Notice of Preliminary Determination of Sales at Less Than Fair Value and Postponement of Final Determination: Certain Preserved Mushrooms From the People's Republic of China

DEPARTMENT OF COMMERCE

International Trade Administration

[A-570-851]

Notice of Preliminary Determination of Sales at Less Than Fair

Value and Postponement of Final Determination: Certain Preserved

Mushrooms From the People's Republic of China

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

EFFECTIVE DATE: August 5, 1998.

FOR FURTHER INFORMATION CONTACT: David J. Goldberger or Kate 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 the People's Republic of China 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 Duty Investigations: Certain Preserved Mushrooms from

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

5360, February 2, 1998) (``Notice of Initiation'')), the following

events have occurred:

During January and February 1998, the Department requested

information from the U.S. Embassy in the People's Republic of China

(``PRC'') to identify producers/exporters of the subject merchandise.

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

questionnaire to the China Chamber of Commerce for Import & Export of

Foodstuffs, Native Produce, and Animal By-Products (the ``Chamber'')

and the Ministry of Foreign Trade and Economic Cooperation (``MOFTEC'')

with instructions to forward the questionnaire to all producers/

exporters of the subject merchandise and that these companies must

respond by the due dates. During February and March 1998, we sent

courtesy copies of the antidumping duty questionnaire to the following

companies identified as possible exporters/producers of the subject

merchandise during the POI:

Shanghai Maling Canned Food

Fuzhou Cannery

Chin Huay Food Co. (HK) Ltd.

China Ningbo Canned Food

Zhang Zhou General Canned Food

Xia Men Cannery

Raoping Tinned Food Factory

Ruian Canned Factory

Yue Qin Canned Food Factory

Wenzhou Wanli Food Co. Ltd.

Glory Land Food Industrial Co.

Ning De Cannery

Shansha Cannery

Xin an Jiang Canned Food

Cangxi Cannery

Ba Zhong Cannery

Chongqing Cannery

Tung Chun Company

Nang Jin Cannery

Mei Wei Foods Industry Co. Ltd.

Dongguan Canning Factory

Cangban Canned Food Factory

Cofco (Longhai) Food Inc.

Longhai Senox Food Industry Ltd.

Pinghe Canned Factory

Fujian Tiand Food Drink Co.

Shanghai Foreign Trade Xian You

Fuan Canned Food Factory

Xibin Overseas Chinese Canned

Dongya Food Company

Fujian Zhaoan Canned Food

Zhanghou Xiancheng Canned

Zhang Huaqing Canned Food

Zishan Food Canning Plant

Gerber Food (Yunnan) Food Co.

Jiufa Edible Fungus Co. Ltd.

Xiamen Jiahua Export and Import Trading Co. Ltd.

Xiamen Gulong Import Export Co., Ltd.

Bazhong Canned Food Factory

Beiliu Canned Food Factory

Dangdong Canned Food Import & Export Co.

Dayi Brewery

Dongqing Canned Food Processing Factory

Fu'an Kangcuo Cereals & Oils Management Station

Fujian Changshan Huaqiao Canned Food Processing Factory

Fujian Zhangzhou Canned Food Factory

Hebei Edible Fungus Research Institute

Hunan Changsha Canned Food Factory

Jiangsu Rugao Canned Food Factory

Chifeng Fuyuan Cereals & Oils Co.

Fuzhou Native Produce & Animal By-Products Import and Export Co.

Guangdong Heshan Foodstuffs Import & Export Corp.

Beijing Foreign Trade Food Corp.

China National Processed Food Import & Export Corp.

Chengdu Native Produce Import & Export Corp.

Shantou Foodstuffs Import & Export Corp.

Shanghai Cereals & Oil Trade Co.

Guangdong Maoming Native Produce Import & Export Corp.

Henan Native Produce Import and Export Corp.

[[Page 41795]]

Qingdao Cereals, Oils & Foodstuffs Import and Export Corp.

On March 30, 1998, the Department issued a notice setting aside 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). No parties to this

investigation commented on product coverage.

During the period March through June 1998, the Department received

questionnaire responses from (1) China Processed Food Import & Export

Company (``China Processed'');

(2) Jiangsu Cereals, Oils & Foodstuffs Group Import & Export

Corporation (``Jiangsu'');

(3) Shenzhen Cofry Cereals, Oils, & Foodstuffs Company, Ltd.

(``Shenzhen Cofry''); (4) Gerber (Yunnan) Food Co.; (5) Fujian

Provincial Cereals, Oils & Foodstuffs Import & Export Corp.;

(6) Putian Cannery Fujian Province, Xiamen Gulong Import & Export

Co., Ltd.; (7) General Canned Foods Factory of Zhangzhou; (8) Zhejiang

Cereals, Oils & Foodstuffs Import & Export Corp.; (9) Shanghai

Foodstuffs Import & Export Corp.; (10) Canned Goods Co. of Raoping; and

(11) Xiamen Jiahua Import & Export Trading Company, Ltd. (``Xiamen

Jiahua''). In addition, the Department received letters from Beilu

Canned Food Factory and Longhai Senox, Ltd., each stating that it did

not sell the subject merchandise to the United States during the second

half of 1997.

