Final Determination of Sales at Less Than Fair Value: Ferrosilicon From Brazil

DEPARTMENT OF COMMERCE

International Trade Administration

[A-351-820]

Final Determination of Sales at Less Than Fair Value:

Ferrosilicon From Brazil

Agency: Import Administration, International Trade Administration,

Department of Commerce.

EFFECTIVE DATE: January 6, 1994.

FOR FURTHER INFORMATION CONTACT: Kimberly Hardin, Office of Antidumping

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

14th Street and Constitution Avenue, NW., Washington, DC 20230;

telephone (202) 482-0371.

FINAL DETERMINATION: We determine that ferrosilicon (FeSi) from Brazil

is being, or is 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), and that critical circumstances exist for

Italmagnesio S.A. Industria e Comercio (Italmagnesio), but not for

Companhia Ferroligas Minas Gerais (Minasligas) or Companhia Brasileira

Carbureto de Calcio (CBCC). The estimated margins are shown in the

``Suspension of Liquidation'' section of this notice.

Scope of Investigation

The merchandise subject to this investigation is ferrosilicon, a

ferroalloy generally containing, by weight, not less than four percent

iron, more than eight percent but not more than 96 percent silicon, not

more than 10 percent chromium, not more than 30 percent manganese, not

more than three percent phosphorous, less than 2.75 percent magnesium,

and not more than 10 percent calcium or any other element.

FeSi is a ferroalloy produced by combining silicon and iron through

smelting in a submerged-arc furnace. FeSi is used primarily as an

alloying agent in the production of steel and cast iron. It is also

used in the steel industry as a deoxidizer and a reducing agent, and by

cast iron producers as an inoculant.

FeSi is differentiated by size and by grade. The sizes express the

maximum and minimum dimensions of the lumps of FeSi found in a given

shipment. FeSi grades are defined by the percentages by weight of

contained silicon and other minor elements. FeSi is most commonly sold

to the iron and steel industries in standard grades of 75 percent and

50 percent FeSi.

Calcium silicon, ferrocalcium silicon, and magnesium ferrosilicon

are specifically excluded from the scope of this investigation. Calcium

silicon is an alloy containing, by weight, not more than five percent

iron, 60 to 65 percent silicon, and 28 to 32 percent calcium.

Ferrocalcium silicon is a ferroalloy containing, by weight, not less

than four percent iron, 60 to 65 percent silicon, and more than 10

percent calcium. Magnesium ferrosilicon is a ferroalloy containing, by

weight, not less than four percent iron, not more than 55 percent

silicon, and not less than 2.75 percent magnesium.

FeSi is currently classifiable under the following subheadings of

the Harmonized Tariff Schedule of the United States (HTSUS):

7202.21.1000, 7202.21.5000, 7202.21.7500, 7202.21.9000, 7202.29.0010,

and 7202.29.0050. Although the HTSUS subheadings are provided for

convenience and customs purposes, our written description of the scope

of this investigation is dispositive.

FeSi in the form of slag is included within the scope of this

investigation if it meets, generally, the chemical content definition

stated above and is capable of being used as FeSi. FeSi is used

primarily as an alloying agent in the production of steel and cast

iron. It is also used in the steel industry as a deoxidizer and a

reducing agent, and by cast iron producers as an inoculant. Parties

that believe their importations of slag do not meet these definitions

should contact the Department and request a scope determination.

Period of Investigation

The period of investigation (POI) is July 1, 1992, through December

31, 1992.

Case History

Since the publication of the notice of preliminary determination on

August 16, 1993 (58 FR 43323), the following events have occurred.

On August 20, 1993, respondent Italmagnesio notified the Department

that it had decided to withdraw from participation in this

investigation and requested the return of all documents that it

submitted during the course of the investigation.

On August 25, 1993, we returned the proprietary versions of all

documents submitted by Italmagnesio during the investigation.

On August 23, 24, and 25, 1993, CBCC, petitioners, and Minasligas,

respectively, requested a public hearing.

The Department conducted verification of the cost and sales

responses of Minasligas and CBCC in Brazil from August 25 through

September 14, 1993.

Petitioners, CBCC, and Minasligas submitted case briefs on October

27, 1993, and rebuttal briefs on November 1, 1993.

On November 3, 1993, a public hearing was held.

Best Information Available

As stated in the ``Case History'' section of this notice,

Italmagnesio withdrew its responses prior to verification and stated

that it would not participate further in the investigation. Therefore,

Italmagnesio must be considered a non-cooperating party. As a non-

cooperating party, based on our past practice (see e.g., 58 FR 37215,

Final Determination of Sales At Less Than Value, Certain Cut-to-Length

Carbon Steel Plate from the United Kingdom, July 9, 1993), Italmagnesio

will be assigned the higher of the margins alleged in the petition or a

calculated margin for another company as best information available

(BIA). (See Comment 15)

Such or Similar Comparisons

We have determined that all the products covered by this

investigation constitute a single category of such or similar

merchandise. Where there were no sales of identical merchandise in the

home market to compare to U.S. sales, we compared similar merchandise

based on the following criteria: (1) The percentage range, by weight,

of silicon content; (2) grade; and (3) sieve size. (See Comment 2 with

regard to sieve size.)

Fair Value Comparisons

To determine whether sales of FeSi 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 below.

United States Price

A. CBCC

We based USP on purchase price, in accordance with section 772(b)

of the Act, because the subject merchandise was sold to unrelated

purchasers in the United States prior to importation and exporter's

sales price was not indicated by other circumstances.

