[Federal Register Volume 69, Number 128 (Tuesday, July 6, 2004)]
[Notices]
[Pages 40607-40611]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-15228]


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DEPARTMENT OF COMMERCE

International Trade Administration

[A-570-831]


Fresh Garlic from the People's Republic of China: Preliminary 
Results of Antidumping Duty New Shipper Review

AGENCY: Import Administration, International Trade Administration, 
Department of Commerce.
SUMMARY: In response to a request from a new shipper, the Department of 
Commerce is conducting a new shipper review of the antidumping duty 
order on fresh garlic from the People's Republic of China. The period 
of review is November 1, 2002, through October 31, 2003.
    We preliminarily determine that Jinxiang Shanyang Freezing Storage 
Co., Ltd., has made sales in the United States at prices below normal 
value.
    We invite interested parties to comment on these preliminary 
results.

[[Page 40608]]

 Parties who submit comments are requested to submit with each argument 
a statement of the issue and a brief summary of the argument.

EFFECTIVE DATE: July 6, 2004.

FOR FURTHER INFORMATION CONTACT: Brian Ellman or Lyn Johnson, Office of 
Antidumping/Countervailing Duty Enforcement 5, Import Administration, 
International Trade Administration, U.S. Department of Commerce, 14th 
Street and Constitution Avenue, N.W., Washington, D.C. 20230; telephone 
(202) 482-4852 or (202) 482-5287, respectively.

SUPPLEMENTARY INFORMATION:

Background

    On January 7, 2004, we published in the Federal Register the Notice 
of Initiation of New Shipper Antidumping Duty Review: Fresh Garlic from 
the People's Republic of China (69 FR 903) for entries of subject 
merchandise grown by Kaifeng Wangtun Fresh Vegetables Factory (Wangtun) 
and exported by Jinxiang Shanyang Freezing Storage Co., Ltd. 
(Shanyang). The period of review (POR) is November 1, 2002, through 
October 31, 2003.
    On June 4, 2004, the petitioners (the Fresh Garlic Producers 
Association and its individual members) submitted comments addressing 
the Department's approach to the valuation of the factors of production 
(FOP). In that submission, the petitioners contend that the 
Department's current FOP methodology does not account for certain 
significant cost components (e.g., the cost of leasing farmland). 
Furthermore, the petitioners argue that many of the consumption factors 
reported by the respondents in segments of this proceeding are 
substantially disparate and anomalous, and thus call into question the 
basic credibility of the data. As such, citing the Department's 
decision in Final Determination of Sales at Less Than Fair Value: 
Certain Frozen Fillets from the Socialist Republic of Vietnam, 68 FR 
37116 (June 23, 2003), the petitioners argue that the Department should 
determine the normal value of garlic based on a surrogate value for raw 
(i.e., unprocessed) garlic, rather than valuing upstream input factors 
in order to determine normal value.
    We have addressed the petitioners' comments with respect to the 
valuation of land leasing. For a further discussion, see the ``Factors 
of Production'' section below and the memorandum from Brian Ellman to 
the File entitled ``Analysis for the Preliminary Results of the New 
Shipper Review of the Antidumping Duty Order on Fresh Garlic from the 
People's Republic of China: Jinxiang Shanyang Freezing Storage Co., 
Ltd., and Wangtun Fresh Vegetable Factory,'' dated June 28, 2004 
(Preliminary Results Analysis Memorandum). With respect to the 
petitioners' other comments concerning the Department's FOP 
methodology, we continue to evaluate these comments and we will 
consider them further for the final results of this new shipper review. 
We invite the respondent to comment on the petitioners' June 4, 2004, 
submission in its case brief to the Department.

