[Federal Register Volume 62, Number 223 (Wednesday, November 19, 1997)]
[Notices]
[Pages 61803-61809]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-30387]
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DEPARTMENT OF COMMERCE
International Trade Administration
[C-337-802]
Preliminary Negative Countervailing Duty Determination and
Alignment of Final Countervailing Duty Determination With Final
Antidumping Duty Determination: Fresh Atlantic Salmon From Chile
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
EFFECTIVE DATE: November 19, 1997.
FOR FURTHER INFORMATION CONTACT: Rosa Jeong, Marian Wells or Todd
Hansen, Office of Antidumping/Countervailing Duty Enforcement, Group 1,
Import Administration, U.S. Department of Commerce, Room 3099, 14th
Street and Constitution Avenue, N.W., Washington, D.C. 20230; telephone
(202) 482-1278, 482-6309 or 482-1276, respectively.
Preliminary Determination
The Department of Commerce (the ``Department'') preliminarily
determines that countervailable subsidies are not being provided to
producers or exporters of fresh Atlantic salmon (``salmon'') in Chile.
Petitioners
The petition in this investigation was filed by the Coalition for
Fair Atlantic Salmon Trade (``FAST'') and the following individual
members of FAST: Atlantic Salmon of Maine; Cooke Aquaculture U.S.,
Inc.; DE Salmon, Inc.; Global Aqua--USA, llc; Island Aquaculture Corp.;
Maine Coast Nordic, Inc.; ScanAm Fish Farms; and Treats Island
Fisheries (collectively referred to hereinafter as ``petitioners'').
Case History
Since the publication of the notice of initiation in the Federal
Register (62 FR 36772 (July 9, 1997) (``Initiation Notice''), the
following events have occurred.
We deemed this case to be extraordinarily complicated and on July
28, 1997, we postponed the preliminary determination until November 10,
1997 (62 FR 40335).
On July 23, 1997, we issued a countervailing duty questionnaire to
the Government of Chile (``GOC''). Due to the large number of producers
and exporters of fresh Atlantic salmon in Chile, and with the GOC's
assurance that it could provide aggregate data for most programs, we
solicited information from the GOC on an aggregate or industry-wide
basis, rather than from the individual producers and exporters. On
August 1, 1997, the GOC notified us that it lacked usage information
for the following programs: Chilean Production Development Corporation
(``CORFO'') Export Credits and Long-Term Export Financing, Law 18,439
Export Credit Limits, Law 18,449 (Stamp Tax Exemption), and Article 59
of Decree Law 824. Therefore, on August 7, 1997, we issued an
additional questionnaire to four producers/exporters of the subject
merchandise concerning the above four programs as well as Chapter XVIII
and Chapter XIX. The questionnaire was sent to the following companies:
Pesquera Mares Australes Ltda., Marine Harvest Chile, Aguas Claras
S.A., and Pesquera Eicosal Ltda.
On August 1, 1997, petitioners submitted comments arguing that the
Law No. 18,480 program should have been included in the initiation. In
the Initiation Notice, the Department declined to initiate on Law No.
18,480, partly based on information provided during consultations with
the GOC. Upon further review of information on the record, we
determined that our initial rejection of petitioners' allegation was
unwarranted. On August 21, 1997, we decided to include certain benefits
allegedly provided under Law No. 18,480 in our investigation (see
Memorandum from team to Richard W. Moreland, Acting Deputy Assistant
Secretary for Import Administration). On August 25, 1997, the
Department requested that the GOC provide information regarding rebates
for exports using domestically produced inputs provided under Law No.
18,480.
The Department received the GOC and company questionnaire responses
on September 15, 1997 and September 22, 1997. The Department issued
supplemental questionnaires to the GOC and the four companies, and
their affiliates, on September 30, 1997, and received the supplemental
responses on October 14, 1997. On October 21, 1997, the Department
issued a second supplemental questionnaire to the GOC. The GOC
responded to this questionnaire on October 27 and October 29, 1997.
On November 6, 1997, we received a request from petitioners,
pursuant to 19 CFR 355.20(c), to postpone the final determination in
this investigation to coincide with the final determination in the
antidumping duty investigation of the fresh Atlantic salmon from Chile.
Accordingly, we are aligning the final determination in this
investigation with the date of the final determination in the
antidumping duty investigation of the fresh Atlantic salmon from Chile.
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
[[Page 61804]]
(steaks), lengthwise cuts (fillets), lengthwise cuts attached by skin
(butterfly cuts), combinations of crosswise and lengthwise cuts
(combination packages), and Atlantic salmon that is minced, shredded,
or ground. Cuts may be subjected to various degrees of trimming, and
imported with the skin on or off and with the ``pin bones'' in or out.
