Titanium Sponge From the Russian Federation; Notice of Final Results of Antidumping Duty Administrative Review

DEPARTMENT OF COMMERCE

INTERNATIONAL TRADE ADMINISTRATION

[A-821-803]

Titanium Sponge From the Russian Federation; Notice of Final

Results of Antidumping Duty Administrative Review

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

ACTION: Notice of final results of antidumping duty administrative

review.

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SUMMARY: On July 29, 1996, the Department of Commerce (the Department)

published the preliminary results of the administrative review of the

antidumping finding on titanium sponge from the Russian Federation

(Russia). This notice of final results covers the review period of

August 1, 1994 through July 31, 1995. This review covers one

manufacturer, Berezniki Titanium-Magnesium Works (AVISMA), and two

trading companies, Interlink Metals & Chemicals, Inc. (Interlink) and

Cometals, Inc. (Cometals). We gave interested parties an opportunity to

comment on the preliminary results. We received comments from AVISMA,

Interlink, Cometals, and Titanium Metals Corporation (TIMET), a

petitioner. A public hearing was held on September 11, 1996. Based on

our analysis of these comments, we have changed the final results from

those presented in the preliminary results of review.

EFFECTIVE DATE: November 15, 1996.

FOR FURTHER INFORMATION CONTACT: Amy S. Wei or Zev Primor, Office of

AD/CVD Enforcement, Office 4, Import Administration, International

Trade Administration, U.S. Department of Commerce, 14th Street and

Constitution Avenue, N.W., Washington, D.C. 20230; telephone: (202)

482-5253.

SUPPLEMENTARY INFORMATION:

Applicable Statute and Regulations

Unless otherwise indicated, all citations to the statute are

references to the provisions effective January 1, 1995, the effective

date of the amendments made to the Tariff Act of 1930 (the Act) by the

Uruguay Round Agreements Act (URAA). In addition, unless otherwise

indicated, all citations to the Department's regulations are to the

current regulations, as amended by the interim regulations published in

the Federal Register on May 11, 1995 (60 FR 25130).

Background

On July 29, 1996, the Department published in the Federal Register

(61 FR 39437) the preliminary results of the 1994-1995 administrative

review of the antidumping finding on titanium sponge from Russia (33 FR

12138, August 28, 1968). This notice of final results covers the review

period for August 1, 1994 through July 31, 1995, covering one

manufacturer, AVISMA, and two trading companies, Interlink and

Cometals.

On September 12, 1996, the Department requested that AVISMA provide

the Harmonized System (HS) classified data from the United Nations

Trade Commodity Statistics (UN Trade Statistics) for Brazil for all

factors of production and by-products used to calculate normal value in

the preliminary results. AVISMA provided this data on September 19,

1996.

The Department has conducted this review in accordance with section

751 of the Act.

Scope of the Review

The product covered by this administrative review is titanium

sponge from Russia. Titanium sponge is chiefly used for aerospace

vehicles, specifically, in construction of compressor blades and

wheels, stator blades, rotors, and other parts in aircraft gas turbine

engines. Imports of titanium sponge are currently classifiable under

the harmonized tariff schedule (HTS)

[[Page 58526]]

subheading 8108.10.50.10. The HTS item number is provided for

convenience and Customs' purposes. The written description remains

dispositive as to the scope of the product coverage.

The review period (POR) is August 1, 1994 through July 31, 1995,

covering one manufacturer, AVISMA, and two trading companies, Interlink

and Cometals.

Analysis of Comments Received

Comment 1: AVISMA and Interlink argue that, in order to value

inputs and by-products for the calculation of normal value, the

Department should use the six-digit Harmonized System (HS)

classifications for the UN Trade Statistics instead of the Standard

International Trade Classification (SITC) for the UN Trade Statistics,

which was used in the preliminary results. AVISMA and Interlink claim

that the HS-based trade data is more accurate, and the surrogate values

would change significantly for vanadium oxychloride, copper powder,

carbon electrodes, and chlorine. AVISMA states that it only provided

HS-based data when it differed substantially from the SITC-based data,

and, therefore, found no need to submit the HS-based data for the

remaining inputs and by-products. By using the HS-based data, AVISMA

and Interlink argue that the Department would not need to use basket

categories for the materials in its normal value calculation.

TIMET argues that the Department should continue to use the SITC-

classified UN data, which it used in the preliminary results. TIMET

contends that where the SITC-based data helps the respondent, the

respondent does not argue to change to the HS-based data, and vice

versa. TIMET assumes that AVISMA did not argue for HS-based usage for

all costs because it would not better its position.

Department's position: We agree with AVISMA and Interlink that, in

order to ensure the most accurate valuation of factors, the HS-based

classification system should be used when available. On balance, the

more specific HS-based data is more appropriate than the broader SITC-

classification system categories. While the Department will continue to

select surrogate material values from one uniform database (i.e., the

UN Trade Statistics), when the value for the product is broken out more

specifically using the same source but a different data set, it would

be unreasonable for the Department not to choose the more specific

value over basket amounts.

In order to obtain the complete listing of HS-based data for

material inputs, on September 12, 1996, the Department requested the

Brazilian HS-classified data from the UN Trade Statistics for all

factors of production and by-products used to calculate normal value.

