# Final Determination of Sales at Less Than Fair Value: Fresh Cut Roses From Colombia

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## Record

- **Collection:** Federal Register
- **Document type:** Notice
- **Published:** February 6, 1995
- **Citation:** 60 FR 6980

## Text

DEPARTMENT OF COMMERCE

International Trade Administration
[A-301-801]

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

AGENCY: Import Administration, International Trade Administration,
Department of Commerce.

EFFECTIVE DATE: February 6, 1995.

FOR FURTHER INFORMATION CONTACT: James Maeder or James Terpstra, Office
of Antidumping Investigations, Import Administration, U.S. Department
of Commerce, 14th Street and Constitution Avenue, N.W., Washington,
D.C. 20230; telephone (202) 482-3330, or (202) 482-3965.

Final Determination

We determine that fresh cut roses (roses) from Colombia are being,
or are likely to be, sold in the United States at less than fair value,
as provided in section 735 of the Tariff Act of 1930 (the Act), as
amended as of 1994. The estimated margins are shown in the ``Suspension
of Liquidation'' section of this notice.

Case History

Since the notice of amended preliminary determination on October 4,
1994 (59 FR 51554, October 12, 1994), the following events have
occurred.
On September 27, 1994, respondents requested a postponement of the
final determination. On September 28, 1994, the Department agreed to
postpone the final determination until January 26, 1994.
On September 29 and 30, 1994, we received responses to the
Department's supplemental questionnaires from Grupo Sabana (Sabana),
Grupo Intercontinental (Intercontinental), the Floramerica Group
(Floramerica), Flores la Fragancia (Fragancia), and Grupo Sagaro
(Sagaro).
On October 3-11, 1994, Grupo Benilda (Benilda), Grupo Tropicales
(Tropicales), Grupo Prisma (Prisma), Grupo Bojaca (Bojaca),
Intercontinental, Sabana, the Andes Group (Andes), Grupo Papagayo
(Papagayo), Grupo Clavecol (Clavecol), Sagaro, Agrorosas, Flores Mocari
S.A. (Mocari), and Rosex submitted preverification corrections to their
respective responses.
Department of Commerce personnel conducted sales and cost
verifications of the respondents' data in Miami from October 9, 1994,
through November 3, 1994.
On October 7, 1994, the petitioner submitted comments regarding the
verification of the respondents' sales responses.
In October 1994, Rosex and Andes submitted corrections identified
at the beginning of verification.
On November 7, 1994, the Caicedo Group (Caicedo), submitted
certifications from the Government of Colombia that four members of its
group did not export during the POI.
On November 10, 1994, Arnold and Porter, counsel for Asocolflores a
growers organization that represents 14 of the 16 individual
respondents, met with Assistant Secretary for Import Administration
Susan G. Esserman regarding a suspension agreement, (See memorandum to
file, November 11, 1994).
On November 14, 1994, Beall's Roses, Inc., an American importer,
entered an appearance as an interested party in this investigation.
On November 18, 1994, Asocolflores submitted four reports, the
Botero Report, the Tayama Report, the Lewis & Sykes Report, and the
Hortimarc Report addressing to the issue of whether or not third
country prices should be used in calculating foreign market value
(FMV).
The Department's sales and cost verification reports for Sabana,
Sagaro, Rosex, Floramerica, Mocari, Prisma, Fragancia, and Tropicales
were issued from November 16 to 29, 1994.
On November 28, 1994, the petitioner supplied the Department with
comments concerning the four third country pricing reports supplied by
the respondents on November 18, 1994.
In November and December 1994, Rosex, Benilda, Floramerica,
Intercontinental, Prisma, Bojaca, Sagaro, Tropicales, and Fragancia
submitted revised sales listings and computer tapes.
In September 1994, both the petitioner and the respondents
requested a public hearing. Case and rebuttal briefs were received from
the petitioner and the respondents on December 2, 6, and 12, 1994. On
December 13, 1994, we held a public hearing. [[Page 6981]]

Scope of Investigation

The products covered by this investigation are fresh cut roses,
including spray roses, sweethearts or miniatures, intermediates, and
hybrid teas, whether imported as individual blooms (stems) or in
bouquets or bunches. Roses are classified under subheadings
0603.10.6010 and 0603.10.6090 of the Harmonized Tariff Schedule of the
United States (HTSUS). The HTSUS subheadings are provided for
convenience and customs purposes. The written description of the scope
of this investigation is dispositive.

Period of Investigation

The POI is January 1, 1993, through December 31, 1993. (See the
April 14, 1994, memorandum from the team to Richard W. Moreland).

Applicable Statute and Regulations

Unless otherwise indicated, all citations to the Statute and to the
Department's regulations are in reference to the provisions as they
existed on December 31, 1994.

Such or Similar Comparisons

We have determined that all roses covered by this investigation
comprise two categories of ``such or similar'' merchandise: culls and
export-quality roses. None of the respondents reported sales of culls
in the United States. Therefore, no comparisons in this such or similar
category were made. Regarding export quality roses, we compared USP to
CV (See the CV section of this notice).

Fair Value Comparisons

To determine whether sales of roses from Colombia to the United
States were made at less than fair value, we compared the United States
price (USP) to the CV for all respondents, as specified in the ``United
States Price'' and ``Foreign Market Value'' sections of this notice.

United States Price

For sales by all respondents except Floramerica, we based USP on
purchase price, in accordance with section 772(b) of the Act, when the
subject merchandise was sold to unrelated purchasers in the United
States prior to importation and when exporter's sales price (ESP)
methodology was not otherwise indicated.
In addition, for all respondents, where sales to the first
unrelated purchaser took place after importation into the United
States, we based USP on ESP, in accordance with section 772(c) of the
Act.
For all U.S. prices, we calculated USP using weighted-average U.S.
prices by rose type, where the appropriate data was available. (See
General Comments 4 and 5).
During the POI, some respondents paid commissions to related
parties in the United States. However, we made no adjustment for these
payments. Instead, we subtracted the actual indirect selling expenses
incurred by the related party in the United States because we
determined that to account for both commissions and actual expenses
would be distortive. (See General Comment 7).
Finally, for those respondents who sold through related parties in
the United States and who did not report inventory carrying costs on
their ESP sales, we calculated these costs by using an inventory
carrying period of seven days. According to a public report by Harry K.
Tayama, PhD., submitted by the respondents in this investigation, this
is an appropriate period. For companies with sales to unrelated
parties, we accepted that inventory carrying costs were included in
U.S. credit expenses.
We made company-specific adjustments, as discussed below:
1. Agrorosas S.A.
For Agrorosas, purchase price was based on packed, f.o.b. prices to
unrelated customers in the United States. We made deductions, where
appropriate, for foreign inland freight.
We calculated ESP based on packed prices to unrelated customers in
the United States. We made deductions, where appropriate, for foreign
inland freight, air freight, brokerage and handling charges, U.S.
import duties. We also deducted U.S. direct selling expenses, including
credit expenses, U.S. indirect selling expenses, Colombian indirect
selling expenses, and commissions to unrelated parties. We recalculated
foreign inland freight and Colombian indirect selling expenses based on
verification findings.
2. Caicedo Group
For Caicedo, we calculated purchase price based on packed, f.o.b.
prices to unrelated customers in the United States. We made deductions,
where appropriate, for foreign inland freight.
We calculated ESP based on packed prices to unrelated customers in
the United States. We made deductions, where appropriate, for discounts
and other price adjustments, unrelated party commissions, foreign
inland freight, air freight, U.S. import duties, U.S. inland freight,
repacking expenses, and Colombian indirect selling expenses incurred on
ESP sales, including inventory carrying costs. We also deducted direct
and indirect selling expenses, including inventory carrying costs.
3. Flores La Fragancia S.A.
For Fragancia, we calculated purchase price based on packed, f.o.b.
prices to unrelated customers in the United States. We made deductions,
where appropriate, foreign inland freight and air freight (which
includes U.S. duties and U.S. brokerage).
We calculated ESP based on packed prices to unrelated customers in
the United States. We made deductions, where appropriate, for foreign
inland freight, air freight (which includes U.S. duties and U.S.
brokerage). We also deducted U.S. credit expenses and U.S. and
Colombian indirect selling expenses, including inventory carrying
costs.
4. Flores Mocari S.A.
For Mocari, we calculated purchase price based on packed, f.o.b.
prices to unrelated customers in the United States. We made deductions,
where appropriate, for foreign inland freight, air freight and U.S.
import duties.
We calculated ESP based on packed prices to unrelated customers in
the United States. We made deductions, where appropriate, for foreign
inland freight, air freight, U.S. import duties, credit expenses,
warranty expenses, and other U.S. direct expenses, and U.S. and
Colombian indirect selling expenses, including inventory carrying
costs. We recalculated U.S. indirect selling expenses and credit
expenses because we did not accept Mocari's allocation methodology (See
Comment 39). As a result of this decision, and our decision on the
interest rate issue, we have also recalculated warranty, credit, and
inventory carrying costs. We also recalculated the inventory carrying
costs using the cost of manufacturing (COM).
5. Grupo Andes
For Andes, we calculated purchase price based on packed, f.o.b.
prices to unrelated customers in the United States. We made deductions,
where appropriate, for foreign inland freight, air freight, and U.S.
import duties.
We calculated ESP based on packed prices to unrelated customers in
the United States. We made deductions where necessary, for foreign
inland freight, air freight, U.S. customs duties, U.S. and Colombian
indirect selling expenses including inventory carrying costs, and U.S.
direct selling expenses including credit expenses. We
[[Page 6982]] recalculated U.S. credit expenses to reflect the data
examined at verification.
For roses that were further manufactured into bouquets after
importation, we adjusted for all value added in the United States,
including the proportional amount of profit or loss attributable to the
value added, pursuant to section 772 (e)(3) of the Act. We added
packing to reported U.S. prices. For the cost of merchandise subject to
further manufacturing, in addition to the adjustments cited in the
section on FMV, below, for constructed value, we 1) corrected the U.S.
general expenses to reflect a percentage of cost of goods sold, and 2)
recalculated interest expense to exclude the CV offset.
6. Grupo Benilda
For Benilda, we calculated purchase price based on packed, f.o.b.
prices to unrelated customers in the United States. We made deductions,
where appropriate, for foreign inland freight.
We calculated ESP based on packed prices to unrelated customers in
the United States. We made deductions, where appropriate, for foreign
inland freight, air freight, U.S. customs duties, U.S. inland freight,
and other movement expenses; as BIA, we broke U.S. inland freight
expenses out from total reported U.S. indirect selling expenses to be
deducted as a movement charge. We also deducted Colombian and U.S.
indirect selling expenses, including inventory carrying costs, U.S.
direct selling expenses, including credit expenses, and other direct
expenses. We also deducted U.S. inland freight charges, which we
removed from the U.S. indirect selling expenses reported as incurred by
AGA, Benilda's U.S. sales subsidiary. For those ESP sales where Benilda
did not report air freight and U.S. duty, we applied, as BIA, the
average reported value for each such expense. Based on findings at
verification, an allocation method was used to segregate freight
expenses included in the U.S. indirect selling expenses and recalculate
U.S. indirect selling expenses. Based on findings at verification,
Benilda has included U.S. brokerage expenses as a component of U.S.
indirect selling expenses.
7. Grupo Bojaca
For Bojaca, we calculated purchase price based on packed, f.o.b.
prices to unrelated customers in the United States. We made deductions,
where appropriate, for foreign inland freight.
We calculated ESP based on packed prices to unrelated customers in
the United States. We made deductions, where appropriate, for foreign
inland freight, air freight, U.S. import duties, brokerage and
handling, and discounts and rebates. We also deducted U.S. direct
selling expenses, including credit expenses, U.S. and Colombian
indirect selling expenses, including inventory carrying costs, and
commissions to unrelated parties.
8. Grupo Clavecol
For Clavecol, we calculated purchase price based on packed, f.o.b.
prices to unrelated customers in the United States. We made deductions,
where appropriate, for discounts and foreign inland freight. As BIA, we
deducted a percentage of gross price for one purchase price customer,
in order to account for unreported wire transfer charges discovered at
verification.
We calculated ESP based on packed prices to unrelated customers in
the United States. We made deductions, where appropriate, for
discounts, foreign inland freight, air freight, U.S. brokerage and
handling charges, credit expenses and U.S. and Colombian indirect
selling expenses, including inventory carrying costs. At the
preliminary determination, because Clavecol had not adequately
supported its reported interest rate for calculating imputed credit
expense, we used the highest public interest rate on the record in the
companion investigation of roses from Ecuador, which was a ranged value
for a U.S. subsidiary of an Ecuadoran rose producer, Guanguilqui Agro-
Industrial S.A., of 10 percent (See the September 12, 1994, concurrence
memorandum and the September 9, 1994, memorandum to the file). However,
on September 22, 1994, Clavecol clarified that its U.S. subsidiary had
no borrowings in the United States on which to base a dollar interest
rate for calculating imputed credit on ESP sales. Therefore, we are
using the reported credit expenses based on Clavecol's reported U.S.
dollar interest rate. For the final determination we are deducting from
ESP those discounts on ESP sales examined at verification but not
submitted in computer form until Clavecol's December 7, 1994,
submission. Accordingly, we also reduced Clavecol's reported U.S.
credit expense by the proportion of discounts from gross price.
9. Grupo Floramerica
For Floramerica, we calculated ESP based on packed prices to
unrelated customers in the United States. We made deductions, where
appropriate, for foreign inland freight, air freight, U.S. import
duties, brokerage and handling, U.S. inland freight, warranty expenses
including billing credits, promotional fees, credit expenses and U.S.,
Panamanian and Colombian indirect selling expenses, including inventory
carrying costs. In addition, we added an amount for interest revenue to
U.S. price.
10. Grupo Intercontinental
For Intercontinental, we calculated purchase price based on packed,
f.o.b. prices to unrelated customers in the United States. We made
deductions, where appropriate, for price adjustments and foreign inland
freight.
We calculated ESP based on packed prices to unrelated customers in
the United States. We made deductions, where appropriate, for
discounts, foreign inland freight, air freight, U.S. import duties,
U.S. brokerage and handling, credit expenses, and U.S. and Colombian
indirect selling expenses incurred on ESP sales, including inventory
carrying costs, and commissions to unrelated parties.
11. Grupo Papagayo
For Papagayo, we calculated purchase price based on packed, f.o.b.
prices to unrelated customers in the United States. We made deductions,
where appropriate, for foreign inland freight expenses, and other
movement expenses.
We calculated ESP based on packed prices to unrelated customers in
the United States. We made deductions, where appropriate, for foreign
inland freight, air freight, U.S. import duties, U.S. inland freight,
brokerage and handling charges, and other movement expenses. We also
deducted Colombian and U.S. indirect selling expenses, including
inventory carrying costs, direct selling expenses, including credit,
other expenses, and commissions paid to unrelated parties. We
recalculated Colombian indirect selling expenses based on findings at
verification.
12. Grupo Prisma
For Prisma, we calculated purchase price based on packed, f.o.b.
prices to unrelated customers in the United States. We made deductions,
where appropriate, for foreign inland freight. We recalculated foreign
inland freight for certain customers based on verification findings.
We calculated ESP based on packed prices to unrelated customers in
the United States. We made deductions, where appropriate, for foreign
inland freight, which we recalculated for certain customers based on
verification findings. We also made deductions for air freight, U.S.
import duties, brokerage and handling, U.S. direct selling
[[Page 6983]] expenses, including credit expenses, Colombian indirect
selling expenses and other indirect selling expenses. We recalculated
Colombian indirect selling expenses based on verification findings. We
made a deduction for unrelated party commissions. We deducted inventory
carrying cost which we calculated, as respondent did not report this
expense.
13. Grupo Sabana
For Sabana, we calculated purchase price based on packed, f.o.b.
prices to unrelated customers in the United States. We made deductions,
where appropriate, for foreign inland freight, air freight and U.S.
import duties. For certain transactions for which Sabana did not
provide proof of payment, we recalculated the credit expense using the
date of the final determination as the payment date.
We calculated ESP based on packed prices to unrelated customers in
the United States. We made deductions, where appropriate, for
discounts, foreign inland freight, air freight, U.S. import duties,
direct selling expenses, including credit expenses, and U.S. and
Colombian indirect selling expenses including inventory carrying costs.
We recalculated the credit expense using the average interest rate
reported by the companies that had short-term POI borrowings. We also
recalculated the inventory carrying expenses using the average interest
rate, an additional number of days for movement of the subject
merchandise from Bogota to Miami, and the COM.
14. Grupo Sagaro
For Sagaro, we calculated purchase price based on packed, f.o.b.
prices to unrelated customers in the United States. We made deductions,
where appropriate, for foreign inland freight.
We calculated ESP based on packed prices to unrelated customers in
the United States. We made deductions, where appropriate, for foreign
inland freight, air freight, U.S. import duties, and brokerage and
handling expenses. We also deducted credit expenses, promotional fees,
and other direct expenses, U.S. indirect selling expenses and
commissions to unrelated parties.
15. Grupo Tropicales
For Tropicales, we calculated purchase price based on packed,
f.o.b. prices to unrelated customers in the United States. We made
deductions, where appropriate, for foreign inland freight and air
freight. We deducted reported packing expenses and replaced them with
verified data. We also deducted discounts, where appropriate.
We calculated ESP based on packed prices to unrelated customers in
the United States. We made deductions, where appropriate, for discounts
and rebates, foreign inland freight, air freight, brokerage, credit
expenses, promotional fees, and other direct selling expenses, and U.S.
and Colombian indirect selling expenses, including inventory carrying
costs. We recalculated credit, inventory carrying costs, and other U.S.
indirect selling expenses, based on findings at verification. We
deducted reported packing expenses and replaced them with verified
data. We also deducted discounts, where appropriate.
16. Rosex Group
For Rosex, we calculated purchase price based on packed, f.o.b.
prices to unrelated customers in the United States. We made deductions,
where appropriate, for foreign inland freight.
We calculated ESP based on packed prices to unrelated customers in
the United States. We made deductions, where appropriate, for foreign
inland freight, air freight, U.S. import duties, and brokerage and
handling. We also deducted credit expenses, and promotional fees, as
well as U.S. indirect selling expenses and commissions to unrelated
parties.

