Anti-dumping and Countervailing Program

Preliminary Determination - Fresh Tomatoes

OTTAWA, March 25, 2002

4237-92
AD/1274

STATEMENT OF REASONS

Concerning a preliminary determination of dumping pursuant to subsection 38(1) of the Special Import Measures Act regarding

FRESH TOMATOES, ORIGINATING IN OR EXPORTED FROM THE UNITED STATES OF AMERICA, EXCLUDING TOMATOES FOR PROCESSING

DECISION

Pursuant to subsection 38(1) of the Special Import Measures Act, the Commissioner of Customs and Revenue has today made a preliminary determination of dumping concerning fresh tomatoes, originating in or exported from the United States of America, excluding tomatoes for processing.

This Statement of Reasons is also available in French.
Cet énoncé des motifs est également disponible en français.

Summary

On November 9, 2001, the Commissioner of Customs and Revenue (Commissioner) initiated an investigation into the alleged injurious dumping of fresh tomatoes, originating in or exported from the United States of America, excluding tomatoes for processing. The investigation was initiated in response to a complaint filed by the Canadian Tomato Trade Alliance of Vancouver, British Columbia.

On receiving notice of the investigation, the Canadian International Trade Tribunal (Tribunal) started its preliminary injury inquiry. On January 8, 2002, the Tribunal made a preliminary determination that the evidence disclosed a reasonable indication that the dumping of the subject goods has caused injury to the domestic industry.

On February 1, 2002, the Commissioner extended the time period to 135 days for completing the preliminary investigation.

As a result of the Canada Customs and Revenue Agency's (CCRA) preliminary investigation, the Commissioner is satisfied that the subject goods have been dumped, that the margins of dumping are not insignificant and that the volume of dumped goods is not negligible. Accordingly, the Commissioner has made a preliminary determination of dumping in accordance with subsection 38(1) of the Special Import Measures Act (SIMA).

Interested Parties

Complainant

The Canadian Tomato Trade Alliance has filed this complaint on behalf of its members. The Canadian Tomato Trade Alliance is an ad hoc alliance formed by greenhouse producers of fresh tomatoes in Canada, representing the majority of fresh tomato producers in Canada.

Exporters

During the preliminary stage of the investigation, the CCRA identified 133 companies that may be exporting the subject goods to Canada.

Importers

During the preliminary stage of the investigation, the CCRA identified 227 importers that may be importing the subject goods.

Background

On September 28, 2001, the Canadian Tomato Trade Alliance filed a formal complaint with the CCRA alleging that its members were being injured as a result of dumped imports of fresh tomatoes, originating in or exported from the United States of America, excluding tomatoes for processing.

On October 19, 2001, the CCRA informed the Canadian Tomato Trade Alliance that this complaint was properly documented and notified the government of the United States that a properly documented complaint had been filed.

On November 9, 2001, 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 disclosed a reasonable indication of injury, retardation or threat of injury caused by the dumping of the goods. On January 8, 2002, the Tribunal concluded that the evidence disclosed a reasonable indication that the alleged dumping has caused injury.

On February 1, 2002, pursuant to paragraph 39(1)(a) of SIMA, the Commissioner extended the time period for completing the preliminary investigation to 135 days. The extension was necessary due to the number of persons involved in the investigation.

Product

Product Definition

For the purpose of this investigation the subject goods are defined as:

fresh tomatoes, originating in or exported from the United States of America, excluding tomatoes for processing.

Additional Product Information

Tomatoes are grown commercially for two general purposes:

"fresh market tomatoes" or "fresh tomatoes", for consumption as a fresh product; or

"processing tomatoes", for further processing into such products as paste, sauce and juice.

The fresh tomatoes covered by the scope of this investigation include those imported for consumption as fresh product, which are not further processed. They may be chilled or not.

Processing is defined to include preserving by any commercial process, such as canning, dehydrating, drying or the addition of chemical substances, or converting the tomato product into juices, sauces or purees.

