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OTTAWA, August 31, 2004
4237-94
AD 1315
STATEMENT OF REASONS
Concerning the final determination of dumping pursuant
to subsection 41(1) of the Special Import Measures Act regarding
FROZEN SELF-RISING PIZZA ORIGINATING IN OR
EXPORTED FROM THE UNITED STATES OF AMERICA
DECISION
On August 16, 2004, in accordance with subsection 41(1) of the Special Import Measures Act, the President of the Canada border Services Agency made a final determination of dumping respecting prepared uncooked frozen pizza products containing uncooked self-rising dough and cooked and/or uncooked toppings which typically may include processed vegetables and/or meats and/or poultry and/or cheeses and/or a prepared sauce, put up for retail sale, originating in or exported from the United States of America.
Cet énoncé des motifs est également disponible en français. Veuillez vous reporter à la section « Renseignements ».
This Statement of Reasons is also available in French. Please refer to the “Information” section.
table OF CONTENTS
[1] On November 12, 2003, the Canada Customs and Revenue Agency (CCRA) received a written complaint from McCain Foods Limited (McCain) concerning the alleged injurious dumping of frozen self-rising pizza originating in or exported from the United States of America (United States). On December 3, 2003, McCain was informed that its complaint was properly documented. The government of the United States was notified that a properly documented complaint had been received by the CCRA respecting the subject goods.
[2] On December 12, 2003, responsibility for the CCRA program, including the administration of the Special Import Measures Act (SIMA), was transferred to the Canada border Services Agency (CBSA), which was created on the same day. The President of the CBSA (President) is now responsible for dumping and subsidy investigations.
[3] On January 2, 2004, the President initiated an investigation into the alleged injurious dumping of frozen self-rising pizza originating in or exported from the United States.
[4] Upon receiving notice of the investigation, the Canadian International trade tribunal (tribunal) started its preliminary injury inquiry. On March 2, 2004, in a preliminary determination of injury, the tribunal determined that the evidence discloses a reasonable indication that the dumping of the subject goods has caused injury to the Canadian industry.
[5] On March 12, 2004, pursuant to paragraph 39(1)(a) of SIMA, the President made the decision to extend the 90-day period for making a preliminary decision in the investigation to 135 days, by reason of the complexity of the issues presented by the investigation.
[6] On May 17, 2004, pursuant to subsection 38(1) of SIMA, the President made a preliminary determination of dumping respecting frozen self-rising pizza originating in or exported from the United States.
[7] The CBSA continued its dumping investigation for purposes of reaching a final decision. On the basis of the results of the investigation, the President was satisfied that the subject goods have been dumped and that the margin of dumping is not insignificant. Consequently, on August 16, 2004, the President made a final determination of dumping pursuant to paragraph 41(1)(a) of SIMA.
[8] On August 18, 2004, the tribunal found that the dumping of the goods has not caused injury or retardation and is not threatening to cause injury to the domestic industry.
[9] The investigation covers all subject goods released into Canada during the period January 1 to December 31, 2003.
[10] The complainant, McCain Foods Limited, is the largest Canadian manufacturer of frozen self-rising pizza, as well as the sole Canadian producer of branded frozen self-rising pizza. The complainant’s address is:
McCain Foods Limited
107 Main Street
P.O. Box 97
Florenceville, New Brunswick
E7L 1B2
[11] At the time of the initiation of the investigation, the CBSA had identified two exporters of the subject goods. The CBSA sent a Request for Information (RFI) to the two exporters and both exporters provided properly documented responses.
[12] A new exporter was identified shortly after the preliminary determination of dumping and was requested to provide a response to the RFI. The exporter notified the CBSA that it would not be providing a response. The new exporter shipped minimal volumes during the POI.
[13] At the time of the initiation of the investigation, the CBSA had identified four potential importers of the subject goods. An RFI was sent to each potential importer. During the investigation, the CBSA confirmed that one of the importers did not import the subject goods during the period of investigation. The other three importers provided complete responses to the RFI.
[14] During the final investigation, a new importer was identified and was requested to provide a response to the RFI. The importer indicated that it would not be providing a response to the RFI. The importer imported minimal volumes during the POI.
[15] For the purpose of this investigation, the subject goods are defined as:
Prepared uncooked frozen pizza products containing uncooked self-rising dough and cooked and/or uncooked toppings which typically may include processed vegetables and/or meats and/or poultry and/or cheeses and/or a prepared sauce, put up for retail sale, originating in or exported from the United States of America.
