[Federal Register Volume 63, Number 110 (Tuesday, June 9, 1998)]
[Notices]
[Pages 31411-31437]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-15183]


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DEPARTMENT OF COMMERCE

International Trade Administration
[A-337-803]


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

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

EFFECTIVE DATE: June 9, 1998.


[[Page 31412]]


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.

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 (the Department) 
regulations refer to the regulations last codified at 19 CFR part 353 
(April 1, 1997).

Final Determination

    We 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 735 of the Act. The estimated margins 
are shown in the Continuation of Suspension of Liquidation section of 
this notice.

Case History

    The preliminary determination in this investigation was issued on 
January 8, 1998. 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) (Preliminary 
Determination). Since the preliminary determination, the following 
events have occurred.
    In February and March 1998, we conducted on-site verifications of 
the questionnaire responses submitted by Aguas Claras S.A. (Aguas 
Claras), Cia. Pesquera Camanchaca S.A. (Camanchaca), Pesquera Eicosal 
Ltda. (Eicosal), Pesquera Mares Australes Ltda. (Mares Australes), and 
Marine Harvest Chile (Marine Harvest)(collectively, ``the 
respondents'').
    On April 17, 1998, we received case briefs from the Coalition for 
Fair Atlantic Salmon Trade (the petitioners) and, on behalf of the 
respondents, the Association of Chilean Salmon and Trout Producers (the 
Association). On April 23, 1998, we received rebuttal briefs from the 
same parties. We held a public hearing on April 28, 1998.

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 of the United States (HTSUS). Although the HTSUS statistical 
reporting numbers are provided for convenience and customs purposes, 
the written description of the merchandise is dispositive.

Period of Investigation

    For all companies, the period of investigation (POI) corresponds to 
each respondent's four most recent fiscal quarters prior to the month 
of the filing of the petition (June 1996). For four of the five 
respondents, the POI is April 1, 1996, through March 31, 1997. The 
remaining respondent, Marine Harvest, has a different fiscal period. 
The POI for this company is March 24, 1996, through March 22, 1997.

Fair Value Comparisons

    To determine whether sales of fresh Atlantic salmon from Chile to 
the United States were made at less than fair value, we compared the 
export price (EP) or constructed export price (CEP), as appropriate, to 
the normal value. Our calculations followed the methodologies described 
in the preliminary determination, except as noted below and in company-
specific analysis memoranda dated June 1, 1998, which have been placed 
in the file.

Export Price and Constructed Export Price

    For the price to the United States, we used EP or CEP as defined in 
section 772 of the Act. We calculated EP and CEP based on the same 
methodology used in the preliminary determination, with the following 
exceptions:

Mares Australes

    We excluded sales to Canada from the U.S. sales database. See 
Comment 17.

Marine Harvest

    We made an adjustment for accrued rebate expenses to the CEP 
calculated for one customer. See Comment 19.

Normal Value

    We used the same methodology to calculate normal value as that 
described in the preliminary determination, with the following 
exceptions. For Eicosal, Mares Australes, and Marine Harvest, we 
determined that the differences between premium and super-premium 
salmon are so minor as to not warrant separate classification in an 
antidumping analysis, and considered all such sales to be of premium 
salmon. See Comment 1. With respect to specific respondents' data, we 
made the following changes:

Aguas Claras

    We did not rely on Canadian sales of salmon fillets to calculate 
normal value for comparison to U.S. sales of fillets. Instead, we 
compared U.S. sales of fillets to constructed value (CV). See Comment 
7.

Mares Australes

    We made an adjustment to normal value for duty drawback.

Cost of Production

    In accordance with section 773(b)(3) of the Act, we calculated the 
weighted-average cost of production (COP), by model, based on the sum 
of each respondent's cost of materials, fabrication, general expenses, 
and packing costs. We relied on the submitted COPs except in the 
following specific instances where the submitted costs were not 
appropriately quantified or valued.

Marine Harvest

    1. We increased the reported cost of eggs and feed purchased from 
affiliated parties to reflect market prices. See Comment 22.
    2. We increased the reported cost of processing performed by an 
affiliated party to reflect the transfer price. See Comment 22.

[[Page 31413]]

    3. We revised the consolidated financial expense ratio to include 
exchange losses associated with loans denominated in foreign 
currencies. See Comment 24.
    4. We recalculated the general and administrative expense (G&A) 
ratio to correct certain errors discovered during verification.

Mares Australes

    1. We increased the cost of manufacturing (COM) to include the 
price-level adjustments for harvested salmon which were required by 
Chilean GAAP. See Comment 27.
    2. We increased the COM to include bonus expenses. See Comment 31.
    3. We revised the consolidated financial expense ratio to remove 
the claimed offset to financial expense for accounts receivable and 
inventory. See Comment 24.
    4. We recalculated the G&A expense ratio based on total G&A 
expenses incurred by the producing entities. See Comment 30.

Aguas Claras

    1. We increased the COM to include the price-level adjustments for 
harvested salmon which were required by Chilean GAAP and were recorded 
in the company's normal books and records. See Comment 27.
    2. We revised the claimed ``feed cost adjustment'' by amortizing 
the total amount specified in the contract over the life of the 
contract. We then allocated the amortized adjustment to individual fish 
groups based on each group's relative biomass. See Comment 36.
    3. We excluded from G&A expenses the gains from the sales of common 
stock investments. Additionally, we included the cost incurred by 
Sociedad Agricola Rio Rollizo Ltda. (``Rio Rollizo'') which held the 
marine concession for the Rio Rollizo hatchery. See Comment 38.
    4. We revised the financial expense ratio to include exchange 
losses associated with loans denominated in foreign currencies. 
Additionally, we removed the claimed offset to financial expenses for 
accounts receivable and inventory. See Comment 24.
    5. We revised the manner in which we calculated indirect selling 
expenses for CV so as to add an amount proportionate to the cost of 
each product, rather than a fixed amount. See Comment 40.

Camanchaca

    1. We increased the COM to include the price-level adjustments for 
harvested salmon that were required by Chilean GAAP and were recorded 
in the company's normal books and records. See Comment 27.
    2. We revised the consolidated financial expense ratio to include 
exchange losses. Additionally, we removed the claimed offset to 
financial expenses for accounts receivable and inventory. See Comment 
24.
    3. We revised the G&A expenses to include the non-operating gains 
and losses that related to the general operations of the company. Also, 
we calculated the G&A expense ratio based on total G&A expenses 
incurred by the company. See Comment 33.

Eicosal

    1. We increased the COM to include the price-level adjustments for 
harvested salmon which were required by Chilean GAAP and were recorded 
in the company's normal books and records. See Comment 27.
    2. We revised the consolidated financial expense ratio to include 
exchange losses. Additionally, we removed the claimed offset to 
financial expenses for holding accounts receivable and inventory. See 
Comment 24.
    3. We revised the G&A expenses to include the non-operating gains 
and losses that related to the general operations of the company. Also, 
we calculated the G&A expense ratio based on total G&A expenses 
incurred by the salmon producing company. See Comment 29.

Currency Conversions

    As in the preliminary determination, 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. In cases involving comparisons to third-
country market sales in Japan, which were necessary for three 
respondents, we made conversions of values denominated in Japanese yen 
based on the official exchange rates published by the Federal Reserve. 
For conversions of values involving Chilean pesos, we relied instead on 
daily exchange rates published by Dow Jones News/Retrieval on-line 
system. The parties did not comment on these exchange rate 
methodologies.

Verification

    As provided in section 782(i)(1) of the Act, we verified the 
information submitted by the respondents for use in our final 
determination. We used standard verification procedures, including 
examination of relevant accounting and production records, as well as 
original source documents provided by the respondents. We also met with 
officials of the Association to discuss its grading standards.

Interested Party Comments

Sales Issues--General

    Comment 1: Distinction between ``Premium'' and ``Super-Premium'' 
Grades.
    The petitioners argue that the Department erred in the preliminary 
determination by accepting as a bona fide grade distinction the 
``super-premium'' designation adopted by the Association with respect 
to whole salmon sold to Japan. The petitioners contend that most of the 
Chilean salmon exported to both the United States and Japan was graded 
as premium until shortly before the POI. According to the petitioners, 
the Association's adoption of the super-premium grade in 1996 coincided 
with active preparations for an impending antidumping petition against 
salmon from Chile, and was designed to avoid comparisons of low-priced 
sales of premium-grade salmon to the United States to high-priced sales 
of the same merchandise to Japan.
    The petitioners add that verification revealed that the 
respondents' classification of premium versus super-premium salmon is 
based only on very minor differences in the external aspects of the 
salmon. According to the petitioners, these differences are 
insignificant, and do not meet the Association's stated criteria for 
differentiation among premium and super-premium salmon. Further, the 
petitioners argue that the finding at verification that the super-
premium/ premium distinction rests primarily on such minor differences 
in grading is at odds with the respondents' earlier representations 
that the color of the salmon meat is the principal distinguishing 
factor between premium and super-premium salmon. The petitioners 
contend that verification established that: (1) the respondents' 
premium and super-premium salmon are of uniformly high color, and (2) 
the respondents do not evaluate the color of salmon during the grading 
process.
    As further evidence that the respondents' grading practices are at 
odds with the Association's standards, the petitioners note that the 
records maintained by Marine Harvest (one of the three respondents that 
export the foreign like product to Japan) do not distinguish even 
nominally between premium and super-premium salmon. According to the 
petitioners, Marine

[[Page 31414]]

Harvest's invoices, ledgers, and other documentation refer to top-grade 
Chilean salmon invariably as ``superior,'' regardless of whether the 
salmon is exported to the United States or to Japan. Moreover, the 
petitioners argue, the same designations are used by Marine Harvest's 
Scottish affiliate for sales of Scottish salmon to the United States 
and Japan, noting that the Scottish standard for superior grade is 
equivalent to the U.S. standard for premium grade.
    The Association responds that the Department confirmed at 
verification that super-premium and premium salmon are distinct 
products with different physical characteristics and market values. 
According to the Association, its super-premium grading criteria were 
established before the beginning of the POI in order to formalize a 
long-standing requirement by Japanese customers for salmon with no 
imperfections. The Association contends that, at verification, the 
Department observed that the grading criteria were strictly applied and 
enforced by independent, internationally-recognized quality assurance 
agencies, and it maintains that the Department confirmed the 
application of these criteria during the POI.
    The Association further asserts that the discernible differences 
between premium and super-premium salmon are evidenced by the 
differences in prices obtained for the two grades in the Japanese 
market. In this respect, the Association notes that Mares Australes, 
the only respondent to sell both super-premium and premium grade salmon 
to Japan, reported higher prices for sales of super-premium grade 
salmon.
    With respect to Marine Harvest's recording of the grade of 
merchandise sold to Japan, the Association claims that, although the 
Marine Harvest processing plant follows its own separate grading 
standards for the U.S. and Japanese markets, these standards are 
consistent with the Association's standards. Thus, even though Marine 
Harvest's salmon are nominally referred to as being of ``superior'' 
grade on invoices to both markets, there are discernible physical 
differences between the merchandise shipped to those markets. Further, 
the Association argues, the Marine Harvest plant also relies on 
independent quality certification agencies to rate its compliance with 
Association grading standards, and the plant received perfect scores in 
those evaluations in reports corresponding to the POI that were 
examined at verification.
    DOC Position: In the preliminary determination, we tentatively 
accepted the Association's distinction between premium and super-
premium salmon, pending verification and further analysis of this 
issue. After conducting verification and carefully considering the 
evidence on the record, we have concluded that any differences between 
premium and super-premium salmon are so minor as to not warrant 
separate classification in an antidumping analysis.
    At the outset, we note that we are not persuaded by the 
petitioners' assertion that the Association's adoption of the super-
premium grade in 1996 was designed primarily to avoid comparisons, in 
the event of an antidumping case, of low-priced sales of premium-grade 
salmon to the United States to high-priced sales of the same 
merchandise to Japan. We acknowledge that the Association's grading 
standards and those of some of the individual respondents did include 
distinct ``premium'' and ``super-premium'' classifications. During 
verification, we found that quality control inspections at the 
respondents' plants were supervised by independent certification 
agencies, which certified the respondents' compliance with the 
Association's grading standards, and that these standards specified 
distinct ``premium'' and ``super-premium'' grades. The reports issued 
by the independent certification agencies during the POI indicated high 
scores in the category of adherence to these grading standards. See 
Memorandum from Case Analysts to Gary Taverman, Regarding Inspection of 
Eicomar Processing Plant (April 7, 1998) (Eicomar Verification Report) 
at 3-4 and Exhibit P-2; see also Memorandum from Case Analysts to Gary 
Taverman, Regarding Verification of Sales by Marine Harvest (April 7, 
1998) (Marine Harvest Sales Verification Report), at 8-9 and Exhibit M-
25.
    However, the record also contains evidence that the distinctions 
between the two grades were, in practice, nominal. At the outset of 
this proceeding, the Association explained that the single most 
important factor considered by Japanese customers in purchasing fresh 
Atlantic salmon is the color of the meat. See  letter from the 
Association to the Department of Commerce (November 3, 1997) (alleging 
particular market situation in Japan) at 14. Both the Association 
standards and the respondents' individual standards require higher meat 
color for super-premium salmon than for premium salmon. See letter from 
the Association to the Department of Commerce (October 10, 1998) at 
Attachment 1 (transmitting Association standards); see also letter from 
Mares Australes to the Department of Commerce (November 3, 1997) (Mares 
Australes Section A and B Questionnaire Response) at 19-20; and letter 
from Eicosal to the Department of Commerce (November 3, 1997) (Eicosal 
Section A and B Questionnaire Response), at 4. Despite these claims 
regarding the significance of color in distinguishing the two grades, 
we found at verification that, in practice, the respondents adjust the 
feed delivered to the salmon pens so as to ensure a uniformly high red 
color to the salmon meat for all salmon produced. See, e.g., Eicomar 
Verification Report at 2. Further, verification established that the 
respondents do not measure the color of the whole salmon during 
processing, but rather take an occasional sample to ensure that the 
fish are of sufficiently high color. Id. at 3.\1\ Thus, respondents 
routinely export to the United States salmon that has the same meat 
color as the salmon exported to Japan and do not consider the criterion 
(color) that was initially claimed to be of paramount significance in 
distinguishing super-premium from premium salmon.
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    \1\ Although the Association claims that a shiny blue exterior 
on a whole salmon is indicative of very red meat color, at 
verification we found that in practice this was not used as a 
yardstick to differentiate premium from super-premium salmon: 
``According to plant officials, salmon exhibiting a shiny blue 
exterior will have meat surpassing the Association's standards for 
color required for premium and super-premium grades.'' Id. at 2.
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    The Association argues that, in addition to color, its standards 
also distinguish among minor external imperfections in the salmon. 
During the plant tour conducted at verification, Department verifiers 
observed that there were in fact minor differences between salmon 
classified as premium and salmon classified as super-premium, such as 
small scale loss or light lacerations. These minor differences, 
however, do not establish a different grade of salmon for purposes of 
our analysis. While the Chilean respondents that sell to both the 
United States and Japan may sort their harvest based on the premise 
that Japanese customers are more likely to take notice of a light 
defect than U.S. customers, such differences are not recognized by the 
salmon producers of any other nation that exports to Japan. The 
Norwegian, Scottish, Canadian, and U.S. farmed salmon industries do not 
recognize any grade higher than ``superior.'' The ``superior'' grade is 
consistent with the premium grade and permits minor defects.\2\ Because 
the grading standards

[[Page 31415]]

of ``superior'' salmon recognized by the world's largest salmon farming 
countries provide for a range of quality (e.g., from zero defects to up 
to three minor defects) we note that, by definition, there will be some 
merchandise within this grade with no imperfections, as well as some 
merchandise that will be closer to the lower end of this range. 
Nonetheless, all salmon in this range are graded equally (i.e., as 
``superior''/``premium''), and are comparable products in the market 
place.\3\
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    \2\ We note that one of the respondents in this investigation, 
Marine Harvest, has an affiliate in Scotland that produces and 
exports fresh Atlantic salmon to Japan. At verification, we reviewed 
the grading standards followed by Scottish producers, and found that 
the highest-quality salmon produced by those producers is graded as 
``superior.'' The ``superior'' standard allows for light defects, 
and is comparable to the Chilean ``premium'' standard. See Marine 
Harvest Sales Verification Report at 13 and Exhibit M-24. Further, 
we found that invoices for Marine Harvest's sales of Chilean salmon 
and invoices for the Scottish affiliate's sales of Scottish salmon 
refer to salmon sold in Japan as ``superior'' salmon, and do not 
distinguish the two in any manner.
    \3\ While the Association's ``super-premium'' specification for 
fresh Atlantic salmon does not tolerate any defects in the fish, the 
Association has no such standard for other types of salmon, such as 
coho salmon. Thus, by the Association's own standards, a range of 
small defects is generally permissible for a variety of different 
types of fish sold in Japan. The respondents have not demonstrated 
that fresh Atlantic salmon is so unique to Japanese customers in 
comparison with other salmon that a heightened quality standard is 
required for this particular type of salmon.
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    Finally, regarding the Association's claim that there are price 
differences in Japan for salmon sold as ``super-premium'' versus that 
sold as ``premium,'' we note first that, as shown above and in 
accordance with our practice, our matching criteria are based on the 
actual physical characteristics of the merchandise. Moreover, even if 
we were to consider the Association's analysis, it rests entirely on 
sales made by the one company that made POI sales of both designations 
to Japan. The pricing of this company's sales of merchandise labeled 
``premium,'' which covered only a few months of the POI and involved 
relatively small quantities, is an insufficient basis on which to find 
systematic price differences between the two labels, much less to 
employ a matching methodology based on such differences.
    The nominal distinctions noted above do not preclude an apples-to-
apples comparison of the salmon sold in the two markets. For this final 
determination, we have considered that salmon reported as super-premium 
are in fact of premium grade and have matched such sales to premium-
grade salmon sold in the United States, where otherwise appropriate.
    Comment 2: Distinction between Vacuum-Packed Fillets and Regular 
Fillets.
    The petitioners argue that the Department erred in preliminarily 
accepting the respondents' treatment of vacuum-packed fillets and 
regular fillets as separate forms of merchandise, thereby precluding 
comparisons of identical merchandise. The petitioners argue that 
vacuum-packed salmon fillets sold in Japan are identical to regular 
fillets sold in the United States in every respect except packing, and 
claim that their prices can be compared after the appropriate 
adjustment for differences in packing costs.
    The petitioners further contend that, in responding to the 
Department's cost of production questionnaire, Marine Harvest and 
Eicosal erroneously included vacuum-packing costs in the reported cost 
of manufacturing of fillets that were vacuum-packed. According to the 
petitioners, vacuum-packing costs should be regarded as costs of 
packing for shipment (i.e., the cost of containers incidental to 
placing the foreign like product in a ready condition for shipment), 
consistent with section 773(b)(3)(C) of the Act.
    In addition, the petitioners argue that the Department incorrectly 
relied on Washington Red Raspberry Commission v. United States, 859 
F.2d 898, 905 (Fed. Cir. 1988)(Red Raspberry Commission) in 
distinguishing vacuum-packed fillets in the preliminary determination. 
According to the petitioners, the CAFC ruled in that case that packing 
can only be considered an integral part of a product if the product 
could not survive in its natural form without such packing. According 
to the petitioners, vacuum packing is not necessary to bring salmon 
fillets to market, as they are regularly wrapped in sheets of plastic, 
without vacuum packaging. Petitioners argue that, at most, vacuum 
packing lengthens the shelf-life of a fillet, an advantage that is 
obviated if the product is quickly consumed.
    Finally, petitioners argue that Department practice supports the 
treatment of vacuum packing as packing costs, rather than as physical 
differences, citing, inter alia, Tapered Roller Bearings and Parts 
Thereof, Finished and Unfinished, From Japan and Tapered Roller 
Bearings, Four Inches or less in Diameter, and Components Thereof, From 
Japan; Final Results of Antidumping Duty Administrative Reviews and 
Revocation in Part of an Antidumping Finding, 61 FR 57629, 57630 
(November 7, 1996)(TRBs from Japan). Petitioners claim that TRBs from 
Japan stands for the proposition that not comparing identical products 
that differ only by their packaging would constitute ``an additional 
matching factor which is unwarranted by the statute.'' Id.
    The Association responds that the Department correctly determined 
that vacuum-packed fillets sold in Japan are physically different from 
fillets sold in the United States and thus cannot be used for 
comparison. The Association contends that vacuum packing represents a 
significant additional processing step, akin to smoking or canning, 
that enhances the shelf life of the product, rather than merely placing 
the product in a condition ready for shipment. According to the 
Association, the proper reading of the CAFC's decision in Red Raspberry 
Commission is that packaging is an integral part of the product when it 
is in effect a part of that product. The Association argues that the 
Department has consistently followed this rule in other cases, and 
maintains that the cases cited by petitioners are inapposite.
    DOC Position: We agree with the Association. Vacuum packing is not 
incidental to shipment, but is instead an extra processing step that 
doubles the shelf life of fresh Atlantic salmon. Such packing is an 
integral part of the product, and its cost is appropriately included 
among costs of manufacturing, rather than among costs of packing for 
shipment.
    At the outset of this investigation, after considering the parties' 
comments with respect to vacuum packing, we recognized the distinction 
between regular fillets and vacuum-packed fillets, and instructed the 
respondents to treat these as separate forms. See Antidumping 
Questionnaire at B-6 and C-6 (August 26, 1997). The respondents 
appropriately included the cost of vacuum packing in the costs of 
manufacturing, and included the cost of Styrofoam boxes and cooling 
materials as packing materials.
    The cases cited by the petitioners do not require a different 
result. In those cases, the issue was whether products sold 
individually could be compared to groupings of products, or to bulk 
sales. See, e.g., Final Determination of Sales at Less Than Fair Value: 
Fresh Cut Roses from Ecuador, 60 FR 7019, 7022 (February 6, 1995)(Roses 
from Ecuador)(noting that roses are not transformed by virtue of being 
bunched or placed in a bouquet); see also TRBs from Japan, 61 FR 57629, 
57630 (November 7, 1996)(noting that bearing cups or cones sold 
individually could be compared to package sets); and Gray Portland 
Cement and Clinker from Mexico: Final Results of Antidumping Duty 
Administrative Review, 63 FR