Foreign Market Value

To determine whether a respondent's sales of roses from Colombia to
the United States were made at less than fair value, we compared the
United States price (USP) to the foreign market value (FMV), as
specified in the ``United States Price'' and ``Foreign Market Value''
sections of this notice. We based FMV on constructed value (CV) for all
producers. For those respondents with viable home markets, we found
insufficient sales above COP. For those respondents with viable third
country markets, we rejected sales to these markets (see Comment 7).
The remaining respondents had no viable home or third country markets.
We calculated CV on a rose type basis, where the appropriate data was
available (see Comment 6).
In calculating FMV, wherever there were insufficient sales above
cost in the home market, we based FMV on CV, as explained in ``Cost of
Production Analysis'', below.

Home Market Sales

In order to determine whether there were sufficient sales of fresh
cut roses in the home market to serve as a viable basis for calculating
FMV, we compared the volume of home market sales of export quality
roses to the volume of third country sales of export quality roses in
accordance with section 773(a)(1)(A) of the Act. Based on this
comparison, we determined that ten of the 16 respondents had viable
home markets. The ten companies were: Andes; Benilda; Bojaca; Caicedo;
Floramerica; Fragancia; Intercontinental; Papagayo; Prisma; and,
Sagaro.

Cost of Production Analysis

Because the petitioner's allegations, when considered in light of
the information on the record, gave the Department ``reasonable grounds
to believe or suspect'' that the ten respondents with known viable home
markets were selling roses in Colombia at prices below their COP, the
Department initiated COP investigations to determine whether these
respondents had home market sales that were made at less than their
respective COPs (See the September 8, 1994, memorandum from Richard W.
Moreland to Barbara R. Stafford). The respondents requested that we
depart from our normal practice and interpret our COP analysis in such
a manner as to either accept or reject all sales. We denied this
request. (See the January 26, 1995, COP memorandum from the team to
Barbara R. Stafford).
In keeping with our past practice in cases involving perishable
agricultural products, where we found less than 50 percent of a
respondent's sales of roses were at prices below the COP, we did not
disregard any below-cost sales because we determined that the
respondent's below-cost sales were not made in substantial quantities
(See Certain Fresh Winter Vegetables From Mexico 45 FR 20512 (1980)).
Where we found between 50 and 90 percent of a respondent's sales of
export quality roses were at prices below the COP, and the below cost
sales were made over an extended period of time, we disregarded only
the below-cost sales. Where we found that more than 90 percent of
respondent's sales were at prices below the COP, and the sales were
made over an extended period of time, we disregarded all sales for that
product and calculated FMV based on CV. The Department enunciated its
practice of modifying the standard cost test to account for the
perishability of products in Certain Fresh-Cut Flowers from Mexico (3/
1/88 to 4/31/89), and stated that the 50 percent modification only
affected the lower threshold of the standard 10-90-10 test. The
Department is continuing this standard practice in this investigation
(for a detailed discussion of the history of the cost test for
perishable products, see the January [[Page 6984]] 26, 1995, 50-90-10
memorandum from the team to Barbara R. Stafford).

Constructed Value Comparisons: Companies With Home Market Sales Below
the Cost of Production

In order to determine whether the home market prices were above the
COP, we calculated the COP based on the sum of a respondent's cost of
cultivation, general expenses, and packing. For all respondents with
viable home market sales, we found that more than 90 percent of all
sales fell below COP for each company. Therefore, in accordance with
section 773(b) of the Act we disregarded all home market sales and
calculated FMV on CV. We calculated CV based on the sum of a
respondent's cost of cultivation, plus general expenses, profit, and
U.S. packing. For general expenses, which includes selling and
financial expenses (SG&A), we used the greater of the reported general
expenses or the statutory minimum of ten percent of the cost of
cultivation. For profit, we used the statutory minimum of eight percent
of the cost of cultivation and general expenses, in accordance with
section 773(e)(B) of the Act (19 CFR 353.50(a)(2)) and Ad Hoc Committee
of AZ-NM-TX-FL Producers of Gray Portland Cement v. United States, Slip
Op. 93-1239 (Fed. Cir., January 5, 1994).

Constructed Value Revisions

We made specific revisions to each respondent's submitted COP and
CV data as described below:
1. Flores La Fragancia S.A.
For Fragancia, we: (1) Increased G&A expenses by the amount of
other G&A incurred in December, 1993; (2) disallowed interest income
earned on investments of working capital not deemed to be short-term;
(3) adjusted amortization and depreciation expenses to account for the
effect of Colombian inflation; and (4) included the actual greenhouse
plastic expense incurred during the POI.
2. Grupo Andes
For Andes, we: (1) adjusted amortization and depreciation expenses
to account for the effect of Colombian inflation; (2) adjusted G&A
expense to include parent company G&A costs; and (3) adjusted
depreciation expense for a computational error.
3. Grupo Benilda
For Benilda, we: (1) Adjusted amortization and depreciation
expenses to account for the effect of Colombian inflation; and (2)
allocated company-wide net financial expenses to rose production and
non-subject merchandise based on the ratio of cultivated area to flower
type.
4. Grupo Bojaca
For Bojaca, we: (1) Adjusted amortization and depreciation expenses
to account for the effect of Colombian inflation; and (2) reclassified
the miscellaneous income items from financial income to general and
administrative expense.
5. Caicedo Group
For Caicedo, we adjusted amortization and depreciation expenses to
account for the effect of Colombian inflation.
6. Grupo Floramerica
For Floramerica, we: (1) Adjusted amortization and depreciation
expenses to account for the effect of Colombian inflation; (2) adjusted
cultivation costs to include all 1993 year-end adjustments; and (3)
disallowed interest income earned on investments of working capital not
deemed to be short-term.
7. Grupo Intercontinental
For Intercontinental, we: (1) Allocated company-wide G&A costs to
rose production and non-subject merchandise based on the ratio of
cultivated area to flower type; (2) allocated company-wide net
financial expenses to rose production and non-subject merchandise based
on the ratio of cultivated area to flower type; and (3) adjusted
amortization and depreciation expenses to account for the effect of
Colombian inflation; (4) corrected materials, direct labor, and field
structure costs to account for amounts that were incorrectly
capitalized as preproductive expenses; and (5) adjusted home market
packing to account for inconsistencies in respondent's reporting of
this expense.
8. Grupo Papagayo
For Papagayo, we: (1) Adjusted amortization and depreciation
expenses to account for the effect of Colombian inflation; (2)
reclassified bad debt expense from financing expense to indirect
selling expense; and (3) included certain income and expense items
which related to the general production activity of the company as a
whole in general and administrative expense.
9. Grupo Prisma
For Prisma, we: (1) Adjusted amortization and depreciation expenses
to account for the effect of Colombian inflation; and (2) allocated
company-wide net financial expenses to rose production and non-subject
merchandise based on the ratio of cultivated area to flower type.
10. Grupo Sagaro
For Sagaro, we: (1) Adjusted amortization and depreciation expenses
to account for the effect of Colombian inflation; (2) included the worm
culture costs as a general research and development expense; and (3)
allocated company-wide net financial expenses to rose production and
non-subject merchandise based on the ratio of cultivated area to flower
type.