Excluded from the scope are: (1) fresh Atlantic salmon that is
``not farmed'' (i.e., wild Atlantic salmon); (2) live Atlantic salmon;
and (3) Atlantic salmon that has been subjected to further processing,
such as frozen, canned, dried, and smoked Atlantic salmon, or processed
into forms such as sausages, hot dogs, and burgers.
The merchandise subject to this investigation is classifiable at
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.
Comment on Scope
As discussed in the Initiation Notice at 36773, we invited comments
on the scope of this proceeding. On August 8, 1997, we received a
comment from the National Restaurant Association, an interested party,
regarding product coverage. Specifically, the National Restaurant
Association argued that ``dressed'' whole Atlantic salmon and ``cut''
salmon are not ``like products.'' Most of the National Restaurant
Association's arguments have already been addressed in the Initiation
Notice, where the Department adopted the single domestic like product
definition set forth in the petition. In addition, the fact that
``dressed'' salmon and ``cut'' salmon are classified under separate HTS
categories is irrelevant. Like products can and often do comprise
several HTS categories or a subset of merchandise covered by a single
HTS number. Finally, the specific exclusion of ``cut'' salmon from the
scope of the Salmon from Norway proceeding was a result of the fact
that the petition in that case did not include cut salmon, whereas, due
to changing market conditions, the petition in this case specifically
did. See, e.g., Antidumping Duty Order: Fresh and Chilled Atlantic
Salmon from Norway, 56 Fed. Reg. 14920 (1991).
The Applicable Statute
Unless otherwise indicated, all citations to the statute are
references to the provisions of the Tariff Act of 1930, as amended by
the Uruguay Round Agreements Act effective January 1, 1995 (the
``Act'').
Injury Test
Because Chile is a ``Subsidies Agreement Country'' within the
meaning of section 701(b) of the Act, the International Trade
Commission (ITC) is required to determine whether imports of the
subject merchandise from Chile materially injure, or threaten material
injury to, a U.S. industry. On August 6, 1997, the ITC published its
preliminary determination finding that there is a reasonable indication
that an industry in the United States is being materially injured or
threatened with material injury by reason of imports from Chile of the
subject merchandise (62 FR 42262).
Period of Investigation (``POI'')
The period for which we are measuring subsidies is calendar year
1996.
Subsidies Valuation Information
Benchmarks for Loans and Discount Rates
To calculate the countervailable benefit from loans and
nonrecurring grants, we have used the average rates for U.S. dollar
lending in Chile, as calculated by the Superintendencia de Bancos e
Instituciones Financieras (``SBIF''), the Chilean bank supervisory
agency. The U.S. dollar interest rates were used because the loans in
question were denominated in U.S. dollars and the grant that was
allocated over time was made in U.S. dollars.
Allocation Period
Based on information provided by the GOC, we have used nine years,
the weighted-average useful life of productive assets for the Chilean
salmon industry, as the allocation period in this investigation.
Based upon our analysis of the petition and the responses to our
questionnaires, we determine the following:
I. Programs Preliminarily Determined To Be Countervailable
A. ProChile Export Promotion Assistance
ProChile, the Export Promotion Bureau of the Chilean Ministry of
Foreign Affairs, aims to promote and diversify Chile's exports by
providing grants to private companies or industries for export
promotional activities. Each ProChile project is designed and developed
through a joint participation of ProChile and the private sector. The
projects are aimed at the ``internationalization'' of the private
sector participant. ``Internationalization'' refers to the extension of
a company's commercial operations to the external markets, which can be
achieved through exportation, mixed-ownership (foreign and domestic),
joint ventures, and international subsidiaries. Typical ProChile
projects include advertising and promotional campaigns, creation of
catalogs and brochures, and organization of trade fairs. These projects
are co-financed by ProChile and the private sector participants.
The producers and exporters of salmon in Chile received funding
under this program for several salmon-related projects targeted to the
U.S. and other export markets.
In the past, the Department has recognized that general export
promotion programs which provide only general informational services,
do not constitute a countervailable benefit. See, e.g., Fresh Cut
Flowers from Mexico, 49 FR 15007 (1984). However, where such activities
promoted a specific product, or provided financial assistance to a
firm, we have found the programs to be countervailable. See, e.g.,
Fresh Atlantic Groundfish from Canada, 51 FR 10041 (1986) (government
funding of attendance at trade fair which targeted the exports of
specific product to the U.S. market found to be countervailable); and
Fresh Cut Flowers from Israel, 52 FR 3316 (1987) (government
reimbursements of up to 50 percent of actual expenses incurred by the
firm for promotional activities found to be countervailable). Based on
the information on the record, we find that ProChile's projects went
beyond what we normally consider to be general export promotional
activities. The projects were aimed at the promotion of specific
products to targeted export markets and also provided direct financial
assistance to the participating firms.
