[Federal Register Volume 63, Number 110 (Tuesday, June 9, 1998)]
[Notices]
[Pages 31411-31437]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-15183]
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DEPARTMENT OF COMMERCE
International Trade Administration
[A-337-803]
Notice of Final Determination of Sales at Less Than Fair Value:
Fresh Atlantic Salmon From Chile
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
EFFECTIVE DATE: June 9, 1998.
[[Page 31412]]
FOR FURTHER INFORMATION CONTACT: Gabriel Adler or Kris Campbell, Office
of AD/CVD Enforcement 2, Import Administration, International Trade
Administration, U.S. Department of Commerce, 14th Street and
Constitution Avenue, N.W., Washington, D.C. 20230; telephone: (202)
482-1442 or (202) 482-3813, respectively.
The Applicable Statute and Regulations
Unless otherwise indicated, all citations to the statute are
references to the provisions effective January 1, 1995, the effective
date of the amendments made to the Tariff Act of 1930 (the Act) by the
Uruguay Round Agreements Act (URAA). In addition, unless otherwise
indicated, all citations to Department of Commerce (the Department)
regulations refer to the regulations last codified at 19 CFR part 353
(April 1, 1997).
Final Determination
We determine that fresh Atlantic salmon from Chile is being sold,
or is likely to be sold, in the United States at less than fair value
(LTFV), as provided in section 735 of the Act. The estimated margins
are shown in the Continuation of Suspension of Liquidation section of
this notice.
Case History
The preliminary determination in this investigation was issued on
January 8, 1998. See Notice of Preliminary Determination of Sales at
Less Than Fair Value and Postponement of Final Determination: Fresh
Atlantic Salmon from Chile, 63 FR 2664 (January 16, 1998) (Preliminary
Determination). Since the preliminary determination, the following
events have occurred.
In February and March 1998, we conducted on-site verifications of
the questionnaire responses submitted by Aguas Claras S.A. (Aguas
Claras), Cia. Pesquera Camanchaca S.A. (Camanchaca), Pesquera Eicosal
Ltda. (Eicosal), Pesquera Mares Australes Ltda. (Mares Australes), and
Marine Harvest Chile (Marine Harvest)(collectively, ``the
respondents'').
On April 17, 1998, we received case briefs from the Coalition for
Fair Atlantic Salmon Trade (the petitioners) and, on behalf of the
respondents, the Association of Chilean Salmon and Trout Producers (the
Association). On April 23, 1998, we received rebuttal briefs from the
same parties. We held a public hearing on April 28, 1998.
Scope of Investigation
The scope of this investigation covers fresh, farmed Atlantic
salmon, whether imported ``dressed'' or cut. Atlantic salmon is the
species Salmo salar, in the genus Salmo of the family salmoninae.
``Dressed'' Atlantic salmon refers to salmon that has been bled,
gutted, and cleaned. Dressed Atlantic salmon may be imported with the
head on or off; with the tail on or off; and with the gills in or out.
All cuts of fresh Atlantic salmon are included in the scope of the
investigation. Examples of cuts include, but are not limited to:
crosswise cuts (steaks), lengthwise cuts (fillets), lengthwise cuts
attached by skin (butterfly cuts), combinations of crosswise and
lengthwise cuts (combination packages), and Atlantic salmon that is
minced, shredded, or ground. Cuts may be subjected to various degrees
of trimming, and imported with the skin on or off and with the ``pin
bones'' in or out.
Excluded from the scope are (1) fresh Atlantic salmon that is ``not
farmed'' (i.e., wild Atlantic salmon); (2) live Atlantic salmon; and
(3) Atlantic salmon that has been subject to further processing, such
as frozen, canned, dried, and smoked Atlantic salmon, or processed into
forms such as sausages, hot dogs, and burgers.
The merchandise subject to this investigation is classifiable as
item numbers 0302.12.0003 and 0304.10.4093 of the Harmonized Tariff
Schedule of the United States (HTSUS). Although the HTSUS statistical
reporting numbers are provided for convenience and customs purposes,
the written description of the merchandise is dispositive.
Period of Investigation
For all companies, the period of investigation (POI) corresponds to
each respondent's four most recent fiscal quarters prior to the month
of the filing of the petition (June 1996). For four of the five
respondents, the POI is April 1, 1996, through March 31, 1997. The
remaining respondent, Marine Harvest, has a different fiscal period.
The POI for this company is March 24, 1996, through March 22, 1997.
Fair Value Comparisons
To determine whether sales of fresh Atlantic salmon from Chile to
the United States were made at less than fair value, we compared the
export price (EP) or constructed export price (CEP), as appropriate, to
the normal value. Our calculations followed the methodologies described
in the preliminary determination, except as noted below and in company-
specific analysis memoranda dated June 1, 1998, which have been placed
in the file.
Export Price and Constructed Export Price
For the price to the United States, we used EP or CEP as defined in
section 772 of the Act. We calculated EP and CEP based on the same
methodology used in the preliminary determination, with the following
exceptions:
Mares Australes
We excluded sales to Canada from the U.S. sales database. See
Comment 17.
Marine Harvest
We made an adjustment for accrued rebate expenses to the CEP
calculated for one customer. See Comment 19.
Normal Value
We used the same methodology to calculate normal value as that
described in the preliminary determination, with the following
exceptions. For Eicosal, Mares Australes, and Marine Harvest, we
determined that the differences between premium and super-premium
salmon are so minor as to not warrant separate classification in an
antidumping analysis, and considered all such sales to be of premium
salmon. See Comment 1. With respect to specific respondents' data, we
made the following changes:
Aguas Claras
We did not rely on Canadian sales of salmon fillets to calculate
normal value for comparison to U.S. sales of fillets. Instead, we
compared U.S. sales of fillets to constructed value (CV). See Comment
7.
Mares Australes
We made an adjustment to normal value for duty drawback.
Cost of Production
In accordance with section 773(b)(3) of the Act, we calculated the
weighted-average cost of production (COP), by model, based on the sum
of each respondent's cost of materials, fabrication, general expenses,
and packing costs. We relied on the submitted COPs except in the
following specific instances where the submitted costs were not
appropriately quantified or valued.
Marine Harvest
1. We increased the reported cost of eggs and feed purchased from
affiliated parties to reflect market prices. See Comment 22.
2. We increased the reported cost of processing performed by an
affiliated party to reflect the transfer price. See Comment 22.
[[Page 31413]]
3. We revised the consolidated financial expense ratio to include
exchange losses associated with loans denominated in foreign
currencies. See Comment 24.
4. We recalculated the general and administrative expense (G&A)
ratio to correct certain errors discovered during verification.
Mares Australes
1. We increased the cost of manufacturing (COM) to include the
price-level adjustments for harvested salmon which were required by
Chilean GAAP. See Comment 27.
2. We increased the COM to include bonus expenses. See Comment 31.
3. We revised the consolidated financial expense ratio to remove
the claimed offset to financial expense for accounts receivable and
inventory. See Comment 24.
4. We recalculated the G&A expense ratio based on total G&A
expenses incurred by the producing entities. See Comment 30.
Aguas Claras
1. We increased the COM to include the price-level adjustments for
harvested salmon which were required by Chilean GAAP and were recorded
in the company's normal books and records. See Comment 27.
2. We revised the claimed ``feed cost adjustment'' by amortizing
the total amount specified in the contract over the life of the
contract. We then allocated the amortized adjustment to individual fish
groups based on each group's relative biomass. See Comment 36.
3. We excluded from G&A expenses the gains from the sales of common
stock investments. Additionally, we included the cost incurred by
Sociedad Agricola Rio Rollizo Ltda. (``Rio Rollizo'') which held the
marine concession for the Rio Rollizo hatchery. See Comment 38.
4. We revised the financial expense ratio to include exchange
losses associated with loans denominated in foreign currencies.
Additionally, we removed the claimed offset to financial expenses for
accounts receivable and inventory. See Comment 24.
5. We revised the manner in which we calculated indirect selling
expenses for CV so as to add an amount proportionate to the cost of
each product, rather than a fixed amount. See Comment 40.
Camanchaca
1. We increased the COM to include the price-level adjustments for
harvested salmon that were required by Chilean GAAP and were recorded
in the company's normal books and records. See Comment 27.
2. We revised the consolidated financial expense ratio to include
exchange losses. Additionally, we removed the claimed offset to
financial expenses for accounts receivable and inventory. See Comment
24.
3. We revised the G&A expenses to include the non-operating gains
and losses that related to the general operations of the company. Also,
we calculated the G&A expense ratio based on total G&A expenses
incurred by the company. See Comment 33.
Eicosal
1. We increased the COM to include the price-level adjustments for
harvested salmon which were required by Chilean GAAP and were recorded
in the company's normal books and records. See Comment 27.
2. We revised the consolidated financial expense ratio to include
exchange losses. Additionally, we removed the claimed offset to
financial expenses for holding accounts receivable and inventory. See
Comment 24.
3. We revised the G&A expenses to include the non-operating gains
and losses that related to the general operations of the company. Also,
we calculated the G&A expense ratio based on total G&A expenses
incurred by the salmon producing company. See Comment 29.
Currency Conversions
As in the preliminary determination, we made currency conversions
in accordance with section 773A of the Act. The Department's preferred
source for daily exchange rates is the Federal Reserve Bank. The
Federal Reserve Bank publishes daily exchange rates for Japanese yen,
but not for Chilean pesos. In cases involving comparisons to third-
country market sales in Japan, which were necessary for three
respondents, we made conversions of values denominated in Japanese yen
based on the official exchange rates published by the Federal Reserve.
For conversions of values involving Chilean pesos, we relied instead on
daily exchange rates published by Dow Jones News/Retrieval on-line
system. The parties did not comment on these exchange rate
methodologies.
Verification
As provided in section 782(i)(1) of the Act, we verified the
information submitted by the respondents for use in our final
determination. We used standard verification procedures, including
examination of relevant accounting and production records, as well as
original source documents provided by the respondents. We also met with
officials of the Association to discuss its grading standards.
Interested Party Comments
Sales Issues--General
Comment 1: Distinction between ``Premium'' and ``Super-Premium''
Grades.
The petitioners argue that the Department erred in the preliminary
determination by accepting as a bona fide grade distinction the
``super-premium'' designation adopted by the Association with respect
to whole salmon sold to Japan. The petitioners contend that most of the
Chilean salmon exported to both the United States and Japan was graded
as premium until shortly before the POI. According to the petitioners,
the Association's adoption of the super-premium grade in 1996 coincided
with active preparations for an impending antidumping petition against
salmon from Chile, and was designed to avoid comparisons of low-priced
sales of premium-grade salmon to the United States to high-priced sales
of the same merchandise to Japan.
The petitioners add that verification revealed that the
respondents' classification of premium versus super-premium salmon is
based only on very minor differences in the external aspects of the
salmon. According to the petitioners, these differences are
insignificant, and do not meet the Association's stated criteria for
differentiation among premium and super-premium salmon. Further, the
petitioners argue that the finding at verification that the super-
premium/ premium distinction rests primarily on such minor differences
in grading is at odds with the respondents' earlier representations
that the color of the salmon meat is the principal distinguishing
factor between premium and super-premium salmon. The petitioners
contend that verification established that: (1) the respondents'
premium and super-premium salmon are of uniformly high color, and (2)
the respondents do not evaluate the color of salmon during the grading
process.
As further evidence that the respondents' grading practices are at
odds with the Association's standards, the petitioners note that the
records maintained by Marine Harvest (one of the three respondents that
export the foreign like product to Japan) do not distinguish even
nominally between premium and super-premium salmon. According to the
petitioners, Marine
[[Page 31414]]
Harvest's invoices, ledgers, and other documentation refer to top-grade
Chilean salmon invariably as ``superior,'' regardless of whether the
salmon is exported to the United States or to Japan. Moreover, the
petitioners argue, the same designations are used by Marine Harvest's
Scottish affiliate for sales of Scottish salmon to the United States
and Japan, noting that the Scottish standard for superior grade is
equivalent to the U.S. standard for premium grade.
The Association responds that the Department confirmed at
verification that super-premium and premium salmon are distinct
products with different physical characteristics and market values.
According to the Association, its super-premium grading criteria were
established before the beginning of the POI in order to formalize a
long-standing requirement by Japanese customers for salmon with no
imperfections. The Association contends that, at verification, the
Department observed that the grading criteria were strictly applied and
enforced by independent, internationally-recognized quality assurance
agencies, and it maintains that the Department confirmed the
application of these criteria during the POI.
The Association further asserts that the discernible differences
between premium and super-premium salmon are evidenced by the
differences in prices obtained for the two grades in the Japanese
market. In this respect, the Association notes that Mares Australes,
the only respondent to sell both super-premium and premium grade salmon
to Japan, reported higher prices for sales of super-premium grade
salmon.
With respect to Marine Harvest's recording of the grade of
merchandise sold to Japan, the Association claims that, although the
Marine Harvest processing plant follows its own separate grading
standards for the U.S. and Japanese markets, these standards are
consistent with the Association's standards. Thus, even though Marine
Harvest's salmon are nominally referred to as being of ``superior''
grade on invoices to both markets, there are discernible physical
differences between the merchandise shipped to those markets. Further,
the Association argues, the Marine Harvest plant also relies on
independent quality certification agencies to rate its compliance with
Association grading standards, and the plant received perfect scores in
those evaluations in reports corresponding to the POI that were
examined at verification.
DOC Position: In the preliminary determination, we tentatively
accepted the Association's distinction between premium and super-
premium salmon, pending verification and further analysis of this
issue. After conducting verification and carefully considering the
evidence on the record, we have concluded that any differences between
premium and super-premium salmon are so minor as to not warrant
separate classification in an antidumping analysis.
At the outset, we note that we are not persuaded by the
petitioners' assertion that the Association's adoption of the super-
premium grade in 1996 was designed primarily to avoid comparisons, in
the event of an antidumping case, of low-priced sales of premium-grade
salmon to the United States to high-priced sales of the same
merchandise to Japan. We acknowledge that the Association's grading
standards and those of some of the individual respondents did include
distinct ``premium'' and ``super-premium'' classifications. During
verification, we found that quality control inspections at the
respondents' plants were supervised by independent certification
agencies, which certified the respondents' compliance with the
Association's grading standards, and that these standards specified
distinct ``premium'' and ``super-premium'' grades. The reports issued
by the independent certification agencies during the POI indicated high
scores in the category of adherence to these grading standards. See
Memorandum from Case Analysts to Gary Taverman, Regarding Inspection of
Eicomar Processing Plant (April 7, 1998) (Eicomar Verification Report)
at 3-4 and Exhibit P-2; see also Memorandum from Case Analysts to Gary
Taverman, Regarding Verification of Sales by Marine Harvest (April 7,
1998) (Marine Harvest Sales Verification Report), at 8-9 and Exhibit M-
25.
However, the record also contains evidence that the distinctions
between the two grades were, in practice, nominal. At the outset of
this proceeding, the Association explained that the single most
important factor considered by Japanese customers in purchasing fresh
Atlantic salmon is the color of the meat. See letter from the
Association to the Department of Commerce (November 3, 1997) (alleging
particular market situation in Japan) at 14. Both the Association
standards and the respondents' individual standards require higher meat
color for super-premium salmon than for premium salmon. See letter from
the Association to the Department of Commerce (October 10, 1998) at
Attachment 1 (transmitting Association standards); see also letter from
Mares Australes to the Department of Commerce (November 3, 1997) (Mares
Australes Section A and B Questionnaire Response) at 19-20; and letter
from Eicosal to the Department of Commerce (November 3, 1997) (Eicosal
Section A and B Questionnaire Response), at 4. Despite these claims
regarding the significance of color in distinguishing the two grades,
we found at verification that, in practice, the respondents adjust the
feed delivered to the salmon pens so as to ensure a uniformly high red
color to the salmon meat for all salmon produced. See, e.g., Eicomar
Verification Report at 2. Further, verification established that the
respondents do not measure the color of the whole salmon during
processing, but rather take an occasional sample to ensure that the
fish are of sufficiently high color. Id. at 3.\1\ Thus, respondents
routinely export to the United States salmon that has the same meat
color as the salmon exported to Japan and do not consider the criterion
(color) that was initially claimed to be of paramount significance in
distinguishing super-premium from premium salmon.
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\1\ Although the Association claims that a shiny blue exterior
on a whole salmon is indicative of very red meat color, at
verification we found that in practice this was not used as a
yardstick to differentiate premium from super-premium salmon:
``According to plant officials, salmon exhibiting a shiny blue
exterior will have meat surpassing the Association's standards for
color required for premium and super-premium grades.'' Id. at 2.
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The Association argues that, in addition to color, its standards
also distinguish among minor external imperfections in the salmon.
During the plant tour conducted at verification, Department verifiers
observed that there were in fact minor differences between salmon
classified as premium and salmon classified as super-premium, such as
small scale loss or light lacerations. These minor differences,
however, do not establish a different grade of salmon for purposes of
our analysis. While the Chilean respondents that sell to both the
United States and Japan may sort their harvest based on the premise
that Japanese customers are more likely to take notice of a light
defect than U.S. customers, such differences are not recognized by the
salmon producers of any other nation that exports to Japan. The
Norwegian, Scottish, Canadian, and U.S. farmed salmon industries do not
recognize any grade higher than ``superior.'' The ``superior'' grade is
consistent with the premium grade and permits minor defects.\2\ Because
the grading standards
[[Page 31415]]
of ``superior'' salmon recognized by the world's largest salmon farming
countries provide for a range of quality (e.g., from zero defects to up
to three minor defects) we note that, by definition, there will be some
merchandise within this grade with no imperfections, as well as some
merchandise that will be closer to the lower end of this range.
Nonetheless, all salmon in this range are graded equally (i.e., as
``superior''/``premium''), and are comparable products in the market
place.\3\
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\2\ We note that one of the respondents in this investigation,
Marine Harvest, has an affiliate in Scotland that produces and
exports fresh Atlantic salmon to Japan. At verification, we reviewed
the grading standards followed by Scottish producers, and found that
the highest-quality salmon produced by those producers is graded as
``superior.'' The ``superior'' standard allows for light defects,
and is comparable to the Chilean ``premium'' standard. See Marine
Harvest Sales Verification Report at 13 and Exhibit M-24. Further,
we found that invoices for Marine Harvest's sales of Chilean salmon
and invoices for the Scottish affiliate's sales of Scottish salmon
refer to salmon sold in Japan as ``superior'' salmon, and do not
distinguish the two in any manner.
\3\ While the Association's ``super-premium'' specification for
fresh Atlantic salmon does not tolerate any defects in the fish, the
Association has no such standard for other types of salmon, such as
coho salmon. Thus, by the Association's own standards, a range of
small defects is generally permissible for a variety of different
types of fish sold in Japan. The respondents have not demonstrated
that fresh Atlantic salmon is so unique to Japanese customers in
comparison with other salmon that a heightened quality standard is
required for this particular type of salmon.
