Notice of Preliminary Determination of Sales at Less Than Fair Value and Postponement of Final Determination: Fresh Atlantic Salmon From Chile

DEPARTMENT OF COMMERCE

International Trade Administration

[A-337-803]

Notice of Preliminary Determination of Sales at Less Than Fair

Value and Postponement of Final Determination: Fresh Atlantic Salmon

From Chile

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

EFFECTIVE DATE: January 16, 1998.

FOR FURTHER INFORMATION CONTACT: Gabriel Adler or Kris Campbell, Office

of AD/CVD Enforcement 2, Import Administration, International Trade

Administration, U.S. Department of Commerce, 14th Street and

Constitution Avenue, N.W., Washington, D.C. 20230; telephone: (202)

482-1442 or (202) 482-3813, respectively.

SUPPLEMENTARY INFORMATION:

The Applicable Statute and Regulations

Unless otherwise indicated, all citations to the statute are

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

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

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

indicated, all citations to Department of Commerce (Department)

regulations refer to the regulations last codified at 19 CFR part 353

(April 1, 1997).

Preliminary Determination

We preliminarily determine that fresh Atlantic salmon from Chile is

being sold, or is likely to be sold, in the United States at less than

fair value (LTFV), as provided in section 733 of the Act. The estimated

margins are shown in the Suspension of Liquidation section of this

notice.

Case History

This investigation was initiated on July 2, 1997. See Initiation of

Antidumping Duty Investigation: Fresh Atlantic Salmon From Chile, 62 FR

37027 (July 10, 1997) (Initiation Notice). Since the initiation of the

investigation, the following events have occurred:

On July 12, 1997, the United States International Trade Commission

(the ITC) preliminarily determined that there is a reasonable

indication that imports of the product under investigation are

materially injuring the United States industry.

On July 21, 1997, the Department invited interested parties to

submit comments regarding selection of respondents and model matching.

After considering those comments, on August

[[Page 2665]]

26, 1997, the Department selected the following companies as

respondents in this investigation: Pesquera Mares Australes Ltda.

(Mares Australes); Marine Harvest Chile (Marine Harvest); Aguas Claras

S.A. (Aguas Claras); Pesquera Eicosal Ltda. (Eicosal); and Cia.

Pesquera Camanchaca S.A. (Camanchaca) (collectively ``respondents'').

See Selection of Respondents, below. On the same date, the Department

issued an antidumping questionnaire to the selected respondents.

1

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\1\ Section A of the questionnaire requests general information

concerning a company's corporate structure and business practices,

the merchandise under investigation that it sells, and the manner in

which it sells that merchandise in all of its markets. Section B

requests a complete listing of all home market sales, or, if the

home market is not viable, of sales in the most appropriate third-

country market. Section C requests a complete listing of U.S. sales.

Section D requests information on the cost of production of the

foreign like product and the constructed value of the merchandise

under investigation.

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The respondents submitted their initial responses to that

questionnaire in September and October of 1997. After analyzing these

responses, we issued supplemental questionnaires to the respondents to

clarify or correct the initial questionnaire responses.

On October 6, 1997, the Coalition for Fair Atlantic Salmon Trade

(the petitioners) requested that the Department initiate a sales-below-

cost investigation with respect to sales in Canada by Aguas Claras.

2 The petitioners' allegation was timely, and provided

reasonable grounds to believe that Aguas Claras had made sales below

cost in Canada. Therefore, in accordance with section 773(b) of the

Act, on October 21, 1997, we initiated a sales-below-cost investigation

with respect to Aguas Claras' sales to Canada. See Cost of Production,

below.

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\2\ The petition had demonstrated reasonable grounds to believe

that Chilean producers/exporters of the foreign like product had

made sales below cost in Japan and Brazil, and the Department had

initiated country-wide cost investigations with respect to these

markets. However, the petition did not make an allegation of sales

below cost with respect to Canada. See Initiation Notice at 37029.

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On October 17, 1997, in accordance with section 773(a)(1) of the

Act, the Department determined that a particular market situation

existed in the home market that rendered sales in that market an

inappropriate basis for comparison to U.S. sales. The Department

requested that Eicosal and Mares Australes, the two respondents that

had provided a response to Section B of our questionnaire based on home

market sales, provide a revised response based on sales to Japan, the

only viable third-country market for those two companies. Eicosal and

Mares Australes complied with this request, but argued that to the

extent that the Department considered that the home market presents a

particular market situation, it should find that Japan also presents a

particular market situation. See Selection of Comparison Markets,

below.

On October 17, 1997, the petitioners filed a timely request for a

50-day postponement of the preliminary determination. Absent compelling

reasons to deny this request, and in accordance with section

733(c)(1)(A) of the Act and section 353.15(c) of the Department's

regulations, on October 23, 1997, the Department postponed the

preliminary determination until not later than January 8, 1998. See

Notice of Postponement of Preliminary Antidumping Determination: Fresh

Atlantic Salmon from Chile, 62 FR 56151 (October 29, 1997).

Postponement of Final Determination

Section 735(a)(2) of the Act provides that a final determination

may be postponed until not later than 135 days after the date of the

publication of the preliminary determination, if in the event of an

affirmative preliminary determination, a request for such postponement

is made by exporters who account for a significant proportion of

exports of the subject merchandise.

