56 FR 7661

(Cite as: 56 FR 7661)

NOTICES

DEPARTMENT OF COMMERCE

International Trade Administration

[A-403-801]

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

Atlantic Salmon from Norway

Monday, February 25, 1991

AGENCY: Import Administration, International Trade Administration, Commerce.

ACTION: Notice.

SUMMARY: The Department of Commerce (the Department) has determined that imports of fresh and chilled Atlantic salmon (salmon) from Norway are being, or are likely to be, sold in the United States at less than fair value. The Department has notified the International Trade Commission (ITC) of its determination and has directed the Customs Service to continue to suspend liquidation of all entries of Atlantic salmon from Norway. The ITC will determine, within 45 days of publication of this notice, whether these imports materially injure, or threaten material injury to, the U.S. industry.

EFFECTIVE DATE: February 25, 1991.

FOR FURTHER INFORMATION CONTACT:Louis Apple, Tracey E. Oakes, David C. Smith or Edward Easton, Office of antidumping Investigations, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW., Washington, DC 20230; telephone: (202) 377- 1769, 377-3174, 377-3798, or 377-1777, respectively.

SUPPLEMENTARY INFORMATION:

Final Determination

We determine that imports of Atlantic salmon from Norway are being, or are likely to be, sold in the United States at less than fair value, as provided in section 735 of the Tariff Act of 1930, as amended (19 U.S.C. 1673d(a)) (the Act). The estimated weighted-average margins are shown in the "Continuation of Suspension of Liquidation" section of this notice.

Case History

Since publication of the preliminary determination on October 3, 1990 (55 FR 40418), the following events have occurred. On October 5, 1990, counsel for respondents requested that we postpone our final determination until not later than 135 days after the date of publication of the preliminary determination in accordance with section 735(a)(2) of the Act.

We verified questionnaire responses in Norway from October 29 to November 20, 1990. Petitioner and respondents submitted comments for the record in case briefs dated January 14, 1991 and in rebuttal briefs dated January 22, 1991. We held a public hearing on January 23, 1991 in which petitioner and respondents participated.

At the hearing, the Department requested additional submissions on the issue of "perishability", which all parties submitted on January 29, 1991.

Scope of Investigation

The product covered by this investigation is the species Atlantic salmon (Salmo salar) marketed as specified herein; the investigation excludes all other species of salmon: Danube salmon; Chinook (also called "king" or "quinnat"); Coho ("silver"); Sockeye ("redfish" or "blueback"); Humpback ("pink"); and Chum ("dog"). Atlantic salmon is a whole or nearly-whole fish, typically (but not necessarily) marketed gutted, bled, and cleaned, with the head on. The subject merchandise is typically packed in fresh-water ice ("chilled"). Excluded from the subject merchandise are fillets, steaks, and other cuts of Atlantic salmon. Also excluded are frozen, canned, smoked or otherwise processed Atlantic salmon. Atlantic salmon is currently provided for under the harmonized tariff schedule (HTS) subheading: 0302.12.00.02.9. Prior to January 1, 1990, Atlantic salmon was provided for under HTS subheadings 0302.12.00.60.8 and 0302.12.00.65.3. The HTS subheadings are provided for convenience and customs purposes. The written description remains dispositive as to the scope of the product coverage.

Period of Investigation

The period of investigation (POI) is September 1, 1989 through February 28, 1990.

Such or Similar Comparisons

For the purpose of this investigation, we have determined that all Atlantic salmon comprises a single category of such or similar mechandise. Product comparisons were made on the basis of grade of salmon (superior, ordinary) and weight bands. We compared U.S. sales of gutted Atlantic salmon to sales of gutted Atlantic salmon sold in third countries because only gutted merchandise is sold in the United States. In addition, U.S. sales were compared only to sales of identical weights and grades of merchandise sold in the third country markets.

Best Information Available

For some companies, as specified elsewhere in this notice, the Department used best information available (BIA) *7662 for portions of the response. For one company, Hallvard Leroy, we relied only on BIA. At verification, we had found that Hallvard Leroy had weight averaged reported prices of U.S. sales. Because this is not in accordance with the instructions provided to the company and because it could have a significant impact on the fair value calculations (potentially shielding margins), we have used only BIA for this company. As BIA, we have assigned Hallvard Leroy the highest rate found for any of the seven exporters for which a margin was calculated.

Fair Value Comparisons

To determine whether sales of Atlantic salmon from Norway to the United States were made at less than fair value, we compared the United States price (USP) to the foreign market value (FMV), as specified in the "United States Price" and "Foreign Market Value" sections of this notice.

United States Price

We based the USP on purchase price, in accordance with section 772(b) of the Act, because all sales by all exporters were made directly to unrelated parties prior to importation into the United States. We calculated USP for the exporters as follows. Salmonor. We calculated purchase price based on airpacked, c.i.f. prices to unrelated customers in the United States. We made deductions, where appropriate for airfreight, inland insurance, rebates, and Norwegian export duties in accordance with section 772(d)(2) of the Act.

Sea Star International

We calculated purchase price based on airpacked, c.i.f. prices to unrelated customers in the United States. We made deductions, where appropriate, for airfreight, handling, inland insurance, discounts, and Norwegian export duties, in accordance with section 772(d)(2) of the Act. For Sea Star International, we lowered each United States gross price by $.05 because at verification we found that Sea Star applied a systematic, improper rounding-up technique for reporting the U.S. gross unit prices. The maximum amount of that rounding is $.05. For Sea Star sales which we were able to verify as accurate, we used the reported prices.

Skaarfish Mowi

We calculated purchase price based on airpacked, c.i.f. prices to unrelated customers in the United States. We made deductions, where appropriate, for airfreight, inland insurance, foreign inland freight, and Norwegian export duties, in accordance with section 772(d)(2) of the Act.

Fremstad Group

We calculated purchase price based on airpacked, c.i.f. prices to unrelated customers in the United States. We made deductions, where appropriate, for airfreight, inland insurance, export taxes, and discounts in accordance with section 772(d)(2) of the Act.

Domstein

We calculated purchase price based on airpacked, c.i.f. prices to unrelated customers in the United States. We made deductions, where appropriate, for airfreight, inland insurance, discounts, handling, custom fees, and Norwegian export duties, in accordance with section 772(d)(2) of the Act.

Saga

We calculated purchase price based on airpacked, c.i.f. prices to unrelated customers in the United States. We made deductions, where appropriate, for airfreight, inland insurance, discounts, foreign inland freight and Norwegian export duties, in accordance with section 772(d)(2) of the Act.

Chr. Bjelland

We calculated purchase price based on airpacked, c.i.f. prices to unrelated customers in the United States. We made deductions, where appropriate, for airfreight, inland insurance, and Norwegian export duties, in accordance with section 772(d)(2) of the Act.

Foreign Market Value

Market Viability

In order to determine whether there were sufficient sales of Atlantic salmon in the home market to serve as the basis for calculating FMV, we compared the volume of home market sales to the volume of third country sales, in accordance with section 773(a)(1) of the Act. We did not consider home market sales to other exporters in the viability calculation because the ultimate destination of the merchandise is not known. For six respondents, the volume of home market sales was less than five percent of the aggregate volume of third country sales. In the case of Sea Star, all of its home market sales were to other exporters or to related customers. Because we had no home market sales from which to determine whether Sea Star's sales to related customers were at arms length, we selected third country sales to determine FMV.

Therefore, for these seven respondents, we determined that home market sales did not constitute a viable basis for calculating FMV, in accordance with 19 CFR 353.48. In selecting third country markets for computing FMV, we considered the criteria set forth in 19 CFR 353.49(b). Because similarity of merchandise was not an issue for six of the respondents, we selected third countries having the largest sales volumes. For one respondent, similarity was an issue in selecting the third country market for computing FMV (see Exporter- Specific Comment 1 for Chr. Bjelland). The volume of sales to the third country we selected was "adequate" within the meaning of 19 CFR 353.49(b)(1).

Cost of Production

Petitioner alleged that respondents' third country sales of Atlantic salmon were made at prices below the cost of production (COP). Based on petitioner's allegation, we gathered and verified data on production costs. Because the growth cycle of the subject merchandise is approximately 18 to 24 months, we requested production costs for the previous two to three years, as applicable, which were incurred on the salmon delivered to and accepted by an exporter during the POI.

We calculated the COP of salmon sold by each exporter based on the sum of the following: (1) The simple average of responding farmers' COPs (which included the cost of materials, fabrication, processing and packing, wellboat services, general expenses of the farmer, freight costs, Fiskeoppdretternes Salsgag (FOS) and Norske Fiskeoppdretternes Forening (NFF) fees); and (2) the exporter's selling, general and administrative expenses. The total cost of production was calculated on a Norwegian kroner per kilogram (NOK/kg) basis. To calculate the amount of direct selling expenses incurred by the exporter, we applied a cost-based percentage of total direct selling expenses, adjusted for verification changes, to the farmers' COP. In all cases, for salmon sold on or after January 1, 1990, a five NOK/kg cost was added to the COPs (see Farm-Wide Comment 3).

We compared third country weighted average monthly prices of gutted merchandise to the COP because only gutted merchandise is sold in the U.S. market. If over 90 percent of a respondent's sales were at prices above the COP, we did not disregard any below-cost sales because we determined that the respondent's below-cost sales were not made in substantial quantities over an extended period of time. If between ten and 90 percent of a respondent's sales were at prices below *7663 the COP, we disregarded only the below-cost sales. In such cases, we determined that the respondent's below-cost sales were made in substantial quantities over an extended period of time. If less than ten percent of respondent's sales were at prices above the COP, we disregarded all sales and calculated FMV based on constructed value (see the company specific sections below).

The COP data submitted by the farmers and exporters were relied upon, except in the following instances where the costs were not appropriately quantified or valued.

Safish

(1) Smolt costs were increased to include a prepayment made in 1987 for the 1988 year class, because smolt costs were specifically identified to each year class;

(2) Feed, direct labor and overhead cost were revised due to an adjustment to salmon inventory quantities used to calculate the per unit production cost;

(3) General and administrative (G&A) and interest expenses were adjusted to reflect cost per kilogram by dividing total 1989 G&A and interest expenses by the total kilograms of salmon sold in 1989 for all year classes (see Farm-Wide Comment 7); and

(4) Packing and processing and freight costs for gutted salmon were adjusted to reflect a cost per gutted kilogram rather than a cost per round kilogram.

Hofa

(1) Feed, direct labor and overhead were adjusted for the following: (a) Adjustments submitted by the company at the beginning of verification to the ending inventory quantity of salmon; (b) an insurance indemnity received by Hofa for large losses of the 1988 year class due to disease;

(2) Depreciation expense was adjusted to reflect the amount of ordinary depreciation recorded on the company's audited financial statements (see Farm- Wide Comment 5);

(3) G&A and interest expenses were adjusted to reflect the cost per kilogram by dividing total 1989 G&A and interest expenses by the total kilograms of 1988 year class salmon sold (see Farm-Wide Comment 7); and

(4) Wellboat costs for gutted salmon were adjusted to reflect a cost per gutted kilogram rather than a cost per round kilogram.

