Final Determination of Sales at Less Than Fair Value: Greenhouse Tomatoes From Canada

AGENCY:

Import Administration, International Trade Administration, Department of Commerce.

ACTION:

Notice of final determination of sales at less than fair value.

SUMMARY:

On October 5, 2001, the Department of Commerce published its preliminary determination of sales at less than fair value of greenhouse tomatoes from Canada. The period of investigation is January 1, 2000, through December 31, 2000. On October 19, 2001, the Department published a notice of amended preliminary determination of sales at less than fair value and postponement of final determination of greenhouse tomatoes from Canada.

Based on our analysis of the comments received and certain findings from the verifications, we have made changes in the margin calculations. Therefore, the final determination differs from the preliminary determination and the amended preliminary determination.

We determine that greenhouse tomatoes from Canada are being, or are likely to be, sold in the United States at less-than-fair-value prices as provided in section 735 of the Tariff Act of 1930, as amended. The estimated margins of sales at less than fair value are shown in the “Final Determination” section of this notice.

EFFECTIVE DATE:

February 26, 2002.

FOR FURTHER INFORMATION CONTACT:

Mark Ross or Minoo Hatten, 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; (202) 482-4794 or (202) 482-1690, respectively.

SUPPLEMENTARY INFORMATION:

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 (the Act) by the Uruguay Round Agreements Act. In addition, unless otherwise indicated, all citations to the Department of Commerce's (the Department's) regulations refer to 19 CFR part 351 (April 2000).

Case History

This investigation was initiated on April 17, 2001. See Initiation of Antidumping Duty Investigation: Greenhouse Tomatoes From Canada, 66 FR 20630 (April 24, 2001) (Initiation Notice). The preliminary determination in this investigation was published on October 5, 2001. See Notice of Preliminary Determination of Sales at Less Than Fair Value: Greenhouse Tomatoes From Canada, 66 FR 51010 (October 5, 2001) (Preliminary Determination). The Department also issued a Notice of Amended Preliminary Determination of Sales at Less Than Fair Value and Postponement of Final Determination: Greenhouse Tomatoes From Canada, 66 FR 53203 (October 19, 2001) (Amended Preliminary Determination and Postponement of Final Determination).

In October, November, and December 2001, we conducted verification of the questionnaire responses of the five mandatory respondents in this case: BC Hot House Foods, Inc., Red Zoo Marketing (a.k.a. Produce Distributors, Inc.), Veg Gro Sales, Inc. (a.k.a. K & M Produce Distributors, Inc.), J-D Marketing, Inc., and Mastronardi Produce Ltd. We also conducted verification of five cost respondents.

In January 2002, we received case briefs from the petitioners (i.e., Carolina Hydroponic Growers Inc., Eurofresh, HydroAge, Sunblest Management LLC, Sunblest Farms LLC, and Village Farms) and the mandatory respondents. The Department held a public hearing on January 22, 2002, at the request of the parties.

Scope of Investigation

The merchandise subject to this investigation consists of all fresh or chilled tomatoes grown in greenhouses in Canada, e.g., common round tomatoes, cherry tomatoes, plum or pear tomatoes, and cluster or “on-the-vine” tomatoes. Specifically excluded from the scope of this investigation are all field-grown tomatoes.

The merchandise subject to this investigation may enter the United States under item numbers 0702.00.2000, 0702.00.2010, 0702.00.2030, 0702.00.2035, 0702.00.2060, 0702.00.2065, 0702.00.2090, 0702.00.2095, 0702.00.4000, 0702.00.4030, 0702.00.4060, 0702.00.4090, 0702.00.6000, 0702.00.6010, 0702.00.6030, 0702.00.6035, 0702.00.6060, 0702.00.6065, 0702.00.6090, and 0702.00.6095 of the Harmonized Tariff Schedule of the United States (HTSUS). These subheadings may also cover products that are outside the scope of this investigation, i.e., field-grown tomatoes. Although the HTSUS subheadings are provided for convenience and customs purposes, our written description of the scope of this investigation is dispositive.

