[Federal Register Volume 59, Number 4 (Thursday, January 6, 1994)]
[Notices]
[Pages 732-740]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-281]


[[Page Unknown]]

[Federal Register: January 6, 1994]


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DEPARTMENT OF COMMERCE
International Trade Administration
[A-351-820]

 

Final Determination of Sales at Less Than Fair Value: 
Ferrosilicon From Brazil

Agency: Import Administration, International Trade Administration, 
Department of Commerce.

EFFECTIVE DATE: January 6, 1994.

FOR FURTHER INFORMATION CONTACT: Kimberly Hardin, Office of Antidumping 
Investigations, Import Administration, U.S. Department of Commerce, 
14th Street and Constitution Avenue, NW., Washington, DC 20230; 
telephone (202) 482-0371.

FINAL DETERMINATION: We determine that ferrosilicon (FeSi) from Brazil 
is being, or is likely to be, sold in the United States at less than 
fair value, as provided in section 735 of the Tariff Act of 1930, as 
amended (the Act), and that critical circumstances exist for 
Italmagnesio S.A. Industria e Comercio (Italmagnesio), but not for 
Companhia Ferroligas Minas Gerais (Minasligas) or Companhia Brasileira 
Carbureto de Calcio (CBCC). The estimated margins are shown in the 
``Suspension of Liquidation'' section of this notice.

Scope of Investigation

    The merchandise subject to this investigation is ferrosilicon, a 
ferroalloy generally containing, by weight, not less than four percent 
iron, more than eight percent but not more than 96 percent silicon, not 
more than 10 percent chromium, not more than 30 percent manganese, not 
more than three percent phosphorous, less than 2.75 percent magnesium, 
and not more than 10 percent calcium or any other element.
    FeSi is a ferroalloy produced by combining silicon and iron through 
smelting in a submerged-arc furnace. FeSi is used primarily as an 
alloying agent in the production of steel and cast iron. It is also 
used in the steel industry as a deoxidizer and a reducing agent, and by 
cast iron producers as an inoculant.
    FeSi is differentiated by size and by grade. The sizes express the 
maximum and minimum dimensions of the lumps of FeSi found in a given 
shipment. FeSi grades are defined by the percentages by weight of 
contained silicon and other minor elements. FeSi is most commonly sold 
to the iron and steel industries in standard grades of 75 percent and 
50 percent FeSi.
    Calcium silicon, ferrocalcium silicon, and magnesium ferrosilicon 
are specifically excluded from the scope of this investigation. Calcium 
silicon is an alloy containing, by weight, not more than five percent 
iron, 60 to 65 percent silicon, and 28 to 32 percent calcium. 
Ferrocalcium silicon is a ferroalloy containing, by weight, not less 
than four percent iron, 60 to 65 percent silicon, and more than 10 
percent calcium. Magnesium ferrosilicon is a ferroalloy containing, by 
weight, not less than four percent iron, not more than 55 percent 
silicon, and not less than 2.75 percent magnesium.
    FeSi is currently classifiable under the following subheadings of 
the Harmonized Tariff Schedule of the United States (HTSUS): 
7202.21.1000, 7202.21.5000, 7202.21.7500, 7202.21.9000, 7202.29.0010, 
and 7202.29.0050. Although the HTSUS subheadings are provided for 
convenience and customs purposes, our written description of the scope 
of this investigation is dispositive.
    FeSi in the form of slag is included within the scope of this 
investigation if it meets, generally, the chemical content definition 
stated above and is capable of being used as FeSi. FeSi is used 
primarily as an alloying agent in the production of steel and cast 
iron. It is also used in the steel industry as a deoxidizer and a 
reducing agent, and by cast iron producers as an inoculant. Parties 
that believe their importations of slag do not meet these definitions 
should contact the Department and request a scope determination.

Period of Investigation

    The period of investigation (POI) is July 1, 1992, through December 
31, 1992.

Case History

    Since the publication of the notice of preliminary determination on 
August 16, 1993 (58 FR 43323), the following events have occurred.
    On August 20, 1993, respondent Italmagnesio notified the Department 
that it had decided to withdraw from participation in this 
investigation and requested the return of all documents that it 
submitted during the course of the investigation.
    On August 25, 1993, we returned the proprietary versions of all 
documents submitted by Italmagnesio during the investigation.
    On August 23, 24, and 25, 1993, CBCC, petitioners, and Minasligas, 
respectively, requested a public hearing.
    The Department conducted verification of the cost and sales 
responses of Minasligas and CBCC in Brazil from August 25 through 
September 14, 1993.
    Petitioners, CBCC, and Minasligas submitted case briefs on October 
27, 1993, and rebuttal briefs on November 1, 1993.
    On November 3, 1993, a public hearing was held.

Best Information Available

    As stated in the ``Case History'' section of this notice, 
Italmagnesio withdrew its responses prior to verification and stated 
that it would not participate further in the investigation. Therefore, 
Italmagnesio must be considered a non-cooperating party. As a non-
cooperating party, based on our past practice (see e.g., 58 FR 37215, 
Final Determination of Sales At Less Than Value, Certain Cut-to-Length 
Carbon Steel Plate from the United Kingdom, July 9, 1993), Italmagnesio 
will be assigned the higher of the margins alleged in the petition or a 
calculated margin for another company as best information available 
(BIA). (See Comment 15)

Such or Similar Comparisons

    We have determined that all the products covered by this 
investigation constitute a single category of such or similar 
merchandise. Where there were no sales of identical merchandise in the 
home market to compare to U.S. sales, we compared similar merchandise 
based on the following criteria: (1) The percentage range, by weight, 
of silicon content; (2) grade; and (3) sieve size. (See Comment 2 with 
regard to sieve size.)

Fair Value Comparisons

    To determine whether sales of FeSi from Brazil to the United States 
were made at less than fair value, we compared the United States price 
(USP) to the foreign market value (FMV), as specified below.

