65 FR 60406 October 11, 2000 

                                                    A-351-605 
                                                    AR 5/98-4/99 
                                                    Public Document


MEMORANDUM TO:        Troy H. Cribb
                      Acting Assistant Secretary 
                       for Import Administration

FROM:                 Richard W. Moreland
                      Deputy Assistant Secretary, Group 1
                       Office of AD/CVD Enforcement    
         
SUBJECT:    Issues and Decision Memorandum for the Antidumping Duty
Administrative Review on Frozen Concentrated Orange Juice from Brazil - May 1,
1998, through April 30, 1999
    
Summary       


We have analyzed the comments of the interested parties in the 1998-1999
administrative review of the antidumping duty order covering frozen
concentrated orange juice from Brazil.  As a result of our analysis of the
comments received from interested parties, we have made changes in the margin
calculations as discussed in the "Margin Calculations" section of this
memorandum.  We also 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 administrative review for which we received
comments from parties:


1.   Collapsing of Affiliated Parties
2.   Calculation of Financing Expenses          
3.   Treatment of Citrovita's Foreign Exchange Losses
4.   Treatment of Cambuhy's Foreign Exchange Losses
5.   Calculation of the Cost of Oranges Produced by an Affiliated Party
6.   Calculation of Selling, General, and Administrative Expenses and
       Financing Expenses for the Collapsed Entity


Background


On June 6, 2000, the Department of Commerce (the Department) published the
preliminary results of the administrative review of the antidumping duty order
on frozen concentrated orange juice (FCOJ) from Brazil.  See Frozen
Concentrated Orange Juice from Brazil; Preliminary Results of Antidumping Duty
Administrative Review, 65 FR 35892 (June 6, 2000) (Preliminary Results).  The
product covered by this order is frozen concentrated orange juice.  The period
of review (POR) is May 1, 1998, through April 30, 1999.
   
We invited parties to comment on our preliminary results of review.  Based on
our analysis of the comments received, we have changed the results from those
presented in the preliminary results.


Margin Calculations


We calculated constructed export price and normal value using the same
methodology stated in the preliminary results, except as follows:
      
 We recalculated Citrovita's and Cambuhy's manufacturing costs for purposes
of calculating the selling, general, and administrative (SG&A) and financing
expense rates in order to state the denominator used in the calculation of the
SG&A and financing expense rates on the same basis as the cost of
manufacturing, to which the rates were applied.  We applied these revised rates
to the cost of manufacturing used in the preliminary results.   See Comment 6.
         
Discussion of the Issues


Comment 1: Collapsing of Affiliated Parties
 
During the POR, an affiliate of Citrovita purchased another Brazilian producer
of FCOJ and that producer's affiliated trading company. (1)  These companies
are named Cambuhy MC Industrial Ltda. (Cambuhy) and Cambuhy Citrus Comercial e
Exportadora S.A. (Cambuhy Exportadora), respectively. (2)  For purposes of the
preliminary results, we found that Citrovita was affiliated with Cambuhy and
Cambuhy Exportadora because: 1) beginning in September 1998, certain members of
the family that controls Citrovita, as well as the commercial director of
Citrovita, were placed on the boards of directors of Cambuhy and Cambuhy
Exportadora; and 2) in December 1998, ownership of these two companies was
transferred to Citrovita's affiliate.  


Because we found that Citrovita and the two acquired companies were
affiliated, we conducted an analysis to determine whether it was appropriate to
collapse them within the meaning of 19 CFR 351.401(f).  Based on this analysis,
we found that: 1) these companies had production facilities for similar or
identical products which would not require substantial retooling in order to
restructure manufacturing priorities; and 2) there was a significant potential
for the manipulation of prices or production between these companies. 
Consequently, we treated them as a single entity and calculated a single cash
deposit rate for them for purposes of the preliminary results.  Specifically,
we combined Citrovita's POR sales and cost data with the data reported for
Cambuhy and Cambuhy Exportadora beginning with the time period that affiliation
began (i.e., September 1998).


