Pure Magnesium From Canada; Preliminary Results of Antidumping Administrative Review and Notice of Intent Not To Revoke Order in Part

DEPARTMENT OF COMMERCE

International Trade Administration

[A-122-814]

Pure Magnesium From Canada; Preliminary Results of Antidumping

Administrative Review and Notice of Intent Not To Revoke Order in Part

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

ACTION: Notice of preliminary results of antidumping duty

administrative review and notice of intent not to revoke order in part

of pure magnesium from Canada.

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SUMMARY: The Department of Commerce is conducting an administrative

review of the antidumping duty order on pure magnesium from Canada. The

period of review is August 1, 1996 through July 31, 1997. This review

covers imports of pure magnesium from one producer/exporter.

We have preliminarily found that sales of subject merchandise have

not been made below normal value. Further, we intend not to revoke the

order with respect to pure magnesium from Canada produced by Norsk

Hydro Canada Inc. If these preliminary results are adopted in our final

results, we will instruct the Customs Service not to assess antidumping

duties.

Interested parties are invited to comment on these preliminary

results. We will issue the final results not later than 120 days from

the date of publication of this notice.

EFFECTIVE DATE: May 12, 1998.

FOR FURTHER INFORMATION CONTACT: Zak Smith, Import Administration,

International Trade Administration, U.S. Department of Commerce, 14th

Street and Constitution Avenue, N.W., Washington D.C. 20230; telephone

(202) 482-1279.

The Applicable Statute and Regulations

Unless otherwise indicated, all citations to the statute are

references to the provisions effective January 1, 1995, the effective

date of the amendments made to the Tariff Act of 1930 (``the Act'') by

the Uruguay Round Agreements Act (``URAA''). In addition, unless

otherwise indicated, all citations to the Department of Commerce's

(``the Department's'') regulations refer to the regulations, codified

at 19 CFR part 351 (62 FR 27399, May 19, 1997).

Background

The Department published an antidumping duty order on pure

magnesium from Canada on August 31, 1992 (57 FR 39390). On August 4,

1997, the Department published a notice of ``Opportunity to Request an

Administrative Review'' of the antidumping duty order on pure magnesium

from Canada (62 FR 41925). On August 29, 1997, a producer/exporter,

Norsk Hydro Canada Inc. (``NHCI'') requested an administrative review

of its exports of the subject merchandise to the United States for the

period of review August 1, 1996, through July 31, 1997. In accordance

with 19 CFR 351.221, we initiated the review on September 25, 1997. The

Department is now conducting this administrative review in accordance

with section 751 of the Act.

Scope of Review

The product covered by this review is pure magnesium. Pure

unwrought magnesium contains at least 99.8 percent magnesium by weight

and is sold in various slab and ingot forms and sizes. Granular and

secondary magnesium are excluded from the scope currently classifiable

under subheading 8104.11.0000 of the Harmonized Tariff Schedule

(``HTS''). The HTS item number is provided for convenience and for

customs purposes. The written description remains dispositive.

Verification

As provided in section 751(d) of the Act, we verified information

provided by the respondent, NHCI, by using our standard verification

procedures, including on-site examination of relevant sales and

financial records.

Export Price

For sales to the United States, we used export price (``EP'') as

defined in section 772(a) of the Act because the merchandise was sold

directly to the first unaffiliated purchaser in the United States prior

to importation. The use of constructed export prices was not warranted

based on the facts of the record. EP was based on the packed delivered,

duties unpaid price to unaffiliated purchasers in the United States. We

made a deduction for movement expenses in accordance with section

772(c)(2)(A) of the Act; this included the foreign and U.S. inland

freight expense.

Normal Value

We compared the aggregate quantity of home market and U.S. sales

and determined that the quantity of the company's sales in its home

market was more than five percent of the quantity of its sales to the

U.S. market. Consequently, pursuant to section 773(a)(1)(B) of the Act,

we based normal value (``NV'') on home market sales.

We made adjustments for differences in packing in accordance with

sections 773(a)(6)(A), B(i) of the Act. We also made adjustments for

movement expenses, consistent with section 773(a)(6)(B)(ii) of the Act,

for inland freight. In addition, we made adjustments for differences in

circumstances of sale (``COS'') in accordance with section

773(a)(6)(C)(iii) of the Act and 19 CFR 351.410. We made COS

adjustments by deducting direct selling expenses incurred on home

market sales (credit expenses) and adding U.S. direct selling expenses

(credit expenses).