See Department's letter to Berezniki Titanium-Magnesium Works (AVISMA),

September 12, 1996. On September 19, 1996, AVISMA submitted to the

Department HS-based data for all but four inputs, for which the

appropriate HS-based classification was not apparent (i.e., titanium

turnings and steel sheet) or the HS-based data did not exist because

there were no imports during the period (i.e., argon and polyethylene

bags). See Letter from Wilmer, Cutler & Pickering to the Department,

September 19, 1996.

In applying the HS-based data set, because copper and aluminum were

each divided into two HS-based categories for lamenar and non-lamenar

characteristics, AVISMA argued that the Department should use the HS-

based data for non-lamenar copper and aluminum, rather than the data

for the lamenar categories. See Id. On October 4, 1996, we contacted

the U.S. Geological Survey regarding the difference between lamenar and

non-lamenar aluminum and copper. Lamenar aluminum or copper is shaped

similar to flakes, and non-lamenar aluminum or copper is granular. See

Memo to File Regarding Telephone Conversation with U.S. Geological

Survey, October 4, 1996. Because the copper and aluminum used in

producing titanium sponge are in powdered form, the copper and aluminum

are more likely to be granular.

Therefore, we are using the HS-based data for non-lamenar copper

and aluminum.

For the remaining inputs and by-products, we used the HS-based data

when available. If the HS-based data was not clear or existent, we used

the SITC-based data.

Comment 2: AVISMA and Interlink argue that the Brazilian rail

freight rate, which was obtained from the U.S. Consulate in Belo

Horizonte and used by the Department in the preliminary results,

applies to small cargos being transported small distances. AVISMA

stated that it transported some materials (especially ilmenite and

anthracite) in large quantities over long distances. AVISMA and

Interlink stated in their brief that the Department's use of the

Consulate rate is inconsistent with the economics of titanium sponge

production. As a result, AVISMA and Interlink contacted Rede

Ferroviaria S.A. (RFFSA), the Brazilian federal railroad, to obtain

rail rates over long distances for dolomite and similar ores in Central

East and Southeast regions of Brazil for the 1994-1995 period. AVISMA

argues that the RFFSA rates are more realistic because they demonstrate

a declining average rate per ton per kilometer as the transport

distance increases. In addition, AVISMA obtained similar rail rate

information from tariff rates of Burlington Northern Santa Fe Railroad,

to demonstrate that the U.S. rates are consistent with the RFFSA rail

rates.

AVISMA argues that the RFFSA rates are more precise than the

Consulate information and more accurate for determining what a producer

in Brazil would pay to transport its merchandise.

AVISMA contends that the submitted RFFSA tables are representative

of AVISMA's inputs and do not vary greatly among the commodities for

which it supplied data.

TIMET argues that AVISMA provided piecemeal data for Brazilian

freight rates similar to the piecemeal data provided for materials.

TIMET claims that AVISMA only provided partial information which is

favorable to it, rather than providing the entire data and allowing the

Department to make its own decision. Therefore, TIMET argues that the

Department must reject this data and continue to use the Brazilian

freight rates provided by the Consulate.

Department's position: We agree with AVISMA that the Department

should use the most accurate rail rates available. AVISMA stated that

the RFFSA rates supplied by AVISMA are mileage-based, apply to several

commodities similar to ilmenite and anthracite, and cover two large

areas where most of the country's economic activity occurs. Given the

limitations on the availability of publicly available published

information on Brazilian rail rates, the rates that AVISMA provided

from RFFSA provide a more accurate estimation of the rail rates paid in

a surrogate country.

Because the Department is required to value the factors of

production based on the best available information regarding values in

a surrogate country, we have determined that the RFFSA rail rates are

more accurate surrogates for the transportation rates for ilmenite and

anthracite than the rates used in the preliminary results. See Section

773(c)(1) of the Act. In addition, the Department has stated its

preference to use publicly available published information, rather than

information from embassies or consulates, from the surrogate country to

value any factors for which such information is available.

[[Page 58527]]

See Final Determination of Sales at Less Than Fair Value; Certain

Carbon Steel Butt-Weld Pipe Fittings from the People's Republic of

China, 57 FR 21058, 21062 (1982)(Comment 4).

Although petitioner contends that AVISMA is only providing

piecemeal data for freight rates, the Department individually values

each input from a surrogate country. If more accurate information

exists on the record for a certain input, regardless of the party

submitting the information, then it should be used in order to secure

the most accurate value possible for that input. Therefore, we are

using the RFFSA rail rates to compute transportation costs for ilmenite

and anthracite.

Because these rail rates were established in July 1994, which is

prior to the review period, we are adjusting these rail rates to

reflect inflation through the POR using the wholesale price indices

(WPI) published by the International Monetary Fund (IMF).

Comment 3: AVISMA argues that the selling, general, and

administrative (SG&A) expense ratios used by the Department in the

preliminary results are unadjusted for the effects of inflation. AVISMA

argues that the Department should use the SG&A ratio provided by

respondent (i.e., 8.75 percent) or only use the SG&A ratio for one

Brazilian company, RIMA Industrial, because its ratio is more

representative of the costs that AVISMA would incur if valued in a

market economy.

