APPLE JUICE Report to the President on Investigation No. TA-201-59 Under Section 201 of the Trade Act of 1974 USITC PUBLICATION 1881 JUNE 1988 United States International Trade Commission I Washington, DC 20436 UNITED STATES INTERNATIONAL TRADE COMMISSION COMMISSIONERS Susan W. Liebeler, Chairman Anne E. Brunsdale, Vice Chairman Paula Stem Alfred E. Eckes Seeley G. Lodwick David B. Rohr STAFF ASSIGNED Office of Investigations: Stephen Vastagh Jerald Tepper Office of Economics: Laurie Cameron Office of Industries: Alvin Macomber Antoinette James Office of the General Counsel: Catherine Field William Gearhart Supervisory Investigator: Robert Eninger Address all communications to Kenneth R. Mason, Secretary to the Commission United States International Trade Commission Washington, DC 20436 C 0 N T E N T S Determination------------------------------------------------------------ 1 Views of Chairwoman Paula Stern and Commissioners Alfred Eckes, Seeley G. Lodwick, and Anne E. Brunsdale------------------------------ 3 Views of Vice Chairman Susan W. Liebeler-------------------------------- 21 Dissenting views of Commissioner David B. Rohr-------------------------- 52 Information obtained· in the investigation: Introduction--------------------------------------------------------- A-1 The products: Juice A-1 apples------------------------------------~·c-------------- Single-strength apple juice----------------,-----c·_ ------------- A-4 Fresh single-strength juice----~ -----~·--•------------------- A-4 Pasteurized single.strength juic.e--'---.---·-------------------- A-4 Concentrated apple juice-----------·---o.-"------------------------ A-5 Frozen concentrated apple juice----------------------------- A-5 Concentrated apple juice--·---------------------------------- A-5 Reconstituted and blended apple juice--------------------------- A-6 U.S. tariff treatment----~------------------------------------------- A-7 The U.S. market------------------------------------------------------ A-8 Growers---------------------------------------------------------- A-9 Growing operations------------------------------------------- A-9 cost of growing---------------------------------------------- A-10 Jtiice production of growers--------------------------------- A-11 Entry into and exit from the industry------------------------ A-11 Packers---------------------------------------------------------- A-12 Processors of U.S. apples--------------------------------------- A-12 Producers of domestic juice------------------------------------- A-12 Concentrators of domestic juice---------------------------------- A-15 Reconstitutors-------------------------------------------------- A-16 Bottlers-------------------------------------------------------- A-16 U. S. importers--------------------------------------------------- A-16 Channels of distribution---------------------------------------- A-17 Transportation factors affecting demand-------------------------- A-20 Apple industry trade associations: International Apple Institute----------------------------------- A-21 Processed Apple Institute--------------------------------------- A-21 Grower associations---------------------------------------------- A-21 Apparent U.S. consumption------------------------------------------- A-22 The question of increased imports: U.S. imports---------------------------------------------------- A-24 Crop-year data----------------------------------------------- A-25 Quarterly data---------------------------------------------- A-25 Customs district data---------------------------------------- A-25 U. S. exports----------------------------------------------------- A-29 The question of serious injury: U.S. plant closings---------------------------------------------- A-30 U.S. production, capacity, and shipments: U.S. production and utilization of apples------------------- A-31 U.S. production capacity for apple juice and CAJ------------ A-34 Single-strength domestic apple juice--------------------- A-38 CAJ------------------------------------------------------ A-39 ii CONTENTS Information obtained in the investigat ·.on--continued The question of serious injury--continued U.S. production, capacity, and shipments--continued Production and movements of CAJ and single-strength apple juice made entirely of U.S.-grown apples------------------ A-41 Imports and purchases of juice apples and CAJ by producers of domestic juice------------------------------------------ A-45 Imports and purchases of CAJ by reconstitutors-------------- A-45 Inventories of juice apples and domestic apple juice and CAJ----- A-45 Employment------------------------------------------------------- A-48 Financial experience of U.S. growers and producers of domestic apple juice: U.S. growers------------------------------------------------ A-50 Large growers------------------------------------------- A-52 Small growers-------------------------------------------- A-55 Capital expenditures------------------------------------ A-57 Financial position of U.S. growers----------------------- A-59 Operations of producers of domestic apple juice------------- A-59 Capital expenditures------------------------------------ A-61 Research and development expenditures------------------- A-61 Financial condition of U.S. producers-------------------- A-61 The question of threat of serious injury: U.S. importers' inventories------------------------------------- A-62 Foreign industries---------------------------------------------- A-63 The question of imports as a substant.ial cause of serious injury: Market penetration----------------------------------------------- A-68 Prices---------------------------------------------------------- A-68 Apple juice------------------------------------------------- A-68 Juice