1320 Federal Register / Vol. 62, No. 6 / Thursday, January 9, 1997 / Notices

[A–351–824]

Silicomanganese From Brazil:

Preliminary Results of Antidumping

Administrative Review

AGENCY: Import Administration,

International Trade Administration,

Department of Commerce.

ACTION: Notice of Preliminary Results of

Antidumping Administrative Review.

SUMMARY: The Department of Commerce

(the Department) is conducting an

administrative review of the

antidumping duty order on

silicomanganese from Brazil in response

to a request from one manufacturer/

exporter, Companhia Paulista de

Ferroligas (CPFL) and Sibra EletroSiderurgica Brasileira S.A. (Sibra)

(collectively ‘‘Ferro-Ligas Group’’). This

review covers the period June 17, 1994,

through November 30, 1995.

We have preliminarily determined

that sales have been made below normal

value (NV). Interested parties are invited

to comment on these preliminary

results. Parties who submit argument

are requested to submit with the

argument (1) a statement of the issue

and (2) a brief summary of the

argument.

EFFECTIVE DATE: January 9, 1997.

FOR FURTHER INFORMATION CONTACT:

Hermes Pinilla or Kris Campbell, Office

of AD/CVD Enforcement, Import

Administration, International Trade

Administration, U.S. Department of

Commerce, 14th Street and Constitution

Avenue, N.W., Washington, D.C. 20230;

telephone (202) 482–4733.

SUPPLEMENTARY INFORMATION:

The Applicable Statute

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

current regulations, as amended by the

interim regulations published in the

Federal Register on May 11, 1995 (60

FR 25130).

Background

On December 22, 1994, the

Department published in the Federal

Register the antidumping duty order on

silicomanganese from Brazil (59 FR

66003). On December 4, 1995, we

published in the Federal Register a

notice of opportunity to request an

administrative review of the

antidumping duty order on

silicomanganese from Brazil covering

the period June 17, 1994, through

November 30, 1995 (60 FR 62070). On

January 11, 1996, we received a request

for review from the Ferro-Ligas Group

covering the period June 17, 1994

through November 30, 1995.

On May 31, 1996, Elkem Metals

Company, petitioner in the less-than-fair

value investigation (LTFV) (hereafter

petitioner), requested that the

Department conduct an investigation to

determine whether the Ferro-Ligas

Group made sales at prices below the

cost of production (COP) during the

1994–1995 review period. On

September 16, 1996, based on

petitioner’s allegation and the evidence

on the record, the Department

determined, in accordance with section

773(b)(2)(A)(i) of the Act, that there

were reasonable grounds to believe or

suspect that the Ferro-Ligas Group made

sales at prices below its COP and

initiated a COP investigation of the

Ferro-Ligas Group, pursuant to section

773 (b) (1) of the Act (see Memorandum

to the File (September 16, 1996)).

Verification

From November 18 through

November 26, 1996, in accordance with

section 782(i) of the Act, we verified

information provided by the Ferro-Ligas

Group using standard verification

procedures, including on-site inspection

of the manufacturer’s facilities, the

examination of relevant sales and

financial records, and selection of

original documentation containing

relevant information. Our verification

results are outlined in the public

version of the verification reports.

Scope of Review

The merchandise covered by this

review is silicomanganese from Brazil.

Silicomanganese, which is sometimes

called ferrosilicon manganese, is a

ferroalloy composed principally of

manganese, silicon, and iron, and

normally containing much smaller

proportions of minor elements, such as

carbon, phosphorous and sulfur.

Silicomanganese generally contains, by

weight, not less than 4 percent iron,

more than 30 percent manganese, more

than 8 percent silicon and not more

than 3 percent phosphorous. All

compositions, forms and sizes of

silicomanganese are included within the

scope of this review, including

silicomanganese slag, fines and

briquettes. Silicomanganese is used

primarily in steel production as a source

of both silicon and manganese. This

review covers all silicomanganese

currently classifiable under subheading

7202.30.000 of the Harmonized Tariff

Schedule of the United States (HTSUS).

Some silicomanganese may also

currently be classifiable under HTSUS

subheading 7202.99.5040. Although the

HTSUS subheadings are provided for

convenience and customs purposes, our

written description of the scope is

dispositive.

