[Federal Register Volume 61, Number 213 (Friday, November 1, 1996)]
[Notices]
[Pages 56608-56616]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-28091]
[[Page 56607]]
_______________________________________________________________________
Part II
Department of Commerce
_______________________________________________________________________
International Trade Administration
_______________________________________________________________________
Preliminary Determination of Sales at Less Than Fair Value and
Postponement of Final Determination: Fresh Tomatoes From Mexico; Notice
Federal Register / Vol. 61, No. 213 / Friday, November 1, 1996 /
Notices
[[Page 56608]]
DEPARTMENT OF COMMERCE
International Trade Administration
[A-201-820]
Notice of Preliminary Determination of Sales at Less Than Fair
Value and Postponement of Final Determination: Fresh Tomatoes From
Mexico
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
EFFECTIVE DATE: November 1, 1996.
FOR FURTHER INFORMATION CONTACT: John Brinkmann or Judith Wey Rudman,
Office of AD/CVD Enforcement II, Import Administration, International
Trade Administration, U.S. Department of Commerce, 14th Street and
Constitution Avenue, N.W., Washington, D.C. 20230; telephone: (202)
482-5288 or (202) 482-0192, respectively.
The Applicable Statute
Unless otherwise indicated, all citations to the Tariff Act of
1930, as amended (the Act), are references to the provisions effective
January 1, 1995, the effective date of the amendments made to the Act
by the Uruguay Round Agreements Act (URAA).
Preliminary Determination
We preliminarily determine that fresh tomatoes from Mexico are
being, or are likely to be, sold in the United States at less than fair
value (LTFV), as provided in section 733 of the Act. The estimated
margins are shown in the Suspension of Liquidation section of this
notice.
Case History
Since the initiation of this investigation on April 18, 1996 (61 FR
18377, April 25, 1996 (Initiation Notice)), the following events have
occurred:
On May 16, 1996, the United States International Trade Commission
(ITC) notified the Department of Commerce (the Department) of its
affirmative preliminary injury determination.
On June 4, 1996, the Department issued the antidumping duty
questionnaire 1 to counsel for the following growers/exporters of
fresh tomatoes to the United States: San Vincente Camalu (Camalu);
Ernesto Fernando Echavarria Salazar Grupo Solidario (Echavarria);
Arturo Lomeli Villalobas S.A. de C.V. (Lomeli); Ranchos Los Pinos S. de
R.L. de C.V. (RLP); Administradora Horticola Del Tamazula (Tamazula);
and Agricola Yory, S. de P.R. de R.I. (Yory) (collectively
``respondents'').
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\1\ Section A of the questionnaire requests general information
concerning a company's corporate structure and business practices,
the merchandise under investigation that it sells, and the sales of
the merchandise in all of its markets. Sections B and C of the
questionnaire request home market sales listings and U.S. sales
listings, respectively. Section D requests information on the cost
of production of the foreign like product and constructed value of
the merchandise under investigation.
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The six mandatory respondents and three voluntary respondents
submitted questionnaire responses in July 1996. The Department issued
supplemental questionnaires to the mandatory respondents in July and
August 1996. Responses to these supplemental questionnaires were
received in August and September 1996. The voluntary responses were not
analyzed. (For a discussion of the selection of respondents, see the
Selection of Respondents and Voluntary Respondents sections of this
notice.)
On July 26, 1996, petitioners made a timely request for a
postponement of the preliminary determination for a period of no more
than 30 days. Pursuant to Section 733(c)(1)(A) of the Act and section
353.15(c) of the Department's regulations, and absent compelling
reasons to deny this request, the Department postponed the preliminary
determination until no later than October 7, 1996 (61 FR 40607, August
5, 1996).
Based on the information contained in the questionnaire responses
of Lomeli's affiliate, Eco Cultivos, S.A. de C.V. (Eco), it appeared
that Eco's sole U.S. customer, Desert Glory, Ltd., (DGL), might be
considered an ``affiliated person,'' as defined under section 771(33)
of the Act. Therefore, on September 9, 1996, we sent DGL a list of
questions concerning its ownership and the nature of its business
relationships with Eco and Lomeli. DGL's response to these questions
was submitted on September 13, 1996. (For a discussion of this issue,
see the Affiliated Persons section of this notice.) DGL submitted a
request for scope clarification on September 30, 1996. Specifically,
DGL requested that greenhouse grown ``Desert Glory Cocktail
Tomato[es]'' be excluded from the scope of this investigation.
On September 13, 1996, the petitioners requested that, for all
respondents, the Department compare transaction-specific export prices
in the United States market to weighted-average normal values, in
accordance with the ``targeted dumping'' provisions of section
777A(d)(1)(B) of the Act. For further discussion, see the Targeted
Dumping section of this notice.
On October 7, 1996, the Department further postponed the
preliminary determination until no later than October 28, 1996 (see,
Notice of Postponement of Preliminary Antidumping Duty Determination:
Fresh Tomatoes from Mexico, 61 FR 53702 (October 15, 1996)).
Petitioners responded to DGL's request for a scope clarification on
October 10, 1996, indicating that ``green-house grown `cocktail
tomatoes' '' are not included in the scope of this investigation (see,
Scope of Investigation section below).
The Commerce Department and the Mexican tomato growers initialled a
proposed agreement suspending this investigation on October 10, 1996.
Interested parties were informed that the Department intended to
finalize the agreement on October 28, 1996, and were invited to provide
written comments on the agreement.
Selection of Respondents
Section 777A(c)(1) of the Act states that the Department is to
calculate individual dumping margins for all known exporters and
producers of the subject merchandise. Section 777A(c)(2) of the Act,
however, states that the Department may examine less than all exporters
and producers, if there is a large number of exporters and producers.
This latter provision permits us to investigate (1) a sample of
exporters, producers, or types of products that is statistically valid
based on the available information, or (2) exporters and producers
accounting for the largest volume of the subject merchandise from the
exporting country that can reasonably be examined. In the antidumping
investigations involving pasta from Italy and Turkey, for example,
because of our limited resources, we did not investigate individually
all known exporters. (See, Final Determination of Sales at Less Than
Fair Value: Certain Pasta from Italy, 61 FR 30326 (June 14, 1996);
Final Determination of Sales at Less Than Fair Value: Certain Pasta
From Turkey, 61 FR 30309 (June 14, 1996), (Certain Pasta from Turkey).)
