Final Determination of Sales at Less Than Fair Value: Fresh Cut Roses from Ecuador

DEPARTMENT OF COMMERCE

[A-331-801]

Final Determination of Sales at Less Than Fair Value: Fresh Cut

Roses from Ecuador

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

EFFECTIVE DATE: February 6, 1995.

FOR FURTHER INFORMATION CONTACT: James Terpstra or Pamela Ward, Office

of Antidumping Investigations, Import Administration, U.S. Department

of Commerce, 14th Street and Constitution Avenue, N.W., Washington,

D.C. 20230; telephone (202) 482-3965 or (202) 482-1174, respectively.

Final Determination

We determine that fresh cut roses (roses) from Ecuador are being,

or are likely to be, sold in the United States at less than fair value,

as provided in 19 U.S.C. 1673d. The estimated margins are shown in the

``Suspension of Liquidation'' section of this notice.

Case History

Since the notice of preliminary determination on September 13, 1994

(59 FR 48299, September 20, 1994), the following events have occurred.

In September and October, the Department of Commerce (the

Department) received responses to the Department's supplemental

questionnaires.

On September 20 and 27, 1994, Arbusta, Florinsa and Guanguilqui

Agro Industrial S.A. (Guaisa), three of the mandatory respondents, and

Inversiones Floricola S.A. (Floricola), the fourth mandatory

respondent, respectively, requested a postponement of the final

determination. On September 28, 1994, the Department agreed to postpone

the final determination until January 26, 1995 (59 FR 50725; October 5,

1994).

On September 20, 1994, Arbusta made allegations of clerical errors

in the calculation of Arbusta's preliminary margin. In addition,

Florinsa requested that the Department reconsider its preliminary

determination and assign it a less punitive BIA rate.

On September 28, 1994, the Department received a new sales listing

from Arbusta. This was returned to Arbusta on September 30, 1994, as

untimely in accordance with 19 C.F.R. 353.31(a).

On September 29 and 30, 1994, the Department received requests for

a public hearing from respondents, petitioners, and the Government of

Ecuador.

On September 30, 1994, petitioner submitted comments on the

Department's verification outline.

On October 3, 1994, White and Case entered a Notice of Appearance

on behalf of Denmar, S.A. an interested party. Denmar S.A. and its

related companies are, collectively, a producer, exporter and importer

of fresh cut roses from Ecuador.

Department personnel conducted sales and cost verifications of

respondents' data from October 3, 1994, through November 11, 1994, in

Quito, Ecuador; the Netherlands; Miami, Florida; New York, New York;

and Los Angeles, California.

On October 14, 1994, the Department received a notice of appearance

from Klayman & Associates on behalf of the Government of Ecuador and

received comments on the preliminary determination on October 17, 1994.

On November 23, 1994, the Department received new computer tapes

from Floricola.

In December the Department issued its verification reports.

The Department received general issues case briefs on December 2

and 12, 1994. The Department received general issues rebuttal briefs on

December 16 and 19, 1994. The Department received company specific case

briefs on December 23 and 30, 1994. The Department received company

specific rebuttal briefs on January 5, 1995.

On January 3, 1995, the Department received new computer tapes from

Guaisa, Florinsa and Arbusta.

On January 5, 1995, Klayman & Associates withdrew its appearance on

behalf of the Government of Ecuador. On the same day, Kay, Scholer,

Fierman, Hays & Handler entered an appearance on behalf of the

Government of Ecuador.

A public hearing was held on January 6, 1995.

Scope of Investigation

The products covered by this investigation are fresh cut roses,

including sweethearts or miniatures, intermediates, and hybrid teas,

whether imported as individual blooms (stems) or in bouquets or

bunches. Loose rose foliage (greens), loose rose petals and detached

buds are excluded from the scope of these investigations. Roses are

classifiable under subheadings 0603.10.6010 and 0603.10.6090 of the

Harmonized Tariff Schedule of the United States (HTSUS). The HTSUS

subheadings are provided for convenience and customs purposes. The

written description of the scope of this investigation is dispositive.

Period of Investigation

The period of investigation (POI) is January 1, 1993, through

December 31, 1993. See the April 14, 1994, Memorandum from the Team to

Richard W. Moreland.

Applicable Statute and Regulations

Unless otherwise indicated, all citations to the statute and to the

Department's regulations are in reference to the provisions as they

existed on December 31, 1994.

Best Information Available

We have determined, in accordance with 19 U.S.C. 1677e(c), that the

use of best information available (BIA) is appropriate for sales of the

subject merchandise by Florinsa. We have found that Florinsa's original

and deficiency questionnaire responses were unusable for the final

determination because they contained significant deficiencies and could

not be verified. See the January 19, 1995, Memorandum from the Team to

Barbara Stafford. These deficiencies were so substantial that it was

not possible for the [[Page 7020]] Department to calculate an

antidumping duty margin for Florinsa.

In assigning BIA, the Department applies a two-tier methodology

based on the degree of respondent's cooperation. In the first tier, the

Department normally assigns higher margins (i.e., margins based on more

adverse assumptions) for those respondents which did not cooperate in

an investigation or which otherwise impede the proceeding. If a

respondent is deemed as non-cooperative, the Department bases the final

margin for the relevant class or kind of merchandise on the higher of:

(1) The highest margin in the petition or (2) the highest calculated

margin of any respondent within the country that supplied adequate

responses for the relevant class or kind of merchandise.

In the second tier, the Department assigns lower margins to those

respondents who substantially cooperate in an investigation. These

margins are based on the higher of: (1) The highest calculated margin

for any respondent within that country that supplied adequate

information for the relevant class or kind of merchandise or (2) the

average of the margins in the petition. See, e.g., Final Determination

of Sales at Less than Fair Value: Antifriction Bearings (Other than

Tapered Roller Bearings) and Parts Thereof from the Federal Republic of

Germany, 54 FR 18992 (May 3, 1989).

The Department's two-tiered methodology for assigning BIA has been

upheld by the U.S. Court of Appeals for the Federal Circuit. See

Allied-Signal Aerospace Co. v. United States, 996 F.2d 1185 (Fed. Cir.

1993); see also Krupp Stahl AG v. United States, 822 F. Supp. 789 (CIT

1993).

Florinsa responded to our requests for information and we find that

it has been substantially cooperative for purposes of this final

determination. Accordingly, we used as second-tier BIA for this

respondent, the average of the margins contained in the petition, which

is 84.72 percent. This margin is higher than the highest margin

calculated for any respondent in this investigation.

Exclusion of BIA Rate From Calculation of the ``All Others'' Rate

The Department has determined to exclude from the calculation of

the ``All Others'' rate the BIA rate assessed to Florinsa. The

Department's general practice is to include in its calculation of an

``all others'' rate all investigated firms that receive affirmative

margins, including any firm whose margin is based upon BIA. However,

where appropriate, the Department has departed from its general

practice in prior cases and excluded BIA-based margins from the

calculation of the ``all others'' rate. See, e.g., Silicomanganese from

Brazil, 59 FR 55432 (November 7, 1994); Sweaters from Hong Kong

(Sweaters), 55 FR 30733 (July 27, 1990) (affirmed by the CIT in

National Knitwear).

For example, in Sweaters, an association of Hong Kong knitting

manufacturers and an association of U.S. textile and apparel importers

argued that firms not representative of the industry should not be

included in the calculation of the ``all others'' rate, particularly

where a firm had received a BIA-based margin. The Department agreed

that departure from its general practice was warranted because it would

have been ``inappropriate'' to include The BIA-based rate in the

calculation of the ``all others'' rate given ``(1) The enormous

disparity between the three verified rates and the highest rate in the

petition, i.e., approximately 20 times greater; (2) [the Department's]

examination of only the top 30 percent of total quota holdings, and (3)

the small number of firms investigated, i.e., four from a potential

pool of over 300.'' 55 FR 30737-38 (comment 3).

Like Sweaters, the unusual circumstances present in the instant

proceedings, particularly the Department's need to limit the number of

firms investigated, call into question the representativeness of

investigated firms with respect to noninvestigated firms. Specifically,

(1) The Department only examined companies which produced the

top 40 percent of the total export volume, as opposed to the normal

60 percent minimum proscribed by the Department's regulations (19

C.F.R. 353.42(b));

(2) the Department examined only a relatively small number of

firms, i.e., four out of a potential pool of 20 firms in Ecuador;

(3) the Department was unable, due to administrative burdens, to

accept voluntary respondents and exclusion requests.

Based on these circumstances and in light of the Sweaters

precedent, it is reasonable to exclude Florinsa's BIA-based margin from

the calculation of the ``all others'' rate. See comment 21, infra for

petitioner and respondent arguments. See also the January 13, 1995,

Memorandum from the Office of Chief Counsel to Susan G. Esserman.

Such or Similar Comparisons

We have determined that all roses covered by this investigation

comprise two categories of ``such or similar'' merchandise: culls and

export-quality roses. None of the respondents reported sales of culls

in the United States. Therefore, no comparisons in this such or similar

category were made. Regarding export quality roses, we compared United

States Price (USP) to constructed value (CV).

Fair Value Comparisons

To determine whether sales of roses from Ecuador to the United

States were made at less than fair value, we compared the USP to the CV

for all non-BIA respondents, as specified in the ``United States

Price'' and ``Foreign Market Value'' sections of this notice.

United States Price

For all U.S. prices, we calculated USP using weighted-average

monthly prices by rose type, where the appropriate data were available.

See Comments 4 and 5 below.

During the POI, respondents paid commissions to related parties in

the United States. However, we made no adjustment for these payments.

Instead, we subtracted the actual indirect selling expenses incurred by

the related party in the United States because we determined that to

account for both commissions and actual expenses would be distortive.

See Comment 7 below.

For sales by Arbusta and Guaisa, we based USP on purchase price, in

accordance with 19 U.S.C. 1677a(b), when the subject merchandise was

sold to unrelated purchasers in the United States prior to importation

and when exporter's sales price (ESP) methodology was not otherwise

indicated.

In addition, for Arbusta, Guaisa, and Floricola, where sales to the

first unrelated purchaser took place after importation into the United

States, we also based USP on ESP, in accordance with 19 U.S.C 1677a(c).

Each of the respondents classified credits related to quality

problems with the merchandise as warranty expenses. However, because

these quality-related credits functioned as price reductions, we

reclassified them as such.

We made company-specific adjustments, as follows:

1. Arbusta

For Arbusta, we calculated purchase price based on packed F.O.B.

Quito prices to unrelated customers. In accordance with 19 U.S.C.

1677a(d)(2)(A), we made deductions, where appropriate, for foreign

inland freight and for quality-related credits and for export taxes

imposed by the Government of Ecuador, in accordance with 19 U.S.C.

1677a(d)(2)(B). We also deducted DHL expenses for one customer.

[[Page 7021]]

We calculated ESP based on packed prices to unrelated customers in

the United States. We made deductions, where appropriate, for quality-

related credits, foreign inland freight, export taxes, air freight,

U.S. customs duties, U.S. brokerage and handling expenses and U.S.

inland freight. We also made deductions for direct selling expenses

inlcuding credit and for U.S. and Ecuadorian indirect selling expenses,

including inventory carrying costs.

Regarding export taxes, Arbusta did not report these taxes in its

sales listing. Because the taxes are included in the USP, we,

therefore, calculated them based on the formula given in Arbusta's

response.

2. Floricola

For Floricola, we calculated ESP based on packed prices to

unrelated customers in the United States. We made deductions, where

appropriate, for quality-related credits, including billing and other

credits, foreign inland freight, export taxes imposed by the government

of Ecuador, air freight, U.S. customs duties, U.S. inland freight and

credit expenses. We also made deductions for U.S., Panamanian, and

Ecuadorian indirect selling expenses, including brokerage and handling

expenses and inventory carrying costs.

Floricola failed to report inventory carrying costs on their ESP

sales. Accordingly, as in the preliminary determination, we calculated

these costs using an inventory carrying period of seven days.

3. Guaisa

For Guaisa, we calculated purchase price based on packed F.O.B.

Quito prices to unrelated customers. We made deductions, where

appropriate, for quality-related credits and foreign inland freight. We

also made deductions for export taxes imposed by the Government of

Ecuador.

We calculated ESP based on packed prices to unrelated customers in

the United States. We made deductions, where appropriate, for quality-

related credits, foreign inland freight, U.S. inland freight, air

freight, U.S. customs duties, U.S. brokerage and handling expenses,

employee commissions, credit expenses and indirect selling expenses

including warehousing expenses inventory carrying costs.

Guaisa reported that it earned a rebate, as well as six free round-

trip tickets, from its air freight carrier based on its volume of sales

to the United States during the POI. We deducted the rebate from

Guaisa's air freight calculations. However, because the airline tickets

were not a direct reduction in the air freight paid, we did not reduce

Guaisa's air freight.

Foreign Market Value

We based FMV on CV for all producers. For those respondents with

viable third country markets, we rejected sales to these markets. See

Comment 6 below. The remaining respondent had no viable home or third

country market. We calculated CV on a rose type basis, where the

appropriate data were available. See comment 5 below.

In order to determine whether there were sufficient sales of fresh

cut roses in the home market to serve as a viable basis for calculating

FMV, we compared the volume of home market sales of export quality

roses to the volume of third country sales of export quality roses in

accordance with 19 U.S.C. 1677b(a)(1)(A). Based on this comparison, we

determined that none of the three non-BIA respondents had viable home

markets.

In the preliminary determination, we based FMV for two of the three

non-BIA respondents on third country sales. However, as set forth in

Comment 6 below, we determined third country prices as an inappropriate

basis for FMV in this investigation. Therefore, we calculated FMV based

on CV for all non-BIA companies, in accordance with 19 U.S.C. 1677b(e).

Third Country Versus Constructed Value

The Department has determined that FMV should be based on CV rather

than third country. For a full discussion of this issue, see Comment 6

below.

Constructed Value

We also made specific adjustments to each respondent's submitted

COP and CV data as described below:

1. Arbusta

For Arbusta, we: (1) Adjusted amortization and depreciation

expenses for the effects of Ecuadorian inflation; (2) corrected G&A to

reflect income generated from the sale of humus; (3) reclassified the

FONIN tax to selling expenses; (4) removed foreign exchange gains

unrelated to production from the reported financial expenses.

2. Floricola

For Floricola, we: (1) Adjusted amortization and depreciation

expenses for the effects of Ecuadorian inflation; (2) corrected a

computational error in the amortization expense; (3) reclassified the

FONIN tax to selling expenses; (4) included the amortization of pre-

operating expenses and corrected the over accrual of other expenses in

G&A; (5) reclassified insurance reimbursements, gain on sale of fixed

assets and other expenses from financial expense to G&A; (6) revised

the cost of goods sold used as the allocation basis for G&A; and, (7)

decreased short term financial income for foreign exchange gains from

sales transactions.

3. Guaisa

For Guaisa, we: (1) Adjusted amortization and depreciation expenses

for the effects of Ecuadorian inflation; (2) corrected the allocation

methodology for certain expenses to a relative area planted

methodology; (3) included the write-off of greenhouses; (4) adjusted

costs for two clerical errors; (5) increased financial expenses to

include all interest paid; (6) increased financial expenses for

translation losses on loans denominated on foreign currencies; (7)

increased the quantity of export quality roses to reflect normal

production levels.

In order to calculate FMV, we made company-specific adjustments as

described below:

1. Arbusta

For CV to purchase price comparisons, we made circumstance of sale

adjustments for direct selling expenses including credit expenses.

For CV to ESP comparisons, we made deductions, where appropriate,

for direct selling expenses including credit expenses. We also deducted

from CV indirect selling expenses, including inventory carrying costs

up to the amount of indirect selling expenses incurred on U.S. sales,

in accordance with 19 CFR 353.56(b)(2).

