Import Administration, International Trade Administration, Department of Commerce.
In response to a request by the petitioners and one producer/exporter of the subject merchandise, the Department of Commerce is conducting an administrative review of the antidumping duty order on frozen concentrated orange juice from Brazil. This review covers one manufacturer/exporter of the subject merchandise to the United States, Citrovita Agro Industrial Ltda. The period of review is May 1, 1998, through April 30, 1999.
We have preliminarily determined that sales have been made below the normal value by the company subject to this review. If these preliminary results are adopted in the final results of this administrative review, we will instruct the Customs Service to assess antidumping duties on all appropriate entries.
We invite interested parties to comment on these preliminary results. Parties who wish to submit comments in this proceeding are requested to submit with each argument: (1) a statement of the issue; and (2) a brief summary of the argument.
June 6, 2000.Start Further Info
FOR FURTHER INFORMATION CONTACT:
Shawn Thompson or Irina Itkin, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW, Washington, DC 20230; telephone (202) 482-1776 or (202) 482-0656, respectively.
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 (URAA). In addition, unless otherwise indicated, all citations are to the Department's regulations at 19 CFR part 351 (1999).End Further Info End Preamble Start Supplemental Information
On May 19, 1999, the Department of Commerce (the Department) published in the Federal Register a notice of “Opportunity to Request an Administrative Review” of the antidumping duty order on frozen concentrated orange juice (FCOJ) from Brazil (64 FR 27235).
In accordance with 19 CFR 351.213(b)(1), on May 27, 1999, the petitioners, Florida Citrus Mutual, Caulkins Indiantown Citrus Co., Citrus Belle, Citrus World, Inc., Orange-Co of Florida, Inc., Peace River Citrus Products, Inc., and Southern Gardens Citrus Processors Corp., requested an administrative review of the antidumping order covering the period Start Printed Page 35893May 1, 1998, through April 30, 1999, for two producers and exporters of FCOJ: CTM Citrus S.A. (CTM) and Sucorrico S.A. (Sucorrico). In addition, on May 28, 1999, and June 1, 1999, respectively, two producers and exporters of FCOJ, Branco Peres Citrus S.A. (Branco Peres) and Citrovita Agro Industrial Ltda. (Citrovita), also requested an administrative review. On June 15, 1999, the Department issued questionnaires to Branco Peres, Citrovita, CTM, and Sucorrico.
On June 21, 1999, the Department initiated an administrative review for Citrovita (64 FR 35124 (June 30, 1999)); the initiation notice mistakenly omitted Branco Peres, CTM, and Sucorrico. However, on June 30, 1999, Branco Peres withdrew its request for an administrative review. In addition, in August 1999, CTM and Sucorrico informed the Department that they had no shipments of subject merchandise into the United States during the period of review (POR). We have confirmed CTM's and Sucorrico's assertions using information from the Customs Service. See the memorandum to the file from Jerry Surowiec on this topic, dated May 30, 2000.
In September 1999, we received a response to the Department's questionnaire from Citrovita. In October and November 1999, we issued supplemental questionnaires to Citrovita. We received responses to these questionnaires in November and December 1999.
In December 1999, we conducted verification of Citrovita's U.S. sales responses at its offices in Delaware.
In January 2000, we requested additional information related to Citrovita's cost of production (COP), as well as the COP of an affiliated producer of FCOJ. We received a response to this questionnaire in February 2000.
Also in February 2000, we conducted verification of Citrovita's home market sales and cost responses, as well as the sales and cost responses of the affiliated FCOJ producer.
Scope of the Review
The merchandise covered by this review is frozen concentrated orange juice from Brazil. The merchandise is currently classifiable under item 2009.11.00 of the Harmonized Tariff Schedule of the United States (HTSUS). The HTSUS item number is provided for convenience and for customs purposes. The Department's written description of the scope of this proceeding remains dispositive.
Period of Review
The POR is May 1, 1998, through April 30, 1999.
