[Federal Register Volume 61, Number 232 (Monday, December 2, 1996)]
[Notices]
[Pages 63822-63825]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-30627]
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DEPARTMENT OF COMMERCE
International Trade Administration
[A-201-601]
Fresh Cut Flowers From Mexico; Final Results of Antidumping Duty
Administrative Review and Revocation in Part of Antidumping Duty Order
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
ACTION: Notice of final results of antidumping duty administrative
review and revocation in part of antidumping duty order.
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SUMMARY: On June 4, 1996, the Department of Commerce (the Department)
published the preliminary results of its administrative review of the
antidumping duty order on certain fresh cut flowers from Mexico. The
period of review is April 1, 1994 through March 31, 1995.
We gave interested parties an opportunity to comment on our
preliminary results. We have not changed our preliminary results of
review. We have determined that sales have not been made below normal
value (NV). We have also determined to revoke the order in part, with
respect to the respondent, Rancho El Aguaje (Aguaje).
EFFECTIVE DATE: December 2, 1996.
FOR FURTHER INFORMATION CONTACT: Rebecca Trainor or Maureen Flannery,
Import Administration, International Trade Administration, U.S.
Department of Commerce, 14th Street and Constitution Avenue, NW,
Washington, DC 20230; telephone: (202) 482-4733.
SUPPLEMENTARY INFORMATION:
Background
On June 4, 1996, we published in the Federal Register (61 FR 28166)
the preliminary results of administrative review of the antidumping
duty order on certain fresh cut flowers from Mexico (52 FR 13491 (April
23, 1987)), wherein we gave notice of our intent to revoke the order
with respect to Aguaje's sales of the subject merchandise. We received
a case brief from petitioners, The Floral Trade Council, on July 5,
1996, and a rebuttal brief from respondent on July 12, 1996.
Applicable Statutes and Regulations
Unless otherwise stated, all citations to the statute are
references to the provisions effective January 1, 1995, the effective
date of the amendments made to the Tariff Act of 1930 (the Act) by the
Uruguay Round Agreements Act (URAA). In addition, unless otherwise
indicated, all citations to the Department's regulations are to the
current regulations, as amended by the interim regulations published in
the Federal Register on May 11, 1995 (60 FR 25130).
Scope of the Review
The products covered by this review are certain fresh cut flowers,
defined as standard carnations, standard chrysanthemums, and pompon
chrysanthemums. During the period of review (POR), such merchandise was
classifiable under Harmonized Tariff Schedule of the United States
(HTSUS) items 0603.10.7010 (pompon chrysanthemums), 0603.10.7020
(standard chrysanthemums), and 0603.10.7030 (standard carnations). The
HTSUS item numbers are provided for convenience and Customs purposes
[[Page 63823]]
only. The written description remains dispositive as to the scope of
the order.
This review covers the period April 1, 1994 through March 31, 1995.
Revocation of the Order in Part
On April 28, 1995, Aguaje submitted a request, in accordance with
19 C.F.R. 353.25(b), to revoke the order with respect to its sales of
the subject merchandise. In accordance with 19 C.F.R. 353.25(b)(1),
this request was accompanied by a certification from the firm that it
had not sold the relevant class or kind of merchandise at less than NV
for a three-year period, including this review period, and would not do
so in the future. In our preliminary results we incorrectly stated that
Aguaje had also submitted a written agreement to reinstatement in the
order if we found that Aguaje had sold the subject merchandise at less
than NV subsequent to revocation. Section 353.25(b)(2) requires that a
firm that previously has been found to have sold the subject
merchandise at less than NV also submit a written agreement to
reinstatement in the order if we conclude that it sold the subject
merchandise at less than NV subsequent to revocation. At the time of
Aguaje's April 28, 1995 request for administrative review and
revocation, this provision was not applicable to Aguaje, as we had not
yet completed an administrative review in which we found dumping
margins for Aguaje. The reinstatement agreement became applicable when
we published the final results for the 1991-1992 administrative review
on September 26, 1995 (60 FR 49569), in which we found dumping margins
for Aguaje's sales in that period. Aguaje submitted a reinstatement
agreement for the record of this review on November 15, 1996.