The review period is June 17, 1994

through November 30, 1995, and

involves one manufacturer/exporter of

silicomanganese from Brazil.

United States Price

For sales to the United States, we

used export price (EP) as defined in

section 772(a) of the Act, because the

subject merchandise was sold to an

unaffiliated U.S. purchaser prior to the

date of importation and the use of

constructed export price was not

indicated by the facts of record.

We based EP on the packed, F.O.B.

price to the first unaffiliated purchaser

in the United States. We made

deductions to EP for foreign inland

freight and domestic brokerage and

handling in accordance with section 772

(c)(2)(A) of the Act.

The Ferro-Ligas Group reported

inventory carrying costs (ICCs) and

indirect selling expenses which were

attributed to sales in the U.S. market.

Since nothing on the record shows that

ICCs are direct selling expenses, we

consider them to be indirect selling

expenses. We did not make an

adjustment for these expenses since

these are indirect selling expenses

which are not included among the

adjustments applicable to EP under

section 772(e) of the Act.

No other adjustments to EP were

claimed or allowed.

Normal Value

Based on a comparison of the

aggregate quantity of home market and

U.S. sales, and absent any information

that a particular market situation in the

exporting country does not permit a

proper comparison, we determined that

the quantity of foreign like product the

Ferro-Ligas Group sold in the exporting

country was sufficient to permit a

proper comparison with the sales of the

subject merchandise to the United

States, pursuant to section 773(a) of the

Act, because the Ferro-Ligas Group had

sales in its home market which were

greater than five percent of its sales in

the U.S. market. Therefore, in

accordance with section 773(a)(1)(B)(i)

of the Act, it was appropriate to look at

the prices at which the foreign like

products were first sold for

consumption in the exporting country

for NV.
Federal Register / Vol. 62, No. 6 / Thursday, January 9, 1997 / Notices 1321

However, in accordance with section

773(a)(4) of the Act, we used

constructed value (CV) as NV because

all sales were below cost and, therefore,

we disregarded all home market sales

pursuant to section 773(b) of the Act.

We calculated CV, in accordance with

section 773(e) of the Act, as the sum of

the cost of manufacturing (COM) of the

product sold in the United States, home

market selling, general and

administrative (SG&A) expenses, home

market profit and U.S. packing expenses

(see our description of adjustments to

cost information below). The COM of

the product sold in the United States is

the sum of direct material, direct labor,

and variable and fixed factory overhead

expenses. For home market SG&A

expenses and profit, because all sales of

the subject merchandise were below the

COP, we calculated SG&A and profit for

CV in accordance with section

773(e)(2)(B)(i) of the Act, the actual

amounts incurred and realized by the

respondent in connection with the

production and sale, for consumption in

the foreign country, of merchandise that

is in the same general category of

products as the subject merchandise. In

accordance with section 773(a)(8) of the

Act, we made circumstance-of-sale

(COS) adjustments to CV by deducting

home market direct selling expenses

and adding U.S. direct selling expenses.

Cost of Production Analysis

As stated above, the Department

initiated a COP investigation of the

Ferro-Ligas Group to determine whether

sales were made below cost in the home

market. See section 773(b) of the Act.

Before making any fair-value

comparisons, we conducted the COP

analysis described below.

Calculation of COP

We calculated COP, in accordance

with section 773(b)(3) of the Act, based

on the sum of the costs of materials and

fabrication employed in producing the

foreign like product, plus SG&A

expenses, and the cost of all expenses

incidental to placing the foreign like

product in packed condition ready for

shipment to the United States. In

conducting our calculations, we relied

on the home market sales and COP

information for the six-month period

surrounding the Ferro-Ligas Group’s

sole sale to the United States, except in

the following circumstances:

A. Major Inputs (Use of Facts Available)

The Ferro-Ligas Group purchased

most major inputs for silicomanganese

solely from affiliated parties. Sections

773(f) (2) and (3) of the Act specify the

treatment of transactions between

affiliated parties for purposes of

reporting cost data (for use in

determining both COP and CV) to the

Department. Sections 773(f)(2) indicate

that the Department may disregard such

transactions if the amount representing

that element (the transfer price) does not

fairly reflect the amount usually

reflected (typically the market price) in

the market under consideration (where

the production takes place). Under these

circumstances, the Department may rely

on the market price to value inputs

purchased from affiliated parties.

