Honey From Argentina: Preliminary Results of New Shipper Review

AGENCY:

Import Administration, International Trade Administration, Department of Commerce.

SUMMARY:

In response to a request by the respondent Patagonik S.A. (Patagonik), the Department of Commerce (the Department) is conducting a new shipper review of the antidumping order of honey from Argentina. The period of review (POR) is December 1, 2004, through December 31, 2005.

We preliminarily determine a zero margin in the case of sales of honey from Argentina from Patagonik. If these preliminary results are adopted in our final results of this new shipper review, we will instruct Customs and Border Protection (CBP) to assess antidumping duties based on the difference between the export price (EP) or constructed export price (CEP) and normal value (NV). Interested parties are invited to comment on these preliminary results.

EFFECTIVE DATE:

November 24, 2006.

FOR FURTHER INFORMATION CONTACT:

David Cordell or Robert James, AD/CVD Operations, Office 7, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW., Washington, DC 20230; telephone: (202) 482-0649 or (202) 482-0408, respectively.

SUPPLEMENTARY INFORMATION:

Background

The Department published an antidumping duty order on honey from Argentina on December 10, 2001. See Notice of Antidumping Duty Order; Honey From Argentina, 66 FR 63672. On January 3, 2006, Patagonik, an Argentine exporter of subject merchandise, requested that the Department conduct a new shipper review. On January 20, 2006, the Department initiated this new shipper review. See Honey from Argentina: Initiation of New Shipper Antidumping Duty Review, 71 FR 4349 (January 26, 2006).

On January 30, 2006, the Department issued sections A, B, and C of the antidumping questionnaire to Patagonik, as well as a supplemental questionnaire to its unaffiliated customer in the United States. We received responses on February 16, 2006, March 2, 2006, and March 20, 2006.

The Department issued additional supplemental questionnaires on April 13, May 22, and July 31, 2006. We received responses to these additional supplemental questionnaires on May 8, June 9, and August 28, 2006. The American Honey Producers Association and the Sioux Honey Association (petitioners) submitted comments on respondent's submissions on May 3, May 26, and July 14, 2006.

On May 5, 2006, petitioners made a sales below cost allegation in this segment of the proceeding. Respondent and petitioners submitted comments on the allegation on May 16, and May 26, 2006, respectively. On June 27, 2006, the Department initiated a sales below cost investigation based upon petitioner's allegation and on July 18, 2006, the Department issued its section D questionnaire to the selected beekeepers and middleman, Colmenares Santa Rosa. On August 15, 2006, the beekeepers and the middleman submitted their response to the cost questionnaire. On September 7, 2006, the Department issued a supplemental cost questionnaire to which Patagonik's beekeepers and middleman replied on October 6, 2006.

On June 30, 2006, the Department extended the time limit for issuance of the preliminary results of the new shipper review to November 16, 2006. See Notice of Extension of Time Limit for Preliminary Results of Antidumping New Shipper Review: Honey from Argentina, 71 FR 39304 (July 12, 2006).

Scope of the Review

The merchandise covered by this order is honey from Argentina. The products covered are natural honey, artificial honey containing more than 50 percent natural honey by weight, preparations of natural honey containing more than 50 percent natural honey by weight, and flavored honey. The subject merchandise includes all grades and colors of honey whether in liquid, creamed, comb, cut comb, or chunk form, and whether packaged for retail or in bulk form.

The merchandise covered by this order is currently classifiable under subheadings 0409.00.00, 1702.90.90, and 2106.90.99 of the Harmonized Tariff Schedule of the United States (HTSUS). Although the HTSUS subheadings are provided for convenience and customs purposes, the Department's written description of the merchandise under this order is dispositive.

