66 FR 15076, March 15, 2001
                                        A-570-840
                                        ARP: 2/1/99-1/31/00
                                        PUBLIC DOCUMENT
                                        IA, DAS I, Office 1;GWC, ext. 2239



MEMORANDUM TO: Bernard T. Carreau, fulfilling the duties of
               Assistant Secretary for Import Administration

FROM:          Richard W. Moreland
               Deputy Assistant Secretary 
               for Import Administration

DATE:          March 7, 2001


SUBJECT: Issues and Decision Memo for the Administrative Review of Manganese
Metal from the People's Republic of China - February 1, 1999 through January 
31, 2000; Final Results


BACKGROUND 

On November 7, 2000, the Department of Commerce ("Department") published the
preliminary results and partial rescission of the review of the antidumping 
duty order on manganese metal from the PRC.(1) The period of review ("POR") 
is February 1, 1999 through January 31, 2000. We invited parties to comment 
on our preliminary results of review. The petitioner and the respondents 
CMIECHN/CNIECHN and Minmetals (together, these two respondents are referred 
to in this memo as the "PRC respondents") submitted case briefs on December 
15, 2000, and December 18, 2000, respectively. LSM/SMC (the third-country 
reseller/U.S. importer) also submitted a case brief on December 15, 2000. 
All parties submitted rebuttal briefs on January 5, 2001. At the request of 
certain interested parties, we held a public hearing on January 16, 2001. 


DISCUSSION OF ISSUES

Comment 1: Abuse of Discretion

Respondents' Arguments: The PRC respondents argue that the Department's change
of surrogate value methodology from previous administrative reviews is
arbitrary and constitutes an abuse of discretion. In support of their argument,
the PRC respondents rely on the decision by the Court of International Trade
("CIT") in Shikoku Chemicals Corporation v. United States, 795 F. Supp. 417,
421 (CIT 1992) ("Shikoku"), in which the court ruled that the Department abused
its discretion when altering its methodology without warning after having
consistently applied a certain methodology in prior reviews. The PRC
respondents cite to Shikoku for the proposition that if the facts in a review
are unchanged and there are no significant errors, then fairness prevents the
Department from changing its methodology from one review to the next. In order
for any respondent to reasonably rely on the Department's prior decisions for
guidance in setting future U.S. prices, the Department's methodology must be
consistent and transparent. Because of the Department's change in its surrogate
value selection for electricity and ratios for overhead, SG & A, and profit,
CMIECHN/CNIECHN's rate increased from 2.00 percent in the preliminary results
of the third administrative review to 36.59 percent in the final results of
that review.(2) This result was unforeseeable to the PRC respondents in light
of their reliance on the Department's previous surrogate methodology.




Petitioner's Arguments: The petitioner argues that since the Department must
use the best available information in selecting surrogate values, it may choose
different values in different reviews or between the preliminary and final
results of an investigation or review. The petitioner argues that Shikoku
involved an actual change in methodology, whereas the instant case involves
only a change in certain surrogate values. This change is appropriate because
it allows the Department to use the best available information. However, the
petitioner argues, even if the change in the surrogate value is tantamount to a
change in methodology, the Department has wide discretion in its choice of
methodology for calculating normal value in nonmarket economy cases.(3) 

Department's Position: We agree with the petitioner. Section 773(c)(1) of the
Act directs the Department to value factors of production based on the best
available information. The statute does not specify what constitutes best
available information. Instead, these decisions are within the Department's
discretion.(4) In deciding what constitutes best available information for a
particular investigation or review, we consider the information and
argumentation on the record of that investigation or review. Given that new
data may be developed, a surrogate value which is the best available
information during one investigation or review does not necessarily remain the
best available information during subsequent reviews. 

Where we have chosen a different surrogate value for a particular input from
one review to the next, we have clearly explained our reasons for finding the
new surrogate value to be the best available information on the record of that
review. In the last review of this order the record data indicated that there
was a significant increase in Indian electricity prices generally throughout
the second half of the 1990s. Therefore, the Department selected the most
recent data available in that review in order to more accurately value
electricity. Similarly, the data from the Center for Monitoring Indian Economy
("CMIE") used to value the PRC producers' factory overhead, SG&A and profit was
more accurate, specific and contemporaneous than previous data.(5)

The United States Court of Appeals for the Federal Circuit clearly defines the
broad discretion with which the Department may value factors of production in
nonmarket economy cases in stating:

We have previously noted that "the process of constructing foreign market
value for a producer in a nonmarket economy country is difficult and
necessarily imprecise." Sigma Corp. v. United States, 117 F.3d 1401, 1407 (Fed.
Cir. 1997). While §§1677b(c) provides guidelines to assist Commerce in this
process, this section also accords Commerce wide discretion in the valuation of
factors of production in the application of those guidelines. See Lasko Metal
Prods., Inc. v. United States, 43 F.3d 1442, 1446 (Fed. Cir. 1994) (citing
Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837,
842-43 (1983), and Suramerica de Aleaciones Laminadas, C.A. v. United States,
966 F.2d 660, 665 (Fed. Cir. 1992)); see also Magnesium Corp. of Am. v. United
States, 166 F.3d 1364 (Fed. Cir. 1999) (noting that §§1677b(c) "gives Commerce
broad discretion in valuing the factors of production on which factory overhead
is based," and holding that a factors of production analysis "does not require
item-by-item accounting for factory overhead."). (6) 

Thus, the changes to which the PRC respondents refer remain well within the
Department's discretion when utilizing the best available information in
nonmarket economy cases. 

Comment 2: Ore 1 Valuation Using Indian Prices

In the Preliminary Results, we valued Ore 1 using a price quotation for
carbonate manganese lump ore from a Ghanaian manganese ore mine, as provided by
the petitioner. The PRC respondents have also provided a (different) Ghanaian
price which is for manganese carbonate ore fines. Additionally, we have on the
record prices charged by two Indian producers for manganese oxide ore.

Respondents' Arguments: LSM/SMC urge the Department to value Ore 1 based on
the Indian prices used in the Preliminary Results to value Ore 2. In their
view, Indian values are superior to the Ghana price for the following reasons.
First, the Indian prices are public information, whereas the Ghana submitted by
the petitioner is proprietary and was rejected in Mn Metal III by the
Department for that reason, among others. Second, use of the Indian prices will
allow all factors to be valued in a single country. LSM/SMC argue that this is
consistent with 351.408(c)(2) of the Department's regulations. Third, the
statute directs that factors should be valued in a country that is a
significant producer of comparable merchandise, and the Department determined
that Ghana was not a producer of comparable merchandise in the last
administrative review. Fourth, the Indian prices are domestic prices whereas
the price used in the Preliminary Results is an export price from a country
that may grant preferential tax treatment for its exports.(7) Fifth, the grades
of ore identified in the Indian price quotes are reasonable surrogates for the
PRC ore and can be adjusted for manganese content. Last, the Indian values
reflect a range of prices whereas the petitioner's information is a single
price quote. 

Additionally, LSM/SMC argue that the Department's selection of a surrogate
value for Ore 1 should be determined by the ore's manganese content. Therefore,
the Indian prices are preferable because they require fewer adjustments to
account for the difference in manganese content than the proprietary export
price data.

Petitioner's Arguments: The petitioner argues that LSM/SMC's contention, that
the choice of surrogates for Ore 1 should be based only on manganese content,
is erroneous. There is no basis for LSM/SMC's recommending manganese dioxide
ores as surrogates for Ore 1, as Ore 1 is a manganese carbonate ore.
Reiterating that the manganese-to-iron ratio has been recognized as an
important factor in selecting a value for Ore 1 in prior reviews, the
petitioner proposes that if the Department nevertheless chooses an Indian
manganese ore to value Ore 1, the most appropriate ore is the 44-46% manganese
ore from the Indian producer Mysore. This price is contemporaneous with the POR
and, hence, requires no adjustment. 

Furthermore, the petitioner refutes the assertions of LSM/SMC that the Indian
prices are preferable because they: 1) are public, 2) are domestic, 3) allow
the Department to rely on a single surrogate country, and 4) are adjustable
using the same methodology to calculate the surrogate value of Ore 2. The
petitioner asserts that the Department has used proprietary manganese carbonate
ore prices from non-surrogate countries in prior reviews. Specifically, the
petitioner references the second administrative review of this order as one in
which the Department used proprietary information from Brazil, submitted by the
PRC respondents to value Ore 1. Also, when the Department used Brazilian
information in the prior review, it did not rely on a single surrogate country.
In addition, according to the petitioner, the Ghana price quote gives no
indication that it is an export price. The petitioner also asserts that the
surrogate value it proposed for Ore 1, similar to the value for Ore 2, need not
be adjusted for grade. Rather, the Department correctly computed the ex-mine
surrogate value for Ore 1 on a dollars per metric ton unit ("MTU") basis
without adjusting for grade. 

Department's Position: For the final results, we have used the Ghana (lump)
ore quote provided by the petitioner to value the Ore 1 used by flake producer
XTMM , and we have used the Ghana (fine) ore provided by the PRC respondents to
value the Ore 1 used by the flake producer HHYM. We have not used the Indian
ore prices to value Ore 1 for the following reasons. 

