Initiation of Antidumping Duty Investigation: Fresh Atlantic Salmon From Chile

DEPARTMENT OF COMMERCE

International Trade Administration

[A-337-803]

Initiation of Antidumping Duty Investigation: Fresh Atlantic

Salmon From Chile

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

EFFECTIVE DATE: July 10, 1997.

FOR FURTHER INFORMATION CONTACT: Michelle Frederick, at (202) 482-0186,

or Kris Campbell, at (202) 482-3813; Import Administration,

International Trade Administration, U.S. Department of Commerce, 14th

Street and Constitution Avenue, NW., Washington, DC 20230.

INITIATION OF INVESTIGATION:

The Applicable Statute and Regulations

Unless otherwise indicated, all citations to the statute are

references to the provisions effective January 1, 1995, the effective

date of the amendments made to the Tariff Act of 1930 (the Act) by the

Uruguay Round Agreements Act (URAA). In addition, unless otherwise

indicated, all citations to the Department's regulations refer to the

regulations, codified at 19 CFR part 353, 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''). The

petitioners submitted information supplementing the petition on June

23, 1997.

The petitioners allege that imports of fresh Atlantic salmon from

Chile are being, or are likely to be, sold in the United States at less

than fair value within the meaning of section 731 of the Act, and that

such imports are materially injuring, or threatening material injury

to, a U.S. industry.

The Department finds that the petitioners have standing to file the

petition because they are interested parties as defined in section

771(9)(C) of the Act, and because they have demonstrated sufficient

industry support (see discussion below).

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 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 classifiable as

statistical reporting numbers 0302.12.0003 and 0304.10.4091 of the

Harmonized Tariff Schedule (HTS) of the United States. Although the HTS

subheadings are provided for convenience and customs purposes, the

written description of the merchandise is dispositive.

[[Page 37028]]

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 encourages all

interested parties to submit such comments before 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 732(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 an antidumping 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 732(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

Fed. Reg. 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

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

[[Page 37029]]

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 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 a 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

732(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.

Export Price and Normal Value

The petitioners calculated separate export prices for dressed

Atlantic salmon (dressed salmon), fillets of Atlantic salmon (fillets),

and steaks of Atlantic salmon (steaks).

For dressed salmon and fillets, the petitioners based export price

on 1996 CIF price quotes to U.S. customers, as reported by the Urner

Barry guide, an industry standard for seafood price quotes. The

petitioners made deductions for foreign inland freight, international

freight, and brokerage fees.

For steaks, the petitioners based export price on 1996 FOB Chilean

export values derived from Chilean Customs Service statistics, because

the Urner Barry guide does not track salmon steak. The petitioners made

deductions for foreign inland freight.

With respect to normal value, the petitioners could not find

specific data regarding the size of the Chilean domestic market for

Atlantic salmon. However, they obtained statements from several

sources, including the Chilean Salmon and Trout Producers Association

and the U.S. Department of Agriculture, indicating that virtually all

production of Chilean Atlantic salmon is exported. Given these

statements, and the lack of information about the size of the Chilean

domestic market, the petitioners turned to third country exports as the

basis for normal value. The petitioners determined that Japan and

Brazil are the largest third country markets, based on statistics taken

from an export statistics bulletin published by the Chilean

Government's Instituto de Fomento Pesquero (IFOP).

The petitioners obtained prices for exports to Japan and Brazil

from the IFOP export statistics bulletin, but did not rely upon these

prices for a price-to-price comparison of U.S. sales to third country

sales. Instead, the petitioners alleged that sales in the third country

markets of Japan and Brazil were made at prices below the fully

allocated cost of production (COP), and cannot serve as the basis for

normal value.

The petitioners calculated COP using data derived primarily from a

consultant's report commissioned by the Alaska Department of Commerce

and Economic Development, as well as from the financial statements of

two Chilean fresh Atlantic salmon producers.

The Statement of Administrative Action (SAA), submitted to Congress

in connection with the interpretation and application of the Uruguay

Round Agreements, states that an allegation of sales below COP need not

be specific to individual exporters or producers. SAA, H.R. Doc. No.

316, 103d Cong., 2d Sess., at 833 (1994). The SAA, at 833, states that

``Commerce will consider allegations of below-cost sales in the

aggregate for a foreign country, just as Commerce currently considers

allegations of sales at less than fair value on a country-wide basis

for purposes of initiating an antidumping investigation.''

Further, the SAA provides that ``new section 773(b)(2)(A) retains

the current requirement that Commerce have ``reasonable grounds to

believe or suspect'' that below cost sales have occurred before

initiating such an investigation. ``Reasonable grounds'' * * * exist

when an interested party provides specific factual information on costs

and prices, observed or constructed, indicating that sales in the

foreign market in question are at below-cost prices.'' Id.

Based on a comparison of the Japan and Brazil prices for fresh

Atlantic salmon to the COP calculated in the petition, we find

reasonable grounds to believe or suspect that sales of the foreign like

product were made at prices below COP in accordance with section

773(b)(2)(A)(i) of the Act. Accordingly, the Department is initiating

the requested country-wide cost investigation. We note, however, that

if we determine that the home market (i.e., Chile) is viable, our

initiation of a country-wide cost investigation with respect to sales

to Japan and Brazil will be rendered moot.

Since, as described above, we have found reasonable grounds to

believe or suspect that sales of the foreign like product were made at

prices below COP, for purposes of this initiation we have accepted the

use of CV as the basis for normal value.

The petitioners calculated CVs for dressed salmon, fillets, and

steaks using the same cost of manufacturing, SG&A, and packing expense

figures that were used to compute COP. Consistent with section

773(e)(2), the petitioners included profit in the calculation of CV,

based on the financial statements of Chilean producers of fresh

Atlantic salmon.

Fair Value Comparison

Based on the data provided by the petitioners, there is reason to

believe that imports of fresh Atlantic salmon from Chile are being, or

are likely to be, sold at less than fair value. The weighted-average

dumping margin based on price-to-CV comparisons is 41.78 percent. If it

becomes necessary at a later date to consider the petition as a source

of facts available under section 776 of the Act, we may further review

the margin calculations in the petition.

[[Page 37030]]

Initiation of Antidumping Investigation

We have examined the petition on fresh Atlantic salmon from Chile

and have found that it meets the requirements of section 732 of the

Act, including the requirement concerning allegation of material injury

or threat of material injury to the domestic producers of a domestic

like product by reason of subject imports allegedly sold at less than

fair value. Therefore, we are initiating an antidumping duty

investigation to determine whether imports of fresh Atlantic salmon

from Chile are being, or are likely to be, sold in the United States at

less than fair value. Our preliminary determination will be issued by

November 19, 1997, unless the deadline for the determination is

extended.

Distribution of Copies of the Petition

In accordance with section 732(b)(3)(A) of the Act, a copy of the

public version of the petition has been provided to the representatives

of the Government of Chile. We will attempt to provide a copy of the

public version of each petition to each exporter named in the petition,

as appropriate.

International Trade Commission Notification

We have notified the ITC of our initiation of this investigation,

as required by section 732(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.

Dated: July 2, 1997.

Joseph A. Spetrini,

Acting Assistant Secretary for Import Administration.

[FR Doc. 97-18112 Filed 7-9-97; 8:45 am]

BILLING CODE 3510-DS-P