Silicon Metal From Brazil; Preliminary Results of Antidumping Duty Administrative Review and Intent Not To Revoke in Part

DEPARTMENT OF COMMERCE

International Trade Administration

[A-351-806]

Silicon Metal From Brazil; Preliminary Results of Antidumping

Duty Administrative Review and Intent Not To Revoke in Part

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

ACTION: Notice of preliminary results of the antidumping duty

administrative review and intent not to revoke in part.

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SUMMARY: The Department of Commerce (the Department) is conducting an

administrative review of the antidumping duty order on silicon metal

from Brazil in response to requests by respondents Eletrosilex Belo

Horizonte (Eletrosilex), Companhia Ferroligas Minas Gerais--Minasligas

(Minasligas), Companhia Brasileira Carbureto de Calcio (CBCC), RIMA

Industrial S/A (RIMA), and Wabash Alloys, a division of Connell Limited

Partnership, an interested party which imported silicon metal during

the period of review. This review covers the period July 1, 1995,

through June 30, 1996.

We preliminarily determine not to revoke the order with respect to

CBCC or Minasligas. These companies submitted timely requests for

revocation in this review, however, in the final results of the

preceding administrative review of this order the Department determined

that both companies had dumping margins greater than de minimis.

Accordingly, these companies have not met the requirements of 19 CFR

353.25 (i.e., three consecutive years with zero or de minimis dumping

margins) and therefore do not qualify for revocation under the

Department's regulations.

We preliminarily determine that sales have been made at less than

normal value (NV) during the POR by Eletrosilex and Rima. If these

preliminary results are adopted in our final results of administrative

review, we will instruct the U.S. Customs Service to assess ad-valorem

antidumping duties equal to the difference between export price (EP)

and NV. Interested parties are invited to comment on these preliminary

results. Parties who submit comments are requested to submit with the

argument: (1) A statement of the issue; and (2) a brief summary of the

argument.

EFFECTIVE DATE: August 8, 1997.

FOR FURTHER INFORMATION CONTACT: Alexander Braier, Yury Beyzarov,

Sharon Harris, Sinem Sonmez, or James C. Doyle, Office of Antidumping/

Countervailing Enforcement, Group III, Import Administration,

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

Street and Constitution Avenue N.W., Washington, D.C. 20230; telephone

482-3793.

SUPPLEMENTARY INFORMATION:

Applicable Statute and Regulations

Unless otherwise indicated, all citations to the Tariff Act of

1930, as amended (the Act) are to the provisions effective January 1,

1995, the effective date of the amendments made to the Tariff Act by

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

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

regulations, as codified at 19 CFR part 353 (1996).

Background

On July 31, 1991, the Department published in the Federal Register

the antidumping duty order on silicon metal from Brazil (56 FR 36135).

On July 8, 1996, the Department published a ``Notice of Opportunity to

Request Administrative Review'' on silicon metal from Brazil in the

Federal Register for the period July 1, 1995, through June 30, 1996 (61

FR 35712).

In accordance with 19 CFR 353.22(a)(1), Eletrosilex, Minasligas,

CBCC, and RIMA requested that the Department conduct an administrative

review of their respective sales. Pursuant to 19 CFR 353.25, Minasligas

and CBCC also requested revocation of the antidumping duty order in

part. On August 15, 1995, the Department published in the Federal

Register a notice of initiation of this antidumping duty administrative

review (61 FR 42416). On March 7, 1997, the Department published in the

Federal Register its notice extending the deadline in these preliminary

results until May 14, 1997 (62 FR 10540). Due to the complicated issues

in this case, the Department again extended the deadline for these

preliminary results until July 31,1997 (62 FR 27235).

Verification

From March 17 through March 22, 1997, in accordance with section

782(i) of the Act, we verified information provided by Minasligas and

Rima using standard verification procedures including examination of

relevant sales and financial records, and selection of original source

documentation containing relevant information. Our verification results

are outlined in the respective verification reports, the public

versions of which are available in the Central Records Unit of the

Department of Commerce, room B-099.

