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Final Determination - Garlic, Fresh or Frozen
OTTAWA, APRIL 2, 2001
File No. 4237-89
Case No. AD/1250
STATEMENT OF REASONS
Concerning a final determination of dumping pursuant to paragraph 41(1)(a) of the Special Import Measures Act regarding
GARLIC, FRESH OR FROZEN, ORIGINATING IN OR EXPORTED FROM THE PEOPLE'S REPUBLIC OF CHINA AND VIETNAM, EXCLUDING FRESH GARLIC SUBJECT TO THE FINDING MADE IN THE CANADIAN INTERNATIONAL TRADE TRIBUNAL INQUIRY NO. NQ-96-002
DECISION
Pursuant to paragraph 41(1)(a) of the Special Import Measures Act, the Commissioner of Customs and Revenue has today made a final determination that garlic, fresh or frozen, originating in or exported from the People's Republic of China and Vietnam, excluding fresh garlic subject to the finding made in the Canadian International Trade Tribunal Inquiry No. NQ-96-002, has been dumped.
This Statement of Reasons is also available in French.
Cet énoncé des motifs est également disponible en français.
STATEMENT OF REASONS
Summary
On October 31, 2000, the Commissioner of Customs and Revenue (Commissioner) initiated an investigation into the alleged injurious dumping of fresh or frozen garlic, originating in or exported from the People's Republic of China (PRC) and Vietnam, excluding fresh garlic subject to the finding made in the Canadian International Trade Tribunal (Tribunal) Inquiry No. NQ-96-002. The investigation was initiated in response to a complaint filed by the Garlic Growers Association of Ontario (GGAO) of Stratford, Ontario.
On December 29, 2000, the Tribunal made a preliminary determination that the evidence disclosed a reasonable indication that the alleged dumping of the subject goods has caused injury to the domestic industry. The Canada Customs and Revenue Agency (CCRA) subsequently made a preliminary determination of dumping on January 2, 2001.
Based on the results of the CCRA's investigation, the Commissioner is satisfied that the subject goods have been dumped and that the margins of dumping are not insignificant. Accordingly, the Commissioner has made a final determination of dumping in accordance with paragraph 41(1)(a) of the Special Import Measures Act (SIMA).
The Tribunal's inquiry concerning the question of injury to the Canadian industry is continuing. Provisional duties of CDN$ 1.59 per Kg for subject goods originating in or exported from the PRC and CDN$ 1.48 per Kg for subject goods originating in or exported from Vietnam will continue to be assessed until the Tribunal issues its finding.
Interested Parties
Complainant
The complainant, GGAO, represents 96 members which are, in large part, full-time farmers in the province of Ontario, growing garlic as part of their selection of crops. The GGAO represents in excess of 68 per cent of production of fresh or frozen garlic in Canada. The GGAO's offices are located at 38 Centre Street, Stratford, Ontario N5A 1E3.
Exporters
At the time of the initiation of the investigation, the CCRA identified 77 potential exporters. The investigation revealed that 49 exporters shipped the subject goods during the period of investigation.
Importers
At the time of the initiation of the investigation, the CCRA identified 71 potential importers. The investigation revealed that 29 importers imported the subject goods during the period of investigation.
Background
In July 1996, the GGAO filed a dumping complaint involving fresh garlic originating in the PRC. The CCRA initiated an investigation on August 23, 1996. A preliminary determination of dumping was made on November 21, 1996, and a final determination of dumping was made on February 19, 1997. On March 21, 1997, the Tribunal found that the dumping had caused material injury to the domestic industry. The finding, however, only applies to fresh garlic originating in the PRC and imported into Canada between July 1 and December 31 of each calendar year.
On September 27, 2000, the GGAO filed a formal complaint with the CCRA alleging that its members were being injured as a result of dumped imports of fresh garlic from the PRC and imported into Canada during the six-month period of the year which is not part of the Tribunal's finding of March 21, 1997, as well as frozen garlic from the PRC and imported into Canada throughout the year. This complaint also included allegations relating to dumping and injury resulting from imports of fresh and frozen garlic from Vietnam.
