[Federal Register Volume 66, Number 83 (Monday, April 30, 2001)]
[Notices]
[Pages 21325-21328]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-10686]


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DEPARTMENT OF COMMERCE

International Trade Administration

[A-508-809]


Notice of Preliminary Determination of Sales at Less Than Fair 
Value: Pure Magnesium from Israel

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

EFFECTIVE DATE: April 30, 2001.

FOR FURTHER INFORMATION CONTACT: Craig Matney or Andrew 
Covington, Office 1, AD/CVD Enforcement, Import Administration, 
International Trade Administration, U.S. Department of Commerce, 14th 
Street and Constitution Avenue, NW., Washington, DC 20230; telephone: 
(202) 482-1778, or (202) 482-3534, respectively.

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 (April 2000).

Preliminary Determination

    We preliminarily determine that pure magnesium from Israel is being 
sold, or is likely to be sold, in the United States at less than fair 
value (LTFV), as provided in section 733 of the Act. The estimated 
margins are shown in the Suspension of Liquidation section of this 
notice.

Case History

    Since the publication of the notice of initiation of this 
investigation in the Federal Register (see Initiation of 
Antidumping Duty Investigations: Pure Magnesium from Israel, the 
Russian Federation, and the People's Republic of China, 65 FR 68121 
(November 14, 2000) (Initiation Notice)), the following events 
have occurred:
    On December 1, 2000, the United States International Trade 
Commission (ITC) preliminarily determined that there is a reasonable 
indication that imports of pure magnesium from Israel are materially 
injuring the United States industry. See 65 FR 77910 (December 13, 
2000). On December 4, 2000, the Department requested comments from 
interested parties regarding the criteria to be used for model matching 
purposes. The parties submitted comments on our proposed model matching 
criteria on December 8, 2000. On December 12, 2000, the Department 
issued an antidumping questionnaire to Dead Sea Magnesium (DSM).
    DSM submitted its initial responses to the questionnaire on January 
25 and February 1, 2001. The petitioners in this case (i.e., 
the Magnesium Corporation of America (Magcorp) and the United Steel 
Workers of America, Locals 482 and 8319) filed comments on the 
questionnaire responses on February 12, 2001. After analyzing the 
initial responses and the petitioners' comments, we issued a 
supplemental questionnaire to DSM on February 22, 2001. We received 
DSM's response to this supplemental questionnaire on March 15, 2001.
    On February 8, 2001, the petitioners requested that the Department 
initiate an investigation of sales below the cost of production (COP) 
for DSM. On February 20, 2001, based on our review of the petitioners' 
below cost allegation, we initiated a cost investigation for DSM and 
requested that DSM respond to Section D of the antidumping 
questionnaire concerning COP and constructed value (CV) (see 
Memorandum dated February 20, 2001, to Senior Office Director Susan 
Kuhbach, which is on file in Import Administration's Central Records 
Unit (Cost Initiation Memo)). DSM filed its Section D response 
on March 21, 2001. On April 2, 2001, we issued a Section D supplemental 
questionnaire to DSM. DSM submitted supplemental section D information 
on April 10 and 16, 2001.
    On March 1, 2001, the petitioners made a timely request for a 
postponement of the preliminary determination pursuant to section 
733(c)(1)(A) of the Act. On March 6, 2001, the Department postponed the 
preliminary determination until no later than April 23, 2001 (see 
Notice of Postponement of Preliminary Determinations of Sales at Less 
Than Fair Value: Pure Magnesium From Israel, the Russian Federation, 
and the People's Republic of China and Alignment of Final 
Countervailing Duty Determination With Final Antidumping Duty 
Determinations: Pure Magnesium From Israel, 66 FR 14546 (March 13, 
2001) (Postponement Notice)).

Scope of the Investigation

    The scope of this investigation includes imports of pure magnesium 
products, regardless of chemistry, form, or size, including, without 
limitation, ingots, raspings, granules, turnings, chips, powder, and 
briquettes.
    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 pure magnesium, by weight (generally 
referred to as ``pure'' magnesium); and (3) chemical combinations of 
pure magnesium and other material(s) in which the pure magnesium 
content is 50 percent or greater, but less than 99.8 percent, by 
weight, that do not conform to an ``ASTM Specification for Magnesium 
Alloy'' \1\ (generally referred to as ``off-specification pure'' 
magnesium); and (4) physical mixtures of pure magnesium and other 
material(s) in which the pure magnesium content is 50 percent or 
greater, but less than 99.8 percent, by weight, except that mixtures 
containing 90 percent or less pure magnesium, by weight, when mixed 
with lime, calcium metal, calcium silicon, calcium carbide, calcium 
carbonate, carbon slag coagulants, and/or fluorspar, are excluded.
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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.
---------------------------------------------------------------------------

    The merchandise subject to this investigation is classifiable 
under 8104.11.00, 8104.19.00, and 8104.30.00 of the Harmonized Tariff 
Schedule of the United States (HTSUS). Although the HTSUS subheading is 
provided for convenience and customs purposes, the written description 
of the merchandise under investigation is dispositive.

