02-19342. Fresh Garlic from the People's Republic of China: Preliminary Results of Antidumping Duty New Shipper Review and Intent to Rescind in Part

AGENCY:

Import Administration, International Trade Administration, Department of Commerce.

ACTION:

Notice of Preliminary Results of Antidumping Duty New Shipper Review and Intent to Rescind in Part.

SUMMARY:

In response to requests from interested parties, the Department of Commerce is conducting a new shipper review of the antidumping duty order on fresh garlic from the People's Republic of China. The review covers Jinan Yipin Corporation, Ltd., and Shandong Heze International Trade and Developing Company. The period of review is November 1, 2000, through October 31, 2001.

We have preliminarily determined that Jinan Yipin Corporation, Ltd., has made sales in the United States at prices below normal value. With respect to Shandong Heze International Trade and Developing Company, we intend to rescind the antidumping duty new shipper review.We invite interested parties to comment on these preliminary results. Parties who submit comments are requested to submit with each argument (1) a statement of the issue and (2) a brief summary of the argument.

EFFECTIVE DATE:

July 31, 2002.

FOR FURTHER INFORMATION CONTACT:

Jennifer Moats or Brian Ellman, Office of AD/CVD Enforcement 3, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, N.W., Washington, D.C., 20230; telephone: [phone] and [phone], respectively.

SUPPLEMENTARY INFORMATION:

The Applicable Statute and Regulations

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's regulations are to 19 CFR Part 351 (April 2001).

Background

On January 7, 2002, the Department of Commerce (the Department) published in the Federal Register the Notice of Initiation of New Shipper Antidumping Duty Reviews: Fresh Garlic From the People's Republic of China (67 FR 715). The Department issued antidumping questionnaires to Jinan Yipin Corporation, Ltd. (Jinan Yipin), and Shandong Heze International Trade and Developing Company (Shandong Heze).¹

During the period March through July 2002, the Department received responses to sections A, C, and D of the Department's original and supplemental questionnaires from Jinan Yipin and Shandong Heze.

On May 16, 2002, we requested publicly available information for valuing the factors of production and comments on surrogate-country selection. We received comments from the petitioners and Jinan Yipin on May 30, 2002. On July 15, 2002, and July 16, 2002, we completed a verification at Jinan Yipin's U.S. sales office. We intend to verify the factors-of-production information upon which we will rely in completing our final results of review.

Scope of the Order

The products covered by this antidumping duty order are all grades of garlic, whole or separated into constituent cloves, whether or not peeled, fresh, chilled, frozen, provisionally preserved, or packed in water or other neutral substance, but not prepared or preserved by the addition of other ingredients or heat processing. The differences between grades are based on color, size, sheathing, and level of decay.

The scope of this order does not include the following: (a) garlic that has been mechanically harvested and that is primarily, but not exclusively, destined for non-fresh use; or (b) garlic that has been specially prepared and cultivated prior to planting and then harvested and otherwise prepared for use as seed.

The subject merchandise is used principally as a food product and for seasoning. The subject garlic is currently classifiable under subheadings 0703.20.0010, 0703.20.0020, 0703.20.0090, 0710.80.7060, 0710.80.9750, 0711.90.6000, and 2005.90.9700 of the Harmonized Tariff Schedule of the United States (HTSUS). Although the HTSUS subheadings are provided for convenience and customs purposes, our written description of the scope of this order is dispositive. In order to be excluded from the antidumping duty order, garlic entered under the HTSUS subheadings listed above that is (1) mechanically harvested and primarily, but not exclusively, destined for non-fresh use or (2) specially prepared and cultivated prior to planting and then harvested and otherwise prepared for use as seed must be accompanied by declarations to the Customs Service to that effect.

Separate Rates

In proceedings involving non-market-economy (NME) countries, the Department begins with a presumption that all companies within the country are subject to government control and thus should be assigned a single antidumping rate unless an exporter can affirmatively demonstrate an absence of government control, both in law (de jure) and in fact (de facto), with respect to its exports. In these reviews, both Jinan Yipin and Shandong Heze have requested separate company-specific rates.

To establish whether a company is sufficiently independent in its export activities from government control to be entitled to a separate, company-specific rate, the Department analyzes the exporting entity in an NME country under the test established in the Final Determination of Sales at Less Than Fair Value: Sparklers from the People's Republic of China, 56 FR 20588, 20589 (May 6, 1991) (Sparklers), and amplified by the Final Determination of Sales at Less Than Fair Value: Silicon Carbide from the People's Republic of China, 59 FR 22585, 22586 - 22587 (May 2, 1994) (Silicon Carbide).

