[Federal Register Volume 61, Number 222 (Friday, November 15, 1996)]
[Notices]
[Pages 58525-58532]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-29365]


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DEPARTMENT OF COMMERCE
INTERNATIONAL TRADE ADMINISTRATION
[A-821-803]


Titanium Sponge From the Russian Federation; Notice of Final 
Results of Antidumping Duty Administrative Review

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

ACTION: Notice of final results of antidumping duty administrative 
review.

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SUMMARY: On July 29, 1996, the Department of Commerce (the Department) 
published the preliminary results of the administrative review of the 
antidumping finding on titanium sponge from the Russian Federation 
(Russia). This notice of final results covers the review period of 
August 1, 1994 through July 31, 1995. This review covers one 
manufacturer, Berezniki Titanium-Magnesium Works (AVISMA), and two 
trading companies, Interlink Metals & Chemicals, Inc. (Interlink) and 
Cometals, Inc. (Cometals). We gave interested parties an opportunity to 
comment on the preliminary results. We received comments from AVISMA, 
Interlink, Cometals, and Titanium Metals Corporation (TIMET), a 
petitioner. A public hearing was held on September 11, 1996. Based on 
our analysis of these comments, we have changed the final results from 
those presented in the preliminary results of review.

EFFECTIVE DATE: November 15, 1996.

FOR FURTHER INFORMATION CONTACT: Amy S. Wei or Zev Primor, Office of 
AD/CVD Enforcement, Office 4, Import Administration, International 
Trade Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue, N.W., Washington, D.C. 20230; telephone: (202) 
482-5253.

SUPPLEMENTARY INFORMATION:

Applicable Statute and Regulations

    Unless otherwise indicated, all citations to the statute are 
references to the provisions effective January 1, 1995, the effective 
date of the amendments made to the Tariff Act of 1930 (the Act) by the 
Uruguay Round Agreements Act (URAA). In addition, unless otherwise 
indicated, all citations to the Department's regulations are to the 
current regulations, as amended by the interim regulations published in 
the Federal Register on May 11, 1995 (60 FR 25130).

Background

    On July 29, 1996, the Department published in the Federal Register 
(61 FR 39437) the preliminary results of the 1994-1995 administrative 
review of the antidumping finding on titanium sponge from Russia (33 FR 
12138, August 28, 1968). This notice of final results covers the review 
period for August 1, 1994 through July 31, 1995, covering one 
manufacturer, AVISMA, and two trading companies, Interlink and 
Cometals.
    On September 12, 1996, the Department requested that AVISMA provide 
the Harmonized System (HS) classified data from the United Nations 
Trade Commodity Statistics (UN Trade Statistics) for Brazil for all 
factors of production and by-products used to calculate normal value in 
the preliminary results. AVISMA provided this data on September 19, 
1996.
    The Department has conducted this review in accordance with section 
751 of the Act.

Scope of the Review

    The product covered by this administrative review is titanium 
sponge from Russia. Titanium sponge is chiefly used for aerospace 
vehicles, specifically, in construction of compressor blades and 
wheels, stator blades, rotors, and other parts in aircraft gas turbine 
engines. Imports of titanium sponge are currently classifiable under 
the harmonized tariff schedule (HTS)

[[Page 58526]]

subheading 8108.10.50.10. The HTS item number is provided for 
convenience and Customs' purposes. The written description remains 
dispositive as to the scope of the product coverage.
    The review period (POR) is August 1, 1994 through July 31, 1995, 
covering one manufacturer, AVISMA, and two trading companies, Interlink 
and Cometals.