Accordingly, we preliminarily determine that the ProChile grants
provide countervailable subsidies within the meaning of section 771(5)
of the Act. The grants are a direct transfer of funds from the GOC
providing a benefit in the amount of the grant. The grants are also
specific within the meaning of section 771(5A)(B) of the Act because
their receipt is tied to the anticipated exportation of the subject
merchandise to the United States and other export markets.
We are treating these grants as ``non-recurring'' based on the
analysis set forth in the Allocation section of the General Issues
Appendix because they are exceptional rather than ongoing
[[Page 61805]]
events. Each project funded by a grant requires a separate application
and approval, and the projects represent one-time events.
To calculate the countervailable subsidy, we used our standard
grant methodology. In accordance with our past practice, we allocated
over time grants from those years in which the benefits from this
program exceeded 0.5 percent of the value of appropriate exports in the
year of receipt. We divided the benefit attributable to the POI by the
value of appropriate exports in the POI. On this basis, we determine
the countervailable subsidy rate for this program to be 0.05 percent ad
valorem. For a discussion of the denominators used in the calculation
of the subsidy rate for this program, see November 10, 1997 Calculation
Memorandum to file from team.
B. CORFO Export Credit Insurance Premium Assistance
In 1995, CORFO established a program entitled ``Export Credit
Insurance Premium Assistance For Small and Medium-Sized Companies.''
This program provides a grant of up to 50 percent of the value of the
export credit insurance premium, subject to a cap of one percent of the
particular export invoice, for export insurance purchased by small and
medium-sized Chilean exporting companies from private insurance
companies. Only those Chilean exporters with annual sales of up to US
$10,000,000 are eligible for this program. CORFO's liability to the
insurers is limited to the payment of a portion of the insurance
premium for the eligible company. Once the exporter is approved, the
agreed portion of the insurance premium is paid directly to the
insurance company by CORFO. CORFO made payments to insurance companies
on behalf of eligible salmon-exporters under this program.
We preliminarily determine that CORFO's payments of the insurance
premiums constitute countervailable grants within the meaning of
section 771(5) of the Act. They are a direct transfer of funds from the
GOC that confer a benefit in the amount of the grant. These grants are
specific within the meaning of section 771(5A)(B) of the Act because
their receipt is contingent upon export performance. Because these
grants are made on an ongoing basis, we have treated the benefits as
recurring in accordance with the analysis set forth in the General
Issues Appendix.
To calculate the subsidy rate, we divided the benefit attributable
to the POI by the value of all exports of fresh Atlantic salmon by
producers and exporters of salmon during the POI. On this basis, we
determine the countervailable subsidy for this program to be 0.01
percent ad valorem.
C. Law No. 18,634 (Deferred and Waived Import Duties on Capital Goods)
Law Number 18,634 of August 5, 1987, established a program whereby
customs duties may be deferred and subsequently waived on imported
capital goods used in the production of exports. Under this program,
both exporters and non-exporters are allowed to defer paying duties on
certain capital goods. During the deferral period, the amount of duties
owed is treated as a loan on which the producer is required to pay
interest. If the capital goods are ultimately used for the production
of exported goods, the outstanding balance and interest on the loan are
waived.
The Law 18,634 deferral program is available to exporters as well
as non-exporters. The usage data provided by the GOC indicates that the
fishing and aquaculture sector is neither a predominant nor
disproportionate user of the program. Moreover, many sectors not
normally considered to be exporters, such as the construction,
electric, gas and water industries, participated in the duty deferral
program. Accordingly, we preliminarily determine that the benefit, if
any, under the deferral program is not specific within the meaning of
section 771(5A) of the Act.
Under the Law 18,634 waiver program, the waiver of duties is
allowed, in whole or in part, if imported capital goods are used in the
production of merchandise that is later exported. We preliminarily
determine that the waiver program provides countervailable subsidies
within the meaning of section 771(5) of the Act. The waiver of import
duties represents revenue foregone by the GOC, providing a benefit in
the amount of the waiver. Because the waiver program is contingent on
export performance, we preliminarily determine that it is specific
within the meaning of section 771(5A)(B) of the Act.
The GOC has provided the amounts of customs duties waived during
the POI for exporters of subject merchandise. Because these waivers are
automatic when exportation is demonstrated, we determine that the
benefits under this program are recurring. To calculate the
countervailable subsidy from this program, we divided the total amount
of waivers granted during the POI by the value of all exports of
producers and exporters of salmon. On this basis, we determine the
countervailable subsidy from this program to be 0.23 percent.
D. Import Substitution of Capital Goods
In addition to the duty deferral and waiver program discussed
above, Law 18,634 also contains a provision related to the purchase of
domestically sourced capital goods. According to the GOC, this program
is intended to encourage capital investment in Chile and to avoid a
preference for imported capital goods resulting from the import duty
deferral and waiver provisions of the same law. Under this provision,
companies purchasing capital equipment domestically can borrow up to 73
percent of the amount of customs duties that would have been paid on
the capital goods if they had been imported. If the capital goods are
ultimately used in the production of exports, the loan balances and any
unpaid interest are waived and the producer is not required to repay
the loan. The GOC has provided the amounts of loans and waivers
received under this program by exporters of subject merchandise for the
POI.
