65 FR 34440, May 30, 2000 A-823-805 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 Suspended Investigation on Silicomanganese from Ukraine; Preliminary Results of Full Review Summary We have analyzed the substantive responses of interested parties in the full sunset review of the suspended antidumping investigation covering silicomanganese from Ukraine. 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 discussed in the substantive responses we received in this full sunset review: 1. Adequacy Determination 2. Likelihood of continuation or recurrence of dumping A. Weighted-average dumping margin B. Volume of imports 3. Magnitude of the margin likely to prevail A. Margins from investigation B. Use of a more recent margin History of the Suspended Investigation On October 31, 1994, the Department suspended its antidumping investigation on the subject merchandise and on November 29, 1994, published the suspension agreement in the Federal Register (59 FR 60951). Upon request, the Department continued its investigation, and in accordance with section 734(g) of the Tariff Act of 1930, as amended ("the Act"), on December 6, 1994, published its final determination of sales at less than fair value. (1) Since the agreement has been in place, the Department has not completed an administrative review on silicomanganese from Ukraine. (2) The suspension agreement remains in effect for all producers and exporters of the subject merchandise from Ukraine. We note that, to date, the Department has not issued any duty absorption findings in this case. Background On November 2, 1999, the Department initiated a sunset review of the suspended antidumping investigation on silicomanganese from Ukraine (64 FR 59160), pursuant to section 751(c) of the Act. On November 17, 1999, we received a Notice of Intent to Participate on behalf of Eramet Marietta Inc. ("Eramet"), within the deadline specified in 19 CFR 351.218(d)(1)(i). Eramet claimed interested party status under section 771(9)(C) of the Act, as a domestic producer of silicomanganese. (3) We received a complete substantive response to the notice of initiation on December 2, 1999, on behalf of Eramet, within the 30-day deadline specified in 19 CFR 351.218(d)(3)(i). In its substantive response, Eramet indicated that Elkem was the petitioner in the original investigation and actively participated in the suspended antidumping investigation. We received a substantive response to the notice of initiation on December 13, 1999, on behalf of Ronly Holdings LTD. ("Ronly"), Nikopol Ferroalloys Plant ("Nikopol"), Zaporozhye Ferroalloys Plant ("Zaporozhye"), and the Ministry of Industrial Policy of the Government of Ukraine ("GOU") (collectively the "respondent interested parties"). (4) Ronly, Zaporozhye, and Nikopol claimed interested party status within the meaning of 771(9)(A) of the Act as foreign manufacturers and/or exporters of silicomanganese from Ukraine. Zaporozhye and Nikopol assert that they participated in the original antidumping investigation that led to the suspension agreement. On December 20, 1999, we received rebuttal comments from Eramet. (5) In accordance with section 751(c)(5)(C)(v) of the Act, the Department may treat a review as extraordinarily complicated if it is a review of a transition order (i.e., an order in effect on January 1, 1995). The review at issue concerns a transition order within the meaning of section 751(c)(6)(C)(ii) of the Act. Therefore, the Department determined that the sunset review of the suspension agreement on silicomanganese from Ukraine is extraordinarily complicated and extended the time limit for completion of the preliminary results of this review until not later than May 22, 2000, in accordance with section 751(c)(5)(B) of the Act. (6) Discussion of the Issues In accordance with section 751(c)(1) of the Act, the Department conducted this sunset review to determine whether termination of the suspended antidumping investigation 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 suspension agreement. In addition, section 752(c)(3) of the Act provides that the Department shall provide to the International Trade Commission ("the Commission") the magnitude of the margin of dumping likely to prevail if the suspended agreement were terminated. Below we address the comments of the interested parties. Adequacy Determination: On December 20, 1999, we determined that the respondent interested parties submitted adequate responses and accounted for significantly more than 50 percent of the value of total exports of the subject merchandise over the past five calendar years. Therefore, we determined to conduct a full sunset review in accordance with 19 CFR 351.218(e)(2)(i). In its rebuttal comments, Eramet argues that the respondent interested parties' substantive response does not qualify for consideration by the Department for numerous reasons, and therefore, that the Department should conduct an expedited review. First, Eramet argues that the accuracy and completeness of the information in the respondent interested parties' substantive response is not certified by an official of Nikopol as required under 19 CFR 351.303(g)(1). Secondly, Eramet argues that the respondent interested parties' submission does not address the factors the Department is required to consider in making its determination in this review. Instead, the respondent interested parties rely solely on "other factors," without showing that there is a "good cause" to consider such other factors, as required by the Policy Bulletin. Thirdly, Eramet asserts that after the respondent interested parties and the GOU requested an extension of time to file a substantive response, supra at footnote 2, the GOU, the sole respondent signatory of the suspension agreement, did not join the rest of the respondent interested parties in their submission or file a substantive response, thereby waiving the GOU's willingness to participate in the sunset review. Finally, Eramet notes that the respondent interested parties did not address the Department's criteria for sunset review determinations set