TIMET argues that the Department should continue to use the data

submitted in the Silicon Metal from Brazil administrative reviews.

TIMET contends that the percentages provided by AVISMA and Interlink do

not report that they are adjusted for inflation. In addition, because

the period for the Silicon Metal from Brazil review is almost identical

to the review period for titanium sponge from Russia and the 1994

Brazilian financial statements used by the Department also coincide

with the titanium sponge review period, TIMET argues that an adjustment

for inflation is not required. However, if the Department decides to

adjust for inflation, TIMET argues that any inflation-adjusted ratios

should be calculated on the basis of Electrosilex and RIMA data, two of

the respondents in the Silicon Metal from Brazil review, because they

are reliably adjusted for inflation.

In addition, TIMET states that the Department should include the

SG&A ratio from Electrosilex's financial statements, which was

inadvertently excluded in the preliminary results, because a public

version of its 1994 financial statements exists on the 1993-1994

Silicon Metal from Brazil administrative review record.

TIMET further asserts that the record does not prove that the data

submitted by AVISMA and Interlink is more reliable than the audited and

verified data submitted and used in the Silicon Metal from Brazil

administrative reviews.

Department's position: We agree with TIMET that the record does not

demonstrate that AVISMA's and Interlink's surrogate SG&A ratio

information is more reliable; both sets of data are adjusted for

inflation, according to the notes in the financial statements, and the

SG&A ratio used in the preliminary results is derived from information

that was utilized by the Department in its preliminary results for the

Silicon Metal from Brazil reviews. See Preliminary Results of

Antidumping Duty Administrative Review; Silicon Metal From Brazil, 61

FR 46779 (September 5, 1996). In addition, because we used 1994

financial statements from the Silicon Metal from Brazil review, which

are contemporaneous with the review period of this case, an additional

adjustment for inflation is not necessary.

In calculating the weighted-averaged SG&A ratio for the preliminary

results from the companies reviewed in the Silicon Metal from Brazil

review, Electrosilex's SG&A ratio was incorrectly omitted. Therefore,

we are including the SG&A ratio of Electrosilex in our normal value

calculations.

Comment 4: Cometals argues that nothing requires the Department to

calculate separate cash deposit rates for Cometals and Interlink.

Cometals contends that the locations of these entities in market

economy countries are not sufficient grounds for the Department to

automatically assign these companies separate rates. Cometals further

contends that the statute directs the Department to assign a single

cash deposit rate to future imports of AVISMA merchandise. Cometals

states that under the Department's ``knowledge test,'' if AVISMA, the

producer, knows the U.S. destination of its merchandise at the time of

sale, Cometals and Interlink will not be acting as exporters, and it,

therefore, would be inappropriate to assign Cometals and Interlink

separate cash deposit rates from AVISMA (which could apply to sales in

future review periods).

Cometals claims that, in the preliminary results, the Department

did not address that AVISMA changed its marketing and distribution

practices with its resellers at the beginning in May 1995. Because of

these new practices, Cometals contends that AVISMA has control over

pricing on its future sales of titanium sponge to the United States.

Therefore, Cometals argues, all of these sales should be subject to the

same cash deposit rate (citing Final Results of Antidumping Duty

Administrative Review; Antifriction Bearings (Other Than Tapered Roller

Bearings) and Parts Thereof from the Federal Republic of Germany, 56 FR

31692, 31699 (July 11, 1991); Federal-Mogul Corp. v. United States, 813

F.Supp. 856, 867 (CIT 1993); Torrington Co. v. United States, 44 F. 3d

1572, 1578 (Fed.Cir. 1995)). Cometals argues that Cometals and

Interlink offered essentially the same prices and same products to

customers. Cometals claims that, if the deposit rates are not equalized

between Cometals and Interlink, Cometals will be forced out of the U.S.

titanium sponge market.

However, in order to determine the single cash deposit rate for

AVISMA, Cometals, and Interlink, Cometals argues that this rate should

not be based on the ``country-wide'' rate. Cometals states that the

``country-wide'' rate is inappropriate because: (1) The rate was

determined more than 10 years ago in the 1982-1983 administrative

review; (2) the rate is based on factors of production data from Japan,

and this review is based on surrogate information from Brazil; (3) the

rate is not a rate established for AVISMA, but for another company

(i.e., Techsnabexport); and (4) AVISMA has demonstrated, in this

review, de jure and de facto absence of government control over its

operations and is entitled to a separate rate. Cometals suggests that

the Department should calculate AVISMA's cash deposit rate based on

either the weighted-average dumping margin on all reviewed entries by

Cometals and Interlink during the POR or the weighted-average export

price from AVISMA to its resellers during the review period as the

facts available.

TIMET agrees with Cometals that the Department must establish a

single cash deposit rate for all future entries of titanium sponge,

after completion of this review, sold for export to the United States

by AVISMA, Cometals, or Interlink. TIMET argues that any merchandise

sold after May 1995 by AVISMA, Cometals, or Interlink is, in fact, an

export sale to the United States by AVISMA. TIMET contends that a lack

of a single cash deposit rate would allow any foreign producer or

exporter to change its deposit rate by simply

[[Page 58528]]

hiring a new agent. However, TIMET argues that AVISMA's cash deposit

rate should be the rate established in the most recent administrative

review for AVISMA, because the statute requires that the existing cash

deposit rate remain in effect until the Department completes a review

of sales for export to the United States by that exporter.

