SUMMARY

On October 31, 1997, the Department of Commerce (the Department) released to interested parties for comment the Draft Results of Redetermination Pursuant to Court Remand (Draft Results) in connection with Certain Fresh Cut Flowers from Colombia; Final Results of Antidumping Duty Administrative Reviews, 61 FR 42833 (August 19, 1996), and the September 17, 1997, remand order of the Court of International Trade in Cultivos Miramonte S.A. and Flores Mocari S.A. v. United States, Slip Op. 97-132.

This remand pertains to Cultivos Miramonte S.A. and Flores Mocari S.A. (collectively "the Cultivos Miramonte Group"⁽²⁾) and the following aspects of the Department's antidumping duty margin calculations: 1) the cost-allocation treatment of land-adequation (land-preparation) costs; 2) the inflation-adjustment factor used to adjust production costs; 3) the interest rate used to impute U.S. credit expenses.

The Department received comments from the FTC regarding the inflation-adjustment factor used to adjust production costs. The Cultivos Miramonte Group submitted comments regarding the cost-allocation treatment of land-preparation costs and the inflation-adjustment factor used to adjust production costs. These comments are addressed in this redetermination.

As a result of this remand the Cultivos Miramonte Group's antidumping duty margin for the period of review from March 1, 1993, through February 28, 1994, decreased from 2.08 to 1.04 percent. The Cultivos Miramonte Group's antidumping duty margins for the periods of review from March 1, 1991, through February 29, 1992, and March 1, 1992, through February 28, 1993, did not change as a result of this remand.

BACKGROUND

On September 17, 1997, the Court of International Trade (CIT) issued an order remanding to the Department Certain Fresh Cut Flowers from Colombia; Final Results of Antidumping Duty Administrative Reviews, 61 FR 42833 (August 19, 1996) (Final Results of Reviews 5, 6, and 7). The Final Results of Reviews 5, 6, and 7 covered a total of 348 producers and/or exporters and their shipments of certain fresh cut flowers, i.e., standard carnations, miniature (spray) carnations, standard chrysanthemums, and pompon chrysanthemums,

from Colombia to the United States during at least one of the following periods of review (PORs): March 1, 1991 through February 29, 1992 (5^th POR); March 1, 1992 through February 28, 1993 (6^th POR); March 1, 1993 through February 28, 1994 (7^th POR). This remand only affects two of the 348 producers and/or exporters subject to review, i.e., Cultivos Miramonte S.A. and Flores Mocari S.A., and their shipments of certain fresh cut flowers from Colombia during the 5^th, 6^th, and 7^th PORs.

In Cultivos Miramonte S.A. and Flores Mocari S.A. v. United States, Slip Op. 97-132 (Cultivos Miramonte), the CIT remanded Final Results of Reviews 5, 6, and 7 and directed the Department to do the following with regard to the Cultivos Miramonte Group's antidumping duty margin calculation: 1) reconsider the cost-allocation treatment of land-preparation costs; 2) select an inflation-adjustment factor for pompons (pompon chrysanthemums) and chrysanthemums (standard chrysanthemums) based upon the production cycle of these flower types; 3) correct the interest rate selected to calculate imputed U.S. credit expenses. The Department has addressed each issue remanded by the CIT and presents its analysis below.

On October 31, 1997, the Department released to interested parties for comment the Draft Results and provided them until November 6, 1997, to submit comments. Following the initial release, we granted all interested parties an extension of time until 12:00 p.m., noon, Monday, November 10, 1997. The FTC filed its comments on the original due date (November 6, 1997) and the Cultivos Miramonte Group filed its comments on November 10, 1997. Upon reviewing the comments filed by the Cultivos Miramonte Group, the Department realized the submission contained new and unsolicited factual information. The Department returned the submission to the Cultivos Miramonte Group on November 13, 1997, and allowed it to remove the new and unsolicited information from the submission and refile the comments on the following day (see November 13, 1997, letter from Laurie Parkhill, Office Director, AD/CVD Enforcement to the law firm of Arnold & Porter and the November 13, 1997, memorandum from Mark Ross, Import Compliance Specialist, to the file). On November 14, 1997, the Cultivos Miramonte Group resubmitted its comments with the new and unsolicited factual information removed.

Below the Department presents its Draft Results. Following the text of the Draft Results are summaries of the comments that the FTC and the Cultivos Miramonte Group filed and the Department's positions on the comments. The Department's position on the comments also contain an explanation of any changes made for the Final Results of Redetermination Pursuant to Court Remand (Final Results of Redetermination).