During the POR, a sister company to Citrovita's parent company purchased another Brazilian producer of FCOJ and that producer's affiliated trading company (i.e., Cambuhy MC Industrial Ltda. (Cambuhy) and Cambuhy Citrus Comercial e Exportadora S.A. (Cambuhy Exportadora), respectively). Because Citrovita became affiliated with these companies during the POR (i.e., beginning in September 1998), we analyzed whether it would be appropriate to treat Citrovita and these affiliated parties as a single entity using the criteria outlined in 19 CFR 351.401(f). Our analysis showed that the parties have production facilities for similar or identical products which would not require substantial retooling in order to restructure manufacturing priorities. Moreover, the preponderance of evidence on the record indicates a significant potential for the manipulation of prices or production between Citrovita and its affiliates because of the degree of common ownership, the positions held by the owners of the parent company on the affiliates' boards of directors, and the extent to which operations were intertwined during the POR. Accordingly, we have collapsed Citrovita, Cambuhy, and Cambuhy Exportadora for purposes of the preliminary results, in accordance with 19 CFR 351.401(f). However, because there is no evidence that the companies were affiliated prior to September 1998, we have used only the sales and cost data reported for Cambuhy and Cambuhy Exportadora from September 1998 through the end of the POR. For further discussion, see the memorandum to Richard W. Moreland, Deputy Assistant Secretary, AD/CVD Enforcement, Group I, entitled “Treatment of Data Reported by Affiliated Parties in the Antidumping Duty Administrative Review on Frozen Concentrated Orange Juice from Brazil,” dated May 30, 2000 (the Affiliated Party issues memo).
To determine whether sales of FCOJ from Brazil to the United States were made at less than normal value (NV), we compared the constructed export price (CEP) to the NV for Citrovita, as specified in the “Constructed Export Price” and “Normal Value” sections of this notice.
When making comparisons in accordance with section 771(16) of the Act, we considered all products sold in the home market as described in the “Scope of the Review” section of this notice that were in the ordinary course of trade. For those U.S. sales of FCOJ for which there were no comparable foreign market sales in the ordinary course of trade, we compared CEP to constructed value (CV), in accordance with section 773(a)(4) of the Act.
Level of Trade and CEP Offset
In accordance with section 773(a)(1)(B) of the Act, to the extent practicable, we determine NV based on sales in the comparison market at the same level of trade as CEP. The NV level of trade is that of the starting-price sales in the comparison market or, when NV is based on CV, that of the sales from which we derive selling, general and administrative expenses (SG&A) and profit. For CEP, it is the level of the constructed sale from the exporter to the importer.
To determine whether NV sales are at a different level of trade than CEP sales, we examine stages in the marketing process and selling functions along the chain of distribution between the producer and the unaffiliated customer. If the comparison-market sales are at a different level of trade and the difference affects price comparability, as manifested in a pattern of consistent price differences between the sales on which NV is based and comparison-market sales at the level of trade of the export transaction, we make a level-of-trade adjustment under section 773(a)(7)(A) of the Act. Finally, for CEP sales, if the NV level is more remote from the factory than the CEP level and there is no basis for determining whether any difference in the levels between NV and CEP affects price comparability, we adjust NV under section 773(a)(7)(B) of the Act (the CEP offset provision). See Notice of Final Determination of Sales at Less Than Fair Value: Certain Cut-to-Length Carbon Steel Plate from South Africa, 62 FR 61731 (Nov. 19, 1997).
We note that the U.S. Court of International Trade (CIT) has held that the Department's practice of determining levels of trade for CEP transactions after CEP deductions is an impermissible interpretation of section 772(d) of the Act. See Borden, Inc. v. United States, 4 F. Supp. 2d 1221, 1241-42 (CIT 1998) (Borden). The Department believes, however, that its practice is in full compliance with the statute. On June 4, 1999, the CIT entered final judgement in Borden on the level of trade issue. See Borden Inc. v. United Start Printed Page 35894States, Court No. 96-08-01970, Slip Op. 99-50 (CIT June 4, 1999). The government has filed an appeal of Borden which is pending before the U.S. Court of Appeals for the Federal Circuit. Consequently, the Department has continued to follow its normal practice of adjusting CEP under section 772(d) prior to starting a level of trade analysis, as articulated by the Department's regulations at section 351.412.