First, in rejecting LSM/SMC's proposal that Ore 1 be valued based on an
average of two price quotations by the Indian ore producers, we note that
section 773(c)(1) of the Act directs the Department to value factors of
production based on the best available information. As we note in Comment 1,
the choice of surrogate value is within the Department's discretion, and a
surrogate value which is the best available information during one
investigation or review does not necessarily remain the best available
information during subsequent reviews. Thus, the fact that we did not rely on a
particular price quote for valuing Ore 1 in Mn Metal III because it was, among
other things, proprietary information does not preclude us from using a similar
quote in the instant review if we find it to be the best information available
in this review. 

Second, the statute also requires that the Department value the factors of
production in one or more market economies that are at a comparable level of
economic development to the nonmarket economy under investigation and that are
significant producers of comparable merchandise, to the extent possible. See
773(c)(4). However, the statue does not preclude us from relying on surrogates
from countries not on the surrogate list when we find it necessary to do so.(8)
In fact, it has been the history of this proceeding that, given the recurring
difficulty in identifying an appropriate surrogate value for Ore 1, in the
previous three reviews we have had to resort to using a surrogate ore value
from Brazil, a country not considered to be a our primary surrogate country. As
noted in Mn Metal I, 

In the past, in proceedings where the facts on record indicate that the
Department's usual practice would not permit the accurate valuation of a factor
input, the Department has chosen surrogates from countries not included among
the Department's list of potential surrogate countries. See Notice of Final
Determination of Sales at Less Than Fair Value: Certain Cased Pencils from the
People's Republic of China, 59 FR 55625 (November 8, 1994).(9)

Third, the Mysore and Tata quotes that LSM/SMC propose as surrogate value for
Ore 1 do not represent a new source of surrogate data in this proceeding.
Rather, earlier price quotations from these and other Indian producers have
been on the record in prior reviews, and we have sometimes relied on them for
valuing Ore 2.(10) However, we have never found, in any administrative review
of this order, these Indian ore prices to be a suitable surrogate for Ore 1.
For instance, in Mn Metal I we stated that

{a}fter careful consideration of the information submitted in this review by
both the petitioners and the respondents, as well as information resulting from
the Department's own research, we have determined that none of the proposed
Indian ore prices represents the best surrogate for the PRC ore available in
this review. In making this decision we have taken into account inter alia the
fact that there is no consensus among the petitioners and the respondents
regarding the suitability of any of the Indian ore surrogate choices. Each
party has submitted a considerable amount of evidence and expert opinion
detailing why every one of the other party's proposed Indian surrogate is
inappropriate on grounds of either price or chemical comparability.(11) 

Fourth, the Department has consistently found the physical and chemical
characteristics of Ore 1 important in selecting a surrogate value.(12) One
important characteristic is whether the ore is an oxide or a carbonate ore.
Indian manganese ores are generally oxide ores, whereas the ores used by the
PRC producers are carbonate ores. In that manganese dioxide is a different type
of ore from manganese carbonate, with properties that may react differently in
the electrolytic process, the Department has preferred not to use manganese
oxide ores, if possible, in valuing Ore 1. For instance, in Mn Metal I in
choosing a Brazilian surrogate over Indian ore prices we stated,

. . . with regard to a certain unique chemical feature,(13) the Brazilian ore
is of the same type as the PRC ore, whereas none of the potential Indian
surrogates is of this type. Information on the record indicates that certain
unique aspects of the respondents' manufacturing process and, consequently, the
respondents' costs of production are contingent on the use of ore with this
particular chemical feature.(14) 

Thus, because reasonable carbonate manganese ore values are available in this
review, consistent with past reviews we have valued Ore 1 using a price
quotation for manganese carbonate ore. 

Fifth, we agree with the argument that it is the Department's general
practice, where possible, not to value non market economy ("NME") inputs using
an export price from a country which maintains non-specific export subsidies.
The NTE Report on which LSM/SMC rely refers to possible benefits under an
export processing zone law and reduced corporate tax rates for exporting
companies.(15) According to evidence on the record, Ghana Manganese Company
("GMC") does not benefit from the Ghanaian export processing zone law.(16)
Furthermore, based on the text of Ghanaian law, the reduced corporate tax rates
are only applicable to exporting companies of non-traditional exports. Minerals
are classified as traditional exports.(17) Thus, the reduced corporate tax
rates would be inapplicable to exports of manganese. Although there may be
other general domestic subsidies for which exporters of traditional products
could potentially be eligible, the information on the record is insufficient to
provide a reasonable basis to believe or suspect that any countervailable
subsidy may have been conferred on this ore. 

Finally, with regard to LSM/SMC's argument that the Indian prices represent a
range of prices whereas the Ghanaian information is a single price quote, we
reiterate the following from Mn Metal I: 

Addressing the petitioners' point that the Brazilian price is for an
individual transaction, information on the record indicates that prices for
globally-traded manganese ore are usually set on an annual contract basis. It
is therefore reasonable to assume that the September 1993 Brazilian price quote
represents a price which was in effect at least over several months rather than
a stand-alone spot price.(18)

There is no information on the record of this review suggesting that higher
grade manganese ore prices are no longer set on an annual contract basis.

Comment 3: Ore 1 Valuation Using Ghanaian Prices

Respondents' Arguments: The PRC respondents argue that, under Section
351.408(c)(1) of the Department's regulations, the Department should use the
public Ghanaian price quote they provided rather than the proprietary quote
submitted by the petitioner. The PRC respondents contend that it is the
Department's longstanding practice and preference to select data from public
sources, if possible, to promote transparency and fairness in the
administrative process. Therefore, the Department should value Ore 1 using the
price from Asia Minerals Ltd., the exclusive agent in China for manganese ore
produced by GMC. 

The PRC respondents further argue that the Department has found the manganese
and iron contents of Ore 1 to be significant in the selection of a surrogate
value. The quote supplied by the PRC respondents is closer in chemical
composition to the ore actually used by PRC producers. 

With respect to the petitioner's argument that the Ghana price submitted by
the PRC respondents is outside the POR, the PRC respondents contend that the
Department frequently makes inflation adjustments when a surrogate value falls
outside the POR . The more important consideration in their view is the public
availability of the data. Moreover, as discussed in Comment 18, the PRC
respondents argue that if their Ghana quote for manganese ore fines is used,
then no additional adjustment to HHYM's production costs to account for
grinding costs would be necessary. Thus, because the quote supplied by the PRC
respondents is both public and closer in physical and chemical composition to
the PRC ore, the Department should base the value of Ore 1 on this information.

Finally, the PRC respondents contend, petitioner's argument that this public
Ghanaian CIF price quote does not allow for the computation of an ex-mine price
is without merit. The PRC respondents contend that the information they have
provided regarding movement costs between the PRC and Ghana is sufficiently
specific, given the limited number of ports in Ghana and China, to derive an ex-
mine price. Moreover, they note, adjusting the CIF price quote for freight
costs would only benefit the respondents. Therefore, the Department may use the
publicly available information submitted by the PRC respondents without making
adjustments for items such as inland freight.

Petitioner's Arguments: The petitioner presents several arguments why the
Department should reject the Ghana quote for valuing Ore 1 submitted by the PRC
respondents. First, the quote is for ore fines, a physically different type of
ore from the manganese ore used by the PRC flake producers. Second, the PRC
respondents' quote is dated outside the POR, whereas the petitioner's quote is
contemporaneous to the POR. Third, the PRC respondents' quote does not allow
for the computation of an ex-mine price because it does not identify the inland
freight and marine insurance costs which must be deducted from the CIF price.


Department's Position: As stated in Comment 2, for the final results we have
used the Ghana (lump) ore quote provided by the petitioner to value the Ore 1
used by flake producer XTMM , and we have used the Ghana (fine) ore provided by
the PRC respondents to value the Ore 1 used by the flake producer HHYM. 

We rely on both the petitioner's and the PRC respondents' Ghanaian quotes
because each quote has its own particular strengths in light of the differing
production processes of the producers, among other things. For instance, the
petitioner's quote has the advantage of being contemporaneous with the POR,
although it is proprietary information.(19) The effective date of the PRC
respondent's quote is a few months subsequent to the POR, but is not
proprietary. We do not agree with the petitioner's argument that the PRC
respondents' CIF quote is not useable because there is insufficient record
information to back out the freight costs to derive an ex-mine surrogate value.
Rather, we find that the PRC's respondents' information regarding manganese ore
shipping costs from Ghana to China, combined with the petitioner's inland
(Ghana) rail freight data, provide a reasonable basis for deriving an ex-mine
ore value.

With regard to the physical and chemical properties of the ores reflected in
the two quotes, both are carbonate ores, both have roughly the same manganese
content, but the ratio of manganese to iron of the PRC respondents' quote is
closer to that used by the PRC producers than the petitioner's quote. The
petitioner itself has argued forcefully, in a prior segment of this proceeding,
that the manganese-to-iron ratio is an important consideration in the selection
of an appropriate Ore 1 surrogate.(20) 

Therefore, based on a comparison of the relative strengths of these two
Ghanaian quotes, we find that no one quote is clearly a better surrogate than
the other. Both appear to be reasonable Ore 1 surrogate choices. The
Department's practice, when faced with two or more equally reasonable potential
surrogates, would normally be to take the simple average of the values.
However, in light of parties' arguments regarding differences in lump ore
versus fine ore, we have not done so here for the following reasons. The PRC
flake producer HHYM reportedly purchases Ore 1 in powder form.(21) On the other
hand, XTMM purchases lump Ore 1 which it then grinds to a similar particle
size. 

