[Federal Register Volume 62, Number 9 (Tuesday, January 14, 1997)]
[Notices]
[Pages 1970-1989]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-755]


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DEPARTMENT OF COMMERCE

International Trade Administration
[A-351-806]


Silicon Metal From Brazil; Final Results of Antidumping Duty 
Administrative Review and Determination Not To Revoke in Part

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

ACTION: Notice of final results of antidumping duty administrative 
review and determination not to revoke in part.

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SUMMARY: On September 5, 1996, the Department of Commerce (the 
Department) published the preliminary results of its administrative 
review of the antidumping duty order on silicon metal from Brazil. This 
review covers the period July 1, 1994, through June 30, 1995, and five 
manufacturers/exporters of the subject merchandise to the United 
States. The review indicates the existence of margins for four firms.
    We gave interested parties an opportunity to comment on the 
preliminary results. Based on our analysis of the comments received and 
new information submitted at the Department's request, we have changed 
our results from those presented in our preliminary results as 
described below in the comments section of this notice.

EFFECTIVE DATE: January 14, 1997.

FOR FURTHER INFORMATION CONTACT: Fred Baker, Alain Letort, or John 
Kugelman, AD/CVD Enforcement Group III, Office 8, Import 
Administration, International Trade Administration, U.S. Department of 
Commerce, 14th Street and Constitution Avenue, N.W., Washington, D.C. 
20230; telephone: (202) 482-2924, -4243, or -0649, respectively.

SUPPLEMENTARY INFORMATION:

Background

    On September 5, 1996, the Department of Commerce (the Department) 
published in the Federal Register (61 FR 46779) the preliminary results 
of its administrative review of the antidumping duty order on silicon 
metal from Brazil (July 31, 1991, 56 FR 36135). We solicited additional 
information from Minasligas on October 1, 1996, from Eletrosilex on 
October 2, 1996, from CBCC on October 10, 1996, and from RIMA on 
November 14, 1996. We received responses on October 15, October 16, 
October 24, and November 20, 1996, respectively. The Department has now 
completed that administrative review in accordance with section 751 of 
the Tariff Act of 1930, as amended (the Act).

Applicable Statute and Regulations

    Unless otherwise indicated, all citations to the Act are references 
to the provisions effective January 1, 1995, the effective date of the 
amendments made to the Act by the Uruguay Round Agreements Act (URAA).

Scope of the Review

    The merchandise covered by this review is silicon metal from Brazil

[[Page 1971]]

containing at least 96.00 percent but less than 99.99 percent silicon 
by weight. Also covered by this review is silicon metal from Brazil 
containing between 89.00 and 96.00 percent silicon by weight but which 
contains a higher aluminum content than the silicon metal containing at 
least 96.00 percent but less than 99.99 percent silicon by weight. 
Silicon metal is currently provided for under subheadings 2804.69.10 
and 2804.69.50 of the Harmonized Tariff Schedule (HTS) as a chemical 
product, but is commonly referred to as a metal. Semiconductor grade 
silicon (silicon metal containing by weight not less than 99.99 percent 
silicon and provided for in subheading 2804.61.00 of the HTS) is not 
subject to the order. HTS item numbers are provided for convenience and 
for U.S. Customs purposes. The written description remains dispositive 
as to the scope of the product coverage.
    The period of review (POR) is July 1, 1994, through June 30, 1995. 
This review involves five manufacturers/exporters of Brazilian silicon 
metal: Companhia Brasileira Carbureto de Calcio (CBCC), Companhia 
Ferroligas Minas Gerais--Minasligas (Minasligas), Eletrosilex Belo 
Horizonte (Eletrosilex), Rima Eletrometalurgia S.A. (RIMA), and Camargo 
Correa Metais (CCM).

Verification

    As provided in section 782(i) of the Act, we verified information 
provided by CBCC and RIMA by using standard verification procedures, 
including onsite inspection of the manufacturers' facilities, the 
examination of relevant sales and financial records, and original 
documentation containing relevant information. Our verification results 
are outlined in the public versions of the verification reports.

Analysis of Comments Received

    We gave interested parties an opportunity to comment on the 
preliminary results. We received case and rebuttal briefs from 
Minasligas, Eletrosilex, CCM, CBCC, RIMA, and a group of five domestic 
producers of silicon metal (collectively, the petitioners). Those five 
domestic producers are American Alloys, Inc., Elkem Metals Co., Globe 
Metallurgical, Inc., SMI Group, and SKW Metals and Alloys, Inc. We 
received a request for a hearing from CBCC, Minasligas, Eletrosilex, 
RIMA, and the petitioners. We conducted a public hearing on November 
25, 1996.

Comment 1

    Petitioners argue that the Department erred by using the 
methodology used in the final results of the second administrative 
review of this order in determining which U.S. sales to review. In the 
second review final results, we explained our methodology as follows:

    1. Where a respondent sold merchandise, and the importer of that 
merchandise had at least one entry during the POR, we reviewed all 
sales to that importer during the POR.
    2. Where a respondent sold subject merchandise to an importer 
who had no entries during the POR, we did not review the sales of 
subject merchandise to that importer in this administrative review. 
Instead, we will review those sales in our administrative review of 
the next period in which there is an entry by that importer.

We also said in the preliminary results notice that after completion of 
the review we would issue liquidation instructions to Customs which 
would instruct them to assess dumping duties against importer-specific 
entries during the period. See Silicon Metal From Brazil, Final Results 
of Antidumping Duty Administrative Review, 61 FR 46763, 46765 
(September 5, 1996) (Silicon Metal From Brazil; Second Review Final 
Results.)
    Petitioners argue that the methodology described above and used in 
the preliminary results of this review is inconsistent with the Act 
because section 751(a)(2) of the Act requires that margins be based on 
sales associated with entries during the POR. Petitioners also cite to 
Torrington Co. v. United States, 818 F. Supp. 1563, 1573 (CIT 1993) 
(Torrington) to demonstrate that the CIT has held that the word 
``entry'' as used in the statute refers to the ``formal entry of 
merchandise into the U.S. Customs territory.'' Furthermore, petitioners 
argue that the Department itself has stated that the use of the term 
``entry'' in the antidumping law refers unambiguously to the release of 
merchandise into the customs territory of the United States. See 
Antifriction Bearings (Other Than Tapered Roller Bearings) and Parts 
Thereof From the Federal Republic of Germany; Final Results of 
Antidumping Duty Administrative Review, 56 FR 31692, 31704 (July 11, 
1991). Petitioners also argue that the legislative history of section 
751 demonstrates that margin calculations in administrative reviews are 
to be based on sales of merchandise that entered during the POR.
    In addition to the above arguments based on their interpretation of 
the statute and case law, petitioners argue that prior to issuance of 
the final results of the second review of this order, the Department's 
practice was to review only those sales that entered U.S. customs 
territory during the POR. In support of this statement, they cite the 
questionnaire that the Department issued to the respondents in the 
1993-94 review. It states that ``purchase price sales that have a sales 
date during the period of review, but which entered after the period of 
review, will be covered in subsequent administrative reviews.'' In 
further support, they cite to the questionnaire issued to the 
respondents in this administrative review which requests that each 
respondent report only U.S. sales of merchandise that entered for 
consumption during the POR with the exception of constructed export 
price sales made after importation and export price sales of 
merchandise for which the entry date is not known.
    Furthermore, petitioners argue that the failure to calculate 
dumping margins based on sales associated with entries during the POR 
would result in improper assessment of duties because the duties 
assessed on entries during the POR would have no relation to the margin 
of dumping on those sales. Thus, by assessing duties on entries at 
rates unrelated to the margin of dumping on the associated sales, 
petitioners argue, the Department would violate 19 U.S.C. 
Sec. 1673(2)(B), which requires that ``there shall be imposed upon such 
merchandise an antidumping duty . . . in an amount equal to the amount 
by which the foreign market value exceeds the United States price for 
the merchandise.''
    Eletrosilex argues that the Department rejected petitioners' 
argument with respect to section 751 of the Act as long ago as 1991 in 
a rule-making proceeding. There it asserted that section 751 does not 
require consideration solely of entries made in the POR, and that the 
statute as a whole requires a balanced consideration of ``entries'' and 
``sales'' in the review process. See Advance Notice of Proposed 
Rulemaking (56 FR 63696, 63697, December 5, 1991). Furthermore, in the 
final results of both the first and second administrative review of 
this proceeding the Department specifically rejected petitioners' 
arguments that the statute requires consideration only of entries made 
during the POR. See Silicon Metal From Brazil; Final Results of 
Antidumping Duty Administrative Review, 59 FR 42806, 42813 (August 19, 
1994) (Silicon Metal From Brazil; First Review Final Results) and 
Silicon Metal From Brazil; Second Review Final Results. Eletrosilex 
concludes that the Department has acted within its discretion in 
reviewing Eletrosilex's sale made during this POR in this segment of 
the proceeding.

[[Page 1972]]

Department's Position

    We disagree with petitioners. The Department most recently 
addressed this issue in the final results of the second review of this 
order. There we stated:

    We do not agree with petitioners that section 751(a)(2) requires 
that we review only sales that entered U.S. customs territory during 
the POR. Section 751(a)(2) mandates that the dumping duties 
determined be assessed on entries during the POR. It does not limit 
administrative reviews to sales associated with entries during the 
POR. Furthermore, to review only sales associated with entries 
during the POR would require that we tie sales to entries. In many 
cases we are unable to do this. Moreover, the methodology the 
Department should use to calculate antidumping duty assessment rates 
is not explicitly addressed in the statute, but rather has been left 
to the Department's expertise based on the facts of each review. ``* 
* * the statute merely requires that PUDD (i.e., potentially 
uncollected dumping duties) . . . serve as the basis for both 
assessed duties and cash deposits of estimated duties.'' See The 
Torrington Company v. United States, 44 F.3d 1572, 1578 (CAFC 1995).

Our analysis of this issue and interpretation of the statute remain 
unchanged from those announced in the final results of the second 
review. Furthermore, by applying a consistent methodology in each 
segment of the proceeding we ensure that we review all sales made 
during the entire proceeding. Changing the methodology could result in 
our failure to review some sales. Hence, in these final results of 
review we have employed the methodology we announced in the final 
results of the second review.

Comment 2

    Petitioners argue that evidence on the record indicates that 
Minasligas' and Eletrosilex's costs and prices have been severely 
distorted by hyperinflation that occurred prior to the start of the 
period covered by this review, and that, therefore, the Department 
should adopt a methodology that eliminates the effects of those 
distortions. These distortions occurred, petitioners argue, because the 
inventories that these companies had on July 1, 1994 (the first day of 
this POR) were purchased prior to July 1, 1994, during the period when 
Brazil experienced hyperinflation.
    Minasligas argues that there is no evidence that its costs or 
prices were affected by hyperinflation that occurred prior to the POR. 
It makes the following points:
     During the three months prior to July 1994 (the first 
month in recent history during which there was no hyperinflation in 
Brazil and also the first month covered by this administrative review) 
the effects of hyperinflation had already been greatly attenuated in 
the negotiations of material prices in Brazil because of the use of the 
URV (unit of real value) as a unit of exchange. (Minasligas stated that 
the URV was a unit reference value pegged to the U.S. dollar which the 
Brazilian government introduced into the Brazilian economy in March 
1994.)
     Minasligas' accounts were subject to a one-time 
restatement into URVs at the end of June 1994.
     Petitioners have pointed to no support in the record for 
their claim that Minasligas had significant inventories of material 
inputs for silicon metal production in the first half of 1994.
     Petitioners have pointed to no support in the record for 
their claim that the value of such inventories was affected by 
hyperinflation during the first half of 1994.
     Petitioners have pointed to no support in the record for 
their claim that these inventories were carried over into the POR.
     The end-of-year inventories that Minasligas records in its 
financial statements include materials used in the production of 
merchandise which is not subject to this proceeding.
     The petitioners' request that the Department adopt a 
methodology that eliminates the effects of alleged distortions is 
limited to only two respondents. One would think, Minasligas argues, 
that if a country is hyperinflationary during a certain period, it 
would equally affect all companies doing business in that country.
    Eletrosilex argues that the introduction of the URV in March 1994 
resulted in a substantial reduction in inflation during the period 
March through June 1994, and that it was during the latter two months 
of this period that it bought all of the stock it had in inventory on 
July 1, 1994. Moreover, it argues that on July 1, 1994 (the date of the 
introduction of the real plan) it converted all of its inventory from 
cruzeiros reais to reais based upon the URV value at that date. This 
conversion, Eletrosilex argues, refutes the petitioners' allegation of 
any impact on the value of its inventory on July 1, 1994. Finally, 
Eletrosilex argues that the U.S. sale upon which the Department based 
its margin calculation for Eletrosilex in this review was sold long 
after Eletrosilex used up its entire stock in inventory on July 1, 
1994. Therefore, Eletrosilex concludes, there is no possible effect on 
Eletrosilex's costs from any high inflation that may have existed at 
some time before the POR.

Department's Position

    We agree with petitioners. Evidence on the record shows that 
Eletrosilex's and Minasligas' cost of materials for the first several 
months of the POR reflect significant fluctuations. ``See'' 
petitioners' July 17, 1996 and July 18, 1996 submissions. These 
fluctuations occurred because these respondents consumed inventory 
which they had purchased during a period of hyperinflation. Moreover, 
these respondents reported their POR costs based on their normal books 
and records which reflect historic costs. Therefore, we requested, and 
Minasligas and Eletrosilex provided, information regarding the purchase 
dates, quantities, and amounts recorded in their July 1, 1994 beginning 
inventory. Because the reported costs of materials included the cost of 
the beginning inventory based on historic costs, these amounts were 
understated by the rates of inflation that occurred from the date of 
purchase until June 30, 1994. Therefore, we revalued the beginning 
inventory of July 1, 1994 by applying the UFIR index to the value of 
the inventory from the date of purchase until July 1, 1994.

