[Federal Register Volume 64, Number 130 (Thursday, July 8, 1999)]
[Notices]
[Pages 36844-36847]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-17394]


-----------------------------------------------------------------------

DEPARTMENT OF COMMERCE

International Trade Administration
[A-614-801]


Fresh Kiwifruit From New Zealand: Preliminary Results of 
Antidumping Duty Administrative Review

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

ACTION: Notice of preliminary results of antidumping duty 
administrative review.

-----------------------------------------------------------------------

SUMMARY: The Department of Commerce is conducting an administrative 
review of the antidumping duty order on fresh kiwifruit from New 
Zealand in response to a request by the respondent, the New Zealand 
Kiwifruit Marketing Board, the sole exporter of the subject merchandise 
to the United States. The review covers the period June 1, 1997, 
through May 31, 1998.
    We preliminarily determine that sales have been made below normal 
value. Interested parties are invited to comment on these preliminary 
results. If these preliminary results are adopted in our final results 
of administrative review, we will instruct the Customs Service to 
assess antidumping duties on entries subject to this review.

EFFECTIVE DATE: July 8, 1999.

FOR FURTHER INFORMATION CONTACT: Sunkyu Kim or John P. Maloney, Jr., 
Office 2, AD/CVD Enforcement Group I, Import Administration--Room B099, 
International Trade Administration, U.S. Department of Commerce, 14th 
Street and Constitution Avenue, N.W., Washington, D.C. 20230; 
telephone: (202) 482-2613 or (202) 482-1503, respectively.

SUPPLEMENTARY INFORMATION:

The Applicable Statute and Regulations

    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's (the 
Department's) regulations are to the current regulations at 19 CFR part 
351 (April 1998).

Background

    On June 10, 1998, the Department published in the Federal Register 
a notice of ``Opportunity to Request an Administrative Review'' of the 
antidumping duty order on fresh kiwifruit from New Zealand (63 FR 
31717).
    In accordance with 19 CFR 351.213(b)(1), on June 29, 1998, the New 
Zealand Kiwifruit Marketing Board (NZKMB) requested an administrative 
review of the antidumping duty order covering the period June 1, 1997, 
through May 31, 1998. NZKMB also requested revocation of the 
antidumping order, in accordance with 19 CFR 351.222(b)(1). On July 28, 
1998, the Department initiated an administrative review for NZKMB (63 
FR 40258).
    On July 21, 1998, the California Kiwifruit Commission (the 
petitioner) submitted a letter objecting to NZKMB's request for 
revocation. The petitioner argued that NZKMB failed to satisfy the 
regulatory requirements for seeking revocation and urged the Department 
to reject NZKMB's revocation request in this administrative review. 
Subsequently, on September 23, 1998, NZKMB withdrew its request for 
revocation of the antidumping duty order at the conclusion of this 
review.
    On August 20, 1998, the Department issued the antidumping 
questionnaire to NZKMB. NZKMB submitted responses to sections A through 
D of the antidumping questionnaire on October 19, 1998 and February 22, 
1999. The Department issued its supplemental questionnaires and 
received responses to the questionnaires in April 1999.
    During May 1999, the Department conducted verifications of the 
sales and cost responses of NZKMB and individual kiwifruit growers. On 
June 24, 1999, NZKMB submitted revised sales and cost of production 
databases incorporating changes resulting from the verifications.
    The Department is conducting this review in accordance with section 
751(a) of the Act.

Scope of Review

    The product covered by this review is fresh kiwifruit. Processed 
kiwifruit, including fruit jams, jellies, pastes, purees, mineral 
waters, or juices made from or containing kiwifruit are not covered 
under the scope of this review. This merchandise is currently 
classifiable under Harmonized Tariff Schedule of the United States 
(HTSUS) subheading 0810.90.20.60. Although the HTSUS subheading is 
provided for convenience and customs purposes, the written description 
of the scope of this proceeding is dispositive.

Verification

    As provided in section 782(i) of the Act, we verified the 
information provided by NZKMB. We used standard verification 
procedures, including on-

[[Page 36845]]

site inspection of the respondent's facilities and examination of 
relevant sales and financial records. Based on the Department's 
verification findings, we made certain changes to the sales and cost 
data submitted by the respondent used to calculate the preliminary 
margin. Our verification results are outlined in the verification 
reports placed in the case file.

Normal Value Comparisons

    To determine whether sales of fresh kiwifruit to the United States 
were made at less than normal value (NV), we compared the constructed 
export price (CEP) to the NV for NZKMB, as specified in the 
``Constructed Export Price'' and ``Normal Value'' sections of this 
notice.
    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 the Review'' section of this notice, above, that were 
sold in the ordinary course of trade for purposes of determining 
appropriate product comparisons to U.S. sales.

