Notice of Final Determination of Sales at Less Than Fair Value: Manganese Metal From the People's Republic of China

DEPARTMENT OF COMMERCE

International Trade Administration

[A-570-840]

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

Manganese Metal From the People's Republic of China

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

EFFECTIVE DATE: November 6, 1995.

FOR FURTHER INFORMATION CONTACT: David Boyland or Daniel Lessard,

Office of Countervailing Investigations, Import Administration,

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

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

(202) 482-4198 or (202) 482-1778.

Final Determination

We determine that manganese metal from the People's Republic of

China (PRC) 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 (``the Act''), as amended. The estimated sales at less than fair

value are shown in the ``Suspension of Liquidation'' section of this

notice.

Applicable Statute and Regulations

Unless otherwise indicated, all citations to the statute and to the

Department's regulations are references to the provisions as they

existed on December 31, 1994.

Case History

Since the preliminary determination (60 FR 31282, June 14, 1995),

the following events have occurred. The Department published an amended

preliminary determination correcting a ministerial error (60 FR 37875,

July 24, 1995). We conducted verification of the questionnaire

responses in the PRC between July 24, 1995 and August 11, 1995, of the

following respondents: China National Electronics Import & Export Hunan

Company (CEIEC), China Hunan International Economic Development Corp.

(HIED), China Metallurgical Import & Export Hunan Corporation (CMIECHN/

CNIECHN), Minmetals Precious & Rare Minerals Import & Export Co.

(Minmetals), and Great Wall Industry Import and Export Corporation

(GWIIEC). Case and rebuttal briefs were filed by petitioners and

respondents on October 2, 1995, and October 4, 1995, respectively. On

October 6, 1995, the Department held a public hearing.

Scope of the Investigation

The subject merchandise in this investigation is manganese metal,

which is composed principally of manganese, by weight, but also

contains some impurities such as carbon, sulfur, phosphorous, iron and

silicon. Manganese metal contains by weight not less than 95 percent

manganese. All compositions, forms and sizes of manganese metal are

included within the scope of this investigation, including metal flake,

powder, compressed powder, and fines. The subject merchandise is

currently classifiable under subheadings 8111.00.45.00 and

8111.00.60.00 of the Harmonized Tariff schedule of the United States

(HTSUS). Although the HTSUS subheadings are provided for convenience

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

proceeding is dispositive.

Period of Investigation

The period of investigation (POI) is June 1 through November 30,

1994.

Best Information Available

We have based the PRC-wide rate on best information available

(BIA). In administrative proceedings involving merchandise from

nonmarket economy countries, the Department's consistent practice has

been to treat all exporters as part of the government and assign to

them the single government rate, known as the country-wide rate, unless

an exporter affirmatively demonstrates that it is separate from the

government and entitled to its own rate. If a non-market economy

exporter does not respond to the Department's request for information,

the Department has no basis to treat that exporter separately from the

government and, as a result, the government (which includes the

exporter) receives a margin based on best information available because

one of its entities failed to respond.

In this case, the evidence on the record indicates that the

respondents identified during the investigation do not account for all

of the exports of the subject merchandise to the United States. As a

result, it is reasonable for the Department to conclude that it did not

receive responses from all exporters. In the absence of responses from

all exporters, we are basing the country-wide deposit rate on BIA,

pursuant to section 776(c) of the Act. (See, e.g., Final Determination

of Sales at Less Than Fair Value: Antidumping Duty Investigation of

Pure Magnesium From Ukraine (61 FR 16433, March 30, 1995)).

In determining what to use as BIA, the Department follows a two-

tiered methodology, whereby the Department normally assigns lower

margins to those respondents who cooperated in an investigation and

margins based on more adverse assumptions for those respondents who did

not cooperate in an investigation. As outlined in the Final

Determination of Sales at Less Than Fair Value: Certain Hot-Rolled

Carbon Steel Flat Products, Certain Cold-Rolled Carbon Steel Flat

Products, and Certain Cut-to-Length Carbon Steel Plate From Belgium (58

FR 37083, July 9, 1993), when a company refuses to provide the

information requested in the form required, or otherwise significantly

impedes the Department's investigation, it is appropriate for the

Department to assign to that company the higher of (a) the highest

margin alleged in the petition, or (b) the highest calculated rate of

any respondent in the investigation.

In this investigation, we are assigning to any PRC company, other

than those specifically identified in the ``suspension of liquidation''

section the PRC-Wide deposit rate of 143.32 percent, ad valorem. This

margin represents the highest margin in the petition, as recalculated

by the Department for purposes of the initiation (see Initiation of

Antidumping Duty Investigation: Manganese Metal from the People's

Republic of China 59 FR 61869 (December 2, 1994)).

GWIIEC

The Department has decided to disregard the sales made by GWIIEC to

the United States during the POI (see Comment 2 below for interested

party comments on this issue). The Court of International Trade has

stated the if evidence demonstrates to the Department that a respondent

has

[[Page 56046]]

``artificially orchestrated an export scheme involving artificially set

prices,'' the agency has the discretion to disregard the U.S. sales as

not resulting from a bona fide transactions. Chang Tieh Industry Co.,

Ltd. v. U.S., 840 F. Supp. 141, 146 (CIT 1993). The timing of these

sales relative to the filing of the petition coupled with the fact that

the prices were significantly higher than the world market price of

this commodity and prices observed in the United States at the time of

the sale, led the Department to gather additional information from the

U.S. purchaser to determine whether the sales were bona fide

transactions. Certain facts asserted by parties to these transactions

during this subsequent inquiry did not verify. See the October 27,

1995, Confidential Memorandum to File Re: Bona Fide Sales. Based on the

totality of the circumstances, viewed in light of the discrepancies

found, the Department determines, based on substantial evidence on the

record (much of which is proprietary), that these were not bona fide

sales for commercial purposes and, therefore, would not provide an

appropriate basis for determining GWIIEC's pricing behavior for sales

to the United States. Therefore, these sales have been disregarded.

