[Federal Register Volume 63, Number 150 (Wednesday, August 5, 1998)]
[Notices]
[Pages 41794-41801]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-20912]


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DEPARTMENT OF COMMERCE

International Trade Administration
[A-570-851]


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

AGENCY: Import Administration, International Trade Administration, 
Department of Commerce.

EFFECTIVE DATE: August 5, 1998.

FOR FURTHER INFORMATION CONTACT: David J. Goldberger or Kate Johnson, 
Import Administration, International Trade Administration, U.S. 
Department of Commerce, 14th Street and Constitution Avenue, N.W., 
Washington, D.C. 20230; telephone: (202) 482-4136 or (202) 482-4929, 
respectively.

The Applicable Statute

    Unless otherwise indicated, all citations to the Tariff Act of 
1930, as amended (``the Act''), are references to the provisions 
effective January 1, 1995, the effective date of the amendments made to 
the Act by the Uruguay Round Agreements Act (``URAA''). In addition, 
unless otherwise indicated, all citations to the Department of Commerce 
(``Department'') regulations are to the regulations at 19 CFR Part 351, 
62 FR 27296 (May 19, 1997).

Preliminary Determination

    We preliminarily determine that certain preserved mushrooms 
(``mushrooms'') from the People's Republic of China are being, or are 
likely to be, sold in the United States at less than fair value 
(``LTFV''), as provided in section 733 of the Act. The estimated 
margins of sales at LTFV are shown in the ``Suspension of Liquidation'' 
section of this notice.

Case History

    Since the initiation of this investigation (Notice of Initiation of 
Antidumping Duty Investigations: Certain Preserved Mushrooms from 
Chile, India, Indonesia, and the People's Republic of China, (63 FR 
5360, February 2, 1998) (``Notice of Initiation'')), the following 
events have occurred:
    During January and February 1998, the Department requested 
information from the U.S. Embassy in the People's Republic of China 
(``PRC'') to identify producers/exporters of the subject merchandise.
    On February 27, 1998, the United States International Trade 
Commission (``ITC'') notified the Department of its affirmative 
preliminary injury determination in this case.
    Also, on February 27, 1998, the Department issued an antidumping 
questionnaire to the China Chamber of Commerce for Import & Export of 
Foodstuffs, Native Produce, and Animal By-Products (the ``Chamber'') 
and the Ministry of Foreign Trade and Economic Cooperation (``MOFTEC'') 
with instructions to forward the questionnaire to all producers/
exporters of the subject merchandise and that these companies must 
respond by the due dates. During February and March 1998, we sent 
courtesy copies of the antidumping duty questionnaire to the following 
companies identified as possible exporters/producers of the subject 
merchandise during the POI:

Shanghai Maling Canned Food
Fuzhou Cannery
Chin Huay Food Co. (HK) Ltd.
China Ningbo Canned Food
Zhang Zhou General Canned Food
Xia Men Cannery
Raoping Tinned Food Factory
Ruian Canned Factory
Yue Qin Canned Food Factory
Wenzhou Wanli Food Co. Ltd.
Glory Land Food Industrial Co.
Ning De Cannery
Shansha Cannery
Xin an Jiang Canned Food
Cangxi Cannery
Ba Zhong Cannery
Chongqing Cannery
Tung Chun Company
Nang Jin Cannery
Mei Wei Foods Industry Co. Ltd.
Dongguan Canning Factory
Cangban Canned Food Factory
Cofco (Longhai) Food Inc.
Longhai Senox Food Industry Ltd.
Pinghe Canned Factory
Fujian Tiand Food Drink Co.
Shanghai Foreign Trade Xian You
Fuan Canned Food Factory
Xibin Overseas Chinese Canned
Dongya Food Company
Fujian Zhaoan Canned Food
Zhanghou Xiancheng Canned
Zhang Huaqing Canned Food
Zishan Food Canning Plant
Gerber Food (Yunnan) Food Co.
Jiufa Edible Fungus Co. Ltd.
Xiamen Jiahua Export and Import Trading Co. Ltd.
Xiamen Gulong Import Export Co., Ltd.
Bazhong Canned Food Factory
Beiliu Canned Food Factory
Dangdong Canned Food Import & Export Co.
Dayi Brewery
Dongqing Canned Food Processing Factory
Fu'an Kangcuo Cereals & Oils Management Station
Fujian Changshan Huaqiao Canned Food Processing Factory
Fujian Zhangzhou Canned Food Factory
Hebei Edible Fungus Research Institute
Hunan Changsha Canned Food Factory
Jiangsu Rugao Canned Food Factory
Chifeng Fuyuan Cereals & Oils Co.
Fuzhou Native Produce & Animal By-Products Import and Export Co.
Guangdong Heshan Foodstuffs Import & Export Corp.
Beijing Foreign Trade Food Corp.
China National Processed Food Import & Export Corp.
Chengdu Native Produce Import & Export Corp.
Shantou Foodstuffs Import & Export Corp.
Shanghai Cereals & Oil Trade Co.
Guangdong Maoming Native Produce Import & Export Corp.
Henan Native Produce Import and Export Corp.

[[Page 41795]]

Qingdao Cereals, Oils & Foodstuffs Import and Export Corp.

