Certain Fresh Cut Flowers From Colombia; Final Results of Antidumping Duty Administrative Reviews
Federal RegisterAug 19, 1996
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DEPARTMENT OF COMMERCE
International Trade Administration
[A-301-602]
Certain Fresh Cut Flowers From Colombia; Final Results of
Antidumping Duty Administrative Reviews
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
ACTION: Notice of Final Results of Antidumping Duty Administrative
Reviews.
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SUMMARY: On June 8, 1995, the Department of Commerce (the Department)
published the preliminary results of three concurrent administrative
reviews of the antidumping duty order on certain fresh cut flowers from
Colombia. These reviews cover a total of 348 producers and/or exporters
of fresh cut flowers to the United States for at least one of the
following periods: March 1, 1991 through February 29, 1992; March 1,
1992 through February 28, 1993; and March 1, 1993 through February 28,
1994.
We gave interested parties an opportunity to comment on the
preliminary results. Based on our analysis of the comments received and
the correction of certain clerical errors, we have made certain changes
for the final results. The review indicates the existence of dumping
margins for certain firms during the review periods.
EFFECTIVE DATE: August 19, 1996.
FOR FURTHER INFORMATION CONTACT: Thomas Schauer, J. David Dirstine, or
Richard Rimlinger, Office of Antidumping Compliance, Import
Administration, International Trade Administration, U.S. Department of
Commerce, 14th Street and Constitution Avenue, N.W., Washington, D.C.
20230; telephone (202) 482-4733.
APPLICABLE STATUTE AND REGULATIONS: The Department is conducting these
administrative reviews in accordance with section 751 of the Tariff Act
of 1930, as amended (the Act). Unless otherwise indicated, all
citations to the statute and to the Department's regulations are
references to the provisions as they existed on December 31, 1994.
SUPPLEMENTARY INFORMATION:
Background
On March 5, 1992, March 12, 1993, and March 4, 1994, the Department
published notices in the Federal Register of ``Opportunity to Request
Administrative Review'' (57 FR 7910, 58 FR 13583, and 59 FR 10368,
respectively) of the antidumping duty order on certain fresh cut
flowers from Colombia. On May 21, 1992, May 28, 1993, and May 2, 1994,
in accordance with 19 CFR 353.22(c)(1994), we initiated administrative
reviews of this order for more than 500 Colombian firms covering the
periods March 1, 1991 through February 29, 1992 (the 5th review), March
1, 1992 through February 28, 1993 (the 6th review), and March 1, 1993
through February 28, 1994 (the 7th review), respectively (see 57 FR
21643, 58 FR 31010, and 59 FR 22579, respectively).
On June 8, 1995, we published a notice of Preliminary Results of
Antidumping Duty Administrative Reviews, Partial Termination of
Administrative Reviews, and Notice of Intent to Revoke Order (In Part)
(Preliminary Results), wherein we invited interested parties to
comment. See 60 FR 30270 (June 8, 1995). At the request of interested
parties, we held a public hearing on September 8, 1995.
Although the Preliminary Results indicated that Cultivos Miramonte,
Flores Aurora, the Funza Group, and Industrial Agricola were being
considered for revocation, our recalculations for these final results
indicate that these firms no longer meet our requirements of not
selling the subject merchandise at less than fair value for a period of
at least three years and that it is not likely that they will sell the
subject merchandise at less than fair value in the future. See 19 CFR
353.25(a)(2). Therefore, we are no longer considering these firms for
revocation.
A number of respondents have asked that we correct clerical errors
contained in their responses. We have had a longstanding practice of
correcting a respondent's clerical errors after the preliminary results
only if we can assess
[[Page 42834]]
from information already on the record that an error has been made,
that the error is obvious from the record, and that the correction is
accurate. See Industrial Belts and Components and Parts Thereof,
Whether Cured or Uncured, From Italy: Final Results of Antidumping Duty
Administrative Review, 57 FR 8295, 8297 (March 9, 1992). In light of a
recent decision of the United States Court of Appeals for the Federal
Circuit (CAFC), we have reevaluated our policy for correcting clerical
errors of respondents. See NTN Bearing Corp. v. United States, Slip Op.
94-1186 (Fed. Cir. 1995) (NTN).
In NTN, the CAFC ruled that the Department had abused its
discretion by refusing to correct certain clerical errors, which the
respondent brought to the Department's attention after the preliminary
results of review. Specifically, the CAFC found that the application of
our test for determining whether to correct clerical errors in NTN was
unreasonable for the following reasons: (1) The requirement that the
record disclose the error essentially precludes corrections of clerical
errors made by a respondent; (2) draconian penalties are inappropriate
for clerical errors because clerical errors are by their nature not
errors in judgment but merely inadvertencies; (3) in NTN's case, a
straightforward mathematical adjustment was all that was required, so
correction of NTN's errors would neither have required beginning anew
nor have delayed issuance of the final results of review.
As a result of the NTN decision, we are modifying our policy
regarding the correction of alleged clerical errors. We will accept
corrections of clerical errors under the following conditions: (1) The
error in question must be demonstrated to be a clerical error, not a
methodological error, an error in judgment, or a substantive error; (2)
the Department must be satisfied that the corrective documentation
provided in support of the clerical error allegation is reliable; (3)
the respondent must have availed itself of the earliest reasonable
opportunity to correct the error; (4) the clerical error allegation,
and any corrective documentation, must be submitted to the Department
no later than the due date for the respondent's administrative case
brief; (5) the clerical error must not entail a substantial revision of
the response; and (6) the respondent's corrective documentation must
not contradict information previously determined to be accurate at
verification. In the Analysis of Comments Received section of this
notice, we have evaluated company-specific situations using the above
criteria.
Scope of Review
Imports covered by these reviews are shipments of certain fresh cut
flowers from Colombia (standard carnations, miniature (spray)
carnations, standard chrysanthemums and pompon chrysanthemums). These
products are currently classifiable under item numbers 0603.10.30.00,
0603.10.70.10, 0603.10.70.20, and 0603.10.70.30 of the Harmonized
Tariff Schedule (HTS). The HTS item numbers are provided for
convenience and Customs purposes. The written description of the scope
of this order remains dispositive.
Although we initiated reviews on more than 500 firms, we have only
reviewed a total of 348 firms for at least one of the three review
periods. We initiated reviews for a large number of firms which could
not be located in spite of our requests for assistance from diverse
sources such as the Floral Trade Council (the FTC), Asocolflores, the
American Embassy in Bogota, and the U.S. Customs Service. Therefore, we
were unable to conduct administrative reviews for these firms. We shall
assess duties for those unlocatable firms that have not previously been
reviewed at the ``all others'' rate of 3.10 percent. Assessment of
duties, as well as cash deposits, on entries from firms which we were
not able to locate but that had been previously reviewed will be
collected at the most recent cash deposit rate applicable to them. The
unlocatable firms are:
Achalay
Agricola Altiplano
Agricola de Occidente
Agricola del Monte
Agricola Megaflor Ltda.
Agrocaribu Ltd.
Agro de Narino
Agroindustrial Madonna, S.A.
Agroindustrias de Narino Ltda.
Agropecuaria la Marcela
Agropecuaria Mauricio
Agrocosas
Agrotabio Kent
Aguacarga
Alcala
Alstroflores Ltda.
Amoret
Andalucia
Ancas Ltda.
A.Q.
Arboles Azules Ltda.
Carcol Ltda.
Classic
Clavelez
Coexflor
Color Explosion
Consorcio Agroindustrial Columbiano S.A. ``CAICO''
Cota
Crest D'or
Crop S.A.
Cultivos Guameru
Cypress Valley
Degaflor
Del Monte
Del Tropico Ltda.
Disagro Ltda.
El Dorado
Elite Flowers
El Milaro
El Tambo
El Timbul Ltda.
Euroflora
Exoticas
Exotic Flowers
Exotico
Exportadora
F. Salazar
Ferson Trading
Flamingo Flowers
Flor y Color
Flores Abaco, S.A.
Flores Agromonte
Flores Ainsus
Flores Alcala Ltda.
Flores Calichana
Flores Cerezangos
Flores Corola
Flores de Guasca
Flores de Iztari
Flores de Memecon/Corinto
Flores de la Cuesta
Flores de la Hacienda
Flores de la Maria
Flores del Cielo Ltda.
Flores del Cortijo
Flores del Tambo
Flores el Talle Ltda.
Flores Flamingo Ltda.
Flores Fusu
Flores Gloria
Flores la Cabanuela
Flores la Pampa
Flores la Union/Santana
Flores Montecarlo
Flores Palimana
Flores Saint Valentine
Flores San Andres
Flores Santana
Flores Sausalito
Flores Sindamanoi
Flores Suasuque
Flores Tenerife Ltda.
Flores Urimaco
Flores Violette
Florexpo
Floricola
Florisol
Florpacifico
Flower Factory
Flowers of the World/Rosa
Four Seasons
Fracolsa
Fresh Flowers
Garden and Flowers, Ltda.
German Ocampo
Granja
Gypso Flowers
Hacienda La Embarrada
Hacienda Matute
Hana/Hisa Group
Flores Hana Ichi de Colombia Ltda.
Flores Tokai Hisa
Hernando Monroy
Hill Crest Gardens
Horticultura de la Sasan
[[Page 42835]]
Horticultura Montecarlo
Illusion Flowers
Indigo S.A.
Industria Santa Clara
Industrial Terwengel, Ltda.
Innovacion Andina, S.A.
Inversiones Bucarelia
Inversiones Maya, Ltda.
Inversiones Playa
Inversiones & Producciones Tecnicas
Inversiones Silma
Inversiones Sima
Jardin de Carolina
Jardines Choconta
Jardines Darpu
Jardines de Timana
Jardines Natalia Ltda.
Jardines Tocarema
J.M. Torres
Karla Flowers
Kingdom S.A.
La Colina
La Embairada
La Flores Ltda.
La Floresta
Laura Flowers
L.H.
Loma Linda
Loreana Flowers
M. Alejandra
Mauricio Uribe
Merastec
Morcoto
My Flowers Ltda.
Nasino
Olga Rincon
Otono
Pinar Guameru
Piracania
Prismaflor
Reme Salamanca
Rosa Bella
Rosales de Suba Ltda.
Rosas y Jardines
Rose
San Ernesto
San Valentine
Sarena
Select Pro
Shila
Solor Flores Ltda.
Starlight
Sunbelt Florals
Susca
The Rose
Tomino
Tropical Garden
Tropiflor
Villa Diana
Zipa Flowers
Best Information Available
Section 776(c) of the Act provides that whenever a party refuses or
is unable to produce information requested in a timely manner and in
the form required, or otherwise significantly impedes an investigation,
the Department shall use best information otherwise available (BIA). In
deciding what to use as BIA, 19 CFR 353.37(b) provides that the
Department may take into account whether a party refused to provide
requested information. Thus, the Department determines on a case-by-
case basis what is BIA.
For these final results of reviews, in cases where we have
determined to use total BIA, we applied two tiers of BIA depending on
whether the companies attempted to or refused to cooperate in these
reviews. When a company refused to provide the information requested in
the form required, or otherwise significantly impeded the Department's
review, the Department assigned to that company first-tier BIA, which
is the higher of (1) the highest rate found for any firm for the same
class or kind of merchandise in the same country of origin in the less-
than-fair-value (LTFV) investigation or any prior administrative
review; or (2) the highest calculated rate found in the specific period
of review for any firm for the same class or kind of merchandise in the
same country of origin. When a company has substantially cooperated
with the Department's request for information but failed to provide the
information required in a timely manner or in the form required, the
Department assigned to that company second-tier BIA, which is the
higher of either: (1) The highest rate ever applicable to the firm for
the same class or kind of merchandise from either the LTFV
investigation or a prior administrative review or, if the firm has
never been investigated or reviewed, the all others rate from the LTFV
investigation; or (2) the highest calculated rate in the specific
review for the class or kind of merchandise for any firm from the same
country of origin. See Antifriction Bearings (Other Than Tapered Roller
Bearings) and Parts Thereof From France, et al.; Final Results of
Antidumping Duty Administrative Reviews, Partial Termination of
Administrative Reviews, and Revocation in Part of Antidumping Duty
Orders, 60 FR 10900, 10907 (Feb. 28, 1995); see also Allied-Signal
Aerospace Co. v. United States, 996 F.2d 1185 (Fed. Cir. 1993).
Because a number of firms failed to respond to our requests for
information, we have used the highest rate ever found in any segment of
this proceeding to establish their margins. This rate, which was
calculated for the Bojaca Group in the 5th administrative review, is
76.60 percent for all three administrative reviews. The firms to which
we have applied first-tier BIA rates and the review periods for which
these firms are receiving a BIA rate (as indicated in parentheses) are
as follows:
Agricola Jicabal (5,6,7)
Agricola Malqui (5,6,7)
Agricola Monteflor Ltda. (7)
Agrobloom Ltda. (7)
Agrokoralia (5,6,7)
Bali Flowers (7)
Bloomshare Ltda. (7)
Bogota Flowers (5,6,7)
Ciba Geigy (5,6,7)
Claveles Tropicales de Colombia (7)
Colony International Farm (5,6,7)
Conflores Ltda. (5,6,7)
Cultivos el Lago (5,6,7)
Flora Bellisima (5,6,7)
Flores Alfaya (5,6,7)
Flores Arco Iris (5,6,7)
Flores Balu (7)
Flores Catalina (7)
Flores de Fragua (7)
Flores de la Pradera Ltda. (5,6,7)
Flores del Pradro (7)
Flores el Majui (7)
Flores Guaicata Ltda. (5,6,7)
Flores Magara (7)
Flores Naturales (7)
Flores Petaluma Ltda.(5,6,7)
Flores Rio Grande (7)
Flores Santa Lucia (5,6,7)
Flores Tejas Verdes (5,6,7)
Fribir Ltda. (7)
Groex S.A. (5,6)
Hacienda Susata (7)
Inpar (5,6,7)
Interflora Ltda. (5,6,7)
Inter Flores (7)
Internacional Flowers (7)
Invernavas (5,6,7)
Inversiones del Alto (7)
Inversiones Nativa Ltda. (5,6,7)
Jardin (5,6,7)
Jardines del Muna (5,6,7)
La Florida (5,6,7)
Naranjo Exportaciones e Importaciones (7)
Plantas Ornamentales de Colombia S.A. (7)
Rosas y Flores (5,6,7)
Rosicler Ltda. (5,6,7)
Sabana Flowers (5,6,7)
Sunset Farms (5,6,7)
Tempest Flowers (5,6,7)
At the time of our preliminary results of review, we determined
that MG Consultores, Flores Canelon, Flores la Valvanera, Flores del
Hato, Agroindustrial del Riofrio, Jardines de Chia, Queen's Flowers de
Colombia, and Jardines Fredonia were sufficiently related to each other
to warrant collapsing their sales and production information into the
Queen's Flowers Group. See Preliminary Results at 30271. Based on
information which we requested and received after the preliminary
results, we have determined that twelve other firms (Flores Jayvana,
Flores el Cacique, Flores Calima, Flores la Mana, Flores el Cipres,
Flores el Roble, Flores del Bojaca, Flores el Tandil, Flores el Ajibe,
Flores Atlas, Floranova, and Cultivos Generales) are also related to
the members of the Queen's Flowers Group within the meaning of section
771(13) of the Act. We determine that the type and degree of
relationship is so significant that there is the strong possibility of
price manipulation among all 20 of these companies. See our response to
Comment 26, below. Therefore, we are
[[Page 42836]]
assigning a single rate for all 20 companies for these final results.
However, not all of the companies of this group responded to our
questionnaire. Further, there exist serious deficiencies in the
responses submitted by the group. See Department's Position regarding
Comment 27, below. Therefore, we determine that the members of the
Queen's Flowers Group have significantly impeded our reviews and have
used as uncooperative, or first-tier, BIA the highest rate for any
company for this same class or kind of merchandise from this or any
prior segment of the proceeding.
