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OTTAWA, January 6, 2006
RR-2005-001

STATEMENT OF REASONS

Concerning a determination under paragraph 76.03(7)(a) of the

Special Import Measures Act respecting

GARLIC, FRESH OR FROZEN, ORIGINATING IN OR EXPORTED FROM THE PEOPLE'S REPUBLIC OF CHINA AND VIETNAM

DECISION

On December 22, 2005, pursuant to paragraph 76.03(7)(a) of the Special Import Measures Act, the President of the Canada Border Services Agency determined that the expiry of the finding made by the Canadian International Trade Tribunal on May 2, 2001, in Inquiry No. NQ-2000-006, concerning 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, and the expiry of the order made by the Canadian International Trade Tribunal on March 20, 2002, in Inquiry No. RR-2001-001, concerning fresh garlic originating in or exported from the People's Republic of China, imported into Canada from July 1 to December 31, inclusive, of each calendar year, are likely to result in the continuation or resumption of dumping of such goods.

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


Table of Contents

SUMMARY

I.Case Information

II. Expiry Review Proceedings

CONCLUSION
FUTURE ACTION
INFORMATION


SUMMARY

[1] On August 26, 2005, the Canadian International Trade Tribunal (Tribunal), pursuant to subsection 76.03(3) of the Special Import Measures Act (SIMA), initiated an expiry review of:

  • its order made on March 20, 2002, continuing without amendment, its finding made on March 21, 1997, concerning fresh garlic originating in or exported from the People's Republic of China (China), imported into Canada from July 1 to December 31, inclusive, of each calendar year; and
  • its finding made on May 2, 2001, concerning garlic, fresh or frozen, originating in or exported from China and Vietnam, and not included in the first case.
  • [2] It is the Tribunal's practice to issue a single notice of expiry where two or more findings or orders concerning identical goods, or goods that closely resemble each other, have dates of expiry of up to one year apart. In this case, the finding is scheduled to expire on May 2, 2006, and the order is scheduled to expire on March 20, 2007.
  • [3] The Canada Border Services Agency (CBSA) initiated an expiry review investigation on August 29, 2005, to determine whether the expiry of the finding and order are likely to result in the continuation or resumption of dumping of the subject goods.
  • [4] On December 22, 2005, the President of the CBSA (President), determined, pursuant to paragraph 76.03(7)(a) of SIMA, that the expiry of the finding and order was likely to result in the continuation or resumption of dumping into Canada of the goods from China and Vietnam.

I. Case Information

A. Background

[5] This case was originally two separate anti-dumping investigations concerning garlic.

[6] The original case was initiated on August 23, 1996, following a complaint regarding fresh garlic from China filed by the Garlic Growers Association of Ontario (GGAO). A final determination of dumping was made on February 19, 1997. On
March 21, 1997, the Tribunal found that the dumping in Canada of fresh garlic originating in or exported from China had caused material injury to the domestic industry. The finding, however, was restricted to subject goods imported from July 1 to December 31, inclusive, f each calendar year.

[7] Following two unsuccessful requests for interim reviews of the finding, the GGAO filed a second dumping complaint concerning Chinese garlic, to cover the
six-month period that was not covered by the Tribunal finding. The second investigation was initiated on October 31, 2000. In addition to fresh garlic from China imported from January 1 to June 30 of each year, the second investigation included frozen garlic from China imported during the entire year, and fresh and frozen garlic from Vietnam imported during the entire year.

[8] The final determination of dumping regarding the goods subject to the second investigation was made on April 2, 2001. On May 2, 2001, the Tribunal issued its finding of injury with respect to the goods subject to the second investigation.

[9] On March 20, 2002, the Tribunal concluded an expiry review of the first finding and issued an order that continued the finding without amendment.

[10] On June 28, 2005, the Tribunal issued a single notice of expiry for both the finding and order. When it issued its notice, the Tribunal invited comments from all interested parties. Based on the available information, the Tribunal decided that an expiry review of the finding and order was warranted and, on August 26, 2005, the Tribunal initiated an expiry review (RR-2005-001).

[11] On August 29, 2005, the CBSA initiated an expiry review investigation to determine whether the expiry of the finding and order are likely to result in the continuation or resumption of dumping of the subject goods from China and Vietnam.

B. Product Description

[12] The goods under review are defined as garlic, fresh or frozen, originating in or exported from China and Vietnam.

[13] The subject goods include whole garlic bulbs; individual cloves, unpeeled or peeled; garlic sprouts; and garlic stems. The garlic may be cured, trimmed and cleaned. Garlic delivered in cold storage (chilled garlic) is considered "fresh" garlic. The garlic may also be frozen.

[14] The subject goods include all strains of garlic, of both the ophioscorodon (hardneck) and sativum (softneck) subspecies. 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. Garlic is used principally as a food product and for seasoning.

[15] Dehydrated garlic, garlic flakes, garlic powder, garlic paste or similar processed garlic are not included in the finding and order.

C. Classification of Imports

[16] Fresh and frozen garlic are classified under the Harmonized System (HS) code numbers 0703.20.00.00 and 0710.80.90.90, respectively.

D. Period of Review

[17] The CBSA's Period of Review (POR) for the expiry review is January 1, 2002 to June 30, 2005.

E. Canadian Industry

[18] The CBSA did not receive any responses to its producer Expiry Review Questionnaire (ERQ) and can, therefore, not accurately assess the Canadian production of garlic. Nonetheless, based on details concerning the GGAO, whose membership has traditionally accounted for approximately 70% of Canadian garlic production,1 it appears that the Canadian garlic industry has declined significantly since 2001. In 2001, the GGAO was comprised of 96 producers and the estimated total area of garlic production in Canada was 1,215 acres.2 The GGAO membership currently consists of 69 growers whose acreage has been reduced to 309 acres.3 Assuming that the non-GGAO producers, representing 30% of the garlic industry, have experienced similar acreage reductions, the CBSA estimates the current Canadian industry to be 440 acres, which is a reduction of approximately 65% since 2001.

