CULTIVOS MIRAMONTE S.A. and FLORES MOCARI S. A., Plaintiffs,
              v. UNITED STATES, Defendants, FLORAL TRADE COUNCIL,
                             Defendant-Intervenor.

                             Court No. 96-09-02222

                   UNITED STATES COURT OF INTERNATIONAL TRADE

          980 F. Supp. 1268; 1997 Ct. Intl. Trade LEXIS 136; SLIP OP.
                                     97-132

                          September 17, 1997, Decided

DISPOSITION:   [*1]   Final results of administrative review sustained in part
and remanded in part.

COUNSEL: Michael T. Shor, Arnold & Porter, for Plaintiffs.

Frank W. Hunger, Assistant Attorney General of the United States, David M.
Cohen, Director, United States Department of Justice, Velta A. Melnbrencis,
Assistant Director, Of Counsel, Lucius B. Lau, Attorney, Office of the Chief
Counsel for Import Administration, for Defendants.

Terence P. Stewart, James R. Cannon, Jr., Amy S. Dwyer, Mara M. Burr, Stewart &
Stewart, for Defendant-Intervenor.

JUDGES: Donald C. Pogue, Judge.

OPINIONBY: Donald C. Pogue

OPINION: OPINION

   POGUE, Judge: Plaintiffs n1 ("Miramonte") challenge certain aspects of the
United States Department of Commerce ("Commerce") final determination in the
consolidated fifth, sixth, and seventh administrative reviews of the antidumping
order covering entries of fresh cut flowers from Colombia between March 1, 1991
and February 28, 1994. See Certain Fresh Cut Flowers from Colombia, 61 Fed. Reg.
42,833 (Dep't Commerce Aug. 19, 1996)(final results admin. rev.). The Court has
jurisdiction pursuant to 28 U.S.C. @ 1581(c)(1994) and 19 U.S.C. @
1516a(a)(2)(B)(iii) (1994).

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   n1 Plaintiffs Cultivos Miramonte S.A. and Flores Mocari S.A. are two related
Colombian companies that produce and export fresh-cut flowers to the United
States. Without objection, Commerce "collapsed" the two companies and treated
them as a single entity Columbia, 60 Fed. Reg. 30,270, 30,271 (Dep't Commerce
1995)(prelim. results admin. rev.).

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[*2]


   Miramonte's motion for judgment on the agency record n2 raises three issues:
(1) whether Commerce's change of practice in its treatment of Miramonte's land
preparation costs was in accordance with law; (2) whether Commerce's use of best
information available ("BIA") to adjust Miramonte's seventh review cost data for
inflation was in accordance with law, and if in accordance with law, whether
Commerce's use of a twelve-month compound inflation adjustment factor was
supported by substantial evidence; and (3) whether Commerce's substitution and
use of a 7.0 percent U.S. interest rate in the calculation of U.S. credit
expense for the seventh period for all flower types instead of the actual
percent rate reported by Miramonte and verified by Commerce was supported by
substantial evidence.

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   n2 See USCIT R. 56.2.

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   BACKGROUND

   Miramonte received de minimis margins in the two administrative reviews
preceding the three consolidated reviews at issue here. See 56 Fed. Reg. 50,554,
50,558 (Oct. 7, 1991); 59 Fed.   [*3]   Reg. 15,159, 15,179 (Mar. 31, 1994).
Under its regulations Commerce may revoke an antidumping order covering a
particular respondent if that respondent has zero or de minimis (less than 0.50
percent) dumping margins for three consecutive reviews, see 19 C.F.R. @
353.25(a)(2)(i), and that respondent will not likely sell the merchandise at
less than foreign market value in the future. See 19 C.F.R. @ 353.25(a)(2)(ii).

   Unable to conduct the fifth and sixth administrative reviews, Commerce
consolidated them with the seventh. Commerce's preliminary determination
resulted in antidumping margins for Miramonte of 0.27 percent, 0.10 percent, and
0.11 percent in the fifth, sixth, and seventh administrative reviews,
respectively. See Certain Fresh Cut Flowers From Colombia, 60 Fed. Reg. 30,270,
30,274 (Dep't Commerce June 8, 1995)(prelim. results admin. rev.). Commerce also
announced its intent to revoke the antidumping duty order for Miramonte. Id. at
30,270.

   In the final results Commerce found antidumping margins of 0.36, 0.00, and
2.08 percent for Miramonte in the fifth, sixth, and seventh reviews,
respectively. 61 Fed. Reg. at 42,867. Thus, Miramonte's seventh period margin of
2.08  [*4]   percent precluded revocation of the antidumping duty order. Id. at
42,833.

   STANDARD OF REVIEW

   In reviewing the final results of an administrative review, the Court of
International Trade must decide whether Commerce's determination is in
accordance with law and whether Commerce's conclusions are supported by
substantial evidence on the record. See Section 516a(b)(1)(B)(i) of the Tariff
Act of 1930, 19 U.S.C. @ 1516a(b)(1)(B)(i) (1994).


