Ferrosilicon From Brazil: Notice of Partial Rescission and Preliminary Results of Antidumping Duty Administrative Review

DEPARTMENT OF COMMERCE

International Trade Administration

[A-351-820]

Ferrosilicon From Brazil: Notice of Partial Rescission and

Preliminary Results of Antidumping Duty Administrative Review

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

ACTION: Notice of partial rescission and preliminary results of

antidumping duty administrative review.

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

SUMMARY: In response to timely requests for administrative review for

the period March 1, 1997 through February 28, 1998, the Department of

Commerce is conducting an administrative review of the antidumping duty

order on ferrosilicon from Brazil. We preliminarily determined that

during the period of review, one of the two manufacturers/exporters

that are under review sold ferrosilicon to customers in the United

States at less than normal value. If the preliminary results are

adopted in our final results of this administrative review, we will

instruct the U.S. Customs Service to assess antidumping duties on all

appropriate entries.

Interested parties are invited to comment on the preliminary

results of this review. Parties who submit comments on issues in this

proceeding should submit with each comment (1) a statement of the

issue; and (2) a brief summary of their comment.

EFFECTIVE DATE: December 8, 1998.

FOR FURTHER INFORMATION CONTACT: Alexander Amdur, Howard Smith, or

Wendy Frankel, AD/CVD Enforcement Group II, Office IV, Import

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

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

20230; telephone: (202) 482-5346, (202) 482-5193, or (202) 482-5849,

respectively.

The 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 the

regulations codified at 19 CFR Part 351 (April 1998).

[[Page 67651]]

SUPPLEMENTARY INFORMATION:

Background

On March 11, 1998, the Department of Commerce (the Department)

published in the Federal Register a notice of opportunity to request an

administrative review of the antidumping duty order on ferrosilicon

from Brazil covering the period March 1, 1997, through February 28,

1998. See Antidumping or Countervailing Duty Order, Finding, or

Suspended Investigation; Opportunity to Request Administrative Review,

63 FR 1868 (March 11, 1998); see also Antidumping Duty Order:

Ferrosilicon From Brazil, 59 FR 11769 (March 14, 1994). Pursuant to the

notice of opportunity to request an administrative review and 19 CFR

351.213(b) of the Department's regulations, in March 1998, Companhia de

Ferro Ligas da Bahia (Ferbasa) and Companhia Brasileira Carbureto de

Calcio (CBCC) requested that the Department conduct an administrative

review of their respective shipments of ferrosilicon to the United

States. Additionally, in March 1998, AIMCOR and SKW Metals & Alloys,

Inc., (collectively petitioners), domestic interested parties under 19

CFR 351.102(b) of the Department's regulations, requested that the

Department conduct an administrative review of Companhia Ferroligas

Minas Gerais-Minasligas (Minasligas) as well as the aforementioned

companies. In response to these requests, the Department initiated an

antidumping duty administrative review of Ferbasa, CBCC, and Minasligas

(collectively respondents). See Initiation of Antidumping and

Countervailing Duty Administrative Reviews and Request for Revocation

in Part, 63 FR 20378 (April 24, 1998).

The Department issued an antidumping duty questionnaire to the

respondents in May 1998 and received responses thereto in June and July

1998. In June 1998, the Department granted Ferbasa's request that it be

allowed to limit its reporting period for sales in the comparison

market to the period that is contemporaneous with its U.S. sale,

namely, May 1, 1997 through October 31, 1997. In a letter granting this

request, the Department also instructed Ferbasa to report its cost

figures for ferrosilicon for this limited period. Additionally, based

on U.S. Custom's documents obtained by the Department, we determined,

and CBCC confirmed, that CBCC did not have any entries of ferrosilicon

for consumption in the U.S. customs territory during the period of

review (POR). Therefore, we are rescinding this review with respect to

CBCC. The Department issued supplemental questionnaires to the

remaining respondents in September, October, and November 1998 and

received responses thereto in these same three months.

