[Federal Register Volume 60, Number 102 (Friday, May 26, 1995)]
[Notices]
[Pages 27957-27963]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-13011]



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DEPARTMENT OF COMMERCE
International Trade Administration
[A-821-807]


Notice of Final Determination of Sales at Less Than Fair Value: 
Ferrovanadium and Nitrided Vanadium From the Russian Federation

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

EFFECTIVE DATE: May 26,1995.

FOR FURTHER INFORMATION CONTACT: David J. Goldberger or Louis Apple, 
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) 482-4136 or (202) 482-1769, respectively.

Applicable Statute and Regulations

    Unless otherwise indicated, all citations to the statute and to the 
Department of Commerce (the Department) regulations are in reference to 
the provisions as they existed on December 31, 1994.
    Final Determination: We determine that imports of ferrovanadium and 
nitrided vanadium from the Russian Federation (Russia) are being, or 
are likely to be, sold in the United States at less-than-fair-value 
(LTFV), as provided in section 735 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 Department announced its preliminary determination on 
December 27, 1994, (60 FR 438, January 4, 1995) the following events 
have occurred:
    In response to our request, on February 27, 1995, we received 
additional surrogate valuation data from Odermet Limited (Odermet), 
Galt Alloys, Inc. (Galt), SC Vanadium-Tulachermet (Tulachermet), and 
Chusavoy Metallurgical Works (Chusavoy).
    On February 17, 1995, we amended our preliminary determination to 
correct a significant ministerial error (60 FR 10563, February 27, 
1995).
    From January through March , 1995, we conducted verifications at 
Galt, Tulachermet, Chusavoy, Odermet, Shieldalloy Metallurgical 
Corporation (Shieldalloy), and Gesellschaft fur Elektrometallurgie 
m.b.H. (GfE).1 Verification reports were issued in February, 
March, and April, 1995.

    \1\ Shieldalloy is the petitioner in this investigation and is 
related to GfE as both are wholly-owned subsidiaries of Metallurg, 
Inc.
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    On April 17, 1995, the petitioner, Shieldalloy, and respondents 
Odermet, Chusavoy, Galt, and Tulachermet filed case briefs. Rebuttal 
briefs were submitted by these parties on April 24, 1995. A public 
hearing was held on April 26, 1995.

Scope of Investigation

    The products covered by this investigation are ferrovanadium and 
nitrided vanadium, regardless of grade, chemistry, form or size, unless 
expressly excluded from the scope of this investigation. Ferrovanadium 
includes alloys containing ferrovanadium as the predominant element by 
weight (i.e., more weight than any other element, except iron in some 
instances) and at least 4 percent by weight of iron. Nitrided vanadium 
includes compounds containing vanadium as the predominant element, by 
weight, and at least 5 percent, by weight, of nitrogen. Excluded from 
the scope of this investigation are the vanadium additives other than 
ferrovanadium and nitrided vanadium, such as vanadium-aluminum master 
alloys, vanadium chemicals, vanadium waste and scrap, vanadium-bearing 
raw materials, such as slag, boiler residues, fly ash, and vanadium 
oxides.
    The products subject to this investigation are currently 
classifiable under subheadings 2850.00.20, 7202.92.00, 7202.99.5040, 
8112.40.3000, and 8112.40.6000 of the Harmonized Tariff Schedule of the 
United States (HTSUS). Although the HTSUS subheadings are provided for 
convenience and customs purposes, our written description of the scope 
is dispositive.

Period of Investigation

    The period of investigation (POI) is December 1, 1993, through May 
31, 1994.

Non-Market Economy Country Status

    Russia has been treated as a non-market economy (NME) for the 
purpose of determining foreign market value (FMV) in all past 
antidumping investigations (see, e.g., Final Determinations of Sales at 
Less Than Fair Value: Pure Magnesium and Alloy Magnesium from Russia, 
60 FR 16432 (March 30, 1995)) (Magnesium from Russia). No information 
has been provided in this proceeding that would lead us to consider 
changing this designation. Therefore, in accordance with section 
771(18)(c) of the Act, we continue to treat Russia as a NME for 
purposes of this investigation.
Best Information Available (BIA)

    In this investigation, three companies failed to respond to the 
Department's questionnaire, and we were unable to verify the sales 
response of a fourth company, Tulachermet (discussed below under 
Comment 1). Consistent with the Department's two-tiered methodology for 
assigning BIA, we have based the BIA margin on the highest margin in 
the petition (see, Final Determination of Sales at Less Than Fair 
Value: Antifriction Bearings (other than Tapered Roller Bearings) and 
Parts Thereof from the Federal Republic of Germany, 54 FR 1892, 19033 
(1989)) and (Allied Signal v. United States, 996 F.2d 1185 (Fed. Cir. 
1993) (June 22, 1993)).

Fair Value Comparisons

    In cases involving imports from NMEs, we calculate a single 
antidumping duty margin for companies that do not demonstrate that they 
are entitled to separate rates. The Russia-wide margin in this case, 
which applies to all exporters other than Galt, GfE, and Odermet, is 
the BIA rate. Galt, GfE, and Odermet have received separate rates.
    To determine whether sales to the United States of ferrovanadium 
and nitrided vanadium by Galt, GfE, and Odermet, were made at less than 
fair value, we compared the United States price (USP) to FMV, as 
specified in the ``United States Price'' and ``Foreign Market Value'' 
sections of this notice.

