66 FR 42505, August 13, 2001 A-337-803 Administrative Review(1999-2000) Public Document Group II/Office V: SMB MEMORANDUM TO: Faryar Shirzad Assistant Secretary for Import Administration FROM: Bernard T. Carreau Deputy Assistant Secretary for Import Administration, Group II DATE: August 6, 2001 SUBJECT: Issues and Decision Memorandum for the 1999-2000 Antidumping Duty Administrative Review: Fresh Atlantic Salmon from Chile Summary This memorandum addresses issues briefed in the above-referenced proceeding. Section A lists the issues briefed by interested parties. Section B sets out the scope, or product coverage, of this administrative review. Finally, Section C analyzes the comments of the interested parties, and provides our recommendations for each of the issues. A. Issues 1. Calculation of Constructed Value Profit Rate 2. Collapse of Affiliated Parties 3. Clerical Errors B. Scope of the Review The product covered by this review is 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 review. Examples of cuts include, but are not limited to: crosswise cuts (steaks), lengthwise cuts (fillets), lengthwise cuts attached by skin (butterfly cuts), combinations of crosswise and lengthwise cuts (combination packages), and Atlantic salmon that is minced, shredded, or ground. Cuts may be subjected to various degrees of trimming, and imported with the skin on or off and with the "pin bones" in or out. Excluded from the scope are (1) fresh Atlantic salmon that is "not farmed" (i.e., wild Atlantic salmon); (2) live Atlantic salmon; and (3) Atlantic salmon that has been subject to further processing, such as frozen, canned, dried, and smoked Atlantic salmon, or processed into forms such as sausages, hot dogs, and burgers. The merchandise subject to this investigation is classifiable as item numbers 0302.12.0003, 0304.10.4093, 0304.90.1009, 0304.90.1089, and 0304.90.9091 of the Harmonized Tariff Schedule of the United States (HTSUS). Although the HTSUS statistical reporting numbers are provided for convenience and customs purposes, the written description of the merchandise is dispositive. C. Discussion of Interested Party Comments Comment 1: Calculation of Constructed Value Profit Rate Respondent Cultivadora de Salmones Linao Ltda. (Linao), which did not have a viable comparison market during the period of review (POR), argues that the Department should not have based the constructed value (CV) profit rate for Linao on the average of the profit rates of the two respondents with viable home markets. According to Linao, the average home market profit rate was skewed by an aberrationally high profit rate for one of the two respondents (Cultivos Marinos Chiloe, Ltda.), reflecting the fact that Cultivos Marinos Chiloe, Ltda. (Cultivos Marinos) sells to customers that demand a high grade of salmon. Linao contends that the Cultivos Marinos profit rate is considerably higher than that calculated for Linao in the first administrative review (wherein Linao had a viable comparison market), and also higher than the profit rate shown on Linao's financial statements corresponding to the period of the second review (the instant review). Linao argues that the Department has statutory discretion to use any reasonable methodology to determine profit where there is no viable comparison market. The respondent proposes that the Department rely on the profit rate calculated in the first administrative review. Alternatively, Linao proposes that the Department rely on the profit rate shown on its financial statements corresponding to the period of the second review. As a third alternative, Linao proposes that the Department rely on the average profit rate for all respondents that had viable comparison markets during the period of the second review. The petitioners did not brief this issue. The Department's Position: For the reasons explained below, we disagree with Linao, and have continued to base the CV profit rate for Linao on the average profit rates of the two respondents with viable home markets. Where it is not possible to base profit and selling expenses for CV on the actual amounts of the respondent, subsection 773(e)(2)(B) of the Act provides three alternative methodologies. The Department's regulations, at 19 CFR 351.405(b)(2), require that profit calculated under these alternative methodologies be based on home market data. In this review, as in the first review, there are two respondents with viable home markets (Cultivos Marinos and Pesquera Eicosal Ltda.). In the Preliminary Results, the Department followed the precedent of the first review, and based the surrogate CV profit rate for respondents with no viable comparison markets on the average of the rates of those two respondents. We disagree with Linao that Cultivos Marinos' profits are aberrational. Both Cultivos Marinos and Pesquera Eicosal Ltda. (Eicosal) sell premium grade salmon to smokers in the home market. Eicosal also sells premium grade salmon in the home market to other types of customers, including supermarket chains and hotels, but there is no physical difference between the salmon sold to smokers and the salmon sold to supermarket chains and hotels. Thus, the two companies' sales of premium grade salmon are made under comparable circumstances. Eicosal also has sales of lower grades of salmon in the home market, but to the extent that those sales were made at below-cost prices in significant quantities, they were found to be outside the ordinary course of trade and disregarded in the calculation of profit. The mere fact that Cultivos Marinos has a higher profit rate than Eicosal does not mean that the sales of that company are aberrational; it simply reflects the fact that Cultivos Marinos sold its merchandise at a higher price-cost differential. Given the facts of this case, the profit rate experienced by Cultivos Marinos is not, on its face, aberrational. Therefore, consistent with section 773(e)(2)(B)(ii) of the Act, we have continued to rely on the average of the profit rates realized by the two companies with viable home markets for purposes of calculating a surrogate CV profit. Comment 2: Collapse of Affiliated Parties Respondent Pesquera Mares Australes Ltda. (Mares Australes) argues that it should not have been collapsed with Marine Harvest (Chile) S.A. (Marine Harvest) during the period of the second review, for purposes of determining the future cash deposit rate for Mares Australes, because Marine Harvest was expressly excluded from the antidumping duty order on salmon from Chile. However, the respondent notes that the issue is moot, inasmuch as the assessment rate calculated for Mares Australes is de minimis regardless of whether Mares Australes is collapsed with Marine Harvest. The petitioners did not brief this issue. The Department's Position: The Department's reasons for collapsing Mares Australes and Marine Harvest are explained in detail in the preliminary results, and Mares Australes has not contested the factual basis for that determination. The respondent argues only that the Department had no legal authority to analyze Marine Harvest's data for purposes of determining Mares Australes' assessment rate for the second review. We disagree with the legal argument advanced by Mares Australes, but agree that the issue is moot, inasmuch as the assessment rate for Mares Australes in the second review, after collapsing with Marine Harvest, is zero. The Department's legal authority for subjecting Marine Harvest to the antidumping duty order is discussed, within the context of a changed circumstances review, in the concurrent Notice of Final Results of Changed Circumstances Antidumping Duty Review: Fresh Atlantic Salmon from Chile and its accompanying Issues and Decision Memorandum. Comment 3: Clerical Errors Respondents Linao, Salmones Pacifico Sur S.A., Salmones Pacific Star, Ltda., and Salmones Mainstream S.A., contend that the Department made several clerical errors in the calculation of the preliminary results. The petitioners did not comment on these allegations. The Department's Position: We agree that the alleged clerical errors require correction. These are described in the calculation memorandum for each respondent. Recommendation Based on our analysis of the comments received, we recommend adopting the positions described above. If these recommendations are accepted, we will publish the final results of this administrative review and the final weighted-average dumping margins in the Federal Register. Agree____ Disagree_____ _____________________ Faryar Shirzad Assistant Secretary for Import Administration ___________________ (Date)