[[Page 31416]]

12764, 12777 (March 16, 1998)(Cement from Mexico)(noting that bagged 
cement and bulk cement are identical except in packaging, and could be 
compared). In the instant case, the issue is not whether fillets sold 
individually should be compared to fillets sold by the box, or to 
fillets sold in bulk quantities. Rather, it is whether the product is 
transformed by vacuum packing, such that the packing becomes an 
integral part of the product.
    In Red Raspberry Commission, the CAFC found that packing of 
raspberries is an integral part of the product, stating that the 
cardboard containers are necessary for the very survival of the 
merchandise. The CAFC held that, because the packing was an integral 
part of the product, it was properly included in the cost of 
manufacturing rather than treated as packing for shipment. However, the 
ruling does not suggest that packing that otherwise transforms the 
physical properties of a product cannot also be considered an integral 
part of the product. In significantly extending the shelf life of a 
fillet, the vacuum packing transforms the product. We also note that 
the vacuum-packing process extends the shelf life not only by the 
packaging itself but also by other aspects of the vacuum-packing 
process, such as the use of ethyl alcohol, which significantly lowers 
the bacteria count of the salmon relative to salmon that is not vacuum 
packed. For these reasons, we have continued to regard regular fillets 
and vacuum-packed fillets as separate forms of fresh Atlantic salmon.
    Comment 3: Averaging of Prices for Comparison to CV.
    The Association contends that the Department erred in the 
preliminary determination by comparing U.S. prices that were averaged 
by form, grade, and weight band to CVs that, due to the nature of the 
product, essentially do not vary except by form. The Association claims 
that salmon of different grades and weight bands have distinct physical 
differences resulting from natural variation in salmon populations, 
rather than from differences in production inputs or techniques. 
According to the Association, while the cost of production of a 
particular form of salmon (e.g., salmon fillets) may be the same 
regardless of differences in grades and weight bands, such differences 
affect the market value and selling price of salmon. The Association 
argues that, to make an apples-to-apples comparison, the Department 
should average all U.S. sales prices by form only and not by grade or 
weight band, such that a form-specific price is compared to a form-
specific CV.
    According to the Association, the Department's practice in cases 
involving flowers and roses supports such an approach. The Association 
states that, in the Flowers cases (e.g.,Certain Fresh Cut Flowers from 
Colombia: Final Results of Antidumping Administrative Review, 55 FR 
20491, 20496 (May 17, 1990) (Certain Fresh Cut Flowers from 
Colombia)(Comment 19)), the respondents were able to provide only an 
average cost for each type of flower, rather than a unique cost for 
each unique variety within the particular flower type. Under these 
facts, the Association contends, the Department found it appropriate to 
compare an average price for each flower type to the average CV of that 
flower type. Similarly, in the Roses cases (e.g., Fresh Cut Roses from 
Colombia, 60 FR 6980, 6990 (February 6, 1995) (Comment 5)), where the 
Department had the same cost for different rose types, the Department 
averaged the prices of roses across types prior to comparison to CV. 
The Association argues that there is no material difference in the fact 
pattern of the flowers cases compared to the fact pattern of this 
investigation. According to the Association, failure to conduct price-
to-CV comparisons on a form-average basis in this case would violate 
not only the statutory requirement for a fair comparison, but also 
violate the fair-comparison requirements imposed by the GATT/WTO. The 
Association also argues that such a methodology would run counter to 
the findings of a GATT panel with respect to the LTFV investigation of 
salmon from Norway.
    The petitioners respond that the antidumping statute directs price-
to-CV comparisons to be based on the prices and costs of each unique 
product, as defined by the physical characteristics of those products. 
According to the petitioners, the respondents could have reported costs 
of production specific to different weight bands and grades, but opted 
not to do so. Specifically, the petitioners argue that the respondents 
could have attempted to differentiate costs for weight bands based on 
differences in feed conversion ratios, and for grades based on 
differences in post-harvest costs. The petitioners argue that it would 
be inappropriate to correct this deficiency in the respondents' 
reporting by averaging U.S. prices, since there are price differences 
corresponding to differences in weight bands and grade.
    DOC Position: We disagree with the Association. For the final 
determination, we have continued to average U.S. prices by form, grade, 
and weight band.
    We accept the Association's contention that, with minor exceptions, 
each company's recorded costs of the subject merchandise do not vary by 
grade or weight band. Our examination of the voluminous record evidence 
concerning this issue, including our verification findings, confirms 
that the costs as reported reasonably reflect the actual costs of 
producing each matching group (i.e., each combination of form, grade, 
and weight band), and that the costs of certain of these matching 
groups are the same. In this respect, we disagree with the petitioners' 
arguments that the respondents should have been required to report 
costs based on methodologies that deviate from their normal accounting 
practices, e.g., through the use of feed conversion ratios, in order to 
estimate differences in costs.
    With this in mind, when comparing U.S. prices to CV, the Department 
is charged with determining whether sales are made to the United States 
at prices below the actual cost of production. The CAFC has ruled 
definitively on this issue:

    By its terms, the statute expressly covers actual production 
costs * * *. The broad language of section 1677b(e) [the CV portion 
of the statute] does not at any point expressly authorize adjustment 
of these production costs to account for products of a lower grade 
or less value.

See IPSCO Inc. v. United States, 965 F. 2d, 1056, 1059-1060 (Fed. Cir. 
1992)(IPSCO).
    As in the instant proceeding, IPSCO involved merchandise (steel 
pipe used for oil and gas wells) that varied in grade (prime and 
limited service) but not in the cost of producing each grade. As with 
salmon, the same materials, processes, labor, and overhead went into 
the production of both grades, and buyers purchased both grades ``for 
the same purpose--``down hole'' use in oil and gas wells.'' Id. at 
1058. Thus, both grades had the same actual costs:

    Because IPSCO expended the same materials, capital, labor, and 
overhead for both grades of OCTG, the constructed value of one ton 
of limited-service pipe necessarily matched the constructed value of 
one ton of prime pipe.

Id. at 1060.
    As with premium salmon, prime-grade pipe was of a higher quality 
and, as such, commanded a higher price in the marketplace. Id. at 1058. 
In the proceeding underlying the IPSCO decision, the Department 
compared U.S. sales of prime-and limited-service grade pipe to CVs 
based on the actual costs of each grade, which were identical. There, 
as here, the respondents objected to this methodology vis-a-vis 
comparisons involving U.S. sales of the lower grade

[[Page 31417]]

of merchandise. The CAFC rejected this claim, ruling that the 
Department had ``calculated constructed value precisely as the statute 
directs'' in basing CV on the actual cost of production for each grade. 
Id. at 1060.
    While making the same complaint as that made by the respondent in 
IPSCO, the respondents in the instant proceeding have proposed a 
different solution. Rather than arguing for an adjustment to CV, the 
respondents suggest that the Department average the reported U.S. 
prices without respect to two of the three matching characteristics 
(grade and weight band) for comparisons involving CV.
    We reject the respondents' proposal for the following reasons. 
First, no change to either side of the antidumping analysis (EP/CEP and 
normal value) is necessary because, in accordance with IPSCO and with a 
basic tenet of the dumping law, the Department's methodology in this 
case properly compares the price of U.S. sales of a given product with 
the actual costs of that product where normal value is based on CV, 
without regard to whether that product's actual costs are the same as, 
or different from, other products under investigation.
    Further, the methodological changes proposed by the respondents are 
inappropriate under the facts of this case to the extent that they 
conflict with other requirements imposed by the statute and Department 
practice. Specifically, the proposal to eliminate two of the three 
matching criteria from our analysis with respect to CV comparisons 
would reduce the accuracy of that analysis and, depending on the manner 
employed, would either eliminate price-based matches entirely, or would 
result in inconsistent matching groups depending on whether a U.S. sale 
is matched to comparison market sales or to CV.
    Pursuant to sections 771(16) and 773(a)(1) of the Act, it is our 
practice first to match U.S. sales with comparison market sales of the 
most physically comparable merchandise. We require the matching 
categories to be as precise as possible in order to effect a meaningful 
comparison:

    In determining the comparability of sales for purposes of 
inclusion in a particular average, Commerce will consider factors it 
deems appropriate, such as the physical characteristics of the 
merchandise, the region of the country in which the merchandise is 
sold, the time period, and the class of customer involved.

Statement of Administrative Action accompanying the URAA (SAA) at 842 
(emphasis added). Thus, the statute and SAA recognize the importance of 
developing, under the facts of each case, matching categories that 
allow for meaningful comparisons, while preventing, to the extent 
possible, the masking of dumping through overly broad averages. The 
discretion afforded to the Department by the SAA (to consider such 
factors as it deems appropriate) reflects the fact that this is 
arguably the most case-specific aspect of the dumping analysis, 
depending as it does on the particular characteristics of the product 
under investigation.
    In light of the importance of determining our matching categories, 
it is our longstanding practice to consider comments submitted by 
interested parties regarding the relevant matching characteristics of 
the product under investigation. Early in this proceeding, both parties 
agreed that form, weight band, and grade were critical physical 
characteristics of fresh Atlantic salmon. See letter from the 
Association to the Department of Commerce, (August 7, 1997); see also 
letter from the petitioners to the Department of Commerce (August 7, 
1997). Having established these matching categories, we averaged U.S. 
and comparison market sales of these product groups and made price-to-
price matches, where possible. Only where we could not make such 
matches did we resort to CV. We have based CV on the actual costs of 
each matching category; where the respondents reported differences in 
actual costs (e.g., Marine Harvest's reporting of different costs by 
weight band), we have taken this into account.
    Significantly, in arguing that we should eliminate two of the three 
matching characteristics with respect to CV comparisons, the 
respondents do not address the fact that, unlike the Flowers line of 
cases, this investigation involves price-to-price matches that were 
made using matching characteristics (form, grade, and weight band) that 
the respondents themselves agreed were the defining features of the 
subject merchandise in terms of our matching groups. Their argument 
does not address the inconsistency of maintaining one set of averaging 
and matching characteristics (form, grade, and weight band) for one set 
of U.S. sales (those for which we are able to find a price-based 
match), while averaging and matching other U.S. sales (the remainder) 
according to form alone. The contingency of whether a given U.S. sale 
has a priced-based match or a CV-based match would not be an 
appropriate means of determining the averaging methodology for that 
sale.
    When the respondents first raised this issue, it appeared that they 
would have resolved this inconsistency by eliminating price-based 
matches altogether for any company that would have any CV matches (all 
of them). See Mares Australes Section A and B Questionnaire Response 
(November 3, 1997) at 4 (``We suggest that because there are U.S. 
grades that do not match, the Department reject Japanese sales entirely 
as the basis for normal value and rely instead upon constructed 
value.'' (citing Roses from Colombia, Roses from Equador, and Fresh Cut 
Flowers from Colombia)). <SUP>4</SUP>Since the respondents have not 
addressed in the case briefs how to treat U.S. sales that would 
otherwise have suitable price-based matches, it is not clear whether 
the respondents continue to advocate this approach. We note for the 
record that we also disagree with this proposal, as it would undermine 
the statutory preference for price-to-price matches, as reinforced by 
the CAFC's decision in Cemex v. United States, WL 3626 (Fed. Cir.).
---------------------------------------------------------------------------

    \4\ We note that this argument by respondents for rejecting 
Japanese sales is separate from their argument that we should 
disregard such sales due to a particular market situation, as 
addressed in Comment 4, infra. 
---------------------------------------------------------------------------

    Here again, the analogy to the Flowers cases fails, and serves only 
to illustrate why the SAA explicitly instructs the Department to use 
its discretion in determining the appropriate matching methodology 
under the facts of each case. To state the obvious, flowers and salmon 
are different products that are sold in different markets under 
different conditions. While we have determined to date in the Flowers 
line of cases that the merchandise and markets involved do not permit 
reasonable price-based comparisons (due to, for example, the holiday-
driven demand patterns in the U.S. market), that is not the case with 
the merchandise and markets involved in this investigation. It is not 
appropriate to force such a case-specific finding involving the 
physical characteristics of flowers, and the selling practices that 
relate specifically to flowers, onto the matching methodology for fresh 
Atlantic salmon, thereby effectively eliminating the valid methodology 
developed early in this case. We would likewise disagree with the 
concept of averaging U.S. sales that have price-based matches only with 
respect to form, as this would undermine the precision of our analysis 
with respect to such sales.
    Finally, with respect to the relevance of the 1992 GATT panel 
report in United States: Imposition of Antidumping Duties on Imports of 
Fresh and Chilled Atlantic Salmon from Norway, we note that the panel's 
findings were limited, by the panel's

[[Page 31418]]

own terms of reference, to the facts of that pre-Uruguay Round 
proceeding. Moreover, the GATT panel faulted the Department for its 
lack of an explanation regarding its matching methodology in the 
Norwegian salmon case:

    While the United States had explained that because of the 
absence of differences in costs of production between salmon of 
different weights no separate constructed values for individual 
weight categories had been calculated, the United States had not put 
forward any arguments to explain why export prices of individual 
weight categories had been used in the comparison with the single 
constructed values. The public notice of the affirmative final 
determination was also silent on this point.

Id. at. 470.
    Unlike the Norway case, we have provided a detailed explanation for 
our methodology in this respect.
    Comment 4: Particular Market Situation in Home Market.
    The Association argues that the Department erred in finding that a 
particular market situation exists in the home market, and disputes the 
Department's underlying conclusion that the home market is an 
incidental market consisting of sales of non-export quality salmon. The 
Association contends that the home market unquestionably passes the 
statutorily mandated viability test, and that the merchandise sold in 
that market is within the scope of the investigation. According to the 
Association, the Department's finding of a particular market situation 
is based on an unprecedented and extra-statutory consideration of the 
amounts and percentages of each grade of merchandise sold in the home 
market, compared to the merchandise sold in the United States. The 
Association asserts that any such differences can be adjusted for under 
the Department's normal calculation methodologies, and do not warrant 
rejection of the home market.
    The Association argues that, in the alternative, the Department 
should also find that a particular market situation exists in the 
Japanese market. According to the Association, the differences between 
the salmon sold by the respondents in Japan and that sold in the United 
States are greater than those between the salmon sold in the home 
market and that sold in the United States.
    The petitioners respond that the Department properly rejected the 
home market as a comparison market. According to the petitioners, the 
Department had ample statutory and regulatory authority to make a 
finding of a particular market situation with respect to the home 
market, and properly concluded that the Chilean market is incidental to 
the export-based Chilean salmon industry.
    The petitioners further argue that the Japanese market does not 
present a particular market situation, since any differences between 
the salmon sold in Japan and that sold in the United States are minor 
distinctions within export-quality merchandise. The petitioners urge 
the Department to continue its reliance on the Japanese market as the 
basis for normal value for the respondents in question.
    DOC Position: We agree with the petitioners. The Department's 
reasons for rejecting the use of the home market were set forth in 
detail in a memorandum addressing this issue. See Memorandum from Case 
Analysts to Richard Moreland, Regarding Appropriateness of Chilean 
Market as a Comparison Market (October 17, 1997) (Particular Market 
Determination Memorandum). As explained in that memorandum, the home 
market is incidental to the Chilean salmon industry, which is export-
oriented. The home market is comprised almost exclusively of salmon 
graded by the respondents as ``industrial'' or ``reject,'' which the 
respondents sell locally for drastically reduced prices compared to 
export merchandise. The perfunctory marketing and distribution of 
salmon in the home market is consistent with the incidental nature of 
those sales.
    The Association has not raised substantial new arguments in its 
case brief, and instead has reiterated arguments advanced prior to the 
preliminary determination. We therefore refer interested parties to our 
Particular Market Determination Memorandum and to the Memorandum from 
Gary Taverman to Richard Moreland, Issues Concerning the Preliminary 
Determination of Sales at Less Than Fair Value (January 8, 1998) 
(Preliminary Issues Memorandum) for more detailed discussions of the 
issue.
    With respect to the Association's claims regarding the home market, 
we add only that our verification findings refuted one of the 
Association's arguments regarding this issue. The Association 
characterizes the difference between the home market and the United 
States as one of differences in ``product mix,'' suggesting that the 
same grades of merchandise are sold in both markets, only in different 
proportions. This contention has been premised to a large extent on a 
claim that one of the respondents had exported ``industrial'' grade 
salmon to the United States, albeit in small quantities, and that this 
merchandise was identical to that sold in the home market. However, as 
we found at verification, the U.S. sales in question in fact were not 
of industrial-grade salmon, but rather of premium-grade salmon that was 
subject to a post-sale quality claim. The Association now recognizes 
that these sales were reported improperly. See Association rebuttal 
brief at 54. Thus, the record clearly establishes that the grade of 
merchandise sold by the respondents in the home market is not exported 
to the United States or Japan.
    We also continue to find that the Japanese market does not present 
a particular market situation. As explained in our Preliminary Issues 
Memorandum, the respondents' Japanese market is far from incidental. 
Moreover, as explained above in response to Comment 1, the premium-
grade salmon sold in the United States and the super-premium salmon 
sold in Japan are essentially the same merchandise. By contrast, as 
ascertained at verification, the salmon sold in the home market have 
severe defects. See Eicomar Verification Report at 3 (noting ``severe 
scale loss, greenish outer color, and numerous red spots due to early 
sexual maturation''); see also Marine Harvest Sales Verification Report 
at 7-8 (noting ``deformed mandibles, greenish-brownish external color, 
and marked lacerations'').
    Comment 5: All-Others Rate.
    The Association argues that the Department's exclusion of de 
minimis rates from the calculation of the ``all-others'' rate violates 
the constitutional due process and equal protection rights of Chilean 
producers/exporters of subject merchandise and their U.S. importers. 
According to the Association, exclusion of de minimis rates results in 
an unrepresentative and skewed all-others rate, because the Department 
limited its investigation to a minority of producers/exporters, did not 
accept voluntary participation by other firms, and found that the 
majority of the investigated firms were not dumping. The Association 
contends that the Court of International Trade (CIT) expressly stated 
in Serampore Indus. Pvt. Ltd. v. United States Dep't of Commerce, 696 
F. Supp. 665, 668 (Ct. Int'l Trade 1988) (Serampore) that where the 
Department limits the number of firms to be investigated, there is no 
basis for excluding de minimis margins in the calculation of the all-
others rate.
    The petitioners respond that the Department is bound by the plain 
language of the antidumping statute to exclude de minimis rates from 
the calculation of the all-others rate. According to the petitioners, 
Serampore