Common types of commercially grown fresh market tomatoes include: round or "beefsteak"; roma or "plum" or "pear"; cherry; and grape tomatoes. In the United States tomatoes are generally grown in fields but are also grown in greenhouses.

The above types of fresh market tomatoes can be further divided into two other characteristics, depending on the stage of maturation when they are harvested. "Mature green" tomatoes are harvested when they are fully mature in size but still entirely green in color, which are then degreened at some point in the distribution, through the use of ethylene gas. "Vine ripe" or red tomatoes are allowed to ripen to a moderate color on the vine, prior to harvest.

At the point of sale to the consumer, fresh market round, roma, cherry or grape tomatoes (whether field or greenhouse produced, whether mature green or vine ripe) are a red ripe fruit that may be sliced or cut up for salads, sandwiches or salsas, or as an ingredient in various recipes. Roma tomatoes differ from round, cherry and grape tomatoes in that they have a more oval shape, otherwise, they share the same characteristics and end-uses.

The subject goods are typically shipped to Canada in 25 lb boxes, but this may vary depending on the type of tomato.

Classification of Imports

The subject tomatoes are properly classified under the following Harmonized System classification numbers:

0702.00 Tomatoes, fresh or chilled
0702.00.99.10 ----- Cherry
0702.00.99.20 ----- Roma
0702.00.99.90 ----- Other

There is a free rate of duty under the United States Tariff for fresh tomatoes imported from the United States.

Canadian Industry

There have been no changes in the structure of the Canadian industry since the initiation of this investigation. Fresh market tomatoes come from two sources, greenhouse production and field production. Greenhouse tomatoes are destined for the fresh market, while production of field tomatoes is allocated between the fresh market and processing industry. Evidence has shown that, while greenhouse production is increasing, overall field production of fresh market tomatoes has been declining. The majority of field grown tomatoes are specifically grown for processing, which are excluded from this complaint.

Canadian Market

The total market of the subject goods has increased steadily in the last three years: 258,273 metric tonnes in 1998; 271,097 metric tonnes in 1999; and 279,969 metric tonnes in 2000. Canadian production figures for 2001 from Statistics Canada will be available only in April 2002.

Apparent Canadian Fresh Tomato Market from 1998 to 2000
(metric tonnes)

	1998		1999		2000
Greenhouse Production	115,970		158,042		182,736
Field Production	47,628		30,099		26,009
Total Production	163,598		188,141		208,745
Less Exports	61,729		79,554		101,472
Domestic Production for Domestic Consumption	101,869	39%	108,587	40%	107,273	38%
Total Imports	156,404	61%	162,510	60%	172,696	62%
US Imports	115,836	45%	133,249	49%	141,041	50%
All Other Countries	40,568	16%	29,261	11%	31,655	11%
Apparent Canadian Market	258,273		271,097		279,969

Source: Statistics Canada

During the period of investigation, the total volume of all subject goods from the United States exceeded 96 per cent of the total volume of all tomatoes imported into Canada. Of the 96 per cent of the volume of tomatoes imported into Canada from the United States, 81 per cent of those tomatoes originated in the United States, with the remaining 19 per cent of those tomatoes originating in other countries (mainly Mexico) and transshipped through the United States to Canada.

The Investigation

The dumping investigation covered subject goods from the United States, shipped to Canada during the period of investigation, from October 1, 2000 to September 30, 2001. All known importers were contacted at the time of initiation and were requested to respond to a questionnaire concerning subject goods imported into Canada during the period of investigation.

All known exporters were also contacted. In view of the large number of exporters, the CCRA limited the number of exporters to be investigated and questionnaires were sent to the 40 largest exporters, representing in excess of 70 per cent of the subject goods imported into Canada during the period of investigation. These exporters, as mandatory respondents, were required to respond to the Request for Information, while the balance of the exporters could voluntarily provide a response. Furthermore, in the situation where a mandatory respondent was not the grower or did not grow all the tomatoes it exported to Canada, CCRA requested them to send a copy of the CCRA's Request for Information to all of their unrelated producers/suppliers. It was recognized this may increase the number of mandatory respondents.

