[Federal Register Volume 63, Number 110 (Tuesday, June 9, 1998)]
[Notices]
[Pages 31437-31447]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-15184]
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DEPARTMENT OF COMMERCE
International Trade Administration
[C-337-802]
Final Negative Countervailing Duty Determination: Fresh Atlantic
Salmon from Chile
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
EFFECTIVE DATE: June 9, 1998.
FOR FURTHER INFORMATION CONTACT: Rosa Jeong, Marian Wells or Todd
Hansen, Office of Antidumping/Countervailing Duty Enforcement, Group 1,
Office 1, Import Administration, U.S. Department of Commerce, Room
3099, 14th Street and Constitution Avenue, N.W., Washington, D.C.
20230; telephone (202) 482-1278, 482-6309 or 482-1276, respectively.
Final Determination
The Department of Commerce (the ``Department'') determines that
countervailable subsidies are not being provided to producers or
exporters of fresh Atlantic salmon (``salmon'') in Chile.
Petitioners
The petition in this investigation was filed by the Coalition for
Fair Atlantic Salmon Trade (``FAST'') and the following individual
members of FAST: Atlantic Salmon of Maine; Cooke Aquaculture U.S.,
Inc.; DE Salmon, Inc.; Global Aqua--USA, llc; Island Aquaculture Corp.;
Maine Coast Nordic, Inc.; ScanAm Fish Farms; Treats Island Fisheries;
and Trumpet Island Salmon Farm, Inc. (collectively referred to
hereinafter as the ``petitioners'').
Case History
Since the publication of the preliminary negative determination in
the Federal Register on November 19, 1997 (62 FR 61803) (``Preliminary
Determination''), the following events have occurred.
On December 3, 1997, the petitioners requested that the Department
collect information on Law 889, a program which we had not included in
our investigation because information in the petition indicated that
the program was no longer in existence. The petitioners' submission
included evidence that indicated that this program was in operation
during the POI.
Upon a review of information on the record, we determined that
because the program was included in the petition, the petitioners'
request constituted a timely submission of factual information rather
than a new subsidy allegation. Accordingly, on December 11, 1997, we
requested that the Government of Chile (``GOC'') provide information
regarding benefits provided under Chilean Law 889. The GOC submitted
the requested information on January 21, 1998.
We conducted verification of the responses of the GOC from January
28 through February 11, 1998.
The petitioners and the GOC filed case and rebuttal briefs on March
4 and
[[Page 31438]]
March 10, 1998, respectively. The Department held a hearing on March
13, 1998.
On March 9, 1998, the petitioners amended the petition to include
Trumpet Island Salmon Farm, Inc., a U.S. producer of the subject
merchandise, as an additional petitioner.
Scope of Investigation
The scope of this investigation covers fresh, farmed Atlantic
salmon, whether imported ``dressed'' or cut. Atlantic salmon is the
species Salmo salar, in the genus Salmo of the family salmoninae.
``Dressed'' Atlantic salmon refers to salmon that has been bled,
gutted, and cleaned. Dressed Atlantic salmon may be imported with the
head on or off; with the tail on or off; and with the gills in or out.
All cuts of fresh Atlantic salmon are included in the scope of the
investigation. Examples of cuts include, but are not limited to:
crosswise cuts (steaks), lengthwise cuts (fillets), lengthwise cuts
attached by skin (butterfly cuts), combinations of crosswise and
lengthwise cuts (combination packages), and Atlantic salmon that is
minced, shredded, or ground. Cuts may be subjected to various degrees
of trimming, and imported with the skin on or off and with the ``pin
bones'' in or out.
Excluded from the scope are: (1) fresh Atlantic salmon that is
``not farmed'' (i.e., wild Atlantic salmon); (2) live Atlantic salmon;
and (3) Atlantic salmon that has been subjected to further processing,
such as frozen, canned, dried, and smoked Atlantic salmon, or processed
into forms such as sausages, hot dogs, and burgers.
The merchandise subject to this investigation is classifiable at
item numbers 0302.12.0003 and 0304.10.4093 of the Harmonized Tariff
Schedule of the United States (``HTSUS''). Although the HTSUS numbers
are provided for convenience and customs purposes, the written
description of the merchandise is dispositive.
The Applicable Statute
Unless otherwise indicated, all citations to the statute are
references to the provisions of the Tariff Act of 1930, as amended by
the Uruguay Round Agreements Act effective January 1, 1995 (the
``Act'').
Period of Investigation (``POI'')
The period for which we are measuring subsidies is calendar year
1996.
Subsidies Valuation Information
Benchmarks for Loans and Discount Rates: To calculate the
countervailable benefit from loans and nonrecurring grants, we have
used the average rates for U.S. dollar lending in Chile, as calculated
by the Superintendencia de Bancos e Instituciones Financieras
(``SBIF''), the Chilean bank supervisory agency. The U.S. dollar
interest rates were used because the loans in question were denominated
in U.S. dollars and the grant that was allocated over time was made in
U.S. dollars.
Allocation Period: Based on information provided by the GOC, we
have used nine years, the weighted-average useful life of productive
assets for the Chilean salmon industry, as the allocation period in
this investigation.
De Minimis Countervailable Subsidy
Pursuant to its authority under section 771(36) of the Act, the
United States Trade Representative (``USTR'') has designated Chile as a
``developing country.'' See USTR Interim Final Rule: Developing and
Least-Developed Country Designations Under the Countervailing Duty Law
(15 CFR 2013). Consequently, a net countervailable subsidy rate that
does not exceed two percent ad valorem is considered de minimis, in
accordance with section 703(b)(4)(B) of the Act and Article 27 of the
Agreement on Subsidies and Countervailing Measures (``SCM Agreement'').
As discussed below, we determine that the net countervailable subsidy
bestowed on fresh Atlantic salmon from Chile is less than two percent
ad valorem, and therefore, de minimis.
Based upon our analysis of the petition, the responses to our
questionnaires, and the information reviewed at verification, we
determine the following:
I. Programs Determined To Be Countervailable
A. ProChile Export Promotion Assistance
In the preliminary determination, we found that this program
conferred countervailable subsidies on the subject merchandise. Our
review of the record, our findings at verification and our analysis of
the comments submitted by the interested parties, summarized below,
have led us to modify our findings from the preliminary determination
for this program. See infra Comments 2 and 4 for a discussion of issues
related to this program. See also memorandum from the team to the file,
``Calculations for Final Determination,'' dated June 1, 1998 (public
version on file in the Central Records Unit of the Department of
Commerce) (``Calculation Memorandum''). The benefit in the POI was
calculated using our standard grant allocation methodology. The
countervailable subsidy rate for this program is changed and is
determined to be 0.04 percent ad valorem.
B. CORFO Export Credit Insurance Premium Assistance
In the preliminary determination, we found that this program
conferred countervailable subsidies on the subject merchandise. We did
not receive any comments on this program from the interested parties,
and our review of the record has not led us to change any findings or
calculations. Accordingly, the countervailable subsidy for this program
is unchanged and is determined to be 0.01 percent ad valorem.