Revocation

Pursuant to 19 CFR 351.222(b)(2), NHCI requested revocation of the

antidumping duty order in part. In accordance with 19 CFR 351.222(e),

the request was accompanied by certifications that NHCI had not sold

the subject merchandise at less than normal value during the current

period of review and would not do so in the future. NHCI further

certified that it sold the subject merchandise to the United States in

commercial quantities for a period of at least three consecutive years.

NHCI also agreed to immediate reinstatement of the antidumping duty

order, as long as any exporter or producer is subject to the order, if

the Department concludes that NHCI, subsequent to the revocation, sold

the

[[Page 26148]]

subject merchandise at less than normal value.

On October 22 and November 6, 1997, the petitioner submitted

argumentation opposing NHCI's revocation request. On February 12, 1998,

the Department established a process for the submission of factual

information and argument pertaining to the issue of likelihood of

future dumping.

Interested Party Comments on Whether Future Dumping Is Likely

On April 2 and April 9, 1998, NHCI and the petitioner submitted

comments and rebuttals, respectively, on the issue of whether it is

likely that NHCI would resume dumping if the Department granted NHCI's

revocation request.

Petitioner's Arguments: The petitioner contends that NHCI did not

make sales in commercial quantities during the last three consecutive

review periods, and thus has not fulfilled one of the revocation

requirements under the new regulations. In this case, the petitioner

states that although one sale during a one-year period may be

sufficient for the calculation of an antidumping margin, it does not

constitute commercial quantities for the relevant product and industry.

The petitioner also argues that the dramatic decline in NHCI's sales

after the imposition of the order is indicative of NHCI's inability to

make sales in the United States without dumping.

The petitioner made comments as to the condition of the pure

magnesium market as well. The petitioner argues that the likelihood

that NHCI will resume dumping is all the greater because of the

substantial fall and continuing decline in magnesium prices that has

occurred over the past two years, which is due to a fundamental

oversupply in the global market. According to the petitioner, this

oversupply will be exacerbated in coming years as new production

facilities come on line in Canada (unrelated to NHCI) and in third

countries. Furthermore, NHCI has plans to increase its own production

capacity, which, according to the petitioner, will contribute to the

oversupply in the global market and thus, likely lead to a resumption

of dumping. In response to NHCI's argument that it is focusing on the

alloy market, the petitioner states that greater competition in

magnesium products along with supply exceeding demand will pressure

NHCI to engage the U.S. pure magnesium market. Furthermore, according

to the petitioner, if NHCI vigorously enters the U.S. pure magnesium

market it will be facing a situation where pure magnesium prices are

actually on the decline, making dumping more likely.

Respondent's Arguments: NHCI argues that it has met all the

procedural requirements for revocation. It has made the proper

submissions and certifications, has a record of three years of U.S.

sales at not less than normal value, and will continue to trade fairly

and abide by trade laws in all markets. In response to the petitioner's

allegations with respect to commercial quantities, NHCI argues that the

Department has stated in past cases that there has been no substantive

change of the revocation policy pursuant to the new regulations, and

thus no additional revocation threshold in the form of the

certification of sales in commercial quantities has been created.

Rather, NHCI states that the Department should give great weight to the

fact that it has met the Department's requirement of three consecutive

years without dumping, all based on bona fide sales.

With respect to the likelihood of future dumping, NHCI argues that

it has no incentive to engage in dumping in the U.S. pure magnesium

market because it has a stable customer base in Canada and third

countries. Additionally, it has no incentive to shift production from

alloy magnesium to pure magnesium, given the growth in the alloy

magnesium market. While NHCI's planned plant expansion may give it the

ability to produce more pure magnesium for sale in the U.S. market, the

company contends that the planned expansion is for the alloy magnesium

market, and that any increases in production are not necessarily

targeted for the United States. Even if some of the new production

capacity were for pure magnesium, NHCI states that there has been

growth in all magnesium markets, not just alloy. NHCI notes that such

market conditions do not lend themselves to dumping.

