[Federal Register Volume 63, Number 11 (Friday, January 16, 1998)]
[Notices]
[Pages 2664-2671]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-1164]


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DEPARTMENT OF COMMERCE

International Trade Administration
[A-337-803]


Notice of Preliminary Determination of Sales at Less Than Fair 
Value and Postponement of Final Determination: Fresh Atlantic Salmon 
From Chile

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

EFFECTIVE DATE: January 16, 1998.

FOR FURTHER INFORMATION CONTACT: Gabriel Adler or Kris Campbell, Office 
of AD/CVD Enforcement 2, Import Administration, International Trade 
Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue, N.W., Washington, D.C. 20230; telephone: (202) 
482-1442 or (202) 482-3813, respectively.

SUPPLEMENTARY INFORMATION:

The Applicable Statute and Regulations

    Unless otherwise indicated, all citations to the statute are 
references to the provisions effective January 1, 1995, the effective 
date of the amendments made to the Tariff Act of 1930 (the Act) by the 
Uruguay Round Agreements Act (URAA). In addition, unless otherwise 
indicated, all citations to Department of Commerce (Department) 
regulations refer to the regulations last codified at 19 CFR part 353 
(April 1, 1997).

Preliminary Determination

    We preliminarily determine that fresh Atlantic salmon from Chile is 
being sold, or is 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 are shown in the Suspension of Liquidation section of this 
notice.

Case History

    This investigation was initiated on July 2, 1997. See Initiation of 
Antidumping Duty Investigation: Fresh Atlantic Salmon From Chile, 62 FR 
37027 (July 10, 1997) (Initiation Notice). Since the initiation of the 
investigation, the following events have occurred:
    On July 12, 1997, the United States International Trade Commission 
(the ITC) preliminarily determined that there is a reasonable 
indication that imports of the product under investigation are 
materially injuring the United States industry.
    On July 21, 1997, the Department invited interested parties to 
submit comments regarding selection of respondents and model matching. 
After considering those comments, on August

[[Page 2665]]

26, 1997, the Department selected the following companies as 
respondents in this investigation: Pesquera Mares Australes Ltda. 
(Mares Australes); Marine Harvest Chile (Marine Harvest); Aguas Claras 
S.A. (Aguas Claras); Pesquera Eicosal Ltda. (Eicosal); and Cia. 
Pesquera Camanchaca S.A. (Camanchaca) (collectively ``respondents''). 
See Selection of Respondents, below. On the same date, the Department 
issued an antidumping questionnaire to the selected respondents. 
<SUP>1</SUP>
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    \1\ Section A of the questionnaire requests general information 
concerning a company's corporate structure and business practices, 
the merchandise under investigation that it sells, and the manner in 
which it sells that merchandise in all of its markets. Section B 
requests a complete listing of all home market sales, or, if the 
home market is not viable, of sales in the most appropriate third-
country market. Section C requests a complete listing of U.S. sales. 
Section D requests information on the cost of production of the 
foreign like product and the constructed value of the merchandise 
under investigation.
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    The respondents submitted their initial responses to that 
questionnaire in September and October of 1997. After analyzing these 
responses, we issued supplemental questionnaires to the respondents to 
clarify or correct the initial questionnaire responses.
    On October 6, 1997, the Coalition for Fair Atlantic Salmon Trade 
(the petitioners) requested that the Department initiate a sales-below-
cost investigation with respect to sales in Canada by Aguas Claras. 
<SUP>2</SUP> The petitioners' allegation was timely, and provided 
reasonable grounds to believe that Aguas Claras had made sales below 
cost in Canada. Therefore, in accordance with section 773(b) of the 
Act, on October 21, 1997, we initiated a sales-below-cost investigation 
with respect to Aguas Claras' sales to Canada. See Cost of Production, 
below.
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    \2\ The petition had demonstrated reasonable grounds to believe 
that Chilean producers/exporters of the foreign like product had 
made sales below cost in Japan and Brazil, and the Department had 
initiated country-wide cost investigations with respect to these 
markets. However, the petition did not make an allegation of sales 
below cost with respect to Canada. See Initiation Notice at 37029.
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    On October 17, 1997, in accordance with section 773(a)(1) of the 
Act, the Department determined that a particular market situation 
existed in the home market that rendered sales in that market an 
inappropriate basis for comparison to U.S. sales. The Department 
requested that Eicosal and Mares Australes, the two respondents that 
had provided a response to Section B of our questionnaire based on home 
market sales, provide a revised response based on sales to Japan, the 
only viable third-country market for those two companies. Eicosal and 
Mares Australes complied with this request, but argued that to the 
extent that the Department considered that the home market presents a 
particular market situation, it should find that Japan also presents a 
particular market situation. See Selection of Comparison Markets, 
below.
    On October 17, 1997, the petitioners filed a timely request for a 
50-day postponement of the preliminary determination. Absent compelling 
reasons to deny this request, and in accordance with section 
733(c)(1)(A) of the Act and section 353.15(c) of the Department's 
regulations, on October 23, 1997, the Department postponed the 
preliminary determination until not later than January 8, 1998. See 
Notice of Postponement of Preliminary Antidumping Determination: Fresh 
Atlantic Salmon from Chile, 62 FR 56151 (October 29, 1997).