F. Canadian Market

[19] The Canadian market is composed of Canadian garlic production and imports of garlic from all countries. The CBSA could not accurately determine the size of the Canadian market for the following reasons:

  • The CBSA did not receive submissions from importers and exporters of the subject goods or from Canadian producers;
  • Import data contained in the Customs Commercial System (CCS) concerning fresh garlic from non-subject countries, that is other than China and Vietnam, presents challenges because the HS code number includes processed forms of fresh garlic that are not included in the scope of the product definition; and
  • Import data concerning frozen garlic is particularly difficult to obtain given that the frozen garlic is imported under an HS code including other frozen vegetables.

[20] For purposes of estimating the Canadian market, the following assumptions were made:

  • The Canadian production for 2002 has been estimated to be 2 million kilograms, that is, the all time high level that it was at prior to the 2000 investigation;4
  • The Canadian annual production for 2003, 2004 and 2005 have been estimated by decreasing the estimated 2002 production by 65% (equivalent to the 65% acreage reduction mentioned above) in equal parts over the 3-year period;5
  • While import volumes from non-subject countries may include processed garlic (e.g. minced, chopped, sliced, etc.), which is not subject to the Tribunal finding, it is assumed that the totality of the imported volume is subject to the finding; and
  • There continues to be a limited number of importations of frozen garlic.6

[21] Using the above assumptions, the CBSA has estimated the apparent Canadian market during the POR as found in Appendix A. Based on the information in
Appendix A as well as the apparent Canadian market from 1992 - 2000 (Appendix B), the following general comments may be made concerning the Canadian market:

  • The Canadian market has remained fairly constant in the past few years at approximately 13 - 14 million kg;
  • Historically, imports from the "Americas" group (i.e. United States of America (United States), Mexico and Argentina) and China represented a significant proportion of Canada's imports of garlic;
  • China's share of imports into Canada had reached levels as high as 69% in the past. Garlic from China currently accounts for less than 2% of the import market;
  • Imports from Vietnam, predominantly during periods when Chinese garlic was subject to a finding, had permitted Vietnam's share of the import market to reach levels as high as 6% in the past. There were no imports of garlic from Vietnam during the POR; and
  • Since the 2001 finding, which effectively rendered all imports of Chinese garlic subject to anti-dumping measures, import sources have shifted to the "Asia" group (i.e. Philippines, Turkmenistan, Uzbekistan, Thailand, etc.), which now represent more than 85% of imports of garlic into Canada. The average price of imports from these sources is relatively low in comparison to the Americas group average import price.

[22] Taking the above comments into consideration, it appears that from 1992 to 1996, imports of fresh garlic into Canada were predominantly from the Americas and China, with China gaining increasingly larger shares. Following the 1997 finding, imports from China remained very significant (particularly during the half year period when anti-dumping measures were not in place) while imports from Vietnam increased (primarily during the period of the year when the finding regarding Chinese garlic was in effect). Imports from the Americas group, while still significant, never recovered their prior levels. Since the 2001 finding, it appears that lower priced imports from the Asia group have acquired the lion's share of imports (86% in 2004 and 85% in the first half of 2005) and replaced the import market shares traditionally held by China, Vietnam, and to some extent, the Americas group (the United States in particular).

G. Case Enforcement

Normal Values

[23] The normal values applied to garlic imported during the POR were established at a time when the CBSA considered the garlic industry in China and Vietnam to be operating in a non-market environment. Accordingly, normal values were determined pursuant to section 20 of SIMA using Mexico as a surrogate country and calculated to be $2.50/kg CAD.

[24] Prior to this expiry review, the CBSA conducted a reinvestigation to update the normal values of the subject goods. At the time of the reinvestigation, the President concluded that section 20 was no longer applicable as economic conditions in both countries had changed since the last investigation. Exporters were advised that, while the CBSA was requesting information regarding domestic selling prices and costs of production in China and Vietnam, normal values of future shipments to Canada would nonetheless be determined pursuant to section 29 of SIMA, that is, in a manner specified by the Minister. Given the potential variance in crop yield from one crop-year to another, the CBSA does not consider the normal values established pursuant to sections 15 to 19 for one crop year to be indicative of the normal value of future crop years. By requesting domestic pricing and costing information for a two-year period, the CBSA hoped to gather information that would allow it to establish a more representative value for future shipments to Canada.

[25] The CBSA did not receive sufficient information to do so. Accordingly, the CBSA used the information available at the time of the final determination of dumping of the second case and maintained the $2.50/kg CAD normal value for imports of fresh and frozen garlic from China and Vietnam.

Export Price

[26] In 1998, following the first Tribunal finding, the former Department of
National Revenue (now the CBSA) found evidence of false declarations of selling prices that lead to widespread avoidance of anti-dumping duty on imports of Chinese garlic subject to the first Tribunal finding.7 This resulted in the export price for fresh garlic being determined pursuant to section 29 of SIMA, that is, in a manner specified by the Minister. The specified export prices for goods imported during the POR are
$0.68/kg CAD for China and $0.79/kg CAD for Vietnam.

[27] The export price of frozen garlic from China and Vietnam is based on the Free on Board (FOB) selling price declared on customs documentation, as these were not suspected of being misrepresented.

[28] Table 1 provides the normal values, export prices and anti-dumping duty applicable to imports of fresh and frozen garlic from Vietnam and China during the POR.