United States Price

A. CBCC
    We based USP on purchase price, in accordance with section 772(b) 
of the Act, because the subject merchandise was sold to unrelated 
purchasers in the United States prior to importation and exporter's 
sales price was not indicated by other circumstances.
    We calculated purchase price based on packed FOB port of 
embarkation prices to unrelated customers. Because CBCC did not report 
packing for bulk sales, we used information from the public version of 
Minasligas' response for bulk packing. We made deductions where 
appropriate for foreign inland freight (which also included foreign 
inland insurance), foreign brokerage and handling, and warehousing.
    We made an adjustment to USP for the taxes paid on the comparison 
sales in Brazil. On October 7, 1993, the Court of International Trade 
(CIT), in Federal-Mogul Corp. and The Torrington Co. v. United States, 
Slip Op. 93-194 (CIT, October 7, 1993), rejected the Department's 
methodology for calculating an addition to USP under section 
772(d)(1)(C) of the Act to account for taxes that the exporting country 
would have assessed on the merchandise had it been sold in the home 
market. The CIT held that the addition to USP under section 
772(d)(1)(C) of the Act should be the result of applying the foreign 
market tax rate to the price of the United States merchandise at the 
same point in the chain of commerce that the foreign market tax was 
applied to foreign market sales. Federal-Mogul, Slip Op. 93-194 at 12.
    The Department has changed its methodology in accordance with the 
Federal-Mogul decision, and has applied this new methodology in making 
the final determination in this investigation. From now on, the 
Department will add to USP the result of multiplying the foreign market 
tax rate by the price of the United States merchandise at the same 
point in the chain of commerce that the foreign market tax was applied 
to foreign market sales. The Department will also adjust the USP tax 
adjustment and the amount of tax included in FMV. These adjustments 
will deduct the portions of the foreign market tax and the USP tax 
adjustment that are the result of expenses that are included in the 
foreign market price used to calculate foreign market tax and are 
included in the United States merchandise price used to calculate the 
USP tax adjustment and that are later deducted to calculate FMV and 
USP. These adjustments to the amount of the foreign market tax and the 
USP tax adjustment are necessary to prevent the new methodology for 
calculating the USP tax adjustment from creating antidumping duty 
margins where no margins would exist if no taxes were levied upon 
foreign market sales.
    This margin creation effect is due to the fact that the bases for 
calculating both the amount of tax included in the price of the foreign 
market merchandise and the amount of the USP tax adjustment include 
many expenses that are later deducted when calculating USP and FMV. 
After these deductions are made, the amount of tax included in FMV and 
the USP tax adjustment still reflects the amounts of these expenses. 
Thus, a margin may be created that is not dependent upon a difference 
between USP and FMV, but is the result of the price of the United 
States merchandise containing more expenses than the price of the 
foreign market merchandise. The Department's policy to avoid the margin 
creation effect is in accordance with the United States Court of 
Appeals' holding that the application of the USP tax adjustment under 
section 772(d)(1)(C) of the Act should not create an antidumping duty 
margin if pre-tax FMV does not exceed USP. Zenith Electronics Corp. v. 
United States, 988 F.2d 1573, 1581 (Fed. Cir. 1993). In addition, the 
CIT has specifically held that an adjustment should be made to mitigate 
the impact of expenses that are deducted from FMV and USP upon the USP 
tax adjustment and the amount of tax included in FMV. Daewoo 
Electronics Co., Ltd. v. United States, 760 F. Supp. 200, 208 (CIT, 
1991). However, the mechanics of the Department's adjustments to the 
USP tax adjustment and the foreign market tax amount as described above 
are not identical to those suggested in Daewoo.
    In this investigation, there are four different taxes levied on 
sales of the subject merchandise in the home market. The ICMS tax is a 
regional tax, which varies depending upon the state in which the 
purchase originates. The IPI tax is a fixed percentage rate tax of four 
percent. Finally, the PIS and FINSOCIAL taxes are a fixed percentage 
rate tax equalling 2.65 percent combined. CBCC used both a unit and a 
gross basis to calculate the combined PIS and FINSOCIAL taxes within 
various months of the POI. We recalculated these taxes on a unit basis, 
where appropriate, which is the way CBCC calculated them. Because these 
taxes are calculated on the same base price, we find them not to be 
cascading. Thus, for each sale, we made only one tax adjustment which 
equals the sum of the actual tax rates.
B. Minasligas
    We based USP on purchase price, in accordance with section 772(b) 
of the Act, because the subject merchandise was sold to unrelated 
purchasers in the United States prior to importation and exporter's 
sales price was not indicated by other circumstances.
    We calculated purchase price based on packed FOB port of 
embarkation prices to unrelated customers. We made deductions where 
appropriate for foreign inland freight (which also included foreign 
inland insurance) and foreign brokerage and handling.
    We made an adjustment to USP for the taxes paid on the comparison 
sale in Brazil. (See above description under ``A. CBCC'' for an 
explanation of our new tax methodology as well as a description of the 
specific taxes in this investigation.)