Bremanger Fiskeindustri

(1) Feed costs for 1988 were reduced for discounts that had been recorded as interest income;

(2) Overhead was adjusted for insurance expenses that were not included in the farming costs for 1988, depreciation expense that was not included in the farming costs for 1989 (as BIA, an amount was calculated based on the useful life of the assets as reported on the financial statement) and depreciation expense submitted for 1988 farming costs by the respondent was not used because it was not based on actual costs incurred (as BIA, the Department recalculated depreciation expense based on the useful life of the assets as reported on the financial statement);

(3) G&A expenses were revised using the highest G&A of the other farmers as BIA, because these expenses did not include services provided by a related party (R. Domstein & Co.);

(4) Interest expense was adjusted to include all of Bremanger's interest expense allocated to the salmon farm in 1989 including certain mortgage expenses excluded by the respondent divided over total kilograms of salmon sold in 1989 (see Farm-Wide Comment 7);

(5) Costs for packing and processing, performed by a related company, were not used because they could not be verified (as BIA, the FOS price list was used as the basis for the cost of packing and processing gutted salmon); and

(6) Wellboat costs for gutted salmon were adjusted to reflect a cost per gutted kilogram rather than a cost per round kilogram.

Midnor

(1) Labor for 1988 was adjusted to include all labor costs including labor costs excluded by the respondent incurred during 1988 which had not been capitalized as part of the construction costs for an on-shore facility;

(2) G&A and interest expenses were adjusted to reflect the cost per kilogram by dividing total 1989 G&A and interest expenses including certain mortgage expenses excluded by the respondent by the total kilograms of 1988 year class salmon sold (see Farm-Wide Comment 7);

(3) Certain categories of cost for 1988 were reclassified from factory overhead to SG&A expense; and

(4) A clerical error in 1989 submitted G&A expenses was corrected.

Bremnes

(1) Material costs were adjusted to reflect a purchase of feed recorded in the 1989 financial statements but excluded from the submission, and a fee which was included in material costs on the 1989 financial statements but excluded from the submission; and

Austevoll

(1) The cost of cultivation of the 1988 year class was reduced by the amount of an insurance indemnity received due to losses from disease; and

(2) G&A and interest expenses were adjusted to reflect cost per kilogram by dividing total 1989 G&A and interest expenses by the total kilograms of salmon sold in 1989 for all year classes (see Farm-Wide Comment 7). In calculating the exporters' selling, general and administrative expenses we did not include movement charges such as inland freight, insurance, and export duties. We recalculated the remaining direct selling expenses as a percentage of cost of goods sold attributable to sales of salmon to the third country or home market during the POI.

Foreign Market Value

In accordance with section 773(e) of the Act we calculated foreign market value based on constructed value (CV) when there were insufficient sales above the COP in the third country and when there were no identical third country comparisions. In this case, the COP data submitted by the respondents were used in the CV calculations. The CV for salmon sold by each exporter included the sum of the following: (1) The simple average of the responding farmers' COPs (the cost of materials, fabrication, processing and packing, wellboat services, general expenses of the farmer, freight costs, and FOS and NFF fees); and (2) the exporters' selling, general and administrative expenses, profit, and packing. The exporter's direct selling expenses were calculated as a percentage of cost of goods sold and applied to the farmers cost of production. In all cases: (1) Actual general expenses were used, because the total of the farmer's and exporter's general expenses exceeded the statutory minimum requirement of ten percent of the sum of materials and fabrication, and (2) imputed credit expenses were included in selling expenses. Interest expenses were reduced for the portion related to credit activities in order to avoid overstating credit expenses.

For all exporters, profit equal to the statutory minimum eight percent of the cost of production was applied (see Farm-Wide Comment 4). In all cases, for salmon sold on or after January 1, 1990, a five NOK/kg cost was added to the *7664 CV before profit. (see Farm-Wide Comment 3).

We calculated FMV for the exporters as follows.

Salmonor

Over 90 percent of this exporter's sales were below the cost of production, and we based FMV on constructed value. Because all comparisons involved purchase price sales, we made circumstance of sale adjustments, where appropriate, for Norske Ferskfiskomsetnings Landsforening (NFOL) dues, Fresh Fish Export Committee (FFEC) fees, credit, warranty, and export credit insurance expenses.

Sea Star

Skaarfish Mowi

Fremstad

Seventy-five percent of sales were below the cost of production. We based FMV on constructed value for comparison categories where there were below cost sales and for comparison categories for which there were no matching third country sales. For all other comparison categories we used third country sales prices for our comparisons. When we used third country prices, we made deductions, where appropriate, for inland freight, inland insurance, Norwegian export duties, rebates, credit expenses, FFEC fees, and NFOL dues. Because all comparisons involved purchase price sales, we made circumstance of sale adjustments, where appropriate, for NFOL dues, FFEC fees, credit, and warranty expenses.

Domstein

Over 90 percent of this exporter's sales were below the cost of production, and we based FMV on constructed value. Because all comparisons involved purchase price sales, we made circumstance of sale adjustments, where appropriate, for NFOL dues, FFEC fees, credit, and warranty expenses. If commissions were paid in both markets, we deducted weighted average third country commissions and added the U.S. commission. If commissions were paid on U.S. sales only, we allowed an adjustment for the lesser of U.S. commissions or indirect selling expenses. If commissions were paid on the third country sales only, we allowed an adjustment for the lesser of third country commissions or indirect selling expenses. Finally, certain direct selling expenses classified as indirect selling expenses were removed from the calculation of indirect selling expenses.

Saga

Over 90 percent of this exporter's sales were below the cost of production, and we based FMV on constructed value. Because all comparisons involved purchase prices sales, we made circumstance of sale adjustments, where appropriate, for NFOL dues, FFEC fees, credit, and warranty expenses. Where commissions were paid in the third country and not in the U.S. market, we allowed an adjustment of the lesser of indirect selling expenses or average third country commissions in accordance with the Department's regulations.

Chr. Bjelland

Currency Conversion

When calculating foreign market value, we made currency conversions in accordance with 19 CFR 353.60, using the exchange rates certified by the Federal Reserve Bank of New York.

Verification

As provided in 19 CFR 353.36(a)(1), we verified all information used in reaching our final determination in this investigation. We used standard verification procedures, including examination of relevant accounting records and original source documents provided by respondents.

Interested Party Comments

I. Farm-Wide Comments

Comment 1

Petitioner argues that the respondents did not disclose until verification significant information regarding methodology and certain costs which should have been disclosed in the responses. For example, respondents did not disclose the use of a surrogate period for calculating smolt costs and failed to identify all related parties. Petitioner argues that the new information submitted at verification constituted a basic change in methodology which should have been disclosed prior to verification. Therefore, the Department should reject all of the responses and use, as BIA, the highest reported cost of the farmers, adjusted for additional costs discovered at verification.

Respondents state that the farmers had no cost accounting system in place and had very minimal resources available for conducting the verifications. Respondents argue that the petitioner has ignored the fact that the farmers answered every question "which had any substantive bearing on the case."

DOC Position

The Department discovered deficiencies in the respondents' submissions during verification. However, the Department concluded that these deficiencies were not of such significance as to be considered a substantially revised or new response. Therefore, with the exception of one farmer (see Nordsvalaks Comment 1), the responses have been used, as adjusted, in the final determination.

Comment 2

Petitioner alleges that the omission of January and February 1990 costs for six of the seven farmers significantly understates the costs for sales made during the POI. Petitioner argues that, if the Department uses the verified cost data, it should adjust these costs by using the highest 1989 COP calculated *7665 for any farmer, and average this figure with each individual farmer's verified cost for the first four months of the POI.

Respondents argue that it was not possible to accurately determine costs for January and February 1990, because the accounting records of certain farmers had not been closed. Therefore, the farmers calculated costs and production quantities over the two-year period, 1988 and 1989, and so matched costs with production accurately. Respondents also argue that any increased costs and quantities during those two months are in direct proportion to the increased growth of the fish, resulting in no change to the per kilogram cost of salmon.

DOC Position

For those respondents which were unable to provide costs for January and February 1990, i.e., all farmers except Hofa, we used BIA. As BIA, we calculated a cost per kilogram based on respondent's methodology which captured costs over the two-year period, 1988 and 1989, and allocated these costs over the gross production for these two years. The petitioner's claim that costs would have been higher in the months of January and February 1990, except for the five NOK/kg freezing fee, was not supported by the information on the record for Hofa.

Comment 3

Petitioner argues that the five Norwegian kroner/kilogram (five NOK/kg) fee paid by the farmers to FOS, the Norwegian fish farmers' sales organization, should be included in the cost of production for those sales made on or after January 1, 1990. Petitioner asserts that the charge is equivalent to a tax collected on sales, which is normally included as a cost of production, and the fact that this tax was imposed to finance FOS's freezing intervention program should not be a consideration in determining the cost of the product under investigation.

Respondents claim that the freezing charge assessed by FOS is a cost for a production that is not under investigation, i.e., frozen salmon. Respondents argue that this cost would probably be included as a cost of producing frozen salmon if this were an investigation of frozen salmon; therefore, it cannot logically be included as a cost of producing fresh salmon. While respondents agree that the freezing charge is assessed on all sales of fresh salmon beginning January 1, 1990, they argue that the method in which a charge is calculated is irrelevant, and the fact that the fee is a tax assessed on sales of fresh fish is also irrelevant. Therefore, respondents argue that this charge should not be included in the cost of production.

DOC Position

The Department agrees with petitioner. This fee is a five NOK/kg charge assessed on all sales of fresh salmon. Therefore, the amount of the fee incurred by each salmon farmer is completely a function of the amount of fresh salmon it sells. The fact that FOS uses this money to finance a freezing plan is not the deciding factor. The Department considers this fee to be a general expense and included it as a cost of producing the fresh salmon.

Comment 4

Petitioner argues that the respondents' refusal to submit CV information, on the basis of a claim that CV is not relevant in this case, is justification for rejecting the responses of all farmers. Petitioner states that the respondent does not determine what is and what is not relevant in an investigation, because that is the role of the Department itself. Furthermore, the Department does not have all of the necessary information, such as related party transfer prices and profit, to calculate CVs.

Respondents argue that the farmers did not submit CV information because there was no need for it. Respondent states that the Department's memorandum of August 20, 1990 set forth the proposed methodology and that memorandum did not stipulate that CV would be used. Respondent states that the statute requires that only one amount for general expenses (which is not less than 10 percent of the cost of manufacturing) and one amount for profit (which is not less than 8 percent of the sum of the cost of manufacturing and general expenses) be included in CV. The statute does not allow for the addition of statutory minimums at two different levels in the calculation of total constructed value, therefore, all CV information is irrelevant for the farmers.