    On March 30, 1998, the Department issued a notice setting aside a 
period for interested parties to raise issues regarding product 
coverage. (See Certain Preserved Mushrooms from Chile, India, 
Indonesia, and the People's Republic of China: Comments Regarding 
Product Coverage, 63 FR 16971 (April 7, 1998). No parties to this 
investigation commented on product coverage.
    During the period March through June 1998, the Department received 
questionnaire responses from (1) China Processed Food Import & Export 
Company (``China Processed'');
    (2) Jiangsu Cereals, Oils & Foodstuffs Group Import & Export 
Corporation (``Jiangsu'');
    (3) Shenzhen Cofry Cereals, Oils, & Foodstuffs Company, Ltd. 
(``Shenzhen Cofry''); (4) Gerber (Yunnan) Food Co.; (5) Fujian 
Provincial Cereals, Oils & Foodstuffs Import & Export Corp.;
    (6) Putian Cannery Fujian Province, Xiamen Gulong Import & Export 
Co., Ltd.; (7) General Canned Foods Factory of Zhangzhou; (8) Zhejiang 
Cereals, Oils & Foodstuffs Import & Export Corp.; (9) Shanghai 
Foodstuffs Import & Export Corp.; (10) Canned Goods Co. of Raoping; and
    (11) Xiamen Jiahua Import & Export Trading Company, Ltd. (``Xiamen 
Jiahua''). In addition, the Department received letters from Beilu 
Canned Food Factory and Longhai Senox, Ltd., each stating that it did 
not sell the subject merchandise to the United States during the second 
half of 1997.
    On April 13, 1998, the Department invited interested parties to 
provide publicly available information (``PAI'') for valuing the 
factors of production and for surrogate country selection. We received 
responses from the interested parties on May 27, 1998, and additional 
comments on June 4, 1998.
    On April 14, 1998, pursuant to section 777A(c) of the Act, the 
Department determined that, due to the large number of exporters/
producers of the subject merchandise, it would limit the number of 
mandatory respondents in this investigation. See ``Respondent 
Selection'' section below.
    On April 20, 1998, Gerber requested that it be considered a 
voluntary respondent in this investigation. On April 28, 1998, we 
informed Gerber that, due to administrative resource constraints, we 
would not accept voluntary respondents unless one of the designated 
mandatory respondents elected not to respond to the Department's 
questionnaire.
    On May 1, 1998, pursuant to section 733(c)(1)(A) of the Act, the 
petitioners made a timely request to postpone the preliminary 
determination for forty days. We granted this request and, on May 8, 
1998, we postponed the preliminary determination until no later than 
July 27, 1998. (See 63 FR 27264, May 18, 1998).
    On June 5, 1998, the respondents requested that the PRC be treated 
as a market economy in this investigation, and that the PRC mushroom 
industry be considered a market-oriented industry (``MOI''). The 
Department issued a MOI questionnaire to the PRC respondents on June 
19, 1998, and the respondents submitted their responses on July 17, 
1998. Treatment of both of these claims for the preliminary 
determination is discussed below under ``Nonmarket Economy Country and 
Market-Oriented Industry Status.''
    On June 17, 1998, the petitioners alleged that critical 
circumstances exist with respect to imports of mushrooms from the PRC. 
Accordingly, pursuant to section 732(e) of the Act, on June 19, 1998, 
the Department requested information regarding shipments of mushrooms 
for the period January 1996 to July 1998 from all mandatory respondents 
participating in this investigation. We received the requested 
information on July 6, 1998. The critical circumstances analysis for 
the preliminary determination is discussed below under ``Critical 
Circumstances.''

Postponement of Final Determination and Extension of Provisional 
Measures

    Pursuant to section 735(a)(2) of the Act, on July 16, 1998, the 
mandatory PRC respondents requested that, in the event of an 
affirmative preliminary determination in this investigation, the 
Department postpone its final determination until not later than 135 
days after the date of the publication of an affirmative preliminary 
determination in the Federal Register. On July 27, 1998, these parties 
amended their request to agree to extend the provisional measures to 
not more than six months. In accordance with 19 CFR 351.210(b), because 
(1) our preliminary determination is affirmative, (2) the requesting 
exporters account for a significant proportion of exports of the 
subject merchandise, and (3) no compelling reasons for denial exist, we 
are granting the respondents' request and are postponing the final 
determination until no later than 135 days after the publication of 
this notice in the Federal Register. Suspension of liquidation will be 
extended accordingly.

Scope of Investigation

    For purposes of this investigation, the products covered are 
certain preserved mushrooms whether imported whole, sliced, diced, or 
as stems and pieces. The preserved mushrooms covered under this 
investigation are the species Agaricus bisporus and Agaricus bitorquis. 
``Preserved mushrooms'' refer to mushrooms that have been prepared or 
preserved by cleaning, blanching, and sometimes slicing or cutting. 
These mushrooms are then packed and heated in containers including but 
not limited to cans or glass jars in a suitable liquid medium, 
including but not limited to water, brine, butter or butter sauce. 
Preserved mushrooms may be imported whole, sliced, diced, or as stems 
and pieces. Included within the scope of the investigation are 
``brined'' mushrooms, which are presalted and packed in a heavy salt 
solution to provisionally preserve them for further processing.
    Excluded from the scope of this investigation are the following: 
(1) all other species of mushroom including straw mushrooms; (2) all 
fresh and chilled mushrooms, including ``refrigerated'' or ``quick 
blanched mushrooms;'' (3) dried mushrooms; (4) frozen mushrooms; and 
(5) ``marinated,'' ``acidified'' or ``pickled'' mushrooms, which are 
prepared or preserved by means of vinegar or acetic acid, but may 
contain oil or other additives.
    The merchandise subject to this investigation is classifiable under 
subheadings 2003.10.27, 2003.10.31, 2003.10.37, 2003.10.43, 2003.10.47, 
2003.10.53, and 0711.90.4000 of the Harmonized Tariff Schedule of the 
United States (``HTS''). Although the HTS subheadings are provided for 
convenience and Customs purposes, the written description of the 
merchandise under investigation is dispositive.

Period of Investigation

    The period of this investigation (``POI'') comprises each 
exporter's two most recent fiscal quarters prior to the filing of the 
petition.