Because the receipt of loans under this program is contingent upon
the purchase of domestically produced capital equipment, we determine
that these loans are specific in accordance with section 771(5A)(C) of
the Act. Based on a comparison of the benchmark interest rates (see
Subsidies Valuation section of this notice) to the rates charged on the
loans, we preliminarily determine that certain loans confer benefits
within the meaning of section 771(5)(E)(ii) of the Act because the rate
charged is less than the benchmark rate. We calculated the benefit from
these loans by subtracting the interest charged during the POI under
the program from interest under the benchmark rate and dividing this
difference by the value of all sales of producers and exporters of
salmon. On this basis, we determine the countervailable subsidy from
this program to be 0.02 percent ad valorem.
Regarding the waivers provided under the program, we preliminarily
determine that the waivers are countervailable subsidies within the
meaning of section 771(5) of the Act. The waiver of the loan balances
represents a direct transfer of funds from the GOC, providing a benefit
in the amount of the balance and any unpaid interest waived. Further,
the waivers are specific within the meaning of section 771(5A)(B) of
the Act because their receipt is contingent upon export performance.
Because these waivers are automatic when exportation occurs, we
determine that the benefit from this program is recurring. To calculate
the
[[Page 61806]]
countervailable subsidy from the waiver portion of this program, we
divided the total amount of waivers granted during the POI by the value
of all exports of producers and exporters of salmon from Chile. On this
basis, we determine the countervailable subsidy from this program to be
0.25 percent ad valorem.
E. Promotion and Development Fund
The Promotion and Development Fund for Extreme Regions was
established pursuant to Decree Law No. 3,529, published on December 6,
1980. Article 38 of this law established the fund to aid in the
development of remote regions of Chile. These regions are Tarapaca,
Aysen del Presidente Carlos Ibanez del Campo, Magallanes and Antartica
Chilena and the provinces of Chiloe and Pelena. The fund was
established to assist small and medium-sized investors who make
investments or reinvestments in these regions. Decree 15 of Decree Law
3,529 (published April 20, 1981) established the regulations pertaining
to the fund. These investments must be directly linked to the
production process and involve capital assets relating to the company's
regular business activities. The program provides grants in the amount
of 15 percent of the cost of new investments or reinvestments made
between January 1 and December 31, 1981, and 20 percent of the cost of
investments and reinvestments made between January 1, 1982 and December
31, 1999. The GOC has provided information on the amount of grants
received under this program by the producers and exporters of the fresh
Atlantic salmon.
We preliminarily determine that Promotion and Development Fund
grants provide countervailable subsidies within the meaning of section
771(5) of the Act. The grants are a direct transfer of funds from the
GOC providing a benefit in the amount of the grant. The grants are
specific within the meaning of section 771(5A)(D)(iv) because they are
limited to firms located in a designated geographical region.
We have treated these grants as non-recurring based on the analysis
set forth in the Allocation section of the General Issues Appendix. In
accordance with our practice, we allocated over time, the grants from
those years in which the benefits from this program exceeded 0.5
percent of the value of all sales of producer and exporters of salmon
in the year of receipt. To calculate the countervailable subsidy, we
used our standard grant methodology. We divided the benefit
attributable to the POI by the value of all sales of producers and
exporters of salmon during the POI. On this basis, we determine the
countervailable subsidy for this program to be 0.01 percent ad valorem.
F. Law No. 18,480
Law 18,480 of December 19, 1985, established a simplified duty
drawback system for inputs used in small volume exports. In addition to
the duty drawback provision for imported inputs, the law also contains
a provision whereby exporters using domestically produced inputs in
their export operations are entitled to the amount of the duty drawback
that the exporter would otherwise have realized if they had imported
the inputs. Because fresh Atlantic salmon is excluded from the duty
drawback portion of the program, our investigation of Law No. 18,480 is
limited to the payments for using domestically sourced inputs in the
production of exported goods.
The maximum export values for which the rates are applicable and
the list of eligible inputs are updated each year. For an input to be
eligible as a domestic input, the CIF value of its imported raw
materials and inputs may not exceed 50 percent of its net value.
We preliminarily determine that Law 18,480 is a countervailable
subsidy within the meaning of section 771(5) of the Act. It is specific
within the meaning of section 771(5A)(B) of the Act because the receipt
of the payment is contingent upon export performance. The program
provides a financial contribution because it is a direct transfer of
funds from the GOC to the exporters and producers of salmon.
