[Federal Register Volume 59, Number 181 (Tuesday, September 20, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-23196]


[[Page Unknown]]

[Federal Register: September 20, 1994]


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DEPARTMENT OF COMMERCE
(A-331-801)

 

Preliminary Determination of Sales at Less Than Fair Value: Fresh 
Cut Roses From Ecuador

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

EFFECTIVE DATE: September 20, 1994.

FOR FURTHER INFORMATION CONTACT: Shawn Thompson, Office of Antidumping 
Investigations, Import Administration, U.S. Department of Commerce, 
14th Street and Constitution Avenue, N.W., Washington, D.C. 20230; 
telephone (202) 482-1776.

PRELIMINARY DETERMINATION: We preliminarily determine that fresh cut 
roses (roses) from Ecuador are being, or are likely to be, sold in the 
United States at less than fair value, as provided in section 733 of 
the Tariff Act of 1930 (the Act), as amended. The estimated margins are 
shown in the ``Suspension of Liquidation'' section of this notice.

Case History

    Since the notice of initiation on March 7, 1994 (59 FR 11771, March 
14, 1994), the following events have occurred.
    On March 31, 1994, the U.S. International Trade Commission (ITC) 
issued an affirmative preliminary determination.
    On April 13, 1994, three companies, the Caicedo Group, Hilsea 
Investments Ltd. (Hilsea), and Quitoflores, requested that they be 
excluded from any potential antidumping duty order issued as a result 
of this investigation. Due to constraints on the Department's 
administrative resources, we were unable to investigate companies 
requesting to be excluded from the potential order or requesting to 
receive a questionnaire on a voluntary basis (See the May 2, 1994, 
memorandum from the team to Barbara R. Stafford).
    On April 19, 1994, the Department decided to collect constructed 
value (CV) information from all respondents in addition to home market 
or, where appropriate, third country sales information (See the April 
19, 1994, memorandum from the team to Barbara R. Stafford).
    On May 5, 1994, the Department issued sales and cost questionnaires 
to the following four Ecuadorian companies: Arbusta-Agritab (Arbusta), 
Inversiones Floricola S.A. (Floricola), Florin S.A. (Florinsa), and 
Guanguilqui Agro Industrial S.A. (Guaisa). These companies accounted 
for approximately 40 percent of the exports of the subject merchandise 
during the period of investigation (POI). Although the Department 
``normally will examine not less than 60 percent of the dollar value or 
volume of the merchandise sold'' during the POI, 19 CFR 353.42 (b)(1), 
due to the limited administrative resources, the Department chose to 
examine less than 60 percent (See the May 3, 1994, memorandum from 
David L. Binder to Richard W. Moreland).
    On June 7, 1994, the Department relieved all respondents from the 
requirement of reporting sales of roses imported and/or sold as part of 
bouquets (See the June 7, 1994, memorandum from the team to Barbara R. 
Stafford).
    On June 14, 1994, the Department selected the appropriate third 
country markets for all four of the respondents (See the June 14, 1994, 
memorandum from the team to Barbara R. Stafford). However, since 
respondents argued that third country markets were fundamentally 
different from the U.S. market, it was decided that the final basis for 
foreign market value (FMV) for the respondents (either third country 
sales or CV) would not be determined until more information was 
received (See the ``Third Country Sales Versus Constructed Value'' 
section of this notice for further discussion).
    On June 24, 1994, the Floral Trade Council, petitioner in this 
investigation, requested a postponement of the preliminary 
determination until September 12, 1994, pursuant to 19 CFR 353.15(c) 
(1994). The Department granted this request on June 28, 1994 (59 FR 
34409, July 5, 1994).
    Also, on June 24, 1994, the Department instructed respondents to 
report monthly-average price data for the U.S. and third country 
markets (See the June 24, 1994, memorandum from the team to Barbara R. 
Stafford).
    On July 25, 1994, Floricola, one of the four respondents, submitted 
an amendment to its questionnaire response. In that amendment, 
Floricola stated that, based on further review, it did not have viable 
third country markets.
    Respondents submitted responses to the Department's sales and cost 
questionnaires in May, June, and July 1994. Hilsea also submitted a 
voluntary response to section A on May 26, 1994. Because the Department 
determined that it did not have the administrative resources to accept 
voluntary responses, Hilsea's response was returned on June 3, 1994.
    The Department issued deficiency sales and cost questionnaires in 
June, July, August, and September 1994. Respondents submitted their 
responses to these deficiency sales and cost questionnaires in June and 
August 1994. Responses to the September deficiency letters are due 
later this month.
    On September 12, 1994, the Department decided to base FMV for 
Arbusta and Guaisa on third country sales (See the September 12, 1994, 
memorandum from the team to Barbara R. Stafford). For a further 
discussion, see the ``Third Country Versus Constructed Value'' section 
of this notice.

