[Federal Register Volume 63, Number 251 (Thursday, December 31, 1998)]
[Notices]
[Pages 72246-72255]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-34703]



[[Page 72246]]

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DEPARTMENT OF COMMERCE

International Trade Administration
[A-533-813]


Notice of Final Determination of Sales at Less Than Fair Value: 
Certain Preserved Mushrooms from India

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

EFFECTIVE DATE: December 31, 1998.

FOR FURTHER INFORMATION CONTACT: David J. Goldberger or Everett D. 
Kelly, 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) 482-4194, 
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).
FINAL DETERMINATION:
    We determine that certain preserved mushrooms (``mushrooms'') from 
India are being, or are likely to be, sold in the United States at less 
than fair value (``LTFV''), as provided in section 735 of the Act. The 
estimated margins are shown in the ``Suspension of Liquidation'' 
section of this notice.

Case History

    Since the preliminary determination (Preliminary Determination of 
Sales at Less Than Fair Value: Certain Preserved Mushrooms from India, 
63 FR 41789, August 5, 1998), the following events have occurred.
    On August 7, 1998, the petitioners in this investigation (L.K. 
Bowman, Inc., Modern Mushroom Farms, Inc., Monterey Mushrooms, Inc., 
Mount Laurel Canning Corp., Mushroom Canning Company, Southwood Farms, 
Sunny Dell Foods, Inc., and United Canning Corp.), requested a public 
hearing. This request was withdrawn on October 29, 1998.
    We conducted verifications of the data submitted by respondents, 
Agro Dutch Foods (India) (``Agro Dutch'') and Ponds India Ltd. 
(``Ponds''), during August and September. We issued our verification 
reports in October (see Memorandum to the File dated October 20, 1998 
(Ponds) and Memorandum to the File dated October 21, 1998 (Agro 
Dutch)). The petitioners and the two respondents submitted case briefs 
on October 28, 1998, and rebuttal briefs on November 4, 1998.

Facts Available

    As discussed in the preliminary determination, we did not receive a 
questionnaire response from two Indian companies, Alpine Biotech and 
Mandeep. In accordance with Section 776 and 782 of the Act, we 
determined that the use of facts available is appropriate for both of 
these companies. We have again made that determination for the final 
determination, and continue to use the corroborated petition rate of 
243.87 percent as the facts available margin for the two nonresponding 
companies (see Memorandum to the File dated July 27, 1998).

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 2003.10.0027, 2003.10.0031, 2003.10.0037, 2003.10.0043, 
2003.10.0047, 2003.10.0053, 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 Department's 
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 Agro Dutch and Ponds covered by the description in 
the ``Scope of Investigation'' section, above, and sold by Agro Dutch 
to the Netherlands and sold by Ponds to Denmark (see ``Home Market 
Viability'' section below) 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 in the third 
country to compare to U.S. sales, we compared U.S. sales to the most 
similar foreign like product. For those U.S. sales of mushrooms for 
which there were no comparable third country sales in the ordinary 
course of trade (i.e., above-cost) , we compared U.S. sales to 
constructed value (``CV'').
    In making the product comparisons, we matched foreign like products 
based on the physical characteristics reported by the respondents in 
the following order: preservation method, container type, mushroom 
style, weight, grade, container solution, and label type. Although Agro 
Dutch has suggested that the Department consider whole mushroom size as 
a product characteristic, we have not included it as a product matching 
characteristic (see Comment 8 in the ``Interested Party Comments'' 
section below).

Fair Value Comparisons

    To determine whether sales of certain preserved mushrooms from 
India to the United States were made at less than fair value, we 
compared the export price (EP) to the Normal Value (NV), as described 
in the ``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 EPs for comparison to weighted-average NVs.
    On January 8, 1998, the Court of Appeals for the Federal Circuit 
issued a decision in CEMEX v. United States, 1998 WL 3626 (Fed Cir.). 
In that case, based on the pre-URAA version of the Act, the Court 
discussed the appropriateness of using constructed

[[Page 72247]]

value (CV) as the basis for foreign market value when the Department 
finds home market sales of physically identical merchandise to be 
outside the ``ordinary course of trade.'' This issue was not raised by 
any party in this proceeding. However, the URAA amended the definition 
of sales outside the ``ordinary course of trade'' to include sales 
below cost. See Section 771(15) of the Act. Consequently, the 
Department has reconsidered its practice in accordance with this court 
decision and has determined that it would be inappropriate to resort 
directly to CV, in lieu of foreign market sales, as the basis for NV if 
the Department finds foreign market sales of merchandise identical or 
most similar to that sold in the United States to be outside the 
``ordinary course of trade.'' Instead, the Department will use sales of 
similar merchandise, if such sales exist. The Department will use CV as 
the basis for NV only when there are no above-cost sales that are 
otherwise suitable for comparison. Therefore, in this proceeding, when 
making comparisons in accordance with section 771(16) of the Act, we 
considered all products sold in the home market as described in the 
``Scope of Investigation'' section of this notice, above, that were in 
the ordinary course of trade for purposes of determining appropriate 
product comparisons to U.S. sales. Where there were no sales of 
identical merchandise in the home market made in the ordinary course of 
trade to compare to U.S. sales, we compared U.S. sales to sales of the 
most similar foreign like product made in the ordinary course of trade, 
based on the characteristics listed in Sections B and C of our 
antidumping questionnaire.

Level of Trade

    In the preliminary determination, we determined that all 
comparisons are at the same level of trade for both respondents and an 
adjustment pursuant to section 773(a)(7)(A) of the Act is not 
warranted. We find no basis to change this determination for the final 
determination.

Export Price

    For Agro Dutch and Ponds, we used EP methodology, in accordance 
with section 772(a) of the Act, because the subject merchandise was 
sold directly to the first unaffiliated purchaser in the United States 
prior to importation and CEP methodology was not otherwise indicated.

Agro Dutch

    We calculated EP based on the same methodology used in the 
preliminary determination, with revisions to movement expenses as a 
result of the Department's verification findings (see Agro Dutch Sales 
and Cost Verification Report dated October 21, 1998 for specific 
details).

Ponds

    We calculated EP based on the same methodology used in the 
preliminary determination, with revisions to foreign movement expenses 
and packing as a result of the Department's verification findings (see 
Ponds' Sales and Cost Verification Report dated October 20, 1998 for 
specific details).

Normal Value

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

  1. Home and Third Country Market Viability

    As discussed in the preliminary determination, we examined whether 
there is a sufficient volume of sales in the home market to serve as a 
viable basis for calculating NV, in accordance with section 
773(a)(1)(C) of the Act. We verified that the aggregate volume of POI 
home market sales of the foreign like product for both respondents was 
less than five percent of its aggregate volume for POI U.S. sales for 
the subject merchandise; and therefore, the home market was not viable 
for either respondent. We also verified that the Netherlands, Agro 
Dutch's largest third country market, and Denmark, Ponds' largest third 
country market, were viable for the respective respondents 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 the 
Netherlands is the appropriate third country market for calculating 
Agro Dutch's NV, and Denmark is the appropriate third country market 
for calculating Ponds' NV.