C. Law 18,634
In the preliminary determination, we found that the fiscal credit
and the waiver provisions of this program conferred countervailable
subsidies on the subject merchandise. Based on our review of the record
and our analysis of comments on this program from the interested
parties, we have changed our findings and find the entirety of Law
18,634, including the duty deferral provision which was preliminarily
determined to be not countervailable, constitutes a countervailable
export subsidy. See infra Comment 5; see also infra Comment 6 for a
discussion of another issue that did not affect our findings. We
changed our methodology for calculating the fiscal credit benefit to
account for the difference between the date the GOC records the loan
and the date the funds are disbursed to participants. In addition, we
corrected our calculations for certain clerical errors discovered in
the data submitted by the GOC. See infra Comment 7. Accordingly, the
countervailable subsidy for this program is changed and is determined
to be 0.48 percent ad valorem.
D. Promotion and Development Fund (Decree 15)
In the preliminary determination, we found that this program
conferred countervailable subsidies on the subject merchandise. Our
review of the record and our analysis of the comments on this program
from the interested parties have not led us to change our findings or
calculations. See infra Comment 11. Accordingly, the countervailable
subsidy for this program is unchanged
[[Page 31439]]
and is determined to be 0.01 percent ad valorem.
E. Law 18,480
In the preliminary determination, we found that this program
conferred countervailable subsidies on the subject merchandise. Our
review of the record and our analysis of the comments submitted by the
interested parties have led us to modify our calculations from the
preliminary determination for this program. Specifically, we adjusted
the denominator used to calculate the benefit for this program. See
infra Comment 8; see also Calculation Memorandum. Accordingly, the
countervailable subsidy for this program has been changed and is
determined to be 0.06 percent ad valorem.
F. Law 889 (Workers' Support Program)
(As discussed in the ``Case History'' section above, Law 889 was
not considered at the preliminary determination.)
Law 889, enacted in 1975, established the ``Workers'' Support
Program'' for Regions I, XI and the province of Chiloe in Region X. In
1993, the eligibility was extended to the province of Palena, also in
Region X. The Workers' Support Program provides grants to employers
operating in those named regions in an amount equivalent to 17 percent
of the taxable remuneration of the worker. The taxable remuneration of
the employee must not exceed 90,000 pesos. This limit is adjusted every
year according to the Consumer Price Index of the corresponding year
(adjusted to 109,967 pesos during the period January 1, 1996, through
May 31, 1996, and then again to 118,984 pesos for the remainder of
1996). The GOC reports that the government policy behind this program
was to provide an incentive to generate new jobs in certain
economically disadvantaged territories of the country by compensating
for a portion of the cost of labor to employers operating in those
regions.
To be eligible, the company must employ workers who are both
domiciled and permanently employed in the identified regions. Certain
employers including the public sector, large and medium copper and iron
mining companies, state-controlled enterprises, banking and financing
companies, insurance companies, and domestic (household) workers are
excluded from benefits under this program. The GOC has provided
information on the amount of grants received under this program by the
producers and exporters of fresh Atlantic salmon.
We determine that the Workers' Support Program under Law 889
provides countervailable subsidies within the meaning of section 771(5)
of the Act. The grants are a direct transfer of funds providing a
benefit in the amount of the grant. Pursuant to section 771(5A)(D)(iv)
of the Act, the grants are specific because they are limited to firms
located in a designated geographical region.
Because these grants are made on an ongoing basis, we have treated
these grants as recurring based on the analysis set forth in the
General Issues Appendix (``GIA''), attached to the Final Affirmative
Countervailing Duty Determination: Certain Steel Products from Austria,
58 FR 37217, 37226 (July 9, 1993).
To calculate the subsidy rate, we divided the benefit attributable
to the POI by the value of all sales by producers and exporters of
salmon during the POI. See infra Comment 11. On this basis, we
determine the countervailable subsidy for this program to be 0.51
percent ad valorem.
II. Programs Determined To Be Not Countervailable
Based on the information provided in the responses and the results
of verification, we continue to find the following programs not
countervailable for the same reasons identified in the preliminary
determination:
A. Fundacion Chile Assistance
B. Fund for Technological and Productive Development (FONTEC)
C. Central Bank Chapter XIX
D. Law 18,449 (Stamp Tax Exemption)
E. Article 59 of Law 824
III. Programs Determined To Be Not Used
Based on the information provided in the responses and the results
of verification, we determine that the following programs were not
used:
A. Institute for Technological Research (INTEC)
B. Central Bank Chapter XVIII
C. Export Promotion Fund
D. CORFO Export Credits and Long-Term Export Financing
E. Law 18,392 (Tax Exemptions)
IV. Programs Determined Not To Exist
Based on information provided by the GOC and the results of
verification, we determine that the following programs do not exist:
A. GOC Guarantee of Private Bank Loans
B. Import Substitution Subsidy for New Industries
C. Tax Deductions Available to Exporters
V. Other Programs Examined
A. Export Credit Limits
In our preliminary determination, we found that Law 18,576, which
authorizes banks to lend an additional five percent of their paid-in
capital to exporters for their foreign currency loans, did not confer
countervailable benefits on the subject merchandise. (See Preliminary
Determination at 61808.) In Final Affirmative Countervailing Duty
Determination; Standard Carnations from Chile, 52 FR 3313, 3315
(February 3, 1987), we found this program to be not used, stating:
``[W]e found no indication that the exporters under investigation
received more loans than domestic sellers.'' At verification, we met
with several representatives from private banks in Chile, as well as
representatives from the Central Bank and from the SBIF. These experts
indicated that bank credit limits are designed to limit a bank's loss
exposure to any one client. They further stated that the decision to
lend funds to an individual customer is based on a variety of factors,
and that the bank will seek to prudently assess the risk associated
with lending to that customer (see memorandum from the team to Roy A.
Malmrose, Acting Director, Office I, ``Verification of the
Questionnaire Responses of the Government of Chile,'' dated February
27, 1998, page 33 and Appendix 3 at page 2).
Because Law 18,576 limits the amount that a bank may lend to any
individual customer, and it allows higher credit limits for export
loans, it may constitute a countervailable subsidy within the meaning
of section 771(5) of the Act. The GOC is directing the actions of
financial institutions by setting credit limits for otherwise similarly
situated domestic borrowers at a lower level than that which is
available to exporters. The higher lending limits for exporters may
result in exporters receiving more credit from any one bank than would
otherwise be available from that bank. The higher credit limits are
specific because they are contingent on exportation or anticipated
exportation.
A review of the record evidence, however, has led us to conclude
that any potential benefit to the subject merchandise resulting from
this program would be minuscule. First, the salmon industry in Chile is
fragmented, with many small- and medium-sized producers and exporters.
Accordingly, the borrowing needs of any individual producer are
relatively insignificant. Second, the banking industry in Chile has
undergone a period of consolidation, such that the available
[[Page 31440]]
capital at larger banks for an individual domestic borrower is
substantial. Further, record evidence indicates that the Chilean
banking industry is highly competitive; there is no reason to believe
loans on similar terms are not available from other banks. In fact,
information on the record does not demonstrate any differential between
interest rates on export loans compared to domestic loans that can be
attributed to Law 18,576. Because there would likely be no impact on
the overall subsidy rate in the instant investigation for the POI, we
do not consider it necessary to address the issue of whether this
program is countervailable or what would be the appropriate methodology
for measuring any benefit accruing to the subject merchandise.