Bona Fide Sale Analysis

For the reasons stated below, we preliminarily find that Patagonik's reported U.S. sales during the POR appear to be bona fide based on the totality of the facts on the record. Specifically, we find that: (1) The price of Patagonik's sale was within the range of the prices of other entries of subject merchandise from Argentina into the United States during the POR; (2) Patagonik's sale was made between Patagonik and unaffiliated parties at arm's length; and (3) there is no record evidence that indicates that Patagonik's sale was not made based on commercial principles. See the accompanying memo from David Cordell through Robert James, Program Manager, to Richard Weible, Office Director, entitled Bona Fide Nature of the Sale in the New Shipper Review of Patagonik S.A.: Honey from Argentina, dated November 16, 2006.

Verification

As provided in section 782(i) of the Tariff Act of 1930, as amended (the Act), we verified sales and cost information provided by Patagonik, selected beekeepers, and the middleman/collector, using standard verification procedures such as the examination of relevant sales and financial records. The sales verification took place between September 11, 2006, and September 14, 2006. Sales verification results are outlined in the public and proprietary versions of our verification reports, which are on file in the Central Records Unit (CRU) in room B-099 of the main Department building. See Memoranda to the File from David Cordell, Deborah Scott and Maryanne Burke through Richard Weible Office Director, entitled “Verification of the Sales Response of Patagonik S.A.”, dated October 30, 2006. We conducted a cost verification with respect to the collector and two selected beekeeper cost respondents from October 23, 2006, to October 27, 2006. See Memoranda to the File from Angela Strom and Heidi Schriefer to Neal Halper “Verification of the Cost Responses of Colmenares Santa Rosa S.R.L.”; “Verification of the Cost Response of Beekeeper 2”; and, “Verification of the Cost Response of Beekeeper 4”, which will be released shortly.

Product Comparison

In accordance with section 771(16) of the Act, we considered all sales of honey covered by the description in the “Scope of the Review” section of this notice, supra, which were sold in the respective third-country market during the POR to be the foreign like product for the purpose of determining appropriate product comparisons to honey sold in the United States. We matched products based on the physical characteristics reported by Patagonik in accordance with the Department's model match criteria. Where there were no sales of identical merchandise in the third-country market to compare to U.S. sales, we compared U.S. sales to the next most similar foreign like product on the basis of the characteristics and reporting instructions listed in the antidumping duty questionnaire and instructions, or to constructed value (CV), as appropriate.

Level of Trade

In accordance with section 773(a)(1)(B)(i) of the Act, to the extent practicable, we determine NV based on sales in the third country market at the same level of trade (LOT) as EP or CEP. The NV LOT is that of the starting-price sales in the third country market or, when NV is based on CV, that of the sales from which we derive selling, general and administrative (SG&A) expenses and profit. For CEP, it is the level of the constructed sale from the exporter to an affiliated importer after the deductions required under section 772(d) of the Act.

To determine whether NV sales are at a different LOT than CEP, we examine stages in the marketing process and selling functions along the chain of distribution between the producer and the unaffiliated customer. If the comparison-market sales are at a different LOT and the difference affects 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 an LOT adjustment under section 773(a)(7)(A) of the Act. Finally, for CEP sales, if the NV level is more remote from the factory than the CEP level and there is no basis for determining whether the difference in the levels between NV and CEP affects price comparability, we adjust NV under section 773(a)(7)(B) of the Act (the CEP-offset provision). See Final Determination of Sales at Less Than Fair Value: Certain Cut-to-Length Carbon Steel Plate from South Africa, 62 FR 61731, 61732-33 (November 19, 1997).

Patagonik reported a single LOT for all U.S. and third-country sales. Patagonik claimed that its selling activities in both markets are identical, and nothing on the record appears to suggest otherwise. For Patagonik, we determine that all reported sales are made at the same LOT, and we have no need to make an LOT adjustment. See Analysis Memoranda for Patagonik, dated November 16, 2006.

