[Federal Register Volume 63, Number 110 (Tuesday, June 9, 1998)]
[Notices]
[Pages 31437-31447]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-15184]


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DEPARTMENT OF COMMERCE

International Trade Administration
[C-337-802]


Final Negative Countervailing Duty Determination: Fresh Atlantic 
Salmon from Chile

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

EFFECTIVE DATE: June 9, 1998.

FOR FURTHER INFORMATION CONTACT: Rosa Jeong, Marian Wells or Todd 
Hansen, Office of Antidumping/Countervailing Duty Enforcement, Group 1, 
Office 1, Import Administration, U.S. Department of Commerce, Room 
3099, 14th Street and Constitution Avenue, N.W., Washington, D.C. 
20230; telephone (202) 482-1278, 482-6309 or 482-1276, respectively.

Final Determination

    The Department of Commerce (the ``Department'') determines that 
countervailable subsidies are not being provided to producers or 
exporters of fresh Atlantic salmon (``salmon'') in Chile.

Petitioners

    The petition in this investigation was filed by the Coalition for 
Fair Atlantic Salmon Trade (``FAST'') and the following individual 
members of FAST: Atlantic Salmon of Maine; Cooke Aquaculture U.S., 
Inc.; DE Salmon, Inc.; Global Aqua--USA, llc; Island Aquaculture Corp.; 
Maine Coast Nordic, Inc.; ScanAm Fish Farms; Treats Island Fisheries; 
and Trumpet Island Salmon Farm, Inc. (collectively referred to 
hereinafter as the ``petitioners'').

Case History

    Since the publication of the preliminary negative determination in 
the Federal Register on November 19, 1997 (62 FR 61803) (``Preliminary 
Determination''), the following events have occurred.
    On December 3, 1997, the petitioners requested that the Department 
collect information on Law 889, a program which we had not included in 
our investigation because information in the petition indicated that 
the program was no longer in existence. The petitioners' submission 
included evidence that indicated that this program was in operation 
during the POI.
    Upon a review of information on the record, we determined that 
because the program was included in the petition, the petitioners' 
request constituted a timely submission of factual information rather 
than a new subsidy allegation. Accordingly, on December 11, 1997, we 
requested that the Government of Chile (``GOC'') provide information 
regarding benefits provided under Chilean Law 889. The GOC submitted 
the requested information on January 21, 1998.
    We conducted verification of the responses of the GOC from January 
28 through February 11, 1998.
    The petitioners and the GOC filed case and rebuttal briefs on March 
4 and

[[Page 31438]]

March 10, 1998, respectively. The Department held a hearing on March 
13, 1998.
    On March 9, 1998, the petitioners amended the petition to include 
Trumpet Island Salmon Farm, Inc., a U.S. producer of the subject 
merchandise, as an additional petitioner.

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 subjected 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 at 
item numbers 0302.12.0003 and 0304.10.4093 of the Harmonized Tariff 
Schedule of the United States (``HTSUS''). Although the HTSUS numbers 
are provided for convenience and customs purposes, the written 
description of the merchandise is dispositive.

The Applicable Statute

    Unless otherwise indicated, all citations to the statute are 
references to the provisions of the Tariff Act of 1930, as amended by 
the Uruguay Round Agreements Act effective January 1, 1995 (the 
``Act'').

Period of Investigation (``POI'')

    The period for which we are measuring subsidies is calendar year 
1996.

Subsidies Valuation Information

    Benchmarks for Loans and Discount Rates: To calculate the 
countervailable benefit from loans and nonrecurring grants, we have 
used the average rates for U.S. dollar lending in Chile, as calculated 
by the Superintendencia de Bancos e Instituciones Financieras 
(``SBIF''), the Chilean bank supervisory agency. The U.S. dollar 
interest rates were used because the loans in question were denominated 
in U.S. dollars and the grant that was allocated over time was made in 
U.S. dollars.
    Allocation Period: Based on information provided by the GOC, we 
have used nine years, the weighted-average useful life of productive 
assets for the Chilean salmon industry, as the allocation period in 
this investigation.

De Minimis Countervailable Subsidy

    Pursuant to its authority under section 771(36) of the Act, the 
United States Trade Representative (``USTR'') has designated Chile as a 
``developing country.'' See USTR Interim Final Rule: Developing and 
Least-Developed Country Designations Under the Countervailing Duty Law 
(15 CFR 2013). Consequently, a net countervailable subsidy rate that 
does not exceed two percent ad valorem is considered de minimis, in 
accordance with section 703(b)(4)(B) of the Act and Article 27 of the 
Agreement on Subsidies and Countervailing Measures (``SCM Agreement''). 
As discussed below, we determine that the net countervailable subsidy 
bestowed on fresh Atlantic salmon from Chile is less than two percent 
ad valorem, and therefore, de minimis.
    Based upon our analysis of the petition, the responses to our 
questionnaires, and the information reviewed at verification, we 
determine the following:

I. Programs Determined To Be Countervailable

A. ProChile Export Promotion Assistance

    In the preliminary determination, we found that this program 
conferred countervailable subsidies on the subject merchandise. Our 
review of the record, our findings at verification and our analysis of 
the comments submitted by the interested parties, summarized below, 
have led us to modify our findings from the preliminary determination 
for this program. See infra Comments 2 and 4 for a discussion of issues 
related to this program. See also memorandum from the team to the file, 
``Calculations for Final Determination,'' dated June 1, 1998 (public 
version on file in the Central Records Unit of the Department of 
Commerce) (``Calculation Memorandum''). The benefit in the POI was 
calculated using our standard grant allocation methodology. The 
countervailable subsidy rate for this program is changed and is 
determined to be 0.04 percent ad valorem.

B. CORFO Export Credit Insurance Premium Assistance

    In the preliminary determination, we found that this program 
conferred countervailable subsidies on the subject merchandise. We did 
not receive any comments on this program from the interested parties, 
and our review of the record has not led us to change any findings or 
calculations. Accordingly, the countervailable subsidy for this program 
is unchanged and is determined to be 0.01 percent ad valorem.

C. Law 18,634

    In the preliminary determination, we found that the fiscal credit 
and the waiver provisions of this program conferred countervailable 
subsidies on the subject merchandise. Based on our review of the record 
and our analysis of comments on this program from the interested 
parties, we have changed our findings and find the entirety of Law 
18,634, including the duty deferral provision which was preliminarily 
determined to be not countervailable, constitutes a countervailable 
export subsidy. See infra Comment 5; see also infra Comment 6 for a 
discussion of another issue that did not affect our findings. We 
changed our methodology for calculating the fiscal credit benefit to 
account for the difference between the date the GOC records the loan 
and the date the funds are disbursed to participants. In addition, we 
corrected our calculations for certain clerical errors discovered in 
the data submitted by the GOC. See infra Comment 7. Accordingly, the 
countervailable subsidy for this program is changed and is determined 
to be 0.48 percent ad valorem.

D. Promotion and Development Fund (Decree 15)

    In the preliminary determination, we found that this program 
conferred countervailable subsidies on the subject merchandise. Our 
review of the record and our analysis of the comments on this program 
from the interested parties have not led us to change our findings or 
calculations. See infra Comment 11. Accordingly, the countervailable 
subsidy for this program is unchanged

[[Page 31439]]

and is determined to be 0.01 percent ad valorem.