DOC Position

The Department used information submitted for the calculation of cost of production when constructed values were required. In those cases where sales were found to be below cost and constructed value was used as FMV, BIA was used when the respondent did not use the proper costs for related party transactions. We combined the SG&A of the farmer and the exporter for the statutory ten percent test. As we found the total SG&A amount to be above ten percent in all instances, we used actual SG&A for our CV calculations. For profit, we used the statutory eight percent minimum. This was reasonable given that almost all third country sales were made at prices below the cost of production.

Comment 5

Petitioner argues that respondents' submissions included an amount for depreciation expense that was less than that reported in the financial statements prepared according to Norwegian generally accepted accounting principles (GAAP). Petitioner states that several farmers did not provide any information about the useful life of the assets, and those that did submit such information provided no independent support for the claimed periods. As such, depreciation expense should be taken from the financial statements.

Respondents claim that a certain portion of depreciation on the financial statement is tax-related accelerated depreciation and is reported in the financial statements as a separate non-operating item. Respondents argue that only the portion of depreciation expense shown in the financial statements as "ordinary depreciation" should be included in the cost of production and that inclusion of tax-related depreciation would be distortive.

DOC Position

The Department used the "ordinary depreciation" reported on the respondents' financial statements. This "ordinary depreciation" was based on the assets' historical cost and useful life in accordance with Norwegian GAAP. While the accelerated depreciation taken for tax purposes also appears on the financial statement, it is not based on the useful life of the assets. The tax-related accelerated depreciation does not appear to be a current cost but an appropriation to an account that reflects the difference between the "ordinary depreciation" and that used by the company for tax purposes. Because the historical value of the assets and the ordinary depreciation calculated on this historical value were not affected by the tax-related depreciation in this case, we did not include the tax-related depreciation in COP.

Comment 6

Petitioner states that wellboat fees should be calculated on a gutted weight basis, not on a round weight basis. Furthermore, several farms did not report freight costs.

Respondents state that most of the farmers have properly reported processing fees and wellboat fees on a gutted weight basis by converting round *7666 weight to gutted weight at a rate of 90 percent.

DOC Position

The Department made adjustments where necessary to calculate processing and wellboat costs on a gutted weight basis and to reflect the inclusion of freight where appropriate.

Comment 7

Petitioner argues that the inclusion of general expenses as a manufacturing cost and, thus, part of the classification inventory value, is inconsistent with the Department's standard practice and with generally accepted accounting principles. Petitioner claims that none of the farmers demonstrated that their G&A costs were clearly related to production. Generally accepted accounting principles stipulate that G&A expenses shall be period charges except for the portion of such expenses that is clearly related to production. Therefore, 1989 G&A expenses should be allocated over 1989 production.

Respondents argue that the general expenses of the fishfarmers include very few selling expenses as most of the selling function is handled by the exporter, and that the remaining general and administrative expenses relate solely to production operations, i.e., cultivating fish. Respondent asserts that an allocation of 1989 G&A expenses based on 1989 production would be distortive because more than one year class is under production during each year because the cultivation process requires 18 to 24 months. Because materials, labor and overhead for 1988 and 1989 were used to calculate costs, G&A expenses allocated over 1988 and 1989 production should also be included in the cost of production.

DOC Position

We agree with petitioner and have calculated both G&A and interest expenses as period expenses for the year 1989. This methodology attributes G&A and interest expenses to salmon sold during 1989 from both 1988 and 1989 year classes. G&A and interest expenses were calculated as a per-kilogram cost by dividing the relevant costs incurred in 1989 by the number of kilograms of salmon sold in 1989.

Two farms, Midnor and Hofa, began operations in 1988 and had no sales in the first half of 1989. Thus, a G&A and interest expense cost per kilogram of fish sold in 1989 was not representative of such expenses that would occur in the production of salmon in the ordinary course of business. The Department used the sales of the 1988 year class in the first half of 1990 as best information available for sales in the first half of 1989, in order to normalize these expenses for Midnor and Hofa.

Comment 8

Petitioner proposes that the Department calculate for each farm average cost figures for both gutted and round fish. Because a five NOK/kg fee was imposed on all sales of fresh salmon made on or after January 1, 1990, petitioner also proposes that the Department calculate separate COPs for the first four months of the POI and the final two months, after imposition of the fee. The Department should next recalculate the sales prices reported by each farmer to the exporters. (Hereafter, the farmer to exporter prices will be referred to as the exporter's "acquisition prices" or "AP".) These prices should then be weight-averaged for both gutted and round fish for each of the two sub-periods of the POI. Petitioner argues that it is necessary to weight-average the acquisition prices since large salmon has a higher per-unit price than smaller salmon. Comparing average costs with APs would result in below-cost sales for the smaller salmon and above-cost sales for the larger salmon. Therefore, the four separate average costs should be compared to four separate average APs and the higher of the two figures should be deemed the exporter's COM. The Department should then add the verified SG&A of each exporter to the gutted and round average costs for both sub-periods of the POI.

DOC Position

The Department calculated one simple average cost of production for gutted fish based on the adjusted costs of production of all seven farmers included in the investigation. We did not compare the farmers' cost of production to the APs because we determined that APs were not relevant to the COP analysis (see Exporter-Wide Comment 1). Therefore, no APs have been used for purposes of the final determination. Instead, we calculated the simple average of the seven farmers' individual costs of production for gutted fish (we did not calculate a simple average cost of production for round fish because no sales of round fish were used in our comparisons) and added the exporter-specific SG&A expenses to determine COP of fish sold by each exporter for the first sub-period of the POI (September 1 through December 31, 1989). We did the same for the second sub-period of the POI (January 1 through February 28, 1990), but also added the FOS fee of five NOK/kg. to COP (see Farm-Wide Comment 3). The COPs were then compared to the exporter's monthly weighted average third country prices.

II. Farm-Specific Comments

Safish

Comment 1

Petitioner argues that Safish submitted a materially revised cost of production submission at verification. Petitioner asserts that it is the Department's well-established practice not to accept material changes to responses at verification and, thus, the Department should have rejected the submission at verification to the extent the resubmitted costs are lower.

Respondent maintains that, at the beginning of verification, Safish informed the Department of an inventory error it had discovered and provided the Department with a corrected calculation of the quantity produced.

DOC Position

The Department agrees with the respondent. At the beginning of verification, the respondent submitted revised inventory information. The revisions were supported by detailed farm inventory records. This revision was not so significant as to constitute a new response. Therefore, the Department used this information as the basis for calculating the cost of production.

Comment 2

Petitioner argues that Safish's audited financial statement casts serious doubt on the reliability of its production costs as submitted to the Department. Specifically, petitioner claims that the results on Safish's income statement do not reflect the costs and selling prices submitted to the Department. Additionally, petitioner argues that Safish's 1989 Management Report lists a "calculated cost of production" at odds with the cost of producing round salmon as reported to the Department. Petitioner also argues that Safish failed to disclose a method of calculating costs of producing salmon for inventory purposes, even though specifically requested to do so by the Department. Petitioner concludes that these factors warrant rejection of Safish's cost response in its entirety.

Respondent claims that the Department verified Safish's cost of production based on a complete review of its operations and accounting records.

DOC Response

The Department agrees with the respondent. The response to the *7667 Department's questionnaire was prepared by utilizing the company's accounting records, general ledgers and financial statements which were audited according to Norway's generally accepted accounting principles. Additionally, the management study does not support the petitioner's claim regarding the reported cost of production, because after minor adjustments, both amounts were comparable.

Bremnes

Comment 1

Petitioner argues that Bremnes' entire response be rejected and BIA used in the final determination because of the substantial adjustments which were made to actual costs for the submission and not disclosed to the Department until verification. Furthermore, Bremnes did not disclose to the Department until verification the use of surrogate costs for the 1987 smolt class. Petitioner argues that this data constitutes new information which should not have been accepted by the Department at verification.

Respondent argues that it answered exactly what the Department asked for in the questionnaire: An explanation of the differences between the response and the cost accounting system, not the difference between the response and the financial statements. Because Bremnes had no cost accounting system in place, it was required to perform an entry-by-entry analysis of the financial records in order to prepare the submission. Respondent claims that the Department verified each adjustment and petitioner has no basis on which to make its assertion that Bremnes' response is not credible.

DOC Position

The Department did discover deficiencies in Bremnes' submission. However, based on information provided at verification, we were able to make necessary adjustments. These adjustments were not so significant as to warrant the use of BIA for the entire response.

Comment 2

Petitioner argues that the Department should reject Bremnes' material costs in their entirety and use as BIA the average feed cost of NOK 10.92/kg from the 1988 Norwegian Directorate of Fisheries Study because of inconsistent year-end adjustments which lowered the feed costs. Petitioner asserts that it is impossible to determine how many one-sided adjustments could have been made. If the Department does add back this cost to materials, it should allocate the full amount to salmon farming.

Respondent argues that this one expenditure was excluded from the COP because it was a prepayment. Respondent claims that this purchase represented costs for a period subsequent to the period for which costs were calculated. Respondent states that at verification it showed that the purchase was from a supplier other than its normal supplier, that it was in addition to the regular purchases made in December, and that delivery did not begin until Feburary 1990. Therefore, respondent contends that it has properly been excluded from the COP.

DOC Position

We agree with petitioner in part. The Department increased 1989 material costs for this purchase of feed. The respondent documented at verification that the invoice for this purchase of feed was recorded in 1989, the period for which costs were calculated. Respondent's cost methodology calculated a per-kilogram production cost over a two-year period based on costs for 1988 and 1989 and production quantity for 1988 and 1989. The methodology did not include adding material expenses incurred in 1987 for feed used during 1988 at the beginning of the period for which costs were calculated, i.e., January 1, 1988. Therefore, the respondent's adjustments to year-end purchases have understated the total quantity of feed used and was not in accordance with the methodology used to calculate production costs.

Comment 3

Petitioner argues that the respondent's exclusion of an expense classified as materials on the financial statements should be rejected. Petitioner states that the information on the record does not support the respondent's claim that this expense was, in fact, not a materials cost. Petitioner contends that since the amount is treated as a materials expense in the company's books, it should be included in the cost of production.

Respondent argues that it properly excluded a payment in 1989 because it was misclassified as a material costs in the company's books. Respondent states that it provided documentation at verification which detailed the nature of the fee and the propriety of its exclusion.

DOC Position

We agree with the petitioner. The documentation submitted at verification did not substantiate respondent's claim. The Department calculated material costs according to the company's accounting records and financial statements.