[[Page 31419]]

is specific to situations where the Department selects a sample of 
firms for investigation from among a much larger group of potential 
respondents. The petitioners note that in this case the Department did 
not select a sample of firms, but chose instead those exporters 
accounting for the largest volume of exports to the United States 
during the POI. The petitioners also point out that the Association 
specifically requested at the outset of this proceeding that the 
Department limit its investigation to those producers/exporters 
accounting for 50 percent of the exports during the POI, and note that 
those companies investigated account for approximately that figure.
    DOC Position: We agree with the petitioners. Section 735(c)(5)(A) 
of the Act unambiguously directs the Department to exclude ``any zero 
and de minimis margins'' from the calculation of the estimated all-
others rate (emphasis added). There is no indication in the legislative 
history of this provision that Congress intended for exceptions to this 
rule. We therefore have no basis to ignore the Act's clear directive to 
exclude de minimis margins from the calculation of the estimated all-
others rate.
    Further, as the petitioners note, the Association itself requested 
that the Department limit its selection of firms to be investigated to 
those exporters accounting for 50 percent of exports to the United 
States, in addition to ``a relatively small number of volunteer 
respondents.'' See letter from the Association to the Department of 
Commerce (August 4, 1997), at 4-6. The Department selected a pool of 
exporters accounting for very close to that volume of exports, and the 
Association did not voice its concerns about the implications of 
limiting the number of respondents with respect to the all-others rate 
until after the preliminary determination was issued.<SUP>5</SUP>
---------------------------------------------------------------------------

    \5\ In accordance with section 777A(c)(2) of the Act, the 
Department limited its investigation to the five largest producers/
exporters. However, in limiting its investigation, the Department 
stated that if a selected respondent failed to cooperate, and 
companies wishing to be treated separately as voluntary respondents 
had submitted a response to our antidumping questionnaire, the 
Department would consider replacing the uncooperative respondent 
with a voluntary respondent, to be selected based on the order of 
each company's submission of a written request for investigation as 
a voluntary respondent. See Memorandum from the Team to Richard 
Moreland, Regarding Selection of Respondents (August 26, 1997), at 
6.
---------------------------------------------------------------------------

    Comment 6: Industry Support for the Petition.
    The Association argues that the Department should not have 
initiated this antidumping investigation because the petitioners did 
not demonstrate sufficient industry support for the petition. The 
Association claims that the petition identified only U.S. producers of 
whole salmon, and failed to identify U.S. producers of cuts of fresh 
Atlantic salmon (``fillet producers''), which were also under the scope 
of the petition. The Association contends that fillet producers 
comprise an industry separate from the whole salmon industry.
    The Association argues further that, even if these two segments can 
be considered one industry, such that production from these two 
segments could be combined in the industry support ratio, the 
Department should have polled the fillet producer portion of the 
industry rather than derive an estimate of such production. The 
Association asserts the following errors in the Department's estimate 
of fillet production: (1) the calculation inappropriately estimates the 
size of the fillet producer industry on the basis of the value added in 
the processing of whole salmon into salmon cuts, rather than on the 
basis of the total value of the salmon cuts; (2) it focuses only on the 
basic processing of whole salmon into fillets, ignoring ``higher value-
added products,'' such as portions; and (3) it relies on the cost data 
derived from a single source, rather than from a variety of sources.
    The petitioners respond that the Department appropriately 
determined that there was industry support for the petition on the 
basis of data in the petition as well as data gathered from external 
sources. According to the petitioners, the Act does not require polling 
to determine the domestic industry under such circumstances.
    DOC Position: Section 732(c)(4)(E) of the Act provides that, after 
the administering authority determines that it is appropriate to 
initiate an investigation, the determination regarding industry support 
shall not be reconsidered. Therefore, we have not reconsidered our 
determination regarding industry support. We refer interested parties 
to our notice of initiation and companion memorandum, which set forth 
in detail the methodologies followed in establishing industry support. 
See Initiation of Antidumping Duty Investigation: Fresh Atlantic Salmon 
From Chile, 62 FR 37027, 27028-29 (July 10, 1997).

Sales Issues--Aguas Claras

    Comment 7: Use of the Canadian Market as Comparison Market.
    The petitioners contend that the Department should reject Aguas 
Claras' sales to the Canadian market as the basis for normal value for 
three reasons: (1) the Canadian market is an unimportant market for 
Chilean salmon exporters as a whole, such that prices to this market 
are not ``representative'' within the meaning of section 
773(a)(1)(B)(ii)(I) of the Act; (2) the particular market situation in 
Canada renders that market an improper comparison market; and (3) 
verification findings indicate that the reporting of Canadian fillet 
sales is unreliable.
    The petitioners first argue that prices to Canada are not 
representative because total Chilean exports of fresh Atlantic salmon 
to Canada constitute a minuscule percentage of Chile's worldwide 
exports of that merchandise, i.e. Canada is an unimportant market. 
Citing the preliminary results of the tenth administrative review of 
Flowers from Colombia, 63 FR 5354, 5357 (February 2, 1998), the 
petitioners claim that the Department recently rejected the use of 
Canada and Japan as comparison markets where: (1) the Department did 
not examine all potential respondents, such that the rate for non-
selected companies would be based on an average of the rates found for 
the respondents; and (2) exports to the Canadian market were a small 
percentage of total exports. The petitioners claim the same facts apply 
to the instant proceeding.
    The petitioners' second argument, that a particular market 
situation in Canada renders that market an improper comparison market, 
rests on the following claims: (1) the narrow margin of the five-
percent viability determination, which was affected by the timing of 
Aguas Claras' acquisition of its U.S. affiliate, Bowrain Corp., during 
the POI; (2) the existence of a high degree of integration in the 
channels of trade for subject merchandise in the United States and 
Canada, which, petitioners assert, renders Canada an inappropriate 
comparison market because it is essentially the same market as the U.S. 
market; and (3) the recent Canada/Chile free trade agreement, which 
ended each country's right under the GATT to initiate antidumping 
proceedings against each other and, according to the petitioners, has 
rendered Canada a secondary dumping ground.
    Finally, the petitioners argue that the Department's verification 
findings suggest that Aguas Claras' reporting of Canadian market sales 
of fillets is unreliable and that the Department must resort to CV for 
such sales.
    Aguas Claras responds that there is no reason for rejection of the 
Canadian market as the basis for normal value. First, with respect to 
the allegation that

[[Page 31420]]

the Canadian market is unimportant to the Chilean exporters as a whole 
such that prices to this market are unrepresentative, Aguas Claras 
contends that the Department's decision in the tenth review of Flowers 
from Colombia is factually distinguishable because, in the Flowers 
proceedings, the Department has consistently rejected price-based 
normal values for all respondents. Thus, the respondents argue, the 
Department's rejection of Japan and Canada as comparison markets in the 
tenth Flowers review was consistent with its general practice in the 
Flowers proceedings. Aguas Claras further argues that the export 
statistics cited by the petitioners are based on direct exports, and 
thus mis-classify sales to Canada made through the United States as 
U.S. sales. According to Aguas Claras, all of its own sales to Canada 
were made through this route. Therefore, Aguas Claras concludes, there 
is no basis for a finding that the Canadian market is unimportant.
    Second, with respect to the allegation that there is a particular 
market situation in Canada, Aguas Claras argues that the Canadian 
market passes the ``bright line'' (five-percent) test for viability, 
and maintains that no heightened standards should be applied to that 
market. Aguas Claras adds that the high degree of integration between 
the U.S. and Canadian salmon markets actually supports the use of 
Canada as the basis for normal value, because similarities between the 
two markets support a finding that there is no particular market 
situation in Canada that would render prices in that market not 
comparable to U.S. prices.
    Finally, with respect to the verification findings cited by the 
petitioners, Aguas Claras argues that there is no evidence of any price 
distortions in the Canadian market with respect to fillet sales.
    DOC Position: We disagree with the petitioners that the Canadian 
market is characterized by ``unrepresentative'' prices or by a 
particular market situation, within the meaning of sections 
773(a)(1)(B)(ii)(I) and (II) of the Act. However, we agree with the 
petitioners that, based on our verification findings, we are unable to 
match Aguas Claras' POI Canadian sales of fillets, as reported, to its 
U.S. sales. We have based normal value for such sales on CV.
    To address the petitioners' arguments in turn, we first disagree 
that the Canadian market is characterized by unrepresentative prices. 
Contrary to the petitioners' assertions, the recent finding in the 
preliminary results of the tenth review of Flowers from Colombia does 
not compel the rejection of an otherwise viable Canadian market in the 
instant proceeding. As we state in our response to Comment 3, above, 
the Flowers cases have relied on CV as the sole basis for normal value 
for each of the past 10 reviews, for a variety of product- and market-
specific factors that do not pertain to this investigation (e.g., 
holiday demand patterns). The unique history of the market-selection 
determinations made in the Flowers and Roses cases does not lend itself 
to broad application of those findings to a salmon respondent that, as 
verification demonstrated, sells to a viable Canadian market in the 
same manner, and through the same channels of distribution, as it sells 
to the U.S. market.
    We also disagree with the basis of the petitioners' numerical 
analysis regarding exports to Canada versus exports to the United 
States vis-a-vis their ``unrepresentative prices'' argument. As Aguas 
Claras correctly notes, all of its own sales to Canada were made 
through its U.S. affiliate in Miami, after entry of the merchandise 
into the United States. The effect of this distribution pattern is to 
inflate significantly the apparent volume of exports to the United 
States, and to deflate the apparent volume of exports to Canada. The 
size of this distortion of ``direct'' export numbers with respect to 
the one company whose Canadian sales we are examining is a reasonable 
indication that the overall export figures provided by the petitioners 
understate the volume of Chilean fresh Atlantic salmon that is destined 
for the Canadian market. The Department has not found any statistics 
establishing the ultimate destination of merchandise exported by the 
Chilean industry. Therefore, in view of the demonstrated viability of 
the Canadian market for Aguas Claras, and in the absence of persuasive 
evidence to the contrary, we have not rejected Canadian sales prices as 
unrepresentative.
    Regarding the petitioners' particular market situation claim, we 
agree with Aguas Claras that similarities between the U.S. and Canadian 
markets are not evidence of a particular market situation. As for the 
contention that Canada has become a secondary dumping ground due to the 
terms of the Canada/Chile Free Trade Agreement, we note that such trade 
agreements are not designed to promote dumping, and their mere 
existence is not evidence of such. In addition, the below-cost test 
that we have applied to sales made by Aguas Claras in the Canadian 
market prevents the inclusion of such sales, when made in substantial 
quantities, in our analysis.
    However, we agree with the petitioners' argument that our 
verification findings call into question the reporting of certain data 
essential to price-to-price comparisons, specifically with respect to 
fillets.<SUP>6</SUP> Although we do not agree that this is sufficient 
to disregard the Canadian market in its entirety, we have rejected the 
use of price-based comparisons for fillets, and have instead compared 
U.S. fillet sales to CV. For sales of whole fish, which are unaffected 
by the problem involving fillets, we have made price-to-price 
comparisons where otherwise appropriate. For a detailed explanation of 
this methodology, see Aguas Claras Analysis Memorandum.
---------------------------------------------------------------------------

    \6\ We cannot address the specifics of the verification finding 
in this public forum, as a meaningful discussion is only possible by 
means of reference to business proprietary information. We have 
addressed the petitioners' argument in a separate memorandum to the 
file, which will be placed on the official record and served upon 
parties with access to such information under administrative 
protective order. See Memorandum from the Case Analyst to Gary 
Taverman, Regarding Analysis of Aguas Claras Data for Final 
Determination (June 1, 1998)(Aguas Claras Analysis Memorandum).
---------------------------------------------------------------------------

    Comment 8: Sales by Affiliated Producer/Exporter.
    The petitioners argue that Aguas Claras failed to report U.S. sales 
made by an affiliate, Pesquera Invertec, that produced and exported 
subject merchandise during the POI. The petitioners state that the 
existence of these sales was found only at verification, a situation 
that warrants the application of the facts available to derive the 
dumping margins on such sales. Noting that the Department obtained the 
total volume of Pesquera Invertec's U.S. sales at verification, the 
petitioners argue further that the inclusion of this figure in Aguas 
Claras' total U.S. sales causes the Canadian market to drop below the 
Department's viability threshold. The petitioners state that this 
constitutes another reason for the Department to reject the use of the 
Canadian market as a comparison market (in addition to the arguments 
made in Comment 7, above) and compare U.S. prices to CV.
    Aguas Claras responds that it has never been affiliated with 
Pesquera Invertec, and was never required to report that exporter's 
sales. According to Aguas Claras, Pesquera Invertec was affiliated for 
part of the POI with Aguas Claras' parent company, Antarfish S.A. 
(Antarfish), by virtue of their joint control of a salmon processing 
company. However, Aguas Claras argues, there is no transitive principle 
of affiliation in the statute, such that Antarfish's affiliation with 
Pesquera

[[Page 31421]]

Invertec would extend to Aguas Claras. Aguas Claras contends that it 
reported all of its own sales, and those of its affiliates, but was 
never requested to report the sales of its affiliates' affiliates.
    Aguas Claras further argues that even if it were deemed to be 
affiliated with Pesquera Invertec, there would be no basis for 
collapsing the two companies and requiring the reporting of the 
latter's U.S. sales. In this respect, Aguas Claras maintains that the 
Department collapses affiliated companies only where there is such a 
high degree of integration between the companies' operations that there 
is a significant potential for price manipulation. Aguas Claras claims 
that verification established that, at most, Antarfish was only 
distantly affiliated with Pesquera Invertec during part of the POI 
through joint ownership of a processing facility, but that the two 
companies were not otherwise related. Aguas Claras also states that, 
prior to the end of the POI, Antarfish fully divested itself of its 
interests in the processing facility, such that there is no potential 
for future price manipulation.
    Finally, Aguas Claras argues that it could not have provided 
Pesquera Invertec sales data even if requested to do so, because 
Antarfish and Pesquera Invertec are involved in a business dispute, and 
Pesquera Invertec would not have supplied those data. According to 
Aguas Claras, the application of adverse facts available is only 
appropriate where a party has demonstrably failed to act to the best of 
its ability; therefore, it would be inappropriate to penalize Aguas 
Claras with respect to information that was not within its control.
    DOC Position: We disagree with the petitioners that Pesquera 
Invertec's sales should have been included in Aguas Claras' sales 
database. Even if we were to assume, arguendo, that Aguas Claras was 
affiliated with Pesquera Invertec for part of the POI, the record does 
not warrant collapsing these two parties. The Department's practice is 
to collapse affiliated producers when the companies: (1) have 
production facilities that are sufficiently similar so that a shift in 
production would not require substantial retooling; and (2) present a 
significant potential for the manipulation of price or production. See 
19 CFR 351.401(f) of the Department's regulations. See also, Cement 
From Mexico at 12774. As detailed below, it would be inappropriate to 
collapse Aguas Claras and Pesquera Invertec because there is not a 
significant potential for the manipulation of price or production.
    As provided at section 351.401(f)(2) of our regulations, we 
consider three factors in identifying a significant potential for the 
manipulation of price or production: (1) the level of common ownership; 
(2) the extent to which managerial employees or board members of one 
firm sit on the board of directors of an affiliated firm; and (3) 
whether operations are intertwined, such as through the sharing of 
sales information, involvement in pricing and production decisions, 
etc. In examining these factors as they pertain to a significant 
potential for manipulation, we consider both actual manipulation in the 
past and the possibility of future manipulation. See Preamble to Final 
Regulations, 62 FR 27296, 27346 (May 19, 1997). The preamble 
underscores the importance of considering the possibility of future 
manipulation: ``a standard based on the potential for manipulation 
focuses on what may transpire in the future.'' Id. We have, therefore, 
examined all three factors in light not only of actual manipulation 
during the POI but also with respect to the possibility of future 
manipulation.
    Applying these criteria to this case, Aguas Claras and Pesquera 
Invertec do not, and did not during the POI, have common stock 
ownership or common directors on their respective boards, as confirmed 
at verification. See Memorandum from Case Analysts to Gary Taverman, 
Regarding Verification of Sales by Aguas Claras (April 7, 1998) (Aguas 
Claras Sales Verification Report) at 3 and Exhibits A-15 and A-16. 
Thus, the first two factors suggest no potential manipulation during 
the POI or in the future. Regarding the third factor, Aguas Claras' 
parent company, Antarfish, fully divested itself of its participation 
in the processing facility it jointly owned with Pesquera Invertec, and 
ceased any processing of salmon at that plant. Moreover, at 
verification we reviewed extensive documentation involving arbitration 
proceedings over a significant business dispute between Pesquera 
Invertec and Antarfish.
    See Aguas Claras Sales Verification Report at 3-4 and exhibit A-15. 
As for the possibility that Aguas Claras/Antarfish and Pesquera 
Invertec engaged in price or production manipulation during the POI, we 
note that only a very small percentage of Aguas Claras/Antarfish's 
sales of subject merchandise were processed at the facility owned 
jointly with Pesquera Invertec, and the vast majority of Aguas Claras/
Antarfish salmon was processed at Aguas Claras' own plant. Further, as 
part of our cost verification testing, we reviewed transactions between 
affiliates and specifically examined whether the company had 
transactions with Pesquera Invertec. We did not find any such 
transactions. See Aguas Claras Cost Verification Report at 6 and 
exhibit B-2. Thus, we did not find evidence that the two companies' 
operations were significantly intertwined during the POI, or that they 
shared sensitive business data.
    Accordingly, because Aguas Claras and Antarfish share no common 
stock ownership or board members with Pesquera Invertec, and Antarfish 
terminated its relationship with Pesquera Invertec during the POI, we 
find no evidence to suggest a significant possibility for the 
manipulation of price or production, and we have determined that it 
would not be appropriate to collapse Aguas Claras and Pesquera 
Invertec.
    Comment 9: CEP Offset.
    The petitioners argue that the Department erred in making a CEP 
offset adjustment to normal value. According to the petitioners, Aguas 
Claras' U.S. and Canadian sales are made through the same sales 
affiliate, which performs exactly the same functions for both kinds of 
sales. The petitioners contend that, in determining the level of trade 
of U.S. sales, the Department ignored selling functions associated with 
the U.S. affiliate's CEP selling expenses, and erroneously concluded 
that the level of trade of Canadian sales was more advanced. The 
petitioners argue that such a comparison, and the resulting CEP offset 
adjustment, ignores commercial reality, and that the CIT has rejected 
such ``automatic'' CEP offset adjustments, citing Borden et al. v. 
United States, Slip Op. 98-36 (March 26, 1998).
    Aguas Claras responds that the Act explicitly directs the 
Department to determine the level of trade of CEP sales based on the 
price as adjusted, i.e., after deducting CEP selling expenses, and to 
ignore the selling functions associated with those expenses.
    DOC Position: We agree with Aguas Claras. As discussed in detail in 
the preliminary determination, the Act requires us to determine the 
level of trade of CEP sales without consideration of the selling 
functions associated with economic activities in the United States. See 
Preliminary Determination at 2670. See also section 351.412(c)(ii) of 
the Department's new regulations (62 FR 27495 and preamble at 27370-
27371). Based on this analysis, we continue to find that the level of 
trade of Canadian sales is more advanced than the level of trade of 
U.S. sales. Therefore, we have made a CEP offset to normal value. With 
respect to the petitioners' claim that the CIT recently overturned the

