA's aggregate volume of home 
market sales of the foreign like product and Norte Pesca's aggregate 
volume of home market and third country sales of the foreign like 
product were insufficient to permit a proper comparison with U.S. sales 
of the subject merchandise. Therefore, with respect to CIDA, we used 
sales to France, which is CIDA's largest third country market, as the 
basis for comparison-market sales in accordance with section 
773(a)(1)(C) of the Act and 19 CFR 351.404. See Third Country 
Comparison Market Selection Memorandum. For Norte Pesca, we used CV as 
the basis for calculating NV, in accordance with section 773(a)(4) of 
the Act.

B. Level of Trade

    In accordance with section 773(a)(1)(B) of the Act, to the extent 
practicable, we determine NV based on sales in the comparison market at 
the same level of trade (LOT) as the EP or CEP. The NV LOT is that of 
the starting-price sales in the comparison market or, when NV is based 
on CV, that of the sales from which we derive selling, general and 
administrative expenses (SG&A) and profit. For EP, the U.S. LOT is also 
the level of the starting-price sale, which is usually from exporter to 
importer. For CEP, it is the level of the constructed sale from the 
exporter to the importer.
    To determine whether NV sales are at a different LOT than EP or CEP 
sales, we examine stages in the marketing process and selling functions 
along the chain of distribution between the producer and the 
unaffiliated customer. If the comparison-market sales are at a 
different LOT, and the difference affects price comparability, as 
manifested in a pattern of consistent price differences between the 
sales on which NV is based and comparison market sales at the LOT of 
the export transaction, we make an LOT adjustment under section 
773(a)(7)(A) of the Act. Finally, for CEP

[[Page 47087]]

sales, if the NV level is more remote from the factory than the CEP 
level and there is no basis for determining whether the difference in 
levels between NV and CEP affects price comparability, we adjust NV 
under section 773(a)(7)(B) of the Act (the CEP-offset provision). See 
Notice of Final Determination of Sales at Less Than Fair Value: Certain 
Cut-to-Length Carbon Steel Plate From South Africa, 62 FR 61731 (Nov. 
19, 1997).
    In this investigation, we obtained information from each respondent 
regarding the marketing stages involved in making the reported home 
market or third country and U.S. sales, including a description of the 
selling activities performed by each respondent for each channel of 
distribution. Company-specific LOT findings are summarized below.

CIDA

    CIDA made direct sales to distributors/traders through the same 
channel of distribution in both the United States and France. As 
described in its questionnaire response, CIDA performs the identical 
selling functions in the United States and France. Therefore, these 
sales channels are at the same LOT. Accordingly, all comparisons are at 
the same LOT for CIDA and an adjustment pursuant to section 
773(a)(7)(A) is not warranted.

EMPAF

    EMPAF sold through one channel of distribution in the home market--
directly to unaffiliated small distributors, retailers, and consumers. 
We examined the chain of distribution and the selling activities and 
selling expenses associated with sales reported by EMPAF to 
distributors, retailers, and consumers in the home market. EMPAF's 
sales to these customers did not differ from each other with respect to 
selling activities (e.g. packing, order input/processing, direct sales 
personnel, freight and delivery logistics and warranty services). 
Therefore, we found that all of EMPAF's sales to customers in the home 
market constituted one LOT.
    In the U.S. market, EMPAF made CEP sales to distributors through 
two channels of distribution: (1) directly to U.S. customers with 
assistance from NetUSA (EMPAF's affiliated U.S. importer) and (2) to 
NetUSA, which then resold the subject merchandise to U.S. customers. We 
examined EMPAF's U.S. distribution system, including selling functions, 
classes of customers, and selling expenses, and determined that EMPAF 
performs the same selling functions with respect to all CEP sales. 
Therefore, we found only one LOT for EMPAF's CEP sales. This CEP LOT 
differed from the home market LOT in that EMPAF reported a lower 
intensity of selling activities associated with order input/processing, 
direct sales personnel, freight and delivery logistics, and warranty 
services for the CEP LOT than the home market LOT. Therefore, we found 
the CEP LOT to be different from the home market LOT and to be at a 
less advanced stage of distribution than the home market LOT.
    Therefore, we could not match CEP sales to sales at the same LOT in 
the home market, nor could we determine an LOT adjustment based on 
EMPAF's sales in Brazil because there is only one LOT in the home 
market, and it is not possible to determine if there is a pattern of 
consistent price differences between the sales on which NV is based and 
home market sales at the LOT of the export transaction. Furthermore, we 
have no other information that provides an appropriate basis for 
determining an LOT adjustment. Consequently, because the data available 
do not form an appropriate basis for making an LOT adjustment but the 
home market LOT is at a more advanced stage of distribution than the 
CEP LOT, we have made a CEP offset to NV in accordance with section 
773(a)(7)(B) of the Act. The CEP offset is calculated as the lesser of: 
(1) the indirect selling expenses on the home market sales, or (2) the 
indirect selling expenses deducted from the starting price in 
calculating CEP.

