[Federal Register Volume 77, Number 26 (Wednesday, February 8, 2012)]
[Notices]
[Pages 6537-6542]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-2913]


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DEPARTMENT OF COMMERCE

International Trade Administration

[A-821-807]


Preliminary Negative Determination and Extension of Time Limit 
for Final Determination of Circumvention of the Antidumping Duty Order 
on Ferrovanadium and Nitrided Vanadium From the Russian Federation

AGENCY: Import Administration, International Trade Administration, 
Department of Commerce.
SUMMARY: On May 2, 2011, pursuant to an allegation by AMG Vanadium, 
Inc. (AMG Vanadium), the Department of Commerce (the Department) 
initiated an anticircumvention inquiry to determine whether imports of 
vanadium pentoxide from the Russian Federation (Russia) that are 
converted into ferrovanadium in the United States are circumventing the 
antidumping duty order on ferrovanadium and nitrided vanadium 
(ferrovanadium) from Russia.\1\ We preliminarily determine that the 
importation of vanadium pentoxide by the Evraz Group,\2\ which is toll-
converted into ferrovanadium in the United States by the Bear 
Metallurgical Corporation (BMC), prior to sale to unaffiliated 
customers in the United States, does not constitute circumvention of 
the aforementioned order, within the meaning of section 781(a) of the 
Tariff Act of 1930, as amended (the Act).
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    \1\ See Initiation of Anticircumvention Inquiry on Antidumping 
Duty Order on Ferrovanadium and Nitrided Vanadium From the Russian 
Federation, 76 FR 26243 (May 6, 2011) (Initiation Notice).
    \2\ The Evraz Group includes OAO Vanady-Tula, East Metals S.A., 
and East Metals N.A. (EMNA).

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DATES: Effective Date: February 8, 2012.

FOR FURTHER INFORMATION CONTACT: David Goldberger or Rebecca Trainor, 
AD/CVD Operations, Office 2, Import Administration, International Trade 
Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue NW., Washington, DC 20230; telephone: (202) 482-
4136 or (202) 482-4007, respectively.

SUPPLEMENTARY INFORMATION: 

Background

    On July 10, 1995, the Department published an antidumping duty 
order on ferrovanadium from Russia.\3\ On February 25, 2011, AMG 
Vanadium requested that the Department initiate an anticircumvention 
inquiry pursuant to section 781(a) of the Act, and 19 CFR 351.225(c) 
and (g), to determine whether imports of vanadium pentoxide from 
Russia, produced by Evraz Group member OAO Vanady-Tula, that are 
processed into ferrovanadium in the United States under a tolling 
agreement with the unaffiliated processor, BMC, and sold by Evraz Group 
member EMNA to unaffiliated U.S. customers, are circumventing the 
antidumping duty order on ferrovanadium from Russia. AMG Vanadium 
submitted additional information in support of its request on March 16, 
2011.
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    \3\ See Notice of Antidumping Order: Ferrovanadium and Nitrided 
Vanadium From the Russian Federation, 60 FR 35550 (July 10, 1995).
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    On May 2, 2011, the Department initiated the anticircumvention 
inquiry with respect to the Evraz Group's imports of vanadium pentoxide 
which are toll-converted into ferrovanadium by BMC in the United 
States. See Initiation Notice. In June 2011, the Department issued 
questionnaires to the Evraz Group and BMC. The Evraz Group and BMC 
responded to their respective questionnaires in July 2011. The 
Department issued supplemental questionnaires to each company in August 
2011. The Evraz Group and BMC responded to these supplemental 
questionnaires in August and September 2011, respectively.
    In September 2011, the Department conducted verifications at EMNA 
and BMC. In October 2011, the Department issued verification 
reports.\4\
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    \4\ See Memorandum to The File entitled ``Verification of the 
Questionnaire Responses of the Evraz Group S.A.'' dated October 7, 
2011 (Evraz Verification Report), and Memorandum to The File 
entitled ``Verification of the Questionnaire Responses of Bear 
Metallurgical Company'' dated October 7, 2011 (BMC Verification 
Report).
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    AMG Vanadium submitted comments for consideration in the 
preliminary determination of this inquiry on December 19, 2011. On 
January 6, 2012, the Evraz Group and BMC submitted comments in response 
to AMG Vanadium's submission.