Comment 4

Petitioner argues that respondent disclosed at verification substantially new information regarding the methodology it used to calculate smolt costs. Because this new information was disclosed at verification, the Department did not have sufficient time to analyze the methodology. Furthermore, respondent's smolt costs are unreasonable when compared to the averages reported in the Norwegian Directorate of Fisheries. Petitioner contends that the surrogate costs should be rejected and BIA used instead.

Respondent contends that it did not have full cost data for 1987 nor an established smolt cost accounting system. However, the use of 1988 smolt costs did not understate Bremnes' cost of production. Respondent states that it supplied the Department with information that the smolt feed remained constant from 1987 to 1988 and the quantities of smolt delivered in 1988 were higher than that delivered in 1989. Therefore, its methodology did not understate costs.

DOC Position

The Department used the data submitted by respondent to calculate smolt costs. At verification, we analyzed respondent's methodology and through testing concluded that there was no basis to determine that smolt costs were understated.

Comment 5

Petitioner contends that the selling expenses of the Leroy Aqua Group (LAG), a cooperative comprised of many fish farmers, should have been included in Bremnes' COP. Because Bremnes did not provide this information, the Department should reject the response as unreliable. Alternatively, petitioner contends that the fees paid to LAG are selling expenses which should be added to COP or deducted from the sales prices.

Respondent argues that payments to LAG were properly excluded from Bremnes' COP.

DOC Position

Bremnes submitted documentation at verification to support its claim that fees paid to LAG should not be included in its COP, and we have not included them.

*7668 Nordsvalaks

Comment 1

Petitioner asserts that Nordsvalak's failure to report crucial related-party information rendered its response unverifiable, and that the Department should use as BIA the highest verified cost of production for any farmer.

Respondent claims that the failure to report the existence of Furberg & Yttersian (F&Y) resulted because the Department's questionnaire requested information only on related input suppliers, and not on "sister companies." Respondent claims further that the information submitted was verifiable and that the 50/50 split of costs between Nordsvalaks and F&Y is the same as an allocation of costs within a company. Lastly, respondent asserts that the Department did verify Nordsvalaks' response. To support this argument, respondent compares the time spent at the verification of Nordsvalaks to time spent for verification of other respondents in this proceeding.

DOC Position

We agree with the petitioner. The Department's questionnaire does specifically request information on relationships such as that between Nordsvalaks and F&Y. These parties, owned one by a husband and the other by the husband and his wife, maintained that although they kept separate books and records, costs and expenses were shared.

Section 773(e)(4) of the Act, a copy of which was included at Attachment A to the questionnaire, indicates that "members of a family, including brothers, sisters, spouse" are considered related

The Department did not verify the major elements of the Nordsvalaks response. The existence of this second, related company presented the question of whether all costs and expenses were appropriately allocated between these two entities. In effect, only part of a whole farm was reported in the respondent's submission. Since these companies essentially operated as one company, the verification of Nordsvalaks' submission could not be completed without accepting an entirely new response, including F&Y's data, and so we terminated the verification.

Midnor

Comment 1

Petitioner argues that the Department should adjust net production quantity for Midnor to December 1989 year-end quantities.

Respondent states that at verification Midnor provided revised ending inventory figures for the 1988 year class of salmon and that this information should be taken into account in the calculation of production quantities and per-kilogram cost of production.

DOC Position

The Department agrees with both parties and has adjusted the cost of production to reflect the actual verified ending inventory quantity.

Comment 2

Petitioner claims that Midnor's failure to identify a related supplier undermines the credibility of Midnor's response and that the Department should use BIA in the final determination.

Respondent argues that Midnor's relationship with the supplier is insignificant. Respondent further asserts that transactions were recorded at fair market value.

DOC Position

The Department agrees with the respondent in part. The relationship is not a significant related supplier relationship for cost of production considerations as defined in our cost of production questionnaire. For CV, we tested the prices and found them to fairly reflect the amount usually reflected in the market under consideration in accordance with section 773(e)(4) of the Act. With the exception of processing costs (discussed below), the Department used the verified costs for transactions between the parties.

Comment 3

Petitioner claims that Midnor has not followed a consistent methodology in allocating costs for the year class of 1988 over the production period. Petitioner also asserts that the Department should not exclude those costs incurred for 1988.

Respondent claims that the inconsistency in treatment of costs for 1988 and 1989 should be remedied by correcting the 1989 allocation to resemble 1988 allocations rather than by including those costs incurred in 1988 which had been excluded for the response.

DOC Position

We have modified the calculation of cultivation costs to treat all classifications of 1988 costs in the same manner as they are treated for 1989 costs.

Comment 4

Petitioner claims respondent's failure to provide evidence of actual payment of processing fees should be viewed by the Department as additional evidence of the overall unreliability of the submission and that respondent's submission should be disregarded.

Respondent claims that its submitted processing cost is supported by the FOS price list which was included as a verification exhibit.

DOC Position

For the final determination, the Department has used, as best information available, the processing fees as supported by the FOS price list.

Comment 5

Petitioner claims that the respondent failed to report interest expense for Midnor in the manner requested by the Department and that the Department should ignore respondent's calculations and resort to BIA.

Respondent claims that its calculation of interest expense is justified because of its unusual (start up) situation.

DOC Position

The Department has calculated interest expense based only on 1989 costs incurred divided by the total kilograms of 1988 year class salmon sold. (See Farm-Wide Comment 7).

Bremanger Fiskeindustrie

Comment 1

Petitioner argues that the web of interrelationships between Bremanger Fiskeindustrie A/S (Bremanger) and the exporter R. Domstein & Co. (Domstein) makes it nearly impossible to determine actual production costs for the group. Petitioner further states that these interrelationships create major problems in verifying the accuracy of transfer prices, because transfer prices for certain goods and services can be adjusted by over- or under-pricing other goods and services. Because of the extent of the interrelationships, complete cost of production data should have been supplied for all related parties. Given this lack of information, the petitioner claims that the Department has no choice but to use best information available in determining the cost of production of the group.

Petitioner further argues that Bremanger failed to include in general expenses an amount for services rendered by Domstein for which remuneration was not made by Bremanger. At the very least, Bremanger's general expense should be increased to reflect this omission. The failure to include these expenses should also be weighed by the Department in determining whether Bremanger's *7669 submission should be rejected as unverified.

Petitioner asserts that, despite the fact that Domstein in essence owns Bremanger, the calculation of Bremanger's own interest expense was not based on a Domstein business group basis. Petitioner holds that it is the Department's standard policy to allocate total group interest expenses by total group cost of sales. In its final determination, should the Department accept Bremanger's response, it must adjust interest expenses to the highest amount reported by a responding company.

Respondent argues that Bremanger's salmon farm operates independently of Domstein, with day-to-day decisions and operational record keeping performed by Bremanger's employees. Respondent maintains that general expenses reported in Bremanger's response properly were based upon Bremanger's accounting records. Although Domstein provides limited bookkeeping support, Bremanger provides electronic data processing (EDP) services for the entire Domstein business group without remuneration. In the response, EDP services were allocated to Bremanger operations, i.e., fish farming and fish processing. Therefore, imputing general expenses to Bremanger from Domstein's operations would overstate Bremanger's COP for salmon.

Moreover, respondent argues that Bremanger is a company within the non- consolidated Domstein business group and operates as a separate and distinct enterprise. No consolidated financial statements are prepared. Bremanger incurs its own interest expense and records this expense in its statements in accordance with Norwegian generally accepted accounting principles. Therefore, in accordance with past Department practice on this issue, the Department should calculate cost on the basis of interest expense as reported on Bremanger's financial statements.

DOC Position

The Department agrees with petitioner in regards to exclusion of G&A expenses and with the respondent in regards to which company's interest expense should be used in the calculation. Because Bremanger did not compensate Domstein for administrative services, the Department did not use Bremanger's submitted G&A expenses and used, as BIA, the highest G&A expense of any other farmer. The Department disagrees with the respondent that including an amount for Domstein's services would overstate Bremanger's general expenses. The assertion that Bremanger provides EDP services for the entire Domstein business group was neither reported in the questionnaire responses nor supported by evidence on the record.

Domstein does not own Bremanger, although common control does exist. The Department used Bremanger's interest expenses rather than interest expense incurred by Domstein for computing the COP. However, the Department adjusted this interest expense to include all of Bremanger's interest expense allocated to salmon operations in 1989 (see Farm-Wide Comment 7). The Department did not accept respondent's exclusion of certain mortgage expenses because the Department recognizes the fungible nature of interest expense.

Comment 2

Petitioner argues that Bremanger did not provide accurate data concerning its production quantities and, thus, the Department has no choice but to use the best information available.

Respondent argues that the per-kilogram cost of salmon should be calculated on the basis of the kilograms delivered to and accepted by the exporter.

DOC Position

The Department agrees with respondent and has used the quantity of salmon delivered to and accepted by the exporter to determine COP. In order to determine this amount, the Department relied on the quantities reported by processors, which agreed with the quantities accepted by the exporter.

Comment 3

Petitioner argues that in the absence of compelling reasons and supporting information to justify departure from Norwegian GAAP, Bremanger's recalculation of depreciation expenses must be denied.

Respondent asserts Bremanger prepared its finacial statement for tax purposes. Depreciation of farming equipment was based upon the shortest period allowed under Norwegian tax law rather than on the basis of the economic useful life of those assets. Respondent maintains that a tax life of three years contrasts sharply with the real useful life of the assets in question. For example, in the United States, single purpose agricultural or horticultural structures are assigned a useful life of 15 years by the Internal Revenue Service (IRS). The respondent claims that the Department itself uses the IRS Class Life Asset depreciation system for determining the useful life of assets in numerous countervailing duty cases. For this reason, Bremanger conservatively depreciated its equipment over the ten year period established for agricultural equipment and machinery generally, and did not separate out single purpose assets, including cages and fish feeding equipment, which under U.S. Law are depreciated over 15 Years.

DOC Position

The Department agrees with the petitioner and has not accepted the respondent's recalculation of depreciation expense only for the purposes of the submission in a manner contrary to what is recorded for "ordinary depreciation" on the financial statements. For the final determination, the Department used the "ordinary depreciation" based on the useful life of the assets as reported on the company's financial statement (see Farm-Wide Comment 5).

Comment 4

Petitioner argues that 1988 insurance fees and 1989 depreciation expenses that had been omitted from the response should be included in Bremanger's overhead amounts for the final determination.

Respondent maintains that it provided at the start of verification the inadvertently omitted costs for the 1988 insurance and 1989 depreciation expenses.

DOC Position

The Department has included such costs in the cost of production.

Comment 5

Petitioner argues that the processing of Bremanger's fish was performed by companies related to Domstein, and, thus, to Bremanger. Accordingly actual costs of processing should have been submitted so that the Department could have determined whether they were at or above the proces paid by Bremanger for these services. The Department should consider this omission in determining whether to reject as unverified the responses of both Bremanger and Domstein.

