[Federal Register Volume 66, Number 79 (Tuesday, April 24, 2001)]
[Notices]
[Pages 20630-20633]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-10154]


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DEPARTMENT OF COMMERCE

International Trade Administration

[A-122-837]


Initiation of Antidumping Duty Investigation: Greenhouse Tomatoes 
From Canada

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

EFFECTIVE DATE: April 24, 2001.

FOR FURTHER INFORMATION CONTACT: Mark Ross or Thomas Schauer, Import 
Administration, International Trade Administration, U.S. Department of 
Commerce, 14th Street and Constitution Avenue, NW., Washington, DC 
20230; telephone: (202) 482-4794 or (202) 482-0410, respectively.

SUPPLEMENTARY INFORMATION:

The Applicable Statute and Regulations

    Unless otherwise indicated, all citations to the statute are 
references to the provisions effective January 1, 1995, the effective 
date of the amendments made to the Tariff Act of 1930 (the Act) by the 
Uruguay Round Agreements Act (URAA). In addition, unless otherwise 
indicated, all citations to Department of Commerce's (the Department's) 
regulations are to the provisions at 19 CFR part 351 (2000).

The Petition

    On March 28, 2001, the Department received a petition on imports of 
greenhouse tomatoes filed in proper form by Carolina Hydroponic Growers 
Inc., Eurofresh, HydroAge, Sunblest Management LLC, Sunblest Farms LLC, 
and Village Farms (referred to hereafter as ``the petitioners''). On 
April 2, 2001, the Department requested additional information and 
clarification of certain areas of the petition. The petitioners filed 
supplements to the petition on April 9 and 11, 2001.
    In accordance with section 732(b) of the Act, the petitioners 
allege that imports of greenhouse tomatoes from Canada are being, or 
are likely to be, sold in the United States at less than fair value 
within the meaning of section 731 of the Act and that such imports are 
materially injuring and threaten to injure an industry in the United 
States.
    The Department finds that the petitioners filed this petition on 
behalf

[[Page 20631]]

of the domestic industry because they are interested parties as defined 
in section 771(9)(C) of the Act. Furthermore, the petitioners have 
demonstrated sufficient industry support with respect to the 
antidumping duty investigation they are requesting the Department to 
initiate (see ``Determination of Industry Support for the Petition'' 
below).

Scope of Investigation

    The merchandise subject to this investigation consists of all fresh 
or chilled tomatoes grown in greenhouses in Canada, e.g., common round 
tomatoes, cherry tomatoes, plum or pear tomatoes, and cluster or ``on-
the-vine'' tomatoes. Specifically excluded from the scope of this 
investigation are all field-grown tomatoes.
    The merchandise subject to this investigation may enter under 
0702.00.2000, 0702.00.2010, 0702.00.2030, 0702.00.2035, 0702.00.2060, 
0702.00.2065, 0702.00.2090, 0702.00.2095, 0702.00.4000, 0702.00.4030, 
0702.00.4060, 0702.00.4090, 0702.00.6000, 0702.00.6010, 0702.00.6030, 
0702.00.6035, 0702.00.6060, 0702.00.6065, 0702.00.6090, and 
0702.00.6095 of the Harmonized Tariff Schedule of the United States 
(HTSUS). These subheadings may also cover products that are outside the 
scope of this investigation, i.e., field-grown tomatoes. Although the 
HTSUS subheadings are provided for convenience and customs purposes, 
our written description of the scope of this investigation is 
dispositive.
    During our review of the petition, we discussed the scope with the 
petitioners to ensure that it accurately reflects the products for 
which the domestic industry is seeking relief. Moreover, as discussed 
in the preamble to the Department's regulations (62 FR 27296, 27323), 
we are setting aside a period for interested parties to raise issues 
regarding product coverage. The Department encourages all interested 
parties to submit such comments within 20 calendar days of publication 
of this notice. Comments should be addressed to Import Administration's 
Central Records Unit at Room 1870, U.S. Department of Commerce, 14th 
Street and Constitution Avenue, NW., Washington, DC 20230. The period 
of scope consultations is intended to provide the Department with ample 
opportunity to consider all comments and consult with parties prior to 
the issuance of the preliminary determination.