On April 13, 1998, the Department invited interested parties to

provide publicly available information (``PAI'') for valuing the

factors of production and for surrogate country selection. We received

responses from the interested parties on May 27, 1998, and additional

comments on June 4, 1998.

On April 14, 1998, pursuant to section 777A(c) of the Act, the

Department determined that, due to the large number of exporters/

producers of the subject merchandise, it would limit the number of

mandatory respondents in this investigation. See ``Respondent

Selection'' section below.

On April 20, 1998, Gerber requested that it be considered a

voluntary respondent in this investigation. On April 28, 1998, we

informed Gerber that, due to administrative resource constraints, we

would not accept voluntary respondents unless one of the designated

mandatory respondents elected not to respond to the Department's

questionnaire.

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).

On June 5, 1998, the respondents requested that the PRC be treated

as a market economy in this investigation, and that the PRC mushroom

industry be considered a market-oriented industry (``MOI''). The

Department issued a MOI questionnaire to the PRC respondents on June

19, 1998, and the respondents submitted their responses on July 17,

1998. Treatment of both of these claims for the preliminary

determination is discussed below under ``Nonmarket Economy Country and

Market-Oriented Industry Status.''

On June 17, 1998, the petitioners alleged that critical

circumstances exist with respect to imports of mushrooms from the PRC.

Accordingly, pursuant to section 732(e) of the Act, on June 19, 1998,

the Department requested information regarding shipments of mushrooms

for the period January 1996 to July 1998 from all mandatory respondents

participating in this investigation. We received the requested

information on July 6, 1998. The critical circumstances analysis for

the preliminary determination is discussed below under ``Critical

Circumstances.''

Postponement of Final Determination and Extension of Provisional

Measures

Pursuant to section 735(a)(2) of the Act, on July 16, 1998, the

mandatory PRC respondents requested that, in the event of an

affirmative preliminary determination in this investigation, the

Department postpone its final determination until not later than 135

days after the date of the publication of an affirmative preliminary

determination in the Federal Register. On July 27, 1998, these parties

amended their request to agree to extend the provisional measures to

not more than six months. In accordance with 19 CFR 351.210(b), because

(1) our preliminary determination is affirmative, (2) the requesting

exporters account for a significant proportion of exports of the

subject merchandise, and (3) no compelling reasons for denial exist, we

are granting the respondents' request and are postponing the final

determination until no later than 135 days after the publication of

this notice in the Federal Register. Suspension of liquidation will be

extended accordingly.

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 this investigation (``POI'') comprises each

exporter's two most recent fiscal quarters prior to the filing of the

petition.

Respondent Selection

The Department determined that the resources available to it for

this investigation and the three companion mushroom investigations

limited our ability to analyze any more than the responses of the three

largest exporters/producers of the subject merchandise in this

investigation. Based on Section A questionnaire responses, the

Department selected the three largest exporters to be the mandatory

respondents in this proceeding: China Processed (including its

affiliated

[[Page 41796]]

exporter, Xiamen Jiahua), Jiangsu, and Shenzhen Cofry. (See

``Memorandum from the Team to Louis Apple dated April 14, 1998).

Subsequently, Jiangsu reported in its questionnaire responses that

it purchases the subject merchandise from Mei Wei Foods Industrial Co.

Ltd. (``Mei Wei'') and resells the merchandise to Tak Fat Trading

Company (``Tak Fat''), a Hong Kong trading company, which owns Mei Wei.

In submissions separate from Jiangsu, Tak Fat and Mei Wei provided the

same information. According to the questionnaire responses and Tak

Fat's letters, Tak Fat negotiates the sales prices with the ultimate

U.S. customer, and controls the production of Mei Wei, its wholly-owned

PRC affiliate. Jiangsu acts only as an intermediary in order to

facilitate the export of the merchandise from the PRC and arrange the

shipment of the subject merchandise from the PRC. Under these

circumstances, we find that Tak Fat is the actual exporter and

appropriate respondent. Thus, our analysis for purposes of the

preliminary determination was based on Tak Fat's sales during the POI,

which included the sales initially reported by Jiangsu sourced from Mei

Wei, and the other mandatory exporters and their respective suppliers.

As the supplemental questionnaire responses include consolidated data

from Tak Fat and Jiangsu, the Department was able to analyze Tak Fat's

sales based on submitted data.

Nonmarket Economy Country and Market Oriented Industry Status

The Department has treated the PRC as a nonmarket economy country

(``NME'') in all past antidumping investigations (see, e.g., Final

Determination of Sales at Less Than Fair Value: Silicon Carbide from

the People's Republic of China, 59 FR 22585 (May 2, 1994) (``Silicon

Carbide'') and Final Determination of Sales at Less Than Fair Value:

Furfuryl Alcohol from the People's Republic of China, 60 FR 22545 (May

8, 1995) (``Furfuryl Alcohol'')). A designation as an NME remains in

effect until it is revoked by the Department (see section 771(18)(C) of

the Act).

