Certain Pasta From Turkey: Notice of Preliminary Results of Antidumping Duty Administrative Review

AGENCY:

Import Administration, International Trade Administration, Department of Commerce.

ACTION:

Notice of preliminary results of antidumping duty administrative review.

SUMMARY:

In response to a request by the petitioners, New World Pasta Company, American Italian Pasta Company, and Dakota Growers Pasta Company, the Department of Commerce (the Department) is conducting an administrative review of the antidumping duty order on certain pasta (pasta) from Turkey for the period July 1, 2002, through June 30, 2003.

We preliminarily determine that during the period of review (POR), Filiz Gida Sanayi ve Ticaret A.S. (Filiz) and Tat Konserve A.S. (Tat), successor-in-interest to Pastavilla Makarnacilik San. V. Tic. A.S., (Pastavilla) sold subject merchandise at less than normal value (NV). If these preliminary results are adopted in the final results of this administrative review, we will instruct the U.S. Customs and Border Protection (CBP) to assess antidumping duties based on the difference between the export price (EP) and NV.

Interested parties are invited to comment on these preliminary results. Parties who submit comments in this proceeding should also submit with them: (1) A statement of the issues; (2) a brief summary of their comments; and (3) a table of authorities. Further, we would appreciate it if parties submitting written comments would provide the Department with an additional copy of the public version of any such comments on diskette.

EFFECTIVE DATE:

August 6, 2004.

FOR FURTHER INFORMATION CONTACT:

Lyman Armstrong or Mark Young, AD/CVD Enforcement, Office 3, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW., Washington, DC 20230; telephone: (202) 482-3601 or (202) 482-6397, respectively.

SUPPLEMENTARY INFORMATION

Background

On July 24, 1996, the Department published in the Federal Register the antidumping duty order on pasta from Turkey (61 FR 38545). On July 2, 2003, we published in the Federal Register the notice of “Opportunity to Request Administrative Review” of this order, for the period July 1, 2002, through June 30, 2003 (68 FR 39511).

On July 31, 2003, we received a request for review on behalf of petitioners, for Filiz, Tat, Beslen Makarna Gida Sanayi ve Ticaret, A.S., and Beslen Pazarlarma Gida Sanayi ve Ticaret A.S., respectively (collectively Beslen), Gidasa Sabanci Gida Sanayi ve Ticaret, A.S. (successor to Maktas Makarnacilik ve Ticaret, A.S.) (Gidasa), and Oba Makarnacilik Sanayi ve Ticaret, A.S., (Oba) in accordance with 19 CFR 351.213(b)(1). On August 22, 2003, we published the notice of initiation of this antidumping duty administrative review covering the period July 1, 2002, through June 30, 2003, for Filiz, Tat, Beslen, Gidasa, and Oba. See Notice of Initiation, 68 FR 50750 (August 22, 2003).

On September 10, 2003, we sent the antidumping duty questionnaires to Filiz, Tat, Beslen, Gidasa, and Oba.

On September 29, 2003, Oba sent a letter to the Department stating that it had no shipments of subject merchandise to the United States. On October 3, 2003, petitioners withdrew their request for review for Beslen, Gidasa, and Oba.

For both Filiz and Tat, the Department disregarded sales below the cost of production during the most recently completed segment of the proceeding in which these companies participated. Therefore, pursuant to section 773(b)(2)(A)(ii) of the Tariff Act of 1930, as amended (the Act), we had reasonable grounds to believe or suspect that sales by these companies of the foreign like product under consideration for the determination of NV in this review were made at prices below the cost of production (COP). Thus, we initiated a cost investigation of Filiz and Tat at the time we initiated the antidumping review.

Filiz and Tat submitted their sections A through D questionnaire responses on October 31, 2003, and November 12, 2003, respectively. Both Tat and Filiz submitted voluntary supplemental submissions to the Department on December 18, 2003. Tat and Filiz also submitted a second voluntary submission on February 24, and February 26, 2004, respectively.