Respondent maintains that although the processing costs of Bremanger's processors and the prices its processors charged to unrelated customers where not available to Bremanger during verification, Bremanger documented that it was charged the reference price established by FOS for packing and processing.

DOC Position

For COP, actual costs were submitted but could not be verified. Therefore, the *7670 Department has used, as BIA, the FOS price list to determine processing costs.

Comment 6

Petitioner argues that the Department determined at verification that the cost for wellboat transportation has not been calculated on a gutted basis. Moreover, petitioner holds that there is nothing on the record which indicates that Domstein paid for freight costs incurred by Bremanger. Accordingly, the Department should make the adjustment for gutting, and should at least use the highest freight rate incurred by Domstein as BIA in the final determination.

Respondent claims that, in Bremanger's case, all freight costs are paid by the exporter. Since these amounts are reported in the exporter's response, the inclusion of this amount in Bremanger's response would result in double counting of freight expense.

DOC Position

The Department agrees with the petitioner in regards to wellboat transportation fees. Wellboat fees were adjusted by the Department to reflect a per-gutted kilogram charge (see Farm-Wide Comment 6). According to Domstein's verified questionnaire response, Domstein pays for all trucking, brokerage, and handling from the processing plant to any delivery point in the third country, as stipulated by the terms of sale. Thus, freight costs were not included in Bremanger's costs.

Hofa

Comment 1

Respondent argues that the proper calculation of the per kilogram costs of salmon requires that the costs be calculated on the basis of the kilograms delivered and accepted by the exporter.

DOC Position

The Department has calculated the cost of production based on the quantity of salmon delivered to and accepted by the unrelated exporter. The quantity of salmon accepted by the exporter was supported by documents provided by that exporter.

Comment 2

Petitioner argues that the Department should adjust net production quantity by the amount of the overstatement internally reported by the respondent for the ending inventory.

Respondent states that at verification Hofa provided revised ending inventory figures for the 1988 year class which were verified and that this information should be taken into account in the calculation of production quantities and the cost of production.

DOC Position

The Department has adjusted the cost of production to reflect the actual verified ending inventory quantity.

Comment 3

Petitioner argues that Hofa under reported its "ordinary depreciation" for 1988 by not including depreciation incurred during the first half of 1988 for equipment that was rented to another producer. Petitioner maintains that the respondent did not provide evidence at verification that it was reimbursed for the use of its capital equipment, and argues that this situation is analogous to "idle" equipment which, under standard Department practice, must be fully depreciated during the relevant period.

Respondent maintains that Hofa properly reported depreciation for the last six months in 1988. The 1988 year class entered the sea in the fall of 1988. Prior to that period, Hofa did not use its equipment for farming. Rather, during the first half of 1988, it rented its equipment to another farm, a fact that the Department verified.

DOC Position

The Department agrees with the respondent. The Department verified that respondent received rental income for the equipment and such income and associated depreciation were not included in the cost of production.

Comment 4

Petitioner argues that, in calculating its cost of smolts, Hofa used transfer prices rather than actual production costs incurred by its related supplier. Petitioner maintains that the price paid to Hofa's related supplier for smolts is below the company's production costs, which is the appropriate benchmark to use unless Hofa can demonstrate that the prices paid are above the supplier's costs. Given Hofa's failure to supply the actual costs for the smolt purchased from its related supplier, the Department should use, as best information available, the higher of (1) the appropriate FOS minimum price in effect pre- August 15, 1988, (2) the highest calculated smolt costs submitted in this investigation, or (3) the transaction prices reported by Hofa.

Respondent indicates that Hofa provided invoices for smolt sales to unrelated purchasers and FOS price lists to demonstrate that the prices it paid to a related smolt supplier in the fall of 1988 were at or above market prices. Respondent further claims that, given the high price for these smolt, there is nothing to suggest these sales by the related company to Hofa were distress sales made below its cost of production and, thus, there exists no reason to reject these verified costs.

DOC Position

The Department accepted Hofa's purchase price as the appropriate cost of smolt for the final determination for both the calculation of cost of production and constructed value. Because the supplier does not own more than fifty percent of Hofa, the purchase price is the appropriate determinate of the cost of smolt for the cost of production. For constructed value, we used the transfer prices reported by Hofa because they were comparable to the prices in Norway for similar qualities and sizes of smolt.

Comment 5

Petitioner argues that the Department should not allow the cost of production to be offset by the proceeds of an insurance indemnity that is allegedly related to losses due to disease for the following reasons: (1) This information was submitted well after the Department's standard deadline for accepting new information, and (2) the verification exhibits indicate that the amount of the insurance settlement was based partly on the market value of the lost production and not on the cost associated with the losses.

Respondent maintains that Hofa properly offset its cost for salmon by insurance proceeds received to avoid the economic distortion that otherwise would result. Additionally, respondent disagrees with petitioner's argument that this offset should be rejected because it was partly based upon the market value and not upon the costs associated with the loss. Respondent argues that the record shows that, even if some profit element were included in the insurance valuation of the fish, the insurance settlement was well below the insurance valuation for loss and the portion of the settlement directly related to the lost fish was well below the cost of production as set forth in Hofa's response.

DOC Position

The Department agrees with the respondent. Although the amount of the indemnity was submitted at the beginning of verification, the company's responses to the Department's questionnaire reported that the 1988 year class had suffered great losses due to disease and also that the company incurred insurance expenses. After examination of the documents *7671 supporting the receipt of the insurance indemnity, the Department included the proceeds as an offset to production costs for the 1988 year class. The Department notes that the proceeds were lower than the actual cost of production for the losses incurred.

Austevoll

Comment 1

Petitioner argues that they have reason to believe that Austevoll misreported certain data to FOS. Petitioner calls for the use of BIA (the highest verified COP of any other farm) if it is determined that Austevoll misreported its sales to FOS.

Respondent argues that the petitioner offers no support or evidence that its claim is true other than a general statement from an exporter that it may have under reported its sales to FOS.

DOC Position

We tested quantities reported by Austevoll to the Department against those reported to FOS and noted no discrepancies.

Comment 2

Petitioner argues that the Department should reject Austevoll's claim for an offset to the cost of cultivation for the estimated losses resulting from the infectious anemia syndrome (ILA) disease which infected the 1988 class. Petitioner states the respondent did not establish that the disease affecting the 1988 year class was "extraordinary." Petitioner states that Austevoll supplied neither industry nor government reports regarding the costs incurred in dealing with the ILA disease, nor any information as to the costs incurred by a Norwegian farmer affected by an "ordinary" level of ILA disease. Furthermore, Austevoll's 1989 financial statement did not list any extraordinary expenses from ILA disease. Since Austevoll did not treat these expenses as extraordinary according to Norwegian GAAP, the Department should also not consider them to be extraordinary for this investigation.

Respondent argues that, because a large portion of the stock died prior to harvesting and the remainder had to be slaughtered prematurely, Austevoll's sales and costs should be excluded from the investigation. The ILA disease also affected the quality of the stock which was sold in two ways: (1) The output of superior quality fish decreased substantially; and (2) the fish continued to experience a degradation of the flesh even after being sold, which required Austevoll to pay refunds to customers. Thus, Austevoll contends the ILA disease-related expenses are extraordinary. Respondent argues that it is the Department's normal practice to disregard sales of damaged merchandise and sales made outside of the ordinary course of trade; therefore, Austevoll should be excluded from the investigation.

DOC Position

We agree with the petitioner in part. Austevoll's claim that the extent to which the ILA disease affected its 1988 year class of salmon was extraordinary was not supported by the evidence on the record. In order for a particular item to be classified as extraordinary, it must be unusual in nature and infrequent in occurrence. In the fish farming industry, disease is an expected occurrence. Respondent submitted no independent data regarding ILA disease in general or the extent to which other farmers in Norway suffered from this disease, and no data was submitted regarding ordinary or abnormal levels of disease. Therefore, respondent was unable to support its claim that the extent to which the ILA disease affected its 1988 year class was extraordinary.

The Department disagrees with the respondent's claim that Austevoll's sales and costs should be excluded from the investigation. Austevoll's 1988 year class was sold in the ordinary course of trade. The fact that the disease resulted in the production of a larger proportion of "ordinary" quality salmon than would have been produced absent the disease does not lead to the conclusion that the sale of the "ordinary" quality salmon is outside the ordinary course of trade. The portion of the salmon stock which lived did enter the market.

Comment 3

Petitioner argues that, if an offset is allowed for the ILA disease, the method in which Austevoll calculated the offset is not acceptable. The major portion of the offset represents the "declared value" of the fish on the insurance policy, which is based upon the market value of the fish which includes lost revenues. Petitioner claims that the market value of fish as recognized by insurance companies is much higher than the average selling prices for 1989 which Austevoll reported. Also, the market value of fish does not represent the actual costs incurred by a farmer that has been affected by ILA disease. Petitioner states that only the actual costs incurred by the farmer should be considered in an adjustment for the affects of ILA disease, not unrealized profits. Respondent argues that, if Austevoll's sales are not excluded from the investigation, it should be allowed an offset for the effects of the ILA disease as submitted because it meets the criteria set forth for extraordinary items: The impact of the disease was unusual in nature, infrequent in occurrence, and the effect that it had on the 1988 year class was material. Respondent argues that it should be allowed an offset as calculated by its claim filed with its insurance company.

DOC Position

We agree with petitioner in part. The Department agrees that the method by which respondent calculated the offset did not reflect the actual loss incurred from the disease. The respondent based its offset on the total amount of the claim filed with its insurance company. Included in this calculation are amounts for the lost revenue from fish mortalities and from fish downgraded in quality because of the disease. Certain actual expenses which were paid by Austevoll, such as an additional sanitary fee paid to the exporter, were also included in this calculation. The basis of the respondent's offset bore little relationship to the actual costs incurred by Austevoll, whether in treating this disease, in cultivating the salmon which died, or in protecting the remainder of the stock from contracting the disease. We allowed a reduction to total costs for the amount of the actual reimbursement received from the insurance company.

Comment 4

Petitioner argues that the respondent withheld significant information concerning its methodology for smolt costs. The respondent's use of cost data of the calendar year 1988 as a surrogate for the actual costs incurred in 1987 and 1988 to raise the 1987 smolt year class was not disclosed in any of its submissions. The Department first learned of this information at verification. Petitioner argues that the Department clearly asks for detailed explanations of methodology in its questionnaire in order to analyze the information prior to verification and the Department should not be surprised with new information at verification. Petitioner suggests that Austevoll's smolt costs be rejected and the highest smolt cost of the other farms be used as BIA.