Respondent Selection

    The Department determined that the resources available to it for 
this investigation and the three companion mushroom investigations 
limited our ability to analyze any more than the responses of the three 
largest exporters/producers of the subject merchandise in this 
investigation. Based on Section A questionnaire responses, the 
Department selected the three largest exporters to be the mandatory 
respondents in this proceeding: China Processed (including its 
affiliated

[[Page 41796]]

exporter, Xiamen Jiahua), Jiangsu, and Shenzhen Cofry. (See 
``Memorandum from the Team to Louis Apple dated April 14, 1998).
    Subsequently, Jiangsu reported in its questionnaire responses that 
it purchases the subject merchandise from Mei Wei Foods Industrial Co. 
Ltd. (``Mei Wei'') and resells the merchandise to Tak Fat Trading 
Company (``Tak Fat''), a Hong Kong trading company, which owns Mei Wei. 
In submissions separate from Jiangsu, Tak Fat and Mei Wei provided the 
same information. According to the questionnaire responses and Tak 
Fat's letters, Tak Fat negotiates the sales prices with the ultimate 
U.S. customer, and controls the production of Mei Wei, its wholly-owned 
PRC affiliate. Jiangsu acts only as an intermediary in order to 
facilitate the export of the merchandise from the PRC and arrange the 
shipment of the subject merchandise from the PRC. Under these 
circumstances, we find that Tak Fat is the actual exporter and 
appropriate respondent. Thus, our analysis for purposes of the 
preliminary determination was based on Tak Fat's sales during the POI, 
which included the sales initially reported by Jiangsu sourced from Mei 
Wei, and the other mandatory exporters and their respective suppliers. 
As the supplemental questionnaire responses include consolidated data 
from Tak Fat and Jiangsu, the Department was able to analyze Tak Fat's 
sales based on submitted data.

Nonmarket Economy Country and Market Oriented Industry Status

    The Department has treated the PRC as a nonmarket economy country 
(``NME'') in all past antidumping investigations (see, e.g., Final 
Determination of Sales at Less Than Fair Value: Silicon Carbide from 
the People's Republic of China, 59 FR 22585 (May 2, 1994) (``Silicon 
Carbide'') and Final Determination of Sales at Less Than Fair Value: 
Furfuryl Alcohol from the People's Republic of China, 60 FR 22545 (May 
8, 1995) (``Furfuryl Alcohol'')). A designation as an NME remains in 
effect until it is revoked by the Department (see section 771(18)(C) of 
the Act).
    On June 5, 1998, the respondents made a claim that economic changes 
in the PRC warrant revocation of PRC's NME status. Because the 
respondents' submission does not provide sufficient support for their 
claim for market economy status and does not address a number of 
important factors for determining market economy status (see, 
Memorandum from the Team to Lou Apple, dated July 27, 1998), we have 
preliminarily determined to continue to treat the PRC as an NME.
    In addition, the respondents have claimed that their material 
inputs are acquired at market prices and that, accordingly, the 
Department should determine that the PRC mushroom industry is a MOI and 
should rely on the actual PRC prices for valuing these inputs. Because 
the supporting information for this claim was submitted by respondents 
on July 17, 1998, less than two weeks prior to the preliminary 
determination, we did not have adequate time to analyze the information 
for purposes of the preliminary determination. However, we will examine 
the respondents' MOI claim for purposes of the final determination.

Separate Rates

    Each respondent has requested a separate company-specific rate. 
China Processed is wholly owned by China National Cereals, Oils, & 
Foodstuffs Import & Export Corp., which in turn is owned by ``the whole 
people.'' Its affiliated exporter Xiamen Jiahua is a domestic joint 
venture between China National Cereals, Oils & Foodstuffs Corp., and 
Xiamen Special Economic Trade Group Cereals, Oils, & Foodstuffs Import 
& Export Company. Both of these companies are also owned by ``the whole 
people.'' Shenzhen Cofry is a limited liability company owned by the 
China Ocean Helicopter Company and the Anhui Cereals, Oils, & 
Foodstuffs Import & Export Group, which, in turn, are both owned by 
``the whole people.'' Tak Fat is a Hong Kong trading company which is 
wholly-owned by Hong Kong entities. Therefore, we determine that no 
separate rates analysis is required for this exporter.
    As stated in Silicon Carbide and Furfuryl Alcohol, ownership of the 
company by ``all the people'' does not require the application of a 
single rate. Accordingly, the above-mentioned companies named as 
mandatory respondents as well as the companies who submitted a Section 
A response are eligible for consideration of a separate rate.
    The Department's separate rate test is not concerned, in general, 
with macroeconomic/border-type controls, e.g., export licenses and 
quotas and minimum export prices, particularly if these controls are 
imposed to prevent dumping. The test focuses, rather, on controls over 
the investment, pricing, and output decision-making process at the 
individual firm level. See Certain Cut-to-Length Carbon Steel Plate 
from Ukraine: Final Determination of Sales at Less than Fair Value, 62 
FR 61754, 61757, (November 19, 1997); Tapered Roller Bearings and Parts 
Thereof, Finished and Unfinished, from the People's Republic of China: 
Final Results of Antidumping Duty Administrative Review, 62 FR 61276, 
61279, November 17, 1997; and Honey from the People's Republic of 
China: Preliminary Determination of Sales at Less than Fair Value, 60 
FR 14725, 14726, (March 20, 1995).
    To establish whether a firm is sufficiently independent from 
government control to be entitled to a separate rate, the Department 
analyzes each exporting entity under a test arising out of the Final 
Determination of Sales at Less Than Fair Value: Sparklers from the 
People's Republic of China, 56 FR 20588 (May 6, 1991) and amplified in 
Silicon Carbide. Under the separate rates criteria, the Department 
assigns separate rates in NME cases only if respondents can demonstrate 
the absence of both de jure and de facto governmental control over 
export activities.
1. Absence of De Jure Control
    The respondents have placed on the record a number of documents to 
demonstrate absence of de jure control, including the ``Foreign Trade 
Law of the People's Republic of China'' and the ``Law of the People's 
Republic of China on Industrial Enterprises Owned By the Whole 
People.''
    In prior cases, the Department has analyzed these laws and found 
that they establish an absence of de jure control. (See, e.g., Notice 
of Final Determination of Sales at Less Than Fair Value: Certain 
Partial-Extension Steel Drawer Slides with Rollers from the People's 
Republic of China, 60 FR 54472 (October 24, 1995); see also Furfuryl 
Alcohol.) We have no new information in this proceeding which would 
cause us to reconsider this determination.
    According to the respondents, exports of mushrooms are also 
affected by quota allocations under a December 17, 1997, Notice 
Regarding Printing and Distributing ``List of Commodities Subject 
Export License Administration and Issuance of Licenses at Different 
Levels'' and Relevant Issues issued by MOFTEC (``Notice''). The 
respondents claim that, although the export license and quota 
allocation regulations and procedures which applied to sales of the 
subject merchandise during the POI were promulgated in 1996, they are, 
for all intents and purposes, the same as those set forth in the 1997 
version. Under the Notice, 143 items are subject to export licensing 
controls with three categories of control--(1) ``controlled''; (2) 
``less controlled,'' and (3) the ``least

