Silicon Metal from Brazil: Notice of Final Results of Antidumping Duty Administrative Review.

DEPARTMENT OF COMMERCE

International Trade Administration

[A-351-806]

Silicon Metal from Brazil: Notice of Final Results of Antidumping

Duty Administrative Review.

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

ACTION: Notice of final results of antidumping duty administrative

review.

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SUMMARY: On August 6, 1998, the Department of Commerce (the Department)

published the preliminary results of administrative review of the

antidumping duty order on silicon metal from Brazil. This review covers

five manufacturers/exporters of silicon metal from Brazil during the

period July 1, 1996 through June 30, 1997.

Based on our analysis of the comments received and the correction

of certain ministerial errors, we have changed our results from those

presented in our preliminary results as described below in the

``Changes From the Preliminary Results'' section of this notice. The

final results are listed below in the section ``Final Results of

Review.''

EFFECTIVE DATE: January 9, 1999.

FOR FURTHER INFORMATION CONTACT: Zev Primor or Howard Smith, AD/CVD

Enforcement, Group II, Office Four, Import Administration,

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

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

telephone: (202) 482-4114 and (202) 482-5193, respectively.

SUPPLEMENTARY INFORMATION:

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 are to the

provisions codified at 19 CFR 351 (1998).

Background

On August 6, 1998, the Department published its preliminary results

of review, Silicon Metal from Brazil: Preliminary Results of

Antidumping Duty Administrative Review, 63 FR 42001 (Silicon Metal

Preliminary Results), of the antidumping duty order on silicon metal

from Brazil (56 FR 36135, July 31, 1991).

We gave interested parties an opportunity to comment on the

preliminary results. On October 2, 1998, we received comments from:

Companhia Brasileira Carbureto De Calcio (CBCC); Ligas de Aluminio S.A.

(LIASA); Companhia Ferroligas Minas Gerais-Minasligas (Minasligas); and

RIMA Industrial S/A (RIMA), (collectively, the four respondents),

American Silicon Technologies, Elkem Metals Company, Globe

Metallurgical, Inc. and SKW Metals & Alloys, Inc., (collectively the

petitioners) and General Motors Corporation (GM).

On October 21, 1998, the same parties submitted rebuttal comments.

Eletrosilex Belo Horizonte (Eletrosilex) did not submit a case or

rebuttal brief regarding the preliminary results. We held a public

hearing on December 10, 1998, to give interested parties the

opportunity to express their views directly to the Department. Based on

our analysis of the comments received and the correction of certain

ministerial and computer programming errors, we have made changes from

the preliminary results, as described below in ``Changes From the

Preliminary Results'' section of this notice. The final results are

listed below in the section ``Final Results of Review.'' The Department

has now completed this administrative review in accordance with Section

751(a) of the Act.

Scope of the 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 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.

Changes From the Preliminary Results

We have made the following changes for these final results.

CBCC

We have recalculated the general and administrative (G&A) expense,

financial expense, and depreciation expense included in CBCC's cost of

production (COP) and constructed value (CV). In addition, we have

recalculated U.S. credit expense and reclassified various expense

adjustments for U.S. price as movement expenses rather than direct

selling expenses. For further information refer to the discussion of

CBCC in the ``Company-Specific Issues'' section below; also see the

Memorandum to the File regarding

[[Page 6306]]

CBCC: Calculations for the Final Results of the 1996-1997 Antidumping

Duty Administrative Review of Silicon Metal From Brazil, dated February

2, 1999, on file in the Central Records unit (CRU) located in room B-

099 of the main Department of Commerce building.

Eletrosilex

We have applied an adverse facts available (FA) dumping margin for

Eletrosilex because we determined that Eletrosilex's response is

incomplete with respect to requested clarifications and that the data

on the record is so insufficient that it cannot be used without undue

difficulty. See the ``Facts Available (FA)'' section below for further

discussion. Also see the ``Application of Facts Available for

Eletrosilex Belo Horizonte (Eletrosilex) in the Final Results of the

1996-1997 Administrative Review'' memorandum, dated February 2, 1999,

(Eletrosilex FA memo) on file in the CRU.

Minasligas

We have recalculated home market price to ensure that the ICMS tax

charged to home market customers is only deducted once from home market

price. We recalculated credit expense by using an interest rate of 6.7

percent. We did not allow a duty drawback for the final results. We

recalculated G&A expenses included in CV and COP by using cost of

manufacturing that is net of VAT. In addition, for the final results,

we have revised our calculation of the G&A rate for Minasligas to

exclude G&A expenses incurred by Minasligas's parent.

Rima

We have recalculated U.S. imputed credit expense, removed R$100

adjustment from both the U.S. and home market data, applied the 90/60

day contemporaneous window in the price matching analysis and removed

an offset to financial expenses. For further information see the

discussion of RIMA in the ``Company-Specific Issues'' section below;

also see the Memorandum to the File on RIMA: Calculations for the Final

Results of the 1996-1997 Antidumping Duty Administrative Review of

Silicon Metal From Brazil, dated February 2, 1999, on file in the CRU.

Facts Available (FA)

In accordance with section 776(a) of the Act, we have determined

that the use of adverse FA is warranted for Eletrosilex for these final

results of review.

1. Application of Facts Available

Section 776(a) of the Act provides that, if an interested party

withholds information that has been requested by the Department, fails

to provide such information in a timely manner or in the form or manner

requested, significantly impedes a proceeding under the antidumping

statute, or provides information which cannot be verified, the

Department shall use, subject to sections 782(d) and (e), facts

otherwise available in reaching the applicable determination. In this

review, as described in detail below, Eletrosilex failed to provide the

necessary information in the form and manner requested. Thus, pursuant

to section 776(a) of the Act, the Department is required to apply,

subject to section 782(d), facts otherwise available.

Section 782(d) of the Act provides that, if the Department

determines that a response to a request for information does not comply

with the request, the Department will inform the person submitting the

response of the nature of the deficiency and shall, to the extent

practicable, provide that person the opportunity to remedy or explain

the deficiency. If that person submits further information that

continues to be unsatisfactory, or this information is not submitted

within the applicable time limits, the Department may, subject to

section 782(e), disregard all or part of the original and subsequent

responses, as appropriate.

Pursuant to section 782(e) of the Act, notwithstanding the

Department's determination that the submitted information is

``deficient'' under section 782(d) of the Act, the Department shall not

decline to consider such information if all of the following

requirements are satisfied: (1) the information is submitted by the

established deadline; (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; and

(5) the information can be used without undue difficulties.

2. Selection of Facts Available

In selecting from among the facts otherwise available, section

776(b) of the Act authorizes the Department to use an adverse inference

if the Department finds that an interested party failed to cooperate by

not acting to the best of its ability to comply with the request for

information. See, e.g., Certain Welded Carbon Steel Pipes and Tubes

From Thailand: Final Results of Antidumping Duty Administrative Review,

62 FR 53808, 53819-20 (Oct. 16, 1997) (Pipe and Tubes From Thailand).

Eletrosilex responded only partially to one supplemental

questionnaire and failed to respond altogether to two additional

supplemental requests for information, which prevented the Department

from making critical decisions involving the calculation of

Eletrosilex's dumping margin. Accordingly, Eletrosilex did not act to

the best of its ability to comply with the request for information and

thus, under section 776(b) of the Act, an adverse inference is

warranted. For further discussion of the Department's selection of FA,

please refer to the Department's Position to Eletrosilex-specific

Comment 1 below and the Eletrosilex FA memo.

Thus, pursuant to section 776(b) of the Act, we are basing

Eletrosilex's margin on adverse FA for purposes of the final results.

As adverse FA for Eletrosilex, we have used the highest rate calculated

for any respondent in any segment of this proceeding. This rate is

93.20 percent. See Final Determination of Sales at Less Than Fair

Value: Silicon Metal from Brazil, 55 FR 38716 (September 20, 1990)

(Silicon Metal-LTFV).

3. Corroboration of Information Used as Facts Available

Section 776(b) of the Act authorizes the Department to use as

adverse FA information derived from the petition, the final

determination from the less than fair value (LTFV) investigation, a

previous administrative review, or any other information placed on the

record.

Section 776(c) of the Act requires the Department to corroborate,

to the extent practicable, secondary information used as FA. Secondary

information is defined as ``[i]nformation derived from the petition

that gave rise to the investigation or review, the final determination

concerning the subject merchandise, or any previous review under

section 751 concerning the subject merchandise.'' See the Statement of

Administrative Action (SAA) at 870.

The SAA further provides that the term ``corroborate'' means simply

that the Department will satisfy itself that the secondary information

to be used has probative value (see SAA at 870). Thus, to corroborate

secondary information, the Department will, to the extent practicable,

examine the reliability and relevance of the information used. However,

unlike other types of information, such as input costs or selling

expenses, there are no independent sources for

[[Page 6307]]

corroborating calculated dumping margins. The only source for margins

is an administrative determination. Thus, in an administrative review,

if the Department chooses as total adverse FA a calculated dumping

margin from a prior segment of the proceeding, it is not necessary to

question the reliability of the margin from that time period (i.e., the

Department can normally be satisfied that the information has probative

value and that it has complied with the corroboration requirements of

section 776(c) of the Act). See e.g., Elemental Sulphur from Canada:

Preliminary Results of Antidumping Duty Administrative Review 62 FR at

971 (January 7, 1997) and AFBs-1997.

As to the relevance of the margin used for adverse FA, the

Department will consider information reasonably at its disposal as to

whether there are circumstances that would render a margin irrelevant.

See Tapered Roller Bearings from Japan; Final Results of Antidumping

Duty Administrative Review 62 FR 47454 (September 9, 1997). Where

circumstances indicate that the selected margin is not appropriate as

adverse FA, the Department will disregard the margin and determine an

appropriate margin. See also Fresh Cut Flowers from Mexico; Preliminary

Results of Antidumping Duty Administrative Review 60 FR 49567

(September 26, 1995). See the Department's Position to Eletrosilex-

specific Comment 1, below, for further discussion.

We selected 51.23 percent as adverse because we find that this rate

is sufficiently adverse to induce Eletrosilex's full cooperation in

future reviews.

Interested Party Comments

We gave interested parties an opportunity to comment on the

preliminary results. As noted above, we received case and rebuttal

briefs from CBCC, LIASA, Minasligas, RIMA, petitioners, and GM.

General Issues

Value Added Taxes (VAT)

Comment 1: The Department's Treatment of VAT. The petitioners argue

that the Department's new VAT policy with regard to calculating CV,

which was announced in the preliminary results of this proceeding,

violates the statute. According to the petitioners, under the current

policy the Department will: 1) make no addition for such taxes in

calculating CV where the producer/exporter can demonstrate that it was

able to offset its tax liability on domestic sales; 2) include only a

portion of such taxes in CV where a producer/exporter uses only a

portion of the credits generated by the payment of VAT on inputs as an

offset; and 3) include the entire amount of VAT in CV if a producer/

exporter is unable to use any of the tax credits as an offset, or if

the producer/exporter fails to provide satisfactory evidence of its tax

experience on this question.

The petitioners state that there are two VAT taxes in Brazil: ICMS

and IPI. The petitioners also state that, during the period of review

(POR), the respondents paid VAT on input purchases regardless of

whether the inputs were used in the production of silicon metal or in

the production of other products. The petitioners further state that

all VAT paid by the respondents were recorded indiscriminately as

credits in VAT ledgers. The petitioners continue that no VAT were

collected on export sales of silicon metal and that the Brazilian

government did not remit or refund the VAT paid on inputs to any of the

respondents upon exportation of silicon metal.

The petitioners argue that the Department's new policy is contrary

to law in at least two respects. First, citing section 773(e) of the

Act, the petitioners contend that the statute allows exclusion of VAT

paid on inputs for export merchandise only when the VAT is remitted or

refunded upon exportation of the merchandise made from the inputs. The

petitioners contend that allowing for the exclusion of VAT from CV in

circumstances other than those expressly provided by the statute

violates the statute. Second, the petitioners maintain that, in

applying its policy, the Department relied on information in the

respondents' ICMS tax ledgers that does not distinguish between taxes

paid on inputs for subject merchandise and other products, nor between

taxes collected on sales of subject merchandise or other products. In

addition, the petitioners contend that the policy does not require

sales-specific tracing of taxes paid on inputs to the exported

merchandise produced from such inputs. The petitioners argue that by

indiscriminately considering taxes related to subject as well as non-

subject merchandise, and by failing to require the sales-specific

tracing of taxes, the policy contravenes the statute and case law,

which require the calculation of CV to be specific to the subject

merchandise and any determination regarding VAT recovery to be specific

to the taxes paid on inputs for each U.S. sale.

The petitioners argue that, in order for Brazilian VAT paid on

inputs not to constitute a cost of materials that must be included in

CV, a respondent must demonstrate full recovery of the taxes paid on

the materials used to produce the merchandise exported to the United

States. In support of their argument, the petitioners cite AIMCOR v.

United States, 19 CIT 966 (1995) (AIMCOR 1995), the subsequent

redetermination upon remand Final Redetermination of Remand in

Ferrosilicon from Brazil (January 16, 1996), and the Court of Appeals

for the Federal Circuit's (CAFC's) affirmation of the Department's

redetermination pursuant to AIMCOR v. United States, slip op. 96-79 at

2 (CIT 1996) (AIMCOR 1996).

Furthermore, the petitioners contend that the methodology the

Department used in applying its new VAT policy to CBCC and LIASA is

fundamentally flawed. The petitioners note that for CBCC and LIASA, the

Department determined the amount of unrecovered VAT paid on inputs by

multiplying a VAT ratio by the cost of manufacture.\1\ The Department

determined the numerator of the ratio, which is the total amount of

unused VAT credits generated by the company during the POR, by

subtracting the ICMS credit balance at the beginning of the POR from

the ICMS credit balance at the end of the POR. The Department

determined the denominator of the ratio (i.e., the total COGS for

export sales for 1996) by multiplying the company's total COGS for 1996

by the ratio of the total value of export sales during the POR to the

total value of all sales during the POR. First, with respect to the

numerator of the VAT ratio, the petitioners argue that the Department

failed to recognize that ICMS tax ledgers provided by the respondents,

from which the Department calculated the numerator, show only monthly

total amounts of VAT paid and collected on all products, rather than

VAT amounts that are specific to the subject merchandise. Second, in

calculating the denominator of the VAT ratio, the petitioners argue

that the Department used the annual COGS for 1996, but used export

sales and total sales revenue for the POR. Also, the petitioners note

that the figures used to calculate the denominator of the VAT ratio are

not specific to subject merchandise.