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.
    On December 18, 1997, the respondents in this investigation, who 
account for a significant proportion of exports of subject merchandise, 
made such a request. In their request for an extension of the deadline 
for the final determination, the respondents consented to the extension 
of provisional measures to no longer than six months. Since this 
preliminary determination is affirmative, and there is no compelling 
reason to deny the respondents' request, we have extended the deadline 
for issuance of the final determination until the 135th day after the 
date of publication of this preliminary determination in the Federal 
Register.

Period of Investigation

    The period of investigation (POI) is April 1, 1996, through March 
31, 1997. This period corresponds to each respondent's four most recent 
fiscal quarters prior to the month of the filing of the petition (i.e., 
June 1996).

Scope of Investigation

    The scope of this investigation covers fresh, farmed Atlantic 
salmon, whether imported ``dressed'' or cut. Atlantic salmon is the 
species Salmo salar, in the genus Salmo of the family salmoninae. 
``Dressed'' Atlantic salmon refers to salmon that has been bled, 
gutted, and cleaned. Dressed Atlantic salmon may be imported with the 
head on or off; with the tail on or off; and with the gills in or out. 
All cuts of fresh Atlantic salmon are included in the scope of the 
investigation. Examples of cuts include, but are not limited to: 
crosswise cuts (steaks), lengthwise cuts (fillets), lengthwise cuts 
attached by skin (butterfly cuts), combinations of crosswise and 
lengthwise cuts (combination packages), and Atlantic salmon that is 
minced, shredded, or ground. Cuts may be subjected to various degrees 
of trimming, and imported with the skin on or off and with the ``pin 
bones'' in or out.
    Excluded from the scope are (1) fresh Atlantic salmon that is ``not 
farmed'' (i.e., wild Atlantic salmon); (2) live Atlantic salmon; and 
(3) Atlantic salmon that has been subject to further processing, such 
as frozen, canned, dried, and smoked Atlantic salmon, or processed into 
forms such as sausages, hot dogs, and burgers.
    The merchandise subject to this investigation is classifiable as 
item numbers 0302.12.0003 and 0304.10.4093 of the Harmonized Tariff 
Schedule (HTS) of the United States. Although the HTS statistical 
reporting numbers are provided for convenience and customs purposes, 
the written description of the merchandise is dispositive.

Class or Kind

    We have preliminarily determined that the products subject to this 
investigation comprise a single class or kind of merchandise. Our 
determination is based on an evaluation of the criteria set forth in 
Diversified Products v. United States, 572 F. Supp. 883, 889 (CIT 1983) 
(Diversified Products), which look to differences in: (1) The general 
physical characteristics of the merchandise, (2) the expectations of 
the ultimate purchaser, (3) the ultimate use of the merchandise, (4) 
the channels of trade in which the merchandise moves, and (5) cost. In 
making this determination, we have rejected a request by two of the 
respondents in this investigation, Mares Australes and Eicosal, that 
the Department determine that there are two separate classes or kinds 
of merchandise subject to investigation: (1) Fresh whole dressed 
Atlantic salmon, and (2) fresh Atlantic salmon meat. See letter from 
Arnold & Porter to Department of Commerce (November 3, 1997). In our 
analysis of the Diversified Products criteria, we found first, with 
respect to physical differences, that although certain differences 
between the two forms of the

[[Page 2666]]

merchandise exist, these differences have not been shown to outweigh 
the similarities among the products. With respect to the expectations 
of the ultimate purchaser and the ultimate use of the merchandise, we 
found that both whole dressed salmon and salmon cuts are ultimately 
destined for human consumption. Moreover, even if we were to consider 
restaurants/supermarkets as the ``ultimate purchaser,'' there is 
insufficient evidence to support the respondents' claim that whole 
salmon is sold to gourmet restaurants and fillets of salmon are sold to 
supermarkets and warehouse retailers. Finally, with respect to cost, we 
found while there is a cost difference involved in the additional 
cutting procedure required to make a fillet from a dressed fish, that 
difference alone is not significant enough to warrant a finding that 
there are two classes or kinds of merchandise. For a more detailed 
discussion of our preliminary determination with respect to the class 
or kind issue, see Memorandum from Gary Taverman to Richard W. 
Moreland, Fresh Atlantic Salmon from Chile: Issues Concerning the 
Preliminary Determination of Sales at Less Than Fair Value (January 8, 
1998) (Preliminary Determination Memorandum).

Selection of Respondents

    Section 777A(c)(1) of the Act directs the Department to calculate 
individual dumping margins for each known exporter and producer of the 
subject merchandise. However, section 777A(c)(2) of the Act gives the 
Department discretion, when faced with a large number of exporters/
producers, to limit its examination to a reasonable number of such 
companies if it is not practicable to examine all companies. Where it 
is not practicable to examine all known producers/exporters of subject 
merchandise, this provision permits the Department to investigate 
either: (1) A sample of exporters, producers, or types of products that 
is statistically valid based on the information available at the time 
of selection, or (2) exporters and producers accounting for the largest 
volume of the subject merchandise that can reasonably be examined.
    After consideration of the complexities expected to arise in this 
proceeding (including issues of model matching, market viability, and 
cost of production), and the resources available to the Department, we 
determined that it was not practicable in this investigation to examine 
all known producers/exporters of subject merchandise. Instead, we found 
that given our resources we would be able to investigate the five 
producers/exporters with the greatest export volume, as identified 
above. These companies accounted for slightly less than 50 percent of 
all known exports of the subject merchandise during the POI. For a more 
detailed discussion of respondent selection in this investigation, see 
Memorandum from the Team to Richard W. Moreland, (August 26, 1997) 
(Respondent Selection Memorandum).