Section 773(f)(3) indicates that, if

transactions between affiliated parties

involve a major input, then the

Department may value the major input

based on the COP if the cost is greater

than the amount (higher of transfer price

or market price) that would be

determined under 773(f)(2). Section

773(f)(3) applies if the Department ‘‘has

reasonable grounds to believe or suspect

that an amount represented as the value

of such input is less than the COP of

such input.’’ The Department generally

finds that such ‘‘reasonable grounds’’

exist where it has initiated a COP

investigation of the subject

merchandise.

Because a COP investigation is being

conducted in this case, the Department

requested in its Section D questionnaire

of September 16, 1996, and in its

supplemental questionnaire of October

31, 1996, that the Ferro-Ligas Group

provide both COP and market prices for

each of the major inputs obtained from

affiliates. In its October 16, 1996

response, the Ferro-Ligas Group

declined to provide these data for

‘‘commercial and competitive reasons.’’

(See the Ferro-Ligas Group October 16,

1996 section D questionnaire response

at 10–11.) In its November 15, 1996

supplemental cost response the FerroLigas Group further stated that its

affiliates, Usinas Siderurgicas de Minas

Gerais S/A (USIMINAS) and Companhia

Siderurgica Paulista S/A (COSIPA),

were unwilling to provide cost data and

claimed that affiliate Companhia Vale

do Rio Doce (CVRD) was unable to

provide cost data because access to

CVRD’s business proprietary

information was subject to strict preprivatization procedures established by

the Brazilian government. No evidence

of, or details regarding, such procedures

were provided in that submission.

Because the Department’s verification

team left for Brazil on November 16,

1996, the Department was unable to

follow up on this claim until

verification.

At verification we again requested

cost information for the major inputs.

The Ferro-Ligas Group again claimed

that USIMINAS and COSIPA were

unwilling, and CVRD unable, to provide

the requested data. On the last day of

verification, the Ferro-Ligas Group

provided the verification team with a

Brazilian court order issued in an

unrelated case as sole support for its

claim that CVRD could not provide the

cost data requested by the Department.

In the absence of costs for five of the

eight major inputs for silicomanganese,

the Department was unable to perform

an analysis to determine whether the

transfer prices were below the COP.

Section 776(a) of the Act requires that

the Department use the facts otherwise

available when necessary information is

not on the record or an interested party

withholds requested information, fails

to provide such information in a timely

manner, significantly impedes a

proceeding, or provides information that

cannot be verified. In addition, section

776(b) permits the Department to use

‘‘adverse inferences’’ in determining

facts available where a party does not

cooperate to the best of its ability.

In this case, as explained above,

respondent declined to provide COP

data for several major inputs purchased

from affiliates. Furthermore, the FerroLigas Group did not adequately show

that it cooperated to the best of its

ability to obtain these costs. If the

Department were to accept a refusal by

affiliated parties to provide data

required in antidumping proceedings,

this would allow such parties to provide

data only when it would be

advantageous to respondents and to

selectively deny access to data which

was disadvantageous to respondents.

Therefore, in such situations, the

Department treats affiliated parties as a

single entity for purposes of supplying

data. Because USIMINAS and CVRD

have, directly or indirectly, controlling

interests in the Ferro-Ligas Group, the

Department presumes that these entities

share the same economic interests as the

Ferro-Ligas Group. Therefore, any nondisclosure of required data by

USIMINAS and CVRD is treated as nondisclosure on behalf of the Ferro-Ligas

Group. Finally, the Ferro-Ligas Group

has not supported its claim that CVRD

is barred from providing cost data on

the major inputs because it is preparing

for privatization. The court order

provided at verification was issued to

another party and did not apply to an

antidumping proceeding; furthermore,

the Ferro-Ligas Group provided no

documentation clarifying what

information was covered by the court

order. Therefore, the Department has

concluded that the Ferro-Ligas Group

has not cooperated to the best of its

ability and that the use of adverse facts
1322 Federal Register / Vol. 62, No. 6 / Thursday, January 9, 1997 / Notices

available for the costs of the affected

major inputs is appropriate.