On December 18, 1997, the respondents in this investigation, who

account for a significant proportion of exports of subject merchandise,

made such a request. In their request for an extension of the deadline

for the final determination, the respondents consented to the extension

of provisional measures to no longer than six months. Since this

preliminary determination is affirmative, and there is no compelling

reason to deny the respondents' request, we have extended the deadline

for issuance of the final determination until the 135th day after the

date of publication of this preliminary determination in the Federal

Register.

Period of Investigation

The period of investigation (POI) is April 1, 1996, through March

31, 1997. This period corresponds to each respondent's four most recent

fiscal quarters prior to the month of the filing of the petition (i.e.,

June 1996).

Scope of Investigation

The scope of this investigation covers fresh, farmed Atlantic

salmon, whether imported ``dressed'' or cut. Atlantic salmon is the

species Salmo salar, in the genus Salmo of the family salmoninae.

``Dressed'' Atlantic salmon refers to salmon that has been bled,

gutted, and cleaned. Dressed Atlantic salmon may be imported with the

head on or off; with the tail on or off; and with the gills in or out.

All cuts of fresh Atlantic salmon are included in the scope of the

investigation. Examples of cuts include, but are not limited to:

crosswise cuts (steaks), lengthwise cuts (fillets), lengthwise cuts

attached by skin (butterfly cuts), combinations of crosswise and

lengthwise cuts (combination packages), and Atlantic salmon that is

minced, shredded, or ground. Cuts may be subjected to various degrees

of trimming, and imported with the skin on or off and with the ``pin

bones'' in or out.

Excluded from the scope are (1) fresh Atlantic salmon that is ``not

farmed'' (i.e., wild Atlantic salmon); (2) live Atlantic salmon; and

(3) Atlantic salmon that has been subject to further processing, such

as frozen, canned, dried, and smoked Atlantic salmon, or processed into

forms such as sausages, hot dogs, and burgers.

The merchandise subject to this investigation is classifiable as

item numbers 0302.12.0003 and 0304.10.4093 of the Harmonized Tariff

Schedule (HTS) of the United States. Although the HTS statistical

reporting numbers are provided for convenience and customs purposes,

the written description of the merchandise is dispositive.

Class or Kind

We have preliminarily determined that the products subject to this

investigation comprise a single class or kind of merchandise. Our

determination is based on an evaluation of the criteria set forth in

Diversified Products v. United States, 572 F. Supp. 883, 889 (CIT 1983)

(Diversified Products), which look to differences in: (1) The general

physical characteristics of the merchandise, (2) the expectations of

the ultimate purchaser, (3) the ultimate use of the merchandise, (4)

the channels of trade in which the merchandise moves, and (5) cost. In

making this determination, we have rejected a request by two of the

respondents in this investigation, Mares Australes and Eicosal, that

the Department determine that there are two separate classes or kinds

of merchandise subject to investigation: (1) Fresh whole dressed

Atlantic salmon, and (2) fresh Atlantic salmon meat. See letter from

Arnold & Porter to Department of Commerce (November 3, 1997). In our

analysis of the Diversified Products criteria, we found first, with

respect to physical differences, that although certain differences

between the two forms of the

[[Page 2666]]

merchandise exist, these differences have not been shown to outweigh

the similarities among the products. With respect to the expectations

of the ultimate purchaser and the ultimate use of the merchandise, we

found that both whole dressed salmon and salmon cuts are ultimately

destined for human consumption. Moreover, even if we were to consider

restaurants/supermarkets as the ``ultimate purchaser,'' there is

insufficient evidence to support the respondents' claim that whole

salmon is sold to gourmet restaurants and fillets of salmon are sold to

supermarkets and warehouse retailers. Finally, with respect to cost, we

found while there is a cost difference involved in the additional

cutting procedure required to make a fillet from a dressed fish, that

difference alone is not significant enough to warrant a finding that

there are two classes or kinds of merchandise. For a more detailed

discussion of our preliminary determination with respect to the class

or kind issue, see Memorandum from Gary Taverman to Richard W.

Moreland, Fresh Atlantic Salmon from Chile: Issues Concerning the

Preliminary Determination of Sales at Less Than Fair Value (January 8,

1998) (Preliminary Determination Memorandum).

Selection of Respondents

Section 777A(c)(1) of the Act directs the Department to calculate

individual dumping margins for each known exporter and producer of the

subject merchandise. However, section 777A(c)(2) of the Act gives the

Department discretion, when faced with a large number of exporters/

producers, to limit its examination to a reasonable number of such

companies if it is not practicable to examine all companies. Where it

is not practicable to examine all known producers/exporters of subject

merchandise, this provision permits the Department to investigate

either: (1) A sample of exporters, producers, or types of products that

is statistically valid based on the information available at the time

of selection, or (2) exporters and producers accounting for the largest

volume of the subject merchandise that can reasonably be examined.

After consideration of the complexities expected to arise in this

proceeding (including issues of model matching, market viability, and

cost of production), and the resources available to the Department, we

determined that it was not practicable in this investigation to examine

all known producers/exporters of subject merchandise. Instead, we found

that given our resources we would be able to investigate the five

producers/exporters with the greatest export volume, as identified

above. These companies accounted for slightly less than 50 percent of

all known exports of the subject merchandise during the POI. For a more

detailed discussion of respondent selection in this investigation, see

Memorandum from the Team to Richard W. Moreland, (August 26, 1997)

(Respondent Selection Memorandum).

Product Comparisons

Pursuant to section 771(16) of the Act, all products produced by

the respondents that fit the definition of the scope of the

investigation and were sold in the comparison third-country markets

during the POI fall within the definition of the foreign like product.

