[Federal Register Volume 60, Number 24 (Monday, February 6, 1995)]
[Notices]
[Pages 6980-7019]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-2608]
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DEPARTMENT OF COMMERCE
International Trade Administration
[A-301-801]
Final Determination of Sales at Less Than Fair Value: Fresh Cut
Roses From Colombia
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
EFFECTIVE DATE: February 6, 1995.
FOR FURTHER INFORMATION CONTACT: James Maeder or James Terpstra, Office
of Antidumping Investigations, Import Administration, U.S. Department
of Commerce, 14th Street and Constitution Avenue, N.W., Washington,
D.C. 20230; telephone (202) 482-3330, or (202) 482-3965.
Final Determination
We determine that fresh cut roses (roses) from Colombia are being,
or are likely to be, sold in the United States at less than fair value,
as provided in section 735 of the Tariff Act of 1930 (the Act), as
amended as of 1994. The estimated margins are shown in the ``Suspension
of Liquidation'' section of this notice.
Case History
Since the notice of amended preliminary determination on October 4,
1994 (59 FR 51554, October 12, 1994), the following events have
occurred.
On September 27, 1994, respondents requested a postponement of the
final determination. On September 28, 1994, the Department agreed to
postpone the final determination until January 26, 1994.
On September 29 and 30, 1994, we received responses to the
Department's supplemental questionnaires from Grupo Sabana (Sabana),
Grupo Intercontinental (Intercontinental), the Floramerica Group
(Floramerica), Flores la Fragancia (Fragancia), and Grupo Sagaro
(Sagaro).
On October 3-11, 1994, Grupo Benilda (Benilda), Grupo Tropicales
(Tropicales), Grupo Prisma (Prisma), Grupo Bojaca (Bojaca),
Intercontinental, Sabana, the Andes Group (Andes), Grupo Papagayo
(Papagayo), Grupo Clavecol (Clavecol), Sagaro, Agrorosas, Flores Mocari
S.A. (Mocari), and Rosex submitted preverification corrections to their
respective responses.
Department of Commerce personnel conducted sales and cost
verifications of the respondents' data in Miami from October 9, 1994,
through November 3, 1994.
On October 7, 1994, the petitioner submitted comments regarding the
verification of the respondents' sales responses.
In October 1994, Rosex and Andes submitted corrections identified
at the beginning of verification.
On November 7, 1994, the Caicedo Group (Caicedo), submitted
certifications from the Government of Colombia that four members of its
group did not export during the POI.
On November 10, 1994, Arnold and Porter, counsel for Asocolflores a
growers organization that represents 14 of the 16 individual
respondents, met with Assistant Secretary for Import Administration
Susan G. Esserman regarding a suspension agreement, (See memorandum to
file, November 11, 1994).
On November 14, 1994, Beall's Roses, Inc., an American importer,
entered an appearance as an interested party in this investigation.
On November 18, 1994, Asocolflores submitted four reports, the
Botero Report, the Tayama Report, the Lewis & Sykes Report, and the
Hortimarc Report addressing to the issue of whether or not third
country prices should be used in calculating foreign market value
(FMV).
The Department's sales and cost verification reports for Sabana,
Sagaro, Rosex, Floramerica, Mocari, Prisma, Fragancia, and Tropicales
were issued from November 16 to 29, 1994.
On November 28, 1994, the petitioner supplied the Department with
comments concerning the four third country pricing reports supplied by
the respondents on November 18, 1994.
In November and December 1994, Rosex, Benilda, Floramerica,
Intercontinental, Prisma, Bojaca, Sagaro, Tropicales, and Fragancia
submitted revised sales listings and computer tapes.
In September 1994, both the petitioner and the respondents
requested a public hearing. Case and rebuttal briefs were received from
the petitioner and the respondents on December 2, 6, and 12, 1994. On
December 13, 1994, we held a public hearing. [[Page 6981]]
Scope of Investigation
The products covered by this investigation are fresh cut roses,
including spray roses, sweethearts or miniatures, intermediates, and
hybrid teas, whether imported as individual blooms (stems) or in
bouquets or bunches. Roses are classified under subheadings
0603.10.6010 and 0603.10.6090 of the Harmonized Tariff Schedule of the
United States (HTSUS). The HTSUS subheadings are provided for
convenience and customs purposes. The written description of the scope
of this investigation is dispositive.
Period of Investigation
The POI is January 1, 1993, through December 31, 1993. (See the
April 14, 1994, memorandum from the team to Richard W. Moreland).
Applicable Statute and Regulations
Unless otherwise indicated, all citations to the Statute and to the
Department's regulations are in reference to the provisions as they
existed on December 31, 1994.
Such or Similar Comparisons
We have determined that all roses covered by this investigation
comprise two categories of ``such or similar'' merchandise: culls and
export-quality roses. None of the respondents reported sales of culls
in the United States. Therefore, no comparisons in this such or similar
category were made. Regarding export quality roses, we compared USP to
CV (See the CV section of this notice).
Fair Value Comparisons
To determine whether sales of roses from Colombia to the United
States were made at less than fair value, we compared the United States
price (USP) to the CV for all respondents, as specified in the ``United
States Price'' and ``Foreign Market Value'' sections of this notice.
United States Price
For sales by all respondents except Floramerica, we based USP on
purchase price, in accordance with section 772(b) of the Act, when the
subject merchandise was sold to unrelated purchasers in the United
States prior to importation and when exporter's sales price (ESP)
methodology was not otherwise indicated.
In addition, for all respondents, where sales to the first
unrelated purchaser took place after importation into the United
States, we based USP on ESP, in accordance with section 772(c) of the
Act.
For all U.S. prices, we calculated USP using weighted-average U.S.
prices by rose type, where the appropriate data was available. (See
General Comments 4 and 5).
During the POI, some respondents paid commissions to related
parties in the United States. However, we made no adjustment for these
payments. Instead, we subtracted the actual indirect selling expenses
incurred by the related party in the United States because we
determined that to account for both commissions and actual expenses
would be distortive. (See General Comment 7).
Finally, for those respondents who sold through related parties in
the United States and who did not report inventory carrying costs on
their ESP sales, we calculated these costs by using an inventory
carrying period of seven days. According to a public report by Harry K.
Tayama, PhD., submitted by the respondents in this investigation, this
is an appropriate period. For companies with sales to unrelated
parties, we accepted that inventory carrying costs were included in
U.S. credit expenses.
We made company-specific adjustments, as discussed below:
1. Agrorosas S.A.
For Agrorosas, purchase price was based on packed, f.o.b. prices to
unrelated customers in the United States. We made deductions, where
appropriate, for foreign inland freight.
We calculated ESP based on packed prices to unrelated customers in
the United States. We made deductions, where appropriate, for foreign
inland freight, air freight, brokerage and handling charges, U.S.
import duties. We also deducted U.S. direct selling expenses, including
credit expenses, U.S. indirect selling expenses, Colombian indirect
selling expenses, and commissions to unrelated parties. We recalculated
foreign inland freight and Colombian indirect selling expenses based on
verification findings.
2. Caicedo Group
For Caicedo, we calculated purchase price based on packed, f.o.b.
prices to unrelated customers in the United States. We made deductions,
where appropriate, for foreign inland freight.
We calculated ESP based on packed prices to unrelated customers in
the United States. We made deductions, where appropriate, for discounts
and other price adjustments, unrelated party commissions, foreign
inland freight, air freight, U.S. import duties, U.S. inland freight,
repacking expenses, and Colombian indirect selling expenses incurred on
ESP sales, including inventory carrying costs. We also deducted direct
and indirect selling expenses, including inventory carrying costs.
3. Flores La Fragancia S.A.
For Fragancia, we calculated purchase price based on packed, f.o.b.
prices to unrelated customers in the United States. We made deductions,
where appropriate, foreign inland freight and air freight (which
includes U.S. duties and U.S. brokerage).
We calculated ESP based on packed prices to unrelated customers in
the United States. We made deductions, where appropriate, for foreign
inland freight, air freight (which includes U.S. duties and U.S.
brokerage). We also deducted U.S. credit expenses and U.S. and
Colombian indirect selling expenses, including inventory carrying
costs.
4. Flores Mocari S.A.
For Mocari, we calculated purchase price based on packed, f.o.b.
prices to unrelated customers in the United States. We made deductions,
where appropriate, for foreign inland freight, air freight and U.S.
import duties.
We calculated ESP based on packed prices to unrelated customers in
the United States. We made deductions, where appropriate, for foreign
inland freight, air freight, U.S. import duties, credit expenses,
warranty expenses, and other U.S. direct expenses, and U.S. and
Colombian indirect selling expenses, including inventory carrying
costs. We recalculated U.S. indirect selling expenses and credit
expenses because we did not accept Mocari's allocation methodology (See
Comment 39). As a result of this decision, and our decision on the
interest rate issue, we have also recalculated warranty, credit, and
inventory carrying costs. We also recalculated the inventory carrying
costs using the cost of manufacturing (COM).
5. Grupo Andes
For Andes, we calculated purchase price based on packed, f.o.b.
prices to unrelated customers in the United States. We made deductions,
where appropriate, for foreign inland freight, air freight, and U.S.
import duties.
We calculated ESP based on packed prices to unrelated customers in
the United States. We made deductions where necessary, for foreign
inland freight, air freight, U.S. customs duties, U.S. and Colombian
indirect selling expenses including inventory carrying costs, and U.S.
direct selling expenses including credit expenses. We
[[Page 6982]] recalculated U.S. credit expenses to reflect the data
examined at verification.
For roses that were further manufactured into bouquets after
importation, we adjusted for all value added in the United States,
including the proportional amount of profit or loss attributable to the
value added, pursuant to section 772 (e)(3) of the Act. We added
packing to reported U.S. prices. For the cost of merchandise subject to
further manufacturing, in addition to the adjustments cited in the
section on FMV, below, for constructed value, we 1) corrected the U.S.
general expenses to reflect a percentage of cost of goods sold, and 2)
recalculated interest expense to exclude the CV offset.
6. Grupo Benilda
For Benilda, we calculated purchase price based on packed, f.o.b.
prices to unrelated customers in the United States. We made deductions,
where appropriate, for foreign inland freight.
We calculated ESP based on packed prices to unrelated customers in
the United States. We made deductions, where appropriate, for foreign
inland freight, air freight, U.S. customs duties, U.S. inland freight,
and other movement expenses; as BIA, we broke U.S. inland freight
expenses out from total reported U.S. indirect selling expenses to be
deducted as a movement charge. We also deducted Colombian and U.S.
indirect selling expenses, including inventory carrying costs, U.S.
direct selling expenses, including credit expenses, and other direct
expenses. We also deducted U.S. inland freight charges, which we
removed from the U.S. indirect selling expenses reported as incurred by
AGA, Benilda's U.S. sales subsidiary. For those ESP sales where Benilda
did not report air freight and U.S. duty, we applied, as BIA, the
average reported value for each such expense. Based on findings at
verification, an allocation method was used to segregate freight
expenses included in the U.S. indirect selling expenses and recalculate
U.S. indirect selling expenses. Based on findings at verification,
Benilda has included U.S. brokerage expenses as a component of U.S.
indirect selling expenses.
7. Grupo Bojaca
For Bojaca, we calculated purchase price based on packed, f.o.b.
prices to unrelated customers in the United States. We made deductions,
where appropriate, for foreign inland freight.
We calculated ESP based on packed prices to unrelated customers in
the United States. We made deductions, where appropriate, for foreign
inland freight, air freight, U.S. import duties, brokerage and
handling, and discounts and rebates. We also deducted U.S. direct
selling expenses, including credit expenses, U.S. and Colombian
indirect selling expenses, including inventory carrying costs, and
commissions to unrelated parties.
8. Grupo Clavecol
For Clavecol, we calculated purchase price based on packed, f.o.b.
prices to unrelated customers in the United States. We made deductions,
where appropriate, for discounts and foreign inland freight. As BIA, we
deducted a percentage of gross price for one purchase price customer,
in order to account for unreported wire transfer charges discovered at
verification.
We calculated ESP based on packed prices to unrelated customers in
the United States. We made deductions, where appropriate, for
discounts, foreign inland freight, air freight, U.S. brokerage and
handling charges, credit expenses and U.S. and Colombian indirect
selling expenses, including inventory carrying costs. At the
preliminary determination, because Clavecol had not adequately
supported its reported interest rate for calculating imputed credit
expense, we used the highest public interest rate on the record in the
companion investigation of roses from Ecuador, which was a ranged value
for a U.S. subsidiary of an Ecuadoran rose producer, Guanguilqui Agro-
Industrial S.A., of 10 percent (See the September 12, 1994, concurrence
memorandum and the September 9, 1994, memorandum to the file). However,
on September 22, 1994, Clavecol clarified that its U.S. subsidiary had
no borrowings in the United States on which to base a dollar interest
rate for calculating imputed credit on ESP sales. Therefore, we are
using the reported credit expenses based on Clavecol's reported U.S.
dollar interest rate. For the final determination we are deducting from
ESP those discounts on ESP sales examined at verification but not
submitted in computer form until Clavecol's December 7, 1994,
submission. Accordingly, we also reduced Clavecol's reported U.S.
credit expense by the proportion of discounts from gross price.
9. Grupo Floramerica
For Floramerica, we calculated ESP based on packed prices to
unrelated customers in the United States. We made deductions, where
appropriate, for foreign inland freight, air freight, U.S. import
duties, brokerage and handling, U.S. inland freight, warranty expenses
including billing credits, promotional fees, credit expenses and U.S.,
Panamanian and Colombian indirect selling expenses, including inventory
carrying costs. In addition, we added an amount for interest revenue to
U.S. price.
10. Grupo Intercontinental
For Intercontinental, we calculated purchase price based on packed,
f.o.b. prices to unrelated customers in the United States. We made
deductions, where appropriate, for price adjustments and foreign inland
freight.
We calculated ESP based on packed prices to unrelated customers in
the United States. We made deductions, where appropriate, for
discounts, foreign inland freight, air freight, U.S. import duties,
U.S. brokerage and handling, credit expenses, and U.S. and Colombian
indirect selling expenses incurred on ESP sales, including inventory
carrying costs, and commissions to unrelated parties.
11. Grupo Papagayo
For Papagayo, we calculated purchase price based on packed, f.o.b.
prices to unrelated customers in the United States. We made deductions,
where appropriate, for foreign inland freight expenses, and other
movement expenses.
We calculated ESP based on packed prices to unrelated customers in
the United States. We made deductions, where appropriate, for foreign
inland freight, air freight, U.S. import duties, U.S. inland freight,
brokerage and handling charges, and other movement expenses. We also
deducted Colombian and U.S. indirect selling expenses, including
inventory carrying costs, direct selling expenses, including credit,
other expenses, and commissions paid to unrelated parties. We
recalculated Colombian indirect selling expenses based on findings at
verification.
12. Grupo Prisma
For Prisma, we calculated purchase price based on packed, f.o.b.
prices to unrelated customers in the United States. We made deductions,
where appropriate, for foreign inland freight. We recalculated foreign
inland freight for certain customers based on verification findings.
We calculated ESP based on packed prices to unrelated customers in
the United States. We made deductions, where appropriate, for foreign
inland freight, which we recalculated for certain customers based on
verification findings. We also made deductions for air freight, U.S.
import duties, brokerage and handling, U.S. direct selling
[[Page 6983]] expenses, including credit expenses, Colombian indirect
selling expenses and other indirect selling expenses. We recalculated
Colombian indirect selling expenses based on verification findings. We
made a deduction for unrelated party commissions. We deducted inventory
carrying cost which we calculated, as respondent did not report this
expense.
13. Grupo Sabana
For Sabana, we calculated purchase price based on packed, f.o.b.
prices to unrelated customers in the United States. We made deductions,
where appropriate, for foreign inland freight, air freight and U.S.
import duties. For certain transactions for which Sabana did not
provide proof of payment, we recalculated the credit expense using the
date of the final determination as the payment date.
We calculated ESP based on packed prices to unrelated customers in
the United States. We made deductions, where appropriate, for
discounts, foreign inland freight, air freight, U.S. import duties,
direct selling expenses, including credit expenses, and U.S. and
Colombian indirect selling expenses including inventory carrying costs.
We recalculated the credit expense using the average interest rate
reported by the companies that had short-term POI borrowings. We also
recalculated the inventory carrying expenses using the average interest
rate, an additional number of days for movement of the subject
merchandise from Bogota to Miami, and the COM.
14. Grupo Sagaro
For Sagaro, we calculated purchase price based on packed, f.o.b.
prices to unrelated customers in the United States. We made deductions,
where appropriate, for foreign inland freight.
We calculated ESP based on packed prices to unrelated customers in
the United States. We made deductions, where appropriate, for foreign
inland freight, air freight, U.S. import duties, and brokerage and
handling expenses. We also deducted credit expenses, promotional fees,
and other direct expenses, U.S. indirect selling expenses and
commissions to unrelated parties.
15. Grupo Tropicales
For Tropicales, we calculated purchase price based on packed,
f.o.b. prices to unrelated customers in the United States. We made
deductions, where appropriate, for foreign inland freight and air
freight. We deducted reported packing expenses and replaced them with
verified data. We also deducted discounts, where appropriate.
We calculated ESP based on packed prices to unrelated customers in
the United States. We made deductions, where appropriate, for discounts
and rebates, foreign inland freight, air freight, brokerage, credit
expenses, promotional fees, and other direct selling expenses, and U.S.
and Colombian indirect selling expenses, including inventory carrying
costs. We recalculated credit, inventory carrying costs, and other U.S.
indirect selling expenses, based on findings at verification. We
deducted reported packing expenses and replaced them with verified
data. We also deducted discounts, where appropriate.
16. Rosex Group
For Rosex, we calculated purchase price based on packed, f.o.b.
prices to unrelated customers in the United States. We made deductions,
where appropriate, for foreign inland freight.
We calculated ESP based on packed prices to unrelated customers in
the United States. We made deductions, where appropriate, for foreign
inland freight, air freight, U.S. import duties, and brokerage and
handling. We also deducted credit expenses, and promotional fees, as
well as U.S. indirect selling expenses and commissions to unrelated
parties.
Foreign Market Value
To determine whether a respondent's sales of roses from Colombia to
the United States were made at less than fair value, we compared the
United States price (USP) to the foreign market value (FMV), as
specified in the ``United States Price'' and ``Foreign Market Value''
sections of this notice. We based FMV on constructed value (CV) for all
producers. For those respondents with viable home markets, we found
insufficient sales above COP. For those respondents with viable third
country markets, we rejected sales to these markets (see Comment 7).
The remaining respondents had no viable home or third country markets.
We calculated CV on a rose type basis, where the appropriate data was
available (see Comment 6).
In calculating FMV, wherever there were insufficient sales above
cost in the home market, we based FMV on CV, as explained in ``Cost of
Production Analysis'', below.
Home Market Sales
In order to determine whether there were sufficient sales of fresh
cut roses in the home market to serve as a viable basis for calculating
FMV, we compared the volume of home market sales of export quality
roses to the volume of third country sales of export quality roses in
accordance with section 773(a)(1)(A) of the Act. Based on this
comparison, we determined that ten of the 16 respondents had viable
home markets. The ten companies were: Andes; Benilda; Bojaca; Caicedo;
Floramerica; Fragancia; Intercontinental; Papagayo; Prisma; and,
Sagaro.
Cost of Production Analysis
Because the petitioner's allegations, when considered in light of
the information on the record, gave the Department ``reasonable grounds
to believe or suspect'' that the ten respondents with known viable home
markets were selling roses in Colombia at prices below their COP, the
Department initiated COP investigations to determine whether these
respondents had home market sales that were made at less than their
respective COPs (See the September 8, 1994, memorandum from Richard W.
Moreland to Barbara R. Stafford). The respondents requested that we
depart from our normal practice and interpret our COP analysis in such
a manner as to either accept or reject all sales. We denied this
request. (See the January 26, 1995, COP memorandum from the team to
Barbara R. Stafford).
In keeping with our past practice in cases involving perishable
agricultural products, where we found less than 50 percent of a
respondent's sales of roses were at prices below the COP, we did not
disregard any below-cost sales because we determined that the
respondent's below-cost sales were not made in substantial quantities
(See Certain Fresh Winter Vegetables From Mexico 45 FR 20512 (1980)).
Where we found between 50 and 90 percent of a respondent's sales of
export quality roses were at prices below the COP, and the below cost
sales were made over an extended period of time, we disregarded only
the below-cost sales. Where we found that more than 90 percent of
respondent's sales were at prices below the COP, and the sales were
made over an extended period of time, we disregarded all sales for that
product and calculated FMV based on CV. The Department enunciated its
practice of modifying the standard cost test to account for the
perishability of products in Certain Fresh-Cut Flowers from Mexico (3/
1/88 to 4/31/89), and stated that the 50 percent modification only
affected the lower threshold of the standard 10-90-10 test. The
Department is continuing this standard practice in this investigation
(for a detailed discussion of the history of the cost test for
perishable products, see the January [[Page 6984]] 26, 1995, 50-90-10
memorandum from the team to Barbara R. Stafford).
Constructed Value Comparisons: Companies With Home Market Sales Below
the Cost of Production
In order to determine whether the home market prices were above the
COP, we calculated the COP based on the sum of a respondent's cost of
cultivation, general expenses, and packing. For all respondents with
viable home market sales, we found that more than 90 percent of all
sales fell below COP for each company. Therefore, in accordance with
section 773(b) of the Act we disregarded all home market sales and
calculated FMV on CV. We calculated CV based on the sum of a
respondent's cost of cultivation, plus general expenses, profit, and
U.S. packing. For general expenses, which includes selling and
financial expenses (SG&A), we used the greater of the reported general
expenses or the statutory minimum of ten percent of the cost of
cultivation. For profit, we used the statutory minimum of eight percent
of the cost of cultivation and general expenses, in accordance with
section 773(e)(B) of the Act (19 CFR 353.50(a)(2)) and Ad Hoc Committee
of AZ-NM-TX-FL Producers of Gray Portland Cement v. United States, Slip
Op. 93-1239 (Fed. Cir., January 5, 1994).
Constructed Value Revisions
We made specific revisions to each respondent's submitted COP and
CV data as described below:
1. Flores La Fragancia S.A.
For Fragancia, we: (1) Increased G&A expenses by the amount of
other G&A incurred in December, 1993; (2) disallowed interest income
earned on investments of working capital not deemed to be short-term;
(3) adjusted amortization and depreciation expenses to account for the
effect of Colombian inflation; and (4) included the actual greenhouse
plastic expense incurred during the POI.
2. Grupo Andes
For Andes, we: (1) adjusted amortization and depreciation expenses
to account for the effect of Colombian inflation; (2) adjusted G&A
expense to include parent company G&A costs; and (3) adjusted
depreciation expense for a computational error.
3. Grupo Benilda
For Benilda, we: (1) Adjusted amortization and depreciation
expenses to account for the effect of Colombian inflation; and (2)
allocated company-wide net financial expenses to rose production and
non-subject merchandise based on the ratio of cultivated area to flower
type.
4. Grupo Bojaca
For Bojaca, we: (1) Adjusted amortization and depreciation expenses
to account for the effect of Colombian inflation; and (2) reclassified
the miscellaneous income items from financial income to general and
administrative expense.
5. Caicedo Group
For Caicedo, we adjusted amortization and depreciation expenses to
account for the effect of Colombian inflation.
6. Grupo Floramerica
For Floramerica, we: (1) Adjusted amortization and depreciation
expenses to account for the effect of Colombian inflation; (2) adjusted
cultivation costs to include all 1993 year-end adjustments; and (3)
disallowed interest income earned on investments of working capital not
deemed to be short-term.
7. Grupo Intercontinental
For Intercontinental, we: (1) Allocated company-wide G&A costs to
rose production and non-subject merchandise based on the ratio of
cultivated area to flower type; (2) allocated company-wide net
financial expenses to rose production and non-subject merchandise based
on the ratio of cultivated area to flower type; and (3) adjusted
amortization and depreciation expenses to account for the effect of
Colombian inflation; (4) corrected materials, direct labor, and field
structure costs to account for amounts that were incorrectly
capitalized as preproductive expenses; and (5) adjusted home market
packing to account for inconsistencies in respondent's reporting of
this expense.
8. Grupo Papagayo
For Papagayo, we: (1) Adjusted amortization and depreciation
expenses to account for the effect of Colombian inflation; (2)
reclassified bad debt expense from financing expense to indirect
selling expense; and (3) included certain income and expense items
which related to the general production activity of the company as a
whole in general and administrative expense.
9. Grupo Prisma
For Prisma, we: (1) Adjusted amortization and depreciation expenses
to account for the effect of Colombian inflation; and (2) allocated
company-wide net financial expenses to rose production and non-subject
merchandise based on the ratio of cultivated area to flower type.
10. Grupo Sagaro
For Sagaro, we: (1) Adjusted amortization and depreciation expenses
to account for the effect of Colombian inflation; (2) included the worm
culture costs as a general research and development expense; and (3)
allocated company-wide net financial expenses to rose production and
non-subject merchandise based on the ratio of cultivated area to flower
type.
Constructed Value Adjustments
In order to calculate FMV, we made company-specific adjustments as
described below:
1. Flores La Fragancia S.A.
For CV to purchase price comparisons, we made circumstance of sale
adjustments, where appropriate, for credit expenses.
For CV to ESP comparisons, we deducted the indirect selling
expenses up to the amount of the indirect selling expenses incurred on
U.S. sales, in accordance with 19 CFR 353.56 (b)(2).
2. Grupo Andes
For CV to purchase price comparisons, we made circumstance of sale
adjustments for direct selling expenses, including credit expenses. We
recalculated U.S. credit expenses to reflect data examined at
verification.
For CV to ESP comparisons, we made deductions, where appropriate,
for direct selling expenses, including credit expenses. We also
deducted from CV the indirect selling expenses, including inventory
carrying costs, up to the amount of indirect selling expenses incurred
on U.S. sales, in accordance with 19 CFR 353.56(b)(2). We recalculated
U.S. credit expenses to reflect data examined at verification.