Additional Product Information
[16] Frozen self-rising pizza consists of uncooked dough forming a crust, toppings, protective packaging, and a display carton. Frozen self-rising pizza generally differs from other frozen pizza in the following ways:
- Frozen self-rising pizza dough is uncooked, while in regular frozen pizza the dough is pre-cooked;
- Frozen self-rising pizza is sold in vacuum-sealed packaging, while regular frozen pizza is usually sold in a carton with a simple polyethylene over-wrap; and
- Frozen self-rising pizza is generally produced in “family size” (9 inches in diameter or larger), and sold as single pizzas (“1-packs”) or as a set of two pizzas (“2-packs”). Smaller pizzas, known as “personal” size pizzas are also produced.
[17] Details concerning the production process of frozen self-rising pizza were provided in the Statement of Reasons regarding the initiation of the investigation. This document is available upon request. Please contact the SIMA Registry at 613-948-4605 or simaregistry-depotlmsi@cbsa-asfc.gc.ca for more information.
[18] Frozen self-rising pizza is properly classified under the following Harmonized System classification numbers:
1901.20.13.20
1901.20.15.20
[19] McCain is the largest Canadian manufacturer of frozen self-rising pizza, as well as the sole Canadian producer of branded frozen self-rising pizza. Other Canadian manufacturers of frozen self-rising pizza include Les Aliments T&N of Dorval, Quebec, and Les Aliments Da Vinci Ltée of Montréal, Quebec. Both of these manufacturers produce self-rising pizzas on a private label basis. At the time of initiation, Multi-Do Inc. of Saint-Georges, Quebec, was identified as a manufacturer of frozen self-rising pizza. This company has informed the CBSA that it ceased operation in September 2003.
[20] Information on the volume and value of imports cannot be published because this would reveal confidential data supplied by the exporters involved in the investigation.
[21] At the time of the initiation of the investigation, the CBSA requested information from two exporters to estimate the normal values and export prices of the subject goods. While a third exporter was identified in the latter part of the investigation, the two exporters account for virtually 100% of the goods imported into Canada during the period of investigation. Information concerning imports of the subject goods was also requested from the importers. In March 2004, CBSA officers carried out on-site verification of the information provided by one importer and the two exporters.
[22] In conducting its investigation, the CBSA requested identified exporters and importers to provide sales and cost information necessary to determine the normal values and export prices of the subject goods. For purposes of the final determination, normal values and export prices were determined based on information contained in the importers’ and exporters’ submissions.
[23] Normal values are generally based on the domestic selling prices of the goods in the country of export or on the full cost of the goods (cost of production, administrative, selling and all other costs) plus a reasonable amount for profit.
[24] The export price of goods shipped to Canada is generally the lesser of the exporter’s ex-factory selling price or the importer’s purchase price, adjusted by taking specific costs, charges and expenses into consideration. In certain circumstances, where there is no selling price or the sale is between associated parties, the export price may be determined on the basis of the importer’s selling price in Canada less an amount to cover the importer’s profit and costs associated with the importation and sale of the goods in Canada and the costs, charges and expenses arising from the exportation of the goods.
[25] When the export price is less than the normal value, the difference is the margin of dumping.
[26] The CBSA determined the margins of dumping by subtracting the total export price from the total normal value. This calculation was performed on each pizza variety for each package configuration shipped to Canada during the period of investigation. Accordingly, any sales made at undumped prices reduced the margin of dumping found for that particular variety and package configuration.
[27] The CBSA determined the overall margin of dumping for each exporter by weighting the margins found for each product variety and package configuration according to the volumes exported to Canada during the period of investigation.
[28] In determining the weighted average margin of dumping of the country, the overall margins of dumping found in respect of each exporter were weighted according to the volume of subject goods exported to Canada during the period of investigation.
[29] Two exporters from the United States, Kraft Foods Global, Inc. (formerly Kraft Foods North America, Inc.) and Palermo Villa, Inc. (Palermo) submitted complete responses to the RFI. The submissions were examined and verified by the CBSA. The calculations of the normal values, export prices and margins of dumping for each exporter are discussed below.
[30] Effective March 19, 2004, Kraft Foods North America, Inc. became Kraft Foods Global, Inc. (KFG). Kraft Foods Inc. is the parent company of KFG. The subject goods are produced by KFG at production facilities in Little Chute and Sussex, Wisconsin.
[31] KFG is the exporter of record on all exports to Canada. Kraft Canada Inc. (Kraft Canada) is the sole importer, marketer and national distributor of Kraft frozen self-rising pizza in Canada.
[32] In the United States, frozen self-rising pizza is sold through the Kraft Pizza Company (KPC). Kraft Foods Inc. is the parent company of KPC.
[33] The normal values were determined pursuant to section 15 of SIMA, based on domestic market selling prices of like goods sold in the ordinary course of trade. Paragraph 16(1)(c) of SIMA directs that, where the sales of like goods by the exporter were solely or primarily to purchasers who were associated with the exporter, the President may specify one or more other vendors to be the exporter, if there were sales of like goods by other vendors that permit a proper comparison.
