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

DEPARTMENT OF COMMERCE

International Trade Administration

[A-351-806]

Silicon Metal From Brazil; Final Results of Antidumping Duty

Administrative Review and Determination Not To Revoke in Part

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

ACTION: Notice of final results of antidumping duty administrative

review and determination not to revoke in part.

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SUMMARY: On September 5, 1996, the Department of Commerce (the

Department) published the preliminary results of its administrative

review of the antidumping duty order on silicon metal from Brazil. This

review covers the period July 1, 1994, through June 30, 1995, and five

manufacturers/exporters of the subject merchandise to the United

States. The review indicates the existence of margins for four firms.

We gave interested parties an opportunity to comment on the

preliminary results. Based on our analysis of the comments received and

new information submitted at the Department's request, we have changed

our results from those presented in our preliminary results as

described below in the comments section of this notice.

EFFECTIVE DATE: January 14, 1997.

FOR FURTHER INFORMATION CONTACT: Fred Baker, Alain Letort, or John

Kugelman, AD/CVD Enforcement Group III, Office 8, Import

Administration, International Trade Administration, U.S. Department of

Commerce, 14th Street and Constitution Avenue, N.W., Washington, D.C.

20230; telephone: (202) 482-2924, -4243, or -0649, respectively.

SUPPLEMENTARY INFORMATION:

Background

On September 5, 1996, the Department of Commerce (the Department)

published in the Federal Register (61 FR 46779) the preliminary results

of its administrative review of the antidumping duty order on silicon

metal from Brazil (July 31, 1991, 56 FR 36135). We solicited additional

information from Minasligas on October 1, 1996, from Eletrosilex on

October 2, 1996, from CBCC on October 10, 1996, and from RIMA on

November 14, 1996. We received responses on October 15, October 16,

October 24, and November 20, 1996, respectively. The Department has now

completed that administrative review in accordance with section 751 of

the Tariff Act of 1930, as amended (the Act).

Applicable Statute and Regulations

Unless otherwise indicated, all citations to 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).

Scope of the Review

The merchandise covered by this review is silicon metal from Brazil

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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 a higher aluminum content 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 the product coverage.

The period of review (POR) is July 1, 1994, through June 30, 1995.

This review involves five manufacturers/exporters of Brazilian silicon

metal: Companhia Brasileira Carbureto de Calcio (CBCC), Companhia

Ferroligas Minas Gerais--Minasligas (Minasligas), Eletrosilex Belo

Horizonte (Eletrosilex), Rima Eletrometalurgia S.A. (RIMA), and Camargo

Correa Metais (CCM).

Verification

As provided in section 782(i) of the Act, we verified information

provided by CBCC and RIMA by using standard verification procedures,

including onsite inspection of the manufacturers' facilities, the

examination of relevant sales and financial records, and original

documentation containing relevant information. Our verification results

are outlined in the public versions of the verification reports.

Analysis of Comments Received

We gave interested parties an opportunity to comment on the

preliminary results. We received case and rebuttal briefs from

Minasligas, Eletrosilex, CCM, CBCC, RIMA, and a group of five domestic

producers of silicon metal (collectively, the petitioners). Those five

domestic producers are American Alloys, Inc., Elkem Metals Co., Globe

Metallurgical, Inc., SMI Group, and SKW Metals and Alloys, Inc. We

received a request for a hearing from CBCC, Minasligas, Eletrosilex,

RIMA, and the petitioners. We conducted a public hearing on November

25, 1996.

Comment 1

Petitioners argue that the Department erred by using the

methodology used in the final results of the second administrative

review of this order in determining which U.S. sales to review. In the

second review final results, we explained our methodology as follows:

1. Where a respondent sold merchandise, and the importer of that

merchandise had at least one entry during the POR, we reviewed all

sales to that importer during the POR.

2. Where a respondent sold subject merchandise to an importer

who had no entries during the POR, we did not review the sales of

subject merchandise to that importer in this administrative review.

Instead, we will review those sales in our administrative review of

the next period in which there is an entry by that importer.

We also said in the preliminary results notice that after completion of

the review we would issue liquidation instructions to Customs which

would instruct them to assess dumping duties against importer-specific

entries during the period. See Silicon Metal From Brazil, Final Results

of Antidumping Duty Administrative Review, 61 FR 46763, 46765

(September 5, 1996) (Silicon Metal From Brazil; Second Review Final

Results.)

Petitioners argue that the methodology described above and used in

the preliminary results of this review is inconsistent with the Act

because section 751(a)(2) of the Act requires that margins be based on

sales associated with entries during the POR. Petitioners also cite to

Torrington Co. v. United States, 818 F. Supp. 1563, 1573 (CIT 1993)

(Torrington) to demonstrate that the CIT has held that the word

``entry'' as used in the statute refers to the ``formal entry of

merchandise into the U.S. Customs territory.'' Furthermore, petitioners

argue that the Department itself has stated that the use of the term

``entry'' in the antidumping law refers unambiguously to the release of

merchandise into the customs territory of the United States. See

Antifriction Bearings (Other Than Tapered Roller Bearings) and Parts

Thereof From the Federal Republic of Germany; Final Results of

Antidumping Duty Administrative Review, 56 FR 31692, 31704 (July 11,

1991). Petitioners also argue that the legislative history of section

751 demonstrates that margin calculations in administrative reviews are

to be based on sales of merchandise that entered during the POR.

In addition to the above arguments based on their interpretation of

the statute and case law, petitioners argue that prior to issuance of

the final results of the second review of this order, the Department's

practice was to review only those sales that entered U.S. customs

territory during the POR. In support of this statement, they cite the

questionnaire that the Department issued to the respondents in the

1993-94 review. It states that ``purchase price sales that have a sales

date during the period of review, but which entered after the period of

review, will be covered in subsequent administrative reviews.'' In

further support, they cite to the questionnaire issued to the

respondents in this administrative review which requests that each

respondent report only U.S. sales of merchandise that entered for

consumption during the POR with the exception of constructed export

price sales made after importation and export price sales of

merchandise for which the entry date is not known.

Furthermore, petitioners argue that the failure to calculate

dumping margins based on sales associated with entries during the POR

would result in improper assessment of duties because the duties

assessed on entries during the POR would have no relation to the margin

of dumping on those sales. Thus, by assessing duties on entries at

rates unrelated to the margin of dumping on the associated sales,

petitioners argue, the Department would violate 19 U.S.C.

Sec. 1673(2)(B), which requires that ``there shall be imposed upon such

merchandise an antidumping duty . . . in an amount equal to the amount

by which the foreign market value exceeds the United States price for

the merchandise.''

Eletrosilex argues that the Department rejected petitioners'

argument with respect to section 751 of the Act as long ago as 1991 in

a rule-making proceeding. There it asserted that section 751 does not

require consideration solely of entries made in the POR, and that the

statute as a whole requires a balanced consideration of ``entries'' and

``sales'' in the review process. See Advance Notice of Proposed

Rulemaking (56 FR 63696, 63697, December 5, 1991). Furthermore, in the

final results of both the first and second administrative review of

this proceeding the Department specifically rejected petitioners'

arguments that the statute requires consideration only of entries made

during the POR. See Silicon Metal From Brazil; Final Results of

Antidumping Duty Administrative Review, 59 FR 42806, 42813 (August 19,

1994) (Silicon Metal From Brazil; First Review Final Results) and

Silicon Metal From Brazil; Second Review Final Results. Eletrosilex

concludes that the Department has acted within its discretion in

reviewing Eletrosilex's sale made during this POR in this segment of

the proceeding.

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Department's Position

We disagree with petitioners. The Department most recently

addressed this issue in the final results of the second review of this

order. There we stated:

We do not agree with petitioners that section 751(a)(2) requires

that we review only sales that entered U.S. customs territory during

the POR. Section 751(a)(2) mandates that the dumping duties

determined be assessed on entries during the POR. It does not limit

administrative reviews to sales associated with entries during the

POR. Furthermore, to review only sales associated with entries

during the POR would require that we tie sales to entries. In many

cases we are unable to do this. Moreover, the methodology the

Department should use to calculate antidumping duty assessment rates

is not explicitly addressed in the statute, but rather has been left

to the Department's expertise based on the facts of each review. ``*

* * the statute merely requires that PUDD (i.e., potentially

uncollected dumping duties) . . . serve as the basis for both

assessed duties and cash deposits of estimated duties.'' See The

Torrington Company v. United States, 44 F.3d 1572, 1578 (CAFC 1995).

Our analysis of this issue and interpretation of the statute remain

unchanged from those announced in the final results of the second

review. Furthermore, by applying a consistent methodology in each

segment of the proceeding we ensure that we review all sales made

during the entire proceeding. Changing the methodology could result in

our failure to review some sales. Hence, in these final results of

review we have employed the methodology we announced in the final

results of the second review.

Comment 2

Petitioners argue that evidence on the record indicates that

Minasligas' and Eletrosilex's costs and prices have been severely

distorted by hyperinflation that occurred prior to the start of the

period covered by this review, and that, therefore, the Department

should adopt a methodology that eliminates the effects of those

distortions. These distortions occurred, petitioners argue, because the

inventories that these companies had on July 1, 1994 (the first day of

this POR) were purchased prior to July 1, 1994, during the period when

Brazil experienced hyperinflation.

Minasligas argues that there is no evidence that its costs or

prices were affected by hyperinflation that occurred prior to the POR.

It makes the following points:

During the three months prior to July 1994 (the first

month in recent history during which there was no hyperinflation in

Brazil and also the first month covered by this administrative review)

the effects of hyperinflation had already been greatly attenuated in

the negotiations of material prices in Brazil because of the use of the

URV (unit of real value) as a unit of exchange. (Minasligas stated that

the URV was a unit reference value pegged to the U.S. dollar which the

Brazilian government introduced into the Brazilian economy in March

1994.)

Minasligas' accounts were subject to a one-time

restatement into URVs at the end of June 1994.

Petitioners have pointed to no support in the record for

their claim that Minasligas had significant inventories of material

inputs for silicon metal production in the first half of 1994.

Petitioners have pointed to no support in the record for

their claim that the value of such inventories was affected by

hyperinflation during the first half of 1994.

Petitioners have pointed to no support in the record for

their claim that these inventories were carried over into the POR.

The end-of-year inventories that Minasligas records in its

financial statements include materials used in the production of

merchandise which is not subject to this proceeding.

The petitioners' request that the Department adopt a

methodology that eliminates the effects of alleged distortions is

limited to only two respondents. One would think, Minasligas argues,

that if a country is hyperinflationary during a certain period, it

would equally affect all companies doing business in that country.

Eletrosilex argues that the introduction of the URV in March 1994

resulted in a substantial reduction in inflation during the period

March through June 1994, and that it was during the latter two months

of this period that it bought all of the stock it had in inventory on

July 1, 1994. Moreover, it argues that on July 1, 1994 (the date of the

introduction of the real plan) it converted all of its inventory from

cruzeiros reais to reais based upon the URV value at that date. This

conversion, Eletrosilex argues, refutes the petitioners' allegation of

any impact on the value of its inventory on July 1, 1994. Finally,

Eletrosilex argues that the U.S. sale upon which the Department based

its margin calculation for Eletrosilex in this review was sold long

after Eletrosilex used up its entire stock in inventory on July 1,

1994. Therefore, Eletrosilex concludes, there is no possible effect on

Eletrosilex's costs from any high inflation that may have existed at

some time before the POR.

Department's Position

We agree with petitioners. Evidence on the record shows that

Eletrosilex's and Minasligas' cost of materials for the first several

months of the POR reflect significant fluctuations. ``See''

petitioners' July 17, 1996 and July 18, 1996 submissions. These

fluctuations occurred because these respondents consumed inventory

which they had purchased during a period of hyperinflation. Moreover,

these respondents reported their POR costs based on their normal books

and records which reflect historic costs. Therefore, we requested, and

Minasligas and Eletrosilex provided, information regarding the purchase

dates, quantities, and amounts recorded in their July 1, 1994 beginning

inventory. Because the reported costs of materials included the cost of

the beginning inventory based on historic costs, these amounts were

understated by the rates of inflation that occurred from the date of

purchase until June 30, 1994. Therefore, we revalued the beginning

inventory of July 1, 1994 by applying the UFIR index to the value of

the inventory from the date of purchase until July 1, 1994.

Comment 3

Petitioners argue that for two reasons Minasligas does not qualify

for revocation. (In the preliminary results of this review we stated

that we did not intend to revoke the order on Minasligas at the

completion of this administrative review because we intended to revoke

the order on Minasligas upon completion of the third administrative

review.) First, petitioners allege Minasligas has dumped in this and

every prior segment of this proceeding, and therefore has not met the

regulatory requirement of having not sold at less than fair value for

at least three years. See 19 CFR Sec. 353.25(a)(2)(i). The three years

in question are the first (91-92), second (92-93), and third (93-94)

reviews. For the first and second reviews, the Department calculated a

margin of zero percent in its final results of review. For the third

review the Department calculated a margin of zero percent for its

preliminary results. With respect to the first review (which is in

litigation before the CIT), petitioners argue that after the Department

corrects the errors for which it has already conceded error, Minasligas

will have a margin. They argue, with respect to the second review, that

after the Department corrects the ministerial errors they allege it

made in its final results, Minasligas will again have a margin. They

argue, with respect to the third review, that after the Department

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corrects the calculation and methodological errors which they allege it

made, Minasligas will again have a margin.

Second, petitioners argue that the Department cannot correctly

determine that Minasligas is not likely to resume dumping in the

future, and without this determination the Department cannot revoke the

order. ``See'' 19 CFR Sec. 353.25(a)(2)(ii). Petitioners base this

argument on the following factors:

(1) Minasligas had a margin of greater than de minimis in the

preliminary results of this administrative review. See Silicon Metal

from Brazil, Preliminary Results of Review and Intent Not to Revoke in

Part, 61 FR 46779, 46781 (September 5, 1996) (preliminary results).

(2) Minasligas has submitted no evidence that it is unlikely that

it will dump in the future.