3. Grupo Benilda
For CV to purchase price comparisons, pursuant to section
773(a)(4)(B) of the Act and 19 CFR 353.56(a)(2), we made circumstance
of sale adjustments, where appropriate, for credit expenses and other
direct selling expenses.
For CV to ESP comparisons, we made deductions, where appropriate,
for direct selling expenses including credit. We also deducted from CV
the indirect selling expenses, including inventory carrying costs, up
to the amount of indirect selling expenses incurred on U.S. sales, in
accordance with 19 CFR 353.56(b)(2). [[Page 6985]]
4. Grupo Bojaca
For CV to purchase price comparisons, we made circumstance of sale
adjustments, where appropriate, for direct selling expenses.
For CV to ESP comparisons, we made deductions, where appropriate,
for direct selling expenses. We deducted the indirect selling expenses,
including, where appropriate, inventory carrying costs, up to the sum
of the indirect selling expenses incurred on U.S. sales and commissions
to unrelated parties, in accordance with 19 CFR 353.56(b)(2).
5. Caicedo Group
For CV to purchase price comparisons, we made circumstance of sale
adjustments, where appropriate, for credit expenses and other direct
selling expenses.
For CV to ESP comparisons, we made deductions, where appropriate,
for credit expenses. We also deducted from CV the indirect selling
expenses, including inventory carrying costs, up to the amount of
indirect selling expenses incurred on U.S. sales, in accordance with 19
CFR 353.56(b)(2). We revised reported U.S.-incurred indirect selling
expense to include sales to local vendors in the calculation of the
indirect selling expense ratio. We recalculated U.S. credit expenses to
reflect data examined at verification.
6. Grupo Floramerica
For CV to ESP comparisons, we made deductions, where appropriate,
for credit expenses. We also deducted from CV the indirect selling
expenses up to the amount of indirect selling expenses incurred on U.S.
sales, in accordance with 19 CFR 353.56(b)(2).
7. Grupo Intercontinental
For CV to purchase price comparisons, we made circumstance of sale
adjustments for direct selling expenses, including credit expenses. We
recalculated U.S. direct selling expenses to reflect data examined at
verification. We also deducted from CV indirect selling expenses,
including inventory carrying costs, up to the U.S. unrelated party
commissions, and added U.S. commissions.
For CV to ESP comparisons, we made deductions, where appropriate,
for direct selling expenses, including credit expenses. We recalculated
U.S. direct selling expenses to reflect data examined at verification.
We also deducted from CV indirect selling expenses, including inventory
carrying costs, up to the sum of U.S. unrelated party commissions and
indirect selling expenses 19 CFR 353.56(b)(2).
8. Grupo Papagayo
For CV to purchase price comparisons, we made circumstances of
sales adjustment for direct selling expenses.
For CV to ESP comparisons, we made deductions, where appropriate,
for direct selling expenses. We also deducted from CV the indirect
selling expenses up to the amount of U.S. indirect selling expenses and
unrelated party commissions, in accordance with 19 CFR 353.56(b)(2).
9. Grupo Prisma
For CV to purchase price comparisons, we made circumstances of
sales adjustment for credit expenses and other direct selling expenses.
For CV to ESP comparisons, we made deductions, where appropriate,
for direct selling expenses. We also deducted from CV the indirect
selling expenses up to the amount of U.S. indirect selling expenses and
unrelated party commissions, in accordance with 19 CFR 353.56(b)(2).
10. Grupo Sagaro
For CV to purchase price comparisons, we made circumstance of sale
adjustments, where appropriate, for credit expenses.
For CV to ESP comparisons, we made deductions, where appropriate,
for credit expenses. We also deducted from CV the indirect selling
expenses up to the amount of indirect selling expenses and commissions
paid to unrelated parties incurred on U.S. sales, in accordance with 19
CFR 353.56(b)(2).
Constructed Value: Companies Without Viable Home Markets and
Companies Without Adequate Sales in Any Foreign Market
The Department has determined that, in the case of those
respondents for which the home market was not viable, FMV should be
based on CV rather than a comparison to third country prices. (For a
full discussion of this issue, see Comment 6 of this notice.) These
three companies were: Clavecol, Sabana, and Tropicales.
Additionally, for three other respondents, we calculated FMV based
directly on CV, in accordance with section 773(e) of the Act, because
these respondents did not have adequate sales in either the home market
or in any third country markets during the POI. These three companies
were: Agrorosas, Mocari, and Rosex.
Constructed Value Revisions
We made specific revisions to each respondents' CV data as
described below:
1. Agrorosas S.A.
For Agrorosas, we: (1) Adjusted amortization and depreciation
expenses to account for the effect of Colombian inflation; (2) adjusted
G&A to reflect the actual cost of secretarial salaries and to include a
portion of the cost of maintaining the office in Bogota.
2. Flores Mocari S.A.
For Mocari, we: (1) Increased pre-production amortization expense
to account for an understatement of capitalized costs; (2) adjusted
amortization and depreciation expenses to account for the effect of
Colombian inflation; and (3) increased financial expense for foreign
exchange loss on debt.
3. Grupo Clavecol
For Clavecol, we; (1) Adjusted amortization and depreciation
expenses to account for the effect of Colombian inflation; and (2)
allocated company-wide net financial expense to rose production and
nonsubject merchandise based on cost of sales.
4. Grupo Sabana
For Sabana, we; (1) Adjusted amortization and depreciation expenses
to account for the effect of Colombian inflation; (2) allocated
company-wide net financial expenses to rose production and non-subject
merchandise based on the ratio of cultivated area by flower type; and
(3) adjusted cull revenue to reflect the amount verified by the sales
analyst.
5. Grupo Tropicales
For Tropicales, we adjusted amortization and depreciation expenses
to account for the effect of Colombian inflation.
6. Rosex Group
For Rosex, we: (1) Reclassified certain expenses from G&A expense
to cost of manufacturing; (2) disallowed interest income earned on
investments of working capital not deemed to be short-term; and (3)
adjusted amortization and depreciation expenses to account for the
effect of Colombian inflation.
Constructed Value Adjustments
In order to calculate FMV, we made company-specific adjustments as
described below:
1. Agrorosas S.A.
For CV to purchase price comparisons, we made circumstances of sale
adjustments, where appropriate, for direct selling expenses.
For CV to ESP comparisons, we made deductions, where appropriate,
for [[Page 6986]] direct selling expenses. We also deducted from CV the
indirect selling expenses up to the amount of U.S. indirect selling
expenses incurred on U.S. sales and U.S. commissions to unrelated
parties.
2. Flores Mocari S.A.
For CV to purchase price comparisons, we made circumstance of sales
adjustments for direct selling expenses including credit expenses.
For CV to ESP comparisons, we made deductions, where appropriate,
for credit expenses. We also deducted from CV the indirect selling
expenses, including inventory carrying costs, up to the amount of
indirect selling expenses incurred on U.S. sales, in accordance with 19
CFR 353.56(b)(2).
3. Grupo Clavecol
For CV to purchase price comparisons, pursuant to section
773(a)(4)(B) of the Act and 19 CFR 353.56(a)(2), we made circumstance
of sale adjustments, where appropriate, for credit expenses.
For CV to ESP comparisons, we made deductions, where appropriate,
for credit expenses. We also deducted from CV the indirect selling
expenses, including inventory carrying costs, up to the amount of
indirect selling expenses incurred on U.S. sales, in accordance with 19
CFR 353.56(b)(2).
4. Grupo Sabana
For CV to purchase price comparisons, we made circumstance of sales
adjustments for direct selling expenses, including credit expenses.
For CV to ESP comparisons, we made deductions, where appropriate,
for direct selling expenses, including credit expenses. We also
deducted from CV the indirect selling expenses, including inventory
carrying costs, up to the amount of indirect selling expenses incurred
on U.S. sales, in accordance with 19 CFR 353.56(b)(2).
5. Grupo Tropicales
For CV to purchase price comparisons, we made circumstance of sales
adjustments, where appropriate, for direct selling expenses.
For CV to ESP comparisons, we made deductions, where appropriate,
for direct selling expenses, including credit expenses. We also
deducted from CV the indirect selling expenses, including inventory
carrying costs, up to the amount of indirect selling expenses incurred
on U.S. sales, in accordance with 19 CFR 353.56(b)(2).
6. Rosex LTDA
For CV to purchase price comparisons, we made circumstance of sale
adjustments, where appropriate, for credit expenses.
For CV to ESP comparisons, we made deductions, where appropriate,
for credit expenses. We also deducted from CV the indirect selling
expenses up to the amount of indirect selling expenses and commissions
paid to unrelated parties incurred on U.S. sales, in accordance with 19
CFR 353.56(b)(2).
Verification
As provided in section 776(b) of the Act, we conducted verification
of the information provided by the respondents by using standard
verification procedures, including the examination of relevant sales,
cost and financial records, and selection of original source of
original source documentation.
Critical Circumstances
In the petition, the petitioner alleged that ``critical
circumstances'' exist with respect to importation of roses. However, we
did not initiate a critical circumstances investigation because, since
roses are extremely perishable, it is not possible to accumulate an
inventory of roses in order to evade a potential antidumping duty
order. Therefore, we determined that an allegation that critical
circumstances exist is without merit (See the September 12, 1994,
concurrence memorandum).
General Comments
Petitioner and respondents raised comments pertaining to the
concordance, the treatment of Difmer adjustments, the aggregation of
third country markets, and annual and monthly averaging of FMV. These
comments were rendered moot by the Department's decision to base FMV on
CV. See Comment 6 below.
Comments Pertaining to Scope
Comment 1: Roses in Bouquets
Respondents assert that roses in bouquets should not be included
within the scope of the investigation for four reasons: (1) There is no
legal basis for the Department to include within the scope of the
investigation only a component part contained in imported finished
merchandise (i.e., the roses within the bouquet); (2) bouquets are not
within the same class or kind of merchandise as roses according to the
criteria set out in Diversified Products v. United States, 572 F. Supp.
883, 889 (CIT 1983)(Diversified Products); (3) the Department lacks the
authority to expand the investigation to include bouquets; and (4)
petitioner does not represent producers of bouquets or producers of
``roses in bouquets.'' Respondents have supplied an analysis of the
information in these investigations as applied to Diversified Products.
Petitioner requests that the Department continue to include roses
in bouquets within the scope of its investigation. Petitioner states
that since the description of bouquets is found in the petition, the
Department's and ITC's preliminary determinations are dispositive as to
the scope of the investigation, and an analysis under Diversified
Products is unnecessary, although petitioner supplied such an analysis.
Petitioner states that the scope description in the petition covers all
fresh cut roses, whether imported as individual blooms (stems) or in
bouquets or bunches. Also, petitioner claims to represent growers
producing mixed bouquets of fresh cut flowers, and hence has standing
to file a petition covering bouquets.
Petitioner maintains that any antidumping duty order issued in this
investigation will be substantially undermined if foreign rose
producers/exporters can circumvent the order by importing bouquets of
fresh cut roses covered by the order. Petitioner states that it would
be absurd for the Department to permit respondents to combine
merchandise subject to the order to achieve a final product outside the
scope of the order.
DOC Position
Roses, including roses in bouquets, are within the scope of the
investigation and constitute a single class or kind of merchandise.
Because the scope covers only the roses in bouquets, not the bouquets
themselves, respondents' arguments that bouquets constitute a separate
class or kind are inapposite. Therefore, a Diversified Products
analysis is not required. The Department's conclusion that all roses,
whether or not imported as individual stems or in bouquets or bunches,
constitute a single class or kind of merchandise is consistent with its
determination in Flowers. See Flowers, 59 FR 15159, 15162-4 (March 31,
1994) (final results of 4th admin. review).
The packaging and presentation of roses in bunches and bouquets do
not transform the roses into merchandise outside the scope of the
order. See Final Determination of Sales at Less Than Fair Value; Red
Raspberries from Canada, 50 FR 19768, 19771 (May 10, 1985). Nor is the
rose transformed into a new article by virtue of being bunched or
placed in a bouquet. Notably, Customs disaggregates bouquets, requiring
separate reporting and [[Page 6987]] collection of duties on individual
flower stems regardless of how they are imported. As a result, Customs,
in this case, will collect duty deposits only on individual rose stems
incorporated in bouquets, not the bouquets themselves.
Respondents argue that there is no legal basis for the Department
to include within the scope of an investigation only a component part
of imported finished merchandise, i.e., the roses within the bouquet.
As discussed above, consistent with Customs, the Department is not
treating bouquets as a distinct finished product.
Respondents' argument that the Department cannot expand the
investigation to include bouquets, also can be dismissed. A review of
the descriptions contained in the petition and the Department's and ITC
preliminary determinations reveals quite clearly that what is covered
by this investigation is all fresh cut roses, regardless of the form in
which they were imported. Specifically, the petition covers ``all fresh
cut roses, whether imported as individual blooms (stems) or in bouquets
or bunches, as provided in HTSUS 0603.10.60.'' Petition at 8 (emphasis
added). HTSUS 0603.10.60 covers
Cut flowers and flower buds of a kind suitable for bouquets or
for ornamental purposes, fresh * * *
0603.10.60 Roses:
10 Sweetheart
90 Other
Furthermore, the scope of this investigation unequivocally states that
The products covered by this investigation are fresh cut roses,
including sweethearts or miniatures, intermediates, and hybrid teas,
whether imported as individual blooms (stems) or in bouquets or
bunches.
Preliminary Determination of Sales at Less Than Fair Value, 59 FR 48285
(Colombia), 59 FR 48294 (Ecuador) (emphasis added). Finally, in its
preliminary determination, the ITC found that ``the plain language of
Commerce's scope description in these investigations demonstrates that
the merchandise subject to investigation covers the roses in the
bouquets only,'' and not the bouquets themselves. ITC Pub. No. 2766 at
9 (March 1994). Neither the Department nor the petitioner has ever
attempted to include the bouquets themselves, nor any of the other
types of flowers which comprise a bouquet, within the scope of this
investigation. The plain language of the Department's scope description
demonstrates that the merchandise subject to investigation covers the
roses in the bouquets only and does not expressly state that the
bouquets are themselves covered. Notably, the ITC stated that
``[b]ouquets are referred to in the scope definition to indicate that
all fresh cut roses are covered, regardless of the form, or packaging,
they are imported in.'' ITC Pub. No. 2766 at 9 (March 1994).
Finally, we disagree with respondents' contention that petitioner
lacks standing in this investigation because it does not represent
producers of bouquets or producers or ``roses in bouquets.'' In order
to have standing in an antidumping investigation, petitioner must
produce, or represent producers of, the like product. See, e.g., Final
Determination of Sales at Less Than Fair Value: Nepheline Syenite from
Canada, 57 FR 9237 (March 17, 1992)(comment 5). We agree with the ITC
that there is one like product in this investigation--``all fresh cut
roses, regardless of variety, or whether included in bouquets.'' ITC
Pub. No. 2766 at 9, 14 (March 1994). Because petitioner represents
producers of fresh cut roses they have standing in this investigation.
Comment 2: Spray Roses
Respondent HOSA, an exporter/purchaser of spray roses, argues that
spray roses are a genetically distinct species of the rosa genus.
Therefore, HOSA argues that the Department should exclude spray roses
from the scope of the investigation. HOSA states that spray roses are
not explicitly included in the scope of the investigation. Furthermore,
HOSA argues that spray roses were never mentioned in the petition nor
were price or cost of production data provided in the petition for
spray roses. HOSA suggests that the Department analyze spray roses
pursuant to the criteria set out in Diversified Products analysis to
evaluate whether spray roses are within the scope of this
investigation.
Petitioner requests that the Department include spray roses in the
antidumping duty order. Petitioner states that since the description of
spray roses is found in the petition, the instant investigation and the
Department and ITC determinations are dispositive as to the scope of
the investigation and analysis under Diversified Products is
unnecessary, (although respondent provides an analysis under
Diversified Products). Petitioner asserts that all fresh cut roses,
without regard to stem length, species or variety, were specifically
covered in the scope of the petition. Petitioner contends that the fact
that spray roses may be of a distinct species of the rosaceae family
does not exclude them from the petition, since the petition includes
all roses, regardless of species. Although it claims it as unnecessary,
petitioner conducts an analysis under the Diversified Products criteria
to show that spray roses are properly included in the scope of the
petition.
DOC Position
We agree with petitioner. The descriptions of the merchandise in
the petition and in the Department's scope are dispositive with respect
to spray roses and the evidence on the record, including the ITC's
preliminary determination, supports treating this rose variety no
differently than other varieties within the same class or kind of
merchandise subject to these investigations.
The scope of the petition clearly refers to spray roses. First, the
petition notes that the scope ``* * * covers all fresh cut roses,
whether imported as individual blooms, stems or in bouquets or
bunches.'' Spray roses are fresh cut roses sold in bunches or bouquets
and are classified under the HTSUS subheading 0603.10.60, as are
standard roses. Second, the petition states that its scope is ``* * *
inclusive of all imported roses from Colombia and Ecuador, without
regard to stem length, species or varieties.'' Third, the scope
description in the petition cites the ITC's definition from the prior
roses investigation. See ITC's Publication 2178 at 4-15 (April 1989)
``Roses are members of the rosaceae family * * *'' Genetically, spray
roses are members of the rosaceae family, as are standard roses.
While differences exist between spray and standard roses, it should
be noted that differences also exist between other varieties of roses
within the scope of this investigation. The ITC stated in its
preliminary finding of fresh cut roses from Colombia and Ecuador that
``* * * we note that different rose varieties also have varying stem
lengths and bloom sizes (e.g., as with spray roses, sweetheart roses
have smaller buds and shorter stems than traditional roses), which we
do not find to be significant differences in physical
characteristics.'' See ITC Pub. No. 2766 at 10 (March 1994). Although
the ITC's preliminary finding is not dispositive with respect to this
scope analysis, it clearly demonstrates that the physical differences
of each rose variety within the same like product category are not
merely unique to spray roses, and that the differences of the varieties
within the same like product category are not sufficient ``to rise to
the level'' of differences in the like product.
[[Page 6988]]
We also note that the rationale used by the ITC in these
investigations, of including spray roses within the same like product
category, is consistent with the Department's rationale as to whether a
product should or should not be in the same class or kind of
merchandise. In its notice of final determination of sales at LTFV in
Antifriction Bearings from West Germany, 54 FR 18992 (May 3, 1989), the
Department stated that ``the real question is whether the difference is
so material as to alter the essential nature of the product, and
therefore, rise to the level of class or kind differences.'' The class
or kind of merchandise subject to these investigations includes
different rose varieties such as sweethearts or miniatures,
intermediates, and hybrid teas. Like spray roses, each variety within
the class or kind differs from the other varieties. However, in this
instance, the similarities greatly outweigh the dissimilarities and the
dissimilarities do not alter the essential nature (i.e., that spray
roses are export quality roses) of the spray roses.
Comment 3: Rose Petals
Simpson & Turner, an importer of rose heads, rose petals (petals),
and foliage (by-products) argues that such products should be excluded
from the scope of this investigation because these products are not the
same ``class or kind of merchandise'' as the subject merchandise.
Simpson & Turner maintains that the petition refers to stems, but does
not mention petals or foliage, and the HTSUS description refers to
flower buds as ``flower buds of a kind suitable for bouquets or for
ornamental purposes.''
Simpson & Turner argues that rose heads, rose petals and foliage
were not mentioned in the Department's LTFV investigation's initiation
or preliminary determination. The scope description specifically refers
to a fresh cut rose as a bloom, which is clarified to be a stem. The
scope description then defines the form of importation of the stem as
an individual, part of a bouquet or bunch.
Petitioner asserts that Simpson & Turner fails to distinguish
imported ``rose bush foliage, rose petals, and rose heads'' from
``culls'' within the scope of the this investigation. Petitioner
asserts that culls are within the scope of the petition and
investigation. Petitioner states that in its preliminary determination,
the Department found that culls are a ``such or similar category''
separate from export quality roses but nonetheless covered by the
petition and states further that no party has challenged the
Department's determination that culls are within the scope of the
investigation.
Petitioner states that the description of merchandise provided by
Simpson & Turner, however, invites the Department to issue a scope
ruling that would permit culls to enter the United States outside the
order. To the extent that Simpson & Turner seek to exclude more than
loose rose petals, loose rose foliage, or stems without rose heads, the
described merchandise apparently consists of culls, which as such are
included by the plain language of the petition and by the Department's
unchallenged ruling concerning ``such or similar'' categories.
Petitioner further notes that culls are simply roses that did not
meet the criteria of quality and length required for export. Culls may
``have crooked stems, deformed buds, or have opened prematurely.''
(Guaisa Sec. A Resp. at 26). Consequently, petitioner asserts that the
roses imported by Simpson & Turner, consisting of rose heads with very
small stems or of roses ``normally discarded at the farm level in time
of grading due to poor appearance, stage of development and scarring''
meet the definition of culls and should thus be included within the
scope of these investigations.
DOC Position
We agree with Simpson & Turner. See Scope of Investigation above,
indicating that loose rose foliage (greens), loose rose petals and
detached buds should be excluded from the scope of these
investigations.
The scope used in the preliminary determination clearly stated that
roses which are imported as individual blooms (stems) or in bouquets or
bunches are included. However, we asked petitioner to comment on this
scope issue at the December 12, 1994, Colombia hearing, at which time
petitioner clearly stated that it does not consider loose rose foliage,
loose rose petals or buds detached from the stem to be included in the
scope of these investigations.
Comments Pertaining to USP
Comment 4: Annual and Monthly U.S. Price Averaging
Petitioner argues that USP should not be averaged over a full month
or over a year because such prices would be unrepresentative of
transaction-specific, daily or weekly U.S. sales. Petitioner claims
that both monthly and annual averaging would obscure or mask dumping.
Petitioner contends that monthly averaging would mask dumping of roses
at low prices within every month and that annual averaging would be
even more distortive, concealing dumping during months in which major
holidays occur.
Petitioner claims that the facts in the instant Roses
investigations do not support the reasons articulated in the Flowers
administrative reviews for departing from the normal Department
practice of using daily U.S. prices. Specifically, petitioner maintains
that, because roses have a shorter life span than other fresh cut
flowers, there is no basis for using a monthly average U.S. price.
Petitioner also asserts that respondents' inability to control
production, timing, or prices is irrelevant to the application of the
averaging provision in the statute.
Respondents claim that the Department erred in the preliminary
determination by comparing one average constructed value encompassing
all varieties and stem lengths to a product-specific monthly average
USP. Respondents argue that this comparison is inappropriate because,
although growers do not maintain cost records on a variety-specific or
stem-specific basis, different rose products have different physical
characteristics and different costs and values related to productivity
and consumer preferences, all of which result in widely different
prices. Respondents assert that if costs are standardized, yet prices
fluctuate according to consumer demand for particular rose products,
average costs can only be meaningfully compared to equivalent average
prices without artificially creating margins. Respondents argue that an
annual average constructed value should be compared to an annual
average USP. Respondents state that the unique factors characterizing
rose production, demand, and perishability, in addition to extreme
seasonality, compel the use of annual average U.S. prices.
Respondents maintain that using any type of monthly average USP in
the comparison measures only seasonality and not dumping. Specifically,
respondents argue that the Department must take into account: (1) That
the USP cycle is an unavoidable consequence of the highly seasonal
nature of U.S. demand; (2) the high perishability of the product; (3)
the rose production cycle is geared towards consumer demand which is
concentrated around Valentine's Day; and (4) roses cannot be stored and
rose production is a continuous process that cannot be turned off after
Valentine's Day. According to respondents, these conditions result in
unavoidable price swings. For these reasons, respondents contend that
using any type of monthly USP average artificially creates dumping
[[Page 6989]] margins by establishing a benchmark that no producer can
meet.
In addition, respondents contend that using monthly average USP
does not account for month-to-month volatility caused by the extreme
seasonality of U.S. demand. Therefore, respondents maintain that
monthly average U.S. prices are not representative for purposes of
comparison with an annual CV and that only an annual average USP
captures the full demand/production cycle, undistorted by seasonal
factors.
Regarding petitioner's contention that the Department should not
use a monthly USP in the Roses cases because, unlike flowers, roses
have a shorter life, Floramerica points out that shelf life alone does
not justify a departure from the Department's traditional averaging
methodology and further, that there is information on the record which
shows that roses do not have a shorter shelf life.
DOC Position
19 U.S.C. 1677f-1(b) and 19 353.59(b) provide the Department with
the discretionary authority to use sampling or averaging in determining
United States price, provided that the average is representative of the
transactions under investigation. In these investigations, we
determined, based on a combination of factors, to average U.S. sales.
The Department was confronted with approximately 555,000 Colombian
transactions which, when combined with the number of estimated U.S.
sales transactions from Ecuador, exceeded one million. As a result, a
decision to make fair value comparisons on a transaction-specific basis
would place an onerous, perhaps even an impossible, burden on the
Department in terms of data collection, verification, and analysis.
Consequently, we exercised our discretion in order to reduce the
administrative burden and maximize efficient use of our limited
resources. Additionally, we recognize the need for consistency in our
treatment of these concurrent investigations and, although the number
of transactions may vary between the two countries, uniform application
of an averaging methodology ensures that both Colombia and Ecuador will
be treated on the same basis. See the June 24, 1994, Decision
Memorandum pertaining to reporting requirements from Team to Barbara
Stafford.
Moreover, we took into account that the majority of respondents,
who make U.S. sales on consignment, have little, if any, ability to
provide the level of detail which would have been required for the
Department to do a transaction-specific analysis because unrelated
consignees generally keep accounts for respondents' U.S. sales in
monthly grower reports. Upon review of data submitted, and later
verified, we concluded that a month was the shortest period of time
which would permit all respondents to provide U.S. sales information on
a uniform basis, thus ensuring that we treated all respondents in a
similar manner in terms of data collection and analysis.