2. Floricola

For CV to ESP comparisons, we made deductions, where appropriate

for direct selling expenses. We also deducted the indirect selling

expenses up to the amount of the indirect selling expenses incurred on

U.S. sales, in accordance with 19 CFR 353.56(b)(2).

3. Guaisa

For CV to purchase price comparisons, we made circumstance of sale

adjustments for direct selling expenses including credit expenses and

export taxes.

For CV to ESP comparisons, we made deductions, where appropriate,

for direct selling expenses including credit expenses and export taxes.

We also deducted from CV the indirect selling expenses, including

inventory carrying costs and warehousing expenses up to the amount of

indirect selling expenses [[Page 7022]] incurred on U.S. sales, in

accordance with 19 CFR 353.56(b)(2).

Currency Conversion

Because certified exchange rates for Ecuador were unavailable from

the Federal Reserve, we made currency conversions for expenses

denominated in Ecuadorian sucres based on the official monthly exchange

rates in effect on the dates of the U.S. sales as published by the

International Monetary Fund.

Verification

As provided in 19 U.S.C. 1677e(b), Department personnel conducted

sales and cost verifications of respondents' data from October 3, 1994,

through November 11, 1994, in Quito, Ecuador; the Netherlands; Miami,

Florida; New York, New York; and Los Angeles, California.

Critical Circumstances

In the petition, petitioner alleged that ``critical circumstances''

exist with respect to importation of roses. However, we did not

initiate a critical circumstances investigation. Because roses are

extremely perishable, it is not possible to accumulate an inventory of

roses in order to evade a potential antidumping duty order. Therefore,

we determined that an allegation that critical circumstances exist is

without merit. See the September 12, 1994, Concurrence Memorandum.

Interested Party Comments

The Department conducted LTFV investigations in Fresh Cut Roses

from Ecuador and Fresh Cut Roses from Colombia concurrently. We

determined that certain decisions should be applied consistently across

both cases, even though parties may have placed different arguments on

the record as these decisions concerned issues common to both cases.

All decision memoranda pertaining to general issues and corresponding

supporting documentation are on the record for both investigations. The

information discussed in the General Comments section of this notice is

all non-proprietary. Therefore, unless otherwise stated, the General

Comments apply to both investigations, even if parties in one

investigation did not specifically address the issue.

General Comments

Petitioner and respondents raised comments pertaining to the

concordance, the treatment of Difmer adjustments, the aggregation of

third country markets, and annual and monthly averaging of FMV. These

comments were rendered moot by the Department's decision to base FMV on

CV. See Comment 6 below.

Comments Pertaining to Scope

Comment 1: Roses in Bouquets

Respondents assert that roses in bouquets should not be included

within the scope of the investigation for four reasons: (1) There is no

legal basis for the Department to include within the scope of the

investigation only a component part contained in imported finished

merchandise (i.e., the roses within the bouquet); (2) bouquets are not

within the same class or kind of merchandise as roses according to the

criteria set out in Diversified Products v. United States, 572 F. Supp.

883, 889 (CIT 1983) (Diversified Products); (3) the Department lacks

the authority to expand the investigation to include bouquets; and (4)

petitioner does not represent producers of bouquets or producers of

``roses in bouquets.'' Respondents have supplied an analysis of the

information in these investigations as applied to Diversified Products.

Petitioner requests that the Department continue to include roses

in bouquets within the scope of its investigation. Petitioner states

that since the description of bouquets is found in the petition, the

Department's and ITC's preliminary determinations are dispositive as to

the scope of the investigation, and an analysis under Diversified

Products is unnecessary, although petitioner supplied such an analysis.

Petitioner states that the scope description in the petition covers all

fresh cut roses, whether imported as individual blooms (stems) or in

bouquets or bunches. Also, petitioner claims to represent growers

producing mixed bouquets of fresh cut flowers, and hence has standing

to file a petition covering bouquets.

Petitioner maintains that any antidumping duty order issued in this

investigation will be substantially undermined if foreign rose

producers/exporters can circumvent the order by importing bouquets of

fresh cut roses covered by the order. Petitioner states that it would

be absurd for the Department to permit respondents to combine

merchandise subject to the order to achieve a final product outside the

scope of the order.

DOC Position

Roses, including roses in bouquets, are within the scope of the

investigation and constitute a single class or kind of merchandise.

Because the scope covers only the roses in bouquets, not the bouquets

themselves, respondents' arguments that bouquets constitute a separate

class or kind are inapposite. Therefore, a Diversified Products

analysis is not required. The Department's conclusion that all roses,

whether or not imported as individual stems or in bouquets or bunches,

constitute a single class or kind of merchandise is consistent with its

determination in Flowers. See Flowers, 59 FR 15159, 15162-4 (March 31,

1994) (final results of 4th admin. review).

The packaging and presentation of roses in bunches and bouquets do

not transform the roses into merchandise outside the scope of the

order. See Final Determination of Sales at Less Than Fair Value; Red

Raspberries from Canada, 50 FR 19768, 19771 (May 10, 1985). Nor is the

rose transformed into a new article by virtue of being bunched or

placed in a bouquet. Notably, Customs disaggregates bouquets, requiring

separate reporting and collection of duties on individual flower stems

regardless of how they are imported. As a result, Customs, in this

case, will collect duty deposits only on individual rose stems

incorporated in bouquets, not the bouquets themselves.

Respondents argue that there is no legal basis for the Department

to include within the scope of an investigation only a component part

of imported finished merchandise, i.e., the roses within the bouquet.

As discussed above, consistent with Customs, the Department is not

treating bouquets as a distinct finished product.

Respondents' argument that the Department cannot expand the

investigation to include bouquets, also can be dismissed. A review of

the descriptions contained in the petition and the Department's and ITC

preliminary determinations reveals quite clearly that what is covered

by this investigation is all fresh cut roses, regardless of the form in

which they were imported. Specifically, the petition covers ``all fresh

cut roses, whether imported as individual blooms (stems) or in bouquets

or bunches, as provided in HTSUS 0603.10.60.'' Petition at 8 (emphasis

added). HTSUS 0603.10.60 covers

Cut flowers and flower buds of a kind suitable for bouquets or

for ornamental purposes, fresh * * *

0603.10.60 Roses:

10 Sweetheart

90 Other

Furthermore, the scope of this investigation unequivocally states that

The products covered by this investigation are fresh cut roses,

including sweethearts or miniatures, intermediates, and hybrid teas,

[[Page 7023]] whether imported as individual blooms (stems) or in

bouquets or bunches.

Preliminary Determination of Sales at Less Than Fair Value, 59 FR 48285

(Colombia), 59 FR 48294 (Ecuador) (emphasis added). Finally, in its

preliminary determination, the ITC found that ``the plain language of

Commerce's scope description in these investigations demonstrates that

the merchandise subject to investigation covers the roses in the

bouquets only,'' and not the bouquets themselves. ITC Pub. No. 2766 at

9 (March 1994). Neither the Department nor the petitioner has ever

attempted to include the bouquets themselves, nor any of the other

types of flowers which comprise a bouquet, within the scope of this

investigation. The plain language of the Department's scope description

demonstrates that the merchandise subject to investigation covers the

roses in the bouquets only and does not expressly state that the

bouquets are themselves covered. Notably, the ITC stated that

``[b]ouquets are referred to in the scope definition to indicate that

all fresh cut roses are covered, regardless of the form, or packaging,

they are imported in.'' ITC Pub. No. 2766 at 9 (March 1994).

Finally, we disagree with respondents' contention that petitioner

lacks standing in this investigation because it does not represent

producers of bouquets or producers or ``roses in bouquets.'' In order

to have standing in an antidumping investigation, petitioner must

produce, or represent producers of, the like product. See, e.g., Final

Determination of Sales at Less Than Fair Value: Nepheline Syenite from

Canada, 57 FR 9237 (March 17, 1992) (comment 5). We agree with the ITC

that there is one like product in this investigation--``all fresh cut

roses, regardless of variety, or whether included in bouquets.'' ITC

Pub. No. 2766 at 9, 14 (March 1994). Because petitioner represents

producers of fresh cut roses they have standing in this investigation.

Comment 2: Spray Roses

Respondent HOSA, an exporter/purchaser of spray roses, argues that

spray roses are a genetically distinct species of the rosa genus.

Therefore, HOSA argues that the Department should exclude spray roses

from the scope of the investigation. HOSA states that spray roses are

not explicitly included in the scope of the investigation. Furthermore,

HOSA argues that spray roses were never mentioned in the petition nor

were price or cost of production data provided in the petition for

spray roses. HOSA suggests that the Department analyze spray roses

pursuant to the criteria set out in Diversified Products analysis to

evaluate whether spray roses are within the scope of this

investigation.

Petitioner requests that the Department include spray roses in the

antidumping duty order. Petitioner states that since the description of

spray roses is found in the petition, the instant investigation and the

Department and ITC determinations are dispositive as to the scope of

the investigation and analysis under Diversified Products is

unnecessary, (although respondent provides an analysis under

Diversified Products). Petitioner asserts that all fresh cut roses,

without regard to stem length, species or variety, were specifically

covered in the scope of the petition. Petitioner contends that the fact

that spray roses may be of a distinct species of the rosaceae family

does not exclude them from the petition, since the petition includes

all roses, regardless of species. Although it claims it as unnecessary,

petitioner conducts an analysis under the Diversified Products criteria

to show that spray roses are properly included in the scope of the

petition.

DOC Position

We agree with petitioner. The descriptions of the merchandise in

the petition and in the Department's scope are dispositive with respect

to spray roses and the evidence on the record, including the ITC's

preliminary determination, supports treating this rose variety no

differently than other varieties within the same class or kind of

merchandise subject to these investigations.

The scope of the petition clearly refers to spray roses. First, the

petition notes that the scope ``* * * covers all fresh cut roses,

whether imported as individual blooms, stems or in bouquets or

bunches.'' Spray roses are fresh cut roses sold in bunches or bouquets

and are classified under the HTSUS subheading 0603.10.60, as are

standard roses. Second, the petition states that its scope is ``* * *

inclusive of all imported roses from Colombia and Ecuador, without

regard to stem length, species or varieties.'' Third, the scope

description in the petition cites the ITC's definition from the prior

roses investigation. See ITC's Publication 2178 at 4-15 (April 1989)

``Roses are members of the rosaceae family. * * *'' Genetically, spray

roses are members of the rosaceae family, as are standard roses.

While differences exist between spray and standard roses, it should

be noted that differences also exist between other varieties of roses

within the scope of this investigation. The ITC stated in its

preliminary finding of fresh cut roses from Colombia and Ecuador that

``* * * we note that different rose varieties also have varying stem

lengths and bloom sizes (e.g., as with spray roses, sweetheart roses

have smaller buds and shorter stems than traditional roses), which we

do not find to be significant differences in physical

characteristics.'' See ITC Pub. No. 2766 at 10 (March 1994). Although

the ITC's preliminary finding is not dispositive with respect to this

scope analysis, it clearly demonstrates that the physical differences

of each rose variety within the same like product category are not

merely unique to spray roses, and that the differences of the varieties

within the same like product category are not sufficient ``to rise to

the level'' of differences in the like product.

We also note that the rationale used by the ITC in these

investigations, of including spray roses within the same like product

category, is consistent with the Department's rationale as to whether a

product should or should not be in the same class or kind of

merchandise. In its notice of final determination of sales at LTFV in

Antifriction Bearings from West Germany, 54 FR 18992 (May 3, 1989), the

Department stated that ``the real question is whether the difference is

so material as to alter the essential nature of the product, and

therefore, rise to the level of class or kind differences.'' The class

or kind of merchandise subject to these investigations includes

different rose varieties such as sweethearts or miniatures,

intermediates, and hybrid teas. Like spray roses, each variety within

the class or kind differs from the other varieties. However, in this

instance, the similarities greatly outweigh the dissimilarities and the

dissimilarities do not alter the essential nature (i.e., that spray

roses are export quality roses) of the spray roses.

Comment 3: Rose Petals

Simpson & Turner, an importer of rose heads, rose petals (petals),

and foliage (by-products) argues that such products should be excluded

from the scope of this investigation because these products are not the

same ``class or kind of merchandise'' as the subject merchandise.

Simpson & Turner maintains that the petition refers to stems, but does

not mention petals or foliage, and the HTSUS description refers to

flower buds as ``flower buds of a kind suitable for bouquets or for

ornamental purposes.''

Simpson & Turner argues that rose heads, rose petals and foliage

were not [[Page 7024]] mentioned in the Department's LTFV

investigation's initiation or preliminary determination. The scope

description specifically refers to a fresh cut rose as a bloom, which

is clarified to be a stem. The scope description then defines the form

of importation of the stem as an individual, part of a bouquet or

bunch.

Petitioner asserts that Simpson & Turner fails to distinguish

imported ``rose bush foliage, rose petals, and rose heads'' from

``culls'' within the scope of the this investigation. Petitioner

asserts that culls are within the scope of the petition and

investigation. Petitioner states that in its preliminary determination,

the Department found that culls are a ``such or similar category''

separate from export quality roses but nonetheless covered by the

petition and states further that no party has challenged the

Department's determination that culls are within the scope of the

investigation.

Petitioner states that the description of merchandise provided by

Simpson & Turner, however, invites the Department to issue a scope

ruling that would permit culls to enter the United States outside the

order. To the extent that Simpson & Turner seek to exclude more than

loose rose petals, loose rose foliage, or stems without rose heads, the

described merchandise apparently consists of culls, which as such are

included by the plain language of the petition and by the Department's

unchallenged ruling concerning ``such or similar'' categories.

Petitioner further notes that culls are simply roses that did not

meet the criteria of quality and length required for export. Culls may

``have crooked stems, deformed buds, or have opened prematurely.''

(Guaisa Sec. A Resp. at 26). Consequently, petitioner asserts that the

roses imported by Simpson & Turner, consisting of rose heads with very

small stems or of roses ``normally discarded at the farm level in time

of grading due to poor appearance, stage of development and scarring''

meet the definition of culls and should thus be included within the

scope of these investigations.

DOC Position

We agree with Simpson & Turner. See Scope of Investigation above,

indicating that loose rose foliage (greens), loose rose petals and

detached buds should be excluded from the scope of these

investigations.

The scope used in the preliminary determination clearly stated that

roses which are imported as individual blooms (stems) or in bouquets or

bunches are included. However, we asked petitioner to comment on this

scope issue at the December 12, 1994, Colombia hearing, at which time

petitioner clearly stated that it does not consider loose rose foliage,

loose rose petals or buds detached from the stem to be included in the

scope of these investigations.

Comments Pertaining to USP

Comment 4: Annual and Monthly U.S. Price Averaging

Petitioner argues that USP should not be averaged over a full month

or over a year because such prices would be unrepresentative of

transaction-specific, daily or weekly U.S. sales. Petitioner claims

that both monthly and annual averaging would obscure or mask dumping.

Petitioner contends that monthly averaging would mask dumping of roses

at low prices within every month and that annual averaging would be

even more distortive, concealing dumping during months in which major

holidays occur.

Petitioner claims that the facts in the instant Roses

investigations do not support the reasons articulated in the Flowers

administrative reviews for departing from the normal Department

practice of using daily U.S. prices. Specifically, petitioner maintains

that, because roses have a shorter life span than other fresh cut

flowers, there is no basis for using a monthly average U.S. price.

Petitioner also asserts that respondents' inability to control

production, timing, or prices is irrelevant to the application of the

averaging provision in the statute.

