Notice of Preliminary Determination of Sales at Less Than Fair Value: Certain Preserved Mushrooms From Chile

DEPARTMENT OF COMMERCE

International Trade Administration

[A-337-804]

Notice of Preliminary Determination of Sales at Less Than Fair

Value: Certain Preserved Mushrooms From Chile

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

EFFECTIVE DATE: August 5, 1998.

FOR FURTHER INFORMATION CONTACT: David J. Goldberger or Katherine

Johnson, Import Administration, International Trade Administration,

U.S. Department of Commerce, 14th Street and Constitution Avenue, N.W.,

Washington, D.C. 20230; telephone: (202) 482-4136 or (202) 482-4929,

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''). In addition,

unless otherwise indicated, all citations to the Department of Commerce

(``Department'') regulations are to the regulations at 19 CFR part 351,

62 FR 27296 (May 19, 1997).

Preliminary Determination

We preliminarily determine that certain preserved mushrooms

(``mushrooms'') from Chile 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 of sales at LTFV are

shown in the ``Suspension of Liquidation'' section of this notice.

Case History

Since the initiation of this investigation (Notice of Initiation of

Antidumping Investigations: Certain Preserved Mushrooms From Chile,

India, Indonesia, and the People's Republic of China (63 FR 5360,

February 2, 1998)), the following events have occurred:

During January and February 1998, the Department requested

information from the U.S. Embassy in Chile to identify producers/

exporters of the subject merchandise. During February 1998, the

Department also requested and received comments from the petitioners

and potential respondents regarding the model matching criteria.

On February 27, 1998, the United States International Trade

Commission (``ITC'') notified the Department of its affirmative

preliminary injury determination in this case.

Also on February 27, 1998, the Department issued an antidumping

duty questionnaire to Nature's Farm Products (Chile), S.A. (``NFP''),

the sole exporter of the subject merchandise from Chile.

In March 1998, the Department received a response to Section A of

the questionnaire from NFP. NFP reported that its home market was not

viable during the period of investigation (POI), but that its sales to

Brazil during the POI constituted a viable third country market.

On March 30, 1998, the Department issued a notice identifying a

period for interested parties to raise issues regarding product

coverage. (See Certain Preserved Mushrooms from Chile, India,

Indonesia, and the People's Republic of China: Comments Regarding

Product Coverage, 63 FR 16971 (April 7, 1998). NFP submitted comments

on April 30, 1998, stating that product coverage should include fresh

mushrooms as well as preserved mushrooms.

On April 1, 1998, the petitioners in this investigation, L.K.

Bowman, Inc., Modern Mushroom Farms, Inc., Monterey Mushrooms, Inc.,

Mount Laurel Canning Corp., Mushroom Canning Company, Sunny Dell Foods,

Inc., and United Canning Corp., submitted a timely allegation pursuant

to section 773(b) of the Act that NFP had made sales in the third

country market at less than the cost of production (``COP''). Our

analysis of the allegation indicated that there were reasonable grounds

to believe or suspect that NFP sold mushrooms in the third country

market at prices less than the COP. Accordingly, we initiated a COP

investigation with respect to NFP pursuant to section 773(b) of the Act

(See Memorandum from Team to Louis Apple, Office Director, dated April

8, 1998).

On April 30, 1998, the Department requested comments as to whether

it should consider ``whole mushroom size'' as a physical characteristic

for its model matching methodology. On May 14, 1998, NFP responded to

the Department's request for information.

[[Page 41787]]

On May 1, 1998, pursuant to section 733(c)(1)(A) of the Act, the

petitioners made a timely request to postpone the preliminary

determination for forty days. We granted this request and, on May 8,

1998, we postponed the preliminary determination until no later than

July 27, 1998. (See 63 FR 27264, May 18, 1998).

We received NFP's responses to Sections B and C of the

questionnaire in April 1998. We issued a supplemental questionnaire for

Sections A, B, and C to NFP in April 1998 and received responses to

these questionnaires, along with the Section D response, in May 1998.

In May 1998, we issued a supplemental questionnaire for Section D to

NFP and received the response to this questionnaire in June 1998. NFP

submitted additional information concerning its response data in June

and July 1998.

In the supplemental Section B response, NFP stated that, after a

review of its date of sale methodology for U.S. sales, revisions to its

POI sales totals indicated that the home market may, in fact, be

viable. In response, the petitioners filed a sales below COP allegation

on NFP's home market sales on July 6, 1998. As discussed below under

``Home Market Viability, `` the Department has determined that the home

market is not viable.

Scope of Investigation

For purposes of this investigation, the products covered are

certain preserved mushrooms whether imported whole, sliced, diced, or

as stems and pieces. The preserved mushrooms covered under this

investigation are the species Agaricus bisporus and Agaricus bitorquis.