   In determining whether Commerce's interpretation and application of the
antidumping statute is in accordance with law, this court applies the two-step
analysis articulated in Chevron U.S.A., Inc. v. Natural Resources Defense
Council, Inc., 467 U.S. 837, 842-43, 104 S. Ct. 2778, 2781-82, 81 L. Ed. 2d
694 (1984), as applied and refined by the Federal Circuit. The first task is "to
determine whether Congress has 'directly spoken to the precise question at
issue.'" Id. If the statute unambiguously deals with the subject matter in
issue, the court, as well as the agency, must give effect to the intent of
Congress. Id. See, e.g., Ad Hoc Committee of AZ-NM-TX-FL Producers of Gray
Portland Cement v. United States, 13 F.3d 398, 402-403  [*5]   (Fed. Cir. 1994);
Zenith Elec. Corp. v. United States, 988 F.2d 1573, 1582 (Fed. Cir. 1993). "If
the statute is silent or ambiguous with respect to the specific issue, the
question for the court is whether the agency's answer is based on a permissible
construction of the statute." Chevron, 467 U.S. at 843, 104 S. Ct. at 2782.
Considerable weight is accorded Commerce's construction of the antidumping laws,
whether that construction manifests itself in the application of the statute,
see, e.g., Daewoo Elec. Co. v. Int'l Union of Elec., 6 F.3d 1511, 1516 (Fed.
Cir. 1993); Fujitsu Gen. Ltd. v. United States, 88 F.3d 1034, 1039 (Fed. Cir.
1996), or in the promulgation of a regulation, see, e.g., Smith Corona Group v.
United States, 1 Fed. Cir. (T) 130, 138, 713 F.2d 1568, 1575 (Fed. Cir. 1983),
cert. denied, 465 U.S. 1022, 104 S. Ct. 1274, 79 L. Ed. 2d 679 (1984).

   When examining Commerce's factual determinations to decide whether they are
supported by substantial evidence, the court must determine whether the record
contains "such relevant evidence as a reasonable mind might accept as adequate
to support [Commerce's] conclusion." Consolidated Edison Co. v. NLRB,  [*6]
305 U.S. 197, 229, 59 S. Ct. 206, 216, 83 L. Ed. 126 (1938); Universal Camera
Corp. v. NLRB, 340 U.S. 474, 477, 71 S. Ct. 456, 459, 95 L. Ed. 456
(1951)(quoted in Matsushita Comm. Elec. Indus. Co. v. United States, 3 Fed. Cir.
(T) 44, 51, 750 F.2d 927, 933 (1984)). Substantial evidence "is something less
than the weight of the evidence, and the possibility of drawing two inconsistent
conclusions from the evidence does not prevent an administrative agency's
finding from being supported by substantial evidence." Consolo v. Federal
Maritime Comm'n, 383 U.S. 607, 619-20, 86 S. Ct. 1018, 1026-27, 16 L. Ed. 2d 131
(1966).

   DISCUSSION

   The antidumping statute applicable to the consolidated reviews in issue
provides that if the Department of Commerce (Commerce) through the International
Trade Administration (ITA) determines that less than fair value (LTFV) sales
exist and the International Trade Commission (ITC) determines that material
injury exists, then the ITA will issue an antidumping order directing the United
States Customs Service to collect antidumping duties equal to the amount by
which foreign market value n3 exceeds the United States price n4 for the
merchandise.   [*7]   See 19 U.S.C. @ 1673 (1988).

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   n3 See 19 U.S.C. @ 1677b (1988).

   n4 See 19 U.S.C. @ 1677a (1988).

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   Commerce computed Miramonte's foreign market value using constructed value,
n5 which is the sum of the costs of materials and of fabrication employed in
producing such or similar merchandise, an amount for general expenses and
profit, and the cost of packing the merchandise for shipment to the United
States. See 19 U.S.C. @ 1677b(e)(1) (1988).

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   n5 Foreign market value is computed by one of three methods: (1) home market
sales; (2) third country sales; or (3) constructed value. See 19 U.S.C. @
1677b(a) (1988).

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   1. Treatment of Miramonte's Land Adequation Costs

   As part of fabrication costs, Commerce requested that Miramonte provide its
indirect costs and expenses incurred in the cultivation and harvesting of its
[*8]   flowers. See ITA Section B-C Quest., Pub. Doc. 450 (4/13/94) at 66. For
these costs Commerce's questionnaire instructed, "regardless of whether your
company capitalized expenditures or expensed them, the cost submission should be
consistent with your normal production accounting system and based on your
actual accounting records, if your system and records are in accordance with
Generally Accepted Accounting Principles (GAAP)." Pub. Doc. 450 at 62. Miramonte
reported, inter alia, depreciation expenses for its greenhouses and "land
adequation." Land adequation was described by Miramonte as leveling terrain,
digging ditches, and constructing drainage systems for its greenhouses. See
Miramonte Public @ D QR, Pub. Doc. 783 (7/8/94) at 41.

   In its accounting records Miramonte allocated the costs of the greenhouses
over a twenty-year period and the costs of land adequation over a five-year
period. In its questionnaire response Miramonte allocated its greenhouse costs
over the same twenty-year period reflected in its books; for land adequation
Miramonte allocated the costs over a twenty-year period as well, arguing that
"the leveling, ditching and drainage will provide a benefit  [*9]   over the
useful life of the greenhouse." Pub. Doc. 783 (7/8/94) at 31. Miramonte also
stated that its practice was "exactly the same" as its submission for the third
and fourth administrative reviews, which ITA accepted (and verified in the
fourth), id., and that its accounting system was "primarily oriented for tax
purposes." Id. at 21.

