65 FR 47383, August 02, 2000 A-122-823 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 Cut-to-Length Carbon Steel Plate from Canada; Final Results Summary: We have analyzed the comments of interested parties in the full sunset review of the antidumping duty order covering cut-to-length carbon steel plate ("CTL plate") 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: 1. Decision to redact case brief of Stelco 2. Likelihood of continuation or recurrence of dumping Weighted-average dumping margin Volume of imports Other Factors 3. Magnitude of the margin likely to prevail Margins from the investigation Use of a more recent margin 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 cut-to-length carbon steel plate from Canada (65 FR 18290) 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 from the original investigation of 68.70 percent for Stelco, Inc. ("Stelco") and 61.88 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 1, 2000, Stelco also requested a hearing. On May 9, 2000, within the deadline specified in 19 CFR 351.209(c)(1)(i), we received a case brief on behalf of Stelco. On May 12 and May 17, 2000, domestic interested parties requested an extension of the deadline for filing rebuttal briefs; on May 19, 2000, the Department granted an extension for domestic interested parties to file rebuttal briefs until May 22, 2000.(1) Additionally, on May 17, 2000, because Stelco's case brief contained information from Gerdau MRM Steel's ("MRM") untimely response to the notice of initiation, the Department requested that Stelco redact its case brief accordingly. Subsequently, we received Stelco's refiling of page 16 of its case brief. The Department canceled the scheduled hearing in response to domestic interested parties' and Stelco's withdrawal of their request for a hearing. 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 orders. 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 is revoked. Below, we address the comments of the interested parties. 1. Decision to redact case brief of Stelco Interested Party Comments Comment 1: Stelco protests the Department's decision to ask Stelco to redact from its case brief certain data filed by MRM. Stelco asserts that the Department should allow the use of this data in this proceeding and explains that MRM did not submit this data earlier in the proceeding because it reasonably expected to have the order revoked as to its shipments. However, when the Department reversed its position and did not revoke the order with respect to MRM based on an anti-circumvention inquiry enjoined by the Court of International Trade, MRM promptly filed the data now in question for this sunset review. Stelco contends that the Department's decision to reject the data that MRM has placed on the record ignores the commercial reality of MRM's incentives not to participate in this proceeding back in October and the questionable basis of the Department's final determination not to revoke (see May 17, 2000, refiling of page 16 of Stelco's case brief at 3). Moreover, it ignores the Department's mandate under the World Trade Organization ("WTO") to conduct a forward-looking analysis of all the facts when conducting a sunset review. Id. Because the Department has the discretion to waive its deadline, Stelco urges the Department to do so in the interest of conducting its sunset review with the most complete set of facts possible. Id. Department's Position: We disagree with Stelco that we should allow the use in its case brief of the data from MRM's untimely submission in this proceeding. As provided in 19 CFR 351.218(d)(3)(iii), a complete substantive response must be submitted to the Department within thirty days of initiation of the sunset review. MRM's decision to rely on a preliminary determination to revoke it from the order, notwithstanding it knowledge of the outstanding anti-circumvention inquiry, does not excuse its failure to submit a timely substantive response to the notice of initiation of this review. Moreover, we will not evaluate in the context of the sunset review the Department's decision in a prior review not to revoke the antidumping order with respect to MRM, although we note that the basis for the CIT injunction of the anti-circumvention inquiry referred to by Stelco has been rejected by the Court of Appeals. Nippon Steel v. United States, App. No. 99-1379 (Fed. Cir. July 26, 2000). Further, we find that our analysis of the information on the record complies with the Department's mandate under the WTO; nothing in the WTO Antidumping Agreement prohibits the Department from establishing and enforcing reasonable deadlines for submission of factual information. Finally, even if we were to agree that MRM had an acceptable excuse not to provide information in a timely manner, the information in question, although not relating to MRM, was submitted by Stelco, which has no such excuse. Accordingly, we have not reconsidered the request to waive the deadline for MRM filing its substantive response nor our decision to require Stelco to redact the untimely information from its brief. 