E. Law 18,480

    In the preliminary determination, we found that this program 
conferred countervailable subsidies on the subject merchandise. Our 
review of the record and our analysis of the comments submitted by the 
interested parties have led us to modify our calculations from the 
preliminary determination for this program. Specifically, we adjusted 
the denominator used to calculate the benefit for this program.  See 
infra Comment 8; see also Calculation Memorandum.  Accordingly, the 
countervailable subsidy for this program has been changed and is 
determined to be 0.06 percent ad valorem.

F. Law 889 (Workers' Support Program)

    (As discussed in the ``Case History'' section above, Law 889 was 
not considered at the preliminary determination.)
    Law 889, enacted in 1975, established the ``Workers'' Support 
Program'' for Regions I, XI and the province of Chiloe in Region X. In 
1993, the eligibility was extended to the province of Palena, also in 
Region X. The Workers' Support Program provides grants to employers 
operating in those named regions in an amount equivalent to 17 percent 
of the taxable remuneration of the worker. The taxable remuneration of 
the employee must not exceed 90,000 pesos. This limit is adjusted every 
year according to the Consumer Price Index of the corresponding year 
(adjusted to 109,967 pesos during the period January 1, 1996, through 
May 31, 1996, and then again to 118,984 pesos for the remainder of 
1996). The GOC reports that the government policy behind this program 
was to provide an incentive to generate new jobs in certain 
economically disadvantaged territories of the country by compensating 
for a portion of the cost of labor to employers operating in those 
regions.
    To be eligible, the company must employ workers who are both 
domiciled and permanently employed in the identified regions. Certain 
employers including the public sector, large and medium copper and iron 
mining companies, state-controlled enterprises, banking and financing 
companies, insurance companies, and domestic (household) workers are 
excluded from benefits under this program. The GOC has provided 
information on the amount of grants received under this program by the 
producers and exporters of fresh Atlantic salmon.
    We determine that the Workers' Support Program under Law 889 
provides countervailable subsidies within the meaning of section 771(5) 
of the Act. The grants are a direct transfer of funds providing a 
benefit in the amount of the grant. Pursuant to section 771(5A)(D)(iv) 
of the Act, the grants are specific because they are limited to firms 
located in a designated geographical region.
    Because these grants are made on an ongoing basis, we have treated 
these grants as recurring based on the analysis set forth in the 
General Issues Appendix (``GIA''), attached to the Final Affirmative 
Countervailing Duty Determination: Certain Steel Products from Austria, 
58 FR 37217, 37226 (July 9, 1993).
    To calculate the subsidy rate, we divided the benefit attributable 
to the POI by the value of all sales by producers and exporters of 
salmon during the POI. See infra Comment 11. On this basis, we 
determine the countervailable subsidy for this program to be 0.51 
percent ad valorem.

II. Programs Determined To Be Not Countervailable

    Based on the information provided in the responses and the results 
of verification, we continue to find the following programs not 
countervailable for the same reasons identified in the preliminary 
determination:

A. Fundacion Chile Assistance
B. Fund for Technological and Productive Development (FONTEC)
C. Central Bank Chapter XIX
D. Law 18,449 (Stamp Tax Exemption)
E. Article 59 of Law 824

III. Programs Determined To Be Not Used

    Based on the information provided in the responses and the results 
of verification, we determine that the following programs were not 
used:

A. Institute for Technological Research (INTEC)
B. Central Bank Chapter XVIII
C. Export Promotion Fund
D. CORFO Export Credits and Long-Term Export Financing
E. Law 18,392 (Tax Exemptions)

IV. Programs Determined Not To Exist

    Based on information provided by the GOC and the results of 
verification, we determine that the following programs do not exist:

A. GOC Guarantee of Private Bank Loans
B. Import Substitution Subsidy for New Industries
C. Tax Deductions Available to Exporters

V. Other Programs Examined

A. Export Credit Limits

    In our preliminary determination, we found that Law 18,576, which 
authorizes banks to lend an additional five percent of their paid-in 
capital to exporters for their foreign currency loans, did not confer 
countervailable benefits on the subject merchandise. (See Preliminary 
Determination at 61808.) In Final Affirmative Countervailing Duty 
Determination; Standard Carnations from Chile, 52 FR 3313, 3315 
(February 3, 1987), we found this program to be not used, stating: 
``[W]e found no indication that the exporters under investigation 
received more loans than domestic sellers.'' At verification, we met 
with several representatives from private banks in Chile, as well as 
representatives from the Central Bank and from the SBIF. These experts 
indicated that bank credit limits are designed to limit a bank's loss 
exposure to any one client. They further stated that the decision to 
lend funds to an individual customer is based on a variety of factors, 
and that the bank will seek to prudently assess the risk associated 
with lending to that customer (see memorandum from the team to Roy A. 
Malmrose, Acting Director, Office I, ``Verification of the 
Questionnaire Responses of the Government of Chile,'' dated February 
27, 1998, page 33 and Appendix 3 at page 2).
    Because Law 18,576 limits the amount that a bank may lend to any 
individual customer, and it allows higher credit limits for export 
loans, it may constitute a countervailable subsidy within the meaning 
of section 771(5) of the Act. The GOC is directing the actions of 
financial institutions by setting credit limits for otherwise similarly 
situated domestic borrowers at a lower level than that which is 
available to exporters. The higher lending limits for exporters may 
result in exporters receiving more credit from any one bank than would 
otherwise be available from that bank. The higher credit limits are 
specific because they are contingent on exportation or anticipated 
exportation.
    A review of the record evidence, however, has led us to conclude 
that any potential benefit to the subject merchandise resulting from 
this program would be minuscule. First, the salmon industry in Chile is 
fragmented, with many small- and medium-sized producers and exporters. 
Accordingly, the borrowing needs of any individual producer are 
relatively insignificant. Second, the banking industry in Chile has 
undergone a period of consolidation, such that the available

[[Page 31440]]

capital at larger banks for an individual domestic borrower is 
substantial. Further, record evidence indicates that the Chilean 
banking industry is highly competitive; there is no reason to believe 
loans on similar terms are not available from other banks. In fact, 
information on the record does not demonstrate any differential between 
interest rates on export loans compared to domestic loans that can be 
attributed to Law 18,576. Because there would likely be no impact on 
the overall subsidy rate in the instant investigation for the POI, we 
do not consider it necessary to address the issue of whether this 
program is countervailable or what would be the appropriate methodology 
for measuring any benefit accruing to the subject merchandise.