  2. Cost of Production Analysis

    As discussed in the preliminary determination, we conducted an 
investigation to determine whether each respondent made sales of the 
foreign like product in the respective third country during the POI at 
prices below its cost of production (``COP''). In accordance with 
section 773(b)(3) of the Act, we calculated the weighted-average COP, 
by model, based on the sum of the respondent's cost of materials, 
fabrication, and general expenses. We relied on the submitted COPs 
except in the following specific instances where the submitted costs 
were not appropriately quantified or valued.

Agro Dutch

    (1) We recalculated Agro Dutch's cost worksheets using a weight 
based allocation method instead of relying on Agro Dutch's per-unit 
costs derived from hypothetical yields (see Comment 9 in the 
``Interested Party Comments'' section below for further discussion).
    (2) In order to put both the general and administrative (``G&A'') 
rate and the financial expense rate on the same basis as the per-unit 
cost of manufacturing, we excluded certain expense items from the cost 
of goods sold used by Agro Dutch as the denominator in its 
calculations. (See December 18, 1998 Calculation Memorandum.)
    (3) Finally, we have not included the startup period adjustment 
amounts claimed by Agro Dutch in the COP calculations (see Comment 8 in 
the ``Interested Party Comments'' below for further discussion).

Ponds

    (1) We calculated COP using the average direct materials expense 
reported by Ponds instead of Ponds' reported direct material costs, 
which were derived using a net realizable value (``NRV'') allocation 
(see Comment 1 in the ``Interested Party Comments'' section below).
    (2) We increased the cost of manufacturing for certain minis to 
include an amount for expenses incurred on the reprocessing of minis 
(see Comment 3 ``Interested Party Comments'' section below for further 
discussion).
    (3) We also revised per-unit variable overhead costs to exclude the 
Indian export duty, which we have recalculated as a movement expense.
    (4) We recalculated Ponds' financial expense rate to exclude 
financial income (see Comment 4 in the ``Interested Party Comments'' 
section below).
B. Test of Third Country Sales Prices
    As in our preliminary determination, we compared the weighted-
average COPs for Agro Dutch and Ponds, adjusted where appropriate, to 
third country sales prices of the foreign like product, as required 
under section 773(b) of the Act. In determining whether to disregard 
third country 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

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which permitted the recovery of all costs within a reasonable period of 
time. On a product-specific basis, we compared the COP (exclusive of 
selling expenses) to the third country prices (net of selling 
expenses), less any applicable movement charges, rebates, discounts, 
and direct and indirect selling expenses.
Results of the COP Test
    As in our preliminary determination, pursuant to section 
773(b)(2)(C) of the Act, where less than 20 percent of a 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, because we compared prices to weighted-average COPs 
for the POI, 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 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. 
For those U.S. sales of preserved mushrooms for which there were no 
comparable (above-cost) third country sales in the ordinary course of 
trade, we compared EP to CV, in accordance with section 773(a)(4) of 
the Act.
    We found that, for certain mushroom products sold by Agro Dutch, 
more than 20 percent of third country sales were sold at below COP 
prices within an extended period of time in substantial quantities. We 
therefore excluded these sales and used the remaining above-cost sales 
as the basis for determining NV, in accordance with section 773(b)(1) 
of the Act. For Ponds, we found that all third country sales were at 
prices less than the COP. Thus, in the absence of any above-cost third 
country sales, we compared EP to CV in accordance with section 
773(a)(4) of the Act.
D. Calculation of CV
    As in our preliminary determination, we calculated CV for Ponds 
based on the sum of its cost of materials, fabrication, selling, 
general, and administrative (``SG&A'') expenses, interest, U.S. packing 
costs, and profit, in accordance with section 773(e) of the Act. We 
made the same adjustments to the reported costs for the CV calculation 
as discussed above for the COP calculation.
    For Agro Dutch, all comparisons were made on a price-to-price 
basis. Thus, it was not necessary to calculate CV.
    As stated above with regard to Ponds, since there were no above-
cost Danish sales and, hence, no actual company-specific profit data 
available for Ponds' sales of the foreign like product to Denmark, we 
calculated profit in accordance with section 773(e)(2)(B)(iii) of the 
Act and the Statement of Administrative Action accompanying the URAA, 
H.R. Doc. No. 316, 103d Cong., 2d Sess. at 841 (1994) (``SAA''). 
Section 773(e)(2)(B)(iii) states that profit may be determined under 
any reasonable method with the appropriate ``profit cap.''
    In the preliminary determination, we used Ponds' actual selling 
expenses incurred in India on Danish sales. No party to this 
investigation has commented on this determination. Therefore, we have 
continued to use these selling expense amounts in this final 
determination. As in the preliminary determination, we have used a 
profit rate calculated from Ponds' 1996 financial statements for 
mushrooms as facts available under section 773(e)(2)(B)(iii) of the 
Act.

Price-to-Price Comparisons

    We calculated NV for Agro Dutch respondent based on the same 
methodology applied in the preliminary determination, with the 
following exceptions: for Agro Dutch we made revisions to specific 
sales transactions for foreign movement expenses based on findings at 
verification (see Agro Dutch Sales and Cost Verification report dated 
October 21,1998); and for Ponds we made revisions to specific sales 
transactions for reported gross unit prices, foreign movement expenses 
and packing costs. For price-to-price comparisons we applied the same 
methodology used in the preliminary determination. In making 
circumstance of sale adjustments we made revisions to credit expenses 
based on verification findings for both respondents.

Price-to-CV Comparisons

    For price-to-CV comparisons, we applied the same methodology used 
in the preliminary determination, with the revisions noted above for 
credit expenses.

Currency Conversion

    For Agro Dutch, 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. For Ponds, we made currency conversions into U.S. dollars 
based on the exchange rates specified in Ponds' forward sales 
agreements instead of the actual exchange rate on the date of the U.S. 
sale (see Comment 5 below for discussion)