Importantly, because of the highly perishable nature of the
product, we believe that monthly averaging of U.S. prices in these
investigations provides a fair and more representative measure of
value. Unlike nonperishable merchandise, respondent growers cannot
withhold their roses from the market to await a better price. Rather,
respondents are faced with the choice of accepting whatever return they
can obtain on certain sales, so-called ``end-of-the-day'' and
``distress sales'', or of destroying the product. Were we to perform a
transaction-by-transaction comparison, such an approach, beyond the
limits imposed on the Department as described above, would give undue
and disproportionate weight to end-of-the-day sales. Even where a
respondent's normal sales were above fair value, he could be found to
be dumping solely on the basis of sales made as a result of
perishability. By adopting a monthly averaging period, we ensure that
the entire range of distress and nondistress sale prices are covered.
Furthermore, while use of actual prices and transaction-by-
transaction data is the norm, the statute allows for averaging provided
such averaging yields representative results. We conclude that, in
light of the above factors, using monthly averages of U.S. sales prices
constitutes the shortest period necessary to capture a representative
analysis of the ordinary trading practices in this industry. Our
approach is consistent with the Department's past practice in
investigations of fresh cut flowers as well as other perishable
agricultural products. See Certain Fresh Cut Flowers From Colombia:
Final Results of Antidumping Duty Administrative Review, 55 FR 20491
(May 17, 1990); Final Determination of Sales at Less Than Fair Value:
Certain Fresh Cut Flowers From Mexico, 52 FR 6361 (March 3, 1987).
Furthermore, our approach has been upheld consistently by the court.
See Floral Trade Council v. United States, 775 F. Supp. 1492, 1500-2
(CIT 1991); Asociacion Colombiana de Exportadores de Flores v. United
States, 704 F. Supp. 1114 (CIT 1989).
Lastly, we are unpersuaded by two additional arguments proffered by
petitioner to shorten the averaging period in these investigations.
First, petitioner claims a factual distinction between the life-span of
a rose and a fresh cut flower. However, we find that the record in
these investigations establishes that from the time of importation,
roses last approximately seven to ten days, while flowers last
approximately ten to fourteen days and both may be held for more than
one week in refrigerated coolers. Thus, we find this to be a
distinction without a difference. Second, petitioner argues that, by
not using a shorter averaging period, dumping during peak holiday
periods such as at Valentine's Day, will elude the Department.
According to petitioner, sales of roses imported before this holiday,
but which are sold after the holiday when demand is quite low, will be
sales at dumped prices. The petitioner does not consider such dumped
sales legitimately within the category of end-of-the-day sales, for
which our averaging period is designed to fairly account. Rather,
petitioner argues that by averaging these low- priced sales with high-
priced holiday sales for the month of February, dumping will be
understated. While we recognize that using a monthly averaging period
could result in some offsetting of high-priced sales with low-priced
sales, we believe that overall, monthly averaging is representative of
the transactions under investigation. Moreover, in verifying numerous
companies' February grower reports we found that only an insignificant
number of roses were imported in February after Valentine's Day, as
compared to the overwhelming volume imported during the first 13 days
of the month, thus ameliorating this circumstance.
Annual Averaging
While we recognize that averaging is necessary in these
investigations, we believe that averaging U.S. sales prices over a year
is inappropriate. As we stated in Flowers,
nothing in the statute, the legislative history, or the Department's
practice (including Final Determination of Sales of Not Less Than
Fair Value: Fresh Winter Vegetables from Mexico (45 FR 20512; March
24, 1980) supports the broad notion of annual averaged U.S. prices.
Annual averaging would extend too much credit to respondents by
allowing them to dump for entire months when demand is sluggish, so
long as they recoup their losses during months of high demand.
See Final Results of Antidumping Administrative Review and Revocation
in Part of the Antidumping Duty Order: Certain Fresh Cut Flowers from
[[Page 6990]] Colombia, 56 FR 50554, 50556 (October 7, 1991). The CIT
has agreed with the Department that monthly averaging adequately
compensates for perishablilty but averaging over a longer period could
obscure dumping. See Floral Trade Council v. United States, 775 F.
Supp. 1492, 1500 (CIT 1991).
Even though respondents argue that the demands of the U.S. market
determine their U.S. pricing and that they are price takers rather than
price setters, we note that the intent to dump is not the issue. See
Final Determination of Sales at Less Than Fair Value: Certain Fresh Cut
Flowers from Mexico, 52 FR 6361, 6364 (March 3, 1987). The issue is
whether, in fact, dumping is occurring.
Comment 5: Product Averaging
Regarding the use of variety and stem-specific monthly average
USPs, respondents contend that the Department is bound by its
longstanding administrative practice in the original investigations and
subsequent administrative reviews of Flowers to calculate monthly
average USPs by flower type, without regard to variety or grade.
Additionally, the Department has consistently concluded that comparing
CV data by flower type to grade or variety-specific USPs would produce
unfair and distorted results. Respondents maintain that the Department
has not furnished any reasonable explanation for its departure from
this practice in the preliminary determination.
Respondents urge the Department to compare all rose products to all
rose products on an annual average basis. Alternately, respondents
request that the Department compare product-specific, monthly U.S.
prices to identical product-specific, monthly FMV prices. Respondents
note that where FMV is not available, CV should be used. However, the
profit element should be monthly FMV profit, not annual FMV profit. In
addition, respondents argue that average CV of all products combined
must be compared to U.S. prices of non-matched products.
Petitioner argues that product averaging should not be used to
obliterate differences in prices due to physical differences in roses.
Petitioner stresses that it is particularly important that the prices
of the low-priced Visa roses are not averaged together with prices of
other red roses. Petitioner maintains that an average across varieties,
colors, or stem lengths substantially distorts the market reality.
DOC Position
We agree with respondents that averaging by flower type is
appropriate in this investigation. Consistent with Flowers, where
possible, we compared USP and CV on a rose type basis, i.e., hybrid
tea, sweetheart, etc. See, e.g., Fresh Cut Flowers From Colombia, 59 FR
15159, 15160-61 (March 31, 1994) (4th admin. review final). For a
number of companies, however, we were unable to compare USP and CV on a
rose type basis because the respondents do not keep their cost data in
such a fashion. As a result, in order to ensure an ``apples-to-apples''
comparison, we aggregated U.S. price data to arrive at a weighted-
average monthly USP for all rose types for comparison with respondents'
single average CV for all rose types. While it would have been
preferable to disaggregate rose costs for these respondents in order to
make a fair value comparison on a rose type basis, we were not able to
do so in this investigation because the data were not available and we
did not present respondents with a methodology for disaggregating
costs. However, we intend to do so in any future administrative reviews
if an order is issued. We will seek to devise a method to enable us to
compute cost by rose type, which will not require respondents to change
their method of recordkeeping.
Comments Pertaining to Third Country
Comment 6: Third Country as Basis for FMV
Petitioner maintains that there is no basis in law for rejecting
third country prices that are adequate to establish a viable market. In
addition, petitioner states that the Department's regulations state a
preference for the use of third country prices, where the home market
is not viable. Petitioner maintains that the statute prescribes
adjustments for differences in circumstances of sale, which can take
account of differences in markets, but it does not permit the
Department to simply reject a viable market, due to factors other than
dissimilar merchandise, for the purposes of determining FMV.
Petitioner claims that there is no evidence on the record to
establish that third country prices are incompatible for comparison to
U.S. prices. Petitioner questions the validity of respondents'
statistical studies, claiming that the statistical analyses provided by
Drs. Botero and Sykes and Lewis are unworthy of consideration because
they exclude the impact of dumping in their price analyses. According
to petitioner, if the Colombian and Ecuadoran growers are dumping
during the several off-peak (non-holiday) months in the U.S. market,
but not in other markets, such dumping would produce price changes in
the U.S. market that are much sharper and greater than the price
changes in Europe, thereby causing the greater volatility in the U.S.
market identified by respondents. Petitioner adds that, because the
Colombian and Ecuadoran imports constitute such a large percentage of
the U.S. market and because they sell through consignment agents on a
national basis, the supply of Colombian and Ecuadorian roses uniformly
depresses U.S. prices whenever those imports oversupply the U.S.
market.
Petitioner argues that the Botero and Sykes and Lewis reports are
further skewed because they use the prices of a single variety of red
rose, the Visa, which it asserts is the most price sensitive. Moreover,
these reports did not provide source documentation showing the
composition of the Dutch auction prices relied upon. Thus, it is
unclear how many varieties of roses were included in the comparison
database. In addition, since Colombian and Ecuadoran roses sold on the
Aalsmeer auction account for only a very small portion of all roses
exported to the EU, Aalsmeer prices may not be representative of
Colombian and Ecuadoran rose prices in the EU.
Petitioner argues that the statements provided in the Hortimarc
Report based on FTD data, which included traditional retail florists
and excluded non-traditional outlets such as supermarkets, and mass
merchandisers, ignores a significant number of spontaneous purchases
from their analysis.
Petitioner states that the Stern & Wechsler argument regarding the
opposing demand strains of the U.S. and EU market are irrelevant to the
comparison of foreign market values and U.S. prices. Petitioner
maintains that the U.S. market is as supply driven as any other market
during non-holiday months.
Petitioner recognizes that in the second administrative review of
Fresh Cut Flowers From Colombia, (55 FR 20491, May 17, 1990) (Flowers),
the Department departed from its normal practice and rejected third
country prices in favor of CV for the following three reasons: (1)
Third country and U.S. price and volume movements were not positively
correlated which showed that different forces operated in the relevant
markets, in some instances, pushing prices in opposite directions; (2)
third country sales only occurred in peak months which resulted in a
distorted comparison of off-peak U.S. [[Page 6991]] prices to peak
third country prices; and (3) the perishable nature of flowers and the
inability to control short-term production resulted in ``chance''
sales.
Petitioner argues that the Department's analysis of statistical
data on the record in these investigations confirmed a positive
correlation in prices, thus refuting the principal finding of the
Flowers case. In fact, petitioner argues that the basis for creating an
exception to the statutory preference for price-to-price comparisons
was the presence of a negative correlation. Regarding volatility,
petitioner notes that in Flowers, the Department never required that
prices be equally volatile in each market; volatility alone does not
require the Department to reject a price-to-price comparison. In fact,
petitioner argues that in Flowers the Department found differences in
volatility between the U.S. and European markets and price movement in
opposite directions in each market.
Regarding the second factor, petitioner observes that, unlike the
Flowers case, third country sales of roses even occur in off-peak
months and argues that the Department's six-month weighted average FMVs
take into account seasonal peaks and off-peaks. Moreover, petitioner
maintains that major flower buying holidays are the same in all markets
and, therefore, peaks will occur at similar times in all markets.
Finally, with regard to the issue of perishability and production
control, petitioner maintains that respondents may control production
by pinching back rose buds. In addition, petitioner notes that there is
evidence on the record indicating that third country sales of roses are
stable, some occurring as a result of negotiated standing orders and,
therefore, there is a lesser incidence of chance sales than was present
in Flowers. Petitioner contends that statements by respondents
regarding a potential shift of exports from third country markets to
U.S. markets reveals the extent to which respondents, in fact, control,
plan, and target their rose exports to certain markets.
Respondents claim that third country prices should be rejected in
favor of CV because the three factors found in Flowers are present in
these cases. With regard to the first Flowers factor, respondents quote
empirical evidence on the record showing substantial differences in
demand and pricing seasonality between U.S. and third country markets.
Respondents argue that there are two principal aspects of seasonality:
timing (i.e., the point in time at which demand peaks and valleys occur
in seasonal cycles) and volatility (i.e., the magnitude of peaks and
valleys). Respondents argue that, in Flowers, the Department relied on
both differences in timing and in volatility to explain why it rejected
third country prices. Respondents assert that in the rose industry, as
in the flower industry: (1) The U.S. market is holiday-demand driven;
(2) U.S. demand is not a stable consumption base because the majority
of roses are purchased primarily as gifts; and (3) the U.S. market is
demand driven. In contrast, respondents state that: (1) The European
market is marked by relatively even year-round demand; (2) flower
purchasing on a more regular basis (not tied to gift giving) is a deep
rooted tradition in Europe; and (3) the European market is supply
driven.
Respondents have submitted several statistical analyses of the
different markets which, they claim, conclusively show that the
seasonal demand and pricing patterns are significantly different
between the markets. Respondents point to the second Botero report and
the Sykes & Lewis report which states that the mere presence of a price
correlation is insufficient proof that demand patterns are equivalent.
Respondents contend that while petitioner criticizes their statistical
analysis, petitioner has not provided any independent correlation
analysis regarding U.S. and third country prices.
With regard to the second Flowers factor, access to third country
markets, respondents claim that petitioner's own data rebut the
contention that respondents have substantial continuous access to third
country markets because there are no Colombian and Ecuadorian imports
of roses in at least one month for every country for which petitioner
has provided data. Respondents assert that petitioner's claim that
Colombian and Ecuadorian production is planned with third countries in
mind, and that roses are sold at the same fixed price over a period of
time as a result of a pre-negotiated arrangement, is a misunderstanding
of the facts on the record.
In addition, respondents claim that combining third country markets
would not rectify the gaps created by the absence of sales in all
months in individual markets. Respondents note that adding two markets
with partial year sales is still tantamount to using only peak prices
for foreign market value.
With regard to the third Flowers factor, respondents claim the
control and perishability factor relied upon by the Department in the
Flowers case is equally applicable to roses. Respondents cite to
portions of the Department's Roses preliminary determination where the
Department noted that there are substantial similarities between
flowers and roses in perishability and short-term lack of production
control. Respondents also cite to the first Tayama report which states
that roses are even more perishable than fresh cut flowers.
Respondents claim that petitioner oversimplifies their argument
regarding seasonality by neglecting to view all aspects of the Flowers
exception: the unique combination of differences in seasonality between
U.S. and third country markets for a highly perishable product for
which production cannot be controlled in the short term. Thus,
respondents maintain that the Roses case is a logical extension of the
Flowers case.
DOC Position
The Department agrees with respondents. In the preliminary
determination, we rejected respondents' request to use CV as the basis
for FMV because we determined that the record at that time did not
support the application of the Flowers' precedent. Since the
preliminary determination, a considerable amount of new information has
been submitted. Based on our review of this new information, we have
determined that the records in these cases warrant rejection of third
country sales in favor of CV. See the January 26, 1995, Decision
Memorandum pertaining to third country versus constructed value from
the Team to Barbara Stafford for a more detailed discussion of this
issue.
Information on the record establishes that the three factors
identified by the Department in Flowers as supporting the use of CV are
satisfied in this case. First, the market for roses in the U.S. differs
significantly from the markets in third countries. For example, as in
Flowers, price and quantity within the United States' rose market are
positively correlated; however, the price and quantity within Europe,
Canada, and Argentina are negatively correlated.
Similarly, the U.S. market for roses, like the U.S. market for
flowers, is more volatile in terms of price and quantity movements than
the markets in third countries markets; the European per capita
consumption of flowers is four to ten times greater than the United
States, and Colombian and Ecuadorian producers have, in general,
limited access to the main third country markets, i.e., the Dutch
auction. Thus, the differences in the rose markets are
[[Page 6992]] similar to the differences that existed in Flowers.
The second Flowers factor we considered was whether a comparison of
third country sales to U.S. sales would require comparisons of low-
price U.S. sales in off-peak months with high- price third country
sales in peak months, or vice versa. In the preliminary determination,
we found that this factor was not present in these investigations
because: (1) There were sufficient third country sales in each month of
the POI (when markets were combined); and, (2) using two six-month FMV
periods reduced distortion caused by price comparisons involving peak
and non-peak periods.
For purposes of this final determination, we have determined that
use of third country prices could result in off-peak U.S. sales being
compared with peak third country sales. While six- month averages
ameliorate potential distortions, almost all of the respondents do not
have third country sales in every month of the POI. It is only by
combining markets that respondents have sales in each month of the POI.
If we were to use third country prices as the basis for FMV, prices
during peak periods in one third country could be combined with prices
during peak periods in another third country. These peak prices would
then be compared to both peak and non-peak periods in the United
States. We find that this factor supports use of CV in these cases,
albeit to a somewhat lesser degree than in Flowers.
The third Flowers factor we considered was the extreme
perishability of roses--i.e., the inability to control short-term
production--and the resultant ``chance'' element to sales. As noted in
our preliminary determinations, there are substantial similarities
between the subject merchandise in these investigations and Flowers:
(1) Roses, like flowers, are extremely perishable; (2) rose growers
have relatively minor control over short-term production; (3) rose
production is also affected by exogenous factors (e.g., weather,
disease, etc.) like other flowers; and 4) roses cannot be stored and we
note that there are only very minor alternative uses (e.g., drying).
In conclusion, we have determined that the factors that led the
Department use CV instead of third country prices in Flowers are
present in these investigations. Therefore, we have adopted CV as the
basis for comparison with U.S. prices.
Comments Pertaining to Related Party Commissions
Comment 7: Related Party Commissions
Petitioner requests that commissions paid to consignment agents
should be deducted from USP even where consignees are related parties.
Specifically, petitioners argue that: (1) The statute directs us to
deduct commissions from USP in ESP situations, without discretion to
disregard U.S. commissions in related party transactions; (2) in
Timken, the court recognized that the statute required a deduction when
a U.S. importer was paid commissions, as opposed to earning
``profits;'' (3) the statute should be followed, regardless of the fact
that commissions were not deducted in Flowers; and (4) we should deduct
U.S. indirect selling expenses if such expenses exceed the related
consignee's commissions, in accordance with 19 U.S.C. 1677a(e)(2).
Respondents claim that the Department's treatment in the
preliminary determination of related party sales commissions is
invalid. They argue that deducting the related importer's commission
from U.S. price has the effect of deducting the importer's profit,
which the Department does not have the authority to do. The Department
should deduct the importer's actual selling expenses rather than intra
company transfers. Respondent's argue that the Department's approach is
inconsistent with past practice since related party commissions have
never been treated as a direct selling expense, but rather have been
collapsed in the past for the purposes of determining U.S. price and
expenses. Moreover, respondents assert that the Department's statute
and regulations do not authorize the Department to deduct the higher of
related party commissions or related party actual expenses. Respondents
claim that in selectively choosing deductions of commissions or actual
expenses, the Department fails to account for the fact that the
commission it treats as a cost is also sales related income to the
related importer. Respondents maintain that the Department should
ignore the sales commissions paid between related parties on ESP sales,
regardless of whether such commissions are at arm's length, and treat
as U.S. indirect selling expenses the importer's share of operating and
selling expenses allocable to the exporter's subject sales.
DOC Position
The difference between a related consignee's commission and the
related consignee's U.S. indirect selling expenses is equal to the
related consignee's profit. The Department does not deduct profit from
USP in ESP transactions because the law does not allow it. 19 CFR
353.41(e)(1) and (2) do, however, instruct us to make adjustments in
ESP situations for commissions and expenses generally incurred by or
for the account of the exporter in selling the merchandise.
With respect to treatment of related party commissions paid in the
U.S., we have in the past looked to the definition of ``exporter''
which provides that related party importers are to be collapsed with,
and treated as part of, the exporter. 19 U.S.C. 1677(13). In this
context, it is inappropriate to treat a commission the exporter has
paid to itself as an expense. The expense is the actual costs incurred
by or for the account of the exporter.
In LMI-Le Metalli Industriale, S.p.A. v. United States, 912 F.2d
455, 459 (Fed. Cir. 1990) (LMI), the CAFC indicated that related party
commissions can and should be adjusted for if the commissions are at
arm's-length and are directly related to the sales under review.1
By implication, an arm's-length commission includes the actual indirect
selling expenses incurred by the commissionnaire and the
commissionnaire's profits. Thus, LMI allows us to deduct the profits
that are implicit in the commission. The facts in LMI, however, are
distinguishable from the facts in these investigations. In LMI, the
Court directed the Department to adjust for sales commissions paid to a
related subsidiary of the respondent in the home market. The sales on
which the commissions were paid in the home market were purchase price-
type transactions made with the assistance of the related party selling
agent. The issue of how to treat any selling expenses incurred by the
related party selling agent in addition to commissions earned by that
related party selling agent did not arise in LMI.
1In Coated Groundwood Paper from Finland, 56 FR 56363
(November 4, 1991), which was subsequent to LMI, we developed
guidelines to determine whether commissions paid to related parties,
either in the United States or in the foreign market, are at arm's-
length. If, based on the guidelines, we found commissions to be at
arm's-length, we stated that we would make an adjustment for such
commissions.
---------------------------------------------------------------------------
In the instant investigations, the sales on which the commissions
were paid are ESP transactions where, because the importer of the
merchandise is related to the exporter, we collapse the two pursuant to
19 U.S.C. 1677(13) and base USP on the sale to the first unrelated
party. In contrast to LMI, therefore, the [[Page 6993]] producer and
its related party selling agent in these investigations are collapsed.
Thus, the commission represents an intracompany transfer of funds.
Under these circumstances, our past practice of ignoring intracompany
transfers is still applicable.
Furthermore, ESP transactions are fundamentally different from
purchase price transactions in that, with respect to ESP transactions,
19 U.S.C. 1677a(e), specifically allows for deductions of indirect
expenses. In contrast, with respect to purchase price transactions, 19
U.S.C. 1677a(d) only allows an adjustment for indirect expenses when
there are commissions in one of the two markets. Therefore, when
commissions are paid in an ESP situation, the opportunity for double
counting exists; this problem does not arise in a purchase price
situation like the one reviewed by the Court in LMI.
Whether the sales involved are purchase price or ESP, the
Department's goal is to derive a reliable USP by subtracting actual
expenses from actual sales prices. A commission paid by the exporter to
its collapsed related importer is not an expense incurred by the
exporter; rather the actual expenses incurred by the exporter are the
indirect selling expenses of the related consignee.
At the preliminary determination, we determined that related party
commissions were directly related to the sales under consideration.
However, we agree with respondents and, for the final determination,
considered commissions an intracompany transfer. We have therefore,
deducted only the amount of U.S. indirect selling expense for all
companies with related party commissions.
Comments Pertaining to Accounting
Comment 8: Inflation Adjusted Depreciation and Amortization
Petitioner argues that the Department should compute respondents'
depreciation expense based on asset values which, in accordance with
Colombian GAAP, have been adjusted to reflect the effects of inflation.
Petitioner notes that respondents computed depreciation charges for
rose production costs based on the historical cost of the underlying
fixed assets. Petitioner maintains that because of the effects of
inflation on prices, respondents' methodology inappropriately matches
historical depreciation charges based on past price levels with
revenues generated from the sale of roses at current price levels.
Petitioner notes that in past cases involving hyperinflationary
economies, the Department has corrected for the effects of inflation by
computing cost of production based on respondent's replacement costs.
Petitioner argues that although the POI inflation rates in Colombia did
not meet the Department's normal hyperinflation threshold, the annual
rate of inflation nevertheless has been so substantial as to cause the
government to adopt accounting standards that require an adjustment for
inflation. Thus, according to petitioner, the Department must correct
respondents' reported depreciation expense in order to avoid distorting
the cost of rose production.
Respondents claim that the Department should accept their submitted
rose production costs without taking into account the effects of the
inflation adjustment on depreciation expense. Respondents argue that,
although the inflation adjustment may result in additional costs in
their financial statements, these are not actual, historical costs.
Instead, the inflation adjusted costs are ``phantom'' costs required by
tax law, but not specifically addressed under GAAP.
Respondents maintain that the purpose of the tax law was to
generate tax revenues for the government, because any write-up of fixed
assets due to inflation results in additional income that must be
recognized in a firm's financial statements. Respondents contend that
if the Department determines that it must include the effects of the
fixed asset inflation adjustment in respondents' rose CV, then it also
must reduce CV by the amount of financial statement income generated by
the adjustment. Respondents note that such income is directly related
to production and, thus, there is no basis for failing to offset costs
if the inflation adjustment is included in CV.
Additionally, respondents claim that the Department already
effectively makes an inflation adjustment through the use of monthly
exchange rates in its computer program. Respondents state that the
exchange rate is related to differences in the two countries rates of
inflation, and the use of such exchange rates has an effect equivalent
to making the year-end inflation adjustment.
DOC Position
We agree with petitioner that respondents' failure to follow their
normal accounting practice of adjusting depreciation and amortization
expenses for the effects of inflation distorts rose production costs
for purposes of our antidumping analysis. The exclusion of the
inflation adjustment results in costs which are not reflective of
current price levels and thus produces an improper matching of revenues
and expenses. Therefore, we have revised the submitted COP and CV
figures to reflect inflation- adjusted depreciation and amortization
expenses based on the growers' normal accounting practices.
We disagree with respondents' claim that the Department's use of
monthly exchange rates effectively makes an inflation adjustment,
because the exchange rates are being applied to costs which are
reported in understated foreign currency. To avoid distortion in
production costs, we have used annual average constructed value figures
and converted them to U.S. dollars using a weighted-average exchange
rate based on the monthly volume of roses sold by each grower.
We also disagree with respondents' assertion that income resulting
from the inflation adjustment is directly related to production and
should be applied as an offset to financial expense. This annual
revaluation of non-monetary assets does not represent income during the
POI. Instead, it merely reflects an increase to respondent's financial
statement equity due to the restatement of non-monetary assets to
account for inflation.
Comment 9: Statutory General Expenses and Profit
Petitioner claims that statutory general expenses and profit should
be based on third country sales, since third country sales and third
country profit and general expenses would be used as a basis for FMV
when home market sales are not available.
Respondents maintain that the facts of this case and the statute
require that Department calculate profit on the basis of home market
sales, particularly since the Department made a finding in its
preliminary determination that home market sales of export quality
roses were made in the ordinary course of trade. In addition,
respondents note that where the Department used third country price
comparisons in its preliminary determination, if in the final
determination the Department chooses to reject third country prices in
the final determination in favor of CV, it cannot use annual average
third country profit margins in calculating CV, because this would be
the equivalent of comparing an annual average third country price to a
monthly average U.S. price.
DOC Position
In calculating CV, we used selling expenses based on U.S.
surrogates and the eight percent statutory minimum for profit where
there was not a viable home market for export quality roses.
[[Page 6994]] Where there was a viable, but dissimilar, third country
markets, we used U.S. surrogates and the eight percent statutory profit
because we have determined that third country markets do not provide an
appropriate basis for foreign market value. See Comment 6 above.
We used U.S. selling expenses as a surrogate even though certain
producers had viable home markets for culls which are included in the
general class or kind of merchandise.
