[Federal Register Volume 60, Number 102 (Friday, May 26, 1995)]
[Notices]
[Pages 27957-27963]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-13011]
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DEPARTMENT OF COMMERCE
International Trade Administration
[A-821-807]
Notice of Final Determination of Sales at Less Than Fair Value:
Ferrovanadium and Nitrided Vanadium From the Russian Federation
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
EFFECTIVE DATE: May 26,1995.
FOR FURTHER INFORMATION CONTACT: David J. Goldberger or Louis Apple,
Office of Antidumping Investigations, Import Administration,
International Trade Administration, U.S. Department of Commerce, 14th
Street and Constitution Avenue, N.W., Washington, D.C., 20230;
telephone: (202) 482-4136 or (202) 482-1769, respectively.
Applicable Statute and Regulations
Unless otherwise indicated, all citations to the statute and to the
Department of Commerce (the Department) regulations are in reference to
the provisions as they existed on December 31, 1994.
Final Determination: We determine that imports of ferrovanadium and
nitrided vanadium from the Russian Federation (Russia) are being, or
are likely to be, sold in the United States at less-than-fair-value
(LTFV), as provided in section 735 of the Tariff Act of 1930, as
amended (the Act). The estimated margins are shown in the
``Continuation of Suspension of Liquidation'' section of this notice.
Case History
Since the Department announced its preliminary determination on
December 27, 1994, (60 FR 438, January 4, 1995) the following events
have occurred:
In response to our request, on February 27, 1995, we received
additional surrogate valuation data from Odermet Limited (Odermet),
Galt Alloys, Inc. (Galt), SC Vanadium-Tulachermet (Tulachermet), and
Chusavoy Metallurgical Works (Chusavoy).
On February 17, 1995, we amended our preliminary determination to
correct a significant ministerial error (60 FR 10563, February 27,
1995).
From January through March , 1995, we conducted verifications at
Galt, Tulachermet, Chusavoy, Odermet, Shieldalloy Metallurgical
Corporation (Shieldalloy), and Gesellschaft fur Elektrometallurgie
m.b.H. (GfE).1 Verification reports were issued in February,
March, and April, 1995.
\1\ Shieldalloy is the petitioner in this investigation and is
related to GfE as both are wholly-owned subsidiaries of Metallurg,
Inc.
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On April 17, 1995, the petitioner, Shieldalloy, and respondents
Odermet, Chusavoy, Galt, and Tulachermet filed case briefs. Rebuttal
briefs were submitted by these parties on April 24, 1995. A public
hearing was held on April 26, 1995.
Scope of Investigation
The products covered by this investigation are ferrovanadium and
nitrided vanadium, regardless of grade, chemistry, form or size, unless
expressly excluded from the scope of this investigation. 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 this investigation are the 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 investigation are currently
classifiable under subheadings 2850.00.20, 7202.92.00, 7202.99.5040,
8112.40.3000, and 8112.40.6000 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.
Period of Investigation
The period of investigation (POI) is December 1, 1993, through May
31, 1994.
Non-Market Economy Country Status
Russia has been treated as a non-market economy (NME) for the
purpose of determining foreign market value (FMV) in all past
antidumping investigations (see, e.g., Final Determinations of Sales at
Less Than Fair Value: Pure Magnesium and Alloy Magnesium from Russia,
60 FR 16432 (March 30, 1995)) (Magnesium from Russia). No information
has been provided in this proceeding that would lead us to consider
changing this designation. Therefore, in accordance with section
771(18)(c) of the Act, we continue to treat Russia as a NME for
purposes of this investigation.
Best Information Available (BIA)
In this investigation, three companies failed to respond to the
Department's questionnaire, and we were unable to verify the sales
response of a fourth company, Tulachermet (discussed below under
Comment 1). Consistent with the Department's two-tiered methodology for
assigning BIA, we have based the BIA margin on the highest margin in
the petition (see, Final Determination of Sales at Less Than Fair
Value: Antifriction Bearings (other than Tapered Roller Bearings) and
Parts Thereof from the Federal Republic of Germany, 54 FR 1892, 19033
(1989)) and (Allied Signal v. United States, 996 F.2d 1185 (Fed. Cir.
1993) (June 22, 1993)).
Fair Value Comparisons
In cases involving imports from NMEs, we calculate a single
antidumping duty margin for companies that do not demonstrate that they
are entitled to separate rates. The Russia-wide margin in this case,
which applies to all exporters other than Galt, GfE, and Odermet, is
the BIA rate. Galt, GfE, and Odermet have received separate rates.
To determine whether sales to the United States of ferrovanadium
and nitrided vanadium by Galt, GfE, and Odermet, were made at less than
fair value, we compared the United States price (USP) to FMV, as
specified in the ``United States Price'' and ``Foreign Market Value''
sections of this notice.