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\1\ The Department added unrecovered VAT to CV in its cost

calculations.

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The petitioners argue that these facts demonstrate that the current

policy fails to distinguish between (1) VAT paid on inputs used to

produce subject merchandise and VAT paid on inputs used to produce

other products, and (2) the use of credits derived from VAT

[[Page 6308]]

payments on inputs to reduce VAT liability generated by home market

sales of subject merchandise, as opposed to home market sales of other

products. As a result, the petitioners contend, the new policy fails to

determine as accurately as possible the true cost to the respondent

manufacturing the subject merchandise and is contrary to the statute

and case law.

Minasligas, LIASA, CBCC, and RIMA agree with the Department's VAT

policy as stated in the preliminary results of this proceeding because,

they maintain, it recognizes the economic reality of the Brazilian tax

system. The four respondents note that whether VAT paid is offset by

VAT collected or is used to purchase electricity, VAT is not a cost

under Brazil's tax scheme and should not be added to CV. These four

respondents argue that the petitioners' argument that Brazilian VAT

should always be added in full to CV because it is not ``remitted or

refunded upon exportation of the subject merchandise produced from such

materials ignores the economic reality of the Brazilian tax system. The

respondents further assert that the Brazilian tax scheme creates a

situation in which VAT may not be a cost of the materials and thus

should not be included in the CV as part of the cost of the materials.

The four respondents, like the petitioners, cite AIMCOR 1995 and

the CAFC's affirmation of the Department's redetermination in AIMCOR

1996 in support of their argument. The respondents contend that the

Court of International Trade (CIT) noted ``[i]n a tax scheme such as

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

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

product. For example, a respondent that has fully recovered value-added

taxes upon input costs prior to exportation, has not in fact incurred

the value-added tax as a cost of materials.'' AIMCOR 1995. Citing the

CAFC's affirmation of AIMCOR 1996 the respondents reiterate ``the

method and rationale for complying with 19 U.S.C. 1677b(e)(1)(A) shall

account for the economic reality that ICMS that is paid on inputs to

export production, and recovered from taxes otherwise due the Brazilian

government, is not a cost of producing silicon metal for export in

Brazil.'' Accordingly, the respondents argue that the Department's

approach does not violate the statute.

The respondents continue that the reality of the Brazilian tax

system is that VAT paid and VAT collected are kept in separate tax

books in accordance with Brazilian law, but are reported as one amount

in each of the respective books. Therefore, the respondents state that

the Department, in the preliminary results, performed the same type of

analysis as that performed by the Brazilian government for determining

tax liability and tax recovery.

The respondents state that if the Department were to adopt a

different VAT recovery methodology for the final results, the

Department should use a methodology that reconciles the petitioners'

concerns with the language of the statute. The respondents suggest the

following methodology for analyzing the tax recovery for each export

sale: first, the respondents assert the Department could determine how

much VAT was paid by each respondent on the material inputs used in the

production of one ton of the exported subject merchandise. The

respondents maintain that this information is on the record. Second,

the respondents state that the Department could determine the total

amount of VAT paid to produce the quantity sold to the United States

during the POR. Finally, the respondents state that the Department

could determine whether this amount was recovered from VAT collected

from the domestic sales of subject merchandise, which can be found in

the home market sales listings.

Department's Position: The petitioners incorrectly claim that the

Department must include in CV the ICMS and IPI taxes paid on the

purchase of material inputs because such taxes are not remitted or

refunded upon exportation of the subject merchandise, as provided in

section 773(e) of the Act. No party in this case disputes the fact that

under the Brazilian VAT system, such taxes are not remitted or refunded

upon exportation. However, as the CIT has stated, there is another

statutory exception in which taxes on inputs will not constitute ``cost

of materials.'' Aimcor v. United States, 19 CIT 966 (1995), aff'd, 141

F.3d 1098 (Fed. Cir. 1998) (AIMCOR 1998). In that case, the court held

that the statute requires the inclusion in CV, of the cost of materials

used in producing the merchandise ``at a time preceding the date of

exportation of the merchandise.'' Id. at 976. The court then concluded

that ``[i]n a tax scheme such as Brazil's, a respondent may be able to

show that a value-added tax on inputs did not in fact constitute a

`cost of materials' for the exported product. For example, a respondent

that has fully recovered value-added taxes paid upon input costs prior

to exportation, has not in fact incurred the value-added tax as a `cost

of materials' Id. Thus, contrary to the petitioners' interpretation of

the CIT rulings in Camargo Correa Metals, S.A. v. United States, 17 CIT

897, 911 (1993), AIMCOR 1995, AIMCOR 1996, and the CAFC ruling in

AIMCOR 1998, we continue to believe that the courts have accorded

substantial weight to the ``economic reality'' of the Brazilian tax

system, which in some circumstances allows for the recovery of the tax

paid on material inputs used in the production of exported merchandise.

Therefore, for these final results, we have continued to calculate CV

based upon the VAT methodology established in Silicon Metal Preliminary

Results.

Further, we note that pursuant to amendments brought about by the

URAA, the Act provides that CV shall be an amount equal to the sum of

the cost of materials, ``during a period which would ordinarily permit

the production of the merchandise in the ordinary course of business.''

See section 773(e)(1) of the Act. Thus, the statute does not prohibit

the exclusion of such taxes from CV where recovery of the tax occurs

after exportation of the subject merchandise. In the present case, the

Department finds that taxes on inputs recovered during the period of

the review reasonably and accurately measures the actual amount of

taxes included in the cost of materials used in the production of the

subject merchandise. See also the Department's Position to CBCC-

specific Comment 2 below. Thus, where a respondent demonstrates

recovery of the taxes paid on material inputs during the period of

review, we have determined that such taxes are not incurred, and

therefore do not constitute cost of materials for purposes of

calculating CV.

Moreover, the petitioners mistakenly contend that by considering

taxes related to subject as well as non-subject merchandise, and by not

requiring sales-specific tracing of taxes, the new policy contravenes

the statute and case law. As discussed above, under the Brazilian VAT

system, a tax credit issues upon the purchase of inputs used in the

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

the government arising from home market sales (i.e., ICMS taxes

collected from home market customers). Thus, companies pay taxes on

inputs, collect taxes on home market sales, and remit the difference

(where the taxes collected on sales exceed those paid on inputs) to the

government without regard to which inputs incurred the tax (and thus

generated the credit) and which products were sold in the home market.

Because any recovery of the tax paid on material inputs is contingent

upon the receipt of a tax credit, and because the tax credit arises

upon the purchase of inputs used in the production of

[[Page 6309]]

merchandise which includes subject merchandise, we find that the tax

rebate is directly related to the production of the subject

merchandise.

Furthermore, contrary to the petitioners' request, we have not

required that respondents provide a sales-specific tracing in order to

determine whether the tax is recovered. In this case, taxes paid on

inputs (credits) and taxes collected on home market sales are recorded

in tax ledgers without regard to the inputs generating the credits or

the products sold. Given the nature of how the taxes are treated by the

Brazilian government, and the corresponding manner in which they are

recorded in the companies books and ledgers, we have determined that in

this case, sale-specific reporting is unduly burdensome. See section

773(f)(1)(A) of the Act. Therefore, to the extent taxes paid on inputs

(i.e., credits) are not recovered, they are properly allocated across

all products that generate tax credits.

Finally, we disagree with the petitioners' assertion that our VAT

ratio calculation for CBCC and LIASA is flawed. The Department

calculated the denominator of the ratio using sales figures from 1996,

not the POR as petitioner contends. We have not addressed the VAT

issues raised with respect to Rima because, for these final results,

all of Rima's export sales matched to home market sales and, therefore

we have not resorted to CV.

Company-Specific Issues

Eletrosilex

Comment 1: Facts Available

The petitioners argue that Eletrosilex's failure to respond to the

Department's supplemental questionnaires regarding its reported U.S.

and home market sales data, its COP/CV data, and ICMS taxes, warrant

the application of total FA because the Department cannot perform an

accurate margin calculation using the information on the record. The

petitioners state that section 776(a) of the Act authorizes the

Department to use the facts otherwise available where an interested

party has withheld information requested by the Department. The

petitioners recount several instances where the Department has resorted

to total FA in a number of cases where a respondent, like Eletrosilex,

responded to the Department's original questionnaire, but failed to

respond to supplemental requests for information (e.g., Certain Fresh

Cut Flowers from Colombia; Final Results of Antidumping Duty

Administrative Review 61 FR 42833, 42836 (August 19, 1996) and Notice

of Final Determination of Sales at Less Than Fair Value: Steel Wire Rod

from Venezuela 62 FR 8946, 8947 (February 23, 1998)).

The petitioners argue that in this case the Department does not

have enough data on the record to reasonably calculate a dumping

margin. For instance, the petitioners maintain, Eletrosilex has not

provided sufficient evidence for the Department to determine whether

the involvement of Eletrosilex's affiliates in its U.S. sales requires

use of constructed export price (CEP) as the basis for U.S. price,

rather than export price (EP) as was used by the Department in the

preliminary results.

Maintaining that the Department recognized the issue of affiliate

involvement in U.S. sales in its March 24, 1998 and June 29, 1998,

supplemental questionnaires, the petitioners note that Eletrosilex

provided only invoices and payment notices, but failed to provide sales

correspondence, internal or external sales order confirmations, or

shipping and export documents on all its U.S. sales, as requested by

the Department. The petitioners reiterate that, with the exception of

invoices and payment notices, none of the requested sales information

was provided by Eletrosilex.

Thus, the petitioners conclude the Department cannot resolve this

issue given Eletrosilex's failure to properly respond to the

Department's inquiries into this issue. Noting that section 772(d) of

the Act requires additional deductions from U.S. price in the case of

CEP margin comparisons, the petitioners reiterate, due to Eletrosilex's

failure to respond, the Department cannot even identify the universe of

required deductions to U.S. price under section 772 of the Act.

In addition to the CEP/EP issue, the petitioners contend that

Eletrosilex's refusal to respond to the supplemental requests, led to

Eletrosilex's failure to provide other critical information necessary

to calculate an accurate margin. First, the petitioners state that the

Department requested Eletrosilex to explain a major discrepancy between

its reported depreciation for the POR and the depreciation recorded in

its 1996 financial statements.

The petitioners argue that the Department's partial FA decision in

the preliminary results (i.e., the Department used the depreciation

from the 1996 financial statements) on this issue did not account for a

proper amount of Eletrosilex's depreciation for the portion of the POR

in 1997 (i.e., January through June) because Eletrosilex did not submit

its 1997 financial statements. Similarly, the petitioners state that

the Department included an amount for amortization of deferred expenses

in Eletrosilex's COP/CV using only 1996 data. Second, the petitioners

contend that Eletrosilex provided conflicting and inaccurate

information regarding the basis on which it reported its U.S. and home

market sales quantities. The petitioners state that Eletrosilex

reported in its April 10, 1998, supplemental response that its U.S.

prices were expressed on a gross-weight basis. However, the petitioners

contend that invoices submitted by Eletrosilex indicate that the

quantities reported in its revised U.S. sales listing are expressed on

a net-weight basis. The petitioners note that for certain sales,

documentation submitted by Eletrosilex listed identical gross and net

weights, which the petitioners contend is not possible given the fact

that silicon metal contains elements other than silicon. The

petitioners maintain that Eletrosilex failed to provide a response to

the Department's June 29, 1998, request that Eletrosilex report the

gross and net weights for all U.S. sales and to confirm that its

production volume was reported on a gross-weight basis. The petitioners

argue that Eletrosilex's failure to provide all of the above

information prevents the Department from ensuring that CV and U.S.

price are compared on an equivalent basis.

Citing the Final Determination of Sales at Less Than Fair Value:

Vector Supercomputers From Japan 62 FR 45623, 45625 (August 28, 1997),

the petitioners argue that where a respondent's failures to provide

requested information prevented the Department from fulfilling its

statutory obligation to calculate an accurate margin, the Department

must resort to total FA.

For the reasons stated above, the petitioners contend that the

Department must apply total FA to determine Eletrosilex's dumping

margin in this review. The petitioners argue that where a respondent

has not cooperated to the best of its ability, the Department applies

as total FA the higher of the margin from the petition or the highest

rate calculated for any respondent in any prior segment of the

proceeding. Given that the Department stated in its preliminary results

that Eletrosilex failed to cooperate to the best of its ability, the

petitioners maintain that the Department should apply as total FA the

highest margin determined in any segment of this proceeding, which is

93.20 percent a rate determined in the LTFV investigation.

Notwithstanding

[[Page 6310]]

their arguments above, the petitioners contend that if the Department

does not resort to total FA for Eletrosilex, it would have to make

several important changes in its calculations for the final results

(see Eletrosilex-specific Comments 2 through 5).

Department's Position: We agree with petitioners that Eletrosilex

failed to cooperate to the best of its ability. Moreover, we have

determined that Eletrosilex's questionnaire responses on the record are

insufficient for purposes of conducting a margin analysis. Pursuant to

section 782(d) of the Act, we provided Eletrosilex the opportunity to

explain its deficiencies in our supplemental questionnaires. In fact,

as discussed above, we identified significant deficiencies in

Eletrosilex's questionnaire responses and issued three separate

supplemental questionnaires to Eletrosilex. Eletrosilex failed to

respond in a complete manner to the first supplemental questionnaire,

and did not respond at all to either of the latter two supplemental

requests for information.

First, regarding the issue of whether Eletrosilex's net U.S. prices

should be calculated based on CEP or EP, we issued supplemental

questionnaires to Eletrosilex on March 24, June 29, and July 6, 1998.

In our June 29, 1998, questionnaire, for example, we specifically

requested Eletrosilex to provide sales documentation which could have

resolved the issue (see Eletrosilex FA Memo).

In addition, in our other two supplemental questionnaires, we

requested Eletrosilex to provide the financial statements and other

relevant documents for certain of its affiliates. Furthermore, the

Department asked Eletrosilex questions regarding the following expense

and revenue items: depreciation expenses, by-product revenue, indirect

selling expenses, electricity costs, fixed overhead, interest income,

and duty drawback. Finally, our July 6, 1998, supplemental

questionnaire, primarily requested Eletrosilex to provide further

information on the ICMS tax.

After careful analysis, we have determined that Eletrosilex failed

to satisfy the five requirements enunciated in section 782(e) of the

Act. First, the information is so incomplete that it cannot serve as a

reliable basis for reaching the applicable determination. Specifically,

because of Eletrosilex's failure to provide certain sales

documentation, the Department cannot properly determine whether

Eletrosilex's net U.S. sales prices should be calculated based on CEP

or EP. Although Eletrosilex stated that it had no CEP sales during the

POR (see Eletrosilex's Section A questionnaire response, dated October

30, 1997, at page 4) and that all of its sales in the United States

during the POR were EP sales (see Eletrosilex's Sections B, C, and D

response dated December 1, 1997, at page C-4), the sales documentation

provided by Eletrosilex in Exhibit 5 of its Section A response,

indicates that this may not be the case (see Eletrosilex FA memo).

