66 FR 31204, June 11, 2001
                                                           A-570-851 
                                                   AR 8/5/98-1/31/00 
                                                     Public Document
                                                           IA/1/2/KJ

MEMORANDUM TO: Faryar Shirzad
               Assistant Secretary for 
               Import Administration

FROM:          Richard W. Moreland
               Deputy Assistant Secretary, Group I
               Import Administration 


SUBJECT: Issues and Decision Memorandum for the Antidumping Duty
Administrative and New Shipper Reviews on Certain Preserved Mushrooms from
the People's Republic of China - August 5, 1998, through January 31, 2000


Summary 

We have analyzed the comments of the interested parties in the 1998-2000
administrative and new shipper reviews of the antidumping duty order
covering certain preserved mushrooms from the People's Republic of China
(PRC). As a result of our analysis of the comments received from
interested parties, we have made changes in the margin calculations as
discussed in the "Margin Calculations" section of this memorandum. We also
recommend that you approve the positions we have developed in the
"Discussion of the Issues" section of this memorandum. Below is the
complete list of the issues in these administrative and new shipper
reviews for which we received comments from parties:

India versus Indonesia as Surrogate Country 
Fresh Mushroom Valuation 
Factory Overhead, SG&A, and Profit Ratios 
Classification of Personnel Expenses 
Valuation of Tin Plate 
Valuation of Steam Coal 
Valuation of Cans Consumed by Raoping 
Adjustment for Brined Mushrooms Valuation 
Spawn Valuation Calculation 
Bona Fides of China Processed Food Import and Export Company's (China
Processed's) U.S. Sale 
Use of China Processed's Factor Data 
Raoping's Labor Consumption Figure 



Background 

On November 7, 2000, the Department of Commerce (the Department)
published the preliminary results of the administrative and new shipper
reviews of the antidumping duty order on certain preserved mushrooms from
the PRC. See Preliminary Results of First New Shipper Review and First
Antidumping Duty Administrative Review: Certain Preserved Mushrooms from
the People's Republic of China, 65 FR 66703 (Preliminary Results). The
product covered by this order is preserved mushrooms. The period of review
(POR) is August 5, 1998, through January 31, 2000.

The administrative review covers the exports of China Processed Food
Import & Export Co. (China Processed) and Gerber Food (Yunnan) Co.
(Gerber). The concurrent new shipper review covers the exports of Raoping
Xingyu Foods, Ltd. (Raoping). 


We invited parties to comment on the preliminary results of review. Based
on our analysis of the comments received, we have changed the results from
those presented in the preliminary results.

Margin Calculations

We calculated export price and normal value using the same methodology
described in the preliminary results, except as follows:


For the factors of production reported by respondent China Processed's
supplier, Fujian Yu Xing Fruits and Vegetables Foodstuffs Co., Ltd. (Yu
Xing), we added consumption factors and surrogate values for copper
sealing wire and sealing glue to in calculating normal value. 


We revised the surrogate value for fresh mushrooms as discussed in
Comment 2 below. 


We revised the surrogate value for tin plate consumed by Yu Xing in
making tin cans by using a weighted-average of import and domestic unit
values, as discussed in Comment 5 below. 


We revised the surrogate value for steam coal by using a weighted-
average of import and domestic unit values, instead of the simple-average
used in the preliminary results, as discussed in Comment 6 below. 


We revised the calculation of factory overhead, selling, general, and
administrative expenses, and profit from the financial statement of one of
the three Indian companies used to calculate those surrogate values by
reclassifying the labor expenses included in the selling, general, and
administrative expense category to the direct labor category, as discussed
in Comment 12 below. 


We adjusted the labor consumption factors for respondents Raoping and
Gerber to account for management and other personnel not included in their
labor factor reporting, as discussed in Comment 12 below. 


We recalculated the average unit price for the calcium carbonate
surrogate value to include only the quotes for activated calcium carbonate
because, according to our research, precipitated carbonate is mostly used
in paper industries and does not appear to be used for any agricultural
purposes. 

Discussion of the Issues

Surrogate Value Comments

Comment 1: India versus Indonesia as Surrogate Country


In the preliminary results, the Department relied on surrogate value
information from India to value the factors of production reported by the
PRC producers.

Raoping argues that the Department should consider the Indonesian
surrogate value information it submitted for the final results of this
review. Raoping asserts that Indonesia's economic development is
comparable to the PRC and it is a significant producer of the subject
merchandise. Raoping also contends that the PRC mushroom farming
conditions and canning process are more similar to the conditions and
process in Indonesia rather than India. Finally, Raoping maintains that
the Department has used Indonesian data in PRC cases whenever sufficient
public data was provided.

The petitioners argue that, in the preliminary results, the Department
held that of the five countries determined to be at a level of comparable
economic development to the PRC, India met the statutory requirements for
an appropriate surrogate country. The petitioners further note that this
position is consistent with the one taken in the less-than-fair-value
(LTFV) investigation. Accordingly, the petitioners believe that the
Department should continue to use India as the surrogate country for
purposes of the final results of these reviews. 

Department's Position:

We have continued to rely on surrogate value data from India, wherever
possible. 

The issue raised by Raoping is very much the same issue raised by the
respondents in the LTFV investigation. In our final LTFV determination, we
acknowledged - as we do here - that both India and Indonesia meet the
statutory requirements for an appropriate surrogate country for the PRC in
this proceeding, but we relied on the Indian data because of the quality
and contemporaneity of the available data. The same situation applies in
these reviews.

Most of the price data for material inputs submitted by Raoping in its
November 27, 2000, submission derives from price quotes outside the POR
obtained by Raoping in Indonesia specifically for the purpose of compiling
surrogate value data for these reviews. In contrast, the record includes
material input prices from a variety of Indian sources that are largely
publicly available published data. Most of the data is from the POR. Thus,
the Indian data is clearly superior in terms of quality and
contemporaneity.