Separate Rates

CEIEC, HIED, CMIECHN, and Minmetals have requested separate

antidumping duty rates. In cases involving nonmarket economies, the

Department's policy is to assign a rate, separate from the country-wide

rate, only when an exporter can demonstrate the absence of both de jure

and de facto governmental control over export activities. In

determining whether companies should receive separate rates, we focus

our attention on the exporter rather than the manufacturer, as our

concern is the manipulation of dumping margins.

To establish whether a firm is sufficiently independent to be

entitled to a separate rate, the Department uses criteria that were

developed in the Final Determination of Sales at Less Than Fair Value:

Sparklers from the People's Republic of China (56 FR 20588, May 6,

1991) (Sparklers) and in the Final Determination of Sales at Less Than

Fair Value: Silicon Carbide from the People's Republic of China (59 FR

22585, May 2, 1994) (Silicon Carbide). Under the separate rates

criteria, the Department assigns a separate rate only when an exporter

can demonstrate the absence of both de jure 1 and de facto 2

governmental control over export activities.

\1\ Evidence supporting, though not requiring, a finding of de

jure absence of central control includes: (1) An absence of

restrictive stipulations associated with an individual exporter's

business and export licenses; (2) any legislative enactments

decentralizing control of companies; or (3) any other formal

measures by the government decentralizing control of companies.

\2\ The factors considered include: (1) Whether the export

prices are set by or subject to the approval of a governmental

authority; (2) whether the respondent has authority to negotiate and

sign contracts and other agreements; (3) whether the respondent has

autonomy from the government in making decisions regarding the

selection of management; and (4) whether the respondent retains the

proceeds of its export sales and makes independent decisions

regarding disposition of profits or financing of losses (see Silicon

Carbide).

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The business licenses of all respondents being considered for

separate rates indicate that they are owned ``by all the people.'' As

stated in Silicon Carbide, ``ownership of a company by all the people

does not require the application of a single rate.'' Accordingly, these

respondents are eligible to be considered for a separate rate.

De Jure Control

The respondents submitted a number of documents to demonstrate the

absence of de jure control of their business activities by the PRC

central government. The documents include the following:

Law of the People's Republic of China on Industrial

Enterprises Owned by the Whole People (April 13, 1988) This law granted

autonomy to state-owned enterprises by separating ownership and control

(Article 2). It also granted enterprises the right to set prices and

the right to decide what type of commodity to produce (Article 22-26).

Excerpts from PRC's State Council Decree: Provisions on

Changing the System of Business Operation for States Owned Enterprises

(December 31, 1992) This decree superseded the April 13, 1988 law and

codified existing practice. It also gave state-owned enterprises the

right to establish ``production, management, and operational policies''

and the right to set prices, sell products, purchase production inputs,

make investment decisions, and dispose of profits and assets. These

rights apply specifically to an enterprise's import and export

activities (Provision 12).

Order from MOFERT, No. 4, 1992 and Temporary Provision for

Administration of Export Commodities (Export Provisions) (December 21,

1992) The Export Provisions indicate those products subject to direct

government control. Electrolytic manganese metal does not appear on the

Export Provisions list and, hence, the subject merchandise under

investigation is not subject to export constraints. We note that the

Emergent Notice on Changes in Issuing Authority for Export Licenses

Regarding Public Bidding Quota for Certain Commodities (MOFTEC #140)

(Effective April 1994) canceled previous export licenses for certain

commodities. Manganese metal was not among these commodities.

In addition to the above laws and regulations, respondents provided

the following documents:

PRC's Enterprise Legal Person Registration Administrative

Regulations (June 13, 1988) This regulation sets forth the procedure

for registering enterprises as legal persons.

Law of the People's Republic of China on Enterprise

Bankruptcy (December 2, 1986) This law sets forth bankruptcy procedures

for state-owned enterprises.

GATT Document Concerning Transparency of China's Foreign

Trade Regime (February 12, 1992) This document listed the PRC central

government's response to questions by a GATT committee regarding the

PRC's foreign trade regime.

Consistent with Silicon Carbide, we determine that the existence of

the above-referenced laws and regulations demonstrates that CEIEC,

HIED, CMIECHN, and Minmetals are not subject to de jure central

government control with respect to export sales and pricing decisions.

However, there is some evidence that the provisions of the above-cited

laws and regulations have not been implemented uniformly among

different sectors and/or jurisdictions within the PRC (see ``PRC

Government Findings on Enterprise Autonomy,'' in Foreign Broadcast

Information Service-China--93-133 (July 14, 1993)). As such, the

Department has determined that a de facto analysis is necessary to

determine whether the respondent companies are subject to central

government control over export sales and pricing decisions.

De Facto Control

During verification, our examination of correspondence and sales

documentation revealed no evidence that the export prices of

respondents being considered for separate rates are set, or subject to

approval, by any governmental authority. It was evident from our

examination of correspondence and written agreements and contracts that

these respondents have the authority to negotiate and sign contracts

and other agreements

[[Page 56047]]

independent of any government authority. We also noted that the

respondents retained proceeds from their export sales and made

independent decisions regarding disposition of profits and financing of

losses (based on our examination of financial records and purchase

invoices). Finally, we have determined that these respondents have

autonomy from the central government in making decisions regarding the

selection of management, based on our examination of internal

management selection documents.

Conclusion

Given that the record of this investigation demonstrates a de jure

and de facto absence of governmental control over the export functions

of all respondents being considered for separate rates, we determine

that these respondents should receive a separate rate.

