65 FR 41436, July 5, 2000 Sunset Review A-122-814 MEMORANDUM TO: Troy H. Cribb Acting Assistant Secretary for Import Administration FROM: Jeffrey A. May Director Office of Policy SUBJECT: Issues and Decision Memo for the Sunset Review of Pure Magnesium from Canada, Final Results Summary: We have analyzed the comments and rebuttals of interested parties in the full sunset review of the antidumping duty order covering pure magnesium from Canada. 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 sunset review for which we received comments and rebuttals by parties: 1. Likelihood of continuation or recurrence of dumping A. Weighted-average dumping margin B. Volume of imports C. Other factors 2. Magnitude of the margin likely to prevail A. Margins from the investigation B. Use of a more recent margin Background: On February 29, 2000, the Department published in the Federal Register the preliminary results of the sunset review of the antidumping duty order on pure magnesium from Canada (65 FR 10768 ) pursuant to section 751(c) of the Tariff Act of 1930, as amended ("the Act"). In our preliminary results we found that revocation of this antidumping duty order would likely lead to continuation or recurrence of dumping because imports of the subject merchandise decreased by more than 97 percent in the year following the issuance of the order and imports have consistently remained at less than 10 percent of their pre-order volume (see Department's Issues and Decision Memo for Sunset Review of Pure Magnesium from Canada; Preliminary Results, February 29, 2000). On April 19, 2000 we received a case brief on behalf of Norsk Hydro Canada Inc. ("NHCI"), as specified in 19 CFR 351.309(c)(1)(i). On April 20, 2000, Magnesium Corporation of America ("Magcorp"), Magcorp filed a rebuttal brief in response to the NHCI case brief, pursuant to 19 CFR 351.309(d). We have addressed the comments received below. Discussion of the Issues In accordance with section 751(c)(1) of the Act, the Department conducted this sunset review to determine whether termination of the antidumping duty order would likely lead to continuation or recurrence of dumping. Section 752(c) of the Act provides that in making this determination the Department shall consider the weighted-average dumping margins determined in the investigation and subsequent reviews and the volume of imports of the subject merchandise for the period before and the period after the issuance of the antidumping duty order or suspension agreement. In addition, section 752(c)(3) of the Act provides that the Department shall provide to the International Trade Commission ("the Commission") the magnitude of the margin of dumping likely to prevail if the order or suspension agreement is revoked. Likelihood of Continuation or Recurrence of Dumping Interested Parties' Comments Comment 1: In its case brief of April 19, 2000, the respondent interest party, NHCI , asserts that the Department erred in its finding that dumping continued after the issuance of the order. It asserts that the Department was wrong to state in the preliminary results of this review that it calculated a dumping margin of 21 percent for NHCI in the second administrative review covering the period 1993-94, given that in the first and second reviews, the Department did not find shipments of the subject merchandise made by NHCI. NHCI, April 19, 2000, Case Brief at 2. NHCI maintains that the 21 percent dumping margin is the margin assigned to NHCI in the original investigation. Id. In addition, it contends that in the third, fourth, fifth, and sixth administrative reviews, the Department calculated a zero dumping margin for NHCI in each review. NHCI states that its zero margins demonstrate that it can sell pure magnesium without the discipline of the order. It also claims that the Department will find a zero margin in the pending administrative review. Id. Given these facts, it argues that the Department's conclusion that dumping by NHCI continued, is wrong. In its April 20, 2000 rebuttal, Magcorp agrees with the Department's affirmative determination in its preliminary results that there is a likelihood of a continuation or resumption of dumping of pure magnesium by NHCI and other Canadian producers and exporters if the order were revoked. Magcorp argues that NHCI does not seem to understand that the elimination of dumping does not, in the context of a sunset review, require a conclusion that dumping will not resume if the order is revoked. Magcorp, April 20, 2000, Rebuttal at 2. Magcorp notes that in accordance with Sunset Policy Bulletin, the Department will determine that revocation of an order is likely to lead to "continuation or recurrence" of dumping where dumping was eliminated after the issuance of the order and import volumes for the subject merchandise declined significantly. Magcorp asserts that the statutory