Fresh Garlic from the People's Republic of China: Preliminary Results of Antidumping Duty New Shipper Review

AGENCY:

Import Administration, International Trade Administration, Department of Commerce.

SUMMARY:

In response to a request from a new shipper, the Department of Commerce is conducting a new shipper review of the antidumping duty order on fresh garlic from the People's Republic of China. The period of review is November 1, 2002, through October 31, 2003.

We preliminarily determine that Jinxiang Shanyang Freezing Storage Co., Ltd., has made sales in the United States at prices below normal value.

We invite interested parties to comment on these preliminary results. Parties who submit comments are requested to submit with each argument a statement of the issue and a brief summary of the argument.

EFFECTIVE DATE:

July 6, 2004.

FOR FURTHER INFORMATION CONTACT:

Brian Ellman or Lyn Johnson, Office of Antidumping/Countervailing Duty Enforcement 5, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, N.W., Washington, D.C. 20230; telephone (202) 482-4852 or (202) 482-5287, respectively.

SUPPLEMENTARY INFORMATION:

Background

On January 7, 2004, we published in the Federal Register the Notice of Initiation of New Shipper Antidumping Duty Review: Fresh Garlic from the People's Republic of China (69 FR 903) for entries of subject merchandise grown by Kaifeng Wangtun Fresh Vegetables Factory (Wangtun) and exported by Jinxiang Shanyang Freezing Storage Co., Ltd. (Shanyang). The period of review (POR) is November 1, 2002, through October 31, 2003.

On June 4, 2004, the petitioners (the Fresh Garlic Producers Association and its individual members) submitted comments addressing the Department's approach to the valuation of the factors of production (FOP). In that submission, the petitioners contend that the Department's current FOP methodology does not account for certain significant cost components (e.g., the cost of leasing farmland). Furthermore, the petitioners argue that many of the consumption factors reported by the respondents in segments of this proceeding are substantially disparate and anomalous, and thus call into question the basic credibility of the data. As such, citing the Department's decision in Final Determination of Sales at Less Than Fair Value: Certain Frozen Fillets from the Socialist Republic of Vietnam, 68 FR 37116 (June 23, 2003), the petitioners argue that the Department should determine the normal value of garlic based on a surrogate value for raw (i.e., unprocessed) garlic, rather than valuing upstream input factors in order to determine normal value.

We have addressed the petitioners' comments with respect to the valuation of land leasing. For a further discussion, see the “Factors of Production” section below and the memorandum from Brian Ellman to the File entitled “Analysis for the Preliminary Results of the New Shipper Review of the Antidumping Duty Order on Fresh Garlic from the People's Republic of China: Jinxiang Shanyang Freezing Storage Co., Ltd., and Wangtun Fresh Vegetable Factory,” dated June 28, 2004 (Preliminary Results Analysis Memorandum). With respect to the petitioners' other comments concerning the Department's FOP methodology, we continue to evaluate these comments and we will consider them further for the final results of this new shipper review. We invite the respondent to comment on the petitioners' June 4, 2004, submission in its case brief to the Department.

Scope of the Order

The products subject to the antidumping duty order are all grades of garlic, whole or separated into constituent cloves, whether or not peeled, fresh, chilled, frozen, provisionally preserved, or packed in water or other neutral substance, but not prepared or preserved by the addition of other ingredients or heat processing. The differences between grades are based on color, size, sheathing, and level of decay.

The scope of this order does not include the following: (a) garlic that has been mechanically harvested and that is primarily, but not exclusively, destined for non-fresh use; or (b) garlic that has been specially prepared and cultivated prior to planting and then harvested and otherwise prepared for use as seed.

The subject merchandise is used principally as a food product and for seasoning. The subject garlic is currently classifiable under subheadings 0703.20.0010, 0703.20.0020, 0703.20.0090, 0710.80.7060, 0710.80.9750, 0711.90.6000, and 2005.90.9700 of the Harmonized Tariff Schedule of the United States (HTSUS). Although the HTSUS subheadings are provided for convenience and customs purposes, the written description of the scope of this proceeding is dispositive. In order to be excluded from the antidumping duty order, garlic entered under the HTSUS subheadings listed above that is (1) mechanically harvested and primarily, but not exclusively, destined for non-fresh use or (2) specially prepared and cultivated prior to planting and then harvested and otherwise prepared for use as seed must be accompanied by declarations to U.S. Customs and Border Protection (CPB) to that effect.