[34] KFG did not have domestic market sales to purchasers with whom it was not associated. All frozen self-rising pizza is sold in the domestic market by KPC. The transactions between KFG and KPC cannot be used to determine normal values due to the relationship between the two companies. Accordingly, the CBSA applied subparagraph 16(1)(c)(ii), deeming the vendor, KPC, to be the exporter of the goods for the purpose of determining the normal value of the goods sold to the importer in Canada.
[35] KPC supplied information on its sales of like goods in the domestic market as well as costs of production of the like goods and of the goods exported to Canada. In analyzing the domestic market sales, the quantities and selling prices of each product were consolidated on a monthly basis for each customer, due to the large number of domestic sales. During the on-site verification exercise at the company’s premises, the CBSA obtained and verified domestic sales data on a weekly basis. Based on the analysis, it was determined that KPC had a sufficient number of profitable sales of like goods to non-associated customers in the United States, thus meeting the conditions of section 15 of SIMA.
[36] The quantity of goods sold to Kraft Canada is larger than the largest quantity sold by KPC for consumption in its domestic market. In determining the normal values pursuant to section 15 of SIMA, the CBSA applied paragraph 16(1)(d) of SIMA, which states that, in such circumstances, the sales of like goods shall be those that are in the largest quantity sold by the exporter for use in the domestic market. Accordingly, normal values for each product variety and package configuration were based on the weighted average domestic market selling prices of the like goods sold to KPC’s large volume customers.
[37] Where applicable, the normal values were adjusted in accordance with the Special Import Measures Regulations (SIMR), as follows:
- A regulation 8 freight adjustment was allowed for domestic sales that were sold on a delivered or freight included basis. Freight and distribution expenses were allocated as a percentage of gross sales revenue, which resulted in a downward adjustment to normal values.
- A regulation 9 trade level adjustment was made to take into account selling, advertising and marketing expenses incurred on domestic sales to purchasers who are at the trade level nearest and subsequent to that of the importer. The importer, Kraft Canada, is a national distributor. KPC’s sales in the domestic market are to the retail level of trade. The CBSA examined and verified selling, advertising and marketing expenses incurred on domestic sales that are not incurred by the vendor on sales to Kraft Canada and decreased normal values by the respective amounts.
[38] For purposes of the preliminary determination of dumping, export prices were based on the lesser of the exporter’s sale price of the goods or the price at which the importer has purchased or agreed to purchase the goods in accordance with section 24 of SIMA. At that time, it was indicated that further analysis would be done to test the reliability of the export prices for SIMA purposes, in view of the relationship between the importer and the exporter. The analysis indicated that the export prices based on the selling prices between the two parties were generally unreliable. Therefore, export prices for the final determination of dumping were determined using section 25 of SIMA, based on Kraft Canada’s resale prices in Canada, less the costs incurred on export, the importer’s costs incurred in Canada, and an amount representing the average industry profit in Canada, determined using regulation 22 of the SIMR.
[39] The normal values were compared with the export prices for all subject goods imported into Canada during the POI. The CBSA found that 100% of the goods exported by KFG were dumped by a weighted average margin of dumping of 29.7%, expressed as a percentage of export price. The margins of dumping of the dumped goods ranged from 15.2% to 63.6%. As a result of the re-calculation of export prices in accordance with section 25 of SIMA, the weighted average margin of dumping for the final determination is lower than the margin estimated at the time of the preliminary determination.
[40] Palermo, a pizza manufacturer, is the exporter and vendor of subject goods exported to Canada. Palermo has manufacturing operations located in Milwaukee, Wisconsin, and Elk Grove Village, Illinois. In the United States, Palermo sells private label frozen self-rising pizza to retailers and distributors. Palermo exports private label frozen self-rising pizza to unrelated Canadian customers.
[41] Palermo supplied information regarding its sales and costs of production for like goods sold in the domestic market and for goods exported to Canada. Based on an analysis of the information, it was determined that Palermo had a sufficient number of profitable sales of like goods to non-associated customers in the United States. The normal values for each product variety and package configuration were determined pursuant to section 15 of SIMA based on the weighted average domestic market selling prices of like goods. The domestic sales of Palermo were at the same level of trade as the importers in Canada.
[42] Where applicable, the normal values were adjusted in accordance with the SIMR, as follows:
- A regulation 5 adjustment was allowed when the goods sold to the importer in Canada and the like goods sold in the domestic market differed in their quality, structure, design or material. The CBSA obtained and verified information for carton costs, which resulted in a downward adjustment to normal values.