Analysis of Comments Received

    Comment 1: AVISMA and Interlink argue that, in order to value 
inputs and by-products for the calculation of normal value, the 
Department should use the six-digit Harmonized System (HS) 
classifications for the UN Trade Statistics instead of the Standard 
International Trade Classification (SITC) for the UN Trade Statistics, 
which was used in the preliminary results. AVISMA and Interlink claim 
that the HS-based trade data is more accurate, and the surrogate values 
would change significantly for vanadium oxychloride, copper powder, 
carbon electrodes, and chlorine. AVISMA states that it only provided 
HS-based data when it differed substantially from the SITC-based data, 
and, therefore, found no need to submit the HS-based data for the 
remaining inputs and by-products. By using the HS-based data, AVISMA 
and Interlink argue that the Department would not need to use basket 
categories for the materials in its normal value calculation.
    TIMET argues that the Department should continue to use the SITC-
classified UN data, which it used in the preliminary results. TIMET 
contends that where the SITC-based data helps the respondent, the 
respondent does not argue to change to the HS-based data, and vice 
versa. TIMET assumes that AVISMA did not argue for HS-based usage for 
all costs because it would not better its position.
    Department's position: We agree with AVISMA and Interlink that, in 
order to ensure the most accurate valuation of factors, the HS-based 
classification system should be used when available. On balance, the 
more specific HS-based data is more appropriate than the broader SITC-
classification system categories. While the Department will continue to 
select surrogate material values from one uniform database (i.e., the 
UN Trade Statistics), when the value for the product is broken out more 
specifically using the same source but a different data set, it would 
be unreasonable for the Department not to choose the more specific 
value over basket amounts.
    In order to obtain the complete listing of HS-based data for 
material inputs, on September 12, 1996, the Department requested the 
Brazilian HS-classified data from the UN Trade Statistics for all 
factors of production and by-products used to calculate normal value. 
See Department's letter to Berezniki Titanium-Magnesium Works (AVISMA), 
September 12, 1996. On September 19, 1996, AVISMA submitted to the 
Department HS-based data for all but four inputs, for which the 
appropriate HS-based classification was not apparent (i.e., titanium 
turnings and steel sheet) or the HS-based data did not exist because 
there were no imports during the period (i.e., argon and polyethylene 
bags). See Letter from Wilmer, Cutler & Pickering to the Department, 
September 19, 1996.
    In applying the HS-based data set, because copper and aluminum were 
each divided into two HS-based categories for lamenar and non-lamenar 
characteristics, AVISMA argued that the Department should use the HS-
based data for non-lamenar copper and aluminum, rather than the data 
for the lamenar categories. See Id. On October 4, 1996, we contacted 
the U.S. Geological Survey regarding the difference between lamenar and 
non-lamenar aluminum and copper. Lamenar aluminum or copper is shaped 
similar to flakes, and non-lamenar aluminum or copper is granular. See 
Memo to File Regarding Telephone Conversation with U.S. Geological 
Survey, October 4, 1996. Because the copper and aluminum used in 
producing titanium sponge are in powdered form, the copper and aluminum 
are more likely to be granular.
    Therefore, we are using the HS-based data for non-lamenar copper 
and aluminum.
    For the remaining inputs and by-products, we used the HS-based data 
when available. If the HS-based data was not clear or existent, we used 
the SITC-based data.
    Comment 2: AVISMA and Interlink argue that the Brazilian rail 
freight rate, which was obtained from the U.S. Consulate in Belo 
Horizonte and used by the Department in the preliminary results, 
applies to small cargos being transported small distances. AVISMA 
stated that it transported some materials (especially ilmenite and 
anthracite) in large quantities over long distances. AVISMA and 
Interlink stated in their brief that the Department's use of the 
Consulate rate is inconsistent with the economics of titanium sponge 
production. As a result, AVISMA and Interlink contacted Rede 
Ferroviaria S.A. (RFFSA), the Brazilian federal railroad, to obtain 
rail rates over long distances for dolomite and similar ores in Central 
East and Southeast regions of Brazil for the 1994-1995 period. AVISMA 
argues that the RFFSA rates are more realistic because they demonstrate 
a declining average rate per ton per kilometer as the transport 
distance increases. In addition, AVISMA obtained similar rail rate 
information from tariff rates of Burlington Northern Santa Fe Railroad, 
to demonstrate that the U.S. rates are consistent with the RFFSA rail 
rates.
    AVISMA argues that the RFFSA rates are more precise than the 
Consulate information and more accurate for determining what a producer 
in Brazil would pay to transport its merchandise.
    AVISMA contends that the submitted RFFSA tables are representative 
of AVISMA's inputs and do not vary greatly among the commodities for 
which it supplied data.
    TIMET argues that AVISMA provided piecemeal data for Brazilian 
freight rates similar to the piecemeal data provided for materials. 
TIMET claims that AVISMA only provided partial information which is 
favorable to it, rather than providing the entire data and allowing the 
Department to make its own decision. Therefore, TIMET argues that the 
Department must reject this data and continue to use the Brazilian 
freight rates provided by the Consulate.
    Department's position: We agree with AVISMA that the Department 
should use the most accurate rail rates available. AVISMA stated that 
the RFFSA rates supplied by AVISMA are mileage-based, apply to several 
commodities similar to ilmenite and anthracite, and cover two large 
areas where most of the country's economic activity occurs. Given the 
limitations on the availability of publicly available published 
information on Brazilian rail rates, the rates that AVISMA provided 
from RFFSA provide a more accurate estimation of the rail rates paid in 
a surrogate country.
    Because the Department is required to value the factors of 
production based on the best available information regarding values in 
a surrogate country, we have determined that the RFFSA rail rates are 
more accurate surrogates for the transportation rates for ilmenite and 
anthracite than the rates used in the preliminary results. See Section 
773(c)(1) of the Act. In addition, the Department has stated its 
preference to use publicly available published information, rather than 
information from embassies or consulates, from the surrogate country to 
value any factors for which such information is available.

[[Page 58527]]

