Silicon Metal From Brazil: Preliminary Results of Antidumping Duty Administrative Review

DEPARTMENT OF COMMERCE

International Trade Administration

[A-351-806]

Silicon Metal From Brazil: Preliminary Results of Antidumping

Duty Administrative Review

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

ACTION: Notice of Preliminary Results of the Antidumping Duty

Administrative Review.

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SUMMARY: In response to requests by American Silicon Technologies,

Elkem Metals Company, Globe Metallurgical, Inc. and SKW Metals &

Alloys, Inc. (petitioners) and Companhia Brasileira Carbureto De Calcio

(CBCC), Eletrosilex Belo Horizonte (Eletrosilex), Ligas de Aluminio

S.A. (LIASA), Companhia Ferroligas Minas Gerais-Minasligas (Minasligas)

and RIMA Industrial S/A (RIMA) (respondents), the Department of

Commerce (the Department) is conducting an administrative review of the

antidumping duty order on silicon metal from Brazil. The period of

review (POR) is July 1, 1996 through June 30, 1997.

We preliminarily determine that only Eletrosilex sold subject

merchandise at less than normal value (NV) during the POR. If the

preliminary results are adopted in the final results of administrative

review, we will instruct the U.S. Customs Service to assess antidumping

duties based on the difference between the export price (EP) and the

NV.

We invite interested parties to comment on the preliminary results.

Parties who submit comments in this proceeding should also submit with

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

of the argument (not to exceed five pages).

EFFECTIVE DATE: August 6, 1998.

FOR FURTHER INFORMATION CONTACT: Robert Bolling, Abdelali Elouaradia,

Letitia Kress, Lisette Lach or Sinem Sonmez, Office of Antidumping/

Countervailing Enforcement, Group III, Import Administration,

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

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

482-3793.

SUPPLEMENTARY INFORMATION:

Applicable Statute and Regulations

Unless otherwise indicated, all citations to the statute are

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

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

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

indicated, all citations to the Department's regulations refer to 19

CFR part 351 (62 FR 27296 (May 19, 1997)).

Background

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

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

On July 21, 1997, the Department published in the Federal Register a

notice of opportunity to request an administrative review of the

antidumping duty order on silicon metal from Brazil for the period July

1, 1996 through June 30, 1997 (62 FR 38973). On July 29, 1997, in

accordance with 19 CFR 351.213(b)(1), CBCC, Minasligas, Eletrosilex,

and RIMA requested that the Department conduct an administrative review

of their respective sales. On July 31, 1997, LIASA requested that the

Department conduct an administrative review of its sales. On July 31,

1997, petitioners also requested that the Department conduct an

administrative review on sales made by CBCC, Eletrosilex, Minasligas

and RIMA. On September 22, 1997, the Department issued the antidumping

administrative review questionnaire to all respondents. On September

25, 1997, in accordance with 19 CFR 351.221(b)(1) of the Department's

regulations, the Department published in the Federal Register a notice

of initiation of this antidumping duty administrative review (62 FR

50292). The Department is conducting this review in accordance with

section 751 of the Act.

On March 24, April 24, and July 2, 1998, we issued supplemental

questionnaires to CBCC. We received responses from CBCC on April 15,

April 30, and July 14, 1998, respectively. On March 20, April 30, April

22, and July 13, 1998, we issued supplemental questionnaires to LIASA.

We received responses from LIASA, on April 3, April 27, April 30, and

July 20, 1998, respectively. On March 30, and July 2, 1998, we issued

supplemental questionnaires to Minasligas. We received responses from

Minasligas, on April 14, and July 9, 1998, respectively. On March 31,

June 29, and July 2, 1998, we issued supplemental questionnaires to

RIMA. We received responses from RIMA, on April 17, July 9, and July

13, 1998, respectively. On March 24, June 29, and July 6, 1998, we

issued supplemental questionnaires to Eletrosilex. We received a

response from Eletrosilex on April 10, 1998. However, Eletrosilex did

not respond to the

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Department's final two supplemental questionnaires. See Use of Facts

Available section below.

On March 27, 1998, in accordance with section 751(a)(3)(A) of the

Act, the Department published in the Federal Register its notice

extending the deadline in the preliminary results until July 30, 1998

(63 FR 14900).

Scope of Review

The merchandise covered by this administrative 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 administrative review

is silicon metal from Brazil containing between 89.00 and 96.00 percent

silicon by weight but which contains more aluminum than the silicon

metal containing at least 96.00 percent but less than 99.99 percent

silicon by weight. Silicon metal is currently provided for under

subheadings 2804.69.10 and 2804.69.50 of the Harmonized Tariff Schedule

(HTS) as a chemical product, but is commonly referred to as a metal.

Semiconductor grade silicon (silicon metal containing by weight not

less than 99.99 percent silicon and provided for in subheading

2804.61.00 of the HTS) is not subject to the order. Although the HTS

item numbers are provided for convenience and for U.S. Customs

purposes, the written description remains dispositive.

Period of Review

The POR is July 1, 1996 through June 30, 1997.