Respondents claim that the Department erred in the preliminary

determination by comparing one average constructed value encompassing

all varieties and stem lengths to a product-specific monthly average

USP. Respondents argue that this comparison is inappropriate because,

although growers do not maintain cost records on a variety-specific or

stem-specific basis, different rose products have different physical

characteristics and different costs and values related to productivity

and consumer preferences, all of which result in widely different

prices. Respondents assert that if costs are standardized, yet prices

fluctuate according to consumer demand for particular rose products,

average costs can only be meaningfully compared to equivalent average

prices without artificially creating margins. Respondents argue that an

annual average constructed value should be compared to an annual

average USP. Respondents state that the unique factors characterizing

rose production, demand, and perishability, in addition to extreme

seasonality, compel the use of annual average U.S. prices.

Respondents maintain that using any type of monthly average USP in

the comparison measures only seasonality and not dumping. Specifically,

respondents argue that the Department must take into account: (1) That

the USP cycle is an unavoidable consequence of the highly seasonal

nature of U.S. demand; (2) the high perishability of the product; (3)

the rose production cycle is geared towards consumer demand which is

concentrated around Valentine's Day; and (4) roses cannot be stored and

rose production is a continuous process that cannot be turned off after

Valentine's Day. According to respondents, these conditions result in

unavoidable price swings. For these reasons, respondents contend that

using any type of monthly USP average artificially creates dumping

margins by establishing a benchmark that no producer can meet.

In addition, respondents contend that using monthly average USP

does not account for month-to-month volatility caused by the extreme

seasonality of U.S. demand. Therefore, respondents maintain that

monthly average U.S. prices are not representative for purposes of

comparison with an annual CV and that only an annual average USP

captures the full demand/production cycle, undistorted by seasonal

factors.

Regarding petitioner's contention that the Department should not

use a monthly USP in the Roses cases because, unlike flowers, roses

have a shorter life, Floramerica points out that shelf life alone does

not justify a departure from the Department's traditional averaging

methodology and further, that there is information on the record which

shows that roses do not have a shorter shelf life.

DOC Position

19 U.S.C. 1677f-1(b) and 19 353.59(b) provide the Department with

the discretionary authority to use sampling or averaging in determining

United States price, provided that the average is representative of the

transactions under investigation. In these investigations, we

determined, based on a combination of factors, to average U.S. sales.

The Department was confronted with approximately 555,000 Colombian

transactions which, when combined with the number of estimated U.S.

sales transactions from Ecuador, exceeded one million. As a result, a

decision to make fair value comparisons on a transaction-specific basis

would place an onerous, perhaps even an impossible, burden on the

Department in terms of data collection, verification, and

[[Page 7025]] analysis. Consequently, we exercised our discretion in

order to reduce the administrative burden and maximize efficient use of

our limited resources. Additionally, we recognize the need for

consistency in our treatment of these concurrent investigations and,

although the number of transactions may vary between the two countries,

uniform application of an averaging methodology ensures that both

Colombia and Ecuador will be treated on the same basis. See the June

24, 1994, Decision Memorandum pertaining to reporting requirements from

Team to Barbara Stafford.

Moreover, we took into account that the majority of respondents,

who make U.S. sales on consignment, have little, if any, ability to

provide the level of detail which would have been required for the

Department to do a transaction-specific analysis because unrelated

consignees generally keep accounts for respondents' U.S. sales in

monthly grower reports. Upon review of data submitted, and later

verified, we concluded that a month was the shortest period of time

which would permit all respondents to provide U.S. sales information on

a uniform basis, thus ensuring that we treated all respondents in a

similar manner in terms of data collection and analysis.

Importantly, because of the highly perishable nature of the

product, we believe that monthly averaging of U.S. prices in these

investigations provides a fair and more representative measure of

value. Unlike nonperishable merchandise, respondent growers cannot

withhold their roses from the market to await a better price. Rather,

respondents are faced with the choice of accepting whatever return they

can obtain on certain sales, so-called ``end-of-the-day'' and

``distress sales'', or of destroying the product. Were we to perform a

transaction-by-transaction comparison, such an approach, beyond the

limits imposed on the Department as described above, would give undue

and disproportionate weight to end-of-the-day sales. Even where a

respondent's normal sales were above fair value, he could be found to

be dumping solely on the basis of sales made as a result of

perishability. By adopting a monthly averaging period, we ensure that

the entire range of distress and nondistress sale prices are covered.

Furthermore, while use of actual prices and transaction-by-

transaction data is the norm, the statute allows for averaging provided

such averaging yields representative results. We conclude that, in

light of the above factors, using monthly averages of U.S. sales prices

constitutes the shortest period necessary to capture a representative

analysis of the ordinary trading practices in this industry. Our

approach is consistent with the Department's past practice in

investigations of fresh cut flowers as well as other perishable

agricultural products. See Certain Fresh Cut Flowers From Colombia:

Final Results of Antidumping Duty Administrative Review, 55 FR 20491

(May 17, 1990); Final Determination of Sales at Less Than Fair Value:

Certain Fresh Cut Flowers From Mexico, 52 FR 6361 (March 3, 1987).

Furthermore, our approach has been upheld consistently by the court.

See Floral Trade Council v. United States, 775 F. Supp. 1492, 1500-2

(CIT 1991); Asociacion Colombiana de Exportadores de Flores v. United

States, 704 F. Supp. 1114 (CIT 1989).

Lastly, we are unpersuaded by two additional arguments proffered by

petitioner to shorten the averaging period in these investigations.

First, petitioner claims a factual distinction between the life-span of

a rose and a fresh cut flower. However, we find that the record in

these investigations establishes that from the time of importation,

roses last approximately seven to ten days, while flowers last

approximately ten to fourteen days and both may be held for more than

one week in refrigerated coolers. Thus, we find this to be a

distinction without a difference. Second, petitioner argues that, by

not using a shorter averaging period, dumping during peak holiday

periods such as at Valentine's Day, will elude the Department.

According to petitioner, sales of roses imported before this holiday,

but which are sold after the holiday when demand is quite low, will be

sales at dumped prices. The petitioner does not consider such dumped

sales legitimately within the category of end-of-the-day sales, for

which our averaging period is designed to fairly account. Rather,

petitioner argues that by averaging these low- priced sales with high-

priced holiday sales for the month of February, dumping will be

understated. While we recognize that using a monthly averaging period

could result in some offsetting of high-priced sales with low-priced

sales, we believe that overall, monthly averaging is representative of

the transactions under investigation. Moreover, in verifying numerous

companies' February grower reports we found that only an insignificant

number of roses were imported in February after Valentine's Day, as

compared to the overwhelming volume imported during the first 13 days

of the month, thus ameliorating this circumstance.

Annual Averaging

While we recognize that averaging is necessary in these

investigations, we believe that averaging U.S. sales prices over a year

is inappropriate. As we stated in Flowers,

nothing in the statute, the legislative history, or the Department's

practice (including Final Determination of Sales of Not Less Than

Fair Value: Fresh Winter Vegetables from Mexico (45 FR 20512; March

24, 1980) supports the broad notion of annual averaged U.S. prices.

Annual averaging would extend too much credit to respondents by

allowing them to dump for entire months when demand is sluggish, so

long as they recoup their losses during months of high demand.

See Final Results of Antidumping Administrative Review and Revocation

in Part of the Antidumping Duty Order: Certain Fresh Cut Flowers from

Colombia, 56 FR 50554, 50556 (October 7, 1991). The CIT has agreed with

the Department that monthly averaging adequately compensates for

perishablilty but averaging over a longer period could obscure dumping.

See Floral Trade Council v. United States, 775 F. Supp. 1492, 1500 (CIT

1991).

Even though respondents argue that the demands of the U.S. market

determine their U.S. pricing and that they are price takers rather than

price setters, we note that the intent to dump is not the issue. See

Final Determination of Sales at Less Than Fair Value: Certain Fresh Cut

Flowers from Mexico, 52 FR 6361, 6364 (March 3, 1987). The issue is

whether, in fact, dumping is occurring.

Comment 5: Product Averaging

Regarding the use of variety and stem-specific monthly average

USPs, respondents contend that the Department is bound by its

longstanding administrative practice in the original investigations and

subsequent administrative reviews of Flowers to calculate monthly

average USPs by flower type, without regard to variety or grade.

Additionally, the Department has consistently concluded that comparing

CV data by flower type to grade or variety-specific USPs would produce

unfair and distorted results. Respondents maintain that the Department

has not furnished any reasonable explanation for its departure from

this practice in the preliminary determination.

Respondents urge the Department to compare all rose products to all

rose products on an annual average basis. Alternately, respondents

request that the Department compare product- [[Page 7026]] specific,

monthly U.S. prices to identical product-specific, monthly FMV prices.

Respondents note that where FMV is not available, CV should be used.

However, the profit element should be monthly FMV profit, not annual

FMV profit. In addition, respondents argue that average CV of all

products combined must be compared to U.S. prices of non-matched

products.

Petitioner argues that product averaging should not be used to

obliterate differences in prices due to physical differences in roses.

Petitioner stresses that it is particularly important that the prices

of the low-priced Visa roses are not averaged together with prices of

other red roses. Petitioner maintains that an average across varieties,

colors, or stem lengths substantially distorts the market reality.

DOC Position

We agree with respondents that averaging by flower type is

appropriate in this investigation. Consistent with Flowers, where

possible, we compared USP and CV on a rose type basis, i.e., hybrid

tea, sweetheart, etc. See, e.g., Fresh Cut Flowers From Colombia, 59 FR

15159, 15160-61 (March 31, 1994) (4th admin. review final). For a

number of companies, however, we were unable to compare USP and CV on a

rose type basis because the respondents do not keep their cost data in

such a fashion. As a result, in order to ensure an ``apples-to-apples''

comparison, we aggregated U.S. price data to arrive at a weighted-

average monthly USP for all rose types for comparison with respondents'

single average CV for all rose types. While it would have been

preferable to disaggregate rose costs for these respondents in order to

make a fair value comparison on a rose type basis, we were not able to

do so in this investigation because the data were not available and we

did not present respondents with a methodology for disaggregating

costs. However, we intend to do so in any future administrative reviews

if an order is issued. We will seek to devise a method to enable us to

compute cost by rose type, which will not require respondents to change

their method of recordkeeping.

Comments Pertaining to Third Country

Comment 6: Third Country as Basis for FMV

Petitioner maintains that there is no basis in law for rejecting

third country prices that are adequate to establish a viable market. In

addition, petitioner states that the Department's regulations state a

preference for the use of third country prices, where the home market

is not viable. Petitioner maintains that the statute prescribes

adjustments for differences in circumstances of sale, which can take

account of differences in markets, but it does not permit the

Department to simply reject a viable market, due to factors other than

dissimilar merchandise, for the purposes of determining FMV.

Petitioner claims that there is no evidence on the record to

establish that third country prices are incompatible for comparison to

U.S. prices. Petitioner questions the validity of respondents'

statistical studies, claiming that the statistical analyses provided by

Drs. Botero and Sykes and Lewis are unworthy of consideration because

they exclude the impact of dumping in their price analyses. According

to petitioner, if the Colombian and Ecuadoran growers are dumping

during the several off-peak (non-holiday) months in the U.S. market,

but not in other markets, such dumping would produce price changes in

the U.S. market that are much sharper and greater than the price

changes in Europe, thereby causing the greater volatility in the U.S.

market identified by respondents. Petitioner adds that, because the

Colombian and Ecuadoran imports constitute such a large percentage of

the U.S. market and because they sell through consignment agents on a

national basis, the supply of Colombian and Ecuadorian roses uniformly

depresses U.S. prices whenever those imports oversupply the U.S.

market.

Petitioner argues that the Botero and Sykes and Lewis reports are

further skewed because they use the prices of a single variety of red

rose, the Visa, which it asserts is the most price sensitive. Moreover,

these reports did not provide source documentation showing the

composition of the Dutch auction prices relied upon. Thus, it is

unclear how many varieties of roses were included in the comparison

database. In addition, since Colombian and Ecuadoran roses sold on the

Aalsmeer auction account for only a very small portion of all roses

exported to the EU, Aalsmeer prices may not be representative of

Colombian and Ecuadorian rose prices in the EU.

Petitioner argues that the statements provided in the Hortimarc

Report based on FTD data, which included traditional retail florists

and excluded non-traditional outlets such as supermarkets, and mass

merchandisers, ignores a significant number of spontaneous purchases

from their analysis.

Petitioner states that the Stern & Wechsler argument regarding the

opposing demand strains of the U.S. and EU market are irrelevant to the

comparison of foreign market values and U.S. prices. Petitioner

maintains that the U.S. market is as supply driven as any other market

during non-holiday months.

Petitioner recognizes that in the second administrative review of

Fresh Cut Flowers From Colombia, (55 FR 20491, May 17, 1990) (Flowers),

the Department departed from its normal practice and rejected third

country prices in favor of CV for the following three reasons: 1) third

country and U.S. price and volume movements were not positively

correlated which showed that different forces operated in the relevant

markets, in some instances, pushing prices in opposite directions; 2)

third country sales only occurred in peak months which resulted in a

distorted comparison of off-peak U.S. prices to peak third country

prices; and 3) the perishable nature of flowers and the inability to

control short-term production resulted in ``chance'' sales.

Petitioner argues that the Department's analysis of statistical

data on the record in these investigations confirmed a positive

correlation in prices, thus refuting the principal finding of the

Flowers case. In fact, petitioner argues that the basis for creating an

exception to the statutory preference for price-to-price comparisons

was the presence of a negative correlation. Regarding volatility,

petitioner notes that in Flowers, the Department never required that

prices be equally volatile in each market; volatility alone does not

require the Department to reject a price-to-price comparison. In fact,

petitioner argues that in Flowers the Department found differences in

volatility between the U.S. and European markets and price movement in

opposite directions in each market.

Regarding the second factor, petitioner observes that, unlike the

Flowers case, third country sales of roses even occur in off-peak

months and argues that the Department's six-month weighted average FMVs

take into account seasonal peaks and off-peaks. Moreover, petitioner

maintains that major flower buying holidays are the same in all markets

and, therefore, peaks will occur at similar times in all markets.

Finally, with regard to the issue of perishability and production

control, petitioner maintains that respondents may control production

by pinching back rose buds. In addition, petitioner notes that there is

evidence on the record indicating that third country sales of roses are

stable, some occurring as a result of negotiated standing orders

[[Page 7027]] and, therefore, there is a lesser incidence of chance

sales then was present in Flowers. Petitioner contends that statements

by respondents regarding a potential shift of exports from third

country markets to U.S. markets reveals the extent to which

respondents, in fact, control, plan, and target their rose exports to

certain markets.

Respondents claim that third country prices should be rejected in

favor of CV because the three factors found in Flowers are present in

these cases. With regard to the first Flowers factor, respondents quote

empirical evidence on the record showing substantial differences in

demand and pricing seasonality between U.S. and third country markets.

Respondents argue that there are two principal aspects of seasonality:

timing (i.e., the point in time at which demand peaks and valleys occur

in seasonal cycles) and volatility (i.e., the magnitude of peaks and

valleys). Respondents argue that, in Flowers, the Department relied on

both differences in timing and in volatility to explain why it rejected

third country prices. Respondents assert that in the rose industry, as

in the flower industry, (1) the U.S. market is holiday-demand driven;

(2) U.S. demand is not a stable consumption base because the majority

of roses are purchased primarily as gifts; and (3) the U.S. market is

demand driven. In contrast, respondents state that (1) the European

market is marked by relatively even year-round demand; (2) flower

purchasing on a more regular basis (not tied to gift giving) is a deep

rooted tradition in Europe; and (3) the European market is supply

driven.

Respondents have submitted several statistical analyses of the

different markets which, they claim, conclusively show that the

seasonal demand and pricing patterns are significantly different

between the markets. Respondents point to the second Botero report and

the Sykes & Lewis report which states that the mere presence of a price

correlation is insufficient proof that demand patterns are equivalent.