Scope of the Order

    The products subject to this order are ferrovanadium and nitrided 
vanadium, regardless of grade, chemistry, form or size, unless 
expressly excluded from the scope of this order. Ferrovanadium includes 
alloys containing ferrovanadium as the predominant element by weight 
(i.e., more weight than any other element, except iron in some 
instances) and at least 4 percent by weight of iron. Nitrided vanadium 
includes compounds containing vanadium as the predominant element, by 
weight, and at least 5 percent, by weight, of nitrogen. Excluded from 
the scope of the order are vanadium additives other than ferrovanadium 
and nitrided vanadium, such as vanadium-aluminum master alloys, 
vanadium chemicals, vanadium waste and scrap, vanadium-bearing raw 
materials, such as slag, boiler residues, fly ash, and vanadium oxides.
    The products subject to this order are currently classifiable under 
subheadings 2850.00.20, 7202.92.00, 7202.99.50.40, 8112.40.30.00, and 
8112.40.60.00 of the Harmonized Tariff Schedule of the United States 
(HTSUS). Although the HTSUS subheadings are provided for convenience 
and customs purposes, our written description of the scope is 
dispositive.

Scope of the Anticircumvention Inquiry

    The product subject to this anticircumvention inquiry is vanadium 
pentoxide (V2O5) from Russia, which is usually in 
a granular form and may contain other substances, including silica 
(SiO2), manganese, and sulfur, and which is converted into 
ferrovanadium in the United States. Such merchandise is classifiable 
under subheading 2825.30.0010 of the HTSUS. This

[[Page 6538]]

inquiry only covers such products that are imported by the Evraz Group 
and converted into ferrovanadium in the United States by BMC.

Applicable Statute

    Section 781(a) of the Act provides that the Department may find 
circumvention of an antidumping duty order when merchandise of the same 
class or kind subject to the order is completed or assembled in the 
United States. In conducting anticircumvention inquiries under section 
781(a)(1) of the Act, the Department determines whether (A) merchandise 
sold in the United States is of the same class or kind as any other 
merchandise produced in a foreign country that is the subject of an 
antidumping duty order; (B) such merchandise sold in the United States 
is completed or assembled in the United States from parts or components 
produced in the foreign country with respect to which the antidumping 
duty order applies; (C) the process of assembly or completion in the 
United States is minor or insignificant; and (D) the value of the parts 
or components referred to in (B) is a significant portion of the total 
value of the merchandise.
    With regard to sub-part (C), section 781(a)(2) of the Act specifies 
that the Department ``shall take into account: (A) The level of 
investment in the United States; (B) the level of research and 
development in the United States; (C) the nature of the production 
process in the United States, (D) the extent of production facilities 
in the United States; and (E) whether the value of the processing 
performed in the United States represents a small proportion of the 
value of the merchandise sold in the United States.''
    In addition, the Statement of Administrative Action (SAA) 
accompanying the Uruguay Round Agreements Act, H. R. Doc. No. 103-316, 
at 893 (1994), states that no single factor listed in section 781(a)(2) 
of the Act will be controlling. The SAA also states that the Department 
will evaluate each of the factors as they exist in the United States 
depending on the particular circumvention scenario. See id. Therefore, 
the importance of any one of the factors listed under 781(a)(2) of the 
Act can vary from case to case depending on the particular 
circumstances unique to each specific circumvention inquiry. Further, 
section 781(a)(3) of the Act directs the Department to consider, in 
determining whether to include parts or components produced in a 
foreign country within the scope of an antidumping duty order, such 
factors as: (A) The pattern of trade, including sourcing patterns; (B) 
whether the manufacturer or exporter of the parts or components is 
affiliated with the person who assembles or completes the merchandise 
sold in the United States from the parts or components produced in the 
foreign country with respect to which the order applies; and (C) 
whether imports into the United States of the parts or components 
produced in such foreign country have increased after the initiation of 
the investigation which resulted in the issuance of such order or 
finding.

Statutory Analysis

A. Merchandise of the Same Class or Kind

    The merchandise sold by the Evraz Group in the United States is 
ferrovanadium. Based on the description provided by the Evraz Group in 
its questionnaire responses,\5\ this merchandise is of the same class 
or kind as the merchandise subject to the antidumping duty order.
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    \5\ See the Evraz Group's July 12, 2011, questionnaire response 
(Evraz QR) at page 8, and the Evraz Group's August 31, 2011, 
supplemental questionnaire response (Evraz SQR) at pages 6-7.
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B. Completion of Merchandise in the United States

    As detailed in the Evraz Group and BMC questionnaire responses and 
the two verification reports (see, e.g., Evraz QR at pages 3-4 and 6-
7), the vanadium pentoxide produced in Russia by OAO Vanady-Tula is 
imported into the United States by members of the Evraz Group \6\ and 
further processed into ferrovanadium by BMC. BMC converts the vanadium 
pentoxide into ferrovanadium in the United States under a tolling 
agreement with the Evraz Group. The Evraz Group retains title to the 
merchandise throughout the conversion process and sells the 
ferrovanadium in the United States after the completion of the 
conversion.
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    \6\ Currently EMNA imports, and previously another Evraz Group 
affiliate Strategic Minerals Corporation (Stratcor) imported, the 
OAO Vanady-Tula-produced vanadium pentoxide into the United States.
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C. Minor or Insignificant Process

