[Federal Register Volume 60, Number 61 (Thursday, March 30, 1995)]
[Notices]
[Pages 16440-16450]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-7777]



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DEPARTMENT OF COMMERCE
(A-821-805, A-821-806)


Notice of Final Determinations of Sales at Less Than Fair Value: 
Pure Magnesium and Alloy Magnesium From the Russian Federation

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

EFFECTIVE DATE: March 30, 1995.

FOR FURTHER INFORMATION CONTACT: Ellen Grebasch, Dorothy Tomaszewski or 
Erik Warga, Office of Antidumping Investigations, Import 
Administration, International Trade Administration, U.S. Department of 
Commerce, 14th Street and Constitution Avenue, N.W., Washington, D.C. 
20230; telephone: (202) 482-3773, (202) 482-0631 or (202) 482-0922, 
respectively.

Final Determination

    We determine that imports of pure magnesium and alloy magnesium 
from the Russian Federation are being, or are likely to be, sold in the 
United States at less than fair value (``LTFV''), as provided in 
section 733 of the Tariff Act of 1930, as amended (``the Act''). The 
estimated margins are shown in the ``Continuation of Suspension of 
Liquidation'' section of this notice.

Case History

    Since the preliminary determination on October 27, 1994 (59 FR 
55420, November 7, 1994), the following events have occurred:
    In December 1994, we issued sections A and C of our antidumping 
questionnaire1 to respondent exporters Amalgamet Canada, Greenwich 
Metals, and Hochschild Partners. These companies provided responses to 
these questionnaires in December 1994 and January 1995.

    \1\Section A requested general information on each company; and 
section C requested information on, and a listing of, U.S. sales 
made during the period of investigation (``POI'').
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    All participating respondents' (in each proceeding) supplemental 
questionnaire responses were received and verifications were conducted 
as detailed in Appendix I.
    On January 31, 1995, we amended our preliminary determinations to 
correct for certain ministerial errors (60 FR 7519, February 8, 1995).
    Certain respondents (Amalgamet Canada, AVISMA, SMW, Gerald Metals, 
Greenwich Metals and Hochschild Partners) and petitioners filed case 
briefs. Rebuttal briefs were submitted by petitioners and the following 
respondents: Amalgamet Canada, AVISMA, SMW, Razno, Interlink, & AIOC, 
Gerald Metals, Greenwich Metals, and Hochschild Partners. A public 
hearing was held on February 28, 1995.

Scopes of Investigations

    The scopes of these investigations have been modified since the 
preliminary determination in order to clarify the distinctions between 
pure magnesium and alloy magnesium. See Comment 9 in the ``Interested 
Party Comments'' section of this notice, below.
A. Pure Magnesium
    The product covered by this investigation is pure primary magnesium 
regardless of chemistry, form or size, unless expressly excluded from 
the scope of this investigation. Primary magnesium is a metal or alloy 
containing by weight primarily the element magnesium and produced by 
decomposing raw materials into magnesium metal. Pure primary magnesium 
is used primarily as a chemical in the aluminum alloying, 
desulfurization, and chemical reduction industries. In addition, pure 
primary magnesium is used as an input in producing magnesium alloy.

    Pure primary magnesium encompasses:
    (1) products that contain at least 99.95% primary magnesium, by 
weight (generally referred to as ``ultra-pure'' magnesium);
    (2) products containing less than 99.95% but not less than 99.8% 
primary magnesium, by weight (generally referred to as ``pure'' 
magnesium); and
    (3) products (generally referred to as ``off-specification 
pure'' magnesium) that contain 50% or greater, but less than 99.8% 
primary magnesium, by weight, and that do not conform to ASTM 
specifications for alloy magnesium.

    ``Off-specification pure'' magnesium is pure primary magnesium 
containing magnesium scrap, secondary magnesium, oxidized magnesium or 
impurities (whether or not intentionally added) that cause the primary 
magnesium content to fall below 99.8% by weight. It generally does not 
contain, individually or in combination, 1.5% or more, by weight, of 
the following alloying elements: aluminum, manganese, zinc, silicon, 
thorium, zirconium and rare earths.
    Excluded from the scope of this investigation are alloy primary 
magnesium, primary magnesium anodes, granular primary magnesium 
(including turnings and powder), and secondary magnesium.
    Granular magnesium, turnings, and powder are classifiable under 
Harmonized Tariff Schedule of the United States (HTSUS) subheading 
8104.30.00. Magnesium granules and turnings (also referred to as chips) 
are produced by grinding and/or crushing primary magnesium and thus 
have the same chemistry as primary magnesium. Although not susceptible 
to precise measurement because of their irregular shapes, turnings or 
chips are typically produced in coarse shapes and have a maximum length 
of less than 1 inch. Although sometimes produced in larger sizes, 
granules are more regularly shaped than turnings or chips, and have a 
typical size of 2mm in diameter or smaller.
    Powders are also produced from grinding and/or crushing primary 
magnesium and have the same chemistry as primary magnesium, but are 
even smaller than granules or turnings. Powders are defined by the 
Section Notes to Section XV, the section of the HTSUS in which 
subheading 8104.30.00 appears, as products of which 90 percent or more 
by weight will pass through a sieve having a mesh aperture of 1mm. (See 
HTSUS, Section XV, Base Metals and Articles of Base Metals, Note 6(b).) 
Accordingly, the exclusion of magnesium turnings, granules and powder 
from the scope includes products having a maximum physical dimension 
(i.e., length or diameter) of 1 inch or less.
    The products subject to this investigation are classifiable under 
subheadings 8104.11.00, 8104.19.00 and 8104.20.00 of the HTSUS. 
Although the HTSUS subheadings are provided for convenience and customs 
purposes, our written description of the scope is dispositive.
B. Alloy Magnesium
    The product covered by this investigation is alloy primary 
magnesium regardless of chemistry, form or size, unless expressly 
excluded [[Page 16441]] from the scope of this investigation. Primary 
magnesium is a metal or alloy containing by weight primarily the 
element magnesium and produced by decomposing raw materials into 
magnesium metal.
    Alloy magnesium products are produced by adding alloying elements 
to pure magnesium in order to alter the mechanical and physical 
properties of the magnesium to make it suitable for use as a structural 
material. Alloy magnesium is used primarily for casting or in wrought 
form. It is harder and stronger than pure magnesium and may possess a 
higher corrosion resistance.
    This investigation covers alloy primary magnesium which contains 
50% or greater, but less than 99.8%, primary magnesium, by weight, and 
one or more of the following: Aluminum, manganese, zinc, silicon, 
thorium, zirconium and rare earths in amounts which, individually or in 
combination, constitute not less than 1.5% of the material, by weight. 
Products that meet the aforementioned description but do not conform to 
ASTM specifications for alloy magnesium are not included in the scope 
of this investigation. In addition to primary magnesium, alloy 
magnesium may contain magnesium scrap, secondary magnesium, or oxidized 
magnesium in amounts less than the primary magnesium itself.
    Alloy primary magnesium is cast and sold in various physical forms 
and sizes, including ingots, slabs, rounds, billets and other shapes.
    Excluded from the scope of this investigation are pure primary 
magnesium, primary magnesium anodes, granular primary magnesium 
(including turnings and powder), and secondary magnesium.
    Granular magnesium, turnings, and powder are classifiable under 
Harmonized Tariff Schedule of the United States (HTSUS) subheading 
8104.30.00. Magnesium granules and turnings (also referred to as chips) 
are produced by grinding and/or crushing primary magnesium and thus 
have the same chemistry as primary magnesium. Although not susceptible 
to precise measurement because of their irregular shapes, turnings or 
chips are typically produced in coarse shapes and have maximum length 
of less than 1 inch. Although sometimes produced in larger sizes, 
granules are more regularly shaped than turnings or chips, and have a 
typical size of 2mm in diameter or smaller.
    Powders are also produced from grinding and/or crushing primary 
magnesium and have the same chemistry as primary magnesium, but are 
even smaller than granules or turnings. Powders are defined by the 
Section Notes to Section XV, the section of the HTSUS in which 
subheading 8104.30.00 appears, as products of which 90 percent or more 
by weight will pass through a sieve having a mesh aperture of 1mm. (See 
HTSUS, Section XV, Base Metals and Articles of Base Metals, Note 6(b).) 
Accordingly, the exclusion of magnesium turnings, granules and powder 
from the scope include products having a maximum physical dimension 
(i.e., length or diameter) of 1 inch or less.
    The products subject to this investigation are classifiable under 
subheadings 8104.19.00 and 8104.20.00 of the HTSUS. Although the HTSUS 
subheadings are provided for convenience and customs purposes, our 
written description of the scope is dispositive.

