(65 FR 10768, February 29, 2000) A-122-814 Sunset Review Public Document MEMORANDUM TO: Robert S. LaRussa 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; Preliminary Results Summary We have analyzed the substantive responses and rebuttals of interested parties in the sunset review of the antidumping duty order covering pure magnesium from Canada. We recommend that for our preliminary results 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 substantive responses 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 investigation B. Use of a more recent margin History of the Order The Department published its final determination of sales at less than fair value ("LTFV") with respect to pure magnesium from Canada on July 13, 1992 (57 FR 30939). In this determination, the Department published two weighted-average dumping margins as well as an "all others" rate.(1) On August 31, 1992, the Department issued the antidumping duty order on magnesium from Canada, which affirmed the margins calculated in the LTFV determination (57 FR 39390). Timminco Limited ("Timminco") was excluded from the order because the Department calculated a dumping margin of zero for Timminco in the LTFV determination. The final determination was later amended on remand, reducing the rate for Norsk Hydro Canada Inc. ("NHCI") and "all others" to 21.0 percent.(2) Since the issuance of the order, six administrative reviews have been conducted.(3) In the first review (covering 1992-1993), the Department published one company-specific, weighted-average dumping margin of zero percent for NHCI, the only respondent participant, as well as an "all others" rate of 21.0 percent. In the second (1993-1994) review, the Department calculated a rate of 21.0 percent for NHCI and "all others." In all subsequent reviews, the Department determined that the dumping margin for NHCI, the only respondent participant, was zero percent. The order remains in effect for all known producers/exporters of magnesium from Canada, with the exception of Timminco. To date, the Department has not issued any duty absorption findings in this case. Background On August 2, 1999, the Department initiated a sunset review of the antidumping order on magnesium from Canada (64 FR 41915), pursuant to section 751(c) of the Act. The Department received a notice of intent to participate on behalf of the Magnesium Corporation of America ("Magcorp") on August 13, 1999, within the deadline specified in section 351.218(d)(1)(i) of the Sunset Regulations. Pursuant to 19 U.S.C. § 1677(9)(C), Magcorp claimed interested party status as a domestic producer of pure magnesium. Moreover, Magcorp stated that it was a petitioner in the original antidumping investigation and has participated in all of the administrative reviews conducted by the Department. The Department received a complete substantive response from Magcorp on September 1, 1999, within the 30-day deadline specified in the Sunset Regulations under section 351.218(d)(3)(i). The Department also received a complete substantive response on behalf of NHCI on September 1, 1999, within the deadline specified in the Sunset Regulations under section 351.218(d)(3)(i). NHCI claimed interested party status under 19 U.S.C. § 1677(9)(A) as a manufacturer and exporter of pure magnesium to the United States. In its substantive response, NHCI stated that it participated in the original investigation and all of the subsequent administrative reviews. The Department determined that NHCI's response constituted an adequate response to the notice of initiation. As a result, the Department determined, in accordance with section 351.218(e)(2) of the Sunset Regulations, to conduct a full (240 day) review. On September 13, 1999, the Department received rebuttal comments from Magcorp and NHCI.(4) In accordance with section 751(c)(5)(C)(v) of the Act, the Department may treat a sunset review as extraordinarily complicated if it is a review of a transition order (i.e., an order in effect on January 1, 1995). On November 30, 1999, the Department determined that the sunset review of the antidumping duty order on pure magnesium from Canada is extraordinarily complicated pursuant to section 751(c)(5)(C)(v) of the Act, and extended the time limit for completion of the preliminary results of this review until not later than February 18, 2000, in accordance with section 751(c)(5)(B) of the Act.(5) Discussion of the Issues In accordance with section 751(c)(1) of the Act, the Department is conducting 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 order, and shall provide to the International Trade Commission ("the Commission") the magnitude of the margin of dumping likely to prevail if the order was revoked. The Department's determinations concerning continuation or recurrence of dumping and the magnitude of the margin are discussed below. In addition, parties' comments with respect to continuation or recurrence of dumping and the magnitude of the margin are addressed within the respective sections below. Continuation or Recurrence of Dumping: Interested Parties' Comments In its substantive response, Magcorp argues that revocation of the antidumping duty order would likely result in the continuation or recurrence of dumping of pure magnesium from Canada. Magcorp maintains that the significant decline in import volumes since the imposition of the order demonstrates that