[Federal Register Volume 62, Number 135 (Tuesday, July 15, 1997)]
[Notices]
[Pages 37869-37879]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-18582]
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DEPARTMENT OF COMMERCE
[A-351-824]
Silicomanganese From Brazil; Final Results of Antidumping Duty
Administrative Review
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
ACTION: Notice of final results of antidumping duty administrative
review.
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SUMMARY: On January 9, 1997, the Department of Commerce (``the
Department'') published the preliminary results of its administrative
review of the antidumping duty order on silicomanganese from Brazil.
The review covers exports of this merchandise to the United States by
one manufacturer/exporter, Companhia Paulista de Ferro-Ligas (``CPFL'')
and Sibra Eletro-Siderurgica Brasileira S.A. (``Sibra'') (collectively
``Ferro-Ligas Group''), for the period June 17, 1994 through November
30, 1995.
We gave interested parties an opportunity to comment on our
preliminary results. Based on our analysis of the comments received, we
have revised our calculations for these final results.
EFFECTIVE DATE: July 15, 1997.
FOR FURTHER INFORMATION CONTACT: Hermes Pinilla or Thomas Barlow,
Office of Import Administration, International Trade Administration,
U.S. Department of Commerce, 14th Street and Constitution Avenue, NW,
Washington, DC 20230; telephone: (202) 482-4733.
SUPPLEMENTARY INFORMATION:
Applicable Statute and Regulations
Unless otherwise indicated, all citations to the Tariff Act of
1930, as amended (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). In addition, all references
to the Department's regulations are to 19 CFR 353 (1997).
Background
On January 9, 1997, the Department published in the Federal
Register (62 FR 1320) the preliminary results of its administrative
review of the antidumping duty order on silicomanganese from Brazil.
The antidumping duty order on silicomanganese from Brazil was published
on December 22, 1994 (59 FR 66003). This review covers the period June
17, 1994 through November 30, 1995. On May 8, 1997, we extended the
final results of review (62 FR 25172).
Scope of the Review
The merchandise covered by this review is silicomanganese from
Brazil. Silicomanganese, which is sometimes called ferrosilicon
manganese, is a ferroalloy composed principally of manganese, silicon
and iron, and normally contains much smaller proportions of minor
elements, such as carbon, phosphorous and sulfur. Silicomanganese
generally contains by weight not less than 4 percent iron, more than 30
percent manganese, more than 8 percent silicon and not more than 3
percent phosphorous. All compositions, forms and sizes of
silicomanganese are included within the scope of this review, including
silicomanganese slag, fines and briquettes. Silicomanganese is used
primarily in steel production as a source of both silicon and
manganese. This review covers all silicomanganese currently
classifiable under subheading 7202.30.000 of the Harmonized Tariff
Schedule of the United States (``HTSUS''). Some silicomanganese may
also currently be classifiable under HTSUS subheading 7202.99.5040.
Although the HTSUS subheadings are
[[Page 37870]]
provided for convenience and customs purposes, our written description
of the scope is dispositive.
Analysis of Comments Received
We received case and rebuttal briefs from Petitioner, the Elkem
Metals Company, and from Respondent, the Ferro-Ligas Group. At the
request of Petitioner, we held a hearing on March 24, 1997. In their
briefs both Petitioner and the Ferro-Ligas Group alleged clerical
errors. We agree that certain of these items constitute clerical errors
and therefore made the appropriate changes for the final results. See
Analysis Memorandum from Analyst to File dated July 7, 1997.
Comment 1: Petitioner contends that the Department failed to
include home market indirect selling expenses in constructed value
(``CV''). Petitioner recommends that the Department calculate a selling
expense factor by taking the total selling expenses reported in the
Ferro-Ligas Group's financial statements and dividing that amount by
the reported net sales revenue to yield a total selling expense factor.
According to Petitioner, that total selling expense factor should then
be applied to the gross unit price less home market ICMS (a Brazilian
value-added tax) to derive the amount of home market indirect selling
expenses that should be included in CV.
The Ferro-Ligas Group argues that Petitioner's suggestion that the
Department use total selling expenses to calculate an indirect selling
expense adjustment purposefully overstates indirect selling expenses.
The Ferro-Ligas Group asserts that the amount of selling expenses
derived using the process suggested by petitioner includes both direct
and indirect selling expenses. Therefore, the Ferro-Ligas Group
contends, the suggested adjustment would not accurately reflect the
amount of home market indirect selling expenses. The Ferro-Ligas Group
argues that, if the Department decides to include a home market selling
expense adjustment in its calculation of normal value, the adjustment
should be based on the indirect selling expense adjustment in the
Department's Sales Verification Report. The Ferro-Ligas Group suggests
that this ratio be applied to gross unit price less the appropriate
home market taxes (i.e., ICMS, PIS and COFINS) for the identical home
market sale that would have been matched to the Ferro-Ligas Group's
U.S. sale.
Department's Position: We agree with Petitioner that we did not
include home market indirect selling expenses in CV and that we should
have done so. However, we have also determined that Petitioner's
recommended methodology does not provide the most accurate home market
indirect selling expense factor because the Ferro-Ligas Group's
financial statements do not segregate direct selling expenses from
indirect selling expenses. We disagree with the Ferro-Ligas Group's
suggestion that we use the indirect selling expense adjustment from the
Sales Verification Report because that adjustment factor is a U.S.
indirect selling expense ratio and, therefore, would provide inaccurate
results for a home market indirect selling expense factor. Therefore,
based on the information on the record, we have derived a home market
indirect selling expense factor from the Ferro-Ligas Group's selling
expenses reported in the financial statements. Because this amount
includes both direct and indirect selling expenses, we subtracted the
reported direct selling expense amount (i.e., home market commissions)
from the total selling expense amount to derive a home market indirect
selling expense value, which we divided by the Ferro-Ligas Group's
reported net sales revenue to obtain a home market indirect selling
expense ratio. We then applied the indirect selling expense ratio to
gross unit price less ICMS, PIS and COFINS and included it in CV. Since
this adjustment was based on net prices, we deducted these taxes from
gross unit price because we found that these taxes were included in the
unit price of the subject merchandise. See Analysis Memorandum from
Analyst to File dated July 7, 1997. We have determined that this
methodology provides the most accurate results for a home market
indirect selling expense figure.
Comment 2: Petitioner asserts that the Department failed to include
in its calculation of general and administrative (G&A) expenses all of
the ``extraordinary'' costs excluded by the Ferro-Ligas Group.
Petitioner contends that the Department only accounted for excluded
fixed costs at one plant (Barbacena) for six months of 1995 rather than
for all of the plants for the entire year. Petitioner requests that the
Department add to the Ferro-Ligas Group's reported G&A expenses all
costs that were improperly deducted for the six-month period by the
Ferro-Ligas Group and double all such costs in order to arrive at a
reasonable estimate of the annualized amount that should be included in
the Ferro-Ligas Group's G&A expenses for the entire year.
Petitioner argues that the Department should continue to include
all ``extraordinary'' costs in the period rather than amortize them
over future periods as the Ferro-Ligas Group now suggests. Petitioner
asserts that, in the past, where respondent's financial statements have
reported restructuring costs incurred in the fiscal year, the
Department has consistently included these costs, in their entirety, in
the cost of production (COP) and CV for the subject merchandise.