Determination of Industry Support for the Petition

    Section 732(b)(1) of the Act requires that a petition must be filed 
on behalf of the domestic industry. Section 732(c)(4)(A) of the Act 
provides that a petition meets this requirement if the domestic 
producers or workers who support the petition account for: (1) at least 
25 percent of the total production of the domestic like product; and 
(2) more than 50 percent of the production of the domestic like product 
produced by that portion of the industry expressing support for, or 
opposition to, the petition.
    Section 732(c)(4)(D) of the Act provides that, if the petition does 
not establish support of domestic producers or workers accounting for 
more than 50 percent of the total production of the domestic like 
product, the administering agency shall: (i) poll the industry or rely 
on other information in order to determine if there is support for the 
petition as required by subparagraph (A), or (ii) determine industry 
support using a statistically valid sampling method.
    On April 11 and 12, 2001, potential respondents made submissions 
challenging industry support for the petition pursuant to sections 
732(b)(3) and 732(c)(4)(D) of the Act. They argue that the domestic 
like product is all fresh or chilled tomatoes for the fresh market, 
regardless of whether the tomatoes are grown in a field or in a 
greenhouse. Certain potential respondents argue further that the 
Department should poll the domestic producers of the like product (as 
defined by potential respondents), i.e., all producers of tomatoes for 
the fresh market, in order to determine whether there is sufficient 
industry support for the petition. In addition to their disagreement 
over the petitioners' definition of the domestic like product, these 
potential respondents assert that, in the petitioners' calculation of 
an industry-support percentage, the petitioners underestimated the size 
of the total U.S. industry producing tomatoes for the fresh market. 
Certain potential respondents did not propose that the Department poll 
the U.S. producers of the domestic like product but requested that the 
Department dismiss the petition and terminate the proceeding for lack 
of industry support.
    On April 13 and 16, 2001, the petitioners submitted comments on the 
potential respondents' industry-support challenge. Foremost, the 
petitioners view the comments of the potential respondents as more 
directly related to the like-product analysis and an effort to broaden 
the scope of the domestic like product rather than comment upon 
industry support. The petitioners request that the Department disregard 
the comments of the potential respondents as unrelated to standing with 
respect to the greenhouse tomato industry. The petitioners also assert 
that the arguments submitted by the potential respondents in reference 
to Departmental precedent, the International Trade Commission's (ITC's) 
like-product analysis, standing, and changes in the domestic industry 
are incorrect. On April 16, 2001, the potential respondents replied to 
the petitioners' April 13, 2001, submission and again requested that 
the Department not consider an initiation of an investigation until it 
has polled all producers of tomatoes for the fresh market.
    Section 771(4)(A) of the Act defines the ``industry'' as the 
producers as a whole of a domestic like product. Thus, to determine 
whether the petition has the requisite industry support, the statute 
directs the Department to look to producers and workers who produce the 
domestic like product. The ITC, which is responsible for determining 
whether ``the domestic industry'' has been materially injured, must 
also determine what constitutes a domestic like product in order to 
define the industry. While the Department and the ITC must apply the 
same statutory definition regarding the domestic like product (see 
section 771(10) of the Act), they do so for different purposes and 
pursuant to separate and distinct authority. In addition, the 
Department's determination is subject to limitations of time and 
information. Although this may result in different definitions of the 
domestic like product, such differences do not render the decision of 
either agency contrary to law.\1\
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    \1\ See Algoma Steel Corp. Ltd., v. United States, 688 F. Supp. 
639, 642-44 (CIT 1988), and High Information Content Flat Panel 
Displays and Display Glass from Japan: Final Determination; 
Rescission of Investigation and Partial Dismissal of Petition, 56 FR 
32376, 32380-81 (July 16, 1991).
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    Section 771(10) of the Act defines the domestic like product as ``a 
product which is like, or in the absence of like, most similar in 
characteristics and uses with, the article subject to an investigation 
under this title.'' Thus, the reference point from which the domestic-
like-product analysis begins is ``the article subject to an 
investigation,'' i.e., the class or kind of merchandise to be 
investigated, which normally will be the scope as defined in the 
petition.
    With regard to the definition of domestic like product, in the 
context of this case, we find that considering