On June 5, 1998, the respondents made a claim that economic changes

in the PRC warrant revocation of PRC's NME status. Because the

respondents' submission does not provide sufficient support for their

claim for market economy status and does not address a number of

important factors for determining market economy status (see,

Memorandum from the Team to Lou Apple, dated July 27, 1998), we have

preliminarily determined to continue to treat the PRC as an NME.

In addition, the respondents have claimed that their material

inputs are acquired at market prices and that, accordingly, the

Department should determine that the PRC mushroom industry is a MOI and

should rely on the actual PRC prices for valuing these inputs. Because

the supporting information for this claim was submitted by respondents

on July 17, 1998, less than two weeks prior to the preliminary

determination, we did not have adequate time to analyze the information

for purposes of the preliminary determination. However, we will examine

the respondents' MOI claim for purposes of the final determination.

Separate Rates

Each respondent has requested a separate company-specific rate.

China Processed is wholly owned by China National Cereals, Oils, &

Foodstuffs Import & Export Corp., which in turn is owned by ``the whole

people.'' Its affiliated exporter Xiamen Jiahua is a domestic joint

venture between China National Cereals, Oils & Foodstuffs Corp., and

Xiamen Special Economic Trade Group Cereals, Oils, & Foodstuffs Import

& Export Company. Both of these companies are also owned by ``the whole

people.'' Shenzhen Cofry is a limited liability company owned by the

China Ocean Helicopter Company and the Anhui Cereals, Oils, &

Foodstuffs Import & Export Group, which, in turn, are both owned by

``the whole people.'' Tak Fat is a Hong Kong trading company which is

wholly-owned by Hong Kong entities. Therefore, we determine that no

separate rates analysis is required for this exporter.

As stated in Silicon Carbide and Furfuryl Alcohol, ownership of the

company by ``all the people'' does not require the application of a

single rate. Accordingly, the above-mentioned companies named as

mandatory respondents as well as the companies who submitted a Section

A response are eligible for consideration of a separate rate.

The Department's separate rate test is not concerned, in general,

with macroeconomic/border-type controls, e.g., export licenses and

quotas and minimum export prices, particularly if these controls are

imposed to prevent dumping. The test focuses, rather, on controls over

the investment, pricing, and output decision-making process at the

individual firm level. See Certain Cut-to-Length Carbon Steel Plate

from Ukraine: Final Determination of Sales at Less than Fair Value, 62

FR 61754, 61757, (November 19, 1997); Tapered Roller Bearings and Parts

Thereof, Finished and Unfinished, from the People's Republic of China:

Final Results of Antidumping Duty Administrative Review, 62 FR 61276,

61279, November 17, 1997; and Honey from the People's Republic of

China: Preliminary Determination of Sales at Less than Fair Value, 60

FR 14725, 14726, (March 20, 1995).

To establish whether a firm is sufficiently independent from

government control to be entitled to a separate rate, the Department

analyzes each exporting entity under a test arising out of the Final

Determination of Sales at Less Than Fair Value: Sparklers from the

People's Republic of China, 56 FR 20588 (May 6, 1991) and amplified in

Silicon Carbide. Under the separate rates criteria, the Department

assigns separate rates in NME cases only if respondents can demonstrate

the absence of both de jure and de facto governmental control over

export activities.

1. Absence of De Jure Control

The respondents have placed on the record a number of documents to

demonstrate absence of de jure control, including the ``Foreign Trade

Law of the People's Republic of China'' and the ``Law of the People's

Republic of China on Industrial Enterprises Owned By the Whole

People.''

In prior cases, the Department has analyzed these laws and found

that they establish an absence of de jure control. (See, e.g., Notice

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

Partial-Extension Steel Drawer Slides with Rollers from the People's

Republic of China, 60 FR 54472 (October 24, 1995); see also Furfuryl

Alcohol.) We have no new information in this proceeding which would

cause us to reconsider this determination.

According to the respondents, exports of mushrooms are also

affected by quota allocations under a December 17, 1997, Notice

Regarding Printing and Distributing ``List of Commodities Subject

Export License Administration and Issuance of Licenses at Different

Levels'' and Relevant Issues issued by MOFTEC (``Notice''). The

respondents claim that, although the export license and quota

allocation regulations and procedures which applied to sales of the

subject merchandise during the POI were promulgated in 1996, they are,

for all intents and purposes, the same as those set forth in the 1997

version. Under the Notice, 143 items are subject to export licensing

controls with three categories of control--(1) ``controlled''; (2)

``less controlled,'' and (3) the ``least

[[Page 41797]]

controlled'' merchandise. Mushrooms fall under the ``least controlled''

category.