Because the payment is automatic for eligible products, we have
treated these grants as recurring. To calculate the countervailable
subsidy from this program, we divided the total amount of grants
received during the POI by the value of all exports of producers and
exporters of salmon during the POI. On this basis, we determine the
countervailable subsidy from this program to be 0.05 percent ad
valorem.
II. Programs Preliminarily Determined Not to Be Countervailable
A. Fundacion Chile Assistance
Fundacion Chile (``FCH'') is a private, non-profit organization
established in 1976 through an agreement between the GOC and the
International Telephone and Telegraph Corporation (``ITT'') with an
original endowment fund of US $50 million. This agreement (Decree No.
1528) stemmed from an earlier agreement (Decree No. 801) in which the
GOC agreed to compensate ITT for the value of certain ITT property that
a former Chilean government had previously expropriated from ITT. Under
the terms of the agreement, ITT agreed to contribute its $25 million
compensation to FCH's endowment, and the GOC matched this amount.
FCH's mission is to carry out scientific and technological research
and apply the research to industrial production and service areas of
Chile. To meet these objectives, FCH forms companies to pursue
technologies of interest, which are later sold to private investors,
and also provides technical assistance, consulting services, and
training to companies for a fee. In 1996, a major portion of FCH's
operating budget came from fees for services and profit from the sale
of its companies with the remaining amount from the original endowment.
Under section 771(5)(B) of the Act, a countervailable subsidy
exists where the government provides a financial contribution or
``makes a payment to a funding mechanism to provide a financial
contribution, or entrusts or directs a private entity to make a
financial contribution, if providing the contribution would normally be
vested in the government and the practice does not differ in substance
from practices normally followed by governments.''
The GOC has argued that FCH should not be viewed as the government,
nor was FCH entrusted or directed by the GOC to take actions that would
normally be vested in the government. We have not addressed these
claims because, as explained below, we have preliminarily determined
that the financial contributions provided by FCH do not confer a
benefit.
With respect to the company start-up ventures, FCH created or co-
invested in three salmon-related companies. The first venture was
Salmones Antartica (``Antartica''), created in 1982, which became the
first company to successfully demonstrate the technical and economic
viability of salmon farming in Chile. FCH made three separate equity
infusions in Antartica, the last of which was disbursed in 1988.
Antartica was sold to private investors in 1989. Although Antartica
produced the subject merchandise during the POI, it did not do so
during the time FCH had ownership interest. The second venture was in
1988 when FCH, together with three other private companies, formed
Salmones Huillinco (25 percent equity participation by FCH) which
produces and commercializes smolts. Finally, Salmotec S.A. (Salmotec)
was created by FCH and Antartica in 1988. Salmotec was sold to a
private company in 1995. FCH made equity infusions in Salmotec in 1988
and 1990.
[[Page 61807]]
Section 771(5)(E)(i) of the Act provides that in the case of an
equity infusion, a benefit is conferred if the investment decision is
inconsistent with the usual investment practice of private investors,
including the practice regarding the provision of risk capital, in the
county in which the equity infusion is made.
In making this determination, the Department examines the following
factors, among others:
1. Current and past indicators of a firm's financial condition;
2. Future financial prospects of the firm including market studies,
economic forecasts, and projects or loan appraisals;
3. Rates of return on equity in the three years prior to the equity
infusion;
4. Equity investment in the firm by private investors; and
5. Prospects in world markets for the product under consideration.
In start up situations and major expansion programs, where past
experience is of little use in assessing future performance, we
recognize that the factors considered and the relative weight placed on
such factors may differ from the analysis of an established enterprise.
(For a more detailed discussion of the Department's equityworthiness
criteria see the General Issues Appendix at 37244.)
With respect to FCH's investments in Antartica, the decision to
invest was made in 1981. FCH provided the Department with three
separate feasibility studies that it considered at that time. The
factors evaluated in the studies included the environmental conditions
of Chile, world market conditions, and projected costs and profits. One
of the studies in particular projected an internal rate of return, in
U.S. dollar terms, of over 30 percent on investment. Based on these
factors, the studies conclude that the conditions in Chile were such
that salmon farming would be profitable. In light of the studies, we
preliminarily determine that FCH's 1982 decision to invest in Antartica
was consistent with the usual investment practice of private investors
in Chile.
The decision to invest in Salmotec was approved by FCH in 1988. The
GOC claims that at the time, the Chilean salmon industry was well-
established and profitable. The GOC points to the fact that by 1988,
there were 20 producers and/or exporters of salmon in operation in
Chile and more private companies were investing in the salmon industry.
Moreover, the Chilean salmon industry had been growing at an
extraordinary rate, as evidenced by the dramatic increase in volume and
value of salmon production. The growth was projected to continue at an
even greater rate (see Concurrence Memorandum to Richard W. Moreland,
Deputy Assistant Secretary, Import Administration from team dated
November 10, 1997). Based on the growth projections and the health of
the Chilean salmon industry in 1988 and the entry into that industry by
private investors in the same year, we preliminarily determine that
FCH's decision to invest in Salmotec was consistent with the usual
investment practice of private investors in Chile.
