Fresh Cut Flowers From Mexico; Final Results of Antidumping Duty Administrative Review

DEPARTMENT OF COMMERCE

[A-201-601]

Fresh Cut Flowers From Mexico; Final Results of Antidumping Duty

Administrative Review

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

ACTION: Notice of final results of antidumping duty administrative

review.

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SUMMARY: On September 26, 1995, the Department of Commerce (the

Department) published the preliminary results of its administrative

review of the antidumping duty order on certain fresh cut flowers from

Mexico. The period of review is April 1, 1993 through March 31, 1994.

We gave interested parties an opportunity to comment on our

preliminary results. Based on our analysis of the comments received,

and due to the correction of a clerical error, we have made certain

changes for the final results.

EFFECTIVE DATE: August 5, 1996.

FOR FURTHER INFORMATION CONTACT: Matthew Blaskovich or Zev Primor,

Office of Antidumping Compliance, Import Administration, International

Trade Administration, U.S. Department of Commerce, 14th Street and

Constitution Avenue, NW, Washington, DC 20230; telephone: (202) 482-

5253.

SUPPLEMENTARY INFORMATION:

Background

On September 26, 1995, the Department published in the Federal

Register (60 FR 49567) the preliminary results of its administrative

review of the antidumping duty order on certain fresh cut flowers from

Mexico (52 FR 13491 (April 23, 1987)). The preliminary results

indicated that no dumping margins existed for three of the respondents

in this review: Rancho Guacatay (Guacatay), Rancho el Toro (Toro), and

Rancho del Pacifico (Pacifico). Rancho el Aguaje (Aguaje) received a

margin of 1.54 percent. Moreover, we applied dumping margins based on

the best information available (BIA) to Mexipel, S.A. de CV, Tzitzic

Tareta, Rancho Mision el Descanso, Rancho Alisitos, and Las Flores de

Mexico, because they failed to answer the antidumping questionnaire.

Two producers, Visaflor F. de P.R. (Visaflor) and Rancho Daisy (Daisy),

made no shipments to the United States during the period of review.

Applicable Statutes and Regulations

The Department has conducted this review in accordance with section

751 of the Tariff Act of 1930, as amended (the Act).

Unless otherwise stated, all citations to the statutes and to the

Department's regulations are references to the provisions as they

existed on December 31, 1994.

Scope of the Review

The products covered by this review are certain fresh cut flowers,

defined as standard carnations, standard chrysanthemums, and pompon

chrysanthemums. During the period of review (POR), such merchandise was

classifiable under Harmonized Tariff Schedule of the United States

(HTSUS) items 0603.10.7010 (pompon chrysanthemums), 0603.10.7020

(standard chrysanthemums), and 0603.10.7030 (standard carnations). The

HTSUS item numbers are provided for convenience and U.S. Customs

Service (Customs) purposes only. The written description remains

dispositive as to the scope of the order.

This review covers sales of the subject merchandise entered into

the United

[[Page 40605]]

States during the period April 1, 1993 through March 31, 1994.

Analysis of the Comments Received

The Floral Trade Council, the petitioner, and Aguaje submitted case

briefs and rebuttal comments on October 26, 1995, and November 6, 1995,

respectively. We received no other comments on the preliminary results.

Comment 1

Aguaje requests that the Department reallocate its reported

indirect selling expenses for the final results. Aguaje claims that its

reported methodology improperly allocated its indirect selling expenses

solely to the month in which such expenses were incurred. Aguaje argues

that since certain of its indirect selling expenses were unevenly

distributed on a monthly basis, their allocation methodology distorted

the per unit amount reported for one month for which it had unusually

high indirect selling expenses. Aguaje argues further that indirect

selling expenses are general selling expenses which are not related

only to the sales in the particular month in which the expenses were

incurred, but cover the activity over a longer period. Therefore,

Aguaje asserts that its indirect selling expenses should be reallocated

by summing up its total expense amount for the entire POR and

allocating over total sales volume, in order to establish an even

distribution.

The petitioner contends that Aguaje is attempting to reallocate its

expenses due to the realization that its allocation methodology

resulted in unfavorable results for a particular month. The petitioner

asserts that the Department is not obliged to reallocate Aguaje's

indirect selling expenses, because Aguaje had already allocated those

expenses in a manner consistent with our questionnaire, and had ample

opportunity to revise its methodology prior to the preliminary

determination. The petitioner stated that should the Department decide

to reallocate Aguaje's indirect selling expenses, we should be sure to

reallocate those selling expenses based on resale prices to unrelated

parties, rather than transfer prices between Aguaje and its U.S.

subsidiary.