Furthermore, Raoping has provided financial statement data for an
Indonesian food processing company for the purpose of calculating
surrogate values for factory overhead, selling, general and administrative
(SG&A) expenses, and profit. Raoping did not provide any similar
information for an Indonesian preserved mushroom producer. The food
company's financial statement does not provide much detail with respect to
the financial data used to calculate the three surrogate values. In
contrast, we have financial statement data from ten of the twelve known
producers of preserved mushrooms in India, including data for multiple
years from some of the producers. We also have Reserve Bank of India (RBI)
data for the food processing industry. The relative wealth of detailed
financial data available for India, and in particular for the same
industry under review, demonstrates that the quality of the Indian
financial statement data available on the record is clearly superior to
the single statement available for Indonesia. 

We also note that, contrary to Raoping's assertions, there is no
information on the record to indicate that the Indonesian preserved
mushroom industry is more similar to the PRC preserved mushroom industry
than is the Indian preserved mushroom industry. Therefore we cannot
conclude that the Indonesian data is more appropriate for surrogate
values. The Department addressed this same point in the LTFV final
determination (Notice of Final Determination of Sales at Less Than Fair
Value: Certain Preserved Mushrooms from the People's Republic of China, 63
FR 72255, 72263 (December 31, 1998) (LTFV Final Determination)) as follows:

Even if the Department were to consider the production method of an input
as a factor in determining the appropriate surrogate value, the available
evidence does not support the respondents' argument that Indonesian
production methods are "low tech" compared to Indian production methods
and thus more similar to PRC production methods. ..., the information on
the public record of the companion investigation of certain preserved
mushrooms from Indonesia indicates that the Indonesian growers are not
like the PRC growers and, in fact, are more like the "high tech" Indian
growers, as noted by the petitioners at pages 11 - 12 and Exhibit 1 of
their June 3, 1998, submission. For example, while the PRC growers used a
fixed bed system (May 28, 1998, submission at page 5), the Indonesian
respondents used a tray system (see P.T. Dieng Djaya/Surya Jaya Abadi
Perkasa's ("Dieng/Surya Jaya") and P.T. Zeta Agro Corporation's April 23,
1998, responses at pages 51 and 22, respectively). Contrary to the
respondents' assertions, the Indonesian growers employ a climate control
system (see, e.g., Dieng/Surya Jaya's June 22, 1998, response at pages 7 -
9, respectively). Accordingly, there is no basis to reject the Indian
surrogate values in favor of the Indonesian surrogate values.

Finally, while the Department has relied on Indonesian data for surrogate
values in a number of antidumping duty proceedings involving the PRC, it
has never declared a preference for Indonesia over India as a surrogate
country when information from both countries has been available. The
Department's selection of a surrogate country depends on a case-specific
analysis of the facts and available information in each investigation and
review. The facts and available information in these reviews direct us to
continue relying on surrogate value data from India.

Comment 2: Fresh Mushroom Valuation 

In the preliminary results, the Department valued fresh mushrooms based
on the simple-average of the fresh mushrooms prices quoted in the Indian
publication The Economic Times during the POR, as provided by Gerber.

The petitioners contend that the Department should correct the surrogate
value for fresh mushrooms to include the daily range of prices reported in
the Indian publication The Economic Times. The petitioners argue that the
prices provided by Gerber reflect only the lower end of a daily range of
prices reported in The Economic Times, thereby understating the surrogate
value. For the final results, the petitioners propose adjusting the
surrogate value by recalculating the daily prices to include the daily
high price published, which was five rupees higher than the low price used
in Gerber's calculation, and then recalculating the POR average price.

Gerber argues that the Department should reject the petitioners' argument
because the "low" price is the "buy" rate and as the producers are buying
mushrooms, the "buy" rate is the appropriate price to use. Gerber also
claims that the petitioners' argument is untimely because the petitioners
have had since August 17, 2000, when The Economic Times mushroom price
data was first submitted, to raise this issue. By raising it now, Gerber
states that there is insufficient time to address the issue with any
additional record evidence.

Department's Position:

As a threshold matter, we find no basis to reject the petitioners'
argument as untimely. The petitioners' argument raises an issue addressing
facts already on the record. The argument was raised in the case brief,
which was timely submitted in accordance with the Department's established
deadline. The brief did not contain any new factual information.
Accordingly, the petitioners' argument is timely.

With respect to adjusting the fresh mushrooms value, we agree with the
petitioners. In each of the sample newspapers Gerber submitted on
September 26, 2000, in support of its mushroom price reporting, two prices
are listed - a low and a high price. Gerber consistently used the low
price to calculate its simple average. Gerber claims that the low price is
a "buy" price and the high price is a "sell" price, but we find no
indication in any of the sample newspapers to support this contention.
Nowhere in these newspaper excerpts is there a statement that prices
quoted represent buying and selling prices. We note that for some
commodities, a single price is quoted, while for others, two prices are
quoted in the same manner as for mushrooms. The only identification that
the prices represent "buy" and "sell" rates is in the charts Gerber's
Indian market researcher prepared and included as Exhibit 1 to Gerber's
August 17, 2000, submission. That exhibit does not explain how it was
determined that the low price was a "buy" price.

In the absence of any evidence on the record to support Gerber's
assumption regarding the fresh mushrooms prices, we find it more
reasonable to assume, as the petitioners have, that the two prices quoted
in each edition of The Economic Times represent the daily high and low
prices. Accordingly, we agree with the petitioners that a more appropriate
surrogate value should be based on an average of the midpoint of each set
of prices. However, we note that the high price was not uniformly five
rupees higher than the low price, as the petitioners suggest. Two of the
seventeen examples show the high price to be two rupees higher, rather
than the five rupees difference observed in the other examples.
Accordingly, to recalculate the average mushroom price, we have adjusted
the petitioners' proposed methodology to account for these exceptions. See
Valuation Memorandum for a further discussion of the recalculation
methodology.