We have relied on three criteria to match U.S. sales of subject

merchandise to comparison market sales of the foreign like product:

form, grade, and weight band. We have determined that it is generally

not possible to match across forms, grades, or weight bands, because

there are significant differences among products that cannot be

accounted for by means of a difference-in-merchandise adjustment. (The

exception to this general rule is that dressed salmon with gills in can

be compared to dressed salmon with gills out, after making a

difference-in-merchandise adjustment.) Therefore, we have compared U.S.

sales to comparison market sales of identical merchandise, and have not

compared U.S. sales to comparison market sales of similar merchandise.

A detailed description of the matching criteria, as well as our

matching methodology, is contained in the Preliminary Determination

Memorandum.3

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\3\ Certain respondents contend that, in the Japanese market,

there is a distinction between premium and super-premium salmon.

While we have accepted this claim for the preliminary determination,

we intend to examine this issue thoroughly at verification.

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Fair Value Comparisons

To determine whether sales of fresh Atlantic salmon from Chile were

made in the United States at less than fair value, we compared the

export price (EP) or constructed export price (CEP) to the normal value

(NV), as described in the Export Price and Constructed Export Price and

Normal Value sections of this notice. In accordance with section

777A(d)(1)(A)(i) of the Act, we calculated weighted-average EPs and

CEPs for comparison to weighted-average NVs.

Export Price and Constructed Export Price

In accordance with section 772 of the Act, we calculated either an

EP or a CEP, depending on the nature of each sale. Section 772(a) of

the Act defines EP as the price at which the subject merchandise is

first sold before the date of importation by the exporter or producer

outside the United States to an unaffiliated purchaser in the United

States, or to an unaffiliated purchaser for exportation to the United

States. Section 772(b) of the Act defines CEP as the price at which the

subject merchandise is first sold in the United States before or after

the date of importation, by or for the account of the producer or

exporter of the merchandise, or by a seller affiliated with the

producer or exporter, to an unaffiliated purchaser, as adjusted under

sections 772 (c) and (d) of the Act.

Consistent with these definitions, we have found that Aguas Claras,

Mares Australes, and Camanchaca made EP sales during the POI. These

sales are properly classified as EP sales because they were made by the

exporter or producer outside the United States to unaffiliated

customers in the United States prior to the date of importation. We

note that the Aguas Claras EP sales were indirect (i.e., these sales

were made through an affiliated U.S. reseller that facilitated the

processing of sales documentation).

We also found that all the respondents made CEP sales during the

POI. Marine Harvest and Aguas Claras made sales through an affiliated

reseller in the United States after the date of importation. Mares

Australes, Eicosal, and Camanchaca made sales classifiable as CEP sales

because the sales were made for the account of the producer/exporter by

an unaffiliated consignment agent in the United States after the date

of importation.4

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\4\ On October 31, 1997, the petitioners alleged that

respondents Mares Australes, Camanchaca, and Eicosal are affiliated

with their U.S. consignment sellers because the nature of a

consignment relationship is such that the consignment seller

controls the exporter. We have not adopted that position for this

preliminary determination. In recent cases involving consignment

sales of agricultural products, we explicitly recognized that a

consignment relationship does not per se establish affiliation

between the producer and the consignment seller. See, e.g., Certain

Fresh Cut Flowers from Colombia; Final Results and Partial

Rescission of Antidumping Duty Administrative Review, 62 FR 53287,

53295 (October 14, 1997) (rejecting petitioners' contention that

``any consignment sale implies affiliation between the exporter and

the consignment importer''). Beyond the consignment nature of the

relationship between the parties, the evidence on the record does

not warrant a finding of affiliation. For a further discussion of

this issue, see Preliminary Determination Memorandum.

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[[Page 2667]]

In their original questionnaire responses, Mares Australes,

Eicosal, and Camanchaca reported prices based on the aggregated

revenues reported periodically by unaffiliated consignment sellers.

Because it is the Department's preference to examine transaction-

specific data wherever possible, we requested that these three

respondents prepare a listing of all sales made by unaffiliated

consignment sellers to their U.S. customers. See letters from

Department of Commerce to Arnold & Porter (October 31, 1997) (regarding

sales by Eicosal and Camanchaca), and (November 20, 1997) (regarding

sales by Mares Australes). The respondents complied with this request,

but argued that since this data is not normally in their possession,

the Department should instead rely on prices calculated on the basis of

the aggregated revenues reported by the unaffiliated consignment

sellers. See letters from Arnold & Porter to Department of Commerce

(November 18, 1997) (submitting sales data for Eicosal and Camanchaca),

and (December 8, 1997) (submitting sales data for Mares Australes).

Given the Department's preference for transaction-specific data, we

have relied on that data for this preliminary determination.

For all respondents, we calculated EP and CEP, as appropriate,

based on packed prices charged to the first unaffiliated customer in

the United States. (Where sales were made through consignment sellers,

we did not consider the consignment seller to be the customer; rather,

the relevant customer was the consignment seller's customer.) We based

the date of sale on the date of the invoice issued to the U.S.

customer.

In accordance with section 772(c)(2) of the Act, we reduced the EP

and CEP by movement expenses and export taxes and duties, where

appropriate.

Section 772(d)(1) of the Act provides for additional adjustments to

the CEP. Generally, where sales were made through an unaffiliated

consignment seller for the account of the exporter, we deducted

commissions from the CEP.5 Where sales were made through an

affiliated reseller, we deducted direct and indirect selling expenses

that related to commercial activity in the United States.