[[Page 41797]]

controlled'' merchandise. Mushrooms fall under the ``least controlled'' 
category.
    The respondents describe the quota process as follows. MOFTEC 
distributes quota amounts to the provinces and municipalities and 
exporters (except those located in Beijing, which are supposed to apply 
to MOFTEC directly). The quota process is administered through export 
licenses required for the export of the subject merchandise. Neither 
the quota allocation process nor the export licensing process involve 
any PRC government participation in the setting of export prices.
    Global quota amounts are determined by MOFTEC based on (1) 
international market demand/supply; (2) the previous year's exports; 
(3) Chamber proposals; and (4) the suggestions of PRC Provincial Trade 
Commissions which take into account the requests of mushroom exporters 
and their previous year's exports as well as requests of other PRC 
exporters who wish to export, but have not previously received a quota. 
The Commissions are comprised of local government authorities involved 
with foreign trade of their provinces. They are separate from MOFTEC, 
receiving neither funding nor administration from MOFTEC. Once a quota 
is received, a company may obtain an export license from the applicable 
Commissions' Trade Administration Import and Export Divisions after it 
has a commitment from a foreign buyer. Copies of the quotas are sent to 
MOFTEC and the Chamber.
    The Commissions grant the export licenses based on the quotas 
allocated to each company. Records are kept of each individual 
company's quota and the quantities it has exported so that the 
Commissions can determine when an individual company has reached its 
allocated quota.
    Furthermore, according to the respondents, the concept of the 
``minimum price'' floor referenced in the Memorandum on Minimum Price 
for Export of Canned Mushroom Products is an agreed minimum price only. 
The exporters claim to have the autonomy to set the price at whatever 
level they wish without government interference. The memorandum 
referenced above did not set forth minimum prices established by the 
Chamber or the PRC government but, rather, established minimum prices 
that were discussed among, and agreed to, by the member companies of 
the Chamber that were involved in the canned mushroom business.
    The respondents describe the process for establishing the minimum 
prices as follows: (1) member companies request the Chamber convene a 
meeting of all the exporters; (2) the Chamber provides information on 
domestic productivity and international markets during this meeting; 
and (3) the member companies then agree to minimum prices and 
memorialize the agreement in the minutes to the meeting. Therefore, 
according to the respondents, the minimum price is an agreement among 
the exporters and a means by which exporters can insure that no 
exporter is selling subject merchandise lower than what they, as an 
industry, consider to be the fair market price. In addition, the 
minimum price is considered a means of ``self-regulation'' among the 
industry to prevent unfair competition.
    The quota system in the instant investigation operates on the basis 
of transparent and well-defined rules. Companies are free to 
independently negotiate export prices with their customers above the 
floor price, which the exporting companies themselves set. MOFTEC has 
claimed that it does not involve itself in the price-setting of 
companies that export mushrooms. Thus, the allocation of the export 
quota is arrived at in a competitive forum, and separate prices are set 
by each enterprise with industry input regarding the floor price and in 
open competition with respect to the final price.
    In past cases, the Department has determined that there is an 
absence of government control over export pricing and marketing 
decisions of firms even though there may be some government involvement 
with respect to the export of products subject to investigation. See 
Preliminary Determination of Sales at Less Than Fair Value: Honey from 
the People's Republic of China, 60 FR 14725, March 20, 1995.
    Accordingly, we preliminarily determine that, within the preserved 
mushroom industry, there is an absence of de jure government control 
over exporting pricing and marketing decisions of firms.
2. Absence of De Facto Control
    As stated in previous cases, there is some evidence that certain 
enactments of the PRC central government have not been implemented 
uniformly among different sectors and/or jurisdictions in the PRC. (See 
Silicon Carbide and Furfuryl Alcohol.) Therefore, the Department has 
determined that an analysis of de facto control is critical in 
determining whether respondents are, in fact, subject to a degree of 
governmental control which would preclude the Department from assigning 
separate rates.
    The Department typically considers four factors in evaluating 
whether each respondent is subject to de facto governmental control of 
its export functions: (1) whether the export prices are set by, or 
subject to, the approval of a governmental authority; (2) whether the 
respondent has authority to negotiate and sign contracts, and other 
agreements; (3) whether the respondent has autonomy from the government 
in making decisions regarding the selection of its management; and (4) 
whether the respondent retains the proceeds of its export sales and 
makes independent decisions regarding disposition of profits or 
financing of losses (see Silicon Carbide and Furfuryl Alcohol).
    China Processed/Xiamen Jiahua and Shenzhen Cofry each asserted the 
following: (1) it establishes its own export prices; (2) it negotiates 
contracts without guidance from any governmental entities or 
organizations; (3) it makes its own personnel decisions; and (4) it 
retains the proceeds of their export sales, uses profits according to 
its business needs, and has the authority to sell its assets and to 
obtain loans. Additionally, the three respondents' questionnaire 
responses indicate that company-specific pricing during the POI does 
not suggest coordination among exporters. This information supports a 
preliminary finding that there is an absence of de facto governmental 
control of the export functions of these companies. Consequently, we 
preliminarily determine that these exporters have met the criteria for 
the application of separate rates.

