Silicomanganese From Brazil; Final Results of Antidumping Duty Administrative Review

DEPARTMENT OF COMMERCE

[A-351-824]

Silicomanganese From Brazil; 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 January 9, 1997, the Department of Commerce (``the

Department'') published the preliminary results of its administrative

review of the antidumping duty order on silicomanganese from Brazil.

The review covers exports of this merchandise to the United States by

one manufacturer/exporter, Companhia Paulista de Ferro-Ligas (``CPFL'')

and Sibra Eletro-Siderurgica Brasileira S.A. (``Sibra'') (collectively

``Ferro-Ligas Group''), for the period June 17, 1994 through November

30, 1995.

We gave interested parties an opportunity to comment on our

preliminary results. Based on our analysis of the comments received, we

have revised our calculations for these final results.

EFFECTIVE DATE: July 15, 1997.

FOR FURTHER INFORMATION CONTACT: Hermes Pinilla or Thomas Barlow,

Office of Import Administration, International Trade Administration,

U.S. Department of Commerce, 14th Street and Constitution Avenue, NW,

Washington, DC 20230; telephone: (202) 482-4733.

SUPPLEMENTARY INFORMATION:

Applicable Statute and Regulations

Unless otherwise indicated, all citations to the Tariff Act of

1930, as amended (the Act), are references to the provisions effective

January 1, 1995, the effective date of the amendments made to the Act

by the Uruguay Round Agreements Act (URAA). In addition, all references

to the Department's regulations are to 19 CFR 353 (1997).

Background

On January 9, 1997, the Department published in the Federal

Register (62 FR 1320) the preliminary results of its administrative

review of the antidumping duty order on silicomanganese from Brazil.

The antidumping duty order on silicomanganese from Brazil was published

on December 22, 1994 (59 FR 66003). This review covers the period June

17, 1994 through November 30, 1995. On May 8, 1997, we extended the

final results of review (62 FR 25172).

Scope of the Review

The merchandise covered by this review is silicomanganese from

Brazil. Silicomanganese, which is sometimes called ferrosilicon

manganese, is a ferroalloy composed principally of manganese, silicon

and iron, and normally contains much smaller proportions of minor

elements, such as carbon, phosphorous and sulfur. Silicomanganese

generally contains by weight not less than 4 percent iron, more than 30

percent manganese, more than 8 percent silicon and not more than 3

percent phosphorous. All compositions, forms and sizes of

silicomanganese are included within the scope of this review, including

silicomanganese slag, fines and briquettes. Silicomanganese is used

primarily in steel production as a source of both silicon and

manganese. This review covers all silicomanganese currently

classifiable under subheading 7202.30.000 of the Harmonized Tariff

Schedule of the United States (``HTSUS''). Some silicomanganese may

also currently be classifiable under HTSUS subheading 7202.99.5040.

Although the HTSUS subheadings are

[[Page 37870]]

provided for convenience and customs purposes, our written description

of the scope is dispositive.

Analysis of Comments Received

We received case and rebuttal briefs from Petitioner, the Elkem

Metals Company, and from Respondent, the Ferro-Ligas Group. At the

request of Petitioner, we held a hearing on March 24, 1997. In their

briefs both Petitioner and the Ferro-Ligas Group alleged clerical

errors. We agree that certain of these items constitute clerical errors

and therefore made the appropriate changes for the final results. See

Analysis Memorandum from Analyst to File dated July 7, 1997.

Comment 1: Petitioner contends that the Department failed to

include home market indirect selling expenses in constructed value

(``CV''). Petitioner recommends that the Department calculate a selling

expense factor by taking the total selling expenses reported in the

Ferro-Ligas Group's financial statements and dividing that amount by

the reported net sales revenue to yield a total selling expense factor.

According to Petitioner, that total selling expense factor should then

be applied to the gross unit price less home market ICMS (a Brazilian

value-added tax) to derive the amount of home market indirect selling

expenses that should be included in CV.

The Ferro-Ligas Group argues that Petitioner's suggestion that the

Department use total selling expenses to calculate an indirect selling

expense adjustment purposefully overstates indirect selling expenses.

The Ferro-Ligas Group asserts that the amount of selling expenses

derived using the process suggested by petitioner includes both direct

and indirect selling expenses. Therefore, the Ferro-Ligas Group

contends, the suggested adjustment would not accurately reflect the

amount of home market indirect selling expenses. The Ferro-Ligas Group

argues that, if the Department decides to include a home market selling

expense adjustment in its calculation of normal value, the adjustment

should be based on the indirect selling expense adjustment in the

Department's Sales Verification Report. The Ferro-Ligas Group suggests

that this ratio be applied to gross unit price less the appropriate

home market taxes (i.e., ICMS, PIS and COFINS) for the identical home

market sale that would have been matched to the Ferro-Ligas Group's

U.S. sale.

Department's Position: We agree with Petitioner that we did not

include home market indirect selling expenses in CV and that we should

have done so. However, we have also determined that Petitioner's

recommended methodology does not provide the most accurate home market

indirect selling expense factor because the Ferro-Ligas Group's

financial statements do not segregate direct selling expenses from

indirect selling expenses. We disagree with the Ferro-Ligas Group's

suggestion that we use the indirect selling expense adjustment from the

Sales Verification Report because that adjustment factor is a U.S.

indirect selling expense ratio and, therefore, would provide inaccurate

results for a home market indirect selling expense factor. Therefore,

based on the information on the record, we have derived a home market

indirect selling expense factor from the Ferro-Ligas Group's selling

expenses reported in the financial statements. Because this amount

includes both direct and indirect selling expenses, we subtracted the

reported direct selling expense amount (i.e., home market commissions)

from the total selling expense amount to derive a home market indirect

selling expense value, which we divided by the Ferro-Ligas Group's

reported net sales revenue to obtain a home market indirect selling

expense ratio. We then applied the indirect selling expense ratio to

gross unit price less ICMS, PIS and COFINS and included it in CV. Since

this adjustment was based on net prices, we deducted these taxes from

gross unit price because we found that these taxes were included in the

unit price of the subject merchandise. See Analysis Memorandum from

Analyst to File dated July 7, 1997. We have determined that this

methodology provides the most accurate results for a home market

indirect selling expense figure.

Comment 2: Petitioner asserts that the Department failed to include

in its calculation of general and administrative (G&A) expenses all of

the ``extraordinary'' costs excluded by the Ferro-Ligas Group.

Petitioner contends that the Department only accounted for excluded

fixed costs at one plant (Barbacena) for six months of 1995 rather than

for all of the plants for the entire year. Petitioner requests that the

Department add to the Ferro-Ligas Group's reported G&A expenses all

costs that were improperly deducted for the six-month period by the

Ferro-Ligas Group and double all such costs in order to arrive at a

reasonable estimate of the annualized amount that should be included in

the Ferro-Ligas Group's G&A expenses for the entire year.

Petitioner argues that the Department should continue to include

all ``extraordinary'' costs in the period rather than amortize them

over future periods as the Ferro-Ligas Group now suggests. Petitioner

asserts that, in the past, where respondent's financial statements have

reported restructuring costs incurred in the fiscal year, the

Department has consistently included these costs, in their entirety, in

the cost of production (COP) and CV for the subject merchandise.