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\5\ Consistent with our practice, we did not deduct from the CEP

the expenses of the unaffiliated consignment seller, since such

expenses are effectively covered by the commission charged by the

consignment seller to the producer/exporter. See, e.g., Certain

Fresh Cut Flowers from Colombia; Final Results and Partial

Rescission of Antidumping Duty Administrative Review, 62 FR 53287,

53295 (October 14, 1997).

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Section 772(d)(3) of the Act requires that the CEP be adjusted for

the profit allocated to the selling expenses of a producer/exporter's

affiliated reseller. For Marine Harvest and Aguas Claras, which made

sales through affiliated resellers, we calculated a CEP profit ratio

following the methodology set forth in section 772(f) of the Act.

We made company-specific adjustments as follows:

Aguas Claras. We based EP and CEP on delivered or C&F prices to

unaffiliated customers in the United States. For both EP and CEP sales,

we made deductions from the starting price, where appropriate, for

movement expenses including foreign inland freight from the plant to

Santiago airport, international air freight/insurance, and U.S.

brokerage and handling fees and port charges. We also made deductions

for post sale price adjustments corresponding to quality claims.

In addition, for CEP sales, we made deductions for U.S. inland

freight to the customer, imputed credit, direct advertising, export

documentation fees, quality control/inspection fees, and U.S. repacking

costs.

Camanchaca. We based EP on either delivered, CIF Miami airport, or

delivered, C&F Los Angeles airport, prices to unaffiliated customers in

the United States. We based CEP on either delivered to customer or

delivered FOB warehouse prices to unaffiliated customers of the

consignment seller. For both EP and CEP sales, we made deductions from

the starting price, where appropriate, for movement expenses including

foreign inland freight from plant to Santiago airport, international

air freight, transportation insurance from plant to final destination,

and customs export documentation fees.

In addition, for CEP sales, we made deductions for U.S. customs

duties, handling and warehousing fees, U.S. inland freight from the

consignee to customer, as well as imputed credit, direct advertising,

and wire transfer fees.

Eicosal. We based CEP on either FOB Miami, or delivered prices to

the unaffiliated consignment seller's customers in the United States.

We made deductions from the starting price, where appropriate, for

movement expenses including foreign inland freight from plant to

Chilean port of exit, international air freight, Chilean brokerage and

handling fees, and U.S. inland freight from warehouse to customer. We

also deducted post-sale price adjustments, including quality claims and

invoicing errors; imputed credit; direct advertising; quality control/

inspection fees; expenses for maintaining bank accounts in the United

States for sales of the subject merchandise; and expenses associated

with gill tags. We made an upward adjustment to the starting price for

duty drawback.

Mares Australes. We based EP and CEP on either ex-factory, C&F U.S.

port, or FOB Santiago prices to unaffiliated customers in the United

States. For both EP and CEP sales, we made deductions from the starting

price, where appropriate, for movement expenses including foreign

inland freight from plant to Santiago airport, international air

freight, U.S. customs duty, U.S. brokerage and handling, and post sale

price adjustments including quality claims and a consignment broker's

surcharge.

In addition, for CEP sales, we made deductions for U.S. inland

freight from the consignee to customer, as well as for imputed credit,

direct advertising, Chilean customs export documentation fees, and

quality control/inspection fees.

Marine Harvest. We based CEP on FOB U.S. port and delivered prices

to unaffiliated customers in the United States. We made deductions from

the starting price, where appropriate, for movement expenses including

foreign inland freight from plant to Santiago airport, international

air freight, U.S. customs duty, U.S. brokerage and handling, and post

sale price adjustments including quality claims and rebates. In

addition, we deducted U.S. inland freight from the port to the

affiliated reseller and from the affiliated reseller to customer, as

well as indirect selling expenses incurred by the affiliated reseller,

repacking costs, imputed credit, inventory carrying costs, advertising,

Chilean customs fees, quality control/inspection fees, and Association

membership fees.

Normal Value

A. Selection of Comparison Markets

Section 773(a)(1) of the Act directs that NV be based on the price

at which the foreign like product is sold in the home market (or third

country market), provided that the merchandise is sold in sufficient

quantities (or value, if quantity is inappropriate) and that there is

no particular market situation that prevents a proper comparison with

the EP or CEP. The statute contemplates that quantities (or value) will

normally be considered insufficient if they are less than five percent

of the aggregate

[[Page 2668]]

quantity (or value) of sales of the subject merchandise to the United

States.

In their responses to our antidumping questionnaires, Mares

Australes and Eicosal claimed that NV should be based on home market

sales because the home market was viable. Marine Harvest and Aguas

Claras indicated that their respective home markets were not viable,

and claimed that NV should instead be based on sales to Japan and

Canada, respectively, the only viable third-country market for each of

these companies. Camanchaca stated that it had no viable comparison

market at all, and claimed that NV should be based on the constructed

value.

In determining the appropriate comparison market for each

respondent, we examined several issues, as discussed in detail in the

Preliminary Determination Memorandum. First, we determined that Chile

was not an appropriate comparison market for Mares Australes and

Eicosal because a particular market situation existed in Chile. Our

determination was based on record evidence indicating that this market

involves almost exclusively ``industrial'' or ``off-quality'' grades

sold directly from the factory depending on availability. Since the

Chilean market is incidental to the respondents, it is not appropriate

for comparison with the U.S. market, which is one of the respondents'

primary marketing targets and which involves sales of primarily high-

grade ``premium'' salmon made through distributors.