"Fines" are defined as "very small material produced in breaking up large
lumps" and "the fine fraction of a sediment or the product of rock crushing,
particularly that which passes through a grading sieve."(22) In manganese ore
mining, fines are produced and separated from lump ore during the crushing
stage and kept distinct until sold. In fact, "lump" and "fines" frequently
appear as two distinct categories in the reported prices of globally traded
manganese ore. Thus, Ore 1 lump and Ore 1 fines are distinguishable based on at
least one physical characteristic-particle size. We, therefore, find that the
two Ghanaian prices on the record of this review are sufficiently different
with regard to particle size to treat them as two different types of ores, even
though they are similar in chemical composition. Moreover, the particle size of
the fine ore is closer than that of the lump ore to the particle size of the
actual ore purchased by the PRC producer HHYM. On the other hand, the particle
size of the lump ore is more similar to that of the ore purchased by XTMM.
Thus, we have valued HHYM's Ore 1 using the fine ore and XTMM's Ore 1 using the
lump ore. 

Comment 4: Ore 2 Valuation

In the Preliminary Results, we valued Ore 2 using a simple average of two
price quotations from the Indian manganese ore producers, Mysore and Tata.


Petitioner's Arguments: The petitioner argues that the Department has not
followed its practice of choosing surrogate values that correspond as closely
as possible to the actual inputs used by the PRC producers in selecting a value
for Ore 2. In particular, the petitioner argues that the Department selected
the surrogate value for Ore 2 based on manganese content of the ore rather than
the more appropriate manganese-to-iron ratio. Specifically, the manganese-to-
iron ratios of the manganese dioxide ores selected by the Department for
valuing Ore 2 are lower than those of the actual ores used by the PRC
respondents. 

Respondents' Arguments: The PRC respondents contend that the Department should
select the surrogate value for Ore 2 based on its primary physical and chemical
property, the manganese dioxide content of the ore, rather than its manganese-
to-iron ratio. Both the PRC respondents and LSM/SMC cite Mn Metal III, in which
the Department stated "We do not agree with the petitioner's argument that we
should rely solely on the Mysore quote since the manganese-to-iron ratio is
closer to the respondent's ore. Regardless of whether this is true, it is not
clear that this ratio is a relevant factor in selecting an Ore 2 surrogate."(23)

LSM/SMC further argue that no information on the record of this administrative
review indicates that manganese-to-iron ratio is more appropriate than
manganese content alone for selecting a surrogate value. Therefore, the
Department should continue to rely, as it did in Mn Metal III and in the
Preliminary Results, on manganese content alone as the correct basis for
selecting the Ore 2 surrogate value.

Department's Position: We have determined that both the Mysore and Tata quotes
provide a reliable basis for deriving a surrogate value for Ore 2. Since we
have quotations for several grades of ore, we selected one price quotation from
each producer for the grade of ore that had an average or typical manganese
content similar to that of the Ore 2 actually used by the PRC producers. We
have taken an average of the two prices for the final results. We do not agree
with the petitioner that we should chose a surrogate value based solely on the
manganese-to-iron ratio. Rather, as we stated in Mn Metal I, "{i}nformation
provided by the manganese industry expert at the US Geological Survey indicates
that manganese content is generally a more important determinate of ore prices
than the manganese-to-iron ratio."(24) 

Comment 5: Positive Mud Surrogate Source

For the Preliminary Results, we valued positive mud using a 1992 Indian price
for manganese dioxide ore (82-84 percent MnO2) obtained from the Indian
Minerals Yearbook: 1995 ("IMY"). 

Respondents' Arguments: The PRC respondents argue that the Department should
value positive mud based on the value of electrolytic manganese dioxide
("EMD"), not manganese dioxide ore, for several reasons. First, they contend
that positive mud is a "co-product" or a "finished product" resulting from the
electrolytic process. Second, they state that positive mud should not be valued
less than the value of the major input, manganese ore. Third, these respondents
believe that positive mud should be valued as a low-grade EMD, pointing out
that mud is physically and chemically distinct from ore. The PRC respondents
contend that the Department used the value of processed manganese dioxide-not
manganese dioxide ore-in the investigation to value positive mud. Finally, the
PRC respondents note that there are differences in the tariff classifications
of each product. 

At a minimum, the PRC respondents argue, positive mud should be valued by
averaging the prices of EMD and manganese dioxide ore. In the Preliminary
Results, the Department valued manganese dioxide at a lower price than
manganese ore 2. Because the manganese content is a key determinant in price,
they argue, the higher the concentration of manganese, the higher the price
should be. Since positive mud has a higher concentration than manganese ore 2,
positive mud should have a higher value than manganese ore 2.

The PRC respondents further state that if the Department continues to value
positive mud based on manganese ore, then the Department should use the same
surrogate that it uses for manganese Ore 2, which is contemporaneous with the
POR and, therefore, preferable to the outdated (1992-93) IMY price.

LSM/SMC agree with the PRC respondents that the surrogate value for positive
mud should be higher than that for manganese ore. 

Petitioner's Arguments: The petitioner argues that the PRC respondents are
mistaken to equate positive mud with EMD. The petitioner states that the
reported concentration in positive mud indicates that it contains significant
impurities, and the concentration of positive mud (65-75 percent) is
considerably different from the concentration of EMD (at least 92 percent).
Moreover, the petitioner points out that positive mud and EMD have different
end uses, with the former used in paint, dye, etc., and the latter used in dry-
cell batteries. Furthermore, the petitioner notes that the PRC respondents have
argued this point before and that the Department has rejected it. Finally, the
petitioner states that the PRC respondents have provided no new information
and, therefore, the Department should continue to use the IMY price.

Department's Position: We start by noting that we have addressed many of these
arguments in past reviews, and find no new information on the record of this
review to prompt a change from our past finding that a manganese dioxide ore
price is an appropriate surrogate value for positive mud. Therefore, to value
this product we have continued to use the IMY 82-84 percent manganese dioxide
ore price. 

With regard to LSM/SMC's and the PRC respondents' arguments, we reiterate our
findings in Mn Metal I:(25)

The Department disagrees with the respondents' argument for the use of EMD as
a surrogate value. First, the respondents are incorrect in stating that the
Department used for a by-product surrogate in the LTFV Investigation an Indian
import value for manganese dioxide excluding ores. In the LTFV Investigation,
the Department used an 82-84 percent MnO2 peroxide ore, as listed in the 1993
Indian Minerals Yearbook, to value the respondents' by-product credit. EMD is a
very high-valued product used mainly in the production of dry-cell batteries. .
. The respondents have not sufficiently demonstrated that the PRC by-product is
of the same rigorous specifications as EMD. 

The respondents have demonstrated, however, that their by-product does have
some resale value. In lieu of any information on the Indian value of the actual
by-product in question, the Department is maintaining the methodology used in
the LTFV Final Determination of using for a surrogate the price of high-valued
Indian manganese dioxide ore.

We continue by further citing to Mn Metal II:(26)

{W}e find the respondents' comparison of the surrogate value for positive mud
with the surrogate value for ore 2 to be misplaced. The respondents reason that
the value of a by-product must be greater than the value of an input from which
the by-product was generated. However, a by-product (as distinct from a co-
product) is something that is generated incidentally in the course of
manufacturing some primary finished good, in this case manganese metal. The
fact that the respondents' by-product happens to have some residual value does
not require that value to be greater than the value of the ore used in the
manufacturing process. 

The respondents imply that our choice of a lower-valued by-product surrogate
suggests value destruction, which occurs when the value of the inputs is
greater than the value of the final product. This is not the case. The value
created in this manufacturing process is captured in the price of the primary
product-manganese metal-and is fully recoverable, under normal market
conditions, in the sale of that product. Any value recovered from the sale of
the by-product merely serves to offset the production costs incurred in the
production of the primary product. We, therefore, have not changed our choice
of the positive mud surrogate value for these final results.

In the instant review, the PRC respondents have made the argument that
positive mud is a co-product rather than a by-product, but they have provided
no evidence to support this claim. In fact, both PRC respondents indicated in
their respective September 24, 2000 questionnaire responses on page D.1 VI-5
that their respective producers "sell this by-product to unaffiliated chemical
companies in the area." This is also consistent with our findings during the
verification of one of the producers in the first administrative review.(27)
Moreover, the PRC respondents have not in any prior review of this order put
forward the argument that the inputs used to produce the manganese metal flake
should be allocated in part to the production of positive mud, as would be the
case for a co-product. 

We are also not persuaded by these respondents' argument to value positive mud
as "low-grade electrolytic manganese dioxide." As noted in Mn Metal I, positive
mud and EMD have different characteristics and end-uses; the former is used in
paint and dye applications, the latter used in dry-cell batteries. Moreover,
the PRC respondents have not sufficiently demonstrated that the positive mud is
of the same rigorous specifications as EMD. Therefore, we have a basis for
using an average, as suggested by the PRC respondents, of the manganese dioxide
ore and EMD prices. Finally, the PRC respondents' comparison of the
concentrations of positive mud and Ore 2 are incorrect because the
concentration of positive mud is reported in terms of its manganese dioxide
content, whereas the concentration of Ore 2 is stated in terms of only its
manganese content.

