Notice of Final Determination of Sales at Less Than Fair Value: Silicomanganese From Venezuela

DEPARTMENT OF COMMERCE

[A-307-811]

Notice of Final Determination of Sales at Less Than Fair Value:

Silicomanganese From Venezuela

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

EFFECTIVE DATE: November 7, 1994.

FOR FURTHER INFORMATION CONTACT: John Brinkmann or Greg Thompson,

Office of Antidumping Investigations, Import Administration,

International Trade Administration, U.S. Department of Commerce, 14th

Street and Constitution Avenue, NW., Washington, DC 20230; telephone:

(202) 482-5288 or (202) 482-2336, respectively.

FINAL DETERMINATION: We determine that imports of silicomanganese from

Venezuela are being, or are 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). The estimated weighted-average margins are

shown in the ``Continuation of Suspension of Liquidation'' section of

this notice.

Case History

Since the preliminary determination and postponement of the final

determination of this investigation on June 10, 1994, (59 FR 31204,

dated June 17, 1994), the following has occurred:

On June 27, 1994, Hornos Electricos de Venezuela, S.A. de C.V.

(Hevensa) submitted its response to Section D of the Department of

Commerce's (the Department) questionnaire. (Section D of the

questionnaire requests information on the cost of production (COP) and

constructed value (CV).) On June 29, 1994, Hevensa submitted a revised

version of this response correcting bracketing errors. On July 12,

1994, Hevensa also submitted supplemental responses to its March 1,

1994, and April 19, 1994, submissions.

The Department requested additional information regarding Section D

of the questionnaire on July 14, 1994. Hevensa submitted this

information on August 15, 1994.

Verification of Hevensa's sales and COP/CV questionnaire responses

was conducted in July and September 1994, respectively.

Hevensa and petitioners submitted case briefs on October 3, 1994,

and rebuttal briefs on October 6, 1994. At Hevensa's request, the

Department held a public hearing on October 7, 1994.

Scope of the 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 four percent iron, more than 30 percent manganese,

more than eight percent silicon and not more than three percent

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 (HTSUS). Some silicomanganese may also

currently be classifiable under HTSUS subheading 7202.99.5040. Although

the HTSUS subheadings are provided for convenience and customs

purposes, the written description of the scope of this investigation is

dispositive.

Period of Investigation

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

30, 1993.

Such or Similar Comparisons

We made fair value comparisons using the following such or similar

categories: (1) lumps and (2) fines. Where we were not able to compare

U.S. sales to sales of identical merchandise, we made similar

merchandise comparisons on the basis of the criteria defined in

Appendix V to the antidumping duty questionnaire, on file in Room B-099

of the main building of the Department.

Fair Value Comparisons

To determine whether Hevensa's sales to the United States of

silicomanganese 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

We calculated USP according to the methodology described in our

preliminary determination.

Foreign Market Value

As noted in our preliminary determination, we initiated a COP

investigation on May 9, 1994, based on an allegation by the petitioners

(see decision memorandum from Richard Moreland to Barbara Stafford,

dated May 9, 1994). On the basis of petitioners' allegations, we

gathered and verified data on production costs. Because Hevensa's COP

response was not due until after the date of the preliminary

determination, this information was not considered for the preliminary

determination.

A. Calculation of COP

In order to determine whether prices were above the COP, we

calculated the COP in accordance with 353.51(c) of the Department's

regulations. Our calculations of COP were based on the sum of Hevensa's

submitted costs of materials, fabrication, general expenses, and

packing, except in the following instances where we determined that the

costs were not appropriately quantified or valued. Specifically, we:

1. Recalculated depreciation expense based on the restated value of

Hevensa's fixed assets;

2. Disallowed Hevensa's claimed foreign exchange gains on client

accounts receivable;

3. Reclassified foreign exchange gains and losses on the purchase

of input materials from financing expense to cost of manufacturing;

4. Recomputed general and administrative expense and interest

expense using a cost of sales figure adjusted for depreciation expense

and exchange losses on material purchases as noted in 1 and 3 above;

5. Included the same amount of value-added tax (VAT) in home market

COP as is included in the domestic sales prices; and

6. Added the additional charge incurred by Hevensa for the

production of the Grade C product, as negotiated with its contractor.

B. Test of Home Market and Third Country Sale Prices

After calculating COP, we tested whether home market and third

country sales of silicomanganese were made at prices below COP.

