Initiation of Antidumping Duty Investigations: Pure Magnesium From Israel, the Russian Federation, and the People's Republic of China

AGENCY:

Import Administration, International Trade Administration, Department of Commerce.

ACTION:

Initiation of antidumping duty investigations.

EFFECTIVE DATE:

November 14, 2000.

FOR FURTHER INFORMATION CONTACT:

Craig Matney or James Nunno at (202) 482-1778 and (202) 482-0783, respectively; Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW, Washington, DC 20230.

INITIATION OF INVESTIGATIONS:

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 are references to the provisions codified at 19 CFR Part 351 (April 2000).

The Petitions

On October 17, 2000, the Department received petitions filed in proper form by the Magnesium Corporation of America (Magcorp) and the United Steel Workers of America, Local 8319. On October 26, 2000, the petitioners amended the petitions to include the United Steelworkers of America, Local 482, as co-petitioners. Collectively, these entities are hereinafter referred to as “the petitioners.” The Department received information supplementing the petitions throughout the initiation period.

In accordance with section 732(b) of the Act, the petitioners allege that imports of pure magnesium from Israel, the People's Republic of China (PRC), and the Russian Federation (Russia) are being, or are likely to be, sold in the United States at less than fair value within the meaning of section 731 of the Act, and that such imports are materially injuring an industry in the United States.

On November 3 and 6, 2000, we received a submission from producers of granular pure magnesium. On November 6, 2000, the petitioners filed a response. The Department has taken these submissions into consideration in making the initiation determination.

The Department finds that the petitioners filed these petitions on behalf of the domestic industry because they are interested parties as defined in sections 771(9)(C) and (D) of the Act and they have demonstrated sufficient industry support with respect to each of the antidumping investigations that they are requesting the Department to initiate (see the following section, below).

Determination of Industry Support for the Petitions

Section 732(b)(1) of the Act requires that a petition be filed on behalf of the domestic industry. Section 732(c)(4)(A) of the Act provides that the Department's industry support determination, which is to be made before the initiation of the investigation, be based on whether a minimum percentage of the relevant industry supports the petition. A petition meets this requirement if the domestic producers or workers who support the petition account for: (1) At least 25 percent of the total production of the domestic like product; and (2) more than 50 percent of the production of the domestic like product produced by that portion of the industry expressing support for, or opposition to, the petition. Moreover, section 732(c)(4)(D) provides that, if the petition does not establish support of domestic producers or workers accounting for more than 50 percent of the total production of the domestic like product, the Department shall either poll the industry or rely on other information in order to determine if there is support for the petition.

Section 771(4)(A) of the Act defines the “industry” as the producers of a domestic like product. Thus, to determine whether the petition has the requisite industry support, the statute directs the Department to look to producers and workers who produce the domestic like product. The International Trade Commission (ITC), which is responsible for determining whether “the domestic industry” has been injured, must also determine what constitutes a domestic like product in order to define the industry. While both the Department and the ITC must apply the same statutory definition regarding the domestic like product (section 771(10) of the Act), they do so for different purposes and pursuant to separate and distinct authority. In addition, the Department's determination is subject to limitations of time and information. Although this may result in different definitions of the like product, such differences do not render the decision of either agency contrary to the law.

Section 771(10) of the Act defines the domestic like product as “a product which is like, or in the absence of like, most similar in characteristics and uses with, the article subject to an investigation under this subtitle.” Thus, the reference point from which the domestic like product analysis begins is “the article subject to an investigation,” i.e., the class or kind of merchandise to be investigated, which normally will be the scope as defined in the petition.

The domestic like product described in the petitions is pure magnesium in all forms. Based upon our review of petitioners' claims we concur that there is a single domestic like product: pure magnesium, regardless of chemistry, form, or size, including, without limitation, ingots, raspings, granules, turnings, chips, powder, and briquettes. Moreover, because the Department specifically excluded granular magnesium from earlier proceedings covering pure magnesium (see, e.g., Preliminary Determination of Sales at Less Than Fair Value: Pure and Alloy Magnesium From Canada, 57 FR 6094, 6095 (February 20, 1992) aff'd in Pure and Alloy Magnesium From Canada: Final Affirmative Determination; Rescission of Investigation and Partial Dismissal of Petition, 57 FR 30939 (July 13, 1992)), we have examined whether conditions in the magnesium industry have changed to an extent that it is now appropriate to include both forms in the proceedings covering Israel and Russia. Based on our review of the information provided in the petitions, we have concluded that conditions have changed and that we should include both granular magnesium and magnesium in ingot form in the same proceeding. See the Memorandum from the team to Richard W. Moreland, Deputy Assistant Secretary, Office of AD/CVD Enforcement, Group I entitled “Like Product and Industry Support Determinations in the Antidumping Duty Investigations of Pure Magnesium from Israel, the People's Republic of China, and the Russian Federation and the Countervailing Duty Investigation of Pure Magnesium from Israel,” dated November 6, 2000 (“Like Product/Industry Support Memo”).