Comment 6: Positive Mud Time Adjustment

For the Preliminary Results, we derived a POR-contemporaneous surrogate value
for positive mud by adjusting the 1992-93 IMY price by the change during the
intervening period in a benchmark price for internationally traded manganese
ore from the Australian ore producer BHP. 

Petitioner's Arguments: The petitioner argues that the Department has
incorrectly valued positive mud for two reasons. First, in adjusting the 1992
IMY price, the Department used a fiscal year 1998 (April 1998 through March
1999) price for BHP's ore. Instead, the petitioner argues, the Department
should use the fiscal year 1999 BHP price submitted by the petitioner
subsequent to the Preliminary Results because the later price more closely
corresponds to the POR. Second, the petitioner contends that the Department did
not use "all available public information" in relying solely on the BHP price.
Rather, the petitioner urges, the Department should average the prices of BHP
and the South African ore producer, Samancor, to calculate the adjustment
factor for the IMY price.

Respondents' Arguments: The PRC respondents argue that section 773(c) of the
Act requires that surrogate values be obtained from countries that are
economically comparable to the home market, in this case, the PRC. Therefore,
the PRC respondents believe that neither the BHP nor the Samancor contract
price should be used to value manganese ore since those producers are in
Australia and South Africa, respectively, neither of which are economically
comparable countries. Likewise, LSM/SMC state that if the Department continues
to use the 1992-93 IMY price, it should continue to use the 1998 BHP price for
the adjustment, as it did in the Preliminary Results, since the 1998 fiscal
year overlaps the POR by two months and is, therefore, contemporaneous.

Department's Position: We agree with the petitioners. Where the Department has
two, equally reliable values that are contemporaneous to the POR, we will
generally take the simple average of both in deriving a surrogate value. We
have, therefore, averaged the fiscal year 1998 and 1999 prices for both BHP and
Samancor because we find that all of those prices are all equally reliable and
contemporaneous with the POR. In response to the PRC respondents' objections to
using prices from South Africa and Australia in calculating a surrogate value
because those countries are not economically comparable to the PRC, we note
that in Mn Metal I (63 FR at 12445) we found those ore price series to be
representative of high grade manganese ores, which are traded internationally.
Therefore, those prices are not unique to the domestic ore markets of specific
countries but, rather, reflect the price trends generally across all markets
for higher grade manganese ore.

Comment 7: Liquid Ammonia Valuation

In the Preliminary Results, we valued liquid ammonia using the Monthly
Statistics of the Foreign Trade of India: Volume II - Imports ("Indian Import
Statistics"), as published by the Government of India.

Petitioner's Arguments: The petitioner argues that its price quote from a
domestic Indian supplier of ammonia products is a more appropriate surrogate
for valuing liquid ammonia than the CIF value computed from the Indian Import
Statistics. The quote submitted by the petitioner is public, from an Indian
supplier, and of a specified grade of ammonia. Hence, the petitioner's quote
for 25% grade liquid ammonia more closely adheres to the Department's policy of
accepting public, domestic information before import data. 

Respondents' Arguments: The PRC respondents argue that the Department's
failure to adjust for differences between the concentration of liquid ammonia
used by the PRC producers and the surrogate is essentially a use of an adverse
inference. The Department did not make an adjustment because Indian Import
Statistics contained no information on the concentration level.(28) However,
the PRC respondents argue that the reasonable assumption is that the Indian
Import Statistics contain prices for a concentration of 100 percent. According
to section 776(b) of the Act, an adverse inference may be applied only when a
party fails to cooperate.

With regard to the price quote proposed by the petitioner, the PRC respondents
cite to Bulk Aspirin from the People's Republic of China; Final Results of
Investigation, 65 FR 33805 (May 25, 2000) ("Bulk Aspirin") and accompanying
decision memorandum at comment 2, for the proposition that the Department does
not have a policy of using domestic information over import data. In Bulk
Aspirin, the Department selected an import price over a domestic price because
the Indian domestic price was distorted by a protective tariff system. The PRC
respondents propose that the Department has a preference for using a value that
is representative of a range of prices rather than relying on a single price
quote. Therefore, the PRC respondents assert that the Indian Import Statistics
is the appropriate source with which to calculate surrogate values as it does
represent a range of prices. 

Department's Position: We have continued to use the data in the Indian Import
Statistics to value liquid ammonia because the data represent a range of prices
which are closer in time to the POR than the petitioner's proposed quote. 

Consistent with the Department's practice, we have not made adjustments for
chemical purity where the information regarding the level of chemical
concentration is insufficient.(29) In previous cases, adjustments have been
made only where both the chemical concentration levels of the HTS categories
are defined in the Indian Import Statistics and where the respondent reported
the actual chemical levels used. The Indian Import Statistics provides only a
basket category for liquid ammonia, without any further detail as to
concentration. Therefore, we have not adjusted for any differences in chemical
purity in the final results. 

Furthermore, we disagree with the petitioner's argument that the Department
has a policy of accepting public, domestic information before import values in
the surrogate country. As directed by section 773(c)(1) of the Act, selection
of surrogate values is based on our consideration of what represents the best
available information. In Sulfanilic Acid from the People's Republic of China;
Final Results of Antidumping Duty Administrative Review, 63 FR 63834, 63838
(November 17, 1998), the Department, when faced with selecting between domestic
and import prices for aniline, determined that the import price represented a
better surrogate value "because the Indian price for domestically-produced
aniline is artificially inflated due to a protective tariff that bears no
relationship to the situation governing the aniline respondents source
domestically in the PRC." Likewise, in this review, for the reasons cited above
we find that the data in the Indian Import Statistics better reflect the value
of the underlying input.

Comment 8: SDD Valuation

Petitioner's Arguments: The petitioner argues that the Department should use
the price quote for sodium dimethyl dithiocarbamate ("SDD") provided in the
petitioner's November 27, 2000 submission because it is contemporaneous to the
POR, whereas the data used by the Department in the Preliminary Results are not.

Respondents' Arguments: The PRC respondents argue that the quote provided by
the petitioner is neither reliable nor representative of commercial quantities.
They point out that the petitioner's quote does not specify the total quantity
on which the quote is based. These respondents suggest that the Department
should instead use the quote they provided, which is from the same Indian
producer, because the total quantity is known. Moreover, this quote is
denominated in metric tons which, they argue, is the "normal commercial unit"
for SDD as opposed to the quote offered by the petitioner, which is in
kilograms.

Department's Position: The Department prefers, where possible, to use
surrogate values which are contemporaneous to the POR. Accordingly, for the
final results, we have used the price quote provided by the petitioner. We find
that there is no evidence to suggest that the quote provided by the petitioner
does not reflect a commercial quantity. Moreover, we note that the quote
provided by the PRC respondents does not indicate the total quantity on which
the quote is based. Additionally, there is nothing in the record to suggest
that metric tons are the standard commercial unit used for this input. In fact,
the Department used an average value of two quotes, both denominated in
kilograms, in Mn Metal III.(30) The Department also notes that the quote
provided by the petitioner is clearly tax-exclusive, consistent with our
preference.

Comment 9: Selenium Dioxide Valuation

In the Preliminary Results, we valued selenium dioxide using a July 1998 price
quote obtained from a domestic Indian producer. Because the period covered by
the price quotation is outside the POR, we inflated the price accordingly. 


Petitioner's Arguments: The petitioner argues that, in the Preliminary
Results, the Department incorrectly used the average third quarter 1998 WPI
rather than the July 1998 WPI to adjust the price quote from the domestic
Indian producer. This error should be corrected for the final results.

Furthermore, the petitioner argues, the Department should reject the data from
the Indian Import Statistics submitted by the PRC respondents. The petitioner
contends that the Department prefers publicly available, domestic information
when valuing surrogates, if such information exists. Additionally, the price
quote from the domestic supplier is for selenium dioxide, which is the actual
chemical compound the PRC producers reported using during the POR, and thus is
more specific than the broad category of selenium which may include "selenium-
containing compounds." 

Respondents' Arguments: The PRC respondents argue that it is the Department's
preference, when available, to select surrogate information that is
representative of a range of prices-rather than a single, specific quote-within
the POR. Therefore, these respondents urge the Department to use the quotes
from the Indian Import Statistics for valuing selenium dioxide rather than rely
on a single producer quote. LSM/SMC further notes that the Indian Import
Statistics not only represent a range of prices but are also contemporaneous to
the POR. Furthermore, LSM/SMC and the PRC respondents allege, the value under
the heading "selenium" clearly includes selenium dioxide. 

Department's Position: We agree with the petitioner that the 1998 price
quotation used in the Preliminary Results is the best available surrogate value
because it reflects the actual chemical used by the PRC producers. While it is
the Department's general preference to use a range of prices for the input
being valued, the value in the Indian Import Statistics suggested by LSM/SMC
and the respondents is for selenium, not selenium dioxide, and is therefore not
sufficiently specific to the underlying input being valued. Therefore,
consistent with Mn Metal III, we have continued to use the 1998 price
quotation. Furthermore, we have inflated this 1998 value to the POR using the
July 1998 WPI submitted by the petitioner subsequent to the Preliminary Results.