19 U.S.C. 1677b(e)(1)(B) states that the CV of imported merchandise
shall include an amount for general expenses and profit equal to that
usually reflected in sales of merchandise of the same general class or
kind as the merchandise under consideration which are made by producers
in the country of exportation, in the usual commercial quantities and
in the ordinary course of trade, except that--
(i) The amount for general expenses shall not be less than 10
percent of the cost as defined in subparagraph (A), and (ii) the amount
for profit shall not be less than 8 percent of the sum of such general
expenses and cost.
19 CFR 353.50(a) states that if FMV is based on CV, the Secretary
will calculate the FMV by adding general expenses and profit usually
reflected in sales of merchandise of the same class or kind of
merchandise.
However, in the final determination of Certain Granite Products
from Italy, 53 FR 27187, 27191-2 (July 19, 1988)(comment 15), the
Department stated that, due to the uniqueness of one of the such or
similar categories of merchandise, there was no comparability between
sales in the home market and sales in the United States. Therefore, the
Department used the U.S. selling expenses as a surrogate in computing
CV instead of home market selling expenses. As in Certain Granite
Products from Italy, we find that, in the instant investigations, culls
are not representative of the merchandise sold in the United States, as
these products are by definition not export-quality.
Comment 10: Allocation of Production Costs to Cull Roses
Respondents argue that the Department incorrectly calculated CV by
requiring growers to allocate production costs only to export quality
roses, thereby assigning no costs to cull roses. Respondents note that
because cull roses are included in the class or kind of merchandise,
they should be allocated a share of production costs equal to that of
export quality roses. Respondents point out that the Department has
never held that a product covered by an investigation should be treated
as a byproduct having no cost. Respondents also argue that the Federal
Circuit in Ipsco, Inc. v. United States, 965 F.2d 1056 (Fed. Cir. 1990)
defined byproducts as ``secondary products not subject to
investigation.''
Petitioner asserts that cull roses should be categorized as
byproducts to which, from an accounting standpoint, no production costs
should be allocated. Petitioner claims that an appropriate measure for
determining whether a specific product represents a byproduct or
coproduct is to determine if the production process would still be
performed if the product in question was the only one produced.
According to petitioner, no rose grower would establish operations
solely for the purpose of growing culls for sale and, therefore, cull
roses are unmistakably byproducts. Petitioner notes that ITA has
consistently and correctly treated cull roses as byproducts, with
revenues earned from their sale being properly recognized as other
income and, thus, deducted from the cost of producing export quality
roses.
DOC Position
We disagree with respondents' claim that CV was calculated
incorrectly by not allocating any production costs to cull roses. When
determining how to allocate costs among joint products, the Department
normally relies upon generally accepted accounting principles (GAAP) to
prescribe an appropriate cost allocation methodology. One of the
factors used to assess the proper accounting treatment of jointly-
produced products examines the value of each specific product relative
to the value of all products produced during, or as a result of, the
process of manufacturing the main product or products. In this regard,
the distinguishing feature of a byproduct is its relatively minor sales
value in comparison to that of the major product or products produced.
The Department's general practice in agricultural cases has been to
offset the total cost of production with revenue earned from the sale
of the reject agricultural products. The cultivation costs, net of any
recovery from byproducts, are then allocated over the quantity of non-
reject product actually sold. See, e.g., Fresh Cut Flowers from
Colombia, 52 FR 6844 (March 5, 1987); Fresh Cut Flowers from Peru, 52
FR 7003 (March 6, 1987); Fall-Harvested Round White Potatoes, 48 FR
51673 (November 10, 1983); Fresh Cut Roses from Colombia, 49 FR 30767
(August 1, 1984).
In Asociacion Colombiana de Exportadores v. United States, 704 F
Supp. 1114, 1125-26 (CIT 1989), the Court found that ``[c]ulls were
often disposed of as waste, or if saleable, were sold for low prices in
the local market. ITA's treatment of non-export quality flowers as a
byproduct was supported by substantial evidence. The record indicates
that cull value was relatively low and that the production of culls was
unavoidable. These both have been recognized by ITA in the past as
indicia of byproduct status.'' The CIT further noted, ``[c]ull value,
if determinable, should be deducted from cost of production and
production costs should not be allocated to culls.''
For each respondent in this investigation, the total revenue
generated from the sale of cull roses was minimal when compared to the
revenue generated from the sale of export quality roses. Other facts
concerning the production and sale of cull roses are also consistent
with those found in the investigation and subsequent administrative
reviews of Flowers. We therefore find that it is appropriate to treat
cull roses sold in the home market as a byproduct of the production of
export quality roses. This treatment is consistent with the
Department's previous practice of accounting for culls as a byproduct
in the calculation of COP and CV.
Finally, we disagree with respondents' argument that the inclusion
of cull roses in the class or kind of merchandise compels the
Department to use a particular cost accounting methodology. A decision
that a particular product is, or is not, within the scope of a
proceeding does not dictate, or necessarily have any relationship to,
the selection of the particular cost accounting methodology that must
be applied in the determination of COP and CV.
Unlike respondents, we do not read the Federal Appeals Court's
decision in Ipsco as standing for the proposition that in all
circumstances a byproduct for accounting purposes cannot be within the
class or kind of merchandise as that term is defined under the Act.
Moreover, as discussed above, our decision in this regard has been
explicitly upheld by the CIT.
Comment 11: CV--Interest Expense
Respondents argue that the Department grossly overstated each
respondents' net interest expense in calculating CV by using total
company-wide interest expense instead of the expense allocable to rose
production. Respondents request that the Department correct its
preliminary [[Page 6995]] calculations in line 38 of the CV tables, and
using the allocated per unit interest expense calculated on the
spreadsheet.
Petitioner agrees with respondents that net interest expenses were
potentially overstated in the preliminary determination and ITA should
allocate interest expenses on a sales dollar basis to roses and then to
rose stems, provided that interest expenses reported were in fact
reported with respect to all sales of all rose types to all markets.
DOC Position
We agree that for some respondents we incorrectly assigned total
company-wide financial expenses only to roses. For purposes of the
final determination, we allocated net financial expenses to roses and
non-subject merchandise using one of the following methodologies, each
of which we consider reasonable: cultivated area, cost of sales or cost
of cultivation. We computed a per stem financial cost by dividing the
net financial expenses related to roses by the total export quality of
stems sold.
Comment 12: CV--U.S. Indirect Selling Expenses
Respondents allege that the Department incorrectly included U.S.
indirect selling expenses incurred by respondents' related importers in
its calculation of constructed value. Respondents claim that including
these expenses in constructed value artificially inflated the FMV,
since these expenses would never have been incurred to sell roses in
the home market. In addition, respondents object to the Department's
calculation of an eight percent profit on these expenses, while at the
same time deducting related party commissions, and thereby all profit
earned by the related importer, from U.S. prices. Respondents hold that
the Department should include only all selling expenses incurred in
Colombia and Ecuador in its calculation of CV.
Petitioner claims that the Department should include in constructed
value direct and indirect selling expenses equal to those expenses
incurred in third country markets, unless such markets are not viable.
And, to the extent that the Department deems home market sales to be
within the ordinary course of trade, and in the event that the home
market for any given respondent was viable, then the Department should
add home market selling expenses to constructed value. Petitioner
states that, in the absence of selling expenses from either the home or
third country market, the Department's practice is to add U.S. selling
expenses in computing SG&A.
DOC Position
For those companies with viable home markets, we used home market
indirect selling expenses. For those companies without viable home
markets we used U.S. indirect selling expenses as a surrogate. See
Comment 9 above. Respondents' objection to deduction of related party
commissions is addressed in Comment 7 above.
Comment 13: Per Unit CV in Dollars
Respondents argue that the Department's methodology used to obtain
the per unit CV in dollars produces a distorted, declining per unit
dollar CV. Respondents note that the Department's method involves
converting annual average per unit foreign-denominated costs to monthly
per unit dollar figures using the monthly exchange rate, which in part
reflects a relatively high inflation rate. Respondents claim that in
order to properly obtain the average per unit CV, the Department should
first convert each month's total foreign-denominated costs using that
month's exchange rate, and then sum these monthly dollar costs for the
period. Next, the total dollar costs should be divided by the total
quantity of roses sold to obtain the average per unit CV in dollars for
the period.
Petitioner does not object to respondents' request for
modifications in the Department's methodology, although petitioner
suggests that such modifications are unnecessary. If modified however,
petitioner argues that it is inappropriate to apply a foreign-dominated
interest rate in order to calculate imputed credit costs, unless the
exchange rate is also adjusted for currency devaluation.
DOC Position
We agree that in this case the Department's previous methodology
used to obtain per unit constructed value in U.S. dollars did not
provide an accurate result. In order to avoid distortion, we have
converted home market cost in local currency to U.S. dollars using the
annual average exchange rate.
Comment 14: Home Market Price Cost Test
Respondents maintain that the Department's sales below cost test
does not test whether a particular product is sold below its cost of
production. Respondents argue that the Department's normal methodology
is to compare prices to model-specific COPs. Because respondents were
only able to supply the Department with average COP information
representing an entire range of rose production, they argue that the
Department should compare annual average COP figures to average home
market prices of all varieties and stem lengths.
Additionally, respondents state that, to account for price
seasonality, the Department must use annual home market average prices
to properly test whether home market sales prices permit the recovery
of costs in a reasonable time. Respondents refer to the Botero Report
as evidence that the unusual seasonal prices of roses allow for ``below
average costs over periods of time, including months, that do not cover
a full price cycle.''
Petitioner argues that the court has rejected the comparison of
production costs with average home market prices. See, Timken Co. v.
United States, 673 F. Supp. 495, 516-17 (CIT 1987).
DOC Position
While it is our normal practice in determining sales below cost to
compare the price of each sale in the home market to the cost of
production (COP) of that product during the period under investigation,
in these investigations we were not able to do so because the
respondents do not segregate their cost data by rose type, variety and
stem length. As a result, we determined that to compare one yearly COP
(the POI in these investigations is one year), which combines all
export quality rose costs to prices for each variety of export quality
roses would not be appropriate. See Comment 5 above. Instead, we
combined prices of home market sales for all varieties on a monthly
basis to our annual COP, in conforming with our modified cost test for
agricultural products, as discussed below in Comment 15.
Although respondents urge the Department to combine individual
sales prices for all export quality roses in the home market on a
yearly basis to compare to the yearly COP calculation for export
quality roses, respondents have not persuaded us that such a radical
departure from our procedure is warranted in these circumstances. As
discussed in Comment 15, the Department has a specific test for
determining whether or not sales are below cost that encompasses
recovery of costs within a reasonable time, which we have applied here.
Comment 15: 50-90-10 Test
Respondents maintain that the Department originally intended to
change its 10-90-10 test to a 50/50 test whereby, if less than half of
all sales were below cost, then all sales should be used in creating
weighted-average [[Page 6996]] FMVs, and if half or more of the sales
were found to be sold below cost, then home market sales would be
rejected in their entirety and FMV would be based on CV.
Petitioner maintains that respondents have misrepresented the
Department's past practice and ignored judicial precedent. Petitioner
maintains that the current 50-90-10 test by which the Department
removes from consideration ``significant'' quantities of sales made
below COP but uses those sales made above cost, is correct. Petitioner
maintains that the courts supported the Department's use of remaining
above-cost sales as sufficient for FMV in Timken Co. v. United States,
673 F. Supp. 495, 516-517 (CIT 1987), and that the basic principle
applies to all products.
DOC Position
We disagree with respondents. The Department has an established
practice which takes into account the realities of selling perishable
agricultural products. In Final Determination of Sales at Less Than
Fair Value: Certain Fresh Winter Vegetables from Mexico, 45 FR 20512,
20515 (March 24, 1980), after examining the nature of sales of
vegetables, the Department determined that it was a regular business
practice to make a relatively high number of sales of the subject
merchandise below cost because of the perishability of the product,
which rapidly ages into non-salable merchandise. As a result, the
Department determined that were it to apply the normal below cost test
used for nonperishable products, i.e., the 10-90-10 test, this would
not fairly reflect the economic realities of the fresh vegetable
industry. As a result, the Department concluded that it would permit
all sales at below cost to remain in the FMV comparison unless more
than 50 percent were found to be below cost.
This modified test was clarified in a review of Final Results of
Antidumping Duty Administrative Review; Certain Fresh Cut Flowers from
Mexico, 58 FR 1794, 1795 (January 17, 1991), wherein the Department
explicitly stated that the test to be applied for determining sales
below cost for perishable agricultural products was a 50-90-10 test,
i.e., if between 50 and 90 percent of home market sales consisted of
prices below cost, then only the below cost sales were disregarded,
while if over 90 percent of sales were below cost then all sales in the
home market were disregarded. See Final Results of Antidumping Duty
Review: Certain Fresh Cut Flowers from Mexico, 56 FR 1795, 1795
(January 17, 1991).
This modified test still remains our current practice and
respondent's rationale for the adoption of a straight 50-50 test is an
unmerited modification. Were we to adopt respondents' either/or
position, i.e., if less than 50 percent are below cost we will use all
sales, and if more than 50 percent we will disregard all sales, then we
would, in effect, be concluding that 11 percent of widget sales above
cost are sufficient to be the basis for FMV but that 49 percent of rose
sales above cost are insufficient. This is a an illogical result, which
we are not prepared to accept.
Comment 16: Duty Deposit Rate--Roses Shipped But Not Sold
Respondents urge the Department to adjust the deposit rate to
reflect the fact that many roses imported into the U.S. perish or are
destroyed prior to sale. To avoid over collecting duty deposits on
roses that never reach the U.S. market, and since there is no way of
distinguishing between roses that will be sold and roses that will be
destroyed at the time of entry, respondents argue that the duty deposit
rate should be adjusted downward to reflect the quantity of roses
shipped to the United States, but not sold. This practice is being used
in Flowers. Respondents suggest the Department multiply any ad valorem
rates it calculates by the ratio of total quantity sold divided by
total quantity shipped, as reported by each respondent.
Petitioner states that all imports at the time of importation are
potentially for sale and, therefore, must bear the appropriate cash
deposit rate. Because the percentage of roses that will go unsold
varies due to season, weather, problems in transportation, etc.,
petitioner argues that there is no accurate way to adjust for this
potential impact.
Additionally, petitioner states that if the Department does adjust
the duty deposit rate to account for roses shipped but not sold, than
it is appropriate to adjust the deposit rate to reflect the fact that
values entered by Customs are arbitrarily established on consignment
entries. Petitioner argues that the use of the calculated USP to derive
a cash deposit rate may bear no relation to the value used by Customs
for collecting duties. Therefore, petitioner believes that the duty
deposit rate should be adjusted upwards so that the duty amount
collected reflects the potentially uncollectible duty deposits
calculated in the final determination.
DOC Position
We disagree with respondent that the duty deposit rate should be
adjusted for roses shipped but not sold. We do, however, agree with
respondent, in part, that such adjustment is appropriate for assessment
purposes, which are distinct from duty deposit purposes. In the case
cited by respondents, Fresh Cut Flowers from Colombia 55 FR 20491 (May
17, 1990), the Department indicated that it would make such an
adjustment in preparing assessment instructions to the Customs Service.
The Department did not make such an adjustment to the duty deposit
rates in that case and has not done so in subsequent reviews.
We agree with petitioners that all imports at the time of
importation are potentially for sale, and that the percentage of roses
which go unsold varies with the seasons. Moreover, this percentage will
likely vary with each producer and reseller. Thus, any adjustment
contemplated would be speculative. It is preferable to wait until the
Department prepares assessment instructions on entries covered by these
deposit rates and then make such an adjustment based on the actual
experience of the affected companies.
Comment 17: Cash Deposits--The Department's Sampling Technique
Respondents claim that the all others cash deposit rate calculated
by the Department is not based on a representative sample of the
Colombian rose exporting population--it merely reflects the experience
of 16 of the largest exporters. Furthermore, according to respondents,
the all others rate disregards the representativeness of such
experience. Respondents maintain that this is inconsistent with the
Department's statutory requirement that any averages and samples used
must be representative of the whole. See 19 U.S.C. 1677f-1(b).
DOC Position
We disagree with respondents. The Department's normal practice, in
accordance its regulations, is to select that number of the largest
exporters of the subject merchandise needed to represent 60 percent of
the imports into the United States from the country under
investigation. Due to the large number of companies needed to reach 60
percent of imports in this investigation and the administrative burden
it would put on the Department's resources to investigate these
companies, the Department selected the 16 largest exporters
representing over 40 percent of the imports into the United States. See
the May 2, 1994, Decision Memorandum from the Team to Barbara Stafford.
The methodology used by the Department maximized its coverage of
[[Page 6997]] imports into the United States. The technique of
selecting the largest exporters was employed in the Preliminary
Determination of Sales at Less Than Fair Value: Sweaters Wholly or in
Chief Weight of Man-Made Fiber from Taiwan, 55 FR 17779 (April 27,
1990). The other suggested sampling methods, stratified and random,
were not selected due to the lack of sufficient industry-wide
information on the universe of Colombian and Ecuadorian rose growers
(approximately 400 companies in Colombia and 100 companies in Ecuador).
The collection and analysis of data to determine an appropriate
sampling technique was not reasonably within the power of the
Department to undertake. Therefore, we have chosen the most
representative sample under the circumstances.
Comment 18: Duty Deposit Rate for Volunteer Companies
Respondents argue that the due process clause of the Fifth
Amendment to the U.S. Constitution precludes the Department from
requiring cash deposits with respect to companies that the Department
refused to investigate. Respondents cite Kemira Fibres Oy v. United
States, Slip Op. 94-120 (CIT July 26, 1994) to support their argument
that due process is required in antidumping proceedings. Such a course,
according to respondents, would represent an unconstitutional
deprivation of property without due process of law. Respondents
maintain that the cash deposit rate must be set at zero, and that all
cash deposits paid to date should be refunded, and any bonds posted
should be lifted, for all companies ready and willing to participate,
but not chosen by the Department.
Petitioner also refers to Kemira Fibres to support its argument
that procedural due process guarantees do not require trial-type
proceedings in all administrative determinations. Additionally,
petitioner maintains that, as long as the Department adheres to the
procedures mandated by Congress and implemented in the Department's
regulations, then the Department has afforded interested parties the
process due. These regulations, according to petitioner, allow
interested parties the right to appear and submit their views on the
proceedings of an investigation, but they do not require the Department
to investigate every company that requests a company-specific margin.
DOC Position
We agree with petitioner. Although it is the Department's practice
to accept voluntary respondents when we have the administrative
resources to do so, the Department's regulations do not require that we
accept responses from voluntary respondents. Furthermore, pursuant to
19 CFR 353.14(c), the Department is required to investigate exclusion
requests only ``to the extent practicable in each investigation.''
Due to the large number of producers and limited administrative
resources, the Department was unable to follow its standard practice of
investigating 60 percent of the exports of roses into the United
States. Accepting these voluntary respondents and investigating
exclusion requests would have reduced the number of ``mandatory''
respondents we could select. Because the Department is not required to
investigate all voluntary respondents and requests for exclusion, and
because the Department followed its regulations and policy concerning
voluntary respondents and exclusion requests, we have afforded
interested parties the process due.
Comment 19: Amortization and Preproduction Costs
Petitioner argues that the Department should not allow respondents
to amortize rose plant costs over periods which exceed the useful lives
of rose plants, as reported in respondent's normal accounting records.
Petitioner asserts that amortization of rose plants and
preproduction costs should be based on the methodology used by
respondents to report their production costs in accordance with normal
corporate accounting practices and pursuant to Colombian generally
accepted accounting principles (``GAAP''). Petitioner states that it is
the Department's well-established and longstanding practice to prohibit
respondents' departures from normal practices, except in those
instances where those normal accounting practices would distort
production costs.
Petitioner claims that the useful lives normally used by these
companies are preferable, as they are a function of each grower's plant
varieties and cultivation methods. Petitioner states that respondents
have not submitted any evidence to establish that their normal
accounting practices result in a material distortion of costs or that
the useful lives normally used by these companies are unreasonably
short. Petitioner also claims that the normal practices of these
respondents reflect the preferred cycle for replanting roses.
Respondents claim that the reported rose plant and preproduction
costs should be accepted by the Department, since they accurately
reflect production costs during the POI and achieve a proper matching
of costs and revenues. Respondents contend that their normal financial
accounting practices are designed to minimize their taxable income.
According to respondents, Colombian tax law (which forms the basis for
the growers' GAAP accounting practices) is relatively unrestrictive and
allows for the amortization of rose plant and preproduction costs over
periods that are in some instances far less than the useful lives of
the underlying assets.
Respondents assert that the amortization expense recorded in their
financial statements should not be used by the Department, because
these amounts do not reflect the amortization of capital expenses over
the appropriate period, resulting in a distortion of the production
costs of the subject merchandise. Respondents state that evidence on
the record regarding their growing practices, plant varieties and
cultivation conditions confirms that the useful life of rose plants in
Colombia is at least eight to ten years, although such costs are
commonly amortized over shorter periods in respondents' books. As
support for their position, respondents cite Fresh Kiwifruit from New
Zealand, 57 Fed. Reg. 13695, 13703 (1992), where the Department
required growers to amortize the cost of kiwi fruit vines over the
useful lives of the plants despite the fact that, for financial
accounting purposes, the cost of the vines had been recognized as an
expense in the year of purchase.
DOC Position
We agree with respondents. The Department typically requires
respondents to report production costs pursuant to their home country
GAAP. The use of home country accounting principles provides the
Department with an objective standard by which to measure costs, while
allowing respondents a predictable basis on which to compute those
costs. However, the Department may reject the use of home country GAAP
as the basis for calculating production costs if it is determined that
the accounting principles at issue unreasonably distort or misstate
costs for purposes of an antidumping analysis. In these instances, the
Department may use alternative cost calculation methodologies that more
accurately capture the costs incurred during the period of
investigation or review.
In determining whether a respondent's normal GAAP depreciation
policies are distortive for purposes of our antidumping analysis, it is
clearly not the Department's purpose to judge the reasonableness of
each asset's depreciable life on an asset-by-asset [[Page 6998]] basis.
Under most circumstances, the depreciable life of an asset is based on
the purchaser's best estimate of the asset's economic life at the time
of purchase. Obviously, there are any number of events, unforeseen at
the time of purchase, that could serve to lengthen or shorten the
asset's actual physical life. Typically, the Department does not
attempt to account for the fact that estimations of useful life are not
always accurate.
In this case, however, we found that Colombian accounting
principles permitted growers significant latitude in determining the
depreciable lives of their rose plants and in accounting for
preproduction costs. Moreover, respondents provided reasonable evidence
to support the fact that the useful lives recorded in financial
statements were, in many cases, shorter than the plants' economic
useful lives. The growers' decision to amortize their rose plant costs
over shortened periods appears to have been driven largely by Colombian
tax considerations rather than by the basic accounting principle of
matching costs and revenues. Therefore, we have accepted respondents'
rose plant and preproduction amortization expense calculations for
purposes of computing COP and CV, provided that they had correctly
capitalized and amortized these same assets from previous years.
U.S. Price Adjustments
Comment 20: Invoice Discrepancies
Petitioner argues that the Department should reject or adjust U.S.
prices to account for discrepancies between invoice amounts and
``registro'' prices (the price that appears on official Colombian
export documentation) recorded in respondents' books and records.
Respondents argue that there is no merit to petitioner's suggestion
that declared Colombian registro prices should be used rather than
actual U.S. selling prices. Respondents explain that registro prices
represent the growers best estimate of prices. Moreover, respondents
assert that registro prices do not meet the statutory definition of
U.S. price since they are not the price at which merchandise is sold or
agreed to be sold in the United States, nor are they the price at which
merchandise is purchased.
DOC Position
We agree with respondents. Due to the volatility of the rose market
and the fact that sales are made to unrelated consignees, it is
impossible for respondents to accurately record U.S. price at the time
of export, thus requiring estimates on export documentation, i.e.,
registro prices. The amounts listed on the registros do not meet the
Department's definition of U.S. price.
Comment 21: Interest Rate
Respondents claim that it is against Department practice and
prevailing case law (United Engineering & Forging v. United States,
LMI-La Metalli Industriale, S.p.A. v. United States) to apply a
Colombian peso interest rate to a U.S. dollar account receivable in
calculating U.S. imputed credit expenses. Respondents argue that, in
accordance with Class 150 Stainless Steel Threaded Pipe Fittings from
Taiwan, 59 Fed Reg. 38432 (1994), the Department should have used the
lowest interest rate at which respondents borrowed or to which
respondents had access, namely the U.S. prime rate.
Petitioner argues that it is inappropriate to estimate a U.S.-
dollar denominated interest rate where loans were actually obtained in
pesos. Petitioner cites to Flowers, where the Department held that
``where there were no U.S. borrowings, we used the actual peso
borrowing rate, adjusted to reflect the fact that the credit expense
was incurred in dollars and not pesos.'' See Certain Fresh Cut Flowers
from Colombia, 59 Fed. Reg. 15,1159, 15,164 (March 31, 1994).
Petitioner defends the appropriateness of the Department precedent of
adjusting the borrowing rate for devaluation. Petitioner notes that
such an adjustment reflects that net borrowing costs are lowered to the
extent that the dollars later received will be worth a larger number of
pesos.
DOC Position
We agree, in part, with respondents. In determining the U.S.
interest rate, it is the Department's policy that the interest rate
used for a particular credit calculation should match the currency in
which the sales are denominated. In cases where there are no borrowings
in the currency of the sales made, the Department may use external
information about the cost of borrowing in a particular currency (see,
Memorandum from Susan Kuhbach to Barbara R. Stafford: Proposed Change
in Policy Regarding Interest Rates Used in Credit Calculations, dated
September 26, 1994). Therefore, the Department used a U.S. short-term
interest rate of 7.575 percent, which is the average of the publicly
ranged interest rates reported by those respondents that had actual
U.S. borrowings during the POI. We consider this to be the best
estimate of the U.S. dollar borrowing rates for those respondents that
had no short-term borrowings, as it is based on best publicly available
data of the actual experience of other rose growers.