United States Price (USP)
Pursuant to section 772 of the Act, USP was calculated on the basis
of purchase price for Odermet, and exporter's sales price (ESP) for
Galt and GfE, as described in the preliminary determination notice.
Pursuant to findings at verification, we made the following adjustments
to our margin calculations:
For GfE, we deducted handling and repacking expenses
incurred in Germany on certain sales. We revised the inland freight to
customer expense incurred on certain sales to reflect verification
findings. Finally, we revised the general and administrative expenses
allocated to further manufacturing expenses to include environmental
cleanup expenses omitted by GfE's U.S. [[Page 27958]] affiliate,
Shieldalloy, as derived from verification information.
For Odermet, we revised ocean freight, brokerage, and
containerization per-unit expenses on a contained vanadium weight
basis, rather than gross weight basis (see Comment 12). We also revised
inland insurance and marine insurance expenses, which Odermet had
allocated on the basis of weight, to a value basis, reflecting the
manner in which these expenses were incurred. Finally, we recalculated
foreign inland freight using surrogate values, based on our
verification finding that the actual freight services were provided by
NME subcontractors (see Comment 10).
Foreign Market Value
In accordance with section 773(c) of the Act, we based FMV for
ferrovanadium and nitrided vanadium on the factors of production
reported by the two factories in Russia,(i.e., Chusovoy and
Tulachermet), which produced the subject merchandise for export to the
United States. We calculated FMV based on factors of production as
cited in the preliminary determination, making the following
adjustments:
We applied this methodology to Odermet's sales as well as
to Galt's and GfE's sales as we have rejected Odermet's intermediate
reseller claim (see Comment 5).
We recalculated inland freight distances between each
factory and various input suppliers, based on verified distances.
We made minor revisions to many of Chusovoy's material and
energy consumption factors, based on corrected verified data.
We applied Chusovoy's public version reported vanadium
pentoxide and ferrovanadium production labor factors for the
corresponding labor inputs for Tulachermet, as discussed below in
Comment 9. In addition, Odermet sold the subject merchandise produced
by Tulachermet. Even though significant portions of Tulachermet's
responses failed verification, Tulachermet's factors of production,
with exception of labor, fully verified. Therefore, we continued to use
Tulachermet's factors to calculate FMV for sales by Odermet.
To calculate FMV, the verified factor amounts for each company were
multiplied by the appropriate surrogate values for the different
inputs. In accordance with section 773(c)(4) of the Act, the Department
must, to the extent possible, determine FMV by valuing the factors of
production in one or more market economy countries that: (1) Are at a
level of economic development comparable to that of the NME economy
country, and (2) are significant producers of comparable merchandise.
As discussed in the preliminary determination, the Department has
determined that South Africa is the country that best meets the
statutory criteria for purposes of this investigation. Accordingly, we
have based FMV on the appropriate factors of production as valued in
South Africa, except for those factors for which we were unable to
obtain a suitable value from South Africa. In these instances, as
discussed below, and in our preliminary determination, we used values
from publicly-available, published information pertaining to Poland,
Thailand, and Turkey, or values pertaining to Brazil and Germany as
included in the petition. The selection of surrogate countries and
certain surrogate values is discussed further below at Comment 6. We
have obtained and relied upon published, publicly-available
information, wherever possible, to value the factors of production.
Following the surrogate value selection methodology outlined in our
preliminary determination, we have used the same surrogate values used
in the preliminary, with the following exceptions:
For vanadium slag, we adjusted the surrogate value to
account for differences between the grade of the surrogate and Russian
materials, as discussed below in Comment 7.
For additional raw materials identified subsequent to our
preliminary determination, we used published price quotes for the South
African material (fluorspar), or, in the absence of any available value
from South Africa, unit values derived from Thai import statistics (fly
ash, aluminum alloy, and cold-rolled steel sheet) or Thai export
statistics (paint, thinner).
For natural gas, we used the Polish natural gas rate
published by the International Energy Agency.
As noted above, we relied on surrogate values from Thailand and
Poland, countries identified as potential surrogates for Russia in the
July 29, 1994, Memorandum from the Office of Policy to Gary Taverman,
when no appropriate South African value was available for a particular
factor. When no value was available from any potential surrogate
country, we used values from Brazil and Germany, as described in our
preliminary determination. The selection of the surrogate values for
this determination is discussed further in the Valuation Memorandum
dated May 19, 1995.
Currency Conversion
We made currency conversions based on the official exchange rates
in effect on the dates of the U.S. sales as certified by the Federal
Reserve Bank or, when unavailable, at the rates published by the
International Monetary Fund in International Financial Statistics.
Verification
As provided in section 776(b) of the Act, we verified or attempted
to verify all information submitted by respondents for use in our final
determination. We used standard verification procedures, including
examination of relevant accounting records and original source
documents provided by respondents.
