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

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, 1993, through June 30, 1994, 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 published in the

Federal Register (61 FR 46776) the preliminary results of its

administrative review of the antidumping duty order on silicon metal

from Brazil (July 31, 1991, 56 FR 36135). On September 27, October 2,

and November 13, 1996 the Department requested additional information

from Minasligas, Eletrosilex, and CCM, respectively. We received

responses from these firms on October 15, October 16, 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 Tariff Act).

Applicable Statute and Regulations

Unless otherwise indicated, all citations to the statute and the

Department's regulations are in reference to the provisions as they

existed on December 31, 1994.

Scope of the Review

The merchandise covered by this review is silicon metal from Brazil

containing at least 96.00 percent but less than 99.99 percent silicon

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

containing between 89.00 and 96.00 percent silicon by weight but which

contains 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, 1993, through June 30, 1994.

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).

Consumption Tax

In light of the Federal Circuit's decision in Federal Mogul v.

United States, CAFC No. 94-1097, the Department has changed its

treatment of home market consumption taxes. 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. This is the same methodology

that the Department adopted following the decision of the Federal

Circuit in Zenith v. United States, 988 F.2d 1573, 1582 (1993), and

which was suggested by the court in footnote 4 of its decision. The

Court of International Trade (CIT) overturned this methodology in

Federal Mogul v. United States, 834 F.Supp. 1391 (1993), and the

Department acquiesced in the CIT's decision. The Department then

followed the CIT's preferred methodology, which was to calculate the

tax to be added to U.S. price by multiplying the adjusted U.S. price by

the foreign market tax rate; the Department made adjustments to this

amount so that the tax adjustment would not alter a ``zero'' pre-tax

dumping assessment.

The foreign exporters in the Federal Mogul case, however, appealed

that decision to the Federal Circuit, which reversed the CIT and held

that the statute did not preclude Commerce from using the ``Zenith

footnote 4'' methodology to calculate tax-neutral dumping assessments

(i.e., assessments that are unaffected by the existence or amount of

home market consumption taxes). Moreover, the Federal Circuit

recognized that certain international agreements of the United States,

in particular the General Agreement on Tariffs and Trade (GATT) and the

Tokyo Round Antidumping Code, required the calculation of tax-neutral

dumping assessments. The Federal Circuit remanded the case to the CIT

with instructions to direct Commerce to determine which tax methodology

it will employ.

The Department has determined that the ``Zenith footnote 4''

methodology should be used. First, as the Department has explained in

numerous administrative determinations and court filings over the past

decade, and as the Federal Circuit has now recognized, Article VI of

the GATT and Article 2 of the Tokyo Round Antidumping Code required

that dumping assessments be tax-neutral. This requirement continues

under the new Agreement on Implementation of Article VI of the General

Agreement on Tariffs and Trade. Second, the Uruguay Round Agreements

Act (URAA) explicitly amended the antidumping law to remove consumption

taxes from the home market price and to eliminate the addition of taxes

to U.S. price, so that no consumption tax is included in the price in

either market. The Statement of Administrative Action (p. 157)

explicitly states that this change was intended to result in tax

neutrality.

While the ``Zenith footnote 4'' methodology is slightly different

from the URAA methodology, in that section 772(d)(1)(C) of the pre-URAA

law required that the tax be added to United States price rather than

subtracted from home market price, it does result in tax-neutral duty

assessments. In sum, the Department has elected to treat consumption

taxes in a manner consistent with its longstanding policy of tax-

neutrality and with the GATT.

[[Page 1955]]

Verification

As provided in section 776(b) of the Tariff Act, we verified

information provided by Minasligas, CBCC, RIMA, and CCM by using

standard verification procedures, including onsite inspection of the

manufacturers' facilities, the examination of relevant sales and

financial records, and selection of original documentation containing

relevant information. Our verification results are outlined in the

public versions of the verification reports.

Use of Best Information Available (BIA)

In our preliminary results of this administrative review, we

determined that RIMA was a non-shipper. See Silicon Metal from Brazil;

Preliminary Results of Antidumping Duty Administrative Review, Intent

to Revoke in Part, and Intent Not to Revoke in Part, 61 FR 46776

(September 5, 1996) (preliminary results). Since publication of the

preliminary results, we have determined that RIMA did have shipments

during the POR. See the Department's response to comment 2 below.

Therefore, we have included in these final results of review all of

RIMA's sales during the POR made to an importer who had at least one

importation during the POR. See the Department's response to comment 1

below.

Because RIMA failed to produce information requested at

verification to substantiate significant portions of its response, in

accordance with section 776(c) of the Act, we have determined that the

use of BIA is appropriate. For these final results we applied the

following two-tier BIA analysis in choosing what to use as BIA:

1. When a company refuses to cooperate with the Department or

otherwise significantly impedes these proceedings, it assigns that

company first-tier BIA, which is the higher of:

(a) The highest of the rates found for any firm for the same

class or kind of merchandise in the same country of origin in the

less-than-fair-value investigation (LTFV) or prior administrative

review; or

(b) The highest rate found in the present administrative review

for any firm for the same class or kind of merchandise from the same

country of origin.

2. When a company substantially cooperates with our requests for

information including, in some cases, verification, but fails to

provide the information requested in a timely manner or in the form

required, it assigns to that company second-tier BIA, which is the

higher of:

(a) The firm's highest rate (including the ``all others'' rate)

of the same class or kind of merchandise from a prior administrative

review or, if the firm has never before been investigated or

reviewed, the all others rate from the LTFV investigation; or

(b) The highest calculated rate in this review for the class or

kind of merchandise for any firm from the same country of origin.

See Allied-Signal Aerospace Co. v. United States, 28 F.3d 1188, 1189,

1190 n.2 (CAFC 1994).

RIMA cooperated by responding to the Department's questionnaires.

However, we determined at verification that this company could not

substantiate significant portions of its responses. Therefore, we have

determined to apply second-tier BIA to RIMA's third-review sales. (See

Use of BIA memorandum to Joseph Spetrini, Deputy Assistant Secretary,

Enforcement Group Three.) The second-tier BIA rate we have assigned to

RIMA is 91.06 percent. This rate represents the highest rate ever

applicable to RIMA for the subject merchandise.

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, 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,

CCM, and the petitioners. We held a public hearing on November 25,

1996.

Comment 1

Petitioners argue that the Department erred in determining which

U.S. sales to review by using the methodology employed in the final

results of the second administrative review of this order. 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 notice that after completion of the review, we

would instruct Customs 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 Tariff

Act, because section 751(a)(2) of the Tariff 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 Court of International

Trade (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.'' They argue that this date of formal entry is the date on

which the entry summary is filed in proper form. 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 the questionnaire

issued by the Department to the respondents in this review shows that,

prior to the 1992-93 administrative review of this order, the

Department's established practice was to base reviews on sales of

merchandise that entered U.S. Customs territory during the POR, and

that it was the Department's expressed intention to conduct this review

in the same way. 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. 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.''

[[Page 1956]]

Eletrosilex argues that section 751 of the Tariff Act does not

provide the specificity that petitioners assert, and must be read in

light of the other provisions of the statute. In a rule-making

proceeding several years ago, Eletrosilex alleges that the Department

did just that. There the Department said:

Notwithstanding the reference to review and assessment of

``entries'' pursuant to section 751, Congress also provided that the

Department should analyze ``sales'' transactions pursuant to

sections 772 and 773 of the statute in the course of conducting its

administrative review. The statute provides for the review of both

``entries'' and ``sales'' without recognizing that the two terms are

not synonymous or providing a mechanism for linking them.

See Advance Notice of Proposed Rulemaking, 56 FR 63696 (December 5,

1991). Eletrosilex argues that in that proceeding the Department

concluded that Congress could not have intended that it base all

reviews on entries of merchandise rather than sales, and that such a

conclusion ``would hinder the achievement of other statutory goals

governing review and assessments.'' Id., at 63697.

Furthermore, Eletrosilex argues that, contrary to the petitioners'

statements, the Department has consistently adhered to this policy.

Petitioners' citations in support of their argument, Eletrosilex

argues, are dicta, and have no controlling precedent. More importantly,

Eletrosilex argues, the Department has recently repudiated exactly the

same argument made by the very same petitioners. As support for this

statement, Eletrosilex cites the final results of the first and second

administrative reviews of this proceeding. 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.

Department's Position

We disagree with petitioners. We 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).

See Silicon Metal from Brazil; Second Review Final Results at 46765.

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, and which petitioners cite above.

Comment 2

Petitioners argue that the Department should assign a margin to

RIMA based on BIA. In the preliminary results of review the Department

determined that RIMA had no shipments during the POR, and therefore

assigned RIMA its calculated rate from the final results of the

previous review. Petitioners argue that the Department was in error in

its determination that RIMA had no shipments during the POR, and that

because at verification RIMA was unable to substantiate significant

portions of its response, the Department should assign RIMA a margin

based on BIA.

Department's Position

On October 21, 1996 the importer of the merchandise in question

submitted information regarding its imports. We have carefully reviewed

the importer's Customs documentation, and have determined that the

Department was in error in its preliminary determination that the sales

did not involve an entry during the third administrative review period.

Furthermore, RIMA was unable at verification to substantiate

significant portions of its response in regard to this entry (see the

preliminary review results for the fourth review (Preliminary Results

of Antidumping Administrative Review; Intent Not to Revoke in Part, 61

FR 46779, September 5, 1996), the October 25, 1995 verification report,

and the September 13, 1996 ``Use of Facts Available'' memorandum from

Fred Baker to Richard Weible). Therefore, we have determined to use BIA

for these sales. We have assigned to this sale, as BIA, 91.06 percent

(see Use of Best Information Available (BIA) above). This rate

represents the highest rate ever applicable to RIMA for the subject

merchandise.

Comment 3

Petitioners argue that the Department erred in its preliminary

results of review by announcing an intent to revoke the order with

respect to Minasligas. They argue that Minasligas does not qualify for

revocation for two reasons. First, Minasligas has sold at less than

fair value (LTFV) 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.

