[Federal Register Volume 60, Number 107 (Monday, June 5, 1995)]
[Notices]
[Pages 29553-29571]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-13695]



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DEPARTMENT OF COMMERCE
[A-549-813]


Final Determination of Sales at Less Than Fair Value: Canned 
Pineapple Fruit From Thailand

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

EFFECTIVE DATE: June 5, 1995.

FOR FURTHER INFORMATION CONTACT: Michelle Frederick or Jennifer Katt, 
Office of Antidumping Investigations, Import Administration, 
International Trade Administration, U.S. Department of Commerce, 14th 
Street and Constitution Avenue, NW, Washington, DC 20230; telephone 
(202) 482-0186 or 482-0498, respectively.

Final Determination

    We determine that imports of canned pineapple fruit (CPF) from 
Thailand are being, or are likely to be, sold in the United States at 
less than fair value, as provided in section 735 of the Tariff Act of 
1930, as amended (the ``Act'') (1994). The estimated weighted-average 
margins are shown in the ``Continuation of Suspension of Liquidation'' 
section of this notice.

Case History

    Since our affirmative preliminary determination and postponement of 
the final determination on January 4, 1995 (60 FR 2734, January 11, 
1995) (Preliminary Determination), the following events have occurred:
    On January 20, 1995, Maui Pineapple Company, Ltd. and the 
International Longshoremen's and Warehousemen's Union (the petitioners) 
alleged a ministerial error in the Department's preliminary 
determination calculations regarding Dole Food Company, Inc., Dole 
Packaged Foods Company, and Dole Thailand, Ltd. (collectively Dole). 
The error was found to constitute a significant ministerial error 
because the correction resulted in a difference between a dumping 
margin of de minimis and a margin greater than de minimis. See 
Sec. 353.15(g)(4)(ii) of the Department's Proposed Regulations (57 FR 
1131, January 10, 1992). An amended preliminary determination was 
issued on February 14, 1995 (60 FR 9820, February 22, 1995).
    The four respondents in this investigation, Dole, The Thai 
Pineapple Public Co., Ltd. (TIPCO), Siam Agro Industry Pineapple and 
Others Co., Ltd. (SAICO), and Malee Sampran Factory Public Co., Ltd. 
(Malee), submitted revisions to their responses, and/or revised 
computer tapes that corrected clerical errors discovered at 
verification in January, February, March and April 1995.
    We conducted verifications of TIPCO, SAICO and Malee's sales and 
cost questionnaire responses in Thailand in February and March 1995. 
Verifications of Dole's sales and cost responses were conducted in 
Belgium, Thailand, Hong Kong, and the United States in January, 
February and March 1995.
    Dole, TIPCO, SAICO, Malee and the petitioners submitted case briefs 
on April 26, 1995, and rebuttal briefs on May 3, 1995. At the request 
of both the petitioners and Dole, a public hearing was held on May 10, 
1995.

Scope of the Investigation

    The product covered by this investigation is canned pineapple fruit 
(CPF). For the purposes of this investigation, CPF is defined as 
pineapple processed and/or prepared into various product forms, 
including rings, pieces, chunks, tidbits, and crushed pineapple, that 
is packed and cooked in metal cans with either pineapple juice or sugar 
syrup added. CPF is currently classifiable under subheadings 
2008.20.0010 and 2008.20.0090 of the Harmonized Tariff Schedule of the 
United States (HTSUS). HTSUS 2008.20.0010 covers CPF packed in a sugar-
based syrup; HTSUS 2008.20.0090 covers CPF packed without added sugar 
(i.e., juice-packed). Although the HTSUS subheadings are provided for 
convenience and customs purposes, our written description of the scope 
of this proceeding is dispositive.

Period of Investigation

    The period of investigation (``POI'') is January 1 through June 30, 
1994, for TIPCO, SAICO and Malee; and January 2 through June 18, 1994, 
for Dole (see Memorandum from Gary Taverman to Barbara R. Stafford, 
dated August 18, 1994).

Applicable Statute and Regulations

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

    We have determined that all products covered by this investigation 
constitute a single category of such or similar merchandise. Where 
there were no sales of identical merchandise in the third country 
market1 to compare to U.S. sales, we made similar merchandise 
comparisons on the basis of the criteria defined in Appendix V to the 
antidumping questionnaire, on file in Room B-099 of the main building 
of the Department of Commerce. In accordance with 19 CFR 353.58, we 
made comparisons at the same level of trade, where possible. Where we 
were not able to match sales at the same level of trade, we made 
comparisons across levels of trade.

    \1\Third country markets were used because none of the four 
respondents had a viable home market.
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    Based on the functional differences between Dole's U.S. and German 
customers, we continue to consider Dole's sales of CPF to be made at 
two distinct levels of trade in both the U.S. and German markets. (See 
Preliminary Determination and Import Administration Policy Bulletin 92/
1, dated July 29, 1992.) The first level is comprised of sales to 
customers in the retail and food service sectors (Level I); the second 
is comprised of sales to customers in the industrial sector (Level II). 
[[Page 29554]] 

Fair Value Comparisons

    To determine whether sales of CPF from Thailand to the United 
States were made at less than fair value, we compared the United States 
price (USP) to the foreign market value (FMV), as specified in the 
``United States Price'' and ``Foreign Market Value'' sections of this 
notice.
    As stated in our preliminary determination, Dole has reported all 
of its U.S. sales of subject merchandise, including those of Philippine 
origin and re-sales of CPF Dole purchased from unrelated producers in 
Thailand. We have continued to exclude these sales by weighing the 
dumping margin for each Universal Product Code (UPC) category by both 
(1) the ratio of shipments of CPF from Thailand to the total volume 
shipped from both Thailand and the Philippines during the last seven 
accounting periods of 1993, and (2) the ratio of shipments of Dole-
produced product to the total volume of Dole-produced and purchased 
product shipped to the United States during 1993, respectively. For 
further discussion, see the Preliminary Determination and Comment 8 in 
the ``Interested Party Comments'' section of this notice.
    For those unreported U.S. sales by TIPCO, SAICO and Malee presented 
or discovered during verification, we are applying the average of all 
positive margins to the quantities sold as best information available 
(BIA). See Comment 2 below.

United States Price

    For Dole, TIPCO, SAICO and Malee we calculated USP according to the 
methodology described in our preliminary determination, with the 
following company-specific exceptions:

A. Dole

    1. We excluded all sales made to military commissaries from our 
calculation of USP because we determined that these sales do not 
represent the sale to the first unrelated purchaser. In this channel of 
trade, the first unrelated purchaser of CPF is a distributor for the 
U.S. military. This distributor takes title and physical possession of 
the merchandise before reselling it to military commissaries. Dole's 
sales to the distributor were included in our calculation of USP.
    2. In the Preliminary Determination we stated that Dole would be 
required to report as U.S. sales, certain shipments pursuant to a long-
term agreement negotiated prior to the POI. Because these shipments 
were not reported for the preliminary determination, we applied as BIA, 
the average of all positive margins to one-half of the maximum quantity 
specified in the agreement to be purchased during 1994. Based on our 
findings at verification, we determined that Dole made no shipments 
pursuant to the contract during the POI. Therefore, Dole did not fail 
to report these sales and we have removed these sales from our margin 
calculation.
    3. We recalculated direct selling expenses for the ``warehouse 
club'' channel of trade to reflect the allowance confirmed at 
verification.
    4. We recalculated inventory carrying costs using a publicly 
available representative Thai baht borrowing rate for that period of 
time the merchandise was held in inventory in Thailand. For the period 
of time when the merchandise was shipped to and held in inventory in 
the United States, we used the short-term U.S. dollar borrowing rate 
confirmed at verification, because the title passed from the Thai 
producer to the U.S. parent at the time of shipment. For further 
discussion, see the Concurrence Memorandum, dated May 26, 1995, on file 
in Room B-099 of the main Commerce building (Concurrence Memorandum).

B. TIPCO

    1. We reclassified reported rebates as discounts because it was 
determined that customers paid a reduced price, rather than receiving a 
refund of monies. See Comment 21 below.
    2. We reclassified a certain expense reported as warranty expense 
as a discount. It was determined that a customer did not receive a 
reimbursement for the reported warranty claim, but rather paid a 
reduced price. See Comment 21 below.
    3. We recalculated inventory carrying costs based on the actual 
cost of manufacture of the inventory, rather than the selling price. In 
addition, we applied TIPCO's borrowing rate for short-term loans during 
the POI denominated in baht.

C. SAICO

    1. We did not reduce USP for export bill discounts because we 
determined that this expense was already captured in our imputed credit 
calculation. See Comment 29 below.
    2. As in the preliminary determination, we included certain U.S. 
shipments of spoiled subject merchandise because we determined them to 
be POI sales. See Comment 28 below.

D. Malee

    1. We recalculated inventory carrying costs based on the actual 
cost of manufacture of the inventory, rather than the selling price. In 
addition, we applied Malee's borrowing rate for short-term loans during 
the POI denominated in baht.

Foreign Market Value

    As stated in our preliminary determination, we determined that the 
home market was not viable for any of the four respondents. In 
accordance with 19 CFR 353.49(b), we selected Germany as the third 
country market for all four respondents. We calculated FMV as noted in 
the ``Price-to-Price'' and ``Price to Constructed Value (CV)'' sections 
of this notice.

Cost of Production

    Based on the petitioners' allegations, the Department found 
reasonable grounds to believe or suspect that sales in the comparison 
market were made at prices below the cost of producing the merchandise. 
As a result, the Department initiated investigations to determine 
whether Dole, TIPCO, SAICO and Malee made third country sales during 
the POI at prices below their respective cost of productions (COP) 
within the meaning of section 773(b) of the Act. See memorandum from 
Richard W. Moreland to Barbara R. Stafford, dated October 21, 1994.

A. Calculation of COP

    We calculated the COP based on the sum of each respondent's cost of 
materials, fabrication, general expenses, and third country packing in 
accordance with 19 CFR 353.51(c). We relied on the submitted COPs, 
except in the following company specific instances where the costs were 
not appropriately quantified or valued:

Dole

    1. We rejected the respondent's submitted fruit cost allocation 
methodology and recalculated these costs as described in Comment 7 
below.
    2. We increased fruit costs to include purchases of pineapple fruit 
on the last day of the POI, which had been excluded from the submitted 
fruit cost calculation.
    3. We adjusted certain costs incurred prior to the split-off point 
which were improperly allocated. See Comment 7 below.
    4. We increased fixed overhead costs to remove a credit which was 
specifically related to non-subject merchandise.
    5. We recalculated other materials costs to reflect the actual 
packing [[Page 29555]] medium which was used in each product. See 
Comment 17 below.
    6. We adjusted fixed overhead and other materials costs for the 
respondent's incorrect calculation of the activity base used for these 
costs.
    7. We recalculated general and administrative (G&A) expenses using 
the respondent's 1993 audited financial information. See Comment 18 
below.
    8. For those products where more than one COP value was reported, 
we calculated an average COP value for the product.

TIPCO

    1. We rejected the respondent's submitted fruit cost allocation 
methodology and recalculated these costs. See Comment 7 below.
    2. We adjusted certain costs incurred prior to the split-off point 
which were improperly allocated. See Comment 7 below.
    3. We recalculated TIPCO's G&A expense factor using the company's 
annual 1993 audited income statement. See Comment 22 below. As part of 
our calculation, we reduced 1993 G&A costs and increased cost of sales 
to account for the administrative costs reported as part of cost of 
manufacture in 1994. The 1993 selling expenses and reclassified 
administrative costs were approximated using information on the record.
    4. We adjusted interest expense to reflect the adjustment to costs 
of sales discussed above.
     5. For those products where more than one COP value was reported, 
we calculated an average COP value for the product.

SAICO

    1. We recalculated SAICO's cost of pineapple fruit in the following 
manner: (a) We calculated SAICO's pineapple cost using the company's 
normal cost accounting methodology (see Comment 7 below); (b) we 
recalculated SAICO's plantation growing costs using the company's 
normal costing methodology with a modification for the allocation of 
overhead costs between subject and non-subject crops based on direct 
labor hours; and (c) we recalculated the cost of juice used as a 
packing medium.
    2. We adjusted certain costs incurred prior to the split-off point 
which were improperly allocated. See Comment 7 below.
    3. We recalculated SAICO's fixed overhead expense based on the 
amortization of 1993 shutdown costs over the POI.
    4. We recalculated SAICO's G&A rate to account for the omission of 
board of director fees.

Malee

    1. We rejected the respondent's submitted fruit cost allocation 
methodology and recalculated these costs as described in Comment 7, 
below.
    2. We adjusted fruit cost for the respondent's incorrect 
calculation of conversion factors.
    3. We adjusted certain costs incurred prior to the split-off point 
which were improperly allocated. See Comment 7 below.
    4. We increased overhead by including the depreciation effect of 
foreign exchange losses incurred on purchases of machinery and removing 
a credit for a reimbursement.
    5. We increased G&A expenses to include the G&A expenses of Malee's 
parent company, which is a holding company with no operations, and 
inventory write-downs.
    6. We adjusted certain COM offsets to reflect amounts which are 
more directly related to production during the POI. (See the 
Concurrence Memorandum for a further discussion of all of these 
adjustments.)
    7. For those products where more than one COP value was reported, 
we calculated an average COP value for the product.