apples------------------------------------------------- A-70 Concentrated apple juice------------------------------------- A-72 Exchange rates--------------------------------------------------- A-76 Factors other than imports affecting the domestic industry------- A-79 Competitive efforts against imports---------------------------------- A-79 Small growers--------------------------------------------------- A-80 Large growers---------------------------------------------------- A-80 Producers of domestic apple juice-------------------------------- A-81 Adjustment if relief were to be granted------------------------------ A-81 Small growers--------------------------------------------------- A-81 Large growers---------------------------------------------------- A-82 Producers of domestic apple juice------------------------------- A-82 Other comments of producers: Producers of domestic juice and/or CAJ--------------------------- A-82 Growers---------------------------------------------------------- A-83 Appendix A. Notice in the Federal Register of institution of investigation No. TA-201-59, letter from the United States Trade Representative, and list of witnesses appearing at the hearing-------- A-85 Appendix B. Excerpts from the Tariff Schedules of the United States Annotated (1986), schedule l, part 12, subpart A---------------------- A-93 Appendix C. Certain apple growers' comments on their operations that were supplied voluntarily with the return of the Commission questionnaire---------------------------------------------------------- A-97 Appendix D. Statistical tables------------------------------------------ A-99 ii • iii CONTENTS Figure Packer's tally to grower for season's pack of fresh market apples and culls (juice apples) of one variety, Washington State, 1984 crop------- A-13 Tables 1. Concentrated apple juice (CAJ): Distribution of purchases from U.S. importers and directly from foreign sources, crop years 1980/81 to 1984/85----------------------------------------------- A-17 2. Concentrated apple juice (CAJ): Importers• sales of imports, by types of users, 1981 and 1985--------------------------------- A-18 3. Single-strength apple juice: Distribution of sales by producers of domestic juice, by types of purchasers, 1981 and 1985--------- A-19 4. Single-strength apple juice: Distribution of sales by reconstitutors, by types of purchasers, 1981 and 1985------------ A-19 s. Apples and apple juice: Transportation costs as a share of the price, by distances------------------------------------------ A-20 6. U.S. per capita consumption of apples and apple products, 1975-84-- A-22 7. Apple juice: Apparent U.S. consumption on a single-strength basis, crop years 1980/81 to 1984/85 and July-January of crop years 1984/85 and 1985/86---------------------------------------- A-23 8. Apple juice: U.S. production, imports, apparent U.S. consumption, and Producers' Price Index, crop years 1975/76 to 1984/85-------- A-24 9. Apple or pear juice: U.S. imports for consumption, by principal sources, crop years 1980/81 to 1984/85--------------------------- A-26 10. Apple or pear juice: U.S. imports for consumption, by principal sources, July-September, October-January, and crop year to date, 1984/85 and 1985/86----------------------------------------------- A-27 11. Concentrated apple juice (CAJ): U.S. imports for consumption from specified major suppliers, annually and by quarters, crop years 1980/81 to 1984/85, July 1984-January 1985, and July 1985-January 1986------------------------------------------- A-28 12. Apple or pear juice: U.S. imports for consumption, by principal U.S. Customs districts, 1980-85---------------------------------- A-29 13. Apples: U.S. production and utilization, crop years 1980/81 to 1984/85----------------------------------------------------------- A-32 14. Juice apples: U.S. production, by principal States and by crop years, 5-year averages 1970/71 to 1974/75, 1975/76 to 1979/80, 1980/81 to 1984/85, and annually 1980/81 to 1985/86-------------- A-33 15. Apples: Smaller U.S. growers• production and sales, crop years 1980/81 to 1984/85 and July-December 1985------------------------ A-35 16. Apples: Larger U.S. growers• production and sales, crop years 1980/81 to 1984/85 and July-December 1985------------------------ A-36 17. Apples: Age of trees in 1985 on large and small apple farms------- A-37 18. Apples: Expected production and share of juice apples in expected production, by farm sizes, 1986-90-------------------------------- A-37 Ill iv CONTENTS 19. Apple juice and CAJ: Production, shipments, and inventories of domestic apple juice and CAJ made entirely from U.S. apples, crop years 1980/81 to 1984/85, July-December 1984, and July- December 1985----------------------------------------------------- A-42 20. Apple juice, single-strength equivalent: Estimated U.S. production based on the production of juice apples, by principal States, crop years 1980/81 to 1985/86---------------------------- A-44 21. Apples and apple juice: Purchases and imports by producers of domestic apple juice, crop years 1980/81 to 1984/85, July December 1984, and July-December 1985---------------------------- A-46 22. Apple juice: Reconstitutors• purchases and imports, crop years 1980/81 to 1984/85, July-December 1984, and July-December 1985--- A-47 23. Apples: U.S. growers• inventories as of Dec. 31 and Mar. 31, crop years 1981/82 to 1985/86------------------------------------ A-48 24. Apples: Full-time and part-time employment and unpaid employment on U.S. apple farms, crop years 1980/81 to 1984/85---------------- A-49 25. Average number of U.S. production and related workers engaged in the production of apple juice, and hours worked and wages and total compensation paid to such employees, fiscal years 1981-85 and interim periods