67 FR 8781, February 26, 2002 A-122-837 Investigation Public Document G1O3: Greenhouse Tomato Team MEMORANDUM TO: Faryar Shirzad Assistant Secretary for Import Administration FROM: Richard W. Moreland Deputy Assistant Secretary for Import Administration SUBJECT: Final Issues and Decision Memorandum for the Investigation of Greenhouse Tomatoes From Canada Summary We have analyzed the case and rebuttal briefs of interested parties submitted in the investigation of greenhouse tomatoes from Canada. As a result of our analysis, we have made changes, including corrections of certain inadvertent programming and clerical errors, in the margin calculations. We recommend that you approve the positions we have developed in the Discussion of the Issues section of this memorandum. Below is the complete list of the issues in this investigation for which we received comments and rebuttal comments by parties: Common Issues 1. Province-Specific All-Others Rate 2. Extraordinary Costs 3. Payments to Owners 4. Amortization of Assets 5. Averaging Prices Across Grades, Sizes, and Color for the Cost Test 6. Calculating a Difference-in-Merchandise Adjustment Based on Market Value 7. Weighted-Average Cost Versus Simple-Average Cost Company-Specific Issues BC Hot House Foods, Inc. (BCHH) 8. Level of Trade 9. Allocation of U.S. Advertising Expenses 10. Canagro's Start-Up Adjustment 11. Weight-Averaging the Cost for BCCH's Cost Respondents 12. Combined Interest and General and Administrative (G&A) Expenses 13. Accuracy of Canagro's Production Quantities 14. Use of Corrected BCHH Sales Lists 15. Reclassification of Certain BCHH Customers 16. Representativeness of Cost For BCHH Red Zoo Marketing (Red Zoo) 17. Combined Financial Expense 18. Cost-Allocation Errors Mastronardi Produce Ltd. (Mastronardi) 19. Capitalization of Costs 22. Cost Allocations Based on Supplier and Management Representations 21. Calculation of Mastronardi's Indirect Selling Expense Rate 22. Treatment of Mastronardi's Management Bonuses Veg Gro Sales, Inc. (Veg Gro Sales) 23. Management Estimates 24. Arithmetical Error 25. Clerical Errors With Regard to Amco Farms, Inc. (Amco) 26. Exporter G&A and Financial-Expense Ratios 27. Clerical Error Affecting COP and CV Calculations 28. Expenses Paid on Behalf of Owners J-D Marketing, Inc. (J-D) 29. Accuracy of Cost Data for IPR Farms 30. Representativeness and Accuracy of COP Analysis 31. Exclusion of Cluster-Roma and Cherry Tomatoes from Margin Calculations 32. Expenses Paid on Behalf of Owners Background On October 5, 2001, the Department of Commerce (the Department) published the Preliminary Determination of Sales at Less Than Fair Value: Greenhouse Tomatoes From Canada, 66 FR 51010 (October 5, 2001) ("Preliminary Determination"). The period of investigation ("POI") is January 1, 2000, through December 31, 2000. We invited interested parties to comment on the Preliminary Determination. At the request of interested parties, we held a hearing on January 22, 2002. Discussion of the Issues Common Issues 1. Province-Specific All-Others Rate Comment 1: The Ontario respondents, Red Zoo, Mastronardi, Veg Gro Sales, and J-D, argue that the Department should establish a province-specific all-others deposit rate for those Ontario companies that were not investigated. They recommend a rate based on the weighted-average of the rates of the Ontario companies that the Department investigated. While they acknowledge that the preamble to Antidumping Duties; Countervailing Duties; Final Rule, 62 FR 27296, 27325 (May 19, 1997) ("the Preamble"), to the Department's regulations rejects the notion of sub-national rates for countervailing duty determinations, the Ontario respondents assert that, for the purpose of an antidumping cash deposit rate in this case, the Department should nevertheless exercise its discretion and calculate such a rate. The respondents argue that the Ontario-based exporters have open competition in the marketplace for sales in Canada and the United States. They assert that, unlike in the case of British Columbia where growers must sell their product only through the authorized agents existing in the province, Ontario growers are not required to use any centrally controlled sales agents. The Ontario respondents argue that, therefore, the BCHH rate is effectively a province-specific rate for all of the British Columbia greenhouse-tomato industry and contend that growers in Ontario also deserve a province-specific rate. These respondents also argue for a separate all-others rate on the basis that it would be only fair to the companies that were not permitted to respond to the Department's questionnaire. They also argue that, in addition to their request for a province-specific rate, if all of the Ontario respondents receive a de minimis rate, the Department should establish a cash-deposit rate of zero for all exporters in Ontario. Finally, the Ontario respondents argue that, pursuant to Article 9.4 of the Antidumping Agreement, in the event "facts available" is used for any part of any respondent's margin calculation, that respondent's rate should not be included in the calculation of the all-others rate. The petitioners argue that the respondents have made this request with a view to alter the method in which the Department calculates an all-others rate in this investigation. They assert that they have not found any antidumping case in which the Department has altered the calculation of the all-others rate as suggested by the Ontario respondents. Furthermore, the petitioners cite section 735(c)(5) of the Tariff Act of 1930, as amended (the Act), and argue that the respondents' request runs counter to the statute's express methodology for establishing margins for exporters and producers not individually investigated. Per the guidelines set forth in the statute, the petitioners argue that the only way in which the Department could deviate from using the weighted-average margin of the five mandatory respondents is if all five of these respondents had a rate that was zero or de minimis or if one of the respondent's rates were based on facts available. Department Position: The Department has calculated the all-others rate pursuant to section 735(c)(5) of the Act which states that: (A) GENERAL RULE - For purposes of this subsection and section 733(d), the estimated all-others rate shall be an amount equal to the weighted average of the estimated weighted average dumping margins established for exporters and producers individually investigated, excluding any zero and de minimis margins, and any margins determined entirely under section 776. (B) EXCEPTION - If the estimated weighted average dumping margins established for all exporters and producers individually investigated are zero or de minimis margins, or are determined entirely under section 776, the administering authority may use any reasonable method to establish the estimated all-others rate for exporters and producers not individually investigated, including averaging the estimated weighted average dumping margins determined for the exports and producers individually investigated. Consistent with the methodology established in section 735(c)(5) of the Act, the Department has calculated the all-others rate by weight-averaging the estimated weighted- average dumping margins established for the five mandatory respondents individually investigated in this case. Pursuant to the statute, the Department could only deviate from its standard all- others rate methodology if the dumping margins established for all respondents individually investigated are zero, de minimis, or based on facts available. Therefore, given that the weighted-average dumping margins calculated in this case for all respondents do not fall in these categories, there is no justification for not using the Department's standard all-others rate methodology. 2. Extraordinary Costs Comment 2: The Ontario respondents argue that the Department should allow an adjustment to the cost of production for an increase in natural-gas heating costs that occurred in Canada during the POI. The respondents state that, although these costs were not recognized as extraordinary expenses in their annual financial statements, these costs were both unusual and infrequent in nature. Citing Floral Trade Council v. United States, 16 CIT 1014 (Court of International Trade 1992) ("Floral Trade"), the respondents claim that the Department excludes costs where they are found to be extraordinary (i.e., infrequent in nature and unusual in occurrence). The respondents argue that the significant increase of natural-gas costs during 2000 qualifies as both infrequent and unusual. In support of their argument, the respondents refer to an excerpt from a National Gas Market Report prepared by Canadian Energy Data Inc. ("National Gas Report"), which was presented to the Department during the Ontario cost verifications, in which there is a report that natural-gas prices returned to normalized levels by the middle of 2001. Thus, the respondents contend, the natural-gas prices experienced during the POI were both short-lived and significantly higher than average and as such should qualify as extraordinary. Addressing the fact that these expenses were not reported as extraordinary in their FY2000 annual financial statements, the respondents argue that prices were still high at the time of the release of the financial statements by the companies' auditors; therefore, they assert, the auditors could not quantify or reasonably estimate the extent of the extraordinary expense. The respondents argue that in Floral Trade the Department upheld adjustments for extraordinary expenses despite the fact that the expenses were not recognized as such in the respondent companies' financial statements. The petitioners counter that extraordinary items must be both unusual in nature and infrequent in occurrence. They then distinguish between a recurring and nonrecurring event by asserting that "an unpredictable event, which occurs infrequently, is classified as nonrecurring" whereas "an event occurring infrequently but whose occurrence is predictable raises questions as to classification," citing Financial Statement Analysis: Theory, Application and Interpretation, 6th Ed., Leopold A. Berstein, at 638 (1998). Furthermore, the petitioners disagree with the respondents' position that the expenses were not treated as extraordinary in the financial statements because company auditors could not estimate the loss. Instead, the petitioners believe that this suggests that such a classification was not in accordance with generally accepted accounting practices ("GAAP") and could not be justified. Therefore, the petitioners contend that the respondents' request is without merit and the natural-gas adjustment should be disallowed by the Department in the final determination. Department's Position: We disagree with respondents that, simply because the cost of natural gas, an input to tomato production, increased significantly during the POI, we should decrease the actual cost included in the calculations of the cost of production ("COP") and constructed value ("CV"). Section 773(f)(1)(A) of the Act states that "costs shall normally be calculated based on the records of the exporter or producer of the merchandise, if such records are kept in accordance with the generally accepted accounting principles of the exporting country (or the producing country, where appropriate) and reasonably reflect the costs associated with the production and sale of the merchandise." Thus, unless a company's normal books and records kept in accordance with home-country GAAP result in a distortion of the costs, the Department will rely on the assurances of the company's independent accountants and auditors as the basis for calculating costs. Here, the respondents recognized the full amount paid for natural gas during the year as ordinary operating costs, not extraordinary costs. An event must be unusual in nature and infrequent in occurrence for it to be considered extraordinary. An event is unusual in nature if it is highly abnormal and unrelated or incidentally related to the ordinary and typical activities of the entity, in light of the entity's environment. An event is infrequent in occurrence if it is not reasonably expected to recur in the foreseeable future. See Floral Trade, 16 CIT at 1016. Further, we recognize that GAAP treatment of extraordinary items differs by country. Thus, the Department's practice is to assess whether an event giving rise to unexpected costs is both unusual and infrequent in order to qualify as being extraordinary. See Final Determination of Sales at Less Than Fair Value: Certain Polyester Staple Fiber from the Republic of Korea, 65 FR 16880 (March 30, 2000), and accompanying Issues and Decision Memorandum at Comment 8, and Final Determination of Sales at Less Than Fair Value: Static Random Access Memory Semiconductors from Taiwan, 63 FR 8909, 8932 (February 23, 1998), at Comment 26. In this case, the increase in the cost of natural gas appears to be the result of market forces of supply and demand, not some unusual or infrequent event. The Department is not persuaded that market-based fluctuations in the prices of production inputs qualifies as an extraordinary event for which it will exclude the resulting costs. See Fujitsu General Ltd. v. United States, 88 F.3d 1034-1038 (Fed. Cir. 1996). Finally, we disagree with the respondents that there is any relevance to their explanation that their auditors did not categorize the high natural- gas costs as extraordinary because the prices had not peaked at the time of the release of the reports. If there was any merit to the respondents' claim that the auditors were considering classifying the high natural-gas costs as extraordinary but did not because they could not estimate the excess expense, we would expect there to be a footnote to the financial statements stating this fact. However, there were no such disclosures. Rather, the respondents' audited and reviewed financial statements included the natural-gas costs incurred during the POI in full by treating these costs as ordinary operating costs. Accordingly, we do not consider the respondents' normal accounting treatment of these costs as ordinary operating costs to be unreasonable. 3. Payments to Owners Comment 3: All the Ontario respondents claim that, for tax-reporting purposes and to reduce taxes, they have reported in their normal records dividend distributions to company shareholders as bonuses and management fees. They argue that these bonuses and management fees are actually dividends that are based solely on ownership and maintain that some of the shareholders to whom profits were distributed did not perform any services for the companies, thereby indicating that these payments were dividends and not compensation. The respondents continue by noting that these distributions were significant and to include these amounts as a cost of the company's operations would not be reasonable. The respondents state that, according to section 773(f)(1)(A) of the Act, COP and CV must reasonably reflect the costs associated with the production and sale of the merchandise under consideration. They argue that the payments made to the owners were tax-motivated and not associated with the production and sale of tomatoes; therefore, they assert, these payments should not be included in the reported costs. In support of their assertion, the respondents cite to the Final Determination of Sales at Less than Fair Value: Fresh Cut Roses from Colombia, 60 FR 6980, 7000 (Feb. 6, 1995) ("Roses from Colombia"), where the Department found that personal expenses paid by the company on the owner's behalf were personal in nature, tax-motivated, and not related to the production of the subject merchandise. The respondents explain that, by distributing profits in the form of bonuses to the companies' shareholders, they can receive the best possible tax treatment under Canadian tax law. According to the respondents, they are able to record the distributions as expenses on their income statements rather than as reductions in retained earnings. They assert that this accounting practice lowers each company's (and eventually its shareholders') effective tax rate. According to the respondents, these amounts were not costs of production but merely a means of distributing profits and reducing taxes. Therefore, for the final determination, the respondents urge the Department to accept the reduction in costs for profit distributions. The petitioners observe that the bonuses and management fees were reported as expenses in the respondents' financial statements which were prepared in accordance with Canadian GAAP. They counter the respondents' argument that it would be unreasonable for the Department to include these payments to the shareholders in the calculation of COP and CV by asserting that the Department has an established practice of relying on the records of the exporter or producer of the merchandise, if such records are kept in accordance with the GAAP of the exporting country and reasonably reflect the costs associated with production and sale of the merchandise. The petitioners contend that, for reasons set forth above, the Department should continue to include these amounts reported in the respondents' financial statements as expenses in the calculation of COP and CV for the final determination. Department's Position: We agree with the petitioners. During the cost- reporting period, many of the respondents paid bonuses and management fees to their owners and shareholders. The respondents recognized these payments as expenses in their financial statements, which were prepared in accordance with Canadian GAAP. Pursuant to section 773(f)(1)(A) of the Act, the Department's normal practice for calculating COP and CV is to rely upon a company's normal books and records where those records are prepared in accordance with the home-country GAAP and reasonably reflect the cost of producing and selling the subject merchandise. See Final Results of Antidumping Duty Administrative Review: Stainless Steel Bar from Japan, 65 FR 13717 (March 14, 2000), and accompanying Issues and Decision Memorandum at Comment 7. We find the respondents' argument that these payments are merely dividend distributions unpersuasive for several reasons. First, bonuses and management fees are commonly incurred by companies. Second, the respondents characterized these payments as bonuses and management fees in their audited or reviewed financial statements. Independent auditors review, test, and give an opinion on a company's financial statements so that users can be rely on the statements. As a user of the financial statements we are relying on the unqualified opinion in each of the respondents' audited or reviewed financial statements and, therefore, we consider their classification of these payments to be accurate and reliable. Third, as can be seen from the financial statements of the companies, the respondents have historically recognized these payments as expenses in their audited or reviewed financial statements. Fourth, nowhere in the companies' records (i.e., financial statements, tax returns, general ledgers) were these items shown as dividends, not even in the board minutes that allowed for these payments. Dividends are distributed to the owners in proportion to their shareholdings. We found from the information on the record that the payments made to individual shareholders were not necessarily in proportion to their shareholdings. Further, it was not possible for the Department to verify the respondents' claim that, because some of the owners did not draw a salary, these owners performed no services for the companies. In regard to the Ontario respondents' statement that these payments were in excess of certain elements of the COP, we determined from the financial statements that the bonuses and management fees incurred by the respondents during the cost-reporting period were reasonable when compared to sales revenue. The respondents' reliance on Roses from Colombia is misplaced. In that case, the Department did not include, in the CV calculation, the personal expenses the company paid on the owners' behalf because the expenses in question were personal in nature, tax-motivated, and not related to the production of the subject merchandise. In that case, the Department was not relying on the financial statements as a basis for costs because no financial statements existed. In this case, audited and reviewed financial statements exist that reflect that the bonuses and management fees were paid to the owners, not on behalf of the owners. Because these payments were classified in the audited or reviewed financial statements as salary or management fees paid to the owners and because there is no evidence on the record that these individuals did not perform services for the company, we believe that the amounts recorded in the financial statements are accurate and reliable for use in the calculation of costs. As such, for the final