Notice of Preliminary Determination of Sales at Less Than Fair Value and Postponement of Final Determination: Silicomanganese from Brazil

DEPARTMENT OF COMMERCE

International Trade Administration

[A-351-824]

Notice of Preliminary Determination of Sales at Less Than Fair

Value and Postponement of Final Determination: Silicomanganese from

Brazil

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

EFFECTIVE DATE: June 17, 1994.

FOR FURTHER INFORMATION CONTACT: Lori Way or Stephen Alley, Office of

Antidumping Investigations, Import Administration, U.S. Department of

Commerce, 14th Street and Constitution Avenue NW., Washington, DC

20230; telephone (202) 482-0656 or 482-5288, respectively.

Preliminary Determination:

We preliminarily determine that silicomanganese from Brazil is

being, or is likely to be, sold in the United States at less than fair

value, as provided in section 733 of the Tariff Act of 1930, as amended

(the Act). The estimated margins are shown in the ``Suspension of

Liquidation'' section of this notice.

Case History

Since the initiation of this investigation on December 2, 1993 (58

FR 64553, December 8, 1993), the following events have occurred.

On December 27, 1993, the U.S. International Trade Commission (ITC)

issued an affirmative preliminary determination in this case (see USITC

Publication 2714, December, 1993).

We issued the antidumping questionnaire on January 18, 1994, to

Companhia Paulista de Ferro-Ligas and Sibra-Eletrosiderurgica

Brasileira S/A (collectively, ``Paulista''). On January 24, 1994,

representatives of the Department of Commerce (the Department) met with

Paulista officials in Brazil to provide further explanation of the

antidumping questionnaire and to answer outstanding technical and

procedural questions.

Responses to the questionnaire were received on February 4, 1994,

and March 7, 1994. Petitioners in this investigation, Elkem Metals

Company and the Oil, Chemical & Atomic Workers, Local 3-639, submitted

comments regarding deficiencies in Paulista's questionnaire responses

on March 17 and 18, 1994. A supplemental questionnaire was issued on

March 28, 1994. Paulista submitted responses to this questionnaire in

April and May, 1994.

On February 2 and 8, 1994, Paulista asked the Department to amend

the product matching criteria included in Appendix V of its

questionnaire. Petitioners submitted comments on Paulista's request on

February 7 and 9, 1994. On February 10, 1994, we amended Appendix V

with respect to the silicon content and sieve size categories (see

letter from Gary Taverman to Dorsey & Whitney, dated February 10, 1994,

on file in Room B-099 of the main building of the Department of

Commerce).

At the request of petitioners, on March 30, 1994, the Department

postponed its preliminary determination until no later than June 10,

1994 (59 FR 16177, April 6, 1994).

On May 13, 1994, based on petitioners' March 14, 1994, allegation

of sales below cost of production (COP), the Department initiated a COP

investigation (see decision memorandum from Richard Moreland to Barbara

Stafford, dated May 13, 1994) and issued a COP questionnaire. However,

because of the deadline established for Paulista's COP questionnaire

response, this information could not be considered for the preliminary

determination. It will be considered for the final determination.

Postponement of Final Determination

Pursuant to section 735(a)(2)(A) of the Act, on April 26, 1994,

Paulista requested that, in the event of an affirmative preliminary

determination in this investigation, the Department postpone its final

determination to 135 days after the date of publication of an

affirmative preliminary determination. Pursuant to 19 CFR 353.20(b), if

our preliminary determination is affirmative, and the Department

receives a request from producers or resellers who account for a

significant portion of the exports under investigation, we will, absent

compelling reasons for denial, grant the request. Because Paulista

represents a significant portion of the exports under investigation and

there are no compelling reasons to deny the request, we are postponing

the final determination until the 135th day after the date of

publication of this notice in the Federal Register.

Scope of Investigation

The merchandise covered by this investigation is silicomanganese.

Silicomanganese, which is sometimes called ferrosilicon manganese, is a

ferroalloy composed principally of manganese, silicon, and iron, and

normally containing much smaller proportions of minor elements, such as

carbon, phosphorous and sulfur. Silicomanganese generally contains by

weight not less than 4% iron, more than 30% manganese, more than 8%

silicon and not more than 3% phosphorous. All compositions, forms and

sizes of silicomanganese are included within the scope of this

investigation, including silicomanganese slag, fines and briquettes.

