Notice of Preliminary Determination of Sales at Less Than Fair Value and Postponement of Final Determination: Fresh Tomatoes From Mexico

[Federal Register Volume 61, Number 213 (Friday, November 1, 1996)]

[Notices]

[Pages 56608-56616]

From the Federal Register Online via the Government Publishing Office [www.gpo.gov]

[FR Doc No: 96-28091]

[[Page 56607]]

_______________________________________________________________________

Part II

Department of Commerce

_______________________________________________________________________

International Trade Administration

_______________________________________________________________________

Preliminary Determination of Sales at Less Than Fair Value and

Postponement of Final Determination: Fresh Tomatoes From Mexico; Notice

Federal Register / Vol. 61, No. 213 / Friday, November 1, 1996 /

Notices

[[Page 56608]]

DEPARTMENT OF COMMERCE

International Trade Administration

[A-201-820]

Notice of Preliminary Determination of Sales at Less Than Fair

Value and Postponement of Final Determination: Fresh Tomatoes From

Mexico

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

EFFECTIVE DATE: November 1, 1996.

FOR FURTHER INFORMATION CONTACT: John Brinkmann or Judith Wey Rudman,

Office of AD/CVD Enforcement II, Import Administration, International

Trade Administration, U.S. Department of Commerce, 14th Street and

Constitution Avenue, N.W., Washington, D.C. 20230; telephone: (202)

482-5288 or (202) 482-0192, 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).

Preliminary Determination

We preliminarily determine that fresh tomatoes from Mexico are

being, or are likely to be, sold in the United States at less than fair

value (LTFV), as provided in section 733 of the Act. The estimated

margins are shown in the Suspension of Liquidation section of this

notice.

Case History

Since the initiation of this investigation on April 18, 1996 (61 FR

18377, April 25, 1996 (Initiation Notice)), the following events have

occurred:

On May 16, 1996, the United States International Trade Commission

(ITC) notified the Department of Commerce (the Department) of its

affirmative preliminary injury determination.

On June 4, 1996, the Department issued the antidumping duty

questionnaire 1 to counsel for the following growers/exporters of

fresh tomatoes to the United States: San Vincente Camalu (Camalu);

Ernesto Fernando Echavarria Salazar Grupo Solidario (Echavarria);

Arturo Lomeli Villalobas S.A. de C.V. (Lomeli); Ranchos Los Pinos S. de

R.L. de C.V. (RLP); Administradora Horticola Del Tamazula (Tamazula);

and Agricola Yory, S. de P.R. de R.I. (Yory) (collectively

``respondents'').

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\1\ Section A of the questionnaire requests general information

concerning a company's corporate structure and business practices,

the merchandise under investigation that it sells, and the sales of

the merchandise in all of its markets. Sections B and C of the

questionnaire request home market sales listings and U.S. sales

listings, respectively. Section D requests information on the cost

of production of the foreign like product and constructed value of

the merchandise under investigation.

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The six mandatory respondents and three voluntary respondents

submitted questionnaire responses in July 1996. The Department issued

supplemental questionnaires to the mandatory respondents in July and

August 1996. Responses to these supplemental questionnaires were

received in August and September 1996. The voluntary responses were not

analyzed. (For a discussion of the selection of respondents, see the

Selection of Respondents and Voluntary Respondents sections of this

notice.)

On July 26, 1996, petitioners made a timely request for a

postponement of the preliminary determination for a period of no more

than 30 days. Pursuant to Section 733(c)(1)(A) of the Act and section

353.15(c) of the Department's regulations, and absent compelling

reasons to deny this request, the Department postponed the preliminary

determination until no later than October 7, 1996 (61 FR 40607, August

5, 1996).

Based on the information contained in the questionnaire responses

of Lomeli's affiliate, Eco Cultivos, S.A. de C.V. (Eco), it appeared

that Eco's sole U.S. customer, Desert Glory, Ltd., (DGL), might be

considered an ``affiliated person,'' as defined under section 771(33)

of the Act. Therefore, on September 9, 1996, we sent DGL a list of

questions concerning its ownership and the nature of its business

relationships with Eco and Lomeli. DGL's response to these questions

was submitted on September 13, 1996. (For a discussion of this issue,

see the Affiliated Persons section of this notice.) DGL submitted a

request for scope clarification on September 30, 1996. Specifically,

DGL requested that greenhouse grown ``Desert Glory Cocktail

Tomato[es]'' be excluded from the scope of this investigation.

On September 13, 1996, the petitioners requested that, for all

respondents, the Department compare transaction-specific export prices

in the United States market to weighted-average normal values, in

accordance with the ``targeted dumping'' provisions of section

777A(d)(1)(B) of the Act. For further discussion, see the Targeted

Dumping section of this notice.

On October 7, 1996, the Department further postponed the

preliminary determination until no later than October 28, 1996 (see,

Notice of Postponement of Preliminary Antidumping Duty Determination:

Fresh Tomatoes from Mexico, 61 FR 53702 (October 15, 1996)).

Petitioners responded to DGL's request for a scope clarification on

October 10, 1996, indicating that ``green-house grown `cocktail

tomatoes' '' are not included in the scope of this investigation (see,

Scope of Investigation section below).

The Commerce Department and the Mexican tomato growers initialled a

proposed agreement suspending this investigation on October 10, 1996.

Interested parties were informed that the Department intended to

finalize the agreement on October 28, 1996, and were invited to provide

written comments on the agreement.

Selection of Respondents

Section 777A(c)(1) of the Act states that the Department is to

calculate individual dumping margins for all known exporters and

producers of the subject merchandise. Section 777A(c)(2) of the Act,

however, states that the Department may examine less than all exporters

and producers, if there is a large number of exporters and producers.

This latter provision permits us to investigate (1) a sample of

exporters, producers, or types of products that is statistically valid

based on the available information, or (2) exporters and producers

accounting for the largest volume of the subject merchandise from the

exporting country that can reasonably be examined. In the antidumping

investigations involving pasta from Italy and Turkey, for example,

because of our limited resources, we did not investigate individually

all known exporters. (See, Final Determination of Sales at Less Than

Fair Value: Certain Pasta from Italy, 61 FR 30326 (June 14, 1996);

Final Determination of Sales at Less Than Fair Value: Certain Pasta

From Turkey, 61 FR 30309 (June 14, 1996), (Certain Pasta from Turkey).)

