(65 FR 10468, February 28, 2000) A-201-802 Sunset Review Public Document MEMORANDUM TO: Robert S. LaRussa Assistant Secretary for Import Administration FROM: Jeffrey A. May Director Office of Policy SUBJECT: Issues and Decision Memo for the Sunset Review of Gray Portland Cement and Cement Clinker From Mexico; Preliminary Results Summary We have analyzed the substantive responses and rebuttals of interested parties in the sunset review of the antidumping duty order covering gray portland cement and clinker from Mexico. We recommend that for our preliminary results you approve the positions we have developed in the Discussion of the Issues section of this memorandum. Below is the complete list of the issues in this sunset review for which we received substantive responses and rebuttals by parties: 1. Likelihood of continuation or recurrence of dumping A. Weighted-average dumping margin B. Volume of imports C. Other factors 2. Magnitude of the margin likely to prevail A. Margins from investigation B. Use of a more recent margin C. Duty absorption History of Order: The antidumping duty order on gray portland cement from Mexico was published in the Federal Register on August 30, 1990 (55 FR 35443).(1) In that order, the Department announced that the subject merchandise is being sold in the United States at less than fair value. The weighted-average dumping margins in the order are as follows: CEMEX, S.A. ("CEMEX") - 60.33, Apasco, S.A. de C.V. ("Apasco") - 53.26, Cementos Hidalgo, S.C.L. - 3.69, and all others - 59.91 percent. The Department has conducted several administrative reviews since that time.(2) The order remains in effect for all manufacturers and exporters of gray portland cement and clinker from Mexico. In the administrative review initiated in 1996, covering the period August 1, 1995, through July 31, 1996, the Department determined that duty absorption had occurred in 92.49 percent (the portion of imports of the subject merchandise that was sold through affiliated importers) of CEMEX's exports of the subject merchandise to the United States.(3) Background: On August 2, 1999, the Department of Commerce (the Department) published the notice of initiation of sunset review of the antidumping duty order on gray portland cement and cement clinker from Mexico. We invited parties to comment. On August 16, 1999, the Department received a Notice of Intent to Participate on behalf of the Committee for Fairly Traded Mexican Cement ("the Committee") and, on August 17, 1999, on behalf of Rio Grande Portland Cement Corporation ("RGPCC") and Sunbelt-Texas, LP ("Sunbelt") within the applicable deadline specified in section 351.218(d)(1)(i) of the Sunset Regulations. The Committee indicates that none of its members is related to foreign manufacturers/exporters of the subject merchandise or to U.S. importers thereof. However, RGPCC indicates that it is related to a Mexican manufacturer/exporter of the subject merchandise, Cementos de Chihuahua, S.A. de C.V. ("CDC"),(4) and Sunbelt notes that it is related to CEMEX, a Mexican portland cement manufacturer.(5) We received a complete substantive response to the notice of initiation from the Committee on September 1, 1999. The Committee indicates that it is an ad hoc association of manufacturers of the domestic like product and, as such, it is a domestic interested party pursuant to section 771(9)(E) of the Act, a trade or business association a majority of whose members manufacture, produce, or wholesale a domestic like product in the United States.(6) The Committee also notes that it is a successor to the Ad Hoc Committee of AZ-NM-TX-FL Producers of Gray Portland Cement ("Ad Hoc Committee"), which filed the petition in the original investigation.(7) The Ad Hoc Committee and National Cement Company of California ("NCCC") participated in the first three administrative reviews of the order.(8) (See the Committee's September 1, 1999, substantive response at 5 - 8.) The Southern Tier Cement Committee ("STCC"), which was an ad hoc association of domestic cement manufacturers, succeeded the Ad Hoc Committee in the fourth administrative review and participated in the fourth, fifth, sixth, seventh, and eighth administrative reviews.(9) Finally, the Committee notes that it and its members, which own 31 cement plants in the Southern Tier Region and 61 plants in the United States, are willing to participate in the instant review. Id. Sunbelt states that it is a U.S. manufacturer of the subject merchandise and, as such, is a domestic interested party within the meaning of 771(9)(C) of the Act. Sunbelt also notes that it was not a petitioner and did not participate in the original investigation, nor did it partake in any subsequent administrative reviews of the order. Sunbelt indicates, nonetheless, it is willing to participate fully in the instant review. (See Sunbelt's September 1, 1999, substantive response at 1.) Similarly, RGPCC claims that it is a U.S. manufacturer of a domestic like product; hence, it claims interested-party status pursuant to 771(9)(C) of the Act. RGPCC indicates that it participated in the fifth, sixth, seventh, and pending eighth review by supplying information on behalf of CDC. RGPCC states that it is willing to participate fully in the instant sunset review by providing information requested by the Department. (See RGPCC's September 1, 1999, substantive response at 2 - 4.) Apasco states that it is a Mexican manufacturer, producer, and exporter of the subject merchandise and, therefore, qualifies as a respondent interested party under 771(9)(A) of the Act. Apasco notes that it participated in the original investigation and administrative reviews of the order. Apasco indicates that, because it did not export the subject merchandise for many years, it took only a limited role in past administrative reviews of the order, but that it is willing to participate fully in the instant review. (See Apasco's October 7, 1999, substantive response at 1 - 2.)