dumping is likely to continue or recur if the order is revoked (see September 1, 1999, substantive response of Magcorp at 8). Magcorp argues that the reduction in exports of the subject merchandise shows that Canadian companies are unable to sell in the U.S. market without dumping. More specifically, Magcorp maintains that imports of the subject merchandise from Canada ceased altogether for two review periods (29 months) after the issuance of the order and have never resumed at commercial quantities (see id. at 11). Magcorp argues that imports of pure magnesium from Canada fell from 21,234 metric tons in 1991, the year before the order was imposed, to 548 metric tons in 1992, the year the order was imposed (see id. at 15). Although NHCI was found to have zero dumping margins in the third, fourth, fifth, and sixth administrative reviews, Magcorp argues that NHCI's import volumes have remained negligible, and, thus concludes that NHCI cannot sell in the United States without dumping (see id. at 11). In fact, Magcorp argues that no U.S. market developments could explain NHCI's exit from the market after 1992. Magcorp concludes that although dumping margins above de minimis have not existed throughout the life of the order, NHCI's zero margins were the result of a significant decline in exports. Magcorp also provides five factors which it argues heighten the likelihood that dumping would recur or continue should the order be revoked. First, Magcorp argues that in the current highly competitive U.S. market for magnesium, which already faces the prospect of oversupply, NHCI would have to match and undercut the prices of other magnesium producers in order to expand sales (see id. at 22-23). Second, Magcorp argues that the likelihood that NHCI would resume or continue dumping absent the order is increased by the fact that NHCI announced in June 1997 that it plans to double its production capacity from the current 43,000 metric tons to 86,000 metric tons, increasing the supply of pure magnesium and thereby putting additional downward pressure on prices (see id. at 23-24 and Exhibit 10). Moreover, Magcorp argues that a new magnesium company, Magnola Metallurgy Inc. ("Magnola"), has been formed with the intention of exporting a major portion of its production to the U.S. market (see id. at 25). Magcorp further asserts that increased global production capacity in both pure and alloy magnesium, as well as the declining trend in pure magnesium prices increase the likelihood that NHCI would continue or resume dumping were the order revoked. Additionally, Magcorp maintains that NHCI could easily shift its current production of alloy magnesium back to pure magnesium production, thereby increasing the likelihood of dumping absent the order (see id. at 29, 32-34). In its substantive response, NHCI argues that revocation of the antidumping duty order would not be likely to lead to continuation or recurrence of dumping of pure magnesium. NHCI bases its argument, in part, on the fact that it has received dumping margins of zero during the last four administrative reviews conducted by the Department (see September 1, 1999, substantive response of NHCI at 3). NHCI maintains that the fact that it has been selling pure magnesium in the United States during the past four administrative review periods at not LTFV demonstrates that it does not need to dump in order to sell in the U.S. market (see id. at 3). Moreover, NHCI urges the Department to interpret NHCI's behavior during the past four administrative review periods (dumping margins of zero) as substantial evidence that it is not likely to dump if the order is revoked (see id. at 3). In addition, NHCI argues that, given the successive zero margins determined in the previous four administrative review, there exists "good cause" for consideration of other factors when determining likelihood. Among the "other factors" NHCI urges the Department to consider are the changes in exchange rates. Specifically, NHCI argues that since the time of the original investigation, the value of the Canadian dollar has depreciated against the U.S. dollar by 24 percent (see id. at 4). NHCI contends that this decline in the Canadian dollar would substantially, and likely wholly, reverse the dumping margin of 21 percent calculated in the original investigation (see id. at 4). Additionally, NHCI argues that because its current dumping margin is zero and, therefore, does not affect the selling price, revocation of the order would not affect the current U.S. pricing of pure magnesium from Canada (see id. at 4). Moreover, NHCI maintains that it is not likely to engage in future dumping should the order be revoked because (1) NHCI's share of the U.S. pure magnesium market has dropped to insignificant levels and is not likely to increase, (2) the Department has never found NHCI to be making sales below cost, and (3) since the time of the original investigation, U.S. import duties imposed on pure magnesium from Canada have been eliminated under the North American Free Trade Agreement (see id. at 9, 10). In addition, NHCI argues that all of its sales to the United States since the imposition of the order meet the Department's "commercial quantities" standard as set forth in Color Television Receivers from Taiwan ("Color Television Receivers") (see September 1, 1999, substantive response of NHCI at 3, footnote 4, and