DRAFT RESULTS

Issue 1: Cost-Allocation Treatment of Land-Adequation Costs

In the original reviews, Cultivos Miramonte reported that it incurred land-adequation costs for leveling terrain, digging ditches, and constructing drainage systems for its greenhouses. See Pub. Doc. 783, at 31 (July 8, 1994). In Cultivos Miramonte's normal accounting records, the company treats the costs as a deferred asset and then amortizes the costs over a five-year period. However, for reporting its costs to the Department, the company reasoned that its land-adequation costs are tied to the cost of building greenhouses and amortized land-adequation costs over the same period as greenhouse costs, i.e., twenty years. The Department's questionnaire requested that the company's cost submission be consistent with the company's normal accounting system and records, if those were consistent with Generally Accepted Accounting Principles (GAAP). See Pub. Doc. 450, at 62 (April 13, 1994). Cultivos Miramonte instead stated that its land-adequation cost methodology was the same it had used for the third and fourth administrative reviews. Pub. Doc. 783, at 31.

In commenting on Certain Fresh Cut Flowers from Colombia; Preliminary Results of Antidumping Duty Administrative Review, Partial Termination of Administrative Reviews, and Notice of Intent to Revoke Order (in Part), 60 FR 30270, 30271 (June 8, 1995), the FTC challenged the Department's acceptance of Cultivos Miramonte's methodology for reporting land-adequation costs. It asserted that, as Cultivos Miramonte had provided no evidence that the five-year amortization used in its normal books and records was inappropriate, the Department should adhere to the costs on a five-year basis, as in the company's accounting records. See Final Results of Reviews 5, 6, and 7 at 42846. While Cultivos Miramonte's reporting was consistent with its approach in prior segments of the proceeding and the Department had accepted that approach, it was contrary to the Department's request in these reviews that any such reporting be in accordance with GAAP-consistent accounting records. See Pub. Doc. 450, at 62. The Department noted that an error in methodology, unmentioned and undiscovered in previous reviews, does not constitute explicit acceptance of that methodology. See Final Results of Reviews 5, 6, and 7 at 42846. In analyzing the land-adequation costs methodology in these reviews, the Department found the error to be significant, i.e., the reported land-adequation costs were about 75 percent less than the costs as stated in Cultivos Miramonte's normal accounting records. Therefore, the Department adjusted the reported costs to reflect the company's normal five-year amortization schedule. The Department concluded that while Cultivos Miramonte chose to depart from its normal accounting records it had not explained why it treated land-adequation costs differently in its accounting records and it failed to demonstrate that the five-year amortization of land-adequation costs in its accounting records did not reasonably reflect the cost of producing the subject merchandise. Id.

Cultivos Miramonte argued before the CIT that the Department's decision to disallow the twenty-year amortization of land-adequation costs in the 5^th, 6^th, and 7^th PORs after allowing such amortization in the two prior segments of this proceeding is unsupported by substantial evidence and not in accordance with the law.

The CIT found that the Department's determination is not supported by substantial evidence because the agency had not explained the basis for its change of position from the prior reviews. The Court found that Cultivos Miramonte alerted the Department that it oriented its accounting records primarily for tax purposes and that the firm offered the rationale that land-adequation costs provide a benefit equal to the life of its greenhouses, i.e., twenty years. While acknowledging that Cultivos Miramonte's explanation may or may not have been sufficient, the CIT noted that the firm did provide some justification for its claim that the five-year amortization period in its accounting records did not reasonably reflect the cost of producing the merchandise. Finally, the CIT concluded that, if the Department overlooked the question of distortion when it accepted Cultivos Miramonte's twenty-year amortization of land-adequation costs in prior segments of this proceeding, then the agency must articulate this rationale.

The Court is correct that the Department overlooked the question of distortion when it accepted Cultivos Miramonte's twenty-year allocation for land-adequation costs in the previous reviews. It was not until these reviews, when the FTC raised the issue for the first time, that the Department fully analyzed the correctness of Cultivos Miramonte's land-adequation costs methodology. However, having examined this question in the reviews and again pursuant to the Court's order, the Department determines that its position to amortize land-adequation costs over five years is supported by substantial evidence on the record.

The Department's practice is to adhere to a company's recording of costs, where such recording is in accordance with the GAAP of the company's home country and if the Department is satisfied that such principles reflect the cost of producing the subject merchandise. Final Results of Reviews 5, 6, and 7 at 42846. This practice has been sustained by the CIT. See, e.g., Laclede Steel Co. v. United States, Slip Op. 94-160, 21-25 (CIT October 12, 1994) and Hercules, Inc. v. United States, 673 F. Supp. 454 (CIT 1987). The Department's questionnaire to Cultivos Miramonte stated that, if its records were consistent with GAAP, that its reporting of costs "should be consistent with your normal production accounting system and based on your actual accounting records." Pub. Doc. 450, at 62. Cultivos Miramonte reported to the Department that its accounting records are "taken under a tax criteria which goes in accordance with generally accepted accounting principles and the legal norms established in Colombia." Pub. Doc. 783, at 32. In its response, however, although Cultivos Miramonte acknowledged that in its accounting records land-adequation costs are "amortized within a 5 year term," it departed from its normal accounting records and instead chose to amortize land-adequation costs over a twenty-year period for purposes of its antidumping submissions. Id. at 31. Colombian GAAP requires that companies amortize assets over the period some benefit is derived from the assets (the assets' useful life). Since Cultivos Miramonte's accounting records are kept in accordance with Colombian GAAP, the five-year amortization period it used in its accounting records reflects the company's assessment of the useful life of the land-adequation costs. Therefore, absent evidence that a five-year amortization of land-adequation costs is distortive, the Department was correct in adhering to its practice and Cultivos Miramonte should have adhered to its accounting records. There is no evidence that depreciation of this asset over a five-year useful life is distortive.