determination, we have considered these payments as compensation, rather than dividends, and included the amounts incurred for bonuses and management fees in the calculation of COP and CV. 4. Amortization of Assets Comment 4: The Ontario respondents argue that the Department should allow them to recompute depreciation using longer useful lives because four of the six Ontario cost respondents claim that they use tax depreciation in their financial statements. They contend that this adjustment brings reported costs into conformity with GAAP and ensures consistency throughout the responding Ontario companies. The respondents argue that, rather than maintaining two sets of depreciation records, the Ontario companies used tax depreciation for both financial and tax purposes to simplify record-keeping. The respondents argue that the Statement of Administrative Action accompanying the URAA, H.R. Doc. 103-316, Vol. 1 (1994) ("SAA"), allows for adjusting depreciation expenses in determining whether a company's records reasonably reflect costs where a firm's financial statements reflect an extremely large amount of depreciation for the first year of an asset's life. Thus, the respondents believe, because accelerated tax depreciation significantly shortens the useful life of the asset, the SAA would allow for such a distortive depreciation methodology to be corrected in the reporting of costs to the Department. Citing the Final Determination of Sales at Less Than Fair Value: Fresh Kiwifruit from New Zealand, 57 FR 13695 (April 17, 1992) ("Kiwifruit from New Zealand"), and Roses from Colombia, the respondents assert that the Department has found that amortization over the useful life of a respondent's capital assets is the most accurate way to calculate costs. The petitioners assert that there is nothing to indicate that the depreciation the Ontario cost respondents used in the financial statements was not in accordance with GAAP. The petitioners argue that the Ontario cost respondents have not established that their adjustments are more reflective and not distortive of the actual costs they incurred and reported as expenses for purposes of their financial statements. The petitioners contend that the adjustments are merely self-serving restatements for the purposes of responding to the Department's questionnaire. Citing the Final Results of Administrative Review, DRAMS of One Megabit or Above From the Republic of Korea, 64 FR 69694 (December 14, 1999), the petitioners argue that the Department stated that these restatements may be "contrary to the principles of conservatism in accounting where an expense is recognized when incurred if the probability of associated revenue is remote or uncertain. Therefore, (the Department finds) that, for dumping purposes, this methodology does not reasonably reflect the cost of producing the subject merchandise." The petitioners assert that the Department must apply the same analysis here. Department's Position: We disagree with the respondents. There is no evidence on the record that four of the Ontario cost respondents used tax depreciation for purposes of compiling their financial statements. On the contrary, the independent accountants and auditors' reports on the financial statements state that the financial statements were prepared in accordance with Canadian GAAP. The Department's long-standing practice, codified at section 773(f)(1)(A) of the Act, is to rely on data from the respondent's normal books and records where those records are prepared in accordance with home-country GAAP and reasonably reflect the costs of producing the merchandise. See Final Results of Antidumping Duty Administrative Review: Certain Preserved Mushrooms from India, 66 FR 42507 (August 13, 2001) ("Mushrooms from India"), and accompanying Issues and Decision Memorandum at Comment 5. The cost respondents chose to use a depreciation methodology which is consistent with Canadian GAAP to calculate depreciation expenses on both their audited financial statements and their tax returns. Section 773(f)(1)(A) of the Act also states that the Department will consider whether "such allocations have been historically used by the exporter or the producer." We have observed from past financial statements that the Ontario respondents have historically used the same depreciation method. We disagree with the respondents' assertion that the use of this depreciation methodology results in an inaccurate cost of manufacturing. Other than merely stating that the depreciation method results in a greater expense than would be calculated using a longer useful life, the respondents have provided no evidence demonstrating that the depreciation methodology used in their financial statements is distortive. The respondents' citations to Kiwifruit from New Zealand and Roses from Colombia, where, they say, the Department found that amortization over the useful life of a respondent's capital assets is the most accurate way to calculate costs, are not applicable to the facts of this investigation. In Kiwifruit from New Zealand the Department had to calculate the depreciation expense for companies which purchased established orchards and could not determine the value of the orchard or whose prior-year financial records did not lend themselves to this calculation. In that case the Department calculated an average per-hectare capitalized cultivation cost based on the verified data of growers which established their own orchards which also had complete financial information regarding capitalized cultivation costs. As opposed to that situation, the respondents in this case did record depreciation in the normal course of business in accordance with Canadian GAAP. In Roses from Colombia the Department found that the Colombian accounting principles permitted growers significant latitude in determining the depreciable lives of their rose plants and in accounting for pre-production costs. Furthermore, the respondents in that case provided evidence to support the fact that the useful lives recorded in their financial statements were, in many cases, shorter than the plants' economic useful lives. If the financial statements of the respondents in this case were presented on a tax basis rather than a GAAP basis, the independent accountants and auditors' reports would have stated that they were prepared on an "Other Comprehensive Basis of Accounting" and would not have stated that they were presented in accordance with Canadian GAAP. Furthermore, there is no indication that the depreciation recorded in these statements is distortive. Therefore, for the final determination we have used the depreciation expenses calculated in the respondents' normal books and records kept in accordance with Canadian GAAP to calculate the COP and CV. 5. Averaging Prices Across Grades, Sizes, and Color for the Cost Test Comment 5: BCHH argues that the Department should average prices across grades, sizes, and color within a particular type of tomato for its sales- below-cost analysis. Citing section 773(b)(2)(C)(ii) of the Act ("the weighted average per unit price of the sales under consideration ... is less than the weighted average per unit cost of production for such sales"), BCHH contends that the statutory reference to "such sales" means that, in assessing whether below-cost sales have been made in "substantial quantities," the universe of sales used for comparison purposes must reflect precisely the products for which average costs are calculated. BCHH argues that, because it was unable to distinguish costs by grade, size, or color, the Department must calculate weighted-average per-unit prices by type so that the prices are on the same basis as the reported costs. BCHH claims that the Department's methodology for the Preliminary Determination is distortive because tomato prices vary depending upon all four of the product characteristics. Furthermore, BCHH states that the characteristics are variables over which growers that supply BCHH have little control when they grow tomatoes. For example, according to BCHH, a single tomato plant can produce tomatoes of different grades and sizes, which it characterizes as joint products, and it sells each tomato for as much as it can obtain. Thus, according to BCHH, growers that supply it do not decide whether it is economical to grow only a specific size or grade of tomato but, rather, they seek to recover costs for the crop as a whole. BCHH argues that any reasonable comparison of costs and prices must recognize this circumstance and must not attempt to impose cost recovery separately on the different joint products. The petitioners argue that the statute, the SAA, the Department's regulations, and Department precedent support averaging prices on a model- specific basis as the Department did in the Preliminary Determination. The petitioners cite section 773(b)(2)(C) of the Act, the SAA at 832 ("the cost test will generally be performed on a no wider than model specific basis"), The Preamble, 62 FR at 27361, Preliminary Determination of Sales at Less than Fair Value, Live Cattle from Canada, 64 FR 36848, 36851 (July 8, 1999), Preliminary Determination of Sales at Less than Fair Value: Fresh Atlantic Salmon from Chile, 63 FR 2664, 2669 (January 16, 1998), and Preliminary Determination of Sales at Less than Fair Value: IQF Red Raspberries from Chile, 66 FR 67510, 67512 (December 31, 2001). The petitioners observe that there are four matching characteristics that distinguish different "models" of tomatoes. The petitioners contend that, to follow the intent of the statute, the Department must compare model- specific weighted-average prices to the cost of each model, even though the costs for a number of models are the same. The petitioners claim that a broader averaging methodology, such as that suggested by BCHH, would result in comparisons that would mask or distort the extent to which sales may have been made below COP. Department's Position: We disagree with BCHH that the cost test must be performed on a basis other than a model-specific basis. Section 773(b)(2)(C) of the Act and the SAA support averaging prices on a model- specific basis. The SAA directs that "the cost test will generally be performed on a no wider than model specific basis." SAA at 832. Furthermore, the Department stated in The Preamble that, "where a particular model is sold at prices below the cost of production during one month of the period of investigation or review (and where such sales are in substantial quantities and are not at prices that would permit cost recovery), the Department may disregard these sales in its determination of normal value." See 62 FR at 27361. Finally, in past cases, the Department has routinely performed the cost test on a model-specific basis. See, e.g., Preliminary Determination of Sales at Less than Fair Value, Live Cattle from Canada, 64 FR 36848, 36851 (July 8, 1999), and Final Determination of Sales at Less Than Fair Value: Large Newspaper Printing Presses and Components Thereof, Whether Assembled or Unassembled, From Japan, 61 FR 38139, 38145 (July 23, 1996). Therefore, as we did in the Preliminary Determination, we have performed the cost test on a model-specific basis by using the costs that the respondents submitted. 6. Calculating a Difference-in-Merchandise Adjustment Based on Market Value Comment 6: BCHH claims that, because the respondents, including BCHH, could not account for cost differences based on differences in grade, size, and color, the Department preliminarily concluded that it would not be appropriate to compare prices of non-identical products using a difference-in-merchandise (difmer) adjustment. It states that if no identical match was found the Department used the CV of the subject merchandise as the basis for normal value, even if the non-identical products had the same COP. BCHH argues that, at a minimum, the Department should make price-to-price comparisons of non-identical products that have the same COP. The respondent asserts that, in such cases, calculating normal value based on CV is inappropriate. BCHH cites the Preliminary Determination, where, it claims, the Department's articulated reason for resorting to CV instead of calculating a difmer adjustment was the inability to calculate cost differences at the model-specific level. BCHH claims that the Department's argument is moot because there are no cost differences between non- identical products with the same COP. The respondent provides the example of packing-expense adjustments made in the calculation of normal value. It argues that the Department routinely encounters the situation where packing expenses for different products are identical and that, in such cases, instead of resorting to CV the Department calculates a net adjustment of zero for such differences. The respondent asserts that the Department should compare prices of non- identical products using a difmer adjustment based on differences in market value. BCHH argues that, in deciding what constitutes a reasonable allowance for a difmer adjustment, the applicable regulations expressly permit the Department to base the adjustment on differences in market value. Moreover, the respondent cites UHFC Company v. United States, 916 F. 2d 689 (Fed. Cir. 1990) ("UHFC"), and argues that the Court of Appeals for the Federal Circuit ("CAFC") has held that, in making difmer adjustments, the Department may not rely on cost to the exclusion of value. BCHH asserts that the circumstances are appropriate for calculating a difmer adjustment based on the market value of the products for two reasons. According to BCHH, all parties concur that tomato type, grade, size, and color are physical differences that affect the price of the product. Further, the respondent cites the Final Determination of Sales at Less Than Fair Value: Nepheline Syenite from Canada, 57 FR 9237 (March 17, 1992) ("Nepheline Syenite"), to demonstrate that there are circumstances under which the Department has exercised its discretion to calculate difmer adjustments based on the market value of the products. In addition, the respondent states that the Department can easily calculate difmer adjustments based on market-price data on the record. The respondent asserts that the Department can calculate an average price by using the CONNUM (model) variable as it does for level-of-trade differences. It argues that the Department's preliminary calculations did this on both a net-price and a net-cost comparison basis in the home market. BCHH contends that the Department can then use the differences between the average prices as the difmer adjustments. According to BCHH, there are no types that are resold only in the United States so the calculation can be made relying exclusively on home-market price data. The petitioners argue that the Department should not make a difmer adjustment based on differences in market value. They assert that the Department matched U.S. sales with identical merchandise in the home market when calculating margins in this investigation correctly. The petitioners cite The Preamble, which indicates that the language of the SAA does not appear to even contemplate difmer adjustments based on differences in market value. The petitioners also cite the Preliminary Determination of Sales at Less Than Fair Value: Softwood Lumber from Canada, 66 FR 56062 (November 6, 2001) ("Softwood Lumber"), where the Department found that it was not able to make a difmer adjustment based on market value. The petitioners assert that in the instant investigation the Department is again faced with a situation in which there are numerous physical differences in products which may or may not affect price. They argue that, while BCHH has argued that differences in type, size, color, and grade all affect price, it has not identified the degree to which each of these factors affect price. Thus, the petitioners contend, as was the case in Softwood Lumber, the Department cannot determine accurately how to adjust normal value for differences in merchandise. The petitioners argue that, in order for the Department to make a value- based difmer adjustment, it should have clear information on the record which can be tied directly to the physical differences in the products. The petitioners assert that, when difmer adjustments are based on COP data, such adjustments can be tied accurately to physical differences in products. Finally, the petitioners state that BCHH's proposal to calculate a difmer adjustment based solely on differences in average prices between types is unsound and contradicts the statute's requirement that difmer adjustments be based solely on the physical differences in the products being compared. Department's Position: As we stated in our Preliminary Determination, we found that it is not appropriate to compare prices of products that do not have the same type, color, size, and grade because these are significant physical characteristics which affect the price comparability of these products. In addition, the respondents in this investigation reported that their methods of tracking costs and the nature of producing greenhouse tomatoes does not allow them to distinguish costs by grade, size, or color. See, e.g., page 5 of the September 18, 2001, comments from the Ontario respondents and page D-1 of the August 6, 2001, response of BCHH to our COP questionnaire. In accordance with 19 CFR 351.411, we generally will make a reasonable allowance for differences in physical characteristics by considering differences in variable costs associated with the physical differences. Because the respondents reported that they could not report costs that distinguish between factors other than type, we matched sales of subject merchandise to home-market sales of identical type, color, size, and grade but not to home-market sales of similar merchandise. The information on the record concerning this issue has not changed since the Preliminary Determination. As such, we have continued to match sales of subject merchandise to home-market sales of identical type, color, size, and grade but not to home-market sales of similar merchandise. This methodology is consistent with that taken in other antidumping proceedings which involved foreign like product with significant differences for which we could not account by means of a difference-in-merchandise adjustment. See Preliminary Determination of Sales at Less Than Fair Value and Postponement of Final Determination; Fresh Tomatoes from Mexico, 61 FR 56608, 56610 (November 1, 1996), and Preliminary Determination of Sales at Less Than Fair Value and Postponement of Final Determination; Fresh Atlantic Salmon from Chile, 63 FR 2664, 2666 (January 16, 1998). With regard to BCHH's argument that we should make price-to-price comparisons of non-identical products that have the same COP, we have determined that it is not appropriate to compare non-identical products with the same COP because we are aware that there are differences in price due to differences in physical attributes. However, the issue is that we are unable to quantify these differences. As such, it would not be appropriate to compare non-identical products with no difmer adjustment. The respondent's example of packing-expense adjustments made in the calculation of normal value is not persuasive. If the cost of packing is the same for two products, it is normally reasonable to conclude that price comparability is not affected by packing. In this case, however, it is clear that, despite the absence of cost differences attributable to certain physical attributes, differences in these physical attributes of the products being compared affect price comparability. In deciding what constitutes a reasonable allowance for a difmer adjustment, as indicated by the respondent, we acknowledge that the applicable regulations allow for an adjustment based on differences in market value. Although in addressing comments to its proposed regulations in 1997 the Department specifically retained language preserving, as an option, the use of market value in measuring a difmer adjustment, as explained in Policy Bulletin 92.2, Differences in Merchandise; 20% Rule (July 29, 1992), the Department has "rarely been able to determine the direct price effect of a difference in merchandise." As a result, difmer "adjustments are based almost exclusively on the cost of the physical difference." Further, this investigation is distinguishable from the circumstances of the UHFC case, where there was only a single difference, i.e., glue strength, between the products. In the instant investigation, there are several significant differences in physical characteristics which affect price, such as type, grade, color, and size, and we are unable to quantify how much of the difference is attributable to each physical characteristic. As a result, we have determined that we have no comparable basis on which to adjust for physical differences between products based upon market value as has been suggested by the respondent. This investigation is also distinguishable from the facts in Nepheline Syenite. In that case, there was evidence on the record, submitted by the domestic party and the respondent, that physical differences existed and that the market value of each grade could vary based on these differences. However, in that case, unlike in this investigation, there was "sufficient evidence to support the appropriateness of using market value." See Nepheline Syenite, 57 FR at 9240. In this case, the parties have not submitted information to support the appropriateness of using market value as a difmer adjustment. Further, contrary to BCHH's claim, the information on the record is not adequate for determining value-based difmer adjustments. We have used CV in this investigation as the basis for normal value because for some U.S. sales there was no identical product sold in the home market or because the identical products were sold at below-cost prices in the home market. The below-cost sales are outside the ordinary course of trade; therefore, it would not be appropriate to base a difmer adjustment on market value using sales which are outside the ordinary course of trade. Given this situation, the respondent has not given us a reasonable methodology to use in calculating a value-based difmer adjustment. Therefore, for all the reasons discussed above, we have not made a value- based difmer adjustment for the final determination. Further, because we do not have an accurate means of measuring the physical differences between similar products, we have matched sales of subject merchandise to home-market sales of identical type, color, size, and grade but not to home-market sales of similar merchandise. 