Norte Pesca

    Norte Pesca had no viable home or third country market during the 
POI. Therefore, we based NV on CV. When NV is based on CV, the NV LOT 
is that of the sales from which we derive SG&A expenses and profit. 
(See Notice of Preliminary Determination of Sales at Less Than Fair 
Value and Postponement of Final Determination: Fresh Atlantic Salmon 
From Chile, 63 FR 2664 (January 16, 1998).) In accordance with 19 CFR 
351.412(d), the Department will make its LOT determination under 
paragraph (d)(1) of this section on the basis of sales of the foreign 
like product by the producer or exporter. Because we based the selling 
expenses and profit for Norte Pesca on the weighted-average selling 
expenses incurred and profits earned by the other respondents in the 
investigation, we could not determine the LOT of the sales from which 
we derived selling expenses and profit for CV. As a result, there is 
insufficient information on the record to enable us to determine 
whether there is a difference in LOT between any U.S. sales and CV. 
Therefore, we made no LOT adjustment to NV. See ``Calculation of Normal 
Value Based on Constructed Value'' section of this notice below.

C. Cost of Production Analysis

    Based on our analysis of the petitioners' allegations, we found 
that there were reasonable grounds to believe or suspect that CIDA's 
and EMPAF's sales of frozen and canned warmwater shrimp in the third 
country and home market, respectively, were made at prices below their 
COP. Accordingly, pursuant to section 773(b) of the Act, we initiated 
sales-below-cost investigations to determine whether CIDA's and EMPAF's 
sales were made at prices below their respective COPs. See Memorandum 
to Louis Apple, Director Office 2, from The Team Re: Petitioners' 
Allegation of Sales Below the Cost of Production for Central de 
Industrializacao e Distribuicao de Alimentos Ltda. dated June 7, 2004; 
and Memorandum to Louis Apple, Director Office 2, from The Team Re: 
Petitioners' Allegation of Sales Below the Cost of Production for 
Empresa de Armazenagem Frigorifica Ltda. dated June 15, 2004.
1. Calculation of COP
    In accordance with section 773(b)(3) of the Act, we calculated COP 
based on the sum of the cost of materials and fabrication for the 
foreign like product, plus an amount for general and administrative 
expenses (G&A), interest expenses, and home market or third country 
packing costs. See ``Test of Home Market/Third Country Sales Prices'' 
section below for treatment of home market/third country selling 
expenses. We relied on the COP data submitted by the respondents except 
in the following instances:

CIDA

    During the POI, CIDA used an affiliated processor, Cia. Exportadora 
de Produtos do Mar (PRODUMAR), to produce the subject merchandise. CIDA 
purchased all material inputs, and maintained ownership of the 
materials and the processed shrimp, and PRODUMAR charged a fee for 
processing. During the POI, PRODUMAR neither produced nor sold the 
subject merchandise or the foreign like product for its own account. 
CIDA performed all marketing and selling functions, and controlled both 
the sale of the subject merchandise and the production schedules 
followed by PRODUMAR. For cost reporting purposes, CIDA collapsed 
itself with PRODUMAR as a single entity, and reported the processing 
costs incurred by PRODUMAR.