Periods of Investigation

    The POI in both proceedings is October 1, 1993, through March 31, 
1994.

Fair Value Comparisons

A. Participating Respondents
    To determine whether sales of pure magnesium to the United States 
by AIOC, Gerald Metals, Greenwich Metals, Hochschild Partners, HDM, 
Interlink, MG Metals, and Razno, and sales to the United States of 
alloy magnesium by Amalgamet, Gerald Metals, and SMW, were made at less 
than fair value, we compared the United States price (``USP'') to the 
foreign market value (``FMV''), as specified in the ``United States 
Price'' and ``Foreign Market Value'' sections of this notice.
    Verification revealed that, for its POI sales to U.S. companies, 
there were no instances where Greenwich Metals' role in the sales 
process was that of being the first company to sell Russia-produced 
alloy magnesium to a U.S. customer. That is, all subject merchandise 
purchased by Greenwich was done so on terms that made Greenwich the 
U.S. customer of its supplier. Accordingly, Greenwich will be subject 
to the ``Russia-wide'' deposit rate for alloy magnesium.
    Amalgamet Canada is closely related to W&O Bergmann in that a large 
percentage of each company's shares are owned by a common owner 
(Preussag). Bergmann was sent an antidumping questionnaire in August, 
but, despite its close relationship to Amalgamet, never apprised us of 
Amalgamet's POI U.S. sales of subject merchandise.2

    \2\Until just prior to our preliminary determinations, the 
record showed that Bergmann by itself was a mandatory respondent; 
this changed (albeit temporarily given Amalgamet's post-preliminary-
determination revelation that it had made U.S. sales) when Bergmann 
stated in an October 1994 fax that earlier-disclosed sales of 
subject merchandise, although to a U.S. company, were sold ``fob 
Rotterdam, Antwerp or Zeebrugge'' without knowledge of destination 
on Bergmann's part.
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    The questionnaire sent to Bergmann clearly instructed Bergmann to 
report ``the names and addresses of all related companies in all 
countries dealing'' with the subject merchandise. Had Bergmann properly 
participated in these investigations, Amalgamet would have been 
identified in a timely fashion, and would have been instructed to 
respond to the questionnaire. Amalgamet and Bergmann should have known 
that Amalgamet's participation in these proceedings was mandatory based 
on Bergmann's receipt of the questionnaire. Accordingly, Amalgamet and 
Bergmann will be assigned a deposit rate based on the best information 
available (``BIA'') based on their failure to participate despite early 
notice of the investigations.
B. All Other Companies
    In both proceedings, there is nothing on the record to indicate 
that any exporters within Russia failed to report U.S. sales of subject 
merchandise during the POI. The only Russian exporter to have sold 
either product to the United States during the POI is SMW. Because 
SMW's calculated margin in both proceedings is zero, we have based the 
``Russia-wide'' deposit rate on a simple average of the rates 
applicable to all companies considered mandatory respondents, excluding 
calculated rates that are zero or de minimis. In these proceedings, 
because all such companies' margins are based on BIA, the ``Russia-
wide'' rate is also based entirely on BIA.
    In determining what to use as BIA, the Department follows a two-
tiered methodology, whereby the Department normally assigns lower 
margins to respondents that cooperated in an investigation and margins 
based on more adverse assumptions for those respondents, like the non-
participating respondents in this investigation, which did not 
cooperate in an investigation. As outlined in Coumarin,3 where, as 
here, a company refuses to provide the information requested in the 
form required, or otherwise significantly impedes the Department's 
investigation, it is appropriate for the Department to assign to that 
company the higher of (1) the highest calculated rate of any respondent 
in the investigation, (2) the [[Page 16442]] highest margin alleged in 
the petition, or (3) the margin from the preliminary determination for 
that firm. Accordingly, we have set the Russia-wide deposit rate at 
100.25 percent and 153.65 percent, ad valorem, in the pure magnesium 
and alloy magnesium, respectively. These margins represent the highest 
margin in the petition, as recalculated by the Department for purposes 
of initiating this proceeding and as further adjusted to account for 
factors of production listed in the petition that were not valued at 
the time of initiation, but for which information is on the record upon 
which to base a surrogate value.

    \3\Final Determination of Sales at Less Than Fair Value: 
Coumarin from the People's Republic of China (59 FR 66895, December 
28, 1994).
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United States Price

    As detailed below, we based USP on purchase price, in accordance 
with section 772(b) of the Act, when the subject merchandise was sold 
directly by the exporters to unrelated parties in the United States 
prior to importation into the United States and because exporter's 
sales price (``ESP'') methodology was not indicated by other 
circumstances.
    We based USP on ESP, in accordance with section 772(c) of the Act, 
when the subject merchandise was sold to the first unrelated purchaser 
after importation into the United States.
    Both purchase price and ESP were based on packed prices to 
unrelated purchasers in the United States, according to the applicable 
delivery terms, with appropriate price adjustments. The following is a 
summary of U.S. price calculations for each exporter, with an asterisk 
(``*'') designating price adjustments applicable to some but not all 
sales (see Final Calculation Memorandum, on file in room B-099 of the 
Main Commerce Department Building, for details of these adjustments).

----------------------------------------------------------------------------------------------------------------
             Exporter                        Terms of sale                         Price adjustments            
----------------------------------------------------------------------------------------------------------------
          Pure Magnesium                                                                                        
                                                                                                                
AIOC (PP, ESP)...................  CIF, FOB, Delivered..............  Foreign inland freight, storage charges,  
                                                                       inspection charges*, sample costs        
                                                                       charges*, document charges*, other       
                                                                       foreign inland freight, dunnage, ocean   
                                                                       freight, seaway tolls, U.S. duty,        
                                                                       stevedoring, wharfage*, unloading        
                                                                       charges*, warehousing*, U.S. inland      
                                                                       freight.                                 
Interlink (PP)...................  Delivered, In-Warehouse..........  Foreign insurance, ocean freight, marine  
                                                                       insurance, procedure fees, harbor        
                                                                       maintenance fees, U.S. inland freight,   
                                                                       U.S. inland insurance*, U.S. brokerage.  
Gerald (PP)......................  In-Warehouse, Delivered, FOT       Foreign brokerage, foreign inland         
                                    Warehouse.                         freight*, ocean freight, U.S. inland     
                                                                       freight*, U.S. brokerage, oxidation      
                                                                       credits.*                                
Greenwich (PP, ESP)..............  Delivered, FOT, In-warehouse.....  Discounts*, foreign brokerage, ocean      
                                                                       freight, marine insurance, U.S. duty,    
                                                                       U.S. inland freight*, U.S. inland        
                                                                       insurance, U.S. brokerage, third party   
                                                                       payments.*                               
Hochschild (PP)..................  Delivered........................  Foreign brokerage, ocean freight, marine  
                                                                       insurance, U.S. duty*, U.S. inland       
                                                                       freight*, U.S. brokerage*, third party   
                                                                       payments.*                               
HDM (ESP)........................  Delivered........................  Ocean freight, U.S. duty*, U.S. inland    
                                                                       freight, U.S. brokerage*, repacking*,    
                                                                       U.S. containerization*, other            
                                                                       containerization.                        
MG (PP, ESP).....................  Delivered........................  Foreign brokerage*, foreign inland        
                                                                       freight, ocean freight, marine insurance,
                                                                       U.S. duty, U.S. inland freight, U.S.     
                                                                       inland insurance, U.S. brokerage,        
                                                                       repacking.*                              
Razno (PP).......................  CIF, FOB.........................  Foreign brokerage, foreign inland freight,
                                                                       oxidation credits.*                      
SMW (PP).........................  FOB..............................  Foreign brokerage, foreign inland freight.
                                                                                                                
