Initiation of Antidumping Duty Investigations: Lemon Juice from Argentina and Mexico

AGENCY:

Import Administration, International Trade Administration, Department of Commerce.

EFFECTIVE DATE:

October 19, 2006.

FOR FURTHER INFORMATION CONTACT:

Mark Hoadley (Argentina) or Hermes Pinilla (Mexico), AD/CVD Operations, Office 6 and Office 5, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW, Washington, DC 20230; telephone: (202) 482-3148 or (202) 482-3477, respectively.

SUPPLEMENTARY INFORMATION:

The Petition

On September 21, 2006, the Department of Commerce (the Department) received a petition on imports of lemon juice from Argentina and Mexico filed in proper form by Sunkist Growers, Inc. (the petitioner). See Petition for the Imposition of Antidumping Duties Against Lemon Juice from Argentina and Mexico (September 21, 2006) (petition). On September 28, 2006, the Department issued a request for additional information and clarification of certain areas of the petition. Based on the Department's request, the petitioner filed amendments to the petition on October 3, 2006. See Supplemental Questionnaire: Petition for the Imposition of Antidumping Duties Against Lemon Juice from Argentina and Mexico (October 3, 2006). On October 6, October 10, and October 11, 2006, the Department discussed further concerns with the petitioner by phone. See Memorandum to the File: Lemon Juice from Argentina and Mexico - Telephone Conversation with counsel to the Petitioner, dated October 6, 2006, Memorandum to the File: Lemon Juice from Argentina and Mexico - Telephone Conversations with counsel to the Petitioner, dated October 10, 2006, and Memorandum to the File: Lemon Juice from Argentina and Mexico - Telephone Conversation with counsel to the Petitioner, dated October 11, 2006. In response to these concerns, the petitioner filed additional petition amendments on October 10, 2006 and October 11, 2006.

In accordance with section 732(b) of the Tariff Act of 1930, as amended (the Act), the petitioner alleges that imports of lemon juice from Argentina and Mexico are being, or are likely to be, sold in the United States at less than fair value, within the meaning of section 731 of the Act, and that such imports are materially injuring, or threatening material injury to, an industry in the United States.

The Department finds that the petitioner filed this petition on behalf of the domestic industry because the petitioner is an interested party as defined in section 771(9)(C) of the Act, and the petitioner has demonstrated sufficient industry support with respect to the investigations that the petitioner is requesting the Department to initiate (see “Determination of Industry Support for the Petition” below).

Scope of Investigations

The merchandise covered by each of these investigations includes certain lemon juice for further manufacture, with or without addition of preservatives, sugar, or other sweeteners, regardless of the GPL (grams per liter of citric acid) level of concentration, brix level, brix/acid ratio, pulp content, clarity, grade, horticulture method (e.g., organic or not), processed form (e.g., frozen or not-from-concentrate), FDA standard of identity, the size of the container in which packed, or the method of packing.

Excluded from the scope are: (1) lemon juice at any level of concentration packed in retail-sized containers ready for sale to consumers, typically at a level of concentration of 48 GPL; and (2) beverage products such as lemonade that typically contain 20%% or less lemon juice as an ingredient.

Lemon juice is classifiable under subheadings 2009.39.6020, 2009.31.6020, 2009.31.4000, 2009.31.6040, and 2009.39.6040 of the Harmonized Tariff Schedule of the United States (HTSUS). While HTSUS subheadings are provided for convenience and Customs and Border Patrol purposes, our written description of the scope of this investigation is dispositive.

During our review of the petition, we discussed the scope with the petitioner to ensure that it is an accurate reflection of the products for which the domestic industry is seeking relief. Moreover, as discussed in the preamble to the regulations (Antidumping Duties; Countervailing Duties; Final Rule, 62 FR 27296, 27323 (May 19, 1997)), we are setting aside a period for interested parties to raise issues regarding product coverage. The Department encourages all interested parties to submit such comments within 20 calendar days of the publication of this notice. Comments should be addressed to Import Administration's Central Records Unit (CRU), Room 1870, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW, Washington, DC 20230. The period of scope consultations is intended to provide the Department with ample opportunity to consider all comments and to consult with parties prior to the issuance of the preliminary determinations.

Determination of Industry Support for the Petition

Section 732(b)(1) of the Act requires that a petition be filed on behalf of the domestic industry. Section 732(c)(4)(A) of the Act provides that a petition meets this requirement if the domestic producers or workers who support the petition account for (1) at least 25 percent of the total production of the domestic like product and (2) the domestic producers or workers who support the petition account for more than 50 percent of the production of the domestic like product produced by that portion of the industry expressing support for or opposition to the petition.