   In the Final Results Commerce used the five year cost allocation in
Miramonte's accounting records rather than the twenty-year allocation provided
in Miramonte's questionnaire response. 61 Fed. Reg. 42,846. Commerce stated that
its administrative practice "is to adhere to an individual firm's recording of
costs in accordance with GAAP of its home country if we are satisfied that such
principles reasonably reflect the costs of producing the subject merchandise."
Id. Commerce further noted that, in contrast to the instructions contained in
the questionnaire, Miramonte had departed from its normal accounting records by
allocating its land adequation costs over a twenty-year period. Id.

   Commerce rejected the twenty-year allocation because "although Miramonte
stated that it considered land adequation to have the same useful life as a
greenhouse,   [*10]   it never explained why it treated land adequation expenses
differently in its accounting records, nor did Miramonte justify why a five-year
amortization did not reasonably reflect the costs of producing the merchandise."
Id.; see also Commerce Public Analysis Memo, Pub. Doc. 1733 (6/28/96) at 2-3.

Therefore, Commerce "increased Miramonte's depreciation expense to reflect the
amount of land adequation costs recorded in its accounting records." Id. at
42,847.

   On its change of practice in the treatment of Miramonte's land adequation
costs, Commerce stated:

. . . we first note that verification of the values used in a methodology does
not indicate acceptance of the methodology itself. We agree . . . that the FTC
has not raised this issue in the past. An error in methodology, unmentioned and
undiscovered in previous reviews, does not constitute explicit acceptance of
that methodology. Nor are we bound by past reviews when we do discover a
significant error. See Shikoku Chem. Corp. v. United States, 16 C.I.T. 382, 795
F. Supp. 417 (CIT 1992). In examining this methodology in these instant reviews,
we have found the error to be significant. Miramonte's reported land adequation
[*11]   costs are approximately one-fourth of the amount recorded in its
accounting records. Therefore, for these final results, we have increased
Miramonte's depreciation expense to reflect the same amount of land adequation
costs recorded in its accounting records.

Id.

   To explain: the yearly expense from a twenty-year allocation of land
adequation costs is one-fourth the yearly expense from a five-year allocation of
such costs, which means lower fabrication costs, a corresponding lower
constructed value, and ultimately, a lower dumping margin.

   As noted above, Commerce stated in the Final Determination that its "practice
is to adhere to an individual firms's recording of costs in accordance with GAAP
of its home country if [Commerce is] satisfied that such principles reasonably
reflect the costs of producing the subject merchandise," 61 Fed. Reg. at 42,846.
This practice has been upheld by this court. See, e.g., FAG U.K. Ltd. v. United
States, 945 F. Supp. 260, 271 (CIT 1996)("reliance on an individual firm's home
country GAAP provides an objective standard by which to measure costs, and
allows a respondent a predictable basis on which to compute costs."). Commerce
may,   [*12]   however, as it has done from time to time in the investigation
and administrative reviews of this case, reject the use of home country GAAP as
the basis for calculating production costs if the accounting methods at issue
unreasonably distort or misstate costs for purposes of an antidumping analysis.
See 61 Fed. Reg. at 42, 847 (cmt. 15).

   For the third and fourth administrative reviews Commerce accepted Miramonte's
reported land adequation costs which were allocated over a twenty-year period.
In those reviews FTC did not challenge Commerce's treatment of these costs. For
the consolidated reviews at issue here, Commerce changed its position, no longer
accepting Miramonte's reported land adequation costs, and instead using the
figures from Miramonte's books and records.

   Commerce has the flexibility to change its position providing that it
explains the basis for its change n6 and providing that the explanation is in
accordance with law and supported by substantial evidence. n7


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   n6 "The underlying ground of that principle is that the reviewing court
should be able to understand the basis of the agency's action and so may judge
the consistency of that action with the agency's general mandate." Chennault v.
Department of Navy, 796 F.2d 465, 467 (Fed. Cir. 1986). The rule also assures
that an administrative agency will be "faithful and not indifferent to the rule
of law," Columbia Broadcasting System, Inc. v. FCC, 147 U.S. App. D.C. 175, 183,
454 F.2d 1018, 1026 (1971), and "prohibit[s] the agency from adopting
significantly inconsistent policies that result in the creation of 'conflicting
lines of precedent governing the identical situation.'" Davila-Bardales v. INS,
27 F.3d 1, 5 (1st Cir. 1994)(quoting Shaw's Supermarkets, Inc. v. NLRB, 884 F.2d
34, 36 (1st Cir. 1989); see also Hussey Copper, Ltd. v United States, 17 C.I.T.
993, 997, 834 F. Supp. 413, 418 (1993)("'This rule is not designed to restrict
an agency's consideration of the facts from one case to the next, but rather it
is to insure consistency in an agency's administration of the
statute.'")(quoting Citrosuco Paulista, S.A. v. United States, 12 C.I.T. 1196,
1209, 704 F. Supp. 1075, 1088 (1988)). "This is not to say that an agency, once
it has announced a precedent, must forever hew to it. Experience is often the
best teacher, and agencies retain a substantial measure of freedom to refine,
reformulate, and even reverse their precedents in the light of new insights and
changed circumstances. However, the law demands a certain orderliness. If an
administrative agency decides to depart significantly from its own precedent, it
must confront the issue squarely and explain why the departure is reasonable."
Davila-Bardales, 27 F.3d at 5.  [*13]

