01-28225. Notice of Preliminary Determination of Sales at Less Than Fair Value; Silicomanganese From Venezuela

AGENCY:

Import Administration, International Trade Administration, Department of Commerce.

EFFECTIVE DATE:

November 9, 2001.

FOR FURTHER INFORMATION CONTACT:

Deborah Scott at [phone] or Robert James at [phone]; Antidumping and Countervailing Duty Enforcement Group III, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW., Washington, DC 20230.

The Applicable Statute and Regulations

Unless otherwise indicated, all citations to the statute are references to the provisions effective January 1, 1995, the effective date of the amendments made to the Tariff Act of 1930 (the Tariff Act) by the Uruguay Round Agreements Act (URAA). In addition, unless otherwise indicated, all citations to the Department of Commerce (the Department) regulations are to the regulations at 19 CFR part 351 (April 2000).

Preliminary Determination

We preliminarily determine that silicomanganese from Venezuela is being sold, or is likely to be sold, in the United States at less than fair value (LTFV), as provided in section 733 of the Tariff Act. The estimated margins of sales at LTFV are shown in the “Suspension of Liquidation” section of this notice.

Case History

On April 26, 2001 the Department initiated antidumping investigations of silicomanganese from Kazakhstan, India, and Venezuela. See Initiation of Antidumping Duty Investigations: Silicomanganese from Kazakhstan, India, and Venezuela, 66 FR 22209 (May 3, 2001) (Initiation Notice). Since the initiation of these investigations the following events have occurred.

In its initiation notice the Department set aside a period for all interested parties to raise issues regarding product coverage. See Initiation Notice at 22209. On May 17, 2001, we received comments from Eramet Marietta, Inc. and the Paper, Allied-Industrial, Chemical and Energy Workers International Union, Local 5-0639 (collectively, the petitioners).

On May 9, 2001 the Department issued a letter to interested parties in all of the concurrent silicomanganese antidumping investigations, providing an opportunity to comment on the Department's proposed model matching characteristics and hierarchy. On May 16, 2001, petitioners submitted a letter suggesting certain modifications be made to the Department's proposed physical criteria which would be used for matching purposes.

On May 21, 2001, the United States International Trade Commission (ITC) notified the Department that it preliminarily determined there is a reasonable indication that an industry in the United States is materially injured by reason of imports of the subject merchandise from India, Kazakhstan, and Venezuela. See Silicomanganese from India, Kazakhstan, and Venezuela, 66 FR 31258 (June 11, 2001).

On May 23, 2001, the Department issued an antidumping questionnaire to Hornos Electricos de Venezuela, S.A. (HEVENSA), the sole producer/exporter of subject merchandise in Venezuela. We requested that HEVENSA respond to section A (general information, corporate structure, sales practices, and merchandise produced), section B (home market or third-country sales), section C (U.S. sales), section D (cost of production/constructed value), and, if applicable, section E (cost of further manufacture or assembly performed in the United States).

HEVENSA submitted its initial response to section A of the Department's questionnaire on June 13, 2001. We received respondent's response to sections B through D on July 23, 2001. Petitioners filed comments regarding section A and sections B through D of HEVENSA's response on July 10, 2001 and August 6, 2001, respectively. We issued supplemental questionnaires to respondent for section A on July 19, 2001 and August 28, 2001 and for sections B through D on August 14, 2001 and September 18, 2001. Respondent filed responses to our section A supplemental questionnaires on August 3, 2001 and September 7, 2001, and to our supplemental questionnaires for sections B through D on September 4, 2001 and October 3, 2001.

Period of Investigation

The period of investigation (POI) is April 1, 2000 through March 31, 2001. This period corresponds to the four most recent fiscal quarters prior to the month of the filing of the petition (i.e., April 2001), and is in accordance with our regulations. See 19 CFR 351.204(b)(1).