Petitioners argue, with respect to the first review (which is in

litigation before the CIT), 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 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 selling at less than

fair value in the future, and without this determination the Department

cannot revoke the order. (See 19 CFR 353.25(a)(2)(ii).) Petitioners

base this argument on the following factors:

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

preliminary results of the fourth administrative review of this order.

See Silicon Metal from Brazil, Preliminary Results of Review and Intent

Not to Revoke in Part, 61 FR 46779, 46781 (September 5, 1996).

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

sell at less than fair value 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

[[Page 1957]]

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

used by the Department in its review of the antidumping duty order on

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)

(German Brass).) 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 of the third

review, the Department found Minasligas not to have sold at less than

fair value, and that, therefore, if, in the final results of this

review the Department finds no sales at less than fair value, 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 that

dumping is not likely to occur in the future, but, contrary to

petitioner's suggestion, does not require Minasligas to provide, or the

record to contain, evidence that Minasligas is unlikely 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 analysis

in these final results of review indicates that Minasligas had no

margin for this period. Therefore, because Minasligas has met the

requirement under 353.25(a)(2)(i), we determine that Minasligas has met

the regulatory requirement of having sold the subject merchandise at

not less than foreign market value for at least three consecutive

years.

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. The Department has determined that Minasligas has a dumping

margin of greater than de minimis in the fourth administrative review

(being issued concurrently). 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

the COP/CV for Minasligas, Eletrosilex, and CCM by using the monthly

amounts of depreciation that they reported. Petitioners argue with

respect to Minasligas and Eletrosilex that their calculation of

depreciation does not reflect the useful life of the assets, but rather

reflects an accelerated life. Petitioners argue that the Department's

practice is 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, which, petitioners allege,

is the case here. Furthermore, with respect to Eletrosilex, petitioners

argue that evidence on the record indicates that Eletrosilex did not

report depreciation in accordance with Brazilian GAAP. With respect to

Minasligas and CCM, petitioners argue that their depreciation

calculation does not restate the value of the assets to account for

hyperinflation. Petitioners argue that when an economy is

hyperinflationary, basing depreciation on historical asset values

results in severe understatement of actual costs; for this reason the

Department's practice is to use depreciation that is based on revalued

assets in hyperinflationary economy cases. Finally, petitioners argue

that CCM's submitted calculation is inadequate because it does not

include depreciation of idle equipment. It is the Department's

practice, petitioners argue, to include depreciation for idle equipment

when calculating COP and CV. Moreover, petitioners allege that there is

contradictory information on the record as to whether CCM had expenses

for idle equipment. Petitioners argue that because CCM failed to

provide the information that would allow the Department to calculate

monthly depreciation based on revalued assets and to include

depreciation for idle assets, and because CCM misled the Department

about whether it had depreciated its idle equipment, the Department

should determine depreciation for CCM based on BIA. In the alternative,

the Department should obtain from CCM the information necessary to

determine monthly depreciation in accordance with Department practice.

Minasligas argues that petitioners' argument is fallacious.

Minasligas points to documentation it submitted on October 15, 1996,

showing that (1) Minasligas did not depreciate its assets over the

shortened period that petitioners suggest; (2) the depreciation

reported in its COP/CV tables for purposes of this proceeding is fully

supported by Minasligas' accounting records; (3) the value of the

assets subject to depreciation is 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 petitioner's 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 of Minasligas' assets that petitioners

suggest, would be unfair because the Department has already completed

two administrative reviews in which it calculated Minasligas'

depreciation using the shorter useful lives that are the basis for the

depreciation calculation that Minasligas records in its books and

reported to the Department. Therefore, Minasligas argues that, if the

Department does decide to recalculate its depreciation using longer

useful lives for the firm's assets, it should adopt a methodology that

takes into account the depreciation expenses that Minasligas reported

in the previous administrative reviews.

Eletrosilex argues that the petitioners have presented no basis for

rejecting Eletrosilex's longstanding use of aggressive accelerated

depreciation. It argues that after having taken depreciation of 10

percent per year through 1991 on its furnaces, as permitted under

Brazilian generally accepted accounting principles (GAAP), Eletrosilex

necessarily had to interrupt depreciation on an item that had a 20-year

useful life. It states it resumed a 5 percent depreciation on its

furnaces in January 1995. Furthermore, it argues that it has provided

the Department with a clear statement of its depreciation schedule and

its application to all depreciable assets. Thus, Eletrosilex concludes

that it has demonstrated to the Department a sound and legitimate basis

for the

[[Page 1958]]

depreciation schedules used in the POR, and the Department should use

those schedules again in the final results of this review.

CCM argues that petitioners' argument with respect to restatement

of asset values is invalid because CCM does not base its depreciation

on historical costs. CCM's financial statement, CCM argues, makes clear

that the value of CCM's property, plant, and equipment is recorded at

the cost of acquisition plus monetary adjustment. CCM states that this

is a common accounting mechanism used by Brazilian companies to restate

the historical costs of their assets at their current cost during

hyperinflation. With regard to its statement (cited by petitioners)

that CCM did not revalue its assets, CCM argues that the statement

meant only that there was no special asset re-valuation during the POR;

CCM did follow the accepted accounting practice of restating the

historical cost through the application of monetary correction. Thus,

CCM argues, there is no basis for petitioners' statements that CCM's

reported depreciation is grossly understated because it is based on

historical costs.

With respect to petitioners' argument that CCM did not report

depreciation of idle equipment, CCM admits that it did not include idle

equipment in its submitted costs, but argues that doing otherwise would

have distorted the Department's hyperinflationary cost calculations.

The fundamental premise of the Department's replacement cost

methodology, CCM argues, is that costs actually incurred by the

respondent in the production of subject merchandise must be restated on

a replacement basis in order to eliminate the distortive effects of

hyperinflation on costs incurred at various times in the POR. In order

to calculate an accurate monthly replacement cost, CCM argues, the

Department must apply this approach only to the value of inputs

actually consumed in the production process. Because of this, it would

be incorrect to include the replacement cost of an idled asset, because

by definition the asset was not used or consumed in the specific month.

Thus, CCM argues that the Department's replacement cost rules work only

if applied to those costs actually (and not hypothetically) incurred in

production, as petitioners advocate. Therefore, CCM argues, the

Department should not include depreciation on idled equipment in CCM's

COP/CV.

Department's Position

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

disagree with petitioners' argument that Minasligas' depreciation

calculation is unacceptable because it is based on accelerated

depreciation. 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, and these methods are

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 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 two 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.

With respect to Eletrosilex, we agree with petitioners that

evidence on the record indicates that Eletrosilex did not report

depreciation in accordance with Brazilian GAAP. See note 5(b)(iv) of

Eletrosilex's 1994 financial statement in Eletrosilex's February 26,

1996 submission. Therefore, for these final results of review, we have

used the auditor's estimate of Eletrosilex's depreciation for the COP

calculation because it is the most accurate reflection of Eletrosilex's

depreciation that is on the record and because it is in accordance with

Brazilian GAAP.

With respect to CCM, we agree with CCM that evidence on the record

indicates that it makes a monetary adjustment in recording the value of

its property, plant, and equipment. Therefore, no additional

restatement is necessary.

Concerning idle assets, we agree with the petitioners that the

Department includes in fully absorbed factory overhead the depreciation

of equipment not in use or temporarily idle, notwithstanding home

market accounting standards which may allow companies to refrain from

doing so. See, for example:Silicon Metal From Argentina (58 FR 65336,

65338, December 14, 1993); Antifriction Bearings (Other than Tapered

Roller Bearings) and Parts Thereof From France, Germany, Italy, Japan,

Romania, Singapore, Sweden, Thailand, and the United Kingdom (58 FR

39729, 39756, July 26, 1993); Tapered Roller Bearings and Parts

Thereof, Finished and Unfinished, From Japan and Tapered Roller

Bearings, Four Inches or Less in Outside Diameter, and Components

Thereof, From Japan (58 FR 64720, 64727-28, July 26, 1993); Tapered

Roller Bearings and Parts Thereof, Finished and Unfinished, From Japan

and Tapered Roller Bearings, Four Inches or Less in Outside Diameter,

and Components Thereof, From Japan (57 FR 4960, 4973, February 11,

1992); Shop Towels from Bangladesh (57 FR 3996, 3999, February 3,

1992); Mechanical Transfer Presses from Japan (55 FR 335, January 4,

1990); Titanium Sponge from Japan (49 FR 38687, 38689, October 1,

1984). See also NTN Bearing Corp. of America, et al., plaintiffs, v.

United States, Slip Op. 93-129 (August 4, 1993) (upholding the

Department's inclusion of depreciation expenses for idle equipment).

We disagree with CCM's argument that a hyperinflationary

environment necessitates disregarding the Department's long-standing

policy. Depreciation is a cost that is incurred without regard to

whether the assets being depreciated are used in production during a

particular period. Thus, depreciation of idle assets must be included

in COP in order for COP to reflect the full costs incurred during the

POR regardless of whether an economy experienced hyperinflation during

the POR.

Similarly, we disagree with CCM's related argument that

depreciation expense for idled assets involves only hypothetical

expenses; depreciation expenses reflect not only wear and tear from

usage but also aging and obsolescence, which affect idle assets as much

as, and sometimes more than, active assets.

Therefore, in these final results of review we have added the

depreciation for idle assets to CCM's reported depreciation.

Comment 5

Petitioners argue that the Department should disregard Minasligas'

inventory holding gain/loss calculation because Minasligas failed to

``layer'' or value its inventory properly. They argue the Department

should require Minasligas to provide the information necessary to

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perform a proper inventory holding gain/loss calculation in accordance

with Department practice.

Minasligas argues that the petitioner's point is moot because the

Department used Minasligas' home market selling prices for foreign

market value (FMV), not CV. It also argues that the Department verified

the accuracy of Minasligas' calculations, and found no discrepancies.