[[Page 47088]]

    Based upon the facts above, we find that PRODUMAR is a toller under 
19 CFR 351.401(h). Section 351.401(h) of the Department's regulations 
mandates that the Department will not consider a toller to be a 
manufacturer or producer where the toller does not acquire ownership, 
and does not control the relevant sale of the subject merchandise. 
Consistent with our practice with respect to subcontractors and 
tollers, we do not consider CIDA and PRODUMAR to be one reporting 
entity. See Notice of Final Determination of Sales at Less Than Fair 
Value: Dynamic Random Access Memory Semiconductors of One Megabit and 
Above from Taiwan, 64 FR 56308, 56318 (October 19, 1999). Accordingly, 
because we consider PRODUMAR to be a toller affiliated with CIDA, we 
invoked the transactions disregarded and major input rules, in 
accordance with sections 773(f)(2) and (3) of the Act and 19 CFR 
351.407(b). We determined the value of PRODUMAR's toll processing based 
on the higher of the transfer price paid by CIDA and PRODUMAR's 
reported processing costs. See Memorandum to Neal Halper from Sheikh M. 
Hannan dated July 28, 2004, Re: Cost of Production and Constructed 
Value Calculation Adjustments for the Preliminary Determination (CIDA 
COP/CV Calculation Memo.)
    However, the Department recognizes that, given the nature of the 
affiliation between CIDA and PRODUMAR, a related issue could arise with 
respect to whether there is a potential for manipulation of price or 
production and, if so, whether CIDA and PRODUMAR should receive the 
same antidumping duty rate. Therefore, the Department is soliciting 
comments on this issue for consideration in the final determination.
    We also made the following adjustments to CIDA's reported COP 
information:
    1. We revised the reported cost of manufacturing to include the 
internal taxes on purchases of inputs which were not refunded.
    2. As noted above, we revised the reported cost of manufacturing 
for affiliated party transactions in accordance with sections 773(f)(3) 
of the Act.
    3. We revised the reported product-specific G&A and net financial 
expense amounts by applying the reported G&A and financial expense 
ratios to the product-specific cost of manufacturing.
    4. CIDA did not report costs for some products that were sold in 
the third country and U.S. markets. In these instances, as facts 
available under 776(a)(1) of the Act, we assigned to those products the 
costs reported for comparable products. We intend to solicit the 
missing cost information from CIDA after the preliminary determination 
for consideration in the final determination.
    For further discussion of these adjustments, see CIDA COP/CV 
Calculation Memo.

EMPAF

    1. We revised EMPAF's and Maricultura's G&A expense rate to include 
Maricultura's amortization of pre-operating costs.
    2. We revised EMPAF's and Maricultura's financial expense rate to 
exclude EMPAF's other financial income.
    3. EMPAF did not report costs for one product that was sold in the 
home market. In this instance, as facts available under 776(a)(1) of 
the Act, we assigned to that product the cost reported for a comparable 
product. We intend to solicit the missing cost information from EMPAF 
after the preliminary determination for consideration in the final 
determination. See Memorandum to Neal Halper from Michael P. Harrison 
dated July 28, 2004, Re: Cost of Production and Constructed Value 
Calculation Adjustments for the Preliminary Determination (EMPAF COP/CV 
Calculation Memo).