(10) CEMEX notes that it is a respondent interested party within the meaning of 771(9)(A) of the Act because it is a Mexican manufacturer and exporter of the subject merchandise. CEMEX indicates that it was a respondent in the original investigation and in each of the subsequent administrative reviews of the order. CEMEX also states that it is willing to participate in the instant review by providing all the information requested by the Department. (See CEMEX's September 1, 1999, substantive response at 1 - 2.) CDC notes that as a Mexican manufacturer and exporter of the subject merchandise it is a respondent interested party within the meaning of 771(9)(A) of the Act. CDC indicates that it participated in the original investigation and several administrative reviews (fifth, sixth, seventh, and pending eighth review, during which CDC exported directly to the United States).(11) In addition, CDC states that it is willing to participate fully in the instant sunset review by providing information requested by the Department. (See CDC's September 1, 1999, substantive response at 2 - 4.) We received complete substantive responses from all the above interested parties, both domestic and respondent, within the 30-day deadline specified in the Sunset Regulations under section 351.218(d)(3)(i) and Apasco's revised substantive response within the two-day deadline specified in section 351.304(d)(1). The Department received rebuttal comments on behalf of the Committee, CEMEX, and CDC on September 13, 1999.(12) Using the Department's Trade Statistics, the United States Census Bureau's IM146s, and the information provided by CEMEX, CDC, and Apasco, we determined that the respondent interest parties' five-year average percentage of exports vis à vis the total imports of the subject merchandise, during the relevant period, was significantly above the fifty percent (50%) threshold provided for in section 351.218(e)(1)(ii)(A) of the Sunset Regulations. As a result, the Department determined to conduct a full (240-day) sunset review in accordance with section 351.218(e)(2)(i) of the Sunset Regulations. In accordance with section 751(c)(5)(C)(v) of the Act, the Department may treat a review as extraordinarily complicated if it is a review of a transition order (i.e., an order in effect on January 1, 1995). Therefore, on November 30, 1999, the Department determined that the sunset review of the antidumping duty order on gray portland cement from Mexico is extraordinarily complicated and extended the time limit for completion of the preliminary results of this review until not later than February 18, 2000, in accordance with section 751(c)(5)(B) of the Act.(13) Discussion of the Issues In accordance with section 751(c)(1) of the Act, the Department conducted this sunset review to determine whether revocation of the antidumping duty order would be likely to lead to continuation or recurrence of dumping. Section 752(c) of the Act provides that, in making this determination, the Department shall consider the weighted-average dumping margins determined in the investigation and subsequent reviews and the volume of imports of the subject merchandise for the period before and the period after the issuance of the antidumping duty order. In addition, section 752(c)(3) of the Act provides that the Department shall provide to the International Trade Commission ("the Commission") the magnitude of the margin of dumping likely to prevail if the order is revoked. Below we address the comments and rebuttals of interested parties. 1. Likelihood of continuation or recurrence of dumping Interested Parties' Comments: The Committee, in its substantive response, argues that dumping of the subject merchandise by Mexican manufacturers/exporters will continue if the order is revoked. In support of its argument, the Committee points to the final results of all of the administrative reviews of the order which the Department conducted over the years; based on those results, the committee contends that Mexican manufacturers/exporters of the subject merchandise have consistently maintained high dumping margins since the issuance of the order. In addition, the Committee indicates that the import volumes of the subject merchandise declined substantially after the imposition of the order. Finally, the Committee claims that distinct economic conditions in Mexico and the United States dictate that continuation, or even intensification, of dumping is likely if the order were revoked. (See the Committee's substantive response at 1 - 23.) With respect to its argument that Mexican manufacturers/exporters dumped the subject merchandise persistently since issuance of the order, the Committee claims that CEMEX's average dumping margin in seven administrative reviews of the order was 72 percent,(14) ranging from a low of 37.49 present to a high of 109.43 percent.(15) According to the Committee, these unprecedented high rates of consistent dumping are indicative of the likelihood that dumping would continue if the order is revoked. Id. As for import volumes of the subject merchandise, the Committee indicates that Mexican exports of the subject merchandise declined dramatically after the issuance of the order and have never returned to the pre-order levels. The Committee states that the import volume of the subject merchandise decreased from the pre-order levels of 4.5 million metric tons (in both 1987 and 1988) and 3.9 million metric tons in 1989 (the petition year) to 2 million metric tons in 1990 (the order imposed in August 1990) and to less than 1 million metric tons in 1991. The Committee also comments that, in 1996, the peak year since the order, the import volume of the subject merchandise reached less than 1.2 million metric tons, which is about 31 percent of the pre-order level. Also, the Committee asserts that the Mexican share of the cement market in the Southern Tier regional market(16) declined rather drastically.