Verification

As provided in section 782(i) of the Act, we verified LIASA's sales

and cost information from May 4, 1998 through May 9, 1998, and CBCC's

sales and cost information from May 11, 1998 through May 16, 1998. At

each verification, we used standard verification procedures, including

on-site inspection of the manufacturers' facilities, the examination of

relevant sales and financial records, and the selection of original

source documentation containing relevant information. Our verification

results are outlined in the public version of the respective

verification reports, available to the public in Room B-099 of the U.S.

Department of Commerce.

Product Comparisons

In accordance with section 771(16) of the Act, we considered all

products produced by the respondents, covered by the description in the

``Scope of the Review'' section, above, and sold in the home market

during the POR, to be foreign like products for purposes of determining

appropriate product comparisons to U.S. sales. Where there were no

sales of identical or similar merchandise in the home market to compare

to U.S. sales, we compared U.S. sales to the constructed value (CV) of

the product sold in the U.S. market during the comparison period.

On January 8, 1998, the U.S. Court of Appeals for the Federal

Circuit issued a decision in Cemex S.A. v. United States, 133 F. 3d 897

(Fed. Cir. 1998). In that case, based on the pre-URAA version of the

Act, the Court discussed the appropriateness of using CV as the basis

for foreign market value when the Department finds foreign market sales

to be outside ``the ordinary course of trade.'' This issue was not

raised by any party in this proceeding. However, the URAA amended the

definition of sales outside the ``ordinary course of trade'' to include

sales below cost. See section 771(15) of the Act. Consequently, the

Department has reconsidered its practice in accordance with this court

decision and has determined that it would be inappropriate to resort

directly to CV, in lieu of foreign market sales, as the basis for NV if

the Department finds foreign market sales of merchandise identical or

most similar to that sold in the United States to be outside the

``ordinary course of trade.'' Instead, the Department will use sales of

similar merchandise, if such sales exist. The Department will use CV as

the basis for NV only when there are no above-cost sales that are

otherwise suitable for comparison. Therefore, in this proceeding, when

making comparisons in accordance with section 771(16) of the Act, we

considered all products sold in the home market as described in the

``Scope of the Review'' section of this notice, above, that were in the

ordinary course of trade for purposes of determining appropriate

product comparisons to U.S. sales. Where there were no sales of

identical merchandise in the home market made in the ordinary course of

trade to compare to U.S. sales, we compared U.S. sales to sales of the

most similar foreign like product made in the ordinary course of trade,

based on the information provided by each respondent in response to our

antidumping questionnaire. We have implemented the Court's decision in

this case to the extent that the data on the record permitted.

Fair Value Comparisons

To determine whether sales of silicon metal by the Brazilian

respondents to the United States were made at less than fair value, we

compared EP to the NV, as described in the ``Export Price'' and

``Normal Value'' sections of this notice. In accordance with section

777A(d)(2), we calculated monthly weighted-average prices for NV and

compared these to individual U.S. transactions.

Export Price

For CBCC, Eletrosilex, LIASA, Minasligas and RIMA, we used the

Department's export price (EP) methodology, in accordance with section

772(a) of the Act, because the subject merchandise was sold by the

producer outside the United States directly to the first unaffiliated

purchaser in the United States prior to importation.

We made company-specific adjustments to EP as follows:

CBCC

In accordance with section 772(c) of the Act, we calculated EP

based on packed, delivered prices to the first unaffiliated purchasers

in the United States or to unaffiliated trading companies who sell the

subject merchandise in the United States. We made deductions from the

starting price (gross unit price), where appropriate, for foreign

inland freight, brokerage and handling, international freight.

Eletrosilex

In accordance with section 772(c) of the Act, we calculated EP

based on packed, delivered prices to the first unaffiliated customer in

the United States or to unaffiliated trading companies who sell the

subject merchandise in the United States. We made deductions from the

starting price (gross unit price), where appropriate, for foreign

inland freight, brokerage and handling, and international freight, and

added duty drawback.

LIASA

In accordance with section 772(c) of the Act, we calculated EP

based on packed, delivered prices to the first unaffiliated customer in

the United States or to unaffiliated trading companies who sell the

subject merchandise in the United States. We made deductions from the

starting price (gross unit price), where appropriate, for foreign

movement expenses. Upon our findings at verification, we modified the

value for inland freight and packing, as appropriate. See LIASA's

Verification Report dated July 30, 1998 and Memorandum dated July 30,

1998.

On May 1, 1998, petitioners requested in their pre-verification

comments that the Department closely examine a particular sale in the

LIASA U.S. sales database during its verification of

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LIASA data. Petitioners stated that it appeared that this particular

sale was not representative of a normal commercial transaction due to

its aberrant sale price, quantity, and unusual mode of transportation.

Thus, petitioners requested that the Department use its authority to

exclude from the margin calculation this U.S. sale as it is distortive,

atypical and unrepresentative of an arm's-length transaction.

At verification, the Department examined the sale in question. See

LIASA Verification Report dated July 29, 1998. The evidence on the

record indicates that this sale is a testing/trial run sale. See

LIASA's Verification Exhibit 4 and verification report at pages 6-9.