We calculated purchase price based on packed FOB port of

embarkation prices to unrelated customers. Because CBCC did not report

packing for bulk sales, we used information from the public version of

Minasligas' response for bulk packing. We made deductions where

appropriate for foreign inland freight (which also included foreign

inland insurance), foreign brokerage and handling, and warehousing.

We made an adjustment to USP for the taxes paid on the comparison

sales in Brazil. 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.

The Department has changed its methodology in accordance with the

Federal-Mogul decision, and has applied this new methodology in making

the final determination in this investigation. From now on, the

Department will add to USP the result of multiplying the foreign market

tax rate by 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. The Department will also adjust the USP tax

adjustment and the amount of tax included in FMV. These adjustments

will deduct the portions of the foreign market tax and the USP tax

adjustment that are the result of expenses that are included in the

foreign market price used to calculate foreign market tax and are

included in the United States merchandise price used to calculate the

USP tax adjustment and that are later deducted to calculate FMV and

USP. These adjustments to the amount of the foreign market tax and the

USP tax adjustment are necessary to prevent the new 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 bases 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 amount of tax included in FMV and

the USP tax adjustment still reflects the amounts of these expenses.

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

between USP and FMV, but is the result of the price of the United

States merchandise containing more expenses than the price of the

foreign market merchandise. The Department's policy to avoid the margin

creation effect is in accordance with the United States Court of

Appeals' holding 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, there are four different taxes levied on

sales of the subject merchandise in the home market. The ICMS tax is a

regional tax, which varies depending upon the state in which the

purchase originates. The IPI tax is a fixed percentage rate tax of four

percent. Finally, the PIS and FINSOCIAL taxes are a fixed percentage

rate tax equalling 2.65 percent combined. CBCC used both a unit and a

gross basis to calculate the combined PIS and FINSOCIAL taxes within

various months of the POI. We recalculated these taxes on a unit basis,

where appropriate, which is the way CBCC calculated them. Because these

taxes are calculated on the same base price, we find them not to be

cascading. Thus, for each sale, we made only one tax adjustment which

equals the sum of the actual tax rates.

B. Minasligas

We based USP on purchase price, in accordance with section 772(b)

of the Act, because the subject merchandise was sold to unrelated

purchasers in the United States prior to importation and exporter's

sales price was not indicated by other circumstances.

We calculated purchase price based on packed FOB port of

embarkation prices to unrelated customers. We made deductions where

appropriate for foreign inland freight (which also included foreign

inland insurance) and foreign brokerage and handling.

We made an adjustment to USP for the taxes paid on the comparison

sale in Brazil. (See above description under ``A. CBCC'' for an

explanation of our new tax methodology as well as a description of the

specific taxes in this investigation.)

Foreign Market Value

In order to determine whether there were sufficient sales of FeSi

in the home market to serve as a viable basis for calculating FMV, we

compared the volume of home market sales of FeSi to the aggregate

volume of third country sales in accordance with section 773(a)(1)(B)

of the Act. For both CBCC and Minasligas, the volume of home market

sales was greater than five percent of the aggregate volume of third

country sales. Therefore, for both CBCC and Minasligas, we determined

that home market sales of FeSi constituted a viable basis for

calculating FMV, in accordance with 19 CFR 353.48(a).

In the petition and in subsequent filings, petitioners alleged that

home market sales were made at less than the cost of production (COP)

and that constructed value (CV) should be used to compute FMV. Based on

petitioners' allegations, which provided a reasonable basis to

``believe or suspect'' below cost sales (see section 773(b) of the

ACT), we initiated COP investigations. We examined respondents' cost

data at verification and analyzed this information for purposes of this

final determination.

We determine Brazil's economy to be hyperinflationary. Therefore,

in order to eliminate the distortive effects of inflation, consistent

with past practice (see, e.g., 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), we calculated

separate weighted-average FMVs, COPs, and CVs for each month.

A. CBCC

In order to determine whether home market sales were above the COP,

we calculated the monthly COPs on the basis of CBCC's cost of

materials, fabrication, general expenses, and packing. We relied on the

COP data submitted by CBCC except in the following instances where the

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

1. Revised general and administrative (G&A) expenses by calculating

them as a percentage of cost of goods sold as reported on CBCC's 1992

financial statements (see Comment 4);

2. Added an amount for the G&A expenses of CBCC's parent company

(see Comment 4);

3. Revised the interest expense computation using the financial

statements of CBCC's parent, Solvay do Brasil (see Comment 3);

4. Included IPI and ICMS taxes as part of reported material costs

in COP (see Comment 5);

5. Recalculated the cost of CBCC's own production of charcoal based

upon BIA (see Comment 6);

6. Recalculated depreciation costs for Furnace 8 based upon a 10

year useful life (see Comment 7);

7. Corrected an error in the October 1992 calculation of

electricity cost (see Comment 9);

8. Added packing expenses in COP for the home market and United

States, respectively.

We compared individual home market prices with the monthly COPs. We

tested the home market prices on a sieve-size-specific basis and found,

for all sieve sizes, that between 10 and 90 percent of sales in the

home market were made at prices above the COP. Therefore, we

disregarded the below-cost sales, if those sales were made over an

extended period of time. CBCC did not provide any information in its

responses to indicate that its below cost sales were made at prices

which would permit recovery of all costs within a reasonable period of

time in the normal course of trade. In order to determine whether

below-cost sales were made over an extended period of time, we

performed the following analysis on a product-specific basis: (1) If

respondent sold a product in only one month of the POI and there were

sales in that month below the COP, or (2) if 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. All of

CBCC's sales were made over an extended period of time.

