65 FR 47713, August 3, 2000 A-570-832 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 Sunset Review of the Antidumping Duty Order on Pure Magnesium from the People's Republic of China; Final Results Summary We have analyzed the substantive response of interested parties in the expedited sunset review of the antidumping duty order on pure magnesium from the People's Republic of China ("China"). We recommend that you approve the positions we have developed in the Discussion of the Issues section of this memorandum for these final results. Below is the complete list of the issues in this expedited sunset review for which we received substantive comments. 1. Likelihood of continuation or recurrence of dumping Weighted-average dumping margin Volume of imports Other factors 2. Magnitude of the margin likely to prevail Margins from investigation Use of a more recent margin History of the Order: On May 12, 1995, the Department of Commerce ("the Department") published the antidumping duty order on pure magnesium from China.(1) In its antidumping duty order the Department determined a country-wide rate of 108.26 percent for all producers and exporters of the subject merchandise from China. Since the issuance of this antidumping duty order the Department has conducted a new shipper administrative review.(2) In the new shippers review, the Department established a cash deposit rate of 69.53 percent for Taiyuan Heavy Machinery Import and Export Corporation ("Taiyuan"), and 108.26 percent for all other Chinese producers and exporters of the subject merchandise. No other administrative reviews have been conducted by the Department with respect to this antidumping duty order. The order remains in effect for all manufacturers and exporters of pure magnesium from China. On February 10, 1998, the Department published in the Federal Register a notice of scope rulings with regard to the subject merchandise.(3) The Department has made no duty absorption finding in this case. Background: On April 3, 2000, the Department of Commerce ("the Department") published the notice of initiation of the sunset review of the antidumping duty order on pure magnesium from China.(4) The Department received a Notice of Intent to Participate on behalf of Magnesium Corporation of America ("Magcorp"), within the deadline specified in 19 CFR 351.218(d)(1)(i). Pursuant to section 771(9)(C) of the Tariff Act of 1930, as amended (the Act"), Magcorp claimed interested party status as a U.S. manufacturer of the domestic like product. We received a complete substantive response from Magcorp, within the deadline specified in section 351.218(d)(3)(i) of the Sunset Regulations. The Department did not receive a substantive response from any respondent interested party in this review. As a result, and in accordance with 19 CFR 351.218(e)(1)(ii)(C)(2), the Department determined to conduct an expedited sunset review of this antidumping duty order. Discussion of the Issues In accordance with section 751(c)(1) of the Act, the Department conducted this sunset 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 margin of dumping likely to prevail if the order is revoked. Below we address comments of the interested party. 1. Likelihood of Continuation or Recurrence of Dumping Interested Party Comments: In its substantive response, Magcorp asserts that revocation of the antidumping duty order on pure magnesium from China would likely lead to continuation or recurrence of dumping because imports continue to be dumped at 108.36 percent dumping margin, and subject imports for consumption ceased for six months following the imposition of the order and sales in commercial quantities have not resumed since the order was issued. See Magcorp's May 3, 2000, Substantive Response at 1. With respect to dumping margins, Magcorp contends that the country-wide margin of 108.26 percent from the original antidumping investigation has remained the same throughout the history of the order. Magcorp adds that, in the only administrative review since the original investigation (the new shipper review), the Department established a substantial dumping margin for Taiyuan Heavy Machinery Import and Export Corporation ("Taiyuan"), the only exporter of the subject merchandise during the period of the administrative review.(5) They assert that the extremely high cash deposit rate has effectively stopped subject imports; therefore, this demonstrates that manufacturers and exporters of the subject merchandise cannot make shipments in commercial quantities without dumping. Id. at 10. With respect to import volumes, Magcorp demonstrates in its substantive response that import levels declined significantly after the issuance of the order. Id. at 10 - 13, and Exhibit 1. Furthermore, Magcorp maintains that Chinese manufactures and exporters have recently attempted to avoid the antidumping duties by shipping other types of magnesium not subject to the order. Magcorp claims that imports of pure magnesium from China have entered the United States under the temporary importation under bond ("TIB") provision. Id. at 5. The TIB provision provides exemption from duty deposits for imports not for consumption for a specified period of time, provided they are re- exported. Id. According to Magcorp, between 1997 and 1998, shipments of pure magnesium from China were virtually all entered under TIB as Chinese producers expanded their use of the TIB provision. Id. at 12 and Exhibit 1. For example, in 1997 total imports of pure magnesium from China were 2,185 metric tons ("mt") and non-TIB imports totaled 61 mt. In 1998 total import volumes of pure magnesium from China were 2,194 mt., while 14 mt. were shipments of non-TIB's. Id. at 12. Magcorp adds several other factors that indicate the probability that dumping of pure magnesium from China is likely to continue or recur if the order is revoked: (1) the condition of competition in the U.S. market; (2) the Chinese industry's expansion to become the world's largest magnesium producer; (3) China's reliance on export markets; (4) barriers to Chinese exports in other countries; (5) increasing global production capacity in both pure and alloy magnesium; (6) the continuing low level of Chinese export prices; and (7) the declining trend in magnesium prices in the U.S. market. See Magcorp's, April 3, 2000, Substantive Response at 14- 20. First, in regard to the condition of competition in the U.S. market, Magcorp asserts that because magnesium is a homogeneous, commodity product, consumers tend to buy from the lowest-priced supplier. Id. at 14. With a significant oversupply and falling prices in the current competitive market, Magcorp contends that manufacturers and exporters of pure magnesium from China would need to reenter the U.S. market at prices below those of the U.S. and other country producers which currently sell in the U.S. market. Id. at 15. Second, according to Magcorp, China is now the world's largest