[Federal Register Volume 59, Number 183 (Thursday, September 22, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-23504]
[[Page Unknown]]
[Federal Register: September 22, 1994]
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DEPARTMENT OF COMMERCE
International Trade Administration
[A-614-801]
Fresh Kiwifruit From New Zealand; Final Results of Antidumping
Administrative Review
AGENCY: Import Administration, International Trade Administration,
Commerce.
ACTION: Notice of Final Results of Antidumping Duty Administrative
Review.
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SUMMARY: On May 6, 1994, the Department of Commerce (the Department)
published the preliminary results of its administrative review of the
antidumping duty order on fresh kiwifruit from New Zealand. The review
covers one exporter, the New Zealand Kiwifruit Marketing Board (NZKMB),
and the period November 27, 1991, through May 31, 1993. Based on our
analysis of the comments received, we determine the dumping margin for
NZKMB to be 15.41 percent.
EFFECTIVE DATE: September 22, 1994.
FOR FURTHER INFORMATION CONTACT: Amer M. Kayani or Thomas F. Futtner,
Office of Antidumping Compliance, Import Administration, International
Trade Administration, U.S. Department of Commerce, 14th Street and
Constitution Avenue, NW., Washington, DC 20230; telephone (202) 482-
5346 or 482-3814, respectively.
Background
On May 6, 1994, the Department published the preliminary results
(59 FR 23691) of its administrative review of the antidumping duty
order on fresh kiwifruit from New Zealand (57 FR 23203, (June 2,
1992)). The Department has now completed this administrative review in
accordance with section 751 of the Tariff Act of 1930, as amended (the
Act).
Scope of the Review
The product covered by the order under review is fresh kiwifruit.
Processed kiwifruit, including fruit jams, jellies, pastes, purees,
mineral waters, or juices made from or containing kiwifruit, are not
covered under the scope of the order. The subject merchandise is
currently classifiable under subheading 0810.90.20.60 of the Harmonized
Tariff Schedule (HTS). Although the HTS number is provided for
convenience and customs purposes, our written description of the scope
of this review is dispositive.
Analysis of Comments Received
We invited interested parties to comment on the preliminary
results. At the request of respondent, NZKMB, we held a public hearing
on June 20, 1994. We received timely comments from respondent and
petitioners, the California Kiwifruit Commission (CKC).
General Comments
Comment 1
Respondent argues that the Department should exclude from NZKMB's
expenses amounts of interest it incurred to finance antidumping
deposits in accordance with the Department's practice in the
administrative review of Final Results of Antidumping Duty
Administrative Review and Revocation in Part of an Antidumping Order;
Antifriction Bearings (Other Than Tapered Roller Bearings) and Parts
Thereof from France, et. al. (58 FR 39729, (July 26, 1993)). Respondent
further argues that the Department successfully verified the amount of
interest NZKMB incurred as a result of the duty deposits.
Petitioners contend that this interest is not ``dumping duty
interest'', but rather that it is simply interest incurred by
respondent on short-term commercial bank financing to finance kiwifruit
business operations. Furthermore, petitioners contend that respondent's
reliance on the third administrative review results in Antifriction
Bearings is misplaced because in the more recent Antifriction Bearings
fourth administrative review, the Department disallowed a reduction for
U.S. indirect-selling expenses by the amount of interest incurred to
finance antidumping duty deposits.
DOC Position
We disagree with respondent. Respondent mischaracterized the
Department's verification of this expense. The Department only verified
the total interest expense for NZKMB. NZKMB did not provide any
supporting documentation for specific interest on dumping deposits (see
Department's verification report for NZKMB, dated April 16, 1994, pp.
14-15). Given the Department's inability to verify the interest
incurred for dumping deposits, there is no evidentiary basis for making
the adjustment claimed by respondent. Therefore, the issue of the
Department's practice in Antifriction Bearings is moot.
Comment 2
Respondent argues that the general and administrative (G&A)
expenses should be reduced by revenues from sales of salvaged
packaging, which were posted to two accounts in NZKMB's general ledger.
Respondent contends that the Department verified the items in one
account and declined to examine the second account, citing lack of
time. Furthermore, respondent claims that the Department traced the
total amount in the second account to the general ledger and that the
Department's unwillingness to go behind the ledger for this account is
not sufficient grounds to doubt its accuracy.
DOC Position
We disagree. The Department informed respondent, prior to
verification, in a letter dated March 4, 1994, that ``it is the
responsibility of the respondent to be fully prepared for the
verification. If (respondent) is not prepared to support or explain a
response item at the appropriate time, we will move on to another
topic. Due to time constraints, it may not be possible to return to
that item and we may consider the item unverified.'' Respondent did not
bring its claim for the adjustments in question to the Department's
attention prior to the start of verification. In fact, these
adjustments were first brought to the Department's attention on the
third day of a five-day verification. Due to respondent's considerable
delay in bringing the information to the Department's attention and
subsequent lack of preparation in providing the supporting
documentation, the verification team was only able to verify fully the
amount reported for tender revenue packaging. The Department was unable
to verify fully the amount reported in the sundry on-shore packaging
account because of respondent's inability to provide supporting
documentation in a timely manner. Accordingly, no adjustment has been
made to G&A for the sundry on-shore packaging in the final results.
Comment 3
Respondent argues that the Department should add the delivery
premium for sales in the United States to the U.S. price rather than
deduct it from U.S. price. NZKMB asserts that it charges a delivery
premium for sales in the United States made on a delivered basis. This
amount is charged to the customer as a premium above the gross unit
price. Thus, according to respondent, it should be added to the gross
unit price to yield the actual price paid by the customer.
DOC Position
We agree with respondent that the delivery premium should not be
subtracted from the gross price when calculating the net U.S. price and
have added it to the gross unit price so that our calculations reflect
the full price paid by the customer. We then have adjusted the U.S.
price for actual movement expenses respondent incurred.
Comment 4
Respondent contends that the Department incorrectly used a
weighted-average price for the entire period of review (POR) in the
calculation of foreign market value (FMV). Respondent argues that the
Department should use monthly weighted-average prices in the
calculation of FMV.
DOC Position
We agree with respondent and have used monthly weighted-average
prices in the calculation of FMV for the final results.
Comment 5
Respondent contends that the Department improperly treated interest
expenses by including the growers' interest cost in the cost of
manufacture (COM) rather than accounting for it as a general expense in
accordance with the Department's practice. To remedy this alleged
error, respondent suggests that the Department subtract the growers'
interest from COM.
Furthermore, respondent contends that, when calculating the
constructed value (CV) interest expense, the Department double-counted
the growers' interest by including it both in grower's COM and in CV
interest expense calculation for NZKMB. According to respondent, the
amount reported as CV interest expense in NZKMB's response to the
Department's grower cost questionnaire, represents the total interest
expense, for both NZKMB and the growers, that should be added to CV.
Respondent suggests correcting this alleged error by subtracting the
grower interest from COM and multiplying the result with CV offset
proposed by NZKMB in its response to the Department's questionnaire.
Petitioners contest respondent's claim that the growers' interest
expense should not be included in the COM but rather should be
accounted for as a general expense. Petitioners note that respondent's
claim overlooks the distinction between NZKMB's and growers' costs.
Petitioners point out that the interest expenses incurred by each
grower are directly related to the kiwifruit operations for each grower
and that the loans relate directly to individual growers' costs of
cultivation and are not ``general'' in nature nor are they a general
expense of NZKMB.
Petitioners also dispute respondent's claim that the interest
expense reported in NZKMB's response to the Department's grower cost
questionnaire represents the total interest, for both NZKMB and the
growers, that should be added to CV. According to petitioners, the
amount for CV interest expense used by the Department is much less than
the actual interest incurred by either the growers or NZKMB because of
an offset of interest expense with interest income that was not related
to the grower interest. Petitioners argue that the Department should
not allow any offset to growers' interest expense. Instead, petitioners
argue that any offset that the Department chooses to make should only
be subtracted from the interest expense of NZKMB. Furthermore,
petitioners maintain that this offset should be in the form of a whole
number instead of an estimated ratio used by respondent in its
response.
DOC Position
We agree, in part, with both respondent and petitioners. We
disagree with respondent's first argument that the growers' interest
cost should be excluded from the COM. The Department's objective is to
calculate the cost of production (COP) of the subject merchandise sold
by NZKMB. This COP includes the cost incurred by the grower to produce
the kiwifruit as well as the selling, general and administrative
expenses (SG&A) incurred by NZKMB to sell the kiwifruit. The financial
expenses incurred by growers are a part of the costs associated with
producing the kiwifruit. That is, these financial expenses are directly
related to individual growers' COM and are not NZKMB's general expense.
NZKMB's financial expense is treated as the general expense of NZKMB
and added to the grower's COM to arrive at the total COP of the
kiwifruit.