For CBCC, we based FMV on home market prices. However, for one U.S.

sale, although there were comparable home market sales in the same

month, we were unable to make a difference-in-merchandise (DIFMER)

adjustment. This is because the U.S. product was produced in a month

different than the home market products and in hyperinflationary

economies, we limit such adjustments to products produced and sold in

the same month. In that instance, we used CV as FMV.

We calculated CV in accordance with section 773(e)(1) of the Act.

The monthly CV includes materials, fabrication, general expenses,

profit and packing. We made all adjustments described in the COP

section (except for the inclusion of ICMS and IPI taxes in material

costs) in calculating the CV. We used the following as the basis for

calculating CV:

(1) CBCC's actual general expenses because they exceed the

statutory ten percent minimum of materials and fabrication, in

accordance with section 773(e)(1)(B)(i) of the Act;

(2) the statutory minimum profit of eight percent, in accordance

with section 773(e)(1)(B)(ii) of the Act, as CBCC's profit was less

than eight percent of the sum of general expenses and the cost of

manufacture; and

(3) we calculated an offset to interest expense to avoid double

counting the portion of such expense attributable to the imputed credit

and inventory carrying costs which were already included in the

selling, general and administrative expenses.

We made circumstance-of-sale adjustments for differences in credit

expenses, in accordance with 19 CFR 353.56(a). Finally, we added U.S.

packing expenses to CV.

For price-to-price comparisons, we based FMV on ex-factory prices,

inclusive of packing, to unrelated customers. We deducted foreign

inland freight from FMV. We made circumstance-of-sale adjustments,

where appropriate, for differences in credit expenses, in accordance

with 19 CFR 353.56(a). Because the home market credit figure reported

by CBCC is actually interest revenue, we imputed credit expense and

then applied the interest revenue as an offset against the imputed

expense. We also used the actual paydates found at verification in our

credit expense calculation. For those sales which we did not examine at

verification, we added the average difference between the paydate

reported and the actual paydate from the verified sales.

For FeSi sales packed in bags, we deducted home market packing

costs and added U.S. packing costs. Because CBCC did not report packing

for bulk sales, we used information on bulk packing costs from the

public version of Minasligas' response for these sales.

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

market. We also calculated the amount of the tax that was due solely to

the inclusion of price deductions in the original tax base (i.e., the

sum of any amounts that were deducted from the tax base). This amount

was deducted from the FMV after all other additions and deductions had

been made. By making the additional tax adjustments, we avoid a

distortion that would create a dumping margin even when pre-tax dumping

is zero.

B. Minasligas

In order to determine whether home market sales were above the COP,

we calculated the monthly COPs on the basis of Minasligas' cost of

materials, fabrication, general expenses, and packing. We relied on the

COP data submitted by Minasligas except in the following instances

where the costs were not appropriately quantified or valued.

Specifically, we:

1. Revised G&A expenses by calculating them on an annual basis as a

percentage of cost of goods sold as reported in Minasligas' 1992

financial statements (see Comment 4);

2. Revised interest expenses to include finance expenses of Delp

(Minasligas' parent company), and disallowed a portion of the claimed

interest income offset (see Comment 3);

3. Included IPI and ICMS taxes as part of reported material costs

in COP (see Comment 5);

4. Revised the labor and overhead allocation methodology to reflect

production quantity (see Comment 14);

5. Adjusted the inventory holding gains and losses to account for

revisions in the reported costs (see Comment 10);

6. Disallowed the claimed differences in cost between high purity

and standard grade FeSi and used the ``all kinds'' reported costs;

7. Added packing expenses in COP for the home market and United

States, respectively.

We compared individual home market prices with the monthly COPs. We

tested the home market prices on a sieve-size-specific basis and found,

for certain sieve sizes, that between 10 and 90 percent of sales of

each in the home market were made at prices above the COP. Therefore,

we disregarded the below-cost sales for those sieve sizes, if those

sales were made over an extended period of time. Minasligas did not

provide any information in its responses to indicate that its below

cost sales were made at prices which would permit recovery of all costs

within a reasonable period of time in the normal course of trade. In

order to determine whether below-cost sales were made over an extended

period of time, we performed the following analysis on a product-

specific basis: (1) If respondent sold a product in only one month of

the POI and there were sales in that month below the COP, or (2) if

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. All of Minasligas' below cost sales were made over an

extended period of time.

For Minasligas, we based FMV on home market prices. We calculated

FMV based on ex-factory prices, inclusive of packing, to unrelated

customers. We deducted foreign inland freight from FMV. We made

circumstance-of-sale adjustments, where appropriate, for differences in

credit expenses, in accordance with 19 CFR 353.56(a). Because the home

market credit figure reported by Minasligas is actually interest

revenue, we imputed credit expense and then used the interest revenue

as an offset against the imputed expense. We imputed U.S. credit

because Minasligas did not report this expense. We used the ``First

Payment'' date reported by Minasligas and the monthly interest rates

based on the ``Taxa Referential'' which is the Brazilian Government's

referential index for short-term borrowings. We also made circumstance-

of-sale adjustments, where appropriate, for direct selling expenses

(finance charges), warehousing, and quality control expenses. We

reallocated a portion of direct selling expenses to foreign brokerage

and handling based on findings at verification. Finally, we deducted

home market packing costs and added U.S. packing costs.

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

market. We also calculated the amount of the tax that was due solely to

the inclusion of price deductions in the original tax base (i.e., the

sum of any adjustments that were deducted from the tax base). This

amount was deducted from the FMV after all other additions and

deductions had been made. By making the additional tax adjustments, we

avoid a distortion that would create a dumping margin even when pre-tax

dumping is zero.