Comment 22: Adjustment to Interest Rate
The parties' further arguments concerning the appropriate Colombian
peso interest rate are rendered moot.
Company-Specific Comments
Because the Department is using constructed CV rather than third
country prices, the parties' comments concerning the appropriate
methodology in comparing USP to third country prices are moot.
Therefore, we have not addressed company-specific comments relating to
this issue. Furthermore, because the Department is using monthly
average USPs for all roses, regardless of stem length, variety, or
color, the parties' comments concerning issues of stem length, variety,
rose type, and rose color are also moot and are not addressed.
Agrorosas S.A.
Comment 23
Respondent argues that the Department should not consider the air
ticket and travel expenses, discovered during verification in its
accounting records, as indirect selling expenses since these expenses
had no relation to the production and sale of the subject merchandise.
According to respondent, the air ticket and travel expenses discovered
during verification were the personal expenses of one of the company's
shareholders (``the shareholder'') who was not employed in any capacity
other than as a member of respondent's board of directors. Therefore,
respondent maintains that ``the shareholder's'' personal travel was not
related to the sale or production of the subject merchandise.
Respondent further maintains that the air ticket invoices examined by
the Department during verification provide proof that the travel and
air ticket expenses in question were the personal expenses of ``the
shareholder''.
The petitioner, on the other hand, argues that the travel expenses
should be added to the reported indirect selling expense because there
is no evidence that the travel expenses shown in the company's
accounting records are unrelated to rose sales. According to the
petitioner, a presumption arises from the company's books and records
that these expenses were related to the company's sales. [[Page 6999]]
DOC Position
Respondent included entertainment expenses as part of the indirect
selling expense reported to the Department. As the Department
established during its verification of the respondent, those
entertainment expenses included, among others, entertainment expenses
related to business trips made to the United States and in Colombia
during the POI. These business trips were made by company officials as
well as by the shareholder referred to above. The reported
entertainment expenses did not include any travel or air ticket
expenses associated with the business-related trips to the United
States and in Colombia. During verification, the Department discovered
unreported air ticket and travel expenses recorded in the company's
accounting records.
Although we could not ascertain during verification whether all of
the travel and air ticket expenses were related to rose sales, we
conclude that at least a portion of these expenses were related to rose
sales.
First, since the company incurred business-related entertainment
expenses attributable, in part, to company officials' trips to the
United States and in Colombia, the company must have incurred related
air ticket and travel expenses for these trips. Second, because the
shareholder, referred to above, was one of the company officials making
business trips to the United States and in Colombia, it is reasonable
to assume that at least a portion of the air ticket and travel expenses
invoiced to the company for that shareholder must have been related to
business as well. Finally, the air ticket and travel expenses were
officially recognized in the company's accounting records as business-
related expenses.
For the reasons outlined above, the Department cannot ascertain
whether the air ticket and travel expenses were not tied to the sales
of roses. However, because companies are required to report air ticket
and travel expenses as expenses related to sales in the companies'
audited financial statements, this provides a more reliable source of
information as to the manner in which these expenses should be treated.
Therefore, the Department included, as BIA, the entire amount of the
air ticket and travel expenses discovered during verification in the
calculation of the indirect selling expenses related to respondent's
rose sales.
Comment 24
The respondent maintains that it did not report any foreign inland
freight expenses for the truck used to transport flowers to the airport
in the months of January and February because the truck owned and used
by respondent during those months was fully-depreciated and reflected
no costs on respondent's records. The respondent further states that
the truck rental expenses for the month of October of the POI were
included in the amount reported in the month of December because the
company was billed for the month of October in the month of December.
Therefore, the respondent requests that the Department not use BIA for
trucking expenses in those three months.
The petitioner argues that there is no evidence on the record that
respondent did not incur truck rental expenses for the month of
January.
DOC Position
In the Department's preliminary determination we used, as BIA, the
monthly average truck rental expenses for the months of January,
February and October because respondent reported no trucking expenses
for those months. However, at verification, we established that
respondent used its fully-depreciated truck for the months of January
and February, and we found no record of expenses related to the
operation of respondent's truck during those months. We found that
respondent began renting a new truck beginning in February 1993, while
it continued to use its fully depreciated truck until the end of that
month. We also established that the truck rental expenses not reported
for the month of February were included in the amount reported for the
month of March. Similarly, the truck rental expenses not reported for
the month of October were, in part, included in the amount reported for
the month of December.
Because we found no evidence of expenses related to respondent's
truck for the months of January and February, and because we
established that respondent included the truck rental expenses for the
months of February and October in the amounts reported to the
Department for following months, the Department used these actual
expenses, and not BIA, in its calculations of these freight expenses.
Comment 25
The respondent requests that the Department not use BIA for the
fuel expenses related to the transportation of roses that respondent
was unable to separately identify and report to the Department in its
questionnaire responses. Instead, the respondent requests that the
Department use the estimated monthly fuel expenses examined by the
Department during verification.
The petitioner maintains that the estimated fuel and maintenance
costs were submitted for the first time during verification and should,
therefore, not be accepted as a basis for a final determination. The
petitioner further maintains that the purpose of verification is to
verify the accuracy of the respondent's information already submitted
on the record, not to collect new information. Therefore, the
petitioner requests that the Department use BIA in its calculation of
such foreign inland freight expenses.
DOC Position
We agree with the respondent. In its August 24, 1994, submission,
respondent stated it could not determine the value of fuel expenses
related to the transportation of roses separately. However, respondent
also stated that it included fuel expenses related to the
transportation of roses in the fuel purchase expenses reported in the
CV table (see Appendix 7 of the respondent' August 24, 1994,
submission). Absent any specific information on the fuel expense
related to the transportation of roses, the Department, in its
preliminary determination, used as BIA the monthly average fuel expense
amount reported in the CV table.
Given the above-referenced facts on the record, we disagree with
the petitioner that the information collected during verification with
respect to fuel expenses is new. The information submitted on the
record does include fuel expenses. However, due to the difficulty of
identifying these expenses separately, the respondent included them in
the overall fuel charges of the company.
During verification the respondent was able to provide information
to substantiate an estimated monthly fuel expense amount. The estimated
fuel charges were based on supporting documentation showing the
distance in kilometers from the farm to the airport, the per gallon
cost of fuel, and the number of gallons of fuel consumed per kilometer
for the rented truck.
The method used by the respondent to estimate the fuel charges, and
the supporting documentation collected during verification constitute
sufficient evidence and a viable means which enabled the Department to
identify the fuel expenses related to rose transportation from
information already submitted on the record prior to verification. For
the above reasons, the Department used respondent's estimated monthly
fuel expense [[Page 7000]] amount, instead of BIA, in the calculation
of these foreign inland freight expenses.
Comment 26
Respondent states that the December 1993 amortization expense
relating to its new farm should be included in the CV calculation since
it started producing roses during the POI.
Petitioner states that to the extent that sales of roses from the
new farm were included in the sales listing, costs incurred with
respect to such farm should also be reported.
DOC Position
The Department agrees with both the petitioner and the respondent
in that the December 1993 amortization associated with the
preproduction costs of Greenhouse B-1 should be included in constructed
value. During verification, it was found that rose production of
saleable roses had begun in December 1993. The Department, therefore,
increased respondent's submitted costs to include the December
amortization expense.
Comment 27
Respondent states that the allocation of the Bogota office costs
between subject and nonsubject merchandise is equitable and reasonable.
Respondent argues that the Department should not charge these costs
solely to subject merchandise because the only production-related
expenses incurred at the Bogota office relate to the monthly Board of
Directors meeting. All other managerial functions associated with rose
production are performed at respondent's farm office.
Petitioner contends that corporate expenses incurred at the Bogota
office should be added to G&A in full and not allocated based on use of
the office. Petitioner argues that there is no basis to exclude the
expenses of the Bogota office since there is no evidence that the owner
does not oversee the rose business from this office. Petitioner's
allegation that the office is used for a construction business is
belied by the fact that the office expenses are carried on respondent's
corporate income statement and tax return.
DOC Position
We agree with respondent. At verification, respondent demonstrated
that the Bogota office was used mainly by a shareholder to manage other
businesses which are not associated with rose production. The
Department also determined that the methodology used to allocate the
costs of the office between subject and nonsubject merchandise was
reasonable. Respondent allocated the Bogota office expense based on the
number of days during which the company uses the office for its Board
of Directors meeting. For the final determination, we increased
respondent's submitted G&A expense by an allocated portion of the
Bogota office costs.
Comment 28
Respondent argues that the Department should not account for
certain expenses paid by the company on the owner's behalf as G&A costs
since these expenses were unrelated to the production or sale of the
subject merchandise. Respondent states that in past cases, the
Department has not required respondents to include similar owner
expenses in CV even when such expenses were recorded in the accounting
records of the company. Respondent cites in support of its position
Final Determination of Sales at less Than Fair Value: Fresh Kiwifruit
for New Zealand, 57 Fed. Reg. 13695, 13704 (April 17, 1992). Respondent
also argues that these expenses should be considered a dividend paid by
respondent to its majority shareholder and, thus, should not be
accounted for as salary or compensation since the shareholder performs
no day to day management of the company.
Petitioner contends that the expenses paid by the company on the
owner's behalf should be included in G&A since there is no evidence
that such costs were unrelated to the rose business, and because they
were carried on the respondent's books.
DOC Position
We did not include in CV the personal expenses paid by the company
on the owner's behalf. At verification, the expenses in question were
demonstrated to be personal in nature, tax motivated, and not related
to the production of the subject merchandise. The Department reached a
similar conclusion in the Final Determination of Sales at less Than
Fair Value: Fresh Kiwifruit for New Zealand, 57 Fed. Reg. 13695, 13704
(April 17, 1992) in which personal expenses of an owner were not
included in COP/CV since they were not related to the production of the
subject merchandise.
Caicedo Group
Comment 29
Respondent argues that the Department should not have used a high
BIA rate for its sales through an unrelated importer. It states that
while most of its sales to the United States are through its related
importer, when the volume of exports is too great for the related party
to handle, respondent will sell roses through other unrelated
importers. One of these unrelated parties through which the respondent
sold during the POI, according to respondent, failed to supply it with
the detailed information needed for the response to the Department's
questionnaire.
Respondent also states that at verification, it supplied what it
could relating to these sales, including copies of written requests to
the unrelated importer to supply the necessary information and a copy
of a negative reply from this unrelated importer to its request. The
respondent states that, because it did not have the ability to compel
the unrelated importer to supply it with information, that it would be
unfair to apply a punitive BIA rate to these sales. The respondent
states that due to the high value and the small volume of these sales
the Department should leave these sales out of the margin calculations
altogether. Respondent adds that, if these sales are not excluded, the
Department should apply to them the average margin found with respect
to the remaining sales by the respondent.
The petitioner argues that where a party failed to supply U.S.
sales data, the Department should apply ``Tier 1'' BIA. It cites 19
U.S.C. 1677e(c), which, it states, prescribes the use of ``best
information'' whenever requested information is not supplied, without
regard to motive. The petitioner also states that the circumstances
appear to indicate that the unrelated importer acted as a consignment
agent, in which case there would typically be growers reports or other
documentation pertaining to transactions. The petitioner adds that
respondent is properly responsible if its agent withholds data.
DOC Position
We agree with respondent. At verification, we closely examined the
quantity and value of sales to this consignee and noted no
discrepancies with respect to either quantity of sales to this importer
or respondent's claims about the availabilty of price information
needed to respond to the questionnaire.
The Department has the discretion to exclude certain sales. In
Dynamic Random Access Memory Semiconductors of One Megabit and Above
from the Republic of Korea, 54 FR 15467 (March 23, 1993), the
Department excluded sales where the volume of sales was insignificant.
We [[Page 7001]] determine that the sales through one of the
respondent's unrelated U.S. customers during the POI were insignificant
in volume. Therefore, we excluded these sales from our margin
calculation.
Comment 30
Respondent argues that in calculating U.S. indirect selling
expenses, the Department should include the value of local Miami sales
in the denominator of the equation. It claims that it inadvertently
excluded local sales in the value of sales used to calculate the
percentage applied to gross unit price. It adds that in accordance with
the Department's instructions, however, all U.S. sales, including local
sales, have been included in the U.S. sales listing.
The petitioner provided no comments on this issue.
DOC Position
We agree with the respondent. While selling expenses associated
with local sales may not be as great as those associated with sales in
the normal course of trade in the market, they are nonetheless actual
selling expenses that were incurred and examined at verification.
Therefore, we have included the value of local Miami sales in the
denominator of the U.S. indirect selling expense calculation.
Comment 31
Petitioner argues that the costs associated with the freeze which
occurred on December 31, 1993, the last day of the POI, were ordinary
expenses and should not be deferred solely for the antidumping
investigation. Petitioner further claims that the freeze was not
unusual in the industry and that the company treated the cost
associated with the freeze as a current year expense in its tax return.
Respondent argues that the freeze, which destroyed a number of rose
plants, was an extraordinary event. Respondent notes that the damaged
plants were not scheduled to produce roses until the following year.
Finally, respondent argues that under Colombian tax law it is
permissible to write off a loss at the time of the event, despite the
fact that the actual loss related to future income.
DOC Position
We believe that the costs resulting from the freeze do not relate
to the production and sale of roses during the POI. Instead, given the
date on which the freeze occurred and the fact that the lost and
damaged plants had not yet begun to produce roses, we have determined
that these costs should be recognized in a future period.
Flores la Fragancia
Comment 32
The petitioner maintains that there is no evidence that the
respondent's breeder customers purchase merchandise that is different
from the type of export quality rose which it sells to its retailer
customers. In addition, the petitioner maintains that sales to breeders
are made ``for home consumption'' and should be included in the
Department's analysis. Alternatively, the petitioner argues that the
respondent's sales to breeders do not constitute a distinct and
separate level of trade because the respondent has not demonstrated
that breeders' functions are different from the functions of any other
type of purchaser as outlined in the Notice of Preliminary
Determination: Disposable Pocket Lighters from Thailand 59 FR 53414
(October 24, 1994). Finally, the petitioner alleges that, even though
the respondent is now requesting that the Department exclude sales to
breeders in its final analysis, the respondent initially relied on the
breeder sales made in the home market in order to avoid the need to
report third country sales.
The respondent maintains that the Department should exclude sales
to breeders because breeders are end users that are concerned only with
whether the rose has a sprouting eye and not whether the rose is export
quality or a cull. In other words, the breeder is not buying the rose,
rather the plant material that is harvested with the rose.
Alternatively, respondent maintains that, if the Department insists on
using sales to breeders in its analysis, it should treat breeders as a
distinct level of trade and not as retailers since breeders do not
resell the roses purchased from it.
DOC Position
We agree in part with the respondent. We examined invoices at
verification which demonstrated that breeders purchase both export
quality roses and culls from the respondent. We see no reason to
distinguish whether the export quality rose does or does not have a
sprouting eye because the rose is still considered subject merchandise.
In this case, sales to breeders must be considered as a home market
sale of subject merchandise when they are sales of export quality
roses. Therefore, we have used sales to breeders in our COP test. Since
all home market sales are below cost, we are comparing all U.S. sales
to CV. Therefore, the issue of whether breeders constitute a different
level of trade is moot.
Finally, since the respondent correctly reported such sales in its
home market sales database, we find that the petitioner's argument that
the respondent tried to avoid reporting third country sales is not
supported by the evidence on the record.
Comment 33
The respondent maintains that all sales included in the customer
category labelled ``sales to individuals'' were made to individuals
closely associated with the respondent (e.g., mostly employees and
relatives of the owners, the remainder being friends of the owners).
Therefore, the respondent requests that the Department exclude all
sales included in the customer category from our analysis. Finally, the
respondent states that excluding these sales would be consistent with
our decision to exclude other respondents' sales to employees from the
analysis in the preliminary determination.
The petitioner did not provide comments on this issue.
DOC Position
We agree with the respondent. We determined at verification that
the vast majority of customers included in the customer category
``sales to individuals'' were individuals related to the respondent.
Documentation collected at verification demonstrates that the quantity
and value of sales attributable to unrelated customers within the
customer category is insignificant in terms of the total quantity and
value amount reported under the customer category. Finally, we are
comparing all U.S. sales to CV because, even including these home
market sales, all sales are below COP. Therefore, we will not be using
sales grouped under the category ``sales to individuals'' in our LTFV
analysis.
Comment 34
The petitioner contends that there is a large and unreconcilable
discrepancy between the quantity shipped to and the quantity received
by the respondent's U.S. subsidiary during certain POI months. The
petitioner maintains that as a result of the difference between what
export documentation shows the respondent shipped to the United States
and what sales documentation shows the U.S. subsidiary sold during the
POI, the respondent did not report a significant portion of its U.S.
sales of subject merchandise. Therefore, the Department should find the
[[Page 7002]] respondent's U.S. sales listing to be unreliable and
resort to BIA.
The respondent states that the quantity shipped to its U.S.
subsidiary reconciles with the quantity received by the U.S. subsidiary
in the United States and that documentation collected by the Department
at verification demonstrates that the U.S. sales listing is reliable.
DOC Position
We agree with the respondent. It was demonstrated at verification
that, for the three selected POI months, the quantity shipped by the
respondent to the United States reconciles with the quantity received
by the U.S. subsidiary. In cases where differences existed between the
amount of merchandise shipped from Colombia and the amount received in
the United States, the respondent provided a reconciliation of the
differences. Therefore, we have used the respondent's U.S. sales data
in our analysis because the U.S. sales listing is reliable.
Comment 35
The petitioner contends that we should resort to BIA due to the
number and frequency of data problems such as the mis-reporting and
under-reporting of sales information from invoices and grower-reports.
The respondent maintains that it provided the Department with all
information necessary to correct data-entry errors at verification and
that the Department verified all corrections. The respondent points out
that these errors all arose as a result of manually entering data for
tens of thousands of home market sales and providing the Department
with one monthly variety- specific stem-specific U.S. price during each
POI month. Because the errors were unavoidable and most, if not all,
were brought to the attention of the Department's verification team,
the respondent requests that the Department use its sales data in the
final analysis.
DOC Position
We agree with the respondent. We thoroughly tested the respondent's
sales databases and established that the errors mentioned above were
inadvertent, isolated, and small in magnitude, all of which the
respondent either brought to our attention or were errors which we
discovered as a result of respondent providing all requested
information. Therefore, we have used respondent's response in our
analysis.
Comment 36
The petitioner alleges that the respondent's methodology for
determining returned quantities (described in the respondent's
September 12, 1994, submission) is based on returns of both subject and
non-subject merchandise and that the Department should not allow the
adjustment. In addition, the petitioner maintains that, even though the
respondent's reported monthly returned quantities were less than what
would have resulted using an alternative methodology described in the
verification report, the Department should not correct for the
respondent's error because it would greatly benefit the respondent by
producing increases in the average unit value of the quantity sold.
The respondent states that it did not include amounts of non-
subject merchandise in its allocation methodology. The respondent
further notes that the methodology it used conservatively calculated
its quantity of returns. Therefore, the respondent maintains that the
Department should accept its returned credit quantity allocation
method.
DOC Position
We agree with the respondent. As verification demonstrated,
information contained in the credit memos is not contained in the
respondent's U.S. subsidiary's computer system. For this reason, the
respondent used a monthly allocation method. Furthermore, we find that
the respondent did not include returns of non-subject merchandise in
its monthly allocation method. After examining the U.S. sales database,
we determined that the respondent had in fact correctly applied the
allocation method described in its September 12, 1994, submission. The
verification report notes that had the respondent used the returned
credit value factors (not the returned credit quantity factors), the
total quantity returned amount for the POI would have been greater than
the amount the respondent in fact derived using its allocation method.
This does not, however, signify that the respondent's allocation
methodology was improperly or incorrectly computed. Thus, we have
accepted the respondent's returned credit quantity allocation method.
Comment 37
The petitioner contends that respondent's foreign inland freight
monthly per-unit amounts shown in the verification report are based on
quantity information contained in the registros and should not be used.
In addition, the petitioner questions the variation in some of the
monthly per-unit amounts. Finally, the petitioner maintains that the
respondent should not have allocated the freight costs over gross unit
price, since prices for different varieties and colors fluctuate
substantially and such an allocation method would understate inland
freight charges on the least expensive roses. Because of these alleged
errors, the petitioner requests that the Department use, as BIA, the
highest monthly per-unit amount to calculate freight expenses for all
POI months.
The respondent states that the quantity figures used in the freight
calculation were verified by the Department and that it did not
allocate its freight costs over gross unit price. In addition, the
respondent states that monthly freight costs fluctuate significantly
because the volume of shipments can be vastly different for a given
month. Therefore, the respondent maintains that the Department should
accept its methodology and not reject it because freight costs differ
from one month to another in the POI.
DOC Position
We agree with the respondent. It was demonstrated at verification
that its revised freight expense calculation is not based on quantity
amounts from the registros, but on amounts from invoices and grower
reports. Specifically, the quantity amounts of roses and non-subject
merchandise sold to third countries are from invoices and the quantity
amounts of roses and non-subject merchandise sold in the U.S. market
are from grower reports. Therefore, respondent is using actual
quantities to derive its freight expense.
Regarding the petitioner's concerns that questionable variations
exist for some of the monthly per-unit amounts, the respondent derived
its monthly freight expenses by determining the freight expense it paid
and the quantity amount it exported for each month based on when it
recorded the expense in its accounting records and when it exported its
product based on invoices. We have no reason to question this
methodology because the calculated expenses accurately reflect the
amounts respondent incurred.
Finally, the respondent did not allocate freight expenses over
gross unit price. As found at verification, the respondent derived
monthly freight per-unit expenses using only quantity and freight
expenses as variables. Therefore, we have accepted the respondent's
freight allocation methodology and have used the monthly per-unit
amounts.
Comment 38
Respondent states that, while it normally accounts for the cost of
greenhouse plastic as an expense in the [[Page 7003]] year of purchase,
for its submission, it correctly capitalized the cost of the plastics
and amortized them over a two-year period. Respondent maintains that
its greenhouse plastic generally remains a productive asset for at
least two years and, thus, to expense these assets in the year of
acquisition would distort its current production costs. Respondent
further argues that the Department has accepted a two-year amortization
period in the Flowers proceedings.
The petitioner notes that respondent's amortization methodology for
greenhouse plastic was created by the company solely for its
submission. Petitioner contends that the submitted costs must be
rejected because the amortization schedule is incomplete and since
respondent has not demonstrated that its normal accounting practices
distort costs.
DOC Position
As explained in the general issues section, Comment 19, we have
allowed companies to capitalize and amortize greenhouse plastic costs
even though respondents normally treat such costs as expenses in the
year of purchase. Respondents must demonstrate, however, that they
correctly capitalized and amortized similar costs from all previous
years (see, Exhibit 5 of the cost verification report). Respondent
failed to satisfy this requirement. We have therefore calculated
respondent's greenhouse plastics cost using the actual costs incurred
as reported in the company's 1993 accounting records.
Flores Mocari
Comment 39
The petitioner alleges that certain verification exhibits indicate
that respondent did not report all indirect selling expenses, e.g.,
advertising.
The respondent maintains that it reported all indirect selling
expenses. The respondent points out that the expense amounts identified
by the petitioner include amounts associated with months prior to the
POI. Second, the respondent points out that it makes adjustments to its
accounts each month and that the total amounts of the accounting
adjustments will cancel each other out by the end of the fiscal year.
Third, the respondent states that the verification team examined
whether numerous selling expenses were incurred as reflected in the
accounting books and found no unreported selling expenses. Fourth, the
respondent maintains that, where the expense was associated with both
G&A and sales, it appropriately allocated the expense between
administration and sales departments. The respondent maintains that the
Department should accept its indirect selling expense allocation
methodology.
DOC Position
We agree with the respondent. In the course of verifying this
expense we examined and found that amounts from eight randomly selected
accounts in the libro auxiliar for July 1993 were correct as shown on
the respondents's indirect selling expense worksheet. We found that the
respondent reported all of its selling expenses from its financial
records. However, the petitioner points out that amounts from two
additional accounts in the auxiliar do not correspond with amounts on
the worksheet. Respondent's explanation that it moved some indirect
selling expenses among the POI months in order to match monthly sales
expenses with the corresponding sales is reasonable and we examined
evidence of this practice at verification.
We also determine that certain additional expenses should not be
included in respondent's indirect selling expense calculation. We did
not select for examination at verification respondent's method for
allocating a certain expense to sales and a portion of that expense to
G&A. Therefore, we have accepted respondent's methodology. Finally, we
examined the five expenses noted in the petitioner's brief at
verification and found that the respondent did not incur these
expenses.
Comment 40
The petitioner argues that respondent's related U.S. subsidiary
should have allocated its grower/marketing expenses on a value of sales
or cost of sales basis rather than per grower because the U.S.
subsidiary cannot isolate the associates with only sales of merchandise
produced by the respondent. Rather, the petitioner maintains that the
expense should cover sales of subject merchandise of the U.S.
subsidiary made on behalf of all growers.
Respondent states that its U.S. subsidiary's grower/market expenses
associated with making its sales and cultivating its relationship with
respondent are minimal since this relationship is well-established. The
respondent points out that its U.S. subsidiary should have probably
excluded all expenses of the grower department but was instead
conservative and allocated these expenses over the number of suppliers.
Therefore, the Department should accept its U.S. indirect selling
expense allocation methodology.
DOC Position
We agree in part with the petitioner. Because the U.S. subsidiary
could not determine from its accounting records the amount of grower/
marketing expenses associated with a specific grower, we cannot rely on
the allocation method used by the U.S. subsidiary. Therefore, to
account for the sales amount of merchandise produced by respondent that
its U.S. subsidiary sold during the POI, we determined the grower/
marketing expense associated with respondent by first deriving a factor
(gross sales of merchandise produced by respondent divided by the total
product value sold by its U.S. subsidiary). We then multiplied this
factor by the amount of grower/marketing expenses noted in the U.S.
subsidiary's financial statements to arrive at a grower's expense
associated with respondent.
Comment 41
The petitioner alleges that the respondent arbitrarily derived an
air freight expense allocation factor for three periods during the POI
and that, instead, it should have derived freight allocation factors
for each POI month. The petitioner argues that the respondent's
methodology effectively smoothes out monthly fluctuations and produces
higher freight rates during the period when U.S. sale prices are
highest.
