65 FR 47379, August 02, 2000 A-122-822 Sunset Review Public Document 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 Full Sunset Review of Corrosion-Resistant Carbon Steel Flat Products from Canada; Final Results Summary: We have analyzed the comments of interested parties in the full sunset review of the antidumping duty order covering corrosion-resistant carbon steel flat products 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 full sunset review for which we received comments by interested parties:Magnitude of the margin likely to prevail Margins from the investigation Use of a more recent margin Other factors in underlying calculations Background: On April 7, 2000, the Department of Commerce (“the Department”) published in the Federal Register a notice of preliminary results of the full sunset review of the antidumping duty order on corrosion-resistant carbon steel flat products from Canada (65 FR 18286) pursuant to section 751(c) of the Tariff Act of 1930, as amended (“the Act”). In our preliminary results, we found that revocation of the order would likely result in continuation or recurrence of dumping with net margins of 11.71 percent for Dofasco, Inc., 22.70 percent for Stelco, Inc. ("Stelco") and 18.71 percent for "all others." On April 26, 2000, Bethlehem Steel Corporation, U.S. Steel Group, a unit of USX Corporation, Ispat Inland, Inc., and LTV Steel Company, Inc. (collectively "domestic interested parties") requested a hearing in the sunset review. On May 3, 2000, Dofasco also requested a hearing. On May 8, 2000, within the deadline specified in 19 CFR 351.209(c)(1)(i), we received a case brief on behalf of Dofasco and Sorevco Inc., (collectively "Dofasco"). On May 12, 2000, domestic interested parties requested an extension of the deadline for filing rebuttal briefs; on May 15, 2000, the Department granted an extension for domestic interested parties to file rebuttal briefs until May 18, 2000. On June 14, 2000, the Department held a public hearing. On June 19, 2000, in response to the Department's request for further clarification of information on U.S. shipments of subject merchandise,(1) domestic interested parties submitted the underlying calculations to the data submitted in their October 15, 1999, rebuttal to the Dofasco's substantive response. On June 27, 2000, Dofasco submitted comments on domestic interested parties' underlying calculations. Discussion of the Issues In accordance with section 751(c)(1) of the Act, the Department conducted this review to determine whether revocation of the antidumping duty order would be likely to 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. 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 margins of dumping likely to prevail if the orders are revoked. Below, we address the comments of the interested parties. Magnitude of the Margin Likely to Prevail: Interested Party Comments: Comment 1: Dofasco contends that the statute and legislative history require the Department to compare Dofasco's declining dumping margin to import volume - not market share (see May 8, 2000, case brief of Dofasco at 1) in determining a dumping margin to report to the Commission. Specifically, section 752(c)(1) of the Act establishes that the Department must rely on (1) the weighted average dumping margin determined in the investigation and subsequent reviews and (2) the volume of imports for the periods before and the periods after the issuance of the antidumping order. Id. at 2. Dofasco states that section 752(c)(3) directs the Department to transmit the margin that results from the subsection 752(c)(1) analysis to the Commission; section 752(c)(2) of the statute allows the Department to examine factors other than the mandatory factors specified in subsection 752(c)(1) (for example, "market factors"), but only if "good cause" is shown. Id. at 3. Thus, Dofasco argues, the Department's preliminary determination is contrary to law because it failed to examine the volume of imports for the period before and the period after the issuance of the order, and because it relied on "market share" without showing that "good cause" existed to analyze that factor. Dofasco states that the market share of foreign producers' imports is merely one of several additional potential factors the Department might consider "for good cause shown." Id. at 5. Dofasco contends that the Statement of Administrative Action ("SAA") provides no basis for the Department to ignore the volume of imports and instead substitute the market share of a particular foreign producer's imports as the most important mandatory consideration when determining whether to select a margin from an administrative review instead of the margin from the original investigation. Id. Rather, Dofasco restates, according to the Department's Sunset Policy Bulletin, the SAA requires it to compare import volumes - not market share. Id. Further, Dofasco states that "import volumes" cannot be interpreted as "market share" because import volumes refer to the quantity of the imports, while "market share" refers to the percentage of the market held by the imports. Id. at 7. Finally, Dofasco asserts that the Department should reexamine its interpretation of the Sunset Policy Bulletin in light of the recent Supreme Court decision in Christensen v. Harris Cty., No. 98 1167, 2000 U.S. LEXIS 3003, at *19 (May 1, 2000) in which the Court held that agency policy bulletins are not entitled to deference. Id. Thus, Dofasco asserts, the Department cannot suggest that the references in the statute and legislative history to "volume" really mean "market share" instead of absolute quantity. Id. Domestic interested parties rebut Dofasco's argument that, under section 752(c)(3) of the Act, the Department may consider only the two factors, and that the Department's consideration of Dofasco's "relative market share" as part of its prevailing margin