Certain Preserved Mushrooms from India: Preliminary Results of Antidumping Duty Administrative Review

AGENCY:

Import Administration, International Trade Administration, Department of Commerce.

SUMMARY:

In response to timely requests by Agro Dutch Industries, Ltd. (Agro Dutch) and the petitioner,¹ the Department of Commerce (the Department) is conducting an administrative review of the antidumping duty order on certain preserved mushrooms from India with respect to Agro Dutch. The period of review (POR) is February 1, 2004, through January 31, 2005.

We preliminarily determine that sales have been made below normal value (NV). Interested parties are invited to comment on these preliminary results. If these preliminary results are adopted in our final results of administrative review, we will instruct U.S. Customs and Border Protection (CBP) to assess antidumping duties on all appropriate entries.

EFFECTIVE DATE:

November 7, 2005.

FOR FURTHER INFORMATION CONTACT:

David J. Goldberger or Gemal Brangman, AD/CVD Operations, Office 2, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW, Washington, DC 20230; telephone: (202) 482-4136 or (202) 482-3773, respectively.

SUPPLEMENTARY INFORMATION:

Background

On February 19, 1999, the Department published in the Federal Register an amended final determination and antidumping duty order on certain preserved mushrooms from India (64 FR 8311).

In response to timely requests by a manufacturer/exporter, Agro Dutch, and the petitioner, the Department published a notice of initiation of an administrative review with respect to the following companies: Agro Dutch, Alpine Biotech Ltd. (Alpine Biotech), Dinesh Agro Products, Ltd. (Dinesh Agro), Flex Foods, Ltd. (Flex Foods), Himalya International, Ltd. (Himalya), KICM (Madras) Ltd. (KICM), Mandeep Mushrooms Ltd. (Mandeep), Premier Mushroom Farms (Premier), Saptarishi Agro Industries Ltd. (Saptarishi Agro), Transchem Ltd. (Transchem), Techtran Agro Industries Limited (Techtran) and Weikfield Agro Products Ltd. (Weikfield) (70 FR 14643, March 23, 2005). The POR is February 1, 2004, through January 31, 2005.

On March 29, 2005, the Department issued antidumping duty questionnaires to the above-mentioned companies. We received responses to these questionnaires during the period May through June 2005 from Agro Dutch, Flex Foods, Premier, and Himalaya.

In May 2005, the petitioner timely withdrew its request for review with respect to KICM, and in June 2005, the petitioner timely withdrew its request for review with respect to Alpine Biotech, Dinesh Agro, Flex Foods, Himalya, Mandeep, Premier, Saptarishi Agro, Transchem, Techtran and Weikfield. Accordingly, we published a Notice of Partial Rescission of Antidumping Duty Administrative Review, 70 FR 40982 (July 15, 2005), with respect to these companies.

We issued supplemental questionnaires to Agro Dutch in August and October 2005, and received responses in September and October 2005.

On September 29, 2005, the petitioner submitted comments with respect to the preliminary results calculations for Agro Dutch.

Scope of the Order

The products covered by this order are certain preserved mushrooms, whether imported whole, sliced, diced, or as stems and pieces. The preserved mushrooms covered under this order are the species Agaricus bisporus and Agaricus bitorquis. “Preserved mushrooms” refer to mushrooms that have been prepared or preserved by cleaning, blanching, and sometimes slicing or cutting. These mushrooms are then packed and heated in containers including but not limited to cans or glass jars in a suitable liquid medium, including but not limited to water, brine, butter or butter sauce. Preserved mushrooms may be imported whole, sliced, diced, or as stems and pieces. Included within the scope of this order are “brined” mushrooms, which are presalted and packed in a heavy salt solution to provisionally preserve them for further processing.

Excluded from the scope of this order are the following: (1) All other species of mushroom, including straw mushrooms; (2) all fresh and chilled mushrooms, including “refrigerated” or “quick blanched mushrooms"; (3) dried mushrooms; (4) frozen mushrooms; and (5) “marinated,” “acidified” or “pickled” mushrooms, which are prepared or preserved by means of vinegar or acetic acid, but may contain oil or other additives.

The merchandise subject to this order is currently classifiable under subheadings 2003.10.0127, 2003.10.0131, 2003.10.0137, 2003.10.0143, 2003.10.0147, 2003.10.0153 and 0711.51.0000 of the Harmonized Tariff Schedule of the United States (HTSUS). Although the HTSUS subheadings are provided for convenience and customs purposes, our written description of the scope of this order dispositive.