One firm, Agricola Usatama, responded to our original
questionnaire, but failed to respond to our requests for supplemental
information. We determine that this company has not cooperated with our
requests for information. Therefore, we have applied a first-tier BIA
rate to this firm for the seventh review.
Although Santa Helena submitted a response to our supplemental
questionnaire, this firm failed to provide information allowing us to
correct serious deficiencies in its cost responses. Therefore, we were
unable to use its cost data for comparison purposes. However, because
this firm responded to all sections of our questionnaire and
substantially cooperated with our request for information, we have
applied a cooperative, or second-tier, BIA rate to sales made by this
company.
We conducted verification of responses submitted by the Agrodex
Group, Cultivos Miramonte, Floralex, Flores Aurora, Flores Depina, the
Funza Group, Flores de la Vereda, Flores Juanambu, the Florex Group,
the Guacatay Group, the HOSA Group, Industrial Agricola, the Santana
Group, Senda Brava, and the Tinzuque Group. We encountered serious
difficulties in attempting to verify the responses submitted by Flores
de la Vereda and Floralex. With respect to Flores de la Vereda, we
could not successfully verify completeness and accuracy of the sales
data. With respect to Floralex, we were unable to verify the accuracy
of the constructed value information submitted by this firm. Because
Flores de la Vereda and Floralex submitted responses and have otherwise
participated in all segments of the proceeding, we have determined that
they both have substantially cooperated with our requests for
information and applied a second-tier BIA rate to these firms for all
three reviews.
Also, we are applying a second-tier BIA rate to sales made by
Agricola de los Alisos, Colflores, Flores Estrella, Flores Mountgar,
and Flor Colombia S.A., because these companies were unable to respond
to our questionnaire. In Certain Fresh Cut Flowers From Colombia; Final
Results of Antidumping Duty Administrative Review, and Notice of
Revocation of Order (in Part), 59 FR 15159, 15173 (March 31, 1994)
(Fourth Review), we stated:
``In choosing an appropriate BIA * * * we focused on the
following factors and how they applied to the * * * companies at the
time they received our questionnaires (in this case, March 4, 1992):
the extent to which the companies continued to operate, including
current production and export levels, the number of persons employed
by the firms, the disposition of the companies' assets, the
relationship of the companies to other exporters continuing in
business, the current legal status of the bankruptcy, liquidation,
or reorganization proceedings, and the potential for reorganization
(including the likelihood that the companies would resume production
and exports).''
The record shows that Agricola de los Alisos, Colflores, Flores
Estrella, Flores Mountgar, and Flor Colombia S.A. are no longer in
business. In accordance with the standards enunciated above, we have
determined that these companies were unable to respond to our
questionnaire and have assigned a second-tier BIA rate to these firms.
In certain situations, we found it necessary to use partial BIA for
a number of firms to correct more limited response deficiencies. In a
supplemental questionnaire, Flores de Aposentos reported aggregate
carnation sales which the firm knew were destined to be sold to the
United States through resellers. Because the company did not separately
identify these sales in its questionnaire response as required by the
questionnaire, thereby prohibiting us from calculating accurate
margins, as BIA we applied the higher of the highest rate ever
applicable to the company or the highest calculated rate in the same
review to the particular sales involved.
In the case of Las Amalias, we found that, for certain U.S. sales
transactions in the 5th period of review (POR), the firm had reported
sales prices to a related importer instead of sales prices to the first
unrelated U.S. customer as required by our questionnaire. This
prohibits us from calculating margins in accordance with the Act, so,
as BIA, we have applied the higher of the highest rate ever applicable
to Las Amalias or the highest calculated rate in the same review to
these particular transactions.
United States Price
Pursuant to section 777A of the Act, we determined that it was
appropriate to average U.S. prices on a monthly basis in order: (1) to
use actual price information that is often available only on a monthly
basis, (2) to account for large sales volumes, and (3) to account for
perishable product pricing practices. See, e.g., Fourth Review at
15160.
In calculating the U.S. price (USP), we used purchase price when
sales were made to unrelated purchasers in the United States prior to
the date of importation, or exporter's sales price (ESP) when sales
were made to unrelated purchasers in the United States after the date
of importation, both pursuant to section 772 of the Act.
We calculated purchase prices based on the packed price to the
first unrelated purchaser in the United States. The terms of purchase
price sales were either f.o.b. Bogota or c.i.f. Miami. We made
deductions, where appropriate, for foreign inland freight, air freight,
brokerage and handling, U.S. customs duties, and return credits.
We calculated ESP for sales made on consignment or through a
related affiliate based on the packed price to the first unrelated
customer in the United States. We made adjustments, where appropriate,
for foreign inland freight, brokerage and handling, air freight, box
charges, credit expenses, returned merchandise credits, royalties, U.S.
duty, and either commissions paid to unrelated U.S. consignees or U.S.
selling expenses of related U.S. consignees.
Foreign Market Value
Section 773(a)(1) of the Act requires the Department to compare
sales in the United States with viable home market sales of such or
similar merchandise sold in the home market, or a third-country market,
in the ordinary course of trade. Although some companies reported
either viable home or third-country markets for sales of particular
flower types, consistent with our discussion in the Fourth Review (at
15160-61), we have concluded that home market and third-country sales
are not an appropriate basis for FMV. See our response to Comment 7,
below.
Accordingly, in calculating FMV, we used constructed value as
defined in section 773(e) of the Act for all companies. The constructed
value represents the average per-flower cost for each type of flower
during each review period, based on the costs incurred to produce that
type of flower during each review period.
The Department used the materials, production, and general expenses
reported by respondents. Because we have determined that both the home
market and third countries are either not viable or do not provide an
appropriate basis for FMV for all companies, we
[[Page 42837]]
used the U.S. market as a surrogate for determining the amount of
general expenses to add to constructed value. This figure included U.S.
selling expenses which were incurred by affiliated U.S. firms (see our
response to comment 8, below). The per-unit average constructed value
was based on the quantity of export quality flowers sold to the United
States. We have considered non-export quality flowers (also called
culls) produced in conjunction with export quality flowers to be
similar to scrap in that the culls may or may not have recoverable
value. Therefore, we offset revenue from the sales of culls against the
cost of producing the export quality flowers. See our response to
Comment 24, below.
For firms whose actual general expenses exceeded the statutory
minimum of 10 percent of the cost of materials and fabrication, we used
the actual general expenses to calculate constructed value pursuant to
section 773(e)(1)(B)(i) of the Act. For firms whose actual general
expenses were less than the statutory minimum of 10 percent of the cost
of materials and fabrication, we used the statutory minimum of 10
percent. Because imputed credit was included in constructed value, we
reduced the actual interest expense reported in the companies'
financial statements to prevent double-counting.
Because all respondents reported actual profit less than eight
percent of the sum of the cost of production and actual expenses, the
Department used the eight-percent statutory minimum for profit pursuant
to section 773(e)(1)(B)(ii) of the Act. We added U.S. packing to
constructed value. Adjustments to constructed value were made for
credit and indirect selling expenses.
According to the 1993 edition of Doing Business in Colombia,
published by Price Waterhouse, there has been a change in the Colombian
generally accepted accounting practices (GAAP), effective January 1,
1992. This change required firms to revalue certain financial statement
accounts in order to reflect the effects of inflation experienced
during each financial reporting period. As part of this revaluation,
firms must restate their fixed asset accounts and their corresponding
depreciation expense. We asked respondents to provide additional data
to allow us to adjust their data to reflect this change in Colombian
GAAP for our final results. Most of the companies provided this data.
For companies that failed to provide this data, or that provided
inadequate data, we made the adjustment to their response based on
monthly inflation figures published by the Colombian government. See
Memorandum from Michael Martin and William Jones to Richard Rimlinger
(February 20, 1996).
Many of the responding companies reported an ``income'' offset that
they claimed was created along with this revaluation. We disallowed
this offset as it is a change in the firm's equity and not income that
is actually realized. For further discussion of this matter, see our
response to Comment 11, below. For companies that failed to provide
this data, or that provided inadequate data, we made the adjustment to
their response based on monthly inflation figures published by the
Colombian government. See Memorandum from Michael Martin and William
Jones to Richard Rimlinger (February 20, 1996).
Analysis of Comments Received
We invited interested parties to comment on our preliminary results
and intent to revoke the order in part. We received case and rebuttal
briefs from the FTC, petitioner in this proceeding, the Asociacion
Colombiana de Exportadores de Flores (Asocolflores), an association of
Colombian flower producers representing many of the respondents in this
case, and various exporters and importers of fresh cut flowers from
Colombia. On September 8, 1995, we held a public hearing.
General Issues Raised by the Floral Trade Council
Comment 1: The FTC argues that the Department should not revoke the
order with respect to companies that are or may be reselling flowers
grown by other producers. The FTC asserts that, although it argued in
the 1990-91 review (fourth review) that revocation for the Flores
Colombianas Group (FCG) was inappropriate because of the possibility of
other growers routing their flowers through FCG, the Department
disagreed and revoked FCG (Fourth Review). The FTC reiterates the
Department's rationale in the Fourth Review that, because the group's
purchases from other producers were an insignificant percentage of its
total U.S. sales, FCG had consistently stated that its suppliers had no
foreknowledge that the purchased flowers were destined for any specific
export market, and the Department had no evidence that the company
purchased flowers at below its suppliers' cost of production,
revocation was appropriate. The FTC reminds the Department that the
agency informed the public that, if it received information that FCG is
serving as a conduit for other Colombian flower growers, it would take
appropriate action, which could include reinstatement in the order and
referral to the U.S. Customs fraud division.
The FTC contends that the Department's decision to revoke FCG in
the Fourth Review established additional criteria for revocation and
that the Department should apply the same criteria in the current
reviews before making a decision to revoke any of the companies. The
FTC argues that the Department's preliminary determination to revoke
these companies was faulty because ``(1) there is no evidence that
purchases from other producers are insignificant, and (2) there is no
basis on which to conclude that suppliers neither knew or should have
known the destination of their sales'' (Floral Trade Council's Public
Case Brief, page 3, August 11, 1995). The FTC contends that Colombian
growers often purchase flowers from other producers for export to the
United States, and that, because the merchandise is not marked, there
continues to be a danger that companies with dumping margins will route
their flowers through companies with no margins. The FTC asks that the
Department reconsider its reliance on the ``knowledge'' factor in
determining whether revocation candidates are likely to become conduits
for growers subject to the order. The FTC contends that the knowledge
test is impractical and subject to manipulation, and suggests that, as
a precondition for revocation, Colombian growers requesting revocation
should certify that they will not ship flowers grown by other Colombian
growers, on penalty of reinstatement in the order.
Asocolflores argues that there is no factual basis for the FTC to
conclude that companies eligible for revocation would serve as conduits
for other producers. Asocolflores requests that the Department take the
same position as it did in the Fourth Review, and analyze the facts on
record in determining whether there is any basis for the FTC's
speculation. Asocolflores points out that some of the companies
eligible for revocation did not even purchase flowers from other
producers. For those companies that did purchase flowers from other
producers, Asocolflores contends that the purchases were occasional and
that the Department previously has recognized that such limited sales
and purchases do not constitute evasion of the order. Finally,
Asocolflores contends that the FTC has provided no valid basis for the
Department to reconsider its longstanding practice requiring the
producer to know or have reason to know that its sales are destined for
the
[[Page 42838]]
United States before they are reported as U.S. sales.
Department's Position: Section 353.25(a)(2) of our regulations
states that we may revoke an order in part if we conclude that (1) a
producer or reseller has not sold subject merchandise at less than fair
value for a period of at least three consecutive years; (2) it is not
likely that the producer or reseller will sell the subject merchandise
at less than fair value in the future; and (3) the producer or reseller
agrees, in writing, to their immediate reinstatement in the order if we
conclude, under 19 CFR 353.22(f), that they have sold the subject
merchandise below FMV.
For these final results, after recalculating the margins for
Cultivos Miramonte, Flores Aurora, the Funza Group, and Industrial
Agricola, we determine that these firms are no longer eligible for
revocation. In the cases of Cultivos Miramonte, Flores Aurora, and
Industrial Agricola, there has not been a period of at least three
consecutive years without sales at less than fair value. In the case of
the Funza Group, there was a period of three consecutive years (1991-
93) in which the firm did not sell subject merchandise at less than
fair value (i.e., the fourth, fifth, and sixth periods of review).
However, the Group did have sales at less than fair value in the last
period reviewed (i.e., the seventh period of review) and, therefore,
the Group has not demonstrated that it is not likely to sell subject
merchandise at less than fair value in the future. Therefore, we are
not revoking the order with respect to any firms.
Comment 2: The FTC argues that the Department overstated ESP prices
by not deducting commissions paid to related U.S. consignees. The FTC
contends that where commissions paid to related U.S. consignees reflect
arm's-length commissions and are directly related to sales, the
Department should deduct the commissions as direct selling expenses. In
support of deducting these commissions, the FTC argues the following:
(1) the language of section 772(e)(1) of the Act requires the
Department to deduct both U.S. commissions and indirect selling
expenses from ESP, whether or not the U.S. consignee is related to the
exporter; (2) the rationale of Timken Co. v. United States, 630 F.
Supp. 1327 (CIT 1986) (Timken), requires the Department to deduct
related-party commissions; and (3) even under the assumption that
commissions need not always be deducted under section 772(e)(1),
commissions that are arm's length in nature and directly related to the
sales must be deducted from ESP as circumstance-of-sale adjustments.
In its rebuttal brief, Asocolflores states that the FTC's arguments
ignore the Department's practice in this case and in Final
Determination of Sales at Less Than Fair Value: Fresh Cut Roses from
Colombia, 60 FR 6980 (February 6, 1995) (Roses), of deducting actual
expenses rather than intracompany transfers. Asocolflores contends that
the court cases and statutory provisions cited by the FTC in support of
deducting commissions paid to related parties are irrelevant in this
case because the Department collapsed the consignee and supplier and
treated the two parties as a single entity for purposes of determining
ESP. Asocolflores states that when a supplier pays a commission to a
consignee which the Department has collapsed with the supplier, the
payment is merely an intracompany transfer of funds and not an actual
expense. Asocolflores contends that, by deducting only the selling and
operating expenses incurred by the U.S. consignee, USP is calculated on
the basis of the actual sales prices received from unrelated parties
and the actual selling expenses incurred by all related entities.
Asocolflores argues that, because the supplier pays the commission to
the importer to cover the importer's indirect selling expenses and to
provide a profit, deducting the related importer's commission from USP
(instead of deducting the importer's selling expenses) would have the
effect of deducting the importer's profit from ESP. Asocolflores
contends that this would be unlawful according to the Timken decision,
where the Court of International Trade (CIT) observed that the statute
does not call for the deduction of profits in ESP calculations.
Asocolflores alleges that the FTC has attempted to confuse the issue by
requesting that commissions be deducted as a direct selling expense
when found to be at arm's length. Further, Asocolflores contends that
whether a commission is at arm's length has nothing to do with the
commission being an actual expense incurred by the exporter.
Department's Position: We disagree with the FTC. For the final
results, we have continued to treat commissions paid to related
consignees as intracompany transfers.
Section 772(c) of the Act defines ESP as the ``the price at which
the merchandise is sold or agreed to be sold in the United States,
before or after the time of importation, by or for the account of the
exporter * * *.'' (emphasis added). The statute defines ``exporter'' to
include the producer and the related U.S. consignee (section 771(13) of
the Act). We make appropriate deductions to the price at which the
merchandise is sold in the United States to the first unrelated party
to determine ``the net amount returned to the exporter.'' S. Rep. No.
16, 67th Cong., 1st Sess. at 12 (1921). Thus, we deduct the U.S.
indirect selling expenses incurred by the related consignee as these
are payments to unrelated third parties that affect the exporter's net
return. However, payments from a producer to its related U.S. consignee
at issue are intracompany transfers that compensate the related
consignee for selling expenses incurred by the consignee in the United
States. Because these selling expenses are already deducted under our
current methodology, the deduction of the intracompany ``commission''
would result in double-counting. See, e.g., Certain Hot-Rolled Lead and
Bismuth Carbon Steel Products From the United Kingdom; Final Results of
Antidumping Duty Administrative Review, 60 FR 44009, 44010 (Aug. 24,
1995). Thus, we make no deductions for these payments pursuant to
section 772(e)(1).