         Alloy Magnesium                                                                                        
                                                                                                                
SMW (PP).........................  FOB..............................  Foreign brokerage, foreign inland freight.
Gerald (PP)......................  In-Warehouse, Delivered FOT        Foreign brokerage*, foreign inland        
                                    Warehouse.                         freight*, ocean freight, U.S. duty*, U.S.
                                                                       inland freight, U.S. brokerage, third    
                                                                       party payments.                          
----------------------------------------------------------------------------------------------------------------

    From each exporter's U.S. price, we also deducted foreign inland 
freight between the factory and the reported intermediate destination 
(e.g., Rotterdam) as follows: For SMW and Razno, we used reported 
distances and transport modes to calculate an appropriate surrogate 
factory-to-border freight amount on the basis of surrogate freight 
rates in Brazil; for all other exporters, we deducted the per-ton 
foreign inland freight amount reported in the petition as best 
information available because those exporters did not in their 
questionnaire responses information with respect to such charges. We 
made no deduction from USP to account for exporter-incurred selling 
expenses, nor did we deduct export taxes paid by Russian companies to 
the Russian government because the actual amounts paid are an internal 
expense within an NME country. We adjusted reported marine insurance 
and ocean freight charges for Razno as follows: a reported figure that 
was an extended value (i.e., an amount applicable to the entire 
transaction) was adjusted to reflect a per-unit amount.
    The following adjustments were made to the reported U.S. sales of 
these exporters pursuant to our findings at verification (see Final 
Calculation Memorandum, for details of these adjustments):
    AIOC (Pure Magnesium): AIOC's final U.S. sales listing was adjusted 
to exclude certain sales that verification revealed had been improperly 
included. Based on verification findings, minor corrections to reported 
figures for inspection fees, sample costs, dunnage, ocean freight, 
seaway tolls, U.S. duties, unloading. Additionally, we deducted an 
amount for marine insurance based on verification.
    Gerald Metals (Pure Magnesium and Alloy Magnesium): Minor 
corrections to reported figures for foreign brokerage, foreign inland 
freight, ocean freight, U.S. brokerage, third party payments, and 
oxidation credits were made based on verification findings.
    Hochschild Partners (Pure Magnesium): Hochschild's final U.S. sales 
listing was adjusted to exclude certain sales that verification 
revealed had been improperly included. An additional unreported U.S. 
sale was discovered at verification and included in its final sales 
listing. For purposes of calculating a unit margin for this sale, we 
applied the highest reported charges for ocean freight, foreign 
brokerage and marine insurance, as well as the highest reported U.S. 
movement charges applicable to the delivery terms of this sale. Minor 
adjustments to reported figures for foreign brokerage, ocean freight, 
and marine insurance were also made based on verification findings. 
Finally, third party payment figures relating to certain sales were 
disclosed at verification. [[Page 16443]] 
    Hunter Douglas (Pure Magnesium): Minor corrections to reported 
figures for ocean freight, U.S. duty, U.S. brokerage, and U.S. 
containerization charges were made based on verification findings.
    Interlink (Pure Magnesium): Interlink's final U.S. sales listing 
was adjusted (a) to exclude certain sales that had been improperly 
included and (b) to include certain sales that had been improperly 
excluded. Additionally, minor corrections to reported figures for ocean 
freight and U.S. brokerage were made based on verification findings.
    Razno Alloys (Pure Magnesium): Razno's final U.S. sales listing was 
adjusted (a) to exclude certain sales that had been improperly included 
and (b) to include certain sales that verification revealed had been 
improperly excluded. Additionally, although we considered Razno a 
Russian company for our preliminary determination because its sales 
office is in Moscow, we have determined that Razno would more properly 
be characterized as a Swiss company. It is registered in Switzerland, 
its accounts are kept in Switzerland, and its ownership is majority 
non-Russian. Finally, minor corrections were made to reported figures 
for foreign brokerage based on verification.

Foreign Market Value

    For sales of magnesium produced by Avisma and SMW, we calculated 
FMV based on factors of production cited in the preliminary 
determination, making adjustments based on verification findings (see 
Final Calculation Memorandum). To calculate FMV, the verified factor 
amounts were multiplied by the appropriate surrogate values for the 
different inputs. We have used the same surrogate values used in the 
preliminary determination with the exception of certain corrections 
made based on verification or interested party comments.
    Based on verification, we adjusted certain factors' value to 
reflect the actual purity used in the production of subject 
merchandise.
    We recalculated certain inland freight distances between factory 
and input supplier based on verified distances.
    We calculated FMV based on factors of production reported by the 
factories which produced the subject merchandise for the above-
mentioned exporters. The factors used to produce pure and alloy 
magnesium include materials, labor, and energy. To calculate FMV, the 
reported quantities were multiplied by the appropriate surrogate values 
for the different inputs. (For a complete analysis of surrogate values, 
see our Final Calculation Memorandum.) A factory overhead figure was 
also included in the FMV calculation based on a percentage of 
materials, labor and energy. We also granted certain by-product offsets 
against the cost of manufacturing (i.e., the sum of materials, labor, 
energy and factory overhead). We then added the statutory minimum 
amounts for general expenses and profit, the cost of containers and 
coverings, and other expenses incident to placing the merchandise in 
condition packed and ready for shipment to the United States.
    We used the same methodology as in the preliminary determination to 
value factors of production, with the following exceptions: (1) We used 
a publicly available, published Brazilian rate for unskilled labor; (2) 
we used a publicly available, published Brazilian unit price for 
natural gas; and (3) we applied a publicly available, published 
Brazilian industrial rate for electricity used by electricity-intensive 
industries with comparable levels of electricity consumption and 
capacity as magnesium producers.
A. Market Reforms in the Russian Federation
    In accordance with section 773(c) of the Act, the Department 
normally uses a factor valuation methodology to calculate foreign 
market value when the country involved is an NME country and the 
Department determines that it cannot determine foreign market value 
based on the respondent's prices or costs. Alternatively, an NME-
country respondent may argue that market-driven prices characterize its 
particular industry and, therefore, despite NME status, that foreign 
market value should be calculated by using actual home market prices or 
costs (a market-oriented industry or ``MOI'' claim).
    In these investigations, the Russian manufacturers, Avisma and SMW, 
claim that economic conditions now prevalent throughout Russia warrant 
revocation of Russia's NME-country status, effective January 1, 1994. 
Alternatively, the two companies claim MOI for the magnesium industry 
in Russia.
    Regarding the revocation of NME status, the Department's analysis 
centers around a government's role in economic activity. See Final 
Determination of Sales at Less Than Fair Value: Certain Cut-to-Length 
Carbon Steel Plate from Poland (58 FR 37205, July 9, 1993). Consistent 
with the factors described in section 771(18), the Department considers 
the extent to which resources are allocated by the market or 
government, taking into account government involvement in currency and 
labor markets, pricing, and production and investment decisions. Where 
resources are not allocated by the market, it would be difficult to 
conclude that home market prices or costs should be used to calculate 
fair value.
    Evidence provided in these proceedings indicates that Russia is in 
the process of implementing extensive reforms to achieve its goal of 
becoming a market economy. The freeing of most prices in December 1991 
and the privatization of most enterprises formerly within the state-
planning system are important steps in moving Russia towards a market 
economy.
    We cannot conclude, however, based on the information in this 
record that Russia should be treated as a market economy for purposes 
of the antidumping duty law. The Russian economy, having emerged from a 
centrally-planned system, is in a state of transition. Many of the 
state controls have been abandoned, but that does not mean that 
functioning markets have replaced controls. Because the evidence does 
not demonstrate that prices and costs in Russia adequately reflect 
market considerations, we cannot at this time alter Russia's 
designation as a nonmarket economy.
    Regarding the MOI claim, information on the record suggests that 
the government continues to be involved in the Russian magnesium 
sector. For example, the Russian Federal Committee on Metallurgy, a 
successor to the Ministry of Industry (Metallurgy Department), 
indicated in an official statement that it controls activity in the 
magnesium industry in Russia, noting particularly that it coordinates 
production, exports, and prices. Also, although the two producers under 
investigation have been privatized, this same statement indicates that 
the Committee may be using the remaining government interest in these 
companies to carry out its intentions with respect to pricing and 
production. For these reasons, as stated in the preliminary 
determination, we determine that the prices or costs of producing 
magnesium in Russia should not be used to calculate fair value. No new 
information has been presented since then to alter this conclusion.
B. Separate Rates
    In each of these proceedings, SMW requested that the Department 
calculate a dumping margin and assign a deposit rate separate from 
other potential Russian exporters. For our preliminary determination, 
we decided that we did not need to address the issue because (1) SMW 
was the only Russian exporter of alloy magnesium; and (2) we decided 
that SMW's pure magnesium exports were too small to consider in margin 
[[Page 16444]] calculations. However, we have now reconsidered our 
position that SMW's status as the only Russian company to sell to the 
United States obviates the need for a separate rates analysis when a 
separate rates claim has been put forward. SMW has claimed that 
government ownership and control are absent and, therefore, as a POI 
exporter, it is entitled to consideration of its claim.4

