[Federal Register Volume 63, Number 28 (Wednesday, February 11, 1998)]
[Notices]
[Pages 6899-6913]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-3488]
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DEPARTMENT OF COMMERCE
International Trade Administration
[A-351-806]
Final Results of Antidumping Duty Administrative Review: Silicon
Metal From Brazil
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
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SUMMARY: On August 8, 1997, the Department of Commerce (``the
Department'') published the preliminary results of its administrative
review of the antidumping duty order on silicon metal from Brazil. This
review covers exports of this merchandise to the United States by four
manufacturers/exporters, Companhia Brasileria Carbureto de Calcio
(``CBCC''), Eletrosilex Belo Horizonte (``Eletrosilex''), Companhia
Ferroligas Minas Gerais-Minasligas (``Minasligas''), and RIMA
Industrial S/A (RIMA) during the period July 1, 1995, through June 30,
1996.
We gave interested parties an opportunity to comment on the
preliminary results. Based on our analysis of the comments received, we
have changed our results from those presented in our preliminary
results, as described below in the comment section of this notice. The
final results are listed below in the section ``Final Results of
Review.''
EFFECTIVE DATE: February 11, 1998.
FOR FURTHER INFORMATION CONTACT: Alexander Braier or Cindy Sonmez, AD/
CVD Enforcement Group III, Office Seven, Import Administration,
International Trade Administration, U.S. Department of Commerce, 14th
Street and Constitution Avenue, N.W., Washington, D.C. 20230;
telephone: (202) 482-3818 and (202) 482-0961, respectively.
The Applicable Statue
Unless otherwise indicated, all citations to the statute are
references to the provisions effective January 1, 1995, the effective
date of the amendments made to the Tariff Act of 1930 (the Act), by the
Uruguay Round Agreements Act (URAA). In addition, unless otherwise
indicated, all citations to the Department's regulations are to the
regulations codified at 19 CFR Part 353 (April 1, 1996).
SUPPLEMENTARY INFORMATION:
Background
On July 31, 1991, the Department published in the Federal Register
(56 FR 36135) the antidumping duty order on silicon metal from Brazil.
On August 8, 1997, the Department published in the Federal Register (62
FR 42760) the preliminary results of review of the antidumping duty
order on silicon metal from Brazil for the period July 1, 1995, through
June 30, 1996. On October 6, 1997, we received case briefs from the
respondents, CBCC, Eletrosilex, Minasligas, and Rima; from two
interested parties, General Electric Company (``GE'') and Dow Corning
Corporation (``Dow''); and from petitioners, American Silicon
Technologies, Globe Metallurgical, and SKW Metals & Alloys, Inc. On
October 20, 1997, we received rebuttal briefs from the respondents and
petitioners. At the request of both petitioners and respondents, we
held a hearing on October 29, 1997. The Department has now completed
this administrative review in accordance with section 751(a) of the
Act.
Scope of Review
The merchandise covered by this review is silicon metal from Brazil
containing at least 96.00 percent but less than 99.99 percent silicon
by weight. Also covered by this review is silicon metal from Brazil
containing between 89.00 and 96.00 percent silicon by weight but which
contains more aluminum than the silicon metal containing at least 96.00
percent but less than 99.99 percent silicon by weight. Silicon metal is
currently provided for under subheadings 2804.69.10 and 2804.69.50 of
the Harmonized Tariff Schedule (HTS) as a chemical product, but is
commonly referred to as a metal. Semiconductor grade silicon (silicon
metal containing by weight not less than 99.99 percent silicon and
provided for in subheading 2804.61.00 of the HTS) is not subject to the
order. HTS item numbers are provided for convenience and for U.S.
Customs purposes. The written description remains dispositive as to the
scope of product coverage.
Product Comparison
In accordance with section 771(16) of the Act, we considered all
products produced by the respondents, meeting the description in the
``Scope of the Review'' section, above, and sold in the home market
during the period of review (POR), to be foreign like products for
purposes of determining appropriate product comparisons to U.S. sales.
Where there were no sales of identical merchandise in the home market
to compare to U.S. sales, we compared U.S. sales to the next most
similar foreign like product based on the grade of silicon metal.
[[Page 6900]]
On January 8, 1998, the Court of Appeals of the Federal Circuit
issued a decision in Cemex v. United States, 1998 WL 3626 (Fed. Cir.).
In that case, based on the pre-URAA version of the Tariff Act of 1930
(the Act), the Court discussed the appropriateness of using constructed
value (CV) as the basis for foreign market value when the Department
finds home market sales to be outside the ordinary course of trade.
This issue was not raised by any party in this proceeding. However, the
Uruguay Round Agreements Act (URAA) amended the definition of sales
outside the ``ordinary course of trade'' to include sales below cost.
See Section 771(15) of the Act. Because the Court's decision was issued
so close to the deadline for completing this administrative review, we
have not had sufficient time to evaluate and apply (if appropriate and
if there are adequate facts on the record) the decision to the facts of
this ``post-URAA'' case. For these reasons, we have determined to
continue to apply our policy regarding the use of CV when we have
disregarded below-cost sales from the calculation of normal value.
Verification
As provided in section 782(i) of the Act, on March 17 through March
22, 1997, we verified information provided by Rima and Minasligas by
using standard verification procedures, the examination of relevant
sales and financial records, and original documentation containing
relevant information. The results of those verifications are outlined
in the verification reports, the public versions of which are available
on file in room B-099 of the main Commerce building.
I. Comments Related to Normal Value
Comment 1: Home Market Commissions
CBCC argues that the Department incorrectly assumed that the home
market commissions CBCC reported in a particular month were reported on
a per-ton basis when the commission figures were in fact total
commission amounts. As a result, CBCC asserts, the Department should
calculate a per-ton commission amount for that month by dividing the
reported total commission amounts by the total reported quantity sold.
The petitioners did not comment on this issue.
Department's Position: We agree with CBCC. Therefore, for these
final results we have converted the total commission figures CBCC
reported in a particular month to per-ton amounts by dividing the
reported total commission amount for each transaction by the reported
transaction-specific total quantity sold in that month.
Comment 2: Imputed Credit Calculation
Petitioners state that the Department failed to use adverse facts
available for Rima's U.S. imputed credit revenue, as was the
Department's intention. They state that the highest advanced exchange
contracts (ACC) interest rate used by any respondent during the POR,
which the Department used for the imputed credit facts available
interest rate, is adverse to Rima for situations in which Rima incurred
credit expenses, but is advantageous to Rima with respect to advance
payment sales, in which the company realized imputed credit revenue.
Petitioners state that for these sales, the Department should use as
adverse facts available the lowest available U.S. dollar interest rate
on the record of this review. Respondents disagree with petitioners.
They state that in the preliminary results, the Department decided to
penalize Rima for not reporting information regarding its credit
expenses. Respondents conclude that the Department did not intend to
also penalize Rima for not reporting information regarding its credit
revenue.
Department's Position: We agree with petitioners. The Department
intended to use adverse facts available for the interest rate used in
Rima's U.S. imputed credit calculation because the company did not
provide the interest rate for U.S. dollar-denominated borrowing it made
during the POR, despite the fact it had such borrowing, and despite
repeated requests for these rates. In the preliminary results analysis
memorandum (see Analysis of Data Submitted by RIMA Industrial S/A
(Rima) in the Fifth Administrative Review (95-96) of the Antidumping
Duty Order on Silicon Metal from Brazil by Alexander Braier, July 31,
1997), the Department stated that ``Rima failed to provide the ACC
interest rates it was charged during the POR, despite three
Departmental requests for these rates. Therefore, pursuant to 776(b) of
the Act, for Rima's imputed credit calculation, we used as adverse
facts available for Rima's interest rate, the interest rate which was
the highest of the ACC interest rates used during the POR by the other
respondents in this review.'' The imputed credit calculation is used to
calculate both imputed credit expense and credit revenue. Because Rima
did not provide the information the Department needed to properly
calculate imputed credit, the Department intended to use adverse facts
available on interest rate used for both credit expense and credit
revenue. However, as petitioners correctly point out, the interest rate
used was not adverse in our calculation of imputed credit revenue, and
thus we effectively only used adverse facts available for imputed
credit expense. For these final results, we have corrected this mistake
by using the lowest available U.S. dollar denominated interest rate
submitted by respondents in this review for all of Rima's U.S. sales
with imputed credit revenue.
Comment 3: Net Weight vs. Gross Weight
Petitioners argue that for Eletrosilex, the Department erred in the
calculation of U.S. selling prices by calculating the unit price based
on the net weight of contained silicon rather than the gross weight of
the silicon metal. They argue that in a constructed value (CV) based
margin calculation the Department should use the gross weight of the
silicon metal to calculate the per-unit U.S. price because CV is
reported on a gross-weight basis. Use of the contained-weight
quantities would, they allege, distort the comparison of export price
(EP) and CV. The respondents did not comment on this issue.
Department's Position: We disagree with petitioners. Our analysis
has not changed since our final determination in the previous review,
when petitioners raised the identical issue. See Notice of Final
Results of Antidumping Duty Administrative Review and Determination Not
to Revoke in Part Silicon Metal from Brazil;, 62 FR 1970 (January 14,
1997) (Final Results of 4th Review). As in the previous review, there
is no evidence on the record to support petitioners' contention that
the weights Eletrosilex reported for their U.S. market sales differ
from the weights used as the basis of the CV calculations and reflect
only the weight of the silicon, rather than the weight of the silicon
metal. Therefore, there is no reason to change the per-unit
calculations from those in the preliminary results of review.
II. Comments Related to COP/CV
Comment 4: Understatement of Depreciation Expense
Petitioners argue that Rima reduced its asset values for the POR
and understated its current depreciation expense through the use of a
hypothetical prior-period accelerated depreciation. Petitioners note
that Rima admits that its financial statement fixed asset values and
the asset values that it used to calculate its reported depreciation in
the worksheets prepared for this review are different. Petitioners
[[Page 6901]]
also note that Rima admits that depreciation was not recognized in
fiscal years 1987 through 1995. Petitioners assert that Rima failed to
record virtually any depreciation in its books or financial statements
during the period from 1987 through 1995, and that as a result, Rima's
books showed a large depreciable asset balance during the POR.
Petitioners argue that the Department must not allow Rima to
retroactively calculate hypothetical depreciation for the years during
which it recorded no depreciation.
Petitioners further argue that by using an accelerated depreciation
methodology (i.e., a five-year useful life for machinery and equipment
and a ten-year useful life for installations), Rima shifted all of the
depreciation on the great majority of its assets to years prior to the
POR. Petitioners argue that by shifting this expense to prior years,
Rima rendered a large portion of its assets fully depreciated prior to
the POR, thereby artificially reducing its depreciable asset base and
corresponding POR depreciation expense.
