[Federal Register Volume 59, Number 4 (Thursday, January 6, 1994)] [Notices] [Pages 732-740] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 94-281] [[Page Unknown]] [Federal Register: January 6, 1994] ----------------------------------------------------------------------- DEPARTMENT OF COMMERCE International Trade Administration [A-351-820] Final Determination of Sales at Less Than Fair Value: Ferrosilicon From Brazil Agency: Import Administration, International Trade Administration, Department of Commerce. EFFECTIVE DATE: January 6, 1994. FOR FURTHER INFORMATION CONTACT: Kimberly Hardin, Office of Antidumping Investigations, Import Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW., Washington, DC 20230; telephone (202) 482-0371. FINAL DETERMINATION: We determine that ferrosilicon (FeSi) from Brazil is being, or is likely to be, sold in the United States at less than fair value, as provided in section 735 of the Tariff Act of 1930, as amended (the Act), and that critical circumstances exist for Italmagnesio S.A. Industria e Comercio (Italmagnesio), but not for Companhia Ferroligas Minas Gerais (Minasligas) or Companhia Brasileira Carbureto de Calcio (CBCC). The estimated margins are shown in the ``Suspension of Liquidation'' section of this notice. Scope of Investigation The merchandise subject to this investigation is ferrosilicon, a ferroalloy generally containing, by weight, not less than four percent iron, more than eight percent but not more than 96 percent silicon, not more than 10 percent chromium, not more than 30 percent manganese, not more than three percent phosphorous, less than 2.75 percent magnesium, and not more than 10 percent calcium or any other element. FeSi is a ferroalloy produced by combining silicon and iron through smelting in a submerged-arc furnace. FeSi is used primarily as an alloying agent in the production of steel and cast iron. It is also used in the steel industry as a deoxidizer and a reducing agent, and by cast iron producers as an inoculant. FeSi is differentiated by size and by grade. The sizes express the maximum and minimum dimensions of the lumps of FeSi found in a given shipment. FeSi grades are defined by the percentages by weight of contained silicon and other minor elements. FeSi is most commonly sold to the iron and steel industries in standard grades of 75 percent and 50 percent FeSi. Calcium silicon, ferrocalcium silicon, and magnesium ferrosilicon are specifically excluded from the scope of this investigation. Calcium silicon is an alloy containing, by weight, not more than five percent iron, 60 to 65 percent silicon, and 28 to 32 percent calcium. Ferrocalcium silicon is a ferroalloy containing, by weight, not less than four percent iron, 60 to 65 percent silicon, and more than 10 percent calcium. Magnesium ferrosilicon is a ferroalloy containing, by weight, not less than four percent iron, not more than 55 percent silicon, and not less than 2.75 percent magnesium. FeSi is currently classifiable under the following subheadings of the Harmonized Tariff Schedule of the United States (HTSUS): 7202.21.1000, 7202.21.5000, 7202.21.7500, 7202.21.9000, 7202.29.0010, and 7202.29.0050. Although the HTSUS subheadings are provided for convenience and customs purposes, our written description of the scope of this investigation is dispositive. FeSi in the form of slag is included within the scope of this investigation if it meets, generally, the chemical content definition stated above and is capable of being used as FeSi. FeSi is used primarily as an alloying agent in the production of steel and cast iron. It is also used in the steel industry as a deoxidizer and a reducing agent, and by cast iron producers as an inoculant. Parties that believe their importations of slag do not meet these definitions should contact the Department and request a scope determination. Period of Investigation The period of investigation (POI) is July 1, 1992, through December 31, 1992. Case History Since the publication of the notice of preliminary determination on August 16, 1993 (58 FR 43323), the following events have occurred. On August 20, 1993, respondent Italmagnesio notified the Department that it had decided to withdraw from participation in this investigation and requested the return of all documents that it submitted during the course of the investigation. On August 25, 1993, we returned the proprietary versions of all documents submitted by Italmagnesio during the investigation. On August 23, 24, and 25, 1993, CBCC, petitioners, and Minasligas, respectively, requested a public hearing. The Department conducted verification of the cost and sales responses of Minasligas and CBCC in Brazil from August 25 through September 14, 1993. Petitioners, CBCC, and Minasligas submitted case briefs on October 27, 1993, and rebuttal briefs on November 1, 1993. On November 3, 1993, a public hearing was held. Best Information Available As stated in the ``Case History'' section of this notice, Italmagnesio withdrew its responses prior to verification and stated that it would not participate further in the investigation. Therefore, Italmagnesio must be considered a non-cooperating party. As a non- cooperating party, based on our past practice (see e.g., 58 FR 37215, Final Determination of Sales At Less Than Value, Certain Cut-to-Length Carbon Steel Plate from the United Kingdom, July 9, 1993), Italmagnesio will be assigned the higher of the margins alleged in the petition or a calculated margin for another company as best information available (BIA). (See Comment 15) Such or Similar Comparisons We have determined that all the products covered by this investigation constitute a single category of such or similar merchandise. Where there were no sales of identical merchandise in the home market to compare to U.S. sales, we compared similar merchandise based on the following criteria: (1) The percentage range, by weight, of silicon content; (2) grade; and (3) sieve size. (See Comment 2 with regard to sieve size.) Fair Value Comparisons To determine whether sales of FeSi from Brazil to the United States were made at less than fair value, we compared the United States price (USP) to the foreign market value (FMV), as specified below. United States Price A. CBCC We based USP on purchase price, in accordance with section 772(b) of the Act, because the subject merchandise was sold to unrelated purchasers in the United States prior to importation and exporter's sales price was not indicated by other circumstances. We calculated purchase price based on packed FOB port of embarkation prices to unrelated customers. Because CBCC did not report packing for bulk sales, we used information from the public version of Minasligas' response for bulk packing. We made deductions where appropriate for foreign inland freight (which also included foreign inland insurance), foreign brokerage and handling, and warehousing. We made an adjustment to USP for the taxes paid on the comparison sales in Brazil. On October 7, 1993, the Court of International Trade (CIT), in Federal-Mogul Corp. and The Torrington Co. v. United States, Slip Op. 93-194 (CIT, October 7, 1993), rejected the Department's methodology for calculating an addition to USP under section 