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

DEPARTMENT OF COMMERCE

International Trade Administration

[A-614-801]

Fresh Kiwifruit From New Zealand; Preliminary Results of

Antidumping Duty Administrative Review

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

ACTION: Notice of Preliminary Results of Antidumping Duty

Administrative Review.

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SUMMARY: In response to a request by the New Zealand Kiwifruit

Marketing Board (NZKMB), the respondent in this case, the Department of

Commerce (the Department) is conducting an administrative review of the

antidumping duty order on fresh kiwifruit from New Zealand. The review

covers one exporter of the subject merchandise to the United States for

the period June 1, 1994, through May 31, 1995.

We preliminarily determine that sales have been made below the

normal value (NV). If these preliminary results are adopted in our

final results of administrative review, we will instruct the U.S.

Customs Service to assess antidumping duties equal to the difference

between the United States price (USP) and the NV. Interested parties

are invited to comment on these preliminary results. Parties who submit

argument in this proceeding are requested to submit with the argument

(1) a statement of the issue, and (2) a brief summary of the argument.

(No longer than five pages, including footnotes.)

EFFECTIVE DATE: April 10, 1996.

FOR FURTHER INFORMATION CONTACT: Paul Stolz or Thomas F. Futtner,

Office of Antidumping Compliance, Import Administration, International

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

Constitution Avenue, NW., Washington, DC 20230; telephone (202) 482-

4474 or 482-3814, respectively.

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 Rounds Agreements Act. In

addition, unless otherwise indicated, all citations to the Department's

regulations are to the current regulations, as amended by the interim

regulations published in the Federal Register on May 11, 1995 (60 FR

25130).

SUPPLEMENTARY INFORMATION:

Background

On June 2, 1992, the Department published the antidumping duty

order on fresh kiwifruit from New Zealand (57 FR 23203). On June 6,

1995, the Department published a notice of ``Opportunity to Request

Administrative Review'' of this antidumping duty order for the period

June 1, 1994, through May 31, 1995 (60 FR 29821). We received a timely

request for review by the respondent, NZKMB. On July 14, 1995, the

Department initiated a review of NZKMB (60 FR 36260). The period of

review (POR) is June 1, 1994 through May 31, 1995.

Scope of the Review

The product covered by this review is fresh kiwifruit. Processed

kiwifruit, including fruit jams, jellies, pastes, purees, mineral

waters, or juices made from or containing kiwifruit, are not covered

under the scope of this review. The subject merchandise is currently

classifiable under subheading 0810.90.20.60 of the Harmonized Tariff

Schedule (HTS). Although the HTS number is provided for convenience and

customs purposes, our written description of the scope of this order is

dispositive.

Constructed Export Price

The Department treated certain sales by the respondent as

constructed export prices (CEP) sales, as provided in section 772 (b)

of the Tariff Act. Sales to the United States by NZKMB were made to the

first unaffiliated party in the United States after importation, and

hence warranted CEP methodology.

We calculated CEP based on packed F.O.B. (ex-New Zealand

coolstore), and packed F.O.B., freight-prepaid prices. We made

deductions, where appropriate, for New Zealand inland freight

(coolstore to port), loading charges in New Zealand, ocean freight,

basic marine insurance, charter insurance, U.S. import duties, U.S.

brokerage and handling, U.S. inland freight (decreased to account for

prepaid freight where applicable), and price discounts (i.e.,

advertising allowances, special advertising allowances, market

adjustment discounts, advertising rebates which actually constituted

discounts, and discounts for quality problems). In accordance with

sections 772(d) (1) and (2) of the Tariff Act, we made additional

deductions, where appropriate, for agent commissions, broker

commissions, credit, direct advertising, and indirect selling expenses.

Indirect selling expenses included inventory carrying costs, repacking,

U.S. primary and U.S. satellite coolstore charges, New Zealand and U.S.

instore insurance, fire insurance, product liability and tamper

insurance, earthquake insurance, indirect advertising, quality control

expenses, miscellaneous selling-agent-related charges, other U.S.-

incurred indirect expenses, and other New Zealand-incurred indirect

selling expenses associated with selling in the United States.

Furthermore, pursuant to section 772(d)(3), the price was further

reduced by an amount for profit to arrive at the CEP. Finally, we

increased the U.S. price to account for post sale price adjustments not

reflected in the gross price.

