[Federal Register Volume 68, Number 207 (Monday, October 27, 2003)]
[Notices]
[Pages 61185-61188]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-27042]


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DEPARTMENT OF COMMERCE

International Trade Administration

[A-351-824]


Silicomanganese From Brazil: Preliminary Results of Antidumping 
Duty Administrative Review

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

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

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SUMMARY: The Department of Commerce is conducting an administrative 
review of the antidumping duty order on silicomanganese from Brazil in 
response to a request from one manufacturer/exporter, SIBRA Electro-
Siderurgica Brasileira S.A. (``SIBRA'') and Companhia Paulista de 
Ferroligas (``CPFL'') (collectively ``SIBRA/CPFL'').\1\ This review 
covers the period December 1, 2001, through November 30, 2002.
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    \1\ We have collapsed another affiliated Brazilian producer of 
silicomanganese, Urucum Mineracao (``Urucum''), with SIBRA/CPFL for 
purposes of this proceeding and have calculated a single dumping 
margin for them.
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    We have preliminarily determined that SIBRA/CPFL made sales to the 
United States at prices below normal value during the period of review. 
If these preliminary results are adopted in our final results of 
administrative review, we will instruct Customs and Border Protection 
to assess antidumping duties on all appropriate entries. We invite 
interested parties to comment on these preliminary results. Parties who 
submit arguments are requested to submit with each argument (1) a 
statement of the issue, and (2) a brief summary of the argument.

EFFECTIVE DATE: October 27, 2003.

FOR FURTHER INFORMATION CONTACT: Brian Ellman at (202) 482-4852 or 
Katja Kravetsky at (202) 482-0108, Office of AD/CVD Enforcement 3, 
Import Administration, International Trade Administration, U.S. 
Department of Commerce, 14th Street and Constitution Avenue, N.W., 
Washington, D.C. 20230.

SUPPLEMENTARY INFORMATION:

Background

    On December 22, 1994, the Department of Commerce (``the 
Department'') published in the Federal Register the antidumping duty 
order on silicomanganese from Brazil. See Notice of Antidumping Duty 
Order: Silicomanganese from Brazil, 59 FR 66003. On December 2, 2002, 
we published in the Federal Register a notice of opportunity to request 
an administrative review of the antidumping duty order on 
silicomanganese from Brazil covering the period December 1, 2001, 
through November 30, 2002. See Antidumping or Countervailing Duty 
Order, Finding, or Suspended Investigation; Opportunity to Request 
Administrative Review, 67 FR 71533. On December 30, 2002, SIBRA/CPFL 
requested that the Department conduct an administrative review of its 
sales. On January 22, 2003, the Department published in the Federal 
Register a notice of initiation of this antidumping duty administrative 
review. See Initiation of Antidumping and Countervailing Duty 
Administrative Reviews and Request for Revocation in Part, 68 FR 3009.
    On August 29, 2003, the Department postponed the preliminary 
results of this review until no later than October 17, 2003. See 
Silicomanganese From Brazil: Extension of Time Limit for Preliminary 
Results of Antidumping Duty Administrative Review, 68 FR 52895 
(September 8, 2003).
    The Department is conducting this review in accordance with section 
751 of the Tariff Act of 1930, as amended (``the Act'').

Scope of Review

    The merchandise covered by this review is silicomanganese. 
Silicomanganese, which is sometimes called ferrosilicon manganese, is a 
ferroalloy composed principally of manganese, silicon and iron, and 
normally contains much smaller proportions of minor elements, such as 
carbon, phosphorous, and sulfur. Silicomanganese generally contains by 
weight not less than 4 percent iron, more than 30 percent manganese, 
more than 8 percent silicon, and not more than 3 percent phosphorous. 
All compositions, forms, and sizes of silicomanganese are included 
within the scope of this review, including silicomanganese slag, fines, 
and briquettes. Silicomanganese is used primarily in steel production 
as a source of both silicon and manganese.
    Silicomanganese is currently classifiable under subheading 
7202.30.0000 of the Harmonized Tariff Schedule of the United States 
(HTSUS). Some silicomanganese may also currently be classifiable under 
HTSUS subheading 7202.99.5040. This scope

[[Page 61186]]

covers all silicomanganese, regardless of its tariff classification. 
Although the HTSUS subheadings are provided for convenience and customs 
purposes, the written description of the scope remains dispositive.

