[Federal Register Volume 61, Number 232 (Monday, December 2, 1996)]
[Notices]
[Pages 63822-63825]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-30627]


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DEPARTMENT OF COMMERCE
International Trade Administration
[A-201-601]


Fresh Cut Flowers From Mexico; Final Results of Antidumping Duty 
Administrative Review and Revocation in Part of Antidumping Duty Order

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

ACTION: Notice of final results of antidumping duty administrative 
review and revocation in part of antidumping duty order.

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SUMMARY: On June 4, 1996, the Department of Commerce (the Department) 
published the preliminary results of its administrative review of the 
antidumping duty order on certain fresh cut flowers from Mexico. The 
period of review is April 1, 1994 through March 31, 1995.
    We gave interested parties an opportunity to comment on our 
preliminary results. We have not changed our preliminary results of 
review. We have determined that sales have not been made below normal 
value (NV). We have also determined to revoke the order in part, with 
respect to the respondent, Rancho El Aguaje (Aguaje).

EFFECTIVE DATE: December 2, 1996.

FOR FURTHER INFORMATION CONTACT: Rebecca Trainor or Maureen Flannery, 
Import Administration, International Trade Administration, U.S. 
Department of Commerce, 14th Street and Constitution Avenue, NW, 
Washington, DC 20230; telephone: (202) 482-4733.

SUPPLEMENTARY INFORMATION:

Background

    On June 4, 1996, we published in the Federal Register (61 FR 28166) 
the preliminary results of administrative review of the antidumping 
duty order on certain fresh cut flowers from Mexico (52 FR 13491 (April 
23, 1987)), wherein we gave notice of our intent to revoke the order 
with respect to Aguaje's sales of the subject merchandise. We received 
a case brief from petitioners, The Floral Trade Council, on July 5, 
1996, and a rebuttal brief from respondent on July 12, 1996.

Applicable Statutes and Regulations

    Unless otherwise stated, all citations to the statute are 
references to the provisions effective January 1, 1995, the effective 
date of the amendments made to the Tariff Act of 1930 (the Act) by the 
Uruguay Round Agreements Act (URAA). In addition, unless otherwise 
indicated, all citations to the Department's regulations are to the 
current regulations, as amended by the interim regulations published in 
the Federal Register on May 11, 1995 (60 FR 25130).

Scope of the Review

    The products covered by this review are certain fresh cut flowers, 
defined as standard carnations, standard chrysanthemums, and pompon 
chrysanthemums. During the period of review (POR), such merchandise was 
classifiable under Harmonized Tariff Schedule of the United States 
(HTSUS) items 0603.10.7010 (pompon chrysanthemums), 0603.10.7020 
(standard chrysanthemums), and 0603.10.7030 (standard carnations). The 
HTSUS item numbers are provided for convenience and Customs purposes

[[Page 63823]]

only. The written description remains dispositive as to the scope of 
the order.
    This review covers the period April 1, 1994 through March 31, 1995.

Revocation of the Order in Part

    On April 28, 1995, Aguaje submitted a request, in accordance with 
19 C.F.R. 353.25(b), to revoke the order with respect to its sales of 
the subject merchandise. In accordance with 19 C.F.R. 353.25(b)(1), 
this request was accompanied by a certification from the firm that it 
had not sold the relevant class or kind of merchandise at less than NV 
for a three-year period, including this review period, and would not do 
so in the future. In our preliminary results we incorrectly stated that 
Aguaje had also submitted a written agreement to reinstatement in the 
order if we found that Aguaje had sold the subject merchandise at less 
than NV subsequent to revocation. Section 353.25(b)(2) requires that a 
firm that previously has been found to have sold the subject 
merchandise at less than NV also submit a written agreement to 
reinstatement in the order if we conclude that it sold the subject 
merchandise at less than NV subsequent to revocation. At the time of 
Aguaje's April 28, 1995 request for administrative review and 
revocation, this provision was not applicable to Aguaje, as we had not 
yet completed an administrative review in which we found dumping 
margins for Aguaje. The reinstatement agreement became applicable when 
we published the final results for the 1991-1992 administrative review 
on September 26, 1995 (60 FR 49569), in which we found dumping margins 
for Aguaje's sales in that period. Aguaje submitted a reinstatement 
agreement for the record of this review on November 15, 1996.