Scope of Investigation

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

Period of Investigation

    The Department initiated this investigation using our standard six-
month POI from September 1, 1993, to February 28, 1994. On April 5, 
1994, petitioner submitted comments on the POI. On April 11, 1994, 
respondents also submitted comments on the POI. On April 14, 1994, the 
Department altered the POI to calendar year 1993 because of the 
seasonal nature of sales and production in the rose industry (See the 
April 14, 1994, memorandum from the team to Richard W. Moreland).
    In addition, for purposes of price-to-price comparisons, we are 
basing FMV on two six month periods: January 1, 1993, through June 30, 
1993, and July 1, 1993, through December 31, 1993. For further 
discussion of these periods, see the September 12, 1994, concurrence 
memorandum.

Best Information Available

    We have determined, in accordance with section 776(c) of the Act, 
that the use of best information available (BIA) is appropriate for 
sales of the subject merchandise by Florinsa.
    In assigning BIA, the Department applies a two-tier methodology 
based on the degree of respondent's cooperation. In the first tier, the 
Department normally assigns higher margins (i.e., margins based on more 
adverse assumptions) for those respondents which did not cooperate in 
an investigation or which otherwise impede the proceeding. If a 
respondent is deemed as non-cooperative, the Department bases the 
preliminary margin for the relevant class or kind of merchandise on the 
higher of: (1) the highest margin in the petition or (2) the highest 
calculated margin of any respondent within the country that supplied 
adequate responses for the relevant class or kind of merchandise.
    In the second tier, the Department assigns lower margins to those 
respondents who substantially cooperate in an investigation. These 
margins are based on the higher of: (1) The highest calculated margin 
for any respondent within that country that supplied adequate 
information for the relevant class or kind of merchandise or (2) the 
average margin of the margins in the petition (See, e.g., Final 
Determination of Sales at Less than Fair Value: Antifriction Bearings 
(Other than Tapered Roller Bearings) and Parts Thereof from the Federal 
Republic of Germany, 54 FR 18992 (May 3, 1989)).
    The Department's two-tiered methodology for assigning BIA has been 
upheld by the U.S. Court of Appeals for the Federal Circuit (See 
Allied-Signal Aerospace Co. v. United States, 996 F.2d 1185 (Fed. Cir. 
1993); See also Krupp Stahl AG v. United States, 822 F. Supp. 789 (CIT 
1993)).
    We have determined that Florinsa's original and deficiency 
questionnaire responses were unusable for the preliminary determination 
because they contain significant deficiencies (See the September 12, 
1994, memorandum from David L. Binder to Barbara R. Stafford). However, 
because Florinsa responded to our requests for information, we find 
that it has been substantially cooperative for purposes of this 
preliminary determination. Accordingly, we used as second-tier BIA for 
this respondent the average of the margins contained in the petition, 
which is 84.72 percent. This margin is higher than the highest margin 
calculated for any respondent in this investigation.
    Furthermore, we have issued a supplemental deficiency letter to 
Florinsa. If this respondent submits an adequate and timely response to 
this letter, we will conduct verification for Florinsa and will 
consider its information for purposes of the final determination.

Such or Similar Comparisons

    We have determined that all roses covered by this investigation 
comprise two categories of ``such or similar'' merchandise: culls and 
export-quality roses. None of the respondents reported sales of culls 
in the United States. Therefore, no comparisons in this such or similar 
category were made. Regarding export quality roses, where possible, we 
made comparisons of identical merchandise. Where there were no sales of 
identical merchandise in the home market or third country market to 
compare to U.S. sales, we made similar merchandise comparisons on the 
basis of: (1) form (e.g., as part of a bouquet, an individual stem, 
etc.), (2) type (e.g., hybrid tea, sweetheart, etc.), (3) color, (4) 
stem length, and (5) variety. We did not make any adjustments for 
differences in the physical characteristics of the merchandise because 
respondents reported no cost differences between the varieties.