Interested Party Comments
Comment 1: Rejection of Tulachermet Sales Response
GfE and Shieldalloy argue that the Department should reject
Tulachermet's sales response and apply BIA for the final determination
because Tulachermet failed verification. The major reasons for the
alleged verification failure cited by GfE and Shieldalloy are: (a) The
Department's discovery at verification of an unreported sale accounting
for a significant portion of the merchandise sold during the POI; (b)
Tulachermet's refusal to allow the Department timely access to
essential information at verification; (c) Tulachermet's inability to
support or substantiate the questionnaire responses; and (d) inaccurate
and omitted data. According to GfE and Shieldalloy, these verification
failures establish the inaccuracy and unreliability of Tulachermet's
response. Thus, BIA should be used for Tulachermet's margin.
Tulachermet claims that the sale in question was omitted
inadvertently from the response and was not an attempt to impede the
investigation. On the contrary, Tulachermet claims that reporting the
sale would have been in its interest as the selling price was
substantially higher than the prices of the reported sales. Tulachermet
states that the initial refusal to allow the Department to view certain
information at verification, which was subsequently permitted, was due
to the staff involved with verification not having been given explicit
authorization from the chief company official. Tulachermet states that,
until recently, all factory output information was considered a state
secret, with severe penalties for disclosure to outsiders.
Nevertheless, Tulachermet asserts that the Department
[[Page 27959]] subsequently was able to review the information in
question and confirm that there were no other discrepancies in
Tulachermet's sales response. Accordingly, Tulachermet contends that
BIA is unjustified under these circumstances.
Odermet adds that there is no basis to reject Tulachermet's factors
of production response since there were no problems with that portion
of the response except for labor factors and distances to input
suppliers.
DOC Position
During verification, Tulachermet withheld access to a customer
contract and correspondence file. Under 19 CFR 353.36(c)(1994), all
parties are on notice that ``[a]s part of the verification, employees
of the Department will request access to all files, records, and
personnel of the producers, resellers, importers, or unrelated
purchasers which the [Department] considers relevant to factual
information submitted.'' The verification outline presented to
Tulachermet prior to verification specifically advised Tulachermet that
complete sales records, contracts, and customer correspondence files
would be reviewed at verification and should be made available for
inspection at verification. While the verifiers were eventually granted
access to the file in question, the delay in providing access
compromised this critical component of verification. More importantly,
the Department had no way to determine whether the file, when finally
seen, was complete. As a result, the Department was unable to conclude
that no further discrepancies exist. Section 776(b) of the Act provides
that if the Department ``is unable to verify the accuracy of the
information submitted, it shall use the best information available to
it as the basis for its action ***.'' Section 776(c) of the Act further
states that the Department shall use BIA ``whenever a party or any
other person refuses or is unable to produce information requested in a
timely manner and in the form required, or otherwise significantly
impedes an investigation.''
While we recognize the attempt of Tulachermet to be responsive, the
Department cannot consider a response to be verified when the
respondent significantly impedes the investigation in the manner
described above. The verifiers' discovery of a substantial quantity of
unreported POI sales further undermined the integrity of Tulachermet's
sales response. Under such circumstances, we were unable to verify
Tulachermet's responses. Accordingly, we must reject its sales response
and rely on BIA. Further, because Tulachermet's actions at verification
significantly impeded the Department's investigation, as to
Tulachermet, we have treated the company as an uncooperative respondent
warranting the application of adverse BIA.
Comment 2: Sales Responses from Other Russian Companies
GfE and Shieldalloy claim that Chusovoy and a Russian trading
company should have submitted sales responses because, pursuant to
information GfE provided for the record, they knew at the time of
invoice preparation, if not at the time of sale, that the ultimate
destination of the merchandise sold was the United States. GfE and
Shieldalloy cite an internal GfE memorandum as evidence that, at the
time of sale, Chusovoy knew the ultimate destination of its nitrided
vanadium shipment. Since Chusovoy and the trading company each failed
to provide a sales questionnaire response for these sales transactions,
GfE and Shieldalloy argue that these entities should be assigned a
margin based on BIA.
Chusovoy states that knowledge of the ultimate destination at the
time of sale is the determinant factor and that, at the time of the
sale, Chusovoy did not know this information. Chusovoy asserts that
none of the sales documentation between GfE and Chusovoy, including the
nitrided vanadium agreement, give any indication as to the ultimate
destination of the merchandise. According to Chusovoy, GfE's internal
memorandum is a self-serving document, not signed by Chusovoy, which,
moreover, indicates the merchandise could be sold to another market as
well as the United States.
DOC Position
We agree with Chusovoy. Our verification confirmed that neither
Chusovoy nor the Russian trading company had knowledge at the time of
sale as to the ultimate destination of its merchandise. It is knowledge
at the time of the sale, and not the date of shipment, that is relevant
in determining the proper respondent for such sales (see, Magnesium
from Russia). In this situation, GfE was the first party in the
distribution channel to know the ultimate destination of the
merchandise and is, therefore, the proper exporter respondent for these
sales.