Analysis of the Comments Received
Comment 1: Petitioner argues that Aguaje has not established its
entitlement to revocation of the antidumping duty order pursuant to 19
CFR 353.25(a)(2) because: (1) Aguaje failed to submit a reinstatement
agreement when filing its request for revocation in accordance with 19
CFR 353.25(a)(2) & (b); and (2) Aguaje failed to maintain a three-year
period of sales at not less than NV. Petitioner notes that Aguaje
received a calculated dumping margin of 1.54% in the preliminary
results of the 1993-94 administrative review, and was assigned a final
39.95 percent dumping margin for the 1991-92 administrative review on
September 26, 1995.
Aguaje contends that, as of the date of its request for revocation,
April 28, 1995, the Department had never issued a final affirmative
antidumping determination for Aguaje. Thus, the reinstatement agreement
was not required at the time the request for revocation was filed.
Aguaje argues that the preliminary finding of a 1.54 percent
dumping margin for the 1993-94 review was based on a misallocation of
indirect selling expenses which was at odds with standard Departmental
methodology; after correction for this methodological error, Aguaje
argues, its dumping margin becomes zero. Aguaje points out that the
Department found zero dumping margins for the 1992-93 review, and
preliminarily found zero dumping margins for this 1994-95 review. Thus,
when the most recent two reviews are completed, Aguaje will have three
consecutive reviews in which its dumping margin was zero, and will
therefore have met the conditions for revocation under 353.25(a)(2)(i).
Department's Position: We disagree with petitioner. Since we
published the preliminary results in this administrative review, we
have completed the 1993-94 review, in which we found a final margin of
zero for Aguaje. We also found a final margin of zero for Aguaje for
the 1992-93 period. Although we found a margin of 39.95 percent in the
1991-92 review, Aguaje has subsequently demonstrated that it has sold
the subject merchandise at not less than NV for three consecutive
years. As we state in the above section, ``Revocation of the Order in
Part,'' Aguaje has provided all the certifications required by 19 CFR
353.25(b). Therefore, we are revoking the order with respect to Aguaje.
Comment 2: Petitioner argues that the Department should not revoke
the antidumping order with respect to Aguaje because Aguaje's
questionnaire response data could not be reconciled with an audited
financial statement and/or tax return. Petitioner cites the Preliminary
Results of Antidumping Duty Administrative Review; Certain Fresh Cut
Flowers from Mexico, 60 FR 19209 (April 17, 1995), in which the
Department stated that an unaudited ``in-house'' system does not
provide assurance that costs have been stated in accordance with
generally accepted accounting principles, or that all sales and costs
have been appropriately captured, and the Final Results of Antidumping
Duty Administrative Review; Certain Fresh Cut Flowers from Mexico, 60
FR 49569 (September 26, 1995), in which the Department stated that,
``without such independent substantiation, the entire questionnaire
responses are unusable.''
Petitioner also cites the Department's rejection of the
questionnaire responses in Chrome-Plated Lug Nuts from Taiwan, 60 FR
44837 (August 29, 1995) (Lug Nuts), because the responses could not be
reconciled to the respondents' audited financial statements. Petitioner
asserts that Aguaje has provided the Department with questionable data
for three consecutive years, and suggests that the Department postpone
revocation until Aguaje's tax returns are available to confirm the
reported data.
Aguaje argues that the fact that it does not maintain records with
the same level of sophistication as larger, multi-million dollar
companies should not preclude it from revocation. Aguaje asserts that
it went far beyond the accounting requirements or practices of other
small Mexican agricultural businesses in order to demonstrate to the
Department that it is not dumping. Aguaje maintains that its financial
statements and subsidiary ledgers provide detailed cost and revenue
information for all of its flower operations, and that it has fully
satisfied the verification provisions of 353.25(c)(2)(ii).
Department's Position: We disagree with petitioner. Although we
routinely request that respondents provide audited financial statements
and/or income tax returns as independent sources with which to
substantiate questionnaire responses, we have concluded in this review
that Aguaje cannot provide these documents because they do not exist.
Petitioner cites language from the 1991-92 preliminary and final
results of review of this order, in which we presented our rationale
for requiring such sources of independent substantiation, as we also
did in Lug Nuts. However, this review is distinct from those reviews.