(3) The Department has not verified any information that Minasligas

is unlikely to dump in the future. Citing 19 U.S.C. Sec. 1677e(b)(2)(B)

and 19 CFR Sec. 353.25(c)(2)(ii), petitioners argue that the statute

and regulations require that the basis for the ``likelihood''

determination be verified, and that because the Department did not

verify any such basis, Minasligas does not qualify for revocation.

Furthermore, petitioners argue that analysis based on the criteria

that the Department used in Brass Sheet and Strip from Germany show

that Minasligas is likely to resume dumping. See Brass Sheet and Strip

from Germany, Final Results of Administrative Review, 61 FR 49727,

49730 (September 23, 1996) (Brass Sheet and Strip from Germany). These

criteria include a dramatic decline in shipments after publication of

the antidumping duty order and the low level of shipments by the

respondent. Both of these factors, petitioners allege, are present here

with respect to Minasligas.

Minasligas argues, first, that in two consecutive administrative

reviews prior to the issuance of the preliminary results the Department

found Minasligas not to have dumped, and that, therefore, if the

Department issues a final determination of no dumping in the final

results of the third review, it will have met the requirement of 19 CFR

353.25(a)(2)(i). Secondly, Minasligas argues that 19 CFR

353.25(a)(2)(ii) requires a finding of no likelihood of dumping in the

future, but does not, contrary to petitioners' suggestion, require

Minasligas to provide, or the record to contain, evidence that

Minasligas is not likely to resume dumping in the future. Furthermore,

Minasligas argues that there is evidence on the record that Minasligas

will not dump in the future. That evidence consists of Minasligas'

written agreement to reinstatement of the antidumping duty order if it

is found to be selling at less than fair value in the future.

Department's Position

To qualify for revocation in part under 19 CFR 353.25(a)(2)(i), a

respondent must have sold the subject merchandise at not less than

foreign market value for at least three consecutive years. Our final

results of review of the first three reviews of this order indicate

that Minasligas had no margins. However, in order to revoke an order in

part the Department must also be satisfied that the firm is not likely

to resume dumping in the future. In this administrative review the

Department has found that Minasligas had a dumping margin of greater

than de minimis. Accordingly, the issue of likelihood of dumping in the

future is moot because Minasligas has in fact resumed dumping.

Therefore, we are not revoking the order in part for Minasligas.

Comment 4

Petitioners argue that the Department erred in its calculation of

Minasligas' cost of production and constructed value (COP/CV) by using

the depreciation values that Minasligas reported. Petitioners find two

flaws in this calculation. First, Minasligas' calculation of

depreciation, petitioners allege, does not reflect the useful life of

the assets, but rather reflects an extremely accelerated useful life.

Petitioners argue that the Department's practice is to reject

accelerated depreciation of an asset where such accelerated

depreciation fails to allocate the cost of the asset on a consistent

basis over the life of the asset, which, petitioners allege, is the

case here. Second, Minasligas' depreciation calculation, petitioners

allege, does not restate the value of the assets to account for

hyperinflation. The Department's practice, petitioners argue, requires

such restatement.

Therefore, because they find Minasligas' calculation deficient,

petitioners submitted a recalculation of depreciation for some assets

based on what they believe to be the actual useful life of those

assets, and argue that the Department should use this recalculation in

its final results of review. The Department, petitioners argue, should

also solicit information from Minasligas to determine the proper

depreciation for all assets related to the production of silicon metal

that were not included in its recalculation.

Minasligas argues that petitioners' argument is flawed. Minasligas

points to documentation submitted on October 15, 1996, at the

Department's request, which demonstrates (1) that Minasligas did not

depreciate its assets over the shortened period that petitioners

suggest (though it is not the lengthened useful life that petitioners

argue should be used), (2) that the depreciation reported in its COP/CV

tables for purposes of this proceeding is fully supported by

Minasligas' accounting records; (3) that the value of the assets

subject to depreciation are restated in current currency to account for

hyperinflation through the use of special indices known as the BTN/UFIR

indices. Furthermore, Minasligas argues that the Department fully

verified this information. Moreover, Minasligas argues that the

petitioners' argument is based on a misunderstanding of some of the

columns in the verification exhibit upon which they base their

argument. Finally, Minasligas argues that to recalculate depreciation,

using the longer useful lives that petitioners suggest, would be unfair

because the Department has already completed two administrative reviews

in which Minasligas calculated depreciation using the shorter useful

lives. Minasligas contends that their useful lives are the basis for

the depreciation calculation that Minasligas records in its books and

which it reported to the Department. Therefore, Minasligas argues that,

in the alternative, if the Department does decide to recalculate its

depreciation using a longer depreciation period, it should adopt a

methodology that takes into account the depreciation expenses that the

firm reported in the previous administrative reviews.

Department's Position

We agree with Minasligas, except that we did not verify the firm

for this period. The CIT has upheld the Department's calculation of

depreciation based on a respondent's financial records where their

financial records are consistent with foreign GAAP principles and where

those records do not distort actual costs. See Laclede Steel Co. v.

United States, 18 CIT 965, 975 (1994). Here, Minasligas has

historically used accelerated depreciation, consistent with Brazilian

GAAP. Moreover, we note that we have in the past used accelerated

depreciation where the respondent has historically used it in its

financial statements. See Foam Extruded PVC and Polystyrene Framing

Stock from the

[[Page 1974]]

United Kingdom; Final Determination of Sales at Less Than Fair Value;

61 51411, 51418 (October 2, 1996). Furthermore, we agree with

Minasligas that to recalculate depreciation using a longer useful life

for Minasligas' assets after having used a shorter life in prior

reviews would allocate costs to this review that have already been

accounted for in prior reviews, and would therefore be inequitable.

Finally, we agree with Minasligas that its use of the BTN/UFIR indices

accurately restates the value of its assets. Therefore, in these final

results of review, as in the preliminary results of review, we have

used Minasligas' reported depreciation in calculating COP and CV.

Comment 5

Petitioners argue that the Department erred in its calculation of

interest expense for Minasligas, Eletrosilex, CBCC, and RIMA by

allowing an offset to interest expenses for claimed interest income.

Petitioners base their argument on two factors: (1) that these

companies did not substantiate that the reported interest income was

from short-term investments, and (2) many of the categories these

companies listed in their enumeration of short-term interest income

are, on their face, not interest income derived from short-term

investments of working capital.

As for the latter argument, petitioners point out that RIMA's

claimed income consists of revenue from late payment charges paid by

home market customers and discounts that suppliers grant on payment of

an invoice. These categories are not, petitioners assert, interest

income derived from short-term investments. As for Eletrosilex,

petitioners focus on one transaction recorded on Eletrosilex's 1994

financial statement which, they allege, consists of capital gains,

rather than interest income derived from short-term investments of

working capital. For CBCC petitioners allege that there is evidence on

the record (verification exhibit 29) that some of the interest income

claimed by CBCC's Brazilian parent company, Solvay do Brasil (whose

interest expenses, petitioners argue in comment 25 below, should be

consolidated with those of CBCC), are not derived from short-term

investments. Petitioners also argue that CBCC's itemization of its

interest income (verification exhibit 17) indicates that much of CBCC's

interest income is also not derived from short-term investments.

Therefore, petitioners argue, in the final results the Department

should make no offset to interest expenses for any of CBCC's or Solvay

do Brasil's claimed interest offset.

Minasligas argues that it had no long-term financial investments,

and that all of its interest income was related to production

operations. Moreover, it states, it fully replied to all of the

Department's inquiries about its interest expenses and income. Thus, it

argues, there is no basis to reject Minasligas' claim for an offset to

its interest expense.

RIMA argues that, if the Department uses its financial statement to

calculate its interest expenses, it should also use its financial

statement to calculate its interest revenue. Furthermore, the firm

stands by the claim in its supplemental questionnaire response (SQR) of

April 30, 1996 (at 33-34) that its financial income is short-term.

Eletrosilex argues that its financial statement shows that the sole

transaction on which petitioners focus occurred between July 28, 1994

and December 27, 1994, and, therefore, qualifies as short-term under

any analysis. The transaction involved an investment by Eletrosilex in

reais-denominated bonds, purchased from funds obtained by borrowing on

dollar-denominated export notes, and later selling the bonds after

accrual of pro rata interest. The transaction, Eletrosilex argues, was

simply a short-term investment which produced interest income from the

investment. The investment return was heightened by the substantial

over-valuation of the real at the time and the use of dollar-

denominated export notes to finance the purchase of the bonds. This

transaction, Eletrosilex argues, clearly qualifies as financial revenue

permissible under long-settled Department precedent.

CBCC argues that the Department fully verified the interest income

of CBCC and Solvay do Brasil, and found it to be short-term. See July

22, 1996 verification report, pp. 27-28. It also argues that the

petitioners' argument with respect to the interest revenue of CBCC and

Solvay do Brasil is irrelevant in light of the Department's practice to

use consolidated financial statements. Because of this practice, CBCC

argues, the relevant financial statement is that of its ultimate

parent, Solvay and Cie, and not that of either CBCC or Solvay do

Brasil.

Additionally, petitioners argue that the Department erred by

reducing Eletrosilex's cost of manufacture (COM), rather than its

interest expenses, by its reported interest revenue.

Department's Position

We agree with petitioners that almost all of Minasligas' reported

``interest income'' consists of items that are totally unrelated to

interest income. The financial statements for Minasligas and its

parent, Delp Engenharia Mecanica S.A. (Delp), demonstrate that over 95

percent of both companies' reported ``interest income'' consists of

``monetary variation,'' ``monetary correction,'' and ``income from

short-terms applications.'' The Department's verification report for

Minasligas in the immediately preceding review clarifies that

``financial applications'' (which would include ``income from short-

term applications'') refers to compensation for inflation. At no point

has Minasligas demonstrated for the record that the amounts reported

for these categories of income constitute interest income derived from

short-term investments of working capital. Nor has Minasligas

demonstrated that the claimed interest income was derived from short-

term investments of working capital merely by stating in its rebuttal

brief that its net interest income exceeded its net interest expense.

Similarly, the financial statements submitted by Minasligas show

that the category ``interest received'' included, inter alia, (1)

charges paid by customers for Delp's granting of delayed payment terms,

which are really sales revenue; (2) discounts obtained from suppliers;

(3) dividends received; and (4) exchange gains or losses. See

Minasligas' April 30, 1996 SQR at 37 and exhibit 19. These items

clearly do not represent interest income from short-term investments.

For the above reasons, we have reduced Minasligas' interest income

by the total amount of the items incorrectly included therein by

Minasligas (see Final Analysis Memorandum from Fred Baker to the File).

With respect to RIMA, we agree with petitioners that the interest

income categories RIMA reported (i.e., revenue from late payment

charges paid by home market customers and discounts that suppliers

grant on payment of an invoice) by definition do not constitute

interest income from short-term investments. See RIMA's April 30, 1996

supplemental questionnaire response (SQR) at 35. Therefore, in these

final results of review we have not allowed an offset to RIMA's

financial expenses for the claimed interest income.

With respect to Eletrosilex, we agree with petitioners that

Eletrosilex is not entitled to an adjustment. The transaction in

question consisted of an investment in Brazilian bonds denominated in

reais and financed by borrowing on dollar-denominated export notes.

Eletrosilex later sold the real-denominated bonds after they had

accrued pro rata interest for Eletrosilex.

[[Page 1975]]

Such a transaction would result in interest income and capital gains;

only the former would qualify as an offset to interest expenses.

Therefore, in these final results of review, we have not made an

adjustment to Eletrosilex's interest expenses for this transaction.

Moreover, in these final results of review, unlike the preliminary

results of review, we have calculated Eletrosilex's financial expenses

by multiplying its annual COM by the ratio between the financial

expenses and cost of sales reported in its 1994 financial statement.

With respect to CBCC, we agree with CBCC in part. As explained in

our response to comment 25 below, we agree with CBCC that its financial

expenses should be calculated based on the consolidated financial

statement of Solvay & Cie, and not that of Solvay do Brasil. However,

we do not agree that we should make an adjustment for short-term income

because, though we did examine CBCC's financial income at verification

and found that CBCC did have some short-term financial revenues, not

only did CBCC not make an offset claim in this review for any short-

term financial income until submitting its rebuttal brief, but CBCC did

not provide for the record any supporting documentation. See CBCC's

April 30, 1996 SQR at 28 and exhibit 16. Therefore, in these final

results of review, as in the preliminary results of review, we have not

offset CBCC's financial expenses for any short-term interest income.

Comment 6

Petitioners argue that the Department erred in calculating

Minasligas' COP by using Minasligas' submitted computation of direct

labor and variable overhead. This computation, petitioners argue, was

flawed because Minasligas allocated these costs based on the number of

furnaces used to produce ferrosilicon and silicon metal. Furthermore,

petitioners argue, Minasligas used this same method to calculate its

general and administrative (G&A) expenses in the first administrative

review of this order, and the Department rejected it there because G&A

expenses are period expenses that relate to the operation of the

company as a whole, and are not related to a particular product or

process. See Silicon Metal from Brazil; First Review Final Results, at

42811. Petitioners argue that using this same method to allocate direct

labor and variable overhead is equally wrong. Because these costs

relate to production, petitioners argue, the Department should allocate

these costs based on the actual production volume for each product.

Minasligas argues that it allocated its direct labor and overhead

equally to each direct cost center pursuant to its normal accounting

practices. Because the same furnaces are dedicated to the production of

the same product, Minasligas allocated these costs on the basis of the

furnace ratio. This methodology does not cause distortions, Minasligas

argues, because the same number of personnel operates each furnace

regardless of the product produced, and the factory overhead expenses

are equally shared by all the furnaces.

Department's Position

We agree with petitioner. Direct labor and variable overhead are a

function of production, and not the number of furnaces dedicated to the

production of each product. Therefore, for these final results of

review we have recalculated Minasligas' direct labor and variable

overhead. In this recalculation we have allocated direct labor and

variable overhead based on the production volume of silicon metal

relative to total production.