``Preserved mushrooms'' refer to mushrooms that have been prepared or

preserved by cleaning, blanching, and sometimes slicing or cutting.

These mushrooms are then packed and heated in containers including but

not limited to cans or glass jars in a suitable liquid medium,

including but not limited to water, brine, butter or butter sauce.

Preserved mushrooms may be imported whole, sliced, diced, or as stems

and pieces. Included within the scope of the investigation are

``brined'' mushrooms, which are presalted and packed in a heavy salt

solution to provisionally preserve them for further processing.

Excluded from the scope of this investigation are the following:

(1) All other species of mushroom including straw mushrooms; (2) all

fresh and chilled mushrooms, including ``refrigerated'' or ``quick

blanched mushrooms'; (3) dried mushrooms; (4) frozen mushrooms; and (5)

``marinated,'' ``acidified'' or ``pickled'' mushrooms, which are

prepared or preserved by means of vinegar or acetic acid, but may

contain oil or other additives.

The merchandise subject to this investigation is classifiable under

subheadings 2003.10.27, 2003.10.31, 2003.10.37, 2003.10.43,

2003.10.47.2003.10.53, and 0711.90.4000 of the Harmonized Tariff

Schedule of the United States (``HTS''). Although the HTS subheadings

are provided for convenience and Customs purposes, the written

description of the merchandise under investigation is dispositive.

Period of Investigation

The period of investigation (``POI'') is January 1, 1997, through

December 31, 1997.

Product Comparisons

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

products produced by NFP covered by the description in the ``Scope of

Investigation'' section, above, and sold to Brazil during the POI to be

foreign like products for purposes of determining appropriate product

comparisons to U.S. sales. As discussed below, we determined that there

were no comparable third country sales in the ordinary course of trade

(i.e., above cost) during the POI. Therefore, we compared U.S. sales to

constructed value ( ``CV''), as described below.

Fair Value Comparisons

To determine whether sales of mushrooms from Chile to the United

States were made at less than fair value, we compared constructed

export price (``CEP'') to the Normal Value (``NV''), as described in

the ``Constructed Export Price'' and ``Normal Value'' sections of this

notice, below. In accordance with section 777A(d)(1)(A)(i) of the Act,

we calculated weighted-average CEPs for comparison to weighted-average

NVs or CVs.

Level of Trade

In accordance with section 773(a)(1)(B) of the Act, to the extent

practicable, we determine NV based on sales in the comparison market at

the same level of trade (``LOT'') as the CEP transaction. The NV LOT is

that of the starting-price sales in the comparison market or, when NV

is based on constructed value (``CV''), that of the sales from which we

derive selling, general and administrative (``SG&A'') expenses and

profit. For CEP, it is the level of the constructed sale from the

exporter to the importer.

To determine whether NV sales are at a different level of trade

than CEP, we examined stages in the marketing process and selling

functions along the chain of distribution between the producer and the

unaffiliated customer. If the comparison-market sales are at a

different LOT, and the difference affects price comparability, as

manifested in a pattern of consistent price differences between the

sales on which NV is based and comparison-market sales at the LOT of

the export transaction, we make an LOT adjustment under section

773(a)(7)(A) of the Act. Finally, for CEP sales, if the NV level is

more remote from the factory than the CEP level and there is no basis

for determining whether the difference in the levels between NV and CEP

affects price comparability, we adjust NV under section 773(a)(7)(B) of

the Act (the CEP-offset provision). See Notice of Final Determination

of Sales at Less Than Fair Value: Certain Cut-to-Length Carbon Steel

Plate from South Africa, 62 FR 61731 (November 19, 1997).

In this case, we compared all U.S. sales to CV, as noted above. As

we could not determine the LOT of the sales from which we derived the

profit for CV, we could not determine whether there is a difference in

LOT between any U.S. sales and CV. Therefore, we made no LOT adjustment

nor a CEP offset to NV.

Constructed Export Price

We calculated CEP, in accordance with subsections 772(b) of the

Act, because sales to the first unaffiliated purchaser took place after

importation into the United States.

We based CEP on the packed ex-warehouse or delivered prices to

unaffiliated purchasers in the United States. We made deductions for

discounts and rebates, where applicable. We also made deductions for

the following movement expenses, where appropriate, in accordance with

section 772(c)(2)(A) of the Act: foreign inland freight, foreign

brokerage, international freight (including marine insurance), U.S.

customs duties, post-sale warehousing expenses, and U.S. inland

freight. In accordance with section 772(d)(1) of the Act, we deducted

those selling expenses associated with economic activities occurring in

the United States, including direct selling expenses (credit costs,

commissions and other direct selling expenses), inventory carrying

costs, and other indirect selling expenses. We also deducted the profit

allocated to these expenses, in accordance with sections 772(d)(3) and

772(f) of the Act.

