[Federal Register Volume 62, Number 131 (Wednesday, July 9, 1997)]
[Notices]
[Pages 36772-36775]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-17951]
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DEPARTMENT OF COMMERCE
International Trade Administration
[C-337-802]
Notice of Initiation of Countervailing Duty Investigation: Fresh
Atlantic Salmon From Chile
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
EFFECTIVE DATE: July 9, 1997.
FOR FURTHER INFORMATION CONTACT: Elizabeth A. Graham at (202) 482-4105
or Rosa S. Jeong at (202) 482-1278, Import Administration, U.S.
Department of Commerce, Room 3099, 14th Street and Constitution Avenue,
N.W., Washington, DC 20230.
Initiation of Investigation
The Applicable Statute
Unless otherwise indicated, all citations to the statute are
references to the provisions of Tariff Act of 1930 (the Act), as
amended by the Uruguay Round Agreements Act effective January 1, 1995.
In addition, unless otherwise indicated, all citations to the
Department's regulations refer to the regulations, codified at 19 CFR
part 355, as they existed on April 1, 1997.
The Petition
On June 12, 1997, the Department of Commerce (the Department)
received a petition filed in proper form 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; and Treats Island Fisheries
(collectively referred to hereafter as ``the petitioners''). A
supplement to the petition was filed on June 26, 1997.
On June 27 and July 1, 1997, the Department held consultations with
representatives of the Government of Chile (GOC) pursuant to section
702(b)(4)(ii) of the Act (see July 1, 1997 memoranda to the File
regarding these consultations). During these consultations, the GOC
submitted copies of public laws relating to certain programs alleged in
the petition.
In accordance with section 701(a) of the Act, petitioners allege
that producers and exporters of the subject merchandise in Chile
receive countervailable subsidies.
The petitioners state that they have standing to file the petition
because they are interested parties, as defined under section 771(9)(C)
of the Act.
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 of this petition are (1) fresh Atlantic
salmon that is ``not farmed'' (i.e., wild Atlantic salmon); (2) live
Atlantic salmon and Atlantic salmon that has been subjected
[[Page 36773]]
to further processing, such as frozen, canned, dried, and smoked
Atlantic salmon; and (3) Atlantic salmon that has been further
processed into forms such as sausages, hot dogs, and burgers.
The merchandise subject to this investigation is classified at
statistical reporting numbers 0302.12.0003 and 0304.10.4091 of the
Harmonized Tariff Schedule (HTS) of the United States. Although the HTS
numbers are provided for convenience and Customs purposes, the written
description of the merchandise is dispositive.
During pre-filing consultations and as a result of our review of
the petition, we discussed with the petitioners whether the proposed
scope was an accurate reflection of the product for which the domestic
industry is seeking relief. We noted that the scope in the petition
appeared to include both farmed and not farmed Atlantic salmon. The
petitioners subsequently notified the Department on June 26, 1997, that
Atlantic salmon that is not farmed should be excluded from the scope of
the investigation. Accordingly, we have done so.
We are setting aside a period for interested parties to raise
issues regarding product coverage. The Department will accept such
comments until August 4, 1997. This period of scope consultation is
intended to provide the Department ample opportunity to consider all
comments and consult with parties prior to the issuance of the
preliminary determination.
Determination of Industry Support for the Petition
Section 702(c)(4)(A) of the Act requires that the Department
determine, prior to the initiation of an investigation, that a minimum
percentage of the domestic industry supports a countervailing duty
petition. A petition meets these minimum requirements if the domestic
producers or workers who support the petition account for: (1) At least
25 percent of the total production of the domestic like product, and
(2) more than 50 percent of the production of the domestic like product
produced by that portion of the industry expressing support for, or
opposition to, the petition. Under section 702(c)(4)(D) of the Act, if
the petitioners account for more than 50 percent of the total
production of the domestic like product, the Department is not required
to poll the industry to determine the extent of industry support.