Comment 3: Factory Overhead, SG&A, and Profit Ratios

In the preliminary results, the Department based the surrogate value for
factory overhead, SG&A expenses, and profit on the simple average of the
ratios calculated from the 1999-2000 financial statements of three Indian
preserved mushrooms producers: Agro Dutch Foods, Ltd (Agro Dutch), Flex
Foods, Ltd., and Himalya, Ltd. (Himalya).

Gerber contends that the financial information from these companies is
distortive because of "extraordinarily high" capital costs for the "highly-
sophisticated" climate control equipment upon which the Indian companies
rely. In contrast, Gerber continues, at PRC companies such as Gerber,
which are situated in a more temperate climate than the Indian producers,
such equipment is not needed. Moreover, Gerber adds that the Indian
companies are largely growers of mushrooms, while Gerber is principally a
canner.

Further, citing the Notice of Final Determination of Sales at Less Than
Fair Value: Certain Non-Frozen Apple Juice Concentrate from the People's
Republic of China, 65 FR 19873 (April 13, 2000) (Apple Juice), Gerber
contends that the Department should use factory overhead, SG&A, and profit
data from the RBI statistics for the industry group "Processing and
Manufacture - Foodstuffs, Textiles, Tobacco, Leather and Products therof"
because this information is more representative of the food processing
industry than the largely agricultural basis of the selected Indian
financial statements. Gerber states that the Indian companies' data is
based primarily on growing mushrooms, rather than canning mushrooms, or on
non-subject merchandise production and thus should not be used in this
instance. If the Department nevertheless continues to rely on the Indian
producers' data, Gerber argues that the Department should average
Himalya's data for two or three years, and include the data from the
public version of Hindustan Lever, Ltd.'s (Hindustani Lever) mushroom
division profit and loss statement in the overall average of the Indian
producers' data.

The petitioners respond that the Indian producers' financial data is
representative of preserved mushrooms production in India and as such, are
appropriate sources for calculating the surrogate values for factory
overhead, SG&A and profit. The petitioners contend that both Agro Dutch
and Himalya have significant operations to produce the subject merchandise
and are significant canners as well as growers, thus their experience is
appropriate in these reviews, especially because one of the producers in
this review, Yu Xing, also has substantial growing operations. 

Further, the petitioners assert that there is no basis to exclude the
Agro Dutch and Himalya financial statement data as distortive due to
Gerber's claims that the data from these companies relies more on climatic
or agricultural factors. According to the petitioners, there is no
evidence on the record of these reviews to support Gerber's claims that
the relatively high factory overhead, SG&A, and profit ratios derived from
these statements are attributable to either capital investment needed for
climate control or a concentration in agricultural operations. Thus, the
petitioners contend that the Department should continue to apply the
surrogate values used in the preliminary results for these factors.

Department's Position:

Gerber has failed to provide any compelling reason or record evidence why
the three companies' financial statement data are not representative of
the experience of producers of preserved mushrooms in the surrogate
country. As discussed at length in the October 31, 2000, Preliminary
Results Valuation Memorandum, we analyzed the financial statements from
ten of the twelve known producers of preserved mushrooms in India. From
these ten, we relied only on those producers whose activities were largely
related to the production of preserved mushrooms, and who made a profit
during the latest fiscal year for which we had information. We then
averaged the respective factory overhead, SG&A, and profit ratios from the
three companies' financial statements to derive the surrogate values. The
resulting ratios are the best surrogate value information on the record of
these reviews as they meet key elements of the Department's criteria for
surrogate value selection in terms of specificity, industry
representativeness, and contemporaneity. They represent the experience of
multiple producers of the same product under review, are from the country
selected as the primary surrogate country, and cover time periods that,
for the most part, are included in the POR.

The Department's practice is, where information is available, to derive
the factory overhead, SG&A and profit values from producers of merchandise
that is identical or comparable to the subject merchandise (see, e.g.,
Notice of Final Determination of Sales at Less than Fair Value: Synthetic
Indigo from the People's Republic of China, 65 FR 25706 (May 3, 2000),
Decision Memorandum Comment 6, and Notice of Final Determination of Sales
at Less Than Fair Value:

Creatine Monohydrate From the People's Republic of China, 64 FR 71104,
71108 (December 20, 1999) (Creatine)). Gerber would have the Department
discard the financial data from producers of the product under review in
favor of composite data from a "basket" category that includes, but is not
limited to, food processing in general. That is, Gerber argues for the use
of data that is less product- or industry-specific than other data on the
record, contrary to our practice. Gerber provides no basis for us to
conclude that the less product-specific manufacturing sector data is more
appropriate for use than the experience of Indian preserved mushrooms
producers.

In the Apple Juice case cited by Gerber, the only available financial
statement of an Indian apple juice concentrate producer was one for which
apple juice was only a small part of its business activities. The vast
majority of its activities were in service-oriented operations, a
different industrial sector than apple juice. In the instant proceeding,
each of the three Indian preserved mushrooms producers is substantially
involved in producing preserved mushrooms, of which a substantial portion
of those activities is canning. Their other business operations are mostly
in other food processing activities. Even if we were to view them as "food
processors" rather than "preserved mushrooms producers," they would be a
more specific and superior choice for surrogate value data than the broad-
based industry group from the RBI, which could well include data from
inappropriate producers such as shoemakers, cigarette manufacturers, and
clothing factories. 

We acknowledge that no source of surrogate value data is perfect. The
financial experience of one or more Indian preserved mushrooms producers
will be based on circumstances or activities that one or more PRC
producers did not face, and vice versa. In this proceeding, we are able to
rely on the experience of three, rather than one, surrogate country
producers. By averaging the factory overhead, SG&A, and profit ratios
derived from each, we arrive at a broader-based surrogate value that
minimizes the particular circumstances of any one producer and is more
reliable as representative of the specific industry.

We find no basis to broaden our average to include multiple years of data
from the same producer, as Gerber suggests. Gerber has failed to provide
any persuasive evidence or reasoning that the data from the most recent
available financial statements of any of the three companies is distortive
and unusable. Thus we find no basis, nor are we aware of any precedent, to
reduce any alleged but unsupported distortion by including data from an
earlier year. 