In accordance with our regulations, we set aside a period of time for parties to raise issues regarding product coverage and encouraged all parties to submit comments within 20 calendar days of publication of the Initiation Notice (66 FR 20630). On May 14, 2001, BC Vegetable Greenhouse I, L.P. (BCVG), filed comments requesting that the scope be limited to include only hydroponic tomatoes and expressly exclude “heirloom” and “organic” tomatoes grown in greenhouses. On May 21, 2001, the petitioners filed comments opposing BCVG's request to limit the scope. After considering the respondent's request and the petitioners' objections, we determined that the scope of this investigation should remain as published in the Initiation Notice. Our analysis of this scope issue is detailed in the memorandum from Laurie Parkhill, Director, Office 3, to Richard W. Moreland, Deputy Assistant Secretary, Group I, dated July 30, 2001, entitled “Request to Limit Scope of Investigation.”

Period of Investigation

The period of investigation (POI) is January 1, 2000, through December 31, 2000.

Fair Value Comparisons

To determine whether sales of greenhouse tomatoes from Canada to the United States were made at less than fair value, we compared export price or constructed export price (CEP) to normal value. Our calculations followed the methodologies described in the Preliminary Determination, except as noted below, and in the February 19, 2002, Decision Memorandum and each individual respondent's calculation memorandum, which are on file in the Import Administration's Central Records Unit (CRU), Room B-099 of the main Department of Commerce building. In addition, a complete version of the Decision Memorandum can be accessed directly from the web at http://ia.ita.doc.gov. The paper copy and the electronic version of the Decision Memorandum are identical in content.

Export Price and Constructed Export Price

For certain sales to the United States, we used export price as defined in section 772(a) of the Act. For the remaining sales to the United States, we used CEP as defined in section 772(b) of the Act. We calculated export price and CEP based on the same methodologies described in the Preliminary Determination with the following exceptions:

BC Hot House Foods, Inc.

We accepted the revised U.S. sales list that BC Hot House Foods, Inc., submitted on November 13, 2001, to incorporate corrections presented at the sales verification. Exhibit 1 of the December 20, 2001, sales verification report for this respondent contains a detailed list of the corrections. Further, as discussed in the Final Determination Analysis Memorandum from Mark Ross to the file, dated February 19, 2002, we recalculated the credit expenses, direct advertising expenses, and indirect selling expenses for BC Hot House Foods, Inc.'s U.S. sales. Finally, based on the comments we received on the level-of-trade methodology for BC Hot House Foods, Inc. and our reexamination of the information on the record relating to this issue, we revised the level-of-trade designations for this respondent. See comment 8 of the February 19, 2002, Decision Memorandum.

Red Zoo Marketing

We accepted Red Zoo Marketing's revised U.S. sales list pursuant to the corrections it presented at the start of verification, as described in Red Zoo Marketing's December 18, 2001, submission. We disregarded a billing adjustment that Red Zoo Marketing reported for one invoice where we found at verification that it did not make a billing adjustment. We adjusted the prices made for one U.S. customer where we found the customer only made a partial payment.

Veg Gro Sales, Inc.

We accepted Veg Gro Sales, Inc.'s revised U.S. sales list submitted on November 19, 2001, pursuant to changes incorporated as a result of verification. We included two sales which were shipped during the POI but invoiced outside the POI and used the shipment date as the sale date for these two observations. We adjusted the indirect selling expense ratio to reflect corrections submitted by the company and verified by us.

Mastronardi Produce Ltd.

We accepted Mastronardi Produce Ltd.'s revised U.S. sales list pursuant to changes incorporated as a result of verification. These changes affect the warehousing expenses, brokerage and handling expenses, packing expenses, and billing adjustments that Mastronardi Produce Ltd. reported as applicable to its U.S. sales.

J-D Marketing, Inc.