forth in Policy Bulletin 98:3., i.e. the issues whether termination of the suspended investigation is likely to lead to continuation or recurrence of dumping, and the magnitude of the margin likely to prevail were the agreement terminated. In addition, Eramet asserts that not only does the respondents' submission not qualify for consideration, the other factors addressed in the submission are irrelevant to the issues to be decided in this review. See Rebuttal of Eramet to the Substantive Response of Respondent at 3. We disagree with Eramet that the response of the respondent interested parties is inadequate for purposes of 19 CFR 351.218(d)(3)(iii). While the respondent interested parties did not separately reference the likely effects of revocation or the rate that would be likely to prevail were the suspension agreement to be terminated, their submission provides information that indirectly addresses these criteria. In essence, respondent interested parties argue that, given Ukraine's structural economic problems, shipments to the United States would remain low, even absent the discipline of an agreement. Moreover, because Nikopol's exports of silicomanganese from Ukraine to the United States are significantly more that the 50 percent threshold needed for an adequate response, we continue to believe a full review is warranted. Likelihood of Continuation or Recurrence of Dumping: Interested Party Comments In its substantive response, Eramet argues that dumping is likely to continue at significant margins if the suspension agreement is terminated. According to Eramet, the history of this case illustrates that dumping margins for the respondent interested parties have continued at levels above de minimis since the issuance of the suspension agreement. Eramet asserts that, in accordance with the Sunset Policy Bulletin, the Department will determine that termination of a suspension agreement is likely to lead to continuation or recurrence of dumping where dumping continued at any level above de minimis after the issuance of the suspension agreement. Eramet contends that, since the agreement has been in place, silicomanganese from Ukraine has been dumped in the U.S. market at a higher margin. Eramet claims that official U.S. government statistics reveal that the weighted-average Customs unit value of the subject merchandise dropped from 16.2¢/lb, during the original period of investigation ("POI"), to 15.8¢/lb in 1999. (7) Eramet asserts further that, not only was the price in 1999 lower, but that normal increases in production costs would cause the normal value to which the price is compared to be higher than it was during the POI. For these reasons, Eramet believes that the evidence on record justifies a determination that termination of the suspension agreement would be likely to lead to continuation or recurrence of dumping. (8) As explained above, the respondent interested parties do not directly address whether dumping would be likely to continue or recur were the suspension agreement to be terminated. Rather, they argue that the Department should consider the fact that the decrease in production volume was caused by structural problems in Ukraine from 1991 to 1995. They also state that the structural problems were due, in part, to the dependence of the Ukrainian economy on delivery of power from the Commonwealth of Independent States. They argue further that the limited power supply decreased volume production significantly in 1991 and will most likely prevent Ukrainian exporters from increasing their U.S. sales in the future. (9) Rebuttal Comments Eramet reiterates in its rebuttal comments that, in the original investigation, the Department found that silicomanganese from Ukraine was being dumped at a margin of 163.00 percent. However, it adds that, since the original investigation, no exporter has demonstrated that it can ship Ukrainian silicomanganese to the United States without dumping. Furthermore, Eramet asserts that silicomanganese from Ukraine that entered the United States in June 1999 was dumped at a margin even higher than the 163.00 percent rate calculated in the original investigation. For these reasons, Eramet argues that the Department should determine that the termination of the suspension agreement would likely result in the continuation or recurrence of dumping. Department's Determination Drawing on the guidance provided in the legislative history accompanying the Uruguay Round Agreements Act ("URAA"), specifically 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. In addition, the Department normally will determine that termination of a suspended antidumping investigation 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 suspension agreement, (b) imports of the subject merchandise ceased after the issuance of the suspension agreement, or (c) dumping was eliminated after the issuance of the suspension agreement and import volumes for the subject merchandise declined significantly. See section II.A.3 of the Sunset Policy Bulletin. The Department also explained that, in the case of a suspension agreement, the data pertaining to weighted-average dumping margins and import volumes may not be conclusive in determining the likelihood of future dumping. Thus, in the context of the sunset review of a suspended investigation, the Department may be more likely to take other factors into consideration, provided good cause is shown. Id. To date, the Department has not conducted an administrative review of the suspension agreement. Rather, over the life of the suspension agreement, the Department monitored imports of silicomanganese from Ukraine. For the purposes of this sunset review, we considered the volume of imports for the period before and after the suspended investigation. Bureau of the Census IM-145 import statistics demonstrate that import volumes have fluctuated over the life of the agreement, but also that, on the whole, they have declined substantially since entry into force of the agreement. Also, these data show that no Ukrainian-origin silicomanganese entered the United States in 1995, 