Cut-Flower Firms Try to Clip Imports : Growers Ask U.S. to Stop ‘Dumping’ of Low-Cost Blossoms

For a while, Carpinteria flower grower Henry Persoon seriously considered moving his H&M; Flowers operation to Bolivia in order to compete better in the U.S. cut-flower market.

“When I call up a customer and say that I’ve got so many bunches of flowers and ask if he’d like to take some at such and such a price,” Persoon said, “he’ll tell me he can get them out of South America for half that. So I was thinking of giving up here and going to Bolivia and starting over.”

But on reflection, Persoon decided against the move. Instead, he and other U.S. growers are seeking government aid to slow the fast-rising tide of cheaply priced imported fresh flowers, mostly carnations and chrysanthemums, that they believe are being dumped here at prices that are less than their cost of production.

The Floral Trade Council, formed last year, filed petitions last month in Washington with the Commerce Department and the International Trade Commission seeking penalties against Canada, Chile, Colombia, Costa Rica, Ecuador, Kenya, Mexico, Peru and, to a lesser extent, Israel and the Netherlands. To the flower growers, however, Colombia looms largest as a threat to domestic production.

Both federal agencies agreed two weeks ago to investigate, and the ITC called its first public hearing June 6 to determine whether domestic flower growers have been economically damaged by subsidized imports.

The Floral Trade Council acknowledges that the South American countries’ need to boost exports to earn much-needed foreign exchange. But, on the other hand, it maintains that the prices being accepted constitute dumping--selling below the cost of production. Chuck Haley Sr., whose sons continue the carnation and rose-growing business begun by his father in the Denver area, said: “We know that carnations were offered in Florida last year for 2 to 4 cents a flower. Now, that doesn’t even pay the transportation costs.

“We realize that this is a free-trade world,” Haley said. “What we want is fairness. We are in solid opposition to foreigners dumping into this market at below their costs.”

So far, the exporting countries, U.S. importers and the Florists Transworld Delivery Assn.-- whose membership includes 20,000 retail florists--have indicated opposition to the proposed punitive duties, said Washington attorney Eugene L. Stewart, who filed the petitions on behalf of the Floral Trade Council.

South and Central America are relatively recent entries in the U.S. fresh-flower industry, which provides a kaleidoscope of colorful blossoms for the nation’s florists. So rapidly have they expanded production that imported blossoms now account for up

to 71% of the total U.S. cut-flower market, according to Fred Van Wingerden, operator of Topstar Nursery in Oxnard and vice chairman of the Floral Trade Council.

For many species, foreign growers can harvest the flowers while still in the bud stage so that they do not reach full bloom until several days later when they reach the wholesale markets. They are shipped by sea and air in temperature-controlled containers. Domestic growers use climate-controlled trucks and air freight to reach their markets.

“Last year, we were faced with a tremendous amount of product coming in at below-market prices,” Van Wingerden said. California producers, who dominate the nation’s flower growers, have found East Coast markets closed to them as the South American blossoms flow in through Miami, he said.

Industry Is Hurting

“I no longer ship any chrysanthemums to the East Coast, where I had five or six big customers,” Van Wingerden said. “The industry is hurting. We actually have an upward curve of flower use in this country and a downward curve of domestic production. Now, that doesn’t make sense, right?”

Government statistics show, for example, that California growers sold 3 million bunches of miniature carnations from January through mid-May, 1985, and just 2.5 million during the same period this year, while imports increased to 6.2 million bunches from 2.5 million. Indicative of foreign dominance of the field is the fact that California growers sold 7.6 million bunches of pompon chrysanthemums this year, compared to 28 million imported blossoms, about two-thirds of them from Colombia.

California is by far the nation’s largest producer of standard carnations, chrysanthemums, roses and snapdragons. Sales of all cut flowers last year totaled $210 million for the state, compared to $374 million for the nation as a whole. Florida was second with $27 million, followed by Colorado with $22 million, Pennsylvania with $17 million and Hawaii with $14 million. The five leading California counties in production of cut fresh flowers are San Mateo, San Diego, Monterey, Santa Cruz and Santa Barbara, according to the Federal-State Marketing Service.

The highly perishable cut flowers are unusually vulnerable to fluctuating supplies, said Ray Hasek, the council’s executive secretary. Unless sold at their prime, they may not be sold at all.

“You can’t hold those things,” he said. “We’re basically selling beauty.”

Many Shifting Crops

The presence of the rapidly increasing number of imported flowers has affected domestic growers in other ways, said John Muller, who grows snapdragons at Half Moon Bay, south of San Francisco: “People who have grown carnations and mums have shifted into my crops. All of a sudden, everyone is jumping into everybody else’s commodities.”

At San Francisco’s wholesale flower market, where Muller sells cut flowers three nights a week, occasional periods of scarcity have disappeared.