As stated above, Eletrosilex did not respond to the June 29, 1998,

supplemental questionnaire. As a result, without the requested sales

documentation, we are unable to determine from the information on the

record whether Eletrosilex's U.S. sales were CEP or EP. The distinction

between CEP and EP is the fundamental basis for calculating U.S. price.

Furthermore, Eletrosilex did not provide the financial statements

requested in the March 24 and June 29, 1998, supplemental

questionnaires, nor did it respond to our June 29, 1998, supplemental

questionnaire in which we requested Eletrosilex to demonstrate that its

reported depreciation expense ties to its fixed assets recorded in the

1996 and 1997 financial statements. Moreover, we are unable to

accurately determine inland freight for U.S. sales given that

Eletrosilex failed to respond to the July 6, 1998, supplemental

questionnaire, which requested clarification as to whether this expense

was exclusive or inclusive of ICMS tax and requested Eletrosilex to

provide the ICMS tax rate levied on inland freight for each destination

on the sales tape. Eletrosilex's failure to respond to the above-

referenced supplemental questionnaires also prevents the Department

from accurately determining whether Eletrosilex's calculation

methodology was appropriate for the following items: (1) by-product

offset, (2) indirect selling expenses, (3) duty drawback adjustment,

and income offset to interest expenses.

Since we are unable to make the distinction between CEP and EP and

we are unable to properly determine POR depreciation and financial

expenses, inland freight for U.S. sales, by-product offset, indirect

selling expenses, duty drawback adjustment, and income offset to

interest expenses in this case, we find that the information on the

record is so incomplete that it cannot serve as a reliable basis for

reaching the applicable determination and thus, Eletrosilex has not

satisfied the third criterion under section 782(e) of the Act.

In addition, Eletrosilex did not act to the best of its ability to

comply with requests for information. As stated in the Silicon Metal

Preliminary Results, Eletrosilex has demonstrated, in prior reviews, 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. Thus, Eletrosilex has also failed to satisfy the fourth

criterion of section 782(e) of the Act.

Lastly, the information cannot be used without undue difficulties.

Although, the Department, as FA, recalculated numerous expenses (i.e.,

fixed overhead, direct materials, financial expenses, G&A expenses, and

total cost of manufacturing) in the preliminary results due to

Eletrosilex's failure to respond to the two supplemental

questionnaires, because we cannot resolve the EP-CEP issue and because

of additional problems identified above, we are unable to calculate a

margin for Eletrosilex for the final results. Even if the Department

were to make an inference regarding Eletrosilex's U.S. sales and

classify them as CEP, the Department does not have the information

necessary to make the CEP adjustments required by section 772(d) of the

Act, without undue difficulties. For instance, in our June 29, 1998,

supplemental questionnaire, we requested Eletrosilex to provide the

relevant financial statements. Eletrosilex did not do so. As a result,

we are unable to determine the appropriate amount of selling expenses

and profit to use in a CEP calculation. Moreover, there are numerous

other adjustments affected by the lack of information on the record

that the Department is unable to accurately calculate. Although

Eletrosilex originally provided its 1996 financial statements, the

Department requested Eletrosilex's 1997 audited financial statements

given that the POR does not fall within Eletrosilex's fiscal year. As a

result of Eletrosilex's failure to provide the 1997 statements, we are

unable to calculate appropriate POR depreciation and financial

expenses. Moreover, Eletrosilex's failure to respond to the June 29,

1998, supplemental questionnaire prevents the Department from analyzing

whether Eletrosilex is entitled to a by-product offset, a duty drawback

adjustment, or an income offset to interest expenses. Furthermore,

Eletrosilex's failure to respond to the June 29 and July 6, 1998,

[[Page 6311]]

supplemental questionnaires prevents the Department from making

determinations regarding ICMS taxes as it may apply to cost. Thus, in

light of this (and in particular with respect to the CEP adjustments),

the Department cannot use the information without undue difficulties.

Therefore, Eletrosilex has also failed to satisfy the fifth criterion

of section 782(e) of the Act.

Given the foregoing analysis, it is clear that Eletrosilex has not

met all five factors enumerated in section 782(e) of the Act.

Therefore, for the reasons stated above, the use of total FA is

warranted in this case.

Thus, pursuant to section 776(b) of the Act, we are basing

Eletrosilex's margin on adverse facts available for purposes of the

final results. As adverse facts available for Eletrosilex, we have used

the highest rate calculated for any respondent in any segment of this

proceeding. This rate is 93.20 percent. See Silicon Metal-LTFV.

Comment 2: Adjustments to Eletrosilex's Reported Costs in Calculating

CV

The petitioners argue that although the Department made a number of

adjustments to elements of Eletrosilex's reported costs for purposes of

calculating COP, the Department failed to make the same adjustments to

CV. The petitioners contend that if the Department does not apply total

FA to Eletrosilex, it must correct this error for the final results.

Department's Position: This issue is moot as a result of the

Department's application of total FA to Eletrosilex. Therefore, we are

not addressing this issue for these final results.

Comment 3: Duty Drawback

The petitioners note that in the preliminary results of this

review, the Department made an upward adjustment to Eletrosilex's EP

for duty drawback. However, the petitioners contend that Eletrosilex

has not substantiated its eligibility for this adjustment and argue,

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

disallow any adjustment for duty drawback for Eletrosilex.

Department's Position: This issue is moot as a result of the

Department's application of total FA to Eletrosilex. Therefore, we are

not addressing this issue for these final results.

Comment 4: By-Product Offset

The petitioners argue that Eletrosilex is not entitled to its

claimed by-product offset to reported costs since the claimed

adjustment is not based on revenue net of all expenses incurred in

connection with the sale of by-products.

Department's Position: This issue is moot as a result of the

Department's application of total FA to Eletrosilex. Therefore, we are

not addressing this issue for these final results.

Comment 5: Production Quantities Related to COP/CV

The petitioners maintain that the Department calculated

Eletrosilex's per-unit cost of manufacture (COM) using the incorrect

production quantity. The petitioners argue that the Department's use of

a higher production quantity than the one reported by Eletrosilex

resulted in an understatement of Eletrosilex's per-unit COP/CV and its

margin of dumping. Therefore, the petitioners contend that the

Department should use Eletrosilex's reported production quantity.

Department's Position: This issue is moot as a result of the

Department's application of total FA to Eletrosilex. Therefore, we are

not addressing this issue for these final results.

CBCC

Comment 1: Overstatement of G&A Expenses

CBCC claims that the Department overstated its G&A expenses in the

preliminary results of this review. Specifically, CBCC claims that the

Department included in G&A expenses not only CBCC's expenses, but also

a portion of the consolidated G&A expenses from CBCC's indirect parent,

Solvay & Cie,2 which included CBCC's expenses. CBCC contends

that this calculation methodology double counts CBCC's G&A expenses.

Moreover, CBCC suggests that Solvay & Cie's G&A as recorded on its

financial statements includes selling expenses and thus further

distorts the calculation. Consequently, CBCC maintains that the

Department should accept its reported G&A calculation. In the

alternative, CBCC proposes that the Department calculate CBCC's G&A

expenses by multiplying CBCC's cost of manufacturing by the ratio of

Solvay & Cie's consolidated G&A expenses to consolidated COGS.

According to CBCC, this methodology is consistent with that used to

calculate: (1) CBCC's financial expense in the instant review; (2) G&A

expenses for Minasligas in the instant review; and (3) CBCC's G&A

expense in prior segments of these proceedings (see e.g., Silicon Metal

From Brazil; Final Results of Antidumping Duty Administrative Review

and Determination not to Revoke in Part 62 FR 1970, 1981 (January 14,

1997) (Silicon Metal 1994-1995)).

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

\2\ Solvay & Cie owns Solvay do Brazil, which in turn owns CBCC.

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

The petitioners agree with CBCC that the methodology the Department

used to calculate CBCC's G&A expenses in the preliminary results

partially double counts those expenses. However, the petitioners claim

that the same flaw exists in CBCC's calculation of G&A expenses.

Moreover, the petitioners claim that both calculation methodologies are

based on the G&A expenses of CBCC's indirect parent, Solvay & Cie,

which do not include the cost of certain administrative services

performed for CBCC by its direct parent, Solvay do Brasil. Despite

CBCC's claims to the contrary, the petitioners maintain that the

administrative services in question were performed on behalf of CBCC.

Nevertheless, for this review, the petitioners agree with CBCC that the

Department should calculate CBCC's G&A expenses by multiplying CBCC's

cost of manufacturing by the ratio of Solvay & Cie's consolidated G&A

expenses to consolidated COGS.

Department's Position: We agree with both the petitioners and CBCC,

in part. In the preliminary results of this review, the Department

partially double counted G&A expenses by adding to CBCC's G&A expenses

a portion of the consolidated G&A expenses from CBCC's indirect parent

which included CBCC's expenses. However, for these final results we

have not used consolidated figures from CBCC's indirect parent, as was

suggested by the petitioners and CBCC, because ``it is the Department's

normal practice to calculate the G&A expense rate based on the

respondent company's unconsolidated operations plus a portion of G&A

expenses incurred by affiliated companies on behalf of the

respondent.'' (See Notice of Final Determination of Sales at Less Than

Fair Value: Stainless Steel Wire Rod From Japan 63 FR 40434, 40440

(July 29, 1998) and Final Determination of Sales at Less Than Fair

Value: Fresh Atlantic Salmon From Chile, 63 FR 31411, 31433 (June 9,

1998) (Salmon From Chile), wherein the Department stated that its

``normal methodology does not rely on consolidated level G&A

expense'').

Further, in response to the petitioners' allegation that we did not

include relevant G&A costs incurred by CBCC's direct parent, we note

that CBCC, in its questionnaire response stated that its direct parent

performed certain administrative services in connection with CBCC's

operations. CBCC claimed, however, that these services were performed

on behalf of the direct parent,

[[Page 6312]]

not CBCC. We disagree with CBCC's claim. The services in question, the

nature of which is proprietary, are typically required by owners or

managers of businesses in order to control and manage their business

operations. CBCC benefits from any service that promotes the effective

management of its operations and, thus, these services can be viewed as

being performed on CBCC's behalf. Consequently, in order to account for

the administrative services performed on behalf of CBCC, for the final

results we recalculated CBCC's G&A expenses by adding to CBCC's G&A

expenses a portion of the G&A expenses incurred by the company's direct

parent. With respect to our calculation of G&A expenses for Minasligas,

please see the Department's Position to Minasligas-specific Comment 6.

Comment 2: Exclusion of ICMS Tax Expense From Reported Costs

CBCC claims that a portion of the ICMS tax paid by the company

during the POR is not a cost of producing the subject merchandise

because it was used to reduce payments on electricity costs after the

POR. According to CBCC, the Department verified that the company

records ICMS tax paid to suppliers as a credit, rather than a cost in

its accounting records. Furthermore, CBCC notes that Brazilian law

allows companies to reduce the amount of tax that is payable to the

government as a result of tax collections on sales, or to reduce

payments due on electricity costs. CBCC argues that the Department does

not consider the portion of ICMS tax payments used to offset tax

collections to be a cost of production and, thus, it follows that ICMS

tax payments used to purchase electricity are not a cost either.

The petitioners submit that the Department should not consider this

issue because in the preliminary results, the Department calculated

CBCC's margin based on home market sales, not CV (petitioners assume

CBCC is arguing with respect to CV). Nevertheless, the petitioners urge

the Department to reject CBCC's argument because they claim that

respondents must report costs based on the costs incurred during the

POR and the record shows that none of the respondents in this review

used ICMS tax credits during the POR to reduce payments on electricity

costs.

Department's Position: We agree, in part, with the petitioners.

However, before elaborating on our position, it would be useful to make

two observations regarding the preceding arguments. First, although

CBCC argued that the Department should not consider the ICMS tax paid

on inputs to be a cost of production, we assumed, as did petitioners,

that CBCC was arguing that the ICMS tax should not be included in CV

since in the preliminary results, the Department did not intentionally

include any ICMS tax in CBCC's cost of production. Second, we need to

address this issue because, contrary to petitioners' claim, in the

preliminary results the Department based normal value (NV) for CBCC on

both CV and home market sales.

The record of this review demonstrates that CBCC did not use any of

its ICMS tax credits to reduce payments on electricity costs during the

POR. CBCC pays ICMS tax on various purchases. The Brazilian government

allows companies to recover the amount of ICMS tax paid on purchases by

retaining ICMS tax collected on home market sales of finished products

or by reducing payments on electricity costs. If a company pays more

ICMS tax on purchases than it collects on sales or than it can use to

pay electricity costs, the company maintains unused ICMS tax credits.

Even though a company does not record the ICMS tax credits as a cost in

its records, the credits reflect actual expenditures (to the extent

they are not recovered or used to offset electricity costs). Thus, ICMS

tax credits that are generated during the POR but that are not used

during the POR to either offset tax collections or to pay electricity

costs, represent unreimbursed expenditures or costs for the POR. If a

respondent recovers in a subsequent POR some or all of the ICMS tax

credits that were generated during the POR, this should be taken into

account in calculating costs for the subsequent period, not the current

POR. This is consistent with the Department's practice where the

Department has ``consistently required and used the per-unit weighted-

average costs incurred during the POR.'' See Final Results of

Antidumping Duty Administrative Review: Canned Pineapple Fruit From

Thailand 63 FR 7392, 7399 (February 13, 1998). Therefore, we did not

use CBCC's ICMS tax credits used to pay electricity costs to reduce CV

because these credits were not used during the POR.

Comment 3: Revocation of the Antidumping Order as to CBCC

CBCC urges the Department to consider its request for revocation of

the order as to CBCC, and to revoke said order if the results of the

instant administrative review supports such action. In making its

argument for revocation, CBCC notes that it received zero or de minimis

dumping margins in the two administrative reviews preceding the instant

review. Furthermore, CBCC notes that the following events, pertaining

to the issue of revocation, occurred in the instant review: (1) July

29, 1997--CBCC requested an administrative review of its sales; (2)

July 31, 1997--the petitioners requested an administrative review of

CBCC's POR shipments; (3) October 30, 1997--CBCC withdrew its request

for administrative review; (4) November 12, 1997--CBCC rescinded its

withdrawal of request for review and requested that the order be

revoked with regard to CBCC.