Surrogate Country

Section 773(c)(4) of the Act requires the Department to value the

NME producers' factors of production, to the extent possible, in one or

more market economies that (1) Are at a level of economic development

comparable to that of the NME country, and (2) are significant

producers of comparable merchandise.

The Department has determined that India is the most suitable

surrogate for purposes of this investigation (see Comment 1). Based on

available statistical information, India is at a level of economic

development comparable to that of the PRC, and is a significant

producer of comparable merchandise.

Fair Value Comparisons

To determine whether sales of manganese metal from the PRC by

CEIEC, HIED, CMIECHN, and Minmetals 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

For CEIEC, HIED, CMIECHN, and Minmetals, we based USP on purchase

price, in accordance with section 772(b) of the Act, because manganese

metal was sold directly to unrelated parties in the United States prior

to importation into the United States, and because exporter's sales

price (ESP) methodology was not indicated by other circumstances.

Where appropriate, we calculated purchase price based on packed,

C&F and CIF prices to unrelated purchasers in the United States. We

made deductions to these prices for foreign inland freight, foreign

inland insurance, brokerage and handling expenses, ocean freight, and

marine insurance, as appropriate (see Comment 13). Generally, costs for

these items were valued in the surrogate country. However, where

transportation services were purchased from market economy suppliers

and paid for in a market economy currency, we used the cost actually

incurred by the exporter.

Foreign Market Value

In accordance with section 773(c) of the Act, we calculated FMV

based on the factors of production reported by the factories in the PRC

which produced the subject merchandise for the four exporters analyzed

in this determination. The factors used to produce manganese metal

include materials, labor and energy. To calculate FMV, the reported

factor quantities were multiplied by the appropriate surrogate values.

In determining which surrogate value to use for each factor of

production, we selected, where possible, an average non-export value

which was representative of a range of prices within the POI, or most

contemporaneous with the POI, specific to the input in question, and

tax-exclusive.

We first note that because business proprietary treatment was

requested by respondents for certain factor inputs, we have named these

inputs (``A'' through ``F''). A key to these letter assignments is

provided in the attachments to the October 27, 1995 calculation

memorandum.)

With the exception of Factor F, we obtained surrogate values from

the following Indian sources: Chemical Weekly (September-November

1994), the Monthly Trade Statistics of Foreign Trade of India, Volume

II--Imports, August 1994, (Indian Import Statistics); and the Indian

Minerals Yearbook: 1993 (see Comments 4 through 6). For Factor F, we

relied upon information submitted by the petitioners (taken from the

June-October 1994 Chemical Marketing Reporter) for a similar input (see

Comment 7). We are no longer using the surrogate value for manganese

ore which was used at the preliminary determination. We are using a

surrogate value for manganese ore from the Indian Minerals Yearbook

1993 because this ore has a manganese content that is comparable to the

ore used by the PRC producers and also represents a domestic price in

India. We adjusted the value of the manganese ore to reflect a

delivered price (see Comment 4).

For the reasons outlined in the June 6, 1995 preliminary

determination concurrence memorandum, we are using the April 1992

through March 1993 average tax-exclusive price for industrial

electricity in India, as provided by the World Bank, to value

electricity (see Comments 9 and 10). To value PRC labor costs, we used

data on Indian wage rates from the Yearbook of Labor Statistics (see

Comment 8). Because indirect labor was not reported by respondents and

was not included in the surrogate value for manufacturing overhead, we

have added an amount for indirect labor (see Comment 9).

We adjusted the factor values, when necessary, to the POI using

wholesale price indices (WPI's) published by the International Monetary

Fund (IMF). Labor rates have been adjusted using consumer prices

indices (CPI's).

To value factory overhead, we calculated the ratio of factory

overhead expenses to the cost of material, labor, and energy for

industries involved in ``Processing and Manufacture--Metals, Chemicals

and products thereof,'' as reported in the September 1994 Reserve Bank

of India Bulletin's (RBI Bulletin) (see Comment 11). This same source

was used to calculate selling, general and administrative (SG&A)

expenses as a percentage of cost of manufacturing. Because the

calculated SG&A percentage from the RBI was greater than the minimum 10

percent required by the statute, we used the SG&A percentage from the

RBI Bulletin for each company (see Comment 12). With respect to profit,

we used the statutory minimum of eight percent of materials, labor,

energy, overhead, and SG&A costs calculated for each factory.

At the verification of certain producers, we learned that there

were multiple suppliers of raw materials. In order to calculate the

inland freight cost for these inputs, we derived the relative

percentages obtained from each source and then, assuming that the input

was consumed in these same proportions, used the distances from each of

the sources to compute the cost per unit of output.

Interested Party Comments

As discussed above, the Department has not analyzed GWIIEC's sales

for this investigation. Therefore, comments specifically related to

GWIIEC have not been addressed in this notice.

Comment 1: Cometals, an interested party, argues that based on the

criteria set forth in 773(c)(4), India should not be considered the

surrogate country in this investigation. First, India is not at

[[Page 56048]]

the same level of economic development as China, as reflected in

Indias lower per capita gross domestic product measured in terms of

purchasing power parity. Second, India should not be considered a

market economy given its protected markets and centralized control of

economic activity. Third, since a surrogate country must be

disqualified if the comparable merchandise is being subsidized, the

Department should reject India because the Indian economy is

characterized by heavily protected markets and regulated prices of

essential products including energy and industrial inputs.'' Finally,

since ferromanganese (one of two products considered by the Department

to be comparable to the subject merchandise) uses high grade ore, in

contrast to the subject merchandise which can use lower grade ore, and

also is made pursuant to a different production process, it should not

be considered comparable to the subject merchandise. According to

Cometals, South Africa does fit the Department's criteria pursuant to

773(c)(4) (i.e., it is at a level of economic development similar to

the PRC, it is a market economy, and it produces subject merchandise

without subsidies); therefore, it should be considered the surrogate

country in this investigation.