Interested Party Comments

    Comment 1: The petitioners argue that Chile should be treated as a 
developed country subject to a de minimis threshold of one percent for 
purposes of the countervailing duty law. The GOC rebuts that Chile is a 
developing country and should, therefore, be subject to a two percent 
de minimis threshold.
    Department's Position: As acknowledged by the parties, section 
771(36) of the Act reserves the authority to designate Chile's status 
as developed or developing for purposes of the countervailing duty law 
to the USTR. Accordingly, we are not addressing this issue. See supra 
section entitled ``De Minimis Countervailable Subsidy.''
    Comment 2: The GOC claims that ProChile assistance is not 
countervailable because ProChile's services are not contingent upon 
exports and ProChile does not promote certain products over others. 
According to the GOC, the fact that 46 percent of the companies using 
ProChile's services in 1996 did not export evinces the lack of an 
export requirement. The GOC further contends that the ProChile program 
is used by a broad range of industries from all regions of Chile, 
thereby proving that the program is neither de jure nor de facto 
specific.
    Moreover, the GOC argues that ProChile's activities consist mostly 
of general informational activities, similar to those practiced by the 
U.S. Department of Commerce, International Trade Administration's 
Foreign Commercial Service (``FCS'') and Trade Development (``TD'') 
divisions. According to the GOC, ProChile provides the same services 
for a broad spectrum of Chilean goods and services and does not seek to 
promote a particular product over others.
    The petitioners contend that the GOC's argument does not address 
the presumption of per se specificity for export subsidies. The 
petitioners argue that because the GOC assesses export potential when 
considering a company for participation in ProChile export promotion 
events, the program is contingent on exports or anticipated exports 
and, thus, countervailable. The petitioners note that even if 46 
percent of the participating companies did not export, the majority, 54 
percent, did export. The petitioners argue that the name of the 
division of the GOC administering the ProChile program, the Export 
Promotion Bureau, is further evidence that the organization provides a 
countervailable export promotion subsidy.
    The petitioners also reject the GOC's argument that ProChiles' 
activities should be considered ``general informational activities.'' 
The petitioners assert that export promotion programs that promote a 
specific product or provide financial assistance, are not general 
export promotion.
    Department's Position: For this final determination we continue to 
find that payments by ProChile to underwrite the cost of trade fairs 
held in the United States and other marketing expenses to promote, 
inter alia, Chilean salmon, are countervailable export subsidies within 
the meaning of section 771(5) of the Act. At these trade fairs, 
ProChile promoted specific products and assumed certain advertising and 
marketing costs for the participating firms. Consistent with footnote 4 
to Article 3.1(a) of the SCM Agreement, the payments made by ProChile 
are tied to anticipated exportation of Chilean salmon.
    Our treatment of this program as a countervailable export promotion 
program is consistent with our determination in Final Affirmative 
Countervailing Duty Determination: Certain Fresh Atlantic Groundfish 
from Canada, 51 FR 10041 (March 24, 1986) (``Groundfish from Canada''). 
In that case, we countervailed a program in which the Canadian 
government promoted certain products at a trade show abroad, covering 
advertising costs among other costs.
    We agree with the GOC that ProChile provides varied services to 
many companies, including non-exporters, and supports general 
informational activities. However, our finding of countervailability in 
this investigation does not extend to those services and activities. We 
have only found countervailable ProChile's assumption of costs in 
connection with the salmon producers' and exporters' participation in 
trade fairs held in the United States.
    Comment 3: The GOC claims that the trade fair, ``Event Bon 
Appetit,'' is not countervailable because it is part of a much broader 
Chilean promotion campaign that does not promote salmon over other 
products. According to the GOC, this program works to promote the image 
of Chile without assuming costs that the salmon industry would 
otherwise incur. In the event that the Department continues to find 
``Event Bon Appetit'' to be countervailable, the GOC asserts that 
certain payments made after the POI should not be considered 
countervailable.
    The petitioners counter that ``Event Bon Appetit'' is 
countervailable because it conferred an export subsidy to the salmon 
industry by promoting the export of salmon and wine to the United 
States over other Chilean goods. The petitioners note that this is 
consistent with the treatment of a similar program in the Groundfish 
from Canada, where the Department countervailed a program in which the 
Canadian government promoted certain products at a trade show abroad, 
covering advertising costs among other expenses.
    The petitioners further argue that the entirety of ``Event Bon 
Appetit'' funding should be countervailed because it is the 
Department's practice to find that the benefit occurs when the 
recipient experiences the economic effect of the subsidy. The 
petitioners cite to Final Affirmative Countervailing Duty Determination 
and Countervailing Duty Order; Certain Steel Wire Nails from New 
Zealand, 52 FR 37196, 37197 (October 5, 1987) (``Wire Nails from New 
Zealand'') where the Department measured tax benefits on an earned 
basis because the amount of the benefit was known at the time a firm 
made an export transaction. The petitioners argue that it is irrelevant 
when the GOC actually disbursed funds to pay for the events that had 
already benefitted the salmon exporters. What is important, according 
to the petitioners, is when the salmon exporters experienced the 
economic effect of the subsidy, i.e., at the time of the ProChile-
sponsored event.
    Department's Position: While we agree with the petitioners that 
``Event Bon Appetit'' is specific in that it is contingent on exports 
within the meaning of section 771(5A)(B) of the Act , we disagree with 
them concerning the timing of the subsidy benefits. The Department's 
practice deems benefits to be received at the time that there is an 
effect on the recipient's cash flow. In the case of the provision of a 
good or service, this would be the time a firm pays, or in the absence 
of payment, would have paid, for the good or service. (See, e.g., 
Countervailing Duties: Notice of Proposed Rulemaking, 54 FR

[[Page 31441]]