Comment 7

Petitioners argue that the Department must add to Minasligas' and

Eletrosilex's CV the ICMS tax that they collect from their exports of

silicon metal because it is included in the reported U.S. selling

prices. They argue that to do otherwise would result in a dumping

margin distorted by the use of an artificially high selling price as

the basis for U.S. price (USP). Petitioners argue that, in the

alternative, the Department should reduce USP by the amount of the ICMS

taxes included in the reported USP pursuant to section 772(d)(2)(A)

(sic) of the Act, which requires that USP be reduced by ``any

additional costs, charges, and expenses, and United States import

duties, incident to bringing the merchandise from the place of shipment

in the country of exportation to the place of delivery in the United

States.''

Minasligas argues that the alternatives the petitioners suggest

will not result in a tax-neutral comparison. It argues that if the CV

already includes ICMS taxes paid to suppliers, then adding to the CV

the ICMS tax which is included in the U.S. price will overstate taxes

in CV and distort the dumping results. Similarly, Minasligas states, if

the CV includes the value-added taxes (VAT) (i.e., ICMS and IPI taxes)

paid to suppliers, then deducting ICMS taxes from the U.S. price will

result in an apples-to-oranges comparison.

Eletrosilex argues that to be consistent with the URAA, the

Department should remove consumption taxes from all consideration in

U.S. and home market price determinations.

Department's Position

We disagree with petitioners' contention that the ICMS assessed on

the U.S. sale should be deducted from the U.S. price. We addressed this

issue with respect to Eletrosilex in the final results of the second

administrative review of this order. There we stated that because the

ICMS tax assessed on the U.S. sale is not an export tax, it should not

be deducted from the U.S. price. See Silicon Metal from Brazil; Second

Review Final Results, at 46770. However, where the ICMS tax is included

in the U.S. price, CV should not include both the ICMS tax paid on the

purchases of material inputs and the ICMS tax assessed on the U.S.

sale, as this would double-count taxes. Thus, for the calculation of CV

in this situation, we ensured that the amount of ICMS tax included in

CV was the higher of either the ICMS tax on purchases of material

inputs or the ICMS tax included in the U.S. price.

Comment 8

Petitioners argue that the Department erred in its treatment of

taxes in the cost test in two ways. First, they argue that the

Department erred by not including PIS and COFINS taxes in Minasligas'

COM for COP. The preliminary results analysis memorandum, petitioners

state, indicates that the Department intended to include PIS and COFINS

in COM, but its COP calculation worksheet indicates that, in fact, it

did not do so. Second, petitioners argue that the Department erred in

its computation of Eletrosilex's and CBCC's COP by not including in the

COM the IPI taxes that these companies pay on their purchases of

inputs. Petitioners argue that because Eletrosilex and CBCC pay IPI

taxes on their inputs, but IPI taxes are not assessed on sales of

silicon metal, the Department should include all IPI taxes in the COM.

Eletrosilex argues that to be consistent with the URAA, the

Department should remove consumption taxes from all consideration in

U.S. and home market price determinations. Furthermore, Eletrosilex

argues that IPI taxes are subject to refund from the Brazilian

government.

CBCC argues that it can offset the IPI taxes it pays on the

purchase of material inputs with the IPI tax it collects on the sale of

the finished product from domestic customers. Because CBCC is able to

offset the IPI taxes paid on

[[Page 1976]]

material inputs by the IPI taxes it collects from the sale of

ferrosilicon to domestic customers, CBCC argues, IPI taxes are not a

cost of producing silicon metal for CBCC. CBCC also states that in this

review the only material input for which CBCC paid IPI taxes is

electrode paste, and it included these IPI taxes in the reported cost

of this product, even though they do not appear in a separate line item

on the COP worksheet that CBCC submitted to the Department.

RIMA argues that the Department should make no further addition to

its COP for PIS and COFINS taxes because these taxes are already

included in its reported direct materials costs.

Department's Position

As explained more fully in our response to comment 26 (below), we

have determined that PIS and COFINS taxes are gross revenue taxes, and

therefore are not taxes that a buyer pays directly when purchasing

materials. For this reason, in order for COP to reflect the complete

cost of materials, the costs the Department uses in its calculation of

COP must not be net of any hypothetical tax amounts that are presumably

imbedded within the purchase price of the materials. Here, Minasligas

reported its material costs net of a value that it calculated, at the

Department's request, that represented the PIS and COFINS embedded

within its cost of materials. Thus, in order for the COP to reflect the

full purchase price of the materials, we must add to its reported

material costs the hypothetical values that Minasligas reported as PIS

and COFINS taxes on its material inputs. We have done so in these final

results of review. Moreover, because we have determined that the PIS

and COFINS taxes are gross revenue taxes, and are not imposed on a

transaction-by-transaction basis, we have not deducted any reported PIS

and COFINS taxes from the price to which we compare COP in the cost

test.

We agree with petitioners that the IPI tax (a Brazilian Federal

value-added tax) should be included in COM because it is not a tax

which the respondents can recover from sales of silicon metal.

Therefore, in these final results of review we have included the IPI

tax in the COM for Eletrosilex and CBCC. However, we have not made a

separate addition for this tax to RIMA's COM because evidence on the

record indicates that RIMA already included the IPI tax in the reported

COM. We have made a separate addition to CBCC's COM for the IPI tax

because evidence on the record of this review indicates that CBCC

included only a portion of the IPI taxes in its material costs.

Comment 9

Petitioners argue that, with respect to Minasligas, Eletrosilex,

CBCC, and RIMA, in accordance with 19 U.S.C. Sec. 1677b(e)(1)(A) of the

Act, the Department must include in CV all taxes on purchases of

inputs.

Minasligas argues that the Department should calculate a CV that

excludes VAT taxes paid to the suppliers of the material inputs. The

basis for this argument is that when Minasligas collects ICMS taxes

from U.S. customers, it can offset such ICMS taxes against the tax it

pays to its suppliers. Accordingly, the ICMS taxes paid on the material

inputs are, in Minasligas' view, ``refunded or remitted'' upon

exportation of the merchandise to the United States. See 777(3)(1)(A)

of the Act. Furthermore, Minasligas argues, in order to make a fair

comparison, the U.S. price should also not include ICMS taxes. In the

alternative, Minasligas argues that if the CV does not include ICMS

taxes paid on the material inputs, the same absolute amount of ICMS

taxes as that included in the U.S. price could be added to the CV in

order to achieve a tax-neutral result.

RIMA argues that the ICMS and IPI taxes should not be included in

the cost of materials because, under the Brazilian VAT system, taxes

paid on materials can be recovered from taxes collected on the sales of

the merchandise produced from such materials. The CIT, RIMA argues, has

disagreed with petitioners' interpretation of 19 U.S.C.

Sec. 1677b(e)(1)(A), the predecessor provision to 19 U.S.C.

Sec. 1677b(e)(3), and held that the statute does not provide ``refund

or remission'' as the only instance in which taxes upon inputs will not

constitute cost of materials. The CIT noted that ``in a tax scheme such

as Brazil's a respondent may be able to show that a value-added tax on

inputs did not in fact constitute a ``cost of materials'' for the

exported product.'' See AIMCOR v. United States, Ct. No. 94-03-00182,

Slip Op. 95-130 (July 20, 1995) (AIMCOR) at 21.

Department's Position

We agree with petitioners. In the final results of the second

review of this order, the Department stated:

because section 773(e)(1)(A) of the Tariff Act does not account for

offsets of taxes paid due to home market sales, we did not account

for the reimbursement to the respondents of ICMS and IPI taxes due

to home market sales of silicon metal. The experience with regard to

home market sales is irrelevant to the tax burden borne by the

silicon metal exported to the U.S.

See Silicon Metal from Brazil; Second Review Final Results, at 46769.

Our analysis of the issue and interpretation of the statute have not

changed since publication of the second review final results. Thus, in

keeping with our prior determination on this issue, we have included in

CV all taxes paid on purchases of material inputs, except in those

instances where the ICMS tax included in the export price exceeded the

amount of the taxes on the material inputs. In those situations, we

included in CV the higher of the two amounts. See our position on

comment 7.

Comment 10

Petitioners argue that the Department erred by not including

Minasligas' claimed duty drawback in CV. This drawback consists of

taxes and import duties that the government of Brazil suspended on

Minasligas' purchases of imported electrodes used in the production of

silicon metal destined for export. Petitioners argue that because the

Department added the duty drawback to U.S. price, and because the taxes

represented by the drawback were not elsewhere represented in CV, the

Department should add the drawback to CV in order to make a fair

comparison of U.S. price to CV.

Minasligas argues that in the preliminary results the Department

correctly added duty drawback to U.S. price for comparison with a

sales-based normal value (NV). However, if the Department uses CV in

the final results, and includes indirect taxes in CV, it must still add

duty drawback to U.S. price to make a fair comparison.

Department's Position

We agree with petitioners. The Brazilian duty drawback law

applicable to Minasligas suspends the payment of ICMS and IPI taxes

that would ordinarily be due upon importation of electrodes. Therefore,

because the ICMS and IPI taxes are suspended, we cannot conclude that

they are already included in the COM or reported tax payments that

Minasligas reported. Thus, we need to add to CV the full amount of the

duty drawback that we added to USP in accordance with section

772(c)(1)(B) of the Act. We have done so in these final results of

review. This methodology is identical to the methodology announced in

the final results of the prior review of this case. See Silicon Metal

from Brazil; Second Review Final Results, at 46770.

Comment 11

Petitioners argue that the Department erred by calculating RIMA's,

CBCC's, and Minasligas' home market imputed

[[Page 1977]]

credit based on prices that include VAT. The Department's practice,

petitioners argue, is to exclude VAT collected on home market sales

from the prices used in calculating imputed credit expenses. Thus,

petitioners argue, in the final results of review the Department should

exclude ICMS taxes from the prices used to calculate home market

imputed credit.

Minasligas and RIMA argue, based on the tax policies of the

government of Brazil, that ICMS taxes should be included in the imputed

credit calculation. They argue that imputed credit expenses represent

the opportunity cost of financing accounts receivable, and that this

opportunity cost does not apply solely to a portion of the sale, but to

the entire revenue that is generated by the sale. During the period in

which the customer's payment is outstanding, not only must Minasligas

and RIMA finance their production operations, they must also pay any

ICMS amounts they owe to the Brazilian government. The payment of any

such amounts before they received payment from their customers becomes

part of the cost of financing receivables. Therefore, Minasligas and

RIMA argue, ICMS taxes should be included in the imputed credit

calculation.

Department's Position

We agree with petitioners. We addressed this issue in

Silicomanganese from Venezuela. There we responded to the argument now

set forth by Minasligas and RIMA. We said:

The Department's practice is to calculate credit expenses

exclusive of VAT. (See the discussion of our VAT methodology in the

preliminary determination (59 FR 31204, 31205, June 17, 1994.)

Theoretically, there is an opportunity cost associated with any

post-service payment. Accordingly, to calculate the VAT adjustment

argued by Hevensa would require the Department to calculate the

opportunity costs involved with freight charges, rebates, and

selling expenses for each reported sale. It would be an impossible

task for the Department to attempt to determine the opportunity cost

of every such charge and expense.

See Silicomanganese from Venezuela, 59 FR 55436, 55438 (November 7,

1994) (Silicomanganese from Venezuela). In these final results of

review we have followed our practice outlined in Silicomanganese from

Venezuela. See also Ferrosilicon from Brazil; Final Results of

Antidumping Duty Administrative Review, 61 FR 59407, 59410 (November

22, 1996) (Ferrosilicon from Brazil; First Review Final Results).

Comment 12

Petitioners argue that the Department erred in its margin

calculation for Minasligas by converting the cruzeiro value of its U.S.

sales into dollars, rather than using the actual U.S. value of the U.S.

sales since they were originally denominated in U.S. dollars. They

argue that the needless recalculation of U.S. price had the effect of

increasing the U.S. price.

Minasligas argues that it reported its U.S. sales in cruzeiros (as

recorded in its books), and that the Department correctly converted

them into dollars using the average exchange rate of the month of

shipment. This methodology, Minasligas argues, is in accordance with

the Department's practice of comparing the U.S. price to the CV or NV

in the month of shipment.

Department's Position

We agree with petitioners. Our practice is to use the actual U.S.

price in the currency in which it was originally denominated on the

date of sale, and to avoid any unnecessary currency conversions.

Evidence on the record indicates that Minasligas' U.S. sales were

originally denominated in U.S. dollars. See Minasligas' April 30, 1996

SQR, pp. 16-17. Therefore, in these final results of review we have

used the actual dollar value of the U.S. sale in the margin

calculation.

Comment 13

Petitioners argue that the Department erred by calculating negative

imputed U.S. credit expenses for Minasligas and CBCC. This occurred,

petitioners state, because the Department used as the payment date the

date that these companies received payment from their banks under the

terms of their advance exchange contracts (ACC). Under the terms of an

ACC, a Brazilian bank pays Minasligas and CBCC the value of their U.S.

sales, and the U.S. customer pays the bank. This arrangement sometimes

results in Minasligas and CBCC receiving payment for their sales prior

to shipment, and thus incurring negative credit expenses. However,

petitioners argue that though the CIT has allowed negative U.S. credit

expenses under some circumstances, those circumstances are not present

here. Specifically, in AIMCOR (at 14-15) the CIT permitted such an

adjustment for credit revenue partly because the ACCs were tied to

specific sales. Evidence on the record of this review, petitioners

suggest, demonstrates that Minasligas' and CBCC's ACCs were not tied to

specific sales.

With respect to Minasligas, petitioners point out that Minasligas

entered into multiple ACCs for each sale, and that review of the record

shows that there is no correspondence between the dates of the ACC

contracts and Minasligas' reported dates of sale for the sales covered

in this review. Furthermore, petitioners argue, review of the two ACC

contracts (which pertained to the same sale) on the record of this

review reveals that the contracts do not contain an invoice number,

customer name, or country of exportation, and are not specific to the

merchandise subject to review. Moreover, petitioners argue, the dollar

amount of the ACCs does not tie to any specific U.S. sale reviewed in

this proceeding. From this evidence petitioners conclude that the ACCs

were not specific to U.S. sales, and that, therefore, the Department

should use in its imputed credit calculation the date of payment by the

U.S. customer.