Scope of the Order

    The products subject to the antidumping duty order are all grades 
of garlic, whole or separated into constituent cloves, whether or not 
peeled, fresh, chilled, frozen, provisionally preserved, or packed in 
water or other neutral substance, but not prepared or preserved by the 
addition of other ingredients or heat processing. The differences 
between grades are based on color, size, sheathing, and level of decay.
    The scope of this order does not include the following: (a) garlic 
that has been mechanically harvested and that is primarily, but not 
exclusively, destined for non-fresh use; or (b) garlic that has been 
specially prepared and cultivated prior to planting and then harvested 
and otherwise prepared for use as seed.
    The subject merchandise is used principally as a food product and 
for seasoning. The subject garlic is currently classifiable under 
subheadings 0703.20.0010, 0703.20.0020, 0703.20.0090, 0710.80.7060, 
0710.80.9750, 0711.90.6000, and 2005.90.9700 of the Harmonized Tariff 
Schedule of the United States (HTSUS). Although the HTSUS subheadings 
are provided for convenience and customs purposes, the written 
description of the scope of this proceeding is dispositive. In order to 
be excluded from the antidumping duty order, garlic entered under the 
HTSUS subheadings listed above that is (1) mechanically harvested and 
primarily, but not exclusively, destined for non-fresh use or (2) 
specially prepared and cultivated prior to planting and then harvested 
and otherwise prepared for use as seed must be accompanied by 
declarations to U.S. Customs and Border Protection (CPB) to that 
effect.

Verification

    As provided in section 782(i) of the Tariff Act of 1930, as amended 
(the Act), we verified information provided by Wangtun and Shanyang 
using standard verification procedures, including on-site inspection of 
the producer's facilities, the examination of relevant sales and 
financial records, and the selection of original documentation 
containing relevant information. Our verification results are outlined 
in the public version of the verification report dated June 28, 2004, 
which is on file in the Central Records Unit (CRU), Room B-099 of the 
main Department of Commerce building. See the memorandum to the File 
from Brian Ellman entitled ``Verification of the Response of Jinxiang 
Shanyang Freezing Storage Co., Ltd., and Wangtun Fresh Vegetable 
Factory in the Antidumping Duty New Shipper Review of Fresh Garlic from 
the People's Republic of China,'' dated June 28, 2004 (Verification 
Report).

Separate Rates

    The Department of Commerce (the Department) has treated the 
People's Republic of China (PRC) as a non-market-economy (NME) country 
in all past antidumping investigations (see, e.g., Bulk Aspirin From 
the People's Republic of China: Final Determination of Sales at Less 
Than Fair Value, 65 FR 33805 (May 25, 2000), and Certain Non-Frozen 
Apple Juice Concentrate from the People's Republic of China: Notice of 
Final Determination of Sales at Less Than Fair Value, 65 FR 19873 
(April 13, 2000)) and in prior segments of this proceeding. A 
designation as an NME remains in effect until it is revoked by the 
Department. See section 771(18)(C) of the Act. Accordingly, there is a 
rebuttable presumption that all companies within the PRC are subject to 
government control and, thus, should be assessed a single antidumping 
duty rate.
    It is the Department's standard policy to assign all exporters of 
the merchandise subject to review in NME countries a single rate unless 
an exporter can affirmatively demonstrate an absence of government 
control, both in law (de jure) and in fact (de facto), with respect to 
exports. To establish whether a company is sufficiently independent to 
be entitled to a separate, company-specific rate, the Department 
analyzes each exporting entity in an NME country under the test 
established in Sparklers from the People's Republic of China: Final 
Determination of Sales at Less than Fair Value, 56 FR 20588 (May 6, 
1991) (Sparklers), as amplified in Silicon Carbide from the People's 
Republic of China: Notice of Final Determination of Sales at Less Than 
Fair Value, 59 FR 22585 (May 2, 1994) (Silicon Carbide).
    Shanyang provided separate-rate information in its responses to our 
original and supplemental questionnaires. Accordingly, we performed a 
separate-rates analysis to

[[Page 40609]]