23368 (May 31, 1989) (``1989 Proposed Regulations'') section 
355.48(b)(2), and GIA at 37228-29, ``[B]enefits are generally deemed to 
be received at the time there is a cash flow effect on the company 
receiving the benefit.'') The Department occasionally makes an 
exception to this general rule where benefits are earned on a shipment-
by-shipment basis and are known at the time of export, as was the case 
in Wire Nails from New Zealand, but, because the benefits are not 
associated with specific export transactions, this is not the case 
here. (See also Final Results of Countervailing Duty Administrative 
Review: Certain Iron-Metal Castings from India, 56 FR 52521, 52527 
(October 21, 1991).)
    Where the GOC paid fees in connection with this event after the POI 
to the firms that provided the services, the salmon exporter 
experienced the cash flow effect after the POI. Accordingly, we have 
not included payments made after the POI in our calculation of benefits 
from ``Event Bon Appetit.''
    We have continued to find the costs paid by the GOC during the POI 
in putting on this event countervailable, however, as they were costs 
that would normally have been paid by the producers and exporters of 
the promoted merchandise, were targeted to the U.S. market, and were 
contingent on exportation.
    Comment 4: The GOC argues that the ``Summer Harvest'' event is not 
countervailable because it was sponsored as an ``image'' event 
involving a broad range of products that did not promote particular 
products over others. The GOC asserts that many of the costs of the 
event were covered by private participants and no funds were provided 
by the GOC directly to the Chilean companies or associations. The GOC 
argues that if the Department calculates a benefit from the ``Summer 
Harvest'' event, it must use a denominator that reflects the 
participation of the salmon industry as one of many participating 
products rather than allocating all of the benefits of the event to 
salmon.
    The petitioners assert that the ``Summer Harvest'' event is fully 
countervailable. The petitioners argue that the GOC should have 
reported the program prior to verification and that its decision not to 
report the program does not demonstrate that the program constitutes 
general export promotion. The petitioners argue that the GOC's analysis 
is flawed because the Department's determination of an export subsidy 
considers neither the examination of the number of participants nor the 
amount of the government contribution. According to the petitioners, 
the ``Summer Harvest'' event is fully countervailable because it was 
not limited to general informational activities, promoted particular 
products over others, and targeted the U.S. market. The petitioners 
contend that because the record lacks adequate information to properly 
calculate the value of the benefit conferred by this event, the 
Department must apply facts available.
    Department's Position: We agree with the GOC that the ``Summer 
Harvest'' event does not constitute a countervailable subsidy. A review 
of the information on the record indicates that ``Summer Harvest'' was 
an ``image'' event that falls within the category of activities defined 
as ``general export promotion'' which the Department has declined to 
countervail in past cases. See, e.g., Certain Fresh Cut Flowers From 
Mexico, 49 FR 15007, 15008 (April 16, 1984) and Final Affirmative 
Countervailing Duty Determination and Countervailing Duty Order; Cotton 
Sheeting and Sateen From Peru, 48 FR 4501, 4504 (February 1, 1983); see 
also 1989 Proposed Regulations (section 355.44(m)) and Countervailing 
Duties; Proposed Rule, 62 FR 8818, 8825 (February 26, 1997) (``1997 
Proposed Regulations''). While the GOC did consider the export 
potential of products on display at the event, a very broad range of 
products was invited to participate in an effort to position the image 
of Chile as a producer of high quality food products for the world 
market. We note that in the documentation, the participants were 
referred to by the GOC as ``donors'' of the merchandise on display. 
Although the GOC covered certain expenditures related to the event, we 
note that none of the outlays by the GOC for this event went to the 
Chilean associations participating, nor did the GOC cover any of their 
costs. In fact, the participants covered a significant portion of the 
general costs associated with this event, in addition to contributing 
merchandise for display (including transportation costs from Chile). 
Accordingly, we have not included an amount for the ``Summer Harvest'' 
event in our calculation of benefits to the subject merchandise from 
ProChile's export promotion activities.
    Comment 5: The GOC argues that the fiscal credit program of Law 
18,634 is not an import substitution subsidy and, thus, should not be 
countervailed. The GOC contends that the fiscal credit provision and 
the duty deferral provision are in fact a single loan program, rather 
than two separate ones, and when considered together for the 
Department's specificity analysis, the program does not constitute an 
import substitution subsidy.
    According to the GOC, the fiscal credit and duty deferral 
provisions of Law 18,634 are both part of a single, unified statutory 
loan program whose purpose is to promote investment in capital goods 
regardless of the source of those goods. The GOC points out both the 
fiscal credit and the duty deferral are established in the same law, 
administered in the same manner, and their rules are set forth in the 
same Chilean Customs resolution. Referring to the factors set forth in 
the Department's 1997 Proposed Regulations (at 8825) and 1989 Proposed 
Regulations (section 355.43(b)(6)) with respect to the Department's 
practice in evaluating programs that are ``integrally linked,'' the GOC 
states that the fiscal credit and duty deferral provisions of Law 
18,634 meet all of the factors. According to the GOC, an evaluation of 
factors demonstrates that the duty deferral and fiscal credit are not 
only integrally linked, but they in fact are a single loan program.
    The GOC argues that the purpose and design of the fiscal credit was 
to ensure that imports and domestic products would be treated equally. 
Referring to the legislative history of Law 18,634, the GOC asserts 
that the fiscal credit was specifically adopted to offset the pecuniary 
benefits to imported goods created by the duty deferral provision.
    When the fiscal credit and duty deferral provisions are considered 
together, the GOC argues that the fiscal credit does not create a 
preference for domestic goods nor are the loans issued contingent upon 
the purchase of domestic goods. The GOC points out that the amount of 
fiscal credit is equal to 73 percent of the amount of the customs duty 
that would be deferred under the duty deferral provision. Consequently, 
the GOC asserts, the program avoids any preference for domestic goods 
since the amount of the fiscal credit for domestic goods can never 
exceed the amount of the duty deferral for imported goods. The GOC 
further states that the conditions for obtaining a loan under this 
program are the same for both provisions of the law which is limited to 
the type and the value of the good. According to the GOC, the source of 
the good as either foreign or domestic does not affect the eligibility, 
the issuance or the condition of the loan. The GOC states that the 
source is only relevant in determining whether the form of the loan 
will be that of a fiscal credit or a duty deferral.

[[Page 31442]]

    When considered as a single domestic subsidy program, the GOC 
contends that the usage information on the record demonstrates that the 
two provisions are not specific in that there is no disproportionate or 
dominant usage by the salmon industry.
    The petitioners argue that the fiscal credit and the duty deferral 
provisions are properly analyzed as separate programs. Because the 
receipt of benefits is available only to purchasers of domestic goods, 
the petitioners assert that the fiscal credit program is a de jure 
import substitution subsidy which is per se specific pursuant to 
section 771(5A)(A) of the Act. According to the petitioners, whether 
the fiscal credit provision or both provisions of Law 18,634 taken 
together creates any ``preference'' is irrelevant to the analysis of an 
import substitution subsidy, i.e., whether receipt of benefit is 
contingent on the purchase of domestic goods over imported goods. 
Moreover, the petitioners argue that contrary to the GOC's claims, the 
program encourages firms to purchase domestic goods through the 
issuance of interest-free credits. According to the petitioners, the 
duty deferral provision addresses the distortion caused by the 
imposition of the import tariff and, thus, allows imported capital 
goods to compete on an equal basis with domestic capital goods. The 
petitioners contend that the fiscal credit provision, on the other 
hand, artificially reduces the price of the domestic good that was made 
comparable through the duty deferral, thereby creating a preference to 
purchase domestic goods.
    Furthermore, the petitioners argue that the ``integral linkage'' 
test does not apply in this situation because the test is only relevant 
in analyzing the de facto specificity of domestic subsidies. Because 
the fiscal credit program is specific as an import substitution 
subsidy, the petitioners assert that a de facto specificity analysis is 
unnecessary and irrelevant. Even assuming the integral linkage test 
were appropriate in this case, the petitioners argue that Law 18,634 
does not satisfy the criteria set forth in the Department's integral 
linkage analysis. In particular, the petitioners claim that the GOC has 
not proven that the programs share the same purpose and that all 
recipients are treated equally.
    Department's Position: In our preliminary determination, we 
analyzed the assistance provided under Law 18,634 by considering 
separately four components of the law. First, firms that import capital 
equipment are eligible to defer payment of duty. Second, if the firm 
that imports the equipment meets a specified export target, then the 
deferred duty and accrued interest are waived. Third, firms that 
purchase their equipment domestically are eligible to borrow up to 73 
percent of the value of the duty that would have been paid if the 
equipment had been imported. Finally, if the firm that purchases 
domestically sourced equipment meets a specified export target, then 
the loan and accrued interest are forgiven. In our preliminary 
determination, we found that all the components of Law 18,634 except 
the first conferred countervailable subsidies. This was consistent with 
our determinations in past cases (see, e.g., Final Affirmative 
Countervailing Duty Determinations: Certain Steel Products from Brazil, 
58 FR 37295, 37299 (July 9, 1993) (Exemption of IPI and Duties on 
Imports under Decree-Law 2324)). With respect to the duty deferral, we 
found that the benefit was not specific.
    The GOC argues that two components of the program, the duty 
deferral component and the loans to purchasers of domestically sourced 
equipment, should be treated as a single program for specificity 
analysis. We have not adopted this position because it amounts to 
picking and choosing which elements of the law should be combined in 
order to achieve the result that the loans to purchasers of 
domestically sourced equipment are not specific. Based on our review of 
the law and its legislative history, we have determined that the four 
components should be analyzed as a single program.
    In its argument, the GOC points to the legislative history 
discussing the purpose of introducing the loans and waivers for 
purchases of domestically sourced equipment, i.e., to avoid a 
preference for imported equipment. However, the same legislative 
history indicates that the purpose of the pre-existing duty deferral 
and waiver system was to promote importation of capital goods and, at 
the same time, to promote exports. (See January 21, 1998 GOC 
Submission, exhibit 8, page 2, paragraph 2.) We further note that all 
components of Law 18,634 are administered by Chilean Customs, and the 
list of eligible goods is the same for the duty deferral/waiver 
components as for the loan/waiver for domestically sourced equipment. 
Thus, the loan/waiver for domestically sourced equipment was added to 
and became part of an overall scheme to, inter alia, promote exports.
    While we acknowledge that the duty deferrals and loans for 
purchases of domestically sourced equipment are not strictly contingent 
upon exportation, their overarching purpose, along with the waiver 
components, is to promote exports. Viewed as a whole, we determine that 
the benefits provided under Law 18,634 constitute an export subsidy 
within the meaning of section 771(5A)(B) of the Act are, therefore, 
specific. A benefit is conferred on the recipient firms in the amount 
of the waivers and to the extent that the benchmark interest exceeds 
the program interest on the duty deferrals and on the loans for 
purchases of domestically sourced equipment.
    Comment 6: The petitioners argue that the fiscal credits under Law 
18,634 constitute contingent liabilities which should be treated as 
short-term, interest-free loans in the final determination. Referring 
to section 355.49(f) of the 1989 Proposed Regulations, the petitioners 
assert that ``where a government provides a long-term, interest-free 
loan, the obligation for repayment of which is contingent upon 
subsequent events,'' the Department's practice is to treat such loans 
as short-term, interest-free loans. According to the petitioners, all 
the conditions of section 355.49(f) are met here.
    The petitioners first state that the loans are long-term because 
the repayment of the fiscal credits under Law 18,634 occurs at years 
three, five and seven from the date of receipt. Second, the petitioners 
point out that even though interest may be accruing, the recipient 
company is not required to make any principal or interest payments 
until the occurrence of subsequent events. According to the 
petitioners, the lack of payments during the period that the fiscal 
credits are outstanding and given the significant likelihood of a 
salmon company having its fiscal credit waived, the fiscal credits are 
in effect equivalent to a zero interest rate loan. In addition, the 
petitioners assert that because repayment of principal and interest is 
subject to a condition relating to a specific export target, the fiscal 
credits represent contingent liabilities. The petitioners further state 
that the Department treated loans with similar payment structures to 
Law 18,634 fiscal credits as contingent liabilities in past cases such 
as Final Affirmative Countervailing Duty Determination: Carbon Steel 
Products from Sweden, 50 FR 33375 (August 19, 1985) and Final 
Affirmative Countervailing Duty Determinations: Certain Steel Products 
from Germany, 58 FR 37315 (July 9, 1993).
    The GOC counters that because Law 18,634 fiscal credits are in fact 
not interest-free, the petitioners' proposed methodology of treating 
the loans as interest-free would effectively double-count interest--
once when accrued interest has been waived and again