Table 1: Normal Values, Export Prices and Anti-Dumping Duty by Product and Country

Product

Country

Normal Value

(CAD/kg)

Export Price

(CAD/kg)

Anti-Dumping Duty Payable

(CAD/kg)

Fresh Garlic

China

$2.50

$0.68

$1.82

Fresh Garlic

Vietnam

$2.50

$0.79

$1.71

Frozen Garlic

China

$2.50

Based on FOB selling price

= Normal value minus Export price

Frozen Garlic

Vietnam

$2.50

Based on FOB selling price

= Normal value minus Export price

Anti-Dumping Duty Collected

[29] Anti-dumping duty is applicable when the normal value exceeds the export price. Given that the export prices of fresh garlic have been specified at levels lower than the established normal value, anti-dumping duty was payable on all shipments of fresh garlic. Anti-dumping duty for the frozen garlic was applied when the normal value exceeded the export price and was equal to the difference between the normal value and export price.

[30] During the POR, the CBSA collected approximately $845,515 of anti-dumping duty on 476,657 kilograms of fresh and frozen garlic imports.8 The subject imports represent approximately 1% of the volume of imports of garlic from all countries during the POR. Fresh garlic represented approximately 95% of the volume of the subject imports. All of the subject goods were from China as imports from Vietnam ceased after the second Tribunal finding. Details regarding the anti-dumping duty collected on imports during the POR are provided in Table 2.

Table 2: Anti-Dumping Duty Collected on Fresh and Frozen Garlic from China from 2002-2005

Year

Quantity (kg)

Value for Duty

(CAD)

Anti-Dumping Duty Paid

(CAD)

2002

104,098

195,910

173,197

2003

153,791

193,103

275,071

2004

188,853

144,181

342,801

2005

29,915

48,049

54,446

Total

476,657

$ 581,242

$ 845,515

Enforcement Issues

[31] Throughout the enforcement of these two cases, the CBSA received numerous complaints regarding the first finding as well as the enforcement of the Tribunal decisions. On two occasions, the GGAO requested the Tribunal to conduct an interim review of the first finding. The Tribunal was asked to extend the period to include the first six months of each calendar year. The GGAO claimed that exporters from China were circumventing the finding by shipping large quantities in the weeks prior to the period when the anti-dumping duty was applicable. The imported garlic was then stored in controlled-temperature facilities and sold in the Canadian market during the crucial July-December period. On the first occasion, the Tribunal was of the view that the possible circumvention of the finding alone did not justify conducting a review of its finding. On the second occasion, the Tribunal found that it did not have the jurisdiction to expand the scope of the finding to impose anti-dumping duty during the entire year.9

[32] Since the second Tribunal finding, which effectively made all imports of Chinese garlic subject to anti-dumping measures, the CBSA has received complaints alleging that the country of origin of Chinese garlic is being misrepresented in order to avoid the payment of anti-dumping duty.10 As stated previously, imports of Chinese garlic effectively dropped to nothing once the second finding was in place and low-priced imports from other countries quickly replaced the goods that were coming from China. However, at the same time, the CBSA has observed that during 2004, Turkmenistan, representing approximately 16% of total imports of garlic into Canada11, exported approximately twice the amount it has grown, according to the Food and Agriculture Organization of the United Nations (FAO) statistical database.12 Similar allegations concerning the misrepresentation of the country of origin have also been voiced in the United States, which also has an anti-dumping finding in place.13

II. Expiry Review Proceedings

A. Participants

[33] On August 26, 2005, the Tribunal's expiry review notice was sent to 45 Canadian producers, 147 importers, 90 exporters and interested parties.

[34] Parties wishing to submit information for consideration were provided with the relevant ERQ. The ERQs requested the information the President requires when considering the relevant factors listed in subsection 37.2(1) of the Special Import Measures Regulations (SIMR) to determine whether the expiry of the finding and/or the order are likely to result in continued or resumed dumping of the goods. Any person or government having an interest in this investigation was also invited to provide a submission.

[35] While the GGAO did not participate in the CBSA's expiry review proceedings and did not provide a response to the ERQ, they did submit comments to the Tribunal following the Tribunal's notice of expiry on June 28, 2005, and indicated that there is a likelihood of continued or resumed dumping if the finding and order are allowed to expire. These comments are summarized in Part B, below. The GGAO did not provide any case arguments or reply submissions to the CBSA.

[36] Five importers informed the CBSA that they no longer import the subject goods and would not be completing the ERQ. These importers also did not provide case arguments or reply submissions.

[37] The remaining importers and exporters of the subject goods chose not to participate in the CBSA's expiry review proceedings and did not provide responses to the ERQ, case arguments or reply submissions.

[38] The CBSA did receive one submission from a Canadian importer/processor of garlic from non-subject countries, Mannarino's Creative Foods (Mannarino's), which is summarized below.14 Mannarino's did not submit any case arguments or reply submissions.

B. Information Used by the President

Administrative Record

[39] The information to be used and considered by the President for purposes of this expiry review proceeding is contained on the administrative record. The administrative record includes the exhibits listed on the CBSA's Exhibit Listing, which is comprised of the Tribunal's administrative record at initiation of the expiry review, CBSA exhibits and information submitted by interested persons, including information which they believe is relevant to the decision as to whether dumping is likely to continue or resume. This information may consist of expert analysts' reports, excerpts from trade magazines and newspapers, orders and findings issued by authorities of Canada or of a country other than Canada, responses to the ERQs if submitted by Canadian producers, importers and exporters and any other information contained on the Exhibit Listing.

[40] For purposes of an expiry review, the CBSA sets a date after which no "new" information may be placed on the administrative record. This is referred to as the "closing of the record date". For this expiry review, the administrative record closed on October 17, 2005. This allowed participants time to prepare case arguments and reply submissions based on the information that is on the administrative record as of the closing of the record date. The CBSA did not receive any case arguments or reply submissions from any parties during this proceeding.