772(d)(1)(C) of the Act to account for taxes that the exporting country would have assessed on the merchandise had it been sold in the home market. The CIT held that the addition to USP under section 772(d)(1)(C) of the Act should be the result of applying the foreign market tax rate to the price of the United States merchandise at the same point in the chain of commerce that the foreign market tax was applied to foreign market sales. Federal-Mogul, Slip Op. 93-194 at 12. The Department has changed its methodology in accordance with the Federal-Mogul decision, and has applied this new methodology in making the final determination in this investigation. From now on, the Department will add to USP the result of multiplying the foreign market tax rate by the price of the United States merchandise at the same point in the chain of commerce that the foreign market tax was applied to foreign market sales. The Department will also adjust the USP tax adjustment and the amount of tax included in FMV. These adjustments will deduct the portions of the foreign market tax and the USP tax adjustment that are the result of expenses that are included in the foreign market price used to calculate foreign market tax and are included in the United States merchandise price used to calculate the USP tax adjustment and that are later deducted to calculate FMV and USP. These adjustments to the amount of the foreign market tax and the USP tax adjustment are necessary to prevent the new methodology for calculating the USP tax adjustment from creating antidumping duty margins where no margins would exist if no taxes were levied upon foreign market sales. This margin creation effect is due to the fact that the bases for calculating both the amount of tax included in the price of the foreign market merchandise and the amount of the USP tax adjustment include many expenses that are later deducted when calculating USP and FMV. After these deductions are made, the amount of tax included in FMV and the USP tax adjustment still reflects the amounts of these expenses. Thus, a margin may be created that is not dependent upon a difference between USP and FMV, but is the result of the price of the United States merchandise containing more expenses than the price of the foreign market merchandise. The Department's policy to avoid the margin creation effect is in accordance with the United States Court of Appeals' holding that the application of the USP tax adjustment under section 772(d)(1)(C) of the Act should not create an antidumping duty margin if pre-tax FMV does not exceed USP. Zenith Electronics Corp. v. United States, 988 F.2d 1573, 1581 (Fed. Cir. 1993). In addition, the CIT has specifically held that an adjustment should be made to mitigate the impact of expenses that are deducted from FMV and USP upon the USP tax adjustment and the amount of tax included in FMV. Daewoo Electronics Co., Ltd. v. United States, 760 F. Supp. 200, 208 (CIT, 1991). However, the mechanics of the Department's adjustments to the USP tax adjustment and the foreign market tax amount as described above are not identical to those suggested in Daewoo. In this investigation, there are four different taxes levied on sales of the subject merchandise in the home market. The ICMS tax is a regional tax, which varies depending upon the state in which the purchase originates. The IPI tax is a fixed percentage rate tax of four percent. Finally, the PIS and FINSOCIAL taxes are a fixed percentage rate tax equalling 2.65 percent combined. CBCC used both a unit and a gross basis to calculate the combined PIS and FINSOCIAL taxes within various months of the POI. We recalculated these taxes on a unit basis, where appropriate, which is the way CBCC calculated them. Because these taxes are calculated on the same base price, we find them not to be cascading. Thus, for each sale, we made only one tax adjustment which equals the sum of the actual tax rates. B. Minasligas We based USP on purchase price, in accordance with section 772(b) of the Act, because the subject merchandise was sold to unrelated purchasers in the United States prior to importation and exporter's sales price was not indicated by other circumstances. We calculated purchase price based on packed FOB port of embarkation prices to unrelated customers. We made deductions where appropriate for foreign inland freight (which also included foreign inland insurance) and foreign brokerage and handling. We made an adjustment to USP for the taxes paid on the comparison sale in Brazil. (See above description under ``A. CBCC'' for an explanation of our new tax methodology as well as a description of the specific taxes in this investigation.) Foreign Market Value In order to determine whether there were sufficient sales of FeSi in the home market to serve as a viable basis for calculating FMV, we compared the volume of home market sales of FeSi to the aggregate volume of third country sales in accordance with section 773(a)(1)(B) of the Act. For both CBCC and Minasligas, the volume of home market sales was greater than five percent of the aggregate volume of third country sales. Therefore, for both CBCC and Minasligas, we determined that home market sales of FeSi constituted a viable basis for calculating FMV, in accordance with 19 CFR 353.48(a). In the petition and in subsequent filings, petitioners alleged that home market sales were made at less than the cost of production (COP) and that constructed value (CV) should be used to compute FMV. Based on petitioners' allegations, which provided a reasonable basis to ``believe or suspect'' below cost sales (see section 773(b) of the ACT), we initiated COP investigations. We examined respondents' cost data at verification and analyzed this information for purposes of this final determination. We determine Brazil's economy to be hyperinflationary. Therefore, in order to eliminate the distortive effects of inflation, consistent with past practice (see, e.g., Final Determination of Sales at Less Than Fair Value and Amended Antidumping Duty Order, Tubeless Steel Disc Wheels from Brazil, 53 FR 34566, September 7, 1988), we calculated separate weighted-average FMVs, COPs, and CVs for each month. A. CBCC In order to determine whether home market sales were above the COP, we calculated the monthly COPs on the basis of CBCC's cost of materials, fabrication, general expenses, and packing. We relied on the COP data submitted by CBCC except in the following instances where the costs were not appropriately quantified or valued. Specifically, we: 1. Revised general and administrative (G&A) expenses by calculating them as a percentage of cost of goods sold as reported on CBCC's 1992 financial statements (see Comment 4); 2. Added an amount for the G&A expenses of CBCC's parent company (see Comment 4); 3. Revised the interest expense computation using the financial statements of CBCC's parent, Solvay do Brasil (see Comment 3); 4. Included IPI and ICMS taxes as part of reported material costs in COP (see Comment 5); 5. Recalculated the cost of CBCC's own production of charcoal based upon BIA (see Comment 6); 6. Recalculated depreciation costs for Furnace 8 based upon a 10 year useful life (see Comment 7); 7. Corrected an error in the October 