The Ferro-Ligas Group argues that, since these costs are
extraordinary, non-recurring, and dedicated to re-starting and
restructuring the company, it is inappropriate to include these
expenses in an effort to calculate the normal COP of the Ferro-Ligas
Group. The Ferro-Ligas Group asserts that the addition of the
extraordinary costs of the factories other than Barbacena would further
distort the Ferro-Ligas Group's CV in the wrong direction.
The Ferro-Ligas Group adds, however, that, if the Department
continues to include the extraordinary costs as part of G&A expense, it
should amortize these amounts over an appropriate period rather than
fully apply them in this period.
Department's Position: We agree with Petitioner that the amounts
reported by the Ferro-Ligas Group as extraordinary expenses should be
included in the COP and CV calculations, and we have done so in our
final calculations. In this review, the Ferro-Ligas Group classified
certain manufacturing costs as non-operating expenses and excluded them
from its reported COP and CV figures. These costs fall into three major
categories: depreciation and other costs associated with plants that
were closed in prior years; costs associated with reducing the plants'
work forces; and costs associated with lower production levels
resulting from bankruptcy and reorganization proceedings during 1995.
The Ferro-Ligas Group treated amounts recorded in the first of
these categories, the costs associated with plants that were closed in
prior years, as ``other operating expenses'' in its audited financial
statements. These amounts represent depreciation and other costs
actually incurred by the Ferro-Ligas Group during the period of review
(POR) for holding idle production assets. Thus, these costs are
properly included as part of G&A expenses in accordance with the
Department's past practice. See, e.g., Final Determination of Sales at
Less Than Fair Value: Extruded Rubber Thread From Malaysia, 61 FR
54773, 54772 (October 22, 1996).
The second category of costs, amounts associated with work-force
reduction, were treated as manufacturing costs on the Ferro-Ligas
Group's audited financial statements. These costs include severance,
pension payments,
[[Page 37871]]
and a settlement with the worker's union. As such, they represent
amounts actually incurred by the company and are properly included as
part of the cost of the subject merchandise. However, like costs
associated with idle assets, we consider these costs to be period costs
(i.e., costs that are more closely related to the accounting period
rather than the current manufacturing costs) and have therefore
included them in our calculation of G&A expenses.
The third category represents actual labor and overhead costs
incurred by the Ferro-Ligas Group to produce the subject merchandise
during the POR. Although these costs would normally be considered to be
part of the company's actual manufacturing costs, for financial
statement purposes, the Ferro-Ligas Group reclassified the amounts to
non-operating expenses. According to company officials, this
reclassification was done in order to exclude from operating costs
those costs associated with the lower production levels resulting from
the company's bankruptcy proceedings. In its response, the Ferro-Ligas
Group excluded all of the reclassified costs from its reported COP and
CV figures. Although treated as non-operating expenses for financial
statement purposes, the labor and overhead costs excluded by the Ferro-
Ligas Group were incurred specifically to produce the subject
merchandise. As such they should be included in COP and CV and we have
done so for these final results.
We disagree with the Ferro-Ligas Group's contention that the
amounts incurred in each of the three categories described above are
``extraordinary'' expenses and, as a result, must be excluded from the
company's reported costs. Contrary to the company's claims, these
expenses do not meet the criteria for extraordinary expenses and, thus,
are properly treated as part of COP and CV. See, e.g., Final
Determination of Sales at Less Than Fair Value: Certain Hot-Rolled
Carbon Steel Flat Products and Certain Cold-Rolled Carbon Steel Flat
Products from the Netherlands, 58 FR 37199, 37204 (July 9, 1993), and
Final Determination of Sales at Less Than Fair Value: Certain Hot-
Rolled Carbon Steel Flat Products, Certain Cold-Rolled Carbon Steel
Products, Certain Corrosion-Resistant Carbon Steel Flat Products, and
Certain Cut-to-Length Carbon Steel Plate From France, 58 FR 37125,
37135 (July 9, 1993). In fact, the Ferro-Ligas Group did not treat
these expenses as ``extraordinary'' items in its own financial
statements. Moreover, with respect to the Ferro-Ligas Group's claim
that all three categories of excluded expenses be amortized over some
future period, there is no information on the record that would
indicate that these expenses would benefit current or future production
and, therefore, amortization of the amounts would be inappropriate.
Finally, with respect to Petitioner's argument that the costs
should be doubled because they only represent six months of the actual
costs incurred by the Ferro-Ligas Group, we disagree because such
treatment would overstate COP and CV. In its response to the
Department, the Ferro-Ligas Group has appropriately included twelve
month G&A expenses.
Comment 3: The Ferro-Ligas Group argues that the Department
violated section 773(f)(3) of the Act in this case by conducting an
investigation of the major inputs received by the company from its
affiliated suppliers. According to the Ferro-Ligas Group, the
Department did not have reasonable grounds to believe or suspect that
the COP of these inputs exceeded the transfer price the company paid
for them. The Ferro-Ligas Group notes that no interested party provided
the Department with grounds to conduct a major-input inquiry in this
review. Nor does the Group believe that a finding of below-cost sales
was established in the previous segment of this proceeding. The Ferro-
Ligas Group argues that there is evidence on the record that supports
its conclusion that Companhia Vale do Rio Doce (CVRD) and the Usinas
Siderurgicas de Minas Gerais S/A (USIMINAS) generate enormous profits
through their sale of manganese ores and coke and, thus, could not have
been selling these inputs at below-cost prices during the POR. For
these reasons, according to the Ferro-Ligas Group, the Department
should accept the company's submitted transfer prices for major inputs
purchased from affiliated suppliers since there was no basis for
questioning these amounts.
Petitioner argues that section 773(f)(3) of the Act provides the
Department with the authority to conduct an investigation of an
affiliated supplier's production costs where there are reasonable
grounds to believe or suspect that major inputs were supplied at prices
below cost. Moreover, Petitioner contends, section 773(f)(3) of the Act
does not address the circumstances under which the Department may
request COP data for major inputs purchased from affiliated suppliers.
Thus, according to Petitioner, a separate sales-below-cost allegation
need not be filed and accepted before the Department may conduct an
inquiry with respect to the cost of major inputs.
Petitioner asserts that the Department's practice is based on a
sound rationale. Petitioner contends that, where a respondent is
selling subject merchandise in the home market at prices below COP, one
reason the respondent could sustain this practice is its ability to
obtain inputs from affiliated suppliers at prices below the market
value or even the COP of such inputs. Moreover, Petitioner contends,
the affiliated supplier may have an interest in subsidizing a
respondent's below-cost home market sales of subject merchandise by
providing inputs at below COP for the purpose of reducing or
eliminating antidumping duties on U.S. sales.
Department's Position: We agree with Petitioner that a separate
sales-below-cost allegation need not be filed and accepted before we
can investigate COP data for major inputs purchased from affiliated
suppliers. In those instances in which we conduct an investigation of
sales below cost under section 773(b) of the Act, it is our practice to
analyze production-cost data for major inputs purchased by a respondent
from its affiliated suppliers (see, e.g., Final Determination of Sales
at Less Than Fair Value: Certain Carbon Steel Butt-Weld Pipe Fittings
From France, 60 FR 10538 (February 27, 1995), and Final Results of
Antidumping Administrative Review: Tapered Roller Bearings from Japan,
61 FR 57629, 57644 (November 7, 1996)). In this regard, we believe that
the great potential for below-cost sales of the foreign like product
provides us the reasonable grounds to believe that major components of
the foreign like product may also have been sold at prices below the
COP within the meaning of section 773(f)(3) of the Act. Thus, separate
allegations concerning each of the major inputs obtained from
affiliates are not required in order for us to request production-cost
information with respect to such inputs. Rather, our position is that,
if there is reason to suspect that a respondent has sold the foreign
like product at prices below COP, then there is likewise reason to
suspect that the respondent's affiliated suppliers have also
transferred major production inputs at below-cost prices. The
affiliation, that is, the common control, management, or ownership,
creates the potential for companies to act in a manner other than at
arm's length.