Because consideration was paid for the merchandise, we preliminarily

determine in accordance with the Department's practice regarding

samples to include this sale in our calculations. See Antifriction

Other than Tapered Roller Bearings from France; Final Results of

Antidumping Duty Administrative Review, 62 FR 2081, 2122 (January 15,

1997). Further, we preliminarily do not find that it is distortive or

unrepresentative and should therefore be excluded.

Minasligas

In accordance with section 772(c) of the Act, we calculated EP

based on packed, delivered prices to the first unaffiliated customer in

the United States or to unaffiliated trading companies who sell the

subject merchandise in the United States. We made adjustments from the

starting price (FOB unit price), where appropriate, for foreign

movement expense (comprising weighing, sampling and analysis, and port

clerical expenses), inland freight, brokerage and handling, and duty

drawback. We used the FOB unit price (a gross unit price in dollars)

since Minasligas negotiated its U.S. sales in U.S. dollars. We also

made modifications to the payment date. We used the date of payment by

the U.S. customer to Minasligas for each sale rather than the date of

payment by the bank to Minasligas. The date of payment information was

provided to the Department in Minasligas's April 13, 1998 submission.

In addition, we recalculated the interest rate to be used in

Minasligas's U.S. credit expense calculation. For our calculation of

the interest rate for U.S. sales, we relied on the Advance Exchange

Contract (``ACC'') information presented in the company's April 13,

1998 submission.

Because Minasligas does not know the entry dates of its U.S. sales,

it reported all shipments made during the POR, which included two

shipments that were reported in the fifth administrative review. We

have excluded the two U.S. sales that were reported in the fifth

administrative review from our calculation as we have calculated a

margin on these sales in the last review.

RIMA

In accordance with section 772(c) of the Act, we calculated EP

based on packed, delivered prices to the first unaffiliated customer in

the United States or to unaffiliated trading companies who sell the

subject merchandise in the United States. We made deductions from the

starting price (gross unit price), where appropriate, for domestic

inland freight, brokerage and handling, and ocean freight.

Normal Value

A. Viability

In order to determine whether there was a sufficient volume of

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

(i.e., the aggregate volume of home market sales of the foreign like

product is greater than five percent of the aggregate volume of U.S.

sales), we compared each respondent's volume of home market sales of

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

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

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

like product was greater than five percent of its respective aggregate

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

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

respondent. Therefore, pursuant to section 773(a)(1)(B) of the Act, we

based NV on home market sales.

B. Home Market Sales

We based NV on the price at which the foreign like product was

first sold for consumption in Brazil, in the usual commercial

quantities, in the ordinary course of trade in accordance with section

773(a)(1)(B)(i) of the Act. To the extent practicable, we based NV on

sales at the same level of trade as the EP sales. For level of trade,

please see the level of trade section below.

We made company-specific adjustments to the NV prices as follows:

CBCC

We based home market prices on the packed, delivered prices to

affiliated and unaffiliated purchasers in the home market. Where

appropriate, we used CV as the basis of NV. We made adjustments, where

applicable, in accordance with section 773(a)(6) of the Act. Where

applicable, we made adjustments to home market price for inland

freight. To adjust for differences in circumstances of sale between the

home market and the United States, we adjusted home market prices by

deducting HM credit expenses and adding HM interest revenue and adding

U.S. credit expenses (offset by interest revenue), U.S. post-sale

warehousing, and U.S. direct selling expenses. In order to adjust for

differences in packing between the two markets, we adjusted home market

price by deducting HM packing costs and adding U.S. packing costs. Home

market prices were reported inclusive of value-added taxes (VAT) and,

therefore, a deduction for VAT was necessary.

Because CBCC paid commissions on home market sales, in calculating

NV for this respondent, we added the lesser of either: (1) the

weighted-average amount of commissions paid on the home market sales;

or (2) the amount of indirect selling expenses paid on the U.S. sale.

See 351.410(e) of the Department's regulations.

Eletrosilex

We based home market prices on the packed, delivered prices to

affiliated and unaffiliated purchasers in the home market. We made

adjustments, where applicable, in accordance with section 773(a)(6) of

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

inland freight. To adjust for differences in circumstances of sale

between the home market and the United States, we adjusted home market

prices by deducting HM credit expense and other HM direct selling

expenses and adding U.S. directs selling expenses, including U.S.

credit expenses. In order to adjust for differences in packing between

the two markets, we deducted HM packing costs and added U.S. packing

costs. Home market prices were reported exclusive of VAT and,

therefore, no deduction was necessary.

Although Eletrosilex provided the Department with credit expenses

based on Reais and U.S. dollar borrowings, the Department calculated

home market credit expense based on Reais denominated loans.

LIASA

We based home market prices on the packed, delivered prices to

affiliated and unaffiliated purchasers in the home market. Where

appropriate, we used CV as the basis of NV. We made adjustments, where

applicable, in accordance with section 773(a)(6) of the Act. Where

applicable, we made adjustments for movement expenses. To

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adjust for differences in circumstances of sale between the home market

and the United States, we reduced home market prices by the amounts for

direct selling expenses including credit and commission expenses and

added U.S. credit expenses. In order to adjust for differences in

packing between the two markets, we deducted HM packing costs and added

U.S. packing costs. Home market prices were reported inclusive of VAT

and, therefore, a deduction for VAT was necessary.