Product Comparisons

    Pursuant to section 771(16) of the Act, all products produced by 
the respondents that fit the definition of the scope of the 
investigation and were sold in the comparison third-country markets 
during the POI fall within the definition of the foreign like product. 
We have relied on three criteria to match U.S. sales of subject 
merchandise to comparison market sales of the foreign like product: 
form, grade, and weight band. We have determined that it is generally 
not possible to match across forms, grades, or weight bands, because 
there are significant differences among products that cannot be 
accounted for by means of a difference-in-merchandise adjustment. (The 
exception to this general rule is that dressed salmon with gills in can 
be compared to dressed salmon with gills out, after making a 
difference-in-merchandise adjustment.) Therefore, we have compared U.S. 
sales to comparison market sales of identical merchandise, and have not 
compared U.S. sales to comparison market sales of similar merchandise. 
A detailed description of the matching criteria, as well as our 
matching methodology, is contained in the Preliminary Determination 
Memorandum.<SUP>3</SUP>
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    \3\ Certain respondents contend that, in the Japanese market, 
there is a distinction between premium and super-premium salmon. 
While we have accepted this claim for the preliminary determination, 
we intend to examine this issue thoroughly at verification.
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Fair Value Comparisons

    To determine whether sales of fresh Atlantic salmon from Chile were 
made in the United States at less than fair value, we compared the 
export price (EP) or constructed export price (CEP) to the normal value 
(NV), as described in the Export Price and Constructed Export Price and 
Normal Value sections of this notice. In accordance with section 
777A(d)(1)(A)(i) of the Act, we calculated weighted-average EPs and 
CEPs for comparison to weighted-average NVs.

Export Price and Constructed Export Price

    In accordance with section 772 of the Act, we calculated either an 
EP or a CEP, depending on the nature of each sale. Section 772(a) of 
the Act defines EP as the price at which the subject merchandise is 
first sold before the date of importation by the exporter or producer 
outside the United States to an unaffiliated purchaser in the United 
States, or to an unaffiliated purchaser for exportation to the United 
States. Section 772(b) of the Act defines CEP as the price at which the 
subject merchandise is first sold in the United States before or after 
the date of importation, by or for the account of the producer or 
exporter of the merchandise, or by a seller affiliated with the 
producer or exporter, to an unaffiliated purchaser, as adjusted under 
sections 772 (c) and (d) of the Act.
    Consistent with these definitions, we have found that Aguas Claras, 
Mares Australes, and Camanchaca made EP sales during the POI. These 
sales are properly classified as EP sales because they were made by the 
exporter or producer outside the United States to unaffiliated 
customers in the United States prior to the date of importation. We 
note that the Aguas Claras EP sales were indirect (i.e., these sales 
were made through an affiliated U.S. reseller that facilitated the 
processing of sales documentation).
    We also found that all the respondents made CEP sales during the 
POI. Marine Harvest and Aguas Claras made sales through an affiliated 
reseller in the United States after the date of importation. Mares 
Australes, Eicosal, and Camanchaca made sales classifiable as CEP sales 
because the sales were made for the account of the producer/exporter by 
an unaffiliated consignment agent in the United States after the date 
of importation.<SUP>4</SUP>
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    \4\ On October 31, 1997, the petitioners alleged that 
respondents Mares Australes, Camanchaca, and Eicosal are affiliated 
with their U.S. consignment sellers because the nature of a 
consignment relationship is such that the consignment seller 
controls the exporter. We have not adopted that position for this 
preliminary determination. In recent cases involving consignment 
sales of agricultural products, we explicitly recognized that a 
consignment relationship does not per se establish affiliation 
between the producer and the consignment seller. See, e.g., Certain 
Fresh Cut Flowers from Colombia; Final Results and Partial 
Rescission of Antidumping Duty Administrative Review, 62 FR 53287, 
53295 (October 14, 1997) (rejecting petitioners' contention that 
``any consignment sale implies affiliation between the exporter and 
the consignment importer''). Beyond the consignment nature of the 
relationship between the parties, the evidence on the record does 
not warrant a finding of affiliation. For a further discussion of 
this issue, see Preliminary Determination Memorandum.

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[[Page 2667]]