[[Page 31422]]

Department's practice of comparing the level of trade of comparison 
market sales to a constructed level of trade for CEP sales in Borden et 
al. v. United States, we note that the Department is in the process of 
considering the Court's remand order.
    Comment 10: Adjustment to Cash Deposit Rate for Re-Exports to 
Canada.
    Aguas Claras argues that its cash deposit rate should be adjusted 
to account for the fact that it routinely re-exports a portion of its 
U.S. inventory of salmon to Canada. With respect to such inventory, 
Aguas Claras states that entries that result in re-exportation are not 
liable to assessment of antidumping duties, yet U.S. importers must 
post antidumping cash deposits for all entries into the United States, 
since there is no way to identify at the time of entry those products 
that will ultimately be sold to Canada. In view of this, Aguas Claras 
argues that the Department should lower the cash deposit rate so that 
the total deposits collected do not exceed the total duties ultimately 
assessed on sales of subject merchandise. Aguas Claras contends that 
the Department made such an adjustment in cases involving flowers 
imported from Colombia, where consignment importers resell a portion of 
their U.S. inventory to Canada.
    Petitioners argue that, given the small size of the Canadian 
market, there is no guarantee that Aguas Claras will continue to make 
sales to Canada, and that it would be improper to lower Aguas Claras' 
calculated deposit rate to account for some hypothetical volume of U.S. 
entries that might be re-exported to Canada in the future.
    DOC Position: We agree with the petitioners that it would be 
inappropriate to adjust Aguas Claras' cash deposit rate. The cash 
deposit rate applies to all entries entered into the United States for 
purposes of consumption. The fact that Aguas Claras made sales to 
Canada during the POI is not an indicator of the likely volume of 
future sales, nor a guarantee of any future sales, to that market, 
particularly in light of the small portion of U.S. imports that were 
re-exported to Canada. Therefore, it would be inappropriate to reduce 
the cash deposit rate applicable to all entries of subject merchandise 
into the United States to account for past re-exportation of subject 
merchandise to Canada.
    The adjustment to cash deposit rates in the Flowers cases was made 
under a materially different fact pattern. In those cases, the 
Department found that a portion of entries of flowers into the United 
States are never sold due to perishability problems, and are instead 
destroyed. Because those products are inherently perishable, and it is 
reasonable to expect a percentage of entries of those products to go 
unsold in any given period, the Department found it appropriate to make 
a reduction to the cash deposit rate. Although the flowers respondents 
also re-exported a portion of their flowers to Canada, that was not the 
rationale for the adjustment to the cash deposit rate. See Certain 
Fresh Cut Flowers from Colombia at 20494.
    Comment 11: Allegation of Affiliation with Kenbourne International.
    Aguas Claras disputes the petitioners' allegation that Aguas Claras 
and its wholly-owned U.S. sales affiliate, Bowrain Corp., are 
affiliated with Kenbourne International, the Miami-based company that 
administers importer sales activities on behalf of Bowrain Corp.\7\ 
With respect to the nature of the relationship between these companies, 
Aguas Claras states there are no stock relationships or common officers 
between Aguas Claras/Bowrain Corp. and Kenbourne International. 
According to Aguas Claras, Bowrain Corp., which is incorporated in 
Florida but whose officials work for Aguas Claras in Chile, retained 
Kenbourne International to function as a U.S. consignment agent. Aguas 
Claras states that Bowrain Corp. has always required Kenbourne 
International to maintain a separate set of books and records for Aguas 
Claras sales, and shipments of Aguas Claras' merchandise are never 
recorded in Kenbourne International's own inventory, so that Bowrain 
Corp. retains significant control over its sales. Therefore, the 
respondent contends, Kenbourne International cannot be found to control 
Bowrain Corp., nor Aguas Claras itself.
---------------------------------------------------------------------------

    \7\ Aguas Claras' brief responds to allegations with respect to 
Kenbourne International made by the petitioners prior to the 
Department's preliminary determination. The petitioners did not 
reiterate these allegations in their case brief, but, as summarized 
below, did respond to Aguas Claras' comment in their rebuttal brief.
---------------------------------------------------------------------------

    In rebuttal, the petitioners argue that, consistent with case 
precedent involving exporter/agent relationships (see Final Results of 
Antidumping Duty Administrative Review: Furfuryl Alcohol from the 
Republic of South Africa, 62 FR 61081, 61088 (Nov 14, 1997) (Furfuryl 
Alcohol from South Africa), Kenbourne International should be deemed 
affiliated with Aguas Claras through an agency relationship. According 
to petitioners, Kenbourne International is in operational control of 
all aspects of U.S. imports of Aguas Claras merchandise, and thus is in 
a position to exercise direction over Aguas Claras.
    DOC Position: We agree with Aguas Claras, and have continued to 
regard Kenbourne International as unaffiliated with Aguas Claras and 
Bowrain Corp.
    Kenbourne International's role in the importation and sale of Aguas 
Claras' merchandise is that of an unaffiliated consignee. In all 
significant respects, this role is identical to that played by the 
consignees of other respondents in this proceeding (e.g., Aquastar, the 
consignee of Mares Australes). As discussed in detail in the 
preliminary determination, a consignment relationship alone is not 
sufficient basis for a finding of affiliation. See Preliminary Issues 
Memorandum at 4.
    The record of this investigation does not support the conclusion 
that the exporter (Aguas Claras) controls the consignee (Kenbourne 
International), or vice-versa. In Furfuryl Alcohol from South Africa, 
the Department found that the U.S. importer was an agent of the 
exporter and, therefore, was controlled by the principal/exporter. That 
is not the case here, as Kenbourne International is a consignee, not an 
agent (e.g., the two parties do not jointly market subject merchandise 
to U.S. customers, jointly negotiate prices/sales with U.S. customers, 
or interact with U.S. customers on product testing and quality 
control). Therefore, there is no basis on which to conclude that Aguas 
Claras controls Kenbourne International.
    There is also no basis for finding that Kenbourne International 
controls Aguas Claras. As noted above, Kenbourne International provides 
essentially the same services to Aguas Claras that unaffiliated 
consignees perform for the other respondents, and such services do not 
establish control of the exporter by the consignee. Other than these 
basic functions, the fact that Kenbourne International maintains a set 
of books and records on behalf of Bowrain Corp., and deposits revenues 
from sales of Aguas Claras merchandise into Bowrain Corp.'s bank 
accounts (after which Kenbourne International cannot access the 
revenues) is insufficient for a finding of affiliation based on 
control.

Sales Issues--Eicosal

    Comment 12: Affiliation between Eicosal and its Consignee.
    The petitioners argue that Eicosal and its consignee, Stolt Sea 
Farm Inc. (Stolt Inc.), should be considered affiliated parties because 
Stolt Inc. is in a position to exercise control over Eicosal through 
the terms of a ``close supplier'' business arrangement.
    Eicosal argues that the Department should continue to find, as it 
did in the preliminary determination, that Eicosal and Stolt Inc. are 
not affiliated parties.

[[Page 31423]]

According to Eicosal, the two parties have no direct or indirect stock 
ownership in each other, nor do they have a close supplier 
relationship. Eicosal contends that, even if all of its salmon sales to 
the United States are made through Stolt Inc., its voluminous sales of 
salmon to other markets (such as Japan and Brazil) do not involve Stolt 
Inc. at all.
    DOC Position: We agree with the petitioners that Eicosal and Stolt 
Inc. are affiliated parties, although we base our finding on a 
different statutory basis from that alleged by the petitioners. Whereas 
the petitioners allege that the two parties are affiliated by virtue of 
a close supplier relationship (affiliation via ``control'' as per 
section 771(33)(G) of the Act), we find that the parties are affiliated 
by virtue of equity ownership exceeding five percent in accordance with 
section 771(33)(E) of the Act, and therefore do not reach the issue of 
affiliation via control.
    Stolt Inc. is a wholly-owned subsidiary of Stolt-Nielsen Holdings 
B.V. (Stolt-Nielsen). This parent company has another wholly owned 
subsidiary, Stolt Sea Farm Ltda. (Stolt Ltda.), which owns well over 
five percent of Eicosal's stock. In the preliminary determination, the 
Department found that this equity relationship was not sufficient to 
establish affiliation under section 771(33)(E) of the Act. The 
underlying presumption for this finding was that Stolt Inc. and Stolt 
Ltda. were separate (albeit affiliated) corporate entities. See 
Preliminary Issues Memorandum at 5 and n.3.
    At verification, however, the Department gained a greater 
understanding of the interrelationship of the Stolt companies, which 
suggests that Stolt-Nielsen, Stolt Inc., and Stolt Ltda. are 
effectively a single corporate entity. First, the Department learned 
that Stolt Ltda. was created for the purpose of allowing Stolt-Nielsen 
to hold an equity interest in Eicosal. See Memorandum from Case 
Analysts to Gary Taverman re: Verification of Sales made by Pesquera 
Eicosal Ltda (April 9, 1998) (Eicosal Sales Verification Report) at 4. 
Second, the Department found that Stolt-Nielsen's operational control 
over Stolt Inc. (its wholly-owned subsidiary) extended to Stolt-
Nielsen's negotiation of the distribution arrangement with Eicosal. See 
Memorandum from analysts to Gary Taverman re: Verification of Sales 
Made by Pesquera Eicosal Ltda through Stolt Sea Farm Inc. (April 9, 
1998) (Eicosal CEP Sales Verification Report) at 3. Moreover, the 
distribution arrangement with Eicosal was signed on the same day that 
Stolt Ltda. purchased its shares in Eicosal, which further indicates 
the extent of coordination between these companies with respect to 
their relations with Eicosal. See Eicosal Sales Verification Report at 
4.
    In view of the above, we have determined that the Stolt companies 
(i.e., Stolt-Nielsen, Stolt Inc. and Stolt Ltda.) effectively 
constitute a single corporate entity (i.e., a person). For purposes of 
a dumping analysis, we believe that it is appropriate to view the 
equity interests of this single corporate entity in other companies in 
toto. Since this entity (of which Stolt Inc. is a part) owns in excess 
of five percent of Eicosal's stock, we find that Stolt Inc. is 
affiliated with Eicosal within the meaning of section 771(33)(E) of the 
Act.\8\
---------------------------------------------------------------------------

    \8\ The petitioners claim that Stolt Inc. effectively controls 
Eicosal through their contractual arrangement. We do not find that 
the contract between the parties per se establishes clear evidence 
of affiliation through control. In any event, the issue is moot as 
the Department has found the two parties to be affiliated by means 
of stock ownership.
---------------------------------------------------------------------------

    For purposes of this final determination, the finding of 
affiliation between Eicosal and Stolt Inc. does not preclude the use of 
the submitted U.S. sales data, since the Department had already 
requested that Eicosal report U.S. sales based on the prices charged by 
Stolt Inc. to the first unaffiliated U.S. customer. We note that in 
calculating CEP for sales made through affiliated parties (as opposed 
to unaffiliated consignees), the Department normally reduces the CEP by 
the amount of the actual selling expenses incurred by the affiliate, 
plus an amount for profit associated with those selling activities. In 
this case, we do not have such information for Stolt Inc., because the 
Department regarded Stolt Inc. as an unaffiliated party through the 
information-gathering stage. We do not believe that it would be 
appropriate to draw an adverse inference from this, as Eicosal 
submitted substantial and voluminous information about its relationship 
with the Stolt companies in its questionnaire responses. (That the 
Department developed a greater understanding of this relationship at 
verification does not imply that Eicosal withheld material evidence at 
the information-gathering of the proceeding.) Therefore, we have relied 
on the commission charged by Stolt Inc. to Eicosal in lieu of those 
selling expenses and the profit attributable to those expenses. 
However, in the event that an antidumping order is issued in this case 
and that Eicosal's sales become subject to administrative review, the 
Department will require that Eicosal submit sales data under the 
presumption that Eicosal and Stolt Inc. are affiliated parties, and 
will require the reporting of Stolt Inc.'s actual selling expenses.
    Comment 13: Ordinary Course of Trade.
    Eicosal argues that the Department erred in finding that its sales 
of vacuum-packed fillets to Japan were made in the ordinary course of 
trade, and in including these sales in the calculation of CV profit. 
According to Eicosal, the sales in question involved a small volume of 
a unique, specialized product, sold over a limited period of time to a 
single customer. Eicosal disputes the Department's finding in the 
preliminary determination that these sales were made continuously 
throughout the POI, contending that there were no shipments of vacuum-
packed fillets in March 1997, and adding that all shipments of vacuum-
packed fillets ended shortly after the end of the POI.
    The petitioners argue that the Department correctly found in its 
preliminary determination that Eicosal's sales of vacuum-packed fillets 
were made in the ordinary course of trade, as these sales were made 
continuously through the POI, involved significant quantities, and were 
not done on a test basis.
    DOC Position: We agree with the petitioners, and continue to find 
Eicosal's sales of vacuum-packed fillets to have been made in the 
ordinary course of trade.
    Section 773(a)(1)(B) of the Act provides that the Department may 
use third-country prices as the basis for normal value only where such 
prices are made in the ordinary course of trade. Prior to the 
preliminary determination, both Mares Australes and Eicosal argued that 
their respective sales of vacuum-packed fillets had been made outside 
the ordinary course of trade. In our preliminary determination, we 
found that Mares Australes' single sale of that merchandise had been 
made outside the ordinary course of trade, as the sale had involved a 
minute quantity of product sold on a test basis. In contrast, we found 
that Eicosal's sales of vacuum-packed fillets had been made within the 
ordinary course of trade, as they had been made regularly throughout 
the POI, and not on a test basis. See Preliminary Issues Memorandum at 
12.
    The objections now raised by Eicosal do not warrant a reversal of 
our preliminary finding. While sales of vacuum-packed fillets may 
represent a small percentage of total sales, the absolute amount of 
these sales (several thousand kilograms) is not insignificant.

[[Page 31424]]

Also, Eicosal's claim that sales of vacuum-packed fillets were 
intermittent throughout the POI is not persuasive, since these sales 
were suspended only for the last month of the period, and resumed a 
month thereafter. In view of the volume of merchandise involved, the 
fact that the merchandise was sold regularly throughout the POI, and 
the lack of evidence that the sales were made on a sample basis, we 
continue to find that the sales in question were made in the ordinary 
course of trade.
    Comment 14: Advertising Expense.
    Eicosal argues that, in the preliminary determination, the 
Department incorrectly found an advertising expense incurred by Eicosal 
for its participation in the Japan/Chile centennial celebration to be a 
general promotional expense, and treated it as an indirect selling 
expense. Eicosal argues that this advertising expense (specifically, a 
fee that allowed it to display the celebration logo on its boxes of 
salmon), should instead be treated as a direct selling expense. Eicosal 
states that the expense meets the Department's two-prong test for 
classification of advertising expenses as direct expenses, as set forth 
in Antifriction Bearings (other than Tapered Roller Bearings) and Parts 
Thereof from France, Germany, Italy, Japan, Singapore, and the United 
Kingdom; Final Results of Antidumping Duty Administrative Reviews, 62 
FR 2081, 2102 (January 15, 1997) (AFBs 94/95), namely that: (1) the 
expense be incurred directly in conjunction with sales of the foreign 
like product; and (2) the advertising be directed towards the 
customers' customer. Eicosal acknowledges that the promotional logo was 
displayed on boxes of seafood products other than fresh Atlantic 
salmon, but argues that a portion of the expenses nonetheless was 
incurred in direct connection with sales of subject merchandise. 
Further, Eicosal contends that these expenses do not meet the CIT's 
definition of ``general image'' advertising set forth in Brother 
Industries v. United States, 540 F. Supp 1341, 1366 (Ct. Int'l Trade 
1982), aff'd, 713 F.2d 1568 (Fed. Cir. 1983), cert. denied, 465 U.S. 
1022 (1984) (Brother Industries), i.e., such advertising is ``more in 
the nature of making consumers aware of the company's concern for 
consumers and the quality of its workmanship and product in general'' 
than in the nature of touting a specific product. Eicosal contends that 
because the promotional logos in question are applied to particular 
products, they constitute specific product advertising.
    The petitioners respond that the display of the centennial 
celebration logo on boxes of fresh Atlantic salmon does not 
specifically promote the sale of that product, but rather promotes 
goodwill between Chile and Japan, and therefore the associated expense 
cannot be treated as direct.
    DOC Position: We agree with the petitioners. The expenses in 
question do not meet the criteria for direct expenses, as described in 
AFBs 94/95. The nature of the centennial celebration was to promote 
goodwill, thereby promoting Eicosal's corporate image.
    The promotional logo applied to the boxes of fresh Atlantic salmon 
did not refer to salmon, nor even to Eicosal's general product lines. 
Therefore, we have continued to classify the expenses in question as 
indirect expenses.
    Comment 15: Adjustment to Cash Deposit Rate for Re-Exports to 
Canada.
    Eicosal argues that its cash deposit rate should be adjusted to 
account for the fact that it routinely re-exports a portion of its U.S. 
inventory of salmon to Canada. According to Eicosal, entries that 
result in re-exportation are not liable to assessment of antidumping 
duties, yet U.S. importers must post antidumping cash deposits for all 
entries into the United States, since there is no way to identify at 
the time of entry those products that are ultimately sold to Canada. In 
view of this, Eicosal argues, the Department should lower the cash 
deposit rate so that the total deposits collected do not exceed the 
total duties ultimately assessed on sales of subject merchandise.
    Petitioners argue that it would be improper to lower Eicosal's 
calculated deposit rate to account for a hypothetical volume of U.S. 
entries that might be re-exported to Canada in the future.
    DOC Position: We agree with the petitioners. For the reasons 
explained with respect to Comment 10 above (regarding similar arguments 
made by Aguas Claras), it is not appropriate to adjust the cash deposit 
rate for Eicosal to account for possible future entries of subject 
merchandise that might be re-exported to Canada in the future.