[[Page 20632]]

greenhouse tomatoes a distinct domestic like product is reasonable. We 
reached this decision after evaluating the arguments and information 
presented and examining information that we obtained independently. 
Through our analysis we identified several factors that distinguish 
greenhouse tomatoes as a distinct domestic like product. The 
distinctions between tomatoes produced in greenhouses and tomatoes 
produced in a field are found in the production process, cost, pricing, 
and marketing. The petitioners also argued that physical differences 
distinguish greenhouse-grown and field-grown tomatoes.
    With regard to production process, unlike producers of field-grown 
tomatoes, the petitioners produce greenhouse tomatoes in a laboratory-
type situation in which they control the growing environment (e.g., 
temperature, humidity, and, in some cases, light). This enables the 
greenhouse producer to have greater control over quality and results in 
higher yields per acre than field production. Also, the per-acre and 
per-pound cost of production for greenhouse tomatoes is much higher 
than for field-grown tomatoes. This higher cost of production generally 
results in higher pricing than for field-grown tomatoes. To obtain the 
higher prices for their greenhouse tomatoes than the prices for field-
grown tomatoes, it is necessary for the producers of greenhouse 
tomatoes to distinguish their products from the field-grown tomatoes in 
their marketing efforts. These factors support our conclusion that, in 
the context of this case, it is reasonable to conclude that the 
domestic like product, like the scope of the investigation, is limited 
to tomatoes grown in greenhouses.\2\ For more information on our 
analysis and the data upon which we relied see Initiation Checklist, 
Re: Industry Support.
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    \2\ We note that the Department has broad authority to define 
the scope of antidumping duty investigations. See Diversified 
Products Corp. v. United States, 6 CIT 155, 159 (1983). Further we 
acknowledge that the ITC has authority to find a domestic like 
product to be broader or narrower in scope than the class or kind of 
merchandise described by the Department. See Hosiden Corp. et al. v. 
United States, 85 F. 3d 1561, 1563 (Fed. Cir. 1996).
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    We also disagree with the potential respondents' assertion that in 
the petitioners' calculation of an industry-support percentage they 
underestimated the size of the industry producing greenhouse tomatoes. 
To support their assertion that the U.S. industry is larger than that 
identified by the petitioners, the potential respondents cite to an 
estimate by an industry expert of the size of the greenhouse tomato 
industry. In a subsequent submission the petitioners reiterated their 
earlier clarification that this industry expert's figure is overstated. 
Moreover, the petitioners' response is supported by other information 
on the record (see Initiation Checklist, Re: Industry Support).
    The petitioners were not able to locate recent statistics on the 
total production volume or value of the domestic like product, but they 
have sufficiently established that such information is not reasonably 
available to them. Therefore, in accordance with section 351.203(e)(1) 
of the regulations, we have accepted other publicly available 
information as a sufficient measure of current production levels, i.e., 
1998 acreage and sales figures for greenhouse tomato production and the 
petitioners' estimate of 2000 greenhouse tomato acreage. We find the 
acreage and sales information to be reasonably available to the 
petitioners and indicative of production levels.
    Our review of the data provided in the petition and other 
information readily available to the Department indicates that the 
petitioners have established industry support representing over 50 
percent of total production of the domestic like product, requiring no 
further action by the Department pursuant to section 732(c)(4)(D) of 
the Act. In addition, the Department received no opposition to the 
petition from parties other than the potential respondents. Therefore, 
the domestic producers or workers who support the petition account for 
at least 25 percent of the total production of the domestic like 
product, and the requirements of section 732(c)(4)(A)(i) are met. 
Furthermore, the domestic producers or workers who support the petition 
account for more than 50 percent of the production of the domestic like 
product produced by that portion of the industry expressing support for 
or opposition to the petition. Thus, the requirements of section 
732(c)(4)(A)(ii) of the Act also are met. Accordingly, the Department 
determines that the petition was filed on behalf of the domestic 
industry within the meaning of section 732(b)(1) of the Act.