The respondents describe the quota process as follows. MOFTEC

distributes quota amounts to the provinces and municipalities and

exporters (except those located in Beijing, which are supposed to apply

to MOFTEC directly). The quota process is administered through export

licenses required for the export of the subject merchandise. Neither

the quota allocation process nor the export licensing process involve

any PRC government participation in the setting of export prices.

Global quota amounts are determined by MOFTEC based on (1)

international market demand/supply; (2) the previous year's exports;

(3) Chamber proposals; and (4) the suggestions of PRC Provincial Trade

Commissions which take into account the requests of mushroom exporters

and their previous year's exports as well as requests of other PRC

exporters who wish to export, but have not previously received a quota.

The Commissions are comprised of local government authorities involved

with foreign trade of their provinces. They are separate from MOFTEC,

receiving neither funding nor administration from MOFTEC. Once a quota

is received, a company may obtain an export license from the applicable

Commissions' Trade Administration Import and Export Divisions after it

has a commitment from a foreign buyer. Copies of the quotas are sent to

MOFTEC and the Chamber.

The Commissions grant the export licenses based on the quotas

allocated to each company. Records are kept of each individual

company's quota and the quantities it has exported so that the

Commissions can determine when an individual company has reached its

allocated quota.

Furthermore, according to the respondents, the concept of the

``minimum price'' floor referenced in the Memorandum on Minimum Price

for Export of Canned Mushroom Products is an agreed minimum price only.

The exporters claim to have the autonomy to set the price at whatever

level they wish without government interference. The memorandum

referenced above did not set forth minimum prices established by the

Chamber or the PRC government but, rather, established minimum prices

that were discussed among, and agreed to, by the member companies of

the Chamber that were involved in the canned mushroom business.

The respondents describe the process for establishing the minimum

prices as follows: (1) member companies request the Chamber convene a

meeting of all the exporters; (2) the Chamber provides information on

domestic productivity and international markets during this meeting;

and (3) the member companies then agree to minimum prices and

memorialize the agreement in the minutes to the meeting. Therefore,

according to the respondents, the minimum price is an agreement among

the exporters and a means by which exporters can insure that no

exporter is selling subject merchandise lower than what they, as an

industry, consider to be the fair market price. In addition, the

minimum price is considered a means of ``self-regulation'' among the

industry to prevent unfair competition.

The quota system in the instant investigation operates on the basis

of transparent and well-defined rules. Companies are free to

independently negotiate export prices with their customers above the

floor price, which the exporting companies themselves set. MOFTEC has

claimed that it does not involve itself in the price-setting of

companies that export mushrooms. Thus, the allocation of the export

quota is arrived at in a competitive forum, and separate prices are set

by each enterprise with industry input regarding the floor price and in

open competition with respect to the final price.

In past cases, the Department has determined that there is an

absence of government control over export pricing and marketing

decisions of firms even though there may be some government involvement

with respect to the export of products subject to investigation. See

Preliminary Determination of Sales at Less Than Fair Value: Honey from

the People's Republic of China, 60 FR 14725, March 20, 1995.

Accordingly, we preliminarily determine that, within the preserved

mushroom industry, there is an absence of de jure government control

over exporting pricing and marketing decisions of firms.

2. Absence of De Facto Control

As stated in previous cases, there is some evidence that certain

enactments of the PRC central government have not been implemented

uniformly among different sectors and/or jurisdictions in the PRC. (See

Silicon Carbide and Furfuryl Alcohol.) Therefore, the Department has

determined that an analysis of de facto control is critical in

determining whether respondents are, in fact, subject to a degree of

governmental control which would preclude the Department from assigning

separate rates.

The Department typically considers four factors in evaluating

whether each respondent is subject to de facto governmental control of

its export functions: (1) whether the export prices are set by, or

subject to, the approval of a governmental authority; (2) whether the

respondent has authority to negotiate and sign contracts, and other

agreements; (3) whether the respondent has autonomy from the government

in making decisions regarding the selection of its management; and (4)

whether the respondent retains the proceeds of its export sales and

makes independent decisions regarding disposition of profits or

financing of losses (see Silicon Carbide and Furfuryl Alcohol).

China Processed/Xiamen Jiahua and Shenzhen Cofry each asserted the

following: (1) it establishes its own export prices; (2) it negotiates

contracts without guidance from any governmental entities or

organizations; (3) it makes its own personnel decisions; and (4) it

retains the proceeds of their export sales, uses profits according to

its business needs, and has the authority to sell its assets and to

obtain loans. Additionally, the three respondents' questionnaire

responses indicate that company-specific pricing during the POI does

not suggest coordination among exporters. This information supports a

preliminary finding that there is an absence of de facto governmental

control of the export functions of these companies. Consequently, we

preliminarily determine that these exporters have met the criteria for

the application of separate rates.