Analysis of the Comments Received

    Comment 1: Petitioner argues that Aguaje has not established its 
entitlement to revocation of the antidumping duty order pursuant to 19 
CFR 353.25(a)(2) because: (1) Aguaje failed to submit a reinstatement 
agreement when filing its request for revocation in accordance with 19 
CFR 353.25(a)(2) & (b); and (2) Aguaje failed to maintain a three-year 
period of sales at not less than NV. Petitioner notes that Aguaje 
received a calculated dumping margin of 1.54% in the preliminary 
results of the 1993-94 administrative review, and was assigned a final 
39.95 percent dumping margin for the 1991-92 administrative review on 
September 26, 1995.
    Aguaje contends that, as of the date of its request for revocation, 
April 28, 1995, the Department had never issued a final affirmative 
antidumping determination for Aguaje. Thus, the reinstatement agreement 
was not required at the time the request for revocation was filed.
    Aguaje argues that the preliminary finding of a 1.54 percent 
dumping margin for the 1993-94 review was based on a misallocation of 
indirect selling expenses which was at odds with standard Departmental 
methodology; after correction for this methodological error, Aguaje 
argues, its dumping margin becomes zero. Aguaje points out that the 
Department found zero dumping margins for the 1992-93 review, and 
preliminarily found zero dumping margins for this 1994-95 review. Thus, 
when the most recent two reviews are completed, Aguaje will have three 
consecutive reviews in which its dumping margin was zero, and will 
therefore have met the conditions for revocation under 353.25(a)(2)(i).
    Department's Position: We disagree with petitioner. Since we 
published the preliminary results in this administrative review, we 
have completed the 1993-94 review, in which we found a final margin of 
zero for Aguaje. We also found a final margin of zero for Aguaje for 
the 1992-93 period. Although we found a margin of 39.95 percent in the 
1991-92 review, Aguaje has subsequently demonstrated that it has sold 
the subject merchandise at not less than NV for three consecutive 
years. As we state in the above section, ``Revocation of the Order in 
Part,'' Aguaje has provided all the certifications required by 19 CFR 
353.25(b). Therefore, we are revoking the order with respect to Aguaje.
    Comment 2: Petitioner argues that the Department should not revoke 
the antidumping order with respect to Aguaje because Aguaje's 
questionnaire response data could not be reconciled with an audited 
financial statement and/or tax return. Petitioner cites the Preliminary 
Results of Antidumping Duty Administrative Review; Certain Fresh Cut 
Flowers from Mexico, 60 FR 19209 (April 17, 1995), in which the 
Department stated that an unaudited ``in-house'' system does not 
provide assurance that costs have been stated in accordance with 
generally accepted accounting principles, or that all sales and costs 
have been appropriately captured, and the Final Results of Antidumping 
Duty Administrative Review; Certain Fresh Cut Flowers from Mexico, 60 
FR 49569 (September 26, 1995), in which the Department stated that, 
``without such independent substantiation, the entire questionnaire 
responses are unusable.''
    Petitioner also cites the Department's rejection of the 
questionnaire responses in Chrome-Plated Lug Nuts from Taiwan, 60 FR 
44837 (August 29, 1995) (Lug Nuts), because the responses could not be 
reconciled to the respondents' audited financial statements. Petitioner 
asserts that Aguaje has provided the Department with questionable data 
for three consecutive years, and suggests that the Department postpone 
revocation until Aguaje's tax returns are available to confirm the 
reported data.
    Aguaje argues that the fact that it does not maintain records with 
the same level of sophistication as larger, multi-million dollar 
companies should not preclude it from revocation. Aguaje asserts that 
it went far beyond the accounting requirements or practices of other 
small Mexican agricultural businesses in order to demonstrate to the 
Department that it is not dumping. Aguaje maintains that its financial 
statements and subsidiary ledgers provide detailed cost and revenue 
information for all of its flower operations, and that it has fully 
satisfied the verification provisions of 353.25(c)(2)(ii).
    Department's Position: We disagree with petitioner. Although we 
routinely request that respondents provide audited financial statements 
and/or income tax returns as independent sources with which to 
substantiate questionnaire responses, we have concluded in this review 
that Aguaje cannot provide these documents because they do not exist. 
Petitioner cites language from the 1991-92 preliminary and final 
results of review of this order, in which we presented our rationale 
for requiring such sources of independent substantiation, as we also 
did in Lug Nuts. However, this review is distinct from those reviews. 
In the 1991-92 review of this order, the Department was unable to 
conclude from the record that the requested documents did not exist. In 
Lug Nuts, we found that the respondents' submissions were 
``unreconcilable to their audited financial statements and thus 
unverifiable. * * *'' Lug Nuts at 44838. In this case, respondent has 
provided evidence that it is not required by law to keep audited 
financial statements, and that it has not yet filed its income tax 
returns for the review period. Therefore, we cannot deny revocation 
with respect to Aguaje because it failed to provide these documents. 
Cf. Olympic Adhesives, Inc. v. United States, 899 F.2d 1565 (Fed. Cir. 
1990).
    Comment 3: The petitioner claims that the zero margin found by the 
Department in its preliminary results

