[Federal Register Volume 59, Number 181 (Tuesday, September 20, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-23196]
[[Page Unknown]]
[Federal Register: September 20, 1994]
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DEPARTMENT OF COMMERCE
(A-331-801)
Preliminary Determination of Sales at Less Than Fair Value: Fresh
Cut Roses From Ecuador
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
EFFECTIVE DATE: September 20, 1994.
FOR FURTHER INFORMATION CONTACT: Shawn Thompson, Office of Antidumping
Investigations, Import Administration, U.S. Department of Commerce,
14th Street and Constitution Avenue, N.W., Washington, D.C. 20230;
telephone (202) 482-1776.
PRELIMINARY DETERMINATION: We preliminarily determine that fresh cut
roses (roses) from Ecuador are being, or are likely to be, sold in the
United States at less than fair value, as provided in section 733 of
the Tariff Act of 1930 (the Act), as amended. The estimated margins are
shown in the ``Suspension of Liquidation'' section of this notice.
Case History
Since the notice of initiation on March 7, 1994 (59 FR 11771, March
14, 1994), the following events have occurred.
On March 31, 1994, the U.S. International Trade Commission (ITC)
issued an affirmative preliminary determination.
On April 13, 1994, three companies, the Caicedo Group, Hilsea
Investments Ltd. (Hilsea), and Quitoflores, requested that they be
excluded from any potential antidumping duty order issued as a result
of this investigation. Due to constraints on the Department's
administrative resources, we were unable to investigate companies
requesting to be excluded from the potential order or requesting to
receive a questionnaire on a voluntary basis (See the May 2, 1994,
memorandum from the team to Barbara R. Stafford).
On April 19, 1994, the Department decided to collect constructed
value (CV) information from all respondents in addition to home market
or, where appropriate, third country sales information (See the April
19, 1994, memorandum from the team to Barbara R. Stafford).
On May 5, 1994, the Department issued sales and cost questionnaires
to the following four Ecuadorian companies: Arbusta-Agritab (Arbusta),
Inversiones Floricola S.A. (Floricola), Florin S.A. (Florinsa), and
Guanguilqui Agro Industrial S.A. (Guaisa). These companies accounted
for approximately 40 percent of the exports of the subject merchandise
during the period of investigation (POI). Although the Department
``normally will examine not less than 60 percent of the dollar value or
volume of the merchandise sold'' during the POI, 19 CFR 353.42 (b)(1),
due to the limited administrative resources, the Department chose to
examine less than 60 percent (See the May 3, 1994, memorandum from
David L. Binder to Richard W. Moreland).
On June 7, 1994, the Department relieved all respondents from the
requirement of reporting sales of roses imported and/or sold as part of
bouquets (See the June 7, 1994, memorandum from the team to Barbara R.
Stafford).
On June 14, 1994, the Department selected the appropriate third
country markets for all four of the respondents (See the June 14, 1994,
memorandum from the team to Barbara R. Stafford). However, since
respondents argued that third country markets were fundamentally
different from the U.S. market, it was decided that the final basis for
foreign market value (FMV) for the respondents (either third country
sales or CV) would not be determined until more information was
received (See the ``Third Country Sales Versus Constructed Value''
section of this notice for further discussion).
On June 24, 1994, the Floral Trade Council, petitioner in this
investigation, requested a postponement of the preliminary
determination until September 12, 1994, pursuant to 19 CFR 353.15(c)
(1994). The Department granted this request on June 28, 1994 (59 FR
34409, July 5, 1994).
Also, on June 24, 1994, the Department instructed respondents to
report monthly-average price data for the U.S. and third country
markets (See the June 24, 1994, memorandum from the team to Barbara R.
Stafford).
On July 25, 1994, Floricola, one of the four respondents, submitted
an amendment to its questionnaire response. In that amendment,
Floricola stated that, based on further review, it did not have viable
third country markets.
Respondents submitted responses to the Department's sales and cost
questionnaires in May, June, and July 1994. Hilsea also submitted a
voluntary response to section A on May 26, 1994. Because the Department
determined that it did not have the administrative resources to accept
voluntary responses, Hilsea's response was returned on June 3, 1994.