2. Likelihood of Continuation or Recurrence of Dumping Interested Party Comments Comment 1: Stelco states that the Department's findings in the preliminary results of review are either not correct or do not justify an affirmative determination that dumping is likely to continue or recur if the order is revoked. First, Stelco asserts that the analysis is contrary to the Statement of Administrative Action ("SAA"), which provides that the Department must make its sunset determination on an order-wide, rather than a company-specific, basis (see May 9, 2000, case brief of Stelco at 4-5). Stelco states that the Department based its determination on the fact that margins continue to exist at above de minimis levels for at least one manufacturer, producer, or exporter; however, these individual margins are not indicative of the likelihood of future dumping by the entire Canadian industry remaining subject to the order. Id. at 6. Stelco contends that the margin of reseller Forsyth does not indicate that the industry remaining subject to the Canada order will dump plate upon revocation because Forsyth's margin is based on a rate that petitioners calculated nearly a decade ago and on adverse best information available ("BIA"), which was the highest antidumping margin alleged for any producer of CTL plate from Canada in the petition. Id. at 7-8. Thus, the rate is unreliable as to Stelco and any other Canadian company. Id. at 8. In addition, Stelco asserts that Forsyth's margin, when considered on a weighted-average basis, has virtually no effect on the zero or de minimis margins Canadian producers have obtained throughout the life of the order because Forsyth's sales of subject merchandise represent a tiny fraction of subject imports from Canada. Id. at 9. Additionally, Stelco asserts that the Department should not rely on Stelco's margin of 0.92 percent 1993/94 review, its only rate above de minimis in any administrative review, to determined likelihood of dumping were the order revoked. Stelco contends that the fact that this margin from the first administrative review declined consistently throughout the life of the order to zero or de minimis levels in each subsequent period of review ("POR") indicates that dumping is not likely upon revocation. Id. at 12-13. Further, Stelco contends that, according to the SAA and Sunset Policy Bulletin, the record need not establish that there were no margins throughout the life of an antidumping duty order for the order to be revoked. Id. at 13. Rather, "declining margins" may indicate that dumping is less likely to continue if the order were revoked, so long as they are accompanied by steady or increasing imports. Id. at 13. Stelco states that Canadian imports have increased since the order took effect, showing that dumping is not likely to continue or recur upon revocation. Stelco asserts that the Department improperly considered Stelco's import volumes for 1998 only - rather than examining, as the SAA requires, the import trends during the entire review period from 1995 through 1999. Id. at 14. In this case, Stelco asserts, total Canadian CTL plate import volumes increased throughout the five years after the order and Canadian producers were able to increase subject import volumes above pre-order levels without selling at dumped prices. Id. Stelco contends that the evidence and data do not meet the Department's requirements for a likelihood determination, and restates that its decrease in import levels in 1997 and 1998 resulted from a comprehensive upgrade to its plate mill, which reduced production capacity. Id. at 17. Finally, Stelco reasserts that its margins have declined and its imports have fluctuated without exhibiting any clear trends; therefore, the Department should not presume likelihood of continuation or dumping. Id. at 18. In their rebuttal, domestic interested parties argue that the Department properly found that dumping is likely to continue or resume if the order is revoked. First, they state that the dumping margins cited by the Department - 0.92 percent for Stelco in the first review and 68.7 percent for Forsyth in the fourth review - are proper indications of the likelihood of continued dumping. With respect to Forsyth, domestic interested parties assert that a facts available rate is an appropriate estimate because if the respondent could have submitted information demonstrating that it ought to receive a lower margin, it would have done so (see May 22, 2000, rebuttal of domestic interested parties at 3). Further, contrary to Stelco's suggestion, the Department's analysis is based upon an examination of individual companies, not on an aggregate or weighted-average of dumping margins. Id. Even with a small sales volume, Forsyth was unable to ship subject merchandise without dumping and, rather than ignoring Forsyth in this review, the Department properly looked to the company's behavior as probative of continued dumping in the event of revocation. Id. at 4. With respect to Stelco, domestic interested parties assert that the Department should not ignore Stelco's dumping margin from the first review, and that Stelco achieved at least two of the subsequent de minimis margins while selling insignificant quantities of subject merchandise in the second and fifth reviews. Domestic interested parties contend that this drastic reduction in imports from the volume during the period of investigations suggests that Stelco was forced to significantly reduce its import volume in order to reduce dumping. Thus, domestic interested parties state that imports of subject merchandise have declined significantly from pre- order volumes, a condition that, under the statute (which calls for a comparison of pre- and post-order import volumes), supports the Department's conclusion that dumping is likely to continue or recur. Id. at 5-6. Further, an analysis of Stelco's market share of the U.S. CTL plate market supports the Department's determination. Department's Position As discussed in section II.A.3 of the Sunset Policy Bulletin, the SAA at 890, and the House Report at 63-64, if companies continue dumping with the discipline of an order in place, the Department may reasonably infer that dumping would continue if the discipline were removed. We do not agree with Stelco that the Forsyth's margin has any relevance to this issue since they were not part of the original investigation. Although the Department assigned a zero or de minimis margin to Stelco in each of the four most recent reviews, according to the interested parties' data, Stelco's volume of sales decreased significantly following the issuance of the order and has not approached pre- order levels. Indeed, the