With respect to CBCC, petitioners point out that CBCC financed its

U.S. sales using ACCs that covered sales during an extended period. In

addition, they allege that evidence on the record of Ferrosilicon from

Brazil demonstrates that CBCC's ACCs are not tied to specific sales.

See Ferrosilicon from Brazil, Final Determination of Sales at Less than

Fair Value, 54 FR 732 (Jan. 6, 1994) (Ferrosilicon from Brazil; Final

Determination).

Minasligas argues that petitioners' argument is unfounded. First,

Minasligas argues, in Ferrosilicon from Brazil; Final Determination it

had entered into multiple contracts for individual sales too, and there

was also no correspondence between the dates of sale and the contract

dates, but still the CIT upheld in AIMCOR the Department's calculation

of negative U.S. credit expenses. See Ferrosilicon from Brazil, Final

Determination, and also AIMCOR. Second, Minasligas argues that the

petitioners are factually incorrect in saying that the dollar value of

the ACC does not tie to any specific sale. It states that the sum of

the two ACC amounts in local currency equals the amount in reais that

Minasligas reported in its U.S. sales listing. Third, the respondent

argues that the fact that one of the two ACCs indicates that the

exported product was not silicon metal was a mistake by the bank, and

that Minasligas was not aware of this mistake at the time it provided

this information to the Department. Problems of this nature, Minasligas

argues, are verification problems, and the Department opted not to

verify Minasligas in this review. Nevertheless, Minasligas states, it

is prepared to

[[Page 1978]]

provide the Department additional information that clearly shows that

this ACC relates to the sale of silicon metal.

CBCC argues that its ACCs are tied to specific sales. The

Department, CBCC argues, verified the ACC documentation and tied each

ACC to a particular export transaction. See July 22, 1996 verification

report, pp. 14-15. Additionally, CBCC argues that the date on which the

ACC is contracted is irrelevant to the Department's analysis as long as

the ACC contract is tied to a particular export transaction.

Department's Position

We agree with CBCC and Minasligas. We have carefully reviewed the

record of this review, and are persuaded that CBCC's and Minasligas'

ACCs are directly tied to their U.S. sales. With respect to CBCC, we

find that the Department's verifiers were able to tie each ACC to a

specific U.S. sale. See July 22, 1996 verification report, pp. 14-15.

With respect to Minasligas, we note that Minasligas is correct that,

contrary to petitioners' argument, the value of the ACC which

Minasligas put on the record does in fact equal the value of the U.S.

sale; therefore, we find that the ACC is tied to the U.S. sale.

Furthermore, in prior verifications (where negative U.S. imputed credit

was not an issue) the Department was able to tie Minasligas' ACCs to

individual U.S. sales. See July 22, 1996 verification report, p. 9.

Therefore, in the U.S. imputed credit calculation in these final

results of review we have used as the payment date the date on which

the bank credits the accounts of Minasligas and CBCC with funds under

the terms of their ACCs.

Comment 14

Petitioners argue that the Department erred by failing to deduct

from RIMA's USP the ICMS tax that RIMA paid on its foreign inland

freight for U.S. sales.

RIMA argues that the freight amount that it reported for each

export sale includes ICMS taxes.

Department's Position

We agree with petitioners. Evidence on the record indicates that

RIMA reported the ICMS tax on foreign inland freight separately from

the freight costs. See October 3, 1996 verification report, at 6. In

these final results of review we have deducted from USP the ICMS tax

due on freight.

Comment 15

Petitioners argue that the Department erred in the calculation of

Minasligas' and RIMA's COP by granting an offset to production costs

for the sale of by-products. With respect to Minasligas, they argue

that the documentation Minasligas submitted to demonstrate that it had

sold the slag during the POR did not substantiate its claim.

Minasligas argues that its documentation demonstrates that it

concluded the sale in June 1995, and thus during the period covered by

this proceeding. It argues that only if the Department decides to rely

on the date of shipment rather than the date of sale should the

adjustment apply to the fifth review.

With respect to RIMA, petitioners argue that RIMA failed to provide

a requested worksheet demonstrating its computation of the claimed

offset. Furthermore, petitioners claim that the volume of the offset

that RIMA claimed is inconsistent with other information on the record.

RIMA argues that it did not calculate or claim a by-product offset

for its COP/CV.

Department's Position

We agree with petitioners. With respect to Minasligas, we agree

that the documentation Minasligas submitted does not demonstrate that

the date of sale for its claimed offset was during the POR. See

Minasligas' October 15, 1996 submission, exhibit 5. Therefore, in these

final results of review we have not allowed an offset to Minasligas'

production costs for its sale of slag. With respect to RIMA, we find

that the record indicates that RIMA did offset its production costs

with revenue earned from the sales of by-products, and that RIMA did

not substantiate its claim for that offset. See RIMA's April 30, 1996

SQR, at 33. Therefore, in these final results of review we have not

allowed an offset to RIMA's production costs for its sales of by-

products.

Comment 16

Petitioners argue that the Department erred in its calculation of

the by-product offset that it applied to Eletrosilex's COM. It argues

that the ICMS tax should be deducted from the selling price in the

calculation of revenue earned from the sale of the by-product.

Department's Position

We agree with petitioners. The ICMS tax represents a reduction in

Eletrosilex's revenue earned from the sale, and should be deducted from

the selling price in calculating total revenue. We have done so in

these final results of review.

Comment 17

Petitioners argue that the Department erred in its calculation of

Eletrosilex's COP by using Eletrosilex's calculation of indirect

selling expenses. That calculation was flawed, petitioners argue,

because in it Eletrosilex divided its indirect selling expenses by its

volume of production. This methodology was incorrect, petitioners

argue, for two reasons. First, the selling expense total used in the

calculation does not include the selling expenses of Eletrosilex's

related affiliates. Thus, petitioners argue, Eletrosilex allocated to

all of its silicon metal production volume only part of the indirect

selling expenses that it and its related companies incurred for selling

the silicon metal. Second, it is not the Department's practice,

petitioners state, to calculate selling expenses based on production

volume. Eletrosilex bore the burden, petitioners argue, of reporting

properly calculated per-unit indirect selling expenses, and failed to

do so. Therefore, petitioners conclude, in the final results the

Department should use the facts available, and should calculate

Eletrosilex's per-unit indirect selling expenses for COP and CV by

dividing Eletrosilex's reported indirect selling expenses by its

reported volume of home market and U.S. sales.

Eletrosilex argues that it makes no sense to calculate per-unit

indirect selling expenses based solely on U.S. and home market sales

volumes. It argues that the indirect selling expenses that Eletrosilex

incurs (consisting primarily of salaries and related employee costs)

are applicable to all sales, not just to the local and U.S. markets.

These employees, Eletrosilex states, perform functions relevant to all

sales, and it would be unfair and illogical to apply the expenses of

these employees solely to home market and U.S. sales. Citing statements

in its questionnaire response as support, it argues that sales both in

the United States and in Brazil are made solely by Eletrosilex

personnel, with no assistance from affiliated companies. Furthermore,

Eletrosilex argues, while affiliated companies assist Eletrosilex in

some third-country markets, Eletrosilex personnel are deeply involved

in all aspects of these sales. That there is some external assistance

on these sales in third-country markets, Eletrosilex argues, is not

relevant to the determination of per-unit indirect selling expenses in

the home market.

Department's Position

We agree with petitioners that indirect selling expenses should be

calculated based on sales volumes, and not production volumes. This is

our policy because by their nature indirect selling expenses are

attributable to sales

[[Page 1979]]

of merchandise, and not to production of merchandise. We do not agree

with petitioners that the computation needs to include the indirect

selling expenses of all of Eletrosilex's affiliates because COP

includes only the indirect selling expenses attributable to home market

sales. Because the related affiliates were not associated with

Eletrosilex's home market sales, there is no reason to include their

indirect selling expenses in COP. In these final results of review, we

have calculated Eletrosilex's indirect selling expenses by dividing its

home market indirect selling expenses by its home market sales volumes.

Comment 18

Petitioners argue that the Department erred in the calculation of

Eletrosilex's and RIMA's U.S. selling prices by calculating the unit

price based on the net weight of contained silicon rather than the

gross weight of the silicon metal. They argue that in a CV-based margin

calculation the Department should use the gross weight of the silicon

metal to calculate the per-unit USP because CV is reported on a gross-

weight basis. Use of the contained-weight quantities would, they

allege, distort the comparison of export price (EP) and NV. Similarly,

petitioners argue that the Department erred in its sales-below-cost

analysis for RIMA by calculating its home market selling prices on the

basis of the contained weight of silicon, rather than the gross weight

of the silicon metal. They argue that to make a fair comparison, the

Department should convert the per-unit home market selling prices to a

gross-weight basis before comparing them to COP.

RIMA argues, with respect to petitioners' argument concerning the

comparison of USP and NV, that petitioners' argument is tantamount to a

request that the Department determine a USP for its sales on a

different basis than that at which the merchandise was sold to the U.S.

market. Doing so, RIMA argues, would be contrary to the plain language

of the statute, which requires that the Department base EP on ``the

price at which the subject merchandise is first sold (or agreed to be

sold) before the date of importation by the producer or exporter of the

subject merchandise. . .'' (See 19 U.S.C. Sec. 1677a(a).) The

petitioners' approach, RIMA argues, would result in using a unit price

different from that reflected on the invoice, and, therefore, would be

contrary to the statute.

Department's Position

We disagree with petitioners. We find no evidence on the record to

support petitioners' contention that the weights Eletrosilex and RIMA

reported for their U.S. and home market sales reflect only the weight

of the silicon, rather than the weight of the silicon metal.

Furthermore, there is no record evidence to support petitioners'

assertion that CV was calculated on a gross-weight basis. Therefore,

there is no reason to change the per-unit calculations from those in

the preliminary results of review.

Comment 19

Petitioners argue that Eletrosilex failed to provide a

reconciliation of its COM to its inventory cost records. Eletrosilex

attempted to provide a reconciliation in its questionnaire response (Q/

R), but in an SQR acknowledged that the previously submitted

reconciliation contained an error. Therefore, in the SQR Eletrosilex

submitted a revised reconciliation. This second reconciliation

contained beginning and ending inventory values that were different

from those contained in the Q/R. Thus, in a second supplemental

questionnaire, the Department requested that Eletrosilex explain why it

reported two different inventory balances based on the same inventory

records. Eletrosilex answered that ``because inventory unit costs are

calculated by the weighted average methodology rather than purely by

quantities, the inventory balance necessarily changes when there is a

change in values.'' This statement, petitioners argue, shows that

Eletrosilex did not reconcile its reported COM to its inventory records

maintained in the normal course of business, but instead simply

compared its reported monthly COMs to inventory values that it created

from its monthly COMs prepared for this review. Thus, petitioners

argue, Eletrosilex failed to provide a critical reconciliation needed

to validate its reported COM.

Department's Position

We disagree with petitioners. In its SQR, Eletrosilex provided

information which substantiated that the reported per-unit costs could

be reconciled to the financial statement costs. Eletrosilex provided

the financial statement average inventory values for each month of the

POR, as well as financial statements. We reviewed and analyzed the cost

information, the monthly inventory information, and the financial

statements which Eletrosilex submitted. Since Eletrosilex produces only

subject merchandise, we multiplied the submitted costs by the

production quantities and compared the total costs to the financial

statement total costs. We determined that the reported per-unit COP and

CV data were consistent with the per-unit costs used in the financial

statements.

Comment 20

Petitioners argue the Department erred in its computation of CBCC's

COP by using the depreciation expenses that CBCC reported. They find

three errors in CBCC's reported depreciation. First, CBCC calculated

its reported depreciation by aggregating its depreciation for all

assets and allocating the aggregate amount to the three products it

produces based on the relative production quantities of these products.

Petitioners state that the Department's normal practice (which,

petitioners allege, was CBCC's normal methodology prior to the 93-94

administrative review) requires that depreciation of assets used to

produce subject merchandise be directly attributed to the cost of the

subject merchandise. Petitioners object to CBCC's new allocation

because it is not, they allege, how CBCC has historically recorded

depreciation in its books or reported to the Department in earlier

reviews of this order. Petitioners argue that the Department's practice

is clear that a respondent may not depart from its normal, historical

cost allocation methods during an antidumping proceeding unless the

respondent establishes that its normal method is distortive. See Canned

Pineapple Fruit from Thailand, Final Determination of Sales at Less

than Fair Value, 60 FR 29553, 29559 (June 5, 1995). Here, petitioners

argue, CBCC has not even claimed that its prior method was distortive.

The effect of CBCC's new calculation methodology, petitioners

argue, is to shift CBCC's depreciation away from silicon metal and

toward other products. To accept such a calculation, petitioners argue,

would violate the Statement of Administrative Action (SAA) which states

that ``if Commerce determines that costs ... have been shifted away

from production of the subject merchandise, or the foreign like

product, it will adjust costs appropriately, to ensure they are not

artificially reduced.'' See SAA, 1994 U.S.C.A.A.N. at 4172.

For the above reasons, petitioners argue that the Department

should:

Include in COM the depreciation for assets used to make

silicon metal, consistent with CBCC's historical depreciation method;

Allocate depreciation for equipment common to production

of multiple products based on the percentage of

[[Page 1980]]

CBCC's total furnace capacity dedicated to production of each product;

Allocate depreciation for equipment common to production

of multiple products for a particular plant only among the products

made at that facility;

Calculate the proper amount of straight-line depreciation

for the furnaces that produce silicon metal based on the monthly

acquisition values for those furnaces.

The second alleged error petitioners find in CBCC's calculation of

depreciation is that it did not include depreciation for all idle

equipment.

The third alleged error petitioners find in CBCC's calculation of

depreciation is that CBCC used accelerated depreciation for some

assets. Petitioners state that the Department consistently rejects

accelerated depreciation, which by definition is not based on the

average useful life of the fixed assets. Therefore, petitioners argue,

the Department should recalculate CBCC's depreciation eliminating any

prior accelerated depreciation. It should also, petitioners argue,

restate the value of the assets to account for hyperinflation.

