67 FR 6488, February 12, 2002
                                                            A-351-806
                                                  ARP: 7/1/99-6/30/00
                                                      Public Document
                                                  Office IV, Group II 

MEMORANDUM TO: Faryar Shirzad
               Assistant Secretary 
                 for Import Administration

FROM:          Bernard T. Carreau
               Deputy Assistant Secretary
                 for Import Administration


SUBJECT: Issues and Decision Memorandum for the Administrative Review of
Silicon Metal from Brazil - 7/1/1999 through 6/30/2000; Final Results

Summary

We have analyzed the comments and rebuttal comments of interested parties
in the 1999/2000 administrative review of the antidumping duty (AD) order
covering silicon metal from Brazil. As a result of our analysis, we have
made changes from our preliminary results. We recommend that you approve
the positions we have developed in the Discussion of the Issues section of
this memorandum. Below is the complete list of the issues in this
administrative review for which we received comments and rebuttal comments
from parties:

Companhia Ferroligas Minas Gerais (Minasligas)

1.  Short-Term Interest Rate 
2.  Advanced Exchange Contracts (ACC) and Payment Dates 
3.  Duty Drawback 
4.  Offset to Financial Expense 
5.  Calculation of Home Market Credit Expenses 
6.  Double Conversion of Inland Freight 
7.  Circumstance of Sale (COS) Adjustment for Programa de Integracao Social
    (PIS) and Contribuicao do FinSocial (COFINS) taxes 
8.  Duty Drawback and the Treatment of Value-Added Taxes (VAT), i.e., the
    ICMS and IPI Taxes 

Companhia Brasileira Carbureto de Calcio (CBCC)

9.  Shipment Date 
10. Consolidated Financial Statement 
11. Financial Expense Ratio
12. Short-term Income Offset 
13. Interest Revenue 
14. Nature of Sales to an Unaffiliated Customer for Purposes of Determining
    an Appropriate and Reasonable Surrogate for Purposes of Section 772(e) 
    of the Act. 
15. Related-party Transactions and Failure to Examine Documents at
    Verification 
16. Calculation of Export Price (EP) for Use as a Surrogate Price Under
    Section 772(e) of the Act 
17. Application of Special Rule for Merchandise with Value Added after
    Importation (Special Rule) in Margin Program 
18. Calculation of Home Market Imputed Credit Expenses 
19. Constructed Export Price (CEP) Profit 

Rima Industrial S/A (Rima)

20. Major Input Rule 
21. General and Administrative (G&A) Expenses 
22. Net Financial Expenses 
23. ICMS, IPI and Constructed Value (CV) 
24. CV Profit 
25. Currency 
26. Home Market Selling Expenses 
27. Commercial Quantities 
28. Unreviewed and Intervening Years 
29. Aggregate Sales and Commercial Quantities 
30. Impermissible Rule Making and Violation of the Administrative
Procedures
    Act (APA) with Respect to Commercial Quantities 

Rima and CBCC

31. Home Market Imputed Credit Expenses and ICMS Taxes 
32. Conversion of U.S. Packing Cost 


Background

On August 6, 2001, the Department of Commerce (the Department) published
the preliminary results of administrative review of the AD order on 
silicon metal from Brazil. See, Preliminary Results of Antidumping Duty
Administrative Review and Notice of Intent Not To Revoke Order in Part, 66
FR 40980 (August 6, 2001). The review covers four manufacturers, CBCC,
Ligas de Aluminio S.A. (LIASA), Rima and Minasligas. The period of review
(POR) is July 1, 1999, through June 30, 2000. We invited parties to
comment on our preliminary results of review. On October 29, 2001, we
scheduled two rounds of briefing; the first phase to address all general
issues and the second phase to address CBCC's further-manufactured U.S.
sales. On November 21, 2001, we received case briefs from American Silicon
Technologies and Elkem Metals Company (collectively petitioners), and from
Minasligas, CBCC and Rima (collectively respondents, who filed a joint
case brief). On December 4, 2001, we received rebuttal briefs from the
petitioners and Minasligas, CBCC and Rima. On December 31, 2001, we
received a case brief from petitioners concerning CBCC's further-
manufactured U.S. sales. On January 10, 2001, we received a rebuttal brief
from CBCC. In response to comments submitted by petitioners regarding
CBCC's possible affiliation with one of its customers, we issued a series
of supplemental questionnaires to CBCC regarding this issue on January 2,
January 28, and January 29 of 2002. In addition, the Department met with
petitioners twice to discuss this issue and participated in a conference
call and meeting with representatives of CBCC and Dow Corning Corporation
(Dow). See, Memorandum to the File through Thomas Futtner from Maisha
Cryor; 1999-2000 Administrative Review of Silicon Metal from Brazil-
Conference Call with Companhia Carbureto de Calcio's (CBCC) Counsel, dated
January 22, 2002; Memorandum to the File from Thomas Futtner; Silicon
Metal from Brazil: 1999-2000 Administrative Review-Meeting with
Petitioners' Counsels, dated January 24, 2002; Memorandum to the File
through Thomas Futtner from Maisha Cryor; Silicon Metal from Brazil: 1999-
2000 Administrative Review-Meeting with Petitioners' Counsels, dated
January 24, 2002; Memorandum to the File through Thomas Futtner from
Maisha Cryor; Antidumping Duty Administrative Review of Silicon Metal From
Brazil; Meeting with Counsel for Companhia Brasileira Carbureto de Calcio
and Representatives of Dow Corning, dated January 28, 2002. A public
hearing was not held in this proceeding.

The Department has conducted this administrative review in accordance
with section 751 of the Tariff Act of 1930, as amended (the Act).


Changes Since the Preliminary Results

Since the preliminary results, we have made the following changes in our
calculations.

1.  We recalculated Minasligas' home market imputed credit expense using a
    corrected formula. 

2.  We corrected the conversion of Minasligas' U.S. inland freight
expense. 

3.  We recalculated Minasligas' imputed U.S credit expense using the date 
    of liquidation as the date of payment. 

4.  We recalculated Minasligas' home market imputed credit expense using 
    a surrogate interest rate. 

5.  We set Minasligas' negative credit expenses equal to zero. 

6.  We recalculated the financial expense ratio in CBCC's cost of
production
    (COP) using total financial expenses without any reduction for
"financial
    income." 

7.  We included interest revenue in the calculation of CBCC's net home
market
    price. 

8.  We corrected the margin program to properly calculate CBCC's margin
    pursuant to the special rule. 

9.  We recalculated CBCC's home market credit expense using a surrogate
    interest rate. 

10. We recalculated CBCC's home market credit expense using the date of
    shipment from the factory as the date of shipment. 

11. We recalculated Rima's G&A expense ratio using its G&A expenses and
    annual cost of goods sold (COGS) from its financial statements. 

12. We recalculated Rima's financial expense ratio using its financial
    expenses and COGS as reported on its financial statements. 

13. We recalculated Rima's CV to include an amount for profit. 

14. We converted Rima's gross unit price into the proper currency to
    calculate net U.S. price (USP). 

15. We recalculated Rima's home market selling expenses to divide by total
    cost. 

16. We converted CBCC and Rima's U.S. packing costs into U.S. dollars. 

17. We recalculated LIASA's home market credit expense using a surrogate
    interest rate. 


Discussion of the Issues

Minasligas

Comment 1: Short-Term Interest Rate

Petitioners argue that Minasligas failed to substantiate the short-term
nature of its reported interest rate. Consequently, petitioners contend
that the Department, in the preliminary results, should not have used the
reported interest rate to calculate Minasligas' home market imputed credit
expense. Petitioners claim that the Department's use of the reported
interest rate understated Minasligas' normal value (NV). Citing Import
Administration Policy Bulletin 98.2 (February 23, 1998) (Policy Bulletin
98.2), petitioners argue that when, as is the case with Minasligas, a
respondent has no short-term borrowings in the currency of the sales
transactions, the Department calculates home market imputed credit
expenses "using publicly available information, with a preference for
published average short-term lending rates." Petitioners assert that, in
accordance with the Notice of Final Results of Antidumping Duty
Administrative Review: Ferrosilicon from Brazil, 62 FR 43,504, 43,509
(August 14, 1997) (Ferrosilicon from Brazil), when no home market short-
term borrowing rates are available in Brazil, the Department uses the
Brazilian taxa referencial (TR) rate to calculate home market imputed
credit expenses. Petitioners claim that the Department has found the TR
rate to be a "benchmark comparable to a prime rate published by the Bank
of Brazil" and argues that, for the final results, the Department should
recalculate Minasligas' home market credit expenses accordingly. Id. 

Minasligas disagrees with the petitioners and argues that the Department
should continue to calculate its home market imputed credit expense using
its reported interest rate. Minasligas argues that its reported rate
represents the cost, as determined by Minasligas, of extending credit for
each home market sales transaction. In addition, Minasligas claims that
the reported interest rate is similar to other benchmark indicators, such
as the rates contained in a report prepared by the International Monetary
Fund (IMF). See, Respondents' Case Brief at 8. 

Minasligas argues that if the Department decides not to utilize
Minasligas' reported interest rate to calculate home market imputed credit
expenses, it should not choose the TR rate as an alternative. Minasligas
claims that the TR rate is not a short-term rate realized by borrowers in
the course of usual commercial behavior, but rather it is a mechanism
similar to an inflation index; therefore, it is inconsistent with
commercial short-term interest rates in Brazil. See, Respondent's Case
Brief at 9-14. Minasligas argues that if the Department rejects its
reported interest rate, the Department should select a surrogate rate that
represents a commercial short-term rate in Brazil and one that exceeds the
inter-bank or Discount Rate reported in the IMF publication. See,
Submission of Factual Information at Exhibit E, citing International
Financial Statistics as reported in the International Monetary Fund, dated
January 22, 2001.

Department's Position:

We agree with the petitioners in part. Minasligas had no short-term
borrowings in the home market during the POR. In its questionnaire
response, Minasligas stated that its reported interest rate "is the 
one that is determined by Minasligas as being reasonable for negotiating 
the price with customers, on a case-by-case basis." However, Minasligas 
provided no evidence demonstrating that the rate was reflective of the 
short-term lending rates in effect in Brazil during the POR. In addition, 
Minasligas provided no evidence of the source of its reported rate or 
documentation of how it calculated the rate. Therefore, for the final 
results, we will use a surrogate rate to calculate Minasligas' home 
market imputed credit expense. 

Petitioners argue that the Department should use the TR rate to
recalculate Minasligas' home market credit expense, as it has in other
proceedings involving Brazil. See, Ferrosilicon from Brazil, 62 FR 43504,
43509 (August 14, 1997). While the Department does not dispute
petitioners' contention that the TR rate has been used in a number of
Brazilian AD proceedings, that use was based on the facts and arguments
raised in those cases. In the instant case, Minasligas and CBCC (See,
Comment 11 below, regarding the calculation of CBCC's home market imputed
credit expenses), assert that the Department must test whether the TR rate
is reflective of usual commercial behavior for short-term borrowings in
the home market for this review segment.

In LMI-La Metalli Industriale, S.p.A. v. United States, 912 F.2d 455, 460-
461 (Fed. Cir.1990) (LMI), the court ruled that credit cost should conform
with commercial reality and be based on reasonable and commercial
behavior. In cases where a respondent has no short-term borrowings in the
currency of the transaction, the Department will use publicly available
information to establish a short-term interest rate applicable to the
currency of the transaction. According to Policy Bulletin 98.2, the
Department will use a publicly available surrogate interest rate once such
a rate has met three criteria: (1) the rate is reasonable; (2) the rate is
readily obtainable and predictable; and (3) the rate is representative of
"usual commercial behavior." Therefore, the question in this review
segment is which interest rate best meets these criteria as several
respondents in this review period do not have actual short-term borrowings
that the Department can use to impute the respondents'credit expenses. 

The TR rate was created as part of Brazil's inflation stabilization
efforts in the early to mid-1990s. See, Memorandum to The File through
Thomas F. Futtner from Maisha Cryor; Brazilian Interest Rates, dated
February 4, 2002 (Interest Rate Memo), at Attachment II, Brazil: Guide to
Local Fixed Income Markets, Credit Suisse/First Boston Garantia, May 2000.
(Brazil Guide). It is a reference rate for the inflation built into
nominal market interest rates. It was used as a means of determining the
real interest rate, or the nominal interest rate minus inflation. Today,
the main use of the TR rate is as the basic rate for the Brazilian Savings
and Loan System. It is the index for savings accounts, which yield the TR
rate plus a certain percentage. The TR rate is published by the Central
Bank of Brazil on a daily basis. 

To determine if the TR rate can be used as a surrogate for short-term
interest rates in the Brazilian home market, we must review it against the
three criteria outlined in the Department's Policy Bulletin. This 
analysis demonstrates that it is not reasonable to use the TR rate 
as a surrogate interest rate for short-term commercial borrowings 
in this review. As stated above, the TR rate is not an interest rate 
but a reference rate to correct nominal interest rates for inflation.
Various interest rates may be described using the TR rate plus an
appropriate amount. For example, savings rates in Brazil are calculated
using the TR rate plus a certain percentage. As such, the TR rate is not a
stand-alone rate, but is meant to be used in conjunction with other
interest rates. Moreover, when compared to other interest rates on the
record, including those based on actual short-term borrowings in the home
market, the TR rate is well below the range of the other nominal interest
rates. Significantly, the TR rate is much lower than the only reported
interest rate that the Department has on record from a respondent (i.e.,
RIMA's actual short-term borrowing interest rate). Comparing the TR rate
of 2.83% to other commercial rates on the record (see below), the TR rate
is one-ninth of the size of rates from "International Financial
Statistics" published by the International Monetary Fund (IMF) on the
record for the POR. See, Interest Rate Memo. Moreover, the TR rate is not
an interest rate with the same characteristics as nominal rates. This fact
makes it very unlikely that companies would be able to borrow money with
an interest rate identical or similar to the TR rate. As a consequence,
while the TR rate is readily available and published daily by the Central
Bank of Brazil, it would not be reasonable to use it in this review as a
surrogate for a short-term commercial borrowing rate in Brazil.

As an alternative, we reviewed several other interest rates used in the
Brazilian financial system that have been referenced in documents placed
in the record of this review. See, Interest Rate Memo. The Special
Clearance and Custody System (SELIC) interest rate is the primary interest
rate of the Brazilian economy. It is based on the purchase and sale of
public debt securities registered in the SELIC system. The SELIC rate is
published daily, in annualized form, and represents the weighted average
of rates at which public sector securities were traded. There is also
mention of a Discount Rate, which according to the IMF publication, is the
bank rate charged by the Central Bank of Brazil on non-collateralized
loans between financial institutions. In addition, the IMF publication
reports the effective yields on Treasury Bills of 31 days or longer. 