United States Price (USP)

    Pursuant to section 772 of the Act, USP was calculated on the basis 
of purchase price for Odermet, and exporter's sales price (ESP) for 
Galt and GfE, as described in the preliminary determination notice. 
Pursuant to findings at verification, we made the following adjustments 
to our margin calculations:
     For GfE, we deducted handling and repacking expenses 
incurred in Germany on certain sales. We revised the inland freight to 
customer expense incurred on certain sales to reflect verification 
findings. Finally, we revised the general and administrative expenses 
allocated to further manufacturing expenses to include environmental 
cleanup expenses omitted by GfE's U.S. [[Page 27958]] affiliate, 
Shieldalloy, as derived from verification information.
     For Odermet, we revised ocean freight, brokerage, and 
containerization per-unit expenses on a contained vanadium weight 
basis, rather than gross weight basis (see Comment 12). We also revised 
inland insurance and marine insurance expenses, which Odermet had 
allocated on the basis of weight, to a value basis, reflecting the 
manner in which these expenses were incurred. Finally, we recalculated 
foreign inland freight using surrogate values, based on our 
verification finding that the actual freight services were provided by 
NME subcontractors (see Comment 10).

Foreign Market Value

    In accordance with section 773(c) of the Act, we based FMV for 
ferrovanadium and nitrided vanadium on the factors of production 
reported by the two factories in Russia,(i.e., Chusovoy and 
Tulachermet), which produced the subject merchandise for export to the 
United States. We calculated FMV based on factors of production as 
cited in the preliminary determination, making the following 
adjustments:
     We applied this methodology to Odermet's sales as well as 
to Galt's and GfE's sales as we have rejected Odermet's intermediate 
reseller claim (see Comment 5).
     We recalculated inland freight distances between each 
factory and various input suppliers, based on verified distances.
     We made minor revisions to many of Chusovoy's material and 
energy consumption factors, based on corrected verified data.
     We applied Chusovoy's public version reported vanadium 
pentoxide and ferrovanadium production labor factors for the 
corresponding labor inputs for Tulachermet, as discussed below in 
Comment 9. In addition, Odermet sold the subject merchandise produced 
by Tulachermet. Even though significant portions of Tulachermet's 
responses failed verification, Tulachermet's factors of production, 
with exception of labor, fully verified. Therefore, we continued to use 
Tulachermet's factors to calculate FMV for sales by Odermet.
    To calculate FMV, the verified factor amounts for each company were 
multiplied by the appropriate surrogate values for the different 
inputs. In accordance with section 773(c)(4) of the Act, the Department 
must, to the extent possible, determine FMV by valuing the factors of 
production in one or more market economy countries that: (1) Are at a 
level of economic development comparable to that of the NME economy 
country, and (2) are significant producers of comparable merchandise. 
As discussed in the preliminary determination, the Department has 
determined that South Africa is the country that best meets the 
statutory criteria for purposes of this investigation. Accordingly, we 
have based FMV on the appropriate factors of production as valued in 
South Africa, except for those factors for which we were unable to 
obtain a suitable value from South Africa. In these instances, as 
discussed below, and in our preliminary determination, we used values 
from publicly-available, published information pertaining to Poland, 
Thailand, and Turkey, or values pertaining to Brazil and Germany as 
included in the petition. The selection of surrogate countries and 
certain surrogate values is discussed further below at Comment 6. We 
have obtained and relied upon published, publicly-available 
information, wherever possible, to value the factors of production. 
Following the surrogate value selection methodology outlined in our 
preliminary determination, we have used the same surrogate values used 
in the preliminary, with the following exceptions:
     For vanadium slag, we adjusted the surrogate value to 
account for differences between the grade of the surrogate and Russian 
materials, as discussed below in Comment 7.
     For additional raw materials identified subsequent to our 
preliminary determination, we used published price quotes for the South 
African material (fluorspar), or, in the absence of any available value 
from South Africa, unit values derived from Thai import statistics (fly 
ash, aluminum alloy, and cold-rolled steel sheet) or Thai export 
statistics (paint, thinner).
     For natural gas, we used the Polish natural gas rate 
published by the International Energy Agency.
    As noted above, we relied on surrogate values from Thailand and 
Poland, countries identified as potential surrogates for Russia in the 
July 29, 1994, Memorandum from the Office of Policy to Gary Taverman, 
when no appropriate South African value was available for a particular 
factor. When no value was available from any potential surrogate 
country, we used values from Brazil and Germany, as described in our 
preliminary determination. The selection of the surrogate values for 
this determination is discussed further in the Valuation Memorandum 
dated May 19, 1995.
Currency Conversion

    We made currency conversions based on the official exchange rates 
in effect on the dates of the U.S. sales as certified by the Federal 
Reserve Bank or, when unavailable, at the rates published by the 
International Monetary Fund in International Financial Statistics.