[41] After the closing of the record, the CBSA revised the import and enforcement statistics as well as the Canadian market data. The statistics were revised to remove imports of garlic from China that were not subject to the Tribunal finding and order, specifically processed garlic. Since this information was relevant to the expiry review

investigation, the revised tables were included in the record for consideration by the President. The CBSA had not received case arguments from interested parties and therefore, the revised statistics had no impact on any party's submissions.

Position of the Parties

Position of the Canadian Producer (GGAO)

[42] While the GGAO did not present a submission in response to the CBSA's ERQ, in its comments to the Tribunal requesting the initiation of the expiry review, the GGAO stated that there is a likelihood of continued or resumed dumping if the finding and order are allowed to expire. The GGAO stated that the prices of Chinese garlic in the Canadian market are well below the established normal value of $2.50/kg and provided pricing data at the wholesale and retail level to substantiate its claim, which is available from Agriculture and Agri-Food Canada's InfoHort database. The GGAO further stated that Chinese garlic continues to dominate the market solely due to the non-enforcement of the finding and order by the Canadian government.15

Position of Importer and Processor of Non-Subject Garlic

(Mannarino's Creative Foods)

[43] Mannarino's Creative Foods (Mannarino's) stated that it is a garlic grower/importer/processor that uses garlic as a raw material in its preparation of fresh garlic and herb blends and other products.

[44] Mannarino's observed that placing duty on garlic from China opened windows of opportunity for importers to redirect certificates of origin and resulted in imports from China declining and imports from Vietnam and other ports in Asia increasing. Mannarino's further stated that other importers are importing garlic that has been transhipped.

[45] Mannarino's explained that it can no longer compete within its own market, that is, the processed garlic market, because its primary input, fresh garlic, is being imported by its competitors at low prices and Mannarino's is not willing to import transhipped garlic at cheap prices.

[46] Mannarino's requested that the government lift the duty for importations of garlic that are destined for further processing to prevent further injury to its industry. Furthermore, Mannarino's requested that duty be applied to all imports of processed and peeled garlic from Asia with the exception of those importations that will be used in further processing.

[47] Mannarino's did not provide an opinion on the likelihood that dumping would continue or resume if the finding and order are allowed to expire.

C. Consideration and Analysis

[48] Subsection 76.03(7) of SIMA requires the President of the CBSA to determine whether the expiry of the order or finding in respect of the goods of a country or countries is likely to result in the continuation or resumption of dumping or subsidizing of the goods. When making this determination, the President may consider the relevant factors set out in subsection 37.2(1) of the SIMR.

[49] As stated previously, the CBSA has received only one submission in response to the ERQ forwarded to producers, importers and exporters. The CBSA has conducted its own research of the international and Canadian garlic markets and the following analysis reflects this macro-level approach. The analysis has been conducted on a country-by-country basis.

China

[50] Guided by the factors in the SIMR and based on the analysis of the information on the administrative record, the following factors have been considered with respect to subject Chinese garlic:

  • (a) China's increasing garlic production, Chinese exporters' continued interest in export markets and foreign market access restrictions affecting exports of Chinese garlic;
  • (b) The imposition of anti-dumping measures by countries other than Canada;
  • (c) A comparison of the selling price in the Chinese domestic market and the average declared selling price of Chinese garlic exports;
  • (d) The need for exporters of garlic in China to price their product competitively with garlic imports entering Canada from other Asian countries;
  • (e) Chinese exporters' performance during the January to June period at the time that the first Tribunal finding affected imports during the July to December period only; and
  • (f) Dumping while an order or finding is in place.

[51] A discussion of these factors is presented below.

[52] Based on the latest statistics available, China is the largest producer of garlic in the world representing approximately 75% of world production in 2004.16 In 2003, the last year for which export statistics are available, China represented approximately 80% of the world garlic export market.17

[53] The following table has been compiled from the most recent information available from the FAO statistical database concerning China's garlic production and exports.18

Table 3: China's Production and World Exports of Garlic during the POR

Year

Production Qty

(metric tons)

Exported Qty

(metric tons)

% Production

Exported

2002

9,080,049

1,049,395

11.56%

2003

10,078,351

1,142,237

11.33%

2004

10,578,000

Not Available

Not Available

[54] As evidenced by the above, China has the world's largest garlic production capacity, which continues to increase each year. The 2004 production level represents a 60% increase over the 2000 production level, the last year included in the previous expiry review.19 The portion of production that is exported remains relatively stable at approximately 11%, which, compared with the 5% level obtained at the time of the last expiry review, indicates that Chinese exporters have an increasing interest in the world export market.20 China is a competitive player in the world garlic market, as demonstrated by its increasing export volumes and declining export prices.21

[55] Concurrent with the increasing Chinese production volumes and continuing interest in export sales, trade measures in various countries continue to restrict the markets that are available to Chinese exporters. The United States,22 Brazil23 and
South Africa24 all have anti-dumping measures in place for Chinese garlic. It should also be noted that in addition to imposing export market restrictions on Chinese exporters, the

application of anti-dumping measures by other countries, in itself, demonstrates that China has a history of dumping garlic into open markets. This increases the likelihood exporters will divert the subject goods to Canada should the finding and order be allowed to expire.

[56] Phytosanitary measures, such as pest risk analysis requirements on imports and strict food labelling requirements, that have been imposed by Brazil, Chile, Thailand and Venezuela,25 also impose further restrictions to the export market opportunities available to Chinese garlic producers. The additional effort involved in complying with these measures may discourage Chinese garlic exporters from targeting these markets.

[57] Exports of Chinese garlic are also subject to another export market restriction that has been imposed by the European Union (EU). The EU applies an ad valorem customs duty of 9.6% and a specific duty amount of EUR 1,200 per tonne for all garlic importations.26 China has an agreement with the EU that allows it to export
13,200 tonnes of garlic duty-free to the EU each year.27 Any volume exceeding this quota is subject to the normal duty rates. Although China is able to export garlic to the EU duty-free, the quota represents only 1% of China's annual exports. The EU's duty rates restrict Chinese garlic exporters' access to the EU market and further limits their export opportunities.