In addition, as a practical matter, our practice with respect to
analyzing affiliated-party purchases of major inputs recognizes the
extreme burden that would be imposed on all parties where petitioners
would be required to provide specific below-cost allegations
[[Page 37872]]
with respect to individual major inputs and the various suppliers of
those inputs, and respondents would be required to provide specific
information with respect to individual major inputs. In most instances,
the information necessary for a petitioner to recognize the need for
and to file an allegation with respect to below-cost sales of major
inputs is under the control of the respondent. At best, this
information would only be made available to the petitioner once the
respondent had answered the Department's cost questionnaire. Thus, a
separate allegation and initiation procedure for each major input and
affiliated supplier, like that envisioned by the Ferro-Ligas Group in
this case, would serve only to prevent the Department from performing
its analysis of critical production-cost data where there already exist
reasonable grounds to proceed with such an analysis. See Statement of
Administrative Action (SAA) at pages 833 and 834.
We disagree with the Ferro-Ligas Group's argument that, because we
conduct an investigation of affiliated-party major inputs in all cases
in which we initiate a sales-below-cost inquiry under section 773(b) of
the Act, there is no purpose to the ``reasonable grounds to believe or
suspect'' threshold under section 773(f)(3) of the Act. As discussed
previously, a showing of reasonable basis to suspect below-cost sales
of the subject merchandise in the home market, coupled with the fact
that a producer and its supplier(s) of major inputs are affiliated
provides us with a basis for analyzing the cost of major inputs
purchased by the respondent from its affiliates. In situations in which
sufficient allegation of home market sales of the subject merchandise
below cost has not been made, for example when CV is used as normal
value due to the lack of viable home or third-country markets,
petitioner or other interested parties would be required to present the
Department with other ``reasonable grounds'' in order for the
Department to initiate a below-cost investigation of major inputs.
We also disagree with the Ferro-Ligas Group's claim that the
financial statement profits reported by CVRD and USIMINAS prove that
these entities are not transferring major inputs to affiliated parties
at prices below the cost for such inputs. These financial statements
merely show that the company earned an overall profit on its sales of
all goods and services; they do not establish that specific products
transferred to affiliated parties were sold above the respective costs.
Moreover, because the Ferro-Ligas Group refused to provide some of the
requested cost information, we were unable to determine whether their
purchases of major inputs were made at arm's length prices.
Accordingly, we have continued to value the affiliated-party inputs
using the same adverse facts available values we relied upon in the
preliminary results.
Comment 4: The Ferro-Ligas Group argues that the Department's use
of an adverse inference in applying facts available for major inputs
supplied by affiliated parties is contrary to law. The Ferro-Ligas
Group contends that the Court's decision in NSK, Ltd. v. United States
(``NSK''), 910 F. Supp. at 670 (CIT 1995), does not support a
conclusion that if cost information is not available the Department may
penalize the respondent. The Ferro-Ligas Group states that in this
review it was physically and legally unable to extract cost information
from its affiliated parties, CVRD and USIMINAS. The Ferro-Ligas Group
contends that the Department should have determined that neither the
Ferro-Ligas Group nor the Department was in a position to obtain the
information desired in the context of its 773(f)(2) inquiry. Therefore,
the Ferro-Ligas Group argues, its inability to obtain this back-up
information does not provide grounds for the Department to apply
adverse facts available. The Ferro-Ligas Group also believes that the
Department should not have waited until its preliminary results to
indicate for the first time that Respondent had not met the
Department's standard for acting to the best of its ability.
The Ferro-Ligas Group further argues that the Department
incorrectly determined that the Ferro-Ligas Group's shareholders are
``interested parties'' in this proceeding. Respondent contends that the
Department's rationale in determining that the shareholders are
interested parties in the proceeding due to common commercial interests
is a false presumption. Therefore, the Ferro-Ligas Group contends that
the Department is incorrect in assuming that the interest of the
respondent is identical to that of its affiliated parties. Moreover,
the Ferro-Ligas Group asserts, the Department should have either
accepted the transfer price information submitted by the Ferro-Ligas
Group or requested some other information since the affiliated parties'
cost information was unavailable.
The Ferro-Ligas Group asserts that the Department's decision to use
adverse facts available for inputs purchased from CVRD and USIMINAS is
not supported by facts on the record. With respect to USIMINAS, the
Ferro-Ligas Group contends that USIMINAS demonstrated through the
submission of price data that its prices to the Ferro-Ligas Group were
at or above market prices. Therefore, respondent states, there was no
need for additional ``back-up'' cost information and, thus, the
application of facts available for USIMINAS inputs was inappropriate.
The Ferro-Ligas Group also asserts that during verification the
Department could have requested additional information if it was not
persuaded by the information Respondent had submitted. Since the
Department did not make such a request, the Ferro-Ligas Group argues
that the Department cannot silently accept submissions from a
respondent and statements at verification and then state in the
preliminary results that the information is not sufficient, as it did
in this case.
Finally, the Ferro-Ligas Group claims that the only evidence on the
record supports the conclusion that CVRD was subject to severe
restrictions due to the privatization process and could not legally
furnish proprietary information outside the confines of the
privatization procedures.
Petitioner contends that the Ferro-Ligas Group's assertion that its
shareholders are not ``interested parties'' is unfounded. Petitioner
asserts that the record demonstrates that there are well-established
customer-supplier relationships between the Ferro-Ligas Group and
USIMINAS and CVRD. Moreover, Petitioner points out that, if the
Department were to establish a large antidumping margin for merchandise
produced by the Ferro-Ligas Group, its shareholders ultimately would
suffer the effects, both as the sole owners of the Ferro-Ligas Group
and through lower sales due to a decline in the volume of inputs
required by the Ferro-Ligas Group. Therefore, Petitioner contends,
USIMINAS and CVRD are considered interested parties because of their
close affiliations with the Ferro-Ligas Group.
Petitioner contends that, in this case, in light of the close
relationships that exist between the companies, the refusal by USIMINAS
and CVRD to produce requested information is properly treated as a
refusal by the Ferro-Ligas Group itself. Furthermore, Petitioner
alleges that the Ferro-Ligas Group failed to illustrate that it acted
to the best of its ability because there is no evidence of any
additional communications with USIMINAS or CVRD showing efforts to
obtain the information that would rise to the level of acting to the
best of its ability. Moreover, Petitioner asserts that the Department
made repeated attempts to obtain the necessary information, but
[[Page 37873]]
the Ferro-Ligas Group's co-owners refused to provide the requested
information. Therefore, Petitioner contends, the Ferro-Ligas Group
failed to act to the best of its ability to obtain the requested
information.