The Department is conducting this antidumping duty administrative

review in accordance with section 751 of the Act.

Duty Absorption

On May 20, 1998, petitioners requested that the Department

determine, with respect to Minasligas, whether antidumping duties had

been absorbed during the POR. On May 28, 1998, Minasligas requested

that the Department reject petitioners' request for a determination

regarding duty absorption because Minasligas did not sell the subject

merchandise to the United States through an affiliated importer during

the POR.

Section 751(a)(4) of the Act provides that the Department, if

requested, shall determine during an administrative review initiated

two or four years after the publication of the order, whether

antidumping duties have been absorbed by a foreign producer or exporter

subject to the order, if the subject merchandise is sold in the United

States through an importer who is affiliated with such foreign producer

or exporter. For transition orders as defined in section 751(c)(6)(C)

of the Act, i.e., orders in effect as of January 1, 1995, section

351.213(j)(2) of the Department's regulations provides that the

Department will make a duty-absorption determination, if requested, in

any administrative review initiated in 1996 or 1998. Because the order

on ferrosilicon from Brazil has been in effect since 1994, it is a

transition order in accordance with section 751(c)(6)(C) of the Act.

The instant review of Minasligas was initiated in 1998. However, during

the POR, Minasligas did not sell the subject merchandise to the United

States through importers that are affiliated within the meaning of

section 751(a)(4) of the Act and, therefore, we did not make a duty

absorption determination in this segment of the proceeding.

Scope of the Review

The merchandise subject to this review is ferrosilicon, a ferro

alloy generally containing, by weight, not less than four percent iron,

more than eight percent but not more than 96 percent silicon, not more

than 10 percent chromium, not more than 30 percent manganese, not more

than three percent phosphorous, less than 2.75 percent magnesium, and

not more than 10 percent calcium or any other element. Ferrosilicon is

a ferro alloy produced by combining silicon and iron through smelting

in a submerged-arc furnace. Ferrosilicon is used primarily as an

alloying agent in the production of steel and cast iron. It is also

used in the steel industry as a deoxidizer and a reducing agent, and by

cast iron producers as an inoculant.

Ferrosilicon is differentiated by size and by grade. The sizes

express the maximum and minimum dimensions of the lumps of ferrosilicon

found in a given shipment. Ferrosilicon grades are defined by the

percentages by weight of contained silicon and other minor elements.

Ferrosilicon is most commonly sold to the iron and steel industries in

standard grades of 75 percent and 50 percent ferrosilicon. Calcium

silicon, ferrocalcium silicon, and magnesium ferrosilicon are

specifically excluded from the scope of this review. Calcium silicon is

an alloy containing, by weight, not more than five percent iron, 60 to

65 percent silicon, and 28 to 32 percent calcium. Ferrocalcium silicon

is a ferro alloy containing, by weight, not less than four percent

iron, 60 to 65 percent silicon, and more than 10 percent calcium.

Magnesium ferrosilicon is a ferro alloy containing, by weight, not less

than four percent iron, not more than 55 percent silicon, and not less

than 2.75 percent magnesium. Ferrosilicon is currently classifiable

under the following subheadings of the Harmonized Tariff Schedule of

the United States (HTSUS): 7202.21.1000, 7202.21.5000, 7202.21.7500,

7202.21.9000, 7202.29.0010, and 7202.29.0050. The HTSUS subheadings are

provided for convenience and customs purposes. Our written description

of the scope of this review is dispositive.

Ferrosilicon in the form of slag is included within the scope of

this order if it meets, in general, the chemical content definition

stated above and is capable of being used as ferrosilicon. Parties that

believe their importations of ferrosilicon slag do not meet these

definitions should contact the Department and request a scope

determination.

Product Comparisons

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

products within the scope of this review that were produced by the

respondents, and sold in the ordinary course of trade in the comparison

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

determining the appropriate product comparisons to U.S. sales.