Comparisons

To determine whether sales of subject merchandise made by Patagonik to the United States were made at less than fair value, we compared the EP or CEP to the NV, as described below. Pursuant to section 777A(d)(2) of the Act, we compared the EP or CEP of individual U.S. transactions to the monthly weight-averaged NV of the foreign like product where there were sales at prices above the COP, as discussed in the “Cost of Production Analysis” section below.

Date of Sale

Section 351.401(i) of the Department's regulations states that the Department normally will use date of invoice, as recorded in the exporter's or producer's records kept in the ordinary course of business, as the date of sale, but may use a date other than the date of invoice if it better reflects the date on which material terms of sale are established. Patagonik reported invoice date as the date of sale for both markets. For Patagonik, the Department, consistent with prior practice, used the reported shipment date as the date of sale for both its third-country and U.S. markets when shipment occurred prior to invoice date. See Notice of Final Determinations of Sales at Less than Fair Value: Certain Durum Wheat and Hard Red Spring Wheat from Canada, 68 FR 52741 (September 5, 2003), and accompanying Decision Memo at Comment 3.

Export Price and Constructed Export Price

Section 772(a) of the Act defines EP as “the price at which the subject merchandise is first sold (or agreed to be sold) before the date of importation by the producer or exporter of subject merchandise outside of the United States to an unaffiliated purchaser in the United States or to an unaffiliated purchaser for exportation to the United States * * *,” as adjusted under subsection (c). Section 772(b) of the Act defines CEP as “the price at which the subject merchandise is first sold (or agreed to be sold) in the United States before or after the date of importation by or for the account of the producer or exporter of such merchandise or by a seller affiliated with the producer or exporter, to a purchaser not affiliated with the producer or exporter * * *,” as adjusted under subsections (c) and (d). For purposes of this new shipper review, Patagonik classified its U.S. sale as EP because it was made before the date of importation directly to an unaffiliated purchaser in the U.S. market. For purposes of these preliminary results, we have accepted this classification.

For those sales which we are classifying as EP transactions, we calculated EP in accordance with section 772(a) of the Act. We based EP on the FOB price for export to the unaffiliated importer in the U.S. market. We adjusted gross unit price for billing adjustments where applicable. We also made deductions for movement expenses in accordance with section 772(c)(2)(A) of the Act; these included, where appropriate, foreign inland freight, warehousing, insurance, consolidation, port charges and foreign brokerage and handling.

Affiliation

On November 16, 2006, the Department determined that Colmenares Santa Rosa (CSR) and Patagonik are affiliated within the meaning of section 771(33) of the Act, and also that the two companies should be treated as a single entity for the purposes of this new shipper review and that the companies should receive a single antidumping duty rate. See memo from David Cordell through Robert James, Program Manager, to Richard Weible, Office Director, entitled Relationship between Patagonik S.A. and Colmenares Santa Rosa S.R.L. in the 2004-2005 New Shipper Review of Antidumping Order on Honey from Argentina from David Cordell through Robert James to Richard Weible, (Collapsing and Affiliation Memorandum), dated November 16, 2006.

Normal Value

1. Selection of Comparison Market

In accordance with section 773(a)(1)(C) of the Act, to determine whether there was a sufficient volume of sales in the home market to serve as a viable basis for calculating NV (i.e., the aggregate volume of home market sales of the foreign like product is greater than or equal to five percent of the aggregate volume of U.S. sales), we compare each company's aggregate volume of home market sales of the foreign like product to its aggregate volume of U.S. sales of subject merchandise. For Patagonik, the aggregate volume of sales in the home market of the foreign like product was less than five percent of the aggregate volume of U.S. sales of the subject merchandise. Therefore, we determined for Patagonik that sales in the home market did not provide a viable basis for calculating NV.