Concerning industry support, for all three countries covered by the petitions, the petitioners established industry support by demonstrating that they account for over 25 percent of total production of the domestic like product (see Antidumping Investigations Initiation Checklist, dated November 6, 2000 (Initiation Checklist and the Like Product/Industry Support Memo)), thereby meeting the first requirement under section 732(c)(4)(A) of the Act. On October 30, 2000, the Department obtained information from another significant producer of pure magnesium indicating that this company is neutral with respect to the petitions (see November 2, 2000, memorandum to the file regarding submission of additional domestic production data). Since those parties expressing an opinion support the petitions, the second requirement under section 732(c)(4)(A) of the Act is also met.

Because the petitioners represent less than 50 percent of the domestic industry we have additionally examined industry support as required by section 732(c)(4)(D) of the Act. We find that, based on other information, there is sufficient support for the petition. Specifically, because the vast majority of the industry has officially stated its position for the record as either supportive or neutral, any potential opposition could not represent over 50 percent of the industry that has expressed support or opposition to the petition (see the Like Product/Industry Support Memo). Accordingly, we determine that these petitions are filed on behalf of the domestic industry within the meaning of section 732(c)(4)(A) of the Act.

Scope of Investigations

There is an existing antidumping duty order on pure magnesium from the PRC. See Notice of 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).

The scope of these investigations for Israel and the Russian Federation includes imports of pure magnesium products, regardless of chemistry, form, or size, including, without limitation, ingots, raspings, granules, turnings, chips, powder, and briquettes. The scope of the PRC investigation includes all of the foregoing pure magnesium products except pure magnesium that is already covered by the existing order, and classifiable under 8104.11.00 and 8104.19.00 of the Harmonized Tariff Schedule of the United States (HTSUS).

Pure magnesium includes: (1) Products that contain at least 99.95 percent primary magnesium, by weight (generally referred to as “ultra-pure” magnesium); (2) products that contain less than 99.95 percent but not less than 99.8 percent primary magnesium, by weight (generally referred to as “pure” magnesium); and (3) products that contain 50 percent or greater, but less than 99.8 percent primary magnesium, by weight, and that do not conform to an “ASTM Specification for Magnesium Alloy” (generally referred to as “off-specification pure” magnesium).

The merchandise subject to the Israel and the Russian Federation investigations is classifiable under 8104.11.00, 8104.19.00, and 8104.30.00 of the HTSUS. The merchandise subject to the PRC investigation is classifiable under 8104.30.00 of the HTSUS. Although the HTSUS subheading is provided for convenience and customs purposes, the written description of the merchandise under investigation is dispositive.

During our review of the petitions, we discussed the scope with the petitioners to ensure that it accurately reflects the product for which the domestic industry is seeking relief. Moreover, as discussed in the preamble to the Department's regulations (see Antidumping Duties; Countervailing Duties; Final Rule, 62 FR 27295, 27323 (May 19, 1997)), we are setting aside a period for parties to raise issues regarding product coverage. The Department encourages all parties to submit such comments within 20 calendar days of publication of this notice. Comments should be addressed to Import Administration's Central Records Unit at Room 1870, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW, Washington, DC 20230. The period of scope consultations is intended to provide the Department with ample opportunity to consider all comments and consult with parties prior to the issuance of the preliminary determinations.

Export Price and Normal Value

The following are descriptions of the allegations of sales at less than fair value upon which the Department based its decision to initiate these investigations. The sources of data for the deductions and adjustments relating to U.S. price, constructed value (CV), and factors of production are also discussed in the Initiation Checklist. Should the need arise to use any of this information as facts available under section 776 of the Act in our preliminary or final determinations, we may re-examine the information and revise the margin calculations, if appropriate.