The Department issued deficiency sales and cost questionnaires in
June, July, August, and September 1994. Respondents submitted their
responses to these deficiency sales and cost questionnaires in June and
August 1994. Responses to the September deficiency letters are due
later this month.
On September 12, 1994, the Department decided to base FMV for
Arbusta and Guaisa on third country sales (See the September 12, 1994,
memorandum from the team to Barbara R. Stafford). For a further
discussion, see the ``Third Country Versus Constructed Value'' section
of this notice.
Scope of Investigation
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. Roses are classifiable 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 Department initiated this investigation using our standard six-
month POI from September 1, 1993, to February 28, 1994. On April 5,
1994, petitioner submitted comments on the POI. On April 11, 1994,
respondents also submitted comments on the POI. On April 14, 1994, the
Department altered the POI to calendar year 1993 because of the
seasonal nature of sales and production in the rose industry (See the
April 14, 1994, memorandum from the team to Richard W. Moreland).
In addition, for purposes of price-to-price comparisons, we are
basing FMV on two six month periods: January 1, 1993, through June 30,
1993, and July 1, 1993, through December 31, 1993. For further
discussion of these periods, see the September 12, 1994, concurrence
memorandum.
Best Information Available
We have determined, in accordance with section 776(c) of the Act,
that the use of best information available (BIA) is appropriate for
sales of the subject merchandise by Florinsa.
In assigning BIA, the Department applies a two-tier methodology
based on the degree of respondent's cooperation. In the first tier, the
Department normally assigns higher margins (i.e., margins based on more
adverse assumptions) for those respondents which did not cooperate in
an investigation or which otherwise impede the proceeding. If a
respondent is deemed as non-cooperative, the Department bases the
preliminary margin for the relevant class or kind of merchandise on the
higher of: (1) the highest margin in the petition or (2) the highest
calculated margin of any respondent within the country that supplied
adequate responses for the relevant class or kind of merchandise.
In the second tier, the Department assigns lower margins to those
respondents who substantially cooperate in an investigation. These
margins are based on the higher of: (1) The highest calculated margin
for any respondent within that country that supplied adequate
information for the relevant class or kind of merchandise or (2) the
average margin of the margins in the petition (See, e.g., Final
Determination of Sales at Less than Fair Value: Antifriction Bearings
(Other than Tapered Roller Bearings) and Parts Thereof from the Federal
Republic of Germany, 54 FR 18992 (May 3, 1989)).
The Department's two-tiered methodology for assigning BIA has been
upheld by the U.S. Court of Appeals for the Federal Circuit (See
Allied-Signal Aerospace Co. v. United States, 996 F.2d 1185 (Fed. Cir.
1993); See also Krupp Stahl AG v. United States, 822 F. Supp. 789 (CIT
1993)).
We have determined that Florinsa's original and deficiency
questionnaire responses were unusable for the preliminary determination
because they contain significant deficiencies (See the September 12,
1994, memorandum from David L. Binder to Barbara R. Stafford). However,
because Florinsa responded to our requests for information, we find
that it has been substantially cooperative for purposes of this
preliminary determination. Accordingly, we used as second-tier BIA for
this respondent the average of the margins contained in the petition,
which is 84.72 percent. This margin is higher than the highest margin
calculated for any respondent in this investigation.
Furthermore, we have issued a supplemental deficiency letter to
Florinsa. If this respondent submits an adequate and timely response to
this letter, we will conduct verification for Florinsa and will
consider its information for purposes of the final determination.
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, where possible, we
made comparisons of identical merchandise. Where there were no sales of
identical merchandise in the home market or third country market to
compare to U.S. sales, we made similar merchandise comparisons on the
basis of: (1) form (e.g., as part of a bouquet, an individual stem,
etc.), (2) type (e.g., hybrid tea, sweetheart, etc.), (3) color, (4)
stem length, and (5) variety. We did not make any adjustments for
differences in the physical characteristics of the merchandise because
respondents reported no cost differences between the varieties.
Fair Value Comparisons
To determine whether sales of roses from Ecuador to the United
States were made at less than fair value, we compared the United States
price (USP) to the FMV for all non-BIA respondents, as specified in the
``United States Price'' and ``Foreign Market Value'' sections of this
notice.