1992 calculation of electricity cost (see Comment 9); 8. Added packing expenses in COP for the home market and United States, respectively. We compared individual home market prices with the monthly COPs. We tested the home market prices on a sieve-size-specific basis and found, for all sieve sizes, that between 10 and 90 percent of sales in the home market were made at prices above the COP. Therefore, we disregarded the below-cost sales, if those sales were made over an extended period of time. CBCC did not provide any information in its responses to indicate that its below cost sales were made at prices which would permit recovery of all costs within a reasonable period of time in the normal course of trade. In order to determine whether below-cost sales were made over an extended period of time, we performed the following analysis on a product-specific basis: (1) If respondent sold a product in only one month of the POI and there were sales in that month below the COP, or (2) if respondent sold a product during two months or more of the POI and there were sales below the COP during two or more of those months, then below-cost sales were considered to have been made over an extended period of time. All of CBCC's sales were made over an extended period of time. For CBCC, we based FMV on home market prices. However, for one U.S. sale, although there were comparable home market sales in the same month, we were unable to make a difference-in-merchandise (DIFMER) adjustment. This is because the U.S. product was produced in a month different than the home market products and in hyperinflationary economies, we limit such adjustments to products produced and sold in the same month. In that instance, we used CV as FMV. We calculated CV in accordance with section 773(e)(1) of the Act. The monthly CV includes materials, fabrication, general expenses, profit and packing. We made all adjustments described in the COP section (except for the inclusion of ICMS and IPI taxes in material costs) in calculating the CV. We used the following as the basis for calculating CV: (1) CBCC's actual general expenses because they exceed the statutory ten percent minimum of materials and fabrication, in accordance with section 773(e)(1)(B)(i) of the Act; (2) the statutory minimum profit of eight percent, in accordance with section 773(e)(1)(B)(ii) of the Act, as CBCC's profit was less than eight percent of the sum of general expenses and the cost of manufacture; and (3) we calculated an offset to interest expense to avoid double counting the portion of such expense attributable to the imputed credit and inventory carrying costs which were already included in the selling, general and administrative expenses. We made circumstance-of-sale adjustments for differences in credit expenses, in accordance with 19 CFR 353.56(a). Finally, we added U.S. packing expenses to CV. For price-to-price comparisons, we based FMV on ex-factory prices, inclusive of packing, to unrelated customers. We deducted foreign inland freight from FMV. We made circumstance-of-sale adjustments, where appropriate, for differences in credit expenses, in accordance with 19 CFR 353.56(a). Because the home market credit figure reported by CBCC is actually interest revenue, we imputed credit expense and then applied the interest revenue as an offset against the imputed expense. We also used the actual paydates found at verification in our credit expense calculation. For those sales which we did not examine at verification, we added the average difference between the paydate reported and the actual paydate from the verified sales. For FeSi sales packed in bags, we deducted home market packing costs and added U.S. packing costs. Because CBCC did not report packing for bulk sales, we used information on bulk packing costs from the public version of Minasligas' response for these sales. We included in the FMV the amount of taxes collected in the home market. We also calculated the amount of the tax that was due solely to the inclusion of price deductions in the original tax base (i.e., the sum of any amounts that were deducted from the tax base). This amount was deducted from the FMV after all other additions and deductions had been made. By making the additional tax adjustments, we avoid a distortion that would create a dumping margin even when pre-tax dumping is zero. B. Minasligas In order to determine whether home market sales were above the COP, we calculated the monthly COPs on the basis of Minasligas' cost of materials, fabrication, general expenses, and packing. We relied on the COP data submitted by Minasligas except in the following instances where the costs were not appropriately quantified or valued. Specifically, we: 1. Revised G&A expenses by calculating them on an annual basis as a percentage of cost of goods sold as reported in Minasligas' 1992 financial statements (see Comment 4); 2. Revised interest expenses to include finance expenses of Delp (Minasligas' parent company), and disallowed a portion of the claimed interest income offset (see Comment 3); 3. Included IPI and ICMS taxes as part of reported material costs in COP (see Comment 5); 4. Revised the labor and overhead allocation methodology to reflect production quantity (see Comment 14); 5. Adjusted the inventory holding gains and losses to account for revisions in the reported costs (see Comment 10); 6. Disallowed the claimed differences in cost between high purity and standard grade FeSi and used the ``all kinds'' reported costs; 7. Added packing expenses in COP for the home market and United States, respectively. We compared individual home market prices with the monthly COPs. We tested the home market prices on a sieve-size-specific basis and found, for certain sieve sizes, that between 10 and 90 percent of sales of each in the home market were made at prices above the COP. Therefore, we disregarded the below-cost sales for those sieve sizes, if those sales were made over an extended period of time. Minasligas did not provide any information in its responses to indicate that its below cost sales were made at prices which would permit recovery of all costs within a reasonable period of time in the normal course of trade. In order to determine whether below-cost sales were made over an extended period of time, we performed the following analysis on a product- specific basis: (1) If respondent sold a product in only one month of the POI and there were sales in that month below the COP, or (2) if respondent sold a product during two months or more of the POI and there were sales below the COP during two or more of those months, then below-cost sales were considered to have been made over an extended period of time. All of Minasligas' below cost sales were made over an extended period of time. For Minasligas, we based FMV on home market prices. We calculated FMV based on ex-factory prices, inclusive of packing, to unrelated customers. We deducted foreign inland freight from FMV. We made circumstance-of-sale adjustments, where appropriate, for differences in credit expenses, in accordance with 19 CFR 353.56(a). Because the home market credit figure reported by Minasligas is actually interest revenue, we imputed credit expense and then used the