The respondent maintains that its methodology properly reduces
inaccuracies caused by inventory carryover without masking differences
in monthly air freight rates. Therefore, we should accept its freight
expense allocation methodology as reasonable.
DOC Position
We agree with the respondent. At verification it was demonstrated
that the respondent created three distinct time periods within the POI
corresponding to substantial rate changes. Within each period, the air
freight rates incurred were similar. Accordingly, the respondent's air
freight methodology is not arbitrary. Moreover, using monthly freight
rates would not account for significant amounts of merchandise entering
the latter part of one month but sold in the early part of the
following month. Finally, we find that, there were significant rate
changes in specific months of the POI, the different rate changes are
highlighted by the periods used by respondent. Using monthly rates
would not account for the fact that one would be deriving a freight
amount [[Page 7004]] for merchandise sold by using a monthly freight
rate which may have been higher or lower then the rate applicable when
the merchandise entered inventory.
Comment 42
The petitioner maintains that the Department should include
reported sales which listed a box charge (a packing charge that the
related importer charges the unrelated buyer) but a zero price.
The respondent argues that these are sample sales and that the
Department stated that it would exclude sample sales in the preliminary
determination. Respondent argues that the Department should exclude
these sales in the final determination. In addition, the respondent
requests that the Department allocate the movement expenses and packing
costs of its sample sales over the total U.S. sales value.
DOC Position
It is within the Department's discretion to exclude U.S. sales when
it finds that these are clearly atypical and not part of the
respondent's ordinary business practice, e.g., sample sales (see Final
Determination of Sales at Less Than Fair Value: Professional Electric
Cutting and Sanding/Grinding Tools from Japan (58 FR 30144, 30146, May
26, 1993)). However, we must also find that to use these sales would
undermine the fairness of the comparison.
We have used transactions with positive box charge amounts in our
analysis because these transactions are typical and part of the
respondent's ordinary business practice.
Comment 43
The respondent maintains that one of the Department's verification
issues is based on a misunderstanding of how the company accounts for
preproduction costs in its normal books and records. Respondent claims
that verification exhibits on the record conclusively support the fact
that it ordinarily capitalizes preproduction costs in its financial
statements.
Petitioner contends that respondent should not be permitted to
explain its general ledger system and accounting practices in a case
brief. Petitioner argues that respondent's case briefs are not intended
to be a vehicle for the company to submit new information relating to
matters that were not covered during verification.
DOC Position
This issue is moot since, despite respondent's normal accounting
for preproduction costs, the Department allowed the company to
capitalize and amortize its preproduction costs. See General Comment
19.
Comment 44
Respondent states that during verification, the Department found
that there was a difference between the amount of preproduction costs
capitalized for a particular test month and the amount recorded on
respondent's preproduction cost amortization schedule for the same
month. Respondent argues that this difference is insignificant and,
thus, the Department need not adjust its reported rose production costs
to account for the discrepancy.
Petitioner contends that in the interest of accuracy, the
Department should correct for this differential in preproduction costs
capitalized no matter how insignificant the effect.
DOC Position
We disagree with respondent that the difference between the amount
of capitalized preproduction costs and the amount recorded on its
preproduction cost amortization schedule for the same month is
insignificant. The example highlighted in the cost verification report
related to only one month of the POI. Yet, this difference is present
in all twelve months of the POI. We therefore adjusted for the entire
amount of underreported amortization relating to respondent's
preproduction costs.
Comment 45
Petitioner claims that certain expenses recorded as cost of goods
sold in respondent's financial statement should not be reclassified as
G&A. Petitioner argues that respondent failed to provide evidence
sufficient to support its claim that its expenses had been
misclassified in the company's financial statements.
Respondent contends that the evidence it provided at verification
clearly supports its reclassification of these expenses from cost of
goods sold to G&A.
DOC Position
We agree with respondent that sufficient evidence was provided at
verification to support the reclassification of these expenses to G&A.
We therefore made no adjustment was made for purposes of the final
determination.
Comment 46
Petitioner claims that respondent's SG&A costs should not be
reduced by payments received from another company, since a portion of
respondent's SG&A costs have already been allocated to that company.
According to petitioner, if the Department were to allow the respondent
to offset its SG&A by the payments received from the other company, it
would effectively double count the offset. Additionally, petitioner
argues that the revenue received by respondent from the other company
is neither short term nor related to the rose production operations.
Respondent argues that the amounts received from the other company
represent an offset to expenses recorded on respondent's books.
According to the respondent, there is no separate allocation of SG&A
expenses to the other company and, thus, the payments received from the
other company are not double counted on respondent's books.
DOC Position
We agree with respondent that the amounts received from the other
company are not double counted. The full amount of SG&A expenses are
recorded on respondent's books. None of these expenses are allocated to
the other company. By offsetting these total expenses with payments
received from the other company, respondent is in effect charging the
other company for expenses incurred on its behalf.
Comment 47
Petitioner argues that exchange gains and losses related to sales
transactions and debt should be included in respondent's constructed
value calculation. According to petitioner, failure to take into
account these exchange gains and losses will result in the misstatement
of respondent's costs.
DOC Position
We agree with petitioner in part. It is our practice to exclude
from costs the exchange gains and losses arising from sales
transactions since these amounts do not relate to production of the
subject merchandise. Other exchange gains and losses associated with
respondent's debt, however, relate to the company's overall operations.
Thus, we have included these amounts in our calculation of respondent's
rose production costs.
Grupo Andes
Comment 48
Respondent states that the Department should use the interest rate
it reported for calculating credit expense. The respondent argues that
the sales verification report acknowledges that: (1) The company used a
variable rate demand note interest rate for calculating U.S. credit
expense; and (2) [[Page 7005]] the terms of the bond define the
interest rate as a weekly rate using a certain rate, which is the rate
for high quality, short-term or demand, tax-exempt obligations.
Respondent states that if the Department decides that this rate
should not be used, then it should use the prime rate for calculating
U.S. interest credit expense.
DOC Position
We disagree with the respondent. While the respondent accurately
describes the terms of the bond, the Consolidated Balance Sheet for
Continental Farms (respondent's related subsidiary) shows that only the
current portion of the bond is accounted for under ``Current
Liabilities''; the much larger portion of the bond is listed under
``Long-term Debt.'' Thus, we view this obligation and the interest
expense associated with it as long term.
Also, regarding U.S. credit expense, as noted in the verification
report, respondent's U.S. credit expense verification exhibit contained
a written explanation of its credit period calculation methodology from
an accounting manual. This manual states that the methodology ``does
not work well with a seasonal business.''
Therefore, we have recalculated the credit period using a different
methodology but the same data contained in respondent's verification
exhibit. In addition, we have disallowed respondent's interest rate
and, instead, applied an average of publicly ranged interest rates.
(See Comment 21.)
Comment 49
The petitioner argues that respondent could not identify export
selling expenses from its books and records. It states that respondent
earlier reported having an ``export department'' that prepared weekly
and monthly reports concerning export quality roses sold in Colombia.
The petitioner argues that expenses incurred by this department should
be included in the total amounts allocated to indirect selling expenses
incurred in Colombia.
The petitioner also states that, with regard to indirect selling
expenses incurred in the United States, the verification report
indicated that indirect selling expenses were allocated over ``total
global sales.'' The petitioner states that given that Continental Farms
is located in the United States and that the respondent is attempting
to derive U.S. selling expenses, such an allocation appears overly
broad.
Respondent states that it has included in its indirect selling
expenses incurred in Colombia all such expenses that could be
identified based on available accounting records. Respondent also
states that the petitioner's suggestion regarding administrative
expenses is unreasonable. With regard to indirect selling expenses
incurred in the United States, the respondent states that those
expenses were allocated over total sales of all products by Continental
Farms, not Andes as the petitioner seems to assume.
DOC Position
We agree with the respondent. At verification, the Department found
no information to indicate any U.S. indirect selling expenses incurred
in Colombia beyond those identified. Also, we found no significant
discrepancies with the information examined.
With regard to indirect selling expenses incurred in the United
States, the respondent allocated such expenses over sales of all
products to all markets by Continental Farms only.
We agree with the respondent that its allocation methodology was
reasonable based on what was examined at verification.
Comment 50
Petitioner notes that for purposes of computing U.S. value added,
respondent allocated net profits between U.S. and home market
production costs based on the transfer price charged by the respondent
to its U.S. affiliates. Petitioner states that the Department has
always supported a cost based profit allocation methodology in further
manufacturing cases. Petitioner therefore argues that the Department
should exclude all of respondent's U.S. value added sales from the LTFV
margin calculation.
Respondent acknowledges that the Department normally allocates
profit on the basis of cost in further manufacturing cases. Respondent
maintains, however, that because of the unique nature of the rose
market and the volatility in its pricing, profits should be allocated
on the basis of price, not cost.
DOC Position
We agree with petitioner that our normal practice is to allocate
profit in further manufacturing cases on the basis of relative cost.
See Dynamic Random Access Memory Semiconductors of One Megabit and
Above from the Republic of Korea (54 FR 15467, March 23, 1993).
Respondent has provided no evidence or support for its argument that,
because of price volatility in the roses market, our normal practice
distorts the antidumping analysis. Therefore, we have allocated the
profits for further manufactured roses on the basis of cost and have
included these sales in our analysis.
Comment 51
Respondent argues that the Department's cost verification report
significantly overstates the amount of G&A expenses of the respondent
that should be allocated to rose production. Respondent notes that the
Department's report indicates G&A costs inclusive of the intercompany
purchase of flowers. Respondent argues that the respondent's
intercompany purchase of flowers for resale should not be considered
part of the company's G&A expenses. In addition, respondent believes
that the Department's calculation of the respondent. G&A expenses does
not take into account the company's other income which should be
deducted from the G&A expenses. Finally, respondent asserts that the
respondent's net G&A expenses should be allocated among the different
flower types sold by respondent.
Petitioner argues that respondent's claims regarding other revenue
are not support by the record. Petitioner argues that respondent's case
brief is not the place for explaining data that should have been
presented during verification. Accordingly, petitioner does not believe
that there is any basis to credit respondent's G&A expenses with the
offset for respondent's other revenue.
DOC Position
We agree with respondent that the costs of intercompany purchases
of flowers should not be included in the calculation of G&A expenses.
However, we also agree with petitioner that the record does not support
respondent's claims for other income offsets to the G&A expenses.
Accordingly, we have rejected respondent's argument and calculated the
G&A based upon the costs examined at verification.
Grupo Benilda
Comment 52
Respondent maintains that it reported home market sales in U.S.
dollars because the home market sales transactions were denominated and
invoiced in U.S. dollars. According to respondent, the home market
customer paid the peso equivalent of the invoiced dollar amount, using
the exchange rate on the date of payment. For this reason, respondent
argues that the Department should not attempt to recalculate the value
of these sales by converting dollars to pesos and then converting pesos
to dollars because, respondent claims, this would distort the real
value of these sales. [[Page 7006]]
With respect to the short-term borrowing rate to be used in
calculating the home market imputed credit, respondent argues that its
dollar borrowing rate should be used because the home market sales were
negotiated, contracted for, and denominated in dollars. Respondent
further maintains that it would not make economic sense to borrow at a
peso borrowing rate to finance dollar denominated accounts receivable.
Therefore, respondent requests that the Department continue to use
respondent's dollar borrowing rate in its calculation of home market
credit expenses.
DOC Position
During respondent's verification, we established that respondent
invoiced its home market customers in U.S. dollars and received the
equivalent value in pesos at the date of payment. We were able to trace
the payments to the company's records and establish that the payments
made to the company in pesos reflected the prevailing exchange rates at
the time of payment.
It is the Department's practice to accept charges in the currency
in which the charges are made. In this instance, home market prices
were charged in dollars. Therefore, the Department found it appropriate
that respondent's home market sales were reported in dollar value since
the dollar value was the currency in which the sales transactions were
made. Furthermore, since home market sales were transacted in dollars
and the payments made, although in pesos, were based on constant dollar
value, there is no distortion. Using respondent's dollar borrowing rate
in the calculation of the home market imputed credit, is, therefore,
appropriate.
Comment 53
Respondent argues that the air freight account examined by the
Department during verification reflects expenses entirely related to
air freight for products shipped to a customer in a foreign country.
Respondent maintains that the Department collected documentation at
verification which supports this. Respondent further maintains that the
suggestion made in the Department's verification report that half of
the amount reported in the air freight account be added to the reported
foreign inland freight is based on a misunderstanding of the facts, and
it would be incorrect to include any portion of this account in the
Department's calculation of foreign inland freight expenses.
The petitioner argues that there is no evidence on the record to
show that the air freight expenses, reported in one of the company's
transportation accounts, are related entirely to air freight expenses
for that foreign country. According to the petitioner, the supporting
documentation collected during verification only supports the
conclusion that air freight expenses for one month (i.e., the month of
August) were for shipments made to the foreign country. According to
the petitioner, the exhibit collected by the Department does not
establish that all entries under this account code were destined for
that foreign country and does not identify the portion of these
expenses related to inland freight. The petitioner argues that because
respondent failed to report the inland freight expenses included in the
account, the Department should include the full amount of the charges
in the calculation of inland freight expenses.
DOC Position
At verification we examined one of the company's accounts related
to transportation titled ``Transportes Aereos'' (Air Transportation). A
company official stated that the entries made to that account were for
inland and air freight expenses related to products shipped to a
customer in a foreign country. To verify this statement we examined all
supporting documentation for one month.
The documentation consisted solely of air freight charges, which is
indicative that the entries made under this account were related to air
freight, not inland freight. As there is no evidence on the record
showing that the air freight account in question is related to inland
freight, we have not included any amount from this account in our
calculation of respondent's foreign inland freight expenses.
Comment 54
The petitioner requests that all the expenses related to Federal
Express discovered during verification be allocated to rose sales in
the U.S. market. The petitioner argues that there is no evidence that
the Federal Express charges incurred by the respondent's related
company in the United States were not shipment expenses on sales to
U.S. customers, nor is there any basis to assume that such expenses
should be allocated to sales outside the United States or to
merchandise other than roses. According to the petitioner these
expenses should be treated as direct selling expenses related merely to
rose sales.
According to the respondent, these expenses should be appropriately
added to the ``other expenses'' field, or to indirect selling expenses
incurred in the United States.
DOC Position
At verification, company officials discovered unreported expenses
related to Federal Express. However, because, in general, we cannot
accept new information at verification and, due to time constraints we
were unable to verify the exact amounts of these expenses to each
destination and for each merchandise class, we were only able to verify
the total expense. Thus, the Department, as BIA, included the total of
these expenses in the calculation of movement charges related to U.S.
rose sales.
Comment 55
Respondent maintains that at the preliminary determination, the
Department double counted certain expenses related to U.S. duty, U.S.
brokerage and handling, and movement charges. According to respondent,
the Department applied BIA for the above-referenced expenses for
certain ESP sales, even though these expenses were already included in
respondent's indirect selling expenses. Respondent, therefore, requests
that the Department eliminate the BIA values and count the actual
expenses as part of indirect selling expenses, as reported.
Furthermore, respondent argues that delivery and brokerage expenses are
functions performed by respondent's related U.S. importer, and that
such expenses are included in the importer's accounting records as
indirect selling expenses. Therefore, respondent argues that it serves
no purpose to attempt to break these costs out and report them
separately.
Petitioner, on the other hand, argues that the movement expenses
included in the reported indirect selling expenses are not properly
classified as indirect selling expenses and are not entitled to be
offset under 19 CFR Sec. 353.56. According to petitioner, respondent
should bear the burden of identifying its U.S. indirect selling
expenses. Otherwise, respondent has an incentive to report all U.S.
selling expenses as indirect in order to obtain a greater offset.
Therefore, respondent requests that the Department treat the entire
amount of indirect selling expenses as direct selling expenses.
DOC Position
Duty. We are unsure why respondent refers to double-counting of
duty charges. Respondent has always reported U.S. duty as unique
movement charge in its database. We verified duty charges in the same
context as airfreight [[Page 7007]] charges, specific to shipments of
roses and reported as a movement charge. Respondent has not reported
U.S. duty in its importer's indirect selling expenses. In the
preliminary determination, we used the highest reported duty as BIA for
any ESP sale with no duty reported (as all FOB Miami sales must have
applicable duty charges). We noted in our verification report that
respondent failed to report duty for several transactions. Therefore,
as BIA, we are using the average positive duty and airfreight charges
for purposes of the final determination.
Brokerage. In its first submissions, respondent reported U.S.
brokerage as a fixed-fee per airway bill on ESP sales. Respondent then
stated shortly before the preliminary determination that it had double-
counted these costs by also including brokerage charges in its reported
indirect selling expenses. At the preliminary determination, we stated
that it was proper to report brokerage as a movement charge, and that,
since we could not easily remove brokerage from indirect selling
expenses, we subtracted both the charges reported in the database as
movement expenses, and the total reported indirect selling expenses.
At verification, respondent demonstrated to the Department that the
brokerage costs incurred by the importer's staff acting as respondent's
in-house broker, include not only the importer's brokerage fees, but
also the personnel and other costs of the respondent's U.S. subsidiary.
Therefore, company officials maintained that the total costs associated
with brokerage should be reported as a subset of indirect selling
expenses.
We determined that the manner in which total brokerage charges are
incurred and recorded in the respondent's accounting system, and the
difficulty of re-allocation to rose sales, are circumstances under
which their inclusion in the related importer's indirect selling
expenses was warranted.
U.S. Inland Freight Expenses
During verification, respondent identified the freight charges for
local transportation included in the importer's overhead expenses.
Consequently, we removed them from indirect selling expenses and
treated them as a movement expense. We also deducted from the reported
indirect selling the freight expense amount.
Comment 56
Petitioner argues that expenses related to hurricane damage,
amortization, legal fees and depreciation should not be excluded from
respondent's G&A expenses. Petitioner believes that these expenses are
costs of selling in the U.S. market. Petitioner further maintains, that
because these expenses were classified as G&A in the ordinary
accounting records of the importer, there is no basis to treat these
charges as extraordinary items. Petitioner further maintains that
certain depreciation expenses which were not reported as indirect
selling expenses, should be included since they relate to the sale and
distribution of subject merchandise.
Respondent maintains that these expenses were properly excluded
from the reported indirect selling expenses because these expenses are
unrelated to selling expenses.
DOC Position
During verification, we established that the related importer did
not report to the Department certain overhead expenses. According to
respondent, these expenses were not reported since they are unrelated
to rose sales and were properly classified as G&A expenses.
We agree with petitioner that the G&A expenses excluded from the
reported indirect selling expenses should be included in the indirect
selling expenses because importer's function, as a related subsidiary,
is the sale and distribution of the subject merchandise. Since the
expenses respondent excluded from indirect selling were not reported to
the Department and since there is not sufficient information on the
record to show how these expenses can be allocated to the importer's
rose sales related to respondent, the Department used BIA to account
for these unreported expenses. The Department added the ratio of the
unreported overhead expense amount to the importer's total sales value
to the indirect selling expense ratio used in the calculation of
respondent's indirect selling expenses.
Comment 57
The petitioner maintains that expenses related to the computer
system department should be allocated among farms based on the sales
value or volume. The petitioner further argues that allocating these
expenses over the number of farms would disguise the higher costs
involved in making more entries for farms with higher sales volume. The
petitioner, therefore, suggests that the computer system department
expenses be prorated based on either the sales value or the number of
boxes shipped to the respondent's U.S. subsidiary.
According to the respondent, sales value and volume are irrelevant
to this allocation because it takes approximately the same amount of
time to prepare a growers report, regardless of the number of
transactions.
DOC Position
At verification we examined the records of the respondent's U.S.
subsidiary and found no evidence that the method used to allocate entry
processing expenses was not reflective of the company's record-keeping
system.
We disagree with the petitioner that the expenses related to the
computer system department should be allocated based on the sales value
or volume of each farm. Moreover, fixed costs for salaries, computer
supplies, and maintenance are incurred regardless of the volume or
value of transactions entered into the computer system. Therefore, the
Department found the allocation of these expenses based on the number
of farms to be appropriate.
Comment 58
At verification, company officials of the respondent's U.S.
subsidiary explained that its grower department incurred expenses for
soliciting new suppliers of roses. We established that the U.S.
subsidiary did not allocate any of these expenses to the rose sales of
its related company. The respondent argues, however, that, as these
expenses relate to soliciting new suppliers of roses, and the U.S.
subsidiary's supply from the respondent is already guaranteed by their
relationship, the U.S. subsidiary's grower department expenses were
properly not allocated to the respondent.
The petitioner argues that, in the absence of any evidence showing
that such expenses were not applicable to the respondent, the full
amount of grower department expenses should be allocated to the
respondent based on a sales prorated basis.
DOC Position
At verification we found no evidence that respondent's U.S.
subsidiary's grower department expenses were applicable to the
respondent. Therefore, the Department did not allocate any expenses of
the U.S. subsidiary's grower department to the respondent's rose sales
in the U.S. market.
Comment 59
Respondent contends that it appropriately capitalized certain
severance payments for its submission and amortized those payments over
a two-year period. Respondent states that the purpose of the payment
was to encourage employees to switch to a new [[Page 7008]] severance
pay system that could benefit the company in future periods.
Petitioner argues that the severance paid during December 1993
should be expended in the POI, according to the company's normal
accounting practice. Petitioner states that severance by nature is
based on past service, not future services. Petitioner argues that it
is unclear whether the expenditures will produce any future cost
reductions. Additionally, there is no basis to conclude that
respondent's normal accounting practice distorts actual costs.
DOC Position
We agree with respondent. In order to benefit from the amendment to
the Colombian labor laws, respondent paid its employees a voluntary
bonus that was equivalent to approximately two years of severance
payments under the old system. The adoption of the amendment by a
company is voluntary. The purpose of the amendment is to generate lower
monthly severance provisions in the future. For the submission,
respondent amortized this bonus over the period it will take to recover
the bonus expense through cost savings. Since the bonus is, in effect,
a prepayment of future severance cost, we made no adjustment. The
Department also recognizes that U.S. GAAP allows delayed recognition of
post-employment benefits. Thus, charges for post-employment are not
recognized as incurred but are recognized systematically over future
periods. Therefore, no adjustment was made for purposes of the final
determination.
Comment 60
Petitioner states that the accounting adjustments made during the
POI should be included in COP and CV. Petitioner argues that respondent
has not demonstrated that the adjustments were not, in fact, actual
expenditures during the POI. The petitioner also states that there is
no basis on which to depart from the company's audited financial
statements.
Respondent argues that when calculating constructed value, the
Department may include only those costs which would ordinarily permit
production in the ordinary course of business. 19 U.S.C.
1677b(e)(1)(a). Respondent contends that the Department should not
automatically rely upon a company's accounting records, but instead,
should determine whether the amount represents a cost of production
properly attributable to the POI, and if it does not, it should be
excluded. The respondent argues that a company may properly treat a
cost for the purposes of calculating constructed value in a manner that
differs from the treatment of those costs in the company's books.
Respondent argues that is appropriate when the treatment in the books
does not represent actual production costs and cites the final
determination of sales at less than fair value:
Ferrosilicon From Venezuela, 58 FR 27522, 27527 (1993).
DOC Position
We agree with the respondent. At verification, respondent
demonstrated that the year end adjustments were not current production
costs. Instead, these entries related to costs of the following year.
Respondent provided data to support that the adjustments were reversed
within the first few business days of 1994, and, thus, were properly
recorded in 1994 production costs.
Comment 61
Petitioner contends that the 1992 maintenance costs capitalized in
the company's books and the amortized during 1993 should not be
excluded from reported costs. The petitioner claims that there is no
basis on which to depart from the company's audited financial
statements.
Respondent states that these capitalized maintenance costs did not
relate to the production of subject merchandise during the POI.
Respondent states that if the Department were to include 1992
maintenance expenses in 1993 cost, then to be consistent, some
maintenance expenses incurred in 1993 should be reclassified as 1994
costs.
DOC Position
We agree with respondent. By capturing all of respondent's 1993
operating expenses we have accounted for all rose production costs.
Accordingly, no adjustment is deemed necessary.
Comment 62
Respondent states that the Department should not include in CV the
costs of a certain business investment that is wholly unrelated to the
production of roses in Colombia. Respondent notes that the income
generated by this investment was similarly excluded from the
submission.
DOC Position
We agree with respondent. Since this investment is not related to
the production of roses, we did not include the income or expenses
associated with it.
Grupo Bojaca
Comment 63
Respondent confirmed that it properly reported G&A expenses. Thus,
respondent claims there is no longer any factual basis upon which to
continue the G&A adjustment made in the preliminary determination.
DOC Position
We agree with the respondent. The Department adjusted the G&A
amounts at the preliminary determination because respondent had failed
to provide a timely reconciliation of the reported amounts.
Subsequently, the Department reconciled these costs at verification. No
discrepancies concerning this expense were noted at verification,
therefore, adjustments are no longer necessary.
Comment 64
The petitioner claims that offsets to financial expenses were
overstated by profits on investment sales, income from previous years,
and other income. The petitioner states that only income directly
related to the short-term interest expenses is permitted as an offset
to interest expense. Moreover, the petitioner states that respondent
failed to show that the claimed income is related to short-term
investments. Such support is required before income can be used as an
offset to interest expenses. The petitioner states that income from
prior years or from insurance claims does not relate to current short-
term interest costs.
Respondent claims that its reported financial income is
appropriately treated as an offset to financial expenses. The
respondent also argues that the Department should not recalculate its
reported per unit net interest expense so as to allocate total company-
wide interest expense to roses. The respondent states that this is a
generic problem (for all companies) that stems from the Department's
misunderstanding of how the CV tables were developed in the Fresh Cut
Flowers cases. The respondent states that the Department should utilize
the per unit net interest expense as calculated in the CV tables
submitted.
DOC Position
We agree, in part, with both the petitioner and the respondent. The
miscellaneous income amounts allocable to roses were reclassified to
G&A expense. Only interest earned on short-term investments of working
capital was used to offset financial expense. As to the error in the CV
table, [[Page 7009]] we have corrected this problem in our final
calculations. (See Comment 11).