In this case, because of the very large number of exporters of

Mexican tomatoes, we invoked section 772A(c)(2) of the Act. We

solicited comments on sampling methodologies from the Mexican

government, petitioners, and potential respondents. All parties

requested that we examine the producers and exporters accounting for

the largest volumes of exports, rather than devising a sampling

technique.

Based on the administrative resources available to work on this

investigation and the number of potential affiliated companies

involved, we determined that we could only analyze a total of six

respondents (including their affiliates).

[[Page 56609]]

At the time we issued the questionnaire, the information on the record

demonstrated that the six largest growers/exporters and their

affiliates accounted for just under 40 percent of exports, by quantity.

These six companies provided an adequate representation of growers/

exporters from both the Sinaloa and Baja growing regions, the two

significant fresh tomato growing regions in Mexico. (See the June 12,

1996, memorandum to Barbara Stafford.)

Voluntary Respondents

Section 782(a) of the Act states that individual rates shall be

calculated for firms which voluntarily provide information, except

where the number of such respondents is so large that the calculation

of individual dumping margins for all such respondents would be unduly

burdensome and would prevent the timely completion of the

investigation. Because the Department selected the maximum number of

respondents it could investigate given the available administrative

resources, the Department determined that no voluntary respondents

would be accepted unless one of the mandatory respondents did not

participate. (See the June 12, 1996, memorandum to Barbara Stafford.)

Potential voluntary respondents were provided with specific written

guidance on the Department's criteria for including a voluntary

respondent in the investigation. Three voluntary respondents timely

filed section A, B, C, and D questionnaire responses. We did not

analyze these voluntary responses, however, as all mandatory

respondents had timely filed responses and are participating in the

investigation. In light of the substantial effort already required to

analyze the mandatory respondents, analysis of the voluntary

respondents by the Department personnel assigned to this investigation

would be unduly burdensome and would preclude the timely completion of

this investigation.

Affiliated Persons

Based on the information on the record, we have determined that

Lomeli and Eco are affiliated through stock ownership and shared board

members. In determining whether to apply a single antidumping duty

margin to two or more affiliated producers, the Department considers

the following factors: (1) Whether the producers have production

facilities for similar or identical products that would not require

substantial retooling of either facility in order to restructure

manufacturing priorities; and (2) whether there is a significant

potential for the manipulation of prices or production. The factors the

Department may consider in identifying a significant potential for the

manipulation of prices or production include: (1) The level of common

ownership; (2) interlocking officers or directors; and (3) whether

operations are intertwined, such as through the sharing of sales

information, the involvement in production and pricing decisions, the

sharing of facilities or employees, or the presence of significant

transactions between the affiliated producers. The principles

underlying these criteria have been cited with approval in recent court

decisions. (See, FAG Kugelfisher v. U.S., Slip Op. 96-108 (CIT July 10,

1996), citing Nihon Cement Co. v. United States (17 CIT 400, 425

(1993), and Final Determination of Sales at LTFV: Antifriction Bearing

(Other than Tapered Bearings) and Parts Thereof from the Federal

Republic of Germany, 54 FR 18992, 19089 (May 3, 1989); see also Section

351.401 of the Proposed Regulations, 61 FR 7314 (February 27, 1996).)

During the POI, all of the tomatoes produced and sold by Lomeli

were field-grown tomatoes. During the same period, all tomatoes

produced and sold by Eco were grown in greenhouses. Information on the

record regarding the manufacturing facilities and production processes

used to grow greenhouse and field-grown tomatoes indicates that the

production facilities and cultivation methods required to grow

greenhouse tomatoes vary significantly from those needed to grow field-

grown tomatoes. Therefore, it appears that a shift in production from

field-grown tomatoes to greenhouse-grown tomatoes could not be

accomplished without significant and expensive retooling of production

facilities. Accordingly, although the Department considers Lomeli and

Eco to be affiliated parties, we have determined that these companies

should not be collapsed for purposes of the preliminary determination.

Therefore, we have calculated separate dumping margins and deposit

rates for Lomeli and Eco.

In its July 2, 1996, section A response, Eco claimed that its sole

U.S. customer, DGL, was unaffiliated. Based on the existence of an

exclusive purchase and distribution agreement between Eco and DGL, and

the fact that certain employees of a wholly-owned subsidiary of DGL

held positions at Eco, it appeared that Eco might be considered an

affiliated person as defined in section 771(33) of the Act. Therefore,

on September 9, 1996, we sent DGL a list of questions concerning its

ownership and the nature of its business with Eco and Lomeli. On

October 11, 1996, DGL stated that, in practice, DGL's exclusive

purchase and distribution rights are limited to cocktail tomatoes,

which have been excluded from the scope of this investigation (see, the

Scope of Investigation section of this notice, below). Based on the

record evidence, we have preliminarily determined that DGL does not

have the ability to exercise restraint or direction over Eco's sales of

subject merchandise and, therefore, does not control Eco for purposes

of this investigation. Accordingly, for this preliminary determination,

Eco and DGL are not considered affiliated parties within the meaning of

section 771(33)(G) of the Act.

Postponement of Final Determination

Pursuant to section 735(a)(2)(A) of the Act, on October 11, 1996,

five of the six mandatory respondents requested that, in the event of

an affirmative preliminary determination in this investigation, the

Department postpone its final determination until the 135th day after

the date of publication of the affirmative preliminary determination in

the Federal Register. In accordance with 19 CFR 353.20(b), because our

preliminary determination is affirmative, respondents accounting for a

significant proportion of exports of the subject merchandise have

requested postponement, and no compelling reasons for denial exist, we

are postponing the final determination. Accordingly, we are extending

suspension of liquidation in this case. (See Extension of Provisional

Measures memorandum dated February 7, 1996, on file in the

investigation of Certain Pasta from Italy in Room B-099 of the main

Commerce building.)