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Finally, regarding the Association's claim that there are price
differences in Japan for salmon sold as ``super-premium'' versus that
sold as ``premium,'' we note first that, as shown above and in
accordance with our practice, our matching criteria are based on the
actual physical characteristics of the merchandise. Moreover, even if
we were to consider the Association's analysis, it rests entirely on
sales made by the one company that made POI sales of both designations
to Japan. The pricing of this company's sales of merchandise labeled
``premium,'' which covered only a few months of the POI and involved
relatively small quantities, is an insufficient basis on which to find
systematic price differences between the two labels, much less to
employ a matching methodology based on such differences.
The nominal distinctions noted above do not preclude an apples-to-
apples comparison of the salmon sold in the two markets. For this final
determination, we have considered that salmon reported as super-premium
are in fact of premium grade and have matched such sales to premium-
grade salmon sold in the United States, where otherwise appropriate.
Comment 2: Distinction between Vacuum-Packed Fillets and Regular
Fillets.
The petitioners argue that the Department erred in preliminarily
accepting the respondents' treatment of vacuum-packed fillets and
regular fillets as separate forms of merchandise, thereby precluding
comparisons of identical merchandise. The petitioners argue that
vacuum-packed salmon fillets sold in Japan are identical to regular
fillets sold in the United States in every respect except packing, and
claim that their prices can be compared after the appropriate
adjustment for differences in packing costs.
The petitioners further contend that, in responding to the
Department's cost of production questionnaire, Marine Harvest and
Eicosal erroneously included vacuum-packing costs in the reported cost
of manufacturing of fillets that were vacuum-packed. According to the
petitioners, vacuum-packing costs should be regarded as costs of
packing for shipment (i.e., the cost of containers incidental to
placing the foreign like product in a ready condition for shipment),
consistent with section 773(b)(3)(C) of the Act.
In addition, the petitioners argue that the Department incorrectly
relied on Washington Red Raspberry Commission v. United States, 859
F.2d 898, 905 (Fed. Cir. 1988)(Red Raspberry Commission) in
distinguishing vacuum-packed fillets in the preliminary determination.
According to the petitioners, the CAFC ruled in that case that packing
can only be considered an integral part of a product if the product
could not survive in its natural form without such packing. According
to the petitioners, vacuum packing is not necessary to bring salmon
fillets to market, as they are regularly wrapped in sheets of plastic,
without vacuum packaging. Petitioners argue that, at most, vacuum
packing lengthens the shelf-life of a fillet, an advantage that is
obviated if the product is quickly consumed.
Finally, petitioners argue that Department practice supports the
treatment of vacuum packing as packing costs, rather than as physical
differences, citing, inter alia, Tapered Roller Bearings and Parts
Thereof, Finished and Unfinished, From Japan and Tapered Roller
Bearings, Four Inches or less in Diameter, and Components Thereof, From
Japan; Final Results of Antidumping Duty Administrative Reviews and
Revocation in Part of an Antidumping Finding, 61 FR 57629, 57630
(November 7, 1996)(TRBs from Japan). Petitioners claim that TRBs from
Japan stands for the proposition that not comparing identical products
that differ only by their packaging would constitute ``an additional
matching factor which is unwarranted by the statute.'' Id.
The Association responds that the Department correctly determined
that vacuum-packed fillets sold in Japan are physically different from
fillets sold in the United States and thus cannot be used for
comparison. The Association contends that vacuum packing represents a
significant additional processing step, akin to smoking or canning,
that enhances the shelf life of the product, rather than merely placing
the product in a condition ready for shipment. According to the
Association, the proper reading of the CAFC's decision in Red Raspberry
Commission is that packaging is an integral part of the product when it
is in effect a part of that product. The Association argues that the
Department has consistently followed this rule in other cases, and
maintains that the cases cited by petitioners are inapposite.
DOC Position: We agree with the Association. Vacuum packing is not
incidental to shipment, but is instead an extra processing step that
doubles the shelf life of fresh Atlantic salmon. Such packing is an
integral part of the product, and its cost is appropriately included
among costs of manufacturing, rather than among costs of packing for
shipment.
At the outset of this investigation, after considering the parties'
comments with respect to vacuum packing, we recognized the distinction
between regular fillets and vacuum-packed fillets, and instructed the
respondents to treat these as separate forms. See Antidumping
Questionnaire at B-6 and C-6 (August 26, 1997). The respondents
appropriately included the cost of vacuum packing in the costs of
manufacturing, and included the cost of Styrofoam boxes and cooling
materials as packing materials.
The cases cited by the petitioners do not require a different
result. In those cases, the issue was whether products sold
individually could be compared to groupings of products, or to bulk
sales. See, e.g., Final Determination of Sales at Less Than Fair Value:
Fresh Cut Roses from Ecuador, 60 FR 7019, 7022 (February 6, 1995)(Roses
from Ecuador)(noting that roses are not transformed by virtue of being
bunched or placed in a bouquet); see also TRBs from Japan, 61 FR 57629,
57630 (November 7, 1996)(noting that bearing cups or cones sold
individually could be compared to package sets); and Gray Portland
Cement and Clinker from Mexico: Final Results of Antidumping Duty
Administrative Review, 63 FR
[[Page 31416]]
12764, 12777 (March 16, 1998)(Cement from Mexico)(noting that bagged
cement and bulk cement are identical except in packaging, and could be
compared). In the instant case, the issue is not whether fillets sold
individually should be compared to fillets sold by the box, or to
fillets sold in bulk quantities. Rather, it is whether the product is
transformed by vacuum packing, such that the packing becomes an
integral part of the product.
In Red Raspberry Commission, the CAFC found that packing of
raspberries is an integral part of the product, stating that the
cardboard containers are necessary for the very survival of the
merchandise. The CAFC held that, because the packing was an integral
part of the product, it was properly included in the cost of
manufacturing rather than treated as packing for shipment. However, the
ruling does not suggest that packing that otherwise transforms the
physical properties of a product cannot also be considered an integral
part of the product. In significantly extending the shelf life of a
fillet, the vacuum packing transforms the product. We also note that
the vacuum-packing process extends the shelf life not only by the
packaging itself but also by other aspects of the vacuum-packing
process, such as the use of ethyl alcohol, which significantly lowers
the bacteria count of the salmon relative to salmon that is not vacuum
packed. For these reasons, we have continued to regard regular fillets
and vacuum-packed fillets as separate forms of fresh Atlantic salmon.
Comment 3: Averaging of Prices for Comparison to CV.
The Association contends that the Department erred in the
preliminary determination by comparing U.S. prices that were averaged
by form, grade, and weight band to CVs that, due to the nature of the
product, essentially do not vary except by form. The Association claims
that salmon of different grades and weight bands have distinct physical
differences resulting from natural variation in salmon populations,
rather than from differences in production inputs or techniques.
According to the Association, while the cost of production of a
particular form of salmon (e.g., salmon fillets) may be the same
regardless of differences in grades and weight bands, such differences
affect the market value and selling price of salmon. The Association
argues that, to make an apples-to-apples comparison, the Department
should average all U.S. sales prices by form only and not by grade or
weight band, such that a form-specific price is compared to a form-
specific CV.
According to the Association, the Department's practice in cases
involving flowers and roses supports such an approach. The Association
states that, in the Flowers cases (e.g.,Certain Fresh Cut Flowers from
Colombia: Final Results of Antidumping Administrative Review, 55 FR
20491, 20496 (May 17, 1990) (Certain Fresh Cut Flowers from
Colombia)(Comment 19)), the respondents were able to provide only an
average cost for each type of flower, rather than a unique cost for
each unique variety within the particular flower type. Under these
facts, the Association contends, the Department found it appropriate to
compare an average price for each flower type to the average CV of that
flower type. Similarly, in the Roses cases (e.g., Fresh Cut Roses from
Colombia, 60 FR 6980, 6990 (February 6, 1995) (Comment 5)), where the
Department had the same cost for different rose types, the Department
averaged the prices of roses across types prior to comparison to CV.
The Association argues that there is no material difference in the fact
pattern of the flowers cases compared to the fact pattern of this
investigation. According to the Association, failure to conduct price-
to-CV comparisons on a form-average basis in this case would violate
not only the statutory requirement for a fair comparison, but also
violate the fair-comparison requirements imposed by the GATT/WTO. The
Association also argues that such a methodology would run counter to
the findings of a GATT panel with respect to the LTFV investigation of
salmon from Norway.
The petitioners respond that the antidumping statute directs price-
to-CV comparisons to be based on the prices and costs of each unique
product, as defined by the physical characteristics of those products.
According to the petitioners, the respondents could have reported costs
of production specific to different weight bands and grades, but opted
not to do so. Specifically, the petitioners argue that the respondents
could have attempted to differentiate costs for weight bands based on
differences in feed conversion ratios, and for grades based on
differences in post-harvest costs. The petitioners argue that it would
be inappropriate to correct this deficiency in the respondents'
reporting by averaging U.S. prices, since there are price differences
corresponding to differences in weight bands and grade.
DOC Position: We disagree with the Association. For the final
determination, we have continued to average U.S. prices by form, grade,
and weight band.
We accept the Association's contention that, with minor exceptions,
each company's recorded costs of the subject merchandise do not vary by
grade or weight band. Our examination of the voluminous record evidence
concerning this issue, including our verification findings, confirms
that the costs as reported reasonably reflect the actual costs of
producing each matching group (i.e., each combination of form, grade,
and weight band), and that the costs of certain of these matching
groups are the same. In this respect, we disagree with the petitioners'
arguments that the respondents should have been required to report
costs based on methodologies that deviate from their normal accounting
practices, e.g., through the use of feed conversion ratios, in order to
estimate differences in costs.
With this in mind, when comparing U.S. prices to CV, the Department
is charged with determining whether sales are made to the United States
at prices below the actual cost of production. The CAFC has ruled
definitively on this issue:
By its terms, the statute expressly covers actual production
costs * * *. The broad language of section 1677b(e) [the CV portion
of the statute] does not at any point expressly authorize adjustment
of these production costs to account for products of a lower grade
or less value.
See IPSCO Inc. v. United States, 965 F. 2d, 1056, 1059-1060 (Fed. Cir.
1992)(IPSCO).
As in the instant proceeding, IPSCO involved merchandise (steel
pipe used for oil and gas wells) that varied in grade (prime and
limited service) but not in the cost of producing each grade. As with
salmon, the same materials, processes, labor, and overhead went into
the production of both grades, and buyers purchased both grades ``for
the same purpose--``down hole'' use in oil and gas wells.'' Id. at
1058. Thus, both grades had the same actual costs:
Because IPSCO expended the same materials, capital, labor, and
overhead for both grades of OCTG, the constructed value of one ton
of limited-service pipe necessarily matched the constructed value of
one ton of prime pipe.
Id. at 1060.
As with premium salmon, prime-grade pipe was of a higher quality
and, as such, commanded a higher price in the marketplace. Id. at 1058.
In the proceeding underlying the IPSCO decision, the Department
compared U.S. sales of prime-and limited-service grade pipe to CVs
based on the actual costs of each grade, which were identical. There,
as here, the respondents objected to this methodology vis-a-vis
comparisons involving U.S. sales of the lower grade
[[Page 31417]]
of merchandise. The CAFC rejected this claim, ruling that the
Department had ``calculated constructed value precisely as the statute
directs'' in basing CV on the actual cost of production for each grade.
Id. at 1060.
While making the same complaint as that made by the respondent in
IPSCO, the respondents in the instant proceeding have proposed a
different solution. Rather than arguing for an adjustment to CV, the
respondents suggest that the Department average the reported U.S.
prices without respect to two of the three matching characteristics
(grade and weight band) for comparisons involving CV.
We reject the respondents' proposal for the following reasons.
First, no change to either side of the antidumping analysis (EP/CEP and
normal value) is necessary because, in accordance with IPSCO and with a
basic tenet of the dumping law, the Department's methodology in this
case properly compares the price of U.S. sales of a given product with
the actual costs of that product where normal value is based on CV,
without regard to whether that product's actual costs are the same as,
or different from, other products under investigation.
Further, the methodological changes proposed by the respondents are
inappropriate under the facts of this case to the extent that they
conflict with other requirements imposed by the statute and Department
practice. Specifically, the proposal to eliminate two of the three
matching criteria from our analysis with respect to CV comparisons
would reduce the accuracy of that analysis and, depending on the manner
employed, would either eliminate price-based matches entirely, or would
result in inconsistent matching groups depending on whether a U.S. sale
is matched to comparison market sales or to CV.
Pursuant to sections 771(16) and 773(a)(1) of the Act, it is our
practice first to match U.S. sales with comparison market sales of the
most physically comparable merchandise. We require the matching
categories to be as precise as possible in order to effect a meaningful
comparison:
In determining the comparability of sales for purposes of
inclusion in a particular average, Commerce will consider factors it
deems appropriate, such as the physical characteristics of the
merchandise, the region of the country in which the merchandise is
sold, the time period, and the class of customer involved.
Statement of Administrative Action accompanying the URAA (SAA) at 842
(emphasis added). Thus, the statute and SAA recognize the importance of
developing, under the facts of each case, matching categories that
allow for meaningful comparisons, while preventing, to the extent
possible, the masking of dumping through overly broad averages. The
discretion afforded to the Department by the SAA (to consider such
factors as it deems appropriate) reflects the fact that this is
arguably the most case-specific aspect of the dumping analysis,
depending as it does on the particular characteristics of the product
under investigation.
In light of the importance of determining our matching categories,
it is our longstanding practice to consider comments submitted by
interested parties regarding the relevant matching characteristics of
the product under investigation. Early in this proceeding, both parties
agreed that form, weight band, and grade were critical physical
characteristics of fresh Atlantic salmon. See letter from the
Association to the Department of Commerce, (August 7, 1997); see also
letter from the petitioners to the Department of Commerce (August 7,
1997). Having established these matching categories, we averaged U.S.
and comparison market sales of these product groups and made price-to-
price matches, where possible. Only where we could not make such
matches did we resort to CV. We have based CV on the actual costs of
each matching category; where the respondents reported differences in
actual costs (e.g., Marine Harvest's reporting of different costs by
weight band), we have taken this into account.
Significantly, in arguing that we should eliminate two of the three
matching characteristics with respect to CV comparisons, the
respondents do not address the fact that, unlike the Flowers line of
cases, this investigation involves price-to-price matches that were
made using matching characteristics (form, grade, and weight band) that
the respondents themselves agreed were the defining features of the
subject merchandise in terms of our matching groups. Their argument
does not address the inconsistency of maintaining one set of averaging
and matching characteristics (form, grade, and weight band) for one set
of U.S. sales (those for which we are able to find a price-based
match), while averaging and matching other U.S. sales (the remainder)
according to form alone. The contingency of whether a given U.S. sale
has a priced-based match or a CV-based match would not be an
appropriate means of determining the averaging methodology for that
sale.
When the respondents first raised this issue, it appeared that they
would have resolved this inconsistency by eliminating price-based
matches altogether for any company that would have any CV matches (all
of them). See Mares Australes Section A and B Questionnaire Response
(November 3, 1997) at 4 (``We suggest that because there are U.S.
grades that do not match, the Department reject Japanese sales entirely
as the basis for normal value and rely instead upon constructed
value.'' (citing Roses from Colombia, Roses from Equador, and Fresh Cut
Flowers from Colombia)). 4Since the respondents have not
addressed in the case briefs how to treat U.S. sales that would
otherwise have suitable price-based matches, it is not clear whether
the respondents continue to advocate this approach. We note for the
record that we also disagree with this proposal, as it would undermine
the statutory preference for price-to-price matches, as reinforced by
the CAFC's decision in Cemex v. United States, WL 3626 (Fed. Cir.).
---------------------------------------------------------------------------
\4\ We note that this argument by respondents for rejecting
Japanese sales is separate from their argument that we should
disregard such sales due to a particular market situation, as
addressed in Comment 4, infra.
---------------------------------------------------------------------------
Here again, the analogy to the Flowers cases fails, and serves only
to illustrate why the SAA explicitly instructs the Department to use
its discretion in determining the appropriate matching methodology
under the facts of each case. To state the obvious, flowers and salmon
are different products that are sold in different markets under
different conditions. While we have determined to date in the Flowers
line of cases that the merchandise and markets involved do not permit
reasonable price-based comparisons (due to, for example, the holiday-
driven demand patterns in the U.S. market), that is not the case with
the merchandise and markets involved in this investigation. It is not
appropriate to force such a case-specific finding involving the
physical characteristics of flowers, and the selling practices that
relate specifically to flowers, onto the matching methodology for fresh
Atlantic salmon, thereby effectively eliminating the valid methodology
developed early in this case. We would likewise disagree with the
concept of averaging U.S. sales that have price-based matches only with
respect to form, as this would undermine the precision of our analysis
with respect to such sales.
Finally, with respect to the relevance of the 1992 GATT panel
report in United States: Imposition of Antidumping Duties on Imports of
Fresh and Chilled Atlantic Salmon from Norway, we note that the panel's
findings were limited, by the panel's
[[Page 31418]]
own terms of reference, to the facts of that pre-Uruguay Round
proceeding. Moreover, the GATT panel faulted the Department for its
lack of an explanation regarding its matching methodology in the
Norwegian salmon case:
While the United States had explained that because of the
absence of differences in costs of production between salmon of
different weights no separate constructed values for individual
weight categories had been calculated, the United States had not put
forward any arguments to explain why export prices of individual
weight categories had been used in the comparison with the single
constructed values. The public notice of the affirmative final
determination was also silent on this point.
Id. at. 470.
Unlike the Norway case, we have provided a detailed explanation for
our methodology in this respect.
Comment 4: Particular Market Situation in Home Market.
The Association argues that the Department erred in finding that a
particular market situation exists in the home market, and disputes the
Department's underlying conclusion that the home market is an
incidental market consisting of sales of non-export quality salmon. The
Association contends that the home market unquestionably passes the
statutorily mandated viability test, and that the merchandise sold in
that market is within the scope of the investigation. According to the
Association, the Department's finding of a particular market situation
is based on an unprecedented and extra-statutory consideration of the
amounts and percentages of each grade of merchandise sold in the home
market, compared to the merchandise sold in the United States. The
Association asserts that any such differences can be adjusted for under
the Department's normal calculation methodologies, and do not warrant
rejection of the home market.
The Association argues that, in the alternative, the Department
should also find that a particular market situation exists in the
Japanese market. According to the Association, the differences between
the salmon sold by the respondents in Japan and that sold in the United
States are greater than those between the salmon sold in the home
market and that sold in the United States.
The petitioners respond that the Department properly rejected the
home market as a comparison market. According to the petitioners, the
Department had ample statutory and regulatory authority to make a
finding of a particular market situation with respect to the home
market, and properly concluded that the Chilean market is incidental to
the export-based Chilean salmon industry.
The petitioners further argue that the Japanese market does not
present a particular market situation, since any differences between
the salmon sold in Japan and that sold in the United States are minor
distinctions within export-quality merchandise. The petitioners urge
the Department to continue its reliance on the Japanese market as the
basis for normal value for the respondents in question.