Department, in Certain Welded Stainless Steel Pipes from the Republic of Korea and Taiwan (65 FR 5607, 5610, February 4, 2000), and Sulfanilic Acid from India and the People's Republic of China (65 FR 6156, 6158, February 8, 2000), has relied on significant declines in import volumes even if one or two years' imports exceed pre-order levels. Finally, margins continue to exist at above de minimis levels for at least one manufacturer, producer, or exporter, and, according to the Department's and interested parties' data, after the issuance of the order, total import volumes of subject merchandise from Canada decreased significantly, and continue to remain, below pre-order levels. Therefore, we determine that dumping will likely continue or recur in the event of revocation. Comment 2: Stelco states that if the Department is not inclined to apply a presumption of no dumping, then good cause exists for the Department to consider other economic factors. Stelco restates that there was virtually no dumping after the order was issued and total import volumes have increased in every year since 1994, with 1996 volumes essentially equaling import volumes before the investigation was initiated (see May 9, 2000, case brief of Stelco at 19). Thus, the specific numbers defy a conclusion that import volumes have declined significantly. Id. Therefore, Stelco submits that the inability to use volume and margin data to establish a presumption for either outcome constitutes sufficient cause to examine other economic factors. Id. at 20. Stelco states that an examination of other factors reinforces the conclusion that dumping will not resume following revocation. First, Stelco states that, on February 10, 2000, the Department issued an antidumping duty order which imposes duties up to 72.49 percent on cut-to-length plate on sources comprising half of U.S. plate imports, including France, India, Indonesia, Italy and Korea. Id. at 20. Stelco contends that the order has operated to increase prices across the board for plate in the U.S. market and, as a result, producers from non-subject countries like Canada will not sell their product at dumped prices. Id. at 21. Stelco asserts that analysts' and executives' predictions of this scenario were validated by price hikes on the price of cut-to-length plate at the end of 1999, and a second round in April of this year. Id. Thus, Stelco contends, by the time the antidumping duty order on Canadian cut-to-length plate is lifted, U.S. cut-to length plate prices will probably have returned to strong levels. Id. at 22. Second, Stelco asserts that the Canadian market is an attractive market for Canadian companies' large volume of shipments of plate, making it unlikely that they will ship plate to the United States at dumped prices. Id. at 24. Stelco states that in its previous submission to the Department, Stelco provided data that showing that the Canadian market has been strong over the past several years. Therefore, in light of the facts, the Department should find that it is highly unlikely that Canadian companies would ship plate to the U.S. at dumped prices upon revocation of the U.S. plate order on Canada. Third, Stelco's comprehensive overhaul of its cut-to-length production facility will allow Stelco to focus its plate production on new, higher value- added products for the Canadian market. Stelco asserts that his modernization effort reduced Stelco's cut-to-length plate production in 1997 and 1998, and the upgrade is currently expected to be fully operational by 2001. Once finished, it will allow Stelco to produce new higher value-added plate products, and shift its production focus away from the more commodity-type products, which were the bulk of Stelco's sales during the original investigation, to the more attractive (higher priced) alternative plate product markets in Canada. Id. at 29. Fourth, Stelco asserts that Canada's currency has been relatively stable since 1994, with relative depreciation from 1997 through the present, and this exchange rate trend removes any pricing constraints caused by currency concerns, thereby making it unlikely that Canadian companies will sell subject plate in the U.S. market at dumped prices. The domestic interested parties state that the Department properly declined to consider other factors in its preliminary determination; in this case, volume and margin data clearly support the Department's preliminary determination (see May 22, 2000, rebuttal brief of domestic interested parties at 10). Further, even if the Department were to consider other factors (Stelco cites the overhaul of its CTL plate production facility and points to increased demand in Canada as factors that mitigate any likelihood of future dumping), these factors actually increase the likelihood of continued dumping. Id. at 11. Domestic interested parties cite (1) the increased output as a result of the plate mill upgrade in Stelco's annual report and (2) the Canadian International Trade Tribunal's conclusion that the market for carbon plate in Canada is likely to remain fragile in the near future - as reasons that the Canadian market would not be able to absorb expanding domestic plate production and increase the likelihood that revocation will lead to continuation or recurrence of dumping. Id. Department's Position Consistent with section 752(c) of the Act, the Department considered the volume of imports before and after issuance of the orders. As we noted in our preliminary results, the import statistics provided by domestic interested parties show that imports of subject merchandise remain below sixty percent of their pre-order levels; however, Stelco asserts that 1998 Canadian shipments to the United States are virtually equal to shipments in 1991, the year before the initiation of the investigation. Although these sets of statistics differ with respect to changes from their pre-order levels, they