    \4\Although Avisma also made a separate rates claim, it did not 
make any POI direct U.S. sales. It is, for good reason, 
unprecedented for the Department to entertain separate rates claims 
from companies that have not made direct sales to the United States: 
Analyzing and verifying separate rates claims from such companies 
would be a great burden, and government involvement in export sales 
operations could be hard to fully evaluate absent sales to the 
United States.
---------------------------------------------------------------------------

    Further, we no longer consider SMW's pure magnesium sales 
insignificant because we have determined, as discussed above, that 
Razno Alloys, preliminarily found to be a Russian company, is actually 
a Swiss company. Razno's redefined status as a Swiss company renders 
SMW's pure magnesium exports significant in that SMW was the only 
company in Russia to have exported any pure magnesium directly to the 
United States. Thus, SMW is the only Russian company that exported 
either pure or alloy magnesium to the United States.
    To establish whether a firm is sufficiently independent to be 
entitled to a separate rate, the Department employs the criteria 
developed in the Final Determination of Sales at Less Than Fair Value: 
Sparklers from the People's Republic of China (56 FR 20588, May 6, 
1991) (Sparklers) and amplified in Silicon Carbide. Under this 
analysis, the Department assigns a separate rate only when an exporter 
can demonstrate the absence of both de jure5 and de facto6 
governmental control over export activities.

    \5\Evidence supporting, though not requiring, a finding of de 
jure absence of central control includes: (1) An absence of 
restrictive stipulations associated with an individual exporter's 
business and export licenses; (2) any legislative enactments 
decentralizing control of companies; or (3) any other formal 
measures by the government decentralizing control of companies.
    \6\The factors considered include: (1) whether the export prices 
are set by or subject to the approval of a governmental authority; 
(2) whether the respondent has authority to negotiate and sign 
contracts and other agreements; (3) whether the respondent has 
autonomy from the government in making decisions regarding the 
selection of management; and (4) whether the respondent retains the 
proceeds of its export sales and makes independent decisions 
regarding disposition of profits or financing of losses (see Silicon 
Carbide).
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Ownership

    SMW is a joint-stock company (``JSC'') that was state-owned until 
1992, when a transition to private and employee ownership was begun. At 
the end of the POI, the Perm Regional Fund of State Property (``Perm 
Fund'') owned 20 percent of SMW's shares, with the rest of shares owned 
by a workers collective--51 percent--or private companies (e.g., 
investment funds). Verification supported SMW's account of its 
ownership status.

Control

    Government control over SMW's export operations (both de jure and 
de facto) is absent. Specifically:
    The July 1, 1992, Decree of the President of the Russian 
Federation: Measures for the Organization and Reconstruction of State 
Enterprises, and the Transferring of State Enterprises into Joint Stock 
Companies (``Decree 721''), establishes that JSCs are ``out of the 
control of Ministries, State and Local administrative organs and 
authorities.''
    The July 3, 1991, law, ``On Privatization of State-Owned and 
Municipal Enterprises,'' is divided into three sections dealing with 
general principles, procedures and means, and concluding principles. It 
is also divided into 31 articles. Significant articles include:

    Article 6, which establishes Russian Federal Property Fund to 
act as temporary ``possessor of RSFSR [Russian Federation] deeds to 
enterprises'' and to sell shares and deeds to enterprises. Limits 
Fund's voting rights to a maximum of 20 percent of shares. States 
that Fund may not ``interfere in the operations of enterprises 
except in cases stipulated by enterprises' founding documents and 
the legislation of the RSFSR * * *''; and
    Article 9, which forbids buying of enterprises undergoing 
privatization by state entities or certain state-held companies/
funds.

    With respect to de facto aspects of government control over export 
activities, SMW sets its own prices7 and ``has free access to'' 
the proceeds and profits of its export sales, would finance its own 
losses if they occurred, and could purchase foreign currency with 
rubles or otherwise dispose of assets (but has never actually had done 
so). Verification of sales transactions revealed no evidence of 
government involvement in the disposition of SMW's proceeds from export 
sales aside from the already-reported requirement that SMW convert half 
of foreign exchange earnings to rubles.

    \7\Although an export license was required in order to make 
export sales, and the nominal purpose was to allow the licensing 
authority to approve the export price, SMW characterized this 
procedure as pro forma. Verification revealed no indication that 
such control had ever been exercised: export licenses that had been 
issued, examined in the context of reviewing SMW's sales, appeared 
to reflect without exception prices negotiated between SMW and its 
customers. The price negotiation process did not appear to involve 
any government authorities.
---------------------------------------------------------------------------

    As a shareholder, the Perm Fund was able to appoint one of SMW's 15 
Board members and votes in the appointment of the general director. The 
other 14 Board members are employees. In fact, minutes of SMW's 1993 
Board meeting, examined at verification, did not appear to indicate 
participation by a representative associated with the Perm Fund or with 
any other government entity.
    Although the Board of shareholders did not appoint SMW's general 
director, it did, based on the minutes of its 1993 meeting, reaffirm 
the basic terms of SMW's contract with the general director, who had 
been appointed before SMW became a JSC. This reaffirmation indicates 
that the Board controlled decisions regarding the appointment of 
management even though it did not choose to make a management change 
upon becoming a JSC.
    In summary, the evidence favors a finding that government control 
is absent and, accordingly, we find that SMW should be considered a 
separate company for purposes of assigning a deposit rate.
C. Surrogate Country Selection
    We selected Brazil as the appropriate surrogate country for the 
reasons set forth in our preliminary determinations. Since we find no 
compelling reason to change this selection, we have continued to base 
FMV on the values of the appropriate factors of production as valued in 
Brazil.
D. Factors of Production
    For sales of magnesium produced by Avisma and SMW, we calculated 
FMV based on factors of production cited in the preliminary 
determination, making adjustments based on verification findings (see 
Final Calculation Memorandum). To calculate FMV, the verified factor 
amounts were multiplied by the appropriate surrogate values for the 
different inputs. We have used the same surrogate values used in the 
preliminary determination with the exception of certain corrections 
made based on verification or interested party comments.
    Based on verification, we adjusted certain factors' value to 
reflect the actual purity used in the production of subject 
merchandise.
    We have adjusted the surrogate inland freight charge for 
transporting factor inputs from supplier to factory to reflect the 
surrogate value for the actual quantity being transported. We 
[[Page 16445]] recalculated inland freight distances between factory 
and input supplier based on verified distances.
    We calculated FMV based on factors of production reported by the 
factories which produced the subject merchandise for the above-
mentioned exporters. The factors used to produce pure and alloy 
magnesium include materials, labor, and energy. To calculate FMV, the 
reported quantities were multiplied by the appropriate surrogate values 
for the different inputs. (For a complete analysis of surrogate values, 
see our final calculation memorandum.) We then added amounts for 
general expenses and profit, the cost of containers and coverings, and 
other expenses incident to placing the merchandise in condition packed 
and ready for shipment to the United States.
    We used the same methodology as in the preliminary determination to 
value the raw materials, except where corrections were possible or 
necessary.