Normal Value

In order to determine whether there were sufficient sales of

kiwifruit in the home market to serve as a viable basis for calculating

NV, we compared the volume of home market sales of kiwifruit by NZKMB

to its volume of kiwifruit sales to the United States, in accordance

with section 773(a)(1)(B) of the Act. The petitioner has claimed that

the home market should not be considered viable. However, since

[[Page 15923]]

respondent's aggregate volume of home market sales of the foreign like

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

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

was viable for the respondent. Therefore, we have based NV on home

market sales.

In accordance with section 777A(d)(2), we calculated monthly

weighted-average prices for NV and compared these to individual U.S.

transactions.

Third country sales were used as the basis of foreign market value

in the most recently completed review as the home market was not viable

in that proceeding. Because many of the NZKMB's third-country sales

were found to have been made at prices below the cost of production and

were therefore disregarded in that review, the Department initiated a

COP investigation for the purposes of this administrative review. (See

memorandum to file dated November 7, 1995.) Just as the Department

found in the original investigation, and the first and second

administrative reviews, we find that in comparing NV to COP, the

reseller/exporter's acquisition prices are irrelevant because section

773(b) of the Tariff Act requires that the Department look at the

actual COP of the subject merchandise. Thus, we used the cost incurred

by kiwifruit farmers, the actual producers of the subject merchandise,

to calculate the COP benchmark.

Due to the large number of growers from which the NZKMB purchased

kiwifruit during the POR, the Department determined that sampling was

both administratively necessary and methodologically appropriate to

calculate a representative cost of producing the subject merchandise

for purposes of this administrative review (see section 777A of the

Tariff Act). We selected the sample of kiwifruit growers as follows:

Farms were segregated by geographic regions into either the Bay of

Plenty region or non-Bay of Plenty regions. In selecting the sample of

20 growers, we determined that we would select 15 growers representing

the Bay of Plenty region and five from the non-Bay of Plenty regions,

in order to reflect the relative proportion of kiwi production from

each of the two regions. Because the Department's purpose is to

estimate the average unit cost per tray of exported kiwifruit, as a

second step we have assigned selection probabilities to the growers on

the basis of the volume of kiwifruit each grower submitted to the NZKMB

for export. We sent COP questionnaires through the NZKMB to the 20

kiwifruit growers selected, all of which responded to the Department's

questionnaire. The 20 COP responses submitted, along with the sales and

supplemental responses, were analyzed and relied upon, where

appropriate, in reaching the preliminary results of the review.

We calculated the cost of cultivation for each grower by summing

all costs for the 1994-1995 kiwifruit season. These costs included the

cost of materials, farm labor, farm overhead, and packing. We allocated

the cost on a per-tray equivalent basis over the total number of tray

equivalents submitted by each grower to the NZKMB. (A tray equivalent

is a standard unit of measurement for kiwifruit. It is representative

of the kiwifruit which can fit into a standard packing tray.) We then

adjusted those costs to reflect fruit loss. We added the NZKMB's

general and administrative expenses to the farm's average cost per

tray.

The orchard set-up costs for all growers were amortized over 20

years as was done in prior reviews. Where growers purchased an

established orchard, the acquisition price of the farm was treated as

the set-up cost.

For growers that allocated costs over the productive area, that is,

canopy area, we made adjustments to include the headlands and sidelands

in the productive area of the kiwifruit orchard for the purpose of

allocating costs. We made adjustments to growers' cost for

depreciation, interest, labor, repairs, management, vehicles,

fertilizer, spraying, rates (property tax), electricity, shelter,

water, general and administrative, pruning, and mowing on a farm-

specific basis where appropriate.

We calculated a simple average COP from the sampled growers'

individual COPs. The total COP was calculated on a New Zealand dollar

per single-layer tray equivalent basis (NZ$/SLT).

In accordance with section 773(b) of the Tariff Act, in determining

whether to disregard home market sales made at prices below COP, we

examined whether such sales were made within an extended period of time

in substantial quantities, and whether such sales were made at prices

which would permit recovery of all costs within a reasonable period of

time.

Pursuant to section 773(b)(2)(C) of the Act, where less than 20

percent of a respondent's sales of a given product were at prices less

than the COP, we did not disregard any below-cost sales of that product

because we determined that the below-cost sales were not made in

``substantial quantities.'' Where 20 percent or more of a respondent's

sales of a given product were at prices less than the COP, we

disregarded only the below-cost sales where such sales were found to be

made within an extended period of time (in accordance with section

773(b)(2)(B) of the Act) and at prices which would not permit recovery

of all costs within a reasonable period of time (in accordance with

section 773(b)(2)(D) of the Act). Where all sales of a specific product

were at prices below the COP, we disregarded all sales of that product,

and calculated NV based on CV, in accordance with section 773(b)(1) of

the Act.