The Ferro-Ligas Group argues that, since these costs are

extraordinary, non-recurring, and dedicated to re-starting and

restructuring the company, it is inappropriate to include these

expenses in an effort to calculate the normal COP of the Ferro-Ligas

Group. The Ferro-Ligas Group asserts that the addition of the

extraordinary costs of the factories other than Barbacena would further

distort the Ferro-Ligas Group's CV in the wrong direction.

The Ferro-Ligas Group adds, however, that, if the Department

continues to include the extraordinary costs as part of G&A expense, it

should amortize these amounts over an appropriate period rather than

fully apply them in this period.

Department's Position: We agree with Petitioner that the amounts

reported by the Ferro-Ligas Group as extraordinary expenses should be

included in the COP and CV calculations, and we have done so in our

final calculations. In this review, the Ferro-Ligas Group classified

certain manufacturing costs as non-operating expenses and excluded them

from its reported COP and CV figures. These costs fall into three major

categories: depreciation and other costs associated with plants that

were closed in prior years; costs associated with reducing the plants'

work forces; and costs associated with lower production levels

resulting from bankruptcy and reorganization proceedings during 1995.

The Ferro-Ligas Group treated amounts recorded in the first of

these categories, the costs associated with plants that were closed in

prior years, as ``other operating expenses'' in its audited financial

statements. These amounts represent depreciation and other costs

actually incurred by the Ferro-Ligas Group during the period of review

(POR) for holding idle production assets. Thus, these costs are

properly included as part of G&A expenses in accordance with the

Department's past practice. See, e.g., Final Determination of Sales at

Less Than Fair Value: Extruded Rubber Thread From Malaysia, 61 FR

54773, 54772 (October 22, 1996).

The second category of costs, amounts associated with work-force

reduction, were treated as manufacturing costs on the Ferro-Ligas

Group's audited financial statements. These costs include severance,

pension payments,

[[Page 37871]]

and a settlement with the worker's union. As such, they represent

amounts actually incurred by the company and are properly included as

part of the cost of the subject merchandise. However, like costs

associated with idle assets, we consider these costs to be period costs

(i.e., costs that are more closely related to the accounting period

rather than the current manufacturing costs) and have therefore

included them in our calculation of G&A expenses.

The third category represents actual labor and overhead costs

incurred by the Ferro-Ligas Group to produce the subject merchandise

during the POR. Although these costs would normally be considered to be

part of the company's actual manufacturing costs, for financial

statement purposes, the Ferro-Ligas Group reclassified the amounts to

non-operating expenses. According to company officials, this

reclassification was done in order to exclude from operating costs

those costs associated with the lower production levels resulting from

the company's bankruptcy proceedings. In its response, the Ferro-Ligas

Group excluded all of the reclassified costs from its reported COP and

CV figures. Although treated as non-operating expenses for financial

statement purposes, the labor and overhead costs excluded by the Ferro-

Ligas Group were incurred specifically to produce the subject

merchandise. As such they should be included in COP and CV and we have

done so for these final results.

We disagree with the Ferro-Ligas Group's contention that the

amounts incurred in each of the three categories described above are

``extraordinary'' expenses and, as a result, must be excluded from the

company's reported costs. Contrary to the company's claims, these

expenses do not meet the criteria for extraordinary expenses and, thus,

are properly treated as part of COP and CV. See, e.g., Final

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

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

Products from the Netherlands, 58 FR 37199, 37204 (July 9, 1993), and

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

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

Products, Certain Corrosion-Resistant Carbon Steel Flat Products, and

Certain Cut-to-Length Carbon Steel Plate From France, 58 FR 37125,

37135 (July 9, 1993). In fact, the Ferro-Ligas Group did not treat

these expenses as ``extraordinary'' items in its own financial

statements. Moreover, with respect to the Ferro-Ligas Group's claim

that all three categories of excluded expenses be amortized over some

future period, there is no information on the record that would

indicate that these expenses would benefit current or future production

and, therefore, amortization of the amounts would be inappropriate.

Finally, with respect to Petitioner's argument that the costs

should be doubled because they only represent six months of the actual

costs incurred by the Ferro-Ligas Group, we disagree because such

treatment would overstate COP and CV. In its response to the

Department, the Ferro-Ligas Group has appropriately included twelve

month G&A expenses.

Comment 3: The Ferro-Ligas Group argues that the Department

violated section 773(f)(3) of the Act in this case by conducting an

investigation of the major inputs received by the company from its

affiliated suppliers. According to the Ferro-Ligas Group, the

Department did not have reasonable grounds to believe or suspect that

the COP of these inputs exceeded the transfer price the company paid

for them. The Ferro-Ligas Group notes that no interested party provided

the Department with grounds to conduct a major-input inquiry in this

review. Nor does the Group believe that a finding of below-cost sales

was established in the previous segment of this proceeding. The Ferro-

Ligas Group argues that there is evidence on the record that supports

its conclusion that Companhia Vale do Rio Doce (CVRD) and the Usinas

Siderurgicas de Minas Gerais S/A (USIMINAS) generate enormous profits

through their sale of manganese ores and coke and, thus, could not have

been selling these inputs at below-cost prices during the POR. For

these reasons, according to the Ferro-Ligas Group, the Department

should accept the company's submitted transfer prices for major inputs

purchased from affiliated suppliers since there was no basis for

questioning these amounts.

Petitioner argues that section 773(f)(3) of the Act provides the

Department with the authority to conduct an investigation of an

affiliated supplier's production costs where there are reasonable

grounds to believe or suspect that major inputs were supplied at prices

below cost. Moreover, Petitioner contends, section 773(f)(3) of the Act

does not address the circumstances under which the Department may

request COP data for major inputs purchased from affiliated suppliers.

Thus, according to Petitioner, a separate sales-below-cost allegation

need not be filed and accepted before the Department may conduct an

inquiry with respect to the cost of major inputs.

Petitioner asserts that the Department's practice is based on a

sound rationale. Petitioner contends that, where a respondent is

selling subject merchandise in the home market at prices below COP, one

reason the respondent could sustain this practice is its ability to

obtain inputs from affiliated suppliers at prices below the market

value or even the COP of such inputs. Moreover, Petitioner contends,

the affiliated supplier may have an interest in subsidizing a

respondent's below-cost home market sales of subject merchandise by

providing inputs at below COP for the purpose of reducing or

eliminating antidumping duties on U.S. sales.

Department's Position: We agree with Petitioner that a separate

sales-below-cost allegation need not be filed and accepted before we

can investigate COP data for major inputs purchased from affiliated

suppliers. In those instances in which we conduct an investigation of

sales below cost under section 773(b) of the Act, it is our practice to

analyze production-cost data for major inputs purchased by a respondent

from its affiliated suppliers (see, e.g., Final Determination of Sales

at Less Than Fair Value: Certain Carbon Steel Butt-Weld Pipe Fittings

From France, 60 FR 10538 (February 27, 1995), and Final Results of

Antidumping Administrative Review: Tapered Roller Bearings from Japan,

61 FR 57629, 57644 (November 7, 1996)). In this regard, we believe that

the great potential for below-cost sales of the foreign like product

provides us the reasonable grounds to believe that major components of

the foreign like product may also have been sold at prices below the

COP within the meaning of section 773(f)(3) of the Act. Thus, separate

allegations concerning each of the major inputs obtained from

affiliates are not required in order for us to request production-cost

information with respect to such inputs. Rather, our position is that,

if there is reason to suspect that a respondent has sold the foreign

like product at prices below COP, then there is likewise reason to

suspect that the respondent's affiliated suppliers have also

transferred major production inputs at below-cost prices. The

affiliation, that is, the common control, management, or ownership,

creates the potential for companies to act in a manner other than at

arm's length.