Section 771(4)(A) of the Act defines the “industry” as the producers as a whole of a domestic like product. Thus, to determine whether the petition has the requisite industry support, the statute directs the Department to look to producers and workers who produce the domestic like product. The International Trade Commission (ITC) is responsible for determining whether “the domestic industry” has been injured and must also determine what constitutes a domestic like product in order to define the industry. While the Department and the ITC must apply the same statutory definition regarding the domestic like product, they do so for different purposes and pursuant to separate and distinct authority. See section 771(10) of the Act. In addition, the Department's determination is subject to limitations of time and information. Although this may result in different definitions of the domestic like product, such differences do not render the decision of either agency contrary to law.¹

Section 771(10) of the Act defines the domestic like product as “a product which is like, or in the absence of like, most similar in characteristics and uses with, the article subject to an investigation under this subtitle.” Thus, the reference point from which the domestic like product analysis begins is “the article subject to an investigation,” i.e., the class or kind of merchandise to be investigated, which normally will be the scope as defined in the petition.

With regard to domestic like product, the petitioner does not offer a definition of domestic like product distinct from the scope of the investigations. Based on our analysis of the information presented by the petitioner, we have determined that there is a single domestic like product, lemon juice, which is defined in the “Scope of Investigations” section above, and we have analyzed industry support in terms of the domestic like product.

We received no opposition to this petition. The petitioner accounts for a sufficient percentage of the total production of the domestic like product, and the requirements of section 732(c)(4)(A) are met. Accordingly, the Department determines that the petition was filed on behalf of the domestic industry within the meaning of section 732(b)(1) of the Act. See “Office of AD/CVD Operations Initiation Checklist for the Antidumping Duty Petition on Lemon Juice from Argentina,” at Attachment II (October 11, 2006) (Argentina Initiation Checklist) and “Office of AD/CVD Operations Initiation Checklist for the Antidumping Duty Petition on Lemon Juice from Mexico,” at Attachment II (October 11, 2006) (Mexico Initiation Checklist), on file in the CRU.

Allegations and Evidence of Material Injury and Causation

The petitioner alleges that the U.S. industry producing the domestic like product is being materially injured and is threatened with material injury by reason of the imports of the subject merchandise sold at less than fair value. The petitioner contends that the industry's injury is evidenced by reduced market share, increased inventories, lost sales, reduced production, lower capacity and capacity utilization rates, decline in prices, lost revenue, reduced employment, decreased capital expenditures, and a decline in financial performance.

These allegations are supported by relevant evidence including import data, evidence of lost sales, and pricing information. We assessed the allegations and supporting evidence regarding material injury, threat of material injury, and causation, and have determined that these allegations are supported by accurate and adequate evidence and meet the statutory requirements for initiation. See Argentina Initiation Checklist at Attachment III and Mexico Initiation Checklist at Attachment III.

Period of Investigation

In accordance with section 351.204(b) of the Department's regulations, because the petition was filed on September 21, 2006, the anticipated period of investigation (POI) is July 1, 2005 through June 30, 2006.

Allegations of Sales at Less Than Fair Value

The following is a description of the allegations of sales at less than fair value upon which the Department has based its decision to initiate investigations with respect to Argentina and Mexico. The sources of data for the deductions and adjustments relating to U.S. price and normal value are discussed in greater detail in the Argentina Initiation Checklist and Mexico Initiation Checklist. Should the need arise to use any of this information as facts available under section 776 of the Act, we may reexamine the information and revise the margin calculation, if appropriate.

Use of a Third Country Market and Sales Below Cost Allegation

With respect to normal value (NV), the petitioner stated that home market prices are not reasonably available. According to the petitioner, the Argentine and Mexican lemon juice industry is geared almost exclusively to exports. See, e.g., pages 12 and 22 of the October 3, 2006 petition amendment. The petitioner stated that its personnel most knowledgeable about international markets inquired about the Argentine and Mexican home markets for lemon juice from their sources but that they were unable to obtain home market prices in Argentina or Mexico. In addition, the petitioner stated that there were no indications of domestic prices for lemon juice in these markets in the several Department of Agriculture and ITC reports which were included in the petition, and which the Department has reviewed.