Sales Issues--Mares Australes

    Comment 16: Unreconciled Revenues.
    The petitioners note that there is a discrepancy between the total 
value of sales in the database submitted by Mares Australes and the 
total value of sales in the database submitted by Mares Australes' 
consignees. To account for this discrepancy, the petitioners request 
that the Department reduce CEP prices by the ratio of the unreconciled 
sales amount to the total value of Mares Australes' sales.
    Mares Australes responds that the discrepancy noted by the 
petitioners was identified during verification in Chile, and was 
accounted for almost entirely at the outset of the subsequent CEP 
verification. Further, Mares Australes argues that the total value of 
sales of the consignee's database (which was the database relied on by 
the Department for its preliminary determination) was fully verified, 
and maintains that any remaining discrepancy with Mares Australes' 
initial database is insignificant.
    DOC Position: We agree with Mares Australes. The small discrepancy 
between the two databases found at verification in Santiago was almost 
entirely accounted for at the outset of the CEP verification. The 
remaining discrepancy is an insignificant amount, particularly given 
that it involves a comparison of databases maintained by separate 
companies at different points in the distribution chain.
    Comment 17: Canadian Sales Included in U.S. Sales Database.
    The petitioners argue that sales to Canada by one of Mares 
Australes' consignees should be removed from the U.S. sales database.
    Mares Australes argues that in the normal course of business it is 
not informed of the ultimate destination of merchandise shipped to the 
United States for consignment resale. According to Mares Australes, the 
Department's practice is to determine the market of destination 
according to the producer/exporter's knowledge of destination at the 
time of sale, and therefore the sales in question are properly included 
in the U.S. sales database.
    DOC Position: We disagree with Mares Australes. Even if Mares 
Australes was not aware at the time of sale that the transactions 
involved Canadian customers, the fact remains that Mares Australes' 
consignee clearly identified the transactions as Canadian sales in its 
submitted database.
    The Department's ``exporter knowledge'' rule is typically applied 
where the respondent ships merchandise to a reseller and is aware at 
the time of sale that the merchandise is ultimately destined for the 
United States. In this case, Mares Australes' sales to both the United 
States and Canada are made through consignees, who set the terms of 
sale on behalf of Mares Australes, and have ultimate knowledge of the 
location of the customer. In preparing its sales database, Mares 
Australes obtained a sales listing from its consignees that listed the 
location of the customer. Since the sales database identifies

[[Page 31425]]

certain transactions as sales to Canada, and since this information 
reflects the knowledge of the consignee (acting on behalf of the 
exporter), at the time of sale, the transactions in question are 
unarguably Canadian sales. Therefore, we have excluded these 
transactions from the U.S. sales database.
    Comment 18: Unreconciled Claim Adjustments.
    The petitioners contend that, at verification, the Department found 
that it could not link certain quality claim expenses incurred by the 
consignee to sales of subject merchandise. According to the 
petitioners, the Department should not assume that the consignee 
absorbed the expense of the quality claims, as this would be tantamount 
to application of ``beneficial facts available.'' The petitioners argue 
that, instead, the Department should assume that Mares Australes bore 
the full amount of the quality claim expense, and reduce U.S. price by 
that amount.
    Mares Australes responds that, while the resellers' books may not 
permit linkage of specific quality claims to specific sales, all 
quality claim expenses charged by the consignee to Mares Australes have 
been captured in the submitted sales database. According to Mares 
Australes, claim expenses absorbed by the consignee should not be 
deducted from U.S. price, as they do not affect the net return to the 
respondent.
    DOC Position: We agree with Mares Australes. At verification, we 
observed that a number of quality claims were charged by the consignee 
to Mares Australes. While some of these claims could not be linked to 
specific transactions due to the nature of the consignees' books, they 
resulted in an allocated reduction to U.S. price for groupings of 
sales. Other quality claims were absorbed by the consignee. Such claims 
are not expenses of the respondent and do not reduce the revenue 
received by the respondent; rather, they are normal expenses of the 
consignee, and are covered by the commission charged by the consignee 
on the sale.

Sales Issues--Marine Harvest

    Comment 19: Accruals for Rebates.
    The petitioners claim that Marine Harvest did not report certain 
rebates for co-op advertising accrued on its U.S. expense ledgers 
during the POI, and failed to provide evidence to support its claim 
that the co-op advertising program in question was canceled before any 
rebates were granted. The petitioners request that, as adverse facts 
available, the Department reduce Marine Harvest's U.S. prices by the 
highest amount accrued on Marine Harvest's expense ledgers.
    Marine Harvest responds that the co-op advertising program in 
question never proceeded beyond the ``good idea'' stage, and that no 
rebates were ever paid. Citing Certain Corrosion-Resistant Carbon Steel 
Flat Products and Certain Cut-to-Length Carbon Steel Plate From Canada, 
63 FR 12725 (March 16, 1998), Marine Harvest argues that the 
Department's practice is to not adjust prices for such accruals.
    DOC Position: We agree with the petitioners. At verification, we 
found that Marine Harvest had made accruals for anticipated rebates to 
be paid to one of its customers during the POI. While we found no 
evidence that Marine Harvest had paid these rebates to the customer, we 
observed that Marine Harvest had not reversed these accruals as of the 
time of verification. Therefore, Marine Harvest's books indicated that 
the respondent anticipated that such payments would be made.
    The case cited by Marine Harvest involves claims of accrued (but 
unpaid) rebates for comparison market sales, and not for U.S. sales. In 
this and other cases involving such claims for adjustments to normal 
value, the Department has required that the respondent demonstrate that 
there is evidence of a contractual obligation for the payment of such 
rebates, or that there is a historical record of such rebates having 
been paid regularly in the past. Id. at 12740-41; see also Final 
Determination of Sales at Less Than Fair Value; Gray Portland Cement 
and Clinker From Japan, 56 FR 12156, 12168 (March 22, 1991); Final 
Determination of Sales at Less Than Fair Value; Color Television 
Receivers From Taiwan, 49 FR 7628, 7637 (March 1, 1984). If the 
Department did not require such evidence, respondents could record 
accruals on their books for fictitious expenses, artificially reduce 
normal value, and then reverse the accruals after the antidumping 
proceeding was ended.
    We do not know of, and the parties have not cited to, any case 
where the Department has found accrued but unpaid expenses 
corresponding to U.S. sales, as opposed to comparison market sales. 
Given the fact that the expense in question involves U.S. sales, we 
believe that it is incumbent on the respondent to demonstrate that the 
expense accrued on its books will not result in a rebate payment. At 
verification, the respondent did not provide any such evidence. The 
only evidence on the record is the respondent's accrual of these 
expenses on its books. In view of this, we have reduced U.S. price for 
the customer in question by the amount of the unreported accrued 
rebates. Because Marine Harvest has been a cooperative respondent, and 
with the single exception of this unreported accrued rebate, has been 
generally very thorough in its reporting of sales and expenses, we have 
not applied adverse facts available. Instead, we have reduced U.S. 
price by the rebate amounts actually accrued.
    Comment 20: Level of Trade/CEP Offset for Marine Harvest.
    The petitioners argue that the Department should not make a CEP 
offset for Marine Harvest's sales in the Japanese market. According to 
the petitioners, the level of trade in Japan is less advanced than the 
level of trade of U.S. sales, because Marine Harvest's U.S. sales 
affiliate engages in a wider variety of sales activities than does 
Marine Harvest's Japanese sales affiliate. As a secondary point, the 
petitioners contend that since sales to Japan are made exclusively to 
trading companies, the Department should find that there are separate 
levels of trade for U.S. sales involving retailers versus supermarkets/
distributors and make a level-of-trade adjustment for any comparisons 
of U.S. sales to retailers to Japanese sales.
    Marine Harvest argues that a CEP offset for Japanese sales is 
appropriate. According to Marine Harvest, the level of trade of sales 
to Japan is more advanced than the level of trade to the United States, 
since the sales activities performed by the U.S. reseller correspond to 
selling expenses already adjusted for as reductions to the CEP, and 
therefore cannot be considered in the comparison of selling functions 
performed by the sales affiliates in the two markets. Marine Harvest 
contends that its Japanese sales affiliate performs significant selling 
functions.
    Marine Harvest does not address the petitioners' request that the 
Department find the existence of different levels of trade in the U.S. 
market and make an LOT adjustment for comparisons of U.S. sales to 
retailers to Japanese sales.
    DOC Position: We agree with Marine Harvest that a CEP offset is 
appropriate. In the preliminary determination, we found a single level 
of trade in the Japanese market and a single level of trade in the U.S. 
market. We also found that the level of trade of sales to Japan is more 
advanced than the level of trade to the U.S. See Preliminary 
Determination at 2670. Verification has borne out that finding. At 
verification, we found that Marine Harvest's Japanese affiliate is 
engaged in a variety of selling functions including negotiation of 
terms of sale, visits to customers, handling of quality claims, and 
promotion of Marine Harvest's

[[Page 31426]]

products. See Marine Harvest Sales Verification Report at 12. To the 
extent that Marine Harvest's U.S. affiliate performs such functions, 
the associated expenses have already been adjusted for as reductions to 
the CEP.<SUP>9</SUP> Therefore, we continue to find that the level of 
trade of the Japanese market is more advanced than that of the U.S. 
market.
---------------------------------------------------------------------------

    \9\ As noted in Comment 9, supra, petitioners claim that the CIT 
recently overturned the Department's practice of comparing the level 
of trade of comparison market sales to a constructed level of trade 
for CEP sales. See Borden et al. v. United States, cited in 
petitioners' case brief at 83. The Department is still considering 
the Court's remand order.
---------------------------------------------------------------------------

    With respect to the petitioners' request that the Department find 
separate levels of trade in the United States, we note first that 
petitioners have not offered any reasons for the Department to deviate 
from its analysis in the preliminary determination. Since (1) the LOT 
of the Japanese sales is more advanced than the LOT of U.S. sales, (2) 
there is only one LOT in the Japanese market, (3) Marine Harvest does 
not sell salmon nor any other product at a different level of trade in 
Japan, and (4) the data submitted by the other respondents do not 
permit quantification of differences in level of trade, we find that an 
LOT adjustment cannot be made. Therefore, we have continued to make a 
CEP offset.
    Comment 21: Commingling of Different Grades of Salmon.
    According to the petitioners, Marine Harvest has admitted that it 
commingled premium and super-premium salmon on shipments to the United 
States. The petitioners argue that, therefore, even if the Department 
accepts that there is a legitimate distinction between the two grades 
in the Japanese market, it should nonetheless average Japanese sales 
prices of premium and super-premium salmon.
    Marine Harvest contends that it is rare that U.S. shipments of 
premium salmon will contain some super-premium salmon in the mix, and 
that such sales are in any case properly identified as being of premium 
grade, since they include only about five percent super-premium salmon.
    DOC Position: As explained above in Comment 1, we have not 
distinguished between super-premium and premium salmon. Accordingly, 
this issue is moot.

Cost Issues--General

    Comment 22: Major Inputs.
    The Association argues that, in its final determination, the 
Department should not use transfer prices to value transactions between 
companies and their affiliated processors and feed producers. Instead, 
the Association suggests that, for Eicosal and Marine Harvest, the 
Department rely on the affiliated suppliers' costs to value processing 
services and feed for purposes of computing cost of production and 
constructed value.
    The Association contends that the so-called ``transactions 
disregarded'' and ``major input'' rules under sections 773(f) (2) and 
(3) of the Act do not apply in this instance because the two companies' 
affiliated suppliers are separate legal entities in form only and that, 
in substance, these suppliers operate as divisions of a single entity. 
According to the Association, the record demonstrates that Eicosal and 
Eicomar, and Marine Harvest and Marifarms/Marine Feeds are more than 
mere ``affiliated persons'' as defined by section 771(33) of the Act. 
As evidence of this, the Association points out that Eicosal and Marine 
Harvest are each part of wholly-owned, commonly controlled, vertically 
integrated salmon production operations with the same accounting 
systems and under the same management.
    The Association asserts that the Department has not allowed the 
legal form of an entity to distort the calculation of dumping margins 
in other areas of the law. The Association notes that, for instance, in 
Certain Cold-Rolled and Corrosion-Resistant Carbon Steel Flat Products 
from Korea: Final Results of Antidumping Duty Administrative Reviews, 
62 FR 18404, 18430 (April 15, 1997) (Steel Flat Products from Korea) 
(Comment 19), the Department chose not to impose the major input rule 
where it treated respondent companies as a single entity for purposes 
of reporting sales of the subject merchandise. The Association further 
points to the Department's practice of calculating financial expenses 
on a consolidated basis in support of its argument that Eicosal and 
Marine Harvest and their respective affiliated suppliers should be 
treated as single entities for purposes of valuing inter-company 
transactions.
    In addition, the Association argues that generally accepted 
accounting principles suggest that the Department should treat the 
companies and their affiliated suppliers as single entities. 
Specifically, the Association notes that U.S. and international 
financial accounting principles require all companies that hold 
controlling interests in other companies to consolidate the results of 
their operations with those of their subsidiaries. This practice, the 
Association observes, has the effect of treating consolidated companies 
as a single entity, since all profits and losses on transactions 
between the companies are eliminated. The Association contends that the 
respective parent companies of Eicosal and Marine Harvest each follow 
these accounting principles in the ordinary course of business and 
prepare consolidated financial statements covering all of their 
controlled subsidiaries. Thus, the Association argues, the Department 
should value affiliated-party transactions at cost in the same way they 
are recorded in the ordinary course of business in the companies' 
audited, consolidated financial statements.
    With respect to a third salmon producer, Mares Australes, the 
Association argues that the Department should use a market price 
instead of the higher transfer price in valuing feed purchases from its 
affiliated feed producer Trouw Chile, S.A. (Trouw Chile). According to 
the Association, the relevant provision of the antidumping statute 
provides for the use of market price to value inputs from affiliated 
parties ``if, in the case of any element of value required to be 
considered, the amount representing that element does not fairly 
reflect the amount usually reflected in sales of merchandise under 
consideration in the market under consideration.'' See section 
773(f)(2) of the Act. Therefore, the Association believes that the 
statutory provision at issue provides for the use of market price 
whenever the transfer price does not fairly reflect the amount usually 
reflected in sales of the subject merchandise. The objective of the 
affiliated party rule is to ensure that COP is appropriately calculated 
and not distorted by decisions between affiliated parties as to where 
to book the profits on the production of the input, suggests the 
Association.
    The petitioners assert that, in dealing with transactions between 
affiliated companies under sections 773(f) (2) and (3) of the Act, it 
is the Department's practice to value major inputs, like processing and 
feed, at the higher of the transfer price, market price, or actual 
production cost. Indeed, according to the petitioners, Eicosal and 
Marine Harvest's argument that the Department may make an exception to 
its normal practice in the case of ``close affiliates'' is inconsistent 
with the statutory scheme as drafted by Congress. The petitioners 
maintain that the Department must reject Eicosal and Marine Harvest's 
argument to base affiliated-party purchases on cost rather than on the 
higher transfer price amounts.

[[Page 31427]]

    The petitioners disagree with the two respondents' reliance on 
Steel Flat Products from Korea, noting that, unlike Eicosal, Marine 
Harvest, and their respective affiliates, all of the Korean companies 
involved in that case produced the subject merchandise and, thus, had 
been ``collapsed'' by the Department for purposes of reporting sales 
and computing a single antidumping duty margin. Similarly, the 
petitioners reject respondents' argument with respect to the 
Department's practice of computing financial expenses based on 
consolidated financial statement data. The petitioners observe that, in 
contrast to debt which is dispersed throughout the consolidated 
companies, inter-company profit is generated at different points in the 
production process and by the sales process specific to each product, 
customer and market. The petitioners also contend that because the 
Department conducts a two-market price analysis in antidumping cases, 
some profit must be built into comparison market sales so that 
respondents do not allocate away all comparison market profit for 
dumping purposes.
    With respect to respondents' arguments that U.S. and international 
accounting principles call for treating Eicosal, Marine Harvest and 
their affiliates as single entities, the petitioners contend that these 
accounting principles do not in any way outweigh the provisions of the 
antidumping statute. The petitioners argue that the Department must 
therefore apply the statutory provisions for ``fair value'' and ``major 
inputs'' for Eicosal and Marine Harvest in the final determination.
    With regard to the Association's claim that the Department should 
rely on market prices for Mares Australes, the petitioners assert that 
this claim is inconsistent with the Department's normal establishment 
of arm's-length transactions.
    DOC Position: We disagree with the Association with respect to our 
application of the major input rule for Eicosal, Marine Harvest and 
Mares Australes. In order to value processing services and feed 
purchased by these companies from their affiliated suppliers, we have 
continued to rely on the higher of transfer prices, market value, or 
the affiliate's cost of production in accordance with sections 
773(f)(2) and (3) of the Act.
    As noted in the comments from both respondents and the petitioners, 
section 773(f)(2) and (3) of the Act prescribes how the Department is 
to treat affiliated-party transactions in its calculation of cost of 
production and constructed value. With respect to major inputs 
purchased from affiliated suppliers (in this instance, salmon 
processing and feed), the Department's practice is that such inputs 
will normally be valued at the higher of the affiliated party's 
transfer price, the market price of the inputs, or the actual costs 
incurred by the affiliated supplier in producing the inputs.
    Since implementation of the URAA, the Department has consistently 
applied this interpretation (see, e.g., Small Diameter Circular 
Seamless Carbon and Alloy Steel Standard, Line and Pressure Pipe From 
Germany: Final Results of Antidumping Duty Administrative Review, 63 FR 
13217, 13218 (March 18, 1998)(Comment 1), and Silicomanganese from 
Brazil; Final Results of Antidumping Duty Administrative Review, 62 FR 
37869, 37871 (July 15, 1997) (Silicomanganese from Brazil)(Comment 3)), 
making exception in only those cases wherein it treats respondents as a 
single entity for purposes of sales reporting and calculating an 
antidumping margin (see, e.g., Steel Flat Products from Korea (Comment 
19)). Relying solely on cost in the latter case flows logically from 
the overall calculation methodology being employed.
    All of the parties in question are separate legal entities in 
Chile, responsible for maintaining their own books and records. In 
contrast to Steel Flat Products from Korea, the Department is applying 
its normal company-specific calculation methodology. Therefore, there 
is no basis for establishing an exception to the ``major input rule.'' 
Accordingly, sections 773(f)(2) and (3) of the Act apply to the 
transactions between these companies.
    Further, we disagree with respondents' argument that the principles 
that guide the Department to treat groups of affiliated companies as a 
single entity for purposes of calculating financial expenses should 
apply to other elements of cost of production. The Department's 
practice regarding the calculation of financial expenses based on the 
consolidated financial statements of the parent company is well 
established and has been upheld by the courts. See, e.g., E.I. DuPont 
de Nemours & Company v. United States, Slip Op. 98-7, Court No. 96-11-
02509 (January 29, 1998)(upholding the Department's application of its 
long-standing policy of calculating interest expense from the borrowing 
cost incurred by the consolidated group of companies rather than the 
individual producer). The Department's practice with respect to 
calculating financial expenses is for a completely different purpose, 
i.e., to ensure that consolidated companies do not direct actual 
interest costs away from producers of subject merchandise and to 
producers of non-subject merchandise. On the other hand, under the 
major input rule, the statute requires that we review affiliated-party 
purchases in order to determine that they reasonably reflect a fair 
value.
    Although generally accepted accounting principles usually require 
that a company's financial statements be consolidated with all 
companies in which it owns a controlling interest, these consolidated 
financial statements do not alter the manufacturing costs associated 
with producing the subject merchandise as recorded by the entity 
producing the subject merchandise.
    Consistent with our general practice, outlined above, we disagree 
with Mares Australes that a market price rather than the transfer price 
it pays its affiliate should be used to value feed purchases from Trouw 
Chile. The Department will use the transfer price which normally 
reflects Mares Australes' purchases of the input, unless the transfer 
price does not reflect a fair value in the market under consideration. 
Therefore, we continue to rely on transfer prices in order to value 
feed purchased from Mares Australes' affiliated supplier, Trouw Chile.
    Comment 23: Perishability.
    The Association argues that the Department erroneously determined 
in the preliminary determination that salmon was not a highly 
perishable agricultural product for purposes of determining 
``substantial quantities'' of sales below cost in the cost test. The 
Association contends that the test for ``high perishability'' is 
whether a product has a short shelf life, noting that the Department 
has found products with significantly longer shelf lives than salmon, 
<SUP>10</SUP> to be highly perishable. According to the Association, 
the petitioners themselves have attested to the high perishability of 
salmon before the International Trade Commission (ITC).
---------------------------------------------------------------------------