Level of Trade

    In accordance with section 773(a)(1)(B) of the Act, to the extent 
practicable, we determine NV based on sales in the comparison market at 
the same level of trade (LOT) as the export price (EP) or CEP 
transaction. The NV LOT is that of the starting-price sales in the 
comparison market or, when NV is based on constructed value (CV), that 
of the sales from which we derive selling, general and administrative 
(SG&A) expenses and profit. For EP, the LOT is also the level of the 
starting-price sale, which is usually from exporter to importer. For 
CEP, it is the level of the constructed sale from the exporter to the 
importer.
    To determine whether NV sales are at a different LOT than EP or 
CEP, we examine stages in the marketing process and selling functions 
along the chain of distribution between the producer and the 
unaffiliated customer in the comparison market. If the comparison-
market sales are at a different LOT and the difference affects price 
comparability, as manifested in a pattern of consistent price 
differences between the sales on which NV is based and comparison-
market sales at the LOT of the export transaction, we make an LOT 
adjustment under section 773(a)(7)(A) of the Act. Finally, for CEP 
sales, if the NV level is more remote from the factory than the CEP 
level and there is no basis for determining whether the difference in 
the levels between NV and CEP affects price comparability, we adjust NV 
under section 773(a)(7)(B) of the Act (the CEP-offset provision). See 
Notice of Final Determination of Sales at Less Than Fair Value: Certain 
Cut-to-Length Carbon Steel Plate from South Africa, 62 FR 61731 
(November 19, 1997).
    NZKMB claimed that it made home market sales at two levels of trade 
based on the channel of distribution (i.e., sales to a distributor on a 
consignment basis and direct sales to wholesale or retail customers). 
In the U.S. market, NZKMB reported only CEP sales made through one 
channel of distribution and claimed one level of trade (the CEP level 
of trade). NZKMB argued that a CEP offset is warranted in this case 
because neither of its two claimed home market levels of trade is 
similar to the U.S. CEP level of trade, and the home market levels are 
more remote from the factory than the CEP level. Accordingly, we have 
performed an analysis of the information on the record to determine 
whether a LOT adjustment, or in the alternative, a CEP offset, is 
warranted.
    In order to determine whether NV was established at a different LOT 
than CEP sales, we examined stages in the marketing process and selling 
functions along the chains of distribution between NZKMB and its home 
market customers. We compared the selling functions performed for home 
market sales with those performed with respect to the CEP transactions, 
exclusive of economic activities occurring in the United States, 
pursuant to section 772(d) of the Act, to determine whether the home 
market levels of trade constituted more advanced stages of distribution 
than the CEP level of trade.
    Based on an analysis of the information on the record, we found 
that NZKMB made sales in the home market at one LOT, with two types of 
sales within that level: sales through a distributor and direct sales 
to wholesale or retail customers. We examined the selling functions 
performed for both types of sales and found that NZKMB, and its 
marketing subsidiary Zespri, performed minimal selling functions for 
both types of sales in the home market. Through its packhouse and 
coolstore providers, NZKMB provides quality checking services 
supporting all home market sales. In addition, Zespri provides some 
advertising and customer support for home market sales to its 
distributor. However, for sales made to its distributor, which 
constitute the vast majority of home markets sales, the distributor 
handles the bulk of the services and selling functions after delivery 
from the coolstore, and Zespri ``does not provide technical advice, 
warranty services, freight or delivery arrangements, direct advertising 
support to the distributor (except for general brand-enhancement 
advertising), or any other sales support services.'' See NZKMB's 
October 19, 1998, submission at page A-17. Similarly, for the few 
direct sales to its customers, NZKMB maintains the fruit in coolstore 
until sale and provides quality control through its coolstore 
providers, but Zespri provides no subsequent sales support activities 
besides general advertising and customer support. Given the minimal 
level of reported selling functions for both types of sales in the home 
market, we preliminarily determine that the selling functions for both 
sales types are sufficiently similar to justify only one LOT in the 
home market.
    Because all U.S. sales were CEP sales, the LOT for such sales is 
the level of the constructed sale from the exporter to the importer. We 
examined the selling functions performed by NZKMB and Zespri for U.S. 
CEP sales and preliminarily determine that they are made at the same 
LOT as home market sales. As with home market sales, NZKMB provides 
quality checking services in support of U.S. sales through their 
packhouse and coolstore providers. In addition, Zespri staff in New 
Zealand provide some support for U.S. sales including promotional 
information and strategic advice on sales and marketing tactics. See 
NZKMB verification report memorandum for Louis Apple from James Maeder 
and John Maloney, dated June 14, 1999. The majority of selling function 
support for U.S. sales occurs in the United States, performed by 
Zespri's affiliated North American selling agent, and are not 
considered for comparison purposes. Thus, similar to home market sales, 
Zespri performs a limited number of selling functions in New Zealand in 
support of the constructed U.S. CEP sales, including the quality and 
condition checking services performed for all kiwifruit sales. 
Furthermore, a comparison between the reported indirect selling 
expenses in New Zealand for U.S. sales and the reported indirect 
selling expenses for home market sales indicated no substantial 
quantitative difference in the level of selling functions. As a result, 
we find that the quantity and quality of selling functions performed by 
NZKMB and Zespri in support of the constructed U.S. sales are 
comparable to the selling functions performed in support of home market 
sales. Therefore, our analysis of the chains of distribution and 
selling functions performed for all sales in the home market and CEP 
sales in the U.S.