Citrovita claimed that it made home market sales at only one level of trade (i.e., sales to end users). Because Citrovita performed the same selling activities for sales to all customers in the home market, we determined that no level of trade adjustment is possible for Citrovita.
In order to determine whether NV was established at a level of trade which constituted a more advanced stage of distribution than the level of trade of the CEP, we compared the selling functions performed for home market sales with those performed with respect to the CEP transaction, which excludes economic activities occurring in the United States. We found that Citrovita performed most of the selling functions and services related to U.S. sales at its sales office in the United States. These selling functions are associated with those expenses which we deduct from the CEP starting price, as specified in section 772(d) of the Act. We found that Citrovita performed the same selling functions for home market sales in Brazil. Therefore, we find that Citrovita's sales in the home market were at a more advanced stage of marketing and distribution (i.e., more remote from the factory) than the constructed U.S. level of trade, which represents an F.O.B. foreign port price after the deduction of expenses associated with U.S. selling activities. However, because we find that Citrovita sells at only one level of trade in the foreign market, the difference in the level of trade cannot be quantified. Further, we do not have information which would allow us to examine pricing patterns based on the respondent's sales of other products, and there are no other respondents or other record information on which such an analysis could be based. Accordingly, because the data available do not form an appropriate basis for making a level of trade adjustment, but the level of trade in the home market is at a more advanced stage of distribution than the level of trade of the CEP, we have granted a CEP offset to Citrovita. For further discussion, see the concurrence memorandum issued for the preliminary results of this review, dated May 30, 2000 (the concurrence memo).
Constructed Export Price
We based the U.S. price on CEP because sales to the unaffiliated purchaser took place after importation into the United States, in accordance with section 772(b) of the Act. We calculated CEP based on the starting price to the first unaffiliated purchaser in the United States. We made deductions from the starting price, where appropriate, for foreign inland freight, foreign brokerage and handling expenses, ocean freight, marine insurance, U.S. customs duty, U.S. port fees, U.S. brokerage and handling expenses, U.S. inland freight, and U.S. warehousing expenses, in accordance with section 772(c)(2)(A) of the Act.
We made additional deductions from CEP, where appropriate, for commissions, credit expenses, and U.S. indirect selling expenses, including U.S. inventory carrying costs, in accordance with section 772(d)(1) of the Act.
Pursuant to section 772(d)(3) of the Act, we further reduced the starting price by an amount for profit, to arrive at CEP. In accordance with section 772(f) of the Act, we calculated the CEP profit rate using the expenses incurred by Citrovita and its affiliate on their sales of the subject merchandise in the United States and of the foreign like product in the home market and the profit associated with those sales.
In order to determine whether there is a sufficient volume of sales in the home market to serve as a viable basis for calculating NV (i.e., the aggregate volume of home market sales of the foreign like product is greater than five percent of the aggregate volume of U.S. sales), we compared the volume of Citrovita's home market sales of the foreign like product to the volume of U.S. sales of subject merchandise, in accordance with 19 CFR 351.404(b). Based on this comparison, we determined that Citrovita had a viable home market during the POR. Consequently, we based NV on home market sales.
Pursuant to section 773(b)(2)(A)(ii) of the Act, there were reasonable grounds to believe or suspect that Citrovita had made home market sales at prices below their COPs in this review because the Department disregarded sales that failed the cost test for Citrovita in the most recently completed administrative review. See Frozen Concentrated Orange Juice From Brazil; Final Results and Partial Rescission of Antidumping Duty Administrative Review, 64 FR 43650, 43652 (Aug. 11, 1999) (FCOJ from Brazil). As a result, the Department initiated an investigation to determine whether Citrovita made home market sales during the POR at prices below their COP.