Foreign Market Value

    In order to determine whether there were sufficient sales of FeSi 
in the home market to serve as a viable basis for calculating FMV, we 
compared the volume of home market sales of FeSi to the aggregate 
volume of third country sales in accordance with section 773(a)(1)(B) 
of the Act. For both CBCC and Minasligas, the volume of home market 
sales was greater than five percent of the aggregate volume of third 
country sales. Therefore, for both CBCC and Minasligas, we determined 
that home market sales of FeSi constituted a viable basis for 
calculating FMV, in accordance with 19 CFR 353.48(a).
    In the petition and in subsequent filings, petitioners alleged that 
home market sales were made at less than the cost of production (COP) 
and that constructed value (CV) should be used to compute FMV. Based on 
petitioners' allegations, which provided a reasonable basis to 
``believe or suspect'' below cost sales (see section 773(b) of the 
ACT), we initiated COP investigations. We examined respondents' cost 
data at verification and analyzed this information for purposes of this 
final determination.
    We determine Brazil's economy to be hyperinflationary. Therefore, 
in order to eliminate the distortive effects of inflation, consistent 
with past practice (see, e.g., Final Determination of Sales at Less 
Than Fair Value and Amended Antidumping Duty Order, Tubeless Steel Disc 
Wheels from Brazil, 53 FR 34566, September 7, 1988), we calculated 
separate weighted-average FMVs, COPs, and CVs for each month.
A. CBCC
    In order to determine whether home market sales were above the COP, 
we calculated the monthly COPs on the basis of CBCC's cost of 
materials, fabrication, general expenses, and packing. We relied on the 
COP data submitted by CBCC except in the following instances where the 
costs were not appropriately quantified or valued. Specifically, we:
    1. Revised general and administrative (G&A) expenses by calculating 
them as a percentage of cost of goods sold as reported on CBCC's 1992 
financial statements (see Comment 4);
    2. Added an amount for the G&A expenses of CBCC's parent company 
(see Comment 4);
    3. Revised the interest expense computation using the financial 
statements of CBCC's parent, Solvay do Brasil (see Comment 3);
    4. Included IPI and ICMS taxes as part of reported material costs 
in COP (see Comment 5);
    5. Recalculated the cost of CBCC's own production of charcoal based 
upon BIA (see Comment 6);
    6. Recalculated depreciation costs for Furnace 8 based upon a 10 
year useful life (see Comment 7);
    7. Corrected an error in the October 1992 calculation of 
electricity cost (see Comment 9);
    8. Added packing expenses in COP for the home market and United 
States, respectively.
    We compared individual home market prices with the monthly COPs. We 
tested the home market prices on a sieve-size-specific basis and found, 
for all sieve sizes, that between 10 and 90 percent of sales in the 
home market were made at prices above the COP. Therefore, we 
disregarded the below-cost sales, if those sales were made over an 
extended period of time. CBCC did not provide any information in its 
responses to indicate that its below cost sales were made at prices 
which would permit recovery of all costs within a reasonable period of 
time in the normal course of trade. In order to determine whether 
below-cost sales were made over an extended period of time, we 
performed the following analysis on a product-specific basis: (1) If 
respondent sold a product in only one month of the POI and there were 
sales in that month below the COP, or (2) if respondent sold a product 
during two months or more of the POI and there were sales below the COP 
during two or more of those months, then below-cost sales were 
considered to have been made over an extended period of time. All of 
CBCC's sales were made over an extended period of time.
    For CBCC, we based FMV on home market prices. However, for one U.S. 
sale, although there were comparable home market sales in the same 
month, we were unable to make a difference-in-merchandise (DIFMER) 
adjustment. This is because the U.S. product was produced in a month 
different than the home market products and in hyperinflationary 
economies, we limit such adjustments to products produced and sold in 
the same month. In that instance, we used CV as FMV.
    We calculated CV in accordance with section 773(e)(1) of the Act. 
The monthly CV includes materials, fabrication, general expenses, 
profit and packing. We made all adjustments described in the COP 
section (except for the inclusion of ICMS and IPI taxes in material 
costs) in calculating the CV. We used the following as the basis for 
calculating CV:
    (1) CBCC's actual general expenses because they exceed the 
statutory ten percent minimum of materials and fabrication, in 
accordance with section 773(e)(1)(B)(i) of the Act;
    (2) the statutory minimum profit of eight percent, in accordance 
with section 773(e)(1)(B)(ii) of the Act, as CBCC's profit was less 
than eight percent of the sum of general expenses and the cost of 
manufacture; and
    (3) we calculated an offset to interest expense to avoid double 
counting the portion of such expense attributable to the imputed credit 
and inventory carrying costs which were already included in the 
selling, general and administrative expenses.
    We made circumstance-of-sale adjustments for differences in credit 
expenses, in accordance with 19 CFR 353.56(a). Finally, we added U.S. 
packing expenses to CV.
    For price-to-price comparisons, we based FMV on ex-factory prices, 
inclusive of packing, to unrelated customers. We deducted foreign 
inland freight from FMV. We made circumstance-of-sale adjustments, 
where appropriate, for differences in credit expenses, in accordance 
with 19 CFR 353.56(a). Because the home market credit figure reported 
by CBCC is actually interest revenue, we imputed credit expense and 
then applied the interest revenue as an offset against the imputed 
expense. We also used the actual paydates found at verification in our 
credit expense calculation. For those sales which we did not examine at 
verification, we added the average difference between the paydate 
reported and the actual paydate from the verified sales.
    For FeSi sales packed in bags, we deducted home market packing 
costs and added U.S. packing costs. Because CBCC did not report packing 
for bulk sales, we used information on bulk packing costs from the 
public version of Minasligas' response for these sales.
    We included in the FMV the amount of taxes collected in the home 
market. We also calculated the amount of the tax that was due solely to 
the inclusion of price deductions in the original tax base (i.e., the 
sum of any amounts that were deducted from the tax base). This amount 
was deducted from the FMV after all other additions and deductions had 
been made. By making the additional tax adjustments, we avoid a 
distortion that would create a dumping margin even when pre-tax dumping 
is zero.
B. Minasligas
    In order to determine whether home market sales were above the COP, 
we calculated the monthly COPs on the basis of Minasligas' cost of 
materials, fabrication, general expenses, and packing. We relied on the 
COP data submitted by Minasligas except in the following instances 
where the costs were not appropriately quantified or valued. 
Specifically, we:
    1. Revised G&A expenses by calculating them on an annual basis as a 
percentage of cost of goods sold as reported in Minasligas' 1992 
financial statements (see Comment 4);
    2. Revised interest expenses to include finance expenses of Delp 
(Minasligas' parent company), and disallowed a portion of the claimed 
interest income offset (see Comment 3);
    3. Included IPI and ICMS taxes as part of reported material costs 
in COP (see Comment 5);
    4. Revised the labor and overhead allocation methodology to reflect 
production quantity (see Comment 14);
    5. Adjusted the inventory holding gains and losses to account for 
revisions in the reported costs (see Comment 10);
    6. Disallowed the claimed differences in cost between high purity 
and standard grade FeSi and used the ``all kinds'' reported costs;
    7. Added packing expenses in COP for the home market and United 
States, respectively.
    We compared individual home market prices with the monthly COPs. We 
tested the home market prices on a sieve-size-specific basis and found, 
for certain sieve sizes, that between 10 and 90 percent of sales of 
each in the home market were made at prices above the COP. Therefore, 
we disregarded the below-cost sales for those sieve sizes, if those 
sales were made over an extended period of time. Minasligas did not 
provide any information in its responses to indicate that its below 
cost sales were made at prices which would permit recovery of all costs 
within a reasonable period of time in the normal course of trade. In 
order to determine whether below-cost sales were made over an extended 
period of time, we performed the following analysis on a product-
specific basis: (1) If respondent sold a product in only one month of 
the POI and there were sales in that month below the COP, or (2) if 
respondent sold a product during two months or more of the POI and 
there were sales below the COP during two or more of those months, then 
below-cost sales were considered to have been made over an extended 
period of time. All of Minasligas' below cost sales were made over an 
extended period of time.
    For Minasligas, we based FMV on home market prices. We calculated 
FMV based on ex-factory prices, inclusive of packing, to unrelated 
customers. We deducted foreign inland freight from FMV. We made 
circumstance-of-sale adjustments, where appropriate, for differences in 
credit expenses, in accordance with 19 CFR 353.56(a). Because the home 
market credit figure reported by Minasligas is actually interest 
revenue, we imputed credit expense and then used the interest revenue 
as an offset against the imputed expense. We imputed U.S. credit 
because Minasligas did not report this expense. We used the ``First 
Payment'' date reported by Minasligas and the monthly interest rates 
based on the ``Taxa Referential'' which is the Brazilian Government's 
referential index for short-term borrowings. We also made circumstance-
of-sale adjustments, where appropriate, for direct selling expenses 
(finance charges), warehousing, and quality control expenses. We 
reallocated a portion of direct selling expenses to foreign brokerage 
and handling based on findings at verification. Finally, we deducted 
home market packing costs and added U.S. packing costs.
    We included in FMV the amount of taxes collected in the home 
market. We also calculated the amount of the tax that was due solely to 
the inclusion of price deductions in the original tax base (i.e., the 
sum of any adjustments that were deducted from the tax base). This 
amount was deducted from the FMV after all other additions and 
deductions had been made. By making the additional tax adjustments, we 
avoid a distortion that would create a dumping margin even when pre-tax 
dumping is zero.