Cultivos Miramonte defined land-adequation costs as "leveling, ditching, and drainage," terrain preparation that would "provide a benefit over the useful life of the greenhouse." Id. Cultivos Miramonte stated that it departed from its normal accounting records because it "conceived" land-adequation costs "as attached to the greenhouses and therefore it amortized within a 20 year term," the same term as the greenhouses. Id. Cultivos Miramonte justified the use of the alternative methodology by trying to correlate the useful life of land-adequation costs with the useful life of greenhouses. However, Cultivos Miramonte's explanation of how greenhouses and land-adequation costs tie to one another is insufficient. For example, it is not evident that "leveling, ditching, and drainage" are one-time events just for the construction of greenhouses rather than activities that occur periodically. Thus, lacking a sufficient explanation to demonstrate that allocation of such land-adequation costs over five years is distortive, the Department can be satisfied that the five-year amortization reported in Cultivos Miramonte's GAAP-consistent accounting records reasonably reflects the cost of production.

The Department determines that the record supports a conclusion that a five-year allocation of land-adequation costs results in a proper allocation of the expenses, correctly matches costs with revenues, and prevents the costs from being significantly under-reported. Thus, upon reconsideration of this matter, the Department continues to adhere to the five-year allocation treatment of land-adequation costs it used in the final results of these reviews. If in a prior segment of this proceeding the Department had identified the distortive nature of Cultivos Miramonte's twenty-year amortization of land-adequation costs, it would have made the same change as in the final results of the 5^th, 6^th, and 7^th reviews.

Issue 2: Inflation-Adjustment Factor Used to Adjust Cultivos Miramonte's Production Costs

A change in Colombian GAAP, effective January 1, 1992, required that firms revalue certain financial-statement accounts to reflect the effects of inflation experienced during each financial-reporting period. Thus, to reflect this change in Colombian GAAP, in preparing for the Final Results of Reviews 5, 6, and 7, the Department asked respondents to provide additional information to adjust the depreciation and amortization costs that they reported as part of the cost of production. Cultivos Miramonte provided inconsistent data on the effects of inflation on its cost data and, therefore, the Department considered the company to be nonresponsive to the request for inflationary-adjustment data.⁽³⁾ Thus, in the Final Results of Reviews 5, 6, and 7, as partial best information available (BIA), the Department applied inflation-adjustment factors to the post-January 1, 1992, costs that Cultivos Miramonte reported in Tables 2A through 2D of its margin-analysis spreadsheets. (The Department did not apply the inflation-adjustment factors to the depreciation expenses reported in Line 181 of Table 2C. In Table 2D the Department only applied the inflation-adjustment factors to Line 214.⁽⁴⁾) The inflation-adjustment factors were based on monthly inflation rates published by the Colombian government. See the Department's Memorandum from Michael Martin and William Jones to Richard Rimlinger, Pub. Doc. 1721 (February 20, 1996).

Cultivos Miramonte argued before the CIT that the Department's selection of BIA was inappropriate and unlawful. Specifically, Cultivos Miramonte argued that the Department's selection of BIA must be based upon substantial evidence, bear a rational relationship to the data for which the Department intends to substitute, and be neutral. In support of these three criteria, Cultivos Miramonte cited Micron Tech., Inc. v. United States, 893 F. Supp. 21, 25 (CIT 1995), D&L Supply Co. V. United States, 888 F. Supp. 1191, 1195-96 (CIT 1995), and NSK Ltd. v. United States, 919 F. Supp. 442, 448 (CIT 1996), respectively. Cultivos Miramonte stated that the Department's application of a 21.24 percent inflation-adjustment factor does not meet these three BIA criteria. The company reasoned that such a factor is based on the production cycle of carnations, while the company only incurred costs for producing standard chrysanthemums and pompon chrysanthemums, which have a much shorter production cycle than carnations, and significantly overstates costs because inflation-adjustment factors based on the shorter production cycle of standard chrysanthemums and pompon chrysanthemums would only increase monthly reported costs of production somewhere between two and eleven percent.