On October 12, 2000, the CCRA informed the GGAO that the complaint was properly documented and informed the governments of the PRC and Vietnam of the complaint respecting the alleged dumping. On October 31, 2000, the Commissioner initiated a dumping investigation and notified the Tribunal of that decision. The Tribunal subsequently initiated a preliminary injury inquiry into whether the evidence discloses a reasonable indication of injury, retardation or threat of injury caused by the dumping of the goods. On December 29, 2000, the Tribunal concluded that the evidence disclosed a reasonable indication that the alleged dumping has caused injury. On January 2, 2001, the Commissioner made a preliminary determination of dumping with respect to the subject goods and provisional duties have been in place since that date.
Product Information
Definition
For the purpose of this investigation the subject goods are defined as:
Garlic, fresh or frozen, originating in or exported from the People's Republic of China and Vietnam, excluding fresh garlic subject to the finding made in the Canadian International Trade Tribunal Inquiry No. NQ-96-002.
Description
Garlic is grown in order to harvest the bulb, which develops underground in much the same way as an onion does. A garlic bulb is made up of numerous layers of skin wrapped around a number of individual segments called cloves, which usually number from four to fifteen. Fresh garlic is used principally as a food product and for seasoning. There is no standardized grading system in Canada. Garlic is offered for sale according to size.
The goods which are the subject of the complaint are all strains of garlic, of both the ophioscorodon ("hardneck") and sativum ("softneck") subspecies, which are grown in the PRC and Vietnam. The product may be exported to Canada as whole garlic bulbs or as individual cloves, unpeeled or peeled, as garlic sprouts or as garlic stems. The garlic may also be cured, trimmed and cleaned. Garlic delivered in cold storage (chilled garlic) is considered "fresh" garlic. The definition does not include dehydrated garlic, garlic flakes, garlic powder, garlic paste or similar processed garlic.
Classification of Imports
Garlic is specifically provided for in subheading 0703.20.00.00 of the Harmonized System tariff classification. Frozen garlic falls within tariff classification number 0710.80.90.90 (frozen vegetables, other).
Canadian Industry
The commercial production of garlic for the fresh market began in Canada in the province of Ontario during the period from 1984 to 1988. Today, garlic is grown commercially in all provinces except Newfoundland and there are an estimated 1,215 acres in production. The garlic grown in Canada is almost exclusively of the hardneck type, which is better suited to cultivation in regions having cold winters. Garlic is usually planted in October and harvested in July and August of the following year. It may be sold for immediate consumption, or stored in controlled temperature facilities and thus be available for the entire calendar year. The 2000 crop yielded approximately 2 million kilograms. The major production area is in southwestern Ontario.
The GGAO has 96 members which are in large part full-time farmers in the province of Ontario, who grow garlic as part of their selection of crops. The GGAO is the only organized garlic producer association in Canada. Based on surveys of 1999/2000 production conducted by the GGAO, its members constitute over 68 per cent of total Canadian production. The dumping complaint is also supported by an additional 14 producers which are not members of the GGAO.
Canadian Market
Appendix 1 contains data relating to the apparent Canadian market for garlic. The apparent Canadian market for garlic has increased steadily and markedly in recent years, from an estimated 5.6 million kilograms in 1992, to approximately 13 million kilograms in 1999.
The domestic producers' share of the Canadian market peaked at 17.5 per cent in 1997, the year in which the Tribunal made its initial injury finding involving garlic from the PRC. Since 1997, the share of the market held by domestic producers decreased to 17.1 per cent in 1998, and decreased to 15.6 per cent in 1999.
The PRC is the largest producer of garlic in the world and has traditionally been the largest supplier of garlic to the Canadian market. The garlic industry in the PRC has reached a high level of sophistication, particularly in the areas of large-scale finishing, handling and storage systems, as well as crop timing. The PRC has developed the ability to deliver large quantities of fresh or frozen garlic anywhere in the world at any time of year.
The market share held by imported garlic from the PRC increased steadily from approximately 30 per cent in 1992, to 69 per cent in 1995. In 1997, subsequent to the injury finding by the Tribunal, the market share of garlic from the PRC dropped to approximately 38 per cent. By 1999, the share of the market held by imports of garlic from the PRC had increased to approximately 44 per cent.
During the first six months of 2000, 7.5 million kilograms of garlic was imported from the PRC. This is the largest amount of garlic ever imported into Canada from one country and represents 82.1 per cent of all imports during this period. This period is the portion of the calendar year when the current Tribunal finding is not in effect.