United States Price
For sales by Arbusta and Guaisa, 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 Arbusta, Guaisa, and Floricola, where sales to the
first unrelated purchaser took place after importation into the United
States, we also based USP on ESP, in accordance with section 772(c) of
the Act.
During the POI, each of the respondents paid commissions to related
parties in the United States. We determined that these commissions were
directly related to the sales under consideration. We also tested these
commissions for these respondents to determine whether they were paid
at arm's length using the criteria set forth in the Final Determination
of Sales at Less Than Fair Value: Coated Groundwood Paper from Belgium
(56 FR 56359, November 4, 1991). Where we found that they were paid at
arm's length, we deducted them from USP. However, we found that
respondents used these commissions as a mechanism for reimbursing their
related parties for their actual expenses. Accordingly, in order to
avoid double-counting, where the actual expenses of the related party
were less than the commissions, we deducted only the commissions. Where
the commissions were less than the actual expenses, we also deducted
the amount by which the actual expenses exceeded the commissions (See
the September 12, 1994, concurrence memorandum).
In addition, each of the respondents classified credits related to
quality problems with the merchandise as warranty expenses. However,
because these quality-related credits functioned as price reductions,
we reclassified them as such.
Finally, none of the respondents reported inventory carrying costs
on their ESP sales. Accordingly, we calculated these costs using an
inventory carrying period of seven days, which, due to the perishable
nature of the product, is the maximum amount of time that can transpire
between the time a rose is cut and when it must be sold to the ultimate
customer, according to a public report by Harry K. Tayama, Ph.D.,
submitted in the companion investigation on fresh cut roses from
Colombia and placed, as well, on the public record for this
investigation.
For all U.S. prices, we used monthly USPs, because we determined
that monthly prices are representative of the transactions under
investigation (See the September 12, 1994, concurrence memorandum).
We made company-specific adjustments, as follows:
1. Arbusta
For Arbusta, we calculated purchase price based on packed F.O.B.
Quito prices to unrelated customers. In accordance with section
772(d)(2)(A) of the Act, we made deductions, where appropriate, for
foreign inland freight. We also made deductions for export taxes
imposed by the government of Ecuador, in accordance with section
772(d)(2)(B) of the Act.
We calculated ESP based on packed prices to unrelated customers in
the United States. We made deductions, where appropriate, for quality-
related credits, foreign inland freight, export taxes, air freight,
U.S. customs duties, U.S. brokerage and handling expenses, U.S. inland
freight, and credit expenses. Also, as described above, we deducted the
greater of related party commissions or indirect selling expenses.
Arbusta failed to report foreign inland freight expenses for a
small number of transactions in its ESP sales listing. As BIA for these
expenses, we assigned the highest freight amount for any other of
Arbusta's ESP transactions.
Regarding export taxes, Arbusta did not report these taxes in its
sales listing. Because the taxes are included in the USP, we,
therefore, calculated them based on the formula given in Arbusta's
response.
Arbusta calculated U.S. customs duties for its sales agents in
Miami on the basis of sales volume. Because these duties were incurred
on the basis of sales value, we recalculated them accordingly.
Arbusta calculated credit expenses using an interest rate based, in
part, on loans taken outside the POI. Therefore, we revised the
interest rate to reflect only POI-related borrowings and recalculated
credit expenses using this revised rate.
Regarding indirect selling expenses in Ecuador, we based these
expenses on BIA because Arbusta did not report them in its sales
listing. As BIA, we included the per unit expense reported in Arbusta's
calculation of CV. However, because Arbusta did not include the
indirect selling expenses of one of its four related farms, as an
additional BIA amount, we divided the expenses of the other three
related farms by three and added this to the total expense amount.
Regarding indirect selling expenses incurred by Arbusta's related
party in New York, we determined that Arbusta's calculations contained
a number of errors. Accordingly, we based these expenses on BIA. As
BIA, we used the single highest amount reported for any sales
transaction by this related party.
Regarding indirect selling expenses incurred by Arbusta's other
U.S. related parties, Arbusta reported monthly indirect selling
expenses instead of a yearly average. Accordingly, we recalculated the
expenses reported for one of these parties as a percentage of annual
sales value. However, the expenses reported for the other related party
appeared to pertain to another expense, unrelated to indirect selling
expenses. Therefore, we based the calculation of this expense on BIA
for sales through this company. As BIA, we applied the annual
percentage noted above.