When sales in the home market are not suitable to serve as the basis for NV, section 773(a)(1)(B)(ii) of the Act provides that sales to a third-country market may be utilized if (i) The prices in such market are representative; (ii) the aggregate quantity of the foreign like product sold by the producer or exporter in the third-country market is five percent or more of the aggregate quantity of the subject merchandise sold in or to the United States; and (iii) the Department does not determine that a particular market situation in the third-country market prevents a proper comparison with the U.S. price. Patagonik reported Germany as its largest third-country market during the POR, in terms of volume of sales by quantity (and with five percent or more of sales, by quantity, to the United States). The Department preliminarily determines that the prices in Germany are representative and no particular market situation exists that would prevent a proper comparison to EP or CEP. As a result, for Patagonik, NV is based on sales to Germany.

In summary, therefore, NV for Patagonik is based on third-country market sales to unaffiliated purchasers made in commercial quantities and in the ordinary course of trade. For NV, we used the prices at which the foreign like product was first sold for consumption in the usual commercial quantities, in the ordinary course of trade, and, to the extent possible, at the same LOT as the EP or CEP, as appropriate. We calculated NV as noted in the “Price-to-CV Comparisons” and “Price-to-Price Comparisons” sections of this notice.

2. Cost of Production

Background

As noted above, on May 5, 2006, petitioners made a sales below cost allegation in this segment of the proceeding. Respondent and petitioners submitted comments on the allegation on May 16, and May 26, 2006, respectively. On June 20, 2006, the Department initiated a sales below cost investigation.

A. Cost of Production Analysis

As previously stated, Patagonik is an exporter, not a producer, of subject merchandise in this review. On February 16, 2006, Patagonik submitted a list of its unaffiliated honey suppliers, which identified companies, individuals, and cooperatives operating as either producers (beekeepers) or intermediary parties (collectors) in Patagonik's honey purchases. The list was updated in exhibit A-16 in Patagonik's May 8, 2006 and August 4, 2006 responses. To calculate a COP and CV for the merchandise under consideration, the Department followed the same methodology relied upon in the first administrative review. The Department selected its five largest beekeepers and honey collector from Patagonik's list of suppliers. See Memorandum to the File: “Selection of Cost of Production Respondents,” dated June 27, 2006.

B. Calculation of COP

In accordance with section 773(b)(3) of the Act, we calculated a COP for each beekeeper supplier based on the sum of the cost of materials and fabrication for the foreign like product, plus amounts for general and administrative (G&A) and financial expenses. Since all the beekeepers utilized the intermediary party, Colmenares Santa Rosa, S.R.L. (CSR), to supply honey to Patagonik for its export sales, we used the collecting costs associated with CSR (i.e., the selected honey collector) and added such costs to the individual COP reported by each beekeeper supplier. We then calculated a simple average of the COP figures, inclusive of collecting costs, to obtain a final COP figure for Patagonik. We note that our final COP represents the costs incurred over the cost reporting period (CRP) covering June 1, 2004 to May 31, 2005, which differs from the established POR in this new shipper review. The CRP was established to capture the cost of producing honey for a complete production season.

Collector Cost Adjustments

For purposes of allocating the collecting costs incurred by CSR, we used the actual honey received less returns at the CSR warehouse during the CRP as opposed to reported estimated purchased volumes. We also included the cost of blending as a component of the collector's costs, captured the full labor costs associated with the manager of CSR and excluded income taxes from the total reported collector costs. See Memorandum from Angela Strom to Neal M. Halper “Cost of Production and Constructed Value Adjustments for the Preliminary Results-Collector”, dated November 16, 2006.

Beekeeper Cost Respondent Adjustments

We relied on the COP data submitted by each beekeeper in its cost questionnaire response, except for the following adjustments.

Common Adjustments

Due to the limited source documents maintained by the individual beekeeper cost respondents, we were unable to confirm management's estimates related to the reported amounts for the consumption of surplus honey or sugar as feed for the hives. Because the reported feed amounts were based on management's estimates, we compared the reported feed costs to publicly available data. As a result, we adjusted the reported feed costs for Beekeepers 1, 2, 3, 4, and 5 to reflect the data available from public sources.