Verification

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

Interested Party Comments

Comment 1: Rejection of Tulachermet Sales Response
    GfE and Shieldalloy argue that the Department should reject 
Tulachermet's sales response and apply BIA for the final determination 
because Tulachermet failed verification. The major reasons for the 
alleged verification failure cited by GfE and Shieldalloy are: (a) The 
Department's discovery at verification of an unreported sale accounting 
for a significant portion of the merchandise sold during the POI; (b) 
Tulachermet's refusal to allow the Department timely access to 
essential information at verification; (c) Tulachermet's inability to 
support or substantiate the questionnaire responses; and (d) inaccurate 
and omitted data. According to GfE and Shieldalloy, these verification 
failures establish the inaccuracy and unreliability of Tulachermet's 
response. Thus, BIA should be used for Tulachermet's margin.
    Tulachermet claims that the sale in question was omitted 
inadvertently from the response and was not an attempt to impede the 
investigation. On the contrary, Tulachermet claims that reporting the 
sale would have been in its interest as the selling price was 
substantially higher than the prices of the reported sales. Tulachermet 
states that the initial refusal to allow the Department to view certain 
information at verification, which was subsequently permitted, was due 
to the staff involved with verification not having been given explicit 
authorization from the chief company official. Tulachermet states that, 
until recently, all factory output information was considered a state 
secret, with severe penalties for disclosure to outsiders. 
Nevertheless, Tulachermet asserts that the Department 
[[Page 27959]] subsequently was able to review the information in 
question and confirm that there were no other discrepancies in 
Tulachermet's sales response. Accordingly, Tulachermet contends that 
BIA is unjustified under these circumstances.
    Odermet adds that there is no basis to reject Tulachermet's factors 
of production response since there were no problems with that portion 
of the response except for labor factors and distances to input 
suppliers.
DOC Position
    During verification, Tulachermet withheld access to a customer 
contract and correspondence file. Under 19 CFR 353.36(c)(1994), all 
parties are on notice that ``[a]s part of the verification, employees 
of the Department will request access to all files, records, and 
personnel of the producers, resellers, importers, or unrelated 
purchasers which the [Department] considers relevant to factual 
information submitted.'' The verification outline presented to 
Tulachermet prior to verification specifically advised Tulachermet that 
complete sales records, contracts, and customer correspondence files 
would be reviewed at verification and should be made available for 
inspection at verification. While the verifiers were eventually granted 
access to the file in question, the delay in providing access 
compromised this critical component of verification. More importantly, 
the Department had no way to determine whether the file, when finally 
seen, was complete. As a result, the Department was unable to conclude 
that no further discrepancies exist. Section 776(b) of the Act provides 
that if the Department ``is unable to verify the accuracy of the 
information submitted, it shall use the best information available to 
it as the basis for its action ***.'' Section 776(c) of the Act further 
states that the Department shall use BIA ``whenever a party or any 
other person refuses or is unable to produce information requested in a 
timely manner and in the form required, or otherwise significantly 
impedes an investigation.''
    While we recognize the attempt of Tulachermet to be responsive, the 
Department cannot consider a response to be verified when the 
respondent significantly impedes the investigation in the manner 
described above. The verifiers' discovery of a substantial quantity of 
unreported POI sales further undermined the integrity of Tulachermet's 
sales response. Under such circumstances, we were unable to verify 
Tulachermet's responses. Accordingly, we must reject its sales response 
and rely on BIA. Further, because Tulachermet's actions at verification 
significantly impeded the Department's investigation, as to 
Tulachermet, we have treated the company as an uncooperative respondent 
warranting the application of adverse BIA.
Comment 2: Sales Responses from Other Russian Companies
    GfE and Shieldalloy claim that Chusovoy and a Russian trading 
company should have submitted sales responses because, pursuant to 
information GfE provided for the record, they knew at the time of 
invoice preparation, if not at the time of sale, that the ultimate 
destination of the merchandise sold was the United States. GfE and 
Shieldalloy cite an internal GfE memorandum as evidence that, at the 
time of sale, Chusovoy knew the ultimate destination of its nitrided 
vanadium shipment. Since Chusovoy and the trading company each failed 
to provide a sales questionnaire response for these sales transactions, 
GfE and Shieldalloy argue that these entities should be assigned a 
margin based on BIA.
    Chusovoy states that knowledge of the ultimate destination at the 
time of sale is the determinant factor and that, at the time of the 
sale, Chusovoy did not know this information. Chusovoy asserts that 
none of the sales documentation between GfE and Chusovoy, including the 
nitrided vanadium agreement, give any indication as to the ultimate 
destination of the merchandise. According to Chusovoy, GfE's internal 
memorandum is a self-serving document, not signed by Chusovoy, which, 
moreover, indicates the merchandise could be sold to another market as 
well as the United States.
DOC Position
    We agree with Chusovoy. Our verification confirmed that neither 
Chusovoy nor the Russian trading company had knowledge at the time of 
sale as to the ultimate destination of its merchandise. It is knowledge 
at the time of the sale, and not the date of shipment, that is relevant 
in determining the proper respondent for such sales (see, Magnesium 
from Russia). In this situation, GfE was the first party in the 
distribution channel to know the ultimate destination of the 
merchandise and is, therefore, the proper exporter respondent for these 
sales.
Comment 3: Rejection of GfE/Shieldalloy response
    Chusovoy, Galt, and Tulachermet argue that the Department should 
reject GfE/Shieldalloy's sales response because sales reporting of 
Russian-sourced merchandise was based on quantity estimates drawn from 
inventory turnover records, rather than actual sales data. These 
respondents claim that this averaging approach methodology is counter 
to the Department's specific questionnaire instructions and creates the 
potential for minimizing margins from large quantity product sales at 
lower prices. Accordingly, these respondents contend that the 
Department should assign GfE/Shieldalloy a margin based on BIA.
    GfE and Shieldalloy contend that their reporting methodology is 
reasonable and sound, given the manner in which the sales were 
conducted. These sales were not reported using averaged prices, 
according to GfE and Shieldalloy, but rather at the per-unit price of 
each sale. GfE and Shieldalloy add that the verification showed the 
methodology was consistent with the information presented throughout 
the proceeding.
DOC Position
    We have used GfE's and Shieldalloy's questionnaire response in our 
final determination. Their methodology did not affect the prices 
reported but rather the quantity of subject merchandise reported. We 
verified that the sales reporting was complete and that the inventory 
turnover methodology provided a reasonable basis for determining the 
quantity of subject merchandise sold during the POI. Further, we found 
no indication of any sale-specific distortions deriving from the 
application of this methodology.
Comment 4: Proper Respondent for Galt Sales
    GfE and Shieldalloy claim that the exporter for Galt's sales was 
Hascor BV, or the ``Galt/Hascor'' joint venture, not Galt, since 
according to GfE and Shieldalloy, the former was the first exporter 
with knowledge that the merchandise was destined for the United States. 
Since neither entity filed a questionnaire response, GfE and 
Shieldalloy contend that a BIA rate should be assigned to these 
entities, and that Galt should receive the ``all others'' rate. 
Alternatively, GfE and Shieldalloy claim that the Galt response should 
be rejected because of the number of revisions submitted seven days 
prior to verification and response errors identified at verification.