In this case, because of the very large number of exporters of
Mexican tomatoes, we invoked section 772A(c)(2) of the Act. We
solicited comments on sampling methodologies from the Mexican
government, petitioners, and potential respondents. All parties
requested that we examine the producers and exporters accounting for
the largest volumes of exports, rather than devising a sampling
technique.
Based on the administrative resources available to work on this
investigation and the number of potential affiliated companies
involved, we determined that we could only analyze a total of six
respondents (including their affiliates).
[[Page 56609]]
At the time we issued the questionnaire, the information on the record
demonstrated that the six largest growers/exporters and their
affiliates accounted for just under 40 percent of exports, by quantity.
These six companies provided an adequate representation of growers/
exporters from both the Sinaloa and Baja growing regions, the two
significant fresh tomato growing regions in Mexico. (See the June 12,
1996, memorandum to Barbara Stafford.)
Voluntary Respondents
Section 782(a) of the Act states that individual rates shall be
calculated for firms which voluntarily provide information, except
where the number of such respondents is so large that the calculation
of individual dumping margins for all such respondents would be unduly
burdensome and would prevent the timely completion of the
investigation. Because the Department selected the maximum number of
respondents it could investigate given the available administrative
resources, the Department determined that no voluntary respondents
would be accepted unless one of the mandatory respondents did not
participate. (See the June 12, 1996, memorandum to Barbara Stafford.)
Potential voluntary respondents were provided with specific written
guidance on the Department's criteria for including a voluntary
respondent in the investigation. Three voluntary respondents timely
filed section A, B, C, and D questionnaire responses. We did not
analyze these voluntary responses, however, as all mandatory
respondents had timely filed responses and are participating in the
investigation. In light of the substantial effort already required to
analyze the mandatory respondents, analysis of the voluntary
respondents by the Department personnel assigned to this investigation
would be unduly burdensome and would preclude the timely completion of
this investigation.
Affiliated Persons
Based on the information on the record, we have determined that
Lomeli and Eco are affiliated through stock ownership and shared board
members. In determining whether to apply a single antidumping duty
margin to two or more affiliated producers, the Department considers
the following factors: (1) Whether the producers have production
facilities for similar or identical products that would not require
substantial retooling of either facility in order to restructure
manufacturing priorities; and (2) whether there is a significant
potential for the manipulation of prices or production. The factors the
Department may consider in identifying a significant potential for the
manipulation of prices or production include: (1) The level of common
ownership; (2) interlocking officers or directors; and (3) whether
operations are intertwined, such as through the sharing of sales
information, the involvement in production and pricing decisions, the
sharing of facilities or employees, or the presence of significant
transactions between the affiliated producers. The principles
underlying these criteria have been cited with approval in recent court
decisions. (See, FAG Kugelfisher v. U.S., Slip Op. 96-108 (CIT July 10,
1996), citing Nihon Cement Co. v. United States (17 CIT 400, 425
(1993), and Final Determination of Sales at LTFV: Antifriction Bearing
(Other than Tapered Bearings) and Parts Thereof from the Federal
Republic of Germany, 54 FR 18992, 19089 (May 3, 1989); see also Section
351.401 of the Proposed Regulations, 61 FR 7314 (February 27, 1996).)
During the POI, all of the tomatoes produced and sold by Lomeli
were field-grown tomatoes. During the same period, all tomatoes
produced and sold by Eco were grown in greenhouses. Information on the
record regarding the manufacturing facilities and production processes
used to grow greenhouse and field-grown tomatoes indicates that the
production facilities and cultivation methods required to grow
greenhouse tomatoes vary significantly from those needed to grow field-
grown tomatoes. Therefore, it appears that a shift in production from
field-grown tomatoes to greenhouse-grown tomatoes could not be
accomplished without significant and expensive retooling of production
facilities. Accordingly, although the Department considers Lomeli and
Eco to be affiliated parties, we have determined that these companies
should not be collapsed for purposes of the preliminary determination.
Therefore, we have calculated separate dumping margins and deposit
rates for Lomeli and Eco.
In its July 2, 1996, section A response, Eco claimed that its sole
U.S. customer, DGL, was unaffiliated. Based on the existence of an
exclusive purchase and distribution agreement between Eco and DGL, and
the fact that certain employees of a wholly-owned subsidiary of DGL
held positions at Eco, it appeared that Eco might be considered an
affiliated person as defined in section 771(33) of the Act. Therefore,
on September 9, 1996, we sent DGL a list of questions concerning its
ownership and the nature of its business with Eco and Lomeli. On
October 11, 1996, DGL stated that, in practice, DGL's exclusive
purchase and distribution rights are limited to cocktail tomatoes,
which have been excluded from the scope of this investigation (see, the
Scope of Investigation section of this notice, below). Based on the
record evidence, we have preliminarily determined that DGL does not
have the ability to exercise restraint or direction over Eco's sales of
subject merchandise and, therefore, does not control Eco for purposes
of this investigation. Accordingly, for this preliminary determination,
Eco and DGL are not considered affiliated parties within the meaning of
section 771(33)(G) of the Act.
Postponement of Final Determination
Pursuant to section 735(a)(2)(A) of the Act, on October 11, 1996,
five of the six mandatory respondents requested that, in the event of
an affirmative preliminary determination in this investigation, the
Department postpone its final determination until the 135th day after
the date of publication of the affirmative preliminary determination in
the Federal Register. In accordance with 19 CFR 353.20(b), because our
preliminary determination is affirmative, respondents accounting for a
significant proportion of exports of the subject merchandise have
requested postponement, and no compelling reasons for denial exist, we
are postponing the final determination. Accordingly, we are extending
suspension of liquidation in this case. (See Extension of Provisional
Measures memorandum dated February 7, 1996, on file in the
investigation of Certain Pasta from Italy in Room B-099 of the main
Commerce building.)