In addition, as a practical matter, our practice with respect to

analyzing affiliated-party purchases of major inputs recognizes the

extreme burden that would be imposed on all parties where petitioners

would be required to provide specific below-cost allegations

[[Page 37872]]

with respect to individual major inputs and the various suppliers of

those inputs, and respondents would be required to provide specific

information with respect to individual major inputs. In most instances,

the information necessary for a petitioner to recognize the need for

and to file an allegation with respect to below-cost sales of major

inputs is under the control of the respondent. At best, this

information would only be made available to the petitioner once the

respondent had answered the Department's cost questionnaire. Thus, a

separate allegation and initiation procedure for each major input and

affiliated supplier, like that envisioned by the Ferro-Ligas Group in

this case, would serve only to prevent the Department from performing

its analysis of critical production-cost data where there already exist

reasonable grounds to proceed with such an analysis. See Statement of

Administrative Action (SAA) at pages 833 and 834.

We disagree with the Ferro-Ligas Group's argument that, because we

conduct an investigation of affiliated-party major inputs in all cases

in which we initiate a sales-below-cost inquiry under section 773(b) of

the Act, there is no purpose to the ``reasonable grounds to believe or

suspect'' threshold under section 773(f)(3) of the Act. As discussed

previously, a showing of reasonable basis to suspect below-cost sales

of the subject merchandise in the home market, coupled with the fact

that a producer and its supplier(s) of major inputs are affiliated

provides us with a basis for analyzing the cost of major inputs

purchased by the respondent from its affiliates. In situations in which

sufficient allegation of home market sales of the subject merchandise

below cost has not been made, for example when CV is used as normal

value due to the lack of viable home or third-country markets,

petitioner or other interested parties would be required to present the

Department with other ``reasonable grounds'' in order for the

Department to initiate a below-cost investigation of major inputs.

We also disagree with the Ferro-Ligas Group's claim that the

financial statement profits reported by CVRD and USIMINAS prove that

these entities are not transferring major inputs to affiliated parties

at prices below the cost for such inputs. These financial statements

merely show that the company earned an overall profit on its sales of

all goods and services; they do not establish that specific products

transferred to affiliated parties were sold above the respective costs.

Moreover, because the Ferro-Ligas Group refused to provide some of the

requested cost information, we were unable to determine whether their

purchases of major inputs were made at arm's length prices.

Accordingly, we have continued to value the affiliated-party inputs

using the same adverse facts available values we relied upon in the

preliminary results.

Comment 4: The Ferro-Ligas Group argues that the Department's use

of an adverse inference in applying facts available for major inputs

supplied by affiliated parties is contrary to law. The Ferro-Ligas

Group contends that the Court's decision in NSK, Ltd. v. United States

(``NSK''), 910 F. Supp. at 670 (CIT 1995), does not support a

conclusion that if cost information is not available the Department may

penalize the respondent. The Ferro-Ligas Group states that in this

review it was physically and legally unable to extract cost information

from its affiliated parties, CVRD and USIMINAS. The Ferro-Ligas Group

contends that the Department should have determined that neither the

Ferro-Ligas Group nor the Department was in a position to obtain the

information desired in the context of its 773(f)(2) inquiry. Therefore,

the Ferro-Ligas Group argues, its inability to obtain this back-up

information does not provide grounds for the Department to apply

adverse facts available. The Ferro-Ligas Group also believes that the

Department should not have waited until its preliminary results to

indicate for the first time that Respondent had not met the

Department's standard for acting to the best of its ability.

The Ferro-Ligas Group further argues that the Department

incorrectly determined that the Ferro-Ligas Group's shareholders are

``interested parties'' in this proceeding. Respondent contends that the

Department's rationale in determining that the shareholders are

interested parties in the proceeding due to common commercial interests

is a false presumption. Therefore, the Ferro-Ligas Group contends that

the Department is incorrect in assuming that the interest of the

respondent is identical to that of its affiliated parties. Moreover,

the Ferro-Ligas Group asserts, the Department should have either

accepted the transfer price information submitted by the Ferro-Ligas

Group or requested some other information since the affiliated parties'

cost information was unavailable.

The Ferro-Ligas Group asserts that the Department's decision to use

adverse facts available for inputs purchased from CVRD and USIMINAS is

not supported by facts on the record. With respect to USIMINAS, the

Ferro-Ligas Group contends that USIMINAS demonstrated through the

submission of price data that its prices to the Ferro-Ligas Group were

at or above market prices. Therefore, respondent states, there was no

need for additional ``back-up'' cost information and, thus, the

application of facts available for USIMINAS inputs was inappropriate.

The Ferro-Ligas Group also asserts that during verification the

Department could have requested additional information if it was not

persuaded by the information Respondent had submitted. Since the

Department did not make such a request, the Ferro-Ligas Group argues

that the Department cannot silently accept submissions from a

respondent and statements at verification and then state in the

preliminary results that the information is not sufficient, as it did

in this case.

Finally, the Ferro-Ligas Group claims that the only evidence on the

record supports the conclusion that CVRD was subject to severe

restrictions due to the privatization process and could not legally

furnish proprietary information outside the confines of the

privatization procedures.

Petitioner contends that the Ferro-Ligas Group's assertion that its

shareholders are not ``interested parties'' is unfounded. Petitioner

asserts that the record demonstrates that there are well-established

customer-supplier relationships between the Ferro-Ligas Group and

USIMINAS and CVRD. Moreover, Petitioner points out that, if the

Department were to establish a large antidumping margin for merchandise

produced by the Ferro-Ligas Group, its shareholders ultimately would

suffer the effects, both as the sole owners of the Ferro-Ligas Group

and through lower sales due to a decline in the volume of inputs

required by the Ferro-Ligas Group. Therefore, Petitioner contends,

USIMINAS and CVRD are considered interested parties because of their

close affiliations with the Ferro-Ligas Group.

Petitioner contends that, in this case, in light of the close

relationships that exist between the companies, the refusal by USIMINAS

and CVRD to produce requested information is properly treated as a

refusal by the Ferro-Ligas Group itself. Furthermore, Petitioner

alleges that the Ferro-Ligas Group failed to illustrate that it acted

to the best of its ability because there is no evidence of any

additional communications with USIMINAS or CVRD showing efforts to

obtain the information that would rise to the level of acting to the

best of its ability. Moreover, Petitioner asserts that the Department

made repeated attempts to obtain the necessary information, but

[[Page 37873]]

the Ferro-Ligas Group's co-owners refused to provide the requested

information. Therefore, Petitioner contends, the Ferro-Ligas Group

failed to act to the best of its ability to obtain the requested

information.

Petitioner argues that the Ferro-Ligas Group's assertion that CVRD

may not have the resources to obtain the requested information is

unsubstantiated. Petitioner contends that the Ferro-Ligas Group would

have the Department believe that it is harder for a large entity, such

as CVRD, with a ``sizable administrative structure'' (citing

Respondent's March 3rd brief at 21) to provide this information than it

would be for a small entity without such resources. In addition,

Petitioner argues the Ferro-Ligas Group's claim that CVRD was barred

from providing information due to Brazilian law fails to provide a

reason not to apply adverse facts available. Petitioner contends that

the Ferro-Ligas Group made no showing that the court order upon which

it relies prohibited CVRD from providing information to the Department

for use in an antidumping proceeding nor that the information protected

by the court order cited by respondents is the same information that

would be provided in this case. Thus, Petitioner asserts, the Ferro-

Ligas Group failed to demonstrate that CVRD was prevented from

providing the requested information.