CBCC argues, with respect to the first alleged error, that though

its methodology represents a change from the first and second reviews

of this order, it is the same methodology it used in the third (93-94)

review. Moreover, CBCC argues, it used this depreciation allocation

method also with respect to production equipment common to all

production in Ferrosilicon from Brazil; Final Determination, and the

Department accepted it. Therefore, CBCC states, its current methodology

has been historically used, and the Department has accepted it in one

prior instance. Furthermore, CBCC argues, the methodology is proper

because CBCC can produce any of its products in each furnace, with only

minor modifications. Therefore, allocating depreciation to each product

based on relative production capacity is not improper.

CBCC argues, with respect to the second alleged error, that it was

pursuant to Brazilian law that it did not report depreciation of idle

assets. Under Brazilian law, it states, the depreciation of idle assets

is illegal. Under such circumstances, it argues, depreciation is

suspended and resumes only when the assets are operational again.

CBCC argues, with respect to the third alleged error, that the

Department verified at the fourth review verification that there was no

accelerated depreciation of furnaces. Furthermore, had accelerated

depreciation occurred in any prior review, CBCC argues, the Department

verifiers would have noted it. Therefore, CBCC concludes, there is no

evidence on the record to support petitioners' theories. With regard to

petitioners' argument that the Department should restate the value of

the assets to account for hyperinflation, CBCC argues that it

calculated depreciation on asset values that were re-actualized to take

account of inflation.

Department's Position

We agree with petitioners in part. We have determined that CBCC's

new method of calculating depreciation distorts the cost of

depreciation incurred to produce silicon metal because it shifts

depreciation costs incurred in the production of silicon metal away

from that product and toward other products. For this reason, accepting

this method would be contrary to the guidance set forth in the SAA.

Since publication of the preliminary results of this review, we have

requested and obtained information from CBCC that enables us to

identify the depreciation expense associated with assets used to

produce silicon metal and to include that expense as part of the COP/CV

for silicon metal.

Concerning depreciation expenses for idle assets, we agree with

petitioners that it is our clearly stated practice and policy to

include these in COP/CV. Accordingly, for these final results, we have

included this category of expense in the calculation of depreciation.

Petitioners' allegation that CBCC improperly used accelerated

depreciation expenses is moot for these final results because, as

stated above, we have performed a recalculation of depreciation. In

this recalculation we have not accelerated the useful lives of the

assets. For the furnaces we have used a useful life of ten years, which

is the useful life we used in prior reviews of this order. By using the

same useful life in successive reviews, we avoid accounting for the

same costs more than once. See our position on comment 4 above.

Comment 21

Petitioners argue that the Department erred in its calculation of

CBCC's COP by using CBCC's reported direct labor costs. They argue that

the figures CBCC reported reflect a methodology which distorts costs.

As a result of this methodology, petitioners argue, CBCC reported

disproportionate direct labor costs for products with comparable direct

labor requirements. CBCC also, petitioners argue, allocated direct

labor costs to furnaces that were not even operating, and thus required

no direct labor. Therefore, petitioners argue that the Department

should recalculate direct labor correctly, or use facts available for

CBCC's direct labor.

CBCC argues that its direct labor costs for this review were taken

directly from its books and accounting records, which the Department

verified. CBCC believes that its allocation and accounting methodology

are justified based on how its labor is in fact employed and how it

records the cost of labor in its books. CBCC explains that it assigns a

set number of workers to each furnace, no matter what the output of the

furnace may be. When a furnace is inoperative or idle, the workers and

employees continue to be paid and are generally not reassigned to other

furnaces because the cost of laying off employees for temporary periods

of time would be prohibitive. Furthermore, all furnaces operate 24

hours a day, and therefore it would be impracticable and unnecessary to

add employees in addition to those already assigned to other furnaces.

As a result, CBCC allocated these labor costs to the product which the

idle furnace produced before becoming non-operational. Under these

circumstances, CBCC argues, the evidence on the record, which the

Department verified, shows that the workers assigned to idle furnaces

continued to be paid, and that CBCC continued to account for this labor

in its accounting records based on the volume of silicon metal produced

by each furnace while it was active.

Department's Position

We agree with petitioners that CBCC's reported labor costs distort

the actual labor costs incurred to produce silicon metal because the

company allocates a disproportionate share of labor costs to products

that have comparable labor requirements and because it allocates labor

costs associated with idle furnaces to specific products that are not

in production at the time the labor costs were incurred. Although CBCC

used this method in its normal accounting system, we cannot use it in

our antidumping analysis. The SAA indicates that costs will be

calculated based on records kept by a firm if they are kept in

accordance with GAAP and if they reasonably reflect the costs

associated with the production and sale of the merchandise.

This is not the case with respect to CBCC's accounting for the

labor costs associated with idle furnaces. Under CBCC's accounting, the

company charges these costs to the last product produced in the

furnace. We believe

[[Page 1981]]

that it is more appropriate to allocate these costs to all products

produced by CBCC since, during the idle time, the labor costs incurred

are not directly related to any specific product.

Comment 22

Petitioners argue that the Department erred in its calculation of

CBCC's COP by using the forest exhaustion costs that CBCC reported.

CBCC's reported forest exhaustion costs were deficient, petitioners

argue, because in them CBCC revalued the formation and pre-harvest

maintenance costs of each forest project only up to the date that

harvesting began for that project. Petitioners argue that in

Ferrosilicon from Brazil; Final Determination the Department found that

CBCC had used the same methodology, and determined that because of it

CBCC ``had substantially understated its cost of producing charcoal by

inaccurately recording the costs associated with their wood forests.''

(See Ferrosilicon from Brazil; Final Determination, at 738.)

Petitioners argue that in this review the Department should require

CBCC to recalculate its self-produced charcoal costs using forest

exhaustion based on forest formation and pre-harvest maintenance costs

that have been revalued to account for inflation during the harvest

period. In the alternative, petitioners argue, the Department should

determine CBCC's charcoal costs based on the facts available.

CBCC argues that it explained its reporting of exhaustion to

Department officials at the verification, and that the verifiers fully

verified this question. It notes too that the exhaustion costs are re-

stated in UFIR to account for hyperinflation, and that they include all

taxes and expenses attributable to exhaustion.

Department's Position

We agree with petitioners that because CBCC did not revalue the

cost of its forests after harvesting began, the charcoal costs it

submitted are inadequate. Therefore, in these final results of review

we have valued CBCC's self-produced charcoal at the price paid to

outside suppliers. Under these circumstances we resorted to this same

cost methodology in the first and second administrative reviews of this

order. See Silicon Metal from Brazil; First Review Final Results at

42809 and page 1 of the attachment to the March 14, 1995 analysis

memorandum from Fred Baker to the file (public version).

Comment 23

Petitioners argue that the Department erred by allocating CBCC's

indirect selling expenses according to the relative sales volume of

each of CBCC's three products. Petitioners argue that this is not a

proper allocation because silicon metal has a significantly higher

value than CBCC's other two products. Furthermore, petitioners argue

that the Department should use adverse facts available for CBCC's

indirect selling expenses because at the verification the Department

requested information on CBCC's sales values for each of its products

in order to allocate indirect selling expenses to silicon metal based

on sales values rather than sales volumes, but CBCC refused to provide

that information. The verification report states that the basis for the

refusal was that the Department had not requested the information prior

to the verification. Petitioners argue that this reason is inadequate

because CBCC did not state that the information was unavailable.

CBCC states that at the verification the Department officials

suggested that CBCC recalculate the indirect selling expenses on the

spot using a different methodology than that it requested in the

supplemental questionnaire. CBCC states that at the verification it did

not have the time or resources to provide an entirely new set of

indirect selling expenses. It also notes that the Department's

officials did not suggest providing this information to the Department

at a later date. Accordingly, CBCC argues, the Department should not

penalize CBCC for the Department's failure to request information other

than the information requested in its questionnaires. See Toyota Motor

Sales U.S.A. v. United States, Slip Op. 96-95, June 14, 1996; Micron

Technology, Inc. v. United States, Slip Op. 95-107, June 12, 1995.

Department's Position

We disagree with petitioners. Petitioners have given us no reason

to believe that an allocation based on sales volume is unreasonable or

distortive in this case. That silicon metal may have a higher sales

value than other products CBCC produces is an insufficient basis to

conclude, absent any supporting information on the record of this

review regarding the specific nature of the indirect selling expenses

incurred by CBCC, that an allocation based on sales value would produce

more accurate results than an allocation based on sales volume.

Therefore, in these final results of review, as in the preliminary

results of review, we have allocated CBCC's indirect selling expenses

to silicon metal based on relative sales volume.

Comment 24

Petitioners argue the Department erred in its calculation of CBCC's

G&A expenses by not allocating to CBCC a portion of the G&A expenses of

CBCC's direct Brazilian parent, Solvay do Brasil, but instead it

allocated to CBCC a portion of the G&A expenses of only its Belgian

parent, Solvay & Cie. Petitioners argue that in the less-than-fair-

value (LTFV) investigation of this case CBCC acknowledged that Solvay

do Brasil performed some services on CBCC's behalf, and that in this

review CBCC has not stated that Solvay do Brasil did not do the same.

Therefore, petitioners argue, the Department should calculate the

portion of Solvay do Brasil's G&A expenses that is attributable to

CBCC, and include those expenses in CBCC's COP and CV.

CBCC argues that the consolidated financial statements of Solvay &

Cie include the financial results of Solvay do Brasil as well as CBCC

and some two dozen other affiliated companies in the Solvay Group.

Thus, by calculating G&A expenses on the basis of the consolidated

statements of the Solvay Group, CBCC argues, not only did the

Department allocate G&A expenses incurred by Solvay do Brasil on behalf

of CBCC, but also those of a number of companies throughout the world

that did not perform any administrative services whatsoever for CBCC.

Department's Position

We agree with the respondent that the allocation of its overall

parent company's G&A expenses was correct and that to also add the G&A

expenses of Solvay do Brazil would double-count the G&A expenses of

Solvay do Brazil, which are included in the consolidated financial

statements. Accordingly, for these final results we have continued to

apply the consolidated G&A expenses reported by CBCC.

Comment 25

Petitioners argue that the Department erred in its calculation of

CBCC's interest expense by calculating it on the basis of the interest

expense of CBCC's ultimate Belgian parent, Solvay & Cie. They argue

that the Department should instead calculate it on the basis of the

combined interest expense of CBCC and its Brazilian parent, Solvay do

Brasil. In support of their argument, they point out that there is

evidence on the record that there are loans between Solvay do Brasil

and CBCC, whereas there is no evidence on the record that there are any

intercompany transactions or borrowing between CBCC and Solvay & Cie.

Furthermore, they argue that the

[[Page 1982]]

Brazilian firms normally would borrow in Brazilian credit markets or

from Brazilian banks. Moreover, in the final results of the first

administrative review of this order, and in Ferrosilicon from Brazil;

Final Determination, the Department used the financial statements of

Solvay do Brasil to calculate CBCC's interest expenses.

CBCC argues that the Department's well-established practice is to

calculate financial expenses based on the consolidated statements at

the parent company level. See Ferrosilicon from Brazil; Final

Determination at 736. In prior segments of this proceeding the

Department consolidated the financial expenses of CBCC and Solvay do

Brasil because CBCC had not submitted the consolidated financial

statements of its Belgian parent, Solvay & Cie. In this review CBCC

provided such consolidated financial statements. They show, CBCC

states, that the financial results of both CBCC and Solvay do Brasil

are consolidated with those of the Solvay Group. Therefore, CBCC

argues, it is proper for the Department to use these consolidated

financial statements pursuant to its ``well-established practice of

deriving net financial costs based on the borrowing experience of the

consolidated group of companies.'' See New Minivans from Japan, 57 FR

21937, 21946 (May 26, 1992).

Department's Position

We agree with CBCC. Both parties urge the Department to use

interest expenses reflecting the consolidated financial results of the

parent and its subsidiaries. However, the petitioners would have us

refer only to the financial results of CBCC and its immediate Brazilian

parent, while CBCC would have us use the global corporate interest

expense. The petitioners' recommendation is internally inconsistent

because, while they state that Department policy is to use fully

consolidated results, they urge us to rely on only partially

consolidated results (those of CBCC and Solvay do Brasil).

Our policy is to base interest expenses and income on consolidated

financial statements. We explained our basis for this position in

Silicon Metal from Brazil; First Review Final Results as follows:

Since the cost of capital is fungible, we believe that

calculating interest expense based on consolidated statements is the

most appropriate methodology. (see, e.g., Final Determination of

Sales at Less Than Fair Value, Small Business Telephones from Korea,

54 FR 53141, 53149 (December 27, 1989), Final Results of Antidumping

Duty Administrative Review, Brass Sheet and Strip from Canada, 55 FR

31414, 31418-13418-13419 (August 2, 1990), and Final Determination

of Sales at Less Than Fair Value, Antifriction Bearings (Other than

Tapered Roller Bearings) and Parts Thereof from the Federal Republic

of Germany, et al., 54 FR 18992, 19074 (May 3, 1989)).

See Silicon Metal from Brazil; First Review Final Results at 42807.

Also see Ferrosilicon from Brazil; First Review Final Results at 59412.

While we did use the consolidated financial statement of CBCC and

Solvay do Brasil in prior reviews of this order and in Ferrosilicon

from Brazil; Final Determination, in those segments of the proceeding

we did not have the consolidated statement of Solvay & Cie on the

record. Accordingly, for these final results of review, we have used

the consolidated financial statement of Solvay & Cie for the interest

expense.

Comment 26

Petitioners argue that the Department erred in its calculation of

CBCC's and RIMA's USP by adding to it the weighted-average amount of

ICMS, PIS, and COFINS taxes reported for home market sales. They argue

that this addition was improper because under the recent amendments to

the antidumping law, the Department is to make no addition to USP for

home market taxes. Rather, they argue, when based on home market

prices, the Department should reduce NV by:

[t]he amount of any taxes imposed directly upon the foreign like

product or components thereof which have been rebated, or which have

not been collected, on the subject merchandise, but only to the

extent that such taxes are added to or included in the price of the

foreign like product. . . .

See 19 U.S.C. Sec. 1677b(a)(6)(B)(iii). Furthermore, petitioners argue

that under this provision, the Department may not reduce NV by the

amount of PIS and COFINS taxes reported for home market sales because

they are gross revenue taxes. Thus, they are not ``imposed directly

upon the foreign like product,'' as required under the statute in order

to deduct them from NV.