We compared product-specific COP to reported prices that were net

of movement charges, discounts, rebates, direct and indirect selling

expenses, and inclusive of VAT. If over 90 percent of a respondent's

sales of a given product were at prices above the COP, we did not

disregard any below-cost sales because we determined that the

respondent's below-cost sales were not made in substantial quantities.

If between ten and 90 percent of a respondent's sales of a given

product were at prices above the COP, we discarded only the below-cost

sales if made over an extended period of time. Where we found that more

than 90 percent of respondent's sales of a given product were at prices

below the COP and were sold over an extended period of time, we

disregarded all sales for that product and calculated FMV based on

constructed value (CV).

In order to determine that below-cost sales were made over an

extended period of time, we performed the following analysis on a

product-specific basis: 1) if a respondent sold a product in only one

month of the POI and there were sales in that month below the COP, or

2) if a 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.

C. Results of COP Test

We found that more than 90 percent of Hevensa's third country sales

of Grade C fines were sold at below-COP prices over an extended period

of time. Hevensa provided no indication that these below-COP sales were

at prices that would permit recovery of all costs within a reasonable

period of time and in the normal course of trade. Therefore, we

disregarded all third country sales of Grade C fines. For U.S. sales

left without a match as a result of disregarding these below-COP sales,

we based FMV on CV.

We found that more than ten percent but less than 90 percent of

Hevensa's sales of Grade B silicomanganese lump, size 5'' x 1'', were

sold at below-COP prices over an extended period of time. Therefore, we

excluded from the calculation of FMV those home market sales which were

priced below the merchandise's cost of production.

Price-to-Price Comparisons

We calculated FMV using the methodology described in our notice of

preliminary determination, with the following exceptions:

1. We matched the 5'' x 2'' material sold in the United States to

the 5'' x 1'' material sold in the home market instead of to the 4'' x

2'' material sold in the home market.

2. We matched 30mm x 6mm Grade C lump material to CV (see

concurrence memorandum, dated October 31, 1994).

3. We matched the 6mm x 1mm Grade C fines sold in the United States

to CV because more than 90 percent of respondent's sales of this

product were at prices below the COP and were sold over an extended

period of time.

Price to CV Comparisons

In the instances noted above and where there was otherwise no

matching home market or third country sale, we based FMV on CV. We

calculated CV based on the sum of the cost of materials, fabrication,

general expenses, and U.S. packing cost. We made all adjustments

described in the COP section (except for the inclusion of VAT) in

calculating CV. In accordance with section 773(e)(1)(B)(i) of the Act,

we included in CV the greater of the company's reported general

expenses or the statutory minimum of ten percent of the cost of

manufacture. For profit, we used the actual profit earned by Hevensa

where the actual figure was greater than the statutory minimum of eight

percent of the sum of COM and general expenses, in accordance with

section 773(e)(1)(B)(ii) of the Act.

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 of New York.

Verification

As provided in section 776(b) of the Act, we verified information

provided by Hevensa by using standard verification procedures,

including the examination of relevant sales and financial records, and

selection of original source documentation containing relevant

information.

Interested Party Comments

Comment 1: Hevensa asserts that its home market sale of Grade C

lump silicomanganese during the POI was outside the ordinary course of

trade and, therefore, should not be used to calculate FMV for the 30mm

x 6mm Grade C merchandise. Hevensa asserts that the home market sale

was the only such sale made during the POI, that the amount of the sale

was smaller than those made in Hevensa's ordinary home market sales,

and that the sale was made on a trial basis to a trader who had

requested a different product that was not available at the time.

Petitioners assert that the sale was a legitimate one and the fact

that it was for a smaller than usual amount is not enough to indicate

that it was outside the ordinary course of trade.

DOC Position: We agree with Hevensa. During verification, we

satisfied ourselves that the home market sale of 30mm x 6mm Grade C

material was a trial amount sold outside the ordinary course of trade.

This was the only sale of a trial amount during the 16 months examined

at verification. Moreover, Hevensa did not make any other sales to this

customer during that period of time.

Comment 2: Hevensa contends that the Department should use monthly

or bi-monthly weighted-average FMVs, rather than the normal six-month

average FMV, to calculate whether there is a margin of dumping in this

investigation. Hevensa argues that, during the POI, the interplay among

the Venezuelan rate of inflation, the U.S. dollar-based prices of the

subject merchandise, and the changes in the exchange rate for U.S.

dollars and Venezuelan bolivars, could create a margin of dumping if a

weight-averaged FMV were used for the entire POI.

