[Federal Register Volume 63, Number 150 (Wednesday, August 5, 1998)]
[Notices]
[Pages 41786-41789]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-20910]


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DEPARTMENT OF COMMERCE

International Trade Administration
[A-337-804]


Notice of Preliminary Determination of Sales at Less Than Fair 
Value: Certain Preserved Mushrooms From Chile

AGENCY: Import Administration, International Trade Administration, 
Department of Commerce.

EFFECTIVE DATE: August 5, 1998.

FOR FURTHER INFORMATION CONTACT: David J. Goldberger or Katherine 
Johnson, Import Administration, International Trade Administration, 
U.S. Department of Commerce, 14th Street and Constitution Avenue, N.W., 
Washington, D.C. 20230; telephone: (202) 482-4136 or (202) 482-4929, 
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''). In addition, 
unless otherwise indicated, all citations to the Department of Commerce 
(``Department'') regulations are to the regulations at 19 CFR part 351, 
62 FR 27296 (May 19, 1997).

Preliminary Determination

    We preliminarily determine that certain preserved mushrooms 
(``mushrooms'') from Chile 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 of sales at LTFV are 
shown in the ``Suspension of Liquidation'' section of this notice.

Case History

    Since the initiation of this investigation (Notice of Initiation of 
Antidumping Investigations: Certain Preserved Mushrooms From Chile, 
India, Indonesia, and the People's Republic of China (63 FR 5360, 
February 2, 1998)), the following events have occurred:
    During January and February 1998, the Department requested 
information from the U.S. Embassy in Chile to identify producers/
exporters of the subject merchandise. During February 1998, the 
Department also requested and received comments from the petitioners 
and potential respondents regarding the model matching criteria.
    On February 27, 1998, the United States International Trade 
Commission (``ITC'') notified the Department of its affirmative 
preliminary injury determination in this case.
    Also on February 27, 1998, the Department issued an antidumping 
duty questionnaire to Nature's Farm Products (Chile), S.A. (``NFP''), 
the sole exporter of the subject merchandise from Chile.
    In March 1998, the Department received a response to Section A of 
the questionnaire from NFP. NFP reported that its home market was not 
viable during the period of investigation (POI), but that its sales to 
Brazil during the POI constituted a viable third country market.
    On March 30, 1998, the Department issued a notice identifying a 
period for interested parties to raise issues regarding product 
coverage. (See Certain Preserved Mushrooms from Chile, India, 
Indonesia, and the People's Republic of China: Comments Regarding 
Product Coverage, 63 FR 16971 (April 7, 1998). NFP submitted comments 
on April 30, 1998, stating that product coverage should include fresh 
mushrooms as well as preserved mushrooms.
    On April 1, 1998, the petitioners in this investigation, L.K. 
Bowman, Inc., Modern Mushroom Farms, Inc., Monterey Mushrooms, Inc., 
Mount Laurel Canning Corp., Mushroom Canning Company, Sunny Dell Foods, 
Inc., and United Canning Corp., submitted a timely allegation pursuant 
to section 773(b) of the Act that NFP had made sales in the third 
country market at less than the cost of production (``COP''). Our 
analysis of the allegation indicated that there were reasonable grounds 
to believe or suspect that NFP sold mushrooms in the third country 
market at prices less than the COP. Accordingly, we initiated a COP 
investigation with respect to NFP pursuant to section 773(b) of the Act 
(See Memorandum from Team to Louis Apple, Office Director, dated April 
8, 1998).
    On April 30, 1998, the Department requested comments as to whether 
it should consider ``whole mushroom size'' as a physical characteristic 
for its model matching methodology. On May 14, 1998, NFP responded to 
the Department's request for information.