ended Dec. 31, 1984, and Dec. 31, 1985-------- A-51 26. Income-and-loss experience of large apple growers on the overall operations of their farms on which apples are grown, 1981-85----- A-53 27. Income-and-loss experience of large apple growers on their total apple operations, 1981-85---------------------------------------- A-55 28. Income-and-loss experience of small apple growers on the overall operations of their farms on which apples are grown, 1981-85----- A-56 29. Income-and-loss experience of small apple growers on their total apple operations, 1981-85---------------------------------------- A-58 30. Selected balance sheet items for U.S. apple growers, as of the end of accounting years 1981-85---------------------------------- A-59 31. Income-and-loss experience of 10 producers on their operations producing domestic apple juice, accounting years 1982-85--------- A-60 32. Selected balance sheet and financial ratios for producers of domestic apple juice on their overall operations, as of the end of accounting years 1982-85-------------------------------------- A-62 33. Apples: World production for all uses in selected regions and countries, by crop years, 5-year averages 1970/71 to 1984/85 and annually 1981/82 to 1985/86---------------------------------- A-64 34. Apples: Supply, utilization, and share of production processed, by countries and crop year---------------------------------------- A-66 35. Concentrated apple juice (CAJ) (69-72 degree Brix): All apples produced, apples used for CAJ, capacity to produce CAJ, production of CAJ, and exports of CAJ to the United States, by sources, 1981-85---------------------------------------------- A-67 36. Index of prices of apple juice produced from domestically grown apples and imported concentrate, 1975-84------------------------- A-69 37. Index of weighted-average prices of apple juice reported by producers--------------------------------------------------------- A-70 38. Prices of apples, by uses, crop years 1975/76 to 1984/85----------- A-71 39. Selling and purchase prices of juice apples, crop years 1981/82 to 1984/85 and July-December 1985--------------------------------- A-72 IV v CONTENTS 40. Quarterly purchase and selling prices of juice apples, July 1981- December 1985----------------------------------------------------- A-73 41. Estimated unit values of imported concentrated apple juice from all sources, crop years 1975/76 to 1984/85 and July-December 1985-------------------------------------------------------------- A-73 42. Estimated unit values of imported concentrated apple juice from largest suppliers, crop years 1982/83 to 1984/85 and July- December 1985----------------------------------------------------- A-74 43. Purchase prices of domestic and imported concentrated apple juice, crop years 1981/82 to 1984/85 and July-December 1985------- A-74 44. Quarterly purchase prices of domestic and imported concentrated apple juice, July 1981-December 1985------------------------------ A-75 45. Quarterly purchase prices of imported concentrated apple juice, by sources, July 1981-December 1985------------------------------- A-76 46. Exchange rates: Nominal-exchange-rate equivalents of selected currencies in U.S. dollars, real-exchange-rate equivalents, and producer price indicators in specified countries, indexed by quarters, January 1981-December 1985------------------------------ A-77 Note.--Information that would reveal the confidential operations of individual concerns may not be published and therefore has been deleted from this report. Such deletions are indicated by asterisks. v vi REPORT TO THE PRESIDENT ON INVESTIGATION NO. TA-201-59 APPLE JUICE UNITED STATES INTERNATIONAL TRADE COMMISSION June 13, 1986 Determination On the basis of the information developed in the subject investigation, the Commission has determined !J that apple juice, not mixed and not containing over 1.0 percent of ethyl alcohol by volume, provided for in item 165.15 of the Tariff Schedules of the United States, is not being imported into the United States in such increased quantities as to be a substantial cause of serious injury, or the threat thereof, to the domestic industry producing an article like or directly competitive with the imported article. Background The United States International Trade Commission instituted investigation No. TA-201-59, under section 20l(b)(l) of"the Trade Act of 1974 (19 U.S.C. 225l(b)(l)), in order to determine whether the above described apple juice is being imported into the United States in such increased quantities as to be a substantial cause of serious injury, or the threat thereof, to the domestic industry producing an article like or directly competitive with the imported article. The investigation resulted from a request received by the Commission on December 27, 1985, from the United States Trade Representative. Notice of the institution of the Commission's investigation and of a public hearing to be held in connection therewith was given by posting copies of the notice in the Office of the Secretary, U.S. International Trade Commission, Washington, DC, and by publishing the notice in the Federal Register of January 24, 1986 (51 F.R. 3266). The hearing was held in !J Commissioner Rohr dissenting. 2 Washington, DC, on April 17, 1986, and all persons who requested the opportunity were permitted to appear in person or by counsel. This report is being furnished to the President in accordance with section 20l(d)(l) of the Trade Act of 1974. The information in the report was obtained from responses to Commission questionnaires, fieldwork and interviews by members of the Commission's staff, other agencies, information presented at the public hearing, briefs submitted by interested parties, the Commission's files, and other sources. 2