Petitioners argue that Hevensa is requesting that the Department

adopt a methodology that is inconsistent with its practice in

hyperinflationary economy cases. Additionally, the petitioners assert

that, if Hevensa's monthly FMVs were adopted, any comparison between

the FMV and the U.S. price would be distorted. Specifically, the

petitioners argue that Hevensa is requesting that the Department apply,

in effect, only that part of its methodology for hyperinflationary

economies calling for the use of monthly FMVs, not the part of the

methodology calling for the submission of costs on a replacement basis.

DOC Position: We disagree with respondent's argument that the

Department should use monthly or bi-monthly weighted-average FMVs

because of the high rate of inflation in Venezuela during the POI.

However, it should be noted that the Department has calculated two

weighted-average FMVs to accommodate the introduction of VAT in

Venezuela during the last two months of the POI. Because Hevensa's U.S.

sales were only invoiced during the last two months of the POI, it

happens that Hevensa's U.S. sales of the merchandise in question were

compared only to a two-month VAT-inclusive weighted-average FMV.

We agree with the petitioners that it would be inappropriate to

apply only the averaging portion, and not the replacement cost portion,

of our hyperinflationary economy methodology. Although information on

the record of this investigation would permit the Department to

calculate the FMV on a monthly or bi-monthly basis, if we were to find

the Venezuelan economy to be hyperinflationary during the POI, our

methodology for hyperinflationary economies also requires us to

calculate the cost of production on a replacement cost basis. It is not

possible for us to calculate Hevensa's replacement costs because

Hevensa has insisted, and we have accepted, that the Venezuelan economy

during the POI was not hyperinflationary. Accordingly, Hevensa has not

supplied the Department with its replacement costs, and we have applied

our standard non-hyperinflationary methodology in this final

determination.

Comment 3: Hevensa argues that the Department should revise its

level-of-trade analysis from the preliminary determination. During the

POI, all of Hevensa's U.S. sales were made to Mannesmann, who resold

the silicomanganese. Hevensa contends that, in the preliminary

determination, it was inappropriate for the Department to compare

Hevensa's sales to Mannesmann to Hevensa's home market sales to a home

market trader because its home market trader does not perform the same

role as Mannesmann. Rather, Hevensa claims that Mannesmann functions as

a commission agent, while the home market trader functions as a

wholesaler.

Petitioners assert that the Department focuses on the customer's

function in the distribution chain to classify sales by level of trade

and that Mannesmann functions as any trader does, i.e., it takes title

to the material and then resells it. Accordingly, the petitioners argue

that both Mannesmann and Hevensa's home market trader ``have the same

place in the chain of distribution--to sell to end-users and,

therefore, they are at the same level of trade.''

DOC Position: We agree with the petitioners. We view the level of

trade of the sales between Hevensa and its home market trader as being

functionally equivalent to the level of trade of Hevensa's sales to

Mannesmann. Both Mannesmann and the home market trader are wholesalers,

and both are taking title to the merchandise prior to reselling it (see

Concurrence Memo for this final determination).

Comment 4: The petitioners argue that the Department should compare

Hevensa's U.S. sales of 5'' x 2'' Grade B lump silicomanganese with

home market sales of 5'' x 1'' Grade B lump silicomanganese to

Hevensa's home market trader/wholesaler (i.e., at the same level of

trade).

Hevensa argues that, if the Department decides that its U.S. sales

to Mannesmann are at the same level of trade as its home market sales

to the trader (see Comment 3, above), the Department should not take

level of trade into account when making comparisons. Hevensa contests

comparisons based on level of trade because there was no correlation

between its prices and selling expenses on the one hand, and levels of

trade on the other. Hevensa asserts both that its average prices for

5'' x 1'' Grade B lump material were higher to its home market trader

than to its home market end users, and that its selling expenses were

roughly equivalent for both traders and end users. Moreover, Hevensa

asserts that its sales to both categories of customers were made by the

same sales department, within the same sales process, and that no

additional technical support or additional services were provided to

either category of customer.

DOC Position: We agree with Hevensa. Level of trade can be an

important distinction where respondents charge different prices and

incur different selling expenses at the different levels of trade.