Interested Party Comments
Comment 1: The petitioners argue that Chile should be treated as a
developed country subject to a de minimis threshold of one percent for
purposes of the countervailing duty law. The GOC rebuts that Chile is a
developing country and should, therefore, be subject to a two percent
de minimis threshold.
Department's Position: As acknowledged by the parties, section
771(36) of the Act reserves the authority to designate Chile's status
as developed or developing for purposes of the countervailing duty law
to the USTR. Accordingly, we are not addressing this issue. See supra
section entitled ``De Minimis Countervailable Subsidy.''
Comment 2: The GOC claims that ProChile assistance is not
countervailable because ProChile's services are not contingent upon
exports and ProChile does not promote certain products over others.
According to the GOC, the fact that 46 percent of the companies using
ProChile's services in 1996 did not export evinces the lack of an
export requirement. The GOC further contends that the ProChile program
is used by a broad range of industries from all regions of Chile,
thereby proving that the program is neither de jure nor de facto
specific.
Moreover, the GOC argues that ProChile's activities consist mostly
of general informational activities, similar to those practiced by the
U.S. Department of Commerce, International Trade Administration's
Foreign Commercial Service (``FCS'') and Trade Development (``TD'')
divisions. According to the GOC, ProChile provides the same services
for a broad spectrum of Chilean goods and services and does not seek to
promote a particular product over others.
The petitioners contend that the GOC's argument does not address
the presumption of per se specificity for export subsidies. The
petitioners argue that because the GOC assesses export potential when
considering a company for participation in ProChile export promotion
events, the program is contingent on exports or anticipated exports
and, thus, countervailable. The petitioners note that even if 46
percent of the participating companies did not export, the majority, 54
percent, did export. The petitioners argue that the name of the
division of the GOC administering the ProChile program, the Export
Promotion Bureau, is further evidence that the organization provides a
countervailable export promotion subsidy.
The petitioners also reject the GOC's argument that ProChiles'
activities should be considered ``general informational activities.''
The petitioners assert that export promotion programs that promote a
specific product or provide financial assistance, are not general
export promotion.
Department's Position: For this final determination we continue to
find that payments by ProChile to underwrite the cost of trade fairs
held in the United States and other marketing expenses to promote,
inter alia, Chilean salmon, are countervailable export subsidies within
the meaning of section 771(5) of the Act. At these trade fairs,
ProChile promoted specific products and assumed certain advertising and
marketing costs for the participating firms. Consistent with footnote 4
to Article 3.1(a) of the SCM Agreement, the payments made by ProChile
are tied to anticipated exportation of Chilean salmon.
Our treatment of this program as a countervailable export promotion
program is consistent with our determination in Final Affirmative
Countervailing Duty Determination: Certain Fresh Atlantic Groundfish
from Canada, 51 FR 10041 (March 24, 1986) (``Groundfish from Canada'').
In that case, we countervailed a program in which the Canadian
government promoted certain products at a trade show abroad, covering
advertising costs among other costs.
We agree with the GOC that ProChile provides varied services to
many companies, including non-exporters, and supports general
informational activities. However, our finding of countervailability in
this investigation does not extend to those services and activities. We
have only found countervailable ProChile's assumption of costs in
connection with the salmon producers' and exporters' participation in
trade fairs held in the United States.
Comment 3: The GOC claims that the trade fair, ``Event Bon
Appetit,'' is not countervailable because it is part of a much broader
Chilean promotion campaign that does not promote salmon over other
products. According to the GOC, this program works to promote the image
of Chile without assuming costs that the salmon industry would
otherwise incur. In the event that the Department continues to find
``Event Bon Appetit'' to be countervailable, the GOC asserts that
certain payments made after the POI should not be considered
countervailable.
The petitioners counter that ``Event Bon Appetit'' is
countervailable because it conferred an export subsidy to the salmon
industry by promoting the export of salmon and wine to the United
States over other Chilean goods. The petitioners note that this is
consistent with the treatment of a similar program in the Groundfish
from Canada, where the Department countervailed a program in which the
Canadian government promoted certain products at a trade show abroad,
covering advertising costs among other expenses.
The petitioners further argue that the entirety of ``Event Bon
Appetit'' funding should be countervailed because it is the
Department's practice to find that the benefit occurs when the
recipient experiences the economic effect of the subsidy. The
petitioners cite to Final Affirmative Countervailing Duty Determination
and Countervailing Duty Order; Certain Steel Wire Nails from New
Zealand, 52 FR 37196, 37197 (October 5, 1987) (``Wire Nails from New
Zealand'') where the Department measured tax benefits on an earned
basis because the amount of the benefit was known at the time a firm
made an export transaction. The petitioners argue that it is irrelevant
when the GOC actually disbursed funds to pay for the events that had
already benefitted the salmon exporters. What is important, according
to the petitioners, is when the salmon exporters experienced the
economic effect of the subsidy, i.e., at the time of the ProChile-
sponsored event.
Department's Position: While we agree with the petitioners that
``Event Bon Appetit'' is specific in that it is contingent on exports
within the meaning of section 771(5A)(B) of the Act , we disagree with
them concerning the timing of the subsidy benefits. The Department's
practice deems benefits to be received at the time that there is an
effect on the recipient's cash flow. In the case of the provision of a
good or service, this would be the time a firm pays, or in the absence
of payment, would have paid, for the good or service. (See, e.g.,
Countervailing Duties: Notice of Proposed Rulemaking, 54 FR
[[Page 31441]]
23368 (May 31, 1989) (``1989 Proposed Regulations'') section
355.48(b)(2), and GIA at 37228-29, ``[B]enefits are generally deemed to
be received at the time there is a cash flow effect on the company
receiving the benefit.'') The Department occasionally makes an
exception to this general rule where benefits are earned on a shipment-
by-shipment basis and are known at the time of export, as was the case
in Wire Nails from New Zealand, but, because the benefits are not
associated with specific export transactions, this is not the case
here. (See also Final Results of Countervailing Duty Administrative
Review: Certain Iron-Metal Castings from India, 56 FR 52521, 52527
(October 21, 1991).)
Where the GOC paid fees in connection with this event after the POI
to the firms that provided the services, the salmon exporter
experienced the cash flow effect after the POI. Accordingly, we have
not included payments made after the POI in our calculation of benefits
from ``Event Bon Appetit.''
We have continued to find the costs paid by the GOC during the POI
in putting on this event countervailable, however, as they were costs
that would normally have been paid by the producers and exporters of
the promoted merchandise, were targeted to the U.S. market, and were
contingent on exportation.
Comment 4: The GOC argues that the ``Summer Harvest'' event is not
countervailable because it was sponsored as an ``image'' event
involving a broad range of products that did not promote particular
products over others. The GOC asserts that many of the costs of the
event were covered by private participants and no funds were provided
by the GOC directly to the Chilean companies or associations. The GOC
argues that if the Department calculates a benefit from the ``Summer
Harvest'' event, it must use a denominator that reflects the
participation of the salmon industry as one of many participating
products rather than allocating all of the benefits of the event to
salmon.