Verification

As provided in section 782(i) of the Tariff Act of 1930, as amended (the Act), we verified information provided by Wangtun and Shanyang using standard verification procedures, including on-site inspection of the producer's facilities, the examination of relevant sales and financial records, and the selection of original documentation containing relevant information. Our verification results are outlined in the public version of the verification report dated June 28, 2004, which is on file in the Central Records Unit (CRU), Room B-099 of the main Department of Commerce building. See the memorandum to the File from Brian Ellman entitled “Verification of the Response of Jinxiang Shanyang Freezing Storage Co., Ltd., and Wangtun Fresh Vegetable Factory in the Antidumping Duty New Shipper Review of Fresh Garlic from the People's Republic of China,” dated June 28, 2004 (Verification Report).

Separate Rates

The Department of Commerce (the Department) has treated the People's Republic of China (PRC) as a non-market-economy (NME) country in all past antidumping investigations (see, e.g., Bulk Aspirin From the People's Republic of China: Final Determination of Sales at Less Than Fair Value, 65 FR 33805 (May 25, 2000), and Certain Non-Frozen Apple Juice Concentrate from the People's Republic of China: Notice of Final Determination of Sales at Less Than Fair Value, 65 FR 19873 (April 13, 2000)) and in prior segments of this proceeding. A designation as an NME remains in effect until it is revoked by the Department. See section 771(18)(C) of the Act. Accordingly, there is a rebuttable presumption that all companies within the PRC are subject to government control and, thus, should be assessed a single antidumping duty rate.

It is the Department's standard policy to assign all exporters of the merchandise subject to review in NME countries a single rate unless an exporter can affirmatively demonstrate an absence of government control, both in law (de jure) and in fact (de facto), with respect to exports. To establish whether a company is sufficiently independent to be entitled to a separate, company-specific rate, the Department analyzes each exporting entity in an NME country under the test established in Sparklers from the People's Republic of China: Final Determination of Sales at Less than Fair Value, 56 FR 20588 (May 6, 1991) (Sparklers), as amplified in Silicon Carbide from the People's Republic of China: Notice of Final Determination of Sales at Less Than Fair Value, 59 FR 22585 (May 2, 1994) (Silicon Carbide).

Shanyang provided separate-rate information in its responses to our original and supplemental questionnaires. Accordingly, we performed a separate-rates analysis to determine whether the exporter is independent from government control of their export and sales-related activities (see Bicycles From the People's Republic of China: Final Determination of Sales at Less Than Fair Value, 61 FR 56570 (April 30, 1996)).

1. Absence of De Jure Control

The Department considers the following de jure criteria in determining whether an individual company may be granted a separate rate: (1) an absence of restrictive stipulations associated with an individual exporter's business and export licenses; (2) any legislative enactments decentralizing control of companies; (3) any other formal measures by the government decentralizing control of companies.

Shanyang has placed on the record a number of documents to demonstrate absence of de jure control including the “Foreign Trade Law of the People's Republic of China” and the “Administrative Regulations of the People's Republic of China Governing the Registration of Legal Corporations.” The Department has analyzed such PRC laws and found that they establish an absence of de jure control. See, e.g., Certain Preserved Mushrooms From the People's Republic of China: Preliminary Results of New Shipper Review, 66 FR 30695, 30696 (June 7, 2001). We have no information in this proceeding that would cause us to reconsider this determination.

2. Absence of De Facto Control

Typically, the Department considers four factors in evaluating whether a respondent is subject to de facto governmental control of its export functions: (1) whether the export prices are set by, or subject to, the approval of a governmental authority; (2) whether the respondent has authority to negotiate and sign contracts, and other agreements; (3) whether the respondent has autonomy from the government in making decisions regarding the selection of its management; (4) whether the respondent retains the proceeds of its export sales and makes independent decisions regarding disposition of profits or financing of losses. See Silicon Carbide at 22587.

As stated in previous cases, there is some evidence that certain enactments of the PRC central government have not been implemented uniformly among different sectors and/or jurisdictions in the PRC. See Silicon Carbide at 22586-22587. Therefore, the Department has determined that an analysis of de facto control is critical in determining whether respondents are, in fact, subject to a degree of governmental control which would preclude the Department from assigning separate rates.