Respondent argues that Austevoll used the smolt production costs for the calendar year 1988 as a surrogate for the actual production costs of the 1987 smolt year class because of the difficulties in allocating costs among different year classes and the lack of complete data for 1987 smolt production costs. *7672 Austevoll claims its methodology does not understate costs and, in fact, overstated costs. Austevoll stated that it showed at verification that the per-unit costs for feed and roe was lower in 1987 than 1988. Therefore, Austevoll's methodology should be accepted for the final determination.

DOC Position

We agree with respondent. The Department used 1988 smolt production costs as best information available. In testing the 1987 smolt cost elements during verification, there was no indication that the total smolt cost was understated.

Comment 5

Petitioner argues that Austevoll did not provide any support that the processing fees charged by its related party were at arm's length or were above the related party's cost of production. Therefore, the Department should use BIA for the final determination and base processing costs on the higher of (1) the highest verified processing costs, (2) Austevoll's submitted prices for processing, or (3) the FOS minimum processing prices.

Respondent argues that its processing fees were set forth in the FOS invoices and were properly reported.

DOC Position

We agree with respondent. We used Austevoll's reported processing charges since they agreed to those reported on FOS invoices.

Comment 6

Petitioner argues that the Department should base its calculation of wellboat expenses on the higher of Austevoll's reported transfer price or the highest wellboat expense of any other farmer. Austevoll based its wellboat costs on an internal transfer price used for cost accounting purposes rather than on actual costs of its wellboat operations.

Respondent contends that the market price for wellboat costs that it used as the basis for its internal cost for wellboat operations reflected the actual costs of Austevoll's use of its wellboat and was properly included in COP.

DOC Position

We agree with respondent. After testing the actual costs to the submitted costs, the Department determined that the submitted costs reflected the actual costs of the wellboat operation. Therefore, no adjustment was made.

III. Exporter-Wide Comments

Comment 1

Petitioner argues that the Department should base COP on the higher of: (1) The costs of production of the farm to which the exporter has been linked, or (2) the weighted-average acquisition price the exporter paid the farmer. Petitioner also argues that an average COP would not be representative since the sample selection process was not adjusted to take account of size differences between farms.

Respondents argue that the cost of production of the farms should be based on an average of all the farmers' costs weighted by production volume. Linking an exporter to a farmer would not be representative of the exporter's costs since each exporter bought salmon from a large number of farms during the POI. They also argue that acquisition prices are not relevant to the COP analysis.

DOC Position

First, the Department agrees with respondents' position that acquisition prices are not relevant to the cost of production analysis. In determining whether exporters' sales were made at less than cost, we looked at the "cost of producing the merchandise," in accordance with section 773(b) of the Act. As described in the Foreign Market Value section of this notice, the "cost of producing" the merchandise included the sum of the farmers' COP plus the exporters' general, selling and administrative expenses, profit and packing.

Second, a discussion of the background of the investigation is required to comment on the issue of an average COP as opposed to exporter-farmer specific COPs. The Department intended to construct a sample of farms which supplied each of the individual exporters during the POI. This methodology was designed to arrive at representative costs for each of the eight exporters based on their own experiences. In order to construct this sample, the Department asked the respondents to provide a separate list of farms which supplied each of the eight exporters during the POI. The Department randomly selected eleven farms from the lists and sent cost questionnaires to those farms. However, approximately two weeks after the questionnaires were sent, the respondents informed the Department that the lists used to select the sample were flawed because they contained farms that had not sold to the exporters during the POI. In fact, four of the eleven farms selected by the Department did not sell to the exporters during the POI. The Department decided not to select four additional farms from what was then known to be a flawed list. Moreover, given the time constraints, the Department decided to proceed with the information submitted from the seven remaining farms to avoid difficulties in meeting the statutory deadline for our final determination.

Given the constraints of the sample, the Department used an average of the seven farms' costs to arrive at an average farm COP in Norway. We disagree with the petitioner that averaging does not result in a representative COP. (The Department notes that the sample contains small, medium and large producers as well as farms from both the northern and southern regions of Norway.) To the contrary, this is the most reasonable methodology to determine the cost of producing salmon in Norway in circumstances where a great number of producers (more than 700 in this case) must be investigated in a relatively short period of time. Since four of the eleven farms were eliminated from the sample, we can not arrive at exporter-specific costs by linking exporters to specific farmers. The eleven were chosen to achieve geographic balance between northern and southern farms for exporters who purchased from farms in both these areas. The absence of costs from the four missing farms would skew individual exporter results. We also note that each exporter bought salmon from a large number of farmers during the POI. Therefore, we have concluded that an average of the COP from the seven farms is the most representative of the costs of Atlantic salmon from Norway.

We agree with the petitioner that weight averaging the costs of the farmers would skew the results. Bremnes, one of the seven sampled farms, is one of the largest farms in Norway. Based on public information on the record of this case (response of the Government of Norway to the countervailing duty questionnaire (C-403-802)), the largest farms in Norway produce a very small proportion of total salmon production. However, Bremnes' production constitutes a large proportion of the combined production of the seven farms. Therefore, weight averaging would result in a COP which disproportionately reflects the costs of the largest farms in Norway. In view of this, a simple average of costs is more representative of industry-wide costs then a weighted average.

Comment 2

Respondents contend that farmed salmon is a highly perishable product *7673 that is sold into a market that the seller cannot control. Specifically, respondents allege that when salmon approaches maturity, the color of the flesh changes and it loses value. Consequently, farmers must sell or suffer the loss of their crops.

Respondents assert that Atlantic salmon is also a perishable commodity for the exporters. Respondents further argue that the Department should conclude that sales of Atlantic salmon were not sold below the cost of production over an extended period of time and in substantial quantities, and were at prices which would permit recovery of all costs within a reasonable period of time. Respondents argue that if the Department continues to apply a COP test to determine whether substantial quantities of sales were made below the cost of production, the Department should apply a 50/90/10 test, rather than the 10/90/10 test. (Under the 10/90/10 test, the Department would not disregard sales if less than 10 percent were below cost, disregard only the below cost sales if between 10 and 90 percent were below cost, and disregard all sales if more than 90 percent were below cost).

In past cases the Department has applied the 50/90/10 test in cases involving highly perishable agricultural products. Under a 50/90/10 test, the Department would not disregard any less than cost sales unless more than 50 percent of sales were below cost. Respondents contend that the Department will not find more than 50 percent of sales below the cost of production.

Respondents claim that sales below cost did not occur over an extended period of time, based on an examination of average cost, average fair market value, and average profit on a monthly basis for each exporter. They argue that the information demonstrates that each exporter made a profit in at least two of the six months during the period of investigation with every company showing a profit in the last month of the investigation. The existence of profits in some months for all companies precludes a finding of sales below cost over an extended period of time.

Furthermore, respondents argue that any sales below cost by the exporters were at prices that would permit recovery of all costs within a reasonable period of time. As evidence of their assertion, respondents rely upon monthly data which indicate a return on sales above cost, by weight band, for a majority of exporters. In addition, virtually all below cost sales occurred on sales of smaller fish which do not command high market prices but which bear the same cost per kilogram as the larger fish.

Petitioner challenges respondents' assertions that they lack the ability to control the time of sale of the farmed salmon. Rather, petitioner contends that the Norwegian salmon farmer has the option of delaying harvest of the salmon. Petitioner noted that farmed salmon can be kept in the water for eight to ten months after the onset of maturity and that such "held over" salmon would at least retain value since they regain their color and could weigh more than at the onset of maturity. Petitioner cited a January 1990 study by the National Oceanic and Atmospheric Administration reporting that Norwegian farmers carried over 30,000 metric tons in inventories of fresh harvestable salmon from 1989 to 1990. Accordingly, petitioner supports the 10/90/10 test for cost analysis.

Petitioner further states that respondents failed to produce documentation to support data indicating profitable months during the POI. In addition, exporters' audited financial statements for the year ending 1989 reflect net losses. Each of these facts, petitioner argues, undermines the credibility of respondents' assertion that below cost sales did not exist over an extended period of time. Finally, petitioner disputes respondents' claims that sales in later months are above costs, indicating the recovery of costs.

DOC Position

We agree with petitioner that fresh salmon is not a perishable commodity for purposes of the cost analysis. Norwegian Atlantic salmon farmers have the ability to control the time of sale of their output by "holding over" inventory and, since January 1990, by freezing fresh salmon. Regarding respondents' assertion that salmon is perishable in the hands of the exporters, the Department found at verification that the opposite is true. Exporters coordinate their salmon requirements in weekly telephone conferences with their customers, with farmers, and with other exporters. By doing so, exporters can communicate their salmon requirements two weeks into the future to the farmers so that farmers can begin to "starve" (prepare for harvest) the salmon two weeks prior to harvest. Accordingly, there appears to be no perishability problem at the exporter level. Therefore, the Department applied the 10/90/10 test applicable to non-perishable products for purposes of determining whether below-cost sales were in substantial quantities.

Regarding the extended period of time during which below cost sales occurred, respondents' reliance on average prices and costs is misplaced. Section 773(b)(1) of the Act allows us to disregard sales at less than cost if they are made over an extended period of time. Thus, the focus is on the individual sales below costs, not whether the average price of all sales is above or below cost. An examination of below cost sales reveals that they took place throughout the POI, as opposed to being concentrated in only a short period of time. Therefore, the Department concludes individual sales at prices below cost occurred over an extended period of time. Similarly, to be disregarded, the price of below-cost sales also must be insufficient to recover all costs in a reasonable period of time. An average price, which includes both above and below cost prices is not relevant to this determination. In order for prices below cost in the POI to recover all costs, there would need to be evidence that costs in a reasonable time would decline sufficiently for prices below POI costs to exceed future costs to a degree that would permit not only recovery of future costs but recovery of current losses. We have examined costs of producing salmon over a two year period and have found no evidence of either costs expensed in the POI which should be reallocated to a future time, thus lowering POI costs, nor of any other evidence that current costs are aberrational and expected to decline. In the absence of evidence that current below-cost prices will recover future and current costs, the Department concludes that below-cost prices will not recover all costs in a reasonable period of time.

Comment 3

Respondents suggest that the Department's usual practice of comparing U.S. prices to a weighted average FMV covering the entire period of investigation would result in an inherently unfair comparison of "apples to oranges" or "fish to fowl." Respondents note that the International Trade Commission, in its preliminary determination in this case, stated that fresh salmon prices fluctuated "widely" from 1987 through mid-1988 and that thereafter salmon prices declined 50 percent through the end of 1989 before recovering somewhat in the first quarter of 1990. They point out that the Department has previously based FMV on both daily and monthly averages, respectively, in Certain Fresh Winter Vegetables from Mexico; Final Determination of Sales at Less Than Fair Value, 45 FR 20512, 20515 and Fall Harvested Round White Potatoes; Final Determination of Sales at Less Than *7674 Fair Value, 48 FR 51669. With respect to the appropriate time frame on which to base the fair value comparisons, respondents suggest that daily or weekly average FMVs be used because it would provide the Department with the most "contemporaneous" foreign sales. Respondents argue in the alternative that monthly averages should be used.

