Initiation of Antidumping Duty Investigation: Certain Non-Frozen Apple Juice Concentrate From the People's Republic of China

DEPARTMENT OF COMMERCE

International Trade Administration

[A-570-855]

Initiation of Antidumping Duty Investigation: Certain Non-Frozen

Apple Juice Concentrate From the People's Republic of China

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

EFFECTIVE DATE: July 6, 1999.

FOR FURTHER INFORMATION CONTACT: Suresh Maniam or Vincent Kane, Import

Administration, International Trade Administration, U.S. Department of

Commerce, Room 3099, 14th Street and Constitution Avenue, N.W.,

Washington, D.C. 20230; telephone: (202) 482-0176 or 482-2815,

respectively.

INITIATION OF INVESTIGATION:

The Applicable Statute and Regulations

Unless otherwise indicated, all citations to the statute are

references to the provisions effective January 1, 1995, the effective

date of the amendments made to the Tariff Act of 1930 as amended (``the

Act'') by the Uruguay Round Agreements Act (``URAA''). In addition,

unless otherwise indicated, all citations to the Department of

Commerce's (``the Department's'') regulations are to the provisions

codified at 19 CFR Part 351 (1998).

The Petition

On June 7, 1999, the Department received a petition filed in proper

form by Tree Top, Inc.; Knouse Foods Cooperative, Inc.; Green Valley

Packers; Mason County Fruit Packers; and Coloma Frozen Foods, Inc.,

hereinafter collectively referred to as ``the petitioners. On June 17

and 25, 1999, at the request of the Department, petitioners provided

public summaries for certain business proprietary information contained

in the petition. On June 23, 1999, petitioners supplied information

relating to their standing as petitioners and on June 25, 1999,

petitioners clarified their calculation concerning industry support of

the petition.

In accordance with section 732(b) of the Act, the petitioners

allege that imports of certain non-frozen apple juice concentrate

(``NFAJC'') from the People's Republic of China (``PRC'') are being, or

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

within the meaning of section 731 of the Act, and that such imports are

both materially injuring and threatening material injury to an industry

in the United States.

The Department finds that the petitioners filed this petition on

behalf of the domestic industry because they are interested parties as

defined in section 771(9)(C) of the Act and they have demonstrated that

they account for at least 25 percent of the total production of the

domestic like product and more than 50 percent of the production of the

domestic like product produced by that portion of the industry

[[Page 36331]]

expressing support for, or opposition to, the petition (see

``Determination of Industry Support for the Petition'' section, below).

Scope of the Investigation

For purposes of this investigation, the product covered by the

scope is non-frozen concentrated apple juice having a Brix value of 40

or greater, whether or not containing added sugar or other sweetening

matter. Excluded from the scope of this investigation are: frozen

concentrated apple juice, non-frozen concentrated apple juice fortified

with vitamins or minerals, non-frozen concentrated apple juice that has

been fermented, and non-frozen concentrated apple juice to which

spirits have been added.

The merchandise subject to this investigation is classified in the

Harmonized Tariff Schedule of the United States (``HTSUS'') at

subheading 2009.70.20. Although the HTSUS subheading is provided for

convenience and customs purposes, the written description of the

merchandise under investigation is dispositive.

As discussed in the preamble to the Department's regulations (62 FR

27323 February 26, 1997), we are setting aside a period for parties to

raise issues regarding product coverage. The Department encourages all

parties to submit such comments within 20 days of publication of this

notice in the Federal Register. Comments should be addressed to Import

Administration's Central Records Unit at Room 1870, U.S. Department of

Commerce, 14th Street and Constitution Avenue, N.W., Washington, D.C.

20230. The period of scope consultations is intended to provide the

Department with ample opportunity to consider all comments and consult

with parties prior to the issuance of our preliminary determination.

Determination of Industry Support for the Petition

Section 732(b)(1) of the Act requires that a petition be filed on

behalf of the domestic industry. Section 732(c)(4)(A) of the Act

provides that a petition meets this requirement if the domestic

producers or workers who support the petition account for: (1) at least

25 percent of the total production of the domestic like product; and

(2) more than 50 percent of the production of the domestic like product

produced by that portion of the industry expressing support for, or

opposition to, the petition.

Section 771(4)(A) of the Act defines the ``industry'' as: ``the

producers as a whole of a domestic like product.'' Thus, to determine

whether the petition has the requisite industry support, the statute

directs the Department to look to producers and workers who account for

production of the domestic like product. The International Trade

Commission (``ITC''), which is responsible for determining whether

``the domestic industry'' has been injured, must also determine what

constitutes a domestic like product in order to define the industry.