The Department issued supplemental sections A through D questionnaires to Tat on February 26, 2004, March 11, 2004, and March 25, 2004. Tat submitted its responses to our supplemental questionnaires on March 25, 2004, April 8, 2004, and April 15, 2004, respectively. The Department issued supplemental sections A through D questionnaires to Filiz on March 25, 2004. Both Filiz's and Tat's supplemental sections A through D questionnaires were based upon submissions filed on October 31, 2003, November 12, 2003, and December 18, 2003, respectively. Filiz submitted its response to our supplemental questionnaire on April 19, 2004.

On April 28, 2004, the Department returned Tat's and Filiz's second voluntary submission dated February 24, and February 26, 2004, respectively, as untimely filed new factual information pursuant to 19 CFR 351.301(b)(2). See Memorandum to File Re: Tat and Filiz to Strike Unsolicited Questionnaire Responses from the Record, dated April 28, 2004.

On March 17, 2004, the Department published a notice postponing the preliminary results of this review until July 29, 2004. See Certain Pasta from Italy and Turkey: Extension of Preliminary Results 2002/2003 Antidumping Duty Administrative Reviews, 69 FR 12641 (March 17, 2004).

We verified the sales and cost information submitted by Tat from May 10 through May 21, 2004. We did not verify the sales or cost information submitted by Filiz in the instant review.

Scope of Review

Imports covered by this review are shipments of certain non-egg dry pasta in packages of five pounds (2.27 kilograms) or less, whether or not enriched or fortified or containing milk or other optional ingredients such as chopped vegetables, vegetable purees, milk, gluten, diastases, vitamins, coloring and flavorings, and up to two percent egg white. The pasta covered by this scope is typically sold in the retail market, in fiberboard or cardboard cartons, or polyethylene or polypropylene bags of varying dimensions.

Excluded from the scope of this review are refrigerated, frozen, or canned pastas, as well as all forms of egg pasta, with the exception of non-egg dry pasta containing up to two percent egg white.

The merchandise subject to review is currently classifiable under item 1902.19.20 of the Harmonized Tariff Schedule of the United States (HTSUS). Although the HTSUS subheading is provided for convenience and Customs purposes, the written description of the merchandise subject to the order is dispositive.

Verification

As provided in section 782(i) of the Act, we verified the cost and sales information provided by Tat. We used standard verification procedures, including on-site inspection of the manufacturer's facilities and examination of relevant sales and financial records. Our verification results are outlined in a verification report placed in the case file in the central records unit (CRU). We revised certain sales and cost data based on verification findings; see Tat's Preliminary Calculation Memorandum (Preliminary Calculation Memorandum) (July 30, 2004) and Verification of the Sales Questionnaire of Tat (July 30, 2004) on file in the CRU.

Product Comparisons

In accordance with section 771(16) of the Act, the Department first attempted to match contemporaneous sales of products sold in the United States and comparison markets that were identical with respect to the following characteristics: (1) Pasta shape; (2) type of wheat; (3) additives; and (4) enrichment. Where there were no sales of identical merchandise in the home market to compare with U.S. sales, we compared U.S. sales with the most similar product based on the characteristics listed above, in descending order of priority.

For purposes of the preliminary results, where appropriate, we have calculated the adjustment for differences in merchandise based on the difference in the variable cost of manufacturing between each U.S. model and the most similar home market model selected for comparison.

Proposed Modification to Wheat Codes

Besides the wheat codes outlined in their questionnaire responses, Filiz and Tat have classified an additional variety of wheat used in the production of pasta as a separate wheat code. In the Notice of Final Determination of Sales at Less Than Fair Value: Certain Pasta From Italy, 61 FR 30326 (June 14, 1996) (Pasta Investigation), we established that differences in wheat quality may be commercially significant as measured by ash content, gluten content and cost. See Pasta Investigation at 30346. Where respondents have been able to justify differences due to ash and gluten content, as well as cost, the Department has found that these differences result in more appropriate product matches, as contemplated by section 771(16) of the Act. Id.