“Now there is never a shortage of flowers. There’s a glut. The unit price for floral products in Northern California is going down,” he said, “and our operating costs are going up.”

The same is true for Southland growers, said George Townsend, who operates George’s Wholesale Florist in Encinitas. “We found that, even at Valentine’s (Day) this year, there was hardly a shortage of anything. Prices were fair but they weren’t great.

“Mother’s Day is tops in sales volume,” he said, but this year “there was a glut on the market for pompons and other mums. We did all right, but we didn’t do as well as we could have.”

Townsend said he has lost major wholesale customers in Boston, New York and Washington. “We used to ship probably 90% to wholesalers,” he said. “Now we are selling 70% to retailers directly. We’ve had to skip the wholesaler to be able to survive.”

The Floral Trade Council maintains that it favors competition but decided to file the unfair trade petitions because federal trade laws are being violated.

Not Against Imports

“I’m not against imports, because we have a growing market here,” Van Wingerden said. Imported flowers are needed and wanted by florists, especially during the major sales periods of Valentine’s Day and Mother’s Day, he said, but if they stream into the country year-round at market-depressing prices, due to subsidies, the U.S. government should respond.

The petition to offset the alleged dumping seeks penalty duties of 138% against Canadian carnations--that is, a 138% surcharge should be added to invoices--and of 166% against miniature carnations. For Chilean carnations, the proposed penalty is 151%; for Colombian carnations 177%, as well as 37% on chrysanthemums and 185% on pompon chrysanthemums.

It also recommends penalties against flowers from the following countries: 58% on carnations and 66% on pompon chrysanthemums from Costa Rica; 158% for standard carnations, 18% for medium carnations, 23% for chrysanthemums and 85% for pompon chrysanthemums from Ecuador; 247% on carnations and 127% on miniature carnations from Kenya; 78% on carnations, 189% on chrysanthemums and 132% on pompon chrysanthemums from Mexico, and 16% on carnations, 33% on pompon carnations and 7% on gypsophila from Peru.

A separate petition seeks to impose countervailing duties against those countries plus the Netherlands and Israel. The International Trade Commission earlier imposed a 23% duty on Israeli roses.

Gordon Smith, Washington spokesman for the Florists Transworld Delivery Assn., said the FTD opposes any import restrictions that would decrease availability and quality of fresh-cut flowers and increase the cost to consumers.

“We try to be the voice of the consumer in these proceedings,” Smith said.

The florists have just begun their own analysis of the flower growers’ case chronicling their economic distress, he said, but the producers have failed several times since 1977 to persuade the International Trade Commission to take action.

Unless the ITC finds that subsidies and other foreign trade practices have injured a domestic industry, the petition is rejected, Smith noted.

Calls Move ‘Misguided’

Michael Felsher, president of Sunburst Farms, a leading importer of cut flowers based in Miami, called the growers’ petitions misguided. Thanks to foreign producers, Felsher said, U.S. consumers “for the first time” have adequate supplies of high-quality fresh flowers all year and nationwide.

Many of the countries named in the petition enjoy natural production advantages, he acknowledged, in that they are situated at or near the Equator. This enables them to produce in a temperate climate year-round, punctuated by regular, 12-hour days, which virtually eliminates heating costs common to U.S. growers.

Domestic use of cut flowers is relatively low, compared to other countries, he said, and the market is ripe for major expansion. With lower fuel costs and a falling dollar, domestic growers have a “tremendous opportunity” to increase sales volume, he said.

Said attorney Stewart, who filed the trade petitions May 21:

“Domestic growers are in economic distress because of the growth of the imports in capturing the U.S. market. Because cut flowers are very perishable, when a large supply comes on the market it drives the price sharply downward. So the growers are not only losing sales volume but are subject to chaotic and depressed pricing.

Heavy Double Squeeze

“They’re in a very heavy double squeeze--loss of volume and loss of sales revenues--and we’re in danger of losing our domestic flower-growing industries.”

The petitions seek to place duties on seven kinds of imported flowers to offset alleged trade subsidies. In 1985, Stewart said, imports dominated the U.S. carnation market with a 71% share and accounted for 43% of miniature carnations sold in this country, 33% of standard chrysanthemums and 65% of pompon chrysanthemums.

By contrast, he said, imported carnations commanded 59% of the U.S. market in 1981, miniature carnations 23%, standard chrysanthemums 20% and pompon chrysanthemums 55%.

“So you can see that they have made enormous inroads into the U.S. market,” Stewart said, “and not on the basis of better quality, favorable exchange rates or lower wages.”

Haley has seen a few failed attempts at getting government support for the fresh cut-flower business, but he expressed optimism over the outcome this time.

“I think we’ll win,” he said. “I think we’ve got a good case based on solid information.”

But the opposition is equally optimistic that the government will throw out the growers’ petition. “We have an excellent case,” said Felsher of Sunburst Farms.