[[Page 41787]]

    On May 1, 1998, pursuant to section 733(c)(1)(A) of the Act, the 
petitioners made a timely request to postpone the preliminary 
determination for forty days. We granted this request and, on May 8, 
1998, we postponed the preliminary determination until no later than 
July 27, 1998. (See 63 FR 27264, May 18, 1998).
    We received NFP's responses to Sections B and C of the 
questionnaire in April 1998. We issued a supplemental questionnaire for 
Sections A, B, and C to NFP in April 1998 and received responses to 
these questionnaires, along with the Section D response, in May 1998. 
In May 1998, we issued a supplemental questionnaire for Section D to 
NFP and received the response to this questionnaire in June 1998. NFP 
submitted additional information concerning its response data in June 
and July 1998.
    In the supplemental Section B response, NFP stated that, after a 
review of its date of sale methodology for U.S. sales, revisions to its 
POI sales totals indicated that the home market may, in fact, be 
viable. In response, the petitioners filed a sales below COP allegation 
on NFP's home market sales on July 6, 1998. As discussed below under 
``Home Market Viability, `` the Department has determined that the home 
market is not viable.

Scope of Investigation

    For purposes of this investigation, the products covered are 
certain preserved mushrooms whether imported whole, sliced, diced, or 
as stems and pieces. The preserved mushrooms covered under this 
investigation are the species Agaricus bisporus and Agaricus bitorquis. 
``Preserved mushrooms'' refer to mushrooms that have been prepared or 
preserved by cleaning, blanching, and sometimes slicing or cutting. 
These mushrooms are then packed and heated in containers including but 
not limited to cans or glass jars in a suitable liquid medium, 
including but not limited to water, brine, butter or butter sauce. 
Preserved mushrooms may be imported whole, sliced, diced, or as stems 
and pieces. Included within the scope of the investigation are 
``brined'' mushrooms, which are presalted and packed in a heavy salt 
solution to provisionally preserve them for further processing.
    Excluded from the scope of this investigation are the following: 
(1) All other species of mushroom including straw mushrooms; (2) all 
fresh and chilled mushrooms, including ``refrigerated'' or ``quick 
blanched mushrooms'; (3) dried mushrooms; (4) frozen mushrooms; and (5) 
``marinated,'' ``acidified'' or ``pickled'' mushrooms, which are 
prepared or preserved by means of vinegar or acetic acid, but may 
contain oil or other additives.
    The merchandise subject to this investigation is classifiable under 
subheadings 2003.10.27, 2003.10.31, 2003.10.37, 2003.10.43, 
2003.10.47.2003.10.53, and 0711.90.4000 of the Harmonized Tariff 
Schedule of the United States (``HTS''). Although the HTS subheadings 
are provided for convenience and Customs purposes, the written 
description of the merchandise under investigation is dispositive.

Period of Investigation

    The period of investigation (``POI'') is January 1, 1997, through 
December 31, 1997.

Product Comparisons

    In accordance with section 771(16) of the Act, we considered all 
products produced by NFP covered by the description in the ``Scope of 
Investigation'' section, above, and sold to Brazil during the POI to be 
foreign like products for purposes of determining appropriate product 
comparisons to U.S. sales. As discussed below, we determined that there 
were no comparable third country sales in the ordinary course of trade 
(i.e., above cost) during the POI. Therefore, we compared U.S. sales to 
constructed value ( ``CV''), as described below.

Fair Value Comparisons

    To determine whether sales of mushrooms from Chile to the United 
States were made at less than fair value, we compared constructed 
export price (``CEP'') to the Normal Value (``NV''), as described in 
the ``Constructed Export Price'' and ``Normal Value'' sections of this 
notice, below. In accordance with section 777A(d)(1)(A)(i) of the Act, 
we calculated weighted-average CEPs for comparison to weighted-average 
NVs or CVs.