Fair Value Comparisons

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

United States Price

    For sales by Arbusta and Guaisa, we based USP on purchase price, in 
accordance with section 772(b) of the Act, when the subject merchandise 
was sold to unrelated purchasers in the United States prior to 
importation and when exporter's sales price (ESP) methodology was not 
otherwise indicated.
    In addition, for Arbusta, Guaisa, and Floricola, where sales to the 
first unrelated purchaser took place after importation into the United 
States, we also based USP on ESP, in accordance with section 772(c) of 
the Act.
    During the POI, each of the respondents paid commissions to related 
parties in the United States. We determined that these commissions were 
directly related to the sales under consideration. We also tested these 
commissions for these respondents to determine whether they were paid 
at arm's length using the criteria set forth in the Final Determination 
of Sales at Less Than Fair Value: Coated Groundwood Paper from Belgium 
(56 FR 56359, November 4, 1991). Where we found that they were paid at 
arm's length, we deducted them from USP. However, we found that 
respondents used these commissions as a mechanism for reimbursing their 
related parties for their actual expenses. Accordingly, in order to 
avoid double-counting, where the actual expenses of the related party 
were less than the commissions, we deducted only the commissions. Where 
the commissions were less than the actual expenses, we also deducted 
the amount by which the actual expenses exceeded the commissions (See 
the September 12, 1994, concurrence memorandum).
    In addition, each of the respondents classified credits related to 
quality problems with the merchandise as warranty expenses. However, 
because these quality-related credits functioned as price reductions, 
we reclassified them as such.
    Finally, none of the respondents reported inventory carrying costs 
on their ESP sales. Accordingly, we calculated these costs using an 
inventory carrying period of seven days, which, due to the perishable 
nature of the product, is the maximum amount of time that can transpire 
between the time a rose is cut and when it must be sold to the ultimate 
customer, according to a public report by Harry K. Tayama, Ph.D., 
submitted in the companion investigation on fresh cut roses from 
Colombia and placed, as well, on the public record for this 
investigation.
    For all U.S. prices, we used monthly USPs, because we determined 
that monthly prices are representative of the transactions under 
investigation (See the September 12, 1994, concurrence memorandum).
    We made company-specific adjustments, as follows:

1. Arbusta

    For Arbusta, we calculated purchase price based on packed F.O.B. 
Quito prices to unrelated customers. In accordance with section 
772(d)(2)(A) of the Act, we made deductions, where appropriate, for 
foreign inland freight. We also made deductions for export taxes 
imposed by the government of Ecuador, in accordance with section 
772(d)(2)(B) of the Act.
    We calculated ESP based on packed prices to unrelated customers in 
the United States. We made deductions, where appropriate, for quality-
related credits, foreign inland freight, export taxes, air freight, 
U.S. customs duties, U.S. brokerage and handling expenses, U.S. inland 
freight, and credit expenses. Also, as described above, we deducted the 
greater of related party commissions or indirect selling expenses.
    Arbusta failed to report foreign inland freight expenses for a 
small number of transactions in its ESP sales listing. As BIA for these 
expenses, we assigned the highest freight amount for any other of 
Arbusta's ESP transactions.
    Regarding export taxes, Arbusta did not report these taxes in its 
sales listing. Because the taxes are included in the USP, we, 
therefore, calculated them based on the formula given in Arbusta's 
response.
    Arbusta calculated U.S. customs duties for its sales agents in 
Miami on the basis of sales volume. Because these duties were incurred 
on the basis of sales value, we recalculated them accordingly.
    Arbusta calculated credit expenses using an interest rate based, in 
part, on loans taken outside the POI. Therefore, we revised the 
interest rate to reflect only POI-related borrowings and recalculated 
credit expenses using this revised rate.
    Regarding indirect selling expenses in Ecuador, we based these 
expenses on BIA because Arbusta did not report them in its sales 
listing. As BIA, we included the per unit expense reported in Arbusta's 
calculation of CV. However, because Arbusta did not include the 
indirect selling expenses of one of its four related farms, as an 
additional BIA amount, we divided the expenses of the other three 
related farms by three and added this to the total expense amount.
    Regarding indirect selling expenses incurred by Arbusta's related 
party in New York, we determined that Arbusta's calculations contained 
a number of errors. Accordingly, we based these expenses on BIA. As 
BIA, we used the single highest amount reported for any sales 
transaction by this related party.
    Regarding indirect selling expenses incurred by Arbusta's other 
U.S. related parties, Arbusta reported monthly indirect selling 
expenses instead of a yearly average. Accordingly, we recalculated the 
expenses reported for one of these parties as a percentage of annual 
sales value. However, the expenses reported for the other related party 
appeared to pertain to another expense, unrelated to indirect selling 
expenses. Therefore, we based the calculation of this expense on BIA 
for sales through this company. As BIA, we applied the annual 
percentage noted above.