Scope of Investigation

For purposes of these investigations, the products covered are all forms, sizes and compositions of silicomanganese, except low-carbon silicomanganese, including silicomanganese briquettes, fines and slag. Silicomanganese is a ferroalloy composed principally of manganese, silicon and iron, and normally contains much smaller proportions of minor elements, such as carbon, phosphorous and sulfur. Silicomanganese is sometimes referred to as ferrosilicon manganese. Silicomanganese is used primarily in steel production as a source of both silicon and manganese. Silicomanganese generally contains by weight not less than 4 percent iron, more than 30 percent manganese, more than 8 percent silicon and not more than 3 percent phosphorous. Silicomanganese is properly classifiable under subheading 7202.30.0000 of the Harmonized Tariff Schedule of the United States (HTSUS). Some silicomanganese may also be classified under HTSUS subheading 7202.99.5040. This scope covers all silicomanganese, regardless of its tariff classification. Although the HTSUS subheadings are provided for convenience and U.S. Customs purposes, our written description of the scope remains dispositive.

The low-carbon silicomanganese excluded from this scope is a ferroalloy with the following chemical specifications: minimum 55 percent manganese, minimum 27 percent silicon, minimum 4 percent iron, maximum 0.10 percent phosphorus, maximum 0.10 percent carbon and maximum 0.05 percent sulfur. Low-carbon silicomanganese is used in the manufacture of stainless steel and special carbon steel grades, such as motor lamination grade steel, requiring a very low carbon content. It is sometimes referred to as ferromanganese-silicon. Low-carbon silicomanganese is classifiable under HTSUS subheading 7202.30.0000.

Product Comparisons

Pursuant to section 771(16) of the Tariff Act, all products produced by the respondent within the scope of the investigation, above, and sold in the comparison market during the POI, are considered to be foreign like products. To match U.S. sales of subject merchandise to comparison-market sales of the foreign like product, we relied on two physical characteristics—grade and size. During the POI HEVENSA sold only one product in both the home market and United States. Since the product sold in both markets was identical, no matches of similar merchandise were utilized in our calculations.

Fair Value Comparisons

To determine whether sales of slicomanganese from Venezuela were made in the United States at less than fair value, we compared export price (EP) to normal value (NV), as described in the “Export Price” and “Normal Value” sections of this notice. In accordance with section 777A(d)(1)(A)(i) of the Tariff Act, we calculated weighted-average EPs for comparison to weighted-average NVs.

Transactions Reviewed

For its home market sales, HEVENSA reported the date of invoice as the date of sale for some sales, and the date of purchase order or contract as the date of sale for other sales. In keeping with the Department's preference for using a uniform date of sale under section 19 CFR 351.401(i), we have preliminarily determined that invoice date best represents the date on which the essential terms of sale are set. Based on an analysis of HEVENSA's home market sales data, we noted that HEVENSA made changes in the essential terms of sale between the contract date and the invoice date for a significant percentage of its sales. See, e.g., Appendix A-15 of HEVENSA's August 3, 2001 submission and Appendix Sup B-1 of its September 4, 2001 submission. Therefore, for this preliminary determination we have used the date of invoice as the date of sale for all of HEVENSA's home market sales.

For all U.S. sales, HEVENSA reported the date of the customer's purchase order as the date of sale. However, since the record does not provide ample evidence to allow us to determine that the essential terms of sale are set on this date, we have considered the invoice date to be the date of sale for HEVENSA's U.S. sales for this preliminary determination. We intend to examine at verification whether differences in the essential terms of sale exist between the purchase order date and invoice date. See Preamble to the Final Regulations, 62 FR 27296, 27348-50 (May 19, 1997).

Export Price

HEVENSA reported as export price (EP) transactions sales of subject merchandise sold to unaffiliated U.S. customers prior to importation.See HEVENSA's June 13, 2001 response at page 4 and Exhibit A-9. We calculated EP in accordance with section 772(a) of the Tariff Act because the merchandise was sold to the first unaffiliated purchaser in the United States prior to importation and the constructed export price (CEP) methodology was not otherwise warranted, based on the facts of record. We based EP on the FOB price to unaffiliated purchasers in the United States. We made deductions for movement expenses in accordance with section 772(c)(2)(A) of the Tariff Act; these included, where appropriate, foreign inland freight and foreign brokerage and handling charges. We did not accept HEVENSA's claim for a duty drawback adjustment; see the November 2, 2001 preliminary determination analysis memorandum (“Preliminary Analysis Memorandum”) on file in Import Administration's Central Records Unit, Room B-099 of the main Commerce building.