determination was, therefore, erroneous (see May 18, 2000, rebuttal brief of domestic interested parties at 1). Domestic interested parties contend that nothing in the design of the statute supports Dofasco's assertion. Rather, the SAA establishes that subsection (1) delineates the factors to be considered by the Department in making the likelihood determination, and subsection (2) is intended to allow consideration of other factors when "good cause" is shown specifically in relation to the likelihood determination. Id. at 4. Thus, domestic interested parties assert, the factors listed in subsections (1) and (2) of the statute relate only to the likelihood determination, and do not address the Department's prevailing margin determination under subsection (3). Id. Further, domestic interested parties contend that, since nothing in the prevailing margin provision itself suggests that the Department is limited in what may it may consider in making the prevailing margin determination, the Department clearly has discretion. Id. Only when information on market share is missing will the Department look at absolute import volumes as proposed by Dofasco. Id. at 5. Thus, the Department adhered to its well-established and proper procedure in determining the magnitude of the margin most likely to prevail. Id. at 6. Department's Position We agree with domestic interested parties that the SAA establishes that subsection (1) of section 752(c) delineates the factors to be considered by the Department in making the likelihood determination, and subsection (2) is intended to allow consideration of other factors when "good cause" is shown specifically in relation to the likelihood determination. These subsections relate only to the likelihood determination, and do not address the Department's prevailing margin determination under subsection (3). Further, we disagree that the Department's preliminary determination is contrary to law. Section II.B.2 of the Sunset Policy Bulletin provides that in analyzing whether imports volumes remained steady or increased, the Department normally will consider the company's relative market share. The emphasis on the market share of an importer derives from the SAA at 889, which states that declining (or no) dumping margins accompanied by steady or increasing imports may indicate that foreign companies do not have to dump to maintain market share in the United States. Therefore, it is not merely our Policy Bulletin which reflects the appropriateness of consideration of market share for the purpose of determining whether a more recently calculated margin is probative of the margin likely to prevail if the order were revoked. Accordingly, in addition to total import volumes, we considered the information submitted by interested parties on Dofasco's market share in determining the margin to report to the Commission. Comment 2 Dofasco states that, because its import volumes subsequent to the order were higher than those in the period prior to the order, while, at the same time, its margins decreased, the Department in its final determination should report to the Commission the de minimis margin of 0.20 percent, calculated for Dofasco by the Department in its most recently completed administrative review (see May 8, 2000, case brief of Dofasco at 4). Further, the Sunset Policy Bulletin states that the Department will provide a more recently calculated margin to the Commission when margins have declined or have been eliminated and import volumes have remained steady or increased. Id. at 6. Dofasco states that the volume-based test is the correct test for determining whether use of a later administrative review margin is more appropriate than use of the margin from the original investigation in choosing the rates to report to the Commission. Id. at 8. First, Dofasco contends that domestic interested parties have not placed substantial evidence on the record to support their argument based on market share. Specifically, Dofasco asserts that, although domestic interested parties submitted data to show Dofasco's market share for 1991 in comparison to the years 1994 through 1998, they failed to submit the underlying numbers on the record, and did not explain how they arrived at U.S. consumption figures, since those figure require U.S. shipment and export data. Id. at 9. Second, Dofasco contends that there is no reason to believe that the resulting "market share" percentages would be reliable because calculation of Dofasco's percentage share of the U.S. market requires not only Dofasco's data on subject imports, but also requires data on U.S. shipments and exports, in order to determine domestic consumption. Id. In addition, Dofasco asserts that, even if domestic parties had provided that information, it is unlikely that they could separate out the industry shipment data on galvanized steel to narrow the data set to subject merchandise. Id. Dofasco states that Census Bureau export data are not readily categorized into exports of subject merchandise because they are based on Schedule B categories, which, like the Harmonized Tariff Schedule ("HTS") import categories, include certain basket categories with an unknown percentage of merchandise falling within the scope of the antidumping duty order on corrosion-resistant carbon steel flat products. Id. at 10. Therefore, Dofasco asserts, even if domestic interested parties had provided the underlying consumption data necessary to calculate Dofasco's share of the U.S. market over time, such data would be an "apples-to-oranges" comparison that would be unreliable, and could not constitute substantial evidence on the record in this sunset review. Id. Finally, Dofasco asserts that, because an exclusive focus on foreign producers' market share provides a distorted prediction of likely margins of dumping, the direction of the statute and legislative history that the