Federal Register / Vol. 63, No. 110 /Tuesday, June 9, 1998 / Notices 31411

events; (3) evaluate results reported by

small to mid-sized, new-to-export/newto-market U.S. companies; (4) document

the successful completion of trade

promotion activities conducted by

overseas DOC offices; (5) identify

strengths and weaknesses of DOC trade

promotion programs, in the interest of

improving service to the U.S. business

community.

II. Method of Collection

Form ITA–4075P is completed onsite, at the end of an overseas mission

or exhibition, by participating U.S.

firms. Applicant firms complete the

form and forward it to the Department

of Commerce exhibition manager at the

close of the event upon request.

III. Data

OMB Number: 0625–0034.

Form Number: ITA–4075P.

Type of Review: Revision-Regular

Submission.

Affected Public: Companies applying

to participate in Commerce Department

trade promotion events.

Estimated Number of Respondents:

2,000.

Estimated Time Per Response: 5

minutes.

Estimated Total Annual Burden

Hours: 167 hours.

Estimated Total Annual Costs: The

estimated annual cost for this collection

is $5,100.00 ($2,100.00 for respondents

and $3,000.00 for federal government).

IV. Request for Comments

Comments are invited on (a) whether

the proposed collection of information

is necessary for the proper performance

of the functions of the agency, including

whether the information shall have

practical utility; (b) the accuracy of the

agency’s estimate of the burden

(including hours and costs) of the

proposed collection of information; (c)

ways to enhance the quality, utility, and

clarity of the information to be

collected; and (d) ways to minimize the

burden of the collection of information

on respondents, including through the

use of automated collection techniques

or forms of information technology.

Comments submitted in response to

this notice will be summarized and/or

included in the request for OMB

approval of this information collection;

they also will become a matter of public

record.

Dated: June 2, 1998.

Linda Engelmeier,

Departmental Forms Clearance Officer, Office

of Management and Organization.

[FR Doc. 98–15295 Filed 6–8–98; 8:45 am]

BILLING CODE 3510–FP–P

DEPARTMENT OF COMMERCE

International Trade Administration

Certified Trade Mission: Application

for Status; Proposed Collection;

Comment Request

SUMMARY: The Department of

Commerce, as part of its continuing

effort to reduce paperwork and

respondent burdens, invites the general

public and other Federal agencies to

take this opportunity to comment on the

continuing information collections, as

required by the Paperwork Reduction

Act of 1995, Pub. L. 104–13 (44 U.S.C.

3506(c) (2) (A)).

DATES: Written comments must be

submitted on or before August 10, 1998.

ADDRESSES: Direct all written comments

to Linda Engelmeier, Departmental

Forms Clearance Officer, Department of

Commerce, Room 5327, 14th &

Constitution Avenue, NW, Washington,

DC 20230. Phone number: (202) 482–

3272.

FOR FURTHER INFORMATION CONTACT:

Request for additional information or

copies of the information collection

instrument and instructions should be

directed to: John Klingelhut, U.S. &

Foreign Commercial Service, Export

Promotion Services, Room 2810, 14th &

Constitution Avenue, NW, Washington,

DC 20230; Phone number: (202) 482–

4403, and fax number: (202) 482–0872.

SUPPLEMENTARY INFORMATION:

I. Abstract

Certified Trade Missions are overseas

events planned, organized and led by

government and nongovernment export

promotion agencies such as industry

trade associations; agencies of Federal,

State and local governments; chambers

of commerce; regional groups and other

export-oriented groups. The Certified

Trade Missions-Application for status

form is the vehicle by which mission

organizers apply, and if accepted agree,

to participate in the Department of

Commerce’s (DOC) mission certification

program, identify the products or

services that participating firms intend

to sell or promote, and describe the

proposed mission. This submission only

renews use of the form, no changes are

being made. This form is used to: (1)

collect information about the products/

services that participating companies

wish to export; (2) provide basic

information about the purpose, scope

and time frame of the proposed mission

to enable DOC to determine whether or

not to support or ‘certify’ the mission.

II. Method of Collection

Form ITA–4127P is sent by request to

U.S. firms. Applicant firms complete the

form and forward it to the Department

of Commerce to initiate the mission

certification process.

III. Data

OMB Number: 0625–0215.

Form Number: ITA–4127P.

Type of Review: Regular.

Affected Public: Companies applying

to participate in Commerce Department

certified trade promotion events.

Estimated Number of Respondents:

60.

Estimated Time Per Response: 1 hour.

Estimated Total Annual Burden

Hours: 60 hours.

Estimated Total Annual Costs: The

estimated annual cost for this collection

is $5,100.00 ($2,100.00 for respondents

and $3,000.00 for federal government).

IV. Request for Comments

Comments are invited on (a) whether

the proposed collection of information

is necessary for the proper performance

of the functions of the agency, including

whether the information shall have

practical utility; (b) the accuracy of the

agency’s estimate of the burden

(including hours and costs) of the

proposed collection of information; (c)

ways to enhance the quality, utility, and

clarity of the information to be

collected; and (d) ways to minimize the

burden of the collection of information

on respondents, including through the

use of automated collection techniques

or forms of information technology.

Comments submitted in response to

this notice will be summarized and/or

included in the request for OMB

approval of this information collection;

they also will become a matter of public

record.

Dated: June 2, 1998.

Linda Engelmeier,

Departmental Forms Clearance Officer, Office

of Management and Organization.