Silicomanganese is used primarily in steel production as a source of

both silicon and manganese. This investigation covers all

silicomanganese, regardless of its tariff classification. Most

silicomanganese is currently classifiable under subheading 7202.30.0000

of the Harmonized Tariff Schedule of the United States (HTS). Some

silicomanganese may also be classifiable under HTS subheading

7202.99.5040. Although the HTS subheading is provided for convenience

and customs purposes, our written description of the scope of this

proceeding is dispositive.

Period of Investigation

The period of investigation (POI) is June 1, 1993, through November

30, 1993.

Such or Similar Comparisons

We have determined that the class or kind of merchandise subject to

this investigation constitutes two such or similar categories:

silicomanganese lumps and silicomanganese fines. In making our fair

value comparisons, in accordance with the Department's standard

methodology, we first compared identical merchandise. Where there were

no sales of identical merchandise in the home market to compare to U.S.

sales, we made similar merchandise comparisons on the basis of the

criteria defined in Appendix V to the antidumping duty questionnaire.

In accordance with 19 CFR 353.58, the Department normally attempts to

compare U.S. sales to home market sales made at the same level of

trade, where possible. Because Paulista did not make sales at the same

level of trade in Brazil and the United States, we made comparisons

without regard to level of trade.

Fair Value Comparisons

To determine whether Paulista's sales of silicomanganese 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 in the ``United States Price'' and ``Foreign Market

Value'' sections of this notice.

United States Price

In accordance with section 772(b) of the Act, we based USP for

Paulista on purchase price because all sales were made to unrelated

parties prior to importation into the United States.

We calculated purchase price sales based on prices to unrelated

customers in the United States. We made deductions, where appropriate,

for foreign brokerage, handling and foreign inland freight in order to

adjust these prices to an ex-factory basis. We did not add an amount

for interest revenue because Paulista failed to place adequate

information on the record to support this adjustment (see concurrence

memorandum, dated June 3, 1994). We will, however, examine

this issue further at verification, and consider it for the final

determination.

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.

In accordance with the Federal-Mogul decision, we have added to USP

the product of the home market tax rate and the price of the United

States merchandise at the same point in the chain of commerce that the

home market tax was applied to foreign market sales. We have also

deducted from the USP and the FMV those portions of the home market tax

and the USP tax adjustments attributable to expenses included in the

home market and United States bases of the tax if those expenses are

later deducted to calculate FMV and USP. These adjustments to the home

market tax and the USP tax adjustment are necessary to prevent the

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 basis 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 tax included in FMV and the USP

tax adjustment still reflect the inclusion of these expenses in the

bases. Thus, a margin may be created that is not dependent upon a

difference between adjusted USP and FMV, but is the result of

differences between the expenses in the United States and the home

market that were deducted through adjustments.

This adjustment to avoid the margin creation effect is in

accordance with court decisions. The United States Court of Appeals has

held 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, we added to USP an amount for value added

tax that would have been paid had the U.S. sale not been exported. In

Brazil, there are four different taxes levied on sales of the subject

merchandise in the home market which are not levied on export sales:

(1) Imposto sobre a Circulacao de Mercadorias e Servicos (ICMS), a

regional tax with a rate that varies depending upon the state in which

the purchase originates;

(2) Imposto sobre Produtos Industrializados (IPI), the Federal

value-added tax which is levied at a rate of four percent;

(3) Programa de Integracao Social (PIS), a social integration

program tax which is levied at a rate of 0.65 percent; and

(4) Contribuicao do Fim Social (CONFINS), a social investment fund

tax which is levied at a rate of 2.0 percent.

Foreign Market Value

In order to determine whether there was a sufficient volume of

sales in the home market to serve as a viable basis for calculating

FMV, we compared the volume of home market sales of subject merchandise

to the volume of third country sales of subject merchandise, in

accordance with section 773(a)(1)(B) of the Act. Since the total volume

of merchandise sold by Paulista in Brazil during the POI was greater

than five percent of the aggregate volume of third country sales for

each such or similar category, we determined that the home market was

viable. Therefore, we based FMV on home market sales for both

silicomanganese lumps and silicomanganese fines, in accordance with 19

CFR 353.48(a). We excluded from our analysis sales to a related

customer that were not claimed by Paulista to be at arm's length.

We calculated FMV based on prices to unrelated customers. In light

of the Court of Appeals for the Federal Circuit's (CAFC) decision in Ad

Hoc Committee of AZ-NM-TX-FL Producers of Gray Portland Cement v.