In addition, we disagree with the FTC that the rationale of Timken
requires us to deduct related-party commissions. The Timken court held
that the statutory deduction for commissions did not require us to also
deduct the profit earned by a U.S. subsidiary. See Timken v. United
States, 630 F. Supp. 1327, 1342 (CIT 1986). The Timken court did not
state that we were required to deduct related-party commissions.
Further, as stated in Roses, the difference between a ``commission''
paid to a related U.S. consignee and the related consignee's selling
and operating expenses is equal to the related U.S. consignee's profit.
As there is no statutory provision providing for the deduction of
profits in ESP situations, we have made no deductions for these
amounts. See Roses at 6993.
Finally, we disagree with the FTC that these intracompany transfers
should be deducted as a circumstance-of-sale adjustment. As noted
above, we already deduct that portion of the transfer price that
represents selling expenses paid by the related U.S. consignee. The
remaining portion--profit--does not qualify as a circumstance-of-sale
adjustment.
Comment 3: The FTC asserts that failing verification is a basis for
first-tier BIA and argues that the Department was too lenient by
applying second-tier BIA to firms that failed verification. The FTC
points out that Flores de la Vereda presented a revised questionnaire
[[Page 42839]]
response during verification that contained substantial changes to the
data it had submitted originally. The FTC also notes that the
Department found various errors in its verifications of Flores de la
Vereda and Floralex.
Flores de la Vereda and Floralex, Colombian flower producers and
respondents in this case, contend that, when determining which tier of
BIA to apply, the Department's practice is to take into consideration
whether a respondent willfully refuses to participate in an
administrative review, or whether it attempts to cooperate but is
unable to comply with every request during verification. They argue
that discrepancies in the verification of Floralex do not suggest that
the company tried to obstruct the verification or that it was
uncooperative. These respondents also point out that cases to which the
FTC refers do not support its assertion; therefore, they contend, the
FTC's argument that Floralex should be assigned first-tier BIA is
wrong.
Department's Position: We agree with the respondents. The
Department took into consideration all deficiencies found at
verification for Flores de la Vereda and Floralex. However, the fact
that the questionnaire response was revised for one company and various
errors were found for both companies does not give sufficient reason,
in this instance, to assign first-tier BIA. In determining what to
apply as BIA, our regulations provide that we may take into account
whether a party refuses to provide requested information or in some way
impedes the proceedings. See 19 CFR 353.37(b). First-tier BIA is
applied when a company refuses to provide information requested, or
significantly impedes the Department's proceedings. See, e.g.,
Antifriction Bearings (Other Than Tapered Roller Bearings) and Parts
Thereof from France, 60 FR 10900, 10907 (February 28, 1995). In past
administrative reviews, it has been the Department's practice to apply
second-tier BIA when a company has substantially cooperated with the
Department's request for information. In this case, even though Flores
de la Vereda and Floralex failed certain aspects of verification, the
companies substantially cooperated with all of our requests for
information. Therefore, we have applied second-tier BIA to these
companies.
Comment 4: The FTC argues that the Department should calculate and
deduct inventory carrying cost (ICC) from ESP for those respondents
that did not provide such a calculation in their responses. In support
of this argument, the FTC refers to Roses, in which the Department
calculated an estimated ICC for respondents selling through related
parties who did not report ICC. Based on this precedent, the FTC
contends that the Department must calculate ICC for fresh cut flowers
because they have a longer life span than roses.
Asocolflores states that the Department has never deducted ICC from
ESP in this case, and contends that it would be inappropriate to do so
now. Furthermore, Asocolflores contends that ICC ``generally'' is
included in the reported imputed credit expenses because this amount is
calculated from the date of shipment from Colombia to the date of
receipt of payment. Asocolflores states that, to the extent ICC are not
included in the imputed credit expenses, they are insignificant and
would not affect margin calculations. Asocolflores also cites Micron
Technology, Inc. v. United States, Slip Op. 95-107 at 16-17 (CIT June
12, 1995), arguing that, because the Department did not request that
companies provide the inventory carrying period, it cannot apply an
adverse assumption to fill in the information needed to calculate this
expense.
Department's Position: We disagree with the FTC. For the final
results, we have not calculated an ICC for ESP sales.
The Act does not contain a specific provision for deducting ICC
from USP. Rather, we deduct ICC pursuant to section 772(e)(2) of the
statute, which requires us to deduct from ESP ``expenses generally
incurred by or for the account of the exporter in the United States in
selling identical or substantially identical merchandise.'' The CAFC
recently upheld our decision to deduct ICC pursuant to this provision
of the statute. See Torrington Co. v. United States, 44 F.3d 1572, 1580
(Fed. Cir. 1995).
Because ICC are not found in the books of the respondents, we must
look at what the financing cost would have been. Our practice in
calculating ICC for ESP sales is to calculate the cost in two segments:
(1) for the period during which the merchandise is held by the foreign
manufacturer; and (2) for the period during which the merchandise is in
transit or held by the U.S. affiliate. If we were to calculate and
deduct ICC on ESP sales in this case, the methodology would need to be
slightly different because there are two types of ESP transactions.
The first type of ESP transaction is where the foreign manufacturer
sells the flowers through a related U.S. consignee. The second type is
where the foreign manufacturer sells the flowers through an unrelated
consignee. In the latter situation, we would not calculate and deduct
ICC because: (1) Flowers are shipped immediately upon production; and
(2) our imputed credit expense calculation accounts for financing costs
associated with the period during which the merchandise is in transit
and held by the unrelated U.S. consignee (i.e., imputed credit covers
the financing costs from the time the merchandise is shipped to the
United States until the producer receives payment for the merchandise).
Where the foreign manufacturer sells the flowers through a related U.S.
consignee, our imputed credit expense calculations do not cover the
period during which the merchandise is in transit and held by the U.S.
consignee. On these transactions our calculation of imputed credit
covers the financing costs for the period between shipment from the
U.S. consignee to the first unrelated party and receipt of payment.
Thus, in order to capture all the financing costs on ESP transactions
where the foreign manufacturer sells the flowers through a related U.S.
consignee, it may be appropriate to calculate ICC for the period during
which the flowers are in transit and held by the U.S. consignee.
For purposes of calculating USP and FMV, section 777A of the Act
allows the Department to disregard ``adjustments which are
insignificant in relation to the price or value of the merchandise.''
For calculating FMV, our regulations define ``insignificant'' as having
either an ad valorem effect of less than 0.33 percent of FMV for
individual adjustments, or 1.0 percent of FMV for any group of
adjustments. See 19 CFR 353.59(a) (1994). The regulations do not define
``insignificant'' for adjustments involving USP. Regarding section
777A, the CIT has held that ``the statute provides not only that
Commerce is the appropriate authority to determine whether an
adjustment is insignificant, but also that it is Commerce that has the
discretion to determine whether or not to disregard an insignificant
adjustment.'' SKF USA Inc. v. United States, 876 F. Supp. 275, 281 (CIT
1995).
For the preliminary results, we did not calculate an ICC for any
respondent. Furthermore, we did not request the ICC information in our
questionnaires. An estimate of respondents' inventory periods is
available in the public report used in the Roses investigation.
However, respondents claim that this public report overstates the
inventory period for the subject merchandise in this case. Therefore,
we could obtain accurate ICC information only by sending out
supplemental
[[Page 42840]]
questionnaires to each individual company.
Based on the respondents' claim that any ICC adjustment would be
insignificant, we ran tests to determine the relative importance of the
ICC adjustment in this case. See Memorandum from Holly A. Kuga to Joe
A. Spetrini (November 8, 1995). For the Agrodex Group and the Claveles
Colombianos Group, we calculated a per-unit ICC, based on the number of
days in inventory information in the public report used in Roses, and
added this amount to each group's related importer's indirect selling
expenses and deducted the sum from USP. These companies are two of the
largest firms under review in total sales of subject flowers to the
United States. In addition, the majority of their sales were made
through a related U.S. consignee. The effect of the ICC adjustment on
the companies' weighted-average margins during the 5th, 6th, and 7th
reviews ranged from an increase of 0.00 percent to 0.11 percent. As a
result of these tests, we conclude that the ICC adjustment is
insignificant. Further, we conclude that use of this insignificant
adjustment would be inappropriate in these reviews, given the burdens
of obtaining the necessary information to make an accurate ICC
calculation at this stage of the reviews.
Comment 5: The FTC argues that the Department should presume that
respondents who withdrew their requests for revocation prior to
verification would have failed verification. This action, the FTC
contends, is a transparent attempt to avoid scrutiny by the Department.
Therefore, in the FTC's view, the Department must assume that an audit
of these firms' data would expose the inaccuracy of their responses.
Therefore, the FTC asserts, the Department must assign a margin based
on a first-tier BIA rate to sales by these firms.
Asocolflores counters the FTC's argument by claiming that there is
no legal or factual basis for applying BIA to companies that withdraw
requests for revocation. Asocolflores maintains that there were several
reasons why respondents withdrew their requests for revocation: certain
companies determined that they were no longer eligible for revocation
after reviewing their responses; other companies could not afford the
expense of undergoing verification; others were deterred by the
uncertainty created when the Department issued questionnaires
indicating it might use third-country profits in its margin analysis.
Asocolflores argues that BIA can be used only when a company refuses or
otherwise fails to provide information requested by the Department, or
fails verification.
Department's Position: We disagree with FTC. A company will request
revocation when it believes it will satisfy the requirements set forth
in 19 CFR 353.25(a)(2). Conversely, a withdrawal of a request for
revocation merely indicates that a company no longer believes the
regulatory requirements will be satisfied. Because there is no record
evidence indicating that companies that withdrew their request for
revocation would have failed verification, we have no basis to assign
these companies rates based on BIA.
Comment 6: The FTC contends that the Department should not assign
the ``all others'' rate to companies that could not be located by the
Department and that have been assigned higher company-specific margins
in previous reviews.
Asocolflores agrees that companies with pre-existing rates should
continue to receive those rates, whether they are lower or higher than
the ``all others'' rate.
Department's Position: Pursuant to section 751(a) of the Act, the
Department conducts administrative reviews of particular companies ``if
a request for such a review has been received.'' If no request for
review is received for a company, the Department ``will instruct the
Customs Service to assess antidumping duties * * * at rates equal to
the cash deposit of, or bond for, estimated antidumping duties. * * *''
19 CFR 353.22(e) (1994). In other words, ``in cases where a company
makes cash deposits on entries of merchandise subject to antidumping
duties, and no administrative review of those entries is requested, the
cash deposit rate automatically becomes that company's assessment rate
for those entries.'' Federal-Mogul Corp. v. United States, 822 F. Supp.
782, 787-88 (CIT 1993). In this case, an administrative review was
requested for the unlocatable firms in question. However, because we
were unable to review these firms, the results are the same as if no
review had been requested for these firms. Therefore, for the final
results, unlocatable companies with pre-existing rates will be assessed
at those rates. The cash deposit rates for these companies will remain
the same.
Comment 7: The FTC argues that, because the Department did not
collect current third-country price data, its decision to reject third-
country sales as the basis for FMV is flawed. The FTC claims that the
Department based its decision in these reviews on data collected in a
past review, and that the records in these reviews suggest that the
facts and circumstances of third-country sales have changed. The FTC
contends that, because the Department neither collected nor analyzed
third-country sales prices, its conclusions are unsubstantiated.
The FTC claims that the analysis in the Department's notice of
preliminary results is flawed. The FTC claims that the Department's
position that the market patterns in third-country and U.S. markets are
different is not supported by evidence on the record. Also, the FTC
argues that the Department's focus on differences in holidays is
misplaced in that a comparison of U.S. prices during a major holiday
period to prices in a third country would be to respondents' advantage,
because prices in the United States during peak flower-giving holidays
are relatively greater than during non-peak periods, which is when the
FTC contends dumping is occurring. Therefore, the FTC concludes that,
in comparing third-country markets to the U.S. market, the only
relevant inquiry is whether there are foreign holidays where price
levels peak in foreign markets at a time when there is no comparable
U.S. holiday. The FTC states that, without the relevant transaction
data on the record, there is no basis on which to test this concern.
The FTC also contends that, in any case, U.S. holidays and third-
country holidays mostly do coincide, and it cites a list of holidays it
attached to its February 18, 1994 submission in support of this
contention.
With respect to the Department's preliminary decision that there
are differences in market patterns, the FTC argues that flower
producers in third countries do not face the same competitive pricing
pressure that flower producers in the United States do, and the
differences in price volatility can be attributed in no small part to
the pricing practices of Colombian flower producers, which, according
to the FTC, control roughly two-thirds of the U.S. market. The FTC also
argues that the notion that U.S. customers only purchase flowers during
special occasions is belied by import statistics generated by the
Department, and that U.S. customers buy flowers throughout the year,
not just on special occasions.
The FTC objects to the Department's consideration of price
correlation on the grounds that rejecting third-country sales because
they do not follow the same patterns as in the U.S. market undermines
the purpose of the antidumping law. The FTC contends that in any case
where dumping exists, there will be a negative correlation in
[[Page 42841]]
prices between the U.S. and the foreign markets. The FTC concludes by
stating that the Department's resort to CV does not comport with its
consideration of the lack of price correlation because no correlation
between constructed value and the U.S. market will necessarily exist.
Asocolflores argues that the circumstances in third-country markets
have not changed to such a degree to warrant reversing prior practice
in this case, and that, although the Department did not collect sales
data, the Department did collect other data which it used in reaching
its conclusions. Specifically, Asocolflores states that the FTC itself
has provided pricing information demonstrating that prices in the
United States and third countries lacked correlation, peaked at
different times, and were more stable in third countries during the
PORs.
Asocolflores claims that the FTC has provided no new legal analysis
or factual information beyond what has previously been submitted and
rejected by both the Department and the CIT. Asocolflores also takes
issue with the FTC's argument that the Department's focus on U.S.
holidays is misplaced. Asocolflores argues that the Department properly
focused not just on U.S. holidays or just foreign holidays, but rather
on the differences in U.S. and foreign flower-giving holidays and the
consequent distortion that may result when a peak period in one market
is compared to a non-peak period in a different market. Asocolflores
further contends that the FTC's list of holidays is meaningless,
because the FTC has not limited its list to flower-giving holidays;
rather it has listed all holidays in both markets.
Asocolflores claims that, while the FTC urges the Department not to
focus exclusively on pricing trends or market patterns, it is precisely
these factors which compelled the Department to reject third-country
sales as a basis of FMV in the previous reviews. Asocolflores contends
that, in light of the above arguments, there is not a basis for
reversing an established case precedent upheld by the CIT.
Department's Position: For purposes of these final results, we have
continued to base FMV on constructed value because we remain convinced
that third-country sales would be an inappropriate basis for FMV.
Section 773(a)(2) of the Act allows the Department to base FMV on
constructed value where FMV ``cannot be determined'' using home market
or third-country sales. Where, as here, home market sales are
inadequate to serve as a basis for foreign market value, section
353.48(b) of our regulations states a preference for use of third-
country sales over constructed value ``if adequate information is
available and can be verified.''
We have used constructed value for Colombian flowers since the
second administrative review of this proceeding. We did this for three
reasons. First, we determined that prices in third-country markets were
negatively correlated to prices in the United States. We determined
that this negative correlation was caused by a variety of factors,
including the greater volatility and sporadic nature of the U.S.
market, differing peak price periods (holidays), and Colombian
producers' relative lack of access to European markets. Second, because
of the relative lack of access to European markets, Colombian producers
generally sold to Europe only during peak months. Third, because the
merchandise in question is highly perishable, most producers were found
to plan the vast majority of their production for sale to the U.S.
market, and generally sold excess production to markets that they may
not have planned to sell in. This created a ``chance element'' that
could cause price differences that were unrelated to dumping. See
Certain Fresh Cut Flowers From Colombia; Final Results of Antidumping
Duty Administrative Review, 55 FR 20491, 20492 (May 17, 1990) (Second
Review). This decision was subsequently upheld by the CIT. See Floral
Trade Council v. United States, 775 F. Supp. 1492, 1495-98 (CIT 1991).