Minasligas argues that the Department should select a surrogate rate that
exceeds the inter-bank or Discount Rate reported in the IMF publication.
In essence, Minasligas asserts that commercial short-term borrowing rates
in Brazil are higher than the average rates published by the IMF. However,
it would not be possible for the Department to determine the actual cost
of short-term borrowings for a given company since so many factors must be
considered. Where a respondent has no short-term borrowings, we look
instead for a reasonable benchmark to approximate short-term interest
rates for the calculation of imputed credit.

We note that the Discount Rate or interbank rate is based on "non-
collateralized loans to financial institutions." We believe the SELIC 
rate is preferable to this rate and Treasury Bill yields for 
purposes of imputing credit expenses for respondent companies in Brazil. 
The SELIC rate is described as a "short-term" interest rate and the 
"primary interest rate" in Brazil's financial system. See, Interest
Rate Memo. Furthermore, the IMF publication refers to the SELIC rate as 
a "money market" rate, which suggests that it is derived from a
comprehensive market for short-term debt instruments. Additionally, the
SELIC rate satisfies Policy Bulletin 98.2's three criteria: it is
reasonable; it is readily obtainable and predictable; and it can be said
to be representative of usual commercial behavior. While this issue may
require further examination in future reviews, the Department is adopting
the SELIC rate in the instant review as a reasonable surrogate for the
short-term interest rate for commercial borrowings in the home market. 

Comment 2: ACCs and Payment Dates

Petitioners argue that, in the preliminary results, the Department should
not have used payment dates reported by Minasligas in its U.S. sales
listing to calculate U.S. imputed credit expenses. Petitioners state that
the payment dates provided by Minasligas were the dates that Minasligas
entered into and received payment from a Brazilian bank on the ACCs used
to finance its export sales. In past reviews of silicon metal and
ferrosilicon from Brazil, petitioners argue that the Department calculated
imputed credit expenses for the period between the date of shipment from
the plant and the date of payment by the customer. See, Final Results of
Antidumping Duty Administrative Review: Silicon Metal from Brazil, 63 FR
6899, 6908 (February 11, 1998) (Silicon Metal from Brazil (1995-96
Administrative Review). Petitioners argue that the Department calculated
credit in this manner, because it found that the ACCs were not directly
tied to specific export sales at the time the ACC was opened, and
therefore, the advance resulting from the ACC did not represent prepayment
for a specific export sale. See, Silicon Metal from Brazil: Preliminary
Results of Antidumping Duty Administrative Review and Notice of Intent Not
to Revoke Order in Part, 65 FR 47,960, 47,965(August 4, 2000) (1998-1999
Preliminary Results)(no change on this issue in final results); Silicon
Metal from Brazil: Preliminary Results of Antidumping Duty Administrative
Review, 63 FR 42,001, 42,003 (August 6, 1998) (1996-1997 Preliminary
Results)(no change on this issue in final results); Silicon Metal from
Brazil (1995-96 Administrative Review), 63 FR at 6908; Ferrosilicon from
Brazil, 62 FR at 43504. Petitioners claim that many of Minasligas' ACCs
were inconsistent with the reported invoice and shipment dates, and that
the total amounts of individual ACCs did not correspond to the amounts of
the U.S. sales being financed. Petitioners argue that these
inconsistencies demonstrate that there is not a direct link between
Minasligas'ACCs and its U.S. sales. Therefore, for the final results, and
as an alternative to the date of the ACCs, petitioners assert that the
Department should use the liquidation date of the ACCs to recalculate
Minasligas' U.S. imputed credit expense. 

Minasligas argues that, for the final results, the Department should
continue to calculate its U.S. imputed credit expenses using the dates of
its ACCs as payment date. Minasligas asserts that use of the ACC date is
proper because it is the date on which Minasligas no longer incurs the 
opportunity cost of money. Further, Minasligas claims that, in its
questionnaire response, it demonstrated the link between its ACCs and its
U.S sales transactions. Minasligas claims that this link is established
through the sales documentation that Minasligas is required to present to
the bank before receiving ACC payment. Minasligas argues that this
procedure ensures that each sale is directly tied to the ACC at issue.
Minasligas claims that the fact that the date and the amount of the ACCs
differ from the individual sales transactions does not mean that the sale
is not directly related to the ACC because Minasligas received payment for
each sales transaction presented to the bank. In addition, Minasligas
claims that it incurs an interest charge to the bank for the period during
which the ACC is outstanding and argues that to calculate a credit expense
for that period would double-count its cost of money. 

Department's Position:

We agree with petitioners. Although we are persuaded that Minasligas' has
tied its U.S sales to its ACCs, the issue here is whether, at the time the
ACC was opened, the advance funds resulting from the ACC represent
prepayment for a specific export sale. Based on the record of this review
segment, we found that as of the date an ACC is opened with a bank, no tie
exists between an ACC and specific export sales. The link between the ACC
and sale does not occur until respondent makes the sale and presents the
issuing bank with the export documentation for the sale. In Ferrosilicon
from Brazil, the Department addressed the ACC program and found that ACCs
are not directly tied to specific export sales at the time the ACC is
opened; the Department, therefore, noted that the advance resulting from
the ACC did not represent prepayment for an export sale. Similarly, for
purposes of the final results of this review, we find that the ACC bank
loans are not directly related to the U.S. sales. As a result, for the
final results, we have used the date that the U.S. customer pays the bank
as the date of payment to calculate Minasligas' U.S. credit expense.

Comment 3: Duty Drawback

Petitioners argue that Minasligas should not receive a duty-drawback
adjustment because Minasligas failed to prove that it did not pay duties
and taxes on its purchases of imported electrodes used to produce silicon
metal for export. Petitioners argue that under section 772(c)(1)(B) of the
Act, the U.S. price is only adjusted upwards if the payment of duties and
taxes is suspended (i.e., rebated or not collected) on imported
merchandise used to produce exported merchandise. In addition,
petitioners, citing Notice of Final Determination of Sales at Less Than
Fair Value; Certain Cold-Rolled Flat-Rolled Carbon-Quality Steel Products
from Turkey, 65 FR 15123,15124 (March 21, 2000) and accompanying Decision
Memorandum at Comment 2, argue that Minasligas failed to satisfy the two-
pronged test used by the Department to determine whether a respondent has
fulfilled the statutory requirements for a duty-drawback adjustment.
Petitioners state that under the Department's test, a respondent must
demonstrate that (1) an exemption from import duties is linked to
exportation of the subject merchandise and (2) the respondent imported 
a sufficient amount of raw materials to account for the level of duty 
drawback received for the exported product. 

Petitioners argue that Minasligas failed to satisfy the first prong of
the Department's test because Minasligas only provided general information
regarding electrode purchases during the POR and the duties paid on those
imported purchases. Petitioners argue that the documentation provided by
Minasligas did not relate to specific importations and did not identify
the imported inputs on which the duties and taxes were either paid and
rebated or not collected. Therefore, the petitioners argue that Minasligas
did not demonstrate the necessary link between exemption from import
duties and the exportation of subject merchandise. Petitioners also argue
that Minasligas failed to satisfy the second prong of the Department's
test because Minasligas failed to provide documentation proving that it
imported a sufficient amount of raw materials to account for the level of
duty drawback claimed on the exported product. Further, petitioners argue
that this instant POR is distinguished from the eighth review (the 1998-
1999 POR), where the Department allowed Minasligas' duty-drawback
adjustment, because Department officials were able to examine all
"drawback proving reports" at verification.

In addition, petitioners argue that Minasligas failed to demonstrate that
it paid import duties on silicon metal sold in the home market during the
POR. Petitioners state that Minasligas provided no documentation to show
that the silicon metal it sold in the home market during the POR was made
using electrodes on which it paid duties. 

Further, petitioners argue that Minasligas' calculation of its duty-
drawback adjustment resulted in a hypothetical amount of duty drawback for
each MT of silicon metal produced during the POR. Petitioners state that
Minasligas did not demonstrate the actual amount of import duties
suspended, but rather assumed that import duties were suspended on all
electrodes used to produce the exported product. Once again, petitioners
argue that in the eighth review, the adjustment was calculated using the
actual suspended import duties because the Department examined a complete
set of import documents at verification. 

Minasligas argues that the Department should continue to grant it a duty-
drawback adjustment. Minasligas claims that the documents it provided in
this instant review satisfy both prongs of the Department's test and, in
fact, mirror the information provided and found to be sufficient in the
eighth review. Minasligas states that because of the large volume of
documents pertaining to duty drawback, it only provided copies, as
requested by the Department, of a few examples of the information related
to duty drawback. Moreover, Minasligas argues that it should not be
penalized for the Department's decision not to conduct verification,
wherein the Department would have had full access to the relevant
documents. In the eighth review, Minasligas states, the Department
verified and found Minasligas's duty-drawback adjustment to be warranted.
Minasligas argues that the petitioners have provided no new information to
compel the Department to change its stance regarding Minasligas' duty-
drawback adjustment. 

Minasligas argues that because it was fully verified in the eighth
review, it should be accorded a measure of reliability based on its good
faith and continue to receive a duty-drawback adjustment for the final
results.

Department's Position:

We agree with Minasligas. In the final results of the previous
administrative review, the Department verified and found that Minasligas'
claimed duty-drawback adjustment was warranted. See, 1998-1999 Preliminary
Results, 65 FR at 47965 (no change in the final results); Silicon Metal
from Brazil: Final Results of Antidumping Duty Administrative Review and
Notice of Intent Not To Revoke in Part, 66 FR 11256 (February 23, 2001)
(Silicon Metal from Brazil (1998-1999 Administrative Review)). In the
instant review, we requested that Minasligas provide the Department with
samples of documentation related to its duty drawback. Although we chose
not to verify Minasligas' response, we found that the sampling of
information provided was properly responsive to our request and was
consistent with the verified information provided in the previous review
of silicon metal. Moreover, we find that Minasligas' calculation of duty
drawback does not result in a hypothetical amount of claimed duty
drawback. As stated previously, we requested sample documentation from
Minasligas of information related to its duty drawback. The purpose of
requesting the sampling of information was to provide a basis for the
actual amount of duty drawback claimed. The fact that Minasligas did not
provide documentation to support every factor of its claimed duty drawback
amount does not mean that the figures are hypothetical. In addition,
although not as detailed as the information provided to the Department at
verification during the previous review, we find that the record evidence
in this instant review satisfies both prongs of the Department's test.
Minasligas satisfied the first prong of the Department's test by providing
evidence demonstrating the link between the importation of electrodes and
evidence of exportation of the subject merchandise. Minasligas satisfied
the second prong of the Department's test by providing documentation
demonstrating that it imported a sufficient amount of electrodes to
account for the level of duty drawback received. Although, as noted by
petitioners, Minasligas did not provide documentation accounting for
importation of all electrodes during the POR, or information establishing
a link between the importation of all electrodes and exportation of all
subject merchandise, the information provided was sufficient in light of
the fact that Minasligas was not verified in this POR. Further, the
information satisfied our specific request for a sampling of documentation
related to this issue. In addition, contrary to petitioners' arguments,
Minasligas did provide evidence demonstrating that it paid import duties
on silicon metal sold in the home market during the POR. Therefore, we
find the record evidence presented by Minasligas to be sufficient and will
continue to allow the duty-drawback adjustment for the final results.

Comment 4: Offset to Financial Expense

Petitioners argue that the Department should recalculate Minasligas' net
financial expense factor to exclude "financial income from applications" 
because Minasligas failed to demonstrate that such income was short-term 
income from investment of working capital. Petitioners, citing Silicon 
Metal from Brazil (1993-1994 Administrative Review), 62 FR at 1974, state 
that the Department's practice is to allow financial expense to be offset 
only by interest income from short-term investment of working capital. 
Petitioners state that, in accordance with past reviews of silicon metal 
and the Court of International Trade (CIT), the respondent has the burden
of
establishing the right to an adjustment, and if the respondent fails to do
so, the Department disregards the claimed offsets. Id. at 1693; NSK Ltd.
v. United States, 19 CIT 1013, 1030, 896 F. Supp. 1263, 1277 (Ct. Int'l
Trade 1995)(NSK). Petitioners argue that Minasligas provided no evidence
to show that it is entitled to offset its financial expenses with
"financial income from applications" or a description of this offset. The
petitioners state that in the 1994-1995 administrative review of this
proceeding, the Department did not allow an offset for "income from short-
term applications" because in the verification report of the preceding
review, verifiers found that "financial applications" referred to
compensation for inflation." Therefore, petitioners argue that the
Department should deny Minasligas an offset to financial expense for
"financial income from applications."

Minasligas argues that its ratio of short-term financial income to
financial expense has remained virtually unchanged since the previous
review. In the previous review, Minasligas states that the Department
fully verified Minasligas' "financial income from applications" and found
that it was derived from short-term investments of working capital. See,
Silicon Metal from Brazil (1998-1999 Administrative Review) and
accompanying Minasligas Verification Report at 14 (July 31, 2000).
Minasligas states that it has provided the same information in this
instant review as it provided in the preceding eighth review. In addition,
Minasligas argues that its financial statements were audited by an outside
party, thereby confirming the accuracy of the information contained
therein. Minasligas argues that it should not be penalized for the
Department's decision not to verify and that the Department should
continue to offset Minasligas' financial expense by its short-term income. 

Department's Position:

We agree with Minasligas. In calculating COP and CV, it is the
Department's practice to allow a respondent to offset (i.e., reduce)
financial expenses with short-term interest income earned from the general
operations of the company. See, Timken v. United States, 852 F. Supp.
1040, 1048 (CIT 1994) ("Timken"). We note that Minasligas was not verified
in this instant review. However, in the verification of Minasligas in the
1998-1999 POR, the Department found that Minasligas' "financial income
from applications" was short-term interest income. See, Silicon Metal from
Brazil (1998-1999 Administrative Review) and accompanying Minasligas
Verification Report at 14 (July 31, 2000). Petitioners have not presented
the Department with any facts relating to the financial expense, nor 
with any change between the previous review and this review to warrant 
not allowing the offset to Minasligas' financial expense. Given the fact 
that Minasligas was verified in the previous review, the financial income 
in question was found to be short-term interest income, and petitioners 
have presented no evidence to demonstrate a significant change in the 
general operations of Minasligas, we are continuing to grant the offset 
in the final results of this review. 