2. Floricola
For Floricola, we calculated ESP based on packed prices to
unrelated customers in the United States. We made deductions, where
appropriate, for quality-related credits, including billing and other
credits, foreign inland freight, export taxes imposed by the government
of Ecuador, air freight, U.S. customs duties, U.S. Department of
Agriculture inspection fees, U.S. inland freight, and credit expenses.
We also made deductions for U.S., Panamanian, and Ecuadorian indirect
selling expenses, including inventory carrying costs and brokerage and
handling expenses, because these services were performed in-house.
Floricola did not report export taxes. Because it is clear from
other questionnaire responses that all exporters pay this tax and that
the tax is included in the USP, as BIA, we calculated it using the
formula provided in Arbusta's response.
3. Guaisa
For Guaisa, we calculated purchase price based on packed F.O.B.
Quito prices to unrelated customers. We made deductions, where
appropriate, for quality-related credits and foreign inland freight. We
also made deductions for export taxes imposed by the government of
Ecuador. We corrected respondent's inaccurate foreign inland freight
calculation by reallocating truck maintenance expenses over the entire
POI.
We calculated ESP based on packed prices to unrelated customers in
the United States. We made deductions, where appropriate, for quality-
related credits, foreign inland freight, air freight, U.S. customs
duties, U.S. brokerage and handling expenses, and credit expenses.
Also, as described above, we deducted the greater of related party
commissions or indirect selling expenses.
Guaisa reported that it earned a rebate, as well as six free round-
trip tickets, from its air freight carrier based on its volume of sales
to the United States during the POI. We deducted the rebate from
Guaisa's air freight calculations. However, because it is not clear
that the airline tickets affect air freight costs, we did not adjust
air freight for the value of these tickets.
Finally, Guaisa did not include the administrative expenses of its
U.S. sales subsidiary in its calculation of U.S. indirect selling
expenses. Moreover, Guaisa included employee commissions in its
indirect selling expenses. Because the U.S. subsidiary is solely a
sales organization, we reclassified its administrative expenses as
indirect selling expenses, and included these expenses in our
calculations. In addition, we reclassified employee commissions as
commission expenses and made a separate adjustment for them.
Foreign Market Value
In calculating FMV, wherever there were no sales of comparable
merchandise in the home market or third country markets, we based FMV
on CV. In addition, in accordance with 19 CFR 353.58, for price-to-
price comparisons, we compared U.S. sales to third country sales made
at the same level of trade, where possible.
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)(B) of the Act. Based on this
comparison, we determined that none of the three non-BIA respondents
had a viable home market.
For sales made by Arbusta and Guaisa, we based FMV on third country
sales or CV, when there were no third country sales of comparable
merchandise. In accordance with 19 CFR 353.49(c), we selected for these
respondents more than one third country because a single third country
did not meet the Department's viability standards.
In accordance with 19 CFR 353.49(b), we selected the appropriate
third country markets for Arbusta and Guaisa based on the following
criteria: similarity of merchandise sold in the third country to the
merchandise exported to the United States, the volume of sales to the
third country, and the similarity of market organization between the
third country and U.S. markets. For a complete discussion of the
selection of third country markets, see the June 14, 1994, memorandum
from the team to Barbara R. Stafford.
For all transactions made by Floricola, we based FMV on CV in
accordance with sections 773(a)(2) and (e) of the Act, because it did
not have sufficient sales of such or similar merchandise in the home
market or in any third country markets during the POI. Additionally, we
based FMV on CV for a portion of Arbusta's and Guaisa's transactions,
because these sales had no matches of such or similar merchandise in
the third country markets in the same period as the sales made in the
United States. For a further discussion, see the ``Third Country Sales
Versus Constructed Value'' section of this notice.
For all CV transactions, 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 Arbusta's and Guaisa's profit, we used the
greater of the weighted-average third country profit during the POI or
the statutory minimum of eight percent of the cost of cultivation and
general expenses, in accordance with section 773(e)(B) of the Act. For
Floricola, we based profit on the statutory minimum of eight percent of
the cost of cultivation and total general expenses, in accordance with
section 773(e)(B) of the Act. We based the amortization expense upon
amounts normally recorded by each company in their usual recordkeeping.
