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

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## Record

- **Collection:** Federal Register
- **Document type:** Uncategorized Document
- **Published:** November 7, 1994

## Text

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

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A94-27547. Public record. Not legal advice.