Comment 5: Calculation of Home Market Imputed Credit Expense

Petitioners argue that the Department used an erroneous formula to
recalculate Minasligas' home market credit expense. Petitioners state that
this overstated Minasligas' home market imputed credit expense and
understated NV. Petitioners request that the Department make this
correction for the final results.

Minasligas did not comment on this issue.

Department's Position:

The Department agrees that, for the preliminary results, we incorrectly
recalculated Minasligas' home market imputed credit expense. However, we
note one minor exception to petitioners' argument. In their case brief,
petitioners note that the Department assigned a negative value to the
interest rate used in the recalculation of Minasligas' interest expense.
After a careful review of the record, we find that petitioners are
incorrect in this respect. However, we have corrected the formula used to
calculate Minasligas' home market imputed credit expense for the final
results.

Comment 6: Double Conversion of Inland Freight

Petitioners argue that the Department multiplied Minasligas' inland
freight expense from the plant to the port of exportation by the exchange
rate twice in the margin program. Petitioners claim that this understated
inland freight and ultimately understated the dumping margin. Petitioners
request that the Department correct this matter for the final results.

Minasligas did not comment on this issue.

Department's Position: 

The Department agrees that we made this error and have corrected it in
these final results. 

Comment 7: COS Adjustment for PIS/COFINS Taxes 

Minasligas contends that the Department's failure to deduct PIS and
COFINS taxes from NV caused a faulty price comparison with USP because the
taxes are paid on home market sales, but not on U.S sales. Minasligas
asserts that the Department should account for this difference in the
final results and make a COS adjustment for these taxes, as directed by
section 773(a)(6)(C)(iii) of the Act. Minasligas asserts that the
Brazilian PIS and COFINS taxes are imposed on gross sales revenue from the
sales of products produced and sold in the domestic market. Further,
Minasligas contends these taxes are not imposed on the sale of assets,
interest revenue, export revenue or miscellaneous income. Therefore,
Minasligas claims that the PIS and COFINS taxes were imposed on its
domestic sales of silicon metal and are tied directly to those sales.

Minasligas, citing Silicon Metal from Brazil: Notice of Final Results of
Antidumping Duty Administrative Review, 64 FR 6305, 6314 (February 9,
1999)(Silicon Metal from Brazil (1996-1997 Administrative Review), asserts
that the Department only declined to make an adjustment for these taxes in
a previous segment of this proceeding, because the Department found that
Minasligas failed to demonstrate that the taxes were directly tied to
silicon metal sales. Minasligas contends that, in this instant review, it
has provided evidence linking the taxes to silicon metal sales and they
should be considered as a COS adjustment for the final results. 

The petitioners assert that the Department was correct in not reducing NV
by an amount for PIS and COFINS taxes. The petitioners argue that under
section 773(a)(6)(B)(iii) of the Act, NV may only be reduced by taxes
imposed on the "foreign like product or components thereof.'' The
petitioners contend that this language is identical to that of section
772(d)(1)(C) of the Act, the parallel provision in effect prior to the
enactment of the Uruguay Round Agreements Act (URAA), which the
petitioners claim provides for an upward adjustment to the U.S price only
through demonstration of a direct relationship between the tax and the
product. See, e.g., American Alloys, Inc. v. United States, 30 F.3d 1469,
1473 (Fed. Cir. 1994). The petitioners cite several prior determinations
in this case as well as Ferrosilicon from Brazil and Silicon Metal from
Argentina where, the petitioners contend, the Department found that the
relevant taxes are not imposed directly on the merchandise or components
thereof, and thus do not warrant an adjustment to U.S price. 

Further, petitioners contend that the evidence presented by Minasligas in
this review does not demonstrate that the PIS and COFINS taxes are imposed
only when a home market sale is made. Instead, petitioners claim that the
evidence shows that the taxes are assessed on gross domestic sales revenue
and other forms of revenue. Petitioners argue that the URAA Statement of
Administrative Action (SAA) makes clear that the type of taxes which
warrant adjustment under section 773(a)(6)(B)(iii) of the Act are home
market consumption taxes. See, Agreement on Implementation of Article VI
of General Agreement on Tariffs and Trade (GATT), SAA, 807, 827, reprinted
in 1994 U.S.C.C.A.N. 4040, 4166 (emphasis added). Petitioners state that
consumption taxes are paid by the consumer on specific sales transactions,
while the PIS and COFINS taxes are revenue taxes paid by the seller. The 
petitioners contend that this difference clearly demonstrates that PIS and 
COFINS taxes are not consumption taxes. Therefore, the petitioners
conclude 
that the Department should not make an adjustment to NV for these taxes in 
the final results.

Department's Position: 

We agree with the petitioners. Despite its contention to the contrary,
Minasligas has not provided sufficient documentation to support its claim
that the Department has erred in its conclusion that the PIS and COFINS
taxes are taxes on gross revenue exclusive of export revenue and, thus,
are not imposed specifically on the merchandise or components thereof.
Therefore, in accordance with our consistent practice with respect to
these taxes, we have determined for these final results that, because
these taxes cannot be tied directly to silicon metal sales, we have no
statutory basis to deduct them from NV. See, Certain Cut-To-Length Carbon
Steel Plate From Brazil: Final Results of Antidumping Duty Administrative
Review 63 FR 12744, 12746 (March 16, 1998). We note that the Department is
reviewing its practice on this issue in the context of other cases and may
change its practice after such review.

Comment 8: Duty Drawback and ICMS and IPI Taxes

Minasligas argues that, when recalculating Minasligas' duty-drawback
adjustment in the preliminary results, the Department failed to include
the amount of IPI and ICMS taxes suspended for imports of materials used
in the manufacture of exported goods. Minasligas asserts that the
Department should account for these taxes in the duty-drawback adjustment
for the final results.

Petitioners argue that the Department correctly excluded IPI and ICMS
taxes from its recalculation of duty drawback because the Department's
dumping margin was intended to be tax neutral. Petitioners claim that
allowing a drawback claim for IPI and ICMS taxes would unfairly introduce
these taxes into the U.S side of the dumping margin equation when they
were specifically excluded from the home market side. Moreover, citing
Certain Welded Carbon Steel Pipe and Tube from Turkey: Preliminary Results
of Antidumping Duty Administrative Review, 62 FR 26,286, 26,287 (May 13,
1997) (Carbon Steel Pipe and Tube from Turkey), petitioners assert that
the Department, in past cases, has found that no statutory authority
exists to allow a VAT drawback. Thus, petitioners state that the
Department properly denied Minasligas' claim for a duty-drawback
adjustment for IPI and ICMS taxes.

Department's Position: 

We agree with petitioners. In the preliminary results, we intentionally
excluded the amount of ICMS and IPI taxes for the drawback adjustment. 
Specifically, we stated that "[w]e recalculated Minasligas' duty-drawback 
adjustment. We excluded all ICMS and IPI taxes from the duty-drawback 
adjustment because we compared U.S sales to home market sales on an ICMS 
and IPI exclusive basis. We included in the duty-drawback adjustment all 
import duties forgiven by the Brazilian government." See, Memorandum to
The 
File through Thomas F. Futtner from Maisha Cryor: Calculation Memorandum
for 
the Preliminary Determination of the 1999-2000 Administrative Review of the
Antidumping Duty Order on Silicon Metal from Brazil for Companhia
Ferroligas Minas Gerais (Minasligas), July 31, 2001. We note that section
772(c)(1)(B) of the Act states that EP will be increased by "the amount of
any import duties imposed by the country of exportation which have been
rebated, or which have not been collected, by reason of the exportation of
the subject merchandise to the United States." Further, as stated in
Carbon Steel Pipe and Tube from Turkey, the statute makes no provision for
an adjustment for value-added taxes, such as IPI and ICMS. See, Carbon
Steel Pip e and Tube from Turkey, 62 FR at 26,287. Therefore, for the
final results, we made an adjustment for duty drawback, and we have
continued to exclude IPI and ICMS taxes from the adjustment.

CBCC

Comment 9: Shipment Date

Petitioners argue that, for the final results, the Department should use
adverse facts available (AFA) to recalculate CBCC's U.S credit expense.
Petitioners argue that after two requests from the Department to confirm
that its reported shipment date was the date from the factory to the
customer, CBCC continued to report the bill of lading date as the shipment
date. Petitioners, citing Notice of Final Determination of Sales at Less
Than Fair Value; Certain Hot-Rolled Flat-Rolled Carbon-Quality Steel
Products from Brazil, 64 FR 38756, 38773 (July 19, 1999) (Hot-Rolled Flat-
Rolled from Brazil), claim that this date is contrary to the Department's
established practice of using the period between date of shipment from the
factory and payment date by the customer to calculate imputed credit
expense. Petitioners argue that the use of the bill of lading as the
shipment date understates the imputed credit expenses. 

Petitioners assert that, for the final results, the Department should
resort to adverse facts available (AFA) to calculate CBCC's U.S credit
expense for the following reasons: 1) CBCC failed to report the proper
shipment date after two specific requests by the Department and 2) the
record in this proceeding does not contain the shipment dates from the
factory for each of CBCC's U.S sales. 

CBCC argues that the bill of lading date is the proper shipment date
because it is the same date as the commercial invoice and it is the date
on which CBCC no longer owns the merchandise. CBCC claims that its
shipments to the United States begin with small truck lots to the port,
wherein a nota fiscal is issued with each shipment from the factory.
However, CBCC states that the shipment from the factory to the port should 
be considered an internal movement because the sale is not final until the
entire quantity of shipment is at the port with a confirmed shipping
vessel. CBCC argues that because the cost incurred by CBCC during this
period is fully captured by its inventory carrying costs, using a shipment
date other than the bill of lading date would double count the credit
expense during the time the merchandise is transported from the factory to
the port.

CBCC argues that AFA is not warranted because 1) the information
necessary to determine shipment date is on the record, 2) CBCC did not
withhold information, and 3) it provided shipment dates in a timely manner
in compliance with the Department's request. CBCC states that if the
Department rejects the bill of lading date as the shipment date, it should
use the dates of the nota fiscals, which are on record in the verification
exhibits, as an alternative.

Department's Position:

We agree with petitioners. It is the Department's longstanding policy
when calculating imputed credit to use the date of shipment from the
factory. Id. In the instant case, the Department twice requested, on
August 14, 2000 and January 2, 2001, that CBCC confirm that its reported
date of shipment was the date of shipment from the factory. Pursuant to
section 776(a)(2)(B) of the Act, CBCC failed to provide the date of
shipment from the factory of the subject merchandise by the deadline
requested by the Department. CBCC, pursuant to section 782(c)(1),
suggested that the Department use an average of the dates of the nota
fiscals, on the record as verification exhibits, as an alternative form by
which it could submit the requested information. 

Pursuant to section 782(e), we decline to use the alternate information
(the nota fiscals) as suggested by CBCC. A nota fiscal for one sale cannot
serve as a reliable basis for establishing the date the subject
merchandise for another sale was shipped from the factory. The number of
nota fiscals provided by CBCC was less than half of the number of export
sales during the POR. Further, the information submitted by CBCC cannot be
used without undue difficulty because it only applies to less than half
the sales during the POR. Since the nota fiscals only cover a minority of
the sales, they do not even form the basis for a making a reasonable
estimation of the ex-factory date for the sales without a corresponding
nota fiscal. 

Accordingly, we find that the use of facts available is warranted
pursuant to section 776(a)(2)(B) of the Act.

For this information, CBCC twice refused to provide the information
requested by the Department, namely the date of ex-factory shipment fo the
subject merchandise. CBCC demonstrated that it knew that certain documents
were issued upon ex-factory shipment, namely, nota fiscals, and that these
might assist the Department in determining the ex-factory date. 

However, CBCC failed to provide such documents for all the sales at
issue, despite the Department's repeated requests for such information.
Further, CBCC is a long-time respondent in this proceeding. 

Accordingly, we determine that pursuant to section 776(b) of the Act,
CBCC failed to cooperate to the best of its ability and that adverse
inferences are warranted on this issue. Therefore, for the final results,
we will apply the longest period of time between the date of shipment from
the factory and the bill of lading date to CBCC's date of shipment for
those sales without a corresponding nota fiscal. 

Since we are using information from the record to establish a surrogate
ex-factory date, it need not be corroborated pursuant to section 776(c) of
the Act.


Comment 10: Consolidated Financial Statement

The petitioners argue that because the POR straddles two accounting
periods, i.e.,1999 and 2000, the Department should have calculated the
financial expense ratio based on both periods in the preliminary results.
For the preliminary results, the Department based CBCC's financial expense
ratio on its 1999 consolidated financial statements. Petitioners state
that in the 1995-1996 segment of this proceeding, the Department
recalculated Rima's financial expense ratio using the company's net
financial expenses for both 1995 and 1996.

In response, CBCC claims that the Department was correct in applying a
single whole year rather than trying to combine two different accounting
periods when calculating a financial expense ratio. According to CBCC,
such a combination of two periods would be distortive because "the
resulting financial expense ratio would consist of two calendar years
rather than one" See, CBCC's Rebuttal Brief, at 15. Moreover, CBCC claims
that the Department used the same methodology with regards to CBCC in the
1998-1999 POR. Id. CBCC asks the Department to continue to use the same
methodology of a single accounting year for the final results of the
review. 

Department's Position:

We agree with CBCC. The Department normally bases the financial expense
ratio on the respondent's audited financial statements for the full-year
period that most closely corresponds to the POR (See, the Department's
questionnaire at D-17). See, Final Results of Administrative Review:
Stainless Steel Bar from India, 65 FR 48965 (August 10, 2000) and
accompanying Decision Memorandum at Comment 9. The Department based CBCC's
financial expenses on the audited and consolidated 1999 financial
statement of its parent company. This approach is consistent with the
prior review, where the Department, facing the same situation, based
CBCC's financial expense calculation on the 1998 consolidated financial
statement. See, Silicon Metal from Brazil (1998-1999 Administrative
Review) 
66 FR at 11256 and accompanying Decision Memorandum at Comment 7.
Accordingly, 
for the instant review, we have used financial expenses based on 1999 
consolidated and audited financial statement of CBCC's parent company.