determine whether the exporter is independent from government control 
of their export and sales-related activities (see Bicycles From the 
People's Republic of China: Final Determination of Sales at Less Than 
Fair Value, 61 FR 56570 (April 30, 1996)).
1. Absence of De Jure Control
    The Department considers the following de jure criteria in 
determining whether an individual company may be granted a separate 
rate: (1) an absence of restrictive stipulations associated with an 
individual exporter's business and export licenses; (2) any legislative 
enactments decentralizing control of companies; (3) any other formal 
measures by the government decentralizing control of companies.
    Shanyang has placed on the record a number of documents to 
demonstrate absence of de jure control including the ``Foreign Trade 
Law of the People's Republic of China'' and the ``Administrative 
Regulations of the People's Republic of China Governing the 
Registration of Legal Corporations.'' The Department has analyzed such 
PRC laws and found that they establish an absence of de jure control. 
See, e.g., Certain Preserved Mushrooms From the People's Republic of 
China: Preliminary Results of New Shipper Review, 66 FR 30695, 30696 
(June 7, 2001). We have no information in this proceeding that would 
cause us to reconsider this determination.
2. Absence of De Facto Control
    Typically, the Department considers four factors in evaluating 
whether a respondent is subject to de facto governmental control of its 
export functions: (1) whether the export prices are set by, or subject 
to, the approval of a governmental authority; (2) whether the 
respondent has authority to negotiate and sign contracts, and other 
agreements; (3) whether the respondent has autonomy from the government 
in making decisions regarding the selection of its management; (4) 
whether the respondent retains the proceeds of its export sales and 
makes independent decisions regarding disposition of profits or 
financing of losses. See Silicon Carbide at 22587.
    As stated in previous cases, there is some evidence that certain 
enactments of the PRC central government have not been implemented 
uniformly among different sectors and/or jurisdictions in the PRC. See 
Silicon Carbide at 22586-22587. Therefore, the Department has 
determined that an analysis of de facto control is critical in 
determining whether respondents are, in fact, subject to a degree of 
governmental control which would preclude the Department from assigning 
separate rates.
    Shanyang reported that it is a limited-liability company owned by 
private investors. It has asserted the following: (1) There is no 
government participation in setting export prices; (2) sales managers 
and authorized employees have the authority to bind sales contracts; 
(3) it does not have to notify any government authorities of management 
selections; (4) there are no restrictions on the use of export revenue; 
(5) it is responsible for financing its own losses. Shanyang's 
questionnaire responses do not suggest that pricing is coordinated 
among exporters. During our analysis of the information on the record 
we found no information indicating the existence of government control. 
Consequently, we preliminarily determine that Shanyang has met the 
criteria for the application of a separate rate.

The Use of Facts Otherwise Available

    Section 776(a)(2) of the Act provides that, if, in the course of an 
antidumping review, an interested party (A) withholds information that 
has been requested by the Department, (B) fails to provide such 
information in a timely manner or in the form or manner requested, (C) 
significantly impedes a proceeding under the antidumping statute, or 
(D) provides such information but the information cannot be verified, 
then the Department shall, subject to sections 782(d) and (e) of the 
Act, use the facts otherwise available in reaching the applicable 
determination.
    As discussed in detail in the Verification Report and the 
Preliminary Results Analysis Memorandum, while reviewing the companies' 
attendance and payroll records in the context of verifying the reported 
labor factors, we found that both Shanyang and Wangtun did not include 
in the figures reported to the Department the hours worked by certain 
full-time employees whose roles had been identified as being related to 
the production of fresh garlic. See Verification Report at pages 25-27.
    Despite our attempts to verify the information that was submitted 
on behalf of both companies (and which is necessary to the 
determination), we could not verify certain information pertaining to 
labor factors, as required under section 782(i) of the Act. Section 
776(a)(2)(D) of the Act warrants the use of facts otherwise available 
in reaching a determination when information is provided by a 
respondent but that information cannot be verified. We determine that, 
in accordance with section 776(a)(2)(D) of the Act, the use of facts 
available is appropriate for calculating the labor hours worked by 
Shanyang for processing activities (i.e., unskilled processing labor) 
and by Wangtun for production activities (i.e., indirect growing labor) 
because we were unable to verify the information submitted by the 
companies with respect to labor. Consequently, we have revised 
Shanyang's and Wangtun's reported labor factors to include the total 
hours worked by all employees whose roles have been identified as being 
related to the production of subject merchandise. For a detailed 
discussion and the revised calculation of Shanyang's and Wangtun's 
labor-usage factors of production, see the Preliminary Results Analysis 
Memorandum at Attachments 1 and 2.

