[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