The Department's separate-rate test is unconcerned, in general, with macroeconomic/ border-type controls (e.g., export licenses, 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, e.g., 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).

Jinan Yipin and Shandong Heze provided separate-rate information in their responses to our original and supplemental questionnaires. Accordingly, we performed a separate-rates analysis to determine whether these exporters are independent from government control (see Notice of Final Determination of Sales at Less Than Fair Value: Bicycles From the People's Republic of China, 61 FR 56570 (April 30, 1996)).

1. Absence of De Jure Control

The Department considers the following de jure criteria in determining whether an individual company may be granted a separate rate: (1) an absence of restrictive stipulations associated with an individual exporter's business and export licenses; (2) any legislative enactments decentralizing control of companies; and (3) any other formal measures by the government decentralizing control of companies.

Jinan Yipin has 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 “Company Law of the People's Republic of China.” The Department has analyzed these laws and found that they establish an absence of de jure control. See, e.g., Preliminary Results of New Shipper Review: Certain Preserved Mushrooms From the People's Republic of China, 66 FR 30695, 30696 (June 7, 2001). We have no information in this proceeding which would cause us to reconsider this determination.

Shandong Heze placed only one document on the record relevant to our analysis of de jure control, a copy of the “Foreign Trade Law of the People's Republic of China.” Also, Shandong Heze did not provide the Department with information to substantiate its business license, such as the regulated-commodities listings, as evidence of the lack of de jure government control. See Shandong Heze International Trade and Developing Company-Separate Rates Analysis and Deficient Submissions Memorandum, dated July 22, 2002. Therefore, we find that Shandong Heze did not demonstrate the absence of de jure control in this case.

2. Absence of De Facto Control

Typically the Department considers four factors in evaluating whether a 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 at 22587.

As stated in previous cases, there is some evidence that certain enactments of the People's Republic of China (PRC) central government have not been implemented uniformly among different sectors and/or jurisdictions in the PRC. See Silicon Carbide at 22586 - 22587. 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.

According to Jinan Yipin, it is a private limited-liability company owned by a group of private investors. Jinan Yipin has also asserted the following: (1) There is no government participation in setting export prices; (2) its managers have authority to bind sales contracts; (3) it does not have to notify any government authorities of its management selection; and (4) there are no restrictions on the use of its export revenue and it is responsible for financing its own losses. Furthermore, our analysis of Jinan Yipin's questionnaire responses reveals no other information indicating the existence of government control. Consequently, we preliminarily determine that Jinan Yipin has met the criteria for the application of a separate rate.

Although Shandong Heze has made statements that it no longer has a relationship with any level of the government in the PRC, Shandong Heze has not provided an adequate explanation to support its independence from government control. Therefore, we preliminarily determine that Shandong Heze has not met the criteria for the application of a separate rate.

Intent to Rescind in Part

The PRC is an NME, and in NME cases we presume that all entities are subject to government control for purposes of the antidumping law unless those entities prove affirmatively that they are free from de jure and de facto government control of their export activities. See Sparklers and Silicon Carbide. Without adequate documentation of this independence, we find that Shandong Heze is not entitled to a separate rate. Consequently, Shandong Heze's belated acknowledgement of its recent government ownership and its failure to document its independence from the government adequately does not support its contention that it is a new shipper and that it is not part of the PRC-wide entity. As such, we intend to rescind the review of Shandong Heze.

Fair Value Comparisons

To determine whether sales of fresh garlic to the United States by Jinan Yipin were made at less than fair value, we compared constructed export price to normal value, as described in the “Constructed Export Price” and “Normal Value” sections of this notice below.

Constructed Export Price

In accordance with section 772(b) of the Act, we used constructed export price (CEP) methodology because the first sale to an unaffiliated purchaser occurred after importation of the merchandise into the United States. We calculated CEP based on prices from Jinan Yipin's U.S. subsidiary to unaffiliated customers. We made deductions, where appropriate, from the gross unit price to account for foreign inland freight, international freight, customs duties, and brokerage and handling. Because certain domestic charges, such as those for foreign inland freight, were provided by NME companies, we valued those charges based on surrogate rates from India. See the Factors Valuation for the Preliminary Results of the New Shipper Review Memorandum, dated July 24, 2002 (FOP Memorandum).