Finally, petitioners argue that the method used by the Department
to adjust Rima's depreciation expense in the preliminary determination
of this segment of the proceeding is an acceptable facts available
approach to correcting Rima's understated depreciation in view of
Rima's failure to report the amount of depreciation it actually
incurred. Petitioners, however, argue that the proper method of
correcting this shift to prior years is to disregard the hypothetical
depreciation calculation and calculate the proper annual amount of
depreciation using the normal 20 year useful life for machinery and
equipment and installations under Brazilian GAAP. Petitioners argue
that the actual life of a silicon metal furnace is at least 20 years
and often significantly longer. Petitioners argue that it is the
Department's established practice to reject accelerated depreciation of
assets where such depreciation fails to allocate costs of the asset
over the life of the asset, citing Final Determination of Sales at
LTFV; Dynamic Random Access Memory Semiconductors of One Megabit and
Above From the Republic of Korea, 56 FR 15467, 15479 (March 23, 1993)
(``DRAMs from Korea'') and Final Determination of Sales at Less Than
Fair Value: Fresh and Chilled Atlantic Salmon from Norway, 56 FR 7661
(Feb. 25, 1991) (``Salmon from Norway''). Petitioners argue that in
other proceedings regarding this company, the Department also has
rejected the reporting of lower depreciation during a review period
based on prior period accelerated depreciation. Petitioners argue that
in Final Determination of Sales at Less Than Fair Value: Ferrosilicon
From Brazil, 59 FR 732, 738 (January 6, 1994) (``LTFV Ferrosilicon from
Brazil''), the Department instructed CBCC to recalculate its
depreciation and instructed it not to use accelerated depreciation.
Petitioners argue that in the preceding (1994-95) review in this
proceeding, the Department rejected Rima's argument that the Department
should take into account hypothetical, prior years depreciation, not
recognized in Rima's accounting records and financial statements.
Petitioners argue that in that review, the Department rejected Rima's
argument that the estimated depreciation based on the financial
statement fixed asset values were overstated because Rima's auditors
did not consider whether Rima's assets had been fully depreciated.
Petitioners argue that the Department is presented with essentially the
same situation in this review.
Rima and GE argue the Department assumed wrongly that Rima did not
account for certain assets in its depreciation calculation. Rima and GE
argue that, in the Department's attempt to reconcile the asset values
on the depreciation schedules to the financial statements, the
Department was using data representing different asset values. Rima and
GE argue that the total asset value that the Department thought it was
calculating represents merely the unindexed value of assets that became
fully depreciated during 1995, plus the value of the remaining assets
to be depreciated during 1995. Rima and GE argue that the asset values
on the worksheets reconcile to the financial statements if the value of
the assets which have been fully depreciated since 1987 are indexed for
inflation and then are added to the opening value of the remaining
assets to be depreciated.
Rima and GE argue that its depreciation worksheets technically
overstate depreciation expense, since it assumed that all assets
purchased prior to 1986 were purchased in 1986, and that many of these
assets would have become fully depreciated earlier than shown in the
schedule. Rima and GE argue that the Department noted in its
verification report that the depreciation schedules no longer directly
tie to the financial statements when the assets began becoming fully
depreciated.
Rima and GE argue that the Department was correct in agreeing that
a five-year depreciation period employed by Rima is appropriate and in
accordance with both Brazilian and U.S. GAAP. Rima points out
petitioners' only support for their argument that a five-year useful
life is not acceptable under Brazilian GAAP are assertions supplied by
Eletrosilex and CBCC and do not constitute GAAP. Moreover, Rima argues
that as the Department noted in its verification report, Rima's
independent auditor indicated that Rima's new methodology for
calculating depreciation is fully consistent with Brazilian GAAP, and
accurately reflects actual depreciation costs. Rima argues that
Brazilian laws and regulations establish ten years as the normal useful
life for machinery and equipment used during a standard eight-hour
shift, but also allow for shorter useful lives if the assets are used
during three eight-hour shifts in 24-hours as they are at Rima.
Rima argues that in DRAMs from Korea, the Department rejected the
depreciation methodology employed by the respondent, not because that
methodology utilized too short a depreciation period, but rather
because the respondent switched from a double declining to a straight
line depreciation methodology without appropriately adjusting the net
asset values being depreciated. Rima argues that petitioners' reliance
on Salmon from Norway is also unfounded. Rima argues that in Salmon
from Norway, the Department relied upon ordinary depreciation expense
reported in the respondent's financial statements instead of the
accelerated depreciation amounts used for tax purposes and reported as
a separate non-operating expense on the company's financial statements.
Finally, Rima argues that the Department has accepted accelerated
depreciation expense. Rima argues that in the Final Results of the
Antidumping Duty Administrative Review of Ferrosilicon from Brazil for
1995-1996, 62 FR 43504, 43510 (August 14, 1997) (Ferrosilicon from
Brazil), the Department disagreed with petitioners that Minasligas'
depreciation calculation was unacceptable because it is based on
accelerated depreciation and found it consistent with Brazilian GAAP
and that it did not distort actual costs.
Department's Position: We agree with Rima, in part. In the
preliminary results, we incorrectly found that the total fixed assets
on Rima's depreciation schedules did not reconcile to the financial
statements. Rima demonstrated that the monetarily corrected costs of
its assets contained in the depreciation worksheets reconciled to its
financial statements. Rima also demonstrated the worksheets calculated
depreciation on the monetarily corrected costs using a straight line
method over Rima's useful life of the assets. Additionally, Rima
[[Page 6902]]
demonstrated that the depreciation expense shown on the worksheets
reconciled to the depreciation expense reported in the audit opinion of
its financial statements. See Memorandum from Theresa L. Caherty to the
File, dated January 14, 1998.
We disagree with petitioners that simply because Rima chose not to
record depreciation and amortization in its accounting records that its
prior period depreciation and amortization were simply hypothetical
amounts. In the audit opinion of Rima's financial statements for prior
years, the auditors declared the amount of unbooked depreciation and
amortization expenses. In fact, in prior segments of this proceeding
(i.e., the 1992-1993 and the 1994-1995 administrative reviews) when the
Department did not resort to total facts available (or total best
information available), we included in Rima's COP and CV the
depreciation expense which the auditors stated in Rima's audit opinion.
Because the amount of depreciation expense stated in the audit opinion
is supported by Rima's depreciation worksheets, which in turn support
the depreciation expense included in the submitted COP and CV, Rima's
reported depreciation expense does not distort the reported COP and CV.
Our use of Rima's financial statement depreciation expense is
consistent with Salmon from Norway, where we relied on the depreciation
expense reported in the financial statements.
We disagree with petitioners and Rima that useful lives of assets
in a particular country are dictated by GAAP. GAAP does not simply
provide tables which indicate what the useful life for a particular
asset should be; rather, it specifies that the cost of an asset should
be systematically depreciated over the estimated useful life of the
asset. The estimated useful life of an asset should be determined by
consideration of such factors as legal life, the effects of
obsolescence, and other economic factors. In this case, Rima's audit
opinion states that the financial statements were presented in
accordance with GAAP except that Rima did not record depreciation and
amortization expenses of R$3,264,000. This amount of depreciation and
amortization was calculated using Rima's estimated useful life of five
years for machinery and equipment. We agree with Rima that in 1995-1996
Ferrosilicon, we accepted accelerated depreciation expense based on
amounts recorded in the financial statements because they were
calculated in accordance with Brazilian GAAP and they did not distort
actual costs.
As explained above, in prior segments of this proceeding, we
included in Rima's COP and CV depreciation expense that the auditors
identified in their audit opinion and which was calculated using Rima's
estimated useful life of five years for machinery and equipment. If we
were to follow petitioners' request and recalculate Rima's depreciation
expense using a 20-year useful life for machinery and equipment, we
would double count depreciation and amortization costs which we
captured in the prior segments of this proceeding.
Comment 5: Error in Department's Depreciation Adjustment
Petitioners argue that the Department properly recognized the need
to make a significant adjustment to Rima's depreciation expense, but in
making the adjustment it understated the amount. Petitioners argue that
the Department based its adjustment on the difference between the asset
value on Rima's financial statement and the December 1996 asset values
in Rima's hypothetical calculation. Petitioners argue that the
Department should have used the December 1995 asset values in Rima's
hypothetical calculation.
Rima argues that petitioners fundamentally misstate the basis of
the Department's adjustment. Rima argues that petitioners incorrectly
suggest that the Department understated the gap between the 1995 asset
values contained in Rima's depreciation worksheets and the 1995 asset
values contained in the company's 1996 financial statements by basing
its adjustment on the difference between Rima's financial statement
fixed asset values and the beginning 1995 asset values in the
worksheets. Rima argues that it is apparent from the record evidence
that the Department in fact grossly overstated the gap between the 1995
asset values contained in Rima's depreciation worksheets and the 1995
assets values contained in the company's 1996 financial statement.
Rima argues that petitioners' claim that the Department employed a
beginning-of-period amount instead of an end of period amount is off-
base and misleading. Rima argues that the Department needed to employ
neither a beginning nor ending period, but rather an amount which took
account of the entire acquisition cost of each asset. Rima argues that
petitioners' claim is falsely based upon a supposition that Rima had
been depreciating its assets each year and reporting the un-depreciated
amount at the end of each year in its financial statements.
Department's Position: We agree with Rima. As we explained in
Comment 2 above, in the preliminary results we incorrectly found that
the total fixed assets on Rima's depreciation schedules did not
reconcile to the financial statements. Rima demonstrated that the
monetarily corrected costs of its assets contained in the depreciation
worksheets reconciled to its financial statements. Rima also
demonstrated the worksheets calculated depreciation on the monetarily
corrected costs using a straight line method over Rima's useful life of
the assets. Additionally, Rima demonstrated that the depreciation
expense shown on the worksheets reconciled to the depreciation expense
reported in the audit opinion of its financial statements. See
Memorandum from Theresa L. Caherty to the File, dated January 14, 1998.
Therefore, there are no assets on the financial statements for which
RIMA did not report depreciation expense.
Comment 6: Monetary Variation in Financial Expenses
Petitioners state that the Department erred in the calculation of
Rima's financial expenses by not including the category of ``monetary
variations of liabilities'', which is listed on Rima's income
statement, in the calculation of interest expense. Petitioners assert
that ``monetary variation'' should be included in ``net financial''
expenses because this category represents the portion of interest
expense paid to the lender to compensate it for inflation, and as such
constitutes part of Rima's financial expenses. Citing to Notice of
Final Results of Antidumping Duty Administrative Review: Gray Portland
Cement and Clinker From Mexico:, 58 FR 47,256 (September 8, 1993)
(Cement From Mexico), petitioners assert that it is the Department's
practice to include monetary variation of liabilities in the
calculation of financial expenses in non-hyperinflationary economy
cases such as this one. Petitioners also cite to Notice of Final
Redetermination of Remand in Ferrosilicon from Brazil, (January 16,
1996) (Remand in Ferrosilicon from Brazil), stating that in the
original investigation, monetary variation was included in the
financial expense line item on Minasligas' financial statements. (See
petitioners' Case Brief at 39).