Fair Value Comparisons

To determine whether sales of certain preserved mushrooms by the respondents to the United States were made at less than normal value (NV), we compared export price (EP), as appropriate, to the NV, as described in the “Export Price” and “Normal Value” sections of this notice.

Pursuant to section 777A(d)(2) of the Tariff Act of 1930, as amended (the Act), we compared the EPs of individual U.S. transactions to the weighted-average NV of the foreign like product where there were sales made in the ordinary course of trade, as discussed in the “Cost of Production Analysis” section below.

Product Comparisons

In accordance with section 771(16) of the Act, we considered all products produced by the respondent covered by the description in the “Scope of the Order” section, above, to be foreign like products for purposes of determining appropriate product comparisons to U.S. sales. We compared Agro Dutch's U.S. sales to sales made in the third-country market within the contemporaneous window period, which extends from three months prior to the U.S. sale until two months after the sale. Where there were no sales of identical merchandise in the comparison market made in the ordinary course of trade to compare to U.S. sales, we compared U.S. sales to sales of the most similar foreign like product made in the ordinary course of trade. In making the product comparisons, we matched foreign like products based on the physical characteristics reported by the respondents in the following order: preservation method, container type, mushroom style, weight, container solution, and label type.

Export Price

We used EP methodology, in accordance with section 772(a) of the Act, because the subject merchandise was sold directly by Agro Dutch to the first unaffiliated purchaser in the United States prior to importation and constructed export price (CEP) methodology was not otherwise indicated. We based EP on packed prices to unaffiliated purchasers in the United States.

Agro Dutch reported its U.S. sales on an FOB Indian port, CIF or ex-dock duty paid basis. We made deductions from the starting price, where appropriate, for international freight, foreign inland freight, transportation insurance, foreign and U.S. brokerage and handling, and U.S. duty, in accordance with section 772(c)(2) of the Act and 19 CFR 351.402.

Agro Dutch claimed a freight expense offset for some of the freight expenses associated with its export shipments to the United States and Israel, the third-country market. Although Agro Dutch has provided information that appears to show a direct correlation between expenses incurred and the offset payments made by the Indian government in this review, we did not make this adjustment because, as we stated in the previous review (see Certain Preserved Mushrooms From India: Preliminary Results of Antidumping Duty Administrative Review, 70 FR 10597, 10599 (March 4, 2005)), such an adjustment is not contemplated by the Act or the Department's regulations. Specifically, the program described by Agro Dutch, granting an international freight subsidy from the Indian Agricultural and Processed Food Products Export Development Authority for the export of certain food products, is not contingent upon importation of inputs used to produce the exported subject merchandise - the duty drawback system contemplated under section 772(c)(1)(B) of the Act. Neither is it packing (as contemplated under section 772(c)(1)(A) of the Act) nor the amount of any countervailing duty, as there is no companion countervailing duty investigation on certain preserved mushrooms from India (see section 772(c)(1)(C) of the Act). Accordingly, we disregarded the claimed amounts.

Agro Dutch reported that, in certain instances, it provided customers with a number of extra cardboard cartons to replace boxes that are damaged during shipment. The petitioners contend that these cartons are a free merchandise discount and that, in the absence of a reported value, the Department should deduct the reported packing cost from the gross unit price. According to our analysis, it is not clear whether the cost of these extra boxes is considered a selling expense, or whether it is already accounted for in Agro Dutch's packing material cost. However, even if we were to consider the value of the boxes as a selling expense, the per-unit expense would be well under 0.33 percent ad valorem, the Department's threshold under 19 CFR 351.413 for insignificant adjustments (see discussion and calculation in “Agro Dutch Preliminary Results Notes and Margin Calculation,” Memorandum to the File dated October 31, 2005). Therefore, we have disregarded any adjustment for these boxes, in accordance with section 777A(a)(2) of the Act and 19 CFR 351.413.

Normal Value

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 the respondent's volume of home market sales of the foreign like product to the volume of U.S. sales of the subject merchandise, in accordance with section 773(a)(1)(C) of the Act.