Scope of Investigation
The products covered by this investigation are all fresh or chilled
tomatoes (fresh tomatoes) except for cocktail tomatoes and those
tomatoes which are for processing. For purposes of this investigation,
cocktail tomatoes are green-house grown tomatoes, generally larger than
cherry tomatoes and smaller than roma or common round tomatoes, and are
harvested and packaged on-the-vine for retail sale. For purposes of
this investigation, processing is defined to include preserving by any
commercial process, such as canning, dehydrating, drying or the
addition of chemical substances, or converting the tomato product into
juices, sauces or purees. Further, imports of fresh tomatoes for
processing are accompanied by an ``Importer's Exempt Commodity Form''
(FV-6)
[[Page 56610]]
(within the meaning of 7 CFR section 980.501(a)(2) and 980.212(i)).
Fresh tomatoes that are imported for cutting up, not further processed
(e.g., tomatoes used in the preparation of fresh salsa or salad bars),
and not accompanied by an FV-6 form are covered by the scope of this
investigation.
All commercially-grown tomatoes sold in the United States, both for
the fresh market and for processing, are classified as Lycopersicon
esculentum. Important commercial varieties of fresh tomatoes include
common round, cherry, plum, and pear tomatoes, all of which, with the
exception of cocktail tomatoes, are covered by this investigation.
Tomatoes imported from Mexico covered by this investigation are
classified under the following subheadings of the Harmonized Tariff
Schedules of the United States (HTS), according to the season of
importation: 0702.00.20, 0702.00.40, 0702.00.60, and 9906.07.01 through
9906.07.09. Although the HTS numbers are provided for convenience and
Customs purposes, our written description of the scope of this
proceeding is dispositive.
Period of Investigation
The period of investigation (POI) is March 1, 1995, through
February 29, 1996. Since the passage of the URAA, the Department has
altered the period it examines in an investigation to correspond to the
most recently completed four fiscal quarters before the filing of the
petition (i.e., expanding the typical POI from six months to one year).
This change is appropriate in light of the statutory definition of
``extended period of time'' for cost cases, to simplify reporting
requirements and to prevent possible price manipulation by respondents
after they become aware of the filing of a petition.
As indicated in the Initiation Notice, the petition was filed with
the Department on March 29, 1996, although it was not filed with the
ITC until April 1, 1996. Because the Department's current policy is to
exclude the month in which the petition is filed from the POI, the
submission of the petition to the Department in March called into
question the inclusion of March in the POI. Information provided to the
Department suggested that the pending filing of the petition was widely
known and this, combined with the filing of a 201 case with the ITC on
March 11, 1996, called into question the appropriateness of including
March sales in our analysis. Due to the combination of these factors,
we excluded the month of March from the POI.
Because we excluded March from the POI, we considered whether it
was appropriate to base the POI on fiscal quarters. Information on the
record indicated that accounting records and company operations in the
tomato industry are maintained and tracked on a growing season basis.
Because the use of fiscal quarters would not result in a reduced
reporting burden for respondents, we did not adjust the POI further
back in time in order to align it with fiscal quarters. For a further
discussion of the selection of the POI, see the June 12, 1996,
memorandum to Barbara Stafford.
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 Investigation section, above, and sold in the home market
during the POI, to be foreign like products for purposes of determining
appropriate product comparisons to U.S. sales. Where there were no
sales of identical merchandise (tomatoes of the same tomato type (e.g.,
round, roma, etc.)) in the home market to compare to U.S. sales in the
same month, we compared U.S. sales to a normal value based on
constructed value. We did not compare sales of similar merchandise
because the cost differences between tomato types are not associated
with differences in the physical characteristics of the merchandise.
Targeted Dumping
On September 13, 1996, the petitioners requested that the
Department compare the transaction-specific constructed export prices
of the six mandatory respondents in the United States to weighted-
average normal values, pursuant to the ``targeted dumping'' provisions
of section 777A(d)(1)(B) of the Act. The petitioners alleged that there
was a pattern of constructed export prices that differed significantly
by date of sale, by region, and by customer.
To establish that the alleged patterns of prices differed
``significantly,'' petitioners used the average U.S. prices, sorted
only by product codes, as a benchmark for determining whether certain
customers received prices that were below the average prices for the
same packing type. The packing type reported in the respondents' U.S.
sales listings consisted of ``boxes.'' During our analysis of reported
sales, it became apparent that different sizes of boxes had been
reported. As a consequence of the respondents' failure to report prices
in standard units, the petitioners were deprived of meaningful unit
prices with which to establish this benchmark.
Unrelated to the reporting of flawed unit prices, petitioners
relied upon customers' prices that were ten percent or more below the
average price for the packing type to establish that the alleged
pattern of variation in prices was ``significant.'' Petitioners did not
justify their use of the ten percent benchmark in relationship to price
movements for tomatoes, a perishable product. A variation in average
prices of ten percent is not necessarily significant in a market in
which prices can decline far more than ten percent within a given day.
Moreover, fluctuation in price, in and of itself, does not establish a
pattern of price differences. Finally, subsection 777A(d)(1)(B)(ii) of
the Act requires that the Department must be able to establish that the
pattern of price variation cannot be taken into account by comparing
the weight-averaged normal values to the weight-averaged U.S. prices.
The petitioners addressed this requirement in a conclusory manner,
without providing an underlying rationale.
In sum, the targeted dumping allegation does not provide the
Department with an adequate basis for comparing the respondents'
transition-specific export prices in the United States to their
weighted-average normal values. On October 1, 1996, the Department
informed petitioners of these findings and indicated our willingness to
consider a revised allegation that took these concerns into account.
Level of Trade
As set forth in section 773(a)(1)(B)(i) of the Act and in the SAA
accompanying the URAA, at 829-831, to the extent practicable, the
Department will calculate normal values based on sales at the same
level of trade as the U.S. sales. When the Department is unable to find
sales in the comparison market at the same level of trade as the U.S.
sale(s), the Department may compare sales in the U.S. and foreign
markets at different levels of trade.