CBCC claims that it did not receive the service copy of the

petitioners' July 31, 1997 request for an administrative review and,

thus, was unaware of this request at the time that it withdrew its

request for an administrative review. According to CBCC, the company

terminated its withdrawal request and made a request for revocation

upon learning of the petitioners' review request.

CBCC argues that the statute does not preclude the Department from

considering its request for revocation of the order. Moreover, CBCC

contends that it would be overly legalistic for the Department to

refuse to consider the revocation request given that there is no

procedural difference between the instant review and a revocation

review other than the fact that the Department has not published a

notice of request for revocation. CBCC maintains that there is no

deadline for the Department to publish such a notice and, thus, the

Department can amend its prior notice of initiation to include the

request for revocation. In light of the confusing chain of events that

are outlined above, CBCC states, the Department should consider its

request for revocation.

The petitioners argue that the Department should not consider

CBCC's request for revocation for two reasons. First, the petitioners

maintain that CBCC's request is invalid because it does not contain the

necessary certification pursuant to 19 CFR 351.222(e)(1) that CBCC sold

silicon metal to the United States in commercial quantities during the

three relevant consecutive years. Second, the petitioners contend that

CBCC's revocation should not be considered because it was untimely

(i.e., the Department's regulations provide that revocation may be

requested in writing during the annual anniversary month); however,

CBCC filed its request for revocation more than three months after the

end of the anniversary month. The petitioners dismiss the reason cited

by CBCC for the timing of the revocation

[[Page 6313]]

request, namely that CBCC was unaware of petitioners' request for

review because it never received the service copy of the petitioners'

request as disingenuous and note that they had placed on the record of

this review a copy of the messenger request bearing the signature of an

employee of CBCC's counsel which acknowledges receipt of the

petitioners' request for review. Furthermore, the petitioners note that

CBCC's failure to file a timely request for revocation resulted in the

Department not publishing with the initiation notice, a ``Request for

Revocation of the Order.'' Moreover, argue the petitioners, because

revocation was not at issue, the Department never inquired into, or

examined at verification, the likelihood of future dumping by CBCC.

Thus, according to the petitioners, the Department did not make a

determination in its preliminary results as to whether there is a

reasonable basis to believe that the requirements of revocation are

met. For the foregoing reasons, the petitioners contend that there is

no basis on which the Department could revoke the order with respect to

CBCC.

Department's Position: We agree with the petitioners. Section

351.222(e)(1) of the Department's regulations state that ``during the

third and subsequent annual anniversary months of the publication of an

antidumping order * * * an exporter or producer may request in writing

that the Secretary revoke an order * * *'' During the instant review,

CBCC failed to file a timely written request for revocation of the

order with respect to CBCC. It was not until more than three months

after the anniversary month that CBCC requested that the Department

``construe'' its timely request for an administrative review as a

request for revocation of the antidumping duty order. Any confusion on

CBCC's part that resulted in the withdrawal of its request for an

administrative review, the subsequent cancellation of that withdrawal,

and its request that the Department ``construe'' its request for

administrative review as a request for revocation, occurred after the

deadline to request a revocation of the order. Thus, these facts cannot

be viewed as mitigating CBCC's failure to file a timely request for

revocation of the order with respect to CBCC. Moreover, the

Department's refusal to ``construe'' CBCC's request for an

administrative review as a request for revocation is not an ``overly

legalistic'' position. Contrary to CBCC's assertion, there are

procedural differences between an administrative review conducted

pursuant to a revocation request and other administrative reviews. Most

notably, before the Department revokes an antidumping order with

respect to a party, section 351.222 (b)(2)(ii) of the Department's

regulations require the Department to conclude that it is not likely

that the party ``will in the future sell the subject merchandise at

less than normal value.'' Typically, when the likelihood of the

resumption of dumped sales is at issue, the Department considers

evidence, submitted by the parties to the review, regarding the

likelihood of future dumping (see Brass Sheet and Strip From Canada;

Preliminary Results of Antidumping Duty Administrative Review and

Notice of Intent to Revoke Order in Part, 63 FR 6519, 6522 (February 9,

1998)). A party may raise, and thus the Department will consider, a

number of factors in that context, such as conditions and trends in the

United States and exporting country markets, currency movements, and

the ability of the foreign entity to compete in the U.S. market without

selling at LTFV (see e.g., Brass Sheet and Strip From Germany; Final

Results of Antidumping Duty Administrative Review and Determination Not

to Revoke in Part, 61 FR 49727, 49730 (September 23, 1996) and Dynamic

Random Access Modules; Final Results of Antidumping Duty Administrative

Review). None of this was done in the instant review because CBCC did

not file a timely written request for revocation of the order. Thus,

because procedures required in a revocation review were not followed in

the instant review, the Department will not amend the notice of

initiation for the instant review and transform the current

administrative review into a review conducted pursuant to a revocation

request. As the Department noted in Color Television Receivers From the

Republic of Korea; Final Results of Antidumping Duty Administrative

Reviews, 61 FR 4408, 4414 (February 6, 1996), a respondent can only

preserve its right to revocation by filing a timely revocation request.

Therefore, for the foregoing reasons, we have not considered revocation

with respect to CBCC for these final results of review.

Comment 4: Inclusion of Depreciation Expense on Common and Idle Assets

in Reported Cost

The petitioners claim that the Department incorrectly calculated

CBCC's depreciation expense in the preliminary results because it

failed to include in its calculation the depreciation expense incurred

on common and idle assets. According to the petitioners, the

Department's established practice is to include such depreciation

expense in the reported cost. See Final Determinations of Sales at Less

Than Fair Value: Certain Hot-Rolled Carbon Steel Flat Products, Certain

Cold-Rolled Carbon Steel Flat Products, and Certain Cut-To-Length

Carbon Steel Plate From Belgium 58 FR 37083, 37089 (July 9, 1993) and

Silicon Metal 1993-1994 at 1958).

CBCC did not comment on this issue.

Department's Position: We agree with the petitioners. The

Department's practice is to include in reported costs a portion of the

depreciation expense incurred on idle assets and on assets that are

associated with the overall operations of the company, rather than a

specific product (i.e., common assets). See Salmon From Chile at 31436

and Elemental Sulphur From Canada; Final Results of Antidumping Duty

Administrative Review 62 FR 37958, 37959 (July 15, 1997). In Exhibit 2

of its April 30, 1998 supplemental response, CBCC reported depreciation

expense incurred on idle and common assets. However, in the preliminary

results, the Department failed to include this expense in its

calculation of total depreciation expense incurred in the production of

silicon metal. We have corrected this oversight in the final results by

including depreciation expense on common assets in the cost of

manufacturing and depreciation expense on idle assets in G&A expenses.

See Silicomanganese From Brazil; Final Results of Antidumping Duty

Administrative Review 62 FR 37869, 37871 (July 15, 1997) regarding the

Department's practice of including costs associated with idle assets in

G&A expenses.

Comment 5: Interest Income Offset to Financial Expenses

The petitioners contend that the Department should not allow CBCC

to reduce total financial expenses by ``income from current assets''

because CBCC failed to substantiate and document that this category of

income qualifies as an offset to financial expenses under the

Department's established practice. The petitioners maintain that the

Department only allows respondents to reduce financial expense by

interest income derived from short-term investments of working capital.

According to petitioners, CBCC has the burden of establishing its right

to reduce financial expense by such interest income. However, in the

instant review, the petitioners claim that CBCC never demonstrated that

``income from current assets'' constituted interest income, nor did it

demonstrate that the

[[Page 6314]]

interest income was derived from short-term investments of working

capital.

CBCC claims that it correctly reduced total financial expenses by

income from current assets because by definition current assets are

short-term in nature and, thus, the income generated from these assets

is short-term in nature.

Department's Position: We agree with the petitioners. In

calculating COP and CV, it is the Department's practice to allow a

respondent to offset (i.e., reduce) financial expenses with short-term

interest income earned from the general operations of the company. See

e.g., Timken v. United States, 852 F. Supp. 1040, 1048 (CIT 1994)

(Timken). In calculating a company's cost of financing, we recognize

that, in order to maintain its operations and business activities, a

company must maintain a working capital reserve to meet its daily cash

requirements (e.g., payroll, suppliers, etc.). The Department further

recognizes that companies normally maintain this working capital

reserve in interest-bearing accounts. The Department, therefore, allows

a company to offset its financial expense with the short-term interest

income earned on these working capital accounts. The Department does

not, however, allow a company to offset its financial expense with

income earned from investing activities (e.g., long-term interest

income, capital gains, dividend income) because such activities are not

related to the current operations of the company. See e.g.,

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 31734 (July 11, 1991). We

note that the CIT has upheld the Department's approach to calculating

the financial expense offset with only short-term interest income. See

Gulf States Tube Division of Quanex Corp. v. United States, 981 F.

Supp. 630 (CIT 1997) and NTN Bearing Corp. v. United States, 905 F.

Supp.1083, 1097 (CIT 1995) (citing Timken at 1048), in which the CIT

held that, to qualify for an offset, interest income must be related to

the ``ordinary operations of the company''.

Furthermore, we note that the burden of proof to substantiate and

document this adjustment is on the respondent making a claim for an

offset. See e.g., Timken Company v. United States, 673 F. Supp. 495,

513 (CIT 1987); and Gray Portland Cement and Clinker from Japan; Final

Results of Antidumping Duty Administrative Review 60 FR 43761, 43767

(August 23, 1995). In the instant review, the Department requested that

CBCC list ``all interest income and expense items and other financing

amounts used to compute net interest expense.'' See the Department's

antidumping questionnaire dated September 22, 1997 at page D-12. In

response to the Department's request, CBCC provided a worksheet wherein

it calculated net interest expense by reducing total consolidated

financial expenses by total consolidated financial income from current

assets. However, CBCC never listed all of the income items that were

included in the total consolidated financial income from current assets

and, thus, we are unable to determine whether the total claimed income

offset includes only interest income that is short-term in nature.

Moreover, the types of current assets held by the consolidated entity

do not clearly demonstrate that the assets generated only interest

income (e.g., the consolidated entity listed among its current assets,

``Short-term cash investments--Other investments''). Therefore, by

simply offsetting financial expense by the total financial income from

current assets, CBCC failed to demonstrate that the ``income from

current assets'' constituted short-term interest income. Accordingly,

for the final results we disallowed the claimed offset to financial

expense.

LIASA

Comment 1: Whether LIASA's sale to the United States is a bona fide

sale

The petitioners contend that the Department should disregard

LIASA's U.S. sale for purposes of calculating a dumping margin because

the sale in question is not a bona fide arm's-length transaction. The

petitioners claim that the CIT has recognized in FAG U.K. LTD. v.

United States, 945 F. Supp. 260, 265 (CIT 1996) (FAG U.K.) and Chang

Tieh Industry Co., Ltd. v. United States, 840 F. Supp. 141 (CIT 1993)

(Chang Tieh Industry) that the Department may exclude from its margin

calculations U.S. sales that are not the result of a bona fide arm's-

length transaction. Also, the petitioners note that in Certain Cut-To-

Length Carbon Steel Plate From Romania: Notice of Rescission of

Antidumping Duty Administrative Review, 63 FR 47232, 47234 (September

4, 1998) (Steel Plate From Romania), the Department in fact excluded

the U.S. sales transaction from its calculations because it was not

commercially reasonable and, thus, not a bona fide sale. The

petitioners note that the Department rejected the U.S. sales

transaction in Steel Plate From Romania based on, among other things,

the total costs borne by the U.S. importer and the fact that the sale

involved selling practices atypical of the parties' normal selling

practices. Furthermore, the petitioners point out that the Department

made its determination despite respondent's argument that the sale may

not have been commercially viable in all respects because it was a test

shipment.

According to the petitioners, the circumstances surrounding LIASA's

sale, which was also a test shipment, are similar to those in Steel

Plate From Romania. Moreover, the petitioners maintain that regardless

of whether a sale is a test shipment, the Department's practice is to

exclude from its calculations sales that are not commercially

reasonable and, thus, not bona fide.

According to the petitioners, LIASA's test sale was not

commercially reasonable because it: (1) was made at an artificial,

noncommercial price; (2) was delivered using costly air transportation;

and (3) involved atypical selling practices. The petitioners claim that

there was nothing unusual about the chemical specifications of the

merchandise sold by LIASA; however, they allege that LIASA's sale price

was noncommercial when compared to contemporaneous prices charged by

other silicon metal suppliers and by LIASA on silicon metal sales in

Brazil. Additionally, the petitioners claim LIASA's sale price was

noncommercial because, according to the petitioners, the price was

aberrational when compared to the average contemporaneous Metals Week

U.S. dealer price for imported silicon metal. Also, the petitioners

submitted affidavits which they argue indicate that the price charged

by LIASA was not consistent with the price that would typically be

charged for a test sale. Furthermore, the petitioners contend that it

is not commercially reasonable for a producer in a highly competitive

market, such as the silicon metal market, to charge a noncompetitive

price on a test sale when the purpose of such a sale is to qualify for

further sales to a new customer. The petitioners dismiss LIASA's claim

that market conditions dictated the price of its transaction. According

to the petitioners, the Metals Week dealer import price for silicon

metal, which is often used as a guide in price negotiations, steadily

and significantly declined during the POR due to an increasing supply

of silicon metal in the U.S. market.

In addition, the petitioners contend that there was no commercial

reason for LIASA to transport silicon metal to the United States by

air. First, the petitioners argue that the U.S.

[[Page 6315]]

customer's operations were closed at the time LIASA's shipment was

scheduled to arrive in the United States. Second, the petitioners claim

that the U.S. customer could have obtained the merchandise from other

suppliers around the same time that LIASA's shipment was scheduled to

arrive in the United States. Third, the petitioners note that the use

of air freight significantly increased the costs borne by the U.S.

customer. Consequently, the petitioners maintain that the use of air

freight in the absence of any commercial reason for doing so,

demonstrates that the sale was not commercially reasonable, and thus

not bona fide. According to the petitioners, the sole reason that LIASA

used air freight was in order to enter its shipment in time for a new

shipper review so that LIASA could avoid the 91.06 percent ``all

others'' rate. The petitioners base their assertion, in part, on the

fact that LIASA's sale entered the U.S. just before the deadline for

requesting a new shipper review (i.e., are review of the six-month

period immediately preceding the sem-iannual anniversary month).

Additionally, the petitioners maintain that their assertion is

confirmed by LIASA's sales correspondence that contains references to

the instant review and the effects of the antidumping duty order on

silicon metal on the U.S. sale at issue.