Export Price

    In accordance with section 772(a) of the Act, we have used the 
export-price methodology because the sale to the unaffiliated purchaser 
was made outside the United States prior to importation of the subject 
merchandise into the United States. We calculated the export price 
based on the price from Shanyang and Wangtun to the unaffiliated U.S. 
customer. We made deductions, where appropriate, from the gross unit 
price to account for inland freight and brokerage and handling. Because 
certain domestic charges, such as those for foreign inland freight, 
were provided by NME companies, we valued those charges based on 
surrogate rates from India. See the memorandum from Lyn Johnson to the 
File entitled ``Factors Valuations for the Preliminary Results of 
Review for Jinxiang Shanyang Freezing Storage Co., Ltd.,'' dated June 
28, 2004 (FOP Memorandum).
    For a more detailed explanation of the company-specific adjustments 
that we made in the calculation of the dumping margin for these 
preliminary results, see the Preliminary Results Analysis Memorandum.

Normal Value

1. Surrogate Country

    When investigating imports from an NME country, section 773(c)(1) 
of the Act directs the Department to base normal value, in most 
circumstances, on the NME producer's factors of production valued in a 
surrogate market-economy country or countries considered to be 
appropriate by the Department. In accordance with section 773(c)(4) of 
the Act, in valuing the factors of production, the Department shall 
use, to the extent practicable, the prices or costs of factors of 
production in one or more market-economy

[[Page 40610]]

countries that are at a level of economic development comparable to 
that of the NME country and are significant producers of comparable 
merchandise. The sources of the surrogate factor values are discussed 
under the ``Factor Valuations'' section below.
    The Department has determined that India, Indonesia, Sri Lanka, the 
Philippines, Morocco, and Egypt are countries comparable to the PRC in 
terms of economic development. See the memorandum to Laurie Parkhill 
regarding the request for a list of surrogate countries dated May 19, 
2004. In addition to being among the countries comparable to the PRC in 
economic development, India is a significant producer of the subject 
merchandise. We have used India as the surrogate country and, 
accordingly, have calculated normal value using Indian prices to value 
the PRC producer's factors of production, when available and 
appropriate. We have obtained and relied upon publicly available 
information. See the memorandum to the File regarding the selection of 
a surrogate country dated June 28, 2004.
    In accordance with 19 CFR 351.301(c)(3)(ii), for the final results 
of this new shipper review, interested parties may submit publicly 
available information to value the factors of production until twenty 
days following the date of publication of these preliminary results.

2. Factors of Production

    Section 773(c)(1) of the Act provides that the Department shall 
determine the normal value using a factors-of-production methodology if 
(1) the merchandise is exported from an NME country and (2) the 
information does not permit the calculation of normal value using home-
market prices, third-country prices, or constructed value under section 
773(a) of the Act. Factors of production include the following 
elements: (1) hours of labor required, (2) quantities of raw materials 
employed, (3) amounts of energy and other utilities consumed, and (4) 
representative capital costs. We used factors of production reported by 
the producer or exporter for materials, energy, labor, and packing. We 
valued all the input factors using publicly available information, as 
discussed in the ``Surrogate Country'' and ``Factor Valuations'' 
sections of this notice.

