65 FR 41432, July 5, 2000 A-570-831 Sunset Review Public Document MEMORANDUM TO: Troy H. Cribb Acting Assistant Secretary for Import Administration FROM: Jeffrey A. May Director Office of Policy SUBJECT: Issues and Decision Memo for the Sunset Review of Fresh Garlic from the People's Republic of China; Final Results Summary We have analyzed the substantive response of the interested parties participating in the expedited sunset review of the antidumping duty order covering fresh garlic from the People's Republic of China ("PRC"). We recommend that, for our expedited final results, 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 this expedited sunset review for which we received substantive responses by parties: 1. Likelihood of continuation or recurrence of dumping: A. Weighted-average dumping margin B. Volume of imports C. Other factors 2. Magnitude of the margin likely to prevail A. Margins from investigation History of Order: The antidumping duty order on fresh garlic from the PRC was published in the Federal Register on November 16, 1994 (59 FR 59209). (1) In the order, noting that no company had demonstrated it was entitled to a separate rate, the Department assigned a single weighted-average dumping margin of 376.67 percent ad valorem to all Chinese producers/exporters of subject merchandise as a PRC-wide rate. The Department has conducted three administrative reviews since the issuance of the order. (2) The order remains in effect for all producers and exporters of the subject merchandise. The Department has not conducted any duty-absorption investigations in this proceeding. Background: On December 1, 1999, the Department initiated a sunset review of the antidumping duty order on fresh garlic from the PRC (64 FR 67247) pursuant to section 751(c)(6)(A)(i) of the Tariff Act of 1930, as amended ("the Act"). On December 16, 1999, we received a Notice of Intent to Participate on behalf of the Fresh Garlic Producers Association ("FGPA"), (3) whose members consist of producers and processors of the domestic like product, within the deadline specified in 19 CFR 351.218(d)(1)(i) (1999) ("Sunset Regulations"). In its notice of intent to participate, the FGPA indicated that none of its members is affiliated with a Chinese producer/exporter or related to a U.S. importer of the subject merchandise. We received a complete substantive response on behalf of the FGPA on January 3, 2000, within the 30-day deadline specified in the Sunset Regulations under section 351.218(d)(3)(i). The FGPA claims interested- party status under sections 771(9)(C) and 771(9)(F) of the Act. The FGPA states that it intends to participate in the instant review and that most of its members have been involved in this proceeding since its inception. On January 3, 2000, we also received complete substantive responses from Shandong Foodstuffs Imp. and Exp. Corporation ("Shandong"), China Fruits, Vegetables and Aquatic Products Imp. and Exp. Company ("China Fruits"), Henen Cereals, Oils and Foodstuffs Imp. and Exp. Corporation ("Henen"), Jiangsu Cereals, Oils and Foodstuffs Imp. and Exp. Group Corporation ("Jiangsu"), and Anhui Cereals, Oils and Foodstuffs Imp. and Exp. Corporation ("Anhui") (hereinafter, collectively referred to as the "respondent interested parties"). Each of the respondent interested parties claims interested-party status under section 771(9)(A) of the Act as an exporter of the subject merchandise. Each of the respondent interested parties states that it did not adequately participate in the original investigation, that it was not party to any of the subsequent administrative reviews, and that it will not participate in the administrative review which the Department initiated in December 28, 1999. However, each of the respondent interested parties indicates that it is willing to participate in this review by providing any information requested by the Department to the best of its ability. Although the Department received substantive responses from the respondent interested parties, the Department explained in its adequacy determination that because, during the period 1994 through 1998, the average annual combined share of the respondent interested parties' exports of the subject merchandise vis à vis the total Chinese exports of the subject merchandise during the same period was significantly below the fifty-percent threshold provided for in section 351.218(e)(1)(ii)(A) of the Sunset Regulations, the Department determined the respondent interested parties' substantive responses to be inadequate. (4) Consequently, pursuant to section 351.218(e)(1)(ii)(C) of the Sunset Regulations, the Department determined to conduct an expedited, 120-day, sunset review of this order. The FGPA submitted its rebuttal comments on January 10, 2000. In accordance with section 751(c)(5)(C)(v) of the Act, the