Here, where the home market trader operates at an intermediate level

between Hevensa and the end users, Hevensa's prices to the trader

logically would be lower than its prices to end users if there were a

relationship between Hevensa's prices and level of trade. Instead,

Hevensa has demonstrated that its average prices to the trader were

marginally higher than its prices to end users.

The Department also verified that direct selling expenses, with the

exception of certain differences in the average credit days for the

home market trader and some home market end users, were similar. During

verification, we did not note any differences between home market and

end-user sales processes or sales services. Furthermore, there is no

other information on the record that indicates differences existed for

indirect selling expenses. Accordingly, the Department has not taken

the level of trade into account but, rather, has compared Hevensa's

U.S. sales of 5'' x 2'' Grade B material to Mannesmann to the home

market sales of 5'' x 1'' grade material to both the home market trader

and the home market end users.

Comment 5: Hevensa argues that the Department should include the

amount that the customer was required to pay for VAT when calculating

Hevensa's imputed credit expenses on its home market sales. It contends

that when it extends credit to its home market customers, it

necessarily agrees to a delay in the payment of the full amount owed by

the customer, including the VAT. Therefore, the Department must

calculate an imputed cost for the full amount of the delayed payment.

The petitioners argue that the Department should not consider VAT

in calculating imputed credit. The petitioners assert that Hevensa does

not necessarily owe VAT at the time it ships to the purchaser and, in

some instances, it may not owe the tax until after it has received

payment from the purchaser. The petitioners also state that if the

Department were to allow an imputed credit adjustment for the VAT tax,

the date of invoice would not be the proper date for calculation.

Moreover, the petitioners argue that in cases where the purchaser had

paid Hevensa the purchase price, including VAT, prior to the date on

which Hevensa owed VAT to the government, the Department would have to

calculate a credit revenue for Hevensa.

DOC Position: The Department's practice is to calculate credit

expenses exclusive of VAT. (See the discussion of our VAT methodology

in the preliminary determination (59 FR 31204, 31205, June, 17, 1994.)

Theoretically, there is an opportunity cost associated with any post-

service payment. Accordingly, to calculate the VAT adjustment argued by

Hevensa would require the Department to calculate the opportunity costs

involved with freight charges, rebates, and selling expenses for each

reported sale. It would be an impossible task for the Department to

attempt to determine the opportunity cost of every such charge and

expense.

Comment 6: Hevensa argues that the VAT methodology employed by the

Department in its preliminary determination distorted the Department's

calculations by inflating--and possibly creating--the dumping margins

found on Hevensa's sales.

The petitioners argue that the VAT methodology employed in the

preliminary determination is consistent with the Department's practice.

DOC Position: We agree with petitioners. As we explained in our

preliminary determination, we multiplied the foreign VAT rate by the

price of the U.S. merchandise at the same point in the chain of

commerce that the foreign market VAT was applied to foreign market

sales, and we added this product to the U.S. price. The Department also

deducted from the USP and FMV those portions of the respective home

market tax and the USP tax adjustments attributable to expenses. This

methodology was adopted by the Department to comply with Federal-Mogul

Corp. and Torrington Co. v. United States, 834 F. Supp. 1391 (CIT 1993)

and has been the Department's practice since this ruling. See also,

Avesta Sheffield, Inc. v. United States, 838 F. Supp. 608 (CIT 1993).

Comment 7: The petitioners argue that the Department should

calculate duty drawback on only those export shipments of

silicomanganese that correspond to valid ``Admission Temporal par

Perfectionsmiento Activo (ATPA)'' permits of the Venezuelan government.

Hevensa concedes that its ATPA had lapsed for the period from June

29, 1993, through November 2, 1993. However, it argues that it is

eligible for duty drawback on all exports after November 2, 1993, and

that it has the right to request the Venezuelan authorities to modify

its documents to apply other shipments against the ATPA.

DOC Position: We agree with the petitioners. The record

demonstrates that Hevensa was only authorized duty drawback on the

particular export sales for which an ACTA was in effect at the time the

silicomanganese was exported. Accordingly, we have calculated duty

drawback adjustments for only such sales.

Comment 8: The petitioners argue that the Department should base

the adjustment of FMV for royalties on the amount of the fee for

services that had been established between Hevensa and the provider of

the technical services and which Hevensa had accrued during the POI.