Based on U.S. salmon production information published by the State
of Maine Department of Marine Resources and the Washington Farmed
Salmon Commission, the petitioners claimed that they account for over
70 percent of total production of fresh Atlantic salmon in the United
States. The petitioners further claimed that, when the U.S. producers
related to foreign producers are excluded from the analysis, the
petitioners represent approximately 97 percent of domestic production
of fresh Atlantic salmon.
On June 27, 1997, the Association of Chilean Salmon and Trout
Producers (the Association) contested the petitioners' standing claim.
The Association stated that the petitioners' standing calculations
focused exclusively on dressed salmon producers while ignoring U.S.
fillet producers and claimed that fillet salmon represents a separate
domestic like product from dressed salmon under the five-part domestic
like product test used by the International Trade Commission (ITC). The
Association argued that these facts suggest: (1) The petitioners do not
have standing with respect to fillets, and; (2) even if the Department
accepts the petitioners' single domestic like product definition, the
petitioners have failed to provide adequate industry support data since
fillet producers represent a significant portion of the industry
producing the domestic like product. This submission included certain
letters in opposition to the petition submitted by U.S. fillet
processors, some of whom identified themselves as importers of dressed
salmon from Chile.
On June 30, 1997, the petitioners submitted a rebuttal, stating
that the Association failed to refute the ``total domestic production''
and ``percent of production'' industry support figures contained in the
petition and failed to provide any information that would indicate that
the petitioners do not have standing even under a two-like-product
analysis. The petitioners argued that the facts in this case do not
support a finding that fillet salmon is a separate domestic like
product because there are no clear dividing lines, in terms of
characteristics or uses, between dressed salmon and salmon fillets.
Specifically, petitioners contended that, inter alia,: (1) Salmon
fillets are derived from dressed Atlantic salmon and, in fact, all
forms of fresh Atlantic salmon include the salmon meat that is
ultimately consumed; (2) respondents focused solely on one cut of fresh
Atlantic salmon (fillet) while ignoring other cuts (e.g., steak); (3)
the one cutting step that does play a significant role in the physical
characteristic of the product (the initial cutting of the fish in order
to bleed it) has been performed on both dressed and fillet salmon;
1 and (4) fillet cutting is not a ``value added'' operation,
but instead results in a higher-priced end product primarily because
much waste has been eliminated. With respect to the last point, the
petitioners argued that the price trends of fillets compared with
dressed salmon suggest that there is no value added, but in fact
negative value added, because the price of Chilean fillets, when
adjusted for the cost of processing dressed salmon into fillets, is
less than the price of dressed salmon.
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\1\ In this respect, the petitioners distinguish this case from
the like product decisions in Live Swine and Pork from Canada, Inv.
No. 701-TA-22 (Final), USITC pub. 2218 (September 1989).
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On July 1, 1997, the Association submitted further comments in
response to the petitioners' arguments.
Section 771(4)(A) of the Act defines the ``industry'' as the
producers of a domestic like product. Thus, to determine whether the
petition has the requisite industry support, the statute directs the
Department to look to producers and workers who account for production
of the domestic like product. The ITC, which is responsible for
determining whether ``the domestic industry'' has been injured, must
also determine what constitutes a domestic like product in order to
define the industry. However, while both the Department and the ITC
must apply the same statutory provision regarding the domestic like
product (section 771(10) of the Act), they do so for different purposes
and pursuant to separate and distinct authority. In addition, the
Department's determination is subject to limitations of time and
information. Although this may result in different definitions of the
domestic like product, such differences do not render the decision of
either agency contrary to the law.\2\ Therefore, we have examined the
Association's arguments regarding the definition of the domestic like
product in the petition in the context of the statutory provisions
governing initiation and the facts of the record.
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\2\ See Algoma Steel Corp., Ltd. v. United States, 688 F. Supp.
639, 642-44 (CIT 1988); High Information Content Flat Panel Displays
and Display Glass Therefor From Japan: Final Determination;
Rescission of Investigation and Partial Dismissal of Petition, 56 FR
32376, 32380-81 (July 16, 1991).