Margins for Exporters Whose Responses Were Not Analyzed

    For the responding companies that provided all the questionnaire 
responses requested of them and otherwise fully cooperated with the 
Department's investigation, but nonetheless, were not fully analyzed by 
the Department due to limited resources (see ``Respondent Selection'' 
section above), including Jiangsu, we are assigning the weighted-
average of the rates of the three fully analyzed companies, or a non-
adverse facts available rate. Companies receiving this rate are 
identified by name in the ``Suspension of Liquidation'' section of this 
notice.
    The parties who responded but were not analyzed have applied for 
separate rates, and provided information for the Department to consider 
in this request. Although the Department is unable, due to 
administrative constraints, to consider the requests for separate rates 
status, and to calculate a separate rate for each of these named 
parties, there has been no failure on the part of these

[[Page 41798]]

firms to provide requested information. Because it would not be 
appropriate for the Department to refuse to consider a request for an 
examination of separate rates status, and assign to the cooperative 
firms the rate for the noncooperative firms (which in this case is an 
adverse margin based on facts available), the Department has assigned a 
single calculated rate for these firms, which is a weighted-average of 
the rates of the three analyzed companies.

China-Wide Rate

    U.S. import statistics indicate that the total quantity and value 
of U.S. imports of mushrooms from the PRC is greater than the total 
quantity and value of mushrooms reported by all PRC exporters that 
submitted responses in this investigation. Given this discrepancy, it 
appears that not all exporters of PRC mushrooms responded to our 
questionnaire. Accordingly, we are applying a single antidumping 
deposit rate--the PRC-wide rate--to all exporters in the PRC, other 
than those specifically identified below under ``Suspension of 
Liquidation,'' based on our presumption that the export activities of 
the companies that failed to respond to the Department's questionnaire 
are controlled by the PRC government (see, e.g., Notice of Final 
Determination of Sales at Less Than Fair Value: Bicycles from the 
People's Republic of China, 61 FR 19026, April 30, 1996) (``Bicycles 
from the PRC'').
    As explained below, this PRC-wide antidumping rate is based on 
adverse facts available. Section 776(a)(2) of the Act provides that 
``if an interested party or any other person--(A) withholds information 
that has been requested by the administering authority; (B) fails to 
provide such information by the deadlines for the submission of the 
information or in the form and manner requested, subject to subsections 
(c)(1) and (e) of section 782; (C) significantly impedes a proceeding 
under this title; or (D) provides such information but the information 
cannot be verified as provided in section 782(i), the administering 
authority * * * shall, subject to section 782(d), use the facts 
otherwise available in reaching the applicable determination under this 
title.''
    Section 776(b) of the Act provides that adverse inferences may be 
used when a party has failed to cooperate by not acting to the best of 
its ability to comply with a request for information. The exporters 
that decided not to respond in any form to the Department's 
questionnaire failed to act to the best of their ability in this 
investigation. Further, absent a response, we must presume government 
control of these and all other PRC companies for which we cannot make a 
separate rates determination. Thus, the Department has determined that, 
in selecting from among the facts otherwise available, an adverse 
inference is warranted.
    As adverse facts available, we are assigning the highest margin in 
the petition, 198.63%, because the margins in the petition (as 
recalculated by the Department at initiation) were higher than any of 
the calculated margins.
    Section 776(c) of the Act provides that where the Department 
selects from among the facts otherwise available and relies on 
``secondary information,'' such as the petition, the Department shall, 
to the extent practicable, corroborate that information from 
independent sources reasonably at the Department's disposal. The 
Statement of Administrative Action accompanying the URAA, H.R. Doc. No. 
316, 103d Cong., 2d Sess. (1994) (hereinafter, the ``SAA''), states 
that ``corroborate'' means to determine that the information used has 
probative value. See SAA at 870.
    The petitioners methodology for calculating (``EP'') and normal 
value (``NV'') is discussed in the Notice of Initiation. To corroborate 
the petition's EP calculations, we compared the prices in the petition 
for three of the products to the prices submitted by respondents for 
the same mushroom style and container size. To corroborate the 
petitioners' NV calculations, we compared the petitioners' factor 
consumption and surrogate value data for those same three products to 
the data reported by the respondents for the most significant factors--
fresh mushrooms, cans, factory overhead, and selling, general, and 
administrative expenses, and the surrogate values for these factors in 
the petition to the values selected for the preliminary determination, 
as discussed below. Our analysis showed that the petitioners' data was 
either reasonably close to the data submitted by the respondents and 
the surrogate values chosen by the Department, or conservative (see 
Memorandum to the File dated July 27, 1998 (``Corroboration Memo''). 
Therefore, we find that the calculations set forth in the petition have 
probative value.

Fair Value Comparisons

    To determine whether sales of the subject merchandise by China 
Processed/Xiamen Jiahua, Tak Fat, and Shenzhen Cofry to the United 
States were made at LTFV, we compared the EP to the NV, as described in 
the ``Export Price'' and ``Normal Value'' sections of this notice, 
below. In accordance with section 777A(d)(1)(A)(i) of the Act, we 
compared POI-wide weighted-average EPs to weighted-average NVs. To 
value foreign brokerage and handling incurred in the PRC, we relied on 
the value used in the Bicycles from the PRC investigation.