Hevensa argues that the fee it had agreed to with the provider of

the technical services and which it had been accruing during the POI

was not approved by the Venezuelan Superintendent of Foreign

Investments (SIGHTS) and that the accrued rate had been adjusted

subsequently because the original amount had not been authorized by

SIGHTS. Hevensa asserts that the adjustment must be based on the amount

that SIGHTS approved.

DOC Position: We agree with Hevensa. We have adjusted the royalty

expense to reflect the amount that the Venezuelan government permitted

Hevensa to pay for the POI.

Comment 9: Petitioners assert that the silicomanganese slag further

processed into Grade C silicomanganese by Hevensa is a co-product of

Grade B silicomanganese. The petitioners also state that because the

silicomanganese slag should be considered a co-product to the Grade B

silicomanganese, the Department should allocate Hevensa's production

costs equally between Grade B silicomanganese and silicomanganese slag.

The petitioners support the argument that the slag should be classified

as a co-product by noting that both the Grade B silicomanganese and the

slag share a single common production process. The petitioners also

argue that inasmuch as only minor processing is necessary to process

the slag into Grade C silicomanganese, the value of the Grade C

silicomanganese is representative of the value of the slag, and that

this value is significant because of the percentage of total sales that

Grade C silicomanganese accounted for during the POI.

Hevensa argues that the silicomanganese slag generated in the

production of its Grade B silicomanganese is a waste product and,

therefore, should not be treated as a co-product. Hevensa cites to the

petition in this investigation in which silicomanganese slag was

classified as a waste product that received no assignment of costs as

support for its treatment of the silicomanganese slag. Hevensa also

argues that the silicomanganese slag is not a finished product and

cannot be sold without substantial further processing.

DOC Position: We disagree with the petitioners. In determining how

to allocate costs among various products manufactured during the course

of producing the merchandise subject to the investigation, the

Department, pursuant to Section 773(e) of the Act, looks to the value

of the other products relative to the value of all products produced

during, or as a result of, the process of manufacturing the product

under investigation. See, e.g., Final Determination of Sales at Less

Than Fair Value (SLTFV): Sebacic Acid From the People's Republic of

China, 59 FR 28053, 28056 (May 31, 1994). See also IPSCO, Inc. v. U-

Stat, 965 F.2d 1056 (Fed Cir. 1992). If the value of the joint product

is significant, the Department will treat such product as a co-product,

with the result that all costs incurred in the production process are

allocated based on the relative quantity of output of the joint

products. Id., 965 F.2d at 1060.

In this case, the silicomanganese slag further processed into Grade

C silicomanganese is not a co-product of the Grade B silicomanganese,

because its value is not significant in relation to the Grade B

product. The petitioners' conclusion that the total value of Grade C

silicomanganese sales revenue during the POI was significant compared

to the total value of Grade B silicomanganese sales revenue during the

POI is not accurate. The petitioners fail to take into account that the

sales revenue data used in their analysis reflects the disproportionate

production and sales quantities of Grade B silicomanganese and

silicomanganese slag during the POI. That is, a significant amount of

silicomanganese slag which was used to produce the Grade C product sold

during the POI was generated from slag produced in prior years.

Petitioners' analysis also fails to take into account the additional

costs incurred to recover the Grade C material from the slag. These

additional costs should be deducted from the gross revenues received

for the sales of Grade C silicomanganese to perform a net realizable

value comparison. After these adjustments, the net realizable value of

silicomanganese slag produced during the POI is insignificant when

compared to the net realizable value of all products produced during

the POI. See, e.g., Final Determination of SLTFV Polythylene

Terephthalate Film, Sheet and Strip From the Republic of Korea, 56 FR

16305, 16316 (April 22, 1991), concerning the accounting of recycled

scrap film. Accordingly, no allocation of costs is appropriate.

Comment 10: The petitioners assert that the Department should

calculate depreciation expense on the restated value of Hevensa's fixed

assets. The petitioners state that although Hevensa's use of historical

cost based depreciation in its submissions to the Department is

consistent with Venezuelan Generally Accepted Accounting Principles

(GAAP), the resulting depreciation expense is distorted by the high

level of inflation in Venezuela during the POI.