We rejected adjustments that respondents made to the amortization
expense solely for purposes of this investigation. We also made
specific adjustments to respondents' CV data as described below:
1. Guaisa
For Guaisa, we 1) reallocated general and administrative expenses
among products based upon the area under cultivation; 2) removed the
effect of a special adjustment made to eliminate the costs associated
with a severe windstorm; and 3) reallocated financial expenses among
products based upon the area under cultivation.
2. Floricola
For Floricola, we removed the reported net interest income credit
from the CV calculation because we only allow interest income to offset
the interest expense.
In order to calculate FMV, we made company-specific adjustments as
follows:
1. Arbusta
For Arbusta, we based FMV on packed prices to unrelated customers
in Argentina and Germany.
For third country price-to-purchase price comparisons, we deducted
post-sale home market movement charges from FMV under the circumstance-
of-sale provision of 19 CFR 353.56. This adjustment included home
market inland freight. Pursuant to 19 CFR 353.56(a)(2), we made
circumstance-of-sale adjustments, where appropriate, for differences in
credit expenses.
For third country price-to-ESP comparisons, we made deductions for
foreign inland freight and credit expenses. We also made a deduction
for inventory carrying costs based on an inventory carrying period of
seven days, as was done for the calculation of USP. We disallowed
Arbusta's claimed indirect selling expense adjustment because Arbusta
failed to provide an adequate narrative description or a worksheet
showing its calculations.
We recalculated credit expenses using Arbusta's POI short-term
interest rate as discussed in the ``United States Price'' section of
this notice.
For all price-to-price comparisons, we deducted third country
packing costs and added U.S. packing costs, in accordance with section
773(a)(1) of the Act. We recalculated packing expenses in both markets
to exclude depreciation on one of Arbusta's packing facilities. In
addition, we recalculated these expenses on an annual basis because
Arbusta's monthly calculations contained adjusting entries which were
not properly matched with the month in which the expense was incurred.
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 weighted-average
third country market indirect selling expenses, including inventory
carrying costs, up to the amount of the greater of related party
commissions or indirect selling expenses incurred on U.S. sales, in
accordance with 19 CFR 353.56(b)(2). We added U.S. packing expenses, in
accordance with section 773(a)(1) of the Act.
2. Guaisa
For Guaisa, we based FMV on packed prices to unrelated customers in
Germany and Sweden.
For third country price-to-purchase price comparisons, we deducted
quality-related credits. We also deducted post-sale home market
movement charges from FMV under the circumstance-of-sale provision of
19 CFR 353.56. This adjustment included foreign inland freight.
Pursuant to 19 CFR 353.56(a)(2), we made circumstance-of-sale
adjustments, where appropriate, for differences in credit expenses and
commissions paid to an unrelated party. We deducted third country
packing costs and added U.S. packing costs, in accordance with section
773(a)(1) of the Act.
For third country price-to-ESP comparisons, we made deductions for
foreign inland freight, credit expenses and commissions paid to an
unrelated party. We also deducted the weighted-average third country
indirect selling expenses, up to the amount of the greater of related
party commissions or indirect selling expenses, including invoice
carrying costs, incurred on U.S. sales, in accordance with 19 CFR
353.56(b)(1) (See the September 12, 1994, concurrence memorandum).
Inventory carrying costs were based on an inventory carrying period of
seven days, as was done for the calculation of USP.
Regarding credit expenses, Guaisa incorrectly calculated the credit
period for certain third country transactions. In addition, Guaisa
calculated its short-term interest rate based on borrowings from
related parties. Accordingly, as BIA, we used the shortest credit
period reported for any third country sale. We then recalculated
Guaisa's third country and U.S. purchase price credit expenses using
its interest rate paid to unrelated parties.
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 weighted-average
third country market indirect selling expenses, including inventory
carrying costs, up to the amount of the greater of related party
commissions or indirect selling expenses, including indirect carrying
costs, incurred on U.S. sales, in accordance with 19 CFR 353.56(b)(2).
We added U.S. packing costs, in accordance with section 773(a)(1) of
the Act.