Constructed Value Adjustments

In order to calculate FMV, we made company-specific adjustments as
described below:
1. Flores La Fragancia S.A.
For CV to purchase price comparisons, we made circumstance of sale
adjustments, where appropriate, for credit expenses.
For CV to ESP comparisons, we deducted the indirect selling
expenses up to the amount of the indirect selling expenses incurred on
U.S. sales, in accordance with 19 CFR 353.56 (b)(2).
2. Grupo Andes
For CV to purchase price comparisons, we made circumstance of sale
adjustments for direct selling expenses, including credit expenses. We
recalculated U.S. credit expenses to reflect data examined at
verification.
For CV to ESP comparisons, we made deductions, where appropriate,
for direct selling expenses, including credit expenses. We also
deducted from CV the indirect selling expenses, including inventory
carrying costs, up to the amount of indirect selling expenses incurred
on U.S. sales, in accordance with 19 CFR 353.56(b)(2). We recalculated
U.S. credit expenses to reflect data examined at verification.
3. Grupo Benilda
For CV to purchase price comparisons, pursuant to section
773(a)(4)(B) of the Act and 19 CFR 353.56(a)(2), we made circumstance
of sale adjustments, where appropriate, for credit expenses and other
direct selling expenses.
For CV to ESP comparisons, we made deductions, where appropriate,
for direct selling expenses including credit. We also deducted from CV
the indirect selling expenses, including inventory carrying costs, up
to the amount of indirect selling expenses incurred on U.S. sales, in
accordance with 19 CFR 353.56(b)(2). [[Page 6985]]
4. Grupo Bojaca
For CV to purchase price comparisons, we made circumstance of sale
adjustments, where appropriate, for direct selling expenses.
For CV to ESP comparisons, we made deductions, where appropriate,
for direct selling expenses. We deducted the indirect selling expenses,
including, where appropriate, inventory carrying costs, up to the sum
of the indirect selling expenses incurred on U.S. sales and commissions
to unrelated parties, in accordance with 19 CFR 353.56(b)(2).
5. Caicedo Group
For CV to purchase price comparisons, we made circumstance of sale
adjustments, where appropriate, for credit expenses and other direct
selling expenses.
For CV to ESP comparisons, we made deductions, where appropriate,
for credit expenses. We also deducted from CV the indirect selling
expenses, including inventory carrying costs, up to the amount of
indirect selling expenses incurred on U.S. sales, in accordance with 19
CFR 353.56(b)(2). We revised reported U.S.-incurred indirect selling
expense to include sales to local vendors in the calculation of the
indirect selling expense ratio. We recalculated U.S. credit expenses to
reflect data examined at verification.
6. Grupo Floramerica
For CV to ESP comparisons, we made deductions, where appropriate,
for credit expenses. We also deducted from CV the indirect selling
expenses up to the amount of indirect selling expenses incurred on U.S.
sales, in accordance with 19 CFR 353.56(b)(2).
7. Grupo Intercontinental
For CV to purchase price comparisons, we made circumstance of sale
adjustments for direct selling expenses, including credit expenses. We
recalculated U.S. direct selling expenses to reflect data examined at
verification. We also deducted from CV indirect selling expenses,
including inventory carrying costs, up to the U.S. unrelated party
commissions, and added U.S. commissions.
For CV to ESP comparisons, we made deductions, where appropriate,
for direct selling expenses, including credit expenses. We recalculated
U.S. direct selling expenses to reflect data examined at verification.
We also deducted from CV indirect selling expenses, including inventory
carrying costs, up to the sum of U.S. unrelated party commissions and
indirect selling expenses 19 CFR 353.56(b)(2).
8. Grupo Papagayo
For CV to purchase price comparisons, we made circumstances of
sales adjustment for direct selling expenses.
For CV to ESP comparisons, we made deductions, where appropriate,
for direct selling expenses. We also deducted from CV the indirect
selling expenses up to the amount of U.S. indirect selling expenses and
unrelated party commissions, in accordance with 19 CFR 353.56(b)(2).
9. Grupo Prisma
For CV to purchase price comparisons, we made circumstances of
sales adjustment for credit expenses and other direct selling expenses.
For CV to ESP comparisons, we made deductions, where appropriate,
for direct selling expenses. We also deducted from CV the indirect
selling expenses up to the amount of U.S. indirect selling expenses and
unrelated party commissions, in accordance with 19 CFR 353.56(b)(2).
10. Grupo Sagaro
For CV to purchase price comparisons, we made circumstance of sale
adjustments, where appropriate, for credit expenses.
For CV to ESP comparisons, we made deductions, where appropriate,
for credit expenses. We also deducted from CV the indirect selling
expenses up to the amount of indirect selling expenses and commissions
paid to unrelated parties incurred on U.S. sales, in accordance with 19
CFR 353.56(b)(2).

Constructed Value: Companies Without Viable Home Markets and
Companies Without Adequate Sales in Any Foreign Market

The Department has determined that, in the case of those
respondents for which the home market was not viable, FMV should be
based on CV rather than a comparison to third country prices. (For a
full discussion of this issue, see Comment 6 of this notice.) These
three companies were: Clavecol, Sabana, and Tropicales.
Additionally, for three other respondents, we calculated FMV based
directly on CV, in accordance with section 773(e) of the Act, because
these respondents did not have adequate sales in either the home market
or in any third country markets during the POI. These three companies
were: Agrorosas, Mocari, and Rosex.

Constructed Value Revisions

We made specific revisions to each respondents' CV data as
described below:
1. Agrorosas S.A.
For Agrorosas, we: (1) Adjusted amortization and depreciation
expenses to account for the effect of Colombian inflation; (2) adjusted
G&A to reflect the actual cost of secretarial salaries and to include a
portion of the cost of maintaining the office in Bogota.
2. Flores Mocari S.A.
For Mocari, we: (1) Increased pre-production amortization expense
to account for an understatement of capitalized costs; (2) adjusted
amortization and depreciation expenses to account for the effect of
Colombian inflation; and (3) increased financial expense for foreign
exchange loss on debt.
3. Grupo Clavecol
For Clavecol, we; (1) Adjusted amortization and depreciation
expenses to account for the effect of Colombian inflation; and (2)
allocated company-wide net financial expense to rose production and
nonsubject merchandise based on cost of sales.
4. Grupo Sabana
For Sabana, we; (1) Adjusted amortization and depreciation expenses
to account for the effect of Colombian inflation; (2) allocated
company-wide net financial expenses to rose production and non-subject
merchandise based on the ratio of cultivated area by flower type; and
(3) adjusted cull revenue to reflect the amount verified by the sales
analyst.
5. Grupo Tropicales
For Tropicales, we adjusted amortization and depreciation expenses
to account for the effect of Colombian inflation.
6. Rosex Group
For Rosex, we: (1) Reclassified certain expenses from G&A expense
to cost of manufacturing; (2) disallowed interest income earned on
investments of working capital not deemed to be short-term; and (3)
adjusted amortization and depreciation expenses to account for the
effect of Colombian inflation.

Constructed Value Adjustments

In order to calculate FMV, we made company-specific adjustments as
described below:
1. Agrorosas S.A.
For CV to purchase price comparisons, we made circumstances of sale
adjustments, where appropriate, for direct selling expenses.
For CV to ESP comparisons, we made deductions, where appropriate,
for [[Page 6986]] direct selling expenses. We also deducted from CV the
indirect selling expenses up to the amount of U.S. indirect selling
expenses incurred on U.S. sales and U.S. commissions to unrelated
parties.
2. Flores Mocari S.A.
For CV to purchase price comparisons, we made circumstance of sales
adjustments for direct selling expenses including credit expenses.
For CV to ESP comparisons, we made deductions, where appropriate,
for credit expenses. We also deducted from CV the indirect selling
expenses, including inventory carrying costs, up to the amount of
indirect selling expenses incurred on U.S. sales, in accordance with 19
CFR 353.56(b)(2).
3. Grupo Clavecol
For CV to purchase price comparisons, pursuant to section
773(a)(4)(B) of the Act and 19 CFR 353.56(a)(2), we made circumstance
of sale adjustments, where appropriate, for credit expenses.
For CV to ESP comparisons, we made deductions, where appropriate,
for credit expenses. We also deducted from CV the indirect selling
expenses, including inventory carrying costs, up to the amount of
indirect selling expenses incurred on U.S. sales, in accordance with 19
CFR 353.56(b)(2).
4. Grupo Sabana
For CV to purchase price comparisons, we made circumstance of sales
adjustments for direct selling expenses, including credit expenses.
For CV to ESP comparisons, we made deductions, where appropriate,
for direct selling expenses, including credit expenses. We also
deducted from CV the indirect selling expenses, including inventory
carrying costs, up to the amount of indirect selling expenses incurred
on U.S. sales, in accordance with 19 CFR 353.56(b)(2).
5. Grupo Tropicales
For CV to purchase price comparisons, we made circumstance of sales
adjustments, where appropriate, for direct selling expenses.
For CV to ESP comparisons, we made deductions, where appropriate,
for direct selling expenses, including credit expenses. We also
deducted from CV the indirect selling expenses, including inventory
carrying costs, up to the amount of indirect selling expenses incurred
on U.S. sales, in accordance with 19 CFR 353.56(b)(2).
6. Rosex LTDA
For CV to purchase price comparisons, we made circumstance of sale
adjustments, where appropriate, for credit expenses.
For CV to ESP comparisons, we made deductions, where appropriate,
for credit expenses. We also deducted from CV the indirect selling
expenses up to the amount of indirect selling expenses and commissions
paid to unrelated parties incurred on U.S. sales, in accordance with 19
CFR 353.56(b)(2).

Verification

As provided in section 776(b) of the Act, we conducted verification
of the information provided by the respondents by using standard
verification procedures, including the examination of relevant sales,
cost and financial records, and selection of original source of
original source documentation.

Critical Circumstances

In the petition, the petitioner alleged that ``critical
circumstances'' exist with respect to importation of roses. However, we
did not initiate a critical circumstances investigation because, since
roses are extremely perishable, it is not possible to accumulate an
inventory of roses in order to evade a potential antidumping duty
order. Therefore, we determined that an allegation that critical
circumstances exist is without merit (See the September 12, 1994,
concurrence memorandum).

General Comments

Petitioner and respondents raised comments pertaining to the
concordance, the treatment of Difmer adjustments, the aggregation of
third country markets, and annual and monthly averaging of FMV. These
comments were rendered moot by the Department's decision to base FMV on
CV. See Comment 6 below.