Respondents state that petitioners are incorrect, and that the
``monetary variation'' category on Rima's income statement does not
contain any financial expenses incurred by the company during the POR
and so should be ignored by the Department for the purpose of
calculating Rima's COP and CV amounts. Rima states that the ``monetary
variation'' category relates
[[Page 6903]]
exclusively to changes in the face values of the company's outstanding
monetary liabilities, and so does not include any portion of Rima's
interest expense. Rather, it isolates what is used to calculate the
total amount in the ``net financial'' account. As such, it represents
the amount by which the face value of Rima's loans increase from year-
to-year as a result of inflation and is not, in and of itself, an
interest expense incurred by the company.
Rima responds to petitioners' claim regarding Remand in
Ferrosilicon from Brazil, stating that, while it is true that
``monetary variation'' was included in the ``net financial'' expense
line item, the Department did not find that the ``monetary variation''
included interest expense. Rather, the Department found that the
interest expense account on the financial statement included two
components of interest expense, including a component to compensate the
lender for a loss of purchasing power. Rima asserts that similarly, the
``net financial'' expense on Rima's financial statement includes both a
real interest component and an inflation component to compensate the
lender for the continuing loss of purchasing power due to inflation.
Rima cited a Brazilian accounting manual which contained an
explanation of provision 26.3.2(a) of Brazilian GAAP (Rima notes that
petitioners cited to this manual in their submission of July 23, 1997,
attesting to this manual's standing as an authoritative guide). This
explanation states in part ``. . . only interests are included as
financial expenses (or revenue), but not the monetary correction or
exchange variation of the loans which are recorded separately under
Monetary Correction.'' (See Respondent's Case Brief at 23 and
Attachment C.) Rima concludes that this provides evidence that the
``monetary variation'' category on its income statements does not
contain any interest expense, but rather represents the amount by which
the principal was increased to adjust for inflation. Finally, Rima
states that petitioners' cite to Mexican Cement is not appropriate,
because that case did not involve the indexing of loan principal, and
did not involve the use of current costs of production.
Department's Position: We agree with respondents, in part.
Brazilian GAAP requires that the restatement of liabilities be shown in
the category ``monetary variation'' on a company's income statement
(see World Accounting, Vol. 1, Matthew Bender, 1997, pp. BRA-7). The
restatement of the liability in the company's financial statement
represents the increase in the principal amount of the loan due to the
application of the inflation index. It does not represent the interest
on the restatement, as claimed by petitioners. Furthermore, Rima's
trial balance for December, 1995 (Exhibit C-3 of the Department's
verification report), contains the selected account detail for Rima's
income statement. From this detail, we were able to identify the trial
balance accounts for ``monetary variation in liabilities'' for each
Rima company, and tie the total to Rima's income statement. We also
identified the historic value of liabilities and the interest on the
monetary variation of liabilities accounts in the ``net financial''
account detail.
However, we noted that the ``monetary variation'' accounts on
Rima's trial balance contain a sub-account called ``foreign exchange
gains/losses'' (i.e., gains and losses realized due to currency
exchange) for each company. These sub-accounts represent financial
expenses. Therefore, because these sub-accounts represent interest
expense, the Department has subtracted the total amounts of these sub-
accounts from the ``monetary variation'' category on Rima's income
statement and has added them to ``net financial'' expenses category.
The Department's position is that, after making the correction noted in
the preceding sentence, Rima's income statement line item ``monetary
variation in liabilities'' contains no interest expense, and
consequently should not be added to Rima's financial expenses.
Comment 7: Double Counting of Monetary Correction and Deferred
Financial Expense Amortization
Petitioners argue that the Department properly rejected Rima's
reported amortization of deferred financial expenses because Rima did
not recognize amortization of deferred expenses from the 1987-95 period
in its accounting records or financial statements. Petitioners argue
that Rima's reported amortization of deferred expenses is infected with
virtually all of the same defects as its reported depreciation.
Petitioners note that Rima did not recognize amortization of deferred
expenses from 1987-1995 in its accounting records or financial
statements. Petitioners argue that Rima's attempts to shift
amortization to prior years by calculating a hypothetical amortization
during the years 1987-95.
Petitioners also argue that Rima's hypothetical amortization
furthers distorts the current amortization by relying on a highly
accelerated rate. Furthermore, petitioners argue that the highly
accelerated rate is improper because the deferred assets relate to
expenses that benefit Rima's production over a much longer period than
five years.
Petitioners argue that Rima is wrong that the Department assigned
the full value of the Rima group amortization to the subject
merchandise. Petitioners argue that by including the amortization in
Rima's company-wide financial and G&A expense ratios and applying those
ratios to COM, the Department allocated a proportionate share of the
amortization to the subject merchandise.
Rima and GE argue that the Department incorrectly assumed that the
monetary correction of certain deferred financial expenses were not
accounted for in 1995. Rima argues that these deferred financial
expenses are indexed each year to account for inflation and are then
amortized. Rima argues that it included in the reported costs both the
monetary correction on the deferred financial expenses and the
associated accumulated amortization.
Rima also argues that the correct current period amortization
expense was included in the reported costs. Rima argues that the
submissions and verification exhibits on the record in this proceeding
document that it properly calculated and reported the monetary
correction and amortization associated with deferred expense. Rima
argues that accordingly, the Department's adjustments to interest
expenses to apply these deferrals to the current year is incorrect.
Finally, Rima argues that even if the Department was correct that
these costs were not accounted for properly, it erroneously applied to
1995 the total amount of deferred expenses, as if they all related to
silicon metal. Rima argues that the assets of Varzea da Palma in which
silicon metal is produced are much smaller than those of Bocaiuva,
which produces non-subject merchandise.
Department's Position: We agree with Rima, in part. We agree with
Rima that we erred by including in the COP and CV the full amount of
the 1995 monetary correction to restated deferred financial expenses.
While Rima did not record amortization expense in their books, Rima's
qualified audit opinion stated the amount of depreciation and
amortization which it did not include in the financial statements for
the year. Even though Rima did not record the stated amortization in
its books, Rima included it in its reported COP and CV.
As with Rima's depreciation expense, in prior segments of this
proceeding, when the Department did not resort to total facts available
(or total best information available), we included in
[[Page 6904]]
Rima's COP and CV the amortization expense which the auditors stated in
Rima's audit opinion. (See, 1992-1993 Silicon Metal and 1994-1995
Silicon Metal). Because the amount of amortization expense stated in
the audit opinion is supported by Rima's worksheets, which in turn
support the amortization expense included in the submitted COP and CV,
Rima's reported amortization expense does not distort the reported COP
and CV. If we were to follow petitioners request and recalculate Rima's
amortization expense using a longer useful life for the deferred
assets, we would double count amortization costs which we captured in
the prior segments of this proceeding.
After further analysis, we agree that Rima included in its
submitted COP and CV amortization expense of the monetarily corrected
deferred financial expenses. However, we noted that Rima only included
in the submitted costs amortization for the deferred financial expenses
which it identified as related to silicon metal production. It is the
Departments' practice to calculate financial expenses based on the
results of the entire consolidated entity. Additionally, Rima included
its amortization of deferred financial expenses in the reported cost of
manufacturing. For these final results we recalculated Rima's financial
expenses. We calculated Rima's average financial expense for 1995 and
1996. We included Rima's average net financial expenses from its 1995
and 1996 financial statements, amortization of the total deferred
financial expenses, and the exchange losses recorded on the financial
statements in the line item monetary variation on liabilities. We
allocated Rima's total financial expense over its total cost of sales.
Because we included Rima's amortization of deferred expenses in the
calculation of financial expenses, we excluded that same amount from
Rima's cost of manufacturing.
Comment 8: Use of Rima's 95-96 Financial Statements to Calculate
Financial Expense
Petitioners argue that the Department correctly calculated Rima's
financial expense on its 1995 financial statements because Rima offset
its financial expense with financial income, and it was not clear that
this financial income was attributable only to short-term interest
income (the only offset allowed by the Department), and the Department
found that the record contained the amount of financial income to
``undo'' the offset for 1995 only. Petitioners argue that Rima's
assertion that it did not have long-term interest bearing assets is
false. Petitioners assert that GE's argument also conveniently
overlooks the fact that the Department specifically found that Rima had
financial income in 1995, which presumably resulted from investments
that Rima officials claimed did not exist.
Rima and GE argue that the Department should calculate Rima's
financial expense rate utilizing the net financial expenses from both
Rima's 1995 and 1996 financial statements because the Department found
that Rima had financial income in 1995.
Department's Position: We agree with Rima. As discussed in Comment
7 above, we recalculated Rima's financial expense using its 1995 and
1996 data. We did this because, upon further examination of Rima's
interest expense data in Exhibit C-3 and Rima's 1995 and 1996 balance
sheets, we were able to determine that Rima earned only short-term
interest income. Therefore, we included Rima's average net financial
expenses from its 1995 and 1996 financial statements, amortization of
the total deferred financial expenses, and the exchange losses recorded
on the financial statements in the line item monetary variation on
liabilities. We allocated Rima's total financial expense over its total
cost of sales for 1995 and 1996. Because we included Rima's
amortization of deferred expenses in the calculation of financial
expenses, we excluded that same amount from Rima's cost of
manufacturing.
Comment 9: Double Counting of Deferred Non-Financial Expense
Amortization
Petitioners argue that the Department properly rejected Rima's
reported amortization of deferred non-financial expenses because Rima
did not recognize amortization of deferred expenses from the 1987-95
period in its accounting records or financial statements. Petitioners
argue that Rima's reported amortization of deferred expenses is
infected with virtually all of the same defects as its reported
depreciation. Petitioners note that Rima did not recognize amortization
of deferred expenses from 1987-1995 in its accounting records or
financial statements.
Petitioners also argue that Rima's hypothetical amortization
further distorts the current amortization by relying on a highly
accelerated rate. Furthermore, petitioners argue that the highly
accelerated rate is improper because the deferred assets relate to
expenses that benefit Rima's production over a much longer period than
five years.
Rima argues that the Department double counted the amortization
expense on certain deferred non-financial expenses. Rima argues that it
included in the reported costs both the monetary correction on the
deferred non-financial expenses and the associated accumulated
depreciation account. Rima also argues that the correct current period
amortization expense was included in the reported costs. Rima argues
that the submissions and verification exhibits on the record in this
proceeding document that it properly calculated and reported the
monetary correction and depreciation expense associated with deferred
non-financial expenses.