language, "continuation or recurrence," specifically contemplates the possibility of an affirmative determination by the Department in cases in which dumping has been eliminated, where imports of the subject merchandise declined significantly. Id. Department's Response: We agree with NHCI's claim that we erred in the preliminary results of this sunset review by stating that, in the second administrative review (1993-1994), the Department calculated a rate of 21.0 percent for NHCI and for "all others." See Decision Memo to February 29, 2000, Preliminary Results at 2 and 10-11. The Department did not "calculate" a weighted-average dumping margin in the second administrative review. Instead, the Department "assigned" a margin of 21.0 percent for NHCI and for "all others." In the second review, as in the first review, the Department assigned this rate to NHCI since NHCI did not make shipments of the subject merchandise in the periods covered by both reviews, (61 FR 49732 and 60 FR 49258, respectively). Zero margins were calculated for NHCI in the third, fourth, fifth, and sixth administrative reviews. With respect to continuation or recurrence of dumping if the order revoked, we agree with Magcorp. Although NHCI eliminated its dumping over a period of four consecutive administrative reviews, that fact, standing alone does not warrant a determination that dumping would not be likely to continue or recur if the order were revoked. Section 752(c)(4)(A) of the Act provides that a weighted-average dumping margin of zero or de minimis determined in the investigation or subsequent reviews shall not, by itself, require the Department to determine that revocation of an antidumping duty order would not be likely to lead to continuation or recurrence of sales at less-than-fair-value. See also Sunset Policy Bulletin, Section II.A.5. The Department will determine that dumping is likely to continue or recur when, despite the elimination of dumping margins, imports decline significantly following issuance of an order. Such a decline occurred here, with imports dropping 97 percent in the year following the issuance of the order and never since then rising to more than ten percent of pre-order import levels. Accordingly, we conclude that it is likely that dumping of pure magnesium from Canada will continue or recur if the order were revoked. Comment 2: NHCI asserts that the Department erred in its import volume analysis for three reasons: (a) it used unreliable official Census information that included non-subject merchandise; (b) it applied a commercial quantities analysis that does not reflect the determination in this proceeding and is inconsistent with the analysis in another Departmental determination; and (c) there is no factual basis for the Department's finding of likelihood in numerous administrative reviews. NHCI argues that non-subject merchandise is included in the Department's Census information. NHCI's Case Brief at 3. Further, import volume figures in the Department's data include information on Timminco's exports from Canada, a company that was excluded from the antidumping duty order. Id. NHCI claims that because it and Timminco are the only two producers/exporters of magnesium from Canada, and since Census official data reflect total exports from Canada, the Department's conclusion is in error. Id. NHCI also argues, in its case brief, that the commercial quantities analysis does not reflect determinations in this proceeding, and is inconsistent with the commercial quantity analysis in another Departmental determination. It asserts that the Department erred in finding that shipments were not made in commercial quantities. NHCI's Case Brief at 3. With respect to NHCI's assertion that the Department's finding of likelihood has no basis in fact, NHCI asserts that in the preliminary results the Department erred in concluding in numerous administrative reviews the observed patterns regarding import volumes are indicative of the likelihood of dumping. NHCI asserts that the Department made no such determination in any of those reviews. Id. at 5 In addition, NHCI asserts that the Department has refused to consider its request for revocation of this order based upon the Department's consideration of the threshold issue of commercial quantities. Id. Magcorp, in its April 20, 2000 rebuttal, asserts that the Department's import volume analysis is correct. It states that the Department made appropriate use of Census Bureau import data in its preliminary determination. Id. 3. In 1991, the year the order was imposed, total U.S. imports of subject merchandise from Canada were 21,234 metric tons. Id. In 1992, Canada accounted for only 548 metric tons of total U.S. imports. Id. Magcorp calls NHCI's claim that the Department included Timminco, Ltd., import data, frivolous. It further states that Timminco is a small specialty producer that focuses