The petitioners assert that the ``Summer Harvest'' event is fully
countervailable. The petitioners argue that the GOC should have
reported the program prior to verification and that its decision not to
report the program does not demonstrate that the program constitutes
general export promotion. The petitioners argue that the GOC's analysis
is flawed because the Department's determination of an export subsidy
considers neither the examination of the number of participants nor the
amount of the government contribution. According to the petitioners,
the ``Summer Harvest'' event is fully countervailable because it was
not limited to general informational activities, promoted particular
products over others, and targeted the U.S. market. The petitioners
contend that because the record lacks adequate information to properly
calculate the value of the benefit conferred by this event, the
Department must apply facts available.
Department's Position: We agree with the GOC that the ``Summer
Harvest'' event does not constitute a countervailable subsidy. A review
of the information on the record indicates that ``Summer Harvest'' was
an ``image'' event that falls within the category of activities defined
as ``general export promotion'' which the Department has declined to
countervail in past cases. See, e.g., Certain Fresh Cut Flowers From
Mexico, 49 FR 15007, 15008 (April 16, 1984) and Final Affirmative
Countervailing Duty Determination and Countervailing Duty Order; Cotton
Sheeting and Sateen From Peru, 48 FR 4501, 4504 (February 1, 1983); see
also 1989 Proposed Regulations (section 355.44(m)) and Countervailing
Duties; Proposed Rule, 62 FR 8818, 8825 (February 26, 1997) (``1997
Proposed Regulations''). While the GOC did consider the export
potential of products on display at the event, a very broad range of
products was invited to participate in an effort to position the image
of Chile as a producer of high quality food products for the world
market. We note that in the documentation, the participants were
referred to by the GOC as ``donors'' of the merchandise on display.
Although the GOC covered certain expenditures related to the event, we
note that none of the outlays by the GOC for this event went to the
Chilean associations participating, nor did the GOC cover any of their
costs. In fact, the participants covered a significant portion of the
general costs associated with this event, in addition to contributing
merchandise for display (including transportation costs from Chile).
Accordingly, we have not included an amount for the ``Summer Harvest''
event in our calculation of benefits to the subject merchandise from
ProChile's export promotion activities.
Comment 5: The GOC argues that the fiscal credit program of Law
18,634 is not an import substitution subsidy and, thus, should not be
countervailed. The GOC contends that the fiscal credit provision and
the duty deferral provision are in fact a single loan program, rather
than two separate ones, and when considered together for the
Department's specificity analysis, the program does not constitute an
import substitution subsidy.
According to the GOC, the fiscal credit and duty deferral
provisions of Law 18,634 are both part of a single, unified statutory
loan program whose purpose is to promote investment in capital goods
regardless of the source of those goods. The GOC points out both the
fiscal credit and the duty deferral are established in the same law,
administered in the same manner, and their rules are set forth in the
same Chilean Customs resolution. Referring to the factors set forth in
the Department's 1997 Proposed Regulations (at 8825) and 1989 Proposed
Regulations (section 355.43(b)(6)) with respect to the Department's
practice in evaluating programs that are ``integrally linked,'' the GOC
states that the fiscal credit and duty deferral provisions of Law
18,634 meet all of the factors. According to the GOC, an evaluation of
factors demonstrates that the duty deferral and fiscal credit are not
only integrally linked, but they in fact are a single loan program.
The GOC argues that the purpose and design of the fiscal credit was
to ensure that imports and domestic products would be treated equally.
Referring to the legislative history of Law 18,634, the GOC asserts
that the fiscal credit was specifically adopted to offset the pecuniary
benefits to imported goods created by the duty deferral provision.
When the fiscal credit and duty deferral provisions are considered
together, the GOC argues that the fiscal credit does not create a
preference for domestic goods nor are the loans issued contingent upon
the purchase of domestic goods. The GOC points out that the amount of
fiscal credit is equal to 73 percent of the amount of the customs duty
that would be deferred under the duty deferral provision. Consequently,
the GOC asserts, the program avoids any preference for domestic goods
since the amount of the fiscal credit for domestic goods can never
exceed the amount of the duty deferral for imported goods. The GOC
further states that the conditions for obtaining a loan under this
program are the same for both provisions of the law which is limited to
the type and the value of the good. According to the GOC, the source of
the good as either foreign or domestic does not affect the eligibility,
the issuance or the condition of the loan. The GOC states that the
source is only relevant in determining whether the form of the loan
will be that of a fiscal credit or a duty deferral.
[[Page 31442]]
When considered as a single domestic subsidy program, the GOC
contends that the usage information on the record demonstrates that the
two provisions are not specific in that there is no disproportionate or
dominant usage by the salmon industry.
The petitioners argue that the fiscal credit and the duty deferral
provisions are properly analyzed as separate programs. Because the
receipt of benefits is available only to purchasers of domestic goods,
the petitioners assert that the fiscal credit program is a de jure
import substitution subsidy which is per se specific pursuant to
section 771(5A)(A) of the Act. According to the petitioners, whether
the fiscal credit provision or both provisions of Law 18,634 taken
together creates any ``preference'' is irrelevant to the analysis of an
import substitution subsidy, i.e., whether receipt of benefit is
contingent on the purchase of domestic goods over imported goods.
Moreover, the petitioners argue that contrary to the GOC's claims, the
program encourages firms to purchase domestic goods through the
issuance of interest-free credits. According to the petitioners, the
duty deferral provision addresses the distortion caused by the
imposition of the import tariff and, thus, allows imported capital
goods to compete on an equal basis with domestic capital goods. The
petitioners contend that the fiscal credit provision, on the other
hand, artificially reduces the price of the domestic good that was made
comparable through the duty deferral, thereby creating a preference to
purchase domestic goods.
Furthermore, the petitioners argue that the ``integral linkage''
test does not apply in this situation because the test is only relevant
in analyzing the de facto specificity of domestic subsidies. Because
the fiscal credit program is specific as an import substitution
subsidy, the petitioners assert that a de facto specificity analysis is
unnecessary and irrelevant. Even assuming the integral linkage test
were appropriate in this case, the petitioners argue that Law 18,634
does not satisfy the criteria set forth in the Department's integral
linkage analysis. In particular, the petitioners claim that the GOC has
not proven that the programs share the same purpose and that all
recipients are treated equally.
Department's Position: In our preliminary determination, we
analyzed the assistance provided under Law 18,634 by considering
separately four components of the law. First, firms that import capital
equipment are eligible to defer payment of duty. Second, if the firm
that imports the equipment meets a specified export target, then the
deferred duty and accrued interest are waived. Third, firms that
purchase their equipment domestically are eligible to borrow up to 73
percent of the value of the duty that would have been paid if the
equipment had been imported. Finally, if the firm that purchases
domestically sourced equipment meets a specified export target, then
the loan and accrued interest are forgiven. In our preliminary
determination, we found that all the components of Law 18,634 except
the first conferred countervailable subsidies. This was consistent with
our determinations in past cases (see, e.g., Final Affirmative
Countervailing Duty Determinations: Certain Steel Products from Brazil,
58 FR 37295, 37299 (July 9, 1993) (Exemption of IPI and Duties on
Imports under Decree-Law 2324)). With respect to the duty deferral, we
found that the benefit was not specific.