AVISMA and Interlink argue that section 751(a)(2) of the Act

requires the cash deposit for future shipments by an individual

exporter to be set through a margin analysis of entries of that

exporter's merchandise during the most recent administrative review.

AVISMA and Interlink argue that once an exporter demonstrates that it

is not dumping, the exporter is entitled to the presumption that its

future exports will not be subject to dumping duties. AVISMA and

Interlink argue that annual administrative reviews will determine

whether that presumption was incorrect. In addition, AVISMA and

Interlink argue that a cash deposit rate has never been affected by

post-review period or end-of-the-review period developments, and the

statement of the changed relationship between AVISMA and Interlink is

only applicable to the 1994-1995 review period.

Department's position: We agree with AVISMA and Interlink. In

calculating the dumping margin, Section 751(a)(2) of the Act states

that the Department ``shall determine the normal value and export price

(or constructed export price) of each entry of the subject merchandise,

and the dumping margin for each such entry.'' With regard to assessment

and cash deposit rates, section 751(a)(2)(C) states that this

``determination under this paragraph shall be the basis for the

assessment of countervailing or antidumping duties on entries of

merchandise covered by the determination and for deposits of estimated

duties.'' For this review, we calculated margins for each exporter, on

the basis of the calculated normal value and export price, and have

used these margins as the basis for assessment and estimated cash

deposit rates, in accordance with the statute, as stated above.

While the Department is not required to use the same method of

calculation for assessment and cash deposit rates (as confirmed in the

court cases cited by Cometals above), Cometals and TIMET have not

demonstrated a basis for establishing a single cash deposit rate for

AVISMA, Cometals and Interlink in this review and disregarding the

distinct assessment rates applied to each of these firms. Cometals and

TIMET argue that AVISMA changed its relationship with its resellers

during the review period and, therefore, AVISMA will have control over

the pricing of its future sales of the merchandise under review to the

United States. Significantly, however, there are no sales during the

review period made under this changed sales relationship; the evidence

of record confirms that the only reported sales were made at a time

when AVISMA did not have such control. Interlink and Cometals thus rely

entirely on assertions of AVISMA's intent to change its practice. In

the absence of any sales made under this new approach, however, the

Department has no adequate means to verify that AVISMA will, in fact,

rely on this new distribution approach in the future; it is, at best, a

statement of future intent that can change. It is entirely plausible

that AVISMA and its resellers will restructure that relationship in

other ways and that sales in the next review will be based on some

other distribution approach. As reviews fundamentally focus on our

evaluation of sales during the period in question, we look to evidence

of the manner in which actual sales were made as the strongest basis

for our determination of marketing relationships. Accordingly, based on

the actual sales reviewed, we find no reason to establish a single cash

deposit rate for AVISMA, Interlink, and Cometals.

Further, in establishing AVISMA's cash deposit rate, we determined

that, because AVISMA made no shipments to the United States during the

review period, AVISMA's rate will remain the Russia country-wide rate.

Although AVISMA made a separate rate claim, because there are no sales

to the United States by AVISMA, we are not able to evaluate the

company's separateness request.

We disagree with Cometals' contention that the Department, in the

absence of shipments, is obligated to corroborate the country-wide rate

that has been based, in earlier reviews, on facts available.

Corroboration applies in cases where the Department has determined that

a manufacturer/exporter should be assigned a dumping margin based on

adverse facts available, as stated in section 776(b) in the Act. In

this review, because AVISMA had no shipments during the review period,

we are continuing to include AVISMA in the country-wide rate of 83.96

percent, the same rate that AVISMA has received in all prior

administrative reviews of titanium sponge.

Comment 5: Because the Department compared certain stockpile

merchandise sold to the United States with a normal value based on

AVISMA's current production, Cometals claims that the dumping margins

were artificially increased. To account for the physical differences in

the material due to aging and deterioration, Cometals argues that the

Department should adjust for differences in merchandise (difmer).

Cometals contends that this adjustment should be made because there is

a clear price differential between fresh and stockpiled titanium

sponge, and the presence of stockpile material in the world market is

only a temporary situation that reflects Russia's transition to a

market economy. Cometals suggests that the Department can determine the

difmer adjustment by comparing the weighted-average prices of stockpile

and fresh titanium sponge submitted by Cometals.

TIMET argues that the Department's practice is to make allowances

for differences in merchandise based on the cost of production (COP),

not on differences in market value, as proposed by Cometals. However,

TIMET argues that Cometals has not submitted any information regarding

differences between the COP of stockpile and fresh titanium sponge nor

any information on the physical differences between stockpile and fresh

titanium sponge and the rate at which such deterioration is occurring.

Also, TIMET contends that Cometals has had ample time to request a

difmer adjustment and provide the information to the Department. For

these reasons, TIMET argues that a difmer adjustment should not be

granted. However, if the Department determines to make a difmer

adjustment for stockpile material, TIMET argues that storage costs must

be added to normal value before a difmer adjustment may be deducted.