We disagree with the FTC's argument that we cannot decide this
matter based on the existing record. We also disagree with petitioners
that we were required to collect actual third-country sales data prior
to our decision to reject third-country prices. While we did not
collect third-country sales data from respondents, we did collect
information about third-country markets. We received narrative
responses to questions regarding third-country markets, ranging from
general questions about market conditions to questions about specific
companies' practices, experiences, and average profit levels. We also
received price data for standard carnations for 1991 from the FTC for
the United States and for the Aalsmeer market in Europe. The record
shows no change in the differences in market volatilities, no change in
the differences in holidays, and no change in the differences in end-
use of the merchandise. Based on the information we collected for these
PORs, we determine that the differences in prevailing market conditions
between European markets, which comprise the primary third-country
markets, and the United States in these PORs are still too great to
justify use of third-country prices.
We find that there is still great price volatility in the United
States which does not exist in third-country markets. We find that
significant differences in the demand patterns between the markets
continue to exist, which are explained largely by the differences in
holidays and end-uses of subject merchandise.
We find that the differences in volatility between third-country
markets and the United States are largely attributable to differences
in demand patterns. We have observed that demand and prices in the
United States fluctuate much more widely than in European markets, and
that demand and prices correlate strongly in the United States. That
is, prices and demand are both high at the same time and are both low
at the same time. This indicates that, in the United States, supply
moves to meet demand, rather than the other way around. In a demand-
driven market, the quantities supplied move to meet demand, which
explains why prices and quantities are both high at certain times and
why both are low at other times. By contrast, in a supply- driven
market, lower prices would lead to greater quantities purchased by
consumers, and higher prices would cause fewer products purchased.
There is no evidence of low prices coinciding with high demand or high
sales quantities, or vice versa. Therefore, we infer that the United
States is largely a demand-driven market. We conclude that demand
exerts a considerably stronger influence on prices in the U.S. market
than in Europe.
With regard to holidays, we observe that differences in holidays
are not in and of themselves a reason for rejecting third-country
sales, but are a significant factor in explaining why there is no
apparent correlation between prices in third-country markets and the
United States. Further, we are not convinced by the FTC's claims that
flower-buying holidays in third-country markets and the United States
largely coincide. For example, the FTC argues that All Souls' Day, a
European flower-buying holiday, coincides with Halloween. This is true,
but because Halloween is not a holiday for which people in the United
States typically purchase flowers, observing that the two holidays
coincide does not demonstrate that third-country and U.S. flower-buying
holidays coincide.
The FTC is correct that flowers are bought throughout the year in
the United States and not just on special
[[Page 42842]]
occasions. We do not conclude otherwise. The fact remains, however,
that there are certain flower-buying holidays, such as Valentine's Day
and Mother's Day, for which demand for subject merchandise increases
markedly. In contrast, third-country market customers more often buy
flowers for everyday use, such as decoration. See, e.g., Cienfuegos
Group section A response (May 16, 1994), Flores de la Sabana S.A.
supplemental response (April 15, 1994), Flores Tiba S.A. section A
response (May 16, 1994), and HOSA Group section A response (May 16,
1994). This was true when we originally decided that third-country
prices were an inappropriate basis for FMV and was a factor we cited in
that review in our decision. See Second Review at 20492. From this, we
conclude that, for the most part, the end-use of subject merchandise
significantly differs between the United States and third-country
markets.
The FTC, in its February 18, 1994 submission, provided third-
country market price data which, according to the FTC, demonstrated
that the correlation between prices in third-country markets and the
United States was sufficiently strong to justify reversing our
decision. We examined the price data submitted by the FTC covering 1991
and found that third-country and U.S. prices moved in opposite
directions in approximately half of the months of the year. This
indicates that there is neither a strong positive nor negative
correlation between prices in the United States and third-country
markets. Our analysis of correlation is inconclusive and, therefore, we
turned to other factors in our analysis, which are described above.
Finally, we disagree with the FTC's statement that there will be
negative price correlations wherever dumping occurs. Dumping can exist
in any situation regardless of price correlation. For example, USP and
FMV could move together, i.e., be perfectly correlated, and there would
still be dumping as long as FMV was consistently greater than USP.
While we do find that, since our determination in the Second
Review, Colombian producers have gained greater access to third-country
markets and our analysis of the correlation between U.S. and third-
country prices during the PORs was inconclusive, none of the other
factors that affected our decision, including those that explain the
lack of an apparent correlation of prices, has changed significantly
enough to warrant our abandoning CV as the basis for FMV.
Comment 8: The FTC argues that, if the Department chooses not to
use third-country sales as the basis of FMV, it should use actual
third-country profits and general expenses in calculating CV. The FTC
contends that CV is intended as a substitute for a price-based FMV, and
the profit and general expenses used in calculating CV should be equal
to the profit and general expenses on those prices that are the basis
for FMV. The FTC observes that the Department collected and verified
third-country profit data, and that using the statutory minimum does
not reflect the price discrimination that exists between markets. The
FTC argues that the requirements for using profit on third-country
sales are met in this case, citing Aramid Fiber Formed of Poly-
Phenylene Terephthaliamide from the Netherlands, 59 FR 23684, 23686
(1994), as an example of a case in which the Department calculated
profits on the basis of third-country sales.
Asocolflores argues that using third-country profit and general
expenses for the purposes of CV would effectively create a surrogate
for third-country sales. Asocolflores contends that the Department has
recognized this principle and rejected the same argument in Roses at
6994, stating that, ``where there was a viable, but dissimilar third-
country market, [the Department] used U.S. surrogates and the statutory
eight percent profit because [it has] determined that third-country
markets do not provide an appropriate basis for foreign market value.''
Asocolflores argues that many of the same objections to the use of
third-country sales apply to the use of third-country profit. For
example, Asocolflores notes, because prices in the U.S. and third-
country markets are incomparable due to timing and volatility
differences, the profit margins will not be comparable. Asocolflores
also notes that, because sales in third-country markets are not made in
all months, peak periods are not balanced by off-peak periods.
Moreover, Asocolflores contends, using third-country profits in an
annual CV is further distortive because it is being used as a
comparison to monthly- averaged USPs. Asocolflores argues that the FMV
that the FTC would have the Deparment create is not representative of
prices in any market because it would combine a general cost of
production with U.S. selling expenses, U.S. imputed credit expenses,
third-country general expenses, and third-country profits.
Finally, Asocolflores concludes that using third-country profits
would violate established case precedent. Respondents assert that they
have relied upon this methodology and the Department cannot now change
its methodologies without compelling reasons, citing Shikoku Chemicals
Corp. v. United States, 795 F. Supp. 417, 421 (CIT 1992).
Department's Position: We disagree with petitioner. Section
773(e)(1) of the Act states that CV 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 . . .'' Section 353.50(a) of our regulations elaborates
on this requirement by noting that CV will include general expenses and
profit ``usually reflected in sales of merchandise by producers in the
home market country * * *''
In this case, we are not using home market prices for FMV because
home market flower sales are either not viable or outside the ordinary
course of trade. See, e.g., Second Review at 20492. We are not using
third-country prices for FMV because, as discussed in our response to
Comment 7, an unusual fact pattern applies in this case which would
cause comparisons to third- country prices to be distortive.
Because we rejected the prices of the home market and third
countries for purposes of FMV, we find it necessary to reject the
general expenses and profits associated with these sales. Just as home
market and third-country prices will not provide an accurate
measurement of dumping in this case, the general expenses and profit
associated with these sales are not of the amount ``usually reflected
in sales of merchandise of the same general class or kind as the
merchandise under consideration.'' Thus, we decline to use these
amounts for purposes of CV.
We disagree with the FTC that our position in Aramid Fiber compels
us to use third-country selling expenses and profit in this case.
Aramid Fiber used viable third-country markets as a basis for FMV. See
Aramid Fiber at 23685. Here, we are unable to use third-country sales
as the basis of FMV.
For the final results, then, we have used the eight-percent
statutory minimum profit. See Alhambra Foundry Co., Ltd. v. United
States, 685 F. Supp. 1252, 1259-60 (CIT 1988) (upholding use of
statutory eight-percent minimum profit where no viable home market or
third country market exists). In our preliminary results, we stated
that we used respondents' actual profit for
[[Page 42843]]
merchandise of the same general class or kind where this amount was
greater than the statutory minimum. However, for these final results,
we determine that there are no cases in which a respondent's home
market profit exceeded eight percent. Therefore, use of the statutory
minimum profit is appropriate.
For general expenses, it is the Department's practice to use U.S.
selling expenses as a surrogate when home market and third-country
market sales form an inappropriate basis for FMV. See Final
Determination of Sales at Less Than Fair Value: Tubeless Steel Disc
Wheels from Brazil, 52 FR 8947, 8948 (March 20, 1987); Final
Determination of Sales at Less Than Fair Value; Certain Granite
Products from Italy, 53 FR 27187, 27191 (July 19, 1988). Furthermore,
our questionnaire instructed respondents that ``if home market or
third-country sales are not being used to establish foreign market
value, provide selling expenses on U.S. sales of the subject flower
type.''
For the preliminary results and in prior reviews of this order, we
used only those U.S. selling expenses incurred in Colombia for purposes
of calculating a surrogate value for selling expenses. However, we have
revised this figure in these final results to include all U.S. selling
expenses, regardless of whether these expenses were incurred by the
flower grower, its offshore invoicer, or its related U.S. importer.
This revision allows us to utilize the entire universe of U.S. selling
expenses as the surrogate, regardless of any internal corporate
decision as to whether certain selling expenses should be incurred in
Colombia or transferred to an offshore invoicer or an affiliated U.S.
importer.
Comment 9: The FTC argues that the Department should not allow
respondents to offset CV by the amount of revenue on cuttings, other
materials, or services sold in Colombia. The FTC argues that these
items are not production outputs, as are culls, but rather production
inputs.
Asocolflores responds that the revenues described are an
appropriate offset to cost, and claims that the Department has allowed
such revenue as an offset to cost in prior reviews. Asocolflores states
that materials such as cuttings are part of growers'' costs, and argues
that, if a grower has more cuttings than necessary and sells some of
them, the revenue from those cuttings should be allowed as an offset to
costs. Asocolflores contends that including these revenues in the cull
revenues is the easiest way to report them in the Department's Lotus
spreadsheet, and that where these revenues are reported is less
important than whether they are allowed.
Department's Position: We agree with the FTC that items such as
cuttings (and similar materials) are not created in the process of
flower production, as are culls, but rather are inputs or materials
used in producing flowers or can be a separate product line in itself.
Also, the sale of services does not relate to the cost of producing
flowers and therefore should not be allowed as an offset. The fact that
a grower may subsidize its flower production with revenue earned from
other operations is not relevant to the dumping calculation and may
disguise dumping that is occurring. Therefore, we only allow revenues
from operations directly related to flower production and/or sales to
offset the cost of producing subject merchandise. Further, these items
must be properly itemized and tied to the production and/or sales of
flowers. See Notice of Final Determination of Sales at Less Than Fair
Value: Certain Carbon Steel Butt-Weld Pipe Fittings From India, 60 FR
10545, 10547 (Feb. 27, 1995). Therefore, for companies that reported
such revenues as an aggregate part of their cull sales revenue we have
disallowed the entire offset, unless the companies provided a breakdown
of the various revenues they reported in the cull revenue line item
elsewhere in their responses.
We recognize that our decision represents a departure from our past
practice in this case. See Fourth Review at 15168. However, we have
reexamined this issue and we conclude that, generally, cuttings, while
an input into the production of flowers, are a distinct industry. Many
companies are exclusively in the business of selling cuttings. If a
company returned cuttings to the supplier and received a credit for
those cuttings, then it should report the cost of cuttings minus the
rebate. If a company produced or bought cuttings which it later sold,
it should report only the cost of those cuttings used in the production
of subject merchandise. To allow a company to report the revenues it
receives on sales of cuttings not used in flower production would be
equivalent to offsetting cost by the amount of profit received on
nonsubject merchandise, which we do not allow. If a company had broken
out its cost data and cull revenue data in such a way that we could
correct it, then we would do so. However, where companies did not
provide sufficient detail of their cost response to permit us to make
such corrections, we have assumed as partial BIA that all costs
associated with cuttings, other materials, and services reported by the
companies are not related to flower production, and we have disallowed
the cull revenue offset for the reasons outlined above.
Comment 10: The FTC argues that the Department should disallow any
interest income offsets to interest expenses where the interest income
was either long-term or not related to production. The FTC also argues
that the Department should disallow offsets to interest expenses that
are not interest income such as prompt payment discounts, monetary
correction, or exchange rate gains.
Asocolflores does not contest the FTC's argument in general, but
maintains that some of the revenues or discounts mentioned by the FTC
should be allowed as an offset to cost, whether in the interest income
section of the Lotus spreadsheet or elsewhere. Asocolflores
specifically describes the situations for Flores San Juan and the
Sabana Group. Asocolflores also maintains that, contrary to the FTC's
statements, monetary income is a permissible offset to financial
expense. Asocolflores claims that, in Gray Portland Cement and Clinker
from Mexico, 58 FR 25803, 25806 (1993) (Comment 4) (Portland Cement),
the Department expressly allowed monetary correction income resulting
from monetary position gains as an offset to financial expense.
Department's Position: We agree in part with the FTC. Only short-
term interest income directly related to operations may be used as an
offset to interest expense. See Notice of Final Determination of Sales
at Less Than Fair Value: Small Diameter Circular Seamless Carbon and
Alloy Steel, Standard, Line and Pressure Pipe From Italy, 60 FR 31981,
31991 (June 19, 1995).
In Portland Cement, we included monetary gains and losses in the
calculation of net financing expenses for the respondent because, in
that case, the monetary correction under Mexican GAAP pertained solely
to the holding of monetary assets and liabilities. Given these
circumstances, not including monetary gains and losses in the
calculation of net financing expenses would not have accounted for the
effects of Mexico's significant inflation during the review period in
question and would have distorted the firm's corporate financial
expenses and income. See Portland Cement at 25806. In the case of
Colombian GAAP, this restriction does not apply. See our response to
Comment 11, below, concerning our treatment of inflation adjustments in
this case.
With respect to Asocolflores' reference to San Juan, we do not
permit
[[Page 42844]]
interest revenue in excess of interest expenses to offset other costs.
See our response to Comment 32, below. Finally, with respect to
Asocolflores' reference to Sabana, the firm reduced its financial
expenses by an amount for discounts which it received from suppliers.
However, the firm did not provide the requisite information for us to
properly assign these discounts to costs of the applicable flower
types. See our response to Comment 41, below. Therefore, we have not
adjusted for these discounts.
Comment 11: The FTC argues that the Department should use
respondents' reported inflation adjustments as reflected in their
financial statements, but should not allow respondents' claimed
offsetting adjustment for monetary correction. The FTC argues that
failure to include the inflation adjustment would distort production
costs for purposes of the dumping analysis. The FTC argues that
excluding the inflation adjustment would result in costs which are not
reflective of current price levels and thus produces an improper
matching of revenues and expenses. The FTC cites Roses in support of
its argument. The FTC further notes that certain respondents have
included monetary correction income as cull revenue or other financial
income.
Asocolflores argues that the Department should not make a one-sided
adjustment for inflation to depreciation and amortization costs.
Asocolflores states that the Department did not gather actual inflation
adjustment data from the companies in Roses, but performed its own
incorrect calculations and made only a partial adjustment. According to
Asocolflores, the Department should disregard the inflation adjustments
and calculate CV using a company's actual, unadjusted costs. If the
Department does use this data, Asocolflores contends it must take into
consideration not only the increase in depreciation and amortization
expenses, but also the monetary correction resulting from the inflation
adjustments to depreciable assets. Respondents assert that the
Department allowed monetary correction offsets in Portland Cement and
Porcelain-on-Steel Cookware from Mexico, 55 FR 39186 (September 25,
1990) (Cookware from Mexico), and there is no basis for disregarding it
here. Asocolflores contends that the Department needs to focus not just
on the adjustments to non-monetary depreciable or amortizable assets
which result only in changes to a company's balance sheet as it did in
Roses, but also on adjustments to both the costs and income reported in
the profit and loss statement.