interest revenue as an offset against the imputed expense. We imputed U.S. credit because Minasligas did not report this expense. We used the ``First Payment'' date reported by Minasligas and the monthly interest rates based on the ``Taxa Referential'' which is the Brazilian Government's referential index for short-term borrowings. We also made circumstance- of-sale adjustments, where appropriate, for direct selling expenses (finance charges), warehousing, and quality control expenses. We reallocated a portion of direct selling expenses to foreign brokerage and handling based on findings at verification. Finally, we deducted home market packing costs and added U.S. packing costs. We included in FMV the amount of taxes collected in the home market. We also calculated the amount of the tax that was due solely to the inclusion of price deductions in the original tax base (i.e., the sum of any adjustments that were deducted from the tax base). This amount was deducted from the FMV after all other additions and deductions had been made. By making the additional tax adjustments, we avoid a distortion that would create a dumping margin even when pre-tax dumping is zero. Critical Circumstances Petitioners alleged that critical circumstances exist with respect to imports of FeSi from Brazil. Section 735(a)(3) of the Act provides that critical circumstances exist if we determine that: (A) (i) There is a history of dumping in the United States or elsewhere of the class or kind of merchandise which is the subject of the investigation, or (ii) The person by whom, or for whose account, the merchandise was imported knew or should have known that the exporter was selling the merchandise which is the subject of the investigation at less than its fair value, and, (B) There have been massive imports of the class or kind of merchandise which is the subject of the investigation over a relatively short period. Regarding (A)(i) above, we normally consider whether there has been an antidumping order in the United States or elsewhere on the subject merchandise in determining whether there is a history of dumping. Regarding (A)(ii) above, we normally consider margins of 25 percent or more for purchase price comparisons and 15 percent or more for exporter's sales price comparisons as sufficient to impute knowledge of dumping. Pursuant to section 735(a)(3)(B), we generally consider the following factors in determining whether imports have been massive over a short period of time: (1) The volume and value of the imports; (2) seasonal trends (if applicable); and (3) the share of domestic consumption accounted for by imports. If imports during the period immediately following the filing of a petition increase by at least 15 percent over imports during a comparable period immediately preceding the filing of a petition, we normally consider them massive. Since the calculated dumping margins for CBCC and Minasligas are not in excess of 25 percent, we cannot impute knowledge under section 735(a)(3)(A)(ii) of the Act. (See, e.g., Final Determination of Sales At Less Than Fair Value; Tapered Roller Bearings and Parts Thereof, Finished or Unfinished, from Italy, 52 FR 24198, June 29, 1987.) Petitioners provided information regarding respondent's history of dumping in a third country. Therefore, we examined whether imports have been massive. Based on our analysis of verified company specific import data, we determined that imports have not been massive over a relatively short period of time for CBCC and Minasligas. Accordingly, we determine that critical circumstances do not exist for CBCC and Minasligas. However, for Italmagnesio, a non-cooperative respondent, based on BIA we determine that critical circumstances exist. In the case of Italmagnesio, the margin in excess of 25 percent is high enough to impute knowledge of dumping and, as BIA, we concluded that imports have been massive over a relatively short period of time. Because we found that critical circumstances do not exist with respect to all cooperative respondents, we also find that critical circumstances do not exist with respect to all other exporters and producers of the subject merchandise from Brazil, except for Italmagnesio. Verification As provided in section 776(b) of the Act, we conducted verification of the information provided by CBCC and Minasligas by using standard verification procedures, including the examination of relevant sales and financial records, and selection of original source documentation containing relevant information. Currency Conversion No certified rates of exchange, as furnished by the Federal Reserve Bank of New York, were available for the POI. In place of the official certified rates, we used the daily official exchange rates for the Brazilian currency published by the Central Bank of Brazil. In the instances when a post-POI exchange rate was required, we used a monthly average exchange rate from International Monetary Fund's International Financial Statistics. In hyperinflationary economies, the Department normally converts movement charges for the U.S. sales on the date these charges become payable. Where we did not have the exact payment date for a charge, we converted charges for U.S. sales on the date of shipment, the closest approximation to the date the charges became payable. For two of CBCC's U.S. sales, it was necessary to convert the bulk packing charges on the date of sale as we did not have a bulk packing rate in the month of shipment for those U.S. sales. Thus, for these two sales we converted the packing charges in the same month in which the U.S. sales occurred. Interested Party Comments Comment 1: Petitioners argue that, based on the facts now available to the Department, the dumping margins established in the preliminary determination are inadequate to offset the actual dumping margin of Brazilian FeSi producers. In addition, petitioners believe that at verification the Department confirmed the existence of major, continuing deficiencies in respondents' information. Accordingly, petitioners contend that the Department should assign the highest, most adverse margin based on noncooperative BIA to both CBCC and Minasligas. DOC Position: We disagree with petitioners. CBCC and Minasligas' mistakes, found during the course of this investigation, when taken as a whole, do not represent a verification failure and do not support a claim of respondents' noncooperation. The minor errors in calculation or discrepancies with regard to adoption of certain methodological premises do not merit the use of BIA. Therefore, we have followed our practice of correcting errors found at verification as long as those errors are minor and do not exhibit a pattern of systemic misstatement of fact. Thus, we are able to use the data submitted by CBCC and Minasligas, corrected for errors noted at verification, in our calculations. Comment 2: Petitioners argue that the Department should use the highest, most adverse noncooperative BIA rate for CBCC and Minasligas since they both repeatedly failed to provide the Department with the accurate sieve size and silicon content of the FeSi they sold. Petitioners maintain that CBCC's August 17, 1993, letter contained information about silicon content and sieve