[Federal Register Volume 59, Number 4 (Thursday, January 6, 1994)]
[Notices]
[Pages 732-740]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-281]
[[Page Unknown]]
[Federal Register: January 6, 1994]
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DEPARTMENT OF COMMERCE
International Trade Administration
[A-351-820]
Final Determination of Sales at Less Than Fair Value:
Ferrosilicon From Brazil
Agency: Import Administration, International Trade Administration,
Department of Commerce.
EFFECTIVE DATE: January 6, 1994.
FOR FURTHER INFORMATION CONTACT: Kimberly Hardin, Office of Antidumping
Investigations, Import Administration, U.S. Department of Commerce,
14th Street and Constitution Avenue, NW., Washington, DC 20230;
telephone (202) 482-0371.
FINAL DETERMINATION: We determine that ferrosilicon (FeSi) from Brazil
is being, or is likely to be, sold in the United States at less than
fair value, as provided in section 735 of the Tariff Act of 1930, as
amended (the Act), and that critical circumstances exist for
Italmagnesio S.A. Industria e Comercio (Italmagnesio), but not for
Companhia Ferroligas Minas Gerais (Minasligas) or Companhia Brasileira
Carbureto de Calcio (CBCC). The estimated margins are shown in the
``Suspension of Liquidation'' section of this notice.
Scope of Investigation
The merchandise subject to this investigation is ferrosilicon, a
ferroalloy generally containing, by weight, not less than four percent
iron, more than eight percent but not more than 96 percent silicon, not
more than 10 percent chromium, not more than 30 percent manganese, not
more than three percent phosphorous, less than 2.75 percent magnesium,
and not more than 10 percent calcium or any other element.
FeSi is a ferroalloy produced by combining silicon and iron through
smelting in a submerged-arc furnace. FeSi is used primarily as an
alloying agent in the production of steel and cast iron. It is also
used in the steel industry as a deoxidizer and a reducing agent, and by
cast iron producers as an inoculant.
FeSi is differentiated by size and by grade. The sizes express the
maximum and minimum dimensions of the lumps of FeSi found in a given
shipment. FeSi grades are defined by the percentages by weight of
contained silicon and other minor elements. FeSi is most commonly sold
to the iron and steel industries in standard grades of 75 percent and
50 percent FeSi.
Calcium silicon, ferrocalcium silicon, and magnesium ferrosilicon
are specifically excluded from the scope of this investigation. Calcium
silicon is an alloy containing, by weight, not more than five percent
iron, 60 to 65 percent silicon, and 28 to 32 percent calcium.
Ferrocalcium silicon is a ferroalloy containing, by weight, not less
than four percent iron, 60 to 65 percent silicon, and more than 10
percent calcium. Magnesium ferrosilicon is a ferroalloy containing, by
weight, not less than four percent iron, not more than 55 percent
silicon, and not less than 2.75 percent magnesium.
FeSi is currently classifiable under the following subheadings of
the Harmonized Tariff Schedule of the United States (HTSUS):
7202.21.1000, 7202.21.5000, 7202.21.7500, 7202.21.9000, 7202.29.0010,
and 7202.29.0050. Although the HTSUS subheadings are provided for
convenience and customs purposes, our written description of the scope
of this investigation is dispositive.
FeSi in the form of slag is included within the scope of this
investigation if it meets, generally, the chemical content definition
stated above and is capable of being used as FeSi. FeSi is used
primarily as an alloying agent in the production of steel and cast
iron. It is also used in the steel industry as a deoxidizer and a
reducing agent, and by cast iron producers as an inoculant. Parties
that believe their importations of slag do not meet these definitions
should contact the Department and request a scope determination.
Period of Investigation
The period of investigation (POI) is July 1, 1992, through December
31, 1992.
Case History
Since the publication of the notice of preliminary determination on
August 16, 1993 (58 FR 43323), the following events have occurred.
On August 20, 1993, respondent Italmagnesio notified the Department
that it had decided to withdraw from participation in this
investigation and requested the return of all documents that it
submitted during the course of the investigation.
On August 25, 1993, we returned the proprietary versions of all
documents submitted by Italmagnesio during the investigation.
On August 23, 24, and 25, 1993, CBCC, petitioners, and Minasligas,
respectively, requested a public hearing.
The Department conducted verification of the cost and sales
responses of Minasligas and CBCC in Brazil from August 25 through
September 14, 1993.
Petitioners, CBCC, and Minasligas submitted case briefs on October
27, 1993, and rebuttal briefs on November 1, 1993.
On November 3, 1993, a public hearing was held.
Best Information Available
As stated in the ``Case History'' section of this notice,
Italmagnesio withdrew its responses prior to verification and stated
that it would not participate further in the investigation. Therefore,
Italmagnesio must be considered a non-cooperating party. As a non-
cooperating party, based on our past practice (see e.g., 58 FR 37215,
Final Determination of Sales At Less Than Value, Certain Cut-to-Length
Carbon Steel Plate from the United Kingdom, July 9, 1993), Italmagnesio
will be assigned the higher of the margins alleged in the petition or a
calculated margin for another company as best information available
(BIA). (See Comment 15)
Such or Similar Comparisons
We have determined that all the products covered by this
investigation constitute a single category of such or similar
merchandise. Where there were no sales of identical merchandise in the
home market to compare to U.S. sales, we compared similar merchandise
based on the following criteria: (1) The percentage range, by weight,
of silicon content; (2) grade; and (3) sieve size. (See Comment 2 with
regard to sieve size.)
Fair Value Comparisons
To determine whether sales of FeSi from Brazil to the United States
were made at less than fair value, we compared the United States price
(USP) to the foreign market value (FMV), as specified below.
United States Price
A. CBCC
We based USP on purchase price, in accordance with section 772(b)
of the Act, because the subject merchandise was sold to unrelated
purchasers in the United States prior to importation and exporter's
sales price was not indicated by other circumstances.