Individual Beekeeper Adjustments

Beekeeper 1

We made no beekeeper specific adjustments.

Beekeeper 2

1. We adjusted the reported rental cost for land to reflect the market value of the actual quantity of honey that was bartered for the land use.

2. We increased the reported costs for both the depreciation expense of additional fixed assets and other additional expenses identified at the cost verification.

3. We adjusted the reported drum cost calculation by revising the reported market value of a drum to reflect the per unit purchase price actually paid by Beekeeper 2 during the cost reporting period.

Beekeeper 3

We made no beekeeper specific adjustments.

Beekeeper 4

1. We adjusted the reported production quantities based on our cost verification findings.

2. During the cost reporting period, Beekeeper 4 hired a contractor to operate his hives and the fee was a set percentage of the honey production. Therefore, we adjusted the reported contractor fee calculation to reflect the contractor's percentage of the revised honey production quantities at market value.

3. We adjusted the reported drum cost calculation to reflect the revised production quantities.

Beekeeper 5

1. We adjusted the reported costs to include an unreconciled difference between the reported costs and the beekeeper's books and records from the overall cost reconciliation.

2. We adjusted the reported costs to include directors' fees reported in the beekeeper's fiscal year financial statements.

See Memorandum from Heidi K. Schriefer to Neal M. Halper “Cost of Production and Constructed Value Adjustments for the Preliminary Results—Patagonik S.A. Beekeeper Respondents” dated November 16, 2006.

C. Test of Third-Country Prices and Results of the Cost of Production Test

In determining whether to disregard third country market sales made at prices below the COP, in accordance with sections 773(b)(1)(A) and (B) of the Act, we examined: (1) Whether, within an extended period of time, such sales were made in substantial quantities; and (2) whether such sales were made at prices which permitted the recovery of all costs within a reasonable period of time in the normal course of trade. Where less than 20 percent of the respondent's third country market sales of a given model (i.e., CONNUM) were at prices below the COP, we did not disregard any below-cost sales of that model because we determined that the below-cost sales were not made within an extended period of time and in “substantial quantities.” Where 20 percent or more of the respondent's third country market sales of a given model were at prices less than COP, we disregarded the below-cost sales because: (1) They were made within an extended period of time in “substantial quantities,” in accordance with sections 773(b)(2)(B) and (C) of the Act, and (2) based on our comparison of prices to the weighted-average COPs for the POR, they were at prices which would not permit the 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 new shipper review, we disregarded below-cost sales made by Patagonik where 20 percent or more of the respondent's third country market sales of a given model were at prices less than COP, and used the remaining sales as the basis for determining NV, in accordance with section 773(b)(1) of the Act.

Our cost test for Patagonik revealed that for third country market sales of certain models, less than 20 percent of the sales of those models were at prices below the COP. We therefore retained all such sales in our analysis and used them as the basis for determining NV. Our cost test also indicated that for other models sold by Patagonik, more than 20 percent of the third country market sales of those models were sold at prices below COP 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. Thus, in accordance with section 773(b)(1) of the Act, we excluded these below-cost sales from our analysis and used the remaining above-cost sales as the basis for determining NV.

Price-to-Price Comparisons

For those product comparisons for which there were sales at prices above the COP, we based NV on the third-country market prices to unaffiliated purchasers. In accordance with section 773(a)(6)(B) of the Act, we made adjustments, where applicable, for movement expenses. In accordance with section 773(a)(6)(C) of the Act, we made circumstance-of-sale adjustments for credit and other direct selling expenses where appropriate. We adjusted gross unit price for billing adjustments where applicable. We note that certain claimed direct expenses in the third-country market are being re-classified as either indirect selling expenses or as part of the cost of production, for the reasons outlined in the accompanying Analysis Memoranda. See Patagonik's Sales Analysis Memorandum, dated November 16, 2006, and Patagonik's COP Memorandum, dated November 16, 2006.