Citrovita agrees that the Department correctly found that Citrovita was
affiliated with both Cambuhy and Cambuhy Exportadora.  However, Citrovita
argues that the potential for the manipulation of prices or production between
these parties arose only in December, after the end of the 1998 crushing
season.  Citrovita notes that a tolling arrangement existed between Cambuhy and
Cambuhy Exportadora prior to the acquisition of these companies by the
Votorantim Group.  Although Citrovita concedes that this tolling arrangement
continued after the acquisition, Citrovita asserts that it did so only because
the acquisition occurred too late in the crushing season to change anything. 
Thus, Citrovita argues that this fact supports the contention that Citrovita
was not able to manipulate prices or production during the POR.  Finally,
Citrovita notes that neither of the acquired companies made sales to the United
States during the POR. Consequently, Citrovita implies that the Department
should not collapse Citrovita and these parties for purposes of the final
results. (3)


Citrovita argues that, if the Department continues to collapse the companies
in question, it should recalculate the production costs for these companies. 
Specifically, Citrovita maintains that the Department should base SG&A and
financing costs on the experience of Citrovita and Citrovita's parent company,
respectively, rather than on an average of Citrovita's and Cambuhy
Exportadora's SG&A and financing costs.  According to Citrovita, Cambuhy
Exportadora's SG&A and financing costs are distortively high because of certain
actions taken prior to the time when Citrovita (and Citrovita's affiliates)
gained control. (4)  Citrovita argues that inclusion of these expenses has
inflated the normal value calculation far beyond reasonable limits.


The petitioners assert that the Department was within its statutory authority
to collapse Citrovita, Cambuhy, and Cambuhy Exportadora.  According to the
petitioners, evidence on the record indicates that all of the criteria outlined
in 19 CFR 351.401(f) have been met, and thus there is a significant potential
for the manipulation of price or production.  The petitioners note that, in
determining whether the potential for manipulation exists, the Department does
not focus exclusively on the actions taken by a respondent during a given
review period but rather on what actions that company may take in the future. 
As support for this contention, the petitioners citeNotice of Final Results of
Antidumping Administrative Reviews of Certain Fresh Cut Flowers from Colombia,
61 FR 42833, 42854 (Aug. 19, 1996) and Salmon from Chile, 62 FR at 31421. The
petitioners assert that, in those cases, the Department's analysis was directed
toward whether the companies in question had the potential of manipulating
production in order to avoid or artificially minimize dumping duties.


The petitioners contend that Citrovita's reliance on Salmon from Chile is
misplaced.  According to the petitioners, in that case, unlike here, the
Department found that the degree of affiliation was not significant.  Moreover,
the petitioners note that in that case, unlike here, the companies ended their
relationship during the period of investigation.  Thus, the petitioners
maintain that the Department correctly found in Salmon from Chile that there
was no potential for the future manipulation of prices or production.  In
contrast, the petitioners argue that the Department should continue to find
that Citrovita and its affiliates have the ability to manipulate prices or
production and should continue to collapse Citrovita and these parties for
purposes of the final results.     


Regarding Citrovita's argument that the Department should not base SG&A and
financing expenses on Cambuhy Exportadora's experience, the petitioners
disagree.  According to the petitioners, the effect of collapsing is to treat
the companies in question as a single entity.  The petitioners contend that,
contrary to Citrovita's assertions, the true costs of the consolidated entity
would be distorted for purposes of the antidumping analysis if these costs were
not combined.  Moreover, the petitioners assert that, because it is not
possible to segregate Cambuhy Exportadora's data into pre- and post-
acquisition cost periods, the Department must use these costs in their entirety.


Finally, the petitioners maintain that the Department correctly found that
Cambuhy Exportadora was a producer of subject merchandise.  The petitioners
point out that Citrovita did not challenge the Department's factual findings
regarding the nature of the relationship between Cambuhy and Cambuhy
Exportadora.  Moreover, the petitioners assert that Citrovita supplied no
evidence that there was a plan to change the tolling situation.  Thus, the
petitioners assert that it is appropriate to include Cambuhy Exportadora's SG&A
and financing costs in the calculation of normal value, consistent with the
Department's policy on tolling relationships.
     