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The Association's contention is based on an examination of like
product determinations made in prior ITC cases, and follows an analysis
of factors traditionally examined by the ITC. However, as noted above,
the Department's analysis of like product is not bound by ITC practice.
The Department's analysis begins with section 771(10) of the Act, which
[[Page 36774]]
defines domestic like product as ``a product that is like, or in the
absence of like, most similar in characteristics and uses with, the
article subject to an investigation under this title.'' After
considering the information presented by the petitioner and the
Association, we do not find that the petitioner's domestic like product
definition is inconsistent with this statutory definition. While both
parties have cited to various cases involving agricultural and other
products, in light of the information presented in the petition, we
have concluded that there is no basis on which to reject as clearly
inaccurate the petitioners' representations that there are no clear
dividing lines, in terms of characteristics or uses, between dressed
and cut salmon. Therefore, we have adopted the single domestic like
product definition set forth in the petition.
Having found that dressed and cut salmon constitute a single like
product, we considered the Association's arguments that U.S. production
of salmon cuts had not been accounted for in the petition's
demonstration of industry support. The calculation of the standing
ratio in the petition was based on a comparison of the volume of the
petitioners' total 1996 production of dressed salmon to the volume of
the industry's total 1996 production of dressed salmon. We have revised
the petitioner's industry support calculations to add to the total U.S.
domestic industry figure an amount representing the estimated economic
value of U.S. fillet processing, in order to be as conservative as
possible in our evaluation of industry support. In so doing, we have
conservatively assumed that none of this processing industry has
affirmatively supported the petition.
In order to factor fillet processing into our analysis, we used a
value-based analysis. We determined that the calculation of industry
support on the basis of weight is inappropriate because the further
processing of dressed salmon into cuts involves significant weight
yield loss. In this regard, we note that the Statement of
Administrative Action (SAA) for the URAA explicitly provides that the
Department may determine the existence of industry support based on the
value of production. SAA at 862. For further explanation of our
inclusion of salmon processing in the total U.S. domestic industry
figure, which served as the denominator in the industry support
calculation, see the Initiation Checklist prepared for this case, dated
July 1, 1997.
Having accounted for U.S. production of salmon cuts, we find that
the production data provided in the petition indicate that the
petitioners account for more than 50 percent of the total production of
the domestic like product, thus meeting the requirements of section
702(c)(4)(A) of the Act. Since the petitioners exceed the industry
support threshold, we have not taken the letters of opposition that
were filed with the Association's June 27, 1997, submission into
account in our determination of industry support.
Injury Test
Because Chile is a ``Subsidies Agreement Country'' within the
meaning of section 701(b) of the Act, Title VII of the Act applies to
this investigation. Accordingly, the U.S. International Trade
Commission (``ITC'') must determine whether imports of the subject
merchandise from Chile materially injure, or threaten material injury
to, a U.S. industry.
Allegation of Subsidies
Section 702(b) of the Act requires the Department to initiate a
countervailing duty proceeding whenever an interested party files a
petition, on behalf of an industry, that (1) alleges the elements
necessary for an imposition of a duty under section 701(a), and (2) is
accompanied by information reasonably available to petitioners
supporting the allegations.
Initiation of Countervailing Duty Investigations
The Department has examined the petition on fresh Atlantic salmon
(``salmon'') from Chile and found that it complies with the
requirements of section 702(b) of the Act. Therefore, in accordance
with section 702(b) of the Act, we are initiating a countervailing duty
investigation to determine whether producers or exporters of salmon
from Chile receive subsidies.