Norte Pesca

    1. We revised the direct materials costs by increasing the raw 
material shrimp costs for all shrimp with a count size of 51/60 per 
pound and lower (i.e., the larger shrimp). See the ``Facts Available'' 
section of this notice below.
    2. Norte Pesca asserted that it did not pay ICMS and PIS taxes on 
the purchases of shrimp. Thus, we revised the direct materials cost by 
excluding an offset to the raw material shrimp costs for the recovery 
of ICMS and PIS taxes.
    3. We adjusted the reported variable and fixed overhead ratios in 
the CV/COP database to reflect the revised ratios submitted by Norte 
Pesca.
    4. We revised Norte Pesca's per-unit cost of manufacturing to 
reflect a correction to the production quantity.
    5. We adjusted the reported G&A expense ratio in the CV/COP 
database to reflect the revised ratio submitted by Norte Pesca and to 
exclude an offset for the recovery of ICMS, IPI, and PIS taxes, as 
Norte Pesca reported that it did not pay these taxes.
    6. We adjusted the reported financial expense ratio in the CV/COP 
database to reflect the revised ratio submitted by Norte Pesca.
    See Memorandum to Neal Halper from Mark Todd dated July 28, 2004, 
Re: Cost of Production and Constructed Value Calculation Adjustments 
for the Preliminary Determination (Norte Pesca COP/CV Calculation 
Memo).
2. Test of Home Market/Third Country Sales Prices
    On a product-specific basis, we compared the adjusted weighted-
average COP to the home market/third country sales of the foreign like 
product, as required under section 773(b) of the Act, in order to 
determine whether the sale prices were below the COP. The prices were 
exclusive of any applicable billing adjustments, movement charges, 
discounts, and direct and indirect selling expenses. In determining 
whether to disregard home market/third country market sales made at 
prices less than their COP, we examined, in accordance with sections 
773(b)(1)(A) and (B) of the Act, whether such sales were made (1) 
within an extended period of time in substantial quantities, and (2) at 
prices which permitted the recovery of all costs within a reasonable 
period of time.
3. Results of the COP Test
    Pursuant to section 773(b)(2)(C) of the Act, where less than 20 
percent of the respondent's sales of a given product during the POI are 
at prices less than the COP, we do not disregard any below-cost sales 
of that product, because we determine that in such instances the below-
cost sales were not made in substantial quantities. Where 20 percent or 
more of the respondent's sales of a given product during the POI are at 
prices less than the COP, we determine that the below-cost sales 
represent substantial quantities within an extended period of time, in 
accordance with section 773(b)(1)(A) of the Act. In such cases, we also 
determine whether such sales were made at prices which would not permit 
recovery of all costs within a reasonable period of time, in accordance 
with section 773(b)(1)(B) of the Act.
    We found that, for certain specific products, more than 20 percent 
of respondents' sales during the POI were at prices less than the COP 
and, in addition, the below-cost sales did not provide for the recovery 
of costs within a reasonable period of time. We therefore excluded 
these sales and used the remaining sales, if any, as the basis for 
determining NV, in accordance with section 773(b)(1) of the Act. Where 
there were no sales of any comparable product at prices above the COP, 
we used CV as the basis for determining NV.

[[Page 47089]]

