69 FR 15293, March 25, 2004

DEPARTMENT OF COMMERCE

International Trade Administration

[A-570-896, A-821-819]

Notice of Initiation of Antidumping Duty Investigations: 
Magnesium Metal From the People's Republic of China and the Russian 
Federation

AGENCY: Import Administration, International Trade Administration, 
Department of Commerce.

EFFECTIVE DATE: March 25, 2004.

FOR FURTHER INFORMATION CONTACT: Laurel LaCivita at 202-482-4243 
(People's Republic of China) or Mark Hoadley at (202) 482-3148 (Russian 
Federation), Import Administration, International Trade Administration, 
U.S. Department of Commerce, 14th Street and Constitution Avenue, NW., 
Washington, DC 20230.

Initiation of Investigations

The Petition

    On February 27, 2004, the Department of Commerce (the Department) 
received a petition filed in proper form by U.S. Magnesium Corporation 
LLC (US Magnesium), United Steelworkers of America, Local 8319, and 
Glass, Molders, Pottery, Plastics & Allied Workers International, Local 
374 (collectively, ``petitioners''), an ad hoc coalition representative 
of U.S. producers of magnesium metal. Petitioners filed amendments to 
the petition on March 8, 10, 12, and 15, 2004.
    In accordance with section 732(b)(1) of the Tariff Act of 1930 (the 
Act), petitioners allege that imports of magnesium metal from the 
People's Republic of China (PRC) and the Russian Federation (Russia), 
are, or are likely to be, sold in the United States at less than normal 
value within the meaning of section 731 of the Act, and that such 
imports are materially injuring, or threatening material injury to, an 
industry in the United States.
    The Department finds that petitioners filed this petition on behalf 
of the domestic industry because they are an interested party as 
defined in section 771(9)(G) of the Act and they have demonstrated 
sufficient industry support with respect to both of the antidumping 
investigations that they are requesting the Department initiate. See, 
infra, ``Determination of Industry Support for the Petition.''

Scope of Investigations

People's Republic of China
    The products covered by this investigation are primary and 
secondary

[[Page 15294]]