[[Page 67652]]

Fair Value Comparisons

To determine whether the respondents' sales of ferrosilicon to

customers in the United States were made at less than fair value, we

compared export price (EP) to normal value (NV), as described in the

``Export Price'' and ``Normal Value'' sections of this notice. In

accordance with section 777A(d)(2) of the Act, we calculated monthly

weighted-average prices for NV and compared these to the prices of

individual U.S. transactions.

Level of Trade

In accordance with section 773(a)(1)(B) of the Act, to the extent

practicable, we determined NV based on sales in the comparison market

at the same level of trade (LOT) as the EP transaction. The NV LOT is

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

is based on constructed value (CV), that of the sales from which we

derive selling, general and administrative (SG&A) expenses and profit.

For EP, the U.S. LOT is also the level of the starting-price sale,

which in this review, is from the exporter to the U.S. importer.

Neither respondent claimed a LOT adjustment. Nevertheless, in order

to determine whether the respondents' NV sales are at a different LOT

than their EP sales, we examined stages in the marketing process and

selling functions along the chain of distribution between the

respondent producers and the unaffiliated customers. 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 a LOT

adjustment under section 773(a)(7)(A) of the Act. 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).

During the POR, Ferbasa sold ferrosilicon to an unaffiliated

trading company in the U.S. market and to unaffiliated resellers and

end users in the comparison market, while Minasligas sold ferrosilicon

to unaffiliated trading companies and end users in the U.S. market and

unaffiliated end users in the comparison market. We found that the

selling functions associated with each respondent's U.S. and comparison

markets sales of ferrosilicon are generally the same. For example,

Ferbasa negotiated the sales terms, prepared ferrosilicon for shipment,

and maintained sales records in both the U.S. and comparison market.

Minasligas negotiated the sales terms and arranged for delivery, either

to the customer's location, in the case of certain sales in the

comparison market, or to the Brazilian port, in the case of sales to

U.S. customers. We noted, however, that Ferbasa sold ferrosilicon from

inventory in the comparison market, while it manufactured ferrosilicon

to order for the U.S. market. In addition, Ferbasa incurred commission,

freight, and brokerage and handling expenses in connection with sales

of ferrosilicon to the U.S. market, while it did not incur these

expenses on sales of ferrosilicon in the comparison market. With regard

to Minasligas, the company incurred expenses at the port in connection

with sales of ferrosilicon to the U.S. market, but it did not incur

such expenses on sales of ferrosilicon in the comparison market. These

differences primarily involve differences in handling and transporting

ferrosilicon to customers, not differences in selling functions.

Although Ferbasa maintained inventory only for its comparison market

customers, this simply involved storing piles of ferrosilicon in open

stalls at the factory. We concluded that this is not a significant

selling function given the low level of service that is required to

maintain inventory in such a fashion and, thus, we did not consider

Ferbasa's maintenance of inventory to be a significant difference in

selling activities. In the absence of differences in other selling

activities such as the sales order process, advertising, warranty

service, technical support, or the maintenance of distribution

warehouses, we found that the differences noted above do not constitute

substantial differences indicating that either respondent's sales in

the U.S. and comparison markets occurred at different marketing stages.

Therefore, we determined that a single level of trade exists in each

market for both respondents and, moreover, all U.S. and comparison

market sales were made at the same level of trade for each respondent.

Consequently, we did not make a level of trade adjustment in

calculating NV for either respondent.

Export Price

We calculated EP in accordance with sections 772(a) and (c) of the

Act because the respondents sold the subject merchandise directly to

the first unaffiliated purchasers in the United States prior to

importation and constructed export price was not otherwise warranted

based on the facts on the record. Specifically, we calculated EP based

on the packed prices to unaffiliated customers in the United States

from which we made deductions, where appropriate, for foreign inland

freight and insurance, brokerage and handling, port warehousing,

weighing and clerical expenses.