Comment 3

    Petitioners argue that for two reasons Minasligas does not qualify 
for revocation. (In the preliminary results of this review we stated 
that we did not intend to revoke the order on Minasligas at the 
completion of this administrative review because we intended to revoke 
the order on Minasligas upon completion of the third administrative 
review.) First, petitioners allege Minasligas has dumped in this and 
every prior segment of this proceeding, and therefore has not met the 
regulatory requirement of having not sold at less than fair value for 
at least three years. See 19 CFR Sec. 353.25(a)(2)(i). The three years 
in question are the first (91-92), second (92-93), and third (93-94) 
reviews. For the first and second reviews, the Department calculated a 
margin of zero percent in its final results of review. For the third 
review the Department calculated a margin of zero percent for its 
preliminary results. With respect to the first review (which is in 
litigation before the CIT), petitioners argue that after the Department 
corrects the errors for which it has already conceded error, Minasligas 
will have a margin. They argue, with respect to the second review, that 
after the Department corrects the ministerial errors they allege it 
made in its final results, Minasligas will again have a margin. They 
argue, with respect to the third review, that after the Department

[[Page 1973]]

corrects the calculation and methodological errors which they allege it 
made, Minasligas will again have a margin.
    Second, petitioners argue that the Department cannot correctly 
determine that Minasligas is not likely to resume dumping in the 
future, and without this determination the Department cannot revoke the 
order. ``See'' 19 CFR Sec. 353.25(a)(2)(ii). Petitioners base this 
argument on the following factors:
    (1) Minasligas had a margin of greater than de minimis in the 
preliminary results of this administrative review. See Silicon Metal 
from Brazil, Preliminary Results of Review and Intent Not to Revoke in 
Part, 61 FR 46779, 46781 (September 5, 1996) (preliminary results).
    (2) Minasligas has submitted no evidence that it is unlikely that 
it will dump in the future.
    (3) The Department has not verified any information that Minasligas 
is unlikely to dump in the future. Citing 19 U.S.C. Sec. 1677e(b)(2)(B) 
and 19 CFR Sec. 353.25(c)(2)(ii), petitioners argue that the statute 
and regulations require that the basis for the ``likelihood'' 
determination be verified, and that because the Department did not 
verify any such basis, Minasligas does not qualify for revocation.
    Furthermore, petitioners argue that analysis based on the criteria 
that the Department used in Brass Sheet and Strip from Germany show 
that Minasligas is likely to resume dumping. See Brass Sheet and Strip 
from Germany, Final Results of Administrative Review, 61 FR 49727, 
49730 (September 23, 1996) (Brass Sheet and Strip from Germany). These 
criteria include a dramatic decline in shipments after publication of 
the antidumping duty order and the low level of shipments by the 
respondent. Both of these factors, petitioners allege, are present here 
with respect to Minasligas.
    Minasligas argues, first, that in two consecutive administrative 
reviews prior to the issuance of the preliminary results the Department 
found Minasligas not to have dumped, and that, therefore, if the 
Department issues a final determination of no dumping in the final 
results of the third review, it will have met the requirement of 19 CFR 
353.25(a)(2)(i). Secondly, Minasligas argues that 19 CFR 
353.25(a)(2)(ii) requires a finding of no likelihood of dumping in the 
future, but does not, contrary to petitioners' suggestion, require 
Minasligas to provide, or the record to contain, evidence that 
Minasligas is not likely to resume dumping in the future. Furthermore, 
Minasligas argues that there is evidence on the record that Minasligas 
will not dump in the future. That evidence consists of Minasligas' 
written agreement to reinstatement of the antidumping duty order if it 
is found to be selling at less than fair value in the future.

Department's Position

    To qualify for revocation in part under 19 CFR 353.25(a)(2)(i), a 
respondent must have sold the subject merchandise at not less than 
foreign market value for at least three consecutive years. Our final 
results of review of the first three reviews of this order indicate 
that Minasligas had no margins. However, in order to revoke an order in 
part the Department must also be satisfied that the firm is not likely 
to resume dumping in the future. In this administrative review the 
Department has found that Minasligas had a dumping margin of greater 
than de minimis. Accordingly, the issue of likelihood of dumping in the 
future is moot because Minasligas has in fact resumed dumping. 
Therefore, we are not revoking the order in part for Minasligas.

Comment 4

    Petitioners argue that the Department erred in its calculation of 
Minasligas' cost of production and constructed value (COP/CV) by using 
the depreciation values that Minasligas reported. Petitioners find two 
flaws in this calculation. First, Minasligas' calculation of 
depreciation, petitioners allege, does not reflect the useful life of 
the assets, but rather reflects an extremely accelerated useful life. 
Petitioners argue that the Department's practice is to reject 
accelerated depreciation of an asset where such accelerated 
depreciation fails to allocate the cost of the asset on a consistent 
basis over the life of the asset, which, petitioners allege, is the 
case here. Second, Minasligas' depreciation calculation, petitioners 
allege, does not restate the value of the assets to account for 
hyperinflation. The Department's practice, petitioners argue, requires 
such restatement.
    Therefore, because they find Minasligas' calculation deficient, 
petitioners submitted a recalculation of depreciation for some assets 
based on what they believe to be the actual useful life of those 
assets, and argue that the Department should use this recalculation in 
its final results of review. The Department, petitioners argue, should 
also solicit information from Minasligas to determine the proper 
depreciation for all assets related to the production of silicon metal 
that were not included in its recalculation.
    Minasligas argues that petitioners' argument is flawed. Minasligas 
points to documentation submitted on October 15, 1996, at the 
Department's request, which demonstrates (1) that Minasligas did not 
depreciate its assets over the shortened period that petitioners 
suggest (though it is not the lengthened useful life that petitioners 
argue should be used), (2) that the depreciation reported in its COP/CV 
tables for purposes of this proceeding is fully supported by 
Minasligas' accounting records; (3) that the value of the assets 
subject to depreciation are restated in current currency to account for 
hyperinflation through the use of special indices known as the BTN/UFIR 
indices. Furthermore, Minasligas argues that the Department fully 
verified this information. Moreover, Minasligas argues that the 
petitioners' argument is based on a misunderstanding of some of the 
columns in the verification exhibit upon which they base their 
argument. Finally, Minasligas argues that to recalculate depreciation, 
using the longer useful lives that petitioners suggest, would be unfair 
because the Department has already completed two administrative reviews 
in which Minasligas calculated depreciation using the shorter useful 
lives. Minasligas contends that their useful lives are the basis for 
the depreciation calculation that Minasligas records in its books and 
which it reported to the Department. Therefore, Minasligas argues that, 
in the alternative, if the Department does decide to recalculate its 
depreciation using a longer depreciation period, it should adopt a 
methodology that takes into account the depreciation expenses that the 
firm reported in the previous administrative reviews.

Department's Position

    We agree with Minasligas, except that we did not verify the firm 
for this period. The CIT has upheld the Department's calculation of 
depreciation based on a respondent's financial records where their 
financial records are consistent with foreign GAAP principles and where 
those records do not distort actual costs. See Laclede Steel Co. v. 
United States, 18 CIT 965, 975 (1994). Here, Minasligas has 
historically used accelerated depreciation, consistent with Brazilian 
GAAP. Moreover, we note that we have in the past used accelerated 
depreciation where the respondent has historically used it in its 
financial statements. See Foam Extruded PVC and Polystyrene Framing 
Stock from the

[[Page 1974]]

United Kingdom; Final Determination of Sales at Less Than Fair Value; 
61 51411, 51418 (October 2, 1996). Furthermore, we agree with 
Minasligas that to recalculate depreciation using a longer useful life 
for Minasligas' assets after having used a shorter life in prior 
reviews would allocate costs to this review that have already been 
accounted for in prior reviews, and would therefore be inequitable. 
Finally, we agree with Minasligas that its use of the BTN/UFIR indices 
accurately restates the value of its assets. Therefore, in these final 
results of review, as in the preliminary results of review, we have 
used Minasligas' reported depreciation in calculating COP and CV.

Comment 5

    Petitioners argue that the Department erred in its calculation of 
interest expense for Minasligas, Eletrosilex, CBCC, and RIMA by 
allowing an offset to interest expenses for claimed interest income. 
Petitioners base their argument on two factors: (1) that these 
companies did not substantiate that the reported interest income was 
from short-term investments, and (2) many of the categories these 
companies listed in their enumeration of short-term interest income 
are, on their face, not interest income derived from short-term 
investments of working capital.
    As for the latter argument, petitioners point out that RIMA's 
claimed income consists of revenue from late payment charges paid by 
home market customers and discounts that suppliers grant on payment of 
an invoice. These categories are not, petitioners assert, interest 
income derived from short-term investments. As for Eletrosilex, 
petitioners focus on one transaction recorded on Eletrosilex's 1994 
financial statement which, they allege, consists of capital gains, 
rather than interest income derived from short-term investments of 
working capital. For CBCC petitioners allege that there is evidence on 
the record (verification exhibit 29) that some of the interest income 
claimed by CBCC's Brazilian parent company, Solvay do Brasil (whose 
interest expenses, petitioners argue in comment 25 below, should be 
consolidated with those of CBCC), are not derived from short-term 
investments. Petitioners also argue that CBCC's itemization of its 
interest income (verification exhibit 17) indicates that much of CBCC's 
interest income is also not derived from short-term investments. 
Therefore, petitioners argue, in the final results the Department 
should make no offset to interest expenses for any of CBCC's or Solvay 
do Brasil's claimed interest offset.
    Minasligas argues that it had no long-term financial investments, 
and that all of its interest income was related to production 
operations. Moreover, it states, it fully replied to all of the 
Department's inquiries about its interest expenses and income. Thus, it 
argues, there is no basis to reject Minasligas' claim for an offset to 
its interest expense.
    RIMA argues that, if the Department uses its financial statement to 
calculate its interest expenses, it should also use its financial 
statement to calculate its interest revenue. Furthermore, the firm 
stands by the claim in its supplemental questionnaire response (SQR) of 
April 30, 1996 (at 33-34) that its financial income is short-term.
    Eletrosilex argues that its financial statement shows that the sole 
transaction on which petitioners focus occurred between July 28, 1994 
and December 27, 1994, and, therefore, qualifies as short-term under 
any analysis. The transaction involved an investment by Eletrosilex in 
reais-denominated bonds, purchased from funds obtained by borrowing on 
dollar-denominated export notes, and later selling the bonds after 
accrual of pro rata interest. The transaction, Eletrosilex argues, was 
simply a short-term investment which produced interest income from the 
investment. The investment return was heightened by the substantial 
over-valuation of the real at the time and the use of dollar-
denominated export notes to finance the purchase of the bonds. This 
transaction, Eletrosilex argues, clearly qualifies as financial revenue 
permissible under long-settled Department precedent.
    CBCC argues that the Department fully verified the interest income 
of CBCC and Solvay do Brasil, and found it to be short-term. See July 
22, 1996 verification report, pp. 27-28. It also argues that the 
petitioners' argument with respect to the interest revenue of CBCC and 
Solvay do Brasil is irrelevant in light of the Department's practice to 
use consolidated financial statements. Because of this practice, CBCC 
argues, the relevant financial statement is that of its ultimate 
parent, Solvay and Cie, and not that of either CBCC or Solvay do 
Brasil.
    Additionally, petitioners argue that the Department erred by 
reducing Eletrosilex's cost of manufacture (COM), rather than its 
interest expenses, by its reported interest revenue.

Department's Position

    We agree with petitioners that almost all of Minasligas' reported 
``interest income'' consists of items that are totally unrelated to 
interest income. The financial statements for Minasligas and its 
parent, Delp Engenharia Mecanica S.A. (Delp), demonstrate that over 95 
percent of both companies' reported ``interest income'' consists of 
``monetary variation,'' ``monetary correction,'' and ``income from 
short-terms applications.'' The Department's verification report for 
Minasligas in the immediately preceding review clarifies that 
``financial applications'' (which would include ``income from short-
term applications'') refers to compensation for inflation. At no point 
has Minasligas demonstrated for the record that the amounts reported 
for these categories of income constitute interest income derived from 
short-term investments of working capital. Nor has Minasligas 
demonstrated that the claimed interest income was derived from short-
term investments of working capital merely by stating in its rebuttal 
brief that its net interest income exceeded its net interest expense.
    Similarly, the financial statements submitted by Minasligas show 
that the category ``interest received'' included, inter alia, (1) 
charges paid by customers for Delp's granting of delayed payment terms, 
which are really sales revenue; (2) discounts obtained from suppliers; 
(3) dividends received; and (4) exchange gains or losses. See 
Minasligas' April 30, 1996 SQR at 37 and exhibit 19. These items 
clearly do not represent interest income from short-term investments.
    For the above reasons, we have reduced Minasligas' interest income 
by the total amount of the items incorrectly included therein by 
Minasligas (see Final Analysis Memorandum from Fred Baker to the File).
    With respect to RIMA, we agree with petitioners that the interest 
income categories RIMA reported (i.e., revenue from late payment 
charges paid by home market customers and discounts that suppliers 
grant on payment of an invoice) by definition do not constitute 
interest income from short-term investments. See RIMA's April 30, 1996 
supplemental questionnaire response (SQR) at 35. Therefore, in these 
final results of review we have not allowed an offset to RIMA's 
financial expenses for the claimed interest income.
    With respect to Eletrosilex, we agree with petitioners that 
Eletrosilex is not entitled to an adjustment. The transaction in 
question consisted of an investment in Brazilian bonds denominated in 
reais and financed by borrowing on dollar-denominated export notes. 
Eletrosilex later sold the real-denominated bonds after they had 
accrued pro rata interest for Eletrosilex.

[[Page 1975]]

Such a transaction would result in interest income and capital gains; 
only the former would qualify as an offset to interest expenses. 
Therefore, in these final results of review, we have not made an 
adjustment to Eletrosilex's interest expenses for this transaction. 
Moreover, in these final results of review, unlike the preliminary 
results of review, we have calculated Eletrosilex's financial expenses 
by multiplying its annual COM by the ratio between the financial 
expenses and cost of sales reported in its 1994 financial statement.
    With respect to CBCC, we agree with CBCC in part. As explained in 
our response to comment 25 below, we agree with CBCC that its financial 
expenses should be calculated based on the consolidated financial 
statement of Solvay & Cie, and not that of Solvay do Brasil. However, 
we do not agree that we should make an adjustment for short-term income 
because, though we did examine CBCC's financial income at verification 
and found that CBCC did have some short-term financial revenues, not 
only did CBCC not make an offset claim in this review for any short-
term financial income until submitting its rebuttal brief, but CBCC did 
not provide for the record any supporting documentation. See CBCC's 
April 30, 1996 SQR at 28 and exhibit 16. Therefore, in these final 
results of review, as in the preliminary results of review, we have not 
offset CBCC's financial expenses for any short-term interest income.

Comment 6

    Petitioners argue that the Department erred in calculating 
Minasligas' COP by using Minasligas' submitted computation of direct 
labor and variable overhead. This computation, petitioners argue, was 
flawed because Minasligas allocated these costs based on the number of 
furnaces used to produce ferrosilicon and silicon metal. Furthermore, 
petitioners argue, Minasligas used this same method to calculate its 
general and administrative (G&A) expenses in the first administrative 
review of this order, and the Department rejected it there because G&A 
expenses are period expenses that relate to the operation of the 
company as a whole, and are not related to a particular product or 
process. See Silicon Metal from Brazil; First Review Final Results, at 
42811. Petitioners argue that using this same method to allocate direct 
labor and variable overhead is equally wrong. Because these costs 
relate to production, petitioners argue, the Department should allocate 
these costs based on the actual production volume for each product.
    Minasligas argues that it allocated its direct labor and overhead 
equally to each direct cost center pursuant to its normal accounting 
practices. Because the same furnaces are dedicated to the production of 
the same product, Minasligas allocated these costs on the basis of the 
furnace ratio. This methodology does not cause distortions, Minasligas 
argues, because the same number of personnel operates each furnace 
regardless of the product produced, and the factory overhead expenses 
are equally shared by all the furnaces.