We accepted J-D Marketing, Inc.'s revised U.S. sales list pursuant to changes incorporated as a result of verification. These changes affect the credit expenses, inland-freight expenses, product codes, quantities, packing costs, indirect selling expenses, discounts, and brokerage and handling expenses that J-D Marketing, Inc., reported in relation to certain U.S. sales.

Normal Value

We used the same methodology as that described in the Preliminary Determination to determine the cost of production and normal value, with certain exceptions described below.

1. Cost-of-Production Analysis

BC Hot House Foods, Inc.

As discussed in the memorandum from Sheikh Hannan to Neal Halper entitled “Cost of Production and Constructed Value Calculation Adjustments for the Final Determination” dated February 19, 2002, concerning Canagro and Pacific Lagoon, we calculated the per-unit cost of manufacturing based on the production quantities maintained by two producers which supply BC Hot House Foods, Inc. (Canagro and Pacific Lagoon). We revised the general and administrative (G&A) amount applicable to Canagro and Pacific Lagoon's parent company that had been included in the G&A rate calculation. We calculated each company's financial-expense rate based on the highest level of consolidation normally prepared by the companies.

As discussed in the memorandum from Sheikh Hannan to Neal Halper entitled “Cost of Production and Constructed Value Calculation Adjustments for the Final Determination” dated February 19, 2002, concerning the other cost respondent we selected for BC Hot House Foods, Inc., we adjusted the reported G&A rate to include the damaged-goods variance.

Additionally, as discussed in the memorandum from Sheikh Hannan to Neal Halper, “Weighted-Average Cost of Production and Constructed Value Calculation for the Final Determination” dated February 19, 2002, concerning BC Hot House Foods, Inc., we calculated BC Hot House Foods, Inc.'s cost for each type of tomato by weight-averaging the cost of all the cost respondents from which BC Hot House Foods, Inc., obtained tomatoes.

Red Zoo Marketing

As discussed in the memorandum from Laurens van Houten to Neal Halper entitled “Cost of Production and Constructed Value Calculation Adjustments for the Final Determination” dated February 19, 2002, concerning Great Northern Hydroponics, we adjusted its reported costs to include the full amount the company incurred for heating costs during the POI. We removed the trough-system adjustment because at verification the company chose not to pursue those amounts. We included the full heating cost and the trough-system costs in the denominator of the revised G&A rate calculation. We calculated Great Northern Hydroponics's financial-expense rate based on the highest level of consolidation normally prepared by the company.

Additionally, as discussed in the memorandum from Laurens van Houten to Neal Halper, “Weighted-Average Cost of Production and Constructed Value Calculation for the Final Determination” dated February 19, 2002, concerning Red Zoo Marketing, we calculated its cost for each type of tomato by weight-averaging the cost of all the cost respondents from which Red Zoo Marketing obtained tomatoes.

Veg Gro Sales, Inc.

As discussed in the memorandum from Heidi Norris to Neal Halper, “Cost of Production and Constructed Value Calculation Adjustments for the Final Determination” dated February 19, 2002, concerning Veg Gro Inc., we adjusted its reported costs to include the corrections presented on the first day of the cost verification. We adjusted Veg Gro Inc.'s reported costs to include the full amount the company incurred for heating costs during the POI. We also included the full amount of depreciation expense normally recorded in the company's financial statements that are prepared in accordance with Canadian Generally Accepted Accounting Principles (GAAP). Additionally, we included marketing-board fees and shareholder life-insurance expenses, and we revised the G&A rate calculation. In the revised G&A rate calculation, we included the full heating cost and depreciation amounts in the denominator. Further, we revised Veg Gro Inc.'s financial-expense rate to exclude imputed short-term interest income and to include all interest expense incurred by the company. We also revised the reported packing costs to reflect the transfer price paid to an affiliate.