Garlic from Vietnam did not appear in the Canadian market until 1996. At that time, the share of the market held by imports from Vietnam was approximately 2.5 per cent. In 1997, the share of the market held by imports from Vietnam was approximately 4 per cent. In 1998, the share fell to 1 per cent. In 1999, the share of the market held by imports from Vietnam had increased to approximately 6 per cent. Imports from Vietnam enter Canada primarily during July to December, which is the six-month period in which the Tribunal's injury finding is in place involving garlic from the PRC. During this six-month period in 1999, garlic from Vietnam accounted for 14 per cent of all imports.
Garlic imports from the United States, Mexico and Argentina account for the majority of the remainder of the share of the Canadian market.
Results of the Investigation
The investigation covered all shipments of the subject goods imported into Canada from July 1, 1999 to June 30, 2000, which is referred to as the period of investigation (POI).
At the time of the initiation of the investigation, Requests for Information (RFI) concerning the subject goods imported into Canada during the POI were sent to the known exporters and importers. As well, since the PRC and Vietnam have traditionally been considered non-market economy countries, the governments and exporters of the PRC and Vietnam were provided the opportunity to demonstrate that the garlic industry in these countries was operating under market economy conditions.
As explained in the Statement of Reasons for the preliminary determination of dumping, cooperation from companies identified as potential exporters and importers of the subject goods was limited. With respect to the issue of market economies, the CCRA did not receive information that would alter the original opinion that the garlic industry in these countries was operating in non-market economy conditions.
Normal Value
Normal values are usually based on profitable sales in the exporter's home market, or, in the absence of profitable sales, on the basis of the full costs of the goods plus an amount for profit. In the case of a non-market economy, normal values are normally determined, pursuant to section 20 of SIMA, in a surrogate country with an open-market economy, on the basis of profitable domestic sales or the full cost of the goods plus an amount for profit.
For purposes of the preliminary determination of dumping, the normal value was estimated on the basis of the wholesale-to-retail price of fresh garlic in the Central de Abastos del Distrito Federal (the Food Terminal) in Mexico City, Monterey and Guadalajara, as reported by the United States Department of Agriculture.
During the latter period of the preliminary phase, the CCRA contacted several Mexican producers/distributors in order to obtain their assistance in the CCRA's investigation. Three companies indicated their willingness to do so, submitted complete responses to the CCRA's Request for Information and allowed on-site verification of the data submitted. All three companies have large-scale operations and extensive sales in Mexico. These companies are engaged in the growing, packing and/or marketing of various agricultural products including garlic, and sell to the domestic and foreign markets. Information relating to full costs and sales in the Mexican market was provided to the CCRA on a courtesy basis. CCRA officers conducted on-site verification visits the week of February 11, 2001.
The normal value for each company was established pursuant to subparagraph 20(c)(i) of SIMA on the basis of the selling price of the like goods in Mexico, where domestic sales permitted a proper comparison. Where this comparison was not possible, the normal value was established pursuant to subparagraph 20(c)(ii) of SIMA on the basis of the aggregate of the cost of production, an amount for administrative, selling and all other costs, and a reasonable amount for profit as provided for in the Special Import Measures Regulations. The weighted average normal value for the entire POI was determined to be CDN$1.96 per Kg.
The results of the analysis were used to determine the normal value of subject goods originating in both the PRC and Vietnam.
Export Price
The export price of goods is generally the exporter's selling price to the importer in Canada, less all costs, charges and expenses resulting from the exportation of the goods.
For the purposes of the preliminary determination of dumping, the CCRA relied on information supplied in importer responses, whenever an acceptable response was received from the concerned parties. If the information was not provided, the CCRA relied on actual data from customs documentation to estimate export prices. Export prices were estimated under section 24 of SIMA based upon selling prices to importers, with deductions for freight, brokerage and any other expenses resulting from the exportation of the goods where warranted.
Exporters and importers did not provide any further information after the preliminary determination of dumping. Therefore, for purposes of the final decision, export prices were calculated pursuant to section 24 of SIMA using the information available to the CCRA at the time of the preliminary determination of dumping.
Margins of Dumping
The margin of dumping is the amount by which the normal value exceeds the export price.