United States, Slip Op. 93-1239 (Fed. Cir., January 5, 1994), the

Department no longer deducts home market movement charges from FMV

pursuant to its inherent authority to fill in gaps in the antidumping

statute. We instead adjust for those expenses under the circumstance of

sale provision of 19 CFR 353.56 and the exporter's sales price offset

provision of 19 CFR 353.56(b) (1) and (2), as appropriate.

Accordingly, in the present case, we made circumstance of sale

adjustments for certain post-sale home market movement charges under 19

CFR 353.56. Also pursuant to 19 CFR 353.56(a)(2), we made circumstance

of sale adjustments, where appropriate, for differences in credit

expenses, warehousing, sampling-weighing-testing expenses, and bank

fees. In accordance with 19 CFR 353.56(b), we added commissions paid on

U.S. sales and deducted indirect selling expenses incurred on sales in

Brazil up to the amount of the U.S. commission.

Under our past practice, if the Department determines that a

country is hyperinflationary, we calculate FMVs on a monthly basis to

eliminate the distortive effects of inflation (see, 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). An economy is deemed to be hyperinflationary if its monthly

inflation rate is greater than 5 percent or if its annual inflation

rate is greater than 60 percent. We determined that Brazil's economy

was hyper-inflationary during the POI. Brazil's inflation rate was over

60 percent during 1993.

We included in FMV the amount of the VAT collected in the home

market (i.e., the sum of the actual IPI, PIS and CONFINS tax rates plus

the weighted-average ICMS rate). However, we calculated the amount of

tax that was due solely to the inclusion of price deductions in the

original tax base (i.e., the sum of any adjustments, expenses, and

charges that were deducted from the tax base). See the ``United States

Price'' section of this notice, above. This amount was deducted from

the FMV after all other additions and deductions had been made.

Cost of Production

Based on petitioner's allegations, and in accordance with section

773(b) of the Act, the Department initiated an investigation to

determine whether Paulista made home market sales at prices below its

COP over an extended period of time, which would not permit the

recovery of costs within a reasonable period of time. However,

Paulista's COP questionnaire response is due on June 16, 1994, which is

after the deadline for the preliminary determination. The response

will, however, be considered for the final determination.

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

Brazilian currency published by the Central Bank of Brazil.

In hyperinflationary economies, the Department normally converts

movement charges for U.S. sales on the date that these charges become

payable, and we have done so in this investigation.

Verification

As provided in section 776(b) of the Act, we will verify the

accuracy of all information used in making our final determination.

Suspension of Liquidation

In accordance with section 733(d)(1) of the Act, we are directing

the Customs Service to suspend liquidation of all entries of

silicomanganese from Brazil that are entered, or withdrawn from

warehouse, for consumption on or after the date of publication of this

notice in the Federal Register. The Customs Service shall require a

cash deposit or posting of a bond equal to the estimated preliminary

dumping margins as shown below. This suspension of liquidation will

remain in effect until further notice. The estimated preliminary

dumping margins are as follows:

------------------------------------------------------------------------

Weighted-

average

Manufacturer/producer/exporter margin

percentages

------------------------------------------------------------------------

Paulista................................................... 37.76

All others................................................. 37.76

------------------------------------------------------------------------

ITC Notification

In accordance with section 733(f) of the Act, we have notified the

ITC of our determination. If our final determination is affirmative,

the ITC will determine before the later of 120 days after the date of

the preliminary determination or 45 days after our final determination

whether imports of the subject merchandise are materially injuring, or

threaten material injury to, the U.S. industry.

Public Comment

Interested parties who wish to request a hearing must submit a

written request to the Assistant Secretary for Import Administration,

U.S. Department of Commerce, Room B-099, within ten 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.

In accordance with 19 CFR 353.38, case briefs or other written

comments in at least ten copies must be submitted to the Assistant

Secretary for Import Administration no later than September 23, 1994,

and rebuttal briefs no later than September 28, 1994. A public hearing,

if requested, will be held on September 30, 1994, at 10 a.m. at the

U.S. Department of Commerce, Room 4830, 14th Street and Constitution

Avenue NW., Washington, DC 20230. Parties should confirm by telephone

the time, date, and place of the hearing 48 hours before the scheduled

time. In accordance with 19 CFR 353.38(b), oral presentations will be

limited to issues raised in the briefs.

We will make our final determination not later than 135 days after

publication of this determination in the Federal Register.

This determination is published pursuant to section 733(f) of the

Act, and 19 CFR 353.15(a)(4).

Dated: June 10, 1994.

Susan G. Esserman,

Assistant Secretary for Import Administration.

[FR Doc. 94-14850 Filed 6-16-94; 8:45 am]

BILLING CODE 3510-DS-P