[[Page 31443]]

when the amount of interest is calculated. The GOC states that the 
cases cited by the petitioners are clearly distinguishable because the 
programs examined actually did involve interest-free loans. By 
contrast, the GOC asserts that the fiscal credits accrue interest from 
the invoice date of the capital good and, thus, are not interest-free 
for any period of time. According to the GOC, the Department's 
preliminary determination methodology of calculating the difference 
between program interest and benchmark interest accurately captured all 
benefits offered by the fiscal credits.
    Department's Position: We agree with the GOC. While the fiscal 
credits may represent contingent liabilities in that repayment is 
conditioned upon subsequent events, the methodology contained in 
section 355.49(f) of the 1989 Proposed Regulations is inapplicable 
because the loans are in fact not interest-free. Under the terms of Law 
18,634, the interest on the fiscal credit accrues from the date of the 
invoice of the capital good until the time of repayment. Although the 
accrued interest, along with the principal, may ultimately be waived, 
we cannot ignore the fact that the interest may have to be paid. 
Despite the petitioners' argument that a salmon company was 
significantly more likely to have its fiscal credit waived, the fact 
remains that some of the borrowers did not meet the conditions and did 
repay the accrued interest and the principal. As stated by the GOC, by 
countervailing the difference between the program and the benchmark 
interest rate during the time the fiscal credit is outstanding and then 
countervailing the entire waived amount, we have accurately captured 
all benefits that arise from the fiscal credits.
    Comment 7: The GOC argues that the Department should adjust the 
reported amounts for waivers of deferred duties and fiscal credits 
under Law 18,634 to correct for amounts that were double-counted in the 
database submitted by the GOC, as detailed in the GOC's January 21, 
1998 submission, and supplemented in the January 27, 1998 submission.
    The GOC notes that the Department verified that when there was a 
change in ownership of equipment on which the duty deferral or fiscal 
credit was claimed, that asset was reentered in the fiscal credit 
database although the original balance was not deleted from the 
original database. The GOC argues that to avoid double-counting, the 
Department should delete all fiscal credit entries with reference 
numbers less than 500,000 from the database.
    Department's Position: We have corrected the amount of waivers in 
our final determination to exclude double-counted waivers of interest, 
deferred duties and fiscal credits identified by the GOC in the January 
28, 1998 submission. We have not deleted all balances with reference 
numbers of less than 500,000 as suggested by the GOC, however, as it is 
the original reference number that represents the obligation of the 
original owner and should be deleted, not the number that represents 
the obligation by the subsequent purchaser. The GOC has not identified 
the matching reference numbers for all reference numbers less than 
500,000. Accordingly, we have no assurance that the seller was a 
producer of the subject merchandise and that the seller's obligation 
for the duty deferral or fiscal credit was included in the submitted 
databases.
    Comment 8: The petitioners argue that the Department should 
recalculate the benefit provided under Law 18,480 to reflect the 
Department's practice of tying a subsidy to the particular product that 
it benefits. The petitioners suggest that the Department divide the 
amount of grants received by the value of the salmon producers' exports 
of only those products eligible to receive such benefits.
    The petitioners contend that by using a denominator comprised of 
all exports by the salmon producers and exporters, the Department 
significantly understated the benefits conferred by this program in the 
preliminary determination.
    The petitioners suggest that because the GOC has not provided the 
information needed to calculate the correct denominator, i.e., a 
denominator that includes only eligible merchandise, the Department 
should use a numerator that would include total receipts under both 
prongs of Law 18,480. The petitioners also assert that the GOC should 
have been able to identify the subject merchandise in question and the 
amount of benefits tied to that merchandise through the paperwork 
required to document each refund with the Servicio Nacional de Aduanas 
(``Chilean Customs'') and the Tesoreria General de la Republica 
(``Chilean Treasury'').
    The GOC argues that the petitioners have an incorrect understanding 
of Law 18,480 and that the Department should continue to calculate the 
benefits from Law 18,480 by using all exports as the denominator and 
all subsidy benefits received under the domestically sourced inputs 
program as the numerator. The GOC asserts that using the denominator of 
total exports is appropriate because the reported amount of benefits 
for the domestic input prong of Law 18,480 was the total amount of 
benefits received by the responding companies on all of their exports. 
The GOC asserts that the petitioners' statement that there are 
categories of exports that are not eligible for either prong of Law 
18,480 is erroneous, as eligibility for the domestic input prong of Law 
18,480 is not related to the product exported.
    The GOC also argues that it is not practicable for the GOC to 
report benefits received only on exports of the subject merchandise. 
The GOC insists that databases at the Chilean Customs and the Chilean 
Treasury do not contain a link allowing them to cross-reference and 
determine the amount of benefits claimed on domestic inputs based on 
exports of a given category of merchandise. The GOC states that it has 
no way to identify the exported merchandise on which benefits were 
claimed and therefore had no alternative but to report only the 
benefits received for domestically sourced inputs on all exports by 
producers and exporters of the subject merchandise. The GOC contends 
that it has acted to the best of its ability to comply with all 
requests from the Department during this proceeding, therefore 
eliminating any grounds to apply adverse facts available. According to 
the GOC, the Department should not add a value for the simplified duty 
drawback to the input credit benefits, i.e., increase the numerator to 
match the denominator, because salmon is not eligible for the 
simplified duty drawback. The GOC argues that it would clearly be 
incorrect for the Department to countervail benefits that do not and 
cannot relate to the subject merchandise. The GOC argues that if the 
Department considers it necessary to adjust the calculation of the 
benefit rate for this program, the Department should reduce the 
denominator to exclude only those exports where the exporter was shown 
to have claimed simplified duty drawback on that category of 
merchandise.
    Department's Position: The selection of an appropriate calculation 
methodology for this program has been complicated because there are 
two, potentially overlapping provisions to Law 18,480, and because of 
the manner in which the GOC maintains records concerning benefits under 
this program.
    The first provision of Law 18,480 provides a simplified duty 
drawback for small-volume, ``non-traditional,'' exports. The second 
provision enables exporters to claim benefits for certain domestically 
sourced inputs which are incorporated into exports of other