on high-purity magnesium (greater than 99.9 pure) and that Timminco ships only small volumes of the subject merchandise into the United States. Id. This is evident, it states, in the U.S. Census Bureau import statistics. Magcorp asserts that all of the 1992 shipments (548 metric tons) were from Timminco. Id. Magcorp asserts that the Department should reject NHCI's argument regarding sales in commercial quantities. It asserts that NHCI mischaracterizes the Department's preliminary determination by stating that the Department concluded that NHCI did not make shipments in commercial quantities. Magcorp argues that the Department did not make a commercial quantity determination in the preliminary results, or treat it as a threshold issue. Rather, Magcorp asserts, in the preliminary results of this review the Department simply referred to the conclusion in earlier reviews that subject imports were not made in commercial quantities. Id. at 5. In addition, Magcorp argues that the fact that in other administrative reviews the Department has found that subject imports have not been made in commercial quantities simply reenforces the fact that shipments have declined significantly. Id. Magcorp maintains that the Department does not make a commercial quantities determination in the context of a sunset review, but instead, as noted in the Department's Policy Bulletin, determines whether there has been a significant decline in imports after the issuance of the order. Id. 4-5. Magcorp further claims that whether NHCI's shipments into the United States in 1998-1999 were in commercial quantities is irrelevant. Id at 6. Citing to various reviews of the subject merchandise conducted by the Department, Magcorp discusses what the Department considers as constituting commercial quantities in qualifying for revocation of an antidumping duty order. Id. Department's Position We disagree with NHCI's assertion that the Department erred in its import volume analysis because the Census information relied upon by the Department included non-subject merchandise. In the context of a sunset review, we rely on the scope of the order as provided in the most recent administrative review conducted by the Department, in addition to import statistics as compiled from tariff and trade data from the International Trade Commission and the U.S. Census Bureau IM 146 reports. We find that the information in these reports provides an appropriate basis upon which to determine that there has been a significant decline in NHCI exports following the issuance of the order. NHCI's assertion that we erred in our commercial quantity analysis is misplaced since we made no such analysis, but concluded, based on findings, in earlier reviews, that import volumes significantly declined after the issuance of the order. NHCI's assertion that our findings in earlier reviews were erroneous is not relevant in this present review. NHCI did not challenge our conclusion then and cannot properly do so now. In making a determination as to whether revocation of the antidumping duty order is likely to lead to continuation or recurrence of dumping, the Department, consistent with section 752 (c)(1) of the Act, and the Department's Sunset Policy Bulletin, finds that where dumping was eliminated after the issuance of the order, but import volumes for the subject merchandise declined significantly, we will determine that dumping is likely to continue or recur. We have so found here. Comment 3: NHCI maintains that it was unreasonable for the Department not to consider other factors than import volume in its likelihood analysis, given the factual situation in this proceeding. First, NHCI claims that it was not an established producer during the investigation: therefore, its pre-order level reflects its initial operations and shipments. Second, NHCI asserts that in 1992 it ceased its exports of pure magnesium to the United States. Id. It claims that since 1994, although its shipments are small compared to pre-order levels, its exports to the United States have increased. Id. In addition, it claims that its product mix and market strategy have changed since the order was issued. Id. Under these circumstances, NHCI maintains that the Department should consider these other facts in its final results of this review. Id.at 6. In its rebuttal brief, Magcorp states that the Department should reject NHCI's claim that the facts in this case are unique. Magcorp, April 20, 2000, Rebuttal at 9-15. According to Magcorp, the fact is that imports declined significantly after the imposition of the order. Id. at 9. Therefore, consistent with the Department's practice, the Department should not consider them. Id. Magcorp cites to Carbon Steel Wire Rod from Argentina, 64 FR 53321, October 1, 1999)(final), Brass Sheet and Strip from Canada 64 FR 66165 (November 24, 1999)(final) and Brass Sheet and Strip from