Respondents contend that while petitioner criticizes their statistical

analysis, petitioner has not provided any independent correlation

analysis regarding U.S. and third country prices.

With regard to the second Flowers factor, access to third country

markets, respondents claim that petitioner's own data rebut the

contention that respondents have substantial continuous access to third

country markets because there are no Colombian and Ecuadorian imports

of roses in at least one month for every country for which petitioner

has provided data. Respondents assert that petitioner's claim that

Colombian and Ecuadorian production is planned with third countries in

mind, and that roses are sold at the same fixed price over a period of

time as a result of a pre-negotiated arrangement, is a misunderstanding

of the facts on the record.

In addition, respondents claim that combining third country markets

would not rectify the gaps created by the absence of sales in all

months in individual markets. Respondents note that adding two markets

with partial year sales is still tantamount to using only peak prices

for foreign market value. With regard to the third Flowers factor,

respondents claim the control and perishability factor relied upon by

the Department in the Flowers case is equally applicable to roses.

Respondents cite to portions of the Department's Roses preliminary

determination where the Department noted that there are substantial

similarities between flowers and roses in perishability and short-term

lack of production control. Respondents also cite to the first Tayama

report which states that roses are even more perishable than fresh cut

flowers.

Respondents claim that petitioner oversimplifies their argument

regarding seasonality by neglecting to view all aspects of the Flowers

exception: the unique combination of differences in seasonality between

U.S. and third country markets for a highly perishable product for

which production cannot be controlled in the short term. Thus,

respondents maintain that the Roses case is a logical extension of the

Flowers case.

DOC Position

The Department agrees with respondents. In the preliminary

determination, we rejected respondents' request to use CV as the basis

for FMV because we determined that the record at that time did not

support the application of the Flowers' precedent. Since the

preliminary determination, a considerable amount of new information has

been submitted. Based on our review of this new information, we have

determined that the records in these cases warrant rejection of third

country sales in favor of CV. See the January 26, 1995, Decision

Memorandum pertaining to third country versus constructed value from

the Team to Barbara Stafford for a more detailed discussion of this

issue.

Information on the record establishes that the three factors

identified by the Department in Flowers as supporting the use of CV are

satisfied in this case. First, the market for roses in the U.S. differs

significantly from the markets in third countries. For example, as in

Flowers, price and quantity within the United States' rose market are

positively correlated; however, the price and quantity within Europe,

Canada, and Argentina are negatively correlated.

Similarly, the U.S. market for roses, like the U.S. market for

flowers, is more volatile in terms of price and quantity movements than

the markets in third countries markets; the European per capita

consumption of flowers is four to ten times greater than the United

States, and Colombian and Ecuadorian producers have, in general,

limited access to the main third country markets, i.e., the Dutch

auction. Thus, the differences in the rose markets are similar to the

differences that existed in Flowers.

The second Flowers factor we considered was whether a comparison of

third country sales to U.S. sales would require comparisons of low-

price U.S. sales in off-peak months with high-price third country sales

in peak months, or vice versa. In the preliminary determination, we

found that this factor was not present in these investigations because

(1) there were sufficient third country sales in each month of the POI

(when markets were combined); and, (2) using two six-month FMV periods

reduced distortion caused by price comparisons involving peak and non-

peak periods.

For purposes of this final determination, we have determined that

use of third country prices could result in off-peak U.S. sales being

compared with peak third country sales. While six-month averages

ameliorate potential distortions, almost all of the respondents do not

have third country sales in every month of the POI. It is only by

combining markets that respondents have sales in each month of the POI.

If we were to use third country prices as the basis for FMV, prices

during peak periods in one third country could be combined with prices

during peak periods in another third country. These peak prices would

then be compared to both peak and non-peak periods in the United

States. We find that this factor supports use of CV in these cases,

albeit to a somewhat lesser degree than in Flowers.

The third Flowers factor we considered was the extreme

perishability of roses--i.e., the inability to control short-term

production--and the resultant ``chance'' element to sales. As noted in

our preliminary determinations, there are substantial similarities

between the subject merchandise in these investigations and

[[Page 7028]] Flowers: (1) roses, like flowers, are extremely

perishable; (2) rose growers have relatively minor control over short-

term production; (3) rose production is also affected by exogenous

factors (e.g., weather, disease, etc.) like other flowers; and (4)

roses cannot be stored and we note that there are only very minor

alternative uses (e.g., drying).

In conclusion, we have determined that the factors that led the

Department use CV instead of third country prices in Flowers are

present in these investigations. Therefore, we have adopted CV as the

basis for comparison with U.S. prices.

Comments Pertaining to Related Party Commissions

Comment 7: Related Party Commissions

Petitioner requests that commissions paid to consignment agents

should be deducted from USP even where consignees are related parties.

Specifically, petitioners argue that (1) the statute directs us to

deduct commissions from USP in ESP situations, without discretion to

disregard U.S. commissions in related party transactions; (2) in

Timken, the court recognized that the statute required a deduction when

a U.S. importer was paid commissions, as opposed to earning

``profits;'' (3) the statute should be followed, regardless of the fact

that commissions were not deducted in Flowers; and (4) we should deduct

U.S. indirect selling expenses if such expenses exceed the related

consignee's commissions, in accordance with 19 U.S.C. 1677a(e)(2).

Respondents claim that the Department's treatment in the

preliminary determination of related party sales commissions is

invalid. They argue that deducting the related importer's commission

from U.S. price has the effect of deducting the importer's profit,

which the Department does not have the authority to do. The Department

should deduct the importer's actual selling expenses rather than

intracompany transfers. Respondents argue that the Department's

approach is inconsistent with past practice since related party

commissions have never been treated as a direct selling expense, but

rather have been collapsed in the past for the purposes of determining

U.S. price and expenses. Moreover, respondents assert that the

Department's statute and regulations do not authorize the Department to

deduct the higher of related party commissions or related party actual

expenses. Respondents claim that in selectively choosing deductions of

commissions or actual expenses, the Department fails to account for the

fact that the commission it treats as a cost is also sales related

income to the related importer. Respondents maintain that the

Department should ignore the sales commissions paid between related

parties on ESP sales, regardless of whether such commissions are at

arm's length, and treat as U.S. indirect selling expenses the

importer's share of operating and selling expenses allocable to the

exporter's subject sales.

DOC Position

The difference between a related consignee's commission and the

related consignee's U.S. indirect selling expenses is equal to the

related consignee's profit. The Department does not deduct profit from

USP in ESP transactions because the law does not allow it. 19 C.F.R.

353.41(e) (1) and (2) do, however, instruct us to make adjustments in

ESP situations for commissions and expenses generally incurred by or

for the account of the exporter in selling the merchandise.

With respect to treatment of related party commissions paid in the

U.S., we have in the past looked to the definition of ``exporter''

which provides that related party importers are to be collapsed with,

and treated as part of, the exporter. 19 U.S.C. 1677(13). In this

context, it is inappropriate to treat a commission the exporter has

paid to itself as an expense. The expense is the actual costs incurred

by or for the account of the exporter.

In LMI-Le Metalli Industriale, S.p.A. v. United States, 912 F.2d

455, 459 (Fed. Cir. 1990) (LMI), the CAFC indicated that related party

commissions can and should be adjusted for if the commissions are at

arm's-length and are directly related to the sales under review.\1\ By

implication, an arm's-length commission includes the actual indirect

selling expenses incurred by the commissionnaire and the

commissionnaire's profits. Thus, LMI allows us to deduct the profits

that are implicit in the commission. The facts in LMI, however, are

distinguishable from the facts in these investigations. In LMI, the

Court directed the Department to adjust for sales commissions paid to a

related subsidiary of the respondent in the home market. The sales on

which the commissions were paid in the home market were purchase price-

type transactions made with the assistance of the related party selling

agent. The issue of how to treat any selling expenses incurred by the

related party selling agent in addition to commissions earned by that

related party selling agent did not arise in LMI.

\1\In Coated Groundwood Paper from Finland, 56 FR 56363

(November 4, 1991), which was subsequent to LMI, we developed

guidelines to determine whether commissions paid to related parties,

either in the United States or in the foreign market, are at arm's-

length. If, based on the guidelines, we found commissions to be at

arm's-length, we stated that we would make an adjustment for such

commissions.

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In the instant investigations, the sales on which the commissions

were paid are ESP transactions where, because the importer of the

merchandise is related to the exporter, we collapse the two pursuant to

19 U.S.C. 1677(13) and base USP on the sale to the first unrelated

party. In contrast to LMI, therefore, the producer and its related

party selling agent in these investigations are collapsed. Thus, the

commission represents an intracompany transfer of funds. Under these

circumstances, our past practice of ignoring intracompany transfers is

still applicable.

Furthermore, ESP transactions are fundamentally different from

purchase price transactions in that, with respect to ESP transactions,

19 U.S.C. 1677a(e), specifically allows for deductions of indirect

expenses. In contrast, with respect to purchase price transactions, 19

U.S.C. 1677a(d) only allows an adjustment for indirect expenses when

there are commissions in one of the two markets. Therefore, when

commissions are paid in an ESP situation, the opportunity for double

counting exists; this problem does not arise in a purchase price

situation like the one reviewed by the Court in LMI.

Whether the sales involved are purchase price or ESP, the

Department's goal is to derive a reliable USP by subtracting actual

expenses from actual sales prices. A commission paid by the exporter to

its collapsed related importer is not an expense incurred by the

exporter; rather the actual expenses incurred by the exporter are the

indirect selling expenses of the related consignee.

At the preliminary determination, we determined that related party

commissions were directly related to the sales under consideration.

However, we agree with respondents and, for the final determination,

considered commissions an intracompany transfer. We have therefore,

deducted only the amount of U.S. indirect selling expense for all

companies with related party commissions.

Comments Pertaining to Accounting

Comment 8: Inflation Adjusted Depreciation and Amortization

Petitioner argues that the Department should compute respondents'

[[Page 7029]] depreciation expense based on asset values which, in

accordance with Colombian GAAP, have been adjusted to reflect the

effects of inflation. Petitioner notes that respondents computed

depreciation charges for rose production costs based on the historical

cost of the underlying fixed assets. Petitioner maintains that because

of the effects of inflation on prices, respondents' methodology

inappropriately matches historical depreciation charges based on past

price levels with revenues generated from the sale of roses at current

price levels.

Petitioner notes that in past cases involving hyperinflationary

economies, the Department has corrected for the effects of inflation by

computing cost of production based on respondent's replacement costs.

Petitioner argues that although the POI inflation rates in Colombia did

not meet the Department's normal hyperinflation threshold, the annual

rate of inflation nevertheless has been so substantial as to cause the

government to adopt accounting standards that require an adjustment for

inflation. Thus, according to petitioner, the Department must correct

respondents' reported depreciation expense in order to avoid distorting

the cost of rose production.

Respondents claim that the Department should accept their submitted

rose production costs without taking into account the effects of the

inflation adjustment on depreciation expense. Respondents argue that,

although the inflation adjustment may result in additional costs in

their financial statements, these are not actual, historical costs.

Instead, the inflation adjusted costs are ``phantom'' costs required by

tax law, but not specifically addressed under GAAP.

Respondents maintain that the purpose of the tax law was to

generate tax revenues for the government, because any write-up of fixed

assets due to inflation results in additional income that must be

recognized in a firm's financial statements. Respondents contend that

if the Department determines that it must include the effects of the

fixed asset inflation adjustment in respondents' rose CV, then it also

must reduce CV by the amount of financial statement income generated by

the adjustment. Respondents note that such income is directly related

to production and, thus, there is no basis for failing to offset costs

if the inflation adjustment is included in CV.

Additionally, respondents claim that the Department already

effectively makes an inflation adjustment through the use of monthly

exchange rates in its computer program. Respondents state that the

exchange rate is related to differences in the two countries rates of

inflation, and the use of such exchange rates has an effect equivalent

to making the year-end inflation adjustment.

DOC Position

We agree with petitioner that respondents' failure to follow their

normal accounting practice of adjusting depreciation and amortization

expenses for the effects of inflation distorts rose production costs

for purposes of our antidumping analysis. The exclusion of the

inflation adjustment results in costs which are not reflective of

current price levels and thus produces an improper matching of revenues

and expenses. Therefore, we have revised the submitted COP and CV

figures to reflect inflation-adjusted depreciation and amortization

expenses based on the growers' normal accounting practices.

We disagree with respondents' claim that the Department's use of

monthly exchange rates effectively makes an inflation adjustment,

because the exchange rates are being applied to costs which are

reported in understated foreign currency. To avoid distortion in

production costs, we have used annual average constructed value figures

and converted them to U.S. dollars using a weighted-average exchange

rate based on the monthly volume of roses sold by each grower.

We also disagree with respondents' assertion that income resulting

from the inflation adjustment is directly related to production and

should be applied as an offset to financial expense. This annual

revaluation of non-monetary assets does not represent income during the

POI. Instead, it merely reflects an increase to respondent's financial

statement equity due to the restatement of non-monetary assets to

account for inflation.

Comment 9: Statutory General Expenses and Profit

Petitioner claims that statutory general expenses and profit should

be based on third country sales, since third country sales and third

country profit and general expenses would be used as a basis for FMV

when home market sales are not available.

Respondents maintain that the facts of this case and the statute

require that Department calculate profit on the basis of home market

sales, particularly since the Department made a finding in its

preliminary determination that home market sales of export quality

roses were made in the ordinary course of trade. In addition,

respondents note that where the Department used third country price

comparisons in its preliminary determination, if in the final

determination the Department chooses to reject third country prices in

the final determination in favor of CV, it cannot use annual average

third country profit margins in calculating CV, because this would be

the equivalent of comparing an annual average third country price to a

monthly average U.S. price.

DOC Position

In calculating CV, we used selling expenses based on U.S.

surrogates and the eight percent statutory minimum for profit where

there was not a viable home market for export quality roses. Where

there was a viable, but dissimilar, third country markets, we used U.S.

surrogates and the eight percent statutory profit because we have

determined that third country markets do not provide an appropriate

basis for foreign market value. See Comment 6 above.

We used U.S. selling expenses as a surrogate even though certain

producers had viable home markets for culls which are included in the

general class or kind of merchandise.

19 USC 1677b(e)(1)(B) states that the CV of imported merchandise

shall include an amount for general expenses and profit equal to that

usually reflected in sales of merchandise of the same general class or

kind as the merchandise under consideration which are made by producers

in the country of exportation, in the usual commercial quantities and

in the ordinary course of trade, except that--

(i) the amount for general expenses shall not be less than 10

percent of the cost as defined in subparagraph (A), and

(ii) the amount for profit shall not be less than 8 percent of the

sum of such general expenses and cost.

19 C.F.R. 353.50(a) states that if FMV is based on CV, the Secretary

will calculate the FMV by adding general expenses and profit usually

reflected in sales of merchandise of the same class or kind of

merchandise.

However, in the final determination of Certain Granite Products

from Italy, 53 FR 27187, 27191-2 (July 19, 1988)(comment 15), the

Department stated that, due to the uniqueness of one of the such or

similar categories of merchandise, there was no comparability between

sales in the home market and sales in the United States. Therefore, the

Department used the U.S. selling expenses as a surrogate in computing

CV instead of home market selling expenses. As in Certain Granite

Products from Italy, we find that, in the instant investigations, culls

are not representative of the [[Page 7030]] merchandise sold in the

United States, as these products are by definition not export-quality.