We determined that the home market was not viable for Agro Dutch because Agro Dutch's aggregate volume of home market sales of the foreign like product was less than five percent of its aggregate volume of U.S. sales of the subject merchandise. However, we determined that the third-country market of Israel was viable, in accordance with section 773(a)(1)(B)(ii) of the Act. Therefore, pursuant to section 773(a)(1)(C) of the Act, we used third-country sales as a basis for NV for Agro Dutch.

Level of Trade

Section 773(a)(1)(B)(i) of the Act states that, to the extent practicable, the Department will calculate NV based on sales at the same level of trade (LOT) as the EP or CEP. Sales are made at different LOTs if they are made at different marketing stages (or their equivalent). See 19 CFR 351.412(c)(2). Substantial differences in selling activities are a necessary, but not sufficient, condition for determining that there is a difference in the stages of marketing, id.; see also Notice of Final Determination of Sales at Less Than Fair Value: Certain Cut-to-Length Carbon Steel Plate From South Africa (Plate from South Africa) 62 FR 61731, 61732 (November 19, 1997). In order to determine whether the comparison sales were at different stages in the marketing process from the U.S. sales, we reviewed the distribution system in each market (i.e., the “chain of distribution”), including selling functions, class of customer (“customer category”), and the level of selling expenses for each type of sale.

Pursuant to section 773(a)(1)(B)(i) of the Act, in identifying levels of trade for EP and comparison market sales (i.e., NV based on either home market or third-country prices²), we consider the starting prices before any adjustments. For CEP sales, we consider only the selling activities reflected in the price after the deduction of expenses and profit under section 772(d) of the Act. See Micron Technology, Inc. v. United States, 243 F. 3d 1301, 1314-1315 (Fed. Cir. 2001).

When the Department is unable to match U.S. sales to sales of the foreign like product in the comparison market at the same LOT as the EP or CEP, the Department may compare the U.S. sale to sales at a different LOT in the comparison market. In comparing EP or CEP sales at a different LOT in the comparison market, where available data make it practicable, and where the difference affects price comparability, we make an LOT adjustment under section 773(a)(7)(A) of the Act. Finally, for CEP sales only, if an NV LOT is more remote from the factory than the CEP LOT and there is no basis for determining whether the difference in LOTs between NV and CEP affects price comparability (i.e., no LOT adjustment was practicable), the Department shall grant a CEP offset, as provided in section 773(a)(7)(B) of the Act. See Plate from South Africa, 62 FR at 61732-33.

We obtained information from Agro Dutch regarding the marketing stages involved in sales to the reported comparison market and U.S. sales, including a description of the selling activities performed for each channel of distribution. Agro Dutch sold to importers/distributors through one channel of distribution in both the U.S. and Israeli markets. As described in its questionnaire response, Agro Dutch performs limited selling activities on behalf of its U.S. and third country sales. Furthermore, any selling activities performed (e.g., sales negotiation and transportation arrangement) do not vary by channel of distribution, type of customer, or market. Therefore, Agro Dutch's sales channels are at the same LOT. Accordingly, all sales comparisons are at the same LOT for Agro Dutch and an adjustment pursuant to section 773(a)(7)(A) of the Act is not warranted.

Cost of Production Analysis

In the most recently completed administrative review as of March 29, 2005, when the questionnaire was issued (i.e., the 2002-2003 review), we found that Agro Dutch had made sales below the cost of production. See Notice of Final Results of Antidumping Duty Administrative Review: Certain Preserved Mushrooms from India, 69 FR 51630 (August 20, 2004). Subsequently, the Department also disregarded certain sales made by Agro Dutch in the 2003-2004 administrative review that were determined to be below the cost of production (see Notice of Final Results of Antidumping Duty Administrative Review: Certain Preserved Mushrooms from India, 70 FR 37757, June 30, 2005). Thus, in accordance with section 773(b)(2)(A)(ii) of the Act, there are reasonable grounds to believe or suspect that Agro Dutch made sales in the third country at prices below the cost of producing the merchandise in the current review period. Accordingly, we instructed Agro Dutch to respond to the section D (Cost of Production) questionnaire.

A. Calculation of Cost of Production

We calculated the cost of production (COP) on a product-specific basis, based on the sum of Agro Dutch's respective costs of materials and fabrication for the foreign like product, plus amounts for selling, general and administrative (SG&A) expenses, interest expense, and all expenses incidental to placing the foreign like product in a condition packed and ready for shipment in accordance with section 773(b)(3) of the Act.

We relied on the COP information submitted by Agro Dutch, except for the adjustments discussed below.