alloy magnesium metal, regardless of chemistry, raw material source, 
form, shape, or size. Magnesium is a metal or alloy containing by 
weight primarily the element magnesium. Primary magnesium is produced 
by decomposing raw materials into magnesium metal. Secondary magnesium 
is produced by recycling magnesium-based scrap into magnesium metal. 
The magnesium covered by this investigation includes blends of primary 
and secondary magnesium.
    The subject merchandise includes the following alloy magnesium 
metal products made from primary and/or secondary magnesium including, 
without limitation, magnesium cast into ingots, slabs, rounds, billets, 
and other shapes, and magnesium ground, chipped, crushed, or machined 
into raspings, granules, turnings, chips, powder, briquettes, and other 
shapes: Products that contain 50 percent or greater, but less than 99.8 
percent, magnesium, by weight, and that have been entered into the 
United States as conforming to an ``ASTM Specification for Magnesium 
Alloy'' \1\ and thus are outside the scope of the existing antidumping 
orders on magnesium from China (generally referred to as ``alloy'' 
magnesium).
    The scope of this investigation excludes: (1) All forms of pure 
magnesium, including chemical combinations of magnesium and other 
material(s) in which the pure magnesium content is 50 percent or 
greater, but less that 99.8 percent, by weight, that do not conform to 
an ``ASTM Specification for Magnesium Alloy'' \2\; (2) magnesium that 
is in liquid or molten form; and (3) mixtures containing 90 percent or 
less magnesium in granular or powder form by weight and one or more of 
certain non-magnesium granular materials to make magnesium-based 
reagent mixtures, including lime, calcium metal, calcium silicon, 
calcium carbide, calcium carbonate, carbon, slag coagulants, fluorspar, 
nephaline syenite, feldspar, alumina (Al203), calcium aluminate, soda 
ash, hydrocarbons, graphite, coke, silicon, rare earth metals/
mischmetal, cryolite, silica/fly ash, magnesium oxide, periclase, 
ferroalloys, dolomite lime, and colemanite.\3\
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    \1\ The meaning of this term is the same as that used by the 
American Society for Testing and Materials in its Annual Book of 
ASTM Standards: Volume 01.02 Aluminum and Magnesium Alloys.
    \2\ This material is already covered by existing antidumping 
orders. 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); and Notice of 
Antidumping Duty Order: Pure Magnesium in Granular Form from the 
People's Republic of China, 66 FR 57936 (Nov. 19, 2001).
    \3\ This third exclusion for magnesium-based reagent mixtures is 
based on the exclusion for reagent mixtures in the 2000-2001 
investigations of magnesium from China, Israel, and Russia. See 
Final Determination of Sales at Less Than Fair Value: Pure Magnesium 
in Granular Form From the People's Republic of China, 66 FR 49345 
(September 27, 2001); Final Determination of Sales at Less Than Fair 
Value: Pure Magnesium From Israel, 66 FR 49349 (September 27, 2001); 
Final Determination of Sales at Not Less Than Fair Value: Pure 
Magnesium From the Russian Federation, 66 FR 49347 (September 27, 
2001). These mixtures are not magnesium alloys, because they are not 
chemically combined in liquid form and cast into the same ingot.
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    The merchandise subject to this investigation is classifiable under 
items 8104.19.00, and 8104.30.00 of the Harmonized Tariff Schedule of 
the United States (``HTSUS''). Although the HTSUS items are provided 
for convenience and customs purposes, the written description of the 
merchandise under investigation is dispositive.
Russia
    The products covered by this investigation are primary and 
secondary pure and alloy magnesium metal, regardless of chemistry, raw 
material source, form, shape, or size. Magnesium is a metal or alloy 
containing by weight primarily the element magnesium. Primary magnesium 
is produced by decomposing raw materials into magnesium metal. 
Secondary magnesium is produced by recycling magnesium-based scrap into 
magnesium metal. The magnesium covered by this investigation includes 
blends of primary and secondary magnesium.
    The subject merchandise includes the following pure and alloy 
magnesium metal products made from primary and/or secondary magnesium, 
including, without limitation, magnesium cast into ingots, slabs, 
rounds, billets, and other shapes, and magnesium ground, chipped, 
crushed, or machined into raspings, granules, turnings, chips, powder, 
briquettes, and other shapes: (1) Products that contain at least 99.95 
percent 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 magnesium, by weight (generally referred to as 
``pure'' magnesium); and (3) chemical combinations of magnesium and 
other material(s) in which the magnesium content is 50 percent or 
greater, but less that 99.8 percent, by weight, whether or not 
conforming to an ``ASTM Specification for Magnesium Alloy.'' \4\
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    \4\ The meaning of this term is the same as that used by the 
American Society for Testing and Materials in its Annual Book of 
ASTM Standards: Volume 01.02 Aluminum and Magnesium Alloys.
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    The scope of this investigation excludes: (1) Magnesium that is in 
liquid or molten form; and (2) mixtures containing 90 percent or less 
magnesium in granular or powder form by weight and one or more of 
certain non-magnesium granular materials to make magnesium-based 
reagent mixtures, including lime, calcium metal, calcium silicon, 
calcium carbide, calcium carbonate, carbon, slag coagulants, fluorspar, 
nephaline syenite, feldspar, alumina (Al203), calcium aluminate, soda 
ash, hydrocarbons, graphite, coke, silicon, rare earth metals/
mischmetal, cryolite, silica/fly ash, magnesium oxide, periclase, 
ferroalloys, dolomite lime, and colemanite. \5\
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    \5\ This second exclusion for magnesium-based reagent mixtures 
is based on the exclusion for reagent mixtures in the 2000-2001 
investigations of magnesium from China, Israel, and Russia.
    See Final Determination of Sales at Less Than Fair Value: Pure 
Magnesium in Granular Form From the People's Republic of China, 66 
FR 49345 (September 27, 2001); Final Determination of Sales at Less 
Than Fair Value: Pure Magnesium From Israel, 66 FR 49349 (September 
27, 2001); Final Determination of Sales at Not Less Than Fair Value: 
Pure Magnesium From the Russian Federation, 66 FR 49347 (September 
27, 2001). These mixtures are not magnesium alloys, because they are 
not chemically combined in liquid form and cast into the same ingot.
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    The merchandise subject to this investigation is classifiable under 
items 8104.11.00, 8104.19.00, and 8104.30.00 of the Harmonized Tariff 
Schedule of the United States (``HTSUS''). Although the HTSUS items are 
provided for convenience and customs purposes, the written description 
of the merchandise under investigation is dispositive.