Comments on Scope

    In accordance with our regulations, we set aside a period of time 
for parties to raise issues regarding product coverage and encouraged 
all parties to submit such comments within 20 calendar days of 
publication of the Initiation Notice (see 65 FR at 
68123). On December 1, 2000, the petitioners requested that the 
Department clarify that the scope of this investigation excludes 
finished mixtures containing pure magnesium and/or off-specification 
pure magnesium prepared solely for use as a desulfurizer in steel-
making, unless such mixtures contain only minimal amounts of non-
magnesium materials in order to circumvent an antidumping order. On

[[Page 21326]]

December 4, 2000, an interested party in this investigation, ESM, 
submitted a letter supporting the petitioners' position that magnesium-
based reagents should not be included in the scope of the Department's 
investigation. On January 30, 2001, the petitioners submitted proposed 
language to further clarify their intent with respect to the scope of 
this investigation. Based on this submission, we have revised the scope 
to exclude reagent magnesium.
    In its December 4, 2000, submission, ESM also argued that pure 
magnesium ingot and granular magnesium constitute separate classes or 
kinds of merchandise and that the Department should exclude granular 
magnesium from the scope of the investigation. While ESM claimed that 
magnesium ingot and granular magnesium constitute separate classes or 
kinds of merchandise, it did not address the criteria for determining 
separate classes or kinds as set forth in 19 CFR 351.225(k) (i.e., 
the physical characteristics of the products, the expectations of 
the ultimate purchasers, the ultimate use of the product, the channels 
of trade in which the product is sold, and the manner in which the 
product is advertised or displayed). Instead, ESM addressed the 
criteria relating to designation of like products. The Department 
determined prior to initiating this investigation that ingot and 
granular magnesium are a single like product (see Initiation Notice 
65 FR at 68122 and 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).
    On April 10, 2001, Rossborough Manufacturing Co., L.P., requested 
that the Department amend the scope of this investigation to exclude 
certain additional reagent mixtures and imports of granular magnesium 
used for making reagent mixtures. Rossborough's submission was filed 
too late to be given proper consideration for purposes of the 
preliminary determination, but we will consider these issues for the 
final determination.

Period of Investigation

    The period of investigation (POI) is October 1, 1999, through 
September 30, 2000. This period corresponds to the respondent's four 
most recently completed fiscal quarters prior to the filing of the 
petition (see 19 CFR 351.204(b)).

Normal Value

A. Selection of Comparison Market
    Pursuant to section 771(16) of the Act, all products produced and 
sold by the respondents in the comparison market that fit the 
definition contained in the Scope of the Investigation section of this 
notice and were sold during the POI comprise the foreign like product. 
In accordance with section 773(a)(1)(C)(ii) of the Act, in order to 
determine whether there was a sufficient volume of sales in the home 
market to serve as a viable basis for calculating normal value (NV), we 
compared the respondent's volume of home market sales of the foreign 
like product to the volume of its U.S. sales of the subject 
merchandise.
    DSM reported that its home market sales of pure magnesium during 
the POI were less than 5 percent of its sales of pure magnesium in the 
United States. Therefore, DSM did not have a viable home market for 
purposes of calculating normal value. However, DSM reported that 
Germany was its largest viable third country market and, therefore, DSM 
reported its sales to Germany for purposes of calculating normal value. 
Because all of DSM's German sales failed the cost test, we have 
disregarded all comparison market sales (see the Results of the 
COP Test section below). Accordingly, we compared the merchandise sold 
in the United States to CV, in accordance with section 773(a)(4) of the 
Act.
B. Cost of Production Analysis
    Based on a timely cost allegation, and in accordance with section 
773(b)(2)(A)(i) of the Act, we found reasonable grounds to believe or 
suspect that DSM's pure magnesium sales made in Germany were made at 
prices below COP (see Cost Initiation Memo). As a result, the 
Department has conducted an investigation to determine whether the 
respondent made sales in its comparison market at prices below the COP 
during the POI within the meaning of section 773(b) of the Act. We 
conducted the COP analysis described below.