Verification

    As provided in section 776(b) of the Act, we verified the 
information submitted by respondents for use in our final 
determination. We used standard verification procedures, including 
examination of relevant accounting and production records and original 
source documents provided by respondents.

Critical Circumstances

    In accordance with section 735(a)(3) of the Act, we determine that 
critical circumstances exist with respect to imports of alloy magnesium 
from the Russian Federation. No new information has been placed on the 
record since our preliminary determination. Therefore, we continue to 
find that critical circumstances exist with respect to all imports of 
alloy magnesium except those of Gerald Metals and SMW.

Interested Party Comments

Comment 1: Russian Manufacturers' Knowledge of Destination

    Petitioners contend that Avisma and SMW should be assigned BIA 
margins because they knew at the time of sale to third-country 
resellers that the merchandise was destined for the United States. 
Petitioners note that the producers completed GSP forms, sold to 
customers that had U.S. addresses, and were explicitly told by some 
customers of merchandise's destination. Because of this knowledge on 
Avisma's and SMW's part, petitioners argue, resellers claiming to be 
the first to sell to a U.S. customer in the sales process should be 
assigned the ``Russia-wide'' rate.
    Avisma and SMW argue that they did not know at the time of sale 
that merchandise was destined for the United States. The companies 
assert that the GSP forms were filled out by the producers after the 
sales were made, indicating that at the time of sale the producers did 
not know the destination. Avisma and SMW argue that the customer's 
address is irrelevant because magnesium is a commodity product that can 
be sold anywhere in the world. Finally, the companies point out that 
verification confirmed that there was no indication that either Avisma 
or SMW failed to report any U.S. sales.
DOC Position
    We agree with Avisma and SMW. Based on our examination of sales and 
export documents at verification, we found nothing to indicate any 
unreported instances of merchandise being sold with the knowledge at 
the time of sale that the ultimate destination was the United States. 
We verified that simply because a purchaser's address is in the United 
States does not mean that the merchandise is destined for the United 
States. In fact, magnesium sold to purchasers with U.S. addresses was 
frequently shipped to non-U.S. destinations. Although SMW did, as some 
exporters stated, eventually learn of some of its merchandise's sale to 
U.S. customers, this knowledge always came after SMW had sold the 
merchandise.

Comment 2: Completeness and Accuracy of Various Resellers' Reporting of 
U.S. Sales

    Petitioners contend that total or partial BIA is warranted for 
AIOC, Razno, Interlink, Hochschild and Greenwich Metals because these 
companies made various errors in reporting U.S. sales that were not 
revealed until just prior to, or during, verification. Petitioners also 
advocate total BIA for each exporter for which any verification 
revealed that the exporter failed to report sales of the subject 
merchandise, as well as for all companies that refused verification.
    The companies argue that BIA is not warranted because the errors 
made were not serious and were corrected.
DOC Position
    We agree with petitioners in part.
    We determined that the errors cited by petitioners for AIOC, Razno, 
and Interlink were inadvertent and were, in the end, verified. There is 
nothing to indicate that the omission of these sales would have had any 
impact on these companies' margins. Further, we are satisfied that the 
record is now complete and accurate as to these companies' POI sales of 
subject merchandise. Accordingly, the reported information, as 
corrected based on verification, is the appropriate basis for our 
respective LTFV determinations for AIOC, Razno, and Interlink.
    We disagree that BIA is warranted for Hochschild's failure to 
report a pre-POI contract discovered at verification; instead, we have 
included in Hochschild's sales listing information gathered at 
verification regarding this sale.
    We agree with petitioners that Hochschild and Greenwich Metals 
incorrectly reported certain sales as U.S. sales. Verification 
demonstrated that the contracts setting terms of sale by these 
companies' suppliers included an identification of the shipment 
destination. This fact outweighs the contention that the companies had 
the option of transshipping the merchandise to another country. 
Accordingly, we determine that Greenwich did not make any U.S. sales of 
alloy magnesium during the POI and we have not calculated a company-
specific alloy magnesium margin for Greenwich. Instead, Greenwich will 
be subject to the ``Russia-wide'' rate. We have also eliminated these 
improperly included sales from Hochschild's sales listing and have 
assigned the appropriate margin to Hochschild's European supplier.
    Finally, with the exception of those participating exporters that 
have remedied reporting deficiencies, any exporter that improperly did 
not report POI sales is subject to suspension of liquidation at the 
``Russia-wide'' rate (which is based entirely on BIA), as are all 
companies that reported having made no sales.

Comment 3: Scope

    Petitioners contend that the Department should clarify the scopes 
in these proceedings. Petitioners argue that ``off-specification'' pure 
magnesium (i.e., magnesium that is less than 99.8% pure magnesium but 
that otherwise can be and is considered pure magnesium by consumers) 
should be considered within the scope of the pure magnesium proceeding 
instead of within the scope of the alloy magnesium proceeding. 
Petitioners propose revised scopes to achieve this end.
    Greenwich argues that the proposed revised scopes are flawed 
because they appear to include secondary magnesium (i.e., magnesium 
that has been remelted and recast) as subject merchandise.
DOC Position
    We agree with petitioners some magnesium, despite not meeting the 
normal definition (based on magnesium content) of pure magnesium, 
nevertheless may be used in [[Page 16446]] applications that normally 
require pure magnesium. In fact, the records in the concurrent 
antidumping investigations of pure and alloy magnesium from the 
People's Republic of China show sales of such magnesium were supplied 
to fulfill orders for pure magnesium.
    We therefore have revised the scopes of these investigations to 
include this off-specification pure magnesium within the definition of 
pure magnesium, described as any product (1) that is 50 percent or more 
primary magnesium, and (2) that does not meet any ASTM definition of 
alloy magnesium (based on specific percentages of one or more alloying 
agents).
    We note that our consultations with the Bureau of Mines established 
that the industry standards for alloy magnesium are ASTM standards. 
(See Final Calculation Memorandum.) Consequently, we have not adopted 
petitioner's proposed scope language that would describe off-
specification pure magnesium as any product, inter alia, that does not 
meet ASTM standards or other industry standards.
    Although ASTM standards define pure magnesium as not less than 99.8 
percent magnesium, metal with a primary magnesium content below that 
level should be captured in the scope of the pure magnesium 
investigations if it cannot legitimately be defined as a specific ASTM 
alloy magnesium.
    The fact that both scopes capture only merchandise with primary 
magnesium content of 50 percent or greater means that merchandise 
composed of 50 percent or more secondary magnesium would not fall 
within either scope.

Comment 4: Surrogate Value for Electricity

    Avisma and SMW contend that published, public information indicates 
that large industrial users of electricity in Brazil receive a lower 
electricity rate (compared to other types of users). Respondents assert 
that information on the record indicates that Avisma and SMW are 
``large industrial users'' of electricity and, as such, would receive a 
lower electricity rate if they bought electricity in Brazil. Therefore, 
respondents argue the appropriate value for electricity is $0.0235/Kwh.
    Petitioners contend that the Department should continue to use the 
$0.055/Kwh rate for electricity value because the record does not show 
that the rate advocated by Avisma and SMW is the rate actually paid by 
the magnesium industry in Brazil. Petitioners charge that the record 
shows that the Brazil ``large industrial user'' rates are (1) below 
cost because they are subsidized, and (2) generally not applicable 
because they are established pursuant to individual negotiations. Even 
if the Department were to accept Brazil electricity rate schedules 
submitted by Avisma and SMW, petitioners contend, there would be no way 
to determine which rate would be appropriate for Avisma and SMW.
DOC Position
    We agree with Avisma and SMW that the Brazil ``large industry 
user'' rate is the rate they would have received had they been 
electricity consumers in Brazil during the POI. For each company, the 
record contains verified figures on both POI magnesium production and 
the number of kilowatt hours needed to produce one metric ton. Dividing 
the total number of kilowatt hours used in POI magnesium production by 
the number of hours in the POI clearly shows that, at least during the 
POI, the kilowatt capacity of each user was significantly higher than 
the minimum necessary to receive the ``large industrial user'' rate in 
effect in Brazil during the POI. Although subsidization would not 
necessarily render a surrogate value inappropriate, petitioners have 
not in this instance presented evidence of subsidization (providing 
only a vague reference to possible subsidies in the Amazon region).