The petitioner therefore proposed the Netherlands as a third country comparison market for both Argentina and Mexico, and demonstrated the viability of the Netherlands as a third country market. In the case of Argentina, the petitioner provided Argentine figures for exports of lemon juice to the Netherlands and the United States. In the case of Mexico, the petitioner provided European Union lemon juice import data for exports from Mexico into the Netherlands and compared them with U.S. lemon juice import data for imports from Mexico. According to these figures, sales to the Netherlands were greater than 5 percent of sales by volume to the United States for both Argentina and Mexico, and thus the petitioner claims that the Netherlands is an appropriate comparison market in accordance with section 773(a)(1)(B)(ii)(II) of the Act.

The petitioner then claimed that sales prices to the Netherlands are below cost, for both Argentine and Mexican exports. The petitioner provided information demonstrating reasonable grounds to believe or suspect that sales of lemon juice in the comparison market (i.e., the Netherlands) were made at prices below the fully absorbed cost of production (COP), within the meaning of section 773(b) of the Act, and requested that the Department conduct country-wide sales-below-cost investigations for both Argentina and Mexico. Pursuant to section 773(b)(3) of the Act, COP consists of the cost of manufacturing (COM), selling, general, and administrative (SG&A) expenses, financial expenses, and packing expenses (where appropriate). Details regarding the calculation of the COP cost elements (i.e., COM, SG&A, and financial expenses) are included in our discussion of constructed value (CV), in the “Alleged U.S. Price and Normal Value” sections below.² The petitioner calculated export prices for the Netherlands using average unit customs values for imports from Argentina and Mexico. In order to calculate a conservative estimate, the petitioner did not make any deductions to these average unit customs values.

Based upon a comparison of the gross price of the foreign like product in the comparison market to the COP of the product, we find reasonable grounds to believe or suspect that sales of the foreign like product were made below the COP, within the meaning of section 773(b)(2)(A)(i) of the Act. Accordingly, the Department is initiating country-wide cost investigations with regard to both Argentina and Mexico. If we determine during the course of these investigations that the home markets (i.e., Argentina and Mexico) are viable or that the Netherlands is not the appropriate third-country market upon which to base normal value, our initiation of country-wide cost investigations with respect to sales to the Netherlands will be rendered moot. Because it alleged sales below cost, pursuant to sections 773(a)(4), 773(b) and 773(e) of the Act, the petitioner then based NV for sales in the Netherlands on constructed value (CV).

Alleged U.S. Price and Normal Value: Argentina

The petitioner calculated a single export price (EP) using the average unit customs values for import data collected by the U.S. Census Bureau. It used a weighted average of all five HTSUS numbers under which subject merchandise could be imported: 2009.31.4000, 2009.31.6020, 2009.31.6040, 2009.39.6020, and 2009.39.6040. The petitioner deducted amounts for domestic inland freight, storage and other harbor charges, and an export tax to arrive at an EP figure for a product at the same concentration level as the product for which CV was calculated. The deductions are based on an affidavit of one of the petitioner's company officials, and represent the cost of transporting subject merchandise to Buenos Aires and preparing it for export as well as an estimate for the export tax.

We analyzed the five HTSUS numbers used by the petitioner in calculating EP. Four of the five HTSUS categories were comprised solely of subject merchandise; however, one HTSUS number was a basket category, and, therefore, could include significant amounts of merchandise other than subject merchandise. Accordingly, we recalculated EP by removing HTSUS number 2009.31.4000, the basket category. In addition, we did not make the deductions to price made by the petitioner, as the petitioner could not demonstrate that these amounts were not in the SG&A expense figure it calculated. Specifically, it is not clear based on S.A. San Miguel's (an Argentine lemon juice producer) unconsolidated financial statements whether the items which the petitioner subtracted from the average unit value (i.e., export tax, storage, and movement expenses) were included in the reported SG&A expense. Therefore, to avoid possible double counting, we did not make these deductions.

Pursuant to section 773(a)(4) of the Act, the petitioner calculated a single CV as the basis for NV. See “Use of a Third Country Market and Sales Below Cost Allegation“ above. The petitioner calculated CV based on the price of lemons in Buenos Aires, its own processing and packing costs and by-product offsets, and SG&A, interest, and profit taken from the public financial statements of an Argentine producer of lemon juice. It adjusted its own processing costs for known differences between U.S. and Argentine production costs. It also deducted an amount from CV for export tax, in order to offset the export tax deduction to EP.