DOC Position: We agree with the petitioners. The Department's
reasons for rejecting the use of the home market were set forth in
detail in a memorandum addressing this issue. See Memorandum from Case
Analysts to Richard Moreland, Regarding Appropriateness of Chilean
Market as a Comparison Market (October 17, 1997) (Particular Market
Determination Memorandum). As explained in that memorandum, the home
market is incidental to the Chilean salmon industry, which is export-
oriented. The home market is comprised almost exclusively of salmon
graded by the respondents as ``industrial'' or ``reject,'' which the
respondents sell locally for drastically reduced prices compared to
export merchandise. The perfunctory marketing and distribution of
salmon in the home market is consistent with the incidental nature of
those sales.
The Association has not raised substantial new arguments in its
case brief, and instead has reiterated arguments advanced prior to the
preliminary determination. We therefore refer interested parties to our
Particular Market Determination Memorandum and to the Memorandum from
Gary Taverman to Richard Moreland, Issues Concerning the Preliminary
Determination of Sales at Less Than Fair Value (January 8, 1998)
(Preliminary Issues Memorandum) for more detailed discussions of the
issue.
With respect to the Association's claims regarding the home market,
we add only that our verification findings refuted one of the
Association's arguments regarding this issue. The Association
characterizes the difference between the home market and the United
States as one of differences in ``product mix,'' suggesting that the
same grades of merchandise are sold in both markets, only in different
proportions. This contention has been premised to a large extent on a
claim that one of the respondents had exported ``industrial'' grade
salmon to the United States, albeit in small quantities, and that this
merchandise was identical to that sold in the home market. However, as
we found at verification, the U.S. sales in question in fact were not
of industrial-grade salmon, but rather of premium-grade salmon that was
subject to a post-sale quality claim. The Association now recognizes
that these sales were reported improperly. See Association rebuttal
brief at 54. Thus, the record clearly establishes that the grade of
merchandise sold by the respondents in the home market is not exported
to the United States or Japan.
We also continue to find that the Japanese market does not present
a particular market situation. As explained in our Preliminary Issues
Memorandum, the respondents' Japanese market is far from incidental.
Moreover, as explained above in response to Comment 1, the premium-
grade salmon sold in the United States and the super-premium salmon
sold in Japan are essentially the same merchandise. By contrast, as
ascertained at verification, the salmon sold in the home market have
severe defects. See Eicomar Verification Report at 3 (noting ``severe
scale loss, greenish outer color, and numerous red spots due to early
sexual maturation''); see also Marine Harvest Sales Verification Report
at 7-8 (noting ``deformed mandibles, greenish-brownish external color,
and marked lacerations'').
Comment 5: All-Others Rate.
The Association argues that the Department's exclusion of de
minimis rates from the calculation of the ``all-others'' rate violates
the constitutional due process and equal protection rights of Chilean
producers/exporters of subject merchandise and their U.S. importers.
According to the Association, exclusion of de minimis rates results in
an unrepresentative and skewed all-others rate, because the Department
limited its investigation to a minority of producers/exporters, did not
accept voluntary participation by other firms, and found that the
majority of the investigated firms were not dumping. The Association
contends that the Court of International Trade (CIT) expressly stated
in Serampore Indus. Pvt. Ltd. v. United States Dep't of Commerce, 696
F. Supp. 665, 668 (Ct. Int'l Trade 1988) (Serampore) that where the
Department limits the number of firms to be investigated, there is no
basis for excluding de minimis margins in the calculation of the all-
others rate.
The petitioners respond that the Department is bound by the plain
language of the antidumping statute to exclude de minimis rates from
the calculation of the all-others rate. According to the petitioners,
Serampore
[[Page 31419]]
is specific to situations where the Department selects a sample of
firms for investigation from among a much larger group of potential
respondents. The petitioners note that in this case the Department did
not select a sample of firms, but chose instead those exporters
accounting for the largest volume of exports to the United States
during the POI. The petitioners also point out that the Association
specifically requested at the outset of this proceeding that the
Department limit its investigation to those producers/exporters
accounting for 50 percent of the exports during the POI, and note that
those companies investigated account for approximately that figure.
DOC Position: We agree with the petitioners. Section 735(c)(5)(A)
of the Act unambiguously directs the Department to exclude ``any zero
and de minimis margins'' from the calculation of the estimated all-
others rate (emphasis added). There is no indication in the legislative
history of this provision that Congress intended for exceptions to this
rule. We therefore have no basis to ignore the Act's clear directive to
exclude de minimis margins from the calculation of the estimated all-
others rate.
Further, as the petitioners note, the Association itself requested
that the Department limit its selection of firms to be investigated to
those exporters accounting for 50 percent of exports to the United
States, in addition to ``a relatively small number of volunteer
respondents.'' See letter from the Association to the Department of
Commerce (August 4, 1997), at 4-6. The Department selected a pool of
exporters accounting for very close to that volume of exports, and the
Association did not voice its concerns about the implications of
limiting the number of respondents with respect to the all-others rate
until after the preliminary determination was issued.5
---------------------------------------------------------------------------
\5\ In accordance with section 777A(c)(2) of the Act, the
Department limited its investigation to the five largest producers/
exporters. However, in limiting its investigation, the Department
stated that if a selected respondent failed to cooperate, and
companies wishing to be treated separately as voluntary respondents
had submitted a response to our antidumping questionnaire, the
Department would consider replacing the uncooperative respondent
with a voluntary respondent, to be selected based on the order of
each company's submission of a written request for investigation as
a voluntary respondent. See Memorandum from the Team to Richard
Moreland, Regarding Selection of Respondents (August 26, 1997), at
6.
---------------------------------------------------------------------------
Comment 6: Industry Support for the Petition.
The Association argues that the Department should not have
initiated this antidumping investigation because the petitioners did
not demonstrate sufficient industry support for the petition. The
Association claims that the petition identified only U.S. producers of
whole salmon, and failed to identify U.S. producers of cuts of fresh
Atlantic salmon (``fillet producers''), which were also under the scope
of the petition. The Association contends that fillet producers
comprise an industry separate from the whole salmon industry.
The Association argues further that, even if these two segments can
be considered one industry, such that production from these two
segments could be combined in the industry support ratio, the
Department should have polled the fillet producer portion of the
industry rather than derive an estimate of such production. The
Association asserts the following errors in the Department's estimate
of fillet production: (1) the calculation inappropriately estimates the
size of the fillet producer industry on the basis of the value added in
the processing of whole salmon into salmon cuts, rather than on the
basis of the total value of the salmon cuts; (2) it focuses only on the
basic processing of whole salmon into fillets, ignoring ``higher value-
added products,'' such as portions; and (3) it relies on the cost data
derived from a single source, rather than from a variety of sources.
The petitioners respond that the Department appropriately
determined that there was industry support for the petition on the
basis of data in the petition as well as data gathered from external
sources. According to the petitioners, the Act does not require polling
to determine the domestic industry under such circumstances.
DOC Position: Section 732(c)(4)(E) of the Act provides that, after
the administering authority determines that it is appropriate to
initiate an investigation, the determination regarding industry support
shall not be reconsidered. Therefore, we have not reconsidered our
determination regarding industry support. We refer interested parties
to our notice of initiation and companion memorandum, which set forth
in detail the methodologies followed in establishing industry support.
See Initiation of Antidumping Duty Investigation: Fresh Atlantic Salmon
From Chile, 62 FR 37027, 27028-29 (July 10, 1997).
Sales Issues--Aguas Claras
Comment 7: Use of the Canadian Market as Comparison Market.
The petitioners contend that the Department should reject Aguas
Claras' sales to the Canadian market as the basis for normal value for
three reasons: (1) the Canadian market is an unimportant market for
Chilean salmon exporters as a whole, such that prices to this market
are not ``representative'' within the meaning of section
773(a)(1)(B)(ii)(I) of the Act; (2) the particular market situation in
Canada renders that market an improper comparison market; and (3)
verification findings indicate that the reporting of Canadian fillet
sales is unreliable.
The petitioners first argue that prices to Canada are not
representative because total Chilean exports of fresh Atlantic salmon
to Canada constitute a minuscule percentage of Chile's worldwide
exports of that merchandise, i.e. Canada is an unimportant market.
Citing the preliminary results of the tenth administrative review of
Flowers from Colombia, 63 FR 5354, 5357 (February 2, 1998), the
petitioners claim that the Department recently rejected the use of
Canada and Japan as comparison markets where: (1) the Department did
not examine all potential respondents, such that the rate for non-
selected companies would be based on an average of the rates found for
the respondents; and (2) exports to the Canadian market were a small
percentage of total exports. The petitioners claim the same facts apply
to the instant proceeding.
The petitioners' second argument, that a particular market
situation in Canada renders that market an improper comparison market,
rests on the following claims: (1) the narrow margin of the five-
percent viability determination, which was affected by the timing of
Aguas Claras' acquisition of its U.S. affiliate, Bowrain Corp., during
the POI; (2) the existence of a high degree of integration in the
channels of trade for subject merchandise in the United States and
Canada, which, petitioners assert, renders Canada an inappropriate
comparison market because it is essentially the same market as the U.S.
market; and (3) the recent Canada/Chile free trade agreement, which
ended each country's right under the GATT to initiate antidumping
proceedings against each other and, according to the petitioners, has
rendered Canada a secondary dumping ground.
Finally, the petitioners argue that the Department's verification
findings suggest that Aguas Claras' reporting of Canadian market sales
of fillets is unreliable and that the Department must resort to CV for
such sales.
Aguas Claras responds that there is no reason for rejection of the
Canadian market as the basis for normal value. First, with respect to
the allegation that
[[Page 31420]]
the Canadian market is unimportant to the Chilean exporters as a whole
such that prices to this market are unrepresentative, Aguas Claras
contends that the Department's decision in the tenth review of Flowers
from Colombia is factually distinguishable because, in the Flowers
proceedings, the Department has consistently rejected price-based
normal values for all respondents. Thus, the respondents argue, the
Department's rejection of Japan and Canada as comparison markets in the
tenth Flowers review was consistent with its general practice in the
Flowers proceedings. Aguas Claras further argues that the export
statistics cited by the petitioners are based on direct exports, and
thus mis-classify sales to Canada made through the United States as
U.S. sales. According to Aguas Claras, all of its own sales to Canada
were made through this route. Therefore, Aguas Claras concludes, there
is no basis for a finding that the Canadian market is unimportant.
Second, with respect to the allegation that there is a particular
market situation in Canada, Aguas Claras argues that the Canadian
market passes the ``bright line'' (five-percent) test for viability,
and maintains that no heightened standards should be applied to that
market. Aguas Claras adds that the high degree of integration between
the U.S. and Canadian salmon markets actually supports the use of
Canada as the basis for normal value, because similarities between the
two markets support a finding that there is no particular market
situation in Canada that would render prices in that market not
comparable to U.S. prices.
Finally, with respect to the verification findings cited by the
petitioners, Aguas Claras argues that there is no evidence of any price
distortions in the Canadian market with respect to fillet sales.
DOC Position: We disagree with the petitioners that the Canadian
market is characterized by ``unrepresentative'' prices or by a
particular market situation, within the meaning of sections
773(a)(1)(B)(ii)(I) and (II) of the Act. However, we agree with the
petitioners that, based on our verification findings, we are unable to
match Aguas Claras' POI Canadian sales of fillets, as reported, to its
U.S. sales. We have based normal value for such sales on CV.
To address the petitioners' arguments in turn, we first disagree
that the Canadian market is characterized by unrepresentative prices.
Contrary to the petitioners' assertions, the recent finding in the
preliminary results of the tenth review of Flowers from Colombia does
not compel the rejection of an otherwise viable Canadian market in the
instant proceeding. As we state in our response to Comment 3, above,
the Flowers cases have relied on CV as the sole basis for normal value
for each of the past 10 reviews, for a variety of product- and market-
specific factors that do not pertain to this investigation (e.g.,
holiday demand patterns). The unique history of the market-selection
determinations made in the Flowers and Roses cases does not lend itself
to broad application of those findings to a salmon respondent that, as
verification demonstrated, sells to a viable Canadian market in the
same manner, and through the same channels of distribution, as it sells
to the U.S. market.
We also disagree with the basis of the petitioners' numerical
analysis regarding exports to Canada versus exports to the United
States vis-a-vis their ``unrepresentative prices'' argument. As Aguas
Claras correctly notes, all of its own sales to Canada were made
through its U.S. affiliate in Miami, after entry of the merchandise
into the United States. The effect of this distribution pattern is to
inflate significantly the apparent volume of exports to the United
States, and to deflate the apparent volume of exports to Canada. The
size of this distortion of ``direct'' export numbers with respect to
the one company whose Canadian sales we are examining is a reasonable
indication that the overall export figures provided by the petitioners
understate the volume of Chilean fresh Atlantic salmon that is destined
for the Canadian market. The Department has not found any statistics
establishing the ultimate destination of merchandise exported by the
Chilean industry. Therefore, in view of the demonstrated viability of
the Canadian market for Aguas Claras, and in the absence of persuasive
evidence to the contrary, we have not rejected Canadian sales prices as
unrepresentative.
Regarding the petitioners' particular market situation claim, we
agree with Aguas Claras that similarities between the U.S. and Canadian
markets are not evidence of a particular market situation. As for the
contention that Canada has become a secondary dumping ground due to the
terms of the Canada/Chile Free Trade Agreement, we note that such trade
agreements are not designed to promote dumping, and their mere
existence is not evidence of such. In addition, the below-cost test
that we have applied to sales made by Aguas Claras in the Canadian
market prevents the inclusion of such sales, when made in substantial
quantities, in our analysis.
However, we agree with the petitioners' argument that our
verification findings call into question the reporting of certain data
essential to price-to-price comparisons, specifically with respect to
fillets.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.
---------------------------------------------------------------------------
\6\ We cannot address the specifics of the verification finding
in this public forum, as a meaningful discussion is only possible by
means of reference to business proprietary information. We have
addressed the petitioners' argument in a separate memorandum to the
file, which will be placed on the official record and served upon
parties with access to such information under administrative
protective order. See Memorandum from the Case Analyst to Gary
Taverman, Regarding Analysis of Aguas Claras Data for Final
Determination (June 1, 1998)(Aguas Claras Analysis Memorandum).
---------------------------------------------------------------------------
Comment 8: Sales by Affiliated Producer/Exporter.
The petitioners argue that Aguas Claras failed to report U.S. sales
made by an affiliate, Pesquera Invertec, that produced and exported
subject merchandise during the POI. The petitioners state that the
existence of these sales was found only at verification, a situation
that warrants the application of the facts available to derive the
dumping margins on such sales. Noting that the Department obtained the
total volume of Pesquera Invertec's U.S. sales at verification, the
petitioners argue further that the inclusion of this figure in Aguas
Claras' total U.S. sales causes the Canadian market to drop below the
Department's viability threshold. The petitioners state that this
constitutes another reason for the Department to reject the use of the
Canadian market as a comparison market (in addition to the arguments
made in Comment 7, above) and compare U.S. prices to CV.
Aguas Claras responds that it has never been affiliated with
Pesquera Invertec, and was never required to report that exporter's
sales. According to Aguas Claras, Pesquera Invertec was affiliated for
part of the POI with Aguas Claras' parent company, Antarfish S.A.
(Antarfish), by virtue of their joint control of a salmon processing
company. However, Aguas Claras argues, there is no transitive principle
of affiliation in the statute, such that Antarfish's affiliation with
Pesquera
[[Page 31421]]
Invertec would extend to Aguas Claras. Aguas Claras contends that it
reported all of its own sales, and those of its affiliates, but was
never requested to report the sales of its affiliates' affiliates.
Aguas Claras further argues that even if it were deemed to be
affiliated with Pesquera Invertec, there would be no basis for
collapsing the two companies and requiring the reporting of the
latter's U.S. sales. In this respect, Aguas Claras maintains that the
Department collapses affiliated companies only where there is such a
high degree of integration between the companies' operations that there
is a significant potential for price manipulation. Aguas Claras claims
that verification established that, at most, Antarfish was only
distantly affiliated with Pesquera Invertec during part of the POI
through joint ownership of a processing facility, but that the two
companies were not otherwise related. Aguas Claras also states that,
prior to the end of the POI, Antarfish fully divested itself of its
interests in the processing facility, such that there is no potential
for future price manipulation.
Finally, Aguas Claras argues that it could not have provided
Pesquera Invertec sales data even if requested to do so, because
Antarfish and Pesquera Invertec are involved in a business dispute, and
Pesquera Invertec would not have supplied those data. According to
Aguas Claras, the application of adverse facts available is only
appropriate where a party has demonstrably failed to act to the best of
its ability; therefore, it would be inappropriate to penalize Aguas
Claras with respect to information that was not within its control.
DOC Position: We disagree with the petitioners that Pesquera
Invertec's sales should have been included in Aguas Claras' sales
database. Even if we were to assume, arguendo, that Aguas Claras was
affiliated with Pesquera Invertec for part of the POI, the record does
not warrant collapsing these two parties. The Department's practice is
to collapse affiliated producers when the companies: (1) have
production facilities that are sufficiently similar so that a shift in
production would not require substantial retooling; and (2) present a
significant potential for the manipulation of price or production. See
19 CFR 351.401(f) of the Department's regulations. See also, Cement
From Mexico at 12774. As detailed below, it would be inappropriate to
collapse Aguas Claras and Pesquera Invertec because there is not a
significant potential for the manipulation of price or production.
As provided at section 351.401(f)(2) of our regulations, we
consider three factors in identifying a significant potential for the
manipulation of price or production: (1) the level of common ownership;
(2) the extent to which managerial employees or board members of one
firm sit on the board of directors of an affiliated firm; and (3)
whether operations are intertwined, such as through the sharing of
sales information, involvement in pricing and production decisions,
etc. In examining these factors as they pertain to a significant
potential for manipulation, we consider both actual manipulation in the
past and the possibility of future manipulation. See Preamble to Final
Regulations, 62 FR 27296, 27346 (May 19, 1997). The preamble
underscores the importance of considering the possibility of future
manipulation: ``a standard based on the potential for manipulation
focuses on what may transpire in the future.'' Id. We have, therefore,
examined all three factors in light not only of actual manipulation
during the POI but also with respect to the possibility of future
manipulation.
Applying these criteria to this case, Aguas Claras and Pesquera
Invertec do not, and did not during the POI, have common stock
ownership or common directors on their respective boards, as confirmed
at verification. See Memorandum from Case Analysts to Gary Taverman,
Regarding Verification of Sales by Aguas Claras (April 7, 1998) (Aguas
Claras Sales Verification Report) at 3 and Exhibits A-15 and A-16.
Thus, the first two factors suggest no potential manipulation during
the POI or in the future. Regarding the third factor, Aguas Claras'
parent company, Antarfish, fully divested itself of its participation
in the processing facility it jointly owned with Pesquera Invertec, and
ceased any processing of salmon at that plant. Moreover, at
verification we reviewed extensive documentation involving arbitration
proceedings over a significant business dispute between Pesquera
Invertec and Antarfish.
See Aguas Claras Sales Verification Report at 3-4 and exhibit A-15.