4. Use of Facts Available
    Section 776(a)(2) of the Act provides that, if an interested party 
withholds information requested by the Department, fails to provide 
such information by the deadline or in the form or manner requested, 
significantly impedes a proceeding, or provides information which 
cannot be verified, the Department shall use, subject to sections 
782(d) and (e) of the Act, facts otherwise available in reaching the 
applicable determination. Section 782(d) of the Act provides that if 
the Department determines that a response to a request for information 
does not comply with the Department's request, the Department shall 
promptly inform the responding party and provide an opportunity to 
remedy the deficient submission. Section 782(e) of the Act further 
states that the Department shall not decline to consider submitted 
information if all of the following requirements are met: (1) The 
information is submitted by the established deadline; (2) the 
information can be verified; (3) the information is not so incomplete 
that it cannot serve as a reliable basis for reaching the applicable 
determination; (4) the interested party has demonstrated that it acted 
to the best of its ability; and (5) the information can be used without 
undue difficulties.
    In this case, Norte Pesca has failed to provide information 
requested by the Department that is necessary to properly calculate 
antidumping margins for its preliminary determination. Specifically, 
Norte Pesca failed to provide product-specific raw material costs by 
control number. The Department's section D questionnaire at III.A.3, 
requests that if a physical characteristic identified by the Department 
is not tracked by the company's normal cost accounting system, then the 
respondent company should calculate the appropriate cost differences 
for the physical characteristic, using a reasonable method based on 
available company records (e.g., production records, engineering 
statistics). Norte Pesca did not comply with the instructions in the 
Department's original Section D questionnaire nor did it explain why it 
could not do so. Moreover, Norte Pesca failed to provide requested 
information in a supplemental questionnaire that would enable the 
Department to differentiate raw material costs by control number. As a 
result of Norte Pesca's failure to provide the above requested 
information, the Department is unable to use the reported raw materials 
data to properly calculate CV.
    Thus, in reaching our preliminary determination, pursuant to 
sections 776(a)(2)(A), (B), and (C) of the Act, we have based Norte 
Pesca's raw materials cost on facts otherwise available in calculating 
the dumping margin.
    In applying facts otherwise available, section 776(b) of the Act 
provides that the Department may use an inference adverse to the 
interests of a party that has failed to cooperate by not acting to the 
best of its ability to comply with the Department's requests for 
information. See, e.g., Notice of Final Determination of Sales at Less 
Than Fair Value and Final Negative Critical Circumstances: Carbon and 
Certain Alloy Steel Wire Rod from Brazil, 67 FR 55792, 55794-96 (August 
30, 2002). Adverse inferences are appropriate ``to ensure that the 
party does not obtain a more favorable result by failing to cooperate 
than if it had cooperated fully.'' See Statement of Administrative 
Action accompanying the Uruguay Round Agreements Act, H.R. Rep. No. 
103-316, at 870 (1994) (SAA). Furthermore, ``affirmative evidence of 
bad faith on the part of a respondent is not required before the 
Department may make an adverse inference.'' See Antidumping Duties; 
Countervailing Duties; Final Rule, 62 FR 27355 (May 19, 1997). See also 
Nippon Steel v. U.S., 337 F.3d 1373 (Fed. Cir. 2003). In this case, 
Norte Pesca failed to provide adequate responses to the Department's 
section D questionnaires in regard to the cost of raw materials. Norte 
Pesca's April 15, 2004, response to the original section D 
questionnaire was inadequate with respect to differentiating raw 
material costs by control number. In order to address the deficiencies 
in Norte Pesca's response, pursuant to section 782(d) of the Act, the 
Department issued supplemental section D questionnaires on June 17, 
2004, and June 25, 2004. Norte Pesca's responses were received on July 
6, 2004, and July 9, 2004, respectively. In the June 25, 2004, 
supplemental questionnaire, the Department requested detailed raw 
materials purchase cost information necessary for the Department to 
adequately differentiate raw material costs by control number but Norte 
Pesca failed to provide it in its July 9, 2004, supplemental 
questionnaire response. Norte Pesca's failure to provide this critical 
information in any of its responses has rendered its raw materials 
costs inadequate for the preliminary determination. This constitutes a 
failure on the part of Norte Pesca to cooperate to the best of its 
ability to comply with a request for information by the Department 
within the meaning of section 776(b) of the Act. Therefore, the 
Department has preliminarily determined that in selecting from among 
the facts otherwise available, an adverse inference is warranted with 
regard to the raw material costs. See, e.g., Notice of Final 
Determination of Sales at Less than Fair Value: Circular Seamless 
Stainless Steel Hollow Products from Japan, 65 FR 42985, 42986 (July 
12, 2000).
    Where the Department applies adverse facts available (AFA) because 
a respondent failed to cooperate by not acting to the best of its 
ability to comply with a request for information, section 776(b) of the 
Act authorizes the Department to rely on information derived from the 
petition, a final determination, a previous administrative review, or 
other information placed on the record. See also 19 CFR 351.308(c); SAA 
at 829-831. In this case, we revised Norte Pesca's raw material costs 
based on Norte Pesca's own data placed on the record. Because an 
adverse inference is warranted, we have increased raw material costs 
for all shrimp with a count size of 51/60 per pound and lower (i.e., 
the larger size shrimp) by the percent difference between the reported 
total average purchase price for all shrimp and the top ten percent of 
the reported highest purchase prices for shrimp during the POI. See 
Norte Pesca COP/CV Calculation Memo. Thus, for the preliminary 
determination, the Department has differentiated raw material costs by 
control number for the larger size shrimp based on AFA.

D. Calculation of Normal Value Based on Comparison Market Prices

CIDA
    We calculated NV based on delivered prices to unaffiliated 
customers. We made deductions for movement expenses, including inland 
freight and insurance, brokerage, and warehousing under section 
773(a)(6)(B)(ii) of the Act. In addition, we made adjustments under 
section 773(a)(6)(C)(iii) of the Act and 19 CFR 351.410 for differences 
in circumstances of sale for imputed credit and other direct selling 
expenses.
    Furthermore, we made adjustments for differences in costs 
attributable to differences in the physical characteristics of the 
merchandise in accordance with section 773(a)(6)(C)(ii) of the Act and 
19 CFR 351.411. We also deducted third country packing costs and added 
U.S. packing costs in accordance with sections 773(a)(6)(A) and (B) of 
the Act.