size known to be inaccurate. Petitioners contend that accurate information was clearly available to CBCC and the fact that it was not provided prevented the Department from making such or similar comparisons in the final determination, as required by the Act. Similarly, petitioners note that Minasligas, in its August 25, 1993, revised product concordance, failed to provide the exact silicon content and sieve size of its home market sales. CBCC believes that the Department incorrectly based its preliminary determination on BIA because of the alleged failure by CBCC to provide a proper product concordance. CBCC states that it cannot fabricate a product concordance to the level of sieve size, which was requested by the Department, because there is no difference in product between sieve sizes. CBCC argues that the Department verified that sieve size is irrelevant in terms of the cost and the price and, thus, any DIFMER would be zero. CBCC maintains that based on the information submitted and the production processes observed at verification, the Department should use CBCC's information as the basis for the final determination. Similarly, Minasligas maintains that sieve size does not impact cost or price of FeSi and should not be considered a factor for product comparison purposes. With respect to providing information on exact silicon content, Minasligas contends that the ASTM standard specifications for FeSi 75 percent under grade C provide for a product containing between 74 percent and 79 percent of silicon. Minasligas argues that since all of its FeSi sales are of FeSi 75 percent the exact silicon content of the product within this range is irrelevant. DOC Position: We agree with respondents. We determine that Minasligas provided a unique code for each sieve size for each sale during the POI, in accordance with directions in Appendix V. We used Minasligas' product matching method for purposes of margin calculation; however, we rematched in a few instances where we disagreed with their selection. We based matching on home market sales with sieve size ranges which were closest to the sieve size range of the U.S. product. We also determine that CBCC reported sieve sizes in accordance with Appendix V. The sieve size ranges reported by CBCC were broader than those reported by Minasligas and were broader than the ranges observed on CBCC's individual home market sales. Nevertheless, these ranges do allow us to match within the closest sieve size range, as specified in Appendix V. Moreover, these broad ranges are consistent with CBCC's selling practices. CBCC stated on the record that it fills customer orders with the broadest range of possible sieve sizes. Therefore, we accepted CBCC's revised coding system, and matched home market sales with all possible sieve sizes, including those that may extend beyond the sieve size range of the U.S. product because this corresponds to CBCC's selling practices. We excluded from FMV only those home market sales where the sieve size ranges are entirely outside the sieve size range of the U.S. sale in question. (See Concurrence Memorandum dated December 29, 1993.) In addition, we also agree with respondents that reported silicon content ranges, within acceptable ASTM specifications, are adequate. Comment 3: Petitioners claim that both CBCC and Minasligas failed to report their respective interest expenses on a consolidated basis for the purposes of calculating COP in accordance with Department practice. Petitioners argue that CBCC's refusal to provide this information prevented the Department from verifying these expenses. Accordingly, petitioners state that the Department should use adverse, ``noncooperative BIA'' in calculating interest expense for CBCC. However, in the event that the Department does not use ``noncooperative BIA,'' petitioners suggest that the Department use Solvay do Brasil's audited financial statements to calculate interest expense for the purposes of calculating CBCC's COP and CV. Similarly, petitioners contend that the Department should allocate interest expense to Minasligas' COP based on Delp's (Minasligas' parent company) 1992 audited financial statements as a percentage of cost of goods sold, without allowance for a short-term interest income offset. CBCC argues that the Department should use its non-consolidated income statement, rather than the corporate consolidated figure, to compute net interest expense. CBCC claims that the advances of funds from subsidiary to parent were the reverse of those normally seen by the Department and were not ``interest free''. CBCC further argues that without CBCC, Solvay do Brasil would have had to borrow funds in the commercial market. Thus, CBCC suggests that the Department should increase CBCC's financial receipts by an imputed interest on the interest free loans that CBCC made to its parent. With regard to petitioners' allegation that CBCC refused to provide the Department with Solvay do Brasil's financial statement, CBCC explains that the Department requested an additional copy of the translated financial statement, previously submitted to the Department on June 10, 1993, which the company was unable to provide at verification. Minasligas contends that its financial statements are not consolidated with Delp's statements. Minasligas maintains that there is no borrowing relationship between Delp and Minasligas, and further, there is no evidence of control by Delp over borrowings by Minasligas. Minasligas, therefore, believes it is inappropriate to substitute Delp's interest expenses for that of Minasligas. Minasligas asserts that it correctly reduced its submitted unconsolidated interest expenses by various forms of short-term financial income, including capital gains, exchange rate gains, discounts, and monetary correction. DOC Position: We agree with petitioners that CBCC and Minasligas should report interest expense on a consolidated basis. The Department's position is that the cost of capital is fungible, therefore, calculating interest expense based on consolidated statements is the most appropriate methodology. As discussed in the cost verification report of CBCC, we noted that CBCC and Solvay do Brasil rely on intercompany interest-free borrowing to meet their working capital requirements. In addition, in order to extinguish its outstanding debt, CBCC issued new shares of capital stock to its parent company. After establishing at verification that CBCC and Solvay do Brasil have significant financial transactions with each other, we requested information documenting financial expense at the Solvay do Brasil level. Company officials refused to provide any data. Therefore, we have based financial expense for CBCC using BIA. As BIA, we used information from Solvay do Brasil's financial statements (exhibit B; June 10, 1993, questionnaire response). This percentage was then applied to each month's COM. In the case of Minasligas, Delp does not consolidate its accounts with Minasligas. In addition, because there are no significant intercompany transactions between the two companies, we combined the financial expenses of the two companies, effectively creating consolidated accounts. Regarding the offset claimed by Minasligas, the Department only allows