attachment B). In its rebuttal, Magcorp argues that NHCI's own evidence points to the fact that it was only able to obtain zero dumping margins by significantly reducing its exports of pure magnesium to the United States (see September 13, 1999, rebuttal of Magcorp at 3). Furthermore, Magcorp points out that the Department determined in the sixth administrative review (1997-1998) that NHCI did not sell the subject merchandise in the United States in commercial quantities in the years in question (see id. at 6 and Pure Magnesium from Canada: Final Results of Antidumping Duty Administrative Review and Determination Not to Revoke Order in Part, 64 FR 50489 (September 17, 1999)). Magcorp therefore concludes that the cessation of meaningful, commercial quantities of imports since the imposition of the order demonstrates that NHCI is unable to sell in commercial quantities in the United States without dumping (see September 13, 1999, rebuttal of Magcorp at 6). Moreover, Magcorp asserts that changes in the U.S. dollar-Canadian dollar exchange rate do not demonstrate that dumping is not likely to continue or recur if the order is revoked. Magcorp bases this argument on the fact that a substantial portion of NHCI's manufacturing costs are paid in U.S. dollars and although the Canadian dollar, in real terms, depreciated by 13 percent vis-a- vis the U.S. dollar from 1991-1994, NHCI did not export the subject merchandise in commercial quantities during this time (see id. at 9-10). In addition, Magcorp rebuts NHCI's assertion that all of its sales of pure magnesium to the United States since the imposition of the order meet the standard for commercial quantities set forth by the Department in its determination on Color Television Receivers, arguing that what is considered commercial quantities for one product may not be considered so for another product (see id. at 6-7). Magcorp also points out that in the sixth administrative review, the Department rejected NHCI's argument that the commercial quantities criterion requires only that there be a bona fide commercial transaction during a given period (see id. at 7). Moreover, Magcorp rebuts NHCI's claim that because NHCI's current dumping margin is zero and, therefore, does not affect the selling price, revocation of the order would not affect the current U.S. pricing of pure magnesium from Canada (see id. at 8). Magcorp argues that NHCI's claim is incorrect because it fails to take into account the fact that its current export price is based upon de minimis volumes of exports and is artificially high so as to achieve the zero deposit rate (see id. at 8). In its rebuttal, NHCI argues that the volume of NHCI's pure magnesium exports to the United States has been increasing since 1994, and all of NHCI's sales of subject merchandise to the United States since the imposition of the order meet the Department's "commercial quantities" standard as set forth in Color Television Receivers (see September 13, 1999, rebuttal of NHCI at 2). NHCI also rebuts Magcorp's statements concerning future capacity expansions, arguing that Magcorp's speculations concerning future capacity expansions cannot form the basis for finding that the likely result of revocation would be the continuation or recurrence of dumping (see id. at 3). NHCI further maintains that the vast majority of possible expansions discussed in Magcorp's substantive response are merely in the initial assessment stages, and unless and until such projects are completed and magnesium production and exports begin, attempts to predict their effect on NHCI are purely speculative (see id. at 3-4). Additionally, NHCI rebuts Magcorp's claim that potential magnesium producers which have not yet been established will force NHCI's prices for pure magnesium to fall and will cause NHCI to sell the subject merchandise in the United States at LTFV. NHCI argues that there is no evidence on the record that the alleged pricing effects are likely to occur, nor is there any evidence that price changes would cause NHCI to dump the subject merchandise in the United States (see id. at 5-6). Department's Determination Drawing on the guidance provided in the legislative history accompanying the Uruguay Round Agreements Act ("URAA"), specifically the Statement of Administrative Action ("SAA"), the House Report, H.R. Rep. No. 103-826, pt.1 (1994), and the Senate Report, S. Rep. No. 103-412 (1994), the Department issued its Sunset Policy Bulletin providing guidance on methodological and analytical issues, including the basis for likelihood determinations. The Department clarified that determinations of likelihood will be made on an order- wide basis (see section II.A.2 of the Sunset Policy Bulletin). In addition, the Department indicated that it will normally determine that revocation of an antidumping order is likely to lead to continuation or recurrence of dumping where (a) dumping continued at any level above de minimis after the issuance of the order, (b) imports of the subject merchandise ceased after the issuance of the order, or (c) dumping was eliminated after the issuance of the order and import volumes for the subject merchandise declined significantly (see section II.A.3). Consistent with section 752(c) of the Act, the Department considered whether dumping continued at any level above de minimis after the issuance of the order. In the second (1993-1994) administrative