Comments Pertaining to Scope

Comment 1: Roses in Bouquets

Respondents assert that roses in bouquets should not be included
within the scope of the investigation for four reasons: (1) There is no
legal basis for the Department to include within the scope of the
investigation only a component part contained in imported finished
merchandise (i.e., the roses within the bouquet); (2) bouquets are not
within the same class or kind of merchandise as roses according to the
criteria set out in Diversified Products v. United States, 572 F. Supp.
883, 889 (CIT 1983)(Diversified Products); (3) the Department lacks the
authority to expand the investigation to include bouquets; and (4)
petitioner does not represent producers of bouquets or producers of
``roses in bouquets.'' Respondents have supplied an analysis of the
information in these investigations as applied to Diversified Products.
Petitioner requests that the Department continue to include roses
in bouquets within the scope of its investigation. Petitioner states
that since the description of bouquets is found in the petition, the
Department's and ITC's preliminary determinations are dispositive as to
the scope of the investigation, and an analysis under Diversified
Products is unnecessary, although petitioner supplied such an analysis.
Petitioner states that the scope description in the petition covers all
fresh cut roses, whether imported as individual blooms (stems) or in
bouquets or bunches. Also, petitioner claims to represent growers
producing mixed bouquets of fresh cut flowers, and hence has standing
to file a petition covering bouquets.
Petitioner maintains that any antidumping duty order issued in this
investigation will be substantially undermined if foreign rose
producers/exporters can circumvent the order by importing bouquets of
fresh cut roses covered by the order. Petitioner states that it would
be absurd for the Department to permit respondents to combine
merchandise subject to the order to achieve a final product outside the
scope of the order.
DOC Position
Roses, including roses in bouquets, are within the scope of the
investigation and constitute a single class or kind of merchandise.
Because the scope covers only the roses in bouquets, not the bouquets
themselves, respondents' arguments that bouquets constitute a separate
class or kind are inapposite. Therefore, a Diversified Products
analysis is not required. The Department's conclusion that all roses,
whether or not imported as individual stems or in bouquets or bunches,
constitute a single class or kind of merchandise is consistent with its
determination in Flowers. See Flowers, 59 FR 15159, 15162-4 (March 31,
1994) (final results of 4th admin. review).
The packaging and presentation of roses in bunches and bouquets do
not transform the roses into merchandise outside the scope of the
order. See Final Determination of Sales at Less Than Fair Value; Red
Raspberries from Canada, 50 FR 19768, 19771 (May 10, 1985). Nor is the
rose transformed into a new article by virtue of being bunched or
placed in a bouquet. Notably, Customs disaggregates bouquets, requiring
separate reporting and [[Page 6987]] collection of duties on individual
flower stems regardless of how they are imported. As a result, Customs,
in this case, will collect duty deposits only on individual rose stems
incorporated in bouquets, not the bouquets themselves.
Respondents argue that there is no legal basis for the Department
to include within the scope of an investigation only a component part
of imported finished merchandise, i.e., the roses within the bouquet.
As discussed above, consistent with Customs, the Department is not
treating bouquets as a distinct finished product.
Respondents' argument that the Department cannot expand the
investigation to include bouquets, also can be dismissed. A review of
the descriptions contained in the petition and the Department's and ITC
preliminary determinations reveals quite clearly that what is covered
by this investigation is all fresh cut roses, regardless of the form in
which they were imported. Specifically, the petition covers ``all fresh
cut roses, whether imported as individual blooms (stems) or in bouquets
or bunches, as provided in HTSUS 0603.10.60.'' Petition at 8 (emphasis
added). HTSUS 0603.10.60 covers

Cut flowers and flower buds of a kind suitable for bouquets or
for ornamental purposes, fresh * * *

0603.10.60 Roses:
10 Sweetheart
90 Other

Furthermore, the scope of this investigation unequivocally states that

The products covered by this investigation are fresh cut roses,
including sweethearts or miniatures, intermediates, and hybrid teas,
whether imported as individual blooms (stems) or in bouquets or
bunches.

Preliminary Determination of Sales at Less Than Fair Value, 59 FR 48285
(Colombia), 59 FR 48294 (Ecuador) (emphasis added). Finally, in its
preliminary determination, the ITC found that ``the plain language of
Commerce's scope description in these investigations demonstrates that
the merchandise subject to investigation covers the roses in the
bouquets only,'' and not the bouquets themselves. ITC Pub. No. 2766 at
9 (March 1994). Neither the Department nor the petitioner has ever
attempted to include the bouquets themselves, nor any of the other
types of flowers which comprise a bouquet, within the scope of this
investigation. The plain language of the Department's scope description
demonstrates that the merchandise subject to investigation covers the
roses in the bouquets only and does not expressly state that the
bouquets are themselves covered. Notably, the ITC stated that
``[b]ouquets are referred to in the scope definition to indicate that
all fresh cut roses are covered, regardless of the form, or packaging,
they are imported in.'' ITC Pub. No. 2766 at 9 (March 1994).
Finally, we disagree with respondents' contention that petitioner
lacks standing in this investigation because it does not represent
producers of bouquets or producers or ``roses in bouquets.'' In order
to have standing in an antidumping investigation, petitioner must
produce, or represent producers of, the like product. See, e.g., Final
Determination of Sales at Less Than Fair Value: Nepheline Syenite from
Canada, 57 FR 9237 (March 17, 1992)(comment 5). We agree with the ITC
that there is one like product in this investigation--``all fresh cut
roses, regardless of variety, or whether included in bouquets.'' ITC
Pub. No. 2766 at 9, 14 (March 1994). Because petitioner represents
producers of fresh cut roses they have standing in this investigation.

Comment 2: Spray Roses

Respondent HOSA, an exporter/purchaser of spray roses, argues that
spray roses are a genetically distinct species of the rosa genus.
Therefore, HOSA argues that the Department should exclude spray roses
from the scope of the investigation. HOSA states that spray roses are
not explicitly included in the scope of the investigation. Furthermore,
HOSA argues that spray roses were never mentioned in the petition nor
were price or cost of production data provided in the petition for
spray roses. HOSA suggests that the Department analyze spray roses
pursuant to the criteria set out in Diversified Products analysis to
evaluate whether spray roses are within the scope of this
investigation.
Petitioner requests that the Department include spray roses in the
antidumping duty order. Petitioner states that since the description of
spray roses is found in the petition, the instant investigation and the
Department and ITC determinations are dispositive as to the scope of
the investigation and analysis under Diversified Products is
unnecessary, (although respondent provides an analysis under
Diversified Products). Petitioner asserts that all fresh cut roses,
without regard to stem length, species or variety, were specifically
covered in the scope of the petition. Petitioner contends that the fact
that spray roses may be of a distinct species of the rosaceae family
does not exclude them from the petition, since the petition includes
all roses, regardless of species. Although it claims it as unnecessary,
petitioner conducts an analysis under the Diversified Products criteria
to show that spray roses are properly included in the scope of the
petition.
DOC Position
We agree with petitioner. The descriptions of the merchandise in
the petition and in the Department's scope are dispositive with respect
to spray roses and the evidence on the record, including the ITC's
preliminary determination, supports treating this rose variety no
differently than other varieties within the same class or kind of
merchandise subject to these investigations.
The scope of the petition clearly refers to spray roses. First, the
petition notes that the scope ``* * * covers all fresh cut roses,
whether imported as individual blooms, stems or in bouquets or
bunches.'' Spray roses are fresh cut roses sold in bunches or bouquets
and are classified under the HTSUS subheading 0603.10.60, as are
standard roses. Second, the petition states that its scope is ``* * *
inclusive of all imported roses from Colombia and Ecuador, without
regard to stem length, species or varieties.'' Third, the scope
description in the petition cites the ITC's definition from the prior
roses investigation. See ITC's Publication 2178 at 4-15 (April 1989)
``Roses are members of the rosaceae family * * *'' Genetically, spray
roses are members of the rosaceae family, as are standard roses.
While differences exist between spray and standard roses, it should
be noted that differences also exist between other varieties of roses
within the scope of this investigation. The ITC stated in its
preliminary finding of fresh cut roses from Colombia and Ecuador that
``* * * we note that different rose varieties also have varying stem
lengths and bloom sizes (e.g., as with spray roses, sweetheart roses
have smaller buds and shorter stems than traditional roses), which we
do not find to be significant differences in physical
characteristics.'' See ITC Pub. No. 2766 at 10 (March 1994). Although
the ITC's preliminary finding is not dispositive with respect to this
scope analysis, it clearly demonstrates that the physical differences
of each rose variety within the same like product category are not
merely unique to spray roses, and that the differences of the varieties
within the same like product category are not sufficient ``to rise to
the level'' of differences in the like product.
[[Page 6988]]

We also note that the rationale used by the ITC in these
investigations, of including spray roses within the same like product
category, is consistent with the Department's rationale as to whether a
product should or should not be in the same class or kind of
merchandise. In its notice of final determination of sales at LTFV in
Antifriction Bearings from West Germany, 54 FR 18992 (May 3, 1989), the
Department stated that ``the real question is whether the difference is
so material as to alter the essential nature of the product, and
therefore, rise to the level of class or kind differences.'' The class
or kind of merchandise subject to these investigations includes
different rose varieties such as sweethearts or miniatures,
intermediates, and hybrid teas. Like spray roses, each variety within
the class or kind differs from the other varieties. However, in this
instance, the similarities greatly outweigh the dissimilarities and the
dissimilarities do not alter the essential nature (i.e., that spray
roses are export quality roses) of the spray roses.

Comment 3: Rose Petals

Simpson & Turner, an importer of rose heads, rose petals (petals),
and foliage (by-products) argues that such products should be excluded
from the scope of this investigation because these products are not the
same ``class or kind of merchandise'' as the subject merchandise.
Simpson & Turner maintains that the petition refers to stems, but does
not mention petals or foliage, and the HTSUS description refers to
flower buds as ``flower buds of a kind suitable for bouquets or for
ornamental purposes.''
Simpson & Turner argues that rose heads, rose petals and foliage
were not mentioned in the Department's LTFV investigation's initiation
or preliminary determination. The scope description specifically refers
to a fresh cut rose as a bloom, which is clarified to be a stem. The
scope description then defines the form of importation of the stem as
an individual, part of a bouquet or bunch.
Petitioner asserts that Simpson & Turner fails to distinguish
imported ``rose bush foliage, rose petals, and rose heads'' from
``culls'' within the scope of the this investigation. Petitioner
asserts that culls are within the scope of the petition and
investigation. Petitioner states that in its preliminary determination,
the Department found that culls are a ``such or similar category''
separate from export quality roses but nonetheless covered by the
petition and states further that no party has challenged the
Department's determination that culls are within the scope of the
investigation.
Petitioner states that the description of merchandise provided by
Simpson & Turner, however, invites the Department to issue a scope
ruling that would permit culls to enter the United States outside the
order. To the extent that Simpson & Turner seek to exclude more than
loose rose petals, loose rose foliage, or stems without rose heads, the
described merchandise apparently consists of culls, which as such are
included by the plain language of the petition and by the Department's
unchallenged ruling concerning ``such or similar'' categories.
Petitioner further notes that culls are simply roses that did not
meet the criteria of quality and length required for export. Culls may
``have crooked stems, deformed buds, or have opened prematurely.''
(Guaisa Sec. A Resp. at 26). Consequently, petitioner asserts that the
roses imported by Simpson & Turner, consisting of rose heads with very
small stems or of roses ``normally discarded at the farm level in time
of grading due to poor appearance, stage of development and scarring''
meet the definition of culls and should thus be included within the
scope of these investigations.
DOC Position
We agree with Simpson & Turner. See Scope of Investigation above,
indicating that loose rose foliage (greens), loose rose petals and
detached buds should be excluded from the scope of these
investigations.
The scope used in the preliminary determination clearly stated that
roses which are imported as individual blooms (stems) or in bouquets or
bunches are included. However, we asked petitioner to comment on this
scope issue at the December 12, 1994, Colombia hearing, at which time
petitioner clearly stated that it does not consider loose rose foliage,
loose rose petals or buds detached from the stem to be included in the
scope of these investigations.