Petitioner argues that the Ferro-Ligas Group's assertion that CVRD
may not have the resources to obtain the requested information is
unsubstantiated. Petitioner contends that the Ferro-Ligas Group would
have the Department believe that it is harder for a large entity, such
as CVRD, with a ``sizable administrative structure'' (citing
Respondent's March 3rd brief at 21) to provide this information than it
would be for a small entity without such resources. In addition,
Petitioner argues the Ferro-Ligas Group's claim that CVRD was barred
from providing information due to Brazilian law fails to provide a
reason not to apply adverse facts available. Petitioner contends that
the Ferro-Ligas Group made no showing that the court order upon which
it relies prohibited CVRD from providing information to the Department
for use in an antidumping proceeding nor that the information protected
by the court order cited by respondents is the same information that
would be provided in this case. Thus, Petitioner asserts, the Ferro-
Ligas Group failed to demonstrate that CVRD was prevented from
providing the requested information.
Department's Position: We determined that the Ferro-Ligas Group is
affiliated with CVRD and USIMINAS pursuant to sections 771(33) (E) and
(G) of the Act. Based on this affiliation, and on the fact that we had
initiated an investigation to determine whether the Ferro-Ligas Group
made below-cost sales in the home market, we requested cost data for
the major inputs the Ferro-Ligas Group obtained from its affiliated
parties.
Neither the Ferro-Ligas Group nor its parents, CVRD and USIMINAS,
has met its burden of adequately showing that the affiliated firms
acted to the best of their ability to provide the cost data we
requested. In fact, we note that the affiliates specifically stated
their ``unwillingness'' to provide the requested information (October
16, 1996, Section D questionnaire response at 10-11). Therefore,
pursuant to section 776(b) of the Act, the Department used an adverse
inference with respect to the facts available to value all inputs
Ferro-Ligas purchased from its parents, CVRD and USIMINAS. The Ferro-
Ligas Group's claim that the statute requires that the Department
produce evidence that these firms could provide such information is
unfounded and, given the fact that the firms in question control their
own data, unreasonable. Further, we note that, to the extent that there
may have been any aspect of the data which CVRD may not wish to reveal
to Ferro-Ligas, such data could have been provided directly to the
Department and protected under administrative protective order. Though
made aware of this option at verification (see Verification Report
dated December 18, 1996), the Ferro-Ligas Group did not pursue this as
an alternative.
With respect to the Ferro-Ligas Group's argument that CVRD and
USIMINAS, not Ferro-Ligas, refused to furnish the requested data, it is
important to note that the Ferro-Ligas Group is wholly owned by CVRD
and USIMINAS. Hence, through this subsidiary (the Ferro-Ligas Group),
CVRD and USIMINAS may be termed an ``interested party'' within the
meaning of section 771(9)(A) of the Act. An ``interested party'' and an
immediate ``respondent'' are not necessarily the same thing. Although
most information necessary to conduct an antidumping review is
maintained by, and thus best obtained from, the corporate unit
immediately responsible for producing the subject merchandise, it is
sometimes necessary to obtain information, such as G&A data, financial
data and cost-input data, from the parent or other affiliated entities
of such units. Because the Department requires such data and because
the business of the parent entity is clearly affected by its ability to
ensure that its subsidiary avoids or lessens the effect of antidumping
duties on U.S. sales, the consolidated or parent entity must be
considered an ``interested party'' for purposes of responding to
requests for information. Pursuant to this policy, we consider CVRD and
Ferro-Ligas to have shared interests in responding to our request for
cost data and, as in the preliminary results, have used an adverse
inference in determining the facts available because of their lack of
cooperation with respect to the cost data which Ferro-Ligas did not
provide.
We also find that the existence of a separate statutory definition
of the term ``affiliate'' does not preclude us from imputing the
actions of an affiliated party to the respondent or from treating both
as a single entity. As the Department stated in Roller Chain Other Than
Bicycle From Japan; Final Results of Antidumping Duty Administrative
Reviews, 61 FR 64328, 64329 (December 4, 1996), we consider the related
party's non-compliance as an omission imputable to the respondent. If
we were to accept without adverse consequences a simple refusal by
affiliated parties to provide data required in antidumping proceedings,
this would allow such parties to provide data only when it would be in
their best interest to do so.
As to the claim that we failed to notify the Ferro-Ligas Group that
it was not demonstrating its best efforts, we note that we repeatedly
informed the Ferro-Ligas Group of the need to provide the requested
information. Each of our requests also informed the Ferro-Ligas Group
that, if the information requested was not supplied or could not be
verified, we would have to resort to the use of facts available for the
final results. Therefore, any requirement to notify a respondent of
what was expected of it was met. See Creswell Trading Co. v. United
States, 15 F.3d 1054, 1060 (Fed. Cir. 1994) and Section 782 of the Act.
We also note that at verification we further discussed the production
information requirements under the law with personnel from CVRD,
USIMINAS and the Ferro-Ligas Group. At verification, we again requested
that the Ferro-Ligas Group provide us with cost information regarding
affiliated purchases, but they did not take advantage of this
opportunity. Finally, our verification report also discusses the extent
of affiliated-party data which was not provided.
The Ferro-Ligas Group is also incorrect in arguing that cost data
was not necessary for the inputs purchased from USIMINAS because
benchmark price data was provided for these inputs. This assertion
assumes that we were legally permitted only to pursue information for
comparison to transfer prices under section 773(f)(2). However, as
discussed in our response to Comment 3 above, we disagree with this
assertion. We consider all ``manganese ores'' to be a major input and
disagree with the Ferro-Ligas Group's attempt to subdivide manganese
ores into separate ``inputs'' based upon the geographical location from
which the ore was mined (see our response to Comment 6, below, for
further discussion). Thus, the ``market price'' data provided by
USIMINAS does not obviate the need for the actual production-cost
information.
Additionally, we find no evidence to support the assertion that the
Ferro-Ligas Group had inadequate resources to gather this information.
The Section D questionnaire response, dated October 16, 1996,
specifically stated that the affiliated parties are ``unwilling, for
commercial and competitive reasons, to provide any per-unit cost
information to the Ferro-Ligas Group (emphasis added).'' At no time
prior to submitting its briefs did the Ferro-Ligas Group state that it
lacked the resources to prepare
[[Page 37874]]
the data. We note that even if Respondent raised such a claim we would
have had to pursue whatever data was available. Had Respondent raised a
credible issue with respect to its resources earlier in this review we
could have considered providing the respondent additional time in which
to prepare the data.
Finally, we are not persuaded by the Ferro-Ligas Group's argument
that a court decree prohibited CVRD from providing information to us
for use in the antidumping proceeding. The Ferro-Ligas Group made no
showing that the particular court order upon which it relied prohibited
CVRD from providing information to us nor that the information
protected by the court decree is the same information that would be
provided in this case. Specifically, the court decree provided at
verification held that a particular Brazilian entity could not have
access to certain information of CVRD. The Ferro-Ligas Group did not
show that this decree had any effect on the Department's request for
CVRD's cost information. See NSK at 671, (stating that a unilateral
decision by a respondent that Japanese law obviated the need for a
complete and accurate response to the Department's questionnaires was
not sufficient to avoid the application of BIA).
Comment 5: Petitioner argues that, consistent with its practice in
adverse facts-available situations, the Department should have used the
highest cost, transfer price or fair value on record for each such
major input as adverse facts available. Rather than use the publicly
available price of manganese ore on which the Department relied in the
preliminary results, Petitioner states that the highest manganese ore
price on the record should be used to value all manganese ore inputs.
According to Petitioner, the Department's use of any lesser amount for
some manganese ore rewards the Ferro-Ligas Group for its failure to
cooperate in the review.
Respondent claims that it is inappropriate to use the highest
manganese ore price on the record as facts available for three reasons.