Currency Conversion

The Department's preferred source for daily exchange rates is the Federal Reserve Bank. See Preliminary Results of Antidumping Duty Administrative Review: Stainless Steel Sheet and Strip in Coils from France, 68 FR 47049 (August 7, 2003). However, the Federal Reserve Bank does not track or publish exchange rates for the Argentine Peso. Therefore, we made currency conversions based on the daily exchange rates from Factiva, a Dow Jones & Reuters Retrieval Service. Factiva publishes exchange rates for Monday through Friday only. We used the rate of exchange on the most recent Friday for conversion dates involving Saturday and Sunday where necessary.

Preliminary Results of Review

As a result of our review, we preliminarily determine the following weighted-average dumping margins exist for the period December 1, 2004, through December 30, 2005:

The Department will disclose calculations performed within 5 days of the date of publication of this notice in accordance with 19 CFR 351.224(b). An interested party may request a hearing within 30 days of publication. See 19 CFR 351.310(c). Any hearing, if requested, will be held 37 days after the date of publication of these preliminary results, or the first business day thereafter, unless the Department alters the date pursuant to 19 CFR 351.310(d). Interested parties may submit case briefs or written comments no later than 30 days after the date of publication of these preliminary results of review. Rebuttal briefs and rebuttals to written comments, limited to issues raised in the case briefs and comments, may be filed no later than 35 days after the date of publication of this notice. Parties who submit arguments in these proceedings 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, parties submitting case briefs, rebuttal briefs, and written comments should provide the Department with an additional copy of the public version of any such argument on diskette. The Department will issue final results of this new shipper review, including the results of our analysis of the issues in any such case briefs, rebuttal briefs, and written comments or at a hearing, within 120 days of publication of these preliminary results.

Assessment Rate

The Department shall determine, and CBP shall assess, antidumping duties on all appropriate entries. In accordance with 19 CFR 351.212(b)(1), we calculated importer-specific ad valorem assessment rates for the merchandise based on the ratio of the total amount of antidumping duties calculated for the examined sales made during the POR to the total customs value of the sales used to calculate those duties. This rate will be assessed uniformly on all Patagonik/Colmenares entries of that particular importer made during the POR. The Department intends to issue assessment instructions to CBP 15 days after the date of publication of the final results of review.

Cash Deposit

At the initiation of this review, the Department issued cash deposit instructions based on the certifications that Patagonik was the exporter and that CSR was the supplier of subject merchandise. The Department has since determined that Patagonik and CSR are affiliated and, furthermore, that the Department should treat Patagonik and CSR as a single entity for purposes of this new shipper review. final, the combination from the cash deposit instructions issued at initiation will no longer apply. The See Collapsing and Affiliation Memorandum. As such, if this preliminary determination becomes Department would typically apply the combination cash deposit rate to the Patagonik/CSR entity and the producers who supplied Patagonik/CSR during the POR. However, in this particular instance, the number of producers in the form of unaffiliated beekeepers which supplied CSR/Patagonik during the POR is voluminous. The Preamble to the Department's regulations states “it may not be practicable to establish combination rates when there are a large number of producers, such as in certain agricultural cases.” Antidumping Duties; Countervailing Duties: Final Rule, 62 FR 27296, 27303 (May 19, 1997). The Department believes the unique circumstances envisaged in the Preamble are present in this particular review. Therefore the Department preliminarily determines that the numerous producers in this case make it impracticable to apply a combination rate.

The following cash-deposit requirements will be effective upon publication of the final results of this new shipper review for all shipments of the subject merchandise from Patagonik/CSR, 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. For shipments of subject merchandise exported by Patagonik/CSR, the cash deposit rate shall be the rate determined in the final results of the review. These deposit 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.

We are issuing and publishing this notice in accordance with sections 751(a)(1) and 777(i)(1) of the Act.