Scope of Investigation

The products covered by this investigation are all fresh or chilled

tomatoes (fresh tomatoes) except for cocktail tomatoes and those

tomatoes which are for processing. For purposes of this investigation,

cocktail tomatoes are green-house grown tomatoes, generally larger than

cherry tomatoes and smaller than roma or common round tomatoes, and are

harvested and packaged on-the-vine for retail sale. For purposes of

this investigation, processing is defined to include preserving by any

commercial process, such as canning, dehydrating, drying or the

addition of chemical substances, or converting the tomato product into

juices, sauces or purees. Further, imports of fresh tomatoes for

processing are accompanied by an ``Importer's Exempt Commodity Form''

(FV-6)

[[Page 56610]]

(within the meaning of 7 CFR section 980.501(a)(2) and 980.212(i)).

Fresh tomatoes that are imported for cutting up, not further processed

(e.g., tomatoes used in the preparation of fresh salsa or salad bars),

and not accompanied by an FV-6 form are covered by the scope of this

investigation.

All commercially-grown tomatoes sold in the United States, both for

the fresh market and for processing, are classified as Lycopersicon

esculentum. Important commercial varieties of fresh tomatoes include

common round, cherry, plum, and pear tomatoes, all of which, with the

exception of cocktail tomatoes, are covered by this investigation.

Tomatoes imported from Mexico covered by this investigation are

classified under the following subheadings of the Harmonized Tariff

Schedules of the United States (HTS), according to the season of

importation: 0702.00.20, 0702.00.40, 0702.00.60, and 9906.07.01 through

9906.07.09. Although the HTS numbers are provided for convenience and

Customs purposes, our written description of the scope of this

proceeding is dispositive.

Period of Investigation

The period of investigation (POI) is March 1, 1995, through

February 29, 1996. Since the passage of the URAA, the Department has

altered the period it examines in an investigation to correspond to the

most recently completed four fiscal quarters before the filing of the

petition (i.e., expanding the typical POI from six months to one year).

This change is appropriate in light of the statutory definition of

``extended period of time'' for cost cases, to simplify reporting

requirements and to prevent possible price manipulation by respondents

after they become aware of the filing of a petition.

As indicated in the Initiation Notice, the petition was filed with

the Department on March 29, 1996, although it was not filed with the

ITC until April 1, 1996. Because the Department's current policy is to

exclude the month in which the petition is filed from the POI, the

submission of the petition to the Department in March called into

question the inclusion of March in the POI. Information provided to the

Department suggested that the pending filing of the petition was widely

known and this, combined with the filing of a 201 case with the ITC on

March 11, 1996, called into question the appropriateness of including

March sales in our analysis. Due to the combination of these factors,

we excluded the month of March from the POI.

Because we excluded March from the POI, we considered whether it

was appropriate to base the POI on fiscal quarters. Information on the

record indicated that accounting records and company operations in the

tomato industry are maintained and tracked on a growing season basis.

Because the use of fiscal quarters would not result in a reduced

reporting burden for respondents, we did not adjust the POI further

back in time in order to align it with fiscal quarters. For a further

discussion of the selection of the POI, see the June 12, 1996,

memorandum to Barbara Stafford.

Product Comparisons

In accordance with section 771(16) of the Act, we considered all

products produced by the respondent, covered by the description in the

Scope of Investigation section, above, and sold in the home market

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 (tomatoes of the same tomato type (e.g.,

round, roma, etc.)) in the home market to compare to U.S. sales in the

same month, we compared U.S. sales to a normal value based on

constructed value. We did not compare sales of similar merchandise

because the cost differences between tomato types are not associated

with differences in the physical characteristics of the merchandise.

Targeted Dumping

On September 13, 1996, the petitioners requested that the

Department compare the transaction-specific constructed export prices

of the six mandatory respondents in the United States to weighted-

average normal values, pursuant to the ``targeted dumping'' provisions

of section 777A(d)(1)(B) of the Act. The petitioners alleged that there

was a pattern of constructed export prices that differed significantly

by date of sale, by region, and by customer.

To establish that the alleged patterns of prices differed

``significantly,'' petitioners used the average U.S. prices, sorted

only by product codes, as a benchmark for determining whether certain

customers received prices that were below the average prices for the

same packing type. The packing type reported in the respondents' U.S.

sales listings consisted of ``boxes.'' During our analysis of reported

sales, it became apparent that different sizes of boxes had been

reported. As a consequence of the respondents' failure to report prices

in standard units, the petitioners were deprived of meaningful unit

prices with which to establish this benchmark.

Unrelated to the reporting of flawed unit prices, petitioners

relied upon customers' prices that were ten percent or more below the

average price for the packing type to establish that the alleged

pattern of variation in prices was ``significant.'' Petitioners did not

justify their use of the ten percent benchmark in relationship to price

movements for tomatoes, a perishable product. A variation in average

prices of ten percent is not necessarily significant in a market in

which prices can decline far more than ten percent within a given day.

Moreover, fluctuation in price, in and of itself, does not establish a

pattern of price differences. Finally, subsection 777A(d)(1)(B)(ii) of

the Act requires that the Department must be able to establish that the

pattern of price variation cannot be taken into account by comparing

the weight-averaged normal values to the weight-averaged U.S. prices.

The petitioners addressed this requirement in a conclusory manner,

without providing an underlying rationale.

In sum, the targeted dumping allegation does not provide the

Department with an adequate basis for comparing the respondents'

transition-specific export prices in the United States to their

weighted-average normal values. On October 1, 1996, the Department

informed petitioners of these findings and indicated our willingness to

consider a revised allegation that took these concerns into account.

Level of Trade

As set forth in section 773(a)(1)(B)(i) of the Act and in the SAA

accompanying the URAA, at 829-831, to the extent practicable, the

Department will calculate normal values based on sales at the same

level of trade as the U.S. sales. When the Department is unable to find

sales in the comparison market at the same level of trade as the U.S.

sale(s), the Department may compare sales in the U.S. and foreign

markets at different levels of trade.