After rejecting the use of the home market for Mares Australes and

Eicosal, we determined that Japan is the appropriate comparison market

for Mares Australes, Eicosal, and Marine Harvest. In making this

determination, we rejected a contention by Mares Australes and Eicosal

that, by the logic of the Department's decision to reject the home

market, the Department should also find that Japan presents a

particular market situation. We determined that the Japanese market,

unlike the home market, is not incidental to the respondents. Sales to

that market involve export-quality merchandise which, while often

different in grade from merchandise sold in the United States, is not

so different as to render the Japanese market as a whole an unsuitable

basis for NV. By contrast, as explained above, the merchandise sold in

the home market involved a relatively small volume of merchandise that

was not of export-quality. Further, we note that the Department's

decision to reject the use of the home market was predicated in part on

the manner in which the foreign like product is sold in that market.

Sales in Chile are made directly from the respondents' processing

facilities, with no guarantee of quality, on an ``as available'' basis.

By contrast, sales to both the United States and Japan involve much

more elaborate distribution systems, which are designed to ensure

customer satisfaction. In view of these considerations, we determined

that Japan could serve as a proper market on which to base NV.

We note that for Eicosal and Marine Harvest, we were unable to find

any appropriate price-to-price comparisons based on sales to Japan for

this preliminary determination. Accordingly, for these companies we

compared all U.S. sales to constructed value (CV), i.e., the cost of

the merchandise sold in the United States as if it were sold in Japan.

However, for Mares Australes we were able to make price-to-price

comparisons for some U.S. sales.

For Aguas Claras, we determined that the appropriate comparison

market is Canada. For this company, we were able to find appropriate

price-based NV matches for some U.S. sales; for the others, we resorted

to CV. Finally, we based NV for Camanchaca entirely on CV, as that

company did not have a viable comparison market.

Adjustments made in deriving the NVs for each company are described

in detail in Calculation of Normal Value Based on Third-Country Prices

and Calculation of Normal Value Based on Constructed Value, below.

B. Cost of Production Analysis

We tested whether comparison market sales were made below cost for

all respondents except Camanchaca, which did not have a viable

comparison market. Although Eicosal and Marine Harvest did not have

comparison market sales of comparable merchandise during the POI, we

performed a cost analysis based upon the petitioners' timely cost

allegation for purposes of determining the proper basis for calculation

of profit for CV.

Based on an allegation contained in the petition, we found

reasonable grounds to believe or suspect that sales of fresh Atlantic

salmon made in Japan and Brazil were made at prices below the cost of

production (COP). See Initiation Notice, 62 FR at 37029, and Memorandum

from the Team to Richard Moreland, (July 1, 1997) (Initiation

Checklist), at 10. In addition, based on a timely allegation filed by

the petitioners on October 6, 1997, the Department found reasonable

grounds to believe or suspect that sales made by Aguas Claras in Canada

were made at prices below the COP. See Memorandum from the Team to

Richard Moreland, Regarding Petitioners' Allegation of Sales Below the

Cost of Production for Aguas Claras (October 21, 1997). As a result,

the Department has conducted investigations to determine whether the

respondents made sales in their respective third-country markets at

prices below their respective COPs during the POI within the meaning of

section 773(b) of the Act.

1. Calculation of COP. In accordance with section 773(b)(3) of the

Act, we calculated a weighted-average COP for each form of fresh

Atlantic salmon, based on the sum of the cost of materials, fabrication

and general expenses, and packing costs. We relied on the COP data

submitted by each respondent in its supplementary cost questionnaire

response, except, as discussed below, in specific instances where the

submitted costs were not appropriately quantified or valued.

Aguas Claras. We revised Aguas Claras' financial expenses to

exclude an offset for accounts receivables and finished goods

inventory.

Camanchaca. We revised Camanchaca's financial expenses to reflect

the ratio of net financial expenses to cost of goods sold, consistent

with our general practice in the calculation of financial expenses.

Eicosal. We recalculated Eicosal's net financial expense on the

basis of the consolidated financial expenses of Eicosal's parent

company, Sociedad Pesquera Eicosal S.A. We also recalculated Eicosal's

general & administrative (G&A) expenses to exclude an affiliated

company's G&A expenses.

Mares Australes. We revised Mares Australes' financial expenses to

exclude an offset for accounts receivables and finished goods

inventory. We also rejected Mares Australes' claim that the calculation

of costs should not include the costs associated with a particular

group of salmon that had reached sexual maturation prior to harvesting

(i.e., salmon that had reached a ``grilse'' stage), because we found

that the respondent did not adequately support its claim that this is

an unusual, isolated event. We relied on the average cost to produce

all groups of salmon sold during the POI.

Marine Harvest. We increased the reported cost of eggs and feed

purchased from affiliated parties to reflect the difference between

transfer prices and market prices, since the transfer prices were below

market prices.

2. Test of Third-Country Comparison Market Sales Prices. We

compared the adjusted weighted-average COP for each

[[Page 2669]]

respondent to the third-country comparison market sales of the foreign

like product as required under section 773(b) of the Act (except for

Camanchaca, which had no viable comparison market), in order to

determine whether these sales had been made at prices below the COP

within an extended period of time in substantial

quantities,6 and whether such prices were sufficient to

permit the recovery of all costs within a reasonable period of time.