    In their original questionnaire responses, Mares Australes, 
Eicosal, and Camanchaca reported prices based on the aggregated 
revenues reported periodically by unaffiliated consignment sellers. 
Because it is the Department's preference to examine transaction-
specific data wherever possible, we requested that these three 
respondents prepare a listing of all sales made by unaffiliated 
consignment sellers to their U.S. customers. See letters from 
Department of Commerce to Arnold & Porter (October 31, 1997) (regarding 
sales by Eicosal and Camanchaca), and (November 20, 1997) (regarding 
sales by Mares Australes). The respondents complied with this request, 
but argued that since this data is not normally in their possession, 
the Department should instead rely on prices calculated on the basis of 
the aggregated revenues reported by the unaffiliated consignment 
sellers. See letters from Arnold & Porter to Department of Commerce 
(November 18, 1997) (submitting sales data for Eicosal and Camanchaca), 
and (December 8, 1997) (submitting sales data for Mares Australes). 
Given the Department's preference for transaction-specific data, we 
have relied on that data for this preliminary determination.
    For all respondents, we calculated EP and CEP, as appropriate, 
based on packed prices charged to the first unaffiliated customer in 
the United States. (Where sales were made through consignment sellers, 
we did not consider the consignment seller to be the customer; rather, 
the relevant customer was the consignment seller's customer.) We based 
the date of sale on the date of the invoice issued to the U.S. 
customer.
    In accordance with section 772(c)(2) of the Act, we reduced the EP 
and CEP by movement expenses and export taxes and duties, where 
appropriate.
    Section 772(d)(1) of the Act provides for additional adjustments to 
the CEP. Generally, where sales were made through an unaffiliated 
consignment seller for the account of the exporter, we deducted 
commissions from the CEP.<SUP>5</SUP> Where sales were made through an 
affiliated reseller, we deducted direct and indirect selling expenses 
that related to commercial activity in the United States.
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    \5\ Consistent with our practice, we did not deduct from the CEP 
the expenses of the unaffiliated consignment seller, since such 
expenses are effectively covered by the commission charged by the 
consignment seller to the producer/exporter. See, e.g., Certain 
Fresh Cut Flowers from Colombia; Final Results and Partial 
Rescission of Antidumping Duty Administrative Review, 62 FR 53287, 
53295 (October 14, 1997).
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    Section 772(d)(3) of the Act requires that the CEP be adjusted for 
the profit allocated to the selling expenses of a producer/exporter's 
affiliated reseller. For Marine Harvest and Aguas Claras, which made 
sales through affiliated resellers, we calculated a CEP profit ratio 
following the methodology set forth in section 772(f) of the Act.
    We made company-specific adjustments as follows:
    Aguas Claras. We based EP and CEP on delivered or C&F prices to 
unaffiliated customers in the United States. For both EP and CEP sales, 
we made deductions from the starting price, where appropriate, for 
movement expenses including foreign inland freight from the plant to 
Santiago airport, international air freight/insurance, and U.S. 
brokerage and handling fees and port charges. We also made deductions 
for post sale price adjustments corresponding to quality claims.
    In addition, for CEP sales, we made deductions for U.S. inland 
freight to the customer, imputed credit, direct advertising, export 
documentation fees, quality control/inspection fees, and U.S. repacking 
costs.
    Camanchaca. We based EP on either delivered, CIF Miami airport, or 
delivered, C&F Los Angeles airport, prices to unaffiliated customers in 
the United States. We based CEP on either delivered to customer or 
delivered FOB warehouse prices to unaffiliated customers of the 
consignment seller. For both EP and CEP sales, we made deductions from 
the starting price, where appropriate, for movement expenses including 
foreign inland freight from plant to Santiago airport, international 
air freight, transportation insurance from plant to final destination, 
and customs export documentation fees.
    In addition, for CEP sales, we made deductions for U.S. customs 
duties, handling and warehousing fees, U.S. inland freight from the 
consignee to customer, as well as imputed credit, direct advertising, 
and wire transfer fees.
    Eicosal. We based CEP on either FOB Miami, or delivered prices to 
the unaffiliated consignment seller's customers in the United States. 
We made deductions from the starting price, where appropriate, for 
movement expenses including foreign inland freight from plant to 
Chilean port of exit, international air freight, Chilean brokerage and 
handling fees, and U.S. inland freight from warehouse to customer. We 
also deducted post-sale price adjustments, including quality claims and 
invoicing errors; imputed credit; direct advertising; quality control/
inspection fees; expenses for maintaining bank accounts in the United 
States for sales of the subject merchandise; and expenses associated 
with gill tags. We made an upward adjustment to the starting price for 
duty drawback.
    Mares Australes. We based EP and CEP on either ex-factory, C&F U.S. 
port, or FOB Santiago prices to unaffiliated customers in the United 
States. For both EP and CEP sales, we made deductions from the starting 
price, where appropriate, for movement expenses including foreign 
inland freight from plant to Santiago airport, international air 
freight, U.S. customs duty, U.S. brokerage and handling, and post sale 
price adjustments including quality claims and a consignment broker's 
surcharge.
    In addition, for CEP sales, we made deductions for U.S. inland 
freight from the consignee to customer, as well as for imputed credit, 
direct advertising, Chilean customs export documentation fees, and 
quality control/inspection fees.
    Marine Harvest. We based CEP on FOB U.S. port and delivered prices 
to unaffiliated customers in the United States. We made deductions from 
the starting price, where appropriate, for movement expenses including 
foreign inland freight from plant to Santiago airport, international 
air freight, U.S. customs duty, U.S. brokerage and handling, and post 
sale price adjustments including quality claims and rebates. In 
addition, we deducted U.S. inland freight from the port to the 
affiliated reseller and from the affiliated reseller to customer, as 
well as indirect selling expenses incurred by the affiliated reseller, 
repacking costs, imputed credit, inventory carrying costs, advertising, 
Chilean customs fees, quality control/inspection fees, and Association 
membership fees.