See Final Determination of Sales at Less Than Fair Value; Certain 
Carbon Steel Butt-Weld Pipe Fittings from the People's Republic of 
China, 57 FR 21058, 21062 (1982)(Comment 4).
    Although petitioner contends that AVISMA is only providing 
piecemeal data for freight rates, the Department individually values 
each input from a surrogate country. If more accurate information 
exists on the record for a certain input, regardless of the party 
submitting the information, then it should be used in order to secure 
the most accurate value possible for that input. Therefore, we are 
using the RFFSA rail rates to compute transportation costs for ilmenite 
and anthracite.
    Because these rail rates were established in July 1994, which is 
prior to the review period, we are adjusting these rail rates to 
reflect inflation through the POR using the wholesale price indices 
(WPI) published by the International Monetary Fund (IMF).
    Comment 3: AVISMA argues that the selling, general, and 
administrative (SG&A) expense ratios used by the Department in the 
preliminary results are unadjusted for the effects of inflation. AVISMA 
argues that the Department should use the SG&A ratio provided by 
respondent (i.e., 8.75 percent) or only use the SG&A ratio for one 
Brazilian company, RIMA Industrial, because its ratio is more 
representative of the costs that AVISMA would incur if valued in a 
market economy.
    TIMET argues that the Department should continue to use the data 
submitted in the Silicon Metal from Brazil administrative reviews. 
TIMET contends that the percentages provided by AVISMA and Interlink do 
not report that they are adjusted for inflation. In addition, because 
the period for the Silicon Metal from Brazil review is almost identical 
to the review period for titanium sponge from Russia and the 1994 
Brazilian financial statements used by the Department also coincide 
with the titanium sponge review period, TIMET argues that an adjustment 
for inflation is not required. However, if the Department decides to 
adjust for inflation, TIMET argues that any inflation-adjusted ratios 
should be calculated on the basis of Electrosilex and RIMA data, two of 
the respondents in the Silicon Metal from Brazil review, because they 
are reliably adjusted for inflation.
    In addition, TIMET states that the Department should include the 
SG&A ratio from Electrosilex's financial statements, which was 
inadvertently excluded in the preliminary results, because a public 
version of its 1994 financial statements exists on the 1993-1994 
Silicon Metal from Brazil administrative review record.
    TIMET further asserts that the record does not prove that the data 
submitted by AVISMA and Interlink is more reliable than the audited and 
verified data submitted and used in the Silicon Metal from Brazil 
administrative reviews.
    Department's position: We agree with TIMET that the record does not 
demonstrate that AVISMA's and Interlink's surrogate SG&A ratio 
information is more reliable; both sets of data are adjusted for 
inflation, according to the notes in the financial statements, and the 
SG&A ratio used in the preliminary results is derived from information 
that was utilized by the Department in its preliminary results for the 
Silicon Metal from Brazil reviews. See Preliminary Results of 
Antidumping Duty Administrative Review; Silicon Metal From Brazil, 61 
FR 46779 (September 5, 1996). In addition, because we used 1994 
financial statements from the Silicon Metal from Brazil review, which 
are contemporaneous with the review period of this case, an additional 
adjustment for inflation is not necessary.
    In calculating the weighted-averaged SG&A ratio for the preliminary 
results from the companies reviewed in the Silicon Metal from Brazil 
review, Electrosilex's SG&A ratio was incorrectly omitted. Therefore, 
we are including the SG&A ratio of Electrosilex in our normal value 
calculations.
    Comment 4: Cometals argues that nothing requires the Department to 
calculate separate cash deposit rates for Cometals and Interlink. 
Cometals contends that the locations of these entities in market 
economy countries are not sufficient grounds for the Department to 
automatically assign these companies separate rates. Cometals further 
contends that the statute directs the Department to assign a single 
cash deposit rate to future imports of AVISMA merchandise. Cometals 
states that under the Department's ``knowledge test,'' if AVISMA, the 
producer, knows the U.S. destination of its merchandise at the time of 
sale, Cometals and Interlink will not be acting as exporters, and it, 
therefore, would be inappropriate to assign Cometals and Interlink 
separate cash deposit rates from AVISMA (which could apply to sales in 
future review periods).
    Cometals claims that, in the preliminary results, the Department 
did not address that AVISMA changed its marketing and distribution 
practices with its resellers at the beginning in May 1995. Because of 
these new practices, Cometals contends that AVISMA has control over 
pricing on its future sales of titanium sponge to the United States. 
Therefore, Cometals argues, all of these sales should be subject to the 
same cash deposit rate (citing Final Results of Antidumping Duty 
Administrative Review; Antifriction Bearings (Other Than Tapered Roller 
Bearings) and Parts Thereof from the Federal Republic of Germany, 56 FR 
31692, 31699 (July 11, 1991); Federal-Mogul Corp. v. United States, 813 
F.Supp. 856, 867 (CIT 1993); Torrington Co. v. United States, 44 F. 3d 
1572, 1578 (Fed.Cir. 1995)). Cometals argues that Cometals and 
Interlink offered essentially the same prices and same products to 
customers. Cometals claims that, if the deposit rates are not equalized 
between Cometals and Interlink, Cometals will be forced out of the U.S. 
titanium sponge market.
    However, in order to determine the single cash deposit rate for 
AVISMA, Cometals, and Interlink, Cometals argues that this rate should 
not be based on the ``country-wide'' rate. Cometals states that the 
``country-wide'' rate is inappropriate because: (1) The rate was 
determined more than 10 years ago in the 1982-1983 administrative 
review; (2) the rate is based on factors of production data from Japan, 
and this review is based on surrogate information from Brazil; (3) the 
rate is not a rate established for AVISMA, but for another company 
(i.e., Techsnabexport); and (4) AVISMA has demonstrated, in this 
review, de jure and de facto absence of government control over its 
operations and is entitled to a separate rate. Cometals suggests that 
the Department should calculate AVISMA's cash deposit rate based on 
either the weighted-average dumping margin on all reviewed entries by 
Cometals and Interlink during the POR or the weighted-average export 
price from AVISMA to its resellers during the review period as the 
facts available.
    TIMET agrees with Cometals that the Department must establish a 
single cash deposit rate for all future entries of titanium sponge, 
after completion of this review, sold for export to the United States 
by AVISMA, Cometals, or Interlink. TIMET argues that any merchandise 
sold after May 1995 by AVISMA, Cometals, or Interlink is, in fact, an 
export sale to the United States by AVISMA. TIMET contends that a lack 
of a single cash deposit rate would allow any foreign producer or 
exporter to change its deposit rate by simply