However, we preliminarily determine that both Filiz and Tat's second wheat code (Wheat code 2) has failed to meet the standards outlined in the Pasta Investigation. Specifically, Filiz and Tat failed to provide any evidence that indicate ash content, gluten content or cost differed among their wheat codes. Therefore, Tat's and Filiz's wheat codes 1 and 2 were combined for the purposes of these preliminary results. For further discussion of the wheat code, see the company-specific calculation memoranda on file in the CRU.

Comparisons to Normal Value

To determine whether sales of certain pasta from Turkey were made in the United States at less than fair value, we compared the export price (EP) to the NV, as described in the Export Price and Normal Value sections of this notice. Because Turkey's economy experienced high inflation during the POR, as is Department practice, we limited our comparisons to home market sales made during the same month in which the U.S. sale occurred and did not apply our 90/60 contemporaneity rule. See, e.g., Pasta from Turkey 5 and Notice of Preliminary Results of Antidumping Duty Administrative Review: Certain Welded Carbon Steel Pipe and Tube From Turkey, 69 FR 18049 (April 6, 2004) (Carbon Steel Pipe and Tube). This methodology minimizes the extent to which calculated dumping margins are overstated or understated due solely to price inflation that occurred in the intervening time period between the U.S. and home market sales.

Export Price

For the price to the United States, we used EP in accordance with section 772(a) of the Act because the merchandise was sold by the producer or exporter outside the United States to the first unaffiliated purchaser in the United States prior to importation and constructed export price was not otherwise warranted based on the facts on the record. We based EP on the packed C&F prices to the first unaffiliated customer in the United States.

In accordance with section 772(c)(2) of the Act, we made deductions, where appropriate, for movement expenses including inland freight from plant or warehouse to port of exportation, foreign brokerage handling and loading charges, and international freight. In addition, we increased the EP by the amount of the countervailing duties imposed that were attributable to an export subsidy, in accordance with section 772(c)(1)(C).

Normal Value

A. Selection of Comparison Markets

In order to determine whether there was a sufficient volume of sales in the home market to serve as a viable basis for calculating NV, we compared Tat and Filiz's volume of home market sales of the foreign like product to the volume of its U.S. sales of the subject merchandise. Pursuant to section 773(a)(1)(B) of the Act, because Tat and Filiz's aggregate volume of home market sales of the foreign like product was greater than five percent of the companies' aggregate volume of U.S. sales of the subject merchandise, we determined that the home market was viable for both companies.

B. Arm's-Length Test

Tat and Filiz reported sales of the foreign like product to an affiliated end-user and an affiliated reseller. The Department calculates the NV based on a sale to an affiliated party only if it is satisfied that the price to the affiliated party is comparable to the price at which sales are made to parties not affiliated with the producer or exporter, i.e., sales at arms's-length. See 19 CFR 351.403(c). To test whether these sales were made at arm's-length, we compared the starting prices of sales to affiliated and unaffiliated customers net of all movement charges, direct selling expenses, discounts and packing. In accordance with the Department's current practice, if the prices charged to an affiliated party were, on average, between 98 and 102 percent of the prices charged to unaffiliated parties for merchandise identical or most similar to that sold to the affiliated party, we consider the sales to be at arm's-length prices. See 19 CFR 351.403(c). Conversely, where sales to the affiliated party did not pass the arm's-length test, all sales to that affiliated party have been excluded from the NV calculation. See Antidumping Proceedings: Affiliated Party Sales in the Ordinary Course of Trade, 67 FR 69186 (Nov. 15, 2002).

C. Cost of Production Analysis

1. Calculation of Cost of Production (COP)

Before making any comparisons to NV, we conducted a COP analysis, pursuant to section 773(b) of the Act, to determine whether each respondent's comparison market sales were made below the COP. We calculated the COP based on the sum of the cost of materials and fabrication for the foreign like product, plus amounts for selling, general, and administrative expenses (SG&A) and the cost of all expenses incidental to packing and preparing the foreign like product for shipment, in accordance with section 773(b)(3) of the Act. We relied on the respondents' information as submitted, except in instances where we used revised data based on verification findings. See the company-specific calculation memoranda on file in the CRU, for a description of any changes that we made.