Critical Circumstances

Petitioners alleged that critical circumstances exist with respect

to imports of FeSi from Brazil. Section 735(a)(3) of the Act provides

that critical circumstances exist if we determine that:

(A) (i) There is a history of dumping in the United States or

elsewhere of the class or kind of merchandise which is the subject of

the investigation, or

(ii) The person by whom, or for whose account, the merchandise was

imported knew or should have known that the exporter was selling the

merchandise which is the subject of the investigation at less than its

fair value, and,

(B) There have been massive imports of the class or kind of

merchandise which is the subject of the investigation over a relatively

short period.

Regarding (A)(i) above, we normally consider whether there has been

an antidumping order in the United States or elsewhere on the subject

merchandise in determining whether there is a history of dumping.

Regarding (A)(ii) above, we normally consider margins of 25 percent or

more for purchase price comparisons and 15 percent or more for

exporter's sales price comparisons as sufficient to impute knowledge of

dumping.

Pursuant to section 735(a)(3)(B), we generally consider the

following factors in determining whether imports have been massive over

a short period of time: (1) The volume and value of the imports; (2)

seasonal trends (if applicable); and (3) the share of domestic

consumption accounted for by imports. If imports during the period

immediately following the filing of a petition increase by at least 15

percent over imports during a comparable period immediately preceding

the filing of a petition, we normally consider them massive.

Since the calculated dumping margins for CBCC and Minasligas are

not in excess of 25 percent, we cannot impute knowledge under section

735(a)(3)(A)(ii) of the Act. (See, e.g., Final Determination of Sales

At Less Than Fair Value; Tapered Roller Bearings and Parts Thereof,

Finished or Unfinished, from Italy, 52 FR 24198, June 29, 1987.)

Petitioners provided information regarding respondent's history of

dumping in a third country. Therefore, we examined whether imports have

been massive. Based on our analysis of verified company specific import

data, we determined that imports have not been massive over a

relatively short period of time for CBCC and Minasligas. Accordingly,

we determine that critical circumstances do not exist for CBCC and

Minasligas. However, for Italmagnesio, a non-cooperative respondent,

based on BIA we determine that critical circumstances exist. In the

case of Italmagnesio, the margin in excess of 25 percent is high enough

to impute knowledge of dumping and, as BIA, we concluded that imports

have been massive over a relatively short period of time.

Because we found that critical circumstances do not exist with

respect to all cooperative respondents, we also find that critical

circumstances do not exist with respect to all other exporters and

producers of the subject merchandise from Brazil, except for

Italmagnesio.

Verification

As provided in section 776(b) of the Act, we conducted verification

of the information provided by CBCC and Minasligas by using standard

verification procedures, including the examination of relevant sales

and financial records, and selection of original source documentation

containing relevant information.

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 the

Brazilian currency published by the Central Bank of Brazil. In the

instances when a post-POI exchange rate was required, we used a monthly

average exchange rate from International Monetary Fund's International

Financial Statistics.

In hyperinflationary economies, the Department normally converts

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

payable. Where we did not have the exact payment date for a charge, we

converted charges for U.S. sales on the date of shipment, the closest

approximation to the date the charges became payable. For two of CBCC's

U.S. sales, it was necessary to convert the bulk packing charges on the

date of sale as we did not have a bulk packing rate in the month of

shipment for those U.S. sales. Thus, for these two sales we converted

the packing charges in the same month in which the U.S. sales occurred.

Interested Party Comments

Comment 1: Petitioners argue that, based on the facts now available

to the Department, the dumping margins established in the preliminary

determination are inadequate to offset the actual dumping margin of

Brazilian FeSi producers. In addition, petitioners believe that at

verification the Department confirmed the existence of major,

continuing deficiencies in respondents' information. Accordingly,

petitioners contend that the Department should assign the highest, most

adverse margin based on noncooperative BIA to both CBCC and Minasligas.

DOC Position: We disagree with petitioners. CBCC and Minasligas'

mistakes, found during the course of this investigation, when taken as

a whole, do not represent a verification failure and do not support a

claim of respondents' noncooperation. The minor errors in calculation

or discrepancies with regard to adoption of certain methodological

premises do not merit the use of BIA. Therefore, we have followed our

practice of correcting errors found at verification as long as those

errors are minor and do not exhibit a pattern of systemic misstatement

of fact. Thus, we are able to use the data submitted by CBCC and

Minasligas, corrected for errors noted at verification, in our

calculations.

Comment 2: Petitioners argue that the Department should use the

highest, most adverse noncooperative BIA rate for CBCC and Minasligas

since they both repeatedly failed to provide the Department with the

accurate sieve size and silicon content of the FeSi they sold.

Petitioners maintain that CBCC's August 17, 1993, letter contained

information about silicon content and sieve size known to be

inaccurate. Petitioners contend that accurate information was clearly

available to CBCC and the fact that it was not provided prevented the

Department from making such or similar comparisons in the final

determination, as required by the Act. Similarly, petitioners note that

Minasligas, in its August 25, 1993, revised product concordance, failed

to provide the exact silicon content and sieve size of its home market

sales.

CBCC believes that the Department incorrectly based its preliminary

determination on BIA because of the alleged failure by CBCC to provide

a proper product concordance. CBCC states that it cannot fabricate a

product concordance to the level of sieve size, which was requested by

the Department, because there is no difference in product between sieve

sizes. CBCC argues that the Department verified that sieve size is

irrelevant in terms of the cost and the price and, thus, any DIFMER

would be zero. CBCC maintains that based on the information submitted

and the production processes observed at verification, the Department

should use CBCC's information as the basis for the final determination.