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\6\ In accordance with section 773(b)(2)(C)(i) of the Act, we

determined that sales made at below the COP were made in substantial

quantities if the volume of such sales represented 20 percent or

more of the volume of sales under consideration for the

determination of normal value. We note that on December 18, 1997,

the respondents submitted a letter arguing that fresh Atlantic

salmon is a highly perishable product and that the Department should

not use the 20-percent ``substantial quantities'' test, but instead

apply the test set forth by section 773(b)(2)(C)(ii) of the Act

(which compares the average sales price to the average unit cost for

the period). Because the respondents did not raise their argument

until shortly before the issuance of this preliminary determination,

we have not had an adequate opportunity to consider it. We have

therefore relied on the standard 20 percent test, which has been

used in past investigations involving salmon. See Final

Determination of Sales at Less Than Fair Value: Fresh and Chilled

Atlantic Salmon from Norway 56 FR 7661 (February 25, 1991). However,

we intend to examine this issue further for the final determination

of this investigation.

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On a product-specific basis, we compared the revised COP to the

third-country comparison market prices, less any applicable movement

charges, taxes, rebates, commissions and other direct and indirect

selling expenses.

3. Results of the COP Test. After performing the COP test, we

determined that Aguas Claras, Eicosal, Marine Harvest, and Mares

Australes made third-country comparison market sales of certain

products at prices below the COP, within an extended period of time in

substantial quantities. Further, we found that the sales prices did not

permit for the recovery of costs within a reasonable period of time. We

therefore excluded these sales from our analysis.

For Aguas Claras and Mares Australes, which had sales of comparable

merchandise during the POI, we did not conduct price-to-price

comparisons where all sales of a particular product were made at prices

below the COP. Instead, we based NV on CV, and calculated profit for CV

on the basis of third-country sales that did not fail the cost test.

See Calculation of Normal Value Based on Constructed Value, below. For

Marine Harvest and Eicosal, which had no sales of comparable

merchandise in the third-country market that would permit price-to-

price comparisons, the finding of sales below cost affected only the

calculation of profit for CV, inasmuch as profit for these companies

was based only on third-country sales that did not fail the cost test.

C. Calculation of Normal Value Based on Third-Country Prices

We performed price-to-price comparisons where there were sales of

comparable merchandise in the third-country market that did not fail

the cost test. Such comparisons were possible only for Aguas Claras and

Mares Australes.

Aguas Claras. We calculated NV based on delivered or C&F prices,

and made deductions from the starting price, where appropriate, for

movement expenses including inland freight and insurance from the plant

to the Chilean airport, international air freight and insurance,

customs export documentation fee, and U.S. brokerage and handling fees.

We also adjusted the starting price for quality claims. In addition, we

made circumstance of sale (COS) adjustments for direct expenses, where

appropriate, in accordance with section 773(a)(6)(C)(iii) of the Act.

These included imputed credit expenses and quality control/inspection

fees. In accordance with section 773(a)(6)(A) and (B) of the Act, we

deducted third country market packing costs and added U.S. packing

costs.

As discussed in the Level of Trade/CEP Offset section of this

notice below, we preliminarily determined that it was appropriate to

make a CEP offset to NV.

Mares Australes. We calculated NV based on C&F Japanese port or FOB

Santiago prices to unaffiliated customers and made deductions, where

appropriate, from the starting price for inland freight from the plant

to Santiago airport and international air freight. We adjusted for COS

differences in imputed credit expenses, quality control/inspection

fees, Chilean customs export document fees, repacking costs, and direct

advertising expenses.

D. Calculation of Normal Value Based on Constructed Value

Section 773(a)(4) of the Act provides that where NV cannot be based

on comparison market sales, NV may be based on CV. Accordingly, for

those fresh Atlantic salmon products for which we could not determine

the NV based on comparison market sales, either because (1) there were

no sales of a comparable product (as was the case for Eicosal, Marine

Harvest, and Camanchaca) or (2) all sales of the comparison product

failed the COP test (as was the case for Aguas Claras and Mares

Australes, with respect to certain products), we based NV on CV.

Section 773(e)(1) of the Act provides that CV shall be based on the

sum of the cost of materials and fabrication for the foreign like

product, plus amounts for selling, general, and administrative expenses

(SG&A), profit, and U.S. packing costs. For each respondent, we

calculated the cost of materials and fabrication based on the

methodology described in the Calculation of COP section of this notice,

above. Except for Camanchaca, for every respondent we based SG&A and

profit on the actual amounts incurred and realized by the respondent in

connection with the production and sale of the foreign like product in

the ordinary course of trade for consumption in the comparison market,

in accordance with section 773(e)(2)(A) of the Act. Because there is no

viable comparison market for Camanchaca, and hence no actual company-

specific profit and SG&A data available for Camanchaca, we calculated

profit and indirect selling expenses in accordance with section

773(e)(2)(B)(iii) of the Act and the SAA at 841. Specifically, the SAA

at 841 provides that where, due to the absence of data, the Department

cannot determine amounts for profit under alternatives (i) or (ii) of

section 773(e)(2)(B) of the Act or a ``profit cap'' under alternative

(iii) of section 773(e)(2)(B) of the Act, the Department may apply

alternative (iii) on the basis of the facts available. In this case, we

are unable to determine an amount for profit under alternatives (i) or

(ii) or a profit cap under alternative (iii) because none of the

respondents have viable home markets. See 19 CFR 405(b)(2) of the

Department's revised regulations (clarifying that under section

773(e)(2)(B) of the Act, ``foreign country'' means the country in which

the merchandise is produced), (62 FR 27296, 27412-13 (May 19, 1997)).