[[Page 27960]]

    Galt responds that the record, including the verification results, 
demonstrates that Galt is the exporter in this investigation and is 
entitled to its own rate. Galt points to a variety of shipment 
documents, as examined at verification, which specifically identify it 
as the exporter of the merchandise. Further, Galt adds that, at 
verification, the Department was able to determine that Galt was the 
first party in the distribution chain to have knowledge of the 
destination of the merchandise and, in fact, was the party that 
determined that the merchandise was to be sent to the United States.
DOC Position
    We agree with Galt. Our verification confirmed that Galt is the 
proper exporter-respondent for its sales because it determines that the 
merchandise is destined for sale in the United States. The Galt/Hascor 
joint venture was responsible for garnering the merchandise from Russia 
and shipping it to a bonded warehouse in the Netherlands. At that point 
Galt obtained the merchandise, sold it and shipped it to the United 
States. Revisions to its response were timely and verification 
discrepancies were relatively minor, affecting only its movement 
expenses.
Comment 5: Odermet's Intermediate Country Reseller Claim
    Odermet claims that, in accordance with Section 773(f) of the Act, 
its U.S. sales should be compared to its sales to Germany for the 
following reasons: (1) Odermet was a reseller of the subject 
merchandise; (2) the Russian manufacturer, Tulachermet, did not know at 
the time of the sale to Odermet the country to which Odermet intended 
to export the merchandise; (3) the merchandise was exported by Odermet 
to a country other than the United States; (4) the merchandise entered 
the commerce of an intermediate country (Germany) but was not 
substantially transformed there; and (5) the merchandise was 
subsequently exported to the United States. Odermet states that 
verification corroborated its claim, demonstrating that it met all of 
the above statutory criteria to support its claim. In particular, 
Odermet states that it demonstrated that the merchandise entered the 
commerce of Germany and was not warehoused in bond, and that the 
merchandise could then be resold to customers in Germany and elsewhere, 
including the United States.
    GfE and Shieldalloy contend that Odermet's intermediate reseller 
claim should be rejected because Odermet failed to establish at 
verification that the merchandise entered the commerce of Germany. GfE 
and Shieldalloy's contention rests on its assertion that Odermet failed 
to demonstrate that the warehouses used to store the merchandise were 
non-bonded and that, in nearly every case, merchandise ultimately 
shipped to the United States was stored in one warehouse in one city, 
while merchandise ultimately sold to German customers was stored in a 
different warehouse in a different city. Even if the warehouses were 
not bonded, GfE and Shieldalloy claim that, as established in Final 
Determination of Sales At Less Than Fair Value: Sulfur Dyes, Including 
Sulfur Vat Dyes, from the People's Republic of China, (58 FR 7537, 
February 8, 1993) (Sulfur Dyes), storage in a non-bonded warehouse in a 
third country alone does not demonstrate, in and of itself, that the 
merchandise enters the commerce of that country. The channel of 
distribution in this case, they continue, does not support a finding 
that the merchandise entered the commerce of Germany.
DOC Position
    For the Department to accept Odermet's claim, Odermet must 
demonstrate that it satisfies each of the five statutory criteria under 
Section 773(f) of the Act, cited above. The Department agrees with 
Odermet that it has met four of these five criteria. However, we do not 
agree that Odermet has satisfied the criterion that the merchandise 
enter the commerce of the intermediate country. Verification revealed 
that Odermet maintains two distinct distribution channels: (a) 
Transportation of merchandise from Tulachermet to a warehouse in 
Duisburg, Germany, for prospective sale to German customers in that 
region; and (b) transportation of merchandise from Tulachermet to a 
warehouse in Bremerhaven, Germany, for prospective sale and ocean 
shipment from the port of Bremerhaven to customers in the United States 
and other countries outside of Germany. In each case, the sales 
agreement with the customer was made prior to shipment of the 
merchandise into Germany. Moreover, the shipment quantity and delivery 
dates correspond with the specifications in the sales agreements. While 
for each distribution channel we noted one exception to the pattern, in 
that one shipment to Duisburg was destined for delivery to overseas 
customers, and one shipment to Bremerhaven was destined to a German 
customer, all other shipments followed the above stated pattern. 
Furthermore, although the Bremerhaven warehouse may not have been a 
bonded warehouse (we have no evidence that it was or was not), we found 
no customs duties or German value-added taxes (VAT) were assessed on 
U.S. sales through the Bremerhaven warehouse--expenses that would 
support a finding that such merchandise entered Germany for commercial 
consumption--while duties and VAT were imposed on sales withdrawn from 
a bonded warehouse in Duisburg.
    The sum of these facts indicates two very different and distinct 
patterns of distribution, with merchandise shipped to Bremerhaven 
normally not entering the commerce of Germany, as this merchandise is 
not intended to be made available to German customers. Under similar 
circumstances in Sulfur Dyes, where sales intended for U.S. export 
followed a different sales and distribution pattern from sales intended 
for domestic consumption in Hong Kong, we found the pattern for U.S. 
sales to be ``most accurately characterized as transshipment.'' In this 
investigation, we reach the same conclusion for Odermet's sales. These 
transshipments do not enter the commerce of Germany and, accordingly, 
do not merit consideration under Section 773(f) of the Act.
Comment 6: Surrogate Country Selection
    Odermet contends that South Africa is not appropriate for use as 
the surrogate country for Russia in this investigation because current 
economic data offered by Odermet indicates that South Africa is not 