In addition, we cannot accept Gerber's other suggestion to use the ranged
data from the Indian producer Hindustani Lever's mushroom division. In
order to properly analyze and calculate the surrogate value ratios, we
need to review the full financial statement. The complete statements were
available for the Indian companies and Hindustani Lever as a whole,
however, the complete Hindustani Lever mushroom division statement (which
contains substantial business proprietary information) was submitted only
in the concurrent administrative review of certain preserved mushrooms
from India and never placed on the record of the instant reviews. The
public version of the mushroom division profit and loss account submitted
for the record of the instant reviews consists only of ranged data for a
few line items, as prepared for the public record by Hindustani Lever's
counsel in the concurrent Indian preserved mushrooms review. This sparse
level of detail, coupled with the ranged rather than actual data, provides
an unreliable source for surrogate values. 




Comment 4: Classification of Personnel Expenses 

In the preliminary results, for purposes of calculating surrogate factory
overhead, SG&A, and profit ratios from Indian financial statements, the
Department classified all personnel-related expenses as part of the labor
expenses in direct manufacturing costs (i.e., the denominator of the
calculation). 

The petitioners contend that certain expenses, such as house rent
allowance, staff and labor welfare, should be reclassified as factory
overhead or SG&A expenses (i.e., part of the numerator in the Department's
ratio calculation), in accordance with the statement in the Preliminary
Results Valuation Memorandum that the surrogate value for factory overhead
and SG&A expenses included labor that is generally classified under
factory overhead or SG&A.

In calculating Agro Dutch's factory overhead and SG&A rates, the
petitioners claim that the Department excluded certain indirect labor
expenses from the surrogate factory overhead and SG&A calculations.
Accordingly, for purposes of the final results, the petitioners contend
that the Department should allocate all labor that is generally classified
under factory overhead or G&A to the surrogate values for factory overhead
and SG&A. 

China Processed argues that the Department's methodology was correct.
China Processed states that, in the factors of production reporting by its
supplier, Yu Xing, all labor has been reported under the direct and
indirect labor factors. Thus, the Department properly classified these
personnel expenses as part of labor expenses in order to ensure that the
denominators used in the calculation of the overhead and SG&A ratios are
consistent with the expenses to which the ratios are applied. 


Department's Position:

We disagree with the petitioners. The labor component of our normal value
calculation is intended to reflect all labor costs. Thus, we do not want
the factory overhead or SG&A rate to include any labor expense component
in order to avoid double-counting in the normal value calculation.
Therefore, when calculating the factory overhead and SGA rates, we include
all labor in the denominator (not the numerator) to insure that the
calculated rates for factory overhead and SGA do not reflect any labor
expenses. Accordingly, we properly classified the expenses identified by
the petitioners in their case brief as part of the labor factor. 

Comment 5: Valuation of Tin Plate 

In the preliminary results, the Department valued tin plate consumed by
China Processed's supplier Yu Xing to make cans and lids based on the tin
plate unit value derived from import Commodity Trade Statistics published
by the United Nations Statistics Division. Subsequent to the preliminary
results, the petitioners submitted a price for "electrolytic tin plate,"
based on information published in the 1998-1999 annual report of the Tin
Plate Company of India Ltd.

For the final results, the petitioners argue that the Department should
value tin plate based on the Tin Plate Company value, rather than the
United Nations import value. The petitioners state that use of the former
value is consistent with the Department's stated preference for domestic,
tax-exclusive prices, as articulated in such proceedings as Final
Determination at Sales at Less Than Fair Value: Certain Cut-to-Length
Carbon Steel Plate from the People's Republic of China, 62 FR, 61964,
61987 (CTL Plate), where the Department stated, " we normally prefer a
fully reliable domestic, tax-exclusive price to an equally reliable import
price."

Citing Final Determinations of Sales at Less Than Fair Value: Steel Wire
Rope From India and the People's Republic of China; Notice of Final
Determination of Sales at Not Less Than Fair Value: Steel Wire Rope From
Malaysia , 66 FR 12759, February 28, 2001 (SWR), China Processed contends
that the Department's stated preference is to use Indian import statistics
when available to value the factors of production when India is the
surrogate country. In that determination, the Department stated in its
response to Comment 1 of the Decision Memorandum that "[t]he Department's
general practice in NME cases is to value inputs using surrogate values
derived from the import statistics of the surrogate country." China
Processed suggests that the Tin Plate Company price may be distortive due
to a number of possible reasons, such as regional or company-specific
distortions, use of long-term contracts or affiliated party transactions
not conducted at arm's length. As the Department has insufficient
information regarding the basis of the Tin Plate Company's tin plate
price, China Processed argues that the Department should rely only on the
United Nations import value for valuing this input.

Department's Position:

As we stated in the Preliminary Results Valuation Memorandum and repeated
here: 

Consistent with 19 CFR 351.408 and our practice (see, e.g., Final Results
and Partial Rescission of Antidumping Duty Administrative Review Manganese
Metal From the People's Republic of China, 63 FR 12442, March 13, 1998),
where possible, we selected the publicly available value for materials and
energy factors which was: (1) an average non-export value; (2)
representative of a range of prices within the period of review ("POR") or
most contemporaneous with the POR; (3) product-specific; and (4) tax-
exclusive. In addition, wherever possible, we relied on material and
energy input values that are not producer-specific, in accordance with the
preamble to the Department's regulations (62 FR 27296, 27366, May 19,
1997). Where we could not obtain a POR-representative price for an
appropriate surrogate value, we selected a value in accordance with the
remaining criteria mentioned which was the closest in time to the POR.