   n7 The court's review of an agency's change of position or practice will
typically center on whether the action was arbitrary. A change is arbitrary if
the factual findings underlying the reason for change are not supported by
substantial evidence. Apart from factual findings, agency arbitrariness may also
manifest itself in the particular reasoning offered by the agency; principally,
if the reasoning is inconsistent with the statutory mandate, or, to a lesser
extent, if the reasoning (or lack thereof) violates general principles of
administrative law, see, e.g., Hussey Copper, Ltd. v United States, 17 C.I.T.
993, 997, 834 F. Supp. 413, 418 (1993) or offends standards of procedural
fairness implied in the statute. See, e.g., Hussey Copper, Ltd. v. United
States, 18 C.I.T. 454, 457-458, 852 F. Supp. 1116, 1120 (1994); Shikoku Chem.
Corp. v. United States, 16 C.I.T. 382, 388, 795 F. Supp. 417, 421-422 (1992). In
this context the court reviews an agency change of position or practice to
insure it is "in accordance with law."

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   Unlike the changes in other cases considered by this court, the change
[*14]   at issue here does not involve a new methodology or practice. See, e.g.,
Hussey Copper, Ltd. v. United States, 18 C.I.T. 454, 457-458, 852 F. Supp. 1116,
1120 (1994) ("[Respondent] had no reason to believe that its method did not
provide the 'best estimates' of the . . . cost, since the same method had been
accepted and verified by Commerce in the previous investigation and Commerce
never indicated during the proceeding of this administrative review that
[respondent's] method was unacceptable."); Shikoku Chem. Corp. v United States,
16 C.I.T. 382, 388, 795 F. Supp. 417, 421-22 (1992). n8 Here, the administrative
practice of adhering to books and records kept in accord with home country GAAP,
unless distortive, had not changed from one review to the next; all that
changed, apparently, was Commerce's weighing of Miramonte's evidence on the
question of distortion. Thus, the issue in this case does not involve a change
in methodology which implicates issues of statutorily implied standards of
procedural fairness. Here, administrative practice had not changed, and
presumably. having known what that practice was, Miramonte submitted evidence of
distortion that it deemed sufficient  [*15]   to justify deviation from its
books and records. Consequently, Shikoku, predicated as it is on concepts of
procedural fairness and administrative equity, is not a guide for the resolution
of the present case.

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   n8 In Shikoku Commerce adopted a slightly improved allocation methodology to
calculate a packing adjustment to home market value in its fifth administrative
review. 16 C.I.T. at 384-86, 795 F. Supp. 417, 419-20. The methodology differed
from the one used by the Department in the first through fourth reviews. For the
second, third, and fourth reviews, respondent had zero or de minimis margins.
Id. at 383, 795 F. Supp. at 418. Although the court found that there was a
marginal increase in accuracy as a result of the new methodology, the court
concluded, based on "principles of fairness" and "administrative equity," that
"Commerce did not have adequate reasons for its last minute change in
methodology," given the unchanged fact pattern from the prior reviews and the
lack of discovery of a significant error. Id. at 388, 795 F. Supp. at 421-422.

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[*16]

   Notwithstanding its verification and acceptance of Miramonte's response in
the fourth administrative review, Commerce stated that it had committed a
significant error by using Miramonte's twenty-year cost allocation in prior
reviews. Commerce need not perpetuate an error from one review to the next. See
Gilmore Steel, Corp. v United States, 7 C.I.T. 219, 224, 585 F. Supp. 670, 674
(1984) ("A contrary holding would be tantamount to saying that once an error
initially evades detection, the ITA is thereafter powerless to take remedial
steps, thereby compounding the error."). Acknowledgment of an error is therefore
a proper legal basis for Commerce to change its position given an identical set
of facts.