[[Page 31444]]

merchandise. The subject merchandise is not eligible for the simplified 
duty drawback provision, however, during the POI, exporters of the 
subject merchandise claimed benefits for domestically sourced inputs 
incorporated in their exports of salmon. Exporters of the subject 
merchandise also exported other merchandise, for which they may have 
claimed benefits for domestically sourced inputs or simplified duty 
drawback.
    As noted by the GOC, exporters of merchandise that is eligible for 
the simplified duty-drawback provision also have the option of claiming 
benefits for the inputs into that merchandise. They cannot, however, 
receive payments under both the simplified drawback and the provision 
for domestically sourced inputs for the same export transaction. Also, 
as noted by the petitioners, not all exports are eligible to claim 
benefits for domestically sourced inputs. These include, e.g., exports 
for which regular duty drawback was claimed, exports where imported 
inputs exceed 50 percent of the f.o.b. value of the exported 
merchandise, and exports whose raw materials or main factor of 
production is ineligible for the simplified duty drawback and 
represents 85 percent or more of the f.o.b. value of the exported 
merchandise.
    To calculate the countervailing duty rate for this program, we 
would prefer to have information on the benefits provided for exports 
of the subject merchandise, and divide that amount by the value of 
exports of the subject merchandise. That is not possible in this 
instance, however, because when the GOC receives claims for benefits 
for domestically sourced inputs, it records this information under the 
customs category of the input, not based on the merchandise that is 
exported. Based on our verification, we are satisfied that the GOC was 
not able to provide information on the amount of benefits paid on 
exports of the subject merchandise.
    The GOC was able to provide total payments to exporters of salmon 
under the provision for domestically sourced inputs, which may include 
payments for non-subject merchandise exported by these companies. In 
our preliminary determination, we divided these total receipts by the 
value of all products exported by the salmon exporters.
    For our final determination, we have modified our calculation from 
the preliminary determination because we believe it understated the 
benefit to exports of the subject merchandise. In particular, because 
certain exports of non-subject merchandise are eligible for the 
simplified drawback and because the amount of benefits the exporters 
would receive under the simplified drawback is generally greater than 
the amount they would receive under the provision for domestically 
sourced inputs, we have assumed that in most cases, if a claim were 
filed, the simplified drawback would be claimed for eligible exports. 
Consequently, at our request, the GOC provided information on the 
amount of exports eligible for simplified duty drawback and we have 
adjusted the denominator used in our preliminary determination to 
exclude exports of such merchandise.
    The GOC has argued that salmon exporters may have claimed benefits 
for domestically sourced inputs where merchandise was also eligible for 
the simplified drawback and, hence, payments related to merchandise 
excluded from our denominator may be included in our numerator. If our 
assumption is correct that salmon exporters can be expected to use 
simplified drawback for exports of non-subject merchandise eligible for 
that program, rather than claim benefits for domestically sourced 
inputs, then our preliminary methodology dilutes the benefit 
calculation for the subject merchandise. This dilution would result 
from including exports of non-subject merchandise in the denominator 
that had already benefited from the simplified drawback and did not and 
could not have received the payments included in our numerator 
(benefits for domestically sourced inputs). To the extent that benefits 
for domestically sourced inputs were claimed for exports eligible for 
simplified drawback by salmon exporters, we acknowledge that the 
denominator may be slightly understated.
    We disagree with the petitioners that the correct way to adjust our 
calculation would be to increase the numerator by including simplified 
drawback payments received on shipments of non-subject merchandise. 
Because the benefits available under the simplified drawback are 
generally much greater, this would have the effect of significantly 
overstating the benefit to subject merchandise. Additionally, we have 
not calculated the benefit from this program by using only exports of 
subject merchandise as the denominator, because such a methodology 
would clearly overstate the benefit from this program. We note that 
while certain exports may not receive benefits for domestically sourced 
inputs, this is dependent on the inputs, and not the category of 
merchandise exported. Thus, exports of non-subject merchandise included 
in our denominator are not precluded from claiming benefits for 
domestically sourced inputs. Consequently, to the extent that non-
subject merchandise is included in the denominator, we have no evidence 
or reason to believe that the benefit rate claimed on this merchandise 
was less than the rate for benefits claimed on exports of the subject 
merchandise.
    Under the circumstances of this investigation, we have matched our 
denominator to our numerator as best we can to measure the benefit to 
the subject merchandise. As noted above, we are satisfied that the GOC 
acted to the best of its ability in providing the information we 
requested and, hence, we are not drawing an adverse inference. However, 
we believe we have made reasonable assumptions and have calculated the 
most accurate rate possible given the information available.
    Comment 9: The petitioners argue that Chile's Chapter XIX debt-for-
equity swap program provided countervailable benefits to the producers 
of the subject merchandise. The petitioners contend that the debt-for-
equity swap provided a financial contribution and that the acceptance 
by the Central Bank of Chile of a proposed swap was contingent, either 
in law or in fact, upon exportation by the applicant.
    The petitioners cite anecdotal evidence included in articles 
written on Chapter XIX that indicate that one of the goals of the 
Chapter XIX program was to promote exports. The petitioners further 
point to regulations issued in July 1990 for Chapter XIX transactions 
which indicate that a preference would be given to export-oriented or 
import-substituting projects. Although these regulations were not in 
effect at the time the transactions involving producers of the subject 
merchandise occurred, the petitioners argue that the regulations merely 
codified pre-existing policies. The petitioners cite documents gathered 
at verification claiming that these documents demonstrate that 
anticipated exportation was a condition for acceptance of a proposed 
swap. As further evidence that Chapter XIX approvals were biased in 
favor of exports, and particularly in favor of non-traditional exports, 
the petitioners point to statistics which indicate that 70 percent of 
Chapter XIX projects through 1989 were in export-oriented industries, 
while only 11 percent were in mining which previously accounted for 58 
percent of Chile's exports. The petitioners acknowledge that not every 
participant in the Chapter XIX debt conversion program was in an 
export-oriented industry however, the petitioners argue that in Final 
Affirmative Countervailing Duty

[[Page 31445]]

Determination and Countervailing Duty Order; Extruded Rubber Thread 
From Malaysia, 57 FR 38472 (August 25, 1992) (``Extruded Rubber 
Thread''), the Department found that benefits were countervailable 
where Pioneer status was conferred on a respondent company subject to 
an export commitment, stating:

    The combination of the necessary export orientation of the 
industry due to lack of domestic market opportunities and the 
explicit export condition attached to Pioneer status approval, lead 
us to conclude that the ``export'' side of the Pioneer Program 
confers an export subsidy.