Department's Position: We determined that the Ferro-Ligas Group is

affiliated with CVRD and USIMINAS pursuant to sections 771(33) (E) and

(G) of the Act. Based on this affiliation, and on the fact that we had

initiated an investigation to determine whether the Ferro-Ligas Group

made below-cost sales in the home market, we requested cost data for

the major inputs the Ferro-Ligas Group obtained from its affiliated

parties.

Neither the Ferro-Ligas Group nor its parents, CVRD and USIMINAS,

has met its burden of adequately showing that the affiliated firms

acted to the best of their ability to provide the cost data we

requested. In fact, we note that the affiliates specifically stated

their ``unwillingness'' to provide the requested information (October

16, 1996, Section D questionnaire response at 10-11). Therefore,

pursuant to section 776(b) of the Act, the Department used an adverse

inference with respect to the facts available to value all inputs

Ferro-Ligas purchased from its parents, CVRD and USIMINAS. The Ferro-

Ligas Group's claim that the statute requires that the Department

produce evidence that these firms could provide such information is

unfounded and, given the fact that the firms in question control their

own data, unreasonable. Further, we note that, to the extent that there

may have been any aspect of the data which CVRD may not wish to reveal

to Ferro-Ligas, such data could have been provided directly to the

Department and protected under administrative protective order. Though

made aware of this option at verification (see Verification Report

dated December 18, 1996), the Ferro-Ligas Group did not pursue this as

an alternative.

With respect to the Ferro-Ligas Group's argument that CVRD and

USIMINAS, not Ferro-Ligas, refused to furnish the requested data, it is

important to note that the Ferro-Ligas Group is wholly owned by CVRD

and USIMINAS. Hence, through this subsidiary (the Ferro-Ligas Group),

CVRD and USIMINAS may be termed an ``interested party'' within the

meaning of section 771(9)(A) of the Act. An ``interested party'' and an

immediate ``respondent'' are not necessarily the same thing. Although

most information necessary to conduct an antidumping review is

maintained by, and thus best obtained from, the corporate unit

immediately responsible for producing the subject merchandise, it is

sometimes necessary to obtain information, such as G&A data, financial

data and cost-input data, from the parent or other affiliated entities

of such units. Because the Department requires such data and because

the business of the parent entity is clearly affected by its ability to

ensure that its subsidiary avoids or lessens the effect of antidumping

duties on U.S. sales, the consolidated or parent entity must be

considered an ``interested party'' for purposes of responding to

requests for information. Pursuant to this policy, we consider CVRD and

Ferro-Ligas to have shared interests in responding to our request for

cost data and, as in the preliminary results, have used an adverse

inference in determining the facts available because of their lack of

cooperation with respect to the cost data which Ferro-Ligas did not

provide.

We also find that the existence of a separate statutory definition

of the term ``affiliate'' does not preclude us from imputing the

actions of an affiliated party to the respondent or from treating both

as a single entity. As the Department stated in Roller Chain Other Than

Bicycle From Japan; Final Results of Antidumping Duty Administrative

Reviews, 61 FR 64328, 64329 (December 4, 1996), we consider the related

party's non-compliance as an omission imputable to the respondent. If

we were to accept without adverse consequences a simple refusal by

affiliated parties to provide data required in antidumping proceedings,

this would allow such parties to provide data only when it would be in

their best interest to do so.

As to the claim that we failed to notify the Ferro-Ligas Group that

it was not demonstrating its best efforts, we note that we repeatedly

informed the Ferro-Ligas Group of the need to provide the requested

information. Each of our requests also informed the Ferro-Ligas Group

that, if the information requested was not supplied or could not be

verified, we would have to resort to the use of facts available for the

final results. Therefore, any requirement to notify a respondent of

what was expected of it was met. See Creswell Trading Co. v. United

States, 15 F.3d 1054, 1060 (Fed. Cir. 1994) and Section 782 of the Act.

We also note that at verification we further discussed the production

information requirements under the law with personnel from CVRD,

USIMINAS and the Ferro-Ligas Group. At verification, we again requested

that the Ferro-Ligas Group provide us with cost information regarding

affiliated purchases, but they did not take advantage of this

opportunity. Finally, our verification report also discusses the extent

of affiliated-party data which was not provided.

The Ferro-Ligas Group is also incorrect in arguing that cost data

was not necessary for the inputs purchased from USIMINAS because

benchmark price data was provided for these inputs. This assertion

assumes that we were legally permitted only to pursue information for

comparison to transfer prices under section 773(f)(2). However, as

discussed in our response to Comment 3 above, we disagree with this

assertion. We consider all ``manganese ores'' to be a major input and

disagree with the Ferro-Ligas Group's attempt to subdivide manganese

ores into separate ``inputs'' based upon the geographical location from

which the ore was mined (see our response to Comment 6, below, for

further discussion). Thus, the ``market price'' data provided by

USIMINAS does not obviate the need for the actual production-cost

information.

Additionally, we find no evidence to support the assertion that the

Ferro-Ligas Group had inadequate resources to gather this information.

The Section D questionnaire response, dated October 16, 1996,

specifically stated that the affiliated parties are ``unwilling, for

commercial and competitive reasons, to provide any per-unit cost

information to the Ferro-Ligas Group (emphasis added).'' At no time

prior to submitting its briefs did the Ferro-Ligas Group state that it

lacked the resources to prepare

[[Page 37874]]

the data. We note that even if Respondent raised such a claim we would

have had to pursue whatever data was available. Had Respondent raised a

credible issue with respect to its resources earlier in this review we

could have considered providing the respondent additional time in which

to prepare the data.

Finally, we are not persuaded by the Ferro-Ligas Group's argument

that a court decree prohibited CVRD from providing information to us

for use in the antidumping proceeding. The Ferro-Ligas Group made no

showing that the particular court order upon which it relied prohibited

CVRD from providing information to us nor that the information

protected by the court decree is the same information that would be

provided in this case. Specifically, the court decree provided at

verification held that a particular Brazilian entity could not have

access to certain information of CVRD. The Ferro-Ligas Group did not

show that this decree had any effect on the Department's request for

CVRD's cost information. See NSK at 671, (stating that a unilateral

decision by a respondent that Japanese law obviated the need for a

complete and accurate response to the Department's questionnaires was

not sufficient to avoid the application of BIA).

Comment 5: Petitioner argues that, consistent with its practice in

adverse facts-available situations, the Department should have used the

highest cost, transfer price or fair value on record for each such

major input as adverse facts available. Rather than use the publicly

available price of manganese ore on which the Department relied in the

preliminary results, Petitioner states that the highest manganese ore

price on the record should be used to value all manganese ore inputs.

According to Petitioner, the Department's use of any lesser amount for

some manganese ore rewards the Ferro-Ligas Group for its failure to

cooperate in the review.

Respondent claims that it is inappropriate to use the highest

manganese ore price on the record as facts available for three reasons.