[[Page 47090]]

EMPAF
    We calculated NV based on delivered prices to unaffiliated 
customers. We made deductions, where appropriate, from the starting 
price for billing adjustments. We made further deductions for taxes in 
accordance with section 773(a)(6)(B)(iii) of the Act. See Notice of 
Preliminary Determination of Less Than Fair Value and Postponement of 
Final Determination: Carbon and Certain Alloy Steel Wire Rod from 
Brazil, 67 FR 18165, 18169 (April 15, 2002). We also made deductions 
for movement expenses, including inland freight, under section 
773(a)(6)(B)(ii) of the Act. In addition, we made adjustments under 
section 773(a)(6)(C)(iii) of the Act and 19 CFR 351.410 for differences 
in circumstances of sale for imputed credit and interest revenue.
    In accordance with 19 CFR 351.403(d), we excluded from our analysis 
sales made to employees because they were insignificant in terms of 
volume and value. We also excluded home market sales of processed 
shrimp produced by manufacturers other than EMPAF or Maricultura in 
accordance with section 771(16) of the Act.
    Furthermore, we made adjustments for differences in costs 
attributable to differences in the physical characteristics of the 
merchandise in accordance with section 773(a)(6)(C)(ii) of the Act and 
19 CFR 351.411. We also deducted home market packing costs and added 
U.S. packing costs in accordance with sections 773(a)(6)(A) and (B) of 
the Act.
    Finally, we made a CEP offset pursuant to section 773(a)(7)(B) of 
the Act and 19 CFR 351.412(f). We calculated the CEP offset as the 
lesser of the indirect selling expenses on the comparison-market sales 
or the indirect selling expenses deducted from the starting price in 
calculating CEP.

E. Calculation of Normal Value Based on Constructed Value

    In accordance with section 773(a)(4) of the Act, we based NV on CV 
where there was no viable home market or third country market (Norte 
Pesca), or no comparable sales in the third country market (CIDA) made 
in the ordinary course of trade.
    In accordance with section 773(e) of the Act, we calculated CV 
based on the sum of the respondents' cost of materials and fabrication 
for the foreign like product, plus amounts for SG&A, profit, and U.S. 
packing costs. We calculated the cost of materials and fabrication, G&A 
and interest based on the methodology described in the ``Calculation of 
COP'' section of this notice. For further details, see CIDA COP/CV 
Calculation Memo and Norte Pesca COP/CV Calculation Memo.
    Because Norte Pesca does not have a viable comparison market, the 
Department cannot determine profit under section 773(e)(2)(A) of the 
Act, which requires sales by the respondent in question in the ordinary 
course of trade in a comparison market. Likewise, because Norte Pesca 
does not have sales of any product in the same general category of 
products as the subject merchandise, we are unable to apply alternative 
(i) of section 773(e)(2)(B) of the Act. Further, the Department cannot 
calculate profit based on alternative (ii) of this section without 
violating our responsibility to protect respondents' administrative 
protective order (APO) information because EMPAF is the only other 
respondent with viable home market sales (19 CFR 351.405(b) requires 
that a profit ratio under this alternative be based solely on home 
market sales). If we were to use EMPAF's profit ratio exclusively under 
this alternative, Norte Pesca would be able to determine EMPAF's 
proprietary profit rate. Therefore, we calculated Norte Pesca's CV 
profit and selling expenses based on the third alternative, any other 
reasonable method, in accordance with section 773(e)(2)(B)(iii) of the 
Act. As a result, as a reasonable method, we calculated Norte Pesca's 
CV profit and selling expenses based on the weighted average of the 
profit and selling expenses incurred by the two other respondents in 
this investigation. Specifically, we calculated weighted-average profit 
and selling expenses incurred on home market sales by EMPAF and third 
country sales by CIDA.
    Pursuant to alternative (iii), the Department has the option of 
using any other reasonable method, as long as the result is not greater 
than the amount realized by exporters or producers ``in connection with 
the sale, for consumption in the foreign country, of merchandise that 
is in the same general category of products as the subject 
merchandise,'' the ``profit cap.'' In the instant case, the profit cap 
cannot be calculated using the available data (i.e., CIDA and EMPAF), 
because this data would render the cap unrepresentative or inaccurate. 
Specifically, a cap using CIDA's third country data would not reflect 
profit derived solely based on home market data. Furthermore, using 
EMPAF's home market data, the only information we have to allow us to 
calculate the amount normally realized by other exporters or producers 
in connection with the sale, for consumption in the home market, of 
merchandise in the same general category, would violate our 
responsibility to protect the respondent's APO information. Therefore, 
as facts available, we are applying option (iii), without quantifying a 
profit cap.
    For comparisons to EP for CIDA and Norte Pesca, we made 
circumstances-of-sale adjustments for direct selling expenses. For CIDA 
we deducted third country direct selling expenses and added U.S. direct 
selling expenses. For Norte Pesca, we deducted the weighted-average 
direct selling expenses of the other two respondents, as described 
above, and added U.S. direct selling expenses.