NHCI maintains that the growth in the alloy magnesium market

accounts for the drop off in NHCI's U.S. sales of pure magnesium. In

support of its position, NHCI argues that the Norsk Hydro group

produces the subject merchandise in both Canada and Norway, yet sales

from Norway also declined during the same period, despite the absence

of antidumping duties applicable to Norwegian imports. NHCI explains

that the controlling factor for these marketing decisions has been the

growth of the alloy magnesium market.

Department Analysis

Section 351.222(b)(2) of the Department's regulations states that

the Secretary may revoke an order in part if the Secretary concludes

that: (i) the exporter or producer has sold the merchandise at not less

than normal value for a period of three consecutive years; (ii) it is

not likely that the person will in the future sell the merchandise at

less than normal value; and (iii) the person agrees in writing to its

immediate reinstatement in the order if the Secretary concludes that

dumping has resumed (see, 19 CFR 351.222(b) (1998)). If these

preliminary results are adopted as final results, NHCI will have met

the first criterion. NHCI's agreement to its immediate reinstatement in

the order if the Secretary concludes that dumping has resumed meets the

third criterion. Thus, the issue is whether the evidence supports a

finding that it is not likely that NHCI will in the future sell the

merchandise at less than normal value.

When making this determination, the Department looks at all

relevant information on the record (see, Brass Sheet and Strip from

Canada: Preliminary Results of Antidumping Duty Administrative Review

and Notice of Intent To Revoke Order in Part (63 FR 6519, 6523,

February 9, 1998) (``Canadian Brass Sheet'')). When assessing whether a

company is not likely to sell at less than normal value in the future,

the lack of dumping over the course of three years can be predictive of

future behavior in the absence of contrary evidence. Where, as was done

here, the petitioner makes a compelling argument that dumping may occur

in the future if the order is revoked, the Department may request and

consider additional relevant evidence in making its revocation

decision. As we stated in Canadian Brass Sheet, ``the Department has

considered, in addition to the respondent's prices and margins in the

preceding periods, such other factors as conditions and trends in the

domestic and home market industries, currency movements, and the

ability of the foreign entity to compete in the U.S. marketplace

without sales at less than normal value.'' Id. See also, Brass Sheet

and Strip from Germany; Final Results of Antidumping Duty

Administrative Review and Determination Not to Revoke in Part (61 FR

49727, 49730, September 23, 1996) (``German Brass Sheet'').

Following the general practice discussed above, we closely examined

NHCI's ability to compete in the U.S. market without sales at less than

normal value. We based this particular analysis on NHCI's historical

sales behavior, examining in particular its behavior prior to and after

the issuance of the antidumping duty order. We also analyzed trends and

conditions in the

[[Page 26149]]

U.S. and Canadian magnesium markets. (For a further discussion of the

factual background to our decision, see, Memorandum to Gary Taverman

dated May 4, 1998.) As discussed below, we preliminarily find that the

evidence on the record does not support a conclusion that the standard

for revocation has been met in this case.

An examination of the history of NHCI's U.S. pure magnesium sales

behavior reveals that prior to the antidumping order NHCI had numerous

U.S. pure magnesium customers and sold very large quantities of pure

magnesium. Yet, after the investigation, in which the Department found

that NHCI was making sales at less than normal value, imports of pure

magnesium into the United States essentially stopped. In the two years

after the imposition of the antidumping order, NHCI made no sales of

pure magnesium into the United States. Furthermore, in the succeeding

three years sales were negligible (i.e., for each year, sales were less

than one-half of one percent of the sales volume made in the last

completed fiscal year prior to the order). The severe and abrupt drop-

off in sales by NHCI after the order is a strong indicator that the

company is unable to sell in the United States without engaging in

dumping. As noted in German Brass Sheet, ``the sharp decrease in volume

after imposition of the order . . . suggest[s] that [the respondent]

has difficulty selling [the subject merchandise] above fair value'' (at

61 FR 49731). Thus, based on the virtual abandonment of the U.S. pure

magnesium market by NHCI, it is reasonable to assume that the company

has difficulty selling pure magnesium in the United States at or above

normal value.