Department's Position: We agree with Rima. As we explained in
Comment 5 above, in the preliminary results we incorrectly found that
Rima did not report amortization expenses for its deferred asset
accounts. Rima demonstrated that the monetarily corrected deferred
expenses were included in amortization worksheets and the reported COP
and CV.
Comment 10: Slag Revenue
CBCC states that the quantity produced figure it used to calculate
its reported COP on a per-ton basis excluded the quantity of slag
generated during production. As a result, CBCC states, its reported COP
was net of slag. However, CBCC argues, because this by-product is sold
from time to time, and because it provided a figure for the revenue
generated from its sales of slag in exhibit 14 of its December 30, 1996
submission, the revenue generated by such sales should be deducted from
COP. CBCC asserts that not only is this in accordance with the
Department's practice, but the Department made the identical adjustment
for another Brazilian producer in its preliminary results. The
petitioners did not comment on this issue.
Department's Position: We agree with CBCC and for these final
results have made an adjustment to its reported COP to account for the
revenue generated by its sales of slag. For a detailed description of
this adjustment please see the Department's final results analysis
memorandum for CBCC.
Comment 11: Depreciation on Dust Removal System
Petitioners argue that Minasligas underreported depreciation by not
reporting depreciation for the dust removal system that is under the
same sub-account as the new furnace in Minasligas's asset ledger,
reported in Minasligas's cost-deficiency questionnaire response at
exhibit 6
[[Page 6905]]
(March 15, 1997). Petitioners contend that the dust removal system
should have been depreciated together with all other assets related to
the new furnace and conclude that, for the final results, the
Department should add the depreciation for this asset to Minasligas'
reported depreciation and recalculate Minasligas' COP and CV
accordingly.
Minasligas argues that depreciation was not understated for the
dust removal system, since this asset was (a) non-related to the
production of silicon metal, (b) designed to produce micro silica--a
by-product of silicon metal with a separate cost center, and (c) non-
operative during the POR. Minasligas concludes that even if the dust
removal system had been in operation during the POR, the depreciation
expense would be entirely allocated to micro silica and not to silicon
metal in Minasligas' financial accounting system.
Department's Position: We agree with petitioners. With respect to
Minasligas' claim on the operational status of the dust removal system,
the Department finds no evidence on the record demonstrating that the
dust removal system was not in simultaneous operation with the new
furnace during the POR. It is Department's long-standing practice to
depreciate all assets which have been placed into service and are
related to the production of subject merchandise. Because the dust
removal system is attached to the new furnace, which was in operation
during the POR, and because Minasligas' own books treat the dust
removal system as part of that new furnace, in these final results of
the review, the Department has rejected Minasligas' claim and allocated
the depreciation expense of the value of the dust removal system to
silicon metal production.
Comment 12: Weight-Averaging COP Data
Petitioners contend that the Department should use a weighted
average COM for the POR using Exhibit 5 of Minasligas' March 5, 1997
cost deficiency response as verified during the company verification.
Minasligas stated that COP data submitted to the Department in its
submission of March 5, 1997, was inadvertently calculated by means of
simple averaging as opposed to weight-averaging, which is the
Department's standard methodology.
Department's Position: We agree with petitioners that final margin
calculations should be based on the weight averaged COP data and we
corrected this in these final results of the review. For a detailed
discussion on the performed calculation please see Department's final
analysis calculation memorandum for Minasligas.
Comment 13: Slag Offset
Minasligas argues that the offset the Department intended to make
to COP for Minasligas' sales of slag was not properly calculated.
Minasligas asserts that, due to a programming error, the slag offset,
which Minasligas reported as a negative number, was incorrectly added
rather than subtracted from the Department's calculations. Petitioners
did not comment on this issue.
Department's Position: We agree with Minasligas. In these final
results of review, we have rectified the problem by subtracting the
absolute value of the slag offset, reported as a negative number, from
COP in the margin calculations.
Comment 14: Financial Expense Ratio
Petitioners state that in the preliminary results the Department
calculated CBCC's financial expenses by multiplying cost of
manufacturing by a financial expense ratio which the Department derived
from the consolidated financial statements of Solvay & Cie, CBCC's
Belgian parent. Petitioners assert that, because the use of this ratio
significantly understates the financial expenses incurred by CBCC,
produces distorted results, is contrary to law, and is inconsistent
with past Departmental practice, for the final results the Department
should calculate CBCC's financial expenses using a ratio derived from
CBCC's own financial statements.
Petitioners contend that, while the Department normally bases the
financial expense ratio on a parent company's consolidated financial
expenses because the group's parent, due to its influential ownership,
has the power to determine the capital structure of each member within
the group, in accordance with section 773(f) of the Act, the Department
must also ensure that the costs it calculates reasonably reflect the
costs associated with the production and sale of the subject
merchandise. In this case, petitioners argue, when comparing the 1995
financial statements of CBCC and Solvay & Cie, it is clear that the
Department's use of Solvay & Cie's financial expense ratio results in a
large understatement of the financial expenses actually incurred by
CBCC in the production and sale of subject merchandise and could result
in the shifting of debt from the parent to the subsidiary for the
purpose of reducing the financial expense ratio.
Furthermore, petitioners assert that not only did CBCC account for
less than 2 percent of Solvay & Cie's consolidated net worth in 1995,
but because the group consists of numerous subsidiaries and affiliated
parent companies in the automotive, chemical, pharmaceutical, plastic,
shipping, and related industries, virtually all of Solvay & Cie's
financial expenses and cost of goods sold (COGS), as reflected on its
1995 consolidated financial statements, were incurred by entities other
than CBCC engaged in businesses completely unrelated to the production
and sale of silicon metal.
Petitioners also contend that in Notice of Final Results of
Antidumping Duty Administrative Review: Silicon Metal from Brazil, 59
FR 42806 (August 19, 1994) (Final Results of 1st Review) and the Notice
of Final Determination of Sales at Less than Fair Value Ferrosilicon
from Brazil, 59 FR 732 (August 6, 1994), the Department did not rely on
Solvay & Cie's financial expense ratio to calculate CBCC's financial
expenses, but rather based the ratio on Solvay do Brazil's, CBCC's
direct parent, consolidated financial statements.
Petitioners further argue that, if the Department agrees with their
position and bases its calculation of CBCC's financial expense on
CBCC's financial statements, the Department should use the total
financial expense figure as shown on CBCC's financial statement and not
allow CBCC's claimed offset for interest income because CBCC failed to
demonstrate that this interest income was derived from short-term
investments of working capital. Finally, petitioners assert that, if
the Department were to reject their position and continue to calculate
CBCC's financial expense using the ratio derived from Solvay & Cie's
financial statements, the Department should still not allow an offset
for interest income because there is no information on the record
demonstrating that the interest income offsetting Solvay & Cie's total
financial expenses was earned on short-term investments of working
capital.
CBCC argues that, in accordance with the Department's established
practice as applied in Final Results of 4th Review, Notice of Final
Results of Antidumping Duty Administrative Review and Determination Not
to Revoke in Part Silicon Metal from Brazil, 62 FR 1594 (January 14,
1997) and Notice of Final Results of Antidumping Duty Administrative
Review: Ferrosilicon from Brazil, 62 FR 43504 (August 14, 1997)
(Ferrosilicon from Brazil), the Department should not alter its
preliminary results determination and should continue to rely on the
consolidated Solvay & Cie financial statements to calculate CBCC's
interest expenses. However, CBCC states, while
[[Page 6906]]
the Department has used an accurate methodology to calculate its
financial expenses, it nevertheless relied on an incorrect ratio when
it should have used the ratio CBCC provided in exhibit D-3 of its
November 4, 1996, submission.
Department's Position: We agree with the respondent that our
established policy is to calculate interest expenses incurred on behalf
of the consolidated group of companies to which the respondent belongs,
based on consolidated financial statements, regardless of whether the
respondent's financial expense is higher than that of the controlling
entity. This practice recognizes two facts: (1) The fungible nature of
invested capital resources such as debt and equity of the controlling
entity within a consolidated group of companies, and (2) the
controlling entity within a consolidated group has the power to
determine the capital structure of each member country within its group
(see, e.g., Notice of Final Results of Antidumping Duty Administrative
Review Aramid Fiber Formed of Poly ParaPhneylene Terephthalamide from
the Netherlands, 62 FR 136 (July 16, 1997)). While the petitioners
correctly contend that in a past review of this case and in the LTFV
determination for ferrosilicon from Brazil we relied on Solvay do
Brazil's financial statements, they overlook the fact that we did not
have the Solvay & Cie consolidated financial statement on the record
for these reviews. Because we clearly have Solvay & Cie's consolidated
financial statement on the record for this review, in accordance with
our established practice, we have used this consolidated financial
statement to calculate CBCC's interest expenses.
With respect to petitioners' contention that we should not permit
an offset to CBCC's interest expense for interest income, we agree. Not
only did CBCC fail to make an offset claim, but CBCC provided no
information on the record demonstrating that any of the financial
income reflected on the Solvay & Cie consolidated income statement was
earned on short-term investments of working capital. Therefore, for
these final results we have not made an interest income offset to
CBCC's financial expenses.
Comment 15: Production Quantity
Eletrosilex and Dow Corning state that the Department should make
an adjustment in its calculation of COM to reflect an extraordinary
event which caused Eletrosilex's furnaces to shut down for substantial
periods of time during two months of the POR, resulting in what they
claim to be a highly distorted COM. Eletrosilex requests that in the
COM calculation, the Department replace the actual production during
March and May 1996, which was unusually low, with the average
production quantity during the other 10 months of the POR. The company
contends that two unrelated events resulted in the lack of supply of
electrodes, an essential ingredient in the production of silicon metal,
which led to unusually low production during these two months. The
first event was a dispute with Eletrosilex's long-term supplier of
electrodes, and the ultimate termination of the supply relationship.
The second event was a work stoppage by Brazil's customs workers, which
hampered Eletrosilex's ability to import new shipments of electrodes.
Eletrosilex contends that during the prolonged periods during which it
could not produce silicon metal, most of the costs of production, such
as direct labor, direct materials, purchase of most materials,
equipment costs, maintenance costs, selling expenses, general and
administrative expenses and financial expenses, remained constant.
Therefore, according to Eletrosilex, the reported cost of manufacturing
is distorted, warranting an adjustment by the Department. In addition,
Dow Corning supports Eletrosilex's claim for an adjustment by stating
that their supply of silicon metal from Eletrosilex was interrupted due
to a low production during those months of the POR.
Petitioners assert that the Department should not make this
adjustment because COM was calculated correctly, based on the actual
costs incurred. Petitioners cite to the Agreement on Implementation of
Article VI of the GATT, Statement of Administrative Action, Antidumping
Duty and Procedural Provisions 807, 835, reprinted in 1994, U.S.