    \10\ Although it did not make this specific point in its case 
briefs, at the public hearing the Association referenced a 
determination involving a 1983 Department finding that potatoes from 
Canada are highly perishable. The Association noted that salmon have 
much shorter shelf lives than potatoes. See Transcript of Case 
Hearing at 59-61 (April 28, 1998).
---------------------------------------------------------------------------

    Further, although the Association acknowledges that the Department 
did not find salmon to be highly perishable in the LTFV investigation 
of Fresh and Chilled Atlantic Salmon from Norway (Salmon from Norway), 
it contends that

[[Page 31428]]

that precedent is not controlling. According to the Association, 
Norwegian producers and exporters of salmon were different entities, 
and the Department's focus in that case was whether live farmed salmon 
was highly perishable for producers (who sold that salmon to 
exporters). The Association argues that the respondents in this case 
are integrated producers/exporters, such that the Department is not 
examining any sales of live salmon as sold by producers; rather, the 
merchandise in question consists entirely of dressed fish sold by the 
producer/exporter. Therefore, the Association contends, any alleged 
control over harvest timing is irrelevant, since once salmon are 
dressed and/or filleted, they become inherently perishable.
    Finally, the Association claims that the sales data submitted in 
this investigation indicate that salmon prices fall significantly due 
to inevitable perishability problems after harvesting. As evidence, the 
Association submits a graphical illustration of U.S. and Canadian price 
trends over the shelf life of salmon, based on data submitted by Aguas 
Claras in its sales databases.
    The petitioners argue that salmon should not be considered a highly 
perishable agricultural product for purposes of the cost test. 
According to the petitioners, the Department's precedent established in 
Salmon from Norway (i.e., that salmon is not a highly perishable 
product) is controlling in the instant investigation. The petitioners 
disagree with the Association's claim that, due to the integration of 
producers and exporters in the Chilean salmon industry, Salmon from 
Norway is inapplicable. According to the petitioners, that high degree 
of integration in the Chilean salmon industry enhances the respondents' 
control over harvesting and distribution schedules.
    More generally, the petitioners contend that a product can only be 
deemed to be highly perishable if the producer has very little 
flexibility in controlling the timing of harvesting, and if this lack 
of control normally and inevitably results in sales below cost for the 
industry. According to the petitioners, salmon harvests can be delayed 
by as many as 15 months, such that the respondents can fine-tune 
harvest timing so as to avoid the need to make sales below cost.
    The petitioners further argue that verification revealed that sales 
below cost are not an inevitable aspect of salmon production, and that 
Chilean salmon producers have not demonstrated that they suffer from 
perishability problems in bringing their product to market.
    DOC Position: We do not disagree with the Association's statement 
that, once harvested, salmon is a perishable product that does not have 
a long shelf life. However, the issue with respect to the ``substantial 
quantities'' portion of the cost test is whether salmon is a product 
that the respondents can expect to sell routinely in the comparison 
market at prices below the cost of production due to the highly 
perishable nature of the product. We disagree with the Association's 
contentions in this regard and find that fresh Atlantic salmon is not a 
highly perishable agricultural product for purposes of the 
``substantial quantities'' test.
    In Salmon from Norway, the Department found that the respondents 
had sufficient control over harvest timing and distribution such that 
perishability was not a concern, as the salmon were brought to market 
before freshness was compromised. Although the Association contends 
that the Department's focus in that case was on live salmon as sold by 
producers to exporters, the Department in fact found that salmon was 
not highly perishable either with respect to producers or exporters, 
whether live or harvested. The Department concluded:

    Norwegian salmon farmers have the ability to control the time of 
sale of their output by ``holding over'' inventory and, since 
January 1990, by freezing fresh salmon. Regarding respondents' 
assertion that salmon is perishable in the hands of the exporters, 
the Department found at verification that the opposite is true. 
Exporters coordinate their salmon requirements in weekly telephone 
conferences with their customers, with farmers, and with other 
exporters. By doing so, exporters can communicate their salmon 
requirements two weeks into the future so that farmers can begin to 
``starve'' (prepare for harvest) the salmon two weeks prior to 
harvest. Accordingly, there appears to be no perishability problem 
at the exporter level.

See Salmon from Norway at 7673.
    The record of the instant investigation, including our findings at 
verification, suggests that perishability is even less of a problem for 
the Chilean respondents than for the Norwegian respondents. The Chilean 
respondents are integrated producers/exporters, so that their 
production and harvesting schedules are more easily coordinated. 
Moreover, the respondents sell to a small number of importers in their 
respective comparison markets, with whom they closely coordinate both 
production and distribution. Shipments to third-country markets are 
made directly to the customer, without the involvement of consignees or 
affiliated resellers.<SUP>11</SUP> As the salmon are shipped, the terms 
of the sale are set, and the sale is consummated. Therefore, 
perishability does not become a factor in the respondents' pricing.
---------------------------------------------------------------------------

    \11\ The single exception is Aguas Claras, which made sales to 
Canada out of its U.S. affiliate's inventory. However, at 
verification Aguas Claras asserted that it sells merchandise 
affected by perishability problems in the United States and not in 
Canada due to the longer transportation times required for Canadian 
sales. See Aguas Claras Sales Verification Report at 6. Thus, to the 
extent that Aguas Claras makes significant sales below cost in the 
Canadian market, it is for reasons other than perishability.
---------------------------------------------------------------------------

    Our verifications bear out these findings. For instance, Marine 
Harvest sells to a total of three customers in Japan, and the majority 
of sales are made to a single customer. According to company officials, 
because Marine Harvest Chile's sales to Japan are arranged in close 
consultation with Japanese customers, it is exceptionally rare for 
Marine Harvest Chile to make sales below cost to the Japanese market 
due to perishability concerns. See Marine Harvest Sales Verification 
Report at 4-5. The other respondents similarly are able to coordinate 
closely their shipments with their customers. In the case of Eicosal, 
its Japanese customers reportedly will purchase all the high-quality 
salmon that Eicosal can produce. See letter from Eicosal to the 
Department of Commerce, transmitting Supplemental Section A 
Questionnaire Response (November 18, 1997), at 3. Moreover, in 
describing its production and sales process at verification, Eicosal 
stated that it conducts negotiations for Japanese sales before the 
salmon are harvested. See Eicosal Sales Verification Report at 7. 
Similarly, Mares Australes has stated that its two Japanese importers 
inform them of their requirements a month in advance, and that one of 
its importers even provides ``exact requirements by shipment.'' See 
letter from Mares Australes to the Department of Commerce, transmitting 
Supplemental Section A & B Questionnaire Responses (November 3, 1997), 
at 12.
    As for the Association's argument that the Department has found 
products with longer shelf lives than salmon (such as potatoes) to be 
highly perishable, we note that shelf life is not the sole criterion in 
determining whether an agricultural product is highly perishable for 
purposes of the cost test. Rather, as explained above, the issue is 
whether salmon is a highly perishable product that the respondents can 
expect to routinely sell in the comparison market at prices below the 
cost of production.<SUP>12</SUP>

[[Page 31429]]

Given the facts of this case, we have found that fresh Atlantic salmon 
does not meet that standard.
---------------------------------------------------------------------------

    \12\ With respect to the Association's reference to the 
Department's finding that potatoes (which have longer shelf lives 
than salmon) are a perishable product, we note that the underlying 
case dates back sixteen years, and the notice of final determination 
in that case does not set forth any details of the Department's 
analysis of perishability with respect to potatoes. See Final 
Determination of Sales at Less Than Fair Value; Fall-Harvested Round 
White Potatoes From Canada, 48 FR 51669, 51669 (November 10, 1983). 
In any event, there is no bright line ``shelf-life'' test to define 
high perishability, and the determination of whether a product is 
highly perishable for purposes of the cost test is necessarily 
specific to the facts of each case.
---------------------------------------------------------------------------

    In view of the record evidence that salmon is not a highly 
perishable product for purposes of the cost test, we do not find any 
basis to warrant the application of a higher threshold for the 
``substantial quantities'' aspect of the cost test.
    Comment 24: Exchange Rate Losses.
    The Association argues that, in calculating financial expenses for 
COP and CV, the Department must include only those exchange rate losses 
that are attributable to loans used to finance salmon production during 
the POI. While it acknowledges the Department's normal practice of 
calculating general expenses, including financial expenses, based on 
each respondent's fiscal year data, the Association maintains that, in 
this case, such a practice would overstate the actual financial 
expenses incurred by the salmon producers due to the effects of 
exchange rate losses incurred during 1996. Specifically, the 
Association points to the fact that a shift in the Chilean peso/U.S. 
dollar exchange rate during the first part of 1996 was responsible for 
the major portion of the exchange losses incurred by the producers in 
connection with their dollar-denominated debt. These losses, adds the 
Association, were reported by the salmon producers in their 1996 
financial statements, the same financial statements used by the 
Department to compute financial expenses for COP and CV. The 
Association notes, however, that during the actual months of the POI, 
the change in the peso/dollar exchange rate was significantly less than 
that of the full calendar year 1996. Thus, according to the 
Association, where the Department determines to include exchange rate 
losses in financial expenses, it should compute such losses based on 
the actual POI and not the company's 1996 fiscal year, in effect, 
limiting its analysis of exchange rate gains and losses to the POI so 
as to match these costs to sales during the POI.
    As support for its position, the Association argues that exchange 
rate gains and losses differ from other types of G&A expenses and 
interest expense in that the former may fluctuate significantly from 
month to month, causing considerable changes in the amount of gain or 
loss recognized as a cost. Moreover, according to the Association, the 
Department has acknowledged the distortion caused by exchange losses 
and its practice of calculating financial expenses based on full-year 
financial statement information. As evidence of this, the Association 
points to the Final Determination of Sales at Less Than Fair Value Oil 
Country Tubular Goods from Mexico, 60 FR 33567, 33572 (June 28, 1995) 
(OCTG from Mexico) in which the Department chose not to use financial 
statement data to compute financial expenses because devaluation of the 
Mexican peso made the information unrepresentative of costs during the 
POI.
    In addition to considering only the exchange losses incurred during 
the POI, the Association also urges the Department to exclude from COP 
and CV a portion of the losses on loans allocable to financing sales 
and accounts receivable. The Association argues that because the 
companies finance all of their operations, including both production 
and sales activities, part of the exchange loss arising from dollar-
denominated debt must be attributed to the companies' non-production 
activities. If the Department chooses not to allocate a portion of the 
exchange loss to sales activities and accounts receivable, the 
Association contends that it should reexamine its treatment of exchange 
gains arising from foreign currency receivables by treating all such 
gains as an offset to foreign exchange losses.
    The petitioners argue that the Department must continue to 
calculate financial expenses based on the salmon producers' 1996 
financial statement data, and not use the POI data as suggested by the 
Association. According to the petitioners, consistent with the 
Department's practice, the fiscal year information provides the most 
accurate and reasonable basis for estimating the actual expenses 
incurred, including exchange gains and losses. The petitioners point 
also to Gray Portland Cement and Clinker from Mexico: Final Results of 
Antidumping Duty Administrative Review, 62 FR 17148, 17160 (April 9, 
1997), in which the Department determined that exchange gains and 
losses arising from the respondent's foreign currency debt were, 
indeed, related to production and therefore properly included in the 
calculation of financing expenses. Lastly, the petitioners call 
attention to the fact that the Department's practice of including 
foreign exchange gains and losses in financial expenses has been upheld 
by the CIT in Micron Technology, Inc v. United States, 893 F. Supp. 21 
(CIT 1995).
    DOC Position: Our practice is to calculate general expenses, 
including financial expenses, based on the full fiscal year's 
information that most closely corresponds to the period of 
investigation or review. See, e.g., Final Results of Antidumping Duty 
Administrative Review: Silicon Metal From Brazil, 63 FR 6899, 6906 
(February 11, 1998) (Comment 16). Contrary to the Association's claim, 
general expenses often vary greatly from month to month. By considering 
general expense information for the fiscal year, however, the 
Department is able to ensure that it has reasonably captured all of the 
expenses associated with the respondent's complete business and 
accounting cycle. In particular, we note that the year-end financial 
statement data are generally the most accurate reflection of a 
company's results because these data include complete year-end accruals 
and other adjusting entries that are often posted only at year-end. In 
addition, the year-end statements are often audited, or at a minimum, 
reviewed by outside accountants, which provides additional assurance as 
to the accuracy of the data presented and the accounting principles 
used to compile those data.
    Here, the Association suggests that the Department isolate one 
specific expense, foreign exchange losses, which it contends would be 
lower if the Department departs from its normal methodology and shifts 
the calculation period for foreign exchange losses on loans by three 
months. While that may be the case, it is difficult to accept the 
Association's rationale in light of the fact that they have offered no 
information as to the effect that the three-month shift would have on 
all other costs incurred by the companies, certain of which may indeed 
be higher than those of the 1996 fiscal year. Thus, we do not consider 
it appropriate for the Department to abandon its normal practice for a 
single expense (foreign exchange losses) when the rationale for doing 
so is little more than the fact that such expense would be lower if 
calculated over a different period.
    With respect to the Association's reliance on OCTG from Mexico as a 
departure from the Department's general practice of using fiscal year 
data, we note that, in that case, the respondent's financial expense 
ratio was based on best information available (the predecessor to facts 
available).

[[Page 31430]]

Specifically, the investigation in that case encompassed a six-month 
period from January through June 1994. The respondent's 1994 financial 
statements were provided by the petitioners, after the respondent 
claimed that these statements were not available. The financial 
statements showed the effects of the massive devaluation of the Mexican 
peso sustained in late December of 1994, several months subsequent to 
the POI. As discussed more fully in OCTG from Mexico, the Department 
used an adverse inference in its calculation of interest expense, while 
declining to include the full amount of the peso collapse. While the 
Association has characterized the change in the Chilean peso rate 
during the fiscal year as ``four and one-half times'' that of the POI, 
this reflects a change of from 1 to 4.4 percent. This change does not 
begin to equate to the massive currency devaluation noted in OCTG from 
Mexico. Finally, we note that the choice of adverse facts available (or 
its predecessor best information available) provides no guidance with 
respect to the Department's preferred methods for calculating actual 
expenses.
    As to the Association's assertion that exchange losses should be 
attributed to the accounts receivable balance, this is inconsistent 
with our practice. The Department has an established practice of 
including currency translation gains and losses on foreign-currency 
denominated loans in COP and CV because they reflect an actual increase 
in the amount of local currency that will have to be paid to retire the 
foreign-currency denominated loan balances. See, e.g., SRAMs from Korea 
(Comment 4). We allocate the financial expenses based on the cost of 
goods sold and, thus, these expenses are reflected as a cost of 
production, and not a selling expense. We do not consider exchange 
gains and losses from sales transactions to be related to the 
manufacturing activities of the company. See, e.g., Notice of Final 
Determination of Sales at Less Than Fair Value: Steel Wire Rod From 
Trinidad and Tobago, 63 FR 9177, 9181 (February 24, 1998) (Comment 4).
    For this final determination, we have included in the cost of 
production the amortized portion of foreign exchange losses resulting 
from foreign-currency denominated loans as part of the financial 
expenses. The foreign exchange losses on loans reported in the 
consolidated financial statements were amortized over the average 
remaining life of the loans on a straight-line basis.
    Comment 25: CV Imputed Credit.
    The Association argues that the Department's methodology for 
comparing U.S. prices to CV does not properly account for imputed 
credit expenses in the comparison market. The Association believes that 
the Department should either deduct an amount for imputed credit from 
CV, as it has done in recent cases, or should exclude from COP 
financial expenses the amount allocable to financing accounts 
receivable, as it did under the old law.
    Further, for Camanchaca, the only producer that did not have a 
comparison market, the Association argues that, if the Department 
continues to use the weighted-average selling and profit rates of the 
other four respondents in this investigation, the Department should 
apply the weighted-average comparison market imputed credit of the 
other four producers.
    The petitioners do not rebut the Association's comments on this 
issue.
    DOC Position: We agree with the Association that a ``circumstance 
of sale'' adjustment for imputed credit should be made to CV. The 
Department ``uses imputed credit expenses to measure the effect of 
specific respondent selling practices in the United States and the 
comparison market.'' See Stainless Steel Wire Rods from France (Comment 
5). Thus, in order to make a fair comparison, we have deducted imputed 
credit from CV as a COS adjustment in this final determination.
    Comment 26: Allocation of Financial Expenses Based on Assets.
    The Association asks the Department to consider the special 
circumstances of three salmon producers--Eicosal, Camanchaca, and Aguas 
Claras--in calculating financial expenses for COP and CV. According to 
the Association, certain characteristics unique to these companies' 
operations require that the Department modify its normal method of 
computing consolidated financial expenses based on the ratio of net 
financial expenses to cost of goods sold during the period.
    In the case of Eicosal, the Association contends that the 
Department must recognize the very different capital requirements of--
and disproportionate generation of financial expenses by--Eicosal and 
its affiliated processor, Eicomar. That is, in the Association's view, 
the Department must allocate consolidated financial expenses between 
Eicosal and Eicomar based on the relative value of fixed assets held by 
each company. The Association maintains that this allocation is 
necessary in order to avoid significant distortions in the calculation 
of financial expenses due to the fact that Eicomar, as a seafood 
processor, requires substantially greater amounts of capital for 
equipment than does Eicosal, which conducts the salmon farming 
operations. In support of this view, the Association cites the Final 
Determination of Sales at Less Than Fair Value of Dynamic Random Access 
Memory Semiconductors of One Megabit and Above from the Republic of 
Korea, 58 FR 15467, 15471 (March 23, 1993)(DRAMS from Korea) where, 
before calculating a respondent's net financial expense ratio for COP 
and CV, the Department first allocated financial expenses to various 
divisions within the corporation based on the relative value of fixed 
assets within each division.
    The Association also requests that the Department make a fixed 
asset-based allocation of financial expenses for Camanchaca as well. In 
this instance, the Association points out that Camanchaca is involved 
in many fish and seafood-related operations other than the production 
of fresh Atlantic salmon. According to the Association, Camanchaca's 
operations are divided into six distinct production areas, each locally 
administered and having its own capital requirements. The Association 
maintains that unless financial expenses are first allocated to 
Camanchaca's production area on the basis of fixed asset value, the 
Department's normal method of computing such expenses will 
significantly distort the actual capital costs incurred by the 
company's salmon production operations.
    Finally, in the case of Aguas Claras, the Association argues that 
the Department's financial expense calculation fails to take account of 
the company's frozen and smoked salmon operations. Specifically, the 
Association observes that, in addition to fresh salmon, Aguas Claras 
produces and holds in inventory a large amount of frozen and smoked 
salmon products. According to the Association, before it can accurately 
capture the financial expenses of fresh Atlantic salmon, the Department 
must first allocate a portion of total financial expense to frozen and 
smoked salmon in recognition of the costs incurred to finance these 
products in inventory. The Association contends that such an allocation 
would be consistent with the Department's imputation of inventory 
carrying costs in antidumping cases.
    The petitioners argue that the Department should follow its normal 
methodology and calculate financial expenses as a ratio of each 
company's cost of goods sold. According to the petitioners there is no 
reason in this case for the Department to allocate interest on the 
basis of inventory or fixed assets as suggested by the Association. The 
petitioners further