Export Price

China Processed/Xiamen Jiahua
    We used EP methodology in accordance with section 772(a) of the 
Act, because the subject merchandise was sold directly to unaffiliated 
customers in the United States prior to importation and CEP methodology 
was not otherwise indicated. We calculated EP based on packed FOB or 
C&F prices to the first unaffiliated purchaser in the United States. 
Where appropriate, we made deductions from the starting price (gross 
unit price) for billing adjustments, inland freight from the plant/
warehouse to port of exit, brokerage and handling in the PRC, and ocean 
freight. Because domestic brokerage and handling and inland freight 
were provided by NME companies, we based those charges on surrogate 
rates from India. (See ``Normal Value'' section for further 
discussion). As China Processed and Xiamen Jiahua reported using market 
economy carriers for ocean freight, we valued this expense using the 
actual reported costs.

Tak Fat

    We used EP methodology in accordance with section 772(a) of the Act 
because the subject merchandise was sold directly to unaffiliated 
customers in the United States prior to importation and CEP methodology 
was not otherwise indicated. We calculated EP based on packed FOB or 
C&F prices, to the first unaffiliated purchaser in the United States. 
Where appropriate, we made deductions from the starting price (gross 
unit price) for inland freight from the plant/warehouse to port of 
exit, brokerage and handling in the PRC, and international freight, in 
accordance with section 772(c) of the Act. Because domestic brokerage 
and handling and inland freight were provided by NME companies, we 
based those charges on surrogate rates from India. As Tak Fat reported 
using market economy carriers for ocean freight, we valued this expense 
using the actual reported costs.

Shenzhen Cofry

    We used EP methodology in accordance with section 772(a) of the 
Act, because the subject merchandise was sold directly to unaffiliated 
customers in the United States prior to

[[Page 41799]]

importation and CEP methodology was not otherwise indicated. We 
calculated EP based on packed FOB or C&F prices to the first 
unaffiliated purchaser in the United States. Where appropriate, we made 
deductions from the starting price (gross unit price) for billing 
adjustments, inland freight from the plant/warehouse to port of exit, 
brokerage and handling in the PRC, and ocean freight. Because domestic 
brokerage and handling and inland freight were provided by NME 
companies, we based those charges on surrogate rates from India. As 
Shenzhen Cofry reported using market economy carriers for ocean 
freight, we valued this expense using the actual reported costs.

Normal Value

A. Surrogate Country
    Section 773(c)(4) of the Act requires the Department to value the 
NME producer's factors of production, to the extent possible, in one or 
more market economy countries that: (1) are at a level of economic 
development comparable to that of the NME, and (2) are significant 
producers of comparable merchandise. The Department has determined that 
India, Pakistan, Sri Lanka, Egypt, and Indonesia are countries 
comparable to the PRC in terms of overall economic development (see 
Memorandum dated February 23, 1998). According to the available 
information on the record, we have determined that both India and 
Indonesia meet the statutory requirements for an appropriate surrogate 
country for the PRC. For purposes of the preliminary determination, we 
have selected India as the surrogate country, based on the quality and 
contemporaneity of the currently available data. Accordingly, we have 
calculated NV using Indian values for the PRC producers, factors of 
production, except, as noted below, in certain instances where an input 
was sourced from a market economy and paid for in a market economy 
currency. We have obtained and relied upon PAI wherever possible.
B. Factors of Production
    In accordance with section 773(c) of the Act, we calculated NV 
based on factors of production reported by the companies in the PRC 
which produced mushrooms for the exporters which sold mushrooms to the 
United States during the POI. To calculate NV, the reported unit factor 
quantities were multiplied by publicly available Indian values, where 
possible.
    For Longhai Food, Inc. (``Longhai''), which supplied some of the 
merchandise sold by China Processed, Mei Wei, and Zhaoan Canned Food 
Factory (``Zhaoan''), which supplied some of the merchandise sold by 
Shenzhen Cofry, we recalculated the reported mushroom consumption 
factor for preserved mushroom produced from brined mushrooms, to an 
amount equivalent to consumption of fresh mushrooms, based on the 
difference between each producer's reported consumption of both types 
of mushrooms. We made this adjustment because we were unable to 
identify a surrogate value for brined mushrooms (see below).
    For those inputs (e.g., glass jars used by Longhai) that were 
sourced (either partially or totally) from a market economy and paid 
for in market economy currency, we used the actual price paid for the 
input to calculate the factors-based NV, in accordance with 19 CFR 
351.408(a)(1). As appropriate, for these imported materials, we 
calculated PRC brokerage and inland freight from the port to the 
factory using surrogate rates from India. We valued the remaining 
factors using PAI from India, except where noted below. Where a 
producer did not report the distance between the material supplier and 
the factory, as facts available, we used either the distance to the 
nearest seaport (if an import value was used as the surrogate value for 
the factor) or the farthest distance reported for a supplier, as facts 
available.
    Mei Wei claimed it obtained labels from a market economy source and 
paid market economy prices for this factor, but did not provide the 
necessary price data. Therefore, we have valued Mei Wei's label 
consumption based on the Indian surrogate value for labels. Dongya Food 
Co., Ltd., a supplier to Xiamen Jiahua, claimed that it consumed 
chlorine purchased from a market economy source. According to the 
single invoice submitted to support this claim, the material, sodium 
hypochloride, was purchased in November 1995--over one and a half years 
prior to the beginning of the POI. Given this long period between 
purchase and the POI, we have no basis to assume that the material in 
question was actually used during the POI, nor is it clear from the 
record that the sodium hypochloride purchased is the same as the 
chlorine reported as consumed. Therefore, we have not valued this input 
based on the submitted market economy price and, instead, relied on the 
surrogate value.
    The selection of the surrogate values applied in this determination 
was based on the quality, specificity, and contemporaneity of the data. 
As appropriate, we adjusted input prices to make them delivered prices. 
For those values not contemporaneous with the POI and quoted in a 
foreign currency, we adjusted for inflation using wholesale price 
indices published in the International Monetary Fund's International 
Financial Statistics. For a complete analysis of surrogate values, see 
the Preliminary Determination Valuation Memorandum from the team to the 
File (``Preliminary Determination Valuation Memorandum''), dated July 
27, 1998.
    We valued fresh mushrooms using the average unit value derived from 
the 1996-1997 annual reports from three Indian preserved mushroom 
producers for their purchases of fresh mushrooms. We were unable to 
identify an appropriate surrogate value for brined (provisionally 
preserved) mushrooms; thus, as facts available for the preliminary 
determination, we used the fresh mushroom value to value brined 
mushroom consumption but adjusted the reported brined mushroom 
consumption factor to an amount equivalent to a fresh mushroom 
consumption factor using an industry standard ratio. For salt and 
citric acid, we used a domestic price published in the commodity 
section of The Financial Express. For monosodium glutamate (``MSG''), 
vitamin C (ascorbic acid), tin cans and lids, glass jars, and labels, 
we used Indian import values from Monthly Statistics of the Foreign 
Trade of India (``Monthly Statistics''). To value chlorine, we used a 
value from the Final Determination of Sales at Less Than Fair Value: 
Coumarin from the PRC, (59 FR 66895, December 28, 1994), as found in 
the Department's Index of Factor Values for Use in Antidumping Duty 
Investigations Involving Products from the People's Republic of China. 
To value water consumed in the production process (i.e., water packed 
in cans or jars with the mushrooms), we relied on the publicly 
available tariff rates reported in the Second Water Utilities Data 
Book.
    Longhai, Zishan Cannery Canned Food Factory (``Zishan''), which 
also produced merchandise sold by China Processed, and Zhaoan Canned 
Food Factory (``Zhaoan''), which produced some of the merchandise sold 
by Shenzhen Cofry, reported that they resold scrap can material. For 
Longhai and Zishan, we made an offset deduction to the surrogate cost 
of production using an average unit value derived from 1997 U.S. import 
statistics. We used this U.S. value as facts available because we were 
unable to identify an appropriate surrogate value from a surrogate 
country. We were not able to make the same offset deduction