A total of 33 submissions were received from mandatory reply exporters and producer/suppliers. No voluntary submission was received. Among the submissions received, 15 exporters' and 9 producers/suppliers' submissions were considered complete. These complete submissions were considered for the preliminary decision of dumping. No submissions were verified at the exporters' premises for purposes of the preliminary decision.

Normal values, export prices and margins of dumping were estimated based on the exporters' and producer/suppliers' submissions, covering domestic selling prices, costs, overheads and profits. Estimates of normal values, export prices and margins of dumping are discussed below.

CCRA has requested additional information from the exporters and producers/suppliers that provided incomplete submissions.

The results of the investigation with respect to each of the exporters that provided a complete response to the Request for Information can be found in Appendix 1.

Estimate of the Normal Value

The primary method for determining normal value under SIMA is on the basis of the exporter's domestic sales. In the absence of sales of like goods to more than one unrelated customer, normal values are determined on the basis of the sum of the cost of production of the goods, an amount for administrative, selling and all other costs, and an amount for profit.

In this case, the estimation of normal values was based on domestic sales of tomato groupings under section 15 of SIMA. The groupings were defined by using as many of the relevant characteristics that were applicable: type; color; size; packing configuration; and grade. In one case, one other factor, organic and non-organic tomatoes, was also taken into consideration in the groupings for that exporter.

The domestic sales of tomato groupings, in the same groupings that were exported to Canada, were analysed for profitability. Section 16 of SIMA concerns the treatment of sales made at prices below full cost. The profitability analysis period was October 1, 2000 to September 30, 2001. The full costs used in the profitability analysis were the costs as provided in the submissions. Unacceptable sales, those not meeting the conditions set out in section 16 of SIMA, were deleted from the sales used in determining normal values.

The domestic sales that remained were then sorted into 60-day periods. The 60-day periods were chosen by starting on the first day of the first month in which there were sales during the period of investigation. For example, if the first sale to Canada was October 10, the first 60-day period started with October 1. There were no overlapping 60-day periods.

In the absence of domestic sales of like goods of a tomato grouping during a specific 60-day period, normal values were estimated for that period under section 19 of SIMA on the basis of the sum of the cost of production of the goods, an amount for administrative, selling and all other costs, and an amount for profit. The amount for profit was based on the profit earned by the exporter for the period of investigation, for that tomato grouping. In the absence of a profit for a tomato grouping, the amount for profit was based on the profit earned by the exporter for the period of investigation, for domestic sales of the type of tomato in that grouping.

Estimate of the Export Price

The export price of goods is generally the lesser of the exporter's selling price to the importer in Canada, less all costs, charges and expenses resulting from the exportation of the goods, and the importer's purchase price less all costs, charges and expenses. In this investigation, the CCRA found the exporters selling prices to the importer to be reliable.

Therefore, in all cases, export prices have been estimated under section 24 of SIMA, based on the selling prices to the importers, with deductions for freight and any other expenses resulting from the exportation of the goods, where warranted.

Estimated Margins of Dumping

The margin of dumping is the amount by which the normal value exceeds the export price. For the purpose of the preliminary determination of dumping, the estimated margin of dumping was calculated by comparing the estimated normal values with the estimated export prices.

The CCRA's review of imports from the United States during the period of investigation, from October 1, 2000 to September 30, 2001, reveals that 75 per cent of the volume of subject goods, imported from the mandatory reply exporters with complete submissions, was dumped. The estimated margins of dumping of the dumped goods ranged from 1 to 1,125 per cent, expressed as a percentage of export prices. The weighted average margin of dumping of all mandatory respondents is 22 per cent.