Department's Position

    We agree with petitioner. Direct labor and variable overhead are a 
function of production, and not the number of furnaces dedicated to the 
production of each product. Therefore, for these final results of 
review we have recalculated Minasligas' direct labor and variable 
overhead. In this recalculation we have allocated direct labor and 
variable overhead based on the production volume of silicon metal 
relative to total production.

Comment 7

    Petitioners argue that the Department must add to Minasligas' and 
Eletrosilex's CV the ICMS tax that they collect from their exports of 
silicon metal because it is included in the reported U.S. selling 
prices. They argue that to do otherwise would result in a dumping 
margin distorted by the use of an artificially high selling price as 
the basis for U.S. price (USP). Petitioners argue that, in the 
alternative, the Department should reduce USP by the amount of the ICMS 
taxes included in the reported USP pursuant to section 772(d)(2)(A) 
(sic) of the Act, which requires that USP be reduced by ``any 
additional costs, charges, and expenses, and United States import 
duties, incident to bringing the merchandise from the place of shipment 
in the country of exportation to the place of delivery in the United 
States.''
    Minasligas argues that the alternatives the petitioners suggest 
will not result in a tax-neutral comparison. It argues that if the CV 
already includes ICMS taxes paid to suppliers, then adding to the CV 
the ICMS tax which is included in the U.S. price will overstate taxes 
in CV and distort the dumping results. Similarly, Minasligas states, if 
the CV includes the value-added taxes (VAT) (i.e., ICMS and IPI taxes) 
paid to suppliers, then deducting ICMS taxes from the U.S. price will 
result in an apples-to-oranges comparison.
    Eletrosilex argues that to be consistent with the URAA, the 
Department should remove consumption taxes from all consideration in 
U.S. and home market price determinations.

Department's Position

    We disagree with petitioners' contention that the ICMS assessed on 
the U.S. sale should be deducted from the U.S. price. We addressed this 
issue with respect to Eletrosilex in the final results of the second 
administrative review of this order. There we stated that because the 
ICMS tax assessed on the U.S. sale is not an export tax, it should not 
be deducted from the U.S. price. See Silicon Metal from Brazil; Second 
Review Final Results, at 46770. However, where the ICMS tax is included 
in the U.S. price, CV should not include both the ICMS tax paid on the 
purchases of material inputs and the ICMS tax assessed on the U.S. 
sale, as this would double-count taxes. Thus, for the calculation of CV 
in this situation, we ensured that the amount of ICMS tax included in 
CV was the higher of either the ICMS tax on purchases of material 
inputs or the ICMS tax included in the U.S. price.

Comment 8

    Petitioners argue that the Department erred in its treatment of 
taxes in the cost test in two ways. First, they argue that the 
Department erred by not including PIS and COFINS taxes in Minasligas' 
COM for COP. The preliminary results analysis memorandum, petitioners 
state, indicates that the Department intended to include PIS and COFINS 
in COM, but its COP calculation worksheet indicates that, in fact, it 
did not do so. Second, petitioners argue that the Department erred in 
its computation of Eletrosilex's and CBCC's COP by not including in the 
COM the IPI taxes that these companies pay on their purchases of 
inputs. Petitioners argue that because Eletrosilex and CBCC pay IPI 
taxes on their inputs, but IPI taxes are not assessed on sales of 
silicon metal, the Department should include all IPI taxes in the COM.
    Eletrosilex argues that to be consistent with the URAA, the 
Department should remove consumption taxes from all consideration in 
U.S. and home market price determinations. Furthermore, Eletrosilex 
argues that IPI taxes are subject to refund from the Brazilian 
government.
    CBCC argues that it can offset the IPI taxes it pays on the 
purchase of material inputs with the IPI tax it collects on the sale of 
the finished product from domestic customers. Because CBCC is able to 
offset the IPI taxes paid on

[[Page 1976]]

material inputs by the IPI taxes it collects from the sale of 
ferrosilicon to domestic customers, CBCC argues, IPI taxes are not a 
cost of producing silicon metal for CBCC. CBCC also states that in this 
review the only material input for which CBCC paid IPI taxes is 
electrode paste, and it included these IPI taxes in the reported cost 
of this product, even though they do not appear in a separate line item 
on the COP worksheet that CBCC submitted to the Department.
    RIMA argues that the Department should make no further addition to 
its COP for PIS and COFINS taxes because these taxes are already 
included in its reported direct materials costs.

Department's Position

    As explained more fully in our response to comment 26 (below), we 
have determined that PIS and COFINS taxes are gross revenue taxes, and 
therefore are not taxes that a buyer pays directly when purchasing 
materials. For this reason, in order for COP to reflect the complete 
cost of materials, the costs the Department uses in its calculation of 
COP must not be net of any hypothetical tax amounts that are presumably 
imbedded within the purchase price of the materials. Here, Minasligas 
reported its material costs net of a value that it calculated, at the 
Department's request, that represented the PIS and COFINS embedded 
within its cost of materials. Thus, in order for the COP to reflect the 
full purchase price of the materials, we must add to its reported 
material costs the hypothetical values that Minasligas reported as PIS 
and COFINS taxes on its material inputs. We have done so in these final 
results of review. Moreover, because we have determined that the PIS 
and COFINS taxes are gross revenue taxes, and are not imposed on a 
transaction-by-transaction basis, we have not deducted any reported PIS 
and COFINS taxes from the price to which we compare COP in the cost 
test.
    We agree with petitioners that the IPI tax (a Brazilian Federal 
value-added tax) should be included in COM because it is not a tax 
which the respondents can recover from sales of silicon metal. 
Therefore, in these final results of review we have included the IPI 
tax in the COM for Eletrosilex and CBCC. However, we have not made a 
separate addition for this tax to RIMA's COM because evidence on the 
record indicates that RIMA already included the IPI tax in the reported 
COM. We have made a separate addition to CBCC's COM for the IPI tax 
because evidence on the record of this review indicates that CBCC 
included only a portion of the IPI taxes in its material costs.

Comment 9

    Petitioners argue that, with respect to Minasligas, Eletrosilex, 
CBCC, and RIMA, in accordance with 19 U.S.C. Sec. 1677b(e)(1)(A) of the 
Act, the Department must include in CV all taxes on purchases of 
inputs.
    Minasligas argues that the Department should calculate a CV that 
excludes VAT taxes paid to the suppliers of the material inputs. The 
basis for this argument is that when Minasligas collects ICMS taxes 
from U.S. customers, it can offset such ICMS taxes against the tax it 
pays to its suppliers. Accordingly, the ICMS taxes paid on the material 
inputs are, in Minasligas' view, ``refunded or remitted'' upon 
exportation of the merchandise to the United States. See 777(3)(1)(A) 
of the Act. Furthermore, Minasligas argues, in order to make a fair 
comparison, the U.S. price should also not include ICMS taxes. In the 
alternative, Minasligas argues that if the CV does not include ICMS 
taxes paid on the material inputs, the same absolute amount of ICMS 
taxes as that included in the U.S. price could be added to the CV in 
order to achieve a tax-neutral result.
    RIMA argues that the ICMS and IPI taxes should not be included in 
the cost of materials because, under the Brazilian VAT system, taxes 
paid on materials can be recovered from taxes collected on the sales of 
the merchandise produced from such materials. The CIT, RIMA argues, has 
disagreed with petitioners' interpretation of 19 U.S.C. 
Sec. 1677b(e)(1)(A), the predecessor provision to 19 U.S.C. 
Sec. 1677b(e)(3), and held that the statute does not provide ``refund 
or remission'' as the only instance in which taxes upon inputs will not 
constitute cost of materials. The CIT noted that ``in a tax scheme such 
as Brazil's a respondent may be able to show that a value-added tax on 
inputs did not in fact constitute a ``cost of materials'' for the 
exported product.'' See AIMCOR v. United States, Ct. No. 94-03-00182, 
Slip Op. 95-130 (July 20, 1995) (AIMCOR) at 21.

Department's Position

    We agree with petitioners. In the final results of the second 
review of this order, the Department stated:

because section 773(e)(1)(A) of the Tariff Act does not account for 
offsets of taxes paid due to home market sales, we did not account 
for the reimbursement to the respondents of ICMS and IPI taxes due 
to home market sales of silicon metal. The experience with regard to 
home market sales is irrelevant to the tax burden borne by the 
silicon metal exported to the U.S.

See Silicon Metal from Brazil; Second Review Final Results, at 46769. 
Our analysis of the issue and interpretation of the statute have not 
changed since publication of the second review final results. Thus, in 
keeping with our prior determination on this issue, we have included in 
CV all taxes paid on purchases of material inputs, except in those 
instances where the ICMS tax included in the export price exceeded the 
amount of the taxes on the material inputs. In those situations, we 
included in CV the higher of the two amounts. See our position on 
comment 7.

Comment 10

    Petitioners argue that the Department erred by not including 
Minasligas' claimed duty drawback in CV. This drawback consists of 
taxes and import duties that the government of Brazil suspended on 
Minasligas' purchases of imported electrodes used in the production of 
silicon metal destined for export. Petitioners argue that because the 
Department added the duty drawback to U.S. price, and because the taxes 
represented by the drawback were not elsewhere represented in CV, the 
Department should add the drawback to CV in order to make a fair 
comparison of U.S. price to CV.
    Minasligas argues that in the preliminary results the Department 
correctly added duty drawback to U.S. price for comparison with a 
sales-based normal value (NV). However, if the Department uses CV in 
the final results, and includes indirect taxes in CV, it must still add 
duty drawback to U.S. price to make a fair comparison.

Department's Position

    We agree with petitioners. The Brazilian duty drawback law 
applicable to Minasligas suspends the payment of ICMS and IPI taxes 
that would ordinarily be due upon importation of electrodes. Therefore, 
because the ICMS and IPI taxes are suspended, we cannot conclude that 
they are already included in the COM or reported tax payments that 
Minasligas reported. Thus, we need to add to CV the full amount of the 
duty drawback that we added to USP in accordance with section 
772(c)(1)(B) of the Act. We have done so in these final results of 
review. This methodology is identical to the methodology announced in 
the final results of the prior review of this case. See Silicon Metal 
from Brazil; Second Review Final Results, at 46770.

Comment 11

    Petitioners argue that the Department erred by calculating RIMA's, 
CBCC's, and Minasligas' home market imputed

[[Page 1977]]

credit based on prices that include VAT. The Department's practice, 
petitioners argue, is to exclude VAT collected on home market sales 
from the prices used in calculating imputed credit expenses. Thus, 
petitioners argue, in the final results of review the Department should 
exclude ICMS taxes from the prices used to calculate home market 
imputed credit.
    Minasligas and RIMA argue, based on the tax policies of the 
government of Brazil, that ICMS taxes should be included in the imputed 
credit calculation. They argue that imputed credit expenses represent 
the opportunity cost of financing accounts receivable, and that this 
opportunity cost does not apply solely to a portion of the sale, but to 
the entire revenue that is generated by the sale. During the period in 
which the customer's payment is outstanding, not only must Minasligas 
and RIMA finance their production operations, they must also pay any 
ICMS amounts they owe to the Brazilian government. The payment of any 
such amounts before they received payment from their customers becomes 
part of the cost of financing receivables. Therefore, Minasligas and 
RIMA argue, ICMS taxes should be included in the imputed credit 
calculation.

Department's Position

    We agree with petitioners. We addressed this issue in 
Silicomanganese from Venezuela. There we responded to the argument now 
set forth by Minasligas and RIMA. We said:

    The Department's practice is to calculate credit expenses 
exclusive of VAT. (See the discussion of our VAT methodology in the 
preliminary determination (59 FR 31204, 31205, June 17, 1994.) 
Theoretically, there is an opportunity cost associated with any 
post-service payment. Accordingly, to calculate the VAT adjustment 
argued by Hevensa would require the Department to calculate the 
opportunity costs involved with freight charges, rebates, and 
selling expenses for each reported sale. It would be an impossible 
task for the Department to attempt to determine the opportunity cost 
of every such charge and expense.

See Silicomanganese from Venezuela, 59 FR 55436, 55438 (November 7, 
1994) (Silicomanganese from Venezuela). In these final results of 
review we have followed our practice outlined in Silicomanganese from 
Venezuela. See also Ferrosilicon from Brazil; Final Results of 
Antidumping Duty Administrative Review, 61 FR 59407, 59410 (November 
22, 1996) (Ferrosilicon from Brazil; First Review Final Results).

Comment 12

    Petitioners argue that the Department erred in its margin 
calculation for Minasligas by converting the cruzeiro value of its U.S. 
sales into dollars, rather than using the actual U.S. value of the U.S. 
sales since they were originally denominated in U.S. dollars. They 
argue that the needless recalculation of U.S. price had the effect of 
increasing the U.S. price.
    Minasligas argues that it reported its U.S. sales in cruzeiros (as 
recorded in its books), and that the Department correctly converted 
them into dollars using the average exchange rate of the month of 
shipment. This methodology, Minasligas argues, is in accordance with 
the Department's practice of comparing the U.S. price to the CV or NV 
in the month of shipment.

Department's Position

    We agree with petitioners. Our practice is to use the actual U.S. 
price in the currency in which it was originally denominated on the 
date of sale, and to avoid any unnecessary currency conversions. 
Evidence on the record indicates that Minasligas' U.S. sales were 
originally denominated in U.S. dollars. See Minasligas' April 30, 1996 
SQR, pp. 16-17. Therefore, in these final results of review we have 
used the actual dollar value of the U.S. sale in the margin 
calculation.