1. Calculation of COP

    In accordance with section 773(b)(3) of the Act, we calculated a 
weighted-average COP for pure magnesium, based on the sum of the cost 
of materials and fabrication (COM) for the foreign like product, plus 
amounts for interest expenses, general and administrative expenses 
(G&A) and packing costs. We adjusted DSM's reported COM data by 
treating certain joint products as by-products rather than as co-
products. This required the reallocation of manufacturing costs. We 
also recalculated DSM's reported interest and G&A expenses based on 
this revised COM. See April 23, 2001 memorandum to Neal Halper 
regarding adjustments to the COP and CV.

2. Test of Comparison Market Sales Prices

    We compared the adjusted, weighted-average, COP for DSM to its 
prices for German market sales of the foreign like product. The prices 
were exclusive of billing adjustments, movement expenses, commissions, 
and other direct and indirect selling expenses. This is in accordance 
with 773(b) of the Act, and was done to determine whether these sales 
had been made at prices below the COP within an extended period of time 
(i.e., a period of one year) in substantial quantities and 
whether such prices were sufficient to permit the recovery of all costs 
within a reasonable period of time.
3. Results of the COP Test
    Pursuant to section 773(b)(2)(C) of the Act, where less than 20 
percent of a respondent's sales of a given product were at prices less 
than the COP, we do not disregard any below-cost sales of that product 
because we determine that the below-cost sales were not made in 
``substantial quantities.'' Where 20 percent or more of a respondent's 
sales of a given product during the POI were at prices less than the 
COP, we determine such sales to have been made in substantial 
quantities within an extended period of time. See also section 
773(b)(2)(B) of the Act. The Department next compares prices from the 
comparison market to the POI average COP in order to determine whether 
such sales were made at prices which would permit recovery of all costs 
within a reasonable period of time. See section 773(b)(2)(D) of 
the Act.
    We found that all of DSM's comparison market sales were made within 
an extended period of time at prices less than the COP. In addition, 
the prices did not provide for the recovery of costs within a 
reasonable period of time. Therefore, because there were no comparable 
comparison market sales in the ordinary course of trade, we compared 
EP/CEP to CV in accordance with section 773(a)(4) of the Act. See 
the section on Calculation of Normal Value Based on Constructed 
Value below.

[[Page 21327]]