Citing Certain Fresh Cut Flowers from Mexico Final Results of Antidumping Administrative Review, 55 FR 12696, 12897, respondents suggest that fairness requires that the Department calculate United States Price "on an average basis comparable to that utilized for FMV." Respondents note that in that case, the Department was obliged to "take into account" price distortions resulting from the perishable nature of the product.

Petitioner suggests that where FMV is based on home market or third country net prices, the Department should follow its standard price-to-price methodology. With respect to U.S. price, petitioner contends that, at least when FMV is based on constructed value, the Department should use weighted- average U.S. prices by invoice across all weight bands. Petitioner feels that weighted-average U.S. invoice prices are comparable to "single average costs" and that weighted-average prices reflect commercial reality, since a single invoice to a customer covers many weight bands.

DOC Position

To examine the question, we collected gross price information for each exporter for each month of the POI. We aggregated all weights of gutted salmon for purposes of comparing monthly price fluctuations in the same market. The Department used gross prices to minimize exchange rate effects (several exporters had mixed currencies in their databases).

We noted two discernible trends. First, there was a significant increase from month to month in FMVs from September through December, with another notable increase in January, 1990, continuing into February. Second, there was a steady decrease in U.S. price from September to December, with a large, pronounced increase in U.S. price in January, 1990 and continuing in February. For these reasons, i.e., because the time of sale is closely connected to the prices charged, the Department agrees with respondent that a "narrower" window should be used for fair value comparisons, and, accordingly, weight-average FMV by month. The Department did not average U.S. price, following its normal practice of comparing individual U.S. prices to weight-average home market or third country prices. Also, vegetables and flowers were highly perishable products, dominated by sales at auction, and having significant price fluctuations each day. Salmon shares none of these characteristics and, therefore, averaging to eliminate the distortions is unnecessary.

Comment 4

Petitioner contends that the Department should base the foreign market value on constructed value instead of third country prices in Europe because substantial evidence exists from a European Community (EC) preliminary antidumping investigation of salmon from Norway that third country prices are below the fair market value. The failure of the EC to arrive at a final determination in its separate investigation of salmon from Norway should not diminish the significance of the preliminary finding of dumping in the EC. The Department should recognize the practical contradiction of using the price of products sold below fair market value as the average fair market price and should use constructed value as the fair market value.

Respondents contend that any evidence of dumping in the comparison market should have no bearing on the U.S. investigation conducted by the U.S. Department of Commerce. Respondents argue that U.S. law does not contemplate consideration of whether third country prices are below fair market value as determined by a different antidumping authority. Respondents also point out that during this investigation, petitioner has consistently maintained that because EC and U.S. investigations significantly differ, information obtained in the EC investigation cannot be used for the purpose of the U.S. investigation. Therefore, any E.C. preliminary finding of dumping is irrelevant for the purpose of the U.S. antidumping analysis.

DOC Position

The statute does not preclude the Department from using third country sales solely because an authority other than the Department has found or may find that they are at dumped prices.

Comment 5

Respondent argues that fees paid to the NFOL, ECFF and the Norwegian Government for health inspections may either be classified as direct selling expenses or taxes. If the Department clsssifies the fees as direct selling expenses, it should deduct the expenses from third country prices. If, however, the Department classifies the fees as taxes, no adjustment should be made to the gross unit price and no amount should be added to the COP.

Petitoner contends that the fees discovered at verification, such as the NFOL fee, the ECFF fee, and the NOG health certificate fee should not be deducted from FMV because respondents failed to report the expenses incurred. Petitoner states that the cumulative effect of the individual fees will have a significant effect on the overall margins. In addition, petitioner argues that the fee for NOG health inspections must be added to the exporters' cost of production.

DOC Position

At verification, the Department discovered that the exporters pay certain fees to two organizations that were not reported, or only partially reported, in the responses. Payments to the NFOL represent mandatory payments to the exporters' organization by all exporters who are members of the NFOL. The amount of the fee payable varies with the quantity of the merchandise purchased by the exporter. Similarly, the ECFF fee, which varies with the volume of the merchandise exported, is paid by all exporters on export sales to all markets. Therefore, both of the fees represent variable costs attributable to the subject merchandise.

The Department has characterized the fees as direct selling expenses because the fees represent variable costs and are paid by the exporters on sales of the subject merchandise. Consequently, the Department has made a circumstance of sale adjustment to foreign market value to reflect the payment of fees on shipments to the U.S. and third country markets and has included the total expenses attributable to salmon sales in the COP.

Certain exporters incurred expenses related to inspection and certification of merchandise destined for the European Community. The Department has determined that this adjustment to foreign market value constitutes an insignificant adjustment under 19 CFR 353.59. Therfore, we have disregarded the adjustment relating to health certification fees incurred on goods sold to those third countries.

Comment 6

Petitioner objects to all respondents' overall methodology of averaging certain expenses in the foreign market such as movement, insurance, duties and fees to the extent that the costs are to be deducted from individual sales prices. Petitoner argues that the averaging techniques employed results *7675 in margin distortions by causing a higher FMV in sales in the less frequent but higher weight bands and a lower FMV in sales of more frequent, lower weight bands.

Respondents contend that the averaging methods employed constitute reasonable methodologies for allocating expenses that are, by their nature, averages.

DOC Position

We have accepted all movement, insurance, duty and fee averages since verification substantiated that the average amounts reported were reasonable in relation to the sale specific charges we observed. In some instances, our verification findings changed the reported charges.

Comment 7

Petitoner argues that the Department should use actual processing costs, where available, in lieu of the standard fee listed on the FOS schedule.

Respondents assert that the Department should use actual costs for Chr. Bjelland and Skaarfish, two exporters which demonstrated lower processing costs for merchandise processed in-house than charged for unrelated packers, which charge the FOS fee.

DOC Position

Although the Department verified lower in-house processing costs for some exporters, the Department was unable to verify either whether the charge was always passed to the farmer or whether the exporter at times bore the cost. One exporter, Chr. Bjelland, reported in its May 16, 1990 response that it "buys fish from the farmers at an ex-cage" price. On July 27, Chr. Bjelland reported that "[a]ll charges applicable to transporting the merchandise to Chr. Bjelland's distribution warehouse, including standard packing (which includes processing) are included in the exporter's cost of purchasing the merchandise." Because of the conflicting accounts, the Department applied, as BIA, the FOS fee in its build-up of the farmer's COP and CV.

Comment 8

Petitioner contends that some respondents have improperly claimed warranty expenses relating to rebate payments or total write offs on specific sales. Petitioner recommends that where information does not exist to deduct only the proper amount for each sale, the Department should reduce the U.S. price by the amount claimed and should disallow an adjustment for warranty expenses to the FMV.

Respondents challenge petitioner's assertions that warranty expenses are improperly reported. Respondents claim that the nature of the business practice in the salmon industry prevents maintenance of warranty expense records as typically maintained in other industries. Respondents state that the claimed expenses represent complaints based on quality, incorrect shipments, or unilateral refusals to pay. All exporters derived warranty adjustments by totalling the expenses of the types described above and allocating the expenses over market specific sales.

DOC Position

Regarding the treatment of warranty expenses, the Department's practice is to allow only expenses related to quality based complaints. In this case, for those exporters that claimed only warranty expenses as defined by the Department, we have allowed the circumstance of sale adjustment. For those exporters who claimed warranty expenses which included unilateral price deductions, we disallowed the claim in the third country market and applied the full amount claimed in the U.S. market in making circumstance of sale adjustments. We did this because we were unable to segregate the warranty only portion of the claimed expense.

IV. Exporter-Specific Comments

Domstein

Comment 1

Petitioner recommends that the Department either disallow completely or allow only the lowest charges incurred for miscellaneous freight charges incurred on third country sales. Petitioner's position is based on verification findings that the charges were not fixed charges as originally reported but related to terminal costs that varied in amount.

Respondent states that the fixed rate submitted represents the average expense incurred. Respondent claims that Domstein's accounting department derived the average amount and documented the calculations in an accounting study.

DOC Position

The Department agrees with the petitioner. At verification the Department requested documentation to support the amount claimed in the submissions. Domstein offered only documentation that indicated miscellaneous charges at varying amounts. Domstein did not offer any further documentation, despite our inquiries. Therefore, because neither the expense nor a reasonable estimation of the average amount claimed was documented, the Department has disallowed Domstein's claimed miscellaneous freight expenses.

Comment 2

Petitioner states that on U.S. sales with unreported payment dates, the Department should treat the unpaid amount as a discount unless Domstein can demonstrate that the outstanding balance is collectible. Respondent argues that no evidence exists which indicates that the outstanding payments represent discounts. Respondent recommends that the Department either exclude the sales with open paydates or apply the average paydate as in the preliminary determination.

DOC Position

The Department agrees with the respondent. At verification, the Department reviewed sales and payment records for those sales with unreported paydates. The review included examination of computer sales data files and payment records. No evidence exists which suggests that Domstein extended a discount to the purchaser. In addition, the Department thoroughly investigated the discounts claimed and found no discrepancies. Therefore, because substantial payment was received and no evidence of a lack of good faith by the exporter to accurately report discounts exists, as BIA the Department has not treated the unpaid amount as a discount and has assigned the average credit period of all sales to the ten transactions with missing paydates to calculate a credit expense.

Comment 3

Domstein urges the Department to use the verified selling expenses. In the preliminary determination, the Department applied BIA to calculate the commission offset for sales in which a commission was paid in only one market because Domstein did not report indirect selling expenses.

DOC Position

At verification, Domstein provided information total indirect selling, general and administrative expenses incurred for the year ending 1989. We have used that information in our final determination to calculate the commission offset.

Saga

Comment 1

Petitioner contends that the Department should reject the Saga's third country sales listing and base *7676 Saga's FMV on the higher of the FMV calculated for another exporter or the FMV in the petition. Petitioner's contention is based on findings at verification of one invoice of frozen salmon and two to three credit notes erroneously included in the third country database as third country sales. Petitioner characterizes the database as unusable because of the potentionally pervasive inclusion of other credit notes and sales of frozen salmon which it describes as typcially lower in price.

Respondents disputes petitioner's assertion that the mistakes in quantity arising from the inclusion of frozen salmon sales and credit notes warrant a rejection of the response. Respondent notes that the original invoice erroneously recorded the sale of fresh salmon as frozen salmon. The mistake was detected upon review of shipping documents. Furthermore, the Department's random sampling techniques did not detect any other sales of frozen salmon reported in the database. With respect to the credit notes, respondent submitted two out of three of the credit notes erroneously reported as sales to the Department at the beginning of verification. Credit notes were easily detectable upon review of the database because the quantity of goods reported was a single unit, an unlikely amount for a sale.