C.C.A.N. 4151, 4172, (``SAA''), which states that costs shall be
determined ``using a method that reasonably reflects and accurately
captures all of the actual costs incurred in producing and selling the
merchandise under . . . review.'', and contend that ``Curtailments in
production due to a restricted flow of supplies caused by the
termination of an unreliable supplier are simply a fact of doing
business. Such occurrences do not render the actual costs incurred
distortive and do not warrant any adjustment to those costs.'' See
Petitioners' Rebuttal brief at 14.
Department's Position: We disagree with Eletrosilex and Dow
Corning. The Department rejected a similar argument from Eletrosilex in
the first review. See Notice of Final Results of Antidumping Duty
Administrative Review: Silicon metal from Brazil, 61 FR 46763
(September 5, 1996) (Final Results of 3rd Review). As stated in those
final results, the Department's policy is to use actual production
volumes in the calculation of COM. The Department's policy is to use
actual cost and production information because this information is the
most accurate.
Comment 16: G&A Expenses
Eletrosilex asserts that the DOC should use the actual G&A incurred
during the POR rather than the average based on Eletrosilex's 1995
financial statements. Eletrosilex states that the Department should do
so because the company provided the Department with the actual G&A for
each month of the POR, and because Eletrosilex incurred an
extraordinary charge which is reflected in the 1995 financial
statements, but actually occurred outside the POR. Eletrosilex claims
that the Department rejected its normal policy of using fiscal year
data to calculate G&A expenses in the first administrative review of
this proceeding, where it concluded that to apply actual G&A expenses
would produce a distorted and unrepresentative result.
Petitioners state that the Department was correct in employing its
standard practice and calculating Eletrosilex's G&A expenses based on
the company's 1995 financial statements. Petitioners state that
respondents have provided no documentation to substantiate their claim
that the amount in question was an extraordinary charge, and that
calculating G&A in the manner suggested by respondents would be
contrary to established Department practice.
Department's Position: We disagree with Eletrosilex. The Department
correctly used Eletrosilex's most recently audited financial statements
to calculate Eletrosilex's G&A expenses, because G&A expenses are
period expenses. Period expense categories such as G&A and interest
expense capture all expenses incurred during a company's standard
reporting period, i.e. its fiscal year. The Department's accepted
practice is to use the audited fiscal year financial statement that
most closely corresponds to the POR to calculate period expense ratios
such as the G&A and interest expense ratios. The Department does not
adjust these period expenses to account for certain expenses which were
incurred at a particular point in time during a company's fiscal year.
Employing the methodology used in this instance is both consistent with
Department policy, and accurately reflects expenses
[[Page 6907]]
realized during the most recent fiscal year for which financial
statements were available.
III. Comment Related to U.S. Sales
Comment 17: Date of Sale
Petitioners contend that the Department erred by using the purchase
order confirmation date rather than the invoice date for determining
date of sale for Minasligas' U.S. sales. Petitioners argue that
contrary to the Department's questionnaire instructions issued for this
review period, Minasligas reported the purchase order confirmation date
as the date of sale for its U.S. sales rather than the invoice date.
Minasligas responded that the Department was correct in using the
purchase order date, as it has in prior reviews, in determining the
date of sale. Minasligas asserts that purchase order date is the date
upon which all sales terms are set. Minasligas deems the invoice date
as an improper date of sale, because a sale may have more than one
``nota fiscal'' (invoice) issued at different dates depending on the
date of shipment of each lot from the plant and a separate ``master
nota fiscal'' at the port.
Department's Position: We agree with Minasligas. Consistent with
our practice in the second, third, and fourth reviews, the Department
used date of confirmation order as date of sale based upon our finding
that all essential terms of sale are established by this date.
Comment 18: Tying Sales to Entries
Petitioners assert that section 751(a)(2)(A) of the Act requires
the Department to determine the margin of dumping on each entry of
subject merchandise during the POR. Petitioners assert that, in its
preliminary results the Department incorrectly included within its
margin calculation sales transactions which were not within the POR,
and excluded from its margin calculation sales which were indeed
entered in the POR. As a result, petitioners argue, the Department
understated the margins of dumping for Minasligas, Eletrosilex and CBCC
and, if not corrected for the final results, will understate the
assessment and cash deposit rates for these firms as well. Petitioners
contend that section 751(2)(B) of the Act requires that antidumping
duties be imposed in the amount of the margin of dumping in order to
ensure that the duty offsets the unfairly low pricing of the
merchandise entering the United States. Therefore, petitioners assert,
to impose duties on entries at rates based on sales unrelated to the
POR, as the Department has done its preliminary results, is a violation
of this core principle of the U.S. antidumping law.
With respect to Eletrosilex, petitioners argue that certain U.S.
sales reported by Eletrosilex did not enter the U.S. Customs territory
during the POR and, based on the arguments presented above, should be
excluded from the Department's margin calculations for Eletrosilex for
these final results.
With respect to CBCC, petitioners assert that the Department must
determine which sales made by CBCC entered U.S. Customs territory for
consumption during the POR, including merchandise withdrawn from a
bonded warehouse, in order to establish a universe of sales to review
during the POR. In response to petitioners, CBCC stated that it sells
to unrelated U.S. customers and has no knowledge of the ultimate
destination of the merchandise once it enters the bonded warehouse in
the territory of the United States. Further, petitioners contend that
based on a comparison of the U.S. sales by the U.S. Census Bureau for
the POR, there was a very large volume of entries for consumption of
silicon metal from Brazil during July 1995 and there are no
corresponding sales reported to the Department by the respondents. In
addition, petitioners assert, the volume of reported arrivals at U.S.
ports during July 1995 falls far short of the volume of reported
entries for consumption during that month. For these reasons,
petitioners argue, as was done in the preceding two segments of this
proceeding, the Department must request from the U.S. Customs Service
information concerning which U.S. sales by CBCC entered U.S. Customs
territory for consumption during the POR, including merchandise
withdrawn from bonded warehouse for consumption during the POR.
In its case briefs, Minasligas refers to the questionnaire that the
Department issued to the respondents in this review on the issue of
which sales to consider for a review during the POR. It is Minasligas'
understanding that in EP sale situations, Minasligas was required to
report each sale transaction to the Department based on its date of
shipment. Hence, Minasligas contends the Department should include
those U.S. sales in question that have been shipped during the POR but
whose dates of sales are indeed outside the POR.
Department's Position: We disagree with Minasligas. The
Department's methodology has remained the same as that in prior reviews
in determining which U.S. sales to review. Further, information on the
record confirms that all respondents in this review had at least one
consumption entry into U.S. Customs territory during the POR.
Therefore, in the final results of this review, the Department has
continued to employ the following approach in determining which U.S.
sales to review for all companies:
(1) Where a respondent sold subject merchandise, and the importer
of that merchandise had at least one entry during the POR, we reviewed
all sales to that importer during the POR.
(2) Where a respondent sold subject merchandise to an importer who
had no entries during the POR, we did not review the sales of subject
merchandise to that importer in this administrative review. Instead, we
will review those sales in our administrative review of the next period
in which there is an entry by that importer.
We also disagree with petitioners. The Department most recently
addressed and rejected petitioners' assertion that the Department of
Commerce calculate dumping margins based on sales of subject
merchandise that entered U.S. Customs territory during the POR in the
final results of the last review of this order (See Final Results of
4th Review at 1955, 1956).
Our analysis of this issue and interpretation of the statute remain
unchanged from those announced in the final results of the second,
third and fourth reviews of this order. In applying a consistent
methodology from review to review, we capture all sales transactions.
Changing the methodology could result in the failure to review some
sales.
Comment 19: Shipment Date
Citing to the Department's Notice of Final Determination of Sales
at Less Than Fair Value: Welded Stainless Steel Pipe from Malaysia, 59
FR 4023 (January 28, 1994), petitioners contend that it is the
Department's practice to calculate U.S. imputed credit expenses for the
period from the date of shipment from the factory to the date of
payment from the U.S. customer. However, petitioners argue, based on
their comparison of the date of shipment reported by CBCC in its U.S.
sales listing and U.S. sales documentation on the record, it appears
that CBCC reported as its date of shipment the date of the bill of
lading (i.e., the date upon which the merchandise was loaded onto the
ship at the foreign port). Petitioners argue that, because CBCC failed
to report the actual date of shipment for its U.S. sales, the
Department should use the date of sale as the date of shipment when
calculating CBCC's U.S. credit
[[Page 6908]]
expenses. CBCC did not comment on this issue.
Department's Position: We agree with the petitioners in part. It is
the Department's long-standing practice to calculate credit for U.S. EP
sales from the time that the merchandise is shipped to the customer
from the foreign production site (see, e.g., Notice of Final
Determination of Sales at Less Than Fair Value: 3.5'' Microdisks and
Coated Media Thereof From Japan, 54 FR 6433 (February 10, 1989)). Based
on our review of the record, we have determined that the date of
shipment reported by CBCC for its U.S. sales was the date of the bill
of lading and not the date of shipment from the foreign production
site. As a result, CBCC's reported credit expenses cover only a portion
of the imputed credit expense period. However, as indicated in CBCC's
November 4, 1996 section A response, the respondent issues its U.S.
sales invoices upon shipment of the merchandise from the plant to the
port. Therefore, for these final results we have relied on CBCC's
reported invoice dates for our calculation of its U.S. credit expenses.
Comment 20: Deduction of Movement Expenses From EP
Petitioners assert that the Department did not deduct (1)
warehousing expenses, and (2) the ICMS tax that Rima incurred for
inland freight, from EP, as the statute requires. They state that the
full amount of warehousing expenses, as well as inland freight (field
``FGNMOVE'') inclusive of ICMS taxes, should be deducted from Rima's
EP.
Department's Position: We agree with petitioners. Section
772(c)(2)(A) of the Act requires that all movement expenses be deducted
from EP. Warehousing expenses, and ICMS taxes paid on freight, are
movement expenses. Therefore, we have modified these final results to
deduct the full amount of inland freight, inclusive of warehousing
expenses and ICMS taxes, from Rima's EP.
Furthermore, section 773(a)(6)(B)(ii) requires that all movement
expenses be deducted from normal value. Therefore, for these final
results, we also deducted ICMS taxes incurred on freight from normal
value. We note that we did not deduct warehousing expense from normal
value because Rima did not incur this expense for home market sales.
Comment 21: U.S. Credit Expenses
Minasligas argues that the Department double-counted its U.S.
credit expenses in the preliminary results. Minasligas contends that in
addition to the adjustment for imputed credit expenses, the Department
also adjusted Minasligas' credit expenses for Advance Exchange Contract
(ACCs) bank charges that it reported in its U.S. sales listing.