DOC Position: It is the Department's longstanding practice in

selecting surrogate countries to rely on market-exchange-rate-based per

capita income figures as a rough indicator of economic development.

While some arguments can be made for relying, instead, on purchasing

power parity (PPP) per capita income figures, Cometals has not provided

information which demonstrates why this measure would be preferable to

the data normally relied on by the Department. Therefore, the

Department continues to rely primarily on exchange-rate-based per

capita income figures and continues to find India (with a per capita

income of approximately US$300 in 1993) at a level of economic

development comparable to that of China (with a per capita income of

approximately US$500 in 1993). The Department also finds on the basis

of exchange-rate-based income figures that South Africa (with a per

capita income of approximately US$3,000 in 1993) is not at a level of

economic development comparable to that of China.

With regard to government involvement in the Indian economy, it has

been and remains our longstanding practice to treat India as a market

economy under the antidumping law. In antidumping cases involving

Indian products, we have accepted Indian prices and costs as market

determined. We do not find Cometal's arguments concerning government

involvement in India's economy sufficient grounds to reject India as

and appropriate surrogate market economy.

With respect to the allegation that the comparable merchandise in

India is subsidized, we note that any subsidies which may be provided

on the final product generally would be of concern to the Department

only if foreign market value is based on export prices of the final

product from the surrogate country. Here, foreign market value is not

based on exports from India of the final product but rather on domestic

input prices in India. There is no evidence on the record indicating

that the input prices in the instant investigation are subsidized.

Finally, regarding the comparability of manganese metal and

ferromanganese, the Department analyzes the comparability in terms of

following four criteria: (1) Manufacturing process, (2) production

inputs (3) intensity of input usage and (4) normal end-uses and

applications. As noted in a May 5, 1995 Memorandum to Dave Mueller,

Director of the Office of Policy, we found that ferromanganese is

comparable to manganese metal based on several of the above criteria.

This finding of comparability does not mean that the two products are

identical in terms of the four criteria. It means that the two products

are sufficiently similar that the Department can reasonably assume that

commercial production of the merchandise under investigation can occur

in the surrogate. Therefore, we do not agree that the possible

dissimilarities between manganese metal and ferromanganese described by

Cometals are sufficient to render the products non-comparable.

Furthermore, the decision to select India as a surrogate country was

based on its production of both ferromanganese and electrolytic

manganese dioxide (EMD), the latter of which we consider to be another

comparable product.

Comment 2: Petitioners contend that GWIIEC's U.S. sales are not

bona-fide and should be excluded from the antidumping calculations.

Petitioners argue that GWIIEC's accounting system inhibited the

Department from verifying the legitimacy of the suspect terms

surrounding GWIIEC's U.S. sales. Also, according to petitioners, Chang

Tieh Industry Co. v. United States, 840 F. Supp 141, 146 (1993)

demonstrates that the Department should disregard sales as not

resulting from a bona fide transaction if evidence demonstrates that a

respondent ``orchestrated an export scheme involving artificially set

prices for purposes of dumping after the investigative period.''

GWIIEC argues that the Department verified the terms of its U.S.

sales characteristics of the product sold. GWIIEC also argues that

petitioners by conceding that Bureau of the Census import data showed

imports of manganese metal in February 1995 from the PRC at a volume

and average value consistent with that it reported, confirmed GWIIEC's

U.S. sales.

According to respondent, the precedent cited by petitioners in

Chang Tieh is misstated and actually supports using GWIIEC's U.S.

sales. Furthermore, GWIIEC points to the U.S. International Trade

Commission preliminary determination which found that ``substantial

volumes of manganese metal are purchased for non-price reasons, end-

users face difficulties in maintaining supplies, atypical transactions

are significant in the marketplace, and prices are subject to sharp

changes.''

DOC Position: As stated above, we have decided to disregard the

sales made by GWIIEC (see, the GWIIEC section of this notice).

Comment 3: With respect to all respondents, petitioners argue that

the record on de facto control remains deficient because the

Department's separate rates questionnaire addressed to the central and

provincial governments remains unanswered. Petitioners add that this

deficiency is important in light of the National People's Congress'

mandate to MOFTEC to ``take charge of the foreign trade work in the

whole country,'' and in light of other administrative practices such as

foreign exchange targets set by the central or local government.

Respondents CEIEC, HIED, CMIECHN, and Minmetals state that the laws

placed on the record establish that the responsibility for managing the

business activities of ``owned by all the people'' companies has been

transferred from the central and provincial governments to the

companies themselves; i.e., there is an absence of de jure control by

the central or provincial governments. Additionally, respondents

contend that during the course of verification it was demonstrated that

the activities of CEIEC, HIED, CMIECHN, and Minmetals ``are not subject

to governmental control nor direction.'' Respondents also note that the

Department confirmed at verification that they are allowed ``to borrow

freely, to make independent business decisions regarding the

disposition of profit or losses, and have autonomy from the central or

provincial

[[Page 56049]]

government in making decisions regarding the selection of management.''

Finally, these respondents disagree with petitioners claim that

the responses to the government portion of the separate rates

questionnaire do not reflect the totality of government knowledge.

Respondents note that Department personnel met with PRC government

officials and that the Department could have obtained additional

information.