Determination of Industry Support for the Petition

    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

[[Page 15295]]

support for, or opposition to, the petition. Moreover, section 
732(c)(4)(D) of the Act 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: (i) Poll the industry or rely on other 
information in order to determine if there is support for the petition, 
as required by subparagraph (A), or (ii) determine industry support 
using a statistically valid sampling method.
    Section 771(4)(A) of the Act defines the ``industry'' as the 
producers of a 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 a 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.\6\
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    \6\ See Algoma Steel Corp. Ltd. v. United States, 688 F. Supp. 
639, 642-44 (CIT 1988) (``the ITC does not look behind ITA's 
determination, but accepts ITA's determination as to which 
merchandise is in the class of merchandise sold at LTFV'').
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    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 title.'' 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.
    In this case, the domestic like product referred to in the petition 
is the product defined in the ``Scopes of Investigations'' section, 
above, for Russia. While the scope definition for Russia differs from 
that for the PRC, the domestic like product is the same for both 
countries and includes all magnesium as defined by the broader Russian 
scope definition. For the details of the Department's like product 
analysis, see Attachment VI of Office of AD/CVD Enforcement Initiation 
Checklist: Magnesium Metal from the People's Republic of China 
(``PRC'') and the Russian Federation (``Russia''), dated March 18, 2004 
(Initiation Checklist).
    Moreover, the Department has determined that the petition contains 
adequate evidence of industry support; therefore, polling was 
unnecessary. See Attachment III of the Initiation Checklist. 
Specifically, based on the analysis contained in the Initiation 
Checklist, the Department finds that producers supporting the petition 
represent over 50 percent of total production of the domestic like 
product.
    Accordingly, the Department determines that this petition is filed 
on behalf of the domestic industry within the meaning of section 
732(b)(1) of the Act.

Period of Investigation

    The anticipated period of investigation (POI) for the PRC is July 
1, 2003 through December 31, 2003. The anticipated POI for Russia is 
January 1, 2003 through December 31, 2003.

Export Price and Normal Value

    The following are descriptions of the allegations of sales at less 
than normal value upon which the Department based its decision to 
initiate these investigations. The sources of data for U.S. prices, 
constructed value (CV), and factors of production are discussed in 
greater detail 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 will reexamine the 
information and revise the margin calculations as necessary.
    Regarding an investigation involving a non-market economy (NME) 
country, 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., Notice of Final Determination of Sales 
at Less Than Fair Value: Silicon Carbide from the People's Republic of 
China, 59 FR 22585, 22586-87 (May 2, 1994).
People's Republic of China
Export Price
    Petitioners based U.S. price for Chinese exports on the average 
free on board (FOB) value as indicated by U.S. Customs and Border 
Protection (CBP) data collected by the Bureau of Census. They used data 
for the POI, and only for cast magnesium alloys. Petitioners did not 
include imports of granular magnesium from China because it is a basket 
category including both pure and alloy granular magnesium. See the 
Initiation Checklist.
Normal Value
    Petitioners assert that the PRC is an NME country, and notes that 
in all previous investigations the Department has determined that the 
PRC is an NME. See Notice of Final Determination of Sales at Less Than 
Fair Value: Bulk Aspirin From the People's Republic of China, 65 FR 
33805 (May 25, 2000). The PRC will be treated as an NME unless and 
until its NME status is revoked. See section 771(18)(C)(i) of the Act. 
Because the PRC's status as an NME remains in effect, petitioners 
estimated the dumping margin using a NME methodology. Petitioners based 
their normal value (NV) calculations on the factors of production 
methodology as described in section 773(c)(3) of Act. They compiled 
their list of inputs and factor consumption rates from four different 
sources, including public information provided by respondents in past 
PRC magnesium proceedings, a technical paper presented at an industry 
conference, and an affidavit submitted by an employee of U.S. 
Magnesium.
    Petitioners selected India as the surrogate country for the PRC. 
Petitioners argued that, pursuant to section 773(c)(4) of the Act, 
India is an appropriate surrogate because it is a market-economy 
country that is at a comparable level of economic development to the 
PRC and is a significant producer of comparable merchandise. Based on 
the information provided by petitioners, we believe that the use of 
India as a surrogate country is appropriate for purposes of initiating 
this investigation. See the Initiation Checklist.
    In accordance with section 773(c)(4) of the Act, petitioners valued 
factors of production, where possible, on reasonably available, public 
surrogate country data. To value certain raw materials, petitioners 
used official Indian government import statistics, excluding those 
values from countries previously determined by the Department to be NME 
countries and excluding imports into India from Indonesia, Korea and 
Thailand, in light of the prevalence of export subsidies in those 
countries. See Notice of Final Determination of Sales at Less Than Fair 
Value: Ferrovanadium from the People's Republic of China, 67 FR 71137, 
71139 (Nov. 29, 2002).
    Petitioners did not provide factor values for magnesium chloride or 
aluminum-beryllium hardener, since