Regarding the information involving non-market economies (NME), the Department presumes, based on the extent of central government control in an NME, that a single dumping margin, should there be one, is appropriate for all NME exporters in the given country. In the course of these investigations, all parties will have the opportunity to provide relevant information related to the issues of a country's NME status and the granting of separate rates to individual exporters. See, e.g., Final Determination of Sales at Less Than Fair Value: Silicon Carbide from the People's Republic of China, 59 FR 22585 (May 2, 1994).

Israel

Export Price

The petitioners based export price (EP) on the unit values for the period October 1999 through July 2000, as reported in the Bureau of the Census IM-145 data. Because this data represents a FOB foreign-port price, it was not necessary to adjust for U.S. and international movement expenses. Furthermore, the petitioners were not able to quantify foreign market brokerage, handling and inland freight expenses; therefore, they conservatively made no adjustment for such expenses. No other adjustments to the starting price were made to arrive at net U.S. price.

Normal Value

The petitioners claimed that there were no home market sales of pure magnesium in Israel. Based on the data in the petition, however, there is insufficient evidence to conclude that the home market for pure magnesium in Israel is not viable. Because the petitioners were unable to provide home market price information, we have relied on CV for purposes of calculating NV for this initiation. For further discussion, see the Initiation Checklist at page 8.

According to the petitioners, there is only one producer of pure magnesium in Israel, Dead Sea Magnesium Ltd. (DSM). Pursuant to sections 773(a)(4), 773(b) and 773(e) of the Act, the petitioners calculated CV using the manufacturing costs for pure magnesium shown for DSM in the 1999 financial statements of its parent company, Dead Sea Works Ltd. (DSW). Pursuant to section 773(b)(3) of the Act, the petitioners calculated CV as the sum of the cost of materials and fabrication, plus amounts for home market general expenses (i.e., selling, general and administrative expenses (SG&A) and interest), and packing. We relied on the reported CV amounts except for interest, which we recalculated using cost of sales as the denominator in the interest expense ratio consistent with our normal practice. Consistent with section 773(e)(2) of the Act, the petitioners also added to CV an amount for profit. Profit was based upon the 1999 financial statements of DSW. We also made the following circumstance-of-sale adjustments to the data above: (1) Deducted HM imputed credit expenses and HM royalty expenses; and (2) added U.S. imputed credit expenses and U.S. royalty expenses. The Department adjusted the petitioners' calculation of the U.S. imputed credit expense based on the average U.S. prime rate (see Initiation Checklist at page 9).

Based upon the comparison of EP to CV, the revised calculated estimated dumping margins range from 85.86 to 96.35 percent.

Sales Below Cost Allegation

Based upon the petitioners' claim that no viable Israeli market existed for pure magnesium, the petitioners looked to the largest export market other than the United States for pure magnesium sales. The petitioners determined this market to be Belgium and stated that Belgium would be the appropriate third-country market for NV. The petitioners alleged, however, that there were reasonable grounds to believe or suspect that sales of pure magnesium to Belgium were made at prices below the cost of production (COP), within the meaning of section 773(b) of the Act, and requested that the Department conduct a country-wide sales-below-cost investigation. Because we find that the petitioners did not adequately support their claim that the home market in Israel is not viable, however, we have not used this third-country price information for purposes of determining whether there are reasonable grounds to believe or suspect that sales of the foreign like product were made below the COP, within the meaning of section 773(b)(2)(A)(i) of the Act. Since we have rejected the use of Belgian prices and the petitioners have stated that there are no Israeli prices for pure magnesium, we have no price data upon which to perform a sales-below-cost analysis. Accordingly, we have not initiated a country-wide cost investigation. For further discussion, see the Initiation Checklist at pages 8-9.

The PRC

Export Price

The petitioners based EP on the average unit value for the period April through July 2000, as reported in the Bureau of the Census IM-145 data. The petitioners made no adjustments to the average unit value.

Normal Value

The petitioners allege that the PRC is an NME country, and that in all previous investigations the Department has determined that the PRC is an NME. See, e.g., Notice of Preliminary Results of Antidumping Duty Administrative Review: Natural Bristle Paintbrushes and Brush Heads From the People's Republic of China, 65 FR 13944, 13946 (Mar. 15, 2000). In accordance with section 771(18)(c) of the Act, any determination that a foreign country has at one time been considered an NME shall remain in effect until revoked. Therefore, the PRC will continue to be treated as an NME unless and until its NME status is revoked. Pursuant to section 771(18)(C)(i) of the Act, because the PRC's status as an NME remains in effect, the petitioners determined the dumping margin using an NME analysis.