[[Page 58528]]

hiring a new agent. However, TIMET argues that AVISMA's cash deposit 
rate should be the rate established in the most recent administrative 
review for AVISMA, because the statute requires that the existing cash 
deposit rate remain in effect until the Department completes a review 
of sales for export to the United States by that exporter.
    AVISMA and Interlink argue that section 751(a)(2) of the Act 
requires the cash deposit for future shipments by an individual 
exporter to be set through a margin analysis of entries of that 
exporter's merchandise during the most recent administrative review. 
AVISMA and Interlink argue that once an exporter demonstrates that it 
is not dumping, the exporter is entitled to the presumption that its 
future exports will not be subject to dumping duties. AVISMA and 
Interlink argue that annual administrative reviews will determine 
whether that presumption was incorrect. In addition, AVISMA and 
Interlink argue that a cash deposit rate has never been affected by 
post-review period or end-of-the-review period developments, and the 
statement of the changed relationship between AVISMA and Interlink is 
only applicable to the 1994-1995 review period.
    Department's position: We agree with AVISMA and Interlink. In 
calculating the dumping margin, Section 751(a)(2) of the Act states 
that the Department ``shall determine the normal value and export price 
(or constructed export price) of each entry of the subject merchandise, 
and the dumping margin for each such entry.'' With regard to assessment 
and cash deposit rates, section 751(a)(2)(C) states that this 
``determination under this paragraph shall be the basis for the 
assessment of countervailing or antidumping duties on entries of 
merchandise covered by the determination and for deposits of estimated 
duties.'' For this review, we calculated margins for each exporter, on 
the basis of the calculated normal value and export price, and have 
used these margins as the basis for assessment and estimated cash 
deposit rates, in accordance with the statute, as stated above.
    While the Department is not required to use the same method of 
calculation for assessment and cash deposit rates (as confirmed in the 
court cases cited by Cometals above), Cometals and TIMET have not 
demonstrated a basis for establishing a single cash deposit rate for 
AVISMA, Cometals and Interlink in this review and disregarding the 
distinct assessment rates applied to each of these firms. Cometals and 
TIMET argue that AVISMA changed its relationship with its resellers 
during the review period and, therefore, AVISMA will have control over 
the pricing of its future sales of the merchandise under review to the 
United States. Significantly, however, there are no sales during the 
review period made under this changed sales relationship; the evidence 
of record confirms that the only reported sales were made at a time 
when AVISMA did not have such control. Interlink and Cometals thus rely 
entirely on assertions of AVISMA's intent to change its practice. In 
the absence of any sales made under this new approach, however, the 
Department has no adequate means to verify that AVISMA will, in fact, 
rely on this new distribution approach in the future; it is, at best, a 
statement of future intent that can change. It is entirely plausible 
that AVISMA and its resellers will restructure that relationship in 
other ways and that sales in the next review will be based on some 
other distribution approach. As reviews fundamentally focus on our 
evaluation of sales during the period in question, we look to evidence 
of the manner in which actual sales were made as the strongest basis 
for our determination of marketing relationships. Accordingly, based on 
the actual sales reviewed, we find no reason to establish a single cash 
deposit rate for AVISMA, Interlink, and Cometals.
    Further, in establishing AVISMA's cash deposit rate, we determined 
that, because AVISMA made no shipments to the United States during the 
review period, AVISMA's rate will remain the Russia country-wide rate. 
Although AVISMA made a separate rate claim, because there are no sales 
to the United States by AVISMA, we are not able to evaluate the 
company's separateness request.
    We disagree with Cometals' contention that the Department, in the 
absence of shipments, is obligated to corroborate the country-wide rate 
that has been based, in earlier reviews, on facts available. 
Corroboration applies in cases where the Department has determined that 
a manufacturer/exporter should be assigned a dumping margin based on 
adverse facts available, as stated in section 776(b) in the Act. In 
this review, because AVISMA had no shipments during the review period, 
we are continuing to include AVISMA in the country-wide rate of 83.96 
percent, the same rate that AVISMA has received in all prior 
administrative reviews of titanium sponge.
    Comment 5: Because the Department compared certain stockpile 
merchandise sold to the United States with a normal value based on 
AVISMA's current production, Cometals claims that the dumping margins 
were artificially increased. To account for the physical differences in 
the material due to aging and deterioration, Cometals argues that the 
Department should adjust for differences in merchandise (difmer). 
Cometals contends that this adjustment should be made because there is 
a clear price differential between fresh and stockpiled titanium 
sponge, and the presence of stockpile material in the world market is 
only a temporary situation that reflects Russia's transition to a 
market economy. Cometals suggests that the Department can determine the 
difmer adjustment by comparing the weighted-average prices of stockpile 
and fresh titanium sponge submitted by Cometals.
    TIMET argues that the Department's practice is to make allowances 
for differences in merchandise based on the cost of production (COP), 
not on differences in market value, as proposed by Cometals. However, 
TIMET argues that Cometals has not submitted any information regarding 
differences between the COP of stockpile and fresh titanium sponge nor 
any information on the physical differences between stockpile and fresh 
titanium sponge and the rate at which such deterioration is occurring. 
Also, TIMET contends that Cometals has had ample time to request a 
difmer adjustment and provide the information to the Department. For 
these reasons, TIMET argues that a difmer adjustment should not be 
granted. However, if the Department determines to make a difmer 
adjustment for stockpile material, TIMET argues that storage costs must 
be added to normal value before a difmer adjustment may be deducted.
    Department's position: We agree with TIMET that a difmer adjustment 
should not be granted based on the price differential between 
stockpiled and newly-produced merchandise. This practice is consistent 
with the treatment of stockpiled material in the final determination of 
sales at less than fair value for magnesium from Russia. See March 22, 
1996 Calculation Memorandum (Public Version) for the Final Antidumping 
Duty LTFV Determination on Pure Magnesium and Alloy Magnesium from the 
Russian Federation, A-821-805, at 6. Moreover, normal value is 
calculated based on the factors of production used to produce titanium 
sponge valued in a surrogate country. There is no information on the 
record which would indicate that the stockpiled titanium sponge is 
physically different from newly-produced titanium sponge, or that the 
stockpiled merchandise is subject to a different production process 
than that of the newly-produced titanium sponge.