Normal Value

A. Selection of Comparison Markets
    Section 773(a)(1) of the Act directs that NV be based on the price 
at which the foreign like product is sold in the home market (or third 
country market), provided that the merchandise is sold in sufficient 
quantities (or value, if quantity is inappropriate) and that there is 
no particular market situation that prevents a proper comparison with 
the EP or CEP. The statute contemplates that quantities (or value) will 
normally be considered insufficient if they are less than five percent 
of the aggregate

[[Page 2668]]

quantity (or value) of sales of the subject merchandise to the United 
States.
    In their responses to our antidumping questionnaires, Mares 
Australes and Eicosal claimed that NV should be based on home market 
sales because the home market was viable. Marine Harvest and Aguas 
Claras indicated that their respective home markets were not viable, 
and claimed that NV should instead be based on sales to Japan and 
Canada, respectively, the only viable third-country market for each of 
these companies. Camanchaca stated that it had no viable comparison 
market at all, and claimed that NV should be based on the constructed 
value.
    In determining the appropriate comparison market for each 
respondent, we examined several issues, as discussed in detail in the 
Preliminary Determination Memorandum. First, we determined that Chile 
was not an appropriate comparison market for Mares Australes and 
Eicosal because a particular market situation existed in Chile. Our 
determination was based on record evidence indicating that this market 
involves almost exclusively ``industrial'' or ``off-quality'' grades 
sold directly from the factory depending on availability. Since the 
Chilean market is incidental to the respondents, it is not appropriate 
for comparison with the U.S. market, which is one of the respondents' 
primary marketing targets and which involves sales of primarily high-
grade ``premium'' salmon made through distributors.
    After rejecting the use of the home market for Mares Australes and 
Eicosal, we determined that Japan is the appropriate comparison market 
for Mares Australes, Eicosal, and Marine Harvest. In making this 
determination, we rejected a contention by Mares Australes and Eicosal 
that, by the logic of the Department's decision to reject the home 
market, the Department should also find that Japan presents a 
particular market situation. We determined that the Japanese market, 
unlike the home market, is not incidental to the respondents. Sales to 
that market involve export-quality merchandise which, while often 
different in grade from merchandise sold in the United States, is not 
so different as to render the Japanese market as a whole an unsuitable 
basis for NV. By contrast, as explained above, the merchandise sold in 
the home market involved a relatively small volume of merchandise that 
was not of export-quality. Further, we note that the Department's 
decision to reject the use of the home market was predicated in part on 
the manner in which the foreign like product is sold in that market. 
Sales in Chile are made directly from the respondents' processing 
facilities, with no guarantee of quality, on an ``as available'' basis. 
By contrast, sales to both the United States and Japan involve much 
more elaborate distribution systems, which are designed to ensure 
customer satisfaction. In view of these considerations, we determined 
that Japan could serve as a proper market on which to base NV.
    We note that for Eicosal and Marine Harvest, we were unable to find 
any appropriate price-to-price comparisons based on sales to Japan for 
this preliminary determination. Accordingly, for these companies we 
compared all U.S. sales to constructed value (CV), i.e., the cost of 
the merchandise sold in the United States as if it were sold in Japan. 
However, for Mares Australes we were able to make price-to-price 
comparisons for some U.S. sales.
    For Aguas Claras, we determined that the appropriate comparison 
market is Canada. For this company, we were able to find appropriate 
price-based NV matches for some U.S. sales; for the others, we resorted 
to CV. Finally, we based NV for Camanchaca entirely on CV, as that 
company did not have a viable comparison market.
    Adjustments made in deriving the NVs for each company are described 
in detail in Calculation of Normal Value Based on Third-Country Prices 
and Calculation of Normal Value Based on Constructed Value, below.
B. Cost of Production Analysis
    We tested whether comparison market sales were made below cost for 
all respondents except Camanchaca, which did not have a viable 
comparison market. Although Eicosal and Marine Harvest did not have 
comparison market sales of comparable merchandise during the POI, we 
performed a cost analysis based upon the petitioners' timely cost 
allegation for purposes of determining the proper basis for calculation 
of profit for CV.
    Based on an allegation contained in the petition, we found 
reasonable grounds to believe or suspect that sales of fresh Atlantic 
salmon made in Japan and Brazil were made at prices below the cost of 
production (COP). See Initiation Notice, 62 FR at 37029, and Memorandum 
from the Team to Richard Moreland, (July 1, 1997) (Initiation 
Checklist), at 10. In addition, based on a timely allegation filed by 
the petitioners on October 6, 1997, the Department found reasonable 
grounds to believe or suspect that sales made by Aguas Claras in Canada 
were made at prices below the COP. See Memorandum from the Team to 
Richard Moreland, Regarding Petitioners' Allegation of Sales Below the 
Cost of Production for Aguas Claras (October 21, 1997). As a result, 
the Department has conducted investigations to determine whether the 
respondents made sales in their respective third-country markets at 
prices below their respective COPs during the POI within the meaning of 
section 773(b) of the Act.
    1. Calculation of COP. In accordance with section 773(b)(3) of the 
Act, we calculated a weighted-average COP for each form of fresh 
Atlantic salmon, based on the sum of the cost of materials, fabrication 
and general expenses, and packing costs. We relied on the COP data 
submitted by each respondent in its supplementary cost questionnaire 
response, except, as discussed below, in specific instances where the 
submitted costs were not appropriately quantified or valued.
    Aguas Claras. We revised Aguas Claras' financial expenses to 
exclude an offset for accounts receivables and finished goods 
inventory.
    Camanchaca. We revised Camanchaca's financial expenses to reflect 
the ratio of net financial expenses to cost of goods sold, consistent 
with our general practice in the calculation of financial expenses.
    Eicosal. We recalculated Eicosal's net financial expense on the 
basis of the consolidated financial expenses of Eicosal's parent 
company, Sociedad Pesquera Eicosal S.A. We also recalculated Eicosal's 
general & administrative (G&A) expenses to exclude an affiliated 
company's G&A expenses.
    Mares Australes. We revised Mares Australes' financial expenses to 
exclude an offset for accounts receivables and finished goods 
inventory. We also rejected Mares Australes' claim that the calculation 
of costs should not include the costs associated with a particular 
group of salmon that had reached sexual maturation prior to harvesting 
(i.e., salmon that had reached a ``grilse'' stage), because we found 
that the respondent did not adequately support its claim that this is 
an unusual, isolated event. We relied on the average cost to produce 
all groups of salmon sold during the POI.
    Marine Harvest. We increased the reported cost of eggs and feed 
purchased from affiliated parties to reflect the difference between 
transfer prices and market prices, since the transfer prices were below 
market prices.
    2. Test of Third-Country Comparison Market Sales Prices. We 
compared the adjusted weighted-average COP for each