Comment 11: Financial Expense Ratio

The petitioners claim that, in the preliminary results, the Department
erred for two reasons when it utilized the 1999 financial statements of
CBCC's Belgian parent company (Solvay & Cie) to calculate CBCC's financial
expense ratio: 1) CBCC was only partially owned by its Belgian parent
during the middle segment of the POR and not at all owned by its Belgian
parent during the latter portion of the POR, and 2) because Solvay & Cie
consists of many subsidiaries and affiliated companies, the extent to
which the actual costs incurred by CBCC to produce and sell silicon metal
are reflected on the parent company's financial statement is small and,
thus, not represented by the parent company's financial statements.

The petitioners believe that CBCC's financial statements show a higher
actual ratio of financial expenses than the one utilized by the Department
from the consolidated financial statements of CBCC's Belgian parent. In
addition, the petitioners cite to AIMCOR v. United States, where the court
ruled that the Department's use of consolidated financial statements was
not supported by substantial evidence. See, AIMCOR v. United States, 69 F.
Supp.2d 1345, 1353 (Ct. Int'l Trade 1999) (AIMCOR); American Silicon
Technologies v. United States, Ct. No. 97-02-00267, Slip Op. 99-34 (Ct.
Int'l Trade 1999) (American Silicon). Therefore, petitioners argue that,
in order for the Department to determine the true cost to CBCC to make
silicon metal, the Department should use the financial expenses based on
CBCC's own financial statements. 

CBCC argues that the petitioners' claim is without merit and should be
rejected. According to CBCC, the petitioners' reliance on AIMCOR, 69 F.
Supp. 2d at 1353 and American Silicon is mistaken because these cases
dealt with another POR where the Court found that there was not enough
evidence on the record to establish that Solvay & Cie exercised direct
control over CBCC. In addition, CBCC states that in the eighth review, the
Department verified and found CBCC to be under direct control of Solvay &
Cie and used Solvay & Cie's financial statement to calculate CBCC's
financial expense ratio. CBCC claims that in this instant review the
relationship between Solvay & Cie and CBCC remained unchanged during 1999.
CBCC claims that its Belgian parent company was involved in CBCC's
financial activity, such as establishing policies with respect to CBCC's
financing, audits, human resources, capital expenditures, and approving
and determining inter-company loans for CBCC. CBCC argues that these
activities demonstrate that Solvay & Cie exercised sufficient control over
CBCC and that reliance upon the consolidated financial statements to
calculate financial expense is appropriate. Citing Gulf States Tube
Division, 981 F. Supp. at 650 (Ct. Int'l Trade 1997), CBCC argues that the
CIT has found that the fact that a parent company encompasses companies in
different lines of business is irrelevant to this issue. 



CBCC also states that, although it does not oppose the use of Dow's
financial statement to calculate its financial expenses, the Department
should continue to use Solvay & Cie's 1999 financial statement because
Solvay & Cie's control of CBCC extended over a greater period of the POR
than Dow's.

Department's Position: 

We agree with CBCC. Our established policy is to calculate financial
expenses for COP and CV purposes based on the borrowing costs incurred at
the consolidated group level, regardless of whether the respondent's
financial expense is greater than the consolidated financial expense. This
practice recognizes two facts: (1) the fungible nature of money within a
consolidated group of companies; and (2) that the controlling entity
within a consolidated group has the power to determine the capital
structure (i.e., the debt and equity) of each member company within its
group. See, Silicon Metal from Brazil (1995-1996 Administrative Review);
Notice of Final Determination of Sales at Less Than Fair Value: Steel Wire
Rod from Canada, 63 FR 182 (February 24, 1998). Contrary to the
petitioner's arguments, the situation in this case differs from that in
AIMCOR. In AIMCOR, the CIT stated that "Commerce is justified in utilizing
consolidated financial statements when corporate control, whether direct
or indirect, exists. . ." See, AIMCOR, 69 F. Supp. 2d at 1354. However, in
that case the CIT found that "there was no evidence of inter-company
borrowing or other indicia" that the respondent's parent company
determined the respondent's cost of money. Id. Based on that fact, the CIT
instructed the Department to recalculate the respondent's financial
expenses using the financial statements of the respondent. Id.

In the instant proceeding, Solvay & Cie of Belgium was the majority owner
of CBCC during the preponderance of the POR. In the previous two reviews,
the Department reviewed CBCC's corporate structure at verification and
determined CBCC to be under direct control of Solvay & Cie. See, CBCC 1998-
1999 Silicon Metal Verification Reports at 3 and Verification Exhibit 15,
provided at CBCC's Factual Information Submission at Exhibit D (January
22, 2001). Further, CBCC, as a part of its factual information submission,
submitted memoranda from Solvay Do Brazil, providing evidence of inter-
company borrowings. Id. at Exhibit A. In addition, in a supplemental
questionnaire response, CBCC submitted Solvay & Cie's annual report, where
Solvay & Cie discussed inter-company borrowings by stating that "[t]he
borrowings are generally effected through the Group's special financing
vehicles, the proceeds of their borrowings available to the Group's
operating entities." See, CBCC March 9, 2001 Supplemental Response at
Exhibit 5. Thus, in the instant review, contrary to the circumstances in
the AIMCOR case, there is record evidence of corporate control by Solvay &
Cie and its influence on CBCC's cost of money. In the 1997-1998 POR, where
inter-company loans took place between a respondent and its parent
company, the financial expense calculation was also based on the
consolidated financial statements of both companies. See, Final Results of 
Antidumping Duty Administrative Review: Silicon Metal From Brazil, 65 FR
7497 (February 15, 2000)(Silicon Metal from Brazil (1997-1998
Administrative Review)).

We find that it is appropriate to continue to use the consolidated
financial statements of Solvay & Cie to calculate CBCC's financial
expenses. As noted above at Comment 10, "[t]he Department normally bases
the financial expense ratio on the respondent's audited financial
statements for the full-year period that most closely corresponds to the
POR." Accordingly, following our practice, we have used financial expenses
based on CBCC's 1999 consolidated and audited financial statement.
Although, as noted in our verification of CBCC, [w]e verified that Dow
acquired 50% of CBCC stock on December 15, 1999, and 100% of CBCC on March
10, 2000," we find that Solvay & Cie exercised majority control over CBCC
during the preponderance of 1999. See, Memorandum to the File Through
Thomas Futtner from Esther Chen and Zev Primor; Verification of the
Further Manufacturing Questionnaire Response Of Companhia Brasileira
Carbureto de Calcio (CBCC) in the 1999-2000 Administrative Review of the
Antidumping Duty Order on Silicon Metal from Brazil, dated December 13,
2001. Consequently, for these final results, we continued to base CBCC's
financial expense on the consolidated financial statements of Solvay & Cie.


Comment 12: Short-Term Income Offset

The petitioners contend that the Department should not allow CBCC to
reduce total financial expenses by "financial income" because CBCC failed
to substantiate and document that this category of income qualifies as an
offset to financial income under the Department's established practice.
The petitioners maintain that the Department only allows respondents to
reduce financial expense by interest income derived from short-term
investments of working capital. According to the petitioners, CBCC has the
burden of establishing its right to reduce financial expense by such
interest income. However, in the instant review, the petitioners claim
that CBCC never demonstrated that "financial income" constituted interest
income, nor did it demonstrate that the interest income was derived from
short-term investments of working capital.

CBCC claims that it correctly reduced total financial expenses by income
from current assets because by definition current assets are short-term in
nature and, thus, the income generated from these assets is short-term in
nature.

Department's Position:

We agree with the petitioners. In calculating COP and CV, it is the
Department's practice to allow a respondent to offset (i.e., reduce)
financial expenses with short-term interest income earned from the 
general operations of the company. See, Timken, 852 F. Supp. at 1048. 
In calculating a company's cost of financing, we recognize that, in 
order to maintain its operations and business activities, a company must 
maintain a working capital reserve to meet its daily cash requirements 
(e.g., payroll, suppliers, etc.). The Department further recognizes that 
companies normally maintain this working capital reserve in interest-
bearing accounts. The Department, therefore, allows a company to offset 
its financial expense with the short-term interest income earned on 
these working capital accounts. The Department does not, however, 
allow a company to offset its financial expense with income earned from 
investing activities (e.g., long-term interest income, capital gains, 
dividend income) because such activities are not related to the current 
operations of the company. See, Antifriction Bearings (Other Than Tapered 
Roller Bearings) and Parts Thereof From The Federal Republic of Germany; 
Final Results of Antidumping Duty Administrative Review, 56 FR 31734 
(July 11, 1991). We note that the CIT has upheld the Department's approach 
to calculating the financial expense offset with only short-term interest 
income. See, Gulf States Tube Division, 981 F. Supp at 630 and NTN Bearing 
Corp., 905 F. Supp. at 1097 (citing Timken at 1048), in which the CIT held 
that, to qualify for an offset, interest income must be related to the 
"ordinary operations of the company." Furthermore, we note that the burden 
of proof to substantiate and document this adjustment is on the respondent 
making a claim for an offset. See, Timken Company v. United States, 673 F. 
Supp. 495, 513 (CIT 1987); and Gray Portland Cement and Clinker from
Japan; 
Final Results of Antidumping Duty Administrative Review, 60 FR 43761,
43767 
(August 23, 1995).

In the instant review, the Department requested that CBCC list "all
interest income and expense items and other financing amounts used to
compute net interest expense." See, the Department's Antidumping
Questionnaire dated August 7, 2000, at page D-10. In response to the

Department's request, CBCC provided a worksheet wherein it calculated net
interest expense by reducing total consolidated financial expenses by
total consolidated financial income from current assets. However, CBCC
never listed all of the income items that were included in the total
consolidated financial income from current assets and, thus, we are unable
to determine whether the total claimed income offset includes only
interest income that is short-term in nature. On December 4, 2000, the
Department issued a supplemental questionnaire wherein it again requested
from CBCC supporting documentation regarding the nature of the financial
income offset. CBCC responded by stating that it does not have access to
such information. See, CBCC's Antidumping Supplemental Questionnaire
Response dated January 2, 2001, at page 23. Therefore, by simply
offsetting financial expense by the total financial income from current
assets, CBCC failed to demonstrate that the "financial income" constituted
short-term interest income. Therefore, consistent with our position in two
previous administrative reviews, we have disallowed the claimed offset to
financial expense for the final results. See, Silicon Metal from Brazil
(1996-1997 Administrative Review), 64 FR at 6314; See, Silicon Metal from
Brazil (1998-1999 Administrative Review), 66 FR at 11256. 


Comment 13: Interest Revenue

Petitioners argue that the Department failed to include CBCC's reported
interest revenue on home market sales in the net home market price for
purposes of the preliminary review results.

CBCC did not comment on this issue.

Department's Position:

The Department agrees that, for the preliminary results, we inadvertently
failed to adjust NV for interest revenue. We have corrected this matter in
the final results. 

Comment 14: Nature of Sales to an Unaffiliated Customer for Purposes of
            Determining an Appropriate and Reasonable Surrogate for 
            Purposes of Section 772(e) of the Act

Petitioners argue that CBCC's sales to an unaffiliated U.S trading
company, during a particular segment of the POR, should not be deemed an
appropriate and reasonable surrogate price for purposes of section 772(e)
of the Act. Petitioners claim that the nature of CBCC's sales to this
customer changed after CBCC became affiliated with Dow. Petitioners assert
that record evidence demonstrates that CBCC's post-affiliation sales (with
Dow) to this customer were not normal commercial transactions for the
following reasons: (1) the nature of CBCC's sales to this customer was
inconsistent with the purchasing behavior expected from a trading company; 

(2) there were different pricing patterns for CBCC's sales to this
customer before and after CBCC's affiliation with Dow; (3) the end of the
POR timing of the post-affiliation sales with respect to the POR; (4) the
similarities in quantities covered by sales to unaffiliated and affiliated
customers after CBCC's affiliation with Dow coupled with a change in
pricing. Petitioners contend that, barring evidence to the contrary, the
Department should find that these post-affiliation sales to this
particular unaffiliated customer were not normal commercial transactions
and should exclude the sales from the calculation of a surrogate price
under section 772(e) of the Act.

CBCC, referencing Brake Rotors From the People's Republic of China:
Preliminary Results and Partial Recision of the Fourth New Shipper Review
and Recision of the Third Antidumping Duty Administrative Review, 66 FR
1303, 1307 (January 8, 2001) (Brake Rotors), argues that the timing of
sales during the POR does not demonstrate that the sales are non-bona fide
sales. In addition, CBCC argues that the quantities of sales made towards
the end of the POR are consistent with the quantities of sales made to the
unaffiliated customer in question earlier in the POR. Therefore, CBCC
argues that the Department should continue to determine the surrogate
margin based on the EP sales made by CBCC to its unaffiliated customer
during the POR. 

However, CBCC argues that if the Department chooses to disregard the
sales in question, all remaining EP sales made by CBCC should be used to
determine the surrogate margin. CBCC argues that the petitioners have
presented no evidence showing that the remaining sales are non-bona fide
sales. Therefore, CBCC argues that the Department has no authority to
exclude the remaining sales from the margin calculation.

Department's Position: 

We agree with CBCC. We note that in the absence of contrary evidence, the
fact that the quantities covered by CBCC's sales to the unaffiliated
customer in question were similar to the quantities covered by sales to an
affiliated customer is not sufficient to find that the sales were not
normal commercial transactions. Moreover, the prices for these
transactions were in line with sales made by other Brazilian producers
selling silicon metal to the United States at the same time. Consequently,
we have no evidence on the record to support a conclusion that the
transactions in question were not commercially reasonable. While the sales
in question occurred shortly before the end of the POR, the timing of the
transaction is not a basis in-and-of-itself to call into question the
commercial reasonableness of the transactions. See, Brake Rotors 66 FR at
1307. Therefore, based on a review of the facts in this case, and, as
discussed in the Memorandum to Holly A. Kuga through Thomas Futtner from
Maisha Cryor; Whether Sales from Companhia Brasileira Carbureto de Calcio
(CBCC) to an Unaffiliated U.S. Customer Were Normal Commercial
Transactions or Related-Party Transactions, dated February 4, 2002
(Transactions Memo), we conclude that there is no record evidence to
indicate that the sales by CBCC to the unaffiliated customer in question
were not normal commercial transactions.

As a result, we have included these sales in the calculation of CBCC's
margin. (1) However, we intend to continue to examine this issue in future
administrative reviews, and if the facts should change, will again make a
determination as to whether such sales should be included in the
calculation of CBCC's margin. 