Department's Position

While we verified that the amounts Minasligas used in its

calculation were derived from accounting records, Minasligas did not

substantiate its method of layering its inventory. As petitioners note

in their brief, Minasligas' calculations show only one layer of prior

inventory for inputs and finished product even though inventory stemmed

from more than one previous month. By failing to include in its

calculations the goods placed in inventory during prior months,

Minasligas failed to value the inventory properly based on the

inflation-adjusted costs in the prior months. See Minasligas' March 17,

1995 submission, exhibit 11. Thus, consistent with our practice when a

respondent fails to report inventory properly, we have denied

Minasligas an adjustment for inventory holding gains/losses in these

final results of review.

Comment 6

Petitioners argue that the Department erred by not including

Minasligas' and Eletrosilex's claimed duty drawback in CV. This

drawback consists of taxes and import duties that the government of

Brazil suspended on Minasligas' and Eletrosilex's 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 an ``apples-to-apples'' comparison of U.S. price

to CV. In addition, they argue, with respect to Eletrosilex, that the

Department must include the duty paid on purchases of electrodes in COP

for purposes of the sales-below-cost analysis.

Minasligas argues that in the preliminary results of review the

Department correctly added duty drawback to U.S. price for comparison

with a sales-based FMV. 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 an ``apples-to-apples'' comparison.

Eletrosilex argues that the methodology the Department announced in

its second review final results with respect to taxes does not achieve

the stated aim of tax neutrality. Therefore, it urges the Department to

adopt the approach mandated by the Uruguay Round Agreements Act, and

eliminate consumption taxes from all calculations. It states that this

is the only way truly to achieve tax neutrality. Furthermore, it argues

that this approach has the additional virtue of simplifying these

proceedings.

Department's Position

We agree with petitioners. The Brazilian duty drawback law

applicable to Minasligas and Eletrosilex suspends the payment of ICMS

and IPI taxes and import duties that would ordinarily be due upon

importation of electrodes if they are consumed in producing silicon

metal for export. Therefore, because the ICMS and IPI taxes and import

duties are suspended, we cannot conclude that they are already included

in the COM or reported tax payments that Minasligas and Eletrosilex

have reported. Thus, in order to make a valid comparison between USP

and CV, we need to add to CV the full amount of the claimed duty

drawback that we added to USP in accordance with section 772(d)(1)(B)

of the Tariff Act. We have done so in these final results of review.

This methodology is identical with 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.

Because the import duties are not suspended for electrodes consumed

in the home market, we agree with petitioners that Eletrosilex's import

duties on carbon electrodes should be added to COP for purposes of the

cost test. In these final results of review we have calculated the

import duties by multiplying the cost of carbon electrodes that we

allocated to the domestic market by the import duty rate of ten

percent.

Comment 7

Petitioners argue that the Department erred in its computation of

Minasligas' monthly COP by not including the cost of tubes and rods

that Minasligas consumed during each month. The Department included

these costs only in the months in which Minasligas made purchases of

tubes and rods, and not in the months in which Minasligas consumed

them. Petitioners argue that in the final results the Department should

determine the proper costs for tubes and rods based on the number of

units of each input used in the production of silicon metal in each

month and the monthly replacement cost for each input.

Minasligas states that it reported its costs for tubes and rods in

the month of purchase because this is how they are reported in

Minasligas' accounting records. It also states that if the Department

wishes to recalculate these costs for each month of consumption, it is

willing to cooperate fully with the Department in providing all

necessary information.

Department's Position

Because Brazil's economy was hyperinflationary during the POR, in

these final results of review, we have calculated each respondent's COM

using an ``annual average'' methodology. See the Final Results Analysis

Memorandum. In this methodology we first calculated an annual weighted-

average COM indexed to end-of-year values, and then restated the annual

average COM to compute a monthly COM. We used the wholesale price index

to restate the annual COM to the specific month of production. Thus,

because we calculated monthly costs based on annualized figures,

petitioners' point regarding Minasligas' tubes and rods is moot.

Comment 8

Petitioners argue that the Department made numerous errors with

respect to Brazilian taxes in performing the cost test. With respect to

Minasligas, petitioners allege that the Department erred by comparing

COP to home market prices that included a disproportionately high

amount of ICMS tax. By so doing, petitioners allege, the Department

failed to follow its practice of either including the same absolute

amount of value-added taxes (VAT) in both home market price and COP, or

of excluding VAT from both COP and home market price. Thus, petitioners

argue, the Department did not make a fair and equal comparison in the

preliminary results of review. They argue that in the final results of

review the Department should exclude ICMS taxes from both the home

market prices and the COPs used in the sales-below-cost analysis.

With respect to Eletrosilex, petitioners argue that the Department

erred by failing to deduct the ICMS, PIS, and COFINS taxes from

Eletrosilex's home market prices before performing the cost test.

Petitioners argue that the failure to deduct the ICMS tax was in error

because information on the record shows that Eletrosilex's reported

cost of

[[Page 1960]]

manufacture (COM) did not include the ICMS tax. With respect to PIS and

COFINS taxes, petitioners argue that the Department correctly included

in COP the PIS and COFINS taxes that Eletrosilex paid on its purchases

of inputs (and which Eletrosilex included in its reported price of

materials), but erred in how it treated the PIS and COFINS taxes

Eletrosilex collected on sales of silicon metal. In the preliminary

results, the Department, petitioners allege, added to COP a variable

Eletrosilex reported that represents its home market direct selling

expenses, consisting of inland freight and PIS and COFINS taxes collect

on sales. Petitioners argue that rather than adding this selling

expense variable to COP to account for collections of PIS and COFINS

taxes on home market sales, the Department should instead subtract from

the net home market prices the sales-specific amount of PIS and COFINS

taxes in its computation of NPRICOP (the price which we compare to COP

in the cost test).

With respect to CCM, petitioners argue that the Department erred in

the cost test by comparing home market prices that included ICMS taxes

with COPs that included a disproportionately larger amount of ICMS

taxes. They argue that it is established Department practice when

performing the cost test to either include the same absolute amount of

VAT in both home market price and COP or to exclude VAT from both.

Minasligas argues that the Department should not include the same

amount of VAT in the sales price and COP because different amounts of

taxes were collected and paid on the sales price and production costs,

respectively.

Eletrosilex argues that the Department should eliminate consumption

taxes from all calculations. This approach, it argues, is the only way

to achieve true tax neutrality.

CCM argues that the Department correctly accounted for its VAT in

the preliminary results of review. In support of its argument, it cites

Silicomanganese from Venezuela, 57 FR 55436 (November 7, 1994)

(Silicomanganese from Venezuela), in which the Department agreed with a

respondent's argument that ``if the Department includes the value-added

taxes paid on inputs in the cost of production, it must also include

the VAT received from its customers in the price for purposes of the

sales below cost test.''

Department's Position

We agree with petitioners that in performing the cost test our

policy is to either include the same absolute amount of VAT in both

home market price and COP, or to exclude VAT from both COP and home

market price. In Silicomanganese from Venezuela, though we agreed with

the statement that CCM cites, we also said, ``The amount of VAT

included in the home market COP should be the same as the amount that

is included in the home market sales prices.'' See Silicomanganese from

Venezuela at 55441. In performing the cost test for these final results

of review, we have calculated both COP and the price we compare to COP

exclusive of the ICMS tax. This is the methodology recently used in

Ferrosilicon from Brazil; Final Results of Antidumping Duty

Administrative Review, 61 FR 59407, 59410 (November 22, 1996)

(Ferrosilicon from Brazil; First Review Final Results). However, unlike

Ferrosilicon from Brazil; First Review Final Results, we have not

deducted IPI tax from COP because IPI tax is not assessed on sales of

silicon metal as it is for ferrosilicon.

With respect to PIS and COFINS, we have not deducted these taxes

from the home market price to which we compare COP because they are

gross revenue taxes, and not taxes imposed directly on the merchandise

or components thereof on a transaction-by-transaction basis. See the

Department's Position in response to comment 28 (below). For

Eletrosilex we have eliminated the addition to COP of the selling

expense variable it reported in its COP response, and have instead

added to COP the sales-specific amount of direct selling expenses,

which does not include PIS and COFINS taxes. We have also calculated

COP for all respondents so that it represents the full purchase price

of all inputs, and is not exclusive of a hypothetical amount of PIS and

COFINS taxes.

Comment 9

Petitioners argue that the Department erred in its treatment of

inland freight in the COP test for CCM, Minasligas, and Eletrosilex.

With respect to CCM, petitioners argue that the Department erred by

comparing COPs that did not include freight costs to home market

selling prices that did include freight costs. They argue that to make

a fair comparison in the final results the Department should exclude

freight expenses from the home market prices used in the sales-below-

cost analysis.

CCM states that it included freight costs in the direct selling

expense field of its COP/CV database. Therefore, CCM argues, the COPs

that the Department used in the cost test did in fact include freight

costs.

With respect to Minasligas, petitioners argue that the Department

erred by comparing COPs inclusive of freight charges to home market

prices inclusive of disproportionately high freight charges. This

difference in freight occurred, petitioners argue, because Minasligas

calculated the per-unit freight cost for home market sales by dividing

the freight charges incurred on each home market sale by the quantity

of each sale, while it calculated the per-unit freight included in COP

by dividing the monthly sum of those same freight charges by the

monthly volume of its silicon metal production. This methodology,

petitioners allege, resulted in Minasligas including a lower per-unit

amount of freight in COP than in the home market prices. By using this

methodology, petitioners argue, the Department failed to compare home

market prices to COP on an ``apples-to-apples'' basis. Petitioners also

allege this methodology violates Import Administration Policy Bulletin

No. 94.6, which states that the Department determines both COP and the

home market prices on an ex-factory basis (i.e., net of movement

charges, which, by definition, include freight expenses). They argue,

therefore, that in the final results of review the Department should

exclude freight expenses from both the COP and the home market prices.