We calculated purchase price based on packed FOB port of
embarkation prices to unrelated customers. Because CBCC did not report
packing for bulk sales, we used information from the public version of
Minasligas' response for bulk packing. We made deductions where
appropriate for foreign inland freight (which also included foreign
inland insurance), foreign brokerage and handling, and warehousing.
We made an adjustment to USP for the taxes paid on the comparison
sales in Brazil. On October 7, 1993, the Court of International Trade
(CIT), in Federal-Mogul Corp. and The Torrington Co. v. United States,
Slip Op. 93-194 (CIT, October 7, 1993), rejected the Department's
methodology for calculating an addition to USP under section
772(d)(1)(C) of the Act to account for taxes that the exporting country
would have assessed on the merchandise had it been sold in the home
market. The CIT held that the addition to USP under section
772(d)(1)(C) of the Act should be the result of applying the foreign
market tax rate to the price of the United States merchandise at the
same point in the chain of commerce that the foreign market tax was
applied to foreign market sales. Federal-Mogul, Slip Op. 93-194 at 12.
The Department has changed its methodology in accordance with the
Federal-Mogul decision, and has applied this new methodology in making
the final determination in this investigation. From now on, the
Department will add to USP the result of multiplying the foreign market
tax rate by the price of the United States merchandise at the same
point in the chain of commerce that the foreign market tax was applied
to foreign market sales. The Department will also adjust the USP tax
adjustment and the amount of tax included in FMV. These adjustments
will deduct the portions of the foreign market tax and the USP tax
adjustment that are the result of expenses that are included in the
foreign market price used to calculate foreign market tax and are
included in the United States merchandise price used to calculate the
USP tax adjustment and that are later deducted to calculate FMV and
USP. These adjustments to the amount of the foreign market tax and the
USP tax adjustment are necessary to prevent the new methodology for
calculating the USP tax adjustment from creating antidumping duty
margins where no margins would exist if no taxes were levied upon
foreign market sales.
This margin creation effect is due to the fact that the bases for
calculating both the amount of tax included in the price of the foreign
market merchandise and the amount of the USP tax adjustment include
many expenses that are later deducted when calculating USP and FMV.
After these deductions are made, the amount of tax included in FMV and
the USP tax adjustment still reflects the amounts of these expenses.
Thus, a margin may be created that is not dependent upon a difference
between USP and FMV, but is the result of the price of the United
States merchandise containing more expenses than the price of the
foreign market merchandise. The Department's policy to avoid the margin
creation effect is in accordance with the United States Court of
Appeals' holding that the application of the USP tax adjustment under
section 772(d)(1)(C) of the Act should not create an antidumping duty
margin if pre-tax FMV does not exceed USP. Zenith Electronics Corp. v.
United States, 988 F.2d 1573, 1581 (Fed. Cir. 1993). In addition, the
CIT has specifically held that an adjustment should be made to mitigate
the impact of expenses that are deducted from FMV and USP upon the USP
tax adjustment and the amount of tax included in FMV. Daewoo
Electronics Co., Ltd. v. United States, 760 F. Supp. 200, 208 (CIT,
1991). However, the mechanics of the Department's adjustments to the
USP tax adjustment and the foreign market tax amount as described above
are not identical to those suggested in Daewoo.
In this investigation, there are four different taxes levied on
sales of the subject merchandise in the home market. The ICMS tax is a
regional tax, which varies depending upon the state in which the
purchase originates. The IPI tax is a fixed percentage rate tax of four
percent. Finally, the PIS and FINSOCIAL taxes are a fixed percentage
rate tax equalling 2.65 percent combined. CBCC used both a unit and a
gross basis to calculate the combined PIS and FINSOCIAL taxes within
various months of the POI. We recalculated these taxes on a unit basis,
where appropriate, which is the way CBCC calculated them. Because these
taxes are calculated on the same base price, we find them not to be
cascading. Thus, for each sale, we made only one tax adjustment which
equals the sum of the actual tax rates.
B. Minasligas
We based USP on purchase price, in accordance with section 772(b)
of the Act, because the subject merchandise was sold to unrelated
purchasers in the United States prior to importation and exporter's
sales price was not indicated by other circumstances.
We calculated purchase price based on packed FOB port of
embarkation prices to unrelated customers. We made deductions where
appropriate for foreign inland freight (which also included foreign
inland insurance) and foreign brokerage and handling.
We made an adjustment to USP for the taxes paid on the comparison
sale in Brazil. (See above description under ``A. CBCC'' for an
explanation of our new tax methodology as well as a description of the
specific taxes in this investigation.)
Foreign Market Value
In order to determine whether there were sufficient sales of FeSi
in the home market to serve as a viable basis for calculating FMV, we
compared the volume of home market sales of FeSi to the aggregate
volume of third country sales in accordance with section 773(a)(1)(B)
of the Act. For both CBCC and Minasligas, the volume of home market
sales was greater than five percent of the aggregate volume of third
country sales. Therefore, for both CBCC and Minasligas, we determined
that home market sales of FeSi constituted a viable basis for
calculating FMV, in accordance with 19 CFR 353.48(a).
In the petition and in subsequent filings, petitioners alleged that
home market sales were made at less than the cost of production (COP)
and that constructed value (CV) should be used to compute FMV. Based on
petitioners' allegations, which provided a reasonable basis to
``believe or suspect'' below cost sales (see section 773(b) of the
ACT), we initiated COP investigations. We examined respondents' cost
data at verification and analyzed this information for purposes of this
final determination.
We determine Brazil's economy to be hyperinflationary. Therefore,
in order to eliminate the distortive effects of inflation, consistent
with past practice (see, e.g., Final Determination of Sales at Less
Than Fair Value and Amended Antidumping Duty Order, Tubeless Steel Disc
Wheels from Brazil, 53 FR 34566, September 7, 1988), we calculated
separate weighted-average FMVs, COPs, and CVs for each month.