Department's Position:


The Department's practice of collapsing affiliated producers is codified in 19
CFR 351.401(f), which states:


 [T]he Secretary will treat two or more affiliated producers as a single
entity where those producers have production facilities for similar or
identical products that would not require substantial retooling of either
facility in order to restructure manufacturing priorities and the Secretary
concludes that there is a significant potential for the manipulation of price
or production. . . . In identifying a significant potential for the
manipulation of price or production, the factors the Secretary may consider
include:


  (i)  The level of common ownership;
  (ii) The extent to which managerial employees or board members of one firm
       sit on the board of directors of an affiliated firm; and 
  (iii)Whether operations are intertwined, such as through the sharing of
       sales information, involvement in production and pricing decisions, the
sharing
       of facilities or employees, or significant transactions between the
affiliated
       producers.
In this case, all parties agree that Citrovita was affiliated with Cambuhy and
Cambuhy Exportadora during the POR.  Moreover, Citrovita does not dispute the
facts that: 1) each of the companies has production facilities for similar or
identical products that would not require substantial retooling of either
facility in order to restructure manufacturing priorities; 2) all of the
companies were under the common ownership and control of the same entities; and
3) the commercial director of Citrovita sat on the boards of directors of
Cambuhy and Cambuhy Exportadora. (5)  Rather, Citrovita argues that, because
the crushing season was almost over at the time that Cambuhy and Cambuhy
Exportadora were acquired, Citrovita was unable to manipulate Cambuhy
Exportadora's production process during the POR.


As a threshold matter, we disagree with Citrovita that the company did not
have the ability to manipulate Cambuhy's and Cambuhy Exportadora's operations
after their purchase by the Votorantim Group.  Indeed, Citrovita practically
admitted as much in its supplemental questionnaire response.  See page 16 of
Citrovita's November 22, 1999, submission.  While we are unable to repeat
Citrovita's statements here due to a claim for business proprietary treatment,
we note that these statements confirm that Citrovita had the ability to affect
Cambuhy's and Cambuhy Exportadora's pricing and production decisions during the
POR.  For further discussion, see the Collapsing Memo at page 11.


Moreover, we find unpersuasive Citrovita's argument that the continued tolling
arrangement between Cambuhy and Cambuhy Exportadora served as evidence that
Citrovita was unable to manipulate the production process of these companies. 
Although we know that this relationship remained in place until the end of the
1998 crushing year, there is no evidence on the record to demonstrate that it
changed during the subsequent season.  In contrast, there is evidence on the
record showing that Cambuhy's production activities changed.  Specifically, we
note that, after the Votorantim Group acquired these two companies, Cambuhy
began functioning as a producer in its own right rather than acting merely as a
toller for other parties.  Moreover, Cambuhy purchased the oranges used in its
own production from Citrovita's orchards.  From these facts, we conclude that
Citrovita not only could influence Cambuhy's production process during the POR,
but it actually did influence it.


Regarding pricing, we agree that neither Cambuhy nor Cambuhy Exportadora had
sales to the United States during or after September 1998.  However, the
presence or absence of U.S. sales is not determinative when deciding whether it
is appropriate to collapse affiliated producers.  Rather, the relevant factor
is whether the potential for manipulation of pricing exists between these
affiliated companies.  Because Citrovita's commercial director occupied a
position of importance on both Cambuhy's and Cambuhy Exportadora's boards of
directors, we find that the potential for manipulation of pricing existed
during the POR.  This finding is confirmed by Citrovita's proprietary
statements in its November 22 submission, as noted above.


The purpose of treating affiliated producers as a single entity is straight
forward.  As we stated inCertain Fresh Cut Flowers From Colombia; Final Results
of Antidumping Duty Administrative Reviews, 61 FR 42833, 42853 (Aug. 19, 1996):


Because the Department calculates margins on a company-by-company basis, it
must ensure that it reviews the entire producer or reseller, not merely part of
it. The Department reviews the entire entity due to its concerns regarding
price and cost manipulation.  Because of this concern, the Department normally
examines the question of whether reviewed companies 'constitute separate
manufacturers or exporters for purposes of the dumping law.'  Final
Determination of Sales at Less than Fair Value; Certain Granite Products from
Spain, 53 FR 24335, 24337 (June 28, 1988).  Where there is evidence indicating
a significant potential for the manipulation of price and production, the
Department will 'collapse' related companies; that is, the Department will
treat the companies as one entity for purposes of calculating the dumping
margin.  See Nihon Cement Co., Ltd. v. United States, 17 CIT 400 (1993).