7. Weighted-Average Cost Versus Simple-Average Cost Comment 7: BCHH states that, because of the large number of growers in this case, the Department decided to calculate the respondent-specific COP based on a representative sampling of each respondent's growers which, for BCHH, resulted in the selection of two of its largest growers. BCHH disagrees with the Department's decision to use a simple-average cost rather than a weighted-average cost to calculate the combined COP for the two sampled growers. BCHH claims that the use of a simple average may be appropriate in cases where costs are unrelated to production volume, but it distorts the costs in cases such as this one where there is a significant difference in the sampled producers' production volumes. By using a simple average, BCHH asserts, the methodology effectively gives more weight to the COP of the smaller producer and less weight to the COP of the larger producer. BCHH contends that for the final determination the Department should calculate the combined COP based on the weighted-average costs of the two sampled growers by type-specific volume. BCHH contends that using weighted averages to calculate a combined COP is consistent with the Department's long-standing practice, particularly in cases involving agricultural products. In support of its contention, BCHH cites Final Determination of Sales at Less than Fair Value; Fall Harvested Round White Potatoes from Canada, 48 FR 51669, 51670 (November 10, 1983), where the Department found it appropriate that, "in cases where several growers whose costs were verified supplied a distributor, the weighted- average rather than the simple arithmetic average of their costs {should} be used." BCHH also refers to Kiwifruit from New Zealand, where the Department relied on weighted averages to adjust for variables that otherwise would have distorted the total COP calculation and would have produced a figure that was unrepresentative of the industry's experience. In that case, BCHH asserts, the Department used weighted averages based on geography as the basis for its weighting calculation when it determined that the most significant factors influencing the cost of producing kiwifruit are farm location and farm size. BCHH suggests that, under the circumstances in the greenhouse-tomato industry, the more reasonable approach is to give each unit of sampled production equal weight by combining the costs and production quantity of varieties produced by both sampled growers into a single productive unit and average cost. J-D Marketing argues that, if the Department includes the costs for more than one cost respondent in the cost calculation, it should continue to use the methodology in the Preliminary Determination and calculate the simple average of the costs from the various cost respondents. The petitioners object to BCHH's proposal to calculate the weighted- average combined COP based on type-specific volume. They contend that they have argued extensively about the representativeness of the cost respondents the Department selected to report for BCHH, claiming that their production experiences are significantly different from those of the other producers which supplied BCHH during the POI. The petitioners observe that BCHH seems to agree by acknowledging in its case brief that a simple average ascribes greater weight to the lower-volume producer and is unrepresentative of the non-sampled growers. The petitioners state that the Department's use of a simple average does not distort the costs and is in line with its determinations in Kiwifruit from New Zealand and the Final Determination of Sales at Less Than Fair Value: Live Cattle From Canada, 64 FR 56739 (October 21, 1999) ("Live Cattle from Canada"). They claim that BCHH's weighted-average methodology would skew the results in favor of the higher-yield producer. According to the petitioners, for purposes of the final determination, the Department should continue to use simple averages in the calculation of COP and CV for those respondents that had multiple cost respondents for the same type of tomato. Department's Position: We have evaluated the facts in this investigation and find that a weighted-average cost-calculation methodology is more appropriate than a simple-average cost for the multiple suppliers of tomatoes to the respondents. We disagree, however, that the weighting factor should be the cost respondent's production quantity. Instead, we consider the cost respondent's quantity supplied to the exporter to be the appropriate weighting factor. Because of the large number of producers supplying the exporters with greenhouse tomatoes and our significant resource constraints, we determined that it was necessary to limit the number of producers required to respond to the cost questionnaire. Thus, we had to devise a method for selecting the cost respondents. We rejected use of a statistically valid sampling technique as was done in Kiwifruit from New Zealand and Final Determination of Sales at Less Than Fair Value: Fresh and Chilled Atlantic Salmon from Norway, 56 FR 7661 (February 25, 1991) ("Salmon from Norway"), because resource constraints required that we limit our cost analysis to one or two growers per respondent, which is too small a number to be meaningful for sampling purposes. Instead, we decided to choose the growers which supplied the exporters with significant quantities of tomatoes during the POI. See the Memorandum to Richard W. Moreland from Laurie Parkhill regarding the Identification of Cost-of-Production Respondents dated June 29, 2001 ("Identification of COP Respondents"). We chose for BCHH, based on the information on the record at the time, its two largest suppliers. We did this for several reasons. First, we wanted to maximize our coverage of the tomatoes ultimately sold by each respondent. Second, we wanted to maximize the probability of compliance with our requests for information. We assumed that there would be more incentive for the larger suppliers to respond because they had more at stake. Third, the larger suppliers tend to be better able to meet the Department's very detailed reporting and verification requirements. The Department is using the costs incurred by the selected cost respondents as a proxy for the average cost of all tomatoes supplied to the respondent. Thus, the Department has narrowed the universe of tomatoes supplied to the respondents. A simple average of unit costs would only by pure chance give the average cost of all the tomatoes supplied to the respondents by the selected growers because a simple average would not account for the different supply shares of each grower. A supply-based weighted average, however, does that. Therefore, we consider a weighted- average approach preferable to a simple average in this instance. Further, because relative quantities supplied to BCHH was a key factor in our cost- respondent selection process, we find that it is appropriate to take into account each selected grower's relative quantity of tomatoes supplied to BCHH in arriving at a reasonable approximation of the cost of the tomatoes sold by BCHH. We disagree with the petitioners that in Live Cattle from Canada we calculated a simple-average COP for the reseller based on a sample population of five cattle breeders. In that case, the Department increased the reseller's reported acquisition costs for feeder cattle by a certain percentage to reflect the producers' COP by applying a ratio based on the five suppliers' aggregate net loss on cattle over their net cattle revenues. By increasing the acquisition price by the average net loss, the Department derived a surrogate cost for the traded cattle. See Calculation Memo to Neal Halper from Gina Lee and Taija Slaughter regarding the Final Determination of Live Cattle from Canada dated October 4, 1999. The average net-loss ratio was calculated by dividing the total net loss incurred by the five producers by the total sales revenue earned by the five producers. Thus, the average net-loss ratio was a weighted-average net-loss ratio and not a simple-average net-loss ratio. In Kiwifruit from New Zealand and Salmon from Norway, the Department selected producers to be the cost respondents based on sampling techniques (i.e., stratified and random sampling methods). In this case, the two growers were selected because of their size and not through any statistically valid sampling procedures. Therefore, the averaging methods we used in those determinations reflect different factual situations from those present in this investigation. Additionally, for the other exporters which obtained tomatoes from suppliers which we identified as cost respondents, we calculated the weighted-average cost of all the suppliers using the same methodology. Company-Specific Issues BC Hot House Foods, Inc. 8. Level of Trade Comment 8: BCHH explains that in both the U.S. and Canadian markets it has a retailer channel of distribution and a distributor channel of distribution. It asserts that the nature and intensity of its selling functions within each of these channels is consistent across markets. The respondent explains further that in the U.S. market it has an additional channel of distribution that consists of sales to retailers through unaffiliated distributors acting as BCHH's agent (the agent channel of distribution). It asserts that the nature and intensity of its selling functions for the agent channel of distribution correspond most closely to the distributor channel of distribution. BCHH agrees with the Department's finding in the Preliminary Determination that, in each market, the retailer channel of distribution comprises a different level of trade than the distributor channel of distribution. The respondent, however, contends that for the final determination the Department should alter its level-of-trade designations so that it treats the agent channel of distribution as corresponding most closely to the home-market distributor channel of distribution. BCHH contends that, since it provides a low level of selling functions for the agent channel of distribution and a high level of selling functions for the retailer channel of distribution, treating these channels as the same level of trade is distortive and inconsistent with Department precedent. BCHH identifies nine types of selling functions that are performed throughout its channels of distribution for greenhouse tomatoes (inventory and supply management, color-staging, grooming, custom packing, delivery logistics, retail point of contact, retail ordering, retail billing, and direct advertising). BCHH indicates that at verification the Department reviewed the selling functions performed for each channel of distribution and the intensity of each function. Citing the December 20, 2001, memorandum from Mark Ross and Edythe Artman to the file ("BCHH Sales Verification Report"), BCHH contends that the Department confirmed that it performs the above selling functions at a high level for the retailer channel of distribution and, that, except for direct advertising, it performs the selling functions at a low level for the distributor channel of distribution. BCHH asserts that at verification the Department also confirmed that the distributor or agent assumes principal responsibility for most functions that the retailer requires (except advertising). BCHH asserts further that it compensates the agents and distributors with lower net prices (through commissions, payment of fees for functions, or some combination thereof) to reflect the absence of BCHH selling functions. BCHH contends that other evidence on the record corroborates the differences in the level of selling activities between the retailer channel of distribution and the other channels of distribution. Specifically, the respondent states that the pricing information in the U.S. and home-market sales lists it submitted to Department demonstrate that the prices BCHH charged to retailers are substantially higher than the net prices it charged to distributors, prices that are "netted down" because, BCHH asserts, it provides a low level of services for those transactions. BCHH contends that the higher prices it charged to retailers reflect its additional costs of providing a high level of selling functions for the retailer channel of distribution. The respondent also asserts that documentation on the record (e.g., invoices from BCHH to retail customers with a description of custom packaging used and documents from a BCHH-administered rebate program) support the high level of selling functions it provided directly to the retail channel of distribution. Citing an inventory-adjustment form reflecting price adjustments for grooming activities performed by a home-market distributor, BCHH asserts that documentation on the record establishes that the distributors are responsible for providing selling functions to the retailers. BCHH contends that, in evaluating channels of distribution, the Department considers the relative intensity of selling functions between channels. The respondent suggests that, where the nature of selling functions between channels of distribution are essentially the same, differences in the intensity of those functions may result in a finding of separate levels of trade. In support of this argument, BCHH cites the Department's level-of-trade analysis in Professional Electric Cutting Tools From Japan; Notice of Final Results of Antidumping Duty Administrative Review, 63 FR 6891 (February 11, 1998), and the Final Results of Antidumping Duty Administrative Review; Certain Pasta from Italy, 65 FR 7349, 7358 (February 14, 2000). The respondent asserts that the record supports, and the Department has verified, that the types and intensity of the selling functions that it provides for the agent channel of distribution are essentially the same as the distributor channel of distribution. BCHH requests that the Department find these channels of distribution to be directly comparable for the level-of-trade classification. Noting that sales through the agent channel of distribution are constructed export price ("CEP") sales, BCHH argues that the Department should only consider the selling functions reflected in the price after the deduction of expenses and profit under section 772(d) of the Act. BCHH argues that, by deducting the costs of the selling functions the agents performed on behalf of BCHH, a CEP emerges that is at the same level of advancement in the marketing process as BCHH's sales to distributors. The petitioners support the Department's continued application of the level-of-trade methodology it used in the Preliminary Determination. They contend that BCHH's agent channel of distribution most closely correspond to the retailer channel of distribution in terms of the customer category, point in the chain of distribution at which the selling activities occur, and the nature of the selling activities. The petitioners request that, in the final determination, the Department continue to find the sales in these two channels of distribution to have been made at the same level of trade. In support of their argument the petitioners present an analysis of the channels of distribution. Identifying the agent channel of distribution as being comprised of CEP sales made through unaffiliated agents acting as consignees, the petitioners contend that it is the Department's practice to treat the consignment agent's customers as the true customer rather than the consignment agent itself. In support of this argument the petitioners cite the Preliminary Results of Antidumping Duty Administrative Review and Partial Recision of Antidumping Duty Administrative Review: Fresh Atlantic Salmon from Chile, 66 FR 18431, 18438 (April 9, 2001), in which the Department stated that, "where sales were made through an unaffiliated consignment broker, we did not consider the consignment broker to be the customer; rather, we considered the customer to be the consignment broker's customer." Accordingly, the petitioners assert, the first sale of merchandise in the agent channel of distribution occurred between BCHH and the retail customer in the United States. In support of this argument the petitioners also cite page 5 of the BCHH Sales Verification Report and page A-19 of BCHH's June 28, 2001, questionnaire response. After evaluating customer categories, the petitioners assert that the next step in the level- of-trade analysis is to evaluate selling activities. The petitioners agree with BCHH that, since the sales in the agent channel of distribution are CEP sales, the Department can only consider the selling activities reflected in the price after the deduction of expenses and profit under section 772(d) of the Act. However, the petitioners take issue with how BCHH has characterized the selling functions it reported to the Department. The petitioners list the nine selling functions that BCHH listed in its case brief and identified to the Department at verification. They assert that during the course of this proceeding the respondent has eliminated three of the selling functions which it initially identified as being associated with home-market and U.S. sales. The petitioners also argue that BCHH changed the definition of certain selling functions in order to enhance the difference in the intensity of selling functions performed at the retailer channel of distribution from the intensity of the selling functions performed at the agent channel of distribution. They request that the Department use, to the extent possible, the definitions submitted by the respondent before it sought to change the Department's level-of-trade decision made for the Preliminary Determination. With regard to BCHH's assertion that the Department has verified that the types and intensity of the selling functions that it provides for the agent channel of distribution are essentially the same as the distributor channel of distribution, the petitioners contend that the BCHH Sales Verification Report does not definitively support the existence or absence of any particular selling function, nor does it justify altering the level- of-trade decision the Department made for the Preliminary Determination. The petitioners also contend that BCHH has not met the burden of demonstrating that there are significant differences in the level of selling functions performed for the agent channel of distribution and retailer channel of distribution. The petitioners present an analysis for each of the selling functions identified by BCHH and contend that the majority are performed by BCHH, in whole or part, for both the retailer channel of distribution and the agent channel of distribution. Citing the Final Determination of Sales at Less Than Fair Value: Certain Cut-to- Length Carbon Steel Plate from South Africa, 62 FR 61731, 61745 (November 19, 1997), the petitioners contend that where minimal differences in selling functions between channels of distribution exist the Department can find that the channels comprise a common level of trade. Department's Position: Based on the comments that we received on the level-of-trade methodology that we applied to BCHH's sales in the Preliminary Determination, we decided to re-examine the information on the record to determine the most appropriate level-of-trade designations for BCHH's home-market and U.S. sales. We find that this is necessary for several reasons. First, in the Preliminary Determination, we misread