In accordance with section 773(a)(7)(A) of the Act, if sales at

different levels of trade are compared, the Department will adjust the

normal value to account for the difference in level of trade if two

conditions are met. First, there must be differences between the actual

selling functions performed by the seller at the level of trade of the

U.S. sale and at the level of trade of the normal value sale. Second,

the difference in level of trade must affect price comparability as

evidenced by a pattern of consistent price differences between sales at

the different levels of

[[Page 56611]]

trade in the market in which normal value is determined.

In order to determine that there is a difference in level of trade,

the Department must find that two sales have been made at different

stages of marketing, or the equivalent. Different stages of marketing

necessarily involve differences in selling functions, but differences

in selling functions (even substantial ones) are not alone sufficient

to establish a difference in the level of trade. Similarly, seller and

customer descriptions (such as ``distributor'' and ``wholesaler'') are

useful in identifying different levels of trade, but are insufficient

to establish that there is a difference in the level of trade.

In implementing these principles in this investigation, information

relevant to level of trade comparisons and adjustments was requested in

our initial and supplemental questionnaires. We asked each respondent

to establish any claimed levels of trade based on selling functions,

and to document and explain any claims for a level of trade adjustment.

In order to determine whether separate levels of trade actually

existed within or between the U.S. and the home market, we reviewed,

inter alia, the selling activities associated with each channel of

distribution reported by the respondents. In reviewing the selling

functions reported by the respondents, we considered all types of

selling functions, both claimed and unclaimed, that were performed.

Where possible, we further examined whether the selling function was

performed on a substantial portion of sales. The level of trade claims

of each respondent were considered, but the ultimate decision was based

on the Department's analysis of the reported selling functions.

Pursuant to section 773(a)(1)(B)(i) of the Act, and the SAA at 827,

in identifying levels of trade for export price and normal value sales,

we considered the selling functions reflected in the starting price,

before any adjustments. For CEP sales, we considered the selling

functions reflected in the price after the deduction of expenses and

profit under Section 772(d) of the Act. Whenever sales within a

customer group were made by or through an affiliated company or agent,

we ``collapsed'' the affiliated parties before considering the selling

functions performed. In determining whether separate levels of trade

exist in this investigation, we found that no single selling function

in the tomato industry was sufficient to warrant a separate level of

trade (see, Notice of Proposed Rulemaking and Request for Public

Comments, 61 FR 7307, 7348 (February 27, 1996)) (Proposed Regulations).

Based on our analysis of the selling functions performed by each

respondent, we found that a single level of trade exists in each

market. We then compared selling functions in the U.S. market and in

the home market and found them to be similar. We find, therefore, that

sales in the home market and in the U.S. market are at the same level

of trade. (See October 22, 1996, Level of Trade Analysis memorandum to

Barbara Stafford.)

Fair Value Comparisons

The SAA states that in determining the comparability of sales for

inclusion within a particular average, ``Commerce will consider factors

it deems appropriate, such as * * * the class of customer involved,''

SAA at 842. The Department, not the respondents, determines which

customers may be grouped together for product comparison purposes. Cf.,

N.A.R., S.p.A. v. U.S., 741 F. Supp. 936 (CIT, 1990).

We examined the channel of distribution information reported by

respondents and determined that it was not appropriate to include the

class of customer as a separate comparison factor. Most respondents did

not provide sufficient information that would allow us to examine the

appropriateness of the respective customer code classifications based

on the functions commonly associated with each category of customer.

Since fresh tomatoes may be sold on consignment through unaffiliated

distributors, some respondents were unable to obtain customer category

information from their distributors. Therefore, since all respondents

had the same level of trade in the U.S. and home markets and there was

no basis for distinguishing among customer categories, the weighted-

average prices were calculated and compared by product type.

To determine whether sales of tomatoes by the Mexican respondents

to the United States were made at less than fair value, we compared the

export price (EP) or constructed export price (CEP) to the Normal Value

(NV), as described in the Export Price and Constructed Export Price and

Normal Value sections of this notice. In accordance with section

777A(d)(1)(A)(i), we calculated weighted-average EPs and CEPs for

comparison to weighted-average NVs.

Mexico experienced significant inflation during the POI, as

measured by the wholesale price index published in International

Financial Statistics and the consumer price index from the Bank of

Mexico. Accordingly, to avoid the distortions caused by the effects of

significant inflation on prices and on the weighted-averages of those

prices, we calculated EPs, CEPs, and NVs on a monthly average basis,

rather than on a POI average basis.

Export Price and Constructed Export Price

For Eco, we calculated EP, in accordance with subsections 772 (a)

and (c) of the Act because the subject merchandise was sold directly to

the first unaffiliated purchaser in the United States prior to

importation and CEP was not otherwise warranted based on the facts of

record. We calculated CEP for all other respondents, in accordance with

subsections 772(b), (c) and (d) of the Act, where sales to the first

unaffiliated purchaser took place after importation into the United

States. With the exception of Eco, we found that CEP is warranted for

all respondents because all U.S. sales activities, including the

setting of prices, take place in the United States through U.S.

distributors/consignees and brokers, either affiliated or unaffiliated.

(See, Final Determination of Sales at Less Than Fair Value: Canned

Pineapple Fruit from Thailand, 60 FR 29553 (June 5, 1995), and

Preliminary Determination of Sales at Less Than Fair Value: Canned

Pineapple Fruit from Thailand, 60 FR 2734 (January 11, 1995).)

For all respondents, we calculated EP and CEP based on packed

prices to the first unaffiliated customer in the United States. We

based date of sale on shipment date to avoid the potential for

distortion of cost and price comparisons that occur when there is a

significant lag time between date of shipment and date of invoice

within the same market and/or between the two markets.

In accordance with section 772(c)(2) of the Act, we made

deductions, where appropriate, for foreign brokerage and handling,

freight expenses between the farm and the U.S. distributor's warehouse,

freight insurance, export fees, brokerage and handling, U.S. inspection

fees, U.S. duties, and U.S. freight. For Eco, we added the amount of

import duties collected on packaging materials which were rebated upon

exportation to the United States.