First, the highest manganese ore price on record corresponds to a

manganese ore purchased from CVRD, an affiliated party. Respondent

argues that because Petitioner has claimed that this is an

unsubstantiated transfer price it cannot now argue that it should be

used as facts available for other manganese ore inputs. The Ferro-Ligas

Group notes the inconsistency of ignoring transfer prices from CVRD and

then selecting the highest transfer price from CVRD to value all

manganese ores. Second, Respondent states that the specific ore in

question, ``Carajas Granulado,'' is unlike all other inputs used in the

production of subject merchandise because it has a significantly higher

manganese content than other inputs and, as a result, is significantly

more costly. Third, Respondent contends, this ore was consumed only in

very small quantities and there were months during the POR when it was

not used at all; when it was used, respondent states, consumption

quantities were minimal. The Ferro-Ligas Group states that the

Department already has overstated its manganese ore costs by using a

market price for manganese ores with a purity (i.e., manganese content)

of 48-50 percent, although most of the ores used in the production of

subject merchandise contain only approximately 30-percent manganese

ore. Respondent claims that the use of Carajas Granulado as a surrogate

for all inputs would further distort the Department's calculations.

Department's Position: We disagree with Petitioner that, as facts

available, we should rely on the price of the ore with the highest

manganese content to value all manganese ores, regardless of manganese

content. As in the preliminary results, we applied appropriate adverse

facts available to value each of the individual manganese ores as

listed by geographical location. In each case, we used the highest of

the cost (where provided), transfer price, and benchmark market value

(where provided) to value the individual ores. Where appropriate, as

adverse facts available we applied a publicly available (non-source-

specific) market price for ores having a manganese content of 48-50

percent. We agree with Respondent that Carajas Granulado is not

representative of all manganese ores and note that its low consumption

quantities and high manganese content differentiate it from the other

manganese ores.

Further, we disagree with Petitioner that the use of anything less

than the highest price for any manganese ore rewards the Ferro-Ligas

Group for failing to cooperate. As noted above, we applied the price of

higher-quality ores to ore of lesser manganese content. Therefore, our

choice of facts available for these ores was adverse. We find that

Petitioner's argument for use of more adverse facts available is not

persuasive. We have discretion to choose the appropriate facts

available. Cf. Allied-Signal Aerospace Co. v. United States, 996 F.2d

1185, 1191 (Fed. Cir. 1993) (Congress has ``explicitly left a gap for

the agency to fill'' in determining what constitutes the best

information available). We are not required to use the most adverse

value on the record as adverse facts available. Cf., e.g., Saha Thai

Steel Pipe Co., Ltd. v. United States, 828 F. Supp. 57, 62 (CIT 1993)

(``Commerce need not unduly apply the highest rate * * * as BIA for

non-cooperating parties when Commerce has credible evidence of a more

accurate rate'').

Comment 6: The Ferro-Ligas Group argues that, if the Department

continues to apply facts available to manganese ores obtained from

affiliated parties, it should limit its application to those specific

ores which were identified as major inputs. The Ferro-Ligas Group

asserts that, in accordance with the definition provided in the

questionnaire response, it identified eight major inputs purchased from

affiliated parties. It claims that the Department did not request cost

or market-price information for affiliated-party inputs other than the

major inputs nor did the Department question the Ferro-Ligas Group's

definition of major input. Therefore, the Ferro-Ligas Group concludes,

if the Department intends to use adverse facts available, it should

limit its application to major inputs, citing Olympic Adhesives v.

United States, 899 F.2d 1565, 1574 (Fed. Cir. 1990).

Petitioner argues that the Department should continue to value

manganese ores classified by the Ferro-Ligas Group as ``minor inputs''

at the same price as those classified by the Ferro-Ligas Group as

``major inputs,'' as it did in the preliminary results. It states that

the Ferro-Ligas Group should not be permitted to treat manganese ore

obtained from different suppliers as different inputs. Petitioner

asserts that all manganese ores are major inputs, regardless of their

origin, and should be valued in the same manner. Citing Final

Determination of Sales at Less Than Fair Value: Newspaper Printing

Presses From Japan, 61 FR 38139, 38162 (July 23, 1996), Petitioner

argues that the Department has specifically rejected an attempt by a

respondent to portray the same basic input as several different

components based on the different suppliers from which it was obtained.

Therefore, Petitioner requests that the Department reject the Ferro-

Ligas Group's argument for these reasons.

Department's Position: We agree with Petitioner that, in this

review, the manganese ores represent a single major input. The Ferro-

Ligas Group identified, in this review, charcoal, coke, and manganese

ores as major inputs obtained from affiliated suppliers (October 16,

1996, Section D response at 9) as did the International Trade

[[Page 37875]]

Commission in its original investigation (Preliminary Determination of

Sales at Less Than Fair Value: Silicomanganese from Brazil, the

People's Republic of China, Ukraine and Venezuela, Nos. 731-TA-671

through 674, USITC Pub. 2714 at II-3 (December 1993)). Additionally,

Respondent indicates that it relies almost exclusively on manganese ore

as the source of manganese in its production process. Based on the

Ferro-Ligas Group's representations and the ITC's determination, we

also find that manganese ores represent a major input into the

production of silicomanganese.

We have rejected the Ferro-Ligas Group's argument that, based on

the supplier or geographical origin, the same component (manganese

ores) should be considered to reflect many different inputs. Factors

such as the supplier or the geographical location from which the inputs

were obtained are not sufficient to warrant different classification of

an input. We further note that we have specifically rejected the

argument that a foreign like product can be composed of numerous minor

inputs, none of which is subject to the major input rule. See, e.g.,

Final Determination of Sales at Less Than Fair Value: Large Newspaper

Printing Presses From Japan, 61 FR 38139, 38162 (July 23, 1996).

Comment 7: Petitioner argues that the Department should value the

manganese ores obtained from one of the Ferro-Ligas Group's

subsidiaries, Sociedade Mineira de Mineracao Ltd. (``SMM''), at the

higher facts-available amount instead of at the cost reported by that

subsidiary. Petitioner asserts that the Department stated in its

preliminary results that, as adverse facts available, it applied the

highest price to the reported consumption quantities for all manganese

ores purchased from affiliated parties. However, Petitioner notes, with

respect to two manganese ores purchased from SMM, the Department did

not apply the highest price as adverse facts available, but instead

applied an average COP that was reported by SMM. Petitioner argues that

the cost worksheet for SMM submitted by the Ferro-Ligas Group

establishes that this average is based on the cost of producing several

products, including quartz, and therefore does not reflect SMM's cost

of producing manganese ore. In addition, Petitioner claims, the record

indicates that the cost of producing quartz is significantly lower than

the cost of producing manganese ore. Petitioner requests that the

Department apply, as adverse facts available, the highest manganese ore

cost, transfer price or fair value on record to value the manganese ore

produced by SMM.

The Ferro-Ligas Group argues that the Department's calculations

significantly overstate SMM's production cost because the Department

used the cost from a month in which that firm experienced unusually

high production costs. The Ferro-Ligas Group states that, rather than

inflate the value of inputs purchased from SMM, the Department should

decrease its valuation to reflect the normal production costs of SMM

during the POR. Further, the Ferro-Ligas Group argues that the

Department should benchmark its transfer prices against a six-month

cost average rather than rely solely on costs during September 1995.

Finally, the Ferro-Ligas Group contends that Petitioner never supported

its claim that manganese ore production costs at SMM are higher than

quartz production costs.