1. We revised the material costs for fresh mushrooms to account for our revaluation of work-in-process (WIP) inventory change. Agro Dutch's reported fresh mushroom costs incorporated a WIP adjustment that included costs for items other than fresh mushrooms. Based on information in the responses, we revised the fresh mushroom growing cost to limit the WIP adjustment to fresh mushroom-related WIP changes. See “Cost of Production and Constructed Value Calculation Adjustments for the Preliminary Results,” Memorandum to Neal Halper from Trinette Ruffin and Sheikh M. Hannan dated October 31, 2005 (Preliminary Results COP Calculation Memo).

2. Agro Dutch calculated the general and administrative (G&A) and interest expense ratios using the cost of manufacture as the denominator. The Department's practice, however, is to rely on the cost of goods sold (COGS) as the denominator in calculating these ratios. See, e.g., Notice of Final Determination of Sales at Less Than Fair Value and Negative Final Determination of Critical Circumstances: Certain Frozen and Canned Warmwater Shrimp From Thailand, 69 FR 76918 (December 23, 2004) and accompanying Issues and Decision Memorandum at Comment 12. We recalculated the G&A and interest expense ratios using COGS data derived from information in Agro Dutch's responses. We also recalculated the net interest expense ratio to include the foreign exchange loss on remittance and prepayment penalty on loans. See Preliminary Results COP Calculation Memo.

On a product-specific basis, we compared Agro Dutch's weighted-average COP to the prices of third country market sales of the foreign like product, as required by section 773(b) of the Act, in order to determine whether these sales were made at prices below the COP. For purposes of this comparison, we used COP exclusive of selling and packing expenses. The prices (inclusive of interest revenue, where appropriate) were exclusive of any applicable billing adjustments, movement charges, discounts, direct and indirect selling expenses and packing. In determining whether to disregard third country sales made at prices less than their COP, we examined, in accordance with sections 773(b)(1)(A) and (B) of the Act, whether such sales were made: (1) within an extended period of time in substantial quantities; and (2) at prices which did not permit the recovery of all costs within a reasonable period of time.

B. Results of COP Test

Pursuant to section 773(b)(2)(C) of the Act, where less than 20 percent of the respondent's 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 the respondent's sales of a given product during the POR were at prices less than the COP, we disregarded the below-cost sales because we determined that they represented “substantial quantities” within an extended period of time, and were at prices which would not permit the recovery of all costs within a reasonable period of time, in accordance with section 773(b)(1) of the Act.

The results of our cost test for Agro Dutch indicated that, for certain products, more than 20 percent of home market or third country sales within an extended period of time were at prices below COP which would not permit the full recovery of all costs within a reasonable period of time. See section 773(b)(2) of the Act. Therefore, in accordance with section 773(b)(1) of the Act, we excluded these below-cost sales from our analysis and used the remaining sales as the basis for determining NV.

Price-to-Price Comparisons

We based NV on the price at which the foreign like product is first sold for consumption in the third country market, in the usual commercial quantities and in the ordinary course of trade, and at the same LOT as EP, where possible, as defined by section 773(a)(1)(B)(ii) of the Act.

Third country prices were based on FOB Indian port prices. We reduced the starting price for billing adjustments and movement expenses, and increased the starting price for interest revenue, where appropriate, in accordance with section 773(a)(6)(B) of the Act and 19 CFR 351.401(c) and (e).

We disregarded Agro Dutch's claimed freight expense offset for certain third country sales granted under the Indian government program discussed in the “Export Price” section above, because this type of adjustment to NV is not contemplated by section 773(a)(6) of the Act or the Department's regulations.

We also reduced the starting price for packing costs incurred in the comparison market, in accordance with section 773(a)(6)(B)(i) of the Act, and increased NV to account for U.S. packing expenses in accordance with section 773(a)(6)(A) of the Act. We made circumstance-of-sale adjustments for credit expenses and bank fees, where appropriate, pursuant to section 773(a)(6)(C)(iii) of the Act and 19 CFR 351.410. In addition, we made adjustments to NV, where appropriate, for differences in costs attributable to differences in the physical characteristics of the merchandise, pursuant to section 773(a)(6)(C)(ii) of the Act and 19 CFR 351.411.

Calculation of Constructed Value

We calculated CV in accordance with section 773(e) of the Act, which states that CV shall be based on the sum of the respondent's cost of materials and fabrication for the subject merchandise, plus amounts for SG&A expenses, profit and U.S. packing costs. We relied on the submitted CV information except for the adjustments described above under “Calculation of Cost of Production.”