Level of Trade

In accordance with section 773(a)(1)(B)(i) of the Tariff Act, to the extent practicable, we determine NV based on sales in the comparison market at the same level of trade (LOT) as the EP or CEP transaction. The NV LOT is that of the starting price sales in the comparison market or, when NV is based on CV, that of the sales from which we derive selling, general and administrative (SG&A) expenses and profit. For EP, the U.S. LOT is also the level of the starting price sale, which is usually from the exporter to the importer. For CEP, it is the level of the constructed sale from the exporter to the importer.

To determine whether NV sales are at a different LOT than EP or CEP sales, we examine stages in the marketing process and selling functions along the chain of distribution between the producer and the unaffiliated customer. If the comparison market sales are at a different LOT, and the difference affects price comparability, as manifested in a pattern of consistent price differences between the sales on which NV is based and comparison market sales at the LOT of the export transaction, we make a LOT adjustment under section 773(a)(7)(A) of the Tariff Act. Finally, for CEP sales, if the NV level is more remote from the factory than the CEP level and there is no basis for determining whether the differences in the levels between NV and CEP affect price comparability, we adjust NV under section 773(A)(7)(B) of the Tariff Act (the CEP offset provision). See, e.g., Certain Carbon Steel Plate from South Africa, Final Determination of Sales at Less Than Fair Value, 62 FR 61731 (November 19, 1997).

In implementing these principles in this investigation, we obtained information from HEVENSA about the marketing stages involved in its reported U.S. and home market sales, including a description of the selling activities performed by HEVENSA for each channel of distribution.

In the home market HEVENSA reported two channels of distribution—sales to end users, and sales to a trading company. See HEVENSA's June 13, 2001 response at page 3. For both channels of distribution in the home market, HEVENSA performed similar selling functions, including sales logistics and inventory maintenance. See, e.g., HEVENSA's June 13, 2001 questionnaire response at 3 and its July 23, 2001 questionnaire response at 2-4. Because channels of distribution do not qualify as separate levels of trade when the selling functions performed for each channel are sufficiently similar, we have determined that one LOT exists for HEVENSA's home market sales.

In the United States, HEVENSA reported one channel of distribution for sales of subject merchandise during the POI (EP sales made directly to an unaffiliated reseller who then resold silicomanganese to its own customers). For its U.S. sales HEVENSA performed selling functions such as sales logistics. HEVENSA did not claim that its sales to home market customers were at a different LOT than its sales to U.S. customers and, therefore, did not claim a LOT adjustment. Based on the information provided by HEVENSA, we preliminarily determine that one LOT exists in the United States and that the U.S. LOT is comparable to the home market LOT.

Facts Available

In accordance with section 776(a)(1) of the Tariff Act, in this preliminary determination we find it necessary to use partial facts available where certain information needed to conduct our analysis is not available on the record. In its original and supplemental questionnaire responses, HEVENSA reported that it is owned by three holding companies. See, e.g., HEVENSA's August 3, 2001 submission at 2-3. While HEVENSA stated that “[t]he three holding companies are limited strictly to holding shares in HEVENSA, and do not perform any business for HEVENSA,” HEVENSA indicated in its questionnaire responses that these companies performed certain activities on its behalf during the POI. These activities included, among others, collection of payments from customers, payments to suppliers of inputs, and lending transactions. See, e.g., Appendix A-6 of HEVENSA's June 13, 2001 submission (audited financial statement for fiscal years 1999 and 2000; specifically, see note 8 on page 9); see also HEVENSA's August 3, 2001 submission at 4 and its September 7, 2001 submission at 1.