We have not analyzed nor investigated FCH's investment in Salmones
Huillinco because this company is not a producer or exporter of the
subject merchandise.
The GOC reported that FCH did not provide any aquaculture
infrastructure to the salmon industry during the AUL period, and there
can be no residual benefits from the provision of infrastructure prior
to the AUL period. Therefore, we did not examine this program further.
Finally, regarding the technical assistance provided by FCH, this
assistance included research and development, consultations, seminars
and inspection services. For each type of service provided, FCH charged
a fee. Pursuant to section 771(5)(E)(iv) of the Act, a countervailable
benefit exists in this situation if the services are provided for less
than adequate remuneration. The adequacy of remuneration is determined
in relation to prevailing market conditions for the service.
We have examined the fees charged by private companies which are
FCH's major competitors and have found that the fees charged by FCH are
in line with those charged by the private service providers.
Accordingly, we preliminarily determine that FCH's fees provided
adequate remuneration for the services it provided.
For the foregoing reasons, we preliminarily determine that the
Chilean salmon industry has not received a benefit from financial
contributions provided by FCH.
B. Fund for Technological and Productive Development (FONTEC)
FONTEC was established in 1991 by CORFO to promote, guide, finance,
and assist the execution of technological research and development
projects in Chile. FONTEC is a committee composed of eight members from
the public and private sectors with significant experience and
reputation in technological fields. This program provides grants and
loans for research and development projects that are aimed at
innovations in technology and for investment projects in technological
infrastructure.
The amount of FONTEC financing was subject to a ceiling dependent
on the line of financing: (1) the first line was for ``technology
innovation'' projects involving financing requests lower than US
$100,000; (2) the second line was for projects involving financing
requests larger than US $100,000; and (3) the third line was for
technological infrastructure projects. Any private company or entity in
the production sector is eligible for FONTEC funding, provided that the
company demonstrates that it has the proper technical, administrative
and financial capacity to execute and implement the proposed project
and that the project is aimed at technological innovation in products
or processes. In addition, the third line of financing is only
available to entities which: (1) are formed by at least five companies;
(2) organized as a corporation or a foundation whose main line of
business is technological transfer; and (3) can show stable projections
of the project over time. Applicants, regardless of the line of
financing under which they are applying, must demonstrate the
eligibility of the project and the applicant company as well as the
economic benefits of the project. In particular, the evaluation
guidelines for the second line of financing (projects over US $100,000)
specifies that the economic benefit criterion may be satisfied by
factors such as ``cost savings, production increases, export increases,
etc.'' (Emphasis added). The guidelines for the other two lines of
financing do not enumerate specific factors to measure the economic
benefit. Chilean salmon producers received grants under all three lines
of financing of this program.
We analyzed whether the program is specific ``in law or fact''
within the meaning of section 771(5A) of the Act. We preliminarily
determine that the program is not de jure specific because the receipt
of the benefits, in law, is not contingent on export performance or on
use of domestically goods over imported goods nor are the benefits
limited to an enterprise, industry or region. As stated above, we note
that anticipated exportation could have been a factor in the approval
process of projects under the second line of financing. Nevertheless,
we have no evidence that the GOC approved the salmon project under the
second line of financing based on the export factor. In other words,
although the applicant may have fulfilled the economic benefits
criterion by demonstrating anticipated increases
[[Page 61808]]
in exports, it is also possible that the criterion was met by other
factors such as savings in cost and production increases. At
verification, we will closely examine the actual application and
approval documents of the project under the second line of financing to
determine whether the GOC's approval of the project was actually
contingent on the company's export performance.
Pursuant to section 771(5A)(D)(iii) of the Act, a subsidy is de
facto specific if one or more of the following factors exists: (1) the
number of enterprises, industries or groups thereof, which use a
subsidy is limited; (2) there is predominant use of a subsidy by an
enterprise, industry, or group; (3) there is disproportionate use of a
subsidy by an enterprise, industry, or group; or (4) the manner in
which the authority providing a subsidy has exercised discretion
indicates that an enterprise or industry is favored over others. As
explained in the Statement of Administrative Action (``SAA'') (H.R.
Doc. No. 316, Vol. I, 103d Cong., 2d Session (1994) at 931), the fourth
criterion normally serves to support the analysis of other de facto
specificity criteria.
During the period 1991 through 1996, assistance under this program
was distributed to a large number and wide variety of users in the
majority of regions of Chile. Therefore, the program is not limited
based on the number of users. The evidence also indicates that neither
the salmon nor the fishing and aquaculture industry received a
predominant or a disproportionate share of the total funding. Given our
findings that the number of users is large and that there is no
predominant or disproportionate use of the program by the salmon
industry, we do not reach the issue of whether administrators of the
program exercised discretion in awarding benefits. Accordingly, we
preliminarily determine that the funding of projects by FONTEC is not
specific and has not conferred countervailable subsidies to the Chilean
salmon industry within the meaning of section 771(5) of the Act.