Price-to-Constructed Value Comparisons

We based NV on CV for comparison to certain U.S. sales, in accordance with section 773(a)(4) of the Act. For comparisons to Agro Dutch's EP sales, we made circumstance-of-sale adjustments by deducting from CV the weighted-average direct selling expenses of Agro Dutch's above-cost third country sales, and adding to CV the U.S. direct selling expenses, in accordance with section 773(a)(8) of the Act and 19 CFR 351.410.

Currency Conversion

We made currency conversions in accordance with section 773A(a) of the Act based on the exchange rates in effect on the dates of the U.S. sales as certified by the Federal Reserve Bank.

Preliminary Results of Review

As a result of this review, we preliminarily determine that the weighted-average dumping margin for the period February 1, 2004, through January 31, 2005, is as follows:

We will disclose the calculations used in our analysis to parties to this proceeding within five days of the publication date of this notice. See 19 CFR 351.224(b). Any interested party may request a hearing within 30 days of publication. See 19 CFR 351.310(c). If requested, a hearing will be scheduled after determination of the briefing schedule.

Interested parties who wish to request a hearing or to participate if one is requested, must submit a written request to the Assistant Secretary for Import Administration, Room B-099, within 30 days of the date of publication of this notice. Requests should contain: (1) the party's name, address and telephone number; (2) the number of participants; and (3) a list of issues to be discussed. See 19 CFR 351.310(c).

Issues raised in the hearing will be limited to those raised in the respective case briefs. Case briefs from interested parties and rebuttal briefs, limited to the issues raised in the respective case briefs, may be submitted in accordance with a schedule to be determined. Parties who submit case briefs or rebuttal briefs in this proceeding are requested to submit with each argument (1) a statement of the issue and (2) a brief summary of the argument. Parties are also encouraged to provide a summary of the arguments not to exceed five pages and a table of statutes, regulations, and cases cited.

The Department will issue the final results of this administrative review, including the results of its analysis of issues raised in any written briefs, not later than 120 days after the date of publication of this notice, pursuant to section 751(a)(3)(A) of the Act.

Assessment Rates

The Department shall determine, and CBP shall assess, antidumping duties on all appropriate entries, in accordance with 19 CFR 351.212. The Department will issue appropriate appraisement instructions for the companies subject to this review directly to CBP within 15 days of publication of the final results of this review.

With respect to Agro Dutch, we intend to calculate importer-specific assessment rates for the subject merchandise by aggregating the dumping margins calculated for all of the U.S. sales examined and dividing this amount by the total entered value of the sales examined. We will instruct CBP to assess antidumping duties on all appropriate entries covered by this review if any importer-specific assessment rate calculated in the final results of this review is above de minimis (i.e., at or above 0.50 percent). See 19 CFR 351.106(c)(1). The final results of this review shall be the basis for the assessment of antidumping duties on entries of merchandise covered by the final results of this review and for future deposits of estimated duties, where applicable.

Cash Deposit Requirements

The following cash deposit requirements will be effective for all shipments of the subject merchandise entered, or withdrawn from warehouse, for consumption on or after the publication date of the final results of this administrative review, as provided by section 751(a)(1) of the Act: (1) the cash deposit rate for the reviewed company will be that established in the final results of this review, except if the rate is less than 0.50 percent, and therefore, de minimis within the meaning of 19 CFR 351.106(c)(1), in which case the cash deposit rate will be zero; (2) for previously reviewed or investigated companies not listed above, the cash deposit rate will continue to be the company-specific rate published for the most recent period; (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 period for the manufacturer of the merchandise; and (4) the cash deposit rate for all other manufacturers or exporters will continue to be 11.30 percent, the “All Others” rate made effective by the LTFV investigation (see Notice of Amendment of Final Determination of Sales at Less Than Fair Value and Antidumping Duty Order: Certain Preserved Mushrooms From India, 64 FR 8311 (February 19, 1999)). These requirements, when imposed, shall remain in effect until publication of the final results of the next administrative review.

Notification to Importers

This notice also 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 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 duties occurred and the subsequent assessment of double antidumping duties.

This administrative review and notice are published in accordance with sections 751(a)(1) and 777(i)(1) of the Act and 19 CFR 351.221.