Comment 3: Rejection of GfE/Shieldalloy response
Chusovoy, Galt, and Tulachermet argue that the Department should
reject GfE/Shieldalloy's sales response because sales reporting of
Russian-sourced merchandise was based on quantity estimates drawn from
inventory turnover records, rather than actual sales data. These
respondents claim that this averaging approach methodology is counter
to the Department's specific questionnaire instructions and creates the
potential for minimizing margins from large quantity product sales at
lower prices. Accordingly, these respondents contend that the
Department should assign GfE/Shieldalloy a margin based on BIA.
GfE and Shieldalloy contend that their reporting methodology is
reasonable and sound, given the manner in which the sales were
conducted. These sales were not reported using averaged prices,
according to GfE and Shieldalloy, but rather at the per-unit price of
each sale. GfE and Shieldalloy add that the verification showed the
methodology was consistent with the information presented throughout
the proceeding.
DOC Position
We have used GfE's and Shieldalloy's questionnaire response in our
final determination. Their methodology did not affect the prices
reported but rather the quantity of subject merchandise reported. We
verified that the sales reporting was complete and that the inventory
turnover methodology provided a reasonable basis for determining the
quantity of subject merchandise sold during the POI. Further, we found
no indication of any sale-specific distortions deriving from the
application of this methodology.
Comment 4: Proper Respondent for Galt Sales
GfE and Shieldalloy claim that the exporter for Galt's sales was
Hascor BV, or the ``Galt/Hascor'' joint venture, not Galt, since
according to GfE and Shieldalloy, the former was the first exporter
with knowledge that the merchandise was destined for the United States.
Since neither entity filed a questionnaire response, GfE and
Shieldalloy contend that a BIA rate should be assigned to these
entities, and that Galt should receive the ``all others'' rate.
Alternatively, GfE and Shieldalloy claim that the Galt response should
be rejected because of the number of revisions submitted seven days
prior to verification and response errors identified at verification.
[[Page 27960]]
Galt responds that the record, including the verification results,
demonstrates that Galt is the exporter in this investigation and is
entitled to its own rate. Galt points to a variety of shipment
documents, as examined at verification, which specifically identify it
as the exporter of the merchandise. Further, Galt adds that, at
verification, the Department was able to determine that Galt was the
first party in the distribution chain to have knowledge of the
destination of the merchandise and, in fact, was the party that
determined that the merchandise was to be sent to the United States.
DOC Position
We agree with Galt. Our verification confirmed that Galt is the
proper exporter-respondent for its sales because it determines that the
merchandise is destined for sale in the United States. The Galt/Hascor
joint venture was responsible for garnering the merchandise from Russia
and shipping it to a bonded warehouse in the Netherlands. At that point
Galt obtained the merchandise, sold it and shipped it to the United
States. Revisions to its response were timely and verification
discrepancies were relatively minor, affecting only its movement
expenses.
Comment 5: Odermet's Intermediate Country Reseller Claim
Odermet claims that, in accordance with Section 773(f) of the Act,
its U.S. sales should be compared to its sales to Germany for the
following reasons: (1) Odermet was a reseller of the subject
merchandise; (2) the Russian manufacturer, Tulachermet, did not know at
the time of the sale to Odermet the country to which Odermet intended
to export the merchandise; (3) the merchandise was exported by Odermet
to a country other than the United States; (4) the merchandise entered
the commerce of an intermediate country (Germany) but was not
substantially transformed there; and (5) the merchandise was
subsequently exported to the United States. Odermet states that
verification corroborated its claim, demonstrating that it met all of
the above statutory criteria to support its claim. In particular,
Odermet states that it demonstrated that the merchandise entered the
commerce of Germany and was not warehoused in bond, and that the
merchandise could then be resold to customers in Germany and elsewhere,
including the United States.
GfE and Shieldalloy contend that Odermet's intermediate reseller
claim should be rejected because Odermet failed to establish at
verification that the merchandise entered the commerce of Germany. GfE
and Shieldalloy's contention rests on its assertion that Odermet failed
to demonstrate that the warehouses used to store the merchandise were
non-bonded and that, in nearly every case, merchandise ultimately
shipped to the United States was stored in one warehouse in one city,
while merchandise ultimately sold to German customers was stored in a
different warehouse in a different city. Even if the warehouses were
not bonded, GfE and Shieldalloy claim that, as established in Final
Determination of Sales At Less Than Fair Value: Sulfur Dyes, Including
Sulfur Vat Dyes, from the People's Republic of China, (58 FR 7537,
February 8, 1993) (Sulfur Dyes), storage in a non-bonded warehouse in a
third country alone does not demonstrate, in and of itself, that the
merchandise enters the commerce of that country. The channel of
distribution in this case, they continue, does not support a finding
that the merchandise entered the commerce of Germany.