[[Page 36846]]

market indicates that both are made at the same stage in the marketing 
process.
    Because of the analogous levels of selling functions and stages in 
the chains of distribution between home market sales and constructed 
U.S. sales, we find that sales in both markets were made at the same 
LOT. Therefore, no LOT adjustment or CEP offset is warranted in this 
case.

Constructed Export Price

    For all U.S. sales made by NZKMB, we used CEP, in accordance with 
section 772(b) of the Act, because the sales were made to the first 
unaffiliated party in the United States after importation. We 
calculated CEP based on packed F.O.B. (ex-New Zealand coolstore) and 
delivered prices. We made deductions, where appropriate, for foreign 
inland freight (coolstore to port), pre-sale warehousing expenses, 
transportation insurance expenses (including inland and marine 
insurance), foreign brokerage and handling expenses, ocean freight, 
U.S. brokerage and handling, U.S. inland freight, U.S. coolstore 
expenses, and U.S. Customs fees, in accordance with section 772 
(c)(2)(A) of the Act.
    In accordance with sections 772(d)(1) and (2) of the Act, we made 
additional deductions, where appropriate, for commissions, credit 
expenses, direct advertising expenses, U.S. indirect selling expenses, 
U.S. inventory carrying costs, and U.S. repacking costs. We also made 
an adjustment for profit, in accordance with section 772(d)(3) of the 
Act. Finally, we increased the U.S. price to account for post-sale 
price adjustments not reflected in the gross price.