In accordance with section 773(a)(7)(A) of the Act, if sales at
different levels of trade are compared, the Department will adjust the
normal value to account for the difference in level of trade if two
conditions are met. First, there must be differences between the actual
selling functions performed by the seller at the level of trade of the
U.S. sale and at the level of trade of the normal value sale. Second,
the difference in level of trade must affect price comparability as
evidenced by a pattern of consistent price differences between sales at
the different levels of
[[Page 56611]]
trade in the market in which normal value is determined.
In order to determine that there is a difference in level of trade,
the Department must find that two sales have been made at different
stages of marketing, or the equivalent. Different stages of marketing
necessarily involve differences in selling functions, but differences
in selling functions (even substantial ones) are not alone sufficient
to establish a difference in the level of trade. Similarly, seller and
customer descriptions (such as ``distributor'' and ``wholesaler'') are
useful in identifying different levels of trade, but are insufficient
to establish that there is a difference in the level of trade.
In implementing these principles in this investigation, information
relevant to level of trade comparisons and adjustments was requested in
our initial and supplemental questionnaires. We asked each respondent
to establish any claimed levels of trade based on selling functions,
and to document and explain any claims for a level of trade adjustment.
In order to determine whether separate levels of trade actually
existed within or between the U.S. and the home market, we reviewed,
inter alia, the selling activities associated with each channel of
distribution reported by the respondents. In reviewing the selling
functions reported by the respondents, we considered all types of
selling functions, both claimed and unclaimed, that were performed.
Where possible, we further examined whether the selling function was
performed on a substantial portion of sales. The level of trade claims
of each respondent were considered, but the ultimate decision was based
on the Department's analysis of the reported selling functions.
Pursuant to section 773(a)(1)(B)(i) of the Act, and the SAA at 827,
in identifying levels of trade for export price and normal value sales,
we considered the selling functions reflected in the starting price,
before any adjustments. For CEP sales, we considered the selling
functions reflected in the price after the deduction of expenses and
profit under Section 772(d) of the Act. Whenever sales within a
customer group were made by or through an affiliated company or agent,
we ``collapsed'' the affiliated parties before considering the selling
functions performed. In determining whether separate levels of trade
exist in this investigation, we found that no single selling function
in the tomato industry was sufficient to warrant a separate level of
trade (see, Notice of Proposed Rulemaking and Request for Public
Comments, 61 FR 7307, 7348 (February 27, 1996)) (Proposed Regulations).
Based on our analysis of the selling functions performed by each
respondent, we found that a single level of trade exists in each
market. We then compared selling functions in the U.S. market and in
the home market and found them to be similar. We find, therefore, that
sales in the home market and in the U.S. market are at the same level
of trade. (See October 22, 1996, Level of Trade Analysis memorandum to
Barbara Stafford.)
Fair Value Comparisons
The SAA states that in determining the comparability of sales for
inclusion within a particular average, ``Commerce will consider factors
it deems appropriate, such as * * * the class of customer involved,''
SAA at 842. The Department, not the respondents, determines which
customers may be grouped together for product comparison purposes. Cf.,
N.A.R., S.p.A. v. U.S., 741 F. Supp. 936 (CIT, 1990).
We examined the channel of distribution information reported by
respondents and determined that it was not appropriate to include the
class of customer as a separate comparison factor. Most respondents did
not provide sufficient information that would allow us to examine the
appropriateness of the respective customer code classifications based
on the functions commonly associated with each category of customer.
Since fresh tomatoes may be sold on consignment through unaffiliated
distributors, some respondents were unable to obtain customer category
information from their distributors. Therefore, since all respondents
had the same level of trade in the U.S. and home markets and there was
no basis for distinguishing among customer categories, the weighted-
average prices were calculated and compared by product type.
To determine whether sales of tomatoes by the Mexican respondents
to the United States were made at less than fair value, we compared the
export price (EP) or constructed export price (CEP) to the Normal Value
(NV), as described in the Export Price and Constructed Export Price and
Normal Value sections of this notice. In accordance with section
777A(d)(1)(A)(i), we calculated weighted-average EPs and CEPs for
comparison to weighted-average NVs.
Mexico experienced significant inflation during the POI, as
measured by the wholesale price index published in International
Financial Statistics and the consumer price index from the Bank of
Mexico. Accordingly, to avoid the distortions caused by the effects of
significant inflation on prices and on the weighted-averages of those
prices, we calculated EPs, CEPs, and NVs on a monthly average basis,
rather than on a POI average basis.
Export Price and Constructed Export Price
For Eco, we calculated EP, in accordance with subsections 772 (a)
and (c) of the Act because the subject merchandise was sold directly to
the first unaffiliated purchaser in the United States prior to
importation and CEP was not otherwise warranted based on the facts of
record. We calculated CEP for all other respondents, in accordance with
subsections 772(b), (c) and (d) of the Act, where sales to the first
unaffiliated purchaser took place after importation into the United
States. With the exception of Eco, we found that CEP is warranted for
all respondents because all U.S. sales activities, including the
setting of prices, take place in the United States through U.S.
distributors/consignees and brokers, either affiliated or unaffiliated.
(See, Final Determination of Sales at Less Than Fair Value: Canned
Pineapple Fruit from Thailand, 60 FR 29553 (June 5, 1995), and
Preliminary Determination of Sales at Less Than Fair Value: Canned
Pineapple Fruit from Thailand, 60 FR 2734 (January 11, 1995).)
For all respondents, we calculated EP and CEP based on packed
prices to the first unaffiliated customer in the United States. We
based date of sale on shipment date to avoid the potential for
distortion of cost and price comparisons that occur when there is a
significant lag time between date of shipment and date of invoice
within the same market and/or between the two markets.
In accordance with section 772(c)(2) of the Act, we made
deductions, where appropriate, for foreign brokerage and handling,
freight expenses between the farm and the U.S. distributor's warehouse,
freight insurance, export fees, brokerage and handling, U.S. inspection
fees, U.S. duties, and U.S. freight. For Eco, we added the amount of
import duties collected on packaging materials which were rebated upon
exportation to the United States.