Lastly, the petitioners argue that LIASA's U.S. sale involved

atypical selling practices. Specifically, the petitioners contend that

although LIASA was entering into its first business relationship with

the U.S. customer, LIASA abandoned its normal selling practice and

shipped the merchandise without receiving a purchase order from the

customer. The petitioners state that this is further evidence that

LIASA's U.S. sale was not commercially reasonable.

General Motors (GM), an interested party in the instant review,

argues that the petitioners are incorrect because (1) the statute does

not permit exclusion of the sale; and (2) there is no basis on which to

conclude that the transaction is not bona fide. According to GM, the

Department must include all U.S. sales in its margin calculations for

administrative reviews because section 751(a)(2)(A) of the Act requires

the Department to determine the NV and EP of each entry of subject

merchandise and the dumping margin for each such entry. Furthermore, GM

maintains that the Department has clearly stated and long held that it

does not have the discretion to disregard U.S. sales in administrative

reviews. GM notes that examples of the Department's long-standing

practice of including all U.S. sales in its analysis for administrative

reviews can be found in Carbon Steel Wire Rope From Mexico; Final

Results of Antidumping Duty Administrative Review 63 FR 46753

(September 2, 1998) (Wire Rope From Mexico), Antifriction Bearings

(Other Than Tapered Roller Bearings) and Parts Thereof From France, et

al; Final Results of Antidumping Duty Administrative Reviews, Partial

Termination of Administrative Reviews, and Revocation in Part of

Antidumping Duty Orders 60 FR 10900 (February 28, 1995), Color

Television Receivers From the Republic of Korea; Final Results of

Antidumping Duty Administrative Review 56 FR 12701 (March 27, 1991),

and 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; Final Results of

Antidumping Duty Administrative Reviews and Revocation in Part of an

Antidumping Finding 61 FR 57629 (November 7, 1996). GM notes that in

Wire Rope From Mexico, the Department held that section 751 of the Act,

which the petitioners refer to as a ``statutory mandate,'' requires the

Department to analyze each entry into the United States within the

review period, and thus, the Department based the results of the review

on the single reported U.S. transaction.

In contrast, GM claims that the two court decisions cited by the

petitioners fail to support exclusion of LIASA's U.S. sale because in

neither case did the Department exclude a U.S. sale from an

administrative review. GM notes that in FAG U.K., the CIT held that the

Department's authority to eliminate unusual sales from LTFV

investigations ``does not extend to administrative reviews, which

require that each entry be included.'' Additionally, GM contends that

Chang Tieh Industry does not support the petitioners' position because

that case involved an investigation, not an administrative review. In

fact, GM maintains that the CIT has never ruled that the Department has

the authority to exclude U.S. sales from an administrative review.

Moreover, GM submits that the purpose of an administrative review

is for the Department to accurately assess antidumping duties on all

entries during the POR, rather than consider dumping that may occur in

the future. GM notes that in the preamble to its regulations the

Department dismissed the concerns of one commentator regarding the bona

fide nature of transactions used to calculate antidumping duty rates.

In the context of new shipper reviews, the commentator suggested that

the Department send out a ``questionnaire to the U.S. customer seeking

information concerning the bona fide nature of the new shipper

transaction.'' GM notes that the commentator claimed this approach

``would safeguard against new shippers conspiring with an unaffiliated

U.S. customer to engage in a single transaction at a high price that

would generate a dumping margin and deposit and assessment rates of

zero.'' GM points out that the Department rejected the commentator's

suggestion, noting that the new shipper would not be excluded from the

order and, thus, if the ``new shipper later began to sell at dumped

prices antidumping duties could be assessed with interest for any

underpayment of estimated duties.'' (International Trade

Administration, Antidumping Duties; Countervailing Duties; Final Rule,

62 FR 27296, 27320 (May 19, 1997)).

Furthermore, GM claims that the petitioners have been able to find

only one case that appears to support their argument; however,

according to GM, this case offers no support because the facts of the

case are considerably different from the facts in the instant review.

GM submits that in Steel Plate From Romania, the Department deviated

from its long-standing practice of including all U.S. sales in its

analysis during an administrative review, and terminated the

administrative review based on a determination that the single U.S.

sale was not bona fide. GM points out that the U.S. sale in Steel Plate

From Romania was to a trading company that took a tremendous loss on

the sale when it resold the merchandise. According to GM, trading

companies value merchandise based on their ability to resell the

merchandise at a profit. Thus, a resale of the merchandise at a loss

might raise questions about the legitimacy of the initial sale. On the

other hand, GM states that consumers who are testing the products of

new suppliers, as was the case for LIASA's sale, may not focus on

obtaining bargain prices because they know that the test quantity being

purchased is small and they focus on other factors such as quality and

consistency. Furthermore, GM contends that Steel Plate From Romania

relies almost exclusively on decisions in previous proceedings

involving investigations (i.e., Chang Tieh Industry and the Final

Determination of Sales at Less Than Fair Value: Manganese Metal From

the People's Republic of China, 60 FR 56045 (November 6, 1995)

(Manganese Metal From the PRC)), not administrative

[[Page 6316]]

reviews. Because the Department may disregard U.S. sales in an

investigation but not a review, GM argues that Steel Plate From Romania

should not be controlling in the instant review.

Nevertheless, GM contends that even if Congress had placed the

Department in the position of excluding U.S. sales from administrative

reviews based on whether the sale was bona fide, the petitioners have

not provided a valid reason why the Department should question LIASA's

U.S. sale. GM maintains that the Department thoroughly verified the

sale and found no discrepancies. Also, GM dismisses the data and

affidavits submitted by the petitioners to show that the price of the

sale is not commercially reasonable. GM argues that a decision as to

whether the price of a transaction is commercially reasonable can only

be made after considering many factors that are unique to the parties

involved. GM maintains that consumers that are testing the products of

new suppliers may value quality, consistency, and the relationship with

a new supplier over the price obtained on the test purchase. According

to GM, the petitioners' argument that the price is not commercially

reasonable fails because they did not address any of these

considerations. Furthermore, GM claims the Department determined in

Titanium Sponge From the Russian Federation; Notice of Final Results of

Antidumping Duty Administrative Review, 62 FR 48601 (September 16,

1997) (Titanium Sponge From Russia), that a price that is higher than

prevailing U.S. and world prices is not a sufficient basis on which to

disregard sales. Finally, with regard to the issue of price, GM

characterizes the petitioners' affidavits as irrelevant arguing that

they merely offer opinions as to the likely price for a test run

transaction, such as LIASA's sale, while the reported price was fairly

established at arm's-length.

With respect to the issue of mode of transport, GM disputes the

petitioners' accusation that LIASA's U.S. sale was not commercially

reasonable because it was transported via costly air freight. GM argues

that the petitioners mistakenly assume that the only commercially

reasonable goal is to obtain a low price for a product. GM contends

that in an era of ``just-in-time delivery,'' the value of having an

item in place, on time, might mitigate other factors (such as cost)

involved in a transaction. For instance, GM explains, heavy goods may

be shipped via air freight, for example, if a supplier is late

delivering parts that are needed in order to keep a production line

running, or if the parts are needed in order to meet testing schedules

or delivery deadlines. GM maintains that obtaining the lowest price is

not the only factor to consider when judging whether a method of

transportation is commercially reasonable. Finally, GM rejects the

petitioners' assertion that LIASA used air freight in order to enter

its shipment in time for a new shipper review. GM notes that LIASA

never requested a new shipper review and that it made its shipment a

full six months prior to the end of the POR. Moreover, GM maintains

that even if a single U.S. transaction is undertaken in order to

establish a deposit rate in a particular review period, there is no

basis to reject the transaction because the Department has stated that

the statutory and regulatory structure offer sufficient safeguards to

petitioners in such situations.

Additionally, GM discounts the petitioners' claim that LIASA's U.S.

sale involved atypical selling practices. In particular, GM argues that

the purchase order for LIASA's U.S. sale was issued in accordance with

the U.S. customer's usual business practices (i.e., there was no

unusual delay in issuing the purchase order given the U.S. customer's

operating schedule between the time the purchase order was generated

and issued).

Lastly, GM urges the Department not to reject LIASA's U.S. sale

based on the petitioners' characterization of the motives of the

parties involved. Specifically, GM refers to the petitioners' claim

that LIASA's U.S. sale was not commercially reasonable because the sole

purpose for the sale was to eliminate the antidumping duty deposit

requirement for LIASA. GM notes that the petitioners reached this

conclusion based on LIASA's sales correspondence that contains

references to the 1997-1998 administrative review and the effects of

the antidumping duty order on silicon metal on the U.S. sale at issue.

However, GM maintains that the petitioners' claims are irrelevant

because, according to GM, the Department has stated that it will not

inquire into motives since the statutory and regulatory structure of

the antidumping law provide protection to petitioners without such

inquiry. Nonetheless, GM notes that there is nothing unusual about

parties considering the antidumping duty order in setting prices and,

in fact, GM maintains that this is precisely what the antidumping law

encourages.

The petitioners contend that GM has misrepresented the case law and

Departmental practice with respect to excluding non-bona fide U.S.

sales from its calculations for administrative reviews. According to

the petitioners, GM selectively quoted from a footnote in the CIT's

decision in FAG U.K., while ignoring the statement in the body of the

court's decision that the Department can exclude U.S. sales from margin

calculations in administrative reviews in exceptional circumstances.

Moreover, the petitioners note that in American Permac, Inc. v. United

States, 783 F. Supp. 1421, 1424 (CIT 1992) (American Permac), the court

indicated that it is unfair to include distortive sales in

administrative reviews ``without some methodology which compensates for

the distortion.'' Furthermore, the petitioners maintain that none of

the final results cited by GM involved circumstances where there was

evidence (or even a claim) that the U.S. sales in question were not

bona fide transactions. The petitioners also note that while the

Department decided not to issue questionnaires in new shipper reviews

seeking information regarding the bona fide nature of U.S. sales, it

did so because it believed ``that the statutory and regulatory schemes

provide adequate safeguards against such manipulation.'' Thus, the

petitioners maintain that contrary to GM's claims, the Department did

not address the issue of whether it can exclude U.S. sales from its

margin calculations in administrative reviews in its recent rule

making. However, the petitioners note that the Department stated in

Fresh and Chilled Atlantic Salmon From Norway: Final Results of New

Shipper Antidumping Duty Administrative Review, 62 FR 1430, 1432

(January 10, 1997) (Salmon From Norway) that it ``may disregard a U.S.

sale if its is determined that the sale is not the result of a bona

fide arm's-length transaction.'' Finally, the petitioners maintain that

GM is wrong when it claims that the Department cannot exclude a U.S.

sale from an administrative review because, in fact, the Department has

done so in Steel Plate From Romania.

Department's Position: The Department has proper authority to

disregard U.S. sales in administrative reviews as non-bona fide

transactions. However, in this review we did not disregard LIASA's U.S.

sale because the information on the record does not support a finding

that the sale was not a bona fide transaction. While there is no

express statutory or regulatory provision that addresses the exclusion

of U.S. sales, the Department's authority to disregard U.S. sales for

purposes of calculating a dumping margin in an administrative review

has been recognized by the Court of International Trade (CIT). See

e.g., American Permac

[[Page 6317]]

and PQ Corp. v. United States, 652 F. Supp. 724, 729 (CIT 1987).

However, the CIT noted in FAG U.K. (at 265) that ``Commerce can only

exclude sales from USP [United States Price] in an administrative

review in exceptional circumstances when those sales are

unrepresentative and extremely distortive.'' (Emphasis added).

Accordingly, the Department has established a practice of examining and

disregarding U.S. sales, where warranted. See Salmon From Norway at

1431-32 and Steel Plate From Romania at 47233-34.

However, contrary to the petitioners' claim, the basis for

disregarding U.S. sales as non-bona fide transactions is not whether

such sales are ``commercially unreasonable.'' See e.g., Steel Plate

From Romania at 47234. While this factor is relevant to whether the

sales are bona fide, the Department only disregards U.S. sales in

exceptional circumstances where the sale is commercially unreasonable

and other facts and circumstances indicate an attempt to manipulate the

dumping margin. Other facts and circumstances may be, for example, the

timing of the sale, the quantity involved, whether the customer is an

end-user of the merchandise or is in the business of buying and

reselling the subject merchandise. See Manganese Metal From the PRC,

where the Department disregarded the sales because the evidence

indicated that the sale was orchestrated to manipulate the margin

calculation and was commercially unreasonable.

In the instant review, the Department has not exercised its

authority to exclude LIASA's U.S. sale because there is not sufficient

evidence on the record which demonstrates the existence of exceptional

circumstances that warrant exclusion of this sale. First, it is

important to note that the Department verified LIASA and found no

discrepancies with the information the company reported regarding its

U.S. sale. Additionally, unlike Steel Plate From Romania and Manganese

Metal From the PRC, the facts on the record of the instant review fail

to demonstrate that there was no commercial basis for the U.S. customer

to engage in the transaction other than for the purpose of manipulating

the dumping margin. The petitioners' claim that LIASA's sale is not a

bona fide, arm's-length transaction primarily rests on their contention

that the terms of LIASA's sale did not make commercial sense for the

U.S. customer given the allegedly non-commercial price charged by LIASA

and the related freight costs borne by the U.S. customer. While it is

consistent with good business practices to purchase acceptable material

at favorable prices, a purchaser's failure to obtain prices that may be

favorable does not necessarily mean the transaction is not at arm's-

length. Arm's-length transactions are those transactions whose terms

are negotiated based on the independent interests of the parties

involved. Those interests may vary depending on the parties and the

nature of the sale. While obtaining a commercially reasonable price for

a purchase may be of critical concern to a party who intends to resell

the items purchased, price may not be as critical to an original

equipment manufacturer (OEM) or an end-user which is seeking to

evaluate the quality of the product. Other considerations, such as

establishing supplier relationships and alternative supplier sources,

may affect the price an end-user is willing to pay. In such situations,

the price of the transaction may not be the primary concern because

only a limited quantity is purchased for testing purposes. The record

in the instant review shows that LIASA's U.S. customer was a producer

that was actively searching for potential silicon metal suppliers.

Also, the record indicates that the U.S. customer purchased a limited

quantity of silicon metal from LIASA in order to test the quality of

the merchandise. Consequently, in the instant review a potentially

``non-commercial'' cost to the U.S. purchaser (i.e. purchase price and

transportation costs) is not sufficient to indicate that this was not a

bona fide sale.