As for the possibility that Aguas Claras/Antarfish and Pesquera
Invertec engaged in price or production manipulation during the POI, we
note that only a very small percentage of Aguas Claras/Antarfish's
sales of subject merchandise were processed at the facility owned
jointly with Pesquera Invertec, and the vast majority of Aguas Claras/
Antarfish salmon was processed at Aguas Claras' own plant. Further, as
part of our cost verification testing, we reviewed transactions between
affiliates and specifically examined whether the company had
transactions with Pesquera Invertec. We did not find any such
transactions. See Aguas Claras Cost Verification Report at 6 and
exhibit B-2. Thus, we did not find evidence that the two companies'
operations were significantly intertwined during the POI, or that they
shared sensitive business data.
Accordingly, because Aguas Claras and Antarfish share no common
stock ownership or board members with Pesquera Invertec, and Antarfish
terminated its relationship with Pesquera Invertec during the POI, we
find no evidence to suggest a significant possibility for the
manipulation of price or production, and we have determined that it
would not be appropriate to collapse Aguas Claras and Pesquera
Invertec.
Comment 9: CEP Offset.
The petitioners argue that the Department erred in making a CEP
offset adjustment to normal value. According to the petitioners, Aguas
Claras' U.S. and Canadian sales are made through the same sales
affiliate, which performs exactly the same functions for both kinds of
sales. The petitioners contend that, in determining the level of trade
of U.S. sales, the Department ignored selling functions associated with
the U.S. affiliate's CEP selling expenses, and erroneously concluded
that the level of trade of Canadian sales was more advanced. The
petitioners argue that such a comparison, and the resulting CEP offset
adjustment, ignores commercial reality, and that the CIT has rejected
such ``automatic'' CEP offset adjustments, citing Borden et al. v.
United States, Slip Op. 98-36 (March 26, 1998).
Aguas Claras responds that the Act explicitly directs the
Department to determine the level of trade of CEP sales based on the
price as adjusted, i.e., after deducting CEP selling expenses, and to
ignore the selling functions associated with those expenses.
DOC Position: We agree with Aguas Claras. As discussed in detail in
the preliminary determination, the Act requires us to determine the
level of trade of CEP sales without consideration of the selling
functions associated with economic activities in the United States. See
Preliminary Determination at 2670. See also section 351.412(c)(ii) of
the Department's new regulations (62 FR 27495 and preamble at 27370-
27371). Based on this analysis, we continue to find that the level of
trade of Canadian sales is more advanced than the level of trade of
U.S. sales. Therefore, we have made a CEP offset to normal value. With
respect to the petitioners' claim that the CIT recently overturned the
[[Page 31422]]
Department's practice of comparing the level of trade of comparison
market sales to a constructed level of trade for CEP sales in Borden et
al. v. United States, we note that the Department is in the process of
considering the Court's remand order.
Comment 10: Adjustment to Cash Deposit Rate for Re-Exports to
Canada.
Aguas Claras argues that its cash deposit rate should be adjusted
to account for the fact that it routinely re-exports a portion of its
U.S. inventory of salmon to Canada. With respect to such inventory,
Aguas Claras states that entries that result in re-exportation are not
liable to assessment of antidumping duties, yet U.S. importers must
post antidumping cash deposits for all entries into the United States,
since there is no way to identify at the time of entry those products
that will ultimately be sold to Canada. In view of this, Aguas Claras
argues that the Department should lower the cash deposit rate so that
the total deposits collected do not exceed the total duties ultimately
assessed on sales of subject merchandise. Aguas Claras contends that
the Department made such an adjustment in cases involving flowers
imported from Colombia, where consignment importers resell a portion of
their U.S. inventory to Canada.
Petitioners argue that, given the small size of the Canadian
market, there is no guarantee that Aguas Claras will continue to make
sales to Canada, and that it would be improper to lower Aguas Claras'
calculated deposit rate to account for some hypothetical volume of U.S.
entries that might be re-exported to Canada in the future.
DOC Position: We agree with the petitioners that it would be
inappropriate to adjust Aguas Claras' cash deposit rate. The cash
deposit rate applies to all entries entered into the United States for
purposes of consumption. The fact that Aguas Claras made sales to
Canada during the POI is not an indicator of the likely volume of
future sales, nor a guarantee of any future sales, to that market,
particularly in light of the small portion of U.S. imports that were
re-exported to Canada. Therefore, it would be inappropriate to reduce
the cash deposit rate applicable to all entries of subject merchandise
into the United States to account for past re-exportation of subject
merchandise to Canada.
The adjustment to cash deposit rates in the Flowers cases was made
under a materially different fact pattern. In those cases, the
Department found that a portion of entries of flowers into the United
States are never sold due to perishability problems, and are instead
destroyed. Because those products are inherently perishable, and it is
reasonable to expect a percentage of entries of those products to go
unsold in any given period, the Department found it appropriate to make
a reduction to the cash deposit rate. Although the flowers respondents
also re-exported a portion of their flowers to Canada, that was not the
rationale for the adjustment to the cash deposit rate. See Certain
Fresh Cut Flowers from Colombia at 20494.
Comment 11: Allegation of Affiliation with Kenbourne International.
Aguas Claras disputes the petitioners' allegation that Aguas Claras
and its wholly-owned U.S. sales affiliate, Bowrain Corp., are
affiliated with Kenbourne International, the Miami-based company that
administers importer sales activities on behalf of Bowrain Corp.\7\
With respect to the nature of the relationship between these companies,
Aguas Claras states there are no stock relationships or common officers
between Aguas Claras/Bowrain Corp. and Kenbourne International.
According to Aguas Claras, Bowrain Corp., which is incorporated in
Florida but whose officials work for Aguas Claras in Chile, retained
Kenbourne International to function as a U.S. consignment agent. Aguas
Claras states that Bowrain Corp. has always required Kenbourne
International to maintain a separate set of books and records for Aguas
Claras sales, and shipments of Aguas Claras' merchandise are never
recorded in Kenbourne International's own inventory, so that Bowrain
Corp. retains significant control over its sales. Therefore, the
respondent contends, Kenbourne International cannot be found to control
Bowrain Corp., nor Aguas Claras itself.
---------------------------------------------------------------------------
\7\ Aguas Claras' brief responds to allegations with respect to
Kenbourne International made by the petitioners prior to the
Department's preliminary determination. The petitioners did not
reiterate these allegations in their case brief, but, as summarized
below, did respond to Aguas Claras' comment in their rebuttal brief.
---------------------------------------------------------------------------
In rebuttal, the petitioners argue that, consistent with case
precedent involving exporter/agent relationships (see Final Results of
Antidumping Duty Administrative Review: Furfuryl Alcohol from the
Republic of South Africa, 62 FR 61081, 61088 (Nov 14, 1997) (Furfuryl
Alcohol from South Africa), Kenbourne International should be deemed
affiliated with Aguas Claras through an agency relationship. According
to petitioners, Kenbourne International is in operational control of
all aspects of U.S. imports of Aguas Claras merchandise, and thus is in
a position to exercise direction over Aguas Claras.
DOC Position: We agree with Aguas Claras, and have continued to
regard Kenbourne International as unaffiliated with Aguas Claras and
Bowrain Corp.
Kenbourne International's role in the importation and sale of Aguas
Claras' merchandise is that of an unaffiliated consignee. In all
significant respects, this role is identical to that played by the
consignees of other respondents in this proceeding (e.g., Aquastar, the
consignee of Mares Australes). As discussed in detail in the
preliminary determination, a consignment relationship alone is not
sufficient basis for a finding of affiliation. See Preliminary Issues
Memorandum at 4.
The record of this investigation does not support the conclusion
that the exporter (Aguas Claras) controls the consignee (Kenbourne
International), or vice-versa. In Furfuryl Alcohol from South Africa,
the Department found that the U.S. importer was an agent of the
exporter and, therefore, was controlled by the principal/exporter. That
is not the case here, as Kenbourne International is a consignee, not an
agent (e.g., the two parties do not jointly market subject merchandise
to U.S. customers, jointly negotiate prices/sales with U.S. customers,
or interact with U.S. customers on product testing and quality
control). Therefore, there is no basis on which to conclude that Aguas
Claras controls Kenbourne International.
There is also no basis for finding that Kenbourne International
controls Aguas Claras. As noted above, Kenbourne International provides
essentially the same services to Aguas Claras that unaffiliated
consignees perform for the other respondents, and such services do not
establish control of the exporter by the consignee. Other than these
basic functions, the fact that Kenbourne International maintains a set
of books and records on behalf of Bowrain Corp., and deposits revenues
from sales of Aguas Claras merchandise into Bowrain Corp.'s bank
accounts (after which Kenbourne International cannot access the
revenues) is insufficient for a finding of affiliation based on
control.
Sales Issues--Eicosal
Comment 12: Affiliation between Eicosal and its Consignee.
The petitioners argue that Eicosal and its consignee, Stolt Sea
Farm Inc. (Stolt Inc.), should be considered affiliated parties because
Stolt Inc. is in a position to exercise control over Eicosal through
the terms of a ``close supplier'' business arrangement.
Eicosal argues that the Department should continue to find, as it
did in the preliminary determination, that Eicosal and Stolt Inc. are
not affiliated parties.
[[Page 31423]]
According to Eicosal, the two parties have no direct or indirect stock
ownership in each other, nor do they have a close supplier
relationship. Eicosal contends that, even if all of its salmon sales to
the United States are made through Stolt Inc., its voluminous sales of
salmon to other markets (such as Japan and Brazil) do not involve Stolt
Inc. at all.
DOC Position: We agree with the petitioners that Eicosal and Stolt
Inc. are affiliated parties, although we base our finding on a
different statutory basis from that alleged by the petitioners. Whereas
the petitioners allege that the two parties are affiliated by virtue of
a close supplier relationship (affiliation via ``control'' as per
section 771(33)(G) of the Act), we find that the parties are affiliated
by virtue of equity ownership exceeding five percent in accordance with
section 771(33)(E) of the Act, and therefore do not reach the issue of
affiliation via control.
Stolt Inc. is a wholly-owned subsidiary of Stolt-Nielsen Holdings
B.V. (Stolt-Nielsen). This parent company has another wholly owned
subsidiary, Stolt Sea Farm Ltda. (Stolt Ltda.), which owns well over
five percent of Eicosal's stock. In the preliminary determination, the
Department found that this equity relationship was not sufficient to
establish affiliation under section 771(33)(E) of the Act. The
underlying presumption for this finding was that Stolt Inc. and Stolt
Ltda. were separate (albeit affiliated) corporate entities. See
Preliminary Issues Memorandum at 5 and n.3.
At verification, however, the Department gained a greater
understanding of the interrelationship of the Stolt companies, which
suggests that Stolt-Nielsen, Stolt Inc., and Stolt Ltda. are
effectively a single corporate entity. First, the Department learned
that Stolt Ltda. was created for the purpose of allowing Stolt-Nielsen
to hold an equity interest in Eicosal. See Memorandum from Case
Analysts to Gary Taverman re: Verification of Sales made by Pesquera
Eicosal Ltda (April 9, 1998) (Eicosal Sales Verification Report) at 4.
Second, the Department found that Stolt-Nielsen's operational control
over Stolt Inc. (its wholly-owned subsidiary) extended to Stolt-
Nielsen's negotiation of the distribution arrangement with Eicosal. See
Memorandum from analysts to Gary Taverman re: Verification of Sales
Made by Pesquera Eicosal Ltda through Stolt Sea Farm Inc. (April 9,
1998) (Eicosal CEP Sales Verification Report) at 3. Moreover, the
distribution arrangement with Eicosal was signed on the same day that
Stolt Ltda. purchased its shares in Eicosal, which further indicates
the extent of coordination between these companies with respect to
their relations with Eicosal. See Eicosal Sales Verification Report at
4.
In view of the above, we have determined that the Stolt companies
(i.e., Stolt-Nielsen, Stolt Inc. and Stolt Ltda.) effectively
constitute a single corporate entity (i.e., a person). For purposes of
a dumping analysis, we believe that it is appropriate to view the
equity interests of this single corporate entity in other companies in
toto. Since this entity (of which Stolt Inc. is a part) owns in excess
of five percent of Eicosal's stock, we find that Stolt Inc. is
affiliated with Eicosal within the meaning of section 771(33)(E) of the
Act.\8\
---------------------------------------------------------------------------
\8\ The petitioners claim that Stolt Inc. effectively controls
Eicosal through their contractual arrangement. We do not find that
the contract between the parties per se establishes clear evidence
of affiliation through control. In any event, the issue is moot as
the Department has found the two parties to be affiliated by means
of stock ownership.
---------------------------------------------------------------------------
For purposes of this final determination, the finding of
affiliation between Eicosal and Stolt Inc. does not preclude the use of
the submitted U.S. sales data, since the Department had already
requested that Eicosal report U.S. sales based on the prices charged by
Stolt Inc. to the first unaffiliated U.S. customer. We note that in
calculating CEP for sales made through affiliated parties (as opposed
to unaffiliated consignees), the Department normally reduces the CEP by
the amount of the actual selling expenses incurred by the affiliate,
plus an amount for profit associated with those selling activities. In
this case, we do not have such information for Stolt Inc., because the
Department regarded Stolt Inc. as an unaffiliated party through the
information-gathering stage. We do not believe that it would be
appropriate to draw an adverse inference from this, as Eicosal
submitted substantial and voluminous information about its relationship
with the Stolt companies in its questionnaire responses. (That the
Department developed a greater understanding of this relationship at
verification does not imply that Eicosal withheld material evidence at
the information-gathering of the proceeding.) Therefore, we have relied
on the commission charged by Stolt Inc. to Eicosal in lieu of those
selling expenses and the profit attributable to those expenses.
However, in the event that an antidumping order is issued in this case
and that Eicosal's sales become subject to administrative review, the
Department will require that Eicosal submit sales data under the
presumption that Eicosal and Stolt Inc. are affiliated parties, and
will require the reporting of Stolt Inc.'s actual selling expenses.
Comment 13: Ordinary Course of Trade.
Eicosal argues that the Department erred in finding that its sales
of vacuum-packed fillets to Japan were made in the ordinary course of
trade, and in including these sales in the calculation of CV profit.
According to Eicosal, the sales in question involved a small volume of
a unique, specialized product, sold over a limited period of time to a
single customer. Eicosal disputes the Department's finding in the
preliminary determination that these sales were made continuously
throughout the POI, contending that there were no shipments of vacuum-
packed fillets in March 1997, and adding that all shipments of vacuum-
packed fillets ended shortly after the end of the POI.
The petitioners argue that the Department correctly found in its
preliminary determination that Eicosal's sales of vacuum-packed fillets
were made in the ordinary course of trade, as these sales were made
continuously through the POI, involved significant quantities, and were
not done on a test basis.
DOC Position: We agree with the petitioners, and continue to find
Eicosal's sales of vacuum-packed fillets to have been made in the
ordinary course of trade.
Section 773(a)(1)(B) of the Act provides that the Department may
use third-country prices as the basis for normal value only where such
prices are made in the ordinary course of trade. Prior to the
preliminary determination, both Mares Australes and Eicosal argued that
their respective sales of vacuum-packed fillets had been made outside
the ordinary course of trade. In our preliminary determination, we
found that Mares Australes' single sale of that merchandise had been
made outside the ordinary course of trade, as the sale had involved a
minute quantity of product sold on a test basis. In contrast, we found
that Eicosal's sales of vacuum-packed fillets had been made within the
ordinary course of trade, as they had been made regularly throughout
the POI, and not on a test basis. See Preliminary Issues Memorandum at
12.
The objections now raised by Eicosal do not warrant a reversal of
our preliminary finding. While sales of vacuum-packed fillets may
represent a small percentage of total sales, the absolute amount of
these sales (several thousand kilograms) is not insignificant.
[[Page 31424]]
Also, Eicosal's claim that sales of vacuum-packed fillets were
intermittent throughout the POI is not persuasive, since these sales
were suspended only for the last month of the period, and resumed a
month thereafter. In view of the volume of merchandise involved, the
fact that the merchandise was sold regularly throughout the POI, and
the lack of evidence that the sales were made on a sample basis, we
continue to find that the sales in question were made in the ordinary
course of trade.
Comment 14: Advertising Expense.
Eicosal argues that, in the preliminary determination, the
Department incorrectly found an advertising expense incurred by Eicosal
for its participation in the Japan/Chile centennial celebration to be a
general promotional expense, and treated it as an indirect selling
expense. Eicosal argues that this advertising expense (specifically, a
fee that allowed it to display the celebration logo on its boxes of
salmon), should instead be treated as a direct selling expense. Eicosal
states that the expense meets the Department's two-prong test for
classification of advertising expenses as direct expenses, as set forth
in Antifriction Bearings (other than Tapered Roller Bearings) and Parts
Thereof from France, Germany, Italy, Japan, Singapore, and the United
Kingdom; Final Results of Antidumping Duty Administrative Reviews, 62
FR 2081, 2102 (January 15, 1997) (AFBs 94/95), namely that: (1) the
expense be incurred directly in conjunction with sales of the foreign
like product; and (2) the advertising be directed towards the
customers' customer. Eicosal acknowledges that the promotional logo was
displayed on boxes of seafood products other than fresh Atlantic
salmon, but argues that a portion of the expenses nonetheless was
incurred in direct connection with sales of subject merchandise.
Further, Eicosal contends that these expenses do not meet the CIT's
definition of ``general image'' advertising set forth in Brother
Industries v. United States, 540 F. Supp 1341, 1366 (Ct. Int'l Trade
1982), aff'd, 713 F.2d 1568 (Fed. Cir. 1983), cert. denied, 465 U.S.
1022 (1984) (Brother Industries), i.e., such advertising is ``more in
the nature of making consumers aware of the company's concern for
consumers and the quality of its workmanship and product in general''
than in the nature of touting a specific product. Eicosal contends that
because the promotional logos in question are applied to particular
products, they constitute specific product advertising.
The petitioners respond that the display of the centennial
celebration logo on boxes of fresh Atlantic salmon does not
specifically promote the sale of that product, but rather promotes
goodwill between Chile and Japan, and therefore the associated expense
cannot be treated as direct.
DOC Position: We agree with the petitioners. The expenses in
question do not meet the criteria for direct expenses, as described in
AFBs 94/95. The nature of the centennial celebration was to promote
goodwill, thereby promoting Eicosal's corporate image.
The promotional logo applied to the boxes of fresh Atlantic salmon
did not refer to salmon, nor even to Eicosal's general product lines.
Therefore, we have continued to classify the expenses in question as
indirect expenses.
Comment 15: Adjustment to Cash Deposit Rate for Re-Exports to
Canada.
Eicosal argues that its cash deposit rate should be adjusted to
account for the fact that it routinely re-exports a portion of its U.S.
inventory of salmon to Canada. According to Eicosal, entries that
result in re-exportation are not liable to assessment of antidumping
duties, yet U.S. importers must post antidumping cash deposits for all
entries into the United States, since there is no way to identify at
the time of entry those products that are ultimately sold to Canada. In
view of this, Eicosal argues, the Department should lower the cash
deposit rate so that the total deposits collected do not exceed the
total duties ultimately assessed on sales of subject merchandise.
Petitioners argue that it would be improper to lower Eicosal's
calculated deposit rate to account for a hypothetical volume of U.S.
entries that might be re-exported to Canada in the future.