In accordance with section 772(d)(1) of the Act, for Tamazula, RLP,
Echavarria, Lomeli, Yory and Camalu, we made deductions, where
appropriate, for direct selling expenses including advertising, credit,
and commissions paid to unaffiliated distributors and brokers. In
addition, we deducted those indirect selling expenses that related to
commercial activity in the United States. These included inventory
carrying costs, certain indirect
[[Page 56612]]
selling expenses incurred in the home market, and the indirect selling
expenses of the affiliated U.S. distributors. Where there were
commissions paid to affiliated U.S. distributors, we considered the
actual reported indirect selling expenses of the producer/exporter and
its affiliated distributor, rather than the reported affiliated party
commissions. This methodology is consistent with Final Determination of
Sales at Less than Fair Value: Fresh Cut Roses from Colombia, 60 FR
6981 (February 6, 1995).
Where possible, monthly packing costs were recalculated using
monthly indices to account for the effects of inflation. This
recalculation was not possible for Lomeli, Eco and Yory since they did
not provide monthly packing costs as requested by the Department. For
these three respondents, we used packing costs, as reported.
Where payment dates were not reported, we used October 7, 1996, or
average credit days, as appropriate, to determine credit expenses.
Additionally, we made adjustments for CEP profit for all respondents
except Eco in accordance with section 772 (d)(3) and (f) of the Act.
We made company-specific adjustments as follows:
Eco. We calculated Eco's EP sales based on FOB packing shed prices.
We excluded from our analysis all reported sales of cocktail tomatoes
because cocktail tomatoes are not included in the scope of this
investigation (see the Scope of Investigation section of this notice
above). We recalculated warranty expenses to reflect the actual factor
reported in Eco's response. Credit was recalculated as follows: (1) We
excluded the factoring fee from the imputed credit calculation; and (2)
we recalculated the credit period for the first and second payments
using the number of days reported in Eco's narrative. Finally, we
calculated the factoring fee using the actual percentage derived from
sample documentation provided in Eco's questionnaire responses. The
factoring fee was treated as a direct selling expense.
Camalu. We calculated CEP based on FOB U.S. distributor's warehouse
prices. We excluded from our analysis reported shipments of tomatoes
that were given away as gifts or free samples, or shipments that had
been discarded in their entirety because of poor quality. Where
appropriate, we made deductions for price adjustments which were
reported as rebates in the sales database. We recalculated inventory
carrying costs based on the actual cost of manufacture of the
inventory, rather than the selling price. In addition, in calculating
the imputed credit expense and inventory carrying costs, we applied
Camalu's actual U.S. dollar denominated short-term borrowing rate for
the POI.
Echavarria. We calculated Echavarria's CEP sales based on FOB U.S.
distributor's warehouse prices. We excluded from our calculations
amounts reported separately for foreign brokerage and handling because
that expense had already been included in the amount reported for
foreign freight. Reported advertising expenses incurred were
reclassified as indirect selling expenses because the advertising was
directed at Echavarria's customers.
Lomeli. We calculated Lomeli's CEP sales based on FOB U.S.
distributor's warehouse prices. For a small number of sales made
through DGL, Lomeli claimed that it was unable to obtain transaction-
specific sales data because DGL did not agree to provide its sales
information to Lomeli. Therefore, in reporting these sales, Lomeli
relied on information contained in liquidation reports received from
DGL. These liquidation reports, however, could not be used in
calculating CEP because the reports did not contain sufficient data to
allow the Department to calculate all of the charges and adjustments
incurred on the sales. Given that Lomeli attempted to obtain the
transaction-specific data from DGL, the sales represent an extremely
small percentage of Lomeli's total U.S. sales, and Lomeli has otherwise
complied with all of the Department's requests for information, we find
that Lomeli has acted to the best of its ability in this investigation
and that an adverse inference is not warranted. Accordingly, we are
applying the weighted-average margin calculated for all other sales to
the quantity of sales sold through DGL as facts available in our
preliminary determination.
Lomeli used different weight bases to convert its reported gross
unit prices and charges and adjustments to a per kilogram basis for
U.S. and home market sales. We determined it was necessary to select a
single weight basis in order to make a fair comparison. Therefore, for
all U.S. sales, we used theoretical box weights reported for home
market sales, rather than the actual box weights provided in the U.S.
sales listing, to convert the gross unit prices, quantities, and
charges and adjustments to a per kilogram basis. The theoretical box
weight was chosen because data concerning the actual box weights for
certain home market box types not sold in the U.S. during the POI were
not reported.
We recalculated the reported commission expenses for Lomeli's two
unaffiliated distributors as follows: (1) For the first distributor, we
used the actual commission percentage specified in Lomeli's contract
with the distributor; and (2) for the second distributor, we used the
actual commission percentage specified in the contract plus an amount
for fees the distributor incurs in making sales through a third party
in the United States. For those sales where a negative commission
amount was reported, we set the commission equal to zero.
Because we were unable to duplicate Lomeli's calculation of the
reported credit expenses, and Lomeli stated that it had no dollar
denominated borrowings during the POI, we recalculated credit using the
average prime rate for the POI charged by the 25 largest U.S. banks on
short-term business loans, as published by the Federal Reserve Bank. We
also recalculated Lomeli's reported inventory carrying costs based on
the actual cost of manufacture of the inventory, rather than the
selling price. In addition, for all sales where Lomeli reported no U.S.
inventory carrying costs, we have used the inventory turnover period
reported for Lomeli's other transactions because Lomeli claims that it
incurred the same theoretical inventory period for all U.S.
distributors.
For those U.S. sales where no U.S. inspection fee was reported, we
deducted the amount of the inspection fee reported for other sales made
through the same distributor because Lomeli did not provide an
explanation as to why inspection fees were not reported on all sales.
RLP. We calculated CEP based on FOB U.S. distributor's warehouse
and delivered prices. We recalculated inventory carrying costs based on
the actual cost of manufacture of the inventory, rather than the
selling price. Since RLP reported that it incurred a U.S. brokerage
charge on its U.S. sales, but did not report this charge in its
database, we recalculated the U.S. brokerage costs accordingly.