Although Hevensa revalued its assets in its financial statements

for the fiscal year ending October 31, 1993, Hevensa argues that

Venezuelan GAAP did not permit this revaluation of assets. Hevensa

further states that because its calculation of depreciation expense on

the basis of the historical value of its fixed assets for its

submissions to the Department is in accordance with the home-market

country's GAAP, it should be accepted by the Department.

DOC Position: We agree with the petitioners that the depreciation

expense should be based on the restated value of Hevensa's fixed

assets. Normally, the Department does calculate costs in accordance

with the GAAP of the home market country (see NTN Bearing Corp. of

America v. V-State, 826 F. Supp. 1435, 144-42 (CIT 1993). However, the

Department will not use a country's GAAP if it does not accurately

recognize a company's actual costs or distorts those costs (see Id.).

This case is unusual because the accounting authorities in the home

market country itself changed their position on the restatement of

fixed assets, allowing it for fiscal years beginning after October 31,

1993, after having not approved it in prior years. This decision to

revise Venezuelan GAAP was made on the basis of an on-going analysis of

the impact of economic conditions on the reporting of financial data.

Depreciation enables companies to spread large expenditures on

purchases of machinery and equipment over the expected useful lives of

these assets. Not adjusting for the devaluation of currency due to high

inflation results in the depreciation deferred to future years being

understated in constant currency terms, and, therefore, distorts the

Department's COP and CV calculations.

For these reasons, we have adjusted Hevensa's depreciation expense

to reflect amounts based on the restated value of Hevensa's fixed

assets.

Comment 11: The petitioners assert that the Department should not

deduct Hevensa's net exchange gain on financial assets and liabilities

nor its net exchange gain on client accounts in its calculation of

Hevensa's interest expense. The petitioners argue that because the net

exchange gains on financial assets and liabilities are not related to

the production of silicomanganese, the Department should not offset

Hevensa's interest expense with these gains. With respect to exchange

gains and losses on accounts receivable, the petitioners argue that

Department policy does not permit such items to be used as an offset to

interest expense.

Hevensa argues that its net exchange gain on financial assets and

liabilities should be treated in a manner similar to interest income on

short-term financial assets. The respondent also states that the

exchange gain or loss relates to a foreign deposit in which the total

return is equal to the sum of the interest to be paid and the exchange

gains and losses.

DOC Position: We agree with the petitioners, in part. It is

Department practice not to include exchange gains and losses on client

accounts receivable because the exchange rate we use to convert third-

country sales to U.S. dollars is that in effect on the date of the U.S.

sale. (See 19 CFR 353.60.) Accordingly, we have disallowed Hevensa's

claimed foreign exchange gains on client accounts receivable.

It is Department practice to include foreign exchange gains and

losses on financial assets and liabilities in our COP and CV

calculations where they are related to the company's production of the

subject merchandise. Financial assets and liabilities are directly

related to a company's need to borrow money, and we include the cost of

borrowing in our COP and CV calculations. Therefore, we disagree with

the petitioners and have included foreign exchange gains and losses on

financial assets and liabilities in COP and CV.

Comment 12: The petitioners assert that late payment penalties paid

to suppliers and net exchange losses on purchases from suppliers should

be reclassified as costs of manufacturing. The petitioners cite prior

Department policy in which all costs directly associated with the

purchasing of materials were included in material costs.

Hevensa argues that because money is fungible, late payment

penalties and net exchange losses on purchases from suppliers should be

classified as a general expense, not as a cost of manufacturing.

Hevensa notes that by borrowing working capital from its suppliers (by

delaying its payments), it freed up its remaining cash to be used in

other operations, and thus borrowing from these suppliers helped

finance Hevensa's overall operations.

DOC Position: We agree with the petitioners, in part. Foreign

exchange gains and losses on the purchase of raw materials used in

production of subject merchandise relate directly to the acquisition of

the input materials and should be included in the cost of manufacture.

Late payment penalties, which represent interest charges for late

payment to suppliers, are directly related to management's decision on

the usage of capital. Because the Department considers the cost of

acquiring capital to be fungible, we believe these late payment

penalties are classified appropriately as interest expense.

Comment 13: The petitioners assert that Hevensa misallocated the

cost of silicomanganese fines and manganese ore used in the production

of Grade B lump silicomanganese. Hevensa divided the total costs of

fines and manganese ore for the month by the total volume of Grade B

lump and fines produced during the same month to obtain a monthly cost

of fines and ore per unit of silicomanganese produced. Petitioners also

assert that because Hevensa reported no sales of Grade B fines during

the POI, Hevensa should have allocated the fines and ore cost only over

the volume of Grade B lump and silicomanganese slag produced.