CBCC argues that the recent amendments to the U.S. antidumping laws

require the Department to use tax-neutral methodologies for its dumping

calculations. Accordingly, CBCC argues, it is proper for the Department

to add to USP the weighted-average amount of ICMS, PIS, and COFINS

taxes imposed on domestic sales because, by adding the same amount of

taxes to the USP as that collected on the home market sales, the

Department makes ``apples-to-apples'' comparisons.

CBCC also argues that, even though the PIS and COFINS taxes are

gross revenue taxes, this does not mean ``they are not imposed directly

upon the foreign like product,'' as petitioners allege. Whether or not

they are shown as a separate line item on the invoice is immaterial,

CBCC argues, as long as they are embedded or included in the price of

the sale. Furthermore, CBCC argues, the CIT has upheld the Department's

practice of making an adjustment for taxes embedded in sales prices.

See Daewoo Electronics Co., Ltd. v. International Union of Electronic,

Electrical, Technical, Salaried and Mach. Workers, AFL-CIO, 6 F.3d.

1511, 1516-17 (Fed. Cir. 1993). Moreover, CBCC argues that the PIS and

COFINS taxes meet the two requirements of 19 U.S.C.

Sec. 1677b(a)(6)(B)(iii) (quoted above). First, PIS and COFINS taxes

are imposed on gross home market sales revenue of silicon metal, but

are not ``collected'' on export sales. Second, although PIS and COFINS

taxes are not shown as a separate line item on the invoice, they are

``included'' in that price because they are embedded in such price.

RIMA argues that the Department should be guided by the principle

of tax neutrality that it re-stated in the final results of Silicon

Metal from Brazil; Second Review Final Results. Accordingly, RIMA

argues, the Department should add to the USP the absolute amount of

ICMS taxes as well as the absolute amounts of PIS/COFINS taxes

collected on home market sales, pursuant to 19 U.S.C.

Sec. 1677a(c)(2)(B), 19 U.S.C. Sec. 1677b(a)(6)(B)(iii), and 19 U.S.C.

Sec. 1677b(a)(6)(C)(iii). To add ICMS and PIS/COFINS taxes to NV

without a corresponding adjustment to the USP, RIMA argues, would

create dumping margins due solely to indirect taxes where none would

otherwise exist.

Minasligas argues that the Department erred by failing to deduct

from NV the PIS, COFINS, and ICMS taxes due on Minasligas' home market

sales. Minasligas argues that this failure was a violation of 19 U.S.C.

1677b(6)(B)(iii), cited above. Minasligas argues, with respect to the

PIS and COFINS taxes, that because these taxes are not collected on

export sales, they must be deducted from NV prior to the comparison to

USP. As for the ICMS tax, Minasligas argues that under the statute the

Department must deduct from NV the amount by which the home market ICMS

tax due exceeds the amount of ICMS tax due on U.S. sales. This

deduction is necessary, Minasligas argues, to account for the

difference in ICMS tax which has been rebated or not collected upon

exportation, as directed in 16 U.S.C. 1677b(6)(B)(iii).

Minasligas also argues that, in the alternative, if the Department

does not

[[Page 1983]]

deduct the PIS, COFINS, and the correct amount of ICMS taxes from NV,

then, in the alternative, it must add the absolute amount of these

taxes to USP in order to achieve tax neutrality. As another

alternative, Minasligas argues that the Department should make a

circumstance-of-sale (COS) adjustment for the tax differential by

deducting from the NV the absolute amount of the tax difference between

USP and NV.

Petitioners argue that the Department was correct in adding the PIS

and COFINS taxes to Minasligas' home market sales prices because it had

reported its home market prices net of these taxes, and thus

understated the gross unit prices. Therefore, petitioners argue, the

Department must add the PIS and COFINS taxes to Minasligas' home market

prices in order to determine the actual prices that Minasligas charged,

which are the proper starting point for the calculation of NV.

Furthermore, petitioners argue, under section 773(a)(6)(B)(iii) of the

Act, NV may be reduced only by taxes imposed directly upon the

``foreign like product or components thereof.'' Petitioners argue that

because the PIS and COFINS taxes are calculated based on gross receipts

(excluding receipts from export sales), they are not imposed ``directly

upon the foreign like product,'' and therefore may not be deducted from

NV.

Moreover, petitioners argue that in similar situations in the past

the Department has not made an adjustment for gross revenue taxes. In

support of this argument they first note that the language of 19 U.S.C.

1677b(6)(B)(iii) is virtually identical to the language of

772(d)(1)(C), which was, they state, the parallel provision in effect

prior to the enactment of the URAA, and which provided for an upward

adjustment to USP. They then note that in Silicon Metal from Argentina

the Department determined that two Argentine taxes (which petitioners

allege are almost identical to Brazil's PIS and COFINS taxes) did not

qualify for an adjustment to USP because they were gross revenue taxes.

See Silicon Metal from Argentina, Final Determination of Sales at Less

Than Fair Value, 56 FR 37891, 37893 (August 9, 1991).

Petitioners also argue that the PIS and COFINS taxes do not qualify

for a COS adjustment pursuant to 19 U.S.C. Sec. 773(a)(6)(C)(iii) for

the same reason that they do not qualify for an adjustment to NV

pursuant to 19 U.S.C. Sec. 773(a)(6)(B)(iii) of the Act. The

Department's regulations specify that the Department will limit

allowances for differences in the circumstances of sales ``to those

circumstances which bear a direct relationship to the sales compared.''

See 19 CFR Sec. 353.56(a)(1). Petitioners argue that because PIS and

COFINS taxes are not imposed on silicon metal transactions, but instead

are assessed on gross receipts from operations, they are not directly

related to specific sales and therefore do not qualify for a COS

adjustment.

Department's Position

We agree with petitioners that recent changes to the antidumping

law make no allowance for additions to USP for home market taxes. Thus,

to achieve tax neutrality in these final results of review, we have

deducted relevant taxes from NV, and have not added them to USP. This

approach in is accordance with 19 U.S.C. Sec. 1677b(a)(6)(B)(iii).

However, we agree with Minasligas that in order to achieve tax

neutrality with respect to the ICMS tax we should deduct from NV only

the amount of the difference between ICMS tax due on home market sales

and ICMS tax due on U.S. sales. We have done so in these final results

of review.

We also agree with petitioners that information on the record

demonstrates that the PIS and COFINS taxes are taxes on gross revenue

exclusive of export revenue. Thus, in accordance with our determination

in Silicon Metal from Argentina, we determine that these taxes are not

imposed ``directly upon the merchandise or components thereof.'' Thus,

we have no statutory basis to deduct them from NV. We also agree with

petitioners that because the PIS and COFINS taxes are gross revenue

taxes, they do not bear a direct relationship to the sales, and

therefore do not qualify for a COS adjustment. Therefore, in these

final results of review we have not made an adjustment for PIS and

COFINS taxes in the margin calculation.

Comment 27

Petitioners argue with respect to all respondents that the

Department should include profit in CV, and that the foreign like

product that should be excluded from the profit calculation as outside

the ordinary course of trade includes sales disregarded as below cost,

sales of off-quality merchandise, and sales to related parties at

prices that are not at arm's length.

Department's Position

We agree that the calculation of CV should include profit. Where we

used CV in the margin calculation in these final results of review and

the respondent had above-cost sales, we have calculated profit based on

above-cost home market sales of commercial-grade silicon metal sold at

arm's length prices. Where a respondent had no above-cost sales, but

its financial statement indicates that it had profits, we based the

profit calculation on the respondent's financial statement. Where a

respondent had no above-cost sales and its financial statement

indicated the company experienced losses rather than profits during the

calendar year, we have calculated profit based on the weighted-average

profit ratios of other respondents who reported profits on their

financial statements.

Comment 28

Petitioners argue that the Department erred in its calculation of

RIMA's COP by using incorrect figures for depreciation. The figures the

Department used were depreciation expenses that RIMA submitted to the

Department at verification. (Subsequent to publication of the

preliminary results the Department solicited additional information

from RIMA regarding its depreciation. Petitioners submitted separate

comments regarding that information, as described below.) Petitioners

argue regarding RIMA's original depreciation figures that the reported

depreciation is massively understated. As support for this assertion,

they cite the independent auditor's report accompanying RIMA's 1994 and

1995 financial statements. These reports give the independent auditor's

opinion as to what RIMA's depreciation and amortization would be if

RIMA recognized them on their financial statements. Comparing the

independent auditor's estimate of depreciation with those submitted by

RIMA for this review, petitioners argued, shows that the numbers given

by the independent auditors are much higher than those given by RIMA in

this review.

Furthermore, petitioners argued that RIMA's depreciation

calculation is flawed in numerous ways. Among them:

1. Its calculation of the purported company-wide depreciation for

all its products included only depreciation for machinery and equipment

at its Varzea da Palma (VZP) plant, and thus excluded the depreciation

for the machinery and equipment at the other plants;

2. It is based on an accelerated depreciation rate. Petitioners

argue that it is the Department's practice to reject accelerated

depreciation of assets where such accelerated depreciation fails to

allocate the cost of the asset on a consistent basis over the life of

the asset.

3. RIMA's 1995 audited financial statements reported fixed asset

values for buildings, vehicles, furniture, and implements, while RIMA's

depreciation

[[Page 1984]]

worksheets prepared for this review do not reflect depreciation for

these assets.

4. RIMA's depreciation worksheets do not appear to contain line

items for amortization of its deferred expenses, which were incurred to

set up, expand, and modernize RIMA's production facilities and to

develop new plants.

Moreover, petitioners argue that RIMA improperly changed its

depreciation calculation method since the preceding review. The 93-94

verification report says:

Since each piece of equipment was dedicated to the production of

certain products, RIMA reported the depreciation expense from the

cost center for silicon metal. RIMA allocated the remaining overhead

expenses [including depreciation] based on the relative number of

hours worked on silicon metal production versus total hours worked

on all products.

See Verification Report, October 25, 1995, p. 19 (public version). In

the 94-95 review, petitioners allege, RIMA departed from this

methodology by calculating company-wide depreciation and allocating it

to products based on the relative cost of sales of the products.

Department practice requires that respondents show that their

historically-used method is distortive before they can use a new

method. RIMA, petitioners allege, made no such showing.

Finally, petitioners argue that RIMA performed an improper

allocation of its depreciation which resulted in depreciation for some

equipment used exclusively for silicon metal being allocated to other

products. Moreover, they argues that where allocation of depreciation

is appropriate, RIMA's allocation, which was based on cost of sales, is

improper because cost of sales does not reflect the extent to which

assets were used to produce individual products during a period. This

is because cost of sales excludes the cost of inventory production and

includes the cost of products sold out of inventory.

For the above reasons, petitioners argue that the Department should

obtain the necessary information to calculate RIMA's depreciation

properly, or, in the alternative, it should calculate RIMA's

depreciation based on the facts available.

In response to petitioners' comments regarding its original

calculation of depreciation, RIMA argues that petitioners base their

comments on incorrect assumptions or on a fundamental misunderstanding

of RIMA's depreciation calculations. RIMA argues that while it is true

that the independent auditor's estimate of depreciation is different

from RIMA's, the difference is accounted for by the fact that the

independent auditor's estimate is a cumulative figure representing

depreciation that has occurred since RIMA stopped recording

depreciation on its financial statement (which has been at least five

years), whereas the depreciation RIMA reported to the Department is the

depreciation only for the POR. RIMA also state that petitioners were

mistaken regarding the number of RIMA's plants that produce silicon

metal, and thus are mistaken in their own estimate of what RIMA's

allocated silicon metal depreciation should be.

Furthermore, RIMA states that petitioners have made several other

errors in their analysis. First, RIMA argues that because petitioners

have misread the verification exhibit showing the calculation of

depreciation, they are in error in stating that the reported

depreciation takes account only of the VZP plant's equipment. In fact,

RIMA states, it included eight items in its depreciation worksheet,

including deferred expenses and categories of equipment other than

equipment at the VZP plant. Second, RIMA states that the depreciation

of the assets takes into account the effect of hyperinflation because

the acquisition values of such assets are stated in UFIR, which are

then converted into local currency for the months concerned. Third,

petitioners were incorrect, RIMA argues, in saying that its

depreciation methodology is a change from prior reviews. In fact, RIMA

argues, it is the same calculation methodology used in Silicon Metal

from Brazil; Second Review Final Results, which the Department

accepted.

Finally, RIMA argues that the Department verifiers noted nothing

unusual or incorrect in RIMA's depreciation calculations. Therefore,

RIMA concludes, the Department should rely on these findings.

On November 14, 1996 the Department solicited additional

information from RIMA. We requested that RIMA submit depreciation

expenses that tied to the auditor's statements, and which should

consist of the sum of the depreciation expenses for assets only

associated with the production of silicon metal and an allocated

portion of the depreciation expenses for other, common assets. In its

response, in addition to providing information, RIMA reiterated that

the auditor's stated depreciation amounts should not be used as a basis

for the analysis because the auditors did not consider whether RIMA's

assets had been fully depreciated when they calculated the estimated

depreciation expenses for the years reported in the financial

statement. RIMA argued that this methodology overstates depreciation

significantly because during the normal course of business, every year,

assets become fully depreciated and, therefore, cannot be used as a

basis for determining depreciation expenses.

In commenting on RIMA's response to the Department's November 14,

1996 supplemental questionnaire, petitioners stated that RIMA's new

response was deficient. Petitioners state that RIMA did not respond to

the Department's request for information on the replacement cost for

silicon metal assets or for depreciation expenses for silicon metal

assets. Because RIMA allegedly failed to respond to the Department's

request for information, petitioners argue that the Department should

use facts available for RIMA's depreciation.

Department's Position

We agree with petitioners that both RIMA's initial depreciation

calculation and the depreciation calculation submitted in response to

the Department's November 14, 1996 supplemental questionnaire were

deficient. As petitioners point out, RIMA's original calculation did

not include all assets, and therefore is understated. Furthermore,

RIMA's response to the Department's November 14, 1996 submission did

not respond to all the Department's requests for information. Rather

than providing requested information, RIMA calculated depreciation in a

way not in conformity with the Department's instructions. Without the

requested information the Department cannot properly determine RIMA's

depreciation expenses during the POR.