Comment 10: Electricity Valuation

In the Preliminary Results, we valued electricity using electricity rate data
from two sources: 1995 Conference of Indian Industries: Handbook of Statistics
("CII Handbook"), and data from the CMIE. We used the more contemporaneous rate
of the two sources for each Indian state, and inflated, where appropriate, the
value from the effective date of the rate quote to the POR using an electricity-
specific price index. 

Petitioner's Arguments: The petitioner argues that the Department should use
the more contemporaneous electricity rate data from the CMIE that the
petitioner has placed on the record since the Preliminary Results. The
petitioner notes that the rate data for most Indian states show a more detailed
breakdown, within the "Large Industries" category of users, by ranges of
monthly electricity consumption (e.g., large industry users that consume
3,650,000 kWh per month). The petitioner asks that the Department use the rates
for the subcategories of large industrial users that most closely reflect the
actual electricity use of the PRC manganese metal producers. Where necessary,
the petitioner continues, these rates would be inflated using the Indian
electricity-specific price index.

The petitioner further argues that the Department should reject the
electricity data from the Tata Energy Research Institute, Energy Data Directory
& Yearbook 1999/2000 ("TERI") data provided by LSM/SMC, for the following
reasons: 1) the CMIE data are as contemporaneous as the TERI data, 2) the CMIE
data are more specific (i.e., provide a breakdown within the large industry
category) than the TERI data, 3) the TERI data include rates for fewer state
electricity boards or agencies than the CMIE data, 4) LSM/SMC has not
substantiated its claim that the TERI data include fuel adjustment costs and
exclude taxes, and 5) the accuracy of the TERI data are suspect because the
reported average of the rates of the 19 boards or agencies appears incorrect.

The petitioner also contends that LSM/SMC's statements (see below) regarding
the reasonableness of inflating individual state electricity rates using an
India-wide electricity-specific price index are unfounded. This is so, the
petitioner argues, because the overall objective is to compute the POR average
India-wide electricity rate. While the yearly change in rates may differ from
state to state, the India-wide electricity price index represents the overall
average change in electricity rate in India over time. Applying this average
index to virtually all of the individual state's rates will result in a
correctly computed India-wide POR average rate.

Respondents' Arguments: LSM/SMC argue that the Department should base the
surrogate electricity value on the TERI data exclusively, for the following
reasons. First, the TERI data are contemporaneous with the POR and, therefore,
do not need to be inflated, whereas some of the electricity data used in the
Preliminary Results were up to five years old. LSM/SMC contends that using the
contemporaneous data is important because the Department's practice of using an
India-wide electricity price index to inflate state-specific outdated rates
yields distorted results.(31) Second, TERI is a widely-known, credible, private-
sector research organization focused solely on energy-related issues in India.
Moreover, the ultimate source of the TERI data is the Power and Energy
Division, Planning Commission of the Government of India. Therefore, the TERI
data are a reliable basis for deriving an electricity surrogate. Third, the
TERI data include a wide range of electricity rates covering 19 Indian states
and, thus, are representative of an India-wide average. Fourth, the TERI
publication includes data that are specific to industrial consumers of
electricity and that include the fuel cost adjustment, but exclude taxes.

Moreover, LSM/SMC continues, the petitioner is wrong in arguing that the CMIE
data it favors are as contemporaneous with the POR as the TERI data. LSM/SMC
suggests that the petitioner has confused the fact that the date of publication
of the petitioner's CMIE data is contemporaneous with the POR with the fact
that the effective dates of the rates reported in that publication are
generally well before the POR. The petitioner's arguments regarding the
contemporaneity of the CMIE data, LSM/SMC contend, are belied by the fact that
in its suggested derivation of an average rate based on the CMIE data the
petitioner had to inflate the Indian states' rates to the POR.

LSM/SMC also contends that the petitioner's argument--that the CMIE data are
more product specific-is not dispositive in selecting a surrogate electricity
value in this case. Other selection criteria that are equally important include
whether a potential surrogate is: 1) an average, non-export value, 2)
contemporaneous, and 3) tax-exclusive. Moreover, LSM/SMC argues, the fact that
the TERI data do not provide a breakdown within the large industry category
does not preclude the use of that data. Rather, in several cases the Department
has relied on aggregate rates for the industrial user category. Moreover,
LSM/SMC continues, the rates for the particular large industrial user sub-
categories the petitioner has chosen are merely based on the petitioner's
speculation of the PRC producers' actual monthly electricity consumption.

The PRC respondents argue that the Department should use the more
contemporaneous CMIE data they placed on the record subsequent to the
Preliminary Results, and note that the average electricity price derived from
this updated CMIE data is the same as the average electricity rate derived from
the TERI data submitted by LSM/SMC. Moreover, the PRC respondents argue,
contrary to the petitioner's assertions the electricity data advocated by the
petitioner are not as or more contemporaneous than the data provided by LSM/SMC
and the PRC respondents.

Department's Position: For the final results, we have derived a surrogate
electricity value based on the TERI data advocated by LSM/SMC because this data
best fits our selection criteria.(32) As stated in the Preliminary Results,
where possible we used a surrogate value that was (1) an average non-export
value; (2) representative of a range of prices within the POR or closest in
time to the POR; (3) product-specific; and (4) tax-exclusive.(33) Taking each
criterion in turn, the TERI data appear to represent average statewide
electricity prices for domestic use. The TERI publication includes rates for 19
state electricity boards or agencies and, therefore, represents a range of
prices within India. The publication identifies the rates as being effective
during 1998/99 and, therefore, the data are contemporaneous with the POR. The
TERI data include a breakdown of rates specific to the "industrial" users
category, which we find to be the appropriate category for valuing electricity
usage in the metals industry sector. Moreover, the petitioner has not provided
any information suggesting that the TERI data are not tax-exclusive, or do not
include the fuel cost adjustment.

LSM/SMC have also provided evidence demonstrating that TERI is a widely known,
credible and relied-upon research organization, focused on energy-related
issues in India and that the ultimate source of the TERI data is the Power and
Energy Division, Planning Commission of the Government of India. We note that,
although we are using the TERI data for some of the same reasons argued by
LSM/SMC, we do not agree with LSM/SMC's arguments regarding the appropriateness
of inflating pre-POR state-specific electricity values using an country-wide
electricity-specific price index. This issue is moot, however, given that the
TERI data are contemporaneous with the POR and, therefore, no inflation
adjustment is required.

With regard to the petitioner's objections to the TERI data, we first note
that the CMIE data proposed by the petitioner are not, as a whole,
contemporaneous with the POR. In fact, the rate data for the majority of states
included in the CMIE data are for periods prior to the POR, as evidenced by the
effective dates noted in the electricity rate tables. Second, although the TERI
publication includes rates for fewer states than does the CMIE data, we find
that the data for the 19 states are a sufficiently broad basis with which to
derive an average electricity cost that reasonably reflects India as a whole.
Third, as noted by LSM/SMC, the apparent inaccuracies alleged by the petitioner
in the TERI data have been clarified by the staff of TERI, who also confirmed
that the TERI electricity rates were exclusive of tax and inclusive of the fuel
cost adjustment. 

As to the petitioner's argument that the CMIE data are more product-specific
because they include a further breakdown within the large industry category, we
disagree that this should be an overriding consideration when choosing an
electricity surrogate in this review. Though in Mn Metal III, we used the large
industrial user subcategory that most closely reflected the reported amount of
electricity consumed monthly in the production of manganese metal,(34) we have
reconsidered this approach for these final results. The reason is that we know
from prior verifications that at least one of the producers in this
administrative review purchases more electricity than is used in manufacturing
the subject merchandise and, therefore, reflected in the reported unit
electricity figures in its FOP data. This is because the company manufacturers
products other than the subject merchandise.(35) In other words, we cannot
necessarily infer the amount of overall monthly electricity consumption of a
producer based on that producer's reported unit electricity consumption in
producing manganese metal. In this light, it is clear that selecting rates for
particular subcategories within the "large industry" category in the aim of
improving specificity may, in fact, merely distort the actual electricity costs
of the producers. Therefore, for these final results we have used the data for
the aggregate "industry" category only.

Comment 11: Industry-Specific Direct Materials in Overhead, SG&A and Profit 

In the Preliminary Results, we based our surrogate ratios for factory
overhead, SG&A and profit on financial information in two CMIE publications.
One publication contains financial data specific to the nonferrous metals
industry in India. The other publication contains financial information
aggregated across all Indian industries. Where possible, we derived surrogate
ratios for factory overhead, SG&A and profit based on the nonferrous industry-
specific data (from the first publication). However, the industry-specific
publication does not provide a detailed breakdown for the category of expenses
"raw materials and stores." According to the glossary of terms accompanying the
publication, this category includes "{c}onsumption of raw materials, stores as
well as packing expenses and purchase of finished goods for resale." Therefore,
in order to further break out these raw materials and stores costs, we applied,
to the nonferrous metal net sale amount, the percentage of the aggregate figure
(e.g., for all industries) for each of these expenses to aggregated net sales,
as detailed in the aggregate data publication. 

Respondents' Arguments: The PRC respondents argue that the Department should
revise this methodology to rely more on the nonferrous metals (industry-
specific) data. Specifically, these respondents suggest that the Department
should subtract, from the nonferrous-specific "Raw Materials & Stores" figure,
"packing" and "stores & spares" expenses derived using the aggregate industry
ratios to net sales. 