For our preliminary results of review,

we used publicly available data and

other information to value those major

inputs purchased by the Ferro-Ligas

Group from its affiliated suppliers for

which cost information was not

provided. See Calculation Memo of the

Office of Accounting to the File, dated

December 31, 1996 (Calculation Memo).

For the three remaining major inputs,

cost data was provided. In accordance

with sections 773(f) (2) and (3), we used

the highest of transfer price, market

price or COP. See Calculation Memo.

B. Financial Expense

In calculating net financial expense in

its response, respondent subtracted

what it claimed to be financial income

from short-term sources. At verification,

however, company officials stated that

certain amounts included in the

financial income value were generated

from assets held longer than one year

and were investment income, not

income earned on working capital.

Moreover, respondent failed to provide

support for the short-term nature of the

remaining items included in the

financial income value. The Department

considers financial income from longterm investments as not being related to

the production activities of the company

and, therefore, does not allow financial

income from long-term investments as

offsets to financial expense in

calculating COP and CV. The

Department only allows financial

expense to be offset by interest income

from short-term sources (i.e., working

capital). Because the Ferro-Ligas Group

did not provide any documentation

supporting the short-term nature of the

financial income offsets, we disallowed

its claimed offsets.

C. Value-Added Taxes (VAT)

When calculating the CV for the

subject merchandise, respondent did

not include value-added ICMS and IPI

taxes in the material and energy costs.

Section 773(e) of the Act directs the

Department to exclude from CV only

those internal taxes remitted or

refunded upon export. Therefore, if the

VAT paid on production inputs are

neither remitted nor refunded upon

exportation of the subject merchandise,

as in the present case, whether the

producer actually recoups its VAT

through domestic market sales is

irrelevant. The Department reasons that

the VAT taxes paid on inputs used in

manufacturing merchandise for export

is a real cost that must be recovered by

being included in the price of the

finished product sold in the export

market. Thus, we calculated the ICMS

and IPI taxes as a percentage of the total

purchases of materials and energy, and

we added the amount to the reported

CV.

D. Restructuring Costs

The Ferro-Ligas Group classified

certain manufacturing costs as nonoperating expenses, thereby excluding

them from the reported COP. These

costs fall into three major categories:

depreciation and other costs associated

with plants that were closed in prior

years; costs associated with reducing the

work force; and costs associated with

lower production levels resulting from

the bankruptcy and reorganization

proceedings during 1995.

The costs associated with plants that

were closed in prior years were treated

as ‘‘other operating expenses’’ on the

respondent’s audited financial

statements. Such items represent the

cost to the respondent of holding idle

assets and, as such, should be included

in general and administrative expenses.

The second category, costs associated

with work-force reduction, were treated

as manufacturing costs on the

respondent’s audited financial

statements. However, the bulk of these

costs relate to severance, pension

payments, and a settlement with the

workers’ union. Such costs would

properly be considered period costs

(i.e., costs that are more closely related

to the accounting period rather than the

current manufacturing costs) and,

therefore, we have included them in

general and administrative expenses.

The third category, costs associated with

lower production levels resulting from

the bankruptcy and reorganization

proceedings, were treated as nonoperating expenses on respondent’s

audited financial statements. However,

the Department normally treats such

costs as a part of the COP. Furthermore,

only one of the two producers owned by

the Ferro-Ligas Group reduced the

manufacturing costs on the financial

statement to account for the lower

production levels. The other producer

treated these costs as normal

manufacturing costs on the companyspecific financial statement, even

though for several months during the

period a number of its facilities were

shut down completely by the

bankruptcy. Therefore, we added these

costs back to the reported

manufacturing costs.

The Ferro-Ligas Group also deducted

the minority shareholder’s portion of

the company’s net loss, as well as

bankruptcy and reorganization costs,

from the general and administrative

expenses reported to the Department.