In calculating the estimated margin of dumping for a grouping, any negative margins of dumping offset the positive margins of dumping. In calculating the estimated margins of dumping of each cooperative mandatory respondent, a negative margin at the grouping level was set at zero. In calculating the weighted average margin of dumping of all mandatory respondents, that is, the country weighted average margin of dumping, negative margins were set at zero at the exporter level.

For the mandatory reply exporters that did not respond, or provided an incomplete response to the request for information, the estimated margin of dumping is the highest estimated weighted average margin of dumping found for a cooperative mandatory respondent in the investigation, that is, 71 per cent of the export price. These margins of dumping were not included in the weighted average margin of dumping that was applied to those exporters who were not required to complete the Request for Information.

For the exporters that did not have to respond to the request for information, the margin of dumping is the estimated weighted average margin of dumping found for all cooperative mandatory respondents in the investigation, that is, 22 per cent of the export price.

Summary of Results

Before making a preliminary determination of dumping, the Commissioner must be satisfied that the actual or potential volume of dumped goods is not negligible and that the estimated margins of dumping are not insignificant.

If the volume of dumped goods from a country is less than 3 per cent of the total volume of like goods imported into Canada from all countries during the period of investigation, the volume is considered to be negligible. The total volume of dumped subject goods from only the cooperative mandatory reply exporters that provided a complete response to the request for information exceeded 28 per cent of the total volume of all tomatoes imported into Canada. The total volume of dumped subject goods from all United States of America exporters represents 87 per cent of the total volume of all tomatoes imported into Canada.

The estimated margin of dumping is considered to be insignificant if it is less than 2 per cent of the export price of the goods. In this case, the overall estimated weighted average margin of dumping of all goods, shipped by cooperative mandatory reply exporters, was 22 per cent, expressed as a percentage of the export price. The overall estimated weighted average margin of dumping of all goods shipped from the United States of America was 37 per cent.

The Commissioner is satisfied that the volume of dumped goods is not negligible and the margins of dumping are not insignificant.

Representations concerning the Investigation

Prior to the initiation of the investigation, representations from interested parties, such as the California Tomato Commission and the Florida Tomato Exchange, were received. Certain issues raised in the representations were examined prior to initiation of the investigation and others were left for the preliminary phase, such as an exclusion for field tomatoes used by food services.

The Commissioner did not consider it appropriate to exclude these goods on the basis of their use for food services. In addition, during the investigation, it was found that these goods were dumped.

At the initiation of the investigation, interested parties were invited to file written submissions on the question of the alleged dumping. In response, the NAFTA Office of Mexico in Canada filed a submission. Mexican officials were of the opinion that the CCRA has effectively initiated an investigation against Mexican tomatoes, since the majority of Mexican tomatoes are shipped to Canada through United States' distribution channels, with the exception of a small volume of in-bond shipments. Further, the Chief Representative of the NAFTA Office of Mexico in Canada contends that the method of conducting the investigation has denied producers and exporters of Mexican tomatoes their rights under the World Trade Organization.

The CCRA is of the opinion that the investigation involved all tomatoes originating in or exported from the United States. Therefore, tomatoes grown in Mexico and entered into the commerce of the United States before being re-exported from the United States to Canada are subject to the investigation. Further, the CCRA has sent a Request for Information to all known mandatory reply producers whose products were exported to Canada, including Mexican growers, to get costing data for the profitability analysis.

Decision

Based on the preliminary results of the investigation, the Commissioner is satisfied that the subject goods have been dumped, that the volume of dumped goods is not negligible, and that the estimated margin of dumping is not insignificant. Accordingly, on March 25, 2002, the Commissioner has made a preliminary determination of dumping pursuant to subsection 38(1) of SIMA.

Provisional Duty to be Imposed

In order to prevent further injury from dumped imports, provisional duty will be applied to all subject goods imported into Canada on or after March 25, 2002, pursuant to subsection 8(1) of SIMA. The amounts of provisional duty are based on the estimated weighted average margins of dumping found during the period of investigation.