A. CBCC
In order to determine whether home market sales were above the COP,
we calculated the monthly COPs on the basis of CBCC's cost of
materials, fabrication, general expenses, and packing. We relied on the
COP data submitted by CBCC except in the following instances where the
costs were not appropriately quantified or valued. Specifically, we:
1. Revised general and administrative (G&A) expenses by calculating
them as a percentage of cost of goods sold as reported on CBCC's 1992
financial statements (see Comment 4);
2. Added an amount for the G&A expenses of CBCC's parent company
(see Comment 4);
3. Revised the interest expense computation using the financial
statements of CBCC's parent, Solvay do Brasil (see Comment 3);
4. Included IPI and ICMS taxes as part of reported material costs
in COP (see Comment 5);
5. Recalculated the cost of CBCC's own production of charcoal based
upon BIA (see Comment 6);
6. Recalculated depreciation costs for Furnace 8 based upon a 10
year useful life (see Comment 7);
7. Corrected an error in the October 1992 calculation of
electricity cost (see Comment 9);
8. Added packing expenses in COP for the home market and United
States, respectively.
We compared individual home market prices with the monthly COPs. We
tested the home market prices on a sieve-size-specific basis and found,
for all sieve sizes, that between 10 and 90 percent of sales in the
home market were made at prices above the COP. Therefore, we
disregarded the below-cost sales, if those sales were made over an
extended period of time. CBCC did not provide any information in its
responses to indicate that its below cost sales were made at prices
which would permit recovery of all costs within a reasonable period of
time in the normal course of trade. In order to determine whether
below-cost sales were made over an extended period of time, we
performed the following analysis on a product-specific basis: (1) If
respondent sold a product in only one month of the POI and there were
sales in that month below the COP, or (2) if respondent sold a product
during two months or more of the POI and there were sales below the COP
during two or more of those months, then below-cost sales were
considered to have been made over an extended period of time. All of
CBCC's sales were made over an extended period of time.
For CBCC, we based FMV on home market prices. However, for one U.S.
sale, although there were comparable home market sales in the same
month, we were unable to make a difference-in-merchandise (DIFMER)
adjustment. This is because the U.S. product was produced in a month
different than the home market products and in hyperinflationary
economies, we limit such adjustments to products produced and sold in
the same month. In that instance, we used CV as FMV.
We calculated CV in accordance with section 773(e)(1) of the Act.
The monthly CV includes materials, fabrication, general expenses,
profit and packing. We made all adjustments described in the COP
section (except for the inclusion of ICMS and IPI taxes in material
costs) in calculating the CV. We used the following as the basis for
calculating CV:
(1) CBCC's actual general expenses because they exceed the
statutory ten percent minimum of materials and fabrication, in
accordance with section 773(e)(1)(B)(i) of the Act;
(2) the statutory minimum profit of eight percent, in accordance
with section 773(e)(1)(B)(ii) of the Act, as CBCC's profit was less
than eight percent of the sum of general expenses and the cost of
manufacture; and
(3) we calculated an offset to interest expense to avoid double
counting the portion of such expense attributable to the imputed credit
and inventory carrying costs which were already included in the
selling, general and administrative expenses.
We made circumstance-of-sale adjustments for differences in credit
expenses, in accordance with 19 CFR 353.56(a). Finally, we added U.S.
packing expenses to CV.
For price-to-price comparisons, we based FMV on ex-factory prices,
inclusive of packing, to unrelated customers. We deducted foreign
inland freight from FMV. We made circumstance-of-sale adjustments,
where appropriate, for differences in credit expenses, in accordance
with 19 CFR 353.56(a). Because the home market credit figure reported
by CBCC is actually interest revenue, we imputed credit expense and
then applied the interest revenue as an offset against the imputed
expense. We also used the actual paydates found at verification in our
credit expense calculation. For those sales which we did not examine at
verification, we added the average difference between the paydate
reported and the actual paydate from the verified sales.
For FeSi sales packed in bags, we deducted home market packing
costs and added U.S. packing costs. Because CBCC did not report packing
for bulk sales, we used information on bulk packing costs from the
public version of Minasligas' response for these sales.
We included in the FMV the amount of taxes collected in the home
market. We also calculated the amount of the tax that was due solely to
the inclusion of price deductions in the original tax base (i.e., the
sum of any amounts that were deducted from the tax base). This amount
was deducted from the FMV after all other additions and deductions had
been made. By making the additional tax adjustments, we avoid a
distortion that would create a dumping margin even when pre-tax dumping
is zero.
B. Minasligas
In order to determine whether home market sales were above the COP,
we calculated the monthly COPs on the basis of Minasligas' cost of
materials, fabrication, general expenses, and packing. We relied on the
COP data submitted by Minasligas except in the following instances
where the costs were not appropriately quantified or valued.
Specifically, we:
1. Revised G&A expenses by calculating them on an annual basis as a
percentage of cost of goods sold as reported in Minasligas' 1992
financial statements (see Comment 4);
2. Revised interest expenses to include finance expenses of Delp
(Minasligas' parent company), and disallowed a portion of the claimed
interest income offset (see Comment 3);
3. Included IPI and ICMS taxes as part of reported material costs
in COP (see Comment 5);
4. Revised the labor and overhead allocation methodology to reflect
production quantity (see Comment 14);
5. Adjusted the inventory holding gains and losses to account for
revisions in the reported costs (see Comment 10);
6. Disallowed the claimed differences in cost between high purity
and standard grade FeSi and used the ``all kinds'' reported costs;
7. Added packing expenses in COP for the home market and United
States, respectively.
We compared individual home market prices with the monthly COPs. We
tested the home market prices on a sieve-size-specific basis and found,
for certain sieve sizes, that between 10 and 90 percent of sales of
each in the home market were made at prices above the COP. Therefore,
we disregarded the below-cost sales for those sieve sizes, if those
sales were made over an extended period of time. Minasligas did not
provide any information in its responses to indicate that its below
cost sales were made at prices which would permit recovery of all costs
within a reasonable period of time in the normal course of trade. In
order to determine whether below-cost sales were made over an extended
period of time, we performed the following analysis on a product-
specific basis: (1) If respondent sold a product in only one month of
the POI and there were sales in that month below the COP, or (2) if
respondent sold a product during two months or more of the POI and
there were sales below the COP during two or more of those months, then
below-cost sales were considered to have been made over an extended
period of time. All of Minasligas' below cost sales were made over an
extended period of time.