The minority shareholder’s portion of

the company’s net loss is not an expense

but rather is its share of the result of

subtracting all of the company’s

expenses from its revenues. This figure

is presented on the financial statement

to inform investors of the portion of the

entity’s income or loss belonging to the

non-controlling shareholders. The

bankruptcy and reorganization costs

consist of items, such as legal fees,

identified by respondent as arising from

this event. Although the Department

does allow for the exclusion of

extraordinary expenses, bankruptcy and

reorganization costs do not fall into this

category. Extraordinary expenses under

U.S. generally accepted accounting

principles (GAAP) are both unusual in

nature and infrequent in occurrence.

Neither bankruptcy nor reorganization

costs can be considered either unusual

or infrequent. Such costs are typically

incurred by entities and, therefore,

should be included in general and

administrative expenses along with

other period costs. See, e.g., Final

Determination of Sales at Less Than

Fair Value: Certain Hot-Rolled Carbon

Steel Flat Products and Certain ColdRolled Carbon Steel Flat Products From

the Netherlands, 58 FR 37199–37204

(July 9, 1993).

Test of Home Market Prices

In determining whether to disregard

home market sales made at prices below

the COP, the statute directs us to

examine whether (1) within an extended

period of time, such sales were made in

substantial quantities below their

respective COPs, and (2) such sales were

made at prices which permitted

recovery of all costs within a reasonable

period of time in the normal course of

trade. We compared model-specific

COPs to the reported home market price

less any applicable movement charges

and direct selling expenses.

Pursuant to section 773(b)(2)(C) of the

Act, where less than 20 percent of

respondent’s sales of a given product

were at prices less than the COP, we did

not disregard any below-cost sales of

that product because we determined

that the below-cost sales were not made

in ‘‘substantial quantities.’’ Where 20

percent or more of a respondent’s sales

of a given product during the six-month

period surrounding the U.S. sale were at

prices less than the COP, we

disregarded, in accordance with

sections 773(b)(2) (B) and (C) of the Act,

the below-cost sales because we

determined that the below-cost sales

were made within an extended period of

time in ‘‘substantial quantities.’’

Respondent reported home market sales

and COP data for the six months
Federal Register / Vol. 62, No. 6 / Thursday, January 9, 1997 / Notices 1323

surrounding the sole U.S. sale. Given

respondent’s request to limit home

market reporting, as neutral facts

available, we tested whether respondent

recovered its costs within a reasonable

period of time based on the six months

of data respondent submitted and we

found that respondent did not recover

its costs.

We found that all of Ferro-Ligas

reported home market sales were at

below-cost prices and that such sales

were in substantial quantities. As a

result, we disregarded all of Ferro-Ligas

home market sales and instead used CV

in accordance with section 773(b)(1)(B)

of the Act.

Preliminary Results of Review

As a result of our comparison of EP

and NV based on CV, we preliminarily

determine that the following weightedaverage dumping margin exists for the

period June 17, 1994 through November

30, 1995:

Manufacturer/exporter

Margin

(percent)

The Ferro-Ligas Group ................... 80.54

Parties to the proceeding may request

disclosure within five days of the date

of publication of this notice. Any

interested party may request a hearing

within 10 days of publication. Any

hearing, if requested, will be held 44

days after the date of publication of this

notice, or the first workday thereafter.

Interested parties may submit case

briefs within 30 days of the date of

publication of this notice. Rebuttal

briefs, which must be limited to issues

raised in the case briefs, may be filed

not later than 37 days after the date of

publication. Parties who submit

argument are requested to submit with

the argument: (1) a statement of the

issues and (2) a brief summary of the

arguments.

The Department will publish a notice

of final results of this administrative

review, which will include the results of

its analysis of issues raised in any such

comments or at a hearing, within 120

days from the publication of these

preliminary results.

The Department shall determine, and

the Customs Service shall assess,

antidumping duties on all appropriate

entries. Upon completion of this review,

the Department will issue appraisement

instructions directly to the Customs

Service.

Furthermore, the following deposit

requirements will be effective upon

publication of the final results of this

administrative review for all shipments

of silicomanganese from Brazil entered,

or withdrawn from warehouse, for

consumption on or after the publication

date, as provided by section 751(a)(1) of

the Act: (1) The cash deposit rate for the

reviewed company will be the rate

established in the final results of this

review; (2) for merchandise exported by

producers or exporters not covered in

this review but covered in the original

LTFV investigation, the cash deposit

will continue to be the most recent rate

published in the final determination or

final results for which the producer or

exporter received an individual rate; (3)

if the exporter is not a firm covered in

this review, or the original LTFV

investigation, but the producer is, the

cash deposit rate will be the rate

established for the most recent period

for the producer of the merchandise;

and (4) if neither the exporter nor the

producer is a firm covered in this or any

previous review, the cash deposit rate

shall be 17.60 percent, the all-others rate

established in the LTFV investigation

(59 FR 55432, November 7, 1994).