Department may treat a review as extraordinarily complicated if it is a review of a transition order (i.e., an order in effect on January 1, 1995). This review concerns a transition order within the meaning of section 751(c)(6)(C)(ii) of the Act. Therefore, on April 6, 2000, the Department determined that the sunset review of the antidumping duty order on fresh garlic from the PRC is extraordinarily complicated and extended the time limit for completion of the final results of this review until not later than June 28, 2000, in accordance with section 751(c)(5)(B) of the Act. (5) Discussion of the Issues In accordance with section 751(c)(1) of the Act, the Department conducted this sunset review to determine whether revocation of the antidumping duty order would be likely to lead to continuation or recurrence of dumping. Section 752(c) of the Act provides that, in making this determination, the Department shall consider the weighted-average dumping margins determined in the investigation and subsequent reviews and the volume of imports of the subject merchandise for the period before and the period after the issuance of the antidumping duty order. In addition, section 752(c)(3) of the Act provides that the Department shall provide to the International Trade Commission ("the Commission") the magnitude of the margin of dumping likely to prevail if the order is revoked. Below we address substantive responses and rebuttal comments of interested parties. 1. Likelihood of Continuation or Recurrence of Dumping Interested Parties' Substantive Responses and Rebuttal Comments: The FGPA argues that dumping of the subject merchandise will continue or recur should the Department revoke the order. In support of its argument, the FGPA contends that Chinese producers/exporters have persisted dumping the subject merchandise at levels above de minimis since the issuance of the order. The FGPA also claims that import volumes of the subject merchandise declined after the issuance of the order. (See January 3, 2000, Substantive Response of the FGPA at 1 - 15.) As to import volumes, the FGPA argues, that after the imposition of the order, imports of fresh garlic from the PRC drastically declined. The FGPA states that, for example, in the three-year period prior to the filing of the petition (1991-1993), the average annual import volume of the subject merchandise was 21 million pounds, whereas, in the three-year period subsequent to the issuance of the order (1995-1997), the annual average import volume of Chinese fresh garlic was only 542,000 pounds - less than 3 percent of the three-year average preceding the filing of the petition. In addition, the FGPA asserts that in 1993, the year immediately prior to the initiation of the investigation, Chinese producers/exporters exported 54 million pounds of fresh garlic to the United States. However, in the year immediately following the imposition of the order, 1995, the FGPA reports, the import volume of the subject merchandise declined to 1 million pounds - a decrease of more than 98 percent. Finally, the FGPA indicates that, over the five-year period preceding the year in which the sunset review was initiated, 1994-1998, average annual Chinese exports of the fresh garlic totaled 3 million pounds, much less than the pre- investigation volume of 54 million pounds in 1993. Id. With respect to the issue of continued dumping, the FGPA claims that the two final and one preliminary results of administrative reviews demonstrate that, since the imposition of the order, Chinese producers/exporters have continued to sell the subject merchandise at less than normal value. (6) The FGPA concludes that, therefore, the Department should determine that revocation of the order is inappropriate because dumping continued at levels above de minimis after the issuance of the order. Id. The respondent interested parties argue that revocation of the order would not cause continuation or recurrence of dumping. (7) The respondent interested parties contend that (1) their exports of the subject merchandise to the United States did not cease after the imposition of the order; (2) decreased import volumes of the subject merchandise after the issuance of the order were primarily due to Chinese producers/exporters' conscious effort to exploit more profitable opportunities in other markets; (3) revocation would help to stop illegal importation of Chinese fresh garlic in the United States; and (4) revocation would alleviate the shortage of fresh garlic supply in the United States and would prevent the U.S. producers from unjustly enriching themselves. (See the respondent interested parties' January 3, 2000, substantive responses at 4 - 9.) To be more specific, the respondent interested parties state that, in spite of a high weighted-average dumping margin imposed upon their exports of fresh