Specifically, to value raw materials, the petitioner used the prices quoted on the Mercado Central in Buenos Aires for lemons sold during the POI. The added processing costs were based on the petitioner's fiscal year 2005 experience adjusted for known differences between U.S. and Argentine production costs (electricity rates and manufacturing labor wages). See U.S. Department of Energy: Energy Statistics - Electricity Prices, and International Labor Organization: Labor Statistics - Wages and Manufacturing for Argentina, found in the Argentina Initiation Checklist at Attachment VII and Attachment VIII, respectively. Additional information, including by-product offsets and packing expenses, were provided in affidavits from company officials of the petitioner, and reasonably reflect its POI experience. To calculate SG&A, financial expenses, and profit, the petitioner relied upon amounts reported in the 2005 fiscal year financial statements of S.A. San Miguel. See Argentina Initiation Checklist.

In making fair value calculations for Argentina, we used the CV calculated by the petitioner, except that we did not make a deduction for export tax from CV, which the petitioner had suggested as a means of offsetting its export tax deduction from EP, as we did not make such a deduction from EP.

Alleged U.S. Price and Normal Value: Mexico

The petitioner calculated a single Mexican EP using the average unit customs values for import data collected by the U.S. Census Bureau. It used a weighted average of all five HTSUS numbers under which subject merchandise could be imported: 2009.31.4000, 2009.31.6020, 2009.31.6040, 2009.39.6020, and 2009.39.6040. The petitioner did not make any adjustments to U.S. price. We recalculated EP by removing the same basket category as we did for Argentina.

Pursuant to section 773(a)(4) of the Act, the petitioner calculated a single CV as the basis for normal value (NV). See “Use of a Third Country Market and Sales Below Cost Allegation“ above. The petitioner calculated CV using its own data for some values, published data for other cost values, and costs values from a Mexican lemon juice manufacturer's publicly available financial statement for other factors. It adjusted its own processing costs for known differences between U.S. and Mexican production costs.

Specifically, to value raw materials, the petitioner used the 2005 average Mexican cost of production for lemons (excluding packing costs) from an ITC publication. See ITC publication on Conditions for Certain Oranges and Lemons in the U.S. Fresh Market, Table 9-16, p. 9-17. The added processing costs were based on the petitioner's fiscal year 2005 experience adjusted for known differences between U.S. and Mexican production costs (electricity rates and manufacturing labor wages). See Mexico Initiation Checklist at Attachments VII and VIII. The petitioner did not adjust for storage, packing and transportation costs in its calculation of processing cost. The petitioner based the SG&A and financial expenses on the most recently available fiscal year 2003 financial statements (the most current statements available) of UniMark Group, a Mexican lemon juice producer. The petitioner assumed a packing cost of zero because there were no packing cost data available to the petitioner. To calculate an amount for profit consistent with section 773(e)(2) of the Act, the petitioner relied upon amounts reported in UniMark Group's income statement for the most recently available fiscal year 2003. Because UniMark Group's income statement for fiscal year 2003 showed a loss, the petitioner assumed a zero profit in the calculation of the constructed value. See Mexican Initiation Checklist.

The petitioner did not claim any other adjustments to either EP or CV and we found that no other adjustments were warranted.

Fair Value Comparisons

Based on a comparison of the revised EP to CV, the dumping margin is 102.46 percent with respect to Argentina and 134.22 percent with respect to Mexico. Therefore, in accordance with section 773(a) of the Act, there is reason to believe that imports of lemon juice from Argentina and Mexico are being, or are likely to be, sold in the United States at less than fair value.

Initiation of Antidumping Investigations

Based upon the examination of the petition on lemon juice from Argentina and Mexico and other information reasonably available to the Department, the Department finds that the petition meets the requirements of section 732 of the Act. Therefore, we are initiating antidumping duty investigations to determine whether imports of lemon juice from Argentina and Mexico are being, or are likely to be, sold in the United States at less than fair value. In accordance with section 733(b)(1)(A) of the Act, unless postponed, we will make our preliminary determinations no later than 140 days after the date of this initiation.

Distribution of Copies of the Petition

In accordance with section 732(b)(3)(A) of the Act, a copy of the public version of the petition has been provided to the representatives of the Governments of Argentina and Mexico. We will attempt to provide a copy of the public version of the petition to the foreign producers/exporters named in the petition.

International Trade Commission Notification

We have notified the ITC of our initiation, as required by section 732(d) of the Act.

Preliminary Determination by the International Trade Commission

The ITC will preliminarily determine, no later than November 6, 2006, whether there is a reasonable indication that imports of lemon juice from Argentina and Mexico are materially injuring, or threatening material injury to, a U.S. industry. A negative ITC determination will result in the investigations being terminated; otherwise, these investigations will proceed according to statutory and regulatory time limits.

This notice is issued and published pursuant to section 777(i) of the Act.