the information BCHH provided in the selling-functions chart it submitted at Exhibit B-5 of its July 12, 2001, questionnaire response. Specifically, in interpreting the chart, we attributed all of the selling functions performed by BCHH's unaffiliated agents in selling to retailers, and the intensity of these functions, to BCHH rather than the agent. Both BCHH and the petitioners commented that, since the sales in the agent channel of distribution are CEP sales, we should have only considered the selling functions reflected in the price after the deduction of expenses and profit under section 772(d) of the Act. We agree. See Micron Technology, Inc. v. United States, 243 F. 3d 1301, 1314-1315 (CAFC 2001). Second, revisiting our level-of-trade analysis for BCHH allows us to determine whether the information on the record (some of which was not available for consideration at the time of the Preliminary Determination) substantiates or invalidates the respondent's claim that the nature and intensity of its selling functions for the agent channel of distribution correspond most closely to the distributor channel of distribution in the home market. The SAA directs us to take such action when evaluating the appropriateness of a respondent's level-of-trade claim. Specifically, the SAA at 829 states that the Department "will require evidence from the foreign producers that the functions performed by the sellers at the same level of trade in the U.S. and foreign markets are similar, and that different selling activities are actually performed at the allegedly different levels of trade." Finally, we are revisiting this issue to take into consideration the petitioners' contention that during the course of this proceeding the respondent has eliminated certain selling functions and changed the definition of certain selling functions to differentiate the retailer channel of distribution from the agent channel of distribution. We have addressed the petitioners' concerns by performing both a quantitative and qualitative analysis of all the information submitted on the record regarding each selling function. Below we outline our analysis and conclusions concerning the most appropriate level-of-trade designations for BCHH's home-market and U.S. sales. Sales are made at different levels of trade if they are made at different marketing stages (or their equivalent). See 19 CFR 351.412(c)(2). To determine whether BCHH's comparison-market sales were at different stages in the marketing process than its U.S. sales, we reviewed the distribution system in each market (i.e., the chain/channel of distribution), including selling functions, class of customer (or customer category), and the level of selling expenses for each type of sale. This analysis is detailed in the Memorandum from Mark Ross to the File regarding the final determination for BCHH dated February 19, 2002. While customer categories are insufficient, by themselves, to establish that there is a difference in the level of trade, we used the customer categories reported by BCHH as a starting point for our reexamination of its distribution system. According to pages B-9 and C-8 of BCHH's July 12, 2001, questionnaire response and the BCHH Sales Verification Report at pages 21 and 22, all of BCHH's home-market and U.S. sales during the POI were either to retailers, wholesalers, distributors, or to retailers through unaffiliated agents. In reporting channels of distribution for home-market sales BCHH consolidated its sales to wholesalers and sales to retailers into a single "retail" channel of distribution on the basis that the marketing stages are equivalent, and it reported direct sales to distributors as the distributor channel of distribution. With regard to U.S. sales, BCHH reported both export-price and CEP transactions. The channels of distribution it reported for export-price sales also correspond to the retailer and distributor customer categories. According to BCHH's questionnaire response and the U.S. sales list, its CEP transactions correspond with the retailer customer category. However, it reported its CEP transaction as a separate channel of distribution, since it made the sales to the retailers through unaffiliated U.S. distributors acting as its agent. Since we found more than one customer category in the U.S. and comparison markets, we evaluated the types and level of selling functions BCHH performed for each of these customer categories. Selling functions are the activities or services provided by a company in making sales to a particular customer. At verification and in its case brief, BCHH identified nine types of selling functions that it provided on home-market and U.S. sales during the POI (i.e., inventory and supply management, color-staging, grooming, custom packing, delivery logistics, retail point of contact, retail ordering, retail billing, and direct advertising). Some of the selling functions identified by BCHH are related (i.e., they are sub-parts of a single type of selling function) and, therefore, in evaluating the appropriate level-of-trade methodology for BCHH in the final determination, we evaluated them as a single selling function. This approach is consistent with our treatment of selling-function sub-groups in other proceedings. See, e.g, the Preliminary Determination of Sales at Less Than Fair Value and Postponement of Final Determination: Stainless Steel Bar From Italy, 66 FR 40209, 40213 (August 2, 2001), in which the Department organized the common selling functions of a respondent into four major categories, and the Final Results of Antidumping Duty Administrative Review: Certain Pasta From Italy, 65 FR 7349, 7360 (February 14, 2001), in which the Department addressed the appropriateness of categorizing the sub-parts of certain selling activities into selling- activity groups. Accordingly, for the final determination we have consolidated the common selling-function sub-groups BCHH called retail point of contact, retail ordering, and retail billing into a single selling-activity group which we call sales support and administration. Sales support and administration encompass BCHH's interaction with the customer to negotiate prices, establish a sales strategy, receive and process orders, issue invoices, and collect payment. Besides these selling functions being similar, we also found that consolidating them is appropriate because it avoids mischaracterizing these types of activities as only being associated with sales to retailers. Specifically, at verification we examined sales-trace documentation and reviewed information on BCHH's sales process that supports that the company undertook similar types of activities in relation to all of its sales, not just sales to retailers. See pages 4 through 9 and Exhibit 4 of the BCHH Sales Verification Report. We also decided it was appropriate to consolidate inventory/supply management and color staging into a single selling function which we call supply management. Inventory/supply management consists of the handling and storage logistics that BCHH undertakes in receiving greenhouse tomatoes from its growers and supplying the merchandise to its customers. BCHH undertakes such activities at its distribution facilities in Canada and they are also performed on behalf of BCHH by U.S. distributors acting as the respondent's agent on CEP transactions. Color staging involves the process of inspecting and timing shipments to ensure that the greenhouse tomatoes are at their optimal degree of ripeness when they arrive at the customer's premise. Since this activity relates directly to the management of BCHH's greenhouse-tomato supply, we decided that evaluating it as a separate function is not appropriate. After consolidating the reported nine selling functions BCHH reported into six selling functions (sales support and administration, supply management, grooming, custom packing, delivery logistics, and advertising), we evaluated both the quantitative and qualitative levels of each selling function in order to designate their activity levels as either high, medium, or low for a particular channel of distribution. This approach to analyzing selling functions is consistent with the methodology applied in the above-cited less-than-fair-value investigation on stainless steel bar from Italy and administrative review of certain pasta from Italy. It entailed reviewing all of BCHH's submissions to determine which selling functions applied to a particular customer category. It also involved analyzing on a transaction specific basis whether services corresponding to the six selling function categories BCHH reported were provided to a particular customer category. The latter part of the analysis measures the frequency with which the function occurred in a channel of distribution by examining the number of observations for which an expense directly associated with this channel occurred. For example, if BCHH claimed that it incurred a high level of activity for delivery functions on sales within the retailer channel of distribution, it was possible to measure this quantitatively by observing the percentage of observations in that channel for which BCHH reported freight costs. Similarly, if BCHH claimed that it provided certain types of rebates within a particular channel of distribution, measuring quantitatively whether this was accurate was possible based on the information it reported in its sale list. We performed this type of analysis for each quantifiable activity (e.g., handling of billing adjustments, maintaining rebate programs, negotiating and tracking early-payment discounts) within a selling activity (e.g., sales support and administration). We emphasize that, to the extent expenses incurred by BCHH were taken into account, we evaluated the number of instances where BCHH incurred an expense associated with a function and not the direct cost of the expense. For example, we considered how often BCHH arranged for freight and delivery and not the actual cost to BCHH for the freight charges incurred; for rebates, we considered the number of instances BCHH negotiated and processed rebates rather than the actual amount of the rebates. When evaluating the qualitative level of each selling function, we considered the extent and nature of the selling activity based on information in the narrative responses. Next, based on our analysis of the quantitative and qualitative level of each selling-function activity, we assigned a final selling-function factor of high, medium, or low to that selling-activity group for that channel of distribution. These selling-function factors were incorporated into a summary selling-function chart for each customer category for normal value, export price, CEP, and the CEP starting price. See the Memorandum from Mark Ross to the File regarding the final determination for BCHH dated February 19, 2002, for details of our analysis of the quantitative and qualitative level of each selling-function activity. From our analysis of the customer categories, chain of distribution, and selling activities associated with sales reported by BCHH, we found that the home-market sales to retailers, wholesalers, and distributors were similar with respect to supply management, grooming, and advertising, and differed slightly with respect to delivery logistics and sales support and administration. There was a difference with regard to custom packing for two of the home-market customer categories (this service was only offered to retailers), but we did not find this one difference to be significant enough to constitute a separate level of trade. This decision is consistent with our practice of finding that substantial differences in selling activities are a necessary, but not sufficient, condition for determining that there is a difference in the stages of marketing. See Final Determination of Sales at Less Than Fair Value: Certain Cut-to- Length Carbon Steel Plate from South Africa, 62 FR 61731, 61732 (November 19, 1997). We determined, therefore, that BCHH's home-market sales constitute a single level of trade. In the U.S. market, BCHH reported both CEP and EP sales. At BCHH's constructed CEP level of trade for the agent channel of distribution the nature and frequency of the functions were similar, and we found these CEP sales to constitute one level of trade. We compared the selling functions performed for home-market sales with those performed with respect to the CEP sales, after deductions for economic activities occurring in the United States pursuant to section 772(d) of the Act, to determine whether the home-market level of trade constituted a different stage in the marketing process than the CEP level of trade. Based on our overall analysis of the information on the record with respect to the chains of distribution, customer categories, and level of selling functions BCHH performed at the CEP level of trade, we found that both were made at the same stage in the marketing process and involve substantially similar selling functions. Specifically, the CEP level of trade was similar to that of the home-market level of trade with respect to supply management, grooming, and advertising, and the two levels differed only slightly with respect to sales support and administration and delivery logistics. There was a difference with regard to custom packing for one of the customer categories (BCHH only offered this service to retailers), but we did not find this one difference to be significant enough to constitute a separate level of trade. Since we found the CEP level of trade to be similar to the home-market level of trade, we matched CEP sales to normal value and did not make a CEP-offset adjustment to normal value. With regard to BCHH's claim that the pricing information in the U.S. and home-market sales lists it submitted to the Department demonstrate that the prices BCHH charged to retailers are substantially higher than the net prices it charged to distributors, BCHH did not provided any sort of analysis to support this claim. Moreover, it did not attempt to substantiate that such pricing differences are directly related to differences in the level of selling activities between sales to retailers and the other home-market customer categories. Finally, because we found there to be just one home-market level of trade, any difference in prices between home-market retailers and the other home-market customer categories is irrelevant to the level-of-trade analysis. See the Final Determination of Sales at Less Than Fair Value: Stainless Steel Sheet and Strip in Coils From Italy, 64 FR 30750, 30767 (June 8, 1999). With regard to export-price sales, BCHH reported two customer categories (distributors and retailers) and two separate channels of distribution corresponding to these customer categories. We found the export-price sales to retailers and distributors were similar with respect to all of the selling functions except custom packing. We did not find this difference to be significant enough to constitute a separate level of trade and, therefore, treated all of BCHH's export-price sales as the same level of trade. The level of trade for export-price sales was similar to that of the home market with respect to supply management, grooming, and direct advertising, and differed only slightly with respect to sales support and delivery logistics. There was a difference with regard to custom packing for one of the customer categories (this service was only offered to retailers), but we did not find this one difference to be significant enough to constitute a significant difference between the home- market and U.S. levels of trade. Since we found that the single home- market level of trade is the same as the BCHH's single U.S. level of trade, it was not necessary to make a level-of-trade adjustment when matching the export price sales to normal value. Thus, as a result of revisiting the level-of-trade analysis for BCHH, we determined that the qualitative and quantitative information on the record invalidates the respondent's claim that the nature and intensity of its selling functions for the agent channel of distribution for CEP sales correspond most closely to the home-market distributor channel of distribution. 9. Allocation of U.S. Advertising Expenses Comment 9: BCHH disagrees with the Department's decision in the Preliminary Determination to reallocate U.S. advertising expenses based on the value of U.S. sales of subject merchandise rather than the value of U.S. sales of all commodities. BCHH contends that at the sales verification the Department confirmed that the reported U.S. advertising expenses were incurred with respect to the full range of BCHH's U.S. sales (e.g., peppers, cucumbers, and tomatoes), not only sales of the subject merchandise. Accordingly, BCHH requests, for the final determination the Department should allocate U.S. advertising expenses over U.S. sales of all commodities rather than just over U.S. sales of subject merchandise. The respondent also comments that during the sales verification the Department discovered that BCHH had reported the cost of graphic-design work associated with advertising campaigns as indirect selling expenses rather than as an advertising expense. The respondent asserts that, if the Department decides to treat these costs as advertising expenses, it should adjust the amount for indirect selling expenses accordingly. No other party commented on this issue. Department's Position: We agree with BCHH. For the final determination we have allocated U.S. advertising expenses to U.S. sales of all commodities rather than limiting the allocation to U.S. sales of subject merchandise. Further, we have recalculated the amount for indirect selling expenses to exclude the cost of graphic-design work associated with advertising campaigns. We also revised the calculation of advertising expenses to include these costs. 10. Canagro's Start-Up Adjustment Comment 10: BCHH argues that the Department should allow its claimed start-up adjustment in the calculation of COP. According to BCHH, Canagro and Pacific Lagoon, two growers of greenhouse tomatoes, are affiliated companies that are controlled and managed by the same parent company. During the POI, BCHH explains, Pacific Lagoon used a new greenhouse facility and production levels were limited by technical factors associated with the initial phase of commercial production, such that the start-up adjustment to COP is appropriate. BCHH also claims that the Department should allow Canagro's start-up adjustment for an existing greenhouse facility because it experienced high labor costs and a low crop yield as a result of assisting Pacific Lagoon with the start-up of its new facility. According to BCHH, Pacific Lagoon's new greenhouse involved an enormous capital cost and increased the combined cultivation area of Pacific Lagoon and Canagro significantly. BCHH claims that, during the start-up period, Pacific Lagoon trained new management and workers, used new equipment, lost tomato plants to fungus as a result of a construction defect, and hired more workers than necessary. Moreover, to help with the start-up operations, BCHH contends, trained workers and the experienced greenhouse manager from Canagro's existing facility were transferred to Pacific Lagoon's new greenhouse which caused Canagro to hire new workers and the new greenhouse manager. Moreover, BCHH contends, Canagro experienced a low crop yield because the new workers and greenhouse manager at Canagro were not as efficient as those who were transferred to Pacific Lagoon. According to BCHH, this resulted in unusually high production costs during the start-up period contemplated by the section 773(f)(1)(C)(ii) of the Act. BCHH contends that the Department has a special responsibility in this investigation because it sampled growers instead of collecting cost data from all producers. According to BCHH, as a consequence of not obtaining costs from each producer, the costs of Canagro and Pacific Lagoon have an exaggerated importance in determining the COP of BCHH's home-market sales. Moreover, BCHH argues, if the Department does not exclude the start-up costs, the costs of all its growers will be distorted. BCHH comments that section 773(f)(1)(C)(ii) of the Act allows the Department to adjust the COP to account for start-up operations if a producer is using a new production facility and production levels are limited by technical factors associated with the initial phase of commercial production. BCHH holds that these two statutory requirements for claiming a start-up adjustment are independent of each other and that nothing in the second requirement suggests that the reduced production levels can only be claimed with respect to new production facilities. Therefore, BCHH asserts, the Department should make the claimed adjustment for start-up costs. The petitioners argue that Pacific Lagoon's information provided to the Department to support the claimed start-up adjustment demonstrates that it does not in fact qualify for a start-up adjustment. According to the petitioners, the