Department's position: We agree with TIMET that a difmer adjustment

should not be granted based on the price differential between

stockpiled and newly-produced merchandise. This practice is consistent

with the treatment of stockpiled material in the final determination of

sales at less than fair value for magnesium from Russia. See March 22,

1996 Calculation Memorandum (Public Version) for the Final Antidumping

Duty LTFV Determination on Pure Magnesium and Alloy Magnesium from the

Russian Federation, A-821-805, at 6. Moreover, normal value is

calculated based on the factors of production used to produce titanium

sponge valued in a surrogate country. There is no information on the

record which would indicate that the stockpiled titanium sponge is

physically different from newly-produced titanium sponge, or that the

stockpiled merchandise is subject to a different production process

than that of the newly-produced titanium sponge.

[[Page 58529]]

Therefore, because the production costs for these items were the same,

we assigned the same normal value for the stockpiled and newly-produced

material.

Comment 6: Cometals contends that the Department erred in deducting

foreign inland freight to Cometals' warehouse and Russian brokerage

expenses in the calculation of Cometals' export price, because they

were incurred by Cometals' supplier rather than by Cometals.

TIMET explains that the statute requires that export price be

reduced by charges incident in bringing the merchandise from the

``original place of shipment in the exporting country'' to the United

States. However, TIMET argues that if the home market country is a NME,

the Department compares the export price to normal value based on the

factors of production. TIMET contends that certain adjustments are made

to the export price to reach an ``ex-factory'' price to be compared to

normal value. If the Department does not deduct the referenced movement

expenses from export price, TIMET argues that the Department has not

calculated an ``ex-factory'' price and has overstated the U.S. price.

Department's position: We agree with Cometals that adjustments for

the foreign inland freight to Cometals' warehouse and Russian brokerage

expenses should not be deducted from the export price. Section

772(c)(2)(A) of the Act states that export price shall be reduced by

the expenses ``incident to bringing the subject merchandise from the

original place of shipment in the exporting country to the place of

delivery in the United States.'' When a reseller, not the producer, is

considered the exporter, the ``original place of shipment'' is the

point from which the reseller shipped the merchandise. In this review,

we consider the ``original place of shipment'' to be the locations of

Cometals' or Interlink's warehouses. Therefore, we are only deducting

those movement expenses from export price which were incurred from the

resellers' warehouses to the U.S. customer.

However, the antidumping statute requires an ``apples-to-apples''

comparison. See Torrington Co. v. United States, 66 F.3d 1347, 1352

(Fed.Cir. 1995). Therefore, in order to calculate normal value at the

same point of shipment, we are including in normal value an amount for

the inland freight from the producer to the resellers' warehouses and

for Russian brokerage. This calculation is in accordance with section

773(c)(1) of the Act, which provides that the normal value will be

based on, among other things, the ``cost of containers, coverings, and

other expenses'' (emphasis added). It is necessary to include these

expenses for bringing the subject merchandise to the resellers'

warehouses to calculate the normal value at the original places of

shipment.

Comment 7: TIMET argues that the Department should inquire whether

Interlink has antidumping duty reimbursement (rebate) arrangements with

its customers.

Department's position: It has been our consistent policy that

evidence of reimbursement is necessary before we can consider making an

adjustment to U.S. price. As there is no evidence on the record that

Interlink reimbursed customers for antidumping duties in this review,

it is not appropriate to include this factor in our calculation. At the

time of liquidation, the U.S. Customs Service will require the importer

to certify that it has not entered into any agreement with the exporter

or producer to be reimbursed for antidumping duties. If any

reimbursement is uncovered, it will be handled as our regulations

instruct under 19 CFR 353.26 at that time.

Comment 8: TIMET argues that the Department must adjust U.S. price

for export taxes, in accordance with the statute and regulations.

According to TIMET, the calculation of U.S. price is not affected by

the fact that these taxes are paid in an NME country. TIMET contends

that nothing in the statute allows the Department to ignore export

taxes, because the taxes are direct selling expenses, and the failure

to deduct such direct selling expenses does not allow a valid

comparison of ex-factory prices.

AVISMA and Interlink argue that export taxes should not be deducted

because: (1) AVISMA did not pay export taxes on exports to the United

States during the review period; (2) Cometals and Interlink were the

exporters and neither company paid an export tax; (3) Russian export

taxes are not included and have no effect on the export prices; and (4)

the export tax paid by an NME producer to its government does not

represent a ``real cost,'' and, therefore, should not be deducted.

Department's position: We agree with AVISMA and Interlink. Section

772(c)(2)(B) of the Act states that the Department shall reduce export

price by ``the amount, if included in such price, of any export tax,

duty, or other charge imposed by the exporting country on the

exportation of the subject merchandise to the United States.'' For

purposes of this review, Interlink and Cometals, not AVISMA, are the

exporters of the merchandise. In the export price transactions between

Interlink/Cometals and its customer in the United States, neither

Interlink nor Cometals incurred export taxes as defined by section

772(c)(2)(B).