income generated from investments of working capital which the company documents as short-term in nature. Minasligas was able to substantiate only a portion of the investments to be short- term; consequently, we have allowed only the documented portion of interest income as an offset. We did not allow an offset to Minasligas' parent, Delp, for interest expense because the information required to substantiate such an adjustment is not contained in the record of this investigation. For both companies, in order to avoid overstating financing charges, we applied the interest expense ratio to each month's COM calculated on a historical basis rather than amounts computed under the replacement cost basis. Comment 4: Petitioners maintain that CBCC and Minasligas failed to follow the Department's established practice for allocating G&A expenses. Petitioners make the same allegation with regard to CBCC's selling expenses. Petitioners claim that G&A expenses are period costs that should be allocated based on the ratio of total annual G&A expenses over total annual costs of goods sold. Selling expenses should be allocated similarly. However, petitioners state that CBCC allocated G&A and selling expenses to individual products, using the ratio of each separate product's cost of goods sold. Minasligas allocated POI G&A expenses on a monthly basis. For purposes of the final determination, petitioners believe that the Department should reallocate these expenses following its established practice. CBCC argues that the Department should not use the ratio of expenses to cost of goods sold as an estimate of G&A expenses. CBCC believes that the monthly expenses accurately reflect, on a replacement cost basis, the expenses for the company in that month and are the most appropriate figures to use. CBCC claims that the petitioners are urging the Department to use a methodology that the Court of International Trade specifically invalidated as susceptible to overstating the effects of inflation. Minasligas agrees that G&A expenses are period costs, but maintains that an annual calculation based on cost of sales is problematic because the annual G&A expense and the annual cost of sales are conglomerations of monthly expenses which have not been adjusted for inflation. Minasligas believes the Department should calculate G&A rates based on monthly averages or a simple average G&A rate. DOC Position: We agree with petitioners in part. G&A expenses are period expenses which are normally measured over a fiscal year. As such, the Department calculates G&A on an annual basis. To calculate G&A for a lesser period may exclude certain expenses, which is distortive. Therefore, we recalculated G&A expenses on an annual historical basis for both companies and, in order to avoid overstating G&A expenses and neutralize hyperinflationary effects, we applied the G&A ratio to each month's COM calculated on a historical basis. We also revised CBCC's reported G&A to include a portion of Solvay do Brasil's G&A, which CBCC had failed to include in its reported costs. Moreover, we calculated CBCC's selling expense portion of SG&A based on sales of the same class or kind of merchandise according to our normal practice. Comment 5: Petitioners contend that the Department should include ICMS and IPI taxes in CBCC's and Minasligas' reported materials costs in applying the Department's sales-below-cost test. Petitioners state that Department practice is to perform the sales-below-cost test on a tax-inclusive basis, with the COP and home market prices containing the same absolute amount of taxes. With regard to CV, petitioners contend that the Department has previously determined that ICMS and other domestic taxes are not remitted or refunded upon exportation and consequently have to be included in CV. CBCC submits that the Department should not include the ICMS and IPI taxes in its COP and CV calculations. CBCC states that the Department reviewed CBCC's records at verification showing that CBCC's payments of ICMS offset any amount owed by virtue of its receipts of ICMS. Thus, CBCC claims that the ``cost of materials'' does not include any ICMS or IPI value, because CBCC always receives a tax credit for these payments. Minasligas argues that in determining whether home market sales are above the cost of production, the Department must either include ICMS and IPI in the cost of production and in the sales price to the domestic market or exclude them from both sides to avoid double counting. Minasligas further argues that these taxes should not be included in calculations of CV because they are offset against the amounts collected from the domestic market sales. DOC Position: We agree with petitioners in part. For our test of home market sales below cost we have included the same amount of domestic taxes in the COP and the domestic sales prices. However, when using CV as a surrogate for home market prices we must determine if in fact the entity under investigation is able to recover all of the taxes paid on inputs (raw materials) from its domestic sales of subject merchandise. If domestic sales of subject merchandise fully recover all of the domestic taxes paid on inputs, then these taxes would appropriately be excluded from the margin analysis. However, if the producer is not able to recover all input taxes from its sales of subject merchandise, then these actual costs must be reflected in the CV. (See Camargo Correa Metais, S.A., v. United States, Slip Op. 93- 163, p. 19 (August 13, 1993). We have determined that CBCC's domestic sales of subject merchandise fully recover all input taxes incurred to produce the subject merchandise sold in both the domestic and export markets. We have excluded the domestic tax amounts from CV because the taxes paid are offset against the amounts which are collected on domestic sales which are rebated to the government. Comment 6: Petitioners claim that CBCC did not accurately report its charcoal replacement costs. They further argue that CBCC did not provide the Department with the additional documentation requested regarding the estimated harvest of wood and other assumptions used in the calculation of the amortization costs for charcoal production. Petitioners argue that by not providing this information, CBCC prevented the Department from verifying the accuracy of the cost data and CBCC did not comply with Department practice in reporting replacement costs for company-produced charcoal. Therefore, petitioners state that the Department should assign a noncooperative BIA rate to CBCC. Alternatively, petitioners suggest that the Department adjust CBCC's reported cost for company-produced charcoal upward to the level of CBCC's cost for purchasing charcoal from unrelated suppliers. CBCC argues that since charcoal accounts for less than three percent of the cost of production of FeSi, use of BIA because of the difficulty encountered with verifying the accuracy of this factor of production would be totally inappropriate. CBCC maintains that should the Department make any adjustments to the charcoal costs it should only adjust the figures with the information gathered at verification rather than disregard the entire response. DOC Position: We agree with petitioners that