Comments Pertaining to USP

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

Petitioner argues that USP should not be averaged over a full month
or over a year because such prices would be unrepresentative of
transaction-specific, daily or weekly U.S. sales. Petitioner claims
that both monthly and annual averaging would obscure or mask dumping.
Petitioner contends that monthly averaging would mask dumping of roses
at low prices within every month and that annual averaging would be
even more distortive, concealing dumping during months in which major
holidays occur.
Petitioner claims that the facts in the instant Roses
investigations do not support the reasons articulated in the Flowers
administrative reviews for departing from the normal Department
practice of using daily U.S. prices. Specifically, petitioner maintains
that, because roses have a shorter life span than other fresh cut
flowers, there is no basis for using a monthly average U.S. price.
Petitioner also asserts that respondents' inability to control
production, timing, or prices is irrelevant to the application of the
averaging provision in the statute.
Respondents claim that the Department erred in the preliminary
determination by comparing one average constructed value encompassing
all varieties and stem lengths to a product-specific monthly average
USP. Respondents argue that this comparison is inappropriate because,
although growers do not maintain cost records on a variety-specific or
stem-specific basis, different rose products have different physical
characteristics and different costs and values related to productivity
and consumer preferences, all of which result in widely different
prices. Respondents assert that if costs are standardized, yet prices
fluctuate according to consumer demand for particular rose products,
average costs can only be meaningfully compared to equivalent average
prices without artificially creating margins. Respondents argue that an
annual average constructed value should be compared to an annual
average USP. Respondents state that the unique factors characterizing
rose production, demand, and perishability, in addition to extreme
seasonality, compel the use of annual average U.S. prices.
Respondents maintain that using any type of monthly average USP in
the comparison measures only seasonality and not dumping. Specifically,
respondents argue that the Department must take into account: (1) That
the USP cycle is an unavoidable consequence of the highly seasonal
nature of U.S. demand; (2) the high perishability of the product; (3)
the rose production cycle is geared towards consumer demand which is
concentrated around Valentine's Day; and (4) roses cannot be stored and
rose production is a continuous process that cannot be turned off after
Valentine's Day. According to respondents, these conditions result in
unavoidable price swings. For these reasons, respondents contend that
using any type of monthly USP average artificially creates dumping
[[Page 6989]] margins by establishing a benchmark that no producer can
meet.
In addition, respondents contend that using monthly average USP
does not account for month-to-month volatility caused by the extreme
seasonality of U.S. demand. Therefore, respondents maintain that
monthly average U.S. prices are not representative for purposes of
comparison with an annual CV and that only an annual average USP
captures the full demand/production cycle, undistorted by seasonal
factors.
Regarding petitioner's contention that the Department should not
use a monthly USP in the Roses cases because, unlike flowers, roses
have a shorter life, Floramerica points out that shelf life alone does
not justify a departure from the Department's traditional averaging
methodology and further, that there is information on the record which
shows that roses do not have a shorter shelf life.
DOC Position
19 U.S.C. 1677f-1(b) and 19 353.59(b) provide the Department with
the discretionary authority to use sampling or averaging in determining
United States price, provided that the average is representative of the
transactions under investigation. In these investigations, we
determined, based on a combination of factors, to average U.S. sales.
The Department was confronted with approximately 555,000 Colombian
transactions which, when combined with the number of estimated U.S.
sales transactions from Ecuador, exceeded one million. As a result, a
decision to make fair value comparisons on a transaction-specific basis
would place an onerous, perhaps even an impossible, burden on the
Department in terms of data collection, verification, and analysis.
Consequently, we exercised our discretion in order to reduce the
administrative burden and maximize efficient use of our limited
resources. Additionally, we recognize the need for consistency in our
treatment of these concurrent investigations and, although the number
of transactions may vary between the two countries, uniform application
of an averaging methodology ensures that both Colombia and Ecuador will
be treated on the same basis. See the June 24, 1994, Decision
Memorandum pertaining to reporting requirements from Team to Barbara
Stafford.
Moreover, we took into account that the majority of respondents,
who make U.S. sales on consignment, have little, if any, ability to
provide the level of detail which would have been required for the
Department to do a transaction-specific analysis because unrelated
consignees generally keep accounts for respondents' U.S. sales in
monthly grower reports. Upon review of data submitted, and later
verified, we concluded that a month was the shortest period of time
which would permit all respondents to provide U.S. sales information on
a uniform basis, thus ensuring that we treated all respondents in a
similar manner in terms of data collection and analysis.
Importantly, because of the highly perishable nature of the
product, we believe that monthly averaging of U.S. prices in these
investigations provides a fair and more representative measure of
value. Unlike nonperishable merchandise, respondent growers cannot
withhold their roses from the market to await a better price. Rather,
respondents are faced with the choice of accepting whatever return they
can obtain on certain sales, so-called ``end-of-the-day'' and
``distress sales'', or of destroying the product. Were we to perform a
transaction-by-transaction comparison, such an approach, beyond the
limits imposed on the Department as described above, would give undue
and disproportionate weight to end-of-the-day sales. Even where a
respondent's normal sales were above fair value, he could be found to
be dumping solely on the basis of sales made as a result of
perishability. By adopting a monthly averaging period, we ensure that
the entire range of distress and nondistress sale prices are covered.
Furthermore, while use of actual prices and transaction-by-
transaction data is the norm, the statute allows for averaging provided
such averaging yields representative results. We conclude that, in
light of the above factors, using monthly averages of U.S. sales prices
constitutes the shortest period necessary to capture a representative
analysis of the ordinary trading practices in this industry. Our
approach is consistent with the Department's past practice in
investigations of fresh cut flowers as well as other perishable
agricultural products. See Certain Fresh Cut Flowers From Colombia:
Final Results of Antidumping Duty Administrative Review, 55 FR 20491
(May 17, 1990); Final Determination of Sales at Less Than Fair Value:
Certain Fresh Cut Flowers From Mexico, 52 FR 6361 (March 3, 1987).
Furthermore, our approach has been upheld consistently by the court.
See Floral Trade Council v. United States, 775 F. Supp. 1492, 1500-2
(CIT 1991); Asociacion Colombiana de Exportadores de Flores v. United
States, 704 F. Supp. 1114 (CIT 1989).
Lastly, we are unpersuaded by two additional arguments proffered by
petitioner to shorten the averaging period in these investigations.
First, petitioner claims a factual distinction between the life-span of
a rose and a fresh cut flower. However, we find that the record in
these investigations establishes that from the time of importation,
roses last approximately seven to ten days, while flowers last
approximately ten to fourteen days and both may be held for more than
one week in refrigerated coolers. Thus, we find this to be a
distinction without a difference. Second, petitioner argues that, by
not using a shorter averaging period, dumping during peak holiday
periods such as at Valentine's Day, will elude the Department.
According to petitioner, sales of roses imported before this holiday,
but which are sold after the holiday when demand is quite low, will be
sales at dumped prices. The petitioner does not consider such dumped
sales legitimately within the category of end-of-the-day sales, for
which our averaging period is designed to fairly account. Rather,
petitioner argues that by averaging these low- priced sales with high-
priced holiday sales for the month of February, dumping will be
understated. While we recognize that using a monthly averaging period
could result in some offsetting of high-priced sales with low-priced
sales, we believe that overall, monthly averaging is representative of
the transactions under investigation. Moreover, in verifying numerous
companies' February grower reports we found that only an insignificant
number of roses were imported in February after Valentine's Day, as
compared to the overwhelming volume imported during the first 13 days
of the month, thus ameliorating this circumstance.

Annual Averaging

While we recognize that averaging is necessary in these
investigations, we believe that averaging U.S. sales prices over a year
is inappropriate. As we stated in Flowers,

nothing in the statute, the legislative history, or the Department's
practice (including Final Determination of Sales of Not Less Than
Fair Value: Fresh Winter Vegetables from Mexico (45 FR 20512; March
24, 1980) supports the broad notion of annual averaged U.S. prices.
Annual averaging would extend too much credit to respondents by
allowing them to dump for entire months when demand is sluggish, so
long as they recoup their losses during months of high demand.

See Final Results of Antidumping Administrative Review and Revocation
in Part of the Antidumping Duty Order: Certain Fresh Cut Flowers from
[[Page 6990]] Colombia, 56 FR 50554, 50556 (October 7, 1991). The CIT
has agreed with the Department that monthly averaging adequately
compensates for perishablilty but averaging over a longer period could
obscure dumping. See Floral Trade Council v. United States, 775 F.
Supp. 1492, 1500 (CIT 1991).
Even though respondents argue that the demands of the U.S. market
determine their U.S. pricing and that they are price takers rather than
price setters, we note that the intent to dump is not the issue. See
Final Determination of Sales at Less Than Fair Value: Certain Fresh Cut
Flowers from Mexico, 52 FR 6361, 6364 (March 3, 1987). The issue is
whether, in fact, dumping is occurring.

Comment 5: Product Averaging

Regarding the use of variety and stem-specific monthly average
USPs, respondents contend that the Department is bound by its
longstanding administrative practice in the original investigations and
subsequent administrative reviews of Flowers to calculate monthly
average USPs by flower type, without regard to variety or grade.
Additionally, the Department has consistently concluded that comparing
CV data by flower type to grade or variety-specific USPs would produce
unfair and distorted results. Respondents maintain that the Department
has not furnished any reasonable explanation for its departure from
this practice in the preliminary determination.
Respondents urge the Department to compare all rose products to all
rose products on an annual average basis. Alternately, respondents
request that the Department compare product-specific, monthly U.S.
prices to identical product-specific, monthly FMV prices. Respondents
note that where FMV is not available, CV should be used. However, the
profit element should be monthly FMV profit, not annual FMV profit. In
addition, respondents argue that average CV of all products combined
must be compared to U.S. prices of non-matched products.
Petitioner argues that product averaging should not be used to
obliterate differences in prices due to physical differences in roses.
Petitioner stresses that it is particularly important that the prices
of the low-priced Visa roses are not averaged together with prices of
other red roses. Petitioner maintains that an average across varieties,
colors, or stem lengths substantially distorts the market reality.
DOC Position
We agree with respondents that averaging by flower type is
appropriate in this investigation. Consistent with Flowers, where
possible, we compared USP and CV on a rose type basis, i.e., hybrid
tea, sweetheart, etc. See, e.g., Fresh Cut Flowers From Colombia, 59 FR
15159, 15160-61 (March 31, 1994) (4th admin. review final). For a
number of companies, however, we were unable to compare USP and CV on a
rose type basis because the respondents do not keep their cost data in
such a fashion. As a result, in order to ensure an ``apples-to-apples''
comparison, we aggregated U.S. price data to arrive at a weighted-
average monthly USP for all rose types for comparison with respondents'
single average CV for all rose types. While it would have been
preferable to disaggregate rose costs for these respondents in order to
make a fair value comparison on a rose type basis, we were not able to
do so in this investigation because the data were not available and we
did not present respondents with a methodology for disaggregating
costs. However, we intend to do so in any future administrative reviews
if an order is issued. We will seek to devise a method to enable us to
compute cost by rose type, which will not require respondents to change
their method of recordkeeping.