In Cultivos Miramonte, the CIT sustained the Department's decision to reject Miramonte's inflation adjustments and use inflation-adjustment factors as partial BIA to adjust Cultivos Miramonte's production costs. However, the CIT ordered that the Department use information on the record to recalculate the inflation-adjustment factors for Cultivos Miramonte's cost of producing standard chrysanthemums and pompon chrysanthemums. The CIT noted that the Department based the inflation-adjustment factors applied to the cost of producing these flower types inappropriately on the production cycle of carnations, which is much longer than the production cycle for standard chrysanthemums and pompon chrysanthemums. Furthermore, the CIT instructed the Department to explain the appropriateness of the amount it selects, in light of the FTC's argument that Cultivos Miramonte was non-cooperative with respect to the Department's request for information.

In accordance with the CIT's order, the Department has recalculated the inflation-adjustment factors it applied as partial BIA to the production costs of pompon chrysanthemums in the 7^th POR.⁽⁵⁾ The recalculated inflation-adjustment factors are based on the entire production cycle for pompon chrysanthemums, which the Department has estimated to be about four months based on the record evidence. According to the record, Cultivos Miramonte carries out a very intensive production system for the cultivation of these flower types, in which cuttings are taken from mother plants, put in cool storage for a week, placed in rooting benches for two weeks, planted in greenhouses (where cultivation from planting to blooming takes three months), harvested, and then replanted. See Pub. Doc. 783, at 21-25 (July 8, 1994). Based on this information, the Department estimates that it takes four months from the time cuttings are taken from mother plants until the flowers are harvested.

According to Cultivos Miramonte's description of its accounting system, costs incurred during the first month of the production cycle are treated as an asset and are not recorded in the company's books as an expense until the flowers are harvested at the end of the production cycle, i.e., approximately four months later. This accounting practice is necessary for matching costs with revenues. Since Cultivos Miramonte treats the costs incurred during the first month as an asset, by the time the company expenses the asset it has increased in value by a factor of four months' worth of inflation and, therefore, an adjustment is required in accordance with Colombian GAAP. The Department's new inflation-adjustment factors, based on the four-month period, are more appropriate than the inflation-adjustment factors it applied to Cultivos Miramonte's pompon chrysanthemum production costs in the final results. This is because the inflation-adjustment factors the Department applied in the final results were based on the cumulative effects of inflation during the production cycle of carnations, which is a much longer period. Thus, in accordance with the CIT's order, the Department applied as partial BIA the four-month inflation adjustment factor to the costs that Cultivos Miramonte reported in Tables 2A through 2D of its margin-analysis spreadsheet for pompon chrysanthemums. (The Department did not apply the inflation-adjustment factors to the depreciation expenses reported in Line 181 of Table 2C. In Table 2D the Department only applied the inflation-adjustment factors to Line 214. See footnote 4.)

Regarding the FTC's argument of noncompliance, the Department notes that, even in a partial BIA situation, BIA can be adverse. See National Steel Corp. v. United States, 870 F.Supp. 1130, 1135 (CIT 1994) ("[w]hen errors in the information submitted constitutes a failure to provide the necessary data, Commerce applies a more adverse dumping margin as partial BIA"). Here, Cultivos Miramonte provided inconsistent information on the effects of inflation on its cost data. Its ultimate explanation regarding these inconsistencies was provided after closure of the record of this proceeding; thus, it was rejected by the Department properly. Def. Brf., at 20-21. Given the information the Department had at the time it made the determination, the Department properly treated the inconsistencies in Cultivos Miramonte's data as errors. Therefore, the Department is correct to apply an adverse inference in selecting partial BIA as Cultivos Miramonte did not provide, in a timely manner, the necessary data the Department requested regarding inflation adjustments. An adverse inference induces respondents to provide timely, complete, and accurate information. In this situation, applying the four-month inflation-adjustment factor is adverse since some deferred costs only incurred three-months' worth of inflation before being recorded as an expense in Cultivos Miramonte's books.

Issue 3: Interest Rate Used to Impute U.S. Credit Expenses

In the final results of the 7^th POR, the Department inadvertently used a prime U.S. dollar short-term borrowing rate of 7.00 percent to impute U.S. credit expenses. This error resulted from a mechanical operation that the Department performed in collapsing the data of Cultivos Miramonte S.A. and Flores Mocari.

The CIT ordered that the Department correct this ministerial error. The Department has carried out the CIT's order by substituting the Cultivos Miramonte Group's actual U.S. dollar short-term borrowing rate for the prime rate in the calculation of imputed U.S. credit expenses on all 7^th POR sales.