With respect to respondent's argument that the Department double-
counted growers' interest expenses, the Department agrees with
respondent in part. We agree with respondent that the Department
double-counted the growers' interest by including it both in grower's
COM and in CV interest expense calculation for NZKMB. However, we
disagree with the specific amount of the CV offset proposed by
respondent. The CV offset proposed by respondent is a percentage factor
that is applied to total interest of growers and NZKMB which was
adjusted for deposits made for estimated antidumping duties. We have
recalculated respondent's proposed adjustment by disallowing
respondent's deduction for the interest incurred on its duty deposits.
(For an explanation of the Department's position on this issue, see
Comment 1.) Furthermore, we have allowed this offset only to NZKMB's
financial expenses because, as noted above, the Department does not
consider financial expenses incurred by growers to be a general expense
of NZKMB.
Cost of Production Comments
Comment 6
Respondent contends that the Department's treatment of orchard set-
up costs for growers who purchased already- established orchards and
thus did not report actual orchard set-up costs has unfairly distorted
and inflated costs. Respondent argues that the Department's decision to
use the best information available (BIA) for these orchards set-up
costs grossly exaggerates their value. Respondent maintains that a
purchaser of an established orchard does not bear directly any set-up
costs, since those costs were borne by the original establisher of the
orchard. Respondent asserts that a purchaser's total cost for an
orchard is the price the purchaser paid to the seller of the property
and that a portion of that purchase price attributable to capital
improvements is effectively the purchaser's set-up cost. That is,
respondent contends, the difference in value between the raw land and
the land with an established orchard represents the value to the
purchaser of the set-up costs incurred by the original owner. Moreover,
respondent points out that for most growers the Department has valued
the set-up cost of the orchard at more than the price paid for the
entire farm. Respondent notes that growers reported the actual
amortized value of the orchard based on their purchase prices for the
land and the orchard. Respondent contends that this reporting
methodology was obtained from land valuation reports prepared by
private appraisers and was not challenged by the Department in its
supplemental questionnaire. Furthermore, respondent maintains that it
is not clear what facts or information the Department believes were
withheld by those growers who, in the Department's view, failed to
provide actual set-up costs as those growers could not report
``actual'' set-up costs given that they did not incur any such costs.
Petitioners contest respondent's assertion that the Department
ought to adopt a ``purchase price'' methodology for deriving the
orchard set-up costs for growers who purchased already established
orchards. Petitioners argue that the fact that a reasonable imputed
set-up cost for some of these farms meets or exceeds their recent
purchase price simply demonstrates that kiwifruit properties in New
Zealand are depressed. Furthermore, petitioners maintain that the
purchase price of these farms does not represent the costs of
developing the kiwifruit operation. According to petitioners,
respondent ignores the fact that set-up costs are allocated over the
useful life of the orchard and that allocation of a purchase price
established after the set-up period would understate actual set-up
costs for a kiwifruit orchard by allowing allocation of a mere
``remnant value'' to be substituted for the actual set-up costs.
Petitioners agree with the Department's decision to apply BIA to
reflect the set-up costs associated with kiwifruit production.
DOC Position
For those growers who purchased already-established orchards in an
arm's-length transaction, we agree with respondent that their ``set-
up'' cost is the portion of the price paid for the orchard that is
attributable to ``capital improvements''. That is, the ``set-up'' costs
for these orchards is the difference in value between the raw land and
the land with an established orchard on it.
When conducting the test for sales below the COP, we are concerned
with the COP for the merchandise sold during the POR. The fact that the
prevailing prices for kiwifruit orchards in New Zealand are depressed
is irrelevant. What is relevant in our COP analysis are the costs
incurred by growers to produce the fruit sold during the POR.
Therefore, we agree with respondent that the price a grower paid for an
orchard's ``capital improvements'' is effectively the equivalent of
``set-up'' costs for growers who purchased already-established
orchards. Accordingly, we have revised the ``set-up'' costs for
Growers' 1, 3, 5, and 19 in these final results.
Comment 7
Respondent argues that the Department's use of a 20-year
amortization period for orchard set-up costs is entirely unsupported
and that the Department should instead use a 35-year amortization
period. Respondent cites excerpts from various studies conducted in New
Zealand to support its claim that the useful life of kiwifruit orchards
in New Zealand is at least 35 years. Furthermore, respondent asserts
that the Department's staff refused to discuss this issue at
verification and would not accept any offers to back up or otherwise
verify the accuracy of the 35-year productive life. Respondent also
asserts that the document relied on by the Department in the original
investigation to support the 20-year productive life does not make the
20-year estimate with conviction nor does it claim to be based on
scientific study. Respondent maintains that the document was only a
guess since it was based on commercial experience in California which
at the time of writing in 1989 had just recently been established.
Petitioners argue that respondent has not offered new support for a
period longer than 20 years. According to petitioners, the possibility
that the respondent was prepared to show the Department's verifiers a
New Zealand vineyard older than 20 years is not dispositive of the
issue because one, two, or even 20 farms with old vines cannot refute
the fact that nearly every commercially producing kiwifruit vineyard in
New Zealand and in other countries is less than 20 years old.
DOC Position
We agree with petitioners. Generally accepted accounting principles
(GAAP) call for the amortization and recovery of costs over the
expected productive life of an asset. The estimated useful life of an
asset is the period over which the asset may reasonably be expected to
be useful to the individual's business or to the production of income.
Some of the factors to be considered in determining this period are (1)
wear and tear and decay or decline from natural causes, (2) economic
changes and current developments within the industry or business, and
(3) the climatic and other local conditions peculiar to the
individual's business.
The information submitted by respondent in support of useful vine
life does not refute the Department's 20-year estimate in the
preliminary results. The excerpts from studies cited by respondent do
not provide any conclusive evidence in support of respondent's claim
for a 35-year or longer productive life. In fact, a letter from the
Horticultural and Food Research Institute of New Zealand, Ltd. (HORT),
submitted by respondent, states that ``the Ministry of Agriculture and
Fisheries (MAF) surveys indicate that before about 1970, there were
insignificant plantings of kiwifruit--this means that in New Zealand
there are very few plants more than 20-25 years old. * * *'' During
verification in New Zealand, the Department discovered that, because of
low profitability, some of the growers in the Department's sample had
either pulled out or were contemplating pulling out their kiwifruit
vines to use the land for other purposes. Furthermore, respondent's
argument that it was prepared to show the Department's verifiers a New
Zealand vineyard older than 20 years is not conclusive because the
Department's objective is to measure an average useful life and not the
useful life of one or two farms. Therefore, we maintain our position
that the expected productive life of a kiwifruit orchard is 20 years.
Comment 8
Respondent argues that the Department's methodology of allocating
orchard costs to headlands and sidelands is flawed because the
Department allocated headlands and sidelands only to kiwifruit crops,
even though other fruit orchards also have associated headlands and
sidelands. Respondent contends that the shelter-belt and sidelands are
an integral part of all the orchard crops, not just of kiwifruit.
Furthermore, respondent argues that the Department should not include
headlands and sidelands in the allocation formula because the net area
of the orchard is the area that is the focus of horticultural expenses.
Although shelterbelts are occasionally trimmed and headlands and
sidelands are mowed and sprayed for bugs, according to respondent,
these costs are trivial. Respondent further contends that the
Department's methodology of allocating costs to headlands and sidelands
by using Grower 4 as an example is flawed because Grower 4's headlands
and sidelands are only allocated to kiwifruit.
Petitioners argue that headlands, sidelands, and windbreaks are not
required for all fruit orchards. Petitioners note, however, that they
are crucial for kiwifruit orchards because kiwifruit vines are much
more sensitive to severe weather than are other crops. Furthermore,
petitioners note that the support systems on which kiwifruit vines grow
are also more sensitive to weather conditions than are other more
deeply rooted orchard crops. According to petitioners, respondent is
wrong to question the Department's use of Grower 4 as an example for
allocation of costs to headlands and sidelands because respondent's
submission did not provide any information about headlands or sidelands
for Grower 4's passionfruit canopy and no support was forwarded that
showed that headlands and sidelands were an integral part of the
grower's passionfruit crop. Petitioners further contend that contrary
to respondent's contention, aerial photographs submitted by respondents
for Growers 10 and 17 do not show that crops other than kiwifruit crops
require shelter belts. Petitioners additionally contend that
respondent's attempt to demonstrate that the Department misallocated
headlands and sidelands is inconclusive. For Grower 8, for example,
petitioners argue that respondent admits in its own submission that the
headlands and sidelands are devoted only to kiwifruit by attributing
the extra area to the kiwifruit orchards. Finally, petitioners maintain
that while the headlands and sidelands are not themselves productive,
these areas are nonetheless integral to the successful growth and
production of kiwifruit and are therefore appropriately accounted for
in the cost of producing kiwifruit.
DOC Position
We agree, in part, with both petitioners and respondent. Costs,
such as fertilizer expenses, that are solely applicable to kiwifruit or
to another crop's canopy area should be allocated on the basis of
productive area only. However, by respondent's own admission, there are
certain costs, such as trimming, mowing, spraying, etc., involved in
the maintenance of shelterbelts, headlands, and sidelands. These costs
should be allocated over the gross kiwifruit area. Accordingly, we have
adjusted our COP calculations in the final results.
