2011-11122. Magnesium Metal From the Russian Federation: Preliminary Results of Antidumping Duty Administrative Review

AGENCY:

Import Administration, International Trade Administration, Department of Commerce.

SUMMARY:

In response to timely requests, the Department of Commerce (the Department) is conducting an administrative review of the antidumping duty order on magnesium metal from the Russian Federation for the period of review (POR) April 1, 2009, through March 31, 2010. The review covers two respondents, PSC VSMPO-AVISMA Corporation (AVISMA) and Solikamsk Magnesium Works (SMW).

The Department preliminarily determines that AVISMA did not make sales to the United States at less than normal value. If these preliminary results are adopted in the final results of this administrative review, we will instruct U.S. Customs and Border Protection (CBP) to assess no antidumping duties on entries by AVISMA during the POR. SMW reported that it had no shipments to the United States during the POR. The preliminary results are listed below in the section titled “Preliminary Results of Review.”

DATES:

Effective Date: May 6, 2011.

FOR FURTHER INFORMATION CONTACT:

Hermes Pinilla or Minoo Hatten, AD/CVD Operations, Office 5, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW., Washington, DC 20230; telephone: [phone] or [phone], respectively.

SUPPLEMENTARY INFORMATION:

Background

The Department published the antidumping duty order on magnesium metal from the Russian Federation on April 15, 2005. See Notice of Antidumping Duty Order: Magnesium Metal From the Russian Federation, 70 FR 19930 (April 15, 2005). On April 1, 2010, the Department published in the Federal Register a notice of opportunity to request an administrative review of the order on magnesium metal from the Russian Federation. See Antidumping or Countervailing Duty Order, Finding, or Suspended Investigation; Opportunity To Request Administrative Review, 75 FR 16426 (April 1, 2010). On April 30, 2010, U.S. Magnesium Corporation LLC, the petitioner in this proceeding, requested that the Department conduct an administrative review with respect to AVISMA and SMW, both Russian Federation producers of the subject merchandise. On May 28, 2010, the Department published a notice of initiation of an administrative review of the antidumping duty order on magnesium metal from the Russian Federation for the period April 1, 2009, through March 31, 2010. See Initiation of Antidumping and Countervailing Duty Administrative Reviews, 75 FR 29976 (May 28, 2010).

We have extended the deadline for the preliminary results of this administrative review from December 31, 2010, to April 30, 2011.^[1] See Magnesium Metal From the Russian Federation: Extension of Time Limit for Preliminary Results of Antidumping Duty Administrative Review, 75 FR 78968 (December 17, 2010), and Magnesium Metal From the Russian Federation: Extension of Time Limit for Preliminary Results of Antidumping Duty Administrative Review, 76 FR 12938 (March 9, 2011).

We are conducting this review in accordance with section 751 of the Tariff Act of 1930, as amended (the Act).

Scope of the Order ^[2]

The merchandise covered by the order is magnesium metal (also referred to as magnesium), which includes 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 the order 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.”

The scope of the order 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.^[3]

The merchandise subject to the order is currently classifiable under items 8104.11.00, 8104.19.00, 8104.30.00, and 8104.90.00 of the Harmonized Tariff Schedule of the United States (HTSUS). Although the HTSUS item numbers are provided for convenience and customs purposes, the written description of the merchandise covered by the order is dispositive. See id.

SMW

On June 8, 2010, SMW submitted a letter indicating that it made no sales of the subject merchandise to the United States during the POR. We have not received any comments on SMW's submission. We examined SMW's claim of no shipments by issuing a “No Shipments Inquiry” to CBP and by reviewing electronic CBP data. See Memorandum to the File entitled “Magnesium Metal from the Russian Federation—Request for U.S. Entry Documents,” dated October 27, 2010. Based on our review of the electronic CBP data, we found that there were entries of subject merchandise produced by SMW to the United States during the POR. On November 29, 2010, we requested clarification from SMW on the entries we found in the electronic CBP data. On December 8, 2010, SMW filed a response indicating that the shipments in question were made by a third party which resold the subject merchandise produced by SMW to the United States without the specific knowledge of SMW. Thus, according to SMW, it had no knowledge of or involvement in the importation of magnesium metal into the United States during the POR. See SMW's response to the Department's inquiry dated December 8, 2010. Based on the information SMW provided on the record, we find that SMW did not have knowledge of exports or involvement in imports of magnesium metal into the United States during the POR. Thus, we did not request SMW to report such sales to the Department for purposes of calculating a dumping margin in this administrative review.