Currency Conversion

    We made currency conversions into U.S. dollars in accordance with 
section 773A(a) of the Act based on the exchange rates in effect on the 
dates of the U.S. sales as certified by the Federal Reserve Bank.

Verification

    As provided in section 782(i) of the Act, we will verify all 
information relied upon in making our final determination.

Suspension of Liquidation

    In accordance with section 733(d)(2) of the Act, we are directing 
U.S. Customs and Border Protection (CBP) to suspend liquidation of all 
imports of subject merchandise that are entered, or withdrawn from 
warehouse, for consumption on or after the date of publication of this 
notice in the Federal Register. We will instruct CBP to require a cash 
deposit or the posting of a bond equal to the weighted-average amount 
by which NV exceeds EP or CEP, as indicated in the chart below. These 
suspension-of-liquidation instructions will remain in effect until 
further notice. The weighted-average dumping margins are as follows:

[[Page 47091]]

--------------------------------------------------------------------------
                                                                Weighted-
                                                                 average
                   Exporter/manufacturer                          margin
                                                                percentage
--------------------------------------------------------------------------
Empresa de Armazenagem Frigorifica Ltda./Maricultura Netuno S.A...  0.00
Central de Industrializacao e Distribuicao de Alimentos Ltda......  8.41
Norte Pesca S.A................................................... 67.80
All Others........................................................ 36.91
--------------------------------------------------------------------------
The All Others rate is derived exclusive of all de minimis margins and
margins based entirely on adverse facts available.

ITC Notification

    In accordance with section 733(f) of the Act, we have notified the 
ITC of our determination. If our final determination is affirmative, 
the ITC will determine before the later of 120 days after the date of 
this preliminary determination or 45 days after our final determination 
whether these imports are materially injuring, or threaten material 
injury to, the U.S. industry.

Disclosure

    We will disclose the calculations used in our analysis to parties 
in this proceeding in accordance with 19 CFR 351.224(b).

Public Comment

    Case briefs for this investigation must be submitted to the 
Department no later than seven days after the date of the final 
verification report issued in this proceeding. Rebuttal briefs must be 
filed five days from the deadline date for case briefs. A list of 
authorities used, a table of contents, and an executive summary of 
issues should accompany any briefs submitted to the Department. 
Executive summaries should be limited to five pages total, including 
footnotes. Section 774 of the Act provides that the Department will 
hold a public hearing to afford interested parties an opportunity to 
comment on arguments raised in case or rebuttal briefs, provided that 
such a hearing is requested by an interested party. If a request for a 
hearing is made in this investigation, the hearing will tentatively be 
held two days after the rebuttal brief deadline date at the U.S. 
Department of Commerce, 14th Street and Constitution Avenue, NW., 
Washington, DC 20230. Parties should confirm by telephone the time, 
date, and place of the hearing 48 hours before the scheduled time.
    Interested parties who wish to request a hearing, or to participate 
if one is requested, must submit a written request to the Assistant 
Secretary for Import Administration, U.S. Department of Commerce, Room 
1870, within 30 days of the publication of this notice. Requests should 
contain: (1) The party's name, address, and telephone number; (2) the 
number of participants; and (3) a list of the issues to be discussed. 
Oral presentations will be limited to issues raised in the briefs.
    We will make our final determination no later than 135 days after 
the publication of this notice in the Federal Register.
    This determination is published pursuant to sections 733(f) and 
777(i) of the Act.

    Dated: July 28, 2004.
James J. Jochum,
Assistant Secretary for Import Administration.
[FR Doc. 04-17814 Filed 8-3-04; 8:45 am]