Verification

    From August 4 through August 8, 2003, and from August 18, 2003, 
through August 22, 2003, in accordance with section 782(i) of the Act, 
the Department verified the sales and cost information provided by 
SIBRA/CPFL using standard verification procedures, including on-site 
inspection of the manufacturer's facilities, the examination of 
relevant sales and financial records, and selection of original 
documentation containing relevant information. Our verification results 
are outlined in the public and proprietary versions of the verification 
reports (``Sales Verification Report: Administrative Review of the 
Antidumping Duty Order on Silicomanganese from Brazil (December 1, 
2001, through November 30, 2002)'' dated October 14, 2003, (``Sales 
Verification Report'') and ``Verification Report on the Cost of 
Production and Constructed Value Data Submitted by SIBRA 
Electrosiderurgica Brasileira S.A. (``SIBRA''), Companhia Paulista de 
Ferro-Ligas (``CPFL'') and Urucum Mineracao S.A 
(``Urucum'')(collectively ``SIBRA/CPFL'')'' dated October 2, 2003, 
(``Cost Verification Report'') on file in the Central Records Unit 
(``CRU''), Room B-099 of the main Department of Commerce building.

Collapsing

    The Department's regulations under 19 CFR 351.401(f) outline the 
criteria for collapsing (i.e. treating as a single entity) affiliated 
producers for purposes of calculating a dumping margin. The regulations 
state that we will treat two or more affiliated producers as a single 
entity where (1) those producers have production facilities for similar 
or identical products that would not require substantial retooling of 
either facility in order to restructure manufacturing priorities, and 
(2) we conclude that there is a significant potential for the 
manipulation of price or production. In identifying a significant 
potential for the manipulation of price or production, the Department 
may consider the following factors: (i) the level of common ownership; 
(ii) the extent to which managerial employees or board members of one 
firm sit on the board of directors of an affiliated firm; and, (iii) 
whether operations are intertwined, such as through the sharing of 
sales information, involvement in production and pricing decisions, the 
sharing of facilities or employees, or significant transactions between 
the affiliated producers. See 19 CFR 351.401(f)(2).
    Urucum is a wholly-owned subsidiary of Companhia Vale de Rio Doce 
(``CVRD''); therefore, SIBRA/CPFL and Urucum are affiliated under 
section 771(33)(F) of the Act, which provides that persons directly or 
indirectly under common control of any person are affiliates. As for 
the first criterion of 19 CFR 351.401(f), the information currently on 
the record indicates that Urucum is also a producer of silicomanganese 
and that SIBRA/CPFL and Urucum use similar production facilities to 
produce silicomanganese. There is no evidence on the record to indicate 
that substantial retooling would be required for SIBRA, CPFL, or Urucum 
to restructure their manufacturing priorities.
    As to whether there is significant potential for manipulation, we 
find that their operations are intertwined, in that a centralized 
office provides administrative and sales services in connection with 
sales of silicomanganese produced by SIBRA, CPFL, and Urucum, and all 
financial data for these three companies are maintained in a single 
accounting system. In addition, they share directors (the president of 
Urucum serves as a director at both SIBRA and CPFL), which is a clear 
indication that significant potential for manipulating price and 
production exists in this case. Therefore, we find that they are 
affiliated for the purposes of this administrative review and that 
Urucum should be collapsed with SIBRA/CPFL and considered one entity 
pursuant to section 771(33) of the Act and 19 CFR 351.401(f).

Affiliation of Parties

    Pursuant to section 771(33)(F) of the Act, the Department has 
preliminarily determined that certain customers to whom SIBRA/CPFL sold 
silicomanganese during the period of review (``POR'') and whom SIBRA/
CPFL identified as unaffiliated parties are, in fact, affiliated with 
SIBRA/CPFL. Specifically, the Department has determined that SIBRA/CPFL 
and some of its home market customers are under the common control of 
``CVRD'', SIBRA's parent company. According to section 771(33)(F) of 
the Act, two or more persons under common control with any other person 
shall be considered affiliated. Thus, we have preliminarily found these 
companies to be affiliated with SIBRA/CPFL. For a complete discussion 
of this issue, see the October 17, 2003, memorandum entitled ``Analysis 
of the Affiliation of SIBRA/CPFL with its Customers'' which is on file 
in CRU.