In order for the Department to revoke the antidumping duty order

with respect to NHCI, the record evidence must support a finding that

it is not likely that the company will sell at less than normal value

in the future. As noted above, three years of no dumping is normally

probative as to a company's future pricing practices. However, this

approach assumes the company continues to participate meaningfully in

the U.S. market. In this case, the three years in question are

characterized by a negligible number and volume of sales by NHCI to the

U.S. market and therefore does not have the same probative value.

NHCI states that the decline in its U.S. sales is not due to its

inability to make sales above normal value, but rather due to its focus

on the alloy magnesium market. We do not accept this explanation for

two reasons. First, while we recognize the recent and projected rapid

growth rates for alloy magnesium, we find it extremely difficult to

conclude that NHCI's abrupt abandonment of the U.S. market for pure

magnesium was unrelated to the dumping proceedings.

Second, given the size and importance of the U.S. pure magnesium

market and NHCI's continued sales of pure magnesium in other markets,

we are not convinced that NHCI has permanently changed its marketing

and sales strategy to focus solely on alloy magnesium. Although the

company implies that it has little interest in the U.S. market for pure

magnesium, we note that NHCI maintains significant sales of pure

magnesium in Canada and third countries. The magnitude of NHCI's pure

magnesium sales in Canada reflects the current global reality of a

higher demand for pure than alloy magnesium. The higher demand for pure

magnesium also exists in the United States. U.S. consumption of pure

magnesium in 1996, for instance, was nearly triple that of alloy

magnesium consumption. Given the mix of magnesium products (alloy

versus pure) in the United States and the fact that the United States

is the largest market in the world for pure magnesium, it appears

likely that NHCI, in the absence of the antidumping duty order, would

seek to reestablish itself in the U.S. pure magnesium market.

Thus, based on the above, we preliminarily conclude that the

revocation standard has not been met in this case. Therefore, we have

preliminarily determined not to revoke the antidumping duty order with

respect to pure magnesium from Canada produced by NHCI.

Preliminary Results of the Review

As a result of this review, we preliminarily determine that NHCI's

margin for the period August 1, 1996, through July 31, 1997, is zero.

Parties to the proceeding may request disclosure within five days

of the date of publication of this notice. Interested parties may also

request a hearing within thirty days of publication. If requested, a

hearing will be held 37 days after publication. Interested parties may

submit case briefs within thirty days of publication. Rebuttal briefs,

which must be limited to issues raised in the case briefs, may be filed

not later than five days after the case briefs. The Department will

issue a notice of the final results of this administrative review,

which will include the results of its analysis of issues raised in any

such briefs, within 120 days from the publication of these preliminary

results.

Furthermore, the following deposit requirements will be effective

upon completion of the final results of this administrative review for

all shipments of pure magnesium from Canada entered, or withdrawn from

warehouse, for consumption on or after the publication date of the

final results of this administrative review, as provided by section

751(a)(1) of the Act: (1) the cash deposit rate for the reviewed

company will be the rate established in the final results of this

administrative review (except no cash deposit will be required for the

company if its weighted-average margin is de minimis, i.e., less than

0.5 percent); (2) for merchandise exported by manufacturers or

exporters not covered in this review but covered in the original less

than fair value investigation or a previous review, the cash deposit

will continue to be the most recent rate published in the final

determination or final results for which the manufacturer or exporter

received an individual rate; (3) if the exporter is not a firm covered

in this review, the previous review, or the original investigation, but

the manufacturer is, the cash deposit rate will be the rate established

for the most recent period for the manufacturer of the merchandise; and

(4) if neither the exporter nor the manufacturer is a firm covered in

this or any previous reviews, the cash deposit rate will be 21 percent,

the ``all others'' rate established in 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).

This notice serves as a preliminary reminder to importers of their

responsibility to file a certificate regarding the reimbursement of

antidumping duties prior to liquidation of the relevant entries during

this review period. Failure to comply with this requirement could

result in the Secretary's presumption that reimbursement of antidumping

duties occurred and the subsequent assessment of double antidumping

duties.

This administrative review and notice are in accordance with

sections 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)) and 19 CFR section

351.213.

Dated May 4, 1998.

Robert S. LaRussa,

Assistant Secretary for Import Administration.

[FR Doc. 98-12595 Filed 5-11-98; 8:45 am]

BILLING CODE 3510-DS-P