    As explained above, section 781(a)(2) of the Act sets forth the 
relevant statutory factors to consider in determining whether the 
processing in the United States is ``minor or insignificant.'' These 
factors include: (1) The level of investment in the United States; (2) 
the level of research and development in the United States; (3) the 
nature of the production process in the United States; (4) the extent 
of production facilities in the United States; and (5) whether the 
value of the processing performed in the United States represents a 
small proportion of the value of the merchandise sold in the United 
States. Our analysis of the statutory factors to determine whether the 
process in the United States is minor or insignificant in accordance 
with sections 781(a)(1)(C) and 782(a)(2) of the Act follows below.
(1) Level of Investment in the United States
    The facilities for converting vanadium pentoxide into ferrovanadium 
are owned by BMC. BMC has been producing ferrovanadium from vanadium 
pentoxide since the early 1990s, prior to the initiation of the 
underlying less-than-fair-value (LTFV) investigation of ferrovanadium 
from Russia. BMC discussed its recent investment activity in its July 
18, 2011, questionnaire response (BMC QR) at pages 19-20, and its 
September 2, 2011, supplemental questionnaire response (BMC SQR) at 
page 8. Because BMC has requested proprietary treatment for most of the 
investment information it provided, that information cannot be 
summarized in this notice. However, the Evraz Group has placed on the 
record publicly available information concerning the market value of 
BMC's production facility. Specifically, the Evraz Group noted in the 
Evraz QR at page 19 that BMC's market value in 2005 was approximately 
$24 million, and that BMC has engaged in a number of expansion projects 
in the last 15 years. The Evraz Group also noted in its March 25, 2011, 
submission (Evraz March 25 Submission) that the International Trade 
Commission (ITC) concluded in the 1995 antidumping injury investigation 
that:

    {BMC{time}  is a domestic producer {of ferrovanadium{time}  
because the activities in which it engages involve significant 
production operations and production costs and a level of technical 
expertise that adds substantial value to the end product it produces 
* * * Bear accounted for a significant percentage of domestic 
production during the period {of the investigation{time}  and its 
level of employment, production assets, investments, and R&D 
expenses for production of ferrovanadium are significant.\7\
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    \7\ See Ferrovanadium and Nitrided Vanadium from Russia, Inv. 
No. 731-TA-702 (Final), USITC Pub. 2904 (June 1995) (ITC 
Investigation Report) at page I-9 and n.28; included as Attachment E 
in the Evraz March 25 Submission.
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(2) Level of Research and Development in the United States
    While BMC's process for converting vanadium pentoxide into 
ferrovanadium has not changed since BMC began operations, BMC reported 
certain

[[Page 6539]]