Shanyang reported that it is a limited-liability company owned by private investors. It has asserted the following: (1) There is no government participation in setting export prices; (2) sales managers and authorized employees have the authority to bind sales contracts; (3) it does not have to notify any government authorities of management selections; (4) there are no restrictions on the use of export revenue; (5) it is responsible for financing its own losses. Shanyang's questionnaire responses do not suggest that pricing is coordinated among exporters. During our analysis of the information on the record we found no information indicating the existence of government control. Consequently, we preliminarily determine that Shanyang has met the criteria for the application of a separate rate.

The Use of Facts Otherwise Available

Section 776(a)(2) of the Act provides that, if, in the course of an antidumping review, an interested party (A) withholds information that has been requested by the Department, (B) fails to provide such information in a timely manner or in the form or manner requested, (C) significantly impedes a proceeding under the antidumping statute, or (D) provides such information but the information cannot be verified, then the Department shall, subject to sections 782(d) and (e) of the Act, use the facts otherwise available in reaching the applicable determination.

As discussed in detail in the Verification Report and the Preliminary Results Analysis Memorandum, while reviewing the companies' attendance and payroll records in the context of verifying the reported labor factors, we found that both Shanyang and Wangtun did not include in the figures reported to the Department the hours worked by certain full-time employees whose roles had been identified as being related to the production of fresh garlic. See Verification Report at pages 25-27.

Despite our attempts to verify the information that was submitted on behalf of both companies (and which is necessary to the determination), we could not verify certain information pertaining to labor factors, as required under section 782(i) of the Act. Section 776(a)(2)(D) of the Act warrants the use of facts otherwise available in reaching a determination when information is provided by a respondent but that information cannot be verified. We determine that, in accordance with section 776(a)(2)(D) of the Act, the use of facts available is appropriate for calculating the labor hours worked by Shanyang for processing activities (i.e., unskilled processing labor) and by Wangtun for production activities (i.e., indirect growing labor) because we were unable to verify the information submitted by the companies with respect to labor. Consequently, we have revised Shanyang's and Wangtun's reported labor factors to include the total hours worked by all employees whose roles have been identified as being related to the production of subject merchandise. For a detailed discussion and the revised calculation of Shanyang's and Wangtun's labor-usage factors of production, see the Preliminary Results Analysis Memorandum at Attachments 1 and 2.

Export Price

In accordance with section 772(a) of the Act, we have used the export-price methodology because the sale to the unaffiliated purchaser was made outside the United States prior to importation of the subject merchandise into the United States. We calculated the export price based on the price from Shanyang and Wangtun to the unaffiliated U.S. customer. We made deductions, where appropriate, from the gross unit price to account for inland freight and brokerage and handling. Because certain domestic charges, such as those for foreign inland freight, were provided by NME companies, we valued those charges based on surrogate rates from India. See the memorandum from Lyn Johnson to the File entitled “Factors Valuations for the Preliminary Results of Review for Jinxiang Shanyang Freezing Storage Co., Ltd.,” dated June 28, 2004 (FOP Memorandum).

For a more detailed explanation of the company-specific adjustments that we made in the calculation of the dumping margin for these preliminary results, see the Preliminary Results Analysis Memorandum.

Normal Value

1. Surrogate Country

When investigating imports from an NME country, section 773(c)(1) of the Act directs the Department to base normal value, in most circumstances, on the NME producer's factors of production valued in a surrogate market-economy country or countries considered to be appropriate by the Department. In accordance with section 773(c)(4) of the Act, in valuing the factors of production, the Department shall use, to the extent practicable, the prices or costs of factors of production in one or more market-economy countries that are at a level of economic development comparable to that of the NME country and are significant producers of comparable merchandise. The sources of the surrogate factor values are discussed under the “Factor Valuations” section below.

The Department has determined that India, Indonesia, Sri Lanka, the Philippines, Morocco, and Egypt are countries comparable to the PRC in terms of economic development. See the memorandum to Laurie Parkhill regarding the request for a list of surrogate countries dated May 19, 2004. In addition to being among the countries comparable to the PRC in economic development, India is a significant producer of the subject merchandise. We have used India as the surrogate country and, accordingly, have calculated normal value using Indian prices to value the PRC producer's factors of production, when available and appropriate. We have obtained and relied upon publicly available information. See the memorandum to the File regarding the selection of a surrogate country dated June 28, 2004.

In accordance with 19 CFR 351.301(c)(3)(ii), for the final results of this new shipper review, interested parties may submit publicly available information to value the factors of production until twenty days following the date of publication of these preliminary results.