Asocolflores argues that three separate adjustments are required to
perform the inflation adjustments required by Colombian tax laws.
First, Asocolflores states that the value of assets must be adjusted to
reflect the hypothetical increase in value due to inflation.
Asocolflores explains that this amount is recorded as a debit to the
asset account and a credit to a ``monetary correction'' account that
all companies are required to establish in their books, and the
monetary correction account is a profit and loss statement account
which ``corrects'' the monetary value of non-monetary assets,
liabilities, and equity for inflation. Second, Asocolflores asserts,
the upward adjustment to the value of the asset leads to an upward
adjustment to depreciation expense. Asocolflores explains that the
companies record depreciation expense calculated at historical cost
plus the adjustment due to inflation as a debit to the depreciation
expense account and a credit to the accumulated depreciation account.
Third, Asocolflores states that the companies adjust the accumulated
depreciation account for inflation. Therefore, Asocolflores asserts,
the amount of the adjustment is debited to the monetary correction
account and credited to the accumulated depreciation account.
Asocolflores explains that companies generally responded to the
Department's questionnaire by providing the data concerning both the
depreciation expense (cost) and monetary correction (income) effects of
the inflation adjustment to depreciable/amortizable assets, resulting
in an increase of depreciation or amortization expense. Asocolflores
states that companies also reported the monetary correction they are
required to recognize on their books as a result of the difference
between required inflation adjustments to asset value and accumulated
depreciation. Asocolflores explains that the companies generally
reported this monetary correction as an offset to costs as ``cull
revenue,'' since this was the only line on the Lotus spreadsheet on
which such income could be reported and still allow the Department to
use the spreadsheet to calculate CV properly.
Asocolflores argues that, in cases involving non-hyperinflationary
economies such as Colombia, the Department ordinarily does not make any
adjustments to depreciation or amortization expenses for inflation.
Asocolflores cites Portland Cement to support its contention that the
only possible legal basis for including inflation adjustments is that
(1) they are required by Colombian GAAP, and (2) they are not
distortive. Asocolflores contends that, if the Department makes
adjustments, they must reflect the full adjustments required in
Colombia. According to Asocolflores, any adjustment made to just
depreciation and amortization is distortive from the perspective of
cost accounting and should therefore be disregarded. Asocolflores
further contends that, by calculating CV on a monthly basis, the
Department is already ensuring that it does not distort the dumping
calculations by mismatching costs and revenues. Asocolflores contends
that the Department's precedent in Roses, where it recognized the
unfairness of comparing monthly prices with an annual CV calculated
using full-year inflation adjustments and adjusted for inflation only
through the middle of the period so as to estimate a midpoint average
cost, contradicts the intended approach in this case of using full
period inflation adjustments in a comparison with unadjusted monthly
sales prices.
In rebuttal, the FTC argues that the Department should reject
Asocolflores' July 21, 1995 submission as untimely. The FTC argues that
the submission contained new factual information, which was submitted
after the preliminary results of review. The FTC argues that the
Department should not allow an offset for monetary correction income
that does not ultimately benefit flower producers and is not real
income. The FTC also argues that, although the Department has accepted
an income offset in the treatment of monetary correction in Portland
Cement and Cookware from Mexico, this acceptance does not compel the
Department to make an offset in these reviews. Finally, the FTC
contends that, if the Department not use respondents' supplemental
inflation adjusted costs, it should ensure that all monetary correction
income included in respondents' original responses has been excluded
from the database.
Department's Position: We disagree with respondents. For these
final results, we have used respondents' revised depreciation and
amortization expense figures, which have been adjusted for the effects
of inflation, in calculating CV. However, we have excluded the amount
of monetary correction income that respondents claimed as an offset to
production costs. With respect to the FTC's argument that we should
reject Asocolflores' July 21, 1995 submission as untimely, we disagree.
We requested this information
[[Page 42845]]
in our supplemental questionnaire of June 21, 1995 concerning inflation
adjustment.
In general, CV includes amounts for depreciation of fixed assets
that are used to produce the subject merchandise. Most often, these
fixed assets are recorded for normal accounting purposes at their
historical cost (i.e., the original purchase price of the assets).
Consequently, amounts incurred for depreciation reflect the historical
cost of the underlying fixed assets spread systematically over the
assets' useful lives. In an inflationary economic environment, however,
depreciating fixed assets based on historical costs fails to adequately
measure the cost of those assets relative to the sales income that
results from the merchandise they produce. For this reason, in many
countries that experience high inflation, GAAP requires that fixed
assets be indexed (i.e., increased) annually to reflect the increasing
nominal value of those assets as stated in prevailing currency units.
The Department also recognizes the effects of inflation on costs in
its antidumping analysis. Specifically, in cases involving respondents
whose home market economies are hyperinflationary (which the Department
considers to be annual inflation greater than 50 percent), the
Department resorts to the use of monthly replacement costs. See, e.g.,
Final Determination of Sales At Less Than Fair Value: Ferrosilicon From
Brazil, 59 FR 732 (January 6, 1994).
In other instances, where the home market economies, while not
reaching the Department's annual hyperinflationary threshold during the
period of investigation (POI) or the POR, nonetheless exhibit
significant inflation from year to year, the Department has adjusted
respondents' depreciation expenses in order to permit a more
appropriate matching of costs and prices based on equivalent currency
units. See, e.g., Aimcor, Alabama Silicon, Inc., and American Alloys,
Inc. v. United States, Slip Op. 94-192 (CIT 1994) (Ferrosilicon From
Venezuela). Stated another way, at hyperinflationary levels, the
Department adjusts all production costs for the effects of inflation.
On the other hand, at inflationary levels that, if compounded from year
to year, significantly affect the value of historically-based fixed
assets, the Department adjusts only depreciation expense for the
effects of inflation.
In the instant case, while the Colombian economy did not experience
hyperinflation during any of the PORs, it did see annual inflation
rates between 20 and 30 percent in the five years leading up to and
including the PORs. Therefore, the effect of compounded annual
inflation results in a distortion of historical depreciation. More
specifically, the compounded annual inflation results in an
understatement of costs. In order to correct this distortion, the
Department asked respondents to submit revised CV figures reflecting
depreciation expense amounts adjusted for inflation. The inclusion of
inflation-corrected depreciation amounts in CV is consistent with past
Departmental practice, as demonstrated in Ferrosilicon from Venezuela,
Roses from Colombia and Roses from Ecuador. The Department's
methodology corrects understated depreciation and amortization costs,
which results from significant inflation compounded over some extended
time period. This approach is also consistent with Colombian tax law,
which requires firms to revalue certain financial statement accounts to
reflect the effects of inflation experienced in each financial
reporting period. See Memorandum from Holly Kuga to Joseph Spetrini,
dated November 8, 1995.
As noted above, in antidumping cases involving countries whose
economies are continually marked by high inflation (but not
hyperinflation), the Department has adjusted depreciation expenses
reported by respondents while allowing other costs, such as materials
and labor, to be recorded at their current, nominal values. This has
been done in recognition of the fact that, over time, consistently high
inflation rates greatly affect the nominal value of fixed assets that
are recorded for accounting purposes at historical costs. At the same
time, however, because the price level changes in these cases do not
reach those defined by the Department's hyperinflation threshold, this
practice purposely ignores other inflation effects that can occur
within the POI or POR. Such effects are numerous and can either
increase or decrease costs or prices as stated in real terms. Yet
because these inflation effects are contained largely within the POI or
POR, unless demonstrated to be otherwise, their net effect on the
Department's analysis is presumed to be minimal.
Regarding respondents' claim that our methodology imposes a ``one-
sided'' adjustment, we note that the inflation accounting adjustment to
fixed assets does not ``create'' income. That is, the fact that a
company may own fixed assets does not in some way earn that company
income simply as a result of accounting for inflation. Rather,
ownership of fixed assets at best acts as a hedge against inflation,
neither creating nor generating a loss in asset value.
The purpose of requiring an adjustment to fixed assets under
Colombian GAAP (or under the GAAP of any country which accounts for
inflation) is to measure the gains and losses on monetary assets and
liabilities, such as cash or accounts payable, which are exposed to
inflation. The Colombian tax law adjusts for high inflation by
requiring a form of price-level accounting, a method that revalues
fixed assets to provide constant currency, as opposed to historical
cost information.
The mechanics of the inflation adjustment for fixed assets require
companies to increase or ``debit'' fixed assets by an amount equal to
the year's inflation index. At the same time, as part of the accounting
entry, a corresponding ``credit'' is recorded to a monetary correction
account, which has the effect of increasing financial statement income
for the same year. This is the income that respondents maintain is
somehow generated by their fixed assets. There is no merit, however, to
respondents' claim that the Department is making only a ``one-sided''
adjustment by ignoring the ``credit'' to income. The ``debits'' to the
fixed asset (e.g., the flower plants) and the ``credit'' to financial
income are in no way related for purposes of calculating CV. As stated
above, the revaluation of flower plants and other fixed asset costs to
account for inflation does not, in and of itself, create income.
Further, it does not create income related to flower production.
We disagree with respondents' assertion that it is inappropriate to
focus on adjusting CV for the effects of inflation on depreciation and
amortization expense. That is precisely what the Department did in
Ferrosilicon from Venezuela, where the Department used a depreciation
expense figure which was based upon revalued, as opposed to historical,
fixed assets. Inflation adjustments were not applied to any other
balance sheet or income statement accounts. Moreover, as in Colombia,
the inflation rate in Venezuela prior to and during the POI was
significant, but failed to reach the Department's hyperinflation
threshold.
We also find that respondent's reliance on Portland Cement and
Cookware from Mexico is misplaced. It is important to note that
inflation accounting practices vary from country to country. In the
cases cited by respondents, under Mexican GAAP, the Department's
acceptance of the monetary correction related solely to each
respondent's financing expenses
[[Page 42846]]
and not, as Asocolflores asserts, to the fixed assets and depreciation
expense.
We also find respondents' contention that it is inappropriate to
compare annualized costs, which have been adjusted for inflation, to
monthly U.S. sales prices, which have not been adjusted, to be without
merit. What respondents fail to recognize in making this argument is
that production costs were incurred in the Colombian economy, which, as
discussed earlier, has experienced significant inflation for a number
of years. The U.S. sales prices, on the other hand, are denominated in
U.S. dollars and have occurred in an economy which has experienced
extremely low inflation during this same time period. In consideration
of these important differences, our comparison of inflation-corrected
Colombian costs to the nominal U.S. prices is valid and appropriate for
these reviews.
Company-Specific Issues Raised by the FTC
Comment 12: The FTC points out that Agricola de los Alisos has been
included among the companies that the Department could not locate
although the company had filed a letter notifying the Department that
the company was liquidated in December 1992. The FTC argues that
Agricola de los Alisos and any other company that has officially gone
out of business should be assigned a margin based on a second-tier rate
of BIA, consistent with the standard enunciated in previous reviews.
Department's Position: We agree with the FTC that we should not
treat Agricola de los Alisos as a company that could not be located.
Agricola de los Alisos filed a letter and certification with the
Department in May 1994 indicating that it is no longer in business.
Consistent with our treatment of companies that are no longer in
business, we have applied a second-tier BIA rate to Agricola de los
Alisos. See Fourth Review at 15173.
Comment 13: The FTC notes that Florex reduced the expenses of its
invoicing agent by short-term interest income allegedly gained on
working capital. However, because these expenses are related to the
sales of subject merchandise, not the production thereof, the FTC
asserts that they are not eligible for such an offset adjustment. The
FTC requests that the Department increase the selling expenses incurred
by Florex's related invoicing agent by the amount of short-term
interest income.
Asocolflores agrees that these expenses are selling expenses, and
not related to production. However, Asocolflores contends that to
ignore the short-term interest income would distort the actual selling
expenses of this agent. Furthermore, Asocolflores asserts, the
Department has visited this issue in previous reviews and has rejected
it.
Department's Position: We examined the expenses reported by
Florex's related selling agent and have determined that some, if not
all, of the interest income derives from intracompany loans. It is the
Department's practice to ignore such intracompany transfers regardless
of whether they relate to sales or production. See Certain Fresh Cut
Flowers From Colombia; Final Results of Antidumping Duty Administrative
Review, 56 FR 32169, 32172 (July 15, 1991). For these final results,
because we could not segregate the intracompany loans from the interest
income reported, we have denied the entire interest income adjustment.
Comment 14: The FTC asserts that Cultivos Miramonte (Miramonte)
departed from its normal accounting records by reporting a different
depreciation period for its ``land adequation'' costs than it records
in its normal accounting system (Miramonte explained in its response
that land adequation is comprised of expenses to level the terrain, dig
ditches, and construct drainage systems for the greenhouses). The FTC
asserts that Miramonte has not provided evidence that the five-year
useful life recorded in its accounting records is inappropriate nor
that the 20-year useful life reported in its response is more
appropriate. The FTC asks the Department to recalculate Miramonte's
land adequation costs on a five-year basis as per its accounting
records.
Asocolflores rebuts that Miramonte has consistently used this
methodology since the third review of this order. Asocolflores argues
that the FTC has never raised this issue and the Department has twice
verified Miramonte and has accepted its methodology in the third and
the fourth reviews.
Department's Position: We agree with the FTC. Our practice is to
adhere to an individual firm's recording of costs in accordance with
GAAP of its home country if we are satisfied that such principles
reasonably reflect the costs of producing the subject merchandise. See,
e.g., Final Determination of Sales at Less Than Fair Value: Furfuryl
Alcohol from South Africa, 60 FR 22556 (May 8, 1995) (``The Department
normally relies on the respondent's books and records prepared in
accordance with the home country GAAP unless these accounting
principles do not reasonably reflect the COP of the merchandise'').
This practice has been sustained by the CIT. See, e.g., Laclede Steel
Co. v. United States, Slip Op. 94-160 at 21-25 (CIT October 12, 1994),
upholding the Department's decision to reject the respondent's reported
depreciation expenses in favor of verified information obtained
directly from the company's financial statements that was consistent
with Korean GAAP; Hercules, Inc. v. United States, 673 F. Supp. 454
(CIT 1987), upholding the Department's decision to rely on COP
information from respondent's normal financial statements maintained in
conformity with GAAP.
In this case, Miramonte has departed from its normal accounting
records in its reporting of the ``land adequation'' costs included in
its depreciation expense. This was in contrast to instructions in our
questionnaire, which stated that ``regardless of whether your company
capitalized expenditures or expensed them, the cost submission should
be consistent with your normal production accounting system and based
on your actual accounting records, if your system and records are in
accordance with Generally Accepted Accounting Principles (GAAP).''
Miramonte claimed that the greenhouse manufacturer expected the
greenhouse to have a useful life of 20 years. Accordingly, Miramonte
amortized its greenhouse expenses over a 20-year period in both its
accounting records and its response. In contrast to greenhouse
expenses, the land adequation costs were amortized over a five-year
period in its accounting records. Although Miramonte stated that it
considered land adequation to have the same useful life as a
greenhouse, it never explained why it treated land adequation expenses
differently in its accounting records, nor did Miramonte justify why a
five-year amortization did not reasonably reflect the cost of producing
the merchandise. Thus, we agree with the FTC that Miramonte failed to
justify that the five-year amortization of land adequation expenses in
its accounting records does not reasonably reflect the cost of
producing the subject merchandise.
With respect to Asocolflores' contention that we have verified and
accepted this methodology in previous reviews, we first note that
verification of the values used in a methodology does not indicate
acceptance of the methodology itself. We agree with Asocolflores that
the FTC has not raised this issue in the past. An error in methodology,
unmentioned and undiscovered in previous reviews, does not constitute
explicit acceptance of that methodology. Nor are we bound by past
[[Page 42847]]
reviews when we do discover a significant error. See Shikoku Chemicals
Corp. v. United States, 795 F.Supp. 417 (CIT 1992). In examining this
methodology in these instant reviews, we have found the error to be
significant. Miramonte's reported land adequation costs are
approximately one-fourth of the amount recorded in its accounting
records. Therefore, for these final results, we have increased
Miramonte's depreciation expense to reflect the same amount of land
adequation costs recorded in its accounting records.