With regard to respondent's comment that headlands and sidelands
were allocated to kiwifruit only, the Department imputed the area for
headlands and sidelands only for those growers for whom respondent did
not provide the actual breakdown between the canopy and the gross area
for various crops and where it was not clear from the record whether
crops other than kiwifruit had shelterbelts, headlands, and sidelands
around them. Therefore, no adjustment for orchard area has been made.
Comment 9
Respondent argues that the Department distorted its calculation by
completely excluding the pastoral portions of the land from orchard
cost allocation because pastoral activities are an integral part of the
growers' operations which must bear an appropriate share of management,
repair, and vehicle expenses.
Petitioners contend that pasture land should not bear expenses
because it requires little tending or investment. Furthermore,
petitioners note that pasture land requires virtually no management,
while kiwifruit orchards require intensive management activities.
DOC Position
We agree with petitioners in part. While pasture land requires
little or no labor, it may require management and vehicle-related
expenses. Accordingly, we have adjusted our COP calculations to reflect
these costs in the final results. (See Department's analysis memorandum
dated August 29, 1994, for appropriate adjustments.)
Comment 10
Respondent argues that the Department's treatment of intra-family
interest and salary and other related-party expenses in the preliminary
results is inconsistent and in error. Respondent contends that it has
been the Department's practice to treat transactions between related
parties as unreliable and to examine costs to a company as a whole and
eliminate intra-company payments and transfers. Respondent argues that
the kiwifruit growers' accounting is typical of a small business in
that it is essentially tax driven. In particular, respondent argues
that recharacterizing grower profits as interest payments and inflated
salaries paid to family members are typical methods used to cut taxes.
Respondent cites Growers 5, 7, 17, and 19 as examples of this practice.
Respondent uses Grower 17 for analysis purposes and argues that the
wages paid by the grower to his spouse are a paper transaction only and
that his spouse is not in fact a farm hand. Similarly, respondent
argues that the loan from Grower 17's spouse to the grower was a paper
transaction to reduce taxes in which the wife pretended to loan her
husband money and the husband pretended to pay his wife interest.
Respondent applies the same argument to salary payments made to the son
of Grower 19 and asserts that this is a profit distribution among
family members. Respondent further argues that, for Grower 8, the
Department should exclude interest that the owners paid themselves from
the COP calculation because it was a distribution of profits to the
owners.
Petitioners argue that respondent has furnished no evidence of New
Zealand tax provisions to support its claim that the inflated payments
are reported for tax purposes. Petitioners argue that the Department
should not accept respondent's claim that some of the expenses are not
real expenses when nothing in the record demonstrates this claim to be
true.
DOC Position
We agree with petitioners. Absent specific evidence to the
contrary, we consider expenses recorded in a company's financial
statements to reflect actual expenses incurred in its operations. See
Final Results of Sales at Less Than Fair Value, Sweaters Wholly or in
Chief Weight of Man-Made Fiber From Taiwan, 55 FR 34585 (1990).
Respondent has not presented any documentary evidence in support of its
claim that the recorded expenses were not actual expenses. Accordingly,
we continue to rely on the growers' financial statements for orchard
expenses in the final results.
Comment 11
Respondent argues that the Department incorrectly disallowed the
rental income credit reported by Growers 8, 13, and 18. Respondent
contends that these growers reported imputed rental income as a credit
against their reported labor cost because each of these growers
provided housing to their orchard employees. According to respondent,
under New Zealand income tax law, employer-provided housing is
considered a taxable benefit to the employee. As a result, the grower
that provides housing is required, when submitting its tax information,
to increase the reported salary paid in cash to the employee by the
imputed value of the housing benefit. Respondent explains that, because
of this calculation, the growers' income statement reflects a total
labor cost that includes both the wages actually paid to employees, the
imputed value of the housing benefit, and the growers' actual expenses
incurred in providing employee housing. Respondent contends that this
imputed housing value is not an additional expense to the grower.
Respondent maintains that the Department misunderstood the nature of
the housing expense and included both the imputed value of the housing
benefit and the actual housing expenses incurred by the grower.
Respondent argues that the Department erred in its COP calculations
when it disallowed the offsetting credit amount reported in growers'
financial statements to correct the employer's overstatement for
employee housing expenses.
Petitioners contend that the rental income credit is inappropriate
because housing rental is not a farm operation.
DOC Position
We agree with respondent. In this case, the growers provide a
housing benefit to employees. Under the New Zealand tax laws, this
housing benefit is considered a taxable benefit to the employees and
its imputed value is reflected on the employees' income statements
along with total wages. Although the growers' income statements reflect
a total labor cost that includes both the wages actually paid to
employees and the imputed value of the housing benefit, the imputed
housing value is not an additional expense to the growers; the actual
cost of the housing benefit, such as depreciation, maintenance,
electricity, etc., is already included in the growers' financial
statements. Since the growers' financial statements show an expense for
the imputed housing benefit that was not incurred, the growers offset
this expense with ``rental income'' to reconcile their financial
statements.
To include the imputed housing value plus the growers' actual
expenses incurred in providing the housing benefit in the COP
calculation would result in double-counting the total expenses for the
housing. Accordingly, we have accepted this ``rental income'' credit
adjustment reported by respondent for Growers 8, 13, and 18 in the
final results.
Comment 12
Petitioners argue that, in its calculation of respondent's COP of
kiwifruit sold in Japan, the Department failed to include: 1) NZKMB's
G&A and interest expenses, 2) certain elements of third-country packing
cost, which the Department included in the net prices compared to COP,
and 3) the New Zealand coolstore cost.
Respondent contests petitioners' position and maintains that the
figures used by the Department include NZKMB's G&A and interest.
DOC Position
We agree with petitioners that NZKMB's G&A and interest expenses
should be included in the COP. However, these expenses are already
included in the cost of production, therefore, we have made no further
adjustment for these expenses in the final results.
We agree with petitioners argument concerning inconsistencies
regarding third-country packing cost in our COP analysis. Therefore, in
the final results, we have excluded certain elements of third-country
packing cost from the net prices for COP comparison purposes. Lastly,
we agree with petitioners that the New Zealand coolstore cost should be
included in the COP because these costs were included in net prices.
Since this coolstore expense is a part of NZKMB's G&A expense, however,
it is already a factor in our analysis. Therefore, we made no further
adjustment for this expense in our COP analysis.
Comment 13
Petitioners contend that the Department omitted NZKMB's G&A
expenses from the CV calculation it used in exporter's sales price
(ESP) comparisons. Petitioners note that the Department included these
expenses in its CV calculations for purchase price (PP) comparisons.
Respondent agrees with petitioners that NZKMB's G&A expenses should
be included in CV calculations for the purposes of PP and ESP
comparisons. Respondent, however, disagrees with petitioners about the
amount that should be included because, according to respondents, the
figure suggested by petitioners includes both G&A and interest
expenses. Respondent urges the Department to use a figure in its CV
calculations which reflects only G&A expenses.
DOC Position
We agree with petitioners. Because of a clerical error, the
Department did not add NZKMB's G&A expenses, including interest
expense, in the preliminary CV calculation for ESP sales. We have
corrected this clerical error in the final results.
We disagree with respondent on the amount that should be included
in NZKMB's G&A expenses for the reasons explained in our response to
Comment 5.
Comment 14
Petitioners argue that the methodology used by respondent to impute
expenses grossly understated the labor costs. Respondent reported labor
in three categories: ``labor'', ``imputed labor'', and ``contracted
labor''. Petitioners allege that these disparate labor expense
reporting practices resulted in a fractured, often unidentifiable,
labor component. Petitioners request that the Department reject
respondent's reported labor expenses and replace them with costs
derived in a more logical fashion. Petitioners contend that actual
kiwifruit labor costs should be determined from the responses for five
growers only, based on the following factors: (1) the grower produced
kiwifruit only, or the grower's kiwifruit labor costs are segregable;
(2) the grower needed to impute no labor cost; (3) labor cost was not
consolidated with materials; or (4) labor cost was easily identifiable.
Petitioners argue that Growers 2, 7, 13, 14, and 20 satisfied the above
conditions. Furthermore, petitioners assert that an analysis of these
growers' labor cost shows that labor cost per hectare decreases as the
area under cultivation increases. Thus, petitioners argue that the
Department should impute labor costs according to the following
``surrogate'' matches: Grower 13 as surrogate for Grower 12; Grower 7
as surrogate for Growers 1, 3, 4, 5, 6, 8, 9, 10, 11, 15, 16, 17, 18,
and 19. Petitioners argue that to calculate the imputed labor cost for
these 15 growers, the Department should simply multiply the growers'
kiwifruit canopy hectares by the per-hectare labor cost of the
surrogate grower.
Respondent argues that since the growers have reported their actual
labor and contracted labor expenses and have added imputed labor
expenses for family labor, there is no basis for adding additional
labor costs to growers who relied more heavily on contracted labor.
DOC Position
We agree with respondent. For most growers, contracted labor
expenses reported by respondent include labor and material costs. In
instances where labor was not contracted for, the labor was provided
either by an employee, by the owner himself, or by the owner's family.