information provided establishes that the conditions of section 773(f)(1)(C)(ii) of the Act were not met and the Department should disallow the claimed start-up adjustment. They reiterate that the statute indicates that adjustments for start-up operations shall be made only where "a producer is using new production facilities" and where "production levels are limited by technical factors associated with the initial phase of commercial production." The petitioners argue that Canagro's existing greenhouse facility for which BCHH is claiming a start-up adjustment started operations in 1996 but that the statute does not allow for an adjustment for costs or yield for an existing facility. Because Canagro's greenhouse is an existing facility and there is no information on record that the existing facility was significantly retooled, expanded, or in any other way modernized, the petitioners state that any request for an adjustment in costs or yield for an existing facility does not meet the statutory requirement of a new facility and, therefore, should be denied. Department's Position: We have not made a start-up adjustment to the COP for BCHH with respect to either the Pacific Lagoon facility or the Canagro facility. Section 773(f)(1)(C)(ii) of the Act states that the Department will make an adjustment for start-up operations only where (1) a producer is using new production facilities or producing a new product that requires substantial additional investment, and (2) the production levels are limited by technical factors associated with the initial phase of commercial production. Pacific Lagoon completed construction in 1999 and began producing tomatoes in the new greenhouse facility during the POI. The new facility has trough systems, where the plants rest on a raised trough and not on the floor. Pacific Lagoon committed a significant amount of investment capital for constructing the new greenhouse as evident from the fixed- asset expenditures record. The entire area of the new greenhouse was planted during the 2000 growing season. Therefore, we have determined that Pacific Lagoon has satisfied the first condition under section 773(f)(1)(C)(ii) of the Act. Pacific Lagoon did not meet, however, the second condition of section 773(f)(1)(C)(ii) of the Act which states that "production levels are limited by technical factors associated with the initial phase of commercial production." The SAA at page 836 and 19 CFR 351.407(d) state that, to determine when a company reaches commercial production levels, the Department will consider first the actual production experience of the merchandise in question and production levels will be measured based on units processed. To the extent necessary, the Department also will examine other factors, including historical data reflecting the same producer's or other producers' experience in producing the same or similar products. A producer's projections of future volume or cost will be accorded little weight, as actual data regarding production are much more reliable than a producer's expectations. The SAA states further that the start-up period will be considered to end at the time the level of commercial production characteristic of the merchandise, producer, or industry concerned is achieved. The attainment of peak production levels will not be the standard for identifying the end of the start-up period, because the start-up period may end well before a company achieves optimum capacity utilization. In addition, consistent with the basic definition of a start-up situation, Commerce will not extend the start-up period so as to cover improvements and cost reductions that may occur over the life cycle of a product. The Department uses production starts as the best measure of a facility's capability to produce at commercial production levels (see 19 CFR 351.407(d)(3)(i)). Information on the record demonstrates that Pacific Lagoon planted the entire new greenhouse during its initial planting and achieved yields comparable to Canagro's historical yields. Thus, Pacific Lagoon attained commercial production levels from the first planting in the new greenhouse. As a result, there was no start-up period and the Department has denied the claim that a start-up adjustment is warranted based on Pacific Lagoon's experience. Regarding BCHH's claim that we should make a start-up adjustment to COP to reflect Canagro's experience, we find that the two conditions required for start-up adjustments are not independent of each other and that a start-up adjustment can be claimed for an existing facility if production levels are restricted due to the start of some other new facility. The information on the record establishes that Canagro's greenhouse is neither a new facility nor has it been expanded in any significant way. Thus, Canagro's situation does not satisfy the statutory criteria for the Department to grant a start-up adjustment. The SAA at 836 states that the expansion of capacity of an existing production line does not qualify as a start-up operation unless the expansion constitutes such a major undertaking that it requires the construction of a new facility and results in the depression of production levels due to technical factors. We do not consider Canagro's facilities to be new because the company began using its growing facilities in 1996, four years before the POI in this case. Moreover, the only significant change in the operations of this facility was the training of new employees. Consequently, the high per-unit costs incurred by Canagro for the existing facility resulted from management decisions rather than from technical factors related to the expansion of the facility. Therefore, for this final determination, we have not made the adjustment for start-up costs which BCHH has requested. Weight-Averaging the Cost for BCCH's Cost Respondents Comment 11: BCHH commented on the appropriateness of the Department's cost-averaging methodology. Because this issue affects the calculations for all the respondents, we have addressed it as a common issue. See Comment 7 above. 12. Combined Interest and G&A Expenses Comment 12: BCHH contends that the Department should calculate the COP and CV for Canagro and Pacific Lagoon based on the consolidated interest and corporate overhead expenses of their ultimate parent company. BCHH also argues that the Department should use asset value, rather than cost of sales, as the basis for allocating these expenses. BCHH claims that the companies within the group to which Canagro and Pacific Lagoon belong are closely held and their independent accountants prepared a combined financial statement that included all elimination entries. BCHH comments that the Department generally requires the use of consolidated financial data in calculating the net interest expense because the managers of a controlled group of companies have wide discretion in determining the mix of debt and equity among group companies. BCHH asserts that adhering to this sound practice and using the consolidated financial data to calculate the costs of Canagro and Pacific Lagoon is especially important in this case. BCHH maintains that Canadian law permits managers of a controlled group of Canadian companies discretionary means of tax planning by shifting earnings and losses among group companies and that, in this case, the ultimate parent company burdened Canagro and Pacific Lagoon with more debts, such that the interest expenses these companies incurred were artificially inflated. Similarly, for G&A expenses, BCHH states that for tax-planning purposes the parent company of Canagro and Pacific Lagoon charged them excessive management and other fees compared to the other affiliated companies, thus subsidizing the other companies' operations at the expense of Canagro and Pacific Lagoon. BCHH contends that, in order to correct for the cross- subsidization of costs among the various companies that are controlled with Canagro and Pacific Lagoon, the Department should use the combined entities' G&A expenses to calculate Canagro and Pacific Lagoon's costs. Finally, BCHH claims that in this case allocating interest and G&A expenses based on cost of sales distorts the costs because the group of companies controlled by Canagro and Pacific Lagoon's parent company are broadly diversified. In support of its claim, BCHH cites the Final Determination of Sales at Less Than Fair Value: Dynamic Random Access Memory Semiconductors of One Megabit and Above from the Republic of Korea, 58 FR 15467,15475 (March 23, 1993) ("LTFV DRAMS from Korea"), where the Department allocated the financial expenses based on the ratio of semiconductor fixed assets to company-wide fixed assets. BCHH also refers to Roses from Colombia in which the Department recalculated the respondent's interest expense by allocating the total combined interest expenses of four companies based on the ratio of one company's productive and long-term assets to the total productive and long-term assets of all four companies. Therefore, BCHH argues, the Department should allocate the interest and G&A expenses from the consolidated financial statements to the individual companies based on their relative asset values. The petitioners disagree with the respondent that the interest expenses Canagro and Pacific Lagoon during the POI incurred were inflated. They comment that Pacific Lagoon started production in a new facility and the costs of building greenhouses are high. Further, they assert, BCHH has not demonstrated that the actual interest expenses Canagro and Pacific Lagoon incurred distort the reported costs. The petitioners also assert that there is no evidence on the record to prove that the management and other fees charged by the parent company to Canagro and Pacific Lagoon were excessive or disproportionate to the services rendered. Citing section 773(f)(1)(A) of the Act, the petitioners comment that the Department has a preference, when calculating COP and CV, of relying "on the records of the exporter or producer of the merchandise, if such records are kept in accordance with the GAAP of the exporting country (or the producing country where appropriate) and reasonably reflect the costs associated with production and sale of the merchandise." According to the petitioners, the Department should deny the claim by BCHH that the G&A expenses should be based on the amounts incurred by the combined entity. The petitioners conclude by asserting that the Department has established guidelines for calculating the G&A expense rate. Citing the Department's Antidumping Manual, Chapter 8, page 58, they contend that the Department's preferred method of allocation is dividing the fiscal-year G&A expenses by the fiscal-year cost of goods sold and then applying this percentage to the cost of manufacturing of the product. The petitioners conclude that the Department should maintain its practice for the final determination. Department's Position: We have not calculated the interest or G&A expense rates based on the combined financial statements of the parent company of Pacific Lagoon and Canagro. First, the combined income statement was prepared by BCHH only for this investigation. Second, the submitted worksheet was not accompanied by any (e.g., audit, review, compilation, etc.) independent accountants' report. Therefore, there is no level of assurance that the statement was prepared in accordance with Canadian GAAP with all the appropriate companies included and all the inter-company transactions eliminated. When faced with a similar situation in LTFV DRAMS from Korea (Comment 25), we stated that, absent detailed testing normally performed in an audit, the Department cannot rely on the submitted combined income statement. The Department has a normal methodology of calculating the financial- expense ratio based on the financial statements at the highest level of consolidation normally prepared by the company. See, e.g., Gulf States Tube Div. Of Quanex Corp. v. United States, Slip Op. 97-124, Consol. Court No. 95-09-01125 (August 29, 1997) ("Gulf States Tube"). In this case, the highest level of consolidation is the individual financial statements of each company. Consistent with LTFV DRAMs from Korea, where consolidated financial statements are not normally prepared, we have based the financial-expense rate on the financial statements of each cost respondent. We also disagree with BCHH's contention that management and other fees paid by Canagro and Pacific Lagoon to their parent company should be excluded from the calculation of the G&A rate. There is no evidence that the amounts charged by the parent company to Canagro and Pacific Lagoon are overstated and, further, the amounts charged by the parent company are included in the financial statements of each entity as an expense. While section 773(b)(3)(B) of the Act directs the Department to use the actual data pertaining to production and sales of the foreign like product by the exporter in question for determining the selling and G&A expenses to include in the calculation of COP and CV, the antidumping law does not prescribe a specific method for calculating the G&A expense rate. When a statute is silent or ambiguous, the determination of a reasonable and appropriate method is left to the discretion of the Department. Because there is no bright-line definition in the Act of what a G&A expense is or how the G&A expense rate should be calculated or allocated, the Department has, over time, developed a consistent and predictable practice for calculating and allocating G&A expenses. We calculate the rate based on the company-wide G&A costs incurred by the producing company allocated over the producing company's company-wide cost of sales. See Final Results of Antidumping Duty Administrative Review: Oil Country Tubular Goods from Mexico, 66 FR 15832 (March 21, 2001), and accompanying Issues and Decision Memorandum at Comment 5. This method is also prescribed in the Department's standard COP questionnaire at page 13. Therefore, for the final determination, we have calculated the G&A expense rate based on the amounts incurred by Canagro and Pacific Lagoon as reflected in their financial statements. Because the Department is not basing the calculations of G&A or financial- expense rates on the combined financial statements, we do not need to address the issue of allocating these expenses based on their relative asset values. 13. Accuracy of Canagro's Production Quantities Comment 13: BCHH claims that the small differences between the production quantities reflected in the growers' records and those in BCHH's records resulted from mathematical errors in the growers' production reports and from differences in the rates the growers used to convert the number of cases to a weight basis. BCHH asserts that Canagro, Pacific Lagoon, and the other growers rely on BCHH for final inventory counts. According to BCHH, the growers ship all tomato production after they have made very hasty counts. When the tomatoes arrive at the warehouse, BCHH explains, it performs a careful count of the tomatoes packed by the growers before entering them into inventory. BCHH contends that the quantities from its records should be used to calculate the reported costs. The petitioners did not comment on this issue. Department's Position: Because we relied on Canagro's and Pacific Lagoon's books and records to calculate the cost of manufacturing for the cost-reporting period, for the final determination we have used the production quantities they maintained in their books and records to calculate the per-unit manufacturing costs for the different types of tomatoes. It appears that the minor differences in the production quantities resulted from timing differences between the dates recorded in the growers' records and BCHH's records. 14. Use of Corrected BCHH Sales Lists Comment 14: BCHH requests that the Department use the home-market and U.S. sales lists it submitted on November 13, 2001, for the margin calculations in the final determination. The respondent asserts that it submitted the corrected sales lists in accordance with instructions given by the Department's verifiers. BCHH asserts further that the corrected sales lists should be used since they reflect corrections that the Department verified. No other party commented on this issue. Department's Position: The corrected sales lists that BCHH submitted on November 13, 2001, incorporate certain corrections that we requested as a result of the sales verification. For the final determination we have used these corrected sales lists for the dumping margin calculation. 15. Reclassification of Certain BCHH Customers Comment 15: The petitioners assert that certain customers listed in BCHH's home-market sales list might not be retail customers. They cite the web page for Red Book Credit Services as support for reclassifying the specified customers as distributors. The petitioners request that the Department correct this apparent discrepancy. BCHH explains that the Canadian customers which the petitioners claim are misclassified are, in fact, wholesalers. BCHH contends further that the record supports that the sales process for its sales to retailers is the same as for sales to wholesalers and that the types and intensity of selling services provided to these two types of customers are virtually identical. Accordingly, BCHH requests, the Department should continue to treat sales to retailers and sales to wholesalers as the same channel of distribution. BCHH contends that the information cited by the petitioners is irrelevant to the proper classification of the specified customers. The respondent contends further that the petitioners have not articulated how the cited information supports reclassifying the certain customers as distributors. Department's Position: While BCHH might have mislabeled the specified customers as retailers we do not find that the information to which the petitioners refer supports reclassifying the customers as distributors. Moreover, based on our overall analysis of the information placed on the record of this proceeding, we find that the sales process for BCHH's sales to retailers is the same as its sales to wholesalers and distributors. We also find that the types and intensity of selling services provided to these customer categories are essentially the same. See our response to Comment 8 of this Decision Memorandum for a detailed discussion of our analysis of BCHH's sales to retailers, wholesalers, and distributors. 