The petitioners note that in the companion antidumping investigation, 
the Department stated that the home market for fresh Atlantic salmon is 
incidental to Chilean growers and that growth in the Chilean salmon 
industry has been almost entirely export-driven.
    The GOC counters that there are statements in the same articles 
cited by the petitioners which indicate that the GOC took a laissez-
faire approach to regulating Chapter XIX transactions. Concerning the 
July 1990 regulations, the GOC points to the transcript of a speech 
made in 1989 by Francisco Garces, who at the time was the International 
Director of the Central Bank. In the speech, Mr. Garce's states that 
the election of a new government in Chile may change the focus of the 
Chapter XIX program to favor export-oriented industries. The GOC notes 
that Mr. Garces refers to a ``change'' in the focus, not a mere 
formalization of existing practice in the form of regulations. The GOC 
argues that the documents reviewed at verification demonstrate the 
opposite of what the petitioners claim, and that the documents show 
that the GOC did not make acceptance of proposed transactions 
contingent on export performance.
    While the GOC does not dispute that a large number of the Chapter 
XIX projects involved export-oriented industries, the GOC argues that 
the investment projects were selected by the investors, without any 
guidance from the GOC. Further, the GOC notes that participants in the 
Pioneer Program in Extruded Rubber Thread made specific export 
commitments in order to receive benefits. According to the GOC, the 
Central Bank's role in reviewing proposed transactions was simply to 
insure that the investors were eligible and that the transactions were 
not fraudulent.
    Finally, the GOC argues that there was no financial contribution, 
because the Chapter XIX projects were carried out by private 
individuals, with terms negotiated at arm's length.
    Department's Position: We determine that the weight of the record 
evidence does not support a conclusion that approval of Chapter XIX 
proposals was contingent on export performance. The anecdotal evidence 
in the published articles on the record of this case is contradictory 
and cannot be considered conclusive. We further disagree that evidence 
gathered at verification indicates that export performance was a 
consideration in acceptance by the Central Bank of proposed 
transactions. Due to the proprietary nature of the verification 
documents, a further discussion of this issue is included in a 
memorandum from the team to Richard W. Moreland, Deputy Assistant 
Secretary for AD/CVD Enforcement, ``Analysis of Proprietary Comments 
Concerning Chapter XIX Debt-for-Equity Swaps,'' dated June 1, 1998.
    Because we have determined any potential subsidy arising under 
Chapter XIX is not specific, we need not reach the question of whether 
there was a financial contribution on the part of the GOC.
    Comment 10: The petitioners argue that Law 18,449 which provides an 
exemption from the Chilean stamp tax on certain financial transactions 
for exporters is countervailable because it is contingent upon 
exportation. The petitioners contend that the Chilean stamp tax 
exemption is not analogous to the indirect taxes ``in respect of the 
production and distribution of exported products'' referenced in the 
Illustrative List of Export Subsidies in Annex 1 of the SCM Agreement 
because the tax is assessed on loan documents and not the exported 
merchandise. The petitioners further contend that the stamp tax, as it 
is crafted in Chile, is not an indirect tax because it is borne by the 
recipient of the loan, i.e., the exporter, and not borne by the 
merchandise. According to the petitioners, the stamp tax is not shifted 
forward and, therefore, behaves more like a direct than an indirect 
tax.
    The GOC rebuts that the SCM Agreement specifically enumerates stamp 
taxes as an example of an indirect tax in footnote 58 to item (g) on 
the Illustrative List. The GOC contends that an indirect tax is almost 
necessarily levied on financial documents, whether the document be an 
invoice or a letter of credit. The GOC notes that letters of credit 
have been used for financing export sales for centuries, and that 
Chilean law requires that the financing be repaid with proceeds from 
export sales in order to qualify for exemption. The GOC cites 
Countervailing Duties; Bicycle Tires and Tubes From Taiwan; Final 
Results of Administrative Review, 48 FR 43366 (September 23, 1983) and 
Final Affirmative Countervailing Duty Determination; Operators for 
Jalousie and Awning Windows From El Salvador, 51 FR 41516, 41517 
(November 17, 1986) as examples of previous cases where the Department 
has found the exemption of exporters from stamp taxes to be non-
countervailable.
    Department's Position: We disagree with the petitioners. First, 
stamp taxes are specifically enumerated in the Illustrative List as 
``indirect taxes.'' Second, although the stamp tax applies to loan 
documents, the financing of sales through arrangements such as letters 
of credit is a normal activity in the distribution of exported goods. 
As the GOC notes, and as we confirmed at verification, Law 18,449 
requires that exporters demonstrate that export financing transactions 
that are exempt from the stamp tax be repaid with proceeds from the 
financed export sales. Accordingly, we determine that the exemption of 
Chilean salmon exporters from the stamp tax does not give rise to 
countervailable benefits within the meaning of section 771(5)(E) of the 
Act.
    Comment 11: In calculating the amount of countervailable benefits 
provided under the two regional programs, Law 889 and the Promotional 
and Development Fund, the petitioners argue that the Department should 
attribute the subsidies to only those products that actually benefited 
from the programs. The petitioners note that the Department's practice 
in the case of domestic subsidies is to divide the benefit by a firm's 
total sales of the product to which the benefit is ``tied.'' Because 
the benefits under both Law 889 and the Promotion and Development Fund 
are only available to companies located in specified regions, the 
petitioners argue that the subsidies are ``tied'' to the products 
produced in those regions.
    The GOC disagrees that a ``longstanding policy'' exists with 
respect to tying benefits only to production in that region. The GOC 
asserts that the Department only ties benefits in two specific 
situations: (1) when the receipt of benefits is tied to sales to a 
particular market; or (2) when it is tied to the production of a 
specific good. Because neither of these situations applies to the two 
Chilean regional programs, the GOC contends that the subsidy rates for 
both programs are correctly calculated by dividing the total amount of 
benefits over total sales.
    Department's Position: We disagree with the petitioners that our 
policy of tying subsidies requires us to attribute