Minasligas argues that the petitioners' proposed method is

distortive, and in fact is contrary to Import Administration Policy

Bulletin 94.6. According to this bulletin, Minasligas argues, COP is

calculated net of selling expenses. Because its reported selling

expenses included inland freight, Minasligas argues that if the

Department removes freight from home market price, it should also

remove selling expenses from COP.

With respect to Eletrosilex, petitioners argue that the Department

erred by not deducting inland freight from Eletrosilex's home market

prices before performing the cost test. In the preliminary results,

rather than subtracting inland freight from Eletrosilex's home market

prices before performing the cost test, the Department added to the

cost build-up a variable that Eletrosilex reported that included inland

freight (as well as PIS and COFINS taxes). Petitioners argue that this

approach was an error because not all of Eletrosilex's home market

sales included freight expenses. Thus, petitioners argue, the

Department improperly compared the home market sales prices that

include freight to a COP that includes an amount of freight that is

artificially lowered by Eletrosilex's improper division of the total

freight

[[Page 1961]]

incurred on a portion of home market sales by the volume of all home

market sales. At the same time, petitioners argue, the Department

improperly compared a COP that includes freight to home market sales

prices for which Eletrosilex reported no freight.

Department Position

Petitioners and Minasligas are correct that Import Administration

Policy Bulletin 94.6 states that the cost test will be performed on an

ex-factory basis, and thus net of freight expenses. Therefore, in these

final results of review we have deducted inland freight from the price

which we compare to COP in the cost test. In order to ensure we make a

proper comparison for those respondents (i.e., Minasligas and CCM) who

included freight in their reported direct selling expenses for COP, we

have not used the direct selling expenses the respondents reported in

their cost questionnaire response. Instead, in these final results of

review, we have added to COP the sales-specific direct selling expenses

included in each home market sales price.

Comment 10

Petitioners argue that the Department erred by calculating

Minasligas', CCM's, and CBCC's home market imputed credit expenses

based on prices that include VAT. The Department's established

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 argues, based on the tax policies of the government of

Brazil, that ICMS taxes should be included in the imputed credit

calculation. It argues 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

that payment from the customers is outstanding, not only must

Minasligas finance its production operations, it must also pay any ICMS

amounts it owes to the Brazilian government. To the extent that it pays

such taxes before it receives them from its customers, they become part

of the cost of financing receivables. Therefore, Minasligas argues,

ICMS taxes should be included in the imputed credit calculation.

CCM argues that petitioners are incorrect in saying that it is the

Department's policy not to include ICMS tax in the computation of

imputed credit. It argues that the Department has previously calculated

CCM's home market imputed credit expenses based on ICMS tax-inclusive

home market prices. In support of this statement, it cites the final

determination of the LTFV investigation of this case, in which the

Department said:

The ICMS incident to a home market sale is outstanding until

that time that the customer pays for its merchandise. Until the

customer pays, CCM cannot use the ICMS collected on that sale to

offset ICMS it has paid on purchases of materials used in the

production of the subject merchandise. Accordingly, there is an

inherent cost in maintaining an outstanding amount of ICMS due to

CCM's receivables. Therefore, we have included the ICMS in the home

market price when calculating imputed credit expenses.

See Silicon Metal from Brazil; Final Determination of Sales at Less

Than Fair Value, 56 FR 26977, 26982 (June 12, 1991). Furthermore, CCM

points out that no party appealed this issue to the CIT, reflecting all

parties' agreement concerning the legitimacy of this approach.

Department's Position

We agree with petitioners. While CCM is correct that we have

calculated imputed credit inclusive of ICMS tax in earlier segments of

this proceeding, our more recent practice is to calculate imputed

credit exclusive of ICMS tax. We addressed this issue in

Silicomanganese from Venezuela. There 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). Similarly, in this case to calculate the ICMS adjustment argued

by CCM would require the Department to calculate the opportunity costs

involved with freight charges, selling expenses, and packing for each

reported sale. It would be an impossible task for the Department to

determine the opportunity cost of every such charge and expense. In

these final results of review we have followed our more recent

practice. See also Ferrosilicon from Brazil; First Review Final Results

at 59410.

Comment 11

Petitioners argue that the Department made two currency conversion

errors in its margin calculation for CBCC and Minasligas. With respect

to CBCC, petitioners argue that the Department used the wrong exchange

rate for converting CBCC's brokerage, warehousing, and foreign inland

freight from Brazilian currency into U.S. dollars. This error occurred,

petitioners allege, because the Department incorrectly believed that

these expenses were denominated in cruzeiros, rather than in cruzeiros

reais.

CBCC argues that there is no evidence on the record that any of the

charges it reported are in a currency other than cruzeiros.

With respect to Minasligas, petitioners argue that the Department

erred by converting the cruzeiro value of Minasligas' U.S. sales into

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

currency in which they were originally denominated. 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 it

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 FMV in

the month of shipment.

Department's Position

We agree with petitioners. With respect to CBCC, we note that in

exhibit 6 of CBCC's March 17, 1994 supplemental questionnaire response

(SQR) CBCC demonstrated the currency conversion. That demonstration

indicates that the expenses were in fact denominated in cruzeiros

reais, and not cruzeiros. We have corrected this error in these final

results of review. With respect to Minasligas, our practice is to use

the actual U.S. price in the currency in which it was originally

denominated. We also seek to avoid any unnecessary currency

conversions. Therefore, in these final results of review we have used

the actual sales prices in the currency in which they were originally

denominated.

Comment 12

Petitioners argue the Department erred in the margin calculation

for Minasligas and CCM by using the wrong shipment date. With respect

to

[[Page 1962]]

Minasligas this alleged error occurred where the Department performed

the currency conversion for the movement expenses on U.S. sales by

using the exchange rate on the date of shipment from the port in

Brazil, rather than the exchange rate on the date of shipment from

Minasligas' plant. Doing so, petitioners allege, was a violation of the

Department's practice in which the date of shipment is the date the

merchandise was shipped from the producer's factory. Therefore,

petitioners argue, the Department should use the exchange rate of the

date of sale in converting U.S. movement expenses, just as it used the

date of sale (rather than the reported date of shipment) in the

calculation of imputed credit.

Minasligas argues that because the record does not contain the date

on which Minasligas paid the movement expenses, the Department was

correct in using the exchange rate of the date of shipment from the

port because it was the closest date on record to the date in which the

expenses were actually incurred.

With respect to CCM, petitioners argue that the Department used the

wrong shipment date in its calculation of U.S. imputed credit. The

shipment date that CCM reported and that the Department used in its

computation, petitioners allege, was the shipment date from the port in

Brazil, rather than the shipment date from CCM's plant. Petitioners

argue that the Department should use the date of sale as the date of

shipment as it did in calculating Minasligas' imputed credit.

Furthermore, petitioners argue that for the same reason the Department

should base CV on the month of the U.S. sale, rather than on CCM's

reported month of shipment.

With respect to petitioners' argument that the Department should

have calculated imputed credit using the date of the U.S. sale, CCM

argues, first, that the Department should use the credit calculation it

submitted in its questionnaire response as the actual credit expense.

This calculation, CCM states, reflects the actual interest charged on

the export credit line obtained for that shipment, and therefore is the

most accurate, transaction-specific measure of CCM's interest expense

in connection with its U.S. sale. Second, CCM argues that if the

Department decides to use an imputed figure, it need not resort to the

date of sale as the date of shipment because the date of shipment from

CCM's factory is on the record as verification exhibit 11.

With regard to petitioners' argument that the Department should use

the CV in the month of sale to establish fair value, CCM argues that it

is the Department's practice in hyperinflationary economy cases to use

the bill-of-lading date as the shipment date, and thus the date upon

which CV should be based. In support of this assertion it cites

Tubeless Steel Disc Wheels from Brazil; Amended Final Determination of

Sales at Less than Fair Value and Amended Antidumping Duty Order, 53 FR

34566 (September 7, 1988) (Tubeless Steel Disc Wheels from Brazil).

There the Department stated that it corrected a clerical error whereby

``invoice dates were used rather than bill-of-lading dates to represent

the date of shipment for the calculation of antidumping duty margins.''

CCM also argues that if the Department decides to use the invoice date,

rather than the bill-of-lading date, as the date of shipment, it need

not resort to using the date of sale (as petitioners urge) because, as

previously mentioned, the invoice date is on the record in verification

exhibit 11.

Department's Position

With respect to the petitioners' argument regarding Minasligas, we

agree with Minasligas. Where the record does not contain the actual

dates of payment for its export sale movement expenses and where the

Department did not specifically solicit this information, it is

reasonable to use the date of shipment from the port in the imputed

credit calculation because it is the closest date on record to the date

on which the expenses were actually incurred. With respect to the

petitioners' argument regarding CCM, we agree with CCM that when using

CV in hyperinflationary economy cases it is the Department's practice

to perform the margin calculation using the CV of the month of shipment

from the port, rather than (as petitioners argue) the CV of the month

of shipment from the plant. See Tubeless Steel Disc Wheels from Brazil

at 34567.

We disagree with CCM that we should use its reported ``actual

expense'' for U.S. credit. The Department requires that the credit

expenses reflect the opportunity cost of the entire period between

shipment from the plant and payment by the customer. That is not the

case for CCM's reported ``actual expense.'' The actual expense covers

only a portion of the imputed credit expense period. Therefore, in

these final results of review we have calculated imputed credit using

the shipment date from CCM's plant, as given in verification exhibit

11.

Comment 13

Petitioners argue that the Department erred in its computation of

Minasligas' COP/CV by using the 1993 G&A expenses that Minasligas

reported. They argue that Minasligas' 1993 audited financial statements

show that Minasligas' G&A expenses are greater than what it reported to

the Department. Therefore, petitioners argue, the Department should

require Minasligas to report monthly G&A expenses for 1993 whose sum

reconciles to the total 1993 G&A expenses shown on its financial

statement.