Comment 15: Related-party Transactions and Failure to Examine Documents at

Verification

Petitioners argue that the Department must determine if CBCC's sales to
an unaffiliated customer during the POR were actually related-party
transactions. Petitioners assert that, under sections 772(a) and (b) of
the Act, if a portion of CBCC's U.S sales were in fact made to an
affiliate, the Department cannot use those sales to calculate U.S price.
Petitioners claim that record evidence demonstrates that the unaffiliated
customer in question may have been acting as 
an intermediary in order to sell the subject merchandise to CBCC's U.S
affiliate. Petitioners argue that it would undermine the intention of
section 772(e) of the Act, if the Department calculated a surrogate CEP
based on sales to an unrelated intermediary which then resold the subject
merchandise to a U.S further-manufacturer related to the foreign producer
or exporter, where the foreign producer or exporter knew or should have
known that such a resale would occur. Petitioners, citing Notice of Final
Determination of Sales at Less than Fair Value: Engineered Process Gas
Turbo-Compressor Systems, Whether Assembled or Unassembled, and Whether
Complete or Incomplete, from Japan, 62 FR 24394, 24395 (May 5, 1997),
state that if the Department finds that an otherwise unaffiliated
purchaser acts as the agent of the foreign producer or exporter in making
sales in the United States, then the transaction between the foreign
producer or exporter and the entity acting as its agent cannot be used to
determine U.S price. However, petitioners note that these cited cases are
not perfectly suited to this instant review because they involve sales by
an agent to an unrelated U.S purchaser, whereas this review involves sales
to a related purchaser. Petitioners contend that given the ownership
relationship between CBCC and Dow, this case best represents the situation
where the Department should disregard the sales between an agent and
principal. Petitioners argue that, consistent with the Department's
agency/principal test, the principal of agency law focuses on whether it
is agreed that the agent is to act primarily for the principal, not for
itself. See, Restatement (Second) of Agency, sections 1 cmt.b. and 26
cmt.a (1957). Therefore, petitioners contend that if CBCC sold the
merchandise to the unaffiliated customer with knowledge that its U.S
affiliate would purchase the subject merchandise, the unaffiliated
customer would not have been acting on its own behalf. Therefore,
petitioners assert that the Department must determine if a portion of
CBCC's sales to the unaffiliated customer in question constituted related-
party sales.

Petitioners state that although they submitted comments prior to
verification, the Department failed to examine Dow's records to determine
whether CBCC sold silicon metal to Dow through a particular unaffiliated
customer. Petitioners state that the Department should send CBCC a
deficiency questionnaire addressing this concern to determine whether the
sales were in fact related-party transactions.

CBCC argues that Dow purchased silicon metal from an unaffiliated trading
company during the POR. CBCC asserts that after reviewing sales
documentation, both CBCC and Dow discovered that CBCC's sales to the
unaffiliated customer in question were in fact resold to an unaffiliated
trading company, which then resold the silicon metal to Dow. However, CBCC
maintains that the sales to its unaffiliated U.S. customer were properly
reported as EP sales because, consistent with section 772(a) of the Act,
the merchandise was first sold to an unaffiliated purchaser before
importation or exportation to the United States. Further, CBCC states that
neither it nor Dow are affiliated with CBCC's unaffiliated customer or the
trading company that Dow contacted. In addition, CBCC states that there is
no evidence to show an agency relationship between CBCC and the parties in
question. However, CBCC argues that if the Department decided to exclude
the sales in question from the final results, a sufficient 
quantity of EP sales remain to calculate a margin for CBCC's further
manufactured sales pursuant to section 772(e) of the Act. Therefore, CBCC
argues that the Department should continue to apply the special rule using
the remaining EP sales.

Department's Position:

We agree with CBCC. As discussed in the Transactions Memo, dated February
4, 2002, there is no record evidence that at the time CBCC made sales to
the unaffiliated customer in question, either CBCC or Dow knew that Dow
would be the end purchaser. In its January 10, 2002, supplemental
response, CBCC stated that, after reviewing sales documentation, Dow
discovered that it had in fact purchased silicon metal from an
unaffiliated trading company, which had purchased it from CBCC's
unaffiliated customer. Although CBCC and Dow both eventually learned that
silicon metal sold by CBCC to the unaffiliated customer in question was
ultimately purchased by Dow, there is no record evidence establishing
knowledge of this fact at the time of sale. Therefore, there is no
evidence establishing that sales by CBCC to the unaffiliated customer in
question were actually related-party transactions. Consequently, for the
final results, we have found that the sales from CBCC to the unaffiliated
customer in question were not related-party transactions and we have
continued to include these sales in the calculation of CBCC's margin. As
we noted above, including or excluding these sales had no effect on the
level of margin found for CBCC's entries in this POR. For a further
discussion of this matter, See, Transactions Memo, dated February 4, 2002.

While petitioners assert that the Department did not investigate these
sales, we note that the Department did not receive petitioners' comments
on this issue until the start of verification. Furthermore, the comments
were directed at sales by CBCC to an unaffiliated customer. The Department
would not have been able to review any of these sales documents at Dow's
headquarters. Such documentation would have to be reviewed at CBCC's
headquarters in Brazil. However, as explained in the Transactions Memo,
the Department issued a series of supplemental questionnaires to CBCC
regarding this issue on January 2, 28 and 29 of 2002. In addition, the
Department met with petitioners twice to discuss this issue and
participated in a meeting and a conference call with CBCC and Dow Corning
on this matter. 

Comment 16: Calculation of EP for Use As a Surrogate Price Under Section
            772(e) of the Act
 
Petitioners argue that the Department departed from its normal practice
of basing the EP used as a surrogate price on individual transactions 
and instead used a one-year period average EP. Petitioners contend that, 
in the preliminary results, the Department calculated a single-weighted-
average EP for CBCC's sales to an unaffiliated customer and used that
single weighted-average price as the surrogate price for the CEP of CBCC's 
sales to Dow during the period of affiliation. Petitioners contend that 
this methodology was distortive because the Department's use of a single 
weighted-average EP as the surrogate for CEP negated the Department's 
contemporaneous requirement. Petitioners contend that as an alternative 
methodology, the Department should calculate monthly-average surrogate 
prices and use the monthly weighted-average EP on sales to the
unaffiliated 
customer in question as the surrogate price for CBCC's U.S sales to Dow 
during the most contemporaneous month under the Department's 90/60
guideline. 

Petitioners argue that when NVs, EPs or CEPs differ significantly over
the period, the Department's regulations state that the Department may
calculate weighted averages "for such shorter period as the Secretary
deems appropriate." See, 19 C.F.R. 351.414(d)(3). See, e.g. Final
Determination of Sales at Less than Fair Value; Certain Steel Concrete
Reinforcing Bars from Turkey, 62 FR 9737 (March 4, 1997) (the Department
used monthly weighted-average prices for EPs and NVs because of inflation
during the POI). Therefore, petitioners argue that, to eliminate the
distortion resulting from the use of a one-year-period-average surrogate
price and to apply a method of selecting a surrogate price that most
closely resembles the method normally used in an administrative review,
the Department should calculate monthly-average EPs on CBCC's sales to an
unaffiliated customer and use the monthly average EP for the most
contemporaneous month to the date of CBCC's U.S sales to Dow as the
surrogate price for such sales.

CBCC disagrees with petitioners. CBCC claims that, contrary to
petitioners' arguments, once the Department opts to apply the special rule
under section 772(e) of the Act, the average-to-transaction comparison is
no longer relevant. CBCC argues that since the special rule is the
exception to the "normal" CEP calculation, the requirements pertaining to
calculation under section 772(b) of the Act, such as averaging and
contemporaneousness, do not apply. In addition, contrary to petitioners'
arguments, CBCC claims that petitioners incorrectly contend that the
statute requires that the surrogate "price selected must be appropriate
and reasonable." CBCC claims that the provision of the statute only
applies to the analysis of the quantity of comparable sales, but does not
mean that the Department must conduct an analysis of the prices to
unaffiliated parties. However, CBCC claims that this argument is moot
because the Department's practice calls for the use of a surrogate margin,
rather than a surrogate price.

CBCC states that under the normal special rule methodology, the surrogate
margin represents the result of the comparison based on the Department's
normal EP methodology. Therefore, CBCC claims that no further adjustments
to the surrogate margin are allowed under 19 CFR 351.402. In addition,
CBCC disagrees with petitioners contention that the 90/60 rule should
apply. CBCC states that the 90/60 guidelines only apply to determining NV.
In addition, CBCC claims that the use of a different averaging period,
only applies where the average-to-average method, which involves a
comparison of the POI-average NV and the POI-average EP (or CEP), is used.
CBCC argues that the normal special rule methodology does not involve a
POR-average-to-POR-average comparison. Therefore, CBCC claims that the
Department should reject petitioners' arguments.

Department's Position:

We agree with CBCC. Under the special rule methodology, the surrogate
margin normally represents the result of comparisons based on the
Department's normal EP methodology. Therefore, no further adjustments to
the surrogate margin are normally made under 19 CFR 351.402. 

This is consistent with the Department's approach of using the POR
weighted-average margins from other sales as the margin for the CEP sales
subject to the special rule. In this case we have not addressed whether
the Department should have considered limiting its margin selection for
CEP sales to margins from more contemporaneous EP sales as it would have
no impact on the outcome of our analysis. 

The purpose of the special rule is to reduce the Department's
administrative burden when it appears that the value added after
importation is likely to exceed substantially the value of the imported
product. See, the SAA at 826. Moreover, the statute does not specify a
hierarchy between the alternative methods of using identical or other
subject merchandise to establish EP. Therefore, it is within the
Department's discretion to select an appropriate method to determine
dumping margins for merchandise the Department has not examined under the
special rule. See, Industrial Nitrocellulose from France: Final Results of
Antidumping Duty Administrative Review, 63 FR 49085 (September 14, 1098).


Comment 17: Application of Special Rule in Margin Program

CBCC argues that the Department incorrectly applied the special rule in
determining CBCC's CEP. CBCC argues that the Department should have
removed the sales subject to the special rule from the database before
performing the margin calculation, instead of replacing the U.S. price of
those sales with the weighted-average price of the sales to unaffiliated
parties. CBCC claims that, as stated in the Memorandum on Whether to
Determine the Constructed Export Price for Certain Further Manufactured
Sales Sold by Companhia Brasileiria Carbureto de Calcio in the United
States During the Period of Review Under Section 772(e) of the Act (July
21, 2001) and pursuant to section 351.402(c)(3) of the Department's
regulations, the margin calculated on sales to unaffiliated parties should
be used as a proxy margin for the sales subject to the special rule. CBCC
argues that while all sales remain subject to antidumping duties, no
margin calculation should be performed on the sales subject to the special
rule. CBCC argues that, for the final results, the Department should
eliminate the entire section of the margin program relating to the CEP
calculation and rely on sales to unaffiliated parties to calculate the 
dumping margin.

Petitioners, while noting that they are not conceding that the special
rule applies under section 772(e) of the Act, disagree with CBCC.
Petitioners argue that the Department was correct in using a surrogate
price for the CEP on the manufactured sales, rather than a surrogate
margin. Petitioners state that section 772(e) of the Act provides that the
price of identical or other subject merchandise sold by the exporter to an
unaffiliated person shall be used to determine CEP. Petitioner argues that
although the Department, in the preliminary results, other cases involving
the special rule and section 351.402(c)(3) of the Department's
regulations, state that using the margin on sales to unaffiliated
purchasers as a proxy for the margin on further-manufactured sales is
appropriate, this statement is inconsistent with the statute. See,
Petitioners' Rebuttal Brief at 20. Petitioners, referencing Uniden America
Corporation and Uniden Financial, Inc. v. United States, 120 F. Supp. 2d
1091, 1101 (Fed. Cir. 2000), state that "[i]t is an equally well
established legal principle that while an agency may adopt rules and
regulations to effectuate the purpose of the law, such rules and
regulations must not be inconsistent with the statute." In this instance,
petitioners assert that section 772(e) of the Act is clear and that the
Department must apply a surrogate price, not margin, to determine CEP for
further-manufactured sales. Petitioners contend that in the matter of
inconsistencies between statutes and regulations, statutes trump
regulations. Therefore, petitioners argue that the Department correctly
applied a surrogate price to determine CEP under section 772(e) in the
preliminary results.

Department's Position:

We agree with CBCC. Section 772(e) of the Act states that for purposes of
determining CEP for further manufacturing purposes the following shall be
used: (1) the price of identical subject merchandise sold by the exporter
or producer to an unaffiliated person; or (2) the price of other subject
merchandise sold by the exporter or producer to an unaffiliated person. If
there is not a sufficient quantity of sales to provide a reasonable basis
for comparison under paragraph (1) or (2), or the administering authority
determines that neither of the prices described in such paragraphs is
appropriate, then the constructed CEP may be determined on any other
reasonable basis. Section 351.402(c)(3) of the Department's regulations
states that "[f]or purposes of determining dumping margins under
paragraphs (1) and (2) of section 772(e) of the Act, the Secretary may use
the weighted-average dumping margins calculated on sales of identical or
other subject merchandise sold to unaffiliated persons." Contrary to
petitioners' arguments, we find that the statute and regulations are not
inconsistent. The weighted-average dumping margins referenced in section
351.402(c)(3) of the Department's regulations are in fact calculated based
upon the prices referred to in section 772(e) of the Act. In other words,
in order to determine weighted-average margins under paragraphs (1) and
(2) of section 772(e), the Department must first begin with the price paid
by an unaffiliated party. And, as is the Department's practice, once 
the weighted-average dumping margin is calculated based upon prices paid,
the resulting margin is applied as the surrogate margin to the
transactions to which the special rule applied. See, Antifriction Bearings
(Other Than Tapered Roller Bearings) and Parts Thereof From France,
Germany, Italy, Japan, Romania, Singapore, Sweden, and the United Kingdom;
Preliminary Results of Antidumping Duty Administrative Reviews, Partial
Rescission of Administrative Reviews, and Notice of Intent To Revoke
Orders in Part 66 FR 8931, 8935 (February 15, 2001); Dynamic Random Access
Memory Semiconductors of One Megabit or Above From the Republic of Korea:
Preliminary Results of Antidumping Duty Administrative Review and Notice
of Intent Not To Revoke Order in Part, 64 FR 30481, 30483 (June 8, 1999). 

The computer language used to calculate the special rule in the
preliminary results was incorrect. In the Memorandum on Whether to
Determine the Constructed Export Price for Certain Further Manufactured
Sales Sold by Companhia Brasileira Carbureto de Calcio (CBCC) During the
Period of Review (POR) Under Section 772(e) of the Act (July 31, 2001)
(Special Rule Memorandum), the Department stated "[c]onsistent with the
application of the special rule, we will base the margin of further-
manufactured sales by Dow on the margin of sales of silicon metal sold by
CBCC to an unaffiliated customer." Therefore, for the final results, and
pursuant to the Department's statute, regulations, past practice and the
Special Rule Memorandum, we will correct the computer programming language
to use the margin calculated on sales to unaffiliated parties as the proxy
margin for the sales subject to the special rule.