Despite repeated requests, HEVENSA did not provide any financial statements or other relevant documents that would allow us to quantify the general and administrative (G&A) and financial expenses incurred by the three holding companies in conducting these activities on HEVENSA's behalf. Such information is necessary to calculate accurately a respondent's cost of production (COP). In its September 7, 2001 response to the Department's second section A supplemental questionnaire, HEVENSA stated that it could not provide copies of the holding companies' audited financial statements because no such financial statements were available. We intend to investigate fully at verification the existence of any financial statements or other relevant documents for the three holding companies. Further, we intend to investigate the exact nature of all activities performed by HEVENSA's parent companies on its behalf, as well as the extent to which these activities are conducted. Because we do not have the information necessary to include a portion of the parents' financial and G&A expenses in HEVENSA's COP in making our preliminary determination, we have found that, pursuant to section 776(a) of the Tariff Act, it is appropriate to use the facts otherwise available in calculating COP. Section 776(a) of the Tariff Act provides that the Department will, subject to section 782(d), use the facts otherwise available in reaching a determination if “necessary information is not available on the record.” Therefore, for this preliminary determination, we have used the G&A and financial expense ratios contained in the petition for Siderurgica Venezolana SIVENSA, S.A. (SIVENSA), a Venezuelan steel producer, in calculating HEVENSA's COP.

Normal Value

Home Market Viability

In order to determine whether there was a sufficient volume of sales in the home market to serve as a viable basis for calculating NV (i.e., the aggregate volume of home market sales of the foreign like product was equal to or greater than five percent of the aggregate volume of U.S. sales), we compared HEVENSA's volume of home market sales of the foreign like product to the volume of U.S. sales of the subject merchandise, in accordance with section 773(a)(1)(C) of the Tariff Act. As HEVENSA's aggregate volume of home market sales of the foreign like product was greater than five percent of its aggregate volume of U.S. sales of the subject merchandise, we determined that the home market was viable. Therefore, we have based NV on home market sales in the usual commercial quantities and in the ordinary course of trade.

Cost of Production Analysis

Based on allegations contained in the petition, and in accordance with section 773(b)(2)(A)(i) of the Tariff Act, we found reasonable grounds to believe or suspect that sales of silicomanganese from Venezuela were made at prices below COP. As a result, the Department has initiated an investigation to determine whether HEVENSA made home market sales during the POI at prices below its respective COP, within the meaning of section 773(b) of the Tariff Act. We conducted the COP analysis described below.

A. Calculation of COP

In accordance with section 773(b)(3) of the Tariff Act, we calculated COP based on the sum of HEVENSA's cost of materials and fabrication for the foreign like product and added an amount for home market G&A and interest expenses. We relied on the COP information provided by HEVENSA in its original and supplemental responses, except as noted below.

1. We disallowed the adjustment HEVENSA made to its fixed overhead costs for a transformer accident that occurred during the POI. For our recalculation of fixed overhead costs and further discussion of this issue, see the Preliminary Analysis Memorandum.

2. As discussed in the “Facts Available” section above, we based HEVENSA's G&A and financial expense ratios on the facts available.

B. Test of Home-Market Sales Prices

We compared the adjusted weighted-average COP for HEVENSA to the home market sales of the foreign like product, as required under section 773(b) of the Tariff Act, in order to determine whether these sales had been made at prices below the COP within an extended period of time (i.e., a period of one year) in substantial quantities and whether such prices were sufficient to permit the recovery of all costs within a reasonable period of time. In accordance with section 773(b)(2)(C)(i) of the Tariff Act, we determined that sales made below the COP were made in substantial quantities if the volume of such sales represented 20 percent or more of the volume of sales under consideration for the determination of normal value.

On a model-specific basis, we compared the revised COP to the home market prices, less any applicable movement charges and other direct and indirect selling expenses.

C. Results of the COP Test

Pursuant to section 773(b)(2)(C) of the Tariff Act, where less than 20 percent of a respondent's sales of a given product were at prices less than the COP, we did not disregard any below-cost sales of that product because we determined that the below-cost sales were not made in “substantial quantities.” Where 20 percent or more of a respondent's sales of a given product during the POI were at prices less than the COP, we determined such sales to have been made in “substantial quantities” within an extended period of time in accordance with section 773(b)(2)(B) or the Tariff Act. In such cases, because we compared prices to POI-average costs, we also determined that such sales were not made at prices which would permit recovery of all costs within a reasonable period of time, in accordance with section 773(b)(2)(D) of the Tariff Act. Therefore, we disregarded the below-cost sales.