Comments Pertaining to Third Country

Comment 6: Third Country as Basis for FMV

Petitioner maintains that there is no basis in law for rejecting
third country prices that are adequate to establish a viable market. In
addition, petitioner states that the Department's regulations state a
preference for the use of third country prices, where the home market
is not viable. Petitioner maintains that the statute prescribes
adjustments for differences in circumstances of sale, which can take
account of differences in markets, but it does not permit the
Department to simply reject a viable market, due to factors other than
dissimilar merchandise, for the purposes of determining FMV.
Petitioner claims that there is no evidence on the record to
establish that third country prices are incompatible for comparison to
U.S. prices. Petitioner questions the validity of respondents'
statistical studies, claiming that the statistical analyses provided by
Drs. Botero and Sykes and Lewis are unworthy of consideration because
they exclude the impact of dumping in their price analyses. According
to petitioner, if the Colombian and Ecuadoran growers are dumping
during the several off-peak (non-holiday) months in the U.S. market,
but not in other markets, such dumping would produce price changes in
the U.S. market that are much sharper and greater than the price
changes in Europe, thereby causing the greater volatility in the U.S.
market identified by respondents. Petitioner adds that, because the
Colombian and Ecuadoran imports constitute such a large percentage of
the U.S. market and because they sell through consignment agents on a
national basis, the supply of Colombian and Ecuadorian roses uniformly
depresses U.S. prices whenever those imports oversupply the U.S.
market.
Petitioner argues that the Botero and Sykes and Lewis reports are
further skewed because they use the prices of a single variety of red
rose, the Visa, which it asserts is the most price sensitive. Moreover,
these reports did not provide source documentation showing the
composition of the Dutch auction prices relied upon. Thus, it is
unclear how many varieties of roses were included in the comparison
database. In addition, since Colombian and Ecuadoran roses sold on the
Aalsmeer auction account for only a very small portion of all roses
exported to the EU, Aalsmeer prices may not be representative of
Colombian and Ecuadoran rose prices in the EU.
Petitioner argues that the statements provided in the Hortimarc
Report based on FTD data, which included traditional retail florists
and excluded non-traditional outlets such as supermarkets, and mass
merchandisers, ignores a significant number of spontaneous purchases
from their analysis.
Petitioner states that the Stern & Wechsler argument regarding the
opposing demand strains of the U.S. and EU market are irrelevant to the
comparison of foreign market values and U.S. prices. Petitioner
maintains that the U.S. market is as supply driven as any other market
during non-holiday months.
Petitioner recognizes that in the second administrative review of
Fresh Cut Flowers From Colombia, (55 FR 20491, May 17, 1990) (Flowers),
the Department departed from its normal practice and rejected third
country prices in favor of CV for the following three reasons: (1)
Third country and U.S. price and volume movements were not positively
correlated which showed that different forces operated in the relevant
markets, in some instances, pushing prices in opposite directions; (2)
third country sales only occurred in peak months which resulted in a
distorted comparison of off-peak U.S. [[Page 6991]] prices to peak
third country prices; and (3) the perishable nature of flowers and the
inability to control short-term production resulted in ``chance''
sales.
Petitioner argues that the Department's analysis of statistical
data on the record in these investigations confirmed a positive
correlation in prices, thus refuting the principal finding of the
Flowers case. In fact, petitioner argues that the basis for creating an
exception to the statutory preference for price-to-price comparisons
was the presence of a negative correlation. Regarding volatility,
petitioner notes that in Flowers, the Department never required that
prices be equally volatile in each market; volatility alone does not
require the Department to reject a price-to-price comparison. In fact,
petitioner argues that in Flowers the Department found differences in
volatility between the U.S. and European markets and price movement in
opposite directions in each market.
Regarding the second factor, petitioner observes that, unlike the
Flowers case, third country sales of roses even occur in off-peak
months and argues that the Department's six-month weighted average FMVs
take into account seasonal peaks and off-peaks. Moreover, petitioner
maintains that major flower buying holidays are the same in all markets
and, therefore, peaks will occur at similar times in all markets.
Finally, with regard to the issue of perishability and production
control, petitioner maintains that respondents may control production
by pinching back rose buds. In addition, petitioner notes that there is
evidence on the record indicating that third country sales of roses are
stable, some occurring as a result of negotiated standing orders and,
therefore, there is a lesser incidence of chance sales than was present
in Flowers. Petitioner contends that statements by respondents
regarding a potential shift of exports from third country markets to
U.S. markets reveals the extent to which respondents, in fact, control,
plan, and target their rose exports to certain markets.
Respondents claim that third country prices should be rejected in
favor of CV because the three factors found in Flowers are present in
these cases. With regard to the first Flowers factor, respondents quote
empirical evidence on the record showing substantial differences in
demand and pricing seasonality between U.S. and third country markets.
Respondents argue that there are two principal aspects of seasonality:
timing (i.e., the point in time at which demand peaks and valleys occur
in seasonal cycles) and volatility (i.e., the magnitude of peaks and
valleys). Respondents argue that, in Flowers, the Department relied on
both differences in timing and in volatility to explain why it rejected
third country prices. Respondents assert that in the rose industry, as
in the flower industry: (1) The U.S. market is holiday-demand driven;
(2) U.S. demand is not a stable consumption base because the majority
of roses are purchased primarily as gifts; and (3) the U.S. market is
demand driven. In contrast, respondents state that: (1) The European
market is marked by relatively even year-round demand; (2) flower
purchasing on a more regular basis (not tied to gift giving) is a deep
rooted tradition in Europe; and (3) the European market is supply
driven.
Respondents have submitted several statistical analyses of the
different markets which, they claim, conclusively show that the
seasonal demand and pricing patterns are significantly different
between the markets. Respondents point to the second Botero report and
the Sykes & Lewis report which states that the mere presence of a price
correlation is insufficient proof that demand patterns are equivalent.
Respondents contend that while petitioner criticizes their statistical
analysis, petitioner has not provided any independent correlation
analysis regarding U.S. and third country prices.
With regard to the second Flowers factor, access to third country
markets, respondents claim that petitioner's own data rebut the
contention that respondents have substantial continuous access to third
country markets because there are no Colombian and Ecuadorian imports
of roses in at least one month for every country for which petitioner
has provided data. Respondents assert that petitioner's claim that
Colombian and Ecuadorian production is planned with third countries in
mind, and that roses are sold at the same fixed price over a period of
time as a result of a pre-negotiated arrangement, is a misunderstanding
of the facts on the record.
In addition, respondents claim that combining third country markets
would not rectify the gaps created by the absence of sales in all
months in individual markets. Respondents note that adding two markets
with partial year sales is still tantamount to using only peak prices
for foreign market value.
With regard to the third Flowers factor, respondents claim the
control and perishability factor relied upon by the Department in the
Flowers case is equally applicable to roses. Respondents cite to
portions of the Department's Roses preliminary determination where the
Department noted that there are substantial similarities between
flowers and roses in perishability and short-term lack of production
control. Respondents also cite to the first Tayama report which states
that roses are even more perishable than fresh cut flowers.
Respondents claim that petitioner oversimplifies their argument
regarding seasonality by neglecting to view all aspects of the Flowers
exception: the unique combination of differences in seasonality between
U.S. and third country markets for a highly perishable product for
which production cannot be controlled in the short term. Thus,
respondents maintain that the Roses case is a logical extension of the
Flowers case.
DOC Position
The Department agrees with respondents. In the preliminary
determination, we rejected respondents' request to use CV as the basis
for FMV because we determined that the record at that time did not
support the application of the Flowers' precedent. Since the
preliminary determination, a considerable amount of new information has
been submitted. Based on our review of this new information, we have
determined that the records in these cases warrant rejection of third
country sales in favor of CV. See the January 26, 1995, Decision
Memorandum pertaining to third country versus constructed value from
the Team to Barbara Stafford for a more detailed discussion of this
issue.
Information on the record establishes that the three factors
identified by the Department in Flowers as supporting the use of CV are
satisfied in this case. First, the market for roses in the U.S. differs
significantly from the markets in third countries. For example, as in
Flowers, price and quantity within the United States' rose market are
positively correlated; however, the price and quantity within Europe,
Canada, and Argentina are negatively correlated.
Similarly, the U.S. market for roses, like the U.S. market for
flowers, is more volatile in terms of price and quantity movements than
the markets in third countries markets; the European per capita
consumption of flowers is four to ten times greater than the United
States, and Colombian and Ecuadorian producers have, in general,
limited access to the main third country markets, i.e., the Dutch
auction. Thus, the differences in the rose markets are
[[Page 6992]] similar to the differences that existed in Flowers.
The second Flowers factor we considered was whether a comparison of
third country sales to U.S. sales would require comparisons of low-
price U.S. sales in off-peak months with high- price third country
sales in peak months, or vice versa. In the preliminary determination,
we found that this factor was not present in these investigations
because: (1) There were sufficient third country sales in each month of
the POI (when markets were combined); and, (2) using two six-month FMV
periods reduced distortion caused by price comparisons involving peak
and non-peak periods.
For purposes of this final determination, we have determined that
use of third country prices could result in off-peak U.S. sales being
compared with peak third country sales. While six- month averages
ameliorate potential distortions, almost all of the respondents do not
have third country sales in every month of the POI. It is only by
combining markets that respondents have sales in each month of the POI.
If we were to use third country prices as the basis for FMV, prices
during peak periods in one third country could be combined with prices
during peak periods in another third country. These peak prices would
then be compared to both peak and non-peak periods in the United
States. We find that this factor supports use of CV in these cases,
albeit to a somewhat lesser degree than in Flowers.
The third Flowers factor we considered was the extreme
perishability of roses--i.e., the inability to control short-term
production--and the resultant ``chance'' element to sales. As noted in
our preliminary determinations, there are substantial similarities
between the subject merchandise in these investigations and Flowers:
(1) Roses, like flowers, are extremely perishable; (2) rose growers
have relatively minor control over short-term production; (3) rose
production is also affected by exogenous factors (e.g., weather,
disease, etc.) like other flowers; and 4) roses cannot be stored and we
note that there are only very minor alternative uses (e.g., drying).
In conclusion, we have determined that the factors that led the
Department use CV instead of third country prices in Flowers are
present in these investigations. Therefore, we have adopted CV as the
basis for comparison with U.S. prices.

Comments Pertaining to Related Party Commissions

Comment 7: Related Party Commissions

Petitioner requests that commissions paid to consignment agents
should be deducted from USP even where consignees are related parties.
Specifically, petitioners argue that: (1) The statute directs us to
deduct commissions from USP in ESP situations, without discretion to
disregard U.S. commissions in related party transactions; (2) in
Timken, the court recognized that the statute required a deduction when
a U.S. importer was paid commissions, as opposed to earning
``profits;'' (3) the statute should be followed, regardless of the fact
that commissions were not deducted in Flowers; and (4) we should deduct
U.S. indirect selling expenses if such expenses exceed the related
consignee's commissions, in accordance with 19 U.S.C. 1677a(e)(2).
Respondents claim that the Department's treatment in the
preliminary determination of related party sales commissions is
invalid. They argue that deducting the related importer's commission
from U.S. price has the effect of deducting the importer's profit,
which the Department does not have the authority to do. The Department
should deduct the importer's actual selling expenses rather than intra
company transfers. Respondent's argue that the Department's approach is
inconsistent with past practice since related party commissions have
never been treated as a direct selling expense, but rather have been
collapsed in the past for the purposes of determining U.S. price and
expenses. Moreover, respondents assert that the Department's statute
and regulations do not authorize the Department to deduct the higher of
related party commissions or related party actual expenses. Respondents
claim that in selectively choosing deductions of commissions or actual
expenses, the Department fails to account for the fact that the
commission it treats as a cost is also sales related income to the
related importer. Respondents maintain that the Department should
ignore the sales commissions paid between related parties on ESP sales,
regardless of whether such commissions are at arm's length, and treat
as U.S. indirect selling expenses the importer's share of operating and
selling expenses allocable to the exporter's subject sales.
DOC Position
The difference between a related consignee's commission and the
related consignee's U.S. indirect selling expenses is equal to the
related consignee's profit. The Department does not deduct profit from
USP in ESP transactions because the law does not allow it. 19 CFR
353.41(e)(1) and (2) do, however, instruct us to make adjustments in
ESP situations for commissions and expenses generally incurred by or
for the account of the exporter in selling the merchandise.
With respect to treatment of related party commissions paid in the
U.S., we have in the past looked to the definition of ``exporter''
which provides that related party importers are to be collapsed with,
and treated as part of, the exporter. 19 U.S.C. 1677(13). In this
context, it is inappropriate to treat a commission the exporter has
paid to itself as an expense. The expense is the actual costs incurred
by or for the account of the exporter.
In LMI-Le Metalli Industriale, S.p.A. v. United States, 912 F.2d
455, 459 (Fed. Cir. 1990) (LMI), the CAFC indicated that related party
commissions can and should be adjusted for if the commissions are at
arm's-length and are directly related to the sales under review.1
By implication, an arm's-length commission includes the actual indirect
selling expenses incurred by the commissionnaire and the
commissionnaire's profits. Thus, LMI allows us to deduct the profits
that are implicit in the commission. The facts in LMI, however, are
distinguishable from the facts in these investigations. In LMI, the
Court directed the Department to adjust for sales commissions paid to a
related subsidiary of the respondent in the home market. The sales on
which the commissions were paid in the home market were purchase price-
type transactions made with the assistance of the related party selling
agent. The issue of how to treat any selling expenses incurred by the
related party selling agent in addition to commissions earned by that
related party selling agent did not arise in LMI.