For Minasligas, we based FMV on home market prices. We calculated
FMV based on ex-factory prices, inclusive of packing, to unrelated
customers. We deducted foreign inland freight from FMV. We made
circumstance-of-sale adjustments, where appropriate, for differences in
credit expenses, in accordance with 19 CFR 353.56(a). Because the home
market credit figure reported by Minasligas is actually interest
revenue, we imputed credit expense and then used the interest revenue
as an offset against the imputed expense. We imputed U.S. credit
because Minasligas did not report this expense. We used the ``First
Payment'' date reported by Minasligas and the monthly interest rates
based on the ``Taxa Referential'' which is the Brazilian Government's
referential index for short-term borrowings. We also made circumstance-
of-sale adjustments, where appropriate, for direct selling expenses
(finance charges), warehousing, and quality control expenses. We
reallocated a portion of direct selling expenses to foreign brokerage
and handling based on findings at verification. Finally, we deducted
home market packing costs and added U.S. packing costs.
We included in FMV the amount of taxes collected in the home
market. We also calculated the amount of the tax that was due solely to
the inclusion of price deductions in the original tax base (i.e., the
sum of any adjustments that were deducted from the tax base). This
amount was deducted from the FMV after all other additions and
deductions had been made. By making the additional tax adjustments, we
avoid a distortion that would create a dumping margin even when pre-tax
dumping is zero.
Critical Circumstances
Petitioners alleged that critical circumstances exist with respect
to imports of FeSi from Brazil. Section 735(a)(3) of the Act provides
that critical circumstances exist if we determine that:
(A) (i) There is a history of dumping in the United States or
elsewhere of the class or kind of merchandise which is the subject of
the investigation, or
(ii) The person by whom, or for whose account, the merchandise was
imported knew or should have known that the exporter was selling the
merchandise which is the subject of the investigation at less than its
fair value, and,
(B) There have been massive imports of the class or kind of
merchandise which is the subject of the investigation over a relatively
short period.
Regarding (A)(i) above, we normally consider whether there has been
an antidumping order in the United States or elsewhere on the subject
merchandise in determining whether there is a history of dumping.
Regarding (A)(ii) above, we normally consider margins of 25 percent or
more for purchase price comparisons and 15 percent or more for
exporter's sales price comparisons as sufficient to impute knowledge of
dumping.
Pursuant to section 735(a)(3)(B), we generally consider the
following factors in determining whether imports have been massive over
a short period of time: (1) The volume and value of the imports; (2)
seasonal trends (if applicable); and (3) the share of domestic
consumption accounted for by imports. If imports during the period
immediately following the filing of a petition increase by at least 15
percent over imports during a comparable period immediately preceding
the filing of a petition, we normally consider them massive.
Since the calculated dumping margins for CBCC and Minasligas are
not in excess of 25 percent, we cannot impute knowledge under section
735(a)(3)(A)(ii) of the Act. (See, e.g., Final Determination of Sales
At Less Than Fair Value; Tapered Roller Bearings and Parts Thereof,
Finished or Unfinished, from Italy, 52 FR 24198, June 29, 1987.)
Petitioners provided information regarding respondent's history of
dumping in a third country. Therefore, we examined whether imports have
been massive. Based on our analysis of verified company specific import
data, we determined that imports have not been massive over a
relatively short period of time for CBCC and Minasligas. Accordingly,
we determine that critical circumstances do not exist for CBCC and
Minasligas. However, for Italmagnesio, a non-cooperative respondent,
based on BIA we determine that critical circumstances exist. In the
case of Italmagnesio, the margin in excess of 25 percent is high enough
to impute knowledge of dumping and, as BIA, we concluded that imports
have been massive over a relatively short period of time.
Because we found that critical circumstances do not exist with
respect to all cooperative respondents, we also find that critical
circumstances do not exist with respect to all other exporters and
producers of the subject merchandise from Brazil, except for
Italmagnesio.
Verification
As provided in section 776(b) of the Act, we conducted verification
of the information provided by CBCC and Minasligas by using standard
verification procedures, including the examination of relevant sales
and financial records, and selection of original source documentation
containing relevant information.
Currency Conversion
No certified rates of exchange, as furnished by the Federal Reserve
Bank of New York, were available for the POI. In place of the official
certified rates, we used the daily official exchange rates for the
Brazilian currency published by the Central Bank of Brazil. In the
instances when a post-POI exchange rate was required, we used a monthly
average exchange rate from International Monetary Fund's International
Financial Statistics.
In hyperinflationary economies, the Department normally converts
movement charges for the U.S. sales on the date these charges become
payable. Where we did not have the exact payment date for a charge, we
converted charges for U.S. sales on the date of shipment, the closest
approximation to the date the charges became payable. For two of CBCC's
U.S. sales, it was necessary to convert the bulk packing charges on the
date of sale as we did not have a bulk packing rate in the month of
shipment for those U.S. sales. Thus, for these two sales we converted
the packing charges in the same month in which the U.S. sales occurred.
Interested Party Comments
Comment 1: Petitioners argue that, based on the facts now available
to the Department, the dumping margins established in the preliminary
determination are inadequate to offset the actual dumping margin of
Brazilian FeSi producers. In addition, petitioners believe that at
verification the Department confirmed the existence of major,
continuing deficiencies in respondents' information. Accordingly,
petitioners contend that the Department should assign the highest, most
adverse margin based on noncooperative BIA to both CBCC and Minasligas.
DOC Position: We disagree with petitioners. CBCC and Minasligas'
mistakes, found during the course of this investigation, when taken as
a whole, do not represent a verification failure and do not support a
claim of respondents' noncooperation. The minor errors in calculation
or discrepancies with regard to adoption of certain methodological
premises do not merit the use of BIA. Therefore, we have followed our
practice of correcting errors found at verification as long as those
errors are minor and do not exhibit a pattern of systemic misstatement
of fact. Thus, we are able to use the data submitted by CBCC and
Minasligas, corrected for errors noted at verification, in our
calculations.