Scope of Review

The merchandise covered by this review is silicon metal from Brazil

containing at least 96.00 percent but less than 99.99 percent silicon

by weight. Also covered by this review is silicon metal from Brazil

containing between 89.00 and 96.00 percent silicon by weight but which

contains more aluminum than the silicon metal containing at least 96.00

percent but less than 99.99 percent silicon by weight. Silicon metal is

currently provided for under subheadings 2804.69.10 and 2804.69.50 of

the Harmonized Tariff Schedule (HTS) as a chemical product, but is

commonly referred to as a metal. Semiconductor grade silicon (silicon

metal containing by weight not less than 99.99 percent silicon and

provided for in subheading 2804.61.00 of the HTS) is not subject to the

order. HTS item numbers are provided for convenience and for U.S.

Customs purposes. The written description remains dispositive as to the

scope of product coverage.

[[Page 42760]]

Level of Trade

To the extent practicable, we determine NV for sales at the same

level of trade as the U.S. sales (either export price (EP) or

constructed export price (CEP)). When there are no sales at the same

level of trade, we compare U.S. sales to home market (or, if

appropriate, third-country) sales at a different level-of-trade. The NV

level of trade is that of the starting-price sales in the home market.

When NV is based on CV, the level of trade is that of the sales from

which we derive selling, general, and administrative expenses (SG&A)

and profit.

For both EP and CEP, the relevant transaction for the level of

trade analysis is the sale (or constructed sale) from the exporter to

the importer. While the starting price for CEP is that of a subsequent

resale to an unaffiliated buyer, the construction of the CEP results in

a price that would have been charged if the importer had not been

affiliated. We calculate the CEP by removing from the first resale to

an independent U.S. customer the expenses under section 772(d) of the

Act and the profit associated with these expenses. These expenses

represent activities undertaken by the affiliated importer. Because the

expenses deducted under section 772(d) represent selling activities in

the United States, the deduction of these expenses normally yields a

different level of trade for the CEP than for the later resale (which

we use for the starting price). Movement charges, duties and taxes

deducted under section 772(c) do not represent activities of the

affiliated importer, and we do not remove them to obtain the CEP level

of trade.

To determine whether home market sales are at a different level of

trade than U.S. sales, we examine whether the home market sales are at

different stages in the marketing process than the U.S. sales. The

marketing process in both markets begins with goods being sold by the

producer and extends to the sale to the final user, regardless of

whether the final user is an individual consumer or an industrial user.

The chain of distribution between the producer and the final user may

have many or few links, and each respondent's sales occur somewhere

along this chain. In the United States, the respondent's sales are

generally to an importer, whether independent or affiliated. We review

and compare the distribution systems in the home market and U.S. export

markets, including selling functions, class of customer, and the extent

and level of selling expenses for each claimed level of trade. Customer

categories such as distributor, original equipment manufacturer (OEM),

or wholesaler are commonly used by respondents to describe levels of

trade, but, without substantiation, they are insufficient to establish

that a claimed level of trade is valid. An analysis of the chain of

distribution and of the selling functions substantiates or invalidates

the claimed levels of trade. Different levels of trade necessarily

involve differences in selling functions, but differences in selling

functions, even substantial ones, are not alone sufficient to establish

a difference in the levels of trade. Different levels of trade are

characterized by purchasers at different stages in the chain of

distribution and sellers performing qualitatively or quantitatively

different functions in selling to them.

When we compare U.S. sales to home market sales at a different

level of trade, we make a level-of-trade adjustment if the difference

in levels of trade affects price comparability. We determine any effect

on price comparability by examining sales at different levels of trade

in a single market, the home market. Any price effect must be

manifested in a pattern of consistent price differences between home

market sales used for comparison and sales at the equivalent level of

trade of the export transaction. To quantify the price differences, we

calculate the difference in the average of the net prices of the same

models sold at different levels of trade. We use the average difference

in net prices to adjust NV when NV is based on a level of trade

different from that of the export sale. If there is a pattern of no

consistent price differences, the difference in levels of trade does

not have a price effect and, therefore, no adjustment is necessary.