Margins for Exporters Whose Responses Were Not Analyzed

For the responding companies that provided all the questionnaire

responses requested of them and otherwise fully cooperated with the

Department's investigation, but nonetheless, were not fully analyzed by

the Department due to limited resources (see ``Respondent Selection''

section above), including Jiangsu, we are assigning the weighted-

average of the rates of the three fully analyzed companies, or a non-

adverse facts available rate. Companies receiving this rate are

identified by name in the ``Suspension of Liquidation'' section of this

notice.

The parties who responded but were not analyzed have applied for

separate rates, and provided information for the Department to consider

in this request. Although the Department is unable, due to

administrative constraints, to consider the requests for separate rates

status, and to calculate a separate rate for each of these named

parties, there has been no failure on the part of these

[[Page 41798]]

firms to provide requested information. Because it would not be

appropriate for the Department to refuse to consider a request for an

examination of separate rates status, and assign to the cooperative

firms the rate for the noncooperative firms (which in this case is an

adverse margin based on facts available), the Department has assigned a

single calculated rate for these firms, which is a weighted-average of

the rates of the three analyzed companies.

China-Wide Rate

U.S. import statistics indicate that the total quantity and value

of U.S. imports of mushrooms from the PRC is greater than the total

quantity and value of mushrooms reported by all PRC exporters that

submitted responses in this investigation. Given this discrepancy, it

appears that not all exporters of PRC mushrooms responded to our

questionnaire. Accordingly, we are applying a single antidumping

deposit rate--the PRC-wide rate--to all exporters in the PRC, other

than those specifically identified below under ``Suspension of

Liquidation,'' based on our presumption that the export activities of

the companies that failed to respond to the Department's questionnaire

are controlled by the PRC government (see, e.g., Notice of Final

Determination of Sales at Less Than Fair Value: Bicycles from the

People's Republic of China, 61 FR 19026, April 30, 1996) (``Bicycles

from the PRC'').

As explained below, this PRC-wide antidumping rate is based on

adverse facts available. Section 776(a)(2) of the Act provides that

``if an interested party or any other person--(A) withholds information

that has been requested by the administering authority; (B) fails to

provide such information by the deadlines for the submission of the

information or in the form and manner requested, subject to subsections

(c)(1) and (e) of section 782; (C) significantly impedes a proceeding

under this title; or (D) provides such information but the information

cannot be verified as provided in section 782(i), the administering

authority * * * shall, subject to section 782(d), use the facts

otherwise available in reaching the applicable determination under this

title.''

Section 776(b) of the Act provides that adverse inferences may be

used when a party has failed to cooperate by not acting to the best of

its ability to comply with a request for information. The exporters

that decided not to respond in any form to the Department's

questionnaire failed to act to the best of their ability in this

investigation. Further, absent a response, we must presume government

control of these and all other PRC companies for which we cannot make a

separate rates determination. Thus, the Department has determined that,

in selecting from among the facts otherwise available, an adverse

inference is warranted.

As adverse facts available, we are assigning the highest margin in

the petition, 198.63%, because the margins in the petition (as

recalculated by the Department at initiation) were higher than any of

the calculated margins.

Section 776(c) of the Act provides that where the Department

selects from among the facts otherwise available and relies on

``secondary information,'' such as the petition, the Department shall,

to the extent practicable, corroborate that information from

independent sources reasonably at the Department's disposal. The

Statement of Administrative Action accompanying the URAA, H.R. Doc. No.

316, 103d Cong., 2d Sess. (1994) (hereinafter, the ``SAA''), states

that ``corroborate'' means to determine that the information used has

probative value. See SAA at 870.

The petitioners methodology for calculating (``EP'') and normal

value (``NV'') is discussed in the Notice of Initiation. To corroborate

the petition's EP calculations, we compared the prices in the petition

for three of the products to the prices submitted by respondents for

the same mushroom style and container size. To corroborate the

petitioners' NV calculations, we compared the petitioners' factor

consumption and surrogate value data for those same three products to

the data reported by the respondents for the most significant factors--

fresh mushrooms, cans, factory overhead, and selling, general, and

administrative expenses, and the surrogate values for these factors in

the petition to the values selected for the preliminary determination,

as discussed below. Our analysis showed that the petitioners' data was

either reasonably close to the data submitted by the respondents and

the surrogate values chosen by the Department, or conservative (see

Memorandum to the File dated July 27, 1998 (``Corroboration Memo'').

Therefore, we find that the calculations set forth in the petition have

probative value.

Fair Value Comparisons

To determine whether sales of the subject merchandise by China

Processed/Xiamen Jiahua, Tak Fat, and Shenzhen Cofry to the United

States were made at LTFV, we compared the EP to the NV, as described in

the ``Export Price'' and ``Normal Value'' sections of this notice,

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

compared POI-wide weighted-average EPs to weighted-average NVs. To

value foreign brokerage and handling incurred in the PRC, we relied on

the value used in the Bicycles from the PRC investigation.

Export Price

China Processed/Xiamen Jiahua

We used EP methodology in accordance with section 772(a) of the

Act, because the subject merchandise was sold directly to unaffiliated

customers in the United States prior to importation and CEP methodology

was not otherwise indicated. We calculated EP based on packed FOB or

C&F prices to the first unaffiliated purchaser in the United States.