Comment 5: By-Product Offset Methodology

    Petitioners contend that the Department's decision to permit an 
offset to material surrogate values to account for by-products of the 
magnesium production process was erroneous for the following reasons: 
(1) The producers were unable to demonstrate for the record that any 
economic benefit accrued to the firm and that the benefit was linked to 
the production of the subject merchandise; (2) the surrogate value used 
was incorrect in that it did not correspond to the actual purity level 
of the by-product produced and was not calculated net of transportation 
and processing costs; and (3) any adjustment determined to be 
appropriate should have been made to the cost of manufacture rather 
than cost of materials so as not to understate factory overhead, 
general expenses, and profit.
    Avisma and SMW argue that there is nothing on the record indicating 
that they should not qualify for by-product offsets. With respect to 
valuation, the companies do not dispute that an appropriate purity 
level adjustment should be made, but contend that there are no 
processing costs associated with the by-products which are not captured 
in costs associated with primary product production. Finally, Avisma 
and SMW argue that an adjustment to cost of materials is the 
appropriate adjustment because the Department is using the factors-of-
production methodology to calculate FMV.
DOC Position
    We agree with petitioners in part and with Avisma and SMW in part. 
First, because the by-products result from the production process and 
are either used by the magnesium producer or sold for use by some other 
company in the NME country, we agree with Avisma and SMW that they are 
a factor whose value must be taken into account in our calculation of 
the fair value against which to test U.S. prices. Second, we have 
adjusted surrogate CIF import value of the by-products to reflect 
concentration differences. However, no adjustment to value for 
transportation costs is appropriate. For by-products, as for material 
factors of production consumed in the production process, we consider 
the import values used to be surrogates for ex-factory, freight-
exclusive prices from suppliers to consumers. Third, we agree with 
petitioners that the proper adjustment is a reduction in the cost of 
manufacture. This adjustment increases the surrogate overhead amount 
commensurately with the value of the by-product, thereby eliminating 
the need for valuing any additional processing-related elements. 
Additionally, an adjustment to cost of manufacture is consistent with 
Department practice in other NME investigations (see, e.g., 
Coumarin8).

    \8\Final Determination of Sales at Less Than Fair Value: 
Coumarin from the People's Republic of China (59 FR 66895, December 
28, 1994)
---------------------------------------------------------------------------

Comment 6: Surrogate Factory Overhead

    Petitioners contend that the Department must account for costs 
associated with the rebuilding of electrolytic cells by adjusting 
upward the surrogate overhead percentage used in the preliminary 
determinations. Petitioners suggest using their own experience as to 
the cost of cell rebuilds expressed as a percentage of the sum of 
material, labor, and energy costs. Petitioners also suggest that the 
Department should, in calculating FMV, use an overhead ratio that 
includes energy in the numerator since verified energy amounts for the 
producers represent only energy directly related to production.
    Avisma, SMW, Interlink, Razno, and AIOC argue that an adjustment to 
[[Page 16447]] overhead based upon petitioners' cell rebuild experience 
would be inconsistent with both the Act and Department practice and is, 
therefore, unwarranted. With respect to energy, these respondents argue 
that (1) inclusion in the denominator of the overhead ratio should be 
limited to indirect energy costs, and (2) only direct energy should be 
included in the base to which the overhead percentage is applied in 
calculating surrogate overhead.
DOC Position
    We agree with respondents that the adjustment proposed by 
petitioners is not appropriate in this instance. Although we may take 
into account petitioners' experience in extraordinary circumstances, we 
generally do not consider petitioners' costs as an appropriate 
benchmark by which to test the accuracy of surrogate country values. 
Further, the fact that one element (i.e, cell rebuild) of factory 
overhead has significant cost associated with it does not invalidate 
the overhead percentage used. Factory overhead is a combination of 
elements, some of which may be more or less expensive depending on the 
product or even the company. The Department has rejected item-by-item 
evaluation of overhead components in the past (see the final 
determination of Tapered Roller Bearings and Parts Thereof, Finished or 
Unfinished, from the Socialist Republic of Romania, (52 FR 17433, 
17436, May 8, 1987)), and we see no reason to alter this practice in 
this case.
    Further, there is no contrary evidence which indicates that the 
overhead percentage used for the preliminary determinations is an 
inappropriate surrogate figure. In the absence of an actual overhead 
for Brazil's magnesium industry, the Department will continue to rely 
on the surrogate overhead percentage used in the preliminary 
determination.

Comment 7: Surrogate General Expenses and Profit

    Petitioners argue that the percentage used to account for 
producers' general expenses in calculating FMV should be changed from 
the statutory minimum to 26.92 percent, which is the ratio of SG&A 
expenses to cost of goods sold based on figures reported in the 1992 
financial statement of an aluminum manufacturer in Brazil. Petitioners 
also argue that an additional amount should be included in FMV 
calculations in order to reflect general expenses incurred and profit 
realized by each reseller involved in the sales process. Petitioners 
argue that, because the responding resellers failed to provide their 
selling expenses (despite a Departmental request to do so in the 
questionnaire), the Department should add an amount based on financial 
statements submitted by resellers.
    With respect to surrogate SG&A for manufacturers, Avisma, SMW, 
Interlink, Razno and AIOC argue that the figures put forward by 
petitioner are bogus because they involve application to an inflation-
adjusted base of a percentage that is based on figures that have not 
been adjusted for inflation. These respondents argue that their own 
submitted surrogate information is superior to petitioners' information 
because it is inflation-adjusted. With respect to the question of 
whether to include in FMV an amount for reseller general expenses, the 
five aforementioned respondents, along with Greenwich, Hochschild, and 
Gerald Metals, assert that petitioners have provided no convincing 
rebuttal to the Department's recent rejection of such a request in 
Coumarin.
DOC Response
    With respect to the question of the appropriate surrogate for 
manufacturer general expenses, we agree with Avisma, SMW, Interlink, 
Razno and AIOC that use of inflation-adjusted figures is the most 
appropriate basis for calculating the SG&A ratio. Accordingly, we have 
used either an appropriate figure from the record or the statutory 
minimum (10%), whichever is greater.
    We also agree with respondents that addition to FMV of actual 
reseller general expenses would be inappropriate. Given that Russia is 
an NME and the Russian magnesium industry has not been found to be 
market oriented, section 773(c) of the Act requires that the Department 
measure U.S prices against the factors of production (materials, labor, 
energy, and overhead) used in producing the merchandise, valued in an 
appropriate surrogate country, plus general expenses, profit and 
containers. The Act's only specific guidance as to the valuation of 
general expenses, profit and containers is to establish minima for the 
first two. Our regulations, meanwhile, instruct us to ``include in this 
calculation of constructed value an amount for general expenses and 
profit, as required by section 773(e)(1)(B) of the Act. (19 CFR 
353.52(c)) The Department has not interpreted the Act and the 
regulations as requiring use of actual expenses and profit for these 
FMV components when FMV is based on factors of production; the 
Department has also explicitly rejected such adjustments in prior NME 
proceedings (see, e.g., Coumarin and Sparklers9). Moreover, to do 
so simply does not make sense because it amounts to a comparison of 
apples and oranges. In NME proceedings, the FMV is normally based 
completely on factors valued in a surrogate country (without regard to, 
for example, actual selling expenses) on the premise that the actual 
experience cannot be meaningfully considered. Were the question simply 
one of ``traditional'' dumping by trading companies, the market-economy 
price-to-price or price-to-CV methodology would appropriately be 
employed; actual selling expenses would have been accounted for on both 
U.S. prices and foreign market prices (or, if appropriate, constructed 
value, in which case other general expenses and profit would also have 
been taken into account). Accordingly, we have continued to value 
general expenses and profit by simply applying to the surrogate-based 
cost of manufacture the greater of either appropriate surrogate 
percentages or the statutory minima.