Comment 2: Petitioners argue that the Department should use the
highest, most adverse noncooperative BIA rate for CBCC and Minasligas
since they both repeatedly failed to provide the Department with the
accurate sieve size and silicon content of the FeSi they sold.
Petitioners maintain that CBCC's August 17, 1993, letter contained
information about silicon content and sieve size known to be
inaccurate. Petitioners contend that accurate information was clearly
available to CBCC and the fact that it was not provided prevented the
Department from making such or similar comparisons in the final
determination, as required by the Act. Similarly, petitioners note that
Minasligas, in its August 25, 1993, revised product concordance, failed
to provide the exact silicon content and sieve size of its home market
sales.
CBCC believes that the Department incorrectly based its preliminary
determination on BIA because of the alleged failure by CBCC to provide
a proper product concordance. CBCC states that it cannot fabricate a
product concordance to the level of sieve size, which was requested by
the Department, because there is no difference in product between sieve
sizes. CBCC argues that the Department verified that sieve size is
irrelevant in terms of the cost and the price and, thus, any DIFMER
would be zero. CBCC maintains that based on the information submitted
and the production processes observed at verification, the Department
should use CBCC's information as the basis for the final determination.
Similarly, Minasligas maintains that sieve size does not impact
cost or price of FeSi and should not be considered a factor for product
comparison purposes. With respect to providing information on exact
silicon content, Minasligas contends that the ASTM standard
specifications for FeSi 75 percent under grade C provide for a product
containing between 74 percent and 79 percent of silicon. Minasligas
argues that since all of its FeSi sales are of FeSi 75 percent the
exact silicon content of the product within this range is irrelevant.
DOC Position: We agree with respondents. We determine that
Minasligas provided a unique code for each sieve size for each sale
during the POI, in accordance with directions in Appendix V. We used
Minasligas' product matching method for purposes of margin calculation;
however, we rematched in a few instances where we disagreed with their
selection. We based matching on home market sales with sieve size
ranges which were closest to the sieve size range of the U.S. product.
We also determine that CBCC reported sieve sizes in accordance with
Appendix V. The sieve size ranges reported by CBCC were broader than
those reported by Minasligas and were broader than the ranges observed
on CBCC's individual home market sales. Nevertheless, these ranges do
allow us to match within the closest sieve size range, as specified in
Appendix V. Moreover, these broad ranges are consistent with CBCC's
selling practices. CBCC stated on the record that it fills customer
orders with the broadest range of possible sieve sizes. Therefore, we
accepted CBCC's revised coding system, and matched home market sales
with all possible sieve sizes, including those that may extend beyond
the sieve size range of the U.S. product because this corresponds to
CBCC's selling practices. We excluded from FMV only those home market
sales where the sieve size ranges are entirely outside the sieve size
range of the U.S. sale in question. (See Concurrence Memorandum dated
December 29, 1993.)
In addition, we also agree with respondents that reported silicon
content ranges, within acceptable ASTM specifications, are adequate.
Comment 3: Petitioners claim that both CBCC and Minasligas failed
to report their respective interest expenses on a consolidated basis
for the purposes of calculating COP in accordance with Department
practice. Petitioners argue that CBCC's refusal to provide this
information prevented the Department from verifying these expenses.
Accordingly, petitioners state that the Department should use adverse,
``noncooperative BIA'' in calculating interest expense for CBCC.
However, in the event that the Department does not use ``noncooperative
BIA,'' petitioners suggest that the Department use Solvay do Brasil's
audited financial statements to calculate interest expense for the
purposes of calculating CBCC's COP and CV. Similarly, petitioners
contend that the Department should allocate interest expense to
Minasligas' COP based on Delp's (Minasligas' parent company) 1992
audited financial statements as a percentage of cost of goods sold,
without allowance for a short-term interest income offset.
CBCC argues that the Department should use its non-consolidated
income statement, rather than the corporate consolidated figure, to
compute net interest expense. CBCC claims that the advances of funds
from subsidiary to parent were the reverse of those normally seen by
the Department and were not ``interest free''. CBCC further argues that
without CBCC, Solvay do Brasil would have had to borrow funds in the
commercial market. Thus, CBCC suggests that the Department should
increase CBCC's financial receipts by an imputed interest on the
interest free loans that CBCC made to its parent. With regard to
petitioners' allegation that CBCC refused to provide the Department
with Solvay do Brasil's financial statement, CBCC explains that the
Department requested an additional copy of the translated financial
statement, previously submitted to the Department on June 10, 1993,
which the company was unable to provide at verification.
Minasligas contends that its financial statements are not
consolidated with Delp's statements. Minasligas maintains that there is
no borrowing relationship between Delp and Minasligas, and further,
there is no evidence of control by Delp over borrowings by Minasligas.
Minasligas, therefore, believes it is inappropriate to substitute
Delp's interest expenses for that of Minasligas. Minasligas asserts
that it correctly reduced its submitted unconsolidated interest
expenses by various forms of short-term financial income, including
capital gains, exchange rate gains, discounts, and monetary correction.
DOC Position: We agree with petitioners that CBCC and Minasligas
should report interest expense on a consolidated basis. The
Department's position is that the cost of capital is fungible,
therefore, calculating interest expense based on consolidated
statements is the most appropriate methodology.
As discussed in the cost verification report of CBCC, we noted that
CBCC and Solvay do Brasil rely on intercompany interest-free borrowing
to meet their working capital requirements. In addition, in order to
extinguish its outstanding debt, CBCC issued new shares of capital
stock to its parent company. After establishing at verification that
CBCC and Solvay do Brasil have significant financial transactions with
each other, we requested information documenting financial expense at
the Solvay do Brasil level. Company officials refused to provide any
data. Therefore, we have based financial expense for CBCC using BIA. As
BIA, we used information from Solvay do Brasil's financial statements
(exhibit B; June 10, 1993, questionnaire response). This percentage was
then applied to each month's COM.