Moreover, the timing of the sale also does not support a finding

that the sale was a non-bona fide transaction. Although the importer in

the instant review did incur high costs for air freight, unlike Steel

Plate From Romania, there is no indication that the merchandise was

shipped by air freight solely to ensure that it entered the United

States before the end of the POR. In fact, the purchaser has stated on

the record that based on its time requirements it may transport various

inputs using air freight, and we note that the merchandise entered the

United States fully six months prior to the end of the POR. The

petitioners' argument that the merchandise was air freighted to the

United States in order for the party to be able to request a new-

shipper review is not indicative of a non-bona fide sale since no such

review has been requested by the exporter of the subject merchandise.

Finally, the fact that the U.S. customer did not issue a purchase

order until after LIASA had shipped the subject merchandise is not such

a significant deviation from typical commercial practice as to call

into question, inter alia, the commercial reasonableness of the

transaction. This is particularly so in light of the U.S. customer's

operating schedule between the time the purchase order was generated

and issued. Therefore, as in the preliminary results, we have treated

LIASA's sale as a bona fide, arm's-length transaction.

Minasligas

Comment 1: Double Deduction of the ICMS Tax

The petitioners argue that the Department understated Minasligas's

NV, by twice deducting the ICMS tax from Minasligas's reported home

market sales price.

Department's Position: The Department agrees that we inadvertently

deducted the ICMS tax twice from Minasligas's reported home market

sales price and have corrected this error in the final results.

Comment 2: Duty Drawback Adjustment. The petitioners argue that

Minasligas should not receive a duty drawback adjustment because

Minasligas did not prove that while it paid duties and taxes on its

purchases of imported electrodes used to produce silicon metal for

sales in the home market, it did not pay such duties on inputs used to

produce merchandise for export. The petitioners argue that under

section 772(c)(1)(B) of the Act, the U.S. price is only adjusted

upwards if the payment of duties and taxes is suspended (i.e., rebated

or not collected) on imported merchandise used to produce exported

merchandise.

The petitioners argue that despite the Department's request that

Minasligas specifically identify which electrodes had been used in the

production of export merchandise and thus might have been exempt from

import duties, Minasligas only provided general information regarding

all electrode purchases during the POR and the duties paid on those

imported purchases. The documentation provided by Minasligas, argue the

petitioners, did not relate to specific importations and did not

identify the imported inputs on which the duties and taxes were either

paid and rebated or not collected.

The petitioners state that in the final results of the 1995-1996

review, the Department rejected a duty drawback claim made by another

respondent because that respondent did not provide documentation

explaining payment of duties and IPI and ICMS taxes on imported

electrodes used in the home market, and failed to substantiate non-

[[Page 6318]]

payment of duties and IPI and ICMS taxes on imported electrodes used to

produce silicon metal for export. The petitioners note that the

Department employs a practice of requiring the respondent to bear the

burden of demonstrating the right to an adjustment under section

772(c)(1)(B) of the Act. The petitioners argue that Minasligas did not

meet that burden with respect to a duty drawback adjustment because

Minasligas failed to provide documentation explaining how and why

Minasligas was exempt from the payment of duties and taxes on imported

electrodes used to produce merchandise for export, under the Brazilian

duty drawback system.

The petitioners further argue that Minasligas's ratio of the volume

of Minasligas's home market shipments of silicon metal to the volume of

its total shipments exceeds the ratio of the volume of Minasligas's

electrode imports on which Minasligas did not pay taxes and duties to

Minasligas's total volume of electrode imports. The petitioners

conclude that because these ratios differ, there is a strong indication

that Minasligas did not pay taxes and duties on electrodes used in the

production of silicon metal for export sales, as well as on a portion

of electrodes used in production for home market sales.

Minasligas argues that since it used the same drawback calculation

and has shown the same proof of payment of duties and taxes as those

verified by the Department in the preceding review, it is entitled to a

duty drawback adjustment for this POR. Minasligas also notes that, for

this current review, it submitted government receipts which document

the amount of duties and taxes it paid on electrodes.

Moreover, Minasligas objects to the petitioners implication that it

could have provided more specific information regarding which

electrodes are used in the production of merchandise for export as

opposed to the home market. Minasligas states that it does not unscrew

electrodes from its furnaces when it shifts between silicon metal

production for export and silicon metal production for sales in the

home market. Minasligas contends that the information it provided

(i.e., information documenting all of its purchases of electrodes

during the POR and taxes and input duties paid on those imports) is

sufficient to substantiate its claim for a duty drawback adjustment.

Finally, Minasligas states that the discrepancy in the comparison

of the ratio discussed by the petitioners is a result of two things:

(1) a portion of the silicon metal produced goes into inventory before

it is sold, while some sales are made from inventory existing before

the POR, and (2) a portion of silicon metal sold during the POR is

produced with electrodes entered before the POR.

Department's Position: We agree with the petitioners that

Minasligas has not met the burden of demonstrating that it is entitled

to a duty drawback adjustment. The Department's practice concerning

duty drawback requires that a company satisfy the requirements of a two

prong test. See Notice of Final Determination of Sales at less than

Fair Value: Stainless Steel Wire Rod from Korea. 63 FR 40420 (July 29,

1998). The two prong test used to determine whether a company is

entitled to a duty drawback adjustment is as follows: ``(1) the import

duty and rebate must be directly linked to, and dependent upon, one

another, and (2) the company claiming the adjustment must demonstrate

that there were sufficient imports of imported raw materials to account

for the duty drawback received on exports of the manufactured

products.''

In this segment of the proceeding Minasligas has not provided

sufficient documentation to satisfy either the first or the second

prong of the test. Minasligas submitted a chart that simply listed the

imports for which a duty payment was made and those for which none was

made. As to the first prong of the test, Minasligas did not provide

adequate documentation establishing a sufficient link between import

duties paid and drawback duties received. Minasligas' chart and the

government receipt documentation submitted did not explain or show why

it was entitled to the duty drawback claimed on certain imports. As to

the second prong of the test, Minasligas did not provide adequate

documentation indicating that Minasligas imported electrodes in

sufficient quantities to account for the rebates received on the export

of silicon metal. Accordingly, we have not made any adjustment to the

U.S. price for duty drawback.

Comment 3: U.S. Credit Expense

Minasligas states that the Department used the wrong interest rate

in re-calculating the U.S. credit expense. Minasligas asserts that the

Department's margin program used an interest rate of 14.75 percent

instead of the rate referenced in the Minasligas Preliminary Results

Analysis Memorandum (July 30, 1998) (Minasligas Prelim Analysis Memo).

Department's Position: The Department agrees that we inadvertently

used the wrong interest rate in re-calculating the U.S. credit expense.

We have corrected this matter in the final results by using the rate

calculated in the Minasligas Prelim Analysis Memo.

Comment 4: Double Conversion of Duty Drawback

Minasligas states that the Department converted the duty drawback

twice into U.S. dollars. Minasligas argues that this double conversion

resulted in a smaller duty drawback amount being added to the U.S.

price.

Department's Position: The Department agrees that for the

preliminary results calculations we inadvertently converted the duty

drawback twice into U.S. dollars. However, this issue is moot for the

final results because the Department has found that Minasligas is not

entitled to a duty drawback adjustment. See the Department's Position

to Minasligas-specific Comment 2. Therefore, for these final results we

have removed all duty drawback adjustment language from our margin

calculations.

Comment 5: PIS/COFINS Taxes and the Calculation of Normal Value

Minasligas contends that the Department's failure to deduct PIS and

COFINS taxes from NV caused a faulty price comparison with USP because

the taxes are paid on the home market sales, but not on U.S. sales.

Minasligas asserts that the Department should account for this

difference in the final results and make a circumstance of sale (COS)

adjustment for these taxes, as directed by section 773(a)(6)(C)(iii) of

the Act, or an adjustment to NV in accordance with section

773(a)(6)(B)(iii) of the Act. Minasligas asserts that while it is aware

that this issue has been raised in previous reviews, the Department's

decision not to make a COS adjustment for PIS and COFINS taxes is

incorrect and should be amended for these final results.

Minasligas cites to Frozen Concentrated Orange Juice from Brazil:

Final Results and Termination in Part of Antidumping Duty

Administrative Review 55 FR 47502 (November 14, 1990), in which the

Department made a COS adjustment for PIS and COFINS taxes. Minasligas

argues that, until recently, it was the Department's long-standing

policy to make COS adjustments for PIS and COFINS taxes and asserts

that there was no valid reason for the Department to have changed its

practice with respect to this issue.

Minasligas asserts that the Brazilian PIS and COFINS taxes are

imposed on revenue from the sales of products

[[Page 6319]]

produced and sold in the domestic market. Further, Minasligas contends

these taxes are not imposed on the sale of assets, interest revenue,

export revenue or miscellaneous income. Therefore, Minasligas claims

that the PIS and COFINS taxes are only imposed if a sale is made, which

means that the taxes are directly tied to the sale of silicon metal.

Minasligas argues that the only noticeable difference between PIS and

COFINS taxes and other Brazilian taxes is that PIS and COFINS taxes are

not recorded on commercial invoices. Minasligas argues that the

exclusion of the taxes on the invoices does not mean that the taxes are

not related to the sale of silicon metal. Minasligas refers to

Torrington v. United States, 82 F. 3d 1039 (Fed. Cir.1996), where the

CAFC found that many allocated expenses are considered directly related

to a sale even if the expenses are not recorded on the commercial

invoices. Therefore, Minasligas concludes that if an allocated expense

is considered directly related to a sale, then so should PIS and COFINS

taxes.

Minasligas argues that the Department cannot rely on its

determination in the Notice of Final Determination of Sales at Less

Than Fair Value: Silicon Metal From Argentina 56 FR 37891 (August 9,

1991) (Silicon Metal From Argentina) to support its position with

respect to the Brazilian PIS and COFINS taxes because there are key

differences between the Brazilian and the Argentine taxes. One

difference, Minasligas notes, is that the Brazilian PIS and COFINS

taxes are imposed only on revenue from home market sales and not on a

company's gross revenue, as are Argentine taxes which are imposed on

interest income, bond revenue, sales revenue and other miscellaneous

revenues. Therefore, Minasligas notes, Argentine taxes are imposed even

in the absence of home market sales, while a home market sale must

occur in order to impose the Brazilian PIS and COFINS taxes. Thus,

Minasligas contends that the Department's conclusion in Ferrosilicon

From Brazil: Notice of Final Results of Antidumping Duty Administrative

Review 62 FR 43504, 43508 (August 14, 1997) (Ferrosilicon From Brazil),

that the Brazilian taxes are gross revenue taxes is faulty and should

be revised in these final results.

The petitioners assert that the Department was correct in not

reducing the NV by an amount for PIS and COFINS taxes. The petitioners

argue that under section 773(a)(6)(B)(iii) of the Act, NV may only be

reduced by taxes imposed on the ``foreign like product or components

thereof.'' The petitioners contend that this language is identical to

that of section 772(d)(1)(C), the parallel provision in effect prior to

the enactment of the URAA, which the petitioners claim provides for an

upward adjustment to the U.S. price only through demonstration of a

direct relationship between the tax and the product. The petitioners

cite several prior determinations in this case as well as Ferrosilicon

From Brazil and Silicon Metal From Argentina where, the petitioners

contend, the Department found that the relevant taxes are not imposed

directly on the merchandise or components thereof, and thus do not

warrant an adjustment to U.S. price. The petitioners conclude that the

Department did not focus on whether revenue subject to the tax

consisted of revenue other than sales revenue, but rather based its

determination not to make the adjustment on the fact that taxes on

revenue or income of any kind do not constitute taxes imposed

``directly on the merchandise or components thereof.'' The petitioners

assert that under section 773(a)(6)(B)(iii) of the Act, the type of

taxes that warrant adjustment are home market consumption taxes.

Consumption taxes are paid by the consumer on specific sales

transactions, while the PIS and COFINS taxes are revenue taxes paid by

the seller. The petitioners contend that this difference clearly

demonstrates that PIS and COFINS taxes are not consumption taxes.

Therefore, the petitioners conclude that the Department should not make

an adjustment to NV for these taxes in the final results.

In response to Minasligas's argument that the Department should

have made a COS adjustment for the PIS and COFINS taxes, the

petitioners state that section 773(a)(6)(B)(iii) of the Act is the sole

provision in the antidumping law for determining adjustments for taxes

in price-to-price margin calculations. The petitioners contend that it

is an established principle of statutory interpretation that when, in

the same statute, there are specific terms governing a particular

subject matter and general terms that could be seen as addressing the

same subject matter, the specific terms prevail over the general.

Therefore, the petitioners assert, if the COS provision in section

773(a)(6)(C)(iii) of the Act could be invoked to make an adjustment for

taxes other than those identified in section 773(a)(6)(B)(iii) or in

circumstances different from those delineated in that provision,

section 773(a)(6)(B)(iii) would be superfluous. The petitioners argue

that even if the Department could make a COS adjustment for taxes, the

PIS and COFINS taxes would not qualify for an adjustment for the same

reason that they do not qualify for an adjustment pursuant to section

773(a)(6)(B)(iii). Claiming that the Department's regulations only

allow for COS adjustments for direct selling expenses, the petitioners

assert that, because the PIS and COFINS taxes are not imposed directly

on silicon metal sales transactions, they are not eligible for a COS

adjustment.

Department's Position: We agree with the petitioners. Minasligas

has not provided any documentation to support its claim that the

Department has erred in its conclusion that the PIS and COFINS taxes

are taxes on gross revenue exclusive of export revenue and, thus, are

not imposed specifically on the merchandise or components thereof.

Therefore, in accordance with our consistent practice with respect to

these taxes, we have determined for these final results that, because

these taxes cannot be tied directly to silicon metal sales, we have no

statutory basis to deduct them from NV. See Certain Cut-To-Length Crbon

Steel Plate From Brazil: Final Results of Antidumping Duty

Administrative Review 63 FR 12744, 12746 (March 16, 1998).

Comment 6: G&A

Minasligas notes that the Department calculated Minasligas's G&A

expense ratio as a percentage of cost of sales from the 1996 financial

statements. Minasligas further notes that VAT is not reflected in the

cost of sales on the financial statements. Therefore, Minasligas argues

that it would be inappropriate to calculate a G&A cost from the

financial statements and then apply the ratio to a cost of

manufacturing (for CV purposes) which includes VAT.

Department's Position: We agree with Minasligas that the record in

this review indicates that Minasligas' COGS, as recorded on its

financial statements, is exclusive of VAT. Therefore, for these final

of review, we have recalculated Minasligas's G&A expenses using a cost

of manufacturing that is net of VAT. See Silicon Metal Amended Final

1994-1995 at 54090.