economically comparable to Russia in terms of gross domestic product 
(GDP). Odermet argues that the Department should first attempt to value 
the factors of production from the ``first tier'' of comparable 
economies identified in the Department's surrogate country selection 
memorandum dated July 29, 1994,--Algeria, Poland, Thailand, Tunisia, 
and Turkey. Specifically, Odermet proposes the use of a surrogate value 
for natural gas from Poland. For values that could not be obtained from 
the above-mentioned countries, such as vanadium slag, Odermet suggests 
that then the Department would turn to allegedly noncomparable 
economies such as South Africa, following the methodology applied in 
Final Determination of Sales at Less Than Fair Value: Cased Pencils 
from the PRC (59 FR 55625, November 8, 1994) (Pencils).
    Chusovoy, Galt, and Tulachermet agree with Odermet that South 
Africa is not economically comparable to Russia, but acknowledge that 
vanadium slag has to be valued in South Africa because of the lack of 
alternatives. However, they contend that values from the first tier 
[[Page 27961]] countries should be used for the other factors. 
Specifically, they propose the use of a Polish labor rate and an 
Algerian value for natural gas.
    GfE and Shieldalloy support the selection of South Africa as the 
appropriate surrogate country. This selection, they state, is 
consistent with the statutory requirement of Section 773(c)(4) of the 
Act that the surrogate country be economically comparable and a 
significant producer of comparable merchandise. They note that the 
Department, in its December 22, 1994, Office of Policy Memorandum, has 
recognized that South Africa is the only producer of comparable 
merchandise whose level of economic development is reasonably close to 
that of Russia. GfE and Shieldalloy further assert that none of the 
first tier countries should be considered as acceptable surrogates for 
Russia in valuing factors for this investigation because these 
countries produce neither the subject merchandise nor comparable 
merchandise. For those instances where values from these countries were 
used in the preliminary determination or may be considered for the 
final determination, GfE and Shieldalloy contend that the Brazilian 
data from the petition should be used. Brazil has been accepted as an 
appropriate surrogate country for purposes of the initiation of this 
investigation, and has also been used as the surrogate country in the 
Magnesium from Russia investigation. The methodology employed in 
Pencils, they say, is not appropriate here because in Pencils the other 
countries used as surrogates were producers of comparable merchandise, 
while in this case the other countries do not produce comparable 
merchandise.
DOC Position
    Section 773 (c)(4) of the Act requires that, to the extent 
possible, the factors be valued in one or more market economy countries 
that are: (a) At a comparable level of economic development, and (b) 
significant producers of comparable merchandise. In this investigation, 
none of the countries initially identified as potential surrogate 
countries because of comparable levels of economic development produces 
comparable merchandise. Of those countries that produce comparable 
merchandise, only South Africa, which produces the subject merchandise, 
is the most comparable in terms of economic development, as stated in 
the December 22, 1994, Memorandum. We acknowledge that economic growth 
trends in South Africa and Russia are dissimilar, but these differences 
notwithstanding, the Department's selection of South Africa satifies 
both statutory criteria set forth above.
    As for the specific factors cited by the parties, the respondents' 
claims that Russian wage levels are among the lowest in the world, are 
not relevant because information regarding specific NME prices or wage 
rates cannot be relied upon. Thus, the argument based on a comparison 
of purported Russian wage rates with South African wage rates is 
inappropriate.
    We disagree with GfE and Shieldalloy's proposal to use Brazilian 
values from the petition where there are no South African values 
available because Brazil is not a producer of comparable merchandise--
there is no information on the record that Brazil has been a 
significant producer of ferrovanadium or comparable merchandise since 
1986.
Comment 7: Valuation of Vanadium Slag
    Respondents contend that the Department should adjust the vanadium 
slag value, based on a price quote submitted in the petition for South 
African Highveld slag containing 24% vanadium pentoxide, to reflect the 
lower purity of the Russian slag in addition to the lower vanadium 
pentoxide content of 12 to 20%. Simply adjusting the value for vanadium 
pentoxide content (``straight-line proportionality'' method) is not 
sufficient, respondents claim, because the additional impurities 
contained in the Russian slag add to the cost of extracting vanadium 
pentoxide from the raw material. They argue that this renders the 
Russian slag less valuable than the prime grade South African Highveld 
slag, even after adjusting for the different concentration levels of 
vanadium pentoxide. Chusovoy, Galt, and Tulachermet propose an 
adjustment to the Highveld slag value based on the price differential 
for processed vanadium pentoxide of Highveld 98% merchandise to 90% 
merchandise, according to price information published in the Metal 
Bulletin. These respondents claim that basing the price differential on 
this data is appropriate given the strong market linkage between 
vanadium pentoxide, the intermediate product, and ferrovanadium, the 
final product. Moreover, they contend it is appropriate to base the 
adjustment on the difference between Highveld vanadium pentoxide and 
other vanadium pentoxide prices because the surrogate value for slag is 
based on the Highveld slag value.
    Odermet adds that the Metal Bulletin price-based adjustment 
methodology is the only reasonably sound basis for valuing vanadium 
slag, given that there is no source of publicly available published 
information for vanadium slag prices and that, as vanadium slag is the 
major input for processed vanadium pentoxide, the pricing of vanadium 
pentoxide is relevant to valuing vanadium slag. Finally, Odermet states 