we should adjust CBCC's charcoal replacement costs; however, we disagree that CBCC was noncooperative and should receive a margin based solely upon BIA. We discovered errors made by CBCC in calculating its cost of producing charcoal, a primary raw material, used in the production of FeSi. CBCC substantially understated its cost of producing charcoal by inaccurately recording the costs associated with their wood forests which provide the raw material needed to produce charcoal. Therefore, we have recalculated the cost of CBCC's production of charcoal. As suggested by petitioners, we relied upon the actual weighted-average monthly cost CBCC was charged by unrelated vendors. Comment 7: Petitioners claim that CBCC incorrectly accelerated the depreciation on a particular furnace by five years. The result was a disproportionate allocation of costs to products manufactured during the first five years the furnace was put into service, as opposed to the second five years, when no depreciation was reported. Petitioners contend that the accelerated depreciation for this furnace was an abnormal event since CBCC returned to its normal ten-year useful life for furnace depreciation following the period of accelerated depreciation. Petitioners further argue that the Department has explicitly rejected the accelerated depreciation of assets where such accelerated depreciation was not based on the useful life of the assets. Accordingly, petitioners believe that the depreciation charges for this furnace should be recalculated to reflect the company's normal ten-year useful life for furnace depreciation. DOC Position: We agree with petitioners. We have recalculated depreciation expense for this furnace to reflect the amounts which would have been recorded based upon CBCC's normal ten year amortization period since it is CBCC's normal practice to employ a ten year useful life in calculating furnace depreciation charges. Comment 8: Petitioners state that CBCC failed to accurately allocate furnace depreciation to FeSi based on the percentage of total furnace capacity devoted to FeSi production. Accordingly, for purposes of the final determination, petitioners contend that the Department should increase depreciation allocated to FeSi production for each month of the POI. CBCC contends that it would be improper for the Department to allocate all of CBCC's depreciation expenses on all furnaces to FeSi production. Although theoretically, any one furnace could be used to produce any of the products that CBCC sells, this does not make the furnaces fungible. The Department's determination should not be based on what could theoretically be produced in a furnace, but rather what was actually produced in each furnace. Regardless, if the Department considers the furnaces fungible, this would result in a lowering of CBCC's depreciation expense as furnaces one through six are fully depreciated. DOC Position: We agree with CBCC. Its methodology of matching furnace depreciation with the product actually produced in each furnace is an acceptable methodology. Accordingly, no adjustment has been made for the final determination. Comment 9: Petitioners claim that at verification CBCC's reported consumption and cost of electricity attributed to FeSi were understated for October 1992. Therefore, petitioners believe that the Department should increase these costs for each month of the POI. CBCC maintains that the Department verified that only the month of October contained an error of 5.7 percent with respect to the electricity consumption and cost; such error was incurred in transferring expenses from one cost report to another. Thus, CBCC concedes only that the Department should adjust its October, 1992, electricity consumption and cost by 5.7 percent, rather than making monthly adjustments. DOC Position: We agree with CBCC. At verification we established that this was an isolated error and not a methodological problem. Accordingly, we have corrected the reported electrical consumption and cost for October 1992, only. Comment 10: Petitioners state that CBCC failed to properly calculate inventory holding gains/losses. Petitioners argue that CBCC reported its input and finished product inventories on a first in first out (FIFO) basis, which is contrary to Department practice. Furthermore, petitioners claim that CBCC provided no inventory holding gain/loss calculations for iron ore. Accordingly, petitioners believe that the reported values cannot be relied on for purposes of the final determination and the Department should apply BIA. CBCC maintains that it provided inventory gain/loss information according to the Department's methodology used in the Final Determination Of Sales At Less Than Fair Value, Silicon Metal from Brazil, 56 FR 26977, June 12, 1991, where the Department rejected CBCC's cost accounting method used in the normal course of business, stating that it did not properly reflect the effects of inflation and used a FIFO basis to make the calculation. With respect to the inventory holding gain/loss calculation for iron ore, the Department verified that CBCC maintains no more than its immediate requirements in inventory. Thus, CBCC submitted no inventory holding gain/loss information on this raw material because there is none. CBCC's monthly purchase of iron ore is consumed during that month. DOC Position: We agree with respondent. In reporting on a FIFO basis, CBCC followed prescribed Department practice. The Department verified that CBCC had no gain or loss on the iron ore because it completely consumed its purchases in the same month as production. Comment 11: Petitioners argue that Minasligas' U.S. sales of slag during the POI are within the scope of this investigation. Petitioners base their argument on the petition's scope language, which they claim does not specifically exclude slag of the chemical composition that Minasligas sold to the United States during the POI. Petitioners further argue that even if the slag were not covered by the product description in the petition, it is within the scope under the criteria outlined in Diversified Products Corporation v. U.S., 572 F. Supp. 883 (CIT 1983) (``Diversified Products'') criteria. Conversely, Minasligas states that its U.S. sales of slag are not covered by the scope of this investigation. Minasligas bases its argument on chemical analysis certificates provided at verification, which list chemical compositions which Minasligas claims are sufficient to exclude the slag sales from the scope of the investigation. Specifically, Minasligas argues that, according to the petition, the high levels of oxygen and calcium oxide present in these slag sales places them outside the scope of the investigation. DOC Position: We agree that ferrosilicon in the form of slag can be included within the scope of investigation if it generally meets the chemical content definition contained in the scope of this investigation and if it is capable of being used as FeSi. (See Scope of Investigation.) With regard to the two U.S. sales of FeSi slag made by Minasligas, we determine that these sales are within the scope of the investigation based on information on the record indicating that the slag in question can be used as FeSi. Since we do not have