[[Page 31431]]

point out that Camanchaca and Aguas Claras improperly reduced their 
submitted financial expenses associated with the imputed cost of 
carrying their accounts receivable and ending inventory.
    DOC Position: We disagree with the Association that the facts of 
the case require us to depart from our general practice of calculating 
financial expenses based on a ratio of the foreign producer's net 
expenses to its cost of goods sold. In this case, each of the three 
respondents proposes alternative methods for calculating financial 
expenses which they believe best represent the unique circumstances of 
their operations. In effect, these calculations allocate interest 
charges to certain assets which the companies contend are not 
associated with subject merchandise, and thus, have the effect of 
lowering the interest expense for subject merchandise. The fact that 
the results of these calculations differ from the normal cost-of-sales-
based calculation does not in any way suggest that the Department's 
longstanding practice of calculating financial expenses is inaccurate 
or unreasonable. In fact, the Courts have upheld as reasonable the 
Department's practice of calculating financial expenses based on the 
consolidated group as a whole, notwithstanding the fact that any non-
respondent member of the Group may have been involved in a different 
line of business or held assets having values substantially different 
from those of the respondent company. See, e.g., E.I. DuPont de Nemours 
& Co. v. United States, Slip op. 98-7, Court No. 96-11-02509 (January 
29, 1998)(where the Court noted that the Department's calculation of 
financial expenses reasonably reflects the actual costs incurred by the 
respondent) and Gulf States Tube Division v. United States, Slip op. 
97-124, Court No. 95-09-01125 (August 29, 1997) at 31 (where in light 
of the fact that the statute provides no specific guidance for the 
calculation of financial expenses, the Court recognized as reasonable 
the Department's allocation of such expenses based on the respondent's 
consolidated group).
    With respect to the Association's citation to DRAMS from Korea, we 
note that while the Department relied on an asset-based allocation 
methodology in the investigation phase of that case, we have since 
reconsidered this approach. Specifically, although the CIT upheld the 
Department's interest calculation in that proceeding (Micron 
Technologies, Inc. v. United States), in a recent investigation 
involving the same respondent companies from the DRAMS from Korea 
proceeding, Final Determination of Sales at Less Than Fair Value: 
Static Random Access Memory Semiconductors From the Republic of Korea, 
63 FR 8934, 8938 (February 23, 1998)(SRAMS from Korea), the Department 
described why it was unnecessary to follow the fixed asset based 
allocation methodology for financial expenses that had been used in the 
DRAMS from Korea proceeding. See SRAMS from Korea at 8938 (General 
Comment 2). (``We have reconsidered this issue for the final 
determination and concluded that because the COGS includes a 
proportional amount of the depreciation of the assets used in the 
production of the merchandise, allocation of financing expenses on the 
basis of COGS distributed proportionately more interest expense to 
those products having higher capital investment.'') Thus, as in this 
case, the Department recognized that its normal method of calculating 
financial expenses on the basis of cost of goods sold, without special 
allocations to specific divisions or assets, provides a reasonable 
measure of the costs incurred for the merchandise.
    Further, we have not allowed the respondents to offset financial 
expenses for the claimed cost of holding accounts receivable and 
inventory. The statute directs the Department to calculate selling, 
general and administrative costs, including financial expense, based 
upon the actual experience of the company. See section 773(b)(3)(B) and 
section 773(e)(2)(A) of the Act. Under the pre-URAA law, we allowed 
offsets to financial expense for accounts receivable and finished goods 
inventory to account for the fact that we calculated CV inclusive of 
amounts imputed for credit and inventory carrying costs. Consistent 
with the provisions of the new law, however, we now base financial 
expense for COP and CV on the amounts incurred by the respondents, and 
do not account for imputed expenses as actual costs for the calculation 
of CV. Therefore, it is no longer appropriate to reduce the financial 
expenses by the accounts receivable and inventory offsets as suggested 
by the Association. See, e.g., Steel Flat Products From Korea at 18422 
(Comment 6); Final Determination of Sales at Less Than Fair Value: 
Certain Pasta From Italy, 61 FR 30326, 30361 (June 14, 1996).
    Comment 27: Inflation.
    The Association contends that the Department should not adjust the 
respondents' reported cost of production and constructed value figures 
to account for the effects of Chilean inflation on salmon stock costs. 
Although it recognizes that such an adjustment would be consistent with 
Chilean accounting principles, the Association points out that 
inflation in the country ranged only between six and eight percent 
during the period over which the respondents calculated their reported 
salmon costs. This low inflation rate, argues the Association, does not 
meet the Department's normal threshold for adjusting costs in cases 
involving significant inflation.
    In support of its position, the Association cites Certain Fresh Cut 
Flowers from Colombia: Final Results of Antidumping Duty Administrative 
Reviews, 61 FR 42833, 42845 (August 19, 1996)(Flowers from Colombia) 
and Final Determination of Sales at Less Than Fair Value: Fresh Cut 
Roses from Colombia, 60 FR 6980, 6993 (February 6, 1995)(Roses from 
Colombia), where it contends that the Department's policy is to adjust 
costs to a constant currency basis only in cases involving high-
inflation and, even then, only to adjust expenses related to long-lived 
fixed assets (i.e., depreciation expense). The Association notes that, 
consistent with Chilean GAAP, each respondent restated the historical 
cost of its fixed assets such that the depreciation expense reported 
for cost of production and constructed value reflected current Chilean 
peso values during the period of investigation. However, the 
Association contends that salmon stock is not a fixed asset and, thus, 
it is inconsistent with past Department practice to also adjust these 
costs for the low inflation experienced in Chile during the cost 
calculation period.
    The petitioners, citing Final Determination of Sales at Less Than 
Fair Value: Canned Pineapple Fruit from Thailand, 60 FR 29553, 29559 
(June 5, 1995) (Pineapple from Thailand), claim that the Department 
should rely on the respondents' normal books and records, kept in 
accordance with Chilean GAAP, for the calculation of the live fish 
inventory cost. The petitioners argue that whether inflation in Chile 
was high or low is irrelevant to the cost calculation because the 
Department must first look at the respondents' home country GAAP to 
determine whether such principles reasonably reflect the costs of 
producing the subject merchandise. In Pineapple from Thailand, the 
Department stated that normal accounting practices provide an objective 
standard by which to measure costs, while providing the respondents a 
predictable basis on which to compute costs. The petitioners further 
contend that, in this case, the respondents want the Department to 
reject outright the Chilean GAAP requirements regarding price-level

[[Page 31432]]

adjustments to non-monetary assets. Yet, the petitioners note, the 
respondents have failed to meet their burden of demonstrating that such 
an adjustment would distort the reported costs. The petitioners assert 
that the respondents have failed to indicate how their normal books and 
records, kept in accordance with Chilean GAAP, distort costs. The 
petitioners argue that the respondents' claim that the cost of live 
fish inventory are mainly contained within the POI is incorrect because 
the production cycle of salmon is between two and three years.
    DOC Position: We agree with the petitioners that certain of the 
salmon producers failed to provide costs which reflected their normal 
accounting practices of adjusting non-monetary assets for increases in 
price-levels. The exclusion of these adjustments results in costs which 
are not reflective of current price levels and, thus, produces an 
improper match of revenues and expenses.
    The Department's long-standing practice, codified at section 
773(f)(1)(A) of the Act, is to rely on data from a respondent's normal 
books and records where those records are prepared in accordance with 
home country GAAP and reasonably reflect the costs of producing the 
merchandise. Normal GAAP accounting practices provide both respondents 
and the Department a reasonably objective and predictable basis by 
which to compute costs for the merchandise under investigation. 
However, in those instances where it is determined that a company's 
normal accounting practices result in a misallocation of production 
costs, the Department will adjust the respondent's costs or use 
alternative calculation methodologies that more accurately capture the 
actual costs incurred to produce the merchandise. See, e.g., Final 
Determination of Sales at Less Than Fair Value: New Minivans from 
Japan, 57 FR 21937, 21952 (May 26, 1992) (Minivans from Japan) (the 
Department adjusted a respondent's U.S. further manufacturing costs 
because the company's normal accounting methodology did not result in 
an accurate measure of production costs); see also, Pineapple from 
Thailand, 60 FR at 29559.
    In the instant proceeding, the Association asks the Department to 
reject each salmon producer's normal price-level accounting 
methodologies used for live fish inventories in favor of costs 
calculated for purposes of this investigation. As noted, however, the 
Department's practice is to rely on a respondent's books and records 
prepared in accordance with its home country GAAP unless these 
accounting principles do not reasonably reflect costs associated with 
production of the subject merchandise. As a result, before analyzing 
any alternative accounting method reported by a respondent during the 
proceeding, the Department will determine whether it is appropriate to 
use the respondent's normal GAAP accounting practices in order to 
calculate the cost of the merchandise.
    In this case, the Department examined whether it was reasonable 
under Chilean GAAP for the salmon producers to adjust their fish 
inventory costs to reflect current Chilean peso values corrected for 
the effects of inflation. Fish stock costs are recorded on the basis of 
the historical amounts incurred to raise the salmon from eggs to 
maturity. Similar to fixed assets, however, because fish stock costs 
are carried on the company books as an asset for two to three years 
prior to harvest, Chilean GAAP requires that the costs be restated to 
reflect inflation-adjusted amounts. In examining the companies' books 
and records at verification, we found that Camanchaca, Aguas Claras and 
Eicosal had used the recorded price-level adjustment methodology for 
live fish inventories for at least a number of years. In addition, 
evidence on the record, i.e., audited financial statements, indicated 
that each of the three companies' normal price-level adjustment 
methodologies was accepted by its independent auditors and was 
consistent with GAAP practiced in Chile.
    Given the fact that the companies' price-level adjustment 
methodology is consistent with Chilean GAAP and the Association has not 
shown this practice to distort salmon production costs during the 
period, we have recalculated each company's fish stock costs to include 
the price-level adjustment reported in accordance with its normal 
accounting practices.
    We also found that two of the companies, Mares Australes and Marine 
Harvest, did not record the price-level adjustment to fish stock costs 
as they do not prepare financial statements in accordance with Chilean 
GAAP. Specifically, these companies are subsidiaries of foreign 
companies that prepare only consolidated financial statements in other 
countries following accounting principles dictated by the home country 
GAAP of their respective parent companies. Thus, Mares Australes and 
Marine Harvest are not required to prepare financial statements in 
accordance with Chilean GAAP.
    We note that in this case, however, the information provided by 
Marine Harvest does, in effect, consider the change in the value of the 
Chilean peso. Marine Harvest's financial data is restated into U.S. 
dollars monthly as part of its reporting for consolidation purposes. We 
note that during the cost calculation period the Chilean peso/U.S. 
dollar exchange rate reflected much of the inflation rate experienced 
in Chile. Thus, Marine Harvest's reported costs were effectively 
adjusted for the price-level changes each month, as part of the 
company's normal accounting.
    With respect to Mares Australes, the case record does not contain 
information regarding the company's accounting consolidation process 
with its parent. As part of the consolidation process, however, Mares 
Australes would have to convert its peso accounting records to the 
currency in which its parent maintains its normal books and records. 
Thus, as with Marine Harvest, it is reasonable to conclude that Mares 
Australes, in effect, accounts for the price-level changes through the 
currency conversion process of its normal accounting consolidation. 
Yet, because Mares Australes reported its salmon production costs in 
pesos for purposes of this investigation, it is necessary for us to 
reflect the price level changes that are consistent with its currency 
conversion and consolidation. Accordingly, we have revised Mares 
Australes' submitted COP and CV figures to reflect price level 
adjustments based on the inflation index.
    The Association has argued that the salmon producers' normal price-
level adjustment methodologies do not reasonably reflect costs due to 
the low rate of inflation in Chile during the growing period for fresh 
Atlantic salmon harvested during the POI. Yet, the fact that the level 
of inflation during the years prior to the POI was not at levels 
experienced in Chile in the past does not make the price-level 
adjustment requirements under Chilean GAAP unreasonable.
    Further, the Association's claim that the Department's high-
inflation methodology (as stated in Flowers from Colombia and Roses 
from Colombia) which only requires price-level adjustments for 
depreciable assets is unfounded. In the specific facts present in those 
cases, the only restated non-monetary assets which affected the COP and 
CV were fixed assets, including the flower and rose plants. In this 
case, as well as in Flowers from Colombia and Roses from Colombia, the 
costs of the subject merchandise, which were accumulated over years 
prior to the period of investigation or review, were adjusted for the 
price-level changes recorded in the company's normal accounting 
records. Contrary to the

[[Page 31433]]

Association's claim, our treatment of the price-level adjustments for 
the live fish inventory in this case is consistent with our treatment 
of similar costs in Flowers from Colombia and Roses from Colombia.
    Comment 28: CV Profit for Japanese Market.
    The Association argues that the Department should not base CV 
profit on sales to the Japanese market without making an appropriate 
adjustment for differences in the grades sold in the U.S. and Japanese 
markets. According to the Association, the Department has recognized 
that there are physical differences between the premium-grade salmon 
sold in the United States and the super-premium salmon sold in Japan, 
and has found that it is inappropriate to make price-to-price 
comparisons of those sales. The Association contends that calculating 
CV profit based on sales of Japan (which are primarily of super-premium 
salmon) effectively results in a CV equivalent to the sales price of 
super-premium salmon in Japan. The Association argues that the use of 
such a NV would result in an unfair comparison, would be contrary to 
other case precedent, and would be inconsistent with the Department's 
stated recognition that price-to-price comparisons of premium to super-
premium merchandise are inappropriate.
    The Association proposes that, for Mares Australes (which sold both 
premium and super-premium salmon in Japan), the Department base CV 
profit only on sales of premium salmon to Japan. For the other two 
respondents for whom Japan is the comparison market (and who did not 
make any sales of premium salmon to Japan), the Association proposes an 
adjustment based on the percentage difference between Mares Australes' 
profit rates from sales of the two grades of salmon in Japan.
    Alternatively, the Association proposes that the Department make 
price-to-price comparisons between premium and super-premium prices 
with a value-based difference-in-merchandise adjustment, based on the 
percentage difference between Mares Australes' sales prices for premium 
and super-premium prices in Japan.
    The petitioners argue that the statute requires that CV profit be 
based on all sales of the foreign like product made in the ordinary 
course of trade in the comparison market. According to the petitioners, 
the statute grants the Department the authority to rely on alternative 
methods only when such data are unavailable.
    DOC Position: This issue has been rendered moot by the Department's 
finding, set forth above in response to Comment 1, that there is no 
significant distinction between premium and super-premium grade salmon 
for purposes of an antidumping analysis.

Cost Issues--Eicosal

    Comment 29: Company-Wide G&A.
    The petitioners argue that the Department must recalculate 
Eicosal's G&A expenses to reflect amounts reported in the company's 
consolidated financial statements. According to the petitioners, such a 
calculation would be consistent with the Department's practice of 
computing G&A expenses of the respondent company as a whole, and not 
just for those expenses directly related to the manufacture of the 
product under investigation.
    Eicosal claims that the Department should rely on the submitted G&A 
rate calculation.
    DOC Position: We agree with the petitioners' assertions that the 
Department's normal methodology is to calculate G&A based on the 
producing company as a whole and not just based on G&A expenses related 
to the production of a particular product. We do not agree, however, 
that this means that the G&A expenses should be based on amounts 
reported in the respondent company's consolidated financial statements, 
as the Department's normal methodology does not rely on consolidated 
level G&A expense. Thus, we did not calculate Eicosal's G&A rate using 
the consolidated company financial statements.

Cost Issues--Mares Australes

    Comment 30: Combined G&A.
    Mares Australes contends that it correctly computed its G&A 
expenses by combining the expenses of Mares Australes and those of its 
affiliate, Trouw Chile. According to Mares Australes, the two companies 
are completely integrated and share common management and 
administrative operations. Thus, Mares Australes argues, in order to 
accurately capture the G&A expenses incurred on sales of fresh Atlantic 
salmon, the Department must compute G&A expenses as if Mares Australes 
and Trouw Chile were a single integrated business unit.
    The petitioners argue that the Department should recalculate Mares 
Australes' G&A expenses excluding the G&A expenses of Trouw Chile. 
According to the petitioners, the Department's general practice is to 
use the G&A expenses that relate to the operations of the producer 
(Mares Australes) supplemented, but not commingled, with a portion of 
G&A expenses from the parent company. Further, the petitioners contend 
that Mares Australes has reported, in effect, not the G&A expenses 
incurred to produce salmon, but a G&A ratio which represents the 
results of a combined fish feed and salmon producer. The petitioners 
also argue that to the degree it is appropriate for Mares Australes to 
report feed costs based on the actual costs of its affiliate Trouw 
Chile, Trouw Chile's actual G&A expenses should be included in 
determining the COP of feed and its G&A expenses should not be mixed 
with those of Mares Australes.
    DOC Position: We disagree with Mares Australes regarding the 
appropriateness of its submitted G&A expense calculation. It is the 
Department's practice to use the G&A expenses calculated based on 
information from the producer. See, e.g., OCTG from Mexico at 33573 
(Comment 8). Trouw Chile's G&A expenses relate to its cost of producing 
fish feed, and do not bear upon the general expenses incurred by Mares 
Australes in producing salmon. For this final determination, we 
calculated G&A expenses for Mares Australes using amounts recorded in 
the company's normal books and records, and excluded the submitted 
information of Trouw Chile.
    Comment 31: Bonus Adjustment.
    Mares Australes argues that the Department should allow its 
adjustment to its reported labor costs so that they reflect only the 
cost of bonuses actually paid to employees rather than the amount 
accrued. Because it accrued a greater expense for employee bonuses than 
was actually paid out during 1996 and the excess accrual was not 
reversed at year-end, Mares Australes believes it should be permitted 
to base the expense on only the cash actually paid for bonuses. Mares 
Australes further argues that in order to match costs incurred during 
the POI with sales during the POI, the Department should include in COP 
only the company's ``actual'' bonus expense.
    The petitioners argue that the Department should disallow Mares 
Australes' adjustment to bonuses and that the full amount of bonuses 
recognized should remain in the cost of production of Atlantic salmon. 
Because Mares Australes has accounted for its fiscal year on the 
accrual basis, that is, in the normal course of business, it recognized 
the expenses to be incurred for the period, whether or not yet fully 
paid, it should be required to report this information to the 
Department.

[[Page 31434]]

    DOC Position: We agree with the petitioners that Mares Australes' 
bonus expense should reflect the amounts recorded in the company's 
audited financial statements. Mares Australes follows accrual 
accounting in its normal books and records. We therefore consider it 
inappropriate to rely on a cash-basis accounting method for bonus 
payments, a single expense identified by the company. Accordingly, we 
have included the bonus amount recognized in the company's accounting 
records in the cost of Atlantic salmon.

Cost Issues--Marine Harvest

    Comment 32: Major Input.
    Marine Harvest argues that if the Department does not rely on the 
costs from the company's affiliated feed producer, Marine Feed, it 
should use only the market prices for feed comparable to Marine 
Harvest's proprietary feed formula in order to value the affiliated 
feed purchases. According to Marine Harvest, the salmon harvested 
during the POI were raised on a diet of a unique proprietary feed that 
was produced only by Marine Feed. Marine Harvest argues that the feed 
prices charged by other unaffiliated feed producers cannot be used to 
value feed inputs produced by Marine Feed because they were for 
experimental trials produced with alternative feed formulations.
    Marine Harvest further contends that the Department has recognized 
that any application of the ``major input'' rule must deal with 
``identical'' or ``comparable transactions of similar inputs.'' See, 
e.g., Final Determination of Sales at Less Than Fair Value: Engineered 
Process Gas Turbo-Compressor Systems, Whether Assembled or Unassembled, 
and Whether Complete or Incomplete, from Japan, 62 FR 24394, 24411 (May 
5, 1997)(Comment 15). Marine Harvest argues that, therefore, any 
calculation of the market price for feed must be based on unaffiliated 
producers of Marine Harvest's proprietary feed formula. Marine Harvest 
also argues that the small amount of feed sold by Marine Feed to 
unaffiliated purchasers demonstrates that the price charged by Marine 
Feed to Marine Harvest was an arm's-length market price.
    The petitioners contend that the Department should value salmon 
feed purchases from Marine Feed at the average price of all 
unaffiliated purchases. The petitioners argue that there is nothing in 
the Department's cost verification report that supports Marine 
Harvest's contention that the average unaffiliated feed price was based 
on a product formula that could not be compared to the feed that Marine 
Harvest purchased from Marine Feed.
    DOC Position: As discussed in our response to Comment 22, we have 
followed our practice of using the higher of transfer price, market 
value or cost of production when valuing major inputs from affiliated 
suppliers. Accordingly, we continue to value feed purchased from Marine 
Harvest's affiliated feed supplier, Marine Feed, based on the market 
value of the input. As to Marine Harvest's claim that the market value 
for its purchases from Marine Feed must be based only on purchases from 
unaffiliated producers of its ``proprietary'' feed formula, we note 
that this argument was first raised in the company's case brief and, 
therefore, the Department was unable to examine this claim during its 
verification of the submitted data. There is no record evidence 
detailing the recipes for Marine Harvest's affiliated or unaffiliated 
feed purchases. Further, there is no record evidence that feed produced 
using Marine Harvest's proprietary formula is not sufficiently similar 
to feed produced by the unaffiliated companies for purposes of 
comparing transfer prices to market prices under section 773(f)(2) of 
the Act. Therefore, we used the weighted average of Marine Harvest's 
purchases from all unaffiliated feed suppliers in order to value the 
company's affiliated feed purchases for this final determination.