[58] It is important to note that the jurisdictions that have restricted access of Chinese garlic to their markets are also some of the largest importers of garlic in the world and represent approximately 30% of the world imports of garlic. 28

[59] Given the number of trade measures in place by other jurisdictions, it is likely that Canada would be an attractive market to Chinese exporters and the subject goods could be diverted to Canada if the Tribunal's finding and order were allowed to expire. The combination of the increasing garlic production in China, the continued interest in export markets, the export market restrictions in countries other than Canada and the competition that Chinese producers face from the various other garlic producing countries, intensifies the pressure on Chinese exporters to search out alternative open market destinations for their garlic production.

[60] The CBSA also considered pricing and trade data obtained from the FAO statistical database and the CBSA import database.

[61] The FAO reports indicate that in 2002, (the only year for which the information is available), the average selling price for garlic in China was $0.58/kg CAD.29 In the same year, the average price of exports of Chinese garlic sold in export markets was approximately $0.52/kg CAD30, that is, approximately 10% lower than the average

domestic price reported by the FAO. It should be noted that while the FAO statistics have been utilized to demonstrate the principle that, on average, Chinese exporters are likely to sell the subject goods to foreign markets at lower prices than they would in the domestic market, it is not an indication that the normal value is or should be
$0.58/kg CAD. That exercise is determined through an independent process, in accordance with the provisions of SIMA.

[62] The CBSA also considered the average import prices of garlic entering Canada from those countries, collectively referred to as "Asia" in Appendix A, to determine if China would have to sell below the normal value in order to compete with these imports. Import data shows that prices are an important factor in Canadian garlic importers' purchasing decisions and that importers will switch sources of supply when offered lower prices. If the allegations regarding the misdescription of the country of origin regarding Chinese garlic are discounted, the information in Appendix A demonstrates that importers in Canada have switched their source of supply in the past few years from China and Vietnam, whose exports to Canada would have a normal value of $2.50/kg, to other Asian countries, whose average export prices are well below this level. For example, information in Appendix A demonstrates that Turkmenistan started shipping garlic to Canada in 2003 at an average price of $0.94/kg CAD. At this price level, Turkmenistan was able to capture 5% of the Canadian import market. Today, Turkmenistan ships garlic to Canada at an average price of $0.76/kg CAD and accounts for 17% of the import market. Countries with higher export prices, such as the

United States, have lost market share to these low value imports, which further demonstrates that Canadian importers will switch suppliers based on prices. Accordingly, in the absence of anti-dumping measures, it is likely that there would be downward pressure on the price of Chinese garlic imported into Canada, presumably below the $2.50/kg normal value.

[63] In the past, Chinese exporters have demonstrated that they are likely to continue or resume dumping in periods where there is not a Tribunal finding or order in place. At the time of the final determination of the first case, the CBSA (then Department of

National Revenue) had determined that the Chinese exporters had dumped the goods throughout the period of investigation, that is July 1, 1995 - June 30, 1996. While the Tribunal determined that the dumping had caused injury, it limited the application of the finding to imports between July 1 and December 31 of each calendar year, given that Canadian garlic was not available during the January - June period.

[64] The initiation of the second garlic case resulted from the fact that exporters shifted their exports to Canada to the January - June period and continued to dump the goods in the six-month period not covered by the finding. The Canada Customs and Revenue Agency's (now the CBSA) review of imports from China during the
January - June 2000 period revealed that 99.5% of the subject goods were dumped by an

average margin of dumping of 213.4%, expressed as a percentage of export price.31 The CBSA has not observed any changes in the global garlic market that would indicate Chinese exporters would act otherwise in the absence of anti-dumping measures in Canada. China is still the largest producer of garlic in the world, shows continued interest in the export market, is faced with export market constraints and produces
20 times more garlic than its nearest competitor, India.32

[65] The CBSA analysis presented above has focussed principally on the fresh garlic market, given that the majority of the statistics available are with respect to the fresh market. Given that frozen garlic is classified under an HS code that includes other frozen vegetables, it is not possible to determine the total volume of frozen garlic imported into Canada. However, as previously mentioned, the CBSA believes that there continues to be only a limited number of importations of frozen garlic. During the POR, approximately 22 metric tons of frozen garlic originating in China were dumped at a weighted average margin of dumping of 42%, expressed as a percentage of the export price. This demonstrates that facilities do exist to prepare the frozen product and that some exporters did dump frozen garlic during the POR. Moreover, it underscores the possibility or likelihood that if the finding with respect to frozen garlic was allowed to expire, while the finding or order with respect to fresh garlic continued, the effect of the finding with respect to fresh garlic could be frustrated.

[66] China is the largest garlic producer in the world and its production continues to grow each year. Chinese exporters have also a demonstrated history of dumping the subject goods into Canada when the goods are not subject to anti-dumping measures. Several jurisdictions have imposed anti-dumping measures against Chinese garlic. These measures, as well as other trade measures which have been put in place by other administrations, have effectively limited the number of markets open to Chinese garlic, making it more likely that Chinese exporters will continue or resume dumping their goods into Canada if the finding and order are allowed to expire. In order to regain the Canadian market share, which they have lost to low-priced imports that are now entering Canada from other Asian countries, Chinese exporters would be forced to sell their product at significantly lower prices. Thus, should the finding and order be allowed to expire there is a likelihood that it will result in the continuation or resumption of dumping of the goods.

Vietnam

[67] There is limited information on the record regarding garlic from Vietnam, as the CBSA did not receive submissions concerning fresh or frozen garlic originating in or exported from Vietnam, from any interested party.