In accordance with section 772(d)(1) of the Act, for Tamazula, RLP,

Echavarria, Lomeli, Yory and Camalu, we made deductions, where

appropriate, for direct selling expenses including advertising, credit,

and commissions paid to unaffiliated distributors and brokers. In

addition, we deducted those indirect selling expenses that related to

commercial activity in the United States. These included inventory

carrying costs, certain indirect

[[Page 56612]]

selling expenses incurred in the home market, and the indirect selling

expenses of the affiliated U.S. distributors. Where there were

commissions paid to affiliated U.S. distributors, we considered the

actual reported indirect selling expenses of the producer/exporter and

its affiliated distributor, rather than the reported affiliated party

commissions. This methodology is consistent with Final Determination of

Sales at Less than Fair Value: Fresh Cut Roses from Colombia, 60 FR

6981 (February 6, 1995).

Where possible, monthly packing costs were recalculated using

monthly indices to account for the effects of inflation. This

recalculation was not possible for Lomeli, Eco and Yory since they did

not provide monthly packing costs as requested by the Department. For

these three respondents, we used packing costs, as reported.

Where payment dates were not reported, we used October 7, 1996, or

average credit days, as appropriate, to determine credit expenses.

Additionally, we made adjustments for CEP profit for all respondents

except Eco in accordance with section 772 (d)(3) and (f) of the Act.

We made company-specific adjustments as follows:

Eco. We calculated Eco's EP sales based on FOB packing shed prices.

We excluded from our analysis all reported sales of cocktail tomatoes

because cocktail tomatoes are not included in the scope of this

investigation (see the Scope of Investigation section of this notice

above). We recalculated warranty expenses to reflect the actual factor

reported in Eco's response. Credit was recalculated as follows: (1) We

excluded the factoring fee from the imputed credit calculation; and (2)

we recalculated the credit period for the first and second payments

using the number of days reported in Eco's narrative. Finally, we

calculated the factoring fee using the actual percentage derived from

sample documentation provided in Eco's questionnaire responses. The

factoring fee was treated as a direct selling expense.

Camalu. We calculated CEP based on FOB U.S. distributor's warehouse

prices. We excluded from our analysis reported shipments of tomatoes

that were given away as gifts or free samples, or shipments that had

been discarded in their entirety because of poor quality. Where

appropriate, we made deductions for price adjustments which were

reported as rebates in the sales database. We recalculated inventory

carrying costs based on the actual cost of manufacture of the

inventory, rather than the selling price. In addition, in calculating

the imputed credit expense and inventory carrying costs, we applied

Camalu's actual U.S. dollar denominated short-term borrowing rate for

the POI.

Echavarria. We calculated Echavarria's CEP sales based on FOB U.S.

distributor's warehouse prices. We excluded from our calculations

amounts reported separately for foreign brokerage and handling because

that expense had already been included in the amount reported for

foreign freight. Reported advertising expenses incurred were

reclassified as indirect selling expenses because the advertising was

directed at Echavarria's customers.

Lomeli. We calculated Lomeli's CEP sales based on FOB U.S.

distributor's warehouse prices. For a small number of sales made

through DGL, Lomeli claimed that it was unable to obtain transaction-

specific sales data because DGL did not agree to provide its sales

information to Lomeli. Therefore, in reporting these sales, Lomeli

relied on information contained in liquidation reports received from

DGL. These liquidation reports, however, could not be used in

calculating CEP because the reports did not contain sufficient data to

allow the Department to calculate all of the charges and adjustments

incurred on the sales. Given that Lomeli attempted to obtain the

transaction-specific data from DGL, the sales represent an extremely

small percentage of Lomeli's total U.S. sales, and Lomeli has otherwise

complied with all of the Department's requests for information, we find

that Lomeli has acted to the best of its ability in this investigation

and that an adverse inference is not warranted. Accordingly, we are

applying the weighted-average margin calculated for all other sales to

the quantity of sales sold through DGL as facts available in our

preliminary determination.

Lomeli used different weight bases to convert its reported gross

unit prices and charges and adjustments to a per kilogram basis for

U.S. and home market sales. We determined it was necessary to select a

single weight basis in order to make a fair comparison. Therefore, for

all U.S. sales, we used theoretical box weights reported for home

market sales, rather than the actual box weights provided in the U.S.

sales listing, to convert the gross unit prices, quantities, and

charges and adjustments to a per kilogram basis. The theoretical box

weight was chosen because data concerning the actual box weights for

certain home market box types not sold in the U.S. during the POI were

not reported.

We recalculated the reported commission expenses for Lomeli's two

unaffiliated distributors as follows: (1) For the first distributor, we

used the actual commission percentage specified in Lomeli's contract

with the distributor; and (2) for the second distributor, we used the

actual commission percentage specified in the contract plus an amount

for fees the distributor incurs in making sales through a third party

in the United States. For those sales where a negative commission

amount was reported, we set the commission equal to zero.

Because we were unable to duplicate Lomeli's calculation of the

reported credit expenses, and Lomeli stated that it had no dollar

denominated borrowings during the POI, we recalculated credit using the

average prime rate for the POI charged by the 25 largest U.S. banks on

short-term business loans, as published by the Federal Reserve Bank. We

also recalculated Lomeli's reported inventory carrying costs based on

the actual cost of manufacture of the inventory, rather than the

selling price. In addition, for all sales where Lomeli reported no U.S.

inventory carrying costs, we have used the inventory turnover period

reported for Lomeli's other transactions because Lomeli claims that it

incurred the same theoretical inventory period for all U.S.

distributors.

For those U.S. sales where no U.S. inspection fee was reported, we

deducted the amount of the inspection fee reported for other sales made

through the same distributor because Lomeli did not provide an

explanation as to why inspection fees were not reported on all sales.

RLP. We calculated CEP based on FOB U.S. distributor's warehouse

and delivered prices. We recalculated inventory carrying costs based on

the actual cost of manufacture of the inventory, rather than the

selling price. Since RLP reported that it incurred a U.S. brokerage

charge on its U.S. sales, but did not report this charge in its

database, we recalculated the U.S. brokerage costs accordingly.