Tamazula. We calculated CEP based on FOB U.S. distributor's
warehouse and delivered prices. We used an average of the affiliated
U.S. distributor's actual short-term borrowing rates during the POI in
our credit calculation. Where negative credit expenses were reported in
error, we used the average of the recalculated credit expenses.
Yory. We calculated CEP based on FOB U.S. distributor's warehouse
and delivered prices. We excluded from our
[[Page 56613]]
analysis Canadian sales that were included in the U.S. database. We
corrected the reported box weights and tomato types for certain product
codes to correct for errors in the database. We recalculated Yory's
credit expenses based on the company's actual borrowing rate for a U.S.
dollar-denominated short-term loan during the POI. We recalculated
freight insurance expenses based on the total expenses incurred and the
total quantity sold for the season, on a tomato type-specific basis.
Additionally, for the 1995/96 season, we revised Yory's reported export
fees and commission expenses to correct for errors in the database.
Since Yory reported that it incurred a repacking charge on its U.S.
sales, but did not report this charge in its database, we calculated
the U.S. repacking costs based on information in Yory's questionnaire
response.
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 each 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. Since
we have not collapsed Lomeli and Eco (see the Affiliated Persons
section of this notice above), separate viability tests were conducted
for Lomeli and Eco. For Eco, we did not find the aggregate volume of
home market sales of the foreign like product to be greater than five
percent of the aggregate volume of U.S. sales of the subject
merchandise. Therefore, we have determined that Eco does not have a
viable home market. Because Eco made no third country sales during the
POI, normal value was based on constructed value, in accordance with
section 773(a)(4) of the Act.
Since the aggregate volume of home market sales of the foreign like
product was greater than five percent of its aggregate volume of U.S.
sales of the subject merchandise, we determined that the home market
was viable for all other respondents. For all respondents except Eco,
we have based NV on home market sales. We calculated NV as noted in the
Price to Price Comparisons and Price to CV Comparisons sections of this
notice.
Cost of Production Analysis
Based on the allegation contained in the petition, the Department
found reasonable grounds to believe or suspect that each respondent
made sales in the home market at prices below the cost of producing the
merchandise. As a result, the Department initiated investigations to
determine whether the respondents made home market sales at prices
below their respective costs of production (COP) during the POI within
the meaning of section 773(b) of the Act. (See, Initiation Notice.)
Before making any fair value comparisons, we conducted the COP
analysis described below for all respondents except Eco. We did not
perform a COP analysis for Eco because, as noted above, Eco did not
have a viable home or third country market.
A. Calculation of COP
We calculated growing season-specific COPs based on the sum of each
respondent's growing season costs for the foreign like product, plus
amounts for selling, general, and administrative expenses (SG&A) and
packing costs, in accordance with section 773(b)(3) of the Act. As
noted above, we determined that the Mexican economy experienced
significant inflation during the POI. Therefore, in order to avoid the
distortive effect of significant inflation on our comparison of costs
and prices, we requested that respondents submit monthly cost
information for each growing season that fell within the POI. This
monthly cost information was to be based on current production costs
incurred during each month. This required collecting cost data for
months outside the POI, as it was necessary to capture all costs for
total production in an entire growing season, in order to accurately
determine the per unit COP of that growing season. Using the consumer
price index (CPI) published by the Bank of Mexico, we indexed each
month's reported costs to end of growing season currency levels in
order to compute a weighted-average growing season COP. We relied on
the respondents' reported COP amounts except in the following specific
instances, wherein the reported costs were determined to be improperly
valued:
1. We adjusted each company's reported monthly materials
consumption costs for the effect of inflation during the inventory
holding period. The adjustment was based on the net inventory and
accounts payable turnover period and the CPI.
2. We recomputed reported depreciation expense for each company
based on the fixed asset values stated in end of growing season
currency levels.
Camalu. We disallowed the reported treatment of livestock feed
tomatoes as co-products of the foreign like product.
Echavarria. We disallowed Echavarria's reported other income offset
to G&A expenses and increased G&A expense to account for net foreign
exchange losses.
Lomeli. We reallocated headquarters G&A costs based on the
percentage of cost of sales for the tomato growing farms to the
consolidated Lomeli group. Additionally, we computed Lomeli's interest
expense rate using its 1995 audited consolidated constant currency
financial statements, and disallowed its reported other income offset
to G&A expenses.
RLP. For the months in which unusually high material costs were
reported for round and cherry tomatoes, we spread these costs evenly
over all preceding months in the growing season.
Tamazula. We increased general expenses to account for net foreign
exchange transaction and translation losses.
Yory. We reallocated the submitted depreciation expense between
products using cultivated hectares rather than the submitted
methodology of relative production weight.
B. Test of Home Market Prices
We used the CPI to adjust respondents' submitted monthly cost and
home market sales amounts in computing weighted-average COPs and home
market sales values stated in end of growing season currency. Because
tomatoes are a highly perishable agricultural product, we compared the
weighted-average COP figure for each growing season to the weighted-
average home market sales for the growing season to determine whether
below cost sales were made in substantial quantities during each
growing season. See SAA at 832 and section 773(b)(2)(c)(ii) of the Act.
Where a respondent's weighted-average home market sales value of a
given product for a growing season were at prices above the respective
weighted-average COP for the growing season, we did not disregard any
below cost sales of that product for that growing season. In such
instances, we found that the below costs sales were not made in
substantial quantities. Where a respondent's weighted-average home
market sales value of a given product for a growing season was less
than the weighted-average COP for the same growing season, we found
that below cost sales were made in substantial quantities, within the
meaning of section 773(b)(2)(C)(ii) of the Act, for that growing
season. We identified individual below cost transactions by indexing
the weighted-average COP for the growing season back to each month
within that growing season, based on
[[Page 56614]]
the CPI, and comparing that monthly COP to individual transaction
prices within that month.
Where below cost sales were found to have been made in substantial
quantities within a growing season, we also found that those sales were
made within an extended period of time because each growing season
constituted an extended period of time, in accordance with section
773(b)(2)(B) of the Act.