As discussed in the memorandum from Minoo Hatten to File, “Cost of Production and Constructed Value Calculation Adjustments for the Final Determination” dated February 19, 2002, concerning Amco Farms, Inc., we adjusted its reported costs to include the full amount the company incurred for heating costs during the POI. We included the full amount of depreciation expense normally recorded in the company's financial statements that are prepared in accordance with Canadian GAAP. We revised Amco Farms Inc.'s fixed-overhead calculation to include the excluded costs for the cooler. We have revised the calculation of Amco Farms Inc.'s G&A rate to include management fees. In the revised G&A rate calculation, we included the full heating cost and depreciation amounts in the denominator. We revised its financial-expense rate to include short-term interest income received from affiliates and all long-term interest expense incurred by the company.

Additionally, as discussed in the memorandum from Laurens van Houten to Neal Halper, “Weighted-Average Cost of Production and Constructed Value Calculation for the Final Determination” dated February 19, 2002, concerning Veg Gro Sales, Inc., we calculated Veg Gro Sales, Inc.'s cost for each type of tomato by weight-averaging the cost of all the cost respondents from which Veg Gro Sales, Inc., obtained tomatoes.

Mastronardi Produce Ltd.

As discussed in the memorandum from Sheikh Hannan to Neal Halper, “Cost of Production and Constructed Value Calculation Adjustments for the Final Determination” dated February 19, 2002, concerning Mastron Enterprises, we adjusted its reported costs to include the full amount the company incurred for heating costs and repairs and maintenance during the POI. We revised the cost calculations to be based on acreage rather that management estimates. We revised the G&A rate calculation to include the full heating cost and repairs and maintenance amounts in the denominator. We revised the amount for indirect selling expenses to exclude the foreign-exchange gains on accounts payable that were not related to the sale of greenhouse tomatoes. We also included office-administration income and management bonuses in the revised calculation of indirect selling expenses.

Additionally, as discussed in the memorandum from Sheikh Hannan to Neal Halper, “Weighted-Average Cost of Production and Constructed Value Calculation for the Final Determination” dated February 19, 2002, concerning Mastronardi Produce Ltd., we calculated its cost for each type of tomato by weight-averaging the cost of all the cost respondents from which Mastronardi Produce Ltd. obtained tomatoes.

J-D Marketing, Inc.

As discussed in the memorandum from Laurens van Houten to Neal Halper, “Cost of Production and Constructed Value Calculation Adjustments for the Final Determination” dated February 19, 2002, concerning I.P.R. Farms Ltd., we adjusted the acreage factors used to allocate costs to reflect the actual acreage for each product produced. We revised the seed cost to reflect the actual cost of seeds. We adjusted its reported costs to include the full amount the company incurred for heating costs and depreciation during the POI as recorded in its financial statements prepared in accordance with Canadian GAAP. We revised the reported G&A expenses to include the full amount incurred for executive salaries, marketing-board fees, and travel expenses, and we excluded a double-counted expense reimbursement from the G&A amount. We included the full amount of interest expense incurred by I.P.R. Farms Ltd. in the revised financial-expense calculation. In the revised G&A rate calculation, we included the full heating cost and depreciation amounts in the denominator. We increased the packing costs to include interest and G&A of the packer.

Additionally, as discussed in the memorandum from Laurens van Houten to Neal Halper, “Weighted-Average Cost of Production and Constructed Value Calculation for the Final Determination” dated February 19, 2002, concerning J-D Marketing, Inc., we calculated J-D Marketing, Inc.'s cost for each type of tomato by weight-averaging the cost of all the cost respondents from which J-D Marketing, Inc. obtained tomatoes.

2. Calculation of Normal Value

BC Hot House Foods, Inc.