(17) In addition, the Committee indicates that Apasco, the second largest Mexican exporter of the subject merchandise prior to the order, dropped out of the U.S. market all together as soon as the order was imposed. The Committee notes further that CEMEX altered its modus operandi pertaining to exports of the subject merchandise to the United States radically so as to minimize its dumping margins; for example, CEMEX ceased exporting cement clinker; CEMEX shipped its exports only from plants near the U.S. border; and CEMEX ceased exporting Type I cement to the United States. (See id. at appendix C and D.) As for industry conditions specific to Mexico and the United States, the Committee notes that the Mexican cement industry is highly concentrated and faces no import competition from abroad. The Committee asserts that, as a result, the Mexican manufacturers/exporters of the subject merchandise face negligible competition in their domestic cement market and, therefore, can charge high prices within Mexico. The Committee also indicates that cement production is capital-intensive, that the capital stock is industry-specific (i.e., it is rather difficult to transfer the capital stock of cement production for a different purpose), that portland cement is a fungible product with high degree of substitutability, and that the overall demand for cement is inelastic. The Committee claims that Mexican manufacturers/exporters are, therefore, likely to price portland cement at a very high price in Mexican market while, at the same time, likely to sell at a very low price in the U.S. market as long as the U.S. price covers their variable costs. The obvious result, according to the Committee, is continued dumping if the order were revoked. Id. Apasco indicates that it is difficult for it to assess the likely effect of revocation because it has not exported the subject merchandise to the United States for past nine years. (See Apasco's October 7, 1999, revised substantive response at 3.) Sunbelt, RGPCC, CEMEX, and CDC do not directly advocate that revocation of the order would not likely lead to the continuation of dumping. Instead, Sunbelt asserts that revocation would not result in material injury to the regional cement industry because the Southern Tier region is facing cement shortages. From Sunbelt's perspective, imports of the subject merchandise are necessary to supplement its U.S. production in order to satisfy growing demand of portland cement in the region. Similarly, RGPCC claims that revocation of the order would facilitate its ability to meet the demand in the region by supplementing its U.S. production with imports of the subject merchandise. Likewise, CEMEX contends that revocation would not result in material injury to the Southern Tier region due to the the shortage of portland cement endemic to the region and, further, that revocation would facilitate the ability of regional customers to obtain required supplies of the subject merchandise without paying a price premium caused by artificial scarcity (however, CEMEX does not explain further or supply any tangible evidence with respect to its claims of price premium and artificial scarcity). Lastly, CDC argues that its production facility is located close to the Southern Tier region and that revocation of the order would facilitate the ability of its affiliate, RGPCC to supply U.S. customers in the region. Sunbelt, RGPCC, CEMEX, and CDC (collectively referred to as "CEMEX et al.")(18) attempt to evoke good cause and other information arguments. CEMEX et al. insist that good cause exists for the Department to consider a bulk-to-bulk or bag-to-bag price comparison and cement shortages in the United States, each of which would lower the dumping margins. As for other information, CEMEX et al. advance the notion that the order is invalid in its inception because the regional manufacturers never demonstrated support for the petition and, therefore, that the order should be terminated and not be extended. Further, CEMEX et al. contend that inadequate implementation of Article 4.2 of the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 ("WTO AD Agreement") pertaining to assessment of duties in regional industry cases would vitiate the order and, accordingly, that the sunset review should be terminated. Finally, CEMEX et al. argue that, since the instant sunset review was initiated based on a standard which is inconsistent with Article 11.3 of the WTO AD Agreement, the order should be revoked. (See Sunbelt, RGPCC, CEMEX, and CDC's September 1, 1999, substantive responses at 3 - 22, 4 - 29, 2 - 24 , 4 - 33, respectively.) In its rebuttal, the Committee argues that, by not arguing or not providing evidence or information which would support that dumping is not likely if the order were revoked, CEMEX, CDC, and Apasco were implicitly conceding that dumping is likely to continue if the order is revoked. The Committee claims that the data pertaining to export volumes of the subject merchandise for the five-year period preceding the year of initiation, provided by CEMEX, CDC, and Apasco, substantially differ from the Commission data. Also, the Committee insists that the respondent interested parties did not supply any good cause for the Department to consider other factors such as comparison on a bulk-to- bulk basis, a shortage of cement in the region, and Mexican manufacturers' ownership of U.S. facilities. (See the Committee's September 13, 1999, rebuttal comments at 1 - 43.) With respect to the arguments by CEMEX et al. that the Department violated or misapplied the WTO AD Agreement, the Committee indicates that the Department's antidumping order and sunset review are consistent with the requirements of the WTO AD Agreement. Further, the Committee argues that the Department should disregard the substantive responses from Sunbelt and RGPCC because they are related to foreign manufacturer(s) and/or are importers of the subject merchandise or related to such an importer. Id. CEMEX, in its rebuttal, does not make