In the case of growers who used family labor, an imputed expense for
family labor was reported and included in the COP. Additionally, for
some growers labor costs were included in direct materials such as
spraying and fertilizer. Therefore, we accepted respondent's labor cost
allocation as an appropriate estimation of the cost of cultivating
kiwifruit and used the information in our COP analysis.
Comment 15
Petitioners argue that interest expenses should be allocated on the
basis of cost of goods sold, rather than on the basis of assets,
because respondent has not demonstrated linkage between the growers'
assets and the interest incurred by the growers. Furthermore,
petitioners contend that interest relates not to assets, but to the
business operations of the orchards. According to petitioners, this is
demonstrated by the fact that of the 20 growers, 11 were unprofitable
in their kiwifruit operations during the POR, five were profitable on
kiwifruit operations, and it was not possible to tell for the remaining
four whether kiwifruit operations were profitable. Petitioners contend
that based on these grounds, the interest incurred by these growers
must be associated with financing the operations.
Respondent claims that interest expenses should be allocated on the
basis of asset value and not on the basis of cost of goods sold.
Respondent argues that the Department has allocated interest on the
basis of cost of sales in a typical proceeding involving a
manufacturing company with multiple products because it has been
assumed that each of the consolidated lines of business of a respondent
have approximately equal operating asset requirements. Respondent
asserts that where that assumption of equivalent assets is not true in
a particular case, the Department uses asset-based allocation as was
done in the antidumping investigations of Dynamic Random Access Memory
Semiconductors of One Megabit and Above from the Republic Korea, 58 FR
15467 (1993), and Sweaters Wholly or in Chief Weight of Man-Made Fiber
from the Republic of Korea, 55 FR 32659 (1990). Respondent asserts that
the growers in this review are in a factual situation similar to that
in Man-Made Fiber Sweaters from Korea.
DOC Position
We agree with respondent but not for the reasons stated. During
verification in New Zealand, the Department observed that many
kiwifruit growers reside on their farms. In most cases, these growers'
financial statements list their private residence as well as orchard-
related expenses together. However, during verification, the Department
observed that the growers' private residences are not directly related
to the cultivation of kiwifruit. Since a grower's residence does not
generate a cost of sales, the allocation of interest on the basis of
cost of sales would not accurately reflect the amount of interest
attributable specifically to the residence of orchard operation.
Therefore, we have accepted respondent's methodology of allocating
interest expense on the basis of asset value, thus distinguishing
between interest expenses attributable to the growers' residence and
those attributable to their commercial activities. Accordingly, no
adjustment for Growers' 1, 5, 6, 8, 9, 10, 12, 14, 16, 17, and 20 has
been made in the final results.
Comment 16
Petitioners disagree with respondent's methodology of allocating
G&A expenses for Growers' 1, 4, 5, 8, 12, 16, 17, and 20. Petitioners
contend that, by using a cost of goods sold ratio based on the
kiwifruit COM relative to all other costs, respondent has understated
kiwifruit costs and has overstated the total orchard costs.
Furthermore, petitioners argue that kiwifruit picking and packing
expense should be included in the cost of goods sold. Petitioners urge
the Department to recalculate growers' G&A expenses by adding the
amount of picking and packing in the total cost of sales.
Respondent argues that petitioners' proposal to reallocate G&A
expenses by including packing in the COM is without merit. Respondent
notes that it is the Department's practice to exclude packing from the
COM for the allocation of G&A. Furthermore, respondent contends that it
used unpacked COM to allocate among all orchard crops. Therefore, if
the Department were to include the cost of packing for allocation
purposes in the cost of kiwifruit only, but not for other crops, the
results would be biased. Respondent argues that while the growers
ultimately pay for packing, NZKMB administers the packing and
distribution of kiwifruit from the time it leaves the orchard.
Therefore, NZKMB is responsible for the packing process and NZKMB has
included its G&A expenses in the COP figures for the kiwifruit.
DOC Position
We disagree with petitioners that respondent understated kiwifruit
costs and overstated the total orchard costs by using a cost of goods
sold ratio based on the kiwifruit COM relative to all other costs.
Where growers had multiple crops, respondent allocated costs between
kiwifruit and other crops. Since respondent used the unpacked COM to
allocate costs among all orchard crops, inclusion of packing cost for
allocation purposes in the cost of kiwifruit and not for other crops
would prejudice the results. Therefore, we have accepted respondent's
methodology in these final results.
We agree with respondent that normally the Department does not
consider packing expense as part of COM for the allocation of G&A.
Therefore, we have accepted respondent's treatment of the packing
expense.
Grower-Specific Comments
Grower 1
Comment 17
Petitioners argue that fertilizing, pollination, pruning, shelter,
labor, and other expenses for Grower 1 should be recalculated based on
the Department's revised ratio of kiwifruit area to total area in the
preliminary results. Petitioners further contend that the grower did
not include all costs for spraying.
DOC Position
We agree with petitioners in part. Because headlands, sidelands,
and shelterbelts require regular pruning and maintenance, certain
expenses such as pruning, shelter, and labor should be allocated on the
basis of gross kiwifruit area. However, we disagree with petitioners
about the allocation of fertilizer and pollination expenses. The
fertilizer and pollination expenses are not applicable to headlands,
sidelands, and shelterbelts, hence, we have allocated these expenses
over the productive area only for the final results.
With regard to the spraying costs, we agree with petitioners that
the grower's financial statement does not support the deduction claimed
by respondent. Accordingly, we have recalculated the spraying expense
for this grower.
Comment 18
Petitioners argue that the respondent miscalculated the
depreciation expense because its starting point is not an actual
depreciation but an amount adjusted for profits and losses on disposal
of assets. Petitioners further contend that all depreciation related to
kiwifruit reported in the partnership's financial statement also
appears in the grower's assets. Therefore, petitioners argue that the
full value of the depreciation of the assets should be dedicated to
this grower because the assets are directly related to his property.
DOC Position
We agree with petitioners in part. The Department normally uses
actual depreciation expenses, exclusive of any gains or losses.
Therefore, we have made adjustments to the reported depreciation amount
in the final results to reflect the total depreciation this grower
experienced.
With regard to petitioners' second argument, we disagree that the
full value of the partnership's depreciation expense should be
dedicated to the current grower because it is not clear from the record
that the current grower was the sole owner of the assets in question in
the partnership. Therefore, we have not made adjustments to the
partnership's depreciation expense in the final results.
Comment 19
Petitioners argue that the fact that the ownership of the kiwifruit
property changed during the POR and that the original property was
split complicated the calculation so much that the reported labor does
not provide supportable grounds for deriving this grower's labor
expenses. Petitioners contend that the Department should compute this
grower's labor cost based on the methodology suggested by petitioners
in Comment 14.
DOC Position
We disagree. Respondent's methodology of allocating costs based on
land area is an acceptable methodology in this case. Without a more
accurate alternative, we accepted respondent's labor cost allocation as
an appropriate estimation of the cost of cultivating kiwifruit.
Accordingly, we have accepted respondent's methodology for the final
results.
Comment 20
Petitioners argue that as a result of respondent's deduction of
picking and packing expenses from the COM, the calculation of this
grower's total cost of goods sold is erroneous. Furthermore,
petitioners contend that the costs added by respondent for the value of
animal stock sold, shearing wages, management, farm working expenses,
repairs and maintenance, depreciation, rates (property taxes) and
vehicle expense are in error because the value of animal stock sold as
described in the grower's submission does not represent actual costs of
producing the goat, deer and sheep stock sold. According to
petitioners, respondent's inclusion of these values resulted in grossly
overstated total costs. Petitioners assert that, if these values are
included, the ``value'' of the kiwifruit plantation should also be
included.
Respondent argues that neither the value of the livestock retained,
and not sold, nor the value of the orchard are included in the cost of
sales it provided to the Department. Thus, respondent asserts that
petitioners' argument that the value of the unsold orchard should be
included in the allocation is without merit. Furthermore, respondent
contends that petitioners' argument is factually unsound because U.S.
GAAP governing the valuation of livestock held for sale specifies that
the value of the livestock is the acquisition price, if any, plus the
cost of feed and other costs of maintaining the livestock until sold.
According to respondent, for tax reporting purposes in New Zealand, the
principle is the same: the cost of sales is the cost of developing
(i.e., raising) the livestock. Respondent further contends that each
year the New Zealand Inland Revenue, the tax authority in New Zealand,
publishes a schedule which specifies the expected cost of developing
livestock. Respondent maintains that this schedule is specific with
respect to breed, sex, and maturity, and that it is this value that
respondent used in its response. Respondent argues that the Department
normally accepts the accounting principles of the respondent's home
country, and that in the case of this grower the accounting principle
is the same as that used in the United States. Therefore, respondent
argues that the Department should use the cost as reported by
respondent in the allocation of G&A as it was based on New Zealand GAAP
and reasonably reflects actual cost.
DOC Position
With regard to the issue of picking and packing expenses in the
COM, we disagree with petitioners. (See our position in response to
Comment 16.)