[FR Doc. 98–15296 Filed 6–8–98; 8:45 am]

BILLING CODE 3510–FP–P

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.
31412 Federal Register / Vol. 63, No. 110 /Tuesday, June 9, 1998 / Notices

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 weightedaverage 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.
Federal Register / Vol. 63, No. 110 /Tuesday, June 9, 1998 / Notices 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 thirdcountry 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 ‘‘superpremium’’ 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 lowpriced 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 superpremium 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
31414 Federal Register / Vol. 63, No. 110 /Tuesday, June 9, 1998 / Notices

1Although 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.

2We note that one of the respondents in this

investigation, Marine Harvest, has an affiliate in

Scotland that produces and exports fresh Atlantic

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 superpremium 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 superpremium 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 superpremium from premium salmon.

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
Federal Register / Vol. 63, No. 110 /Tuesday, June 9, 1998 / Notices 31415

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.

3While 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.

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

Finally, regarding the Association’s

claim that there are price differences in

Japan for salmon sold as ‘‘superpremium’’ 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
31416 Federal Register / Vol. 63, No. 110 /Tuesday, June 9, 1998 / Notices

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 formaverage basis in this case would violate

not only the statutory requirement for a

fair comparison, but also violate the faircomparison 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, primegrade 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
Federal Register / Vol. 63, No. 110 /Tuesday, June 9, 1998 / Notices 31417

4We 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.

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 CVbased 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)). 4Since the

respondents have not addressed in the

case briefs how to treat U.S. sales that

would otherwise have suitable pricebased 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.).

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
31418 Federal Register / Vol. 63, No. 110 /Tuesday, June 9, 1998 / Notices

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 exportquality 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 industrialgrade salmon, but rather of premiumgrade salmon that was subject to a postsale 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 premiumgrade 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 ‘‘allothers’’ 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 allothers 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
Federal Register / Vol. 63, No. 110 /Tuesday, June 9, 1998 / Notices 31419

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.

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 allothers 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 allothers rate until after the preliminary

determination was issued.5

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
31420 Federal Register / Vol. 63, No. 110 /Tuesday, June 9, 1998 / Notices

6We 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).

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.6 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.

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
Federal Register / Vol. 63, No. 110 /Tuesday, June 9, 1998 / Notices 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
31422 Federal Register / Vol. 63, No. 110 /Tuesday, June 9, 1998 / Notices

7Aguas 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.

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 reexports 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 Miamibased 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.

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.
Federal Register / Vol. 63, No. 110 /Tuesday, June 9, 1998 / Notices 31423

8The 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.

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

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 vacuumpacked 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 vacuumpacked fillets in March 1997, and

adding that all shipments of vacuumpacked 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 vacuumpacked 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 vacuumpacked 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.
31424 Federal Register / Vol. 63, No. 110 /Tuesday, June 9, 1998 / Notices

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 reexported 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
Federal Register / Vol. 63, No. 110 /Tuesday, June 9, 1998 / Notices 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 coop advertising program in question

never proceeded beyond the ‘‘good

idea’’ stage, and that no rebates were

ever paid. Citing Certain CorrosionResistant 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
31426 Federal Register / Vol. 63, No. 110 /Tuesday, June 9, 1998 / Notices

9As 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.

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.9 Therefore, we

continue to find that the level of trade

of the Japanese market is more advanced

than that of the U.S. market.

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 superpremium 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 superpremium 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 socalled ‘‘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 intercompany 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.
Federal Register / Vol. 63, No. 110 /Tuesday, June 9, 1998 / Notices 31427

10Although 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).

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 affiliatedparty 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 longstanding 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 nonsubject 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, 10 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).

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
31428 Federal Register / Vol. 63, No. 110 /Tuesday, June 9, 1998 / Notices

11The 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.

12With respect to the Association’s reference to

the Department’s finding that potatoes (which have

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.11 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.

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.12
Federal Register / Vol. 63, No. 110 /Tuesday, June 9, 1998 / Notices 31429

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.

Given the facts of this case, we have

found that fresh Atlantic salmon does

not meet that standard.

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’ nonproduction 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).
31430 Federal Register / Vol. 63, No. 110 /Tuesday, June 9, 1998 / Notices

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 foreigncurrency 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
Federal Register / Vol. 63, No. 110 /Tuesday, June 9, 1998 / Notices 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 nonrespondent 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 highinflation 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
31432 Federal Register / Vol. 63, No. 110 /Tuesday, June 9, 1998 / Notices

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 inflationadjusted 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 pricelevel 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 pricelevel 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 nonmonetary 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
Federal Register / Vol. 63, No. 110 /Tuesday, June 9, 1998 / Notices 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 superpremium 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 superpremium 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-inmerchandise 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.
31434 Federal Register / Vol. 63, No. 110 /Tuesday, June 9, 1998 / Notices

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 TurboCompressor 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
Federal Register / Vol. 63, No. 110 /Tuesday, June 9, 1998 / Notices 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 seafoodrelated, 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 weightedaverage 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
31436 Federal Register / Vol. 63, No. 110 /Tuesday, June 9, 1998 / Notices

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 perpound 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
Federal Register / Vol. 63, No. 110 /Tuesday, June 9, 1998 / Notices 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:

Exporter/manufacturer

Weighted-average margin percentage

Aguas Claras ................................ 8.27

Camanchaca ................................. 0.21

Exporter/manufacturer

Weighted-average margin percentage

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

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