2. Floricola

    For Floricola, we calculated ESP based on packed prices to 
unrelated customers in the United States. We made deductions, where 
appropriate, for quality-related credits, including billing and other 
credits, foreign inland freight, export taxes imposed by the government 
of Ecuador, air freight, U.S. customs duties, U.S. Department of 
Agriculture inspection fees, U.S. inland freight, and credit expenses. 
We also made deductions for U.S., Panamanian, and Ecuadorian indirect 
selling expenses, including inventory carrying costs and brokerage and 
handling expenses, because these services were performed in-house.
    Floricola did not report export taxes. Because it is clear from 
other questionnaire responses that all exporters pay this tax and that 
the tax is included in the USP, as BIA, we calculated it using the 
formula provided in Arbusta's response.

3. Guaisa

    For Guaisa, we calculated purchase price based on packed F.O.B. 
Quito prices to unrelated customers. We made deductions, where 
appropriate, for quality-related credits and foreign inland freight. We 
also made deductions for export taxes imposed by the government of 
Ecuador. We corrected respondent's inaccurate foreign inland freight 
calculation by reallocating truck maintenance expenses over the entire 
POI.
    We calculated ESP based on packed prices to unrelated customers in 
the United States. We made deductions, where appropriate, for quality-
related credits, foreign inland freight, air freight, U.S. customs 
duties, U.S. brokerage and handling expenses, and credit expenses. 
Also, as described above, we deducted the greater of related party 
commissions or indirect selling expenses.
    Guaisa reported that it earned a rebate, as well as six free round-
trip tickets, from its air freight carrier based on its volume of sales 
to the United States during the POI. We deducted the rebate from 
Guaisa's air freight calculations. However, because it is not clear 
that the airline tickets affect air freight costs, we did not adjust 
air freight for the value of these tickets.
    Finally, Guaisa did not include the administrative expenses of its 
U.S. sales subsidiary in its calculation of U.S. indirect selling 
expenses. Moreover, Guaisa included employee commissions in its 
indirect selling expenses. Because the U.S. subsidiary is solely a 
sales organization, we reclassified its administrative expenses as 
indirect selling expenses, and included these expenses in our 
calculations. In addition, we reclassified employee commissions as 
commission expenses and made a separate adjustment for them.

Foreign Market Value

    In calculating FMV, wherever there were no sales of comparable 
merchandise in the home market or third country markets, we based FMV 
on CV. In addition, in accordance with 19 CFR 353.58, for price-to-
price comparisons, we compared U.S. sales to third country sales made 
at the same level of trade, where possible.
    In order to determine whether there were sufficient sales of fresh 
cut roses in the home market to serve as a viable basis for calculating 
FMV, we compared the volume of home market sales of export quality 
roses to the volume of third country sales of export quality roses in 
accordance with section 773(a)(1)(B) of the Act. Based on this 
comparison, we determined that none of the three non-BIA respondents 
had a viable home market.
    For sales made by Arbusta and Guaisa, we based FMV on third country 
sales or CV, when there were no third country sales of comparable 
merchandise. In accordance with 19 CFR 353.49(c), we selected for these 
respondents more than one third country because a single third country 
did not meet the Department's viability standards.
    In accordance with 19 CFR 353.49(b), we selected the appropriate 
third country markets for Arbusta and Guaisa based on the following 
criteria: similarity of merchandise sold in the third country to the 
merchandise exported to the United States, the volume of sales to the 
third country, and the similarity of market organization between the 
third country and U.S. markets. For a complete discussion of the 
selection of third country markets, see the June 14, 1994, memorandum 
from the team to Barbara R. Stafford.
    For all transactions made by Floricola, we based FMV on CV in 
accordance with sections 773(a)(2) and (e) of the Act, because it did 
not have sufficient sales of such or similar merchandise in the home 
market or in any third country markets during the POI. Additionally, we 
based FMV on CV for a portion of Arbusta's and Guaisa's transactions, 
because these sales had no matches of such or similar merchandise in 
the third country markets in the same period as the sales made in the 
United States. For a further discussion, see the ``Third Country Sales 
Versus Constructed Value'' section of this notice.
    For all CV transactions, for general expenses, which includes 
selling and financial expenses (SG&A), we used the greater of the 
reported general expenses or the statutory minimum of ten percent of 
the cost of cultivation. For Arbusta's and Guaisa's profit, we used the 
greater of the weighted-average third country profit during the POI or 
the statutory minimum of eight percent of the cost of cultivation and 
general expenses, in accordance with section 773(e)(B) of the Act. For 
Floricola, we based profit on the statutory minimum of eight percent of 
the cost of cultivation and total general expenses, in accordance with 
section 773(e)(B) of the Act. We based the amortization expense upon 
amounts normally recorded by each company in their usual recordkeeping. 
We rejected adjustments that respondents made to the amortization 
expense solely for purposes of this investigation. We also made 
specific adjustments to respondents' CV data as described below:

1. Guaisa

    For Guaisa, we 1) reallocated general and administrative expenses 
among products based upon the area under cultivation; 2) removed the 
effect of a special adjustment made to eliminate the costs associated 
with a severe windstorm; and 3) reallocated financial expenses among 
products based upon the area under cultivation.