Where appropriate, we made deductions from the starting price (gross

unit price) for billing adjustments, inland freight from the plant/

warehouse to port of exit, brokerage and handling in the PRC, and ocean

freight. Because domestic brokerage and handling and inland freight

were provided by NME companies, we based those charges on surrogate

rates from India. (See ``Normal Value'' section for further

discussion). As China Processed and Xiamen Jiahua reported using market

economy carriers for ocean freight, we valued this expense using the

actual reported costs.

Tak Fat

We used EP methodology in accordance with section 772(a) of the Act

because the subject merchandise was sold directly to unaffiliated

customers in the United States prior to importation and CEP methodology

was not otherwise indicated. We calculated EP based on packed FOB or

C&F prices, to the first unaffiliated purchaser in the United States.

Where appropriate, we made deductions from the starting price (gross

unit price) for inland freight from the plant/warehouse to port of

exit, brokerage and handling in the PRC, and international freight, in

accordance with section 772(c) of the Act. Because domestic brokerage

and handling and inland freight were provided by NME companies, we

based those charges on surrogate rates from India. As Tak Fat reported

using market economy carriers for ocean freight, we valued this expense

using the actual reported costs.

Shenzhen Cofry

We used EP methodology in accordance with section 772(a) of the

Act, because the subject merchandise was sold directly to unaffiliated

customers in the United States prior to

[[Page 41799]]

importation and CEP methodology was not otherwise indicated. We

calculated EP based on packed FOB or C&F prices to the first

unaffiliated purchaser in the United States. Where appropriate, we made

deductions from the starting price (gross unit price) for billing

adjustments, inland freight from the plant/warehouse to port of exit,

brokerage and handling in the PRC, and ocean freight. Because domestic

brokerage and handling and inland freight were provided by NME

companies, we based those charges on surrogate rates from India. As

Shenzhen Cofry reported using market economy carriers for ocean

freight, we valued this expense using the actual reported costs.

Normal Value

A. Surrogate Country

Section 773(c)(4) of the Act requires the Department to value the

NME producer's factors of production, to the extent possible, in one or

more market economy countries that: (1) are at a level of economic

development comparable to that of the NME, and (2) are significant

producers of comparable merchandise. The Department has determined that

India, Pakistan, Sri Lanka, Egypt, and Indonesia are countries

comparable to the PRC in terms of overall economic development (see

Memorandum dated February 23, 1998). According to the available

information on the record, we have determined that both India and

Indonesia meet the statutory requirements for an appropriate surrogate

country for the PRC. For purposes of the preliminary determination, we

have selected India as the surrogate country, based on the quality and

contemporaneity of the currently available data. Accordingly, we have

calculated NV using Indian values for the PRC producers, factors of

production, except, as noted below, in certain instances where an input

was sourced from a market economy and paid for in a market economy

currency. We have obtained and relied upon PAI wherever possible.

B. Factors of Production

In accordance with section 773(c) of the Act, we calculated NV

based on factors of production reported by the companies in the PRC

which produced mushrooms for the exporters which sold mushrooms to the

United States during the POI. To calculate NV, the reported unit factor

quantities were multiplied by publicly available Indian values, where

possible.

For Longhai Food, Inc. (``Longhai''), which supplied some of the

merchandise sold by China Processed, Mei Wei, and Zhaoan Canned Food

Factory (``Zhaoan''), which supplied some of the merchandise sold by

Shenzhen Cofry, we recalculated the reported mushroom consumption

factor for preserved mushroom produced from brined mushrooms, to an

amount equivalent to consumption of fresh mushrooms, based on the

difference between each producer's reported consumption of both types

of mushrooms. We made this adjustment because we were unable to

identify a surrogate value for brined mushrooms (see below).

For those inputs (e.g., glass jars used by Longhai) that were

sourced (either partially or totally) from a market economy and paid

for in market economy currency, we used the actual price paid for the

input to calculate the factors-based NV, in accordance with 19 CFR

351.408(a)(1). As appropriate, for these imported materials, we

calculated PRC brokerage and inland freight from the port to the

factory using surrogate rates from India. We valued the remaining

factors using PAI from India, except where noted below. Where a

producer did not report the distance between the material supplier and

the factory, as facts available, we used either the distance to the

nearest seaport (if an import value was used as the surrogate value for

the factor) or the farthest distance reported for a supplier, as facts

available.

Mei Wei claimed it obtained labels from a market economy source and

paid market economy prices for this factor, but did not provide the

necessary price data. Therefore, we have valued Mei Wei's label

consumption based on the Indian surrogate value for labels. Dongya Food

Co., Ltd., a supplier to Xiamen Jiahua, claimed that it consumed

chlorine purchased from a market economy source. According to the

single invoice submitted to support this claim, the material, sodium

hypochloride, was purchased in November 1995--over one and a half years

prior to the beginning of the POI. Given this long period between

purchase and the POI, we have no basis to assume that the material in

question was actually used during the POI, nor is it clear from the

record that the sodium hypochloride purchased is the same as the

chlorine reported as consumed. Therefore, we have not valued this input

based on the submitted market economy price and, instead, relied on the

surrogate value.