We calculated the COP based on the sum of Citrovita's and the affiliated producers' costs of materials and fabrication for the foreign like product, plus amounts for general and administrative (G&A) expenses and financing expenses, in accordance with section 773(b)(3) of the Act.
We used the reported COP amounts to compute a weighted-average COP during the POR, except in the following instances in which the costs were not appropriately quantified or valued:
1. We treated fresh orange juice as a co-product, rather than a by-product as reported, because this product was not an unintentional consequence of production. For further discussion, see the concurrence memo;
2. We recalculated the claimed by-product credit to (1) correct certain errors discovered during verification; and (2) state all sales of by-products to affiliated parties on an arm's-length basis. For further discussion, see the concurrence memo;
3. We valued the cost of fruit provided by an affiliated party using the affiliate's cost of production, in accordance with sections 773(f)(2) and (3) of the Act. For further discussion, see the concurrence memo and the Affiliated Party issues memo;
4. We treated Cambuhy Exportadora as the producer of certain FCOJ manufactured during the POR. We based the value of the fruit used in the production of this FCOJ on facts available, because Citrovita did not report this information. As facts available, we used the cost of production noted in item 3, above. For further discussion, see the Affiliated Party issues memo;
5. We made no addition to the COP for ICMS and IPI taxes because we found at verification that the respondent completely recovered these taxes during the POR;
6. We included the freight costs on certain shipments of oranges which had been excluded from the reported costs;
7. We revised the calculation of G&A expenses to include certain of Citrovita's non-operating expenses; and
8. We amortized certain foreign exchange losses incurred by Cambuhy on long-term U.S. dollar-denominated debt over the remaining life of the loans. For further discussion, see the Affiliated Party issues memo.
We compared the COP to home market prices of the foreign like Start Printed Page 35895product, as required under section 773(b) of the Act, in order to determine whether these sales had been made at prices below the COP. On a product-specific basis, we compared the COP to home market prices, less any applicable movement charges, selling expenses, and packing costs.
In determining whether to disregard home market sales made at prices below the COP, we examined whether such sales were made: (1) In substantial quantities within an extended period of time; and (2) at prices which permitted the recovery of all costs within a reasonable period of time in the normal course of trade. See section 773(b)(1) of the Act.
Pursuant to section 773(b)(2)(C)(i) of the Act, where less than 20 percent of Citrovita's sales of a given product were made at prices less than the COP, we did not disregard any below-cost sales of that product because we determined that the below-cost sales were not made in “substantial quantities.”
Where 20 percent or more of Citrovita's sales of a given product were at prices below the COP, we found that sales of that model were made in “substantial quantities” within an extended period of time, as defined in section 773(b)(2)(B) and (C) of the Act. In such cases, we also determined that such sales were not made at prices which would permit recovery of all costs within a reasonable period of time, in accordance with section 773(b)(2)(D) of the Act. Therefore, we disregarded the below-cost sales in determining NV.
We found that more than 20 percent of Citrovita's home market sales within an extended period of time were made at prices less than the COP. Further, the prices did not provide for the recovery of costs within a reasonable period of time. We, therefore, disregarded the below-cost sales and, where available, used the remaining above-cost sales as the basis for determining NV, in accordance with section 773(b)(1) of the Act. For those U.S. sales of FCOJ for which there were no comparable home market sales in the ordinary course of trade (i.e., sales within the contemporaneous window which were made at prices above the COP), we compared CEP to CV, in accordance with section 773(a)(4) of the Act.
In accordance with section 773(e) of the Act, we calculated CV based on the sum of the respondent's cost of materials, fabrication, SG&A (including financing expenses), profit, and U.S. packing costs, adjusted as noted above. In accordance with section 773(e)(2)(A) of the Act, we based SG&A (including financing expenses), and profit on the amounts incurred and realized by Citrovita in connection with the production and sale of the foreign like product in the ordinary course of trade, for consumption in the foreign country.
