[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