Hevensa contends that it properly allocated cost to the Grade B

silicomanganese fines produced, even though none were sold during the

POI. The costs assigned to the fines are included in the inventory

value of the fines, and then included in the submitted costs of

manufacture when the fines are used in production. If no cost is

assigned to fines generated during production, then no cost for fines

used in production should be included in the submitted cost of

manufacturing.

DOC Position: We disagree with the petitioners. Hevensa did not

misallocate the cost of silicomanganese fines and manganese ore. The

costs assigned to the silicomanganese Grade B fines generated in the

production process are the same costs assigned to silicomanganese Grade

B fines reintroduced into the furnace. In our view, this methodology

does not distort costs. Accordingly, no adjustment is necessary.

Comment 14: The petitioners argue that Hevensa should include VAT

on raw materials as part of its production costs for months that were

subject to VAT. To exclude VAT on cost of materials from COP and CV

would be contrary to Department practice.

Hevensa argues that if the Department includes the value added

taxes paid on inputs in the cost of production, it must also include

the VAT received from its customers in the price for purposes of the

sales below cost test.

DOC Position: We agree with the respondent. The amount of VAT

included in the home market COP should be the same as the amount that

is included in the home market sales prices. For CV and third-country

sales, no VAT on raw materials should be included. If the VAT is

rebated by the government upon export, no VAT is added to CV on third

country sales price in any event, pursuant to Section 773(e)(1)(a).

Comment 15: Hevensa argues that the Department should perform the

sales below cost test by comparing the sales price to a monthly

weighted-average COP. It asserts that comparing sales prices at the

beginning of the POI to a weighted-average COP for the POI would be

distortive, given the high rate of inflation experienced in Venezuela

during the POI.

The petitioners argue that Hevensa's proposed comparison of monthly

COPs, calculated on a historical cost basis, to monthly selling prices

would be contrary to Department practice and highly distorted.

Petitioners assert that as a consequence of the erosion of the value of

the Venezuelan currency between the date the inputs were purchased and

the date of shipment of the silicomanganese produced using inventoried

inputs, Hevensa's proposed methodology understates Hevensa's production

costs.

DOC Position: Department practice is to compute a single POI

weighted-average cost of production for each different model or product

of subject merchandise. Monthly COPs are computed in situations where

the country under investigation is experiencing ``hyperinflation.''

When a country is experiencing hyperinflation, we require respondents

to report monthly COPs using the replacement cost methodology. In this

investigation, the Department determined that the Venezuelan economy

was not experiencing hyperinflation during the POI. Indeed, this was

the position taken by Hevensa during the investigation. As a

consequence, Hevensa submitted its historical costs rather than the

replacement costs required by the Department's hyperinflation

methodology. Accordingly, monthly weighted average COPs were not used

in the calculations for the final determination.

Continuation of Suspension of Liquidation

We are directing the Customs Service to continue to suspend

liquidation of all entries of silicomanganese from Venezuela that are

entered, or withdrawn from warehouse, for consumption on or after June

17, 1993, the date of publication of our preliminary determination in

the Federal Register. The Customs Service shall require a cash deposit

or posting of a bond equal to the estimated amount by which the FMV of

the merchandise subject to this investigation exceeds the U.S. price,

as shown below. This suspension of liquidation will remain in effect

until further notice. The weighted-average dumping margins are as

follows:

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

Weighted-average

Producer/manufacturer exporter margin

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

Hevensa............................................. 8.81

All others.......................................... 8.81

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

ITC Notification

In accordance with section 735(d) of the Act, we have notified the

U.S. International Trade Commission (ITC) of our determination. The ITC

will now determine, within 45 days, whether these imports are

materially injuring, or threatening material injury to the U.S.

industry. 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 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.

Notification to Interested Parties

This notice also serves as the only reminder to parties subject to

administrative protective order (APO) of their responsibility

concerning 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 and 19 CFR 353.20(a)(4).

Dated: October 31, 1994.

Susan G. Esserman,

Assistant Secretary for Import Administration.

[FR Doc. 94-27547 Filed 11-4-94; 8:45 am]

BILLING CODE 3510-DS-P