Comment 65
Respondent claims the Department's verification report overstates
the errors with respect to its credit period calculation and U.S.
credit expenses, and that only two customers were affected. For those
two customers, respondent used an incorrect box charge in the
denominator of its credit expense calculation. Respondent claims that
increasing the monthly average sales by a given amount results in no
change to the credit periods for these two customers. Respondent also
states that the days outstanding will not change as a result of volume
changes as suggested in the verification report.
The petitioner states that verification disclosed errors in the
calculation of U.S. credit days that should be amended.
DOC Position
While we noted errors in respondent's calculation of U.S. credit
days for two customers, the effect of these errors does not change the
actual number of days outstanding from that reported. Thus, we have
used respondent's reported days outstanding.
Comment 66
The petitioner states that discounts are price adjustments or
direct selling expenses, not financial costs. Accordingly, such costs
should be segregated and separately deducted as direct selling
expenses. The petitioner states that to the extent that these costs
cannot be separated from true financial costs, the entire amount should
be treated as direct selling expenses.
The respondent states that there is no way to segregate cash
discounts from the related importer's financial expenses, nor is there
any reason to do so. Respondent notes that because the basis of its FMV
is CV, it does not matter whether these costs are reported as indirect
or direct selling expenses.
DOC Position
We agree with the petitioner that discounts should be segregated
and treated as a price adjustment. Accordingly, we have segregated
discounts from indirect selling expenses and made an adjustment to USP
for these discounts. Thus, we have adjusted indirect selling expenses
for the discounts and have also included financial expenses in the
indirect selling expenses.
Grupo Clavecol
Comment 67
The petitioner maintains that respondent's air freight charges were
improperly allocated by flower weight. The petitioner maintains that
the use of a universal kg/box weight to allocate freight charges is
inaccurate because box weight will vary significantly depending on the
type of flowers packed in the same size box. The petitioner maintains
that the per-rose weight calculated from the reported average is not
realistic based on the petitioner's comparison of the per-rose weight
to weights of other flowers shipped by respondent. The petitioner
maintains that the Department should use the ratio of total sales of
roses to total sales of all flowers to allocate total air freight
charges to roses.
The respondent maintains its allocation is reasonable because,
although the number of flowers per box varies, boxes of flowers are
generally treated as weighing approximately the same regardless of the
type of flowers contained in the box. The respondent states that the
petitioner overstates the variance in flower weights by failing to
recognize that units for flowers such as alstromeria are for bunches,
not stems. Moreover, the petitioner's proposed methodology appears to
result in a lower air freight charge for roses than the currently
reported allocation.
DOC Position
We disagree with the petitioner. The petitioner did not distinguish
between numbers of stems and numbers of bunches for alstromeria, which
changes the relationship between weight and flower type considerably.
The result of respondent's calculation was an average weight per rose
stem which is neither unreasonable nor improbable. We note that the
respondent's basic weight- driven methodology had been on the record
since June. The petitioner never raised this issue, nor did the
Department instruct respondent to change its reporting prior to
verification. Verification is not intended to collect new data nor to
design new methodology. The petitioner neglects to mention that the air
freight bills to respondent's U.S. subsidiary cover the subsidiary's
FOB Miami sales both to the United States and to Canada, so that the
higher rate would, in fairness, apply to the average for both U.S. and
Canadian FOB Miami sales. Accordingly, we have continued to use the
data as reported and verified by the Department.
Comment 68
The petitioner maintains that respondent did not sufficiently
substantiate that the expenses recorded under a certain account code
pertain only to sales made to third countries. The petitioner argues
that respondent presented no documentation at verification to support
its claim. Moreover, the petitioner argues that, if third-country sales
represent a given percent of total exports, it is not credible that
third-country selling expenses equal a larger percent of total selling
expenses reported.
Respondent maintains that the documentation examined at
verification showed that the categories of expenses included in its
response were specifically related to third country sales. The
respondent states that these expenses, by their nature, do not apply to
U.S. sales.
DOC Position
We disagree with the petitioner. The Department's verifiers were
provided with both explanations and basic documentation to show that
certain Bogota export expenses did not pertain to U.S. sales. In terms
of the general difference in levels of cost, respondent's sales
channels in third-country markets are not the same as its operations in
the United States, therefore, it is not improbable that different costs
are incurred for processing third country sales.
Comment 69
The petitioner argues that respondent should have separately
reported U.S. inland freight costs rather than include them with
indirect selling expenses.
The respondent maintains that the Department issued a letter on
August 10, 1994, expressly stating that it was not necessary to
segregate inland freight charges from U.S. indirect selling expenses.
DOC Position
Early in the investigation, counsel for numerous Colombian
respondents, including respondent, explained that, because of the
nature of their companies' record-keeping, certain expenses could not
readily be broken out in the requested computer format. In our August
10, 1994, letter, we allowed the respondents to report various
expenses, including brokerage and handling, inland freight, and
warehousing, as components of aggregate indirect selling expenses,
instead of breaking these out as separate costs to be reported as
movement expenses. The letter was conditional, however, as it stated
that, ``if at [[Page 7010]] verification the Department discovers
information which is contrary to your August 9, 1994, letter, we may
reconsider these decisions.'' At verification, we examined the records
which contained freight cost entries for truck services and for van
expenses. The various related accounts, such as maintenance and
depreciation, apply to any and all use of the U.S. subsidiary's
vehicles. Company officials showed us that these general expenses apply
universally to trucking and van services. Verification confirmed that
there was not a reasonable method available for disaggregating the
costs for U.S. inland freight for roses.
Therefore, we have kept U.S. inland freight charges as a component
of the U.S. subsidiary's indirect selling expenses in keeping with the
terms outlined in the Department's August 10, 1994, letter.
Comment 70
The petitioner argues that certain advertising expenses should be
treated as direct selling expenses and should only be allocated to U.S.
sales. The petitioner states that since the advertising was published
in the magazine Florists Review, the readers of the magazine would be
customers of respondent's customers, that is, the florists who buy from
the wholesalers who purchase roses from respondent.
The respondent maintains that, first, these are insignificant
expenses and their treatment as direct selling expenses would make
little impact on the dumping calculation. Second, the respondent
maintains that the U.S. subsidiary's advertising is seen by wholesale
customers who also read Florists Review. Third, respondent argues that
this magazine is also distributed in Canada; thus if direct selling
expenses are warranted, Canadian sales as well as U.S. sales should be
affected.
DOC Position
We disagree with the petitioner. We re-examined the sample
documentation in verification Exhibit 14C. The evidence shows that the
advertising touts the U.S. subsidiary's reliability as a supplier.
Nowhere does the advertising speak to retail shops; no admonitions
exist for retail florists to ask their suppliers to look for the U.S.
subsidiary's products. As the advertising is aimed at respondent's
customer, and not to that customer's customers, we have made no change
in treating advertising as reported indirect selling expenses.
Comment 71
The petitioner alleges that purchase prices should be adjusted to
reflect unreported wire transfer changes. The petitioner cites the
verification report, which states that one U.S. customer paid
respondent by wire transfer and deducted the wire transfer cost from
the amount paid to respondent. Respondent did not report this reduction
to the U.S. proceeds from the sale in question. The petitioner
maintains that since there is no indication on the record as to how
many U.S. transactions involved wire transfer charges or how many U.S.
customers deducted wire transfer charges from the amount returned to
respondent, the Department should deduct the verified single
discrepancy, as a percentage of gross price, from all purchase price
sales to all customers.
The respondent argues that since this issue only involved one of
six purchase price sales examined at verification, only the single sale
in question should be modified for the discrepancy.
DOC Position
Wire transfer is one of several common methods of payment by
respondent's customers. The unreported deduction from invoice price for
wire transfer charges appeared in one of six sales examined at
verification. As BIA, we have reduced all sales to that purchase-price
customer whose payment showed this omission, by the corresponding
percentage of the unreported reduction to U.S. price.
Comment 72
The respondent maintains that the Department should use the
reported interest rate to calculate imputed credit on U.S. sales. The
respondent maintains that it submitted proper documentation to the
Department for the reported rate and states that its U.S. subsidiary
did not have loans during the POI.
DOC Position
We agree with the respondent. Respondent did provide requested
documentation for its reported interest rate on September 22, 1994.
Respondent was fully prepared to review its history of borrowing during
the POI; the verification team elected not to review the materials,
thus no negative inference is warranted.
Comment 73
The respondent maintains that the Department should use the
expenses reported as adjustments to U.S. price.
DOC Position
We agree, in part, with the respondent. We are using the data
submitted to the Department by respondent on December 7, 1994, which
includes corrections based on the company's verification. We have also
made minor adjustments, such as that for missing U.S. wire transfer
charges.
Comment 74
Respondent contends that its submitted G&A expense was properly
allocated based on cost of manufacturing (COM). Additionally,
respondent states that all of its business activities related to
growing flowers.
Petitioner alleges that G&A was allocated on the basis of variable
costs, and asserts that G&A should be allocated based on cultivated
area because fixed costs associated with business activities not
concerned with subject merchandise, i.e., a cattle ranch, are very
different than flowers.
DOC Position
The Department considers respondent's allocation of G&A based on
COM to be a reasonable methodology. Additionally, there is no
information on the record indicating that the respondent was involved
in activities other than growing flowers during the POI.
Comment 75
Petitioner claims that rose production costs were understated
because all production costs were allocated on an equal basis, by area,
to field crops (containing gypsophilia. flowers) and flowers grown in
greenhouses.
Respondent states that its gypsophilia. crop was grown in
greenhouses and that petitioner provided no evidence to support its
accusation that gypsophilia. was a field crop. Therefore, the
Department should reject petitioner's claim.
DOC Position
There is no compelling evidence to support petitioner's claim that
respondent's production cost allocation methodology distorts rose
production costs. Accordingly, we made no adjustment for purposes of
the final determination.
Grupo Floramerica
Comment 76
The respondent argues that all of its selling expenses were
incurred by Floramerica, S.A. and Flores Las Palmas. The respondent
states that its central office incurs the majority of the selling
expenses and records them in Floramerica, S.A.'s books. The respondent
explains that the central office provides selling and support functions
for all products at all the [[Page 7011]] Group's farms. However, the
respondent contends that it is impossible to separate selling expenses
on a farm-specific basis. The respondent maintains that its allocation
methodology for its indirect selling expenses is correct because the
total selling expenses to be allocated reflect selling support
functions for all the Group's products. The respondent argues that it
would have overstated its total selling expenses allocable to roses if,
as the Department suggests, it would have used sales revenue from only
Floramerica, S.A. and Flores Las Palmas.
The petitioner argues that indirect selling expenses incurred in
Colombia should be allocated only over sales by Floramerica S.A. and
Las Palmas. The petitioner maintains that the verification exhibit
supporting the Department's analysis of respondent's indirect selling
expenses expressly states ``Total Selling Expenses (Floramerica and
Palmas)'' allocated by revenue of all farms in the Group. The
petitioner further argues that the cost verification report does not
indicate that selling expenses were limited to Floramerica, S.A. and
Flores Las Palmas.
DOC Position
We agree with respondent. Respondent allocated the indirect selling
expenses of Floramerica, S.A. and Flores Las Palmas to roses by
determining the percentage of rose sales as a proportion of sales of
all products. Because respondent allocated Floramerica S.A.'s and
Flores Las Palmas' indirect selling expenses by the revenue of all
related farms in the Group, its calculation understated the indirect
selling expenses of Floramerica, S.A. and Flores Las Palmas. However,
because Floramerica S.A. provides sales support for the entire group,
if we allocated the indirect selling expenses by only Floramerica
S.A.'s and Flores Las Palmas' revenue, we would overstate their
indirect selling expenses. Therefore, as there is no way to reallocate
these expenses, we have accepted the respondent's methodology as
reasonable.
Comment 77
Petitioner argues that only income relating directly to
respondent's short-term assets is permitted as an offset to interest
expense.
Respondent contends that the Department should continue to allow
its total financial income to offset its financial expenses. Respondent
maintains that the cost verification report does not conclude that only
a portion of its financial income should be allowed to offset its
financial expenses. According to the respondent, the cost verification
report states that financial income generated from short-term
investments of working capital are generally allowed as an offset to
financial expenses. Respondent states that its financial income was
verified without discrepancy.
DOC Position
Respondent reduced financial expenses for interest income earned
from certain assets. These assets had maturities ranging from one to
five years. The Department generally only allows financing expense to
be offset by short-term investments of working capital (see, Final
Result of Antidumping Administrative Review: Gray Portland Cement from
Mexico, 58 FR 47256 (September 8, 1993)). The maturities of these
assets are all greater than one year and therefore cannot be considered
short-term in nature. Therefore, we disallowed the portion of interest
income earned from the long term assets.
Comment 78
Petitioner argues that fixed costs should be included in
respondent's packing expenses.
Respondent states that the Department verified its packing
calculation and its allocation methodology and found no discrepancies.
Therefore, respondent contends that the Department should use the
verified packing expense data and not the BIA amount used in the
preliminary determination. Furthermore, respondent argues that the
Department should include fixed overhead in the packing costs.
Respondent further argues that, if the Department decides these costs
are not packing costs, these costs must be classified as indirect
selling expenses.
DOC Position
We agree with respondent that certain fixed overhead costs are part
of the packing operation. Accordingly, we have included fixed overhead
related to the packing operation in the packing cost for purposes of
the final determination.
Comment 79
Respondent contends that the Department should make year-end
accounting adjustments which were noted at verification. Respondent
states that it reported the higher unadjusted costs to the Department
instead of its actual costs, as adjusted at year-end. Respondent states
that the most significant of the year-end accounting adjustments
relates to an over-accrual of pension liability. Respondent states that
it reported the higher, unadjusted costs rather than the actual labor
costs incurred during the POI.
Petitioner agrees with the respondent that the Department should
make year-end labor adjustments.
DOC Position
We agree with respondent that its submitted cost data did not
include the year-end accounting adjustments. Accordingly, for purposes
of the final determination, we corrected the submitted costs to include
all 1993 year-end adjustments.
Comment 80
Respondent argues that the Department should accept its reported
and verified G&A calculation, which was based on cost of goods sold,
for purposes of the final determination.
Petitioner agrees with respondent that the Department's normal
practice is to allocate G&A on the basis of cost of goods sold.
Petitioner states that there is no apparent reason to depart from the
normal methodology unless adequate cost data for each respondent is not
available.
DOC Position
We agree with both parties. The Department considers respondent's
allocation of interest expense and G&A based on cost of goods sold to
be reasonable.
Grupo Intercontinental
Comment 81
Respondent argues the Department should base its final
determination on the information submitted by it and verified by the
Department. It states that, while the Department used BIA as a basis
for its preliminary determination, the Department noted in that
determination that it would conduct verification and base its final
determination on the verified information if these respondents
submitted ``adequate and timely'' responses to supplemental requests
for information.
Respondent states that it filed adequate and timely responses to
supplemental requests regarding both sales and cost and the Department
made no further requests for additional information or clarification.
Moreover, respondent states that the Department conducted a detailed
verification of the information submitted and found only a few minor
discrepancies in revenue and charges.
The petitioner states that respondent's U.S. sales listing is
unreliable and [[Page 7012]] should be rejected in favor of BIA. The
petitioner argues that respondent revised its U.S. sales listing twice
prior to verification and that the Department found additional
discrepancies with regard to volume and value of sales at verification.
The petitioner also states that revenue and charges were incorrectly
reported and identifies discrepancies with respect to box charges, air
freight, return credits (see Comment 82).
DOC Position
We agree with the respondent. While it was not possible to use the
information submitted by respondent for the preliminary determination,
the respondent has submitted, and we have accepted, revised information
which was examined at verification. Although the information examined
at verification contained some discrepancies, these matters were not so
significant as to demonstrate that respondent's U.S. sales listing, as
a whole or in part, was unreliable.
With respect to the quantity and value of respondent's U.S. sales,
the discrepancies found were relatively minor. We find no reason to use
BIA for respondent's U.S. sales response.
Comment 82
The petitioner states that at least box charges should be assigned
a best information value equal to the lowest amount reported for any
sale during the POI or denied altogether as an adjustment. It also
states that since air freight charges are misallocated by the number of
stems rather than by weight, the Department should identify the highest
per-stem charge for any month and apply that charge to all U.S. sales
as ``best information.''
The respondent states that the box charge issue noted by the
petitioner affected only two customers, and was insignificant. The
respondent also states that the petitioner has confused total box
charges per observation with the box charge per box. The respondent
states that the petitioner's allegations with regard to its reporting
of return credits are similarly groundless and reflect a lack of
understanding of how the grower reports record return credits. The
respondent states that nothing on the record or in the sales
verification report supports the contention that its reporting of
return credits to the Department was in any way unreliable.
Respondent also rebuts the petitioner's assertion that air freight
charges were misallocated since it is charged for air freight on the
grower's reports by the number of stems and that is, therefore, the
only reliable basis it has for making this allocation. Respondent adds
that the grower's reports do indicate air freight attributable to non-
roses (i.e., gypsophilia, and alstromeria) and those amounts were
deducted from the total allocated to roses. The respondent also states
that such information was fully verified by the Department and no
discrepancies were reported.
DOC Position
With regard to the question of return credits and air freight and
box charges, the calculation methodologies were reasonable and
consistent with the information available from grower's reports. With
regard to return credits, in particular, we noted at verification that
the respondent was able to link return credits to sales. Moreover, we
accepted the respondent's explanation that in some instances customers
claim credits in excess of the gross value of the merchandise and that
in such instances, the respondent does not make customers adjust for
such excessive credit claims. We have therefore, made no adjustments to
the data that respondent submitted regarding these issues.
Comment 83
Respondent states that for purposes of its final determination the
Department should accept its minor clarification in its reporting of
Colombian Flower Council Contributions. The respondent states that
although certain discrepancies with respect to fees paid to the
Colombian Flower Council were found at verification, the respondent
provided information at verification clarifying these discrepancies.
DOC Position
While certain discrepancies were discovered by the Department
during verification, we verified the revised data and have used this
data in our margin calculations.
Comment 84
Petitioner states that respondent excluded various nonoperating
expenses from its submitted rose production costs and that the excluded
items should be added back as current production costs. Petitioner
asserts that absent any evidence to establish that such costs were
misclassified in respondent's normal accounting records, there is no
basis to exclude these costs.
Respondent maintains that it properly excluded many of the non-
operating expenses noted by the petitioner since these expenses did not
relate to the current production or sale of roses. Respondent further
states that it excluded other expenses listed by the petitioner because
the expenses related to rose production costs from years prior to the
POI.
DOC Position
We agree with petitioner in part. The unreported general income and
expense items relating to Intercontinental as a whole were included in
our cost calculations. Certain income and expense items identified
during the current year relate to prior periods. Similarly, income and
expense items relating to the current year are not identified until a
future point in time, thus generating an offsetting effect. Therefore,
we adjusted the submitted G&A costs to include the unreported income
and expense items.
Comment 85
Respondent states that G&A expenses were properly allocated
according to the number of employees assigned to each flower type.
Respondent states that the number of workers, by flower type, is a
reasonable surrogate for cost of goods sold when allocating G&A, since
labor is the largest expense in flower production.
Petitioner states that G&A should be reallocated based on cost of
goods sold or area in production, rather than number of employees.
Corporate salaries for the finance department, legal department, and
the like have no relationship to the number of employees by flower
type. Such costs are generally allocated according to cost of goods
sold.
DOC Position
We agree with the petitioner and have reallocated G&A using
production area. During verification, it was found that the number of
employees assigned to each flower type was an estimate and could not be
verified.
Grupo Papagayo
Comment 86
The petitioner maintains that one of the exhibits (Exhibit
Indirect-3) collected during respondent's verification shows that
certain expenses for rents and leases incurred by the sales department,
and other expenses related to photocopies and building administration
were not included in the reported indirect selling expenses. The
petitioner argues that since the expenses are related to the Sales
Department, they should be included in respondent's indirect selling
expenses.
Respondent states that the expenses contested by the petitioner are
G&A, not selling expenses, and were reported to [[Page 7013]] and
accepted by the Department as G&A expenses for CV purposes.
DOC Position
We disagree with the petitioner that the contested expenses were
related to sales only. Based on our examination of respondent's
records, we determined that the expenses in question were properly
classified as G&A expenses. The exhibit to which the petitioner refers
reflects an account that contains entries related to sales as well as
to general expenses. At verification, we examined each entry and
supporting documentation made for a specific month and found that the
entries classified as G&A expenses were not specifically related to
sales. Therefore, the Department did not include the expenses to which
the petitioner referred in the calculation of respondent's indirect
selling expenses.
Comment 87
The petitioner maintains that the proportion of expenses related to
export documentation allocated to rose sales in the U.S. market is
disproportionate to the ratio of the U.S. market sales to sales in
other markets. Therefore, the petitioner requests that the Department
reallocate these expenses based on the ratio of U.S. market sales to
the sales in other markets.
Respondent states that the petitioner is mistaken because the
portion of the verification report to which petitioner refers describes
the proportion of the export document charges attributed to various
categories, not just roses.
DOC Position
The petitioner's interpretation of the verification report is
incorrect. First, the petitioner interpreted the proportion of expenses
related to opening and closing registros for all markets as related
only to U.S. sales. Second, the petitioner erroneously interpreted the
ratio of rose sales to sales of all products as the ratio of U.S. rose
sales to sales of roses in all countries. Therefore, the ratios cited
by the petitioner bear no relationship to each other.
It should be noted, however, that the expenses related to opening
and closing registros were not reported to the Department. It was not
possible to allocate these expenses to rose sales for each market
because company officials did not provide sufficient information
necessary for such an allocation. Therefore, the Department included
the total amount of expenses related to opening and closing registros
in the calculation of respondent's indirect selling expenses allocated
to rose sales in the U.S. market.
Comment 88
The petitioner argues that the expenses related to the Colombian
Grower's Association (CGA) discovered during verification in
respondent's accounting records should be included as indirect selling
expenses. According to the petitioner, there is no evidence concerning
the functions or activities of the CGA that justifies treating these
expenses as G&A rather than selling expenses.
The respondent maintains that the fees paid to the CGA should not
be treated as indirect selling expenses because CGA does not provide
sales-related services.
DOC Position
The Colombian Grower's Association is the same type of entity as
Asocolflores. During verification, the Department found no evidence
that this association was involved in selling activities. Therefore,
the Department did not include these fees as part of respondent's
selling expenses.
Comment 89
The petitioner argues that the documentation collected during
verification shows that certain expenses were not captured in the total
indirect selling expense amount.
The respondent maintains that the expenses in question are related
to fees paid to the Colombian Flower Council, which were reported to
the Department as direct selling expenses.
DOC Position
We agree with the respondent that the expenses to which the
petitioner refers are related to the fees paid to the Colombian Flower
Council. Two of these expenses to which the petitioner referred related
to sales to U.S. customers, the third was for a U.K. customer. At
verification, we established that the U.S. expenses were included in
the reported direct selling expenses. Therefore, the Department did not
include these expenses in the calculation of respondent's indirect
selling expenses.
Comment 90
The respondent states that during the POI, it used a U.S. operator
for all international calls, which were paid for in dollars. According
to the respondent, the cost of those international calls was properly
allocated to all international sales, since the calls were made to
customers throughout the world.
The petitioner argues that respondent's claim that the telephone
expenses incurred in U.S. dollars were related to telephone calls to
all countries cannot be supported. The petitioner requests that the
Department treat the entire amount of U.S. dollar denominated telephone
charges as selling expenses related to U.S. sales only.
DOC Position
During verification we found no evidence that the cost of
respondent's international phone calls was related to telephone calls
made to the United States alone. Therefore, the Department used the
portion of telephone expenses the respondent allocated to U.S. sales in
the calculation of indirect selling expenses.
Comment 91
Petitioner stated that drastic pruning and resting should not be
characterized as preproduction costs. Petitioner maintains that pruning
is typically performed annually by all rose producers. Petitioner notes
that these costs are analogous to general maintenance costs on a piece
of equipment. Accordingly, the costs related to the drastic pruning and
resting should be expended as incurred, unless respondent's methodology
can be tied to the normal accounting practices of the company.
Respondent maintains that the cost of drastic pruning and resting
are incurred every thirty months, at the end of each production cycle.
Respondent further notes that these costs are normally capitalized on
the books and records of the company. Respondent believes that these
costs are properly characterized as preproduction costs since they
occur prior to the start of rose production. Respondent notes that the
reported capitalized pruning and resting costs were verified by the
Department.
DOC Position
The drastic pruning/resting crop adjustment methodology is used by
respondent in its normal course of business, and is in accordance with
GAAP of Colombia. At verification, the reported costs were reconciled
to the company's financial records. We further noted at verification
that respondent manages its plants to produce roses in thirty month
production cycles. At the end of each production cycle, respondent cuts
down the rose plants and starts the process over again. Therefore, we
believe that it is appropriate for the respondent to capitalize the
costs incurred in preparing for the next production cycle and to
amortize such costs over the thirty month cycle. The Department
considers the drastic pruning/resting methodology to be reasonable and
[[Page 7014]] therefore, no adjustment is deemed necessary.
Comment 92
Respondent notes that the Department is correct in suggesting that
the write-off of bad debt is a selling expense. However, the write-off
of the bad debt is a selling expense related to sales in 1990 and 1991,
not to sales during the POI. Therefore, the amount of the write-off
should be excluded from finance expense and should not be included in
the calculation of POI per unit costs.
Petitioner argues that the bad debt write-off during the POI should
be included as a selling expense for the POI. The petitioner notes
that, in the future respondent will experience bad debt expense related
to sales occurring in the POI, which would not be included in POI
costs. Thus, the current write-off of past sales is the best evidence
of the proper amount to be deducted currently.
DOC Position
The Department agrees with petitioner. We consider bad debt, by its
very nature, to be an indirect selling expense since, under generally
accepted accounting principles, bad debt is recovered over time by
future price increases (see, Brass Sheet and Strip from France, 52 FR
6, 812 (DOC 1987)). Bad debts should be recognized when the expense is
recognized.