[[Page 41800]]

for Zhaoan because it did not report the necessary factor data. 
Longhai, Zishan, and Zhaoan, reported that they resold scrap mushrooms 
not consumed in the canning/jarring process. We were unable to identify 
an appropriate surrogate value for this material. As this factor does 
not appear to have a significant impact on the calculation of NV, we 
have not made an offset for scrap mushrooms in the preliminary 
determination.
    We valued labor based on a regression-based wage rate, in 
accordance with 19 CFR 351.408(c)(3).
    To value electricity, we used the 1996 electricity rates reported 
in an article ``All Charged Up Over the Cost of Power in India'' 
published in Business World in August 1996. We based the value of coal 
and diesel fuel on the import values from the Monthly Statistics.
    We based our calculation of factory overhead (which includes water 
consumed for rinsing and blanching mushrooms), SG&A expenses, and 
profit on data contained in the financial reports of three Indian 
producers of the subject merchandise (i.e., Agro Dutch Foods (India), 
Saptarishi Agro Industries, Ltd., and Transchem, Ltd.).
    To value truck freight rates, we used a 1994 rate from The Times of 
India. As we were unable to identify a surrogate value for inland water 
transportation, we valued boat and barge transportation using the 
surrogate value for truck freight. With regard to rail freight, we 
based our calculation on information from the Indian Railway Conference 
Association.
    The CAFC's decision in Sigma Corp. v. United States, 117 F. 3d 1401 
(CAFC 1997) requires that we revise our calculation of source-to-
factory surrogate freight for those material inputs that are based on 
CIF import values in the surrogate country. Therefore, we have added to 
CIF surrogate values from India a surrogate freight cost using the 
shorter of the reported distances from either the closest PRC port to 
the factory, or from the domestic supplier to the factory on an import-
specific basis.
    For the following reported packing materials: glue, tape, 
corrugated paper, wooden pallets, and shrink wrap, we used import 
values from the Monthly Statistics.

Critical Circumstances

    On June 17, 1998, the petitioners alleged that there is a 
reasonable basis to believe or suspect that critical circumstances 
exist with respect to imports of mushrooms from the PRC. In accordance 
with 19 CFR 351.206(c)(2)(i), since this allegation was filed earlier 
than the deadline for the Department's preliminary determination, we 
must issue our preliminary critical circumstances determination not 
later than the preliminary determination.
    Section 733(e)(1) of the Act provides that if a petitioner alleges 
critical circumstances, the Department will determine whether there is 
a reasonable basis to believe or suspect that:
    (A)(i) there is a history of dumping and material injury by reason 
of dumped imports in the United States or elsewhere of the subject 
merchandise, or
    (ii) the person by whom, or for whose account, the merchandise was 
imported knew or should have known that the exporter was selling the 
subject merchandise at less than its fair value and that there was 
likely to be material injury by reason of such sales, and
    (B) there have been massive imports of the subject merchandise over 
a relatively short period.
    In this investigation, the first criterion is satisfied. Brazil has 
levied antidumping duties against preserved mushrooms from the PRC. 
Brazil's antidumping duty order will be in force until January 2003. 
Therefore, we preliminarily determine that there is a history of 
dumping elsewhere of mushrooms by PRC producers/exporters. Because 
there is a history of dumping, it is not necessary to address whether 
the importer had knowledge that dumping was occurring and material 
injury was likely.
    Because we have preliminarily found that the first statutory 
criterion is met, we must consider the second statutory criterion: 
whether imports of the merchandise have been massive over a relatively 
short period. According to 19 CFR 351.206(h), we consider the following 
to determine whether imports have been massive over a relatively short 
period of time: (1) volume and value of the imports; (2) seasonal 
trends (if applicable); and (3) the share of domestic consumption 
accounted for by the imports.
    When examining volume and value data, the Department typically 
compares the export volume for equal periods immediately preceding and 
following the filing of the petition. Under 19 CFR 351.206(h), unless 
the imports in the comparison period have increased by at least 15 
percent over the imports during the base period, we will not consider 
the imports to have been ``massive.'' The Department examines shipment 
information submitted by the respondent or import statistics when 
respondent-specific shipment information is not available.
    To determine whether or not imports of subject merchandise have 
been massive over a relatively short period, we compared each of the 
mandatory respondent's export volume for the five months subsequent to 
the filing of the petition (January-May 1998) to that during the five 
months prior to the filing of the petition (August-December 1997). 
These periods were selected based on the Department's practice of using 
the longest period for which information is available from the month 
that the petition was submitted through the effective date of the 
preliminary determination. For the non-mandatory PRC exporters, we 
performed this analysis using import statistics and then subtracted the 
figures of the mandatory respondents. For all other producers/
exporters, we performed the analysis using import statistics.
    Based on our analysis, we preliminarily find that the increase in 
imports was greater than 15 percent with respect to the named 
respondents, the non-mandatory PRC exporters, and all other producers/
exporters.
    With regard to the seasonality issue, we were unable to discern a 
seasonal pattern for any of the mandatory respondents, or any other 
company, based on the information on the record. Furthermore, we were 
unable to consider the share of domestic consumption accounted for by 
the imports, pursuant to 351.206(h)(iii), because the available data 
did not permit such analysis.
    However, because there is a history of dumping of such or similar 
merchandise, and imports of mushrooms from the mandatory respondents, 
the respondents who were not analyzed, and the respondents who failed 
to submit a response have been massive over a relatively short period 
of time, we preliminarily determine that there is a reasonable basis to 
believe or suspect that critical circumstances exist with respect to 
mushrooms from the all mandatory respondents in this investigation as 
well as the non-mandatory respondents and all other producers/
exporters.
    We will make a final determination concerning critical 
circumstances when we make our final determination of sales at LTFV in 
this investigation.