B. Test of Third Country Sales Prices

    After calculating COP, we tested whether, as required by section 
773(b) of the Act, each respondent's third country sales of subject 
merchandise were made at prices below COP, over an extended period of 
time in substantial quantities, and whether such sales were made at 
prices which permit recovery of all costs within a reasonable period of 
time in the normal course of trade. On a product specific basis, we 
compared the COP (net of selling expenses) to the reported third 
country prices, less any applicable movement charges, rebates, and 
direct and indirect selling expenses. To satisfy the requirement of 
section 773(b)(1) of the Act that below-cost sales be disregarded only 
if made in substantial quantities, we applied the following 
methodology. If over 90 percent of a respondent's sales of a given 
product were at prices equal to or greater than the COP, we did not 
disregard any below-cost sales of that product because we determined 
that the below-cost sales were not made in ``substantial quantities.'' 
If between ten and 90 percent of a respondent's sales of a given 
product were at prices equal to or greater than the COP, we discarded 
only the below-cost sales, provided sales of that product were also 
found to be made over an extended period of time. Where we found that 
more than 90 percent of a respondent's sales of a product were at 
prices below the COP, and the sales were made over an extended period 
of time, we disregarded all sales of that product, and calculated FMV 
based on CV, in accordance with section 773(b) of the Act.
    In accordance with section 773(b)(1) of the Act, in order to 
determine whether below-cost sales had been made over an extended 
period of time, we compared the number of months in which below-cost 
sales occurred for each product to the number of months in the POI in 
which that product was sold. If a product was sold in three or more 
months of the POI, we do not exclude below-cost sales unless there were 
below-cost sales in at least three months during the POI. When we found 
that sales of a product only occurred in one or two months, the number 
of months in which the sales occurred constituted the extended period 
of time, i.e., where sales of a product were made in only two months, 
the extended period of time was two months; where sales of a product 
were made in only one month, the extended period of time was one month. 
See Final Determination of Sales at Less Than Fair Value: Certain 
Carbon Steel Butt-Weld Pipe Fittings from the United Kingdom, 60 FR 
10558, 10560 (February 27, 1995).

C. Results of COP Test

    We found that for certain types of CPF more than 90 percent of each 
respondent's third country sales were sold at below COP prices over an 
extended period of time. Because neither Dole, TIPCO, SAICO nor Malee 
provided any indication that the disregarded sales were at prices that 
would permit recovery of all costs within a reasonable period of time 
in the normal course of trade, for all U.S. sales left without a match 
to third country sales as a result of our application of the COP test 
we based FMV on CV, in accordance with section 773(b) of the Act.

D. Calculation of CV

    In accordance with section 773(e)(1) of the Act, we calculated CV 
based on the sum of a respondent's cost of materials, fabrication, 
general expenses and U.S. packing costs as reported in the U.S. sales 
database. In accordance with section 773(e)(1)(B)(i) and (ii) of the 
Act we included: (1) For general expenses, the greater of a 
respondent's reported general expenses, adjusted as detailed in the 
``Calculation of COP'' section above, or the statutory minimum of ten 
percent of the cost of manufacture; and (2) for profit, the 
[[Page 29556]] statutory minimum of eight percent of the sum of COM and 
general expenses because actual profit on third country sales for each 
respondent was less than eight percent. We recalculated each 
respondent's CV based on the methodology described in the calculation 
of COP above. In addition, for Malee, we recalculated interest expense 
using the company's 1993 consolidated financial statements.

Price-to-Price Comparisons

    For those products for which there were an adequate number of sales 
at prices above the COP, we based FMV on third country prices. We 
calculated FMV according to the methodology described in our 
preliminary determination, with the following company-specific 
exceptions:

Dole

    1. We excluded a single, small volume sale from the calculation of 
FMV because we determined this sale was outside the ordinary course of 
trade. See Comment 9 below.
    2. We excluded certain sales from our calculation of FMV where Dole 
knew at the time of sale that the merchandise would be delivered to an 
ultimate location outside of Germany. For further discussion, see the 
Concurrence Memorandum.
    3. We recalculated credit incurred on sales denominated in deutsche 
marks using a publicly available representative equivalent of the 
German prime rate for the POI as the short-term borrowing rate.
    4. We recalculated inventory carrying costs using a publicly 
available representative baht borrowing rate for that period of time 
the merchandise was held in inventory in Thailand. For that period of 
time when the merchandise was shipped to and held in inventory in 
Europe, we used the short-term borrowing rate confirmed at 
verification. For further discussion, see the Concurrence Memorandum.
    5. We used the date of the final determination for all missing 
payment dates in our calculation of imputed credit.
    6. We corrected a clerical error regarding the calculation of pre-
sale movement expenses. In addition, we reclassified all movement, 
import duty, and warehousing expenses associated with certain sales 
made prior to importation as post-sale expenses. See Comment 12 below.
TIPCO

    1. We recalculated credit expenses using the interest rate 
applicable to the currency in which the sale was incurred. For sales 
denominated in U.S. dollars, the U.S. interest rate was based on 
TIPCO's dollar denominated short-term loans during the POI. For sales 
denominated in deutsche marks, we based the interest rate on a publicly 
available representative German short-term borrowing rate in effect 
during the POI.
    2. We recalculated inventory carrying costs based on the actual 
cost of manufacture of the inventory, rather than the selling price. In 
addition, we applied TIPCO's actual baht denominated short-term 
borrowing rate for the POI.

SAICO

    1. We recalculated credit expenses using the interest rate 
applicable to the currency in which the sale was incurred. Because 
SAICO had no dollar denominated short-term borrowings during the POI, 
the U.S. interest rate was based on the average prime rate charged by 
the 25 largest U.S. banks on short-term business loans for the period 
January through June 1994.
    2. We included one third country sale presented at the start of 
verification in our calculation of FMV because the quantity involved 
was insignificant and all the charges and adjustments associated with 
this sale were verified.
    3. We excluded certain sales from our calculation of FMV where 
SAICO knew at the time of sale that the merchandise would be delivered 
to an ultimate location outside of Germany. For further discussion, see 
the Concurrence Memorandum.

Malee

    1. We recalculated credit expenses using the interest rate 
applicable to the currency in which the sale was incurred. Because all 
sales to the United States and Germany were made in U.S. dollars, the 
U.S. interest rate was based on Malee's actual weighted-average U.S. 
dollar denominated short-term borrowing rate in effect during the POI.
    2. We recalculated inventory carrying costs based on the actual 
cost of manufacture of the inventory, rather than the selling price. We 
applied Malee's actual baht denominated short-term borrowing rate for 
the POI.

Price-to-CV Comparisons

    Where, for TIPCO, SAICO and Malee, we made CV to purchase price 
comparisons, we deducted from CV the weighted-average third country 
direct selling expenses and added the U.S. product specific direct 
selling expenses. We adjusted for differences in commissions in 
accordance with 19 CFR 353.56(a)(2) as follows:
    Where commissions were paid on some third country sales, we 
deducted from CV both (1) indirect selling expenses attributable to 
those sales on which commissions were not paid; and (2) commissions. 
The total deduction was capped by the amount of the commission paid on 
the U.S. sales in accordance with 19 CFR 353.56(b)(1) (1994). Where no 
commissions were paid on third country sales, in accordance with 19 CFR 
353.56(b)(1), we deducted the lesser of either (1) the amount of the 
commission paid on the U.S. sale; or (2) the sum of the weighted 
average indirect selling expenses paid on the third country sales. 
Finally, the amount of the commission paid on the U.S. sale was added 
to FMV in accordance with 19 CFR 353.56(a)(2).
    Where we compared Dole's ESP transactions to CV, we made deductions 
for the weighted-average third country direct selling expenses. We also 
deducted from CV the weighted-average third country indirect selling 
expenses. This deduction was capped by the amount of U.S. indirect 
selling expenses, in accordance with 19 CFR 353.56(b) (1) and (2).

Currency Conversion

    We made currency conversions based on the official exchange rates 
in effect on the dates of the U.S. sales as certified by the Federal 
Reserve Bank of New York, pursuant to 19 CFR 353.60.

Verification

    As provided in section 776(b) of the Act, we verified information 
provided by Dole, TIPCO, SAICO and Malee by using standard verification 
procedures, including the examination of relevant sales and financial 
records, and selection of original source documentation containing 
relevant information.

Interested Party Comments

General Issues

Comment 1

    TIPCO, SAICO and Malee argue that if inadequate above-cost sales of 
a given comparison market model are found as a result of the COP test, 
the Department should look for another similar model with adequate 
above-cost sales rather than go directly to CV. Although TIPCO, SAICO 
and Malee recognize that their arguments are at odds with the 
Department's Policy Bulletin 92/4, they argue that the Department's 
policy is flawed and should be changed for this final determination. 
TIPCO, SAICO and Malee assert that although the statutory definition of 
``such or similar merchandise'' contained in section 
[[Page 29557]] 771(16) of the Act does not include adequate sales above 
cost as a criterion of similar merchandise, it does not preclude the 
Department from making product matches with regard to cost 
considerations.
    In addition, TIPCO, SAICO and Malee contend that, pursuant to Koyo 
Seiko Co. v. United States, 810 F. Supp. 1287, 1290 (CIT 1993), rev'd 
on other grounds, 36 F.3d 1565 (Fed. Cir. 1994), the Department must 
consider all potential model matches and avoid the use of CV whenever 
possible. Further, the respondents claim that considering COP in the 
matching procedure would not be burdensome to the Department because 
the only additional work would be in switching lines of computer code 
so that the product matching concordance is applied after, rather than 
before, the below-cost sales test. Finally, TIPCO, SAICO and Malee 
argue that the statute strongly favors the use of price-to-price 
comparisons whenever possible. Therefore, these respondents contend 
that the Department should base FMV on comparison market prices as long 
as there are above-cost sales of similar merchandise.
    The petitioners argue that the Department's policy with respect to 
this issue is clear. Specifically, the Department has consistently 
determined that the statute does not require the exhaustion of all 
possible model matches before resorting to CV. Furthermore, they argue 
that the Department has been given broad discretion in making product 
matching decisions. Finally, the petitioners note that the Department's 
practice with respect to this issue has been upheld by the Court of 
International Trade (CIT). See Zenith Electronics Corp. v. the United 
States, 872 F. Supp. 992 (CIT 1994) (Zenith).

DOC Position

    We agree with the petitioners. The Department's practice is to 
proceed directly to constructed value if the most similar match fails 
the cost test. Although section 773(a) of the Act expresses a 
preference for using the price of such or similar merchandise as the 
FMV before resorting to CV, section 773(b) of the Act directs the 
Department to resort immediately to CV if, after disregarding sales 
below cost, the remaining sales are inadequate as the basis for FMV. 
See, e.g., Final Determination of Sales at Less Than Fair Value: 
Stainless Steel Angle from Japan, 60 FR 16608, 16616 (March 31, 1995), 
and Antifriction Bearings (Other Than Tapered Roller Bearings) and 
Parts Thereof from France, et al.; Final Results of Antidumping Duty 
Administrative Review, Partial Termination of Administrative Reviews, 
and Revocation in Part of Antidumping Duty Orders, 60 FR 10900, 10936 
(February 28, 1995). Furthermore, the Department's practice on this 
issue was upheld in Zenith where the CIT rejected the argument, 
similarly made here by the respondents, that if any merchandise meeting 
one of the definitions of ``such or similar'' under section 771(16) of 
the Act survives the cost test, such merchandise would be used for 
price comparison purposes. See Zenith, 872 F. Supp. at 999. As the 
Court stated, once the product matches are established and the COP test 
is completed, the Department is not required to reexamine all of the 
undifferentiated product data in order to make new matches and price 
comparisons on the basis of whatever subset of lower-ranked such or 
similar merchandise survives the COP test. The respondents' reliance on 
Koyo Seiko therefore is misplaced. In that case the Court rejected the 
Department's resorting to CV when initial attempts at most similar 
model matches failed; the case did not involve resorting to CV due to 
failure to pass the COP test. See Zenith, 872 F. Supp. at 999n.8.
    In this proceeding, therefore, the Department properly used CV for 
those product match comparisons that failed the COP analysis.

Comment 2

    The petitioners contend that the Department should include in its 
calculation of USP the unreported U.S. sales to Puerto Rico made by 
TIPCO, SAICO and Malee that were presented at or discovered during 
verification. To derive the expenses associated with these sales, the 
petitioners argue that the Department should reduce the per unit value 
for each unreported sale by the highest charges and adjustments 
reported by each company in the U.S. sales listing. The petitioners 
contend that the highest deductions are appropriate because shipments 
to Puerto Rico pass through the Panama Canal thus incurring additional 
expenses. In addition, for TIPCO the petitioners contend that an 
additional deduction for certain expenses noted on the invoice is 
appropriate.
    TIPCO, SAICO, and Malee argue that the Department should exclude 
the unreported Puerto Rican sales from the calculation of USP because 
these sales account for only an insignificant portion of total U.S. 
sales during the POI. In the event the Department determines inclusion 
of these sales is appropriate, TIPCO, SAICO and Malee argue that 
applying the highest deductions is unwarranted. Malee asserts that the 
movement and selling expenses it reported for sales to Puerto Rico in 
its February 2, 1995, submission should be used as the best estimate of 
charges and expenses for the omitted sales. SAICO argues that Puerto 
Rican sales incur exactly the same average expenses as other U.S. sales 
with the same sales terms, thus the average charges and adjustments 
reported for U.S. sales with the same sales terms should be applied.

DOC Position

    We agree with the petitioners that these Puerto Rican sales should 
be included in the calculation of USP because Puerto Rico is part of 
the Customs territory of the United States. However, we disagree with 
the petitioners that it is appropriate to apply the highest deductions 
to these sales. Based on our findings at verification, we conclude that 
the omission of these sales was inadvertent. Thus, we are applying the 
average of all positive margins for each company to each of the 
unreported Puerto Rican sales as BIA.