NFP reported receipt of an export incentive credit from the Chilean

government on both U.S. and Brazilian sales. As there is no statutory

provision

[[Page 41788]]

for an adjustment for this credit, we disregarded it when calculating

CEP and NV.

We excluded from our analysis NFP's sales of imperfect merchandise

because the quantity involved is insignificant and NFP made no

comparable third country sales of this type of merchandise. See, e.g.,

Preliminary Determination of Sales at Less than Fair Value and

Postponement of Final Determination: Canned Pineapple Fruit from

Thailand, 60 FR 2734, 2737 (January 11, 1995).

Normal Value

After testing (1) home market and third country viability as

discussed below, and (2) whether third country sales were at below-cost

prices, we calculated NV as noted in the ``Price-to-CV Comparisons''

section of this notice.

1. Home and Third Country Market Viability

In order to determine whether there is a sufficient volume of sales

in the home market to serve as a viable basis for calculating NV (i.e.,

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

is equal to or greater than five percent of the aggregate volume of

U.S. sales), we compared the 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.

Because NFP's aggregate volume of POI home market sales of the foreign

like product was less than five percent of its aggregate volume of POI

U.S. sales for the subject merchandise (as determined by the date of

sale methodology applied by the Department discussed in a Memorandum

from the Team to Louis Apple dated July 27, 1998), we determined that

the home market was not viable for NFP. However, we determined that

Brazil, NFP's largest third country market, was viable in accordance

with section 773(a)(1)(B)(ii) of the Act. Therefore, in accordance with

section 773(a)(1)(C) of the Act, we determined that Brazil is the

appropriate foreign market for calculating NV.

2. Cost of Production Analysis

As stated in the ``Case History'' section of the notice, based on a

timely allegation filed by the petitioners, the Department initiated a

COP investigation of NFP to determine whether sales were made at prices

less than the COP.

We conducted the COP analysis described below.

A. Calculation of COP

In accordance with section 773(b)(3) of the Act, we calculated COP

based on the sum of NFP's cost of materials and fabrication for the

foreign like product, plus an amount for third country SG&A, interest

expenses, and packing costs. We used the information from NFP's Section

D supplemental questionnaire response to calculate COP, with the

following adjustments:

(1) We revised NFP's submitted general and administrative (``G&A'')

expense rate because NFP calculated G&A as a percentage of sales

revenue, rather than cost of goods sold . In addition, NFP calculated a

separate rate for each product. We calculated a company-wide G&A rate

by dividing total G&A expense by total manufacturing cost.

(2) The Department normally calculates financial expenses on a

consolidated basis; however, NFP did not provide either a consolidated

financial statement or a consolidated financial expense rate.

Therefore, we recalculated NFP's financial expense rate based on its

non-consolidated financial statement. In its calculation, NFP claimed

the full amount of the monetary correction as an offset to its

financial expense. We allowed only the portion of the monetary

correction associated with the current portion of its bank loans since

the remaining portion relates to other fiscal periods. In addition, NFP

failed to respond to the Department's request for a detailed analysis

of its foreign exchange gains and losses. Therefore, we included the

entire amount of the net foreign exchange loss in our calculation of

financial expense. We calculated a revised net financial expense and

divided it by the total manufacturing costs.

Startup Adjustment Claim. NFP claimed a startup adjustment to its

COP under section 773(f)(1)(C) of the Act, alleging that it has yet to

achieve commercial production levels and, thus, continues to operate in

a start-up mode. Although NFP completed construction of its plant in

1994, it contends that, due to technical difficulties associated with

harvesting necessary raw materials, commercial production levels have

not yet been reached. NFP estimates that these levels will be reached

in mid-1999.

Section 773(f)(1)(C)(ii) of the Act authorizes adjustments for

start-up operations ``only where (I) a producer is using new production

facilities or producing a new product that requires substantial

additional investment, and (II) production levels are limited by

technical factors associated with the initial phase of production.''

NFP's production facilities were three years old by the start of the

POI; therefore, we do not consider these facilities to be ``new''

within the meaning of section 773(f)(1)(C)(ii)(I) of the Act.

Moreover, NFP has not identified any additional costs associated

with ``substantially retooling'' its production facilities, which,

according to the Statement of Administrative Action accompanying the

URAA, H.R. Doc. No. 316, 103d Cong., 2d Sess. (1994) (``SAA''), might

satisfy the first criterion. Because section 773(f)(1)(C)(ii) of the

Act establishes that both prongs of the test must be met before a

startup adjustment is warranted, this finding is sufficient to deny

NFP's claim. Therefore, we need not address NFP's arguments concerning

technical factors that limit commercial production levels (see Notice

of Final Determination of Sales at Not Less Than Fair Value: Collated

Roofing Nails from Korea, 62 FR 51420, 51426, October 1, 1997).