Ponds' Comments

    Comment 1: Alternative Cost Allocation Methods: Net Realizable 
Value, Treating Certain Sales as By-Products, Averaging U.S. Prices
    Ponds argues that the Department should allocate mushroom growing 
costs based on a NRV methodology, rather than the weight-based 
methodology used in the preliminary determination. Ponds states that 
there are physical differences between mushrooms suitable for 
preserving as whole and sliced mushrooms, and other mushrooms preserved 
as ``minis'' or pieces and stems (PNS). In turn, Ponds argues, whole 
and sliced mushrooms command higher NRVs per kilogram. Accordingly, 
Ponds states that its production process is designed to maximize its 
production of mushrooms suitable for whole and sliced products. To 
reflect this business practice, Ponds argues that the Department should 
follow its case precedents set forth in the Final Determination of 
Sales at Less Than Fair Value: Canned Pineapple Fruit from Thailand, 60 
FR 29553, June 5, 1995 (``CPF from Thailand''), and the Final 
Determination of Sales at Less Than Fair Value: Polyvinyl Alcohol from 
Taiwan, 61 FR 14064, March 29, 1996 (``PVA from Taiwan''), where cost 
allocations were made based on sales values, and apply the NRV 
methodology to Ponds' costs.
    Alternatively, Ponds proposes a second methodology that would 
consider minis and PNS as a by-product of whole and sliced mushrooms. 
Based on this methodology, all costs of producing mushrooms would be 
allocated to whole and sliced mushrooms, and the revenue received from 
sales of minis and PNS would be deducted from those costs.
    Finally, Ponds suggests that the Department should average the EPs 
for all products, and then compare the average prices to average costs, 
as it did in past cases such as Final Results of Administrative Review: 
Certain Fresh Cut Flowers from Colombia, 63 FR 31724, June 10, 1998 
(``Flowers from Colombia''). Ponds states that this approach is 
appropriate, should the Department reject its NRV methodology, because 
a weight-based allocation

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effectively calculates an average CV for preserved mushrooms and thus 
the fair comparison would be to average U.S. prices.
    The petitioners contend that the Department should continue to 
allocate costs on the basis of weight, as in the preliminary 
determination and in the companion investigation of preserved mushrooms 
from Chile (Final Determination of Sales at Less Than Fair Value: 
Certain Preserved Mushrooms from Chile, 63 FR 56613, October 22, 1998) 
(``Mushrooms from Chile''). The petitioners state that Ponds' financial 
accounting system tracks costs and sales on the basis of weight, not 
NRV, as shown in the questionnaire responses and at verification. 
Citing section 773(f)(1)(A) of the Act, the petitioners assert that the 
Department relies on data from a respondent's normal books and records 
where those records are prepared in accordance with the home country's 
general accounting practices (``GAAP'') and reasonably reflect the cost 
of producing the subject merchandise. Petitioners argue that the cost 
of producing mushrooms are reasonably reflected using a weight-based 
allocation because all of the preserved mushroom products utilize the 
same input material, fresh mushrooms.
    The petitioners continue that the references to CPF from Thailand 
and PVA from Taiwan are inappropriate in this case. According to the 
petitioners, the Department determined that the NRV methodology was 
appropriate in CPF from Thailand because the pineapple fruit and 
pineapple juice were completely distinguishable co-products. In 
instances where the juice was produced from the remains of the fruit 
canning process, such as shells, cores and ends, a weight-based cost 
methodology would assign a distortive amount of costs to the various 
parts of the pineapple. In PVA from Taiwan, the PVA production process 
resulted in two different co-products with different end uses. Thus, 
the petitioners assert that a weight-based methodology would have been 
distortive in that instance as well. In this proceeding, the 
petitioners argue, fresh mushrooms are not a co-product of preserved 
mushrooms, and the same material--fresh mushrooms--is used in producing 
all varieties of preserved mushrooms. Similarly, the petitioners reject 
Ponds' contention that minis and PNS should be considered a by-product 
or scrap, as ``scrap'' is considered by the industry to be tiny 
mushroom fragments which are too small to even to be processed as PNS 
and is typically resold as fertilizer or discarded. The petitioners 
assert that PNS and minis, on the other hand, are part of the same like 
product and sold in the same channels of trade as other preserved 
mushrooms.

DOC Position:

    We agree with the petitioners that, in this case, a weight-based 
allocation methodology is appropriate. In accordance with section 
773(f)(1)(A) of the Act, the Department normally relies on data from a 
respondent's normal books and records where those records are prepared 
in accordance with the home country's GAAP, and where they reasonably 
reflect the costs of producing the merchandise. Normal GAAP accounting 
practices provide both respondents and the Department with a reasonably 
objective and predictable basis by which to compute costs for the 
merchandise under investigation. However, in those instances where it 
is determined that a company's normal accounting practices result in a 
mis-allocation of production costs, the Department will adjust the 
respondent's costs or use alternative calculation methodologies that 
more accurately capture the actual costs incurred to produce the 
merchandise. See, e.g., Final Determination of Sales at Less Than Fair 
Value: New Minivans from Japan, 57 FR 21937, 21952, May 26, 1992, 
(adjusting a respondent's U.S. further manufacturing costs because the 
company's normal accounting methodology did not result in an accurate 
measure of production costs); and CPF from Thailand at 29559.
    Furthermore, as described in section 773(f)(1)(A) of the Act, the 
Department must consider whether reported allocations ``have been 
historically used by the exporter or producer.'' In the instant case, 
Ponds does not have an established cost accounting system that 
allocates costs between products and, therefore, for purposes of this 
investigation, Ponds and Agro Dutch developed a reporting methodology. 
In Ponds' Section D questionnaire response, it chose to allocate costs 
between products based on their relative sales values. At the request 
of the Department, Ponds submitted a revised response which allocated 
costs using a weight-based method. For purposes of the final 
determination, we have relied on the costs derived from a weight-based 
allocation methodology as explained below, with the specific 
adjustments noted elsewhere in this notice.
    Section 351.407(c) of the Department's regulations states that 
``[i]n determining the appropriate method for allocating costs among 
products, the Secretary may take into account production quantities, 
relative sales values, and other quantitative and qualitative factors 
associated with the manufacture and sale of the subject merchandise and 
the foreign like product.'' We rejected Ponds' sales-value-based 
methodology because it relies on the faulty premise that minis and PNS 
are joint products of mushrooms.
    A comparison of the Department's approach in responding to certain 
types of allocation questions in past cases is helpful in illustrating 
why minis and PNS are not joint products. In Final Administrative 
Review of Canned Pineapple Fruit from Thailand, 63 FR 7392, February 
13, 1998, the Department stated that ``a joint production process 
produces two distinct products and the essential point of that process 
is that the raw material, labor and overhead costs prior to the initial 
split-off requires an allocation to the final products. See Management 
Accountants' Handbook at 11:1. CPF and juice result from a joint 
production process because they both rely on the use of a single raw 
material, pineapple fruit'' (emphasis added). In PVA from Taiwan at 
14071 the Department stated that, ``like other joint production 
processes, PVA production is characterized by certain joint costs which 
cannot readily be identified or traced to the individual products 
resulting from the joint processing performed in the manufacture of 
PVA. In PVA production, chemical inputs are mixed together in a process 
that results in two distinct products: PVA and acetic acid.'' (Id. at 
7399) (emphasis added). In CPF and PVA production, two or more distinct 
products (i.e., products having significantly different physical 
characteristics) result from the processing of the raw materials. In 
contrast, the mushroom growing process results in only one product, 
i.e., mushrooms. While the Department concedes that mushrooms will vary 
in size and aesthetics, these minor quality differences do not render 
them separate and distinct products. Such minor differences do not rise 
to the level where distinct products exist. The opposite situation, for 
example, occurs in CPF from Thailand, where a liquid fruit drink and a 
solid fruit product are derived from a whole pineapple. On the other 
hand, while mushrooms may be sliced or chopped, sold as fresh or 
canned, they remain mushrooms.
    Ponds' proposal that a sales-based method be used in this case 
relies heavily on the fact that certain aesthetic and quality 
differences in mushrooms command higher prices in the market. We note 
that Ponds' claim that minis are