Comment 3

    TIPCO, SAICO and Malee argue that the Department should calculate 
imputed credit costs using a weighted average short-term borrowing rate 
which reflects the currency in which the sale was invoiced. The 
respondents note that this methodology is consistent with the 
Department's policy expressed in the Final Determination of Sales at 
Less Than Fair Value: Certain Carbon Steel Butt-Weld Pipe Fittings from 
Thailand, 60 FR 10552 (February 27, 1995). Malee asserts that the 
Department should use either the dollar denominated short-term 
borrowing rate calculated at verification or apply a U.S. dollar short-
term interest rate obtained from public information.
    TIPCO argues that dollar denominated short-term borrowing rate 
presented in its case brief should be used to calculate the imputed 
credit expense for all U.S. dollar and deutsche mark denominated sales. 
SAICO had no dollar denominated short-term borrowings during the POI.

DOC Position

    We agree with TIPCO and Malee, in part. We have applied the actual 
weighted-average dollar denominated short-term borrowing rates 
calculated for Malee and TIPCO to all U.S. and German sales invoiced in 
U.S. dollars. Because SAICO had no dollar denominated borrowings during 
the POI, we are applying, as a publicly available representative U.S. 
dollar short-term interest rate, the average [[Page 29558]] prime rate 
charged by the 25 largest U.S. banks on short-term business loans for 
the period January through June 1994.
    We disagree, with TIPCO, however, that it is appropriate to apply a 
dollar rate to those German sales invoiced in deutsche marks. Because 
these German sales are deutsche mark-denominated transactions, it is 
appropriate to apply a deutsche mark-denominated short-term borrowing 
rate to determine the credit costs associated with these transactions. 
Because TIPCO had no deutsche mark-denominated borrowings during the 
POI, we have applied a publicly available representative German short-
term borrowing rate for the POI.

Comment 4

    SAICO, Malee, and the petitioners request that a number of 
corrections presented at, and found during, the sales verifications 
should be incorporated into the Department's calculations of the final 
margins.

DOC Position

    All corrections listed in the respondents' and the petitioners' 
case briefs with respect to the sales were confirmed on-site at 
verification and were incorporated in the Department's calculation of 
the final margin.

Comment 5
    TIPCO, SAICO, and Malee argue that a particular proprietary payment 
should be allowed as an adjustment to COP and CV. Alternatively, if the 
Department chooses to disallow these payments for purposes of computing 
costs, the three respondents claim that the payments should be treated 
as sales price adjustments.
    The petitioners believe that no adjustment should be made for the 
payments because the Department did not verify that these payments were 
related in any way to the production of CPF.

DOC Position

    Because of the business proprietary nature of this item, we have 
addressed the parties' comments and analyzed the issue in detail in the 
proprietary concurrence memorandum. Our determination was to allow the 
payments as an offset to the respondents' submitted COP and CV figures.

Comment 6

    Each of the four respondents claims that providing accurate cost 
information is not the main purpose of its normal fruit cost allocation 
methodology; rather each company's allocation methodology was devised 
to achieve certain managerial goals. The respondents argue that their 
normal allocation methodologies therefore result in the misallocation 
of fresh pineapple fruit costs and generate cost figures that bear no 
relationship to the actual costs incurred.
    Consequently, each respondent submitted alternative fruit cost 
methodologies, based on the relative weight of fresh pineapple fruit in 
CPF and juice products, that result in a lower fruit cost being 
allocated to CPF. According to the respondents, use of a weight-based 
fruit cost allocation methodology is appropriate in the context of this 
antidumping proceeding because it is based on a non-distortive, 
neutral, physical criterion, i.e., weight. Dole also argues that its 
submitted methodology is consistent with its treatment of other shared 
operating and overhead costs, which are allocated among products on the 
basis of weight. Furthermore, the respondents argue that use of a 
weight-based methodology is appropriate because the petitioners use 
such a methodology for tax purposes, elevating the practice to an 
acknowledged and accepted industry norm.
    In addition to arguing that their normal fruit cost allocation 
methodologies are inappropriate, the respondents argue that use of a 
value-based methodology also would be inappropriate. One respondent, in 
particular, argues that although its normal allocation methodology is 
based on an estimate of relative sales value, such a methodology is 
inappropriate under general accounting principles. According to the 
respondents, Cost Accounting: A Managerial Emphasis (Horngren and 
Foster 1987) (Cost Accounting) indicates that use of value-based 
allocations is discouraged in a rate-regulated setting because ``it is 
circular reasoning to use selling prices as a basis for determining a 
selling price.'' The respondents argue that if the Department uses its 
normal value-based allocation of pineapple fruit costs, dumping margins 
would fluctuate because of changes in juice and concentrate prices.
    All four respondents argue that a value-based allocation is also 
legally impermissible under the precedent established in IPSCO v. 
United States, 965 F.2d 1056 (Fed. Cir. 1992). The respondents contend 
that in IPSCO the Court of Appeals for the Federal Circuit held that 
value-based allocations inappropriately shift costs actually incurred 
with respect to one co-product onto another co-product. Furthermore, 
Dole and Malee suggest that a value-based allocation, which would 
result in values being assigned to the various parts of the pineapple 
(i.e., the shell, the core, the ends, and the cylinder), is 
inappropriate because they themselves do not assign values to the 
various parts of the fruit and because pineapples are purchased in 
their entirety on a per-kilogram basis.
    Finally, the respondents argue that a value-based methodology would 
provide a loophole for companies to manipulate dumping margins. 
According to the respondents, a company could reduce CPF prices in non-
comparison markets or in the U.S. market, or could increase prices of 
non-subject merchandise, any of which actions would reduce the relative 
sales value of the subject merchandise, thereby resulting in a 
reduction of allocated costs. A reduction in allocated costs, according 
to respondents, would result in some comparison market models surviving 
a below-cost sales test or in a reduction of constructed value when 
comparison market models remain below cost.
    The petitioners argue that Department precedent supports the use of 
the respondents' normal cost allocation methodologies for calculating 
COP and CV. See, e.g., Final Determination of Sales at Less Than Fair 
Value Certain Hot-Rolled Carbon Steel Flat Products and Certain Cut-To-
Length Carbon Steel Plate from Korea, 48 FR 37176 (July 9, 1993) 
(Department adjusted the submitted data to reflect information 
calculated under the respondent's normal accounting system). The 
petitioners contend that respondents' normal allocation methodologies 
have been accepted by the companies' auditors as reasonable and, in 
turn, have been used to produce audited financial statements which are 
relied upon by lenders, shareholders, and Thai tax authorities. 
Accordingly, the petitioners argue, the respondents' normal allocation 
methodologies must have some factual basis to them or they would not be 
accepted by these parties.
    With respect to the one respondent's argument that general 
accounting principles discourage the use of value-based cost 
allocations in regulatory pricing situations, the petitioners note that 
the reference to the Horngren and Foster text is misplaced in this 
investigation because the CPF industry is not regulated. The 
petitioners agree, however, that if the CPF industry were regulated, 
sales value allocations might be distortive because prices would not be 
set by the marketplace.
    In addition, the petitioners argue that the Department should not 
consider the respondents' weight-based allocation methodology as an 
acceptable [[Page 29559]] alternative to their normal fruit cost 
allocation methodologies. In previous cases, petitioners note, the 
Department has recognized that weight-based allocations may be 
inappropriate. See, e.g., Final Determination of Sales at Less Than 
Fair Value: Certain Carbon and Alloy Steel Wire Rod from Canada, 59 FR 
18791, 18795 (April 20, 1994) (Department determined that weight was an 
inappropriate allocation basis, stating that the ``use of tonnage to 
allocate melt shop costs, as petitioner suggests, would result in the 
same cost per ton regardless of the grade of steel''). Furthermore, the 
petitioners note that none of the respondents use the submitted weight-
based methodology in their normal course of business, nor do they use 
it for any internal decision-making. The petitioners claim that if the 
submitted allocation was accurate, the respondents would certainly 
maintain internal reports showing such a weight-based allocation, yet 
they do not. In addition, the petitioners state that they are not aware 
of any CPF producer anywhere that allocates fruit costs based on weight 
in its normal accounting system. (The petitioners acknowledge using 
weight as the basis for calculating fruit costs for tax purposes, but 
note that their financial and cost accounting systems use value-based 
allocations. The petitioners argue that, contrary to the respondents' 
claims, the use of a weight-based allocation for tax purposes does not 
establish it as an industry standard practice.)
    Additionally, the petitioners claim that a weight-based allocation 
does not make sense in situations such as this one where the 
respondents' production processes assign values to various parts of the 
pineapple, depending upon the product being produced, i.e., CPF or 
juice products. As a result, it makes no sense to use a volume-based 
allocation ratio to calculate costs of production for products that are 
produced using a value-based production process.
    The petitioners argue, therefore, that a value-based allocation is 
appropriate for use in the instant investigation where the raw material 
has different parts with very different values. The petitioners cite 
Cost Accounting at 534 (Horngren, 5th ed. 1980) for the proposition 
that ``[t]he majority of accountants * * * support allocation in 
proportion to some measure of the relative revenue-generating power 
identifiable with the individual products.'' Furthermore, the 
petitioners argue that IPSCO is not controlling in the instant 
proceeding because the facts in IPSCO are significantly different from 
the facts in this investigation.
    Finally, the petitioners maintain that the potential dumping 
consequences suggested by the respondents are illogical. No company 
would decrease prices of subject merchandise in non-subject countries 
in order to affect the dumping margins in the United States because 
this would reduce profits in those countries. Neither would a company 
reduce U.S. prices in an attempt to reduce dumping margins because they 
would risk increasing these margins. The petitioners argue that the 
respondents would not increase concentrate prices, to allocate fruit 
costs away from subject merchandise because this would adversely affect 
their market share.