[[Page 58529]]

Therefore, because the production costs for these items were the same, 
we assigned the same normal value for the stockpiled and newly-produced 
material.
    Comment 6: Cometals contends that the Department erred in deducting 
foreign inland freight to Cometals' warehouse and Russian brokerage 
expenses in the calculation of Cometals' export price, because they 
were incurred by Cometals' supplier rather than by Cometals.
    TIMET explains that the statute requires that export price be 
reduced by charges incident in bringing the merchandise from the 
``original place of shipment in the exporting country'' to the United 
States. However, TIMET argues that if the home market country is a NME, 
the Department compares the export price to normal value based on the 
factors of production. TIMET contends that certain adjustments are made 
to the export price to reach an ``ex-factory'' price to be compared to 
normal value. If the Department does not deduct the referenced movement 
expenses from export price, TIMET argues that the Department has not 
calculated an ``ex-factory'' price and has overstated the U.S. price.
    Department's position: We agree with Cometals that adjustments for 
the foreign inland freight to Cometals' warehouse and Russian brokerage 
expenses should not be deducted from the export price. Section 
772(c)(2)(A) of the Act states that export price shall be reduced by 
the expenses ``incident to bringing the subject merchandise from the 
original place of shipment in the exporting country to the place of 
delivery in the United States.'' When a reseller, not the producer, is 
considered the exporter, the ``original place of shipment'' is the 
point from which the reseller shipped the merchandise. In this review, 
we consider the ``original place of shipment'' to be the locations of 
Cometals' or Interlink's warehouses. Therefore, we are only deducting 
those movement expenses from export price which were incurred from the 
resellers' warehouses to the U.S. customer.
    However, the antidumping statute requires an ``apples-to-apples'' 
comparison. See Torrington Co. v. United States, 66 F.3d 1347, 1352 
(Fed.Cir. 1995). Therefore, in order to calculate normal value at the 
same point of shipment, we are including in normal value an amount for 
the inland freight from the producer to the resellers' warehouses and 
for Russian brokerage. This calculation is in accordance with section 
773(c)(1) of the Act, which provides that the normal value will be 
based on, among other things, the ``cost of containers, coverings, and 
other expenses'' (emphasis added). It is necessary to include these 
expenses for bringing the subject merchandise to the resellers' 
warehouses to calculate the normal value at the original places of 
shipment.
    Comment 7: TIMET argues that the Department should inquire whether 
Interlink has antidumping duty reimbursement (rebate) arrangements with 
its customers.
    Department's position: It has been our consistent policy that 
evidence of reimbursement is necessary before we can consider making an 
adjustment to U.S. price. As there is no evidence on the record that 
Interlink reimbursed customers for antidumping duties in this review, 
it is not appropriate to include this factor in our calculation. At the 
time of liquidation, the U.S. Customs Service will require the importer 
to certify that it has not entered into any agreement with the exporter 
or producer to be reimbursed for antidumping duties. If any 
reimbursement is uncovered, it will be handled as our regulations 
instruct under 19 CFR 353.26 at that time.
    Comment 8: TIMET argues that the Department must adjust U.S. price 
for export taxes, in accordance with the statute and regulations. 
According to TIMET, the calculation of U.S. price is not affected by 
the fact that these taxes are paid in an NME country. TIMET contends 
that nothing in the statute allows the Department to ignore export 
taxes, because the taxes are direct selling expenses, and the failure 
to deduct such direct selling expenses does not allow a valid 
comparison of ex-factory prices.
    AVISMA and Interlink argue that export taxes should not be deducted 
because: (1) AVISMA did not pay export taxes on exports to the United 
States during the review period; (2) Cometals and Interlink were the 
exporters and neither company paid an export tax; (3) Russian export 
taxes are not included and have no effect on the export prices; and (4) 
the export tax paid by an NME producer to its government does not 
represent a ``real cost,'' and, therefore, should not be deducted.
    Department's position: We agree with AVISMA and Interlink. Section 
772(c)(2)(B) of the Act states that the Department shall reduce export 
price by ``the amount, if included in such price, of any export tax, 
duty, or other charge imposed by the exporting country on the 
exportation of the subject merchandise to the United States.'' For 
purposes of this review, Interlink and Cometals, not AVISMA, are the 
exporters of the merchandise. In the export price transactions between 
Interlink/Cometals and its customer in the United States, neither 
Interlink nor Cometals incurred export taxes as defined by section 
772(c)(2)(B).
    Moreover, the Department has determined that it is not required to 
deduct export tax payments made between a NME producer and its NME 
government, pursuant to section 772(c)(2)(B) of Act. Section 
772(c)(2)(B) provides that export taxes are to be deducted only if they 
(1) are paid on exports to the United States and (2) included in the 
export price of the merchandise under investigation. In a NME, the 
Department has no basis for determining that a tax payment from the 
producer to the government is included in the price. The statutory 
treatment of NMEs--as seen in sections 771(18), 773(c), the legislative 
history, and applicable judicial rulings--reflects the fact that cost 
and pricing structures in a NME are inherently unreliable. Russia's 
designation as a NME obligates the Department to reject NME values, 
substituting instead the ``surrogate'' factor prices and costs 
identified in comparable market economy countries. A NME-imposed export 
tax, however, cannot be valued in this fashion, and to make a deduction 
for the export tax amounts would unreasonably isolate one part of the 
web of transactions between government and producer. See Pure and Alloy 
Magnesium from the Russian Federation, 60 FR 16,440, 16,448 
(1995)(comment 10). An export tax charged for one purpose may be offset 
by government transfers provided for another purpose. In such 
circumstances, the Department has no basis for determining whether and 
to what extent a tax might be reflected in a price. This is the very 
type of internal NME transfer that the statute directs the Department 
to reject.
    Comment 9: TIMET argues that the Department should use the average 
of electricity prices provided by the Brazilian Regional Commission for 
Electrical Integration, rather than the Brazilian prices provided by 
AVISMA, which allegedly do not include all appropriate charges and are 
not representative of the entire country. TIMET argues that electricity 
prices in Brazil should include the following four components: (1) 
Demand charges; (2) consumption charges; (3) tax; and (4) premium 
charges, if applicable. TIMET argues that it is unclear whether the 
electricity rate used by the Department includes these components. 
Moreover, TIMET contends that Electrobras, the source that the 
Department used for electricity rates, accounts for less than 50 
percent of the electricity in Brazil.