research and development activities during the inquiry period. See BMC 
QR at page 20 and Exhibit 4, as revised in BMC's September 23, 2011, 
submission. The expenditures associated with these activities are not 
as high as those made when BMC began operations. Nevertheless, the 
nature of these activities demonstrates BMC's ongoing improvement of 
its ferrovanadium production in the United States.
(3) Nature of the Production Process in the United States
    The production process for converting vanadium pentoxide into 
ferrovanadium is detailed in the Evraz QR at pages 16-17 and Exhibit 
11, the BMC QR at pages 10-17, and the SQR at pages 1-6. See also BMC 
Verification Report at page 2. In brief, this process begins with the 
chemical analysis of the vanadium pentoxide input provided by each 
customer to determine the correct blend of oxides and reagents. Then 
the vanadium pentoxide, aluminum, iron scrap, and flux is charged in a 
magnesite-lined vessel and the reagents are ignited. In the ensuing 
reaction, the aluminum metal is converted to alumina, forming a slag, 
and the vanadium pentoxide is reduced to vanadium metal, which 
dissolves in the molten iron to form ferrovanadium. The resulting slab 
is then cooled and removed from its vessel, the layer of ferrovanadium 
metal is separated from the layer of slag, and the ferrovanadium is 
conveyed to a separate part of the facility for crushing, sizing and 
packaging. This conversion process results in the complete 
transformation of the chemical and physical properties of the vanadium 
pentoxide into ferrovanadium. As such, it is not indicative of a simple 
completion or assembly operation. Furthermore, as indicated above, the 
ITC has found that BMC's conversion process constitutes domestic 
production of ferrovanadium.\8\
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    \8\ See ITC Investigation Report at page I-9 (included in Evraz 
March 25 submission at Attachment E); and Ferrovandium and Nitrided 
Vanadium from Russia, Inv. No. 731-TA-702 (Second Review), US ITC 
Pub. 3887 (September 2006) at page 6; included as Attachment F in 
the Evraz March 25 Submission.
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(4) Extent of Production Facilities in the United States
    BMC reports the extent of its Butler, PA production facility, 
including its size, the capital equipment installed, and the number of 
full-time employees, at pages 17-19 of the BMC QR. BMC also produces 
ferromolybdenum at this facility. Nearly all of its production 
equipment is suitable to produce either ferrovanadium or 
ferromolybdenum, and BMC's production labor force is trained to perform 
each of the various functions involved in producing both ferrovanadium 
and ferromolybdenum. See BMC Verification Report at page 2.
    BMC requested proprietary treatment for the information it provided 
regarding the extent of its production facilities. Relying on publicly 
available information from BMC's Web site, the Evraz Group reported in 
the Evraz QR at page 19 and Exhibit 13, that BMC employs more than 35 
workers at its 100,000 square foot facility.
(5) Value of Processing in the United States Compared to Value of the 
Merchandise Sold in the United States
    We calculated the value of the processing in the United States 
using the tolling fees the Evraz Group paid to BMC from 2008 through 
2010, for converting imported vanadium pentoxide into ferrovanadium, as 
reported by the Evraz Group in its questionnaire responses. To 
calculate the value of the ferrovanadium sold in the United States, we 
used the ex-BMC price of ferrovanadium produced at BMC from Russian 
vanadium pentoxide that the Evraz Group sold to unaffiliated customers 
in the United States, as reported by the Evraz Group in its 
questionnaire responses. As the toll-production of ferrovanadium was 
not often tied to specific ferrovanadium sales, to compare the value of 
processing to the value of the merchandise sold in the United States, 
we first calculated monthly weighted averages of the tolling fees paid 
to BMC. We then matched each ferrovanadium sale to the weighted-average 
tolling fee corresponding to the month of the ferrovanadium sale. Where 
there was no toll-production during the month of sale, we matched the 
ferrovanadium sale to the weighted-average tolling fee for the closest 
month of production prior to the month of the sale. We then divided the 
weighted-average tolling fee by the ex-BMC ferrovanadium price to 
derive a percentage reflecting the value of the processing in the 
United States relative to the value of the ferrovanadium sold in the 
United States.
    Based on our calculations, we found that the value of processing 
performed in the United States ranged from approximately 6 percent to 
26 percent on individual transactions from 2008 through 2010. When 
calculated on an annual, weighted-average basis, these percentages 
ranged from approximately 7 percent to 18 percent during the 2008-2010 
inquiry period. However, as noted by the Evraz Group at page 10 of its 
March 25, 2011, submission and confirmed in our calculations, the cost 
of converting vanadium pentoxide was relatively constant during this 
period at roughly $2.00 per pound on a contained vanadium basis, while 
the price of ferrovanadium fluctuated significantly, ranging from under 
$10 per pound to over $30 per pound. In particular, ferrovanadium 
prices in 2008 were significantly higher than ferrovanadium prices in 
2009 and 2010, which in turn resulted in a significantly lower 
weighted-average U.S. processing value ranging from approximately 6 to 
8 percent in 2008. During 2009 and 2010, ferrovanadium prices ranged 
from around $9 to $17 per pound (see, e.g., AMG Vanadium February 25, 
2011, anticircumvention inquiry request (AMG Request) at Exhibit 18). 
Thus, the U.S. processing value ranged from approximately 12 to 26 
percent during 2009-2010. Because the calculation of the value of U.S. 
processing is based upon proprietary data, the value-added percentages 
presented above have been ranged. For a more detailed discussion of the 
calculation of the value of U.S. processing, see the memorandum to the 
file entitled ``Preliminary Determination Calculation of Value Added in 
the United States'' (Value Added Memo).

D. Value of Merchandise Produced in the Foreign Country Is a 
Significant Portion of the Value of the Merchandise Sold in the United 
States

    Under section 781(a)(1)(D) of the Act, the value of the imported 
parts or components must be a significant portion of the total value of 
the subject merchandise sold in the United States in order to find 
circumvention. The vanadium pentoxide is the primary material input 
into the production of ferrovanadium and a substantial portion of the 
value of the toll-produced ferrovanadium is based upon this material 
cost. With respect to the value of the imported vanadium pentoxide, the 
Evraz Group reported, and we verified, that during the inquiry period 
it made no sales of Russian-produced vanadium pentoxide to unaffiliated 
parties other than a relatively small quantity shipped to a third-
country customer under a pre-inquiry period contract. See Evraz QR at 
pages 14-15 and Exhibit 6, and Evraz Verification Report at page 4. Due 
to the small quantity, we did not consider these third-country sales 
for purposes of valuing Russian vanadium pentoxide pursuant to section 
781(a)(1)(D) of the Act. Because the only reported source for the price 
of the imported vanadium pentoxide is the transaction between 
affiliated parties (i.e., from OAO Vanady-Tula to Stratcor or EMNA) in 
this case, we estimated the value of the

[[Page 6540]]

Russian vanadium pentoxide consumed to produce ferrovanadium as the 
difference between the net price of the ferrovanadium sold to 
unaffiliated parties and the cost of conversion in the United States 
(i.e., the inverse of the calculation of the value of U.S. processing 
described above). Accordingly, we found that the value of the Russian 
vanadium pentoxide ranged from approximately 74 to 94 percent of the 
value of the ferrovanadium sold in the United States during the 2008-
2010 inquiry period. When calculated on an annual, weighted-average 
basis, the value of the Russian vanadium pentoxide relative to the 
value of the ferrovanadium sold in the United States was over 80 
percent during each year of the 2008-2010 inquiry period. See Value 
Added Memo.