Comparisons to Normal Value

    Based on a request by the respondent in which it claimed to have 
made one U.S. sale during the POR, we allowed SIBRA/CPFL to limit its 
home-market sales response to the six-month period from August 2002 
through January 2003. In its May 7, 2003, questionnaire response, 
however, SIBRA/CPFL clarified that that it had actually made two sales 
to unaffiliated U.S. customers that had a date of sale in the POR and 
that it had reported sales information for only the sale with an entry 
date during the POR. In accordance with 19 CFR 351.213(e)(1)(i), we 
requested complete sales information with respect to both sales made to 
the United States during the POR.
    To determine whether sales of silicomanganese from Brazil were made 
in the United States at less than normal value (``NV''), we compared 
the export price (``EP'') to the NV. Because Brazil's economy 
experienced significant inflation during the POR, as is Department 
practice, we limited our comparisons to home-market sales made during 
the same month in which the U.S. sale occurred. See ``Cost of 
Production Analysis'' section below. This methodology minimizes the 
extent to which calculated dumping margins are overstated or 
understated due solely to price inflation that occurred in the 
intervening time period between the U.S. and the home-market sales.
    When making comparisons in accordance with section 771(16) of the 
Act, we considered all products sold in the home market as described in 
the ``Scope of the Review'' section of this notice, above, that were in 
the ordinary course of trade (i.e., sales within the same month which 
passed the cost test) for purposes of determining appropriate product 
comparisons to U.S. sales. As there were no appropriate home market 
sales of comparable merchandise, we compared the merchandise sold to 
the United States to constructed value (``CV'').

Merchandise

    In its questionnaire responses and at the sales verification, 
SIBRA/CPFL stated that it sold three grades of silicomanganese in the 
home market during the home-market sales reporting period: 12/16, 15/
20, and 16/20. According to SIBRA/CPFL's description of these grades of 
silicomanganese, 12/16 has a silicon content between 12% and 16% (by 
weight), 15/20 has a

[[Page 61187]]

silicon content between 15% and 20%, and 16/20 has a silicon content 
between 16% and 20%.
    We have preliminarily determined that there is no significant 
difference between the products reported as 15/20 and 16/20 and have 
treated merchandise reported by SIBRA/CPFL as grade 15/20 to be grade 
16/20. As such, we weight-averaged the reported manufacturing costs for 
these two grades. For more information on this topic, see ``Antidumping 
Administrative Review of Silicomanganese from Brazil: Preliminary 
Results Analysis Memorandum of SIBRA/CPFL'' dated October 17, 2003, 
(``Preliminary Results Analysis Memo'') at page 5 and the Sales 
Verification Report at pages 7-8.

Export Price

    For sales to the United States, we used EP, as defined in section 
772(a) of the Act, because the subject merchandise was sold directly to 
the first unaffiliated purchaser in the United States prior to the date 
of importation. We based EP on the price to the first unaffiliated 
purchaser in the United States. We made deductions, where appropriate, 
consistent with section 772(c)(2)(a) of the Act, for movement expense.