DOC Position
For the Department to accept Odermet's claim, Odermet must
demonstrate that it satisfies each of the five statutory criteria under
Section 773(f) of the Act, cited above. The Department agrees with
Odermet that it has met four of these five criteria. However, we do not
agree that Odermet has satisfied the criterion that the merchandise
enter the commerce of the intermediate country. Verification revealed
that Odermet maintains two distinct distribution channels: (a)
Transportation of merchandise from Tulachermet to a warehouse in
Duisburg, Germany, for prospective sale to German customers in that
region; and (b) transportation of merchandise from Tulachermet to a
warehouse in Bremerhaven, Germany, for prospective sale and ocean
shipment from the port of Bremerhaven to customers in the United States
and other countries outside of Germany. In each case, the sales
agreement with the customer was made prior to shipment of the
merchandise into Germany. Moreover, the shipment quantity and delivery
dates correspond with the specifications in the sales agreements. While
for each distribution channel we noted one exception to the pattern, in
that one shipment to Duisburg was destined for delivery to overseas
customers, and one shipment to Bremerhaven was destined to a German
customer, all other shipments followed the above stated pattern.
Furthermore, although the Bremerhaven warehouse may not have been a
bonded warehouse (we have no evidence that it was or was not), we found
no customs duties or German value-added taxes (VAT) were assessed on
U.S. sales through the Bremerhaven warehouse--expenses that would
support a finding that such merchandise entered Germany for commercial
consumption--while duties and VAT were imposed on sales withdrawn from
a bonded warehouse in Duisburg.
The sum of these facts indicates two very different and distinct
patterns of distribution, with merchandise shipped to Bremerhaven
normally not entering the commerce of Germany, as this merchandise is
not intended to be made available to German customers. Under similar
circumstances in Sulfur Dyes, where sales intended for U.S. export
followed a different sales and distribution pattern from sales intended
for domestic consumption in Hong Kong, we found the pattern for U.S.
sales to be ``most accurately characterized as transshipment.'' In this
investigation, we reach the same conclusion for Odermet's sales. These
transshipments do not enter the commerce of Germany and, accordingly,
do not merit consideration under Section 773(f) of the Act.
Comment 6: Surrogate Country Selection
Odermet contends that South Africa is not appropriate for use as
the surrogate country for Russia in this investigation because current
economic data offered by Odermet indicates that South Africa is not
economically comparable to Russia in terms of gross domestic product
(GDP). Odermet argues that the Department should first attempt to value
the factors of production from the ``first tier'' of comparable
economies identified in the Department's surrogate country selection
memorandum dated July 29, 1994,--Algeria, Poland, Thailand, Tunisia,
and Turkey. Specifically, Odermet proposes the use of a surrogate value
for natural gas from Poland. For values that could not be obtained from
the above-mentioned countries, such as vanadium slag, Odermet suggests
that then the Department would turn to allegedly noncomparable
economies such as South Africa, following the methodology applied in
Final Determination of Sales at Less Than Fair Value: Cased Pencils
from the PRC (59 FR 55625, November 8, 1994) (Pencils).
Chusovoy, Galt, and Tulachermet agree with Odermet that South
Africa is not economically comparable to Russia, but acknowledge that
vanadium slag has to be valued in South Africa because of the lack of
alternatives. However, they contend that values from the first tier
[[Page 27961]] countries should be used for the other factors.
Specifically, they propose the use of a Polish labor rate and an
Algerian value for natural gas.
GfE and Shieldalloy support the selection of South Africa as the
appropriate surrogate country. This selection, they state, is
consistent with the statutory requirement of Section 773(c)(4) of the
Act that the surrogate country be economically comparable and a
significant producer of comparable merchandise. They note that the
Department, in its December 22, 1994, Office of Policy Memorandum, has
recognized that South Africa is the only producer of comparable
merchandise whose level of economic development is reasonably close to
that of Russia. GfE and Shieldalloy further assert that none of the
first tier countries should be considered as acceptable surrogates for
Russia in valuing factors for this investigation because these
countries produce neither the subject merchandise nor comparable
merchandise. For those instances where values from these countries were
used in the preliminary determination or may be considered for the
final determination, GfE and Shieldalloy contend that the Brazilian
data from the petition should be used. Brazil has been accepted as an
appropriate surrogate country for purposes of the initiation of this
investigation, and has also been used as the surrogate country in the
Magnesium from Russia investigation. The methodology employed in
Pencils, they say, is not appropriate here because in Pencils the other
countries used as surrogates were producers of comparable merchandise,
while in this case the other countries do not produce comparable
merchandise.