Comment 10: Allocation of Production Costs to Cull Roses

Respondents argue that the Department incorrectly calculated CV by

requiring growers to allocate production costs only to export quality

roses, thereby assigning no costs to cull roses. Respondents note that

because cull roses are included in the class or kind of merchandise,

they should be allocated a share of production costs equal to that of

export quality roses. Respondents point out that the Department has

never held that a product covered by an investigation should be treated

as a byproduct having no cost. Respondents also argue that the Federal

Circuit in Ipsco, Inc. v. United States, 965 F.2d 1056 (Fed. Cir. 1990)

defined byproducts as ``secondary products not subject to

investigation.''

Petitioner asserts that cull roses should be categorized as

byproducts to which, from an accounting standpoint, no production costs

should be allocated. Petitioner claims that an appropriate measure for

determining whether a specific product represents a byproduct or

coproduct is to determine if the production process would still be

performed if the product in question was the only one produced.

According to petitioner, no rose grower would establish operations

solely for the purpose of growing culls for sale and, therefore, cull

roses are unmistakably byproducts. Petitioner notes that ITA has

consistently and correctly treated cull roses as byproducts, with

revenues earned from their sale being properly recognized as other

income and, thus, deducted from the cost of producing export quality

roses.

DOC Position

We disagree with respondents' claim that CV was calculated

incorrectly by not allocating any production costs to cull roses. When

determining how to allocate costs among joint products, the Department

normally relies upon generally accepted accounting principles (GAAP) to

prescribe an appropriate cost allocation methodology. One of the

factors used to assess the proper accounting treatment of jointly-

produced products examines the value of each specific product relative

to the value of all products produced during, or as a result of, the

process of manufacturing the main product or products. In this regard,

the distinguishing feature of a byproduct is its relatively minor sales

value in comparison to that of the major product or products produced.

The Department's general practice in agricultural cases has been to

offset the total cost of production with revenue earned from the sale

of the reject agricultural products. The cultivation costs, net of any

recovery from byproducts, are then allocated over the quantity of non-

reject product actually sold. See, e.g., Fresh Cut Flowers from

Colombia, 52 FR 6844 (March 5, 1987); Fresh Cut Flowers from Peru, 52

FR 7003 (March 6, 1987); Fall-Harvested Round White Potatoes, 48 FR

51673 (November 10, 1983); Fresh Cut Roses from Colombia, 49 FR 30767

(August 1, 1984).

In Asociacion Colombiana de Exportadores v. United States, 704 F

Supp. 1114, 1125-26 (CIT 1989), the Court found that ``[c]ulls were

often disposed of as waste, or if saleable, were sold for low prices in

the local market. ITA's treatment of non-export quality flowers as a

byproduct was supported by substantial evidence. The record indicates

that cull value was relatively low and that the production of culls was

unavoidable. These both have been recognized by ITA in the past as

indicia of byproduct status.'' The CIT further noted, ``[c]ull value,

if determinable, should be deducted from cost of production and

production costs should not be allocated to culls.''

For each respondent in this investigation, the total revenue

generated from the sale of cull roses was minimal when compared to the

revenue generated from the sale of export quality roses. Other facts

concerning the production and sale of cull roses are also consistent

with those found in the investigation and subsequent administrative

reviews of Flowers. We therefore find that it is appropriate to treat

cull roses sold in the home market as a byproduct of the production of

export quality roses. This treatment is consistent with the

Department's previous practice of accounting for culls as a byproduct

in the calculation of COP and CV.

Finally, we disagree with respondents' argument that the inclusion

of cull roses in the class or kind of merchandise compels the

Department to use a particular cost accounting methodology. A decision

that a particular product is, or is not, within the scope of a

proceeding does not dictate, or necessarily have any relationship to,

the selection of the particular cost accounting methodology that must

be applied in the determination of COP and CV.

Unlike respondents, we do not read the Federal Appeals Court's

decision in Ipsco as standing for the proposition that in all

circumstances a byproduct for accounting purposes cannot be within the

class or kind of merchandise as that term is defined under the Act.

Moreover, as discussed above, our decision in this regard has been

explicitly upheld by the CIT.

Comment 11: CV--Interest Expense

Respondents argue that the Department grossly overstated each

respondents' net interest expense in calculating CV by using total

company-wide interest expense instead of the expense allocable to rose

production. Respondents request that the Department correct its

preliminary calculations in line 38 of the CV tables, and using the

allocated per unit interest expense calculated on the spreadsheet.

Petitioner agrees with respondents that net interest expenses were

potentially overstated in the preliminary determination and ITA should

allocate interest expenses on a sales dollar basis to roses and then to

rose stems, provided that interest expenses reported were in fact

reported with respect to all sales of all rose types to all markets.

DOC Position

We agree that for some respondents we incorrectly assigned total

company-wide financial expenses only to roses. For purposes of the

final determination, we allocated net financial expenses to roses and

non-subject merchandise using one of the following methodologies, each

of which we consider reasonable: cultivated area, cost of sales or cost

of cultivation. We computed a per stem financial cost by dividing the

net financial expenses related to roses by the total export quality of

stems sold.

Comment 12: CV--U.S. Indirect Selling Expenses

Respondents allege that the Department incorrectly included U.S.

indirect selling expenses incurred by respondents' related importers in

its calculation of constructed value. Respondents claim that including

these expenses in constructed value artificially inflated the FMV,

since these expenses would never have been incurred to sell roses in

the home market. In addition, respondents object to the Department's

calculation of an eight percent profit on these expenses, while at the

same time deducting related party commissions, and thereby all profit

earned by the related importer, from U.S. prices. Respondents hold that

the Department should include only all selling expenses incurred in

Colombia and Ecuador in its calculation of CV. [[Page 7031]]

Petitioner claims that the Department should include in constructed

value direct and indirect selling expenses equal to those expenses

incurred in third country markets, unless such markets are not viable.

And, to the extent that the Department deems home market sales to be

within the ordinary course of trade, and in the event that the home

market for any given respondent was viable, then the Department should

add home market selling expenses to constructed value. Petitioner

states that, in the absence of selling expenses from either the home or

third country market, the Department's practice is to add U.S. selling

expenses in computing SG&A.

DOC Position

For those companies with viable home markets, we used home market

indirect selling expenses. For those companies without viable home

markets we used U.S. indirect selling expenses as a surrogate. See

Comment 9 above. Respondents' objection to deduction of related party

commissions is addressed in Comment 7 above.

Comment 13: Per Unit CV in Dollars

Respondents argue that the Department's methodology used to obtain

the per unit CV in dollars produces a distorted, declining per unit

dollar CV. Respondents note that the Department's method involves

converting annual average per unit foreign-denominated costs to monthly

per unit dollar figures using the monthly exchange rate, which in part

reflects a relatively high inflation rate. Respondents claim that in

order to properly obtain the average per unit CV, the Department should

first convert each month's total foreign-denominated costs using that

month's exchange rate, and then sum these monthly dollar costs for the

period. Next, the total dollar costs should be divided by the total

quantity of roses sold to obtain the average per unit CV in dollars for

the period.

Petitioner does not object to respondents' request for

modifications in the Department's methodology, although petitioner

suggests that such modifications are unnecessary. If modified however,

petitioner argues that it is inappropriate to apply a foreign-dominated

interest rate in order to calculate imputed credit costs, unless the

exchange rate is also adjusted for currency devaluation.

DOC Position

We agree that in this case the Department's previous methodology

used to obtain per unit constructed value in U.S. dollars did not

provide an accurate result. In order to avoid distortion, we have

converted home market cost in local currency to U.S. dollars using the

annual average exchange rate.

Comment 14: Home Market Price Cost Test

Respondents maintain that the Department's sales below cost test

does not test whether a particular product is sold below its cost of

production. Respondents argue that the Department's normal methodology

is to compare prices to model-specific COPs. Because respondents were

only able to supply the Department with average COP information

representing an entire range of rose production, they argue that the

Department should compare annual average COP figures to average home

market prices of all varieties and stem lengths.

Additionally, respondents state that, to account for price

seasonality, the Department must use annual home market average prices

to properly test whether home market sales prices permit the recovery

of costs in a reasonable time. Respondents refer to the Botero Report

as evidence that the unusual seasonal prices of roses allow for ``below

average costs over periods of time, including months, that do not cover

a full price cycle.''

Petitioner argues that the court has rejected the comparison of

production costs with average home market prices. See, Timken Co. v.

United States, 673 F. Supp. 495, 516-17 (CIT 1987).

DOC Position

While it is our normal practice in determining sales below cost to

compare the price of each sale in the home market to the cost of

production (COP) of that product during the period under investigation,

in these investigations we were not able to do so because the

respondents do not segregate their cost data by rose type, variety and

stem length. As a result, we determined that to compare one yearly COP

(the POI in these investigations is one year), which combines all

export quality rose costs to prices for each variety of export quality

roses would not be appropriate. See Comment 5 above. Instead, we

combined prices of home market sales for all varieties on a monthly

basis to our annual COP, in conforming with our modified cost test for

agricultural products, as discussed below in Comment 15.

Although respondents urge the Department to combine individual

sales prices for all export quality roses in the home market on a

yearly basis to compare to the yearly COP calculation for export

quality roses, respondents have not persuaded us that such a radical

departure from our procedure is warranted in these circumstances. As

discussed in Comment 15, the Department has a specific test for

determining whether or not sales are below cost that encompasses

recovery of costs within a reasonable time, which we have applied here.

Comment 15: 50-90-10 Test

Respondents maintain that the Department originally intended to

change its 10-90-10 test to a 50/50 test whereby, if less than half of

all sales were below cost, then all sales should be used in creating

weighted-average FMVs, and if half or more of the sales were found to

be sold below cost, then home market sales would be rejected in their

entirety and FMV would be based on CV.

Petitioner maintains that respondents have misrepresented the

Department's past practice and ignored judicial precedent. Petitioner

maintains that the current 50-90-10 test by which the Department

removes from consideration ``significant'' quantities of sales made

below COP but uses those sales made above cost, is correct. Petitioner

maintains that the courts supported the Department's use of remaining

above-cost sales as sufficient for FMV in Timken Co. v. United States,

673 F. Supp. 495, 516-517 (CIT 1987), and that the basic principle

applies to all products.

DOC Position

We disagree with respondents. The Department has an established

practice which takes into account the realities of selling perishable

agricultural products. In Final Determination of Sales at Less Than

Fair Value: Certain Fresh Winter Vegetables from Mexico, 45 FR 20512,

20515 (March 24, 1980), after examining the nature of sales of

vegetables, the Department determined that it was a regular business

practice to make a relatively high number of sales of the subject

merchandise below cost because of the perishability of the product,

which rapidly ages into non-salable merchandise. As a result, the

Department determined that were it to apply the normal below cost test

used for nonperishable products, i.e., the 10-90-10 test, this would

not fairly reflect the economic realities of the fresh vegetable

industry. As a result, the Department concluded that it would permit

all sales at below cost to remain in the FMV comparison unless more

than 50 percent were found to be below cost. [[Page 7032]]

This modified test was clarified in a review of Final Results of

Antidumping Duty Administrative Review; Certain Fresh Cut Flowers from

Mexico, 58 FR 1794, 1795 (January 17, 1991), wherein the Department

explicitly stated that the test to be applied for determining sales

below cost for perishable agricultural products was a 50-90-10 test,

i.e., if between 50 and 90 percent of home market sales consisted of

prices below cost, then only the below cost sales were disregarded,

while if over 90 percent of sales were below cost then all sales in the

home market were disregarded. See Final Results of Antidumping Duty

Review: Certain Fresh Cut Flowers from Mexico, 56 FR 1795, 1795

(January 17, 1991).

This modified test still remains our current practice and

respondent's rationale for the adoption of a straight 50-50 test is an

unmerited modification. Were we to adopt respondents' either/or

position, i.e., if less than 50 percent are below cost we will use all

sales, and if more than 50 percent we will disregard all sales, then we

would, in effect, be concluding that 11 percent of widget sales above

cost are sufficient to be the basis for FMV but that 49 percent of rose

sales above cost are insufficient. This is an illogical result, which

we are not prepared to accept.

Comment 16: Duty Deposit Rate--Roses Shipped But Not Sold

Respondents urge the Department to adjust the deposit rate to

reflect the fact that many roses imported into the U.S. perish or are

destroyed prior to sale. To avoid over collecting duty deposits on

roses that never reach the U.S. market, and since there is no way of

distinguishing between roses that will be sold and roses that will be

destroyed at the time of entry, respondents argue that the duty deposit

rate should be adjusted downward to reflect the quantity of roses

shipped to the United States, but not sold. This practice is being used

in Flowers. Respondents suggest the Department multiply any ad valorem

rates it calculates by the ratio of total quantity sold divided by

total quantity shipped, as reported by each respondent.

Petitioner states that all imports at the time of importation are

potentially for sale and, therefore, must bear the appropriate cash

deposit rate. Because the percentage of roses that will go unsold

varies due to season, weather, problems in transportation, etc.,

petitioner argues that there is no accurate way to adjust for this

potential impact.

Additionally, petitioner states that if the Department does adjust

the duty deposit rate to account for roses shipped but not sold, than

it is appropriate to adjust the deposit rate to reflect the fact that

values entered by Customs are arbitrarily established on consignment

entries. Petitioner argues that the use of the calculated USP to derive

a cash deposit rate may bear no relation to the value used by Customs

for collecting duties. Therefore, petitioner believes that the duty

deposit rate should be adjusted upwards so that the duty amount

collected reflects the potentially uncollectible duty deposits

calculated in the final determination.

DOC Position

We disagree with respondent that the duty deposit rate should be

adjusted for roses shipped but not sold. We do, however, agree with

respondent, in part, that such adjustment is appropriate for assessment

purposes, which are distinct from duty deposit purposes. In the case

cited by respondents, Fresh Cut Flowers from Colombia 55 FR 20491 (May

17, 1990), the Department indicated that it would make such an

adjustment in preparing assessment instructions to the Customs Service.

The Department did not make such an adjustment to the duty deposit

rates in that case and has not done so in subsequent reviews.

We agree with petitioners that all imports at the time of

importation are potentially for sale, and that the percentage of roses

which go unsold varies with the seasons. Moreover, this percentage will

likely vary with each producer and reseller. Thus, any adjustment

contemplated would be speculative. It is preferable to wait until the

Department prepares assessment instructions on entries covered by these

deposit rates and then make such an adjustment based on the actual

experience of the affected companies.

Comment 17: Cash Deposits--The Department's Sampling Technique

Respondents claim that the all others cash deposit rate calculated

by the Department is not based on a representative sample of the

Colombian rose exporting population--it merely reflects the experience

of 16 of the largest exporters. Furthermore, according to respondents,

the all others rate disregards the representativeness of such

experience. Respondents maintain that this is inconsistent with the

Department's statutory requirement that any averages and samples used

must be representative of the whole. See 19 U.S.C. 1677f-1(b).

DOC Position

We disagree with respondents. The Department's normal practice, in

accordance with its regulations, is to select that number of the

largest exporters of the subject merchandise needed to represent 60

percent of the imports into the United States from the country under

investigation. Due to the large number of companies needed to reach 60

percent of imports in this investigation and the administrative burden

it would put on the Department's resources to investigate these

companies, the Department selected the 16 largest exporters

representing over 40 percent of the imports into the United States. See

the May 2, 1994, Decision Memorandum from the Team to Barbara Stafford.

The methodology used by the Department maximized its coverage of

imports into the United States. The technique of selecting the largest

exporters was employed in the Preliminary Determination of Sales at

Less Than Fair Value: Sweaters Wholly or in Chief Weight of Man-Made

Fiber from Taiwan, 55 FR 17779 (April 27, 1990). The other suggested

sampling methods, stratified and random, were not selected due to the

lack of sufficient industry-wide information on the universe of

Colombian and Ecuadorian rose growers (approximately 400 companies in

Colombia and 100 companies in Ecuador). The collection and analysis of

data to determine an appropriate sampling technique was not reasonably

within the power of the Department to undertake. Therefore, we have

chosen the most representative sample under the circumstances.