Critical Circumstances

    Petitioners alleged that critical circumstances exist with respect 
to imports of FeSi from Brazil. Section 735(a)(3) of the Act provides 
that critical circumstances exist if we determine that:
    (A) (i) There is a history of dumping in the United States or 
elsewhere of the class or kind of merchandise which is the subject of 
the investigation, or
    (ii) The person by whom, or for whose account, the merchandise was 
imported knew or should have known that the exporter was selling the 
merchandise which is the subject of the investigation at less than its 
fair value, and,
    (B) There have been massive imports of the class or kind of 
merchandise which is the subject of the investigation over a relatively 
short period.
    Regarding (A)(i) above, we normally consider whether there has been 
an antidumping order in the United States or elsewhere on the subject 
merchandise in determining whether there is a history of dumping. 
Regarding (A)(ii) above, we normally consider margins of 25 percent or 
more for purchase price comparisons and 15 percent or more for 
exporter's sales price comparisons as sufficient to impute knowledge of 
dumping.
    Pursuant to section 735(a)(3)(B), we generally consider the 
following factors in determining whether imports have been massive over 
a short period of time: (1) The volume and value of the imports; (2) 
seasonal trends (if applicable); and (3) the share of domestic 
consumption accounted for by imports. If imports during the period 
immediately following the filing of a petition increase by at least 15 
percent over imports during a comparable period immediately preceding 
the filing of a petition, we normally consider them massive.
    Since the calculated dumping margins for CBCC and Minasligas are 
not in excess of 25 percent, we cannot impute knowledge under section 
735(a)(3)(A)(ii) of the Act. (See, e.g., Final Determination of Sales 
At Less Than Fair Value; Tapered Roller Bearings and Parts Thereof, 
Finished or Unfinished, from Italy, 52 FR 24198, June 29, 1987.) 
Petitioners provided information regarding respondent's history of 
dumping in a third country. Therefore, we examined whether imports have 
been massive. Based on our analysis of verified company specific import 
data, we determined that imports have not been massive over a 
relatively short period of time for CBCC and Minasligas. Accordingly, 
we determine that critical circumstances do not exist for CBCC and 
Minasligas. However, for Italmagnesio, a non-cooperative respondent, 
based on BIA we determine that critical circumstances exist. In the 
case of Italmagnesio, the margin in excess of 25 percent is high enough 
to impute knowledge of dumping and, as BIA, we concluded that imports 
have been massive over a relatively short period of time.
    Because we found that critical circumstances do not exist with 
respect to all cooperative respondents, we also find that critical 
circumstances do not exist with respect to all other exporters and 
producers of the subject merchandise from Brazil, except for 
Italmagnesio.

Verification

    As provided in section 776(b) of the Act, we conducted verification 
of the information provided by CBCC and Minasligas by using standard 
verification procedures, including the examination of relevant sales 
and financial records, and selection of original source documentation 
containing relevant information.

Currency Conversion

    No certified rates of exchange, as furnished by the Federal Reserve 
Bank of New York, were available for the POI. In place of the official 
certified rates, we used the daily official exchange rates for the 
Brazilian currency published by the Central Bank of Brazil. In the 
instances when a post-POI exchange rate was required, we used a monthly 
average exchange rate from International Monetary Fund's International 
Financial Statistics.
    In hyperinflationary economies, the Department normally converts 
movement charges for the U.S. sales on the date these charges become 
payable. Where we did not have the exact payment date for a charge, we 
converted charges for U.S. sales on the date of shipment, the closest 
approximation to the date the charges became payable. For two of CBCC's 
U.S. sales, it was necessary to convert the bulk packing charges on the 
date of sale as we did not have a bulk packing rate in the month of 
shipment for those U.S. sales. Thus, for these two sales we converted 
the packing charges in the same month in which the U.S. sales occurred.