[[Page 63824]]

was based in large part on facts otherwise available (FA) instead of 
verifiable costs or actual profit figures, and is therefore an 
imprecise analysis of Aguaje's pricing practices in the U.S. market. 
Thus, petitioner argues, the Department should reconsider revoking the 
order with respect to Aguaje at this time.
    Aguaje contends that petitioner's argument misinterprets the facts 
on the record. Aguaje asserts that total general and administrative 
(G&A) expenses were verified to original invoices, the expense ledger 
and the general ledger, and that the Department found Aguaje to be 
``generally cooperative'' at verification. Aguaje cites the 
Department's Verification Report and the Preliminary Results at 28167. 
Aguaje states that the only aspect of G&A which could not be verified 
was the allocation methodology devised by Aguaje's former counsel, 
which relied on a recalculation of the cost of goods sold for roses. In 
this instance, Aguaje believes that the Department's application of FA 
was a just and reasonable exercise of the FA provision.
    Aguaje argues that the verified data show that Aguaje's U.S. prices 
are almost 4 to 7 times its constructed value (CV) even though the 
Department applied a 52 percent profit rate to U.S. cost of production. 
Further, any G&A allocation method, however adverse to Aguaje, would 
still result in a finding of zero dumping margins, as G&A costs would 
have to increase by multiples of hundreds before any positive dumping 
margin would result.
    Department's Position: Because Aguaje could not support its 
reported allocation of G&A to the subject merchandise at verification, 
we preliminarily used the higher of the amount Aguaje reported for this 
review, or the amount it reported for the 1992-93 review, which we 
verified. We have reconsidered our application of FA for G&A for the 
final results, and have recalculated Aguaje's G&A using the entire 
unallocated G&A figure, which we were able to verify.
    We do not consider our use of FA in this case to be grounds for 
denying revocation. With respect to G&A, we used a verified figure that 
is adverse to Aguaje. With respect to profit, we calculated a 
substantial profit rate based on recent data that is representative of 
the Mexican flower industry. Even with these changes to Aguaje's 
reported data, Aguaje's margin remains zero.
    Comment 4: Petitioner argues that Aguaje understated its G&A 
expenses to the extent that it did not include the cost of income taxes 
owed. Petitioner claims that income taxes should be included in G&A 
expenses as a cost of doing business in Mexico, and the Department 
should therefore impute the cost of Aguaje's income tax liability for 
the 1994-95 period.
    Aguaje contends that the Department's long-held policy to exclude 
income taxes from the cost of production calculations does not lead to 
understated G&A rates, because the Department considers income tax to 
be a reduction in corporate profit rather than an increase in 
production cost. Aguaje cites the Final Determination of Less Than Fair 
Value; High Information Content Flat Panel Display Glass from Japan, 56 
FR 32376 (July 16, 1991) (Flat Panel Displays) and Final Results of 
Antidumping Administrative Review; Color Picture Tubes from Japan, 55 
FR 37915 (September 14, 1990).
    Department's Position: We disagree that G&A should be recalculated 
to include imputed income tax. The amount of this tax is determined 
based on the level of corporate income. We do not consider taxes based 
on the aggregate profit/loss of the company to be a cost of producing 
the product. See Flat Panel Displays at 72792. We have therefore not 
made the requested adjustment.
    Comment 5: Petitioner argues that, contrary to the statute, the 
general expense percentage the Department used for CV in the 
preliminary results does not reflect selling expenses. Petitioner 
asserts that, since Aguaje does not have a viable home or third country 
market, the Department should base CV selling expenses on Aguaje's U.S. 
selling expenses, reported for the 1994-95 period.
    Petitioner states that the Department should also confirm that 
selling expenses have been allocated based on resale prices to 
unrelated parties, rather than transfer prices between Aguaje and its 
U.S. subsidiary, Lizbeth's Wholesale Flowers, Inc. (Lizbeth).
    Aguaje argues that, if the Department were to include U.S. selling 
expenses in the calculation of total CV as advocated by the petitioner, 
it would have to deduct them as a circumstance-of-sale adjustment. 
Thus, the net effect of the inclusion of U.S. indirect selling expenses 
would be to slightly increase the amount of profit included in CV, 
which would not come close to the 400 percent increase in CV necessary 
to create positive dumping margins.
    Aguaje states that the use of acquisition costs to allocate 
Lizbeth's selling expenses is tantamount to using resale prices to 
unrelated parties, because Lizbeth's acquisition costs are equal to 
resale prices, less its commission. As Lizbeth's commission rate to 
Aguaje was substantially less than that charged to unaffiliated 
customers, Aguaje claims, the use of acquisition costs would overstate 
the selling expenses allocable to Aguaje.
    Department's Position: We have revisited this issue and have added 
to CV the amount of U.S. selling expenses incurred by Aguaje, pursuant 
to section 773(e)(2)(B)(iii) of the Act. Section 773(e)(2)(A) provides 
that CV include the actual amount of selling expenses incurred and 
realized by the specific exporter or producer being examined ``in 
connection with the production and sale of a foreign like product, in 
the ordinary course of trade, for consumption in the foreign country. . 
. .'' We determine that this provision does not apply here because 
Aguaje only sells culls in the home market. Because of (1) the 
significant physical differences between culls and export quality sales 
and (2) the major difference in commercial value for these two 
products, culls are not part of the foreign like product as defined by 
section 771(16)(A)-(C) of the Act. Therefore, we are unable to base the 
amount for selling expenses on home market sales of the like product.
    For purposes of determining an amount of selling expenses, we have 
relied on the U.S. selling expenses reported by Aguaje as a reasonable 
method for determining selling expenses. See Section 773(e)(2)(B)(iii) 
(allowing the Department to base selling expenses on ``any other 
reasonable method''). As we have stated elsewhere, ``[b]ecause we 
rejected the prices of home market and third countries for purposes of 
FMV, we find it necessary to reject the general expenses and profits 
associated with these sales.'' Certain Fresh Cut Flowers From Colombia; 
Final Results of Antidumping Duty Administrative Reviews, 61 FR 42833, 
42842 (Aug. 19, 1996). Here, we have determined that Aguaje's home 
market sales are not viable and, thus, not an appropriate basis for NV. 
Similarly, we determine that the selling expenses associated with those 
home market sales will not provide an accurate measurement of dumping 
in this case. We therefore resort to U.S. selling expenses incurred by 
Aguaje as the facts otherwise available. We note that these amounts are 
the only remaining alternative on the record for determining selling 
expenses.
    Contrary to Aguaje's assertion, there is no need for an adjustment 
for differences in circumstances of sale, as the direct selling 
expenses included in CV are the same as those included in the U.S. 
selling price. Furthermore, there is no provision in the statute for 
deducting