We are including in our investigation the following programs
alleged in the petition to have provided subsidies to producers of the
subject merchandise in Chile:
1. Fundacion Chile Assistance
a. Company Start Up Projects
b. Provision of Salmon Infrastructure
c. Technology Support Measures
2. Institute for Technological Research (INTEC)
3. Fund for Technological and Productive Development (FONTEC) Grants
4. Central Bank Chapter 19 (Debt Conversion Program)
5. Central Bank Chapter 18 (Debt Conversion Program)
6. ProChile Export Promotion Assistance
7. Export Promotion Fund
8. Chilean Production Development Corporation (CORFO) Export Credit
Insurance Program
9. CORFO Export Credits and Long-Term Export Financing
10. Law No. 18,439 (Export Credit Limits)
11. GOC Guarantee of Private Bank Loans
12. Law No. 18,449 (Stamp Tax Exemption)
13. Law No. 18,634 (Deferred and/or Waived Import Duties on Capital
Goods)
14. Import Substitution of Capital Goods
15. Import Substitution for New Industries
16. Tax Deductions Available to Exporters
17. Law No. 18,392 (Tax Exemptions)
18. Article 59 of Decree Law 824 (Chilean Income Tax Law)
19. Decree 15 (Promotion and Development Fund)
We are not including in our investigation the following programs
alleged to be benefitting producers and exporters of the subject
merchandise in Chile:
1. Decree Law No. 825 (VAT Rebates for Goods Necessary for Exporting)
Petitioners allege that Decree Law No. 825 allows exporters to
recover the 18 percent VAT tax paid on domestic transactions associated
with export activities. Exporters may either receive the tax benefit in
the form of a fiscal credit deductible from the tax charged on their
local sales, or as the cash equivalent of the VAT tax actually paid.
Petitioners assert that because the Department initiated an
investigation of this program in Standard Carnations from Chile
(``Carnations''), 52 FR 3313 (February 3, 1987), the Department should
investigate whether salmon exporters received VAT rebates during the
POI that extended to inputs that were not consumed in the production of
the export product.
We determined this program to be not countervailable in Carnations.
Further, petitioners have provided no basis to believe or suspect that
the program currently provides excessive rebates. On this basis, we are
not including this program in our investigation.
2. Law No. 18,708 (Duty Drawback)
Petitioners allege that Law No. 18,708 provides drawback of custom
duties paid on imported inputs incorporated into the production of
exported final goods. Petitioners assert that we should investigate
this program because in Carnations, we determined the Law No. 18,480
Simplified Duty Drawback program to be countervailable because it
allowed for excessive drawback of duties. Based on this finding,
petitioners argue the GOC has a practice of remitting excessive import
duties.
We do not consider duty drawback on inputs consumed in the
production of exported products to be countervailable subsidies.
Petitioners have provided no basis for us to believe or suspect that
the duty drawback under Law No. 18,708 is
[[Page 36775]]
excessive. On this basis, we are not including this program in our
investigation.
3. Tariff Abatement for New Companies
Petitioners allege that the GOC provides a tariff abatement of up
to 80 percent to firms that move their machinery to Chile to continue
operations there. Petitioners assert that this abatement constitutes an
import substitution subsidy. However, petitioners have not explained
how this tariff abatement promotes the use of domestic over imported
goods. On this basis, we are not including this program in our
investigation.
4. Law No. 18,645 Loan Guarantees
Petitioners allege that Law No. 18,645 provides loan guarantees to
exporters of non-traditional goods who typically have less access to
ordinary commercial financing. The program provides guarantees of up to
50 percent of the exporter's loans and the loans may not exceed
$150,000. Petitioners state that although the program guarantees
financing at market rates and a fee is charged for the guarantees, the
terms of the guarantees are inconsistent with commercial considerations
because they allow exporters to obtain financing sooner and more easily
then they otherwise could.
Petitioners speculate that the fees paid for Law No. 18,645 loan
guarantees are preferential but provide no information in this respect.
Further, regarding the allegation that exporters are able to receive
loans more easily and sooner as a result of this program, petitioners
have failed to allege any benefit by reason of loans obtained on non-
commercial terms. On this basis, we are not including this program in
our investigation.
5. Currency Retention Scheme
Petitioners allege that exporters are limited in their use of the
foreign exchange they earn from export activities because the Central
Bank requires them to repatriate their foreign exchange earnings to
commercial banks within a designated period. However, the GOC allows
certain exporters to waive this rule if they have export-oriented
investment projects that require the repayment of foreign suppliers or
financial credits of over one year with special authorization from the
Central Bank. This program was investigated in Carnations and found not
used.