DOC Position

    The legislative history of the COP statute states that ``in 
determining whether merchandise has been sold at less than cost (the 
Department) will employ accounting principles generally accepted in the 
home market of the country of exportation if (the Department) is 
satisfied that such principles reasonably reflect the variable and 
fixed costs of producing the merchandise.'' H.R. Rep. No. 571, 93d 
Cong., 1st Sess. 71 (1973). Accordingly, the Department's practice is 
to adhere to an individual firm's recording of costs in accordance with 
GAAP of its home country if the Department is 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''). The Department's 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) (CIT upheld 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).
    Normal accounting practices provide an objective standard by which 
to measure costs, while allowing the respondents a predictable basis on 
which to compute those costs. However, in those instances where it is 
determined that a company's normal accounting practices result in an 
unreasonable allocation of production costs, the Department will make 
certain adjustments or may use alternative methodologies that more 
accurately capture the costs incurred. See, e.g., Final Determination 
of Sales at Less Than Fair Value: New Minivans from Japan, 57 FR 21937, 
21952 (May 26, 1992) (Department adjusted a company's U.S. further 
manufacturing costs because the company's normal accounting methodology 
did not result in an accurate measure of production costs).
    In the instant proceeding, the respondents want the Department to 
reject their normal allocation methodologies in favor of alternative 
methodologies reported during the investigation. As noted, however, the 
Department's practice is to rely on a respondent's books and records 
prepared in accordance with its home country GAAP unless these 
accounting principles do not reasonably reflect costs associated with 
production of the subject merchandise. As a result, before analyzing 
any alternative allocations or accounting methodologies reported by a 
respondent during the proceeding, the Department will determine whether 
it is appropriate to use the respondent's normal allocation 
methodologies.
    In the instant proceeding, therefore, the Department examined 
whether each respondent's normal fruit cost allocation methodology was 
reasonable. In examining each respondent's books and records at 
verification we found that each company had used its recorded fruit 
cost allocation methodology for at least a number of years. 
Furthermore, we found no evidence that each respondent had not relied 
historically upon its recorded allocation percentages to compute its 
production costs. In addition, evidence on the record, i.e., audited 
financial statements, indicates that each respondent's normal 
allocation methodology was accepted by its independent auditors. Given 
the auditors' acceptance of the respondent's financial statements and 
any lack of evidence to the contrary, we conclude that each 
respondent's normal allocation methodology is consistent with generally 
accepted accounting principles practiced in Thailand.
    Given the fact that each respondents' allocation methodology is 
consistent with Thai GAAP, we will accept each respondent's normal 
allocation methodology unless the methodology results in allocations 
that do not reasonably reflect the costs associated with production of 
CPF. The respondents have argued that their normal allocation 
methodologies do not reasonably reflect costs because the methodologies 
were designed to achieve certain managerial goals as opposed to 
providing accurate cost information. [[Page 29560]] While the reasons 
cited by the respondents for employing the allocation methodologies may 
have been factors in their selection, this does not necessarily make 
such methodologies, or the resulting allocations, unreasonable.
    In Hercules, Inc. v. United States, 673 F. Supp. 454 (CIT 1987), 
for example, the Court upheld the Department's decision to rely on COP 
information from respondent's normal financial statements maintained in 
conformity with GAAP. The respondent, SNPE, had argued that the 
accelerated depreciation method employed in its financial statements 
and records was for tax purposes and did not accurately reflect SNPE's 
actual costs. Consequently, SNPE submitted recalculated depreciation 
expenses under a straight-line methodology. The Department rejected 
SNPE's alternate allocation methodology, which was based on 
unverifiable allegations that straight-line depreciation methodology 
would more accurately reflect the actual costs, in favor of the 
information contained in SNPE's verified normal records and audited 
financial statements. See Hercules, 673 F. Supp. at 490-91.
    In the instant investigation, the respondents' arguments that their 
normal allocation methodologies are based on certain managerial goals 
and therefore do not accurately reflect actual costs are similarly 
unpersuasive. An accounting methodology designed to achieve certain 
managerial goals does not necessarily imply that the employed 
methodologies result in an unreasonable reflection of costs, 
particularly where a company's accounting methodology had been approved 
by independent auditors. In addition, as discussed in the paragraphs 
below concerning the respondents' alternative allocation methodologies, 
the respondents have failed to demonstrate that their unverifiable 
alternative methodologies are a more reliable source of reasonable 
fruit cost allocations than their verified books and audited financial 
records.
    Based on the foregoing, we have adjusted Malee's, SAICO's, and 
TIPCO's submitted fruit costs to reflect the allocations as calculated 
and verified under each company's normal accounting system. Their 
normal allocation methodologies are consistent with Thai GAAP and 
appear to reasonably allocate fruit costs to CPF. Furthermore, the 
respondents have provided insufficient, if any, evidence to the 
contrary. In addition, as discussed below, the respondents have failed 
to demonstrate that their unverifiable alternative methodologies are a 
more reliable source of reasonable fruit cost allocations than their 
verified books and audited financial records.
    Notwithstanding the Department's conclusion that the respondents' 
normal fruit cost allocation methodologies are in accordance with Thai 
GAAP and the Department's rejection of the respondents' arguments 
concerning the managerial goals of their normal allocation 
methodologies, the Department determines that in light of the practices 
followed by the other three respondents in this investigation, Dole's 
normal allocation methodology results in an unreasonable allocation of 
fruit costs to CPF. Due to the proprietary nature of the facts at 
issue, our entire analysis of Dole's normal allocation methodology is 
contained in the proprietary version of our concurrence memorandum 
dated May 26, 1995.
    Thus, we have determined that because Dole's allocation does not 
``reasonably reflect'' the cost of producing the merchandise, we cannot 
employ that allocation in our COP analysis. Given that Dole's normal 
methodology results in an unreasonable allocation of fruit costs to 
CPF, the Department must determine what would constitute a reasonable 
allocation of fruit costs. A reasonable fruit cost allocation 
methodology would be one which reflects the significantly different 
quality of the fruit parts which are used in the production of CPF 
versus those which are used in the production of juice products. One 
approach to deriving such an allocation methodology would be to compare 
the net realizable value of the CPF versus juice products over a period 
of years. Net realizable value (NRV) is commonly defined as the 
predicted selling price in the ordinary course of business less 
reasonably predictable costs of completion and disposal. See Cost 
Accounting at 534. Ideally, such a NRV methodology would compare 
historical cost and sales data for pineapple fruit products over a 
period encompassing several years prior to the antidumping proceeding 
and also would include data for markets where allegations of dumping 
have not been lodged.
    While it would have been preferable to develop an allocation 
methodology based on historical NRV data in order to reasonably 
allocate Dole's fruit costs to CPF, we were unable to do so in this 
investigation because the data were not available and we did not 
present Dole with an alternative methodology for allocating fruit 
costs. However, we intend to do so in any future administrative reviews 
if an order is issued.  Cf. Final Determination of Sales at Less Than 
Fair Value: Fresh Cut Roses from Ecuador, 60 FR 7019, 7026 (February 6, 
1995) (Department determined that it would have been preferable to 
disaggregate rose costs but the data were not available and the 
Department did not present respondents with an alternative 
methodology). Such a methodology would enable us to reasonably allocate 
Dole's fruit costs to CPF, but would not require them to change their 
method of recordkeeping.
    Given the fact that the record in this investigation does not 
contain the data necessary to develop an allocation methodology for 
Dole based on its historical NRV data, for our final determination, we 
have allocated Dole's pineapple fruit costs based upon an average of 
the proprietary fruit cost allocation percentages used by Malee, SAICO, 
and TIPCO in their normal accounting systems.
    As discussed above, the Department's practice is to rely on a 
respondent's books and records prepared in accordance with its home 
country GAAP unless those accounting principles do not reasonably 
reflect costs associated with production of the subject merchandise. 
Although we have relied on Malee's, SAICO's and TIPCO's normal fruit 
cost allocation methodologies and have based Dole's fruit costs upon 
the other three respondents' normal fruit cost allocation 
methodologies, we also will address the respondents' alternative, 
weight-based allocation methodologies.
    Each of the respondents have argued that a weight-based methodology 
is appropriate in the context of this investigation because it is based 
on a non-distortive, neutral, physical criterion, i.e., weight. We 
believe, however, that allocating the cost of pineapple evenly over the 
weight is not supportable. Using weight alone as the allocation 
criteria sets up the illogical supposition that a load of shells, 
cores, and ends cost just as much as an equal weight of trimmed and 
cored pineapple cylinders. Significantly, the use of physical weighting 
for allocation of joint costs, i.e., in this case the cost of the 
pineapple fruit, may have no relationship to the revenue-producing 
power of the individual products. Thus, for example, if the joint cost 
of a hog were assigned to its various products on the basis of weight, 
center-cut pork chops would have the same unit cost as pigs' feet, 
lard, bacon, ham, and so forth. Fabulous profits would be shown for 
some cuts, although losses consistently would be shown for other cuts. 
See Cost Accounting: A Managerial Emphasis at 533.
    Much like the hog in the previous example, the pineapple is 
comprised of various parts, i.e., the cylinder, core, 
[[Page 29561]] shells, etc., with significantly different uses and 
values. Because the parts of the pineapple are not interchangeable when 
it comes to CPF versus juice production, it would be unreasonable to 
value all parts equally by using a weight-based allocation methodology.
    We also note that authoritative accounting literature provides 
examples of cost allocations in the canning industry dependent on two 
factors, a quantitative factor and a qualitative factor. See Management 
Accountants' Handbook (Keller 4th ed.) at 11:13, citing ``Cost and 
Sales Control in the Canning Industry'', N.A.C.A. Bulletin, Vol. 36 
(November 1954) at 376. The output of finished products can be captured 
in the quantitative measure, which is used to allocate the direct 
preparation labor costs and other costs directly related to the 
quantity of raw fruit processed. The difference in the relative quality 
of the fruit used in each product is reflected in a qualitative factor, 
which is used to allocate the purchase cost of raw materials among 
products. The various grades or parts of the fruit are assigned a 
factor reflective of the quality of the fruit used for each product. 
With all of this in mind, we believe it is inappropriate to allocate 
fresh pineapple fruit costs to the various pineapple products solely on 
the basis of weight.
    The respondents have also argued that value considerations are 
inappropriate because the purchased pineapples have a uniform value 
throughout and, therefore, the cost of pineapple properly should be 
allocated based on consumed weight. Based on verification testing and 
our review of the record in this case, however, we believe that CPF 
producers strive first to maximize production of the more valuable 
canned fruit products and second, to maximize revenue from the 
remaining raw material through the production of juice and concentrate. 
As such, the respondents place a higher value on the raw material which 
may be used in the production of subject merchandise. As evidence of 
this, we noted that the respondents pay a lower price to pineapple 
suppliers that deliver small fruit. Though two shipments may contain in 
total the same weight of fresh pineapple, a vendor that delivers 
smaller fruit will be paid less than one that delivers fruit of a 
larger size. This is because the smaller pineapples will yield a 
smaller cylinder of quality pineapple fruit which can be used in CPF 
production.
    Accordingly, we reject respondents' claim that, although it is true 
that during the POI the sales value of canned pineapples was higher on 
a per-kilogram basis than that of juice or concentrate, that does not 
mean that the pineapples used to make the canned pineapples were more 
expensive than those used to make the juice or concentrate. We do 
acknowledge that the purchased quantities of small fruit used 
exclusively in juice production were not significant during the POI, 
but the existence of a ``penalty'' for small fruit indicates a lower 
value for such items.
    As discussed above, the respondents have also claimed that a value-
based allocation methodology is legally impermissible pursuant to 
IPSCO.  Contrary to the respondents' arguments, however, IPSCO is not 
controlling in this case. Nor does IPSCO stand for the proposition that 
in every instance value-based allocations are legally impermissible.
    IPSCO involved the Department's use of an appropriate methodology 
for allocating costs between two grades of steel pipe. There were no 
physical differences between the two grades of pipe, only differences 
in quality and market value. IPSCO, 965 F.2d at 1058. Furthermore, the 
same materials, labor, and overhead went into the manufacturing lot 
that yielded both grades of pipe. Id. Given these facts, the 
Department, in its final determination, allocated production costs 
equally between the two grades of pipe. The Department reasoned that 
because they were produced simultaneously, the two grades of pipe in 
fact had identical production costs. Id. The CIT rejected the 
Department's allocation methodology, reasoning that it did not account 
for differences in value between the two grades of pipe. On appeal, the 
Court of Appeals for the Federal Circuit held that the CIT erred by 
substituting its own construction of a statutory provision for the 
reasonable interpretation made by the Department, i.e., identical 
production costs. Id. at 1061.
    While the Court of Appeals noted that the CIT's instructions to 
allocate costs based on relative value in IPSCO resulted in an 
unreasonable circular methodology (i.e., because the value of the pipe 
became a factor in determining cost which became the basis for 
measuring the fairness of the selling price of pipe), nowhere did the 
appellate court indicate that use of an allocation methodology based on 
relative value was legally impermissible. On the contrary, IPSCO 
suggests that the courts will defer to the Department's preference for 
reliance on respondents' normal allocation methodologies, particularly 
where there are significant differences in the raw materials, i.e., the 
use of the cylinder in production of CPF and the use of the shells, 
cores, and ends, in production of juice and concentrate, as well as 
differences in processing, labor and overhead. Our reasoning here is 
consistent with IPSCO as well as the applicable legislative history. As 
a result, respondents' reliance on IPSCO is misplaced. We also find the 
respondents' references to the inappropriateness of value-based 
allocations in a rate-regulated environment to be irrelevant because 
there is no evidence on the record to suggest that either the subject 
merchandise or the juice products are sold in a rate-regulated 
environment.
    We have also considered the respondents' comments regarding 
potentially undesirable consequences of a value-based allocation and 
find that such scenarios are unlikely to actually take place. However, 
as with any allocation methodology chosen by the Department, there 
exists the potential for respondents to manipulate the allocations in 
opposition to the Department's intent. The respondents' argument that 
it will be possible to reduce the dumping margin by reducing their 
prices of subject merchandise in the United States and increasing their 
prices of non-subject merchandise is misleading. Because it would be 
most reasonable to base measures of net realizable value upon long term 
historical data, it is unclear how respondents could use this 
information to restructure their past results. However, the Department 
would, of course, continue to review this information closely through 
the administrative review process. Thus, we believe that this scenario 
is unlikely as such action would likely result in lower profits on 
subject merchandise sales (possibly raising the dumping margin) and 
reduced market share for non-subject merchandise. We also believe it 
would be inappropriate for the Department to choose a particular course 
of action based on an argument that in its essence states, if the 
Department picks a particular methodology we, the respondents, will 
take advantage of loopholes in that methodology.
    Finally, we disagree with the respondents' claim that petitioners' 
use of a weight-based allocation for fruit cost establishes that method 
as industry standard practice. The fact that the petitioners use weight 
as a basis for income tax purposes is not persuasive. We also note the 
dichotomy in respondents' reasoning that their own tax (and book) 
methodology must be rejected, while arguing that petitioners 
[[Page 29562]] tax accounting records should be controlling. We also 
note that the respondents did not provide any examples of companies 
that use weight-based fruit cost allocations as the basis for financial 
or managerial reporting.

Comment 7

    Each respondent claims that its normal accounting method of 
allocating certain costs incurred prior to the split-off point of the 
CPF and juice production lines results in distortive and inappropriate 
cost of production figures.
    The petitioners argue that the Department should rely on the 
respondent companies' normal accounting for these costs.

DOC Position

    Because of the proprietary nature of this item, we have addressed 
the parties' comments and analyzed the issue in detail in our 
proprietary concurrence memorandum. For TIPCO, SAICO, and Malee, our 
determination was to allocate the costs following the companies' normal 
methodology for allocating pineapple fruit costs. For Dole, we 
allocated the costs using the average of the other three respondents' 
normal fruit cost allocation percentages, consistent with our 
determination in Comment 6 above.

Company Specific Issues

Dole

Comment 8

    The petitioners argue that the methodology used by the Department 
in its preliminary determination to calculate a dumping margin for Dole 
based on an estimated quantity of its U.S. sales of Thai-origin 
merchandise is biased. Specifically, the petitioners contend that this 
methodology fails to take into account the fact that prices vary within 
UPC categories because Dole's Philippine-sourced merchandise is sold at 
a lower price than its Thai-sourced merchandise. In order to apply a 
methodology that is less distortive and more accurate, the petitioners 
assert that the Department should calculate one overall Thai-to-
Philippine shipment ratio and apply this ratio to the total amount of 
potential uncollectible dumping duties (PUDD) calculated for all UPC 
codes.
    Dole asserts that no possible distortion could arise from the 
methodology used by the Department in its preliminary determination. 
Although prices vary within a given UPC code, Dole argues that there is 
no correlation between the sales price and the country of origin 
because the selling price is based on contract prices and standard 
price lists that do not distinguish between Philippine- and Thai-
sourced merchandise. Therefore, Dole asserts that any possible dumping 
attributable to imports from Thailand is directly related to the volume 
of imports sourced from Thailand.

DOC Position

    We agree with Dole, in part. At verification we confirmed that Dole 
sells both its Thai- and Philippine-origin merchandise at the same 
price in the United States. Therefore, the petitioners' assertion that 
Dole's Philippine-sourced sales were sold at prices lower than its 
Thai-sourced sales is unfounded. In addition, contrary to the 
petitioners' assertion, the application of a single shipment ratio to 
the total PUDD for all sales would be distortive because this approach 
assumes that the shipment ratio between Thai- and Philippine-sourced 
merchandise is constant across all UPCs. This is not true. The shipment 
data confirmed at verification shows that the ratio of Thai- to 
Philippine-sourced merchandise varied immensely between UPCs. The 
petitioners' approach blurs the vast differences between these UPC 
shipment ratios.
    In order to calculate a less than fair value margin based on an 
estimated quantity of Dole's U.S. sales of Thai-origin merchandise 
during the POI, we have continued to weight average the dumping margin 
for each UPC product category by the ratio of shipments of subject 
merchandise from Thailand to the total volume shipped from both 
Thailand and the Philippines during the last seven accounting periods 
of 1993. In calculating the ratios, we excluded all negative shipment 
quantities reported by Dole because these quantities do not represent 
actual shipments during the second half of 1993. Instead, these 
quantities reflect the reclassification of merchandise from one UPC 
category to another.