2. Floricola

    For Floricola, we removed the reported net interest income credit 
from the CV calculation because we only allow interest income to offset 
the interest expense.
    In order to calculate FMV, we made company-specific adjustments as 
follows:

1. Arbusta

    For Arbusta, we based FMV on packed prices to unrelated customers 
in Argentina and Germany.
    For third country price-to-purchase price comparisons, we deducted 
post-sale home market movement charges from FMV under the circumstance-
of-sale provision of 19 CFR 353.56. This adjustment included home 
market inland freight. Pursuant to 19 CFR 353.56(a)(2), we made 
circumstance-of-sale adjustments, where appropriate, for differences in 
credit expenses.
    For third country price-to-ESP comparisons, we made deductions for 
foreign inland freight and credit expenses. We also made a deduction 
for inventory carrying costs based on an inventory carrying period of 
seven days, as was done for the calculation of USP. We disallowed 
Arbusta's claimed indirect selling expense adjustment because Arbusta 
failed to provide an adequate narrative description or a worksheet 
showing its calculations.
    We recalculated credit expenses using Arbusta's POI short-term 
interest rate as discussed in the ``United States Price'' section of 
this notice.
    For all price-to-price comparisons, we deducted third country 
packing costs and added U.S. packing costs, in accordance with section 
773(a)(1) of the Act. We recalculated packing expenses in both markets 
to exclude depreciation on one of Arbusta's packing facilities. In 
addition, we recalculated these expenses on an annual basis because 
Arbusta's monthly calculations contained adjusting entries which were 
not properly matched with the month in which the expense was incurred.
    For CV-to-purchase price comparisons, we made circumstance of sale 
adjustments, where appropriate, for credit expenses.
    For CV-to-ESP comparisons, we made deductions, where appropriate, 
for credit expenses. We also deducted from CV the weighted-average 
third country market indirect selling expenses, including inventory 
carrying costs, up to the amount of the greater of related party 
commissions or indirect selling expenses incurred on U.S. sales, in 
accordance with 19 CFR 353.56(b)(2). We added U.S. packing expenses, in 
accordance with section 773(a)(1) of the Act.

2. Guaisa

    For Guaisa, we based FMV on packed prices to unrelated customers in 
Germany and Sweden.
    For third country price-to-purchase price comparisons, we deducted 
quality-related credits. We also deducted post-sale home market 
movement charges from FMV under the circumstance-of-sale provision of 
19 CFR 353.56. This adjustment included foreign inland freight. 
Pursuant to 19 CFR 353.56(a)(2), we made circumstance-of-sale 
adjustments, where appropriate, for differences in credit expenses and 
commissions paid to an unrelated party. We deducted third country 
packing costs and added U.S. packing costs, in accordance with section 
773(a)(1) of the Act.
    For third country price-to-ESP comparisons, we made deductions for 
foreign inland freight, credit expenses and commissions paid to an 
unrelated party. We also deducted the weighted-average third country 
indirect selling expenses, up to the amount of the greater of related 
party commissions or indirect selling expenses, including invoice 
carrying costs, incurred on U.S. sales, in accordance with 19 CFR 
353.56(b)(1) (See the September 12, 1994, concurrence memorandum). 
Inventory carrying costs were based on an inventory carrying period of 
seven days, as was done for the calculation of USP.
    Regarding credit expenses, Guaisa incorrectly calculated the credit 
period for certain third country transactions. In addition, Guaisa 
calculated its short-term interest rate based on borrowings from 
related parties. Accordingly, as BIA, we used the shortest credit 
period reported for any third country sale. We then recalculated 
Guaisa's third country and U.S. purchase price credit expenses using 
its interest rate paid to unrelated parties.
    For CV-to-purchase price comparisons, we made circumstance of sale 
adjustments, where appropriate, for credit expenses.
    For CV-to-ESP comparisons, we made deductions, where appropriate, 
for credit expenses. We also deducted from CV the weighted-average 
third country market indirect selling expenses, including inventory 
carrying costs, up to the amount of the greater of related party 
commissions or indirect selling expenses, including indirect carrying 
costs, incurred on U.S. sales, in accordance with 19 CFR 353.56(b)(2). 
We added U.S. packing costs, in accordance with section 773(a)(1) of 
the Act.