Because we find that the criteria set forth in 19 CFR 351.401(f) have been
met, we have continued to treat Citrovita, Cambuhy, and Cambuhy Exportadora as
a single entity for purposes of the final results.  Accordingly, we have
combined these companies' home market sales, as well as their production costs,
in the calculation of normal value.


Finally, we find that it is appropriate to continue to include Cambuhy
Exportadora's SG&A and financing expenses in our calculations for purposes of
the final results.  We agree with the petitioners that combining the costs of
the collapsed affiliates is the only way to represent the true cost of
producing FCOJ for the single entity.  Thus, we find that excluding the SG&A
and financing expenses of Cambuhy Exportadora from the combined expenses of the
collapsed entity would not reasonably reflect the cost of producing FCOJ. 
Moreover, we find that there is no evidence on the record to support
Citrovita's claim that Cambuhy Exportadora's SG&A and financing expenses are
unreasonable.  Therefore, we have continued to calculate SG&A and financing
expenses on an annual basis for the collapsed entity as a ratio of total
company-wide expenses to the cost of goods sold. (6)


Comment 2: Calculation of Financing Expenses
 
For purposes of the preliminary results, we calculated financing expenses
using the amounts shown on the financial statements of Citrovita, Cambuhy, and
Cambuhy Exportadora.  According to Citrovita, this methodology is incorrect
because the Department's established practice is to base financing expenses on
data taken from the financial statements of a respondent's parent company. 
Thus, Citrovita argues that the Department should recalculate financing
expenses using the financial statements of Citrovita's parent company, Nitro
Quimica.  Citrovita maintains that using these financial statements also has
the benefit of avoiding the distortions in the margin calculations caused by
the inclusion of the exchange rate losses noted in Comment 3 andComment 4,
below.
       
The petitioners do not comment on this issue, except to note that there is no
basis for not combining the financing expenses of Citrovita, Cambuhy, and
Cambuhy Exportadora.  SeeComment 1 above.


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 POR.  See Notice of 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 Div. Of Quanex Corp. v. United States, Slip Op. 97-124, Consol.
Court No. 95-09-01125 (CIT August 29, 1997).
  
However, despite the fact that there are numerous affiliated companies that
meet the requirements for consolidation with the respondents,  in this case we
are unable to follow the Department's general practice of using the financing
expenses drawn from consolidated financial statements at the highest level of
consolidation because no such consolidated financial statements exist.  In the
absence of consolidated financial statements, we are unable to base the
interest expense calculation on the financial results of the consolidated
corporate entity to which the respondents are a part.  Consistent with our
approach in 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 (Mar. 23, 1993), where consolidated audited
financial statements do not exist and are not easily prepared, we deem it
appropriate to base the interest expense calculation on the audited financial
statements of the respondent (i.e., the unconsolidated financial statements for
the three entities collapsed for this proceeding).  We disagree with the
respondent that to simply use the financial results for one of the numerous
companies which meet the requirements for consolidation (not even one of the
producing companies) in the interest expense computation rectifies the lack of
consolidated data.  Given the number of companies that, to date, have been
identified as comprising the entire conglomerate, using merely one company's
financing information would not yield a more accurate result.  Thus, consistent
with the approach articulated in DRAMs from Korea and due to facts in this
case, we have based financing expenses on the unconsolidated financial
statements for the three entities collapsed for this proceeding.
         
Comment 3: Treatment of Citrovita's Foreign Exchange Losses
 
During the POR, Citrovita opened a line of credit and guaranteed this line of
credit with future export shipments.  For purposes of the preliminary results,
we included the foreign exchange losses associated with this loan in
Citrovita's financing expenses.  Citrovita argues that this treatment is
inappropriate because the losses in question related to the conversion of
dollar-denominated export revenues, not costs, to Brazilian reais for purposes
of the financial reports prepared by Citrovita.  According to Citrovita, in all
cases the exchange rate loss was attributable to the local currency difference
between the dollar-denominated export earnings at the time the right to collect
those earnings is assigned to the bank and the time that the bank actually
collects them.


Citrovita states that, for most Brazilian companies, the exchange rate gain or
loss associated with the export financing program at issue would be relatively
minor compared to total sales value. Citrovita claims that this holds true for
all companies except those, like itself, which export virtually their entire
production.  Citrovita asserts that, for those companies, the exchange rate
loss can be huge.  Thus, Citrovita contends that, if the loss is treated as
anything other than a nominal bookkeeping entry, it can be fundamentally
distorting to the dumping analysis.