[[Page 58530]]

TIMET further contends that there is no indication that the rates used 
by the Department are average prices from Electrobras.
    If the Department decides to apply the Electrobras rate, TIMET 
argues that the Department should use the A2 Electrobras rate, which, 
TIMET claims, most industrial users in Brazil receive. TIMET points to 
the lack of evidence on the record justifying the use of the A1 rate. 
To qualify for the A1 rate, TIMET claims that a user must meet certain 
consumption standards and have a 230-kilovolt (kV) system. Whereas 
AVISMA's consumption of electricity meets the required standard, there 
is no evidence on the record that AVISMA has a 230-kV system. TIMET 
argues that the AVISMA plant was built in an economic system where 
electricity was ``free'' and AVISMA, therefore, had no incentive to 
reduce costs by locating near a 230-kV system.
    AVISMA argues that because it was found to be entitled to the A1 
rate in the magnesium investigation, AVISMA necessarily qualifies for 
the A1 rate in titanium sponge production because titanium sponge 
production is more energy-intensive than magnesium production. In fact, 
AVISMA contends, Brazil was selected as a surrogate in the magnesium 
investigation because it has a large energy-intensive aluminum 
producing sector. According to AVISMA, TIMET's argument ``contradicts 
the economics of titanium sponge production.'' Although TIMET argues 
that only a small number of users receive the A1 rate in Brazil, AVISMA 
contends that it would take advantage of the 230 kV lines if it were 
located in Brazil given the economics of production. Therefore, AVISMA 
asserts that it would therefore qualify for the A1, rather than the A2, 
electricity rate.
    AVISMA also argues that the Electrobras prices for the review 
period are actual average prices, taken from actual monthly bills 
incurred by each class of users supplied by Electrobras, as discussed 
in the magnesium investigation. AVISMA argues that the Electrobras 
price data is representative because it is a holding company for 
Brazil's federal government and accounts for nearly 60 percent of 
Brazil's installed generation capacity. AVISMA also explains that 
Electrobras accounts for 66 percent of all transmission lines in Brazil 
in voltages of 230 kV or higher. Furthermore, AVISMA argues that 
TIMET's electricity price is flawed because it is not a weighted 
average, is not restricted to the largest users of electricity, and has 
nothing to do with actual prices paid for electricity in Brazil.
    With regard to electricity taxes, AVISMA argues that there is 
sufficient Departmental precedent for using a tax-exclusive electricity 
price because the Department does not want to confuse the price to the 
producer with the overlay of governmental activity in the exporting 
country.
    Department's position: We agree with AVISMA that the A1 Electrobras 
rate is the appropriate electricity rate to use for AVISMA in this 
review. The evidence on the record indicates that Electrobras 
electricity prices are representative of the electricity prices charged 
in Brazil and that the prices include the applicable demand and 
consumption charges cited by TIMET. With regard to the treatment of 
taxes in surrogate prices, the Department's practice is to value each 
factor of production, where possible, with publicly available published 
information which is tax-exclusive. See Preliminary Results of 
Antidumping Duty Administrative Review; Sebacic Acid from the People's 
Republic of China, 61 FR 46440, 46442 (September 3, 1996). Therefore, 
we believe the use of the Electrobras rate is consistent with 
Departmental policy.
    With regard to which Electrobras rate to apply, the Court of 
International Trade (CIT) upheld the Department's decision to apply the 
A1 Electrobras rate to AVISMA for purposes of the final determinations 
of sales of less than fair value for pure magnesium and alloy magnesium 
from the Russian Federation. See Magnesium Corp. of America, et al., v. 
U.S., Slip Op. 96-148 (August 27, 1996). The CIT determined that the 
record indicated that the magnesium industry required enough 
electricity to qualify for the lowest rate, A1. The CIT stated that, 
``(b)ased on the evidence on the record, it is reasonable to conclude 
that magnesium producers use electricity at the lowest rate 
available,'' given that electricity constitutes a large portion of the 
costs incurred in the production of magnesium. See Id., at 18. In 
addition, the CIT also determined that the record evidence demonstrated 
that a planned magnesium investment in Brazil would have an energy line 
of 230 kV. See Id.
    For the preliminary results, we calculated the number of kilowatt 
hours needed to produce one metric ton, based on verified figures. The 
calculation demonstrated that AVISMA's kilowatt capacity was 
significantly higher than the minimum necessary to receive the A1 rate. 
In addition, because AVISMA produces both titanium sponge and magnesium 
at its production facility, it would be reasonable to assume that total 
magnesium/titanium sponge production would require an even greater 
demand for electricity than what is required for only the magnesium 
production. Therefore, based on the evidence on the record, we 
determined that it is reasonable to apply the A1 Electrobras rate as a 
surrogate electricity value for AVISMA.
    Comment 10: TIMET contends that the Department erroneously adjusted 
normal value for by-products of magnesium production (i.e., magnesium 
chloride and KAMA compound). In addition, TIMET argues that AVISMA did 
not prove that it made sales of its by-products because these actual 
sales were not submitted on the record. Therefore, the Department 
cannot assume that these sales were made and cannot adjust for the by-
products. See Frozen Concentrated Orange Juice from Brazil: Final 
Determination of Sales at Less Than Fair Value, 51 FR 8324, 8329 (March 
17, 1987).
    AVISMA argues that magnesium is an input in producing titanium 
sponge. Accordingly, AVISMA included the costs in producing magnesium, 
such as energy consumption, as a part of the build-up of costs for 
producing titanium sponge. Therefore, AVISMA contends that all of the 
by-products reported, including those resulting from magnesium 
production, were related to the titanium sponge production. AVISMA 
argues that the Department verified that magnesium chloride qualifies 
as a by-product. AVISMA also argues that KAMA compound is produced in 
electrolyzers, which are dedicated to producing magnesium for titanium 
sponge production. In addition, AVISMA argues that the Department's 
spot-checking of by-products at verification provides the Department 
with the information necessary to confirm the validity of AVISMA's by-
product claims.
    Department's position: We agree with AVISMA. With regard to the 
verification of the by-product sales, in the Department's initial 
questionnaire, we only requested that AVISMA report the amount of by-
products produced per unit of subject merchandise. See Department's 
Request for Information, September 20, 1995, at D-6. In order to verify 
the amount of by-products reported by AVISMA, we requested that AVISMA 
provide proof of sales and requested that AVISMA demonstrate, through a 
trace of its accounting books, its factor calculations for selected by-
products. No discrepancies were found. See AVISMA's verification 
report, July 10, 1996, at 11.
    With regard to the inclusion of by-products from magnesium 
production in the calculation of normal value for purposes of the 
titanium sponge review,