C. Calculation of Normal Value Based on Comparison Market Prices
    Because all of DSM's sales of comparable merchandise in the 
comparison market failed the cost test, we did not calculate NV based 
on comparison market prices.
D. Calculation of Normal Value Based on Constructed Value
    Section 773(a)(4) of the Act provides that where normal value 
cannot be based on comparison market sales, normal value may be based 
on the constructed value. Accordingly, because all sales of comparison 
products failed the COP test, we based NV on CV.
    Sections 773(e)(1) and (e)(2)(A) of the Act provide that the CV 
shall be based on the sum of the cost of materials and fabrication for 
the foreign like product, plus amounts for selling expenses, G&A, 
profit, and U.S. packing costs. We calculated the cost of materials and 
fabrication based on the methodology described in the Calculation of 
COP section, above.
    Because DSM does not have any above cost comparison market sales of 
subject merchandise, the Department has not determined selling 
expenses, G&A expenses, and profit under section 773(e)(2)(A) of the 
Act, which requires sales by the respondent in question in the ordinary 
course of trade in a comparison market. In situations where we cannot 
calculate selling expenses, G&A expenses, and profit under section 
773(e)(2)(A), section 773(e)(2)(B) of the Act sets forth three 
alternatives. The Statement of Administrative Action at 840 (H.R. Doc. 
103-316 (1994)) states that ``section 773(e)(2)(B) does not establish a 
hierarchy or preference among these alternative methods.''
    Section 773(e)(2)(B)(i) specifies that selling expenses, G&A 
expenses, and profit may be calculated based on ``actual amounts 
incurred by the specific exporter or producer * * * on merchandise in 
the same general category'' as subject merchandise. DSM also produces 
alloy magnesium, which could be considered as the same general category 
of merchandise as pure magnesium. However, there is insufficient 
information on the record for us to determine the selling and G&A 
expenses or the profit rate for DSM's sales of alloy magnesium.
    Alternative (ii) of this section provides that selling expenses, 
G&A expenses, and profit may be calculated based on ``the weighted 
average of the actual amounts incurred and realized by {other} 
exporters or producers that are subject to the investigation.'' 
However, because there are no other respondents in this case, the 
Department cannot calculate selling expenses, G&A expenses, and profit 
based on alternative (ii) of this section.
    Therefore, the only statutory option available to the Department to 
calculate the CV selling expenses, G&A expenses, and profit for DSM is 
under section 773(e)(2)(B)(iii). Alternative (iii) of this section 
allows the Department to use ``any other reasonable method'' to 
calculate the CV selling expenses, G&A expenses, and profit, provided 
that the amount for profit does not ``exceed the amount normally 
realized by exporters or producers * * * in connection with the sale, 
for consumption in the foreign country, of merchandise that is in the 
same general category of products as the subject merchandise.''
    With respect to selling expenses, lacking more suitable 
information, we calculated CV selling expenses based on DSM's reported 
comparison market sales. We calculated G&A based on DSM's reported 
information as applied to a revised COM (see the Calculation of COP 
section, above), as we have no reason to believe DSM's reported G&A 
expenses are unreliable as a result of all of its comparison market 
sales being made at prices below the cost of production.
    We calculated amounts for the CV profit based on the profit earned 
by Dead Sea Periclase (DSP). DSP produces periclase (i.e., 
magnesium oxide) and other magnesium-based compounds. These magnesium-
based products, like subject merchandise, are manufactured from the 
Dead Sea brine. Periclase is primarily used to manufacture refractories 
and other flame retardant materials. The other magnesium-based 
compounds are used in pharmaceuticals, food mineral supplements, 
rubbers, plastics, and to produce specialty steel for transformers. 
Because we do not have any further information regarding profit on the 
same general category of merchandise, we have not been able to quantify 
the ``profit cap'' described in section 773(e)(2)(B)(iii) of the Act. 
The SAA, at 841, anticipates such situations and directs that where the 
Department cannot calculate a profit cap, the Department may apply 
773(e)(2)(B)(iii) of the Act on the basis of the facts available. 
Therefore, we have not calculated a ``profit cap'' for the instant 
determination. As facts available, we have used DSP's profit rate of 
3.12 percent in calculating CV as a reasonable surrogate for DSM's home 
market profit.
    In addition, we added U.S. packing costs. Lastly, we made 
adjustments to CV for differences in circumstances of sale (COS) 
(i.e., imputed credit) in accordance with section 
773(a)(6)(C)(iii) of the Act and 19 CFR 351.410. We made COS 
adjustments for both EP and CEP sales.

Fair Value Comparisons

    To determine whether sales of pure magnesium from Israel to the 
United States were made at less than fair value, we compared the export 
price (EP) or constructed export price (CEP) to NV, as described in the 
Export Price and Normal Value sections, below. In accordance with 
section 777A(d)(1)(A)(i) of the Act, we compared POI-wide weighted-
average EPs and CEPs to the NVs.

Date of Sale

    DSM reported that it made a number of its sales based on term 
contracts in which the terms of sale (e.g., price, quantity, 
delivery schedule) purportedly were set at the time the contract was 
signed. In an April 19, 2001 supplemental questionnaire, the Department 
requested that DSM provide further information on these sales and 
report the contract date and other necessary information for all term 
contract sales negotiated during the POI. The current due date for this 
questionnaire response is May 2, 2001. For purposes of this preliminary 
determination, the Department has used the reported invoice date as the 
date of sale. However, we intend to examine DSM's response to our 
outstanding supplemental questionnaire and consider this issue further 
for the final determination.

Export Price

    In accordance with section 772 of the Act, we based U.S. price on 
EP for certain sales. Section 772(a) of the Act defines EP as the price 
at which the subject merchandise is first sold before the date of 
importation by the exporter or producer outside the United States to an 
unaffiliated purchaser in the United States, or to an unaffiliated 
purchaser for exportation to the United States. Consistent with this 
definition, we found that some of the respondent's sales during the POI 
were EP sales. For these sales, we calculated EP based on prices 
charged to the first unaffiliated customer in the United States.
    As the starting U.S. price, we relied on the reported gross unit 
price. These prices were delivered and FOB prices to unaffiliated 
customers in the United States. In accordance with section 772(c)(2) of 
the Act, we reduced the EP, where appropriate, by billing adjustments 
and movement expenses, including foreign inland freight, foreign

[[Page 21328]]

brokerage charges, insurance, international freight and U.S. inland 
freight.