Comment 15: The FTC claims that Industrial Agricola departed from
its ordinary accounting practice in preparing the questionnaire
response by amortizing pre-production expenses and depreciating
greenhouse costs even though such items have been expensed in its
books. The FTC argues that, unless Industrial Agricola can show that
the normal methodology for depreciation creates a distortion, it should
not depart from its normal cost accounting procedures. Citing Cemex
S.A. v. United States, Slip Op. 95-72, 29 Cust. Bull., No. 20, 119, 128
(CIT April 24, 1995), the FTC argues that the fact that accelerated
depreciation is permitted under the tax rules of the country in
question does not establish that such depreciation is reasonable. The
FTC requests that the Department correct Industrial Agricola's response
to eliminate any distortion.
Industrial Agricola maintains that it followed its practice in
previous reviews of amortizing pre-production expenses and depreciating
greenhouse costs even though such items have been expensed in its
books. Respondent contends that the Department has recognized that, in
this case, these specific expenses and costs are appropriately
amortized in order to avoid distortions and to match costs with
revenues.
Department's Position: We agree with Industrial Agricola. It is our
policy to allow companies to depreciate capital assets over their
useful lives and to amortize pre-production expenses in order to avoid
distortions in the cost of production, as well as to match costs with
revenues. This is true even where the firm has expensed the costs in
its books.
Normally, we require respondents to report production expenses
pursuant to their home country GAAP. However, we may reject the use of
home country GAAP as the basis for calculating production costs if we
determine that the accounting principles at issue unreasonably distort
or misstate costs for purposes of an antidumping analysis. In these
instances, we may use alternative cost calculation methodologies that
more accurately capture the costs incurred during the POR.
Though Colombian GAAP permits companies to expense the purchase of
fixed assets when they are incurred, U.S. GAAP calls for the
depreciation and recovery of costs over the expected productive life of
a fixed asset. The estimated useful life of a fixed asset is the period
over which the asset may reasonably be expected to be useful to the
individual's business or to the production of income. See Fresh
Kiwifruit from New Zealand; Final Results of Antidumping Duty
Administrative Review, 59 FR 48596, 48598 (Sept. 22, 1994). Similarly,
amortizing pre-production expenses allows a firm to more accurately
match these expenses with the sales to which they are attributable. In
this instance, because the economic useful life of Industrial
Agricola's greenhouses and pre-production expenses extend past the year
of purchase, we find that its method of accounting for these costs in
its own books does not reasonably reflect costs for our antidumping
analysis. Therefore, we accept Industrial Agricola's methodology of
amortizing pre-production expenses and depreciating greenhouse costs.
Comment 16: The FTC claims that Flores Aurora's amortized pre-
production costs may have been inaccurately calculated. The FTC alleges
that pre-production expenses were reported as percentages rather than
amounts as required by the questionnaire. The FTC requests that the
Department correct Flores Aurora's response so that the actual amounts,
and not percentages, are used in the relevant lines in the Lotus
spreadsheet.
Flores Aurora states that it reported pre-production costs
accurately in peso amounts and that the FTC misinterpreted Aurora's
narrative response without examining the relevant section of the Lotus
spreadsheet Aurora provided.
Department's Position: We agree with Flores Aurora that it reported
pre-production cost accurately. In Aurora's August 19, 1994,
supplemental response, it reported expenses as peso amounts, not
percentages. We subsequently verified this reporting methodology. See
Flores Aurora Verification Report at 10. Therefore, we have accepted
Flores Aurora's calculations.
Comment 17: The FTC claims that Flores Aurora revised its packing
expense calculations, involving a factor for packing hours per flower
type, after verification. The FTC asserts that the new methodology is
based on only a one-day survey to derive the factor and is therefore
questionable. The FTC contends that the packing hours by flower type
could have been affected by the identity or competency of the workers
as well as the number of orders processed that day. The FTC urges the
Department to require Flores Aurora to resubmit its calculations based
on a longer survey period or assign packing labor costs based on BIA.
Flores Aurora states that its packing expense data was revised and
reviewed by the Department during verification. The firm also argues
that, since it does not keep records that segregate packing costs by
flower type, it was reasonable for the Department to accept the survey.
Department's Position: We agree with Flores Aurora that packing
labor was revised during verification and not after verification. We
reviewed and verified the firm's methodology for calculating expenses
and found it to be accurate. See Flores Aurora Verification Report,
November 4, 1994. For packing expenses, Aurora initially calculated a
standard packing labor and materials cost per box for each flower type,
then multiplied this cost by the number of boxes shipped to each
customer during each POR. During verification, we compared Aurora's
standard costs to actual costs as indicated by Aurora's available
source documents and asked the firm to report actual costs based on the
variance. To calculate the actual number of hours needed to pack a box
of each flower type, Aurora submitted worksheets compiling packing
labor information from each of its packing rooms for one workday. We
find this methodology to be reasonable because the survey includes
virtually all of Aurora's packing workers and, therefore, would not be
unduly affected by the competency of the workers surveyed. In other
words, the large number of workers included in the survey ensured an
accurate average. Also, since the survey was used to compute the
amounts of time needed to pack a box of each type of flower, order
variations on any given day are not a significant factor. Based on our
verification efforts, we are satisfied that Aurora's revised figures
are accurate.
Comment 18: The FTC argues that the Funza Group had Colombian
borrowings during the 5th review and, therefore, credit expenses for
the 5th review should be recalculated based on a peso-denominated
interest rate.
The Funza Group argues that a U.S. borrowing rate should apply to
credit expenses for Funza and all other respondents.
[[Page 42848]]
Department's Position: We agree with the FTC. See our response to
Comment 22, below.
Comment 19: The FTC argues that the Funza Group deviated from its
accounting records without reason. According to the FTC, the Group
expensed greenhouse costs in its records, but for purposes of the
response it depreciated the expenses on a monthly basis over the life
of the greenhouse. The FTC contends that depreciation costs of
greenhouse expenses should be recalculated to conform to the firm's
normal cost practices.
The Funza Group claims that, because a greenhouse has a useful life
exceeding the period in which the expense is incurred, costs would be
grossly distorted if the Department expensed them as the Group did in
its books and records.
Department's Position: We agree with the Funza Group. Although the
company may have expensed greenhouse costs for tax purposes, we find
that this method of accounting distorts costs for purposes of our
analysis. Depreciating fixed assets over their useful life more
accurately reflects the cost of sales during each POR. See our response
to Comment 15, above, concerning a similar situation with Industrial
Agricola.
Comment 20: The FTC claims that Funza allocated Colombia Flower
Council (CFC) charges by flower type based on number of boxes shipped,
which is contrary to the Department's questionnaire instructions to
allocate such costs on the basis of sales value, rather than volume, if
they are paid as a fixed percentage of sales. The FTC requests that the
Department reallocate these costs on the basis of value and deduct them
from USP as direct selling expenses.
The Funza Group argues that CFC fees are assessed based on a fixed
charge for each box of flowers sold; therefore, the Funza Group
maintains, the charges should be allocated based on the number of boxes
sold rather than the relative value of sales.
Department's Position: We disagree with the FTC. We generally
prefer expenses to be allocated on the basis in which they are
incurred. Because the CFC fees are incurred on a per-box basis, we have
accepted the Funza Group's allocation methodology.
General Issues Raised by Asocolflores
Comment 21: Asocolflores requests that the Department issue duty
rates consistent with the units in which each respondent reported its
data. Asocolflores expresses concern that the Department might assess a
per-stem duty rate for companies that reported their data in bunches,
and that this would cause the assessed duties and duty deposits to
greatly exceed the actual amount of dumping the Department found in its
margin analysis.
Department's Position: We intend to issue duty rates either on the
basis of the units in which the individual respondent reported its data
or on a Customs entered value basis. If we assess on the basis of
Customs entered value, the rates will be assessed as a percentage of
the total entered value of the imported subject merchandise. Therefore,
Customs will collect the proper amount of antidumping duties owed
regardless of whether the respondent reported units in bunches or
stems.
Comment 22: Asocolflores, the Florex Group, the Claveles
Colombianos Group, the Santana Flowers Group, and the Floraterra Group
argue that applying a peso-denominated short-term borrowing rate to
sales made in U.S. dollars is contrary to current Department policy,
economic and commercial reality, and the law as established in LMI-La
Metalli Industriale, S.p.A. v. United States, 912 F.2d 455, 460-61
(Fed. Cir. 1990) (LMI). Citing recent cases such as Roses and Brass
Sheet and Strip from Germany: Final Results of Antidumping Duty
Administrative Reviews, 60 FR 38542, these respondents state that
Department policy mandates use of a U.S. dollar interest rate to
calculate imputed credit on U.S. sales even in cases where a respondent
has no borrowings. Respondents also argue that, in LMI, the court
reversed the Department's decision to apply a higher home market
borrowing rate to sales denominated in U.S. dollars and directed the
Department to recalculate imputed credit expenses using a U.S. dollar
rate under the rationale that a borrower will look for the lowest
possible rate across international borders. Respondents conclude that
the only way to measure the cost of financing sales made in U.S.
dollars is by applying a dollar interest rate to the dollar price.
Respondents recommend that the Department use the U.S. prime rate to
calculate credit expenses for firms with no actual U.S. dollar
borrowings.
The FTC states in its rebuttal brief that respondents argued in the
fourth review that, as a result of the steady devaluation of the
Colombian peso against the U.S. dollar, it is cheaper to borrow pesos
in Colombia than it is to borrow dollars. The FTC asserts that this
seems to refute respondents' claim in these three reviews that peso
borrowings to finance dollar debt is contrary to economic reality. The
FTC also indicates that LMI does not apply because, in that case, the
foreign producer had actually obtained dollar-denominated loans and
could be expected to use such financing with respect to its U.S. sales.
The FTC points out that LMI did not hold that, where a company had
actual borrowings in a particular currency, that rate should be
rejected in favor of an estimate of the rate that would have been
obtained if the company obtained dollar-denominated loans. The FTC
argues that the currency in which a sale takes place does not
necessarily have any relationship to the borrowing rate faced by a
grower, and that the Department must derive the appropriate interest
rate from the firm's actual borrowing experience. Finally, the FTC
concludes that not all respondents would be able to obtain dollar-
denominated financing and that the Department lacks authority to
estimate a dollar rate where the record contains evidence of the actual
costs.
Department's Position: Consistent with our practice in the Fourth
Review and in the preliminary results of these reviews, we used U.S.
dollar borrowing rates to impute U.S. credit expenses where the
respondent or a U.S. related party had U.S. dollar short-term
borrowings. However, where a respondent (or its U.S. related party) had
no dollar borrowings and financed its working capital through Colombian
peso borrowings, we calculated U.S. imputed credit expenses using the
firm's actual peso-denominated short-term borrowing rate, and adjusted
this rate to reflect the appreciation of the dollar against the peso.
We did this by subtracting the rate of appreciation of the dollar
against the peso during each POR from the peso-denominated short-term
borrowing rate reported by the firm. Only where no short-term
borrowings were reported in either currency did we use the U.S. prime
rate during each POR.
Although we recognize that our current decision represents a change
from our recent practice, we disagree with respondents that our
decision to use peso-denominated short-term borrowing rates, adjusted
for currency fluctuations, is contrary to commercial reality and the
law as established in LMI. In LMI, the CAFC stated that the cost of
credit ``must be imputed on the basis of usual and reasonable
commercial behavior.'' LMI-La Metalli Industriale, S.p.A. v. United
States, 912 F.2d 455, 461 (Fed. Cir. 1990). Because the respondent in
LMI provided
[[Page 42849]]
evidence that it had obtained dollar-denominated loans during the
period of investigation, and because the dollar rate was lower than the
corresponding lira rate, the CAFC held that the Department should have
used the lower dollar rate for purposes of calculating imputed credit.
However, in this case, many of the respondents did not have U.S.
dollar-denominated loans.
After LMI, during the LTFV investigations involving certain carbon
steel butt-weld pipe fittings, the Department proposed a new policy for
selecting interest rates to be used in imputed credit calculations. See
Memorandum from Program Manager to the File (August 8, 1996), attaching
a September 6, 1994, Memorandum from the Director of the Office of
Investigations to the Deputy Assistant Secretary for Investigations
(hereinafter referred to as ``the 1994 Memorandum''). The 1994
Memorandum suggests that, in situations where the respondent has no
short-term borrowings in the currency of the transaction, the
Department can: (1) Accept ``external'' information about the cost of
borrowing in the relevant currency; or (2) adjust for the application
of a single, observed interest rate to both home market and U.S. sales,
taking into account exchange rate fluctuations between the two
currencies. The 1994 Memorandum gave preference to the first option;
however, it acknowledged the acceptability of using borrowing rates
incurred in a different currency from that of the transaction, if the
rates are adjusted for exchange rate fluctuations.
The 1994 Memorandum makes clear that the practice of using
unadjusted home market currency borrowing rates to impute U.S. credit
expenses is not acceptable because it does not account for fluctuations
in exchange rates over time. This reasoning was further articulated in
the Final Determination of Sales at Less Than Fair Value; Oil Country
Tubular Goods from Austria, 60 FR 33551, 33555 (June 28, 1995) (OCTG).
In OCTG the Department stated,
A company selling in a given currency (such as sales denominated
in dollars) is effectively lending to its purchasers in the currency
in which its receivables are denominated (in this case, in dollars)
for the period from shipment of its goods until the date it receives
payment from its purchaser. Thus, when sales are made in, and future
payments are expected in, a given currency, the measure of the
company's extension of credit would be based on an interest rate
tied to the currency in which its receivables are denominated. Only
then does establishing a measure of imputed credit recognize both
the time value of money and the effect of currency fluctuations on
repatriating revenue.
The new policy described in the 1994 Memorandum was most recently
implemented in Certain Corrosion-Resistant Carbon Steel Flat Products
from Australia; Final Results of Antidumping Duty Administrative
Reviews, 61 FR 14049, 14054 (March 29, 1996) (Steel). In Steel, the
Department stated,
When a respondent has no U.S. borrowings, it is no longer the
Department's practice to substitute home market interest rates when
calculating U.S. credit expense and inventory carrying costs.
Rather, the Department will now match the interest rate used for
credit expenses to the currency in which the sales are denominated.
* * * Where there is no borrowing in a particular currency, the
Department may use external information about the cost of borrowing
in that currency. * * * In the absence of U.S. dollar borrowings, we
need to arrive at a reasonable surrogate for imputing U.S. credit
expense. There are many and varied factors that determine at what
rate a firm can borrow funds, such as the size of the firm, its
creditworthiness, and its relationship with the lending bank.
(Emphasis added.) See also Final Results of Antidumping Duty
Administrative Review; Certain Cut-to-Length Carbon Steel Plate from
Sweden, 61 FR 15772, 15780 (April 9, 1996).
We note that Steel does not state that, in the absence of U.S.
dollar-denominated loans, the Department will impute credit expenses
based on ``external information.'' Rather, Steel states that the
Department will use a reasonable surrogate for imputing U.S. credit
expenses. Respondents' actual peso-denominated short-term borrowing
rates, adjusted for the rate of appreciation of the dollar against the
peso, are reasonable surrogates for U.S. dollar short-term borrowing
rates. Such rates are reasonable because the cost of extending credit
to customers can be measured by a company's actual short-term borrowing
experience. Companies often take out short-term loans to fund business
operations in anticipation of receiving revenue, especially small
flower growers who sell on a consignment basis. Therefore, if a flower
grower's operations are paid for in pesos, it is reasonable to use the
company's actual peso-denominated short-term borrowing rate to measure
the opportunity cost of extending credit to customers, if that rate is
adjusted for fluctuations in the peso/dollar exchange rate to take into
account ``the effect of currency fluctuations on repatriating revenue''
noted in OCTG.