In the 1991-92 review of this order, the Department was unable to
conclude from the record that the requested documents did not exist. In
Lug Nuts, we found that the respondents' submissions were
``unreconcilable to their audited financial statements and thus
unverifiable. * * *'' Lug Nuts at 44838. In this case, respondent has
provided evidence that it is not required by law to keep audited
financial statements, and that it has not yet filed its income tax
returns for the review period. Therefore, we cannot deny revocation
with respect to Aguaje because it failed to provide these documents.
Cf. Olympic Adhesives, Inc. v. United States, 899 F.2d 1565 (Fed. Cir.
1990).
Comment 3: The petitioner claims that the zero margin found by the
Department in its preliminary results
[[Page 63824]]
was based in large part on facts otherwise available (FA) instead of
verifiable costs or actual profit figures, and is therefore an
imprecise analysis of Aguaje's pricing practices in the U.S. market.
Thus, petitioner argues, the Department should reconsider revoking the
order with respect to Aguaje at this time.
Aguaje contends that petitioner's argument misinterprets the facts
on the record. Aguaje asserts that total general and administrative
(G&A) expenses were verified to original invoices, the expense ledger
and the general ledger, and that the Department found Aguaje to be
``generally cooperative'' at verification. Aguaje cites the
Department's Verification Report and the Preliminary Results at 28167.
Aguaje states that the only aspect of G&A which could not be verified
was the allocation methodology devised by Aguaje's former counsel,
which relied on a recalculation of the cost of goods sold for roses. In
this instance, Aguaje believes that the Department's application of FA
was a just and reasonable exercise of the FA provision.
Aguaje argues that the verified data show that Aguaje's U.S. prices
are almost 4 to 7 times its constructed value (CV) even though the
Department applied a 52 percent profit rate to U.S. cost of production.
Further, any G&A allocation method, however adverse to Aguaje, would
still result in a finding of zero dumping margins, as G&A costs would
have to increase by multiples of hundreds before any positive dumping
margin would result.
Department's Position: Because Aguaje could not support its
reported allocation of G&A to the subject merchandise at verification,
we preliminarily used the higher of the amount Aguaje reported for this
review, or the amount it reported for the 1992-93 review, which we
verified. We have reconsidered our application of FA for G&A for the
final results, and have recalculated Aguaje's G&A using the entire
unallocated G&A figure, which we were able to verify.
We do not consider our use of FA in this case to be grounds for
denying revocation. With respect to G&A, we used a verified figure that
is adverse to Aguaje. With respect to profit, we calculated a
substantial profit rate based on recent data that is representative of
the Mexican flower industry. Even with these changes to Aguaje's
reported data, Aguaje's margin remains zero.
Comment 4: Petitioner argues that Aguaje understated its G&A
expenses to the extent that it did not include the cost of income taxes
owed. Petitioner claims that income taxes should be included in G&A
expenses as a cost of doing business in Mexico, and the Department
should therefore impute the cost of Aguaje's income tax liability for
the 1994-95 period.
Aguaje contends that the Department's long-held policy to exclude
income taxes from the cost of production calculations does not lead to
understated G&A rates, because the Department considers income tax to
be a reduction in corporate profit rather than an increase in
production cost. Aguaje cites the Final Determination of Less Than Fair
Value; High Information Content Flat Panel Display Glass from Japan, 56
FR 32376 (July 16, 1991) (Flat Panel Displays) and Final Results of
Antidumping Administrative Review; Color Picture Tubes from Japan, 55
FR 37915 (September 14, 1990).
Department's Position: We disagree that G&A should be recalculated
to include imputed income tax. The amount of this tax is determined
based on the level of corporate income. We do not consider taxes based
on the aggregate profit/loss of the company to be a cost of producing
the product. See Flat Panel Displays at 72792. We have therefore not
made the requested adjustment.
Comment 5: Petitioner argues that, contrary to the statute, the
general expense percentage the Department used for CV in the
preliminary results does not reflect selling expenses. Petitioner
asserts that, since Aguaje does not have a viable home or third country
market, the Department should base CV selling expenses on Aguaje's U.S.
selling expenses, reported for the 1994-95 period.
Petitioner states that the Department should also confirm that
selling expenses have been allocated based on resale prices to
unrelated parties, rather than transfer prices between Aguaje and its
U.S. subsidiary, Lizbeth's Wholesale Flowers, Inc. (Lizbeth).
Aguaje argues that, if the Department were to include U.S. selling
expenses in the calculation of total CV as advocated by the petitioner,
it would have to deduct them as a circumstance-of-sale adjustment.