3. Floricola

    For Floricola, we based FMV on CV. The CV includes the cost of 
materials and cultivation of the merchandise exported to the United 
States, plus SG&A expenses, profit, and packing. We used U.S. selling 
expenses in our CV calculation instead of using Floricola's home market 
selling expenses. For the final determination, however, we will revisit 
the issue of the appropriate selling expenses for use in Floricola's CV 
calculation.
    We deducted credit expenses. We also deducted U.S. indirect selling 
expenses, including inventory carrying costs, in accordance with 19 CFR 
353.56(b)(1) (See the September 12, 1994, concurrence memorandum).
    We also added U.S. packing costs, in accordance with section 
773(a)(1) of the Act.

Third Country Versus Constructed Value

    On March 30, 1994, counsel for 14 of the 16 Colombian respondents 
in the companion investigation on fresh cut roses from Colombia 
requested that the Department reject third-country sales and rely 
instead on constructed value as The basis for FMV. We considered this 
issue for this case as well.
    The Department's normal preference, based on its regulations, is to 
utilize third-country sales rather than constructed value when there is 
a viable third country market. See 19 CFR 353.48(b). Respondents have 
urged departure from this practice, citing Certain Fresh Cut Flowers 
from Colombia; Final Results of Antidumping Duty Administrative Review 
55 FR 20491 (May 17, 1990) (Flowers). The Department determined in 
Flowers that departure from our normal practice was warranted after an 
analysis of three unusual factors present in that case. Respondents 
argue that the facts in this investigation present even more compelling 
reasons to reject third-country sales than were present in Flowers. In 
determining whether the circumstances in this case are such that it 
should fall under the exception established in Flowers, we have 
analyzed the information presented in light of the three factors set 
forth in Flowers: 1) negative correlation of price and volume movements 
between markets; 2) peak to non-peak comparisons; and 3) the 
perishability of the subject merchandise.
    As a threshold matter, we note that the record in this case is 
different from Flowers in that European markets play a relatively less 
important role in our analysis. In Flowers, the Department's analysis 
focused solely on a comparison of the U.S. market with European markets 
as the vast majority of third country markets under consideration were 
in Europe. The Department did not evaluate conditions in other markets. 
In this case, and the companion investigation in Colombia, respondents 
reported significant sales to Argentina and Canada, as well as Europe. 
Respondents in this case have submitted additional information for all 
the relevant markets--Europe, Canada, and Argentina. However, it is not 
clear that the information submitted up to this point supports 
respondents' assertion that sales in the third country markets should 
not be compared to U.S. sales in this case.