The results of our cost test indicated that within an extended

period of time (one year, in accordance with section 773(b)(2)(B) of

the Act) for certain home market models/product codes, more than 20

percent of the home market sales were sold at below the COP prices,

which would not permit the recovery of all costs within a reasonable

period of time. Thus, we excluded these below-cost sales and used the

remaining above-cost sales as the basis of determining NV, in

accordance with section 773(b)(1). For those home market models/product

codes for which there were no above-cost sales, we compared EP and/or

CEP to CV, in accordance with section 773(b)(1) of the Act.

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

the prices of below cost sales would provide for recovery of costs

within a reasonable period of time. As the prices of below cost sales

were below the weighted average per unit cost of production for the

POR, we conclude that no cost recovery took place.

In accordance with section 773(e)(1) of the Act, we calculated CV

based on the sum of the respondent's cost of materials and fabrication

as reported in the U.S. sales databases. In accordance with section

773(e)(2)(A), we based SG&A and profit on the 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 foreign country. For selling expenses, we used the

weighted-average home market selling expenses. Pursuant to section

773(e)(3), we included U.S. packing as reported in the U.S. sales

databases.

We adjusted NV where appropriate, to reflect deductions for home

market rebates, inland freight, delivery premiums, pre-sale warehouse

expenses, credit expenses, and warranty expenses in the calculation of

NV for comparison to CEP transactions. We also deducted home market

packing expenses and added U.S. packing expenses.

[[Page 15924]]

Level of Trade and CEP Offset

As set forth in section 773(a)(2)(B)(i) of the Act and in the

Statement of Administrative Action (SAA) accompanying the Uruguay Round

Agreements Act, at 829-831, to the extent practicable, the Department

will calculate normal value based on sales at the same level of trade

as the U.S. sale. When the Department is unable to find sale(s) 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 a

different level of trade.

In accordance with section 773(a)(7)(A) of the Act, if we compare a

U.S. sale at one level of trade to normal value sales at a different

level of trade, 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 NV sale. Second, the differences must affect

price comparability as evidenced by a pattern of consistent price

differences between sales at the different levels of trade in the

market in which normal value is determined. When constructed export

price is applicable, section 773(a)(7)(B) of the Act establishes the

procedures for making a constructed export price offset when: (1)

Normal value is at a different level of trade, and (2) the data

available do not provide an appropriate basis for a level of trade

adjustment from the U.S. sale. Also, in accordance with section

773(a)(7)(B), to qualify for a CEP offset, the level of trade in the

home market must also constitute a more advanced stage of distribution

than the level or trade of the CEP.

In order to identify levels of trade, the Department must review

information concerning selling functions of the manufacturer/exporter.

We reviewed the questionnaire responses to establish whether there were

sales at different levels of trade based on selling functions performed

and services offered to each customer or customer class.

We identified one level of trade in the home market with two types

of sales within that level: (1) Direct sales by NZKMB to the customer,

and (2) sales through a domestic agent. Both types of sales were made

to resellers, retail stores and distributors. We examined the selling

functions performed for both types of sales and found that NZKMB

handled many of the same or similar selling functions for both types of

sales including: quality control, packing quality control, maintenance

of fruit while in coolstore, marketing and general promotion, and

general price setting. For direct sales, NZKMB also handled order

processing, invoicing, and price negotiation with the customer. For

sales through the domestic agent, NZKMB paid the agent a commission for

handling those responsibilities. Overall, we preliminarily determine

that the selling functions between the two sales types are sufficiently

similar to consider them as one level of trade in the home market. In

addition, all sales, whether made to resellers, retail stores or

distributors, included the same selling functions.

For the U.S. market, all sales were reported as CEP sales. The

level of trade of the U.S. sales is determined by the adjusted CEP

rather than the starting price. We examined the selling functions

performed by NZKMB for U.S. CEP sales and preliminarily determined that

they are at a different level of trade from NZKMB's home market sales

because NZKMB engaged in fewer selling functions for the adjusted CEP

sales than for its home market sales. For instance, NZKMB did not

engage in any general promotion, marketing activities, or price

negotiations for U.S. sales.