Similarly, Minasligas maintains that sieve size does not impact

cost or price of FeSi and should not be considered a factor for product

comparison purposes. With respect to providing information on exact

silicon content, Minasligas contends that the ASTM standard

specifications for FeSi 75 percent under grade C provide for a product

containing between 74 percent and 79 percent of silicon. Minasligas

argues that since all of its FeSi sales are of FeSi 75 percent the

exact silicon content of the product within this range is irrelevant.

DOC Position: We agree with respondents. We determine that

Minasligas provided a unique code for each sieve size for each sale

during the POI, in accordance with directions in Appendix V. We used

Minasligas' product matching method for purposes of margin calculation;

however, we rematched in a few instances where we disagreed with their

selection. We based matching on home market sales with sieve size

ranges which were closest to the sieve size range of the U.S. product.

We also determine that CBCC reported sieve sizes in accordance with

Appendix V. The sieve size ranges reported by CBCC were broader than

those reported by Minasligas and were broader than the ranges observed

on CBCC's individual home market sales. Nevertheless, these ranges do

allow us to match within the closest sieve size range, as specified in

Appendix V. Moreover, these broad ranges are consistent with CBCC's

selling practices. CBCC stated on the record that it fills customer

orders with the broadest range of possible sieve sizes. Therefore, we

accepted CBCC's revised coding system, and matched home market sales

with all possible sieve sizes, including those that may extend beyond

the sieve size range of the U.S. product because this corresponds to

CBCC's selling practices. We excluded from FMV only those home market

sales where the sieve size ranges are entirely outside the sieve size

range of the U.S. sale in question. (See Concurrence Memorandum dated

December 29, 1993.)

In addition, we also agree with respondents that reported silicon

content ranges, within acceptable ASTM specifications, are adequate.

Comment 3: Petitioners claim that both CBCC and Minasligas failed

to report their respective interest expenses on a consolidated basis

for the purposes of calculating COP in accordance with Department

practice. Petitioners argue that CBCC's refusal to provide this

information prevented the Department from verifying these expenses.

Accordingly, petitioners state that the Department should use adverse,

``noncooperative BIA'' in calculating interest expense for CBCC.

However, in the event that the Department does not use ``noncooperative

BIA,'' petitioners suggest that the Department use Solvay do Brasil's

audited financial statements to calculate interest expense for the

purposes of calculating CBCC's COP and CV. Similarly, petitioners

contend that the Department should allocate interest expense to

Minasligas' COP based on Delp's (Minasligas' parent company) 1992

audited financial statements as a percentage of cost of goods sold,

without allowance for a short-term interest income offset.

CBCC argues that the Department should use its non-consolidated

income statement, rather than the corporate consolidated figure, to

compute net interest expense. CBCC claims that the advances of funds

from subsidiary to parent were the reverse of those normally seen by

the Department and were not ``interest free''. CBCC further argues that

without CBCC, Solvay do Brasil would have had to borrow funds in the

commercial market. Thus, CBCC suggests that the Department should

increase CBCC's financial receipts by an imputed interest on the

interest free loans that CBCC made to its parent. With regard to

petitioners' allegation that CBCC refused to provide the Department

with Solvay do Brasil's financial statement, CBCC explains that the

Department requested an additional copy of the translated financial

statement, previously submitted to the Department on June 10, 1993,

which the company was unable to provide at verification.

Minasligas contends that its financial statements are not

consolidated with Delp's statements. Minasligas maintains that there is

no borrowing relationship between Delp and Minasligas, and further,

there is no evidence of control by Delp over borrowings by Minasligas.

Minasligas, therefore, believes it is inappropriate to substitute

Delp's interest expenses for that of Minasligas. Minasligas asserts

that it correctly reduced its submitted unconsolidated interest

expenses by various forms of short-term financial income, including

capital gains, exchange rate gains, discounts, and monetary correction.

DOC Position: We agree with petitioners that CBCC and Minasligas

should report interest expense on a consolidated basis. The

Department's position is that the cost of capital is fungible,

therefore, calculating interest expense based on consolidated

statements is the most appropriate methodology.

As discussed in the cost verification report of CBCC, we noted that

CBCC and Solvay do Brasil rely on intercompany interest-free borrowing

to meet their working capital requirements. In addition, in order to

extinguish its outstanding debt, CBCC issued new shares of capital

stock to its parent company. After establishing at verification that

CBCC and Solvay do Brasil have significant financial transactions with

each other, we requested information documenting financial expense at

the Solvay do Brasil level. Company officials refused to provide any

data. Therefore, we have based financial expense for CBCC using BIA. As

BIA, we used information from Solvay do Brasil's financial statements

(exhibit B; June 10, 1993, questionnaire response). This percentage was

then applied to each month's COM.

In the case of Minasligas, Delp does not consolidate its accounts

with Minasligas. In addition, because there are no significant

intercompany transactions between the two companies, we combined the

financial expenses of the two companies, effectively creating

consolidated accounts. Regarding the offset claimed by Minasligas, the

Department only allows income generated from investments of working

capital which the company documents as short-term in nature. Minasligas

was able to substantiate only a portion of the investments to be short-

term; consequently, we have allowed only the documented portion of

interest income as an offset. We did not allow an offset to Minasligas'

parent, Delp, for interest expense because the information required to

substantiate such an adjustment is not contained in the record of this

investigation.

For both companies, in order to avoid overstating financing

charges, we applied the interest expense ratio to each month's COM

calculated on a historical basis rather than amounts computed under the

replacement cost basis.