COMMENTS RECEIVED AND THE DEPARTMENT'S POSITION

A. Cost-Allocation Treatment of Land-Adequation Costs

Comment 1: Cultivos Miramonte contends that in the Draft Results the Department erred in continuing to amortize the land-adequation (land-preparation) costs over a five-year period and claims that the Department's finding lacks any support from the record evidence. Regarding the Department's assertion that the five-year amortization period reflects the company's assessment of the useful life of the land preparation, Cultivos Miramonte contends that, to the contrary, its accounting is tax-motivated and does not reflect the useful life of the asset. The company asserts that the record supports that the five-year amortization period is used solely for tax purposes because it told the Department its accounting was tax-motivated and not reflective of the useful life of the asset.

Cultivos Miramonte notes that in other aspects of the Department's antidumping cost analysis it permitted companies to depart from their normal books and records in order to match costs more closely with production. Cultivos Miramonte asserts that this practice shows the Department has "recognized in this case, Colombian GAAP affords companies wide latitude in the selection of amortization periods." Cultivos Miramonte Comments, at 2. As support for this argument, Cultivos Miramonte makes reference to the Department's acceptance of its reporting methodology of deferring propagation and production expenses over a longer period than that used in its books and records.⁽⁶⁾ Cultivos Miramonte contends that its reporting of land-preparation expenses is not any different.

Cultivos Miramonte also contends that there is no evidence on the record to support the Department's assertion that land-preparation costs for leveling, ditching, and drainage occur periodically and that such an assertion is contrary to Cultivos Miramonte's statement that these activities "will provide a benefit over the useful life of the greenhouse." Id. Cultivos Miramonte asserts that if the Department found this explanation of land-preparation costs to be insufficient it should have notified the company or requested additional information.

Cultivos Miramonte claims that its statement that the land-preparation costs will provide a benefit over the useful life of the greenhouse is per se evidence in itself that the use of a five-year amortization period is distortive. Cultivos Miramonte states that if "the costs benefit production from the greenhouse over twenty years, it is distortive to allocate such costs only over production in the first five years."

Citing the Department's response to respondents' comments in the Final Determination of Sales at Less Than Fair Value; Certain Fresh Cut Flowers From Colombia, 55 FR 6842, 6849 (March 5, 1987) (Final Determination), Cultivos Miramonte requests that the Department provide an explanation reconciling its finding in this segment of the proceeding to the decision in the less-than-fair-value (LTFV) investigation that land-preparation expenses should be capitalized in the value of the land rather then being expensed or amortized at all. Cultivos Miramonte contends that the Department should either follow that determination or explain why it has not.

Department's Position: The Department disagrees with Cultivos Miramonte's assertion that the administrative record supports a conclusion that a five-year amortization period for land-preparation costs is solely for tax purposes. The part of the record to which Cultivos Miramonte refers in order to justify not using a five-year amortization period is simply a declaratory statement claiming that its accounting records are "tax-motivated." Such a statement is insufficient in a situation where the Department's questionnaire specifically requested that the company's cost submission be consistent with its accounting records, if those records were consistent with GAAP. As noted on page 7 of this redetermination, Cultivos Miramonte reported that its accounting records are "taken under a tax criteria which goes in accordance with the generally accepted accounting principles and legal norms established in Colombia." Pub. Doc. 783, at 32. However, Cultivos Miramonte chose to ignore the Department's instructions and used an alternative reporting methodology without providing a sufficient explanation or documentary evidence to support that such a methodology was more appropriate, given the circumstances of this case. If Cultivos Miramonte had provided a sufficient explanation or documentary evidence to support its claims that 1) its accounting records are tax-motivated and 2) land-preparation costs are tied exclusively to construction of greenhouses that last twenty years, we might have been able to determine whether an alternative reporting methodology was appropriate. Lacking such evidence on the record, however, it was appropriate to disregard the twenty-year amortization of the land-preparation costs and base our findings on substantial evidence, i.e., that costs should be amortized over five years, the period used in Cultivos Miramonte's accounting records which it kept in accordance with GAAP.

Even if we were to accept Cultivos Miramonte's theory that land-preparation costs are properly amortized over the useful life of greenhouses, we find that record evidence indicates that not all of the company's greenhouses have the same useful life. Specifically, Cultivos Miramonte stated that "(m)ost of our greenhouses correspond to the new 'Space Structure Greenhouses' which are estimated to last twenty years according to manufacturer specifications." Id. at 23 (emphasis added). This suggests that not all of the greenhouses are of the type that would last twenty years. We examined the record further and found evidence in exhibits

D-1A, D1-2, and D1-B of respondent's July 8, 1994, submission to indicate that, during the review periods, Cultivos Miramonte purchased "wood for greenhouses." Moreover, the cost of wood for greenhouses was significant. This evidence suggests that certain of Cultivos Miramonte's greenhouses are indeed of the wooden type. Moreover, according to Cultivos Miramonte, these wood greenhouses have an expected useful life of five years. Id. at 39. Therefore, any land-preparation costs attributed to the construction of wooden greenhouses would only be amortized over a five-year period. Thus, we find that not all of the land-prepration costs should be amortized over twenty years as not all of the greenhouses are of the type that Cultivos Miramonte asserts have a useful life of twenty years. Accepting Cultivos Miramonte's proposition would be distortive, given the evidence available.