Comment 9

    Dole argues that the Department's preliminary margin is grossly 
distorted due to the inclusion of a single, aberrant third country 
sale. Dole asserts that this sale is outside the ordinary course of 
trade and should be excluded from the Department's calculation of FMV 
for the following reasons: (1) The sale was of a product type sold only 
once in the third country market during the POI; (2) the sale 
constituted a negligible portion of the third country database; (3) the 
sale was not to a regular customer; (4) the terms of sale were uncommon 
for the third country market; and (5) the selling price was abnormally 
high when compared to the average selling price for other products of 
the same can size during the POI.
    In addition Dole argues that if it were subject to an antidumping 
order, it would not need to raise its U.S. prices or lower its German 
prices to avoid the imposition of dumping duties. Therefore Dole 
asserts that no purpose would be served by an antidumping duty order if 
it were to be based on this sale. In support of its position Dole cites 
Melamine Chemicals, Inc. v. United States, 732 F.2d 924 (Fed. Cir. 
1984) (Melamine Chemicals), where the Court of Appeals emphasized that 
the purpose of the antidumping law is ``to discourage the practice of 
selling in the United States at LTFV ***. That purpose would be ill-
served by application of a mechanical formula to find LTFV sales where 
none existed.''
    The petitioners argue that this sale is not outside of the ordinary 
course of trade and should be included in the calculation of FMV. The 
petitioners contend that the terms of sale were not unusual because the 
same sales terms were offered on numerous third country sales during 
the POI. In addition, the petitioners assert that the customer was 
regular because Dole made several sales to this same customer during 
the POI. Finally, the petitioners contend that Dole's assertion that 
the selling price for this sale was abnormally high is misleading 
because sales made at prices below the COP were included in Dole's 
calculation of the average selling price for this can size. The 
petitioners argue that the fact that this sale was sold at a higher 
price than sales sold at prices below the COP does not provide evidence 
that the price is aberrational.
DOC Position

    We agree with Dole that the sale was outside the ordinary course of 
trade as defined in section 771(15) of the Act and have excluded it 
from the calculation of FMV. We agree with the petitioners that the 
customer and terms of sale associated with this sale were not unique. 
Further, Dole's reliance on Melamine Chemicals is misplaced. Melamine 
Chemicals involved the issue of whether the Department's issuance and 
application of a regulation concerning exchange rate fluctuations 
during a less than fair value investigation was lawful. Notably, the 
sentence immediately following the ones quoted by Dole states, ``A 
finding of LTFV sales based on a margin resulting solely from a factor 
beyond the control of the exporter would be unreal, unreasonable, and 
unfair.'' Melamine Chemical, 732 F. 2d at 933 (emphasis in original). 
However, after reviewing all [[Page 29563]] aspects of the sale, we 
have determined that this sale was outside of the ordinary course of 
trade and have excluded it from the calculation of FMV.
    In determining whether a sale is outside the ordinary course of 
trade, the Department does not rely on one factor taken in isolation, 
but rather considers all of the circumstances particular to the sale in 
question. See Murata Mfg. Co. v. United States, 820 F. Supp. 603, 606 
(CIT 1993). Furthermore, our analysis of these factors is guided by the 
purpose of the ordinary course of trade provision, namely to prevent 
dumping margins from being based on sales which are not representative 
of home market or third country sales. See Monsanto Co. v. United 
States, 698 F. Supp. 275, 278 (CIT 1988). After reviewing all aspects 
of this sale, we found the following facts, taken as a whole, 
determinative: (1) Dole's single third country sale of this product 
constituted an insignificant portion of its total German sales volume; 
(2) the sale was of a product that was sold only once during the POI; 
(3) the sales quantity was significantly lower than the average sales 
quantity for the POI; (4) the sales price was significantly higher than 
the average sales price charged on other CPF products sold in the same 
can size during the POI; (5) the profit margin realized by Dole on this 
particular sale was substantially higher than the weighted-average 
profit earned on other sales of CPF in this can size during the POI; 
and (6) there was only one customer for this product in the third 
country market during the POI. See generally Cemex, S.A. v. United 
States, Slip Op. 95-72 at 6-14 (CIT April 24, 1995)(factors considered 
included lack of market demand, volume of sales, sales patterns, 
shipping arrangements, and relative profitability between models), and 
Mantex, Inc. v. United States, 841 F. Supp. 1290, 1305-09 (CIT 1993) 
(factors considered included volume and frequency of sales, demand, 
product use, and relative profitability). The facts provide the basis 
for our finding that this one sale was outside the ordinary course of 
trade.

Comment 10

    Dole argues that the Department's uneven treatment of pre-sale 
movement and import duty expenses associated with third country and ESP 
transactions in the preliminary determination was unfair and at odds 
with the Department's policy of making ``mirror-image adjustments to 
FMV and ESP so that they can be fairly compared at the same point in 
the chain of commerce.'' See Koyo Seiko Co. v. United States, 36 F. 3d 
1565, 1573 (Fed. Cir. 1994) (Koyo Seiko). Dole notes that the 
antidumping statute provides for such mirror-image adjustments through 
the circumstance of sale (COS) adjustment.
    Dole argues that the Court of Appeals holding in Koyo Seiko 
regarding the COS and ESP offset provisions was not limited by its 
decision in The Ad Hoc Committee of AX-NM-TX-FL Producers of Gray 
Portland Cement v. United States, 13 F.3d 398 (Fed. Cir. 1994) (Ad Hoc 
Committee). Dole asserts that the Ad Hoc Committee decision addressed 
the issue of pre-sale movement expenses incurred in connection with 
home-market sales, and only with regard to FMV where U.S. price is 
based on purchase price sales. Dole claims that it could not have been 
the intent of Congress for significant costs such as those incurred for 
ocean freight and import duties to be ignored when third country sales 
are used to calculate FMV.
    Dole argues that all import duty and movement expenses incurred on 
its third country sales should be deducted under the COS provision as 
direct expenses for the following reasons: (1) In accordance with 19 
CFR 353.56(a)(1), there is a bona fide difference in the COS between 
U.S. and third country sales made on an ex-warehouse basis; (2) 
movement and import duty expenses are directly related to the third 
country terms of sale because the terms call for delivery from Dole's 
European warehouse; (3) transportation costs are variable, not fixed, 
and as such are directly related to sales; (4) pre-sale warehousing 
expenses are directly related to sales because it is necessary to hold 
the inventory in forward warehouses in order to ensure that the 
merchandise is available within the delivery times required under the 
terms of the sales agreement; and (5) Import Policy Bulletin 94.6 
states that movement expenses are a direct cost of making the sale, and 
are always deducted from the price.
    The petitioners argue that the Department properly classified the 
import duty and movement expenses associated with Dole's third country 
sales made on an ex-warehouse or delivered basis as indirect selling 
expenses. The petitioners assert that the costs incurred by Dole for 
duty and movement expenses would have been incurred whether or not any 
individual sale had ever taken place and, therefore, cannot be directly 
associated with individual sales.

DOC Position

    In The Ad Hoc Committee, the Court held that the Department could 
not deduct home market pre-sale movement charges from FMV based on its 
inherent authority to apply reasonable interpretations in areas where 
the antidumping law is silent. Instead we will adjust for these 
expenses under the COS provision of the Department's regulations (19 
CFR 353.56). Pursuant to the COS provision, the Department will make an 
adjustment to FMV only if the expenses are determined to be directly 
related to the sales under investigation. To determine whether pre-sale 
movement expenses are direct, the Department examines the respondent's 
pre-sale warehousing expenses because the pre-sale movement charges 
incurred in positioning the merchandise at the warehouse are 
considered, for analytical purposes, to be linked in most instances to 
pre-sale warehousing expenses. See, e.g., Ad Hoc Committee of AZ-NM-TX-
FL Producers v. United States, Slip Op. 95-91 at 3-9 (CIT May 15, 
1995). Typically the Department treats expenses associated with 
inventory that is held for purposes of production planning and being 
able to ship the merchandise quickly with a regular turnover as 
indirect selling expenses because this inventory is maintained by the 
company as a service to all customers. See, e.g., Carbon Steel Wire Rod 
from Trinidad and Tobago, 46 FR 43206 (September 22, 1983). In limited 
circumstances, however, the Department does recognize certain pre-sale 
expenses as direct. For freight and warehouse expenses, those 
circumstances usually involve products channeled or customized for 
certain buyers. See, e.g., Final Determination of Sales at Less Than 
Fair Value: Stainless Steel Bar from Italy, 59 FR 66921, 66928 
(December 28, 1994) (allowing COS adjustment where pre-sale warehousing 
expenses incurred for designated amount of subject merchandise with 
certain specifications for particular customers); Final Determination 
of Sales at Less Than Fair Value: Polyethylene Terephthalate Film, 
Sheet, and Strip from Japan, 56 FR 16300, 16303 (April 22, 1991) 
(allowing COS adjustment for pre-sale warehousing expenses found to be 
directly related to sales on the basis that expenses were incurred and 
reported for specific products sold to specific customers); and Final 
Determination of Sales at Less Than Fair Value: Calcium Aluminate 
Cement, Cement Clinker and Flux from France, 59 FR 14136 (March 25, 
1994) (respondent demonstrated that specific products were held in a 
warehouse for specific customers and that the stock in question was 
only available for sale to those specific customers).
    In the instant proceeding, Dole reported two types of third country 
warehousing expenses: (1) Those [[Page 29564]] associated with moving 
the merchandise ``in and out'' of the warehouse; and (2) warehouse 
storage charges. Based upon our review of the evidence on the record, 
we are not satisfied that Dole has provided evidence to substantiate 
its claim that either pre-sale warehousing expense is directly linked 
to the sales under investigation. These pre-sale expenses do not appear 
to be direct expenses for the following reasons: (1) The amount of time 
that passes between the date the merchandise arrives at the European 
warehouse and the date it is shipped to the third country customer; (2) 
in most instances the third country sales were made from inventory, as 
demonstrated by the fact that the date of sale and the date of shipment 
are the same, i.e., the fact that the merchandise was sold from 
inventory demonstrates that the warehousing was pre-sale; (3) the 
merchandise held in the European warehouses is not pre-designated for 
sale to a specific customer; (4) the merchandise sold from inventory 
was not specialty merchandise, but instead commercial products sold in 
the normal course of trade in Germany; (5) the merchandise that was 
held in inventory was sold to numerous third country customers during 
the POI; (6) Dole incurs the cost of pre-sale warehousing expenses, not 
the customer, i.e., these expenses are not post-sale warehousing 
expenses because if they were post-sale, the customer would have to 
incur the cost of the post-sale warehousing; and (7) in its 
questionnaire response Dole did not claim the warehouse storage charges 
as direct selling expenses; rather, Dole characterized warehouse 
storage costs as indirect expenses.
    As noted above, pre-sale movement charges incurred in positioning 
the merchandise at the warehouse generally are linked to pre-sale 
warehousing expenses. Therefore, because we have found Dole's third 
country pre-sale warehouse expenses to be indirect, the expenses 
involved in moving the merchandise to the warehouse also must be 
indirect. We do not have the option of treating comparable expenses on 
U.S. sales as indirect in nature because such sales are ESP sales, and 
section 772(d)(2)(A) of the Act clearly requires the deduction of such 
expenses in arriving at USP.

Comment 11

    Dole argues that in the event the Department concludes that the 
third country pre-sale movement and import duty expenses are indirect 
selling expenses, the Department must similarly characterize identical 
U.S. movement and import duty expenses as indirect expenses. Dole 
asserts that 19 CFR 353.56(b)(2) defines the pool of U.S. expenses used 
to calculate the ``ESP cap'' in the same terms it uses to define the 
pool of third country expenses subject to the cap. Therefore, Dole 
contends that the Department is unjustified in categorizing pre-sale 
movement expenses as ``directly related'' to U.S. sales while finding 
the same group of expenses to be indirectly related to third country 
sales.
    The petitioners assert that under 19 CFR 353.41(d)(2)(i), ``any 
cost and expenses, and United States import duties incident to bringing 
the merchandise from the place of shipment in the country of 
exportation to the place of delivery in the United States'' must be 
subtracted from USP. Therefore, the petitioners argue that under the 
law, U.S. movement and duty expenses cannot be classified as selling 
expenses, but instead must be subtracted directly from USP.

DOC Position

    We agree with the petitioners. Pursuant to section 772(d)(2)(A) of 
the Act, to treat these expenses as indirect expenses would be clearly 
contrary to the antidumping law.

Comment 12

    Dole contends that the Department made the following clerical 
errors in its preliminary determination: (1) The Department improperly 
classified import duty and movement expenses associated with two third 
country sales made prior to importation as pre-sale rather than post-
sale expenses; (2) the Department incorrectly classified freight 
expenses associated with moving the merchandise between Dole's European 
warehouse and the German customer as pre-sale rather than post-sale 
expenses; and (3) the Department inadvertently deducted the swells 
allowance from USP as both a discount and a warranty expense.
    The petitioners agree that post-sale expenses associated with the 
third country sales should be treated as direct expenses.