[[Page 15296]]

neither price quotes nor Indian import statistics were available. 
Petitioners valued dolomite using the October 2002 price quote reported 
in rupees that was contained in a past PRC magnesium proceeding. 
Petitioners explained that India imported only a small quantity of 
dolomite during the April 2002 to May 2003 period so that reliable 
import statistics for this period were not available. Petitioners 
valued sulphur powder using a September 9, 2003 price quote from the 
Indian trade magazine, Chemical Weekly. Petitioners relied on Indian 
import statistics to value the amount of coal used to produce one ton 
of magnesium metal. Petitioners relied on the Indian electricity rate 
for industrial users, as reported by the U.S. Department of Energy, to 
value electricity. For inputs valued in Indian rupees and not 
contemporaneous with the POI, petitioners used information from 
wholesale price indices to determine the appropriate adjustments for 
inflation. In addition, petitioners made currency conversions, where 
necessary, based on the average rupee/U.S. dollar exchange rate for the 
POI.
    Petitioners valued labor using the regression-based wage rate for 
the PRC provided by the Department, in accordance with section 
351.408(c)(3) of the Department's regulations.
    Petitioners valued factory overhead, selling, general, and 
administrative expenses (SG&A), and profit using the financial 
statements of two Indian aluminum producers. Petitioners explained that 
the Department has previously relied on the financial statements of 
Southern Magnesium, an Indian magnesium producer, to determine these 
values for Chinese magnesium producers. However, Southern Magnesium is 
currently classified as a ``sick industrial company'' under Indian 
commercial law and has ceased to produce magnesium. Thus, petitioners 
did not select Southern Magnesium as a surrogate company for 
calculating factory overhead, SG&A, and profit. Petitioners further 
explained that they are not aware of any other magnesium producers in 
any of the potential surrogate countries. Therefore, petitioners 
selected aluminum as the most comparable merchandise, since India is a 
known producer of aluminum, and aluminum is a metal produced from ores 
using an energy-intensive (and especially electricity-intensive) 
process. Furthermore, petitioners argue that the Department has 
previously determined that aluminum and magnesium are comparable 
products within the meaning of the statute, and has relied on data from 
financial statements of Indian aluminum producers for the purpose of 
deriving these components of the cost of production. See Notice of 
Final Determination of Sales at Less Than Fair Value: Pure Magnesium in 
Granular Form from the People's Republic of China, 66 FR 49345 
(September 27, 2001) and accompanying Issues and Decision Memorandum at 
Comment 3. Likewise, petitioners noted that the Department determined 
that aluminum was a product comparable to magnesium in the new shipper 
review of pure magnesium from the PRC. See Pure Magnesium from the 
People's Republic of China: Final Results of Antidumping Duty New 
Shipper Administrative Review, 63 FR 3085, 3088 (January 21, 1998). 
Therefore, in the absence of financial data for a producer of the 
identical merchandise, petitioners have relied upon the financial 
statements of two Indian producers of comparable merchandise (aluminum) 
to calculate the ratios for factory overhead, SG&A, and profit.
    Based on comparisons of export price (EP) to NV, calculated in 
accordance with section 773(c) of the Act, the estimated dumping margin 
for magnesium from the PRC is 141.49 percent. See the Initiation 
Checklist for details on supporting documentation and calculations.
Russia
Export Price
    Petitioners were unable to obtain transaction prices for U.S. sales 
produced in Russia, and, therefore, based U.S. price on the average FOB 
value as indicated by CBP data collected by the Bureau of Census. The 
petitioners included values based on this data for the POI for pure 
magnesium and alloy magnesium. There were no imports of granular 
magnesium from Russia during this time period, according to the customs 
data. See the Initiation Checklist.
Normal Value
    On June 6, 2002, the Department determined to consider Russia as a 
market economy, effective April 1, 2002. See Memorandum for Faryar 
Shirzad from Albert Hsu, Inquiry into the Status of the Russian 
Federation as a Non-Market Economy Country Under the U.S. Antidumping 
Law. As such, the petition contains information for calculating NV 
using the market economy methodology.
    Petitioners provided evidence supporting the conclusion that the 
Russian home market is viable. However, they were unable to obtain any 
public or confidential information on the prices charged by the Russian 
producers to their Russian customers. As such, petitioners next turned 
to the World Trade Atlas to locate a suitable third country market for 
Russian export sales. Based on the volume and value data reported in 
the World Trade Atlas, the Netherlands is the third country market with 
the highest volume of sales of magnesium from Russia.
    Petitioners then demonstrated that sales to the Netherlands were 
made at prices below the cost of production (COP), and, that, 
therefore, NV must be based on CV. See Initiation Checklist. They 
calculated the cost of manufacturing component of NV using the costs of 
U.S. Magnesium, one of the petitioners, adjusted for known differences 
between the Russian and U.S. production processes. Because U.S. 
Magnesium does not maintain product-specific costs in its normal cost 
accounting system, petitioners also made adjustments to derive product-
specific costs for primary pure and alloy magnesium. Petitioners relied 
on the financial statements of the Russian producers to calculate SG&A, 
interest expense, and profit.
    Petitioners claim that ``the energy sector in Russia continues to 
operate under strict government regulations, resulting in energy prices 
that are not reflective of market conditions,'' and provided 
documentation discussing the general involvement of the Russian 
government in price setting for, providing subsidies to, and otherwise 
regulating the Russian electricity industry. Therefore, argue 
petitioners, the Department should make an adjustment for distorted 
energy costs. Using publicly available information for ``benchmark'' 
prices for electricity in Hungary, Poland, and the Czech Republic, and 
the actual electricity price paid by one Russian magnesium producer, 
petitioners derive a figure of $0.2515 to add to the product-specific 
NVs. This amounts to an adjustment of between 19.12 to 20.82 percent of 
the unadjusted NV. We recognize that the valuation of energy costs is a 
complex issue that will need to be fully examined during the course of 
this investigation. We intend to examine thoroughly both the factual 
bases and methodological approaches to this issue with all interested 
parties.
    Based on comparisons of EP to NV, calculated in accordance with 
section 773(c) of the Act, the estimated range of dumping margins for 
magnesium from Russia is 54.40 to 68.94 percent without the adjustment 
for electricity, and 86.54 to 101.24 percent with the adjustment. See 
the Initiation Checklist for details