Moreover, the Department has determined that it is not required to

deduct export tax payments made between a NME producer and its NME

government, pursuant to section 772(c)(2)(B) of Act. Section

772(c)(2)(B) provides that export taxes are to be deducted only if they

(1) are paid on exports to the United States and (2) included in the

export price of the merchandise under investigation. In a NME, the

Department has no basis for determining that a tax payment from the

producer to the government is included in the price. The statutory

treatment of NMEs--as seen in sections 771(18), 773(c), the legislative

history, and applicable judicial rulings--reflects the fact that cost

and pricing structures in a NME are inherently unreliable. Russia's

designation as a NME obligates the Department to reject NME values,

substituting instead the ``surrogate'' factor prices and costs

identified in comparable market economy countries. A NME-imposed export

tax, however, cannot be valued in this fashion, and to make a deduction

for the export tax amounts would unreasonably isolate one part of the

web of transactions between government and producer. See Pure and Alloy

Magnesium from the Russian Federation, 60 FR 16,440, 16,448

(1995)(comment 10). An export tax charged for one purpose may be offset

by government transfers provided for another purpose. In such

circumstances, the Department has no basis for determining whether and

to what extent a tax might be reflected in a price. This is the very

type of internal NME transfer that the statute directs the Department

to reject.

Comment 9: TIMET argues that the Department should use the average

of electricity prices provided by the Brazilian Regional Commission for

Electrical Integration, rather than the Brazilian prices provided by

AVISMA, which allegedly do not include all appropriate charges and are

not representative of the entire country. TIMET argues that electricity

prices in Brazil should include the following four components: (1)

Demand charges; (2) consumption charges; (3) tax; and (4) premium

charges, if applicable. TIMET argues that it is unclear whether the

electricity rate used by the Department includes these components.

Moreover, TIMET contends that Electrobras, the source that the

Department used for electricity rates, accounts for less than 50

percent of the electricity in Brazil.

[[Page 58530]]

TIMET further contends that there is no indication that the rates used

by the Department are average prices from Electrobras.

If the Department decides to apply the Electrobras rate, TIMET

argues that the Department should use the A2 Electrobras rate, which,

TIMET claims, most industrial users in Brazil receive. TIMET points to

the lack of evidence on the record justifying the use of the A1 rate.

To qualify for the A1 rate, TIMET claims that a user must meet certain

consumption standards and have a 230-kilovolt (kV) system. Whereas

AVISMA's consumption of electricity meets the required standard, there

is no evidence on the record that AVISMA has a 230-kV system. TIMET

argues that the AVISMA plant was built in an economic system where

electricity was ``free'' and AVISMA, therefore, had no incentive to

reduce costs by locating near a 230-kV system.

AVISMA argues that because it was found to be entitled to the A1

rate in the magnesium investigation, AVISMA necessarily qualifies for

the A1 rate in titanium sponge production because titanium sponge

production is more energy-intensive than magnesium production. In fact,

AVISMA contends, Brazil was selected as a surrogate in the magnesium

investigation because it has a large energy-intensive aluminum

producing sector. According to AVISMA, TIMET's argument ``contradicts

the economics of titanium sponge production.'' Although TIMET argues

that only a small number of users receive the A1 rate in Brazil, AVISMA

contends that it would take advantage of the 230 kV lines if it were

located in Brazil given the economics of production. Therefore, AVISMA

asserts that it would therefore qualify for the A1, rather than the A2,

electricity rate.

AVISMA also argues that the Electrobras prices for the review

period are actual average prices, taken from actual monthly bills

incurred by each class of users supplied by Electrobras, as discussed

in the magnesium investigation. AVISMA argues that the Electrobras

price data is representative because it is a holding company for

Brazil's federal government and accounts for nearly 60 percent of

Brazil's installed generation capacity. AVISMA also explains that

Electrobras accounts for 66 percent of all transmission lines in Brazil

in voltages of 230 kV or higher. Furthermore, AVISMA argues that

TIMET's electricity price is flawed because it is not a weighted

average, is not restricted to the largest users of electricity, and has

nothing to do with actual prices paid for electricity in Brazil.

With regard to electricity taxes, AVISMA argues that there is

sufficient Departmental precedent for using a tax-exclusive electricity

price because the Department does not want to confuse the price to the

producer with the overlay of governmental activity in the exporting

country.

Department's position: We agree with AVISMA that the A1 Electrobras

rate is the appropriate electricity rate to use for AVISMA in this

review. The evidence on the record indicates that Electrobras

electricity prices are representative of the electricity prices charged

in Brazil and that the prices include the applicable demand and

consumption charges cited by TIMET. With regard to the treatment of

taxes in surrogate prices, the Department's practice is to value each

factor of production, where possible, with publicly available published

information which is tax-exclusive. See Preliminary Results of

Antidumping Duty Administrative Review; Sebacic Acid from the People's

Republic of China, 61 FR 46440, 46442 (September 3, 1996). Therefore,

we believe the use of the Electrobras rate is consistent with

Departmental policy.

With regard to which Electrobras rate to apply, the Court of

International Trade (CIT) upheld the Department's decision to apply the

A1 Electrobras rate to AVISMA for purposes of the final determinations

of sales of less than fair value for pure magnesium and alloy magnesium

from the Russian Federation. See Magnesium Corp. of America, et al., v.