[68] Guided by the factors in the SIMR and based on the analysis of the information on the administrative record, the CBSA considered the following factors in its analysis:

  • (a) The performance of Vietnamese exporters during the period that Chinese garlic was subject to a Tribunal finding from July to December;
  • (b) The need for exporters of garlic in Vietnam to price their product competitively with other exporters of garlic from other Asian countries; and
  • (c) Vietnam's declining export prices of garlic sold in the world market.

[69] A discussion of these factors is presented below.

[70] As shown in Appendix B, 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%. In 1997, the year of the first Tribunal finding regarding garlic from China, the market share held by imports from Vietnam increased to approximately 4%, only to fall to 1% in 1998. We surmise that this decrease was due to the misdeclaration of export prices by Chinese exporters in 1998, whereby imports from China were able to enter Canada without being assessed anti-dumping duty and thereby displacing the market share that would have been supplied by Vietnam. The enforcement problems were corrected by using a Ministerial specification to determine the export price of Chinese garlic. In 1999, Vietnam's share of the market increased to approximately 6%. Imports from Vietnam entered Canada primarily during the
July - December period, which is the six-month period during which the Tribunal's first injury finding regarding garlic from China was in effect. During this six-month period in 1999, garlic from Vietnam represented 14% of total imports. In 2000, the GGAO filed its second complaint including, inter alia, fresh and frozen garlic from Vietnam. The investigation that followed demonstrated that 100% of the garlic exports to Canada from Vietnam during the period of investigation had been dumped by a weighted average margin of dumping of 125.9%, expressed as a percentage of the export price.33 Shipments of garlic from Vietnam ceased following the second Tribunal finding.

[71] As demonstrated above, garlic exporters from Vietnam have shown that they have the ability to supply garlic to Canadian importers in Canada at dumped prices, particularly during periods when Chinese garlic is subject to a Tribunal finding.

[72] As previously discussed, prices are an important factor in Canadian garlic importers' purchasing decisions and importers will switch sources of supply when offered lower prices. As in the case of garlic from China, to be competitive in the Canadian market, exporters in Vietnam would have to sell their product at prices that are competitive with those of low-priced imports from other Asian countries, currently an average price of $0.91/kg CAD. This would exert a downward pressure on the selling price of Vietnamese garlic to a level likely below the normal value.

[73] Based on the latest information available from the FAO, the average selling price of garlic exported worldwide from Vietnam decreased from $1.68/kg CAD in 2001 to $0.50/kg CAD in 2003, a decline of 70%. The decline of Vietnam's average export prices of garlic also corroborates the belief that, should the finding respecting garlic from Vietnam be allowed to expire, it is likely that Vietnam would sell garlic to Canada at similar price levels, which is below the normal value.

[74] In conclusion, consideration and analysis of the evidence on the record indicates that if the finding with respect to garlic, fresh or frozen, from Vietnam is allowed to expire, it is likely to result in the continuation or resumption of dumping of the goods.

[75] Exporters have, in the past, demonstrated that they can supply large quantities of garlic to Canada at dumped prices. Traditionally, subject goods from Vietnam have been dumped into the Canadian marketplace at times when there is a finding or order in place regarding Chinese garlic but none regarding Vietnamese garlic. As in the case of garlic from China, in order to regain the Canadian market share which they have lost to low value imports that are now entering Canada from other Asian countries, exporters would be forced to sell their product at significantly lower prices. Thus, should the finding be allowed to expire there is a likelihood that it will result in the continuation or resumption of dumping of the goods.

Concurrent Tribunal Finding and Order

[76] In its analysis, the CBSA has also taken into consideration that the expiry review concerns one finding and one order. While both cases involve garlic, they differ in the scope of products that are included. While the first case only involves fresh garlic from China imported from July - December and the second case involves importations of fresh garlic from China from January - June, the second case also involves frozen garlic from China and Vietnam imported throughout the year. It has been demonstrated that if a finding is only in place for six months of the year, exporters could frustrate the intention of the finding by dumping during the period that the finding is not in place. As well, it has been demonstrated that exporters in Vietnam have shown a tendency to dump their goods particularly during the period in which there was a finding in place concerning Chinese goods. As such:

  • The expiry of the order concerning fresh garlic during the July - December period would likely result in continued or resumed dumping during the July - December period if the finding with respect to fresh garlic during the January - June period was continued, and vice versa;
  • The expiry of the finding with respect to Vietnam would likely result in continued or resumed dumping from Vietnam if the finding and order with respect to China was continued; and
  • The expiry of the finding with respect to frozen garlic would likely result in continued or resumed dumping if the finding and order with respect to fresh garlic was continued.

[77] In addition to the analysis and independent conclusions described in the preceding sections, the fact that the CBSA has determined that there is a likelihood of continued or resumed dumping should either the finding or order be allowed to expire results in a combined outcome that is congruent.

CONCLUSION

[78] For purposes of making a determination in this expiry review, the CBSA conducted its analysis within the scope of the factors set forth in subsection 37.2(1) of the SIMR. Based on the foregoing consideration of pertinent factors and analysis of evidence on the record, on December 22, 2005, pursuant to paragraph 76.03(7)(a) of SIMA, the President determined that the expiry of the finding made by the Tribunal on May 2, 2001, in Inquiry No. NQ-2000-006, concerning 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 Tribunal Inquiry No. NQ-96-002, and the expiry of the order made by the Tribunal on March 20, 2002, in Inquiry No. RR-2001-001, concerning fresh garlic originating in or exported from the People's Republic of China, imported into Canada from July 1 to December 31, inclusive, of each calendar year, are likely to result in the continuation or resumption of dumping of such goods.