1In Coated Groundwood Paper from Finland, 56 FR 56363
(November 4, 1991), which was subsequent to LMI, we developed
guidelines to determine whether commissions paid to related parties,
either in the United States or in the foreign market, are at arm's-
length. If, based on the guidelines, we found commissions to be at
arm's-length, we stated that we would make an adjustment for such
commissions.
---------------------------------------------------------------------------

In the instant investigations, the sales on which the commissions
were paid are ESP transactions where, because the importer of the
merchandise is related to the exporter, we collapse the two pursuant to
19 U.S.C. 1677(13) and base USP on the sale to the first unrelated
party. In contrast to LMI, therefore, the [[Page 6993]] producer and
its related party selling agent in these investigations are collapsed.
Thus, the commission represents an intracompany transfer of funds.
Under these circumstances, our past practice of ignoring intracompany
transfers is still applicable.
Furthermore, ESP transactions are fundamentally different from
purchase price transactions in that, with respect to ESP transactions,
19 U.S.C. 1677a(e), specifically allows for deductions of indirect
expenses. In contrast, with respect to purchase price transactions, 19
U.S.C. 1677a(d) only allows an adjustment for indirect expenses when
there are commissions in one of the two markets. Therefore, when
commissions are paid in an ESP situation, the opportunity for double
counting exists; this problem does not arise in a purchase price
situation like the one reviewed by the Court in LMI.
Whether the sales involved are purchase price or ESP, the
Department's goal is to derive a reliable USP by subtracting actual
expenses from actual sales prices. A commission paid by the exporter to
its collapsed related importer is not an expense incurred by the
exporter; rather the actual expenses incurred by the exporter are the
indirect selling expenses of the related consignee.
At the preliminary determination, we determined that related party
commissions were directly related to the sales under consideration.
However, we agree with respondents and, for the final determination,
considered commissions an intracompany transfer. We have therefore,
deducted only the amount of U.S. indirect selling expense for all
companies with related party commissions.

Comments Pertaining to Accounting

Comment 8: Inflation Adjusted Depreciation and Amortization

Petitioner argues that the Department should compute respondents'
depreciation expense based on asset values which, in accordance with
Colombian GAAP, have been adjusted to reflect the effects of inflation.
Petitioner notes that respondents computed depreciation charges for
rose production costs based on the historical cost of the underlying
fixed assets. Petitioner maintains that because of the effects of
inflation on prices, respondents' methodology inappropriately matches
historical depreciation charges based on past price levels with
revenues generated from the sale of roses at current price levels.
Petitioner notes that in past cases involving hyperinflationary
economies, the Department has corrected for the effects of inflation by
computing cost of production based on respondent's replacement costs.
Petitioner argues that although the POI inflation rates in Colombia did
not meet the Department's normal hyperinflation threshold, the annual
rate of inflation nevertheless has been so substantial as to cause the
government to adopt accounting standards that require an adjustment for
inflation. Thus, according to petitioner, the Department must correct
respondents' reported depreciation expense in order to avoid distorting
the cost of rose production.
Respondents claim that the Department should accept their submitted
rose production costs without taking into account the effects of the
inflation adjustment on depreciation expense. Respondents argue that,
although the inflation adjustment may result in additional costs in
their financial statements, these are not actual, historical costs.
Instead, the inflation adjusted costs are ``phantom'' costs required by
tax law, but not specifically addressed under GAAP.
Respondents maintain that the purpose of the tax law was to
generate tax revenues for the government, because any write-up of fixed
assets due to inflation results in additional income that must be
recognized in a firm's financial statements. Respondents contend that
if the Department determines that it must include the effects of the
fixed asset inflation adjustment in respondents' rose CV, then it also
must reduce CV by the amount of financial statement income generated by
the adjustment. Respondents note that such income is directly related
to production and, thus, there is no basis for failing to offset costs
if the inflation adjustment is included in CV.
Additionally, respondents claim that the Department already
effectively makes an inflation adjustment through the use of monthly
exchange rates in its computer program. Respondents state that the
exchange rate is related to differences in the two countries rates of
inflation, and the use of such exchange rates has an effect equivalent
to making the year-end inflation adjustment.
DOC Position
We agree with petitioner that respondents' failure to follow their
normal accounting practice of adjusting depreciation and amortization
expenses for the effects of inflation distorts rose production costs
for purposes of our antidumping analysis. The exclusion of the
inflation adjustment results in costs which are not reflective of
current price levels and thus produces an improper matching of revenues
and expenses. Therefore, we have revised the submitted COP and CV
figures to reflect inflation- adjusted depreciation and amortization
expenses based on the growers' normal accounting practices.
We disagree with respondents' claim that the Department's use of
monthly exchange rates effectively makes an inflation adjustment,
because the exchange rates are being applied to costs which are
reported in understated foreign currency. To avoid distortion in
production costs, we have used annual average constructed value figures
and converted them to U.S. dollars using a weighted-average exchange
rate based on the monthly volume of roses sold by each grower.
We also disagree with respondents' assertion that income resulting
from the inflation adjustment is directly related to production and
should be applied as an offset to financial expense. This annual
revaluation of non-monetary assets does not represent income during the
POI. Instead, it merely reflects an increase to respondent's financial
statement equity due to the restatement of non-monetary assets to
account for inflation.

Comment 9: Statutory General Expenses and Profit

Petitioner claims that statutory general expenses and profit should
be based on third country sales, since third country sales and third
country profit and general expenses would be used as a basis for FMV
when home market sales are not available.
Respondents maintain that the facts of this case and the statute
require that Department calculate profit on the basis of home market
sales, particularly since the Department made a finding in its
preliminary determination that home market sales of export quality
roses were made in the ordinary course of trade. In addition,
respondents note that where the Department used third country price
comparisons in its preliminary determination, if in the final
determination the Department chooses to reject third country prices in
the final determination in favor of CV, it cannot use annual average
third country profit margins in calculating CV, because this would be
the equivalent of comparing an annual average third country price to a
monthly average U.S. price.
DOC Position
In calculating CV, we used selling expenses based on U.S.
surrogates and the eight percent statutory minimum for profit where
there was not a viable home market for export quality roses.
[[Page 6994]] Where there was a viable, but dissimilar, third country
markets, we used U.S. surrogates and the eight percent statutory profit
because we have determined that third country markets do not provide an
appropriate basis for foreign market value. See Comment 6 above.
We used U.S. selling expenses as a surrogate even though certain
producers had viable home markets for culls which are included in the
general class or kind of merchandise.
19 U.S.C. 1677b(e)(1)(B) states that the CV of imported merchandise
shall include an amount for general expenses and profit equal to that
usually reflected in sales of merchandise of the same general class or
kind as the merchandise under consideration which are made by producers
in the country of exportation, in the usual commercial quantities and
in the ordinary course of trade, except that--
(i) The amount for general expenses shall not be less than 10
percent of the cost as defined in subparagraph (A), and (ii) the amount
for profit shall not be less than 8 percent of the sum of such general
expenses and cost.
19 CFR 353.50(a) states that if FMV is based on CV, the Secretary
will calculate the FMV by adding general expenses and profit usually
reflected in sales of merchandise of the same class or kind of
merchandise.
However, in the final determination of Certain Granite Products
from Italy, 53 FR 27187, 27191-2 (July 19, 1988)(comment 15), the
Department stated that, due to the uniqueness of one of the such or
similar categories of merchandise, there was no comparability between
sales in the home market and sales in the United States. Therefore, the
Department used the U.S. selling expenses as a surrogate in computing
CV instead of home market selling expenses. As in Certain Granite
Products from Italy, we find that, in the instant investigations, culls
are not representative of the merchandise sold in the United States, as
these products are by definition not export-quality.

Comment 10: Allocation of Production Costs to Cull Roses

Respondents argue that the Department incorrectly calculated CV by
requiring growers to allocate production costs only to export quality
roses, thereby assigning no costs to cull roses. Respondents note that
because cull roses are included in the class or kind of merchandise,
they should be allocated a share of production costs equal to that of
export quality roses. Respondents point out that the Department has
never held that a product covered by an investigation should be treated
as a byproduct having no cost. Respondents also argue that the Federal
Circuit in Ipsco, Inc. v. United States, 965 F.2d 1056 (Fed. Cir. 1990)
defined byproducts as ``secondary products not subject to
investigation.''
Petitioner asserts that cull roses should be categorized as
byproducts to which, from an accounting standpoint, no production costs
should be allocated. Petitioner claims that an appropriate measure for
determining whether a specific product represents a byproduct or
coproduct is to determine if the production process would still be
performed if the product in question was the only one produced.
According to petitioner, no rose grower would establish operations
solely for the purpose of growing culls for sale and, therefore, cull
roses are unmistakably byproducts. Petitioner notes that ITA has
consistently and correctly treated cull roses as byproducts, with
revenues earned from their sale being properly recognized as other
income and, thus, deducted from the cost of producing export quality
roses.
DOC Position
We disagree with respondents' claim that CV was calculated
incorrectly by not allocating any production costs to cull roses. When
determining how to allocate costs among joint products, the Department
normally relies upon generally accepted accounting principles (GAAP) to
prescribe an appropriate cost allocation methodology. One of the
factors used to assess the proper accounting treatment of jointly-
produced products examines the value of each specific product relative
to the value of all products produced during, or as a result of, the
process of manufacturing the main product or products. In this regard,
the distinguishing feature of a byproduct is its relatively minor sales
value in comparison to that of the major product or products produced.
The Department's general practice in agricultural cases has been to
offset the total cost of production with revenue earned from the sale
of the reject agricultural products. The cultivation costs, net of any
recovery from byproducts, are then allocated over the quantity of non-
reject product actually sold. See, e.g., Fresh Cut Flowers from
Colombia, 52 FR 6844 (March 5, 1987); Fresh Cut Flowers from Peru, 52
FR 7003 (March 6, 1987); Fall-Harvested Round White Potatoes, 48 FR
51673 (November 10, 1983); Fresh Cut Roses from Colombia, 49 FR 30767
(August 1, 1984).
In Asociacion Colombiana de Exportadores v. United States, 704 F
Supp. 1114, 1125-26 (CIT 1989), the Court found that ``[c]ulls were
often disposed of as waste, or if saleable, were sold for low prices in
the local market. ITA's treatment of non-export quality flowers as a
byproduct was supported by substantial evidence. The record indicates
that cull value was relatively low and that the production of culls was
unavoidable. These both have been recognized by ITA in the past as
indicia of byproduct status.'' The CIT further noted, ``[c]ull value,
if determinable, should be deducted from cost of production and
production costs should not be allocated to culls.''
For each respondent in this investigation, the total revenue
generated from the sale of cull roses was minimal when compared to the
revenue generated from the sale of export quality roses. Other facts
concerning the production and sale of cull roses are also consistent
with those found in the investigation and subsequent administrative
reviews of Flowers. We therefore find that it is appropriate to treat
cull roses sold in the home market as a byproduct of the production of
export quality roses. This treatment is consistent with the
Department's previous practice of accounting for culls as a byproduct
in the calculation of COP and CV.
Finally, we disagree with respondents' argument that the inclusion
of cull roses in the class or kind of merchandise compels the
Department to use a particular cost accounting methodology. A decision
that a particular product is, or is not, within the scope of a
proceeding does not dictate, or necessarily have any relationship to,
the selection of the particular cost accounting methodology that must
be applied in the determination of COP and CV.
Unlike respondents, we do not read the Federal Appeals Court's
decision in Ipsco as standing for the proposition that in all
circumstances a byproduct for accounting purposes cannot be within the
class or kind of merchandise as that term is defined under the Act.
Moreover, as discussed above, our decision in this regard has been
explicitly upheld by the CIT.

Comment 11: CV--Interest Expense

Respondents argue that the Department grossly overstated each
respondents' net interest expense in calculating CV by using total
company-wide interest expense instead of the expense allocable to rose
production. Respondents request that the Department correct its
preliminary [[Page 6995]] calculations in line 38 of the CV tables, and
using the allocated per unit interest expense calculated on the
spreadsheet.
Petitioner agrees with respondents that net interest expenses were
potentially overstated in the preliminary determination and ITA should
allocate interest expenses on a sales dollar basis to roses and then to
rose stems, provided that interest expenses reported were in fact
reported with respect to all sales of all rose types to all markets.
DOC Position
We agree that for some respondents we incorrectly assigned total
company-wide financial expenses only to roses. For purposes of the
final determination, we allocated net financial expenses to roses and
non-subject merchandise using one of the following methodologies, each
of which we consider reasonable: cultivated area, cost of sales or cost
of cultivation. We computed a per stem financial cost by dividing the
net financial expenses related to roses by the total export quality of
stems sold.