First, the highest manganese ore price on record corresponds to a
manganese ore purchased from CVRD, an affiliated party. Respondent
argues that because Petitioner has claimed that this is an
unsubstantiated transfer price it cannot now argue that it should be
used as facts available for other manganese ore inputs. The Ferro-Ligas
Group notes the inconsistency of ignoring transfer prices from CVRD and
then selecting the highest transfer price from CVRD to value all
manganese ores. Second, Respondent states that the specific ore in
question, ``Carajas Granulado,'' is unlike all other inputs used in the
production of subject merchandise because it has a significantly higher
manganese content than other inputs and, as a result, is significantly
more costly. Third, Respondent contends, this ore was consumed only in
very small quantities and there were months during the POR when it was
not used at all; when it was used, respondent states, consumption
quantities were minimal. The Ferro-Ligas Group states that the
Department already has overstated its manganese ore costs by using a
market price for manganese ores with a purity (i.e., manganese content)
of 48-50 percent, although most of the ores used in the production of
subject merchandise contain only approximately 30-percent manganese
ore. Respondent claims that the use of Carajas Granulado as a surrogate
for all inputs would further distort the Department's calculations.
Department's Position: We disagree with Petitioner that, as facts
available, we should rely on the price of the ore with the highest
manganese content to value all manganese ores, regardless of manganese
content. As in the preliminary results, we applied appropriate adverse
facts available to value each of the individual manganese ores as
listed by geographical location. In each case, we used the highest of
the cost (where provided), transfer price, and benchmark market value
(where provided) to value the individual ores. Where appropriate, as
adverse facts available we applied a publicly available (non-source-
specific) market price for ores having a manganese content of 48-50
percent. We agree with Respondent that Carajas Granulado is not
representative of all manganese ores and note that its low consumption
quantities and high manganese content differentiate it from the other
manganese ores.
Further, we disagree with Petitioner that the use of anything less
than the highest price for any manganese ore rewards the Ferro-Ligas
Group for failing to cooperate. As noted above, we applied the price of
higher-quality ores to ore of lesser manganese content. Therefore, our
choice of facts available for these ores was adverse. We find that
Petitioner's argument for use of more adverse facts available is not
persuasive. We have discretion to choose the appropriate facts
available. Cf. Allied-Signal Aerospace Co. v. United States, 996 F.2d
1185, 1191 (Fed. Cir. 1993) (Congress has ``explicitly left a gap for
the agency to fill'' in determining what constitutes the best
information available). We are not required to use the most adverse
value on the record as adverse facts available. Cf., e.g., Saha Thai
Steel Pipe Co., Ltd. v. United States, 828 F. Supp. 57, 62 (CIT 1993)
(``Commerce need not unduly apply the highest rate * * * as BIA for
non-cooperating parties when Commerce has credible evidence of a more
accurate rate'').
Comment 6: The Ferro-Ligas Group argues that, if the Department
continues to apply facts available to manganese ores obtained from
affiliated parties, it should limit its application to those specific
ores which were identified as major inputs. The Ferro-Ligas Group
asserts that, in accordance with the definition provided in the
questionnaire response, it identified eight major inputs purchased from
affiliated parties. It claims that the Department did not request cost
or market-price information for affiliated-party inputs other than the
major inputs nor did the Department question the Ferro-Ligas Group's
definition of major input. Therefore, the Ferro-Ligas Group concludes,
if the Department intends to use adverse facts available, it should
limit its application to major inputs, citing Olympic Adhesives v.
United States, 899 F.2d 1565, 1574 (Fed. Cir. 1990).
Petitioner argues that the Department should continue to value
manganese ores classified by the Ferro-Ligas Group as ``minor inputs''
at the same price as those classified by the Ferro-Ligas Group as
``major inputs,'' as it did in the preliminary results. It states that
the Ferro-Ligas Group should not be permitted to treat manganese ore
obtained from different suppliers as different inputs. Petitioner
asserts that all manganese ores are major inputs, regardless of their
origin, and should be valued in the same manner. Citing Final
Determination of Sales at Less Than Fair Value: Newspaper Printing
Presses From Japan, 61 FR 38139, 38162 (July 23, 1996), Petitioner
argues that the Department has specifically rejected an attempt by a
respondent to portray the same basic input as several different
components based on the different suppliers from which it was obtained.
Therefore, Petitioner requests that the Department reject the Ferro-
Ligas Group's argument for these reasons.
Department's Position: We agree with Petitioner that, in this
review, the manganese ores represent a single major input. The Ferro-
Ligas Group identified, in this review, charcoal, coke, and manganese
ores as major inputs obtained from affiliated suppliers (October 16,
1996, Section D response at 9) as did the International Trade
[[Page 37875]]
Commission in its original investigation (Preliminary Determination of
Sales at Less Than Fair Value: Silicomanganese from Brazil, the
People's Republic of China, Ukraine and Venezuela, Nos. 731-TA-671
through 674, USITC Pub. 2714 at II-3 (December 1993)). Additionally,
Respondent indicates that it relies almost exclusively on manganese ore
as the source of manganese in its production process. Based on the
Ferro-Ligas Group's representations and the ITC's determination, we
also find that manganese ores represent a major input into the
production of silicomanganese.
We have rejected the Ferro-Ligas Group's argument that, based on
the supplier or geographical origin, the same component (manganese
ores) should be considered to reflect many different inputs. Factors
such as the supplier or the geographical location from which the inputs
were obtained are not sufficient to warrant different classification of
an input. We further note that we have specifically rejected the
argument that a foreign like product can be composed of numerous minor
inputs, none of which is subject to the major input rule. See, e.g.,
Final Determination of Sales at Less Than Fair Value: Large Newspaper
Printing Presses From Japan, 61 FR 38139, 38162 (July 23, 1996).
Comment 7: Petitioner argues that the Department should value the
manganese ores obtained from one of the Ferro-Ligas Group's
subsidiaries, Sociedade Mineira de Mineracao Ltd. (``SMM''), at the
higher facts-available amount instead of at the cost reported by that
subsidiary. Petitioner asserts that the Department stated in its
preliminary results that, as adverse facts available, it applied the
highest price to the reported consumption quantities for all manganese
ores purchased from affiliated parties. However, Petitioner notes, with
respect to two manganese ores purchased from SMM, the Department did
not apply the highest price as adverse facts available, but instead
applied an average COP that was reported by SMM. Petitioner argues that
the cost worksheet for SMM submitted by the Ferro-Ligas Group
establishes that this average is based on the cost of producing several
products, including quartz, and therefore does not reflect SMM's cost
of producing manganese ore. In addition, Petitioner claims, the record
indicates that the cost of producing quartz is significantly lower than
the cost of producing manganese ore. Petitioner requests that the
Department apply, as adverse facts available, the highest manganese ore
cost, transfer price or fair value on record to value the manganese ore
produced by SMM.
The Ferro-Ligas Group argues that the Department's calculations
significantly overstate SMM's production cost because the Department
used the cost from a month in which that firm experienced unusually
high production costs. The Ferro-Ligas Group states that, rather than
inflate the value of inputs purchased from SMM, the Department should
decrease its valuation to reflect the normal production costs of SMM
during the POR. Further, the Ferro-Ligas Group argues that the
Department should benchmark its transfer prices against a six-month
cost average rather than rely solely on costs during September 1995.
Finally, the Ferro-Ligas Group contends that Petitioner never supported
its claim that manganese ore production costs at SMM are higher than
quartz production costs.