[[Page 72250]]

a substandard product are seriously undercut by Agro Dutch's argument 
that mini mushrooms are a premium product (See Comment 7 below for 
further discussion). However, as the cases cited above demonstrate, it 
is not the difference in market price that indicates whether the use of 
a value-based cost methodology is warranted, but rather the existence 
of two distinct products and the inherent difficulties therein of 
assigning common production costs between the jointly produced 
products. It is only when a common production process gives rise to 
separate and distinct products that a value-based method may be a more 
appropriate means to allocate costs than a method based on physical 
measure. Indeed, the Department has been upheld in its practice of 
ignoring market price differences when two grades of the same pipe had 
identical costs, but commanded different market prices. In Ipsco v. 
United States, 965 F2d 1056 (Fed. Cir. 1992) (``IPSCO''), where there 
were no physical differences between the two grades of pipe, only 
differences in quality and market value and the same materials, labor, 
and overhead went into the manufacturing lot that yielded both grades 
of pipe, the court upheld the Department's use of a methodology that 
allocated costs equally between two grades of the same pipe. Moreover, 
in Final Determination of Sales at Less Than Fair Value: Fresh Cut 
Roses from Ecuador 60 FR 7038 February 6, 1995 (``Roses from 
Ecuador''), the Department also chose not to distinguish between minor 
aesthetic and quality differences within the broad export quality 
category, but treated as by-products all roses in the national quality 
category. In that case, the Department allocated total net cultivation 
costs over the total quantity of non-reject product actually sold.
    Perhaps the most comparable case to mushrooms is the Final 
Determination of Sales at Less Than Fair Value: Fresh Atlantic Salmon 
from Chile, 63 FR 31411, June 9, 1998 (``Salmon from Chile''). Salmon, 
like mushrooms, are grown in batches where the natural process results 
in products of varying size and quality. Products can both be sold 
either directly after harvest or be processed further and sold in 
several different forms and containers. Furthermore, the production 
processes of both products may be manipulated by the producer, within 
the confines of the natural growing process to obtain different yields 
on certain sizes and qualities. Moreover, both salmon and mushrooms are 
sold by weight and the aesthetic qualities of the individual units 
impact their market price. For both products, the Department has found 
that the actual cost per kilogram of the product, i.e., mushroom or 
salmon, is the same regardless of whether it is sold fresh or processed 
further in a variety of forms. In Salmon from Chile, as in the instant 
case, the Department found that ``with minor exceptions, each company's 
recorded costs of the subject merchandise did not vary by grade or 
weight band [(i.e., size)] . . . and that the costs of certain of these 
matching groups are the same (Id. at 31416).'' Also in Salmon from 
Chile, the Department even rejected ``petitioners'' arguments that the 
respondents should have been required to report costs based on 
methodologies that deviate from their normal accounting practices, 
e.g., through the use of feed conversion ratios, in order to estimate 
differences in costs (Id. at 31416). In citing to IPSCO in the Salmon 
from Chile case, the Department stated that ``as with premium salmon, 
prime-grade pipe was of higher quality and, as such, commanded a higher 
price in the marketplace. In the proceeding underlying the IPSCO 
decision, the Department compared U.S. sales of prime-and limited 
service grade pipe to CVs based on the actual costs of each grade, 
which were identical. The respondents objected to this methodology vis-
a-vis comparisons involving U.S. sales of lower grades of merchandise. 
The Court of Appeals for the Federal Circuit (CAFC) rejected this 
claim, ruling that the Department had ``calculated constructed value 
precisely as the statute directs'' in basing CV on the actual cost of 
production for each grade.'' See Salmon from Chile at 31416--31417.
    Consistent with Mushrooms from Chile, we have determined that an 
allocation methodology based on weight is reasonable for the following 
reasons: (1) both Ponds and Agro Dutch track the mushrooms through the 
production process by weight, not by number of mushrooms or by relative 
sales value; (2) mushrooms are sold by weight; (3) virtually the same 
activities and expenses are incurred in growing each kilogram; and, (4) 
regardless of whether the mushrooms are sold as preserved or fresh 
product, wholes or PNS, they are substantially the same product (i.e., 
they are not joint products). Simply stated, the cost-generating 
elements of growing mushrooms for both preserved and fresh, whole or 
pieces, large or small mushrooms are identical, as evidenced by the 
fact that a considerable quantity of mushrooms initially selected for 
the fresh sales market were eventually canned, and canned whole 
mushrooms may be re-processed into pieces and stems. Additionally, the 
Department has accounted for specific cost differences, such as 
differences in picking costs, supported by its observations at 
verification of Agro Dutch, that additional compensation for picking 
specific sizes of mushrooms was required. (See Comment 9 below for 
further discussion) On this basis, we continue to rely upon a weight-
based methodology because it reasonably reflects the costs of producing 
the subject merchandise.
    We also disagree with Ponds respondents that PNS and minis could 
alternatively be considered by-products of whole and sliced mushrooms. 
In the mushroom growing process, the closest output material to a by-
product is the sale of compost. By-products, as opposed to primary 
products, ``have low relative total sales values,'' resulting from 
either ``a small output or low unit selling prices or both.'' See Cost 
Accounting, Processing, Evaluating, and Using Cost Data at 157 (Morse & 
Roth, Third Edition, 1986). Minis and PNS are identical to the primary 
product (i.e., mushrooms) and, as such, should be treated in the same 
manner. Furthermore, minis and PNS are not incidental to Ponds' 
mushroom selling activities, and represent a significant portion of 
Ponds' sales. In addition, a significant percentage of Ponds' POI 
mushroom production was sold as either minis or PNS. In Roses from 
Ecuador, the Department also chose not to distinguish between minor 
aesthetic and quality differences within the broad export quality 
category, but treated as by-products all roses in the national quality 
category. This practice was consistent with the court's decision in 
Association Colombiana de Exportadores v. United States, 704 F. Supp. 
1114, 1125-26 (CIT 1989), where the court found that ``culls were often 
disposed of as waste, or if saleable, were sold for low prices in the 
local markets.'' As petitioners pointed out in their briefs, mushrooms 
that ultimately become minis and PNS are processed further, exported to 
the United Sates, and represent a significant portion of Ponds' sales.
    We also disagree with Ponds' assertion that, if the actual cost of 
producing the mushrooms is used as the basis of COP and CV, then when 
relying on CV as the basis for normal value, the Department should 
average U.S. sale prices for all products. Ponds errs in citing to 
Flowers from Colombia to support its proposed method. There were case-
specific reasons in Flowers from Colombia as to why the