Pursuant to section 773(b)(2)(D) of Act, we also examined whether
the individual transaction prices which were found to be below cost
provided for recovery of costs within a reasonable period of time. As
noted above, because tomatoes are a perishable agricultural product, we
determined that the relevant period for examining costs in this
investigation is on a growing season basis and applied the cost test
accordingly. Specifically, in determining whether prices were
sufficient to recover cost within a reasonable period of time, we
compared individual below cost sales prices with the growing season
average cost.
C. Results of COP Test
We found that, for certain tomato types and growing seasons,
respondents' home market sales were sold at prices below the COP within
an extended period of time and in substantial quantities. Further,
because (i) home market prices were compared to an average growing
season COP and (ii) we view the growing season as a ``reasonable period
of time'', we did not find that the prices for these sales provided for
the recovery of costs within a reasonable period of time. We therefore
excluded these sales from our analysis and used the remaining above
cost sales as the basis for determining NV, in accordance with
773(b)(1). For those tomato types for which there were no above cost
sales in a given month in the ordinary course of trade, we compared
constructed export prices to CV.
D. Calculation of CV
We calculated growing season CVs for each respondent in accordance
with Section 773(e)(1) of the Act, which indicates that CV shall be
based on the sum of each respondent's growing costs for the foreign
like product, plus amounts for SG&A, profit, and U.S. packing costs.
For each respondent, we indexed the reported monthly growing costs to
the end of POI currency level in order to compute weighted-average POI
growing costs. With the exception of Eco, we based SG&A and profit on
the actual amounts incurred and realized by the respondent in
connection with the production and sale of the foreign like product in
the ordinary course of trade for consumption in the home market, in
accordance with section 773(e)(2)(A). Since the home market is not
viable for Eco, we calculated profit and indirect selling expenses in
accordance with section 773(e)(2)(A) using an alternative methodology.
Specifically, we calculated Eco's profit and indirect selling expenses
as described in Section 773(e)(2)(B)(ii). That is, we used the
weighted-average profit and indirect selling expenses experienced by
the other respondents in connection with the production and sale of the
foreign like product in the ordinary course of trade for consumption in
the home market. In addition, for each respondent we used U.S. packing
costs as described in the Export Price and Constructed Export Price
section of this notice, above.
E. Price-to-Price Comparisons
For those product comparisons for which there were sales at prices
above the COP, we based NV on home market prices. We based date of sale
on shipment date, as discussed in the Export Price and Constructed
Export Price section above. For all respondents we made deductions,
where appropriate, from the starting price for inland freight,
insurance, and other transportation expenses. In addition, we made
circumstance of sale adjustments for direct expenses, where
appropriate, in accordance with section 773(a)(6)(C)(iii) of the Act.
Where payment dates were not reported, we used October 7, 1996, or
average credit days, as appropriate, to determine credit expenses.
For all respondents, we adjusted for commissions, where
appropriate. Where the home market commissions were paid to affiliated
parties, we first determined whether the commissions were made at arm's
length by comparing these commissions to commissions paid or charged to
unaffiliated parties under the same terms. If these commissions were
determined to be at arm's length, we treated these commissions in the
same manner as unaffiliated commissions in the calculation methodology
described below.
Where commissions were paid on some, but not all, home market sales
used to calculate NV, and U.S. commissions were greater than home
market commissions, we calculated the weighted-average of home market
indirect selling expenses (including only those indirect expenses not
associated with an affiliated distributor) attributable to those sales
on which no commissions were paid. If U.S. commissions were greater
than the sum of the home market commissions and home market indirect
selling expenses, we deducted the weighted-average home market indirect
selling expenses from NV. Otherwise, we adjusted NV for the difference
between U.S. and home market commissions. Where no commissions were
paid on a home market sale used to calculate NV, we deducted the lesser
of either (1) the weighted-average amount of commission paid on a U.S.
sale for a particular product, or (2) the weighted-average amount of
indirect selling expenses paid on the home market sales for a
particular product. Where commissions were paid on all home market
sales used to calculate NV, we adjusted NV by the lesser of either (1)
the amount of the commission paid on the home market sale, or (2) the
weighted average of indirect selling expenses paid on U.S. sales.
As discussed above, we preliminarily determined that each
respondent's U.S. sales and home market sales are made at the same
level of trade. As stated in the SAA, at page 160: ``Only where
different functions at different levels of trade are established under
Section 773(a)(7)(A)(i) [and a level of trade adjustment is not
appropriate] will Commerce make a constructed export price offset
adjustment under Section 773(a)(7)(B).'' Accordingly, we did not grant
respondents' request for a CEP offset.
In accordance with section 773(a)(6)(B), we deducted home market
packing costs and added U.S. packing costs for all respondents. Where
possible, monthly packing costs were recalculated using monthly indices
to account for the effects of inflation. This recalculation was not
possible for Lomeli and Yory since they did not provide monthly packing
costs as requested by the Department. For these two respondents, we
made the adverse assumption that the reported packing costs were stated
in end of season currency and indexed those costs to the month of sale.
We made company-specific adjustments for price-to-price comparisons
as follows:
Camalu. We calculated NV based on packed, FOB packing shed or
delivered prices to unaffiliated customers. We recalculated Camalu's
reported home market imputed credit expenses by applying monthly peso-
denominated short-term interest rates obtained from public information
because Camalu did not have peso-denominated borrowings during the POI.
Additionally, we
[[Page 56615]]
recalculated Camalu's reported indirect selling expenses.
Echavarria. We calculated NV based on packed, FOB packing shed or
delivered prices to unaffiliated customers. We excluded from our
analysis sales of tomatoes that Echavarria categorized as sales of
culls. We used the indirect selling expense per box reported in
Echavarria's July 22, 1996, submission, because the indirect selling
expense recalculated in the September 5, 1996, response contained
errors which resulted in an overstatement of the indirect selling
expense amount.