Negative Correlation Factor

    In Flowers, the Department found a negative correlation between 
price and volume movements in the United States and European markets. 
This negative correlation indicated that price differences between 
markets could either mask or exaggerate dumping. The Department 
determined that the negative correlation was caused by a number of 
elements, including: 1) the greater price and volume volatility of the 
U.S. market; 2) the sporadic, gift-giving nature of U.S. demand; 3) 
respondents' lack of access to the European auctions (the main 
distribution point for flowers in Europe); and 4) differing peak price 
periods.
    Respondents argue that, in this case, there is similar evidence of 
a negative correlation of price and volume movements between the U.S. 
and third country markets. In support of their position, respondents 
have submitted several reports. A 1994 report by Professor Tayama 
analyzes, among other things, the consumption patterns for roses in the 
United States, Europe, Canada and Argentina, and compares seasonal and 
holiday purchasing patterns in the markets. Tayama asserts that both 
Europe and Canada have mature and relatively stable markets because 
both markets are supply driven (i.e., in times of peak production as 
supply increases, prices go down). In contrast, Tayama claims that the 
U.S. market is demand driven--the majority of sales are made for 
Valentine's Day when demand increases and prices rise. With regard to 
Argentina, Tayama states that roses are grown for home consumption and 
imports occur mainly during the winter months, as in Europe. Moreover, 
Tayama asserts, Argentina has a different seasonal and holiday pattern 
from the United States. No market, he states, has the extraordinary 
demand for roses that exists in the U.S. market on Valentine's Day.
    Petitioners have countered Tayama's assertions with an August 10, 
1994, submission which contains, among other things, a report by Roses 
Inc., an association of U.S. rose producers. The Roses Inc. report 
raises questions about the conclusions in the Tayama report, asserting 
that: 1) there is a global market for roses which is driven by demand 
everywhere; and 2) key holiday periods are actually very similar 
between the United States and Europe--specifically that the highest 
prices in both the United States and Europe occur in February. Thus, we 
are not in a position to conclude that the Tayama report provides a 
sufficient basis to determine that comparison of U.S. sales to third 
country sales is inappropriate.
    In support of the conclusions drawn in the Tayama report, 
respondents submitted the 1994 Fresh Cut Roses: Issues in the 
Estimation of Dumping in the U.S. Market (Botero Report) which contains 
a statistical analysis of the United States, European, and Canadian 
markets and seeks to demonstrate the lack of correlation between price 
movements in the third country and U.S. markets. The Botero Report 
provides three types of statistical analyses which, according to 
respondents, support their contention that third country prices should 
not be used due to the ``different equilibrium conditions'' of these 
markets as compared to the U.S. market for roses. First, Botero 
analyzes price movements within the United States, Europe and Canada, 
from which he concludes that different market forces are at work (i.e., 
price and quantity movements within Europe and Canada are negatively 
correlated and price and quantity movements within the United States 
are positively correlated). Second, Botero analyzes price and quantity 
movements across markets and concludes that there is no correlation 
between the U.S. market and either the European or Canadian markets. 
Third, he estimates the price cycles for roses in the U.S., European 
and Canadian markets and concludes that ``the seasonal patterns of the 
two markets [U.S. and European, U.S. and Canadian] are different and 
therefore monthly price comparisons do not reflect price 
discrimination.'' Botero asserts that these test results demonstrate 
that prices in these third country markets should not be compared to 
prices in the U.S. market to determine price discrimination.
    We have reviewed the Botero Report and have concerns regarding the 
data and the statistical parameters used to perform the statistical 
analysis on European, Canadian and U.S. rose prices. For example, Dr. 
Botero relied on prices that may not be comparable. U.S. prices for a 
single hybrid tea variety rose were compared to European prices for all 
hybrid tea variety roses; and U.S. import prices, rather than U.S. 
domestic prices, were compared to European domestic prices. These 
comparisons may be inappropriate--we have no basis to conclude that a 
single hybrid tea rose is representative of all hybrid tea roses, or 
that U.S. import prices are representative of U.S. domestic prices. 
Moreover, Dr. Botero's F-test results appear to be invalid. Dr. Botero 
apparently used the incorrect degrees of freedom--(k,n-2) instead of 
(k-1,n-2). More importantly, Dr. Botero appears to have misread the ``F 
Table'': he reported the value of Fn-2,k at the 99 percent 
confidence level, rather than Fk-1,n-2 at the 99 percent 
confidence level. Finally, Dr. Botero provided no explanation of his 
use of a 99 percent confidence level.
    In light of these questions, the Department, at this stage, finds 
the information on the record inconclusive as to whether the third 
country and U.S. markets are negatively correlated. We intend to 
further evaluate the Botero Report for purposes of making our final 
determination. Further details relating to this issue are set forth in 
the September 12, 1994, memorandum to Barbara Stafford.

Peak to Non-Peak Factor

    Third country sales in Flowers were not made over the entire year. 
They were made only in peak months. The record established that 
Colombian growers had little access to the European auction system and 
were only able to export flowers to Europe during those months when 
domestic supply was low. On the other hand, the Colombian growers 
targeted 80 percent of their production to the U.S. market and made 
sales to the United States in every month. As a result, the Department 
determined that it was unable to make contemporaneous sales comparisons 
in all months and would be required to compare low-value U.S. sales in 
off-peak months with high-value third country sales in peak months.
    The circumstances on the record in this case are somewhat 
different. One of the three companies reporting third country sales has 
year-round sales to a single third country market, while the other two 
companies have third country sales in every month in the markets 
selected by the Department pursuant to Sec. 353.49(c). Therefore, it 
appears that the Department may have sufficient contemporaneous sales 
in the aggregate for all twelve months of the POI. Further, the 
Department has based FMV on two six-month averages; the use of such 
averages also should reduce any potential for distortion.