[[Page 63825]]

indirect selling expenses from CV in this situation.
    We agree that Aguaje's selling expenses should be allocated based 
on resale prices to unrelated parties, and not Lizbeth's acquisition 
cost (resale price plus Lizbeth's commission). We have made this 
recalculation for the final results.
    Comment 6: The petitioner argues that the Department should 
recalculate constructed export price (CEP) profit to attribute all of 
Aguaje's expenses to export quality U.S. sales as offset by home market 
cull revenue.
    Aguaje states that the Department's calculation of CEP profit was 
based entirely on U.S. sales, as Aguaje has neither home market sales 
nor costs associated with such sales.
    Department's Position: We disagree that a recalculation of CEP 
profit is necessary. As demonstrated in Attachment 1 to our preliminary 
results calculation memo, the calculation of CEP profit was based 
solely on U.S. sales revenue and U.S. costs, offset by home market cull 
revenue. As Aguaje had neither a viable home market nor any third 
country markets during the POR, Aguaje's expenses have been allocated 
to U.S. sales in their entirety. See Memorandum to the File dated May 
23, 1996, on file in room B-099 of the Commerce Department.
    Comment 7: Petitioner states that the Department should reconsider 
whether revocation is appropriate if it cannot confirm that Aguaje is 
not likely to sell merchandise at less than NV in the future, as 
required by section 353.25(a)(2) of the Department's regulations. 
Petitioner notes that several factors weigh heavily against the finding 
that Aguaje is not likely to dump subject merchandise in the future. 
These factors include Aguaje's recent history of ``evasive and 
misleading'' responses in the 1991-92 review, the Department's 
inability to rely on independent sources for verification, the massive 
pricing pressure from Colombian exporters of the subject merchandise on 
the U.S. market, and the devaluation of the Mexican peso.
    Aguaje contends that the history and facts found in the previous 
three annual reviews undercut petitioner's claim that Aguaje has failed 
to present any evidence that it will not dump in the future. Aguaje 
states that it is in the business for the sole purpose of exporting 
fresh cut flowers to the United States, and that carnation production 
in Mexico requires virtually no fixed costs. Aguaje adds that its sales 
to the United States relative to the total size of the market are so 
small that it cannot engage in predatory pricing. Finally, Aguaje 
asserts that the 1994 peso devaluation has greatly increased 
profitability of sales to the United States relative to sales in 
Mexico, rather than placing further pressure on firms to engage in less 
than fair value pricing as petitioner contends.
    Department's Position: We disagree that we should not revoke the 
order with respect to Aguaje at this time. As stated in our responses 
to the comments received from petitioner and respondent, Aguaje has 
proven that it is entitled to revocation in accordance with section 
353.25(a)(2) of the regulations. Our decision to revoke is based on the 
period April 1, 1992 through March 31, 1995. Our characterization of 
Aguaje's questionnaire response for the 1991-92 period is not relevant.
    Petitioner has presented no evidence that Colombian pricing will 
cause Aguaje to begin dumping the subject merchandise in the future. 
Furthermore, as the 1994 devaluation of the peso did not cause Aguaje 
to dump flowers, we have no basis to conclude that the most recent 
devaluation will cause Aguaje to change its pricing practices to the 
degree needed to create dumping margins, given the negative margins 
found in this review, despite the use of FA for certain elements of CV.