Normal Value

1. Surrogate Country

When investigating imports from an NME country, section 773(c)(1) of the Act directs the Department to base normal value (NV), in most circumstances, on the NME producer's factors of production valued in a surrogate market-economy country or countries considered to be appropriate by the Department. In accordance with section 773(c)(4) of the Act, in valuing the factors of production, the Department shall use, to the extent practicable, the prices or costs of factors of production in one or more market-economy countries that are at a level of economic development comparable to that of the NME country and are significant producers of comparable merchandise. The sources of the surrogate factor values are discussed under the “Factor Valuations” section below.

The Department has determined that India, Pakistan, Indonesia, Sri Lanka, and the Philippines are countries comparable to the PRC in terms of economic development. See Memorandum from Jeffrey May to Laurie Parkhill, dated February 28, 2002. In addition to being among the countries comparable to the PRC in economic development, India is a significant producer of the subject merchandise. We used India as the surrogate country and, accordingly, have calculated NV using Indian prices to value the PRC producer's factors of production, when available and appropriate. We have obtained and relied upon publicly available information wherever possible. See Memorandum from Jason Carver to Mark Ross regarding Selection of a Surrogate Country, dated July 24, 2002. In accordance with 19 CFR 351.301(c)(3)(ii), for the final results of a new shipper review, interested parties may submit publicly available information to value the factors of production within 20 days after the date of publication of these preliminary results of new shipper review.

2. Factors of Production

Section 773(c)(1) of the Act provides that the Department shall determine the NV using a factors-of-production methodology if (1) the merchandise is exported from an NME country and (2) the information does not permit the calculation of NV using home-market prices, third- country prices, or constructed value under section 773(a) of the Act. Factors of production include the following elements: (1) hours of labor required, (2) quantities of raw materials employed, (3) amounts of energy and other utilities consumed, and (4) representative capital costs. We used factors of production reported by the respondent for materials, energy, labor, and packing. We valued all the input factors using publicly available information, as discussed in the “Surrogate Country” and “Factor Valuations” sections of this notice. In accordance with 19 CFR 351.408(c)(1), where a producer sources an input from a market economy and pays for it in market-economy currency, the Department employs the actual price paid for the input to calculate the factors-based NV. See also Lasko Metal Products v. United States, 437 F.3d 1442, 1445-1446 (CAFC 1994). Therefore, where Jinan Yipin had market-economy inputs and paid for these inputs in a market-economy currency, we used the actual prices paid for those inputs in our calculations.

3. Factor Valuations

In accordance with section 773(c) of the Act, we calculated NV based on factors of production reported by the respondent for the period of review (POR). To calculate NV, we multiplied the reported per-unit factor quantities by publicly available Indian surrogate values (except as noted below). In selecting the surrogate values, we considered the quality, specificity, and contemporaneity of the data. As appropriate, we adjusted input prices by including freight costs to make them delivered prices. For a detailed description of all surrogate values used for respondents. See the FOP Memorandum.

We added to Indian import surrogate values a surrogate freight cost using the reported distance from the domestic supplier to the factory. This adjustment is in accordance with the decision in Sigma Corporation v. United States, 117 F. 3d 1401, 1407-08 (CAFC 1997).

For those Indian rupee values not contemporaneous with the POR, we adjusted for inflation using wholesale price indices published in the International Monetary Fund's International Financial Statistics for India. For those U.S. dollar-denominated values not contemporaneous with the POR, we adjusted for inflation using producer price indices published on the Federal Reserve Bank website (www.dallasfed.org/​htm/​data/​data/​wsop03sa.tab.htm).

Except as noted below, we valued raw-material inputs using the weighted-average unit import values derived from the Monthly Trade Statistics of Foreign Trade of India--Volume II--Imports (Indian Import Statistics) for the time period April 2001 through September 2001. Where POR-specific Indian Import Statistics were not available, we used Indian Import Statistics from an earlier period (i.e., April 2001 through June 2001). Surrogate-value data or sources to obtain such data were obtained from the respondent, the petitioners, and Department research.

Furthermore, we valued water based on data from the Asian Development Bank's Second Water Utilities Data Book: Asian and Pacific Region (published in 1997). We valued electricity based on data from the International Energy Agency: Energy Prices & Taxes: 2000 1st Quarter. We valued diesel fuel using data from the International Energy Agency for the time period January 2000 through April 2000.

The inputs Jinan Yipin reported for packing were mesh bags, cartons, and packing belts. We used Indian Import Statistics data for the April 2001 through September 2001 period to value these inputs.

To value truck rates, we used freight costs from the February 14, 2000, publication of.

To value factory overhead, selling, general and administrative expenses, and profit, we used rates based on financial information from the 1999-2000 annual reports of Himalaya International Ltd., Flex Foods, and Agro Dutch, Indian producers of preserved mushrooms. We based the value of the garlic sprouts on the building depreciation in the aforementioned financial information.