Verification

    As provided in section 782(i) of the Act, we will verify all 
information relied upon in making our final determination.

Suspension of Liquidation

    In accordance with section 733(d) of the Act, we are directing the 
Customs Service to suspend liquidation of all

[[Page 41801]]

imports of subject merchandise that are entered, or withdrawn from 
warehouse, for consumption on or after 90 days prior to the date of 
publication of this notice in the Federal Register. We will instruct 
the Customs Service to require a cash deposit or the posting of a bond 
equal to the weighted-average amount by which the NV exceeds the EP, as 
indicated in the chart below. These suspension of liquidation 
instructions will remain in effect until further notice.

------------------------------------------------------------------------
                                      Weighted-                         
      Exporter/manufacturer        average margin         Critical      
                                     percentage        circumstances    
------------------------------------------------------------------------
China Processed Food I&E Co./              168.72  Yes.                 
 Xiamen Jiahua I&E Trading                                              
 Company, Ltd.                                                          
Tak Fat Trading Co...............          180.63  Yes.                 
Shenzhen Cofry Cereals, Oils, &            189.61  Yes.                 
 Foodstuffs Co., Ltd.                                                   
Gerber (Yunnan) Food Co..........          176.78  Yes.                 
Jiangsu Cereals, Oils &                    176.78  Yes.                 
 Foodstuffs Group Import & Export                                       
 Corporation.                                                           
Fujian Provincial Cereals, Oils &          176.78  Yes.                 
 Foodstuffs I&E Corp.                                                   
Putian Cannery Fujian Province...          176.78  Yes.                 
    Xiamen Gulong I&E Co., Ltd...          176.78  Yes.                 
General Canned Foods Factory of            176.78  Yes.                 
 Zhangzhou.                                                             
Zhejiang Cereals, Oils &                   176.78  Yes.                 
 Foodstuffs I&E Corp.                                                   
Shanghai Foodstuffs I&E Corp.....          176.78  Yes.                 
Canned Goods Co. of Raoping......          176.78  Yes.                 
PRC-wide Rate....................          198.63  Yes.                 
------------------------------------------------------------------------

    The PRC-wide rate applies to all entries of subject merchandise 
except for entries from exporters/factories that are identified 
individually above.

ITC Notification

    In accordance with section 733(f) of the Act, we have notified the 
ITC of our determination. If our final determination is affirmative, 
the ITC will determine before the later of 120 days after the date of 
this preliminary determination or 45 days after our final determination 
whether these imports are materially injuring, or threaten material 
injury to, the U.S. industry.

Public Comment

    Case briefs or other written comments in at least ten copies must 
be submitted to the Assistant Secretary for Import Administration no 
later than October 16, 1998, and rebuttal briefs, no later than October 
23, 1998. A list of authorities used and an executive summary of issues 
should accompany any briefs submitted to the Department. Such summary 
should be limited to five pages total, including footnotes. In 
accordance with section 774 of the Act, we will hold a public hearing, 
if requested, to afford interested parties an opportunity to comment on 
arguments raised in case or rebuttal briefs. Tentatively, the hearing 
will be held on October 28, 1998, at the U.S. Department of Commerce, 
14th Street and Constitution Avenue, N.W., Washington, D.C. 20230. 
Parties should confirm by telephone the time, date, and place of the 
hearing 48 hours before the scheduled time.
    Interested parties who wish to request a hearing, or to participate 
if one is requested, must submit a written request to the Assistant 
Secretary for Import Administration, U.S. Department of Commerce, Room 
1870, within 30 days of the publication of this notice. Requests should 
contain: (1) The party's name, address, and telephone number; (2) the 
number of participants; and (3) a list of the issues to be discussed. 
Oral presentations will be limited to issues raised in the briefs. If 
this investigation proceeds normally, we will make our final 
determination by 135 days after the publication of this notice in the 
Federal Register.
    This determination is issued and published in accordance with 
sections 733(d) and 777(i)(1) of the Act.

    Dated: July 27, 1998.
Joseph A. Spetrini,
Acting Assistant Secretary for Import Administration.
[FR Doc. 98-20912 Filed 8-4-98; 8:45 am]
BILLING CODE 3510-DS-P