Comment 4: Petitioners maintain that CBCC and Minasligas failed to

follow the Department's established practice for allocating G&A

expenses. Petitioners make the same allegation with regard to CBCC's

selling expenses. Petitioners claim that G&A expenses are period costs

that should be allocated based on the ratio of total annual G&A

expenses over total annual costs of goods sold. Selling expenses should

be allocated similarly. However, petitioners state that CBCC allocated

G&A and selling expenses to individual products, using the ratio of

each separate product's cost of goods sold. Minasligas allocated POI

G&A expenses on a monthly basis. For purposes of the final

determination, petitioners believe that the Department should

reallocate these expenses following its established practice.

CBCC argues that the Department should not use the ratio of

expenses to cost of goods sold as an estimate of G&A expenses. CBCC

believes that the monthly expenses accurately reflect, on a replacement

cost basis, the expenses for the company in that month and are the most

appropriate figures to use. CBCC claims that the petitioners are urging

the Department to use a methodology that the Court of International

Trade specifically invalidated as susceptible to overstating the

effects of inflation.

Minasligas agrees that G&A expenses are period costs, but maintains

that an annual calculation based on cost of sales is problematic

because the annual G&A expense and the annual cost of sales are

conglomerations of monthly expenses which have not been adjusted for

inflation. Minasligas believes the Department should calculate G&A

rates based on monthly averages or a simple average G&A rate.

DOC Position: We agree with petitioners in part. G&A expenses are

period expenses which are normally measured over a fiscal year. As

such, the Department calculates G&A on an annual basis. To calculate

G&A for a lesser period may exclude certain expenses, which is

distortive. Therefore, we recalculated G&A expenses on an annual

historical basis for both companies and, in order to avoid overstating

G&A expenses and neutralize hyperinflationary effects, we applied the

G&A ratio to each month's COM calculated on a historical basis. We also

revised CBCC's reported G&A to include a portion of Solvay do Brasil's

G&A, which CBCC had failed to include in its reported costs. Moreover,

we calculated CBCC's selling expense portion of SG&A based on sales of

the same class or kind of merchandise according to our normal practice.

Comment 5: Petitioners contend that the Department should include

ICMS and IPI taxes in CBCC's and Minasligas' reported materials costs

in applying the Department's sales-below-cost test. Petitioners state

that Department practice is to perform the sales-below-cost test on a

tax-inclusive basis, with the COP and home market prices containing the

same absolute amount of taxes. With regard to CV, petitioners contend

that the Department has previously determined that ICMS and other

domestic taxes are not remitted or refunded upon exportation and

consequently have to be included in CV.

CBCC submits that the Department should not include the ICMS and

IPI taxes in its COP and CV calculations. CBCC states that the

Department reviewed CBCC's records at verification showing that CBCC's

payments of ICMS offset any amount owed by virtue of its receipts of

ICMS. Thus, CBCC claims that the ``cost of materials'' does not include

any ICMS or IPI value, because CBCC always receives a tax credit for

these payments.

Minasligas argues that in determining whether home market sales are

above the cost of production, the Department must either include ICMS

and IPI in the cost of production and in the sales price to the

domestic market or exclude them from both sides to avoid double

counting. Minasligas further argues that these taxes should not be

included in calculations of CV because they are offset against the

amounts collected from the domestic market sales.

DOC Position: We agree with petitioners in part. For our test of

home market sales below cost we have included the same amount of

domestic taxes in the COP and the domestic sales prices. However, when

using CV as a surrogate for home market prices we must determine if in

fact the entity under investigation is able to recover all of the taxes

paid on inputs (raw materials) from its domestic sales of subject

merchandise. If domestic sales of subject merchandise fully recover all

of the domestic taxes paid on inputs, then these taxes would

appropriately be excluded from the margin analysis. However, if the

producer is not able to recover all input taxes from its sales of

subject merchandise, then these actual costs must be reflected in the

CV. (See Camargo Correa Metais, S.A., v. United States, Slip Op. 93-

163, p. 19 (August 13, 1993).

We have determined that CBCC's domestic sales of subject

merchandise fully recover all input taxes incurred to produce the

subject merchandise sold in both the domestic and export markets. We

have excluded the domestic tax amounts from CV because the taxes paid

are offset against the amounts which are collected on domestic sales

which are rebated to the government.

Comment 6: Petitioners claim that CBCC did not accurately report

its charcoal replacement costs. They further argue that CBCC did not

provide the Department with the additional documentation requested

regarding the estimated harvest of wood and other assumptions used in

the calculation of the amortization costs for charcoal production.

Petitioners argue that by not providing this information, CBCC

prevented the Department from verifying the accuracy of the cost data

and CBCC did not comply with Department practice in reporting

replacement costs for company-produced charcoal. Therefore, petitioners

state that the Department should assign a noncooperative BIA rate to

CBCC. Alternatively, petitioners suggest that the Department adjust

CBCC's reported cost for company-produced charcoal upward to the level

of CBCC's cost for purchasing charcoal from unrelated suppliers.

CBCC argues that since charcoal accounts for less than three

percent of the cost of production of FeSi, use of BIA because of the

difficulty encountered with verifying the accuracy of this factor of

production would be totally inappropriate. CBCC maintains that should

the Department make any adjustments to the charcoal costs it should

only adjust the figures with the information gathered at verification

rather than disregard the entire response.

DOC Position: We agree with petitioners that we should adjust

CBCC's charcoal replacement costs; however, we disagree that CBCC was

noncooperative and should receive a margin based solely upon BIA. We

discovered errors made by CBCC in calculating its cost of producing

charcoal, a primary raw material, used in the production of FeSi. CBCC

substantially understated its cost of producing charcoal by

inaccurately recording the costs associated with their wood forests

which provide the raw material needed to produce charcoal. Therefore,

we have recalculated the cost of CBCC's production of charcoal. As

suggested by petitioners, we relied upon the actual weighted-average

monthly cost CBCC was charged by unrelated vendors.