FUTURE ACTION

[79] On December 23, 2005, the Tribunal commenced its inquiry to determine whether the expiry of the finding and/or order in respect of these goods is likely to result in injury or retardation to the domestic industry. The Tribunal will make its decision by May 1, 2006.

[80] If the Tribunal determines that the expiry of the finding and/or order are likely to result in injury or retardation, the finding and/or order will be continued in respect of those goods, with or without amendment. If this is the case, the CBSA will continue to levy anti-dumping duty on dumped importations of the subject goods.

[81] If the Tribunal determines that the expiry of the finding and/or order is unlikely to result in injury or retardation, the finding and/or order will be rescinded in respect of those goods. Anti-dumping duty would no longer be levied on importations of the subject goods.

INFORMATION

[82] For further information, please contact Tara Ryan at:

Mail
Canada Border Services Agency
Anti-dumping and Countervailing Directorate
100 Metcalfe Street, 11th floor
Ottawa, Ontario K1A 0L8
Canada

Telephone
(613) 954-7187

Telefax
(613) 948-4844

Email
simaregistry-depotlmsi@cbsa-asfc.gc.ca

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

M.R. Jordan
Acting Vice-President
Admissibility Branch


Appendix 1 - Apparent Canadian market
January 1st 2002 - June 30, 2005
Fresh Garlic

 

 

2002

2003

 

 

Quantity (kg)

 

 

Quantity (kg)

 

 

Estimated Canadian Production

 

2,000,000

 

 

1,580,000

 

 

 

Country of Origin

Quantity (kg)

Avg Imp Price

% of Imports

Quantity (kg)

Avg Imp Price

% of Imports

Imports of Garlic into Canada

Subject Countries

 

 

 

 

 

 

China

90,427

$ 1.82

0.7%

147,128

$ 1.25

1%

Vietnam

-

-

-

-

-

-

Sub-Total

90,427

$ 1.82

0.7%

147,128

$ 1.25

1%

Americas

 

 

 

 

 

 

United States

1,638,213

$ 3.17

12.8%

1,398,380

$ 2.69

12%

Mexico

417,980

$ 3.03

3.3%

130,135

$ 2.55

1%

Argentina

240,670

$ 2.16

1.9%

312,940

$ 1.74

3%

Sub-Total

2,296,862

$ 3.03

18.0%

1,841,454

$ 3.03

15%

Asia

 

 

 

 

 

 

Philippines

5,213,916

$ 1.21

40.8%

5,166,844

$ 0.95

43%

Pakistan

1,552,855

$ 1.25

12.1%

1,192,401

$ 1.09

10%

Thailand

1,257,185

$ 1.53

9.8%

811,235

$ 1.14

7%

Turkmenistan

 

 

 

582,820

$ 0.94

5%

Uzbekistan

 

 

 

1,089,554

$ 0.76

9%

South Korea

 

 

 

477,601

$ 1.22

4%

Indonesia

587,506

$ 1.51

4.6%

 

 

 

Cambodia

411,180

$ 1.34

3.2%

 

 

 

India

 

 

 

 

 

 

Azerbaidjan

 

 

 

 

 

 

Sub-Total

9,022,641

$ 1.30

70.5%

9,320,455

$ 0.97

78%

Other Countries

 

 

 

 

 

 

Other Countries

1,379,996

$ 1.54

10.8%

703,783

$ 1.19

6%

 

 

 

 

 

 

 

Total Imports

12,789,925

$ 1.63

86.5%

12,012,820

$ 1.23

88.4%

TOTAL CANADIAN MARKET

 

14,789,925

 

 

13,592,820

 

 


 

 

2004

Jan - Jun 2005

 

 

Quantity (kg)

 

 

Quantity (kg)

 

 

Estimated Canadian Production

 

1,160,000

 

 

0*

 

 

 

Country of Origin

Quantity (kg)

Avg Imp Price

% of Imports

Quantity (kg)

Avg Imp Price

% of Imports

Imports of Garlic into Canada

Subject Countries

 

 

 

 

 

 

China

187,453

$ 0.76

1.5%

29,915

$ 1.61

0.5%

Vietnam

-

-

-

-

-

-

Sub-Total

187,453

$ 0.76

1.5%

29,915

$ 1.61

0.5%

Americas

 

 

 

 

 

 

United States

1,068,855

$ 3.01

8.5%

469,851

$ 3.28

7.8%

Mexico

160,582

$ 2.24

1.3%

221,829

$ 1.98

3.7%

Argentina

220,673

$ 1.34

1.8%

128,111

$ 1.79

2.1%

Sub-Total

1,450,109

$ 2.67

11.6%

819,791

$ 2.70

13.6%

Asia

 

 

 

 

 

 

Philippines

5,722,549

$ 1.01

45.6%

2,844,060

$ 0.96

47.2%

Pakistan

 

 

 

 

 

 

Thailand

1,112,865

$ 1.09

8.9%

510,728

$ 0.99

8.5%

Turkmenistan

2,009,666

$ 0.76

16.0%

1,051,434

$ 0.71

17.5%

Uzbekistan

513,658

$ 0.75

4.1%

 

 

 

South Korea

1,012,839

$ 0.92

8.1%

653,392

$ 0.94

10.8%

Indonesia

 

 

 

 

 

 

Cambodia

 

 

 

 

 

 

India

250,055

$ 1.13

2.0%

76,485

$ 1.08

1.3%

Azerbaidjan

192,553

$ 0.80

1.5%

 

 

 

Sub-Total

10,814,185

$ 0.95

86.2%

5,136,099

$ 0.91

85.3%

Other Countries

 

 

 

 

 

 

Other Countries

91,785

$ 2.58

0.7%

36,810

$ 1.68

0.6%

 

 

 

 

 

 

 

Total Imports

12,543,532

$ 1.16

91.5%

6,022,615

$ 1.16

100.0%

TOTAL CANADIAN MARKET

 

13,703,532

 

 

6,022,615

 

 

* While Canadian production for 2005 is estimated to be 740,000 kg, none of it is available in the first 6 months.