Minasligas

We based home market prices on the packed, delivered prices to

affiliated and unaffiliated purchasers in the home market. We made

adjustments, where applicable, in accordance with section 773(a)(6) of

the Act. Where applicable, we made adjustments for movement expenses.

To adjust for differences in circumstances of sale between the home

market and the United States, we reduced home market prices by an

amount for home market credit expenses and added U.S. credit expenses.

In order to adjust for differences in packing between the two markets,

we adjusted home market price by deducting HM packing costs and adding

U.S. packing costs. Home market prices were reported inclusive of VAT

and, therefore, a deduction for VAT was necessary.

RIMA

We based home market prices on the packed, delivered prices to

affiliated or unaffiliated purchasers in the home market. Where

appropriate, we used CV as the basis of NV. We made adjustments, where

applicable, in accordance with section 773(a)(6) of the Act. Where

applicable, we made adjustments for inland freight. To adjust for

differences in circumstances of sale between the home market and the

United States, we adjusted home market prices by deducting HM credit

expenses and commissions and adding HM interest revenue and adding U.S.

credit expenses. In order to adjust for differences in packing between

the two markets, we adjusted home market price by deducting HM packing

costs and adding U.S. packing costs. Home market prices were reported

inclusive of VAT and, therefore, a deduction for VAT was necessary.

Because Rima paid commissions on home market sales, in calculating

NV for this respondent, we added the lesser of either: (1) the

weighted-average amount of commissions paid on the home market sales;

or (2) the amount of indirect selling expenses paid on the U.S. sale.

See 351.410(e) of the Department's regulations.

C. ICMS Tax

In general, most foreign governments that establish value-added

taxes (``VAT'') allow for a credit for VAT paid on inputs that can be

used to offset tax liability to the government arising from home market

sales (i.e., VAT collected from domestic customers). In addition, most

foreign governments allow for a rebate or remittance of the tax paid on

material inputs upon the exportation of the finished product, provided

companies submit documentation that such inputs are used in the

products for exportation.

Under Brazil's VAT system, however, there is no provision for

refunding the taxes based upon export sales. Rather, in Brazil's system

only a tax credit arises upon the purchase of inputs for use in the

finished product. That credit can be used to offset tax liability to

the government arising from sales in the domestic market (i.e., ICMS

taxes collected from home market customers) to the extent that a

company makes such sales in the home market.

In the past, the Department included ICMS taxes in the calculation

of CV because such taxes are considered a cost of production. However,

recent decisions by the Court of International Trade (CIT) on this

issue have accorded substantial weight to the ``economic reality'' of

the Brazilian tax system which in some circumstances allows for

recovery of the ICMS tax paid on material inputs used in the production

of export sales. See Aimcor v. United States, 19 CIT 966 (CIT 1995);

Camargo Correa Metais, S.A. v. United States, 17 CIT 897, 911 (CIT

1993). In light of these decisions, the Department is reconsidering its

current policy of including ICMS tax in CV.

We will now no longer assume that VAT taxes are a cost when

calculating CV. Instead, we will examine the actual experience of each

producer/exporter subject to an investigation or review. If any

exporter/producer is able to demonstrate that it was able to offset its

tax liability on domestic sales, no addition for such taxes should be

made in calculating CV for that producer/exporter. Similarly, if any

producer/exporter is able to use only a portion of the credits

generated by export sales we will treat as a cost in calculating CV

only that portion which was not used during the period. Only if a

producer/exporter is unable to use any of the tax credits, or if the

producer/exporter fails to provide satisfactory evidence of its tax

experience on this question, will we continue to treat the entire

amount of VAT taxes as a direct cost in calculating CV. The Department

invites comment from interested parties with respect to this issue.

Additionally, CBCC, LIASA, and Minasligas have noted that Brazil's

new ICMS tax law allows companies to use ICMS tax credits generated

during the POR for the reduction in payment of electricity costs. These

companies have requested that the Department reduce their ICMS tax paid

during the POR by the amount of tax credits used for electricity after

the POR, because such credits were generated during the POR. We

preliminarily determine that, since the companies used these tax

credits after the POR, that would be the appropriate time to account

for this reduction in these companies' ICMS tax credit balance.