Department predict likely margins of dumping based on import volume rather than market share is appropriate. Id. Dofasco illustrates its point by relating a hypothetical scenario in which Dofasco makes constant shipments at 100 percent capacity in all years prior to and following the order. However, under this hypothetical scenario, once the order is issued, domestic shipments increase slightly or remain constant while exports decrease slightly, or domestic shipments became constant. Dofasco contends that such a situation, of volumes remaining constant and continuing to represent 100 percent of capacity and the only change being a shift in consumption in the U.S. market that has nothing to do with Dofasco's behavior, illustrates how illogical it is to rely solely upon market share in choosing a margin to report to the Commission. Id. Dofasco states that under the correct interpretation of the statute using Dofasco's import volume, the Department should report a de minimis margin to the Commission. Dofasco asserts that the record evidence demonstrates that the Department should choose a margin from the administrative review rather than the initial investigation. Dofasco's dumping margins have declined over the life of the order, from 11.71 percent in the initial investigation, to 1.72 percent in the first administrative review, to between 0.56 percent and 1 percent in the second through fourth administrative reviews, to 0.20 percent (de minimis) in the fifth administrative review. Id. at 11-12. In addition, Dofascos imports have remained higher in every administrative review as compared with the based period prior to the review. Id. at 12. Therefore, because the de minimis margin calculated by the Department in the fifth administrative review is the most recent margin calculated by the Department, Dofasco contends that the magnitude of the margin that the Department should report to the Commission for Dofasco should be a de minimis margin. Id. Domestic interested parties rebut that the Department properly selected the margin from the investigation. They state that the margin from the original investigation is the preferred margin, and use of more recently calculated margins is to occur only when "certain circumstances" warrant (see May 18, 2000, rebuttal brief of domestic interested parties at 6). In addition, domestic interested parties assert that the Department employs more recently calculated margins "under limited situations" where the more recently calculated margins are indicative of an exporter's likely behavior in the absence of an antidumping duty order. Id. at 7. The margin that the Department will choose in these "limited situations" is the margin of dumping corresponding to the period in which a company increased or decreased dumping while that company was increasing or maintaining market share. Id. Thus, domestic interested parties assert, because the record evidence of this case clearly shows that Dofasco's market share decreased after the issuance of the order, there is no basis for using a more recently calculated margin under the Department's clearly established and proper policy. The domestic interested parties submitted in response to the Department's request their underlying calculations of import penetration in their October 15, 1999, rebuttal to the substantive responses of Dofasco. Dofasco commented on the submission, arguing that the data were wrong and biased, and do not provide a reasonable basis for the Department's analysis. Dofasco states that the import penetration rate in the submission is flawed because it is based on four sets of data, only one of which (Dofasco's imports) precisely corresponds to the scope of investigation (see June 27, 2000, comments of Dofasco at 1). Specifically, Dofasco asserts that the three categories of "carbon" steel sheet and strip (hot-dipped, electrolytic, and all other metallic coated) include alloy steel as well as carbon steel, despite the supposed separate American Iron and Steel Institute ("AISI") reporting categories. Id. at 2. Further, according to Dofasco, to read the AISI reports literally for galvanized and "all other metallic coated" sheet and strip, one would conclude that there were zero domestic shipments of galvanized or "other metallic" sheet and strip that is made of an alloy chemistry. Id. at 2. However, on the contrary, Dofasco insists that the coated alloy business has grown substantially, and represents a bigger portion of the market today than it did in 1991. Id. In fact, Dofasco asserts that the growth of these alloy coated products has been higher than the growth in demand for carbon chemistry galvanized steel. Dofasco also asserts that neither it nor domestic interested parties can accurately estimate this segment of the market. Dofasco asserts that although these products contain sufficient alloying elements that make the product "alloy" steel for classification purposes, and which consequently take these materials outside the scope of the antidumping duty order on corrosion- resistant carbon steel flat products, most of the U.S. steel industry does not recognize and track the bright-line distinction between alloy and carbon steel for galvanized products. Id. at 3. As a result, even though AISI provides for separate alloy reporting categories for alloy versus carbon galvanized products, the AISI members generally do not track their galvanized steel in separate carbon versus alloy categories; consequently, most AISI members simply report all of their galvanized steel in the carbon steel categories. Id. Consequently, the AISI data are artificially inflated over time, because the AISI data include both carbon and alloy galvanized steel, and the alloy galvanized steel (which is non-subject merchandise) has increased at a faster pace since 1991 than has carbon galvanized steel. Id. at 4. Thus, Dofasco argues, domestic interested parties' data