As a result, we are applying alternative (iii) on the basis of the

facts available consistent with the SAA. As facts available, we

calculated Camanchaca's profit and indirect selling expenses based on

the weighted-average actual profit and indirect selling expenses of the

other respondents in connection with the production and sale of the

foreign like product in the ordinary course of trade for consumption in

their respective comparison markets.

In addition, for each respondent we used U.S. packing costs as

described in the Export Price and Constructed Export Price section of

this notice, above.

We made adjustments to CV for differences in COS in accordance with

section 773(a)(8) of the Act and 19 CFR 353.56. For comparisons to EP,

we made

[[Page 2670]]

COS adjustments by deducting direct selling expenses incurred on third-

country market sales and adding U.S. direct selling expenses. For

comparisons to CEP, we made COS adjustments by deducting direct selling

expenses incurred on third-country market sales and adding U.S. direct

selling expenses except those deducted from the starting price in

calculating CEP pursuant to section 772(d) of the Act. We also made

adjustments, where applicable, for indirect selling expenses incurred

on third-country market sales to offset U.S. commissions in EP and CEP

comparisons; specifically, we deducted from NV the lesser of (1) the

amount of commission paid on a U.S. sale for a particular product, or

(2) the amount of indirect selling expenses incurred on the third-

country market sales for a particular product.

Level of Trade/CEP Offset

In accordance with section 773(a)(1)(B) of the Act, to the extent

practicable, we determine NV based on sales in the comparison market at

the same level of trade (LOT) as the EP or CEP transaction. The NV LOT

is that of the starting-price sales in the comparison market or, when

NV is based on CV, that of the sales from which we derive SG&A expenses

and profit. For EP, the U.S. LOT is also the level of the starting-

price sale, which is usually from exporter to importer. For CEP, it is

the level of the constructed sale from the exporter to the importer.

To determine whether NV sales are at a different LOT than EP or

CEP, we examine stages in the marketing process and selling functions

along the chain of distribution between the producer and the

unaffiliated customer. If the comparison-market sales are at a

different LOT, and the difference affects price comparability, as

manifested in a pattern of consistent price differences between the

sales on which NV is based and comparison-market sales at the LOT of

the export transaction, we make an LOT adjustment under section

773(a)(7)(A) of the Act. Finally, for CEP sales, if the NV level is

more remote from the factory than the CEP level and there is no basis

for determining whether the difference in the levels between NV and CEP

affects price comparability, we adjust NV under section 773(a)(7)(B) of

the Act (the CEP offset provision). See Notice of Final Determination

of Sales at Less Than Fair Value: Certain Cut-to-Length Carbon Steel

Plate from South Africa, 62 FR 61731 (November 19, 1997).

In implementing these principles in this investigation, we obtained

information from each respondent about the marketing stage involved in

the reported U.S. and third-country market sales, including a

description of the selling activities performed by the respondents for

each channel of distribution. In identifying levels of trade for EP and

third-country market sales we considered the selling functions

reflected in the starting price before any adjustments. For CEP sales,

we considered only the selling activities reflected in the price after

the deduction of expenses and profit under section 772(d) of the Act.

We expect that, if claimed levels of trade are the same, the functions

and activities of the seller should be similar. Conversely, if a party

claims that levels of trade are different for different groups of

sales, the functions and activities of the seller should be dissimilar.

For Mares Australes and Eicosal, we found one level of trade in

Japan and one level of trade in the United States, between which there

were no significant differences. Other than expenses related to

movement, these companies performed few or no selling functions.

Therefore, we preliminarily determine that these companies' Japanese

levels of trade constitute neither more or less advanced stages of

distribution than the levels of trade found in the United States at the

levels of trade of the CEP. Accordingly, no adjustment for differences

in levels of trade is warranted for either company.

For both Aguas Claras and Marine Harvest, we found that there is

one level of trade for sales to Canada and Japan, respectively, and one

level of trade for sales to the United States. As explained below, we

also preliminarily determine that these companies' comparison market

sales are made at a more advance level of trade than that of the CEP.

Aguas Claras makes all sales to Canada and all CEP sales to the

United States through its affiliated consignee, Bowrain Corp.

Information on the record indicates that Bowrain performs the same

services with respect to both groups of sales, including identifying

customers, arranging for handling and storage, and sales support to the

final customer. As noted above, for CEP sales, we consider only the

selling activities reflected in the price after the deduction of

expenses and profit under section 772(d) of the Act. Thus, the level of

trade of Aguas Claras' Canadian sales involves substantially more

selling functions (those performed by Bowrain) than the level of trade

of the CEP. We also note that the level of trade of Canadian sales

differs from that of the CEP with respect to customer class: Canadian

sales by Bowrain Corp. are to Canadian distributors, retailers,

restaurants, and further processors; the customer at the CEP level of

trade is Aguas Claras' reseller, Bowrain Corp. In light of these facts,

we have determined that Aguas Claras' Canadian sales are made at a

different, and more advanced, stage of marketing than the level of

trade of the CEP. Aguas Claras also made indirect EP sales to the

United States that are at a level of trade in the United States that is

not substantially different from that of the level of trade of the CEP.