[[Page 58531]]

we agree with AVISMA that these by-products should be used to offset 
the cost of manufacturing for titanium sponge production. AVISMA 
produces magnesium specifically for its own consumption in titanium 
sponge production as well as for commercial sale. See AVISMA's 
Supplemental Questionnaire Response, March 26, 1996, at Attachment 9. 
Therefore, a portion of the magnesium production flows directly into 
the titanium sponge production. Because of this, AVISMA reported the 
inputs to produce magnesium as inputs for titanium sponge production, 
and the Department valued these factors to compute normal value in 
order to be reflective of AVISMA's actual production process. Because 
these by-products result from the actual production of titanium sponge, 
they are factors whose value must be taken into account in our 
calculation of the normal value. See Final Determination of Sales of 
Less Than Fair Value; Pure Magnesium from Ukraine, 60 FR 16432, 16435 
(March 30, 1995), Comment 6. Therefore, we are continuing to grant an 
offset for those by-products which directly result from the production 
of titanium sponge.
    Comment 11: When valuing costs for by-products, TIMET argues that 
the Department should adjust the UN Trade Statistics data downward for 
profit in order to value the by-products by cost, not sales.
    AVISMA argues that the Department's policy is to use sales value, 
not COP, when valuing by-product offsets. See Final Results of Silicon 
Metal from Argentina (59 FR 65336, 65340 (December 14, 1993)), Final 
Determination of Sebacic Acid from PRC (59 FR 28053, 28056 (May 31, 
1994)), and Final Determination of Coumarin from PRC (59 FR 66895, 
66900 (December 28, 1994)).
    Department's position: We agree with AVISMA. The Department's 
practice is to value by-product offsets using import values as 
surrogates for the ex-factory, freight-exclusive prices from suppliers 
to consumers because we believe this is the best estimate for the 
market values of the by-products in this case. See Magnesium Final 
Determination, Comment 5, at 16447; Final Determination of Sales at 
Less Than Fair Value: Bicycles from the People's Republic of China, 61 
FR 19027, 19030 (April 30, 1996). Accordingly, we have continued to 
value by-product offsets using the import prices provided in the UN 
Trade Statistics.
    Comment 12: TIMET argues that the Department must exclude AVISMA's 
claimed by-product deduction for copper melt from its calculation of 
normal value. TIMET contends that the copper melt by-product is new 
information presented at the verification, and, therefore, the 
Department is not allowed to accept such untimely information.
    AVISMA argues that the copper melt by-product claim was presented 
as a minor revision on the first day of verification. See AVISMA's 
Verification Exhibits, July 10, 1996, Exhibit A-1.
    Department's position: We agree with TIMET. The Department's 
regulations at 19 CFR 353.31(a)(ii) allows parties to submit factual 
information for consideration until the earlier of the date of 
publication of notice of preliminary results of review or 180 days 
after the date of publication of notice of initiation of the review. 
The Department accepts new information at verification only when (1) 
the need for that information was not evident previously, (2) the 
information makes minor corrections to information already on the 
record, or (3) the information corroborates, supports, or clarifies 
information already on the record. Consistent with our practice, the 
Department does not consider AVISMA's copper melt by-product claim at 
verification as acceptable new information. In addition, AVISMA did not 
alert the Department that it had included a previously unreported by-
product in the minor corrections presented at verification. Therefore, 
the Department is revising its calculation of normal value to exclude 
the by-product offset for copper melt.
    Comment 13: Given the hyperinflation in Brazil, TIMET argues that 
in calculating normal value, the Department should account for the 
effects of inflation on the input pricing data which was originally 
reported in U.S. dollars.
    AVISMA argues that it would be impossible for the Department to 
properly account for variables such as exchange rates and currency 
reform. Further, AVISMA notes that once an input is priced in U.S. 
dollars, the inflation rate in Brazil becomes irrelevant.
    Department's position: We agree with AVISMA. It is not necessary or 
appropriate to make adjustments to these U.S. dollar values for 
Brazilian inflation. Moreover, because we do not know the dates or 
exchange rates used to convert these values into dollars, we could not 
determine any such adjustment. In addition, because the data contained 
in the UN Trade Statistics is nearly contemporaneous with the review 
period, the effect of any dollar inflation adjustment would likely be 
small. See Magnesium Final Determination, Comment 16, at 16449.
    Comment 14: At verification, AVISMA stated that it routinely 
discards the source documentation for its material flow ledgers after 
three months. TIMET argues that the Department should instruct AVISMA 
not to discard this documentation for future verifications.
    AVISMA states that it is now aware of the importance of maintaining 
the source documentation for its material flow ledgers, and has no 
problem with the suggestion.
    Department's position: We agree with TIMET and advise AVISMA to 
maintain the source documentation for its material flow ledgers for 
purposes of verification.