Comment 18: Duty Deposit Rate for Volunteer Companies

Respondents argue that the due process clause of the Fifth

Amendment to the U.S. Constitution precludes the Department from

requiring cash deposits with respect to companies that the Department

refused to investigate. Respondents cite Kemira Fibres Oy v. United

States, Slip Op. 94-120 (CIT July 26, 1994) to support their argument

that due process is required in antidumping proceedings. Such a course,

according to respondents, would represent an unconstitutional

deprivation of property without due process of law. Respondents

maintain that the cash deposit rate must be set at zero, and that all

cash deposits paid to date should be refunded, and any bonds posted

should be lifted, for all companies ready and willing to participate,

but not chosen by the Department.

Petitioner also refers to Kemira Fibres to support its argument

that procedural due process guarantees do not require trial-type

proceedings in all administrative determinations.

[[Page 7033]] Additionally, petitioner maintains that, as long as the

Department adheres to the procedures mandated by Congress and

implemented in the Department's regulations, then the Department has

afforded interested parties the process due. These regulations,

according to petitioner, allow interested parties the right to appear

and submit their views on the proceedings of an investigation, but they

do not require the Department to investigate every company that

requests a company-specific margin.

DOC Position

We agree with petitioner. Although it is the Department's practice

to accept voluntary respondents when we have the administrative

resources to do so, the Department's regulations do not require that we

accept responses from voluntary respondents. Furthermore, pursuant to

19 C.F.R. 353.14(c), the Department is required to investigate

exclusion requests only ``to the extent practicable in each

investigation.''

Due to the large number of producers and limited administrative

resources, the Department was unable to follow its standard practice of

investigating 60 percent of the exports of roses into the United

States. Accepting these voluntary respondents and investigating

exclusion requests would have reduced the number of ``mandatory''

respondents we could select. Because the Department is not required to

investigate all voluntary respondents and requests for exclusion, and

because the Department followed its regulations and policy concerning

voluntary respondents and exclusion requests, we have afforded

interested parties the process due.

Comment 19: Exclusion Requests

The Government of Ecuador and Expoflores argue that the Department

has deviated from its standard policy by refusing to accept requests

for exclusions or the submission of voluntary responses. Respondents

further argue that in the instant investigation this departure caused

excessive harm because the Department chose to investigate only 40

percent of the Ecuadorian rose industry, rather than the normal 60

percent of exports to the United States. Respondent's argue that three

Ecuadorian companies requested in timely fashion an exclusion from any

potential antidumping duty order. In addition, respondents claim that

Hilsea submitted a voluntary response to Section A of the Department's

questionnaire which the Department returned. Respondents argue that, by

denying Hilsea the opportunity to submit a voluntary response, the

Department deprived it of the opportunity of demonstrating to the

Department that it is not dumping subject merchandise in the United

States.

Petitioner states that the Department lawfully limited its

investigation to the largest Ecuadorian exporters accounting for 40

percent of U.S. imports from Ecuador and should not exclude

``voluntary'' respondents from the final determination, and that the

Department has discretion within the time limits of an LTFV

investigation to determine ``fair value'' on the basis of a percentage

of total imports. Petitioner states that the regulations indicate that

the Department ``normally'' will examine imports accounting for 60

percent of the volume or value sold during the POI. Petitioner states

that this is not a ``normal'' case, given the volume of transactions

and complexity of both it, and the companion investigation of roses

from Colombia. Further, petitioner asserts that the Department's

regulations specifically authorize the agency to investigate a subset

of all exporting companies in an antidumping investigation. Petitioner

asserts that the Department is not required to investigate every

company with U.S. imports. Finally, petitioner argues that the

availability of a refund, with interest, adequately protects

respondents that sought to volunteer, but who could not be accommodated

due to the sheer number of responses investigated. Petitioner maintains

that if such companies receive a lower rate than ``all others'',

however, the domestic industry is deprived of due process by a decision

that is not based on the record.

DOC Position

We agree with petitioner. Although it is the Department's practice

to accept voluntary respondents when we have the administrative

resources to do so, the Department's regulations do not require that we

accept responses from all who wish to submit voluntary respondents.

Further, considering concurrent investigations is within the discretion

of the Department.

Comment 20: Exclusion of BIA from ``All Others''

The GOE and Expoflores argue that the ``all others'' rate should

not be skewed by the inclusion of a BIA rate. These parties argue that

where the Department examines the pricing practices of only a

relatively small number of companies, the usual assumption that compels

the Department to include a margin based on BIA (i.e. that the pricing

practices of the investigated companies are representative) is lacking.

Petitioner argues that there is no basis to depart from the

standard Department practice of including BIA rates in the calculation

of the ``all others'' rate. Specifically, petitioner argues that where

BIA rates are not wildly different than rates calculated on the basis

of verified data, the court has endorsed the use of BIA rates as part

of the calculated all others rate.

DOC Position

We agree with respondents. See Exclusion of BIA Rate From

Calculation of the All Others Rate section above.

Comment 21: Rejection of Untimely Sales Tape

Petitioner argues that the Department cannot for any purpose accept

for the record the revised tapes required to be filed on January 3,

1995. Petitioner quotes a memorandum to the file regarding ``tape

submissions'' dated December 30, 1994, which indicates that the

Department extended the deadline for filing computer tapes from

December 30 to January 3, 1995. Petitioner states that specifically,

the memorandum records the deadline as ``9 a.m.'' Petitioner states

that, ``filing'' as a matter of law is not complete without service of

the tapes upon counsel for petitioner. 19 C.F.R. 353.31(g). Petitioner

argues that, under the regulations, ``[t]he Secretary will not accept

any document that is not accompanied by a certificate of service

listing the parties served, the type of document served, and, for each,

indicating the date and method of service.'' 19 C.F.R. 353.31(g).

Petitioner states that, in this case, there is no question that counsel

for petitioner are covered by the administrative protective order and

entitled to receive on a timely basis copies of any computer tapes

filed by respondents. Petitioner notes that the Department has

previously alerted counsel for Arbusta in this proceeding of the need

to serve computer tapes due to counsel's tardiness in serving earlier

tapes submitted to the Department. At this very late stage of the

proceedings, petitioner claims there is no basis to accept any new

computer tapes for the record, where service was not made and the

rights of petitioner have been so prejudiced.

Respondents did not comment on this issue.

DOC Position

We accepted respondent's sales tapes and gave petitioner time to

comment on these tapes. Although respondents did not provide the sales

tapes to petitioner [[Page 7034]] in a timely manner according to our

regulations, we accorded petitioner sufficient time to comment and

petitioner, therefore, was not prejudiced. See the January 17, 1995,

Memorandum to File.

Company Specific Comments

Arbusta

Comment 22

Petitioner argues that respondent's sales to its related U.S.

importer (related importer) were reported using an unreliable

methodology, and, therefore, U.S. price for these sales should be based

upon BIA. Specifically, petitioner takes issue with respondent's

methodology for identifying the country of origin of U.S. sales by

comparing production records with sales records.

Respondent argues that the Department should accept its method of

reporting U.S. sales whose origin cannot be identified from sales

records kept in the normal course of business. Respondent further

argues that the Department cannot punish it for maintaining commercial

records in the ordinary course of its business that do not identify

data in accordance with the Department requirements.

DOC Position

We agree with respondent. At verification we noted that, in order

to compile its sales listing for the Department, the related importer

excluded the following from its total POI sales: (1) sales of non-

Ecuadorian origin having a specific origin code; (2) non-subject

merchandise; and (3) samples. The result represented sales of

respondent-produced merchandise (representing approximately 86 percent

of its related importer's total sales of subject merchandise) and sales

of ``unknown'' origin. Based on records kept in the normal course of

business, respondent's related importer was unable to determine the

origin of the remaining sales. However, our review of the related

importer's method of using the average price on its grower's report to

determine which sales to report suggests that the sales of ``unknown''

origin were priced in accordance with sales of known origin. Therefore,

we find the method used to report sales of unknown origin to be

reasonable and non-distortive. Moreover, the related importer reported

actual prices in its sales listing. Therefore, we have accepted

respondent's reporting methodology as reflective of actual experience

and have used it for purposes of the final determination.

Comment 23

Petitioner claims we should base the LTFV margin for respondent's

consignment sales to two related consignees on BIA as we were unable

verify these consignees. Petitioner argues that, with respect to the

ESP sales listing for these consignees, as the data on the record was

not verifiable and acceptance of the growers report data would

constitute the submission of a substantially new response, the U.S.

sales listing of ESP sales to these two related parties is unreliable

and cannot be used for purposes of the final determination.

Respondent claims that, in preparing for verification, it

discovered that sales through its two consignees in Miami had been

systematically reported incorrectly in its sales listing, in part

because of a computer error. Respondent claims that it immediately

sought to rectify these errors by submitting a new sales listing for

these consignees on September 28, 1994, as part of its timely response

to the supplemental questionnaire issued by the Department on September

15, 1994. Respondent states that the Department erroneously rejected

the new sales listing on the untenable grounds that 19 C.F.R.

353.31(a)(1)(i) requires that factual information be submitted ``seven

days before the scheduled date on which the verification is to

commence.'' Respondent alleges that the Department's interpretation of

the regulation was grossly unfair and inconsistent with past precedent

as verification of the information was not scheduled until October 19

and 20, far longer than seven days after the submission date of

September 28, 1994. Thus, respondent contends that the new September

28, 1994, sales listing was filed well within the seven day deadline

set forth in 19 C.F.R. 353.31(a)(1)(i).

DOC Position

We agree with petitioner. Respondent attempted to submit an

entirely new, unsolicited sales tape beyond the deadlines established

by 19 C.F.R. 353.31(a). Contrary to respondent's assertion, the

September 28, 1994, sales listing was submitted less than two business

days prior to the October 3, 1994, start of verification. We rejected

the sales tape as untimely. Furthermore, when respondent provided

excerpts from the untimely revised sales list at verification in

Ecuador, we examined them and determined that they showed that the

original sales list was substantially inaccurate and would not verify.

See verification report. Accordingly, we have assigned BIA to these

unverified sales. As BIA, we have used the highest of the highest non-

aberrational margin calculated for any U.S. sale or the average

petition margin.

Comment 24

With regard to the rejected sales tapes of respondent's two related

consignees, petitioner argues that there is no basis in the record to

apply a ``neutral'' margin where respondent conceded that its original

sales listing was erroneous and where the revised data were neither

timely submitted nor verified. Petitioner states that partial BIA for

purposes of calculating the LTFV margins for the missing sales data

should consist of the higher of the highest non-aberrant transaction

margin or the average petition margin.

DOC Position

We agree with petitioner. See Comment 23 above.

Comment 25

Petitioner contends that, while the verification report erroneously

suggests that alleged ``free samples'' or sales with a ``zero'' price

should be removed from the sales listing, this conclusion is incorrect

under the statute and Department precedent. First, petitioner claims

that, as a matter of law, there is no basis to exclude any U.S. sale

from the fair value comparison and that the statute applies to all

sales, without the limitation ``ordinary course'' or otherwise. Ipsco,

Inc. v. United States, 687 F. Supp. 633, 640-41 (CIT. 1988). Hence,

petitioner argues that given an express limitation on the determination

of FMV and no corresponding exclusion from USP, statutory construction

requires that there be no exception in the latter case. See Ad Hoc

Committee of AZ-NM-TX-FL Producers of Gray Portland Cement v. United

States, 13 F.3d 398, 401 (Fed. Cir. 1994). Second, petitioner claims

that, to the extent that a box charge is recovered from sales at a

``zero'' price, such sales are indistinguishable from distress sales.

Moreover, petitioner states that because USPs were averaged in order to

take account of distress sales, such sales must be included in the

sales listing in order to produce a ``representative'' average price.

(19 U.S.C. Sec. 1677f-1(b).) An average without including the alleged

``distress'' sales is clearly not ``representative'' of all U.S. sales.

Floral Trade Council v. United States, 775 F. Supp. 1492, 1503 (CIT

1991), appeal pending, No. 94-1019, -1020. In Floral Trade Council, the

court affirmed ITA's determination that so-called ``distress'' sales

must be included in the U.S. sales listing because ``[a]veraging

already [[Page 7035]] accounts for perishability, and all United States

sales both in and out of the ordinary course of trade are included in

calculating USP.''

Respondent argues that its one zero-priced transaction should be

excluded from the sales listing because providing a sample does not

constitute a ``sale'' pursuant to 19 U.S.C. 1673. Respondent claims it

had one shipment of sample roses for which it received no revenue

whatsoever and that, by legal definition, a sale must include the

exchange of money. Moreover, respondent claims the Department has the

authority to exclude U.S. sales from a LTFV margin calculation if such

sales are not representative of the sellers' behavior and are so small

in quantity and value that they would have an insignificant effect on

the margin. See Ipsco Inc. v. United States, 714 F. Supp. 1211, 1217

(CIT 1989) (rev'd on other grounds, 965 F.2d 1056 (Fed. Cir. 1992)

(Ipsco)). Respondent states that this one shipment meets the criteria

set out in Ipsco.

DOC Position

We agree with respondent. We verified that all sales to one

customer in July had been shipped as free samples. In accordance with

our treatment of all sample sales in this case, we have deleted these

observations from the sales listing. Therefore, the verification report

states that U.S. (purchase price) observations 339 through 352 should

be removed from the sales listing.

Comment 26

Petitioner states that export taxes are a direct selling expense,

and are deductible from USP under 19 U.S.C. 1677a(d)(2). Accordingly,

petitioner states that FONIN export taxes should be calculated for all

U.S. sales and deducted in the sales listing. Petitioner agrees with

respondent that the FONIN tax should not be included in G&A expenses

and that such taxes must be deducted separately from U.S. price

pursuant to 19 U.S.C. 1677a(d)(2). With respect to the basis for

calculating the FONIN taxes, however, petitioner is unclear whether the

computer sales listings contain the ``reference value'' declared to the

Central Bank of Ecuador. In the absence of these values, petitioner

claims there is no record basis for calculating the FONIN tax in a

manner that will duplicate the actual tax paid. Petitioner argues that

the Department should, therefore, apply the tax to the gross price as

the best estimate of the amount paid.

Respondent claims that the Ecuadorian export tax, FONIN, was

calculated as 0.5 percent of the reference value declared to the

Central Bank of Ecuador and shown on the export invoice. Respondent

states that it reported FONIN taxes as part of administrative expenses

in its CV tables and the amount of FONIN paid during the POI therefore

should be deducted from its administrative expenses. Respondent

included FONIN in its indirect selling expense calculation and since

this expense is deducted from USP it must also be removed from indirect

selling expense to avoid double counting.

DOC Position

We agree with petitioner and with respondent, in part. Section

772(d)(2)(B) of the Act specifically directs that export taxes be

deducted from USP; therefore, we have deducted FONIN from USP and

adjusted expenses accordingly to avoid double counting. We have

calculated FONIN as a percentage of the gross unit price as was done in

the preliminary determination.

Comment 27

Petitioner states that credit costs on PP sales should be amended

to reflect the correct number of credit days as noted at verification.

DOC Position

We agree with petitioner. Consistent with our treatment of minor

changes to submitted data, we have used verified data for respondent's

credit days (see e.g., Final Determination of Sales at Less Than Fair

Value: New Minivans from Japan, 57 FR 21937, 21952 (May 26, 1992)

(Minivans).

Comment 28

Petitioner states that we should revise the quality credits

incurred by respondent's related importer in accordance with the

verification report. In its rebuttal brief, petitioner states that it

agrees with respondent that the Department should use the revised data

received at verification concerning these expenses.