Department's Position: We have determined that it is inappropriate
to apply the adverse facts-available price (i.e., the publicly
available world market price for manganese ores) to ore supplied by
SMM. Petitioner is correct in noting that, in our preliminary results,
we did not apply this price to ores from SMM. However, our statement
with respect to SMM was overly broad. Instead, for SMM, we used the
company's reported September COP in our preliminary results because
that amount exceeded transfer price SMM charged to the respondent. The
Ferro-Ligas Group provided aggregate cost data for major inputs
obtained from SMM. At verification, we tested this information and
found that the cost data respondent provided reasonably reflected the
actual cost of inputs sourced from SMM. Because we found that the
transfer price reported by the Ferro-Ligas Group was below SMM's
average cost for these inputs, we valued the ore at its higher cost
pursuant to section 773(f)(3) of the Act.
The Department agrees with the Ferro-Ligas Group regarding the
prices at which inputs obtained from SMM were valued. Rather than using
September cost data which we used in the preliminary results, the SMM
ore value in the Ferro-Ligas Group submission is based on the six-month
average production cost. As noted by the Ferro-Ligas Group, September
costs were unusually high and production was the lowest during that
month. Therefore, it is reasonable to value ores obtained from SMM at
the six-month average cost, which is higher than the transfer price.
Comment 8: The Ferro-Ligas Group argues that the Department's
upward adjustment to CV for ICMS and IPI (value-added taxes) is
contrary to law and inconsistent with the Department's prior decisions.
Citing Final Determination of Sales at Less Than Fair Value: Melamine
Institutional Dinnerware from Taiwan (``Dinnerware from Taiwan''), 62
FR 1726, 1732 (January 13, 1997), the Ferro-Ligas Group contends that
the Department noted correctly in that notice that the ability to use
value-added-tax (``VAT'') credits against VAT liabilities generated in
connection with home market sales is effectively a refund or remission.
The Ferro-Ligas Group suggests that the Department adopt the position
it took in Dinnerware from Taiwan and apply it to this proceeding.
The Ferro-Ligas Group asserts that the Department should not
include VAT paid on inputs in CV for this segment of the proceeding.
The Ferro-Ligas Group argues that, since it had sufficient home market
sales to absorb the company's VAT credits generated in connection with
export production, the Department should not include a VAT surcharge in
the Ferro-Ligas Group's CV calculation.
The Ferro-Ligas Group alleges that the Department's departure from
the Ferro-Ligas Group's accounting treatment of VAT on inputs was
unlawful. The Ferro-Ligas Group asserts that, like other Brazilian
companies and in accordance with Brazilian GAAP, it does not include
the VAT paid on input purchases in cost of manufacturing in its normal
accounting system. In addition, the Ferro-Ligas Group argues that, by
including VAT paid on inputs in its CV calculation, the Department
departed from the Ferro-Ligas Group's conventional accounting treatment
of these taxes in identifying costs with production for export. The
Ferro-Ligas Group contends that the record contains no finding that
conventional Brazilian GAAP treatment of VAT is unreasonable. Moreover,
the Ferro-Ligas Group asserts, since the Department only departs from a
respondent's normal treatment of costs when they are unreasonable, the
Department's deviation in this instance is unsupported.
With respect to ICMS and IPI, the Ferro-Ligas Group claims that the
Department has conceded that the value of taxes paid on input materials
is fully credited when the product is sold in the home market. The
Ferro-Ligas Group argues that it would be incorrect to include the VAT
paid on inputs in the calculation of CV. Moreover, the Ferro-Ligas
Group asserts that the inclusion of VAT on inputs is contrary to the
objective of a CV calculation because, according to the Department's
analysis,
[[Page 37876]]
this expense is effectively never incurred in connection with home
market sales. Thus, the Ferro-Ligas Group concludes, while other cost
components in a CV calculation are designed to simulate a home market
sale, the Department has selectively incorporated one cost element
(i.e., VAT on inputs) without acknowledging the full offset when the
product is sold in the home market. The Ferro-Ligas Group requests that
the Department make a downward adjustment for the VAT-liability benefit
that accrues on home market sales for the company's export sales.
The Ferro-Ligas Group contends that the Department must recognize
that the VAT credit is in fact a disparity in selling circumstances
between export sales and home market sales that must be recognized as a
circumstance-of-sale adjustment. The Ferro-Ligas Group argues that,
with regard to export sales, the VAT paid on inputs to produce the
exported product is freely transferable as a credit to benefit VAT
liability associated with home market sales. With respect to home
market sales, the Ferro-Ligas Group argues that the VAT paid on inputs
to produce the product sold in the home market is not transferred to
benefit sales in other markets. The Ferro-Ligas Group contends that the
VAT paid on inputs to produce the home market sale is fully absorbed by
the VAT liability generated when the home market sale is made.
The Ferro-Ligas Group concludes by stating that, if the Department
insists upon including input VAT costs in CV, it must recognize the
``VAT credit generated upon export'' (i.e., credits against payment of
the sort of VAT paid by its domestic customer) as a circumstance-of-
sale adjustment. Respondent maintains that to do otherwise would
overlook this disparity in selling circumstances between U.S. and home
market sales and eliminate the possibility of an apples-to-apples
comparison.
Petitioner argues that, contrary to the Ferro-Ligas Group's claims,
the Department has an established practice regarding the treatment of
the Brazilian ICMS and IPI taxes in calculating CV. Petitioner contends
that the Department's practice is based on section 773(e)(1)(A) of the
Act, which requires that taxes paid on inputs be included in CV where
the taxes are not remitted or refunded upon exportation of the final
product. Petitioner states further that the Department has already
considered and rejected the Ferro-Ligas Group's argument that, because
the amount of ICMS and IPI taxes paid on inputs used in producing
exported merchandise is credited against the liability for taxes
collected on home market sales, the taxes paid on inputs should not be
included in CV. Petitioner states that, more recently, the Department
followed its practice in the final results of the 1993-94 and 1994-95
administrative reviews on silicon metal from Brazil. Therefore,
Petitioner concludes, the Department must include the ICMS and IPI
taxes the Ferro-Ligas Group paid on inputs in the CV for the final
results.
Department's Position: We have an established practice regarding
the treatment of Brazilian ICMS and IPI taxes in calculating CV. See,
e.g., Ferrosilicon from Brazil, Final Redetermination on Remand of
Sales at Less Than Fair Value, at 10 (January 16, 1996); Ferrosilicon
from Brazil, Final Results of Antidumping Duty Administrative Review,
61 FR 59407, 59414 (November 22, 1996); Silicon Metal From Brazil;
Final Results of Antidumping Duty Administrative Review and
Determination Not to Revoke in Part, 63 FR 1954, 1965 (January 14,
1997); Silicon Metal From Brazil; Final Results of Antidumping Duty
Administrative Review and Determination Not to Revoke in Part, 62 FR
1970, 1976 (January 14, 1997). Our practice is governed by section
773(e)(1)(A) of the Act, which requires that taxes paid on inputs be
included in CV when such taxes are not remitted or refunded upon
exportation of the final product. We have considered and rejected in
other cases arguments similar to those the Ferro-Ligas Group has made
that, because the amount of ICMS and IPI taxes paid on inputs used in
producing exported merchandise is credited against the liability for
taxes collected on home market sales, the taxes paid on inputs should
not be included in CV.
When calculating the CV for the subject merchandise, the Ferro-
Ligas Group did not include the ICMS and IPI taxes paid on the material
and energy costs. Section 773(e) of the Act directs us to exclude from
CV only those internal taxes remitted or refunded upon export.