Of the several salmon-related projects funded by FONTEC, the GOC
has argued in the alternative that the funding provided to the
Instituto Tecnologico del Salmon, S.A. (``INTESAL'') falls within the
definition of a non-actionable subsidy under Article 8 of the WTO
Agreement on Subsidies and Countervailing Measures (``SCM Agreement'').
Because we have preliminarily determined that the project funding
provided by FONTEC does not constitute countervailable subsidies, we do
not reach the issue of whether FONTEC's grants to INTESAL constituted a
non-actionable subsidy.
C. Central Bank Chapter XIX
Chapter XIX of the Central Bank's Compendium of International
Exchange Rules was designed to reduce the strain on Chile's foreign
currency reserves following the country's external debt crisis at the
beginning of the 1980s. Chapter XIX permitted non-resident investors
who bought Chilean external debt to trade that debt in Chile for local
currency to be used in carrying out investment projects in Chile. The
debt swap and subsequent investment had to be authorized by the
Executive Council of the Central Bank. Chapter XIX came into effect on
May 14, 1985, and was abolished on August 3, 1995. No operations were
carried out after 1991, however, because Chile's external debt
appreciated in international markets, reducing the attractiveness of
the debt swap operations.
Petitioners alleged that the Central Bank used its authority in
approving the debt swaps to promote export-oriented industries and
import substitution. Based on the evidence provided by the GOC, we have
determined that the benefit, if any, of these debt swaps and equity
investments is not specific.
Neither the laws nor the regulations concerning Chapter XIX debt
for equity swaps contained any formal provision favoring exports or
import substitution at the time the investments at issue were approved.
Moreover, based on information provided by the GOC, nearly 30 percent
of the operations carried out under Chapter XIX were for sectors
producing non-traded goods. While certain anecdotal evidence exists
regarding a bias towards export industries, other anecdotal evidence
indicates that the Central Bank did not favor exporters in its
authorizations. The GOC has claimed that the Central Bank's purpose in
authorizing these transactions was to ensure that the parties were
legally eligible to participate and that the investment was not
fraudulent.
We note that the Central Bank rejected a large number of proposed
operations. Because it was not obligated to publish its reasons for
accepting or rejecting an application, we are unable to determine
whether the Central Bank directed operations under Chapter XIX to
export-oriented or import substituting industries. At verification, we
intend to review closely the rejected proposals to determine if the
Central Bank used discriminatory criteria to favor orientation towards
specific sectors of the economy.
The GOC provided information on the amount of debt renegotiated and
invested in each industry and region for each of the years in which
Chapter XIX operations occurred. Only 4.4 percent of the operations
were in the fishing and aquaculture sector; other sectors represented
in Chapter XIX operations included mining, forestry, communications,
and financial institutions, among others. Manufacture of paper and
printing was the industry sector with the highest representation at
nearly 20 percent of operations. Accordingly, we preliminarily
determine that the farmed salmon industry was neither a predominant nor
a disproportionate user of this program.
D. Export Credit Limits
Law Number 18,576 of 1986 governs lending limits for Chilean banks.
Under this law, Chilean banks are prohibited from extending more than
five percent of their paid-in-capital in non-guaranteed loans to any
single borrower. (For guaranteed loans, the limit is 25 percent.)
However, this law also allows Chilean banks to lend an additional five
percent of their paid-in-capital to exporters for their foreign
currency loans.
While this program allows a Chilean bank to lend a greater
percentage of its paid-in capital to an exporter than to a customer
that does not export, we have preliminarily determined that this does
not confer a benefit on exporters. Based on the information submitted,
it does not appear that non-exporting borrowers have less access to
credit because, if their borrowings will exceed the lending limit at
one bank, they can simply borrow from another commercial bank at
equivalent rates and terms. We intend to examine the information
closely at verification. Therefore, we preliminarily determine that the
export credit limits do not constitute a countervailable subsidy within
the meaning of section 771(5)(E)(ii) of the Act because there is no
benefit conferred on exporters.
E. Law No. 18,449 (Stamp Tax Exemption)
Under Decree Law 3,475 of 1980, a stamp tax is levied on checks,
letters of exchange, money orders, promissory notes and loan documents
in Chile. The tax is levied on checks at the flat rate of 109 pesos,
and on other types of documents at the rate of 0.1 percent of the
capital amount per month, to a maximum of 1.2 percent per annum, or 0.5
percent on obligations payable on demand or with no specified maturity
date. The stamp tax is paid at the time a loan is disbursed, as the
issuing bank withholds the amount of the stamp tax
[[Page 61809]]
from the gross amount of the loan. Law 18,449 exempts documents
relating to the financing of exports from this tax.