DOC Position: We agree with the petitioners. For the reasons
explained with respect to Comment 10 above (regarding similar arguments
made by Aguas Claras), it is not appropriate to adjust the cash deposit
rate for Eicosal to account for possible future entries of subject
merchandise that might be re-exported to Canada in the future.
Sales Issues--Mares Australes
Comment 16: Unreconciled Revenues.
The petitioners note that there is a discrepancy between the total
value of sales in the database submitted by Mares Australes and the
total value of sales in the database submitted by Mares Australes'
consignees. To account for this discrepancy, the petitioners request
that the Department reduce CEP prices by the ratio of the unreconciled
sales amount to the total value of Mares Australes' sales.
Mares Australes responds that the discrepancy noted by the
petitioners was identified during verification in Chile, and was
accounted for almost entirely at the outset of the subsequent CEP
verification. Further, Mares Australes argues that the total value of
sales of the consignee's database (which was the database relied on by
the Department for its preliminary determination) was fully verified,
and maintains that any remaining discrepancy with Mares Australes'
initial database is insignificant.
DOC Position: We agree with Mares Australes. The small discrepancy
between the two databases found at verification in Santiago was almost
entirely accounted for at the outset of the CEP verification. The
remaining discrepancy is an insignificant amount, particularly given
that it involves a comparison of databases maintained by separate
companies at different points in the distribution chain.
Comment 17: Canadian Sales Included in U.S. Sales Database.
The petitioners argue that sales to Canada by one of Mares
Australes' consignees should be removed from the U.S. sales database.
Mares Australes argues that in the normal course of business it is
not informed of the ultimate destination of merchandise shipped to the
United States for consignment resale. According to Mares Australes, the
Department's practice is to determine the market of destination
according to the producer/exporter's knowledge of destination at the
time of sale, and therefore the sales in question are properly included
in the U.S. sales database.
DOC Position: We disagree with Mares Australes. Even if Mares
Australes was not aware at the time of sale that the transactions
involved Canadian customers, the fact remains that Mares Australes'
consignee clearly identified the transactions as Canadian sales in its
submitted database.
The Department's ``exporter knowledge'' rule is typically applied
where the respondent ships merchandise to a reseller and is aware at
the time of sale that the merchandise is ultimately destined for the
United States. In this case, Mares Australes' sales to both the United
States and Canada are made through consignees, who set the terms of
sale on behalf of Mares Australes, and have ultimate knowledge of the
location of the customer. In preparing its sales database, Mares
Australes obtained a sales listing from its consignees that listed the
location of the customer. Since the sales database identifies
[[Page 31425]]
certain transactions as sales to Canada, and since this information
reflects the knowledge of the consignee (acting on behalf of the
exporter), at the time of sale, the transactions in question are
unarguably Canadian sales. Therefore, we have excluded these
transactions from the U.S. sales database.
Comment 18: Unreconciled Claim Adjustments.
The petitioners contend that, at verification, the Department found
that it could not link certain quality claim expenses incurred by the
consignee to sales of subject merchandise. According to the
petitioners, the Department should not assume that the consignee
absorbed the expense of the quality claims, as this would be tantamount
to application of ``beneficial facts available.'' The petitioners argue
that, instead, the Department should assume that Mares Australes bore
the full amount of the quality claim expense, and reduce U.S. price by
that amount.
Mares Australes responds that, while the resellers' books may not
permit linkage of specific quality claims to specific sales, all
quality claim expenses charged by the consignee to Mares Australes have
been captured in the submitted sales database. According to Mares
Australes, claim expenses absorbed by the consignee should not be
deducted from U.S. price, as they do not affect the net return to the
respondent.
DOC Position: We agree with Mares Australes. At verification, we
observed that a number of quality claims were charged by the consignee
to Mares Australes. While some of these claims could not be linked to
specific transactions due to the nature of the consignees' books, they
resulted in an allocated reduction to U.S. price for groupings of
sales. Other quality claims were absorbed by the consignee. Such claims
are not expenses of the respondent and do not reduce the revenue
received by the respondent; rather, they are normal expenses of the
consignee, and are covered by the commission charged by the consignee
on the sale.
Sales Issues--Marine Harvest
Comment 19: Accruals for Rebates.
The petitioners claim that Marine Harvest did not report certain
rebates for co-op advertising accrued on its U.S. expense ledgers
during the POI, and failed to provide evidence to support its claim
that the co-op advertising program in question was canceled before any
rebates were granted. The petitioners request that, as adverse facts
available, the Department reduce Marine Harvest's U.S. prices by the
highest amount accrued on Marine Harvest's expense ledgers.
Marine Harvest responds that the co-op advertising program in
question never proceeded beyond the ``good idea'' stage, and that no
rebates were ever paid. Citing Certain Corrosion-Resistant Carbon Steel
Flat Products and Certain Cut-to-Length Carbon Steel Plate From Canada,
63 FR 12725 (March 16, 1998), Marine Harvest argues that the
Department's practice is to not adjust prices for such accruals.
DOC Position: We agree with the petitioners. At verification, we
found that Marine Harvest had made accruals for anticipated rebates to
be paid to one of its customers during the POI. While we found no
evidence that Marine Harvest had paid these rebates to the customer, we
observed that Marine Harvest had not reversed these accruals as of the
time of verification. Therefore, Marine Harvest's books indicated that
the respondent anticipated that such payments would be made.
The case cited by Marine Harvest involves claims of accrued (but
unpaid) rebates for comparison market sales, and not for U.S. sales. In
this and other cases involving such claims for adjustments to normal
value, the Department has required that the respondent demonstrate that
there is evidence of a contractual obligation for the payment of such
rebates, or that there is a historical record of such rebates having
been paid regularly in the past. Id. at 12740-41; see also Final
Determination of Sales at Less Than Fair Value; Gray Portland Cement
and Clinker From Japan, 56 FR 12156, 12168 (March 22, 1991); Final
Determination of Sales at Less Than Fair Value; Color Television
Receivers From Taiwan, 49 FR 7628, 7637 (March 1, 1984). If the
Department did not require such evidence, respondents could record
accruals on their books for fictitious expenses, artificially reduce
normal value, and then reverse the accruals after the antidumping
proceeding was ended.
We do not know of, and the parties have not cited to, any case
where the Department has found accrued but unpaid expenses
corresponding to U.S. sales, as opposed to comparison market sales.
Given the fact that the expense in question involves U.S. sales, we
believe that it is incumbent on the respondent to demonstrate that the
expense accrued on its books will not result in a rebate payment. At
verification, the respondent did not provide any such evidence. The
only evidence on the record is the respondent's accrual of these
expenses on its books. In view of this, we have reduced U.S. price for
the customer in question by the amount of the unreported accrued
rebates. Because Marine Harvest has been a cooperative respondent, and
with the single exception of this unreported accrued rebate, has been
generally very thorough in its reporting of sales and expenses, we have
not applied adverse facts available. Instead, we have reduced U.S.
price by the rebate amounts actually accrued.
Comment 20: Level of Trade/CEP Offset for Marine Harvest.
The petitioners argue that the Department should not make a CEP
offset for Marine Harvest's sales in the Japanese market. According to
the petitioners, the level of trade in Japan is less advanced than the
level of trade of U.S. sales, because Marine Harvest's U.S. sales
affiliate engages in a wider variety of sales activities than does
Marine Harvest's Japanese sales affiliate. As a secondary point, the
petitioners contend that since sales to Japan are made exclusively to
trading companies, the Department should find that there are separate
levels of trade for U.S. sales involving retailers versus supermarkets/
distributors and make a level-of-trade adjustment for any comparisons
of U.S. sales to retailers to Japanese sales.
Marine Harvest argues that a CEP offset for Japanese sales is
appropriate. According to Marine Harvest, the level of trade of sales
to Japan is more advanced than the level of trade to the United States,
since the sales activities performed by the U.S. reseller correspond to
selling expenses already adjusted for as reductions to the CEP, and
therefore cannot be considered in the comparison of selling functions
performed by the sales affiliates in the two markets. Marine Harvest
contends that its Japanese sales affiliate performs significant selling
functions.
Marine Harvest does not address the petitioners' request that the
Department find the existence of different levels of trade in the U.S.
market and make an LOT adjustment for comparisons of U.S. sales to
retailers to Japanese sales.
DOC Position: We agree with Marine Harvest that a CEP offset is
appropriate. In the preliminary determination, we found a single level
of trade in the Japanese market and a single level of trade in the U.S.
market. We also found that the level of trade of sales to Japan is more
advanced than the level of trade to the U.S. See Preliminary
Determination at 2670. Verification has borne out that finding. At
verification, we found that Marine Harvest's Japanese affiliate is
engaged in a variety of selling functions including negotiation of
terms of sale, visits to customers, handling of quality claims, and
promotion of Marine Harvest's
[[Page 31426]]
products. See Marine Harvest Sales Verification Report at 12. To the
extent that Marine Harvest's U.S. affiliate performs such functions,
the associated expenses have already been adjusted for as reductions to
the CEP.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.
---------------------------------------------------------------------------
\9\ As noted in Comment 9, supra, petitioners claim that the CIT
recently overturned the Department's practice of comparing the level
of trade of comparison market sales to a constructed level of trade
for CEP sales. See Borden et al. v. United States, cited in
petitioners' case brief at 83. The Department is still considering
the Court's remand order.
---------------------------------------------------------------------------
With respect to the petitioners' request that the Department find
separate levels of trade in the United States, we note first that
petitioners have not offered any reasons for the Department to deviate
from its analysis in the preliminary determination. Since (1) the LOT
of the Japanese sales is more advanced than the LOT of U.S. sales, (2)
there is only one LOT in the Japanese market, (3) Marine Harvest does
not sell salmon nor any other product at a different level of trade in
Japan, and (4) the data submitted by the other respondents do not
permit quantification of differences in level of trade, we find that an
LOT adjustment cannot be made. Therefore, we have continued to make a
CEP offset.
Comment 21: Commingling of Different Grades of Salmon.
According to the petitioners, Marine Harvest has admitted that it
commingled premium and super-premium salmon on shipments to the United
States. The petitioners argue that, therefore, even if the Department
accepts that there is a legitimate distinction between the two grades
in the Japanese market, it should nonetheless average Japanese sales
prices of premium and super-premium salmon.
Marine Harvest contends that it is rare that U.S. shipments of
premium salmon will contain some super-premium salmon in the mix, and
that such sales are in any case properly identified as being of premium
grade, since they include only about five percent super-premium salmon.
DOC Position: As explained above in Comment 1, we have not
distinguished between super-premium and premium salmon. Accordingly,
this issue is moot.
Cost Issues--General
Comment 22: Major Inputs.
The Association argues that, in its final determination, the
Department should not use transfer prices to value transactions between
companies and their affiliated processors and feed producers. Instead,
the Association suggests that, for Eicosal and Marine Harvest, the
Department rely on the affiliated suppliers' costs to value processing
services and feed for purposes of computing cost of production and
constructed value.
The Association contends that the so-called ``transactions
disregarded'' and ``major input'' rules under sections 773(f) (2) and
(3) of the Act do not apply in this instance because the two companies'
affiliated suppliers are separate legal entities in form only and that,
in substance, these suppliers operate as divisions of a single entity.
According to the Association, the record demonstrates that Eicosal and
Eicomar, and Marine Harvest and Marifarms/Marine Feeds are more than
mere ``affiliated persons'' as defined by section 771(33) of the Act.
As evidence of this, the Association points out that Eicosal and Marine
Harvest are each part of wholly-owned, commonly controlled, vertically
integrated salmon production operations with the same accounting
systems and under the same management.
The Association asserts that the Department has not allowed the
legal form of an entity to distort the calculation of dumping margins
in other areas of the law. The Association notes that, for instance, in
Certain Cold-Rolled and Corrosion-Resistant Carbon Steel Flat Products
from Korea: Final Results of Antidumping Duty Administrative Reviews,
62 FR 18404, 18430 (April 15, 1997) (Steel Flat Products from Korea)
(Comment 19), the Department chose not to impose the major input rule
where it treated respondent companies as a single entity for purposes
of reporting sales of the subject merchandise. The Association further
points to the Department's practice of calculating financial expenses
on a consolidated basis in support of its argument that Eicosal and
Marine Harvest and their respective affiliated suppliers should be
treated as single entities for purposes of valuing inter-company
transactions.
In addition, the Association argues that generally accepted
accounting principles suggest that the Department should treat the
companies and their affiliated suppliers as single entities.
Specifically, the Association notes that U.S. and international
financial accounting principles require all companies that hold
controlling interests in other companies to consolidate the results of
their operations with those of their subsidiaries. This practice, the
Association observes, has the effect of treating consolidated companies
as a single entity, since all profits and losses on transactions
between the companies are eliminated. The Association contends that the
respective parent companies of Eicosal and Marine Harvest each follow
these accounting principles in the ordinary course of business and
prepare consolidated financial statements covering all of their
controlled subsidiaries. Thus, the Association argues, the Department
should value affiliated-party transactions at cost in the same way they
are recorded in the ordinary course of business in the companies'
audited, consolidated financial statements.
With respect to a third salmon producer, Mares Australes, the
Association argues that the Department should use a market price
instead of the higher transfer price in valuing feed purchases from its
affiliated feed producer Trouw Chile, S.A. (Trouw Chile). According to
the Association, the relevant provision of the antidumping statute
provides for the use of market price to value inputs from affiliated
parties ``if, in the case of any element of value required to be
considered, the amount representing that element does not fairly
reflect the amount usually reflected in sales of merchandise under
consideration in the market under consideration.'' See section
773(f)(2) of the Act. Therefore, the Association believes that the
statutory provision at issue provides for the use of market price
whenever the transfer price does not fairly reflect the amount usually
reflected in sales of the subject merchandise. The objective of the
affiliated party rule is to ensure that COP is appropriately calculated
and not distorted by decisions between affiliated parties as to where
to book the profits on the production of the input, suggests the
Association.
The petitioners assert that, in dealing with transactions between
affiliated companies under sections 773(f) (2) and (3) of the Act, it
is the Department's practice to value major inputs, like processing and
feed, at the higher of the transfer price, market price, or actual
production cost. Indeed, according to the petitioners, Eicosal and
Marine Harvest's argument that the Department may make an exception to
its normal practice in the case of ``close affiliates'' is inconsistent
with the statutory scheme as drafted by Congress. The petitioners
maintain that the Department must reject Eicosal and Marine Harvest's
argument to base affiliated-party purchases on cost rather than on the
higher transfer price amounts.
[[Page 31427]]
The petitioners disagree with the two respondents' reliance on
Steel Flat Products from Korea, noting that, unlike Eicosal, Marine
Harvest, and their respective affiliates, all of the Korean companies
involved in that case produced the subject merchandise and, thus, had
been ``collapsed'' by the Department for purposes of reporting sales
and computing a single antidumping duty margin. Similarly, the
petitioners reject respondents' argument with respect to the
Department's practice of computing financial expenses based on
consolidated financial statement data. The petitioners observe that, in
contrast to debt which is dispersed throughout the consolidated
companies, inter-company profit is generated at different points in the
production process and by the sales process specific to each product,
customer and market. The petitioners also contend that because the
Department conducts a two-market price analysis in antidumping cases,
some profit must be built into comparison market sales so that
respondents do not allocate away all comparison market profit for
dumping purposes.
With respect to respondents' arguments that U.S. and international
accounting principles call for treating Eicosal, Marine Harvest and
their affiliates as single entities, the petitioners contend that these
accounting principles do not in any way outweigh the provisions of the
antidumping statute. The petitioners argue that the Department must
therefore apply the statutory provisions for ``fair value'' and ``major
inputs'' for Eicosal and Marine Harvest in the final determination.
With regard to the Association's claim that the Department should
rely on market prices for Mares Australes, the petitioners assert that
this claim is inconsistent with the Department's normal establishment
of arm's-length transactions.
DOC Position: We disagree with the Association with respect to our
application of the major input rule for Eicosal, Marine Harvest and
Mares Australes. In order to value processing services and feed
purchased by these companies from their affiliated suppliers, we have
continued to rely on the higher of transfer prices, market value, or
the affiliate's cost of production in accordance with sections
773(f)(2) and (3) of the Act.
As noted in the comments from both respondents and the petitioners,
section 773(f)(2) and (3) of the Act prescribes how the Department is
to treat affiliated-party transactions in its calculation of cost of
production and constructed value. With respect to major inputs
purchased from affiliated suppliers (in this instance, salmon
processing and feed), the Department's practice is that such inputs
will normally be valued at the higher of the affiliated party's
transfer price, the market price of the inputs, or the actual costs
incurred by the affiliated supplier in producing the inputs.
Since implementation of the URAA, the Department has consistently
applied this interpretation (see, e.g., Small Diameter Circular
Seamless Carbon and Alloy Steel Standard, Line and Pressure Pipe From
Germany: Final Results of Antidumping Duty Administrative Review, 63 FR
13217, 13218 (March 18, 1998)(Comment 1), and Silicomanganese from
Brazil; Final Results of Antidumping Duty Administrative Review, 62 FR
37869, 37871 (July 15, 1997) (Silicomanganese from Brazil)(Comment 3)),
making exception in only those cases wherein it treats respondents as a
single entity for purposes of sales reporting and calculating an
antidumping margin (see, e.g., Steel Flat Products from Korea (Comment
19)). Relying solely on cost in the latter case flows logically from
the overall calculation methodology being employed.
All of the parties in question are separate legal entities in
Chile, responsible for maintaining their own books and records. In
contrast to Steel Flat Products from Korea, the Department is applying
its normal company-specific calculation methodology. Therefore, there
is no basis for establishing an exception to the ``major input rule.''
Accordingly, sections 773(f)(2) and (3) of the Act apply to the
transactions between these companies.
Further, we disagree with respondents' argument that the principles
that guide the Department to treat groups of affiliated companies as a
single entity for purposes of calculating financial expenses should
apply to other elements of cost of production. The Department's
practice regarding the calculation of financial expenses based on the
consolidated financial statements of the parent company is well
established and has been upheld by the courts. See, e.g., E.I. DuPont
de Nemours & Company v. United States, Slip Op. 98-7, Court No. 96-11-
02509 (January 29, 1998)(upholding the Department's application of its
long-standing policy of calculating interest expense from the borrowing
cost incurred by the consolidated group of companies rather than the
individual producer). The Department's practice with respect to
calculating financial expenses is for a completely different purpose,
i.e., to ensure that consolidated companies do not direct actual
interest costs away from producers of subject merchandise and to
producers of non-subject merchandise. On the other hand, under the
major input rule, the statute requires that we review affiliated-party
purchases in order to determine that they reasonably reflect a fair
value.
Although generally accepted accounting principles usually require
that a company's financial statements be consolidated with all
companies in which it owns a controlling interest, these consolidated
financial statements do not alter the manufacturing costs associated
with producing the subject merchandise as recorded by the entity
producing the subject merchandise.
Consistent with our general practice, outlined above, we disagree
with Mares Australes that a market price rather than the transfer price
it pays its affiliate should be used to value feed purchases from Trouw
Chile. The Department will use the transfer price which normally
reflects Mares Australes' purchases of the input, unless the transfer
price does not reflect a fair value in the market under consideration.