As noted above, we determined that the Turkish economy experienced high inflation during the POR. Therefore, to avoid the distortive effect of inflation on our comparison of costs and prices, we requested that each respondent submit the product-specific cost of manufacturing (COM) incurred during each month of the period for which it reported home market sales. We then calculated an average COM for each product after indexing the reported monthly costs to an equivalent currency level using the Turkish wholesale price index from the International Financial Statistics published by the International Monetary Fund (IMF). We then restated the average COM in the currency value of each respective month. See, e.g., Pasta from Turkey 5 and Pasta from Turkey 4.

2. Test of Comparison Market Prices

As required under section 773(b) of the Act, for Filiz and Tat, we compared the weighted-average COP to the weighted-average per unit price of the comparison market sales of the foreign like product, to determine whether their respective sales had been made at prices below the COP within an extended period of time in substantial quantities. For Tat and Filiz, we determined the net comparison market prices for the below-cost test by subtracting from the gross unit price any applicable movement charges, discounts, rebates, direct and indirect selling expenses (also subtracted from the COP), and packing expenses.

3. Results of COP Test

Pursuant to section 773(b)(2)(C) of the Act, where less than 20 percent of sales of a given product were at prices less than the COP, we did not disregard any below-cost sales of that product because we determined that the below-cost sales were not made in “substantial quantities.” Where 20 percent or more of Tat or Filiz's sales of a given product during the twelve-month period were at prices less than the COP, we determined such sales to have been made in “substantial quantities” within an extended period of time in accordance with section 773(b)(2)(B) and (C) of the Act. In such cases, because we compared prices to POR-average costs (indexed for inflation), we also determined that such sales were not made at prices which would permit recovery of all costs within a reasonable period of time, in accordance with section 773(b)(2)(D) of the Act. Therefore, for purposes of this administrative review, for Tat and Filiz we disregarded the below-cost sales of a given product of 20 percent or more and used the remaining sales as the basis for determining NV, in accordance with section 773(b)(1) of the Act.

D. Calculation of Normal Value Based on Comparison Market Prices

We calculated NV based on ex-factory or delivered prices to comparison market customers. We made deductions from the starting price for inland freight, warehousing, discounts, and rebates. In accordance with sections 773(a)(6)(A) and (B) of the Act, we added U.S. packing costs and deducted comparison market packing costs, respectively. In addition, we made circumstance of sale adjustments for direct expenses, including imputed credit, advertising, promotions, and warranties, in accordance with section 773(a)(6)(C)(iii) of the Act.

When comparing U.S. sales with comparison market sales of similar, but not identical, merchandise, we also made adjustments for physical differences in the merchandise in accordance with section 773(a)(6)(C)(ii) of the Act. Pursuant to section 351.411 of the Department's regulations, we based this adjustment on the difference in the variable COM for the foreign like product and subject merchandise, using twelve-month average costs, as adjusted for inflation for each month of the twelve-month period, as described in the Cost of Production Analysis section above.

E. Level of Trade (LOT)

In accordance with section 773(a)(1)(B) of the Act, we determine NV based on sales in the comparison market at the same LOT as the U.S. EP sales, to the extent practicable. When there are no sales at the same LOT, we compare U.S. sales to comparison market sales at a different LOT.

Pursuant to section 351.412 of the Department's regulations, to determine whether comparison market sales are at a different LOT, we examine stages in the marketing process and selling functions along the chain of distribution between the producer and the unaffiliated (or arm's length) customers. If the comparison-market sales are at a different LOT and the differences affected price comparability, as manifested in a pattern of consistent price differences between the sales on which NV is based and comparison-market sales at the LOT of the export transaction, we make a LOT adjustment under section 773(a)(7)(A) of the Act.

Tat and Filiz reported only one level of trade in both the U.S. and home markets. We compared all EP sales to these home market sales. Therefore, no LOT adjustment was necessary.

For a detailed description of our LOT methodology and a summary of company-specific LOT findings for these preliminary results, see, Preliminary Calculation Memorandum for each company on file in the CRU.