3. Floricola
For Floricola, we based FMV on CV. The CV includes the cost of
materials and cultivation of the merchandise exported to the United
States, plus SG&A expenses, profit, and packing. We used U.S. selling
expenses in our CV calculation instead of using Floricola's home market
selling expenses. For the final determination, however, we will revisit
the issue of the appropriate selling expenses for use in Floricola's CV
calculation.
We deducted credit expenses. We also deducted U.S. indirect selling
expenses, including inventory carrying costs, in accordance with 19 CFR
353.56(b)(1) (See the September 12, 1994, concurrence memorandum).
We also added U.S. packing costs, in accordance with section
773(a)(1) of the Act.
Third Country Versus Constructed Value
On March 30, 1994, counsel for 14 of the 16 Colombian respondents
in the companion investigation on fresh cut roses from Colombia
requested that the Department reject third-country sales and rely
instead on constructed value as The basis for FMV. We considered this
issue for this case as well.
The Department's normal preference, based on its regulations, is to
utilize third-country sales rather than constructed value when there is
a viable third country market. See 19 CFR 353.48(b). Respondents have
urged departure from this practice, citing Certain Fresh Cut Flowers
from Colombia; Final Results of Antidumping Duty Administrative Review
55 FR 20491 (May 17, 1990) (Flowers). The Department determined in
Flowers that departure from our normal practice was warranted after an
analysis of three unusual factors present in that case. Respondents
argue that the facts in this investigation present even more compelling
reasons to reject third-country sales than were present in Flowers. In
determining whether the circumstances in this case are such that it
should fall under the exception established in Flowers, we have
analyzed the information presented in light of the three factors set
forth in Flowers: 1) negative correlation of price and volume movements
between markets; 2) peak to non-peak comparisons; and 3) the
perishability of the subject merchandise.
As a threshold matter, we note that the record in this case is
different from Flowers in that European markets play a relatively less
important role in our analysis. In Flowers, the Department's analysis
focused solely on a comparison of the U.S. market with European markets
as the vast majority of third country markets under consideration were
in Europe. The Department did not evaluate conditions in other markets.
In this case, and the companion investigation in Colombia, respondents
reported significant sales to Argentina and Canada, as well as Europe.
Respondents in this case have submitted additional information for all
the relevant markets--Europe, Canada, and Argentina. However, it is not
clear that the information submitted up to this point supports
respondents' assertion that sales in the third country markets should
not be compared to U.S. sales in this case.
Negative Correlation Factor
In Flowers, the Department found a negative correlation between
price and volume movements in the United States and European markets.
This negative correlation indicated that price differences between
markets could either mask or exaggerate dumping. The Department
determined that the negative correlation was caused by a number of
elements, including: 1) the greater price and volume volatility of the
U.S. market; 2) the sporadic, gift-giving nature of U.S. demand; 3)
respondents' lack of access to the European auctions (the main
distribution point for flowers in Europe); and 4) differing peak price
periods.
Respondents argue that, in this case, there is similar evidence of
a negative correlation of price and volume movements between the U.S.
and third country markets. In support of their position, respondents
have submitted several reports. A 1994 report by Professor Tayama
analyzes, among other things, the consumption patterns for roses in the
United States, Europe, Canada and Argentina, and compares seasonal and
holiday purchasing patterns in the markets. Tayama asserts that both
Europe and Canada have mature and relatively stable markets because
both markets are supply driven (i.e., in times of peak production as
supply increases, prices go down). In contrast, Tayama claims that the
U.S. market is demand driven--the majority of sales are made for
Valentine's Day when demand increases and prices rise. With regard to
Argentina, Tayama states that roses are grown for home consumption and
imports occur mainly during the winter months, as in Europe. Moreover,
Tayama asserts, Argentina has a different seasonal and holiday pattern
from the United States. No market, he states, has the extraordinary
demand for roses that exists in the U.S. market on Valentine's Day.
Petitioners have countered Tayama's assertions with an August 10,
1994, submission which contains, among other things, a report by Roses
Inc., an association of U.S. rose producers. The Roses Inc. report
raises questions about the conclusions in the Tayama report, asserting
that: 1) there is a global market for roses which is driven by demand
everywhere; and 2) key holiday periods are actually very similar
between the United States and Europe--specifically that the highest
prices in both the United States and Europe occur in February. Thus, we
are not in a position to conclude that the Tayama report provides a
sufficient basis to determine that comparison of U.S. sales to third
country sales is inappropriate.