Department's Position: We have determined that it is inappropriate

to apply the adverse facts-available price (i.e., the publicly

available world market price for manganese ores) to ore supplied by

SMM. Petitioner is correct in noting that, in our preliminary results,

we did not apply this price to ores from SMM. However, our statement

with respect to SMM was overly broad. Instead, for SMM, we used the

company's reported September COP in our preliminary results because

that amount exceeded transfer price SMM charged to the respondent. The

Ferro-Ligas Group provided aggregate cost data for major inputs

obtained from SMM. At verification, we tested this information and

found that the cost data respondent provided reasonably reflected the

actual cost of inputs sourced from SMM. Because we found that the

transfer price reported by the Ferro-Ligas Group was below SMM's

average cost for these inputs, we valued the ore at its higher cost

pursuant to section 773(f)(3) of the Act.

The Department agrees with the Ferro-Ligas Group regarding the

prices at which inputs obtained from SMM were valued. Rather than using

September cost data which we used in the preliminary results, the SMM

ore value in the Ferro-Ligas Group submission is based on the six-month

average production cost. As noted by the Ferro-Ligas Group, September

costs were unusually high and production was the lowest during that

month. Therefore, it is reasonable to value ores obtained from SMM at

the six-month average cost, which is higher than the transfer price.

Comment 8: The Ferro-Ligas Group argues that the Department's

upward adjustment to CV for ICMS and IPI (value-added taxes) is

contrary to law and inconsistent with the Department's prior decisions.

Citing Final Determination of Sales at Less Than Fair Value: Melamine

Institutional Dinnerware from Taiwan (``Dinnerware from Taiwan''), 62

FR 1726, 1732 (January 13, 1997), the Ferro-Ligas Group contends that

the Department noted correctly in that notice that the ability to use

value-added-tax (``VAT'') credits against VAT liabilities generated in

connection with home market sales is effectively a refund or remission.

The Ferro-Ligas Group suggests that the Department adopt the position

it took in Dinnerware from Taiwan and apply it to this proceeding.

The Ferro-Ligas Group asserts that the Department should not

include VAT paid on inputs in CV for this segment of the proceeding.

The Ferro-Ligas Group argues that, since it had sufficient home market

sales to absorb the company's VAT credits generated in connection with

export production, the Department should not include a VAT surcharge in

the Ferro-Ligas Group's CV calculation.

The Ferro-Ligas Group alleges that the Department's departure from

the Ferro-Ligas Group's accounting treatment of VAT on inputs was

unlawful. The Ferro-Ligas Group asserts that, like other Brazilian

companies and in accordance with Brazilian GAAP, it does not include

the VAT paid on input purchases in cost of manufacturing in its normal

accounting system. In addition, the Ferro-Ligas Group argues that, by

including VAT paid on inputs in its CV calculation, the Department

departed from the Ferro-Ligas Group's conventional accounting treatment

of these taxes in identifying costs with production for export. The

Ferro-Ligas Group contends that the record contains no finding that

conventional Brazilian GAAP treatment of VAT is unreasonable. Moreover,

the Ferro-Ligas Group asserts, since the Department only departs from a

respondent's normal treatment of costs when they are unreasonable, the

Department's deviation in this instance is unsupported.

With respect to ICMS and IPI, the Ferro-Ligas Group claims that the

Department has conceded that the value of taxes paid on input materials

is fully credited when the product is sold in the home market. The

Ferro-Ligas Group argues that it would be incorrect to include the VAT

paid on inputs in the calculation of CV. Moreover, the Ferro-Ligas

Group asserts that the inclusion of VAT on inputs is contrary to the

objective of a CV calculation because, according to the Department's

analysis,

[[Page 37876]]

this expense is effectively never incurred in connection with home

market sales. Thus, the Ferro-Ligas Group concludes, while other cost

components in a CV calculation are designed to simulate a home market

sale, the Department has selectively incorporated one cost element

(i.e., VAT on inputs) without acknowledging the full offset when the

product is sold in the home market. The Ferro-Ligas Group requests that

the Department make a downward adjustment for the VAT-liability benefit

that accrues on home market sales for the company's export sales.

The Ferro-Ligas Group contends that the Department must recognize

that the VAT credit is in fact a disparity in selling circumstances

between export sales and home market sales that must be recognized as a

circumstance-of-sale adjustment. The Ferro-Ligas Group argues that,

with regard to export sales, the VAT paid on inputs to produce the

exported product is freely transferable as a credit to benefit VAT

liability associated with home market sales. With respect to home

market sales, the Ferro-Ligas Group argues that the VAT paid on inputs

to produce the product sold in the home market is not transferred to

benefit sales in other markets. The Ferro-Ligas Group contends that the

VAT paid on inputs to produce the home market sale is fully absorbed by

the VAT liability generated when the home market sale is made.

The Ferro-Ligas Group concludes by stating that, if the Department

insists upon including input VAT costs in CV, it must recognize the

``VAT credit generated upon export'' (i.e., credits against payment of

the sort of VAT paid by its domestic customer) as a circumstance-of-

sale adjustment. Respondent maintains that to do otherwise would

overlook this disparity in selling circumstances between U.S. and home

market sales and eliminate the possibility of an apples-to-apples

comparison.

Petitioner argues that, contrary to the Ferro-Ligas Group's claims,

the Department has an established practice regarding the treatment of

the Brazilian ICMS and IPI taxes in calculating CV. Petitioner contends

that the Department's practice is based on section 773(e)(1)(A) of the

Act, which requires that taxes paid on inputs be included in CV where

the taxes are not remitted or refunded upon exportation of the final

product. Petitioner states further that the Department has already

considered and rejected the Ferro-Ligas Group's argument that, because

the amount of ICMS and IPI taxes paid on inputs used in producing

exported merchandise is credited against the liability for taxes

collected on home market sales, the taxes paid on inputs should not be

included in CV. Petitioner states that, more recently, the Department

followed its practice in the final results of the 1993-94 and 1994-95

administrative reviews on silicon metal from Brazil. Therefore,

Petitioner concludes, the Department must include the ICMS and IPI

taxes the Ferro-Ligas Group paid on inputs in the CV for the final

results.

Department's Position: We have an established practice regarding

the treatment of Brazilian ICMS and IPI taxes in calculating CV. See,

e.g., Ferrosilicon from Brazil, Final Redetermination on Remand of

Sales at Less Than Fair Value, at 10 (January 16, 1996); Ferrosilicon

from Brazil, Final Results of Antidumping Duty Administrative Review,

61 FR 59407, 59414 (November 22, 1996); Silicon Metal From Brazil;

Final Results of Antidumping Duty Administrative Review and

Determination Not to Revoke in Part, 63 FR 1954, 1965 (January 14,

1997); Silicon Metal From Brazil; Final Results of Antidumping Duty

Administrative Review and Determination Not to Revoke in Part, 62 FR

1970, 1976 (January 14, 1997). Our practice is governed by section

773(e)(1)(A) of the Act, which requires that taxes paid on inputs be

included in CV when such taxes are not remitted or refunded upon

exportation of the final product. We have considered and rejected in

other cases arguments similar to those the Ferro-Ligas Group has made

that, because the amount of ICMS and IPI taxes paid on inputs used in

producing exported merchandise is credited against the liability for

taxes collected on home market sales, the taxes paid on inputs should

not be included in CV.