Minasligas argues that petitioners' argument fails to consider that

Minasligas deducted from its G&A some expenses associated with forest

maintenance, depletion, and exhaustion that it included in its cost of

charcoal as part of direct material expenses. To have not made this

deduction, Minasligas argues, would have resulted in these costs being

double-counted.

Department's Position

We agree with petitioners that the G&A figures Minasligas reported

in its October 15, 1996 submission do not reconcile to its 1993

financial statement. Though Minasligas claims that the difference is

due to its exclusion from G&A of some costs that had been included in

its cost of charcoal as part of direct material costs, we note that

neither Minasligas' G&A chart of accounts nor its cost of charcoal list

includes the categories of forest maintenance, depletion, or

exhaustion. See verification exhibits 23 and 33. Thus, since there is

no evidence on the record to substantiate Minasligas' explanation or

the G&A figures in its October 15, 1996 submission, for these final

results of review we have relied upon the G&A expenses reported in

Minasligas' 1993 financial statement.

Furthermore, in these final results of review, unlike the

preliminary results of review, we have calculated Minasligas' G&A by

multiplying a ratio (consisting of indexed monthly historical G&A

divided by indexed monthly historical cost of goods sold) by monthly

replacement cost COM. As explained below in response to comment 22,

this is our current method of calculating G&A in a hyperinflationary

economy. To perform this calculation, we increased the reported G&A

costs for each month in 1993 by the percentage difference between the

reported annual G&A costs and the financial statement G&A costs.

Comment 14

Petitioners argue that the Department erred in its calculation of

interest

[[Page 1963]]

expense for Eletrosilex, CCM, and CBCC by offsetting interest expenses

with interest income. Petitioners argue with respect to all three of

these respondents that the interest income for which the Department

allowed an offset is not interest income derived from short-term

investments of working capital (i.e., from business operations).

Petitioners argue that allowing an offset for this income was a

violation of the Department's requirements for granting an interest

income offset. Those requirements are, petitioners state, that the

respondent demonstrate (1) that the interest income stemmed from short-

term investments and (2) that short-term interest income was derived

from business operations. Petitioners argue with respect to CBCC that

some of the interest income for which the Department allowed an offset

does not meet these two criteria. Therefore, petitioners argue, in the

final results the Department should allow an offset only for those

interest income items which CBCC has demonstrated to be from short-term

investments.

With respect to Eletrosilex, petitioners focus on one transaction

recorded on Eletrosilex's 1994 financial statement for which, they

allege, there is no evidence that it was revenue from a short-term

investment. They also allege it does not consist of interest income

from investments, and therefore does not qualify to be an offset to

Eletrosilex's financial expenses. Furthermore, petitioners argue,

Eletrosilex did not even make a claim for an offset to its financial

expenses, and for this reason alone the Department should not have made

one.

With respect to CCM, petitioners also argue that CCM did not submit

the financial statement of its direct parent, or a consolidated

financial statement for the CCM group of related companies. By not

submitting such statements, petitioners argue, CCM thwarted application

of the Department's established practice of determining interest

expenses on a consolidated basis. Furthermore, petitioners argue that

because CCM did not cooperate with the Department by answering the

Department's questions regarding its interest income, the Department

should base interest expense for CCM on BIA, or, in the alternative, it

should obtain the information necessary to calculate interest expenses

for CCM properly in accordance with Department practice.

CBCC argues that the Department verified the financial income and

expenses of CBCC and its parents Solvay do Brasil and Solvay & Cie at

verification, and the Department's report did not indicate that the

financial gains were not derived from short-term investments, nor that

they were not related to the companies' business operations.

Furthermore, because the Department verified CBCC's financial gains,

CBCC argues that it is no longer CBCC's burden to prove that the

financial gains are short-term or related to its business operations;

it is, rather, the petitioners' burden to prove that the Department's

methodology was incorrect. Because petitioners are unable to do this,

CBCC argues, the Department should reject their argument.

Eletrosilex argues, with regard to petitioners' second argument,

that its submitted financial statement (at page 79) shows that the

entire transaction occurred between July 28, 1994 and December 27,

1994, and therefore qualifies as short-term under any analysis.

Eletrosilex also argues that the financial statement shows that the

transaction was a credit cession operation made with several financial

institutions. A credit cession operation, Eletrosilex argues, is by its

nature a transaction that provides interest income on the investment.

CCM argues, with regard to petitioners' first argument, that in a

February 21, 1995, submission (in which it submitted its balance sheet)

it demonstrated that all of its interest income was derived from short-

term investments. With regard to petitioners' second argument, CCM

argues that in the same February 21, 1995, submission, it submitted

financial statements for each of CCM's corporate layers. It argues that

these financial statements demonstrate that each of its corporate

layers had a net interest expense of zero, and that for each corporate

layer the interest expenses were offset by interest revenue from short-

term investments. As for the company that petitioners call CCM's

``direct parent,'' CCM states that this company is a related entity

which does not have audited financial statements, and therefore CCM did

not submit one. CCM also says that this entity's net income was

captured in the financial statement of another related entity, and that

CCM submitted this financial statement.

Department's Position

We agree with petitioners in part. With respect to CBCC, we agree

with petitioners that CBCC's reported interest income includes two line

items which do not constitute interest income. We are unable to

identify these line items in this notice because CBCC has requested

that the identity of these line items be treated as business

proprietary information subject to release only under administrative

protective order (APO). The fact that the verification report does not

discuss these items does not imply the Department's agreement with

CBCC's characterization of these two line items as interest income.

CBCC unduly attempts to shift the burden of proof to the petitioners,

disregarding the fact that it is up to a respondent to substantiate and

document any adjustment or claim to the Department. As the Department

stated in Gray Portland Cement and Clinker from Japan; Final Results of

Antidumping Duty Administrative Review (60 FR 43761, 43767, August 23,

1995), ``[w]hen a respondent makes a claim for an adjustment, it is the

respondent's responsibility to provide a detailed explanation of the

adjustment as well as supporting documentation.'' Therefore, because

CBCC did not substantiate through an explanation or supporting

documentation that the claimed offsets were from short-term

investments, we have reduced CBCC's interest income by the total amount

of those two line items. See Final Results Analysis Memorandum for our

calculations.

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. Such a transaction would

result in interest income and capital gains; only the former would

qualify as an offset to interest expenses. However, we have no

information on the record to enable us to break out the interest income

from the capital gains. Furthermore, we are unable to evaluate any of

Eletrosilex's other claimed short-term interest income because, in

response to a request that it itemize its offsets, Eletrosilex stated

that it is not claiming any offsets. See Eletrosilex's March 17, 1995,

SQR, at 32. Therefore, in these final results of review, we have denied

Eletrosilex an offset to its interest expenses.

We agree with CCM that the evidence on the record supports its

contentions that (1) all of CCM's interest income was derived from

short-term investments (see CCM's audited balance sheet); (2) CCM's

interest income outweighed interest expenses (see CCM's audited profit/

loss statement); and (3) each of CCM's parent companies also

experienced short-term interest income in excess of short-term interest

expenses (see the financial statements for each corporate layer of the

group of which CCM is a member). The fact that CCM did not submit

consolidated financial

[[Page 1964]]

statements--which do not exist--cannot be held against CCM since the

individual company statements demonstrate that short-term income

exceeded short-term interest. For all of these reasons, we have

continued to exclude interest expenses from CCM's COP.

Comment 15

Petitioners argue that the Department erred in its computation of

Eletrosilex's COP by allocating Eletrosilex's production costs equally

between silicon metal and products which petitioners allege are by-

products of silicon metal production. They argue that in the final

results of review the Department, as it did in the preliminary results

of the fourth administrative review of this order, should allocate

silicon metal production costs only to commercial-grade silicon metal,

and should offset COM with estimated revenue from by-product sales.

Eletrosilex argues that if the Department allocates all production

costs only to commercial-grade silicon metal, then it should make an

offset to the COP for the revenue generated from the sale of by-

products, and should apply the offset to the volume of by-products

produced, rather than the volume of by-products sold. Furthermore,

Eletrosilex argues that the Department should consider as by-products

only ladle sculls, off-grades, and fines, but not slag or silicon metal

of ingot bottom. Eletrosilex states that it does not consider slag or

silicon metal of ingot bottom production items, and does not include

them in its production volume records.

Department's Position

We agree with petitioners that Eletrosilex's production costs

should be allocated to only commercial-grade silicon metal, and that an

offset should be made to Eletrosilex's costs for the revenue it

collects from its sale of by-products. By using this approach we

succeed in calculating the actual costs of the merchandise subject to

review, without distorting that calculation by allocating some costs to

merchandise not subject to review. We have done so in these final

results of review.

We do not agree with Eletrosilex that the by-product offset should

be calculated based on the volume of by-products produced. Our policy

is to allow an offset only for actual revenue. To offset costs with

revenue not earned would result in an inaccurate calculation of actual

costs, and thus an inaccurate calculation of COP/CV. In these final

results of review we have offset production costs with all revenue that

Eletrosilex reported from its sale of by-products. Based on

Eletrosilex's statement that it does not record slag or silicon metal

of ingot bottom as production items in its books, in these final

results of review we have counted as by-products only ladle sculls,

off-grades, and fines.

Comment 16

Petitioners argue that the Department erred in its calculation of

the indirect selling expenses used in Eletrosilex's COP. For the

preliminary results of review, the Department divided Eletrosilex's

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. Second, it is not the

Department's practice, petitioners state, to calculate selling expenses

based on production volume. Therefore, petitioners argue, in the final

results the Department should calculate 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 solely on U.S. and home market sales

quantities. It argues that its indirect selling expenses (consisting

primarily of salaries and related employee costs) apply to all facets

of Eletrosilex's sales functions without regard to the particular

market. Citing statements in its questionnaire response, Eletrosilex

argues that sales in both the United States and in Brazil are made

solely by Eletrosilex personnel, with no assistance from affiliated

companies. The Eletrosilex employees involved in all aspects of these

sales, Eletrosilex argues, have functions that are relevant to all

sales in all markets, and the fact that some affiliated companies may

assist in some way with respect to some of the sales in the much larger

markets of Europe, Asia, and the Middle East is not relevant to the

determination of per-unit indirect selling expenses in the U.S. and

home markets.