Comment 13

    Petitioners argue that the Department erred by calculating negative 
imputed U.S. credit expenses for Minasligas and CBCC. This occurred, 
petitioners state, because the Department used as the payment date the 
date that these companies received payment from their banks under the 
terms of their advance exchange contracts (ACC). Under the terms of an 
ACC, a Brazilian bank pays Minasligas and CBCC the value of their U.S. 
sales, and the U.S. customer pays the bank. This arrangement sometimes 
results in Minasligas and CBCC receiving payment for their sales prior 
to shipment, and thus incurring negative credit expenses. However, 
petitioners argue that though the CIT has allowed negative U.S. credit 
expenses under some circumstances, those circumstances are not present 
here. Specifically, in AIMCOR (at 14-15) the CIT permitted such an 
adjustment for credit revenue partly because the ACCs were tied to 
specific sales. Evidence on the record of this review, petitioners 
suggest, demonstrates that Minasligas' and CBCC's ACCs were not tied to 
specific sales.
    With respect to Minasligas, petitioners point out that Minasligas 
entered into multiple ACCs for each sale, and that review of the record 
shows that there is no correspondence between the dates of the ACC 
contracts and Minasligas' reported dates of sale for the sales covered 
in this review. Furthermore, petitioners argue, review of the two ACC 
contracts (which pertained to the same sale) on the record of this 
review reveals that the contracts do not contain an invoice number, 
customer name, or country of exportation, and are not specific to the 
merchandise subject to review. Moreover, petitioners argue, the dollar 
amount of the ACCs does not tie to any specific U.S. sale reviewed in 
this proceeding. From this evidence petitioners conclude that the ACCs 
were not specific to U.S. sales, and that, therefore, the Department 
should use in its imputed credit calculation the date of payment by the 
U.S. customer.
    With respect to CBCC, petitioners point out that CBCC financed its 
U.S. sales using ACCs that covered sales during an extended period. In 
addition, they allege that evidence on the record of Ferrosilicon from 
Brazil demonstrates that CBCC's ACCs are not tied to specific sales. 
See Ferrosilicon from Brazil, Final Determination of Sales at Less than 
Fair Value, 54 FR 732 (Jan. 6, 1994) (Ferrosilicon from Brazil; Final 
Determination).
    Minasligas argues that petitioners' argument is unfounded. First, 
Minasligas argues, in Ferrosilicon from Brazil; Final Determination it 
had entered into multiple contracts for individual sales too, and there 
was also no correspondence between the dates of sale and the contract 
dates, but still the CIT upheld in AIMCOR the Department's calculation 
of negative U.S. credit expenses. See Ferrosilicon from Brazil, Final 
Determination, and also AIMCOR. Second, Minasligas argues that the 
petitioners are factually incorrect in saying that the dollar value of 
the ACC does not tie to any specific sale. It states that the sum of 
the two ACC amounts in local currency equals the amount in reais that 
Minasligas reported in its U.S. sales listing. Third, the respondent 
argues that the fact that one of the two ACCs indicates that the 
exported product was not silicon metal was a mistake by the bank, and 
that Minasligas was not aware of this mistake at the time it provided 
this information to the Department. Problems of this nature, Minasligas 
argues, are verification problems, and the Department opted not to 
verify Minasligas in this review. Nevertheless, Minasligas states, it 
is prepared to

[[Page 1978]]

provide the Department additional information that clearly shows that 
this ACC relates to the sale of silicon metal.
    CBCC argues that its ACCs are tied to specific sales. The 
Department, CBCC argues, verified the ACC documentation and tied each 
ACC to a particular export transaction. See July 22, 1996 verification 
report, pp. 14-15. Additionally, CBCC argues that the date on which the 
ACC is contracted is irrelevant to the Department's analysis as long as 
the ACC contract is tied to a particular export transaction.

Department's Position

    We agree with CBCC and Minasligas. We have carefully reviewed the 
record of this review, and are persuaded that CBCC's and Minasligas' 
ACCs are directly tied to their U.S. sales. With respect to CBCC, we 
find that the Department's verifiers were able to tie each ACC to a 
specific U.S. sale. See July 22, 1996 verification report, pp. 14-15. 
With respect to Minasligas, we note that Minasligas is correct that, 
contrary to petitioners' argument, the value of the ACC which 
Minasligas put on the record does in fact equal the value of the U.S. 
sale; therefore, we find that the ACC is tied to the U.S. sale. 
Furthermore, in prior verifications (where negative U.S. imputed credit 
was not an issue) the Department was able to tie Minasligas' ACCs to 
individual U.S. sales. See July 22, 1996 verification report, p. 9. 
Therefore, in the U.S. imputed credit calculation in these final 
results of review we have used as the payment date the date on which 
the bank credits the accounts of Minasligas and CBCC with funds under 
the terms of their ACCs.

Comment 14

    Petitioners argue that the Department erred by failing to deduct 
from RIMA's USP the ICMS tax that RIMA paid on its foreign inland 
freight for U.S. sales.
    RIMA argues that the freight amount that it reported for each 
export sale includes ICMS taxes.

Department's Position

    We agree with petitioners. Evidence on the record indicates that 
RIMA reported the ICMS tax on foreign inland freight separately from 
the freight costs. See October 3, 1996 verification report, at 6. In 
these final results of review we have deducted from USP the ICMS tax 
due on freight.

Comment 15

    Petitioners argue that the Department erred in the calculation of 
Minasligas' and RIMA's COP by granting an offset to production costs 
for the sale of by-products. With respect to Minasligas, they argue 
that the documentation Minasligas submitted to demonstrate that it had 
sold the slag during the POR did not substantiate its claim.
    Minasligas argues that its documentation demonstrates that it 
concluded the sale in June 1995, and thus during the period covered by 
this proceeding. It argues that only if the Department decides to rely 
on the date of shipment rather than the date of sale should the 
adjustment apply to the fifth review.
    With respect to RIMA, petitioners argue that RIMA failed to provide 
a requested worksheet demonstrating its computation of the claimed 
offset. Furthermore, petitioners claim that the volume of the offset 
that RIMA claimed is inconsistent with other information on the record.
    RIMA argues that it did not calculate or claim a by-product offset 
for its COP/CV.

Department's Position

    We agree with petitioners. With respect to Minasligas, we agree 
that the documentation Minasligas submitted does not demonstrate that 
the date of sale for its claimed offset was during the POR. See 
Minasligas' October 15, 1996 submission, exhibit 5. Therefore, in these 
final results of review we have not allowed an offset to Minasligas' 
production costs for its sale of slag. With respect to RIMA, we find 
that the record indicates that RIMA did offset its production costs 
with revenue earned from the sales of by-products, and that RIMA did 
not substantiate its claim for that offset. See RIMA's April 30, 1996 
SQR, at 33. Therefore, in these final results of review we have not 
allowed an offset to RIMA's production costs for its sales of by-
products.

Comment 16

    Petitioners argue that the Department erred in its calculation of 
the by-product offset that it applied to Eletrosilex's COM. It argues 
that the ICMS tax should be deducted from the selling price in the 
calculation of revenue earned from the sale of the by-product.

Department's Position

    We agree with petitioners. The ICMS tax represents a reduction in 
Eletrosilex's revenue earned from the sale, and should be deducted from 
the selling price in calculating total revenue. We have done so in 
these final results of review.

Comment 17

    Petitioners argue that the Department erred in its calculation of 
Eletrosilex's COP by using Eletrosilex's calculation of indirect 
selling expenses. That calculation was flawed, petitioners argue, 
because in it Eletrosilex divided its indirect selling expenses by its 
volume of production. This methodology was incorrect, petitioners 
argue, for two reasons. First, the selling expense total used in the 
calculation does not include the selling expenses of Eletrosilex's 
related affiliates. Thus, petitioners argue, Eletrosilex allocated to 
all of its silicon metal production volume only part of the indirect 
selling expenses that it and its related companies incurred for selling 
the silicon metal. Second, it is not the Department's practice, 
petitioners state, to calculate selling expenses based on production 
volume. Eletrosilex bore the burden, petitioners argue, of reporting 
properly calculated per-unit indirect selling expenses, and failed to 
do so. Therefore, petitioners conclude, in the final results the 
Department should use the facts available, and should calculate 
Eletrosilex's per-unit indirect selling expenses for COP and CV by 
dividing Eletrosilex's reported indirect selling expenses by its 
reported volume of home market and U.S. sales.
    Eletrosilex argues that it makes no sense to calculate per-unit 
indirect selling expenses based solely on U.S. and home market sales 
volumes. It argues that the indirect selling expenses that Eletrosilex 
incurs (consisting primarily of salaries and related employee costs) 
are applicable to all sales, not just to the local and U.S. markets. 
These employees, Eletrosilex states, perform functions relevant to all 
sales, and it would be unfair and illogical to apply the expenses of 
these employees solely to home market and U.S. sales. Citing statements 
in its questionnaire response as support, it argues that sales both in 
the United States and in Brazil are made solely by Eletrosilex 
personnel, with no assistance from affiliated companies. Furthermore, 
Eletrosilex argues, while affiliated companies assist Eletrosilex in 
some third-country markets, Eletrosilex personnel are deeply involved 
in all aspects of these sales. That there is some external assistance 
on these sales in third-country markets, Eletrosilex argues, is not 
relevant to the determination of per-unit indirect selling expenses in 
the home market.

Department's Position

    We agree with petitioners that indirect selling expenses should be 
calculated based on sales volumes, and not production volumes. This is 
our policy because by their nature indirect selling expenses are 
attributable to sales

[[Page 1979]]

of merchandise, and not to production of merchandise. We do not agree 
with petitioners that the computation needs to include the indirect 
selling expenses of all of Eletrosilex's affiliates because COP 
includes only the indirect selling expenses attributable to home market 
sales. Because the related affiliates were not associated with 
Eletrosilex's home market sales, there is no reason to include their 
indirect selling expenses in COP. In these final results of review, we 
have calculated Eletrosilex's indirect selling expenses by dividing its 
home market indirect selling expenses by its home market sales volumes.

Comment 18

    Petitioners argue that the Department erred in the calculation of 
Eletrosilex's and RIMA's U.S. selling prices by calculating the unit 
price based on the net weight of contained silicon rather than the 
gross weight of the silicon metal. They argue that in a CV-based margin 
calculation the Department should use the gross weight of the silicon 
metal to calculate the per-unit USP because CV is reported on a gross-
weight basis. Use of the contained-weight quantities would, they 
allege, distort the comparison of export price (EP) and NV. Similarly, 
petitioners argue that the Department erred in its sales-below-cost 
analysis for RIMA by calculating its home market selling prices on the 
basis of the contained weight of silicon, rather than the gross weight 
of the silicon metal. They argue that to make a fair comparison, the 
Department should convert the per-unit home market selling prices to a 
gross-weight basis before comparing them to COP.
    RIMA argues, with respect to petitioners' argument concerning the 
comparison of USP and NV, that petitioners' argument is tantamount to a 
request that the Department determine a USP for its sales on a 
different basis than that at which the merchandise was sold to the U.S. 
market. Doing so, RIMA argues, would be contrary to the plain language 
of the statute, which requires that the Department base EP on ``the 
price at which the subject merchandise is first sold (or agreed to be 
sold) before the date of importation by the producer or exporter of the 
subject merchandise. . .'' (See 19 U.S.C. Sec. 1677a(a).) The 
petitioners' approach, RIMA argues, would result in using a unit price 
different from that reflected on the invoice, and, therefore, would be 
contrary to the statute.

Department's Position

    We disagree with petitioners. We find no evidence on the record to 
support petitioners' contention that the weights Eletrosilex and RIMA 
reported for their U.S. and home market sales reflect only the weight 
of the silicon, rather than the weight of the silicon metal. 
Furthermore, there is no record evidence to support petitioners' 
assertion that CV was calculated on a gross-weight basis. Therefore, 
there is no reason to change the per-unit calculations from those in 
the preliminary results of review.

Comment 19

    Petitioners argue that Eletrosilex failed to provide a 
reconciliation of its COM to its inventory cost records. Eletrosilex 
attempted to provide a reconciliation in its questionnaire response (Q/
R), but in an SQR acknowledged that the previously submitted 
reconciliation contained an error. Therefore, in the SQR Eletrosilex 
submitted a revised reconciliation. This second reconciliation 
contained beginning and ending inventory values that were different 
from those contained in the Q/R. Thus, in a second supplemental 
questionnaire, the Department requested that Eletrosilex explain why it 
reported two different inventory balances based on the same inventory 
records. Eletrosilex answered that ``because inventory unit costs are 
calculated by the weighted average methodology rather than purely by 
quantities, the inventory balance necessarily changes when there is a 
change in values.'' This statement, petitioners argue, shows that 
Eletrosilex did not reconcile its reported COM to its inventory records 
maintained in the normal course of business, but instead simply 
compared its reported monthly COMs to inventory values that it created 
from its monthly COMs prepared for this review. Thus, petitioners 
argue, Eletrosilex failed to provide a critical reconciliation needed 
to validate its reported COM.

Department's Position

    We disagree with petitioners. In its SQR, Eletrosilex provided 
information which substantiated that the reported per-unit costs could 
be reconciled to the financial statement costs. Eletrosilex provided 
the financial statement average inventory values for each month of the 
POR, as well as financial statements. We reviewed and analyzed the cost 
information, the monthly inventory information, and the financial 
statements which Eletrosilex submitted. Since Eletrosilex produces only 
subject merchandise, we multiplied the submitted costs by the 
production quantities and compared the total costs to the financial 
statement total costs. We determined that the reported per-unit COP and 
CV data were consistent with the per-unit costs used in the financial 
statements.

Comment 20

    Petitioners argue the Department erred in its computation of CBCC's 
COP by using the depreciation expenses that CBCC reported. They find 
three errors in CBCC's reported depreciation. First, CBCC calculated 
its reported depreciation by aggregating its depreciation for all 
assets and allocating the aggregate amount to the three products it 
produces based on the relative production quantities of these products. 
Petitioners state that the Department's normal practice (which, 
petitioners allege, was CBCC's normal methodology prior to the 93-94 
administrative review) requires that depreciation of assets used to 
produce subject merchandise be directly attributed to the cost of the 
subject merchandise. Petitioners object to CBCC's new allocation 
because it is not, they allege, how CBCC has historically recorded 
depreciation in its books or reported to the Department in earlier 
reviews of this order. Petitioners argue that the Department's practice 
is clear that a respondent may not depart from its normal, historical 
cost allocation methods during an antidumping proceeding unless the 
respondent establishes that its normal method is distortive. See Canned 
Pineapple Fruit from Thailand, Final Determination of Sales at Less 
than Fair Value, 60 FR 29553, 29559 (June 5, 1995). Here, petitioners 
argue, CBCC has not even claimed that its prior method was distortive.
    The effect of CBCC's new calculation methodology, petitioners 
argue, is to shift CBCC's depreciation away from silicon metal and 
toward other products. To accept such a calculation, petitioners argue, 
would violate the Statement of Administrative Action (SAA) which states 
that ``if Commerce determines that costs ... have been shifted away 
from production of the subject merchandise, or the foreign like 
product, it will adjust costs appropriately, to ensure they are not 
artificially reduced.'' See SAA, 1994 U.S.C.A.A.N. at 4172.
    For the above reasons, petitioners argue that the Department 
should:
     Include in COM the depreciation for assets used to make 
silicon metal, consistent with CBCC's historical depreciation method;
     Allocate depreciation for equipment common to production 
of multiple products based on the percentage of

[[Page 1980]]

CBCC's total furnace capacity dedicated to production of each product;
     Allocate depreciation for equipment common to production 
of multiple products for a particular plant only among the products 
made at that facility;
     Calculate the proper amount of straight-line depreciation 
for the furnaces that produce silicon metal based on the monthly 
acquisition values for those furnaces.
    The second alleged error petitioners find in CBCC's calculation of 
depreciation is that it did not include depreciation for all idle 
equipment.
    The third alleged error petitioners find in CBCC's calculation of 
depreciation is that CBCC used accelerated depreciation for some 
assets. Petitioners state that the Department consistently rejects 
accelerated depreciation, which by definition is not based on the 
average useful life of the fixed assets. Therefore, petitioners argue, 
the Department should recalculate CBCC's depreciation eliminating any 
prior accelerated depreciation. It should also, petitioners argue, 
restate the value of the assets to account for hyperinflation.
    CBCC argues, with respect to the first alleged error, that though 
its methodology represents a change from the first and second reviews 
of this order, it is the same methodology it used in the third (93-94) 
review. Moreover, CBCC argues, it used this depreciation allocation 
method also with respect to production equipment common to all 
production in Ferrosilicon from Brazil; Final Determination, and the 
Department accepted it. Therefore, CBCC states, its current methodology 
has been historically used, and the Department has accepted it in one 
prior instance. Furthermore, CBCC argues, the methodology is proper 
because CBCC can produce any of its products in each furnace, with only 
minor modifications. Therefore, allocating depreciation to each product 
based on relative production capacity is not improper.
    CBCC argues, with respect to the second alleged error, that it was 
pursuant to Brazilian law that it did not report depreciation of idle 
assets. Under Brazilian law, it states, the depreciation of idle assets 
is illegal. Under such circumstances, it argues, depreciation is 
suspended and resumes only when the assets are operational again.
    CBCC argues, with respect to the third alleged error, that the 
Department verified at the fourth review verification that there was no 
accelerated depreciation of furnaces. Furthermore, had accelerated 
depreciation occurred in any prior review, CBCC argues, the Department 
verifiers would have noted it. Therefore, CBCC concludes, there is no 
evidence on the record to support petitioners' theories. With regard to 
petitioners' argument that the Department should restate the value of 
the assets to account for hyperinflation, CBCC argues that it 
calculated depreciation on asset values that were re-actualized to take 
account of inflation.