[[Page 31446]]

regional subsidies only to merchandise produced in the affected 
regions. Our tying policy, as articulated in section 355.47 of the 1989 
Proposed Regulations, discusses tying subsidies to particular products, 
not to products produced in particular countries or locations. In 
attributing a subsidy to sales of the product or products to which it 
is tied, the Department normally does not define the product at a level 
more specific than the subject merchandise. In the present case, for 
example, the subject merchandise is specifically defined as ``fresh 
Atlantic salmon from Chile,'' not ``fresh Atlantic salmon from Region 
X'' or ``fresh Atlantic salmon from the Island of Chiloe.'' 
Furthermore, the Department does not tie the benefits of federally 
provided regional programs to the product produced in the specified 
regions. See, e.g., Final Affirmative Countervailing Duty 
Determination: Fresh and Chilled Atlantic Salmon From Norway, 56 FR 
7678 (February 25, 1991). Accordingly, we have continued to calculate 
the countervailable subsidy from these programs by dividing the total 
benefit from these programs by the value of all sales of producers and 
exporters of salmon.
    Comment 12: The petitioners argue that the Department should not 
use the SBIF rates it used in the preliminary determination to 
calculate benefits from loans and nonrecurring grants. Instead, the 
petitioners urge the Department to use the interest rate from a private 
bank, Banco Security, reported in the petitioners' June 26, 1997 
submission.
    In the petitioners' view, the Department should not use the SBIF 
rate because it is based on government lending rates. They cite to 
Preliminary Affirmative Countervailing Duty Determination and Alignment 
of Final Countervailing Duty Determination with Final Antidumping Duty 
Determination: Certain Stainless Steel Wire Rod from Italy, 63 FR 809 
(January 7, 1998) where the Department stated it ``normally does not 
use government interest rates in benchmark calculations,'' and to 
section 355.44(b)(7) of the 1989 Proposed Regulations which stipulates 
that the Department use a non-governmental interest rate as a benchmark 
rate.
    The petitioners further contend that the Export Credit Limits 
program as well as the Chilean encaje distort the SBIF rates. The 
petitioners cite Certain Iron-Metal Castings from India: Final Results 
of Countervailing Duty Administrative Review, 61 FR 64687, 64688 
(December 6, 1996) (``Castings from India'') where the Department 
recognized that export financing measures, similar to those in Chile, 
distorted the cost of financing for non-exporters. In that case, the 
Department used an alternative benchmark to measure the preference 
provided by the program.
    The GOC contends that the SBIF rate is not a government rate but 
rather an average of Chilean commercial bank rates, where only one of 
the 30 to 35 banks averaged is a state-owned bank. The GOC argues that 
the Banco del Estado, the only state-owned bank included in the SBIF 
interest rate average pool, operates as a commercial bank and that the 
rates it charges are commercial rates. The GOC also cites to the 1989 
Proposed Regulations which state at section 355.44(b)(9) that the 
Department can consider loans from government-owned banks as commercial 
loans. The GOC insists that the Chilean lending rates are not 
distorted, noting that no Chilean lending program has ever been found 
countervailable and Chilean law prohibits the SBIF or any other body 
from interfering with the lending process at private banks, thus 
eliminating any question of manipulation of the Chilean financial 
markets. The GOC asserts that the SBIF rate is the appropriate rate to 
use in the calculations of these final results.
    Department's Position: We disagree with the petitioners that the 
SBIF rate is not an appropriate benchmark. As stated earlier, at 
verification, we met with several representatives from private banks in 
Chile, as well as representatives from the Central Bank and from the 
SBIF. All of the experts with whom we met indicated that the Chilean 
credit markets have ample liquidity, and that Central Bank and other 
government intervention in financial markets is minimal. We note that 
virtually all governments intervene, to some degree, in financial 
markets. We found no evidence that government intervention in Chile's 
financial markets is so pervasive that it undermines our reliance on 
the SBIF interest rate.
    With respect to the specific arguments raised by the petitioners, 
we agree that the Department normally does not use government rates as 
benchmarks (see section 355.44(b)(7) of the 1989 Proposed Regulations). 
However, in this instance, the SBIF rate is based on the rates of more 
than 30 banks, only one of which is government-owned. Moreover, there 
is no information to indicate that this bank, Banco del Estado, 
operates on anything other than commercial terms. Therefore, we do not 
believe the SBIF rate should be rejected on this basis.
    Regarding the alleged distortions in the credit market caused by 
the Export Credit Limits program, we disagree that this program is 
analogous to the situation described in Castings from India. While the 
higher re-discount ratio on export credit financing available to banks 
in Castings from India effectively reduced the cost of advancing export 
credit compared to domestic credit, we have found, as discussed supra, 
that any effect on lending rates from the increased export credit 
ceilings is minimal.
    Finally, regarding the encaje, we have analyzed the potential 
distortion and concluded that the encaje has not resulted in lower SBIF 
rates. The Chilean encaje requires banks to place 30 percent of foreign 
currency deposits with the Central Bank without interest for the first 
year. (Alternatively, the bank can pay to the Central Bank the 
equivalent of the interest earnings that would have been realized by 
the Central Bank, if such an amount had been placed in its account.) 
Deposits that are used to finance qualifying export credits, however, 
are not subject to the encaje. Such a requirement would be expected to 
lower interest rates on export loans denominated in a foreign currency, 
including dollar-denominated export loans. Because it is our 
understanding that these export loan rates are included in the SBIF 
rate, along with non-export-related dollar denominated loans, use of 
the SBIF rate as a benchmark could understate the benefit to the 
recipient. However, we have reviewed interest rate information included 
in the Central Bank's June 1997 Boletin Mensual concerning dollar 
indexed loans with terms of three years or greater. Dollar-indexed 
loans in Chile are available to domestic borrowers, and would not be 
subject to any potential distortion resulting from the Central Bank 
deposit rules regarding the encaje. Additionally, although there may be 
slight differences in the exchange rates actually applied, a borrower 
in Chile should be indifferent when choosing between a dollar-indexed 
loan and a dollar-denominated loan. The information on the record 
concerning interest rates charged on dollar-indexed loans for the five 
years for which data was reported indicates that the rates on dollar 
indexed loans were very similar to the SBIF rates. On average, the 
interest rate charged on dollar-denominated loans was slightly higher 
than that charged on dollar-indexed loans. Accordingly, the information 
on the record does not appear to support the petitioners' claim that 
the encaje renders inappropriate our use of the SBIF rate as a 
benchmark. Therefore, we have continued to use the SBIF rate to

[[Page 31447]]

calculate benefits for the ProChile and the fiscal credit and duty 
deferral program of Law 18,634.

Summary

    The total net countervailable subsidy rate for all producers or 
exporters of fresh Atlantic salmon in Chile is 1.11 percent, ad 
valorem, which is de minimis. Therefore, we determine that 
countervailable subsidies are not being provided to producers, or 
exporters of fresh Atlantic salmon in Chile.

Verification

    In accordance with section 782(i) of the Act, we verified the 
information used in making our final determination. We followed our 
standard verification procedures, including meeting with government 
officials and examination of relevant government records and original 
source documents. Our verification results are outlined in detail in 
the public versions of the verification reports, which are on file in 
the Central Records Unit (Room B-099 of the Main Commerce Building).

Return or Destruction of Proprietary Information

    This notice serves as the only reminder to parties subject to 
Administrative Protective Order (``APO'') of their responsibility 
concerning the return or destruction of proprietary information 
disclosed under APO in accordance with 19 CFR 355.34(d). Failure to 
comply is a violation of the APO.
    This determination is published pursuant to section 703(f) of the 
Act.

    Dated: June 1, 1998.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 98-15184 Filed 6-8-98; 8:45 am]
BILLING CODE 3510-DS-P