Normal Value

A. Home Market Viability
    In order to determine whether there was a sufficient volume of 
sales in the home market to serve as a viable basis for calculating NV, 
we compared SIBRA/CPFL's volume of home-market sales of the foreign 
like product to the volume of U.S. sales of the subject merchandise in 
accordance with section 773(a)(1)(C) of the Act. Since SIBRA/CPFL's 
aggregate volume of home-market sales of the foreign like product was 
greater than five percent of its aggregate volume of U.S. sales of the 
subject merchandise, we determined that the home market is viable. 
Therefore, we examined home-market sales for purposes of calculating NV
B. Arm's-Length Sales
    SIBRA/CPFL made sales in the home market to affiliated and 
unaffiliated customers. To test whether the sales to affiliates were 
made at arm's length prices, we compared the starting prices of sales 
to affiliated and unaffiliated customers net of all direct selling 
expenses, movement expenses, and taxes. Where the price to the 
affiliated party was, on average, within a range of 98 to 102 percent 
of the price of the same or comparable merchandise to the unaffiliated 
parties, we determined that the sales made to the affiliated party were 
at arm's length. See Modification Concerning Affiliated Party Sales in 
the Comparison Market, 67 FR 69186 (November 15, 2002). In accordance 
with the Department's practice, we only included in our margin analysis 
those sales to affiliated parties that were made at arm's length.
C. Cost of Production Analysis
    Because the Department disregarded all of SIBRA/CPFL's home-market 
sales that failed the cost test in the most recently completed 
administrative review, pursuant to section 773(b)(2)(A)(ii) of the Act, 
we had reasonable grounds to believe or suspect that sales in this POR 
were made at prices below the cost of production (``COP''). Therefore, 
the Department initiated a COP investigation for SIBRA/CPFL.Based on 
the respondent's request, we adjusted the cost-reporting period to 
correspond with the 2002 calendar year. See letter from Laurie 
Parkhill, Office Director to SIBRA/CPFL dated March 21, 2003. Upon 
initial evaluation of inflation in Brazil during the POR, we determined 
that we would use a high-inflation methodology to calculate COP and 
issued to the respondent a high-inflation questionnaire.
    Before making any fair-value comparisons, we conducted the COP 
analysis described below.
    1. Calculation of COP
    We calculated COP, in accordance with section 773(b)(3) of the Act, 
based on the sum of the costs of materials and fabrication employed in 
producing the foreign like product, plus amounts for home-market 
selling, general, and administrative (``SG&A'') expenses. As specified 
above, we determined that the Brazilian economy experienced significant 
inflation during the POR. Therefore, in order to avoid the distortive 
effect of inflation in our comparison of costs and prices, we requested 
that SIBRA/CPFL submit the product-specific cost of manufacturing 
(``COM'') incurred during each month of the period for which it 
reported home-market sales. We then calculated an average COM for each 
product after indexing the reported monthly costs to an equivalent 
currency level using the Brazilian IGP-M inflation index. We then 
restated the average COM in the currency value of each respective 
month.
    For the preliminary results of review, we relied on COP information 
submitted by SIBRA/CPFL in its questionnaire responses, except, as 
noted below, in specific instances where the submitted costs were not 
appropriately quantified or valued:
     a. We weight-averaged the reported manufacturing costs for grade 
16/20 silicomanganese and grade 15/20 silicomanganese in accordance 
with the revised grade classifications described in the ``Merchandise'' 
section above.
     b. We adjusted SIBRA/CPFL's reported COM to account for purchases 
of manganese ore from affiliated parties at non-arm's length prices. 
See ``Cost of Production and Constructed Value Calculation Adjustments 
for the Preliminary Results'' dated October 17, 2003, (``Calculation 
Memo'') on file in CRU.
     c. We adjusted SIBRA/CPFL's reported COM to reflect the actual 
depreciation costs recorded in the financial accounting system. See 
Calculation Memo.
     d. We adjusted SIBRA/CPFL's submitted general and administrative 
expenses to exclude double-counted depreciation expenses and income and 
expense items related to ICMS taxes, PIS/COFINS taxes, and investments. 
We also redistributed charcoal forest exhaustion costs in order to 
properly index these costs for inflation. See Calculation Memo.
     e. We recalculated SIBRA/CPFL's submitted financial expense ratio 
based on CVRD's 2002 consolidated financial statements prepared in 
accordance with Brazilian GAAP. Due to the significant devaluation of 
the Brazilian Real during the fiscal year, CVRD experienced a large net 
foreign exchange loss in 2002. We therefore adjusted the financial 
expense ratio to reflect a normalized net foreign exchange loss based 
on CVRD's average experience over the five-year period from 1998 to 
2002. In addition, we adjusted SIBRA/CPFL's financial income offset to 
exclude interest income from accounts receivable and interest income 
from long-term interest sources. See Calculation Memo.
    2.Test of Home Market Prices
    In determining whether to disregard home-market sales made at 
prices below the COP, we examined whether: (1) within an extended 
period of time, such sales were made in substantial quantities, and (2) 
such sales were made at prices which permitted recovery of all costs 
within a reasonable period of time in accordance with section 
773(b)(1)(A) and (B) of the Act. We compared model-specific COPs to the 
reported home-

[[Page 61188]]

market prices less any applicable movement charges and selling expense.
    3. Results of the COP Test
    Pursuant to section 773(b)(2)(C) of the Act, where 20 percent or 
more of the respondent's sales of a given product during the six-month 
period surrounding the U.S. sales were at prices less than the COP, in 
accordance with sections 773(b)(2)(B) and (C) of the Act, we 
disregarded the below-cost sales because we determined that the below-
cost sales were made within an extended period of time in ``substantial 
quantities.'' In such cases, we also determined that such sales were 
not made at prices that would permit recovery of all costs within a 
reasonable period of time in accordance with section 773(b)(2)(D) of 
the Act. Based on this test, we disregarded below-cost sales in our 
analysis.
D. Calculation of NV based on CV
    Because we were unable to find a home-market sale made in the 
ordinary course of trade for a comparison to EP, in accordance with 
section 773(a)(4) of the Act, we based NV on CV. We calculated CV based 
on SIBRA/CPFL's cost of materials, fabrication employed in producing 
the subject merchandise, and SG&A, including interest expenses and 
profit. We calculated the COP component of CV as noted above in the 
``Calculation of COP'' section of this notice. In accordance with 
section 773(e)(2)(B)(iii) of the Act, we calculated CV profit using the 
information contained in the 2002 financial statements of Maringa S.A. 
Cimento e Ferro-Liga, another Brazilian producer of silicomanganese. 
See Calculation Memo. For selling expenses, we used the actual 
weighted-average home market direct and indirect selling expenses. We 
made the same adjustments to CV as described in the COP section above.
    During the POR, SIBRA/CPFL did not recover all of the ICMS/IPI 
taxes that it paid on material purchases through its home-market sales. 
We therefore calculated a weighted-average per-unit ICMS/IPI tax cost 
for unrecovered taxes paid during the POR. Section 773(e) of the Act 
states, ``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.'' We verified 
that the Brazilian government gave SIBRA/CPFL a credit for the amount 
of PIS/COFINS taxes paid on inputs used to produce exported 
merchandise. Additionally, indicates that SIBRA/CPFL was able to use 
the entire amount of its PIS/COFINS credit due to the high volume of 
home-market sales in the month subsequent to the month of the U.S. 
sales. In accordance with the Act, we therefore calculated a weighted-
average per-unit PIS/COFINS export rebate and deducted the amount of 
this rebate from CV. See Calculation Memo.