16. Representativeness of Cost for BCHH Comment 16: The petitioners request that the Department reconsider its position in the Preliminary Determination and adjust BCHH's costs to account for differences in yields between the selected cost respondents and other suppliers which the Department did not select as cost respondents. The petitioners argue that since the beginning of this investigation they have been concerned that the two growers the Department selected to report cost data for BCHH were unrepresentative of other growers that supplied BCHH with greenhouse tomatoes during the POI. They acknowledge that the use of samples may make sense for administrative reasons but contend that the sample population must be representative to ensure that the Department calculates accurate antidumping margins. Citing The Preamble at 27325 and the SAA at 872, the petitioners argue that, in granting the Department the authority to select samples, Congress required that such samples be statistically valid and representative. The petitioners suggest that when limiting the number of companies required to report cost data the Department's normal procedure is to select the largest producers of subject merchandise, citing the Final Determination of Sales at Less Than Fair Value; Honey from Argentina, 66 FR 24108, 24112 (May 11, 2001) ("Honey from Argentina"), Live Cattle from Canada, and Final Results of Antidumping Finding Administrative Review; Elemental Sulfur from Canada, 61 FR 8239, 8250 (March 4, 1996) ("Elemental Sulfur from Canada"). The petitioners contend that the Department erred in selecting the two growers that supplied the largest volumes to BCHH because it did not take into consideration the affiliation between two of the non-selected suppliers. The petitioners argue that the combined supply to BCHH of greenhouse tomatoes by the affiliated suppliers is greater than the supply of either of the two companies the Department selected for reporting cost data. BCHH contends that the Department concluded and reaffirmed that the selected growers are representative of other BCHH growers. BCHH argues that the Department was fully aware of and considered the combined volume of the non-selected suppliers but chose not to select them for reporting COP data. According to BCHH the cases cited by the petitioners to support their assertion that the Department normally selects the largest producers of the subject merchandise are not pertinent to this case. With regard to Honey from Argentina, BCHH asserts that in that proceeding the Department chose companies randomly for reporting cost data and that the ones selected were of varying sizes, localities, and levels of operation. Concerning Live Cattle from Canada, BCHH asserts that the Department did not decide to limit the reporting in that case in the context of selecting suppliers for reporting cost data but, rather, for identifying mandatory sales respondents whose data would be used to calculate dumping margins. Concerning the petitioners' citation to Elemental Sulfur from Canada, BCHH asserts that the Department apparently did not address or discuss the selection of companies for reporting cost data there. BCHH also contends that, contrary to the petitioners' assertion, the Department correctly concluded that, because yield and cost per square meter affect per-unit costs, it could not determine that the sample growers were unrepresentative without collecting COP data concerning all of the growers. BCHH contends further that, since yield and spending are related variables (i.e., growers can affect yield by the level of their spending per square meter), the Department determined correctly that it cannot make a sampling adjustment because only the yields, not the costs, of the non-sampled growers are on the record. BCHH concludes that, with no evidence as to economies of scale (i.e., a decrease in per-unit COP as a result of large-scale production) or the non-sampled growers' cost per square meter, and only minimal information on non-sampled growers' yield, there is insufficient information to determine whether an adjustment is warranted and there is no information on which to determine the amount of such an adjustment. Department's Position: BCHH did not grow any of the tomatoes that it sold during the POI. Instead, BCHH sold greenhouse tomatoes supplied by nearly twenty growers. We decided that it was not feasible for us to seek and analyze cost data from all of these growers. Therefore, we limited the number of cost-reporting companies. This was a necessary and practicable solution to the significant resource constraints facing the Department. See our response to Comment 7 and Identification of COP Respondents. Contrary to both the petitioners' and the respondent's suggestions, we did not attempt to apply a statistically valid sampling methodology under section 777A(c)(2)(A) of the Act in order to limit the number of companies reporting cost data. Section 777A(c) of the Act sets out the general rule and exception related to the selection of mandatory respondents, i.e., selection of producers or exporters for the purposes of determining individual weighted-average dumping margins. In contrast, the selection of growers for purposes of determining normal value is governed by sections 777A(a) and (b) of the Act. In this case, after careful consideration of our resource limitations, the comments we received from interested parties, and the information on the record, we applied our discretion under section 777A(a)(1) of the Act to select the growers accounting for the largest volume we could reasonably examine. This selection was based on the information that was on the record at that time. For this final determination, we continue to find that the two growers we selected to report cost data for BCHH represent a substantial portion of the supply of greenhouse tomatoes to this mandatory respondent and comprise a reasonable selection for purposes of calculating the COP and CV for BCHH's sales of greenhouse tomatoes. In addition, we find that the two companies we selected provided BCHH with a mix of products that is representative of the types of greenhouse tomatoes BCHH sold during the POI. Our use of the term "representative" in this context does not imply the use of a sampling methodology. Rather, it indicates that the selected companies produced the major of types of greenhouse tomatoes sold by BCHH and, therefore, were capable of supplying the cost data necessary for the Department to calculate a dumping margin for BCHH. We disagree with the petitioners' assertion that obvious distortions may result in the cost analysis based on variations in yield. Moreover, we agree with BCHH that, because yield and cost per square meter affect per- unit costs, the adjustment requested by the petitioners would not be appropriate without collecting and analyzing information concerning both the yield and per-square-meter costs of all suppliers to BCHH during the POI. As explained in the Memorandum to Laurie Parkhill from Mark Ross regarding the Representativeness of Cost Data Submitted for BC Hot House Foods, Inc., dated October 1, 2001, upon analyzing the BCHH supplier yield and cost information on the record, we found no consistent or predictable correlation between the two (i.e., a higher per-square-meter cost does not imply a higher yield or vice versa). One must compare both yields and total costs to understand whether the per-unit cost between the producers is similar. Because both are of equal importance in determining a grower's per-unit cost, relying only on yield differences is not an appropriate basis for concluding that the cost data of a particular grower is unrepresentative. For this reason, the adjustment requested by the petitioners would not be appropriate. As explained above, we did not ask all of the suppliers of BCHH to submit their per-square-meter cost because we found it necessary to limit the number of growers reporting cost data in this investigation. We are satisfied that our selection of growers results in a reasonable and representative calculation of costs. As a result, we have not collected the yield and per-square-meter cost of all suppliers. Based on our overall analysis of the information on the record, for the final determination we still find no evidence that BCHH's costs were understated because we did not obtain cost information from all of the companies that supplied BCHH. Therefore, we have not adjusted the reported COP data to account for the different yield experiences of the growers that supplied BCHH with greenhouse tomatoes during the POI. We disagree with the petitioners' assertion that we should have evaluated any affiliations between BCHH's suppliers. Such a process would have required the issuance of questionnaires on affiliations to each of BCHH's suppliers. Issuing such questionnaires and analyzing the responses would have added an unnecessary level of complexity to the cost-respondent selection process. The resulting additional burden would have delayed the investigation and vitiate our rationale for limiting the number of companies reporting cost data. Further, the cases cited by the petitioners do not support that, when limiting the number of cost respondents, the Department's normal procedure is to select the largest producers of the merchandise. In Honey from Argentina, we initially selected twelve producers out of approximately 25,000 to calculate a countrywide COP. No single company represented a measurable percentage of the total honey production (i.e., while one company may be ten times the size of another, they all still represented only a fraction of the total population). Further, in Honey from Argentina the Department ultimately relied on facts available to calculate the COP because all the selected producers failed to respond to the Department's cost questionnaire. Regarding Live Cattle from Canada, the decision to investigate the producers/exporters with the greatest export volume was not made in the context of selecting suppliers for reporting cost data. The methodology there was chosen for identifying mandatory respondents whose sales data would be used in the calculation of dumping margins, not how to limit the number of companies required to report COP data. In Elemental Sulfur from Canada, the respondent did not produce the merchandise it was selling, so the Department requested cost information from the producers that supplied the respondent. In that case, limiting the number of cost-respondent companies was not an issue. Red Zoo Marketing 17. Combined Financial Expense Comment 17: Red Zoo argues that Great Northern Hydroponic's ("GNH") interest-expense ratio should be based on the experience of the entire Red Zoo Group, of which GNH is a member. According to the respondent, it calculated this interest-expense ratio based on a statement of "Combined Financial Information" compiled by the company's outside accountants. The respondent states that the combined statement had not been prepared before because there were no circumstances which made this information useful. Red Zoo argues that nowhere in the law or regulations is it indicated that the mere fact that information was prepared specifically for an antidumping proceeding undermines the credibility of that information. It argues that the submitted combined financial statement was compiled from audited and reviewed information and that the verifiers did not find anything that would undermine the credibility of the independent accountants' analysis. Red Zoo argues that it is the Department's longstanding practice to use consolidated financial statements as the basis for calculating financial- expense ratios. For example, it asserts, in LTFV DRAMS from Korea the Department stated that, "for purposes of calculating a financial expense ratio, it is the Department's practice to use a company's consolidated financial statements, rather than unconsolidated financial statements." The respondent states that, although the Red Zoo Group statement is not consolidated but rather combined, the same rationale for using consolidated statements pertains to the combined statement in this case. It refers to a decision by the Court of International Trade in Dupont de Nemours & Company v. United States, 22 CIT 19, 1998 Ct. Int. Trade Lexis 14, *12, (CIT 1998), in which the court observed that the reason the Department uses consolidated statements is "the fact that the consolidated group's controlling entity has the power to determine the capital structure of each member of the group." According to the respondent, all of the companies within the Red Zoo Group are closely held private entities in which the controlling owners have the power to determine the capital structure of each member of the group. The petitioners state that Red Zoo has deviated from its normal and historical financial reporting merely to reduce its cost of producing the subject merchandise. They argue that the Department should use the interest expense shown in GNH's audited financial statements and not the combined income-statement worksheet. Department's Position: The Department's longstanding practice with regard to financing expenses is to base net financing expenses on the full-year net interest expense and cost of sales from the audited fiscal-year financial statements at the highest level of consolidation which correspond most closely to the period under consideration. See Final Determination of Sales at Less Than Fair Value: Certain Cut-to-Length Carbon-Quality Steel Plate Products from France, 64 FR 73143, 73152 (Dec. 29, 1999). This practice has been upheld by the Court of International Trade. See Gulf States Tube. The compiled income-statement worksheet Red Zoo prepared for this proceeding is not, contrary to Red Zoo's claim, as good as an audited consolidated statement. Despite the fact that there are numerous affiliated companies that meet the requirements for consolidation with the respondent, the highest level of consolidation is the separate company- specific financial statements. The respondent provided combined financial information compiled by the company's outside accountants for the Red Zoo Group, but the combined financial information was neither reviewed nor audited. In the absence of consolidated financial statements, we are unable to base the calculation of interest expense on the financial results of the consolidated corporate entity to which GNH and Red Zoo are a part. Consistent with our approach in LTFV DRAMS from Korea, where consolidated audited financial statements do not exist, it is appropriate to base the interest-expense calculation on the audited financial statements of the respondent. Thus, due to the facts in this case, we have based financing expenses on the unconsolidated financial statements of GNH. 18. Cost-Allocation Errors Comment 18: According to Red Zoo, the Department's margin calculation was overstated in the Preliminary Determination due to the Department's allocation of costs based on erroneous acreage information. The respondent argues that it has submitted more complete and correct cost information on the record of this proceeding and the Department verified this information at the cost verification of GNH. Therefore, the respondent argues, the Department should rely on the most recent information regarding cost for Red Zoo for purposes of the final determination. The petitioners concur that, should the Department determine that the alleged errors are clerical in nature, such errors should be corrected for purposes of the final determination. Department's Position: For the Preliminary Determination, the Department made adjustments to GNH's reported COP and CV of greenhouse tomatoes. At that time, the Department allocated costs to the different tomato types based on the acreage figures supplied by GNH prior to the Preliminary Determination. In alleging clerical errors after the Preliminary Determination, GNH revised its acreage factor and its production quantities. As stated in our response to this clerical-error allegation in the Amended Preliminary Determination of Sales at Less Than Fair Value and Postponement of Final Determination: Greenhouse Tomatoes From Canada, 66 FR 53203, 53204 (October 19, 2001) ("Amended Preliminary Determination"), the overstatement of costs was due to GNH's misstatement of the acreage and the production-quantity errors which the Department could not have known prior to the Preliminary Determination. We have now verified that the revised figures for GNH's acreage and production quantity are accurate. Therefore, we have relied on this information in calculating the COP of greenhouse tomatoes produced by GNH for the final determination. Mastronardi Produce Ltd. 19. Capitalization of Costs Comment 19: Mastron Enterprises Limited (Mastron), the selected cost respondent for Mastronardi, contends that, for the Preliminary Determination, the Department erroneously included the entire cost of replacing plastic covers in the reported costs. Citing Floral Trade, Mastron argues that the Department should capitalize rather than expense these costs because, according to Mastron, they benefit both present and future periods. Mastron asserts that, while section 773(f)(1)(A) of the Act states that "[c]osts shall normally be calculated based on the records of the exporter or producer of the merchandise, if such records are kept in accordance with the generally accepted accounting principles of the exporting country (or the producing country, where appropriate) and reasonably reflect the costs associated with the production and sale of the merchandise," section 773(f)(1)(B) of the Act clarifies that, notwithstanding company records, "costs shall be adjusted appropriately for those nonrecurring costs that benefit current or future production, or both." Mastron claims that the costs for plastic covers benefit both current and future production such that the Department should amortize these nonrecurring costs over the useful life to reasonably reflect costs associated with current production. The petitioners argue that, for the Preliminary Determination, the Department properly included the entire cost of replacing the plastic covers, which were recorded as an expense in Mastron's normal books and records, in the reported costs. They counter Mastron's argument that the Department should capitalize rather than expense the cost of replacing the plastic covers by claiming that Mastron replaced the plastic covers on some areas of the greenhouse facility and such activities were actually repairs and/or maintenance. As such, the petitioners claim, costs incurred for replacement of plastic covers are more properly expressed during the period in which they were incurred rather than being capitalized and amortized over the five-year period as requested by Mastron. Department's Position: We disagree with Mastron. During the cost- reporting period, Mastron replaced the plastic covers for certain areas of the greenhouse facility and recognized the cost as a repair and maintenance expense in its financial statements, which were prepared in accordance with Canadian GAAP. For submission purposes, Mastron included only a portion of this expense in the reported costs, claiming that these costs are capital in nature. The Department's longstanding practice, codified at section 773(f)(1)(A) of the Act, is to rely on data from the respondent's normal books and records where those records are prepared in accordance with home-country GAAP and reasonably reflect the costs of producing the merchandise. See Mushrooms from India and accompanying Issues and Decision Memorandum at Comment 5. With respect to Mastron's characterization of replacement of plastic covers as a nonrecurring cost, we consider the company's reliance upon section 773(f)(1)(B) of the Act to be misplaced. The plastic covers were replaced on some areas of the greenhouse facility as part of normal repairs and maintenance. The statute describes nonrecurring costs as indirect costs that, by their nature, can be shown to benefit current or future production and, thus, should be systematically allocated to those products benefitted. As an example of such nonrecurring costs, the SAA cites, at page 835, pre-production expenses such as research and development costs. Because the plastic covers were replaced as a part of normal repairs and maintenance, we do not consider them to be nonrecurring costs as contemplated by section 773(f)(1)(B) of the Act. We also find Mastron's reliance on Floral Trade, to be misplaced. In that case, the Department reclassified some expenses as "extraordinary" because there were clear and compelling reasons to substantiate that those expenses were unusual in nature and infrequent in occurrence. To recognize a cost as either an expense or an asset depends on the company's policy. In this case, Mastron classified the costs incurred for the replacement of plastic covers as repair and maintenance expenses in its financial statements. In the past Mastron recognized similar costs as expenses rather than as assets. However, Mastron did not include amortization for prior years' plastic replacement that benefitted the current production. The facts in this case are similar to those raised in the Final Determination 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 Canada, 58 FR 37082, 37120 (July 9, 1993). In these cases the respondent argued that the restoration costs incurred for the battery coke oven were an asset, which could be capitalized and amortized over a period of time pursuant to Canadian GAAP, but the company chose to recognize the entire amount as a repair expense in 1992. The Department disagreed with the respondent and included the entire cost incurred during the POI in the calculation of the cost of the merchandise. Similarly, in this case we disagree with the respondent's claim that these costs should be treated differently in the calculation of COP and CV than they are treated in its normal accounting system. Based on the statute and our past practice in similar situations, we find no reason to accept Mastron's contention that we should capitalize, rather than expense, the cost incurred for replacing the plastic covers. Therefore, for the final determination we have continued to include the cost incurred for replacing plastic covers in the calculation of COP and CV. 20. Cost Allocations Based on Supplier and Management Representations Comment 20: Mastron contends that, in its original response to the COP questionnaire, it allocated all costs incurred during the cost-reporting period to subject and non-subject merchandise based on either specific identification or acreage. However, in response to the Department's request to increase the level of product-specificity of costs, Mastron says it revised its cost allocations by analyzing each cost item separately. Mastron maintains that several cost items (e.g., fertilizer spray, labor cost, fuel cost, repair and maintenance) are consumed differently by different products or at different locations. To allocate these costs, Mastron explains, it relied on statements from the suppliers of equipment and services, as well as its own experience, because Mastron does not maintain any records quantifying consumption differences of these inputs by phase or product. Mastron asserts that, during the cost verification, the Department officials noted that Mastron does not have any other records to substantiate these differences. Therefore, for the final determination Mastron argues that the Department should accept the company's allocation methods. The petitioners comment that, for the purpose of allocating costs to