We disagree with petitioners' second comment that the value of
animal stock sold by this grower does not represent the actual cost of
producing the goat, deer, and sheep. The Department normally accepts
the accounting principles of the respondent's home country, and in the
case of this grower the accounting principle is not distortive.
Therefore, we have accepted respondent's methodology in the allocation
of G&A for this grower.
Comment 21
Respondent contends that only productive hectares and not non-
producing hectares should be assigned orchard set-up costs.
DOC Position
Since we have accepted respondent's methodology of allocating
orchard set-up costs for the reasons explained above (see DOC position
under Comment 6), respondent's comment in this instance is
inconsequential.
Comment 22
Respondent contends that pasture land must bear an appropriate
share of management, repairs and vehicles expenses because it is an
integral part of the orchard's operations.
DOC Position
We agree that pasture land should bear a share of management,
repairs and vehicles expenses. Accordingly, we have made adjustments
for this grower's management, repairs and vehicle expenses in the final
results.
Grower 2
Comment 23
Respondent argues that the Department has no justification for
relying on BIA for the COP expenses of Grower 2. Respondent claims that
the Department should use the grower's submitted costs. Respondent
alleges that, contrary to the Department's preliminary analysis, the
grower did not own an additional orchard during the POR. Respondent
further argues that Grower 2 reported all interest and management
expenses in its questionnaire response to the Department.
Petitioners argue that since respondent provided incomplete and
inconsistent information for this grower, it is not possible to
determine whether all expenses were reported.
DOC Position
We disagree with respondent. In the Department's letter of December
13, 1993, the Department clearly instructed the respondent to review
the list of sampled growers and ``determine (1) whether any of these
growers is related to another grower. * * *'' These instructions in no
way restricted the reporting of related growers to those included in
the sample and any related grower should have been reported. In
addition, previously the Department, in its October 14, 1993, letter,
stated that ``* * * it is important that you supply us with the
information on growers which are related and, as such, should be
treated as single entities.'' Moreover, the letter states that ``If you
do not provide this information, we will assume that the growers
identified in your October 6, 1993, submission are not related and
treat them as separate entities when drawing our sample. However, if we
treat these growers as separate entities and subsequently discover that
our sample includes a farm that should have been consolidated, we may
have to resort to the best information available as required by section
776(b) of the Tariff Act of 1930, as amended, in determining the cost
for that particular farm for the purpose of establishing the costs of
the grower.''
At verification, the Department, in a random review of invoices for
this grower, noted an invoice which was made out in the name of an
orchard that had not been reported to the Department. The grower
claimed at that time that the orchard listed on the invoice was the
orchard that had been reported as sold. The Grower's records did not
support this claim. The name of the sold orchard was not identified in
the grower's response; only the MAF number was listed. Grower 2's
records reviewed at verification showed the name of the orchard with
the MAF number reported as sold; that name was different than the name
listed on the invoice. By way of explanation, the grower claimed that
the orchard operated under two different names, but offered no evidence
to support that claim. Furthermore, our review of NZKMB records did not
support the grower's claim. The NZKMB records for the orchard listed on
the invoice showed Grower 2 as the owner and listed a different MAF
number than the one reported by Grower 2 for the sold orchard. Thus,
neither the grower's records nor the NZKMB records supported Grower 2's
claim that the orchard listed on the invoice and the orchard sold are
one and the same.
Because the Department could not verify the Grower's claim, we
concluded that the related orchard on the invoice was not reported to
the Department. By failing to report all related orchards, the grower
failed to report all relevant costs. Thus, we have maintained our
application of BIA for Grower 2. In light of the Department's
determination to use BIA regarding this grower, we need not address
respondent's allegation regarding management and interest expenses.
Grower 3
Comment 24
Petitioners assert that respondent reported an imputed labor cost
for this grower rather than an actual labor cost. Petitioners argue
that this imputed labor value is understated and should be recalculated
based on the methodology they described in reference to comments on COP
(Comment 14).
DOC Position
We disagree. According to this grower's response, summer and winter
pruning was performed by the owner who worked part-time on the orchard.
Respondent computed the cost of pruning for the two sampled growers in
the Bay of Plenty region who had contracted out for pruning and based
on their cost imputed the cost of pruning for this grower. Without a
more accurate alternative, we accepted respondent's methodology.
Therefore, we have used respondent's figure for the final results.
Comment 25
Petitioners note that the respondent reported an incorrect value
for interest expense. Petitioners urge the Department to scrutinize
respondent's figures and adjust the interest claim.
DOC Position
In our preliminary results, we did not include respondent's value
for the interest expense in our analysis. The Department only allows an
offset of interest expenses by short-term interest income. Thus, no
change in our calculations is necessary.
Grower 4
Comment 26
Petitioners argue that this grower's allocations of certain direct
and indirect costs to kiwifruit based on the ratio of kiwifruit canopy
area to total cultivated area or on the percentage of kiwifruit revenue
of the grower's total revenue are flawed. Furthermore, petitioners
support the Department's decision to recalculate expenses based on the
ratio of total kiwifruit area to total cultivated area in the
preliminary results.
Respondent argues that the Department allocated farm expenses among
the grower's various crops incorrectly by allocating non-productive
headlands and sidelands area only to kiwifruit, while ignoring the
headlands and sidelands that surround the grower's passionfruit
orchard.
DOC Position
We agree, in part, with petitioners' argument regarding allocation
of costs between canopy and non-productive areas. Costs, such as
fertilizers, that are directly applicable to the canopy area only,
should be allocated exclusively to productive areas (see our position
under Comment 8). However, costs applicable both to canopy and non-
canopy areas should be allocated over the gross kiwifruit area.
Accordingly, we have made an adjustment to the fertilizer expenses for
this grower.
Regarding respondent's argument that the Department ignored
headlands and sidelands surrounding the passionfruit orchard, because
the respondent did not provide an exact breakdown among headlands,
sidelands, and shelterbelts for either kiwifruit or passionfruit, the
Department decided to impute the area devoted to headlands, sidelands,
and shelterbelts for cost allocation purposes. Furthermore, we could
not firmly establish from this grower's response whether shelterbelts,
headlands, and sidelands were also applicable to the passionfruit crop.
Therefore, we imputed shelterbelts, headlands, and sidelands for
kiwifruit only.
Comment 27
Petitioners maintain that respondent allocated ``standing'' charges
to kiwifruit on the basis of the ratio of kiwifruit expenses to all
operating expenses. Petitioners argue that some of these operating
expenses were for contracting which occurs off-farm and is not
financing or mortgage intensive. Therefore, according to petitioners,
the Department should recalculate set up costs for this grower by
allocating all interest expenses to kiwifruit.
DOC Position
We disagree. Respondent allocated interest charges to kiwifruit on
the basis of the ratio of kiwifruit expenses to all operating expenses.
There is no evidence on the record that indicates that all interest
expense should be dedicated to kiwifruit. Therefore, we have used
respondent's allocation in the final results.
Grower 5
Comment 28
Petitioners argue that the Department should revise its allocation
of shelter costs based on land area. According to petitioners, given
that the area of shelter devoted to each crop is known, a more accurate
approach would be to calculate kiwifruit shelter area as a percentage
of total shelter area.
DOC Position
We disagree with petitioners. Since it was not possible to identify
shelter costs for a specific crop or activity, we imputed the shelter
cost attributable to kiwifruit based on land area. The methodology
suggested by petitioners is not necessarily more accurate than the one
used by the Department in the preliminary results. Therefore, we have
not made any adjustments in the final results.
Comment 29
Respondent argues that the Department should allocate orchard
expenses using net canopy area. Furthermore, respondent argues that the
pastoral portion of the farm should be included in the allocation of
orchard expenses.
DOC Position
We agree with respondent regarding allocation of certain orchard
expenses over net canopy area (see our response to Comment 8). However,
we disagree with respondent regarding the allocation of all orchard
expenses over the pastoral portion of the farm (see our position under
Comment 9). Accordingly, we have adjusted certain orchard expenses for
this grower.
Grower 6
Comment 30
Petitioners argue that this grower's labor cost should be
recomputed because the reported cost is imputed rather than actual.
DOC Position
We disagree. In this case, certain farm functions were performed by
the owner who worked part-time on the orchard. Respondent computed the
imputed labor cost for this grower based on the prevailing wages for
unionized farm workers in New Zealand. Without a more accurate
alternative, we accepted respondent's methodology as an appropriate
estimation of the labor cost. Accordingly, no adjustment has been made
for the final results.
Grower 7
Comment 31
Petitioners argue that this grower's actual labor costs should be
used to reflect its own labor and as a surrogate for other growers'
labor costs.
DOC Position
We used this grower's actual labor costs, not imputed costs, in the
preliminary results and in these final results.
We disagree with petitioners concerning the use of this grower's
labor costs as a surrogate for other growers. (See DOC position under
Comment 14.)
Comment 32
Petitioners maintain that this grower has two properties: one
property developed by the grower and the other purchased from another
party. For the purchased property, petitioners assert that the grower's
calculation of set-up costs excluded the amount for improvements.