The provisional duty payable by the importer for subject goods imported into Canada on or after March 25, 2002, is, with reference to Appendix 1:

• from cooperative mandatory reply exporters that provided a complete response to the request for information, the company specific estimated weighted average margin of dumping, as a percentage of the export price;
• from uncooperative mandatory reply exporters, those that did not respond or provided an incomplete response to the request for information, the highest estimated weighted average margin of dumping found for a cooperative mandatory respondent in the investigation: 71 per cent of the export price; and
• from exporters that did not have to respond to the request for information, the estimated weighted average margin of dumping found for all cooperative mandatory respondent exporters in the investigation: 22 per cent of the export price.

It is the importer's responsibility to ensure the provisional duty is paid at the time that the importation is accounted for at Customs. Provisional duty is normally applied on all subject imports until the day the Tribunal makes its final ruling on the injury matter. However, if the investigation is terminated by the CCRA or there are undertakings, provisional duty will no longer be applied to the imported goods.

Payments of provisional duty are made in the same way other Customs duties are paid. Provisional duty may be paid by cash or guarantied by posting a security bond. Cash payment includes payment by credit or debit card or by certified cheque. If a security bond is posted, it must be sufficient to cover the amount of provisional duty payable. Importers should contact their regional Customs office if they require further information on the payment of provisional duty or the posting of security. If the services of a customs broker is used, the importer should immediately advise the brokerage firm that provisional duties are payable.

Future Action

The CCRA

The CCRA will continue its investigation in order to obtain further information relating to the dumping of the subject goods. Verification visits will be conducted on the premises of exporters that have provided a complete response. Within 90 days of the preliminary determination, that is, by June 24, 2002, the CCRA will either make a final determination, specifying the margins of dumping on the basis of all information available at that time, or terminate the investigation.

When making a final decision, if the margin of dumping is insignificant or the actual or potential volume of dumped goods is negligible, proceedings will be terminated in whole or in part, and any provisional duty paid or security posted will be returned to the importers, as appropriate.

The Canadian International Trade Tribunal

The Tribunal will now begin its full injury inquiry and conduct a public hearing into the question of injury. The Tribunal is required to issue its final decision not later than July 23, 2002.

If the Tribunal finds that the dumping has not caused injury or is not threatening injury, then proceedings will be terminated and all provisional duties collected will be refunded. If a decision of injury is made, anti-dumping duty will be imposed on imports of the subject goods.

Retroactive Duty on Massive Importations

Under certain circumstances, anti-dumping duty can be imposed retroactively on subject goods imported into Canada.

When the Tribunal conducts its inquiry on material injury to the Canadian industry, it may consider if dumped goods that were imported close to or after the initiation of the investigation constitute massive importations over a relatively short period of time and have caused injury to the Canadian industry. Should the Tribunal issue a finding that there were recent massive importations of dumped goods which caused injury, importations of subject goods released by customs during the period of 90 days preceding the day of the preliminary determination could be subject to anti-dumping duty.

Undertakings

After a preliminary determination of dumping, the Commissioner may accept undertakings that eliminate the margin of dumping of the goods, or that eliminate the injury caused by the dumping. Acceptable undertakings must account for all or substantially all of the exports to Canada of the dumped goods. If undertakings are accepted, the imposition of provisional duty will be suspended.

Exporters could request that the CCRA complete its investigation and that the Tribunal complete its inquiry on the question of injury, notwithstanding the acceptance of undertakings. In view of the time needed for consideration of undertakings, written undertaking proposals should be made as early as possible, and no later than 60 days after the preliminary determination of dumping.

The legislation allows all interested parties to make representations concerning any undertaking proposals. The CCRA will maintain a list of interested parties and will notify them should an undertaking proposal be received. Persons wishing to be notified must provide their name, address, telephone, fax, or e-mail address, to one of the officers listed below. Interested parties may also consult the Internet website noted below for information on undertakings offered in this investigation. A notice will be posted on the website when an undertaking proposal is received. Interested parties have nine days from the date the undertaking offer is received to make representations.