DOC Position: We first note that, CEIEC, HIED, CMIECHN, and

Minmetals, provided certifications from both MOFTEC and the appropriate

municipal authorities stating that the responses to the separate rates

questionnaire were accurate. Moreover, based on the test described in

Silicon Carbide, we have sufficient information on the record to award

separate rates to the four analyzed companies.

Notwithstanding MOFTEC's mandate with respect to foreign trade work

and the other administrative practices alleged by petitioners, we found

no evidence of MOFTEC's or other government agencies' involvement in

the export operations of these companies. While statements such as that

quoted by petitioners may serve to support a presumption that a single

rate should be applied to all exporters in the PRC, the specific

evidence in this case rebuts that presumption for the four exporters in

question.

Comment 4: The petitioners state that the Department should include

an amount for freight between the PRC manganese metal producers and

their ore suppliers. According to petitioners, the surrogate value for

manganese ore should be viewed as an ex-mine price because there is no

factual information in the record that establishes the location of the

Goan mine (the Indian mine from which the surrogate value for manganese

ore was derived) or its distance from the port. Petitioners also argue

that for every other price quote of Indian ore, ``FOB'' meant FOB

plant, which by definition, excludes freight.

Respondents claim that petitioners' argument that the surrogate

value is an ex-mine price is not supported by the record. According to

respondents, the manganese ore in question was shipped via a ``berth,''

which means the buyer took possession of the goods at the port, not at

the plant. Accordingly, the price quoted is FOB port, as opposed to FOB

plant. Therefore, the Department would be double counting freight if it

were to include the distance between the PRC producers and their

suppliers.

DOC Position: We have not used the same source to derive the

surrogate value for manganese ore as the one used for the preliminary

determination (see Foreign Market Value section above). Therefore, the

cite by respondents stating that the surrogate value included freight

is not relevant. For the reasons stated in the October 18, 1995

Memorandum from team to Susan G. Esserman, we have used a domestic

price quote in India taken from the Indian Mineral Yearbook 1993. This

publication, at page 497, states that price is quoted on a ``Free On

Rail Mine Siding'' basis. Therefore, the Department is adding a freight

expense to the surrogate value of manganese ore.

Comment 5: Respondents claim that the Department should use a

particular form of Factor B for the surrogate value instead of the form

used in the preliminary determination. Respondents argue that the form

of Factor B used at the preliminary determination is incorrect because

it is not the form used by the PRC producers. Further, respondents note

that there is a significant price differential between the two forms of

Factor B. Even if the Department uses the correct form of Factor B,

respondents claim that it is still necessary to adjust the surrogate

value to reflect the content levels of Factor B used by the PRC

producers. Respondent suggest that the Department employ the same

adjustment methodology it applied to manganese ore in the preliminary

determination.

DOC Position: We agree with respondents. We verified that the input

actually used by the respondents was a particular form of Factor B.

Accordingly, we have used a surrogate value for this particular form.

We have also adjusted the surrogate value for this factor to reflect

the producer-specific content levels.

Comment 6: Respondents argue that the surrogate values for certain

chemicals (Factors C and D) which were based on prices reported in a

1993 Chemical Weekly publication and Indian Import Statistics,

respectively, do not comport with economic reality and, therefore,

should not be used in the final determination. Furthermore, respondents

note that these values are higher than the delivered factor values in

the Chemical Marketing Reporter, as submitted by petitioners and

should, therefore, be considered aberrational. Respondents suggest that

the Department use the values considered reasonable by petitioners, as

obtained from the Chemical Marketing Reporter.

Petitioners argue that respondents did not provide any information

to indicate what ``economic reality'' is with respect to these

surrogate values. Regarding Factor C, petitioners argue that

respondents did not correct the reported Chemical Marketing Reporter

value for content, thereby invalidating their comparison to the

Chemical Weekly. As regards Factor D, petitioners assert that the form

of Factor D from the Chemical Marketing Reporter cited by respondents

is not comparable to the Factor D used by the Department, as obtained

from Indian Import Statistics. Additionally, petitioners note that

respondents failed to provide publicly available published information

(PAPI) information, which is preferred by the Department for valuing

factors, and that the Chemical Marketing Reporter represents U.S.

prices, as opposed to PAPI from the surrogate country. Finally,

petitioners argue that respondents are drawing an unfair comparison

between non-delivered prices from the Chemical Marketing Reporter and

the delivered prices from the Chemical Weekly and Indian Import

Statistics.

Petitioners also argue that the Department incorrectly adjusted the

input cost for Factor C for HIED in the preliminary determination.

DOC Position: We do not agree with respondents' claim that the

Indian values for Factor C and D are aberrational and do not comport

with economic reality. After adjusting the Chemical Weekly price for

Factor C to account for Indian taxes, it is very close to the price

reported in the Chemical Marketing Reporter. With respect to Factor D,

the Chemical Marketing Reporter price suggested by respondents is not

for the form used by respondents in the production of subject

merchandise, as noted by petitioners. Therefore, we have used the data

from the Chemical Weekly and the India Import Statistics to value these

factors.

Finally, we agree with petitioners that we did not correctly adjust

HIED's input cost for Factor C in the preliminary determination. We are

making the correct adjustment for HIED's specific content level for

Factor C, as verified by the Department.

Comment 7: According to respondents, the price of a chemical

submitted by petitioners and used by the Department as a substitute for

a PRC Factor of production was not properly adjusted at the preliminary

determination. Respondents note that petitioners, as producers of

subject merchandise, know what prices are reasonable for their industry

and cannot be biased in favor of the respondents. Therefore, according

to respondents, the adjusted price submitted by petitioners should be

used by the Department in the final determination.

Petitioners argue that they did not provide a value for the

chemical used by

[[Page 56050]]

respondents because this input was never specified. Petitioners assert

that the Department should not adjust the price that they submitted

because the figures used in their calculations were based on chemicals

used in their production process. Accordingly, these values are not

applicable to the PRC production process.