The GOC argues that two components of the program, the duty
deferral component and the loans to purchasers of domestically sourced
equipment, should be treated as a single program for specificity
analysis. We have not adopted this position because it amounts to
picking and choosing which elements of the law should be combined in
order to achieve the result that the loans to purchasers of
domestically sourced equipment are not specific. Based on our review of
the law and its legislative history, we have determined that the four
components should be analyzed as a single program.
In its argument, the GOC points to the legislative history
discussing the purpose of introducing the loans and waivers for
purchases of domestically sourced equipment, i.e., to avoid a
preference for imported equipment. However, the same legislative
history indicates that the purpose of the pre-existing duty deferral
and waiver system was to promote importation of capital goods and, at
the same time, to promote exports. (See January 21, 1998 GOC
Submission, exhibit 8, page 2, paragraph 2.) We further note that all
components of Law 18,634 are administered by Chilean Customs, and the
list of eligible goods is the same for the duty deferral/waiver
components as for the loan/waiver for domestically sourced equipment.
Thus, the loan/waiver for domestically sourced equipment was added to
and became part of an overall scheme to, inter alia, promote exports.
While we acknowledge that the duty deferrals and loans for
purchases of domestically sourced equipment are not strictly contingent
upon exportation, their overarching purpose, along with the waiver
components, is to promote exports. Viewed as a whole, we determine that
the benefits provided under Law 18,634 constitute an export subsidy
within the meaning of section 771(5A)(B) of the Act are, therefore,
specific. A benefit is conferred on the recipient firms in the amount
of the waivers and to the extent that the benchmark interest exceeds
the program interest on the duty deferrals and on the loans for
purchases of domestically sourced equipment.
Comment 6: The petitioners argue that the fiscal credits under Law
18,634 constitute contingent liabilities which should be treated as
short-term, interest-free loans in the final determination. Referring
to section 355.49(f) of the 1989 Proposed Regulations, the petitioners
assert that ``where a government provides a long-term, interest-free
loan, the obligation for repayment of which is contingent upon
subsequent events,'' the Department's practice is to treat such loans
as short-term, interest-free loans. According to the petitioners, all
the conditions of section 355.49(f) are met here.
The petitioners first state that the loans are long-term because
the repayment of the fiscal credits under Law 18,634 occurs at years
three, five and seven from the date of receipt. Second, the petitioners
point out that even though interest may be accruing, the recipient
company is not required to make any principal or interest payments
until the occurrence of subsequent events. According to the
petitioners, the lack of payments during the period that the fiscal
credits are outstanding and given the significant likelihood of a
salmon company having its fiscal credit waived, the fiscal credits are
in effect equivalent to a zero interest rate loan. In addition, the
petitioners assert that because repayment of principal and interest is
subject to a condition relating to a specific export target, the fiscal
credits represent contingent liabilities. The petitioners further state
that the Department treated loans with similar payment structures to
Law 18,634 fiscal credits as contingent liabilities in past cases such
as Final Affirmative Countervailing Duty Determination: Carbon Steel
Products from Sweden, 50 FR 33375 (August 19, 1985) and Final
Affirmative Countervailing Duty Determinations: Certain Steel Products
from Germany, 58 FR 37315 (July 9, 1993).
The GOC counters that because Law 18,634 fiscal credits are in fact
not interest-free, the petitioners' proposed methodology of treating
the loans as interest-free would effectively double-count interest--
once when accrued interest has been waived and again
[[Page 31443]]
when the amount of interest is calculated. The GOC states that the
cases cited by the petitioners are clearly distinguishable because the
programs examined actually did involve interest-free loans. By
contrast, the GOC asserts that the fiscal credits accrue interest from
the invoice date of the capital good and, thus, are not interest-free
for any period of time. According to the GOC, the Department's
preliminary determination methodology of calculating the difference
between program interest and benchmark interest accurately captured all
benefits offered by the fiscal credits.
Department's Position: We agree with the GOC. While the fiscal
credits may represent contingent liabilities in that repayment is
conditioned upon subsequent events, the methodology contained in
section 355.49(f) of the 1989 Proposed Regulations is inapplicable
because the loans are in fact not interest-free. Under the terms of Law
18,634, the interest on the fiscal credit accrues from the date of the
invoice of the capital good until the time of repayment. Although the
accrued interest, along with the principal, may ultimately be waived,
we cannot ignore the fact that the interest may have to be paid.
Despite the petitioners' argument that a salmon company was
significantly more likely to have its fiscal credit waived, the fact
remains that some of the borrowers did not meet the conditions and did
repay the accrued interest and the principal. As stated by the GOC, by
countervailing the difference between the program and the benchmark
interest rate during the time the fiscal credit is outstanding and then
countervailing the entire waived amount, we have accurately captured
all benefits that arise from the fiscal credits.
Comment 7: The GOC argues that the Department should adjust the
reported amounts for waivers of deferred duties and fiscal credits
under Law 18,634 to correct for amounts that were double-counted in the
database submitted by the GOC, as detailed in the GOC's January 21,
1998 submission, and supplemented in the January 27, 1998 submission.
The GOC notes that the Department verified that when there was a
change in ownership of equipment on which the duty deferral or fiscal
credit was claimed, that asset was reentered in the fiscal credit
database although the original balance was not deleted from the
original database. The GOC argues that to avoid double-counting, the
Department should delete all fiscal credit entries with reference
numbers less than 500,000 from the database.
Department's Position: We have corrected the amount of waivers in
our final determination to exclude double-counted waivers of interest,
deferred duties and fiscal credits identified by the GOC in the January
28, 1998 submission. We have not deleted all balances with reference
numbers of less than 500,000 as suggested by the GOC, however, as it is
the original reference number that represents the obligation of the
original owner and should be deleted, not the number that represents
the obligation by the subsequent purchaser. The GOC has not identified
the matching reference numbers for all reference numbers less than
500,000. Accordingly, we have no assurance that the seller was a
producer of the subject merchandise and that the seller's obligation
for the duty deferral or fiscal credit was included in the submitted
databases.
Comment 8: The petitioners argue that the Department should
recalculate the benefit provided under Law 18,480 to reflect the
Department's practice of tying a subsidy to the particular product that
it benefits. The petitioners suggest that the Department divide the
amount of grants received by the value of the salmon producers' exports
of only those products eligible to receive such benefits.
The petitioners contend that by using a denominator comprised of
all exports by the salmon producers and exporters, the Department
significantly understated the benefits conferred by this program in the
preliminary determination.
The petitioners suggest that because the GOC has not provided the
information needed to calculate the correct denominator, i.e., a
denominator that includes only eligible merchandise, the Department
should use a numerator that would include total receipts under both
prongs of Law 18,480. The petitioners also assert that the GOC should
have been able to identify the subject merchandise in question and the
amount of benefits tied to that merchandise through the paperwork
required to document each refund with the Servicio Nacional de Aduanas
(``Chilean Customs'') and the Tesoreria General de la Republica
(``Chilean Treasury'').