Thus, the net effect of the inclusion of U.S. indirect selling expenses
would be to slightly increase the amount of profit included in CV,
which would not come close to the 400 percent increase in CV necessary
to create positive dumping margins.
Aguaje states that the use of acquisition costs to allocate
Lizbeth's selling expenses is tantamount to using resale prices to
unrelated parties, because Lizbeth's acquisition costs are equal to
resale prices, less its commission. As Lizbeth's commission rate to
Aguaje was substantially less than that charged to unaffiliated
customers, Aguaje claims, the use of acquisition costs would overstate
the selling expenses allocable to Aguaje.
Department's Position: We have revisited this issue and have added
to CV the amount of U.S. selling expenses incurred by Aguaje, pursuant
to section 773(e)(2)(B)(iii) of the Act. Section 773(e)(2)(A) provides
that CV include the actual amount of selling expenses incurred and
realized by the specific exporter or producer being examined ``in
connection with the production and sale of a foreign like product, in
the ordinary course of trade, for consumption in the foreign country. .
. .'' We determine that this provision does not apply here because
Aguaje only sells culls in the home market. Because of (1) the
significant physical differences between culls and export quality sales
and (2) the major difference in commercial value for these two
products, culls are not part of the foreign like product as defined by
section 771(16)(A)-(C) of the Act. Therefore, we are unable to base the
amount for selling expenses on home market sales of the like product.
For purposes of determining an amount of selling expenses, we have
relied on the U.S. selling expenses reported by Aguaje as a reasonable
method for determining selling expenses. See Section 773(e)(2)(B)(iii)
(allowing the Department to base selling expenses on ``any other
reasonable method''). As we have stated elsewhere, ``[b]ecause we
rejected the prices of home market and third countries for purposes of
FMV, we find it necessary to reject the general expenses and profits
associated with these sales.'' Certain Fresh Cut Flowers From Colombia;
Final Results of Antidumping Duty Administrative Reviews, 61 FR 42833,
42842 (Aug. 19, 1996). Here, we have determined that Aguaje's home
market sales are not viable and, thus, not an appropriate basis for NV.
Similarly, we determine that the selling expenses associated with those
home market sales will not provide an accurate measurement of dumping
in this case. We therefore resort to U.S. selling expenses incurred by
Aguaje as the facts otherwise available. We note that these amounts are
the only remaining alternative on the record for determining selling
expenses.
Contrary to Aguaje's assertion, there is no need for an adjustment
for differences in circumstances of sale, as the direct selling
expenses included in CV are the same as those included in the U.S.
selling price. Furthermore, there is no provision in the statute for
deducting
[[Page 63825]]
indirect selling expenses from CV in this situation.
We agree that Aguaje's selling expenses should be allocated based
on resale prices to unrelated parties, and not Lizbeth's acquisition
cost (resale price plus Lizbeth's commission). We have made this
recalculation for the final results.
Comment 6: The petitioner argues that the Department should
recalculate constructed export price (CEP) profit to attribute all of
Aguaje's expenses to export quality U.S. sales as offset by home market
cull revenue.
Aguaje states that the Department's calculation of CEP profit was
based entirely on U.S. sales, as Aguaje has neither home market sales
nor costs associated with such sales.
Department's Position: We disagree that a recalculation of CEP
profit is necessary. As demonstrated in Attachment 1 to our preliminary
results calculation memo, the calculation of CEP profit was based
solely on U.S. sales revenue and U.S. costs, offset by home market cull
revenue. As Aguaje had neither a viable home market nor any third
country markets during the POR, Aguaje's expenses have been allocated
to U.S. sales in their entirety. See Memorandum to the File dated May
23, 1996, on file in room B-099 of the Commerce Department.
Comment 7: Petitioner states that the Department should reconsider
whether revocation is appropriate if it cannot confirm that Aguaje is
not likely to sell merchandise at less than NV in the future, as
required by section 353.25(a)(2) of the Department's regulations.
Petitioner notes that several factors weigh heavily against the finding
that Aguaje is not likely to dump subject merchandise in the future.
These factors include Aguaje's recent history of ``evasive and
misleading'' responses in the 1991-92 review, the Department's
inability to rely on independent sources for verification, the massive
pricing pressure from Colombian exporters of the subject merchandise on
the U.S. market, and the devaluation of the Mexican peso.