This deposit rate, when imposed,

shall remain in effect until publication

of the final results of the next

administrative review.

This notice also serves as a

preliminary reminder to importers of

their responsibility under 19 CFR

353.26 to file a certificate regarding the

reimbursement of antidumping duties

prior to liquidation of the relevant

entries during this review period.

Failure to comply with this requirement

could result in the Secretary’s

presumption that reimbursement of

antidumping duties occurred and the

subsequent assessment of double

antidumping duties.

This administrative review and notice

are in accordance with section 751(a)(1)

of the Act and 19 CFR 353.22 of the

Department’s regulations.

Dated: December 31, 1996.

Robert S. LaRussa,

Acting Assistant Secretary for Import

Administration.

[FR Doc. 97–498 Filed 1–8–97; 8:45 am]

BILLING CODE 3510–DS–P

Export Trade Certificate of Review

AGENCY: International Trade

Administration, Commerce.

ACTION: Notice of revocation of export

trade certificate of Review No. 92–

00006.

SUMMARY: The Secretary of Commerce

issued an export trade certificate of

review to Chris D. McFarland (d/b/a

McChris International). Because this

certificate holder has failed to file an

annual report as required by law, the

Secretary is revoking the certificate.

This notice summarizes the notification

letter sent to Chris D. McFarland (d/b/

a McChris International).

FOR FURTHER INFORMATION CONTACT: W.

Dawn Busby, Director, Office of Export

Trading Company Affairs, International

Trade Administration, 202/482–5131.

This is not a toll-free number.

SUPPLEMENTARY INFORMATION: Title III of

the Export Trading Company Act of

1982 (‘‘the Act’’) [Pub. L. No. 97–290, 15

U.S.C. 4011–21] authorizes the

Secretary of Commerce to issue export

trade certificates of review. The

regulations implementing Title III [‘‘the

Regulations’’] are found at 15 CFR part

325 (1986). Pursuant to this authority, a

certificate of review was issued on July

2, 1992 to Chris D. McFarland (d/b/a

McChris International).

A certificate holder is required by law

to submit to the Department of

Commerce annual reports that update

financial and other information relating

to business activities covered by its

certificate (Section 308 of the Act, 15

U.S.C. 4018, Section 235.14(a) of the

Regulations, 15 CFR 325.14 (a)). The

annual report is due within 45 days

after the anniversary date of the

issuance of the certificate of review

[Sections 325.14 (b) of the Regulations,

15 CFR 325.14 (b)). Failure to submit a

complete annual report may be the basis

for revocation (Sections 325.10(a) and

325.14(c) of the Regulations, 15 CFR

325.10(a)(3) and 325.14(c)).

On June 21, 1996, the Department of

Commerce sent to Chris D. McFarland

(d/b/a McChris Internationa) a letter

containing annual report questions with

a reminder that its annual report was

due on August 16, 1996. Additional

reminders were sent on August 26, 1996

and on October 10, 1996. The

Department has received no written

response from Chris D. McFarland (d/b/

a McChris International) to any of these

letters.

On November 20, 1996, and in

accordance with Section 325.10(c)[2] of

the Regulations, [15 CFR 325.10(c)(2)],

the Department of Commerce sent a

letter by certified mail to notify Chris D.

McFarland (d/b/a McChris

International) that the Department was

formally initiating the process to revoke

its certificate for failure to file an annual

report. In addition, a summary of this

letter allowing Chris D. McFarland (d/b/

a McChris International) thirty days to

respond was published in the Federal

Register on November 26, 1996 at 61 FR

60091. Pursuant to 325.10(c)(2) of the

Regulations (15 CFR 325.10(c)(2)), the

Department considers the failure of

Chris D. McFarland (d/b/a McChris