any comments with respect to the likely effects should the order be revoked. (See CEMEX's September 13, 1999, rebuttal comments.) Likewise, CDC does not make any argument pertaining to the likely effects, per se, in its rebuttal except that the Committee's argument that different competitive conditions in the United States and Mexico would ensure continued dumping if the order were revoked is speculative and does not reflect market realities. Also, CDC argues that the Department should establish or confirm that the Committee represents the domestic cement industry and, if the Committee does not, the Department should terminate the instant review and revoke the order. (See September 13, 1999, rebuttal comments of CDC at 2 -18.) Department's Position: Drawing on the guidance provided in the legislative history accompanying the Uruguay Round Agreements Act ("URAA"), specifically the Statement of Administrative Action ("the SAA"), H.R. Doc. No. 103-316, vol. 1 (1994), the House Report, H.R. Rep. No. 103-826, pt.1 (1994), and the Senate Report, S. Rep. No. 103-412 (1994), the Department issued its Sunset Policy Bulletin providing guidance on methodological and analytical issues, including the basis for likelihood determinations. In its Sunset Policy Bulletin, the Department indicates that determinations of likelihood will be made on an order-wide basis (see section II.A.2). In addition, the Department indicated that normally it will determine that revocation of an antidumping duty order is likely to lead to continuation or recurrence of dumping where (a) dumping continued at any level above de minimis after the issuance of the order, (b) imports of the subject merchandise ceased after the issuance of the order, or (c) dumping was eliminated after the issuance of the order and import volumes for the subject merchandise declined significantly (see section II.A.3.) Consistent with section 752(c) of the Act, the Department considered whether dumping continued at any level above de minimis after the issuance of the order. If companies continue dumping with the discipline of an order in place, the Department may reasonably infer that dumping would continue were the discipline removed. After examining the published findings with respect to the weighted-average dumping margins in previous administrative reviews,(19) the Department preliminarily agrees with the Committee that the weighted-average dumping margins at levels above de minimis have persisted over the life of the order and currently remain in place for all the Mexican manufacturers and exporters of the subject merchandise. In addition, consistent with section 752(c) of the Act, the Department also considered the volume of imports before and after the issuance of the order. The data supplied by the Committee, CEMEX, and CDC, as well as those of the United States Census Bureau IM146s and the Commission indicate that, immediately after the imposition of the order, the import volumes of the subject merchandise declined substantially.(20) Moreover, the same data indicate that import volumes of the subject merchandise during the period 1994 through 1998 have stabilized at the reduced 1991 level.(21) In addition, as noted above, the respondent interested parties do not contest the statistics which show that Mexican manufacturers/exporters' export volumes of the subject merchandise decreased significantly during the life of the order. Therefore, the Department preliminarily determines that import volumes of the subject merchandise decreased significantly after the issuance of the order. With respect to CEMEX's and other respondent interested parties' suggestions that the Department should establish or confirm that the Committee represents the domestic industry, we disagree. The magnitude of domestic support for continuation or revocation of an order does not enter into the Department's determination of likelihood. The Department made clear in its regulations that a complete substantive response from one domestic interested party would be considered adequate for purpose of continuing a sunset review (see section 351.218(e)(1)). Nowhere in the statute or legislative history is there reference to consideration of the level of domestic industry support during the course of a sunset review (other than the statutory provision that, if there is no domestic industry interest in continuation of the order, the Department will revoke the order automatically). (See Notice of Final Results of Expedited Sunset Reviews: Antifriction Bearings from the United Kingdom, 64 FR 60326 (November 4, 1999).) With respect to CEMEX's and other respondent interested parties' arguments that the Department did not implement Article 4.2 of the WTO AD Agreement properly in its assessment of antidumping duties in regional industry cases and that the Department initiated the instant sunset review improperly thereby contravening Article 11.3 of WTO AD Agreement, the Department has addressed this issue in previous administrative reviews.(22) Similarly, as for respondent interested parties' contention that the order is invalid, the Department declines to revisit the issue.