When calculating the CV for the subject merchandise, the Ferro-

Ligas Group did not include the ICMS and IPI taxes paid on the material

and energy costs. Section 773(e) of the Act directs us to exclude from

CV only those internal taxes remitted or refunded upon export.

Therefore, if the taxes paid on production inputs are neither remitted

nor refunded upon exportation of the subject merchandise, as in the

present case, the ability of the manufacturer to recoup this tax

expense through domestic market sales is not automatic and also not

relevant. Thus, we calculated the ICMS and IPI taxes as a percentage of

the total purchases of materials and energy, and we added this amount

to the reported CV.

Comment 9: The Ferro-Ligas Group claims that the Department

determined that the Brazilian economy was hyperinflationary during the

POR. Therefore, the Ferro-Ligas Group argues, rather than using period

average costs, the Department should follow its practice and use

monthly costs during the POR. The Ferro-Ligas Group states that the

Department should have calculated costs specifically for October, the

month of the U.S. sale. The Ferro-Ligas Group further contends that

there was no decision prior to or at the time of the preliminary

results to rescind the Department's earlier determination that Brazil

was hyperinflationary during the POR. The Ferro-Ligas Group therefore

argues that the Department's determination of hyperinflation dictates

the use of monthly costs when calculating CV to be compared to the U.S.

sale. In conclusion, the Ferro-Ligas Group asserts that, if the

Department maintains its method of calculating cost of manufacturing

(COM) based on adverse facts available, the Department should use the

hyperinflationary method to calculate costs for October.

Petitioner contends that, because the Brazilian economy was not

hyperinflationary during this period, the use of a current-cost

methodology in this review would be contrary to the Department's well-

established practice.

Department's Position: We agree with Petitioner. Contrary to the

Ferro-Ligas Group's assertion, we did not determine that the Brazilian

economy was ``hyperinflationary'' during the POR. Early in the case, we

issued a Section D questionnaire which follows a current-cost method in

the event that the Brazilian economy was determined to have experienced

significant levels of inflation during the relevant period. However,

because the Brazilian economy experienced only a 6.48-percent

compounded inflation rate for the six-month cost reporting period, we

instructed the Ferro-Ligas Group to answer the original standard

questionnaire. See Letter from Office Director, AD/CVD Enforcement, to

Willkie Farr & Gallagher dated September 16, 1996. Thus, at no time did

we identify this review period as one in which Brazil experienced high

inflation.

Moreover, the Ferro-Ligas Group's argument that it would be more

appropriate to use October costs rather than September costs is also

unsupported by the evidence on record. The inflation rates for the

months of September and October were negative (i.e., deflation of 1.08

percent and 2.3 percent, respectively). Because restatement of each of

the Ferro-Ligas Group's monthly costs was not possible within the time

constraints of the case,

[[Page 37877]]

we recalculated the company's costs based on its production results for

a selected month, September. We selected this month because it was the

only month for which we could obtain surrogate manganese ore price

data. There is no evidence on the record that would indicate that the

month of September, which falls in the middle of the cost-reporting

period, was not representative of the costs or price level the Ferro-

Ligas Group experienced during the period.

Comment 10: Petitioner argues that the Department failed to include

profit in its calculation of CV. Petitioner states that the SAA

provides three alternative methods for calculating profit when all

relevant sales are at below-cost prices. Petitioner asserts that one of

the alternative methods must be used to determine the amount of profit

to include in CV for the final results. Petitioner contends that there

is no information on the record regarding the amount of profit realized

on the same general category of product as silicomanganese because all

of the Ferro-Ligas Group's home market sales were found to be below

cost and there are no other respondents in this administrative review.

Therefore, Petitioner contends that the Department must use the

statute's third alternative method to determine the amount of profit

that must be included in CV for the final results.

Petitioner asserts that if the Department decides to rely on

information not currently on the record for its determination of the

amount of profit, the information must be made available for comment by

the parties in accordance with section 782(g) of the Act.

The Ferro-Ligas Group argues that there is no presumption that the

Department must include a positive value for profit in its

calculations. The Ferro-Ligas Group argues that, if the company and

industry are not profitable during the review period, then the

Department should not include a positive profit component. The Ferro-

Ligas Group argues further that the Department should not both increase

costs with adverse facts available and also add a profit component.

Department's Position: Contrary to the Ferro-Ligas Group's

assertion, the SAA requires that an element of profit be included in

CV. Although the URAA and the subsequent revisions to U.S. law

eliminated the use of a minimum profit, we do not believe that it

eliminated the presumption of a profit element in the calculation of

CV.

The SAA (at page 839) states: ``because constructed value serves as

a proxy for a sale price, and because a fair sales price would recover

SG&A expenses and would include an element of profit, constructed value

must include an amount for SG&A and for profit'' (emphasis added). The

SAA further specifies that ``under section 773(e)(2)(A), in most cases

Commerce would use profitable sales as the basis for calculating profit

for purposes of constructed value'' (SAA at page 840). The SAA

indicates that section 773(e)(2)(B) ``establishes alternative methods

for calculating amounts for SG&A expenses and profit in instances where

* * * section 773(e)(2)(A) cannot be used either because there are no

home market sales * * * or because all such sales are at below-cost

prices.'' Therefore, if a company has no home market profit or has

incurred losses in the home market, the Department is not instructed to

ignore the profit element, include a zero profit, or even consider the

inclusion of a loss; rather, the Department is directed to find an

alternative home market profit.

In addressing whether profit can be less than or equal to zero, we

first looked to the definition of the word profit. Barron's Financial

Guides: Dictionary of Finance and Investment Terms (New York: Barron's

Educational Series, 1987) defines profit as the ``positive difference

that results from selling products and services for more than the cost

of producing these goods'' and also the ``difference between the

selling price and the purchase price of commodities or securities when

the selling price is higher'' (emphasis added). Thus, the general usage

of the term ``profit'' explicitly refers to a positive figure.

Regardless of the general definition of the word profit, a clear

reading of the statute indicates that a positive amount for profit must

be included in CV. First, we note that, unlike sections 773(e)(2)(A)

and 773(e)(2)(B) (i) or (ii), section 773(e)(2)(B)(iii) specifically

excludes the use of the term ``actual profit'' and instead directs us

to use any other reasonable method that does not exceed the amount

normally realized by the industry on the same general category of

products. The SAA states that there is no hierarchy between the

alternatives in 773(e)(2)(B), indicating that in some instances it may

be more appropriate for the Department to ignore ``actual profit''

available under the other two alternatives and opt instead for some

other reasonable method to obtain a normal profit.

Second, we note that, when we use home market or third-country

prices as the basis for normal value, the statute and SAA specifically

direct us to exclude from the dumping analysis any below-cost sales

when the volume sold below cost in the home market or third country is

greater than 20 percent (sections 773(b) (1) and (2)(C)). The

presumption that normal value includes an element of profit is so

strong that the post-URAA statute directs us to use one above-cost home

market sale as the basis for normal value, even if hundreds of other

sales have below-cost prices. See section 773(b)(1)(B). Moreover, the

exclusion of the phrase ``in the ordinary course of trade'' (i.e.,

referring to above-cost sales) from section 773(e)(2)(B)(iii) cannot be

interpreted to mean an analysis using below-cost sales could result in

use of a negative or zero profit rate in CV calculations. As the SAA

explains, the ordinary-course-of-trade phrase is excluded in order to

allow the Department to use a broader category of available information

(SAA at page 841). Even though the broader category may exclude some

below-cost sales, it enables the Department to find an overall positive

profit in a category in which, were all below-cost sales excluded, it

could not do so. Furthermore, it would be incorrect to interpret the

statute (and redefine the word ``profit'') in such a way that would

allow for a loss or zero profit under section 773(e)(2)(B)(i) when the

Department has bypassed a more precise calculation of the home market

loss on the foreign like product under section 773(e)(2)(A). Therefore,

by providing three equal alternatives in section 773(e)(2)(B) when all

relevant sales are at below-cost prices under section 773(e)(2)(A), the

statute directs that CV must include a positive profit figure. See

Notice of Final Determination of Sales at LTFV: Engineered Process Gas

Turbo-Compressor Systems, Whether Assembled or Unassembled, and Whether

Complete or Incomplete, from Japan, 62 FR 24394 (May 5, 1997).