We agree with Cultivos Miramonte that in certain aspects of our antidumping cost analysis we have permitted companies to depart from their normal books and records in reporting the cost of production. However, we disagree with respondent's assertion that this indicates that we recognize that "Colombian GAAP affords companies wide latitude in the selection of amortization periods." Cultivos Miramonte Comments, at 2. Rather, as noted in Final Results of Reviews 5, 6, and 7 at 42838, this is indicative of our practice of adhering to an individual firm's recording of costs in accordance with GAAP of its home country if we are satisfied that such principles reasonably reflect the costs of producing the subject merchandise. Where we are not satisfied that an individual firm's recording of costs in accordance with GAAP reasonably reflects the cost of production, we permit companies to depart from their normal books and records. An example of such a situation is our allowing Cultivos Miramonte to defer propagation and production expenses for three and four months, respectively. We permitted this because we were not satisfied that a one-month deferral period for recording propagation and production costs, Cultivos Miramonte's normal accounting practice, reasonably reflects the company's cost of production. Further, the record evidence indicates the fact that the entire production cycle for pompon chrysanthemums and standard chrysanthemums is approximately four months and, therefore, we permitted the company to depart from its normal books and records in order to match the cost of production with revenues more accurately. The amortization period for land-adequation costs presents a different situation. Lacking evidence that the 20-year amortization period results in a proper allocation of costs by correctly matching costs with revenues, we have determined that the twenty-year amortization period results in Cultivos Miramonte's costs being significantly under-reported.

With regard to Cultivos Miramonte's request that the Department provide an explanation reconciling its finding on the treatment of land-preparation costs in these segments of the proceeding to a decision in the LTFV investigation on the treatment of land-preparation costs, we note that the statement in the LTFV investigation was based on a different set of circumstances and is not relevant to our treatment of Cultivos Miramonte's land-preparation costs in these segments of the proceeding. The decision in the LTFV investigation was based on the assumption that "land preparation expenditures" comprised expenses incurred during the start-up phase of a company's operations, i.e., agronomic analysis, and that the costs did not relate to propagation and greenhouse construction. In fact, we stated that "(t)hose costs related to propagation and greenhouse construction, however, are capitalized and amortized and therefore included in the costs during the period of investigation." See Final Determination at 6849. Based on the information on the record these segments of the proceeding, we have determined that the expenses Cultivos Miramonte categorized as land-preparation costs are the types of expenses that should be amortized.

B. Inflation-Adjustment Factor Used to Adjust Cultivos Miramonte's Production Costs

Comment 1: Cultivos Miramonte argues that because it incurs the costs of producing pompons over a four-month period the costs are largely contained within the POR. Therefore, Cultivos Miramonte contends, the Department should not have adjusted these costs for the effects of inflation. Citing Final Results of Reviews 5, 6, and 7 at 42845, Cultivos Miramonte notes that the Department made a distinction between not adjusting for inflation effects that are largely contained within the POR and adjusting for inflation effects that extend largely beyond the POR. Cultivos Miramonte contends that, under this premise, no inflation adjustment is appropriate for pompons since the four-month production cycle and associated costs are confined largely within the POR.

Cultivos Miramonte contends that, in the application of inflation-adjustment factors for the Draft Results, the Department overstated the inflation adjustment by adjusting all deferred propagation, deferred production, and harvesting expenses for the effects of four-months' worth of inflation. Cultivos Miramonte explains that, under its "offset" methodology for reporting these expenses, it moves propagation costs forward four months, it moves production costs forward three months, and it expenses harvesting costs in the month incurred. Because of this reporting methodology, Cultivos Miramonte contends that the Department should have applied the following methodology: 1) a four-month inflation adjustment to deferred propagation costs; 2) a three-month inflation adjustment to deferred production costs; 3) no inflation adjustment to harvesting costs.

Cultivos Miramonte claims that applying four-months' worth of inflation is inaccurate and argues that the Department's adjustment has no legal basis because all the data necessary to perform "accurate" calculations is available. Cultivos Miramonte's Comments, at 7. Cultivos Miramonte cites to information on the record in support of its statement that the information is available to calculate the "accurate" adjustment it desires. Cultivos Miramonte also refers to the Federal Circuit's decision in D&L Supply Co. v. United States, 113 F.2d 1220, 1222-23 (May 8, 1997), and argues that, in accordance with this decision, BIA must "(s)erve the basic purpose of the statute -- determining current margins as accurately as possible."