The GOC argues that the petitioners have an incorrect understanding
of Law 18,480 and that the Department should continue to calculate the
benefits from Law 18,480 by using all exports as the denominator and
all subsidy benefits received under the domestically sourced inputs
program as the numerator. The GOC asserts that using the denominator of
total exports is appropriate because the reported amount of benefits
for the domestic input prong of Law 18,480 was the total amount of
benefits received by the responding companies on all of their exports.
The GOC asserts that the petitioners' statement that there are
categories of exports that are not eligible for either prong of Law
18,480 is erroneous, as eligibility for the domestic input prong of Law
18,480 is not related to the product exported.
The GOC also argues that it is not practicable for the GOC to
report benefits received only on exports of the subject merchandise.
The GOC insists that databases at the Chilean Customs and the Chilean
Treasury do not contain a link allowing them to cross-reference and
determine the amount of benefits claimed on domestic inputs based on
exports of a given category of merchandise. The GOC states that it has
no way to identify the exported merchandise on which benefits were
claimed and therefore had no alternative but to report only the
benefits received for domestically sourced inputs on all exports by
producers and exporters of the subject merchandise. The GOC contends
that it has acted to the best of its ability to comply with all
requests from the Department during this proceeding, therefore
eliminating any grounds to apply adverse facts available. According to
the GOC, the Department should not add a value for the simplified duty
drawback to the input credit benefits, i.e., increase the numerator to
match the denominator, because salmon is not eligible for the
simplified duty drawback. The GOC argues that it would clearly be
incorrect for the Department to countervail benefits that do not and
cannot relate to the subject merchandise. The GOC argues that if the
Department considers it necessary to adjust the calculation of the
benefit rate for this program, the Department should reduce the
denominator to exclude only those exports where the exporter was shown
to have claimed simplified duty drawback on that category of
merchandise.
Department's Position: The selection of an appropriate calculation
methodology for this program has been complicated because there are
two, potentially overlapping provisions to Law 18,480, and because of
the manner in which the GOC maintains records concerning benefits under
this program.
The first provision of Law 18,480 provides a simplified duty
drawback for small-volume, ``non-traditional,'' exports. The second
provision enables exporters to claim benefits for certain domestically
sourced inputs which are incorporated into exports of other
[[Page 31444]]
merchandise. The subject merchandise is not eligible for the simplified
duty drawback provision, however, during the POI, exporters of the
subject merchandise claimed benefits for domestically sourced inputs
incorporated in their exports of salmon. Exporters of the subject
merchandise also exported other merchandise, for which they may have
claimed benefits for domestically sourced inputs or simplified duty
drawback.
As noted by the GOC, exporters of merchandise that is eligible for
the simplified duty-drawback provision also have the option of claiming
benefits for the inputs into that merchandise. They cannot, however,
receive payments under both the simplified drawback and the provision
for domestically sourced inputs for the same export transaction. Also,
as noted by the petitioners, not all exports are eligible to claim
benefits for domestically sourced inputs. These include, e.g., exports
for which regular duty drawback was claimed, exports where imported
inputs exceed 50 percent of the f.o.b. value of the exported
merchandise, and exports whose raw materials or main factor of
production is ineligible for the simplified duty drawback and
represents 85 percent or more of the f.o.b. value of the exported
merchandise.
To calculate the countervailing duty rate for this program, we
would prefer to have information on the benefits provided for exports
of the subject merchandise, and divide that amount by the value of
exports of the subject merchandise. That is not possible in this
instance, however, because when the GOC receives claims for benefits
for domestically sourced inputs, it records this information under the
customs category of the input, not based on the merchandise that is
exported. Based on our verification, we are satisfied that the GOC was
not able to provide information on the amount of benefits paid on
exports of the subject merchandise.
The GOC was able to provide total payments to exporters of salmon
under the provision for domestically sourced inputs, which may include
payments for non-subject merchandise exported by these companies. In
our preliminary determination, we divided these total receipts by the
value of all products exported by the salmon exporters.
For our final determination, we have modified our calculation from
the preliminary determination because we believe it understated the
benefit to exports of the subject merchandise. In particular, because
certain exports of non-subject merchandise are eligible for the
simplified drawback and because the amount of benefits the exporters
would receive under the simplified drawback is generally greater than
the amount they would receive under the provision for domestically
sourced inputs, we have assumed that in most cases, if a claim were
filed, the simplified drawback would be claimed for eligible exports.
Consequently, at our request, the GOC provided information on the
amount of exports eligible for simplified duty drawback and we have
adjusted the denominator used in our preliminary determination to
exclude exports of such merchandise.
The GOC has argued that salmon exporters may have claimed benefits
for domestically sourced inputs where merchandise was also eligible for
the simplified drawback and, hence, payments related to merchandise
excluded from our denominator may be included in our numerator. If our
assumption is correct that salmon exporters can be expected to use
simplified drawback for exports of non-subject merchandise eligible for
that program, rather than claim benefits for domestically sourced
inputs, then our preliminary methodology dilutes the benefit
calculation for the subject merchandise. This dilution would result
from including exports of non-subject merchandise in the denominator
that had already benefited from the simplified drawback and did not and
could not have received the payments included in our numerator
(benefits for domestically sourced inputs). To the extent that benefits
for domestically sourced inputs were claimed for exports eligible for
simplified drawback by salmon exporters, we acknowledge that the
denominator may be slightly understated.
We disagree with the petitioners that the correct way to adjust our
calculation would be to increase the numerator by including simplified
drawback payments received on shipments of non-subject merchandise.
Because the benefits available under the simplified drawback are
generally much greater, this would have the effect of significantly
overstating the benefit to subject merchandise. Additionally, we have
not calculated the benefit from this program by using only exports of
subject merchandise as the denominator, because such a methodology
would clearly overstate the benefit from this program. We note that
while certain exports may not receive benefits for domestically sourced
inputs, this is dependent on the inputs, and not the category of
merchandise exported. Thus, exports of non-subject merchandise included
in our denominator are not precluded from claiming benefits for
domestically sourced inputs. Consequently, to the extent that non-
subject merchandise is included in the denominator, we have no evidence
or reason to believe that the benefit rate claimed on this merchandise
was less than the rate for benefits claimed on exports of the subject
merchandise.
Under the circumstances of this investigation, we have matched our
denominator to our numerator as best we can to measure the benefit to
the subject merchandise. As noted above, we are satisfied that the GOC
acted to the best of its ability in providing the information we
requested and, hence, we are not drawing an adverse inference. However,
we believe we have made reasonable assumptions and have calculated the
most accurate rate possible given the information available.
Comment 9: The petitioners argue that Chile's Chapter XIX debt-for-
equity swap program provided countervailable benefits to the producers
of the subject merchandise. The petitioners contend that the debt-for-
equity swap provided a financial contribution and that the acceptance
by the Central Bank of Chile of a proposed swap was contingent, either
in law or in fact, upon exportation by the applicant.