Constructed Export Price and Normal Value

    The following is a description of the allegation of sales at less 
than fair value upon which the Department based its decision to 
initiate this investigation. The sources of data for the deductions and 
adjustments relating to U.S. price and normal value are discussed in 
greater detail in the Initiation Checklist. Should the need arise to 
use any of this information as facts available under section 776 of the 
Act, we may reexamine the information and revise the margin 
calculations, if appropriate. The anticipated period of investigation 
is January 1, 2000, through December 31, 2000.
    The following Canadian companies were identified in the petition as 
producers of greenhouse tomatoes: Amco Produce Inc., Clifford Produce, 
Double Diamond Acres Ltd., Co-Op Sales Agency, DiCiocco Farms, Erie-
James Ltd., Erie Shores Growers Ltd., Fruits et Legumes Vegebec Inc., 
Great Northern Hydroponics, Golden Jem Produce Inc., Huron Produce 
Ltd., Huy Farms Ltd., Hydro-Serre Mirabel, Mastronardi Produce Ltd., 
MCM Acres Ltd., Mucci International Marketing, Rx Farms Ltd., St. 
Laurent Greenhouse, and Veg Gro Sales Inc. Other producers are likely 
to be identified as we proceed with this investigation.
    The petitioners based constructed export prices on terminal market 
prices they obtained from the U.S. Department of Agriculture's 
Agricultural Market News Service. In order to obtain ex-factory prices, 
the petitioners deducted international transportation and customs duty, 
U.S. inland freight, and commissions from the sales value. The 
petitioners calculated international transportation and customs duty 
from data compiled by the U.S. Bureau of Census. The petitioners 
calculated U.S. inland freight on the basis of a weighted-average of 
freight invoices for shipments of tomatoes within the United States. We 
reviewed the information provided regarding constructed export price 
and have determined that it is adequate and accurate and represents 
information reasonably available to the petitioners (see Initiation 
Checklist, Re: Less-Than-Fair-Value Allegation).
    With respect to normal value, the petitioners provided home-market 
prices derived from weekly wholesale prices published by Canada's 
Ministry of Agriculture and Agri-Food. In order to obtain ex-factory 
prices, the petitioners deducted inland freight and commissions. As a 
result of our review of the petitioners' calculation of the inland 
freight adjustment, we determined that it was necessary to revise the 
amount used (see Initiation Checklist, Re: Less-Than-Fair-Value 
Allegation). Otherwise, we determined that the information the 
petitioners used for the calculation of home-market price is adequate 
and accurate and represents information reasonably available to them.
    The petitioners have provided information demonstrating reasonable

[[Page 20633]]

grounds to believe or suspect that sales of greenhouse tomatoes in 
Canada were made at prices below the fully absorbed cost of production, 
within the meaning of section 773(b) of the Act, and requested that the 
Department conduct a country-wide sales-below-cost investigation.
    Pursuant to section 773(b)(3) of the Act, cost of production 
includes cost of materials and fabrication, selling, general, and 
administrative expenses, and packing expenses. The petitioners obtained 
the cost of materials and fabrication and packing expenses from 
publicly available Canadian industry data and affidavits from officials 
of the petitioning companies. To calculate selling, general and 
administrative, and interest expenses, the petitioners relied upon the 
2000 financial statements of a Canadian company in the same general 
industry. As a result of our review of the costs used by the 
petitioners, we determined it was necessary to revise certain items 
(see Initiation Checklist, Re: Less-Than-Fair-Value Allegation).
    Pursuant to sections 773(a)(4), 773(b), and 773(e) of the Act, the 
petitioners also based normal value for sales in Canada on constructed 
value. The petitioners calculated constructed value using the same cost 
of materials, fabrication, and selling, general and administrative 
figures used to compute Canadian home-market costs. Consistent with 
section 773(e)(2) of the Act, the petitioners included in constructed 
value an amount for profit.
    As noted above, pursuant to section 773(b) of the Act, the 
petitioners provided information demonstrating reasonable grounds to 
believe or suspect that sales in the home market were made at prices 
below the fully absorbed cost of production. The petitioners requested 
that the Department conduct a country-wide sales-below-cost 
investigation in connection with the requested antidumping 
investigation. The Statement of Administrative Action (SAA) 
accompanying the URAA states that ``an allegation of sales below cost 
need not be specific to a particular exporter or producer.'' SAA, H. 
Doc. 103-316, Vol. 1, 103d Cong., 2d Session, at 833 (1994). The SAA, 
at 833, also states that ``Commerce will consider allegations of below-
cost sales in the aggregate for a foreign country, just as Commerce 
currently considers allegations of sales at less than fair value on a 
country-wide basis for purposes of initiating an antidumping 
investigation.'' Further, the SAA provides that ``(n)ew section 
773(b)(2)(A) retains the current requirement that Commerce have 
`reasonable grounds to believe or suspect' that below-cost sales have 
occurred before initiating such an investigation. `Reasonable grounds' 
* * * exist when an interested party provides specific factual 
information on costs and prices, observed or constructed, indicating 
that sales in the foreign market in question are at below-cost 
prices.'' Id.
    Based upon the comparison of the adjusted prices from the petition 
for the representative foreign like products to their cost of 
production, we find the ``reasonable grounds to believe or suspect'' 
that sales of the foreign like product in Canada were made at prices 
below their respective cost of production within the meaning of section 
773(b)(2)(A)(i) of the Act. Accordingly, the Department is initiating 
the requested country-wide cost investigation.