B. Test of Third Country Sales Prices

We compared the weighted-average COP for NFP, adjusted where

appropriate, to third country sales of the foreign like product as

required under section 773(b) of the Act. In determining whether to

disregard third country market sales made at prices less than the COP,

we examined whether (1) within an extended period of time, such sales

were made in substantial quantities, and (2) such sales were made at

prices which permitted the recovery of all costs within a reasonable

period of time. On a product-specific basis, we compared the COP to the

third country market prices, less any applicable movement charges, and

direct and indirect selling expenses.

C. Results of the COP Test

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

percent of 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 during the POI were at prices less than the

COP, we determined such sales to have been made in ``substantial

quantities'' within an extended period of time in accordance with

section 773(b)(2)(B) of the Act. In such cases, we also determined that

such sales were not made at prices which would permit recovery of all

costs within a reasonable period of time, in accordance with

[[Page 41789]]

section 773(b)(2)(D) of the Act. Therefore, we disregarded the below-

cost sales. Where all sales of a specific product were at prices below

the COP, we disregarded all sales of that product.

We found that all of NFP's Brazilian sales were at prices below the

COP. Thus, in the absence of any above-cost Brazilian sales, we

compared constructed export prices to CV in accordance with section

773(a)(4) of the Act.

D. Calculation of CV

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

based on the sum of NFP's cost of materials, fabrication, SG&A,

interest, and U.S. packing costs. We made the same adjustments to NFP's

reported costs for the CV calculation as we made for the COP

calculation.

Because there were no above-cost Brazilian sales and hence no

actual company-specific profit data available for NFP's sales of the

foreign like product to Brazil, we calculated profit expenses in

accordance with section 773(e)(2)(B)(iii) of the Act and the SAA.

Section 773(e)(2)(B)(iii) states that profit may be determined under

any reasonable method with the appropriate ``profit cap.'' The SAA,

however, provides that where, due to the absence of data, the

Department cannot determine amounts for profit under alternatives (i)

or (ii) of section 773(e)(2)(B) of the Act or a ``profit cap'' under

alternative (iii) of section 773(e)(2)(B) of the Act, the Department

may apply alternative (iii) on the basis of the facts available (SAA at

841). In this case, we are unable to determine an amount for profit

under alternatives (i) or (ii), or a ``profit cap'' under alternative

(iii) because we do not have actual amounts incurred by NFP on sales of

merchandise in the same general category as the subject merchandise and

because NFP is the only producer subject to this investigation.

Therefore, as facts availabe under section 773(e)(2)(B)(iii) of the

Act, for NFP's profit we are using the 1996 profit margin for

Ianasafrut S.A., a leading Chilean fruit and vegetable producer. We

believe this data is a reasonable surrogate for NFP's profit because it

is based upon a Chilean producer's experience on sales of the same

general category as the subject merchandise for a period in which there

was no alleged dumping. For SG&A, we have used NFP's actual expenses

incurred in Chile on Brazilian sales because this data reflects NFP's

actual experience in selling the foreign like product.

Price-to-CV Comparisons

For price-to-CV comparisons, we made adjustments to CV in

accordance with section 773(a)(8) of the Act. We deducted from CV the

amount of indirect selling expenses capped by the amount of the U.S.

commissions.

Currency Conversion

We made currency conversions into U.S. dollars based on the

exchange rates in effect on the dates of the U.S. sales as certified by

the Federal Reserve Bank, in accordance with section 773A of the Act.

Verification

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

information relied upon 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 imports of subject

merchandise that are entered, or withdrawn from warehouse, for

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

Federal Register. We will instruct the Customs Service to require a

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

amount by which the NV 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

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

Nature's Farm Products (Chile) S.A.......................... 142.43

All Others.................................................. 142.43

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

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 September 8, 1998, and rebuttal briefs no later than

September 11, 1998. 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 afford interested parties an opportunity to comment on

arguments raised in case or rebuttal briefs. Tentatively, the hearing

will be held on September 15, 1998, time and room to be determined, 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

1870, within 30 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 by October 13, 1998.

This determination is issued and published in accordance with

sections 733(d) and 777(i)(1) of the Act.

Dated: July 27, 1998.

Joseph A. Spetrini,

Acting Assistant Secretary for Import Administration.

[FR Doc. 98-20910 Filed 8-4-98; 8:45 am]

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