Petitioners insist that the Department should recalculate the set-up
costs by including the amount of improvements and re-amortize the
orchard set-up costs over 20 years instead of 35 years.
Respondent argues that all assets related to the orchard are
recorded in the grower's fixed asset register and that the depreciation
of these assets is already included in the COP submitted to the
Department. Respondent further contends that the inclusion of the same
assets in the orchard set-up costs would result in double counting of
these assets.
DOC Position
We agree with petitioners that the orchard set-up costs should be
amortized over 20 years instead of 35 years. (See our position under
Comment 7.) Accordingly, we have adjusted the orchard set-up costs for
this grower.
We disagree with petitioners regarding the inclusion of certain
assets related to land improvement expenses in orchard set-up costs
because the depreciation of these assets is already included in the
COP. Therefore, we have accepted respondent's methodology for these
final results.
Grower 8
Comment 33
Petitioners contend that labor costs should be recalculated because
this grower raised multiple crops and did not differentiate labor
costs. According to petitioners, this grower's labor costs should be
recalculated based on Grower 7's labor costs.
DOC Position
We disagree. Respondent's methodology of allocating costs based on
land area is an acceptable methodology in this case. Without a more
accurate alternative, we accepted respondent's methodology as an
appropriate estimation of the labor cost. Accordingly, we have used
respondent's allocation for the final results.
Comment 34
Respondent argues that the Department should allocate horticultural
expenses on net orchard area and should not exclude pasture land from
its calculation of orchard expenses.
DOC Position
We agree, in part, with respondent regarding allocation of certain
orchard expenses on orchard area which includes pasture land. (See our
position under Comment 9.) Accordingly, we have adjusted certain
orchard expenses for this grower in the final results. However, we
disagree with respondent regarding the allocation of orchard expenses
on net orchard area. (See our position under Comment 8.)
Grower 9
Comment 35
Petitioners argue that this grower did not report rates for one of
the properties which produced kiwifruit and contend that the Department
should calculate rates for this property to ensure that all costs are
included in the COP calculation.
DOC Position
We disagree. This grower did not own the second property and simply
purchased mature fruit in an arm's-length transaction. Rates and all
other expenses associated with the cultivation of kiwifruit were
accounted for in the price this grower paid for the mature fruit. Thus,
this grower did not incur any expense related to rates. Accordingly, we
have not added the rates expense for this grower in these final
results.
Comment 36
Petitioners argue that since the grower sold kiwifruit produced on
two properties and for one property did not calculate orchard set-up
costs, the Department should estimate an amount based on multiplying
the orchard set-up cost for the first property by the ratio of the
second property's canopy hectares to the first property's canopy
hectares.
Respondent contends that because the grower purchased mature fruit
on the vine, the purchase price included all the costs of cultivation
including labor, orchard set-up costs and property taxes.
DOC Position
We disagree with petitioners and respondent. In determining whether
sales have been made at less than the COP, prices should not be
substituted for some of the costs. Accordingly, we have disregarded the
purchased kiwifruit's costs and the quantity from the COP analysis.
Grower 10
Comment 37
Petitioners argue that this grower's allocation of costs based on
land area usage does not reflect the division of farm expenses.
Petitioners request that the Department reallocate the expenses on the
basis of orchard revenue. Petitioners further argue that since this
grower raised multiple crops and reported imputed labor costs, labor
costs for this grower should be recalculated.
DOC Position
We disagree. The Department verified this grower's costs in New
Zealand and found the methodology of allocating costs based on land
area to be appropriate. The methodology suggested by petitioners does
not necessarily provide a more accurate estimate of orchard costs.
Therefore, we have accepted this grower's allocation methodology.
Comment 38
Petitioners argue that respondent deducted picking and packing
expenses from total orchard working expenses. Furthermore, according to
petitioners, respondent deducted the imputed labor and management costs
when calculating the kiwifruit COM. Petitioners request that the
Department recalculate the G&A expenses for this grower by adding
packing and imputed labor expense in the calculation of ratio for G&A
expenses.
DOC Position
We agree, in part, with petitioners that respondent's methodology
for calculating G&A expenses is inappropriate because it excludes the
imputed labor expense. This imputed labor expense is a part of COM and
should be included in the calculation of G&A ratio. Accordingly, we
have made adjustment to this grower's G&A expense. However, we disagree
with petitioners regarding the inclusion of packing expense. (See our
position under Comment 16.)
Grower 11
Comment 39
Petitioners maintain that this grower bought packed kiwifruit from
another farm and resold it to NZKMB and that this grower included, in
its cost information, payment it made to the owner of the other farm.
Petitioners argue that this is a faulty methodology because it mixes
costs and prices. Furthermore, petitioners contend that, in an
investigation into whether sales have been made at prices below COP,
price should not substituted for some of the costs. Petitioners insist
that the Department remove the cost and the quantity of the purchased
kiwifruit from the grower's COP.
DOC Position
We agree with petitioners that in determining whether sales have
been made at less than the COP, prices should not be substituted for
some of the costs. Accordingly, we have disregarded the purchased
kiwifruit's costs and the quantity from the COP analysis.
Comment 40
Petitioners argue that this grower deducted a portion of contracted
labor income from the reported imputed labor amount. Petitioners
maintain that contracted labor income does not offset non-contracted
labor for the grower's kiwifruit operation and, therefore, the
Department should remove this offset from the calculation.
DOC Position
We agree with petitioners that the grower's contracted labor income
does not offset non-contracted labor for the grower's kiwifruit
operation. The contracting income is unrelated to kiwifruit operations.
We have made the appropriate adjustment to this grower's calculations
for the final results.
Comment 41
Petitioners argue that respondent's approach in calculating
interest expense for this grower is questionable because it appears to
be based on a subjective valuation of the assets. Petitioners argue
that the interest expense should be recomputed to ensure that all
interest related to kiwifruit is included in the COP.
DOC Position
We agree with petitioners that, where possible, it is preferable to
use actual cost in reporting expenses. This grower's financial
statement shows the actual cost of assets. Therefore, it is appropriate
to use the actual asset value to calculate the interest expense. We
have revised the interest expense for this grower in the final results.
Grower 12
Comment 42
Petitioners note that, although the Department's preliminary
analysis memorandum discusses a recalculation of this grower's rates
expense, the Department used in its calculations the expense as
reported. Petitioners urge the Department to use the amount calculated
in the preliminary analysis memorandum, since this figure more
accurately captures the rates expense.
DOC Position
Because respondent's figure understated the actual rates expense,
we intended to recalculate this expense by allocating it over correct
orchard area. For these final results, we have used our revised figure.
Comment 43
Petitioners argue that since this grower raised orchids as well as
kiwifruit, certain labor costs for this grower were included in direct
materials and should be recalculated.
DOC Position
We disagree with petitioners that certain costs should be
recalculated because the labor costs in question were included in
direct materials. For the reasons explained in our response to Comment
14, we have accepted respondent's classification of these expenses.
Grower 13
Comment 44
Petitioners argue that the Department should reject respondent's
deductions for rent received and sale of sundries from set-up costs.
DOC Position
We disagree with petitioners. For the reasons explained in response
to Comment 11, we have accepted respondent's deduction for rent
received from the orchard set-up costs.
With regard to sundry income, the amount in question is
inconsequential for our analysis. Therefore, we have not made an
adjustment for this amount in these final results.
Grower 14
Comment 45
Petitioners argue that the Department should reject the contracted
labor income offset claimed in the labor expense category by this
grower because respondent has not demonstrated that contracted income
was derived from actual labor performed. In addition, petitioners argue
that any adjustment should be limited to the actual labor performed.
Petitioners also argue that the Department should reject respondent's
adjustment to labor expense for contracting income. Petitioners
maintain that the income should be adjusted for overhead and profit,
or, alternatively, that the actual labor expense identifiable to the
contracting income be deducted.
DOC Position
We agree with petitioners in part. As a result of verification in
New Zealand, the Department has determined that the contracted income
was an appropriate offset against grower's labor costs because contract
income included an element of labor cost which was also included in the
grower's total labor costs. The disallowance of this offset would
result in the inclusion of labor costs unrelated to this grower's
production costs of its own kiwifruit crop. However, we agree with
petitioners that the contracted labor income should be adjusted for
overhead and profit. Accordingly, we have adjusted the labor expense
for this grower in the final results.
Comment 46
Petitioners argue that respondent improperly omitted an amount of
interest expense. Petitioners maintain that this amount should be added
to the interest calculated for the parent company.
DOC Position
The interest amount in question was reported in the grower's
supplemental response and we included it in the COP analysis for both
the preliminary and final results.
Comment 47
Petitioners argue that, since this grower did not report an expense
for rates, the Department should calculate rates for this grower.
Respondent argues that the grower leased the orchards at arm's
length from unrelated parties and the lease payments constituted the
entire compensation to the owner for the use of orchards.
DOC Position
We agree with respondent. The benchmark for determining costs in
this case is the cost of growing kiwifruit to the current grower. This
grower leased orchards from an unrelated party in an arm's-length
transaction. Lease payment includes rates expense. Therefore, we have
not added any additional rates expense in our calculations.