Normal Value

    In order to determine whether there were sufficient sales of 
kiwifruit in the home market to serve as a viable basis for calculating 
NV, we compared the volume of NZKMB's home market sales of the foreign 
like product to the volume of U.S. sales of subject merchandise, in 
accordance with section 773(a)(1)(B) of the Act. Based on this 
comparison, we determined that NZKMB had a viable home market during 
the period of review (POR) (i.e., June 1, 1997 through May 31, 1998). 
Consequently, we based NV on home market sales.
    Pursuant to section 773(b)(2)(A)(ii) of the Act, there were 
reasonable grounds to believe or suspect that NZKMB had made home 
market sales at prices below the cost of production (COP) in this 
review because the Department had disregarded sales below the COP in 
the most recently completed administrative review. See Fresh Kiwifruit 
from New Zealand: Final Results of Antidumping Duty Administrative 
Review, 61 FR 46438 (September 3, 1996) (Kiwifruit Third Review). 
Therefore, pursuant to section 773(b)(1) of the Act, we initiated an 
investigation to determine whether the respondent made home market 
sales during the POR at prices below the COP. We followed the 
Department's determinations in the original investigation and the prior 
administrative reviews that, in comparing NV to COP, the reseller's or 
exporter's acquisition prices are irrelevant because section 773(b) of 
the Act requires that the Department look at the actual COP of the 
subject merchandise. Accordingly, we used the costs incurred by 
kiwifruit growers, the actual producers of the subject merchandise, to 
calculate the COP.
    Due to the large number of growers from which the NZKMB purchased 
kiwifruit during the POR, the Department determined that sampling was 
both administratively necessary and methodologically appropriate to 
calculate a representative cost of producing the subject merchandise 
for purposes of this administrative review. See section 777A of the 
Act. We selected the sample of kiwifruit growers by first 
geographically segregating farms into two regions: the Bay of Plenty 
region and the non-Bay of Plenty region. In selecting the sample of 
twenty growers, we selected sixteen growers representing the Bay of 
Plenty region and four from the non-Bay of Plenty region in order to 
accurately reflect the relative proportion of kiwifruit production from 
each of the two regions. Because the Department's purpose is to 
estimate the average unit cost per tray of exported kiwifruit, as a 
second step, we have assigned selection probabilities to the growers on 
the basis of the volume of kiwifruit each grower submitted to the NZKMB 
for export. We sent the COP/CV questionnaires through the NZKMB to the 
twenty selected kiwifruit growers and received responses to the 
Department's questionnaire from all twenty selected growers. We 
verified the COP/CV data provided by four of the twenty selected 
growers.
    We calculated each grower's cultivation cost by summing all costs 
for the 1997-1998 kiwifruit season. These costs included cost of 
materials, farm labor, farm overhead, and packing. We allocated the 
cultivation cost on a per-tray equivalent basis over the total number 
of tray equivalents submitted by each grower to the NZKMB. A tray 
equivalent is a standard unit of measurement for kiwifruit which 
represents the amount of kiwifruit which can fit into a standard 
packing tray. We adjusted these per-tray costs to reflect fruit loss 
and then added the NZKMB's G&A and interest expenses to the farm's 
average cost per tray.
    The orchard set-up costs for all growers were amortized over twenty 
years as was done in prior reviews. Where growers purchased an 
established orchard, the acquisition price of the farm was treated as 
the set-up cost.
    Except as follows, we relied on the COP data submitted on June 24, 
1999, which incorporates the revised COP data of the three verified 
growers based on information obtained at verification. With respect to 
the COP and packing data provided by the remaining growers that were 
not verified, we adjusted their reported COP and packing data to 
reflect the adjusted COP and packing amounts of the three verified 
growers, based on our findings at the verifications. Specifically, for 
each of the three growers we verified, we calculated the difference 
between the reported COP and packing expense and the revised COP and 
packing expense based on the verification findings. We then increased 
the COP and packing expense amounts reported by the remaining, 
unverified growers by the average percentage difference between the 
revised and reported COPs and packing amounts of the three verified 
growers. See Preliminary Results Calculation Memorandum dated June 30, 
1999. We then calculated a simple average COP and packing expense from 
the sampled growers' individual COPs and packing expenses, as revised. 
The total COP was calculated on a New Zealand dollar per single-layer 
tray (NZ$/SLT) equivalent basis. We compared the COP figures to home 
market prices of the foreign like product, as required under section 
773(b) of the Act, in order to determine whether these sales had been 
made at prices below the COP. On a product-specific basis, we compared 
the COP to home market prices, less any applicable movement charges, 
and direct and indirect selling expenses.
    In determining whether to disregard home market sales made at 
prices below the COP, we examined whether such sales were made: (1) In 
substantial quantities within an extended period of time; and (2) at 
prices which permitted the recovery of all costs within a reasonable 
period of time in the normal course of trade, pursuant to section 
773(b)(1) of the Act.
    Pursuant to section 773(b)(2)(C) of the Act, where less than 20 
percent of NZKMB's sales of a given product were at prices less than 
the COP, we did not disregard any below-cost sales of that

[[Page 36847]]

product because we determined that the below-cost sales were not made 
in ``substantial quantities.'' Where 20 percent or more of NZKMB's 
sales of a given product were at prices less than the COP, we 
determined such sales to have been made in ``substantial quantities'' 
within an extended period of time in accordance with section 
773(b)(2)(B) of the Act. In such cases, we also determined that such 
sales were not made at prices which would permit recovery of all costs 
within a reasonable period of time, in accordance with section 
773(b)(2)(D) of the Act. Therefore, we disregarded the below-cost 
sales.
    We found that all of NZKMB's home market sales were at prices less 
than COP. We, therefore, disregarded all home market sales and based NV 
on CV in accordance with section 773(a)(4) of the Act.
    In accordance with section 773(e)(1) of the Act, we calculated CV 
based on the sum of the respondent's cost of materials, fabrication, 
SG&A, profit and U.S. packing costs. Section 773(e)(2)(B) of the Act 
states that in the absence of above-cost sales of a foreign like 
product, SG&A and profit shall be based on (i) expenses and profit of 
the respondent's other products, or (ii) the expenses and profit of 
other producers subject to the antidumping investigation or review, or 
(iii) any other reasonable method. The first two alternatives are not 
available in this case, since NZKMB sells no other products and there 
are no other New Zealand exporters subject to this review. Therefore, 
we must rely on ``other reasonable'' methods. In this case, NZKMB 
earned no profits on home market sales and we have no other information 
on the record with respect to profit earned in the home market. 
Therefore, consistent with the methodology used in the most recent 
prior review of this proceeding, as facts available, we used the 
profits realized at the grower level. In this instance, we used the 
average profit of the twenty sampled growers as the profit figure in 
our margin calculations. With respect to selling expenses, we have used 
the selling expenses associated with the home market sales. See Fresh 
Kiwifruit from New Zealand: Amended Final Results of Antidumping Duty 
Administrative Review, 62 FR 47440 (September 9, 1997).
    In comparing CEP to CV, we made circumstance-of-sale adjustments, 
where appropriate, for differences in credit expenses and advertising 
expenses, in accordance with sections 773(a)(6)(C)(iii) and 773(a)(8) 
of the Act. With respect to commissions, where applicable, we offset 
any commission paid on a U.S. sale by reducing the NV by the amount of 
home market indirect selling expenses, including inventory carrying 
costs, up to the amount of the U.S. commission, in accordance with 19 
CFR 351.410(e).