Aguaje contends that the history and facts found in the previous
three annual reviews undercut petitioner's claim that Aguaje has failed
to present any evidence that it will not dump in the future. Aguaje
states that it is in the business for the sole purpose of exporting
fresh cut flowers to the United States, and that carnation production
in Mexico requires virtually no fixed costs. Aguaje adds that its sales
to the United States relative to the total size of the market are so
small that it cannot engage in predatory pricing. Finally, Aguaje
asserts that the 1994 peso devaluation has greatly increased
profitability of sales to the United States relative to sales in
Mexico, rather than placing further pressure on firms to engage in less
than fair value pricing as petitioner contends.
Department's Position: We disagree that we should not revoke the
order with respect to Aguaje at this time. As stated in our responses
to the comments received from petitioner and respondent, Aguaje has
proven that it is entitled to revocation in accordance with section
353.25(a)(2) of the regulations. Our decision to revoke is based on the
period April 1, 1992 through March 31, 1995. Our characterization of
Aguaje's questionnaire response for the 1991-92 period is not relevant.
Petitioner has presented no evidence that Colombian pricing will
cause Aguaje to begin dumping the subject merchandise in the future.
Furthermore, as the 1994 devaluation of the peso did not cause Aguaje
to dump flowers, we have no basis to conclude that the most recent
devaluation will cause Aguaje to change its pricing practices to the
degree needed to create dumping margins, given the negative margins
found in this review, despite the use of FA for certain elements of CV.
Final Results of Review
We determine that no dumping margin exists for Aguaje for the
period April 1, 1994 through March 31, 1995. We further determine that
Aguaje has sold fresh cut flowers at not less than NV for three
consecutive review periods, including this review period. For the
reasons stated in our response to petitioner's comments, and because
Aguaje has submitted the required certifications, we are revoking the
order on certain fresh cut flowers from Mexico with respect to Aguaje
in accordance with section 751(d) of the Act and 19 CFR 353.25(a)(2).
This revocation applies to all entries of the subject merchandise
entered, or withdrawn from warehouse, for consumption on or after April
1, 1995. The Department will order the suspension of liquidation ended
for all such entries and will instruct the Customs Service to release
any cash deposit or bonds. The Department will further instruct Customs
to refund with interest any cash deposits on entries made on or after
April 1, 1995.
The Department shall determine, and the Customs Service shall
assess, antidumping duties on all appropriate entries. Furthermore, the
following deposit rates will be effective upon publication of these
final results of administrative review for all shipments of certain
fresh cut flowers from Mexico entered, or withdrawn from warehouse, for
consumption on or after the publication date, as provided for by
section 751(a)(2)(C) of the Act: (1) for previously reviewed or
investigated companies not listed above, the cash deposit rate will
continue to be the company-specific rate published for the most recent
period; (2) if the exporter is not a firm covered in this review, a
prior review, or the original less-than-fair-value (LTFV)
investigation, but the manufacturer is, the cash deposit rate shall be
the rate established for the most recent period for the manufacturer of
the merchandise; and (3) if neither the exporter nor the manufacturer
is a firm covered in this or any previous review, the cash deposit rate
will be 18.20 percent, the all others rate established in the LTFV
investigation. These deposit requirements shall remain in effect until
publication of the final results of the next administrative review.
This notice serves as a final reminder to importers of their
responsibility under 19 CFR 353.26 to file a certificate regarding the
reimbursement of antidumping duties prior to liquidation of the
relevant entries during this review period. Failure to comply with this
requirement could result in the Secretary's presumption that
reimbursement of antidumping duties occurred and the subsequent
assessment of double antidumping duties.
This notice also serves as a reminder to parties subject to
administrative protective order (APO) of their responsibility
concerning the disposition of proprietary information disclosed under
APO in accordance with 19 C.F.R. 353.34(d)(1). Timely written
notification of return/destruction of APO materials or conversion to
judicial protective order is hereby requested. Failure to comply with
the regulations and the terms of an APO is a sanctionable violation.
This administrative review and notice are in accordance with
section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)) and section 353.22
of the Department's regulations.
Dated: November 25, 1996.
Robert S. LaRussa,
Acting Assistant Secretary for Import Administration.
[FR Doc. 96-30627 Filed 11-29-96; 8:45 am]
BILLING CODE 3510-DS-P