Where a respondent has not responded to a request for information,

the Department may resort to facts available. As facts available the

Department has chosen to use one-half of the audited total RIMA

depreciation expenses for each fiscal year as RIMA's total POR

depreciation expenses, and to allocate to silicon metal production a

share of that total based on the highest monthly percentage of cost of

goods sold accounted for by silicon metal, as appearing in verification

exhibit OH1. We allocated one-twelfth of this total, in turn, to each

month of the POR.

Comment 29

Petitioners argue that the Department erred in its calculation of

RIMA's COP by using RIMA's reported cost for its self-produced

charcoal. RIMA reported the price of charcoal from unrelated suppliers,

and said it was reflective of the fair market value for charcoal.

[[Page 1985]]

Petitioners argue that this claim would be relevant if RIMA had

acquired charcoal from related suppliers, but this is not the case;

RIMA produced the charcoal itself. Thus, petitioners argue, prior to

the final results the Department must obtain RIMA's full cost of

producing charcoal (including all operating and materials costs and

depreciation and amortization) or use facts available.

In addition, petitioners argue that at the verification in this

review RIMA revealed for the first time that one of its plants produced

quartz, a major input for the production of silicon metal. Petitioners

argue that for the same reasons as given above with respect to

charcoal, the Department must either obtain RIMA's full cost of

producing quartz or use facts available.

RIMA argues the related entities from which it purchases charcoal

are not departments or subdivisions of RIMA Industrial S/A, and that,

therefore, the charcoal it purchases from them is not ``internally

produced.'' Moreover, it argues that its use of the prices from third-

party suppliers was justified in light of statutory provisions. Because

the prices from its related suppliers were, it admits, not at arms-

length, they could not be used in the cost calculation because 19

U.S.C. Sec. 1677b(f)(2) says that prices between related companies can

be considered in determining the cost of materials in CV only when such

prices ``fairly reflect the amount usually reflected in sales of

merchandise under consideration in the market under consideration.''

Furthermore, because the Department could not use the prices from its

related companies, RIMA argues that it was justified in using the

prices of third-party suppliers as a surrogate for the prices from its

related entities, because the statute provides that when ``a

transaction is disregarded * * * and no other transactions are

available for consideration, the determination of the amount shall be

based on the information available as to what the amount would have

been if the transaction had occurred between persons that were not

related.'' See 16 U.S.C. Sec. 1677b(f)(2). Under this provision of the

statute, RIMA argues, there is no basis for the petitioners' suggestion

that the Department require RIMA to calculate the fabrication costs of

charcoal for its related suppliers. Moreover, RIMA argues, the

Department has used this methodology in other cases, such as in

Ferrosilicon from Brazil; Final Determination at 738.

With respect to petitioners' argument that RIMA purchased quartz

from related suppliers, RIMA argues that petitioners' argument is

unfounded. It states that there is no evidence in the record that RIMA

purchased quartz from any related suppliers.

Department's Position

At the Department's request, RIMA submitted information relating to

the COP of charcoal incurred by RIMA's affiliates during each month of

the POR. However, we noted that RIMA did not report reforestation,

depreciation, depletion, and exhaustion costs. Therefore, because we

cannot rely on RIMA's reported costs for self-produced charcoal, we

have used the prices RIMA paid for charcoal to unrelated suppliers to

value RIMA's charcoal costs.

With respect to quartz, we agree with respondent that there is no

information on the record indicating that RIMA purchased quartz from

affiliated suppliers during this POR. Therefore, we have has not

adjusted RIMA's reported direct material costs for any supposedly self-

produced quartz.

Comment 30

Petitioners argue that the Department erred in its calculation of

RIMA's COP by using RIMA's reported G&A expenses. They argue that the

Department should reject RIMA's reported G&A expenses because RIMA did

not calculate them using the Department's standard methodology for

calculating G&A expenses, which is to multiply the COM by the ratio

between the G&A expenses and the cost of sales reported in the

respondent's audited financial statements. Moreover, petitioners allege

that the method RIMA used was flawed for two reasons. First, it was

based on monthly G&A expenses. The Department expressly rejected use of

monthly G&A expenses in the 1991-92 review in this proceeding. See

Silicon Metal from Brazil; First Review Final Results. Second, RIMA's

calculation used 1994 data to derive monthly G&A expenses for 1995.

In addition, petitioners argue that in its computation of G&A

expenses used in the CV calculation RIMA made one additional mistake.

That mistake was to include an offset for ``other operational income''

in the monthly G&A calculations. Petitioners argue that this ``other

operational income'' consisted of an alleged inventory holding gain due

to hyperinflation. The Department should deny this offset, petitioners

argue, because its practice is to allow an offset to G&A only for

income related to the production of the subject merchandise. The

``other operational income'' here, petitioners argue, is an accounting

adjustment that does not constitute income. Moreover, petitioners argue

that some of this income is unrelated to silicon metal, but is instead

related to RIMA's other products. Therefore, petitioners conclude, the

Department should deny this adjustment.

RIMA argues that it reported its G&A costs based on its accounting

records kept in the normal course of business. Thus, RIMA argues, the

Department should use those reported costs pursuant to 19 U.S.C.

Sec. 1677b(f)(1)(A), which states that ``costs shall be calculated

based on the records of the exporter or producer of the merchandise, if

such records are kept in accordance with the generally accepted

accounting principles of the exporting country * * * and reasonably

reflect the costs associated with the production and sale of the

merchandise.'' Furthermore, RIMA argues, RIMA allocated its G&A costs

to silicon metal based on the ratio of the cost of goods sold, which is

the normal allocation method the Department uses. See e.g.,

Ferrosilicon from Brazil; Final Determination at 734.

Furthermore, RIMA argues that the Department properly adjusted the

G&A costs used in CV to account for a one-time reevaluation of the

company's inventory. In support of this argument, RIMA points to the

verification report, which says, ``due to hyperinflation in Brazil in

1994, Rima reassessed the value of the company's inventory, resulting

in a 15,000,000,000 reais increase in inventory value * * * Rima

provided the inventory re-evaluation report indicating the methodology

and amount associated with the re-evaluation, as well as an independent

auditor's report approving the inventory re-evaluation.'' See October

3, 1996 verification report, at 15.

Department's Position

We agree with petitioners that our standard methodology in

calculating G&A expenses is to multiply the COM by the ratio between

the G&A expenses and the cost of sales reported in the respondent's

audited financial statements. See Silicon Metal from Brazil; First

Review Final Results, at 42809. We have used this method in our final

results of this review.

Furthermore, the Department has determined that the adjustment made

by RIMA to its inventory balance should not be allowed as a reduction

to the company's G&A expense. RIMA chose to restate the historical

value of its inventory balances by recognizing a one-time increase to

reflect the current value of these assets. The accounting entries for

this restatement included a credit to the net equity of the company

that was recognized through RIMA's income statement. Here, the record

does

[[Page 1986]]

not indicate that this credit, or offset, can be characterized as

income that reduces RIMA's production cost for silicon metal.

Consequently, we have made an adjustment to G&A expense to exclude this

offset.

Comment 31

Petitioners argue that the Department erred in its computation of

RIMA's COP by using the financial expenses as RIMA reported them.

Petitioners argue that RIMA's method of calculating its financial

expenses was flawed because RIMA did not perform its computation using

the Department's standard formula. That formula is, according to

petitioners, to multiply COM by the ratio between the financial

expenses and cost of sales reported in the respondent's audited

financial expenses. Instead, RIMA calculated financial expenses for

silicon metal for the months of the POR during 1994 based on its

company-wide financial expenses in each month multiplied by the

percentage of its cost of sales in that month accounted for by sales of

silicon metal. Additionally, RIMA derived monthly financial expenses

for the months of the POR in 1995 using its 1994 data.

RIMA argues that the Department should accept RIMA's calculation of

financial expenses because it reported these costs as they are recorded

in its accounting records in the normal course of business. Thus,

accepting them is in accordance with 19 U.S.C. Sec. 1677b(f)(1)(A),

which states that:

[c]osts shall normally be calculated based on the records of the

exporter or producer of the merchandise, if such records are kept in

accordance with the generally accepted accounting principles of the

exporting country . . . and reasonably reflect the costs associated

with the production and sale of the merchandise. The administering

authority shall consider all available evidence on the proper

allocation of costs, including that which is made available by the

exporter or producer on a timely basis, if such allocations have

been historically used by the exporter or producer.

Department's Position

In order to ensure uniformity in our treatment of different

companies and consistency in our calculation methodology from one

review to the next, we have found it necessary to adopt standard

formulas for the calculation of certain expenses. We agree with

petitioners that our method of calculating financial expenses is to

multiply COM by the ratio between the financial expenses and cost of

sales reported in the respondent's audited financial expenses. We have

used this methodology in these final results of review for all

companies. This methodology is not inconsistent with RIMA's accounting

records because it is based on information contained in RIMA's

financial statement.

Comment 32

Petitioners argue that the Department erred in its calculation of

RIMA's and Minasligas' U.S. credit expenses by using the shipment date

that these companies reported in their sales listings. With respect to

RIMA, petitioners argue that using RIMA's reported shipment date

results in an understatement of U.S. credit expenses because RIMA

reported as the shipment date the date on which it shipped the last lot

of each sale from its plant to the Brazilian port, rather than the date

on which it shipped the first lot of each sale from its plant to the

Brazilian port. Therefore, petitioners argue, the Department should

determine the credit expenses for each sale based on the simple average

of the number of days between the date of payment and the date of

shipment from the plant to the port for each partial shipment from the

plant.

With respect to Minasligas, petitioners argue that the shipment

date Minasligas reported was the bill of lading date, and not the date

of shipment from Minasligas' plant. In a similar situation in the

preliminary results of the third review of this order, the Department

used the date of sale as the date of shipment; petitioners argue that

the Department should do the same here.

RIMA argues that the Department properly used the reported shipment

dates because it ships its U.S. sales from its plant to the Brazilian

port in lots, and a lot is not completed until all shipments from the

plant have been made. Therefore, RIMA argues, it is proper for the

Department to consider the date of the last shipment from the plant as

the date on which the lot was shipped from the plant.

Department's Position

We agree with petitioners in part. With respect to RIMA, we agree

that where a U.S. sale is shipped from the plant to the port in lots, a

computation of credit based on the average credit period would better

reflect the credit expenses borne by the respondent than would a

computation based on the shipment date of either the first or last lot.

In these final results of review we have calculated credit using an

average credit period based on information RIMA provided in exhibit 13

of its April 30, 1996 SQR.

We disagree with petitioners with respect to Minasligas. While

Minasligas did report the bill of lading date as the shipment date for

its U.S. sales, it also reported the invoice date for each sale. This

invoice date is the date of shipment from the plant. See Minasligas'

October 25, 1995 questionnaire response, exhibit C-1. Thus, there is no

need to use the date of sale as the date of shipment as petitioners

suggest. In these final results of review we have calculated credit

using the invoice date as the start of the credit period for those

sales for which the date of invoice was prior to the date of receipt of

payment.

Comment 33

Eletrosilex argues that the Department erred in failing to add to

USP the PIS, COFINS, and consumption taxes charged on its home market

comparison sales. It argues, with respect to the PIS and COFINS taxes,

that this failure was a violation of the Department's policy of

calculating tax-neutral dumping assessments. It argues, with respect to

the consumption taxes, that this failure was a violation of the change

in the treatment of consumption taxes that the Department announced in

the final results of the second review of this case. There the

Department stated:

Where merchandise exported to the United States is exempt from

the consumption tax, the Department will add to the U.S. price the

absolute amount of such taxes charged on the comparison sales in the

home market.

See Silicon Metal from Brazil; Second Review Final Results, at 46764.

Eletrosilex argues that because the ICMS tax was not included in the

USP calculations, the Department's failure to add to USP the absolute

amount of consumption taxes charged on its home market sales was a

violation of the Department's announced policy of adding to the USP

``the absolute amount of such taxes charged on the comparison sales in

the home market.''

Petitioners argue that, with respect to the PIS and COFINS taxes,

that the antidumping law, as amended by the URAA, does not provide for

an upward adjustment to EP for home market taxes imposed directly upon

``the merchandise or components thereof'' which have not been rebated

or collected on the exported merchandise. Instead, under the new law,

NV may be reduced by those taxes. Furthermore, petitioners argue that

for the reasons given above under comment 26, the PIS and COFINS taxes

do not qualify for a reduction to NV.

Petitioners argue, with respect to the ICMS tax (i.e., consumption

tax), that

[[Page 1987]]

evidence on the record indicates that, contrary to Eletrosilex's

statement, Eletrosilex's reported U.S. prices did in fact include the

ICMS tax due on its U.S. sales. Furthermore, petitioners argue,

Eletrosilex's argument is relevant only when the Department bases its

margin calculations on price-to-price comparisons, and after the

Department makes the necessary corrections in its calculations for

Eletrosilex that the petitioners have identified in their case brief,

the Department will base its margin calculations for Eletrosilex on CV.

Department's Position

We agree with petitioners that evidence on the record indicates

that ICMS taxes are assessed on Eletrosilex's U.S. sales. In these

final results of review, in order to calculate the dumping margin on a

tax-neutral basis for price-to-price comparisons, we have deducted from

NV the amount of ICMS tax on the home market sale that exceeds the

amount of ICMS tax collected on the U.S. sale in accordance with

Sec. 773(a)(6)(B)(iii). For our position with respect to the PIS and

COFINS taxes, see comment 26 (above). For our treatment of the ICMS tax

due on U.S. sales when NV is based on CV, see the Department's position

in response to comment 7.

Comment 34

Eletrosilex argues that the Department erred in its calculation of

home market imputed credit by dividing an allegedly annual interest

rate by 30, rather than by 365.

Petitioners argue that the interest rate the Department used in its

calculation was a monthly rate, and that the Department was therefore

correct in using 30 in the denominator.