(23) Regarding the Committee's assertion that the Department should disregard the responses filed on behalf of Sunbelt and RGPCC because they are related to foreign manufacturers and are importers, we disagree. Although, the Department may disregard a substantive response from a related domestic interested party "in making its determination concerning the adequacy of response," the statute and legislative history do not suggest that the Department should ignore or disregard a domestic interested party's comment because that party is related to a foreign respondent interested party. (See section 351.218(e)(1)(i)(B) of the Sunset Regulation.) However, we agree with the Committee's contention that the respondent interested parties did not put forth good cause to warrant the Department to consider such other factors as the comparison of sales based on a bulk-to-bulk basis, a shortage of portland cement in the Southern Tier Region, severe devaluation of the peso, different rates of inflation between the countries, severe cement shortage in the United States, and Mexican manufacturers/exporters' ownerships of U.S. facilities. Given that dumping has continued over the life of the order, that the import volume of the subject merchandise decreased significantly after the issuance of the order, and that there are no arguments and/or evidence to the contrary, the Department preliminarily determines that dumping is likely to continue should the order be revoked. Insofar as the Department made this determination based on the facts that dumping continued at levels above de minimis and that the import volumes of the subject merchandise declined substantially after the issuance of the order, it is not necessary for the Department to address the Committee's arguments regarding different economic conditions between the United States and Mexico or distinct characteristics of cement industry, as noted above, nor is it necessary for the Department to discuss any effects thereof upon this finding. 2. Magnitude of the margin likely to prevail Interested Parties' Comments: The Committee asserts that the Department found higher weighted-average dumping margins in three of its administrative reviews than in its investigation, that the original investigation was based on a Mexican government-mandated price freeze, that the oligopolistic characteristic of the Mexican cement industry engenders a lack of competition, and that higher prices for portland cement in the Mexican market indicate that the investigation margins understate the magnitude of the margins which otherwise would have prevailed in the absence of the order. According to the Committee, the margin likely to prevail would significantly exceed the investigation rate and, consequently, the Department should report a higher rate from either the second or the fourth administrative review - 109.43 percent. (See the Committee's substantive response at 24 - 37.) RGPCC and CDC(24) assert that the Department should not report to the Commission the investigation margin.(25) RGPCC and CDC urge the Department to choose a more recently calculated margin from the last two administrative reviews or, alternatively, to calculate a new margin utilizing information solely from the eighth administrative review or more recent information gathered in the instant review because extraordinary circumstances demand such measures.(26) (See RGPCC and CDC's September 1, 1999, substantive response at 4 - 10.) Likewise, both CEMEX and Sunbelt argue that the Department should provide to the Commission margins from recent reviews, not the margins from the original investigation.(27) (See CEMEX and Sunbelt's September 1, 1999, substantive response at 3 - 6.) CEMEX and Sunbelt indicate that the method used to calculate dumping margins in the original investigation is outdated and therefore obsolete.(28) CEMEX and Sunbelt also comment that the margins the Department established in the original investigation did not take into account the deduction for verified pre-sale freight expenses. Lastly, CEMEX and Sunbelt state that the original margins do not reflect recent pricing structure and conditions of the U.S. cement market(29) nor do the original margins take into account the significant change in exchange rates between two currencies. Id. Apasco again indicates that it does not have any opinion what the likely-to- prevail margins would be if the order were revoked because it has not exported the subject merchandise to the United States for the last nine years. (See Apasco's substantive response at 3.) With respect to duty absorption, the Committee notes that the Department found duty absorption by CEMEX (including its affiliate CDC) in the sixth administrative review, which was initiated in 1996. The Committee also asserts that, in the pending eighth administrative review, which was initiated in 1998, it again alleged duty absorption by CEMEX. Therefore, the Committee states that the sunset review should wait until the final results of the eighth administrative review are published with duty-absorption findings. (See the Committee's substantive response at 37 - 41.) CDC and RGPCC contend that the Department's practice of presuming duty absorption is unreasonable and without statutory support. CDC and RGPCC insist that the Department should actually analyze whether antidumping duties are in fact absorbed. According to CDC and RGPCC the Department's approach in resolving a duty-absorption issue is contrary to law. (See CDC and RGPCC's substantive responses at 10 - 12.)(30) Similarly, CEMEX and Sunbelt claim that the Department's presumption that antidumping duties are absorbed with respect to any dumped sales made through related parties is unreasonable and without statutory support. CEMEX and Sunbelt insist that the Department must carry out a meaningful analysis regarding whether antidumping duties are absorbed. Furthermore, CEMEX and Sunbelt argue that the Department's presumption is, in reality, impossible to rebut. (See CEMEX and Sunbelt's substantive responses at 7 - 9.)(31) In its rebuttal, the Committee insists that, for CEMEX and CDC, the Department should report to the Commission the higher of the 109.43 percent margin found in the second and fourth reviews or the dumping margin determined in the eighth review adjusted to take into account the duty-absorption findings and, for Apasco, 53.26 percent from the original investigation. The Committee claims that there are no extraordinary circumstances that would warrant the Department to calculate a new dumping margin in the instant review(32) and that there is no basis for the Department to choose margins from the most recent administrative reviews. (See the Committee's rebuttal comments at 5 - 20.) In its rebuttal, CDC reiterates the points that it delineated in its substantive response: there are cement shortages in the U.S. cement market; it is unfair to compare prices between bagged and bulk cement; it is an owner of U.S. cement production facilities. In addition, CDC again argues that the Department should determine whether the Committee's purported representation of the domestic industry is a bona fide one.