Appendix 2 - Apparent Canadian market
January 1st 19922 - June 30, 2000
Fresh and Frozen Garlic

 

1992

1993

1994

1995

Imports

Kg

%

Kg

%

Kg

%

Kg

%

China (PRC)

1,687,082

30

3,327,827

49.1

3,707,783

56.2

6,384,599

68.6

Vietnam

-

0

-

0

-

0

-

0

United States

2,474,875

44

2,341,018

34..5

1,576,852

23.9

1,165,311

12.5

Mexico

782,987

14

656,612

9.7

676,643

10.3

768,287

8.3

Argentina

403,588

7.2

287,410

4.2

486,108

7.4

779,250

8.4

All Other Countries:

257,122

4.6

165,620

2.4

153,634

2.3

117,398

1.3

Total Imports:

5,605,654

100

6,778,487

100

6,601,020

100

9,214,845

99

Canada

*

-

*

-

*

-

94,545

1

Total Apparent Market

5,605,655

100

6,778,488

100

6,601,021

100

9,309,390

100

 

1996

1997

1998

1999

Imports

Kg

%

Kg

%

Kg

%

Kg

%

China (PRC)

5,980,034

55.2

3,258,458

37.7

5,247,789

47.9

5,704,933

43.8

Vietnam

268,874

2.5

348,990

4

114,000

1

790,390

6.1

United States

1,344,936

12.4

1,719,638

19.9

1,942,174

17.7

2,416,505

18.5

Mexico

899,495

8.3

681,684

7.9

775,336

7.1

748,013

5.7

Argentina

579,990

5.4

482,632

5.6

554,068

5.1

736,308

5.6

All Other Countries:

63,431

0.6

629,861

7.3

438,867

4

612,152

4.7

Total Imports:

9,136,760

84.4

7,121,263

82.5

9,072,234

82.9

11,008,301

84.4

Canada

1,689,091

15.6

1,512,727

17.5

1,872,727

17.1

2,029,896

15.6**

Total Apparent Market

10,825,851

100

8,633,990

100

10,944,961

100

13,038,197

100


 

Jan - Jun 2000

Imports

Kg

%

China (PRC)

7,144,078

81.3

Vietnam

-

0

United States

752,304

8.6

Mexico

244,598

2.8

Argentina

416,680

4.7

All Other Countries:

233,074

2.7

Total Imports:

8,790,734

100

Canada

***

0

Total Apparent Market

8,790,734

100

Source: Statement of Reasons of Final Determination for Garlic, Fresh and Frozen, from China and Vietnam (2001)

NOTES: * Prior to 1995 Statistics Canada did not gather data on Canadian production

  • ** Estimate of Canadian production (Statistics Canada data incomplete for this year)
  • *** Data relating to Canadian production was not available for 2000 at the time of the final determination in 2001

1 Exhibit 3 (NC) Statement of Reasons (SOR) - Final Determination of Garlic, Fresh or Frozen from the People's Republic of China (China) and Vietnam (2001) p.2

2 Exhibit 3 p. 4

3 Exhibit 15 (NC) Canadian International Trade Tribunal (CITT) Administrative Record

4 Exhibit 3 p. 10

5 The CBSA has assumed that the relationship between acreage and production has a strong, positive correlation

6 SOR (NC) - Initiation of Garlic, Fresh or Frozen, from China and Vietnam (2000) p. 5

7 Exhibit 32 (NC) - CN-230 - Customs Notice regarding assessment of anti-dumping duty on fresh garlic from China (1998)

8 Exhibit 13 (NC) - Import and Enforcement Statistics for 2002 - June 2005

9 Exhibit 6 (NC) - Statement of Reasons for CITT Order concerning fresh garlic from China (2002)

10 Exhibit 15 (NC) - CITT Administrative Record - GGAO Submission (2005)

11 Exhibit 11 (NC) - Customs Commercial System - Garlic Import Statistics - 2002 - June 2005

12 Exhibit 30 (NC) - FAO Statistics - World Production of Garlic 2002 - 2004

13 Exhibit 18 (NC) - Import Competition in the Garlic Industry (Arizona State University) 2003 p.6

14 Exhibit 25 (P) and Exhibit 37 (NC) - Mannarino's Creative Foods' Response to ERQ

15 Exhibit 15 (NC) - CITT Administrative Record - GGAO Submission (2005)

16 Exhibit 30 (NC)

17 Exhibit 31(NC) - World Imports and Exports of Garlic 2002 - 2004

18 Exhibit 30 and 31

19 Exhibit 5 (NC) - Expiry review determination regarding fresh garlic from China (2001)

20 Exhibit 5 (NC) - Expiry review determination regarding fresh garlic from China (2001)

21 Exhibit 23 (NC) - China's garlic production and exports 2001 - 2004

22 Exhibit 28 (NC) - United States Department of Commerce's Final Results of Anti-Dumping Duty Administrative Review (2005)

23 Exhibit 27 (NC) - Anti-Dumping Measures by Brazil (2004)

24 Exhibit 26 (NC) - International Trade Commission (South Africa) - Status of anti-dumping investigation (2005)

25 Exhibit 16 (NC) - WTO Committee on Sanitary and Phytosanitary Measures (2001- 2003)

26 Exhibit 17 (NC) - Official Journal of the European Union - Commission Regulation (2005)

27 Exhibit 17(NC)

28 Exhibit 31 (NC)

29 Exhibit 23 (NC) - China - Garlic Production and Exports from 2001 - 2004

30 Exhibit 23 (NC)

31 Exhibit 3 (NC)

32 Exhibit 30 (NC)

33 Exhibit 3 (NC)