Respondent states that while it provided revised figures for U.S.

quality credits, the revisions do not substantially affect previously

submitted data. Thus, respondent claims the Department should accept

its quality credit calculation as provided by it related importer at

verification.

DOC Position

We agree with petitioner and respondent and have used the quality

credits as verified. See e.g., Minivans.

Comment 29

Petitioner claims that verification of movement expenses on sales

through respondent's related importer established that the charges

reported to the Department could not be supported by its records.

Petitioner cites the sales verification report wherein the Department

stated that, with regard to movement expenses, it found that

respondent's related importer both over-reported and under-reported

certain of these expenses. Accordingly, petitioner states the

Department should deny the claimed adjustments and instead apply BIA.

Petitioner argues that for each charge we should impute the highest

per-unit amount claimed in any month to all sales. Petitioner notes

that the determinations cited by respondent do not support the

proposition that any changes identified by a respondent during

verification should be made, so long as they are not extensive.

Respondent states that, while it provided revised figures for U.S.

movement expenses, the revisions do not substantially affect previously

submitted data. Thus, respondent claims the Department should accept

its revised figures for movement expenses (brokerage and handling, air

freight and inland freight) provided by it related importer at

verification and which tied to its accounting system, even though these

figures differed slightly from the amounts reported. Respondent argues

that the use of the verified movement expenses in the Department's

final margin calculation would be consistent with the Department's

practice and precedent. Respondent cites the Final Determination of

Certain Steel Products from Italy, 58 FR 37327 (July 9, 1993), wherein

the Department used revised information provided by respondents at

verification because it did not substantially amend previously

submitted data.

DOC Position

We agree with respondent. We found that the verified movement

expenses were not greatly different from the reported figures.

Therefore, consistent with our treatment of minor discrepancies found

at verification, we have used the verified movement expenses. See e.g.,

Minivans.

Comment 30

Petitioner states that we should increase indirect selling expenses

incurred in Ecuador to include the full amount shown in respondent's

September 28, 1994, indirect selling expense exhibit. Petitioner notes

that [[Page 7036]] verification in Ecuador established that respondent

could not support the total indirect selling expenses incurred in

Ecuador and urges the Department to allocate the larger amount to ESP

sales as BIA.

DOC Position

We disagree with petitioner that BIA is warranted. At verification,

we noted a small discrepancy in respondent's submission. At

verification, we tied indirect selling expenses to the general ledgers

and trial balances. Consistent with our treatment of minor changes to

submitted data, we have used the verified data for respondent's

indirect selling expenses. See e.g., Minivans.

Comment 31

Petitioner takes issue with the verification of respondent's

reported ``estimator'' used to calculate foreign inland freight and

states that the Department should base foreign inland freight on BIA

for purposes of the final determination.

Respondent states that its foreign inland freight expense was based

on the cost paid to its unrelated trucking company to transport roses

from the farm to the airport. Respondent claims it accurately reported

this expense by dividing the standard charge by the number of boxes

shipped, and then dividing the per box charge by the number of stems

per box. Respondent claims that the Department verified the accuracy of

the standard freight charge by reviewing six selected entries to the

freight account from three months of the POI. With the exception of

freight charges paid to a former employee, respondent claims the

Department found its standard freight charge to be accurate. Thus,

respondent states the Department should accept this expense as

verified.

DOC Position

We agree with petitioner. Only fifty percent of the entries

examined tied to respondent's responses. Therefore, we have used the

highest foreign inland freight amount reported in respondent's response

as BIA.

Comment 32

Petitioner notes that verification disclosed that respondent offset

its short-term interest expenses by income from exchange-rate gains on

sales, sales of humus, and ``other'' income. Petitioner claims that

none of these income items is allowed as an offset to interest expenses

according to longstanding Department practice unless it is directly

linked to the interest expenses deducted. See, e.g., Silicon Metal from

Brazil, 59 FR 42806, 42811 (August 19, 1994) (final results admin.

review); Certain Carbon and Alloy Steel Wire Rod from Canada, 59 FR

18791, 18795 (April 20, 1994) (final LTFV determination).

Respondent claims it offset financial expenses with short-term

interest income and exchange gains generated from sales transactions.

Respondent cites the verification report wherein the Department,

``[e]xamined the assets which generated interest income and noted that

they were short-term in nature.'' Respondent states the Department also

noted that exchange gains that were offset against financial expenses

were from sales transactions. Thus, the Department should accept its

financial expenses as reported.

DOC Position

We agree with petitioners that these items are not proper offsets

to interest expenses as they are of a general and administrative

nature.

GUAISA

Comment 33

Petitioner argues that the U.S. sales listing is unreliable and

should be disregarded. Petitioner points out that at verification the

Department found one U.S. ``sale'' that was reported with a quantity,

price and payment date even though the roses were discarded at the

county dump. Petitioner contends that this sale was not a sale but a

computer generated transaction. Petitioner states that because one of

the eight ESP transactions reviewed at verification contained this

computer generated transaction, it is unclear whether, and to what

extent, other computer generated transactions are contained in the

sales listing. Petitioner argues that the reliability of Respondent's

related consignee's sales data is in question because of this

significant flaw. Therefore, petitioner contends, the Department should

not rely upon respondent's data but assign an LTFV margin to respondent

based on BIA.

DOC Position

We disagree with petitioner. We examined respondent's records in

considerable detail at verification and are satisfied that this

discrepancy is not widespread. Therefore, there is no basis to use BIA,

and we accept respondent's U.S. sales data for purposes of calculating

a margin.

Comment 34

Respondent claims that the Department should disregard disposal

sales from its sales listing and that ``disposal'' sales are different

from ``end of the day'' (i.e., distress) sales. Respondent states that

the purpose of a disposal sale is to discard waste and that disposal

sales are made to customers outside the fresh cut flower industry, such

as manufacturers of potpourri or dried flowers, and recyclers of

cardboard and plastic. Respondent maintains that it has a separate

coding system in its computer system for disposal sales and does not

pay its U.S. subsidiary a commission on these sales.

Respondent maintains that disposal sales differ from distress sales

because they are inflicted with disease or damage before entering the

United States. Further, respondent contends that it established at

verification that roses classified as disposal enter the United States

in damaged or diseased condition.

Respondent also argues that the discarded roses are essentially the

equivalent of ``secondary merchandise'' which the Department has

excluded from the calculation of USP in other cases (see, e.g., Certain

Cold-Rolled Carbon Steel Flat Products from Argentina, 58 FR 37062,

37077 (July 9, 1994) (Carbon Steel). Respondent notes that in Carbon

Steel, the Department excluded sales of non-prime merchandise where

sales of such merchandise were an insignificant portion of total sales.

Respondent maintains that its disposal sales constitute far less than

five percent by volume of its related consignee's sales. Respondent

claims that the high percentage of monthly disposal sales in May was

due to a propagation of botritis.

Regarding ``zero-value'' sales, respondent states that by

definition, a ``zero-value'' sale is one for which no revenue has been

collected. Respondent asserts that petitioner mistakenly claims that

the verification report states that a ``box charge is collected'' on

so-called zero-price sales because the verification report does not

make any reference to ``zero-value sales'' on the page cited by

petitioner. Respondent states that petitioner is confusing zero value

sales with disposal sales. The basic legal definition of a ``sale''

necessarily includes the exchange of money; this component is

distinctly absent from zero-value sales.

Petitioner argues that: (1) There is no record support and no

verified evidence that roses have been damaged or diseased before

entering the United States; and (2) there is no basis offered by

respondent on which the Department could segregate sales of diseased

roses from normal distress sales that result from the perishability of

roses. [[Page 7037]]

Petitioner adds that there is a large supply of roses on the market

in May due to the fact that roses cut for Valentine's Day have a second

``flush'' by May and may be shipped to the U.S. market, whether or not

there is sufficiently strong demand. Therefore, petitioner argues that

a particular stem price does not establish that the roses were damaged

or diseased. Furthermore, petitioner maintains that distress sales are

already accounted for by the use of a monthly average.

Regarding zero-value sales, petitioner maintains that as a matter

of law there is no basis for excluding any sales from the fair value

comparison (see Ipsco, Inc. v. United States. 687 F. Supp. 633, 640-41

(CIT 1988) and Ad Hoc Committee of AZ-NM-TX-FL Producers of Gray

Portland Cement v. United States, 13 F.3d 398, 401 (Fed. Cir. 1994).

Petitioner notes that because a box charge was paid on these sales,

respondents could easily evade an order by selling roses for a zero

price but charging for the box.

Petitioner argues that, to the extent that respondent unilaterally

and improperly excluded zero-price sales from its U.S. sales listing,

the monthly average U.S. prices are overstated and respondent's sales

listing must be rejected and the Department apply BIA.

DOC Position

Regarding ``disposal sales,'' we agree with petitioner and kept

these sales in the sales listing. At verification, we observed that a

large number of very low price sales were reported in the month of May.

Company officials stated that, the fact that a high number of these

sales were made at distressed prices in the month of May is not unusual

because it is the second harvest of the February crop and occurs in a

month when the supply exceeds demand. The fact that, in its brief,

respondent refers to these distress sales as ``disposal'' sales does

not change the fact that these are distress sales.

Regarding zero value sales, we agree with respondent that these

should be treated as sample sales. Respondent reported a small

percentage of its U.S. sales as sample sales. Consistent with our

treatment of samples in the preliminary determination and for all

companies, the Department has excluded sample sales from our U.S.

calculation in previous cases (see, e.g., Final Determination of Sales

at Less Than Fair Value: Professional Electric Cutting and Sanding and

Grinding Tools from Japan 58 FR 30144, 30146 May 26, 1993).

Comment 35

Petitioner argues that the Department should use the quality

credits reported on the growers reports for ESP sales. Petitioner

maintains that the Department was unable to tie the total amount of

credits allegedly outside the POI with the total amount given on sales

``inside'' the POI. Petitioner states that, even though respondent's

growers reports may contain credits applicable to 1992 sales, it does

not contain credits given in 1994 for 1993 sales. Therefore, because

credits on the growers reports cover an entire seasonal cycle, it is

reasonable to use credits awarded over a full year as the basis for

this adjustment even though the credits do not tie entirely to the POI.

Respondent states that the Department identified discrepancies in

its related consignee's U.S. quality credit calculation. However,

respondent maintains that the Department verified corrected data and,

therefore, should use its corrected data in the final determination.

Furthermore, respondent states that the difference between the amount

the Department was unable to tie from respondent's response to its

worksheets differed by only a small percentage from that reported.

Therefore, respondent argues that this does not discredit its

methodology of excluding credits paid on sales made before the POI and

including credits paid after the POI which were on sales made during

the POI.

Respondent maintains that the Department has erroneously referred

to the ``credit reimbursement'' as if it were a quality credit.

Respondent states that this ``credit reimbursement'' is compensation

from respondent's related consignee to respondent in the form of an

inter-company transfer and bears no connection to quality credits.

Respondent explains that the money transferred is actually ``excess''

profit accumulated by respondent's related consignee from sales of

roses from other farms during the Valentine's Day holiday. Furthermore,

respondent states that this credit reimbursement figure is not found in

any quality credit account but, as found by the Department at

verification, is recorded in respondent's related consignee's operating

statement as a cost of sales. Therefore, the Department should use the

verified quality credits, as stated above, in its quality credit

calculation and should exclude credit reimbursements from the

calculation.

DOC Position

We agree with petitioners. Because there is a discrepancy in

respondent's methodology of matching credits in the POI with sales

outside the POI, we used the quality credits reported on the growers

reports in our calculation, including the credits given on freight and

packing. We also included credit reimbursements as a quality credit

expense.

Respondent reported in its sales listing the quality credits shown

on the growers reports. At verification, we noted that by using the

growers reports to report quality credits, respondent had included

quality credits which applied to 1992 and excluded quality credits

reported in 1994 which applied to 1993. Therefore, at our request

respondent attempted to match the quality credits to the month the

sales occurred. Respondent provided a breakdown of the quality credits

for 1992; however, it did not provide a breakdown of quality credits

recorded in its 1994 records that applied to 1993 credits due to the

limited time available at verification. Therefore, we were able to

determine how, if at all, the quality credits should be adjusted.

However, we were satisfied that what they reported is what was actually

incurred and found no reason to conclude that the reported figures

should not be used. Therefore, we used the verified data from the

growers reports.

Comment 36

Respondent argues that at verification the Department found that it

received free airline tickets and freight rebates from its freight

carriers in recognition of the high level of business given the freight

carriers by respondent. Therefore, respondent contends that the

Department should treat the value of these tickets and rebates as a

deduction from total U.S. air freight expenses.

Petitioner notes that it is unclear whether respondent counted such

income as an offset to air freight expenses in its normal books and

records. Petitioner states that because neither the sales nor the cost

verification reports mention that such an item appeared in respondent's

general ledger or was treated other than as income to respondent's

officers, the record does not tie the airline tickets to POI sales of

roses.

Petitioner contends that although respondent claims that the

tickets were rewarded ``in recognition of the high level of business

given the freight carriers,'' there is no documentary evidence to

support this claim. Petitioner adds that no other Ecuadoran rose grower

made a similar claim and there is no support for the claimed

adjustment. [[Page 7038]]

DOC Position

Respondent reported an air freight rebate and six free airline

tickets received from its air cargo carrier in its response. For the

preliminary determination, we deducted the air freight rebate from air

freight expenses. We did not deduct the value of the six free round

trip airline tickets from respondent's air freight expenses. We

verified that respondents received rebates on air freight expenses

incurred during the POI. Therefore, we granted the percentage of rebate

allocable to roses based on exports of roses to exports of all

products. Regarding airline tickets, because these tickets are not a

reduction of the air freight expense of respondent, or a reduction to

respondent's cost, we discarded the airline tickets from our analysis.

Comment 37

Respondent argues that the Department should accept the reported

number of days for purposes of calculating imputed credit calculation

on its purchase price sales.

Respondent's accounting system did not electronically link the date

of sale and date of payment, instead respondent manually matched

invoices and payment records. Respondent stated that, a burdensome and

exhaustive task, some errors occurred. However, respondent argues that

these errors were not significant and worked to respondent's

disadvantage.

Petitioner argues that since the Department only verified a few

observations and found pervasive errors in credit days reported the

payment days reported are unreliable and the Department should apply

BIA. Petitioner asserts that, as partial BIA, the Department should

select the longest payment days from a non-aberrational transaction and

impute that period to all U.S. sales.

DOC Position

We agree, in part, with petitioner. As BIA, we used the highest

monthly weighted-average credit days reported on purchase price sales.

At verification, we found that every preselect and surprise sale had an

error in the calculation of the number of credit days outstanding for

third country and purchase price sales.

Comment 38

Respondent asserts that the Department should use the verified

interest rate for the imputed credit expense for purchase price sales.

Respondent argues that using the verified interest rate does not

substantially effect previously submitted information. Therefore,

respondent claims that, the Department, consistent with its precedent

and practice, should accept and use the revised calculations. In

support of this assertion, respondent cites the final determination of

Certain Steel Products from Italy, 58 FR 37327 (July 9, 1993) wherein

the Department used actual information provided by respondents at

verification which did not substantially amend previously submitted

data.

Petitioner argues that information regarding purchase price

interest rates collected at verification should not be accepted by the

Department merely on the ground that the revisions do not substantially

affect previously submitted. However, to the extent that these

corrections were verified and the Department was satisfied of their

accuracy, petitioner does not object to the use of the verified

interest rate.

DOC Position

We agree with both parties. We used the verified information for

calculating the interest rate for imputed credit.