(33) Also, CDC notes that it was able, via CEMEX, to reduce the weighted-average dumping margins under irrevocable and long-term strategic decisions. CDC argues that the Committee's contention that Mexican manufacturers/exporters have taken action to reduce dumping margins while at the same time arguing that high margins will result if the order is revoked because they took such action to reduce the margins is inconsistent. CDC also claims that the Committee's characterization of the Mexican cement market and surrounding economic factors are speculative and do not reflect current market realities.(34) Lastly, CDC contends that the Committee's assertion that 109.43 percent is the likely-to-prevail dumping margin has no basis, except that the Committee is simply choosing the highest rate available. Instead, CDC urges that the Department calculate a margin that is more representative of realities. (See CDC's rebuttal comments at 2-18.) In regard to duty absorption, the Committee expresses confidence that, since neither CEMEX nor CDC presented any evidence to rebut the Department's presumption, the Department will again find that Mexican manufacturers/exporters absorbed antidumping duties in the pending administrative review, which was initiated in 1998 and in which the Committee requested a duty-absorption determination. The Committee contends that CEMEX and CDC's suggestion that the Department's presumption regarding duty absorption is irrebuttable is without foundation since the Department has rejected such argument repeatedly in the past. Also, the Committee claims that CDC's purported evidence does not meet the Department's substantive as well as procedural standards.(35) In conclusion, the Committee notes that CDC proffered no basis on which the Department could conclude that the duty attributable to the margin is not being absorbed. (See the Committee's rebuttal comments at 19 - 24.) CDC argues that the Department must conduct a meaningful analysis regarding whether antidumping duties were indeed absorbed. CDC claims that it demonstrated its importer, RGPCC, does not absorb antidumping duties but instead passes them on to its customers. CDC notes that the Department did not delve into the discussion regarding duty absorption in the preliminary results of its most recent, eighth administrative review, which was initiated in 1998. (See CDC's rebuttal comments at 17 - 18.) Department's Position: In the Sunset Policy Bulletin, the Department stated that it normally will provide to the Commission the margin that was determined in the final determination in the original investigation. Further, for companies not specifically investigated or for companies that did not begin shipping until after the order was issued, the Department normally will provide a margin based on the all-others rate from the investigation. (See section II.B.1 of the Sunset Policy Bulletin.) Exceptions to this policy include the use of a more recently calculated margin, where appropriate, and consideration of duty- absorption determinations. (See sections II.B.2 and 3 of the Sunset Policy Bulletin.) We will normally provide to the Commission margins from the original investigation because those are the margins that reflect the behavior of exporters/manufacturers absent the discipline of the order (see the SAA at 890 and section II.B.1 of the Sunset Policy Bulletin). As noted above, exceptions to this policy include the use of a more recently calculated margin, where appropriate, and consideration of duty-absorption determinations. In sunset reviews, the Department has established a policy of employing a more recently calculated margin only under limited situations. Specifically, where dumping margins declined or dumping was eliminated after the issuance of the order and import volumes (and relative market shares) remained steady or increased or where dumping margins increased after the issuance of the order and import volumes (relative market share) increased. (See section II.B.2 of the Sunset Policy Bulletin.) The fact pattern in the instant review, however, does not warrant the application of a more recent margin. Our review of the previously calculated margins shows that margins have fluctuated over the life of the order.(36) Furthermore, the import volumes and relative market share of the subject merchandise declined substantially after the imposition of the order.(37) With respect to the "extraordinary circumstances" alleged by respondent interested parties, such circumstances are not relevant to our consideration of the rate appropriate to report to the Commission. Moreover, the Department finds that there is no basis to reject margins calculated in the investigation or in subsequent administrative reviews. A mere change in methodology in calculating weighted-average dumping margins, as long as such change does not explicitly invalidate margins calculated under a prior methodology (e.g., a retroactive application of such change), does not invalidate the margins determined by the Department in its investigation or prior administrative reviews.