garlic to the United States, their exports did not cease. Moreover, the respondent interested parties claim that, after bottoming- out in 1996, import volumes of the subject merchandise showed a increasing trend: from 74,014 kilograms ("kg") in 1996 to 170,790 kg in 1997 and 228,191 kg in 1998. Id. The respondent interested parties further argue that, when the Department evaluates declining import volumes in the context of a sunset review, it should take other valid reasons into the consideration which might explain a decrease in import volumes of the subject merchandise. The respondent interested parties emphasize one such reason - an emergence of more profitable opportunities in other world markets for Chinese producers/exporters of fresh garlic. In fact, according to the respondent interested parties, even if the order is revoked, the existence of relatively stable world markets available to the respondent interested parties would prevent them from flooding the U.S. market with their exports of fresh garlic because they would not simply stop exporting to other world markets. (8) Id. The respondent interested parties further contend that the current and high weighted-average dumping margin (376.67 percent) created an atmosphere which is conducive to illegal activities (such as circumvention of the order). (9) The respondent interested parties continues that, thus, revocation of the order would eliminate incidents in which Chinese fresh garlic is being smuggled into the United States. In addition, the respondent interested parties argue that the U.S. domestic producers of fresh garlic have been unable to satisfy increasing demand for garlic resulting in higher prices and unjust enrichment for the U.S. domestic garlic industry and that, consequently, revocation would ameliorate the fresh-garlic shortage in the United States. Id. In its rebuttal comments, the FGPA claims that the respondent interested parties' contention that their exports of fresh garlic from the PRC have increased since 1996 is meaningless because the recent exports involved are a mere fraction of the pre-initiation level. The FGPA claims that, therefore, nothing in respondent interested parties' substantive responses changes the FGPA's suggestions that import volume of the subject merchandise declined significantly and that dumping of Chinese fresh garlic in the United States continued after issuance of the order. (See the FGPA's January 10, 2000, rebuttal comments at 1 - 7.) The FGPA further asserts that the respondent interested parties' argument that, if the order is revoked, they would not flood the U.S. market because they have more profitable opportunities in other world markets is not credible because (1) when compared to a large U.S. market, third- country markets are insignificant, and (2) Chinese producers/exporters have a proven capacity to increase their exports of the subject merchandise in a very short period of time. The FGPA indicates, as an example, that Chinese producers/exporters increased exports of fresh garlic to the United States from 7.3 million pounds in 1992 to 53.7 million pounds in 1993. Id. The FGPA also argues that the Department should not engage in a practice of revoking an order merely to reduce an incentive for illegal activities and that, despite the recent weather-related difficulties, the U.S. domestic industry is fully capable of satisfying the U.S. demand for fresh garlic. Id. Department's Position: Drawing on the guidance provided in the legislative history accompanying the Uruguay Round Agreements Act ("URAA"), specifically the Statement of Administrative Action ("the SAA"), H.R. Doc. No. 103-316, vol. 1 (1994), the House Report, H.R. Rep. No. 103-826, pt.1 (1994), and the Senate Report, S. Rep. No. 103-412 (1994), the Department issued its Sunset Policy Bulletin providing guidance on methodological and analytical issues, including the bases for likelihood determinations. In its Sunset Policy Bulletin, the Department indicated that determinations of likelihood will be made on an order-wide basis. (See section II.A.2.) In addition, the Department indicated that normally it will determine that revocation of an antidumping order is likely to lead to continuation or recurrence of dumping where (a) dumping continued at any level above de minimis after the issuance of the order, (b) imports of the subject merchandise ceased after the issuance of the order, or (c) dumping was eliminated after the issuance of the order and import volumes for the subject merchandise declined significantly. (See section II.A.3.) Consistent with section 752(c) of the Act, the Department considered import volumes of the subject merchandise before and after the issuance of the order. According to the United States Census Bureau (the U.S. Custom Data) IM146 and the International Trade Commission