Comment 18: Calculation of Home Market Imputed Credit Expenses

CBCC argues that despite having incurred borrowing costs during the POR,
the Department, in the preliminary results, declined to use its short-term
interest rate to calculate CBCC's imputed credit expense for home market
sales. Instead, the Department used the Brazilian TR rate, a publicly
available rate which the Department has used in a number of prior reviews
whenever CBCC had no short-term borrowing in the home market. CBCC
contends that, in this instant review, the Department should have accepted
its loan as representative of its short-term borrowing activity during the
POR in the home market. To do otherwise, CBCC claims, would be contrary to
the Department's own methodology and practice and tantamount to facts
available (FA).

As an example of the Department's policy with respect to determination of
the short-term rate in the calculation of imputed home market credit
expenses, CBCC refers to Certain Steel Concrete Reinforcing Bars From
Turkey; Final Results of Antidumping Duty Administrative Review and New
Shipper Review, 64 FR 49,150, 49,155 (September 10, 1999), as well as the
Court of Appeals for the Federal Circuit's (CAFC's) decision in AIMCOR,
141 F.3d 1098, 1111 (Fed. Cir. 1998).

CBCC also cites Policy Bulletin 98.2 as indicating that, if the respondent 
has short-term borrowing in the relevant market, the Department must use 
that interest rate in calculating the cost of credit. Only in cases where 
there is no short-term borrowing can the Department resort to using
another 
rate. Further, according to CBCC, Policy Bulletin 98.2 and AIMCOR do not 
state that the respondent must have a certain number of loans nor that the
respondent's actual borrowing experience must comply with additional
conditions for the Department to use the respondent's actual short-term
interest rate in determining the imputed credit expense. 

According to CBCC, the duration of a short-term loan has never been a
consideration for the Department when calculating a short-term interest
rate, so long as the loan met the definition of short-term, which is less
than one year. CBCC refers to the Notice of Final Determination of Sales
at Less Than Fair Value: Certain Cut-To-Length Carbon-Quality Steel Plate
Products from Japan, 64 FR 73215, 73230 (December 29, 1999), where the
Department included certain overnight loans (lasting 24 hours) in its
calculation of the respondent's short-term interest rate. 

CBCC argues that by declining to use its reported interest rate in favor
of the TR rate for the preliminary results, the Department essentially
resorted to FA for calculation of CBCC's home market credit expense. CBCC
argues that, pursuant to section 776(a) of the Act, the Department can
only resort to FA if (1) the necessary information is not available on the
record; (2) an interested party withholds information; (3) fails to
provide such information by the specified deadline or in the form and
manner requested; (4) significantly impedes a proceeding; or (5) the
information cannot be verified. CBCC contends that its actions do not meet
any of these conditions because it cooperated with the Department's
instructions and was given no indication that there was anything deficient
with the information it provided. Further, CBCC states that the Department
verified the short-term debt without any discrepancy.

CBCC also claims that the interest rate used in the contested loan was
not aberrational when compared to other published Brazilian short-term
commercial rates prevailing at the time. CBCC asserts that its interest
rate is comparable to the fee that CBCC charged its customers for late
payment. Rather, it is the TR rate, which has been used as a surrogate
benchmark for short-term commercial lending in prior cases, that is not at
par with other commercial short-term lending rates. CBCC states that the
TR rate is an inflation rate rather than a commercial borrowing rate.
Finally, CBCC suggests that should the Department use a different lending
rate in the calculation of the imputed credit expenses, the Department
should use interest rates published by the IMF which are more comparable
to prevailing commercial short-term rates in Brazil during the POR.
However, CBCC argues that if a surrogate rate (other than the TR) is
selected by the Department, it should, at a minimum, exceed the rates
published by the IMF because the IMF rates are lower than any commercial
borrowing rates.

CBCC also claims that the prior use of the TR rate as a surrogate
interest rate in past reviews does not support its use as a surrogate in
the instant review because those cases did not determine that the TR rate
was a short-term rate realized by borrowers in the course of usual 
commercial behavior. CBCC states that the Department selected the TR rate
as a surrogate rate in prior reviews because it believed the rate was
similar to the U.S. prime rate. However, CBCC claims that Policy Bulletin
98.2 states that the U.S. prime rate is not appropriate as a surrogate
rate.

Petitioners disagree with CBCC. According to the petitioners, the
Department's practice of excluding an aberrational short-term borrowing
rate from credit expense calculations is consistent with its general
policy of rejecting aberrational values. The Department's practice is also
consistent with its policy for selecting surrogate short-term interest
rates that are actually realized by borrowers in the course of "usual
commercial behavior," and with the CAFC's determination that surrogate
short-term credit costs are to be computed "on the basis of usual and
reasonable commercial behavior." See, Petitioners' Rebuttal, at 26.
Moreover, the petitioners disagree with CBCC's interpretation of Policy
Bulletin 98.2. Petitioners argue that Policy Bulletin 98.2 does not
require the Department to use a respondent's short-term borrowing rate
regardless of whether the rate is aberrational. Furthermore, the
petitioners claim that since the issuance of Policy Bulletin 98.2, the
Department has examined and rejected a borrower's aberrational short-term
borrowing rate, for example, in Notice of Final Determination of Sales at
Less Than Fair Value: Stainless Steel Round Wire from Korea, 64 FR 17342,
17345 (April 9, 1999) and Silicon Metal from Brazil (1998-1999
Administrative Review). See, Petitioners' Rebuttal, at 26. Similarly, the
petitioners claim that in none of the determinations, cited by CBCC, was
the Department faced with deciding whether the proposed rate was
aberrational. Id. Furthermore, the petitioners also refer to the fact that
the interest rate used by CBCC is not only highly aberrational but also
does not reflect the borrowing rates of other Brazilian respondents in the
same POR. See, Petitioners' Rebuttal, at 28. Petitioners argue that CBCC's
comparison of its reported interest rate to the interest rate CBCC charged
for late payment is flawed because late payment charges are not reflective
of short-term borrowings from lending institutions. Rather, they are
penalty charges that are intended to discourage customers from failing to
make timely payments. 

With regard to the CBCC's suggestion that the IMF rate is comparable and
could be used in lieu of the short-term CBCC rate, the petitioners retort
that the IMF rate is not a short-term commercial lending rate. Rather,
this rate represents "short-term lending between financial institutions."
See, Petitioners' Rebuttal, at 29. Further, petitioners argue that,
contrary to what CBCC claimed, the Department should not select a
surrogate rate that exceeds the IMF rates. Petitioners argue that CBCC has
provided no evidence as to the level of short-term lending rates in
Brazil, other than the TR rate. Therefore, since CBCC did not meet its
burden of establishing an entitlement to the adjustment, as required by
NSK, 896 F. Supp at 1277, petitioners argue that the Department should use
the TR rate.

In addition, the petitioners claim, contrary to CBCC's arguments, since
Policy Bulletin 98.2 was published, the Department has used the TR rate to
calculate Brazilian home market 
credit expenses where a respondent did not have short-term borrowings in
the home market currency during the POR. In addition, petitioners state
that since the publication of Policy Bulletin 98.2, specifically in the
eighth review, CBCC twice stated in its questionnaire responses that it
has treated the TR rate as an appropriate surrogate lending rate. Further,
contrary to CBCC's arguments, petitioners claim that the record contains
no recent evidence that the TR rate is not a commercial lending rate.
Petitioners argue that the information provided by CBCC contains four
outdated articles that predate the Department's findings that the TR rate
is an appropriate surrogate rate for calculating Brazilian home market
imputed credit expenses. See, Petitioner's Rebuttal, at 34. 

Accordingly, because CBCC itself has treated the TR rate as an
appropriate surrogate lending rate, because the Department has previously
found that the TR rate is an appropriate lending rate, and because the
record contains no evidence to contradict that finding, petitioners assert
that the Department properly used the TR rate as a surrogate lending rate
to calculate CBCC's imputed credit expenses. See, Petitioners' Rebuttal,
at 16.

Department's Position: 

We agree with both the petitioner and CBCC in part. As stated in the
preliminary results of this review, we denied CBCC's reported home market
imputed credit expense because we determined that "CBCC's short-term
borrowing in this POR was not in the `normal course of trade.'" See,
Silicon Metal From Brazil: Preliminary Results of Antidumping Duty
Administrative Review and Notice of Intent Not To Revoke Order in Part,
66, FR 400980, 40985 (August 6, 2001)(1999-2000 Preliminary Results). In
the 1999-2000 Preliminary Results, we found CBCC's credit experience to be
similar to the facts in Silicon Metal from Brazil (1998-1999
Administrative Review), where we denied CBCC's reported credit expense
stating that 

". . .given the fact that there was only one short-term loan made during
the course of the POR, a loan with an unusually high interest rate, it is
the Department's opinion that the loan does not represent short-term
lending activity in the "normal course of trade"." See, Silicon Metal from
Brazil (1998-1999 Administrative Review) (February 23, 2001) and
accompanying Decision Memo at Comment 4. (2) In this instant review,
CBCC's loan activity mirrors the nature of the loan that we determined did
not represent usual commercial behavior in Silicon Metal from Brazil (1998-
1999 Administrative Review). In addition, compared to the borrowing
experience of other respondents' in this review, as well as compared to
the SELIC rate, CBCC"s reported credit expense appears to be abnormally
high. Therefore, for these final results, we find that CBCC's reported
credit expense was properly denied in the 1999-2000 Preliminary Results
and we will use a surrogate rate to calculate CBCC's home market imputed 
credit expense.

For a discussion of the surrogate interest rate to be used in the
calculation of CBCC's home market imputed credit expense, See, Comment 1
above regarding Minasligas' short-term interest rate. 

Comment 19: CEP Profit

CBCC argues that, as a matter of record, the Department incorrectly
calculated CBCC's CEP profit ratio by not accounting for all expenses in
the calculation of total COGS in the United States.

Petitioners agree that this and other errors concerning CEP profit should
be corrected for the final results. In addition, petitioners claim that
the Department made the following clerical errors: 1) the Department
treated cost of manufacturing (COM), G&A, interest expense, packing costs
and indirect selling expenses as though they were denominated in U.S
dollars when they were denominated in Brazilian currency; 2) the
Department incorrectly reduced total U.S selling expenses by imputed
inventory carrying costs. 

Department's Position:

As stated above, we are correcting the computer programming language to
use the margin calculated on sales to unaffiliated parties as the proxy
margin for the sales subject to the special rule. As a result, the
calculation of CEP profit is moot. 

RIMA

Comment 20: Major Input Rule

Petitioners argue that the Department should revise Rima's reported
charcoal cost, pursuant to the major input rule, and revalue the charcoal
purchased by Rima from its affiliates to reflect the market price between
unaffiliated parties.

Rima argues that the major input rule does not apply to Rima's charcoal
purchases because Rima self-produced its charcoal. Rima claims that it did
not purchase any inputs from affiliated parties, therefore the major input
rule does not apply. 

Department's Position:

We agree with Rima. In Rima's questionnaire response, Rima stated that it
produced a portion of its charcoal supply during the POR. In this same
questionnaire response, Rima 
mistakenly referred to the self-produced charcoal as having been supplied
by an affiliate. However, in a subsequent questionnaire response, Rima
clarified this inconsistency and stated that no affiliates were involved
in the production or sale of any inputs. Further, the Department verified
Rima during this POR and found nothing to contradict this statement.
Therefore, since Rima did not receive charcoal from an affiliated party,
we find that, for the final results, the major input rule does not apply
to Rima's charcoal costs.

Comment 21: G&A Expenses

Petitioners argue that the Department erred in accepting Rima's reported
G&A expenses to calculate CV because the expenses were calculated on a
monthly basis. Petitioners argue that the Department's methodology is to
calculate G&A on an annual basis from the financial statements and that
the Department rejected the use of monthly G&A expenses in the 1991-1992
review of this proceeding. In addition, petitioners argue that the
Department should reject Rima's reported G&A expenses because Rima failed
to reconcile the expenses to its audited financial statement. Petitioners
note that the Department rejected Rima's method of calculating G&A
expenses in the 1997-1998 segment of this proceeding. 

Rima claims that the statute does not specify how the Department is to
calculate G&A expenses and that, in accordance with Timken v. United
States, 852 F. Supp. at 1049, the Department should accept Rima's reported
G&A because it is "the true cost to the respondent to manufacture the
subject merchandise." Also, Rima argues that the Department verified
Rima's reported G&A and tied the amounts to trial balances and ultimately
to the financial statements.

Department's Position:

We agree with petitioners. It is our standard practice to base G&A on an
amount derived from annual audited financial statements and to calculate
it as a percentage of cost. See, Certain Cut-to-Length Carbon Steel Plate
from Finland: Final Results of Antidumping Duty Administrative Review, 61
FR 2792, 2794 (January 29, 1996)(Carbon Steel Plate from Finland).
Regarding Rima's argument that the Department verified its G&A expense,
the Department's verification confirmed that all appropriate expenses were
included in the reported G&A. The verification report statements that the
allocation methodology was verified only indicated that the figures
reported by Rima accurately traced to their books and records and the
allocation methodology was explained. However, the allocation methodology
used by Rima to calculate its reported G&A is not that traditionally
utilized by the Department in allocating G&A. See, Silicon Metal From
Brazil: Preliminary Results, Intent To Revoke in Part, Partial Rescission
of Antidumping Duty Administrative Review, and Extension of Time Limits,
64 FR 43161, 43164 (August 9, 1999)(1997-1998 Preliminary Results)(no
change on this issue in the final results). Therefore, for the final
results, we followed the Department's methodology and recalculated Rima's
G&A expense ratio using its G&A expenses and annual COGS from its
financial statements.

Comment 22: Net Financial Expenses

Petitioners argue that the Department incorrectly set Rima's net
financial expense ratio to 1 (R$1) in the CV calculation. Petitioners
argue that this should be corrected for the final results. In addition,
petitioners argue that Rima incorrectly calculated its net financial
expenses and did not report these expenses in its cost spreadsheets.
Petitioners argue that Rima calculated its net financial expenses for the
months of the POR based on its company wide financial expenses in each
month multiplied by the percentage of its cost of sales in that month
accounted for by its sales of silicon metal. Petitioners argue that, for
the final results, the Department should recalculate Rima's net financial
expense using Rima's 1999 financial statements. Petitioners note that the
Department rejected Rima's method of calculating financial expenses in the
1997-1998 segment of this proceeding.