We accepted the revised home-market sales list that BC Hot House Foods, Inc., submitted on November 13, 2001, to incorporate corrections presented at the sales verification. Exhibit 1 of the December 20, 2001, verification report for BC Hot House Foods, Inc., contains a detailed list of these corrections. We corrected a billing adjustment that BC Hot House Foods, Inc., reported inaccurately for one home-market sale, and we corrected the quantity that it reported inaccurately for another home-market sale. Further, as discussed in the final determination analysis memorandum from Mark Ross to the file, dated February 19, 2002, we recalculated the credit expenses, direct advertising expenses, and indirect selling expenses for BC Hot House Foods, Inc.'s home-market sales. Finally, based on the comments we received on the level-of-trade methodology for BC Hot House Foods, Inc. and our reexamination of the information on the record relating to this issue, we revised the level-of-trade designations for this respondent. See comment 8 of the February 19, 2002, Decision Memorandum.

Red Zoo Marketing

We accepted Red Zoo Marketing's revised home-market sales list pursuant to the corrections the respondent presented at the start of verification as described in its December 18, 2001, submission.

Veg Gro Sales, Inc.

We accepted Veg Gro Sales, Inc.'s revised home-market sales list pursuant to changes incorporated as a result of verification as described in its November 19, 2001, submission. We deleted certain sales that Veg Gro Sales, Inc., made to an employee, corrected the payment date for one sale, and made an adjustment to indirect selling expenses to reflect corrections submitted by the company and which we verified.

Mastronardi Produce Ltd.

We accepted Mastronardi Produce Ltd.'s revised home-market sales list pursuant to changes incorporated as a result of verification. These changes affected the warehousing expenses, credit expenses, packing expenses, and billing adjustments Mastronardi Produce Ltd. reported for certain home-market sales.

J-D Marketing, Inc.

We accepted J-D Marketing, Inc.'s revised home-market sales list pursuant to changes incorporated as a result of verification. These changes affected the quantities, commissions, credit expenses, and inland-freight expenses that J-D Marketing, Inc., reported for certain home-market sales. The changes also resulted in the addition to the sales list of a sale and certain credits that the respondent had omitted from the home-market sales list.

3. Calculation of Constructed Value

For each of the respondents, we calculated the cost of materials and fabrication based on the methodology described in the “Cost-of-Production Analysis” section of this notice when calculating constructed value.

Currency Conversions

We made currency conversions in accordance with section 773A of the Act in the same manner as in the Preliminary Determination.

Analysis of Comments Received

All issues raised in the case briefs by parties to this proceeding and to which we have responded are listed in the Appendix to this notice and addressed in the Decision Memorandum, which is adopted by this notice.

Verification

As provided in section 782(i) of the Act, we verified the information submitted by the respondents for use in our final determination. We used standard verification procedures including examination of relevant accounting and production records, as well as original source documents provided by the respondents.

Final Determination

We determine that the following percentage weighted-average margins exist for the period January 1, 2000, through December 31, 2000:

Pursuant to section 735(c)(5)(A), we have excluded from the calculation of the all-others rate margins which are zero, de mimimis, or determined entirely on facts available. Because we calculated de minimis margins for Red Zoo Marketing and J-D Marketing, Inc., we calculated the all-others rate on the basis of the margins applicable to BC Hot House Foods, Inc., Mastronardi Produce Ltd., and Veg Gro Sales, Inc.

Continuation of Suspension of Liquidation

In accordance with section 735(c)(1)(B) of the Act, we are directing the Customs Service to continue to suspend liquidation of all imports of subject merchandise except for exports by J-D Marketing, Inc. (and J-D Marketing, Inc.'s affiliate, Special Edition Marketing), and Red Zoo Marketing (which have zero or de minimis weighted-average margins), that are entered, or withdrawn from warehouse, for consumption on or after October 5, 2001, the date of publication of the Preliminary Determination in the Federal Register. We will instruct the Customs Service to continue to require a cash deposit or the posting of a bond equal to the weighted-average amount by which the normal value exceeds the export price or CEP, as indicated in the chart above, effective the date of publication of this final determination.