Final Results of Review

    As a result of the comments received, we have revised our 
preliminary results and determine that the following margins exist:

------------------------------------------------------------------------
                                                                 Margin 
           Manufacturer/exporter               Review period   (percent)
------------------------------------------------------------------------
Russia-wide rate...........................    8/1/94-7/31/95      83.96
Cometals, Inc..............................    8/1/94-7/31/95      28.31
Interlink Metals & Chemicals...............    8/1/94-7/31/95       0.00
------------------------------------------------------------------------

    The Department shall determine, and the US Customs Service shall 
assess, antidumping duties on all appropriate entries. Individual 
differences between U.S. price and normal value may vary from the 
percentages stated above. The Department will issue appraisement 
instructions directly to the U.S. Customs Service.
    Furthermore, the following deposit requirement will be effective 
for all shipments of titanium sponge from Russia entered, or withdrawn 
from warehouse, for consumption on or after the publication date of the 
final results of this administrative review, as provided by section 
751(a)(1) of the Act: (1) The cash deposit rate for merchandise 
manufactured and exported to the United States by AVISMA will be the 
Russia-wide rate established in these final results of review; (2) the 
cash deposit rates for merchandise manufactured by AVISMA and exported 
to the United States by Interlink or Cometals will be those rates 
established for Interlink or Cometals in these final results of review; 
(3) for merchandise exported by manufacturers or exporters not covered 
in this review but covered in the original LTFV investigation or a 
previous review and have a separate rate, the cash deposit

[[Page 58532]]

rate will continue to be the most recent rate published in the final 
determination or final results for which the manufacturer or exporter 
received a company-specific rate; (4) for Russian manufacturers or 
exporters not covered in the LTFV investigation or in this or prior 
administrative reviews, the cash deposit rate will continue to be the 
Russia-wide rate; and (5) the cash deposit rate for non-Russian 
exporters of subject merchandise from Russia that were not covered in 
the LTFV investigation or in this or prior administrative reviews will 
be the rate applicable to the Russian supplier of that exporter. These 
deposit rates, when imposed, shall remain in effect until publication 
of the final results of the next administrative review.
    This notice also serves as a final reminder to importers of their 
responsibility under 19 CFR 353.26(b) to file a certificate regarding 
the reimbursement of antidumping duties prior to liquidation of the 
relevant entries during this review period. Failure to comply with this 
requirement could result in the Secretary's presumption that 
reimbursement of antidumping duties occurred and the subsequent 
assessment of double antidumping duties.
    This notice also serves as the only reminder to parties subject to 
administrative protective order (APO) in this review of their 
responsibility concerning the disposition of proprietary information 
disclosed under APO in accordance with 19 CFR 353.34(d). Timely written 
notification of the return/destruction of APO materials or conversion 
to judicial protective order is hereby requested. Failure to comply 
with the regulations and the terms of an APO is a sanctionable 
violation.
    This administrative review and notice are in accordance with 
section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)).

    Dated: November 8, 1996.
Robert S. LaRussa,
Acting Assistant Secretary for Import Administration.
[FR Doc. 96-29365 Filed 11-14-96; 8:45 am]
BILLING CODE 3510-DS-P