Cost Issues--Camanchaca

    Comment 33: Area Management Expenses.
    Camanchaca argues that the Department has double-counted area 
management expenses in its recalculated G&A ratio. According to 
Camanchaca, because the company's submitted cost of manufacturing 
figures already included area management expenses, it was necessary to 
exclude these amounts from G&A in order to avoid double counting. In 
addition, Camanchaca claims that the Department's calculation of the 
company-wide G&A rate includes administration costs for non-salmon 
producing areas of the company. Camanchaca asserts that the G&A ratio 
should be calculated based only on areas related to salmon production, 
and cites as support for its position, the Department's decision in the 
Final Determination of Sales at Less Than Fair Value: Furfuryl Alcohol 
From South Africa, 60 FR 22550, 22556 (May 8, 1995) (LTFV determination 
in Furfuryl Alcohol from South Africa) (Comment 15).
    In rebuttal, the petitioners argue that the Department calculated 
correctly Camanchaca's G&A expense rate. The petitioners point out that 
Camanchaca did not follow the instructions in the Department's 
antidumping questionnaire with respect to reporting of G&A expenses. 
According to the petitioners, instead of reporting a company-wide G&A 
rate, Camanchaca shifted expenses from G&A to factory overhead by 
basing its G&A rate on only the salmon division of the company.
    DOC Position: In recalculating G&A expenses for Camanchaca, we 
excluded from the company's G&A expenses the local administration costs 
of Puerto Montt and Tome because these costs were already included in 
the cost of manufacturing. Additionally, we reduced Camanchaca's 
company-wide G&A expenses for the amounts reported as indirect selling 
expenses.
    As to the respondent's citation to the LTFV determination in 
Furfuryl Alcohol from South Africa case, we do not believe that this 
case supports Camanchaca's claim that the G&A rate should be calculated 
based only on areas of the company related to salmon production. In 
that proceeding, the respondent maintained its normal books and records 
in such a way that its chemical operations, including subject 
merchandise, maintained specific G&A accounts in the general ledger. As 
a result, the company's G&A rate was calculated based on the sum of the 
overall company G&A expenses, consistent with the Department's normal 
methodology, and also included certain chemical operations-specific G&A 
expenses.
    Comment 34: G&A Expenses Allocation Base.
    Camanchaca explains that the cost of goods sold figure used to 
calculate the G&A and financial expense ratios includes packing cost. 
Thus, according to Camanchaca, G&A and financial expense ratios should 
be applied to packing costs, which the company claims would increase 
the packing expense for U.S. sales.
    DOC Position: We disagree with respondent that the G&A and 
financial expense ratios should be applied to packing costs. We note 
that the packing costs are included in the cost of sales denominator 
used in calculating Camanchaca's G&A and financial expense ratios. 
Thus, in order to correctly reflect the G&A and financial expenses 
incurred by Camanchaca, these ratios must be applied to the salmon 
production costs inclusive of the reported packing expenses. Moreover, 
in calculating packing costs it is not the

[[Page 31435]]

Department's practice to include G&A and financial expenses.
    For this final determination, we have applied the G&A and financial 
expense ratios to the total of COM and packing costs. See Final Results 
of Antidumping Duty Administrative Review and Partial Termination of 
Administrative Review: Circular Welded Non-Alloy Steel Pipe From the 
Republic of Korea, 62 FR 55574, 55580 (October 27, 1997)
    (Comment 6) where the Department determined the same conclusion for 
this issue.
    Comment 35:  CV Profit Rate for Camanchaca.
    Camanchaca does not have a viable home or third-country market. In 
the preliminary determination, the Department based normal value for 
Camanchaca on CV, and based CV profit on a weighted average of the 
profit rates of the other four Chilean producers on sales of the 
foreign like product in their respective comparison markets. Camanchaca 
argues that this method is an arbitrary and unreasonable surrogate for 
Camanchaca's home market profit. Camanchaca contends that the 
antidumping law establishes a preference for company-specific data in 
the calculation of profit for CV, and that the average profit realized 
by the four other respondents in the Japanese and Canadian markets is 
not a reasonable surrogate for Camanchaca's home market profit, because 
those respondents have very different costs, expenses, and profit 
levels.
    Camanchaca argues that, instead, the Department should rely on 
Camanchaca's average profit rate from total worldwide sales, as 
reflected in the company's 1995 and 1996 audited financial statements. 
Camanchaca states that the Department has accepted the use of a 
company's overall worldwide profit under similar circumstances in other 
cases, provided that the overall profit rate reflects sales of the same 
general category as the foreign like product. According to Camanchaca, 
its operations are all fish and seafood-related, and are all related 
within the same general category of merchandise as fresh Atlantic 
salmon, so that the company's overall profit would be a reasonable and 
representative surrogate for home market profit from the sales of 
salmon.
    The petitioners respond that the Department's use of an average of 
the profit for the other four respondents as a surrogate for 
Camanchaca's profit on the foreign like product is both reasonable and 
consistent with statutory requirements and Department practice. 
According to the petitioners, it would be inappropriate to use 
Camanchaca's worldwide profit, as that profit would reflect sales of 
merchandise other than the foreign like product, as well as sales made 
outside the POI. The petitioners note that Camanchaca has argued with 
respect to other issues that costs incurred in relation to other 
merchandise are vastly different from costs incurred on fresh Atlantic 
salmon, and that costs incurred outside the POI are not representative 
of POI costs.
    The petitioners further contend that the cases cited by Camanchaca 
are not on point because, in those cases, the Department had 
acknowledged that the respondent's worldwide profit was the most 
appropriate basis for profit based on the record of that case.
    DOC Position: We have continued to calculate the surrogate profit 
rate for Camanchaca based on the weighted average of the profit rates 
of the other respondents.
    As explained in detail in the preliminary determination, the 
Department must calculate profit for Camanchaca in accordance with 
section 773(e)(2)(B)(iii) of the Act, which allows for profit to be 
based on ``any other reasonable method.'' Given the fact pattern in 
this case, we find that the use of the weighted average of the profit 
rates of the other respondents is a reasonable method. That weighted-
average rate is based on POI sales of the foreign like product, the 
reliability of which the Department has ascertained through 
verification. Camanchaca has not provided any specific reason why the 
profit rates of the other respondents are unreliable, stating only that 
each of the other four respondents has ``different costs, expenses, and 
profit levels.'' See Association's Case Brief at II-52. We do not 
believe that differences in the various profit rates render an average 
of those rates an unreliable surrogate profit; on the contrary, the 
very purpose of an average rate is to capture the range of profit 
experienced by the other parties to the proceeding.
    Moreover, we believe that it would be far less reasonable in this 
case to rely on Camanchaca's worldwide profit for 1995 and 1996 as a 
surrogate profit. First, Camanchaca's only significant market for fresh 
Atlantic salmon is the United States. To the extent that Camanchaca's 
profit on the sale of fresh Atlantic salmon has a significant weight in 
the company's overall profit, it is based in large part on U.S. sales 
that are subject to an antidumping investigation, and therefore 
inherently suspect. Second, as the petitioners correctly point out, 
Camanchaca has acknowledged with respect to other issues that costs 
incurred in relation to other merchandise are vastly different from 
costs incurred on fresh Atlantic salmon (see Comment 26, below), and 
that costs incurred outside the POI are not representative of POI costs 
(see Comment 24, above). These assertions by Camanchaca cast further 
doubt on the representativeness of Camanchaca's worldwide profit for a 
period largely outside the POI.
    In view of the above, we believe that the use of the weighted 
average of the profit rates of the other respondents is not only 
reasonable (thus meeting the standard required by statute), but also 
preferable to the alternative methodology proposed by Camanchaca. 
Therefore, as in our preliminary determination, we have continued to 
calculate Camanchaca's profit, as facts available under section 
773(e)(2)(b)(iii) of the Act, based on the profits realized by the 
other four respondents in sales to their respective comparison markets.

Cost Issues--Aguas Claras

    Comment 36: Feed Costs.
    Aguas Claras maintains that, while it agrees with the Department's 
conclusion that the company miscalculated the amount of discount on 
feed purchased from its supplier, EWOS Chile S.A. (EWOS), the amount of 
the correction in the Department's cost verification report overstates 
the actual amount of the error.
    The petitioners contend that the Department should disallow the 
feed purchase discount paid by EWOS for reasons that are proprietary in 
nature. Additionally, the petitioners argue that the Department should 
not allow Aguas Claras to reduce its feed costs for the EWOS discount 
because the company had knowledge of an impending trade case when it 
entered into the EWOS feed agreement. Furthermore, the petitioners 
claim that Aguas Claras applied the feed discount to salmon which were 
harvested before the contract was entered into and, therefore, these 
fish could not have consumed any EWOS feed.
    DOC Position: We disagree with Aguas Claras' claim that our 
adjustment to EWOS' feed discount overstates the actual amount of the 
company's calculation error. The amount of the discount in question was 
identified in Article 15 of the feed supplier contract between Aguas 
Claras and EWOS. Aguas Claras initially calculated its cost of EWOS-
supplied feed using a methodology that tied the discount to specific 
feed purchases. The contract, however, does not contain any such 
specific provisions relating the discount to feed purchases. In fact, 
provisions of the contract specify only the period for which it is in 
effect. To correct Aguas

[[Page 31436]]

Claras' calculation error, we amortized the discount specified in 
Article 15 over the life of the contract and reduced feed cost by only 
the portion of the discount that was amortized within the POI. We then 
allocated this amount to individual fish groups based on each groups' 
relative biomass.
    Comment 37: Unreported Costs.
    Aguas Claras argues that the Department's cost verification report 
erroneously concluded that the respondent had not reported in its 
submitted COP and CV certain packing and ice costs that were recorded 
outside the company's normal cost accounting system. Aguas Claras 
claims that it included the amount of these costs related to salmon 
production in the minor corrections presented at the beginning of 
verification.
    The petitioners state that the Department should include in COP and 
CV the packing and ice costs that Aguas Claras' failed to report.
    DOC Position: We agree with the respondent. We reexamined the 
information on the record and determined that Aguas Claras did, in 
fact, include the packing and ice costs in question in the revised COP 
and CV figures it submitted as minor corrections at the beginning of 
verification. Therefore, we have not made any additional adjustment for 
these costs. See Aguas Claras Cost Verification Report at exhibits B25 
(the overall reconciliation) and B1 (the minor corrections exhibit).
    Comment 38: Sale of Investment.
    Aguas Claras claims that because Salmofood S.A. and Antarfrio 
Invertec S.A. were involved in the production and processing of 
Atlantic salmon, it is correct to reduce the company's G&A expenses 
with the gain earned from the sale of its investment in the two 
affiliates. Aguas Claras argues that its shareholdings in the two 
companies were not simply passive investments but, instead, represent 
joint ventures related to the production of fresh Atlantic salmon. 
Aguas Claras asserts that there is no practical difference between the 
sale of fixed assets of a feed mill or processing plant, which it 
claims the Department recognizes in calculating G&A expenses, and the 
sale of shares in such a feed mill or processing company.
    The petitioners argue that Aguas Claras incorrectly reduced G&A 
expenses for its gain on the sale of common stock in Antarfrio Invertec 
and Salmofood. The petitioners state that Aguas Claras did not sell the 
assets of these companies but instead sold only its equity investment 
in the companies. The petitioners claim that the gain on the sale of 
common stock is not a part of the day-to-day business of producing 
salmon. In support of its argument, the petitioners indicate that the 
gain was shown on Aguas Claras' income statement as ``other income.'' 
Therefore, the petitioners claim that Aguas Claras itself confirmed 
that the gain was from an investment and not related to the production 
of subject merchandise. The petitioners allege that the sales of the 
affiliated companies were not conducted for bona fide commercial 
reasons, but to influence the antidumping investigation.
    DOC Position: For the final determination in this case, we have not 
reduced Aguas Claras G&A expense for the amount of gain that the 
company received from its sales of Salmofood and Antarfrio Invertec. It 
is the Department's practice to consider the disposal of fixed assets 
used to produce the merchandise under investigation to be a normal part 
of a company's operations. Thus, the Department typically accounts for 
the gains or losses generated from these transactions as part of G&A 
expense in the COP and CV calculations. See, e.g., Minivans from Japan 
at 21943. However, the Department considers the transfer of an equity 
interest in another company as a sale of an investment, which is 
unrelated to the production activities for G&A expenses. Neither is the 
gain or loss from an investment activity considered part of financial 
expenses, since the investment is unrelated to financing the company's 
working capital. See, e.g., Final Determination of Sales at Less than 
Fair Value: Oil Country Tubular Goods from Korea, 60 FR 33561, 33567 
(June 28, 1995). Moreover, in this case, we disagree with Aguas Claras' 
characterization of its sale of common stock in Salmofood and Antarfrio 
Invertec as the equivalent of a disposal of fixed assets related to the 
company's salmon production. Specifically, the sale of stock in a 
company is, indeed, the sale of an interest in all assets of the 
company.
    Comment 39: Cost of Idle Facility.
    Aguas Claras argues that because the cost of the idled salmon 
smoking plant facility related solely to the production of non-subject 
merchandise, it properly excluded these costs from the reported G&A 
expenses. Aguas Claras cites several cases where the Department 
excluded the costs associated with idled or inactive facilities where 
those facilities produced non-subject merchandise.
    The petitioners contend that the costs associated with the idle 
facilities were incorrectly excluded from G&A.
    DOC Position: We agree with respondent that the costs of the idled 
salmon smoking plant should be excluded from the G&A expenses of the 
company. The Department's general practice recognizes that all costs 
incurred during a period should be absorbed by the company's sales of 
all products during that same period. As we stated in Silicomanganese 
from Brazil at 37871, we consider idle facility costs to be period 
costs (i.e., costs that are more closely related to the accounting 
period rather than the current manufacturing costs). While it is the 
Department's general practice to include the cost of shutdowns and idle 
assets in the COP and CV, in this case we determined that the salmon 
smoking facilities were idle for only a short time and that the smoking 
facilities later resumed production during the POI. Therefore, the 
costs associated with this temporary shutdown of the smoking plant are 
more appropriately absorbed by the smoked salmon products sold during 
the POI, rather than absorbed by all products.
    Comment 40: Calculation of CV Indirect Selling expenses for Aguas 
Claras.
    Aguas Claras contends that the Department erred in including in CV 
a fixed amount of selling expenses for different products, rather than 
an amount proportionate to the cost of manufacturing of each product. 
Specifically, Aguas Claras notes that it sold both salmon fillets and 
whole salmon in the Canadian market and claims that, on a per-pound 
basis, salmon fillets are a higher value product than whole salmon. 
Aguas Claras contends that, by assigning all products the same per-unit 
amount of CV indirect selling expenses regardless of the value of the 
product, the Department's methodology is distortive. Aguas Claras 
proposes that the Department calculate a weighted-average selling 
expense ratio and, in computing CV, increase the cost of manufacturing 
of each product by this ratio, such that selling expenses are 
proportionate to costs.
    The petitioners respond that, in view of the problems encountered 
at verification in determining the value of Aguas Claras' sales to 
Canada (see Comment 7 above), the Department should continue to apply a 
fixed per-pound weighted-average selling expense to CV for all 
products.
    DOC Position: We agree with Aguas Claras, and have recalculated CV 
selling expenses as a percentage of cost of production, thus ensuring 
that the selling expenses for higher value-added products are 
proportionately higher than the selling expenses apportioned to

[[Page 31437]]

lower value-added products. This is consistent with the methodology 
used in Antifriction Bearings (Other Than Tapered Roller Bearings) and 
Parts Thereof From France, Germany, Italy, Japan, Romania, Singapore, 
Sweden, and The United Kingdom: Notice of Preliminary Results of 
Antidumping Duty Administrative Reviews and Partial Termination of 
Administrative Reviews, 63 FR 6512 (February 9, 1998).
    We do not agree with the petitioners' argument that, due to 
shortcomings in Aguas Claras' recordkeeping discovered at verification, 
it would be more appropriate to apply a fixed average selling expense 
to all products. However, we cannot address the specifics of the 
petitioners' argument in this public forum, as a meaningful discussion 
is only possible by means of reference to business proprietary 
information. We have addressed the petitioners' argument in a separate 
memo to the file, which has been placed on the official record, and 
served upon parties with access to such information under 
administrative protective order.
    We note that, although only Aguas Claras requested that the 
Department recalculate CV indirect selling expenses, to ensure 
consistency in our calculations for the other respondents we have also 
revised their CV indirect selling expenses on the same basis.

Continuation of Suspension of Liquidation

    In accordance with section 735(c)(4)(B) of the Act, we are 
directing the Customs Service to continue suspending liquidation of all 
entries of fresh Atlantic salmon from Chile, except for subject 
merchandise produced and exported by Camanchaca and Marine Harvest 
(which have de minimis weighted-average margins), that are entered, or 
withdrawn from warehouse, for consumption on or after January 16, 1998 
(the date of publication of the preliminary determination in the 
Federal Register). The Customs Service shall continue to require a cash 
deposit or the posting of a bond equal to the weighted-average amount 
by which the normal value exceeds the EP or CEP, as indicated in the 
chart below. These instructions suspending liquidation will remain in 
effect until further notice.
    The weighted-average dumping margins are as follows:

------------------------------------------------------------------------
                                                               Weighted-
                                                                average 
                    Exporter/manufacturer                       margin  
                                                              percentage
------------------------------------------------------------------------
Aguas Claras................................................        8.27
Camanchaca..................................................        0.21
Eicosal.....................................................       10.91
Mares Australes.............................................        2.24
Marine Harvest..............................................        1.36
All Others..................................................        5.19
------------------------------------------------------------------------

    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. As 
explained above in Comment 5, we have therefore excluded the de minimis 
dumping margins for Camanchaca 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 735(d) of the Act, we have notified the 
ITC of our determination. As our final determination is affirmative, 
the ITC will, within 45 days, determine whether these imports are 
materially injuring, or threaten material injury to, the U.S. industry. 
If the ITC determines that material injury or threat of material injury 
does not exist, the proceeding will be terminated and all securities 
posted will be refunded or canceled. If the ITC determines that such 
injury does exist, the Department will issue an antidumping duty order 
directing the Customs Service to assess antidumping duties on all 
imports of the subject merchandise entered for consumption on or after 
the effective date of the suspension of liquidation.
    This determination is published pursuant to sections 735(d) and 
777(i) of the Act.

    Dated: June 1, 1998.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 98-15183 Filed 6-8-98; 8:45 am]
BILLING CODE 3510-DS-P