For Minasligas, we based EP on the U.S. dollar-denominated prices

that Minasligas negotiated with its U.S. customers and listed on

commercial invoices for its U.S. sales, rather than the Reais-

denominated prices that Minasligas reported on the sales tape. For

further information, see the Memorandum from Alexander Amdur to the

File on Minasligas: Calculations for the Preliminary Results of the

1997-1998 Administrative Review of Ferrosilicon from Brazil (Minasligas

Calculation Memorandum) dated December 1, 1998 on file in the Central

Records Unit (CRU) located in room B-099 of the main Department of

Commerce Building.

For Ferbasa, we based EP on the U.S. dollar-denominated price that

Ferbasa reported for its U.S. transaction on the sales tape. We

accepted the reported price notwithstanding the petitioners' allegation

of November 5, 1998, that the price may not have been the result of a

bona fide arm's-length transaction. We have reviewed the information

contained in the administrative record and concluded that the evidence

does not demonstrate that the transaction in question was not bona

fide. Therefore, for the preliminary results, we have based Ferbasa's

EP on the price reported in the sales tape. For further information,

see the Concurrence Memorandum From Howard Smith to Holly Kuga

regarding this issue, dated December 1, 1998, on file in the CRU

located in room B-099 of the main Department of Commerce Building.

Normal Value

In accordance with section 773(a)(1)(C)(ii) of the Act, we

determined that the home market for each respondent serves as a viable

basis for calculating NV because the aggregate volume of each

respondent's home market sales of the foreign like product was greater

than five percent of the aggregate volume of its U.S. sales of the

subject merchandise. Therefore, in accordance with section

773(a)(1)(B)(i) of the Act, we based NV on the price at which the

foreign like product was first sold for consumption in the exporting

country in the usual commercial quantities and in the ordinary course

of trade and, to the extent practicable, at the same level of trade as

the EP. In accordance with section 773(a)(6) of the Act, we adjusted

NV, where applicable,

[[Page 67653]]

by adding U.S. packing costs and subtracting home market packing costs,

ICMS and IPI tax expenses, and freight expenses. Moreover, in

accordance with section 773(a)(6) of the Act, we adjusted NV for

differences in the circumstances of sale by adding late payment

charges, where applicable, and U.S. credit expenses, and by subtracting

home market credit expenses.

For Minasligas, we recalculated the amount of the U.S. credit

expense that was used as an adjustment to NV by making the following

changes. First, we used, as the date of payment, the date Minasligas'

bank received payment from Minasligas' U.S. customers for each U.S.

sale, rather than the date the bank advanced Minasligas money on the

sale through Advance Exchange Contracts (ACCs). Second, we used the

actual average interest rate of the ACCs that Minasligas used to

finance its U.S. sales during the POR, rather than the average monthly

Brazilian Taxa referencial de juros (TR) rate for the POR reported by

Minasligas in its response. The Department's questionnaire instructs

respondents to calculate U.S. credit expense using the interest rate

paid on short-term U.S. dollar borrowings. Although Minasligas claimed

that it had no short-term U.S. dollar borrowings during the POR, we

determined that the advances obtained from the ACCs were short-term

U.S. dollar borrowings.

In its response, Minasligas calculated home market credit expense

using a gross unit price net of one month's credit expense, regardless

of the credit period applicable to the sale. Because the Department's

practice is to calculate credit expense based on gross unit price

without any adjustments, we recalculated Minasligas's home market

credit expense using the unadjusted gross unit price. Furthermore, we

recalculated the home market credit expense using the average monthly

TR rate for the POR reported by Minasligas in the narrative portion of

its response, rather than the interest rate that Minasligas

inadvertently used to calculate credit expense on its sales tape. For

further information, See Minasligas Calculation Memorandum.

For Ferbasa, we adjusted NV by adding U.S. commissions and

subtracting home market indirect selling expenses up to the amount of

the U.S. commission, in accordance with 19 CFR 351.410(e). We did not

reduce NV by the reported home market packing expense because we

determined that Ferbasa reported packing revenue, rather than packing

expense, in its home market sales tape. In addition, although Ferbasa

revised its reported cost of manufacturing, it failed to revise its

home market inventory carrying cost which was based on manufacturing

costs. Therefore, we recalculated home market inventory carrying cost

using the revised cost of manufacturing figure reported by Ferbasa in

its November 10, 1998, supplemental response.