DOC Position

The Department agrees with respondent. We concluded at verification that the errors in the sales data did not jeopardize the credibility of the third country sales data submitted. The respondent reported the missing credit notes to the Department at the beginning of verification. We verified the amount of the credit notes and the deduction from the corresponding sale. Random sampling did not identify additional unreported credit notes. With respect to the erroneously reported sale of frozen fish, the mischaracterization of the sale as frozen instead of fresh merchandise was an error on the actual invoice. All documentation indicated that the inclusion of the sale was an isolated error.

Comment 2

Petitioner contends that Saga's fees paid to the ECFF were actually .09 percent rather than .1 percent of CIF value. Petitioner requests that the Department adjust the amount deducted to reflect the actual fees paid.

Respondent states that the fee is based on FOB, not CIF, value and argues that petitioner's calculation of the fee is erroneous.

DOC Position

The Department agrees with the respondent. The verification exhibits clearly show that the fees paid to the ECFF were .1 percent of the FOB value on exports to all markets. The Department has adjusted the foreign market value and U.S. price to reflect the payment of these fees.

Comment 3

Petitioner states that Saga's claim for NFOL fees is overstated by .25 percent because the actual NFOL fee fell by .25 percent in January and February 1990.

Saga contends that it did not originally report the NFOL fee and asserts that these fees are paid upon the acquisition of the fish, and not as a charge on the export sale.

DOC Position

In the final determination, the Department calculated NFOL fees as .1 percent of the CIF value for the months of September through December 1989 and .075 percent of the CIF value for the months of January and February 1990 (see Eporter-Wide Comment 6).

Skaarfish

Comment 1

Petitioner suggests that Skaarfish intentionally included sales to customers outside of France to ensure that France was the selected third country. Petitioner hypothesizes that the misreported sales could have been sold to Germany. Petitioner states that sales to Germany were approximately 10 percent higher than sales to France. Petitioner argues that the Department's inability during verification to authenticate the total amounts reportedly sold in each market (United States and France) lends credibility to his assertion. Petitioner requests that the Department apply BIA as the highest calculated FMV for another exporter, or information alleged in the petition.

Respondents argue that the German sales were ultimately destined for Austria and Switzerland and the misreported French sales were actually shipped to Belgium. Respondents point out that they were prepared to prove the destination of the shipments in question at verifcation.

DOC Position

During verification, the Department verified the total quantity and value of merchandise sold during the POI. We attempted to verify the quantity and value sold to each market through the accounting ledgers. Skaarfish officials, however, explained that the accounting system precluded tabulation of sales information for a specific market for a specified period of time. Faced with this situation, we selected invoices from the invoice ledger. We found no improperly reported or unreported sales. Therefore, no reasonable basis exists for the Department to apply the BIA. Accordingly, we have accepted the sales reported by Skaarfish as the appropriate third country market sales.

Fremstad

Comment 1

Petitioner asserts that Fremstad averaged charges per kilogram for each U.S. destination, that such averaging is distortive, and that Fremstad could have submitted air freight charges on a per sale basis. Petitioner urges the Department to use the highest per kilogram charge as best information available.

Fremstad asserts that it does not know in advance what its air freight expense will be when it sells salmon to the United States. It estimates the amount on the basis of experience. Accordingly, Fremstad asserts that average air freight charges per destination are closer to its selling practices that sale- by-sale amounts would be.

DOC Position

Fremstad's reported charges, as corrected by information received verification, were used in recalculating airfreight charges. The average charges per destination, as corrected, were a reasonable method for reporting the charges as the variation in actual charges by destination was not signficant.

Chr. Bjelland

Comment 1

Respondent argues that the Department should use Spain, and not Germany, as the relevant third country market for fair value comparisons. Respondents notes that 19 CFR 353.49(b) requires; inter alia, that we choose a third country to which merchandise is exported which is "more similar" to the United States. Failing that, the Department is to select the third country with the largest volume of sales of "any country" other than the United States.

DOC Position

19 CFR 353.49(b) does not specify a hierarchy for the selection of a third country market. The Department considers all of the listed criteria in deciding which is the appropriate third country market for comparison purposes. In this instance, the *7677 Department determined that German sales represented the most appropriate combination of similar merchandise (over 95 percent of U.S. sales would have identical matches; Spain has considerably fewer), quantity, and similarity of market conditions (there are no pronounced differences on the record between the German and U.S. markets). Accordingly, we selected Germany as the third country market to be used for comparison purposes.

Comment 2

Respondent has repeatedly argued that if the Department uses Germany for fair value comparisons, it must make a level of trade adjustments because sales to Germany include sales to "a distributor" as well as to wholesalers. (Sales in the U.S. market are to wholesalers.) Chr. Bjelland argues that the claim is "documented and verified" by reference to two invoices, Exhibit G-2 and Exhibit G-4, that the Department verified. Chr. Bjelland argues that those verification exhibits show that the same size and quality salmon was sold to two different German purchasers on roughly the same date for different prices. They argue that Exhibit G-4 represents a sale to a "wholesaler" who paid less than did the "distributor" reflected in Exhibit G-2.

DOC Position

We disagree with respondent's assertation that a level of trade adjustment has been "documented and verified" and decline to make an adjustment. Respondent fails to note that the "distributor", just two weeks later, paid less for the same size quality salmon than did the "wholesaler". Respondent has made no attempt to show any pattern of higher-priced sales to the claimed distributor, other than a single unlabelled sheet of paper quoting prices, without reference to either the size or condition of the salmon. Nor has respondent shown that the price difference offered as quantification of the claim is not simply an example of the price fluctuations occurring in the period of investigation.

Salmonor

Comment 1

Petitioner objects to Salmonor's having reported different interest rates for U.S. and third country credit expense adjustments while using average days over all sales for all markets. Petitioner asserts that if uniform credit days are relied upon, a single interest rate should be used for both markets as well. Salmonor asserts that the short-term credit rates for different currencies were verified and that the credit days did not vary between markets.

DOC Position

We verified the actual interest rates, which varied during the POI, in the third country and U.S. markets. Reported interest rates in the response were slightly different than the verified rates. The fact that average credit days is the same for both markets has no bearing on the interest rates we used. We recalculated credit charges using the verified interest rates in effect during the POI.

Comment 2

Petitioner asserts that the total rebates reported exceeded the amount verified and urged the Department not to deduct certain rebates.

Salmonor asserts that the Department verified all rebates.

DOC Position

We recalculated the rebate amount in accordance with the information that we verified.

Sea Star (SSI)

Comment 1

Petitioner asserts that the Department should use the lowest interest rate in effect during the POI as the best information available to determine credit costs. In addition, Petitioner urges the Department to use a 30-day payback term as best information available.

SSI asserts that the lowest interest rate was in effect for only 42 days during the POI and that its application for the entire period would be distortive. SSI also objects to a 30-day payment term inasmuch as we verified average credit days by examining monthly accounts receivable balances and average daily accounts receivable and average daily receipts per customers.

DOC Position

We recalculated SSI's credit expenses using the verified interest rates in effect during the period of investigation. We used the average payment periods per customer in the recalculation.

Comment 2

Petitioner asserts that SSI misreported inland freight charges to France and that the lower freight rates claimed for a large purchaser were incorrect.

SSI asserts that the difference between the reported inland freight charges to France and the corrected figure is inconsequential. With respect to the different rates charged to the large purchaser, SSI asserts that the Department should use the rate reported as the most accurate approximation.

DOC Position

We recalculated SSI's inland freight using an average of the verified rates for its largest French customer for the POI. This amount was used as BIA as it closely approximates the interest rates for all purchasers.

Comment 3

Petitioner objects to SSI's use of average airfreight charges. SSI asserts that the average charges on a per destination basis bear a much closer resemblance to how SSI does business than a sale-by-sale reporting of airfreight.

DOC Position

We received corrected average airfreight charges per destination at verification. We were able to verify the accuracy of these charges. The average rates were a reasonable method for reporting the charges as the variation in actual charges was not significant.

Continuation of Suspension of Liquidation

In accordance with 19 CFR 353.15(a)(3)(i), we are directing the United States Customs Service to continue to suspend liquidation of all entries of Atlantic salmon from Norway, as defined in the "Scope of Investigation" section of this notice, that are entered, or withdrawn from warehouse, for consumption on or October 3, 1990, the date of publication of the preliminary determination notice in the Federal Register. For Sea Star, the United States Customs Service will suspend liquidation of all entries of salmon from Norway, as defined in the "Scope of Investigation" section of this notice, that are entered or withdrawn from warehouse, for consumption on or after the date of publication of this final determination in the Federal Register. The United States Customs Service shall continue to require a cash deposit or posting of a band equal to the estimated amounts by which the FMV of the Atlantic salmon from Norway exceed the U.S. prices, as shown below.

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Manufacturer/producer/exporter Margin percentage

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Salmonor A/S ................................ 18.39

Sea Star International ...................... 24.61

Skaarfish Mowi A/S .......................... 15.65

Fremstad Group A/S .......................... 21.51

Domstein and Co.............................. 31.81

Saga A/S .................................... 26.55

Chr. Bjelland ............................... 19.96

Hallvard Leroy A/S .......................... 31.81

All others .................................. 23.80

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*7678 If the Department publishes an antidumping duty order covering Atlantic salmon from Norway, the Department will instruct the U.S. Customs Service to reduce the dumping deposit by the amount of the countervailing duty deposit attributable to the export subsidies found in the concurrent countervailing duty investigation covering the subject merchandise. This supsension of liquidation will remain in effect until further notice.

ITC Notification

In accordance with section 735(d) of the Act, we have notified the ITC of our determination. In addition, pursuant to section 735(c)(1) of the act, we are making available to the ITC all nonprivileged 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 in writing that it will not disclose such information, either publicly or under administrative protective order, without the written consent of the Deputy Assistant Secretary for Investigations, Import Administration.

The ITC will determine, within 45 days from the date of this final determination, whether there is material injury, or threat of material injury, to the domestic industry. If the ITC determines that material injury, or threat of material injury, does not exist, the proceeding will be terminated and all securities posted as a result of the suspension of liquidation will be refunded or cancelled. However, if the ITC determines that material injury, or threat of material injury, does exist, the Department will issue an antidumping duty order directing Customs officials to assess antidumping duties on salmon from Norway entered, or withdrawn from warehouse, for consumption on or after the effective date of the suspension of liquidation, equal to the amount by which the FMV exceeds U.S. price.

This determination is published pursuant to section 735(d) of the act (19 U.S.C. 1673d(d)).

Dated: February 15, 1991.

Eric I. Garfinkel,

Assistant Secretary for Import Administration.

[FR Doc. 91-4392 Filed 2-22-91; 8:45 am]

BILLING CODE 3510-DS-M

END OF DOCUMENT