[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 This request was withdrawn on October 29, 1998.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
[[Page 72248]]
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
[[Page 72249]]
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