Constructed Export Price

    For certain sales, we used CEP methodology in accordance with 
sections 772(b), (c) and (d) of the Act, because sales to the first 
unaffiliated purchaser in the United States took place after 
importation. Consistent with these definitions, we found that some of 
the respondent's sales during the POI were CEP sales. For these sales, 
we calculated CEP based on prices charged to the first unaffiliated 
customer in the United States.
    As the starting U.S. price, we relied on the reported gross unit 
price. These prices were delivered and FOB prices to unaffiliated 
customers in the United States. In accordance with section 772(c)(2) of 
the Act, we reduced the CEP, where appropriate, by billing adjustments 
and movement expenses, including foreign inland freight, foreign 
brokerage charges, insurance, international freight and U.S. inland 
freight. Also, where appropriate, we deducted direct and indirect 
selling expenses related to commercial activity in the United States. 
Pursuant to section 772(d)(3) of the Act, where applicable, we made an 
adjustment for CEP profit.

Currency Conversions

    We made currency conversions in accordance with section 773A(a) of 
the Act.

Verification

    In accordance with section 782(i) of the Act, we intend to verify 
information to be used in making our final determination.

Suspension of Liquidation

    In accordance with section 733(d)(2) of the Act, we are directing 
the Customs Service to suspend liquidation of all imports of subject 
merchandise from Israel entered, or withdrawn from warehouse, for 
consumption on or after the date of publication of this notice in the 
Federal Register. We will instruct the Customs Service to 
require a cash deposit or the posting of a bond equal to the weighted-
average amount by which the NV exceeds the EP or CEP, as indicated in 
the chart below. These suspension of liquidation instructions will 
remain in effect until further notice.
    The weighted-average dumping margins are as follows:

------------------------------------------------------------------------
                                                               Weighted-
                                                                average
                      Exporter/producer                          margin
                                                                  (in
                                                                percent)
------------------------------------------------------------------------
Dead Sea Magnesium...........................................      12.68
All-others...................................................      12.68
------------------------------------------------------------------------

ITC Notification

    In accordance with section 733(f) of the Act, we have notified the 
ITC of our determination. If our final determination is affirmative, 
the ITC will determine before the later of 120 days after the date of 
this preliminary determination or 45 days after our final determination 
whether these imports are materially injuring, or threaten material 
injury to, the U.S. industry.

Disclosure

    We will disclose the calculations used in our analysis to parties 
in this proceeding within five days of the publication of this notice. 
See 19 CFR 351.224(b).

Public Comment

    Case briefs for this investigation must be submitted no later than 
one week after the issuance of the verification reports. Rebuttal 
briefs must be filed within five days after the deadline for submission 
of case briefs. A list of authorities used, a table of contents, and an 
executive summary of issues should accompany any briefs submitted to 
the Department. Executive summaries should be limited to five pages 
total, including footnotes.
    Section 774 of the Act provides that the Department will hold a 
hearing to afford interested parties an opportunity to comment on 
arguments raised in case or rebuttal briefs, provided that such a 
hearing is requested by an interested party. If a request for a hearing 
is made in an investigation, the hearing will tentatively be held two 
days after the deadline for submission of the rebuttal briefs at the 
U.S. Department of Commerce, 14th Street and Constitution Avenue, NW, 
Washington, DC 20230. Parties should confirm by telephone the time, 
date, and place of the hearing 48 hours before the scheduled time.
    Interested parties who wish to request a hearing, or to participate 
if one is requested, must submit a written request to the Assistant 
Secretary for Import Administration, U.S. Department of Commerce, Room 
1870, within 30 days of the publication of this notice. Requests should 
contain: (1) The party's name, address, and telephone number; (2) the 
number of participants; and (3) a list of the issues to be discussed. 
Oral presentations will be limited to issues raised in the briefs.
    If this investigation proceeds normally, we will make our final 
determination within 75 days of this preliminary determination.
    This determination is issued and published in accordance with 
sections 733(f) and 777(i)(1) of the Act. Effective January 20, 2001, 
Bernard T. Carreau is fulfilling the duties of the Assistant Secretary 
for Import Administration.

    Dated: April 23, 2001.
Bernard T. Carreau,
Deputy Assistant Secretary, Import Administration.
[FR Doc. 01-10686 Filed 4-27-01; 8:45 am]
BILLING CODE 3510-DS-P