(38) Accordingly, the dumping margins from the original investigation are the only rates which reflect the behavior of exporters without the discipline of the order, regardless of the methodology used to calculate that margin or whether a rate based on the best information otherwise available was utilized to derive that margin (see section 752(c)(3) of the Act). Consequently, we do not agree with the Committee, RGPCC, Sunbelt, CEMEX, and Apasco insofar as they advocate that we use a margin or a set of margins other than ones from the original investigation. Accordingly, but for the consideration of duty-absorption findings, we would preliminarily determine that the likely-to-prevail dumping margins for all Mexican manufacturers/exporters are those from the original investigation. Section II.B.3.b of the Sunset Policy Bulletin, the SAA at 885, and the House Report at 60 provide that, if the Department has found duty absorption, the Department will normally provide to the Commission the higher of the margin that the Department otherwise would have reported to the Commission or the most recent margin for that company adjusted to account for the Department's findings on duty absorption. The Department explained that it will normally adjust a company's most recent margin to reflect its findings on duty absorption by incorporating the amount of duty absorption to those sales for which the Department found duty absorption. In the final results of administrative review(39) initiated in 1996, the Department found that duty absorption existed on CEMEX's exports of subject merchandise to the United States at the rate of 92.49 percent.(40) Consistent with the Sunset Policy Bulletin, we adjusted the most recent margins to account for duty-absorption findings.(41) (See Memorandum to File Regarding Calculation of the Likely to Prevail Margins.) Because the margin for CEMEX, as adjusted to reflect duty absorption, is higher than the margin we would have used (i.e., the margins from the original investigation), we preliminarily determine to rely on this adjusted margin. Therefore, we will report to the Commission the margins as contained in the Preliminary Results of Review section below: Preliminary Results of Review We preliminarily determine that revocation of the antidumping duty order would be likely to lead to continuation or recurrence of dumping at the following percentage weighted-average margins: ------------------------------------------------------------------------- Manufacturer/Exporter Margin (percent) ------------------------------------------------------------------------- CEMEX ------------------------------------------------------------- 95.44 Apasco ------------------------------------------------------------ 53.26 Cementos Hildago, S.C.L. ------------------------------------------- 3.69 All others ---------------------------------------------------------59.91 ------------------------------------------------------------------------- Recommendation Based on our analysis of the comments received, we recommend adopting all of the above positions. If these recommendations are accepted, we will publish notice of these preliminary results of review in the Federal Register. AGREE____ DISAGREE____ ---------------------------------------------------------------------- Robert S. LaRussa Assistant Secretary for Import Administration ---------------------------------------------------------------------- (Date) 1. See Antidumping Duty Order; Gray Portland Cement and Clinker From Mexico, 55 FR 35443 (August 30, 1990), as amended, Court Decision and Suspension of Liquidation: Gray Portland Cement and Clinker From Mexico, 58 FR 4980 (January 19, 1993). 2. See Gray Portland Cement and Clinker From Mexico; Final Results of Antidumping Duty Administrative Review, 58 FR 25803 (April 28, 1993), as amended, Gray Portland Cement and Clinker From Mexico; Amended Final Results of Antidumping Duty Administrative Review, 58 FR 49471 (September 23, 1993), as amended, Gray Portland Cement and Clinker From Mexico; Notice of Court Decision, 60 FR 53163 (October 12, 1995), as amended, Gray Portland Cement and Clinker From Mexico; Amended Final Results of Antidumping Duty Administrative Review in Accordance With Court Decision, 62 FR 5800 (February 7, 1997); Gray Portland Cement and Clinker From Mexico; Final Results of Antidumping Duty Administrative Review, 58 FR 47253 (September 8, 1993), as amended, Gray Portland Cement and Clinker From Mexico; Notice of Court Decision, 61 FR 53163 (December 3, 1996); Gray Portland Cement and Clinker From Mexico; Final Results of Antidumping Duty Administrative Review, 60 FR 26865 (May 19, 1995); Gray Portland Cement and Clinker From Mexico; Final Results of Antidumping Duty Administrative Review, 62 FR 17148 (April 9, 1997), as amended, Gray Portland Cement and Clinker From Mexico; Amended Final Results of Antidumping Duty Administrative Review, 62 FR 24414 (May 5, 1997) (see also November 15, 1999, Final Result of Redetermination Pursuant to Panel Remand in the Matter of Gray Portland Cement and Clinker from Mexico (NAFTA-binational panel decision, Secretariat File No. USA-97-1904-01)); Gray Portland Cement and Clinker From Mexico; Final Results of Antidumping Duty Administrative Review, 62 FR 17581 (April 10, 1997); Gray Portland Cement and Clinker From Mexico; Final Results of Antidumping Duty Administrative Review, 60 FR 26865 (March 16, 1998); and Gray Portland Cement and Clinker From Mexico; Final Results of Antidumping Duty Administrative Review, 64 FR 13148 (March 17, 1999). 3. See Gray Portland Cement and Clinker From Mexico: Amended Final Results of Antidumping Duty Administrative Review, 63 FR 24528 (May 4, 1998). (Also, see Preliminary Results of Antidumping Administrative Review: Gray Portland Cement and Clinker From Mexico, 62 FR 47626 (September 10, 1997).) 4. See RGPCC's August 17, 1999, intent to participate at 2. RGPCC notes that it is wholly owned by GCC of America, Inc., which is, in turn, a wholly owned subsidiary of CDC. RGPCC also states that it imports portland cement from CDC and sells the imported cement in the United States. 5. See Sunbelt's August 17, 1999, intent to participate at 2. Sunbelt states that it is related to CEMEX within the meaning of section 771(4)(B)(ii)(I) of the Act and that, although it does not import the subject merchandise, it is related to an importer, Gulf Coast Portland Cement Company. 