share a pattern, as seen in our IM145 reports statistics, of average increases in imports from 1995 through 1999. We also considered the company-specific exports of subject merchandise provided by Stelco. The statistics do not show a pattern of consistent increases, or a return to pre-order volumes. As seen in the Department's and interested parties' data, total Canadian import volumes dropped significantly following the issuance of the order and, throughout the history of the order, have fluctuated and remained far below pre-order levels. However, although Stelco, which is still subject to the order, has had de minimis or zero margins withing the last than four years, we cannot conclude that Canadian producers will participate in the U.S. market without engaging in dumping in the future. Therefore, we find that the existence of dumping margins after the issuance of the order is highly probative of the likelihood of continuation or recurrence of dumping. Further, we agree with domestic interested parties in this case that an analysis of Stelco's market share supports an affirmative finding that dumping is likely to continue or recur were the order revoked. Because Stelco's volume of sales was insignificant during the periods when the Department assigned to it zero or de minimis margins, and because margins continue to exist at above de minimis levels for a least one manufacturer, producer, or exports, we affirm our preliminary decision that dumping is likely to continue or recur if the order is revoked. We disagree with Stelco's assertion that there is good cause to consider other factors in this case, and that an examination of other factors will lead the Department to a different conclusion with respect to the likelihood of dumping. As stated in our preliminary results, we do not find that, in light of the relationship between dumping margins and import volumes, the facts that a new antidumping duty order which imposes duties of 72.49 percent on CTL plate on six countries will keep U.S. market prices high; the assertion that the Canadian market is attractive to Canadian companies; Stelco's comprehensive overhaul of its CTL production facility; and the stability of the Canadian dollar, provide good cause to examine other factors. Therefore, given that dumping continued after the issuance of the order, and imports continued in 1998 at far below pre-order levels, we determine that dumping is likely to continue or recur were the order revoked. Comment 3: Stelco states that, given the stark absence of dumping by Canadian producers, the inherent lack of reliability of Forsyth's margin, and inconclusive import volumes by subject producers since the order, the Department's affirmative preliminary determination in this sunset review is unreasonable and violates the WTO Antidumping Agreement. First, Stelco states that the Department failed to weigh the evidence before it as required by Article 11.3 of the WTO Antidumping Agreement and did little more than apply the presumptions in a mechanical fashion (see May 9, 2000, case brief of Stelco at 12). For instance, Stelco asserts that, the Department, in finding the existence of Forsyth's and Stelco's margins unreliable and the 1998 import volumes in isolation sufficient evidence to make an affirmative determination, violated the Antidumping Agreement. Second, Stelco asserts that the Department, inconsistent with the Antidumping Agreement, applied its Sunset Policy Bulletin improperly by making continuation the rule and revocation the exception. Id. at 34. Only if respondents show "good cause" will the Department not apply its normal presumptions, thus, imposing a high threshold before it will even consider facts that weigh in favor of revocation. Third, Stelco contends that the Department, rather than producing sufficient evidence of likely dumping as required under Article 11.3, improperly placed the burden on Canadian respondents to prove that dumping is not likely to occur. Stelco continues, although, the term "likely" is not defined in the WTO Antidumping Agreement, the United States - DRAMs panel has ruled that the "not likely" standard violated Article 11.2 because it inverted the balance of the term "likely" under the Agreement. Id. at 36. Stelco contends that applying a "not likely" standard to sunset reviews similarly inverts the meaning of "likely" used in Article 11.3. Therefore, the Department should, in light of the mandate that revocation is the rule apply the Policy Bulletin whereby the Department - not respondents - has the burden of proving dumping is likely following revocation and showing that the evidence in this case easily tips the balance in favor of revocation. Id. In their rebuttal, domestic interested parties state that the Department's preliminary determination was based on a reasoned analysis and complied with all WTO requirements. They state that, contrary to Stelco's claims, the Department considered all relevant evidence in this review, including Forsyth's low import volume, Stelco's declining margins, and the average increase in imports from 1995 to 1999, as reflected in total Canadian imports, and Stelco's fluctuating company-specific imports in the same period (see May 22, 2000, rebuttal brief of domestic interested parties at 12). Domestic interested parties contend that Article 17.6(i) of the Anti-Dumping Agreement gives the Department broad discretion in weighing the facts and that the General Agreement of Tariffs and Trade ("GATT") and WTO panel decision have long emphasized that the Department is not required to accord any particular weight to any one factor. Id. at 13. Thus, Stelco's complaints about how the Department balanced the relative weight of its evidence against the weighing in favor of revocation are irrelevant. Id. at 13-14. Finally, domestic interested parties state that the Department's implementation of the Antidumping