The statute also provides for an adjustment to NV when NV is based

on a level of trade different from that of the CEP if the NV level is

more remote from the factory than the CEP and if we are unable to

determine whether the difference in levels of trade between CEP level

and NV level affects the comparability of their prices. This latter

situation can occur where there is no home market level of trade

equivalent to the U.S. sales level or where there is an equivalent home

market level but the data are insufficient to support a conclusion on

price effect. This adjustment, the CEP offset, is identified in section

773(7)(B) of the Act and is the lower of the following:

The indirect selling expenses on the home market sale, or

The indirect selling expenses deducted from the starting

price used to calculate CEP.

The CEP offset is not automatic each time we use CEP. The CEP offset is

made only when the level of trade of the home market sale is more

advanced than the level of trade of the U.S. (CEP) sale and there is

not an appropriate basis for determining whether there is an effect on

price comparability.

In the present review, none of the respondents requested a level of

trade (LOT) adjustment. To ensure that no such adjustment was

necessary, in accordance with the principles discussed above, we

examined information regarding the distribution systems in both the

United States and Brazilian markets, including the selling functions,

classes of customer, and selling expenses for each respondent.

In the home market, all companies sold merchandise to one or more

of the following three categories of customers: end-users, traders, and

commissioned agents. Regardless of the category of customer, all the

companies' home market (HM) sales were manufactured to order and the

merchandise was shipped directly from the factory to each type of

customer. The companies' packing processes were also identical for all

sales, and the selling expenses for the POR were comparable for all

sales, regardless of the category of customer. Evidence on the record

also demonstrates that the companies did not have formal policies for

providing special payment terms, such as discounts, to different types

of customers. Based upon this evidence, we determine that the selling

activities each respondent performed for its home market sales were the

same for all home market sales, and that each respondent's HM sales

were all made at a single LOT.

All four companies' sales in the United States were EP sales. All

of the companies' U.S. customers were end-users or traders, each sale

was manufactured to order, and the selling expenses were comparable for

all sales, regardless of the category of customer. Furthermore, the

packing processes were almost identical to that of the HM sales, and we

found no differences in the selling activities performed for each

respondent's U.S. sales in comparison to their HM sales. Based on this,

for each respondent, we conclude that a single level of trade exists in

the United States which is the same as the HM LOT. As a result, a LOT

adjustment is not warranted in this review.

Product Comparisons

To determine whether sales of silicon metal by CBCC, Eletrosilex,

Minasligas, and Rima to the U.S. were made at less than normal value,

we compared the ``Export Price'' to the ``Normal Value'',

[[Page 42761]]

as described in the ``Export Price'' and ``Normal Value'' sections of

this notice. In accordance with section 777A(d)(2) of the Act, we

compared the EP of individual transactions to the monthly weighted-

average NV of contemporaneous sales of the foreign like product.

Normal Value

A. Viability

In order to determine whether there was a sufficient volume of

sales in the home market to serve as a viable basis for calculating NV,

we compared each respondent's volume of home market sales of the

foreign like product to the volume of U.S. sales of the subject

merchandise, in accordance with section 773(a)(1)(C) of the Act.

Because each respondent's aggregate volume of home market sales of the

foreign like product was greater than five percent of its aggregate

volume of U.S. sales for the subject merchandise, we determined that

the home market provides a viable basis for calculating NV for each

respondent.