Department's Position

We agree with petitioners. For the credit calculation we used the

monthly rates from the state bank of Minas Gerais, which Minasligas

reported in exhibit B-2 of its October 25, 1995 questionnaire response.

This exhibit states that these rates are monthly rates. Therefore,

because these are monthly rates, 30 is the appropriate denominator.

Comment 35

Eletrosilex argues the Department erred in its calculation of the

foreign unit price in dollars (FUPDOL) by converting three values into

U.S. dollars using the exchange rate of the date of sale, rather than

the date of shipment.

Petitioners argue that the Department used the correct exchange

rates because the statute says that the Department ``shall convert

foreign currencies into United States dollars using the exchange rate

in effect on the date of sale of the subject merchandise * * *'' See

773A(a) of the Act.

Department's Position

We agree with petitioners. Because the date we use in making

currency conversions is governed by the statute, in these final results

we have used the exchange rate of the date of the U.S. sale in making

currency conversions.

Comment 36

Eletrosilex argues the Department erred in its computation of COP

by doubling the amount of its reported depreciation. (Eletrosilex

reported depreciation for only the six months of the POR in 1995, and

no depreciation for the six months of the POR in 1994.) It argues that

its recording of no depreciation for 1994 was fully consistent with

Brazil's generally accepted accounting principles (GAAP). Its earlier

application of accelerated depreciation, Eletrosilex argues, required

it to interrupt the application of depreciation for the first part of

the POR. It is an error, it argues, for the Department to charge

depreciation beyond that legitimately accounted for under the law.

Petitioners argue that the Department was correct in including an

amount for 1994 depreciation in Eletrosilex's COP. They argue that the

auditor's report which accompanied Eletrosilex's 1994 financial

statement shows that Eletrosilex is incorrect in stating that its

recording of no depreciation for 1994 was in accordance with Brazilian

GAAP. That auditor's report says that ``the company did not recognize *

* * amounts corresponding to the depreciation of the fixed assets, as

required by the accounting principles foreseen in the CORPORATE'S

LEGISLATION and by the main accounting principles.'' See Eletrosilex's

October 20, 1995 questionnaire response, at exhibit 8. Furthermore,

petitioners argue, under established Department practice, it is

distortive to use a lower depreciation rate (including a zero

depreciation rate) in a review period to compensate for prior

accelerated depreciation. See Ferrosilicon from Brazil; Final

Determination at 738.

Department's Position

We agree with petitioner that evidence from Eletrosilex's financial

statement indicates that Eletrosilex's accounting of depreciation was

not in accord with Brazilian GAAP. For these final results of review,

we have used the depreciation expenses as estimated by Eletrosilex's

independent auditor, which were in accordance with Brazilian GAAP. See

Eletrosilex's October 16, 1996 submission at exhibit 7.

Comment 37

Eletrosilex argues that the Department erred in its computation of

its COP by incorrectly calculating the by-product revenue offset that

it applied to Eletrosilex's COM. The firm argues that the Department

was in error in calculating the offset based on the volume of the by-

products sold, rather than the volume produced. Because much of the by-

product production is not sold, it is only proper, Eletrosilex argues,

that an allocation in terms of cost of production should be made to the

product produced, rather than that portion of the product produced that

is sold. In addition, Eletrosilex argues the Department should consider

as by-products only ladle sculls, off-grades, and fines, and not slag

or silicon metal of ingot bottom. Eletrosilex states that it does not

consider slag or silicon metal of ingot bottom to be a production item,

and does not include it in its production volume records.

Petitioners argue that the Department's practice does not support

calculating an offset to COM based on the volume of by-products

produced, but only on the volume sold.

Department's Position

We do not agree with Eletrosilex that the by-product offset should

be applied to the volume of by-products produced. Our policy is to

allow an offset only for actual revenue. In these final results of

review we have offset production costs with all revenue that

Eletrosilex reported from its sale of by-products. We have counted as

by-products only ladle sculls, off-grades, and fines. See also comment

15 of the third review final results of review this order, being issued

concurrently.

Comment 38

Eletrosilex argues that the Department should make an adjustment to

its USP for duty drawback. It explains that in its questionnaire

response it inadvertently failed to request an adjustment for duty

drawback, but that it is entitled to one. Therefore, Eletrosilex argues

that the Department should use the information it submitted in its case

brief to calculate the adjustment. It argues that the duty drawback

adjustment is essential to the Department's responsibility to make duty

assessments based on full and accurate data.

[[Page 1988]]

Petitioners argue that Eletrosilex did not inadvertently fail to

request an adjustment for duty drawback. In its questionnaire response,

Eletrosilex specifically stated that ``it is not seeking a duty

drawback for the period of review.'' See Eletrosilex's October 20,

1995, questionnaire response, p. 55. Moreover, petitioners argue that

the Department should not consider Eletrosilex's request or the

information about this newly-claimed adjustment that Eletrosilex

submitted in its case brief because it is untimely under the

Department's regulations. See 19 CFR 353.31(a)(1)(ii).

Department's Position

We agree with petitioners. It is a respondent's responsibility to

make a timely claim for any requested adjustment. Under 19 CFR

353.31(a)(3) the Department may not consider unsolicited information

submitted after the applicable time limit. That time limit in this

review is 180 days after the date of publication of the initiation

notice. See 19 CFR 353.31(a)(1)(ii). Because Eletrosilex submitted its

duty drawback claim after that deadline, the information was untimely,

and we did not make an adjustment for it in these final results of

review.

Comment 39

CCM argues that in order for its cash deposit rate for future

entries to reflect the appropriate dumping margin, the Department

should issue the third review final results prior to, or concurrently

with, issuance of the fourth review final results. If the Department

issues the fourth review final results prior to the third review final

results, CCM argues, CCM will continue to face the 93.2 percent cash

deposit rate established in the LTFV investigation. In the alternative,

if the Department does issue the third review final results after the

fourth review, CCM argues that the Department should make clear in it

cash deposit instructions that CCM's third review cash deposit rate

should apply to all future entries because CCM was a no-shipper in the

fourth review.

Department's Position

CCM's concern is resolved because the Department is issuing the

results of both reviews concurrently.

Comment 40

CBCC argues that the Department erred in its computation of home

market imputed credit by using an interest rate other than that which

CBCC submitted. CBCC states that in its submission it calculated its

imputed credit using a published short-term borrowing rate from a

commercial lender because it had no short-term borrowings during the

POR. Doing so, CBCC states, was in accordance with the Department's

instructions as given in the supplemental questionnaire. Thus, CBCC

argues, the Department should not have applied a different rate in its

calculation of imputed credit.

Petitioners argue that the Department is under no obligation to use

the interest rate data that CBCC provided, and that CBCC provided no

basis for the Department to use CBCC's data instead of those used for

the preliminary results of this review. Accordingly, petitioners argue,

the Department should not use CBCC's data for the final results.

Department's Position

We agree with petitioners. In these final results of review, as in

the preliminary results of review, we have calculated credit using the

borrowing rates offered by the state bank of Minas Gerais. These rates

are publicly available, and we have used them without exception for all

respondents who reported no short-term borrowings of their own during

the POR.

Comment 41

CBCC argues that the Department erred in its calculation of the

variable NPRICOP (i.e., the price we compare to COP in the cost test)

by double-deducting part of the ICMS tax. It argues the Department made

this mistake by deducting a variable representing the ICMS tax on the

sale and also a variable, INLFTC2H, that represents the inland freight

and the ICMS tax on the inland freight. CBCC argues that the former

variable includes all ICMS tax on the sale, including that included in

the variable INLFTC2H. Therefore, CBCC argues, the Department should

not deduct INLFTC2H, but INLFTC1H, a variable that represents the

inland freight net of the ICMS tax.

Petitioners argue that CBCC's argument is wrong because the ICMS

tax that CBCC's customers pay on their purchases of silicon metal is

not the same ICMS tax that CBCC paid for inland freight services.

Because the two different ICMS tax amounts both reduce CBCC's net

proceeds from home market sales, petitioners argue that the Department

properly deducted both from CBCC's home market sales prices in the

sales-below-cost analysis.

Department's Position

We agree with petitioners. Our review of the values CBCC reported

under the variable representing the ICMS tax indicates that it reflects

only the ICMS tax on the home market sale. Thus, the ICMS tax due on

the inland freight must be deducted separately.

Comment 42

CBCC argues that the Department erred in its calculation of its COP

by reducing its reported quantity of silicon metal production by the

quantity of a by-product, ferrosilicon 95, without having made a

corresponding offset to its COP for revenue gained from its sales of

ferrosilicon 95. CBCC argues that this failure to grant an offset was a

violation of the Department's practice regarding by-products.

Petitioners argue that the Department should limit any reduction in

COP for revenue obtained from CBCC's sales of ferrosilicon 95 to net

revenue (i.e., revenue net of all selling expenses associated with the

sales) from sales during the POR.

Department's Position

The Department first learned of these sales at the verification in

June 1996. None of our exhibits contain information regarding the value

of these sales or the selling expenses associated with them. Because

CBCC did not claim this offset until it submitted its case brief, and

because it is a respondent's responsibility to substantiate its claims

for offsets, which CBCC has not done, in these final results of review

we have not made an offset.

Comment 43

CBCC argues the Department erred in its margin computation by

failing to convert the variable for bank charges from aggregate figures

to per-unit figures.

Petitioners argue that the Department did in fact convert the bank

charges into per-unit figures in its calculations.

Department's Position

We agree with petitioners. See the July 22, 1996 verification

report at 15, and the SAS program at 824-847.

Comment 44

RIMA argues that the Department erred by including in its margin

calculation a sale that entered U.S. customs territory during the

previous POR. It argues that the date on which the Department relied in

making its determination of this sale's date of entry was not the

actual date of entry, and that therefore the Department should request

additional information from the U.S. Customs Service regarding the

entry date of this sale.

Petitioners argue that the correct date of entry into U.S. customs

territory is the date the entry summary was filed in

[[Page 1989]]

proper form. However, they argue that the date on which the Department

relied regarding the particular sale which RIMA references was not in

fact the date the entry summary was filed. They are in agreement with

RIMA, however, that the sale at issue entered U.S. customs territory

during the prior POR.

Department's Position

On October 21, 1996, the importer of the shipment in question

submitted information on its imports. We have carefully reviewed the

importer's submitted Customs documentation, and have determined that

the Department was in error in its preliminary determination that the

sale in question involved an entry during the POR. We have excluded

this transaction from our analysis for the fourth administrative

review, and have included it in our analysis of the third

administrative review. However, we disagree with petitioners that the

date of entry is necessarily the date on which the entry summary is

filed in proper form. 19 CFR 141.68 allows for the possibility that

formal entry may in some circumstances be dates other than the date the

entry summary is filed.

Comment 45

Parties allege the following clerical errors:

CBCC and petitioner argue the Department erred in its

margin computation by failing to convert the variable for interest

revenue from aggregate figures to per-unit figures.

CBCC argues that the Department incorrectly calculated the

credit period as the shipment date minus the payment date, rather than

the payment date minus the shipment date.

Petitioners argue that the Department erred by failing to

deduct ``port charges'' from Eletrosilex's USP.

Petitioners argue that the Department erred in its

calculation of Minasligas' USP by adding inland freight charges to USP,

rather than subtracting them.

Petitioners argue that the Department neglected to take

into account an expense that Minasligas reported under the variable

name ``PORT CLER. EXP. DIRSELU.''

Department's Position

We agree, and have corrected these errors in these final results of

review. Additionally, in these final results of review, unlike the

preliminary results of review, we have made an adjustment to NV for

Eletrosilex's U.S. post-sale warehousing expenses. We also changed the

credit period used in the calculation of Minasligas' home market credit

so that it is the payment date minus the shipment date, rather than the

shipment date minus the payment date.

Comment 46

CBCC argues that the Department erred in its calculation of U.S.

imputed credit by dividing an annual interest rate by 30, rather than

by 365.

Department's Position

We disagree. The interest rate we used in the calculation of CBCC's

U.S. imputed credit expenses was the average of the monthly rates for

each of the twelve months of the POR, and not an annual rate.

Therefore, 30 is the correct denominator. See September 4, 1996 CBCC

preliminary results analysis memorandum, p. 4.

Final Results of Review

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

that the following margins exist for the period July 1, 1994, through

June 30, 1995:

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

Weighted-

average

Producer/manufacturer/exporter margin

(percent)

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

CBCC....................................................... 0.29

CCM........................................................ \1\ 5.97

Eletrosilex................................................ 17.22

Minasligas................................................. 57.54

RIMA....................................................... 76.96

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

1 No shipments during the POR; margin taken from the last completed

segment in which there were shipments.

The Department shall determine, and the Customs Service shall

assess, antidumping duties on all appropriate entries. Individual

differences between USP and NV may vary from the percentages stated

above. The Department will issue appraisement instructions directly to

the Customs Service.

Furthermore, the following deposit requirements will be effective

upon publication of these final results of review for all shipments of

silicon metal from Brazil entered, or withdrawn from warehouse, for

consumption on or after the publication date, as provided by section

751(a)(1) of the Act, and will remain in effect until publication of

the final results of the next administrative review: (1) the cash

deposit rates for the reviewed companies will be those rates listed

above except for CBCC which had a de minimis margin, and whose cash

deposit rate is therefore zero; (2) for previously reviewed or

investigated companies not listed above, the cash deposit rate will

continue to be the company-specific rate published for the most recent

period; (3) if the exporter is not a firm covered in this review, a

prior review, or the original 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 (4) if

neither the exporter nor the manufacturer is a firm covered in this or

any previous review or in the LTFV investigation conducted by the

Department, the cash deposit rate will be 91.06 percent, the ``all

others'' rate established in the LTFV investigation.

This notice 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.

This notice also serves as a 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

the return/destruction of APO materials or conversion to judicial

protective order is hereby requested. Failure to comply with the

regulations and the terms of an APO is a sanctionable violation.

This administrative review and notice are in accordance with

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

353.22.

Dated: January 3, 1997.

Robert S. LaRussa

Acting Assistant Secretary for Import Administration.

[FR Doc. 97-755 Filed 1-13-97; 8:45 am]

BILLING CODE 3510-DS-P