Because we compared CEP sales to home market sales at a different

level of trade, we examined whether a level of trade adjustment may be

appropriate. In this case, respondent only sold at one level of trade

in the home market; therefore, there is no basis upon which respondent

can demonstrate a consistent pattern of price differences between

levels of trade. Further, we do not have information which would allow

us to examine pricing patterns based on respondent's sales of other

products and there are no other respondents or other record information

on which such an analysis could be based.

Because the data available do not provide an appropriate basis for

making a level of trade adjustment but the level of trade in the HM is

a more advanced stage of distribution than the LOT of the CEP sales, a

CEP offset is appropriate. Respondents claimed a CEP offset. We applied

the CEP offset to normal value or constructed value, as appropriate.

The level of trade methodology employed by the Department in these

preliminary results of review is based on the facts particular to this

review. The Department will continue to examine its policy for making

level of trade comparisons and adjustments for its final results of

review.

Fair Value Comparisons

To determine whether sales of kiwifruit by respondents to the

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

the NV, as described in the ``Constructed Export Price'' and ``Normal

Value'' sections of this notice. In accordance with section 777A(d)(2),

we calculated monthly weighted-average prices for NV and compared these

to individual U.S. transactions. Where possible, in calculating a

monthly weighted average normal value, we averaged home market sales

across the channel of distribution most comparable to that in which the

U.S. transaction was made. Where there were no home market sales

through that channel of distribution, we averaged home market sales

through the other channel of distribution.

Preliminary Results of Review

We preliminarily determine that the following margin exists for the

period June 1, 1994, through May 31, 1995:

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

Percent

Manufacturer/Exporter margin

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

New Zealand Kiwifruit Marketing Board........................ 6.33

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

The Department shall determine, and the Customs Service shall

assess, antidumping duties on all appropriate entries. Individual

differences between USP and NV may vary from the percentage stated

above. Upon completion of this review, the Department will issue

assessment instructions concerning the respondent directly to the U.S.

Customs Service.

Furthermore, the following deposit requirements will be effective

for all shipments of the subject merchandise, entered, or withdrawn

from warehouse, for consumption on or after the publication date of the

final results of this administrative review, as provided for by section

751(a) of the Act: (1) The cash deposit rate for the reviewed firm will

be that firm's rate established in the final results of this

administrative review; (2) For previously reviewed or investigated

companies not listed above, the cash deposit rate will continue to be

the company-specific rate published for the most recent period; (3) If

the exporter is not a firm covered in this review, a prior review, or

in the original less-than-fair-value (LTFV) investigation, but the

manufacturer is, the cash deposit rate will be the rate established for

the most recent period for the manufacturer of the merchandise; (4) If

neither the manufacturer nor the exporter is a firm covered in this or

any previous review

[[Page 15925]]

conducted by the Department, the cash deposit rate will be 98.60

percent, the ``all others'' rate established in the LTFV investigation.

These deposit requirements, when imposed, shall remain in effect

until publication of the final results of the next administrative

review.

Interested parties may request disclosure within five days of the

date of publication of this notice, and may request a hearing within

ten days of the date of publication. Any hearing, if requested, will be

held as early as convenient for the parties but not later than 44 days

after the date of publication or the first work day thereafter. Case

briefs or other written comments from interested parties may be

submitted not later than 30 days after the date of publication of this

notice. Rebuttal briefs and rebuttal comments, limited to issues raised

in the case briefs, may be filed not later than 37 days after the date

of publication. The Department will publish the final results of this

administrative review, including the results of its analysis of issues

raised in any such written comments.

This notice serves as a preliminary reminder to importers of their

responsibility under 19 CFR 353.26 to file a certificate regarding the

reimbursement of antidumping duties prior to liquidation of the

relevant entries during this review period. Failure to comply with this

requirement could result in the Secretary's presumption that

reimbursement of antidumping duties occurred and the subsequent

assessment of double antidumping duties.

This administrative review and notice are in accordance with

section 751(a)(1) of the Tariff Act (19 U.S.C. 1675(a)(1)) and 19 CFR

353.22.

Dated: March 29, 1996.

Paul L. Joffe,

Deputy Assistant Secretary for Import Administration.

[FR Doc. 96-8968 Filed 4-9-96; 8:45 am]

BILLING CODE 3510-DS-P