Therefore, we continue to rely on transfer prices in order to value
feed purchased from Mares Australes' affiliated supplier, Trouw Chile.
Comment 23: Perishability.
The Association argues that the Department erroneously determined
in the preliminary determination that salmon was not a highly
perishable agricultural product for purposes of determining
``substantial quantities'' of sales below cost in the cost test. The
Association contends that the test for ``high perishability'' is
whether a product has a short shelf life, noting that the Department
has found products with significantly longer shelf lives than salmon,
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).
---------------------------------------------------------------------------
\10\ Although it did not make this specific point in its case
briefs, at the public hearing the Association referenced a
determination involving a 1983 Department finding that potatoes from
Canada are highly perishable. The Association noted that salmon have
much shorter shelf lives than potatoes. See Transcript of Case
Hearing at 59-61 (April 28, 1998).
---------------------------------------------------------------------------
Further, although the Association acknowledges that the Department
did not find salmon to be highly perishable in the LTFV investigation
of Fresh and Chilled Atlantic Salmon from Norway (Salmon from Norway),
it contends that
[[Page 31428]]
that precedent is not controlling. According to the Association,
Norwegian producers and exporters of salmon were different entities,
and the Department's focus in that case was whether live farmed salmon
was highly perishable for producers (who sold that salmon to
exporters). The Association argues that the respondents in this case
are integrated producers/exporters, such that the Department is not
examining any sales of live salmon as sold by producers; rather, the
merchandise in question consists entirely of dressed fish sold by the
producer/exporter. Therefore, the Association contends, any alleged
control over harvest timing is irrelevant, since once salmon are
dressed and/or filleted, they become inherently perishable.
Finally, the Association claims that the sales data submitted in
this investigation indicate that salmon prices fall significantly due
to inevitable perishability problems after harvesting. As evidence, the
Association submits a graphical illustration of U.S. and Canadian price
trends over the shelf life of salmon, based on data submitted by Aguas
Claras in its sales databases.
The petitioners argue that salmon should not be considered a highly
perishable agricultural product for purposes of the cost test.
According to the petitioners, the Department's precedent established in
Salmon from Norway (i.e., that salmon is not a highly perishable
product) is controlling in the instant investigation. The petitioners
disagree with the Association's claim that, due to the integration of
producers and exporters in the Chilean salmon industry, Salmon from
Norway is inapplicable. According to the petitioners, that high degree
of integration in the Chilean salmon industry enhances the respondents'
control over harvesting and distribution schedules.
More generally, the petitioners contend that a product can only be
deemed to be highly perishable if the producer has very little
flexibility in controlling the timing of harvesting, and if this lack
of control normally and inevitably results in sales below cost for the
industry. According to the petitioners, salmon harvests can be delayed
by as many as 15 months, such that the respondents can fine-tune
harvest timing so as to avoid the need to make sales below cost.
The petitioners further argue that verification revealed that sales
below cost are not an inevitable aspect of salmon production, and that
Chilean salmon producers have not demonstrated that they suffer from
perishability problems in bringing their product to market.
DOC Position: We do not disagree with the Association's statement
that, once harvested, salmon is a perishable product that does not have
a long shelf life. However, the issue with respect to the ``substantial
quantities'' portion of the cost test is whether salmon is a product
that the respondents can expect to sell routinely in the comparison
market at prices below the cost of production due to the highly
perishable nature of the product. We disagree with the Association's
contentions in this regard and find that fresh Atlantic salmon is not a
highly perishable agricultural product for purposes of the
``substantial quantities'' test.
In Salmon from Norway, the Department found that the respondents
had sufficient control over harvest timing and distribution such that
perishability was not a concern, as the salmon were brought to market
before freshness was compromised. Although the Association contends
that the Department's focus in that case was on live salmon as sold by
producers to exporters, the Department in fact found that salmon was
not highly perishable either with respect to producers or exporters,
whether live or harvested. The Department concluded:
Norwegian salmon farmers have the ability to control the time of
sale of their output by ``holding over'' inventory and, since
January 1990, by freezing fresh salmon. Regarding respondents'
assertion that salmon is perishable in the hands of the exporters,
the Department found at verification that the opposite is true.
Exporters coordinate their salmon requirements in weekly telephone
conferences with their customers, with farmers, and with other
exporters. By doing so, exporters can communicate their salmon
requirements two weeks into the future so that farmers can begin to
``starve'' (prepare for harvest) the salmon two weeks prior to
harvest. Accordingly, there appears to be no perishability problem
at the exporter level.
See Salmon from Norway at 7673.
The record of the instant investigation, including our findings at
verification, suggests that perishability is even less of a problem for
the Chilean respondents than for the Norwegian respondents. The Chilean
respondents are integrated producers/exporters, so that their
production and harvesting schedules are more easily coordinated.
Moreover, the respondents sell to a small number of importers in their
respective comparison markets, with whom they closely coordinate both
production and distribution. Shipments to third-country markets are
made directly to the customer, without the involvement of consignees or
affiliated resellers.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.
---------------------------------------------------------------------------
\11\ The single exception is Aguas Claras, which made sales to
Canada out of its U.S. affiliate's inventory. However, at
verification Aguas Claras asserted that it sells merchandise
affected by perishability problems in the United States and not in
Canada due to the longer transportation times required for Canadian
sales. See Aguas Claras Sales Verification Report at 6. Thus, to the
extent that Aguas Claras makes significant sales below cost in the
Canadian market, it is for reasons other than perishability.
---------------------------------------------------------------------------
Our verifications bear out these findings. For instance, Marine
Harvest sells to a total of three customers in Japan, and the majority
of sales are made to a single customer. According to company officials,
because Marine Harvest Chile's sales to Japan are arranged in close
consultation with Japanese customers, it is exceptionally rare for
Marine Harvest Chile to make sales below cost to the Japanese market
due to perishability concerns. See Marine Harvest Sales Verification
Report at 4-5. The other respondents similarly are able to coordinate
closely their shipments with their customers. In the case of Eicosal,
its Japanese customers reportedly will purchase all the high-quality
salmon that Eicosal can produce. See letter from Eicosal to the
Department of Commerce, transmitting Supplemental Section A
Questionnaire Response (November 18, 1997), at 3. Moreover, in
describing its production and sales process at verification, Eicosal
stated that it conducts negotiations for Japanese sales before the
salmon are harvested. See Eicosal Sales Verification Report at 7.
Similarly, Mares Australes has stated that its two Japanese importers
inform them of their requirements a month in advance, and that one of
its importers even provides ``exact requirements by shipment.'' See
letter from Mares Australes to the Department of Commerce, transmitting
Supplemental Section A & B Questionnaire Responses (November 3, 1997),
at 12.
As for the Association's argument that the Department has found
products with longer shelf lives than salmon (such as potatoes) to be
highly perishable, we note that shelf life is not the sole criterion in
determining whether an agricultural product is highly perishable for
purposes of the cost test. Rather, as explained above, the issue is
whether salmon is a highly perishable product that the respondents can
expect to routinely sell in the comparison market at prices below the
cost of production.12
[[Page 31429]]
Given the facts of this case, we have found that fresh Atlantic salmon
does not meet that standard.
---------------------------------------------------------------------------
\12\ With respect to the Association's reference to the
Department's finding that potatoes (which have longer shelf lives
than salmon) are a perishable product, we note that the underlying
case dates back sixteen years, and the notice of final determination
in that case does not set forth any details of the Department's
analysis of perishability with respect to potatoes. See Final
Determination of Sales at Less Than Fair Value; Fall-Harvested Round
White Potatoes From Canada, 48 FR 51669, 51669 (November 10, 1983).
In any event, there is no bright line ``shelf-life'' test to define
high perishability, and the determination of whether a product is
highly perishable for purposes of the cost test is necessarily
specific to the facts of each case.
---------------------------------------------------------------------------
In view of the record evidence that salmon is not a highly
perishable product for purposes of the cost test, we do not find any
basis to warrant the application of a higher threshold for the
``substantial quantities'' aspect of the cost test.
Comment 24: Exchange Rate Losses.
The Association argues that, in calculating financial expenses for
COP and CV, the Department must include only those exchange rate losses
that are attributable to loans used to finance salmon production during
the POI. While it acknowledges the Department's normal practice of
calculating general expenses, including financial expenses, based on
each respondent's fiscal year data, the Association maintains that, in
this case, such a practice would overstate the actual financial
expenses incurred by the salmon producers due to the effects of
exchange rate losses incurred during 1996. Specifically, the
Association points to the fact that a shift in the Chilean peso/U.S.
dollar exchange rate during the first part of 1996 was responsible for
the major portion of the exchange losses incurred by the producers in
connection with their dollar-denominated debt. These losses, adds the
Association, were reported by the salmon producers in their 1996
financial statements, the same financial statements used by the
Department to compute financial expenses for COP and CV. The
Association notes, however, that during the actual months of the POI,
the change in the peso/dollar exchange rate was significantly less than
that of the full calendar year 1996. Thus, according to the
Association, where the Department determines to include exchange rate
losses in financial expenses, it should compute such losses based on
the actual POI and not the company's 1996 fiscal year, in effect,
limiting its analysis of exchange rate gains and losses to the POI so
as to match these costs to sales during the POI.
As support for its position, the Association argues that exchange
rate gains and losses differ from other types of G&A expenses and
interest expense in that the former may fluctuate significantly from
month to month, causing considerable changes in the amount of gain or
loss recognized as a cost. Moreover, according to the Association, the
Department has acknowledged the distortion caused by exchange losses
and its practice of calculating financial expenses based on full-year
financial statement information. As evidence of this, the Association
points to the Final Determination of Sales at Less Than Fair Value Oil
Country Tubular Goods from Mexico, 60 FR 33567, 33572 (June 28, 1995)
(OCTG from Mexico) in which the Department chose not to use financial
statement data to compute financial expenses because devaluation of the
Mexican peso made the information unrepresentative of costs during the
POI.
In addition to considering only the exchange losses incurred during
the POI, the Association also urges the Department to exclude from COP
and CV a portion of the losses on loans allocable to financing sales
and accounts receivable. The Association argues that because the
companies finance all of their operations, including both production
and sales activities, part of the exchange loss arising from dollar-
denominated debt must be attributed to the companies' non-production
activities. If the Department chooses not to allocate a portion of the
exchange loss to sales activities and accounts receivable, the
Association contends that it should reexamine its treatment of exchange
gains arising from foreign currency receivables by treating all such
gains as an offset to foreign exchange losses.
The petitioners argue that the Department must continue to
calculate financial expenses based on the salmon producers' 1996
financial statement data, and not use the POI data as suggested by the
Association. According to the petitioners, consistent with the
Department's practice, the fiscal year information provides the most
accurate and reasonable basis for estimating the actual expenses
incurred, including exchange gains and losses. The petitioners point
also to Gray Portland Cement and Clinker from Mexico: Final Results of
Antidumping Duty Administrative Review, 62 FR 17148, 17160 (April 9,
1997), in which the Department determined that exchange gains and
losses arising from the respondent's foreign currency debt were,
indeed, related to production and therefore properly included in the
calculation of financing expenses. Lastly, the petitioners call
attention to the fact that the Department's practice of including
foreign exchange gains and losses in financial expenses has been upheld
by the CIT in Micron Technology, Inc v. United States, 893 F. Supp. 21
(CIT 1995).
DOC Position: Our practice is to calculate general expenses,
including financial expenses, based on the full fiscal year's
information that most closely corresponds to the period of
investigation or review. See, e.g., Final Results of Antidumping Duty
Administrative Review: Silicon Metal From Brazil, 63 FR 6899, 6906
(February 11, 1998) (Comment 16). Contrary to the Association's claim,
general expenses often vary greatly from month to month. By considering
general expense information for the fiscal year, however, the
Department is able to ensure that it has reasonably captured all of the
expenses associated with the respondent's complete business and
accounting cycle. In particular, we note that the year-end financial
statement data are generally the most accurate reflection of a
company's results because these data include complete year-end accruals
and other adjusting entries that are often posted only at year-end. In
addition, the year-end statements are often audited, or at a minimum,
reviewed by outside accountants, which provides additional assurance as
to the accuracy of the data presented and the accounting principles
used to compile those data.
Here, the Association suggests that the Department isolate one
specific expense, foreign exchange losses, which it contends would be
lower if the Department departs from its normal methodology and shifts
the calculation period for foreign exchange losses on loans by three
months. While that may be the case, it is difficult to accept the
Association's rationale in light of the fact that they have offered no
information as to the effect that the three-month shift would have on
all other costs incurred by the companies, certain of which may indeed
be higher than those of the 1996 fiscal year. Thus, we do not consider
it appropriate for the Department to abandon its normal practice for a
single expense (foreign exchange losses) when the rationale for doing
so is little more than the fact that such expense would be lower if
calculated over a different period.
With respect to the Association's reliance on OCTG from Mexico as a
departure from the Department's general practice of using fiscal year
data, we note that, in that case, the respondent's financial expense
ratio was based on best information available (the predecessor to facts
available).
[[Page 31430]]
Specifically, the investigation in that case encompassed a six-month
period from January through June 1994. The respondent's 1994 financial
statements were provided by the petitioners, after the respondent
claimed that these statements were not available. The financial
statements showed the effects of the massive devaluation of the Mexican
peso sustained in late December of 1994, several months subsequent to
the POI. As discussed more fully in OCTG from Mexico, the Department
used an adverse inference in its calculation of interest expense, while
declining to include the full amount of the peso collapse. While the
Association has characterized the change in the Chilean peso rate
during the fiscal year as ``four and one-half times'' that of the POI,
this reflects a change of from 1 to 4.4 percent. This change does not
begin to equate to the massive currency devaluation noted in OCTG from
Mexico. Finally, we note that the choice of adverse facts available (or
its predecessor best information available) provides no guidance with
respect to the Department's preferred methods for calculating actual
expenses.
As to the Association's assertion that exchange losses should be
attributed to the accounts receivable balance, this is inconsistent
with our practice. The Department has an established practice of
including currency translation gains and losses on foreign-currency
denominated loans in COP and CV because they reflect an actual increase
in the amount of local currency that will have to be paid to retire the
foreign-currency denominated loan balances. See, e.g., SRAMs from Korea
(Comment 4). We allocate the financial expenses based on the cost of
goods sold and, thus, these expenses are reflected as a cost of
production, and not a selling expense. We do not consider exchange
gains and losses from sales transactions to be related to the
manufacturing activities of the company. See, e.g., Notice of Final
Determination of Sales at Less Than Fair Value: Steel Wire Rod From
Trinidad and Tobago, 63 FR 9177, 9181 (February 24, 1998) (Comment 4).
For this final determination, we have included in the cost of
production the amortized portion of foreign exchange losses resulting
from foreign-currency denominated loans as part of the financial
expenses. The foreign exchange losses on loans reported in the
consolidated financial statements were amortized over the average
remaining life of the loans on a straight-line basis.
Comment 25: CV Imputed Credit.
The Association argues that the Department's methodology for
comparing U.S. prices to CV does not properly account for imputed
credit expenses in the comparison market. The Association believes that
the Department should either deduct an amount for imputed credit from
CV, as it has done in recent cases, or should exclude from COP
financial expenses the amount allocable to financing accounts
receivable, as it did under the old law.
Further, for Camanchaca, the only producer that did not have a
comparison market, the Association argues that, if the Department
continues to use the weighted-average selling and profit rates of the
other four respondents in this investigation, the Department should
apply the weighted-average comparison market imputed credit of the
other four producers.
The petitioners do not rebut the Association's comments on this
issue.
DOC Position: We agree with the Association that a ``circumstance
of sale'' adjustment for imputed credit should be made to CV. The
Department ``uses imputed credit expenses to measure the effect of
specific respondent selling practices in the United States and the
comparison market.'' See Stainless Steel Wire Rods from France (Comment
5). Thus, in order to make a fair comparison, we have deducted imputed
credit from CV as a COS adjustment in this final determination.
Comment 26: Allocation of Financial Expenses Based on Assets.
The Association asks the Department to consider the special
circumstances of three salmon producers--Eicosal, Camanchaca, and Aguas
Claras--in calculating financial expenses for COP and CV. According to
the Association, certain characteristics unique to these companies'
operations require that the Department modify its normal method of
computing consolidated financial expenses based on the ratio of net
financial expenses to cost of goods sold during the period.
In the case of Eicosal, the Association contends that the
Department must recognize the very different capital requirements of--
and disproportionate generation of financial expenses by--Eicosal and
its affiliated processor, Eicomar. That is, in the Association's view,
the Department must allocate consolidated financial expenses between
Eicosal and Eicomar based on the relative value of fixed assets held by
each company. The Association maintains that this allocation is
necessary in order to avoid significant distortions in the calculation
of financial expenses due to the fact that Eicomar, as a seafood
processor, requires substantially greater amounts of capital for
equipment than does Eicosal, which conducts the salmon farming
operations. In support of this view, the Association cites the Final
Determination of Sales at Less Than Fair Value of Dynamic Random Access
Memory Semiconductors of One Megabit and Above from the Republic of
Korea, 58 FR 15467, 15471 (March 23, 1993)(DRAMS from Korea) where,
before calculating a respondent's net financial expense ratio for COP
and CV, the Department first allocated financial expenses to various
divisions within the corporation based on the relative value of fixed
assets within each division.
The Association also requests that the Department make a fixed
asset-based allocation of financial expenses for Camanchaca as well. In
this instance, the Association points out that Camanchaca is involved
in many fish and seafood-related operations other than the production
of fresh Atlantic salmon. According to the Association, Camanchaca's
operations are divided into six distinct production areas, each locally
administered and having its own capital requirements. The Association
maintains that unless financial expenses are first allocated to
Camanchaca's production area on the basis of fixed asset value, the
Department's normal method of computing such expenses will
significantly distort the actual capital costs incurred by the
company's salmon production operations.
Finally, in the case of Aguas Claras, the Association argues that
the Department's financial expense calculation fails to take account of
the company's frozen and smoked salmon operations. Specifically, the
Association observes that, in addition to fresh salmon, Aguas Claras
produces and holds in inventory a large amount of frozen and smoked
salmon products. According to the Association, before it can accurately
capture the financial expenses of fresh Atlantic salmon, the Department
must first allocate a portion of total financial expense to frozen and
smoked salmon in recognition of the costs incurred to finance these
products in inventory. The Association contends that such an allocation
would be consistent with the Department's imputation of inventory
carrying costs in antidumping cases.
The petitioners argue that the Department should follow its normal
methodology and calculate financial expenses as a ratio of each
company's cost of goods sold. According to the petitioners there is no
reason in this case for the Department to allocate interest on the
basis of inventory or fixed assets as suggested by the Association. The
petitioners further
[[Page 31431]]
point out that Camanchaca and Aguas Claras improperly reduced their
submitted financial expenses associated with the imputed cost of
carrying their accounts receivable and ending inventory.
