[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