Affiliated-Party Sales

Based on information on the record, we preliminarily determined that AVISMA is affiliated with one of its home-market customers. See memorandum entitled “Magnesium Metal from the Russian Federation: Affiliation Analysis” dated March 30, 2011. As a result, we requested that AVISMA respond to our June 7, 2010, questionnaire concerning sales of the foreign like product by AVISMA's home-market customer to its unaffiliated home-market customers. See the Department's letter to AVISMA dated March 31, 2011. On April 14, 2011, we received a response from AVISMA indicating that the home-market customer in question consumed all of the magnesium metal it purchased from AVISMA during the POR. Thus, according to AVISMA, it does not have any downstream sales to report to the Department. See AVISMA's response to the Department's request for affiliated-party sales dated April 14, 2011. Based on this information, we preliminarily find that no further action is required with respect to AVISMA's affiliated-party sales regarding the home-market customer in question. See Notice of Preliminary Determination of Sales at Less Than Fair Value and Postponement of Final Determination: Magnesium Metal From the Russian Federation, 69 FR 59197, 59200 (October 4, 2004), unchanged in Magnesium Metal from the Russian Federation: Notice of Final Determination of Sales at Less Than Fair Value, 70 FR 9041 (February 24, 2005).

Constructed Export Price

AVISMA identified all of its sales to the United States as constructed export price (CEP) sales because the U.S. sales were made on behalf of AVISMA by AVISMA's U.S. affiliate, VSMPO-Tirus, U.S., Inc. (Tirus US), to unaffiliated purchasers in the United States. AVISMA and Tirus US are affiliated because Tirus US is a wholly owned subsidiary of AVISMA. See section 771(33)(E) of the Act. U.S. sales to the first unaffiliated party were made in the United States by the U.S. affiliate, thus satisfying the legal requirements for considering these transactions to be CEP sales. See section 772(b) of the Act.

We calculated CEP based on the packed, C.I.F. price to unaffiliated purchasers in the United States. In accordance with section 772(c)(2) of the Act, we made deductions from price for movement expenses and discounts, where appropriate. More specifically, we deducted early-payment discounts, expenses for Russian railway freight from plant to port, freight insurance, Russian brokerage, handling and port charges, international freight and marine insurance, U.S. customs duties, U.S. brokerage, handling, and port charges, U.S. warehousing, and U.S. inland freight.

In accordance with section 772(d)(1) of the Act, we deducted direct selling expenses and indirect selling expenses related to commercial activity in the United States. See also Statement of Administrative Action accompanying the Uruguay Round Agreements Act, H.R. Doc. No. 103-316, Vol. 1 (1994) at 823-824. Pursuant to sections 772(d)(3) and 772(f) of the Act, we made an adjustment for CEP profit allocated to expenses deducted under section 772(d)(1) of the Act. In accordance with section 772(f) of the Act, we computed profit based on the total revenues realized on sales in both the U.S. and home markets, less all expenses associated with those sales. We then allocated profit to expenses incurred with respect to U.S. economic activity based on the ratio of total U.S. expenses to total expenses for both the U.S. and home markets. See AVISMA Preliminary Results Analysis Memorandum dated May 2, 2011 (Preliminary Analysis Memo).

Normal Value

Based on a comparison of the aggregate quantity of home-market and U.S. sales and absent any information that a particular market situation in the exporting country did not permit a proper comparison, we determined that the quantity of foreign like product sold by AVISMA in the exporting country was sufficient to permit a proper comparison with the sales of the subject merchandise to the United States under section 773(a) of the Act. AVISMA's quantity of sales in its home market was greater than five percent of its sales to the U.S. market. Therefore, in accordance with section 773(a)(1)(B)(i) of the Act, we considered basing normal value on the prices at which the foreign like product was first sold for consumption in the exporting country in the usual commercial quantities and in the ordinary course of trade and, to the extent practicable, at the same level of trade as the CEP sales.

In accordance with section 771(16)(A) of the Act, we considered all products produced by AVISMA that are covered by the description in the “Scope of the Order” section, above, and that were sold in the home market during the POR to be foreign like products for purposes of determining appropriate product comparisons to U.S. sales. In accordance with sections 771(16)(B) and (C) of the Act, where there were no sales of identical merchandise in the home market to compare to U.S. sales, we considered comparing U.S. sales to the most similar foreign like product on the basis of the product characteristics we determined to be the most appropriate for purposes of matching products.