Finally, we disagree with the Ferro-Ligas Group that we should not

both increase costs with adverse facts available and also add a profit

component. Neither the law nor the SAA supports such an assertion. The

only statutory reference to adverse facts available for purposes of

identifying profit is the statement that the profit added to CV under

the third alternative method may not be an adverse figure. The adverse

facts-available provision is included in the statute to ensure that a

respondent does not benefit by withholding information which only it

can provide and we resort to adverse facts available only when a

respondent has failed to act to the best of its ability.

Therefore, because the sales and cost data on the record do not

provide a

[[Page 37878]]

basis on which to calculate a home market profit figure, we sought to

find a reasonable method under section 773(e)(2)(B)(iii) to derive a

normal profit rate. For these final results we have relied on the

profit rate of 10.22 percent, realized by one of the Ferro-Ligas

Group's parents, CVRD. This profit rate represents the only information

on the record that we believe reasonably reflects the market for ferro-

alloy inputs. As a leader in the mining and ore-processing industries,

CVRD has a profit rate which reasonably reflects an amount normally

realized in the home market in the same general category of products as

the subject merchandise. The income of CVRD is based on a wide range of

products in the same general category of products as the foreign like

product (i.e., processed ores and minerals) and as such reflects a

broader measure of profit than would be realized in only more specific

market sectors. As a supplier to the Ferro-Ligas Group, CVRD is

subjected to the same market pressures as the Ferro-Ligas Group.

Finally, we note that, although CVRD's sales results include export

activities, the majority of CVRD's sales are realized in Brazil and,

therefore, its profit rate reasonably reflects that of the Brazilian

market.

Comment 11: The Ferro-Ligas Group argues that under no

circumstances should the Department impose an antidumping duty rate

based on adverse inferences that is higher than the highest BIA rate

from prior decisions. It claims that it requested this review because

it had made sales to the United States which generated margins

significantly less than the existing BIA rate of 64.93 percent. It

cites to the opinion in Rhone Poulenc v. United States, 899 F.2d

1185,1190 (1990), that the presumption that a company is currently

dumping at the highest prior margin unless the company can prove

otherwise, ``reflects a common-sense inference that the highest prior

margin is the most probative evidence of current margins because, if it

were not so, the importer, knowing of the rule, would have produced

current information showing the margin to be less.''

Petitioner argues that the Department can select for the

uncooperative Ferro-Ligas Group the higher of (1) The highest rate

calculated for any firm for the same class or kind of merchandise in

the less-than-fair-value (LTFV) investigation or any prior

administrative review or (2) the highest rate calculated in the current

review for any firm. Thus, Petitioner claims, there is no upper limit

on the rate which the Department may apply.

Department's Position: Although the Ferro-Ligas Group did not

cooperate to the best of its ability in providing all of the data we

requested, it did provide much of the data we requested. By using a

combination of information submitted in response to our questionnaire

and partial facts available from other sources, we have been able, in

this review, to calculate a margin for the Ferro-Ligas Group by

comparing the Ferro-Ligas Group's normal value and export price

pursuant to section 751(2)(A) of the Act. When we determine that we can

calculate a margin, we follow the established statutory methodology for

calculating a dumping margin. The statute contains no provision

limiting the current calculation of a margin at the amount of the

previous margin. Because the statute is explicit as to what adjustments

and limits are permitted within its methodology, the application of the

proposed limit is simply not within our discretion. Further, the Rhone

Poulenc case cited by Respondent simply allows the Department to assign

a margin more adverse than the most recent one when a foreign exporter

does not cooperate in a review. It by no means supports the principle

that the inverse is also true and the Department is required to find a

lower dumping margin than currently in effect whenever a firm does

respond to its questionnaire.

Furthermore, the Ferro-Ligas Group cannot argue that the Department

is unable to exceed the previous margin because that was based upon BIA

and that its cooperation in this review demonstrates that it is

entitled to a lesser number. Our BIA/facts-available practice has

always been founded on the principle that, if data in a current review

reflect a higher dumping rate than data from an earlier review, we will

use the higher current data. Moreover, the fact that the Ferro-Ligas

Group still failed to act to the best of its ability in providing some

of the data requested in this review may indicate that the risk of

receiving the previous margin was not sufficient to induce the firm to

provide complete data in the form we requested. Although the Ferro-

Ligas Group argues that it determined to seek this review because it

was not dumping at the margin previously assigned to it, the evidence

on the record of this case shows that such a conclusion was not well-

founded. We are not limited in our margin calculations by the

expectations of parties requesting reviews. Therefore, we have assigned

to the Ferro-Ligas Group, for this review, the margin calculated based

upon the data on the record of the current review.

Final Results of Review

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

determined that a margin of 88.87 percent is applicable to the Ferro-

Ligas Group for the period June 17, 1994 through November 30, 1995.

The Department shall determine, and the U.S. Customs Service shall

assess, antidumping duties on all appropriate entries. Individual

differences between export price and normal value may vary from the

percentage 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 subject merchandise from Brazil entered, or

withdrawn from warehouse, for consumption on or after the publication

date of these final results of this administrative review, as provided

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

reviewed company, the Ferro-Ligas Group, will be 88.87 percent; (2) for

merchandise exported by manufacturers or exporters not covered in this

review but covered in previous reviews or the original LTFV

investigation, the cash deposit rate will continue to be the rate

published in the most recent final results or determination for which

the manufacturer or exporter received a company-specific rate; (3) if

the exporter is not a firm covered in this review, an earlier review,

or the LTFV investigation, but the manufacturer is, the cash deposit

rate will be that established for the manufacturer of the merchandise

in these final results, earlier reviews or the LTFV investigation,

whichever is the most recent; and (4) the cash deposit rate for all

other manufacturers or exporters will be 17.60 percent, the ``all

others'' rate established in the antidumping duty order (59 FR 55432,

November 7, 1994).

These cash deposit requirements 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 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.

[[Page 37879]]

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

administrative protective order (APO) of their responsibility

concerning the disposition of proprietary information disclosed under

APO in accordance with 19 CFR 353.34(d). Timely written notification of

return/destruction of APO materials or conversion to judicial

protective order is hereby requested. Failure to comply with the

regulations and terms of the APO is a sanctionable violation.

This administrative review and this notice are in accordance with

section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)) and 19 CFR 353.22.

Dated: July 8, 1997.

Robert S. LaRussa,

Acting Assistant Secretary for Import Administration.

[FR Doc. 97-18582 Filed 7-14-97; 8:45 am]

BILLING CODE 3510-DS-P