Department's Position

    We agree with petitioners in part. We have determined that CBCC's 
new method of calculating depreciation distorts the cost of 
depreciation incurred to produce silicon metal because it shifts 
depreciation costs incurred in the production of silicon metal away 
from that product and toward other products. For this reason, accepting 
this method would be contrary to the guidance set forth in the SAA. 
Since publication of the preliminary results of this review, we have 
requested and obtained information from CBCC that enables us to 
identify the depreciation expense associated with assets used to 
produce silicon metal and to include that expense as part of the COP/CV 
for silicon metal.
    Concerning depreciation expenses for idle assets, we agree with 
petitioners that it is our clearly stated practice and policy to 
include these in COP/CV. Accordingly, for these final results, we have 
included this category of expense in the calculation of depreciation.
    Petitioners' allegation that CBCC improperly used accelerated 
depreciation expenses is moot for these final results because, as 
stated above, we have performed a recalculation of depreciation. In 
this recalculation we have not accelerated the useful lives of the 
assets. For the furnaces we have used a useful life of ten years, which 
is the useful life we used in prior reviews of this order. By using the 
same useful life in successive reviews, we avoid accounting for the 
same costs more than once. See our position on comment 4 above.

Comment 21

    Petitioners argue that the Department erred in its calculation of 
CBCC's COP by using CBCC's reported direct labor costs. They argue that 
the figures CBCC reported reflect a methodology which distorts costs. 
As a result of this methodology, petitioners argue, CBCC reported 
disproportionate direct labor costs for products with comparable direct 
labor requirements. CBCC also, petitioners argue, allocated direct 
labor costs to furnaces that were not even operating, and thus required 
no direct labor. Therefore, petitioners argue that the Department 
should recalculate direct labor correctly, or use facts available for 
CBCC's direct labor.
    CBCC argues that its direct labor costs for this review were taken 
directly from its books and accounting records, which the Department 
verified. CBCC believes that its allocation and accounting methodology 
are justified based on how its labor is in fact employed and how it 
records the cost of labor in its books. CBCC explains that it assigns a 
set number of workers to each furnace, no matter what the output of the 
furnace may be. When a furnace is inoperative or idle, the workers and 
employees continue to be paid and are generally not reassigned to other 
furnaces because the cost of laying off employees for temporary periods 
of time would be prohibitive. Furthermore, all furnaces operate 24 
hours a day, and therefore it would be impracticable and unnecessary to 
add employees in addition to those already assigned to other furnaces. 
As a result, CBCC allocated these labor costs to the product which the 
idle furnace produced before becoming non-operational. Under these 
circumstances, CBCC argues, the evidence on the record, which the 
Department verified, shows that the workers assigned to idle furnaces 
continued to be paid, and that CBCC continued to account for this labor 
in its accounting records based on the volume of silicon metal produced 
by each furnace while it was active.

Department's Position

    We agree with petitioners that CBCC's reported labor costs distort 
the actual labor costs incurred to produce silicon metal because the 
company allocates a disproportionate share of labor costs to products 
that have comparable labor requirements and because it allocates labor 
costs associated with idle furnaces to specific products that are not 
in production at the time the labor costs were incurred. Although CBCC 
used this method in its normal accounting system, we cannot use it in 
our antidumping analysis. The SAA indicates that costs will be 
calculated based on records kept by a firm if they are kept in 
accordance with GAAP and if they reasonably reflect the costs 
associated with the production and sale of the merchandise.
    This is not the case with respect to CBCC's accounting for the 
labor costs associated with idle furnaces. Under CBCC's accounting, the 
company charges these costs to the last product produced in the 
furnace. We believe

[[Page 1981]]

that it is more appropriate to allocate these costs to all products 
produced by CBCC since, during the idle time, the labor costs incurred 
are not directly related to any specific product.

Comment 22

    Petitioners argue that the Department erred in its calculation of 
CBCC's COP by using the forest exhaustion costs that CBCC reported. 
CBCC's reported forest exhaustion costs were deficient, petitioners 
argue, because in them CBCC revalued the formation and pre-harvest 
maintenance costs of each forest project only up to the date that 
harvesting began for that project. Petitioners argue that in 
Ferrosilicon from Brazil; Final Determination the Department found that 
CBCC had used the same methodology, and determined that because of it 
CBCC ``had substantially understated its cost of producing charcoal by 
inaccurately recording the costs associated with their wood forests.'' 
(See Ferrosilicon from Brazil; Final Determination, at 738.) 
Petitioners argue that in this review the Department should require 
CBCC to recalculate its self-produced charcoal costs using forest 
exhaustion based on forest formation and pre-harvest maintenance costs 
that have been revalued to account for inflation during the harvest 
period. In the alternative, petitioners argue, the Department should 
determine CBCC's charcoal costs based on the facts available.
    CBCC argues that it explained its reporting of exhaustion to 
Department officials at the verification, and that the verifiers fully 
verified this question. It notes too that the exhaustion costs are re-
stated in UFIR to account for hyperinflation, and that they include all 
taxes and expenses attributable to exhaustion.

Department's Position

    We agree with petitioners that because CBCC did not revalue the 
cost of its forests after harvesting began, the charcoal costs it 
submitted are inadequate. Therefore, in these final results of review 
we have valued CBCC's self-produced charcoal at the price paid to 
outside suppliers. Under these circumstances we resorted to this same 
cost methodology in the first and second administrative reviews of this 
order. See Silicon Metal from Brazil; First Review Final Results at 
42809 and page 1 of the attachment to the March 14, 1995 analysis 
memorandum from Fred Baker to the file (public version).

Comment 23

    Petitioners argue that the Department erred by allocating CBCC's 
indirect selling expenses according to the relative sales volume of 
each of CBCC's three products. Petitioners argue that this is not a 
proper allocation because silicon metal has a significantly higher 
value than CBCC's other two products. Furthermore, petitioners argue 
that the Department should use adverse facts available for CBCC's 
indirect selling expenses because at the verification the Department 
requested information on CBCC's sales values for each of its products 
in order to allocate indirect selling expenses to silicon metal based 
on sales values rather than sales volumes, but CBCC refused to provide 
that information. The verification report states that the basis for the 
refusal was that the Department had not requested the information prior 
to the verification. Petitioners argue that this reason is inadequate 
because CBCC did not state that the information was unavailable.
    CBCC states that at the verification the Department officials 
suggested that CBCC recalculate the indirect selling expenses on the 
spot using a different methodology than that it requested in the 
supplemental questionnaire. CBCC states that at the verification it did 
not have the time or resources to provide an entirely new set of 
indirect selling expenses. It also notes that the Department's 
officials did not suggest providing this information to the Department 
at a later date. Accordingly, CBCC argues, the Department should not 
penalize CBCC for the Department's failure to request information other 
than the information requested in its questionnaires. See Toyota Motor 
Sales U.S.A. v. United States, Slip Op. 96-95, June 14, 1996; Micron 
Technology, Inc. v. United States, Slip Op. 95-107, June 12, 1995.

Department's Position

    We disagree with petitioners. Petitioners have given us no reason 
to believe that an allocation based on sales volume is unreasonable or 
distortive in this case. That silicon metal may have a higher sales 
value than other products CBCC produces is an insufficient basis to 
conclude, absent any supporting information on the record of this 
review regarding the specific nature of the indirect selling expenses 
incurred by CBCC, that an allocation based on sales value would produce 
more accurate results than an allocation based on sales volume. 
Therefore, in these final results of review, as in the preliminary 
results of review, we have allocated CBCC's indirect selling expenses 
to silicon metal based on relative sales volume.

Comment 24

    Petitioners argue the Department erred in its calculation of CBCC's 
G&A expenses by not allocating to CBCC a portion of the G&A expenses of 
CBCC's direct Brazilian parent, Solvay do Brasil, but instead it 
allocated to CBCC a portion of the G&A expenses of only its Belgian 
parent, Solvay & Cie. Petitioners argue that in the less-than-fair-
value (LTFV) investigation of this case CBCC acknowledged that Solvay 
do Brasil performed some services on CBCC's behalf, and that in this 
review CBCC has not stated that Solvay do Brasil did not do the same. 
Therefore, petitioners argue, the Department should calculate the 
portion of Solvay do Brasil's G&A expenses that is attributable to 
CBCC, and include those expenses in CBCC's COP and CV.
    CBCC argues that the consolidated financial statements of Solvay & 
Cie include the financial results of Solvay do Brasil as well as CBCC 
and some two dozen other affiliated companies in the Solvay Group. 
Thus, by calculating G&A expenses on the basis of the consolidated 
statements of the Solvay Group, CBCC argues, not only did the 
Department allocate G&A expenses incurred by Solvay do Brasil on behalf 
of CBCC, but also those of a number of companies throughout the world 
that did not perform any administrative services whatsoever for CBCC.

Department's Position

    We agree with the respondent that the allocation of its overall 
parent company's G&A expenses was correct and that to also add the G&A 
expenses of Solvay do Brazil would double-count the G&A expenses of 
Solvay do Brazil, which are included in the consolidated financial 
statements. Accordingly, for these final results we have continued to 
apply the consolidated G&A expenses reported by CBCC.

Comment 25

    Petitioners argue that the Department erred in its calculation of 
CBCC's interest expense by calculating it on the basis of the interest 
expense of CBCC's ultimate Belgian parent, Solvay & Cie. They argue 
that the Department should instead calculate it on the basis of the 
combined interest expense of CBCC and its Brazilian parent, Solvay do 
Brasil. In support of their argument, they point out that there is 
evidence on the record that there are loans between Solvay do Brasil 
and CBCC, whereas there is no evidence on the record that there are any 
intercompany transactions or borrowing between CBCC and Solvay & Cie. 
Furthermore, they argue that the

[[Page 1982]]

Brazilian firms normally would borrow in Brazilian credit markets or 
from Brazilian banks. Moreover, in the final results of the first 
administrative review of this order, and in Ferrosilicon from Brazil; 
Final Determination, the Department used the financial statements of 
Solvay do Brasil to calculate CBCC's interest expenses.
    CBCC argues that the Department's well-established practice is to 
calculate financial expenses based on the consolidated statements at 
the parent company level. See Ferrosilicon from Brazil; Final 
Determination at 736. In prior segments of this proceeding the 
Department consolidated the financial expenses of CBCC and Solvay do 
Brasil because CBCC had not submitted the consolidated financial 
statements of its Belgian parent, Solvay & Cie. In this review CBCC 
provided such consolidated financial statements. They show, CBCC 
states, that the financial results of both CBCC and Solvay do Brasil 
are consolidated with those of the Solvay Group. Therefore, CBCC 
argues, it is proper for the Department to use these consolidated 
financial statements pursuant to its ``well-established practice of 
deriving net financial costs based on the borrowing experience of the 
consolidated group of companies.'' See New Minivans from Japan, 57 FR 
21937, 21946 (May 26, 1992).

Department's Position

    We agree with CBCC. Both parties urge the Department to use 
interest expenses reflecting the consolidated financial results of the 
parent and its subsidiaries. However, the petitioners would have us 
refer only to the financial results of CBCC and its immediate Brazilian 
parent, while CBCC would have us use the global corporate interest 
expense. The petitioners' recommendation is internally inconsistent 
because, while they state that Department policy is to use fully 
consolidated results, they urge us to rely on only partially 
consolidated results (those of CBCC and Solvay do Brasil).
    Our policy is to base interest expenses and income on consolidated 
financial statements. We explained our basis for this position in 
Silicon Metal from Brazil; First Review Final Results as follows:

    Since the cost of capital is fungible, we believe that 
calculating interest expense based on consolidated statements is the 
most appropriate methodology. (see, e.g., Final Determination of 
Sales at Less Than Fair Value, Small Business Telephones from Korea, 
54 FR 53141, 53149 (December 27, 1989), Final Results of Antidumping 
Duty Administrative Review, Brass Sheet and Strip from Canada, 55 FR 
31414, 31418-13418-13419 (August 2, 1990), and 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, et al., 54 FR 18992, 19074 (May 3, 1989)).

See Silicon Metal from Brazil; First Review Final Results at 42807. 
Also see Ferrosilicon from Brazil; First Review Final Results at 59412.
    While we did use the consolidated financial statement of CBCC and 
Solvay do Brasil in prior reviews of this order and in Ferrosilicon 
from Brazil; Final Determination, in those segments of the proceeding 
we did not have the consolidated statement of Solvay & Cie on the 
record. Accordingly, for these final results of review, we have used 
the consolidated financial statement of Solvay & Cie for the interest 
expense.

Comment 26

    Petitioners argue that the Department erred in its calculation of 
CBCC's and RIMA's USP by adding to it the weighted-average amount of 
ICMS, PIS, and COFINS taxes reported for home market sales. They argue 
that this addition was improper because under the recent amendments to 
the antidumping law, the Department is to make no addition to USP for 
home market taxes. Rather, they argue, when based on home market 
prices, the Department should reduce NV by:

[t]he amount of any taxes imposed directly upon the foreign like 
product or components thereof which have been rebated, or which have 
not been collected, on the subject merchandise, but only to the 
extent that such taxes are added to or included in the price of the 
foreign like product. . . .