We found that for the single model of silicomanganese sold in the home market, more than 20 percent of HEVENSA's home market sales within an extended period of time were made at prices less than the COP. Further, the prices did not provide for the recovery of costs within a reasonable period of time. We therefore disregarded these below-cost sales and used the remaining sales as the basis for determining NV, in accordance with section 773(b)(1) of the Tariff Act. Since all U.S. sales of silicomanganese were of a model identical to that sold in the home market, we did not have to compare EP to constructed value (CV) in accordance with section 773(a)(4) of the Tariff Act.

Price-to-Price Comparisons

We calculated NV based on the FOB or delivered prices to unaffiliated customers. We made deductions, where appropriate, from the starting price for inland freight. In addition, we made adjustments under section 773(a)(6)(C)(iii) of the Tariff Act for differences in circumstances of sale for imputed credit expenses. However, we did not rely on HEVENSA's reported home market and U.S. credit expenses but rather recalculated them using the average short-term lending rates calculated by the Federal Reserve. (For a detailed description of the methodology used to recalculate imputed credit expenses, see the Preliminary Analysis Memorandum). We did not make any deductions for home market packing costs or add U.S. packing costs to NV as the respondent reported that it incurred no such expenses in selling silicomanganese in either market.

Currency Conversions

We made currency conversions into U.S. dollars in accordance with section 773A(a) of the Tariff Act based on the exchange rates in effect on the dates of the U.S. sales, as certified by the Federal Reserve Bank.

Verification

Pursuant to section 782(i) of the Tariff Act, we intend to verify all information relied upon in making our final determination.

Suspension of Liquidation

In accordance with section 733(d)(2) of the Tariff Act, we are directing the Customs Service to suspend liquidation of all entries of silicomanganese from Venezuela that are entered, or withdrawn from warehouse, for consumption on or after the date of publication of this notice in the Federal Register. We will instruct the Customs Service to require a cash deposit or the posting of a bond equal to the weighted-average amount by which the NV exceeds the EP, as indicated in the chart below. These suspension-of-liquidation instructions will remain in effect until further notice. The weighted-average dumping margins are as follows:

Exporter/manufacturer	Weighted-average margin percentage
Hornos Electricos de Venezuela	53.47
All Others	53.47

ITC Notification

In accordance with section 733(f) of the Tariff Act, we have notified the ITC of our determination. If our final antidumping determination is affirmative, the ITC will determine whether these imports are materially injuring, or threaten material injury to, the U.S. industry.

The deadline for that ITC determination would be the later of 120 days after the date of this preliminary determination or 45 days after the date of our final determinations.

Public Comment

Case briefs or other written comments in at least six copies must be submitted to the Assistant Secretary for Import Administration no later than fifty days after the date of publication of this notice, and rebuttal briefs, limited to issues raised in case briefs, no later than fifty-five days after the date of publication of this preliminary determination. A list of authorities used and an executive summary of issues should accompany any briefs submitted to the Department. Such summary should be limited to five pages total, including footnotes. Further, we would appreciate it if parties submitting written comments would provide the Department with an additional copy of the public version of any such comments on diskette. In accordance with section 774 of the Tariff Act, we will hold a public hearing, if requested, to afford interested parties an opportunity to comment on arguments raised in case or rebuttal briefs. Tentatively, any hearing will be held fifty-seven days after publication of this notice, time and room to be determined, at the U.S. Department of Commerce, 14th Street and Constitution Avenue, N.W., Washington, D.C. 20230. Parties should confirm by telephone the time, date, and place of the hearing 48 hours before the scheduled time.

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, U.S. Department of Commerce, Room 1870, within 30 days of the publication of this notice. Requests should contain: (1) The party's name, address, and telephone number; (2) the number of participants; and (3) a list of the issues to be discussed. Oral presentations will be limited to issues raised in the case and rebuttal briefs. If this investigation proceeds normally, we will make our final determination no later than 75 days after the date of this preliminary determination.

This determination is published pursuant to sections 733(f) and 777(i)(1) of the Tariff Act.

Dated: November 2, 2001.

Faryar Shirzad,

Assistant Secretary, Import Administration.