Price to Price Comparisons

Where there were contemporaneous sales of the comparison product

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

Price to CV Comparisons

When we based NV on CV, we calculated CV in the manner described

below. See ``Cost of Production (COP) Analysis'' section. Where we

compared export prices to CV, we deducted from CV the weighted-average

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

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

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

Cost of Production (COP) Analysis

On February 11, 1998, the Department published in the Federal

Register the final results of the fifth administrative review on

silicon metal from Brazil. See Final Results of Antidumping Duty

Administrative Review: Silicon Metal From Brazil, 63 FR 6899. In that

review, in accordance with section 773(b)(1) of the Act, the Department

disregarded home market sales found to be below COP for CBCC,

Eletrosilex, Minasligas and RIMA. Therefore, in accordance with section

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

believe or suspect that sales of the foreign like product under

consideration for the determination of NV in this review may have been

made at prices below the COP as provided by section 773(b)(2)(A)(ii) of

the Act. Therefore, pursuant to section 773(b)(1) of the Act, we

initiated an investigation to determine whether these respondents made

home market sales during the POR at prices below their COP. In

addition, on March 16, 1998, we initiated a below-cost investigation

for LIASA pursuant to petitioners' allegation on

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December 12, 1997. See 1996-1997 Administrative Review of the

Antidumping Duty Order on Silicon Metal from Brazil: Analysis of

Petitioners' Allegation of Sales Below the Cost of Production (``COP'')

for Ligas de Aluminio S.A.

A. Calculation of COP

In accordance with section 773(b)(3) of the Tariff Act, we

calculated COP based on the sum of each respondent's cost of materials

and fabrication employed in producing the foreign like product, plus

amounts for home market general and administrative expenses and packing

costs. We relied on the home market sales and COP information that each

respondent provided in its questionnaire responses. We adjusted each

respondent's reported COP as follows:

CBCC

As a result of verification findings, we recalculated depreciation

based on the Departmental methodology. See CBCC's 1996-1997

Verification Report dated July 30, 1998, and Analysis Memorandum on the

Sixth Administrative Review of Silicon Metal from Brazil from Lisette

Lach through James Doyle to the File dated July 30, 1998

(``Memorandum''), a public version of which is in the file in Central

Records, Room B-099 at the U.S. Department of Commerce.

We recalculated CBCC's G&A expenses using CBCC's and Solvay & Cie's

1996 G&A expenses and COGS as reported in Exhibit 3 of CBCC's November

21, 1997 submission, because it is Departmental practice to calculate

G&A expenses on an annual basis as a ratio of total G&A expenses

divided by cost of goods sold (COGS). See Certain Corrosion-Resistant

Carbon Steel Flat Products and Certain Cut-to-Length Carbon Steel Plate

from Canada; Notice of Final Antidumping Duty Administrative Reviews,

62 FR 18448, 18456 (April 15, 1997). To obtain the amount of unit G&A

expense for the POR, we multiplied the G&A expense ratio for CBCC and

Solvay & Cie by the unit COM of the merchandise under investigation.

See CBCC's Memorandum and Attachment to that Memorandum.

Additionally, the Department recalculated CBCC's cost of

manufacture because CBCC did not provide its COP for self-produced

charcoal. Instead, CBCC only provided costs based on its purchases of

charcoal from an unaffiliated supplier(s). Therefore, we had to apply

facts available in accordance with section 776(a) of the Act for the

cost of self-produced charcoal. As facts available, we used as the cost

for CBCC's self-produced charcoal the prices that CBCC paid to

unaffiliated supplier(s) for purchased charcoal. Therefore, we have

recalculated the cost of CBCC's charcoal production by using the annual

average cost CBCC was charged by unaffiliated supplier(s). See CBCC's

Verification Report dated July 30, 1998 and Memorandum dated July 30,

1998.

The Department's established policy is to calculate interest

expenses (INTEX) incurred on behalf of the consolidated group of

companies (e.g., Solvay & Cie) to which the respondent belongs, based

on consolidated financial statements. This practice recognizes two

facts: (1) The fungible nature of invested capital resources such debt

and equity of the controlling entity within a consolidated group of

companies, and (2) the controlling entity within a consolidated group

has the power to determine the capital structure of each member country

within its group. See, e.g., Notice of Final Results of Antidumping

Duty Administrative Review Aramid Fiber Formed of Poly ParaPhneylene

Terephthalamide from the Netherlands, 62 FR 38058 (July 16, 1997).

Accordingly, we recalculated INTEX by multiplying the reported the

percentage of Solvay & Cie's financial expenses by cost of manufacture

(COM). See CBCC's Memorandum and Attachment to Memorandum.

Eletrosilex

As a result of our determination to recalculate interest expense

based on the facts available (see facts available section), we have

recalculated Eletrosilex's general and administrative expenses on the

same basis as interest expense in order to be consistent with the

interest expense calculation. See Analysis Memorandum on the Sixth

Administrative Review of Silicon Metal from Brazil from Letitia Kress

through James Doyle to the File dated July 30, 1998 (``Memorandum''), a

public version of which is in the file in Central Records, Room B-099

at the U.S. Department of Commerce.

LIASA

As a result of verification, the Department recalculated LIASA's

total cost of manufacture because at we found that certain sales of

slag were incorrectly classified as off-grade silicon metal. See

LIASA's Verification Report dated July 30, 1998 and LIASA's Analysis

Memorandum dated July 30, 1998.

Minasligas

We recalculated Minasligas's G&A expenses, using Minasligas's and

Delp Engenharia Mecanica S.A. (Delp) 1996 G&A expenses and COGS as

reported in Minasligas's November 21, 1997 submission. We recalculated

G&A because it is Departmental practice to include both the parent

(Delp) and subsidiary company (Minasligas) G&A expenses in its

calculation of total G&A. See Minasligas's Analysis Memorandum.