Cultivos Miramonte claims that the finding upon which the Department based its decision to apply adverse BIA is not supported by record evidence, asserting that the record is clear on the reason for any apparent inconsistencies in data provided in its July 18, 1995, supplemental response. The company contends that all it did was change the methodology in this submission to revert to the one-month offset period from those reported in its original response to those contained in its books. The company acknowledges that the Court upheld the Department's application of BIA on this basis and that this change was inappropriate. However, it asserts that it explained the change fully and that its explanation was consistent with the data it had provided; therefore, Cultivos Miramonte maintains that the Department has no basis for applying adverse BIA. Cultivos Miramonte requests that, if the Department continues to find the change in its reporting inappropriate, the Department should reverse the change and calculate "appropriate and accurate" inflation adjustments.

Department's Position: The issue the Court put before the Department is to select an inflation-adjustment factor for pompon chrysanthemums and standard chrysanthemums based upon the production cycle of these flower types. Notwithstanding the fact that the Court sustained the Department's determination to use BIA to adjust Miramonte's costs for inflation, the Department requested a redetermination on this issue because, as BIA, it found that the selection of an inflation-adjustment factor based on the production cycle of carnations was an inadvertent error. Thus, for this redetermination, the Department has used information on the record to recalculate BIA inflation-adjustment factors for Cultivos Miramonte's pompon chrysanthemums. Furthermore, in accordance with the CIT's instructions, the Department has explained the appropriateness of the amount it selected as BIA in light of the FTC's argument that Cultivos Miramonte was non-cooperative with respect to the Department's request for information. See the Draft Results on this issue above and our response to Comment 4 below. Having complied with the Court's instructions, we find that Cultivos Miramonte's comments are outside the scope of this redetermination. Therefore, having complied with the Court's instructions, we have not addressed Cultivos Miramonte's comments here.

Comment 2: Cultivos Miramonte contends that in its application of the four-month inflation adjustment factors the Department erred by adjusting the depreciation expenses reported in Line 214 of Table 2D. Cultivos Miramonte asserts that the Department's BIA adjustment only applies to the deferred propagation and production costs. Cultivos Miramonte claims that the depreciation expenses it reported in Line 214 of its July 18, 1995, submission reflect the correct inflation adjustments to this line and that any additional adjustment for the effects of inflation will result in double-counting.

Department's Position: We disagree with Cultivos Miramonte's claim that the depreciation expenses it reported in Line 214 of Table 2D were adjusted twice for the effects of inflation as a result of our adjustment of the expenses. However, in investigating the company's comment on this issue, we realized that the adjustment we made for the Draft Results was inappropriate considering the record evidence on this issue. In making its changes for the Draft Results, the Department did not use the inflation-inclusive depreciation expenses respondent reported in its July 18, 1995, supplemental questionnaire response. Rather, for the Draft Results, we applied four-month BIA inflation-adjustment factors to the unadjusted expenses in Line 214 of Table 2D of the margin-analysis spreadsheets we used for the preliminary results of review. While this did not result in double-counting for the Draft Results, it did result in an improper inflation adjustment. We note that the depreciation expenses Cultivos Miramonte reported under Line 214 of Table 2D in its July 18, 1995, submission are the values that we should have used for the margin calculations because the depreciation expenses were not affected by the change in Cultivos Miramonte's reporting methodology that led to our decision to apply BIA to the other production costs. Thus, for the Final Results of Redetermination, we have used the depreciation expenses reported under Line 214 of Table 2D in Cultivos Miramonte's July 18, 1995, submission and have not made any additional adjustments for inflation.

Comment 3: Cultivos Miramonte contends that the Department applied four-month inflation adjustment inappropriately to the royalty payments contained in Table 2A of the margin-analysis spreadsheets. Citing to the December 1, 1994, preliminary results analysis memorandum, Cultivos Miramonte notes that the Department added the royalty payments to the costs included in Table 2A and the company asserts that the Department's BIA adjustment should only apply to deferred production costs included in that table. Cultivos Miramonte notes that the royalty payments are based on costs incurred in the current month and do not receive the same three- or four-month deferral as other costs. To correct this error, Cultivos Miramonte suggests that the Department subtract the royalty payments contained in Table 2A before making any inflation adjustments to the other costs included in the table and then add the unadjusted royalty payments back to the costs of production.

Department's Position: We agree with Cultivos Miramonte on this issue and have made the suggested correction.