[[Page 2669]]

respondent to the third-country comparison market sales of the foreign 
like product as required under section 773(b) of the Act (except for 
Camanchaca, which had no viable comparison market), in order to 
determine whether these sales had been made at prices below the COP 
within an extended period of time in substantial 
quantities,<SUP>6</SUP> and whether such prices were sufficient to 
permit the recovery of all costs within a reasonable period of time.
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    \6\ In accordance with section 773(b)(2)(C)(i) of the Act, we 
determined that sales made at below the COP were made in substantial 
quantities if the volume of such sales represented 20 percent or 
more of the volume of sales under consideration for the 
determination of normal value. We note that on December 18, 1997, 
the respondents submitted a letter arguing that fresh Atlantic 
salmon is a highly perishable product and that the Department should 
not use the 20-percent ``substantial quantities'' test, but instead 
apply the test set forth by section 773(b)(2)(C)(ii) of the Act 
(which compares the average sales price to the average unit cost for 
the period). Because the respondents did not raise their argument 
until shortly before the issuance of this preliminary determination, 
we have not had an adequate opportunity to consider it. We have 
therefore relied on the standard 20 percent test, which has been 
used in past investigations involving salmon. See Final 
Determination of Sales at Less Than Fair Value: Fresh and Chilled 
Atlantic Salmon from Norway 56 FR 7661 (February 25, 1991). However, 
we intend to examine this issue further for the final determination 
of this investigation.
---------------------------------------------------------------------------

    On a product-specific basis, we compared the revised COP to the 
third-country comparison market prices, less any applicable movement 
charges, taxes, rebates, commissions and other direct and indirect 
selling expenses.
    3. Results of the COP Test. After performing the COP test, we 
determined that Aguas Claras, Eicosal, Marine Harvest, and Mares 
Australes made third-country comparison market sales of certain 
products at prices below the COP, within an extended period of time in 
substantial quantities. Further, we found that the sales prices did not 
permit for the recovery of costs within a reasonable period of time. We 
therefore excluded these sales from our analysis.
    For Aguas Claras and Mares Australes, which had sales of comparable 
merchandise during the POI, we did not conduct price-to-price 
comparisons where all sales of a particular product were made at prices 
below the COP. Instead, we based NV on CV, and calculated profit for CV 
on the basis of third-country sales that did not fail the cost test. 
See Calculation of Normal Value Based on Constructed Value, below. For 
Marine Harvest and Eicosal, which had no sales of comparable 
merchandise in the third-country market that would permit price-to-
price comparisons, the finding of sales below cost affected only the 
calculation of profit for CV, inasmuch as profit for these companies 
was based only on third-country sales that did not fail the cost test.
C. Calculation of Normal Value Based on Third-Country Prices
    We performed price-to-price comparisons where there were sales of 
comparable merchandise in the third-country market that did not fail 
the cost test. Such comparisons were possible only for Aguas Claras and 
Mares Australes.
    Aguas Claras. We calculated NV based on delivered or C&F prices, 
and made deductions from the starting price, where appropriate, for 
movement expenses including inland freight and insurance from the plant 
to the Chilean airport, international air freight and insurance, 
customs export documentation fee, and U.S. brokerage and handling fees. 
We also adjusted the starting price for quality claims. In addition, we 
made circumstance of sale (COS) adjustments for direct expenses, where 
appropriate, in accordance with section 773(a)(6)(C)(iii) of the Act. 
These included imputed credit expenses and quality control/inspection 
fees. In accordance with section 773(a)(6)(A) and (B) of the Act, we 
deducted third country market packing costs and added U.S. packing 
costs.
    As discussed in the Level of Trade/CEP Offset section of this 
notice below, we preliminarily determined that it was appropriate to 
make a CEP offset to NV.
    Mares Australes. We calculated NV based on C&F Japanese port or FOB 
Santiago prices to unaffiliated customers and made deductions, where 
appropriate, from the starting price for inland freight from the plant 
to Santiago airport and international air freight. We adjusted for COS 
differences in imputed credit expenses, quality control/inspection 
fees, Chilean customs export document fees, repacking costs, and direct 
advertising expenses.
D. Calculation of Normal Value Based on Constructed Value
    Section 773(a)(4) of the Act provides that where NV cannot be based 
on comparison market sales, NV may be based on CV. Accordingly, for 
those fresh Atlantic salmon products for which we could not determine 
the NV based on comparison market sales, either because (1) there were 
no sales of a comparable product (as was the case for Eicosal, Marine 
Harvest, and Camanchaca) or (2) all sales of the comparison product 
failed the COP test (as was the case for Aguas Claras and Mares 
Australes, with respect to certain products), we based NV on CV.
    Section 773(e)(1) of the Act provides that CV shall be based on the 
sum of the cost of materials and fabrication for the foreign like 
product, plus amounts for selling, general, and administrative expenses 
(SG&A), profit, and U.S. packing costs. For each respondent, we 
calculated the cost of materials and fabrication based on the 
methodology described in the Calculation of COP section of this notice, 
above. Except for Camanchaca, for every respondent we based SG&A and 
profit on the actual amounts incurred and realized by the respondent in 
connection with the production and sale of the foreign like product in 
the ordinary course of trade for consumption in the comparison market, 
in accordance with section 773(e)(2)(A) of the Act. Because there is no 
viable comparison market for Camanchaca, and hence no actual company-
specific profit and SG&A data available for Camanchaca, we calculated 
profit and indirect selling expenses in accordance with section 
773(e)(2)(B)(iii) of the Act and the SAA at 841. Specifically, the SAA 
at 841 provides that where, due to the absence of data, the Department 
cannot determine amounts for profit under alternatives (i) or (ii) of 
section 773(e)(2)(B) of the Act or a ``profit cap'' under alternative 
(iii) of section 773(e)(2)(B) of the Act, the Department may apply 
alternative (iii) on the basis of the facts available. In this case, we 
are unable to determine an amount for profit under alternatives (i) or 
(ii) or a profit cap under alternative (iii) because none of the 
respondents have viable home markets. See 19 CFR 405(b)(2) of the 
Department's revised regulations (clarifying that under section 
773(e)(2)(B) of the Act, ``foreign country'' means the country in which 
the merchandise is produced), (62 FR 27296, 27412-13 (May 19, 1997)). 
As a result, we are applying alternative (iii) on the basis of the 
facts available consistent with the SAA. As facts available, we 
calculated Camanchaca's profit and indirect selling expenses based on 
the weighted-average actual profit and indirect selling expenses of the 
other respondents in connection with the production and sale of the 
foreign like product in the ordinary course of trade for consumption in 
their respective comparison markets.
    In addition, for each respondent we used U.S. packing costs as 
described in the Export Price and Constructed Export Price section of 
this notice, above.
    We made adjustments to CV for differences in COS in accordance with 
section 773(a)(8) of the Act and 19 CFR 353.56. For comparisons to EP, 
we made