We recognize that in the recent Steel decisions, issued in March
and April of this year, we used average short-term lending rates
calculated by the Federal Reserve as surrogates for actual U.S. dollar
borrowing rates. However, we have decided not to reopen the record at
this late stage in order to collect Federal Reserve borrowing rates and
solicit comments on their use, given that: (1) The adjusted home market
interest rates that we have used are reasonable surrogates for imputing
U.S. credit expenses; (2) several hundred recalculations would be
required in order to impute credit expenses on a different basis; and
(3) further delays in issuing these final results would be caused by
reopening the record and recalculating this adjustment. See Tapered
Roller Bearings Four Inches or Less in Outside Diameter from Japan;
Final Results of Antidumping Duty Administrative Review, 55 FR 22369
(June 1, 1990) (Comment 27).
Finally, as stated by the FTC, we note that, during the fourth
review, respondents did not contend that the use of peso-denominated
short-term borrowing rates (adjusted for exchange rate fluctuations)
was inappropriate for respondents with no U.S. dollar borrowings.
Instead, respondents implied that adjusted peso-denominated short-term
borrowing rates did reflect economic reality, arguing that borrowing
pesos in Colombia was cheaper than borrowing U.S. dollars, even when
financing dollar debt. In the fourth review, respondents contended only
that we should adjust the peso-denominated short-term borrowing rates
for devaluation of the peso against the dollar (i.e., currency
fluctuation), and we made this adjustment. During the fourth review
period, the dollar appreciated against the peso at a high rate. This
resulted in a large downward adjustment to the peso-denominated short-
term borrowing rates, and, therefore, a low U.S. imputed credit
calculation. However, during the current reviews, the rate of
appreciation of the dollar against the peso was not as significant,
and, therefore, the offsets to the peso-denominated short-term
borrowing rates are smaller. Respondents now object to the use of peso-
denominated short-term borrowing rates, arguing that they do not
reflect ``economic reality.'' However, it would be inappropriate for
the Department to change its practice in these reviews merely because
the lower rate of appreciation of the dollar against the peso would
result in less favorable adjustments for respondents.
Comment 23: Asocolflores contends that the Department's methodology
for adjusting the peso borrowing rates used to calculate U.S. imputed
credit expenses is incorrect because it
[[Page 42850]]
measures the effective peso borrowing rate, e.g., the cost of borrowing
pesos to finance the equivalent in pesos of dollars. Asocolflores
contends that, if the Department continues to use an adjusted peso
borrowing rate to calculate U.S. imputed credit expenses, it should use
a methodology that measures the equivalent dollar borrowing rate, e.g.,
the effective cost of lending dollars when the original borrowing is in
pesos.
The FTC contends that the Department's methodology for adjusting
the peso borrowing rates is correct, and that the Department should
reject respondents' proposed calculation methodology.
Departments Position: To account for fluctuations in the peso/
dollar exchange rate, and because U.S. imputed credit expenses must be
quantified in dollars so that they may be deducted from USP, we
adjusted peso borrowing rates for the devaluation of the peso against
the dollar before we used those rates to calculate U.S. imputed credit
expenses. Our methodology measures respondents' borrowing costs in real
terms. As explained in our response to Comment 22 above, this
methodology is reasonable. Therefore, we have not used Asocolflores'
proposed methodology.
Comment 24: Asocolflores argues that the Department should use
annually-averaged U.S. prices in its margin analysis. It argues that,
due to (1) The inability to control production in the short-term, (2)
the highly perishable nature of the product and the inability to store
production, and (3) the extreme seasonality of demand and prices, the
only way to appropriately measure U.S. prices is by using annually-
averaged U.S. prices.
The FTC responds that the Department has based U.S. prices on
monthly averages consistently throughout this proceeding and that there
are no new facts that compel the Department to do otherwise.
Department's Position: Section 777A of the Act allows the
Department to ``use averaging or generally accepted sampling techniques
whenever a significant volume of sales is involved or a significant
number of adjustments to prices is required.'' Further, the Act states
that the ``authority to select appropriate samples and averages shall
rest exclusively with the administering authority; but such samples and
averages shall be representative of the transactions under
investigation.'' See also 19 CFR 353.59(b) (1994).
In prior reviews and the investigation of Colombian flowers, we
have exercised our authority under section 777A by using monthly U.S.
averages to calculate USP. See, e.g., Second Review at 20495. This use
of monthly averaging has been upheld by the CIT. See, e.g., Floral
Trade Council v. United States, 775 F. Supp. 1492, 1499-1501 (CIT
1991).
For the current reviews of Colombian flowers, we have continued to
use monthly averages as this averaging period compensates for the
perishability of the subject merchandise. We reject respondents'
invitation to engage in annual U.S. averaging because, as in prior
reviews, annual averaging creates the potential for masking dumped
sales (i.e., annual averaging would allow exporters to dump for entire
months when demand is sluggish, so long as they recoup their losses
during months of high demand). Therefore, we have continued our
practice of using monthly average U.S. prices in our margin analyses.
Comment 25: HOSA Ltda. and Asocolflores argue that costs should be
allocated over all flowers sold, including ``national quality''
flowers. Their arguments are based on two developments. First, both
claim that national quality flowers are now sold in the United States
and that this development is supported by the Department's verification
report dealing with HOSA's sales activities. Because national quality
flowers are subject to the order, respondents argue, such flowers
cannot have a cost of production of zero. Second, both cite the 1990
decision of the CAFC in IPSCO, Inc. v. United States, 965 F.2d 1056
(IPSCO), in support of their argument that the Department can no longer
treat national quality flowers as by-products with no cost. Respondents
argue that the only difference between national and export quality
flowers is quality and thus value. Respondents further argue that IPSCO
held that the Department may only treat as a by-product products which
are distinct in kind from the primary product subject to investigation
and that lower quality grades of the same product, used for the same
purposes as the primary product and produced by the same process, may
not be treated as a by-product.
The FTC argues that national quality flowers are not co-products
and that the test to determine whether a product should be treated as a
co-product or by-product is (1) Whether the value of the product is
lower in relation to the principal product, and (2) whether the
product's production is only incidental to the production of the main
product. The FTC concludes that, since no flower producer intends to
produce lesser quality flowers, national quality flowers are correctly
treated as by-products. The FTC also argues that HOSA's and
Asocolflores' reliance on IPSCO is misplaced. In the FTC's view, the
CAFC did not address the issue of whether the value difference between
the products necessitated by-product treatment.
Department's Position: We disagree with HOSA. One of the factors
the Department uses to assess the proper accounting treatment of
jointly-produced products is a comparison of 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 by-product is its
relatively minor sales value in comparison to that of the major product
or products produced. Our general practice in cases involving
agricultural goods has been to treat ``reject'' products as by-products
and to offset the total cost of production with revenues earned from
the sale of any such ``reject'' products. We then allocate the
cultivation costs, net of any recovery from ``rejects,'' over the
quantity of non-reject products actually sold. See, e.g., Roses; Roses
from Ecuador; 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 from Canada, 48 FR 51673 (November 10,
1983); Fresh Cut Roses from Colombia, 49 FR 30767 (August 1, 1984).
In accordance with our practice in the less-than-fair-value
investigation and subsequent reviews of this case, fresh cut flowers
have been classified as either export-quality (high quality) or as
culls (low quality or reject). Our practice was upheld by the CIT in
Asociacion Colombiana de Exportadores v. United States, 704 F. Supp.
1114, 1125-26 (CIT 1989). The CIT 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 by-
product 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 by-product status.'' The CIT further noted that ``[c]ull
value, if determinable, should be deducted from cost of production and
production costs should not be allocated to culls.''
However, in these reviews, respondents have characterized culls as
``national'' or ``second'' quality flowers and have argued that,
because HOSA exported some ``second-quality'' flowers, they cannot be
treated as by-products. We agree with respondents that any flowers sold
to the United
[[Page 42851]]
States should not be treated as by-products, and, for our preliminary
results of review, we did in fact allocate costs to all export-quality
flowers HOSA produced during the PORs. However, we disagree that the
HOSA verification report demonstrates that cull flowers were sold to
the United States. At verification, HOSA explained that it sold a small
quantity of flowers that it, HOSA, had graded as ``second quality'' to
the United States and only during periods of peak demand (``HOSA stated
that * * * some second-quality flowers were even sold in the United
States in periods of high demand,'' HOSA Group Verification Report
(January 13, 1995), at 10). In addition, we found at verification that
HOSA generally only sold export-quality flowers in the home market when
demand in the United States was too low to justify shipping the flowers
to the United States.
In HOSA's original section D response, HOSA reported that it has
two grades: top quality, which meet all of a number of standards, and
culls, which do not meet all of the standards enumerated in the
response. See HOSA Group response to sections C and D dated July 22,
1994 at 21. Later, HOSA claimed that it did not sell culls, but rather
that it sold second quality flowers in the home market. At
verification, HOSA presented a list of standards that applied to all
``first quality'' flowers and explained that ``second quality'' flowers
were those flowers that did not meet all of the standards necessary for
a flower to be graded as ``first quality.'' See HOSA Group Verification
Report (January 13, 1995) at 9-11. This definition of ``second
quality'' flowers matches the definition of cull flowers HOSA
originally reported. Therefore, we find no reason to treat what HOSA
claims to be ``second quality'' flowers sold in the home market any
differently than we have treated culls in these reviews.
We find that HOSA's internal grading system is not dispositive as
to whether a cull is a by-product. While HOSA claims to have sold some
``second-quality'' flowers in the United States, this does not mean
that HOSA did not produce and sell culls in Colombia. If a flower is to
be exported it must meet the minimum grade requirements of the U.S.
market, whereas a cull is any flower that does not meet those
requirements. Such flowers are not intended to be produced and are not
worth exporting. We use the term ``culls'' as an accounting concept in
distinguishing which individual products may reasonably carry costs,
but this is not necessarily a grading concept. Culls are not simply a
low grade of flowers, but are unintentionally and unavoidably produced
by-products that have minimal value. The record shows that the
``second-quality'' flowers sold by HOSA in the home market had very low
value: ``HOSA's home market prices for `second-quality' flowers were,
on average, approximately 40% of home market prices'' for first quality
(i.e., indisputably export-quality) flowers, and ``both grades sold in
the home market were, on average, below cost.'' See HOSA Group
Verification Report (January 13, 1995) at 9-11. Contrary to HOSA's
assertions, the fact that ``second-quality'' flowers sold in the home
market were sold at prices well below the costs HOSA attributes to the
production of these flowers suggests that there is not a genuine
domestic market for ``second-quality'' flowers which HOSA claims it
intends to produce. Furthermore, HOSA's claims that a few ``second-
quality'' flowers were sold in the United States, and then only during
peak periods of demand, leads us to conclude that the vast majority of
``second-quality'' flowers did not meet the minimum standards for sale
in the United States, and that the vast majority of ``second-quality''
flowers were therefore culls.
We conclude that HOSA's domestic market is no different from the
market enjoyed by other Colombian flower producers. In other words,
this market exists to the extent that HOSA, like many other Colombian
flower producers, sells flowers it cannot export as surplus at the farm
gate for whatever price it can get for the flowers.
Nevertheless, we conducted a further test of our treatment of cull
flowers as by-products. We examined the total national- and export-
quality sales of the ten largest producers in these reviews in order to
determine whether national-quality flower sales had significant value.
Six of these firms had cull, or national, flower sales. We have found
that total and average per-unit revenues generated from the sale of
cull flowers were small (in most cases negligible) compared to total
revenues generated from the sale of subject merchandise (including
culls) (see Memorandum to Holly Kuga from Laurie Parkhill (July 30,
1996)). This pattern is consistent with the CIT's standard that by-
products are sold at a very low value.
We find no evidence to support respondent's claim that there is
little difference in grade between export-quality and national-quality
flowers. We did find at verification that the prices of ``second-
quality'' flowers sold in the home market were considerably less than
the prices of ``first-quality'' flowers sold in the home market. No
other respondents claimed that cull flowers were in any way comparable
to export-quality flowers. This factual situation suggests that the
grades are not comparable, and that there is a significant difference
in grade between export-quality and national-quality flowers.
We disagree with respondents' argument that the inclusion of cull
flowers in the class or kind of merchandise compels us, under the IPSCO
decision, to assign cost to culls. A decision that a particular product
is, or is not, within the scope of a proceeding does not dictate, nor
necessarily have any relation to, the selection of the particular cost
accounting methodology that must be applied in the determination of CV.
We do not read the CAFC's decision in IPSCO as standing for the
proposition that, in all circumstances, a by-product, 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
position in this regard has been well-established in previous decisions
and explicitly upheld by the CIT.
We have had an established practice since the less-than-fair-value
(LTFV) investigation of treating cull flowers as by-products. Neither
respondents nor petitioner in this proceeding have voiced any concern
regarding this practice prior to these reviews. Now, HOSA and
Asocolflores claim that the factual situation has changed such that we
must significantly alter our treatment of cull, or national-quality,
flowers. In other words, these respondents claim that (1) National-
quality flowers are not by-products but co-products, (2) there is a
viable market for such (national-quality) flowers in the home market,
and (3) there is little difference in grade between export-quality and
national-quality flowers. The burden is on HOSA and Asocolflores to
demonstrate that these factual situations exist. Respondents submitted
no evidence that demonstrated these three points. In fact, for each
point raised by respondents, record evidence supports a different
conclusion. The only change that we found appears to be HOSA's internal
grading system. Therefore, we find that we have no grounds to warrant a
change in our established practice.
Company-Specific Issues Raised by Asocolflores
Comment 26: Asocolflores asserts that the Department erred in
collapsing eight companies into the Queen's Flowers Group. Asocolflores
notes that the Department's August 3, 1995
[[Page 42852]]
memorandum predicates its collapsing test by examining the relationship
between the Queen's Flowers Group companies under section 771(13) of
the Act. Respondents assert that the Department established precedents
for this analysis in Roses from Ecuador at 7040 and Notice of Final
Determination of Sales at Less Than Fair Value and Final Negative
Critical Circumstances Determination: Disposable Pocket Lighters From
Thailand, 60 FR 14263, 14268 (March 16, 1995) (Lighters). However,
Asocolflores distinguishes Roses from Ecuador and Lighters from the
instant case. Whereas the former cases involved collapsing the sales in
the United States of related parties, in the instant case, Asocolflores
notes, the Department would collapse both sales and constructed value
data. As such, Asocolflores argues that both the related party
definitions of section 771(13) and section 773(e)(4) need be satisfied
before the Department may apply its collapsing analysis.
Asocolflores contends that Congress has clearly delineated the
circumstances under which the Department may disregard transactions
between companies. Respondents assert that the Department has no
authority to look past the transfer price and use the seller's cost of
production unless the relationship between buyer and seller meet the
criteria set forth in section 773(e)(4). Asocolflores argues that the
Department cannot circumvent Congress' intent and the express
requirements of the statute by applying a different related party test.
Asocolflores agrees that, under 773b(e)(4), a few of the companies
are related. Asocolflores also agrees that some of the companies are
related under 771(13). However, Asocolflores contends that not all are
related to each other, nor can the Department use the transitive
principle to relate two parties simply because they are both related to
a third party. Asocolflores contends that, in its analysis of the two
sub-groups within the Queen's Flowers Group, the Department ignores the
fact that there are several pairings of companies which do not meet the
statutory criteria. Asocolflores argues that the Department may not
collapse companies that are not related.
Asocolflores asserts that, notwithstanding the Department's failure
to realize the threshold to its collapsing analysis has not been met,
the Department erred in its conclusions for the five points of the
collapsing test. Asocolflores agrees that some of the companies have
common board members, but that this criterion is not satisfied for all
companies.
According to Asocolflores, the Department's conclusion that
shifting of production is possible if companies produce the same
merchandise renders the test meaningless. Asocolflores argues that
where companies produce the same merchandise, shifting of production is
not possible unless the flower plant itself is uprooted and transferred
to another location. In addition, respondents state that several of the
firms do not produce the same or even subject merchandise.