The International Monetary Fund's Exchange Arrangements and
Exchange Restrictions Annual Report on Chile states that as of June 16,
1995, exporters were no longer required to repatriate export proceeds
to the Central Bank. Given the elimination of the repatriation
requirement, exemptions from the requirement cease to have meaning. (We
note that petitioners based their allegation on the IMF's 1991 Annual
Report.) On this basis, we are not including this program in our
investigation.
6. Law No. 18,480 (Simplified Duty Drawback)
Petitioners allege that Law No. 18,480, enacted in 1985, allows
certain exporters a duty drawback of up to 10 percent of the FOB value
of their exports representing import duties paid on imported inputs
used to produce non-traditional exports. Petitioners also assert that
another provision of the law entitles exporters that are using
domestically-produced inputs in their export operations an amount of
duty drawback that the exporter would otherwise realize if they had
imported the inputs. Petitioners allege although this program was
amended to exclude salmon, the program should be investigated given
that the exclusion of salmon was recent.
Included in the information provided by the GOC during its
consultations with the Department were copies of Decrees 102 (dated
March 27, 1991) and 123 (dated March 14, 1997). These decrees clearly
state that as of December 31, 1990, Atlantic salmon was excluded from
the duty drawback provided by Law No. 18,480. On this basis, we are not
including this program in our investigation.
7. VAT Rebates for Fixed Assets
Petitioners allege that exporters may recover the VAT paid on fixed
assets after a designated waiting period of six months from the date of
purchase. They claim that the program is available only to exporters in
that the rebate is limited to acquisitions incurred in the
preproduction phase of export operations.
Petitioners have provided no information to indicate that the VAT
rebates are in any way excessive or that they are provided only to
exporters. On this basis, we are not including this program in our
investigation.
8. Exemption From Prior Deposit Requirements
Petitioners allege that the Central Bank grants companies producing
exclusively for export a complete exemption from prior-deposit
requirements of import taxes on new and used components.
Information provided by the GOC during its consultations with the
Department included a copy of section 88 of Law 18,840, which states
that under no circumstances may prior deposits be required for the
execution of export or import transactions. On this basis, we are not
including this program in our investigation.
9. Decree Law No. 889 (Tax Credits)
Petitioners allege that Decree Law No. 889 provides tax credits to
``non-traditional'' enterprises located in Region I (far north), XI
(Rio Palena to south of O'Higgins) and XII (Cape Horn) regions.
Eligible enterprises receive a subsidy equal to 17 percent of the
employees' taxable income, up to a maximum of 60,000 pesos.
Evidence presented in the petition reveals that this program was
terminated after December 31, 1992. Further, petitioners have not
provided a sufficient basis for us to believe or suspect that the Tax
Credits program remains in existence. On this basis, we are not
including this program in our investigation.
Distribution of Copies of the Petition
In accordance with section 702(b)(4)(A) of the Act, a copy of the
public version of the petition has been provided to the representatives
of Chile. We will attempt to provide copies of the public version of
the petition to all the exporters named in the petition.
ITC Notification
We have notified the ITC of our initiation of this investigation as
required by section 702(d) of the Act.
Preliminary Determination by the ITC
The ITC will determine by July 28, 1997, whether there is a
reasonable indication that imports of fresh Atlantic salmon from Chile
are causing material injury, or threatening to cause material injury,
to a U.S. industry. A negative ITC determination will result in
termination of the investigation; otherwise, the investigation will
proceed according to statutory and regulatory time limits.
This notice is published pursuant to 702(c)(2) of the Act.
Dated: July 2, 1997.
Joseph A. Spetrini,
Acting Assistant Secretary for Import Administration.
[FR Doc. 97-17951 Filed 7-8-97; 8:45 am]
BILLING CODE 3510-DS-P