Currency Conversion

Because this proceeding involves a high-inflation economy, we limited our comparison of U.S. and home market sales to those occurring in the same month (as described above) and only used daily exchange rates. See Carbon Steel Pipe and Tube.

The Department's preferred source for daily exchange rates is the Federal Reserve Bank. However, the Federal Reserve Bank does not track or publish exchange rates for the Turkish Lira. Therefore, we made currency conversions based on the daily exchange rates from the Dow Jones Service, as published in the Wall Street Journal. See, e.g., Pasta from Turkey 5 and Pasta from Turkey 4.

Preliminary Results of Review

As a result of our review, we preliminarily determine that the following percentage weighted-average margins exist for the period July 1, 2002, through June 30, 2003:

The Department will disclose the calculations performed within five days of the date of publication of this notice to the parties of this proceeding in accordance with 19 CFR 351.224(b). An interested party may request a hearing within 30 days of publication of these preliminary results. See 19 CFR 351.310(c). Any hearing, if requested, will be held 44 days after the date of publication, or the first working day thereafter. Interested parties may submit case briefs no later than 30 days after the date of publication of these preliminary results of review. Rebuttal briefs, limited to issues raised in such briefs, may be filed no later than 37 days after the date of publication. Parties who submit arguments are requested to submit with the argument (1) a statement of the issue, (2) a brief summary of the argument and (3) a table of authorities. Further, we would appreciate it if parties submitting written comments would provide the Department with an additional copy of the public version of any such comments on diskette. The Department will issue the final results of this administrative review, which will include the results of its analysis of issues raised in any such comments, or at a hearing, if requested, within 120 days of publication of these preliminary results.

Assessment Rate

Upon completion of this administrative review, pursuant to 19 CFR 351.212(b), the Department will calculate an assessment rate on all appropriate entries. We will calculate importer-specific duty assessment rates on the basis of the ratio of the total amount of antidumping duties calculated for the examined sales to the total entered value of the examined sales for that importer. Where the assessment rate is above de minimis, we will instruct CBP to assess duties on all entries of subject merchandise by that importer.

Cash Deposit Requirements

To calculate the cash-deposit rate for each producer and/or exporter included in this administrative review, we divided the total dumping margins for each company by the total net value for that company's sales during the review period.

The following deposit rates will be effective upon publication of the final results of this administrative review for all shipments of certain pasta from Turkey entered, or withdrawn from warehouse, for consumption on or after the publication date, as provided by section 751(a)(2)(C) of the Act: (1) The cash deposit rates for the companies listed above will be the rates established in the final results of this review; (2) for previously reviewed or investigated companies, the cash deposit rate will continue to be the company-specific rate published for the most recent final results in which that manufacturer or exporter participated; (3) if the exporter is not a firm covered in this review, a prior review, or the original less-than-fair-value (LTFV) investigation, but the manufacturer is, the cash deposit rate will be the rate established for the most recent final results for the manufacturer of the merchandise; and (4) if neither the exporter nor the manufacturer is a firm covered in this or any previous review conducted by the Department, the cash deposit rate will be 51.49 percent, the “All Others” rate established in the LTFV investigation. See Notice of Antidumping Duty Order and Amended Final Determination of Sales at Less Than Fair Value: Certain Pasta from Turkey, 61 FR 38546 (July 24, 1996).

These cash deposit requirements, when imposed, shall remain in effect until publication of the final results of the next administrative review.

Notification to Importers

This notice serves as a preliminary reminder to importers of their responsibility under 19 CFR 351.402(f) to file a certificate regarding the reimbursement of antidumping and countervailing duties prior to liquidation of the relevant entries during this review period. Failure to comply with this requirement could result in the Secretary's presumption that reimbursement of antidumping and/or countervailing duties occurred and the subsequent assessment of double antidumping duties increased by the amount of antidumping and/or countervailing duties reimbursed.

This administrative review is issued and published in accordance with sections 751(a)(1) and 777(i)(1) of the Act.