The selection of the surrogate values applied in this determination

was based on the quality, specificity, and contemporaneity of the data.

As appropriate, we adjusted input prices to make them delivered prices.

For those values not contemporaneous with the POI and quoted in a

foreign currency, we adjusted for inflation using wholesale price

indices published in the International Monetary Fund's International

Financial Statistics. For a complete analysis of surrogate values, see

the Preliminary Determination Valuation Memorandum from the team to the

File (``Preliminary Determination Valuation Memorandum''), dated July

27, 1998.

We valued fresh mushrooms using the average unit value derived from

the 1996-1997 annual reports from three Indian preserved mushroom

producers for their purchases of fresh mushrooms. We were unable to

identify an appropriate surrogate value for brined (provisionally

preserved) mushrooms; thus, as facts available for the preliminary

determination, we used the fresh mushroom value to value brined

mushroom consumption but adjusted the reported brined mushroom

consumption factor to an amount equivalent to a fresh mushroom

consumption factor using an industry standard ratio. For salt and

citric acid, we used a domestic price published in the commodity

section of The Financial Express. For monosodium glutamate (``MSG''),

vitamin C (ascorbic acid), tin cans and lids, glass jars, and labels,

we used Indian import values from Monthly Statistics of the Foreign

Trade of India (``Monthly Statistics''). To value chlorine, we used a

value from the Final Determination of Sales at Less Than Fair Value:

Coumarin from the PRC, (59 FR 66895, December 28, 1994), as found in

the Department's Index of Factor Values for Use in Antidumping Duty

Investigations Involving Products from the People's Republic of China.

To value water consumed in the production process (i.e., water packed

in cans or jars with the mushrooms), we relied on the publicly

available tariff rates reported in the Second Water Utilities Data

Book.

Longhai, Zishan Cannery Canned Food Factory (``Zishan''), which

also produced merchandise sold by China Processed, and Zhaoan Canned

Food Factory (``Zhaoan''), which produced some of the merchandise sold

by Shenzhen Cofry, reported that they resold scrap can material. For

Longhai and Zishan, we made an offset deduction to the surrogate cost

of production using an average unit value derived from 1997 U.S. import

statistics. We used this U.S. value as facts available because we were

unable to identify an appropriate surrogate value from a surrogate

country. We were not able to make the same offset deduction

[[Page 41800]]

for Zhaoan because it did not report the necessary factor data.

Longhai, Zishan, and Zhaoan, reported that they resold scrap mushrooms

not consumed in the canning/jarring process. We were unable to identify

an appropriate surrogate value for this material. As this factor does

not appear to have a significant impact on the calculation of NV, we

have not made an offset for scrap mushrooms in the preliminary

determination.

We valued labor based on a regression-based wage rate, in

accordance with 19 CFR 351.408(c)(3).

To value electricity, we used the 1996 electricity rates reported

in an article ``All Charged Up Over the Cost of Power in India''

published in Business World in August 1996. We based the value of coal

and diesel fuel on the import values from the Monthly Statistics.

We based our calculation of factory overhead (which includes water

consumed for rinsing and blanching mushrooms), SG&A expenses, and

profit on data contained in the financial reports of three Indian

producers of the subject merchandise (i.e., Agro Dutch Foods (India),

Saptarishi Agro Industries, Ltd., and Transchem, Ltd.).

To value truck freight rates, we used a 1994 rate from The Times of

India. As we were unable to identify a surrogate value for inland water

transportation, we valued boat and barge transportation using the

surrogate value for truck freight. With regard to rail freight, we

based our calculation on information from the Indian Railway Conference

Association.

The CAFC's decision in Sigma Corp. v. United States, 117 F. 3d 1401

(CAFC 1997) requires that we revise our calculation of source-to-

factory surrogate freight for those material inputs that are based on

CIF import values in the surrogate country. Therefore, we have added to

CIF surrogate values from India a surrogate freight cost using the

shorter of the reported distances from either the closest PRC port to

the factory, or from the domestic supplier to the factory on an import-

specific basis.

For the following reported packing materials: glue, tape,

corrugated paper, wooden pallets, and shrink wrap, we used import

values from the Monthly Statistics.

Critical Circumstances

On June 17, 1998, the petitioners alleged that there is a

reasonable basis to believe or suspect that critical circumstances

exist with respect to imports of mushrooms from the PRC. In accordance

with 19 CFR 351.206(c)(2)(i), since this allegation was filed earlier

than the deadline for the Department's preliminary determination, we

must issue our preliminary critical circumstances determination not

later than the preliminary determination.