Currency Conversion

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

Preliminary Results of Review

    As a result of our review, we preliminarily determine that the 
following margin exists for the period June 1, 1997, through May 31, 
1998:

------------------------------------------------------------------------
                                                                Percent
                    Manufacturer/exporter                        margin
------------------------------------------------------------------------
New Zealand Kiwifruit Marketing Board........................       4.66
------------------------------------------------------------------------

    Interested parties may request a hearing within 30 days of the 
publication of this notice. See 19 CFR 351.310(c). Any hearing, if 
requested, will be held 37 days after the date of the publication of 
this notice, or the first workday thereafter. Interested parties may 
submit case briefs within 30 days of publication. Rebuttal briefs, 
limited to issues raised in the case briefs, may be filed not later 
than 35 days after the date of publication. Parties who submit case 
briefs or rebuttal briefs in this proceeding are requested to submit 
with each argument (1) a statement of the issue and (2) a brief summary 
of the argument. Parties are also encouraged to provide a summary of 
the arguments not to exceed five pages and a table of statutes, 
regulations, and cases cited.
    The Department will subsequently issue a notice of the final 
results of this administrative review, which will include the results 
of its analysis of issues raised in any such written briefs not later 
than 120 days after the date of publication of this notice.
    The Department shall determine, and the Customs Service shall 
assess, antidumping duties on all appropriate entries. We have 
calculated an importer-specific assessment rate based on the ratio of 
the total amount of antidumping duties calculated for the examined 
sales made during the POR to the total entered value of the examined 
sales. This rate will be assessed uniformly on all entries of that 
particular importer made during the POR. The Department will issue 
appraisement instructions directly to the Customs Service.
    Further, the following deposit requirements will be effective for 
all shipments of fresh kiwifruit from New Zealand entered, or withdrawn 
from warehouse, for consumption on or after the publication date of the 
final results of this administrative review, as provided for by section 
751(a)(1) of the Act: (1) The cash deposit rate for NZKMB will be the 
rate established in the final results of this review, except if the 
rate is less than 0.50 percent and, therefore, de minimis within the 
meaning of 19 CFR 351.106, the cash deposit will be zero; (2) for 
previously reviewed or investigated companies not listed above, the 
cash deposit rate will continue to be the company-specific rate 
published for the most recent period; (3) if the exporter is not a firm 
covered in this review, a prior review, or the less-than-fair-value 
(LTFV) investigation, but the manufacturer is, the cash deposit rate 
will be the rate established for the most recent period for the 
manufacturer of the merchandise; and (4) the cash deposit rate for all 
other manufacturers or exporters will continue to be 98.60 percent, the 
all others rate established in the LTFV investigation.
    These deposit requirements, when imposed, shall remain in effect 
until publication of the final results of the next administrative 
review.
    This notice serves as a preliminary reminder to importers of their 
responsibility under 19 CFR 351.402(f) to file a certificate regarding 
the reimbursement of antidumping duties prior to liquidation of the 
relevant entries during this review period. Failure to comply with this 
requirement could result in the Secretary's presumption that 
reimbursement of antidumping duties occurred and the subsequent 
assessment of double antidumping duties.
    This administrative review and notice are in accordance with 
sections 751(a)(1) and 777(i)(1) of the Act.

    Dated: June 29, 1999.
Richard W. Moreland,
Acting Assistant Secretary for Import Administration.
[FR Doc. 99-17394 Filed 7-7-99; 8:45 am]
BILLING CODE 3510-DS-P