Perishability Factor

    The third factor considered in Flowers was related to the role of 
perishability on production and sale. This factor included: 1) the 
extreme perishability of the subject merchandise; 2) the inability of 
producers to control short-term production; and 3) the inability to 
store or make alternative use of the product. The Department found that 
the respondents planned 80 percent of their production around the U.S. 
market and sold excess production in markets in which they did not 
necessarily plan to sell. These factors combined to create a ``chance 
element'' to third country sales which raised the concern that any 
observed price differences would be unrelated to dumping.
    We note that there are substantial similarities between flowers and 
roses. First, roses, like flowers, are extremely perishable. Second, 
rose growers have relatively greater, though still minor, control over 
short-term production than flower growers because of their ability to 
pinch back buds. Third, as with flowers, roses cannot be stored and we 
note that there are only very minor alternative uses (e.g., drying). 
While some respondents are able to sell a small percentage of their 
production to markets other than the United States as a regular part of 
their business plan, which reduces to some extent the ``chance'' 
element to selling excess production, we note that this was also true 
with some companies in Flowers. See Methodological Issues Concerning 
Colombian Cut Flowers, Sparks Commodities, Inc. 1989.
    In view of the questions raised above, we conclude that, for the 
purpose of the preliminary determination, the evidence at this stage is 
not sufficient to justify departure from our normal practice of 
reliance on third country prices. However, we intend to revisit this 
issue in our final determination in light of further information and 
analysis with regard to the three factors set out in Flowers as well as 
any other facts that might be relevant on this issue.

Currency Conversion

    Because certified exchange rates for Ecuador were unavailable from 
the Federal Reserve, we made currency conversions for expenses 
denominated in Ecuadorian sucres based on the official monthly exchange 
rates in effect on the dates of the U.S. sales as published by the 
International Monetary Fund.

Verification

    As provided in section 776(b) of the Act, we will verify the 
information used in making our final determination.

Critical Circumstances

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

Suspension of Liquidation

    In accordance with section 733(d)(1) of the Act, we are directing 
the Customs Service to suspend liquidation of all entries of fresh cut 
roses from Ecuador, as defined in the ``Scope of Investigation'' 
section of this notice, that are entered, or withdrawn from warehouse, 
for consumption on or after the date of publication of this notice in 
the Federal Register. The Customs Service shall require a cash deposit 
or the posting of a bond equal to the estimated preliminary dumping 
margins, as shown below. The suspension of liquidation will remain in 
effect until further notice. The weighted-average dumping margins are 
as follows:

------------------------------------------------------------------------
                                                                Margin  
               Manufacturer/Producer/Exporter                  percent  
------------------------------------------------------------------------
Arbusta-Agritab (and its related farms Agrisabe, Agritab,               
 and Flaris)...............................................        39.85
Florin S.A. (and its related farms Cuentas En Participacion             
 Florinsa-Ertego (Florinsa Cotopaxi) and Exflodec).........        84.72
Guanguilqui Agro Industrial S.A. (and its related farm                  
 Indipasisa)...............................................        20.60
Inversiones Floricola S.A. (and its related farm Flores                 
 Mitad Del Mundo S.A.).....................................        10.34
All others.................................................        49.76
------------------------------------------------------------------------

ITC Notification

    In accordance with section 733(f) of the Act, we have notified the 
ITC of our determination. If our final determination is affirmative, 
the ITC will determine whether imports of the subject merchandise are 
materially injuring, or threaten material injury to, the U.S. industry, 
before the later of 120 days after the date of the preliminary 
determination or 45 days after our final determination.

Public Comment

    In accordance with 19 CFR 353.38, case briefs or other written 
comments in at least ten copies must be submitted to the Assistant 
Secretary for Import Administration no later than October 17, 1994, and 
rebuttal briefs no later than October 24, 1994. In accordance with 19 
CFR 353.38(b), we will hold a public hearing, if requested, to give 
interested parties an opportunity to comment on arguments raised in 
case or rebuttal briefs. Tentatively, the hearing will be held on 
October 25, 1994, at 9:30 a.m. at the U.S. Department of Commerce, Room 
3708, 14th Street and Constitution Avenue, NW., Washington, DC 20230. 
Parties should confirm by telephone the time, date, and place of the 
hearing 48 hours before the scheduled time.
    Interested parties who wish to request a hearing must submit a 
written request to the Assistant Secretary for Import Administration, 
U.S. Department of Commerce, Room B-099, within ten days of the 
publication of this notice in the Federal Register. The request should 
contain: (1) the party's name, address, and telephone number; (2) the 
number of participants; and (3) a list of the issues to be discussed. 
In accordance with 19 CFR 353.38(b), oral presentations will be limited 
to issues raised in the briefs.
    This determination is published pursuant to section 733(f) of the 
Act (19 U.S.C. 1673b(f)) and 19 CFR 353.15(a)(4).

    Dated: September 12, 1994.
Susan G. Esserman,
Assistant Secretary for Import Administration.
[FR Doc. 94-23196 Filed 9-19-94; 8:45 am]
BILLING CODE 3510-DS-P