Comment 48
Petitioners argue that this grower did not report any set-up costs
and that respondent's claim that the leases for leased properties
included set-up costs is unsupported. Petitioners contend that the
Department should impute set-up costs for this grower.
Respondent argues that the grower leased the orchards at arm's
length from unrelated parties and that the lease payments constituted
the entire compensation to the owner for the use of orchards.
DOC Position
We agree with respondent. This grower leased established orchards
at arm's length from unrelated parties. The lease payments constituted
the entire compensation to the owner for the use of orchards. Thus, the
lease payment effectively reflects the lessor's portion of orchard set-
up costs. Accordingly, we have accepted respondent's claim regarding
set-up costs.
Comment 49
Petitioners argue that respondent understated the G&A expenses for
this grower. Petitioners request that the Department recalculate the
G&A expense for this grower.
DOC Position
We disagree. First, the Department verified this grower's cost in
New Zealand and made certain adjustments to its G&A expenses for the
preliminary results. Second, petitioners have not explained why
respondent's reported G&A expense is not accurate. No additional
adjustment is warranted.
Grower 15
Comment 50
Petitioners argue that certain direct and indirect expenses for
this grower should be recalculated because most expenses were
classified as common and allocated to kiwifruit or cattle/other on the
basis of land area. Petitioners further assert that the allocation to
cattle/other is unreasonable because the kiwifruit vines were not cut
down and the cattle were not introduced until after the harvest, which
occurred two to three months after the end of the period covered by the
financial statement.
In addition, petitioners argue that insurance costs should be
expensed as of the time incurred since the future financial statements
are not likely to show any liability for this cost.
DOC Position
We disagree with petitioners. Respondent's methodology of
allocating costs based on land area is an acceptable methodology in
this case. Although cattle were not fully introduced into the grower's
operations before the kiwifruit harvest, nevertheless, the grower
incurred development costs during the POR that were related to the
establishment of the new cattle operations. Therefore, we accepted
respondent's cost allocation as an appropriate estimation of the cost
of cultivating kiwifruit. Accordingly, we have not adjusted
respondent's figure for the final results.
With regard to petitioners' argument concerning the insurance
premium, we disagree with petitioners because GAAP in New Zealand
allows entities to amortize the value of insurance premiums for loans
over the life of loan. Accordingly, we have not adjusted respondent's
costs for insurance premiums in the final results.
Comment 51
Petitioners argue that the allocation of interest expense on the
basis of land area is not reasonable for this grower because it
understates the interest expense applicable to kiwifruit. Petitioners
contend that this expense should be recalculated.
DOC Position
We disagree with petitioners. Respondent's methodology of
allocating interest based on land area is reasonable because it
attempts to approximate actual expense in terms of the relative
resources devoted to the kiwifruit in relation to other activities on
the farm. Therefore, we have accepted respondent's allocation of
interest expenses.
Grower 16
Comment 52
Petitioners argue that the Department's preliminary analysis
memorandum suggests that the Department intended to recalculate the
``other'' category of expense for this grower. Petitioners urge the
Department to recalculate the ``other'' expense for the final results.
DOC Position
Because respondent's figure understated its actual ``other''
expense category, we intended to reallocate this expense by orchard
area. For these final results, we have used the revised figure.
Comment 53
Petitioners argue that the Department should recalculate labor cost
for this grower because the grower raised multiple crops and reported
imputed, rather than actual, labor cost.
DOC Position
We disagree with petitioners. Respondent's methodology of
allocating costs is an acceptable methodology in this case. Respondent
reported direct-labor costs other than owner labor based on his
financial statements. Without a more accurate alternative, we accepted
respondent's cost allocation as an appropriate estimation of the cost
of cultivating kiwifruit. Accordingly, no adjustment has been made to
respondent's information for the final results.
Comment 54
Respondent argues that the Department should reallocate
horticultural costs based on net orchard area because the Department
failed to account for the headlands and sidelands of other orchard
crops.
DOC Position
We disagree. Since respondent did not provide an exact breakdown
between canopy, shelterbelts, headlands, sidelands, pasture, and
residential area, the Department imputed the land area devoted to
headlands, sidelands, and shelterbelts. In addition, this grower's
response to the Department's questionnaire indicated that the pasture
area was leased to another party. Headlands, sidelands, and
shelterbelts are crucial to growing kiwifruit. However, respondent did
not put forward any support that demonstrated that headlands,
sidelands, and shelterbelts are an integral part of this grower's other
crops. Without any contrary evidence on the record, the Department
could only conclude that the land area for headlands, sidelands, and
shelterbelts applies solely to kiwifruit production.
Grower 17
Comment 55
Petitioners argue that the Department should incorporate into its
COP analysis the cost of the spray expense that the grower sold to a
third party because the grower failed to provide an invoice for it at
verification. Furthermore, petitioners contend that there is no
indication that the sale price for the spray was the same as the
grower's purchase price for the spray. Petitioners argue that if the
resale price of the spray was higher, the Department should ensure that
the actual costs are not distorted by a profit the grower may have made
on the sale.
DOC Position
We disagree with petitioners. The Department verified this grower's
costs, including spray costs, in New Zealand by tracing it from the
original invoice to the grower's bank account. We have found them to
reflect the actual costs of producing kiwifruit. Accordingly, no
adjustment to the grower's costs for the spray expense has been made in
the final results.
With respect to petitioners argument regarding the resale price of
the spray, the Department has made no adjustment for potential profits.
The total cost of the spray and the total amount of revenue received by
respondent for the resold spray was verified by the Department. The
Department was able to determine that potential profit incurred on the
resale of the spray would have no significant impact on the dumping
margin. Thus, pursuant to 19 CFR Sec. 353.59, we have disregarded this
insignificant adjustment.
Comment 56
Petitioners contend that since this grower raised apples as well as
kiwifruit, the Department should disregard respondent's allocation and
recompute an imputed labor cost for the grower's labor.
DOC Position
We disagree. Respondent's methodology of allocating costs based on
orchard land area is an acceptable methodology in this case. Without a
more accurate alternative, we accepted respondent's cost allocation as
an appropriate estimation of the cost of cultivating kiwifruit and have
used it in these final results.
Comment 57
Respondent argues that the Department should allocate horticultural
costs based on net orchard area because this grower's other crops have
headlands, sidelands, and shelterbelts around them.
DOC Position
We agree with respondent in part. In the case of this particular
grower, apple and kiwifruit crops were planted together and the
Department verified that both crops were surrounded by headlands,
sidelands, and shelterbelts. Although the Department recognizes that
shelterbelts are not crucial to the apple trees, since both crops were
planted side-by-side, we have revised some of this grower's costs and
allocated them on the basis of net area only in the final results.
Comment 58
Respondent contends that the Department should not allocate to
kiwifruit the entire depreciation cost of the jeep because it is a
luxury vehicle used as the family car and not in the orchard business.
DOC Position
We disagree with respondent because the depreciation expense for
the jeep was fully allotted to the orchard in the grower's financial
statement. Absent specific evidence to the contrary, we consider
expenses recorded in a company's financial statements to reflect actual
expenses incurred in its operations. See Final Results of Sales at Less
Than Fair Value, Sweaters Wholly or in Chief Weight of Man-Made Fiber
From Taiwan, 55 FR 34585 (1990). Respondent has not presented any
documentary evidence in support of its claim that the depreciation
expense was not an actual expense. Accordingly, we continue to rely on
the grower's financial statement for orchard expenses in the final
results.
Comment 59
Respondent argues that the Department improperly denied a credit to
COP for packaging sold by the grower and contends that it is
appropriate for the Department to allow such a packaging credit.
DOC Position
We disagree with respondent. The credit in question was granted by
the packhouse for kiwifruit packaging specifically to be used in future
years. However, since the grower is no longer in the kiwifruit
business, he would not be able to use this credit for kiwifruit
packaging. Accordingly, we have not allowed for such a credit in our
COP analysis.
Grower 18
Comment 60
Petitioners argue that, since this grower raised apples as well as
kiwifruit, its labor cost should be recomputed to reflect actual costs
of growing kiwifruit.
DOC Position
We disagree. Respondent reported direct labor as recorded in the
grower's financial statement and the Department reviewed this grower's
financial statements in New Zealand. The Department found the
methodology of allocating labor costs for this grower to be reasonable.
Without a more accurate alternative, we accepted respondent's cost
allocation as an appropriate estimation of the cost of cultivating
kiwifruit. Accordingly, we have used respondent's allocation for the
final results.
Comment 61
Petitioners argue that since the grower did not report rates, the
Department should calculate rates for this grower.
DOC Position
We disagree with petitioners. We verified this grower's expenses in
New Zealand. This grower did not incur an expense for rates during the
POR. Therefore, we did not include such an expense for this grower in
our COP calculation.
Comment 62
Respondent contends that the Department should allocate
horticultural costs based on net orchard area because, along with
kiwifruit, this grower's other crop was also surrounded by headlands,
sidelands, and shelterbelts. In addition, respondent asserts that the
Department should include only those costs in the COP analysis that
were incurred by the current grower during the POR.