1996, or 1998. Since the restrictions imposed by the suspension agreement are in part responsible for the decline in import volumes, we find that it is likely that, should the agreement be terminated, silicomanganese import volumes will increase. Accordingly, we preliminarily determine that the likely outcome of removal of the restrictions would be the increase in availability and supply of Ukrainian silicomanganese in the U.S. market. Moreover, the basic laws of supply and demand suggest that an increase in supply, all else being equal, would be accompanied by downward pressure on prices. We note that the determination called for in these types of reviews is inherently predictive and speculative and that there may be more than one likely outcome following termination of the agreement. Although we acknowledge the structural problems associated with silicomanganese production in Ukraine, we do not agree with respondent interested parties that conditions have changed to such an extent that termination of the suspension agreement would avoid the recurrence of dumping. Furthermore, respondent interested parties did not directly address the likely effect upon prices of a termination of the suspension agreement. Given that the preliminary determination in this proceeding found dumping to exist and the probability, noted above, that a likely increase in supply would tend to put downward pressure on prices we believe that the overall weight of the evidence suggests that, in the absence of this agreement, dumping would recur. Therefore, we determine, preliminarily, that dumping would be likely to recur if the suspended investigation were terminated. Magnitude of the Margin Likely to Prevail: Interested Party Comments In its substantive response, Eramet asserts that the Department should follow the guidance of the SAA and the Sunset Policy Bulletin and provide to the Commission the margins from the original investigation. Since the Department has not calculated a dumping margin for any exporter since the original investigation, Eramet suggests that the margin most likely to prevail if the suspension agreement is terminated is 163.00 percent for all manufacturers/producers/exporters of silicomanganese from Ukraine, as calculated in the original investigation. Department's Determination In the Sunset Policy Bulletin, the Department stated that, consistent with the SAA and House Report, the Department will provide to the Commission the company-specific margins from the investigation because that is the only calculated rate that reflects the behavior of exporters without the discipline of suspension agreement. Further, for companies not specifically investigated, or for companies that did not begin shipping until after the suspension agreement 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. We agree with Eramet that the rate to provide the Commission is the rate from the original investigation. In this instance, because no administrative reviews were conducted throughout the history of the suspension agreement, the only rate is the one calculated in the investigation. Therefore, we preliminarily find that the margin from the original investigation is probative of the likely behavior of Ukrainian manufacturers/producers/exporters of the subject merchandise were the suspended agreement terminated. Thus, as stated in the Preliminary Results of Review section of the accompanying Federal Register notice, we will report the rate from the original investigation to the Commission as the magnitude of the margin likely to prevail if the suspended agreement were terminated. Preliminary Results of Review The Department preliminarily determines that if the suspended antidumping investigation is terminated, it is likely that dumping will continue or recur at the levels indicated below: _________________________________________________________________ Manufacturer/Exporter Margin (percent) _________________________________________________________________ All Manufacturers/Producers/Exporters 163.00 _________________________________________________________________ Recommendation Based on our analysis of the substantive responses 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________ _____________________________________________________________________ footnotes: 1. See Notice of Final Determination of Sales at Less Than Fair Value: Silicomanganese from Ukraine, 59 FR 62711 (December 6, 1994). 2. On December 23, 1998, the Department initiated a review of the Agreement. See Notice of Initiation of Antidumping and Countervailing Duty Administrative Reviews: Silicomanganese for Ukraine, 63 FR 71091 (December 23, 1998). On November 30, 1999, the Department received withdrawal requests from Eramet and the Government of Ukraine, and subsequently rescinded the initiation of the review. See Notice of Rescission of Administrative Review: Silicomanganese from Ukraine, 64 FR 68320 (December 7, 1999). 3. Eramet asserts that on June 30, 1999, Elkem Metals Company ("Elkem"), the original petitioner, sold its silicomanganese operations to Eramet SA. Eramet, a subsidiary of Eramet SA, is the new owner of these operations. 4. On December 2, 1999, the Department received a request for an extension of the deadline for filing a substantive response from the respondent interested parties. On December 7, 1999, the Department granted the respondent interested parties an extension, and required them to file both their substantive response and rebuttal comments by December 13, 1999. 5. Because the respondent interested parties filed a joint substantive response and rebuttal comments on December 13, 1999, supra, the Department granted Eramet an extended deadline for filing rebuttal comments until December 20, 1999. 6. See Extension of Time Limit for Final Results of Five-Year Reviews, 64 FR 71726 (December 22, 1999). 7. See Eramet's Substantive Response to the Department's Notice of Initiation, December 2, 1999, at 4. 8. Id., at 5. 9. See Respondent Interested Parties' Substantive Response to the Department's Notice of Initiation, December 13, 1999, at 5.