Tamazula. We calculated CEP based on FOB U.S. distributor's

warehouse and delivered prices. We used an average of the affiliated

U.S. distributor's actual short-term borrowing rates during the POI in

our credit calculation. Where negative credit expenses were reported in

error, we used the average of the recalculated credit expenses.

Yory. We calculated CEP based on FOB U.S. distributor's warehouse

and delivered prices. We excluded from our

[[Page 56613]]

analysis Canadian sales that were included in the U.S. database. We

corrected the reported box weights and tomato types for certain product

codes to correct for errors in the database. We recalculated Yory's

credit expenses based on the company's actual borrowing rate for a U.S.

dollar-denominated short-term loan during the POI. We recalculated

freight insurance expenses based on the total expenses incurred and the

total quantity sold for the season, on a tomato type-specific basis.

Additionally, for the 1995/96 season, we revised Yory's reported export

fees and commission expenses to correct for errors in the database.

Since Yory reported that it incurred a repacking charge on its U.S.

sales, but did not report this charge in its database, we calculated

the U.S. repacking costs based on information in Yory's questionnaire

response.

Normal Value

In order to determine whether there was a sufficient volume of

sales in the home market to serve as a viable basis for calculating NV,

we compared each respondent's volume of home market sales of the

foreign like product to the volume of U.S. sales of the subject

merchandise, in accordance with section 773(a)(1)(C) of the Act. Since

we have not collapsed Lomeli and Eco (see the Affiliated Persons

section of this notice above), separate viability tests were conducted

for Lomeli and Eco. For Eco, we did not find the aggregate volume of

home market sales of the foreign like product to be greater than five

percent of the aggregate volume of U.S. sales of the subject

merchandise. Therefore, we have determined that Eco does not have a

viable home market. Because Eco made no third country sales during the

POI, normal value was based on constructed value, in accordance with

section 773(a)(4) of the Act.

Since the aggregate volume of home market sales of the foreign like

product was greater than five percent of its aggregate volume of U.S.

sales of the subject merchandise, we determined that the home market

was viable for all other respondents. For all respondents except Eco,

we have based NV on home market sales. We calculated NV as noted in the

Price to Price Comparisons and Price to CV Comparisons sections of this

notice.

Cost of Production Analysis

Based on the allegation contained in the petition, the Department

found reasonable grounds to believe or suspect that each respondent

made sales in the home market at prices below the cost of producing the

merchandise. As a result, the Department initiated investigations to

determine whether the respondents made home market sales at prices

below their respective costs of production (COP) during the POI within

the meaning of section 773(b) of the Act. (See, Initiation Notice.)

Before making any fair value comparisons, we conducted the COP

analysis described below for all respondents except Eco. We did not

perform a COP analysis for Eco because, as noted above, Eco did not

have a viable home or third country market.

A. Calculation of COP

We calculated growing season-specific COPs based on the sum of each

respondent's growing season costs for the foreign like product, plus

amounts for selling, general, and administrative expenses (SG&A) and

packing costs, in accordance with section 773(b)(3) of the Act. As

noted above, we determined that the Mexican economy experienced

significant inflation during the POI. Therefore, in order to avoid the

distortive effect of significant inflation on our comparison of costs

and prices, we requested that respondents submit monthly cost

information for each growing season that fell within the POI. This

monthly cost information was to be based on current production costs

incurred during each month. This required collecting cost data for

months outside the POI, as it was necessary to capture all costs for

total production in an entire growing season, in order to accurately

determine the per unit COP of that growing season. Using the consumer

price index (CPI) published by the Bank of Mexico, we indexed each

month's reported costs to end of growing season currency levels in

order to compute a weighted-average growing season COP. We relied on

the respondents' reported COP amounts except in the following specific

instances, wherein the reported costs were determined to be improperly

valued:

1. We adjusted each company's reported monthly materials

consumption costs for the effect of inflation during the inventory

holding period. The adjustment was based on the net inventory and

accounts payable turnover period and the CPI.

2. We recomputed reported depreciation expense for each company

based on the fixed asset values stated in end of growing season

currency levels.

Camalu. We disallowed the reported treatment of livestock feed

tomatoes as co-products of the foreign like product.

Echavarria. We disallowed Echavarria's reported other income offset

to G&A expenses and increased G&A expense to account for net foreign

exchange losses.

Lomeli. We reallocated headquarters G&A costs based on the

percentage of cost of sales for the tomato growing farms to the

consolidated Lomeli group. Additionally, we computed Lomeli's interest

expense rate using its 1995 audited consolidated constant currency

financial statements, and disallowed its reported other income offset

to G&A expenses.

RLP. For the months in which unusually high material costs were

reported for round and cherry tomatoes, we spread these costs evenly

over all preceding months in the growing season.

Tamazula. We increased general expenses to account for net foreign

exchange transaction and translation losses.

Yory. We reallocated the submitted depreciation expense between

products using cultivated hectares rather than the submitted

methodology of relative production weight.

B. Test of Home Market Prices

We used the CPI to adjust respondents' submitted monthly cost and

home market sales amounts in computing weighted-average COPs and home

market sales values stated in end of growing season currency. Because

tomatoes are a highly perishable agricultural product, we compared the

weighted-average COP figure for each growing season to the weighted-

average home market sales for the growing season to determine whether

below cost sales were made in substantial quantities during each

growing season. See SAA at 832 and section 773(b)(2)(c)(ii) of the Act.

Where a respondent's weighted-average home market sales value of a

given product for a growing season were at prices above the respective

weighted-average COP for the growing season, we did not disregard any

below cost sales of that product for that growing season. In such

instances, we found that the below costs sales were not made in

substantial quantities. Where a respondent's weighted-average home

market sales value of a given product for a growing season was less

than the weighted-average COP for the same growing season, we found

that below cost sales were made in substantial quantities, within the

meaning of section 773(b)(2)(C)(ii) of the Act, for that growing

season. We identified individual below cost transactions by indexing

the weighted-average COP for the growing season back to each month

within that growing season, based on

[[Page 56614]]

the CPI, and comparing that monthly COP to individual transaction

prices within that month.