Comment 7: Petitioners claim that CBCC incorrectly accelerated the

depreciation on a particular furnace by five years. The result was a

disproportionate allocation of costs to products manufactured during

the first five years the furnace was put into service, as opposed to

the second five years, when no depreciation was reported. Petitioners

contend that the accelerated depreciation for this furnace was an

abnormal event since CBCC returned to its normal ten-year useful life

for furnace depreciation following the period of accelerated

depreciation. Petitioners further argue that the Department has

explicitly rejected the accelerated depreciation of assets where such

accelerated depreciation was not based on the useful life of the

assets. Accordingly, petitioners believe that the depreciation charges

for this furnace should be recalculated to reflect the company's normal

ten-year useful life for furnace depreciation.

DOC Position: We agree with petitioners. We have recalculated

depreciation expense for this furnace to reflect the amounts which

would have been recorded based upon CBCC's normal ten year amortization

period since it is CBCC's normal practice to employ a ten year useful

life in calculating furnace depreciation charges.

Comment 8: Petitioners state that CBCC failed to accurately

allocate furnace depreciation to FeSi based on the percentage of total

furnace capacity devoted to FeSi production. Accordingly, for purposes

of the final determination, petitioners contend that the Department

should increase depreciation allocated to FeSi production for each

month of the POI.

CBCC contends that it would be improper for the Department to

allocate all of CBCC's depreciation expenses on all furnaces to FeSi

production. Although theoretically, any one furnace could be used to

produce any of the products that CBCC sells, this does not make the

furnaces fungible. The Department's determination should not be based

on what could theoretically be produced in a furnace, but rather what

was actually produced in each furnace. Regardless, if the Department

considers the furnaces fungible, this would result in a lowering of

CBCC's depreciation expense as furnaces one through six are fully

depreciated.

DOC Position: We agree with CBCC. Its methodology of matching

furnace depreciation with the product actually produced in each furnace

is an acceptable methodology. Accordingly, no adjustment has been made

for the final determination.

Comment 9: Petitioners claim that at verification CBCC's reported

consumption and cost of electricity attributed to FeSi were understated

for October 1992. Therefore, petitioners believe that the Department

should increase these costs for each month of the POI.

CBCC maintains that the Department verified that only the month of

October contained an error of 5.7 percent with respect to the

electricity consumption and cost; such error was incurred in

transferring expenses from one cost report to another. Thus, CBCC

concedes only that the Department should adjust its October, 1992,

electricity consumption and cost by 5.7 percent, rather than making

monthly adjustments.

DOC Position: We agree with CBCC. At verification we established

that this was an isolated error and not a methodological problem.

Accordingly, we have corrected the reported electrical consumption and

cost for October 1992, only.

Comment 10: Petitioners state that CBCC failed to properly

calculate inventory holding gains/losses. Petitioners argue that CBCC

reported its input and finished product inventories on a first in first

out (FIFO) basis, which is contrary to Department practice.

Furthermore, petitioners claim that CBCC provided no inventory holding

gain/loss calculations for iron ore. Accordingly, petitioners believe

that the reported values cannot be relied on for purposes of the final

determination and the Department should apply BIA.

CBCC maintains that it provided inventory gain/loss information

according to the Department's methodology used in the Final

Determination Of Sales At Less Than Fair Value, Silicon Metal from

Brazil, 56 FR 26977, June 12, 1991, where the Department rejected

CBCC's cost accounting method used in the normal course of business,

stating that it did not properly reflect the effects of inflation and

used a FIFO basis to make the calculation.

With respect to the inventory holding gain/loss calculation for

iron ore, the Department verified that CBCC maintains no more than its

immediate requirements in inventory. Thus, CBCC submitted no inventory

holding gain/loss information on this raw material because there is

none. CBCC's monthly purchase of iron ore is consumed during that

month.

DOC Position: We agree with respondent. In reporting on a FIFO

basis, CBCC followed prescribed Department practice. The Department

verified that CBCC had no gain or loss on the iron ore because it

completely consumed its purchases in the same month as production.

Comment 11: Petitioners argue that Minasligas' U.S. sales of slag

during the POI are within the scope of this investigation. Petitioners

base their argument on the petition's scope language, which they claim

does not specifically exclude slag of the chemical composition that

Minasligas sold to the United States during the POI. Petitioners

further argue that even if the slag were not covered by the product

description in the petition, it is within the scope under the criteria

outlined in Diversified Products Corporation v. U.S., 572 F. Supp. 883

(CIT 1983) (``Diversified Products'') criteria.

Conversely, Minasligas states that its U.S. sales of slag are not

covered by the scope of this investigation. Minasligas bases its

argument on chemical analysis certificates provided at verification,

which list chemical compositions which Minasligas claims are sufficient

to exclude the slag sales from the scope of the investigation.

Specifically, Minasligas argues that, according to the petition, the

high levels of oxygen and calcium oxide present in these slag sales

places them outside the scope of the investigation.

DOC Position: We agree that ferrosilicon in the form of slag can be

included within the scope of investigation if it generally meets the

chemical content definition contained in the scope of this

investigation and if it is capable of being used as FeSi. (See Scope of

Investigation.)

With regard to the two U.S. sales of FeSi slag made by Minasligas,

we determine that these sales are within the scope of the investigation

based on information on the record indicating that the slag in question

can be used as FeSi. Since we do not have actual price or cost data for

these two sales, we will assign an average of all margins calculated

for Minasligas' sales for which we have price and cost data.