3. Factor Valuations

    In accordance with section 773(c) of the Act, we calculated normal 
value based on factors of production reported by the producer or 
exporter for the POR. To calculate normal value, we multiplied the 
reported per-unit factor quantities by publicly available surrogate 
values from India. In selecting the surrogate values, we considered the 
quality, specificity, and contemporaneity of the data. As appropriate, 
we adjusted input prices by including freight costs in order to make 
them delivered prices. We calculated the freight costs based on the 
shortest reported distance from the domestic supplier to the factory, 
in accordance with Sigma Corporation v. United States, 117 F. 3d 1401, 
1407-08 (CAFC 1997). For a detailed description of the surrogate values 
selected for these preliminary results, see the FOP Memorandum.
    For those Indian-rupee values not contemporaneous with the POR, we 
adjusted for inflation using wholesale price indices for India 
published in the International Monetary Fund's International Financial 
Statistics.
    Except as specified below, we valued raw-material inputs using the 
weighted-average- unit import values derived from the World Trade Atlas 
Trade Information System (Internet Version 4.3e) (WTA). The source of 
the WTA data for India is the Directorate General of Commercial 
Intelligence and Statistics of the Indian Ministry of Commerce and 
Industry. We selected WTA data contemporaneous to the POR. We valued 
garlic seed based on pricing data from the NHRDF News Letter, published 
by India's National Horticultural Research and Development Foundation. 
We valued diesel fuel based on data from the International Energy 
Agency's Energy Prices & Taxes: Quarterly Statistics (Third Quarter, 
2003). We valued water using the averages of municipal water rates from 
Asian Development Bank's Second Water Utilities Data Book: Asian and 
Pacific Region (October 1997).
    For labor, consistent with 19 CFR 351.408(c)(3), we used the PRC 
regression-based wage rate that appears on the website for Import 
Administration (http://ia.ita.doc.gov/wages/01wages/01wages.html). The 
source of this wage-rate data is the International Labor Organization's 
Yearbook of Labour Statistics 2002 (Geneva, 2002), chapter 5B: Wages in 
Manufacturing.
    The respondent claimed an adjustment for revenue earned on the sale 
of garlic sprouts. We found that sprouts are a by-product of garlic and 
deducted an offset amount from normal value for this by-product. As a 
surrogate value for the sale of sprouts in the PRC, we used an average 
of Indian wholesale prices for green onions published by the Azadpur 
Agricultural Produce Marketing Committee.
    We valued the truck rate based on an average of truck rates that 
were published in the Indian publication, Chemical Weekly, during the 
POR. We valued foreign brokerage and handling charges based on a value 
calculated for the less-than-fair-value investigation of certain hot-
rolled carbon steel flat products from India.
    We used the financial information of the tea company, Parry Agro 
Industries Limited (Parry Agro). We found this company to be 
representative of the financial experiences of the producer and 
exporter because Parry Agro produced and processed a product that was 
not highly processed or preserved prior to its sale. Thus, in order to 
value factory overhead, selling, general and administrative expenses 
(SG&\A), and profit, we used rates derived from Parry Agro's 2001/2002 
financial statements. We examined the annual report of Parry Agro and 
were not able to determine whether Parry Agro performed packing 
activities associated with the tea it produced as its financial 
information does not indicate that it incurred any packing expenses. 
Furthermore, in the event Parry Agro did incur packing expenses, we do 
not know the extent to which such expenses are included in the values 
we obtained from its income statement for purposes of calculating the 
surrogate financial ratios because packing expenses are not included as 
a line item or distinguished or described in the income statement in 
any way. For the preliminary results of this review, in calculating the 
amount of overhead, SG&A, and profit included in the normal value, we 
have determined not to apply the surrogate financial ratios to 
production costs that include packing expenses. We have, however, 
calculated separate surrogate values for materials and labor associated 
directly with packing fresh garlic from the PRC and added these packing 
expenses to the calculation of normal value.
    We have valued electricity consumption based on Wangtun's reported 
use of electricity unrelated to obtaining water (e.g., for cold storage 
located at the production/processing facility). We applied the usage 
figure reported by the respondent to a surrogate value for electricity 
that we obtained from the International Energy Agency's Energy Prices & 
Taxes: Quarterly Statistics (Third Quarter, 2003).
    Because we are valuing electricity consumption in the manner 
described, we removed the line item for ``Power and Fuel'' costs from 
the numerator of the surrogate financial ratio for selling,

[[Page 40611]]

general, and administrative (SG&A) expenses. Further, in calculating 
the amount of overhead, SG&A expenses, and profit included in the 
normal value, we have not applied the surrogate financial ratios to 
production costs that include electricity costs.
    In response to the petitioners' comments pertaining to the 
valuation of the cost of land, upon further analysis of this issue, we 
have determined that this factor is an important component in the cost 
build-up of normal value and is not reflected in the financial ratios 
calculated from Parry Agro's income statements. As such, we have valued 
the cost of land using information contained in a Notification of 
Policy for Land Revenue issued by the State of Rajasthan, India.
    Based on all available information, we have determined that this 
land-lease rate serves as the most reliable surrogate value for 
calculating a cost for leasing the farmland used to grow the subject 
merchandise. We have converted the values provided by the Indian state 
government and calculated a per-mu annual land-lease cost. In our 
margin calculation, we have added the cost of leasing land to fixed 
overhead. See the Preliminary Results Analysis Memorandum.