Therefore, if the taxes paid on production inputs are neither remitted
nor refunded upon exportation of the subject merchandise, as in the
present case, the ability of the manufacturer to recoup this tax
expense through domestic market sales is not automatic and also not
relevant. Thus, we calculated the ICMS and IPI taxes as a percentage of
the total purchases of materials and energy, and we added this amount
to the reported CV.
Comment 9: The Ferro-Ligas Group claims that the Department
determined that the Brazilian economy was hyperinflationary during the
POR. Therefore, the Ferro-Ligas Group argues, rather than using period
average costs, the Department should follow its practice and use
monthly costs during the POR. The Ferro-Ligas Group states that the
Department should have calculated costs specifically for October, the
month of the U.S. sale. The Ferro-Ligas Group further contends that
there was no decision prior to or at the time of the preliminary
results to rescind the Department's earlier determination that Brazil
was hyperinflationary during the POR. The Ferro-Ligas Group therefore
argues that the Department's determination of hyperinflation dictates
the use of monthly costs when calculating CV to be compared to the U.S.
sale. In conclusion, the Ferro-Ligas Group asserts that, if the
Department maintains its method of calculating cost of manufacturing
(COM) based on adverse facts available, the Department should use the
hyperinflationary method to calculate costs for October.
Petitioner contends that, because the Brazilian economy was not
hyperinflationary during this period, the use of a current-cost
methodology in this review would be contrary to the Department's well-
established practice.
Department's Position: We agree with Petitioner. Contrary to the
Ferro-Ligas Group's assertion, we did not determine that the Brazilian
economy was ``hyperinflationary'' during the POR. Early in the case, we
issued a Section D questionnaire which follows a current-cost method in
the event that the Brazilian economy was determined to have experienced
significant levels of inflation during the relevant period. However,
because the Brazilian economy experienced only a 6.48-percent
compounded inflation rate for the six-month cost reporting period, we
instructed the Ferro-Ligas Group to answer the original standard
questionnaire. See Letter from Office Director, AD/CVD Enforcement, to
Willkie Farr & Gallagher dated September 16, 1996. Thus, at no time did
we identify this review period as one in which Brazil experienced high
inflation.
Moreover, the Ferro-Ligas Group's argument that it would be more
appropriate to use October costs rather than September costs is also
unsupported by the evidence on record. The inflation rates for the
months of September and October were negative (i.e., deflation of 1.08
percent and 2.3 percent, respectively). Because restatement of each of
the Ferro-Ligas Group's monthly costs was not possible within the time
constraints of the case,
[[Page 37877]]
we recalculated the company's costs based on its production results for
a selected month, September. We selected this month because it was the
only month for which we could obtain surrogate manganese ore price
data. There is no evidence on the record that would indicate that the
month of September, which falls in the middle of the cost-reporting
period, was not representative of the costs or price level the Ferro-
Ligas Group experienced during the period.
Comment 10: Petitioner argues that the Department failed to include
profit in its calculation of CV. Petitioner states that the SAA
provides three alternative methods for calculating profit when all
relevant sales are at below-cost prices. Petitioner asserts that one of
the alternative methods must be used to determine the amount of profit
to include in CV for the final results. Petitioner contends that there
is no information on the record regarding the amount of profit realized
on the same general category of product as silicomanganese because all
of the Ferro-Ligas Group's home market sales were found to be below
cost and there are no other respondents in this administrative review.
Therefore, Petitioner contends that the Department must use the
statute's third alternative method to determine the amount of profit
that must be included in CV for the final results.
Petitioner asserts that if the Department decides to rely on
information not currently on the record for its determination of the
amount of profit, the information must be made available for comment by
the parties in accordance with section 782(g) of the Act.
The Ferro-Ligas Group argues that there is no presumption that the
Department must include a positive value for profit in its
calculations. The Ferro-Ligas Group argues that, if the company and
industry are not profitable during the review period, then the
Department should not include a positive profit component. The Ferro-
Ligas Group argues further that the Department should not both increase
costs with adverse facts available and also add a profit component.
Department's Position: Contrary to the Ferro-Ligas Group's
assertion, the SAA requires that an element of profit be included in
CV. Although the URAA and the subsequent revisions to U.S. law
eliminated the use of a minimum profit, we do not believe that it
eliminated the presumption of a profit element in the calculation of
CV.
The SAA (at page 839) states: ``because constructed value serves as
a proxy for a sale price, and because a fair sales price would recover
SG&A expenses and would include an element of profit, constructed value
must include an amount for SG&A and for profit'' (emphasis added). The
SAA further specifies that ``under section 773(e)(2)(A), in most cases
Commerce would use profitable sales as the basis for calculating profit
for purposes of constructed value'' (SAA at page 840). The SAA
indicates that section 773(e)(2)(B) ``establishes alternative methods
for calculating amounts for SG&A expenses and profit in instances where
* * * section 773(e)(2)(A) cannot be used either because there are no
home market sales * * * or because all such sales are at below-cost
prices.'' Therefore, if a company has no home market profit or has
incurred losses in the home market, the Department is not instructed to
ignore the profit element, include a zero profit, or even consider the
inclusion of a loss; rather, the Department is directed to find an
alternative home market profit.
In addressing whether profit can be less than or equal to zero, we
first looked to the definition of the word profit. Barron's Financial
Guides: Dictionary of Finance and Investment Terms (New York: Barron's
Educational Series, 1987) defines profit as the ``positive difference
that results from selling products and services for more than the cost
of producing these goods'' and also the ``difference between the
selling price and the purchase price of commodities or securities when
the selling price is higher'' (emphasis added). Thus, the general usage
of the term ``profit'' explicitly refers to a positive figure.
Regardless of the general definition of the word profit, a clear
reading of the statute indicates that a positive amount for profit must
be included in CV. First, we note that, unlike sections 773(e)(2)(A)
and 773(e)(2)(B) (i) or (ii), section 773(e)(2)(B)(iii) specifically
excludes the use of the term ``actual profit'' and instead directs us
to use any other reasonable method that does not exceed the amount
normally realized by the industry on the same general category of
products. The SAA states that there is no hierarchy between the
alternatives in 773(e)(2)(B), indicating that in some instances it may
be more appropriate for the Department to ignore ``actual profit''
available under the other two alternatives and opt instead for some
other reasonable method to obtain a normal profit.
Second, we note that, when we use home market or third-country
prices as the basis for normal value, the statute and SAA specifically
direct us to exclude from the dumping analysis any below-cost sales
when the volume sold below cost in the home market or third country is
greater than 20 percent (sections 773(b) (1) and (2)(C)). The
presumption that normal value includes an element of profit is so
strong that the post-URAA statute directs us to use one above-cost home
market sale as the basis for normal value, even if hundreds of other
sales have below-cost prices. See section 773(b)(1)(B). Moreover, the
exclusion of the phrase ``in the ordinary course of trade'' (i.e.,
referring to above-cost sales) from section 773(e)(2)(B)(iii) cannot be
interpreted to mean an analysis using below-cost sales could result in
use of a negative or zero profit rate in CV calculations. As the SAA
explains, the ordinary-course-of-trade phrase is excluded in order to
allow the Department to use a broader category of available information
(SAA at page 841). Even though the broader category may exclude some
below-cost sales, it enables the Department to find an overall positive
profit in a category in which, were all below-cost sales excluded, it
could not do so. Furthermore, it would be incorrect to interpret the
statute (and redefine the word ``profit'') in such a way that would
allow for a loss or zero profit under section 773(e)(2)(B)(i) when the
Department has bypassed a more precise calculation of the home market
loss on the foreign like product under section 773(e)(2)(A). Therefore,
by providing three equal alternatives in section 773(e)(2)(B) when all
relevant sales are at below-cost prices under section 773(e)(2)(A), the
statute directs that CV must include a positive profit figure. See
Notice of Final Determination of Sales at LTFV: Engineered Process Gas
Turbo-Compressor Systems, Whether Assembled or Unassembled, and Whether
Complete or Incomplete, from Japan, 62 FR 24394 (May 5, 1997).