[[Page 2670]]

COS adjustments by deducting direct selling expenses incurred on third-
country market sales and adding U.S. direct selling expenses. For 
comparisons to CEP, we made COS adjustments by deducting direct selling 
expenses incurred on third-country market sales and adding U.S. direct 
selling expenses except those deducted from the starting price in 
calculating CEP pursuant to section 772(d) of the Act. We also made 
adjustments, where applicable, for indirect selling expenses incurred 
on third-country market sales to offset U.S. commissions in EP and CEP 
comparisons; specifically, we deducted from NV the lesser of (1) the 
amount of commission paid on a U.S. sale for a particular product, or 
(2) the amount of indirect selling expenses incurred on the third-
country market sales for a particular product.

Level of Trade/CEP Offset

    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 transaction. 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 SG&A expenses 
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, 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 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 the 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 (November 19, 1997).
    In implementing these principles in this investigation, we obtained 
information from each respondent about the marketing stage involved in 
the reported U.S. and third-country market sales, including a 
description of the selling activities performed by the respondents for 
each channel of distribution. In identifying levels of trade for EP and 
third-country market sales we considered the selling functions 
reflected in the starting price before any adjustments. For CEP sales, 
we considered only the selling activities reflected in the price after 
the deduction of expenses and profit under section 772(d) of the Act. 
We expect that, if claimed levels of trade are the same, the functions 
and activities of the seller should be similar. Conversely, if a party 
claims that levels of trade are different for different groups of 
sales, the functions and activities of the seller should be dissimilar.
    For Mares Australes and Eicosal, we found one level of trade in 
Japan and one level of trade in the United States, between which there 
were no significant differences. Other than expenses related to 
movement, these companies performed few or no selling functions. 
Therefore, we preliminarily determine that these companies' Japanese 
levels of trade constitute neither more or less advanced stages of 
distribution than the levels of trade found in the United States at the 
levels of trade of the CEP. Accordingly, no adjustment for differences 
in levels of trade is warranted for either company.
    For both Aguas Claras and Marine Harvest, we found that there is 
one level of trade for sales to Canada and Japan, respectively, and one 
level of trade for sales to the United States. As explained below, we 
also preliminarily determine that these companies' comparison market 
sales are made at a more advance level of trade than that of the CEP.
    Aguas Claras makes all sales to Canada and all CEP sales to the 
United States through its affiliated consignee, Bowrain Corp. 
Information on the record indicates that Bowrain performs the same 
services with respect to both groups of sales, including identifying 
customers, arranging for handling and storage, and sales support to the 
final customer. As noted above, for CEP sales, we consider only the 
selling activities reflected in the price after the deduction of 
expenses and profit under section 772(d) of the Act. Thus, the level of 
trade of Aguas Claras' Canadian sales involves substantially more 
selling functions (those performed by Bowrain) than the level of trade 
of the CEP. We also note that the level of trade of Canadian sales 
differs from that of the CEP with respect to customer class: Canadian 
sales by Bowrain Corp. are to Canadian distributors, retailers, 
restaurants, and further processors; the customer at the CEP level of 
trade is Aguas Claras' reseller, Bowrain Corp. In light of these facts, 
we have determined that Aguas Claras' Canadian sales are made at a 
different, and more advanced, stage of marketing than the level of 
trade of the CEP. Aguas Claras also made indirect EP sales to the 
United States that are at a level of trade in the United States that is 
not substantially different from that of the level of trade of the CEP.
    Similarly, Marine Harvest's comparison market sales are made at a 
more advanced stage of marketing than its CEP sales. Marine Harvest 
sells in Japan to a trading company that subsequently sells to 
processors and fishmongers through layers of wholesalers. The 
respondent maintains a sales office in Japan (Marine Harvest Japan) 
that coordinates with the trading company. Marine Harvest Japan sets 
prices and establishes order quantities with the trading company's 
primary wholesaler, coordinating the terms and conditions of the sale 
with the trading company. Marine Harvest Japan also assists in 
marketing salmon by accompanying the primary wholesaler on sales trips 
to secondary wholesalers and by working directly with the secondary 
wholesaler's customers. Further, Marine Harvest Japan provides after-
sales service and quality claims. For CEP sales to its affiliated 
consignee in the United States, Marine Harvest performs few or no 
selling functions other than services related to movement of 
merchandise. Thus, Marine Harvest performs fewer selling functions for 
sales to the United States, at a different stage of marketing. We 
therefore preliminarily determine that Marine Harvest's sales to Japan 
are at a more advanced level of trade than the level of trade of the 
CEP.
    Accordingly, for Aguas Claras and Marine Harvest, a level-of-trade 
adjustment is appropriate. However, neither company sells salmon or any 
other product at any other level of trade in their comparison markets 
than that of their fresh Atlantic salmon sales. Therefore, because the 
data available do not permit a determination that there is a pattern of 
consistent price differences between sales at different levels of trade 
in the comparison markets, section 773(a)(7)(B) of the Act permits a 
CEP offset to be made to NV. We granted such an offset equal to the 
amount of indirect expenses incurred in the comparison markets, but not 
exceeding the amount of the deductions made from the U.S. price in 
accordance with 772(d)(1)(D) of the Act. For Aguas