DOC Position

    We agree with Dole, in part. We have corrected the errors noted in 
points one and two above for the final determination. Regarding point 
three, we disagree with Dole's assertion that the swells allowance was 
deducted twice from USP. We have examined both the computer program and 
Dole's U.S. database and have concluded that the swells allowance was 
not deducted as a discount in our preliminary determination. Therefore, 
this expense was properly deducted from USP just once as a warranty 
expense in our preliminary determination.

Comment 13

    The petitioners argue that the Department should adjust Dole's 
submitted fruit costs for pineapple obtained from the company's own 
plantations. The petitioners assert that the Department should use the 
costs which were actually incurred during the POI instead of Dole's 
submitted amount, which represents an allocation of the annual 
plantation costs. According to the petitioners, Dole's methodology is 
contrary to the Department's questionnaire requirements and practice. 
In support of their position, the petitioners refer to the Final 
Determination of Stainless Steel Bar from Spain, 59 FR 69931, 66938 
(December 28, 1994), where the Department stated:

The Section D questionnaire clearly requests weighted average 
production data based on costs incurred during the POI. We have 
departed from this general policy only when unique circumstances 
arise, such as when production did not occur during the period of 
investigation * * * (A)bsent strong evidence to the contrary, the 
Department assumes that the cost structure during the POI is 
representative and can be used to calculate the cost of production.

    Dole argues that the Department should accept its submitted 
calculation of fruit costs, as it is appropriate to take account of the 
growing cycle which occurs at its plantations. According to Dole, the 
majority of its self-grown pineapple was harvested in the second half 
of 1994, yet more than half of its annual operating costs were incurred 
in the first half of the year, during the POI. Dole argues that the use 
of actual costs incurred during the POI would be distortive, in 
relation to the quantity of pineapples harvested in that period, while 
the company's submitted fruit costs reflect a proper matching of 
expenses and production.
DOC Position

    We agree with Dole. The evidence on the record demonstrates the 
disproportionate relationship that exists between expenses incurred and 
pineapples harvested under the accounting methods practiced by Dole's 
plantations. Dole has presented evidence which has led to our 
determination that unique circumstances exist in this case, with regard 
to Dole's self-grown pineapples, and it is clear that the cost 
structure during the POI is not representative. As noted by Dole, its 
annual accrual system for plantation costs effectively ensures 
[[Page 29565]] an approximate relation between the costs incurred and 
the volume of fruit harvested during the same period. The company's 
submitted methodology, which presents a similar allocation, does not 
appear to be unreasonable, given the fluctuation in Dole's growing 
cycle. We therefore accepted Dole's submitted fruit costs, including 
the allocation of plantation fruit costs based upon the POI pineapple 
harvest.

Comment 14

    The petitioners claim that Dole improperly excluded pineapple 
purchases made on the last day of the POI from its fruit cost 
calculation. The petitioners argue that this fruit was used in POI 
production and, therefore, the Department should include this amount in 
the calculation of Dole's COP and CV.
    Dole did not object to the petitioners' comments.

DOC Position

    We agree with the petitioners. COP and CV should be calculated 
using the actual costs incurred during the POI and the excluded 
pineapple purchases were used in POI production. As a result, we 
increased Dole's fruit costs by the amount of the excluded pineapple 
purchases.

Comment 15

    In its submission, Dole allocated fixed overhead and certain 
variable overhead costs to its products in the same manner as in its 
normal accounting system. The petitioners argue that the Department 
should reallocate these overhead costs on the basis of net realizable 
value. The petitioners argue that Dole is unable to track its variable 
overhead costs on a product line basis and suggest that the normal 
allocation methodology does not use an appropriate activity base. The 
petitioners also state that the Department should exclude an offset to 
overhead costs which they claim was improperly applied.
    Dole disagrees with the petitioners' assertions and states that the 
submitted allocation methodology is consistent with its normal 
accounting for these overhead costs and should be accepted by the 
Department. Dole did not comment on the overhead offset.

DOC Position

    We agree with Dole, in part. The methodology used to allocate these 
overhead costs is, in fact, used by Dole in its normal course of 
business. In addition, the activity bases in this methodology are 
commonly used for overhead allocations and present a reasonable method 
of allocating these expenses. However, we agree with the petitioners 
that the overhead offset was directly related to a non-subject product 
line and should not be allocated over all products. We therefore 
accepted the allocation methodology used by Dole, but adjusted the 
submitted overhead costs to exclude the submitted overhead offset.

Comment 16

    The petitioners note that the Department calculated a standard case 
quantity for tropical fruit products that was less than Dole's 
submitted quantity. Since standard cases were used by Dole as an 
activity base for allocating sugar and acid costs, the petitioners 
assert that the Department should correct the quantity of standard 
cases submitted by Dole. Also, the petitioners assert that the standard 
case quantity submitted for concentrate was calculated using unverified 
estimates and should not be relied upon.
    Dole did not comment on this issue.

DOC Position

    We agree with the petitioners, in part. The number of standard 
cases was reviewed for all products by the Department, using Dole's 
normal conversion factors, and only the amount of tropical fruit cases 
was found to be incorrect. We therefore adjusted the number of standard 
cases used in the allocation of sugar and acid costs to reflect the 
quantity calculated by the Department. We also noted that this error 
affects the allocation of fixed overhead, and adjusted the allocation 
accordingly.

Comment 17

    The petitioners assert that the Department should revise Dole's 
other materials costs to reflect the packing medium actually used by 
the company in each of its CPF products. The petitioners argue that, 
for purposes of computing COP and CV, Dole incorrectly allocated sugar 
and citric acid costs over all CPF products, including juice-packed 
products which do not contain sugar.
    Dole disagrees with the petitioners and submits that the cost 
difference for products packed in juice and products packed in syrup is 
minimal and should not be recognized in the COP and CV calculations. 
Dole also argues that the packing medium does not affect the pricing of 
its products and refers to petitioners' own comments from the petition: 
``The difference in costs of manufacturing between the various forms 
and two varieties (juice packed and syrup packed) are sufficiently 
marginal to allow for equal pricing; consumer preferences are not 
sufficiently pronounced as to support price differentials.'' Based upon 
this, Dole argues that sugar and citric acid unit costs were properly 
submitted for all products, regardless of the actual packing medium 
used.

DOC Position

    We agree with the petitioners that Dole should have reported 
packing medium costs for each specific product. It is clear from a 
review of the record that the syrup packing medium costs more to 
produce than the juice packing medium. We have reflected this cost 
difference in our revised COP and CV figures for Dole.
Comment 18

    Dole claims that the Department should revise the company's 
submitted G&A factor to reflect the use of 1994 financial data, 
provided at verification.
    The petitioners did not comment on this issue.

DOC Position

    We disagree with Dole. Dole's submitted G&A factor was computed 
based on 1993 financial data for Dole Thailand, Ltd. (DTL), and 
included an allocation of G&A expenses incurred by Dole Food Company, 
Inc. (DFC) and Dole Packaged Foods Company (DPF). At verification, Dole 
provided a revised G&A factor, which was computed based on full-year 
1994 financial data. To support its revised calculation, Dole provided 
the Department with audited financial statements for DFC and unaudited 
financial statements for DTL. DPF does not prepare audited financial 
statements.
    The Department normally computes the G&A expense factor based on 
the respondent's audited financial statements for the full-year period 
that most closely corresponds to the POI. See, e.g., Final 
Determination of Sales at Less Than Fair Value: Sweaters Wholly or in 
Chief Weight of Man-Made Fiber from Hong Kong, 55 FR 30733 (July 27, 
1990) (Comment 18). Audited financial statement information provides us 
with some degree of assurance that an independent party has reviewed 
the respondent's accounting data and expressed an opinion as to its 
fairness in reflecting the results of that company's operations. 
Therefore, because Dole did not provide 1994 audited financial 
statements for DTL, we calculated the G&A factor using the respondent's 
audited 1993 financial statements, which we believe are a reasonable 
surrogate for Dole's 1994 operations. See also Comment 35 below. 
[[Page 29566]] 

Comment 19

    The petitioners argue that Dole improperly applied waste revenues 
and sugar refunds as offsets to G&A expenses. The petitioners claim 
that waste revenues should be applied to fruit costs, reflecting Dole's 
normal accounting system, in the same ratio that the Department 
determines fruit costs should be allocated (see Comment 6 above). Sugar 
refunds, according to the petitioners, should be applied to materials 
costs, since sugar is a raw material. In addition, the petitioners 
argue that sugar refunds should be applied only to those products to 
which sugar and citric acid costs were allocated.
    Dole did not comment on this issue.

DOC Position

    We agree with the petitioners. It would be more appropriate to 
apply waste revenues to fruit costs, reflecting Dole's normal 
accounting system. It would also be more appropriate to apply sugar 
refunds to other materials costs, since sugar is a raw material. We 
therefore adjusted fruit costs, other materials costs, and G&A costs to 
reflect the reclassification of waste revenues and sugar refunds.

Comment 20

    Dole argues that the Department should use the amount of sugar 
refunds earned as an offset in its calculation of the G&A factor, 
rather than the amount of sugar refunds received.

DOC Position

    We disagree with Dole. We noted that Dole, in its normal accounting 
system, does not record these refunds as earned until payment is 
received. Since the amount of the refund is uncertain until payment is 
received, this appears to be a reasonable treatment and, therefore, we 
have not adjusted the sugar refund offset amounts.

TIPCO

Comment 21

    The petitioners argue that certain price adjustments reported as a 
warranty claim should be reclassified as a rebate in the final 
determination.
    TIPCO argues that the reclassification of the claim is unnecessary 
given its insignificant value. However, TIPCO asserts that the 
Department can incorporate the claim as either a rebate or a warranty 
claim.

DOC Position

    We agree with the petitioners, in part. We agree that this price 
adjustment was improperly reported as a warranty claim. It is the 
Department's practice to allow only those expenses related to quality-
based complaints to be classified as a warranty expense. See, e.g., 
Final Determination of Sales at Less Than Fair Value: Fresh and Chilled 
Atlantic Salmon from Norway, 56 FR 7661 (February 25, 1991). In this 
instance, the records do not indicate that the price adjustments were 
associated with quality based complaints.
    We disagree with the petitioners, however, that the price 
adjustment should be treated as a rebate. A rebate is a refund of 
monies paid, a credit against monies due on future purchases, or the 
conveyance of some other item of value by the seller to the buyer after 
the buyer has paid for the merchandise. In this instance, the price 
adjustment was accounted for by reducing the selling price to the 
customer. Accordingly, we are treating these expenses as discounts.

Comment 22

    TIPCO argues that the Department should compute G&A expenses for 
the final determination using the company's submitted 1994 G&A ratio 
calculation for the six months of the POI. TIPCO claims that the 
Department should not compute a G&A ratio based on 1993 financial data 
and apply that ratio to 1994 CPF manufacturing costs because the 
company's change in its accounting for factory administrative costs 
would make such a calculation nonsensical. Further, TIPCO maintains 
that application of a 1993 G&A ratio to 1994 costs would double count 
factory administrative costs since these costs would be included in 
both the numerator and the denominator of the G&A ratio calculation. 
Lastly, TIPCO argues that if the Department determines the company's 
1994 G&A ratio is unacceptable because it is based on a six-month 
period, then the Department should compute G&A expenses based on the 
unaudited financial statement data for the full-year 1994 provided by 
TIPCO at verification.
    The petitioners assert that, in keeping with its normal practice, 
the Department should use TIPCO's full-year 1993 audited financial 
statements to compute the company's G&A expense ratio for the final 
determination.

DOC Position

    We have followed our normal practice for calculating G&A expenses 
by using TIPCO's 1993 full-year, audited financial statements. See also 
Comment 35 below. However, to correct for any possible distortion 
between 1993 and 1994 costs due to TIPCO's change in accounting 
classifications, we have adjusted the company's 1993 G&A and cost of 
sales figures for an annualized estimate of factory administrative 
costs based on amounts incurred during the POI. This adjustment would 
represent our estimate of 1993 factory administrative costs since the 
actual 1993 cost figure is not available from the case record.
    We also adjusted TIPCO's net interest expense calculation to take 
into account the change to 1993 cost of sales that occurred due to the 
reclassification of factory administration costs in 1994.

Comment 23

    TIPCO states that the Department should accept the company's 
reported can weights for purposes of allocating certain can production 
department costs. TIPCO argues that difference between the can weights 
used by TIPCO in the submission and the POI can weights obtained at 
verification are insignificant. According to TIPCO, any increases to 
weights associated with certain can sizes will only be offset with 
decreases to weights for other can sizes.
    The petitioners state that the Department should adjust the costs 
of cans to incorporate the current weights obtained from the production 
department at verification

DOC Position

    We did not adjust for the differences in can weights since they had 
an immaterial affect on the cost of CPF sold during the POI. In its 
COP/CV submission, TIPCO used the standard weight of cans to allocate 
the can production departments direct labor and overhead costs. At 
verification, we noted that the can weights used to allocate labor and 
overhead costs were outdated. Therefore, we obtained can weights 
specific to the POI. Although we raised this as an issue in our 
verification report, after reviewing the POI can weight data obtained 
at verification, we note that the difference in the reported weights 
has only a slight effect on CPF costs since can production labor and 
overhead during the POI were insignificant.

Comment 24

    TIPCO states that it properly classified seasonal labor costs as 
direct, not indirect, labor. The only labor classified as indirect was 
the labor expense associated with salary of administrative personnel 
who were employed throughout the year in a supervisory or 
administrative capacity.
    The petitioners have no comments on this issue. [[Page 29567]] 

DOC Position

    We agree with the respondent and have accepted their classification 
of seasonal labor as direct labor for the final determination. During 
verification, we traced the payroll records of several seasonal 
production employees from source documentation to a specific 
fabrication cost item reported in TIPCOs income statement. We then 
reconciled this fabrication cost item to the amount reported in the COP 
and CV submission. During this testing, we noted that TIPCO normally 
accounted for the cost of the seasonal employees as part of direct 
labor costs.