In addition, we note that in the notice of preliminary results we

stated that we calculated Minasligas' G&A rate by adding together G&A

expenses incurred by Minasligas and its parent company, Delp Engenharia

Mecanica S.A. (Delp) ``because it is the Departmental practice to

include both the parent (Delp) and subsidiary company (Minasligas) G&A

expenses in its calculation of total G&A'' (See Silicon Metal

Preliminary Results at 42005). However, while the

[[Page 6320]]

Department may calculate the G&A rate by adding to the respondent's G&A

expenses a portion of the unconsolidated G&A expenses incurred by a

parent, it will only do so where the parent, or other affiliated party,

has provided general or administrative services on behalf of the

respondent. In the instant review, there is no evidence that Delp

provided general or administrative services for Minasligas. Therefore,

for the final results, we have revised our calculation of the G&A rate

for Minasligas to exclude G&A expenses incurred by Delp.

RIMA

Comment 1: Application of the Depreciation Methodology

The petitioners argue that RIMA failed to report depreciation of

all of its assets used in the production of silicon metal during the

POR. According to the petitioners, RIMA shifted all depreciation of its

equipment to the years 1987-1995, periods prior to the current POR,

thus reporting virtually no depreciation in the current administrative

review. Although the Department agreed with RIMA's depreciation

methodology in the prior POR (1995-1996), the petitioners claim that

the appropriateness of this methodology is not supported by the record

evidence in the current POR.

Specifically, the petitioners argue that there is a large gap

between the depreciation amount reported in RIMA's financial statements

and the fixed asset values reported in those statements. The

petitioners maintain that this approach violates the basic accounting

requirement that a corresponding deduction to the fixed asset values be

made for the amount of depreciation taken for those assets.

Additionally, the petitioners claim that while normally the Department

relies on audited financial statement depreciation as probative of a

company's actual depreciation, the Department cannot similarly rely on

financial statement depreciation that is inconsistent with the

financial statements' fixed asset values.

The petitioners also allege that RIMA's use of accelerated

depreciation is inconsistent with Brazilian Generally Accepted

Accounting Principles (GAAP). Although the petitioners acknowledge that

the Department, in the 1995-1996 POR, recognized RIMA's accelerated

depreciation method as consistent with Brazilian GAAP, they argue that

the 1996-1997 audit opinion on RIMA's financial statements does not

indicate (as the 1995-1996 statements did) that the statements were

prepared in accordance with Brazilian GAAP. Instead, the petitioners

claim that the 1996-1997 financial statements were prepared according

to generally accepted accounting practice and, even more specifically,

according to accounting practices of Brazilian corporate law. The

petitioners state that Brazilian corporate law is not equivalent to

Brazilian GAAP. Moreover, according to the petitioners, Brazilian GAAP

stipulates that depreciation should be based on the economic useful

life of an asset, not the useful life based on tax legislation. The

petitioners argue that RIMA's own information demonstrates that RIMA's

furnaces have been operating for years after the end of the five-year

useful life used by RIMA to record depreciation expense. Thus, they

conclude, the reported five-year useful life is also not in accordance

with Brazilian GAAP.

Furthermore, the petitioners contend that RIMA's use of accelerated

depreciation does not reasonably reflect its actual cost of producing

silicon metal. They claim that even if the accelerated five-year method

was permissible under the Brazilian GAAP, it is not allowed under the

U.S. antidumping law which, according to the petitioners, states that

COP/CV may not be determined using foreign accounting practices that

are unreliable or distortive of actual costs, (i.e., that do not

reasonably reflect the cost of producing the subject merchandise). The

petitioners cite section 773(e) of the Act as enumerating which

specific costs are to be included in CV. According to the petitioners,

the Act stipulates that general expenses are to be included, and the

petitioners argue the general expenses include overhead which, in turn,

includes depreciation. Since RIMA's reported costs do not include an

appropriate amount for depreciation, according to the petitioners, they

are distorted and unreliable.

Finally, the petitioners dispute the Department's position (as

discussed in the final results of the prior review of this order) that

calculating depreciation for RIMA in a current review on a 20-year

period would result in double counting of the actual depreciation.

According to the petitioners, the Department in the 1994-1995 period of

review resorted to FA when determining RIMA's depreciation.

Consequently, the petitioners argue that there cannot be double-

counting of depreciation because a FA calculation is not intended to

reflect the correct amount of cost. Moreover, the petitioners argue

that a respondent's failure to provide the information necessary to

calculate depreciation properly in one segment of the proceeding should

not and could not require the use of distortive depreciation for the

respondent's productive assets in all later segments of the proceeding.

Additionally, the petitioners argue that no double counting occurred

with respect to the 1995-1996 administrative review. In that review,

according to the petitioners, RIMA shifted the great bulk of the

depreciation of its primary productive assets to periods prior to the

1995-1996 POR resulting in minimal depreciation amounts for these

assets. The petitioners further argue that since RIMA ``'fully

depreciated'' its assets prior to the 1995-1996 POR, no double-counting

is possible since the Department did not ``capture'' any depreciation

for these assets in the 1995-1996 review. The petitioners, argue that

the proper method of correcting RIMA's shift of depreciation to prior

years is to disregard RIMA's hypothetical depreciation calculation and

calculate the proper annual amount of depreciation using the normal 20-

year useful life for machinery, equipment and installations under

Brazilian GAAP. The petitioners argue that the actual life of a silicon

metal furnace is at least 20 years and often significantly longer. The

petitioners also argue that it is the Department's established practice

to reject accelerated depreciation of assets where such depreciation

fails to allocate costs of the asset over the life of the asset. See

Final Determination of Sales at Less Than Fair Value: Dynamic Random

Access Memory Semiconductors of One Megabit and Above From the Republic

of Korea 56 FR 15467, 15479 (March 23, 1993) (DRAMs from Korea) and

Final Determination of Sales at Less Than Fair Value: Fresh and Chilled

Atlantic Salmon from Norway, 56 FR 7661 (Feb. 25, 1991) (Salmon from

Norway-LTFV).

RIMA states that in this review, the company continued to follow

the same methodology of reporting depreciation expenses as that

approved by the Department in the prior administrative review. As to

specific claims by the petitioners pertaining to its depreciation

methodology, RIMA maintains that its calculations are correct and

reconcile with its audited financial statements. RIMA argues that

contrary to the petitioners' allegations, there is no understatement of

the depreciation amount when compared to the value of the reported

assets in the audited financial statements. RIMA notes that the same

issue was raised in the 1995-1996 administrative review and the

Department, in that review, stated that RIMA's depreciation worksheets

[[Page 6321]]

reconciled to its financial statements. With regard to its accelerated

depreciation, RIMA refers to prior cases involving ferrosilicon and

silicon metal from Brazil where the Department accepted the accelerated

depreciation reported by the respondents. See Ferrosilicon from Brazil

and Silicon Metal 1993-1994 at 1958. Specifically, in the prior review

of this case, RIMA contends, the Department accepted the five-year

depreciation methodology by stating that using a longer depreciation

period would result in double-counting of costs which were captured in

the prior segment of this proceeding. RIMA believes that audited

financial statements in the current review demonstrate properly the

same accelerated depreciation as the one used in the prior review.

As to the petitioners' claims that RIMA's audited statements were

not prepared in accordance with Brazilian GAAP, RIMA contends that the

claimed difference between the term ``practices'' and ``principles'' is

an inconsequential mistake in the translation into English and amounts

to little more than hair-splitting on the petitioners' part.

Furthermore, RIMA suggests that in order to put to rest petitioners'

various questions pertaining to depreciation and deferred expenses, the

Department is welcome to conduct on site verification of its books and

records even in the post-preliminary stage of the review. In

conclusion, RIMA urges the Department to accept its depreciation

methodology, as it did in prior reviews.

Department's Position: We agree with Rima. Rima demonstrated that

its assets contained in the depreciation worksheets reconciled to its

financial statements. Specifically, RIMA demonstrated that the

depreciation expense shown on the worksheets reconciled to the

depreciation expense reported in RIMA's audited financial statements.

In prior segments of this proceeding, when the Department did not

resort to total FA (or total best information available), we included

in RIMA's COP and CV the depreciation expense which the auditors

reported in RIMA's audit opinion. See Silicon Metal from Brazil; Final

Results of Antidumping Duty Administrative Review 61 FR 46763

(September 5, 1996) (Silicon Metal 1992-1993), Silicon Metal 1994-1995,

and Silicon Metal 1995-1996. In the current review, because the amount

of depreciation expense detailed in RIMA's depreciation worksheets

(which support the depreciation expense included in the submitted COP

and CV) reconcile to RIMA's audited financial statements, we believe

that RIMA's reported depreciation expense does not distort its COP and

CV figures. Additionally, our use of RIMA's financial statement

depreciation expense is consistent with Salmon from Norway, where we

relied on the depreciation expense reported in the financial

statements.

With regard to the issue of the Brazilian GAAP, although we agree

with the petitioners that Brazilian GAAP specifies that the cost of an

asset should be systematically depreciated over the estimated useful

economic life of the asset, we disagree that Brazilian GAAP dictates

how useful economic life should be defined. The definition of useful

life depends on each individual situation. It can be determined by

consideration of such factors as legal life, the effects of

obsolescence, and other economic factors. See Silicon Metal 1995-1996

at 6903. We agree with Rima that in the 1995-1996 administrative review

of ferrosilicon from Brazil, and in the preliminary review of this

case, we accepted the reported accelerated depreciation expense based

on amounts recorded in the financial statements because they were

calculated in accordance with Brazilian GAAP and they did not distort

actual costs. See Ferrosilicon from Brazil at 43512.

As to the petitioners' claim that no double-counting of the

depreciation expense would occur should we extend the depreciation

schedule to 20 years, in the prior segments of this proceeding, we

included in RIMA's COP and CV depreciation expense that the auditors

identified in their audit opinion and which was calculated using RIMA's

estimated useful life of five years for machinery and equipment. See

Silicon Metal 1992-1993 at 46767, 46768. The petitioners' claim that in

the 1994-1995 administrative review, the Department resorted to FA

while calculating RIMA's depreciation, does not acknowledge the fact

that in that review the Department rejected RIMA's depreciation

worksheets and relied instead on RIMA's audited financial statements.

The depreciation amount from the audited financial statements was based

upon RIMA's five-year depreciation schedule for machinery and

equipment. Thus, if we were to follow the petitioners' request and

recalculate RIMA's depreciation expense using a 20-year useful life for

machinery and equipment, we would double count depreciation costs which

were captured in prior segments of this proceeding. Furthermore, we

disagree with the petitioners that FA were not intended to reflect the

correct amount of cost. Section 776(a) of the Act requires the

Department to ``make determinations on the basis of facts available

where requested information is missing from the record or cannot be

used because, for example, it has not been provided * * *'' (SAA at

869), as was the case in the 1994-1995 review. Accordingly, the

Department ``must make [its] determinations based on all evidence of

record, weighing the record evidence to determine that which is most

probative of the issue under consideration.'' SAA at 869. In that

review, as FA, we calculated RIMA's depreciation expense using the

accelerated depreciation methodology recorded in the company's

financial statements. Therefore, if the Department were to require RIMA

to report depreciation using a 20-year useful life schedule, as the

petitioners request, the Department would clearly double-count

depreciation captured in the 1994-1995 review.

Comment 2: Amortization of Deferred Expenses

The petitioners request that the Department include amortization of

RIMA's deferred expenses in the calculation of RIMA's financial expense

ratio. According to the petitioners, in the 1995-1996 POR, RIMA

included amortization of deferred financial expenses in its reported

depreciation expenses. The Department rejected this methodology and

included amortization of the deferred expenses in RIMA's financial

expense ratio. The petitioners argue that in the current POR, to negate

this increase to its financial expenses, RIMA shifted a significant

portion of the deferred expenses to two newly created fixed assets

accounts, resulting in no significant depreciation of the deferred

expenses being reported. Additionally, the petitioners argue RIMA

recharacterized these expenses as dedicated solely to magnesium

production, whereas in the prior POR, RIMA had reported them as being

related to both the magnesium and the silicon metal production

facilities.

The petitioners object to RIMA's characterization and claim that

the relevant expenses include expenses associated with silicon metal

production. The petitioners argue that based on RIMA's own description

of these expenses in its July 8, 1998 response, these expenses

represent loans taken by RIMA to allow continued operation while

experiencing production problems. As such, according to the

petitioners, these expenses do not qualify for capitalization as part

of fixed assets under the Brazilian accounting standards because they

are not financial expenses incurred in connection with fixed asset

construction. Moreover, the

[[Page 6322]]

petitioners dispute the relevance of one of the regulations cited by

RIMA, and claim that RIMA did not provide the full text of the other.

They further contend that regulations established by the Brazilian

Securities Commission, allow for the capitalization of such financial

expenses as those discussed above, only until the asset is

substantially completed or placed in condition for sale or use. The

petitioners claim that the controlling Brazilian legislation further

stipulates that such expenses must be classified in the same asset

group as the asset for which it was incurred. The petitioners argue

that RIMA did not so classify these expenses.

The petitioners further assert that the expenses RIMA shifted to

the hydroelectric fixed asset account are actually costs associated

with all of RIMA's various products, including the subject merchandise.

According to the petitioners, RIMA itself has noted on its website that

these expenses are associated with the company's goal to produce its

own power. Nevertheless, the petitioners contend that even if these

expenses are not directly related to the production of silicon metal,

the Department's practice is to determine electricity costs on a

company-wide basis and there is no reason for the Department to deviate

from that policy in this review. Moreover, according to the

petitioners, the Statute, the SAA, and the Department's practice

dictate that the Department reject any respondent's change in

accounting practice which shifts costs away from the subject

merchandise. Finally, with respect to this issue, the petitioners

conclude that the Department should include a five percent amortization

ratio of the total deferred expenses (including those shifted to the

new fixed assets accounts) in the calculation of RIMA's financial

expense.

RIMA notes that in the prior review of this order, the Department

accounted for RIMA's deferred expenses as part of its financial

expense. In the current POR, RIMA claims its financial statements

clearly show that all deferred expenses for 1996 were fully amortized.

As to 1997, according to RIMA, it incurred new expenses for several

projects and those expenses were amortized according to accepted

Brazilian accounting principles. RIMA argues that ultimately, the

amortized amount was included in the total depreciation amount, as

specified in the financial statements under ``demonstration of the

origins and application of resources'' and was finally included in

RIMA's account of ``operational income (expense) as part of RIMA's G&A

expenses. Thus, according to RIMA, the amortization amount was included

in RIMA's COP and CV because in the preliminary results the Department

used a ratio of G&A (inclusive of amortization) to COGS and applied it

to RIMA's COM for determining COP and CV. RIMA adds that should the

Department decide to include amortization in the financial expenses

rather than in G&A expenses for its final determination, it should

deduct the amortization amount from G&A to avoid double counting.