skews the data to underestimate Dofasco's true import penetration of subject merchandise. In addition to the problem with the U.S. shipment data, Dofasco contends that the import and export data also include non-subject merchandise. For example, the 1998 IM145 data supplied by domestic interested parties contain several HTS items that include both subject and non-subject merchandise. Id. at 5. Further, domestic interested parties' data, which are based on Census Bureau Schedule B categories, is even more inaccurate, because it is based on even broader categories than the HTS import items. Dofasco asserts that, because these basket categories in both the HTS and Schedule B export categories include some unknown quantity of non-subject merchandise, the figure that domestic interested parties asserts as representative Dofasco's import penetration ratio is underestimated. Id. As a result, Dofasco reasserts, domestic interested parties construct an import penetration ratio based on an "apples to oranges" comparison. Id. In sum, Dofasco asserts that, for the above reasons, the Department should not rely on the numbers supplied by domestic interested parties. Instead, the Department should rely on the actual volume data, which provide the only trend line based on an apples-to-apples comparison, and show higher Dofasco imports every year post-investigation than the level of Dofasco imports in the year preceding initiation of the investigation. Id. at 6. Department's Position As stated in our preliminary results, we agree with respondents that in all the administrative reviews subsequent to the order, the Department assigned margins below those of the original investigation to respondent interested parties. Further, according to statistics from interested parties and those examined by the Department from the IM146 reports, imports decreased immediately after the issuance of the order. Although total imports from Canada fell below the high volumes reported in 1993 (the year the order was imposed), they remained above the pre-1993 volumes. However, as noted above, section II.B.2 of the Sunset Policy Bulletin provides that in analyzing whether imports volumes remained steady or increased, the Department normally will consider the company's relative market share. We agree with Dofasco that the data submitted by the domestic interested parties showing that Dofasco's U.S. market share has decreased since issuance of the order may include some amounts of non-subject merchandise. However, we are not persuaded that the inclusion of such merchandise is likely to invalidate the data, given the apparent significant decrease in Dofasco's U.S. market share. In particular, Dofasco has not submitted any information demonstrating, or even argued, that their share of the U.S. market for the subject merchandise has increased or even remained constant. Therefore, we have concluded, on the available information, that Dofasco's market share since issuance of the order has decreased. As a consequence, we conclude that the record evidence does not support choosing a margin from the administrative review rather than the margin from the investigation. Based upon our consideration of the margins, import volumes, and relative market share throughout the history of the order, we determine that the margins from the original investigation are reflective of the behavior of the producers or exporters in the absence of the order. We note that, as provided in the Sunset Policy Bulletin at section II.B.3.b, the Department normally will provide the Commission the higher of the margin the Department otherwise would have reported to the Commission or the most recent margin for that company adjusted to account for the Department's findings on duty absorption. The Department found in the 1995/96 review that Dofasco, Stelco, and CCC absorbed duties, and, in the 1997/98 review that Stelco and CCC absorbed duties.(2) Consistent with our stated policy we adjusted the rates for Stelco and CCC to reflect our duty absorption findings. Because the adjusted rates are not higher than the rates we would otherwise report, we will report the rates from the original investigation.(3) As such, the Department will report to the Commission the margins likely to prevail if the order were revoked, as contained in the Final Results of Review section of this decision memo. Final Results of Review We determine that revocation of the antidumping duty order on corrosion- resistant carbon steel flat products from Canada would be likely to lead to continuation or recurrence of dumping at the following percentage weighted-average margins: --------------------------------------------------------------------------- Manufacturer/Exporter Margin (percent) --------------------------------------------------------------------------- Dofasco, Inc............................................ 11.71 Stelco, Inc............................................. 22.70 All Others.............................................. 18.71 -------------------------------------------------------------------------------- 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____ _____________________________________________________________________________ footnotes: 1. See June 20, 2000, Memo to File: Sunset Review of Certain Corrosion- Resistant Carbon Steel Flat Products from Canada: Request for Clarification of Information on U.S. Imports. 2. We note the Court of International Trade in SKF USA, Inc. v. United States, Court No. 99-08-00473 (March 22, 2000), found that the Department lacks the authority to conduct duty absorption inquiries with respect to certain transition orders; however, the Court decision is not final and we are not following it at this time. 3. See March 17, 2000, Memo to File: Calculation of the Net Antidumping Duties: Corrosion-Resistant Carbon Steel Flat Products from Canada; Final Results.