U.S., Slip Op. 96-148 (August 27, 1996). The CIT determined that the

record indicated that the magnesium industry required enough

electricity to qualify for the lowest rate, A1. The CIT stated that,

``(b)ased on the evidence on the record, it is reasonable to conclude

that magnesium producers use electricity at the lowest rate

available,'' given that electricity constitutes a large portion of the

costs incurred in the production of magnesium. See Id., at 18. In

addition, the CIT also determined that the record evidence demonstrated

that a planned magnesium investment in Brazil would have an energy line

of 230 kV. See Id.

For the preliminary results, we calculated the number of kilowatt

hours needed to produce one metric ton, based on verified figures. The

calculation demonstrated that AVISMA's kilowatt capacity was

significantly higher than the minimum necessary to receive the A1 rate.

In addition, because AVISMA produces both titanium sponge and magnesium

at its production facility, it would be reasonable to assume that total

magnesium/titanium sponge production would require an even greater

demand for electricity than what is required for only the magnesium

production. Therefore, based on the evidence on the record, we

determined that it is reasonable to apply the A1 Electrobras rate as a

surrogate electricity value for AVISMA.

Comment 10: TIMET contends that the Department erroneously adjusted

normal value for by-products of magnesium production (i.e., magnesium

chloride and KAMA compound). In addition, TIMET argues that AVISMA did

not prove that it made sales of its by-products because these actual

sales were not submitted on the record. Therefore, the Department

cannot assume that these sales were made and cannot adjust for the by-

products. See Frozen Concentrated Orange Juice from Brazil: Final

Determination of Sales at Less Than Fair Value, 51 FR 8324, 8329 (March

17, 1987).

AVISMA argues that magnesium is an input in producing titanium

sponge. Accordingly, AVISMA included the costs in producing magnesium,

such as energy consumption, as a part of the build-up of costs for

producing titanium sponge. Therefore, AVISMA contends that all of the

by-products reported, including those resulting from magnesium

production, were related to the titanium sponge production. AVISMA

argues that the Department verified that magnesium chloride qualifies

as a by-product. AVISMA also argues that KAMA compound is produced in

electrolyzers, which are dedicated to producing magnesium for titanium

sponge production. In addition, AVISMA argues that the Department's

spot-checking of by-products at verification provides the Department

with the information necessary to confirm the validity of AVISMA's by-

product claims.

Department's position: We agree with AVISMA. With regard to the

verification of the by-product sales, in the Department's initial

questionnaire, we only requested that AVISMA report the amount of by-

products produced per unit of subject merchandise. See Department's

Request for Information, September 20, 1995, at D-6. In order to verify

the amount of by-products reported by AVISMA, we requested that AVISMA

provide proof of sales and requested that AVISMA demonstrate, through a

trace of its accounting books, its factor calculations for selected by-

products. No discrepancies were found. See AVISMA's verification

report, July 10, 1996, at 11.

With regard to the inclusion of by-products from magnesium

production in the calculation of normal value for purposes of the

titanium sponge review,

[[Page 58531]]

we agree with AVISMA that these by-products should be used to offset

the cost of manufacturing for titanium sponge production. AVISMA

produces magnesium specifically for its own consumption in titanium

sponge production as well as for commercial sale. See AVISMA's

Supplemental Questionnaire Response, March 26, 1996, at Attachment 9.

Therefore, a portion of the magnesium production flows directly into

the titanium sponge production. Because of this, AVISMA reported the

inputs to produce magnesium as inputs for titanium sponge production,

and the Department valued these factors to compute normal value in

order to be reflective of AVISMA's actual production process. Because

these by-products result from the actual production of titanium sponge,

they are factors whose value must be taken into account in our

calculation of the normal value. See Final Determination of Sales of

Less Than Fair Value; Pure Magnesium from Ukraine, 60 FR 16432, 16435

(March 30, 1995), Comment 6. Therefore, we are continuing to grant an

offset for those by-products which directly result from the production

of titanium sponge.

Comment 11: When valuing costs for by-products, TIMET argues that

the Department should adjust the UN Trade Statistics data downward for

profit in order to value the by-products by cost, not sales.

AVISMA argues that the Department's policy is to use sales value,

not COP, when valuing by-product offsets. See Final Results of Silicon

Metal from Argentina (59 FR 65336, 65340 (December 14, 1993)), Final

Determination of Sebacic Acid from PRC (59 FR 28053, 28056 (May 31,

1994)), and Final Determination of Coumarin from PRC (59 FR 66895,

66900 (December 28, 1994)).

Department's position: We agree with AVISMA. The Department's

practice is to value by-product offsets using import values as

surrogates for the ex-factory, freight-exclusive prices from suppliers

to consumers because we believe this is the best estimate for the

market values of the by-products in this case. See Magnesium Final

Determination, Comment 5, at 16447; Final Determination of Sales at

Less Than Fair Value: Bicycles from the People's Republic of China, 61

FR 19027, 19030 (April 30, 1996). Accordingly, we have continued to

value by-product offsets using the import prices provided in the UN

Trade Statistics.

Comment 12: TIMET argues that the Department must exclude AVISMA's

claimed by-product deduction for copper melt from its calculation of

normal value. TIMET contends that the copper melt by-product is new

information presented at the verification, and, therefore, the

Department is not allowed to accept such untimely information.