Data, since the imposition of the order, import volumes of the subject merchandise have declined substantially. (See Memorandum to File: Regarding Imports for Consumption of the Subject Merchandise in the United States.) In 1993, the year preceding the year in which the antidumping investigation was initiated, the import volume of the subject merchandise was 26,250 metric tons. In 1995, the year immediately following the imposition of the order, the import volume decreased to 353 metric tons. Also, between 1995 and 1998, the annual-average-import volume of the subject merchandise was 242 metric tons - less than 2 percent of the 1993 pre-investigation volume. Consequently, in light of the fact that the import volume averaged less than 2 percent of the pre-investigation volume during the period 1995 through 1998, we consider that it is inappropriate even to contemplate whether import volumes of the subject merchandise during that period show an increasing trend. (10) Therefore, we agree with the FGPA that import volumes of the subject merchandise decreased significantly after the issuance of the order. As indicated in section II.A.3 of the Sunset Policy Bulletin, the SAA at 890, and the House Report at 63-64, the Department also considered whether dumping continued at any level above de minimis after the issuance of the order. If companies continue dumping with the discipline of an order in place, the Department may reasonably infer that dumping would continue were the discipline removed. After examining the published findings pertaining to the weighted-average dumping margins in the order and subsequent administrative reviews, we agree with the FGPA that margins above de minimis have persisted throughout the life of the order. (11) Hence, we determine that dumping of fresh garlic from the PRC has continued since the issuance of the order. Given that dumping continued over the life of the order and that import volumes of the subject merchandise decreased significantly after the issuance of the order, we agree with the FGPA's contention that dumping is likely to continue or recur if the order is revoked. Insofar as the Department made this determination based on the findings that dumping continued at levels above de minimis and that import volumes of the subject merchandise declined substantially after the issuance of the order, it is not necessary for us to address the FGPA and the respondent interested parties' other arguments. 2. Magnitude of the Margin Likely to Prevail Interested Parties' Substantive Responses and Rebuttal Comments: In its substantive response, the FGPA argues that, should the Department revoke the order, the likely-to-prevail dumping margin for all producers/exporters of the subject merchandise is the one from the original investigation: 376.67 percent. The FGPA contends that the Department should choose the likely margin from the original investigation because it is the only margin that was ever calculated and because the margin from the original investigation best reflects the behavior of Chinese producers/exporters of fresh garlic without the discipline of an order in place. (See the FGPA's substantive response at 16-17.) The respondent interested parties claim that the current weighted-average dumping margin is punitive (because the rate is too high) and fictitious (because the rate was based on best information available) and that, therefore, the margin should be recalculated based on new information they are willing and able to provide. (See the respondent interested parties' substantive responses at 9 - 11.) In its rebuttal, the FGPA contends that the weighted-average margin from the investigation is not punitive but a margin properly derived by the Department, which was forced to employ best information available because the respondent interested parties refused to participate fully in the investigation and in subsequent reviews. (See the FGPA's rebuttal comments at 7-12.) Department's Position: In the Sunset Policy Bulletin, the Department stated that it will normally provide to the Commission the margin that was determined in the final determination of the original investigation. Further, for companies not specifically investigated or for companies that did not begin shipping until after the order was issued, the Department normally will provide a margin based on the all-others rate from the investigation. (See section II.B.1 of the Sunset Policy Bulletin.) Exceptions to this policy include the use of a more recently calculated margin, where appropriate, and consideration of duty-absorption determinations. (See sections II.B.2 and 3 of the Sunset Policy Bulletin.) The Department, in its final results of the original investigation, assigned the weighted-average dumping margin of 376.67 percent ad valorem to all producers/exporters of the subject merchandise. The