actual price or cost data for these two sales, we will assign an average of all margins calculated for Minasligas' sales for which we have price and cost data. Comment 12: Petitioners argue that Minasligas failed to provide complete cost information requested by the Department in conjunction with a previously unreported sale. Thus, petitioners argue that the Department should assign a ``noncooperative'' BIA margin for that U.S. sale. Minasligas maintains that it provided all necessary information relating to this sale. DOC Position: Since we used a price-to-price comparison for this sale, petitioners' points are moot. Comment 13: Minasligas contends that the sale dates for certain U.S. sales falls outside the POI. Thus, Minasligas claims these sales should be excluded from this investigation. DOC Position: We agree with respondent. Based on the sale dates reported and verified, these sales are outside the POI and are not included in our margin calculation. Comment 14: Petitioners claim that Minasligas inappropriately allocated its labor and overhead costs between subject and non-subject merchandise based on number of furnaces, rather than actual production during the POI. Therefore, petitioners request that the Department adjust Minasligas' submitted costs accordingly. DOC Position: We agree with petitioners that number of furnaces is not an adequate basis for allocating labor or other fabrication costs. Number of furnaces is an arbitrary measure, which does not necessarily reflect the actual level of labor and overhead expended in the production of the subject merchandise. In the instant case, output tons is a more accurate allocation basis. Therefore, we have revised the submitted costs to reflect an allocation based on actual production units. Comment 15: Petitioners argue that Italmagnesio failed to cooperate with the Department by withdrawing from the investigation and should receive the highest, most adverse BIA rate on the record. Petitioners further argue that BIA includes the rates alleged in the petition, as corrected for clerical errors, and the rates alleged in petitioners' amended allegation of sales below cost for Italmagnesio. Petitioners disagree with the Department's decision in the preliminary determination which rejected the revised margin calculations in petitioners' amended sales-below-cost allegation as a source of BIA; the Department rejected the revisions on the grounds that petitioners based the revisions on information submitted by Italmagnesio. Petitioners state that their amended allegation relied not on financial statements submitted by Italmagnesio but on identical financial statements that petitioners had obtained independently prior to the date of Italmagnesio's submission of the information. In addition, petitioners assert that Italmagnesio withdrew from the investigation after the Department indicated in the preliminary determination that it would not use the higher rates in petitioners' amended allegation as BIA. Therefore, petitioners maintain that not using the amended allegation as BIA would allow Italmagnesio to control the outcome of the investigation. DOC Position: For this final determination, we assigned Italmagnesio a margin in accordance with the two-tiered BIA methodology under which the Department imposes the most adverse rate upon those respondents who refuse to cooperate or otherwise significantly impede the proceeding. In our BIA margin analysis, we utilized information contained in petitioners' amended COP allegation for Italmagnesio. Although Department policy does not allow petitioners to use questionnaire responses in a piece-meal manner in order to increase margins in the petition that may later be used as BIA, our analysis revealed that petitioners had access to Italmagnesio's financial statements prior to the submission of this information on the record by Italmagnesio. Continuation of Suspension of Liquidation In accordance with section 735(c)(4)(A) of the Act, we are directing the U.S. Customs Service to continue to retroactively suspend liquidation of all entries of FeSi from Italmagnesio. Retroactive suspension applies to entries of FeSi, that are entered, or withdrawn from warehouse, for consumption on or after May 18, 1993, which is the date 90 days prior to the date of the publication of our preliminary determination in the Federal Register. We are also directing the Customs Service to terminate the retroactive suspension of liquidation with regard to CBCC, and ``All Other Exporters'' entered, or withdrawn from warehouse, for consumption between May 18, 1993, and August 16, 1993, which is the date of our preliminary determination, and to release any bond or other security, and refund any cash deposit with respect to these entries during that period in accordance with section 735(c)(3). For CBCC and ``All Other Exporters'', we are directing the Customs Service to suspend liquidation of all entries of FeSi from Brazil, that are entered, or withdrawn from warehouse, for consumption on or after August 16, 1993. Finally, since the Department finds that no final dumping margin exists with respect to Minasligas, we are directing the Customs Service to terminate the suspension of liquidation for entries of FeSi from Minasligas, and to release any bond or other security, and refund any cash deposit with respect to these entries from Minasligas in accordance with section 735(c)(2) of the statute. However, if the Department has reasonable cause to believe or suspect at any time during the existence of the antidumping duty order that Minasligas has sold or is likely to sell the subject merchandise to the United States at less than its foreign market value, then the Department may institute an administrative review of Minasligas under section 751 of the Tariff Act of 1930, as amended. The Customs Service shall require a cash deposit or posting of a bond equal to the estimated margin amount by which the FMV of the subject merchandise exceeds the USP as shown below. ------------------------------------------------------------------------ Critical Manufacturer/producer/exporter Margin circumstances percent ------------------------------------------------------------------------ Italmagnesio S.A. Industria e Comercio........ 88.86 Yes. Companhia Brasileira Carbureto de Calcio...... 2.23 No. Companhia Ferroligas Minas Gerais............. 0.00 No. All others.................................... 45.55 No. ------------------------------------------------------------------------ ITC Notification In accordance with section 735(d) of the Act, we have notified the ITC of our determination. Notification to Interested Parties This notice also serves as the only reminder to parties subject to administrative protective order (APO) in this investigation of their responsibility covering the return or destruction of proprietary information disclosed under APO in accordance with 19 CFR 353.34(d). Failure to comply is a violation of the APO. This determination is published pursuant to section 735(d) of the Act (19 U.S.C. 1673d(d)) and 19 CFR 353.20(b)(2). Dated: December 29, 1993. Barbara R. Stafford, Acting Assistant Secretary for Import Administration. [FR Doc. 94-281 Filed 1-5-94; 8:45 am] BILLING CODE 3510-DS-P