Comment 25

    The petitioners state that, at verification, the Department 
discovered that TIPCO incorrectly allocated electricity to certain 
pieces of machinery (e.g., electric generators) based on horsepower 
production factors rather than horsepower consumption factors. 
According to the petitioners, the Department should correct TIPCO's 
reported variable overhead costs for this error.
    TIPCO states that it has already made changes to account for the 
electricity allocation issue found at verification in a supplemental 
submission.

DOC Position

    At verification, we found that TIPCO had overstated the amount of 
electricity allocated to certain overhead departments. A supplemental 
submission that corrects the misstatement was requested by the 
Department and received on February 28, 1995. We reviewed this 
submission and found the corrections to be appropriate. We have used 
this corrected data in reaching our final determination.

Comment 26

    TIPCO states that the Department should accept its submission 
methodology of making a downward adjustment to the cost of 
manufacturing to account for certain revenues received in connection 
with the production of subject merchandise. If this approach is not 
accepted, TIPCO believes that the Department should make an upward 
adjustment to prices pursuant to section 773(a)(4)(B) of the Act.
    The petitioners did not comment on this issue.

DOC Position

    Because of the business proprietary nature of this item, we have 
addressed TIPCO's comment and analyzed the issue in detail in the 
proprietary concurrence memorandum. Our determination was to allow the 
revenues in question as an offset to TIPCO's submitted COP and CV 
figures.

Comment 27

    Both the respondent and the petitioners raise certain issues 
regarding the appropriateness of the methods used by TIPCO to compute 
the weight of its pineapple juice and solid fruit for purposes of 
allocating costs.

DOC Position
    We believe that the issues surrounding the appropriateness of 
TIPCO's weight calculations are moot. For the final determination, 
TIPCO's fresh pineapple costs were allocated based on its normal 
accounting system and not on the company's proposed weight-based 
methodology. See Comment 6 above.

SAICO

Comment 28

    SAICO argues that the Department should exclude certain U.S. sales 
of spoiled CPF from the calculation of any dumping margins, contending 
that these sales are aberrational and that claims for spoiled goods are 
extremely rare. SAICO cites the Final Determination of Sales at Less 
Than Fair Value: Certain Welded Stainless Steel Pipe from Korea, 57 FR 
53693, 53782 (November 12, 1992) where defective corrosion-damaged pipe 
was excluded and the Final Determination of Sales of Less Than Fair 
Value: Circular Welded Non-Alloy Steel Pipe from Korea, 57 FR 
42942,42949 (September 17, 1992) (Welded SST Pipe) in which aberrant 
and damaged sales were disregarded from the analysis. Additionally, 
SAICO argues, that the Department normally excludes cancelled or 
returned sales from its margin analysis. See Welded SST Pipe.
    If the Department does not exclude the cancelled sales, SAICO 
argues that the expenses associated with the replacement shipments 
should be treated as indirect selling expenses because the 
circumstances of sale between the U.S. and German market do not differ. 
Treating the claim expenses as a circumstance of sale adjustment would 
distort the dumping margin. If the Department decides that the indirect 
selling expenses should apply only to the U.S. market, SAICO asserts 
that the allocation of the claim expense should still be made over all 
POI sales. To do otherwise would assume that prices of specific sales 
include a full allowance for aberrational and unforeseeable costs.
    The petitioners contend that the Department should adjust for the 
actual costs incurred by SAICO for shipment of the spoiled merchandise 
shipped to the U.S. customer. In their proprietary case brief, the 
petitioners provide a calculation of costs involved in this process 
based on all aspects of this transaction.

DOC Position

    We agree with the petitioners that the sales of spoiled merchandise 
should not be treated as cancelled sales given that SAICO received 
payment in full for the merchandise. Instead, we are treating the 
expenses associated with the compensation for the spoiled sales as 
warranty expenses because they were associated with quality-based 
complaints. We allocated the total expenses SAICO incurred in 
connection with the spoiled sales over all sales made to the United 
States during the POI.
    The expenses were not allocated over total worldwide sales because 
the data we have applies only to U.S. sales; we do not know whether 
SAICO made replacement shipments for spoiled merchandise to any other 
markets during the POI. Additionally, we do not believe it would be 
appropriate to allocate the expenses to the particular spoiled sales. 
SAICO does not have any warranty programs in place, and therefore its 
sales prices do not reflect an allowance for unforeseeable costs.

Comment 29

    The petitioners interpret export bill discounts as sales-specific 
expenses that were necessitated by the credit terms that SAICO provided 
to certain customers. As such, the petitioners argue that these 
expenses were actual expenses SAICO incurred on certain sales and 
should be treated as direct selling expenses.
    SAICO contends that because there is no adjustment to U.S. or 
foreign market selling price for actual interest expenses (but only 
imputed interest expenses), these expenses should not be deducted from 
U.S. price.

DOC Position

    We agree with SAICO that these charges are included in imputed 
credit expense and therefore should not be deducted from U.S. price. 
Accordingly, we have not done so.

Comment 30

    SAICO claims that, contrary to the assertions in the Department's 
verification report, the company produces syrup for CPF from a 
combination of water, sugar, and citric acid. It further maintains that 
pineapple juice is not an ingredient in its packing syrup but, instead, 
is used only for its [[Page 29568]] CPF products packed in their 
``natural juices.'' SAICO therefore asserts that the Department 
misstated in its cost verification report that the company improperly 
omitted the cost of pineapple juice for CPF products packed in heavy 
and light syrup.
    The petitioners contend that the Department should revise SAICO's 
reported CPF costs to include the cost of pineapple juice used in heavy 
and light packing syrup. The petitioners believe that SAICO's cost of 
production for CPF should include the cost of all materials used to 
produce the merchandise, including pineapple juice used for packing 
syrup.

DOC Position

    We have revised COP and CV to include an amount for the cost of 
pineapple juice used in SAICO's heavy and light packing syrups. During 
verification, we obtained documentation (verification exhibits 10 and 
15) that led us to conclude that, despite SAICO's claims to the 
contrary, the company did in fact use pineapple juice as an ingredient 
in its heavy and light packing syrup.

Comment 31

    SAICO argues that it could not rely on its normal accounting method 
for plantation pineapples for two reasons. First, it notes the fact 
that, at the time of its response preparation (as well as at the time 
of verification), the company's auditors had not made their year-end 
adjustment for pineapple costs. Thus, according to SAICO, essential 
data were missing for the company to compute the cost of plantation 
pineapples under its normal system. Second, SAICO maintains that, even 
if the year-end adjustment could have been made, the adjusting figure 
itself is an aggregate amount and cannot be divided into the materials, 
labor, and overhead cost elements that the company was required to 
report.
    SAICO further argues that, in determining the proper cost-reporting 
period for the company's self-grown pineapples, the Department should 
select the period that captures to the extent practicable the costs 
incurred with respect to pineapples harvested during the POI. SAICO 
maintains that the pineapple costs computed on a 18-month period 
reasonably reflect such costs and that the Department should therefore 
rely on this methodology in its final determination.
    The petitioners argue that SAICO's pineapple production costs 
should be based on the procedures used in the company's normal 
accounting system. Thus, the petitioners maintain that the Department 
should revise SAICO's reported costs for self-grown pineapples to 
reflect the costs actually recorded by the company during the POI, 
including adjustments made by the company's auditors.

DOC Position

    As part of our verification testing, we obtained and verified 
detailed information relating to SAICOs pineapple plantation costs. 
Contrary to SAICOs assertions in its case brief, this information 
showed monthly plantation costs, including capitalized preproduction 
costs, segregated by cost element. Moreover, the information is 
sufficient to compute a POI estimate of the year-end adjustment made by 
SAICOs auditors.
    The lack of the year-end auditors adjustment and separable cost 
elements notwithstanding, SAICO has failed to offer any reason why its 
normal accounting method should not be used to compute the cost of its 
self-grown pineapples. Nor has the company provided the Department with 
information or analysis supporting its contention that such a 
methodology would be distortive for purposes of computing the cost of 
CPF during the POI. We have therefore used the plantation cost data 
obtained at verification to recompute the cost of SAICOs self grown 
pineapples following the company's normal accounting method.

Comment 32

    SAICO argues that certain plantation cost adjustments are 
reasonable and necessary in order to avoid distorting the cost of the 
company's self-grown pineapples harvested during the POI. First, SAICO 
believes that it properly excluded from total plantation costs all of 
the costs incurred at its three newest plantations--plantation numbers 
7, 8, and 9. Second, SAICO states that it is more appropriate for the 
Department to allocate the company's plantation overhead costs based on 
the direct labor hours charged to each crop instead of on land area as 
reported in SAICO's original COP and CV submission.
    The petitioners do not specifically address these adjustments in 
their case or rebuttal briefs. As a general comment, however, the 
petitioners do argue that the Department should base the cost of 
SAICO's self-grown pineapples on costs recorded under the company's 
normal plantation accounting system.

DOC Position

    With respect to SAICO's exclusion of costs for plantations 7, 8, 
and 9, we believe in principle that this adjustment is consistent with 
the companys normal method of deferring preproduction costs during the 
pineapple growing cycle. During verification, however, we found that 
plantation 7 had begun harvesting its pineapple crop during the POI. 
Consequently, in accordance with its normal method of accounting for 
self-produced pineapples, SAICO had begun recognizing as an expense the 
pineapple preproduction costs associated with the harvested plants. We 
have therefore revised SAICOs submitted fresh pineapple costs to 
account for the POI costs recorded by the company for plantation 7. In 
addition, we have excluded the preproduction costs incurred at 
plantations 8 and 9, in accordance with SAICO's normal accounting 
method.
    For plantation overhead costs, we have accepted SAICO's labor-hour 
allocation method to charge a portion of total overhead costs to non-
pineapple crops produced at the plantations. We found that SAICO did in 
fact normally charge all of its overhead costs to pineapples and none 
to the other crops produced at the company's plantations. We believe 
that this method unreasonably inflates the overhead costs associated 
with pineapple production since the overhead costs incurred generally 
relate to the overall operations of the plantations. Moreover, in this 
instance, given the labor-intensive nature of the plantation operations 
and the fact that the overhead costs correspond more closely with 
direct labor hours than land area, we believe that SAICO's proposed 
labor-hour allocation method represents an acceptable means of charging 
overhead costs to all plantation crops harvested during the POI.

Comment 33

    SAICO argues that it is appropriate to include 1994 shutdown costs 
as part of the calculation of fixed overhead costs for the POI. 
According to SAICO, the 1994 shutdown costs are more closely associated 
with the POI than those incurred during the 1993 shutdown period.
    The petitioners contend that SAICO's production costs should be 
based on the methods used by the company in its normal accounting 
system. According to the petitioners, SAICO shut down its processing 
plant during 1993 to prepare the facility for production operations 
during the subsequent months, that is, until the next shutdown in 1994. 
Thus, the petitioners maintain that the 1993 shutdown costs were 
incurred for and directly relate to production during the POI, and that 
the Department should therefore adjust SAICO's reported fixed 
[[Page 29569]] overhead costs to account for shutdown costs under the 
company's normal methodology.
DOC Position

    We recalculated SAICO's fixed overhead costs for the POI based on 
the company's 1993 shutdown costs and following its normal accounting 
method. SAICO has historically amortized its annual plant shutdown 
costs on a prospective basis over the months following the shutdown 
period. Despite this fact, SAICO departed from its normal method and 
amortized shutdown costs retroactively for purposes of its COP and CV 
response. SAICO offered no explanation for this change in methodology 
other than to say that the 1994 shutdown costs were more ``closely 
associated'' with the POI. We found no justification for this claim. 
Further, we note the fact that SAICO's normal prospective accounting 
method was in accordance with Thai GAAP basis.

Comment 34

    SAICO argues that the Department should not adjust the company's 
CPF costs for a certain POI transaction that the company's own outside 
auditors did not see fit to reflect in SAICO's 1994 interim financial 
statements.
    The petitioners argue that this item should have been recorded as a 
loss in SAICO's accounting records and reflected in the company's 
reported COP and CV figures.

DOC Position

    Because of the business proprietary nature of this item, we have 
addressed the parties' comments and analyzed the issue in detail in the 
proprietary concurrence memorandum. Our determination was to exclude 
the transaction from SAICO's reported COP and CV calculations.

Comment 35

    SAICO argues that the Department should use the company's 1993 
audited financial statement information to compute G&A and interest 
expense for the final determination. SAICO maintains that the 1994 
financial data obtained by the Department at verification was unaudited 
and incomplete. Specifically, SAICO notes the fact that the 1994 data 
do not contain information necessary to compute the offsets for 
interest income, trade receivables, or finished goods inventory.
    The petitioners contend that the Department should calculate 
SAICO's G&A and net interest expense factors based on the company's 
1994 financial data since this information encompasses the six months 
of the POI.

DOC Position

    We have used the 1993 audited financial statements to compute G&A 
and interest expense factors. The Department normally computes G&A and 
interest expense factors based on SAICO's audited financial statement 
information for the full-year period that most closely corresponds to 
the POI. Audited financial statement information provides us with some 
degree of assurance that an independent party has reviewed SAICO's 
accounting data and expressed an opinion as to its fairness in 
reflecting the results of that company's operations. In addition, since 
companies often incur G&A and interest expenses sporadically throughout 
the fiscal year, we rely on the respondent's full-year audited data to 
ensure that our G&A and interest calculations capture the expenses 
incurred by the company over most, if not all, of its operating cycle. 
The full-year statements also make certain that we have considered any 
year-end adjusting entries made by respondent to its G&A and interest 
expenses. See, e.g., Final Determinations of Sales at Less Than Fair 
Value: Certain Hot Rolled Carbon Steel Flat Products, Certain Cold 
Rolled Carbon Steel Flat Products, Certain Corrosion-Resistant Carbon 
Steel Flat Products, and Certain Cut to Length Carbon Steel Plate from 
France, 58 FR 37125, 37135 (July 9, 1993) (Certain Carbon Steel 
Products from France).