The petitioners cite anecdotal evidence included in articles
written on Chapter XIX that indicate that one of the goals of the
Chapter XIX program was to promote exports. The petitioners further
point to regulations issued in July 1990 for Chapter XIX transactions
which indicate that a preference would be given to export-oriented or
import-substituting projects. Although these regulations were not in
effect at the time the transactions involving producers of the subject
merchandise occurred, the petitioners argue that the regulations merely
codified pre-existing policies. The petitioners cite documents gathered
at verification claiming that these documents demonstrate that
anticipated exportation was a condition for acceptance of a proposed
swap. As further evidence that Chapter XIX approvals were biased in
favor of exports, and particularly in favor of non-traditional exports,
the petitioners point to statistics which indicate that 70 percent of
Chapter XIX projects through 1989 were in export-oriented industries,
while only 11 percent were in mining which previously accounted for 58
percent of Chile's exports. The petitioners acknowledge that not every
participant in the Chapter XIX debt conversion program was in an
export-oriented industry however, the petitioners argue that in Final
Affirmative Countervailing Duty
[[Page 31445]]
Determination and Countervailing Duty Order; Extruded Rubber Thread
From Malaysia, 57 FR 38472 (August 25, 1992) (``Extruded Rubber
Thread''), the Department found that benefits were countervailable
where Pioneer status was conferred on a respondent company subject to
an export commitment, stating:
The combination of the necessary export orientation of the
industry due to lack of domestic market opportunities and the
explicit export condition attached to Pioneer status approval, lead
us to conclude that the ``export'' side of the Pioneer Program
confers an export subsidy.
The petitioners note that in the companion antidumping investigation,
the Department stated that the home market for fresh Atlantic salmon is
incidental to Chilean growers and that growth in the Chilean salmon
industry has been almost entirely export-driven.
The GOC counters that there are statements in the same articles
cited by the petitioners which indicate that the GOC took a laissez-
faire approach to regulating Chapter XIX transactions. Concerning the
July 1990 regulations, the GOC points to the transcript of a speech
made in 1989 by Francisco Garces, who at the time was the International
Director of the Central Bank. In the speech, Mr. Garce's states that
the election of a new government in Chile may change the focus of the
Chapter XIX program to favor export-oriented industries. The GOC notes
that Mr. Garces refers to a ``change'' in the focus, not a mere
formalization of existing practice in the form of regulations. The GOC
argues that the documents reviewed at verification demonstrate the
opposite of what the petitioners claim, and that the documents show
that the GOC did not make acceptance of proposed transactions
contingent on export performance.
While the GOC does not dispute that a large number of the Chapter
XIX projects involved export-oriented industries, the GOC argues that
the investment projects were selected by the investors, without any
guidance from the GOC. Further, the GOC notes that participants in the
Pioneer Program in Extruded Rubber Thread made specific export
commitments in order to receive benefits. According to the GOC, the
Central Bank's role in reviewing proposed transactions was simply to
insure that the investors were eligible and that the transactions were
not fraudulent.
Finally, the GOC argues that there was no financial contribution,
because the Chapter XIX projects were carried out by private
individuals, with terms negotiated at arm's length.
Department's Position: We determine that the weight of the record
evidence does not support a conclusion that approval of Chapter XIX
proposals was contingent on export performance. The anecdotal evidence
in the published articles on the record of this case is contradictory
and cannot be considered conclusive. We further disagree that evidence
gathered at verification indicates that export performance was a
consideration in acceptance by the Central Bank of proposed
transactions. Due to the proprietary nature of the verification
documents, a further discussion of this issue is included in a
memorandum from the team to Richard W. Moreland, Deputy Assistant
Secretary for AD/CVD Enforcement, ``Analysis of Proprietary Comments
Concerning Chapter XIX Debt-for-Equity Swaps,'' dated June 1, 1998.
Because we have determined any potential subsidy arising under
Chapter XIX is not specific, we need not reach the question of whether
there was a financial contribution on the part of the GOC.
Comment 10: The petitioners argue that Law 18,449 which provides an
exemption from the Chilean stamp tax on certain financial transactions
for exporters is countervailable because it is contingent upon
exportation. The petitioners contend that the Chilean stamp tax
exemption is not analogous to the indirect taxes ``in respect of the
production and distribution of exported products'' referenced in the
Illustrative List of Export Subsidies in Annex 1 of the SCM Agreement
because the tax is assessed on loan documents and not the exported
merchandise. The petitioners further contend that the stamp tax, as it
is crafted in Chile, is not an indirect tax because it is borne by the
recipient of the loan, i.e., the exporter, and not borne by the
merchandise. According to the petitioners, the stamp tax is not shifted
forward and, therefore, behaves more like a direct than an indirect
tax.
The GOC rebuts that the SCM Agreement specifically enumerates stamp
taxes as an example of an indirect tax in footnote 58 to item (g) on
the Illustrative List. The GOC contends that an indirect tax is almost
necessarily levied on financial documents, whether the document be an
invoice or a letter of credit. The GOC notes that letters of credit
have been used for financing export sales for centuries, and that
Chilean law requires that the financing be repaid with proceeds from
export sales in order to qualify for exemption. The GOC cites
Countervailing Duties; Bicycle Tires and Tubes From Taiwan; Final
Results of Administrative Review, 48 FR 43366 (September 23, 1983) and
Final Affirmative Countervailing Duty Determination; Operators for
Jalousie and Awning Windows From El Salvador, 51 FR 41516, 41517
(November 17, 1986) as examples of previous cases where the Department
has found the exemption of exporters from stamp taxes to be non-
countervailable.
Department's Position: We disagree with the petitioners. First,
stamp taxes are specifically enumerated in the Illustrative List as
``indirect taxes.'' Second, although the stamp tax applies to loan
documents, the financing of sales through arrangements such as letters
of credit is a normal activity in the distribution of exported goods.
As the GOC notes, and as we confirmed at verification, Law 18,449
requires that exporters demonstrate that export financing transactions
that are exempt from the stamp tax be repaid with proceeds from the
financed export sales. Accordingly, we determine that the exemption of
Chilean salmon exporters from the stamp tax does not give rise to
countervailable benefits within the meaning of section 771(5)(E) of the
Act.
Comment 11: In calculating the amount of countervailable benefits
provided under the two regional programs, Law 889 and the Promotional
and Development Fund, the petitioners argue that the Department should
attribute the subsidies to only those products that actually benefited
from the programs. The petitioners note that the Department's practice
in the case of domestic subsidies is to divide the benefit by a firm's
total sales of the product to which the benefit is ``tied.'' Because
the benefits under both Law 889 and the Promotion and Development Fund
are only available to companies located in specified regions, the
petitioners argue that the subsidies are ``tied'' to the products
produced in those regions.
The GOC disagrees that a ``longstanding policy'' exists with
respect to tying benefits only to production in that region. The GOC
asserts that the Department only ties benefits in two specific
situations: (1) when the receipt of benefits is tied to sales to a
particular market; or (2) when it is tied to the production of a
specific good. Because neither of these situations applies to the two
Chilean regional programs, the GOC contends that the subsidy rates for
both programs are correctly calculated by dividing the total amount of
benefits over total sales.
Department's Position: We disagree with the petitioners that our
policy of tying subsidies requires us to attribute
[[Page 31446]]
regional subsidies only to merchandise produced in the affected
regions. Our tying policy, as articulated in section 355.47 of the 1989
Proposed Regulations, discusses tying subsidies to particular products,
not to products produced in particular countries or locations. In
attributing a subsidy to sales of the product or products to which it
is tied, the Department normally does not define the product at a level
more specific than the subject merchandise. In the present case, for
example, the subject merchandise is specifically defined as ``fresh
Atlantic salmon from Chile,'' not ``fresh Atlantic salmon from Region
X'' or ``fresh Atlantic salmon from the Island of Chiloe.''