Department's Position

We agree with petitioners that indirect selling expenses should be

calculated based on sales volumes, and not production volumes because,

by their nature, indirect selling expenses are attributable to sales,

not 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 included in each home market sale. Because the related

affiliates did not contribute toward 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

monthly indirect selling expenses by dividing its monthly indirect

selling expenses allocated to the home market by its monthly home

market sales volumes.

Comment 17

Petitioners argue that the Department erred in its computation of

Eletrosilex's COP by using the fixed factory overhead costs that

Eletrosilex reported on its tape file. Petitioners argue that doing so

was improper because evidence on the record suggests that the fixed

overhead costs in Eletrosilex's tape file were not replacement cost

figures. Specifically, petitioners point out that the fixed factory

overhead costs on Eletrosilex's tape file are inconsistent with the

replacement cost fixed overhead costs in exhibit 14 of Eletrosilex's

March 22, 1995 SQR and with the historical cost fixed overhead costs in

exhibit 23 of Eletrosilex's March 22, 1995 SQR. Furthermore, they argue

that a worksheet that Eletrosilex submitted (exhibit 17 of its March

22, 1995 SQR) in response to the Department's request does not

reconcile to either exhibit 14 or 23 of the SQR, though it does

reconcile to the figures on its tape file. Petitioners argue that

though exhibit 17 does reconcile to the tape file, it is not truly

responsive to the Department's question because the Department had

asked Eletrosilex to support the fixed factory overhead costs in its

worksheet. In light of these discrepancies, and in the absence of any

explanation from Eletrosilex for them, petitioners argue that the

Department should use Eletrosilex's reported ``historical'' fixed

factory overhead cost figures as Eletrosilex reported them in exhibit

23 of its SQR. These figures are the most disadvantageous to

Eletrosilex.

Eletrosilex argues that the figures reported in exhibit 23 of its

SQR, which petitioners cite as evidence that the numbers in the tape

file are not replacement cost figures, were only preliminary figures on

a table which was inadvertently submitted with the SQR. Therefore, they

are not the correct historical fixed factory overhead figures. It

further argues that data contained in exhibit 17 of its SQR provide the

correct historical cost figures for fixed overhead, and that these

numbers are identical to those in the tape file.

[[Page 1965]]

Department's Position

In its rebuttal brief Eletrosilex explained the discrepancy

regarding its reported historical costs, and has indicated that the

fixed factory overhead figures it reported on its tape file were

historical cost figures. However, in hyperinflationary economies the

Department uses replacement cost figures, and not historical cost

figures. Therefore we agree with petitioners that the Department should

not have used the figures on Eletrosilex's tape file. For this same

reason we cannot use the figures Eletrosilex reported in exhibits 17 or

23 of its SQR. In these final results of review we have used the

figures that Eletrosilex reported in exhibit 14 of its SQR because

these are replacement cost figures.

Comment 18

Petitioners argue that the Department must include in CV all of the

taxes that Eletrosilex and CBCC paid on purchases of inputs. They base

this argument on the fact that the statute requires that CV include

taxes paid on inputs unless the taxes are ``remitted or refunded upon

the exportation of the article in the production of which such

materials are used.'' See 19 U.S.C. Sec. 1677b(e)(1)(A). Petitioners

argue, with respect to Eletrosilex, that because Eletrosilex did not

even claim that home market taxes paid on material inputs were remitted

or refunded upon exportation of the merchandise, all of Eletrosilex's

taxes must be included in CV.

Eletrosilex argues that the Department should eliminate consumption

taxes from all calculations. This approach, it argues, is the only way

to achieve true tax neutrality.

CBCC argues the Department erred in its calculation of CV (for

those sales for which it used CV, as opposed to BIA, in the preliminary

results) by including VAT in the cost build-up. CBCC argues, first,

that including VAT in CV violates the tax-neutrality principle that the

Department regularly applies in the calculation of margins. If the

Department seeks to apply the tax-neutrality policy in its calculation

of CV that it applies in its calculation of margins, CBCC argues, VAT

should not be included in CV because it has the effect of creating

dumping even where none exists. Secondly, CBCC argues that evidence on

the record demonstrates that CBCC was able to offset its VAT liability

with taxes collected on domestic sales. Thus, CBCC argues, with respect

to CBCC in this review, the ICMS tax does not remain a cost of the

material input, and should not be included in CV.

Petitioners argue that Eletrosilex's and CBCC's arguments ignore

the fact that the statute applicable to this review (19 U.S.C.

Sec. 1677b(e)(1)(A)(1994)) and the statute as amended by the URAA (19

U.S.C. Sec. 1677b(e)(1)) require that CV includes taxes on purchases of

inputs unless those taxes are remitted or refunded upon exportation.

Section 773(e)(1)(A) of the Tariff Act states that the constructed

value of imported merchandise shall be the sum of:

the cost of materials (exclusive of any internal tax applicable in

the country of exportation directly to such materials or their

disposition, but remitted or refunded upon the exportation of the

article in the production of which such materials are used) * * *

Furthermore, petitioners argue that CBCC's claim that it was able

to offset its VAT liability with taxes collected on domestic sales is

contradicted by other information on the record. Moreover, petitioners

point out that the Department directly addressed this issue in the

final results of the second administrative review of this order, and

agreed that section 773(e)(1)(A) of the Tariff Act required that VAT be

included in CV. Silicon Metal from Brazil; Second Review Final Results,

at 46769. The Department took this same position, petitioners state, in

Ferrosilicon from Brazil, Final Redetermination of Remand at 9-10,

AIMCOR v. United States, Ct. No. 94-03-00182 (January 16, 1996).

Therefore, petitioners conclude, CBCC's claim that ICMS and IPI taxes

paid on inputs used to produce exported silicon metal are not a ``cost

of materials'' has no basis and has already been rejected by the

Department.

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 interpretation of the statute and our analysis of the issue 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 where an

ICMS tax was assessed on the respondent's U.S. sales. For our treatment

of the ICMS tax in such a situation, see comment 19 below.

Comment 19

Petitioners argue that the Department must add to Eletrosilex's CV

the ICMS tax that Eletrosilex collects from its exports of silicon

metal, and that is included in the reported U.S. selling price. 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. This approach, they argue, is pursuant to section

772(d)(2)(A) of the Tariff 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.''

Eletrosilex argues that the Department should eliminate consumption

taxes from all calculations. This approach, it argues, is the only way

to achieve true tax neutrality. Furthermore, Eletrosilex argues that

the Department erred in subtracting the ICMS tax from USP. It argues

that this subtraction was a violation of a policy the Department stated

in the final results of the second administrative review of this order.

There the Department stated:

We disagree with petitioners that the ICMS tax is an export tax

or other charge imposed on the exportation of the merchandise to the

United States as defined in section 772(d)(2) of the Act. The ICMS

tax is imposed upon all sales of this product, regardless of the

market to which it is destined. Since the tax is not levied solely

upon exported merchandise, it does not constitute an export tax and

cannot be subtracted from the USP of the merchandise under section

772(d)(2).

Petitioners argue that Eletrosilex is in error in stating that the

Department subtracted the ICMS tax from USP. It states that while the

Department said in its analysis memorandum that it made such a

subtraction, in fact it did not do so in its margin calculations.

Moreover, petitioners state, the argument Eletrosilex has advanced is

irrelevant because it applies only to margin calculations based on

price-to-price comparisons. After the Department makes the necessary

corrections in its calculations for Eletrosilex that the petitioners

have identified, Eletrosilex, petitioners allege, will have its margin

calculated on the basis of CV.

CCM argues that the Department erred by leaving imbedded in the USP

the ICMS tax that its U.S. customers pay,

[[Page 1966]]

and comparing that USP to a home market price that includes the ICMS

tax that its home market customers pay. This was an error, CCM argues,

because the ICMS tax rates in the U.S. and home markets are

significantly different. Thus, CCM argues, in its methodology the

Department did not achieve tax neutrality.

Department's Position

We agree with Eletrosilex that because the ICMS tax assessed on its

U.S. sale is not an export tax, it should not be deducted from the U.S.

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

46770. However, where the ICMS tax is included in the U.S. price, a

proper comparison requires that CV not include both the ICMS tax paid

on the purchases of material inputs and the ICMS tax assessed on the

U.S. sale. Thus, for the calculation of CV in this situation, we

ensured that the amount of the 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.

We agree with CCM that in the preliminary results of review our

methodology failed to achieve tax neutrality. In these final results of

review, where we based the margin calculation on a price-to-price

comparison (as opposed to a price-to-CV comparison) we have added to

the U.S. price the difference between the ICMS tax assessed on the U.S.

sale and the ICMS tax assessed on FMV.

Comment 20

Petitioners argue that the Department erred in the calculation of

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

Department's Position

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

support petitioners' contention that the weights Eletrosilex reported

for its U.S. 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 basis to change the per-unit

calculations from those in the preliminary results of review.

Comment 21

Petitioners argue that the Department erred in its treatment of

packing costs in the cost test for Eletrosilex and CCM. They argue,

with respect to Eletrosilex, that the Department erred by including in

the calculation of Eletrosilex's COP the packing expense amounts as

Eletrosilex reported them on its COP computer file. Petitioners argue

that Eletrosilex's computation of packing on its computer file is not

appropriate for the cost test because not all of Eletrosilex's home

market sales incurred packing costs. They argue that the Department

should compare net home market sales prices to a COP that includes the

reported amount of packing for each sale.