Petitioner's Arguments: The petitioner provided no rebuttal comments to this
argument.

Department's Position: We disagree with the PRC respondents that their
proposed methodology would yield more accurate and industry-specific surrogate
factory overhead, SG&A and profit ratios. Due to availability constraints on
data, it is necessary to combine industry-specific and aggregate-industry data
in the calculations of these surrogate ratios. Implicit in the approach in our
Preliminary Results is the assumption that the ratios of certain specific
expenses (e.g., packing) to net sales calculated using the aggregate data hold
true also for the nonferrous metals industry in particular. The PRC
respondents' proposed methodology also makes this assumption, but approaches
the calculation from the opposite direction. Our approach values the materials
and the stores & spares expenses directly, and ignores (for the purposes of
calculating overhead, SG&A and profit ratios) the remainder of the expenses in
the nonferrous metals-specific composite "Raw Materials & Stores" category. The
PRC respondents' approach starts with the "Raw Materials & Stores" composite
figure and deducts the "unwanted" expenses (e.g., packing), yielding a residual
raw materials amount. Both approaches require the same assumption that the
aggregated ratios, at least for certain expenses, are correct and, therefore,
the PRC respondents' proposed approach is not more accurate or industry-
specific. Therefore, we have not revised this calculation for the final results.

Comment 12: Finished Goods in Overhead, SG&A and Profit

Respondents' Arguments: The PRC respondents argue that the Department should
include the "finished goods" category in the cost of manufacturing ("COM") used
as the denominator in calculating the surrogate factory overhead, SG&A and
profit ratios. The PRC respondents argue that manufacturers commonly purchase
finished and semi-finished goods, incurring overhead and SG&A costs in
purchasing, storing and distributing these products, and earning profit on the
resale.

Petitioner's Arguments: The petitioner argues that the PRC respondents have
not provided any methodology or basis for their arguments, nor has the
Department ever considered such an expense in computing overhead, SG&A and
profits in previous reviews. 

Department's Position: For the final results, we have continued not to include
the finished goods category in the calculation of surrogate factory overhead,
SG&A and profit ratios. Our reasons for this are discussed in Tapered Roller
Bearings and Parts Thereof, Finished and Unfinished, From the People's Republic
of China; Final Results of 1998-1999 Administrative Review, Partial Rescission
of Review, and Determination Not To Revoke Order in Part, 66 FR 1953 (January
10, 2001) ("TRBs XII") and accompanying decision memorandum at Comment 9. We
note that we view these "finished goods" as being essentially the same category
as "traded goods" discussed in TRBs XII.

Comment 13: Overhead and SG&A of Powder Producers

Respondents' Arguments: The PRC respondents argue that, in the Preliminary
Results, the Department overstated the factory overhead and SG&A expenses of
the powder producers because the surrogate overhead ratio was applied to the
powder producers' direct costs which included the labor costs of the flake
producers. These respondents argue that the surrogate ratios for overhead and
SG&A are calculated on a labor-exclusive basis and, therefore, should be
applied to the powder producer's costs exclusive of labor.

Petitioner's Arguments: The petitioner counters, arguing that the Department's
calculation of the powder producers' factory overhead and SG&A expenses in the
Preliminary Results was correct and consistent with the manner in which the
surrogate overhead and SG&A ratios were derived. 

Department's Position: We agree with the petitioner. The value of the flake-
producer's labor embedded in the value of the flake is part of the overall cost
of raw materials (flake) to the powder producer. The calculated surrogate
overhead and SG&A ratios fully include all raw materials costs, including the
value of labor expended in the production of the raw materials. Thus, the
calculation of the powder producers' overhead and SG&A expenses in the
Preliminary Results is accurate and fully consistent with the methodology used
to derive the surrogate ratios.

Comment 14: Outward Distribution Expenses


Petitioner's Arguments: The petitioner argues that the Department should not
exclude outward distribution expenses from selling expenses in calculating the
surrogate ratio for SG&A because these expenses may include warehousing and
other distributor expenses which should be included.

Respondents' Arguments: The PRC respondents counter, arguing that outward
distribution expenses are movement expenses which are accounted for separately
in the margin calculation. Even warehousing expenses are properly classified as
movement expenses. The PRC respondents contend that the petitioner has provided
no evidence demonstrating that these outward distribution expenses include any
other types of selling expenses that are not already reflected in the
calculation of constructed value.

Department's Position: We agree with the PRC respondents. The source data
provide no explanation of this category of expenses other than that these are
outward distribution expenses. As such, in keeping with the Department's
general treatment of distribution expenses these are reasonably construed to be
movement expenses, which have been accounted for elsewhere in the calculation
of constructed value. Therefore, in this regard we have not changed our
treatment of these expenses in the final results. 

Comment 15: Administrative Labor in Total Labor Expenses

Respondents' Arguments: The PRC respondents argue that, in the Preliminary
Results, the Department correctly deducted certain administrative labor
expenses from total administrative expenses. However, the Department failed to
make the corresponding upward adjustment to the "wages and salaries" category
by the same amount.

Petitioner's Arguments: The petitioner counters that the Department correctly
reduced the administrative expenses by the amount of administrative labor, and
that no corresponding upward adjustment to the wages and salaries category
should be made. The petitioner contends that the wages and salaries category
already fully includes all administrative labor expenses. To further adjust the
wages and salaries category would be to double count these administrative labor
expenses.

Department's Position: We agree with the petitioner that no adjustment to the
wages and salaries category is required. The glossary of terms for CMIE's
financial data(36) indicates that the wages and salaries figure includes
administrative salaries. Thus, no adjustment to this calculation is necessary
for the final results.

Comment 16: Plastic Bag Valuation

Petitioner's Arguments: The petitioner alleges that the Department used an
incorrect time period in calculating an inflation factor for plastic bags.
Specifically, the Department used an average WPI for the period between April
and September 1998. The correct period, the petitioner argues, is from April to
August 1998, which coincides with the effective dates of the underlying data to
which the inflation factor is applied.

Respondents' Arguments: The PRC respondents argue that, in the Preliminary
Results, the Department used a surrogate value for plastic bags that is not
contemporaneous with the POR. Given the Department's policy of using data that
are within or most contemporaneous with the POR, these respondents request that
the Department should use, for the final results, the updated plastic bag
surrogate value they submitted after the Preliminary Results, which is
contemporaneous with the POR.

Department's Position: We agree with the PRC respondents that the Department's
practice is to use data that are most contemporaneous with the POR. In the
Preliminary Results, we used data for the period April to August 1998, derived
from the Indian Import Statistics. Subsequent to the Preliminary Results, the
PRC respondents submitted updated Indian Import Statistics for plastic bag
imports for the period February to May 1999, months within the POR.

The data submitted by the PRC respondents are contemporaneous with the POR.
Therefore, for the final results, we have used the February to May 1999 Indian
Import Statistics to calculate a surrogate value for plastic bags. Since we are
using contemporaneous data to value plastic bags, we do not need to address the
petitioner's argument as to whether the correct WPI was used in the Preliminary
Results.

Comment 17: Wooden Pallet Valuation

Respondents' Argument: The PRC respondents and LSM/SMC argue that the
Department used in the Preliminary Results a surrogate value for wooden pallets
that is not contemporaneous with the POR. According to the PRC respondents, on
November 27, 2000, they submitted updated wooden pallet surrogate value data
that are contemporaneous with the POR. Following the Department's policy of
using data that is within or most contemporaneous with the POR, the PRC
respondents request that we use, for the final results, the updated wooden
pallet information they provided.

In addition, the PRC respondents argue that the wooden pallet data suggested
by the petitioner are aberrational when compared to the U.S. benchmark and to
data used in previous reviews. Therefore, these respondents request that the
Department instead use the information provided in their November 27, 2000
submission.

Petitioner's Argument: The petitioner alleges that the Department used an
incorrect time period in calculating an inflation factor in the valuation of
wooden pallets. Specifically, the Department used an average WPI for the period
between April and September 1998. Instead, the petitioner argues, the correct
period is between April and August 1998, corresponding to the effective dates
of the surrogate source data to which the inflation factor is applied. 

The PRC respondents' proposed surrogate value, the petitioner claims, is not
specific to wooden pallets. Furthermore, according to the petitioner, the
companies listed in the PRC respondents' surrogate submission are U.S.
companies and, therefore, their import prices are not relevant to this review.

Department's Position: We agree with the respondents that the Department's
practice is to use data that are most contemporaneous with the POR. In the
Preliminary Results, we used data for the period April to August 1998 derived
from the Indian Import Statistics. Subsequent to the Preliminary Results, the
PRC respondents submitted updated Indian Import Statistics for wooden pallet
imports for the period February to June 1999, months that are within the POR.
Since these data submitted by the PRC respondents are contemporaneous with the
POR, for the final results, we have used the February to June 1999 Indian
Import Statistics to calculate a surrogate value for wooden pallets. 

As for the petitioner's argument that the Indian import statistics are not
specific to wooden pallets, we note that the wooden pallet surrogate value in
the Preliminary Results was also calculated from the Indian Import Statistics
using the same HTS number. The petitioner makes no argument that the HTS number
used in the Preliminary Results is not specific to wooden pallets. There is no
difference in the coverage of items under the relevant HTS number used in the
Preliminary Results and these final results. 