[[Page 15297]]

on supporting documentation and calculations.

Fair Value Comparisons

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

Allegations and Evidence of Material Injury and Causation

    Petitioners 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 sold at less than NV.
    Petitioners contend that the industry's injured condition and 
threat of being injured is evident in the domestic industry's decline 
in domestic capacity, capacity utilization, production, and shipments, 
loss of U.S. market share, declining employment, declining average unit 
sales values/industry price erosion, declining financial performance, 
inability to complete capital and R&D projects, specific instances of 
lost sales and revenue, and excess capacity in the PRC and Russia. 
Injury is caused by imports of subject merchandise, which are different 
under the PRC scope than under the Russian scope. We have assessed the 
allegations and supporting evidence regarding material injury and 
causation and we have determined that these allegations are properly 
supported by adequate evidence and meet the statutory requirements for 
initiation. See the Initiation Checklist.

Initiation of Antidumping Investigations

    Based upon our examination of the petition we have found that it 
meets the requirements of section 732 of the Act. Therefore, we are 
initiating antidumping duty investigations to determine whether imports 
of magnesium from the PRC and Russia are being, or are likely to be, 
sold in the United States at less than normal value. We will make our 
preliminary determinations no later than 140 days after the date of 
this initiation, unless this deadline is extended pursuant to section 
733(b)(1)(A) of the Act.

Distribution of Copies of the Petition

    In accordance with section 732(b)(3)(A) of the Act, a copy of the 
public version of the petition has been provided to the representatives 
of the governments of the PRC and Russia. We will attempt to provide a 
copy of the public version of the petition to each exporter named in 
the petition, as provided for under 19 CFR 351.203(c)(2).

ITC 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 preliminarily determine no later than April 12, 2004, 
whether there is a reasonable indication that imports of magnesium from 
the PRC and Russia are causing material injury, or threatening to cause 
material injury, to a U.S. industry. A negative ITC determination for 
either country will result in the investigation 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.

    Dated: March 18, 2004.
Joseph A. Spetrini,
Acting Assistant Secretary for Import Administration.
[FR Doc. 04-6717 Filed 3-24-04; 8:45 am]