In the case of Minasligas, Delp does not consolidate its accounts
with Minasligas. In addition, because there are no significant
intercompany transactions between the two companies, we combined the
financial expenses of the two companies, effectively creating
consolidated accounts. Regarding the offset claimed by Minasligas, the
Department only allows income generated from investments of working
capital which the company documents as short-term in nature. Minasligas
was able to substantiate only a portion of the investments to be short-
term; consequently, we have allowed only the documented portion of
interest income as an offset. We did not allow an offset to Minasligas'
parent, Delp, for interest expense because the information required to
substantiate such an adjustment is not contained in the record of this
investigation.
For both companies, in order to avoid overstating financing
charges, we applied the interest expense ratio to each month's COM
calculated on a historical basis rather than amounts computed under the
replacement cost basis.
Comment 4: Petitioners maintain that CBCC and Minasligas failed to
follow the Department's established practice for allocating G&A
expenses. Petitioners make the same allegation with regard to CBCC's
selling expenses. Petitioners claim that G&A expenses are period costs
that should be allocated based on the ratio of total annual G&A
expenses over total annual costs of goods sold. Selling expenses should
be allocated similarly. However, petitioners state that CBCC allocated
G&A and selling expenses to individual products, using the ratio of
each separate product's cost of goods sold. Minasligas allocated POI
G&A expenses on a monthly basis. For purposes of the final
determination, petitioners believe that the Department should
reallocate these expenses following its established practice.
CBCC argues that the Department should not use the ratio of
expenses to cost of goods sold as an estimate of G&A expenses. CBCC
believes that the monthly expenses accurately reflect, on a replacement
cost basis, the expenses for the company in that month and are the most
appropriate figures to use. CBCC claims that the petitioners are urging
the Department to use a methodology that the Court of International
Trade specifically invalidated as susceptible to overstating the
effects of inflation.
Minasligas agrees that G&A expenses are period costs, but maintains
that an annual calculation based on cost of sales is problematic
because the annual G&A expense and the annual cost of sales are
conglomerations of monthly expenses which have not been adjusted for
inflation. Minasligas believes the Department should calculate G&A
rates based on monthly averages or a simple average G&A rate.
DOC Position: We agree with petitioners in part. G&A expenses are
period expenses which are normally measured over a fiscal year. As
such, the Department calculates G&A on an annual basis. To calculate
G&A for a lesser period may exclude certain expenses, which is
distortive. Therefore, we recalculated G&A expenses on an annual
historical basis for both companies and, in order to avoid overstating
G&A expenses and neutralize hyperinflationary effects, we applied the
G&A ratio to each month's COM calculated on a historical basis. We also
revised CBCC's reported G&A to include a portion of Solvay do Brasil's
G&A, which CBCC had failed to include in its reported costs. Moreover,
we calculated CBCC's selling expense portion of SG&A based on sales of
the same class or kind of merchandise according to our normal practice.
Comment 5: Petitioners contend that the Department should include
ICMS and IPI taxes in CBCC's and Minasligas' reported materials costs
in applying the Department's sales-below-cost test. Petitioners state
that Department practice is to perform the sales-below-cost test on a
tax-inclusive basis, with the COP and home market prices containing the
same absolute amount of taxes. With regard to CV, petitioners contend
that the Department has previously determined that ICMS and other
domestic taxes are not remitted or refunded upon exportation and
consequently have to be included in CV.
CBCC submits that the Department should not include the ICMS and
IPI taxes in its COP and CV calculations. CBCC states that the
Department reviewed CBCC's records at verification showing that CBCC's
payments of ICMS offset any amount owed by virtue of its receipts of
ICMS. Thus, CBCC claims that the ``cost of materials'' does not include
any ICMS or IPI value, because CBCC always receives a tax credit for
these payments.
Minasligas argues that in determining whether home market sales are
above the cost of production, the Department must either include ICMS
and IPI in the cost of production and in the sales price to the
domestic market or exclude them from both sides to avoid double
counting. Minasligas further argues that these taxes should not be
included in calculations of CV because they are offset against the
amounts collected from the domestic market sales.
DOC Position: We agree with petitioners in part. For our test of
home market sales below cost we have included the same amount of
domestic taxes in the COP and the domestic sales prices. However, when
using CV as a surrogate for home market prices we must determine if in
fact the entity under investigation is able to recover all of the taxes
paid on inputs (raw materials) from its domestic sales of subject
merchandise. If domestic sales of subject merchandise fully recover all
of the domestic taxes paid on inputs, then these taxes would
appropriately be excluded from the margin analysis. However, if the
producer is not able to recover all input taxes from its sales of
subject merchandise, then these actual costs must be reflected in the
CV. (See Camargo Correa Metais, S.A., v. United States, Slip Op. 93-
163, p. 19 (August 13, 1993).
We have determined that CBCC's domestic sales of subject
merchandise fully recover all input taxes incurred to produce the
subject merchandise sold in both the domestic and export markets. We
have excluded the domestic tax amounts from CV because the taxes paid
are offset against the amounts which are collected on domestic sales
which are rebated to the government.
Comment 6: Petitioners claim that CBCC did not accurately report
its charcoal replacement costs. They further argue that CBCC did not
provide the Department with the additional documentation requested
regarding the estimated harvest of wood and other assumptions used in
the calculation of the amortization costs for charcoal production.
Petitioners argue that by not providing this information, CBCC
prevented the Department from verifying the accuracy of the cost data
and CBCC did not comply with Department practice in reporting
replacement costs for company-produced charcoal. Therefore, petitioners
state that the Department should assign a noncooperative BIA rate to
CBCC. Alternatively, petitioners suggest that the Department adjust
CBCC's reported cost for company-produced charcoal upward to the level
of CBCC's cost for purchasing charcoal from unrelated suppliers.
CBCC argues that since charcoal accounts for less than three
percent of the cost of production of FeSi, use of BIA because of the
difficulty encountered with verifying the accuracy of this factor of
production would be totally inappropriate. CBCC maintains that should
the Department make any adjustments to the charcoal costs it should
only adjust the figures with the information gathered at verification
rather than disregard the entire response.