that this case differs from the Final Determination of Sales at Less 
Than Fair Value: Refined Antimony Trioxide from the PRC (57 FR 6801, 
February 28, 1992) (Antimony) situation, where the Department used the 
straight-line proportionality method because it had no prices for 
different concentrate levels. Here, Odermet contends, the Department 
does have the information to make the appropriate adjustment.
    GfE and Shieldalloy state that the adjustments, proposed by 
respondents, are not supported economically. GfE and Shieldalloy argue 
that respondents have failed to demonstrate the relationship between 
selected European transaction prices for processed vanadium pentoxide 
and any value differential between the South African and Russian raw 
materials. They cite a similar situation in Antimony where the 
Department made no adjustment to the raw material value because, 
without actual prices, the data was inconclusive as to the adjustment 
to be made. In addition, GfE and Shieldalloy contend that the 
respondents' price adjustment methodology is flawed because it utilizes 
price comparisons between an ultra-refined product manufactured from 
Highveld slag that is not likely to be used in ferrovanadium 
production, to the lowest prices published. After discounting those 
comparisons, GfE and Shieldalloy assert that the price differentials 
between processed grades are significantly less than those claimed by 
respondents.
DOC Position
    Based on the submitted information, verification findings, and the 
Department's own research, we agree with the respondents that the South 
African vanadium slag value should be adjusted to reflect the lower 
purity of Russian vanadium slag. Our analysis and research suggest a 
strong relationship between vanadium pentoxide prices and vanadium slag 
value, particularly as vanadium slag is the principal raw material for 
vanadium pentoxide production and there are few, if any, other markets 
for vanadium slag. We have confirmed, through a South African 
publication, South Africa's Mineral Industry 1993/94, that the Highveld 
prices cited by Chusovoy, Galt, Odermet, and Tulachermet reflect 
[[Page 27962]] the typical Highveld product, while the prices for the 
other 98% products reflect Chinese origin, and the 90% products are of 
Russian slag. Based on this information, we have adjusted the vanadium 
slag surrogate value according to the Metal Bulletin vanadium pentoxide 
price differentials. Our methodology for adjusting both Tulachermet's 
and Chusovoy's slag values is detailed in the Valuation Memorandum.
Comment 8: Adjustment to Factory Overhead Percentage
    Chusovoy, Galt, and Tulachermet claim that the surrogate value for 
factory overhead, which was derived from GfE's experience at its German 
facility and submitted in the petition, should be adjusted for the 
known differences between the GfE production plant and the Russian 
plants. These respondents contend that the Department verified that the 
Russian plants are fully depreciated and lack special environmental 
equipment. The respondents claim further that depreciation, including 
depreciation for environmental control equipment, accounts for the 
majority of the GfE factory overhead percentage. Accordingly, the 
respondents argue that the Department should reduce the factory 
overhead percentages by at least half to reflect the absence of any 
depreciation element in the Russian producers' factory overhead.
    GfE and Shieldalloy state that factory overhead was properly 
calculated using the petition information derived from GfE experience, 
and this value remains the best available information. They assert that 
GfE's depreciation experience is likely to be the same as the Russian 
companies. Moreover, as there is no evidence of any known differences 
between the GfE's experience and the Russian producers', the 
respondents' claim for a factory overhead adjustment is unsubstantiated 
and the suggested adjustment methodology is arbitrary.
DOC Position
    The Department has been unable to locate other, publicly available, 
data for the factory overhead surrogate value. (The Department's 
attempts to find factory overhead data is described in the Valuation 
Memorandum.) Thus, the only available data is the percentages stated in 
the petition. The respondents' assertions provide an insufficient basis 
for us to make any adjustments to these percentages.
Comment 9: BIA Labor Factors
    GfE, Shieldalloy, and Odermet assert that the Department should use 
the labor factors reported by Chusovoy as BIA for the unreported 
Tulachermet labor factors. GfE and Shieldalloy state that Chusovoy's 
factors should be used because they are the highest available labor 
factors and, given Tulachermet's refusal to provide this information, 
the most adverse data should be applied. Odermet favors the use of 
Chusovoy labor factors because it believes these factors reflect more 
accurately the Russian approach to production of the subject 
merchandise.
DOC Position
    Tulachermet failed to submit its production labor factors. 
Accordingly, it is appropriate to make adverse assumptions about its 
labor factors in assigning BIA. Thus, consistent with Department 
practice, we have applied the data from the public version of 
Chusovoy's response, because these factors are higher than that 
reported in the petition.
Comment 10: Freight Valuation for Odermet Exports
    Odermet argues that its freight expenses from the Russian factory 
to German warehouses were paid in a market-economy currency to a 
market-economy freight forwarder and, thus, should be accepted as 
reported, even though the freight forwarder contracted with NME 
trucking companies to perform the actual service. Odermet claims that 
the subcontracting arrangement is irrelevant; all that is required for 
establishing the market price for the freight service is the 
convertible currency transaction to the market economy freight 
forwarder. To do otherwise and value the freight service using a 
surrogate value would lead, according to Odermet, to such ``absurd'' 
situations as finding surrogate values for PRC-origin inputs when 
calculating the cost of production for a Japanese producer.
DOC Position
    We disagree with Odermet. In NME proceedings, our consistent 
methodology has been to determine whether a good or service obtained 