   The difficulty here is that Commerce's specific findings are not supported by
substantial evidence. Commerce stated in the final determination that Miramonte
"never explained why it treated land adequation expenses differently in its
accounting records, . . . ." 61 Fed. Reg. at 42,847. Miramonte did, however,
alert Commerce that its accounting records were "primarily oriented for tax
purposes." Miramonte Public @ D QR, Public Doc. 783 (7/8/94) at 21. This may or
may not have been a  [*17]   sufficient explanation, see, e.g., Hercules, Inc.
v. United States, 11 C.I.T. 710, 755-56, 673 F. Supp. 454, 491 (1987)(holding
that mere assertion that accounting records were tax-motivated and not
reflective of true costs was insufficient), but it was some explanation.
Commerce's conclusion that Miramonte "did not justify why a five year
amortization did not reasonably reflect the cost of producing the merchandise,"
61 Fed. Reg. at 42.847, is similarly at odds with the administrative record.
Miramonte explained that the land preparation provided a useful benefit for the
life of its greenhouses which lasted twenty years. It therefore allocated the
land preparation costs over twenty years. Here again, this explanation may or
may not have been sufficient, but it nonetheless was some justification for
Miramonte's claim that the five-year amortization did not reasonably reflect
the cost of producing the merchandise. The record does not support the finding
that Miramonte never explained or justified its questionnaire response. Lacking
the requisite substantial evidence, Commerce's explanation of its change of
practice cannot be sustained. The matter must therefore be remanded for Commerce
[*18]   to articulate a reason for its change that is supported by substantial
evidence on the record. See Camp v. Pitts, 411 U.S. 138, 143, 93 S. Ct. 1241, 36
L. Ed. 2d 106 (1973)(stating that if the contemporaneous explanation of the
agency is based on a finding that is not sustainable on the administrative
record, the matter must be remanded for further consideration.).

   If Commerce overlooked the question of distortion when it previously accepted
Miramonte's twenty-year cost allocation for land preparation, then Commerce must
articulate this rationale; the Court cannot supply a rationale for this
discretionary decision. See SEC v. Chenery Corp., 332 U.S. 194, 196-97, 67 S.
Ct. 1575, 1577-78, 91 L. Ed. 1995 (1947)(". . . a reviewing court, in dealing
with a determination or judgment which an administrative agency alone is
authorized to make, must judge the propriety of such action solely by the
grounds invoked by the agency."). n9 While the court will "uphold a decision of
less than ideal clarity if the agency's path may reasonably be discerned,"
Bowman Transp. Inc. v. Arkansas-Best Freight System, 419 U.S. 281, 286, 95 S.
Ct. 438, 441, 42 L. Ed. 2d 447 (1974), "the agency must  [*19]   examine the
relevant data and articulate a satisfactory explanation for its action . . . . "
Motor Vehicle Mfrs. Assn. of U.S. v. State Farm Mutual Auto. Ins. Comp., 463
U.S. 29, 43, 103 S. Ct. 2856, 2866, 77 L. Ed. 2d 443 (1983).

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   n9 At oral argument, counsel for Defendant and counsel for
Defendant-Intervenor suggested that a fair reading of the final determination
suggests that Commerce's error from the prior review involved the Department's
failure to examine closely the question of distortion, and that having corrected
that error in the present consolidated reviews, Commerce lawfully concluded that
Miramonte had failed to make a sufficient showing of distortion to justify
deviating from the costs in its books and records. After careful review of the
final determination, the Court is reluctant to join this interpretation and
thereby supply a rationale for the decision not articulated by the agency.

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   2. Best Information Available

A. Application of BIA to Adjust Miramonte's Costs for Inflation  [*20]

   Normally, Commerce requires respondents to report pre-production expenses
consistent with their home country GAAP, which typically are reflected in
respondents' ordinary books and records. See 61 Fed. Reg. at 42,847. In prior
reviews Commerce accepted pre-production expenses that were amortized over a
longer period than the period contained in respondents' books and records.
Commerce terms this alternative approach to pre-production expenses the "Crop
Adjustment Method." See 61 Fed. Reg. at 42,847 (cmt. 15); see also Fresh Cut
Roses from Colombia, 60 Fed. Reg. 6980, 6997-98 (1995) (cmt. 19) (accepting
pre-production costs that differed from accounting records).



   In its Section D questionnaire response Miramonte acknowledged that its
methodology for reporting cost data in the antidumping questionnaire differed
from that used in its ordinary books and records. See Miramonte Public @ D QR,
Pub. Doc. 783 (7/8/94) at 30. As noted above, Miramonte explained that its
accounting system was "primarily oriented for tax purposes" and, therefore,
Miramonte had developed a different methodology to report costs for purposes of
these reviews, including the third and fourth reviews.   [*21]   Id. at 21.

   Miramonte did not amortize pre-production costs for pompons or chrysanthemums
in its June 8, 1994 or August 22, 1994 questionnaire responses. Instead, it used
offsets, shifting the costs according to the production cycle of these flower
types. Miramonte explained that it took its propagation costs from the first
month and reported them as expensed four months later when the flowers
associated with such propagation expenses were harvested. Similarly, Miramonte
took its production expenses from the first month and reported them as expensed
three months later when the flowers were harvested. Commerce verified this
method of reporting costs.

   In its preliminary determination, Commerce noted a change in Colombian GAAP
effective January 1, 1992. Id. at 30,274. According to Colombian law, flower
growers were required to revalue certain financial statement accounts to reflect
the effects of inflation experienced during each financial reporting period.
Commerce issued a supplemental questionnaire instructing certain respondents to
report their pre-production costs adjusted for inflation:

If you have reported amortized pre-production costs in Tables 2A, 2B, or 2C
[*22]   . . ., revise these expenses so that they are based on asset values
which, in accordance with Colombian GAAP, have been adjusted to reflect the
effects of inflation and submit new diskettes.

ITA Public Supp. Quest., Pub. Doc. 1508 (6/22/95) at 1.