RIMA

The Department adjusted RIMA's G&A and interest expense

calculations. In our original questionnaire of September 22, 1997, and

supplemental questionnaire of March 31, 1998, we requested RIMA to

compute its G&A expenses on an annual basis as a ratio of its total G&A

expenses divided by its cost of goods sold. In both instances, RIMA did

not calculate its G&A expenses using the methodology requested by the

Department. Therefore, we have recalculated RIMA's G&A based on its

1996 and 1997 financial statements, and Departmental practice of

calculating G&A on total G&A expenses divided by cost of sales. See

Analysis Memorandum on the Sixth Administrative Review of Silicon Metal

from Brazil from Abdelali Elouaradia through James Doyle to the File

dated July 30, 1998 (``Memorandum''), a public version of which is in

the file in Central Records, Room B-099 at the U.S. Department of

Commerce.

Additionally, the Department has recalculated RIMA's interest

expense. In our supplemental questionnaire of June 29, 1998, we

requested RIMA to provide a breakout for 1996 and 1997 of their Income

of Financial Investment by the type of investment. In its July 8, 1998

supplemental response, RIMA stated that it did not have financial

investments during this period. However, in its April 17, 1998

supplemental response, RIMA applied certain accounts (i.e., Currency

Adjustment, Asset Discounts, and Asset Interest) to offset its

financial expenses in its calculation of interest expense. Although

requested, RIMA has not provided the Department with an explanation why

these accounts were included as offsets to its interest expense.

Therefore, the Department has recalculated RIMA's interest expense

based on RIMA's 1996 and 1997 financial statements without the offsets

claimed by RIMA. See Analysis Memorandum on the of the Sixth

Administrative Review of Silicon Metal from Brazil from Abdelali

Elouaradia through James Doyle to the File dated July 30, 1998

(``Memorandum''), a public version of which is in the file in

[[Page 42006]]

Central Records, Room B-099 at the U.S. Department of Commerce.

B. Test of Home Market Prices

After calculating COP, we tested whether home market sales of

silicon metal were made at prices below COP within an extended period

of time in substantial quantities and whether such prices permitted the

recovery of all costs within a reasonable period of time. We compared

model-specific COP to the reported home market prices less any

applicable movement charges and discounts, where appropriate.

Pursuant to section 773(b)(2)(C) of the Act, where less than 20

percent of each respondent's home market sales for a model were at

prices less than the COP, we did not disregard any below-cost sales of

that model because we determined that the below cost sales were not

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

Where 20 percent or more of each respondent's home market sales of a

given product during the POR were at prices less than the COP, we

determined that such sales were made within an extended period of time

in substantial quantities in accordance with section 773(b)(2) (C) of

the Tariff Act. To determine whether such sales were at prices which

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

period of time, in accordance with section 773(b)(2)(D) of the Tariff

Act, we compared home market prices to the weighted-average COP for the

POR. When we found that below-cost sales had been made in ``substantial

quantities'' and were not at prices which would permit recovery of all

costs within a reasonable period of time, we disregarded these below-

cost sales in the preliminary results in accordance with section

773(b)(1) of the Act.

In these preliminary results, our cost tests for CBCC, Minasligas,

and Rima indicated that less than twenty percent of the sales of

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

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

determination of NV, where applicable.

The results of our cost tests for Eletrosilex and LIASA indicated

that, within an extended period of time (one year, in accordance with

section 773(b)(2)(B) of the Act), more than twenty percent of the sales

of all products of each company were at prices below COP. Thus these

below-cost sales were in ``substantial quantities.'' In addition, these

sales were at prices which would not permit the full recovery of all

costs within a reasonable period of time. In accordance with section

773(b)(1) of the Act, we disregarded the below-cost sales of subject

merchandise for each of these two companies and used the remaining

above-cost sales as the basis for determining each company's NV, where

applicable.

For all respondents in accordance with section 773(a)(4) of the

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

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

accordance with section 773(e) of the Act.

Constructed Value

In accordance with section 773(e) of the Act, for CBCC, LIASA, and

Rima, we calculated CV based on the sum of respondent's cost of

materials and fabrication employed in producing the subject

merchandise, selling, general and administrative expenses, and profit

incurred and realized in connection with production and sale of the

foreign like product, and U.S. packing costs. In accordance with

section 773(e)(2)(A), we based SG&A and profit on the amounts incurred

and realized by each respondent in connection with the production and

sale of the foreign like product in the ordinary course of trade, for

consumption in the foreign country. We used the costs of materials,

fabrication, and SG&A as reported in the CV portion of respondent's

questionnaire response.

For Rima, we adjusted its general and administrative and interest

expenses. See Analysis Memorandum on the Sixth Administrative Review of

Silicon Metal from Brazil from Abdelali Elouaradia through James Doyle

to the File dated July 30, 1998 (``Memorandum''), a public version of

which is in the file in Central Records, Room B-099 at the U.S.