Rima argues that its interest expense was properly reported in an Exhibit
to its questionnaire response, fully verified and traced to trial balances
and financial statements by the Department. In addition, Rima claims that
since it reported its actual monthly financial expense allocable to
silicon metal, the Department should use the reported amount to calculate
financial expenses. 

Department's Position:

We agree with petitioners in part. As with G&A expenses, it is our
standard practice to base interest expense on an amount derived from
audited consolidated annual financial statements and to calculate interest
expense as a percentage of cost. See, Carbon Steel Plate from Finland 61
FR at 2795. In addition, regarding Rima's argument that the Department
verified its interest expense, the Department's verification confirmed
that all appropriate expenses were included in financial expense. The
verification report statements that the allocation methodology was
verified only indicated that the figures reported by Rima accurately
traced to its books and records and the allocation method was explained.
However, the allocation methodology used by Rima to calculate its reported
financial expense is not that traditionally utilized by the Department in
allocating financial expense. See, 1997-1998 Preliminary Results, 64 FR at
43164. Therefore, for the final results, we recalculated Rima's financial
expense ratio using its financial expenses and annual COGS from its
financial statements.

Comment 23: ICMS, IPI and CV

Petitioners argue that, for the final results, the Department should
include ICMS and IPI taxes in the calculation of Rima's CV. Petitioners
argue that AIMCOR and the AD statute require CV to include internal taxes
paid on inputs where a producer fails to prove that it had recovered those
taxes upon or prior to, exportation of the merchandise in question. See,
AIMCOR, 141 F.3d at 1109 and Section 773(e)(1)(A) of the Act.

Petitioners state that this decision was affirmed in Camargo Correa
Metais, S.A. v. United States, 200 F.3d 771, 772 (Fed. Cir. 1999)
(Camargo). Petitioners argue that Rima stated that it paid VAT for the
purchase of raw materials and that the taxes were not refunded when the
silicon metal was exported. See, Rima Section A-D response at D-10 and D-
20. Petitioners argue that Rima erred by not including these taxes in its
reported costs. 

Rima argues that ICMS and IPI taxes should not be added to CV because
Rima made no actual payments of ICMS on its purchases of inputs because it
used its ICMS credits to pay for inputs. 

Department's Position:

We agree with Rima. In Camargo, the CAFC upheld the Department's position
during the investigative phase of silicon metal from Brazil that Brazil's
ICMS taxes are properly included in the calculation of CV. In this review,
the Department used CV for Rima. We included ICMS taxes in the CV for Rima
using the methodology outlined in 1996-1997 Preliminary Results, 63 FR at
42004, and Silicon Metal from Brazil (1998-1999 Administrative Review), 64
FR at 6308. Brazilian companies pay ICMS taxes on the inputs they
purchase, and collect ICMS taxes on their domestic sales. If a company
pays more tax on its inputs in a fiscal year than it collects from
domestic customers, then the balance is reported as a credit to be carried
over to the next fiscal year. If a company pays less in ICMS taxes on its
inputs than it collects from its domestic customers, then it pays the
balance to the Government. With respect to CV, the Department includes
only that amount of ICMS tax paid by the company on inputs that exceed the
amount of ICMS tax collected by the company (on its domestic sales) during
the POR. The Department verified that the taxes Rima paid on inputs did
not exceed the amount of ICMS tax it collected. Therefore, Rima had net
ICMS credits during the POR. In this case, because Rima did not pay ICMS
on its purchases of inputs during the POR, we find that the amounts of
ICMS credits were properly excluded from CV in the preliminary results. We
continue to make the same finding for the final results.

Comment 24: CV Profit

Petitioners argue that the Department incorrectly set Rima's per-unit CV
profit amount to "1" (R$1) for CV comparisons. In addition, petitioners
argue that the Department failed to activate the section of the model
match program that calculates the CV profit rate. Petitioners state that
the statute requires that CV include profit based on the actual profit
realized by the specific exporter under review for the production and sale
of "a foreign like product, in the ordinary course of trade, for
consumption in the foreign country." See, section 773(e)(2)(A) of the Act.
Accordingly, the petitioners argue that the Department should include
profit in Rima's CV for the final results.

Rima did not comment on this issue.

Department's Position:

We agree with petitioners and have corrected this matter for the final
results.

Comment 25: Currency

Petitioners argue that the Department incorrectly used a gross unit price
denominated in Brazilian currency to calculate net U.S price. 

Rima did not comment on this issue.

Department's Position:

We agree that we made this error in the preliminary results and have
corrected it for the final results. 


Comment 26: Home Market Selling Expenses

Petitioners argue that the Department incorrectly calculated home market
selling expenses for CV purposes by not dividing the total home market
selling expenses by total cost to determine the appropriate percentages.
Petitioners argue that the Department instead multiplied the total
expenses by COP which overstated CV selling expenses that are deducted
from CV. 

Rima did not comment on this issue.

Department's Position:

We agree with petitioners and have corrected this matter for the final
results.


Comment 27: Commercial Quantities

Rima argues that although it requested revocation based on a finding of
no dumping during the past four administrative reviews, the Department
decided to reject the request because Rima had not demonstrated three
consecutive years of sales in commercial quantities. Rima argues that the
Department's decision to reject Rima's revocation request was erroneous
because the Department neglected the fact that Rima's revocation request
was based on four, not three, administrative reviews.

According to Rima, the Department's regulations state that the Department
may consider a period of more than three years as the basis of its
revocation analysis because section 351.222(b)(1)(A) of the Act requires a
showing of no dumping for a period of "at least three consecutive years."
Rima argues that considering more than three consecutive years for
revocation purposes is consistent with the Department's past practice in
the 1997-1998 POR of silicon metal. Specifically, Rima asserts that in the
1997-1998 POR of silicon metal, the Department preliminarily revoked the
order with respect to CBCC after considering four PORs. In particular,
Rima notes that CBCC, like Rima in this instant review, did not have three
consecutive years of sales in commercial quantities. However, Rima asserts
that CBCC was preliminarily revoked even after the Department found that
sales in one year were not as extensive as sales in other years. Rima
claims that the decision to revoke CBCC was based upon the Department's
consideration of four PORs. Rima contends that even though this decision
was reversed on different grounds in the final results of that review, the
Department's four year period for purposes of a revocation analysis was
never questioned. Therefore, Rima argues that the Department should
consider the 1996-97, 1997-98, 1998-99 and 1999-00 PORs for revocation
purposes.

Further, Rima argues that although section 351.222(e)(1)(ii) of the
Department's regulations refers to certification of commercial quantities
"during each of the consecutive years," the Department should not
interpret this to mean that the Department's commercial quantity analysis
must be limited to three consecutive years. Rima asserts that in the
preliminary results, the Department stated that a commercial quantity
determination is made on a case-by-case basis. Consequently, Rima argues
that the Department should analyze the totality of circumstances
supporting Rima's revocation request and not simply base the decision on a
percentage analysis. 

Rima argues that it is entitled to revocation because it has shown that
it had at least three years of no dumping during which sales were made in
commercial quantities. In addition, Rima asserts that it agreed to
reinstatement of the order if it is found to be dumping in the future.
Further, Rima states that there is no record evidence indicating the
continued necessity of the order to offset dumping. 

Petitioners disagree with Rima. Petitioners argue that the plain language
of sections 351.22(e)(1)(ii) and 351.222(d)(1) of the Department's
regulations demonstrates that U.S sales in commercial quantities for three
consecutive years are a threshold requirement for revocation. Petitioners
assert that the Department has consistently found that a respondent has
not satisfied this prerequisite for revocation when the respondent did not
sell the subject merchandise in commercial quantities in the United States
during any one of the three consecutive years forming the basis for the
respondent's request for revocation. See, Petitioners Rebuttal Brief at 3.

In addition, petitioners claim that Rima mistakenly asserts that its
revocation request was based on the past four PORs. Petitioners claim that
the certification attached to Rima's revocation request states that "RIMA
certifies that, during each of the last three consecutive years, it sold
subject merchandise to the United States in commercial quantities."
Petitioners claim that the Department's regulations require the
certification regarding U.S sales in commercial quantities to cover the
time period forming the basis for the revocation request. Petitioners
state that Rima's revocation request does not mention the time period on
which it is based. Therefore, petitioners argue that, contrary to Rima's
claims, its revocation request was based on the "last three consecutive
years." Consequently, petitioners argue that Rima's arguments that the
commercial quantities analysis should be based on four years have no basis.

Further, petitioners dispute Rima's claim that the 1997-1998 review of
silicon metal is precedent for considering four review periods in a
revocation analysis. Petitioners argue that, in the final results of the
1997-1998 POR, the Department based its rejection of CBCC's revocation
request on the absence of U.S sales in commercial quantities during each
of the three consecutive PORs. 

Department's Position: 

We agree with petitioners. Section 351.222(e) of the Department's
regulations explicitly states that, in order to qualify for revocation, a
respondent must demonstrate sales of commercial quantities in at least
three consecutive years. Although, as Rima notes, this regulation does not
limit the revocation request to just three years, it does require sales in
commercial quantities for at least three consecutive years. As stated in
the preliminary results, Rima did not have sales in commercial quantities
in the first of the three years that formed the basis of its revocation
request. Rima's argument that it sold in commercial quantities during the
1996-1997, 1998-1999 and 1999-2000 PORs is of no consequence because the
reviews were not consecutive. Therefore, Rima did not satisfy one of the
most basic requirements of the regulation.

The Department further notes that Rima's assertion that it based its
revocation request on a four year period is incorrect. After a careful
review of the record, Rima's initial revocation request was based on three
consecutive years, not four. As stated previously, a threshold requirement
of revocation is that a respondent submit a revocation request certifying
that it sold at not less than NV for three consecutive years. Rima
submitted a certification attached to its revocation request stating that
it believed that it was entitled to revocation based upon its last three
consecutive years of sales. Accordingly, the Department based its
revocation analysis upon the stated time period. Further, in the final
results of review for the 1997-1998 POR, the Department ultimately decided
that CBCC did not sell in commercial quantities during the POR that was
described in the preliminary as not encompassing quantities as extensive
as others years. Therefore, the case does not serve as precedent for a
four year non-consecutive revocation analysis, as argued by Rima. Rather,
the case serves as precedent that three consecutive years of sales in
commercial quantities are required for revocation. Therefore, regardless
of whether the Department considered three or four years in analyzing
Rima's revocation request, the result would have been the same.
Consequently, for the final results, based on the fact that the Department
previously found that Rima's sales during the 1997-1998 POR were not sold
in commercial quantities and the fact that Rima has presented no evidence
contrary to this finding in the present review, the Department finds that
Rima did not sell subject merchandise in commercial quantities during the
three consecutive years that formed the basis of its revocation request.
See, Memorandum to Thomas Futtner from Maisha Cryor: Decision Memorandum
for the Ninth Administrative Review of Silicon Metal from Brazil Regarding
Whether Rima Industrial S/A (Rima) Sold Subject Merchandise in Commercial
Quantities during Three Consecutive Periods of Review (POR), July 31, 2001
(Commercial Quantities Memo). 


Comment 28: Unreviewed and Intervening Years 

Rima argues that the regulatory support the Department invoked to reject
Rima's revocation request, 19 CFR 351.222(d)(1), was only intended to
apply to unreviewed intervening years for purposes of revocation analysis.
Therefore, Rima argues that this section of the Department's regulations
did not give the Department the authority to conduct a commercial
quantities analysis in the preliminary results. Rima contends that even
though the Department, in past cases, has found that the commercial
quantity regulation developed from the intervening year regulation, the
Department has continually and incorrectly asserted that the application
of 19 CFR 351.222(d)(1) is reasonable in all revocation cases. Moreover,
Rima asserts that the legislative history of the Department's regulations
indicates that the Department's action of applying 19 CFR 351.222(d)(1) to
all revocation requests is incorrect. 

Rima states that the preamble to the Department's regulations are the
proper source for determining the rulemaking intent behind the
Department's promulgation of the commercial quantities criterion in the
Department's regulations. See, Antidumping Duties; Countervailing Duties;
Final Rule, 62 FR 27296 (May 19, 1997). Rima asserts that in the preamble
to the Proposed Rule, it is asserted that proposed section 351.222(b) "is
substantially unchanged from existing section 353.25(a), which sets forth
elements that the Department may consider in determining whether to revoke
an antidumping order with respect to a specific producer that has
participated in three consecutive reviews. Rima asserts that this section
of the regulations does not include a requirement that sales be made in
commercial quantities. Additionally, Rima argues that the Department
promulgated section 351.222(d)(1) to "reduce the administrative burden on
parties and Department personnel," by eliminating the requirement that the
Department needed to conduct a review in each of the three years before
revocation. Further, Rima argues that in the Final Rule, section
351.222(d)(1) demonstrates that the commercial quantities requirement is
not applicable in all revocation analyses because it states that "the
Department established a new procedure under which a review of an
'intervening year' would not be necessary if . . . the Secretary is
satisfied that during the unreviewed intervening years there were exports
to the United States in commercial quantities." See, Antidumping Duties;
Countervailing Duties; Final Rule, 62 FR 27296 (May 19, 1997). Rima argues
that this specific language of the commercial quantities requirement
clarifies that the language is applicable only to a respondent who did not
participate in an administrative review in an intervening year.
Additionally, Rima contends that although the certification requirement
appears to apply generally in section 351.222(e), there is no indication
that the certification was intended to result in enacting a new criterion
for all revocation reviews.

Petitioners disagree with Rima. Petitioners assert that the plain
language of 19 CFR 351.222(e)(1)(ii), which requires that a respondent's
revocation request include a "certification that, during each of the
consecutive years referred to in paragraph (b) of the section, the person
sold the subject merchandise to the United States in commercial
quantities," demonstrates that a commercial quantities analysis was
intended to apply to all revocation requests and not just cases involving
intervening years. Further, petitioners argue that the headline of
subsection (e)(1) (Request for Revocation or Termination), and the
placement of this subsection within section 351.222 of the Department's
regulations, demonstrate that the threshold requirement of U.S sales in
commercial quantities during each of the three consecutive years forming
the basis of the revocation request applies to all revocation requests,
regardless of whether they include a non-reviewed intervening year. 