through a market economy transaction is, in fact, sourced from a market 
economy rather than merely purchased in it. For example, in Final 
Determination of Sales at Less Than Fair Value: Coumarin from the 
People's Republic of China (59 FR 66895, December 28, 1994), we did not 
value Chinese port charges according to the U.S. dollar price quote 
obtained from a market economy freight forwarder because of our 
assumption that such services were actually provided by Chinese 
sources. Instead, we valued port charges according to the information 
obtained from the surrogate country. Since such goods and services are 
produced in a NME, we cannot rely on the market economy payment 
transaction as the basis for valuing these charges because the costs 
upon which these expenses are based are not themselves market-based. 
Although Odermet arranges the freight transportation through its market 
economy freight forwarder, the forwarder's costs for contracting to NME 
trucking companies cannot be relied on and, thus, the price charged to 
Odermet cannot be relied upon.
Comment 11: Input Freight for Tulachermet's Vanadium Slag Factor
    GfE and Shieldalloy allege that the Department erred in not 
including surrogate freight charges for the expense of transporting 
vanadium slag from the source to Tulachermet. Although the surrogate 
value is based on an FOB South African port price, which includes 
inland freight expenses, GfE and Shieldalloy claim that an additional 
amount for the freight expense should be added to Tulachermet's FMV 
calculation because the distance between Tulachermet's supplier and 
Tulachermet is four to five times greater than the distance from the 
South African supplier to the South African port.
    Odermet states there is no support for GfE and Shieldalloy's 
contention regarding the source of the raw material and distance to it 
from the port.
DOC Position
    When relying on a surrogate value that is freight-inclusive, the 
Department's consistent practice has been to accept that value as the 
surrogate value for the good as delivered to the NME consumer, without 
any attempt to adjust for alleged differences in freight costs (see, 
e.g., Final Determination of Sales at Less Than Fair Value: Saccharin 
from the People's Republic of China, 59 FR 588818 (November 15, 1994). 
In most cases, we do not have sufficient information regarding the 
freight expense included in the surrogate value in order to make the 
adjustment. Moreover, a value inclusive of freight represents the level 
of the surrogate value we intend to reflect--the surrogate price of the 
good available to the producer at its factory gate. We add an 
additional value for freight from the supplier to the producer only 
when such freight is not included in the surrogate value. Since the 
surrogate value for vanadium slag is freight-inclusive, we have made no 
[[Page 27963]] adjustment to the vanadium slag value for purported 
differences in freight expenses.
Comment 12: Odermet's Export Shipment Expenses
    Odermet claims it correctly reported its per-unit freight expenses 
based on gross weight, rather than contained vanadium weight, because 
this methodology reflects the manner in which it is billed for freight 
services.
    GfE and Shieldalloy contend that, as USP is reported in terms of 
contained vanadium weight, the freight expenses should be reported on 
the same basis and thus must be corrected.
DOC Position
    We agree with GfE and Shieldalloy and have adjusted these expenses 
accordingly. Price adjustments are always made on the same basis upon 
which price is reported. Although Odermet is correct that expenses 
should be reported on the same basis on which they are incurred, since 
Odermet reported its sales prices on a contained vanadium weight basis, 
the proper basis for allocating movement expenses on a per-unit basis 
is contained vanadium weight. To allocate these expenses on a gross 
weight basis would understate the expense to Odermet, not overstate it 
as Odermet claims.
Comment 13: Inflation Adjustments and Exchange Rate Conversions for 
Surrogate Values
    GfE and Shieldalloy contend that the Department erred by not 
properly inflating pre-POI surrogate values to the POI for raw 
materials where the value was based on 1993 data. These parties contend 
that the pre-POI surrogate values must be converted to U.S. dollar 
values using contemporaneous exchange rates in order to accurately 
reflect costs and market conditions during the time these costs were 
incurred. Thus, according to GfE and Shieldalloy, to value these 
factors properly, the Department should first convert the value to U.S. 
dollars using the average exchange rate for 1993, and then inflate the 
value to the POI using the ratio between the average price index for 
1993 and the average price index for the POI.
    Chusovoy, Galt, and Tulachermet contend that the exchange rate 
methodology used in preliminary determination was proper, and that GfE 
and Shieldalloy's methodology is internally inconsistent. If 
contemporaneous exchange rates must be used, they say, then 
contemporaneous prices must also be used. However, Chusovoy, Galt, and 
Tulachermet add that there is no reason to inflate these 1993 prices 
because the period during which the subject merchandise was produced 
includes months in 1993, and there is no basis to conclude that average 
prices for 1993 went up or down relative to average prices during the 
POI.
DOC Position
    The Department's consistent practice has been to first inflate non-
contemporaneous surrogate values to the POI, to reflect the economic 
trends in the surrogate country, and then convert the POI value to U.S. 
dollars according to the POI exchange rate (see, e.g., Pencils). 
Converting to U.S. dollars first and then inflating the U.S. dollar-
denominated prices risks pulling into the valuation equation variables 
that have no bearing on factor prices in the surrogate country. 
Moreover, our practice is not to inflate values when the time period of 
the value--in this case 1993--overlaps with any part of the POI--in 
this case December 1993. GfE and Shieldalloy offer no compelling 
arguments to change our practice; thus we have made no changes to our 
inflation rate and exchange rate adjustment methodologies.