The petitioners assert that India is the most appropriate surrogate country for the PRC, claiming that India is: (1) A market economy; (2) a significant producer of comparable merchandise; and (3) at a level of economic development comparable to the PRC in terms of per-capita gross national product. Based on the information provided by the petitioners, we believe that the petitioners' use of India as a surrogate country is appropriate for purposes of initiation of this investigation.

In accordance with 773(c)(4) of the Act, the petitioners valued the factors of production, where possible, on reasonably available, public surrogate country data. Values for calcinate, No. 2 flux, flourite powder, sulfur powder, and barium chloride were based on 1998 Indian import statistics as published by the United Nations. The value for ferrosilicon was based on the average unit value of ferrosilicon reported in the 1999 financial statements of an Indian producer of magnesium metal. Values for dolomite and sulfuric acid were based on the values obtained from the 1995-96 financial statements of a producer of ferro-alloys and The Financial Express, respectively. Labor was valued using the Department's regression-based wage rate for the PRC, in accordance with 19 CFR 351.408(c)(3). Electricity was valued using the 1998 rates for India published by the International Energy Agency (IEA) in 1999. Coal was valued using 1998 Indian import statistics as published by the United Nations. All surrogate values that fell outside the anticipated period of investigation (POI), which in the PRC case is April 1, 2000, through September 30, 2000, were adjusted for inflation.

To determine factory overhead, depreciation, selling, general, and administrative (SG&A) expenses, and interest expenses, the petitioners relied on rates derived from the financial statements of the magnesium metal producer noted above. Because these financial statements showed a loss, the petitioners relied on the 1998 financial statements of two Indian producers of aluminum to derive the profit ratio used in their calculations. We, however, have excluded profit from the calculation of normal value. Based on the information provided by the petitioners, we believe that the surrogate values represent information reasonably available to the petitioners and are acceptable for purposes of initiation of this investigation.

Based upon comparisons of EP to NV, the revised calculated estimated dumping margins range from 161.36 to 305.56 percent.

Russia

Export Price

The petitioners calculated EP using two methodologies. First, the petitioners based EP on their information regarding sales of Russian magnesium. The petitioners calculated a net U.S. price by deducting from this value the cost of transporting the subject merchandise from the plant to St. Petersburg, international freight, U.S. import duties, and an estimated importer markup of five percent. Because we could not ascertain the validity of the above-referenced price of Russian magnesium, we based one export price on alternate information contained in the petition regarding prices of Russian magnesium. We made deductions for foreign inland freight, an importer markup, international freight and handling charges, and U.S. import duties as described above.

The petitioners also based EP on the unit values for the period April through July 2000, as reported in the Bureau of the Census IM-145 data. The petitioners calculated a net U.S. price by deducting from this value the cost of transporting the subject merchandise from the plant to St. Petersburg.

Normal Value

The petitioners assert that Russia is an NME country, and that in all previous investigations, the Department has determined that Russia is an NME. See, e.g., Notice of Final Determination of Sales at Less Than Fair Value: Solid Fertilizer Grade Ammonium Nitrate from the Russian Federation, 65 FR 42669, 42670-71 (July 11, 2000). Russia will be treated as an NME unless and until its NME status is revoked. Pursuant to section 771(18)(C)(i) of the Act, because Russia's status as an NME remains in effect, the petitioners determined the dumping margin using an NME analysis.

NV was calculated using the same methodology described above for the PRC, except as noted below. Further, South Africa was used as the surrogate country. We believe that South Africa is an appropriate surrogate for purposes of initiating this case with respect to Russia because South Africa is: (1) A market economy; (2) a significant producer of comparable merchandise; and (3) at a level of economic development comparable to Russia in terms of per-capita gross national product.