Level of Trade

    In accordance with section 773(a)(1)(B) of the Act, to the extent 
practicable, we determine NV based on sales in the comparison market at 
the same level of trade (``LOT'') as the CEP transaction. The NV LOT is 
that of the starting-price sales in the comparison market or, when NV 
is based on constructed value (``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 the importer.
    To determine whether NV sales are at a different level of trade 
than CEP, we examined 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 Notice of Final Determination 
of Sales at Less Than Fair Value: Certain Cut-to-Length Carbon Steel 
Plate from South Africa, 62 FR 61731 (November 19, 1997).
    In this case, we compared all U.S. sales to CV, as noted above. As 
we could not determine the LOT of the sales from which we derived the 
profit for CV, we could not determine whether there is a difference in 
LOT between any U.S. sales and CV. Therefore, we made no LOT adjustment 
nor a CEP offset to NV.

Constructed Export Price

    We calculated CEP, in accordance with subsections 772(b) of the 
Act, because sales to the first unaffiliated purchaser took place after 
importation into the United States.
    We based CEP on the packed ex-warehouse or delivered prices to 
unaffiliated purchasers in the United States. We made deductions for 
discounts and rebates, where applicable. We also made deductions for 
the following movement expenses, where appropriate, in accordance with 
section 772(c)(2)(A) of the Act: foreign inland freight, foreign 
brokerage, international freight (including marine insurance), U.S. 
customs duties, post-sale warehousing expenses, and U.S. inland 
freight. In accordance with section 772(d)(1) of the Act, we deducted 
those selling expenses associated with economic activities occurring in 
the United States, including direct selling expenses (credit costs, 
commissions and other direct selling expenses), inventory carrying 
costs, and other indirect selling expenses. We also deducted the profit 
allocated to these expenses, in accordance with sections 772(d)(3) and 
772(f) of the Act.
    NFP reported receipt of an export incentive credit from the Chilean 
government on both U.S. and Brazilian sales. As there is no statutory 
provision

[[Page 41788]]

for an adjustment for this credit, we disregarded it when calculating 
CEP and NV.
    We excluded from our analysis NFP's sales of imperfect merchandise 
because the quantity involved is insignificant and NFP made no 
comparable third country sales of this type of merchandise. See, e.g., 
Preliminary Determination of Sales at Less than Fair Value and 
Postponement of Final Determination: Canned Pineapple Fruit from 
Thailand, 60 FR 2734, 2737 (January 11, 1995).

Normal Value

    After testing (1) home market and third country viability as 
discussed below, and (2) whether third country sales were at below-cost 
prices, we calculated NV as noted in the ``Price-to-CV Comparisons'' 
section of this notice.

1. Home and Third Country Market Viability

    In order to determine whether there is 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 equal to or greater than five percent of the aggregate volume of 
U.S. sales), we compared the respondent's volume of home market sales 
of the foreign like product to the volume of U.S. sales of the subject 
merchandise, in accordance with section 773(a)(1)(C) of the Act. 
Because NFP's aggregate volume of POI home market sales of the foreign 
like product was less than five percent of its aggregate volume of POI 
U.S. sales for the subject merchandise (as determined by the date of 
sale methodology applied by the Department discussed in a Memorandum 
from the Team to Louis Apple dated July 27, 1998), we determined that 
the home market was not viable for NFP. However, we determined that 
Brazil, NFP's largest third country market, was viable in accordance 
with section 773(a)(1)(B)(ii) of the Act. Therefore, in accordance with 
section 773(a)(1)(C) of the Act, we determined that Brazil is the 
appropriate foreign market for calculating NV.