DOC Position
We agree with respondent in part. In the case of this particular
grower, apple and kiwifruit crops were planted side-by-side and the
Department verified that both apples and kiwifruit crops were
surrounded by headlands, sidelands, and shelterbelts. Although the
Department recognizes that shelterbelts are not crucial to the apple
trees, since both crops were surrounded by shelterbelts, we have
revised certain costs and allocated them over net area only.
With regard to respondent's second argument, we agree with
respondent that the benchmark for determining costs in this case is the
cost of growing kiwifruit to the current owner. Therefore, we have
excluded costs outside the POR from the COP calculations for this
grower.
Grower 20
Comment 63
Petitioners assert that this grower has omitted repacking and
interest expenses from its cost calculation. Furthermore, petitioners
contend that gains on the sale of fixed assets in G&A expenses should
be excluded. According to petitioners, since respondent claimed that
coolstore costs were incurred by NZKMB, rebates from coolstore should
not be deducted from packing costs.
Respondent maintains that all repacking costs have been included in
NZKMB's cost response because NZKMB is responsible for these costs and
reimburses the growers for any repacking expenses. Furthermore,
respondent argues that interest expense was allocated on a consolidated
financial statement basis which includes all debt, both corporate and
for the orchard. According to respondent, gains on sales of assets are
a legitimate inclusion in the G&A expense, and the coolstore rebate is
a reduction in the packing cost paid to the packhouse/coolstore and
should be included in COP calculation.
DOC Position
We agree with respondent that COP is allocated only to fruit sold.
Thus, all costs have been properly allocated. Since NZKMB is
responsible for repacking costs and reimburses the growers for these
expenses, all repackaging costs have already been included in NZKMB's
response. Respondent reported the grower's interest expense on a
consolidated financial statement basis which includes corporate and
orchard interest.
We agree with respondent that gains on sales of assets are a proper
inclusion in the G&A expense and that the coolstore rebate is a
reduction in the packing cost paid to the packhouse/coolstore and,
therefore, is properly included in the COP.
Other Comments
Comment 64
Respondent contends that the Department failed to adjust NZKMB's
interest expenses by the amount of interest NZKMB earned on short-term
deposits. Respondent asserts that the Department normally permits an
offset of interest expenses by short-term interest income, citing the
Final Determination of Sales at Less Than Fair Value: Calcium Aluminate
Cement, Cement Clinker and Flux from France (59 FR 14136, March 25,
1994).
DOC Position
We agree with respondent. Because of a clerical error the
Department inadvertently did not adjust respondent's interest expenses
by the amount of short-term interest income. We have corrected this
clerical error for these final results.
Comment 65
Respondent contends that due to a clerical error in the computer
program, the Department's model match exercise did not result in the
most similar matches for the U.S. sales. Respondent urges the
Department to ensure that comparisons are made on the most similar
products.
DOC Position
We agree. Upon reviewing the computer program we found an error
that did not allow for the most similar products to be compared to the
U.S. merchandise. We have corrected the computer program for the final
results.
Comment 66
Respondent argues that the Department failed to subtract the
quantity adjustment amount from the quantity and that this manipulation
is required to yield the actual quantity sold. Respondent urges the
Department to correct this clerical error.
DOC Position
We agree with respondent and have made the appropriate adjustments
in the final results.
Comment 67
Petitioners argue that the Department should deduct U.S. repacking
expenses in the calculation of ESP because repacking expenses represent
costs for an operation performed in the United States and not an export
packing expense.
DOC Position
We agree. We have made the appropriate adjustment in the final
results.
Comment 68
Petitioners argue that the Department incorrectly entered a
customer code in its computer program and urge the Department to
correct this error. Furthermore, petitioners contend that the
Department should add that particular customer's expense category to
the movement expenses.
DOC Position
We agree with petitioners that an incorrect instruction in the
computer program resulted in a erroneous customer code and did not add
this customer's expense category to the movement expenses. We have
corrected this clerical error in the final results.
Comment 69
Petitioners argue that in calculating PP, the Department treated
certain expenses as indirect expenses. Petitioners assert that, as
presented by NZKMB, these costs are direct expenses and, therefore,
should be treated as such.
DOC Position
We agree. We have treated these expenses as direct expenses in the
final results.
Comment 70
Petitioners argue that the Department incorrectly calculated U.S.
packing expense by excluding labelling and tagging expenses in its
sale-to-sale comparisons. Petitioners urge the Department to correct
this clerical error by adding labelling and tagging expense to export
packing.
DOC Position
We agree. Accordingly, we have made the appropriate adjustments in
the final results.
Comment 71
Respondent argues that in calculating CV, the Department
inadvertently double-counted packing costs by using the packing-
inclusive cost of cultivation and then adding the packing costs again
to the CV.
Petitioners assert that the Department did not use the actual
packing cost in its calculations.
DOC Position
We agree with both petitioners and respondent. Upon reviewing our
calculations, we found that we had inadvertently double-counted packing
costs and did not use the actual packing costs. We have revised our
calculations to reflect these adjustments in the final results.
Comment 72
Respondent argues that the Department improperly deducted credit
expenses in calculating the net home market price to be compared to the
COP. Additionally, respondent contends that the Department improperly
included inventory carrying costs in the calculation of COP. To support
its argument, respondent cites Gray Portland Cement and Clinker from
Japan; Final Results of Administrative Review (58 FR 48826, 48831,
September 20, 1993), in which the Department did not take into account
imputed credit expense and inventory carrying costs when testing sales
below the COP.
DOC Position
Upon reviewing our calculations, we found that we had inadvertently
deducted credit expenses in calculating the net price to be compared to
COP. We also inadvertently included inventory carrying costs in
calculating the COP. We have corrected our calculations for the final
results.
Comment 73
Respondent argues that the Department inadvertently double- counted
pallet tagging and labelling expenses in the CV margin calculation by
including these expenses twice in its calculations.
DOC Position
We agree. We have corrected our calculations for the final results.
Comment 74
Respondent argues that in testing whether sales were made below
cost, the Department inadvertently used a one-month threshold, although
the preliminary results indicated a threshold of ``more than two
months.'' According to respondent, the Department's practice in
administrative reviews is to use a period of time greater than two
months in implementing 19 CFR 353.51(a)(1), which allows the Department
to disregard sales below cost in the calculation of FMV only if they
are made ``over an extended period'' of time.
DOC Position
We inadvertently relied on a one-month threshold of sales below
cost instead of a ``more than two month'' threshold in our preliminary
COP analysis. We have corrected our calculations in the final results.
Comment 75
Petitioners argue that, in its CV calculations, the Department used
a flawed formula for determining whether actual SG&A or the 10 percent
of COM statutory minimum be used.
DOC Position
We agree. We have corrected this clerical error in the final
results.
Final Results of Review
Upon review of comments submitted, the Department has determined
that the following margin exists for the period November 27, 1991,
through May 31, 1993:
------------------------------------------------------------------------
Margin
Manufacturer/Exporter (percent)
------------------------------------------------------------------------
New Zealand Kiwifruit Marketing Board...................... 15.41
------------------------------------------------------------------------
The Customs Service shall assess antidumping duties on all
appropriate entries. Individual differences between U.S. price and FMV
may vary from the percentage stated above. The Department will issue
appraisement instructions concerning the respondent directly to the
U.S. Customs Service.
Furthermore, the following deposit requirements will be effective
for all shipments of the subject merchandise, entered, or withdrawn
from warehouse, for consumption on or after the publication date of
these final results of administrative review, as provided for by
section 751(a)(1) of the Act: (1) the cash deposit rate for the
reviewed firm will be 15.41%; and (2) the cash deposit rate for
merchandise exported by all other manufacturers and exporters who are
not covered by this review will be the ``all others'' rate of 98.60
percent established in the less-than-fair-value investigation; in
accordance with the Department practice. See Floral Trade Council v.
United States, 822 F.Supp. 766 (1993), and Federal Mogul Corporation,
822 F.Supp. 782 (1993).
These deposit requirements shall remain in effect until publication
of the final results of the next administrative review.
This notice serves as the final reminder to importers of their
responsibility under 19 CFR 353.26 to file a certificate regarding the
reimbursement of antidumping duties prior to liquidation of the
relevant entries during this review period. Failure to comply with this
requirement could result in the Secretary's presumption that
reimbursement of antidumping duties occurred and the subsequent
assessment of double antidumping duties.
This notice also serves as a reminder to parties subject to
administrative protective order (APO) of their responsibility
concerning the disposition of proprietary information disclosed under
APO in accordance with 19 CFR 353.34(d). Timely written notification or
conversion to judicial protective order is hereby requested. Failure to
comply with the regulations and the terms of the APO is a sanctionable
violation.
This administrative review and notice are in accordance with
section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)) and 19 CFR 353.22.
Dated: September 16, 1994.
Paul L. Joffe,
Deputy Assistant Secretary for Import Administration.
[FR Doc. 94-23504 Filed 9-21-94; 8:45 am]
BILLING CODE 3510-DS-P