See 19 U.S.C. Sec. 1677b(a)(6)(B)(iii). Furthermore, petitioners argue 
that under this provision, the Department may not reduce NV by the 
amount of PIS and COFINS taxes reported for home market sales because 
they are gross revenue taxes. Thus, they are not ``imposed directly 
upon the foreign like product,'' as required under the statute in order 
to deduct them from NV.
    CBCC argues that the recent amendments to the U.S. antidumping laws 
require the Department to use tax-neutral methodologies for its dumping 
calculations. Accordingly, CBCC argues, it is proper for the Department 
to add to USP the weighted-average amount of ICMS, PIS, and COFINS 
taxes imposed on domestic sales because, by adding the same amount of 
taxes to the USP as that collected on the home market sales, the 
Department makes ``apples-to-apples'' comparisons.
    CBCC also argues that, even though the PIS and COFINS taxes are 
gross revenue taxes, this does not mean ``they are not imposed directly 
upon the foreign like product,'' as petitioners allege. Whether or not 
they are shown as a separate line item on the invoice is immaterial, 
CBCC argues, as long as they are embedded or included in the price of 
the sale. Furthermore, CBCC argues, the CIT has upheld the Department's 
practice of making an adjustment for taxes embedded in sales prices. 
See Daewoo Electronics Co., Ltd. v. International Union of Electronic, 
Electrical, Technical, Salaried and Mach. Workers, AFL-CIO, 6 F.3d. 
1511, 1516-17 (Fed. Cir. 1993). Moreover, CBCC argues that the PIS and 
COFINS taxes meet the two requirements of 19 U.S.C. 
Sec. 1677b(a)(6)(B)(iii) (quoted above). First, PIS and COFINS taxes 
are imposed on gross home market sales revenue of silicon metal, but 
are not ``collected'' on export sales. Second, although PIS and COFINS 
taxes are not shown as a separate line item on the invoice, they are 
``included'' in that price because they are embedded in such price.
    RIMA argues that the Department should be guided by the principle 
of tax neutrality that it re-stated in the final results of Silicon 
Metal from Brazil; Second Review Final Results. Accordingly, RIMA 
argues, the Department should add to the USP the absolute amount of 
ICMS taxes as well as the absolute amounts of PIS/COFINS taxes 
collected on home market sales, pursuant to 19 U.S.C. 
Sec. 1677a(c)(2)(B), 19 U.S.C. Sec. 1677b(a)(6)(B)(iii), and 19 U.S.C. 
Sec. 1677b(a)(6)(C)(iii). To add ICMS and PIS/COFINS taxes to NV 
without a corresponding adjustment to the USP, RIMA argues, would 
create dumping margins due solely to indirect taxes where none would 
otherwise exist.
    Minasligas argues that the Department erred by failing to deduct 
from NV the PIS, COFINS, and ICMS taxes due on Minasligas' home market 
sales. Minasligas argues that this failure was a violation of 19 U.S.C. 
1677b(6)(B)(iii), cited above. Minasligas argues, with respect to the 
PIS and COFINS taxes, that because these taxes are not collected on 
export sales, they must be deducted from NV prior to the comparison to 
USP. As for the ICMS tax, Minasligas argues that under the statute the 
Department must deduct from NV the amount by which the home market ICMS 
tax due exceeds the amount of ICMS tax due on U.S. sales. This 
deduction is necessary, Minasligas argues, to account for the 
difference in ICMS tax which has been rebated or not collected upon 
exportation, as directed in 16 U.S.C. 1677b(6)(B)(iii).
    Minasligas also argues that, in the alternative, if the Department 
does not

[[Page 1983]]

deduct the PIS, COFINS, and the correct amount of ICMS taxes from NV, 
then, in the alternative, it must add the absolute amount of these 
taxes to USP in order to achieve tax neutrality. As another 
alternative, Minasligas argues that the Department should make a 
circumstance-of-sale (COS) adjustment for the tax differential by 
deducting from the NV the absolute amount of the tax difference between 
USP and NV.
    Petitioners argue that the Department was correct in adding the PIS 
and COFINS taxes to Minasligas' home market sales prices because it had 
reported its home market prices net of these taxes, and thus 
understated the gross unit prices. Therefore, petitioners argue, the 
Department must add the PIS and COFINS taxes to Minasligas' home market 
prices in order to determine the actual prices that Minasligas charged, 
which are the proper starting point for the calculation of NV. 
Furthermore, petitioners argue, under section 773(a)(6)(B)(iii) of the 
Act, NV may be reduced only by taxes imposed directly upon the 
``foreign like product or components thereof.'' Petitioners argue that 
because the PIS and COFINS taxes are calculated based on gross receipts 
(excluding receipts from export sales), they are not imposed ``directly 
upon the foreign like product,'' and therefore may not be deducted from 
NV.
    Moreover, petitioners argue that in similar situations in the past 
the Department has not made an adjustment for gross revenue taxes. In 
support of this argument they first note that the language of 19 U.S.C. 
1677b(6)(B)(iii) is virtually identical to the language of 
772(d)(1)(C), which was, they state, the parallel provision in effect 
prior to the enactment of the URAA, and which provided for an upward 
adjustment to USP. They then note that in Silicon Metal from Argentina 
the Department determined that two Argentine taxes (which petitioners 
allege are almost identical to Brazil's PIS and COFINS taxes) did not 
qualify for an adjustment to USP because they were gross revenue taxes. 
See Silicon Metal from Argentina, Final Determination of Sales at Less 
Than Fair Value, 56 FR 37891, 37893 (August 9, 1991).
    Petitioners also argue that the PIS and COFINS taxes do not qualify 
for a COS adjustment pursuant to 19 U.S.C. Sec. 773(a)(6)(C)(iii) for 
the same reason that they do not qualify for an adjustment to NV 
pursuant to 19 U.S.C. Sec. 773(a)(6)(B)(iii) of the Act. The 
Department's regulations specify that the Department will limit 
allowances for differences in the circumstances of sales ``to those 
circumstances which bear a direct relationship to the sales compared.'' 
See 19 CFR Sec. 353.56(a)(1). Petitioners argue that because PIS and 
COFINS taxes are not imposed on silicon metal transactions, but instead 
are assessed on gross receipts from operations, they are not directly 
related to specific sales and therefore do not qualify for a COS 
adjustment.

Department's Position

    We agree with petitioners that recent changes to the antidumping 
law make no allowance for additions to USP for home market taxes. Thus, 
to achieve tax neutrality in these final results of review, we have 
deducted relevant taxes from NV, and have not added them to USP. This 
approach in is accordance with 19 U.S.C. Sec. 1677b(a)(6)(B)(iii). 
However, we agree with Minasligas that in order to achieve tax 
neutrality with respect to the ICMS tax we should deduct from NV only 
the amount of the difference between ICMS tax due on home market sales 
and ICMS tax due on U.S. sales. We have done so in these final results 
of review.
    We also agree with petitioners that information on the record 
demonstrates that the PIS and COFINS taxes are taxes on gross revenue 
exclusive of export revenue. Thus, in accordance with our determination 
in Silicon Metal from Argentina, we determine that these taxes are not 
imposed ``directly upon the merchandise or components thereof.'' Thus, 
we have no statutory basis to deduct them from NV. We also agree with 
petitioners that because the PIS and COFINS taxes are gross revenue 
taxes, they do not bear a direct relationship to the sales, and 
therefore do not qualify for a COS adjustment. Therefore, in these 
final results of review we have not made an adjustment for PIS and 
COFINS taxes in the margin calculation.

Comment 27

    Petitioners argue with respect to all respondents that the 
Department should include profit in CV, and that the foreign like 
product that should be excluded from the profit calculation as outside 
the ordinary course of trade includes sales disregarded as below cost, 
sales of off-quality merchandise, and sales to related parties at 
prices that are not at arm's length.

Department's Position

    We agree that the calculation of CV should include profit. Where we 
used CV in the margin calculation in these final results of review and 
the respondent had above-cost sales, we have calculated profit based on 
above-cost home market sales of commercial-grade silicon metal sold at 
arm's length prices. Where a respondent had no above-cost sales, but 
its financial statement indicates that it had profits, we based the 
profit calculation on the respondent's financial statement. Where a 
respondent had no above-cost sales and its financial statement 
indicated the company experienced losses rather than profits during the 
calendar year, we have calculated profit based on the weighted-average 
profit ratios of other respondents who reported profits on their 
financial statements.

Comment 28

    Petitioners argue that the Department erred in its calculation of 
RIMA's COP by using incorrect figures for depreciation. The figures the 
Department used were depreciation expenses that RIMA submitted to the 
Department at verification. (Subsequent to publication of the 
preliminary results the Department solicited additional information 
from RIMA regarding its depreciation. Petitioners submitted separate 
comments regarding that information, as described below.) Petitioners 
argue regarding RIMA's original depreciation figures that the reported 
depreciation is massively understated. As support for this assertion, 
they cite the independent auditor's report accompanying RIMA's 1994 and 
1995 financial statements. These reports give the independent auditor's 
opinion as to what RIMA's depreciation and amortization would be if 
RIMA recognized them on their financial statements. Comparing the 
independent auditor's estimate of depreciation with those submitted by 
RIMA for this review, petitioners argued, shows that the numbers given 
by the independent auditors are much higher than those given by RIMA in 
this review.
    Furthermore, petitioners argued that RIMA's depreciation 
calculation is flawed in numerous ways. Among them:
    1. Its calculation of the purported company-wide depreciation for 
all its products included only depreciation for machinery and equipment 
at its Varzea da Palma (VZP) plant, and thus excluded the depreciation 
for the machinery and equipment at the other plants;
    2. It is based on an accelerated depreciation rate. Petitioners 
argue that it is the Department's practice to reject accelerated 
depreciation of assets where such accelerated depreciation fails to 
allocate the cost of the asset on a consistent basis over the life of 
the asset.
    3. RIMA's 1995 audited financial statements reported fixed asset 
values for buildings, vehicles, furniture, and implements, while RIMA's 
depreciation

[[Page 1984]]

worksheets prepared for this review do not reflect depreciation for 
these assets.
    4. RIMA's depreciation worksheets do not appear to contain line 
items for amortization of its deferred expenses, which were incurred to 
set up, expand, and modernize RIMA's production facilities and to 
develop new plants.
    Moreover, petitioners argue that RIMA improperly changed its 
depreciation calculation method since the preceding review. The 93-94 
verification report says:

    Since each piece of equipment was dedicated to the production of 
certain products, RIMA reported the depreciation expense from the 
cost center for silicon metal. RIMA allocated the remaining overhead 
expenses [including depreciation] based on the relative number of 
hours worked on silicon metal production versus total hours worked 
on all products.

See Verification Report, October 25, 1995, p. 19 (public version). In 
the 94-95 review, petitioners allege, RIMA departed from this 
methodology by calculating company-wide depreciation and allocating it 
to products based on the relative cost of sales of the products. 
Department practice requires that respondents show that their 
historically-used method is distortive before they can use a new 
method. RIMA, petitioners allege, made no such showing.
    Finally, petitioners argue that RIMA performed an improper 
allocation of its depreciation which resulted in depreciation for some 
equipment used exclusively for silicon metal being allocated to other 
products. Moreover, they argues that where allocation of depreciation 
is appropriate, RIMA's allocation, which was based on cost of sales, is 
improper because cost of sales does not reflect the extent to which 
assets were used to produce individual products during a period. This 
is because cost of sales excludes the cost of inventory production and 
includes the cost of products sold out of inventory.
    For the above reasons, petitioners argue that the Department should 
obtain the necessary information to calculate RIMA's depreciation 
properly, or, in the alternative, it should calculate RIMA's 
depreciation based on the facts available.
    In response to petitioners' comments regarding its original 
calculation of depreciation, RIMA argues that petitioners base their 
comments on incorrect assumptions or on a fundamental misunderstanding 
of RIMA's depreciation calculations. RIMA argues that while it is true 
that the independent auditor's estimate of depreciation is different 
from RIMA's, the difference is accounted for by the fact that the 
independent auditor's estimate is a cumulative figure representing 
depreciation that has occurred since RIMA stopped recording 
depreciation on its financial statement (which has been at least five 
years), whereas the depreciation RIMA reported to the Department is the 
depreciation only for the POR. RIMA also state that petitioners were 
mistaken regarding the number of RIMA's plants that produce silicon 
metal, and thus are mistaken in their own estimate of what RIMA's 
allocated silicon metal depreciation should be.
    Furthermore, RIMA states that petitioners have made several other 
errors in their analysis. First, RIMA argues that because petitioners 
have misread the verification exhibit showing the calculation of 
depreciation, they are in error in stating that the reported 
depreciation takes account only of the VZP plant's equipment. In fact, 
RIMA states, it included eight items in its depreciation worksheet, 
including deferred expenses and categories of equipment other than 
equipment at the VZP plant. Second, RIMA states that the depreciation 
of the assets takes into account the effect of hyperinflation because 
the acquisition values of such assets are stated in UFIR, which are 
then converted into local currency for the months concerned. Third, 
petitioners were incorrect, RIMA argues, in saying that its 
depreciation methodology is a change from prior reviews. In fact, RIMA 
argues, it is the same calculation methodology used in Silicon Metal 
from Brazil; Second Review Final Results, which the Department 
accepted.
    Finally, RIMA argues that the Department verifiers noted nothing 
unusual or incorrect in RIMA's depreciation calculations. Therefore, 
RIMA concludes, the Department should rely on these findings.
    On November 14, 1996 the Department solicited additional 
information from RIMA. We requested that RIMA submit depreciation 
expenses that tied to the auditor's statements, and which should 
consist of the sum of the depreciation expenses for assets only 
associated with the production of silicon metal and an allocated 
portion of the depreciation expenses for other, common assets. In its 
response, in addition to providing information, RIMA reiterated that 
the auditor's stated depreciation amounts should not be used as a basis 
for the analysis because the auditors did not consider whether RIMA's 
assets had been fully depreciated when they calculated the estimated 
depreciation expenses for the years reported in the financial 
statement. RIMA argued that this methodology overstates depreciation 
significantly because during the normal course of business, every year, 
assets become fully depreciated and, therefore, cannot be used as a 
basis for determining depreciation expenses.
    In commenting on RIMA's response to the Department's November 14, 
1996 supplemental questionnaire, petitioners stated that RIMA's new 
response was deficient. Petitioners state that RIMA did not respond to 
the Department's request for information on the replacement cost for 
silicon metal assets or for depreciation expenses for silicon metal 
assets. Because RIMA allegedly failed to respond to the Department's 
request for information, petitioners argue that the Department should 
use facts available for RIMA's depreciation.