DOC Position: We agree with petitioners that we should adjust
CBCC's charcoal replacement costs; however, we disagree that CBCC was
noncooperative and should receive a margin based solely upon BIA. We
discovered errors made by CBCC in calculating its cost of producing
charcoal, a primary raw material, used in the production of FeSi. CBCC
substantially understated its cost of producing charcoal by
inaccurately recording the costs associated with their wood forests
which provide the raw material needed to produce charcoal. Therefore,
we have recalculated the cost of CBCC's production of charcoal. As
suggested by petitioners, we relied upon the actual weighted-average
monthly cost CBCC was charged by unrelated vendors.
Comment 7: Petitioners claim that CBCC incorrectly accelerated the
depreciation on a particular furnace by five years. The result was a
disproportionate allocation of costs to products manufactured during
the first five years the furnace was put into service, as opposed to
the second five years, when no depreciation was reported. Petitioners
contend that the accelerated depreciation for this furnace was an
abnormal event since CBCC returned to its normal ten-year useful life
for furnace depreciation following the period of accelerated
depreciation. Petitioners further argue that the Department has
explicitly rejected the accelerated depreciation of assets where such
accelerated depreciation was not based on the useful life of the
assets. Accordingly, petitioners believe that the depreciation charges
for this furnace should be recalculated to reflect the company's normal
ten-year useful life for furnace depreciation.
DOC Position: We agree with petitioners. We have recalculated
depreciation expense for this furnace to reflect the amounts which
would have been recorded based upon CBCC's normal ten year amortization
period since it is CBCC's normal practice to employ a ten year useful
life in calculating furnace depreciation charges.
Comment 8: Petitioners state that CBCC failed to accurately
allocate furnace depreciation to FeSi based on the percentage of total
furnace capacity devoted to FeSi production. Accordingly, for purposes
of the final determination, petitioners contend that the Department
should increase depreciation allocated to FeSi production for each
month of the POI.
CBCC contends that it would be improper for the Department to
allocate all of CBCC's depreciation expenses on all furnaces to FeSi
production. Although theoretically, any one furnace could be used to
produce any of the products that CBCC sells, this does not make the
furnaces fungible. The Department's determination should not be based
on what could theoretically be produced in a furnace, but rather what
was actually produced in each furnace. Regardless, if the Department
considers the furnaces fungible, this would result in a lowering of
CBCC's depreciation expense as furnaces one through six are fully
depreciated.
DOC Position: We agree with CBCC. Its methodology of matching
furnace depreciation with the product actually produced in each furnace
is an acceptable methodology. Accordingly, no adjustment has been made
for the final determination.
Comment 9: Petitioners claim that at verification CBCC's reported
consumption and cost of electricity attributed to FeSi were understated
for October 1992. Therefore, petitioners believe that the Department
should increase these costs for each month of the POI.
CBCC maintains that the Department verified that only the month of
October contained an error of 5.7 percent with respect to the
electricity consumption and cost; such error was incurred in
transferring expenses from one cost report to another. Thus, CBCC
concedes only that the Department should adjust its October, 1992,
electricity consumption and cost by 5.7 percent, rather than making
monthly adjustments.
DOC Position: We agree with CBCC. At verification we established
that this was an isolated error and not a methodological problem.
Accordingly, we have corrected the reported electrical consumption and
cost for October 1992, only.
Comment 10: Petitioners state that CBCC failed to properly
calculate inventory holding gains/losses. Petitioners argue that CBCC
reported its input and finished product inventories on a first in first
out (FIFO) basis, which is contrary to Department practice.
Furthermore, petitioners claim that CBCC provided no inventory holding
gain/loss calculations for iron ore. Accordingly, petitioners believe
that the reported values cannot be relied on for purposes of the final
determination and the Department should apply BIA.
CBCC maintains that it provided inventory gain/loss information
according to the Department's methodology used in the Final
Determination Of Sales At Less Than Fair Value, Silicon Metal from
Brazil, 56 FR 26977, June 12, 1991, where the Department rejected
CBCC's cost accounting method used in the normal course of business,
stating that it did not properly reflect the effects of inflation and
used a FIFO basis to make the calculation.
With respect to the inventory holding gain/loss calculation for
iron ore, the Department verified that CBCC maintains no more than its
immediate requirements in inventory. Thus, CBCC submitted no inventory
holding gain/loss information on this raw material because there is
none. CBCC's monthly purchase of iron ore is consumed during that
month.
DOC Position: We agree with respondent. In reporting on a FIFO
basis, CBCC followed prescribed Department practice. The Department
verified that CBCC had no gain or loss on the iron ore because it
completely consumed its purchases in the same month as production.
Comment 11: Petitioners argue that Minasligas' U.S. sales of slag
during the POI are within the scope of this investigation. Petitioners
base their argument on the petition's scope language, which they claim
does not specifically exclude slag of the chemical composition that
Minasligas sold to the United States during the POI. Petitioners
further argue that even if the slag were not covered by the product
description in the petition, it is within the scope under the criteria
outlined in Diversified Products Corporation v. U.S., 572 F. Supp. 883
(CIT 1983) (``Diversified Products'') criteria.
Conversely, Minasligas states that its U.S. sales of slag are not
covered by the scope of this investigation. Minasligas bases its
argument on chemical analysis certificates provided at verification,
which list chemical compositions which Minasligas claims are sufficient
to exclude the slag sales from the scope of the investigation.
Specifically, Minasligas argues that, according to the petition, the
high levels of oxygen and calcium oxide present in these slag sales
places them outside the scope of the investigation.
DOC Position: We agree that ferrosilicon in the form of slag can be
included within the scope of investigation if it generally meets the
chemical content definition contained in the scope of this
investigation and if it is capable of being used as FeSi. (See Scope of
Investigation.)
With regard to the two U.S. sales of FeSi slag made by Minasligas,
we determine that these sales are within the scope of the investigation
based on information on the record indicating that the slag in question
can be used as FeSi. Since we do not have actual price or cost data for
these two sales, we will assign an average of all margins calculated
for Minasligas' sales for which we have price and cost data.