E. Factors To Consider in Determining Whether Action Is Necessary

    Section 781(a)(3) of the Act identifies additional factors that the 
Department shall consider in its decision to include parts or 
components in an antidumping duty order as part of an anticircumvention 
investigation. These factors are discussed below.

Pattern of Trade, Including Sourcing Patterns

    As discussed in the AMG Request, following the imposition of the 
antidumping duty order in 1995, imports of ferrovanadium from Russia 
ceased in total by 1997; however, since 2005, imports of vanadium 
pentoxide from Russia have increased from 27 metric tons (MT) in 2005 
to 2,680 MT in 2010. See also U.S. import statistics submitted by the 
Evraz Group at Exhibit 3 of the Evraz QR.
    Although the Evraz Group was not involved in the U.S. ferrovanadium 
market until 2008, its affiliates OAO Vanady-Tula and Stratcor sold 
vanadium pentoxide or ferrovanadium to U.S. customers prior to their 
respective acquisition by the Evraz Group. OAO Vanady-Tula was a 
respondent in the underlying LTVF investigation when it was known as SC 
Vanady Tulachermet. Subsequently, OAO Vanady-Tula had its vanadium 
pentoxide processed into ferrovanadium in the Czech Republic for sale 
to the United States and other countries. Stratcor produced vanadium 
pentoxide in the United States prior to the initiation of the LTFV 
investigation. Stratcor has had a substantial portion of its vanadium 
pentoxide products toll-processed at BMC since BMC's establishment, and 
continues to do so. According to the Evraz Group, the only significant 
change in the pattern of trade and sourcing of material that has 
occurred since 2008, when it obtained the marketing rights for OAO 
Vanady-Tula, is that the Evraz Group is exporting Russian vanadium 
pentoxide to BMC in the United States, rather than to a Czech company, 
for conversion into ferrovanadium and ultimate sale to U.S. customers. 
See Evraz SQR at pages 3-6.
    As noted above, BMC has toll-produced ferrovanadium from vanadium 
pentoxide since it began operations in the early 1990s, prior to the 
initiation of the LTFV investigation. BMC has continued to produce 
ferrovanadium from vanadium pentoxide in the same manner. BMC has 
maintained a relationship with Stratcor since 1993, first as the toll-
converter of vanadium pentoxide produced by Stratcor and later as the 
toll-converter of vanadium pentoxide imported by Stratcor and EMNA. 
See, e.g., Evraz Verification Report at page 2, and BMC Verification 
Report at pages 1-2.

Affiliation

    Under section 781(a)(3)(B) of the Act, the Department shall take 
into account whether the manufacturer or exporter of the parts or 
components is affiliated with the person who assembles or completes the 
merchandise sold in the United States from the parts or components 
produced in the foreign country when making a decision in an 
anticircumvention case. As stated in the Initiation Notice and 
subsequently confirmed in the questionnaire responses and verification 
reports, the Evraz Group, through its affiliates, produces vanadium 
pentoxide in Russia, ships and imports it into the United States, has 
it converted into ferrovanadium by an unaffiliated company while 
maintaining title to the product, and sells the completed ferrovanadium 
to customers in the United States. Thus, the manufacturer, exporter, 
and U.S. importer of the Russian vanadium pentoxide, as well as the 
party overseeing the conversion process and ultimate sale of the 
ferrovanadium in the United States, are all under the common ownership 
and control of a single entity, the Evraz Group. However, the entity 
which performs the conversion process (i.e., the entity which actually 
``completes'' the merchandise in the United States) is not affiliated 
with the Evraz Group.

Subsequent Import Volume

    Under section 781(a)(3)(C) of the Act, the Department shall take 
into account whether imports into the United States of the parts or 
components produced in the foreign country have increased after the 
initiation of the investigation, which resulted in the issuance of the 
order, when making a decision in an anticircumvention case. In the 
Initiation Notice, we noted that AMG Vanadium claimed in the AMG 
Request that imports of vanadium pentoxide from Russia were zero from 
1995 to 2004, and then increased to approximately 2,680 MT by 2010. 
This assertion is confirmed by U.S. import statistics, as submitted at 
Exhibit 3 of the Evraz QR, and our verification findings (see Evraz 
Verification Report at page 4).