DOC Position: Because we have been unable to develop valuation

information for the actual chemical used by PRC respondents, we are

continuing to use a substitute chemical based on information provided

by petitioners. Further, we agree with respondents and have made the

necessary adjustments to the price of this substitute chemical to

reflect the appropriate concentration level.

Comment 8: Respondents challenge the Department's valuation of

skilled labor. Specifically, they argue that the surrogate value for

skilled labor should be based on the upper range of the ``skilled

worker'' category instead of being based on the upper range of the

``industrial worker'' category. Respondents state that ``given the fact

that the lower range of the industrial category chosen by the

Department for unskilled labor corresponds to the lowest monthly wage

for the unskilled worker category, it would be logical and fair for the

Department to use the lower range of the skilled worker category for

determining the average monthly wage for skilled labor.'' Finally, they

state that the Department's decision to use the upper range of the

``industrial worker'' category is not supported by the record.

Petitioners argue that the ``industrial worker'' rate should

continue to be used by the Department because the production of subject

merchandise is an industrial process and ``skilled workers'' represents

a category which includes workers who are not engaged in an industrial

process.

DOC Position: As noted in the Foreign Market Value section above,

the Department is using Indian labor wages from the Yearbook of Labor

Statistics to value PRC labor costs (see October 17, 1995 memorandum

from David R. Boyland, Import Compliance Specialist, to case file).

Therefore, because the comments above are concerned with information

from a source the Department is no longer using, these comments are

moot.

Comment 9: Petitioners argue that respondents incorrectly

classified skilled and supervisory labor as indirect labor and did not

report indirect labor hours needed to produce the merchandise.

Petitioners argue that skilled, supervisory and clerical labor should

be considered direct labor because they are directly related to the

manufacturing operations. Petitioners support their claim by referring

to Plant Design and Economics for Chemical Engineers (Plant Design),

and note that according to this source, the cost of direct supervisory

and clerical labor should be 15 percent of the cost of unskilled and

skilled operating labor.

Additionally, petitioners argue that all respondents, except

GWIIEC, under-reported their labor usage. Petitioners state that the

respondents' production process is less automated than that of

petitioners' and, hence, should reflect higher labor intensiveness.

Petitioners suggest that the Department correct for this by using

GWIIEC's labor hours for the other respondents.

Respondents argue that for one of the producers, the Department

verified that certain workers were not involved in direct labor

activities and, hence, only a part of their labor cost should be used

to calculate FMV. Further, respondents argue that the skilled and

unskilled labor hours were verified by the Department and, as such,

should be used in the final determination. According to respondents,

Plant Design classifies costs based on the fixed or variable nature of

a particular expense, with the result that these costs are treated as

direct costs. However, a cost accounting approach would define items

such as ``maintenance and repairs'' and supervisory labor as a part of

factory overhead. Respondents urge the Department to follow the cost

accounting approach. In support of this position, respondents point out

that the Department's standard cost of production questionnaire for

market economies treats supervisory labor as part of factory overhead.

DOC Position: Because there is no indirect labor component in the

Departments factory overhead surrogate, we reject respondents'

argument that only a portion of verified indirect labor hours be

included in the FMV. With the exception of GWIIEC, all respondents, as

requested by the Department in its questionnaire, reported direct labor

hours, as opposed to direct and indirect labor hours. Pursuant to

information gathered at verification, the Department was able to

quantify some of the indirect labor hours incurred by respondents, as

well as identify other indirect labor functions performed. Because we

do not have complete indirect labor information for respondents and, as

noted above, our factory overhead surrogate does not include a

component for indirect labor, we have estimated the amount of indirect

labor that was not quantified by the Department and have used this

value to calculate FMV (see October 27, 1995 calculation memorandum).

While petitioners have argued that total labor is under-reported

based on their own experience, we have not rejected the labor component

of CEIEC's, HIED's, CMIECHN's and Minmetals' responses in favor of

GWIIEC's data. Instead, we have relied on these companies' verified

amounts of labor usage adjusted for indirect labor as discussed above

in our final determination.

Comment 10: Petitioners argue that electricity consumption for the

majority of respondents is unrealistically low. Petitioners claim that

the use of certain inputs (i.e., Factor A) does not explain

respondents' low electricity consumption and that respondents'

electricity consumption should not be less than the minimal amounts

indicated as being necessary to produce manganese metal based on the

Kirk-Othmer Encyclopedia of Chemical Technology (2nd Edition) (Kirk-

Othmer). Additionally, according to petitioners, respondents' less

efficient economies of scale should result in higher electricity

consumption. Given that the production process employed and the raw

materials consumed by each of the respondents are basically the same,

petitioners also argue that the wide range of electricity usage rates

reported by these respondents indicates that the reported electricity

consumption is suspect for all of them. Petitioners contend that the

Department should use the electricity consumption reported by GWIIEC's

producer for all producers in this investigation since GWIIEC's

manganese metal producer reported electricity consumption within

minimum operational requirements. Respondents, argue that the

electricity consumption extrapolated from Kirk Othmer by petitioners is

based on the electricity consumption in 1967 of two companies no longer

producing manganese metal and should be considered outdated. Therefore,

the verified electricity usage of the individual producers should be

used by the Department in its final determination.

DOC Position: While the domestic and PRC production processes are

fundamentally the same, there are some important differences between

the two. For example, the PRC producers use a certain input (Factor A)

which improves electricity current efficiencies; i.e., all things being

equal, the electrolysis stage of the process requires relatively less

electricity in the presence of Factor A.