Preliminary Results of the New Shipper Review

    We preliminarily determine that the following dumping margin exists 
for the period November 1, 2002, through October 31, 2003:

------------------------------------------------------------------------
                                                       Weighted-average
           Grower and Exporter Combination             percentage margin
------------------------------------------------------------------------
Grown by Kaifeng Wangtun Fresh Vegetables Factory                  25.38
 and Exported by Jinxiang Shanyang Freezing Storage
 Co., Ltd...........................................
------------------------------------------------------------------------

    Case briefs or other written comments in at least six copies must 
be submitted to the Assistant Secretary for Import Administration no 
later than thirty days after the publication of these preliminary 
results. Pursuant to 19 CFR 351.309(d)(2), rebuttal briefs are due no 
later than five days after the submission of case briefs. A list of 
authorities used, a table of contents, and an executive summary of 
issues should accompany any briefs submitted to the Department. 
Executive summaries should be limited to five pages total, including 
footnotes. In accordance with 19 CFR 351.310, we will hold a public 
hearing to afford interested parties an opportunity to comment on 
arguments raised in case or rebuttal briefs, provided that such a 
hearing is requested by an interested party. If we receive a request 
for a hearing, we plan to hold the hearing three days after the 
deadline for submission of the rebuttal briefs at the U.S. Department 
of Commerce, 14th Street and Constitution Avenue, N.W., Washington, 
D.C. 20230. Interested parties who wish to request a hearing, or to 
participate if one is requested, must submit a written request to the 
Assistant Secretary for Import Administration, U.S. Department of 
Commerce, Room 1870, within thirty days after the date of publication 
of the preliminary results of this review in the Federal Register. 
Requests should contain the following information: (1) The party's 
name, address, and telephone number; (2) the number of participants; 
and (3) a list of the issues to be discussed. Oral presentations will 
be limited to issues raised in the briefs.
    The Department will publish the final results of this new shipper 
review, including the results of its analysis of issues raised in any 
case or rebuttal briefs, within 90 days of publication of this notice. 
See 19 CFR 351.214(h)(i)(1).

Assessment Rates

    Upon completion of this new shipper review, the Department will 
determine, and CBP will assess, antidumping duties on all appropriate 
entries. The Department will issue appropriate assessment instructions 
directly to CBP upon completion of this review. If these preliminary 
results are adopted in our final results of review, we will direct CBP 
to assess the antidumping duties applicable to sales of the subject 
merchandise on each of the entries of this exporter's importer/customer 
during the POR.

Cash-Deposit Requirements

    The following cash-deposit requirements will be effective upon 
publication of the final results of the new shipper review for 
shipments of the subject merchandise entered, or withdrawn from 
warehouse, for consumption on or after the publication date, as 
provided for by section 751(a)(2)(C) of the Act: (1) for subject 
merchandise grown by Kaifeng Wangtun Fresh Vegetables Factory and 
exported by Jinxiang Shanyang Freezing Storage Co., Ltd., the cash-
deposit rate will be that established in the final results of this 
review; (2) for all other subject merchandise exported by Jinxiang 
Shanyang Freezing Storage Co., Ltd., the cash-deposit rate will be the 
PRC-wide rate, which is 376.67 percent; (3) for all other PRC exporters 
of subject merchandise which have not been found to be entitled to a 
separate rate, the cash-deposit rate will be the PRC-wide rate of 
376.67 percent; and (4) for all non-PRC exporters of subject 
merchandise, the cash-deposit rate will be the rate applicable to the 
PRC exporter that supplied that exporter. These deposit requirements, 
when imposed, shall remain in effect until publication of the final 
results of the next administrative review.

Notification to Interested Parties

    This notice also 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 the period of this review. 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.
    We are issuing and publishing the preliminary results of this new 
shipper review in accordance with sections 751(a)(2)(B)(iv) and 777(i) 
of the Act.

    Dated: June 28, 2004.
Jeffrey May,
Acting Assistant Secretary for Import Administration.
[FR Doc. 04-15228 Filed 7-2-04; 8:45 am]
BILLING CODE 3510-DS-S