[[Page 72251]]

Department compared CV to average U.S. prices, such as the fact that 
flowers are a perishable product. The Department rejected a similar 
argument in Salmon from Chile, where the respondent asserted that the 
``Department should average all U.S. prices by form only and not by 
grade or weight band, such that a form-specific price is compared to a 
form-specific CV (see Salmon from Chile at page 31416).'' In that case, 
the respondent reasoned that the Department erred ``by comparing U.S. 
prices . . . by form, grade, and weight band to CVs that, due to the 
nature of the product, essentially do not vary except by form (Id. at 
31416).'' In rejecting respondent's assertion that the U.S. prices 
should be averaged for the comparison to CV, the Department noted that 
``while making the same complaint as that made by the respondent in 
IPSCO, the respondent in the instant proceeding has proposed a 
different solution. Rather than arguing for an adjustment to CV, the 
respondent suggests that the Department average the reported U.S. 
prices without respect to two of the three matching characteristics . . 
. for comparisons involving CV (Id. at 31416).'' The Department went on 
to explain that ``no change to either side of the antidumping analysis 
(EP/CEP and normal value) is necessary because, in accordance with 
IPSCO and with the basic tenet of the antidumping law, the Department's 
methodology in this case properly compares the price of U.S. sales of a 
given product with the actual cost of that product where normal value 
is based on CV, without regard as to whether that product's actual 
costs are the same as, or different from, other products under 
investigation (Id. at 31417).'' In Salmon from Chile, the Department 
argued further that the proposed methodological changes would ``reduce 
the accuracy of that analysis and, depending on the manner employed, 
would either eliminate price-based matches entirely, or would result in 
inconsistent matching groups depending on whether a U.S. Sale is 
matched to comparison market sales or CV ( Id. at 31417).''
    Based on the foregoing discussion, for purposes of the final 
determination we have used a weight-based allocation methodology for 
all mushroom growing costs, with the exception of picking labor. 
Furthermore, we have used weighted-average US prices, by product type, 
in our comparisons to NV (i.e., CV).
    Comment 2: Yield Adjustment to Costs for Extraordinary Events
    Ponds claims that the Department should consider Ponds' low 
mushroom yield in 1997 as a highly unusual event generated by 
extraordinary circumstances that occurred during the year. Ponds cites 
a major flood, ``wet bubble disease,'' and the death of its experienced 
plant manager as the extraordinary events that caused its depressed 
yield in 1997, the POI. Pointing to such cases as Flowers from Colombia 
and the decision in Floral Trade Council of Davis, Calif. v. United 
States, 16 CIT 1014, 1016-17 (1992), Ponds contends that the Department 
should take into account these extraordinary events, which are 
infrequent in occurrence, unusual in nature, and cause an unforeseen 
disruption in production that is beyond management's control, and make 
an appropriate adjustment to its costs. To make this adjustment, Ponds 
proposes applying a yield factor based on its mushroom yield history 
exclusive of 1997.
    The petitioners respond that the events cited by Ponds are neither 
infrequent nor outside management's control and, therefore, the 
Department should continue to reject Ponds' claim. Petitioners contend 
that, as various parts of India are subject to seasonal flooding, 
mushroom diseases are an expected risk to the mushroom growing process, 
and staffing changes are a normal part of business operations. Thus, 
according to petitioners, management reasonably should have foreseen 
these possibilities and taken necessary steps to avoid production 
problems. Petitioners assert that the POI drop in production yield is 
the result of inadequate management control, rather than extraordinary 
events.

DOC Position:

    We disagree with Ponds' claim for adjustments to its cost 
calculation based on the ``alleged'' extraordinary events that occurred 
during the POI. The SAA at 162 states that ``when unforeseen disruption 
in production occurs which is beyond management's control. . ., 
Commerce will continue its current practice, such as using the costs 
incurred for production prior to such unforeseen event.'' The 
Department's long-standing practice with regard to ``unforeseen 
events'' is to treat expense items as extraordinary only when they are 
both unusual in nature and infrequent in occurrence. See Final 
Determination of Sales at Less than Fair Value: Static Access Memory 
Semiconductors From Taiwan, 63 FR 8909, February 23, 1998 (``SRAMS from 
Taiwan'') (where the Department rejected respondent's claim for an 
offset due to losses incurred because of a fire); Final Determination 
of Sales at Less than Fair Value: Oil Country Tubular Goods From 
Argentina, 60 FR 33539, June 28, 1995 (where the Department rejected 
respondent's claim for an offset due to restructuring costs); and Roses 
from Ecuador at page 7038 (where the Department allowed an offset for 
damage due to hurricane-force winds). Because adjustments of this type 
are by definition extraordinary, the Department has made its decisions 
regarding these adjustments on a case-by-case basis. Moreover, in our 
review of the case-specific facts, it is incumbent upon the respondent, 
as the party knowledgeable about the industry and country, to provide 
evidence supporting its claim. Ponds did not provide any evidence that 
heavy rains were abnormal and thus unexpected. In the Final 
Determination of Sales at Less than Fair Value: Fresh and Chilled 
Atlantic Salmon from Norway, 56 FR 7661 February 25, 1991 (``Salmon 
from Norway''), the Department rejected a respondent's claimed offset 
for costs related to a disease affecting its salmon harvest by stating 
that ``[i] In the fish farming industry, disease is an expected 
occurrence. Respondent submitted no independent data regarding ILA 
disease in general or the extent to which other farmers in Norway 
suffered from this disease, and no data was submitted regarding 
ordinary or abnormal levels of disease.'' Similarly, in this case, 
Ponds has provided no evidence to demonstrate that the mushroom crop 
disease experienced during the POI was abnormal or unforseen.
    With regard to the death of a production manager, the flooding, and 
the crop disease experienced by Ponds during the POI, we find none of 
these events to be extraordinary or unforeseen. We note that India 
experiences heavy rainfall each year and that Ponds' management had 
taken steps to prevent the next occurrence by building drainage 
ditches. We also note that various climate phenomena, from weather to 
diseases, effect agricultural crops and, therefore, only truly unusual 
climatic events relative to the geographical area in question would be 
considered extraordinary. At verification in India, we observed various 
disease prevention measures in place at both respondents' facilities, 
which indicates that disease is not an unusual or unforseen occurrence. 
Finally, we find that the loss of an employee, whether through a tragic 
death or resignation, is neither unusual or infrequent. Accordingly, we 
disallowed Ponds' yield adjustment factor for purposes of the final 
determination.
    Comment 3: Reprocessing Costs for Mini Mushrooms

[[Page 72252]]

    The petitioners contend that the Department should adjust Ponds' 
reported costs to account for raw material expenses incurred on canned 
mushrooms reprocessed into minis which Ponds did not include in its 
questionnaire response. The petitioners methodology for adjusting for 
reprocessing costs is outlined in their October 29, 1998, case brief.
    Ponds contends that the costs of these minis produced in 1996 and 
repackaged in 1997 should not be considered part of the cost of minis 
produced in 1997. Ponds explains that the repackaging was performed to 
mitigate its 1996 losses for failing to sell these products in larger 
cans, and that including the repackaging costs for the POI merchandise 
would unfairly inflate those costs for an aberrant, extraordinary 
situation that is not a normal component of its COP. Should the 
Department determine that repackaging costs should be included as part 
of the POI costs, Ponds contends that the Department should allocate 
the reprocessing costs over the total production of all minis.