Given the large number of variables (e.g., different production

processes and inputs), it is unknown whether the use of Factor A can

fully explain the

[[Page 56051]]

difference in the electricity consumption reported by producers and the

levels submitted by petitioners. However, based on information supplied

by the U.S. Bureau of Mines, we have determined that the electricity

usage reported by respondents is not outside the range that would be

expected for a producer using Factor A (see the October 16, 1995

memorandum to Barbara R. Stafford, Deputy Assistant Secretary, Import

Administration). Therefore, the Department has used the verified

amounts of electricity consumption.

Comment 11: Respondents argue that indirect material costs were

double counted by the Department when it valued minor process chemicals

and also included the ``stores and spares consumed'' category from the

RBI Bulletin as a component of factory overhead. Respondents argue that

either the ``stores and spares consumed'' component should be

eliminated from the surrogate factory overhead or the Department should

avoid directly valuing process chemicals. Respondents also argue that

inputs that are considered as ``consumables'' in the accounting systems

of the producers should be treated as indirect materials.

Respondents also disagree with petitioners' interpretation of the

term ``stores and spares consumed'' listed in the RBI Bulletin, arguing

that the Department can reasonably assume that the ``stores and spares

consumed'' category includes an element for indirect materials. They

point out that the reference to Plant Design cited by petitioners

distinguishes between ``raw materials,'' which are direct materials,

and ``catalysts and solvents, which are not direct materials.'' The

chemicals in question, according to respondents, are ``catalysts and

solvents.'' Respondents also note that the Department's recognition of

variable overhead in market economy cases contradicts petitioners'

assertion that all variable inputs must be direct materials. Finally,

since the chemicals in question are not physically incorporated into

the finished goods or are used in very small quantities (i.e., the

antithesis of the cost accounting definition of direct materials),

these chemicals should be considered indirect materials which are

included in factory overhead.

Petitioners argue that the ``stores and spares consumed'' line item

in the RBI Bulletin should be considered ``operating supplies,'' as the

term is used in Plant Design; i.e., ``miscellaneous supplies * * *

needed to keep the process functioning.'' Petitioners note that Plant

Design states that ``[r]aw materials are all items that must be

supplied in the manufacturing process for each unit of product

produced.'' According to petitioners, to the extent that process

chemicals are variable inputs, they must be considered ``raw

materials'' for which surrogate values must be attributed. Therefore,

petitioners state that because these items are not included in the

surrogate factory overhead in the ``stores and spares consumed'' line

item, the Department should value these chemicals separately from

overhead.

DOC Position: Both petitioners and respondents have attempted to

explain what the RBI ``stores and spares consumed'' category contains,

but neither side has persuaded us. Based upon our own analysis, we have

concluded that only those chemicals used after the metal has been

produced or those chemicals used for cleaning purposes unrelated to the

actual production process should be included in factory overhead (see

October 16, 1995 Memorandum to Barbara R. Stafford, Deputy Assistant

Secretary, Import Administration). With respect to the other chemicals

in question, while respondents' accounting systems may treat them as an

element of factory overhead, these materials are more appropriately

considered direct materials because they are required for a particular

segment of the production process. Based on this analysis, we have

treated certain of the so-called ``process chemicals'' as indirect

materials which are covered by the surrogate value for factory overhead

and the remainder have been valued as direct materials.

Comment 12: Petitioners argue that the Department omitted certain

expense categories (i.e, ``selling commission,'' ``rates and taxes,''

``other provisions,'' and ``financing interest'') which should have

been included in the surrogate SG&A value. Additionally, if the

Department continues to exclude ``financing interest'' from the SG&A

value, it should use ``gross operating profit'' instead of ``operating

profit.'' Finally, according to petitioners, regardless of how PRC

producers categorize certain items, costs cannot be assigned to factory

overhead or SG&A categories unless the above-referenced RBI Bulletin

table attributes the cost to factory overhead or SG&A.

Respondents argue that the Department should not include ``rates

and taxes'' in SG&A because the surrogate input values are exclusive of

internal taxes or duties. Also, according to respondents, because the

Department does not normally adjust for credit expenses in NME cases,

it should not include a value for credit expenses (``financing

costs''). Moreover, since the cost of producing manganese metal is

determined at the producer level, ``selling commissions'' should not be

included as the producer does not sell the merchandise, only the

exporter does. Generally with respect to SG&A, respondents claim that

because the Indian surrogate information is for a broad group of

industries and India has no manganese metal industry, the Department

should include in its surrogate SG&A only those expenses incurred by

the PRC producers. As an alternative to determining what should be

included in the surrogate SG&A value, respondents suggest that the

Department use the statutory minimum of 10 percent. With respect to

profit, respondents argue that the Department's normal practice is to

use operating profits.

DOC Position: We agree with petitioners that we incorrectly omitted

certain SG&A expense categories listed in the RBI table. We have

included these amounts in our final determination.

We disagree with respondents that financing costs should be removed

from the SG&A. The Department does not adjust for differences in

selling expenses because we do not know enough about the selling

expenses included in the surrogate SG&A to make the adjustment.

However, the lack of an adjustment does not mean that these costs

should be excluded from FMV. We also disagree with respondents

regarding selling commissions. Section 773(c)(1) clearly requires the

Department to include an amount for general expenses in the FMV.

Therefore, regardless of whether the FMV is being constructed at the

producer or exporter level, it is appropriate to add an amount for

selling expenses.

Further, we disagree with respondents' argument that we should use

only those elements of the surrogate SG&A that correspond to expenses

incurred by the PRC producers. It is the Department's consistent

practice to use a surrogate amount for the entirety of SG&A as

calculated using the RBI Bulletin, as opposed to basing the surrogate

SG&A percentage on actual expenses incurred by respondents.