Analysis

    As discussed above, in order to make an affirmative determination 
of circumvention, all the criteria under section 781(a)(1) of the Act 
must be satisfied. In addition, section 781(a)(3) of the Act instructs 
the Department to consider, in determining whether to include parts or 
components within the scope of an order, such factors as pattern of 
trade, affiliation, and import volume.
    With respect to the four criteria under section 781(a)(1) of the 
Act, we find that three of the four criteria have been satisfied to 
find circumvention. As discussed above, (A) the merchandise sold in the 
United States, ferrovanadium, is of the same class or kind as any other 
merchandise that is the subject of the antidumping duty order on 
ferrovanadium from Russia; (B) the ferrovanadium sold in the United 
States is completed in the United States from parts or components 
(i.e., vanadium pentoxide), produced in Russia; and (D) the value of 
the Russian-produced vanadium pentoxide used in the production of 
ferrovanadium in the United States is a significant portion of the 
total value of the ferrovanadium sold in the United States. However, as 
discussed below, based on our analysis of all the relevant factors 
under section 781(a)(2) of the Act and the record information, we do 
not find that the remaining criterion found at section 781(a)(1)(C) of 
the Act, the process of assembly or completion in the United States is 
minor or insignificant, has been satisfied.
    Although the Evraz Group is the entity that retains title to the 
imported vanadium pentoxide, it is BMC which performs the actual 
conversion of the imported material into ferrovanadium. Therefore, it 
is BMC's production process which is relevant to our analysis with 
respect to whether the process of assembly or completion in the United 
States is minor or insignificant. As discussed above, BMC has been 
processing vanadium pentoxide into ferrovanadium for approximately 
twenty years. The ITC concluded in

[[Page 6541]]

1995 that BMC's level of domestic activity in toll-converting vanadium 
pentoxide into ferrovanadium was significant and resulted in 
substantial added value. BMC's level of activity in the United States 
was determined to be substantial enough for BMC to be considered a 
domestic producer of ferrovanadium. See ITC Investigation Report. More 
recently, in 2006, the ITC continued to view BMC as part of the 
domestic ferrovanadium industry through its toll-conversion of vanadium 
pentoxide, and referred to the exclusion of producers of vanadium 
pentoxide from the domestic industry of ferrovanadium because they 
produced only the intermediate product involved in ferrovanadium 
production.\9\
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    \9\ See Ferrovanadium and Nitrided Vanadium From Russia, Inv. 
No. 731-TA-702 (Second Review), USITC Pub. 3887 (September 2006) at 
page 6, included as Attachment F of the Evraz March 25 submission.
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    Our analysis of the questionnaire responses and our verification 
findings yield a similar conclusion to that of the ITC--that BMC's 
production process involves significant operations. Specifically, the 
toll-conversion process is more than a mere finishing or assembly 
process. As described above, it entails a series of processes that 
cause the chemical reaction necessary to convert vanadium pentoxide, in 
powder or flake form, to molten metallic vanadium and then alloys it 
with metallic iron to form a solid. The result is the complete chemical 
and physical transformation of one material, vanadium pentoxide, into 
another material with a completely different physical and chemical 
structure, ferrovanadium. This process requires a significant financial 
investment in a physical plant and equipment--one BMC made at its 
inception--and the employment of a significant number of skilled and/or 
trained employees. While the reported investment and R&D expenditures 
BMC made since 2008 may not be as large as those made at BMC's 
establishment, we would not necessarily expect a high degree of new 
investment and R&D in BMC's case, as it is a well-established 
enterprise which performs a well-established conversion/production 
process. BMC's recent investment and R&D expenditures nevertheless 
demonstrate its commitment to sustain and improve its current 
operations.
    In assessing the calculation of the value of the processing in the 
United States compared to the value of the ferrovanadium sold in the 
United States, we must take into account the qualitative factors 
described above, with particular focus on the nature of the production 
process, consistent with past case precedent and the intent of 
Congress. In prior anticircumvention inquiries, the Department has 
explained that Congress directed the agency to focus more on the nature 
of the production process and less on the difference in value between 
the subject merchandise and the parts and components imported into the 
processing country.\10\ Additionally, the Department has explained 
that, following the Uruguay Round Agreements Act, Congress redirected 
the agency's focus away from a rigid numerical calculation of value-
added toward a more qualitative focus on the nature of the production 
process.\11\ As discussed above, during the inquiry period, the value 
of the toll-conversion was relatively constant, while ferrovanadium 
prices fluctuated greatly. Therefore, the value of the U.S. production 
activity relative to the ferrovanadium sales price varied greatly 
between 2008 and 2010. When ferrovanadium prices were high in 2008, we 
observed that the U.S. value added percentage we calculated ranged from 
approximately 6 to 8 percent. As ferrovanadium prices stabilized in 
2009 and 2010, we observed that the vast majority of the U.S. value-
added percentages we calculated ranged from approximately 15 to 20 
percent. See Value Added Memo at Attachments 3 and 4. In calculating 
these percentages, we note that the Department has not established 
specific value-added percentages that would signal the significance of 
value added. Rather, the Department examines the totality of the 
circumstances in light of the statutory criteria on a case-by-case 
basis.
---------------------------------------------------------------------------