Section 733(e)(1) of the Act provides that if a petitioner alleges

critical circumstances, the Department will determine whether there is

a reasonable basis to believe or suspect that:

(A)(i) there is a history of dumping and material injury by reason

of dumped imports in the United States or elsewhere of the subject

merchandise, or

(ii) the person by whom, or for whose account, the merchandise was

imported knew or should have known that the exporter was selling the

subject merchandise at less than its fair value and that there was

likely to be material injury by reason of such sales, and

(B) there have been massive imports of the subject merchandise over

a relatively short period.

In this investigation, the first criterion is satisfied. Brazil has

levied antidumping duties against preserved mushrooms from the PRC.

Brazil's antidumping duty order will be in force until January 2003.

Therefore, we preliminarily determine that there is a history of

dumping elsewhere of mushrooms by PRC producers/exporters. Because

there is a history of dumping, it is not necessary to address whether

the importer had knowledge that dumping was occurring and material

injury was likely.

Because we have preliminarily found that the first statutory

criterion is met, we must consider the second statutory criterion:

whether imports of the merchandise have been massive over a relatively

short period. According to 19 CFR 351.206(h), we consider the following

to determine whether imports have been massive over a relatively short

period of time: (1) volume and value of the imports; (2) seasonal

trends (if applicable); and (3) the share of domestic consumption

accounted for by the imports.

When examining volume and value data, the Department typically

compares the export volume for equal periods immediately preceding and

following the filing of the petition. Under 19 CFR 351.206(h), unless

the imports in the comparison period have increased by at least 15

percent over the imports during the base period, we will not consider

the imports to have been ``massive.'' The Department examines shipment

information submitted by the respondent or import statistics when

respondent-specific shipment information is not available.

To determine whether or not imports of subject merchandise have

been massive over a relatively short period, we compared each of the

mandatory respondent's export volume for the five months subsequent to

the filing of the petition (January-May 1998) to that during the five

months prior to the filing of the petition (August-December 1997).

These periods were selected based on the Department's practice of using

the longest period for which information is available from the month

that the petition was submitted through the effective date of the

preliminary determination. For the non-mandatory PRC exporters, we

performed this analysis using import statistics and then subtracted the

figures of the mandatory respondents. For all other producers/

exporters, we performed the analysis using import statistics.

Based on our analysis, we preliminarily find that the increase in

imports was greater than 15 percent with respect to the named

respondents, the non-mandatory PRC exporters, and all other producers/

exporters.

With regard to the seasonality issue, we were unable to discern a

seasonal pattern for any of the mandatory respondents, or any other

company, based on the information on the record. Furthermore, we were

unable to consider the share of domestic consumption accounted for by

the imports, pursuant to 351.206(h)(iii), because the available data

did not permit such analysis.

However, because there is a history of dumping of such or similar

merchandise, and imports of mushrooms from the mandatory respondents,

the respondents who were not analyzed, and the respondents who failed

to submit a response have been massive over a relatively short period

of time, we preliminarily determine that there is a reasonable basis to

believe or suspect that critical circumstances exist with respect to

mushrooms from the all mandatory respondents in this investigation as

well as the non-mandatory respondents and all other producers/

exporters.

We will make a final determination concerning critical

circumstances when we make our final determination of sales at LTFV in

this investigation.

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

[[Page 41801]]

imports of subject merchandise that are entered, or withdrawn from

warehouse, for consumption on or after 90 days prior to 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 EP, as

indicated in the chart below. These suspension of liquidation

instructions will remain in effect until further notice.

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

Weighted-

Exporter/manufacturer average margin Critical

percentage circumstances

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

China Processed Food I&E Co./ 168.72 Yes.

Xiamen Jiahua I&E Trading

Company, Ltd.

Tak Fat Trading Co............... 180.63 Yes.

Shenzhen Cofry Cereals, Oils, & 189.61 Yes.

Foodstuffs Co., Ltd.

Gerber (Yunnan) Food Co.......... 176.78 Yes.

Jiangsu Cereals, Oils & 176.78 Yes.

Foodstuffs Group Import & Export

Corporation.

Fujian Provincial Cereals, Oils & 176.78 Yes.

Foodstuffs I&E Corp.

Putian Cannery Fujian Province... 176.78 Yes.

Xiamen Gulong I&E Co., Ltd... 176.78 Yes.

General Canned Foods Factory of 176.78 Yes.

Zhangzhou.

Zhejiang Cereals, Oils & 176.78 Yes.

Foodstuffs I&E Corp.

Shanghai Foodstuffs I&E Corp..... 176.78 Yes.

Canned Goods Co. of Raoping...... 176.78 Yes.

PRC-wide Rate.................... 198.63 Yes.

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

The PRC-wide rate applies to all entries of subject merchandise

except for entries from exporters/factories that are identified

individually above.

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 October 16, 1998, and rebuttal briefs, no later than October

23, 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 October 28, 1998, 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 135 days after the publication of this notice in the

Federal Register.

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. 98-20912 Filed 8-4-98; 8:45 am]

BILLING CODE 3510-DS-P