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

Respondents allege that the Department incorrectly included U.S.
indirect selling expenses incurred by respondents' related importers in
its calculation of constructed value. Respondents claim that including
these expenses in constructed value artificially inflated the FMV,
since these expenses would never have been incurred to sell roses in
the home market. In addition, respondents object to the Department's
calculation of an eight percent profit on these expenses, while at the
same time deducting related party commissions, and thereby all profit
earned by the related importer, from U.S. prices. Respondents hold that
the Department should include only all selling expenses incurred in
Colombia and Ecuador in its calculation of CV.
Petitioner claims that the Department should include in constructed
value direct and indirect selling expenses equal to those expenses
incurred in third country markets, unless such markets are not viable.
And, to the extent that the Department deems home market sales to be
within the ordinary course of trade, and in the event that the home
market for any given respondent was viable, then the Department should
add home market selling expenses to constructed value. Petitioner
states that, in the absence of selling expenses from either the home or
third country market, the Department's practice is to add U.S. selling
expenses in computing SG&A.
DOC Position
For those companies with viable home markets, we used home market
indirect selling expenses. For those companies without viable home
markets we used U.S. indirect selling expenses as a surrogate. See
Comment 9 above. Respondents' objection to deduction of related party
commissions is addressed in Comment 7 above.

Comment 13: Per Unit CV in Dollars

Respondents argue that the Department's methodology used to obtain
the per unit CV in dollars produces a distorted, declining per unit
dollar CV. Respondents note that the Department's method involves
converting annual average per unit foreign-denominated costs to monthly
per unit dollar figures using the monthly exchange rate, which in part
reflects a relatively high inflation rate. Respondents claim that in
order to properly obtain the average per unit CV, the Department should
first convert each month's total foreign-denominated costs using that
month's exchange rate, and then sum these monthly dollar costs for the
period. Next, the total dollar costs should be divided by the total
quantity of roses sold to obtain the average per unit CV in dollars for
the period.
Petitioner does not object to respondents' request for
modifications in the Department's methodology, although petitioner
suggests that such modifications are unnecessary. If modified however,
petitioner argues that it is inappropriate to apply a foreign-dominated
interest rate in order to calculate imputed credit costs, unless the
exchange rate is also adjusted for currency devaluation.
DOC Position
We agree that in this case the Department's previous methodology
used to obtain per unit constructed value in U.S. dollars did not
provide an accurate result. In order to avoid distortion, we have
converted home market cost in local currency to U.S. dollars using the
annual average exchange rate.

Comment 14: Home Market Price Cost Test

Respondents maintain that the Department's sales below cost test
does not test whether a particular product is sold below its cost of
production. Respondents argue that the Department's normal methodology
is to compare prices to model-specific COPs. Because respondents were
only able to supply the Department with average COP information
representing an entire range of rose production, they argue that the
Department should compare annual average COP figures to average home
market prices of all varieties and stem lengths.
Additionally, respondents state that, to account for price
seasonality, the Department must use annual home market average prices
to properly test whether home market sales prices permit the recovery
of costs in a reasonable time. Respondents refer to the Botero Report
as evidence that the unusual seasonal prices of roses allow for ``below
average costs over periods of time, including months, that do not cover
a full price cycle.''
Petitioner argues that the court has rejected the comparison of
production costs with average home market prices. See, Timken Co. v.
United States, 673 F. Supp. 495, 516-17 (CIT 1987).
DOC Position
While it is our normal practice in determining sales below cost to
compare the price of each sale in the home market to the cost of
production (COP) of that product during the period under investigation,
in these investigations we were not able to do so because the
respondents do not segregate their cost data by rose type, variety and
stem length. As a result, we determined that to compare one yearly COP
(the POI in these investigations is one year), which combines all
export quality rose costs to prices for each variety of export quality
roses would not be appropriate. See Comment 5 above. Instead, we
combined prices of home market sales for all varieties on a monthly
basis to our annual COP, in conforming with our modified cost test for
agricultural products, as discussed below in Comment 15.
Although respondents urge the Department to combine individual
sales prices for all export quality roses in the home market on a
yearly basis to compare to the yearly COP calculation for export
quality roses, respondents have not persuaded us that such a radical
departure from our procedure is warranted in these circumstances. As
discussed in Comment 15, the Department has a specific test for
determining whether or not sales are below cost that encompasses
recovery of costs within a reasonable time, which we have applied here.

Comment 15: 50-90-10 Test

Respondents maintain that the Department originally intended to
change its 10-90-10 test to a 50/50 test whereby, if less than half of
all sales were below cost, then all sales should be used in creating
weighted-average [[Page 6996]] FMVs, and if half or more of the sales
were found to be sold below cost, then home market sales would be
rejected in their entirety and FMV would be based on CV.
Petitioner maintains that respondents have misrepresented the
Department's past practice and ignored judicial precedent. Petitioner
maintains that the current 50-90-10 test by which the Department
removes from consideration ``significant'' quantities of sales made
below COP but uses those sales made above cost, is correct. Petitioner
maintains that the courts supported the Department's use of remaining
above-cost sales as sufficient for FMV in Timken Co. v. United States,
673 F. Supp. 495, 516-517 (CIT 1987), and that the basic principle
applies to all products.
DOC Position
We disagree with respondents. The Department has an established
practice which takes into account the realities of selling perishable
agricultural products. In Final Determination of Sales at Less Than
Fair Value: Certain Fresh Winter Vegetables from Mexico, 45 FR 20512,
20515 (March 24, 1980), after examining the nature of sales of
vegetables, the Department determined that it was a regular business
practice to make a relatively high number of sales of the subject
merchandise below cost because of the perishability of the product,
which rapidly ages into non-salable merchandise. As a result, the
Department determined that were it to apply the normal below cost test
used for nonperishable products, i.e., the 10-90-10 test, this would
not fairly reflect the economic realities of the fresh vegetable
industry. As a result, the Department concluded that it would permit
all sales at below cost to remain in the FMV comparison unless more
than 50 percent were found to be below cost.
This modified test was clarified in a review of Final Results of
Antidumping Duty Administrative Review; Certain Fresh Cut Flowers from
Mexico, 58 FR 1794, 1795 (January 17, 1991), wherein the Department
explicitly stated that the test to be applied for determining sales
below cost for perishable agricultural products was a 50-90-10 test,
i.e., if between 50 and 90 percent of home market sales consisted of
prices below cost, then only the below cost sales were disregarded,
while if over 90 percent of sales were below cost then all sales in the
home market were disregarded. See Final Results of Antidumping Duty
Review: Certain Fresh Cut Flowers from Mexico, 56 FR 1795, 1795
(January 17, 1991).
This modified test still remains our current practice and
respondent's rationale for the adoption of a straight 50-50 test is an
unmerited modification. Were we to adopt respondents' either/or
position, i.e., if less than 50 percent are below cost we will use all
sales, and if more than 50 percent we will disregard all sales, then we
would, in effect, be concluding that 11 percent of widget sales above
cost are sufficient to be the basis for FMV but that 49 percent of rose
sales above cost are insufficient. This is a an illogical result, which
we are not prepared to accept.

Comment 16: Duty Deposit Rate--Roses Shipped But Not Sold

Respondents urge the Department to adjust the deposit rate to
reflect the fact that many roses imported into the U.S. perish or are
destroyed prior to sale. To avoid over collecting duty deposits on
roses that never reach the U.S. market, and since there is no way of
distinguishing between roses that will be sold and roses that will be
destroyed at the time of entry, respondents argue that the duty deposit
rate should be adjusted downward to reflect the quantity of roses
shipped to the United States, but not sold. This practice is being used
in Flowers. Respondents suggest the Department multiply any ad valorem
rates it calculates by the ratio of total quantity sold divided by
total quantity shipped, as reported by each respondent.
Petitioner states that all imports at the time of importation are
potentially for sale and, therefore, must bear the appropriate cash
deposit rate. Because the percentage of roses that will go unsold
varies due to season, weather, problems in transportation, etc.,
petitioner argues that there is no accurate way to adjust for this
potential impact.
Additionally, petitioner states that if the Department does adjust
the duty deposit rate to account for roses shipped but not sold, than
it is appropriate to adjust the deposit rate to reflect the fact that
values entered by Customs are arbitrarily established on consignment
entries. Petitioner argues that the use of the calculated USP to derive
a cash deposit rate may bear no relation to the value used by Customs
for collecting duties. Therefore, petitioner believes that the duty
deposit rate should be adjusted upwards so that the duty amount
collected reflects the potentially uncollectible duty deposits
calculated in the final determination.
DOC Position
We disagree with respondent that the duty deposit rate should be
adjusted for roses shipped but not sold. We do, however, agree with
respondent, in part, that such adjustment is appropriate for assessment
purposes, which are distinct from duty deposit purposes. In the case
cited by respondents, Fresh Cut Flowers from Colombia 55 FR 20491 (May
17, 1990), the Department indicated that it would make such an
adjustment in preparing assessment instructions to the Customs Service.
The Department did not make such an adjustment to the duty deposit
rates in that case and has not done so in subsequent reviews.
We agree with petitioners that all imports at the time of
importation are potentially for sale, and that the percentage of roses
which go unsold varies with the seasons. Moreover, this percentage will
likely vary with each producer and reseller. Thus, any adjustment
contemplated would be speculative. It is preferable to wait until the
Department prepares assessment instructions on entries covered by these
deposit rates and then make such an adjustment based on the actual
experience of the affected companies.

Comment 17: Cash Deposits--The Department's Sampling Technique

Respondents claim that the all others cash deposit rate calculated
by the Department is not based on a representative sample of the
Colombian rose exporting population--it merely reflects the experience
of 16 of the largest exporters. Furthermore, according to respondents,
the all others rate disregards the representativeness of such
experience. Respondents maintain that this is inconsistent with the
Department's statutory requirement that any averages and samples used
must be representative of the whole. See 19 U.S.C. 1677f-1(b).
DOC Position
We disagree with respondents. The Department's normal practice, in
accordance its regulations, is to select that number of the largest
exporters of the subject merchandise needed to represent 60 percent of
the imports into the United States from the country under
investigation. Due to the large number of companies needed to reach 60
percent of imports in this investigation and the administrative burden
it would put on the Department's resources to investigate these
companies, the Department selected the 16 largest exporters
representing over 40 percent of the imports into the United States. See
the May 2, 1994, Decision Memorandum from the Team to Barbara Stafford.
The methodology used by the Department maximized its coverage of
[[Page 6997]] imports into the United States. The technique of
selecting the largest exporters was employed in the Preliminary
Determination of Sales at Less Than Fair Value: Sweaters Wholly or in
Chief Weight of Man-Made Fiber from Taiwan, 55 FR 17779 (April 27,
1990). The other suggested sampling methods, stratified and random,
were not selected due to the lack of sufficient industry-wide
information on the universe of Colombian and Ecuadorian rose growers
(approximately 400 companies in Colombia and 100 companies in Ecuador).
The collection and analysis of data to determine an appropriate
sampling technique was not reasonably within the power of the
Department to undertake. Therefore, we have chosen the most
representative sample under the circumstances.

Comment 18: Duty Deposit Rate for Volunteer Companies

Respondents argue that the due process clause of the Fifth
Amendment to the U.S. Constitution precludes the Department from
requiring cash deposits with respect to companies that the Department
refused to investigate. Respondents cite Kemira Fibres Oy v. United
States, Slip Op. 94-120 (CIT July 26, 1994) to support their argument
that due process is required in antidumping proceedings. Such a course,
according to respondents, would represent an unconstitutional
deprivation of property without due process of law. Respondents
maintain that the cash deposit rate must be set at zero, and that all
cash deposits paid to date should be refunded, and any bonds posted
should be lifted, for all companies ready and willing to participate,
but not chosen by the Department.
Petitioner also refers to Kemira Fibres to support its argument
that procedural due process guarantees do not require trial-type
proceedings in all administrative determinations. Additionally,
petitioner maintains that, as long as the Department adheres to the
procedures mandated by Congress and implemented in the Department's
regulations, then the Department has afforded interested parties the
process due. These regulations, according to petitioner, allow
interested parties the right to appear and submit their views on the
proceedings of an investigation, but they do not require the Department
to investigate every company t

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A95-2608. Public record. Not legal advice.