DOC Position: We disagree with the Association that the facts of
the case require us to depart from our general practice of calculating
financial expenses based on a ratio of the foreign producer's net
expenses to its cost of goods sold. In this case, each of the three
respondents proposes alternative methods for calculating financial
expenses which they believe best represent the unique circumstances of
their operations. In effect, these calculations allocate interest
charges to certain assets which the companies contend are not
associated with subject merchandise, and thus, have the effect of
lowering the interest expense for subject merchandise. The fact that
the results of these calculations differ from the normal cost-of-sales-
based calculation does not in any way suggest that the Department's
longstanding practice of calculating financial expenses is inaccurate
or unreasonable. In fact, the Courts have upheld as reasonable the
Department's practice of calculating financial expenses based on the
consolidated group as a whole, notwithstanding the fact that any non-
respondent member of the Group may have been involved in a different
line of business or held assets having values substantially different
from those of the respondent company. See, e.g., E.I. DuPont de Nemours
& Co. v. United States, Slip op. 98-7, Court No. 96-11-02509 (January
29, 1998)(where the Court noted that the Department's calculation of
financial expenses reasonably reflects the actual costs incurred by the
respondent) and Gulf States Tube Division v. United States, Slip op.
97-124, Court No. 95-09-01125 (August 29, 1997) at 31 (where in light
of the fact that the statute provides no specific guidance for the
calculation of financial expenses, the Court recognized as reasonable
the Department's allocation of such expenses based on the respondent's
consolidated group).
With respect to the Association's citation to DRAMS from Korea, we
note that while the Department relied on an asset-based allocation
methodology in the investigation phase of that case, we have since
reconsidered this approach. Specifically, although the CIT upheld the
Department's interest calculation in that proceeding (Micron
Technologies, Inc. v. United States), in a recent investigation
involving the same respondent companies from the DRAMS from Korea
proceeding, Final Determination of Sales at Less Than Fair Value:
Static Random Access Memory Semiconductors From the Republic of Korea,
63 FR 8934, 8938 (February 23, 1998)(SRAMS from Korea), the Department
described why it was unnecessary to follow the fixed asset based
allocation methodology for financial expenses that had been used in the
DRAMS from Korea proceeding. See SRAMS from Korea at 8938 (General
Comment 2). (``We have reconsidered this issue for the final
determination and concluded that because the COGS includes a
proportional amount of the depreciation of the assets used in the
production of the merchandise, allocation of financing expenses on the
basis of COGS distributed proportionately more interest expense to
those products having higher capital investment.'') Thus, as in this
case, the Department recognized that its normal method of calculating
financial expenses on the basis of cost of goods sold, without special
allocations to specific divisions or assets, provides a reasonable
measure of the costs incurred for the merchandise.
Further, we have not allowed the respondents to offset financial
expenses for the claimed cost of holding accounts receivable and
inventory. The statute directs the Department to calculate selling,
general and administrative costs, including financial expense, based
upon the actual experience of the company. See section 773(b)(3)(B) and
section 773(e)(2)(A) of the Act. Under the pre-URAA law, we allowed
offsets to financial expense for accounts receivable and finished goods
inventory to account for the fact that we calculated CV inclusive of
amounts imputed for credit and inventory carrying costs. Consistent
with the provisions of the new law, however, we now base financial
expense for COP and CV on the amounts incurred by the respondents, and
do not account for imputed expenses as actual costs for the calculation
of CV. Therefore, it is no longer appropriate to reduce the financial
expenses by the accounts receivable and inventory offsets as suggested
by the Association. See, e.g., Steel Flat Products From Korea at 18422
(Comment 6); Final Determination of Sales at Less Than Fair Value:
Certain Pasta From Italy, 61 FR 30326, 30361 (June 14, 1996).
Comment 27: Inflation.
The Association contends that the Department should not adjust the
respondents' reported cost of production and constructed value figures
to account for the effects of Chilean inflation on salmon stock costs.
Although it recognizes that such an adjustment would be consistent with
Chilean accounting principles, the Association points out that
inflation in the country ranged only between six and eight percent
during the period over which the respondents calculated their reported
salmon costs. This low inflation rate, argues the Association, does not
meet the Department's normal threshold for adjusting costs in cases
involving significant inflation.
In support of its position, the Association cites Certain Fresh Cut
Flowers from Colombia: Final Results of Antidumping Duty Administrative
Reviews, 61 FR 42833, 42845 (August 19, 1996)(Flowers from Colombia)
and Final Determination of Sales at Less Than Fair Value: Fresh Cut
Roses from Colombia, 60 FR 6980, 6993 (February 6, 1995)(Roses from
Colombia), where it contends that the Department's policy is to adjust
costs to a constant currency basis only in cases involving high-
inflation and, even then, only to adjust expenses related to long-lived
fixed assets (i.e., depreciation expense). The Association notes that,
consistent with Chilean GAAP, each respondent restated the historical
cost of its fixed assets such that the depreciation expense reported
for cost of production and constructed value reflected current Chilean
peso values during the period of investigation. However, the
Association contends that salmon stock is not a fixed asset and, thus,
it is inconsistent with past Department practice to also adjust these
costs for the low inflation experienced in Chile during the cost
calculation period.
The petitioners, citing Final Determination of Sales at Less Than
Fair Value: Canned Pineapple Fruit from Thailand, 60 FR 29553, 29559
(June 5, 1995) (Pineapple from Thailand), claim that the Department
should rely on the respondents' normal books and records, kept in
accordance with Chilean GAAP, for the calculation of the live fish
inventory cost. The petitioners argue that whether inflation in Chile
was high or low is irrelevant to the cost calculation because the
Department must first look at the respondents' home country GAAP to
determine whether such principles reasonably reflect the costs of
producing the subject merchandise. In Pineapple from Thailand, the
Department stated that normal accounting practices provide an objective
standard by which to measure costs, while providing the respondents a
predictable basis on which to compute costs. The petitioners further
contend that, in this case, the respondents want the Department to
reject outright the Chilean GAAP requirements regarding price-level
[[Page 31432]]
adjustments to non-monetary assets. Yet, the petitioners note, the
respondents have failed to meet their burden of demonstrating that such
an adjustment would distort the reported costs. The petitioners assert
that the respondents have failed to indicate how their normal books and
records, kept in accordance with Chilean GAAP, distort costs. The
petitioners argue that the respondents' claim that the cost of live
fish inventory are mainly contained within the POI is incorrect because
the production cycle of salmon is between two and three years.
DOC Position: We agree with the petitioners that certain of the
salmon producers failed to provide costs which reflected their normal
accounting practices of adjusting non-monetary assets for increases in
price-levels. The exclusion of these adjustments results in costs which
are not reflective of current price levels and, thus, produces an
improper match of revenues and expenses.
The Department's long-standing practice, codified at section
773(f)(1)(A) of the Act, is to rely on data from a respondent's normal
books and records where those records are prepared in accordance with
home country GAAP and reasonably reflect the costs of producing the
merchandise. Normal GAAP accounting practices provide both respondents
and the Department a reasonably objective and predictable basis by
which to compute costs for the merchandise under investigation.
However, in those instances where it is determined that a company's
normal accounting practices result in a misallocation of production
costs, the Department will adjust the respondent's costs or use
alternative calculation methodologies that more accurately capture the
actual costs incurred to produce the merchandise. See, e.g., Final
Determination of Sales at Less Than Fair Value: New Minivans from
Japan, 57 FR 21937, 21952 (May 26, 1992) (Minivans from Japan) (the
Department adjusted a respondent's U.S. further manufacturing costs
because the company's normal accounting methodology did not result in
an accurate measure of production costs); see also, Pineapple from
Thailand, 60 FR at 29559.
In the instant proceeding, the Association asks the Department to
reject each salmon producer's normal price-level accounting
methodologies used for live fish inventories in favor of costs
calculated for purposes of this investigation. As noted, however, the
Department's practice is to rely on a respondent's books and records
prepared in accordance with its home country GAAP unless these
accounting principles do not reasonably reflect costs associated with
production of the subject merchandise. As a result, before analyzing
any alternative accounting method reported by a respondent during the
proceeding, the Department will determine whether it is appropriate to
use the respondent's normal GAAP accounting practices in order to
calculate the cost of the merchandise.
In this case, the Department examined whether it was reasonable
under Chilean GAAP for the salmon producers to adjust their fish
inventory costs to reflect current Chilean peso values corrected for
the effects of inflation. Fish stock costs are recorded on the basis of
the historical amounts incurred to raise the salmon from eggs to
maturity. Similar to fixed assets, however, because fish stock costs
are carried on the company books as an asset for two to three years
prior to harvest, Chilean GAAP requires that the costs be restated to
reflect inflation-adjusted amounts. In examining the companies' books
and records at verification, we found that Camanchaca, Aguas Claras and
Eicosal had used the recorded price-level adjustment methodology for
live fish inventories for at least a number of years. In addition,
evidence on the record, i.e., audited financial statements, indicated
that each of the three companies' normal price-level adjustment
methodologies was accepted by its independent auditors and was
consistent with GAAP practiced in Chile.
Given the fact that the companies' price-level adjustment
methodology is consistent with Chilean GAAP and the Association has not
shown this practice to distort salmon production costs during the
period, we have recalculated each company's fish stock costs to include
the price-level adjustment reported in accordance with its normal
accounting practices.
We also found that two of the companies, Mares Australes and Marine
Harvest, did not record the price-level adjustment to fish stock costs
as they do not prepare financial statements in accordance with Chilean
GAAP. Specifically, these companies are subsidiaries of foreign
companies that prepare only consolidated financial statements in other
countries following accounting principles dictated by the home country
GAAP of their respective parent companies. Thus, Mares Australes and
Marine Harvest are not required to prepare financial statements in
accordance with Chilean GAAP.
We note that in this case, however, the information provided by
Marine Harvest does, in effect, consider the change in the value of the
Chilean peso. Marine Harvest's financial data is restated into U.S.
dollars monthly as part of its reporting for consolidation purposes. We
note that during the cost calculation period the Chilean peso/U.S.
dollar exchange rate reflected much of the inflation rate experienced
in Chile. Thus, Marine Harvest's reported costs were effectively
adjusted for the price-level changes each month, as part of the
company's normal accounting.
With respect to Mares Australes, the case record does not contain
information regarding the company's accounting consolidation process
with its parent. As part of the consolidation process, however, Mares
Australes would have to convert its peso accounting records to the
currency in which its parent maintains its normal books and records.
Thus, as with Marine Harvest, it is reasonable to conclude that Mares
Australes, in effect, accounts for the price-level changes through the
currency conversion process of its normal accounting consolidation.
Yet, because Mares Australes reported its salmon production costs in
pesos for purposes of this investigation, it is necessary for us to
reflect the price level changes that are consistent with its currency
conversion and consolidation. Accordingly, we have revised Mares
Australes' submitted COP and CV figures to reflect price level
adjustments based on the inflation index.
The Association has argued that the salmon producers' normal price-
level adjustment methodologies do not reasonably reflect costs due to
the low rate of inflation in Chile during the growing period for fresh
Atlantic salmon harvested during the POI. Yet, the fact that the level
of inflation during the years prior to the POI was not at levels
experienced in Chile in the past does not make the price-level
adjustment requirements under Chilean GAAP unreasonable.
Further, the Association's claim that the Department's high-
inflation methodology (as stated in Flowers from Colombia and Roses
from Colombia) which only requires price-level adjustments for
depreciable assets is unfounded. In the specific facts present in those
cases, the only restated non-monetary assets which affected the COP and
CV were fixed assets, including the flower and rose plants. In this
case, as well as in Flowers from Colombia and Roses from Colombia, the
costs of the subject merchandise, which were accumulated over years
prior to the period of investigation or review, were adjusted for the
price-level changes recorded in the company's normal accounting
records. Contrary to the
[[Page 31433]]
Association's claim, our treatment of the price-level adjustments for
the live fish inventory in this case is consistent with our treatment
of similar costs in Flowers from Colombia and Roses from Colombia.
Comment 28: CV Profit for Japanese Market.
The Association argues that the Department should not base CV
profit on sales to the Japanese market without making an appropriate
adjustment for differences in the grades sold in the U.S. and Japanese
markets. According to the Association, the Department has recognized
that there are physical differences between the premium-grade salmon
sold in the United States and the super-premium salmon sold in Japan,
and has found that it is inappropriate to make price-to-price
comparisons of those sales. The Association contends that calculating
CV profit based on sales of Japan (which are primarily of super-premium
salmon) effectively results in a CV equivalent to the sales price of
super-premium salmon in Japan. The Association argues that the use of
such a NV would result in an unfair comparison, would be contrary to
other case precedent, and would be inconsistent with the Department's
stated recognition that price-to-price comparisons of premium to super-
premium merchandise are inappropriate.
The Association proposes that, for Mares Australes (which sold both
premium and super-premium salmon in Japan), the Department base CV
profit only on sales of premium salmon to Japan. For the other two
respondents for whom Japan is the comparison market (and who did not
make any sales of premium salmon to Japan), the Association proposes an
adjustment based on the percentage difference between Mares Australes'
profit rates from sales of the two grades of salmon in Japan.
Alternatively, the Association proposes that the Department make
price-to-price comparisons between premium and super-premium prices
with a value-based difference-in-merchandise adjustment, based on the
percentage difference between Mares Australes' sales prices for premium
and super-premium prices in Japan.
The petitioners argue that the statute requires that CV profit be
based on all sales of the foreign like product made in the ordinary
course of trade in the comparison market. According to the petitioners,
the statute grants the Department the authority to rely on alternative
methods only when such data are unavailable.
DOC Position: This issue has been rendered moot by the Department's
finding, set forth above in response to Comment 1, that there is no
significant distinction between premium and super-premium grade salmon
for purposes of an antidumping analysis.
Cost Issues--Eicosal
Comment 29: Company-Wide G&A.
The petitioners argue that the Department must recalculate
Eicosal's G&A expenses to reflect amounts reported in the company's
consolidated financial statements. According to the petitioners, such a
calculation would be consistent with the Department's practice of
computing G&A expenses of the respondent company as a whole, and not
just for those expenses directly related to the manufacture of the
product under investigation.
Eicosal claims that the Department should rely on the submitted G&A
rate calculation.
DOC Position: We agree with the petitioners' assertions that the
Department's normal methodology is to calculate G&A based on the
producing company as a whole and not just based on G&A expenses related
to the production of a particular product. We do not agree, however,
that this means that the G&A expenses should be based on amounts
reported in the respondent company's consolidated financial statements,
as the Department's normal methodology does not rely on consolidated
level G&A expense. Thus, we did not calculate Eicosal's G&A rate using
the consolidated company financial statements.
Cost Issues--Mares Australes
Comment 30: Combined G&A.
Mares Australes contends that it correctly computed its G&A
expenses by combining the expenses of Mares Australes and those of its
affiliate, Trouw Chile. According to Mares Australes, the two companies
are completely integrated and share common management and
administrative operations. Thus, Mares Australes argues, in order to
accurately capture the G&A expenses incurred on sales of fresh Atlantic
salmon, the Department must compute G&A expenses as if Mares Australes
and Trouw Chile were a single integrated business unit.
The petitioners argue that the Department should recalculate Mares
Australes' G&A expenses excluding the G&A expenses of Trouw Chile.
According to the petitioners, the Department's general practice is to
use the G&A expenses that relate to the operations of the producer
(Mares Australes) supplemented, but not commingled, with a portion of
G&A expenses from the parent company. Further, the petitioners contend
that Mares Australes has reported, in effect, not the G&A expenses
incurred to produce salmon, but a G&A ratio which represents the
results of a combined fish feed and salmon producer. The petitioners
also argue that to the degree it is appropriate for Mares Australes to
report feed costs based on the actual costs of its affiliate Trouw
Chile, Trouw Chile's actual G&A expenses should be included in
determining the COP of feed and its G&A expenses should not be mixed
with those of Mares Australes.
DOC Position: We disagree with Mares Australes regarding the
appropriateness of its submitted G&A expense calculation. It is the
Department's practice to use the G&A expenses calculated based on
information from the producer. See, e.g., OCTG from Mexico at 33573
(Comment 8). Trouw Chile's G&A expenses relate to its cost of producing
fish feed, and do not bear upon the general expenses incurred by Mares
Australes in producing salmon. For this final determination, we
calculated G&A expenses for Mares Australes using amounts recorded in
the company's normal books and records, and excluded the submitted
information of Trouw Chile.
Comment 31: Bonus Adjustment.
Mares Australes argues that the Department should allow its
adjustment to its reported labor costs so that they reflect only the
cost of bonuses actually paid to employees rather than the amount
accrued. Because it accrued a greater expense for employee bonuses than
was actually paid out during 1996 and the excess accrual was not
reversed at year-end, Mares Australes believes it should be permitted
to base the expense on only the cash actually paid for bonuses. Mares
Australes further argues that in order to match costs incurred during
the POI with sales during the POI, the Department should include in COP
only the company's ``actual'' bonus expense.
The petitioners argue that the Department should disallow Mares
Australes' adjustment to bonuses and that the full amount of bonuses
recognized should remain in the cost of production of Atlantic salmon.
Because Mares Australes has accounted for its fiscal year on the
accrual basis, that is, in the normal course of business, it recognized
the expenses to be incurred for the period, whether or not yet fully
paid, it should be required to report this information to the
Department.
[[Page 31434]]
DOC Position: We agree with the petitioners that Mares Australes'
bonus expense should reflect the amounts recorded in the company's
audited financial statements. Mares Australes follows accrual
accounting in its normal books and records. We therefore consider it
inappropriate to rely on a cash-basis accounting method for bonus
payments, a single expense identified by the company. Accordingly, we
have included the bonus amount recognized in the company's accounting
records in the cost of Atlantic salmon.
Cost Issues--Marine Harvest
Comment 32: Major Input.
Marine Harvest argues that if the Department does not rely on the
costs from the company's affiliated feed producer, Marine Feed, it
should use only the market prices for feed comparable to Marine
Harvest's proprietary feed formula in order to value the affiliated
feed purchases. According to Marine Harvest, the salmon harvested
during the POI were raised on a diet of a unique proprietary feed that
was produced only by Marine Feed. Marine Harvest argues that the feed
prices charged by other unaffiliated feed producers cannot be used to
value feed inputs produced by Marine Feed because they were for
experimental trials produced with alternative feed formulations.
Marine Harvest further contends that the Department has recognized
that any application of the ``major input'' rule must deal with
``identical'' or ``comparable transactions of similar inputs.'' See,
e.g., Final Determination of Sales at Less Than Fair Value: Engineered
Process Gas Turbo-Compressor Systems, Whether Assembled or Unassembled,
and Whether Complete or Incomplete, from Japan, 62 FR 24394, 24411 (May
5, 1997)(Comment 15). Marine Harvest argues that, therefore, any
calculation of the market price for feed must be based on unaffiliated
producers of Marine Harvest's proprietary feed formula. Marine Harvest
also argues that the small amount of feed sold by Marine Feed to
unaffiliated purchasers demonstrates that the price charged by Marine
Feed to Marine Harvest was an arm's-length market price.
The petitioners contend that the Department should value salmon
feed purchases from Marine Feed at the average price of all
unaffiliated purchases. The petitioners argue that there is nothing in
the Department's cost verification report that supports Marine
Harvest's contention that the average unaffiliated feed price was based
on a product formula that could not be compared to the feed that Marine
Harvest purchased from Marine Feed.