Minasligas asserts that the bank charges it reported were not a one-
time fee, but actually the credit expenses charged by the bank for the
period during which credit was outstanding by the customer. In other
words, Minasligas argues, these charges are identical to the
Department's imputed credit expenses because they account for the
opportunity cost associated with the period during which payment is
outstanding. Minasligas further asserts that the Department can confirm
that these bank charges are in fact credit expenses charged by the bank
in connection with ACCs by analyzing the documentation provided for a
certain U.S. sales observation in verification exhibit 10. Minasligas
contends that the documents in this exhibit demonstrate that the
expense was calculated based on the number of days that have lapsed
from the date of payment of the ACC to Minasligas until the date on
which the bank received payment from the customer. Finally, Minasligas
argues that for the final results, if the Department determines ACCs to
be related to U.S. sales, the Department, using the ACC bank charges,
should calculate negative credit expenses for the period between the
date of payment by the bank and the date of shipment of the merchandise
from the plant. On the other hand, Minasligas argues, if the Department
determines that the ACCs are not related to U.S. sales, the Department
should disregard the ACC's bank charges and calculate imputed credit
expenses pursuant to the same methodology it applied to Minasligas in
the Ferrosilicon from Brazil at 43504. The petitioners did not comment
on this issue.
Department's Position: We agree with Minasligas in part. The
Department double-counted credit expenses for Minasligas' U.S. sales.
Our further analysis of the evidence on the record reveals that bank
charges, which are in essence interest incurred on export loan funds
obtained as working capital in the form of advanced exchange contracts
(ACCs), are not a flat bank fee connected with the issuance of ACCs.
Consistent with Ferrosilicon from Brazil, the Department will not treat
bank charges as part of direct selling expenses as these interest
payments have been captured in Minasligas's interest expense account.
The Department disagrees with Minasligas regarding its imputed
credit revenue claim. At verification, the Department determined that
Minasligas obtained funds used for financing of future export sales
from a bank without having to present relevant sales documentation at
the time of payment by bank. Minasligas' claim that the Department
should have used the date on which the bank forwards funds to
Minasligas pursuant to an ACC is incorrect because, at verification,
the Department did not find a direct one-to-one relationship between
the acquisition of the ACCs and U.S. sales, as consistent with the
final results of Ferrosilicon from Brazil. Thus, the Department finds
that the date of payment by bank to Minasligas to be an inappropriate
date of payment to use for Minasligas' credit expense calculation. For
the above-discussed reason, in the final results of this review, the
Department rejected Minasligas' imputed revenue claim and calculated
its imputed credit expense on the basis of payment outstanding, (i.e.,
number of days between the date of payment by customer to Minasligas
and the date of shipment from the factory) (see Analysis of Data
Submitted by Companhia Ferroligas Minas Gerais (Minasligas) in the
Fifth Administrative Review (95-96) of the Antidumping Duty Order on
Silicon Metal from Brazil, July 31, 1997). Therefore, the Department
did not perform any adjustment to the payment date from the preliminary
results of this order.
Comment 22: Duty Drawback
Petitioners made two comments regarding duty and tax drawback.
First, petitioners argue that the Department should not grant a duty
and tax drawback adjustment to Eletrosilex's EP, as the company did not
properly establish its entitlement to the adjustment. Second,
petitioners contend that if the Department does grant the drawback,
then, consistent with Department practice, the identical adjustment to
CV must be made in order for there to be an `apples to apples'
comparison between EP and CV; for sales below cost analysis, the
Department should add the amount of the duties and taxes on electrodes
in COP. Eletrosilex provided no comments on this issue.
Department's Position: We agree with petitioners that no drawback
adjustment is warranted. The Department must reject Eletrosilex's claim
for a drawback adjustment for import duties, ICMS taxes, and IPI taxes
because Eletrosilex failed to demonstrate on the record that it claimed
and received a duty and tax drawback. Eletrosilex did not demonstrate
that it paid duties, IPI taxes, and ICMS taxes for imported
[[Page 6909]]
electrodes used for home market sales in response to the Department's
original questionnaire issued September 3, 1996. Payment of these taxes
and duties on the importation of inputs used for domestic sales, but
not for export sales, is necessary to establish a drawback claim. In
the third supplemental questionnaire response, dated February 14, 1997,
Eletrosilex responded that they did pay taxes and duties on the
importation of electrodes used for domestic sales. However, as its
evidence, Eletrosilex provided import declaration forms that were dated
after the POR. Further, this evidence relates only to IPI taxes and
import duties on its importation of electrodes. Thus, Eletrosilex
failed to substantiate its drawback claim by not providing appropriate
payment documentation on Customs duties and IPI taxes and no payment
documentation on ICMS taxes imposed on importation of electrodes used
for the production of home market sales or any support documentation
for the POR.
Comment 23: Reporting Expenses In the Currency in Which They Were
Incurred
Petitioners argue that Eletrosilex improperly converted inland
freight, warehousing charges, port charges, and ocean freight into U.S.
dollars and reported the converted U.S. dollar amounts on the sales
listing. Petitioners argue that the Department should not use the
provided U.S. dollar amounts, and instead should use the reais-
denominated amounts which were also provided to the Department.
Department's Position: We disagree with petitioners. In its
preliminary margin calculation, the Department used the revised U.S.
sales listing, which stated reais-denominated amounts for inland
freight plant/warehouse to port of exit, brokerage and handling and
port charges. For the final results of this review, the Department has
continued to use the fields of expenses in the currency in which they
were incurred.
IV. Comment Related to Taxes
Comment 24: PIS/COFINS Reflected in the Cost of Production
Petitioners argue that a review of the record in this case
indicates that CBCC reported its weighted-average direct material costs
for the POR exclusive of PIS and COFINS taxes. Petitioners assert that,
not only are these taxes imbedded in the prices CBCC paid for direct
materials, but in Final Results of 4th Review the Department included
PIS and COFINS taxes in its calculation of COP and CV. Therefore,
petitioners claim the Department should do so again for these final
results. CBCC did not comment on this issue.
Department's Position: We agree with the petitioners. In order for
COP to reflect the complete cost of materials, the costs we use in our
calculation of COP must include the full cost of materials, including
any hypothetical tax amounts that are presumably imbedded within these
costs (See Final Results of 4th Review). Thus, in order for
the COP to reflect the full purchase price of the materials, we must
add to the reported material costs an amount reflective of the PIS and
COFINS taxes on material inputs. We have reviewed the information CBCC
provided on the record and have determined that, while CBCC included
PIS and COFINS taxes in its calculation of COP in exhibit D-4 of its
November 4, 1996 questionnaire response, it nevertheless did not
include the taxes in its reported COP computer files (submitted June 2,
1997). Therefore, for these final results we have added to the COP
reported in CBCC's computer file the PIS/COFINS tax amount reported in
exhibit D-4.
Comment 25: COS Adjustment for PIS/COFINS
CBCC and Minasligas argue that the Department failed to adjust
their preliminary margin calculations to account for the PIS/COFINS
taxes which the respondents pay for home market sales but not for U.S.
sales. The respondents contend that, in order to avoid distortions in
its margins calculations, for these final results the Department should
make a circumstance-of-sale (COS) adjustment for these taxes, as
directed by 19 USC 1677b(a)(6)(C)(iii), or an adjustment to NV in
accordance with 19 USC 1677b(a)(6)(B)(iii). Respondents assert that,
while they are well aware that this issue has been raised in previous
reviews of this order and in reviews of other orders, the Department's
recent determinations to not make a COS adjustment for the PIS/COFINS
taxes are incorrect and the Department should change its position for
these final results for the following reasons:
First, citing to Notice of Frozen Concentrated Orange Juice from
Brazil; Final results and Termination in Part of Antidumping Duty
Administrative Review, 55 FR 47502 (November 14, 1990), in which the
Department made a COS adjustment for PIS/COFINS taxes, respondents
assert that, until recently, it was the Department's long-standing
policy to make a COS adjustment for these taxes and argue that there is
no valid reason for the Department to depart from this established
practice.
Second, respondents contend that in the most recent final results
notice in which this issue was raised, Ferrosilicon from Brazil, the
Department's determination not to make a COS adjustment was based on
incorrect assumptions. Respondents assert that in Ferrosilicon from
Brazil the Department concluded that the PIS and COFINS taxes were not
imposed on the sale of subject merchandise. However, respondents
contend, as the record in this review demonstrates, the Brazilian PIS
and COFINS taxes are imposed on revenue from sales of products produced
and sold in the domestic market, exclusive of export revenue. As a
result, respondents claim, like value-added taxes, PIS and COFINS are
only imposed if a sale is made and are therefore tied directly to
silicon metal sales transactions. Respondents argue that the only
difference between PIS/COFINS and the other Brazilian taxes is that
PIS/COFINS taxes, unlike the IPI and ICMS taxes, are not usually
reported on the commercial invoice. However, respondents assert, the
fact that PIS and COFINS taxes are imposed on gross receipts of sales
does not mean that they are not imposed on sales transactions. For
example, respondents argue, as noted by the United States Court of
Appeals for the Federal Circuit (CAFC) in Torrington v United States,
82 F. 3d 1039 Fed. Cir. 1996) and by the Department in its recently
published Final Antidumping Rules (Department of Commerce, Antidumping
Duties; Countervailing Duties; Final Rule, 62 FR 27296 (May 19, 1997),
many allocated expenses are considered directly related to a sale even
though they are not reported on the commercial invoice. Respondents
state that the fact that these taxes are not on the commercial invoice
does not mean they are unrelated to the sale and are not included in
the home market price. Therefore, respondents conclude, if an allocated
expense can be considered directly related to a sale, so too can the
PIS/COFINS taxes.
Lastly, respondents assert that the Department cannot rely on its
conclusions in the Notice of Final Determination of Sales at Less Than
Fair Value: Silicon Metal From Argentina, 56 FR 37891 (August 9, 1991)
(Argentine Silicon Metal) to support its position with respect to the
Brazilian PIS/COFINS taxes because there are important differences
between the Brazilian and Argentine taxes. For example, respondents
note, the Brazilian PIS and COFINS taxes are only imposed on revenue
from domestic sales and not on a company's gross
[[Page 6910]]
revenue, as is the case with the Argentine taxes which are imposed on
sales revenue, interest income, bond revenue, and other miscellaneous
revenues. Therefore, CBCC and Minasligas claim, unlike the Argentine
system, where taxes are based on all of a company's income sources and
would be imposed even if there were no domestic sales, there must be
domestic sales in order for the PIS and COFINS taxes to be imposed in
Brazil.