With respect to CCM, petitioners argue that the Department erred in

its cost test by comparing monthly COPs that include per-unit packing

costs to home market prices that include much larger per-unit packing

costs. They argue that by so doing the Department failed to make an

``apples-to-apples'' comparison. For the final results, they argue, the

Department should include the same absolute per-unit packing costs in

the home market prices and COPs used in the sales-below-cost analysis.

CCM argues that the Department correctly calculated packing costs

for the COP analysis. It argues that differences in per-unit packing

costs are to be expected because in hyperinflationary economy cases the

Department compares home market prices to costs incurred during the

month of payment of the comparison home market sale. Furthermore, it

cites Import Administration Policy Bulletin 94.6 (at 1) which states

that in the sales-below-cost test, the Department uses ``COM, actual

interest cost, and home market packing * * * based on information in

the section D COP/CV questionnaire response.'' Thus, CCM concludes, the

Department's policy in a COP analysis is to use the packing costs from

the cost section of the questionnaire response.

Department's Position

We agree with petitioners in part. We agree that where home market

sales were sold in bulk (i.e., not packed), COP should not include

packing because Import Administration Policy Bulletin 94.6 states (at

1), ``Both the net COP and the net home-market prices should be on the

same basis, e.g., packed, ex-factory, net of selling expenses;

otherwise, the comparison would be distorted.'' We have done this for

Eletrosilex and all other respondents in this review.

We disagree with CCM that we should use the packing costs reported

in the section D response. Our present policy is to use the packing

costs identified on the home market sales tape, which are transaction-

specific. Since the section D packing computation is based on monthly

averages, using it would reflect less accurate costs than using

transaction-specific packing costs.

Finally, we disagree with petitioners that CCM reported much higher

packing costs on its home market sales listing than it reported on its

COP worksheet. Comparison of exhibits A (home market sales listing) and

B (COP worksheet) of CCM's March 17, 1995 submission reveals that the

packing costs are identical.

Comment 22

Petitioners argue the Department erred by using CCM's reported

general and administrative (G&A) expenses in its calculation of CCM's

COP, because CCM calculated an annual G&A ratio that it applied to its

monthly historical COM. Petitioners allege that this methodology is not

the Department's practice in hyperinflationary economy cases. They

argue that the Department should determine monthly G&A expenses for CCM

by multiplying the reported ratio by the monthly replacement COM which

CCM reported.

CCM argues the methodology that CCM submitted and that the

Department used in the preliminary results is the one that the

Department used for CCM in response to the CIT's remand instruction to

the Department in the LTFV investigation to ensure that ``its

allocation of GS&A expenses does not lead to a systematic overstatement

of those expenses due to the restatement of monthly costs as

replacement costs.'' See Camargo Correa Metais, S.A. v. United States,

Ct. No. 91-09-00641, Slip Op. 93-163 (August 12, 1993) at 15. As a

result of these instructions, CCM states, the Department developed and

used this method in the preliminary remand results and final remand

results which are now awaiting the CIT's approval. See Preliminary

Results on Remand at 4-5 (Nov. 17, 1993) and Final Results of

Redetermination Pursuant to Court Remand at 6-7 (Dec. 13, 1993). CCM

argues the Department is under obligation to comply with the CIT's

remand order until and if it is determined by the Federal Circuit in

the LTFV appeal that the CIT's remand instructions, and the

Department's resulting methodology for calculating CCM'S G&A, were

incorrect. Furthermore, CCM argues that the methodology the petitioners

say we should use is one that was developed

[[Page 1967]]

for other respondents, and not the one the Department developed for

CCM.

Department's Position

We agree with petitioners. Contrary to CCM's argument, the

Department is not obligated to employ the calculation methodology it

used in its remand determination in the LTFV investigation. Since

issuing the remand determination the Department has refined its

methodology, and now employs a formula in which it multiplies a ratio

(consisting of indexed monthly historical G&A divided by indexed

monthly historical cost of goods sold) by monthly replacement cost COM.

As explained in the final results of the second administrative review

of this order, the purpose of indexing is to obtain values at a uniform

price level because the simple addition of monthly nominal values

during a period of high inflation would yield a meaningless result. See

Silicon Metal from Brazil; Second Review Final Results at 46773. This

is the formula we used in these final results of review.

Comment 23

Petitioners argue that the Department should include in CV the ICMS

tax that CCM paid on its purchases of electricity. They allege that CCM

did not report this tax in the electricity costs or ICMS tax it

previously reported.

CCM argues that it already reported the ICMS tax it paid on

electricity, and that these amounts are included in its computer

database under the field for taxes.

Department's Position

We agree with CCM. Evidence on the record indicates that CCM did

report the ICMS tax it pays on electricity. See July 3, 1996 submission

by CCM, p. 8. We have included this tax in CV.

Comment 24

Petitioners argue that the Department should not include in CV the

amounts that CCM reported on its CV worksheet under the name

``inventory holding.'' They argue that if these amounts are inventory

carrying costs, then they should be excluded from CV because it is the

Department's established practice to exclude inventory carrying costs

from CV when the margin calculations are based on purchase price (PP)

sales. Furthermore, they argue that if the amounts that CCM reported in

its CV worksheet under the name ``inventory holding'' are actually

inventory holding gains/losses (i.e., the difference between

replacement costs and the inflation-adjusted cost of inventory), they

should be excluded from the calculation because CCM did not calculate

them correctly. They base this argument on the fact that CCM's

calculation allegedly includes only gains or losses on finished product

inventory (and not inventoried inputs) and were calculated without

proper layering of the inventory.

CCM argues that it reported inventory carrying costs as requested

by the Department in its questionnaire, and that petitioners' argument

is irrelevant because in the preliminary results of review the

Department based the margin calculation on a price-to-price comparison,

and not CV. It also notes that it is appropriate to include inventory

carrying costs in the sales-below-cost test where such costs are

compared to the home market sales which were made out of inventory. CCM

also argues (presumably with respect to inventory holding gains and

losses), that it followed the inventory layering method that the

Department used in the LTFV investigation and noted in the

questionnaire, and that these costs should be included in the monthly

COM for CV purposes, should the Department rely on CV for FMV in the

final results of review.

Department's Position

Consistent with our practice we did not include inventory carrying

costs in our calculation of CV. Also consistent with Department

practice, for purposes of the cost test we did not adjust prices for

inventory carrying costs because we do not include any imputed costs in

the calculation of COP. See Silicon Metal from Brazil; Second Review

Final Results, at 46775.

Concerning the adjustment CCM reported on its CV worksheet under

the name ``inventory holding,'' we have not made this adjustment

because CCM failed to substantiate its entitlement to this adjustment.

The record of this review contains no narrative description of or

request for the adjustment, nor any worksheet demonstrating its

calculations. In light of these deficiencies we have denied this

adjustment.

Comment 25

Petitioners argue that the Department erred in its calculation of

CBCC's interest expense ratio for 1992 by treating as interest income a

value that was actually interest expense.

CBCC argues that petitioners' point is moot because the Department

did not use the 1992 ratio in the margin calculation.

Department's Position

We agree with CBCC that this point is moot because we did not use

the 1992 ratio in the margin calculation.

Comment 26

Petitioners argue that the Department used an incorrect methodology

in calculating profit for CBCC. The Department calculated profit by

subtracting a COP that includes interest expenses (which by definition

include the cost of financing receivables) from home market prices from

which the Department subtracted home market imputed credit expenses. By

comparing a COP that includes the cost of financing receivables to home

market prices from which the (imputed) cost of financing receivables

had been subtracted, the Department, petitioners allege, made an

improper comparison. Thus they argue that the Department should remove

the subtraction of home market imputed credit from the calculation of

the price to which the Department compares COP in the cost test.

Department's Position

We agree with petitioners. For purposes of calculating profit, we

have continued to include interest expenses in the calculation of COP,

but did not deduct imputed credit expenses from home market prices.

Comment 27

Petitioners argue that the Department erred in its margin

calculation for CBCC by failing to deduct from U.S. price an

unspecified charge that CBCC reported as ``other expenses.''

Petitioners argue that these ``other expenses'' should be deducted from

U.S. price in accordance with section 772(d)(2)(A) of the Tariff Act.

CBCC argues that if the Department decides to deduct the ``other

expenses'' (which, it states, are movement expenses) from U.S. price,

it should note that CBCC mislabeled the currency as U.S. dollars. In

fact, CBCC states, it reported them in cruzeiros, and they must be

converted into U.S. dollars for the margin calculation.

Department's Position

We agree that we failed to deduct ``other expenses'' in the

calculation of U.S. price used in the preliminary results. We have

converted them into dollars because the amount of these expenses

relative to other reported expenses indicates that they were incurred

in cruzeiros. See CBCC's March 17, 1994 submission, exhibit 3.

[[Page 1968]]

Comment 28

Minasligas comments that the Department correctly applied its tax-

neutral policy in the preliminary results of this review. Minasligas

summarizes that application as follows:

(1) Home market prices included PIS and COFINS taxes;

(2) In calculating U.S. price, the Department subtracted the ICMS

tax that Minasligas' customers pay on their purchases of silicon metal;

(3) The Department then added to the U.S. price the equivalent

amount of ICMS, IPI, PIS, and COFINS taxes due on Minasligas' home

market sales.

This methodology, Minasligas states, is consistent with the

Department's guiding principle of tax neutrality, and should be

affirmed in the final results of this review.

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.

Eletrosilex argues that 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 because there is

evidence on the record that the relevant consumption tax, the ICMS tax,

is exempt from payment upon exportation.

CCM also argues that the Department erred by not adding to USP the

PIS and COFINS taxes that its home market customers pay on their

purchases of silicon metal. It argues that these taxes are imposed only

on home market sales, and not on export sales. Thus, by failing to add

them to USP, CCM argues, the Department failed to achieve tax

neutrality. Moreover, CCM argues, in numerous antidumping

investigations and reviews involving imports from Brazil, the

Department has made an adjustment to USP for the PIS and COFINS taxes.