PRC
The CCRA's review of imports from the PRC during the period January 1, 2000 to June 30, 2000, reveals that 99.5 per cent of the subject goods were dumped. The margins of dumping ranged from 2.6 to 92.7 per cent, expressed as a percentage of normal value. The weighted average margin of dumping is 68.1 per cent, expressed as a percentage of normal value or 213.4 per cent, expressed as a percentage of export price. The CCRA's calculations concerning imports from the PRC did not take into account imports from July 1, 2000 to December 31, 2000, as these goods are excluded from this investigation.
Vietnam
The CCRA's review of imports from Vietnam during the period July 1, 1999 to June 30, 2000, reveals that 100 per cent of the subject goods were dumped. The estimated margins of dumping ranged from 45.3 to 72.8 per cent, expressed as a percentage of normal value. The weighted average margin of dumping is 55.7 per cent, expressed as a percentage of normal value or 125.9 per cent, expressed as a percentage of export price.
Summary of Results
In making a final determination of dumping, the Commissioner must be satisfied that the margin of dumping is not insignificant. If the margin of dumping is less than 2 per cent of the export price of the goods, it is considered to be insignificant. As demonstrated in the previous section, the margins of dumping are well above the required 2 per cent level. The Commissioner is satisfied that the margin of dumping is not insignificant.
Decision
Based on the results of the investigation, the Commissioner is satisfied that the subject goods have been dumped and that the margin of dumping is not insignificant. Accordingly, on April 2, 2001, the Commissioner has made a final determination of dumping pursuant to paragraph 41(1)(a) of SIMA.
Future Action
The Tribunal's inquiry concerning the question of injury to the Canadian industry is continuing. The Tribunal will issue its finding by May 2, 2001.
Subject goods imported during the provisional period will continue to be assessed provisional duty as determined at the time of the preliminary determination of dumping. The provisional period began on January 2, 2001, the date of the preliminary determination, and will end on the date the Tribunal issues its finding.
If the Tribunal finds that the dumped goods have not caused injury and are not threatening to cause injury, all proceedings relating to this investigation will be terminated. In this situation, all provisional duty or security posted by importers will be returned and future imports will not be subject to anti-dumping duties.
If the Tribunal finds that the dumped goods have caused injury, the CCRA will finalize the anti-dumping duty payable on subject goods released from customs' possession during the provisional period pursuant to section 55 of SIMA. If the provisional duty paid is in excess of the final amount of anti-dumping duty payable, the excess duty paid will be refunded. Imports released from customs' possession after the date of the Tribunal's finding will be subject to anti-dumping duty equal to the margin of dumping. If anti-dumping duty is payable, such duty is hereby demanded pursuant to section 11 of SIMA.
If the Tribunal finds that the dumped goods have threatened to cause injury, except for the fact that provisional duty was applied, anti-dumping duty will be assessed on the subject goods imported during the provisional period. If the Tribunal finds that the dumped goods threaten to cause injury, and the finding does not cover the provisional period, all provisional duties collected will be refunded and security posted will be discharged. Imports released from customs after the date of the Tribunal's finding will be subject to an anti-dumping duty equal to the margin of dumping. If anti-dumping duty is payable, such duty is hereby demanded pursuant to section 11 of SIMA.
Specific details regarding the normal values and export prices of subject goods released from customs' possession after the date of a Tribunal finding of injury or threat of injury, have been provided to exporters and importers.
Publication
Notice of this final determination is being published in the Canada Gazette pursuant to paragraph 41(3)(a) of SIMA.
Information
For further information, please contact Mr. Ron McTiernan or Mr. Roger Duprat as follows:
Mail -Canada Customs and Revenue Agency
Anti-dumping and Countervailing Directorate
191 Laurier Avenue West, 19th Floor
Ottawa, Ontario
Canada
K1A 0L5
Telephone -
Roger Duprat: (613) 952-1963
Ron McTiernan: (613) 954-7271
Telefax -
(613) 954-2510
e-mail -
Roger.Duprat@ccra-adrc.gc.ca
Ron.McTiernan@ccra-adrc.gc.ca
Website -
www.ccra-adrc.gc.ca/sima
R.A. Séguin
A/Director General
Anti-dumping and Countervailing Directorate
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