Furthermore, the Department does not tie the benefits of federally
provided regional programs to the product produced in the specified
regions. See, e.g., Final Affirmative Countervailing Duty
Determination: Fresh and Chilled Atlantic Salmon From Norway, 56 FR
7678 (February 25, 1991). Accordingly, we have continued to calculate
the countervailable subsidy from these programs by dividing the total
benefit from these programs by the value of all sales of producers and
exporters of salmon.
Comment 12: The petitioners argue that the Department should not
use the SBIF rates it used in the preliminary determination to
calculate benefits from loans and nonrecurring grants. Instead, the
petitioners urge the Department to use the interest rate from a private
bank, Banco Security, reported in the petitioners' June 26, 1997
submission.
In the petitioners' view, the Department should not use the SBIF
rate because it is based on government lending rates. They cite to
Preliminary Affirmative Countervailing Duty Determination and Alignment
of Final Countervailing Duty Determination with Final Antidumping Duty
Determination: Certain Stainless Steel Wire Rod from Italy, 63 FR 809
(January 7, 1998) where the Department stated it ``normally does not
use government interest rates in benchmark calculations,'' and to
section 355.44(b)(7) of the 1989 Proposed Regulations which stipulates
that the Department use a non-governmental interest rate as a benchmark
rate.
The petitioners further contend that the Export Credit Limits
program as well as the Chilean encaje distort the SBIF rates. The
petitioners cite Certain Iron-Metal Castings from India: Final Results
of Countervailing Duty Administrative Review, 61 FR 64687, 64688
(December 6, 1996) (``Castings from India'') where the Department
recognized that export financing measures, similar to those in Chile,
distorted the cost of financing for non-exporters. In that case, the
Department used an alternative benchmark to measure the preference
provided by the program.
The GOC contends that the SBIF rate is not a government rate but
rather an average of Chilean commercial bank rates, where only one of
the 30 to 35 banks averaged is a state-owned bank. The GOC argues that
the Banco del Estado, the only state-owned bank included in the SBIF
interest rate average pool, operates as a commercial bank and that the
rates it charges are commercial rates. The GOC also cites to the 1989
Proposed Regulations which state at section 355.44(b)(9) that the
Department can consider loans from government-owned banks as commercial
loans. The GOC insists that the Chilean lending rates are not
distorted, noting that no Chilean lending program has ever been found
countervailable and Chilean law prohibits the SBIF or any other body
from interfering with the lending process at private banks, thus
eliminating any question of manipulation of the Chilean financial
markets. The GOC asserts that the SBIF rate is the appropriate rate to
use in the calculations of these final results.
Department's Position: We disagree with the petitioners that the
SBIF rate is not an appropriate benchmark. As stated earlier, at
verification, we met with several representatives from private banks in
Chile, as well as representatives from the Central Bank and from the
SBIF. All of the experts with whom we met indicated that the Chilean
credit markets have ample liquidity, and that Central Bank and other
government intervention in financial markets is minimal. We note that
virtually all governments intervene, to some degree, in financial
markets. We found no evidence that government intervention in Chile's
financial markets is so pervasive that it undermines our reliance on
the SBIF interest rate.
With respect to the specific arguments raised by the petitioners,
we agree that the Department normally does not use government rates as
benchmarks (see section 355.44(b)(7) of the 1989 Proposed Regulations).
However, in this instance, the SBIF rate is based on the rates of more
than 30 banks, only one of which is government-owned. Moreover, there
is no information to indicate that this bank, Banco del Estado,
operates on anything other than commercial terms. Therefore, we do not
believe the SBIF rate should be rejected on this basis.
Regarding the alleged distortions in the credit market caused by
the Export Credit Limits program, we disagree that this program is
analogous to the situation described in Castings from India. While the
higher re-discount ratio on export credit financing available to banks
in Castings from India effectively reduced the cost of advancing export
credit compared to domestic credit, we have found, as discussed supra,
that any effect on lending rates from the increased export credit
ceilings is minimal.
Finally, regarding the encaje, we have analyzed the potential
distortion and concluded that the encaje has not resulted in lower SBIF
rates. The Chilean encaje requires banks to place 30 percent of foreign
currency deposits with the Central Bank without interest for the first
year. (Alternatively, the bank can pay to the Central Bank the
equivalent of the interest earnings that would have been realized by
the Central Bank, if such an amount had been placed in its account.)
Deposits that are used to finance qualifying export credits, however,
are not subject to the encaje. Such a requirement would be expected to
lower interest rates on export loans denominated in a foreign currency,
including dollar-denominated export loans. Because it is our
understanding that these export loan rates are included in the SBIF
rate, along with non-export-related dollar denominated loans, use of
the SBIF rate as a benchmark could understate the benefit to the
recipient. However, we have reviewed interest rate information included
in the Central Bank's June 1997 Boletin Mensual concerning dollar
indexed loans with terms of three years or greater. Dollar-indexed
loans in Chile are available to domestic borrowers, and would not be
subject to any potential distortion resulting from the Central Bank
deposit rules regarding the encaje. Additionally, although there may be
slight differences in the exchange rates actually applied, a borrower
in Chile should be indifferent when choosing between a dollar-indexed
loan and a dollar-denominated loan. The information on the record
concerning interest rates charged on dollar-indexed loans for the five
years for which data was reported indicates that the rates on dollar
indexed loans were very similar to the SBIF rates. On average, the
interest rate charged on dollar-denominated loans was slightly higher
than that charged on dollar-indexed loans. Accordingly, the information
on the record does not appear to support the petitioners' claim that
the encaje renders inappropriate our use of the SBIF rate as a
benchmark. Therefore, we have continued to use the SBIF rate to
[[Page 31447]]
calculate benefits for the ProChile and the fiscal credit and duty
deferral program of Law 18,634.
Summary
The total net countervailable subsidy rate for all producers or
exporters of fresh Atlantic salmon in Chile is 1.11 percent, ad
valorem, which is de minimis. Therefore, we determine that
countervailable subsidies are not being provided to producers, or
exporters of fresh Atlantic salmon in Chile.
Verification
In accordance with section 782(i) of the Act, we verified the
information used in making our final determination. We followed our
standard verification procedures, including meeting with government
officials and examination of relevant government records and original
source documents. Our verification results are outlined in detail in
the public versions of the verification reports, which are on file in
the Central Records Unit (Room B-099 of the Main Commerce Building).
Return or Destruction of Proprietary Information
This notice serves as the only reminder to parties subject to
Administrative Protective Order (``APO'') of their responsibility
concerning the return or destruction of proprietary information
disclosed under APO in accordance with 19 CFR 355.34(d). Failure to
comply is a violation of the APO.
This determination is published pursuant to section 703(f) of the
Act.
Dated: June 1, 1998.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 98-15184 Filed 6-8-98; 8:45 am]
BILLING CODE 3510-DS-P