statute complied with the United States' obligations under the WTO, and that the Department has specifically rejected a mechanical application of the framework for sunset reviews as set forth in its policy bulletin. Id. at 14. With respect to Stelco's argument that the Department violated U.S. obligations under Article 11.3 of the Antidumping Agreement, the domestic interested parties assert that the Department merely recognized that certain facts - such as continued dumping when an antidumping duty order exists and reduced import volumes - strongly indicate that dumping will likely recur. Id. at 15. Department's Position With respect to Stelco's argument that the Department's affirmative preliminary determination violates Article 11.3 of the WTO Antidumping Agreement, we agree with domestic interested parties that our analysis was reasonable and complied with all WTO requirements. Section 751(c) of the Act was enacted to put Article 11.3 of the WTO Antidumping Agreement into effect under U.S. law and, accordingly, we considered all relevant evidence in this review, including Forsyth's low import volume, Stelco's declining margins, and country-wide and company-specific import trends. Further, contrary to Stelco's assertion, the Department does not have a "not likely" standard, but issues an affirmative determination only if we conclude that dumping is likely to continue or recur if the order is revoked. Magnitude of the Margin Likely to Prevail: Interested Party Comments: Comment 1: Stelco asserts that, should the Department determine to affirm its preliminary determination, it should report to the Commission Stelco's 1996/97 POR margin of 0.35 percent because this margin most closely reflects the actual price Stelco is likely to sell subject plate without the order in place (see May 9, 2000, case brief of Stelco at 37). Stelco states that 68.70 percent margin that the Department proposes in its preliminary determination is not the most probative of Stelco's likely future pricing behavior absent the order. Rather, the fact that Stelco's original investigation margin is based on sales data more than six years old make it the least probative of Stelco's past margins. Finally, Stelco asserts, the fact that Stelco's original investigation was based on BIA and a rate calculated by petitioners makes it an unreliable indicator of Stelco's likely pricing behavior absent the margin. Id. at 38. Domestic interested parties argue in their rebuttal that the Department properly reported Stelco's margin from the investigation as the rate likely to recur in the event of revocation (see May 22, 2000, rebuttal of domestic interested parties at 17). They assert that Stelco's original margin was not based on company shipments in 1991, but on the subject merchandise shipped during the six month period of the investigation (ie., the first half of 1992). Thus, Stelco's argument that the Department report Stelco's 1996/97 margin is incorrect. Furthermore, the fact that the rate from the investigation is "more than six years old" and "based on BIA" does not affect its probative value. Id. at 18. The margin from the investigation is the only calculated rate that reflects the behavior of exporters without the discipline of an order and, regardless of how long ago the order was issued, it is most probative of the rate likely to prevail in the event of revocation. Id. at 19-20. Department's Position In the Sunset Policy Bulletin, the Department stated that it will normally provide to the Commission the margin that was determined in the final determination in the original investigation. Further, 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 (see section II.B.1 of the Sunset Policy Bulletin). Exceptions to this policy include the use of a more recently calculated margin, where appropriate, and consideration of duty absorption determinations (see sections II.B.2 and 3 of the Sunset Policy Bulletin). As stated in our preliminary results, although Stelco's margins in subsequent administrative reviews have been significantly lower than the 68.70 percent from the original investigation, we have also considered the company's relative market share. The SAA at 889-90, and the House Report at 63, state that declining or no dumping margins accompanied by steady or increasing imports may indicate that foreign companies do not need to dump to maintain market share in the United States. Because Stelco's relative market share has been insignificant after the issuance of the order, and because Stelco's shipments do not reflect a steady or increasing pattern of imports, we do not find the lower margins to be probative of Stelco's future behavior with respect to the likelihood of dumping. In addition, we agree with domestic interested parties that the fact that the rate from the investigation is more than six years old and based on BIA does not affect the original margin's probative value. The margin from the investigation is the only calculated rate that reflects the behavior of exporters without the discipline of an order in place. Therefore, the Department will provide to the Commission for Stelco and "all others," their rates from the original investigation 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: --------------------------------------------------------------------------- Manufacture/Exporter Margin (percent) --------------------------------------------------------------------------- Stelco, Inc ...................................................... 68.70 All Others ....................................................... 61.88 --------------------------------------------------------------------------- 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. See May 19, 2000, Letter from Jeffrey A. May, Office of Policy, to John Mangan of Skadden, Arps, Slate, Meagher & Flom LLP, Regarding Extension of Deadline for Filing Rebuttal Briefs.