66 FR 64948, December 17, 2001 A-570-848 NSR: 9/1/99-9/30/00 Public Document G3O7: MEH MEMORANDUM TO: Faryar Shirzad Assistant Secretary for Import Administration FROM: Joseph A. Spetrini Deputy Assistant Secretary AD/CVD Enforcement Group III SUBJECT: Issues and Decision Memo for the Final Results of the New Shipper Review of Freshwater Crawfish Tail Meat from the People's Republic of China Summary We have analyzed the comments and rebuttals of interested parties in the September 1, 1999 through September 30, 2000 new shipper review of the antidumping duty order covering freshwater crawfish tail meat from the People's Republic of China (PRC). As a result of our analysis, we have made changes in the margin calculations. We 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 this new shipper review for which we received comments and rebuttals by parties: 1. Surrogate Value for Whole, Live Crawfish 2. Surrogate Value for Whole, Live Crawfish Based on Size-Specific Prices 3. Wet/Dry Conversion Factor for Scrap 4. Relevance of Chitin Extraction from Shrimp Shells Applicable Statute and Regulations Unless otherwise indicated, all citations to the Tariff Act of 1930, as amended (the Act), are references to the provisions effective January 1, 1995, the effective date of the amendments made to the Act by the Uruguay Round Agreements Act. In addition, unless otherwise indicated, all citations to the Department's regulations are to the provisions codified at 19 CFR part 351 (2000). Background The company covered by this new shipper review of the antidumping duty order on freshwater crawfish tail meat from the PRC is Shanghai Taoen International Trading Co., Ltd. (Shanghai Taoen). On September 6, 2001, the Department of Commerce (the Department) published the preliminary results of this new shipper review. See Preliminary Results of Antidumping Duty New Shipper Review: Freshwater Crawfish Tail Meat From the People's Republic of China, 66 FR 46601 (September 6, 2001) (Preliminary Results). The merchandise covered by this order consists of freshwater crawfish tail meat as described in the "Scope of Review" section of the Federal Register notice. The period of review (POR) is September 1, 1999 through September 30, 2000. The Department also initiated a review of China Kingdom Import & Export Co., Ltd. (China Kingdom) for the period September 1, 1999 through August 31, 2000. China Kingdom requested that the review be conducted in the event that the Department denied its request for a review of the September 1, 1999 through February 29, 2000 period. On September 27, 2001, we published Freshwater Crawfish Tail Meat From the People's Republic of China: Amended Final Results of Antidumping Duty New Shipper Reviews (69 FR 49343), covering China Kingdom for that period. Therefore, we are rescinding China Kingdom's new shipper review for the period September 1, 1999 through August 31, 2000. We invited parties to comment on our Preliminary Results of review. On September 26, 2001, we received a timely submission of publicly available information (PAI) on the surrogate values for whole live freshwater crawfish and crawfish scrap from the Crawfish Processors Alliance (petitioner) and the Louisiana Department of Agriculture & Forestry and Bob Odom, Commissioner. On October 9, 2001, we received a case brief from petitioner. On October 15, 2001, we received a rebuttal brief from Shanghai Taoen. Discussion of Comments Comment 1: Surrogate Value for Whole, Live Crawfish In Freshwater Crawfish Tail Meat From the People's Republic of China; Notice of Final Results of Antidumping Duty New Shipper Review, 66 FR 45002 (August 27, 2001) (China Kingdom Final Notice) the Department used the price of Australian yabbies 30-40 grams in weight as a surrogate value for whole, live crawfish. See China Kingdom Final Notice, 66 FR at 45003, and accompanying decision memorandum, at 5. We rejected the use of figures published by the Australia Bureau of Agriculture and Resource Economics (ABARE) because we concluded that the ABARE figures reflected sizes of crawfish less similar to subject merchandise than yabbies 30-40 grams in weight. See Id. at Comment 1. Petitioner argues that the Department should use the ABARE figures as a surrogate value for whole freshwater crawfish. Petitioner argues that the Department erroneously rejected these numbers in China Kingdom Final Notice because these numbers included whole crawfish over 40 grams. This rejection was erroneous in petitioner's view because yabbies over 40 grams are sold in Australia, and the Chinese crawfish under review are not typically under 40 grams. Petitioner cites a catalog from an Australian producer of whole and processed yabbies that advertises tail meat at 13 to 20 grams per tail, which implies, according to petitioner's suggested calculations, whole crawfish of 65 to 100 grams each. Also, petitioner points to the fact that the president of the Australian producer is described by the Department as stating "Since 1997, the farm gate price for the yabbies which