Comment 39

Respondent, stating that it experienced extraordinary wind damage

on August 2 through 7, 1993, argues that the Department should not

include in COP or CV, the expenses it incurred to rebuild its

greenhouses. Respondent maintains that the hurricane winds experienced

during the POI were not a normal event. Respondent states that

according to U.S. GAAP, for an event to be considered ``extraordinary''

it ``must be unusual in nature and infrequent in occurrence.'' (See

Floral Trade Council v. United States, Slip Op. 92-213.) Respondent

contends that the hurricane winds it experienced were both ``unusual in

nature'' and ``infrequent in occurrence.'' Respondent states that this

was the first time that winds of such abnormally high and devastating

velocity struck the region, and thus such winds were highly abnormal

and could not be reasonably anticipated. Accordingly, respondent

contends that the Department should base CV on the actual production of

the first five months of the POI and expected production for the

remaining seven months. In addition, respondent urges the Department to

exclude its extraordinary costs associated with the damage from the

windstorm.

Petitioner notes that wind, like other weather conditions, is an

anticipated factor in growing roses. Petitioner maintains that certain

losses occur each year due to weather, disease, or the environment.

Therefore, there is no basis to treat respondent's wind damage costs

differently for this investigation.

Petitioner argues that respondent did not claim expenses associated

with the windstorm as ``extraordinary'' in its financial statements.

Thus, petitioner contends, there is no basis upon which normal and

allegedly ``extraordinary'' costs can be segregated.

Petitioner maintains that if an adjustment for extraordinary losses

is granted, it would be improper for the Department to determine unit

costs based on theoretical production. Instead, extraordinary cost from

the storm should be removed from the total and then actual costs

incurred should be spread over actual production.

DOC Position

We agree with respondent. At verification we reviewed news videos

and photographs of the wind damage. The severe wind storm damage

resulted in an unusual loss of crop. To make an appropriate adjustment

for this loss we have normalized the production level. We have relied

upon the actual number of stems sold in January through July 1993. For

the months which suffered crop losses due to the storm, i.e., August,

September, October and November, we have based our calculations of

monthly stems produced on the average of actual monthly sales from the

first seven months of 1993. This is a conservative estimate since

respondent had plants that would have begun to enter the productive

phase during the August-November period. Thus, under normal

circumstances, production would have increased to include additional

stems harvested from plants just starting the production period when

the wind storm occurred.

Finally, we disagree with petitioner that we should remove all

expenses as an extraordinary cost and that it would be inappropriate to

isolate an extra cost of the storm. The Department determined that the

major loss of the storm was the loss of the growing crop, the stems

which would have matured over approximately the next twelve weeks.

Therefore, we believe that it is appropriate to adjust for the loss of

the crop.

Comment 40

Petitioner states that verification disclosed that nursery plants

were excluded from the basis for allocating certain costs to rose

production. Petitioner argues that by depreciating the rose plants over

their useful life, respondent takes account of the pre-production stage

of its rose plants. Therefore, respondent should not also exclude

plants in the pre-production [[Page 7039]] stage from the total to

which costs are allocated. Otherwise, no costs are attributed to the

pre-production rose plants.

Petitioner states that respondent's allocation of services (e.g.,

insurance and depreciation expenses) by the number of plants, rather

than the area in production is reasonable. However, petitioner argues

that greenhouse depreciation, machinery and equipment depreciation,

insurance on the facility, and service costs are related to area in

production, not the number of plants.

Petitioner also argues that the record does not establish that the

nursery stock was sold exclusively to unrelated customers. Therefore,

if some or all of the nursery stock was used in respondent's

greenhouses, then there is no basis for excluding these costs or

allocating a portion to rose production.

Furthermore, petitioner contends that because respondent did not

segregate these costs in its response, the Department should determine

whether the number-of-plants allocation (including nursery plants)

reasonably approximates the production-area allocation. If not,

petitioner argues that the Department should use the higher percentage

as the allocation basis as BIA.

Respondent argues that petitioner's theory that the pre-production

stage of a rose plant is accounted for by depreciating rose plants over

their useful life is erroneous. Respondent asserts that petitioner is

confusing the amortization of pre-production costs of rose plants

ultimately grown by respondent for production, with the separate

business of selling nursery rose plants to unrelated parties.

Respondent maintains that the sale of nursery plants constitutes a

separate line of business and the costs of nursery plants, like any

other plant not subject to this investigation, should not be included

in the CV calculation of fresh cut roses.

Respondent adds that it allocated service, insurance and

depreciation expenses on the basis of number of plants which included

nursery rose plants. Respondent states that nursery plants are not

considered production plants and are sold to unrelated customers in the

normal course of business. Therefore, respondent contends that the

nursery plants, like any other plant not subject to this investigation,

should not be included in the CV calculation.

DOC Position

We agree with petitioner that using the number of plants to

allocate certain expenses is not an accurate measure. At verification,

we reviewed respondent's plant allocation methodology and determined

that it was inaccurate. With the exception of the plants themselves,

other inputs in the growing process seem to be more closely linked to

the area under cultivation. We also reviewed the calculation of area

under cultivation. As we have determined that it is more correct to

allocate the costs in question based on cultivation area, we have re-

allocated the cost on that basis.

Comment 41

Respondent states that it translated dollar-denominated loans and

payments into sucres in its financial statements and that during the

POI, that a fictitious loss was created and recorded in the translation

gain/loss account. Respondent argues that this account is purely

cosmetic and does not reflect actual costs of production. Therefore,

the Department should not include the fictitious translation expenses

in its CV calculation.

Petitioner asserts that because respondent's so-called

``translation'' losses on foreign-currency loans are recorded in

respondent's financial statement in the ordinary course of business and

in accordance with GAAP, they should not be disregarded. Petitioner

asserts that, in order to repay foreign-currency loans, respondent will

be required to convert sucres to the currency of the loan. Therefore,

repayment is affected by the exchange rate. Moreover, the overall

financial condition of respondent, and its ability to raise capital and

obtain loans, is affected by the translation losses shown on its

financial statements. Accordingly, petitioner argues, there is no basis

to ignore these costs in determining the total cost of production.

DOC Position

We agree with petitioner. The translation loss reflects an actual

increase in the amount of sucres that will be paid to settle these

borrowings. We have therefore included the translation loss and

amortized it over the remaining life of the loan.

Comment 42

Petitioner maintains that respondent treated interest payments to a

shareholder as normal interest expenses in its ordinary books and

records. Petitioner cites Kiwi Fruit from New Zealand, 59 FR 48596,

48599 (September 22, 1994) (final results of admin. review) in which

the Department stated:

Absent specific evidence to the contrary, we consider expenses

recorded in a company's financial statements to reflect actual

expenses incurred

in its operations * * * 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.

Moreover, petitioner maintains that the proceeds of the loan were

used for working capital, not capital expenditures. Petitioner contends

that the shareholder and the company did not treat the loan as a stock

purchase or otherwise as an increase in capitalization. Therefore, the

issue is not whether the interest costs of the loan should be excluded,

but whether the provision of working capital was at a favorable less

than arm's length rate. If so, petitioner maintains that the

transaction should be treated as any other related-party input and

revalued at an arm's length interest rate. Alternatively, the interest

paid to a shareholder should be treated as income to that shareholder

in return for management services. Furthermore, petitioner maintains

that because of the nature of the relationship between the shareholder

and respondent, the ``interest'' paid to the shareholder should be

deemed to be part of his salary.

Respondent states that this ``loan'' was more in the nature of an

investment and was recorded in respondent's records as a loan for tax

purposes only. Furthermore, respondent states that it followed the

Department's questionnaire instructions which state to ``include all

interest expenses incurred on your company's long and short-term debt

from unrelated sources.* * *'' Therefore, respondent states that the

Department should not include interest paid to a shareholder as part of

respondent's financial costs.

DOC Position

We agree with petitioner. At verification, the Department was

unable, due to time constraints, to collect sufficient information to

determine what the original classification of a loan should have been.

Since the loan was not recorded originally as an equity investment and

is reflected in the company's books and records as borrowings, we have

no basis to reclassify it as equity. Therefore, consistent with the

company's financial statement treatment, we have included interest

expense for this loan in our cost calculations.

[[Page 7040]]

Inversiones Floricola, S.A.

Comment 43

Petitioner argues that a small rose producer in Ecuador (because

its identity is proprietary, it will hereinafter be referred to as

``company X'') is related to respondent and that respondent did not

report sales from this farm in its sales listing. Regarding the nature

of the relationship, petitioner states that there is sufficient

evidence of ownership between respondent and company X. Petitioner

argues that: (1) The rose farms of the group most likely have similar

production processes and could, therefore, shift production to company

X to supply respondent's U.S. customers to take advantage of a possible

lower antidumping duty margin; and (2) there is at least a possibility

of future price manipulation due to knowledge of marketing and

production information for both respondent and company X; (4) there is

no evidence on the record of an absence of control of production or

sales at the group of companies and that respondent's claim that

Sunburst Farms controls marketing, sales, and pricing for respondent

are unsupported by the evidence on the record; and (5) even the

smallest amount of third country sales by company X would establish the

viability of respondent's third country markets. Therefore, petitioner

argues that company X and respondent are related parties and as such,

company X's sales should have been reported. Petitioner argues that, as

cooperative BIA, the Department should assign the average margin from

the petition to company X.

Respondent maintains that it is the only rose-producing entity

among its related companies, and that it has fully reported its sales

and cost information in this investigation. Regarding company X,

respondent argues that it is not a related party under 19 U.S.C.

1677(13). Respondent states that it is neither an agent nor a principal

of company X. Furthermore, respondent states that it owns no interest

in company X and company X owns no interest in respondent. Respondent

argues that there is no direct or indirect ownership link between

respondent and company X.

Moreover, respondent maintains that respondent and company X

operate as separate and distinct entities. Respondent argues that there

is no common control between company X and respondent. Company X does

not share employees, land, equipment, administrative offices,

distribution channels, or pricing and production decisions with

respondent or respondent's related farm. Respondent maintains that

production, marketing, sales, and pricing decisions for respondent are

made by Sunburst Farms Miami and Sunburst Farms Holland in accordance

with export market conditions. Furthermore, there are no contractual

relations or similar business dealings between respondent and company

X.

Regarding petitioner's assertion that respondent could shift

production to company X, respondent argues that company X is primarily

a dairy farm and does not have sufficient capacity to take over more

than a negligible portion of respondent's production. Furthermore,

respondent states that the Department verified that no expenses or

revenue from any other farm runs through company X's checking account.

Respondent thus argues that joint control of both entities cannot be

established and therefore, these companies are not related within the

meaning of 19 U.S.C. 1677(13). However, if the Department determines

that respondent and company X are related, respondent maintains that

the Department should apply a separate rate for company X, and that the

Department should use respondent's verified data to calculate its rate.

DOC Position

It is the Department's practice to collapse parties related within

the meaning of section 771(13) of the Act when the facts demonstrate

that the relationship is such that there is a strong possibility of

manipulation of prices and production decisions that would result in

circumvention of the antidumping law. See Nihon Cement Co. v. United

States, Slip Op. 93-80 (CIT May 25, 1993); Certain Iron Metal

Construction Castings from Canada, 55 FR 460, 460 (January 5, 1990)

(final results of admin. review); Antifriction Bearings (Other Than

Tapered Roller Bearings) and Parts Thereof from the Federal Republic of

Germany, 54 FR 18992, 19089 (May 3, 1989) (final results of LTFV

investigation). Based on the evidence on the record, we find that

respondent and company X are not related parties within the meaning of

section 771(13) of the Act and, as a result, should not be collapsed in

this investigation.

Pursuant to section 771(13) of the Act, the Department examined (A)

whether respondent was the agent or principal of company X; (B/C)

whether respondent owns or controls any interest in the business of

company X, or vice versa; and (D) whether there is any direct or

indirect common ownership between respondent and company X, involving

at least 20 percent of the voting power or control. The Department

found no evidence that any of these statutory indicators of relatedness

existed with respect to respondent and company X.

Petitioner's arguments concerning interlocking shareholders,

shifting of production, possibility of price manipulation, and control

of production and sales, are inapposite because they are related to

factors that the Department considers in determining whether to

collapse companies for the purpose of calculating a single dumping

margin. See, e.g., Antifriction Bearings from France, etc., 58 FR

39729, 39772 (July 26, 1993) (final results of 3d admin. review)

(``AFBs III''). Significantly, however, a collapsing analysis is only

done on related parties. See, e.g., AFBs III at 39772. (``[T]he

Department uses * * * factors in determining whether to collapse

related enterprises.* * *'') (emphasis added). In most cases, the

relatedness of the parties is quite clear, i.e., a parent and a

subsidiary, or two sister subsidiaries. See, e.g., AFBs III at 39772.

In contrast, in this investigation there is no evidence that, pursuant

to the definition of related parties under section 771(13) of the Act,

respondent and company X are related. As a result, we have not

performed a collapsing analysis.

Comment 44

Respondent argues that the statute requires the Department to use

general expenses and profit related to home market sales of the same

general class or kind of merchandise that are in the ordinary course of

trade. The respondent maintains that its home market sales of culls are

the same general class or kind of merchandise as export- quality roses.

Respondent also maintains that culls are a regular and recurring part

of business in Ecuador and are in the ordinary course of trade.

Therefore, the respondent contends that the Department should use its

verified home market selling expenses in CV. Regarding profit,

respondent argues that the appropriate profit for use in CV is the

statutory minimum eight percent.

Respondent argues that if the Department uses its U.S. selling

expenses in CV, it must modify its methodology for calculating

respondent's ESP offset to eliminate the margin-creating effects of its

preliminary ESP offset calculation.

Respondent further argues that if the Department uses its U.S.

selling expenses, then the Department should not include the Panama and

farm-level components of those expenses in CV. Respondent contends that

the inclusion of farm-level or Panamanian expenses

[[Page 7041]] double-counts home market expenses as expenses incurred

in the United States are already being used as a supposed proxy.

Moreover, the expenses incurred in Panama relating to U.S. sales have

nothing to do with the home market because the Panamanian selling agent

is involved only with export sales.

Petitioner maintains that the home market is not a viable market in

the ordinary course of trade with respect to export quality roses.

Petitioner argues that the home market is a market for distress sales.

Petitioner states that the Department should use third-country expenses

and profits to calculate CV.

Petitioner argues that it is appropriate to add selling expenses on

the same terms as the constructed value (i.e., using annual average

indirect selling expense). Petitioner further argues that if the

Department relies on U.S. selling expenses to compute CV, all U.S.

selling expenses, whether incurred in Ecuador, Panama, or in the United

States should be included. Petitioner argues that it has been the

Department's practice and upheld by the courts that all expenses

incurred in selling merchandise in the United States should be deducted

from ESP, regardless of whether the entity incurring the expenses was

physically located in the United States.

DOC Position

We disagree with respondents and have used U.S. selling expenses as

a surrogate (see Comment 9). We agree with petitioners that all

expenses incurred in selling merchandise in the United States should be

deducted from ESP, regardless of whether the entity incurring the

expenses was physically located in the United States. Further, we

disagree that modification of our standard ESP offset methodology is

warranted in this case.

Comment 45

Petitioner asserts that the verification report indicates that

common indirect selling expenses were allocated to three Panamanian

companies which were involved with the sale of roses. However,

petitioner argues that the verification report indicates that certain

selling expenses were not allocated to the company involved in the sale

of respondent's roses. Petitioner contends that all indirect selling

expenses should be reallocated.

Respondent asserts that it allocated its indirect selling expenses

among all three of the Panamanian companies based on the relative sales

revenue of each company. Respondent argues that the allocation is

clearly supported in the verification report.

DOC Position

We agree with respondent. We verified that all selling expenses

were reported and allocated appropriately.

Comment 46

This text is long and has been trimmed here. Open the source document for the complete record.