review conducted by the Department, NHCI was assigned a dumping margin of 21 percent. Since then, the Department has conducted four more administrative reviews, and in each of these reviews, NHCI was assigned a dumping margin of zero. No other producer/exporter has been investigated or reviewed in connection with this order other than Timminco, which was excluded from the order. In addition, consistent with section 752(c) of the Act, the Department also considered the volume of imports of the subject merchandise before and after the issuance of the order. Utilizing U.S. Census data, including IM146 reports, and data provided by the interested parties, the Department finds that imports of the subject merchandise from Canada fell off dramatically in 1992, the year the order was issued. Despite the fact that imports have increased slightly since that time, import volumes of the subject merchandise remain substantially below pre-order levels.(6) The U.S. Census Bureau information indicates that imports of the subject merchandise decreased by more than 97 percent in the year following the issuance of the order. Further, imports have consistently remained at less than 10 percent of their pre-order levels. Therefore, the Department preliminarily determines that although dumping was eliminated by NHCI, its export volumes have declined significantly since the issuance of the order. As set forth in the Sunset Policy Bulletin (section II.A.3), and consistent with the SAA at 889-90, and the House Report at 63, where dumping was eliminated after the issuance of the order and import volumes for the subject merchandise declined significantly, the Department normally will determine that revocation of the antidumping duty order would be likely to lead to continuation or recurrence of dumping. In this case, although dumping has been eliminated, shipments of the subject merchandise have also declined dramatically.(7) Therefore, we preliminarily determine that, consistent with Section II.A.3 of the Sunset Policy Bulletin, dumping is likely to continue or recur if the order were revoked. The Department finds that such a situation indicates that NHCI was only able to eliminate dumping by significantly reducing its exports of subject merchandise to the United States. Since we are basing our likelihood determination on the elimination of dumping at the expense of exports, it is not necessary to consider other factors, such as the changes in exchange rates and the possibility of new magnesium producers. Given that the Department has conducted numerous administrative reviews and is satisfied that observed patterns regarding import volumes are indicative of the likelihood of continuation or recurrence of dumping, we will not consider good cause arguments in this case. Magnitude of the Margin: Interested Parties' Comments Magcorp argues that the Department should adhere to its normal procedure and report to the Commission the dumping margin of 21 percent calculated in the original investigation since that is the only calculated rate that reflects the behavior of exporters without the discipline of the order in place. It argues that while the Department may depart from its normal procedure and use more recently calculated margins, the criteria for doing so are not met in this case since imports of the subject merchandise have declined dramatically (see September 1, 1999, substantive response of Magcorp at 34-35). Furthermore, Magcorp argues that although the margins calculated for NHCI in the four most recent reviews were de minimis, these margins are not indicative of NHCI's likely behavior in the absence of the discipline of the order because these lower margins were the result of NHCI's virtual withdrawal from the U.S. market (see id. at 35-36). In addition, Magcorp suggests that the Department treat Magnola as a producer/exporter that has never been investigated and whose merchandise is likely to be sold after the order was issued. Therefore, Magcorp urges the Department, in accordance with the Sunset Policy Bulletin and the SAA, to assign Magnola the "all others" rate determined in the original investigation (see September 1, 1999, substantive response of Magcorp at 37). NHCI, in its substantive response, recommends that the Department should report to the Commission the dumping margin of zero should the Department decide not to revoke the order (see September 1, 1999, substantive response of NHCI at 4). NHCI maintains that although the volume of NHCI's pure magnesium exports currently are lower than in the period preceding the imposition of the order, they have exhibited an increasing trend since 1994. Therefore, NHCI argues, the Department should consider NHCI's behavior over the past four administrative review periods as evidence that the more recently calculated zero margins best reflect the dumping margin likely to prevail if the order were to be revoked (see id. at 5). Moreover, NHCI urges the Department to reject consideration of the margin determined in the original investigation as a measure of the likelihood of the continuation or recurrence of dumping because the original dumping margin was calculated on the basis of "best information available" ("BIA"), rather than on NHCI's information (see id. at 6). In its rebuttal, Magcorp maintains that it is the Department's standard practice to use the margin from the original