The Department's Position

We agree with Aguaje and therefore have reallocated its total

indirect selling expenses incurred during the POR over total quantity

of sales made to unrelated parties during the POR. We agree with

Aguaje's contention that indirect selling expenses are period costs

which help maintain sales operations over the entire POR. Aguaje's

revised methodology is in line with this reasoning and previous

determinations made by the Department. See e.g., Canned Pineapple Fruit

from Thailand (Final Determination), 60 FR 29553, 29567, June 5, 1995;

and Certain Electrical Conductor Aluminum Redraw Rod from Venezuela

(Preliminary Determination), 53 FR 3614, February 8, 1988.

We agree with petitioners that we are not obliged to accept

Aguaje's reallocation methodology. However, because the revised

methodology uses previously submitted data, provides for a more

representative distribution of indirect selling expenses, and is

consistent with previous determinations made by the Department (see

above), we have accepted the revised methodology and allocated total

POR indirect selling expenses over total quantity of sales made to

unrelated parties for these final results.

Comment 2

The petitioner claims that the Department overstated exporter's

sales prices (ESP) by failing to deduct commissions paid to related

parties. The petitioner states that the statute and the Department's

regulations require the Department to deduct U.S. commissions and

indirect selling expenses, regardless of whether the consignment agent

is a related party. For this reason, the petitioner argues, the

Department should reconsider its treatment of related party commissions

in this case and as articulated in Fresh Cut Roses from Colombia and

Fresh Cut Roses from Ecuador, 60 FR 6980, 7019 (Feb. 6, 1995) (Roses).

The petitioner argues that, in Roses, the Department erroneously

distinguished between commissions paid to related and unrelated

parties, while the statute, which makes no such distinction, simply

requires that commissions be deducted from ESP. The petitioner states

that the Department's treatment of related party commissions in Roses

is irrational, and it is inconsistent with Timken Co. v. United States,

630 F. Supp. 1327, 1341 (CIT 1986) (Timken). The petitioner asserts

that, in Timken, the Court supported the Department's rationale for not

deducting related party profits because they were not commissions,

while, in Roses, the Department refused to deduct commissions because

they are profits. The petitioner points out that, in the 1989-1990

administrative review of Certain Fresh Cut Flowers from Mexico, the

Department deducted related party commissions found to be at arm's

length (57 FR 7732 (March 4, 1992)).

Finally, the petitioner states that, even assuming that commissions

need not always be deducted under section 772(e)(1) of the Act, the

Department must deduct from ESP all direct selling expenses incurred at

arm's length as circumstance-of-sale adjustments.

The Department's Position

We disagree with the petitioner. Since the Department published its

final results in the 1989-1990 administrative review of this order, we

have established the practice of collapsing exporters and their related

consignment agents in ESP situations. 57 FR at 7732. The petitioner's

arguments do not persuade us to deviate from this practice. As fully

explained in Roses, the Department considers commissions paid to

related parties to be intracompany transfers of funds, which are not

deductible from ESP. See also Furfuryl Alcohol From South Africa; Final

Determination of Sales at Less Than Fair Value 60 FR 22551 (May 8,

1995). Further, we do not consider such a transfer of funds to be a

direct selling expense. Instead of making a deduction for commissions,

the Department deducts the amount of the related importer's U.S. direct

and indirect selling expenses pursuant to section 772(e)(2) of the Act.

This methodology avoids double-counting the direct and indirect selling

expense component of the related party commission, and avoids deducting

any of the related importer's profit, as the Court affirmed in Timken

Co. v. United States, 630 F. Supp. 1327, 1341 (CIT 1986) (Timken).

Comment 3

The petitioner claims that the Department should confirm that the

respondents' reported credit costs account for the time between receipt

of payment and deposit into the respondents' bank accounts, as the

Department did in the 1989-1990 administrative review.

The Department's Position

We disagree with the petitioner. For the purposes of calculating

imputed credit costs, it is our practice to calculate the number of

credit days based on the number of days between the date of shipment

and the date of payment. If actual payment dates are not readily

accessible, we normally allow respondents to base the number of credit

days on the average age of accounts receivables. See, e.g., Color

Television Receivers from the Republic of Korea; Final Results of

Antidumping Duty Administrative Review, 56 FR 12701, 12708 (Comment

28)(March 27, 1991).