Currency Conversions

    Because this proceeding involves a high-inflation economy, we 
limited our comparison of U.S. and home-market sales to those occurring 
in the same month and only used daily exchange rates.
    The Department's preferred source for daily exchange rates is the 
Federal Reserve Bank. However, the Federal Reserve Bank does not track 
or publish exchange rates for the Brazilian Real. Therefore, we made 
currency conversions based on the daily exchange rates from Factiva, a 
Dow Jones & Reuters Retrieval Service.

Preliminary Results of Review

    As a result of our review, we preliminarily determine that a margin 
of 2.12 percent exists for SIBRA/CPFL/Urucum for the period December 1, 
2001, through November 30, 2002. Pursuant to 19 CFR 351.224(b), the 
Department will disclose to parties calculations performed in 
connection with these preliminary results within five days of the date 
of publication of this notice. Any interested party may request a 
hearing within 30 days of publication of this notice. A hearing, if 
requested, will be held at the main Commerce Department building three 
business days after submission of rebuttal briefs.
    Issues raised in hearings will be limited to those raised in the 
respective case and rebuttal briefs. Case briefs from interested 
parties may be filed no later than 30 days after publication of this 
notice. Rebuttal briefs, limited to the issues raised in case briefs, 
may be submitted no later than five days after the deadline for filing 
case briefs. Parties who submit case or rebuttal briefs in this 
proceeding are requested to submit with each argument (1) a statement 
of the issue, and (2) a brief summary of the argument with an 
electronic version included.
    The Department will publish a notice of final results of this 
administrative review, which will include the results of its analysis 
of issues raised in any such comments or at a hearing, within 120 days 
from the publication of these preliminary results.
    The Department shall determine, and Customs and Border Protection 
(``CBP'') shall assess, antidumping duties on all appropriate entries. 
Upon completion of this review, the Department will issue appraisement 
instructions directly to the CBP.
    Furthermore, the following deposit requirements will be effective 
upon publication of the final results of this administrative review for 
all shipments of silicomanganese 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: (1) The cash deposit rate for 
the reviewed company will be the rate established in the final results 
of this review; (2) for merchandise exported by producers or exporters 
not covered in this review but covered in the original less-than-fair-
value (``LTFV'') investigation, the cash deposit will continue to be 
the most recent rate published in the final determination or final 
results for which the producer or exporter received an individual rate; 
(3) if the exporter is not a firm covered in this review, or the 
original LTFV investigation, but the producer is, the cash deposit rate 
will be the rate established for the most recent period for the 
producer of the merchandise; and (4) if neither the exporter nor the 
producer is a firm covered in this or any previous review, the cash 
deposit rate shall be 17.60 percent, the all-others rate established in 
the LTFV investigation. See Notice of Final Determination of Sales at 
Less than Fair Value: Silicomanganese from Brazil, 59 FR 55432 
(November 7, 1994). These deposit requirements, when imposed, shall 
remain in effect until publication of the final results of the next 
administrative review.
    This notice serves as a preliminary reminder to importers of their 
responsibility under 19 CFR 351.402(f) 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 administrative review and notice are in accordance with 
sections 751(a)(1) and 777(i)(1) of the Act.

    Dated: October 17, 2003.
James J. Jochum,
Assistant Secretary for Import Administration.
[FR Doc. 03-27042 Filed 10-24-03; 8:45 am]
BILLING CODE 3510-DS-S