Regarding NV, the petitioners valued petroleum coke, magnesium chloride, fluorspar, sulfuric acid, barium chloride, barium fluoride, potassium chloride, and packing materials using South African import statistics as published by the United Nations. The petitioners valued chlorine using a contemporaneous South African price quote. The petitioners deducted from the surrogate values of the two by-products (i.e., chlorine and potassium chloride) an amount for profit based on their own production experience in order to account for additional costs incurred to render these by-products marketable for sale. The petitioners also added to the surrogate value for chlorine an amount for re-vaporization based on the petitioners' production experience. The petitioners valued carnallite using a price quote for dolomite because the petitioners were unable to find a carnallite price quote. Because they were unable to find a surrogate value for dehydrated carnallite, the petitioners estimated the value of dehydrated carnallite as twenty times the value of carnallite. Labor was valued using the methodology described above for the PRC. Electricity was valued using the 2000 electricity rate schedule for large-volume users as published by one of South Africa's largest utility companies. The petitioners valued heavy oil using a 1999 price published by the International Energy Agency. All surrogate values that fell outside the anticipated POI were adjusted for inflation. The petitioners made purity adjustments for certain factors of production based on information from the investigation of pure and alloy magnesium from Russia.

To determine fixed factory overhead, depreciation, SG&A, interest expenses, and profit, the petitioners relied on rates derived for the aluminum operations of two aluminum producers, as reflected on their parent company's financial statement, and a South African zinc producer. Although there are no producers of magnesium in South Africa, the petitioners identified two primary aluminum producers in South Africa. The petitioners used the consolidated financial statement of the South African aluminum producers' parent company because no separate financial statements for the two aluminum producers were available. Because the parent company's financial statements did not separately identify SG&A expenses, the petitioners relied on a zinc producer whose electrolytic process is similar to the magnesium production process. In addition, the petitioners adjusted the factory overhead rate to account for higher electrolytic cell rebuilding costs associated with the production of magnesium. Based on the information provided by the petitioners, we believe that the surrogate values represent information reasonably available to the petitioners and are acceptable for purposes of initiation of this investigation.

Because we found certain discrepancies with the petitioners' calculations of surrogate values and constructed value, we recalculated margins for both Russian producers using both revised United States price information from the petition and the United States price based on Census Bureau data. See Initiation Checklist at pages 14 and 15. Based on comparisons of EP to NV, the calculated estimated dumping margins range from 23.45 to 39.14 percent.

Fair Value Comparisons

Based on the data provided by the petitioners, there is reason to believe that imports of pure magnesium from Israel, the PRC, and Russia are being, or are likely to be, sold at less than fair value.

Allegations and Evidence of Material Injury and Causation

The petitions allege that the U.S. industry producing the domestic like product is being materially injured, or is threatened with material injury, by reason of the individual and cumulated imports of the subject merchandise. The petitioners contend that the industry's injured condition is evident in the declining trends in net operating income, net sales volume and value, profit to sales ratios, and capacity utilization. The allegations of injury and causation are supported by relevant evidence including U.S. Customs import data, lost sales, and pricing information. We have assessed the allegations and supporting evidence regarding material injury and causation, and have determined that these allegations are properly supported by accurate and adequate evidence, and meet the statutory requirements for initiation (see Initiation Checklist). In accordance with section 771(7)(G)(ii)(IV), which provides an exception to the mandatory cumulation provision for imports from Israel, we have considered the petitioners' allegation of injury with respect to Israel independent of their allegations with respect to the PRC and Russia.

Initiation of Antidumping Investigations

Based upon our examination of the petitions on pure magnesium, we have found that they meet the requirements of section 732 of the Act. Therefore, we are initiating antidumping duty investigations to determine whether imports of pure magnesium from Israel, the PRC, and Russia are being, or are likely to be, sold in the United States at less than fair value. Unless this deadline is extended, we will make our preliminary determinations no later than 140 days after the date of this initiation.

Distribution of Copies of the Petitions

In accordance with section 732(b)(3)(A) of the Act, a copy of the public version of each petition has been provided to the representatives of the governments of Israel, the PRC, and Russia. We will attempt to provide a copy of the public version of each petition to each exporter named in the petition, as appropriate.

International Trade Commission Notification

We have notified the ITC of our initiations, as required by section 732(d) of the Act.

Preliminary Determinations by the ITC

The ITC will determine, no later than December 1, 2000, whether there is a reasonable indication that imports of pure magnesium from Israel, the PRC, and Russia are causing material injury, or threatening to cause material injury, to a U.S. industry. A negative ITC determination for any country will result in the investigations being terminated with respect to that country; otherwise, these investigations will proceed according to statutory and regulatory time limits.

This notice is issued and published pursuant to section 777(i) of the Act.