Citrovita acknowledges that the Department addressed this issue in Notice of
Final Determination of Sales at Less Than Fair Value: Certain Cold-Rolled Flat-
Rolled Carbon-Quality Steel Products From Brazil, 65 FR 5554, 5581 (Feb. 4,
2000) (Cold-Rolled Steel from Brazil).  However, Citrovita contends that the
Department mischaracterized the nature of the foreign exchange gains and losses
in that case.  According to Citrovita, because the bank collects the dollar
amounts received from the purchaser, any exchange rate loss is attributable to
the revenue side of the transaction.  Thus, Citrovita argues that the loss has
nothing to do with the amount of local currency that will have to be paid to
retire the foreign currency-denominated loan balance. (7)


The petitioners contend that the Department properly accounted for the
exchange rates losses at issue.  According to the petitioners, the Department
correctly found in the preliminary results that: 1) the line of credit was
simply a loan like any other loan taken out by Citrovita; and 2) the fact that
this loan was guaranteed by exports was incidental to the treatment of any
foreign exchange losses related to it.  The petitioners assert that, because
Citrovita used the loan to finance its production, the Department should
continue to include the exchange losses in question in the company's cost of
production (COP).


Department's Position:


We disagree with Citrovita that the foreign exchange losses in question are
related to the company's export revenues.  During the POR, the Brazilian real
experienced a significant depreciation against the U.S. dollar.  Although
Citrovita claims that this depreciation resulted in substantial exchange losses
associated with the company's accounts receivables, we note that this statement
cannot be true from an accounting perspective.  Rather, because the value that
Citrovita (and the bank) actually collected from the customer was worth more in
terms of Brazilian reais than the Brazilian reais value recorded in the
accounting system at the time of the sale, Citrovita should have recognized an
exchange gain on its sales transactions.  In contrast, we believe that the
exchange rate loss was generated by the repayment of the loan and the payment
of interest in U.S. dollars (i.e., interest expense was accrued at one exchange
rate and actually paid at another). 


We normally include a portion of the exchange gain or loss incurred on notes
(or loans) payable in our calculation of interest expenses.  This portion is
equivalent to the total exchange gain or loss amortized over the annual
maturities of the debt.  We do not include any exchange gain or loss related to
accounts receivable because it does not relate in any way to production
activities.  


We note that our treatment of Citrovita's foreign exchange losses is
consistent with the Department's practice to include foreign exchange losses
incurred on advance financing for export sales in the financial expense ratio
calculation.  In this case, we find that the foreign exchange losses incurred
on the export financing in question are related to the financing activities of
the company.  As noted by the petitioners, the funds received from using
accounts receivable as collateral may be used in any capacity the company
decides, such as in producing subject merchandise.  Accordingly, we find that
the foreign exchange losses incurred on these types of agreements are related
to the company's debt.  Therefore, we have included the losses in the
calculation of the financial expense ratio, consistent with our practice.  See
Cold-Rolled Steel from Brazil, 65 FR at 5581.


Comment 4: Treatment of Cambuhy's Foreign Exchange Losses


During the POR, Cambuhy held two long-term loans which were denominated in
U.S. dollars. For purposes of the preliminary results, we amortized the total
fiscal-year exchange rate loss associated with these loans over the remaining
maturities of the loans.  Citrovita argues that this treatment is inappropriate
because it creates a financial cost for future payments which is entirely
speculative.  According to Citrovita, if the Brazilian real appreciates in the
future, Cambuhy will book exchange rate gains which reflect the lower value of
the outstanding loan balance in Brazilian reais, thus reversing the costs that
the Department included in the calculation of COP.


Citrovita contends that the Department should disregard these losses in their
entirety.  Citrovita asserts that, because Cambuhy sells the majority of its
production in export markets, the principal amounts of these loans will be
repaid from dollar-denominated export earnings.  Consequently, Citrovita
maintains that exchange rate shifts have no real impact on Cambuhy's actual
financing costs.