The Department calculated respondents' credit expenses for the

[[Page 40606]]

1989-1990 review period based on observations made during verification

of that review. However, the Department more recently verified the

1992-1993 review which immediately precedes this review. Based on the

findings of this more recent verification, the Department determined

that respondents' use of the average age of accounts receivables to

calculate credit expenses is reasonable (Fresh Cut Flowers from Mexico;

Final Results of Antidumping Duty Administrative Review, 61 FR 6812

(Comment 2) (February 22, 1996)). Although no verification was

conducted for this review period, we have determined, consistent with

the final results of the 1992-1993 review, to rely on respondents' use

of their average age of accounts receivables to calculate credit

expenses. We therefore have accepted respondents' reported credit

expenses for these final results.

Comment 4

The petitioner contends that since Lizebeth (Aguaje's subsidiary)

does not track sales of the subject merchandise by country of origin,

Lizebeth is indiscriminately allocating a portion of its box and

freight revenue to Aguaje's sales. The petitioner also contends that,

absent evidence that box and freight revenue has been remitted to

Aguaje, the Department should reduce Aguaje's U.S. price accordingly.

The Department's Position

We disagree with petitioner and accept Aguaje's addition of freight

and box revenue to U.S. price. As Aguaje and Lizebeth are related

parties, it is unnecessary to trace the disposition of the freight and

box revenue, because such a remission merely represents a transfer of

intercorporate funds. Since Lizebeth's accounting system does not track

particular sales of the subject merchandise by country of origin, we

accept Aguaje's methodology of allocating its box and freight revenue

based on the ratio of Lizebeth's acquisition cost of Aguaje flowers

sold to the total acquisition cost of all flowers sold.

The Department maintains that box and freight revenue earned by a

related party represents additional revenue. Therefore, it is the

Department's determination to add box charges and freight revenues

earned by Lizebeth to U.S. price. See, e.g., Certain Fresh Cut Flowers

from Ecuador, 52 FR 2128 (January 20, 1987).

Comment 5

The petitioner contends that Aguaje incorrectly classified its U.S.

repacking costs as an indirect selling expense. Although Aguaje claims

that Lizebeth's accounting system does not permit a precise segregation

of repacking expenses, the petitioner argues that packing expenses are

not selling expenses and cannot be included in the ESP offset cap.

Therefore, the petitioner requests that the Department reduce Aguaje's

U.S. price for U.S. repacking expenses.

The Department's Position

It is the Department's policy to deduct U.S. repacking expenses

from the U.S. price. See, e.g., Final Determination of Sales at Less

Than Fair Value: Fresh Cut Roses from Colombia, 60 FR 6980 (February 6,

1995). However, given the fact that Aguaje's subsidiary does not

maintain records which precisely quantify the cost incurred for U.S.

packing, we determine that it is sufficient to deduct from U.S. price

Aguaje's indirect selling expenses which included the cost of U.S.

repacking.

Aguaje's indirect selling expenses consist of numerous expense

categories, a small increase or decrease in a particular category would

not produce a noticeable effect in total indirect selling expenses for

the POR. Therefore, we are making no deductions from the ESP offset cap

for U.S. repacking costs.

Comment 6

The petitioner states that the Department should describe the

manner in which it confirmed that Visaflor and Daisy made no shipments

of the subject merchandise during the review period.

The Department's Position

To determine whether Visaflor and Daisy made shipments of the

subject merchandise to the United States during the review period, the

Department followed its standard practice of issuing a request to

Customs field personnel to notify the Department whether any subject

merchandise exported by Visaflor or Daisy entered the United States

during the review period. A copy of this message is on file in Room

B099 of the Commerce Department. We received no information from

Customs that Visaflor and Daisy had shipments of the subject

merchandise during the POR.

Comment 7

The petitioner agrees with the Department's decision to assign non-

responding companies a margin based on BIA; however, the petitioner

states that the Department should not have assigned these companies the

second-highest rate found for any respondent. By doing so, the

petitioner argues, the Department unnecessarily and unfairly departed

from its practice of assigning non-responding companies the highest

available margin.

The petitioner states that, although the Department did not use the

highest rate as BIA in prior reviews, the respondents in those reviews

had, at least, submitted partial or complete questionnaire responses.

The petitioner argues that the Department has no evidence that the

highest margin is unrepresentative, since the parties failed to respond

to the questionnaire. Furthermore, the petitioner states, the

respondents are presumed to be aware of the highest possible margin

when they decided not to respond to the antidumping questionnaire,

citing Rhone Poulenc, Inc. v. United States, 899 F.2d 1185, 1191 (Fed.