Because Red Zoo Marketing and J-D Marketing, Inc. (and its affiliate, Special Edition Marketing), are non-producing exporters, in accordance with 19 CFR 351.204(e)(3), we are limiting the exclusion from these suspension-of-liquidation instructions to entries only of subject merchandise exported by Red Zoo Marketing or J-D Marketing, Inc. (and its affiliate, Special Edition Marketing), that is produced or supplied by the companies that supplied these respondents during the POI. Any entries of subject merchandise exported by Red Zoo Marketing or J-D Marketing, Inc. (and its affiliate, Special Edition Marketing), which is not produced or supplied by the companies that supplied these respondents during the POI will be subject to the all-others rate.

For Red Zoo Marketing, because its estimated weighted-average final dumping margin is de minimis, we are directing Customs to terminate suspension of liquidation of entries of merchandise from Red Zoo Marketing that were produced by the companies that supplied Red Zoo Marketing during the POI and refund all bonds and cash deposits posted on such subject merchandise exported by Red Zoo Marketing. Because we never required suspension of liquidation or the posting of cash deposits or bonds for entries of merchandise from J-D Marketing, Inc., no such step is necessary.

These suspension-of-liquidation instructions will remain in effect until further notice.

International Trade Commission Notification

In accordance with section 735(d) of the Act, we have notified the International Trade Commission (ITC) of our final determination. As our final antidumping determination is affirmative, the ITC will determine, within 45 days, whether these imports are causing material injury or threat of material injury to the U.S. industry. If the ITC determines that material injury or threat of injury does not exist, the proceeding will be terminated and all securities posted will be refunded or canceled. If the ITC determines that such injury does exist, the Department will issue an antidumping duty order directing Customs officials to assess antidumping duties on all imports of the subject merchandise entered, or withdrawn from warehouse, for consumption on or after the effective date of the suspension of liquidation.

This notice serves as the only reminder to parties subject to administrative protective order (APO) of their responsibility concerning the disposition of proprietary information disclosed under APO in accordance with 19 CFR 351.305(a)(3). Timely written notification of return or destruction of APO materials or conversion to judicial protective order is hereby requested. Failure to comply with the regulations and the terms of an APO is a sanctionable violation.

This determination is issued and published pursuant to sections 735(d) and 777(i)(1) of the Act.

Appendix—Issues in the Decision Memorandum

Common Issues

1. Province-Specific All-Others Rate

2. Extraordinary Costs

3. Payments to Owners

4. Amortization of Assets

5. Averaging Prices Across Grades, Sizes, and Color for the Cost Test

6. Calculating a Difference-in-Merchandise Adjustment Based on Market Value

7. Weighted-Average Cost Versus Simple-Average Cost

Company-Specific Issues

BC Hot House Foods, Inc.

8. Level of Trade

9. Allocation of U.S. Advertising Expenses

10. Canagro's Start-Up Adjustment

11. Weight-Averaging the Cost for BCCH's Cost Respondents

12. Combined Interest and General and Administrative (G&A) Expenses

13. Accuracy of Canagro's Production Quantities

14. Use of Corrected BCHH Sales Lists

15. Reclassification of Certain BCHH Customers

16. Representativeness of Cost for BCHH

Red Zoo Marketing

17. Combined Financial Expense

18. Cost-Allocation Errors

Mastronardi Produce Limited

19. Capitalization of Costs

20. Cost Allocations Based on Supplier and Management Representations

21. Calculation of Mastronardi's Indirect Selling Expense Rate

22. Treatment of Mastronardi's Management Bonuses Veg Gro Sales, Inc.

23. Management Estimates

24. Arithmetical Error

25. Clerical Errors With Regard to Amco Farms, Inc.

26. Exporter G&A and Financial-Expense Ratios

27. Clerical Error Affecting COP and CV Calculations

28. Expenses Paid on Behalf of Owners

J-D Marketing, Inc.

29. Accuracy of Cost Data for IPR Farms

30. Representativeness and Accuracy of COP Analysis

31. Exclusion of Cluster-Roma and Cherry Tomatoes from Margin Calculations

32. Expenses Paid on Behalf of Owners