- A regulation 6 adjustment was allowed to take into consideration cash discounts, rebates and deferred discounts that were generally granted in the domestic market and for which the importer would have qualified if the sale had occurred in the United States. The CBSA identified and verified cash discounts given to customers that resulted in a downward adjustment to certain normal values.
- A regulation 7 freight adjustment was allowed for domestic sales that were sold on a delivered or freight included basis. Palermo provided data covering actual freight costs for shipments to each domestic purchaser of like goods. The data indicated a downward adjustment to normal values was in order. The amount allowed for the regulation 7 freight adjustment was revised in the latter part of the investigation and has resulted in normal values that are slightly higher than those estimated at the time of the preliminary determination.
[43] Export prices were determined pursuant to section 24 of SIMA, based on the lesser of the exporter’s sale price of the goods or the price at which the importer has purchased or agreed to purchase the goods. In this case, the CBSA used the exporter’s selling price.
[44] The normal values were compared with the export prices for all subject goods imported into Canada during the POI. The CBSA found that 26% of the goods exported by Palermo were dumped by a weighted average margin of dumping of 0.9%, expressed as a percentage of export price. The margins of dumping of the dumped goods ranged from 0.08% to 9.35%. While Palermo’s exports to Canada were not found to be dumped at the time of the preliminary determination, the revised normal values have resulted in a slightly higher margin of dumping for the final determination.
[45] A third exporter was identified as an exporter of subject goods shortly after the preliminary determination of dumping and was requested to provide a response to the RFI. The exporter notified the CBSA that it would not be providing a response to the RFI.
[46] Pursuant to subsection 29(1) of SIMA, where, sufficient information has not been furnished or is not available to enable the determination of the normal value or the export price of the subject goods as provided for in sections 15 to 28 of SIMA, the normal value or the export price of the subject goods, as the case may be, shall be determined in such manner as the Minister specifies.
[47] The normal value of the goods exported to Canada by the third exporter was determined to be the export price plus 63.6% of the export price. The advance represents the highest margin of dumping on an individual shipment from cooperative exporters during the investigation. This resulted in a weighted average margin of dumping equal to 63.6% of the export price.
[48] The results of the investigation indicate that 97.3% of the subject goods imported into Canada during the POI were dumped by an overall weighted average margin of dumping of 28.7% when expressed as a percentage of export price. The margins of dumping by exporter can be found in Appendix 1.
[49] In making a final determination of dumping, the President must be satisfied that the subject goods have been dumped and that the margin of dumping is not insignificant. Subsection 2(1) of SIMA defines insignificant as being less than 2% of the export price of the goods. The overall weighted average margin of dumping calculated for the goods originating in or exported from the United States is well above the 2% threshold.
[50] Based on the results of the investigation, the President is satisfied that the frozen self-rising pizza originating in or exported from the United States has been dumped and that the margin of dumping is not insignificant. Accordingly, on August 16, 2004, the President made a final determination of dumping pursuant to paragraph 41(1)(a) of SIMA.
[51] On August 18, 2004, the tribunal found that the dumping of the goods has not caused injury or retardation and is not threatening to cause injury to the domestic industry. As such, all proceedings under SIMA respecting the dumping of the subject goods are now terminated and the collection of provisional duties has ceased. All provisional duty paid will be returned and any security posted will be cancelled.
[52] A notice of this final determination is being published in the Canada Gazette pursuant to paragraph 41(3)(a) of SIMA.
[53] This Statement of Reasons has been provided to persons directly interested in these proceedings. It is also posted on the Directorate’s Web site at the address below. For further information, please contact one of the officers noted below:
Mail
Canada border Services Agency
Anti-Dumping and Countervailing Directorate
100 Metcalfe Street, 11th Floor
Ottawa, Ontario K1A 0L8
Canada
Telephone
Karen Humphries (613) 954-7176
Rand McNally: (613) 954-1663
Tara Ryan: (613) 954-7187
Fax
(613) 954-2510
Email:
Karen.Humphries@cbsa-asfc.gc.ca
Rand.McNally@ccra-adrc.gc.ca
Tara.Ryan@ccra-adrc.gc.ca
Web site: www.cbsa-asfc.gc.ca/sima
Suzanne Parent
Director General
Anti-Dumping and Countervailing Directorate
MARGINS OF DUMPING
Exporter |
Percentage of Goods Dumped |
Range of Margins of Dumping* |
Weighted Average Margin of Dumping * |
Kraft Foods Global, Inc. |
100% |
15.2% - 63.6% |
29.7% |
Palermo Villa, Inc. |
26.0% |
0.8% - 9.35% |
0.9% |
Other Exporter |
100% |
63.6% |
63.6% |
United States of America – Total |
97.3% |
28.7% |
*expressed as a percentage of export price