2. Cost of Production Analysis

    As stated in the ``Case History'' section of the notice, based on a 
timely allegation filed by the petitioners, the Department initiated a 
COP investigation of NFP to determine whether sales were made at prices 
less than the COP.
    We conducted the COP analysis described below.
A. Calculation of COP
    In accordance with section 773(b)(3) of the Act, we calculated COP 
based on the sum of NFP's cost of materials and fabrication for the 
foreign like product, plus an amount for third country SG&A, interest 
expenses, and packing costs. We used the information from NFP's Section 
D supplemental questionnaire response to calculate COP, with the 
following adjustments:
    (1) We revised NFP's submitted general and administrative (``G&A'') 
expense rate because NFP calculated G&A as a percentage of sales 
revenue, rather than cost of goods sold . In addition, NFP calculated a 
separate rate for each product. We calculated a company-wide G&A rate 
by dividing total G&A expense by total manufacturing cost.
    (2) The Department normally calculates financial expenses on a 
consolidated basis; however, NFP did not provide either a consolidated 
financial statement or a consolidated financial expense rate. 
Therefore, we recalculated NFP's financial expense rate based on its 
non-consolidated financial statement. In its calculation, NFP claimed 
the full amount of the monetary correction as an offset to its 
financial expense. We allowed only the portion of the monetary 
correction associated with the current portion of its bank loans since 
the remaining portion relates to other fiscal periods. In addition, NFP 
failed to respond to the Department's request for a detailed analysis 
of its foreign exchange gains and losses. Therefore, we included the 
entire amount of the net foreign exchange loss in our calculation of 
financial expense. We calculated a revised net financial expense and 
divided it by the total manufacturing costs.
    Startup Adjustment Claim. NFP claimed a startup adjustment to its 
COP under section 773(f)(1)(C) of the Act, alleging that it has yet to 
achieve commercial production levels and, thus, continues to operate in 
a start-up mode. Although NFP completed construction of its plant in 
1994, it contends that, due to technical difficulties associated with 
harvesting necessary raw materials, commercial production levels have 
not yet been reached. NFP estimates that these levels will be reached 
in mid-1999.
    Section 773(f)(1)(C)(ii) of the Act authorizes adjustments for 
start-up operations ``only where (I) a producer is using new production 
facilities or producing a new product that requires substantial 
additional investment, and (II) production levels are limited by 
technical factors associated with the initial phase of production.'' 
NFP's production facilities were three years old by the start of the 
POI; therefore, we do not consider these facilities to be ``new'' 
within the meaning of section 773(f)(1)(C)(ii)(I) of the Act.
    Moreover, NFP has not identified any additional costs associated 
with ``substantially retooling'' its production facilities, which, 
according to the Statement of Administrative Action accompanying the 
URAA, H.R. Doc. No. 316, 103d Cong., 2d Sess. (1994) (``SAA''), might 
satisfy the first criterion. Because section 773(f)(1)(C)(ii) of the 
Act establishes that both prongs of the test must be met before a 
startup adjustment is warranted, this finding is sufficient to deny 
NFP's claim. Therefore, we need not address NFP's arguments concerning 
technical factors that limit commercial production levels (see Notice 
of Final Determination of Sales at Not Less Than Fair Value: Collated 
Roofing Nails from Korea, 62 FR 51420, 51426, October 1, 1997).
B. Test of Third Country Sales Prices
    We compared the weighted-average COP for NFP, adjusted where 
appropriate, to third country sales of the foreign like product as 
required under section 773(b) of the Act. In determining whether to 
disregard third country market sales made at prices less than the COP, 
we examined whether (1) within an extended period of time, such sales 
were made in substantial quantities, and (2) such sales were made at 
prices which permitted the recovery of all costs within a reasonable 
period of time. On a product-specific basis, we compared the COP to the 
third country market prices, less any applicable movement charges, and 
direct and indirect selling expenses.
C. Results of the COP Test
    Pursuant to section 773(b)(2)(C) of the Act, where less than 20 
percent of respondent's sales of a given product were at prices less 
than the COP, we did not disregard any below-cost sales of that product 
because we determined that the below-cost sales were not made in 
``substantial quantities.'' Where 20 percent or more of a respondent's 
sales of a given product during the POI were at prices less than the 
COP, we determined such sales to have been made in ``substantial 
quantities'' within an extended period of time in accordance with 
section 773(b)(2)(B) of the Act. In such cases, we also determined that 
such sales were not made at prices which would permit recovery of all 
costs within a reasonable period of time, in accordance with