Department of Commerce. Additionally, because Rima has recovered ICMS

tax on material inputs used in the production of silicon metal for

export, we have excluded such taxes in the calculation of constructed

value. We used the U.S. packing costs as reported in the U.S. sales

portion of respondent's questionnaire responses. We based selling

expenses and profit on the information reported in the home market

sales portion of respondent's questionnaire responses. See Certain

Pasta from Italy; Notice of Preliminary Determination of Sales at Less

Than Fair Value and Postponement of Final Determination, 61 FR 1344,

1349 (January 19, 1996). For selling expenses, we used the weighted-

average home market selling expenses.

For CBCC, we made adjustments to fixed overhead to reflect the

correct depreciation expense, G&A expenses and interest expense. These

adjustments reflect those made in CBCC's COP. See adjustments to CBCC's

COP in ``Calculation of COP'' section above. Because CBCC did not

recover ICMS tax on material inputs used in the production of silicon

metal for export to the United States, we have included CBCC's ICMS tax

in the calculation of constructed value. To the extent CBCC recovered

ICMS taxes for sales in the home market during the POR, we have

excluded such tax from the calculation of CV.

For LIASA, because LIASA did not recover ICMS tax on material

inputs used in the production of silicon metal for export to the United

States we have included LIASA's ICMS tax in the calculation of

constructed value. To the extent LIASA recovered ICMS taxes for sales

in the home market during the POR, we have excluded such tax from the

calculation of CV.

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

and G&A expenses in CV. We made adjustments to depreciation expenses,

amortization expenses, electricity cost, general and administrative

expenses, and financial expenses. These adjustments reflect those made

in Eletrosilex's COP. See adjustments to Eletrosilex's COP in

``Calculation of COP'' section above and Facts Available section below.

In these preliminary results, since we found that Eletrosilex made no

above-cost sales of the foreign like product in the comparison market,

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

value calculation using Eletrosilex's home market sales data. For this

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

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

profit realized, by CBCC, LIASA, Minasligas and Rima in connection with

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

course of trade, for consumption in the home market. Additionally, we

have included Eletrosilex's ICMS tax balance in the calculation of

constructed value because Eletrosilex failed to provide the Department

complete information on its ICMS tax balance. See Facts Available

Section below and Analysis Memorandum. In accordance with section

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

expenses) on the amounts incurred by the respondent in connection with

the production and sale, for consumption in the foreign country, of the

same general category of products.

[[Page 42007]]

Use of Facts Available

Eletrosilex

We preliminarily determine that the use of adverse facts available

is appropriate with respect to certain aspects of Eletrosilex's

submitted data in accordance with section 776(a)(2)(C) and section

776(b) of the Act because we find that Eletrosilex failed to cooperate

to the best of its ability in failing to comply with our requests for

complete information. In two supplemental questionnaires issued by the

Department, Eletrosilex failed to provide the requested information.

See Memorandum to Robert S. LaRussa from Joseph A. Spetrini, July 20,

1998 on file in the Central Records Unit, Room B-099 of the main

Commerce Building.

On June 29 and July 6, 1998, the Department issued supplemental

questionnaires to Eletrosilex requesting additional information on its

home market sales, U.S. sales, cost of production, constructed value,

and ICMS taxes. See Departmental letters to Eletrosilex on those dates.

Eletrosilex failed to respond to two supplemental questionnaires

requesting clarification of specific sales and cost questions and the

nature of Eletrosilex's ICMS taxes. We must therefore consider whether

Eletrosilex's submitted response is usable under section 782(e) of the

Act.

Section 782(e) provides that the Department shall not decline to

consider information that is submitted by an interested party and is

necessary to the determination but does not meet the applicable

requirements established by the Department if: (1) the information is

submitted by the deadline established for its submission; (2) the

information can be verified; (3) the information is not so incomplete

that it cannot serve as a reliable basis for reaching the applicable

determination; (4) the interested party has demonstrated that it acted

to the best of its ability in providing the information and meeting the

requirements established by the Department with respect to the

information; and (5) the information can be used without undue

difficulties.

When examined in light of the requirements of section 782(e), the

facts of this review demonstrate that while Eletrosilex data is

incomplete for certain elements of the calculation, nevertheless the

Department has enough data on the record to reasonably calculate a

dumping margin. On this basis, we determine that it is appropriate to

resort to partial facts available, based on Departmental adjustments to

Eletrosilex's cost of production data.

The Department finds that Eletrosilex did not act to the best of

its ability to comply with requests for information. In the past,

Eletrosilex has demonstrated an understanding for requests of

additional information by the Department. In this review, Eletrosilex

responded on April 10, 1998, to the Department's March 24, 1998

supplemental questionnaire. However, its failure to provide responses

to our other supplemental questionnaires (i.e., dated June 29 and July

6, 1998) despite numerous opportunities to do so constitutes a failure

to cooperate to the best of its ability with respect to our request for

information. See Public Version of Memorandum to File from Robert

Bolling, dated July 20, 1998. It is therefore appropriate, under

section 776(b) of the Act, for the Department to use an adverse

inference in applying facts available.

Accordingly, based on facts available, we have determined to

recalculate Eletrosilex's depreciation expenses, amortization expenses,

electricity cost, and financial expenses. See Analysis Memorandum dated

July 30, 1998.