Petitioners argue that the Department was correct in not adding the

equivalent amount of PIS and COFINS taxes to USP. They base this

argument on 772(d)(1)(C) of the Tariff Act which states that USP may be

adjusted only for taxes imposed directly upon the ``merchandise or

components thereof.'' They argue that the Department has concluded that

taxes on gross revenue exclusive of export revenue were not taxes

imposed directly upon the merchandise or components thereof, and thus

did not qualify for an adjustment to USP. See Silicon Metal from

Argentina, 56 FR 37891, 37893 (August 9, 1991) (Silicon Metal from

Argentina). Petitioners argue that Brazil's PIS and COFINS taxes are

taxes on gross revenue exclusive of export revenue, and that therefore

the Department should not add them to USP.

Department's Position

We disagree with Eletrosilex that there is evidence on the record

that the ICMS tax is not assessed upon exportation. In fact, there is

evidence to the contrary. See Eletrosilex's March 22, 1995, submission,

pp. 21-22. To achieve tax neutrality in these final results of review,

where we calculated the margin on U.S. and Brazilian price-to-price

comparisons, we added to Eletrosilex's USP the difference between the

absolute amounts of ICMS tax assessed on its U.S. sales and its FMV.

See comment 19 (above).

We 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.''

Therefore, in these final results of review we have not added PIS and

COFINS taxes to USP.

Comment 29

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 that the rate is a monthly rate. This

rate is the average of the monthly rates that appear in Exhibit VI-3 of

Minasligas' November 10, 1994, submission. Those rates are the monthly

rates of the state bank of Minas Gerais.

Comment 30

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 its

cash deposit instructions that CCM's third review cash deposit rate

should apply to all future entries because CCM was a non-shipper in the

fourth review.

Department's Position

CCM's point is moot because the Department is issuing the results

of both reviews concurrently.

Comment 31

CBCC argues that the Department erred in using total BIA for its

U.S. sales verified at the third review verification. (The Department

assigned a margin to these sales based on total BIA after it determined

that CBCC was unable to substantiate significant portions of its

response with respect to these sales.) CBCC argues that the Department

was not justified in using BIA for these sales because:

1. Throughout the proceeding CBCC cooperated fully with the

Department;

2. At the verification the verifiers collected the information

needed to correct the mistakes uncovered at the verification;

3. Even if the Department did not have the resources to recalculate

CBCC's data, the Department could have requested CBCC to perform the

recalculations.

CBCC also notes that there was ample time to perform any necessary

recalculations during the 14 months between the verification and

issuance of the Department's BIA memorandum.

Furthermore, CBCC argues that, if the Department believes it does

not have all necessary information totally to correct the mistakes

found at verification, it should calculate CBCC's dumping margin using

partial BIA for those discrete areas where it does not have the

necessary information. CBCC argues that this use of partial BIA would

be warranted in this case because there were no mistakes uncovered at

verification regarding U.S. sales; most of

[[Page 1969]]

the mistakes, CBCC argues, were connected with home market sales. CBCC

argues that as an alternative, the Department should base FMV on CV,

for which, CBCC alleges, the Department has all necessary information.

Petitioners argue the Department properly determined the margin for

the sales at issue based on total BIA. They argue that the number and

magnitude of the deficiencies in CBCC's reported data, the law, and the

Department's practice require the Department to assign a margin to the

sales at issue based on total BIA. With respect to CBCC's argument that

it could have rectified the problems found at the verification if the

Department had requested that it do so, petitioners argue that this

suggestion ignores the responsibility of respondents to provide

accurate and complete information in antidumping proceedings prior to

verification. Moreover, petitioners argue, this suggestion is

tantamount to asking the Department to condone the submission of false

and incomplete information in response to the Department's

questionnaire until, at verification, the Department positively

determines the submitted information to be false. Doing so would allow

respondents to abuse and manipulate the administrative review process.

With regard to CBCC's argument that the Department use partial BIA,

petitioners argue that the deficiencies the Department found at

verification are so fundamental and numerous that they require the use

of total BIA. Moreover, with regard to CBCC's argument that the

Department should use CV as the FMV, petitioners argue that using CV

would be contrary to the purpose of using BIA. The purpose of using BIA

is to induce the respondent to provide accurate and complete

information. To achieve this purpose, petitioners argue, a margin based

on BIA must be adverse, i.e., it must be higher than the margin that

would have been calculated had the respondent provided accurate and

complete information. Here, because of the deficiencies in the

submitted information, the Department cannot even begin to determine

whether a price-based margin calculation would result in a higher

margin than the CV-based margin calculation that CBCC suggests.

Department's Position

We agree with the petitioners. As we stated in our September 13,

1996 memorandum on this subject:

It is the obligation of the respondents to provide an accurate

and complete response prior to verification so that the Department

may have opportunity to analyze fully the information and other

parties are able to review and comment on it. Verification is

intended to establish the accuracy and completeness of a response

rather than to supplement and reconstruct the information to fit the

requirements of the Department.

Nor is it the Department's practice or policy to reconstruct a

response with the large number of errors which we found in CBCC's

response. See Final Determination of Sales at Less Than Fair Value:

Certain Granite Products from Italy (53 FR 27187, 27190, July 19,

1988). See also 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 (54 FR 18992, 19037, May

3, 1989). Among the problems we encountered were:

CBCC underreported all per-unit COP and CV values by using

unrefined weights, rather than refined weights;

CBCC underreported its direct materials costs by failing

to report late fees it had to pay;

CBCC was unable to substantiate some of its parent

company's interest rates;

CBCC's method of calculating depreciation understated

depreciation for all months;

CBCC could not substantiate its reported home market sales

value;

CBCC's reported consignment sales listing reported

adjustments to sales prices, rather than actual sale prices;

CBCC underreported ICMS taxes for all its consignment

sales.

Because of these and other problems more fully discussed in the

September 13, 1996 memorandum, we deem CBCC's submissions to be

unusable. Accordingly, in these final results of review we have applied

total BIA to CBCC's third review sales.

Comment 32

CBCC argues that the Department erred in its application of its

two-tier BIA methodology. This methodology, CBCC argues, states

explicitly that the Department has discretion to use two alternative

types of BIA when a respondent is deemed to be cooperative. The

Department can (1) use the firm's highest rate from a prior

administrative review or, if the firm has never been investigated or

reviewed, the all others rate from the LTFV investigation; or (2) the

highest calculated rate in this review.

CBCC argues that in this case the Department erred because it used

CBCC's rate from the LTFV investigation. Under the two-tier BIA

methodology, the Department should have used CBCC's rate from a prior

review because CBCC has been included in two completed reviews since

the LTFV investigation.

Petitioners argue that CBCC's erroneous argument is based on the

Department's inadvertent misstatement of its second-tier BIA policy in

the preliminary results of this review. It argues that the Department

has expressed its two-tier BIA methodology on many occasions, and on

one of those recent occasions it expressed it as follows:

When a company substantially cooperates with our request for

information, but fails to provide all the information requested in a

timely manner or in the form requested, we use as BIA the higher of

(1) the highest rate (including the ``all others'' rate) ever

applicable to the firm for the same class or kind of merchandise

from the same country from the LTFV investigation or a prior

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

review of any firm for the same class or kind of merchandise from

the same country.

See Silicon Metal from Argentina; Final Results of Antidumping Duty

Administrative Review and Termination In Part, 60 FR 64416, 64417

(December 15, 1995) (Silicon Metal from Argentina II). Petitioners

argue that the Department properly applied this methodology when as BIA

it assigned to CBCC its rate from the LTFV investigation.

Department's Position

We agree with the petitioners. As cooperative BIA, we use the

higher of either (1) the highest rate ever applicable to the firm in

the investigation or in any previous review, or (2) the highest

calculated margin for any respondent in the same review. See Silicon

Metal from Argentina II and Tapered Roller Bearings and Parts Thereof,

Finished and Unfinished, From the People's Republic of China; Final

Results of Antidumping Duty Administrative Reviews (61 FR 65527,

December 13, 1996). Accordingly, for these final results, where

necessary, we have applied to CBCC 87.79 percent, which is the highest

rate ever applicable to CBCC. This use of BIA applies to only those

sales where we determined that the use of BIA is appropriate. See

September 10, 1996 preliminary results analysis memorandum from Fred

Baker to the file and September 13, 1996 ``Use of Best Information

Available'' memorandum from Fred Baker to Richard Weible.

Comment 33

Parties allege the following clerical errors:

Petitioners argue that the Department erred by failing to

make a

[[Page 1970]]

circumstance-of-sale adjustment to Minasligas' FMV for bank charges

related to loans taken out to finance its U.S. sales.

Petitioners argue that the Department erred by using an

incorrect amount of foreign inland insurance on CCM's U.S. sale.

CCM argues that the Department erred by failing to deduct

post-sale inland freight expenses from its home market price.

Department's Position

We agree, and have corrected these errors in these final results of

review. We have also corrected one additional error we noted in our

review of the preliminary results. There, for U.S. sales, we used

Minasligas' dates of sale as the date of shipment from its plant

because we believed the dates of shipment not to be on the record.

However, we have determined that the invoice dates are on the record in

verification exhibit 12. Therefore, in these final results of review we

have used the invoice dates as the dates of shipment.

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, 1993, through

June 30, 1994:

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

Weighted-

average

Producer/manufacturer/exporter margin

(percent)

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

CBCC........................................................ 64.39

CCM......................................................... 5.97

Eletrosilex................................................. 39.72

Minasligas.................................................. 0

RIMA........................................................ 91.06

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

The Department shall determine, and the Customs Service shall

assess, antidumping duties on all appropriate entries. Individual

differences between USP and FMV 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 Tariff 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; (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 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 Tariff Act (19 U.S.C. Sec. 1675(a)(1)) and 19

CFR Sec. 353.22.

Dated: January 3, 1997.

Robert S. LaRussa,

Acting Assistant Secretary for Import Administration.

[FR Doc. 97-816 Filed 1-13-97; 8:45 am]

BILLING CODE 3510-DS-P