Cost of Production Analysis

We disregarded below-cost sales in accordance with section 773(b) of the Act in the last completed review with respect to AVISMA in which it participated as of the date of initiation of this review. See Magnesium Metal from the Russian Federation: Final Results of Antidumping Duty Administrative Review, 73 FR 52642, 52643 (September 10, 2008). Therefore, we have reasonable grounds to believe or suspect that sales of the foreign like product under consideration for the determination of normal value in this review may have been made at prices below the cost of production (COP) as provided by section 773(b)(2)(A)(ii) of the Act. Therefore, pursuant to section 773(b)(1) of the Act, we conducted a COP investigation of sales by AVISMA in the home market.

In accordance with section 773(b)(3) of the Act, we calculated a weighted-average COP based on the sum of the cost of materials and fabrication for the foreign like product plus amounts for home-market selling, general and administrative expenses, interest expense, and packing expenses.

During the POR, AVISMA used two different accounting methodologies in its normal books and records to determine the costs of raw magnesium. AVISMA treated raw magnesium as a by-product in its normal books and records during the period April 1 through December 31, 2009. Raw magnesium and chlorine gas are produced jointly during the third major processing step, the electrolysis stage (i.e., the split-off point), during which both products become identifiable physically. AVISMA's calculation of the by-product value for raw magnesium started with the total sales value of finished goods produced. It reduced this amount by the budgeted profit, selling expenses, and post-split-off costs. Because AVISMA considers the remaining amount to represent the total net realizable value (NRV) of raw magnesium, it used this value as the offset for raw magnesium in calculating a total NRV for chlorine gas for its response to our questionnaire.

On January 1, 2010, AVISMA revised its accounting methodology in its normal books and records and began to treat chlorine gas as a by-product of raw magnesium. AVISMA's calculation of the by-product value for chlorine gas was based on the budgeted cost of production of AVISMA's new gasification plant. AVISMA valued chlorine gas at the estimated cost of liquid chlorine plus estimated transportation and gasification costs at its new facility. AVISMA then deducted the total estimated value of chlorine gas from the total joint costs and assigned the remaining joint costs to raw magnesium.

For reporting purposes in this administrative review, AVISMA departed from its normal books and records and relied instead on the Department's calculation methodology in Magnesium Metal From the Russian Federation: Preliminary Results of Antidumping Duty Administrative Review, 75 FR 26922 (May 13, 2010) (Preliminary Results 08-09 Review). See also Memorandum entitled “Cost of Production and Constructed Value Calculation Adjustments for the Preliminary Results—PSC VSMPO-AVISMA Corporation and VSMPO—Tirus US Inc.”' dated May 7, 2010 (Preliminary Results 08-09 Review Cost Memo); the Department followed the same methodology in Magnesium Metal From the Russian Federation: Final Results of Antidumping Duty Administrative Review, 75 FR 56989 (September 17, 2010) (Final Results 08-09 Review).

As such, AVISMA considered chlorine gas and market-quality raw magnesium produced jointly at the split-off point as co-products. For the purpose of allocating the split-off-point joint costs to the co-products, AVISMA used the NRV of chlorine gas as calculated by the Department in the Final Results 08-09 Review. See Attachment 5 of the Preliminary Results 08-09 Review Cost Memo.

In accordance with section 773(f)(1)(A) of the Act, we have examined both accounting methodologies employed by AVISMA in its normal books and records during the POR. We agree with AVISMA that for purposes of this review it is proper to depart from AVISMA's normal books and records for the period April 1 through December 31, 2009. See Memorandum entitled “Cost of Production and Constructed Value Calculation Adjustments for the Preliminary Results—PSC VMPSO-AVIMSA Corporation and VSMPO—Tirus, U.S. Inc.,” dated May 2, 2011 (Preliminary Results 09-10 Review Cost Memo). We have accepted AVISMA's reported costs for the period April 1 through December 31, 2009, for the sake of maintaining consistency with the prior segments of this proceeding. In the previous review, we also deviated from AVISMA's normal books and records (which considered raw magnesium to be a by-product of the joint process) and used the same co-product approach in allocating joint costs to raw magnesium and chlorine gas as reported by AVISMA for the first nine months of the instant POR (April 1 through December 31, 2009). See, e.g., Preliminary Results 08-09 Review, 75 FR at 26925 (unchanged in Final Results 08-09 Review).

As explained in the Preliminary Results 09-10 Review Cost Memo, we find AVISMA's new methodology to be a reasonable reflection of the costs associated with the production of the subject merchandise. Therefore, for these preliminary results, we have recalculated AVISMA's costs of raw magnesium and chlorine gas for the period January 1 through March 31, 2010, to reflect AVISMA's normal books and records as instructed by section 773(f)(1)(A) of the Act.