RIMA disputes the petitioners' argument that RIMA improperly

shifted deferred expenses related to new technology and hydroelectric

expenses to fixed assets accounts. RIMA claims this transfer was in

accordance with Brazilian law, since fully amortized deferred assets

are no longer subject to amortization. According to RIMA, the

petitioners' request that the Department include in RIMA's costs

amortization of deferred assets that were fully amortized in 1996 would

result in the double counting of these assets.

Moreover, RIMA argues that since these deferred assets were fully

amortized already, their classification as fixed assets does not shift

costs away from subject merchandise as alleged by the petitioners.

Furthermore, with regard to the alleged production expenses common to

both magnesium and silicon metal, RIMA argues that it provided ample

evidence to contradict the petitioners' claim that the relevant

expenses do relate to the production of silicon metal. RIMA also argues

that the petitioners cite parts of that submission out of context in

order to infer that certain expenses relate to silicon metal

production. According to RIMA, once the submission is read in its

entirety, it becomes clear that these expenses related to magnesium

production only, and have no bearing on the production of silicon

metal. RIMA suggests that all these issues can be clarified through

verification of the appropriate records, however, it also believes that

the entire issue is moot since deferred expenses were fully amortized

in 1996 and thus are not costs related to silicon metal production in

1997.

Department's Position: We agree with RIMA. As with RIMA's

depreciation expense, in prior segments of this proceeding, when the

Department did not resort to total FA (or total best information

available), we included in COP and CV the amortization expense reported

in the auditors' opinion to RIMA's financial statements. See the 1992-

1993, 1994-1995 and the 1995-1996 administrative reviews. In this

review, because the amount of amortization expense in RIMA's worksheets

is supported by the audited financial statements and does not distort

the reported costs, we believe that the amortization expense included

in the submitted COP and CV is correct. Additionally, since all of the

deferred assets were fully amortized prior to 1997, if we were to

follow the petitioners' request and recalculate RIMA's amortization

expenses using a longer useful life for the deferred assets, we would

double count amortization costs which we captured in the prior segments

of this proceeding. With regard to the petitioners' claim that RIMA

shifted a significant portion of the deferred expenses to the newly

created fixed assets accounts (i.e., hydroelectric, and development and

technology), thus significantly reducing the depreciation of these

expenses, our review of the record indicates that the petitioners'

allegations are unsubstantiated. According to the independent auditors'

statement, these accounts refer to magnesium metal production (a

product that is not subject merchandise) and contain expenses relevant

only to magnesium production. We also disagree with the petitioners'

statement that the hydroelectric plant is supplying electricity used in

the silicon metal production. As stated above, the record in the

current review indicates that the plant is located in Bocaiuva, a

facility dedicated to production of magnesium (i.e., non-subject

merchandise). We further disagree with the petitioners' claim that if

the said hydroelectric plant supplied electricity to a magnesium plant

only, based on the 1991-1992 silicon metal review, the Department

should allocate electricity costs on a company-wide basis even if these

costs were not related to production of subject merchandise. Our review

of that segment of the proceeding indicates that the case involved

another respondent, CBCC, which used plants and furnaces capable of

producing both subject and non-subject merchandise. Accordingly, we

state in that review that ``[t]he facts of the instant case are

consistent with the Department's position requiring the weight-

averaging of the costs of merchandise produced in more than one

facility.'' This is not the case in the current review where there is a

clear distinction between plants and furnaces producing silicon metal

and those dedicated to production of non-subject merchandise. See

Silicon Metal from Brazil; Final Results of Antidumping Duty

Administrative Review, 59 FR 42808 (August 19, 1994). Consequently, our

treatment of amortization in the preliminary results remains unchanged.

[[Page 6323]]

Comment 3: Offset to Financial Expenses

According to the petitioners, the Department stated in the

preliminary results that RIMA failed to provide sufficient information

to warrant granting it an offset to its financial expenses. However,

the petitioners argue that despite the Department's statement in the

preliminary results that it did not grant RIMA an offset to its

financial expenses, it appears that the Department in its margin

calculation did allow an offset for financial income related to RIMA's

headquarters. Moreover, the petitioners argue, certain categories of

income claimed by RIMA as an offset to financial expense do not qualify

as an offset and should be disallowed on those grounds. The petitioners

conclude that the Department should not grant RIMA any offset for

interest income.

RIMA did not comment on this issue.

Department's Position: We agree with the petitioners. In the

Department's March 31, 1998, supplemental questionnaire, we requested

RIMA to provide a breakdown of the financial expense line item in its

financial statements and to describe fully each type of financial

income reflected in that line item. In its April 18, 1998, supplemental

response, RIMA identified four types of financial income used to offset

its financial expenses: ``Currency Adjustments,'' ``Asset Discounts,''

``Asset Interest,'' and ``Income on Financial Investments.''

RIMA claimed no income from the ``Currency Adjustments'' category,

and therefore, we did not grant an offset for this item. With regard to

RIMA's ``Asset Discounts'' account, described as discounts received

from suppliers, RIMA failed to provide any additional information as to

the nature of the discounts nor any supporting documentation for this

adjustment. It is the Department's long-standing policy that the burden

of proof to substantiate the legitimacy of a claimed adjustment falls

on the respondent party making that claim. However, we note that in

this instance, if RIMA had demonstrated that this category represents

discounts from suppliers, we would still not grant an offset for this

item because the Department considers such discounts to be an

adjustment to the purchase price rather than interest income.

Therefore, for these final results we have not allowed this item as an

offset to RIMA's reported financial expense. Regarding the income

account ``Asset Interest,'' RIMA characterized this item as ``expenses

on late payments,'' but did not provide any additional explanation.

Since the Department considers interest on late payments from customers

to be an adjustment to price (not interest income) and RIMA did not

meet its burden of proof (i.e., it failed to provide documentation

demonstrating how this income can qualify as income derived from short-

term investments), we are denying this offset to RIMA's financial

expense.

With respect to RIMA's account referred to as ``Income of Financial

Investments,'' in the April 18, 1998, supplemental response, RIMA

defines this account as representing financial investment income

derived from short-term investment. On June 29, 1998, the Department

issued a second supplemental questionnaire requesting RIMA to provide a

breakout for this account by the type of investment. In its July 8,

1998, supplemental response, RIMA stated that it did not have financial

investments during this period. This statement appears to contradict

the company's financial statements, which record income in this

category. Since RIMA failed to substantiate its original claim for this

adjustment, the company has not met its burden of proof and, therefore,

we have not granted RIMA an offset to financial expense for this item.

Thus, for these final results of review, we have not granted RIMA any

offset for interest income to its financial expenses.

Comment 4: Data Set Discrepancy

The petitioners claim that the Department made an erroneous

adjustment to certain of RIMA's U.S. and home market prices and

expenses based on the Department's incorrect determination that the

electronic version of the data submitted to the Department did not

correspond to that presented in the hard copy response. The petitioners

argue that they compared both versions of the data files and found no

discrepancies. Specifically, the petitioners contest the R$100

deduction that the Department made to these reported prices and

expenses and argue that these deductions resulted in understated

dumping margins.

RIMA did not comment on this issue.

Department's Position: We agree with the petitioners. We reviewed

both the hard copy and the electronic version of the submitted data

sets and found no discrepancies between them. Consequently, for the

final results of this review, we have removed the relevant adjustment

from the margin calculation.

Comment 5: U.S. Imputed Credit Expense

The petitioners claim that the Department erroneously recalculated

U.S. imputed credit and revenue using a reais-denominated borrowing

rate. The petitioners ask the Department to revise RIMA's imputed

credit expenses by using appropriate U.S.-based borrowing rate (i.e.,

the U.S. prime rate).

RIMA did not comment on this issue.

Department's Position: We agree with the petitioners. In its

original questionnaire response, RIMA calculated its U.S. imputed

credit expense and revenue using an interest rate related to reais-

denominated borrowing. In the March 31, 1998, Deficiency Questionnaire

(Deficiency Questionnaire), the Department requested RIMA to

``recalculate the credit expenses by using the appropriate U.S. short

term borrowing rate.'' See Deficiency Questionnaire, at 5. In its April

17, 1998, Deficiency Response Questionnaire (Deficiency Response

Questionnaire), RIMA stated that it recalculated U.S. imputed credit

expense using a U.S. short-term borrowing rate. See Deficiency Response

Questionnaire at 6 and Exhibit 10. However, RIMA did not identify what

rate it actually used. In the preliminary results the Department

inadvertently calculated the U.S. imputed credit using the reais-

denominated borrowing rate. In the Department's Policy Bulletin 98.2,

issued on February 23, 1998, the Department stated that:

[f]or purposes of calculating imputed credit expenses, we will use a

short-term interest rate tied to the currency in which the sales are

made. * * * In cases where a respondent has no short-term borrowings

in the currency of the transaction, we will use publicly available

information to establish a short-term interest rate applicable to

the currency of transaction.

Consequently, for these final results, we have recalculated RIMA's U.S.

imputed credit expense using the U.S. short-term prime interest rate.

Comment 6: Unit Weights Measurements

The petitioners claim that silicon metal quantities can be

expressed in terms of the gross weight of the silicon metal or the net

weight of contained silicon (pure silicon) and that those two types of

weight measurements are being used inconsistently in the preliminary

results analysis. The petitioners rely on RIMA's response to the

Department's Deficiency Questionnaire, where it was asked to explain

which type of weight units are used in both the U.S. and home market

sales. In its April 17, 1998,

[[Page 6324]]

deficiency response questionnaire, RIMA stated that ``the quantity in

the sales listing both in the home market and in the foreign market is

based on gross weight, i.e., [sic] the total weight of Silicon Metal

excluding the big bags.'' Following that statement, the petitioners

claim that upon review of RIMA's sample of shipping documents it

appears that the reported sales quantities are based not on gross

weight, as reported by RIMA, but rather on net weight of contained

silicon. Subsequently, the petitioners claim that the Department, while

conducting a sales-below-cost test, erroneously compared home market

sales which are measured in units of weight of contained silicon with

cost of production figures based on silicon metal gross weight units.

The petitioners conclude, therefore, that the Department's comparison

of U.S. sales to constructed values (which are based on the COP

figures) is flawed. Consequently, the petitioners request that the

Department adjust the appropriate units' weight in order to ensure

proper comparisons.

RIMA claims that the same issue was raised in the prior review

within the context of a different respondent and rejected by the

Department. RIMA argues that the petitioners failed to provide evidence

that RIMA's U.S. prices reflect different weights than those used in

the below-cost and CV analysis and urge the Department to reject the

petitioners' contention.

Department's Position: We agree with RIMA. The petitioners' main

argument rests on RIMA's shipping document submitted as part of one of

its supplemental responses. In that document, RIMA lists the quantity

shipped in both net and gross terms. The petitioners infer that RIMA's

net weights on the shipping documents are not net of packaging, but

rather net weight of contained silicon. Consequently, the petitioners

conclude that our use of weight units is incorrect.

Our review of the shipping document finds no reference to net

weight of contained silicon metal. Rather, the exhibit provides two

weight quantities measured in gross and net terms. The record indicates

that the difference between the two weights represents the weight of

packaging which is listed separately on the same document. Thus the

petitioners' claim that the net weights reported on the invoice somehow

represent ``net weight of contained silicon'' is not supported by the

record of this proceeding. Consequently, there is no reason to adjust

the weight measurements used in the per-unit calculations from those

used in the preliminary results of review.

Final Results of Review

As a result of this review, we have determined that the following

margins exist for the period April 1, 1996 through March 31, 1997:

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

Weighted-

average

Manufacturer/exporter margin

percentage

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

Eletrosilex Belo Horizonte................................. 93.20

Companhia Ferroligas Minas Gerais--Minasligas.............. 9.47

Companhia Brasileira Carbureto de Calico................... (\1\)

LIASA...................................................... (\1\)

Rima Eletrometalurgia S.A.................................. (\1\)

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

\1\ Zero.

Cash Deposit Requirements

The Department shall determine, and the Customs Service shall

assess, antidumping duties on all appropriate entries.

The following deposit requirements shall be effective upon

publication of this notice of final results of administrative review

for all shipments of the subject merchandise from Brazil that are

entered or withdrawn from warehouse, for consumption on or after the

publication date, as provided by 751(a)(1) of the Act: (1) the cash

deposit rates for the reviewed companies will be the rates listed

above, except if the rate is less than 0.5 percent 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 a previous segment of this proceeding, the cash deposit rate

will continue to be the company-specific rate published in the most

recent final results in which that manufacturer or exporter

participated; (3) if the exporter is not a firm covered in this review

or in any previous segment of this proceeding, but the manufacturer is,

the cash deposit rate will be that established for the manufacturer of

the merchandise in these final results of review or in the most recent

final results of review in which that manufacturer participated; and

(4) if neither the exporter or the manufacturer is a firm covered in

this review or in any previous segment of this proceeding, the cash

deposit rate will be 91.06 percent, the ``all others'' rate established

in the LTFV investigation. These requirements shall remain in effect

until publication of the final results of the next administrative

review.

For duty assessment purposes, we have calculated importer-specific

assessment rates for silicon metal. For CEP sales we calculated an

importer-specific assessment rate by aggregating the dumping margins

calculated for all U.S. sales to each importer and dividing this amount

by the estimated entered value of those same sales. We calculated the

estimated entered value by subtracting international movement expenses

and expenses incurred in the United States from the gross sales value.

For EP sales, for each importer, we calculated a per unit importer-

specific assessment amount by aggregating the dumping margins

calculated for all U.S. sales to that importer and dividing this amount

by the total quantity of subject merchandise in those same sales. In

accordance with 19 CFR 351.106(c)(2), where we have calculated an

importer-specific assessment rate that is less than 0.5 percent, and

therefore, de minimis, we will instruct the Customs' Service to

liquidate that importer's entries during the POR without regard to

antidumping duties.

This notice serves as a final 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 notice serves as the only reminder to parties subject to

administrative protective order (APO) of their responsibility

concerning the disposition of proprietary information disclosed under

APO in accordance with 19 CFR 351.105(a). Timely written notification

of return/destruction of APO materials or conversion to judicial

protective order is hereby requested. Failure to comply with the

regulation and the terms of an APO is a sanctionable violation.

This administrative review and notice are published in accordance

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

Dated: February 2, 1999.

Robert S. LaRussa,

Assistant Secretary for Import Administration.

[FR Doc. 99-3137 Filed 2-8-99; 8:45 am]

BILLING CODE 3510-DS-P