Lomeli. We based NV on packed, FOB packing shed and home market
distributor's warehouse prices to unaffiliated customers. Since we are
not collapsing Eco and Lomeli, we are treating Lomeli as an affiliated
home market distributor of Eco. Therefore, we excluded all sales of
merchandise which Lomeli purchased from Eco from Lomeli's home market
sales database. In addition, we excluded all zero priced and/or zero
quantity transactions from our calculations for the preliminary
determination because the quantity of sales involved was insignificant
and Lomeli did not provide the Department with evidence indicating that
these transactions represent actual sales made in the ordinary course
of trade.
We recalculated Lomeli's reported credit expense as follows: (1) We
used actual monthly short-term borrowing rates available to Mexican
growers, in lieu of the average interest rate reported for each growing
season, because Mexico experienced high inflation during the POI; and
(2) for those sales with missing payment dates, we used the average
credit days for all transactions with a reported shipment and payment
date. The average credit days was used, rather than October 7, 1996,
because Lomeli contends that these sales were made by a farm that does
not track actual payment dates in its normal accounting records.
We recalculated Lomeli's inventory carrying costs based on the
actual cost of manufacture of the inventory, rather than the selling
price. In addition, as noted above, we applied the monthly short-term
borrowing rates in lieu of the growing season averages.
Lomeli assigned a bulk packing cost to its sales of merchandise
packed in four-layer boxes. However, because merchandise packed in
four-layer boxes is not considered bulk packaging and Lomeli has
provided no explanation for assigning a bulk packing rate to these
sales, we have applied the ratio of the difference in packing costs
reported for two-layer and three-layer boxes to the reported packing
cost for three-layer boxes. This has allowed the Department to derive
an estimated packing cost for four-layer boxes for its preliminary
determination.
RLP. We calculated NV based on packed, FOB warehouses or delivered
prices to unaffiliated customers. We recalculated RLP's reported home
market imputed credit expenses by applying peso-denominated short-term
interest rates obtained from public information because RLP did not
have peso-denominated borrowings during the POI. Inventory carrying
costs were recalculated based on the actual cost of manufacture of the
inventory, rather than the selling price.
Tamazula. We calculated NV based on packed, FOB packing shed or
delivered prices to unaffiliated customers. Where payment dates were
missing, we used the average credit period for the growing season to
calculate credit expenses. Where Tamazula had peso-denominated
borrowings during the growing season, we used the actual interest rate
in our credit calculation. For the growing seasons where Tamazula did
not have actual borrowings, we used public monthly peso-denominated
short-term interest rates. We excluded zero quantity transactions and
an insignificant amount of ``sample sales'' from our calculations.
Yory. We calculated NV based on packed, delivered prices to
unaffiliated customers. We revised Yory's reported credit expenses
based on new credit ratios submitted on September 19 and 25, 1996.
Price to CV Comparisons
For Eco, where we compared CV to EP, we added the U.S. product-
specific direct selling expenses. For all other respondents, where we
compared CV to constructed export prices, we made deductions for the
weighted-average home market direct selling expenses. Where
appropriate, we adjusted for the difference between U.S. commissions
and home market indirect selling expenses.
Currency Conversion
The Department's preferred source for daily exchange rates is the
Federal Reserve Bank. However, the Federal Reserve Bank does not track
or publish exchange rates for the Mexican peso. We made currency
conversions based on the actual daily exchange rates from the Dow Jones
News/Retrieval on-line system.
Verification
As provided in section 782(i) of the Act, we will verify all
information determined to be acceptable for use in making our final
determination.
Suspension of Liquidation
In accordance with section 733(d) of the Act, we are directing the
Customs Service to suspend liquidation of all entries of fresh tomatoes
from Mexico, that are entered, or withdrawn from warehouse for
consumption, on or after the date of publication of this notice in the
Federal Register. We are also instructing the Customs Service to
require a cash deposit or the posting of a bond equal to the weighted-
average amount by which the normal value exceeds the export price, as
indicated in the chart below. These suspension of liquidation
instructions will remain in effect until further notice.
The weighted-average dumping margins are as follows:
------------------------------------------------------------------------
Weighted-
average
Exporter/manufacturer margin
percentage
------------------------------------------------------------------------
Camalu..................................................... 4.16
Echavarria................................................. 11.89
Lomeli..................................................... 26.97
Eco-Cultivos............................................... 188.45
RLP........................................................ 10.26
Tamazula................................................... 28.30
Yory....................................................... 11.95
All Others................................................. 17.56
------------------------------------------------------------------------
Pursuant to section 735(c)(5)(A) of the Act, the Department has
excluded all zero and de minimis weighted-average dumping margins and
margins determined entirely under section 776 of the Act, from the
calculation of the All Others rate.
ITC Notification
In accordance with section 733(f) of the Act, we have notified the
ITC of our determination. If our final determination is affirmative,
the ITC will determine before the later of 120 days after the date of
this preliminary determination or 45 days after our final determination
whether these imports are materially injuring, or threaten material
injury to, the U.S. industry.
Public Comment
Case briefs or other written comments in at least ten copies must
be submitted to the Assistant Secretary for Import Administration no
later than February 7, 1997, and rebuttal briefs, no later than
February 12, 1997. A list of authorities used and an executive summary
of issues should accompany any briefs submitted to the Department. Such
summary should be limited to five pages total, including footnotes. In
accordance with section 774 of the Act, we will hold a public hearing,
if requested, to
[[Page 56616]]
afford interested parties an opportunity to comment on arguments raised
in case or rebuttal briefs. Tentatively, the hearing will be held on
February 18, 1997, at the U.S. Department of Commerce, 14th Street and
Constitution Avenue, N.W., Washington, D.C. 20230. Parties should
confirm by telephone the time, date, and place of the hearing 48 hours
before the scheduled time.
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
B-099, within ten days of the 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 the issues to be
discussed. Oral presentations will be limited to issues raised in the
briefs. If this investigation proceeds normally, we will make our final
determination no later than 135 days after the publication of this
notice in the Federal Register.
This determination is published pursuant to section 733(f) of the
Act.
Dated: October 28, 1996.
Robert S. LaRussa,
Acting Assistant Secretary for Import Administration.
[FR Doc. 96-28091 Filed 10-31-96; 8:45 am]
BILLING CODE 3510-DS-P