Fresh Kiwifruit From New Zealand; Final Results of Antidumping Administrative Review

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