Department has not conducted any duty-absorption investigations with respect to the subject merchandise. The Department agrees with the FGPA's contention that the margin that is likely to prevail were the order revoked is the one from the original investigation. Since the facts of the case do not warrant the consideration of a more recently calculated margin and absent any duty- absorption investigation, we determine that the margin from the original investigation is probative of the behavior of Chinese producers/exporters of the subject merchandise without the discipline of the order. Therefore, we will report to the Commission the rate as contained in the Final Results of Review section of this notice. Final Results of Review Based on the above analysis, the Department finds that revocation of the antidumping duty order would be likely to lead to continuation or recurrence of dumping at the margin listed below: ---------------------------------------------------------------------- Manufacturer/Exporter Margin (percent) ---------------------------------------------------------------------- PRC-wide ------------------------------------------- 376.67 ---------------------------------------------------------------------- Recommendation Based on our analysis of the substantive responses received, we recommend adopting all of the above positions. If these recommendations are accepted, we will publish the final results of review in the Federal Register. AGREE____ DISAGREE____ _______________________ Troy H. Cribb Acting Assistant Secretary for Import Administration __________________ (Date) _________________________________________________________________________ footnotes: 1. See Antidumping Duty Order: Fresh Garlic From the People's Republic of China, 59 FR 59209 (November 16, 1994). 2. See Fresh Garlic From the People's Republic of China; Final Results of Antidumping Duty Administrative Review and Partial Termination of Administrative Review, 62 FR 51082 (September 30, 1997); Fresh Garlic From the People's Republic of China; Final Results of Antidumping Duty Administrative Review and Partial Termination of Administrative Review, 62 FR 23758 (May 1, 1997); and Fresh Garlic From the People's Republic of China: Final Results of Antidumping Duty Administrative Review, 65 FR 33295 (May 23, 2000). 3. The FGPA is an ad hoc trade association of U.S. fresh garlic producers and processors: A&D Christopher Ranch; Colusa Produce Corporation; Crinklaw Farms; Dalena Farms; Denice & Filice Packing Co.; El Camino Packing; Frank Pitts Farms; the Garlic Company; Spice World; Thompson International, Inc.; and Vessey and Company, Inc. 4. See Memorandum for Jeffrey A. May, Director, Import Administration/Office of Policy ("Adequacy Determination"), and the letter from Jeffrey A. May, Director, Import Administration/Office of Policy, to Mr. Lynn Featherstone, Director, Office of Investigations, ITC. 5. See Extension of Time Limit for Final Results of Five-Year Reviews, 65 FR 18058 (April 6, 2000). 6. At the time of the FGPA's comments, the Department had not yet issued its final results of administrative review for the 1997/1998 period. 7. Each of the respondent interested parties' substantive responses is virtually identical except with respect to company-specific data. 8. However, the respondent interested parties do not claim or make a point that their production is near or at full capacity or that their capacity is limited. 9. The respondent interested parties relate an incident in which an importer was sentenced to 18 months in jail for falsifying the country of origin for a batch of imported fresh garlic from the PRC. 10. The Commission data (based on HTS numbers delineated in the November 16, 1994, antidumping duty order and the September 30, 1997, final results of the second administrative review (see footnote 1 and 2, supra)) indicate that the import volumes of the subject merchandise during the period 1995 through 1998 are as follows: 1995 - 353, 1996 - 123, 1997 - 205, and 1998 - 287 metric tons (the investigation was initiated in 1994; the order was imposed in the same year). Although these numbers are different from those of the FGPA and the respondent interested parties (see the FGPA's substantive response at Attachments 4 and the respondent interested parties' substantive response at 4), all numbers are comparable to the extent that they illustrate the import volume of the subject merchandise in 1998 was much lower than that of 1993. 11. The weighted-average dumping margin for all producers/exporters of the subject merchandise in the order was 376.67; for period of review ("POR") July 11, 1994, through October 31, 1995 - 376.67 percent; and for POR November 1, 1995, through October 31, 1996 - 376.67 percent; and for POR November 1, 1997, through October 31, 1998 - 376.67 percent.