Where below cost sales were found to have been made in substantial

quantities within a growing season, we also found that those sales were

made within an extended period of time because each growing season

constituted an extended period of time, in accordance with section

773(b)(2)(B) of the Act.

Pursuant to section 773(b)(2)(D) of Act, we also examined whether

the individual transaction prices which were found to be below cost

provided for recovery of costs within a reasonable period of time. As

noted above, because tomatoes are a perishable agricultural product, we

determined that the relevant period for examining costs in this

investigation is on a growing season basis and applied the cost test

accordingly. Specifically, in determining whether prices were

sufficient to recover cost within a reasonable period of time, we

compared individual below cost sales prices with the growing season

average cost.

C. Results of COP Test

We found that, for certain tomato types and growing seasons,

respondents' home market sales were sold at prices below the COP within

an extended period of time and in substantial quantities. Further,

because (i) home market prices were compared to an average growing

season COP and (ii) we view the growing season as a ``reasonable period

of time'', we did not find that the prices for these sales provided for

the recovery of costs within a reasonable period of time. We therefore

excluded these sales from our analysis and used the remaining above

cost sales as the basis for determining NV, in accordance with

773(b)(1). For those tomato types for which there were no above cost

sales in a given month in the ordinary course of trade, we compared

constructed export prices to CV.

D. Calculation of CV

We calculated growing season CVs for each respondent in accordance

with Section 773(e)(1) of the Act, which indicates that CV shall be

based on the sum of each respondent's growing costs for the foreign

like product, plus amounts for SG&A, profit, and U.S. packing costs.

For each respondent, we indexed the reported monthly growing costs to

the end of POI currency level in order to compute weighted-average POI

growing costs. With the exception of Eco, we based SG&A and profit on

the actual amounts incurred and realized by the respondent in

connection with the production and sale of the foreign like product in

the ordinary course of trade for consumption in the home market, in

accordance with section 773(e)(2)(A). Since the home market is not

viable for Eco, we calculated profit and indirect selling expenses in

accordance with section 773(e)(2)(A) using an alternative methodology.

Specifically, we calculated Eco's profit and indirect selling expenses

as described in Section 773(e)(2)(B)(ii). That is, we used the

weighted-average profit and indirect selling expenses experienced by

the other respondents in connection with the production and sale of the

foreign like product in the ordinary course of trade for consumption in

the home market. In addition, for each respondent we used U.S. packing

costs as described in the Export Price and Constructed Export Price

section of this notice, above.

E. Price-to-Price Comparisons

For those product comparisons for which there were sales at prices

above the COP, we based NV on home market prices. We based date of sale

on shipment date, as discussed in the Export Price and Constructed

Export Price section above. For all respondents we made deductions,

where appropriate, from the starting price for inland freight,

insurance, and other transportation expenses. In addition, we made

circumstance of sale adjustments for direct expenses, where

appropriate, in accordance with section 773(a)(6)(C)(iii) of the Act.

Where payment dates were not reported, we used October 7, 1996, or

average credit days, as appropriate, to determine credit expenses.

For all respondents, we adjusted for commissions, where

appropriate. Where the home market commissions were paid to affiliated

parties, we first determined whether the commissions were made at arm's

length by comparing these commissions to commissions paid or charged to

unaffiliated parties under the same terms. If these commissions were

determined to be at arm's length, we treated these commissions in the

same manner as unaffiliated commissions in the calculation methodology

described below.

Where commissions were paid on some, but not all, home market sales

used to calculate NV, and U.S. commissions were greater than home

market commissions, we calculated the weighted-average of home market

indirect selling expenses (including only those indirect expenses not

associated with an affiliated distributor) attributable to those sales

on which no commissions were paid. If U.S. commissions were greater

than the sum of the home market commissions and home market indirect

selling expenses, we deducted the weighted-average home market indirect

selling expenses from NV. Otherwise, we adjusted NV for the difference

between U.S. and home market commissions. Where no commissions were

paid on a home market sale used to calculate NV, we deducted the lesser

of either (1) the weighted-average amount of commission paid on a U.S.

sale for a particular product, or (2) the weighted-average amount of

indirect selling expenses paid on the home market sales for a

particular product. Where commissions were paid on all home market

sales used to calculate NV, we adjusted NV by the lesser of either (1)

the amount of the commission paid on the home market sale, or (2) the

weighted average of indirect selling expenses paid on U.S. sales.

As discussed above, we preliminarily determined that each

respondent's U.S. sales and home market sales are made at the same

level of trade. As stated in the SAA, at page 160: ``Only where

different functions at different levels of trade are established under

Section 773(a)(7)(A)(i) [and a level of trade adjustment is not

appropriate] will Commerce make a constructed export price offset

adjustment under Section 773(a)(7)(B).'' Accordingly, we did not grant

respondents' request for a CEP offset.

In accordance with section 773(a)(6)(B), we deducted home market

packing costs and added U.S. packing costs for all respondents. Where

possible, monthly packing costs were recalculated using monthly indices

to account for the effects of inflation. This recalculation was not

possible for Lomeli and Yory since they did not provide monthly packing

costs as requested by the Department. For these two respondents, we

made the adverse assumption that the reported packing costs were stated

in end of season currency and indexed those costs to the month of sale.

We made company-specific adjustments for price-to-price comparisons

as follows:

Camalu. We calculated NV based on packed, FOB packing shed or

delivered prices to unaffiliated customers. We recalculated Camalu's

reported home market imputed credit expenses by applying monthly peso-

denominated short-term interest rates obtained from public information

because Camalu did not have peso-denominated borrowings during the POI.

Additionally, we

[[Page 56615]]

recalculated Camalu's reported indirect selling expenses.

Echavarria. We calculated NV based on packed, FOB packing shed or

delivered prices to unaffiliated customers. We excluded from our

analysis sales of tomatoes that Echavarria categorized as sales of

culls. We used the indirect selling expense per box reported in

Echavarria's July 22, 1996, submission, because the indirect selling

expense recalculated in the September 5, 1996, response contained

errors which resulted in an overstatement of the indirect selling

expense amount.