Asocolflores goes on to state that, in analyzing whether the
companies operate as separate and distinct entities, the Department
ignored the fact that each company is run by its own independent
manager and does not assist the other companies through loans or
otherwise. Instead, Asocolflores asserts the Department focuses on
sales of flowers between some of the companies. However, Asocolflores
contends that, if the sales between companies were arm's-length
transactions, then the Department must conclude that the companies
operate as separate and distinct entities under section 773(e)(2).
Moreover, Asocolflores notes that it is a common industry practice for
flower companies to buy or sell small quantities of flowers to help
fill an order. As an example, Asocolflores refers to Agroindustrial del
RioFrio, which is a bouquet maker. As such, Asocolflores states, it
must purchase a variety of flowers from other producers. Yet, according
to Asocolflores, the intercompany transactions are few and far between
and occur at prices above their cost of production, and all the
purchased flowers were then exported to third countries, not the United
States. Asocolflores maintains that the sales to the commonly owned
importers are irrelevant to the Department's analysis of this
criterion. Moreover, Asocolflores contends, the importers have
developed an inventory system that precludes the potential for price
manipulation. Asocolflores argues that the existence of common board
members cannot be sufficient to prove that two respondents actually
share marketing and sales information. Because interlocking boards of
directors is a separate factor, it should not overlap with the
Department's consideration of whether two respondent's share marketing
and sales information.
Asocolflores points to the companies' statements that they do not
share sales or marketing information or offices. Asocolflores maintains
that, lacking evidence to the contrary, these statements preclude the
Department from concluding otherwise. Asocolflores maintains that,
although some of the companies in the group rent office space in a
building that is owned by some of the companies in the group, neither
the costs nor the spaces are shared, and each firm operates its own
phone line.
Asocolflores disputes the Department's conclusions regarding the
fact that there are intercompany transactions; in respondents' opinion
this does not indicate that the companies are involved in each other's
pricing and production decisions. Asocolflores also disagrees with the
Department's conclusion that, because virtually all of the production
of flowers is sold by the related importers, the companies are linked
to one another.
In sum, Asocolflores maintains that, by collapsing the companies'
cost and sales data, the Department achieves the very effect that it
intends to avoid: the possibility of manipulation. Although the
companies do not object to being collapsed per se (notwithstanding
their belief that the Department has no legal or statutory authority to
collapse any or all of the 20 companies), they take issue with the
collapsing analysis because they fear that the Department may use the
results of such analysis in determining whether the companies responded
completely to the questionnaire.
The FTC maintains that Asocolflores is incorrect in asserting that
section 771(13) is limited to identifying when an exporter and an
importer are related. The FTC states that section 771(13) also defines
relationships when the merchandise is sold to the United States ``by or
for account of the exporter'' (19 C.F.R. Sec. 353.41(c)) or when the
merchandise is sold in the home market to or through a related party
(19 C.F.R. Sec. 353.45). In contrast, the FTC asserts, the definition
in section 773(e)(4) only applies to producers who purchase major
inputs from related suppliers.
Given the nature of the flower industry and the lack of markings
identifying the producer, the FTC argues that the Department's concerns
that a producer with a high margin may route its flowers through a
related producer with a low margin should be heightened. The FTC
believes that, considering this environment, coupled with the various
transactions and relationships between the members of the Queen's
Flowers Group, the Department appropriately collapsed the Group into a
single entity.
Asocolflores rebuts that the FTC has not identified where in the
statute or the questionnaire a company can look to determine which
definition of related party the Department will apply for the purpose
of collapsing. Moreover,
[[Page 42853]]
Asocolflores reiterates its assertion that 771(13) is limited to
defining the relationship between the importer and the exporter, not
between two exporters. Finally, Asocolflores contends that the FTC
fails to point to record evidence that all of the companies are related
under the statutory tests.
The FTC rebuts that 19 CFR 353.41(c) and 353.45 clearly direct the
Department to section 771(13), while section 773(e)(4) applies only to
the reporting of certain constructed value data. Moreover, petitioner
asserts, it is the Department that determines whether to collapse
related parties.
Department's Position: For these final reviews, we have continued
to collapse the original eight members of the ``Queen's Flowers
Group.'' Additionally, for the other twelve companies under
consideration, we have determined that they should be collapsed with
the original eight members of the Queen's Flowers Group.
As we have noted elsewhere, ``[i]t is the Department's long-
standing practice to calculate a separate dumping margin for each
manufacturer or exporter investigated.'' Final Determinations of Sales
at Less than Fair Value: Certain Hot-Rolled Carbon Steel Flat Products,
Certain Cold-Rolled Carbon Steel Flat Products, and Certain Corrosion-
Resistant Carbon Steel Flat Products From Japan, 58 FR 37154, 37159
(July 9, 1993) (Japanese Steel). Because the Department calculates
margins on a company-by-company basis, it must ensure that it reviews
the entire producer or reseller, not merely a part of it. The
Department reviews the entire entity due to its concerns regarding
price and cost manipulation. Because of this concern, the Department
examines the question of whether reviewed companies ``constitute
separate manufacturers or exporters for purposes of the dumping law.''
Final Determination of Sales at Less than Fair Value; Certain Granite
Products from Spain, 53 FR 24335, 24337 (June 28, 1988). Where there is
evidence indicating a significant potential for the manipulation of
price and production, the Department will ``collapse'' related
companies; that is, the Department will treat the companies as one
entity for purposes of calculating the dumping margin. See Nihon Cement
Co., Ltd. v. United States, Slip Op. 93-80 (CIT May 25, 1993).
To determine whether companies should be collapsed, the Department
makes three inquiries. First, the Department examines whether the
companies in question are related within the meaning of section 771(13)
of the Act. See Lighters From Thailand at 14268 (declining to collapse
non-related companies). Second, the Department examines whether the
companies in question have similar production facilities, such that
retooling would not be required to shift production from one company to
another. See Certain Corrosion-Resistant Carbon Steel Flat Products and
Certain Cut-to-Length Carbon Steel Plate From Canada; Preliminary
Results of Antidumping Duty Administrative Review, 60 FR 42511, 42512
(Aug. 16, 1995) (Steel from Canada). Third, the Department examines
whether there exists other evidence indicating a significant potential
for the manipulation of price or production. The types of factors the
Department examines include: (1) The level of common ownership; (2) the
existence of interlocking officers or directors (e.g., whether
managerial employees or board members of one company sit on the board
of directors of the other related parties); and (3) the existence of
intertwined operations. ``The Department need not show all of these
factors exist in order to collapse related entities, but only that the
companies are sufficiently related to create the possibility of price
manipulation.'' Japanese Steel.
In examining the questionnaire responses for several of the
companies involved in these administrative reviews, we noticed the
existence of numerous interrelationships (via ownership and otherwise).
We asked for additional information concerning these relationships and,
as a result, have concluded that these companies should be collapsed.
First, the companies within the Queen's Flowers Group are related
to each other within the meaning of section 771(13) of the Act. See
Memoranda From Michael F. Panfeld to Holly A. Kuga, dated August 3,
1995 and February 1, 1996. Second, these companies have similar
production facilities. All of these companies produce flowers in a
similar manner and, thus, the companies would not need to engage in
retooling to shift production. Third, other proprietary evidence
indicates that there is a significant potential for price or cost
manipulation among these companies. In general, this additional
evidence consists of: (1) The existence of interlocking managers,
officers and directors; (2) the shipment of subject merchandise through
common importers in the United States; (3) use of common office space
and shared costs; and (4) intercompany transactions. See Memorandum
from Michael F. Panfeld to File dated November 17, 1994, and Memorandum
from Michael F. Panfeld to Holly A. Kuga dated February 1, 1996.
We disagree with Asocolflores' assertion that we applied the wrong
statutory definition of related party in our analysis. Section
773(e)(4) pertains solely to determining the cost of inputs purchased
from related parties in calculating constructed value. The definition
of ``related party'' found in this provision is used for the purpose of
disregarding certain related party transactions for inputs that are not
at arm's length (773(e)(2)) and for determining whether a major input
purchased from a related party was sold below cost (773(e)(3)). There
is no explicit provision in the Act regarding whether companies should
be considered as separate or as a single enterprise for margin
calculation purposes. See Roses from Ecuador at 7040. However, it is
the Department's practice to use section 771(13) in its collapsing
analysis. This use of 771(13) is consistent with how the Department
defines a related party for purposes of determining whether related
party sales in the home market will be used for purposes of calculating
FMV. See 19 CFR 353.45(a) (1994).
Further, contrary to Asocolflores' argument, the Department uses
section 771(13) for purposes of collapsing in all cases, regardless of
whether constructed value forms the basis of FMV. Thus, in both Roses
from Ecuador and Lighters, the issue before the Department was not
merely whether to collapse sales in the United States for the companies
in question. Rather, the issue was whether to collapse the companies
and treat them as one entity for all margin calculation purposes.
Asocolflores argues that some of the eight companies (as well as
the additional twelve companies which the Department collapsed into the
Queen's Flowers Group) have no common board members and, as such, the
interlocking boards criterion was not satisfied. However, in examining
this factor, we are looking at the degree of interlocking boards, not
the existence of fully- integrated boards. As with many of the
collapsing factors we consider, we examine the degree to which the
companies are intertwined with each other. For the Queen's Flowers
Group, we conclude that the number of interlocking boards, officers and
managers is such that this factor supports a finding that the companies
should be treated as a single entity.
Our finding that shifting of production could occur in the Queen's
Flowers Group does not, as suggested by Asocolflores, mean that
companies will ``dig up the plant and move it to another
[[Page 42854]]
farm.'' Rather, our concerns over shifting production refer to a longer
period of time; thus, if Company A receives a lower margin than Company
B, we are concerned that Company A would increase production of new
flowers to take advantage of a lower margin while Company B would, over
time, reduce production due to its higher margin. Alternatively, more
of the production of Company A could be shifted to the U.S. market.
We agree that sales to a common importer do not indicate an
intercompany transfer, per se. However, for proprietary reasons, we
find that these sales indicate cooperation and intertwined operations
between the companies in question. See Memorandum from Michael F.
Panfeld to Holly Kuga dated February 1, 1996.
We also find that shared office space is an appropriate factor to
consider in our analysis. While the sharing of office space does not,
by itself, indicate that collapsing is appropriate, it does indicate
cooperation and intertwined operations. Moreover, in addition to
sharing facilities, some of the firms also shared costs associated with
these facilities and reported these shared costs in their constructed
value data. See Memorandum from Michael F. Panfeld to Holly A. Kuga
dated February 1, 1996. Thus, it weighs in favor of a collapsing
determination.
Finally, we agree with Asocolflores that we should not overlap
factors in our collapsing analysis (i.e., common board members and
sharing of sales and marketing information). Notwithstanding this
factor, our analysis of this criterion remains unchanged due to the
reasons outlined in the two preceding paragraphs. Therefore, our
conclusion to collapse these firms remains unchanged.
Our determination whether to collapse is based on the totality of
the circumstances. See Certain Corrosion-Resistant Steel at 42512. We
do not use bright-line tests in making this finding. Rather, we weigh
the evidence before us to discern whether the companies are, in fact,
separate entities or whether they are sufficiently intertwined as to
properly be treated as a single enterprise to prevent evasion of the
antidumping order via price or cost manipulation. Here, we find that
such potential for manipulation exists for the group of 20 companies in
the Queen's Flowers Group. Therefore, we have collapsed these companies
and treated them as one entity for purposes of these final results.
Comment 27: Asocolflores asserts that the Department erroneously
assigned an uncooperative BIA rate to eight companies in the Queen's
Flowers Group. Asocolflores refers to its comments submitted on July
26, 1995 rebutting the 23 deficiencies outlined in the Department's
preliminary analysis memo of December 5, 1994. Asocolflores asserts
that those discrepancies fall into three broad categories: (1) Failures
to provide factual information, (2) failures to identify related party
transactions, and (3) failures to identify certain companies as related
parties. Asocolflores maintains that, if the Department reexamines its
analysis in light of the comments raised in its July 26, 1995
submission, it will find that virtually no discrepancies exist and all
factual information is now on the record. Furthermore, Asocolflores
contends that the Department has improperly scrutinized the
relationships among the firms within the meaning of section 771(13).
Instead, Asocolflores contends, the Department should apply section
773(e)(4). If the Department continues to assign the eight companies a
BIA margin, Asocolflores contends that there is no basis for assigning
a BIA margin to the 12 additional companies believed to have ``strong
ties'' to the Queen's Flowers Group, maintaining that the Department
may only assign a BIA margin to firms that fail to supply requested
information. Asocolflores argues that the 12 companies fully responded
to the questionnaires. Moreover, Asocolflores contends, several of the
respondents either did not produce, export, buy, or sell subject
merchandise or were not in existence during the PORs.
The FTC argues that the Department properly concluded that the
Queen's Flowers Group significantly impeded its investigation. The FTC
states that the Department's questionnaire was clear in its request to
identify related parties. To the extent that the Queen's group failed
to do so, the FTC contends, the group impeded the investigation. The
FTC argues that respondents are presumed to have knowledge of
Departmental practice and U.S. antidumping law, and the Department's
questionnaire provided adequate guidance. The FTC also asserts that, to
the extent that respondents were uncertain in their interpretation of
the questionnaire, they had access to legal counsel and Department
analysts. In the FTC's view, the Department attempted to determine the
exact nature of the interrelationships among the group members through
multiple deficiency letters, but respondents failed to respond
appropriately and the Department correctly classified their responses
as ``uncooperative.'' The FTC cites Allied Signal v. United States, 996
F.2d 1185, 1192 (Fed. Cir. 1993), Chinsung Indus. Co. v. United States,
705 F. Supp. 598, 600 (CIT 1989), Pulton Chain Co., Inc. v. United
States, Slip Op. 93-202 (CIT October 18, 1993), and Pistachio Group of
Ass'n of Food Ind. v. United States, 671 F. Supp. 31, 40 (CIT 1987), as
support for the Department's application of BIA when the respondent
deliberately withholds information, attempts to direct the
investigation itself, or attempts to control the results of an
investigation by supplying partial information. In this case, the FTC
states, the Department found that the Queen's Flowers Group refused to
cooperate or otherwise significantly impeded the investigation and
correctly rejected the companies' responses, assigning an antidumping
duty margin based on BIA. The FTC further asserts that Asocolflores is
also incorrect in its claims that ``there were no transactions in
Colombia implicating the U.S. price definition.'' The FTC asserts that
when two parties are related, the knowledge test is irrelevant.
Asocolflores rebuts that the FTC offers no facts or analysis
showing that the respondents failed to respond fully to the
questionnaire, that the respondents should be faulted for not knowing
which definition of related party to apply, or that all of the firms
are related under either of the statutory definitions. Asocolflores
reiterates that 771(13) only applies to the relationship between the
importer and the exporter, not to the relationship between two
exporters. Asocolflores argues that there were no sales in Colombia
that would implicate USP. According to Asocolflores, the sales to
Agroindustrial del RioFrio were destined for third countries, while,
for the other transaction at issue, the selling company was not aware
of the ultimate destination of the product. According to Asocolflores,
the FTC cites no authority for its proposition that respondents are
``presumed to be aware of and comply with ITA practice and antidumping
law.''
The FTC rebuts that the Department determines whether parties are
related based on 771(13), and section 773(e)(4) applies only to the
reporting of constructed value data. In responding to section A of the
Department's questionnaire, the FTC contends, respondents cannot
predict on what basis FMV will ultimately be calculated. In the FTC's
view, the respondents' reporting on the basis of 773(e)(4) was at their
own peril and the Department was correct in rejecting responses based
on only one of the related party tests. The FTC asserts that, contrary
to the
[[Page 42855]]
claims of Asocolflores, all copies of the questionnaire contained the
same question requiring respondents to identify related parties in
Section A and, in any case, it was incumbent upon respondents to
request clarification. Finally, the FTC maintains that, if the
Department assigns a BIA rate to the original eight members of the
Queen's Flowers Group, it should also apply this rate to the 12
additional companies to the exten
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