the Netherlands, 64 FR 46637 (August 26, 1999)(prelim), contending that in the above reviews the Department similarly excluded from consideration other factors by respondents. Id. 9-11. Department's Position: As provided in section 752(c)(2) of the Act, the Department will consider factors other than import volumes where good cause for such consideration is shown to exist. While the apparent focus of NHCI's business may have been modified since the order was issued, we are not persuaded that this change, rather than the issuance of the order accounts for the drastic reduction in exports to the United States since the period prior to the order. The information presented by NHCI therefore, does not provide good cause for taking additional factors into account in making our determination. Consistent with our Sunset Policy Bulletin, we, therefore, affirm our preliminary results of this review and determine that dumping is likely to continue or recur if the order on pure magnesium from Canada were revoked. Magnitude of the Margin Likely to Prevail Interested Parties' Comments Comment 1: NHCI asserts that the Department's preliminary determination is seriously flawed because the rate calculated in the investigation is not the only calculated rate that reflects the behavior of NHCI absent the order, especially if the rate established in the investigation was based on best information available. NHCI, Case Brief at 7. NHCI maintains that, as a producer of pure magnesium in Canada and Norway, it has demonstrated that it can sell the subject merchandise in the United States without dumping absent the discipline of the order. Id. at 8. It asserts that in three consecutive administrative reviews, the Department found zero dumping margins for the respondent. NHCI Case Brief at 8. Magcorp asserts that the rate calculated during the investigation is the only calculated rate that reflects the behavior of respondent absent the order. See Magcorp's April 20, 2000, Rebuttal at 15. Magcorp states that NHCI 's only support for its assertion is that prior to the order, it was the seller of Norwegian exports of pure magnesium from its parent, Norsk Hydro A/S, not of pure magnesium produced in Canada. As to NHCI's imports to the United States, Magcorp maintains that respondent's role as a reseller of imports of non-subject merchandise has no relevance to the analysis by the Department Department's Response: We disagree with respondent. The Statement of Administrative Action ("SAA") states that the Department normally will select a margin from the investigation because that is the only rate that reflects the behavior of exporters without the discipline of the order. The fact that NHCI has avoided dumping margins in four consecutive administrative reviews and, therefore, demonstrated that it can sell pure magnesium to the United States without dumping absent the order, standing alone, does not demonstrate that it would be likely to continue to sell at non-dumped prices if the order were revoked. Section 752(c)(4)(A) of the Act provides that a weighted-average dumping margin determined in the investigation or subsequent reviews that is zero or de minimi shall not, in itself, require the Department to determine that dumping by a specific company is not likely to continue or recur. (1) Since import volumes declined significantly after the order was issued, even though dumping margins were eliminated, and since NHCI has not provided convincing evidence to report a margin different from the one we determined to exist in the original investigation, we find that the rate from the investigation is the calculated margin likely to prevail if the order were revoked. Therefore, consistent with our Sunset Policy Bulletin, we will report to the Commission the rate determined in the investigation. Comment 2: NHCI argues that the Department erred in its preliminary affirmative finding that NHCI has not resumed shipping in commercial quantities. Id. at 7-8. According to NHCI, its record information illustrates that its shipments in 1998 equaled 3.8 percent of its pre-order volume, and in 1999 (on an annualized basis) equaled 8.9 percent of its pre-order volume. NHCI notes that in a more recent review, Certain Corrosion-Resistant Carbon Steel Flat Products and Certain Cut-to-Length Carbon Steel Plate from Canada, the Department found shipments to be in commercial quantities although only 3.3 percent of pre-order levels. Id at 8. NHCI states that consistency between cases requires the Department to find in this review that NHCI has resumed sales in commercial quantities. Id. With respect to NHCI's assertion that the Department did not find its shipments of subject merchandise in this review to be in commercial quantities, Magcorp asserts that in a sunset review a finding that shipments are in commercial quantities is not necessary. Magcorp states that the