Fair Value Comparison

    Based on the data provided by the petitioners, there is reason to 
believe that imports of greenhouse tomatoes from Canada are being, or 
are likely to be, sold in the United States at less than fair value. As 
a result of the comparison of constructed export prices to normal 
value, we recalculated estimated dumping margins for imports of 
greenhouse tomatoes from Canada that range from 0.00 percent to 126.73 
percent.

Allegations and Evidence of Material Injury and Causation

    The petition alleges that the U.S. industry producing the domestic 
like product is being materially injured and is threatened with 
material injury by reason of the imports of the subject merchandise 
sold at less than normal value. The petitioners contend that their 
injured condition is evidenced by declining trends in market share, 
pricing, production levels, profits, sales, and utilization of 
capacity. Furthermore, the petitioners contend that injury and threat 
of injury is evidenced by negative effects on their cash flow, ability 
to raise capital, and growth.
    These allegations are supported by relevant evidence including U.S. 
Customs import data, lost sales, and pricing information. The 
Department assessed the allegations and supporting evidence regarding 
material injury and causation and determined that these allegations are 
supported by accurate and adequate evidence and meet the statutory 
requirements for initiation (see Initiation Checklist, Re: Material 
Injury).

Initiation of Antidumping Investigation

    Based upon our examination of the petition on greenhouse tomatoes 
from Canada and other information reasonably available to the 
Department, we find that the petition meets the requirements of section 
732 of the Act. Therefore, we are initiating an antidumping duty 
investigation to determine whether imports of greenhouse tomatoes from 
Canada are being, or are likely to be, sold in the United States at 
less than fair value. Unless postponed, we will make our preliminary 
determination no later than 140 days after the date of this initiation.

Distribution of Copies of the Petition

    In accordance with section 732(b)(3)(A) of the Act, a copy of the 
public version of the petition has been provided to the representatives 
of the government of Canada. We will attempt to provide a copy of the 
public version of the petition to each producer named in the petition, 
as appropriate.

International Trade Commission Notification

    We have notified the ITC of our initiation, as required by section 
732(d) of the Act.

Preliminary Determination by the ITC

    The ITC will preliminarily determine, no later than May 14, 2001, 
whether there is a reasonable indication that imports of greenhouse 
tomatoes are causing material injury, or threatening to cause material 
injury, to a U.S. industry. A negative ITC determination will result in 
this investigation being terminated; otherwise, this investigation will 
proceed according to statutory and regulatory time limits.
    This notice is published pursuant to section 777(i) of the Act. 
Effective January 20, 2001, Bernard T. Carreau is fulfilling the duties 
of the Assistant Secretary for Import Administration.

    Dated: April 17, 2001.
Bernard T. Carreau,
Deputy Assistant Secretary, Import Administration.
[FR Doc. 01-10154 Filed 4-23-01; 8:45 am]
BILLING CODE 3510-DS-P