are typically processed into tail meat has been A${Australian dollars}3.00/kg for 20-40 gram Seconds and A$4.00/kg for 40- 70 gram Seconds." See Department's Memorandum to the File from Abdelali Elouardia and Thomas Gilgunn: Freshwater Crawfish Tail Meat (crawfish) from the People's Republic of China (PRC): Meetings Regarding the Crawfish Industry in Western Australia (July 18, 2001) (Australia Memo) at 4. ("Seconds" are crawfish that are considered unsuitable for being sold whole, such as those missing a claw.) Petitioner argues that "{t}his statement clearly indicates that yabbies weighing 40-70 grams, and not just those under 40 grams, are typically used in Australia for tail meat." See Petitioner's October 9, 2001 Submission at 4. Petitioner also argues that the Department has the proprietary information for three respondents originally under review for this time period needed to determine whether Chinese crawfish have been sold in sizes greater than 40 grams a piece. (1) According to petitioner, after one dismisses the Department's concerns with only using price data for crawfish under 40 grams a piece, the ABARE figures are clearly preferable because they are data published by a government agency. Petitioner adds that the ABARE prices are consistent with data concerning world prices that it has placed on the record of this review. See Exhibit 10 of Petitioner's September 26, 2001 submission. Finally, petitioner insists that there is no evidence that the average unit value (AUV) of the ABARE figures favors large crawfish any more than does the AUV of Chinese crawfish, which petitioner claims reflects crawfish larger than 40 grams. Shanghai Taoen responds that, while over 40-gram yabby seconds might be processed into tail meat, over 40-gram non-seconds are not, and that seconds make up only 30 percent of the over 40-gram harvest. In support of its argument, Shanghai Taoen cites the Australia Memo, at page 4. Shanghai Taoen also argues that the Australian producer's advertisement is promotional literature that, like most such promotional literature, simply lists all available products, but that such a list does not imply that large size tail meat production is typical. Regarding the typical size of Chinese crawfish reviewed under this order, Shanghai Taoen argues that petitioner's claim that Chinese processors use all sizes of live crawfish for tail meat processing is unsupported by the record evidence. Department's Position: During its examination of the crawfish industry in Australia, the Department was informed by private commercial sources that freshwater tail meat is produced from yabbies weighing 40 grams or less and larger seconds. For example, see Australia Memo at page 4: {The Australian producer's president} stated the following. Any yabby may be processed into tail meat. However, yabbies that weigh below 30 grams or yabbies that have physical deformities (i.e., missing limbs or claws) (Seconds) are more likely to be processed into tail meat than larger or physically intact yabbies. Small yabbies or deformed yabbies cannot be sold as a whole live premium product. See Id. Also, the Executive Director of Aquaculture Council of Western Australia stated that, Most yabby processors in Western Australia focus primarily on processing whole live yabbies. Therefore, the yabbies which they process into tail meat are generally smaller than 40 grams. Id., at 5. We based our determination in China Kingdom Final Notice partly on this information. The fact that tail meat is also offered for sale produced from over 40-gram whole crawfish does not undermine our determination that under 40-grams is the primary, or typical, size of the input in Australia's crawfish tail meat industry. Moreover, as Shanghai Taoen notes, insofar as tail meat is produced from over 40-gram yabbies, the yabbies used for this purpose are generally seconds. The Department noted this determination in the China Kingdom Final Notice, and accompanying decision memorandum, at Comment 1: "Only smaller yabbies (40 grams or less), yabbies with physical deformities, or surplus yabbies are processed into tail meat." The determination is supported by the quote above from the Australian producer's president. Presumably, yabbie seconds are worth less than yabbie non-seconds, but we do not have ABARE data for seconds. More importantly, yabbies under 40 grams are the closest match to the subject merchandise under review. We reached this conclusion in the China Kingdom Final Notice, and accompanying decision memorandum, at Comment 1, and the proprietary information on the record of this review only reinforces this conclusion. See Memorandum to the File from Mark Hoadley, Regarding Shanghai Taoen Analysis (December 7, 2001) (Analysis Memo) at page 2. While the Department normally prefers to use published data and data from government agencies, in this proceeding, unpublished data from a private source provides a more appropriate match for the input the Department is attempting to value, for the reasons just described. We