Publication

Notice of this preliminary determination is being published in the Canada Gazette pursuant to paragraph 38(3)(a) of SIMA.

Information

This Statement of Reasons has been provided to persons directly interested in these proceedings. It is also posted on the Directorate's Website at the address below. For further information, please contact Michel Desmarais, Roger Lyons or Blair Hynes as follows:

Mail:
Canada Customs and Revenue Agency
Anti-dumping and Countervailing Directorate
191 Laurier Avenue West, 19^th Floor
Ottawa, ON
Canada K1A 0L5

Telephone:
Michel Desmarais: (613) 954-7188 
Roger Lyons: (613) 954-7342
Blair Hynes: (613) 954-1641

Fax:
(613) 954-2510

E-mail:
Michel.Desmarais@cbsa-asfc.gc.ca
Roger.Lyons@cbsa-asfc.gc.ca
Blair.Hynes@cbsa-asfc.gc.ca

Web site:
www.cbsa-asfc.gc.ca/sima-lmsi/

Alice Shields
Director General
Anti-dumping and Countervailing Directorate

Appendix 1

Estimated Margin of Dumping by Exporter
FRESH TOMATOES
(October 1, 2000 to September 30, 2001)

Exporter	Volume of GoodsFound to be Dumped	Estimated Weighted Average Margin of Dumping % of Export Price (provisional duty)	Range of Dumping for Dumped Goods Low  High
Cooperative
Ace Tomato Growers	80%	22%	1%	159%
Ag-Mart Produce, Inc.	28%	1%	1%	14%
DiMare Homestead	98%	45%	3%	1125%
DiMare Ruskin, Inc.	0%
Gargiulo Inc., California	83%	23%	3%	372%
Gargiulo Inc., Florida	91%	31%	1%	974%
Live Oak Farms	79%	10%	1%	76%
Nobles Collier Inc.	84%	71%	1%	105%
Oceanside	62%	18%	1%	56%
Pacific Tomato Growers	99%	35%	3%	105%
Six L's Packing Co., Inc.	59%	5%	1%	130%
Sun Pacific	25%	6%	5%	421%
Taylor & Fulton, Inc., Florida	63%	15%	1%	189%
Taylor & Fulton, Inc., Virginia	79%	19%	1%	375%
The DiMare Company, Newman	100%	15%	2%	138%
Triple E Produce Group	44%	7%	13%	26%
West Coast Tomato, Inc.	72%	13%	1%	265%
Un-cooperative
Bianchi & Sons Packing Co.	100%	71%*
Byrd Foods, Inc.	100%	71%*
Central California Tomato Growers Inc.	100%	71%*
East Coast Brokers and Packers	100%	71%*
Foster Farms	100%	71%*
Frank's Distributing Inc.	100%	71%*
Green Valley Farms, Inc.	100%	71%*
Gulfstream Tomato Growers, Ltd.	100%	71%*
Harllee Packing Inc.	100%	71%*
Houwelling Nurseries Ltd.	100%	71%*
Markon Fresh	100%	71%*
Maurice Trudel Brokerage Co.	100%	71%*
Mecca Farms	100%	71%*
Nova Produce	100%	71%*
O.P. Murphy & Son	100%	71%*
Omega Produce	100%	71%*
Oshawa Group Produce Inc.	100%	71%*
Oxbow - Wheatfield	100%	71%*
Oxbow Power - NT	100%	71%*
Ruskin Vegetable Corp.	100%	71%*
Sunblest Management LLC	100%	71%*
Tomatoes of Ruskin	100%	71%*
West Coast Tomato of California L.P.	100%	71%*
All other exporters		22% **

* The highest estimated weighted average margin of dumping found for a cooperative mandatory respondent exporter in the investigation.

** The estimated weighted average margin of dumping found for all cooperative mandatory respondent exporters in the investigation.