B. Home Market Sales

We compared the EP of individual transactions to the monthly

weighted-average NV of sales of the foreign like product, pursuant to

section 777A(d)(2) of the Act. In such cases we based NV on packed, ex-

factory or delivered prices to unaffiliated purchasers in the home

market. Where applicable, we made adjustments to home market price for

inland freight, inland freight insurance, and interest revenue. We

reduced home market prices by an amount for home market credit and

packing expenses, and we increased it by U.S. credit expenses and U.S.

packing costs, in accordance with sections 773(a)(6)(A) and (B) of the

Act. We also increased NV, where appropriate, for bank charges, U.S.

advertising, and warehousing expenses incurred on U.S. sales, in

accordance with sections 773(a)(6)(A) and (B) of the Act. We decreased

NV, where appropriate, by the amount of commissions paid in the home

market, but limited this amount to the amount of indirect selling

expenses incurred on U.S. sales, in accordance with 19 CFR

353.56(b)(1).

As respondents did not provide sufficient information regarding the

interest rates used in the calculation of home market credit, we used

the simple average of monthly Government of Brazil Taxa Referencial

(TR) rates for the POR. The TR rate is the published Government of

Brazil prime lending rate. We disallowed Minasligas' claimed imputed

U.S. credit revenue because the Department's practice is to allow

imputed credit revenue only in situations where advance payment is made

by the customer before the merchandise is shipped. See, e.g., Fresh Cut

Flowers from Mexico, Final Results of Antidumping Duty Administrative

Review (61 FR 40604). However, the customer does not pay until after it

receives the merchandise. Therefore, applying the Department's standard

imputed credit calculation would result in imputed U.S. credit expense,

not revenue. However, consistent with the Department's practice,

because all companies used Advance Exchange Contract's (ACC's) to

finance export sales, and ACC's are dollar-denominated short-term

loans, we used ACC rates to determine the interest rate used in the

U.S. imputed credit calculation. To calculate each company's U.S.

imputed credit interest rate, we used the simple average of their ACC

interest rates.

United States Price (USP)

A. Export Price

In calculating USP we used export price (EP) for each respondent,

as defined in section 772(a) of the Act, because the subject

merchandise was first sold to unrelated purchasers prior to the date of

importation into the United States and the use of constructed export

price was not indicated by the facts on the record.

We based EP on the packed, delivered price to the first

unaffiliated purchasers in the United States, or to unaffiliated

trading companies who sell the subject merchandise in the United

States. In accordance with Section 772(c)(2) of the Act, we reduced

this price, where appropriate, for foreign inland freight,

international freight, marine insurance, weighing and sampling charges,

port clerical expenses, and brokerage and handling. We made an addition

to USP, where appropriate, for duty drawback in accordance with section

772(c) of the Act. No other adjustments to company provided information

were made except in the following instances:

1. For the imputed U.S. credit calculation for CBCC, Eletrosilex,

and Minasligas, we used an interest rate which was the simple average

of the ACC rates used during the POR, as reported by each respondent.

2. Rima failed to provide the ACC interest rates it was charged

during the POR, despite three Departmental requests for these rates.

Therefore, pursuant to 776(b) of the Act, for Rima's imputed U.S.

credit calculation, we used as adverse facts available for Rima's

interest rate, the interest rate which was the highest of the ACC

interest rates used during the POR by the other respondents in this

review.

3. For all companies, we used as the payment date the date the bank

received payment from the U.S. customer.

4. For Eletrosilex, we used the date of shipment from the factory

as the date of shipment.

5. For Eletrosilex, we reallocated indirect selling expenses using

the methodology we used in the previous reviews of this case (see the

Department's calculation memo of January 24, 1997).

6. For Minasligas, we used as the date of shipment the date of

invoice, because that is the date of the first shipment from the

factory pursuant to a sale.

Cost of Production Analysis

In prior segments of this proceeding, we disregarded home market

sales found to be below the cost of production (COP) for CBCC,

Eletrosilex, and Rima. Therefore, in accordance with section

773(b)(2)(A)(ii) of the Act, the Department has reasonable grounds to

believe or suspect that sales below the COP may have occurred during

the review period for these companies and has conducted a COP

investigation for these respondents. In addition, on January 28, 1997,

we initiated a below-cost investigation for Minasligas pursuant to an

allegation from petitioners on December 11, 1996.