DOC Position:

    We disagree with Ponds that the costs of the minis produced in 1996 
and repackaged in 1997 should not be considered part of the cost of 
minis produced in 1997. First, approximately two-thirds of minis canned 
in 1997 were from these reprocessed cans. Second, the cost of 
reprocessing that took place in 1997 must be accounted for in 1997. 
However, we agree with Ponds that the Department erred in allocating 
the total reprocessing costs only over 1997 production of 6 oz. jars. 
Therefore, for purposes of the final determination, reprocessing costs 
have been allocated over the total production of all types of product 
(i.e., container size) into which the original containers were 
reprocessed during 1997.
    Comment 4: SG&A Calculation
    The petitioners claim that Ponds' SG&A calculation is incorrect 
because it includes net financial income and the Department allows 
short-term interest income as an offset only up to the amount of 
financial expense. The petitioners argue that the Department should 
adjust the reported SG&A expenses using the methodology outlined in its 
October 29, 1998, case brief.
    Ponds asserts that its SG&A calculation is correct because it would 
be unfair to include the costs of managing certain investments in its 
SG&A expenses, but then exclude the income generated by the 
investments. Thus, Ponds argues that the Department should either 
exclude both the costs and the revenues associated with these 
investments in the SG&A expense, or include both items.

DOC Position:

    We agree with petitioners that only the short-term portion of 
financial income should be included in Ponds' financial expense 
calculation. Therefore, for purposes of the final determination, we 
have revised Ponds' combined G&A and financial expense rate. First, we 
calculated separate rates for G&A and financial expense. Second, we 
excluded Ponds' financial income because Ponds failed to provide a 
breakdown of the long-or short-term portions. Third, we excluded the 
claimed income related to dividends and investments. The Department 
includes financial expense in its calculation of cost in order to 
account for the company's cost of financing its activities. In 
calculating the company's cost of financing, we recognize that in order 
to maintain its operations and business activities, a company is 
required to maintain a working capital reserve to meet its daily cash 
requirements (e.g., payroll, suppliers, etc.). The Department 
recognizes that the company normally maintains this working capital 
reserve in interest bearing accounts. The Department, therefore, allows 
a company to offset its financial expense with the short-term interest 
income earned on these working capital accounts. The Department does 
not allow a company to offset its financial expense with the income 
earned from investment activities (e.g., long-term interest income, 
capital gains, dividend income). See Gulf States Tube Division Of 
Quanex Corp. v. United States, 981 F.Supp 630 (CIT 1997). 
    Comment 5: Forward Cover Exchange Rates
    Ponds contends that the forward cover contracts Ponds made with its 
bank should be used to calculate the foreign currency exchange rate 
used to convert Ponds' sales revenues, expenses and costs from Indian 
rupees to US dollars, in accordance with 19 CFR 351.415(b). In meeting 
this regulation, Ponds states that its forward cover contracts were 
verified as clearly linked to its sales and thus it meets the necessary 
criteria for applying the contract exchange rate in lieu of the actual 
exchange rate on the date of sale.

DOC Position:

    We agree with Ponds' contention that the exchange rate noted on 
Ponds' forward cover contracts is the appropriate exchange rate for 
converting Ponds' Indian rupee sales revenues and expenses into US 
dollars. At verification, we found that Ponds' foreign cover contracts 
were directly related to its sales. Specifically, we traced each 
contract to invoices, bills of lading and bank advices (see Ponds' 
Verification Report at 29-30 and Verification Exhibit 33). Therefore, 
according to the Departments' practice, in the final determination we 
have used the exchange rate specified in the forward sales agreement 
instead of the actual exchange rate on the date of sale in making all 
currency conversions (see Final Determination of Sales at Less than 
Fair Value: Large Power Transformers from France,  60 FR 62808-809, 
December 7, 1995).
    Comment: Facts Available for Packing Costs
    The petitioners claim that the Department found various 
discrepancies in Ponds' sales reporting that reflect systematic errors 
which undermine the reliability of Ponds' data. In particular, the 
petitioners cite an allegedly significant, systematic error in the 
reporting of Ponds' packing costs, and argue that the Department should 
reject the reported costs and instead apply adverse facts available.
    Ponds replies that the petitioners have exaggerated minor, 
innocuous corrections that Ponds presented to the Department at the 
commencement of verification. According to Ponds, verification 
demonstrated that its data is reliable and contained very few errors. 
Ponds states that the packing cost correction cited by the petitioners 
resulted from a single error involving a single number, and not any 
``systematic'' unreliability; therefore, Ponds maintains that 
petitioners' assertions should be rejected.

DOC Position:

    We disagree with petitioners. For purposes of the final 
determination, we have used Ponds' sales data in general and packing 
costs in particular, as revised based on verification findings and 
noted elsewhere in this notice, rather than facts available as argued 
by petitioner. At the request of the Department (see Ponds Verification 
Outline at page 2 dated August 27, 1998), Ponds presented corrections 
to minor errors found during preparation for verification. Department 
officials were able to verify all corrections noted including those 
related to packing costs (see Ponds' October 21, 1998 Verification 
Report at page 2 and at Verification Exhibit 1). Accordingly, the 
Department has determined that the application of adverse facts 
available for Ponds' identified packing costs or otherwise is not 
warranted.

[[Page 72253]]

Agro Dutch Comments

    Comment 7: Whole Mushroom Size as a Product Matching Characteristic
    Agro Dutch argues that the Department should include whole mushroom 
size as a product matching criterion. Agro Dutch states that it 
considers mini mushrooms to be a premium product and while Ponds may 
consider these mushrooms to be a substandard product, both Indian 
respondents agree that the size of the whole mushroom affects pricing 
and marketing. In support of its contention, Agro Dutch points to its 
sales reporting, which shows that its mini mushrooms sales prices are 
higher than its other mushroom prices. Thus, Agro Dutch argues, the 
Department should not compare mini mushrooms to larger mushrooms.
    The petitioners contend that Agro Dutch's claims are not supported 
by the record as there is no record evidence that the actual size of 
the fresh mushroom is a significant characteristic of preserved 
mushrooms. The petitioners state that the mushroom style, i.e., whole, 
sliced, or PNS, already incorporates the important and relevant size 
characteristics for the preserved mushroom product.