Final Results of Review

    We determine that no dumping margin exists for Aguaje for the 
period April 1, 1994 through March 31, 1995. We further determine that 
Aguaje has sold fresh cut flowers at not less than NV for three 
consecutive review periods, including this review period. For the 
reasons stated in our response to petitioner's comments, and because 
Aguaje has submitted the required certifications, we are revoking the 
order on certain fresh cut flowers from Mexico with respect to Aguaje 
in accordance with section 751(d) of the Act and 19 CFR 353.25(a)(2).
    This revocation applies to all entries of the subject merchandise 
entered, or withdrawn from warehouse, for consumption on or after April 
1, 1995. The Department will order the suspension of liquidation ended 
for all such entries and will instruct the Customs Service to release 
any cash deposit or bonds. The Department will further instruct Customs 
to refund with interest any cash deposits on entries made on or after 
April 1, 1995.
    The Department shall determine, and the Customs Service shall 
assess, antidumping duties on all appropriate entries. Furthermore, the 
following deposit rates will be effective upon publication of these 
final results of administrative review for all shipments of certain 
fresh cut flowers from Mexico entered, or withdrawn from warehouse, for 
consumption on or after the publication date, as provided for by 
section 751(a)(2)(C) of the Act: (1) for previously reviewed or 
investigated companies not listed above, the cash deposit rate will 
continue to be the company-specific rate published for the most recent 
period; (2) if the exporter is not a firm covered in this review, a 
prior review, or the original less-than-fair-value (LTFV) 
investigation, but the manufacturer is, the cash deposit rate shall be 
the rate established for the most recent period for the manufacturer of 
the merchandise; and (3) if neither the exporter nor the manufacturer 
is a firm covered in this or any previous review, the cash deposit rate 
will be 18.20 percent, the all others rate established in the LTFV 
investigation. These deposit requirements shall remain in effect until 
publication of the final results of the next administrative review.
    This notice serves as a final reminder to importers of their 
responsibility under 19 CFR 353.26 to file a certificate regarding the 
reimbursement of antidumping duties prior to liquidation of the 
relevant entries during this review period. Failure to comply with this 
requirement could result in the Secretary's presumption that 
reimbursement of antidumping duties occurred and the subsequent 
assessment of double antidumping duties.
    This notice also serves as a reminder to parties subject to 
administrative protective order (APO) of their responsibility 
concerning the disposition of proprietary information disclosed under 
APO in accordance with 19 C.F.R. 353.34(d)(1). Timely written 
notification of return/destruction of APO materials or conversion to 
judicial protective order is hereby requested. Failure to comply with 
the regulations and the terms of an APO is a sanctionable violation.
    This administrative review and notice are in accordance with 
section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)) and section 353.22 
of the Department's regulations.

    Dated: November 25, 1996.
Robert S. LaRussa,
Acting Assistant Secretary for Import Administration.
[FR Doc. 96-30627 Filed 11-29-96; 8:45 am]
BILLING CODE 3510-DS-P