Lomeli. We based NV on packed, FOB packing shed and home market

distributor's warehouse prices to unaffiliated customers. Since we are

not collapsing Eco and Lomeli, we are treating Lomeli as an affiliated

home market distributor of Eco. Therefore, we excluded all sales of

merchandise which Lomeli purchased from Eco from Lomeli's home market

sales database. In addition, we excluded all zero priced and/or zero

quantity transactions from our calculations for the preliminary

determination because the quantity of sales involved was insignificant

and Lomeli did not provide the Department with evidence indicating that

these transactions represent actual sales made in the ordinary course

of trade.

We recalculated Lomeli's reported credit expense as follows: (1) We

used actual monthly short-term borrowing rates available to Mexican

growers, in lieu of the average interest rate reported for each growing

season, because Mexico experienced high inflation during the POI; and

(2) for those sales with missing payment dates, we used the average

credit days for all transactions with a reported shipment and payment

date. The average credit days was used, rather than October 7, 1996,

because Lomeli contends that these sales were made by a farm that does

not track actual payment dates in its normal accounting records.

We recalculated Lomeli's inventory carrying costs based on the

actual cost of manufacture of the inventory, rather than the selling

price. In addition, as noted above, we applied the monthly short-term

borrowing rates in lieu of the growing season averages.

Lomeli assigned a bulk packing cost to its sales of merchandise

packed in four-layer boxes. However, because merchandise packed in

four-layer boxes is not considered bulk packaging and Lomeli has

provided no explanation for assigning a bulk packing rate to these

sales, we have applied the ratio of the difference in packing costs

reported for two-layer and three-layer boxes to the reported packing

cost for three-layer boxes. This has allowed the Department to derive

an estimated packing cost for four-layer boxes for its preliminary

determination.

RLP. We calculated NV based on packed, FOB warehouses or delivered

prices to unaffiliated customers. We recalculated RLP's reported home

market imputed credit expenses by applying peso-denominated short-term

interest rates obtained from public information because RLP did not

have peso-denominated borrowings during the POI. Inventory carrying

costs were recalculated based on the actual cost of manufacture of the

inventory, rather than the selling price.

Tamazula. We calculated NV based on packed, FOB packing shed or

delivered prices to unaffiliated customers. Where payment dates were

missing, we used the average credit period for the growing season to

calculate credit expenses. Where Tamazula had peso-denominated

borrowings during the growing season, we used the actual interest rate

in our credit calculation. For the growing seasons where Tamazula did

not have actual borrowings, we used public monthly peso-denominated

short-term interest rates. We excluded zero quantity transactions and

an insignificant amount of ``sample sales'' from our calculations.

Yory. We calculated NV based on packed, delivered prices to

unaffiliated customers. We revised Yory's reported credit expenses

based on new credit ratios submitted on September 19 and 25, 1996.

Price to CV Comparisons

For Eco, where we compared CV to EP, we added the U.S. product-

specific direct selling expenses. For all other respondents, where we

compared CV to constructed export prices, we made deductions for the

weighted-average home market direct selling expenses. Where

appropriate, we adjusted for the difference between U.S. commissions

and home market indirect selling expenses.

Currency Conversion

The Department's preferred source for daily exchange rates is the

Federal Reserve Bank. However, the Federal Reserve Bank does not track

or publish exchange rates for the Mexican peso. We made currency

conversions based on the actual daily exchange rates from the Dow Jones

News/Retrieval on-line system.

Verification

As provided in section 782(i) of the Act, we will verify all

information determined to be acceptable for use in making our final

determination.

Suspension of Liquidation

In accordance with section 733(d) of the Act, we are directing the

Customs Service to suspend liquidation of all entries of fresh tomatoes

from Mexico, that are entered, or withdrawn from warehouse for

consumption, on or after the date of publication of this notice in the

Federal Register. We are also instructing the Customs Service to

require a cash deposit or the posting of a bond equal to the weighted-

average amount by which the normal value exceeds the export price, as

indicated in the chart below. These 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

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

Camalu..................................................... 4.16

Echavarria................................................. 11.89

Lomeli..................................................... 26.97

Eco-Cultivos............................................... 188.45

RLP........................................................ 10.26

Tamazula................................................... 28.30

Yory....................................................... 11.95

All Others................................................. 17.56

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

Pursuant to section 735(c)(5)(A) of the Act, the Department has

excluded all zero and de minimis weighted-average dumping margins and

margins determined entirely under section 776 of the Act, from the

calculation of the All Others rate.

ITC Notification

In accordance with section 733(f) of the Act, we have notified the

ITC of our determination. If our final determination is affirmative,

the ITC will determine before the later of 120 days after the date of

this preliminary determination or 45 days after our final determination

whether these imports are materially injuring, or threaten material

injury to, the U.S. industry.

Public Comment

Case briefs or other written comments in at least ten copies must

be submitted to the Assistant Secretary for Import Administration no

later than February 7, 1997, and rebuttal briefs, no later than

February 12, 1997. A list of authorities used and an executive summary

of issues should accompany any briefs submitted to the Department. Such

summary should be limited to five pages total, including footnotes. In

accordance with section 774 of the Act, we will hold a public hearing,

if requested, to

[[Page 56616]]

afford interested parties an opportunity to comment on arguments raised

in case or rebuttal briefs. Tentatively, the hearing will be held on

February 18, 1997, at the U.S. Department of Commerce, 14th Street and

Constitution Avenue, N.W., Washington, D.C. 20230. Parties should

confirm by telephone the time, date, and place of the hearing 48 hours

before the scheduled time.

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

B-099, within ten days of the publication of this notice. Requests

should contain: (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. If this investigation proceeds normally, we will make our final

determination no later than 135 days after the publication of this

notice in the Federal Register.

This determination is published pursuant to section 733(f) of the

Act.

Dated: October 28, 1996.

Robert S. LaRussa,

Acting Assistant Secretary for Import Administration.

[FR Doc. 96-28091 Filed 10-31-96; 8:45 am]

BILLING CODE 3510-DS-P