Department's Position

    We agree with petitioners that both RIMA's initial depreciation 
calculation and the depreciation calculation submitted in response to 
the Department's November 14, 1996 supplemental questionnaire were 
deficient. As petitioners point out, RIMA's original calculation did 
not include all assets, and therefore is understated. Furthermore, 
RIMA's response to the Department's November 14, 1996 submission did 
not respond to all the Department's requests for information. Rather 
than providing requested information, RIMA calculated depreciation in a 
way not in conformity with the Department's instructions. Without the 
requested information the Department cannot properly determine RIMA's 
depreciation expenses during the POR.
    Where a respondent has not responded to a request for information, 
the Department may resort to facts available. As facts available the 
Department has chosen to use one-half of the audited total RIMA 
depreciation expenses for each fiscal year as RIMA's total POR 
depreciation expenses, and to allocate to silicon metal production a 
share of that total based on the highest monthly percentage of cost of 
goods sold accounted for by silicon metal, as appearing in verification 
exhibit OH1. We allocated one-twelfth of this total, in turn, to each 
month of the POR.

Comment 29

    Petitioners argue that the Department erred in its calculation of 
RIMA's COP by using RIMA's reported cost for its self-produced 
charcoal. RIMA reported the price of charcoal from unrelated suppliers, 
and said it was reflective of the fair market value for charcoal.

[[Page 1985]]

Petitioners argue that this claim would be relevant if RIMA had 
acquired charcoal from related suppliers, but this is not the case; 
RIMA produced the charcoal itself. Thus, petitioners argue, prior to 
the final results the Department must obtain RIMA's full cost of 
producing charcoal (including all operating and materials costs and 
depreciation and amortization) or use facts available.
    In addition, petitioners argue that at the verification in this 
review RIMA revealed for the first time that one of its plants produced 
quartz, a major input for the production of silicon metal. Petitioners 
argue that for the same reasons as given above with respect to 
charcoal, the Department must either obtain RIMA's full cost of 
producing quartz or use facts available.
    RIMA argues the related entities from which it purchases charcoal 
are not departments or subdivisions of RIMA Industrial S/A, and that, 
therefore, the charcoal it purchases from them is not ``internally 
produced.'' Moreover, it argues that its use of the prices from third-
party suppliers was justified in light of statutory provisions. Because 
the prices from its related suppliers were, it admits, not at arms-
length, they could not be used in the cost calculation because 19 
U.S.C. Sec. 1677b(f)(2) says that prices between related companies can 
be considered in determining the cost of materials in CV only when such 
prices ``fairly reflect the amount usually reflected in sales of 
merchandise under consideration in the market under consideration.'' 
Furthermore, because the Department could not use the prices from its 
related companies, RIMA argues that it was justified in using the 
prices of third-party suppliers as a surrogate for the prices from its 
related entities, because the statute provides that when ``a 
transaction is disregarded * * * and no other transactions are 
available for consideration, the determination of the amount shall be 
based on the information available as to what the amount would have 
been if the transaction had occurred between persons that were not 
related.'' See 16 U.S.C. Sec. 1677b(f)(2). Under this provision of the 
statute, RIMA argues, there is no basis for the petitioners' suggestion 
that the Department require RIMA to calculate the fabrication costs of 
charcoal for its related suppliers. Moreover, RIMA argues, the 
Department has used this methodology in other cases, such as in 
Ferrosilicon from Brazil; Final Determination at 738.
    With respect to petitioners' argument that RIMA purchased quartz 
from related suppliers, RIMA argues that petitioners' argument is 
unfounded. It states that there is no evidence in the record that RIMA 
purchased quartz from any related suppliers.

Department's Position

    At the Department's request, RIMA submitted information relating to 
the COP of charcoal incurred by RIMA's affiliates during each month of 
the POR. However, we noted that RIMA did not report reforestation, 
depreciation, depletion, and exhaustion costs. Therefore, because we 
cannot rely on RIMA's reported costs for self-produced charcoal, we 
have used the prices RIMA paid for charcoal to unrelated suppliers to 
value RIMA's charcoal costs.
    With respect to quartz, we agree with respondent that there is no 
information on the record indicating that RIMA purchased quartz from 
affiliated suppliers during this POR. Therefore, we have has not 
adjusted RIMA's reported direct material costs for any supposedly self-
produced quartz.

Comment 30

    Petitioners argue that the Department erred in its calculation of 
RIMA's COP by using RIMA's reported G&A expenses. They argue that the 
Department should reject RIMA's reported G&A expenses because RIMA did 
not calculate them using the Department's standard methodology for 
calculating G&A expenses, which is to multiply the COM by the ratio 
between the G&A expenses and the cost of sales reported in the 
respondent's audited financial statements. Moreover, petitioners allege 
that the method RIMA used was flawed for two reasons. First, it was 
based on monthly G&A expenses. The Department expressly rejected use of 
monthly G&A expenses in the 1991-92 review in this proceeding. See 
Silicon Metal from Brazil; First Review Final Results. Second, RIMA's 
calculation used 1994 data to derive monthly G&A expenses for 1995.
    In addition, petitioners argue that in its computation of G&A 
expenses used in the CV calculation RIMA made one additional mistake. 
That mistake was to include an offset for ``other operational income'' 
in the monthly G&A calculations. Petitioners argue that this ``other 
operational income'' consisted of an alleged inventory holding gain due 
to hyperinflation. The Department should deny this offset, petitioners 
argue, because its practice is to allow an offset to G&A only for 
income related to the production of the subject merchandise. The 
``other operational income'' here, petitioners argue, is an accounting 
adjustment that does not constitute income. Moreover, petitioners argue 
that some of this income is unrelated to silicon metal, but is instead 
related to RIMA's other products. Therefore, petitioners conclude, the 
Department should deny this adjustment.
    RIMA argues that it reported its G&A costs based on its accounting 
records kept in the normal course of business. Thus, RIMA argues, the 
Department should use those reported costs pursuant to 19 U.S.C. 
Sec. 1677b(f)(1)(A), which states that ``costs shall be calculated 
based on the records of the exporter or producer of the merchandise, if 
such records are kept in accordance with the generally accepted 
accounting principles of the exporting country * * * and reasonably 
reflect the costs associated with the production and sale of the 
merchandise.'' Furthermore, RIMA argues, RIMA allocated its G&A costs 
to silicon metal based on the ratio of the cost of goods sold, which is 
the normal allocation method the Department uses. See e.g., 
Ferrosilicon from Brazil; Final Determination at 734.
    Furthermore, RIMA argues that the Department properly adjusted the 
G&A costs used in CV to account for a one-time reevaluation of the 
company's inventory. In support of this argument, RIMA points to the 
verification report, which says, ``due to hyperinflation in Brazil in 
1994, Rima reassessed the value of the company's inventory, resulting 
in a 15,000,000,000 reais increase in inventory value * * * Rima 
provided the inventory re-evaluation report indicating the methodology 
and amount associated with the re-evaluation, as well as an independent 
auditor's report approving the inventory re-evaluation.'' See October 
3, 1996 verification report, at 15.

Department's Position

    We agree with petitioners that our standard methodology in 
calculating G&A expenses is to multiply the COM by the ratio between 
the G&A expenses and the cost of sales reported in the respondent's 
audited financial statements. See Silicon Metal from Brazil; First 
Review Final Results, at 42809. We have used this method in our final 
results of this review.
    Furthermore, the Department has determined that the adjustment made 
by RIMA to its inventory balance should not be allowed as a reduction 
to the company's G&A expense. RIMA chose to restate the historical 
value of its inventory balances by recognizing a one-time increase to 
reflect the current value of these assets. The accounting entries for 
this restatement included a credit to the net equity of the company 
that was recognized through RIMA's income statement. Here, the record 
does

[[Page 1986]]

not indicate that this credit, or offset, can be characterized as 
income that reduces RIMA's production cost for silicon metal. 
Consequently, we have made an adjustment to G&A expense to exclude this 
offset.

Comment 31

    Petitioners argue that the Department erred in its computation of 
RIMA's COP by using the financial expenses as RIMA reported them. 
Petitioners argue that RIMA's method of calculating its financial 
expenses was flawed because RIMA did not perform its computation using 
the Department's standard formula. That formula is, according to 
petitioners, to multiply COM by the ratio between the financial 
expenses and cost of sales reported in the respondent's audited 
financial expenses. Instead, RIMA calculated financial expenses for 
silicon metal for the months of the POR during 1994 based on its 
company-wide financial expenses in each month multiplied by the 
percentage of its cost of sales in that month accounted for by sales of 
silicon metal. Additionally, RIMA derived monthly financial expenses 
for the months of the POR in 1995 using its 1994 data.
    RIMA argues that the Department should accept RIMA's calculation of 
financial expenses because it reported these costs as they are recorded 
in its accounting records in the normal course of business. Thus, 
accepting them is in accordance with 19 U.S.C. Sec. 1677b(f)(1)(A), 
which states that:

[c]osts shall normally be calculated based on the records of the 
exporter or producer of the merchandise, if such records are kept in 
accordance with the generally accepted accounting principles of the 
exporting country . . . and reasonably reflect the costs associated 
with the production and sale of the merchandise. The administering 
authority shall consider all available evidence on the proper 
allocation of costs, including that which is made available by the 
exporter or producer on a timely basis, if such allocations have 
been historically used by the exporter or producer.

Department's Position

    In order to ensure uniformity in our treatment of different 
companies and consistency in our calculation methodology from one 
review to the next, we have found it necessary to adopt standard 
formulas for the calculation of certain expenses. We agree with 
petitioners that our method of calculating financial expenses is to 
multiply COM by the ratio between the financial expenses and cost of 
sales reported in the respondent's audited financial expenses. We have 
used this methodology in these final results of review for all 
companies. This methodology is not inconsistent with RIMA's accounting 
records because it is based on information contained in RIMA's 
financial statement.

Comment 32

    Petitioners argue that the Department erred in its calculation of 
RIMA's and Minasligas' U.S. credit expenses by using the shipment date 
that these companies reported in their sales listings. With respect to 
RIMA, petitioners argue that using RIMA's reported shipment date 
results in an understatement of U.S. credit expenses because RIMA 
reported as the shipment date the date on which it shipped the last lot 
of each sale from its plant to the Brazilian port, rather than the date 
on which it shipped the first lot of each sale from its plant to the 
Brazilian port. Therefore, petitioners argue, the Department should 
determine the credit expenses for each sale based on the simple average 
of the number of days between the date of payment and the date of 
shipment from the plant to the port for each partial shipment from the 
plant.
    With respect to Minasligas, petitioners argue that the shipment 
date Minasligas reported was the bill of lading date, and not the date 
of shipment from Minasligas' plant. In a similar situation in the 
preliminary results of the third review of this order, the Department 
used the date of sale as the date of shipment; petitioners argue that 
the Department should do the same here.
    RIMA argues that the Department properly used the reported shipment 
dates because it ships its U.S. sales from its plant to the Brazilian 
port in lots, and a lot is not completed until all shipments from the 
plant have been made. Therefore, RIMA argues, it is proper for the 
Department to consider the date of the last shipment from the plant as 
the date on which the lot was shipped from the plant.

Department's Position

    We agree with petitioners in part. With respect to RIMA, we agree 
that where a U.S. sale is shipped from the plant to the port in lots, a 
computation of credit based on the average credit period would better 
reflect the credit expenses borne by the respondent than would a 
computation based on the shipment date of either the first or last lot. 
In these final results of review we have calculated credit using an 
average credit period based on information RIMA provided in exhibit 13 
of its April 30, 1996 SQR.
    We disagree with petitioners with respect to Minasligas. While 
Minasligas did report the bill of lading date as the shipment date for 
its U.S. sales, it also reported the invoice date for each sale. This 
invoice date is the date of shipment from the plant. See Minasligas' 
October 25, 1995 questionnaire response, exhibit C-1. Thus, there is no 
need to use the date of sale as the date of shipment as petitioners 
suggest. In these final results of review we have calculated credit 
using the invoice date as the start of the credit period for those 
sales for which the date of invoice was prior to the date of receipt of 
payment.

Comment 33

    Eletrosilex argues that the Department erred in failing to add to 
USP the PIS, COFINS, and consumption taxes charged on its home market 
comparison sales. It argues, with respect to the PIS and COFINS taxes, 
that this failure was a violation of the Department's policy of 
calculating tax-neutral dumping assessments. It argues, with respect to 
the consumption taxes, that this failure was a violation of the change 
in the treatment of consumption taxes that the Department announced in 
the final results of the second review of this case. There the 
Department stated:

    Where merchandise exported to the United States is exempt from 
the consumption tax, the Department will add to the U.S. price the 
absolute amount of such taxes charged on the comparison sales in the 
home market.

See Silicon Metal from Brazil; Second Review Final Results, at 46764. 
Eletrosilex argues that because the ICMS tax was not included in the 
USP calculations, the Department's failure to add to USP the absolute 
amount of consumption taxes charged on its home market sales was a 
violation of the Department's announced policy of adding to the USP 
``the absolute amount of such taxes charged on the comparison sales in 
the home market.''
    Petitioners argue that, with respect to the PIS and COFINS taxes, 
that the antidumping law, as amended by the URAA, does not provide for 
an upward adjustment to EP for home market taxes imposed directly upon 
``the merchandise or components thereof'' which have not been rebated 
or collected on the exported merchandise. Instead, under the new law, 
NV may be reduced by those taxes. Furthermore, petitioners argue that 
for the reasons given above under comment 26, the PIS and COFINS taxes 
do not qualify for a reduction to NV.
    Petitioners argue, with respect to the ICMS tax (i.e., consumption 
tax), that

[[Page 1987]]

evidence on the record indicates that, contrary to Eletrosilex's 
statement, Eletrosilex's reported U.S. prices did in fact include the 
ICMS tax due on its U.S. sales. Furthermore, petitioners argue, 
Eletrosilex's argument is relevant only when the Department bases its 
margin calculations on price-to-price comparisons, and after the 
Department makes the necessary corrections in its calculations for 
Eletrosilex that the petitioners have identified in their case brief, 
the Department will base its margin calculations for Eletrosilex on CV.

Department's Position

    We agree with petitioners that evidence on the record indicates 
that ICMS taxes are assessed on Eletrosilex's U.S. sales. In these 
final results of review, in order to calculate the dumping margin on a 
tax-neutral basis for price-to-price comparisons, we have deducted from 
NV the amount of ICMS tax on the home market sale that exceeds the 
amount of ICMS tax collected on the U.S. sale in accordance with 
Sec. 773(a)(6)(B)(iii). For our position with respect to the PIS and 
COFINS taxes, see comment 26 (above). For our treatment of the ICMS tax 
due on U.S. sales when NV is based on CV, see the Department's position 
in response to comment 7.

Comment 34

    Eletrosilex argues that the Department erred in its calculation of 
home market imputed credit by dividing an allegedly annual interest 
rate by 30, rather than by 365.
    Petitioners argue that the interest rate the Department used in its 
calculation was a monthly rate, and that the Department was therefore 
correct in using 30 in the denominator.

Department's Position

    We agree with petitioners. For the credit calculation we used the 
monthly rates from the state bank of Minas Gerais, which Minasligas 
reported in exhibit B-2 of its October 25, 1995 questionnaire response. 
This exhibit states that these rates are monthly rates. Therefore, 
because these are monthly rates, 30 is the appropriate denominator.