Our selection of the appropriate surrogate value for a given factor is a
case-specific decision based on an analysis of the available information.
As we explained further in the CTL Plate determination:

It is important to emphasize, however, that our overarching mandate is to
select the "best" available data (see 19 U.S.C. 1677b(c)(1)), which
involves weighing all of the relevant characteristics of the data, rather
than relying solely on one or two absolute "rules." Thus, for example, the
most specific data may not be the most contemporaneous, the most reliable,
or from the selected surrogate country. There is no set hierarchy for
applying the above-stated principles, nor will parties always agree as to
the reliability of certain data or the relevance of certain facts or
assertions. Thus, the Department must weigh available information with
respect to each input value and make a product-specific and case-specific
decision as to what the "best" surrogate value is for each input.


Both the petitioners and China Processed are correct in noting that the
Department has indicated a preference for domestic values, while also
relying often on import values. The cited quotes are not necessarily
contradictory; neither quoted statement offers a complete articulation of
our practice. Import values are often used because they are frequently
available and representative of a range of prices within the POR. They are
also not producer-specific. Elsewhere in the SWR Decision Memorandum, in
our response to Comment 4, we also stated that "[t]he Department's common
practice in past PRC antidumping proceedings has been to use India
Chemical Weekly, when possible, to value chemicals. See, e.g., Persulfates
from the People's Republic of China, 65 FR 46691 (July 31, 2000)." The
Chemical Weekly prices are Indian domestic values, not producer-specific,
and are representative of a range of prices within the POR. All other
things being equal, we would normally prefer the domestic Chemical Weekly
prices over Indian import values to value a factor of production.

In this instance, we have the choice between two values contemporaneous
with the POR: a) a unit value derived from import statistics, and b) an
Indian (i.e., domestic) unit value derived from the financial statement of
an Indian company. Both values are reasonably specific to the factor to be
valued. The import value is representative of a range of prices within the
POR and is not producer-specific. The domestic value in this case may be
representative of a range of prices during the POR, but only those prices
experienced by this Indian producer. 

China Processed notes that the domestic value may be based on pricing
factors that may be distortive. While that situation is possible, we have
no information on the record to support that proposition. At the same
time, an import value may also be distortive, as import values may be
based on sales to affiliated parties that are not at arm's length, or an
exporting country may provide export subsidies. We also have no
information on the record to support that assumption. In such cases, we
consider the merits of using the surrogate value at face value.

In isolation, we may prefer the import value because it is not producer-
specific and more likely to be broader-based than the domestic value from
the financial statement of a single producer. However, in this case, we
also have a third option: to weight-average the two values and use the
resulting average as the surrogate value. 


In selecting a surrogate value, we attempt to find the most
representative and least distortive market-based value. The more broad-
based the value, the greater the likelihood that the value is
representative. Moreover, the more sources involved in deriving the value,
the less any possible distortions in any one price will distort the
resulting value. By using a weighted-average of both tin plate values, we
reduce the impact of any distortions that may exist in either value.
Further, we arrive at a broader-based price - one that is based on prices
a producer may pay for an imported input, and on prices a producer may pay
for a domestic input - that is more likely to be representative of the
input to be valued. Accordingly, we have valued tin plate based on the
weighted-average of the United Nations import statistics and the Tin Plate
Company data.

Comment 6: Valuation of Steam Coal 

In the preliminary results, the Department valued steam coal based on the
simple average of two prices: a) the 1998 weighted-average unit value for
Indian imports of "Bituminous coal, not agglomerated" from the Commodity
Trade Statistics published by the United Nations Statistics Division, and
b) the unit value for steam coal derived from the 1998-1999 annual report
for the Indian company Polychem, Ltd (Polychem).

Following the same reasoning each party laid out for valuing tin plate,
the petitioners claim that, in the final results, the Department should
apply only the domestic Polychem value as the surrogate value for steam
coal, while China Processed claims that the Department should rely only on
the United Nations import statistics value. Gerber joins China Processed
in arguing for the use of the import statistics surrogate value. 

Gerber favors the United Nations import statistics value because it
asserts that the import value for steam coal is broad in coverage while
the Polychem value is of uncertain breadth. Gerber also contends that
there are huge and unexplained price differences between the coal value
from the United Nations import statistics and the value from Polychem,
Ltd. In such circumstances, Gerber maintains that the Department's
practice is to rely on the broad-based data and to reject data from a
single company, especially where such data appear to be distorted. 

Department's Position:

Following the reasoning set forth above with respect to tin plate, we
have continued the methodology used in the preliminary results and applied
a value composed of both the import statistics and the Polychem value.
Contrary to Gerber's assertions, the import statistics value is not
necessarily more broad-based than the Polychem value because, in this
case, the former value is based only on imports from a single country. By
calculating and applying a weighted-average of the two contemporaneous
values, we are relying on the most specific, most broad-based value for
the POR based on the information on the record of these reviews. 

The petitioners claimed that the Polychem value is more specific because
it is for coal used in "steam raising," while the import value is for
"bituminous coal." As we demonstrated in the Preliminary Results Valuation
Memorandum, however, bituminous coal is equivalent to coal for "steam
raising" based on the United Nations Commodity Index classification (see
Attachment 15 of the Preliminary Results Valuation Memorandum). 


Comment 7: Valuation of Cans Consumed by Raoping 

Raoping reported that it purchased cans from a market-economy supplier
(i.e., a Hong Kong trading company) and paid for them in U.S. dollars. In
the preliminary results, we valued the cans consumed by Raoping based on
Raoping's purchase price for the cans. 

The petitioners argue that the Department should not rely on Raoping's
purchase price to value the cans because Raoping failed to provide
evidence at verification of the cans' country of origin. Therefore, the
petitioners continue, Raoping has failed to demonstrate that the cans were
produced in a market-economy country. As the result, the petitioners
contend that the Department should value Raoping's can consumption based
on the surrogate value for tin cans.

Raoping argues that the Department should continue to value its
consumption of tin cans using the actual purchase price from the market
economy. Raoping claims that it was unable to prove the country of origin
solely because it had already disposed of the can packaging in its normal
course of business. Raoping maintains, however, that the Department's
regulations do not require that the respondent prove the country of origin
of a particular factor in order for the Department to use the actual
purchase price in lieu of a surrogate value in its analysis.