Interested Party Comments

    Comment 1: Petitioners argue that, based on the facts now available 
to the Department, the dumping margins established in the preliminary 
determination are inadequate to offset the actual dumping margin of 
Brazilian FeSi producers. In addition, petitioners believe that at 
verification the Department confirmed the existence of major, 
continuing deficiencies in respondents' information. Accordingly, 
petitioners contend that the Department should assign the highest, most 
adverse margin based on noncooperative BIA to both CBCC and Minasligas.
    DOC Position: We disagree with petitioners. CBCC and Minasligas' 
mistakes, found during the course of this investigation, when taken as 
a whole, do not represent a verification failure and do not support a 
claim of respondents' noncooperation. The minor errors in calculation 
or discrepancies with regard to adoption of certain methodological 
premises do not merit the use of BIA. Therefore, we have followed our 
practice of correcting errors found at verification as long as those 
errors are minor and do not exhibit a pattern of systemic misstatement 
of fact. Thus, we are able to use the data submitted by CBCC and 
Minasligas, corrected for errors noted at verification, in our 
calculations.
    Comment 2: Petitioners argue that the Department should use the 
highest, most adverse noncooperative BIA rate for CBCC and Minasligas 
since they both repeatedly failed to provide the Department with the 
accurate sieve size and silicon content of the FeSi they sold. 
Petitioners maintain that CBCC's August 17, 1993, letter contained 
information about silicon content and sieve size known to be 
inaccurate. Petitioners contend that accurate information was clearly 
available to CBCC and the fact that it was not provided prevented the 
Department from making such or similar comparisons in the final 
determination, as required by the Act. Similarly, petitioners note that 
Minasligas, in its August 25, 1993, revised product concordance, failed 
to provide the exact silicon content and sieve size of its home market 
sales.
    CBCC believes that the Department incorrectly based its preliminary 
determination on BIA because of the alleged failure by CBCC to provide 
a proper product concordance. CBCC states that it cannot fabricate a 
product concordance to the level of sieve size, which was requested by 
the Department, because there is no difference in product between sieve 
sizes. CBCC argues that the Department verified that sieve size is 
irrelevant in terms of the cost and the price and, thus, any DIFMER 
would be zero. CBCC maintains that based on the information submitted 
and the production processes observed at verification, the Department 
should use CBCC's information as the basis for the final determination.
    Similarly, Minasligas maintains that sieve size does not impact 
cost or price of FeSi and should not be considered a factor for product 
comparison purposes. With respect to providing information on exact 
silicon content, Minasligas contends that the ASTM standard 
specifications for FeSi 75 percent under grade C provide for a product 
containing between 74 percent and 79 percent of silicon. Minasligas 
argues that since all of its FeSi sales are of FeSi 75 percent the 
exact silicon content of the product within this range is irrelevant.
    DOC Position: We agree with respondents. We determine that 
Minasligas provided a unique code for each sieve size for each sale 
during the POI, in accordance with directions in Appendix V. We used 
Minasligas' product matching method for purposes of margin calculation; 
however, we rematched in a few instances where we disagreed with their 
selection. We based matching on home market sales with sieve size 
ranges which were closest to the sieve size range of the U.S. product.
    We also determine that CBCC reported sieve sizes in accordance with 
Appendix V. The sieve size ranges reported by CBCC were broader than 
those reported by Minasligas and were broader than the ranges observed 
on CBCC's individual home market sales. Nevertheless, these ranges do 
allow us to match within the closest sieve size range, as specified in 
Appendix V. Moreover, these broad ranges are consistent with CBCC's 
selling practices. CBCC stated on the record that it fills customer 
orders with the broadest range of possible sieve sizes. Therefore, we 
accepted CBCC's revised coding system, and matched home market sales 
with all possible sieve sizes, including those that may extend beyond 
the sieve size range of the U.S. product because this corresponds to 
CBCC's selling practices. We excluded from FMV only those home market 
sales where the sieve size ranges are entirely outside the sieve size 
range of the U.S. sale in question. (See Concurrence Memorandum dated 
December 29, 1993.)
    In addition, we also agree with respondents that reported silicon 
content ranges, within acceptable ASTM specifications, are adequate.
    Comment 3: Petitioners claim that both CBCC and Minasligas failed 
to report their respective interest expenses on a consolidated basis 
for the purposes of calculating COP in accordance with Department 
practice. Petitioners argue that CBCC's refusal to provide this 
information prevented the Department from verifying these expenses. 
Accordingly, petitioners state that the Department should use adverse, 
``noncooperative BIA'' in calculating interest expense for CBCC. 
However, in the event that the Department does not use ``noncooperative 
BIA,'' petitioners suggest that the Department use Solvay do Brasil's 
audited financial statements to calculate interest expense for the 
purposes of calculating CBCC's COP and CV. Similarly, petitioners 
contend that the Department should allocate interest expense to 
Minasligas' COP based on Delp's (Minasligas' parent company) 1992 
audited financial statements as a percentage of cost of goods sold, 
without allowance for a short-term interest income offset.
    CBCC argues that the Department should use its non-consolidated 
income statement, rather than the corporate consolidated figure, to 
compute net interest expense. CBCC claims that the advances of funds 
from subsidiary to parent were the reverse of those normally seen by 
the Department and were not ``interest free''. CBCC further argues that 
without CBCC, Solvay do Brasil would have had to borrow funds in the 
commercial market. Thus, CBCC suggests that the Department should 
increase CBCC's financial receipts by an imputed interest on the 
interest free loans that CBCC made to its parent. With regard to 
petitioners' allegation that CBCC refused to provide the Department 
with Solvay do Brasil's financial statement, CBCC explains that the 
Department requested an additional copy of the translated financial 
statement, previously submitted to the Department on June 10, 1993, 
which the company was unable to provide at verification.
    Minasligas contends that its financial statements are not 
consolidated with Delp's statements. Minasligas maintains that there is 
no borrowing relationship between Delp and Minasligas, and further, 
there is no evidence of control by Delp over borrowings by Minasligas. 
Minasligas, therefore, believes it is inappropriate to substitute 
Delp's interest expenses for that of Minasligas. Minasligas asserts 
that it correctly reduced its submitted unconsolidated interest 
expenses by various forms of short-term financial income, including 
capital gains, exchange rate gains, discounts, and monetary correction.
    DOC Position: We agree with petitioners that CBCC and Minasligas 
should report interest expense on a consolidated basis. The 
Department's position is that the cost of capital is fungible, 
therefore, calculating interest expense based on consolidated 
statements is the most appropriate methodology.
    As discussed in the cost verification report of CBCC, we noted that 
CBCC and Solvay do Brasil rely on intercompany interest-free borrowing 
to meet their working capital requirements. In addition, in order to 
extinguish its outstanding debt, CBCC issued new shares of capital 
stock to its parent company. After establishing at verification that 
CBCC and Solvay do Brasil have significant financial transactions with 
each other, we requested information documenting financial expense at 
the Solvay do Brasil level. Company officials refused to provide any 
data. Therefore, we have based financial expense for CBCC using BIA. As 
BIA, we used information from Solvay do Brasil's financial statements 
(exhibit B; June 10, 1993, questionnaire response). This percentage was 
then applied to each month's COM.
    In the case of Minasligas, Delp does not consolidate its accounts 
with Minasligas. In addition, because there are no significant 
intercompany transactions between the two companies, we combined the 
financial expenses of the two companies, effectively creating 
consolidated accounts. Regarding the offset claimed by Minasligas, the 
Department only allows income generated from investments of working 
capital which the company documents as short-term in nature. Minasligas 
was able to substantiate only a portion of the investments to be short-