Comment 35

    Eletrosilex argues the Department erred in its calculation of the 
foreign unit price in dollars (FUPDOL) by converting three values into 
U.S. dollars using the exchange rate of the date of sale, rather than 
the date of shipment.
    Petitioners argue that the Department used the correct exchange 
rates because the statute says that the Department ``shall convert 
foreign currencies into United States dollars using the exchange rate 
in effect on the date of sale of the subject merchandise * * *'' See 
773A(a) of the Act.

Department's Position

    We agree with petitioners. Because the date we use in making 
currency conversions is governed by the statute, in these final results 
we have used the exchange rate of the date of the U.S. sale in making 
currency conversions.

Comment 36

    Eletrosilex argues the Department erred in its computation of COP 
by doubling the amount of its reported depreciation. (Eletrosilex 
reported depreciation for only the six months of the POR in 1995, and 
no depreciation for the six months of the POR in 1994.) It argues that 
its recording of no depreciation for 1994 was fully consistent with 
Brazil's generally accepted accounting principles (GAAP). Its earlier 
application of accelerated depreciation, Eletrosilex argues, required 
it to interrupt the application of depreciation for the first part of 
the POR. It is an error, it argues, for the Department to charge 
depreciation beyond that legitimately accounted for under the law.
    Petitioners argue that the Department was correct in including an 
amount for 1994 depreciation in Eletrosilex's COP. They argue that the 
auditor's report which accompanied Eletrosilex's 1994 financial 
statement shows that Eletrosilex is incorrect in stating that its 
recording of no depreciation for 1994 was in accordance with Brazilian 
GAAP. That auditor's report says that ``the company did not recognize * 
* * amounts corresponding to the depreciation of the fixed assets, as 
required by the accounting principles foreseen in the CORPORATE'S 
LEGISLATION and by the main accounting principles.'' See Eletrosilex's 
October 20, 1995 questionnaire response, at exhibit 8. Furthermore, 
petitioners argue, under established Department practice, it is 
distortive to use a lower depreciation rate (including a zero 
depreciation rate) in a review period to compensate for prior 
accelerated depreciation. See Ferrosilicon from Brazil; Final 
Determination at 738.

Department's Position

    We agree with petitioner that evidence from Eletrosilex's financial 
statement indicates that Eletrosilex's accounting of depreciation was 
not in accord with Brazilian GAAP. For these final results of review, 
we have used the depreciation expenses as estimated by Eletrosilex's 
independent auditor, which were in accordance with Brazilian GAAP. See 
Eletrosilex's October 16, 1996 submission at exhibit 7.

Comment 37

    Eletrosilex argues that the Department erred in its computation of 
its COP by incorrectly calculating the by-product revenue offset that 
it applied to Eletrosilex's COM. The firm argues that the Department 
was in error in calculating the offset based on the volume of the by-
products sold, rather than the volume produced. Because much of the by-
product production is not sold, it is only proper, Eletrosilex argues, 
that an allocation in terms of cost of production should be made to the 
product produced, rather than that portion of the product produced that 
is sold. In addition, Eletrosilex argues the Department should consider 
as by-products only ladle sculls, off-grades, and fines, and not slag 
or silicon metal of ingot bottom. Eletrosilex states that it does not 
consider slag or silicon metal of ingot bottom to be a production item, 
and does not include it in its production volume records.
    Petitioners argue that the Department's practice does not support 
calculating an offset to COM based on the volume of by-products 
produced, but only on the volume sold.

Department's Position

    We do not agree with Eletrosilex that the by-product offset should 
be applied to the volume of by-products produced. Our policy is to 
allow an offset only for actual revenue. In these final results of 
review we have offset production costs with all revenue that 
Eletrosilex reported from its sale of by-products. We have counted as 
by-products only ladle sculls, off-grades, and fines. See also comment 
15 of the third review final results of review this order, being issued 
concurrently.

Comment 38

    Eletrosilex argues that the Department should make an adjustment to 
its USP for duty drawback. It explains that in its questionnaire 
response it inadvertently failed to request an adjustment for duty 
drawback, but that it is entitled to one. Therefore, Eletrosilex argues 
that the Department should use the information it submitted in its case 
brief to calculate the adjustment. It argues that the duty drawback 
adjustment is essential to the Department's responsibility to make duty 
assessments based on full and accurate data.

[[Page 1988]]

    Petitioners argue that Eletrosilex did not inadvertently fail to 
request an adjustment for duty drawback. In its questionnaire response, 
Eletrosilex specifically stated that ``it is not seeking a duty 
drawback for the period of review.'' See Eletrosilex's October 20, 
1995, questionnaire response, p. 55. Moreover, petitioners argue that 
the Department should not consider Eletrosilex's request or the 
information about this newly-claimed adjustment that Eletrosilex 
submitted in its case brief because it is untimely under the 
Department's regulations. See 19 CFR 353.31(a)(1)(ii).

Department's Position

    We agree with petitioners. It is a respondent's responsibility to 
make a timely claim for any requested adjustment. Under 19 CFR 
353.31(a)(3) the Department may not consider unsolicited information 
submitted after the applicable time limit. That time limit in this 
review is 180 days after the date of publication of the initiation 
notice. See 19 CFR 353.31(a)(1)(ii). Because Eletrosilex submitted its 
duty drawback claim after that deadline, the information was untimely, 
and we did not make an adjustment for it in these final results of 
review.

Comment 39

    CCM argues that in order for its cash deposit rate for future 
entries to reflect the appropriate dumping margin, the Department 
should issue the third review final results prior to, or concurrently 
with, issuance of the fourth review final results. If the Department 
issues the fourth review final results prior to the third review final 
results, CCM argues, CCM will continue to face the 93.2 percent cash 
deposit rate established in the LTFV investigation. In the alternative, 
if the Department does issue the third review final results after the 
fourth review, CCM argues that the Department should make clear in it 
cash deposit instructions that CCM's third review cash deposit rate 
should apply to all future entries because CCM was a no-shipper in the 
fourth review.

Department's Position

    CCM's concern is resolved because the Department is issuing the 
results of both reviews concurrently.

Comment 40

    CBCC argues that the Department erred in its computation of home 
market imputed credit by using an interest rate other than that which 
CBCC submitted. CBCC states that in its submission it calculated its 
imputed credit using a published short-term borrowing rate from a 
commercial lender because it had no short-term borrowings during the 
POR. Doing so, CBCC states, was in accordance with the Department's 
instructions as given in the supplemental questionnaire. Thus, CBCC 
argues, the Department should not have applied a different rate in its 
calculation of imputed credit.
    Petitioners argue that the Department is under no obligation to use 
the interest rate data that CBCC provided, and that CBCC provided no 
basis for the Department to use CBCC's data instead of those used for 
the preliminary results of this review. Accordingly, petitioners argue, 
the Department should not use CBCC's data for the final results.

Department's Position

    We agree with petitioners. In these final results of review, as in 
the preliminary results of review, we have calculated credit using the 
borrowing rates offered by the state bank of Minas Gerais. These rates 
are publicly available, and we have used them without exception for all 
respondents who reported no short-term borrowings of their own during 
the POR.

Comment 41

    CBCC argues that the Department erred in its calculation of the 
variable NPRICOP (i.e., the price we compare to COP in the cost test) 
by double-deducting part of the ICMS tax. It argues the Department made 
this mistake by deducting a variable representing the ICMS tax on the 
sale and also a variable, INLFTC2H, that represents the inland freight 
and the ICMS tax on the inland freight. CBCC argues that the former 
variable includes all ICMS tax on the sale, including that included in 
the variable INLFTC2H. Therefore, CBCC argues, the Department should 
not deduct INLFTC2H, but INLFTC1H, a variable that represents the 
inland freight net of the ICMS tax.
    Petitioners argue that CBCC's argument is wrong because the ICMS 
tax that CBCC's customers pay on their purchases of silicon metal is 
not the same ICMS tax that CBCC paid for inland freight services. 
Because the two different ICMS tax amounts both reduce CBCC's net 
proceeds from home market sales, petitioners argue that the Department 
properly deducted both from CBCC's home market sales prices in the 
sales-below-cost analysis.

Department's Position

    We agree with petitioners. Our review of the values CBCC reported 
under the variable representing the ICMS tax indicates that it reflects 
only the ICMS tax on the home market sale. Thus, the ICMS tax due on 
the inland freight must be deducted separately.

Comment 42

    CBCC argues that the Department erred in its calculation of its COP 
by reducing its reported quantity of silicon metal production by the 
quantity of a by-product, ferrosilicon 95, without having made a 
corresponding offset to its COP for revenue gained from its sales of 
ferrosilicon 95. CBCC argues that this failure to grant an offset was a 
violation of the Department's practice regarding by-products.
    Petitioners argue that the Department should limit any reduction in 
COP for revenue obtained from CBCC's sales of ferrosilicon 95 to net 
revenue (i.e., revenue net of all selling expenses associated with the 
sales) from sales during the POR.

Department's Position

    The Department first learned of these sales at the verification in 
June 1996. None of our exhibits contain information regarding the value 
of these sales or the selling expenses associated with them. Because 
CBCC did not claim this offset until it submitted its case brief, and 
because it is a respondent's responsibility to substantiate its claims 
for offsets, which CBCC has not done, in these final results of review 
we have not made an offset.

Comment 43

    CBCC argues the Department erred in its margin computation by 
failing to convert the variable for bank charges from aggregate figures 
to per-unit figures.
    Petitioners argue that the Department did in fact convert the bank 
charges into per-unit figures in its calculations.

Department's Position

    We agree with petitioners. See the July 22, 1996 verification 
report at 15, and the SAS program at 824-847.

Comment 44

    RIMA argues that the Department erred by including in its margin 
calculation a sale that entered U.S. customs territory during the 
previous POR. It argues that the date on which the Department relied in 
making its determination of this sale's date of entry was not the 
actual date of entry, and that therefore the Department should request 
additional information from the U.S. Customs Service regarding the 
entry date of this sale.
    Petitioners argue that the correct date of entry into U.S. customs 
territory is the date the entry summary was filed in

[[Page 1989]]

proper form. However, they argue that the date on which the Department 
relied regarding the particular sale which RIMA references was not in 
fact the date the entry summary was filed. They are in agreement with 
RIMA, however, that the sale at issue entered U.S. customs territory 
during the prior POR.

Department's Position

    On October 21, 1996, the importer of the shipment in question 
submitted information on its imports. We have carefully reviewed the 
importer's submitted Customs documentation, and have determined that 
the Department was in error in its preliminary determination that the 
sale in question involved an entry during the POR. We have excluded 
this transaction from our analysis for the fourth administrative 
review, and have included it in our analysis of the third 
administrative review. However, we disagree with petitioners that the 
date of entry is necessarily the date on which the entry summary is 
filed in proper form. 19 CFR 141.68 allows for the possibility that 
formal entry may in some circumstances be dates other than the date the 
entry summary is filed.

Comment 45

    Parties allege the following clerical errors:
     CBCC and petitioner argue the Department erred in its 
margin computation by failing to convert the variable for interest 
revenue from aggregate figures to per-unit figures.
     CBCC argues that the Department incorrectly calculated the 
credit period as the shipment date minus the payment date, rather than 
the payment date minus the shipment date.
     Petitioners argue that the Department erred by failing to 
deduct ``port charges'' from Eletrosilex's USP.
     Petitioners argue that the Department erred in its 
calculation of Minasligas' USP by adding inland freight charges to USP, 
rather than subtracting them.
     Petitioners argue that the Department neglected to take 
into account an expense that Minasligas reported under the variable 
name ``PORT CLER. EXP. DIRSELU.''

Department's Position

    We agree, and have corrected these errors in these final results of 
review. Additionally, in these final results of review, unlike the 
preliminary results of review, we have made an adjustment to NV for 
Eletrosilex's U.S. post-sale warehousing expenses. We also changed the 
credit period used in the calculation of Minasligas' home market credit 
so that it is the payment date minus the shipment date, rather than the 
shipment date minus the payment date.

Comment 46

    CBCC argues that the Department erred in its calculation of U.S. 
imputed credit by dividing an annual interest rate by 30, rather than 
by 365.

Department's Position

    We disagree. The interest rate we used in the calculation of CBCC's 
U.S. imputed credit expenses was the average of the monthly rates for 
each of the twelve months of the POR, and not an annual rate. 
Therefore, 30 is the correct denominator. See September 4, 1996 CBCC 
preliminary results analysis memorandum, p. 4.

Final Results of Review

    As a result of our analysis of the comments received, we determine 
that the following margins exist for the period July 1, 1994, through 
June 30, 1995:

------------------------------------------------------------------------
                                                              Weighted- 
                                                               average  
               Producer/manufacturer/exporter                   margin  
                                                              (percent) 
------------------------------------------------------------------------
CBCC.......................................................         0.29
CCM........................................................     \1\ 5.97
Eletrosilex................................................        17.22
Minasligas.................................................        57.54
RIMA.......................................................       76.96 
------------------------------------------------------------------------
1 No shipments during the POR; margin taken from the last completed     
  segment in which there were shipments.                                

    The Department shall determine, and the Customs Service shall 
assess, antidumping duties on all appropriate entries. Individual 
differences between USP and NV may vary from the percentages stated 
above. The Department will issue appraisement instructions directly to 
the Customs Service.
    Furthermore, the following deposit requirements will be effective 
upon publication of these final results of review for all shipments of 
silicon metal from Brazil entered, or withdrawn from warehouse, for 
consumption on or after the publication date, as provided by section 
751(a)(1) of the Act, and will remain in effect until publication of 
the final results of the next administrative review: (1) the cash 
deposit rates for the reviewed companies will be those rates listed 
above except for CBCC which had a de minimis margin, and whose cash 
deposit rate is therefore zero; (2) for previously reviewed or 
investigated companies not listed above, the cash deposit rate will 
continue to be the company-specific rate published for the most recent 
period; (3) if the exporter is not a firm covered in this review, a 
prior review, or the original LTFV investigation, but the manufacturer 
is, the cash deposit rate will be the rate established for the most 
recent period for the manufacturer of the merchandise; and (4) if 
neither the exporter nor the manufacturer is a firm covered in this or 
any previous review or in the LTFV investigation conducted by the 
Department, the cash deposit rate will be 91.06 percent, the ``all 
others'' rate established in the LTFV investigation.
    This notice serves as a final reminder to importers of their 
responsibility under 19 CFR 353.26 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 a reminder to parties subject to 
administrative protective order (APO) 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. Sec. 1675(a)(1)) and 19 CFR 
353.22.

    Dated: January 3, 1997.
Robert S. LaRussa
Acting Assistant Secretary for Import Administration.
[FR Doc. 97-755 Filed 1-13-97; 8:45 am]
BILLING CODE 3510-DS-P