Department's Position:

Under 19 CFR 351.408(c)(1), "where a factor is purchased from a market
economy supplier and paid for in a market economy currency, the Secretary
normally will use the price paid to the market economy supplier." The
regulation does not require that the nonmarket economy respondent
establish in which particular country the factor of production was
produced, only that it was obtained from a market economy supplier. As
discussed in our preliminary results, although Raoping was unable to
provide evidence of the cans' country of manufacture, Raoping demonstrated
to the Department's satisfaction at verification that the material was
obtained from a Hong Kong supplier and that Raoping paid for the material
in U.S. dollars. We found no evidence at verification to indicate that the
cans were not actually produced in a market economy. Based on these
circumstances, Raoping has met the regulatory criteria used to value the
cans at the market-economy purchase price, and we have continued to value
these cans based on that price.

Comment 8: Adjustment for Brined Mushrooms Valuation 

Raoping consumed brined (i.e., provisionally preserved) mushrooms to
produce the subject merchandise sold during the POR, while Gerber consumed
both brined and fresh mushrooms. We were unable to find a surrogate value
specifically for brined mushrooms in the preliminary results. Therefore,
we applied a fresh mushroom value to the brined mushroom input and
adjusted the brined mushroom consumption amount to reflect the difference
in quantity if fresh mushrooms had been consumed instead of brined
mushrooms. For Raoping Yucun Canned Foods Factory (Raoping Yucun), the
supplier for respondent Raoping Xingyu, we applied a ratio of 1.43 units
of fresh mushrooms for each unit of brined mushrooms, based on information
obtained from the U.S. preserved mushrooms industry and placed on the
record in the Preliminary Results Valuation Memorandum at Attachment 8.
For Gerber, we applied a ratio based on Gerber's own experience in
producing brined mushrooms from fresh mushrooms.

Raoping contends that the Department should apply a ratio of 1.2 fresh
mushrooms for each unit of brined mushrooms, which it asserts was obtained
during the verification of Chinese producers and was applied in the LTFV
investigation. Raoping insists that this ratio is based on the production
experience of PRC producers and that there is publicly available
information to support this ratio. Finally, Raoping maintains that the
Department did not provide it with the same opportunity to submit the
brined production ratio as it did for the petitioners. 

The petitioners state that Raoping appears to have misunderstood the
Department's verification findings in the LTFV investigation because, in
fact, the Department did not apply a 1.2 ratio in the LTFV final
determination. The petitioners argue that the data provided by both the
petitioners and the respondents in the instant reviews confirm that the
appropriate conversion factor is significantly higher than 1.2. The
petitioners add that Raoping has failed to provide any record evidence to
support its 1.2 ratio claim. 

Gerber argues that the Department should apply Gerber's own fresh-to-
brined mushroom production experience only to its self-produced brined
mushrooms. For brined mushrooms purchased from unaffiliated suppliers,
Gerber states that the Department should apply the 1.43 ratio because
Gerber's own production efficiency has no relation to that of its
suppliers. 

Department's Position:

We have continued to adjust Raoping Yucun's brined mushrooms consumption
factor by the 1.43 ratio to arrive at the fresh mushroom consumption
equivalent for valuation purposes. In addition, we have continued to use
Gerber's own production experience for calculating the fresh mushroom
equivalent for Gerber's purchases of brined mushrooms.

As petitioners have noted, Raoping has misunderstood the Department's
LTFV methodology for valuing brined mushrooms. In the response to Comment
4 of the LTFV Final Determination, we stated:

In the absence of a better methodology, we agree with petitioners and
continue to adjust the brined mushroom input factor to a fresh mushroom
equivalent in the same manner as that in the preliminary determination. We
made the adjustment by applying an industry standard ratio to the brined
mushroom factor.


(See LTFV Final Determination at 72264).

The "industry standard ratio" cited in the Federal Register notice relied
on the production experience of each producer involved in the
investigation. Producers in the LTFV investigation who consumed brined
mushrooms also consumed fresh mushrooms. Therefore, we were able to
compare the consumption factor for fresh mushrooms to that for brined
mushrooms to produce the subject merchandise. For each of these producers,
we were able to derive a producer-specific ratio.

Of the parties involved in these reviews, only Gerber consumes both fresh
and brined mushrooms. Raoping Yucun consumes only brined mushrooms, thus
there is no information on fresh mushroom consumption to derive a ratio
specific to Raoping Yucun. We are unable to use the information from the
LTFV investigation because the actual ratios were derived from proprietary
producer-specific information. Similarly, we cannot apply Gerber's
experience to Raoping because Gerber's information is proprietary
information. The only available public information is the 1.43 ratio
provided by the petitioners. 

Moreover, there is no credible information on the record to support
Raoping's 1.2 ratio claim. Contrary to its claims, Raoping had ample
opportunity to submit support for its claimed ratio and for any other
surrogate value information concerning brined mushrooms. The Department
first invited parties to submit such information in May 2000, and the
deadline for submitting such information for consideration in the final
results was November 27, 2000, almost two months after the preliminary
results. The petitioners and the other respondents were subject to the
same deadline. Thus, there is no basis to rely on Raoping's unsupported
claims.

In Gerber's case, we have the choice of using Gerber's own experience or
that of the U.S. industry to calculate the fresh mushroom equivalent of
Gerber's purchases of brined mushrooms, which constitute a relatively
small portion of Gerber's canned mushroom inputs. Given these two options,
we find it more reasonable to rely on Gerber's verified production
experience. This methodology is consistent with that applied in the LTFV
investigation.

Comment 9: Spawn Valuation Calculation 

In the preliminary results, the Department valued spawn based on the
weighted-average of unit values derived from data in the 1998-1999 Premier
Explosives Ltd. (Premier) financial statement, the 1998-1999 Agro Dutch
financial statement, and the 1999-2000 Agro Dutch financial statement
notes. Agro Dutch reported its spawn consumption in liters, which the
Department converted to kilograms. The Department treated the Premier
consumption figure as kilograms and did not convert the amount.