    \9\ Final Determination of Sales at Less Than Fair Value: 
Sparklers from the People's Republic of China (56 FR 20588, May 6, 
1991)
---------------------------------------------------------------------------

Comment 8: Market Orientation (Russia and Magnesium Industry)

    Avisma and SMW contend that, although they ``do not expect the 
magnesium investigation[s] to result in the revocation of Russia's NME 
status,'' consideration of whether to revoke Russia's NME status should 
hinge upon whether there are concrete indicators of market-driven 
activity rather than on the degree to which the market has moved toward 
``an orderly Western-style brand of capitalism.'' The companies also 
state for the record that they demonstrated that the Russian magnesium 
industry is market oriented, but opted not to pursue this tack because 
they anticipated favorable outcomes using factors of production valued 
in a surrogate country.
    Petitioners state that the records in these investigations offer no 
basis for determining that Russia is no longer an NME for purposes of 
these investigations, nor do the records support a finding that the 
magnesium industry is market oriented.
DOC Position
    As discussed in the ``Foreign Market Value'' section, above, we 
have determined that it would be inappropriate to alter Russia's 
designation as an NME, and that the Russian magnesium sector is not a 
market-oriented industry. Should these [[Page 16448]] issues arise in 
future antidumping proceedings involving merchandise from the Russian 
Federation, the status of market reforms and market orientation of 
specific industries will be carefully evaluated if raised by parties in 
those proceedings.

Comment 9: Separate Rates

    Petitioners argue that Avisma and SMW are subject to de jure and de 
facto government control and thus do not warrant separate rates.
    SMW and Avisma counter that they are fully entitled to separate 
rates.
DOC Position
    We agree with respondents in part. As is detailed above, we find 
that SMW has demonstrated the absence of de jure and de facto 
government control and thus is entitled to a separate rate in both 
proceedings. However, because Avisma did not make any POI U.S. sales of 
subject merchandise in either proceeding, it is not necessary to 
address the question of whether Avisma should be assigned a separate 
rate since such an action would result in no difference in the deposit 
rate that would apply to any future direct U.S. sales by Avisma.

Comment 10: Export Taxes

    Petitioners argue that a tax imposed by the Russian government on 
magnesium exports must be accounted for in making LTFV comparisons 
because (1) section 772(d)(2)(B) requires deduction from U.S. price of 
export taxes, and (2) the tax imposition had the effect of reducing net 
receipts to the Russian producers selling their magnesium.
DOC Position
    We disagree, and have not accounted for the export tax in our LTFV 
calculations. With respect to the reduction of net receipts to Russian 
producers, the premise in determining values in NME proceedings is that 
pecuniary aspects of internal transactions are considered meaningless 
and thus ignored. The export tax paid to an NME government is an intra-
NME transfer of funds between a Russian producer and the Russian 
government. As such, it is inappropriate to account for such transfers 
in our LTFV analysis just as it is NME prices and costs.
    The Department has interpreted section 772(e)(2), another paragraph 
dealing with the general question of reductions to U.S. price, as not 
requiring the deduction of selling expenses from ESP when FMV is based 
on factors of production. The issue of the export tax is analogous. 
Similarly, we interpret 772(d)(2)(B) as not requiring the deduction of 
an intra-NME transfer of funds, even if it is in the form of an export 
tax. Finally, we note that, in these proceedings, even if a reduction 
to USP to account for the export tax had been deemed appropriate, it 
would not have resulted in positive margins for any company receiving a 
calculated rate.

Comment 11: Surrogate Country Selection

    Avisma and SMW contend that Poland, not Brazil, is the more 
appropriate surrogate country because Poland is the market economy 
country that most resembles the Russian Federation in economic terms 
and because Poland produces comparable merchandise. The companies 
assert that, in selecting a surrogate country, economic similarity 
should outweigh production of the investigated product.
    Petitioners argue that Brazil is the appropriate surrogate country 
citing, among other factors weighing against selection of Poland, the 
fact that Poland produces an insignificant quantity of aluminum and no 
magnesium.
DOC Response
    We agree with petitioners. Selection of a proper surrogate country 
must be made on case-by-case basis, in consideration of the 
Department's judgment of how to weigh facts on the record within the 
parameters prescribed by statute and regulations, as well as case 
precedent. Based on our experience in this case and previous 
proceedings involving magnesium, we judged electricity use to be a very 
important factor and thus gave it great weight under the rubric of 
product comparability. Given the economic comparability of Brazil to 
the Russian Federation, and since Brazil is a significant producer of 
electricity-intensive products such as magnesium and aluminum, we 
continue to find that Brazil is the most appropriate surrogate country 
in this case.

Comment 12: Quantity and Surrogate Value of Natural Gas, Liquid 
Petroleum Gas, and Heavy Oil

    Petitioners contend that the Department should correct for a 
mathematical error made in converting a surrogate value for natural gas 
from a price per cubic meter to a price per metric ton. Petitioners 
also suggest a value of $290/MT to be the appropriate surrogate value 
for liquid petroleum gas. Petitioners claim that, for both Avisma and 
SMW, reported usage of heavy oil and natural gas appears to represent 
theoretical amounts that do not account for thermal losses (which 
petitioners suggest should be at least 30 percent).
    Avisma, SMW, AIOC, Interlink and Razno argue that a value of 
$142.86/MT is correct because of an error in the source of petitioners' 
figure.
DOC Position
    We agree with Avisma et al. as to the proper conversion of natural 
gas quantities. We do not need to address the question about the 
appropriate value for LPG because we are basing the value for this 
factor on natural gas. With respect to actual use of heavy oil and 
natural gas, we did not discover the error claimed by petitioners at 
verification and thus have not changed the reported quantities.

Comment 13: Quantity and Surrogate Value for Timber

    Petitioners contend that the Department, in calculating FMV, should 
use the information on the record to value the timber used by Avisma 
and SMW and convert from cubic meters to kilograms.
    Avisma, SMW, AIOC, Interlink and Razno advocate conversion of 
reported figures to board feet rather than kilograms, and use of the 
POI value of lumber per board foot in the United States.
DOC Position
    We agree with petitioners and have valued timber based on their 
suggested methodology. With respect to the contention of Avisma et al., 
use of U.S. values for production factors is not appropriate in NME 
proceedings, particularly when surrogate-country values are available.

Comment 14: Surrogate Values of Carnallite Concentrate and Dehydrated 
Carnallite

    Petitioners argue that the price of dolomite is not an appropriate 
surrogate for carnallite concentrate and dehydrated carnallite (which, 
unlike dolomite, are processed materials). Petitioners advocate 
increasing the dolomite value used in the preliminary determinations to 
account for processing associated with the manufacture from raw 
carnallite of either concentrated carnallite or dehydrated carnallite.
    Avisma and SMW argue that the price of dolomite is a reasonable 
surrogate for the price of carnallite concentrate because the two 
materials have similar magnesium contents and the processing necessary 
to transform raw carnallite into carnallite concentrate is minimal. The 
companies contend that the value for calcinated dolomite is not a 
suitable [[Page 16449]] surrogate for carnallite concentrate because 
the two materials have completely different chemistries (chiefly, the 
absence of magnesium chloride in calcinated dolomite) and are used in 
substantially different magnesium production processes. The two 
companies advocate calculation of a value for dehydrated carnallite 
used by SMW based on Avisma's factors of production for that commodity.
DOC Position
    We agree with Avisma and SMW. We used the price of dolomite in 
Brazil, as provided in the petition, as the surrogate for carnallite 
concentrate. Dolomite, with a comparable magnesium chloride content, is 
the most appropriate substitute available in the absence of an actual 
price in Brazil for carnallite concentrate. We have also calculated a 
value for dehydrated carnallite based on Avisma's factors of 
production.