Comment 12: Petitioners argue that Minasligas failed to provide

complete cost information requested by the Department in conjunction

with a previously unreported sale. Thus, petitioners argue that the

Department should assign a ``noncooperative'' BIA margin for that U.S.

sale.

Minasligas maintains that it provided all necessary information

relating to this sale.

DOC Position: Since we used a price-to-price comparison for this

sale, petitioners' points are moot.

Comment 13: Minasligas contends that the sale dates for certain

U.S. sales falls outside the POI. Thus, Minasligas claims these sales

should be excluded from this investigation.

DOC Position: We agree with respondent. Based on the sale dates

reported and verified, these sales are outside the POI and are not

included in our margin calculation.

Comment 14: Petitioners claim that Minasligas inappropriately

allocated its labor and overhead costs between subject and non-subject

merchandise based on number of furnaces, rather than actual production

during the POI. Therefore, petitioners request that the Department

adjust Minasligas' submitted costs accordingly.

DOC Position: We agree with petitioners that number of furnaces is

not an adequate basis for allocating labor or other fabrication costs.

Number of furnaces is an arbitrary measure, which does not necessarily

reflect the actual level of labor and overhead expended in the

production of the subject merchandise. In the instant case, output tons

is a more accurate allocation basis. Therefore, we have revised the

submitted costs to reflect an allocation based on actual production

units.

Comment 15: Petitioners argue that Italmagnesio failed to cooperate

with the Department by withdrawing from the investigation and should

receive the highest, most adverse BIA rate on the record. Petitioners

further argue that BIA includes the rates alleged in the petition, as

corrected for clerical errors, and the rates alleged in petitioners'

amended allegation of sales below cost for Italmagnesio. Petitioners

disagree with the Department's decision in the preliminary

determination which rejected the revised margin calculations in

petitioners' amended sales-below-cost allegation as a source of BIA;

the Department rejected the revisions on the grounds that petitioners

based the revisions on information submitted by Italmagnesio.

Petitioners state that their amended allegation relied not on financial

statements submitted by Italmagnesio but on identical financial

statements that petitioners had obtained independently prior to the

date of Italmagnesio's submission of the information. In addition,

petitioners assert that Italmagnesio withdrew from the investigation

after the Department indicated in the preliminary determination that it

would not use the higher rates in petitioners' amended allegation as

BIA. Therefore, petitioners maintain that not using the amended

allegation as BIA would allow Italmagnesio to control the outcome of

the investigation.

DOC Position: For this final determination, we assigned

Italmagnesio a margin in accordance with the two-tiered BIA methodology

under which the Department imposes the most adverse rate upon those

respondents who refuse to cooperate or otherwise significantly impede

the proceeding. In our BIA margin analysis, we utilized information

contained in petitioners' amended COP allegation for Italmagnesio.

Although Department policy does not allow petitioners to use

questionnaire responses in a piece-meal manner in order to increase

margins in the petition that may later be used as BIA, our analysis

revealed that petitioners had access to Italmagnesio's financial

statements prior to the submission of this information on the record by

Italmagnesio.

Continuation of Suspension of Liquidation

In accordance with section 735(c)(4)(A) of the Act, we are

directing the U.S. Customs Service to continue to retroactively suspend

liquidation of all entries of FeSi from Italmagnesio. Retroactive

suspension applies to entries of FeSi, that are entered, or withdrawn

from warehouse, for consumption on or after May 18, 1993, which is the

date 90 days prior to the date of the publication of our preliminary

determination in the Federal Register. We are also directing the

Customs Service to terminate the retroactive suspension of liquidation

with regard to CBCC, and ``All Other Exporters'' entered, or withdrawn

from warehouse, for consumption between May 18, 1993, and August 16,

1993, which is the date of our preliminary determination, and to

release any bond or other security, and refund any cash deposit with

respect to these entries during that period in accordance with section

735(c)(3). For CBCC and ``All Other Exporters'', we are directing the

Customs Service to suspend liquidation of all entries of FeSi from

Brazil, that are entered, or withdrawn from warehouse, for consumption

on or after August 16, 1993. Finally, since the Department finds that

no final dumping margin exists with respect to Minasligas, we are

directing the Customs Service to terminate the suspension of

liquidation for entries of FeSi from Minasligas, and to release any

bond or other security, and refund any cash deposit with respect to

these entries from Minasligas in accordance with section 735(c)(2) of

the statute. However, if the Department has reasonable cause to believe

or suspect at any time during the existence of the antidumping duty

order that Minasligas has sold or is likely to sell the subject

merchandise to the United States at less than its foreign market value,

then the Department may institute an administrative review of

Minasligas under section 751 of the Tariff Act of 1930, as amended.

The Customs Service shall require a cash deposit or posting of a

bond equal to the estimated margin amount by which the FMV of the

subject merchandise exceeds the USP as shown below.

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

Critical

Manufacturer/producer/exporter Margin circumstances

percent

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

Italmagnesio S.A. Industria e Comercio........ 88.86 Yes.

Companhia Brasileira Carbureto de Calcio...... 2.23 No.

Companhia Ferroligas Minas Gerais............. 0.00 No.

All others.................................... 45.55 No.

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

ITC Notification

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

ITC of our determination.

Notification to Interested Parties

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

administrative protective order (APO) in this investigation of their

responsibility covering 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 (19 U.S.C. 1673d(d)) and 19 CFR 353.20(b)(2).

Dated: December 29, 1993.

Barbara R. Stafford,

Acting Assistant Secretary for Import Administration.

[FR Doc. 94-281 Filed 1-5-94; 8:45 am]

BILLING CODE 3510-DS-P