Where NV was based on home market sales, we based NV on the starting price to unaffiliated customers. We made deductions from the starting price for foreign inland freight, pursuant to section 773(a)(6)(B) of the Act. Pursuant to section 773(a)(6)(C)(iii) of the Act, we also made deductions for home market credit expenses (offset by interest revenue). We recalculated home market credit expenses on the basis of home market price net of Brazilian taxes, in accordance with our practice. See, e.g., Ferrosilicon from Brazil; Final Results of Antidumping Duty Administrative Review, 61 FR 59407, 59410 (Nov. 22, 1996); and FCOJ from Brazil, 64 FR at 43653.
We disallowed a claim made for foreign exchange losses on one home market sale because this sale was denominated in, and paid for, in Brazilian reais. Consequently, because this transaction did not involve the conversion of currency, there was no foreign exchange loss associated with the sale. For further discussion, see the concurrence memo.
We deducted home market indirect selling expenses, including inventory carrying costs and other indirect selling expenses, up to the amount of indirect selling expenses incurred on U.S. sales, in accordance with section 773(a)(7)(B) of the Act. Where applicable, in accordance with 19 CFR 351.410(e), we offset any commission paid on a U.S. sale by reducing the NV by home market indirect selling expenses remaining after the deduction for the CEP offset, up to the amount of the U.S. commission.
In addition, we deducted home market packing costs and added U.S. packing costs, in accordance with section 773(a)(6) of the Act.
We made currency conversions in accordance with section 773A of the Act. Section 773A(a) of the Act directs the Department to use a daily exchange rate to convert foreign currencies into U.S. dollars unless the daily rate involves a fluctuation. The Department considers a “fluctuation” to exist when the daily exchange rate differs from the benchmark rate by 2.25 percent or more. The benchmark is defined as the moving average of rates for the past 40 business days. When we determine a fluctuation to have existed, we generally substitute the benchmark rate for the daily rate, in accordance with established practice. (For an explanation of this method, see Policy Bulletin 96-1: Currency Conversions, 61 FR 9434 (Mar. 8, 1996).)
Our preliminary analysis of dollar-real exchange rates shows that the real declined rapidly in early 1999, losing over 40 percent of its value in January 1999, when the Brazilian government ended its exchange rate restrictions. The decline was, in both speed and magnitude, many times more severe than any change in the dollar-real exchange rate during recent years, and it did not rebound significantly in a short time. As such, we preliminarily determine that the decline in the real during January 1999 was of such magnitude that the dollar-real exchange rate cannot reasonably be viewed as having simply fluctuated at that time, i.e., as having experienced only a momentary drop in value relative to the normal benchmark. We preliminarily find that there was a large, precipitous drop in the value of the real in relation to the U.S. dollar in January 1999.
We recognize that, following a large and precipitous decline in the value of a currency, a period may exist wherein it is unclear whether further declines are a continuation of the large and precipitous decline or merely fluctuations. Under the circumstances of this case, such uncertainty may have existed following the large, precipitous drop in January 1999. Thus, we devised a methodology for identifying the point following a precipitous drop at which it is reasonable to presume that rates were merely fluctuating. Beginning on January 13, 1999, we used only daily rates until the daily rates were not more than 2.25 percent below the average of the 20 previous daily rates for five consecutive days. At that point, we determined that the pattern of daily rates no longer reasonably precluded the possibility that they were merely “fluctuating.” (Using a 20-day average for this purpose provides a reasonable indication that it is no longer necessary to refrain from using the normal methodology, while avoiding the use of daily rates exclusively for an excessive period of time.) Accordingly, from the first of these five days, we resumed classifying daily rates as “fluctuating” or “normal” in accordance with our standard practice, except that we began with a 20-day benchmark and on each succeeding day added a daily rate to the average until the normal 40-day average was restored as the benchmark. See Notice of Final Determination of Sales at Less Than Fair Value: Certain Cold-Rolled Flat-Rolled Carbon-Quality Steel Products from Brazil, 65 FR 5554, 5563-64 (Feb. 4, 2000); and Notice of Final Results of Antidumping Duty Administrative Review: Certain Welded Start Printed Page 35896Carbon Steel Pipes and Tubes from Thailand, 64 FR 56759, 56763 (Oct. 21, 1999).