investigation, regardless of whether it was based on BIA. In addition, Magcorp argues that the Department states in the Sunset Policy Bulletin that it will provide the Commission with the margin that was determined in the original investigation, regardless of whether the margin was calculated using a company's own information or based on BIA or facts available. Moreover, Magcorp concludes that the reasons advanced by NHCI for rejecting the margin determined in the original investigation should be disregarded (see September 13, 1999, rebuttal of Magcorp at 13-14). NHCI did not address the magnitude of the margin in its rebuttal. Department's Determination In section II.B.1 of the Sunset Policy Bulletin, the Department stated that it normally will provide to the Commission the margin that was determined in the final determination in the original investigation. The Department normally will provide the company-specific margin from the original investigation regardless of whether the margin was calculated using a company's own information or based on BIA, as was the case here (see section II.B.1 of the Sunset Policy Bulletin). 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 id.). 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.) We have not issued any duty absorption findings in this case. The Department agrees with Magcorp, in part. In this case, imports of the subject merchandise from Canada declined significantly following the imposition of the order and have never regained their pre-order levels. We disagree with NHCI that the use of a more recently calculated margin is appropriate in this review. Rather, because imports decreased significantly following the imposition of the order and have not resumed at commercial quantity levels, we preliminarily determine that the margins from the Department's original investigation, as amended, are probative of the behavior of Canadian producers and exporters of pure magnesium if the order were revoked because they are the only calculated rates which reflect the behavior of exporters without the discipline of the order in place. As for assigning a rate to Magnola, we note that the Department's practice normally is to provide a margin based on the "all others" rate from the investigation for companies not specifically investigated or for companies that did not begin shipping until after the order was issued (see section II.B.1 of the Sunset Policy Bulletin). If Magnola begins shipping the subject merchandise to the United States, it will be subject to the "all others" rate, until the Department calculates a company- specific margin, if any. Therefore, we will report to the Commission the company-specific and "all others" rates from the original investigation, as amended, contained in the Preliminary Results of Review section of the accompanying Federal Register notice. 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 preliminary results of review in the Federal Register. AGREE____ DISAGREE____ Robert S. LaRussa Assistant Secretary for Import Administration (Date) 1. Specifically, 31.33 percent for NHCI, 0.00 percent for Timminco, and 31.33 percent for "all others." 2. See Pure Magnesium from Canada: Amendment of Final Determination of Sales at Less Than Fair Value and Order in Accordance With Decision on Remand, 58 FR 62643 (November 29, 1993). Pursuant to remand by a US-Canada FTA panel, the amendment reflected corrections to the petition's constructed value calculation which served as a basis for the Department's "best information available" determination. 3. See Pure Magnesium from Canada, Final Results of Antidumping Duty Administrative Review, 60 FR 49258 (September 22, 1995); Pure Magnesium from Canada; Final Results of Antidumping Duty Administrative Review, 61FR 41771 (August 12, 1996); Pure Magnesium from Canada; Final Results of Antidumping Duty Administrative Review, 61 FR 49732 (September 23, 1996); Pure Magnesium from Canada; Final Results of Antidumping Duty Administrative Review, 62 FR 43513 (August 14, 1997); Pure Magnesium from Canada; Final Results of Antidumping Duty Administrative Review and Determination Not To Revoke Order in Part, 64 FR 12977 (March 16, 1999); Pure Magnesium from Canada; Final Results of Antidumping Duty Administrative Review and Determination Not to Revoke Order in Part, 64 FR 50489 (September 17, 1999). 4. On September 3, 1999, the Department received and granted a request from Magcorp for a five working-day extension of the deadline for filing rebuttal comments in this sunset review. This extension was granted for all participants eligible to file rebuttal comments in this review. The deadline for filing rebuttals to the substantive comments therefore became September 13, 1999. 5. See Extension of Time Limit for Preliminary Results of Full Five-Year Reviews, 64 FR 66879 (November 30, 1999). 6. The Department bases this determination on information submitted by the domestic and respondent interested parties in their September 1, 1999, submissions, as well as U.S. IM146 Reports, U.S. Department of Commerce statistics, U.S. Department of Treasury statistics, and information obtained from the U.S. International Trade Commission. 7. Indeed, the Department has determined separately that shipments were not made in commercial quantities. This determination reinforces our conclusion here, even though the same standard was not used.