2. Factors of Production

Section 773(c)(1) of the Act provides that the Department shall determine the normal value using a factors-of-production methodology if (1) the merchandise is exported from an NME country and (2) the information does not permit the calculation of normal value using home-market prices, third-country prices, or constructed value under section 773(a) of the Act. Factors of production include the following elements: (1) hours of labor required, (2) quantities of raw materials employed, (3) amounts of energy and other utilities consumed, and (4) representative capital costs. We used factors of production reported by the producer or exporter for materials, energy, labor, and packing. We valued all the input factors using publicly available information, as discussed in the “Surrogate Country” and “Factor Valuations” sections of this notice.

3. Factor Valuations

In accordance with section 773(c) of the Act, we calculated normal value based on factors of production reported by the producer or exporter for the POR. To calculate normal value, we multiplied the reported per-unit factor quantities by publicly available surrogate values from India. In selecting the surrogate values, we considered the quality, specificity, and contemporaneity of the data. As appropriate, we adjusted input prices by including freight costs in order to make them delivered prices. We calculated the freight costs based on the shortest reported distance from the domestic supplier to the factory, in accordance with Sigma Corporation v. United States, 117 F. 3d 1401, 1407-08 (CAFC 1997). For a detailed description of the surrogate values selected for these preliminary results, see the FOP Memorandum.

For those Indian-rupee values not contemporaneous with the POR, we adjusted for inflation using wholesale price indices for India published in the International Monetary Fund's International Financial Statistics.

Except as specified below, we valued raw-material inputs using the weighted-average- unit import values derived from the World Trade Atlas Trade Information System (Internet Version 4.3e) (WTA). The source of the WTA data for India is the Directorate General of Commercial Intelligence and Statistics of the Indian Ministry of Commerce and Industry. We selected WTA data contemporaneous to the POR. We valued garlic seed based on pricing data from the NHRDF News Letter, published by India's National Horticultural Research and Development Foundation. We valued diesel fuel based on data from the International Energy Agency's Energy Prices & Taxes: Quarterly Statistics (Third Quarter, 2003). We valued water using the averages of municipal water rates from Asian Development Bank's Second Water Utilities Data Book: Asian and Pacific Region (October 1997).

For labor, consistent with 19 CFR 351.408(c)(3), we used the PRC regression-based wage rate that appears on the website for Import Administration (http://ia.ita.doc.gov/wages/01wages/01wages.html). The source of this wage-rate data is the International Labor Organization's Yearbook of Labour Statistics 2002 (Geneva, 2002), chapter 5B: Wages in Manufacturing.

The respondent claimed an adjustment for revenue earned on the sale of garlic sprouts. We found that sprouts are a by-product of garlic and deducted an offset amount from normal value for this by-product. As a surrogate value for the sale of sprouts in the PRC, we used an average of Indian wholesale prices for green onions published by the Azadpur Agricultural Produce Marketing Committee.

We valued the truck rate based on an average of truck rates that were published in the Indian publication, Chemical Weekly, during the POR. We valued foreign brokerage and handling charges based on a value calculated for the less-than-fair-value investigation of certain hot-rolled carbon steel flat products from India.

We used the financial information of the tea company, Parry Agro Industries Limited (Parry Agro). We found this company to be representative of the financial experiences of the producer and exporter because Parry Agro produced and processed a product that was not highly processed or preserved prior to its sale. Thus, in order to value factory overhead, selling, general and administrative expenses (SG&\A), and profit, we used rates derived from Parry Agro's 2001/2002 financial statements. We examined the annual report of Parry Agro and were not able to determine whether Parry Agro performed packing activities associated with the tea it produced as its financial information does not indicate that it incurred any packing expenses. Furthermore, in the event Parry Agro did incur packing expenses, we do not know the extent to which such expenses are included in the values we obtained from its income statement for purposes of calculating the surrogate financial ratios because packing expenses are not included as a line item or distinguished or described in the income statement in any way. For the preliminary results of this review, in calculating the amount of overhead, SG&A, and profit included in the normal value, we have determined not to apply the surrogate financial ratios to production costs that include packing expenses. We have, however, calculated separate surrogate values for materials and labor associated directly with packing fresh garlic from the PRC and added these packing expenses to the calculation of normal value.