A. Calculation of COP

In accordance with 773(b)(3) of the Act, we calculated COP based on

the sum of each respondent's cost of materials and fabrication employed

in producing the foreign like product, plus home market selling,

general, and administrative expenses (SG&A) and the cost of all

expenses incidental to placing the foreign like product in condition

packed and ready for shipment. We relied on the home market sales data

and COP information provided by each respondent, except in the

following specific instances where the reported costs were determined

to be improperly valued:

1. For Minasligas, we made an offset to the total cost of

production (totcop) to account for the revenue received from the sale

of by-products.

2. For Minasligas, we set interest expense equal to zero because

financial income exceeded financial expenses for Minasligas and its

parent company, Delp Engenharia Mechanica, S.A.

3. For Minasligas, we computed G&A by multiplying the tax-exclusive

Cost of Manufacturing (COM) by the ratio of the combined G&A expenses

for Minasligas and its parent company to the two

[[Page 42762]]

companies' combined cost of goods sold.

4. For Eletrosilex, we recalculated total cost of manufacturing

(totcom) to account for the revenue received from the sale of by-

products.

5. For Rima, in the calculation of interest expense, we reallocated

financial revenues to the ``net interest expense'' reported on Rima's

1995 financial statements. We also added the increase in deferred

financial expenses shown on the 1995 financial statements, and the

amortization of the 1994 remaining balance of deferred financial

expenses, to the ``net interest expense''.

6. For Rima, in order to be consistent with the interest expense

calculation, we based G&A expenses on Rima's 1995 financial statements,

rather than its 1996 financial statements.

7. For Rima, we allocated an amount to G&A based on the difference

between the depreciated asset values from the depreciation calculation

worksheets for 1995, and the total asset values for 1995 as indicated

on Rima's financial statements. We also added to G&A the amortization

of the 1994 remaining balance of deferred assets.

B. Test of Home Market Prices

After calculating COP for each respondent, we tested whether home

market sales of subject merchandise were made at prices below COP

within an extended period of time and in substantial quantities, and

whether such prices permitted the recovery of all costs within a

reasonable period of time. We compared model-specific COP to the

reported home market prices less any applicable movement charges and

post-sale price adjustments, where appropriate.

Pursuant to section 773(b)(2)(C) of the Act, where less than twenty

percent of a respondent's home market sales of a given model are at

prices less than COP, we do not disregard any below-cost sales of that

product because we determine that the below-cost sales were not made

within an extended period of time ``in substantial quantities.'' Where

twenty percent or more of a respondent's home market sales of a given

product are at prices less than the COP, we disregard the below-cost

sales because we determine that the below-cost sales were made within

an extended period of time in ``substantial quantities,'' in accordance

with section 773(b)(2)(C) of the Act. To determine whether such sales

are at prices which would not permit the full recovery of all costs

within a reasonable period of time, in accordance with section

773(b)(2)(D) of the Act, we compare home market prices to the weighted-

average model-specific COPs for the POR.

In these preliminary results, our cost tests for CBCC and

Minasligas indicated that less than twenty percent of the sales of

subject merchandise were at prices below COP. We therefore retained all

sales of subject merchandise in our analysis and used them in our

determination of NV, where applicable. The results of our cost tests

for Eletrosilex and Rima indicated that, within an extended period of

time (one year, in accordance with section 773(b)(2)(B) of the Act),

more than twenty percent of the sales of all products of each company

were at prices below COP. Thus these below-cost sales were in

``substantial quantities.'' In addition, these sales were at prices

which would not permit the full recovery of all costs within a

reasonable period of time. In accordance with section 773(b)(1) of the

Act, we disregarded the below-cost sales of subject merchandise for

each of these two companies and used the remaining above-cost sales as

the basis for determining each company's NV, where applicable.