The petitioners maintain that Citrovita's arguments are irrelevant because the
Department's long-standing policy is to include in the calculation of COP those
exchange rate losses which are related to the actual cost of acquiring and
maintaining debt.  As support for this contention, the petitioners cite Notice
of Final Determination of Sales at Less Than Fair Value: Static Random Access
Semiconductors From the Republic of Korea, 63 FR 8934, 8940 (Feb. 23, 1998)
(SRAMs from Korea) and Cold-Rolled Steel from Brazil, 65 FR at 5581.  Moreover,
the petitioners state that, even though the principal on the loans at issue
will be paid from dollar-denominated export earnings, this does not change the
fact that the funds that Cambuhy received were in reais and that, as the
devaluation took place, Cambuhy had to spend more money than expected in its
production costs.  Thus, the petitioners maintain that the exchange rate losses
had an impact on Cambuhy's financing costs and should be included in the COP.

Department's Position:


We agree with the petitioners and have included the amortized portion of
foreign exchange losses on long-term debt in the COP as part of interest
expense.  The transaction gains and losses at issue are related to the cost of
acquiring and maintaining debt.  Because these costs are related to production,
they are properly included in the calculation of financing expense as a part of
COP.  


In previous cases, we have found that exchange losses represent an increase in
the actual amount of cash needed by respondents to retire their foreign-
currency-denominated loan balances.  See,e.g., SRAMs from Korea, 63 FR at 8940;
and Salmon from Chile, 63 FR at 31430.  The fact that Cambuhy exported a
significant portion of its production during the POR is irrelevant to the issue
of determining whether Cambuhy recognized exchange losses in its normal books
and records. Cambuhy recorded the loan in reais in its normal books and records
and adjusted the reais-denominated loan balance and interest and principal
payments to reflect current exchange rates with the U.S. dollar since the loans
were denominated in U.S. dollars.  U.S. dollars when collected from export
customers will be converted to reais and used as principal repayments in the
books and records of the company to reduce the loan payable to the lender. 


We verified the foreign exchange losses for Cambuhy.  See the Cambuhy cost
verification report at page 23.  To reasonably reflect the cost of producing
and selling the subject merchandise, it is necessary that the respondents' cost
reflect the added financial burden represented by the additional cash needed to
retire foreign-currency-denominated loans. Therefore, for the final results, we
amortized deferred foreign exchange translation losses over the maturities of
the debt and included the amortized portion in net interest expense, in
accordance with our practice.  SeeSalmon from Chile, 63 FR at 31430; SRAMs from
Korea, 63 FR at 8940; and Notice of Final Determination of Sales at Less Than
Fair Value: Certain Steel Concrete Reinforcing Bars From Turkey, 62 FR 9737,
9743, (March 4, 1997).  


Regarding Cambuhy's concern that the Department would not accord similar
treatment to foreign exchange gains, we find that this concern is misplaced
because it is our practice to include both gains and losses related to foreign-
currency-denominated loans for purposes of our calculations.  


Comment 5: Calculation of the Cost of Oranges Produced by an Affiliated Party


Both Citrovita and Cambuhy purchased oranges from an affiliated party during
the POR.  For purposes of the preliminary results, we valued these oranges
using the affiliate's cost of production, in accordance with 19 CFR 351.407(b),
because this cost was higher than both the transfer price between the
affiliates and the market price between unaffiliated parties.  Citrovita
asserts that it does not disagree with the decision to use the affiliate's
costs; however, it contends that the Department should recalculate them. 
Specifically, Citrovita contends that the Department should exclude all selling
expenses incurred by the affiliate from its calculation of the affiliate's COP
because these expenses were not incurred to sell oranges to Citrovita.  Rather,
Citrovita asserts that they were incurred to sell various other products to
unaffiliated parties.  According to Citrovita, sales to unaffiliated purchasers
entail significant selling expenses, while sales to Citrovita do not.


The petitioners contend that the Department correctly calculated the
affiliate's COP.  The petitioners argue that the affiliate's costs, including
selling expenses as if sold to an unaffiliated party, is the most accurate
value of the oranges in question.  According to the petitioners, acceptance of
Citrovita's argument would undermine the Department's general methodology with
respect to inputs provided by an affiliated supplier because it would allow
respondents to gain an advantage by using such inputs.  Specifically, the
petitioners argue that respondents would never include selling expenses, a
traditional component of cost, in their calculations in situations where
inclusion of these expenses would result in costs which were higher than the
prices paid to affiliated or unaffiliated parties.