Applying this methodology in the instant case, we used daily rates from January 13, 1999, through March 4, 1999. We then resumed the use of a benchmark, starting with a benchmark based on the average of the 20 reported daily rates on March 5, 1999. We resumed the use of the normal 40-day benchmark starting on April 3, 1999, through the close of the review period.
Preliminary Results of Review
As a result of our review, we preliminarily determine that the following margin exists for the period May 1, 1998, through April 30, 1999:
|Citrovita Agro Industrial Ltda/Cambuhy MC Industrial Ltda/Cambuhy Citrus Comercial e Exportadora||26.27|
The Department will disclose to parties the calculations performed in connection with these preliminary results within five days of the date of publication of this notice. Interested parties may request a hearing within 30 days of the publication. Any hearing, if requested, will be held seven days after the date rebuttal briefs are filed. Interested parties may submit case briefs not later than 30 days after the date of publication of this notice. Rebuttal briefs, limited to issues raised in the case briefs, may be filed not later than 37 days after the date of publication of this notice. The Department will publish a notice of the final results of this administrative review, which will include the results of its analysis of issues raised in any such case briefs, within 120 days of the publication of these preliminary results.
Upon completion of this administrative review, the Department shall determine, and the Customs Service shall assess, antidumping duties on all appropriate entries. We have calculated importer-specific assessment rates based on the ratio of the total amount of antidumping duties calculated for the examined sales to the total entered value of those sales, as appropriate. These rates will be assessed uniformly on all entries of particular importers made during the POR. Pursuant to 19 CFR 351.106(c)(2), we will instruct the Customs Service to liquidate without regard to antidumping duties all entries for any importer for whom the assessment rate is de minimis (i.e., less than 0.50 percent). The Department will issue appraisement instructions directly to the Customs Service.
Further, the following deposit requirements will be effective for all shipments of FCOJ from Brazil entered, or withdrawn from warehouse, for consumption on or after the publication date of the final results of this administrative review, as provided for by section 751(a)(1) of the Act: 1) the cash deposit rates for Citrovita, Cambuhy, and Cambuhy Exportadora will be the rate established in the final results of this review; except if the rate is less than 0.50 percent and, therefore, de minimis within the meaning of 19 CFR 351.106, the cash deposit will be zero; 2) for previously reviewed or investigated companies not listed above, the cash deposit rate will continue to be the company-specific rate published for the most recent period; 3) if the exporter is not a firm covered in this review, a prior review, or the less-than-fair-value (LTFV) investigation, but the manufacturer is, the cash deposit rate will be the rate established for the most recent period for the manufacturer of the merchandise; and 4) the cash deposit rate for all other manufacturers or exporters will continue to be 1.96 percent, the all others rate established in the LTFV investigation.
These deposit requirements, when imposed, shall remain in effect until publication of the final results of the next administrative review.
This notice serves as a preliminary reminder to importers of their responsibility under 19 CFR 351.402(f) to file a certificate regarding the reimbursement of antidumping duties prior to liquidation of the relevant entries during this review period. Failure to comply with this requirement could result in the Secretary's presumption that reimbursement of antidumping duties occurred and the subsequent assessment of double antidumping duties.
This administrative review and notice are in accordance with sections 751(i)(1) and 777(i)(1) of the Act.Start Signature
Dated: May 30, 2000.
Troy H. Cribb,
Acting Assistant Secretary for Import Administration.
[FR Doc. 00-14205 Filed 6-5-00; 8:45 am]
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