Petitioners argue that under section 773 (a)(6)(B)(iii) of the Act,
NV may only be reduced by taxes imposed on the ``foreign like product
or components thereof.'' Petitioners contend that the language of this
section is virtually identical to that of section 772(d)(1)(C), the
parallel provision in effect prior to the enactment of the URAA, and
that the CAFC, in American Alloys, Inc. v. United States, 30 F.3d
1469,1473 (Fed. Cir. 1994), ruled that the wording of section
772(d)(1)(C) as well as the legislative history evinces an intent by
Congress to permit adjustment only upon demonstration of a direct
relationship between the tax and the commodity or its components.
Petitioners state that in Ferrosilicon from Brazil, Argentine Silicon
Metal, Final Results of 3rd and 4th Reviews, the Department clearly
determined that the PIS and COFINS taxes are not taxes directly imposed
on the merchandise or components thereof. Thus, petitioners assert, the
Department did not focus on whether revenue subject to the tax
consisted of revenue other than sales revenue, but rather based its
determination not to make the adjustment on the fact that taxes on
revenue or income of any kind do not constitute taxes imposed directly
on the merchandise or components thereof. Petitioners assert that the
SAA makes clear that the type of taxes which warrant adjustment under
section 773(a)(6)(B)(iii) are home market consumption taxes. Because
consumption taxes are taxes paid by the consumer on specific sales
transactions and the PIS and COFINS taxes at issue in this review are
revenue taxes paid by the seller, petitioners contend, the PIS and
COFINS taxes are clearly not consumption taxes. As a result, petitioner
conclude, the Department correctly did not make an adjustment to NV for
these taxes in its preliminary results of this review and should not do
so in these final results.
With respect to the respondents' contention that the Department
should have made a COS adjustment for these taxes, petitioners argue
that section 773(a)(6)(B)(iii) of the Act is the sole provision in the
antidumping law that provides for an adjustment for taxes in the
context of a price-to-price margin calculation. Petitioners maintain
that it is an established principle of statutory interpretation that
when, in the same statute, there are specific terms governing a
particular subject matter and general terms that could be read to
address the same subject matter, the specific terms prevail over the
general. Thus, petitioners assert, if the COS provision in section
773(a)(6)(C)(iii) of the Act could be invoked to make an adjustment for
taxes other than those identified in section 773(a)(B)(iii) or in
circumstances different from those delineated in that provision,
section 773(a)(6)(B)(iii) would be superfluous. Even if he Department
could make a COS adjustment for taxes, petitioners argue, the PIS and
COFINS taxes would not qualify for such an adjustment for the same
reason that they do not qualify for an adjustment pursuant to section
773(a)(6)(B)(iii). Petitioners contend that the Department's
regulations limit allowances for COS adjustments to instances which
bear a direct relationship to the sales compared. Petitioners assert
that, because the PIS and COFINS taxes are not imposed directly on
silicon metal sales transactions, they do not qualify for a COS
adjustment.
Department's Position: We agree with petitioners. It is important
to note that this identical issue has been raised before the Department
not in only in previous reviews of the instant case (Final Results of
3rd and 4th Reviews), but in Ferrosilicon from
Brazil as well. In each of those proceedings and in this instant
review, the record indicated that the Brazilian PIS and COFINS taxes
are taxes on gross revenue exclusive of export revenue and, thus, are
not imposed on the merchandise or components thereof. Therefore, in
accordance with our consistent practice with respect to these taxes, we
have again determined for these final results that, because these taxes
cannot be tied directly to silicon metal sales, we have no statutory
basis to deduct them from NV. Likewise, because the PIS and COFINS
taxes are gross revenue taxes, we have again determined they do not
bear a direct relationship to home market sales and, therefore, do not
qualify for a COS adjustment.
Comment 26: ICMS Taxes Paid on Inputs
First, Eletrosilex contends that the Department improperly
calculated the total cost of manufacturing (TOTCOM) inclusive of ICMS
taxes paid on inputs as these taxes have been included in the variable
overhead of Eletrosilex's cost data. Eletrosilex asserts that the
reported variable overhead included all internal taxes (ICMS, IPI, PIS
and COFINS) and accordingly, the Department should reduce its TOTCOM
for the full amount of ICMS taxes included in the COP calculations of
the preliminary results of this review.
Second, Eletrosilex argues that the Department should revert to its
approach in Final Results of 1st Review at 42806, 42808 and
therefore not include ICMS taxes paid on input material when those
taxes are offset by a respondent's collection of ICMS taxes on the
sales of the merchandise. Eletrosilex claims that the Department's
justification of its current treatment of ICMS taxes stated in the
Final Results of 3rd Review at 46769 as ``does not account
for offsets of taxes paid due to home market sales'' and its basis of
determination on ICMS tax treatment solely on the remittance of
internal taxes upon exportation of merchandise results in a Department
position inconsistent with the interpretation of the statute by the
Court of International Trade and with the requirements of the GATT.
Further, Eletrosilex states that it is required by the statute to
include in CV all ``costs of material'' incurred in the production of
the merchandise. Eletrosilex contends that VAT taxes, like the
Brazilian ICMS tax, are not a cost of materials and therefore should
not be included in the CV build up. Eletrosilex states that if a
producer demonstrates that VAT taxes imposed on inputs are fully
recouped (i.e. ICMS taxes collected from domestic sales exceed ICMS
taxes paid to the input suppliers), then ICMS taxes are not a cost of
materials and should therefore not be in the calculation of CV.
Dow Corning asserts that ICMS taxes should not be included in the
cost of production of Eletrosilex or any other Brazilian producer based
on their ``direct knowledge'' of ICMS taxes and its impact on operation
costs. Dow Corning states it is knowledgeable on ICMS Tax treatment in
Brazil because the company has extensive production facilities and a
sales network in Brazil. Dow Corning states that ICMS taxes are fully
recouped by the producer on all sales, not just on export sales, and
therefore ICMS taxes should not be included in the cost of production
of Eletrosilex or any other Brazilian producer.
Rima concurs with Eletrosilex that without first determining
whether VAT paid on material inputs are in fact a cost of such
materials it is improper to compare CV, inclusive of VAT, with a U.S.
price, exclusive of VAT. Rima
[[Page 6911]]
argues that in calculating CV, the Department included Brazil's ICMS
and IPI taxes in the cost build-up. Rima argues that Article VI of the
GATT and Article 2 of the Tokyo Round Antidumping Code require that
dumping assessments be tax-neutral. Rima also argues that the Uruguay
Round Agreements Act explicitly amended the antidumping law to remove
consumption taxes from the home market price and to eliminate the
addition of taxes to U.S. Price, so that no consumption tax is included
in the price in either market. Rima argues that in Brazil, VAT paid on
the supply of input materials can be offset with VAT collected from
sale of the merchandise produced with such materials. Accordingly, Rima
argues that in a tax scheme such as Brazil's, a respondent may be able
to show that a value added tax on inputs did not in fact constitute a
cost of materials for the exported product within the meaning of 19
U.S.C. section 1677b(e)(1)(A), Aimcor et al. v. United States, Slip Op.
95-130 (July 20, 1995) (``AIMCOR''). Therefore, Rima argues that it was
improper to compare a CV inclusive of VAT to a U.S. price which does
not include any VAT.
Petitioners argue that the Department correctly included ICMS and
IPI taxes in CV, because the statute requires a tax neutral comparison.
Petitioners argue that in Brazil these taxes paid on inputs are not
remitted or refunded upon exportation. Petitioners argue that Rima does
not even claim that the company recovered the ICMS and IPI taxes paid
on inputs.
Petitioners argue that the Department's inclusion in CV of ICMS and
IPI taxes paid on inputs used in metal production is consistent with
the statute. Petitioners argue that section 773(e) of the Act provides
that CV shall include cost of materials and that the cost of materials
shall be determined without regard to any internal tax in the exporting
country imposed on such materials or their disposition which are
remitted or refunded upon exportation of the subject merchandise
produced from such materials. Petitioners argue that according to the
plain language of the statute, a domestic tax directly applicable to
materials used in producing exported merchandise is a cost that must be
included in CV unless, and only if, such tax is remitted or refunded
upon exportation of the merchandise. Petitioners argue that there is no
dispute that the ICMS taxes paid on inputs used to produce silicon
metal exported to the U.S. were not remitted or refunded upon
exportation.
Petitioners also argue that including the ICMS taxes paid on inputs
in CV does not violate the principle of tax neutrality, as expressed in
the General Agreement on Tariffs and Trade.
Finally, petitioners argue that Rima's reliance on AIMCOR is
misplaced, in that petitioners point out that the general clause relied
upon by the Court of International Trade does not address the specific
question of how taxes are to be treated in determining the cost of
materials. Petitioners argue that in AIMCOR the CIT interpreted the
virtually identical provision of section 773(e)(1)(A) prior to the
changes made by the Uruguay Round Act. Petitioners argue that the CIT's
interpretation of the statute is wrong because it relies on the general
clause at the end of the provision stating that the cost of materials
to be included in CV is to be determined at a time preceding the date
of exportation. Moreover, petitioners argue that clause is not part of
the current statute.
Petitioners contend that the Department correctly included an
amount for ICMS taxes in the calculation of CV. Petitioners cite to
Section 773(e) of the Act, which states that ``the costs of materials
shall be determined without regard to any internal tax in the exporting
country imposed on such materials or their disposition which are
remitted or refunded upon exportation of the subject merchandise
produced from such materials.'' Petitioners point out that because the
ICMS taxes paid on inputs used to produce silicon metal exported to the
United States were not remitted or refunded upon exportation, the ICMS
taxes were correctly included in CV.
Department's Position: We disagree with Eletrosilex that ICMS taxes
are included in its reported total manufacturing costs (TOTCOM) as
variable overhead. Evidence on the record (see Eletrosilex's November
12, 1996 and January 7, 1998 questionnaire responses) contradicts this
assertion. Specifically, Eletrosilex provided a worksheet which breaks
out all the components of variable overhead. ICMS taxes are not
accounted for on this worksheet. Furthermore, Eletrosilex provided
worksheets detailing, on a monthly basis, the amounts of ICMS taxes
paid on secondary material and direct material inputs. The sum of these
taxes in each month exceeds the amount Eletrosilex reported as variable
overhead for that month. Therefore, we conclude that the reported
TOTCOM does not include ICMS.
With respect to the broader issue of whether ICMS and IPI taxes
should be included in CV, we have an established practice regarding the
treatment of such 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 respondents have made here 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.
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, 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.