DOC Position
Section 773 (c)(4) of the Act requires that, to the extent
possible, the factors be valued in one or more market economy countries
that are: (a) At a comparable level of economic development, and (b)
significant producers of comparable merchandise. In this investigation,
none of the countries initially identified as potential surrogate
countries because of comparable levels of economic development produces
comparable merchandise. Of those countries that produce comparable
merchandise, only South Africa, which produces the subject merchandise,
is the most comparable in terms of economic development, as stated in
the December 22, 1994, Memorandum. We acknowledge that economic growth
trends in South Africa and Russia are dissimilar, but these differences
notwithstanding, the Department's selection of South Africa satifies
both statutory criteria set forth above.
As for the specific factors cited by the parties, the respondents'
claims that Russian wage levels are among the lowest in the world, are
not relevant because information regarding specific NME prices or wage
rates cannot be relied upon. Thus, the argument based on a comparison
of purported Russian wage rates with South African wage rates is
inappropriate.
We disagree with GfE and Shieldalloy's proposal to use Brazilian
values from the petition where there are no South African values
available because Brazil is not a producer of comparable merchandise--
there is no information on the record that Brazil has been a
significant producer of ferrovanadium or comparable merchandise since
1986.
Comment 7: Valuation of Vanadium Slag
Respondents contend that the Department should adjust the vanadium
slag value, based on a price quote submitted in the petition for South
African Highveld slag containing 24% vanadium pentoxide, to reflect the
lower purity of the Russian slag in addition to the lower vanadium
pentoxide content of 12 to 20%. Simply adjusting the value for vanadium
pentoxide content (``straight-line proportionality'' method) is not
sufficient, respondents claim, because the additional impurities
contained in the Russian slag add to the cost of extracting vanadium
pentoxide from the raw material. They argue that this renders the
Russian slag less valuable than the prime grade South African Highveld
slag, even after adjusting for the different concentration levels of
vanadium pentoxide. Chusovoy, Galt, and Tulachermet propose an
adjustment to the Highveld slag value based on the price differential
for processed vanadium pentoxide of Highveld 98% merchandise to 90%
merchandise, according to price information published in the Metal
Bulletin. These respondents claim that basing the price differential on
this data is appropriate given the strong market linkage between
vanadium pentoxide, the intermediate product, and ferrovanadium, the
final product. Moreover, they contend it is appropriate to base the
adjustment on the difference between Highveld vanadium pentoxide and
other vanadium pentoxide prices because the surrogate value for slag is
based on the Highveld slag value.
Odermet adds that the Metal Bulletin price-based adjustment
methodology is the only reasonably sound basis for valuing vanadium
slag, given that there is no source of publicly available published
information for vanadium slag prices and that, as vanadium slag is the
major input for processed vanadium pentoxide, the pricing of vanadium
pentoxide is relevant to valuing vanadium slag. Finally, Odermet states
that this case differs from the Final Determination of Sales at Less
Than Fair Value: Refined Antimony Trioxide from the PRC (57 FR 6801,
February 28, 1992) (Antimony) situation, where the Department used the
straight-line proportionality method because it had no prices for
different concentrate levels. Here, Odermet contends, the Department
does have the information to make the appropriate adjustment.
GfE and Shieldalloy state that the adjustments, proposed by
respondents, are not supported economically. GfE and Shieldalloy argue
that respondents have failed to demonstrate the relationship between
selected European transaction prices for processed vanadium pentoxide
and any value differential between the South African and Russian raw
materials. They cite a similar situation in Antimony where the
Department made no adjustment to the raw material value because,
without actual prices, the data was inconclusive as to the adjustment
to be made. In addition, GfE and Shieldalloy contend that the
respondents' price adjustment methodology is flawed because it utilizes
price comparisons between an ultra-refined product manufactured from
Highveld slag that is not likely to be used in ferrovanadium
production, to the lowest prices published. After discounting those
comparisons, GfE and Shieldalloy assert that the price differentials
between processed grades are significantly less than those claimed by
respondents.
DOC Position
Based on the submitted information, verification findings, and the
Department's own research, we agree with the respondents that the South
African vanadium slag value should be adjusted to reflect the lower
purity of Russian vanadium slag. Our analysis and research suggest a
strong relationship between vanadium pentoxide prices and vanadium slag
value, particularly as vanadium slag is the principal raw material for
vanadium pentoxide production and there are few, if any, other markets
for vanadium slag. We have confirmed, through a South African
publication, South Africa's Mineral Industry 1993/94, that the Highveld
prices cited by Chusovoy, Galt, Odermet, and Tulachermet reflect
[[Page 27962]] the typical Highveld product, while the prices for the
other 98% products reflect Chinese origin, and the 90% products are of
Russian slag. Based on this information, we have adjusted the vanadium
slag surrogate value according to the Metal Bulletin vanadium pentoxide
price differentials. Our methodology for adjusting both Tulachermet's
and Chusovoy's slag values is detailed in the Valuation Memorandum.