producer of pure magnesium. Magcorp notes that between 1998 and 1999, magnesium produced by China increased in strength and sophistication. Id. at 15, and Exhibit 3 and 4. Third, China relies on its exports. The low demand for pure magnesium in its home market led the Chinese Government to increase its manufacturers' and exporters' export tax rebate on pure magnesium to 15 percent this year. Id. at 16. Fourth, Chinese pure magnesium is currently subject to antidumping duty orders in other markets, i.e., India and the European Union. Id. at 17. Fifth, there have been major expansions of capacity in key magnesium producing countries. Magcorp asserts that, as a result, China will face intense competition in the pure magnesium markets. Id. at 18-19. Sixth, prices of magnesium from China imported under TIB, which is exempt from the dumping duties, are as low, if not lower now than prices in 1993, when imports from China began to surge. Finally, Magcorp argues that revocation of pure magnesium from China will likely lead to continuation or recurrence of dumping because of the declining trend of import prices. Magcorp asserts that between April 1999, and April 2000, prices declined from $1.38 /lb. to $1.205/lb. Id. at 20 and Exhibit 9. In sum, Magcorp maintains that dumping margins at levels above de minimis have remained since the investigation, and import volumes decreased after the issuance of the order. Therefore, they argue that based on the SAA and the Department's Sunset Policy Bulletin the Department should determine that revocation of this order would likely lead to the continuation or recurrence of dumping. Department's Position: Drawing on the guidance provided in the legislative history accompanying the Uruguay Round Agreements Act ("URAA"), specifically the Statement of Administrative Action ("the SAA"), H.R. Doc. No. 103-316, vol. 1 (1994), 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). Additionally, the Department normally will determine that revocation of an antidumping duty 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 of the Sunset Policy Bulletin). In addition to considering the guidance on likelihood cited above, section 751(c)(4)(B) of the Act provides that the Department shall determine that revocation of an order is likely to lead to continuation or recurrence of dumping where a respondent interested party waives its participation in the sunset review. In the instant review, the Department did not receive a response from any respondent interested party. Pursuant to section 351.218(d)(2)(iii) of the Sunset Regulations, this constitutes a waiver of participation. As discussed above 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. Dumping margins above de minimis levels remained unchanged and continued to exist for shipments of the subject merchandise from Chinese producers and exporters throughout the life of the order. Consistent with section 752(c) of the Act, the Department also considered the volume of imports before and after the issuance of the order. The Department, utilizing U.S. Census Bureau IM 146 reports and information concerning imports of the subject merchandise, confirms that imports decreased sharply following the issuance of the order. After the issuance of the order, subject imports declined significantly, and, although import volumes increased in 1997/1998, in 1999 there were no shipments of the subject imports. Therefore because dumping at levels above de minimis have continued over the life of the order, import volumes of the subject merchandise declined after the issuance of the order, respondent interested parties waived their right to participate in this review, and absent argument and evidence to the contrary, the Department determines that dumping would likely continue or recur if the order on pure magnesium from China were revoked. Given these facts, it is not necessary that the Department address Magcorp's other factors. 2. Magnitude of the margin likely to prevail Interested Party Comments: Magcorp asserts that the Department should provide the Commission the margin from the original investigation because with the exception of the margin calculated of 69.53 percent for Taiyuan, in the new shipper administrative review, there is no other calculated margin. See Magcorp's, April 3, 2000, Substantive Response at 21. Further, they assert that the dumping margin found in the investigation is the margin that best represents the behavior of Chinese producers and exporters of the subject merchandise absent the discipline of the order. Department's Position: In the Sunset Policy Bulletin, the Department stated that the Department will normally provide to the Commission the margin that was determined in the final determination of 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.) The Department agrees with Magcorp's argument concerning the choice of the margin rate to provide to the Commission. In the antidumping duty order on pure magnesium from China, the Department established a country-wide deposit rate of 108.26 percent for all producers and exporters. Except for a lower margin established for one exporter in a new shipper review, this margin has remained unchanged over the history of this order and continues to exist as the country- wide rate for producers and exporters of pure magnesium from China. As discussed in section II.B.1 of the Department's Sunset Policy Bulletin, for companies not specifically investigated, or for companies that did not begin shipping until after the order was issued, as in this case, the Department normally will provide a margin based on the "all others" rate from the investigation. Consistent with our Sunset Policy Bulletin we determine that the country- wide margin calculated in the Department's original investigation on pure magnesium is probative of the behavior of Chinese producers and exporters absent the discipline of the order. Therefore, the Department will provide to the Commission the margin from the original investigation. 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 X DISAGREE ________ Date: July 28, 2000 _________________________________________________________________________ footnote: 1. See Antidumping Duty Orders: Pure Magnesium From the People's Republic of China, the Russian Federation and Ukraine; Notice of Amended Final Determination of Sales at Less Than Fair Value: Antidumping Duty Investigation of Pure Magnesium From the Russian Federation, 60 FR 25691 (May 12, 1995). 2. See Pure Magnesium From the People's Republic of China; Final Results of Antidumping Duty New Shipper Administrative Review, 62 FR 3085 (January 21, 1998). 3. See Notice of Scope Rulings, 63 FR 6722 (February 22, 1998). 4. See Notice of Initiation of Five-Year ("Sunset") Reviews, 65 FR 17484 (April 3, 2000). 5. See Pure Magnesium From the People's Republic of China: Final Results of Antidumping Duty New Shipper Administrative Review, 63 FR 3085 (January 21, 1998).