[[Page 41789]]

section 773(b)(2)(D) of the Act. Therefore, we disregarded the below-
cost sales. Where all sales of a specific product were at prices below 
the COP, we disregarded all sales of that product.
    We found that all of NFP's Brazilian sales were at prices below the 
COP. Thus, in the absence of any above-cost Brazilian sales, we 
compared constructed export prices to CV in accordance with section 
773(a)(4) of the Act.
D. Calculation of CV
    In accordance with section 773(e)(1) of the Act, we calculated CV 
based on the sum of NFP's cost of materials, fabrication, SG&A, 
interest, and U.S. packing costs. We made the same adjustments to NFP's 
reported costs for the CV calculation as we made for the COP 
calculation.
    Because there were no above-cost Brazilian sales and hence no 
actual company-specific profit data available for NFP's sales of the 
foreign like product to Brazil, we calculated profit expenses in 
accordance with section 773(e)(2)(B)(iii) of the Act and the SAA. 
Section 773(e)(2)(B)(iii) states that profit may be determined under 
any reasonable method with the appropriate ``profit cap.'' The SAA, 
however, provides that where, due to the absence of data, the 
Department cannot determine amounts for profit under alternatives (i) 
or (ii) of section 773(e)(2)(B) of the Act or a ``profit cap'' under 
alternative (iii) of section 773(e)(2)(B) of the Act, the Department 
may apply alternative (iii) on the basis of the facts available (SAA at 
841). In this case, we are unable to determine an amount for profit 
under alternatives (i) or (ii), or a ``profit cap'' under alternative 
(iii) because we do not have actual amounts incurred by NFP on sales of 
merchandise in the same general category as the subject merchandise and 
because NFP is the only producer subject to this investigation. 
Therefore, as facts availabe under section 773(e)(2)(B)(iii) of the 
Act, for NFP's profit we are using the 1996 profit margin for 
Ianasafrut S.A., a leading Chilean fruit and vegetable producer. We 
believe this data is a reasonable surrogate for NFP's profit because it 
is based upon a Chilean producer's experience on sales of the same 
general category as the subject merchandise for a period in which there 
was no alleged dumping. For SG&A, we have used NFP's actual expenses 
incurred in Chile on Brazilian sales because this data reflects NFP's 
actual experience in selling the foreign like product.

Price-to-CV Comparisons

    For price-to-CV comparisons, we made adjustments to CV in 
accordance with section 773(a)(8) of the Act. We deducted from CV the 
amount of indirect selling expenses capped by the amount of the U.S. 
commissions.

Currency Conversion

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

Verification

    As provided in section 782(i) of the Act, we will verify all 
information relied upon 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 imports of subject 
merchandise that are entered, or withdrawn from warehouse, for 
consumption on or after the date of publication of this notice in the 
Federal Register. We will instruct the Customs Service to require a 
cash deposit or the posting of a bond equal to the weighted-average 
amount by which the NV 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
------------------------------------------------------------------------
Nature's Farm Products (Chile) S.A..........................      142.43
All Others..................................................      142.43
------------------------------------------------------------------------

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 September 8, 1998, and rebuttal briefs no later than 
September 11, 1998. 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 afford interested parties an opportunity to comment on 
arguments raised in case or rebuttal briefs. Tentatively, the hearing 
will be held on September 15, 1998, time and room to be determined, 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 
1870, within 30 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 by October 13, 1998.
    This determination is issued and published in accordance with 
sections 733(d) and 777(i)(1) of the Act.

    Dated: July 27, 1998.
Joseph A. Spetrini,
Acting Assistant Secretary for Import Administration.
[FR Doc. 98-20910 Filed 8-4-98; 8:45 am]
BILLING CODE 3510-DS-P