For Eletrosilex and Rima, in accordance with section 773(a)(4) of

the Act, we used CV as the basis for NV when there were no usable sales

of the foreign like product in the comparison market. We calculated CV

in accordance with section 773(e) of the Act.

For Eletrosilex and Rima, we included the cost of materials and

fabrication, and G&A expenses in CV. In these preliminary results, we

found that Eletrosilex and Rima made no above-cost sales of the foreign

like product in the comparison market. Therefore, for these companies,

we were unable to derive profit for use in the constructed value

calculation using the companies' home market sales data. For this

reason, in accordance with section 773(e)(2)(B)(ii) of the Act, we used

the average of the actual amounts of selling expenses incurred, and

profit realized, by CBCC and Minasligas in connection with the

production and sale of the foreign like product, in the ordinary course

of trade, for consumption in the home market. In accordance with

section 773(2)(B)(i) of the Act, we based G&A expenses (including net

interest expenses) on the amounts incurred by the respondent in

connection with the production and sale for consumption in the foreign

country, of the same general category of products. Where appropriate,

we made adjustments to CV, in accordance with section 773(a)(8) of the

Act and section 353.56(a) of the Department's regulations, for

circumstances of sale (COS) differences. For comparisons to EP, we made

COS adjustments by deducting home market direct selling expenses and

adding U.S. direct selling expenses.

Price Comparisons

Where there were contemporaneous sales of the comparison product

that passed the COP test, we based NV on home market prices.

Where we compared export prices to CV, we deducted from CV the home

market direct selling expenses and added the U.S. direct selling

expenses, where applicable, in accordance with sections 773(a)(8) and

773(a)(6)(iii) of the Act.

Preliminary Results of Review

As a result of our comparison of EP and NV, we preliminarily

determine that the following weighted-average dumping margins exist for

the period July 1, 1995 through June 30, 1996:

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

Margin

Manufacturer/exporter (percent)

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

CBCC....................................................... 0.0

Minasligas................................................. 1.93

Eletrosilex................................................ 36.74

RIMA....................................................... 70.02

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

Parties to the proceeding may request disclosure within 5 days of

the date of publication of this notice. Any interested party may

request a hearing within 10 days of publication. Any hearing, if

requested, will be held 44 days after the date of publication of this

notice, or the first workday thereafter. Interested parties may submit

case briefs within 30 days of the date of publication of this notice.

Rebuttal briefs, which must be limited to issues raised in the case

briefs, may be filed not later than 37 days after the date of

publication. Parties who submit argument are requested to submit with

the argument: (1) A statement of the issues and (2) a brief summary of

the argument. The Department will publish a notice of final results of

this administrative review, which will include the results of its

analysis of issues raised in any such comments or at a hearing, within

120 days of publication of these preliminary results.

The Department shall determine, and the Customs Service shall

assess, antidumping duties on all appropriate entries. Upon completion

of this review, the Department will issue appraisement instructions

directly to the Customs Service.

Furthermore, the following deposit rates will be effective upon

publication of the final results of this administrative review for all

shipments of silicon metal from Brazil entered, or withdrawn from

[[Page 42763]]

warehouse, for consumption on or after the publication date, as

provided for by section 751(a)(2)(c) of the Act: (1) The cash deposit

rate for the reviewed companies will be the rate established in the

final results of this review; (2) if the exporter is not a firm covered

in this review, or the original less than fair value (LTFV)

investigation, but the manufacturer is, the cash deposit rate will be

the rate established for the most recent period for the manufacturer of

the merchandise; and (3) for all other producers and/or exporters of

this merchandise, the cash deposit rate shall be 91.06 percent, the all

others rate established in the LTFV investigation (56 FR 36135, July

31, 1991).

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 preliminary 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.

This administrative review and notice are in accordance with

section 751(a)(1) of the Act.

Dated: July 31, 1997.

Robert S. LaRussa,

Acting Assistant Secretary for Import Administration.

[FR Doc. 97-20935 Filed 8-7-97; 8:45 am]

BILLING CODE 3510-DS-P