The petitioners claim that the Premier figure was also reported in
liters. Accordingly, the petitioners maintain that the Department should
correct the calculation and convert the Premier figure from liters to
kilograms in calculating the weighted-average surrogate value for spawn. 

China Processed contends that the Department correctly determined that
the consumption amount in Premier's financial statement was reported in
kilograms and no recalculation is necessary. 

Department's Position:

We agree with China Processed that the Premier figure was reported in
kilograms. The Department used the figure at page 26 of the 1998-1999
Premier financial statement in calculating the weighted-average surrogate
value for spawn. The line item for spawn does not specify the unit of
measurement, but the other line items in that table are identified as
reported in metric tons. In the table at page 25, the spawn consumption
figure is specifically distinguished from the other line items as being
reported in liters.

We compared the page 26 data to the comparable table in Premier's 1997-
1998 financial statement, which is included in Attachment 6 to the
Department's July 17, 2000, memorandum. This table appears at page 24 of
the 1997-1998 financial statement. The line item for spawn in the relevant
table specifically identifies the unit of measurement as "tonnes" (i.e.,
metric tons). The same figure for 1997-1998 consumption appears in the
1997-1998 column in the 1998-1999 Premier financial statement. We find it
reasonable to conclude that the 1998-1999 consumption figure is also in
metric tons, which we converted to kilograms in our weighted-average
calculation.

Comment 10:. Bona Fides of China Processed's U.S. Sale

The petitioners argue that, with regard to China Processed, total facts
available is warranted for purposes of the final results because, in
addition to the serious problems with China Processed's reported
production data, this respondent's single U.S. sale was not bona fide.
Moreover, the petitioners claim that China Processed's U.S. sale was small
in quantity and was made at a price that is not commercially sustainable
and, therefore, cannot serve as the basis for setting export price for
purposes of the final results. The petitioners argue further that, because
China Processed had no entries of the subject merchandise during the POR,
rescission of this segment of the proceeding is warranted. However,
because the Department has already invested significant resources in
analyzing China Processed's data, the petitioners advocate the use of
total facts available as opposed to rescinding the review. The petitioners
suggest a total facts available rate of 142.11, the "all others" rate
assigned to cooperative, non-selected respondents from the LTFV
investigation. 

China Processed maintains that the petitioners' argument must be rejected
because, consistent with the Department's practice, the "totality of the
circumstances" in this review indicate that China Processed's U.S. sale
was bona fide and commercially viable. China Processed cites Certain Cut-
to-Length Carbon Steel Plate from Romania: Notice of Rescission of
Antidumping Duty Administrative Review, 63 FR 47232, 47234, September 4,
1998 (Plate from Romania), Natural Bristle Paint Brushes and Brush Heads
from the People's Republic of China: Final Results of Antidumping Duty
Administrative Review, 65 FR 45753, July 25, 2000 (Paint Brushes), and Oil
Country Tubular Goods from Japan: Final Results of Antidumping Duty
Administrative Review, 65 FR 15305, March 22, 2000 (OCTG), in support of
its argument. China Processed claims that in order for the Department to
determine that a sale is not bona fide, a petitioner must submit adequate
evidence addressing each of the Department's factors, which include: U.S.
and worldwide market prices, the commercial reasonableness of the sales
price, the timing, quantity, and amount of the sale, whether the
merchandise was resold at a significant loss, the total costs borne by the
U.S. importer, discrepancies found at verification, inconsistency with
respondent's normal business practices, and comparison with other price
data from U.S. Customs. China Processed asserts that the petitioners'
allegation relies on only a few non-dispositive factors that do not
adequately address the "totality of the circumstances" in this case.
Moreover, China Processed claims that the petitioners' allegation that
China Processed's sales price was commercially unreasonable because it was
too high compared to that of other respondents or other foreign producers
for the U.S. market has been rejected by the Department in previous cases.
Accordingly, China Processed advocates the rejection of the petitioners'
argument by the Department.


Department's Position:

Under section 351.213(e) of the Department's regulations, an
administrative review normally will cover, as appropriate, sales, exports,
or entries of the subject merchandise made during the particular period
under review. While it is the Department's normal practice to calculate
margins based upon entries made during the POR, our regulations provide
some flexibility in this matter, and we may depart from the normal
practice when circumstances warrant. See Certain Welded Carbon Steel Pipes
and Tubes from Thailand: Final Results of Antidumping Duty Administrative
Review, 63 FR 55578, 55589 (October 16, 1998).

In this review, China Processed sold and exported the subject merchandise
during the POR and placed information on the record demonstrating that
this sale entered the Customs Territory of the United States shortly after
the POR. This transaction was a single export price sale and corresponding
entry. Because we are able to tie with little or no extra expenditure of
resources the sale to the entry in this case, we are able to calculate a
margin and will be able to issue entry-specific liquidation instructions
to the Customs Service. Because at this time we have available resources
to make the calculation and have accurate and timely information on the
record for this single export price sale and corresponding entry,
circumstances warrant concluding this review and assessing antidumping
duties on the entry of this merchandise.

With regard to the petitioners' argument that China Processed's sale was
not commercially viable, the Department has repeatedly refused to
determine that sales are not bona fide without sufficient evidence
concerning the totality of circumstances that indicates that the sale is
not bona fide. The Department's practice in this matter is to consider,
inter alia, factors such as timing, sale price, transportation costs,
other expenses borne by the importer and whether the merchandise was
resold by the importer at a loss to determine whether a sale was a bona
fide arm's-length transaction. See American Silicon Technologies v. United
States, 110 F Supp. 2d 992, 996 (CIT 2000). In the instant review, the
petitioners have not provided sufficient evidence addressing each of the
above-mentioned factors. Moreover, the Department has ruled that single
sales, even those involving small quantities, are not inherently
commercially unreasonable and do not necessarily involve selling practices
atypical of the parties' normal selling practices. See Plate from Romania
at 47233. In addition, the Department has previously determined that a
bona fide sale can occur despite high prices. See OCTG at Comment 1 of the
Decision Memorandum and Paint Brushes at Comment 2 of the Decision
Memorandum. Because the record does not contain sufficient evidence
regarding the Department's totality-of-the-circumstances test, and in the
absence of other evidence that the sale was not bona fide, we determine
that the application of total facts available, as suggested by the
petitioners, is not warranted. 