Department's determination that the margin from the original investigation is probative of the behavior of Canadian producers' exports of pure magnesium if the order is revoked is based on the significant decline in subject imports since the order was imposed, and not the previous finding in administrative reviews that shipments from Canada have not been in commercial quantities. Id at 16. Department's Position: In sunset reviews we are not required to make threshold determinations as to whether imports have been made in commercial quantities. We do, however, examined the volume of shipments in analyzing import trends and any changes in corresponding dumping margins. In this case, import statistics demonstrate clearly that import volumes of the subject merchandise have declined significantly after the issuance of the order and have remained well below pre-order levels. Comment 3: NHCI contends that it is unreasonable for the Department to use the fact that import volumes have never regained pre-order levels as one of the reasons for selecting the margin from the investigation. NHCI's April 19, 2000, Case Brief. Given the facts in this proceeding, NHCI maintains that it is improper for the Department to assume that its pre-order 1989-1991 imports reflect its normal commercial behavior. Id. at 9. In the year prior to the investigation, NHCI asserts, it was a new producer, and since the time of the investigation it has drastically changed its product mix and marketing strategy. Id. It is now primarily a producer of alloy magnesium; Therefore, its shipments of pure magnesium into the United States are not likely to regain pre-order volumes in the foreseeable future. Id. Finally, NHCI argues that the zero margins in recent reviews are based on a trend of increasing imports and reflect NHCI's normal commercial behavior. Id. NHCI asserts that the Department should consider that it is an established producer and has achieved zero dumping margins while at the same time increasing shipments of the subject merchandise to the United States. Although when making its determination the Department relied upon the Policy Bulletin in analyzing imports in this case, NHCI asserts that, should the Department use 1994 as a benchmark, the Department would see a trend of increased imports accompanied by zero dumping margins. Id. at 10. Magcorp argues that NHCI's exports of pure magnesium to the United States remain very small and do not suggest normal commercial behavior. Magcorp claims that the only appropriate benchmark for the likely effect of the order is the period prior to the issuance of the order. Id. at 16. Magcorp asserts that NHCI failed to provide evidence to support its argument for using 1994 as the only appropriate benchmark for its likely export volume in the event of revocation. Id. Even if 1999 shipments were expressed on an annualized basis, Magcorp notes that imports of the subject merchandise were equal to only 8.9 percent of NHCI's pre-order volume, far below pre- order levels. Id. Department's Position: We agree with Magcorp that use of 1994 as a benchmark for any purpose here would be inappropriate. 1994 is a year in which the dumping order was in place and cannot logically reflect import volumes or pricing practices likely to exist if the order were revoked. Neither can we rely on 1998 as a benchmark rate since NHCI's exports of pure magnesium from Canada have consistently remained at less than 10 percent of their pre-order levels, which indicates that NHCI cannot sell at pre-order levels without dumping. The SAA at 890, and the House Report at 64, provide that the Department normally will select a margin from the investigation, because that is the only calculated rate that reflects the behavior of exporters without the discipline of an order. Furthermore, for companies not specifically investigated or for companies that did not begin shipping until after the order was issued, the Department normally will provide a margin based on the all others rate from the investigation and we will do so here. The Department will also provide the Commission a list of companies excluded from the order. After reviewing comments by the Magcorp and NHCI, we affirm the findings in our February 29, 2000 preliminary results and will report to the Commission the dumping margin from the investigation as the margin likely to prevail if the order were revoked. Recommendation: Based on our analysis of the comments received, we recommend adopting all of the above positions. If these recommendations are accepted, we will publish the final results of review in the Federal Register. AGREE ____________ DISAGREE ____________ ________________________________________________________________________ footnote: 1. Also see Policies Regarding the Conduct of Five-year Sunset Reviews of Antidumping and Countervailing Duty Orders: Policy Bulletin at 18873.