Comment 8: Adjustment to Factory Overhead Percentage
Chusovoy, Galt, and Tulachermet claim that the surrogate value for
factory overhead, which was derived from GfE's experience at its German
facility and submitted in the petition, should be adjusted for the
known differences between the GfE production plant and the Russian
plants. These respondents contend that the Department verified that the
Russian plants are fully depreciated and lack special environmental
equipment. The respondents claim further that depreciation, including
depreciation for environmental control equipment, accounts for the
majority of the GfE factory overhead percentage. Accordingly, the
respondents argue that the Department should reduce the factory
overhead percentages by at least half to reflect the absence of any
depreciation element in the Russian producers' factory overhead.
GfE and Shieldalloy state that factory overhead was properly
calculated using the petition information derived from GfE experience,
and this value remains the best available information. They assert that
GfE's depreciation experience is likely to be the same as the Russian
companies. Moreover, as there is no evidence of any known differences
between the GfE's experience and the Russian producers', the
respondents' claim for a factory overhead adjustment is unsubstantiated
and the suggested adjustment methodology is arbitrary.
DOC Position
The Department has been unable to locate other, publicly available,
data for the factory overhead surrogate value. (The Department's
attempts to find factory overhead data is described in the Valuation
Memorandum.) Thus, the only available data is the percentages stated in
the petition. The respondents' assertions provide an insufficient basis
for us to make any adjustments to these percentages.
Comment 9: BIA Labor Factors
GfE, Shieldalloy, and Odermet assert that the Department should use
the labor factors reported by Chusovoy as BIA for the unreported
Tulachermet labor factors. GfE and Shieldalloy state that Chusovoy's
factors should be used because they are the highest available labor
factors and, given Tulachermet's refusal to provide this information,
the most adverse data should be applied. Odermet favors the use of
Chusovoy labor factors because it believes these factors reflect more
accurately the Russian approach to production of the subject
merchandise.
DOC Position
Tulachermet failed to submit its production labor factors.
Accordingly, it is appropriate to make adverse assumptions about its
labor factors in assigning BIA. Thus, consistent with Department
practice, we have applied the data from the public version of
Chusovoy's response, because these factors are higher than that
reported in the petition.
Comment 10: Freight Valuation for Odermet Exports
Odermet argues that its freight expenses from the Russian factory
to German warehouses were paid in a market-economy currency to a
market-economy freight forwarder and, thus, should be accepted as
reported, even though the freight forwarder contracted with NME
trucking companies to perform the actual service. Odermet claims that
the subcontracting arrangement is irrelevant; all that is required for
establishing the market price for the freight service is the
convertible currency transaction to the market economy freight
forwarder. To do otherwise and value the freight service using a
surrogate value would lead, according to Odermet, to such ``absurd''
situations as finding surrogate values for PRC-origin inputs when
calculating the cost of production for a Japanese producer.
DOC Position
We disagree with Odermet. In NME proceedings, our consistent
methodology has been to determine whether a good or service obtained
through a market economy transaction is, in fact, sourced from a market
economy rather than merely purchased in it. For example, in Final
Determination of Sales at Less Than Fair Value: Coumarin from the
People's Republic of China (59 FR 66895, December 28, 1994), we did not
value Chinese port charges according to the U.S. dollar price quote
obtained from a market economy freight forwarder because of our
assumption that such services were actually provided by Chinese
sources. Instead, we valued port charges according to the information
obtained from the surrogate country. Since such goods and services are
produced in a NME, we cannot rely on the market economy payment
transaction as the basis for valuing these charges because the costs
upon which these expenses are based are not themselves market-based.
Although Odermet arranges the freight transportation through its market
economy freight forwarder, the forwarder's costs for contracting to NME
trucking companies cannot be relied on and, thus, the price charged to
Odermet cannot be relied upon.
Comment 11: Input Freight for Tulachermet's Vanadium Slag Factor
GfE and Shieldalloy allege that the Department erred in not
including surrogate freight charges for the expense of transporting
vanadium slag from the source to Tulachermet. Although the surrogate
value is based on an FOB South African port price, which includes
inland freight expenses, GfE and Shieldalloy claim that an additional
amount for the freight expense should be added to Tulachermet's FMV
calculation because the distance between Tulachermet's supplier and
Tulachermet is four to five times greater than the distance from the
South African supplier to the South African port.
Odermet states there is no support for GfE and Shieldalloy's
contention regarding the source of the raw material and distance to it
from the port.
DOC Position
When relying on a surrogate value that is freight-inclusive, the
Department's consistent practice has been to accept that value as the
surrogate value for the good as delivered to the NME consumer, without
any attempt to adjust for alleged differences in freight costs (see,
e.g., Final Determination of Sales at Less Than Fair Value: Saccharin
from the People's Republic of China, 59 FR 588818 (November 15, 1994).
In most cases, we do not have sufficient information regarding the
freight expense included in the surrogate value in order to make the
adjustment. Moreover, a value inclusive of freight represents the level
of the surrogate value we intend to reflect--the surrogate price of the
good available to the producer at its factory gate. We add an
additional value for freight from the supplier to the producer only
when such freight is not included in the surrogate value. Since the
surrogate value for vanadium slag is freight-inclusive, we have made no
[[Page 27963]] adjustment to the vanadium slag value for purported
differences in freight expenses.