Comment 4: The FTC disagrees with the Department's selection of a four-month inflation-adjustment factor as BIA for adjusting Cultivos Miramonte's pompon production costs. The FTC contends that the adjustment factor the Department selected as BIA for the Draft Results is not adverse and cites the remand instructing the Department to address this concern. The FTC notes that the Court did not disagree with the application of an adverse form of BIA as a measure to induce companies to provide complete, timely, and accurate information, but only found that it was an "error for Commerce to consider only a carnation-based inflation adjustment factor." FTC Comments, at 1. As adverse BIA, the FTC suggests that the Department apply a fourteen-month inflation-adjustment factor that is based on the simple average of the twenty-four-month carnation production cycle and the four-month pompon production cycle. The FTC asserts that this would be appropriate because Cultivos Miramonte produced a variety of flower types and, in doing so, incurred costs for items like fertilizer and pesticides that would have benefitted all flower types. Lacking accurate information on all the flower types produced, the FTC asserts that the carnation production cycle is a reasonable proxy.

Department's Position: We disagree with the FTC's assertion that our application of a four-month inflation adjustment factor is not adverse and that a 14-month inflation-adjustment factor based in part upon the production cycle of carnations is more appropriate. Cultivos Miramonte's costs for producing pompons are attributable to three cost centers: 1) propagation; 2) production; 3) harvesting. Cultivos Miramonte's reporting methodology is such that propagation and production costs require adjustments for four months' and three months' worth of inflation, respectively, while harvesting costs did not incur any inflation adjustment. As adverse BIA, we adjusted all three categories of costs for four-months' worth of inflation. If we applied a neutral form of BIA, we would have only adjusted production costs for three-months' worth of inflation and would not have adjusted harvesting costs at all. Further, we do not agree that the adverse form of BIA proposed by the FTC is appropriate. The purpose of this remand is to select an inflation-adjustment factor based on the production cycle of pompons and apply the factor to Cultivos Miramonte's cost of producing this merchandise. For the reasons explained above, our application of this inflation-adjustment factor is appropriately adverse.

C. Interest Rate Used to Impute U.S. Credit Expenses

We received no comments on this issue.

FINAL RESULTS OF REDETERMINATION

In accordance with the remand order, the Department has revised the Final Results of Reviews 5, 6, and 7 for the Cultivos Miramonte Group.

The recalculated, weighted-average percentage dumping margins for the Cultivos Miramonte Group did not change for the 5^th and 6^th PORs. The weighted-average percentage dumping margin for the Cultivos Miramonte Group for the 7^th POR changed from 2.08 percent to 1.04 percent.

These final results of redetermination are pursuant to the order of the CIT in Cultivos Miramonte.

Robert S. LaRussa
Assistant Secretary
for Import Administration

Date: 11/18/97

1. Defendant-Intervenor: Floral Trade Council (FTC)

2. During the course of the reviews the Department learned that Cultivos Miramonte S.A. and Flores Mocari S.A. were sufficiently related to warrant collapsing the firms into one entity for the purposes of calculating antidumping margins (see Certain Fresh Cut Flowers from Colombia; Preliminary Results of Antidumping Duty Administrative Review, Partial Termination of Administrative Reviews, and Notice of Intent to Revoke Order (in Part), 60 FR 30270, 30271 (June 8, 1995)). Thus, the Department refers to the companies collectively as the Cultivos Miramonte Group. When the Department refers to one of the companies separately, it is referring to specific data provided by that company.

3. Flores Mocari, the other company in the Cultivos Miramonte Group, reported that its costs already included an adjustment for the effects of inflation.

4. On page 2 of the final results analysis memorandum for the Cultivos Miramonte Group the Department describes its treatment of the depreciation expenses reported in Line 181of Table 2C of the margin analysis spreadsheet. See Pub. Doc. 1733 at 2 (June 28, 1996). In Table 2D the Department only applied the inflation-adjustment factor to Line 214 since this is the only line in that table that contains expenses that need to be adjusted for the effects of inflation.

5. The effect of this change is to reduce the constructed value which the Department compares to United States prices in calculating antidumping duty margins. Where margins exist, the reduction in constructed value has a net effect of reducing margins. The Department did not recalculate the inflation-adjustment factors applied as partial BIA to Cultivos Miramonte's cost of producing standard chrysanthemums or pompon chrysanthemums in the 6^th POR or standard chrysanthemums in the 7^th POR because there were no dumping margins on sales of these flower types and, therefore, the change would have no effect. Further, the Department did not recalculate the inflation-adjustment factors applied as partial BIA in the 5^th POR because only two months' worth of costs were affected by the change in Colombian GAAP. Thus, the inflation-adjustment factors for the 5^th POR were only based on two months of inflation, which is well within the production cycle of pompon chrysanthemums or standard chrysanthemums.

6. In its books and records Cultivos Miramonte uses a one-month deferral for propagation and production costs while for reporting costs to the Department for the antidumping margin calculation it defers the costs for three and four months to match them with the pompon production cycle. The company asserts that the one-month deferral is also a "tax motivated" form of record keeping.