term; consequently, we have allowed only the documented portion of 
interest income as an offset. We did not allow an offset to Minasligas' 
parent, Delp, for interest expense because the information required to 
substantiate such an adjustment is not contained in the record of this 
investigation.
    For both companies, in order to avoid overstating financing 
charges, we applied the interest expense ratio to each month's COM 
calculated on a historical basis rather than amounts computed under the 
replacement cost basis.
    Comment 4: Petitioners maintain that CBCC and Minasligas failed to 
follow the Department's established practice for allocating G&A 
expenses. Petitioners make the same allegation with regard to CBCC's 
selling expenses. Petitioners claim that G&A expenses are period costs 
that should be allocated based on the ratio of total annual G&A 
expenses over total annual costs of goods sold. Selling expenses should 
be allocated similarly. However, petitioners state that CBCC allocated 
G&A and selling expenses to individual products, using the ratio of 
each separate product's cost of goods sold. Minasligas allocated POI 
G&A expenses on a monthly basis. For purposes of the final 
determination, petitioners believe that the Department should 
reallocate these expenses following its established practice.
    CBCC argues that the Department should not use the ratio of 
expenses to cost of goods sold as an estimate of G&A expenses. CBCC 
believes that the monthly expenses accurately reflect, on a replacement 
cost basis, the expenses for the company in that month and are the most 
appropriate figures to use. CBCC claims that the petitioners are urging 
the Department to use a methodology that the Court of International 
Trade specifically invalidated as susceptible to overstating the 
effects of inflation.
    Minasligas agrees that G&A expenses are period costs, but maintains 
that an annual calculation based on cost of sales is problematic 
because the annual G&A expense and the annual cost of sales are 
conglomerations of monthly expenses which have not been adjusted for 
inflation. Minasligas believes the Department should calculate G&A 
rates based on monthly averages or a simple average G&A rate.
    DOC Position: We agree with petitioners in part. G&A expenses are 
period expenses which are normally measured over a fiscal year. As 
such, the Department calculates G&A on an annual basis. To calculate 
G&A for a lesser period may exclude certain expenses, which is 
distortive. Therefore, we recalculated G&A expenses on an annual 
historical basis for both companies and, in order to avoid overstating 
G&A expenses and neutralize hyperinflationary effects, we applied the 
G&A ratio to each month's COM calculated on a historical basis. We also 
revised CBCC's reported G&A to include a portion of Solvay do Brasil's 
G&A, which CBCC had failed to include in its reported costs. Moreover, 
we calculated CBCC's selling expense portion of SG&A based on sales of 
the same class or kind of merchandise according to our normal practice.
    Comment 5: Petitioners contend that the Department should include 
ICMS and IPI taxes in CBCC's and Minasligas' reported materials costs 
in applying the Department's sales-below-cost test. Petitioners state 
that Department practice is to perform the sales-below-cost test on a 
tax-inclusive basis, with the COP and home market prices containing the 
same absolute amount of taxes. With regard to CV, petitioners contend 
that the Department has previously determined that ICMS and other 
domestic taxes are not remitted or refunded upon exportation and 
consequently have to be included in CV.
    CBCC submits that the Department should not include the ICMS and 
IPI taxes in its COP and CV calculations. CBCC states that the 
Department reviewed CBCC's records at verification showing that CBCC's 
payments of ICMS offset any amount owed by virtue of its receipts of 
ICMS. Thus, CBCC claims that the ``cost of materials'' does not include 
any ICMS or IPI value, because CBCC always receives a tax credit for 
these payments.
    Minasligas argues that in determining whether home market sales are 
above the cost of production, the Department must either include ICMS 
and IPI in the cost of production and in the sales price to the 
domestic market or exclude them from both sides to avoid double 
counting. Minasligas further argues that these taxes should not be 
included in calculations of CV because they are offset against the 
amounts collected from the domestic market sales.
    DOC Position: We agree with petitioners in part. For our test of 
home market sales below cost we have included the same amount of 
domestic taxes in the COP and the domestic sales prices. However, when 
using CV as a surrogate for home market prices we must determine if in 
fact the entity under investigation is able to recover all of the taxes 
paid on inputs (raw materials) from its domestic sales of subject 
merchandise. If domestic sales of subject merchandise fully recover all 
of the domestic taxes paid on inputs, then these taxes would 
appropriately be excluded from the margin analysis. However, if the 
producer is not able to recover all input taxes from its sales of 
subject merchandise, then these actual costs must be reflected in the 
CV. (See Camargo Correa Metais, S.A., v. United States, Slip Op. 93-
163, p. 19 (August 13, 1993).
    We have determined that CBCC's domestic sales of subject 
merchandise fully recover all input taxes incurred to produce the 
subject merchandise sold in both the domestic and export markets. We 
have excluded the domestic tax amounts from CV because the taxes paid 
are offset against the amounts which are collected on domestic sales 
which are rebated to the government.
    Comment 6: Petitioners claim that CBCC did not accurately report 
its charcoal replacement costs. They further argue that CBCC did not 
provide the Department with the additional documentation requested 
regarding the estimated harvest of wood and other assumptions used in 
the calculation of the amortization costs for charcoal production. 
Petitioners argue that by not providing this information, CBCC 
prevented the Department from verifying the accuracy of the cost data 
and CBCC did not comply with Department practice in reporting 
replacement costs for company-produced charcoal. Therefore, petitioners 
state that the Department should assign a noncooperative BIA rate to 
CBCC. Alternatively, petitioners suggest that the Department adjust 
CBCC's reported cost for company-produced charcoal upward to the level 
of CBCC's cost for purchasing charcoal from unrelated suppliers.
    CBCC argues that since charcoal accounts for less than three 
percent of the cost of production of FeSi, use of BIA because of the 
difficulty encountered with verifying the accuracy of this factor of 
production would be totally inappropriate. CBCC maintains that should 
the Department make any adjustments to the charcoal costs it should 
only adjust the figures with the information gathered at verification 
rather than disregard the entire response.
    DOC Position: We agree with petitioners that we should adjust 
CBCC's charcoal replacement costs; however, we disagree that CBCC was 
noncooperative and should receive a margin based solely upon BIA. We 
discovered errors made by CBCC in calculating its cost of producing 
charcoal, a primary raw material, used in the production of FeSi. CBCC 
substantially understated its cost of producing charcoal by 
inaccurately recording the costs associated with their wood forests 
which provide the raw material needed to produce charcoal. Therefore, 
we have recalculated the cost of CBCC's production of charcoal. As 
suggested by petitioners, we relied upon the actual weighted-average 
monthly cost CBCC was charged by unrelated vendors.
    Comment 7: Petitioners claim that CBCC incorrectly accelerated the 
depreciation on a particular furnace by five years. The result was a 
disproportionate allocation of costs to products manufactured during 
the first five years the furnace was put into service, as opposed to 
the second five years, when no depreciation was reported. Petitioners 
contend that the accelerated depreciation for this furnace was an 
abnormal event since CBCC returned to its normal ten-year useful life 
for furnace depreciation following the period of accelerated 
depreciation. Petitioners further argue that the Department has 
explicitly rejected the accelerated depreciation of assets where such 
accelerated depreciation was not based on the useful life of the 
assets. Accordingly, petitioners believe that the depreciation charges 
for this furnace should be recalculated to reflect the company's normal 
ten-year useful life for furnace depreciation.
    DOC Position: We agree with petitioners. We have recalculated 
depreciation expense for this furnace to reflect the amounts which 
would have been recorded based upon CBCC's normal ten year amortization 
period since it is CBCC's normal practice to employ a ten year useful 
life in calculating furnace depreciation charges.
    Comment 8: Petitioners state that CBCC failed to accurately 
allocate furnace depreciation to FeSi based on the percentage of total 