    \10\ See, e.g., Anti-Circumvention Inquiry of the Antidumping 
and Countervailing Duty Orders on Certain Pasta From Italy: 
Affirmative Preliminary Determinations of Circumvention of 
Antidumping and Countervailing Duty Orders, 68 FR 46571, 46575 
(August 6, 2003) (Pasta Circumvention Prelim), unchanged in Anti-
Circumvention Inquiry of the Antidumping and Countervailing Duty 
Orders on Certain Pasta From Italy: Affirmative Final Determinations 
of Circumvention of Antidumping and Countervailing Duty Orders, 68 
FR 54888 (September 19, 2003) (Pasta Circumvention Final).
    \11\ See Pasta Circumvention Prelim, 68 FR at 46575, unchanged 
in Pasta Circumvention Final.
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    AMG Vanadium notes at page 12 of the AMG Request that the 
Department has found valued-added percentages of 10 to 20 percent to be 
``small'' in the context of affirmative determinations of 
circumvention. However, the production or finishing processes in the 
cases cited in the AMG Request differ qualitatively from the 
ferrovanadium production process in this inquiry. With respect to the 
granular polytetrafluoroethylene (PTFE) resin from Italy circumvention 
inquiry, the Department determined that the subject of the inquiry, 
PTFE wet raw polymer, already possessed the basic physical 
characteristics that distinguished granular PTFE resin from other forms 
of PTFE resin. Thus the respondent's post-treatment activity in the 
United States of cutting PTFE wet raw polymer and drying it to form 
granular PTFE resin was deemed relatively minor.\12\
---------------------------------------------------------------------------

    \12\ See Granular Polytetrafluoroethylene Resin From Italy: 
Final Affirmative Determination of Circumvention of Antidumping Duty 
Order, 58 FR 26100, 26110 (April 30, 1993).
---------------------------------------------------------------------------

    In the brass sheet and strip from Canada circumvention inquiry, a 
re-roller in the United States imported brass plate from Canada (which 
was outside the scope of the antidumping duty order) and performed 
rolling, annealing, pickling, and slitting operations which resulted in 
brass sheet and strip. The Department concluded in that inquiry that 
the re-roller ``imported brass plate, a product which was {only{time}  
one rolling step short of constituting sheet and strip {the merchandise 
subject to the order{time} .'' \13\ That is, only with respect to 
product thickness did the imported brass plate differ physically from 
the brass sheet and strip included in the antidumping duty order. 
Therefore, the Department determined that the value added by the re-
roller in the United States was small.
---------------------------------------------------------------------------

    \13\ See Brass Sheet and Strip From Canada; Final Affirmative 
Determination of Circumvention of Antidumping Duty Order, 58 FR 
33610, 33613 (June 18, 1993).
---------------------------------------------------------------------------

    With respect to the butt-weld pipe fittings from the People's 
Republic of China (China) circumvention case, the Department's inquiry 
covered imports of pipe fittings finished in Thailand that were 
completed from unfinished ``as-formed'' pipe fittings manufactured in 
China. The Thai processor performed cutting, heat treatment, shot 
blasting, machining, cleaning, and coating operations on the unfinished 
pipe fittings. No additional materials (other than coating materials) 
were added to the unfinished pipe fitting, thus the processing in the 
intermediate country did not alter the chemical composition of the 
Chinese material. Accordingly, the Department found that the finishing 
operations performed in Thailand were minor.\14\
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    \14\ See Certain Carbon Steel Butt-Weld Pipe Fittings From the 
People's Republic of China: Affirmative Preliminary Determination of 
Circumvention of Antidumping Duty Order, 59 FR 62, 64 (January 3, 
1994), unchanged in Certain Carbon Steel Butt-Weld Pipe Fittings 
From the People's Republic of China: Affirmative Final Determination 
of Circumvention of Antidumping Duty Order, 59 FR 15155 (March 31, 
1994).