AVISMA argues that the copper melt by-product claim was presented

as a minor revision on the first day of verification. See AVISMA's

Verification Exhibits, July 10, 1996, Exhibit A-1.

Department's position: We agree with TIMET. The Department's

regulations at 19 CFR 353.31(a)(ii) allows parties to submit factual

information for consideration until the earlier of the date of

publication of notice of preliminary results of review or 180 days

after the date of publication of notice of initiation of the review.

The Department accepts new information at verification only when (1)

the need for that information was not evident previously, (2) the

information makes minor corrections to information already on the

record, or (3) the information corroborates, supports, or clarifies

information already on the record. Consistent with our practice, the

Department does not consider AVISMA's copper melt by-product claim at

verification as acceptable new information. In addition, AVISMA did not

alert the Department that it had included a previously unreported by-

product in the minor corrections presented at verification. Therefore,

the Department is revising its calculation of normal value to exclude

the by-product offset for copper melt.

Comment 13: Given the hyperinflation in Brazil, TIMET argues that

in calculating normal value, the Department should account for the

effects of inflation on the input pricing data which was originally

reported in U.S. dollars.

AVISMA argues that it would be impossible for the Department to

properly account for variables such as exchange rates and currency

reform. Further, AVISMA notes that once an input is priced in U.S.

dollars, the inflation rate in Brazil becomes irrelevant.

Department's position: We agree with AVISMA. It is not necessary or

appropriate to make adjustments to these U.S. dollar values for

Brazilian inflation. Moreover, because we do not know the dates or

exchange rates used to convert these values into dollars, we could not

determine any such adjustment. In addition, because the data contained

in the UN Trade Statistics is nearly contemporaneous with the review

period, the effect of any dollar inflation adjustment would likely be

small. See Magnesium Final Determination, Comment 16, at 16449.

Comment 14: At verification, AVISMA stated that it routinely

discards the source documentation for its material flow ledgers after

three months. TIMET argues that the Department should instruct AVISMA

not to discard this documentation for future verifications.

AVISMA states that it is now aware of the importance of maintaining

the source documentation for its material flow ledgers, and has no

problem with the suggestion.

Department's position: We agree with TIMET and advise AVISMA to

maintain the source documentation for its material flow ledgers for

purposes of verification.

Final Results of Review

As a result of the comments received, we have revised our

preliminary results and determine that the following margins exist:

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

Margin

Manufacturer/exporter Review period (percent)

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

Russia-wide rate........................... 8/1/94-7/31/95 83.96

Cometals, Inc.............................. 8/1/94-7/31/95 28.31

Interlink Metals & Chemicals............... 8/1/94-7/31/95 0.00

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

The Department shall determine, and the US Customs Service shall

assess, antidumping duties on all appropriate entries. Individual

differences between U.S. price and normal value may vary from the

percentages stated above. The Department will issue appraisement

instructions directly to the U.S. Customs Service.

Furthermore, the following deposit requirement will be effective

for all shipments of titanium sponge from Russia entered, or withdrawn

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

final results of this administrative review, as provided by section

751(a)(1) of the Act: (1) The cash deposit rate for merchandise

manufactured and exported to the United States by AVISMA will be the

Russia-wide rate established in these final results of review; (2) the

cash deposit rates for merchandise manufactured by AVISMA and exported

to the United States by Interlink or Cometals will be those rates

established for Interlink or Cometals in these final results of review;

(3) for merchandise exported by manufacturers or exporters not covered

in this review but covered in the original LTFV investigation or a

previous review and have a separate rate, the cash deposit

[[Page 58532]]

rate will continue to be the most recent rate published in the final

determination or final results for which the manufacturer or exporter

received a company-specific rate; (4) for Russian manufacturers or

exporters not covered in the LTFV investigation or in this or prior

administrative reviews, the cash deposit rate will continue to be the

Russia-wide rate; and (5) the cash deposit rate for non-Russian

exporters of subject merchandise from Russia that were not covered in

the LTFV investigation or in this or prior administrative reviews will

be the rate applicable to the Russian supplier of that exporter. These

deposit rates, when imposed, shall remain in effect until publication

of the final results of the next administrative review.

This notice also serves as a final reminder to importers of their

responsibility under 19 CFR 353.26(b) to file a certificate regarding

the reimbursement of antidumping duties prior to liquidation of the

relevant entries during this review period. Failure to comply with this

requirement could result in the Secretary's presumption that

reimbursement of antidumping duties occurred and the subsequent

assessment of double antidumping duties.

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

administrative protective order (APO) in this review of their

responsibility concerning the disposition of proprietary information

disclosed under APO in accordance with 19 CFR 353.34(d). Timely written

notification of the return/destruction of APO materials or conversion

to judicial protective order is hereby requested. Failure to comply

with the regulations and the terms of an APO is a sanctionable

violation.

This administrative review and notice are in accordance with

section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)).

Dated: November 8, 1996.

Robert S. LaRussa,

Acting Assistant Secretary for Import Administration.

[FR Doc. 96-29365 Filed 11-14-96; 8:45 am]

BILLING CODE 3510-DS-P