DOC Position:

    We disagree with Agro Dutch and continue to find an insufficient 
basis on the record to include whole mushroom size as a product 
matching criterion. Of all of the respondents in the three concurrent 
preserved mushrooms investigations from India, Chile, and Indonesia, we 
note that only Agro Dutch has argued that mushroom size must be 
accounted for in the product matching characteristics. Moreover, we 
have determined that there are no cost differences associated with the 
physical size of the mushroom. Rather, we found that Agro Dutch prices 
its mushrooms based on the physical size of the mushroom because of the 
labor involved. While Ponds does identify minis as a product type, as 
noted above in Comment 1, Ponds considers these mushrooms to be 
substandard products, in contrast to Agro Dutch's classification of 
minis as premium product. As also noted in Comment 1, we found no basis 
on which to treat minis differently with regard to cost accounting, and 
that mushroom growing costs (with the exception of packing labor) 
should be allocated on a weight-basis, rather than NRV. Thus, there is 
no reason to assign different costs to a whole mushroom solely for its 
different physical size. While one respondent out of all of the 
respondents involved in the market economy preserved mushroom 
investigations sells minis at higher prices relative to other 
mushrooms, the development of a successful market niche for one company 
is not, in itself, a basis for establishing a separate product 
characteristic.
    Comment 8: Startup Adjustment
    Agro Dutch claims that the Department should grant it a startup 
cost adjustment in accordance with Section 773(f)(1)(C) of the Act for 
its 50 percent expansion of growing rooms in a stand-alone facility 
during the POI. Agro Dutch states that these additional growing rooms 
began production during the POI and their construction constitutes the 
``major undertaking'' contemplated in the SAA at 166 for granting the 
startup adjustment.
    The petitioners state that Agro Dutch has failed to demonstrate its 
eligibility for a startup adjustment because the claim is based on the 
expansion of its existing mushroom growing facilities, rather than on a 
new production facility or production of a new product, as required 
under section 773(f)(1)(C) of the Act. In addition, the petitioners 
argue that the decline in production levels experienced at that time 
were related to ongoing improvements to existing facilities, rather 
than adjustments for the operation of a new facility. Further, the 
petitioners contend that Agro Dutch has failed to demonstrate that the 
lower mushroom yield rates it may have experienced were the result of 
technical factors associated with the allegedly new facility, as 
required by the statute.

DOC Position:

    We disagree with Agro Dutch that a startup adjustment is warranted 
in this case. 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'' during the POI. Based on our analysis of the information 
Agro Dutch submitted to support its claim, we have determined that Agro 
Dutch's production expansion of its operations does not satisfy these 
criteria.
    Agro Dutch's production operations were only expanded by one third 
during the POI. The SAA at 166 states that ``[m]ere improvements to 
existing products or ongoing improvements to existing facilities will 
not qualify for a startup adjustment'' (emphasis added). Agro Dutch's 
original production operations were several years old at the start of 
the POI. Agro Dutch added two new sections of growing houses, only one 
of which was used for production during the POI. Agro Dutch made no 
claim that commercial production levels at the preexisting operations 
were limited by any technical factors associated with the new capacity. 
In addition, Agro Dutch's start-up claim is addressed only with respect 
to the first of the two new sections of growing houses.
    Furthermore, Agro Dutch claims that commercial production levels in 
the new sections were limited by technical factors. First, we do not 
think that the expansion of capacity by one third rises to the level of 
expansion contemplated by the language in the SAA. The SAA at 166 
states that ``Commerce also will not consider an expansion of the 
capacity of an existing production line to be a start-up operation 
unless the expansion constitutes such a major undertaking that it 
requires the construction of a new facility and results in a depression 
of production levels due to technical factors associated with the 
initial phase of commercial production of the expansion facilities.'' 
Second, the technical factors cited by Agro Dutch did not appear to 
limit commercial production levels. Agro Dutch argues that after the 
new sections were completed, the environmental conditions inside the 
growing houses had to be adjusted in order for production levels to 
rise to the levels of the preexisting growing houses. While we do not 
take issue with this assertion, we note that the SAA states that ``the 
attainment of peak production levels will not be the standard for 
identifying the end of the start-up period, because the start-up period 
may end well before a company achieves optimum capacity utilization.'' 
Although production levels at the growing houses in question were not 
at their peak levels, Agro Dutch was able to produce sizable quantities 
of mushrooms.
    We note that Agro Dutch failed to establish that its production 
levels during the POI were limited by technical factors associated with 
the initial phase of production in accordance with section 
773(f)(1)(C)(ii)(II) of the Act. Specifically, Agro Dutch has provided 
insufficient evidence to support a claim that production levels were 
limited by technical factors. The only information provided by Agro 
Dutch to support its claim that POI production levels were limited is a 
comparison of its production yields to yields of its preexisting 
growing houses. The SAA, however, does not refer to quality of 
merchandise produced or the efficiency

[[Page 72254]]

of production operations as a criterion for measuring production 
levels. The SAA at 166 directs the Department to examine the number of 
units processed as a primary indicator of production levels in 
determining the end of the start-up period. See also SRAMS from Taiwan 
at 8930. In other words, the Department must look at processed units, 
not output yields. Agro Dutch provided no information, for example, on 
historical production or capacity usage at its facilities to serve as a 
benchmark for measuring commercial production levels during the POI. 
The only evidence Agro Dutch submitted was a comparison of its yields 
to the yields at its pre-existing growing houses, asserting that such 
levels are not indicative of commercial production levels. Moreover, we 
note that under a comparative yield approach, a respondent may never 
leave the start-up phase because it may never reach comparative yields.
    Section 773(f)(1)(C)(ii) of the Act establishes that both prongs of 
the startup test must be met to warrant a startup adjustment. In this 
case, we find that Agro Dutch has failed both prongs of the test and, 
accordingly, we have denied Agro Dutch's claim for a start-up 
adjustment.
    Comment 9: Allocation of Costs Based on Mushroom Size-Based Yields
    Agro Dutch contends that its COP should be allocated based on yield 
factors reflecting the various mushrooms it grows. Specifically, Agro 
Dutch contends that higher harvesting and material costs should be 
allocated to mini mushrooms which have a smaller yield than the larger 
mushrooms. In support of its argument, Agro Dutch refers to on-site 
experiments conducted at verification which it claims demonstrated the 
different yield factors based on whole mushroom size.
    The petitioners claim that a yield factor reported by Agro Dutch 
derived from an experiment solely for the purpose of this investigation 
does not demonstrate that yield factors have any impact on raw material 
costs. While the petitioners may agree that labor costs may differ 
depending on the size of the fresh mushroom picked, they contend that 
Agro Dutch provided no evidence that the cost of production for any of 
the growing materials varies by the size of the mushroom. Moreover, the 
petitioners state that, as indicated in the verification report, Agro 
Dutch's financial records do not rely on yield factors to allocate 
costs in its normal course of business; rather, Agro Dutch tracks costs 
on an overall basis without regard to per-unit costs for any specific 
type of preserved mushroom product.