For labor, consistent with 19 CFR 351.408(c)(3), we used the PRC regression-based wage rate at the Import Administration's home page, Import Library, Expected Wages of Selected NME Countries, revised in May 2000 (see http://ia.ita.doc.gov/​wages). The source of the wage-rate data on the Import Administration's web site is the 1999 Yearbook of Labour Statistics, International Labor Organization (Geneva: 1999), Chapter 5B: Wages in Manufacturing.

Preliminary Results of the Review

We preliminarily determine that the following dumping margin exists for the period November 1, 2000, through October 31, 2001:

Manufacturer and Exporter	Weighted-average ­percentage margin
Jinan Yipin Corporation, Limited	15.26

The Department will disclose calculations performed in connection with these preliminary results of review within five days of the date of publication of this notice in accordance with 19 CFR 351.224(b). Case briefs regarding our intent to rescind the review of Shandong Heze must be submitted within 15 days of the date of publication of this notice. Case briefs regarding Jinan Yipin must be submitted no later than seven days after the issuance of the last verification report. Rebuttal briefs, limited to issues raised in the case briefs, must be filed within five days after the deadline for submission of case briefs. Parties who submit argument in these proceedings are requested to submit with the argument: 1) a statement of the issue, 2) a brief summary of the argument with an electronic version included, and 3) a table of authorities.

Pursuant to 19 CFR 351.310 of the Department's regulations, any interested party may request a hearing within 30 days of the date of publication of this notice. Any hearing, if requested, will be held approximately 37 days after the publication of this notice or the first workday thereafter. In accordance with 19 CFR 351.309(c)(ii), issues raised in hearings will be limited to those raised in the case and rebuttal briefs.

The Department will publish the final results of this new shipper review, including the results of its analysis of issues raised in any such written briefs, within 90 days of publication of these preliminary results. See 19 CFR 351.214(i)(1) of the Department's regulations.

Assessment Rates

Upon completion of this new shipper review, the Department will determine, and the Customs Service will assess, antidumping duties on all appropriate entries. The Department will issue appropriate appraisement instructions directly to the Customs Service upon completion of these reviews. To calculate the amount of duties to be assessed with respect to CEP sales, we divided the total dumping margins for the reviewed sales by the total entered value of those reviewed sales for each importer/customer. If these preliminary results are adopted in our final results of this new shipper review, we will direct the Customs Service to assess the resulting percentage margin against the entered customs values for the subject merchandise on each of the importer's/customer's entries during the review period.

Cash-Deposit Requirements

The following cash-deposit requirements will be effective upon publication of the final results of this new shipper review for all shipments of the subject merchandise entered, or withdrawn from warehouse, for consumption on or after the publication date, as provided for by section 751(a)(1) of the Act: (1) for subject merchandise manufactured and exported by Jinan Yipin, the cash-deposit will be that established in the final results of this review except if the rate is less than .50 percent and therefore de minimis within the meaning of 19 CFR 351.106(c)(1), in which case the cash-deposit rate will be zero; (2) for all other PRC exporters, including Shandong Heze, the rate will continue to be the PRC country-wide rate, which is 376.67 percent; and (3) for all other non-PRC exporters of subject merchandise from the PRC, the cash-deposit rate will be the rate applicable to the PRC supplier of that exporter. These deposit requirements, when imposed, shall remain in effect until publication of the final results of the next administrative review.

Notification to Importers

This notice also serves as a preliminary reminder to importers of their responsibility under 19 CFR 351.402(f) to file a certificate regarding the reimbursement of antidumping duties prior to liquidation of the relevant entries during this review period. Failure to comply with this requirement could result in the Secretary's presumption that reimbursement of antidumping duties occurred and the subsequent assessment of double antidumping duties.

We are issuing and publishing these preliminary results of review in accordance with sections 751(a)(2)(B) and 777(i)(1) of the Act.

Dated: July, 24, 2002

Bernard T. Carreau,

Acting Assistant Secretary for Import Administration.

Footnotes

1.  A new shipper review of the antidumping duty order on fresh garlic from the People"s Republic of China was also initiated for Huaiyang Hongda Dehydrated Vegetable Company. We rescinded this new shipper review, however, for the November 1, 2000, through October 31, 2001, period of review and initiated a review for the period from November 1, 2001, through April 30, 2002 (see Notice of Rescission of New Shipper Antidumping Duty Review and Initiation of Antidumping Duty New Shipper Review, 67 FR 44594 (July 3, 2002)).