furnace capacity devoted to FeSi production. Accordingly, for purposes 
of the final determination, petitioners contend that the Department 
should increase depreciation allocated to FeSi production for each 
month of the POI.
    CBCC contends that it would be improper for the Department to 
allocate all of CBCC's depreciation expenses on all furnaces to FeSi 
production. Although theoretically, any one furnace could be used to 
produce any of the products that CBCC sells, this does not make the 
furnaces fungible. The Department's determination should not be based 
on what could theoretically be produced in a furnace, but rather what 
was actually produced in each furnace. Regardless, if the Department 
considers the furnaces fungible, this would result in a lowering of 
CBCC's depreciation expense as furnaces one through six are fully 
depreciated.
    DOC Position: We agree with CBCC. Its methodology of matching 
furnace depreciation with the product actually produced in each furnace 
is an acceptable methodology. Accordingly, no adjustment has been made 
for the final determination.
    Comment 9: Petitioners claim that at verification CBCC's reported 
consumption and cost of electricity attributed to FeSi were understated 
for October 1992. Therefore, petitioners believe that the Department 
should increase these costs for each month of the POI.
    CBCC maintains that the Department verified that only the month of 
October contained an error of 5.7 percent with respect to the 
electricity consumption and cost; such error was incurred in 
transferring expenses from one cost report to another. Thus, CBCC 
concedes only that the Department should adjust its October, 1992, 
electricity consumption and cost by 5.7 percent, rather than making 
monthly adjustments.
    DOC Position: We agree with CBCC. At verification we established 
that this was an isolated error and not a methodological problem. 
Accordingly, we have corrected the reported electrical consumption and 
cost for October 1992, only.
    Comment 10: Petitioners state that CBCC failed to properly 
calculate inventory holding gains/losses. Petitioners argue that CBCC 
reported its input and finished product inventories on a first in first 
out (FIFO) basis, which is contrary to Department practice. 
Furthermore, petitioners claim that CBCC provided no inventory holding 
gain/loss calculations for iron ore. Accordingly, petitioners believe 
that the reported values cannot be relied on for purposes of the final 
determination and the Department should apply BIA.
    CBCC maintains that it provided inventory gain/loss information 
according to the Department's methodology used in the Final 
Determination Of Sales At Less Than Fair Value, Silicon Metal from 
Brazil, 56 FR 26977, June 12, 1991, where the Department rejected 
CBCC's cost accounting method used in the normal course of business, 
stating that it did not properly reflect the effects of inflation and 
used a FIFO basis to make the calculation.
    With respect to the inventory holding gain/loss calculation for 
iron ore, the Department verified that CBCC maintains no more than its 
immediate requirements in inventory. Thus, CBCC submitted no inventory 
holding gain/loss information on this raw material because there is 
none. CBCC's monthly purchase of iron ore is consumed during that 
month.
    DOC Position: We agree with respondent. In reporting on a FIFO 
basis, CBCC followed prescribed Department practice. The Department 
verified that CBCC had no gain or loss on the iron ore because it 
completely consumed its purchases in the same month as production.
    Comment 11: Petitioners argue that Minasligas' U.S. sales of slag 
during the POI are within the scope of this investigation. Petitioners 
base their argument on the petition's scope language, which they claim 
does not specifically exclude slag of the chemical composition that 
Minasligas sold to the United States during the POI. Petitioners 
further argue that even if the slag were not covered by the product 
description in the petition, it is within the scope under the criteria 
outlined in Diversified Products Corporation v. U.S., 572 F. Supp. 883 
(CIT 1983) (``Diversified Products'') criteria.
    Conversely, Minasligas states that its U.S. sales of slag are not 
covered by the scope of this investigation. Minasligas bases its 
argument on chemical analysis certificates provided at verification, 
which list chemical compositions which Minasligas claims are sufficient 
to exclude the slag sales from the scope of the investigation. 
Specifically, Minasligas argues that, according to the petition, the 
high levels of oxygen and calcium oxide present in these slag sales 
places them outside the scope of the investigation.
    DOC Position: We agree that ferrosilicon in the form of slag can be 
included within the scope of investigation if it generally meets the 
chemical content definition contained in the scope of this 
investigation and if it is capable of being used as FeSi. (See Scope of 
Investigation.)
    With regard to the two U.S. sales of FeSi slag made by Minasligas, 
we determine that these sales are within the scope of the investigation 
based on information on the record indicating that the slag in question 
can be used as FeSi. Since we do not have actual price or cost data for 
these two sales, we will assign an average of all margins calculated 
for Minasligas' sales for which we have price and cost data.
    Comment 12: Petitioners argue that Minasligas failed to provide 
complete cost information requested by the Department in conjunction 
with a previously unreported sale. Thus, petitioners argue that the 
Department should assign a ``noncooperative'' BIA margin for that U.S. 
sale.
    Minasligas maintains that it provided all necessary information 
relating to this sale.
    DOC Position: Since we used a price-to-price comparison for this 
sale, petitioners' points are moot.
    Comment 13: Minasligas contends that the sale dates for certain 
U.S. sales falls outside the POI. Thus, Minasligas claims these sales 
should be excluded from this investigation.
    DOC Position: We agree with respondent. Based on the sale dates 
reported and verified, these sales are outside the POI and are not 
included in our margin calculation.
    Comment 14: Petitioners claim that Minasligas inappropriately 
allocated its labor and overhead costs between subject and non-subject 
merchandise based on number of furnaces, rather than actual production 
during the POI. Therefore, petitioners request that the Department 
adjust Minasligas' submitted costs accordingly.
    DOC Position: We agree with petitioners that number of furnaces is 
not an adequate basis for allocating labor or other fabrication costs. 
Number of furnaces is an arbitrary measure, which does not necessarily 
reflect the actual level of labor and overhead expended in the 
production of the subject merchandise. In the instant case, output tons 
is a more accurate allocation basis. Therefore, we have revised the 
submitted costs to reflect an allocation based on actual production 
units.
    Comment 15: Petitioners argue that Italmagnesio failed to cooperate 
with the Department by withdrawing from the investigation and should 
receive the highest, most adverse BIA rate on the record. Petitioners 
further argue that BIA includes the rates alleged in the petition, as 
corrected for clerical errors, and the rates alleged in petitioners' 
amended allegation of sales below cost for Italmagnesio. Petitioners 
disagree with the Department's decision in the preliminary 
determination which rejected the revised margin calculations in 
petitioners' amended sales-below-cost allegation as a source of BIA; 
the Department rejected the revisions on the grounds that petitioners 
based the revisions on information submitted by Italmagnesio. 
Petitioners state that their amended allegation relied not on financial 
statements submitted by Italmagnesio but on identical financial 
statements that petitioners had obtained independently prior to the 
date of Italmagnesio's submission of the information. In addition, 
petitioners assert that Italmagnesio withdrew from the investigation 
after the Department indicated in the preliminary determination that it 
would not use the higher rates in petitioners' amended allegation as 
BIA. Therefore, petitioners maintain that not using the amended 
allegation as BIA would allow Italmagnesio to control the outcome of 
the investigation.
    DOC Position: For this final determination, we assigned 
Italmagnesio a margin in accordance with the two-tiered BIA methodology 
under which the Department imposes the most adverse rate upon those 
respondents who refuse to cooperate or otherwise significantly impede 
the proceeding. In our BIA margin analysis, we utilized information 
contained in petitioners' amended COP allegation for Italmagnesio. 
Although Department policy does not allow petitioners to use 
questionnaire responses in a piece-meal manner in order to increase 
margins in the petition that may later be used as BIA, our analysis 
revealed that petitioners had access to Italmagnesio's financial 
statements prior to the submission of this information on the record by 
Italmagnesio.