DOC Position:

    We agree with Agro Dutch, in part. Agro Dutch argues that it is 
more efficient to grow the larger size mushrooms than it is for them to 
grow smaller mushrooms. Therefore, Agro Dutch reasons that a greater 
amount of costs must be allocated to smaller sized mushrooms. Agro 
Dutch accomplishes this shifting of costs through the use of estimated 
growing yields. While we agree with Agro Dutch that, as demonstrated at 
verification, the time required to pick the smaller mushrooms was 
longer than the time needed to pick the larger sizes, we disagree that 
there is a significant, if any, growing cost difference between sizes 
of mushrooms.
    As discussed in Comment 1, above, in accordance with section 
773(f)(1)(A) of the Act, the Department normally relies on data from a 
respondent's books and records where those records are prepared in 
accordance with the home country's GAAP, and where they reasonably 
reflect the costs of producing the merchandise. However, in those 
instances where it is determined that a company's normal accounting 
practices result in a mis-allocation of production costs, the 
Department will adjust the respondent's costs or use alternative 
calculation methodologies that more accurately capture the actual costs 
incurred to produce the merchandise. Agro Dutch does not have an 
established cost accounting system that allocates costs between 
products and, therefore, for purposes of this investigation, Agro Dutch 
developed a reporting methodology. Agro Dutch chose to allocate costs 
to different size ranges of mushrooms produced based on certain 
estimated product yield factors. At the request of the Department, Agro 
Dutch submitted a revised response which allocated costs using a 
weight-based methodology.
    As also noted in Comment 1, ``when determining the appropriate 
method for allocating costs among products, the Department may take 
into account production quantities, relative sales values, and other 
quantitative and qualitative factors associated with the manufacture 
and sale of the subject merchandise and the foreign like product.'' For 
purposes of the final determination, we rejected Agro Dutch's yield-
based allocation methodology for materials and other non-picking labor 
costs because the method relies purely on estimates of the mushroom 
yield factors for each size range, and because the cost per kilogram of 
growing a large or small mushroom is identical. We disagree with Agro 
Dutch that it is more efficient to grow a larger versus a smaller 
mushroom. Mushrooms in India are grown in large bags that contain the 
compost, mushroom fungus and other necessary materials. These bags are 
stored in large growing houses where the climate is controlled. Since 
three to four pickings can be made from any given bag, a company like 
Ponds' may choose to have shorter periods of time between the picking 
of each ``flush,'' in order to ensure that the harvests are 
predominantly small-to-medium sized mushrooms. Alternatively, a company 
like Agro Dutch may choose to wait longer between pickings, in order to 
ensure that the harvests are predominantly medium-to-large sized 
mushrooms. Thus, companies have some control over the relative sizes of 
mushrooms produced. While a weight-based allocation may not be perfect 
(i.e., because on a per-mushroom basis slightly more costs are applied 
to a larger mushroom, given that a larger mushroom will produce more 
kilograms of products) we do not find this to be a substantial problem. 
Within the normal mushroom size ranges and given the nature of the 
production growing process, we consider weight-based allocation 
reasonable.
    Therefore, it is the Department's position that the per-kilogram 
materials, non-picking labor, and overhead costs, within the normal 
ranges of mushroom sizes, are virtually identical, irrespective of the 
minor variations in the size of the specific mushroom. First, there is 
very little growing time difference between a 15-20 millimeter mushroom 
and a 35-45 millimeter mushroom. Second, different size mushrooms grow 
side-by-side, incurring the identical costs (i.e., materials, non-
picking labor, and overhead). Third, the mushroom companies limit the 
outlying sizes (i.e., under 15 mm and over 45 mm) because smaller than 
15 mm is considered scrap and greater than 45 mm have open gills and 
become too fibrous. Furthermore, it is reasonable to derive cost on the 
basis of weight because: (1) both Ponds and Agro Dutch track the 
mushrooms through the production process by weight, not by number of 
mushrooms, estimated yields, or by relative sales value; (2) mushrooms 
are sold by weight; (3) virtually the same activities and expenses are 
incurred in growing each kilogram; and (4) regardless of whether the 
mushrooms are sold as preserved or fresh product, wholes or PNS, they 
are substantially the same product. Simply stated, the cost-generating 
elements of growing mushrooms for both preserved and fresh, whole or 
pieces, large or small mushrooms are identical as evidenced

[[Page 72255]]

by the fact that a considerable quantity of mushrooms initially 
selected for the fresh sales market were eventually canned, and canned 
whole mushrooms may be re-processed into PNS.
    Finally, the Department has accounted for specific cost 
differences, such as differences in picking costs, supported by our 
observations that additional time was required to harvest the smaller 
mushrooms. On this basis, consistent with Mushrooms from Chile, we 
continue to rely upon a weight-based methodology because, while 
ignoring differences in aesthetics and quality, it reasonably reflects 
the costs of producing the subject merchandise. See IPSCO, Salmon from 
Chile, Flowers from Colombia as cited in Comment 1.

Continuation of Suspension of Liquidation

    In accordance with section 735(c)(1)(B) of the Act, we are 
directing the Customs Service to continue to suspend liquidation of all 
imports of subject merchandise that are entered, or withdrawn from 
warehouse, for consumption on or after August 5,1998 (the date of 
publication of the preliminary determination in the Federal Register). 
The Customs Service shall continue to require a cash deposit or the 
posting of a bond equal to the weighted-average amount by which the NV 
exceeds the EP, as indicated in the chart below. The 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
------------------------------------------------------------------------
Agro Dutch Foods Limited....................................        6.28
Ponds India, Ltd............................................       14.19
Alpine Biotech Ltd..........................................      243.87
Mandeep Mushrooms Ltd.......................................      243.87
All Others..................................................      10.87
------------------------------------------------------------------------
Note: The margins based on facts available were not included in the
  calculation of the All Others rate in accordance with 735(c)(5)(A) of
  the Act.

ITC Notification

    In accordance with section 735(d) of the Act, we have notified the 
International Trade Commission (ITC) of our determination. As our final 
determination is affirmative, the ITC will, within 45 days, determine 
whether these imports are materially injuring, or threaten material 
injury to, the U.S. industry. If the ITC determines that material 
injury, or threat of material injury does not exist, the proceeding 
will be terminated and all securities posted will be refunded or 
canceled. If the ITC determines that such injury does exist, the 
Department will issue an antidumping duty order directing Customs 
officials to assess antidumping duties on all imports of the subject 
merchandise entered for consumption on or after the effective date of 
the suspension of liquidation.
    This determination is issued and published in accordance with 
sections 735(d) and 777(i)(1) of the Act.

    Dated: December 18, 1998.
Richard W. Moreland,
Acting Assistant Secretary for Import Administration.
[FR Doc. 98-34703 Filed 12-30-98; 8:45 am]
BILLING CODE 3510-DS-P