therefore will continue to use the Australian producer's sales prices for yabbies 30 to 40 grams in size. Comment 2: Surrogate Value for Whole, Live Crawfish Based on Size- Specific Prices Petitioner argues that, if the Department determines not to use the ABARE statistics, it should base the surrogate value on the Australian producer's prices for the sizes of crawfish actually used by respondent. According to petitioner, the respondent is using a whole crawfish input that is probably larger than 40 grams in size. Department's Position: The Department has used the Australian producer surrogate value information most closely matching the respondent input data on the record. See Analysis Memo, and Department's position on Comment 1, above. Comment 3: Wet/Dry Conversion Factor for Scrap In the preliminary calculations, the Department used a surrogate value for dry shells as an offset to surrogate raw material cost. Shanghai Taoen, however, provided a factor for wet shells. In order to convert the surrogate value into a value for wet shells, the Department used a wet/dry conversion factor. Petitioner argues that the Department should recalculate this factor using new information it submitted. Petitioner provided a reproduction of the web page of an Indian producer of chitin and chitosan (http://www.planetace.com/mahtani/). The web page states the Indian producer's chitin yield from wet and dry crustacean shells. Petitioner argues that the Department should use this information to calculate a wet/dry conversion factor to replace the one used in the preliminary calculations, by dividing the wet yield by the dry yield. Petitioner emphasizes that India is the Department's preferred surrogate value country for this proceeding. Shanghai Taoen argues that "the method used to extract chitin from dry shell may be different from that of wet shell, and the yield of chitin does not necessarily reflect the wet-dry weight conversion for the shells. Using the percentage of chitin extracted from wet and dry shells to derive a wet-dry weight conversion is very distortive and misleading." Shanghai Taoen's October 14, 2001 Submission at 3. Shanghai Taoen also notes that the conversion factor used in the preliminary calculations was based on information submitted by petitioner. Department's Position: While India is at a level of development more comparable to China than is Canada, we have concerns about the applicability of the surrogate information provided by petitioner. We have been unable to contact by telephone the chitin producer whose information petitioner submitted. See Memorandum from Mark Hoadley to the File: Attempts to Contact Mahtani Chitosan Pvt. Ltd. (December 6, 2001). Without further information, we are unable to judge the applicability of relative chitin extraction ratios for wet and dry crawfish to the drying of crawfish independent of chitin production. Therefore, we have continued to use the wet-to-dry conversion rate from an article published by S. Subasinghe, "The Development of Crustacean and Mollusc Industries," page 33, that we used in the preliminary results. Comment 4: Relevance of Chitin Extraction from Shrimp Shells Petitioner argues that if the Department rejects the Indian information it has provided on the wet/dry conversion factor the Department should recalculate its current conversion factor to reflect an average of the conversion factors for shrimp and crab shells on the record, because the surrogate value used by the Department for shells in the Preliminary Results was for crab and shrimp shells combined. The conversion factor used in the preliminary results is for crab shells only. Shanghai Taoen argues that crawfish shells are more similar to crab shells than to shrimp shells. Department's Position: We agree with petitioner. The surrogate value and the conversion factor should ideally be on the same basis, because the values of various types of wet shells could be affected by their relative moisture content (i.e., wet crab shells could dry differently than wet shrimp shells). Therefore, for these final results we have used the average of the conversion rates for crab and shrimp shells to convert the dry-weight value of crab and shrimp shells to a wet-weight value, since Shanghai Taoen sells its shells wet and the surrogate value for shells is on a dry-weight basis. 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 weighted-average dumping margin and the final results of this new shipper review in the Federal Register. __________________ __________________ Agree Disagree ______________________________ Faryar Shirzad Assistant Secretary for Import Administration ______________________________ Date ______________________________________________________________________ footnote: 1. The new shipper reviews for this time period originally included three other respondents, Coastal (Jiangsu) Foods Co., Ltd., Shouzhou Huaxiang Foodstuffs Co., Ltd. (Shouzhou), and China Kingdom. Petitioner refers to Shanghai Taoen, Shouzhou, and China Kingdom documents in its case brief.