   Miramonte indicated that it was confused about how to report inflation
adjustments for the pre-production costs reported in its questionnaire response.
Id. at 4. Miramonte's accounting books did not contain inflation adjustments
based on the three and four-month offset periods used in the questionnaire
response. In its books, Miramonte used one-month offset periods. Rather than
submit inflation adjustments for the offset costs reported in its original
questionnaire response, Miramonte responded to Commerce's supplemental
questionnaire by reporting the costs and inflation adjustments for propagation
and production expenses contained in its books and records.

   Commerce concluded that Miramonte erred because its reported
inflation-adjusted costs were inconsistent with the previously reported costs
which had been verified by Commerce. When compared with the verified cost data,
certain line totals in the inflation adjusted data were  [*23]   actually less
than line totals in verified reported costs. See Commerce Public Analysis Memo,
Pub. Doc. 1733 (6/28/96) at 2. Having concluded Miramonte's submission was
non-responsive, Commerce used the best information available (BIA) to increase
Miramonte's expenses, except for depreciation, in all three review periods to
account for inflation. Id.


   Miramonte challenges Commerce's application of BIA, arguing that the resort
to BIA was not in accordance with law. Section 776(c) of the Tariff Act of
1930, as amended 19 U.S.C. @ 1677e(c)(1988) states that ITA "shall, whenever a
party or any other person refuses or is unable to produce information requested
in a timely manner and in the form required, or otherwise significantly impedes
an investigation, use the best information otherwise available." Under ITA's
regulations, BIA is used whenever ITA "(1) Does not receive a complete,
accurate, and timely response to the Secretary's request for factual
information; or (2) Is unable to verify, within the time specified, the accuracy
and completeness of the factual information submitted." 19 C.F.R. @ 353.37(a).

   Commerce must "fairly request" the data prior to resorting to any secondary
[*24]   information. See Koyo Seiko Co. v. United States, 92 F.3d 1162, 1165
(Fed. Cir. 1996). Once Commerce has done so, it possesses the "discretion to
determine whether a respondent has complied with an information request." Daido
Corp. v. United States, 893 F. Supp. 43, 49-50 (CIT 1995) (citing S. Rep. No.
249, 96th Cong., 1st Sess. at 98 (1979); H.R. Rep. No. 317, 96th Cong., 1st
Sess. 77 (1979).

   Although the supplemental questionnaire did not address Miramonte's situation
with unmistakable clarity, (Miramonte did not report "amortized pre-production
costs" in its original questionnaire response), the supplemental questionnaire
nonetheless fairly requested inflation adjustments, and Miramonte's response was
inappropriate given the facts of these consolidated administrative reviews. The
questionnaire did not request that Miramonte abandon its previously verified
reported costs, or substitute completely different, unverified cost data.

   It was clear from the original questionnaire that Commerce was seeking an
accurate, verifiable statement of pre-production costs. It was clear from the
supplemental questionnaire that Commerce sought an inflation adjustment to these
costs.   [*25]   See ITA Public Supp. Quest., Pub Doc. 1508 (6/22/95) at 21
("revise these expenses so that they are based on asset values which, in
accordance with Colombian GAAP, have been adjusted to reflect the effects of
inflation."). Miramonte's "offsets" approach, an adaptation of the "Crop
Adjustment Method" for which no amortization of costs was made, was verified and
accepted by Commerce. The clear intent of the supplemental questionnaire was to
acquire inflation adjustments for these previously reported and verified costs.
Although the questionnaire used the qualifier "amortized," presumably because
most respondents had amortized costs in one form or another in their earlier
responses, the fair import of the request was clear, and it applied with equal
force to Miramonte's "offsets" situation.


   By adapting the "Crop Adjustment Method" to its own uses, Miramonte accepted
the responsibility to ask Commerce for clarification of any information requests
that could involve that adaptation. In its original questionnaire response
Miramonte departed from its ordinary books and records in reporting
pre-production costs using a three-month rather than the one-month offset
period. Such adjustments  [*26]   obligated Miramonte to clarify any confusion
with the requirements of the supplemental questionnaire as they pertained to
Miramonte. See Antifriction Bearings (Other Than Tapered Roller Bearings) and
Parts Thereof from France, et al., 57 Fed. Reg. 28,360, 28,381 (Dep't Commerce
1992) (final results admin. rev.) ("If a respondent found the requirements to be
unclear, then the burden is on the respondent to ask the Department for
guidance."), aff'd, Emerson Power Transmission Corp. v. United States, 19 C.I.T.

   , 903 F. Supp. 48, 55 (1995) (affirming ITA's resort to BIA when
questionnaire instructions were clear on their face despite respondent's
misinterpretation).