Finally, since we are using contemporaneous data to value wooden pallets, we
do not need to address the issue of whether the correct WPI was used or the
aberrational nature of data used in the Preliminary Results. 

Comment 18: HYMM's Ore Grinding Costs

Petitioner's Arguments: The petitioner argues that the Department should add a
conversion cost for grinding manganese lump ore into higher-valued powder to
HYMM's reported costs because HYMM purchases its ore pre-ground, whereas the
ore surrogate used in the Preliminary Results was for lump ore. The petitioner
suggests that the costs of this grinding could be based on one of two possible
sources of information on the record. One source is the information regarding
grinding costs (including packing and overhead costs) at its own U.S.
operations that the petitioner has placed on the record. As an alternative
source, the petitioner suggests, the Department could use the grinding factors
data on record for XTMM (which does perform its own grinding). 

The petitioner disagrees with the argument (below) by the PRC respondents that
manganese ore fines, as reflected in the PRC respondents' proposed ore
surrogate, are the same as ground lump ore. Though there is no information on
the record regarding the particle size of the "fine" ore in the Ghana ore quote
provided by the PRC respondents, the petitioner states that it is "highly
likely" that the fines in that price quote are significantly larger "by at
least an order of magnitude" than the "ore powder" used by HYMM. 

Respondents' Arguments: The PRC respondents counter that adding additional
grinding costs to HYMM's production costs would be inappropriate, for several
reasons. First, if the Department uses the Ore 1 surrogate value proposed by
the PRC respondents, this surrogate is for fine ore (which, these respondents
contend, is at least similar to powdered ore) and, therefore, already reflects
the extra expense of grinding the ore. Second, adding an additional grinding
cost to HYMM's costs would amount to a use of adverse facts available, which
would be improper in light of the PRC respondents' full cooperation in this
review. Third, it would be inappropriate to use the grinding costs of the
petitioner's U.S. operations to value grinding operations in the PRC given that
the PRC is not economically comparable to the United States. Fourth, the
petitioner's reported grinding costs include, separately, packing costs and
grinding maintenance and depreciation costs. The PRC respondents argue that it
is not the Department's practice to account separately for the packing costs of
inputs, nor would it be appropriate to include the petitioner's maintenance and
depreciation costs since these are already reflected in the Department's
surrogate overhead and SG&A ratios. Last, the PRC respondents contend, assuming
the Department uses the manganese fines quote to value Ore 1, the Department
should, in fact, subtract ore grinding costs from the constructed value of
XTMM's operations since these costs are already reflected in the surrogate ore
value.

Department's Position: As discussed in Comment 3, we have valued HHYM's Ore 1
using a price for manganese ore fines. We have determined that for the purposes
of selecting an appropriate ore surrogate, the particle size of the surrogate
ore fines adequately approximates the particle size of the powdered ore that
HYMM purchases. Thus, we find that it is unnecessary to add additional grinding
costs to HYMM's cost of production.

Comment 19: XTMM's Constructed Value Calculation

Petitioner's Arguments: The petitioner argues that the Department made several
errors in the Preliminary Results in calculating constructed value for XTMM.
These alleged mistakes are as follows. First, the Department should value
XTMM's liquid ammonia, SDD, and selenium dioxide inputs taking into account the
reported purities for those chemicals. Second, the Department relied on an
incorrectly computed POR average of XTMM's reported monthly unit electricity
consumption to calculate XTMM's unit electricity costs. Third, the Department
used the wrong total unit consumption rates for grinding and SG&A labor.

Respondent's Arguments: The PRC respondents argue that the Department should
adjust for liquid ammonia concentrations. See Comment 7. None of the
respondents provide rebuttal comments to the petitioner's other arguments,
however.

Department's Position: With regard to the petitioner's arguments regarding
chemical purities, in the final results, as in the Preliminary Results, we have
correctly reflected XTMM's reported chemical purities in the calculation of
selenium dioxide and SDD costs. With regard to adjusting for the reported
purity of liquid ammonia, see Comment 7.

As for the petitioner's argument concerning electricity consumption, we agree
that the reported POR weighted average unit electricity consumption reported
for XTMM was incorrect based on XTMM's reported monthly consumption and output
figures. We have used the corrected average electricity unit consumption figure
in the final results. 

With regard to the petitioner's argument concerning unit labor consumption, we
agree that the reported POR weighted average unit labor consumption reported
for XTMM was incorrect based on the data in the calculation worksheet included
as Exhibit D-1.1 of the PRC respondents's July 24, 2000 questionnaire response.
We have used the unit consumption figures from Exhibit D-1.1 in the final
results. 

Comment 20: Minmetals' Typographical Error

Respondents' Argument: The PRC respondents argue that the Department should
correct the error in Minmetals' sales listing, as reported by Minmetals in its
November 6, 2000 submission. Specifically, the CONNUMs reported in the sales
listing had incorrectly identified flake sales as powder, and vice versa. 

Petitioner's Arguments: The petitioner provided no rebuttal comments to this
argument.

Department's Position: We agree with the PRC respondents and have made the
requested correction in the final results.

Comment 21: HYMM's Iron Drums

Respondents' Arguments: LSM/SMC allege that in the Preliminary Results, the
Department incorrectly calculated the iron drum input cost for their manganese
metal supplier, Huan Yu. Specifically, LSM/SMC argue that the Department failed
to multiply the surrogate value of an iron drum by HYMM's reported unit
consumption of iron drums. 

Petitioner's Arguments: The petitioner disagrees, arguing that the iron drum
calculation is correctly based on the adjusted POR price for the iron drum, the
reported volume of drum, and the manganese metal density. Multiplying the
surrogate value by the reported unit drum consumption, the petitioner contends,
would be incorrect.

Department's Position: We agree with the petitioner. Our surrogate value for
iron drums is $9.50 per metric ton of packed manganese metal. Huan Yu's
constructed value is calculated in terms of dollars per metric ton of
manganese. Thus, there is no need to further multiply the iron drum surrogate
value by Huan Yu's unit drum consumption and, therefore, we have made no change
to this calculation for the final results.

Comment 22: Minmetals' Flake Value

Respondents' Arguments: The PRC respondents allege that in calculating the
cost of production of Minmetals' manganese metal powder supplier (Special), the
Department incorrectly used the flake input value of XTMM (which does not
supply Special) rather than the flake value of HYMM (which does supply
Special). 

Petitioner's Arguments: The petitioner provided no rebuttal comments to this
argument.

Department's Position: We agree with the PRC respondents. In the Preliminary
Results, we inadvertently used the wrong flake input costs for the powder
producer. For the final results, we have corrected this error by using the
flake value for HYMM rather than XTMM.

Comment 23: OBS 43 Transportation Mode

In the Preliminary Results, we calculated an foreign inland freight cost for
CMIECHN/CNIECHN's U.S. sales observation 43 using a surrogate value for
trucking freight.

Petitioner's Argument: The petitioner argues that, based on information in
CMIECHN/CNIECHN's supplemental questionnaire response, the mode of inland
transportation for this sale was train. Thus, the Department should use the
rail freight surrogate to derive inland freight costs for this sale.

Respondents' Argument: None of the respondents provided rebuttal comments to
this argument.

Department's Position: We agree the reported mode of transportation for this
observation is by train, and have corrected the inland freight calculation in
the final results accordingly.

Comment 24: LSM/SMC's CEP Profit

Petitioner's Argument: The petitioner contends that the Department has
incorrectly calculated LSM/SMC's constructed export price ("CEP") profit ratio
by dividing the income before taxes by the difference between sales revenue and
income before taxes. The petitioner argues that this method of calculating a
CEP profit ratio includes items unrelated to the selling process for the
further manufactured product. According to the petitioner, and citing to the
Department's Policy Bulletin Number 97/1 "Calculation of Profit for Constructed
Export Price Transactions" (Sept. 4, 1997), the CEP profit ratio should be the
ratio of the income before taxes (numerator) to the total expenses
(denominator). The petitioner suggests that total expenses should include only
sales, selling expenses, general and administrative expenses, and net interest
expense. 

Respondents' Argument: LSM/SMC argue that the consolidated financial statement
for the fiscal year ending January 31, 1999 from which the Department
calculated a CEP profit ratio was not the most contemporaneous with the POR.
Instead, LSM/SMC suggest that the Department calculate a CEP profit ratio using
the consolidated financial statement for the fiscal year ending January 31,
2000 (which was submitted in their July 24, 2000 questionnaire response). Use
of this data, according to LSM/SMC, results in a negative CEP profit ratio. 

As for the petitioner's argument regarding the calculation total expenses (the
denominator), LSM/SMC claim the argument is moot since, regardless of whether
the Department continues with its methodology in the Preliminary Results or
uses the petitioner's method, the numerator is negative and, therefore, the CEP
profit ratio will be negative.

Department's Position: We agree with LSM/SMC. The Department's practice is to
use data that are the most contemporaneous with the POR. In this case, the
consolidated financial statements for the fiscal year ending January 31, 2000,
are the most contemporaneous with the POR. These consolidated financial
statements show a negative income before taxes (numerator) and, therefore, the
resulting CEP ratio will also be negative, regardless of whether we accept the
petitioner's argument for calculating total expenses (denominator). Thus, the
petitioner's arguments regarding the Department's policy in calculating total
expenses are moot. For the final results, we have calculated a CEP profit based
on LSM/SMC's consolidated financial statement for the fiscal year ending
January 31, 2000.