Level of Trade

In accordance with section 773(a)(7) of the Act, to the extent

practicable, we determine NV based on sales in the comparison market at

the same level of trade (LOT) as the EP or CEP transaction. The NV LOT

is that of the starting price sales in the comparison market or, when

NV is based on CV, that of the sales from which we derive selling,

general and administrative (SG&A) expenses and profit. For EP sales,

the U.S. LOT is also the level of the starting price sales, which is

usually from exporter to importer. For CEP sales, it is the level of

the constructed sale from the exporter to the importer.

To determine whether NV sales are at a different LOT than EP or CEP

sales, we examine the stages in the marketing process and selling

functions along the chain of distribution between the producer and the

unaffiliated customer. If the comparison-market sales are at a

different LOT, and the difference affects price comparability, as

manifested in a pattern of consistent price differences between the

sales on which NV is based and comparison-market sales at the LOT of

the export transaction, we make an LOT adjustment under section

773(a)(7)(A) of the Act. Finally, for CEP sales, the NV level is more

remote from the factory than the CEP level and there is no basis for

determining whether the difference in the levels between NV and CEP

affects price comparability, we adjusted NV under section 773(a)(7)(B)

of the Act (the CEP Offset provision). See Notice of Final

Determination of Sales at Less Than Fair Value: Certain Cut-to-Length

Carbon Steel Plate from South Africa, 62 FR 61731 (November 19, 1997).

To determine whether a LOT adjustment or CEP offset was warranted

for all Brazilian respondents, we compared the EP sales to the HM sales

in accordance with the principles discussed above. For purposes of our

analysis, we examined information regarding the distribution systems in

both the U.S. and Brazilian markets, including the selling functions,

classes of customer, and selling expenses for each respondent.

In the home market, all respondents sold the subject merchandise to

one or more of the following three categories of customers: end-users,

and trading companies. Regardless of the category of customer, all

respondents' home market sales were manufactured to order and the

merchandise was shipped directly from the factory to each type of

customer. Their packing processes were also identical for all sales,

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

regardless of the category of customer. Evidence on the record also

demonstrates that respondents did not have formal policies for

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

of customers. Additionally, we found no differences in the selling

activities performed for each respondent's U.S. sales in comparison to

its home market sales. Thus, we have determine that the selling

activities each respondent performed for its home market sales were the

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

sales were all made at a single LOT.

All respondents reported only EP sales in the U.S. market. All U.S.

sales were made to either U.S. end-users or traders, where each sale

was manufactured to order, and the selling activities were comparable

for all sales, regardless of the category of customer. Therefore, we

have concluded that for each respondent a single LOT exists in the

United States which is the same as the HM LOT. Therefore, no LOT

adjustment is warranted in this review.

Currency Conversion

For purposes of the preliminary results, we made currency

conversions in accordance with section 773A of the Act based on the

official exchange rates in effect on the dates of the U.S. sales as

certified by the Federal Reserve Bank of New York.

Preliminary Results of Review

As a result of our review, we preliminarily determine that the

[[Page 42008]]

following weighted-average dumping margins exist for the period July 1,

1996 through June 30, 1997, to be as follows:

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

Margin

Manufacturer/exporter (percent)

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

CBCC....................................................... 0

Eletrosilex................................................ 33.11

LIASA...................................................... 0

Minasligas................................................. 0

RIMA....................................................... 0

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

Parties to the proceeding may request disclosure within five (5)

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

may request a hearing within ten (30) days of publication. Any hearing,

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

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

submit case briefs within 30 days of the date of publication of this

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

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

publication. Parties who submit argument are requested to submit with

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

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

this administrative review, which will include the results of its

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

120 days of publication of these preliminary results.

The Department shall determine, and the Customs Service shall

assess, antidumping duties on all appropriate entries. Upon completion

of this review, the Department will issue appraisement instructions

directly to the Customs Service. The Department calculated the

assessment of duties in accordance with section 351.212 of its

regulations.

Furthermore, the following deposit rates will be effective upon

publication of the final results of this administrative review for all

shipments of silicon metal from Brazil entered, or withdrawn from

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

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

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

final results of this review (except that no deposit will be required

for firms with zero or de minims margins, i.e., margins less than 0.5

percent); (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

less than fair value (LTFV) investigation, but the manufacturer is, the

cash deposit rate will be the rate established for the most recent

period for the manufacturer of the merchandise; and (4) for all other

producers and/or exporters of this merchandise, the cash deposit rate

shall be 91.06 percent, the all others rate established in the LTFV

investigation, 56 FR 36135 (July 31, 1991).

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

publication of the final results of the next administrative review.

This notice also serves as a preliminary reminder to importers of

their responsibility under 19 CFR 351.402(f)(2) 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 determination is issued and published in accordance with

sections 751(a)(1) and 777(i)(1) of the Act.

Dated: July 30, 1998.

Joseph A. Spetrini,

Acting Assistant Secretary for Import Administration.

[FR Doc. 98-21061 Filed 8-5-98; 8:45 am]

BILLING CODE 3510-DS-P