64 FR 6305, February 9, 1999

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,<SUP>2</SUP> 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