Comment 11: Use of China Processed's Factor Data

The petitioners argue that the Department should reject the factors of
production data for China Processed's sale under review and instead rely
on the facts available for the final results. According to the
petitioners, even after the Department's verification, the production data
for China Processed's supplier, Yu Xing, is flawed and unreliable. Based
on the petitioners' reconciliation of the production data, the petitioners
insist that Yu Xing's production records fail to reveal sufficient
production of the relevant control number to fill its purported U.S.
shipment during the POR. Moreover, the petitioners' analysis shows that a
discrepancy remains in Yu Xing's reporting of production of the same size
can as the U.S. sale, further undermining the reliability of Yu Xing's
data. The petitioners also point to unexplained product control numbers
first identified at verification and Yu Xing's pre-verification "minor
correction" that would result in fundamental changes of all of Yu Xing's
data as further cause for deeming the response unreliable. Given these
outstanding problems, despite the Department's repeated requests for
information and conduct of verification, the petitioners contend that
there is sufficient basis for the Department to determine that China
Processed failed to provide reliable data in a timely manner and thus has
impeded the review, forcing the Department to apply facts available in the
final results.

China Processed argues that the Department should continue to use Yu
Xing's production data because it was verified to be accurate. China
Processed responds to the petitioners' analysis by providing its own
reconciliation of the production data. According to this information, the
petitioners' analysis is based on several input errors based on a
misreading of Yu Xing's production data. After correcting the petitioners'
errors, China Processed demonstrates that its verification documents
reconcile to the reported production data in its response. With regard to
Yu Xing's reporting of control numbers, China Processed states that it
reported all product control numbers used in its accounting system. The
product codes identified by the petitioners, China Processed explains, are
only internal production numbers that do not appear on invoices or
financial records. 

Department's Position:

As discussed in the verification report, we successfully reconciled Yu
Xing's production data and found no discrepancies. The petitioners' claims
are based, as China Processed points out, on erroneous data entered in
their spreadsheet used for analysis. Further, Verification Exhibit 6,
which includes pages from Yu Xing's finished goods inventory ledger as
segregated by product, supports China Processed's statement that the
product control numbers used in the accounting system were properly
reported. Thus, we have no basis to consider Yu Xing's production or
product identification data to be unreliable. 

The petitioners have relied on a control number-based analysis for many
of their claims regarding the unreliability of Yu Xing's data. The
petitioners acknowledge the pre-verification correction of this
information, but claim it resulted in a pervasive revision of the factors
of production data (see Petitioners' April 6, 2001, case brief at page 10,
footnote 19). This statement is incorrect. The per-unit factors of
production data included in the March 5, 2001, submission are, in nearly
every case, virtually identical to the per-unit factors of production data
used in the preliminary results. As explained in the October 31, 2000,
memorandum accompanying China Processed's preliminary results
calculations, we had recalculated all of Yu Xing's per-unit material and
energy factors of production based on Yu Xing's response data submitted
prior to that time. We stated that our recalculations were consistent with
data China Processed and Yu Xing had already submitted. Yu Xing's March 5,
2001, revisions effectively confirmed our own recalculations, rather than
cast doubt on the questionnaire response. Our verification findings
supported these per-unit factor amounts. Accordingly, we have continued to
rely on Yu Xing's data for the review final results and find no basis to
apply facts available for any part of China Processed's response. 

Comment 12: Raoping's Labor Consumption Figure

Raoping's supplier, Raoping Yucun, did not include the labor factor for
management employees in its reporting of labor factors (see September 29,
2000, Raoping Yucun Verification Report at page 7). In the preliminary
results, we did not make an adjustment for this labor factor. 

The petitioners argue that, if the Department continues to classify
personnel expenses as labor expenses in the calculation of factory
overhead or SG&A ratios (see Comment 4 above), then the Department must
increase Raoping's labor consumption figure to include factory management. 

Raoping responds that the Department should follow the preliminary
results methodology and continue to treat factory management as part of
factory overhead or SG&A, consistent with the methodology applied in
"numerous" other proceedings.

Department's Position:

Based on further analysis of the financial statements used to calculate
the factory overhead and SG&A ratios for the surrogate value calculation,
we have determined that a portion of the Himalya expenses classified as
SG&A included "Staff Expenses and Welfare." For the final results, we have
reclassified this item as part of the labor expense used in the
denominator of our ratio calculations, and revised the Himalya factory
overhead, SG&A, and profit ratios accordingly. Our review of the other two
financial statements indicates that none of the expenses included in the
factory overhead and SG&A expenses for the numerator of the ratio
calculation are likely to include labor or personnel expenses.

Because we now find that it is unlikely that any personnel expenses are
included in factory overhead or SG&A, we have adjusted the reported labor
factors for Raoping to include an estimate for the unreported management
and staff personnel, based on information developed at verification.
Although not briefed by any party, we also found that Gerber's reported
labor factors did not include labor for employees such as management,
office staff, and growing technicians. (See October 2, 2000, Gerber
Verification Report at page 11.) Accordingly, we have also adjusted
Gerber's labor factors based on our verification results. The specifics of
our adjustments are described in the memoranda attached to our final
results margin calculations for Raoping and Gerber, respectively.

Recommendation

Based on our analysis of the comments received, we recommend adopting all
of the above positions. If these recommendations are accepted, we will
publish the final results of these reviews and the final weighted-average
dumping margins for the reviewed firms in the Federal Register.


Agree_____ Disagree_____ 





______________________

Faryar Shirzad
Assistant Secretary 
for Import Administration


______________________

(Date)