Similarly, Marine Harvest's comparison market sales are made at a

more advanced stage of marketing than its CEP sales. Marine Harvest

sells in Japan to a trading company that subsequently sells to

processors and fishmongers through layers of wholesalers. The

respondent maintains a sales office in Japan (Marine Harvest Japan)

that coordinates with the trading company. Marine Harvest Japan sets

prices and establishes order quantities with the trading company's

primary wholesaler, coordinating the terms and conditions of the sale

with the trading company. Marine Harvest Japan also assists in

marketing salmon by accompanying the primary wholesaler on sales trips

to secondary wholesalers and by working directly with the secondary

wholesaler's customers. Further, Marine Harvest Japan provides after-

sales service and quality claims. For CEP sales to its affiliated

consignee in the United States, Marine Harvest performs few or no

selling functions other than services related to movement of

merchandise. Thus, Marine Harvest performs fewer selling functions for

sales to the United States, at a different stage of marketing. We

therefore preliminarily determine that Marine Harvest's sales to Japan

are at a more advanced level of trade than the level of trade of the

CEP.

Accordingly, for Aguas Claras and Marine Harvest, a level-of-trade

adjustment is appropriate. However, neither company sells salmon or any

other product at any other level of trade in their comparison markets

than that of their fresh Atlantic salmon sales. Therefore, because the

data available do not permit a determination that there is a pattern of

consistent price differences between sales at different levels of trade

in the comparison markets, section 773(a)(7)(B) of the Act permits a

CEP offset to be made to NV. We granted such an offset equal to the

amount of indirect expenses incurred in the comparison markets, but not

exceeding the amount of the deductions made from the U.S. price in

accordance with 772(d)(1)(D) of the Act. For Aguas

[[Page 2671]]

Claras, we made no LOT adjustment for comparisons to EP.

Finally, with respect to Camanchaca, we did not perform a level-of-

trade analysis because this company does not have a viable comparison

market.

Currency Conversions

We made currency conversions in accordance with section 773A of the

Act. The Department's preferred source for daily exchange rates is the

Federal Reserve Bank. The Federal Reserve Bank publishes daily exchange

rates for Japanese yen, but not for Chilean pesos. For purposes of the

preliminary results, we made conversions of figures denominated in

Japanese yen based on the official exchange rates published by the

Federal Reserve. For conversions of figures involving Chilean pesos, we

relied instead on daily exchange rates published by Dow Jones News/

Retrieval on-line system.

Verification

In accordance with section 782(i) of the Act, we intend to verify

information determined to be acceptable for use in making our final

determination.

Suspension of Liquidation

In accordance with section 733(d) of the Act, we are directing the

Customs Service to suspend liquidation of all entries of fresh Atlantic

salmon from Chile, except for subject merchandise produced and exported

by Camanchaca, Mares Australes, and Marine Harvest (which have de

minimis weighted-average margins), that are entered, or withdrawn from

warehouse, for consumption on or after the date of publication of this

notice in the Federal Register. We are also instructing the Customs

Service to require a cash deposit or the posting of a bond equal to the

weighted-average amount by which the NV exceeds the EP or CEP, as

indicated in the chart below. These instructions suspending liquidation

will remain in effect until further notice. We note that, as stated in

the Case History section of the notice above, we have extended the

provisional measures from four months to no more than six months.

The weighted-average dumping margins are as follows:

------------------------------------------------------------------------

Weighted-

average

Exporter/Manufacturer margin

percentage

------------------------------------------------------------------------

Aguas Claras............................................... 3.31

Eicosal.................................................... 8.27

Camanchaca................................................. 0.18

Mares Australes............................................ 1.21

Marine Harvest............................................. 1.87

All Others................................................. 5.79

------------------------------------------------------------------------

Section 735(c)(5)(A) of the Act directs the Department to exclude

all zero and de minimis weighted-average dumping margins, as well as

dumping margins determined entirely under facts available under section

776 of the Act, from the calculation of the ``all others'' rate. We

have excluded the de minimis dumping margins for Camanchaca, Mares

Australes, and Marine Harvest from the calculation of the ``all

others'' rate. No dumping margins were based entirely on facts

available.

ITC Notification

In accordance with section 733(f) of the Act, we have notified the

ITC of our determination. If our final antidumping determination is

affirmative, the ITC will determine whether these imports are

materially injuring, or threaten material injury to, the U.S. industry.

The deadline for that ITC determination would be the later of 120 days

after the date of this preliminary determination or 45 days after the

date of our final determination.

Public Comment

Case briefs must be submitted to the Assistant Secretary for Import

Administration no later than April 13, 1998. Rebuttal briefs will be

due no later than April 20, 1998. A list of authorities used, a table

of contents, and an executive summary of issues should accompany any

briefs submitted to the Department. Executive summaries should be

limited to five pages total, including footnotes.

Section 774 of the Act provides that the Department will hold a

hearing to afford interested parties an opportunity to comment on

arguments raised in case or rebuttal briefs, provided that such a

hearing is requested by any interested party. If a request for a

hearing is made, the hearing will tentatively be held on Monday, April

28, 1998, at 8:30 A.M., at the U.S. Department of Commerce, 14th Street

and Constitution Avenue, N.W., Washington, D.C. 20230. Parties should

confirm by telephone the time, date, and place of the hearing 48 hours

before the scheduled time.

Interested parties who wish to request a hearing, or to participate

if one is requested, must submit a written request within ten days of

the publication of this notice. Requests should specify the number of

participants and provide a list of the issues to be discussed. Oral

presentations will be limited to issues raised in the briefs.

If this investigation proceeds normally, we will make our final

determination no later than 135 days after the date of publication of

this notice in the Federal Register.

This determination is published pursuant to section 733(f) of the

Act.

Dated: January 8, 1998.

Robert S. LaRussa,

Assistant Secretary for Import Administration.

[FR Doc. 98-1164 Filed 1-15-98; 8:45 am]

BILLING CODE 3510-DS-P