Comment 36

    The petitioners state that, for the final determination, the 
Department should increase SAICO's reported cost of production to 
include the compensation paid by SAICO to its Board of Directors. The 
compensation paid to the Board of Directors was directly charged to 
retained earnings and was not recorded in the income statement.
    SAICO did not comment on this issue.

DOC Position

    For the final determination, we have determined that it is 
appropriate to include the Board of Directors' compensation in G&A 
costs.

Comment 37

    SAICO believes that the Department should revise its submitted 
values for the clerical corrections and modifications presented at the 
first day of verification. These modifications were: (1) A single 
drained weight used in the COP/CV tables for a specific control number 
that had been incorrectly stated, (2) using actual cases instead of 
standard cases of finished goods to calculate can and lid costs, and 
(3) revising the total net weights of the CPF production used to 
allocate variable overhead to correct for a minor mathematical error.
    The petitioners state that the Department should revise SAICO's 
cost of production to reflect the actual costs obtained during 
verification.

DOC Position

    The clerical corrections and modification were tested at 
verification and are appropriate adjustments. We have incorporated the 
adjustments into SAICO's COP and CV figures.

Comment 38

    SAICOs states that the sugar ratio used by the company in its COP 
and CV submission accurately reflects the differing amounts of sugar 
required in the production of heavy and light syrup products.
    The petitioners did not comment on this issue.

DOC Position

    We have relied on SAICO's submitted sugar ratio for allocating 
sugar costs between heavy and light syrup products for the final 
determination. SAICO's sugar ratio was found to be an average of the 
daily sugar ratio reported in the company's production logs. This ratio 
was analyzed and tested at verification with no discrepancies noted.

Comment 39

    Both respondent and petitioners raise certain issues regarding the 
appropriateness of the methods used by SAICO to compute the weight of 
its pineapple juice and solid fruit for purposes of allocating costs.

DOC Position

    We believe that the issues surrounding the appropriateness of 
SAICO's weight calculations are moot. For the final determination, 
SAICO's fresh pineapple costs were allocated based on its normal 
accounting system and not on the company's proposed weight-based 
methodology. See Comment 6 above.

Malee

Comment 40

    Malee argues that the Department should exclude from its less than 
fair value calculation certain additional ocean freight and demurrage 
expenses it incurred on some of its sales to the United States. It 
asserts that it has already been reimbursed in part for these expenses 
by its freight forwarder and states that it will be reimbursed in 
[[Page 29570]] full. Further, Malee contends that in prior cases the 
Department has not included expenses where the respondent was seeking 
reimbursement for the expense. See, e.g., Certain Internal-Combustion, 
Industrial Forklift Trucks from Japan: Final Results of Antidumping 
Duty Administrative Review, 57 FR 3167, 3179 (January 28, 1992) 
(Forklift Trucks from Japan).

DOC Position
    We agree with Malee that these expenses should be excluded from our 
calculations. In Forklift Trucks from Japan, the Department had no 
evidence on the record that the respondent's insurance company had 
rejected its claim, or that it would not be reimbursed in part or in 
full, for expenses associated with stolen trucks. In that instance, the 
Department determined that lack of this evidence was not dispositive 
that reimbursement would not occur, and thus the expenses were not 
treated as direct selling expenses.
    In this case, at verification we found evidence that Malee was to 
be reimbursed by its freight forwarder for the demurrage charges. We 
examined Malee's records and confirmed that it has already been 
reimbursed in part for these expenses. Documents on the record indicate 
that Malee will be fully reimbursed for the remaining balance of the 
charges.

Comment 41

    Malee argues that the Department should exclude certain interest 
expense which was reported as a bank charge in its sections B and C 
responses. This expense represents the interest expense for delayed 
payment.
    Malee states that since the Department's only use for interest 
expenses in the sales response is for calculating the interest rate to 
be used for the imputed credit expenses, the Department does not 
include a company's actual interest expenses as a direct expense. 
Moreover, this interest expense for late payment is already included in 
Malee's interest expense reported in the COP/CV databases and thus has 
been double counted. As a result, the interest expense for late payment 
should be removed as a direct adjustment from the sales listing.
    The petitioners argue that similar to other direct expenses, the 
late payment expense is an expense incurred by Malee for sales of CPF 
to its customers; therefore, the petitioners contend that this expense 
should be deducted as a direct expense. The petitioners claim that 
because this expense is charged by Malee's bank for late payment after 
Malee has already received payment from the bank, it is not included in 
the imputed credit expense.

DOC Position

    We agree with the petitioners that this interest expense should be 
deducted as a direct expense because this is a transaction specific 
bank charge. Because Malee received payment before it incurred this 
expense, it is not captured by our imputed credit cost. Furthermore, 
Malee's concern regarding double counting of late payment expenses is 
not substantiated because we do not have documents on the record 
demonstrating that this expense was recorded as an interest expense in 
Malee's accounting records. Accordingly, we continue to treat this 
expense as a bank charge.

Comment 42

    The petitioners argue that the Department should adjust Malee's 
submitted factory overhead costs to include an amount for foreign 
exchange gains or losses incurred on purchases of machinery depreciated 
over a 7.5 year period. Additionally, the petitioners argue that the 
Department should adjust factory overhead by removing an offset for 
reimbursement of an overpayment on a machine purchase.
    Malee agrees with the petitioners that fixed overhead should be 
adjusted for the depreciation effect of the foreign exchange gains or 
losses, but suggests that these amounts should be depreciated over five 
years. Malee did not comment on the reimbursement offset.

DOC Position

    We agree with the petitioners, in part. Since the foreign exchange 
gains or losses relate directly to machinery purchases, we consider it 
appropriate to include them in the basis of the assets. Therefore, we 
adjusted Malee's fixed overhead costs to include the depreciation 
effect of the foreign exchange gains or losses. We calculated the 
revised depreciation expense using the five-year useful life suggested 
by Malee, which is a reasonable period for the company's equipment. 
Also, we removed the reimbursement offset from the overhead calculation 
as the company's normal record-keeping included this item in other 
income. We believe this is a reasonable treatment for a minor 
reimbursement. Malee's reclassification of this item to a credit in 
fixed overhead does not represent a more precise treatment, since the 
company did not identify the credit to the specific machine or even to 
the specific group which uses this machinery. Therefore, we 
reclassified this credit to the other income account, in accordance 
with Malee's normal accounting treatment.
Comment 43

    Malee argues that the activities of its parent company, Boon Malee, 
are not related to the production of the subject merchandise and, 
therefore, its G&A expenses should not be included in the G&A factor 
calculation. To support this position, Malee refers to the Certain 
Carbon Steel Products from France, 58 FR at 37136, where the Department 
agreed that the G&A expenses of a parent company whose activities were 
not related to production of the subject merchandise should not be used 
in place of those of the company actually producing the subject 
merchandise.
    The petitioners claim that the G&A factor should be revised to 
include 1993 G&A expenses incurred by Malee's parent company. They 
argue that since Boon Malee is a holding company with no operations, 
its G&A expenses should be included in Malee's calculation. Malee's 
cite from Certain Carbon Steel Products from France is misplaced, 
according to the petitioners. They assert that the Department decided 
to base its G&A factor on the financial records of the producer, which 
included an allocation of the parent company's G&A expenses.

DOC Position

    We agree with the petitioners. We noted that Malee is the only 
directly-owned active subsidiary of Boon Malee, which is a holding 
company that has no operations. In addition, we noted that Boon Malee's 
G&A expenses are related to a building that it rents to Malee. As 
discussed in Certain Carbon Steel Products from France, the 
Department's general approach to calculating a G&A factor is to use 
Malee's G&A expenses, along with an allocation of G&A expenses from the 
parent company. 58 FR at 37136; See also Camargo Correa Metais v. 
United States, Slip Op. 93-163 at 18 (CIT August 13, 1993). Therefore, 
we included Boon Malee's G&A expenses in our adjusted calculation of 
Malee's G&A factor.

Comment 44

    The petitioners argue that we should revise Malee's submitted G&A 
expenses to include inventory write-downs made during the year. These 
adjustments are normally recorded by Malee to cost of sales. According 
to the petitioners, write-downs are a period expense, similar to G&A 
expenses, and thus should be reported as part of the fully-absorbed 
cost of products sold during [[Page 29571]] the period. The petitioners 
argue that both inventory write-downs and inventory write-offs have the 
same function of recognizing losses of future revenue and thus should 
be treated the same for COP.
    Malee argues that inventory write-downs are not a cost of 
production and should not be included in COP. It claims that the only 
effect of these adjustments is on the value of inventory for balance 
sheet purposes, and on cost of goods sold for income statement 
purposes. Further, Malee argues that there is a fundamental difference 
between COP and cost of goods sold and states that the effect of such 
revaluation is self-cancelling over time. Malee claims that these 
write-downs are a method of absorbing losses more gradually as 
inventory declines in expected market value.

DOC Position

    We agree with the petitioners that the inventory write-downs should 
be reflected in Malee's production costs. During verification, we noted 
that inventory write-downs are a normal, recurring period adjustment 
made annually by Malee. Also, we agree with the petitioners that such 
adjustments are part of the fully-absorbed cost of goods sold and 
should be included in the calculation of COP and CV. We therefore 
adjusted the G&A factor calculation to include the amount of inventory 
write-downs.

Comment 45

    Malee asserts that certain proprietary payments, applied as offsets 
to COM, should be determined based upon the amounts earned rather than 
the amounts received during the POI. It claims that it is more 
appropriate to match the income earned during the POI with the expense 
incurred. It would be inappropriate, according to Malee, to use the 
amounts received during the POI, since they relate to production in a 
prior period.
    The petitioners did not comment on this issue.

DOC Position

    We agree with Malee, in part. We noted that certain proprietary 
payments are accrued at the time production occurs and the payment is 
effectively earned. However, we noted that other payments are not 
recorded as earned until a letter is received confirming the amount to 
be paid to Malee. This letter is normally received after the production 
is completed. We agree with Malee that the actual receipt date is a 
function of timing and cash flow and has no relationship to the 
production occurring in that same period. Therefore, we adjusted the 
offset amounts to reflect the payments earned during the POI rather 
than the amounts received by Malee during the same period.

Comment 46

    Malee asserts that the Department should recalculate COP and CV 
using the can and lid costs which were submitted to the Department at 
the start of verification as a correction of an error.
    The petitioners claim that the revisions submitted at the start of 
verification should not have been accepted by the Department. These 
corrections adjusted per kilogram costs by a significant percentage, 
according to the petitioners. They argue that the explanation provided 
for this error was inadequate and should not have been accepted by the 
Department.

DOC Position

    We agree with Malee. We reviewed Malee's explanation for its 
submitted cost revisions, which are described in the March 1, 1995, 
submission, and considered it to be reasonable. During verification, we 
reconciled the revised can and lid costs to stock reports and to the 
general ledger. Therefore, we accepted these costs for purposes of 
calculating COP and CV.

Comment 47
    Malee states that the Department should recalculate COP and CV 
using the verified drained weight/net weight ratios, which were 
submitted at the start of verification. It also requests that the 
Department calculate the interest offset using the consolidated 
financial statements, as discussed at verification.
    The petitioners did not comment on these issues.

DOC Position

    We agree with Malee. We have used the submitted and reviewed 
drained weight/net weight ratios to calculate fruit costs and we used 
the consolidated financial statements to calculate CV interest expense.

Continuation of Suspension of Liquidation

    We are directing the Customs Service to continue to suspend 
liquidation of all entries of CPF from Thailand, as defined in the 
``Scope of the Investigation'' section of this notice, that are 
entered, or withdrawn from warehouse, for consumption on or after 
January 11, 1995, the date of publication of our preliminary 
determination in the Federal Register. The Customs Service shall 
require a cash deposit or posting of a bond equal to the estimated 
amount by which the FMV of the merchandise subject to this 
investigation exceeds the U.S. price, as shown below. This suspension 
of liquidation will remain in effect until further notice.
    The weighted-average dumping margins are as follows:

------------------------------------------------------------------------
                                                               Weighted-
               Producer/manufacturer exporter                   average 
                                                                margin  
------------------------------------------------------------------------
Dole........................................................        2.36
TIPCO.......................................................       38.68
SAICO.......................................................       55.77
Malee.......................................................       43.43
All Others..................................................       25.76
------------------------------------------------------------------------

ITC Notification

    In accordance with section 735(d) of the Act, we have notified the 
ITC of our determination. As our final determination is affirmative, 
the ITC will determine whether these imports are causing material 
injury, or threat of material injury, to the industry in the United 
States, within 45 days. If the ITC determines that material injury, or 
threat of material injury, does not exist, the proceeding will be 
terminated and all securities posted will be refunded or cancelled. If 
the ITC determines that such injury does exist, the Department will 
issue an antidumping duty order directing Customs officials to assess 
antidumping duties on all imports of the subject merchandise entered, 
or withdrawn from warehouse, for consumption on or after the effective 
date of the suspension of liquidation.
    This determination is published pursuant to section 735(d) of the 
Act and 19 CFR 353.20(a)(4).

    Dated: May 26, 1995.
Susan G. Esserman,
Assistant Secretary for Import Administration.
[FR Doc. 95-13695 Filed 6-2-95; 8:45 am]
BILLING CODE 3510-DS-P