We note that on November 25, 1997, the U.S. Court of International
Trade remanded to the Department the determination in the LFTV
investigation of Silicon Metal from Brazil. Camargo Correa Metais,
S.A., v. United States, Slip Op. 97-159, November 25, 1997. The Court
ordered the Department to change its treatment of ICMS taxes in the
calculation of constructed value. In ordering the remand, the Court
held that ICMS taxes are remitted or refunded upon exportation of the
subject merchandise within the meaning of the pre-URAA antidumping
statute (section 773(e)(1)(A)). The Department is in the process of
reviewing the Court's decision, as well as other relevant CIT
decisions, and their implications for the Department's treatment of
Brazilian value-added taxes. The Department's determination on remand
is due to the Court by February 24, 1998.
[[Page 6912]]
V. Other Comments
Comment 27: Control Numbers
Petitioners assert that CBCC's reported control numbers are
unreliable. Petitioners contend that not only does CBCC's product
brochure describe two different types of silicon metal produced and
sold by CBCC (silicon metal for the aluminum industry and silicon metal
designed for chemical and metallurgical industries) which have distinct
chemical specifications, but an examination of CBCC's U.S. sales
indicates that CBCC sold silicon metal for both applications during the
review period. Petitioners state that, while the Department clearly
instructed CBCC in the Department's second supplemental questionnaire
to report the chemical composition of the merchandise it sold in the
home market during the POR, CBCC failed to provide this information,
stating that the information would be available at verification.
However, petitioners assert, because the Department subsequently
canceled its scheduled verification of CBCC's home market sales
information and CBCC failed to subsequently report this information,
there is no way to ensure that CBCC's reported home market control
numbers are accurate and the Department is therefore unable to perform
a proper product matching. As a result, petitioners assert, the
Department should base its calculation of normal value for CBCC on CV.
In the alternative, petitioners contend, the Department should require
CBCC to report the chemical composition of its home market merchandise
and to re-report control numbers which reflect the chemical composition
and the grade of merchandise described in CBCC's product brochure.
CBCC argues that the petitioners' assertions are unfounded for the
following reasons: First, CBCC states, the petitioners have
misinterpreted the nature of CBCC's reported U.S. sales. CBCC asserts
that the customer for one of the U.S. sales identified by the
petitioners in its case brief clearly did not purchase silicon metal
for chemical or metallurgical applications. In addition, CBCC argues
that the difference in the per-ton price of this U.S. sale compared to
that for its other U.S. sales is not due to differences in chemical
composition as the petitioners assert, but rather is the result of (1)
the fact that the sale included ocean freight costs, and (2) the fact
that the sale was made at the end of the review period at a time when
the price of silicon metal was lower in the U.S. market than it was at
the time the other U.S. sales were made. Second, CBCC maintains that
the record demonstrates that it sold only one type of product in the
U.S. and home markets during the review period and, as a result, it
correctly reported the same control number for all its home market and
U.S. sales. Third, CBCC argues that its brochure is intended for
general customer use and informs potential customers about the types of
products that CBCC can produce and sell. Thus, CBCC contends, simply
because the brochure identifies different product types does not
automatically indicate that it sold both types during the review
period. Finally, CBCC asserts that the petitioners provide no support
whatsoever to demonstrate that the information it provided in its
response was incorrect or hinders the Department's ability to make
appropriate price comparisons.
Department's Position: We agree with CBCC. Not only does the record
in this review lack information which calls into question the accuracy
of CBCC's reported control numbers but the petitioners have not
provided any evidence supporting their contentions. For example, while
we asked respondents to submit a copy of their product brochures, we
recognize that not every product in the brochure may be produced and
sold by the company during our identified review periods. As a result,
we agree with CBCC that such brochures serve the purpose of only
identifying the range of products available and that there is no basis
for the assertion that all products identified in a brochure will
necessarily be produced and sold during a review period. Thus, we do
not accept CBCC's product brochure as evidence that CBCC sold more than
one type of subject merchandise in the U.S. and home markets during the
review period. Furthermore, while the petitioners assert that a certain
U.S. sale was of silicon metal for chemical or metallurgical
applications, we are satisfied with CBCC's explanation rebutting this
contention and note that while petitioners claim the chemical
composition of this sale warrants its classification as sale for
chemical or metallurgical applications, the petitioners provide no
evidence supporting this contention. Finally, not only did CBCC report
detailed chemical compositions for its U.S. sales which demonstrate the
appropriateness of using a single control number, but it clearly
indicated in its responses that there was no major variation in the
chemical compositions between its U.S. and home market sales. In light
of this and the absence of any record evidence which supports
petitioners' contentions or otherwise calls into question the accuracy
of CBCC's reported control numbers, for these final results we have
again accepted CBCC's reported control numbers and have not altered the
model-match portion of our analysis.
Comment 28: Discrepancy on Information Reported by Dow Corning
Petitioners argue that the Department should require Dow to (1)
explain the discrepancy in the quantity of imports Dow indicated it
purchased from Eletrosilex, and the quantity of exports Eletrosilex
states that it sold to Dow during the POR, and (2) submit the audit
documents used to derive the per-unit depreciation amount submitted in
its case brief. In a letter dated December 26, 1997, Dow Corning stated
that ``We have reviewed our records for the period of review, including
the commercial invoices received from Eletrosilex and our records of
merchandise, and find that we erred in the quantity we referenced in
our Case Brief.'' In this letter, Dow also indicated that its record of
imports from Eletrosilex match the quantity Eletrosilex claimed it
exported to Dow during the POR. Petitioners submitted a letter on
January 8, 1998 which reiterates their rebuttal brief positions, and
asserts that the Department remove Dow's letter of December 26, 1997
from the record of this proceeding because, pursuant to 19 CFR
353.31(a)(3), the Department ``will not consider...in the final
results, or retain in the record of the proceeding, any factual
information submitted after the applicable time limit.''
Department's Position: In their rebuttal brief, petitioners
requested that the Department require Dow to explain the discrepancy in
the quantity of imports as reported separately by Dow and Eletrosilex.
Dow provided an explanation in its December 26, 1997 letter.
Petitioners have also commented on this submission. Accordingly, the
Department, in its discretion, has accepted Dow Corning's December 26,
1997 letter.
In its letter, Dow explained that it erred in calculating the total
quantity shipped during the period of review. Dow has recalculated the
total quantity shipped by examining and applying data from the original
invoices. Dow's recalculation is consistent with that reported by
Eletrosilex in its response. Further, nothing in petitioners' January
8, 1998 letter disputes the accuracy of this information. Accordingly,
the Department is satisfied with Dow's explanation of the discrepancy
in quantity in this case. Therefore, the Department's calculation of
quantity is
[[Page 6913]]
based upon information submitted by the respondent Eletrosilex.
With respect to petitioners' argument that the Department should
request additional information from Dow due to discrepancies in the
amounts reported by Dow and Eletrosilex for depreciation expenses, we
disagree. The information submitted by Dow is not relevant to the
Department's analysis. First, the data submitted by Dow were
illustrative, in that the company was making the point that its
independent auditors concluded that Eletrosilex was selling its
products above the cost of production. Dow did not provide this
information to the Department as a substitute for the information
reported by Eletrosilex. Dow stipulated that its cost data were
gathered for a completely different purpose, notably to determine
whether the financial position of Eletrosilex was sufficiently sound
for Dow to establish a long-term supply agreement. Second, this
information would only serve to confuse the issue. Dow's auditors
utilized a different period in their calculations than the Department,
and calculated depreciation in U.S. dollars, while the Department
calculated depreciation in Brazilian currency. Finally, this
information is clearly unnecessary. The Department requested and
received information on this issue in the original and supplemental
questionnaire responses by Eletrosilex.
Final Results of Review
As a result of our analysis of the comments received, we determine
that the following margins exist for the period March 1, 1995 through
February 29, 1997:
------------------------------------------------------------------------
Percent
Manufacturer/exporter margin
------------------------------------------------------------------------
CBCC......................................................... 0.00
Eletrosilex.................................................. 39.00
Minasligas................................................... 1.67
Rima......................................................... 3.08
------------------------------------------------------------------------
The Department shall determine, and the Customs Service shall
assess, antidumping duties on all appropriate entries. For assessment
purposes, we have calculated importer-specific ad valorem duty
assessment rates for the merchandise based on the ratio of the total
amount of antidumping duties calculated for the examined sales during
the POR to the total quantity of sales examined during the POR. This
method has been upheld by the courts. (See e.g., Antifriction Bearings
(Other Than Tapered Roller Bearings) from France, Germany, Italy,
Japan, Singapore, and the United Kingdom; Final Results of Antidumping
Duty Administrative Reviews, 61 FR 2081, 2083 (January 15, 1997); FAG
Kugelfischer Georg Schafer KgaAv. United States, No. 92-07-00487, 1995
Ct. Int'l Trade LEXIS 209, at CIT*10 (September 14, 1995), aff'd. No.
96-1074 1996 U.S. App. Lexis 11544 (Fed. Cir. May 1996).
The Department will issue appraisement instructions directly to the
Customs Service. Individual differences between United States price and
NV may vary from the percentages stated above. Furthermore, the
following deposit requirements will be effective upon publication of
these final results of review for all shipments of silicon metal from
Brazil entered, or withdrawn from warehouse, for consumption on or
after the publication date, as provided by section 751(a)(1) of the
Act, and will remain in effect until publication of the final results
of the next administrative review: (1) the cash deposit rates for the
reviewed companies will be those rates listed above except for CBCC,
which had a de minimis margin, and whose cash deposit rate is therefore
zero; (2) for previously reviewed or investigated companies not listed
above, the cash deposit rate will continue to be the company-specific
rate published for the most recent period; (3) if the exporter is not a
firm covered in this review, a prior review, or the original LTFV
investigation, but the manufacturer is, the cash deposit rate will be
the rate established for the most recent period for the manufacturer of
the merchandise; and (4) if neither the exporter nor the manufacturer
is a firm covered in this or any previous review or in the LTFV
investigation conducted by the Department, the cash deposit rate will
be 91.06 percent, the ``all others'' rate established in the LTFV
investigation.
This notice serves as a final reminder to importers of their
responsibility under 19 CFR 353.26 to file a certificate regarding the
reimbursement of antidumping duties prior to liquidation of the
relevant entries during this review period. Failure to comply with this
requirement could result in the Secretary's presumption that
reimbursement of antidumping duties occurred and the subsequent
assessment of double antidumping duties.
This notice also serves as a reminder to parties subject to
administrative protective order (APO) of their responsibility
concerning the disposition of proprietary information disclosed under
APO in accordance with 19 CFR 353.34(d). Timely written notification of
the return/destruction of APO materials or conversion to judicial
protective order is hereby requested. Failure to comply with the
regulations and the terms of an APO is a sanctionable violation.
This administrative review and notice are in accordance with
section 751(a)(1) of the Act (19 U.S.C. Sec. 1675(a)(1)) and 19 CFR
353.22.
Dated: February 4, 1998.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 98-3488 Filed 2-10-98; 8:45 am]
BILLING CODE 3510-DS-P