DOC Position: As discussed in our response to Comment 22, we have
followed our practice of using the higher of transfer price, market
value or cost of production when valuing major inputs from affiliated
suppliers. Accordingly, we continue to value feed purchased from Marine
Harvest's affiliated feed supplier, Marine Feed, based on the market
value of the input. As to Marine Harvest's claim that the market value
for its purchases from Marine Feed must be based only on purchases from
unaffiliated producers of its ``proprietary'' feed formula, we note
that this argument was first raised in the company's case brief and,
therefore, the Department was unable to examine this claim during its
verification of the submitted data. There is no record evidence
detailing the recipes for Marine Harvest's affiliated or unaffiliated
feed purchases. Further, there is no record evidence that feed produced
using Marine Harvest's proprietary formula is not sufficiently similar
to feed produced by the unaffiliated companies for purposes of
comparing transfer prices to market prices under section 773(f)(2) of
the Act. Therefore, we used the weighted average of Marine Harvest's
purchases from all unaffiliated feed suppliers in order to value the
company's affiliated feed purchases for this final determination.
Cost Issues--Camanchaca
Comment 33: Area Management Expenses.
Camanchaca argues that the Department has double-counted area
management expenses in its recalculated G&A ratio. According to
Camanchaca, because the company's submitted cost of manufacturing
figures already included area management expenses, it was necessary to
exclude these amounts from G&A in order to avoid double counting. In
addition, Camanchaca claims that the Department's calculation of the
company-wide G&A rate includes administration costs for non-salmon
producing areas of the company. Camanchaca asserts that the G&A ratio
should be calculated based only on areas related to salmon production,
and cites as support for its position, the Department's decision in the
Final Determination of Sales at Less Than Fair Value: Furfuryl Alcohol
From South Africa, 60 FR 22550, 22556 (May 8, 1995) (LTFV determination
in Furfuryl Alcohol from South Africa) (Comment 15).
In rebuttal, the petitioners argue that the Department calculated
correctly Camanchaca's G&A expense rate. The petitioners point out that
Camanchaca did not follow the instructions in the Department's
antidumping questionnaire with respect to reporting of G&A expenses.
According to the petitioners, instead of reporting a company-wide G&A
rate, Camanchaca shifted expenses from G&A to factory overhead by
basing its G&A rate on only the salmon division of the company.
DOC Position: In recalculating G&A expenses for Camanchaca, we
excluded from the company's G&A expenses the local administration costs
of Puerto Montt and Tome because these costs were already included in
the cost of manufacturing. Additionally, we reduced Camanchaca's
company-wide G&A expenses for the amounts reported as indirect selling
expenses.
As to the respondent's citation to the LTFV determination in
Furfuryl Alcohol from South Africa case, we do not believe that this
case supports Camanchaca's claim that the G&A rate should be calculated
based only on areas of the company related to salmon production. In
that proceeding, the respondent maintained its normal books and records
in such a way that its chemical operations, including subject
merchandise, maintained specific G&A accounts in the general ledger. As
a result, the company's G&A rate was calculated based on the sum of the
overall company G&A expenses, consistent with the Department's normal
methodology, and also included certain chemical operations-specific G&A
expenses.
Comment 34: G&A Expenses Allocation Base.
Camanchaca explains that the cost of goods sold figure used to
calculate the G&A and financial expense ratios includes packing cost.
Thus, according to Camanchaca, G&A and financial expense ratios should
be applied to packing costs, which the company claims would increase
the packing expense for U.S. sales.
DOC Position: We disagree with respondent that the G&A and
financial expense ratios should be applied to packing costs. We note
that the packing costs are included in the cost of sales denominator
used in calculating Camanchaca's G&A and financial expense ratios.
Thus, in order to correctly reflect the G&A and financial expenses
incurred by Camanchaca, these ratios must be applied to the salmon
production costs inclusive of the reported packing expenses. Moreover,
in calculating packing costs it is not the
[[Page 31435]]
Department's practice to include G&A and financial expenses.
For this final determination, we have applied the G&A and financial
expense ratios to the total of COM and packing costs. See Final Results
of Antidumping Duty Administrative Review and Partial Termination of
Administrative Review: Circular Welded Non-Alloy Steel Pipe From the
Republic of Korea, 62 FR 55574, 55580 (October 27, 1997)
(Comment 6) where the Department determined the same conclusion for
this issue.
Comment 35: CV Profit Rate for Camanchaca.
Camanchaca does not have a viable home or third-country market. In
the preliminary determination, the Department based normal value for
Camanchaca on CV, and based CV profit on a weighted average of the
profit rates of the other four Chilean producers on sales of the
foreign like product in their respective comparison markets. Camanchaca
argues that this method is an arbitrary and unreasonable surrogate for
Camanchaca's home market profit. Camanchaca contends that the
antidumping law establishes a preference for company-specific data in
the calculation of profit for CV, and that the average profit realized
by the four other respondents in the Japanese and Canadian markets is
not a reasonable surrogate for Camanchaca's home market profit, because
those respondents have very different costs, expenses, and profit
levels.
Camanchaca argues that, instead, the Department should rely on
Camanchaca's average profit rate from total worldwide sales, as
reflected in the company's 1995 and 1996 audited financial statements.
Camanchaca states that the Department has accepted the use of a
company's overall worldwide profit under similar circumstances in other
cases, provided that the overall profit rate reflects sales of the same
general category as the foreign like product. According to Camanchaca,
its operations are all fish and seafood-related, and are all related
within the same general category of merchandise as fresh Atlantic
salmon, so that the company's overall profit would be a reasonable and
representative surrogate for home market profit from the sales of
salmon.
The petitioners respond that the Department's use of an average of
the profit for the other four respondents as a surrogate for
Camanchaca's profit on the foreign like product is both reasonable and
consistent with statutory requirements and Department practice.
According to the petitioners, it would be inappropriate to use
Camanchaca's worldwide profit, as that profit would reflect sales of
merchandise other than the foreign like product, as well as sales made
outside the POI. The petitioners note that Camanchaca has argued with
respect to other issues that costs incurred in relation to other
merchandise are vastly different from costs incurred on fresh Atlantic
salmon, and that costs incurred outside the POI are not representative
of POI costs.
The petitioners further contend that the cases cited by Camanchaca
are not on point because, in those cases, the Department had
acknowledged that the respondent's worldwide profit was the most
appropriate basis for profit based on the record of that case.
DOC Position: We have continued to calculate the surrogate profit
rate for Camanchaca based on the weighted average of the profit rates
of the other respondents.
As explained in detail in the preliminary determination, the
Department must calculate profit for Camanchaca in accordance with
section 773(e)(2)(B)(iii) of the Act, which allows for profit to be
based on ``any other reasonable method.'' Given the fact pattern in
this case, we find that the use of the weighted average of the profit
rates of the other respondents is a reasonable method. That weighted-
average rate is based on POI sales of the foreign like product, the
reliability of which the Department has ascertained through
verification. Camanchaca has not provided any specific reason why the
profit rates of the other respondents are unreliable, stating only that
each of the other four respondents has ``different costs, expenses, and
profit levels.'' See Association's Case Brief at II-52. We do not
believe that differences in the various profit rates render an average
of those rates an unreliable surrogate profit; on the contrary, the
very purpose of an average rate is to capture the range of profit
experienced by the other parties to the proceeding.
Moreover, we believe that it would be far less reasonable in this
case to rely on Camanchaca's worldwide profit for 1995 and 1996 as a
surrogate profit. First, Camanchaca's only significant market for fresh
Atlantic salmon is the United States. To the extent that Camanchaca's
profit on the sale of fresh Atlantic salmon has a significant weight in
the company's overall profit, it is based in large part on U.S. sales
that are subject to an antidumping investigation, and therefore
inherently suspect. Second, as the petitioners correctly point out,
Camanchaca has acknowledged with respect to other issues that costs
incurred in relation to other merchandise are vastly different from
costs incurred on fresh Atlantic salmon (see Comment 26, below), and
that costs incurred outside the POI are not representative of POI costs
(see Comment 24, above). These assertions by Camanchaca cast further
doubt on the representativeness of Camanchaca's worldwide profit for a
period largely outside the POI.
In view of the above, we believe that the use of the weighted
average of the profit rates of the other respondents is not only
reasonable (thus meeting the standard required by statute), but also
preferable to the alternative methodology proposed by Camanchaca.
Therefore, as in our preliminary determination, we have continued to
calculate Camanchaca's profit, as facts available under section
773(e)(2)(b)(iii) of the Act, based on the profits realized by the
other four respondents in sales to their respective comparison markets.
Cost Issues--Aguas Claras
Comment 36: Feed Costs.
Aguas Claras maintains that, while it agrees with the Department's
conclusion that the company miscalculated the amount of discount on
feed purchased from its supplier, EWOS Chile S.A. (EWOS), the amount of
the correction in the Department's cost verification report overstates
the actual amount of the error.
The petitioners contend that the Department should disallow the
feed purchase discount paid by EWOS for reasons that are proprietary in
nature. Additionally, the petitioners argue that the Department should
not allow Aguas Claras to reduce its feed costs for the EWOS discount
because the company had knowledge of an impending trade case when it
entered into the EWOS feed agreement. Furthermore, the petitioners
claim that Aguas Claras applied the feed discount to salmon which were
harvested before the contract was entered into and, therefore, these
fish could not have consumed any EWOS feed.
DOC Position: We disagree with Aguas Claras' claim that our
adjustment to EWOS' feed discount overstates the actual amount of the
company's calculation error. The amount of the discount in question was
identified in Article 15 of the feed supplier contract between Aguas
Claras and EWOS. Aguas Claras initially calculated its cost of EWOS-
supplied feed using a methodology that tied the discount to specific
feed purchases. The contract, however, does not contain any such
specific provisions relating the discount to feed purchases. In fact,
provisions of the contract specify only the period for which it is in
effect. To correct Aguas
[[Page 31436]]
Claras' calculation error, we amortized the discount specified in
Article 15 over the life of the contract and reduced feed cost by only
the portion of the discount that was amortized within the POI. We then
allocated this amount to individual fish groups based on each groups'
relative biomass.
Comment 37: Unreported Costs.
Aguas Claras argues that the Department's cost verification report
erroneously concluded that the respondent had not reported in its
submitted COP and CV certain packing and ice costs that were recorded
outside the company's normal cost accounting system. Aguas Claras
claims that it included the amount of these costs related to salmon
production in the minor corrections presented at the beginning of
verification.
The petitioners state that the Department should include in COP and
CV the packing and ice costs that Aguas Claras' failed to report.
DOC Position: We agree with the respondent. We reexamined the
information on the record and determined that Aguas Claras did, in
fact, include the packing and ice costs in question in the revised COP
and CV figures it submitted as minor corrections at the beginning of
verification. Therefore, we have not made any additional adjustment for
these costs. See Aguas Claras Cost Verification Report at exhibits B25
(the overall reconciliation) and B1 (the minor corrections exhibit).
Comment 38: Sale of Investment.
Aguas Claras claims that because Salmofood S.A. and Antarfrio
Invertec S.A. were involved in the production and processing of
Atlantic salmon, it is correct to reduce the company's G&A expenses
with the gain earned from the sale of its investment in the two
affiliates. Aguas Claras argues that its shareholdings in the two
companies were not simply passive investments but, instead, represent
joint ventures related to the production of fresh Atlantic salmon.
Aguas Claras asserts that there is no practical difference between the
sale of fixed assets of a feed mill or processing plant, which it
claims the Department recognizes in calculating G&A expenses, and the
sale of shares in such a feed mill or processing company.
The petitioners argue that Aguas Claras incorrectly reduced G&A
expenses for its gain on the sale of common stock in Antarfrio Invertec
and Salmofood. The petitioners state that Aguas Claras did not sell the
assets of these companies but instead sold only its equity investment
in the companies. The petitioners claim that the gain on the sale of
common stock is not a part of the day-to-day business of producing
salmon. In support of its argument, the petitioners indicate that the
gain was shown on Aguas Claras' income statement as ``other income.''
Therefore, the petitioners claim that Aguas Claras itself confirmed
that the gain was from an investment and not related to the production
of subject merchandise. The petitioners allege that the sales of the
affiliated companies were not conducted for bona fide commercial
reasons, but to influence the antidumping investigation.
DOC Position: For the final determination in this case, we have not
reduced Aguas Claras G&A expense for the amount of gain that the
company received from its sales of Salmofood and Antarfrio Invertec. It
is the Department's practice to consider the disposal of fixed assets
used to produce the merchandise under investigation to be a normal part
of a company's operations. Thus, the Department typically accounts for
the gains or losses generated from these transactions as part of G&A
expense in the COP and CV calculations. See, e.g., Minivans from Japan
at 21943. However, the Department considers the transfer of an equity
interest in another company as a sale of an investment, which is
unrelated to the production activities for G&A expenses. Neither is the
gain or loss from an investment activity considered part of financial
expenses, since the investment is unrelated to financing the company's
working capital. See, e.g., Final Determination of Sales at Less than
Fair Value: Oil Country Tubular Goods from Korea, 60 FR 33561, 33567
(June 28, 1995). Moreover, in this case, we disagree with Aguas Claras'
characterization of its sale of common stock in Salmofood and Antarfrio
Invertec as the equivalent of a disposal of fixed assets related to the
company's salmon production. Specifically, the sale of stock in a
company is, indeed, the sale of an interest in all assets of the
company.
Comment 39: Cost of Idle Facility.
Aguas Claras argues that because the cost of the idled salmon
smoking plant facility related solely to the production of non-subject
merchandise, it properly excluded these costs from the reported G&A
expenses. Aguas Claras cites several cases where the Department
excluded the costs associated with idled or inactive facilities where
those facilities produced non-subject merchandise.
The petitioners contend that the costs associated with the idle
facilities were incorrectly excluded from G&A.
DOC Position: We agree with respondent that the costs of the idled
salmon smoking plant should be excluded from the G&A expenses of the
company. The Department's general practice recognizes that all costs
incurred during a period should be absorbed by the company's sales of
all products during that same period. As we stated in Silicomanganese
from Brazil at 37871, we consider idle facility costs to be period
costs (i.e., costs that are more closely related to the accounting
period rather than the current manufacturing costs). While it is the
Department's general practice to include the cost of shutdowns and idle
assets in the COP and CV, in this case we determined that the salmon
smoking facilities were idle for only a short time and that the smoking
facilities later resumed production during the POI. Therefore, the
costs associated with this temporary shutdown of the smoking plant are
more appropriately absorbed by the smoked salmon products sold during
the POI, rather than absorbed by all products.
Comment 40: Calculation of CV Indirect Selling expenses for Aguas
Claras.
Aguas Claras contends that the Department erred in including in CV
a fixed amount of selling expenses for different products, rather than
an amount proportionate to the cost of manufacturing of each product.
Specifically, Aguas Claras notes that it sold both salmon fillets and
whole salmon in the Canadian market and claims that, on a per-pound
basis, salmon fillets are a higher value product than whole salmon.
Aguas Claras contends that, by assigning all products the same per-unit
amount of CV indirect selling expenses regardless of the value of the
product, the Department's methodology is distortive. Aguas Claras
proposes that the Department calculate a weighted-average selling
expense ratio and, in computing CV, increase the cost of manufacturing
of each product by this ratio, such that selling expenses are
proportionate to costs.
The petitioners respond that, in view of the problems encountered
at verification in determining the value of Aguas Claras' sales to
Canada (see Comment 7 above), the Department should continue to apply a
fixed per-pound weighted-average selling expense to CV for all
products.
DOC Position: We agree with Aguas Claras, and have recalculated CV
selling expenses as a percentage of cost of production, thus ensuring
that the selling expenses for higher value-added products are
proportionately higher than the selling expenses apportioned to
[[Page 31437]]
lower value-added products. This is consistent with the methodology
used in Antifriction Bearings (Other Than Tapered Roller Bearings) and
Parts Thereof From France, Germany, Italy, Japan, Romania, Singapore,
Sweden, and The United Kingdom: Notice of Preliminary Results of
Antidumping Duty Administrative Reviews and Partial Termination of
Administrative Reviews, 63 FR 6512 (February 9, 1998).
We do not agree with the petitioners' argument that, due to
shortcomings in Aguas Claras' recordkeeping discovered at verification,
it would be more appropriate to apply a fixed average selling expense
to all products. However, we cannot address the specifics of the
petitioners' argument in this public forum, as a meaningful discussion
is only possible by means of reference to business proprietary
information. We have addressed the petitioners' argument in a separate
memo to the file, which has been placed on the official record, and
served upon parties with access to such information under
administrative protective order.
We note that, although only Aguas Claras requested that the
Department recalculate CV indirect selling expenses, to ensure
consistency in our calculations for the other respondents we have also
revised their CV indirect selling expenses on the same basis.
Continuation of Suspension of Liquidation
In accordance with section 735(c)(4)(B) of the Act, we are
directing the Customs Service to continue suspending liquidation of all
entries of fresh Atlantic salmon from Chile, except for subject
merchandise produced and exported by Camanchaca and Marine Harvest
(which have de minimis weighted-average margins), that are entered, or
withdrawn from warehouse, for consumption on or after January 16, 1998
(the date of publication of the preliminary determination in the
Federal Register). The Customs Service shall continue to require a cash
deposit or the posting of a bond equal to the weighted-average amount
by which the normal value exceeds the EP or CEP, as indicated in the
chart below. These instructions suspending liquidation will remain in
effect until further notice.
The weighted-average dumping margins are as follows:
------------------------------------------------------------------------
Weighted-
average
Exporter/manufacturer margin
percentage
------------------------------------------------------------------------
Aguas Claras................................................ 8.27
Camanchaca.................................................. 0.21
Eicosal..................................................... 10.91
Mares Australes............................................. 2.24
Marine Harvest.............................................. 1.36
All Others.................................................. 5.19
------------------------------------------------------------------------
Section 735(c)(5)(A) of the Act directs the Department to exclude
all zero and de minimis weighted-average dumping margins, as well as
dumping margins determined entirely under facts available under section
776 of the Act, from the calculation of the ``all others'' rate. As
explained above in Comment 5, we have therefore excluded the de minimis
dumping margins for Camanchaca and Marine Harvest from the calculation
of the ``all others'' rate. No dumping margins were based entirely on
facts available.
ITC Notification
In accordance with section 735(d) of the Act, we have notified the
ITC of our determination. As our final determination is affirmative,
the ITC will, within 45 days, determine whether these imports are
materially injuring, or threaten material injury to, the U.S. industry.
If the ITC determines that material injury or threat of material injury
does not exist, the proceeding will be terminated and all securities
posted will be refunded or canceled. If the ITC determines that such
injury does exist, the Department will issue an antidumping duty order
directing the Customs Service to assess antidumping duties on all
imports of the subject merchandise entered for consumption on or after
the effective date of the suspension of liquidation.
This determination is published pursuant to sections 735(d) and
777(i) of the Act.
Dated: June 1, 1998.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 98-15183 Filed 6-8-98; 8:45 am]
BILLING CODE 3510-DS-P