Comment 12: Petitioners argue that Minasligas failed to provide
complete cost information requested by the Department in conjunction
with a previously unreported sale. Thus, petitioners argue that the
Department should assign a ``noncooperative'' BIA margin for that U.S.
sale.
Minasligas maintains that it provided all necessary information
relating to this sale.
DOC Position: Since we used a price-to-price comparison for this
sale, petitioners' points are moot.
Comment 13: Minasligas contends that the sale dates for certain
U.S. sales falls outside the POI. Thus, Minasligas claims these sales
should be excluded from this investigation.
DOC Position: We agree with respondent. Based on the sale dates
reported and verified, these sales are outside the POI and are not
included in our margin calculation.
Comment 14: Petitioners claim that Minasligas inappropriately
allocated its labor and overhead costs between subject and non-subject
merchandise based on number of furnaces, rather than actual production
during the POI. Therefore, petitioners request that the Department
adjust Minasligas' submitted costs accordingly.
DOC Position: We agree with petitioners that number of furnaces is
not an adequate basis for allocating labor or other fabrication costs.
Number of furnaces is an arbitrary measure, which does not necessarily
reflect the actual level of labor and overhead expended in the
production of the subject merchandise. In the instant case, output tons
is a more accurate allocation basis. Therefore, we have revised the
submitted costs to reflect an allocation based on actual production
units.
Comment 15: Petitioners argue that Italmagnesio failed to cooperate
with the Department by withdrawing from the investigation and should
receive the highest, most adverse BIA rate on the record. Petitioners
further argue that BIA includes the rates alleged in the petition, as
corrected for clerical errors, and the rates alleged in petitioners'
amended allegation of sales below cost for Italmagnesio. Petitioners
disagree with the Department's decision in the preliminary
determination which rejected the revised margin calculations in
petitioners' amended sales-below-cost allegation as a source of BIA;
the Department rejected the revisions on the grounds that petitioners
based the revisions on information submitted by Italmagnesio.
Petitioners state that their amended allegation relied not on financial
statements submitted by Italmagnesio but on identical financial
statements that petitioners had obtained independently prior to the
date of Italmagnesio's submission of the information. In addition,
petitioners assert that Italmagnesio withdrew from the investigation
after the Department indicated in the preliminary determination that it
would not use the higher rates in petitioners' amended allegation as
BIA. Therefore, petitioners maintain that not using the amended
allegation as BIA would allow Italmagnesio to control the outcome of
the investigation.
DOC Position: For this final determination, we assigned
Italmagnesio a margin in accordance with the two-tiered BIA methodology
under which the Department imposes the most adverse rate upon those
respondents who refuse to cooperate or otherwise significantly impede
the proceeding. In our BIA margin analysis, we utilized information
contained in petitioners' amended COP allegation for Italmagnesio.
Although Department policy does not allow petitioners to use
questionnaire responses in a piece-meal manner in order to increase
margins in the petition that may later be used as BIA, our analysis
revealed that petitioners had access to Italmagnesio's financial
statements prior to the submission of this information on the record by
Italmagnesio.
Continuation of Suspension of Liquidation
In accordance with section 735(c)(4)(A) of the Act, we are
directing the U.S. Customs Service to continue to retroactively suspend
liquidation of all entries of FeSi from Italmagnesio. Retroactive
suspension applies to entries of FeSi, that are entered, or withdrawn
from warehouse, for consumption on or after May 18, 1993, which is the
date 90 days prior to the date of the publication of our preliminary
determination in the Federal Register. We are also directing the
Customs Service to terminate the retroactive suspension of liquidation
with regard to CBCC, and ``All Other Exporters'' entered, or withdrawn
from warehouse, for consumption between May 18, 1993, and August 16,
1993, which is the date of our preliminary determination, and to
release any bond or other security, and refund any cash deposit with
respect to these entries during that period in accordance with section
735(c)(3). For CBCC and ``All Other Exporters'', we are directing the
Customs Service to suspend liquidation of all entries of FeSi from
Brazil, that are entered, or withdrawn from warehouse, for consumption
on or after August 16, 1993. Finally, since the Department finds that
no final dumping margin exists with respect to Minasligas, we are
directing the Customs Service to terminate the suspension of
liquidation for entries of FeSi from Minasligas, and to release any
bond or other security, and refund any cash deposit with respect to
these entries from Minasligas in accordance with section 735(c)(2) of
the statute. However, if the Department has reasonable cause to believe
or suspect at any time during the existence of the antidumping duty
order that Minasligas has sold or is likely to sell the subject
merchandise to the United States at less than its foreign market value,
then the Department may institute an administrative review of
Minasligas under section 751 of the Tariff Act of 1930, as amended.
The Customs Service shall require a cash deposit or posting of a
bond equal to the estimated margin amount by which the FMV of the
subject merchandise exceeds the USP as shown below.
------------------------------------------------------------------------
Critical
Manufacturer/producer/exporter Margin circumstances
percent
------------------------------------------------------------------------
Italmagnesio S.A. Industria e Comercio........ 88.86 Yes.
Companhia Brasileira Carbureto de Calcio...... 2.23 No.
Companhia Ferroligas Minas Gerais............. 0.00 No.
All others.................................... 45.55 No.
------------------------------------------------------------------------
ITC Notification
In accordance with section 735(d) of the Act, we have notified the
ITC of our determination.
Notification to Interested Parties
This notice also serves as the only reminder to parties subject to
administrative protective order (APO) in this investigation of their
responsibility covering the return or destruction of proprietary
information disclosed under APO in accordance with 19 CFR 353.34(d).
Failure to comply is a violation of the APO.
This determination is published pursuant to section 735(d) of the
Act (19 U.S.C. 1673d(d)) and 19 CFR 353.20(b)(2).
Dated: December 29, 1993.
Barbara R. Stafford,
Acting Assistant Secretary for Import Administration.
[FR Doc. 94-281 Filed 1-5-94; 8:45 am]
BILLING CODE 3510-DS-P