I. Cost of Production (COP) Analysis

Because we disregarded sales below the COP for Ferbasa and

Minasligas in the last completed segments of the proceeding (See

Ferrosilicon from Brazil; Notice of Final Results of Antidumping Duty

Administrative Review, 63 FR 28355 (May 22, 1998) with respect to

Ferbasa, and 62 FR 43504 (August 14, 1997) with respect to Minasligas),

we had reasonable grounds to believe or suspect that sales of the

foreign 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 investigations to determine whether

the respondents sold ferrosilicon in the home market during the POR at

prices that were less than their COP.

a. Calculation of COP. In accordance with section 773(b)(3) of the

Act, we calculated each respondent's COP based on the sum of the cost

of materials and fabrication employed in producing the foreign like

product, plus amounts for SG&A, financing expenses and, for Minasligas,

packing costs. We did not include packing costs in COP for Ferbasa

because the company failed to report this cost separately. We adjusted

Ferbasa's reported costs by (1) adjusting general and administrative

expenses by other operating income and non-operating expenses related

to the general operations of the company, and (2) increasing financing

expense by monetary correction losses. For further information, see the

Ferbasa Preliminary Results Calculation Memorandum dated December 1,

1998, on file in the CRU located in room B-099 of the main Department

of Commerce Building. We adjusted Minasligas' reported costs by using,

as the fixed overhead cost for all grades of ferrosilicon, the one cost

that Minasligas originally reported for all grades of ferrosilicon,

rather than the separate fixed overhead costs that Minasligas

subsequently allocated to the standard and refined grades of

ferrosilicon. We recalculated the indirect selling expenses using a

value-based, rather than quantity-based, allocation methodology. For

further information, see Minasligas Calculation Memorandum.

b. Test of Home Market Prices. In order to determine whether the

respondents made home market sales during the POR at prices below the

COP on a product-specific basis, we compared the weighted-average COP

(net of selling and, where applicable, packing expenses and adjusted as

noted above) to home market prices less ICMS and IPI tax expenses,

direct and indirect selling expenses and, where applicable, home market

packing expenses. In addition, where applicable, we added interest

revenue to home market prices before comparing them to the COP. We

excluded ICMS and IPI tax expenses from the home market prices used in

our sales-below-cost analysis because the COP did not contain these

expenses.

In determining whether to disregard home market sales made at

prices below the COP, we examined whether such sales were made (1)

within an extended period of time in substantial quantities, and (2) at

prices which permitted the recovery of all costs within a reasonable

period of time, in accordance with section 773(b)(1) of the Act.

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

percent of a respondent's sales of a given product during the POR were

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

that product because we determined that the below-cost sales were not

made in ``substantial quantities.'' Where 20 percent or more of a

respondent's sales of a given product during the POR were at prices

less than the COP, we determined that such sales were made in

``substantial quantities'' within an extended period of time and not at

prices which would permit recovery of all costs within a reasonable

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

Act. Therefore, we disregarded the below-cost sales.

In the instant review, we found that for certain ferrosilicon

products, more than 20 percent of Ferbasa's and Minasligas' home market

sales were sold at prices less than the COP within an extended period

of time, and that the prices did not provide for the recovery of costs

within a reasonable period of time. Therefore, in accordance with

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

used the remaining above-cost sales as the basis for determining NV.