products, the Department prefers to rely on the records of the exporter or producer of the merchandise, if such records are kept in accordance with the GAAP of the exporting country (or the producing country where appropriate) and which reasonably reflect the costs associated with the production and sale of the merchandise. Moreover, they assert, section 773(f)(1)(A) of the Act states that the Department will consider whether ``such allocations have been historically used by the exporter or the producer.'' The petitioners claim that the respondent's allocation methods "based on supplier and management representations" are not the best information available for purposes of reporting the COP for an antidumping investigation. According to the petitioners, the Department should use the costs as found in the company's actual books and records and as used historically by the respondent. Therefore, for purposes of the final determination, the petitioners urge the Department to reject all cost- allocation methods which were based upon unsubstantiated supplier or management representations. Department's Position: We confirmed through verification that Mastron does not have a cost-accounting system. For submission purposes, Mastron used several factors and methods to allocate costs to the different types of tomatoes and peppers it grew during the cost-reporting period. During the cost verification, we found that the allocation factors and methods Mastron used for most of the cost elements in its response were substantiated by its normal books and records and were verified. However, we were unable to verify the allocation factors for fertilizer spray, labor, fuel, repair and maintenance, and management-fee grower costs because Mastron allocated these costs based on either the supplier's representation or management's experience. Mastron was unable to produce any records, reports, or engineering studies to substantiate these allocation factors for these elements. For the purposes of cost calculations, the Department normally relies on the information maintained in the company's books and records, provided the information can be verified. In Final Results of the Antidumping Duty Administrative Reviews and the Determination to Revoke in Part: Certain Corrosion-Resistant Carbon Steel Flat Products and Cut-to-Length Carbon Steel Plate from Canada, 66 FR 3543 (January 16, 2001), and accompanying Issues and Decision Memorandum at Comment 4, the Department rejected the hourly production rates the respondent used to allocate costs between subject and non-subject merchandise because they were based on the firm's employee's subjective estimates and were unverifiable. Instead, the Department calculated an average hourly production rate based on the information maintained by the respondent in its normal books and records to allocate labor costs between subject and non-subject merchandise. Similarly, in Final Determination of Sales at Less Than Fair Value: Certain Preserved Mushrooms from India, 63 FR 72246 (December 31, 1998), and accompanying Issues and Decision Memorandum at Comment 9 ("LTFV Mushrooms from India"), the Department rejected a respondent's yield-based allocation methodology for materials and other non-picking labor costs because the method relied purely on unsubstantiated estimates. Instead, the Department allocated these costs to the different sizes of mushrooms based on production weights maintained by the respondent in its normal books and records. In this case, the factors developed by Mastron to allocate fertilizer spray, labor, fuel, repair and maintenance, and management-fee grower costs to the different types of tomatoes and peppers were based on estimates that the respondent could not support at verification. For the final determination, we have rejected Mastron's allocation factors for these costs. Instead, we have allocated these costs to the different types of tomatoes and peppers based on acreage which we verified from the information maintained by Mastron in its books and records. 21. Calculation of Mastronardi's Indirect Selling Expense Rate Comment 21: The respondent comments that it is the selling arm of the Mastronardi group of companies. It explains that Mastronardi buys and sells subject and non-subject products. Therefore, it claims, the company intended to report all of its costs except cost of sales as either direct or indirect selling expenses. Following the cost verification, Mastronardi claims, it revised the calculation of its indirect selling expense rate in order to address the cost-verification findings. Specifically, the respondent asserts, the revised calculation included a portion of the management bonuses, foreign-exchange gains on accounts payable and cash, and office and administrative service income. Mastronardi claims that it is the Department's longstanding practice to include foreign-exchange gains and losses from accounts payable and cash in the calculation of COP and CV. Therefore, for the final determination it urges the Department to use the revised rate for indirect selling expenses in the margin calculations. The petitioners respond that the Department's normal practice is to distinguish between exchange gains and losses incurred on sales transactions and those incurred on purchase transactions. In addition, they assert, the Department has indicated that it will normally include, in the calculation of COP and CV, the foreign-exchange gains and losses that result from the transactions related to a company's manufacturing activities, citing the Final Determination of Sales at Less Than Fair Value; Certain Hot-Rolled Flat-Rolled Carbon-Quality Steel Products from Brazil, 64 FR 38756, 38786 (July 19, 1999). The petitioners argue that the Department should not include foreign-exchange gains and losses from accounts payable in the calculation of the indirect selling expense rate as suggested by the respondent because the Department normally includes them in the calculation of the G&A expense rate. Department's Position: It is the Department's normal practice to distinguish between foreign-exchange gains and losses from sales transactions and exchange gains and losses from other types of transactions. The Department normally does not include foreign-exchange gains and losses generated from accounts receivable in its COP and CV calculations. See Final Determination of Sales at Less Than Fair Value: Hot-Rolled Flat-Rolled Carbon-Quality Steel Products from Japan, 64 FR 24329, 24350 (May 6, 1999). However, the Department does include foreign- exchange gains and losses related to accounts payable in the calculation of the G&A expense rate because they are associated with the purchases of materials and services used by the company to manufacture and sell its products. See Final Determination of Sales at Less Than Fair Value: Certain Hot-Rolled Steel Flat Products from Indonesia, 66 FR 49628 (September 28, 2001), and its accompanying Issues and Decision Memorandum at Comment 3, and Final Determination of Sales at Less Than Fair Value: Certain Cut-to-Length Carbon-Quality Steel Plate Products from Indonesia, 64 FR 73164, 73173 (December 29, 1999). The foreign-exchange gain related to accounts payable resulted from the purchases of packing materials by Mastronardi. It used these packing materials to pack subject and non-subject merchandise purchased from sources other than Mastron. Mastron packs all the subject merchandise that it sells to Mastronardi. The reported packing expenses are based on the packing costs Mastron incurred during the POI. Because the reported packing expenses are based on the costs Mastron incurred, we have not included Mastronardi's foreign-exchange gain related to the purchase of packing materials in the packing-expense computation. We also did not include this foreign-exchange gain in the reported G&A expense rate because the G&A rate computation is based on the amounts incurred by Mastron, not by Mastronardi. Additionally, we have excluded the foreign- exchange gain related to accounts payable from the revised indirect selling expense rate because it relates to acquiring packing materials, not indirect selling expenses. For the final determination we have included the entire amount of management bonuses paid by Mastronardi to its owners because we consider these amounts to be compensation, not profit distributions. See our response to Comment 3 concerning "Payments to Owners." Finally, we have included foreign-exchange gains related to cash and office and administrative service income recognized by Mastronardi, whose only activity is the purchase and resale of merchandise, in the calculation of the indirect selling expense rate. 22. Treatment of Mastronardi's Management Bonuses Comment 22: Mastronardi commented on the Department's inclusion of bonuses and management fees in the calculation of COP and CV. Because this issue affects the calculations for more than one respondent, we have addressed it as a common issue. See Comment 3 above. Veg Gro Sales, Inc. 23. Management Estimates Comment 23: Veg Gro Inc. ("Veg Gro"), one of the cost respondents selected for Veg Gro Sales, argues that, regarding management estimates, the Department should treat the respondent companies consistently. Veg Gro comments that it had allocated fertilizer and bio-control expenses in its original response based on acreage. It explains that supplemental questions by the Department resulted in the submission of management estimates to allocate these costs to subject and non-subject merchandise. Veg Gro submits that, although these estimates represent costs fairly, these allocations cannot be supported by company records. Veg Gro observes that the Department questions such estimates fairly for other respondent companies and, therefore, Veg Gro requests that the Department disallow such estimates for Veg Gro if the Department disallows the use of management estimates for other respondents. Veg Gro asserts these expenses should instead be allocated based on acreage. The petitioners believe the Department should use those amounts which reflect the historical allocation of costs. Department's Position: We agree with the respondent. We found that management's estimates for the allocation of biological controls and fertilizer were not verifiable; therefore, we have not included them in our calculation of COP and CV for the final determination. In LTFV Mushrooms from India at Comment 9, the Department rejected the respondent's approach to allocate costs based on unsubstantiated management estimates. At Veg Gro's verification, we found that Veg Gro does not maintain a cost-accounting system or a formal production-control system. Consequently, the company derived a methodology for allocating costs between subject and non-subject merchandise for reporting COP and CV to the Department. At verification, however, the company was unable to substantiate management estimates of fertilizer and bio-control allocations. We found that acreage was the most reasonable allocation method available to the company and were able to verify the respondent's production acreage. See Memorandum to Neal Halper from Heidi S. Norris: Verification Report on the Cost of Production and Constructed Value Data Submitted by Veg Gro Sales, Inc., dated November 19, 2001. Therefore, we have used production acreage, rather than management's estimates, for the allocation of biological controls and fertilizer in the calculation of COP and CV for the final determination. 24. Arithmetical Error Comment 24: Veg Gro argues that the Department made an arithmetic error in Veg Gro's cost verification report regarding the transfer price of packing charges for 15-pound boxes. Veg Gro requests that the Department correct the error when calculating packing costs for the final determination. The petitioners concur that any errors found to be clerical in nature should be corrected for the purposes of the final determination. Department's Position: We agree with the respondents and have used the corrected amount in the calculation of COP and CV for the final determination. 25. Clerical Errors With Regard To Amco Farms Comment 25: Amco, a supplier to Veg Gro Sales, Inc., states that in the Preliminary Determination the Department adjusted the fixed overhead cost reported for Amco to include a depreciation expense related to a cooler that was rented to a third party. The respondent asserts that the Department made this adjustment based on an inadvertent error by Amco in certain footnote references in the calculation worksheet in the company's questionnaire response. Amco explains that its reported costs exclude revenues and costs related to rental activities and, in its response, it provided notes to explain how it had allocated each cost among the plants. Amco states that Note 1 refers to items relating exclusively to rental activities but that the depreciation of the cooler inadvertently referred to Note 2, which was intended for cost items that related exclusively to Plants 1 and 2. Amco asserts that, as a result of this erroneous reference, the Department reallocated the cooler's depreciation between the two plants. It requests that the Department correct its adjustment to reflect the appropriate depreciation of the cooler. The petitioners state that, should the Department determine that the alleged error is clerical in nature, the error should be corrected for the final determination. Department's Position: The Department based its adjustment with regard to the depreciation of the cooler on information on the record. Despite the fact that the Department made this adjustment in the Preliminary Determination, Amco never identified this claimed error or provide corrected information in its responses. In fact, we only learned of Amco's claim when it submitted case brief. In its case brief, Amco simply stated its claim and did not provide any evidence or direct us to any information on the record that would allow us to corroborate its claim. In an effort to determine whether the claim could be substantiated, we reviewed all the record information. However, we were unable to identify any information to support that the submitted information was in error. Because there is no information on the record which supports the respondent's assertion related to the cooler, we find that the respondent's claimed correction of "erroneous" information is unsubstantiated and, therefore, have not made a change for the final determination. See Certain Fresh Cut Flowers from Colombia; Final Results of Antidumping Duty Administrative Reviews, 61 FR 42833 (August 19, 1996). Comment 26: Amco asserts that, when the Department recalculated Amco's cost of goods sold (the denominator for the G&A and interest-expense ratio), it excluded two items, depreciation and property and business taxes. The respondent argues that it reported these two items with the administrative expenses in its income statement but included them in the cost of manufacturing for submission purposes. Therefore, Amco contends, the Department should include these amounts in the denominator of the G&A and interest-expense calculations. The petitioner states that, should the Department determine that the alleged error is clerical in nature, the error should be corrected for the final determination. Department's Position: We agree with the respondent and have revised the cost-of-goods-sold figure to include the two items which were excluded. Comment 27: Amco claims that the long-term interest expense it reported included certain investment-related interest expenses concerning two pieces of land that the company is holding for speculative purposes. Amco states that the Department's practice is to exclude investment-related income and expenses from reported costs and requests that the Department exclude this investment expense from the financial-expense rate. Department's Position: The Department's practice is to include the entire borrowing experience of the respondent company in the calculation of the financial-expense rate. In the Final Results of the Antidumping Duty Administrative Review of Stainless Steel Wire Rod from Taiwan, 66 FR 52587 (October 10, 2001), the Department included investment-related interest expense in the financial-rate calculation, stating that, "because money is fungible, and a corporation can use the proceeds from loans for a variety of corporate purposes, we do not generally investigate the use of the loan proceeds, and therefore do not associate interest expense with specific activities, such as investment." Given this practice, we include this expense in our calculations. Consistent with our practice, we believe it is appropriate to include in the financial-expense ratio the total interest expense Amco experienced. Therefore, we have included all of Amco's interest expense in the calculation of the financial-expense ratio for the final determination. 26. Exporter G&A and Financial-Expense Ratios Comment 28: Veg Gro Sales argues that the exporter G&A and financial- expense ratio the Department calculated are no longer necessary. Veg Gro Sales contends that the Department calculated this rate for the Preliminary Determination to account for selling expenses which Veg Gro, had excluded from the exporter's indirect selling expenses it reported in the cost response. As a result, Veg Gro Sales explains, it submitted a revised indirect selling expense calculation which includes these expenses. Given the revision, the company argues that the exporter G&A and financial-expense ratio is no longer needed. Department's Position: Since the issuance of the Preliminary Determination, Veg Gro has submitted a revised indirect selling expense which includes these expenses. Therefore, we have excluded the exporter's combined G&A and interest rate from the final calculations. 27. Clerical Error Affecting COP and CV Calculations Comment 29: The petitioners state that, although the Department's analysis memorandum for the COP and CV calculations for Amco contains computer-programming language which would revise the unite values of direct materials and direct labor, these changes do not appear in the Department's actual calculations. The respondent argues that the language to which the petitioners refer concerns Veg Gro costs, not Amco costs. It states that Amco costs are in an exhibit to the memorandum and were addressed correctly in the Department's calculations. The respondent also cites the Department's October 1, 2001, memorandum to Neal Halper concerning Veg Gro in which the Department did not make any adjustments to Veg Gro's reported direct material and direct labor costs. The respondent asserts that the Department made all applicable corrections to Veg Gro's costs properly in the margin calculations. Department's Position: The Department revised the direct material and direct labor unit values for Amco and used accurate programming language to implement these changes in its calculations for the Preliminary Determination. Unfortunately, the Department's memorandum on Cost of Production and Constructed Value Calculation Adjustments for Amco mis- identified line numbers where it implemented these changes. Programming language with regard to Amco's changes are implemented accurately at lines 528-543 of the comparison-market program and at lines 319-333 of the margin program. Programming language at lines 545-553 of the comparison-market program and lines 334-343 of the margin program deal with adjustments to VegGro's costs. For the Preliminary Determination, we did not make revisions to VegGro's direct material and direct labor unit values. See Memorandum to Neal Halper from Heidi S. Norris: Cost of Production and Constructed Value Calculation Adjustments for the Preliminary Determination, dated October 1, 2001. In our preliminary analysis memorandum for Amco Farms we mistakenly included two lines at page 2 which indicated that the direct material and labor unit values for VegGro were adjusted, when, actually, we had not made any such adjustments. See Memorandum from Minoo Hatten to the File, Antidumping Duty Investigation on Greenhouse Tomatoes from Canada; Amco Farms Inc., Cost of Production and Constructed Value Calculation Adjustments for the Preliminary Determination, dated October 1, 2001. For the final determination, we have made certain cost adjustments to both Amco's and VegGro's cost information and have implemented these changes in our calculations. 