Comment 25: LSM/SMC's Inventory Carrying Cost, Inland Freight, and U.S.
Brokerage and Handling

Petitioner's Argument: The petitioner argues that LSM/SMC has provided no
documentation supporting the date that the further manufactured product in the
U.S. was completed in calculating inventory carrying costs, its methodology in
allocating transportation costs to calculate inland freight from port to
warehouse, and its methodology in allocating brokerage and handling.

Respondents' Argument: LSM/SMC state, first, that the petitioner makes no
recommendation as to how the Department should correct the Preliminary Results
for any of these calculations. Instead, LSM/SMC claim, the petitioner merely
implies that the reported data are somehow unreliable. Furthermore, LSM/SMC
continues, they have complied with all of the Department's requests for
information and that the data were available for verification. As such, LSM/SMC
request that all the data as reported be considered authoritative and reliable.
Specifically, LSM/SMC state that, as for inland freight from port to warehouse,
in its July 24, 2000 section C and E responses, they provided sufficient
documentation showing the calculation methodology. As for its calculation of
brokerage and handling, LSM/SMC state they explained the calculations and
methodology in exhibit 4 of their July 24, 2000 section C and E responses.

Department's Position: We agree with LSM/SMC. In their various submissions, we
find that LSM/SMC adequately answered all of the questions posed by the
Department as well as properly explained and documented their methodology. The
Department had the option to verify any data submitted by LSM/SMC, but chose
not to do so in this administrative review. 

Comment 26: Exclusion of LSM/SMC's Sale

Respondents' Argument: LSM/SMC argue that one of their further manufactured
merchandise sales during the POR contained subject merchandise imported prior
to the POR that was already liquidated by Customs at the cash deposit rate
applicable at the time of entry. LSM/SMC claim that since the subject
merchandise was already liquidated, this sale should not be included in the
calculation of a weighted-average dumping margin for this review. The reason
for this problem, according to LSM/SMC, is because LSM/SMC's sales were not
reviewed in the third review, but are being reviewed currently. As a result,
LSM/SMC claims that in the last review, the Department assessed duties on POR
entries of subject merchandise, while in this review duties would be assessed
on sales of subject merchandise (incorporated in the further manufactured
merchandise) during the POR. The result, according to LSM/SMC, is that in this
review the subject merchandise captured in the margin analysis would include
certain subject merchandise already captured in the last review. LSM/SMC cite
to American Silicon Technologies v. United States, Slip Op. 99-34 (CIT April 9,
1999) for the proposition that the Department recognizes the calculation
difficulties when switching from a entries-based methodology to a sales-based
methodology. LSM/SMC state that it discussed and documented in the
questionnaire response and supplemental submissions that the sale assigned
"OBS" 1 included the subject merchandise entered prior to the POR. Therefore,
LSM/SMC argues, by calculating a dumping margin for this sale, the Department
double-counted the subject merchandise included in this entry. LSM/SMC request
that the Department exclude the sale which included the subject merchandise
entered prior to the POR from the final results calculations. 

Petitioner's Argument: According to the petitioner, the Department has the
discretion to examine all sales that fall within the POR. Since LSM/SMC are
related, and there are such very few sales withing the POR, the petitioner
requests that the Department include this sale in its final calculations.

Department's Position: We have continued to include the sale labeled "OBS 1"
in calculating the antidumping duty rate for our final results. This sale,
along with others during the POR, will be used to calculate the assessment rate
to be applied to entries (not sales) during the POR. In the preamble to section
351.212(b)(1) of our regulations, we discuss at length our past practice of
attempting to match particular U.S. sales with entries and our reasons for
moving away from that practice. The current practice of reviewing sales to
determine amounts to be assessed, and not entries, has been upheld by the U.S.
Court of International Trade in FAG Kugelfischer Georg Schafer KgaA v. United
States (1995 CIT LEXIS 209, *10 (1995), aff'd, 1996 U.S. App.LEXIS 11544 (Fed.
Cir. 1996).



RECOMMENDATION 

Based on our analysis of the comments received, we recommend adopting all of
the above positions and adjusting all related margin calculations accordingly.
If these recommendations are accepted, we will publish the final results of
review and the final weighted-average dumping margins for all reviewed firms in
the Federal Register.

AGREE ________ DISAGREE _________





Bernard T. Carreau, fulfilling the duties of
Assistant Secretary for Import Administration





_____________________________________________________________________________
footnotes:


1. Manganese Metal from the People's Republic of China; Preliminary Results
and Rescission in Part of Antidumping Administrative Review, 65 FR 66697
(November 7, 2001) ("Preliminary Results"). 

2. See Manganese Metal from the People's Republic of China; Final Results and
Partial Rescission of Antidumping Administrative Review, 65 FR 30067 (May 10,
2000) ("Mn Metal III"). 

3. See Magnesium Corp. of America v. United States, 166 F.3d 1364, 1369-1373
(Fed. Cir. 1999); Shakeproof Assembly Components Div. Of Ill. Tool Works, Inc.
v. United States, 59 F. Supp. 2d 1354, 1358 (CIT 1999); Olympia Indus. v.
United States, 7 F. Supp. 2d 997, 999 n.l (CIT 1998). 

4. See e.g., Shieldalloy Metallurgical Corp. v. United States, 947 F. Supp.
525, 532 (CIT 1996). 

5. See Mn Metal III and accompanying Decision Memorandum at Comments 5 & 9. 

6. Nation Ford Chemical Company v. United States, 166 F.3d 1373 (Fed. Cir.
1999).

7. LSM/SMC cite to the National Trade Estimate Report (2000), ("NTE Report")
published by the U.S. Trade Representative's Office, in support of this
argument. 

8. Mn Metal I, 63 FR at 12444. 

9. Id. 

10. Mn Metal III, at Comment 4. 

11. Mn Metal I, 63 FR at 12444. 

12. See e.g., Manganese Metal From the People's Republic of China; Final
Results and Partial Rescission of Antidumping Duty Administrative Review, 63 FR
12440, (March 13, 1998) ("Mn Metal I"); and Manganese Metal From the People's
Republic of China; Final Results of Second Antidumping Administrative Review,
64 FR 49447, 49454, (September 13, 1999) ("Mn Metal II"). 

13. The "certain chemical feature" referred to here is the fact that the PRC
(and Brazilian) ore is carbonate, whereas the Indian ore is oxide. This feature
was proprietary in that review, but has since been reported as public
information by the PRC respondents. 

14. Mn Metal I, 63 FR at 12444. 

15. See NTE Report at 125. 

16. Memorandum to the Case File "Factors of Production Valuation for the Final
Results" (March 7, 2001) ("FOP Memo") at Exhibit B. 

17. Id. 

18. Mn Metal I, 63 FR 12445. 

19. Though, as stated above, the facts that certain information is proprietary
or is not contemporaneous with the POR do not, in themselves, preclude its use
as a surrogate value. 

20. See e.g., Mn Metal I, 63 FR at 12444. 

21. See, Minmetal's September 19, 2000 Responses to the Department's
Supplemental Questionnaires of August 22, 2000, at 8. 

22. A Dictionary of Mining, Mineral, and Related Terms, at 428, Paul W.
Thrush, ed., (U.S. Department of the Interior, 1968). 

23. Mn Metal III, 65 FR at 30068. 

24. Mn Metal I, 63 FR at 12443. 

25. Mn Metal I, 63 FR at 12448. 

26. Mn Metal II, 64 FR at 49459. 

27. See Memorandum to the Case File "Verification in Xiang Tan" (October 13,
1997), attached to Memorandum to the Case File "Miscellaneous Supporting
Documents for Final Results" (March 1, 2001) ("Miscellaneous Documents Memo"). 

28. Memorandum to the Case File "Factors of Production Valuation for the
Preliminary Results" (October 31, 2000) at 3. 

29. See Certain Helical Spring Lock Washers from the People's Republic of
China; Final Results of Review, 62 FR 61794 (November 19, 1997). 

30. See Memorandum to Case File; "Factors of Production Valuation for the
Final Results" (May 3, 2000), attached to the Miscellaneous Documents Memo. 

31. LSM/SMC argues that in the event the Department does not use the TERI data
in the final results, the Indian wholesale price index, rather than the
electricity-specific price index, should be used to inflate any pre-POR data. 

32. As the PRC respondents have noted, the India-wide average electricity
rates derived from the TERI data and the PRC respondents' CMIE data are the
same. The TERI data provided by LSM/SMC and the CMIE data provided by the PRC
respondents do not include as extensive a breakdown into subcategories of users
as the CMIE data provided by the petitioner. 

33. Preliminary Results, 65 FR at 66700. 

34. Memorandum to Susan Kuhbach, "Analysis of Electricity Surrogate Options
for Final Results" (May 3, 2000), attached to the Miscellaneous Documents Memo. 

35. Memorandum to Case File, "Results of Verification of XTMM" (November 22,
1999), attached to the Miscellaneous Documents Memo. 

36. FOP Memo at Exhibit K.