Currency Conversion

Pursuant to section 773(A)(a) of the Act, for purposes of the

preliminary results, we converted foreign currencies into U.S. dollars

using the official exchange rates in effect on the date of the U.S.

sales. These official exchange

[[Page 67654]]

rates are based on the daily rates identified by the Dow Jones Business

Information Services. Section 773(A)(a) of the Act directs the

Department to use a daily exchange rate to convert foreign currencies

into U.S. dollars unless the daily rate involves a ``fluctuation.'' It

is our practice to find that a fluctuation exists when the daily

exchange rate differs from a benchmark rate by 2.25 percent. See

Preliminary Results of Antidumping Duty Administrative Review: Certain

Welded Carbon Steel Pipe and Tube from Turkey (61 FR 35188, 35192)

(July 5, 1996). The benchmark rate is defined as the moving average of

the rates for the past 40 business days. Where we determined that the

daily rates applicable to this review fluctuated, as defined above, we

converted foreign currencies into U.S. dollars using the benchmark

exchange rate.

Preliminary Results of The Review

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

following weighted-average dumping margins exist:

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

Weighted-

average

Manufacturer/exporter margin

(percent)

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

Companhia Ferroligas Minas Gerais-Minasligas (Minasligas).. 10.16

Companhia de Ferro Ligas da Bahia (Ferbasa)................ 0.00

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

Pursuant to 19 CFR 351.224(b), the Department will disclose to

parties to the proceeding any calculations performed in connection with

these preliminary results within 5 days of the date of publication of

this notice. Any interested party may request a hearing within 30 days

of the date of publication of this notice. Parties who submit arguments

in this proceeding are requested to submit with each argument: (1) a

statement of the issue and (2) a brief summary of the argument. All

case briefs must be submitted within 30 days of the date of publication

of this notice. Rebuttal briefs, which are limited to issues raised in

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

publication of this notice. A hearing, if requested, will be held 44

days after the publication of this notice or the first business day

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

of this administrative review, which will include the results of its

analysis of issues raised in any written comments or at the hearing,

within 120 days from the publication of these preliminary results.

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

(Customs) shall assess, antidumping duties on all appropriate entries.

Upon completion of this review, the Department will issue appraisement

instructions directly to Customs. The final results of this review

shall be the basis for the assessment of antidumping duties on entries

of merchandise covered by the determination and for future deposits of

estimated duties. For duty assessment purposes, for each importer we

will divide the total applicable dumping margin (calculated as the

difference between NV and EP) by the total number of metric tons sold.

We will direct Customs to assess the resulting per-metric ton dollar

amount against each metric ton of subject merchandise entered by the

importer during the POR. Furthermore, the following deposit

requirements will be effective upon completion of the final results of

this administrative review for all shipments of ferrosilicon from

Brazil entered, or withdrawn from warehouse, for consumption on or

after the publication date of the final results of this administrative

review, as provided by section 751(a)(1) of the Act: (1) The cash

deposit rate for the reviewed companies (Ferbasa and Minasligas) will

be the rate established in the final results of this administrative

review, except if the rate is less than 0.5 percent, ad valorem and,

therefore, de minimis, the cash deposit rate will be zero; (2) for

merchandise exported by manufacturers or exporters not covered in this

review but covered in the original less than fair value (LTFV)

investigation or a previous review, the cash deposit rate will continue

to be the company-specific rate published in the most recent period;

(3) if the exporter is not a firm covered in this review, a previous

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

reviews or the original LTFV investigation, the cash deposit rate will

be 35.95 percent, the ``All Others'' rate established in the original

LTFV investigation (59 FR 11769, March 14, 1994). These requirements,

when imposed, shall remain in effect until publication of the final

results of the next administrative review.

This notice serves as a preliminary reminder to importers of their

responsibility under 19 CFR 351.402(f) of the Department's regulations

to file a certificate regarding the reimbursement of antidumping duties

prior to liquidation of the relevant entries during this review period.

Failure to comply with this requirement could result in the Secretary's

presumption that reimbursement of antidumping duties occurred and the

subsequent assessment of double antidumping duties.

This administrative review and notice are in accordance with

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

Dated: December 1, 1998.

Robert S. LaRussa,

Assistant Secretary for Import Administration.

[FR Doc. 98-32542 Filed 12-7-98; 8:45 am]

BILLING CODE 3510-DS-P