Continuation of Suspension of Liquidation

    In accordance with section 733(d)(1) of the Act, we directed the 
Customs Service to suspend liquidation of all entries of ferrovanadium 
and nitrided vanadium from the Russian Federation entered, or withdrawn 
from warehouse, for consumption on or after January 4, 1995, which is 
the date of publication of our notice of preliminary determination in 
the Federal Register. We shall instruct the Customs Service to require 
a cash deposit or posting of a bond equal to the estimated amount by 
which the FMV exceeds the USP as shown below, as of the effective date 
of this notice. The suspension of liquidation instructions will remain 
in effect until further notice.
    The weighted-average margins are as follows:

------------------------------------------------------------------------
                                                              Weighted- 
               Manufacturer/producer/exporter                  average  
                                                                margin  
------------------------------------------------------------------------
Galt Alloys, Inc...........................................         3.75
Gesellschaft far Elektrometallurgie m.b.H. (and its related             
 companies Shieldalloy Metallurgical Corporation, and                   
 Metallurg, Inc.)..........................................        11.72
Odermet....................................................        10.10
Russia-wide Rate...........................................       108.00
------------------------------------------------------------------------

ITC Notification

    In accordance with section 735(d) of the Act, we have notified the 
ITC of our determination. As our final determination is affirmative, 
the ITC will determine whether these imports are causing material 
injury, or threat of material injury, to the industry in the United 
States, within 45 days. If the ITC determines that material injury, or 
threat of material injury, does not exist, the proceeding will be 
terminated and all securities posted will be refunded or cancelled. If 
the ITC determines that such injury does exist, the Department will 
issue an antidumping duty order directing Customs officials to assess 
antidumping duties on all imports of the subject merchandise entered, 
or withdrawn from warehouse, for consumption on or after the effective 
date of the suspension of liquidation.

    Dated: May 19, 1995.
Susan G. Esserman,
Assistant Secretary for Import Administration.
[FR Doc. 95-13011 Filed 5-25-95; 8:45 am]
BILLING CODE 3510-DP-P