In support of the conclusions drawn in the Tayama report,
respondents submitted the 1994 Fresh Cut Roses: Issues in the
Estimation of Dumping in the U.S. Market (Botero Report) which contains
a statistical analysis of the United States, European, and Canadian
markets and seeks to demonstrate the lack of correlation between price
movements in the third country and U.S. markets. The Botero Report
provides three types of statistical analyses which, according to
respondents, support their contention that third country prices should
not be used due to the ``different equilibrium conditions'' of these
markets as compared to the U.S. market for roses. First, Botero
analyzes price movements within the United States, Europe and Canada,
from which he concludes that different market forces are at work (i.e.,
price and quantity movements within Europe and Canada are negatively
correlated and price and quantity movements within the United States
are positively correlated). Second, Botero analyzes price and quantity
movements across markets and concludes that there is no correlation
between the U.S. market and either the European or Canadian markets.
Third, he estimates the price cycles for roses in the U.S., European
and Canadian markets and concludes that ``the seasonal patterns of the
two markets [U.S. and European, U.S. and Canadian] are different and
therefore monthly price comparisons do not reflect price
discrimination.'' Botero asserts that these test results demonstrate
that prices in these third country markets should not be compared to
prices in the U.S. market to determine price discrimination.
We have reviewed the Botero Report and have concerns regarding the
data and the statistical parameters used to perform the statistical
analysis on European, Canadian and U.S. rose prices. For example, Dr.
Botero relied on prices that may not be comparable. U.S. prices for a
single hybrid tea variety rose were compared to European prices for all
hybrid tea variety roses; and U.S. import prices, rather than U.S.
domestic prices, were compared to European domestic prices. These
comparisons may be inappropriate--we have no basis to conclude that a
single hybrid tea rose is representative of all hybrid tea roses, or
that U.S. import prices are representative of U.S. domestic prices.
Moreover, Dr. Botero's F-test results appear to be invalid. Dr. Botero
apparently used the incorrect degrees of freedom--(k,n-2) instead of
(k-1,n-2). More importantly, Dr. Botero appears to have misread the ``F
Table'': he reported the value of Fn-2,k at the 99 percent
confidence level, rather than Fk-1,n-2 at the 99 percent
confidence level. Finally, Dr. Botero provided no explanation of his
use of a 99 percent confidence level.
In light of these questions, the Department, at this stage, finds
the information on the record inconclusive as to whether the third
country and U.S. markets are negatively correlated. We intend to
further evaluate the Botero Report for purposes of making our final
determination. Further details relating to this issue are set forth in
the September 12, 1994, memorandum to Barbara Stafford.
Peak to Non-Peak Factor
Third country sales in Flowers were not made over the entire year.
They were made only in peak months. The record established that
Colombian growers had little access to the European auction system and
were only able to export flowers to Europe during those months when
domestic supply was low. On the other hand, the Colombian growers
targeted 80 percent of their production to the U.S. market and made
sales to the United States in every month. As a result, the Department
determined that it was unable to make contemporaneous sales comparisons
in all months and would be required to compare low-value U.S. sales in
off-peak months with high-value third country sales in peak months.
The circumstances on the record in this case are somewhat
different. One of the three companies reporting third country sales has
year-round sales to a single third country market, while the other two
companies have third country sales in every month in the markets
selected by the Department pursuant to Sec. 353.49(c). Therefore, it
appears that the Department may have sufficient contemporaneous sales
in the aggregate for all twelve months of the POI. Further, the
Department has based FMV on two six-month averages; the use of such
averages also should reduce any potential for distortion.
Perishability Factor
The third factor considered in Flowers was related to the role of
perishability on production and sale. This factor included: 1) the
extreme perishability of the subject merchandise; 2) the inability of
producers to control short-term production; and 3) the inability to
store or make alternative use of the product. The Department found that
the respondents planned 80 percent of their production around the U.S.
market and sold excess production in markets in which they did not
necessarily plan to sell. These factors combined to create a ``chance
element'' to third country sales which raised the concern that any
observed price differences would be unrelated to dumping.