28. Expenses Paid On Behalf Of Owners Comment 30: Two Ontario cost respondents comment that personal expenses paid by companies on behalf of their owners should not be included in the calculation of COP. Since this issue concerned another respondent as well, we addressed this issue under Comment 34 below. J-D Marketing, Inc. 29. Accuracy of Cost Data for IPR Farms Comment 31: The petitioners state that the costs of IPR, a supplier to J- D, do not accurately reflect the grower's actual costs. They point to the fact that the Department found at verification that the way IPR reported its costs led to significant understating of its costs. The petitioners observe that, at verification, the Department had to recalculate the acreage factor based on the square footage used to grow beefsteak tomatoes, cluster tomatoes, and cucumbers because several of the greenhouses operated by IPR were idle during the POI. J-D does not dispute that IPR's cost data has changed from the Preliminary Determination. It argues that the Department verified the new cost data and urges the Department to rely on the verified data. Department's Position: We have adjusted IPR's cost based on our verification findings in which we found that some of IPR's greenhouses were idle during the POI. Therefore, we have recalculated the "acreage factor" based on the square footage used to grow beefsteak tomatoes, cluster tomatoes, and cucumbers. The revised acreage factors changed the calculations of the per-unit costs applicable to direct materials, direct labor, variable overhead and fixed overhead. 30. Representativeness and Accuracy of COP Analysis Comment 32: The petitioners argue that the Department's selection of IPR and its sole reliance on IPR's COP and CV information for calculation of J- D's margin is unrepresentative and inaccurate. They contend that IPR is an unrepresentative grower because it does not account for a significant portion of the tomatoes supplied to J-D, nor is it a proper source of cost data for comparison to supplies of tomatoes that were grown in other provinces for purposes of the COP test. The petitioners argue that, for the final determination, the Department should amend its selection of cost respondents for J-D and use the COP data which another supplier provided in calculating the margin for J-D. The petitioners assert that, according to section 777A(c)(2) of the Act, the Department has the discretion, when faced with a large number of exporters or producers and limited resources to examine all known exporters or producers of subject merchandise, to limit its examination to a reasonable number of such companies. In such instances, the petitioners contend, section 777A(c)(2)(B) of the Act permits the Department to investigate either a sample of exporters, producers, or types of products that is statistically valid based on the information available at the time of selection or exporters or producers accounting for the largest volume of the subject merchandise that can reasonably be examined. Citing The Preamble at 27296, 27325, and the SAA at 872, the petitioners contend that any such sample must be statistically valid and representative. Citing the Memorandum to Richard W. Moreland from Laurie Parkhill: Identification of Cost-of-Production Respondents (June 29, 2001), the petitioners argue that the Department acknowledged that J-D's two largest suppliers were Co-Op Sales Agency (Co-Op) and another supplier, whose name is proprietary. Citing the Preliminary Determination of Sales at Less Than Fair Value: Fresh Honey from Argentina, 66 FR 24108 (May 11, 2001), Preliminary Determination of Sales at Less Than Fair Value: Fresh Kiwi Fruit from New Zealand, 56 FR 60092, 60093 (November 27, 1991), Preliminary Determination of Sales at Less Than Fair Value: Fresh and Frozen Atlantic Salmon from Norway, 55 FR 40418 (October 3, 1990), and Preliminary Determination of Sales at Less Than Fair Value: Live Cattle from Canada, 64 FR 36847, 36850 (July 8, 1999), the petitioners argue further that it is the Department's normal practice to select producers which account for the largest volume of the subject merchandise. They contend that the other supplier's cost data should be included in J-D's margin calculation because the other supplier is the largest supplier to J- D, accounting for a substantial portion of all types of tomatoes supplied to J-D, and its cost data is already on the record. The petitioners contend that, because provinces of Canada have dramatically different cost structures, by not including the other supplier's cost data the Department is distorting its COP analysis of J-D with respect to a significant percentage of its supply and, consequently, creating inaccuracies in the margin calculation for J-D. Citing Rhone- Poulenc, Inc. v. United States, 899 F.2d 1185, 1191 (CAFC 1990), and Lasko Metal Products, Inc. v. United States, 43 F. 3d 1442, 1446 (CAFC 1994), the petitioners comment that the most basic purpose of the antidumping statute and the Department's most important task in an antidumping investigation is to determine dumping margins as accurately as possible. The petitioners also contend that, prior to its COP respondent selection, the Department was aware that J-D's largest suppliers were located in different provinces of Canada. Citing their Comments With Respect to Sampling for COP Questionnaire (May 31, 2001), the petitioners state that in this submission they indicated that the sample of cost respondents must take into account that differences in breed genetics, hours of available sunlight, facility size and structure, climate, and more lead to significant variances in costs between producers and regions. They argue further that, in order to ensure that its sample is representative of J- D's suppliers, the Department should have accounted for these differences and have selected at least one supplier from each region. The petitioners argue further that in prior agricultural investigations the Department constructed its sample of cost respondents to address concerns regarding regional variances in production costs and techniques. J-D argues that the petitioners have not provided any new data substantiating a claim that, contrary to Department's determination, IPR alone is not representative as a cost respondent for J-D. J-D argues further that the petitioners did not object to the Department's choice of IPR at the early stage of the investigation nor that the other supplier should be a cost respondent for J-D. J-D argues that, since the Department rejected another Co-Op member as a cost respondent and chose only IPR, the Department must have deemed IPR to be representative of J-D's suppliers. J-D argues that, for the purpose of determining representativeness of production costs, the Department must look at the grower/producer share of supply to the respondent. J-D contends that, when the comparison of J-D's suppliers is made at the grower level, as opposed to non-grower/reseller level, IPR is clearly representative because it is the largest, single grower to J-D. J-D argues that the other supplier's suppliers which the Department chose as cost respondents for the other supplier account for a smaller supply to J-D than that of IPR's share alone. J-D argues further that IPR's representativeness is also obvious when analyzed at the non- grower/reseller level (e.g., Co-Op, and the other supplier). J-D contends that IPR's sole supply volume of greenhouse tomatoes to Co-Op is greater than that of the total supply of the other supplier's selected suppliers to the other supplier. J-D argues that the reliance on the other supplier's unadjusted cost data in the COP test of J-D would be inappropriate for the purpose of gauging J- D's tomato costs. J-D contends that the other supplier's growers' reported costs include certain selling expenses as well as allocated amounts for the other supplier's own G&A and interest costs. J-D argues that, since all of J-D's costs have already been accounted for as indirect selling expenses or as some other selling expenses, reliance on the other supplier's unadjusted costs in J-D's margin calculation would result in a flawed COP comparison. J-D argues that, if the Department decides to include the other supplier's cost data in the margin calculation for J-D, it must include other respondents' cost data if such respondents were also suppliers to J- D. J-D argues that, similar to the other supplier, other respondents' cost data are also on the record and are verified. J-D also contends that, if the Department accepts the petitioners' argument at this point in time in the investigation, J-D would be denied due process since its counsel has had no opportunity to comment on the cost respondents selected for the other supplier in the context of the relationship between the other supplier and J-D or on how the selected cost respondents' costs were calculated. Department's Position: When limiting the number of companies required to report COP data, the Department's normal procedure is not necessarily to select the largest producers of subject merchandise. Although this might be the most efficient way to ensure that the selected companies represent a substantial portion of the subject merchandise sold by a mandatory respondent, such an approach does not necessarily guarantee a reasonable selection for purposes of reporting COP data. For example, the largest producer might not have supplied the mandatory respondent with the primary type of greenhouse tomato (e.g., tomatoes on the vine) the mandatory respondent sold during the POI. Further, we do not interpret section 777A(c)(2)(B) of the Act as limiting the reporting of cost data to one or more of the "largest" producers supplying a mandatory respondent because this provision only applies to the selection of mandatory respondents for the purpose of calculating a weighted-average dumping margin. See our response to Comment 16 above. Further, we disagree with the petitioners' assertion in their reference to earlier agricultural investigations that the Department, for the purpose of obtaining cost information when faced with a large number of potential exporters or producers, selected producers which accounted for the largest volume of the subject merchandise. Because it was not practicable for us to analyze the cost data of all the producers supplying greenhouse tomatoes to the mandatory respondents, we analyzed the information on the record to identify growers which provided the mandatory respondents with a substantial portion of the greenhouse tomatoes they sold. We also considered whether such growers provided the respondents with a mix of greenhouse tomatoes that included all types supplied. In regard to J-D, we chose Co-Op because it is the second largest supplier of tomatoes to J-D and is a representative supplier of all major types of tomatoes sold by J-D. See Memorandum to Richard W. Moreland from Laurie Parkhill: Identification of Cost-of-Production Respondents (June 29, 2001). As the record developed it became apparent that Co-Op is a reseller of greenhouse tomatoes and was itself supplied by numerous growers. Once again, because it was not practicable for us to analyze the cost data of all growers that supplied greenhouse tomatoes to Co-Op, we analyzed the information on the record to identify which growers provided the company with a significant portion of the greenhouse tomatoes ultimately supplied to J-D. We also considered whether the growers provided a mix of greenhouse tomatoes that included all types supplied. Based on this analysis, we identified IPR as an appropriate cost respondent. IPR accounts for a significant portion of J-D's total greenhouse tomato supply. Although we acknowledge that the other supplier is the largest supplier to J-D, the cost respondents we selected for the other supplier, in total, account for approximately the same volume of greenhouse tomatoes supplied to J-D as that which IPR supplied. IPR is a significant supplier to J-D when its supply is analyzed at the non- grower/reseller level (e.g., Co-Op, and the other supplier). IPR's supply of greenhouse tomatoes to Co-Op is greater than the total supply of the selected cost respondents for the other supplier. We do not find that our cost-respondent selection for J-D is not representative because it did not account for various factors that account for cost differences between producers and regions. We acknowledge that the petitioners suggested that the sample of cost respondents must take into account factors such as cropping system, greenhouse type and size, hours of available sunlight, etc. See Petitioners, Comments With Respect to Sampling for COP Questionnaire, May 31, 2001. Such factors would have been relevant had the Department decided to base its cost-respondent selection on a statistically valid sampling technique. Instead, after careful consideration of our resource limitations, the comments we received from interested parties, and the information on the record, we decided to limit our examination of COP data to a reasonable number of growers that provided a substantial portion of the total supply to the mandatory respondents. Although we are satisfied that our selection of cost respondents for J-D is representative, we have determined that it is appropriate to include the cost data provided by the other supplier's cost respondents for purposes of calculating J-D's margin. In addition, we find it appropriate to also include the cost data already on the record of the other cost respondents that supplied J-D. In our cost-respondent memorandum we stated that "the information currently available to us suggests that obtaining cost data from the selected companies will provide representative cost-of- production information for the mandatory respondents." See Memorandum to Richard W. Moreland from Laurie Parkhill: Identification of Cost-of- Production Respondents (June 29, 2001). In making the decision, we also stated that "limiting the reporting of cost data in this manner is a necessary and practicable solution to the burdens associated with the cost investigation and this office's substantial recourse constraints. If, during the course of investigation, we determine that cost data from other suppliers is necessary, and we have the resources available to analyze such data, we will issue additional requests for information." The other supplier's verified cost data is already on the record and does not require the additional resources for the Department to analyze and include such data in J-D's margin calculation. See our response to Comment 7 of this Decision Memorandum for a detailed discussion. In light of the fact that the other supplier accounts for a substantial portion of J-D's supply, ignoring the other supplier's data which is readily available would affect the Department's ability in this investigation to determine dumping margins accurately. We disagree with J-D that we should adjust the other supplier's data to exclude certain selling expenses. We verified that the expenses classified as overhead and G&A were related to the production of tomatoes. Furthermore, we believe that the cost of the greenhouse tomatoes supplied to J-D would include the expenses incurred by the other supplier. Therefore, for calculating J-D's weighted-average COP, we have not revised the other supplier's COP data to exclude these expenses. We disagree with J-D that use of the other supplier's cost data for the final determination denies the respondent due process. J-D was aware, at all times, that the other supplier is a significant supplier of greenhouse tomatoes to J-D and a mandatory respondent in this investigation. J-D was also aware that the process of selecting cost respondents does not preclude the Department from using other information on the record. Therefore, J-D could have foreseen that the Department might use the other supplier's cost data if it deemed it necessary. In this investigation, the necessity of using the other supplier's data is dictated by the accuracy achieved from using the actual COP information provided by the supplier in question. 31. Exclusion of Cluster-Roma and Cherry Tomatoes from Margin Calculations Comment 33: The petitioners contend that the Department should not exclude home-market sales of cluster-roma and cherry tomatoes from its analysis. The petitioners argue that, since the other supplier's cost data contains cost information on these types of tomatoes, use of the data will enable the Department to perform a COP analysis on these products. The petitioners argue that, since J-D suggested and/or did not object to use costs of the other supplier as a surrogate cost for these types of tomatoes, the Department had no reason to exclude sales of such products from its analysis. J-D argues that the exclusion of cluster-roma and cherry-tomato sales was appropriate and such sales should also be excluded for the final determination. J-D states that, if sales of cluster-roma and cherry tomatoes will be included for the final determination, the costs used for these types of tomatoes must exclude any extraneous costs that do not relate to J-D. Department's Position: In the Preliminary Determination the Department did not test to determine whether home-market sales of cluster-roma and cherry tomatoes were made at prices below COP because the selected cost respondent for J-D (IPR) did not produce these tomatoes and, therefore, it could not provide the cost data for these products. Therefore, for the Preliminary Determination, the Department excluded home-market sales of these types of tomatoes from its analysis. Sales of cluster-roma and cherry tomatoes account for an insignificant portion of J-D's total U.S. sales by quantity. For the final determination the Department has used the other supplier's cost data for J-D's margin calculation. See our response to Comment 32. The other supplier's information contains cost data on these types of tomatoes and, therefore, the Department can perform the COP analysis on these products. Thus, the Department has included home-market sales of cluster roma and cherry tomatoes in its analysis. 32. Expenses Paid On Behalf of Owners Comment 34: IPR and VegGro argue that personal expenses paid by the companies on behalf of their owners (including personal travel expenses, interest expenses on a loan carried by the company on behalf of its owner, and life-insurance premiums on behalf of its owner) should not be included in the COP because these payments represent a form of dividend, are based solely on ownership, and are not related to any services provided to the company. Citing Kiwifruit from New Zealand, the respondents state that the Department has found that, where actual business use of the assets paid by the company appears to be minute, these expenses should not be included in COP. Citing Roses from Colombia, the respondents state that the Department excluded from its calculations in that case the expenses demonstrated to be personal in nature, tax-motivated, and not related to the production of the subject merchandise. Therefore, the respondents argue, the Department should exclude these types of costs from the final determination in this investigation. The petitioners state that it is routine for corporations to take out life-insurance policies on behalf of management, wherein the company is the beneficiary, especially if those individuals are critical in the functioning of the enterprise. They argue that, before accepting any adjustments as reported, the Department must determine whether those costs are related in any way with the production of the subject merchandise. The petitioners argue that, if the evidence of record is unclear in any way, the Department has no alternative but to use the costs actually reflected in the companies' books and records for purposes of calculating the COP. Department's Position: We agree with the petitioners and have included these costs in calculating COP and CV. Each of the respondents reported these expenses as operating costs on their audited or reviewed financial statements. Independent auditors reviewed, tested, and gave an opinion on the respective growers' financial statements that users can rely upon them. Because each of the respondents received a unqualified opinion on their audited or reviewed financial statements, we consider inclusion of these expenses as operating costs to be accurate and reliable. The fact that a company may pay certain personal expenses on behalf of an active owner does not mean the payment is a dividend. The payment of personal expenses on behalf of an active owner is simply a form of compensation, supported by the fact that the payments are included as operating costs on the respective audited or reviewed financial statements. Because section 773(f)(1)(A) of the Act instructs the Department to follow the respondent's normal accounting methodology, if it is consistent with GAAP in the foreign market and "reasonably reflects the costs associated with the production and sale of the merchandise," and because the companies normally record these amounts as company expenses, we have included the expenses paid on behalf of the owners in the calculation of COP and CV for the final determination. Recommendation Based on our analysis of the comments received, we recommend adopting all of the above positions and adjusting all related margin calculations accordingly. If these recommendations are accepted, we will publish the final determination and the final weighted-average dumping margins for all reviewed firms in the Federal Register. Agree _________ Disagree _______ _____________________ Faryar Shirzad Assistant Secretary Import Administration _____________________ Date