   Having concluded that Commerce's supplemental questionnaire fairly requested
inflation adjustments to reported pre-production costs, the remaining question
is whether Miramonte properly responded to that request. Commerce explained in
the Final Results that "in many countries that experience high inflation, GAAP
requires that fixed assets be indexed (i.e., increased) annually to reflect the
increasing nominal value of those assets as stated in prevailing currency
units." 61 Fed. Reg. at 42,845. In its case brief  [*27]   Miramonte
acknowledged that this adjustment would lead to an upward adjustment to asset
values. See Asocoflores Case Brief, Pub. Doc. 1695 (8/11/95) at 14 ("the value
of assets must be adjusted to reflect the hypothetical increase in value due to
inflation") (emphasis added). When Commerce asked respondents to "revise these
expenses so that they are based on asset values which, in accordance with
Colombian GAAP, have been adjusted to reflect the effects of inflation," ITA
Public Supp. Quest., Pub. Doc. 1508 (6/22/95) at 21, both the agency and
Miramonte recognized that the adjustment to be made would result in increases to
reported expenses.

   Miramonte also demonstrated this expectation of an increase in expenses when
it submitted its July 18, 1995 response to Commerce's inflation adjustment
questionnaire. In its response, Miramonte stated that "this adjustment includes
both the additional income by monetary correction (the additional value in the
asset) and the additional charge in the cost of production." Miramonte Public
Supp. QR, Pub. Doc. 1580 (7/18/95) at 4 (emphasis added).

   Upon review of the underlying numbers accompanying Miramonte's July 18, 1995,
response, Commerce  [*28]   recognized that the inflation adjustment to
Miramonte's "'Crops in Process' account was distributed on a monthly basis to
each flower type based on the same methodology it used to allocate the
depreciation expense." ITA Public Analysis Memo, Pub. Doc. 1733 (6/28/96) at 2.
Commerce "examined Miramonte's data and discovered that, while some line totals
increased, others stayed the same. Moreover many line totals decreased." Id.

   Confronted with cost data which had been previously verified, and written
narrative from Miramonte which indicated that the adjustment would result in
increases to Miramonte's line totals (a result that Commerce had expected based
on Colombian GAAP), Commerce viewed the existence of unchanged data and data
which decreased in value as an inconsistency, and concluded that Miramonte had
not made the inflation adjustment as requested by Commerce. Commerce's finding
that Miramonte failed to respond properly to its request for inflation
adjustment data is supported by substantial evidence, n10 and, accordingly,
Commerce's application of BIA to adjust Miramonte's verified cost data for
inflation was in accordance with law.

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   n10 Miramonte has attempted to demonstrate that there was no inconsistency in
its cost data by referencing "its September 10, 1996 request for correction of
clerical errors. . . . ." Miramonte brief at 30. The final results in this case
were signed by the Assistant Secretary for Import Administration on August 9,
1996, and published by Commerce on August 19, 1996. See Pub. Doc. 1843; 61 Fed.
Reg. 42,833 (Aug. 19, 1996). As defined by the statute, the record for review
includes "a copy of all information presented to or obtained by [Commerce]
during the course of the administrative proceeding . . . ." 19 U.S.C. @
1516a(b)(2)(A)(i) (emphasis added). This statutory language "has been
interpreted by this Court to mean that, barring exceptional circumstances, 'the
scope of the record for purposes of judicial review is based upon information
which was 'before the relevant decision-maker' and was presented and considered
'at the time the decision was rendered.'" Kerr-McGee Chem. Corp. v. United
States, 955 F. Supp. 1466, 1997 Ct. Intl. Trade LEXIS 1, Slip Op. 97-2 at 19
(CIT Jan. 8, 1997) (quoting Beker Industries Corp. v. United States, 7 C.I.T.
313, 315 (1984)). No "exceptional circumstances" exist here; rather, Commerce
based its decision to reject Miramonte's inflation adjustments upon
inconsistencies contained in the administrative record. Miramonte's request for
correction of clerical errors was submitted on September 10, 1996, which as
after Commerce rendered its decision on Miramonte's response. See Pub. Doc.
1843. The September 10 response was outside the administrative record and
Commerce properly did not consider it for purposes of the final results.

- - - - - - - - - - - - - - - - -End Footnotes- - - - - - - - - - - - - - - - -
[*29]

   An additional factor supports Commerce's application of BIA in this
situation. Section 776(b)(2) of the Tariff Act of 1930, as amended (19 U.S.C. @
1677e(b)(2)) and 19 C.F.R. @ 353.25(c) require ITA to verify all information
relied upon in revoking an order. If the agency is unable to verify the accuracy
of the information submitted, Commerce may resort to "best information
available." Miramonte submitted its revised pre-production costs and
accompanying inflation adjustments after the preliminary determination and after
verification. See Miramonte Public Supp. QR (7/18/95), Pub. Doc. 1580 at 2-4.
Acceptance of the revised costs at that date would have required Commerce to
re-verify Miramonte's pre-production costs. Commerce was "unable to verify,
within the time specified, the accuracy and completeness of the [new] factual
information submitted," 19 C.F.R. @ 353.37(a)(2), and therefore, use of best
information available was appropriate.

   If data are accepted after verification, there is not only no guarantee of
accuracy, but opposing parties are denied the opportunity to have their claims
tested through the verification process. Thus, Miramonte's submission of revised
pre-production  [*30]   costs was untimely and resort to "best information
available" was in accordance with law.

   B. Selection of Inflation Adjustment Factor

   Resort to best information available may be either "total" or "partial." See
National Steel Corp. v. United States, 18 C.I.T. 1126, 870 F. Supp. 1130, 1135
(CIT 1994). Because Commerce determined that only part of Miramonte's data was
deficient (i.e., the inflation adjustment), it applied partial BIA for
Miramonte.