We have calculated the weighted-average COP using the costs of the final products for the period April 1 through December 31, 2009, and the costs of the final products for the period January 1 through March 31, 2010, in order to determine the weighted-average per-unit costs of the merchandise under consideration. See Preliminary Results 09-10 Review Cost Memo.

We have not considered the comments filed by the petitioner on April 20, 2011, in our analysis of AVISMA's reported costs for these preliminary results because of the lack of time between the date of the petitioner's filing and the statutory deadline for completion of the preliminary results. With less than two weeks between the submission of the comments and the fully extended statutory deadline for issuing these preliminary results, we could not ensure full participation by all parties in the process of determining whether sufficient information is on the record to apply the proposed analysis. We will consider the petitioner's comments carefully for the final results of this review and we invite comments from the parties concerning the implications of applying the petitioner's proposed analysis for the purposes of this review (e.g., what to use for constructed value in the event we must rely on one of the alternative methods described in section 773(e)(2)(B) of the Act). Such comments should be filed in accordance with the schedule for filing case briefs as discussed in the “Disclosure and Public Comment” section below.

We also revised AVISMA's reported net interest expense ratio to exclude that portion of the reported interest income offset related to loans receivable. AVISMA's auditor could not determine that the carrying value of AVISMA's loans receivable was reasonable. As such, we cannot determine whether the interest income calculated by AVISMA based on the value of the loans receivable is a reasonable reflection of the actual interest received. Therefore, we have disallowed the offset for this interest income because we cannot conclude that the value of the reported interest income offset related to loans receivable is reasonable. See id.

After calculating the COP and in accordance with section 773(b)(1) of the Act, we tested whether home market sales of the foreign like product were made at prices below the COP within an extended period of time in substantial quantities and whether such prices permitted the recovery of all costs within a reasonable period of time. We compared model-specific COPs to the reported home market prices less any applicable movement charges, discounts, and rebates. Pursuant to section 773(b)(2)(C) of the Act, when 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 the below-cost sales were not made in substantial quantities within an extended period of time. When 20 percent or more of a respondent's sales of a given product were at prices less than the COP, we disregard the below-cost sales because they were made in substantial quantities within an extended period of time pursuant to sections 773(b)(2)(B) and (C) of the Act and because, based on comparisons of prices to weighted-average COPs for the POR, such sales were at prices which would not permit recovery of all costs within a reasonable period of time in accordance with section 773(b)(2)(D) of the Act. Based on this test, we disregarded certain home market sales of magnesium metal because such sales did not pass the cost test. See Preliminary Analysis Memo.

Level of Trade

In the U.S. market, AVISMA made CEP sales. In the case of CEP sales, we identified the level of trade based on the price after the deduction of expenses and profit under section 772(d) of the Act. Although the starting price for CEP sales was based on sales made by the affiliated reseller to unaffiliated customers through two channels of distribution, sales to end-users and distributors, AVISMA reported similar selling activities associated with all sales to the affiliated reseller (i.e., at the CEP level of trade).

AVISMA reported one channel of distribution in the home market, sales to end-users. We found that this channel of distribution constitutes a single level of trade in the home market. To determine whether home market sales were made at a different level of trade than U.S. sales, we examined stages in the marketing process and selling functions along the chain of distribution between the producer and the unaffiliated customer. We found that there were significant differences between the selling activities associated with the CEP level of trade and those associated with the home market level of trade and, thus, we found the CEP level of trade to be different from the home market level of trade. Further, we found the CEP level of trade to be at a less advanced stage of distribution than the home market level of trade.

Because AVISMA reported no home market levels of trade that were equivalent to the CEP level of trade and because we determined that the CEP level of trade was at a less advanced stage than the single home market level of trade, we were unable to determine a level-of-trade adjustment based on the respondent's home market sales of the foreign like product. Furthermore, we have no other information that provides an appropriate basis for determining a level-of-trade adjustment. For AVISMA's CEP sales, we made a CEP-offset adjustment in accordance with section 773(a)(7)(B) of the Act. For a description of our level-of-trade analysis for these preliminary results, see Preliminary Analysis Memo.

Currency Conversion

For purposes of the preliminary results and in accordance with section 773A of the Act, we made currency conversions based on the official exchange rates in effect on the dates of the U.S. sales as certified by the Federal Reserve Bank of New York. See 19 CFR 351.415.