[[Page 2671]]

Claras, we made no LOT adjustment for comparisons to EP.
    Finally, with respect to Camanchaca, we did not perform a level-of-
trade analysis because this company does not have a viable comparison 
market.

Currency Conversions

    We made currency conversions in accordance with section 773A of the 
Act. The Department's preferred source for daily exchange rates is the 
Federal Reserve Bank. The Federal Reserve Bank publishes daily exchange 
rates for Japanese yen, but not for Chilean pesos. For purposes of the 
preliminary results, we made conversions of figures denominated in 
Japanese yen based on the official exchange rates published by the 
Federal Reserve. For conversions of figures involving Chilean pesos, we 
relied instead on daily exchange rates published by Dow Jones News/
Retrieval on-line system.

Verification

    In accordance with section 782(i) of the Act, we intend to verify 
information determined to be acceptable for use in making our final 
determination.

Suspension of Liquidation

    In accordance with section 733(d) of the Act, we are directing the 
Customs Service to suspend liquidation of all entries of fresh Atlantic 
salmon from Chile, except for subject merchandise produced and exported 
by Camanchaca, Mares Australes, and Marine Harvest (which have de 
minimis weighted-average margins), that are entered, or withdrawn from 
warehouse, for consumption on or after the date of publication of this 
notice in the Federal Register. We are also instructing the Customs 
Service to require a cash deposit or the posting of a bond equal to the 
weighted-average amount by which the NV exceeds the EP or CEP, as 
indicated in the chart below. These instructions suspending liquidation 
will remain in effect until further notice. We note that, as stated in 
the Case History section of the notice above, we have extended the 
provisional measures from four months to no more than six months.
    The weighted-average dumping margins are as follows:

------------------------------------------------------------------------
                                                              Weighted- 
                                                               average  
                   Exporter/Manufacturer                        margin  
                                                              percentage
------------------------------------------------------------------------
Aguas Claras...............................................         3.31
Eicosal....................................................         8.27
Camanchaca.................................................         0.18
Mares Australes............................................         1.21
Marine Harvest.............................................         1.87
All Others.................................................         5.79
------------------------------------------------------------------------

    Section 735(c)(5)(A) of the Act directs the Department to exclude 
all zero and de minimis weighted-average dumping margins, as well as 
dumping margins determined entirely under facts available under section 
776 of the Act, from the calculation of the ``all others'' rate. We 
have excluded the de minimis dumping margins for Camanchaca, Mares 
Australes, and Marine Harvest from the calculation of the ``all 
others'' rate. No dumping margins were based entirely on facts 
available.

ITC Notification

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

Public Comment

    Case briefs must be submitted to the Assistant Secretary for Import 
Administration no later than April 13, 1998. Rebuttal briefs will be 
due no later than April 20, 1998. 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 
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 any interested party. If a request for a 
hearing is made, the hearing will tentatively be held on Monday, April 
28, 1998, at 8:30 A.M., at the U.S. Department of Commerce, 14th Street 
and Constitution Avenue, N.W., Washington, D.C. 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 within ten days of 
the publication of this notice. Requests should specify the number of 
participants and provide a list of the issues to be discussed. Oral 
presentations will be limited to issues raised in the briefs.
    If this investigation proceeds normally, we will make our final 
determination no later than 135 days after the date of publication of 
this notice in the Federal Register.
    This determination is published pursuant to section 733(f) of the 
Act.

    Dated: January 8, 1998.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 98-1164 Filed 1-15-98; 8:45 am]
BILLING CODE 3510-DS-P