Continuation of Suspension of Liquidation

    In accordance with section 735(c)(4)(A) of the Act, we are 
directing the U.S. Customs Service to continue to retroactively suspend 
liquidation of all entries of FeSi from Italmagnesio. Retroactive 
suspension applies to entries of FeSi, that are entered, or withdrawn 
from warehouse, for consumption on or after May 18, 1993, which is the 
date 90 days prior to the date of the publication of our preliminary 
determination in the Federal Register. We are also directing the 
Customs Service to terminate the retroactive suspension of liquidation 
with regard to CBCC, and ``All Other Exporters'' entered, or withdrawn 
from warehouse, for consumption between May 18, 1993, and August 16, 
1993, which is the date of our preliminary determination, and to 
release any bond or other security, and refund any cash deposit with 
respect to these entries during that period in accordance with section 
735(c)(3). For CBCC and ``All Other Exporters'', we are directing the 
Customs Service to suspend liquidation of all entries of FeSi from 
Brazil, that are entered, or withdrawn from warehouse, for consumption 
on or after August 16, 1993. Finally, since the Department finds that 
no final dumping margin exists with respect to Minasligas, we are 
directing the Customs Service to terminate the suspension of 
liquidation for entries of FeSi from Minasligas, and to release any 
bond or other security, and refund any cash deposit with respect to 
these entries from Minasligas in accordance with section 735(c)(2) of 
the statute. However, if the Department has reasonable cause to believe 
or suspect at any time during the existence of the antidumping duty 
order that Minasligas has sold or is likely to sell the subject 
merchandise to the United States at less than its foreign market value, 
then the Department may institute an administrative review of 
Minasligas under section 751 of the Tariff Act of 1930, as amended.
    The Customs Service shall require a cash deposit or posting of a 
bond equal to the estimated margin amount by which the FMV of the 
subject merchandise exceeds the USP as shown below. 

------------------------------------------------------------------------
                                                              Critical  
        Manufacturer/producer/exporter            Margin   circumstances
                                                 percent                
------------------------------------------------------------------------
Italmagnesio S.A. Industria e Comercio........      88.86  Yes.         
Companhia Brasileira Carbureto de Calcio......       2.23  No.          
Companhia Ferroligas Minas Gerais.............       0.00  No.          
All others....................................      45.55  No.          
------------------------------------------------------------------------

ITC Notification

    In accordance with section 735(d) of the Act, we have notified the 
ITC of our determination.

Notification to Interested Parties

    This notice also serves as the only reminder to parties subject to 
administrative protective order (APO) in this investigation of their 
responsibility covering the return or destruction of proprietary 
information disclosed under APO in accordance with 19 CFR 353.34(d). 
Failure to comply is a violation of the APO.
    This determination is published pursuant to section 735(d) of the 
Act (19 U.S.C. 1673d(d)) and 19 CFR 353.20(b)(2).

    Dated: December 29, 1993.
Barbara R. Stafford,
Acting Assistant Secretary for Import Administration.
[FR Doc. 94-281 Filed 1-5-94; 8:45 am]
BILLING CODE 3510-DS-P