Cir. 1990).

The Department's Position

We disagree with the petitioner. Prior to 1993 and the CIT's

decisions in The Floral Trade Council v. United States, 822 F.Supp. 766

(CIT 1993), and Federal Mogul Corporation and the Torrington Company v.

United States, 839 F.Supp. 864 (CIT 1993), the Department determined an

``all others'' or ``new shippers'' rate during the course of each

administrative review. In the 1989-1990 review of this order, the

Department did not include Florex's rate of 264.43 percent in its

determination of the updated ``all others'' rate. The CIT supported the

Department's position, stating that, ``Florex's accumulated interest

expenses from a separate line of business that never began operations

skewed its cost of production figures and should not have been included

in the review analysis.'' The Floral Trade Council v. the United

States, 799 F. Supp. 116 (CIT 1992).

The Court recognized that Florex's rate was unrepresentative of the

other companies in that review, and by extension, of the entire flower

industry because: (1) it was an out of proportion rate explained by

factors unassociated with the overall industry, and (2) Florex

represented only a small fraction of the industry. The Court concluded

that ``ITA did not err in finding it would be punitive to maintain

Florex's rate as the ``all other'' rate. Id. at 119. Although we

received no information from the non-responding companies, we maintain

that the Florex rate is unrepresentative of the Mexican fresh cut

flower industry, and unsuitable to be applied to the non-responding

companies as BIA. Therefore, we assigned Tzitzic Tareta, Rancho Mision

el Descanso, Rancho Alisitos, Las Flores de Mexico, and Mexipel, S.A.

de CV a BIA rate of 39.95 percent, which is the highest

[[Page 40607]]

representative rate of the Mexican fresh cut flower industry.

Final Results of Review

We determine that the following dumping margins exist for the

period April 1, 1993, through March 31, 1994:

------------------------------------------------------------------------

Margin

Manufacturer/exporter (percent)

------------------------------------------------------------------------

Rancho el Aguaje............................................. 0.00

Rancho Guacatay.............................................. 0.00

Rancho el Toro............................................... 0.00

Rancho del Pacifico.......................................... 0.00

Rancho Daisy................................................. *0.00

Visaflor..................................................... *0.00

Tzitzic Tareta............................................... 39.95

Rancho Mision el Descanso.................................... 39.95

Rancho Alisitos.............................................. 39.95

Las Flores de Mexico......................................... 39.95

Mexipel, S.A. de CV.......................................... 39.95

All others................................................... 18.20

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*No shipments subject to this review. Rate is from the last relevant

segment of the proceeding in which the firm had shipments.

The following deposit requirements shall be effective for all

shipments of the subject merchandise that are entered or withdrawn from

warehouse, for consumption on or after the publication date of these

final results, as provided by section 751(a)(1) of the Act: (1) the

cash deposit rates for the reviewed companies shall be the above rates;

(2) for previously reviewed or investigated companies not listed above,

the cash deposit rate will continue to be the company-specific rate

published for the most recent period; (3) if the exporter is not a firm

covered in this review, a prior review, or the original less-than-fair-

value (LTFV) investigation, but the manufacturer is, the cash deposit

rate shall be the rate established for the most recent period for the

manufacturer of the merchandise; and (4) if neither the exporter nor

the manufacturer is a firm covered in this or any previous review, the

cash deposit rate will be 18.28 percent, the all others rate

established in the LTFV investigation. These deposit requirements shall

remain in effect until publication of the final results of the next

administrative review.

This notice serves as a final reminder to importers of their

responsibility under 19 CFR 353.26 to file a certificate regarding the

reimbursement of antidumping duties prior to liquidation of the

relevant entries during this review period. Failure to comply with this

requirement could result in the Secretary's presumption that

reimbursement of antidumping duties occurred and the subsequent

assessment of double antidumping duties.

This notice also serves as a reminder to parties subject to

administrative protective order (APO) of their responsibility

concerning the disposition of proprietary information disclosed under

APO in accordance with 19 CFR 353.34(d) or 355.34(d). Timely written

notification of return/destruction of APO materials or conversion to

judicial protective order is hereby requested. Failure to comply with

the regulations and the terms of an APO is a sanctionable violation.

This administrative review and notice are in accordance with

section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)) and section 353.22

of the Department's regulations.

Dated: July 29, 1996.

Robert S. LaRussa,

Acting Assistant Secretary for Import Administration.

[FR Doc. 96-19862 Filed 8-2-96; 8:45 am]

BILLING CODE 3510-DS-P