Preliminary Results of Review

As a result of our review, we preliminarily determine that the following weighted-average dumping margins on magnesium metal from the Russian Federation exist for the period April 1, 2009, through March 31, 2010:

Manufacturer/exporter	Margin (percent)
PSC VSMPO-AVISMA Corporation	0.00
Solikamsk Magnesium Works	*
* No shipments or sales subject to this review. The firm has an individual rate from the last segment of the proceeding in which the firm had shipments or sales.

Disclosure and Public Comment

Pursuant to 19 CFR 351.224(b), the Department will disclose to any party to the proceeding the calculations performed in connection with these preliminary results within five days after the date of publication of this notice. Interested parties are invited to comment on the preliminary results of this review. Pursuant to 19 CFR 351.309(c), case briefs or other written comments may be submitted to the Assistant Secretary for Import Administration. Interested parties may submit case briefs within 30 days of the date of publication of this notice. See 19 CFR 351.309(c). Rebuttal briefs, which must be limited to issues raised in the case briefs, may be filed not later than 35 days after the date of publication of this notice. See 19 CFR 351.309(d). Parties who submit case briefs or rebuttal briefs in this review are requested to submit with each argument (1) a statement of the issue and (2) a brief summary of the argument with an electronic version included. A list of authorities used and an executive summary of issues should accompany any briefs submitted to the Department. This summary should be limited to five pages total, including footnotes.

In accordance with 19 CFR 351.310, we will hold a public hearing, if requested, to afford interested parties an opportunity to comment on arguments raised in case or rebuttal briefs. If requested, a hearing will 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, at a time and location to be determined. Parties should confirm by telephone the date, time, and location of the hearing two days before the scheduled date. 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 date of publication of this notice. See 19 CFR 351.310(c). 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. At the hearing, each party may make an affirmative presentation only on issues raised in that party's case brief and may make rebuttal presentations only on arguments included in that party's rebuttal brief. See 19 CFR 351.310(c).

Assessment Rates

The Department shall determine, and CBP shall assess, antidumping duties on all appropriate entries. In accordance with 19 CFR 351.212(b)(1), we have calculated an importer-specific assessment rate for AVISMA reflecting these preliminary results of review.

The Department clarified its “automatic assessment” regulation on May 6, 2003. This clarification will apply to entries of subject merchandise during the POR produced by AVISMA or SMW for which AVISMA or SMW did not know their merchandise was destined for the United States. In such instances, we will instruct CBP to liquidate unreviewed entries of merchandise produced by AVISMA or SMW at the all-others rate if there is no rate for the intermediate company(ies) involved in the transaction. For a full discussion of this clarification, see Antidumping and Countervailing Duty Proceedings: Assessment of Antidumping Duties, 68 FR 23954 (May 6, 2003).

The Department intends to issue liquidation instructions to CBP 15 days after the publication of the final results of review.

Cash-Deposit Requirements

Because we revoked the order effective April 15, 2010, no cash deposits for estimated antidumping duties are required.

Notification to Importers

This notice serves as a preliminary reminder to importers of their responsibility under 19 CFR 351.402(f)(2) 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.

The preliminary results of this administrative review and this notice are issued and published in accordance with sections 751(a)(1) and 777(i)(1) of the Act.

Dated: May 2, 2011.

Ronald K. Lorentzen,

Deputy Assistant Secretary for Import Administration.

Footnotes

1.  Because April 30, 2011 falls on a Saturday, it is the Department's practice to issue a determination the next business day when the statutory deadline falls on a weekend, federal holiday, or any other day when the Department is closed. See Notice of Clarification: Application of “Next Business Day” Rule for Administrative Determination Deadlines Pursuant to the Tariff Act of 1930, as Amended, 70 FR 24533 (May 10, 2005). Accordingly, the deadline for completion of the preliminary results is May 2, 2011.

2.  On March 10, 2011, the Department revoked the order, effective April 15, 2010. See Magnesium Metal From the Russian Federation: Revocation of Antidumping Duty Order Pursuant to Five-Year Sunset Review, 76 FR 13128 (March 10, 2011). This review covers merchandise that entered the United States for consumption during the POR which met the description of the scope of the order.

3.  This second exclusion for magnesium-based reagent mixtures is based on the exclusion for reagent mixtures in the 2001 investigations of magnesium from the People's Republic of China, Israel, and the Russian Federation. 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), Notice of Final Determination of Sales at Less Than Fair Value: Pure Magnesium From Israel, 66 FR 49349 (September 27, 2001), and Notice of 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.