Finally, we disagree with the Ferro-Ligas Group that we should not
both increase costs with adverse facts available and also add a profit
component. Neither the law nor the SAA supports such an assertion. The
only statutory reference to adverse facts available for purposes of
identifying profit is the statement that the profit added to CV under
the third alternative method may not be an adverse figure. The adverse
facts-available provision is included in the statute to ensure that a
respondent does not benefit by withholding information which only it
can provide and we resort to adverse facts available only when a
respondent has failed to act to the best of its ability.
Therefore, because the sales and cost data on the record do not
provide a
[[Page 37878]]
basis on which to calculate a home market profit figure, we sought to
find a reasonable method under section 773(e)(2)(B)(iii) to derive a
normal profit rate. For these final results we have relied on the
profit rate of 10.22 percent, realized by one of the Ferro-Ligas
Group's parents, CVRD. This profit rate represents the only information
on the record that we believe reasonably reflects the market for ferro-
alloy inputs. As a leader in the mining and ore-processing industries,
CVRD has a profit rate which reasonably reflects an amount normally
realized in the home market in the same general category of products as
the subject merchandise. The income of CVRD is based on a wide range of
products in the same general category of products as the foreign like
product (i.e., processed ores and minerals) and as such reflects a
broader measure of profit than would be realized in only more specific
market sectors. As a supplier to the Ferro-Ligas Group, CVRD is
subjected to the same market pressures as the Ferro-Ligas Group.
Finally, we note that, although CVRD's sales results include export
activities, the majority of CVRD's sales are realized in Brazil and,
therefore, its profit rate reasonably reflects that of the Brazilian
market.
Comment 11: The Ferro-Ligas Group argues that under no
circumstances should the Department impose an antidumping duty rate
based on adverse inferences that is higher than the highest BIA rate
from prior decisions. It claims that it requested this review because
it had made sales to the United States which generated margins
significantly less than the existing BIA rate of 64.93 percent. It
cites to the opinion in Rhone Poulenc v. United States, 899 F.2d
1185,1190 (1990), that the presumption that a company is currently
dumping at the highest prior margin unless the company can prove
otherwise, ``reflects a common-sense inference that the highest prior
margin is the most probative evidence of current margins because, if it
were not so, the importer, knowing of the rule, would have produced
current information showing the margin to be less.''
Petitioner argues that the Department can select for the
uncooperative Ferro-Ligas Group the higher of (1) The highest rate
calculated for any firm for the same class or kind of merchandise in
the less-than-fair-value (LTFV) investigation or any prior
administrative review or (2) the highest rate calculated in the current
review for any firm. Thus, Petitioner claims, there is no upper limit
on the rate which the Department may apply.
Department's Position: Although the Ferro-Ligas Group did not
cooperate to the best of its ability in providing all of the data we
requested, it did provide much of the data we requested. By using a
combination of information submitted in response to our questionnaire
and partial facts available from other sources, we have been able, in
this review, to calculate a margin for the Ferro-Ligas Group by
comparing the Ferro-Ligas Group's normal value and export price
pursuant to section 751(2)(A) of the Act. When we determine that we can
calculate a margin, we follow the established statutory methodology for
calculating a dumping margin. The statute contains no provision
limiting the current calculation of a margin at the amount of the
previous margin. Because the statute is explicit as to what adjustments
and limits are permitted within its methodology, the application of the
proposed limit is simply not within our discretion. Further, the Rhone
Poulenc case cited by Respondent simply allows the Department to assign
a margin more adverse than the most recent one when a foreign exporter
does not cooperate in a review. It by no means supports the principle
that the inverse is also true and the Department is required to find a
lower dumping margin than currently in effect whenever a firm does
respond to its questionnaire.
Furthermore, the Ferro-Ligas Group cannot argue that the Department
is unable to exceed the previous margin because that was based upon BIA
and that its cooperation in this review demonstrates that it is
entitled to a lesser number. Our BIA/facts-available practice has
always been founded on the principle that, if data in a current review
reflect a higher dumping rate than data from an earlier review, we will
use the higher current data. Moreover, the fact that the Ferro-Ligas
Group still failed to act to the best of its ability in providing some
of the data requested in this review may indicate that the risk of
receiving the previous margin was not sufficient to induce the firm to
provide complete data in the form we requested. Although the Ferro-
Ligas Group argues that it determined to seek this review because it
was not dumping at the margin previously assigned to it, the evidence
on the record of this case shows that such a conclusion was not well-
founded. We are not limited in our margin calculations by the
expectations of parties requesting reviews. Therefore, we have assigned
to the Ferro-Ligas Group, for this review, the margin calculated based
upon the data on the record of the current review.
Final Results of Review
As a result of our analysis of the comments received, we have
determined that a margin of 88.87 percent is applicable to the Ferro-
Ligas Group for the period June 17, 1994 through November 30, 1995.
The Department shall determine, and the U.S. Customs Service shall
assess, antidumping duties on all appropriate entries. Individual
differences between export price and normal value may vary from the
percentage stated above. The Department will issue appraisement
instructions directly to the U.S. Customs Service.
Furthermore, the following deposit requirement will be effective
for all shipments of subject merchandise from Brazil entered, or
withdrawn from warehouse, for consumption on or after the publication
date of these final results of this administrative review, as provided
by section 751(a)(1) of the Act: (1) The cash deposit rate for the
reviewed company, the Ferro-Ligas Group, will be 88.87 percent; (2) for
merchandise exported by manufacturers or exporters not covered in this
review but covered in previous reviews or the original LTFV
investigation, the cash deposit rate will continue to be the rate
published in the most recent final results or determination for which
the manufacturer or exporter received a company-specific rate; (3) if
the exporter is not a firm covered in this review, an earlier review,
or the LTFV investigation, but the manufacturer is, the cash deposit
rate will be that established for the manufacturer of the merchandise
in these final results, earlier reviews or the LTFV investigation,
whichever is the most recent; and (4) the cash deposit rate for all
other manufacturers or exporters will be 17.60 percent, the ``all
others'' rate established in the antidumping duty order (59 FR 55432,
November 7, 1994).
These cash deposit requirements shall remain in effect until
publication of the final results of the next administrative review.
This notice also serves as a final reminder to importers of their
responsibility under 19 CFR 353.26 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.
[[Page 37879]]
This notice also serves as the only 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
return/destruction of APO materials or conversion to judicial
protective order is hereby requested. Failure to comply with the
regulations and terms of the APO is a sanctionable violation.
This administrative review and this notice are in accordance with
section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)) and 19 CFR 353.22.
Dated: July 8, 1997.
Robert S. LaRussa,
Acting Assistant Secretary for Import Administration.
[FR Doc. 97-18582 Filed 7-14-97; 8:45 am]
BILLING CODE 3510-DS-P