Department's Position:


Although Citrovita has asserted that the selling expenses in question were
incurred solely in conjunction with sales to unaffiliated parties, there is no
evidence on the record to support such a finding.  Indeed, we note that
Citrovita raised this issue for the first time in its case brief, well after
the deadline for the submission and verification of new factual information. 
Because there is no basis on the record for accepting Citrovita's claim, we
have continued to include selling expenses in the affiliate's cost of producing
the oranges sold to Citrovita for purposes of the final results.


Comment 6: Calculation of Selling, General, and Administrative Expenses and
Financing Expenses for the Collapsed Entity


For purposes of the preliminary results, we calculated G&A and financing
expenses using the expenses of Citrovita, Cambuhy and Cambuhy Exportadora.  We
expressed these costs as a percentage of each company's cost of sales shown on
its financial statements and then multiplied the resulting percentage by the
cost of manufacturing (COM) computed for each party.  We then computed a
weighted-average COP using these figures.


Citrovita argues that this methodology overstates the companies' actual G&A
and financing expenses because the COM calculated by the Department includes
certain costs which are not reflected in the companies' financial statements. 
Specifically, Citrovita notes that COM includes the cost of oranges produced by
an affiliated party (see Comment 5, above), whereas Citrovita's financial
statements reflect the transfer price from the affiliate and Cambuhy's
financial statements reflect either the transfer price or no cost for these
oranges.


The petitioners did not comment on this issue.
    
Department's Position:


We agree with Citrovita in part and have recalculated Citrovita's and
Cambuhy's manufacturing costs for purposes of calculating the G&A and financing
expense rates in order to state the denominators of these calculations on the
same basis as the COMs, to which the rates were applied.  We applied these
revised rates to the COMs used in the preliminary results.  Specifically, we
have adjusted the denominators of these calculations to use the cost of the
oranges in question rather than the transfer price from the affiliated party. 
Additionally, for Citrovita, we added to the denominator of the G&A and
financing expense calculation freight costs related to transporting the oranges
in question because these costs had been mis-classified as selling expenses.


Regarding Cambuhy Exportadora, we note that this company did not report its
cost of acquiring the oranges used in its production.  As a result, we have no
reasonable method of including Cambuhy Exportadora's actual costs in its COM,
other than the amount included as facts available (i.e., the affiliated party's
COP for fruit).  Consequently, we have continued to calculate G&A and financing
expenses for Cambuhy Exportadora using the same methodology as in the
preliminary results.


Recommendation


Based on our analysis of the comments received, we recommend adopting all of
the above positions.  If these recommendations are accepted, we will publish
the final results of review and the final weighted-average dumping margin for
the reviewed firm in the Federal Register.


 
Agree____     Disagree___                            




                                                
Troy H. Cribb
Acting Assistant Secretary for
  Import Administration



Endnotes:
__________________________________________________________________________
         
1.        Specifically, these acquisitions were made by a sister company to
Citrovita's parent company, both of whom were in the same corporate group of
companies known as the Votorantim Group.
2.        Based on analysis of the data on the record of this proceeding, we
also found that Cambuhy Exportadora functioned as a producer of FCOJ during the
POR.  See the May 30, 2000, memorandum from the team to Richard W. Moreland,
entitled "Treatment of Data Reported by Affiliated Parties in the Antidumping
Duty Administrative Review on Frozen Concentrated Orange Juice from Brazil"
(the Collapsing Memo).
3.        Citrovita asserts that the Department has never collapsed parties
which became affiliated late in a review period for purposes of the normal
value calculation.  As support for this contention, Citrovita cites Notice of
Final Determination of Sales at Less Than Fair Value: Fresh Atlantic Salmon
from Chile, 63 FR 31411, 31421 (June 9, 1998) (Salmon from Chile), where the
Department declined to collapse affiliated parties that terminated the
affiliation during the period of investigation.
4.        See the July 14, 2000 case brief at page 3 for a proprietary
discussion of these expenses.
5.        Each of these factors is discussed in detail in the Collapsing Memo.
6.       This ratio is based on figures from the company's audited fiscal year
financial statements that most closely correspond to the POR.
7.       Citrovita notes that the Department stated this rationale in Salmon
from Chile, 63 FR at 31430.