We have valued electricity consumption based on Wangtun's reported use of electricity unrelated to obtaining water (e.g., for cold storage located at the production/processing facility). We applied the usage figure reported by the respondent to a surrogate value for electricity that we obtained from the International Energy Agency's Energy Prices & Taxes: Quarterly Statistics (Third Quarter, 2003).

Because we are valuing electricity consumption in the manner described, we removed the line item for “Power and Fuel” costs from the numerator of the surrogate financial ratio for selling, general, and administrative (SG&A) expenses. Further, in calculating the amount of overhead, SG&A expenses, and profit included in the normal value, we have not applied the surrogate financial ratios to production costs that include electricity costs.

In response to the petitioners' comments pertaining to the valuation of the cost of land, upon further analysis of this issue, we have determined that this factor is an important component in the cost build-up of normal value and is not reflected in the financial ratios calculated from Parry Agro's income statements. As such, we have valued the cost of land using information contained in a Notification of Policy for Land Revenue issued by the State of Rajasthan, India.

Based on all available information, we have determined that this land-lease rate serves as the most reliable surrogate value for calculating a cost for leasing the farmland used to grow the subject merchandise. We have converted the values provided by the Indian state government and calculated a per-mu annual land-lease cost. In our margin calculation, we have added the cost of leasing land to fixed overhead. See the Preliminary Results Analysis Memorandum.

Preliminary Results of the New Shipper Review

We preliminarily determine that the following dumping margin exists for the period November 1, 2002, through October 31, 2003:

Case briefs or other written comments in at least six copies must be submitted to the Assistant Secretary for Import Administration no later than thirty days after the publication of these preliminary results. Pursuant to 19 CFR 351.309(d)(2), rebuttal briefs are due no later than five days after the submission of case briefs. A list of authorities used, a table of contents, and an executive summary of issues should accompany any briefs submitted to the Department. Executive summaries should be limited to five pages total, including footnotes. In accordance with 19 CFR 351.310, we will hold a public hearing to afford interested parties an opportunity to comment on arguments raised in case or rebuttal briefs, provided that such a hearing is requested by an interested party. If we receive a request for a hearing, we plan to hold the hearing three days after the deadline for submission of the rebuttal briefs at the U.S. Department of Commerce, 14th Street and Constitution Avenue, N.W., Washington, D.C. 20230. 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, U.S. Department of Commerce, Room 1870, within thirty days after the date of publication of the preliminary results of this review in the Federal Register. Requests should contain the following information: (1) The party's name, address, and telephone number; (2) the number of participants; and (3) a list of the issues to be discussed. Oral presentations will be limited to issues raised in the briefs.

The Department will publish the final results of this new shipper review, including the results of its analysis of issues raised in any case or rebuttal briefs, within 90 days of publication of this notice. See 19 CFR 351.214(h)(i)(1).

Assessment Rates

Upon completion of this new shipper review, the Department will determine, and CBP will assess, antidumping duties on all appropriate entries. The Department will issue appropriate assessment instructions directly to CBP upon completion of this review. If these preliminary results are adopted in our final results of review, we will direct CBP to assess the antidumping duties applicable to sales of the subject merchandise on each of the entries of this exporter's importer/customer during the POR.

Cash-Deposit Requirements

The following cash-deposit requirements will be effective upon publication of the final results of the new shipper review for shipments of the subject merchandise entered, or withdrawn from warehouse, for consumption on or after the publication date, as provided for by section 751(a)(2)(C) of the Act: (1) for subject merchandise grown by Kaifeng Wangtun Fresh Vegetables Factory and exported by Jinxiang Shanyang Freezing Storage Co., Ltd., the cash-deposit rate will be that established in the final results of this review; (2) for all other subject merchandise exported by Jinxiang Shanyang Freezing Storage Co., Ltd., the cash-deposit rate will be the PRC-wide rate, which is 376.67 percent; (3) for all other PRC exporters of subject merchandise which have not been found to be entitled to a separate rate, the cash-deposit rate will be the PRC-wide rate of 376.67 percent; and (4) for all non-PRC exporters of subject merchandise, the cash-deposit rate will be the rate applicable to the PRC exporter that supplied that exporter. These deposit requirements, when imposed, shall remain in effect until publication of the final results of the next administrative review.

Notification to Interested Parties

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 the period of this review. 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.

We are issuing and publishing the preliminary results of this new shipper review in accordance with sections 751(a)(2)(B)(iv) and 777(i) of the Act.