Comment 12: Odermet's Export Shipment Expenses
Odermet claims it correctly reported its per-unit freight expenses
based on gross weight, rather than contained vanadium weight, because
this methodology reflects the manner in which it is billed for freight
services.
GfE and Shieldalloy contend that, as USP is reported in terms of
contained vanadium weight, the freight expenses should be reported on
the same basis and thus must be corrected.
DOC Position
We agree with GfE and Shieldalloy and have adjusted these expenses
accordingly. Price adjustments are always made on the same basis upon
which price is reported. Although Odermet is correct that expenses
should be reported on the same basis on which they are incurred, since
Odermet reported its sales prices on a contained vanadium weight basis,
the proper basis for allocating movement expenses on a per-unit basis
is contained vanadium weight. To allocate these expenses on a gross
weight basis would understate the expense to Odermet, not overstate it
as Odermet claims.
Comment 13: Inflation Adjustments and Exchange Rate Conversions for
Surrogate Values
GfE and Shieldalloy contend that the Department erred by not
properly inflating pre-POI surrogate values to the POI for raw
materials where the value was based on 1993 data. These parties contend
that the pre-POI surrogate values must be converted to U.S. dollar
values using contemporaneous exchange rates in order to accurately
reflect costs and market conditions during the time these costs were
incurred. Thus, according to GfE and Shieldalloy, to value these
factors properly, the Department should first convert the value to U.S.
dollars using the average exchange rate for 1993, and then inflate the
value to the POI using the ratio between the average price index for
1993 and the average price index for the POI.
Chusovoy, Galt, and Tulachermet contend that the exchange rate
methodology used in preliminary determination was proper, and that GfE
and Shieldalloy's methodology is internally inconsistent. If
contemporaneous exchange rates must be used, they say, then
contemporaneous prices must also be used. However, Chusovoy, Galt, and
Tulachermet add that there is no reason to inflate these 1993 prices
because the period during which the subject merchandise was produced
includes months in 1993, and there is no basis to conclude that average
prices for 1993 went up or down relative to average prices during the
POI.
DOC Position
The Department's consistent practice has been to first inflate non-
contemporaneous surrogate values to the POI, to reflect the economic
trends in the surrogate country, and then convert the POI value to U.S.
dollars according to the POI exchange rate (see, e.g., Pencils).
Converting to U.S. dollars first and then inflating the U.S. dollar-
denominated prices risks pulling into the valuation equation variables
that have no bearing on factor prices in the surrogate country.
Moreover, our practice is not to inflate values when the time period of
the value--in this case 1993--overlaps with any part of the POI--in
this case December 1993. GfE and Shieldalloy offer no compelling
arguments to change our practice; thus we have made no changes to our
inflation rate and exchange rate adjustment methodologies.
Continuation of Suspension of Liquidation
In accordance with section 733(d)(1) of the Act, we directed the
Customs Service to suspend liquidation of all entries of ferrovanadium
and nitrided vanadium from the Russian Federation entered, or withdrawn
from warehouse, for consumption on or after January 4, 1995, which is
the date of publication of our notice of preliminary determination in
the Federal Register. We shall instruct the Customs Service to require
a cash deposit or posting of a bond equal to the estimated amount by
which the FMV exceeds the USP as shown below, as of the effective date
of this notice. The suspension of liquidation instructions will remain
in effect until further notice.
The weighted-average margins are as follows:
------------------------------------------------------------------------
Weighted-
Manufacturer/producer/exporter average
margin
------------------------------------------------------------------------
Galt Alloys, Inc........................................... 3.75
Gesellschaft far Elektrometallurgie m.b.H. (and its related
companies Shieldalloy Metallurgical Corporation, and
Metallurg, Inc.).......................................... 11.72
Odermet.................................................... 10.10
Russia-wide Rate........................................... 108.00
------------------------------------------------------------------------
ITC Notification
In accordance with section 735(d) of the Act, we have notified the
ITC of our determination. As our final determination is affirmative,
the ITC will determine whether these imports are causing material
injury, or threat of material injury, to the industry in the United
States, within 45 days. If the ITC determines that material injury, or
threat of material injury, does not exist, the proceeding will be
terminated and all securities posted will be refunded or cancelled. If
the ITC determines that such injury does exist, the Department will
issue an antidumping duty order directing Customs officials to assess
antidumping duties on all imports of the subject merchandise entered,
or withdrawn from warehouse, for consumption on or after the effective
date of the suspension of liquidation.
Dated: May 19, 1995.
Susan G. Esserman,
Assistant Secretary for Import Administration.
[FR Doc. 95-13011 Filed 5-25-95; 8:45 am]
BILLING CODE 3510-DP-P