While both the Department and the ITC must apply the same statutory

definition regarding the domestic like product, they do so for

different purposes and pursuant to separate and distinct authority. In

addition, the Department's determination is subject to limitations of

time and information. Although this may result in different definitions

of the like product, such differences do not render the decision of

either agency contrary to the law.\1\ Section 771(10) of the Act

defines the domestic like product as ``a product which is like, or in

the absence of like, most similar in characteristics and uses with, the

article subject to an investigation under this subtitle.'' Thus, the

reference point from which the domestic like product analysis begins is

``the article subject to an investigation,'' i.e., the class or kind of

merchandise to be investigated, which normally will be the scope as

defined in the petition.

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\1\ See Algoma Steel Corp. Ltd., v. United States, 688 F. Supp.

639, 642-44 (CIT 1988); High Information Content Flat Panel Displays

and Display Glass from Japan: Final Determination; Rescission of

Investigation and Partial Dismissal of Petition, 56 FR 32376, 32380-

81 (July 16, 1991).

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The domestic like product referred to in the petition is the single

domestic like product defined in the ``Scope of Investigation''

section, above. The Department has no basis on the record to find this

definition of the domestic like product to be inaccurate. The

Department, therefore, has adopted this domestic like product

definition.

In this case, the Department has determined that the petition and

supplemental information contained adequate evidence of sufficient

industry support; therefore, polling was not necessary. See Initiation

Checklist dated June 28, 1999 (public versions on file in the Central

Records Unit of the Department of Commerce, Room B-099). To the best of

the Department's knowledge, the producers who support the petition

account for more than 50 percent of the production of the domestic like

product. Additionally, no person who would qualify as an interested

party pursuant to section 771(b)(A), (C), (D), (E) or (F) of the Act

has expressed opposition on the record to the petition. Accordingly,

the Department determines that this petition is filed on behalf of the

domestic industry within the meaning of section 732(b)(1) of the Act.

A potential respondent in this proceeding requested that the

Department poll the U.S. industry to determine industry support and

check the validity of petitioners' calculations of their percent of

U.S. production. We addressed this respondent's concerns in the June

28, 1998 initiation checklist.

Export Price and Normal Value

The following is a description of the allegation of sales at less

than fair value upon which our decision to initiate this investigation

is based. Should the need arise to use any of this information in our

preliminary or final determination for purposes of facts available

under section 776 of the Act, we may re-examine the information and

revise the margin calculations, if appropriate.

The petitioners have based U.S. price on export price (``EP'')

because information obtained by the petitioners indicates that PRC

producers sold NFAJC outside the United States to unaffiliated

importers in the United States prior to importation. As a basis for its

EP calculation, the petitioners have used an invoice price for sale of

the subject merchandise by an unaffiliated U.S. distributor to an

unaffiliated purchaser in the United States in the last quarter of

1998. The petitioners calculated a net U.S. price by subtracting from

the invoice price the U.S. distributor's markup, ocean freight, and

insurance. The petitioners based the cost of ocean freight and

insurance on the difference between the C.I.F. price and the F.A.S.

price of NFAJC from the PRC as reflected in the IM-145 statistics

published by the U.S. Bureau of the Census. The petitioners used the

IM-145 statistics for the month in which the U.S. sale occurred for

calculating ocean freight and insurance. Petitioners based the

distributor's markup on an affidavit attesting to the standard

distributor markup in the industry.

Because the PRC is considered a nonmarket economy (NME) country

under section 771(18) of the Act, the petitioners based normal value

(NV) on the factors of production valued in a surrogate country, in

accordance with section 773(c)(3) of the Act. The petitioners selected

India as the most appropriate surrogate market economy. For the factors

of production, the petitioners relied upon the factor usage rates of

what it claimed was the world's most efficient NFAJC producer.

The petitioners first derived a cost for apple juice and then,

based on this cost,

[[Page 36332]]

they derived a cost of apple juice concentrate. The cost of apples was

based on the current price of juice apples in India as reported in a

market research study included in the petition. Labor was valued using

the methodology described by the Department in 19 CFR 351.408(c)(3).

For energy, the petitioners used data from Energy Prices & Taxes,

Fourth Quarter 1998, which shows 1995 electricity rates in India to be

Rs. 2.1836 per kwh. They then adjusted this 1995 electricity rate for

inflation based on the increase in the wholesale price index in India

from 1995 to 1998 as reported in the IMF's International Financial

Statistics. For natural gas, the petitioners obtained a price of US

$1.96 per thousand cubic feet based on the first quarter 1999 report of

Enron Corp., a large, publicly traded oil and gas company selling

energy products in India. For processing agents, maintenance supplies,

and miscellaneous costs, the petitioners used the costs of a U.S.

producer because Indian values for these inputs were not reasonably

available to them.

Selling, general, and administrative (SG&A) expenses, depreciation,

and financial expenses were based on the 1997 financial statements of

an Indian NFAJC producer. For packing costs, including drums, liners,

and pallets, the petitioners used the costs of a U.S. NFAJC producer

because Indian values for these inputs were not reasonably available to

them.