In the Final Affirmative Countervailing Duty Determination:
Standard Carnations from Chile, 52 FR 3313, 3314 (February 3, 1987),
the Department found the stamp tax exemption countervailable, stating:
``Neither the Government of Chile nor the respondent companies gave us
clear explanations as to what is meant by `export credit operations.'
'' In this proceeding, the GOC has placed on the record the copies and
translations of regulations relating to this program which describe the
types of operations and instruments eligible for the exemption. We have
previously determined that the non-excessive rebate or exemption of
indirect taxes levied at the final stage is not considered a subsidy
(see, e.g., Final Negative Countervailing Determination: Welded Carbon
Steel Line Pipe from Taiwan, 50 FR 53364 (December 31, 1985)). Because
the amount of the exemption is not greater than the amount of the stamp
tax due, we preliminarily determine that this program does not confer
countervailable benefits within the meaning of section 771(5)(E) of the
Act.
F. Article 59 of Decree Law 824
Under Article 59 of Decree Law 824, effective January 1, 1994, all
foreign service providers doing business in Chile are required to pay
income tax at the rate of 35 percent. This tax is withheld by the
Chilean company to which the service is provided and then paid to the
government. The law exempts the foreign service providers from paying
the tax if the income was for certain services related to exportable
goods and services produced in Chile. If the services are eligible for
the exemption, the Chilean company (i.e., the purchaser of the
services) is also exempt from the withholding requirement.
We found no evidence that the benefit, if any, resulting from the
exemption from the tax and the withholding requirement accrues to the
subject merchandise. Therefore, we preliminarily determine that this
program does not constitute a countervailable subsidy.
III. Programs Preliminarily Determined To Be Not Used
The following programs were not used:
A. Institute for Technological Research (INTEC)
B. Central Bank Chapter XVIII
C. Export Promotion Fund
D. CORFO Export Credits and Long-Term Export Financing
E. Law No. 18,392 (Tax Exemptions)
IV. Programs Preliminarily Determined Not To Exist
Based on information provided by the GOC, we preliminarily
determine that the following programs do not exist:
A. GOC Guarantee of Private Bank Loans
B. Import Substitution Subsidy for New Industries
C. Tax Deductions Available to Exporters
Summary
The total estimated preliminary net countervailable subsidy rate
for all producers or exporters of fresh Atlantic salmon in Chile is
0.62 percent, ad valorem, which is de minimis. Therefore, we
preliminarily determine that countervailable subsidies are not being
provided to producers, or exporters of fresh Atlantic salmon in Chile.
Verification
In accordance with section 782(i) of the Act, we will verify the
information submitted by respondents prior to making our final
determination.
ITC Notification
In accordance with section 703(f) of the Act, we will notify the
ITC of our determination. In addition, we are making available to the
ITC all non-privileged and nonproprietary information relating to this
investigation. We will allow the ITC access to all privileged and
business proprietary information in our files, provided the ITC
confirms that it will not disclose such information, either publicly or
under an administrative protective order, without the written consent
of the Deputy Assistant Secretary, Import Administration.
If our final determination is affirmative, the ITC will make its
final determination within 45 days after the Department make its final
determination.
Public Comment
In accordance with 19 CFR 355.38, we will hold a public hearing, if
requested, to afford interested parties an opportunity to comment on
this preliminary determination. The hearing will be held on March 6,
1998, at the U.S. Department of Commerce, Room 3708, 14th Street and
Constitution Avenue, N.W., Washington, D.C. 20230. Individuals who wish
to request a hearing must submit a written request within ten days of
the publication of this notice in the Federal Register to the Assistant
Secretary for Import Administration, U.S. Department of Commerce, Room
B099, 14th Street and Constitution Avenue, N.W., Washington, DC 20230.
Parties should confirm by telephone the time, date, and place of the
hearing 48 hours before the scheduled time.
Requests for a public hearing should contain: (1) The party's name,
address, and telephone number; (2) the number of participants; (3) the
reason for attending; and (4) a list of the issues to be discussed. In
addition, ten copies of the business proprietary version and five
copies of the nonproprietary version of the case briefs must be
submitted to the Assistant Secretary no later than February 24, 1998.
Ten copies of the business proprietary version and five copies of the
nonproprietary version of the rebuttal briefs must be submitted to the
Assistant Secretary no later than March 3, 1998. An interested party
may make an affirmative presentation only on arguments included in that
party's case or rebuttal briefs. Written arguments should be submitted
in accordance with 19 CFR 355.38 and will be considered if received
within the time limits specified above.
This determination is published pursuant to section 703(f) of the
Act.
Dated: November 10, 1997.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 97-30387 Filed 11-18-97; 8:45 am]
BILLING CODE 3510-DS-P