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[[Page 6542]]

    In the above-cited cases, while the value-added percentage may have 
been as high as 20 percent, the production processes were relatively 
minor, involving finishing operations that did not alter the chemical 
structure or basic physical nature of the imported material. In 
contrast, the processing of vanadium pentoxide into ferrovanadium 
requires the complete transformation of the chemical and physical 
properties of the imported material. Therefore, the valued-added ranges 
we calculated, as discussed above, when viewed in combination with this 
fundamental alteration of the imported material, are not small. After 
considering these factors, as well as the level of investment, research 
and development, and extent of production facilities, we preliminarily 
conclude that the process of completing/producing ferrovanadium from 
vanadium pentoxide in the United States is neither minor nor 
insignificant, pursuant to section 781(a)(1)(C) of the Act.
    Pursuant to section 781(a)(3), we also considered the additional 
factors of pattern of trade, affiliation, and import trends after the 
initiation of the investigation which resulted in the antidumping duty 
order on ferrovanadium from Russia.

Pattern of Trade

    As discussed above, imports of ferrovanadium from Russia ceased 
within two years of the imposition of the antidumping duty order in 
1995. Imports of vanadium pentoxide from Russia increased almost ten-
fold from 2005 to 2010. While toll-processing of vanadium pentoxide has 
been a consistent aspect of the U.S. ferrovanadium industry, the 
sourcing of substantial quantities of vanadium pentoxide from Russia is 
a recent trend. In other words, imports of vanadium pentoxide from 
Russia did not begin until 10 years after the order was imposed. We do 
not find that these changes in the pattern of trade, when viewed in 
conjunction with the other statutory factors under section 871(a)(3) of 
the Act, support including vanadium pentoxide in the antidumping order.

Affiliation

    Generally, we consider circumvention to be more likely when the 
manufacturer/exporter of the parts or components is related to the 
party completing or assembling merchandise in the United States using 
the imported parts or components. As discussed above, in this case, the 
manufacturer of the Russian vanadium pentoxide (Evraz Group member OAO 
Vanady-Tula) and the party converting the merchandise into 
ferrovanadium in the United States (BMC) are not affiliated parties. 
BMC toll-processes the Russian vanadium pentoxide under the terms of 
its agreement with the Evraz Group.

Import Volume

    Imports of vanadium pentoxide from Russia did not begin until 10 
years after the order was imposed. We do not find that this change in 
imports, when viewed in conjunction with the other statutory factors 
under section 781(a)(3) of the Act, supports including vanadium 
pentoxide in the antidumping order.

Preliminary Negative Determination

    Based upon our analysis of all of the factors under section 781(a) 
of the Act, as detailed above, we preliminarily find that circumvention 
of the antidumping duty order on ferrovanadium and nitrided vanadium 
from Russia is not occurring by reason of imports of vanadium pentoxide 
from Russia by the Evraz Group.

Public Comment

    Case briefs from interested parties may be submitted no later than 
30 days from the date of publication of this notice. A list of 
authorities used and an executive summary of issues should accompany 
any briefs submitted to the Department. See 19 CFR 351.309(c). This 
summary should be limited to five pages total, including footnotes. 
Rebuttal briefs limited to issues raised in the case briefs may be 
filed no later than 35 days after the date of publication of this 
notice. See 19 CFR 351.309(d).
    Interested parties, who wish to request a hearing, or to 
participate if one is requested, must submit a written request to the 
Assistant Secretary for Import Administration, filed electronically 
using Import Administration's Antidumping and Countervailing Duty 
Centralized Electronic Service System (``IA ACCESS''). An 
electronically filed document must be received successfully in its 
entirety by the Department's electronic records system, IA ACCESS, by 5 
p.m. Eastern Standard Time within 30 days after the date of publication 
of this notice. See 19 CFR 351.310(c). Requests should contain the 
party's name, address, and telephone number, the number of 
participants, and a list of the issues to be discussed. If a request 
for a hearing is made, we will inform parties of the scheduled date for 
the hearing which will be held at the U.S. Department of Commerce, 14th 
Street and Constitution Avenue NW., Washington, DC 20230, at a time and 
location to be determined. See 19 CFR 351.310. Parties should confirm 
by telephone the date, time, and location of the hearing. At the 
hearing, each party may make an affirmative presentation only on issues 
raised in that party's case brief and may make rebuttal presentations 
only on arguments included in that party's rebuttal brief. We intend to 
hold a hearing, if requested, no later than 40 days after the date of 
publication of this notice.
    The Department intends to publish the final determination with 
respect to this anti-circumvention inquiry, including the results of 
its analysis of any written comments, no later than August 24, 2012. 
This deadline date reflects a 180-day extension of the original 
deadline date for the final determination pursuant to section 781(f) of 
the Act. This deadline extension is necessary due to the complicated 
nature of this proceeding and in order to allow sufficient opportunity 
for the submission and analysis of interested party comments for the 
final determination.
    This negative preliminary circumvention determination, extension of 
the time limit for the final determination, and notice are in 
accordance with section 781(a) of the Act and 19 CFR 351.225(g).

    Dated: January 31, 2012.
Paul Piquado,
Assistant Secretary for Import Administration.
[FR Doc. 2012-2913 Filed 2-7-12; 8:45 am]
BILLING CODE 3510-DS-P