Petitioners argue that the principles of Chevron v. U.S, 467 U.S 837
(1984), which state that "when the language of a provision is unambiguous,
that is the end of the analysis," apply to the interpretation of the plain
language of the Department's revocation regulations. However, petitioners,
citing Torrington Company v. United States, 156 F.3d. 1361, 1363-64 (Fed.
Cir.1998), contend that even if the language of a regulation is ambiguous
or unclear, the Department is given broad deference to interpret and apply
its own regulations. In addition, petitioners argue that the Department
has rejected arguments similar to the one made by Rima in Pure Magnesium
from Canada: Final Results of Antidumping Duty Administrative Review and
Determination Not to Revoke the Antidumping Duty Order in Part, 65 FR
55502, and accompanying Decision Memorandum at Comment 4 (September 14,
2000) (Pure Magnesium from Canada). Moreover, petitioners argue that it is
a fundamental principle of U.S law that between two incompatible agency
statements, the later one is controlling over the earlier one. 

Department's Position:

We agree with petitioners. Rima's arguments ignore the plain language of
the regulation and the Department's past rejection of this position. As
discussed in Pure Magnesium from Canada, the Department has developed a
procedure for revocation that is described in section 351.222 of the
Department's regulations. This regulation requires that a company
requesting revocation must submit a certification that the company sold
the subject merchandise at not less than NV in commercial quantities in
each of the three years forming the basis of the request. Therefore, in
accordance with our regulations, we must determine, as a threshold matter,
whether the company requesting revocation sold the subject merchandise in
commercial quantities in each of the three years forming the basis of the
request. In the preliminary results, we found that Rima did not qualify
for revocation of the order on silicon metal because it did not have three
consecutive years of sales in commercial quantities at not less than NV.
We based this finding on the fact that sales in one of the three years of
sales Rima is relying upon to support its request for revocation, the
period covering the 1997-1998 POR, were not made in commercial quantities.
Because Rima has used this period as support for its current request for
revocation and the facts have not otherwise changed, we determine that
Rima has not met the threshold criterion outlined in section 351.222
requiring sales in commercial quantities in each of the three years
forming the basis of the revocation request. See, Commercial Quantities
Memo.


As the Department noted in the Pure Magnesium From Canada, while the
regulation requiring sales in commercial quantities may have developed
from the unreviewed intervening year regulation, its application in
revocation cases based on an absence of dumping is reasonable and mandated
by the regulations. See, 64 FR at 50491. The application of this
requirement to such cases is reflected not only in the provision for
unreviewed intervening years (See, 19 CFR § 351.222(d)(1)), but also in
the new general requirement that parties seeking revocation certify
to sales in commercial quantities in each of the years on which
revocation is to be based. See, 19 CFR § 351.222(e)(1)(ii). This
requirement ensures that the Department's revocation determination is
based upon a sufficient breadth of information regarding a company's
normal commercial practices. In this case, the number of sales and the
total sales volumes for at least one of the three years are so small, 
both in absolute terms and in comparison with the period of
investigation and other review periods, that we do not have sufficient
information regarding the company's normal commercial behavior to make 
a revocation decision. If sales levels are not reflective of a company's
normal commercial activities, they can offer no basis upon which to make 
a revocation determination, regardless of whether we conducted a review 
of the sales in question or the sales took place in an intervening year. 
See, Certain Corrosion-Resistant Carbon Steel Flat Products and Certain 
Cut-to-Length Carbon Steel Plate from Canada: Final Results of Antidumping 
Duty Administrative Review and Determination To Revoke in Part, 64 FR 2173,
2175 (January 13, 1999).

In other words, the assessment of commercial quantities is a threshold
issue to any request for a revocation review. When a respondent is not
meaningfully participating in the U.S market (i.e., selling at below
commercial quantities), the Department is not able to establish the
respondent's ability to compete in the U.S market without the discipline
of the AD order. Thus, without sales in commercial quantities the
Department lacks a basis upon which to evaluate whether revocation of an
order, with respect to that respondent, is appropriate. In sum, the
Department must be satisfied that exports were in commercial quantities in
each of the consecutive years under review. This language ensures that the
commercial quantities requirement applies to years that have had reviews
because revocation is precluded unless the Secretary conducted reviews in
at least two of those years (i.e., the first and last years). Thus, the
application of the commercial quantities requirement to Rima is not an
expansion of our precedent or law, but rather consistent with agency
practice.

Further, as Rima cited in its case brief, the preamble to the
Department's proposed regulations states that ". . . [t]o ensure that the
lack of requests for reviews is not simply due to the absence of imports
in commercial quantities, the Department will require a certification from
a company seeking revocation (or each signatory in the case of a suspended
investigation) that it sold subject merchandise to the United States in
commercial quantities in each of the three (or five) years, including any
unreviewed intervening years." See, Antidumping Duties; Countervailing
Duties; Proposed Rule, 61 FR 7308, 7319-20 (February 27, 1997) (Proposed
Rule); Respondents' Case Brief at 25. Thus, the preamble and the
regulation included all periods in revocation requests, not just those
pertaining to unreviewed intervening years, in the scope of those
proceedings that are subject to a commercial quantities analysis.
Therefore, Rima's argument that the regulation was not intended to apply
to all revocations is incorrect. 


Comment 29: Aggregate Sales and Commercial Quantities

Rima argues that the Department's practice of determining commercial
quantities based on aggregate sales is inconsistent with the Department's
regulations. Rima states that in the preamble to the proposed regulations,
the Department states that "it will establish whether sales were made in
commercial quantities based upon examination of the normal sizes of sales
by the producer/exporter and other producers of subject merchandise. See,
Proposed Rule, 61 FR at 7320. Rima contends that this statement means that
commercial quantities was intended to refer to the size and nature of the
transaction, rather than the aggregate volume. Further, Rima argues that
given that the small sales quantity was deemed reasonable and
representative to determine the company's dumping margin, it should not be
considered unreasonable for purposes of a revocation determination.
Therefore, Rima argues that the Department should find that Rima sold the
subject merchandise in commercial quantities. 

Petitioners argue that the Department has always made its commercial
quantities analysis on the basis of aggregate sales volume and has
rejected the argument that the analysis should be based on the individual
size of each sale. See, Polyvinyl Alcohol from Taiwan: Final Results of
Third Antidumping Duty Administrative Review and Determination Not to
Revoke Order in Part, 65 FR 60615 and accompanying Decision Memorandum at
Comment 1c (October 12, 2000) (Polyvinyl Alcohol). Petitioners assert that
the Department has not defined commercial quantities by the size of
individual sales in the preamble to its proposed regulations, the preamble
to its final regulations or in subsequent determinations. Id. Petitioners
argue that although the Department's regulations do not state whether
commercial quantities should be applied to aggregate sales volumes or the
individual size of the sales, the Department is given broad deference to
interpret its own regulations. Further, petitioners argue that analyzing
the aggregate volume of sales provides a reasonable and fair means of
establishing whether the respondent is able to participate meaningfully in
the U.S market without dumping. 

Department's Position:

We disagree with Rima that the Department has applied the commercial
quantities requirement in a manner inconsistent with its past practice and
regulations. In addition, we disagree with Rima's assertion that the
Department has defined commercial quantities as specifically referring to
the size of individual sales (which is not included in the preamble of the
Final Rule, the preamble of our Proposed Rule, or reflected in our past
practice). On the contrary, it has been the Department's practice to
examine the aggregate volume of total sales to the United States in
absolute terms and in comparison with the POI or other appropriate
benchmark period in determining whether sales have been made in commercial
quantities. See, Polyvinyl Alcohol from Taiwan, 65 FR at 60515; Certain
Corrosion-Resistant Carbon Steel Flat Products and Certain Cut-to-Length
Carbon Steel Plate from Canada: Final Results of Antidumping Duty
Administrative Reviews, and Determination Not to Revoke in Part, 65 FR
9243, 9249 (February 24, 2000). Therefore, for the final results, and
pursuant to past Department practice, we have continued to base Rima's
commercial quantity analysis on aggregate sales volumes.

Comment 30: Impermissible Rule Making and Violation of the APA with
             Respect to Commercial Quantities

Rima argues that the Department engaged in impermissible de facto
rulemaking because the commercial quantities criterion amounts to a
substantive change to the Department's revocation procedures, despite the
Department's assertion that there were to be no substantive changes to the
new revocation analysis. See, Proposed Rule, 61 FR at 7319. Further Rima
states that this substantive change to the regulations violated the APA,
set out in 5 U.S.C. section 553. Rima argues that the proposed rule only
discussed the application of the commercial quantities criterion to the
intervening reviews exception. Rima contends that applying the commercial
quantities criterion to all revocation analysis deprived interested
parties of the opportunity to comment on the substantial change to the
revocation regulations. Further, Rima argues that the Department violated
the APA in its most recent amendment to section 351.222. Rima claims that
the Department made an amendment to section 351.222, in response to a
ruling by a World Trade Organization (WTO) panel concerning the
Department's "likelihood of dumping" analysis for revocation purposes.
Rima states that the proposed rule promulgated by the Department only
pertains to the issue of "likelihood of dumping." However, in the final
amended regulation, Rima claims that the Department added a footnote
stating "[i]n accordance with 19 C.F.R. 351.222(e)(ii), to be considered
for revocation, the producers and exporters must have sold the subject
merchandise in commercial quantities in each of the three years." See,
Amended Regulation Concerning the Revocation of Antidumping and
Countervailing Duty Orders, 64 FR 51236, 51238, n. 2 (September 22, 1999).
Rima argues that because this footnote was not part of the proposed rule,
interested parties were deprived of the opportunity to comment on this
issue. Therefore, Rima argues that the commercial quantities analysis
should not be used by the Department in the absence of a proper notice-and-
comment process.

Petitioners disagree with Rima. Petitioners argue that the Department
followed the notice-and-comment procedure required by 5 U.S.C. section 553
and provided general notice in the Federal Register of the proposed
rulemaking. In addition, petitioners argue that the Department provided
interested persons with the opportunity to participate in the rulemaking
through submission of written comment, and published the final rule not
less than 30 days before its effective date. Further, petitioners argue
that the requirement of U.S sales in commercial quantities was part of the
proposed rule, and was pointed out by the Department in its comments on
the proposed rule and remained unchanged in the final rule. Moreover,
petitioners argue that the Department's application of the requirement of
U.S sales in commercial quantities for revocation purposes is consistent
with the plain language of its regulations. 

Department's Position: 

We agree with the petitioners. In the proposed rule, noted by Rima in its
case brief, the Department stated that ". . . [t]o ensure that the lack of
requests for reviews is not simply due to the absence of imports in
commercial quantities, the Department will require a certification from a
company seeking revocation (or each signatory in the case of a suspended
investigation) that it sold subject merchandise to the United States in
commercial quantities in each of the three (or five) years, including any
unreviewed intervening years." See, Proposed Rule 61 FR at 7319-20. This
statement alerted interested persons to the fact that the Department was
proposing to apply a commercial quantities analysis to three consecutive
years forming the revocation request, as well as to apply the commercial
quantities analysis to any unreviewed intervening years. Therefore,
contrary to Rima's argument, interested parties were notified of the
proposed commercial quantity criterion and were given the opportunity to
comment. Consequently, we find that the Department's commercial quantities
criterion does not constitute impermissible de facto rulemaking or a
violation of the APA.

Regarding Rima's argument concerning likelihood of dumping and commercial
quantities, we have not addressed the issue for the final results. Because
we preliminarily decided not to revoke the order with respect to Rima, we
did not consider the issue of likelihood of future dumping. Similarly,
since we are not revoking the order with respect to Rima for the final
results, we are not addressing this issue in the final results.

Rima and CBCC

Comment 31: Home Market Credit and ICMS

CBCC and Rima argue that the Department erroneously calculated its home
market credit expense based on a home market price exclusive of ICMS. CBCC
argues that, according to LMI, 912 F. 2d at 461, the imputed credit
expense must reflect the time value of the amount of money of which the
respondents were deprived use. Therefore, for the final results, CBCC
argues that the Department should calculate credit based on a home market
price inclusive of ICMS.

Petitioners disagree with CBCC and Rima. Petitioners argue that, contrary
to CBCC's claim, the issue in LMI, 912 F. 2d at 461, was not whether VAT
should be included in the calculation of imputed credit expenses, but what
interest rate should be used in the calculation. Petitioners assert that
the Department, as it did in Certain Cut-to Length Carbon Steel Plate from
Brazil: Final Results of Antidumping Duty Administrative Review, 62 FR
18,486, 18,488 (April 15, 1997), should not base CBCC's home market credit
expense on home market prices inclusive of ICMS tax. Further, petitioners
assert that since the ICMS tax is not included in the home market selling
price to begin with, CBCC should not be able to claim an adjustment for
the opportunity cost associated with a home market selling price,
inclusive of ICMS tax. Accordingly, petitioners argue that, for the final
results, the Department should continue to exclude ICMS tax from the gross
unit price in the imputed home market credit expense calculation.



Department's Position: 

We agree with the petitioners. In the Notice of Final Determination of
Sales at Less Than Fair Value; Certain Hot-Rolled Flat-Rolled Carbon-
Quality Steel Products from Brazil, 64 FR 38756, 38773 (July 19, 1999),
the Department found that home market credit expense should be calculated
exclusive of ICMS taxes. Specifically, the Department stated that "the
Department agrees with petitioners that home market imputed credit expense
should be calculated using the price net of taxes, rather than the gross
unit price. It is the Department's practice not to impute credit expenses
related to VAT payments. Nor is there any statutory or regulatory
requirement for making the adjustment proposed by the respondent." Id.
Therefore, for the final results, because the ICMS tax is a VAT, the
Department will continue to exclude ICMS taxes from the gross unit price
in Rima's and CBCC's imputed home market credit expense calculation.

Comment 32: Conversion of U.S. Packing Costs

CBCC and Rima state that they reported the packing costs for U.S sales in
Brazilian currency and that the Department failed to convert this expense
to U.S dollars in the margin program. CBCC and Rima request that the
Department correct this matter for the final results.

Petitioners did not comment on this issue.

Department's Position:

We agree that, in the preliminary results, with respect to Rima and CBCC,
we inadvertently failed to convert U.S packing costs into U.S dollars. We
have corrected this matter for the final results.







_________________________________________________________________________
footnotes:

1. We note that either including or excluding the sales from the margin
calculation has no bearing on the outcome of the margin. 

2. We have placed on the record of this review the pertinent parts of the
verification report, verification exhibits and questionnaire responses
surrounding the details of the loan activity at issue in Silicon Metal
from Brazil (1998-1999 Administrative Review).