Comment 15: Quantity and Surrogate Value of Labor

    Petitioners advocate corrections to reported labor figures based on 
verification findings. Petitioners also argue that the Department 
should use as a surrogate 1993 wage rates in Brazil to value unskilled 
labor.
DOC Position
    We agree with petitioners and have both corrected the reported 
labor figures and adopted the alternative value for unskilled labor.

Comment 16: Inflation Adjustments for Brazil Values

    Petitioners contend that 1992 Brazil values used as surrogate 
values should be adjusted for inflation.
    Avisma, SMW, AIOC, Interlink and Razno argue that no adjustment is 
appropriate since dollar-denominated prices of commodity chemicals 
cannot be assumed to have risen between 1992 and the POI.
DOC Position
    We disagree with petitioners. Since we do not know the dates or 
exchange rates used to convert these values into dollars, an 
appropriate adjustment (if any) for dollar inflation cannot be 
determined. Further, the magnitude of any adjustment would likely be 
small since the data are nearly contemporaneous with the POI.

Comment 17: Concentration/Purity Levels of Material Inputs

    Petitioners contend that appropriate adjustments should be made for 
differences in concentration or purity between surrogate values on the 
one hand and materials used in production on the other hand. However, 
petitioners also argue that the Department should not assume that 
surrogate values represent 100 percent concentration and therefore 
should make no adjustment where the concentration applicable to a 
surrogate value cannot be determined.
DOC Position
    Where we have been able to determine the purity or concentration 
applicable to a surrogate value, we have adjusted for differences, if 
any, between the surrogate and the actual material. Otherwise, we have 
attempted no adjustment for purity or concentration.

Continuation of Suspension of Liquidation

    In accordance with section 735(c)(4)(A) of the Act, we are 
directing the Customs Service to continue to suspend liquidation of all 
entries of pure magnesium from the Russian Federation that are entered, 
or withdrawn from warehouse, for consumption on or after November 7, 
1994, which is the date of publication of our notice of preliminary 
determination in the Federal Register. The following companies will be 
excepted from these instructions because their sales of pure magnesium 
were found not to have been sold below fair value: AIOC, Amalgamet, 
Gerald Metals, Greenwich Metals, Hochschild Partners, Hunter Douglas, 
Interlink, MG Metals, Razno Alloys, or SMW. These companies will be 
excluded from an antidumping duty order should one be issued.
    We are also directing the Customs Service to suspend liquidation of 
all entries of alloy magnesium from the Russian Federation entered, or 
withdrawn from warehouse, for consumption on or after August 9, 1994 
(i.e., the date that is 90 days prior to the date of publication of 
this notice in the Federal Register). Gerald Metals and SMW will be 
excepted from these instructions because their sales of alloy magnesium 
were found not to have been sold below fair value. The Customs Service 
shall, in each proceeding, require a cash deposit or posting of a bond 
equal to the estimated amount by which the FMV exceeds the USP as shown 
below. These suspension of liquidation instructions will remain in 
effect until further notice.
    The weighted-average dumping margins are as follows:

                            A. Pure Magnesium                           
------------------------------------------------------------------------
                                                              Weighted- 
                                                               average  
               Exporter/manufacturer/producer                   margin  
                                                             percentages
------------------------------------------------------------------------
AIOC*......................................................         0.00
AIOC/Other.................................................       100.25
Gerald Metals*.............................................         0.00
Gerald Metals/Other........................................       100.25
Greenwich Metals*..........................................         0.00
Greenwich Metals/Other.....................................       100.25
Hochschild Partners*.......................................         0.00
Hochschild Partners/Other..................................       100.25
Hunter Douglas*............................................         0.00
Hunter Douglas/Other.......................................       100.25
Interlink*.................................................         0.00
Interlink/Other............................................       100.25
MG Metals/Avisma...........................................         0.00
MG Metals/SMW..............................................         0.00
MG Metals/Other............................................       100.25
Razno Alloys/SMW...........................................         0.00
Razno Alloys/Other.........................................       100.25
SMW/SMW....................................................         0.00
[[Page 16450]]                                                          
                                                                        
SMW/Other..................................................       100.25
Russia-wide................................................       100.25
------------------------------------------------------------------------
*This company has not disclosed for the public record the identity of   
  its supplier or suppliers in Russia. Upon public disclosure of this   
  information to the Department, we will notify the Customs Service that
  sales through certain supply channels have an LTFV margin of zero and 
  thus an exclusion from any order resulting from this investigation.   
  Until and unless such disclosure is made, all entries will be subject 
  to the ``Russia-wide'' deposit rate.                                  


                           B. Alloy Magnesium                           
------------------------------------------------------------------------
                                                Weighted                
                                                average       Critical  
       Manufacturer/producer/exporter            margin      circumst.  
                                              percentages               
------------------------------------------------------------------------
Gerald Metals*..............................         0.00  No.          
Gerald Metals/Other.........................       153.65  Yes.         
SMW/SMW.....................................         0.00  No.          
SMW/Other...................................       153.65  Yes.         
Russia-wide.................................       153.65  Yes.         
------------------------------------------------------------------------
*This company has not disclosed for the public record the identity of   
  its supplier or suppliers in Russia. Upon public disclosure of this   
  information to the Department, we will notify the Customs Service that
  sales through certain supply channels have an LTFV margin of zero and 
  thus an exclusion from any order resulting from this investigation.   
  Until and unless such disclosure is made, all entries will be subject 
  to the ``Russia-wide'' deposit rate.                                  

ITC Notification

    In accordance with section 735(d) of the Act, we have notified the 
ITC of our determinations. As our final determinations are affirmative, 
the ITC will within 45 days determine whether imports of either product 
are materially injuring, or threaten material injury to, the U.S. 
industry. In each proceeding, if the ITC determines that material 
injury, or threat of material injury does not exist, that proceeding 
will be terminated and all securities posted will be refunded or 
cancelled. If, in either proceeding, the ITC determines that such 
injury does exist, the Department will issue an antidumping duty order 
for the appropriate proceeding directing Customs officials to assess 
antidumping duties on all imports of the subject merchandise entered 
for consumption on or after the effective date of the suspension of 
liquidation.
    These determinations are published pursuant to section 735(d) of 
the Act and 19 CFR 353.20(a)(4).

Susan G. Esserman,
Assistant Secretary for Import Administration.

                                                                       Appendix I                                                                       
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               CASE rus.    Supp. QR filing     Verif.     Verif. end                                   
                   Company                       Rus. pure       alloy           date         start date      date                  Location            
--------------------------------------------------------------------------------------------------------------------------------------------------------
Hunter Douglas...............................            X   ............  ................         12/8         12/8  Chicago.                         
MG Metals....................................            X   ............  ................         12/6         12/7  Chicago.                         
Gerald Metals................................            X             X   11/1, 30........        12/13         1/25  Lausanne and Stamford CT.        
Interlink....................................            X   ............  11/8............        12/15         1/10  Fribourg and NYC.                
SMW..........................................            X             X   ................         1/18         1/19  Solikamsk, Russia.               
AVISMA.......................................            X   ............  ................         1/16         1/17  Berezniki, Russia.               
Razno........................................            X   ............  ................         1/23         1/24  Zurich.                          
Hochschild Partners..........................            X   ............  ................         1/26         1/27  NYC.                             
Greenwich Metals.............................            X             X   ................         1/30         1/31  Greenwich, CT.                   
Amalgamet....................................            X             X   1/4.............          2/1          2/2  Toronto.                         
AIOC.........................................            X   ............  11/21...........        12/15          2/9  NYC.                             
--------------------------------------------------------------------------------------------------------------------------------------------------------

[FR Doc. 95-7777 Filed 3-29-95; 8:45 am]
BILLING CODE 3510-DS-P