We note that there are substantial similarities between flowers and
roses. First, roses, like flowers, are extremely perishable. Second,
rose growers have relatively greater, though still minor, control over
short-term production than flower growers because of their ability to
pinch back buds. Third, as with flowers, roses cannot be stored and we
note that there are only very minor alternative uses (e.g., drying).
While some respondents are able to sell a small percentage of their
production to markets other than the United States as a regular part of
their business plan, which reduces to some extent the ``chance''
element to selling excess production, we note that this was also true
with some companies in Flowers. See Methodological Issues Concerning
Colombian Cut Flowers, Sparks Commodities, Inc. 1989.
In view of the questions raised above, we conclude that, for the
purpose of the preliminary determination, the evidence at this stage is
not sufficient to justify departure from our normal practice of
reliance on third country prices. However, we intend to revisit this
issue in our final determination in light of further information and
analysis with regard to the three factors set out in Flowers as well as
any other facts that might be relevant on this issue.
Currency Conversion
Because certified exchange rates for Ecuador were unavailable from
the Federal Reserve, we made currency conversions for expenses
denominated in Ecuadorian sucres based on the official monthly exchange
rates in effect on the dates of the U.S. sales as published by the
International Monetary Fund.
Verification
As provided in section 776(b) of the Act, we will verify the
information used in making our final determination.
Critical Circumstances
In the petition, 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).
Suspension of Liquidation
In accordance with section 733(d)(1) of the Act, we are directing
the Customs Service to suspend liquidation of all entries of fresh cut
roses from Ecuador, 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 Customs Service shall require a cash deposit
or the posting of a bond equal to the estimated preliminary dumping
margins, as shown below. The suspension of liquidation will remain in
effect until further notice. The weighted-average dumping margins are
as follows:
------------------------------------------------------------------------
Margin
Manufacturer/Producer/Exporter percent
------------------------------------------------------------------------
Arbusta-Agritab (and its related farms Agrisabe, Agritab,
and Flaris)............................................... 39.85
Florin S.A. (and its related farms Cuentas En Participacion
Florinsa-Ertego (Florinsa Cotopaxi) and Exflodec)......... 84.72
Guanguilqui Agro Industrial S.A. (and its related farm
Indipasisa)............................................... 20.60
Inversiones Floricola S.A. (and its related farm Flores
Mitad Del Mundo S.A.)..................................... 10.34
All others................................................. 49.76
------------------------------------------------------------------------
ITC Notification
In accordance with section 733(f) of the Act, we have notified the
ITC of our determination. If 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,
before the later of 120 days after the date of the preliminary
determination or 45 days after our final determination.
Public Comment
In accordance with 19 CFR 353.38, case briefs or other written
comments in at least ten copies must be submitted to the Assistant
Secretary for Import Administration no later than October 17, 1994, and
rebuttal briefs no later than October 24, 1994. In accordance with 19
CFR 353.38(b), we will hold a public hearing, if requested, to give
interested parties an opportunity to comment on arguments raised in
case or rebuttal briefs. Tentatively, the hearing will be held on
October 25, 1994, at 9:30 a.m. at the U.S. Department of Commerce, Room
3708, 14th Street and Constitution Avenue, NW., Washington, DC 20230.
Parties should confirm by telephone the time, date, and place of the
hearing 48 hours before the scheduled time.
Interested parties who wish to request a hearing must submit a
written request to the Assistant Secretary for Import Administration,
U.S. Department of Commerce, Room B-099, within ten days of the
publication of this notice in the Federal Register. The request should
contain: (1) the party's name, address, and telephone number; (2) the
number of participants; and (3) a list of the issues to be discussed.
In accordance with 19 CFR 353.38(b), oral presentations will be limited
to issues raised in the briefs.
This determination is published pursuant to section 733(f) of the
Act (19 U.S.C. 1673b(f)) and 19 CFR 353.15(a)(4).
Dated: September 12, 1994.
Susan G. Esserman,
Assistant Secretary for Import Administration.
[FR Doc. 94-23196 Filed 9-19-94; 8:45 am]
BILLING CODE 3510-DS-P