   As partial best information available, ITA increased Miramonte's expenses,
except for depreciation, in all three review periods using the Colombian PAAG
inflation rates. n11 See ITA Public Analysis Memo, Pub. Doc. 1733 (6/28/96) at
2. Thus, for the seventh review period, Commerce used an inflation adjustment
factor of 21.24 percent which reflected the cumulative inflation rate for the
twelve-month period of September 1992 through August 1993. See ITA Public
Analysis Memo at Attachment, Pub. Doc. 1733 (6/28/96).

- - - - - - - - - - - - - - - - - -Footnotes- - - - - - - - - - - - - - - - - -

   n11 Each month the Government of Colombia publishes an inflation index, known
as the percent annual inflation rate ("PAAG") index. Pub. Doc. 1695 at 14.

- - - - - - - - - - - - - - - - -End Footnotes- - - - - - - - - - - - - - - - -
[*31]

   For all respondents, including Miramonte, that failed to adjust their
pre-production expenses for the effects of inflation, Commerce adjusted those
expenses for the sixth and seventh reviews using twelve months of Colombian
inflation rates ending in mid-year because "respondents generally amortized
pre-production costs over eighteen months." Commerce Public Cost Memo, Pub. Doc.
1721 (2/20/96) at 2. Attached to the public cost memorandum was a chart which
listed the monthly Colombian inflation index and which calculated cumulative
inflation indices for the fifth, sixth, and seventh periods of review.

   Although Miramonte produced standard carnations for export during the fifth
review period and submitted constructed value information for this flower type,
id. at 28; Miramonte Public Supp. QR at 4, Pub. Doc. 945 (8/22/94); Miramonte
Verification Report at 1, Pub. Doc. 1270 (10/24/94), Miramonte primarily
produced pompons and chrysanthemums for the periods of investigation. The
production cycle for pompons and chrysanthemums is shorter than the production
cycle for carnations. Miramonte, therefore challenges Commerce's application of
an inflation adjustment factor in the seventh review  [*32]   based on the
production cycle of carnations.

   The statute requires Commerce to resort to "best information available" under
certain circumstances, but does not specify what information should be selected
as "best information available." 19 U.S.C. @ 1677e(c) (1988). Through counsel,
Commerce concedes that the selection of an inflation adjustment factor based on
the production cycle of carnations was an inadvertent error and requests a
remand to permit re-calculation of Miramonte's inflation adjustment factor based
on the production cycles of chrysanthemums and pompons. FTC argues that the
selection of an inflation-adjustment factor based on the production cycles of
carnations was appropriate given that Miramonte had reported some cost
information for carnations in the fifth review. FTC also argues that such an
inflation adjustment factor is appropriately adverse to Miramonte's interests
given their noncompliance with Commerce's request.

   The Court agrees that it was error for Commerce to consider only a
carnation-based inflation adjustment factor to calculate Miramonte's
inflation-adjusted costs. Commerce requests remand to calculate a new inflation
adjustment factor for Miramonte.   [*33]   The issue will be remanded for
Commerce to do this, but Commerce must also explain the appropriateness of the
amount it selects given FTC's arguments.

3. Amount of Interest Rate in Calculation of U.S. Credit Expense


   Miramonte challenges Commerce's application of a 7.0 percent U.S. interest
rate in the calculation of U.S. credit expense for the seventh period for all
flower types instead of the actual percentage rate reported by Miramonte and
verified by Commerce. Commerce has requested a remand to permit recalculation
of Miramonte's U.S. credit expense using the actual percentage rate. FTC does
not object to a remand. Accordingly, the matter will be remanded for Commerce to
make the appropriate correction.

   CONCLUSION

   This case having been duly submitted for decision and the Court, after due
deliberation, having rendered a decision herein; now, in conformity with said
decision, it is hereby

   ORDERED that the Department of Commerce's final determination in Certain
Fresh Cut Flowers from Colombia, 61 Fed. Reg. 42,833 (Dep't Commerce Aug. 19,
1996)(final results admin. rev.) is sustained in part and remanded in part; and
it is further

   ORDERED that the issue of  [*34]   Commerce's treatment of Miramonte's land
adequation costs is remanded for further consideration in accord with the
Court's opinion; and it is further

   ORDERED that Commerce's decision to use best information available to adjust
Miramonte's pre-production costs for inflation is sustained; and it is further.

   ORDERED that the case is remanded to Commerce to (1) select an inflation
adjustment for plaintiffs' sales of chrysanthemums and pompons based upon the
production cycle for chrysanthemums and pompons using information contained in
the administrative record, and (2) correct the selection of the interest rate
for imputed credit calculations; and it is further

   ORDERED that the remand results are due on Tuesday, November 18, 1997;
comments and responses are due on Wednesday, December 17, 1997; any rebuttal
comments are due on Tuesday, January 6, 1998; and it is further

   ORDERED that plaintiffs' motion is denied in all other respects and the final
results of the administrative reviews are sustained in all other respects.

   Donald C. Pogue, Judge

Dated: September 17, 1997

   New York, New York