Comment 93
Respondent maintains that the unreported general expense items do
not relate to rose production during the POI. Respondent asserts that
they are corrections to sales and production expenses from previous
years. Therefore, these costs are not properly attributable to the POI.
Respondent contends that if the Department decides to include these
costs, then it also should offset them by the related income amounts.
Petitioner argues that there is no basis to offset G&A expense
items and year-end accounting adjustments with income unrelated to rose
production. According to petitioner there is no evidence to support
respondents' claim for this offset.
DOC Position
The unreported general income and expense items relate to the
general activities of respondent as a whole. Certain income and expense
items identified during the current year relate to prior periods.
Similarly income and expense items relating to the current year are not
being identified until a future point in time, thus generating an
offsetting effect. Therefore, we consider it reasonable to include the
financial statement general income and expense items in the G&A
calculation.
Grupo Prisma
Comment 94
The respondent claims that each of the deficiencies identified by
the Department as a reason for BIA in the preliminary determination are
now moot because the problems have been resolved in its September 23,
1994, submission and at verification. Respondent states that the
Department thoroughly verified the completeness of its U.S. and home
market sales reporting, the accuracy of the adjustments and the
methodology used to consolidate sales of different companies of the
group. Respondent claims the Department identified only minor data
entry errors in its sales report. Accordingly, respondent alleges there
no longer exists any sustainable basis for finding that its response
contains significant deficiencies or for applying a BIA rate.
Respondent states that the ``significant findings'' noted in the
sales verification report all involve minor data entry errors that were
corrected and verified. Respondent states that none of the errors
detracts from the overall integrity of the questionnaire response.
Specifically, respondent indicates that, whether or not Argicola el
Faro (one of the respondent's growers) was omitted from the corporate
flow chart is inconsequential as Agricola el Faro's products never
separately enter the United States. Regarding quantity changes noted in
the verification report, respondent notes that these were isolated and
the result of input errors. Finally, respondent states that the
reporting error to one customer has no impact on its overall numbers
and that the error worked against it and respondent states that the
Department should use the corrected sales listing it prepared for this
customer. The respondent states that the petitioner's entire argument
for basing the respondent's final determination on BIA is based on a
misrepresentation of a sentence in a draft version of the verification
report that the Department has admitted was mistakenly issued to the
petitioner.
Finally, respondent alleges that the petitioner took a statement
out of context from the verification report to suggest that the
respondent's indirect selling expenses are not accurate. Respondent
notes that, as its unrelated importer had prepared the noted worksheet
based on its own documents and records, the information could not be
verified by using its documents. Moreover, respondent states that even
disregarding the importer's worksheets and using its own sales values
did not change the indirect selling expense that it reported. Thus,
respondent claims there is no basis for the petitioner's charge that
its response is unreliable.
The petitioner states that, based upon the results of verification,
respondent's U.S. sales listing is unreliable and should be rejected in
favor of BIA. The petitioner states that the Department found numerous
discrepancies during verification including discrepancies in
respondent's June sales affecting volume and value and, sometimes,
both. The petitioner also notes that, with respect to U.S. indirect
selling expenses, the verification report states that, ``importer's
worksheets were not maintained as we were unable to verify much of the
data.'' Therefore, the petitioner claims that the U.S. sales listing is
not credible. The petitioner suggests that the June sales for which the
Department checked 100 percent of the transactions might be relied upon
as the basis for calculating margins for that month. Without similarly
exhaustive revisions to the sales listing for other months, however,
the petitioner claims the errors are too numerous to disregard. The
petitioner, thus, suggests that BIA be used for purposes of the final
determination.
DOC Position
Although we used BIA for respondent for purposes of the preliminary
determination, we conducted a complete and thorough verification of its
responses. The discrepancies noted at verification were of the type
normally discovered at verification. We find no reason to reject the
respondent's response in to to and have used it for purposes of the
final determination.
Comment 95
The petitioner alleges that respondent has not included any
salaries in its indirect selling expenses and references an account for
the respondent that includes G&A expenses for the company.
Respondent states that, as its unrelated importers in Miami
function as its sales force, it does not have a sales force in Miami.
Respondent notes that the account the petitioner mentions includes all
expenses for general services, including all administrative and general
management salaries. Thus, respondent notes that the expenses were
properly reported as G&A expenses in the CV tables. Respondent claims
it included all relevant salaries in its [[Page 7015]] calculation of
indirect selling expenses for the people in Bogota that take care of
preparing export documentation and coordinating shipments. Respondent
claims that it has no other salaries related to sales to the United
States.
DOC Position
We agree with the respondent. The petitioner's allegation is
unfounded and we have not adjusted respondent's indirect selling
expenses to include salaries.
Grupo Sabana
Comment 96
The petitioner alleges that respondent did not consistently record
oil and gas charges associated with rose transportation and that for
certain months these charges were reported under other accounts. The
petitioner requests that we use, as BIA, the highest cost per unit in a
given POI month.
The respondent maintains that it reported all of its freight costs
and that the Department verified these costs during both the cost and
sales verifications. The respondent also contends that if there are any
additional expenses, they are captured in the reported CV. The
respondent maintains that there is no justification to resort to BIA
since its reported inland freight expenses tie directly into its
accounting records. Finally, the respondent notes that if the
Department deemed it necessary to include freight expenses in the
freight calculation, the amounts involved are insignificant, and the
adjustment has no impact.
DOC Position
We agree with the respondent. We established that the reported oil
and gas expense plus an amount included on the worksheet sum to the
expense reported in the respondent's financial statement. We further
note that during the cost verification not every month had an oil and
gas expense, but these omissions were due to accounting practices that
are generally accepted accounting principles in Colombia. Therefore, we
have accepted the respondent's freight expense allocation methodology.
Comment 97
The petitioner argues that respondent should not be using the prime
rate when other U.S. importers that had POI short-term borrowings did
not obtain such a rate. The petitioner maintains that we should
increase the respondent's interest rate to be consistent with the
commercial rate actually charged to other importers during the POI.
The respondent notes that there is no record evidence that it used
an inappropriate U.S. interest rate. Therefore, the respondent
maintains that the Department should accept its U.S. credit expense
calculation.
DOC Position
We agree in part with the petitioner. In situations where there are
no borrowings in the currency of the sales made, we have used external
information about the cost of borrowings in a particular currency (see
Notice of Preliminary Determination of Sales at Less Than Fair Value:
Certain Carbon Steel Butt-weld Pipe Fittings from Thailand, 59 FR
50568, October 4, 1994). We are using an average of the interest rates
reported by those respondents that had actual U.S. borrowings during
the POI. We consider this to be the best estimate of the U.S. dollar
borrowing rates for those respondents that had no short-term
borrowings, as it is based on the actual expenses of other respondents.
Comment 98
The petitioner argues that the Department should increase the
number of days used in the respondent's expense calculation because the
respondent's methodology only accounts for merchandise which has
already reached U.S. inventory and does not take into account the time
during which merchandise is transported from the factory to Miami.
The respondent maintains that in the inventory day calculation the
Department should not increase the number of days by the amount the
petitioner is proposing because that amount represents the time it
takes to transport the product to Toronto and Montreal and not to
Miami.
DOC Position
We agree in part with the petitioner. Our verification report at
exhibit 24 demonstrates that the respondent did not take into account
the time necessary to transport the merchandise from the factory to
Miami. Therefore, we added to the number of inventory days an amount
which other respondents claimed was necessary to transport product from
the factory to Miami.
Comment 99
Respondent argues that the Department should allocate certain
production costs based on the number of beds under cultivation and not
based on the hectares under cultivation, because all of its
recordkeeping is based on beds.
Petitioner contends that allocation by beds is less precise because
it does not account for walkways, common areas, and there is no
evidence that subject and nonsubject beds are the same size.
DOC Position
The Department agrees with the respondent. During verification, the
Department reviewed the beds under cultivation allocation methodology
and found it to be a reasonable approach. The methodology is used in
respondent's normal course of business, and has been accepted in the
Fresh Cut Flower reviews.
Comment 100
The petitioner argues that cull revenue should not be offset
against production costs. Petitioner argues that a certain expense is
diminished to the extent of the cull revenue.
Respondent claims that cull revenue must be included in the
calculation of CV. Respondent argues that there is no justification for
disallowing the credit to production costs because of where the
revenues are deposited.
DOC Position
We agree in part with the petitioner. The Department allowed only
the rose cull revenue recorded in respondent's normal accounting
records to offset production costs. All claimed cull revenue which had
not been appropriately deposited into respondent's bank account has
been excluded. The cull revenue that is not deposited into respondent's
bank account is neither recorded nor reported in any of respondent's
accounting records.
Grupo Sagaro
Comment 101
The petitioner argues that the discovery of unreported stems that
were sold to one customer in June 1993 undermines the reliability of
respondent's submission. The petitioner also contends that the
verification of February 1993 sales did not include this customer. For
these reasons, the petitioner argues that the Department should not
rely on respondent's data in these circumstances. If the Department
used respondent's data the petitioner argues that it should increase
the quantities sold to all customers in June proportionately or, at the
least, increase the quantity sold to this customer.
The respondent argues that there are no grounds for the
petitioner's assertion that a minor discrepancy in its sales reporting
to one customer undermines its response. The respondent maintains that
this discrepancy accounts for an [[Page 7016]] insignificant amount of
total U.S. sales. The respondent explains that the error resulted when
the customer in question changed the format for reporting inventories
on its growers report. June was the first month of this change and is
the month in which the error occurred. The respondent maintains that
the error was limited to this one customer in a single month. Finally,
the respondent states that the Department verified that it had no sales
to this customer in February.
DOC Position
We disagree with the petitioner's assertion that respondent's
response is unreliable. At verification, we reviewed the volume and
value of respondent's U.S. sales and found only minor discrepancies,
none of which would render its response unreliable. Therefore, based on
the growers report for this customer, we have revised respondent's
sales listing to reflect the quantity and value of sales to this
customer during June.
Comment 102
The petitioner maintains that credit costs should be revised to
reflect only the short-term interest rate as provided in the sales
verification report.
Respondent maintains that it does not object to the use of the
interest rate the Department calculated at verification for home market
credit expenses.
DOC Position
We agree with both parties and have applied the verified home
market short-term interest rate in the calculation of home market
credit expenses.
Comment 103
The respondent argues that we should use its reported credit period
in its home market credit expense calculation.
DOC Position
We disagree with the respondent. At verification, we found credit
periods longer and shorter then the period reported by respondent.
Therefore, we used the average of the credit periods found at
verification, because that average most closely reflects the actual
home market credit periods.
Comment 104
The petitioner argues that unreported direct selling expenses
incurred on sales to one customer should be allocated to only subject
merchandise and not over all other sales. The petitioner states that
the Department should increase this customer's direct selling expenses
accordingly and provided a calculation of this expense.
DOC Position
We agree with petitioner's argument but not its suggested
calculation formula. We have increased this customer's direct selling
expense by the unreported amount and allocated the total of these
expenses to the rose sales of this customer.
Comment 105
The petitioner argues that foreign inland freight charges on U.S.
sales should be increased to reflect charges allocated per stem sold,
as per the verification report. Additionally, the petitioner requests
that wire transfer fees be corrected as per the verification report.
DOC Position
Respondent made these corrections on its December 7, 1994, sales
listing. We accepted these changes and used them for the final
determination.
Comment 106
Respondent argues that the Department should permit it to
capitalize and amortize certain costs, which would only benefit
production in future years, but were expensed for financial statement
purposes.
Petitioner argues that items expensed in respondent's accounting
records in the normal course of business should not be capitalized and
amortized for purposes of the response. Petitioner argues that there is
no basis on the record, and no verification exhibit, to support the
claim that such items should be capitalized or to indicate a particular
useful life for each of the identified costs.
DOC Position
We agree with respondent that these costs benefit future years.
Accordingly, it is reasonable for these assets to be capitalized in the
year of acquisition. See also Comment 19.
Comment 107
Respondent argues that the cost of its worm project should not be
included in CV. Respondent argues that, although it is theoretically
possible for the fertilizer generated from the worm project to be used
on rose plants, the project was not started with that intention and it
has not analyzed whether the fertilizer would be appropriate for use in
rose beds. Additionally, respondent notes that the fertilizer from the
worm project was not used for the production of roses during the period
of investigation.
Petitioner claims that costs incurred with respect to the worm
culture project for soil preparation should be allocated to rose
production. Petitioner argues that this type of research and
development (``R&D'') expense should be expensed in the current period.
Petitioner states that, since the respondent characterizes the project
as related to rose production, there is no basis to exclude such
expenses from the current period.
DOC Position
We agree with petitioner that the worm culture project costs should
be categorized as R&D. There is no conclusive evidence that this
project is R&D specific to either rose production or any other type of
production activity. Therefore, we consider the worm culture project to
be related to general R&D and, accordingly, have included its costs in
the G&A expense calculation.
Comment 108
Petitioner argues that the Department should reject the allocation
of costs to non-subject merchandise as it was not substantiated on the
record or during verification. Specifically, petitioner argues that
verification exhibits 1, 9, and 15 show conflicting results for
cultivation area of the different flowers grown by respondent. Absent
evidence to support the basic allocation of costs, the entire cost
response should be rejected.
Respondent argues that its allocation of costs by area under
cultivation is fully supported in the record. Respondent believes that
petitioner's complaint that the percentage areas in respondent's cost
exhibits CV-9 and CV-15 do not agree is without merit. Respondent notes
that those exhibits support the allocations of different classes of
expenses, relate to different corporate entities, and the percentage
areas should not agree. Additionally, respondent notes that cost
exhibit CV-1 does not agree with either of the other two exhibits
because of a printing error which was addressed at verification.
DOC Position
We agree with respondent that its allocation of costs between
subject and non-subject merchandise based on area under cultivation is
fully supported by data on the record. Therefore, no adjustment is
deemed necessary for purposes of the final determination.
Grupo Tropicales
Comment 109
The petitioner notes that, because the Department found
discrepancies in respondent's return credits for five preselected U.S.
sales, respondent's return credit reporting is unreliable. The
petitioner asserts that return credits were overstated, either by
volume or [[Page 7017]] value, thus increasing U.S. price. The
petitioner suggests that we reject respondent's return credits claim
entirely or make a downward adjustment to all U.S. return credits equal
to the excess amount reported for certain observations.
The respondent claims that the record does not support taking the
action requested by the petitioner with respect to its return credits.
Respondent describes its return credit reporting methodology in its
brief and notes that its methodology would increase its dumping margin.
The respondent states that the Department should not disregard or
adjust return credit volumes and then not adjust return credit values
or vice versa. Moreover, the respondent claims that there is no reason
to make any changes to its return credits based on the minor
discrepancies noted in the verification report.
DOC Position
We agree with the petitioner that respondent's return credits did
not verify as reported. We have made a downward adjustment to the sales
on which return credits were reported. This adjustment equals the
overall average error as a percentage of gross unit price for the
months which we have information.
Comment 110
The petitioner claims that respondent's credit days should not be
adjusted to account for outstanding return credit claims. The
petitioner states that verification is not the appropriate time for
submitting a new and substantially revised claim.
Respondent states that it revised its calculation of days
outstanding in its imputed credit calculation to account for return
credits and revised certain payment and balance figures. The respondent
states that ignoring return credits leads to an ever increasing balance
for receivables, a growing portion of which simply are not receivables.
The respondent claims that the Department should use the days
outstanding as revised and verified.
DOC Position
We agree with the respondent. At verification, respondent presented
revised U.S. credit days outstanding to account for outstanding return
credit claims. This constituted a minor change to the data they
reported. Consistent with our treatment of minor changes noted at
verification, we have used respondent's revised U.S. credit days.
Comment 111
The petitioner notes that respondent did not claim to have paid
commissions on its ESP sales to its related U.S. importer. However, the
related importer's grower's reports indicate that commissions were
paid. Thus, the petitioner states that these commissions should be
deducted from ESP.
The respondent states that no commission was reported because the
two companies were related during the period in which the sales took
place and, thus, the commissions should not be deducted on the ESP
sales.
DOC Position
Although respondent indeed pays its related U.S. importer an arm's
length commission, we have ignored this commission for the reasons
stated in General Issue Comment 7.
Comment 112
Respondent claims that we should accept the minor revisions,
corrections and clarifications presented prior to verification and
discovered during verification. Specifically, respondent states that
the Department should accept a correction to the calculation of foreign
inland freight that was verified. Also, respondent states that none of
the discrepancies noted at verification had a significant impact on the
margin calculations.
DOC Position
We agree with the respondent that the discrepancies noted at
verification were minor in nature and we have, thus, used respondent's
verified data.
Rosex Group
Comment 113
The petitioner maintains that, according to the sales verification
report, the respondent did not deduct return credits for one customer
in the month of February in its sales listing. Therefore, the
petitioner argues that, as BIA, the Department should make a deduction
from all of the respondent's U.S. prices equal to the percentage of the
unreported return credits to revenue for February.
The respondent argues that the error which affected one return
credit for one customer for one month of the POI was insignificant. The
respondent contends that small errors are inevitable when such a large
amount of information is required. The respondent contends that the
petitioner's claim that the entire sales listing is unreliable or its
suggestion that, if the sales listing is accepted, every U.S. sales
price should be reduced by the percentage of the error, is
unsupportable.
DOC Position
We disagree with the petitioner that, due to an error in month of
the POI for one customer, we should reject the respondent's entire
response and base its final margin on BIA. At verification we found
that this discrepancy was limited to one customer and no discrepancies
were found for other customers. However, because the respondent did not
report any quality credits for this customer, we have based the return
credits for this customer on BIA. We reduced the respondent's U.S.
gross unit price in each month of the POI by the percentage of returned
credits to sales during the month examined at verification.
Comment 114
The petitioner contends that respondent failed to allocate foreign
inland freight costs to stems sold because it included ``stems dumped''
in its formula for allocating freight costs. Therefore, the petitioner
maintains that the freight costs per box decreased when the respondent
sold fewer boxes than it shipped in a given month. The petitioner
argues that, as the Department found in its verification report, the
respondent should have increased its cost per box shipped in order to
allocate its total foreign inland freight to roses sold. The petitioner
further argues that the Department should, as BIA, apply foreign inland
freight charges equal to the highest calculated charge according to the
respondent's methodology, or to the amount calculated on shipments in
which the total number of stems shipped equalled the number of stems
sold.
The respondent argues that it reported all of its foreign inland
freight expenses during the POI. Therefore, the respondent contends, it
did not underreport or overreport its foreign inland freight in any
way. The respondent maintains that its allocation methodology is more
accurate than directly allocating monthly costs to monthly sales. The
respondent contends that its methodology correlates freight expenses
with sales that were not made in the same month that the expenses were
incurred. The respondent states that this methodology prevents the
distortional effects of unadjusted monthly per unit foreign inland
freight costs. The respondent maintains that the Department should not
penalize it for reporting its foreign inland freight in the most
accurate manner possible and should accept its methodology. The
respondent argues, alternatively, that [[Page 7018]] the Department can
use the verified figures and calculate a simple monthly foreign inland
freight expense.
DOC Position
We agree with the petitioner that the respondent's methodology did
not account for roses which were shipped but not sold for certain
customers. At verification, we found that when customers did not sell
the same amount of roses which were shipped in a given month, the
allocation of foreign inland freight expenses were either overstated or
understated. However, we agree that the respondent attempted to provide
the most specific inland freight expenses possible and that the total
yearly amount of inland freight was verified. Since the Department
decided to average USP by all roses combined, we have recalculated the
respondent's foreign inland freight expenses for all customers with
this expense using a yearly allocation without regard to stem length or
rose type.
Comment 115
The petitioner states that, according to the sales verification
report, the methodology the respondent used to report air freight for
one of its customers is flawed. Therefore, the petitioner argues that,
as BIA, the Department should deduct the highest per stem air freight
charge calculated for any sale to that customer.
The respondent contends that the Department should correct the
minor discrepancy in its air freight calculation and use the verified
figures. The respondent argues that a discrepancy of this limited
magnitude should not result in BIA as the petitioner argues.
DOC Position
We agree with the respondent that air freight expenses for those
months that we verified (i.e., May and October) should be applied
because this discrepancy was limited to one customer. Because we found
that the respondent overstated and understated this expense in the
months reviewed at verification we have added the aggregated amount of
the understated air freight expenses for this customer for the verified
months and applied that amount to all other months during the POI for
this customer.
Comment 116
The petitioner maintains that the respondent offset interest
expenses with ``other'' financial income. Since the Department found
that the respondent had no short-term interest income, the petitioner
argues the ``other'' financial income should be disregarded and that
the interest expense cannot be offset for purposes of the final
determination.
The respondent argues that the absence of short-term interest
income has no relevance as to whether the respondent had other
financial income relating to production that should be included in CV.
The respondent maintains that the Department verified its financial
income and noted no discrepancies. Additionally, respondent states that
other financial income, not short-term interest income, was used as an
offset to interest expense and the fact that it was not short-term
interest income is not relevant.
DOC Position
We agree with the petitioner. We disregarded other financial income
as an offset to interest expense because it is Department practice to
only allow an offset to interest expense for interest income generated
from short-term investments of working capital. Since the other
financial income was not generated from short-term investments of
working capital, the offset was disallowed.
Comment 117
The respondent argues that the Department should use credit periods
based on actual payment data which was verified by the Department with
only minor discrepancies.
DOC Position
We agree with the respondent and have used the verified
information.
Comment 118
The respondent argues that the Department should use its verified
indirect selling expense information for purposes of the final
determination.
DOC Position
We agree with the respondent and have used the verified
information.
Suspension of Liquidation
In accordance with section 735(c)(4)(A) of the Act, we are
directing the U.S. Customs Service to continue to suspend liquidation
of all entries of fresh cut roses from Colombia, as defined in the
``Scope of Investigation'' section of this notice, that are entered, or
withdrawn from warehouse, for consumption on or after the date of
publication of this notice in the Federal Register. The U.S. Customs
Service shall require a cash deposit or the posting of a bond equal to
the estimated margins amount by which the FMV of the subject
merchandise exceeds the USP, as shown below. The weighted-average
dumping margins are as follows:
------------------------------------------------------------------------
Margin
Manufacturer/Producer/Exporter percent
------------------------------------------------------------------------
Agrorosas..................................................... 0.00
Grupo Papagayo (and its related farms Agricola Papagayo,
Inversiones Calypso S.A., Omni Flora Farms Inc., and Perci
S.A.)........................................................ 3.02
Flores Mocari S.A. (and its related farms Cultivos Miramonte
and Devor Colombia).......................................... 3.26
Grupo Sabana (and its related farms Flore de la Sabana S.A.
and Roselandia S.A.)......................................... 5.80
Flores la Frangancia.......................................... 3.31
Grupo Benilda (and its related farms Agricola La Maria S.A.,
Agricola La Celestina Ltda., and Agricola Benilda Ltda.)..... 5.07
Grupo Clavecol (and its related farms Claveles Colombianos
Ltda., Sun Flowers Ltda., Fantasia Flowers Ltda., Splendid
Flowers Ltda.)............................................... 1.56
Floramerica Group (and its related farms Floramerica S.A.
(Santa Lucia and Santa Barbara Farms), Jardines de Colombia
Ltda., Flores Las Palmas Ltda., Cultivos del Caribe Ltda.,
Jardines del Valle Ltda., and Cultivos San Nocolas Ltda.).... 4.95
Rosex (and its related farms Rosex Ltda. (La Esquina and
Paraiso Farms), Induflora Ltda., and Rosas Sausalito Ltda.).. 3.06
Grupo Sagaro (and its related farms Flores Sagaro S.A. and Las
Flores S.A.)................................................. 0.00
Grupo Tropicales (and its related farms Rosas Colombianas
Ltda., Happy Candy Ltda., Mercedes Ltda., and Flores
Tropicales Ltda.)............................................ 0.00
Grupo Prisma (and its related farms Flores del Campo Ltda.,
Flores Prisma S.A., Flores Acuarela S.A., Flores el Pincel
S.A., Rosas del Colombia Ltda., Agropecuaria Cuernavaca
Ltda.)....................................................... 1.29
Grupo Bojaca (and its related farms Agricola Bojaca Ltda.,
Universal Flowers, and Plantas y Flores Tropicales Ltda.
(Tropifora))................................................. 22.14
Andes Group (and its related farms Flores Horizonte, Cultivos
Buenavista, Flores de los Andes, and Inversiones
Penasblancas)................................................ 0.00
Caicedo Group (and its related farms Agrobosque, Productos el
Rosal S.A., Productos el Zorro S.A., Exportaciones Bochia
S.A.--Flora Ltda., Flores del Cauca, Aranjuez S.A., Andalucia
S.A., Inverfloral S.A., and Great America Bouquet)........... 36.04
Grupo Intercontinental (and its related farms Flora
Intercontinental and Flores Aguablanca)...................... 11.94
All Others.................................................... 6.41
------------------------------------------------------------------------
ITC Notification
In accordance with section 735(d) of the Act, we have notified the
ITC of our [[Page 7019]] determination. As our final determination is
affirmative, the ITC will determine whether imports of the subject
merchandise are materially injuring, or threaten material injury to,
the U.S. industry, within 45 days. If the ITC determines that material
injury or threat of material injury does not exist, the proceedings
will be terminated and all securities posted as a result of the
suspension of liquidation will be refunded or cancelled. However, if
the ITC determines that such injury does exist, we will issue an
antidumping duty order directing Customs officers to assess an
antidumping duty on fresh cut roses from Colombia entered or withdrawn
from warehouse, for consumption on or after the date of the suspension
of liquidation.
Notification to Interested Parties
This notice serves as the only reminder to parties subject to
administrative protective order (APO) in these investigations of their
responsibility covering the return or destruction of proprietary
information disclosed under APO in accordance with 19 CFR 353.34(d).
Failure to comply is a violation of the APO.
This determination is published pursuant to section 735(d) of the
Act and 19 CFR 353.20(a)(4).
Dated: January 26, 1995.
Susan G. Esserman,
Assistant Secretary for Import Administration.
[FR Doc. 95-2608 Filed 2-3-95; 8:45 am]
BILLING CODE 3510-DS-P