Finally, following our normal practice, we considered operating

rather than gross profit. Because this amount was less than 8 percent

of COM and SG&A, we used the statutory minimum.

Comment 13: Respondents claim that the Department verified that

certain charges deducted in the preliminary determination were not

incurred by respondents. Therefore, these amounts should not be

deducted for the final determination. Moreover, respondents reject

petitioners' claim that it is

[[Page 56052]]

common practice in the PRC to include insurance as part of inland

freight.

Specifically, for CEIEC, respondents claim that the Department

verified that foreign brokerage charges were included in ocean freight

and hence, this expense should not be valued separately. Regarding

CEIEC's ocean freight, the charges were incurred in U.S. dollars.

Therefore, respondents argue that CEIEC's actual shipping should be

used.

For HIED, respondents claim that the Department verified that

foreign inspection charges were not incurred. Hence, no deduction

should be made for this expense in the final determination.

Finally, for Minmetals' ocean freight, respondents ask the

Department to take the average amount Minmetals paid in U.S. dollars

for shipping on most of its U.S. sales on market carriers and use that

amount to value the shipping for its remaining sale.

Petitioners argue that an amount for insurance should be added to

foreign inland freight because the Department found numerous situations

where insurance was included as part of the freight charges paid by the

respondents. Regarding the specific exporters, petitioners generally

refute respondents' claims. Much of their discussion is proprietary in

nature. Hence, the details are not presented here.

DOC Position: We have made deductions for all expenses incurred in

shipping the merchandise to the United States (see CFR

353.41(d)(2)(i)). If an expense was not incurred, no deduction was

made. With respect to insurance for foreign inland freight, we have

made deduction only where we verified that insurance was included in

the inland freight charge.

We have not used CEIEC's actual freight because an NME carrier was

used. We have made the adjustment by using a surrogate ocean freight

which includes brokerage and handling. No additional deduction for

brokerage and handling was made. Thus, there is no double counting of

brokerage and handling.

For HIED, we disagree that we made any deduction for inspection

charges at the preliminary determination. As stated in Comment 12, the

Department does not adjust for differences in selling expenses because

we do not know enough about the selling expenses included in the

surrogate SG&A to make an adjustment. Thus, for the final

determination, the Department has continued not to make a deduction for

this expense for any respondent.

Finally, for Minmetals, we used the shipping rate proposed by

respondents for the single U.S. sale where shipping was paid in RMB.

Comment 14: Respondents argue that a type of packing material

identified by the Department in its verification report of CMIECHN/

CNIECHN's supplier should not be used to calculate FMV because this

packing material was not used for POI sales.

DOC Position: The sales in question were not found to be outside

the POI, as respondents claim. Therefore, we have calculated the FMV

for these sales using the estimated weight of the packing material used

for these sales.

Comment 15: According to respondents, both the statute and the

Department's regulations require that internal taxes remitted or

refunded upon export are to be excluded from the calculation of the

constructed value. Further, these respondents argue that the Department

verified that the value added tax (VAT) paid by the exporters to the

manganese metal producers is reimbursed by the PRC government upon

exportation of the merchandise. Therefore, according to respondents,

the Department should deduct VAT from all direct material inputs used

to determine the cost of manufacture and which were refunded by the PRC

government when subject merchandise was exported. The respondents also

submit an alternative suggestion for a VAT adjustment in which the

Department increases the export price by the amount of the VAT they

receive from the PRC government upon exportation of the merchandise.

The petitioners claim that the PRC government does not refund VAT

on material inputs, rather, the refund is on the final product.

Additionally, the VAT is not incorporated in the FMV calculation,

because the inputs are valued using Indian surrogate values which do

not incorporate a VAT. Petitioners claim that respondents' alternative

to increase the U.S. price is without merit, and that the Department

correctly excluded VAT from the U.S. price-to-FMV comparison.

DOC Position: The Department's factors of production calculation

uses Indian surrogate values which are exclusive of Indian taxes.

Because the FMV is net of taxes, neither a downward adjustment to FMV

nor the alternative upward adjustment to USP suggested by respondents

is necessary.

Continuation of Suspension of Liquidation

In accordance with section 733(d)(1) and 735(c)(4)(B) of the Act,

we are directing the Customs Service to suspend liquidation of all

entries of manganese metal from the PRC, as defined in the ``Scope of

the Investigation'' section of this notice, that are entered, or

withdrawn from warehouse, for consumption on or after the date of

publication of this notice in the Federal Register. The Customs Service

shall require a cash deposit or posting of a bond equal to the

estimated dumping margins, as shown below. This suspension of

liquidation will remain in effect until further notice. The weighted-

average dumping margins are as follows:

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

Margin

Manufacturer/producer/exporter percent

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

CEIEC........................................................ 10.27

CMIECHN/CNIECHN.............................................. 0.86

HIED......................................................... 3.72

Minmetals.................................................... 4.36

PRC-wide Rate................................................ 143.32

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

ITC Notification

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

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

the ITC will determine whether these imports are causing material

injury, or threat of material injury to the industry in the United

States, within 45 days. If the ITC determines that material injury, or

threat of material injury, does not exist, the proceeding will be

terminated and all securities posted will be refunded or canceled. If

the ITC determines that such injury does exist, the Department will

issue an Antidumping Duty Order directing Customs officials to assess

antidumping duties on all imports of the subject merchandise entered,

or withdrawn from warehouse, for consumption on or after the effective

date of the suspension of liquidation.

This determination is published pursuant to section 735(d) of the

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

Dated: October 27, 1995.

Susan G. Esserman,

Assistant Secretary for Import Administration.

[FR Doc. 95-27369 Filed 11-3-95; 8:45 am]

BILLING CODE 3510-DS-P