Based on a comparison of EP to NV, as adjusted by the Department,

the information in the petition and other information reasonably

available to the Department indicates dumping margins of 51.69 and

65.64 percent. A description of the adjustments which the Department

made to petitioners' calculations of export price and normal value are

contained in the June 28, 1999 initiation checklist, a public version

of which is available in the Central Records Unit, Room B-099, Main

Commerce, 14th and Constitution Avenue, N.W., Washington, D.C. 20230.

Fair Value Comparisons

Based on the data provided by the petitioners, there is reason to

believe that imports of NFAJC from the PRC are being, or are likely to

be, sold at less than fair value.

Allegations and Evidence of Material Injury and Causation

The petition alleges that the U.S. industry producing the domestic

like product is being materially injured, and is threatened with

material injury, by reason of the imports of the subject merchandise

sold at less than NV. The petitioners explained that the industry's

injured condition is evident in the declining trends in net operating

profits and income, net sales volumes and values, profit to sales

ratios, and capacity utilization. The allegations of injury and

causation are supported by relevant evidence including U.S. Customs

import data, lost sales, and pricing information. The Department

assessed the allegations and supporting evidence regarding material

injury and causation and determined that these allegations are

supported by accurate and adequate evidence and meet the statutory

requirements for initiation. See Initiation Checklist.

Allegation of Critical Circumstances

The petitioners allege that critical circumstances exist with

respect to imports of NFAJC from the PRC and have supported their

allegations with the following information.

First, the petitioners claim that the importers knew, or should

have known, that NFAJC from the PRC was being sold at less than normal

value. Specifically, the petitioners allege that the margins calculated

in the petition exceed the 25 percent threshold used by the Department

to impute importer knowledge of dumping.

The petitioners also have alleged that imports have been massive

over a relatively short period. Alleging that there was sufficient pre-

filing notice of this antidumping petition, the petitioners contend

that the Department should compare imports during June 1998-October

1998 to imports during November 1998-March 1999 for purposes of this

determination. Specifically, petitioners supported this allegation with

copies of a news article and a transcript of a television program. The

new article appeared in the September 1998 edition of ``The Great Lakes

Fruit Grower News,'' which reported that the U.S. Apple Association was

considering filing an antidumping action against NFAJC from the PRC.

The television program, ``The World Today,'' aired on CNN on October 5,

1998. The program also reported that the U.S. Apple Association was

considering filing an antidumping action on NFAJC from the PRC. On

October 6, 1998, the Associated Press Newswire carried a story that the

apple industry planned to file an antidumping action on NFAJC from the

PRC. Accordingly, the petitioners provided import statistics for the

periods November 1998-March 1999 and June 1998-October 1998. Based on

this comparison, imports of NFAJC from the PRC increased by 111

percent.

Although the ITC has not yet made a preliminary decision with

respect to injury, the petitioners note that in the past the Department

has also considered the extent of the increase in the volume of imports

of the subject merchandise as one indicator of whether a reasonable

basis exists to impute knowledge that material injury was likely. In

this case, the petitioners allege that the increase in imports was more

than double the amount considered ``massive.'' Taking into

consideration the foregoing, we find that the petitioners have alleged

the elements of critical circumstances and supported them with

information reasonably available for purposes of initiating a critical

circumstances inquiry. For these reasons, we will investigate this

matter further and will make a preliminary determination at the

appropriate time, in accordance with section 735(e)(1) of the Act and

Department practice (see Policy Bulletin 98/4 (63 FR 55364, October 15,

1998)).

Initiation of Antidumping Investigation

Based upon our examination of the petition, we have found that the

petition meets the requirements of section 732 of the Act. Therefore,

we are initiating an antidumping duty investigation to determine

whether imports of NFAJC from the PRC are being, or are likely to be,

sold in the United States at less than fair value. Unless this deadline

is extended, we will make our preliminary determination by November 15,

1999.

Distribution of Copies of the Petition

In accordance with section 732(b)(3)(A) of the Act, a copy of the

public version of the petition has been provided to the representatives

of the Government of the People's Republic of China. We will attempt to

provide a copy of the public version of the petition to the exporters

named in the petition.

International Trade Commission Notification

We have notified the ITC of our initiation of this investigation,

as required by section 732(d) of the Act.

Preliminary Determination by the ITC

The ITC will determine by July 22, 1999, whether there is a

reasonable indication that an industry in the United States is

materially injured, or is threatened with material injury, by reason of

imports of NFAJC from the PRC. A negative ITC determination will result

in the investigation being terminated; otherwise, this investigation

will proceed according to statutory and regulatory time limits.

This notice is published in accordance with section 777(i) of the

Act.

[[Page 36333]]

Dated: June 28, 1999.

Richard W. Moreland,

Acting Assistant Secretary for Import Administration.

[FR Doc. 99-17050 Filed 7-2-99; 8:45 am]

BILLING CODE 3510-DS-P