6. The Committee lists its members as follows: Alamo Cement Co., Arizona Portland Cement, Blue Circle Inc., Calaveras Cement, California Portland Cement Co., Florida Crushed Stone Co., Florida Rock Industries, Inc., Hanson Permanente Cement, Inc., Lafarge Corp., Lehigh Portland Cement Co., Lone Star Industries, Inc., National Cement Co. of Alabama, Inc., National Cement Co. of California, Inc., North Texas Cement Co. L.P., Phoenix Cement, Rinker Materials Corp., RMC Lonestar, Southdown, Inc., Tarmac America Inc., Texas Industries, Inc., Texas-Lehigh Cement Co., and TXI-Riverside Cement Co. (See the Committee's September 1, 1999, substantive response, appendix A.) According to the Committee, its members account for over 75 percent of domestic production capacity for domestic like product within the Southern Tier Region. (See footnote 9, infra, for the definition of Southern Tier Region.) 7. The Committee claims five members of the Ad Hoc Committee belong to the Committee: Florida Crushed Stone Co., Phoenix Cement Co., Southdown, Inc., Texas Industries, Inc., and North Texas Cement Co. 8. The petition was later amended to add NCCC, and NCCC is a member of the Committee. 9. The Committee indicates that its members consist of all of NCCC's members which currently operate cement production facilities within the Southern Tier Region. (The Southern Tier Region is defined as states of Calfornia, Arizona, New Mexico, Texas, Louisiana, Mississippi, Alabama, and Florida; see the Committee's September 1, 1999, substantive response at 1.) 10. Apasco submitted its substantive response on September 1, 1999. Subsequent to the filing, however, the Committee objected to Apasco's failure to provide either a summary of the bracketed, proprietary information in sufficient detail or, if such summarization is not possible, a full explanation of the reasons supporting such claim in the public version. Upon the Department's October 5, 1999, request that Apasco submit either a summary or full explanation, Apasco resubmitted its public version with a summary on October 7, 1999. (See sections 351.304(c)(1) and (d)(1) of the Department's Regulations.) 11. During the investigation, noting that CDC and CEMEX do not constitute separate entities because of their close, intertwined relationship (CDC was predominantly owned by CEMEX), the Department treated CDC and CEMEX as one respondent and calculated a single weighted-average margin for CEMEX. Also, during the first through fourth administrative reviews of the order, CDC states that it did not export directly to the United States. 12. The Committee, on September 2, 1999, CDC and CEMEX on September 3, 1999, each requested an extension of the deadline for filing rebuttal comments to the substantive responses. The Department extended the deadline until September 13, 1999, for all participants eligible to file rebuttal comments. 13. See Extension of Time Limit for Preliminary Results of Full Five-Year Reviews, 64 FR 66879 (November 30, 1999). 14. See footnote 3, supra, especially concerning the fifth administrative review and the Department's redetermination thereof. Because the Department, in its November 15, 1999, redetermination, recalculated and lowered CEMEX's weighted-average dumping margin for the fifth review from 73.69 percent to 53.59 percent, the average dumping rate for the seven administrative reviews would be about 68 percent. Also, CDC did not participate in the administrative reviews until the fifth review. When CDC appeared for the first time in the fifth review requesting a separate review, the Department, noting that CEMEX indirectly owns more that 5 percent of the outstanding voting share of CDC, decided to collapse CDC and CEMEX. Thus, the average margin for CDC is 43.99 percent (identical to CEMEX's rates but only covering the fifth through seventh reviews). (Also see footnote 11 supra.) 15. Also see Gray Portland Cement and Clinker From Mexico; Preliminary Results of Antidumping Duty Administrative Review and Extension of Final Results of Administrative Review, 64 FR 48778 (September 8, 1999). The Department published the preliminary results of the eighth administrative review on September 8, 1999. In the preliminary results, the Department preliminarily determined that CEMEX and its affiliate, CDC, were dumping at the margin of 45.39 percent during the review period August 1, 1997, through July 31, 1998. 16. See footnote 9, supra. 17. Mexican manufacturers/exporters' export share of the subject merchandise in the Southern Tier regional market are as follows: 1987 - 14, 1988 - 13.6, 1989 - 11.5, 1990 - 6.6 percent. During the period 1991 through 1998, Mexican imports never accounted for more than 3.8 percent of the regional market. 18. In arguing good cause and other information, Sunbelt, CEMEX, RGPCC, and CDC put forth almost identical presentations. 19. The weighted-average dumping margins for CEMEX from previous administrative reviews are as follows: first review - 61.42, second review - 109.43, third review - 61.85, fourth review - 109.43, fifth review - 44.89, sixth review - 37.49, seventh review - 49.58, eighth review (preliminary results) - 45.39, and all-others - 61.85 percent. Apasco has not been subject to any administrative review because it did not export the subject merchandise during the review periods. CDC was collapsed into CEMEX for the purpose of calculating weighted-average dumping margins in above reviews (see footnote 15, supra). 20. The order was imposed on August 30, 1990. In 1989, the import volume was 3.9 million metric tons. In contrast, in 1991, the import volume was less than 1 million metric tons. 21. The data supplied by CEMEX and CDC corroborate that the average import volume of the subject merchandise during these period is comparable to that of 1991. 22. See footnote 3, supra (seventh and pending eighth administrative reviews). 23. Id. See also third, fourth, fifth, sixth, seventh, and pending eighth administrative reviews. 24. As noted above, RGPCC is a wholly owned subsidiary of CDC and their substantive responses pertaining to likely-to-prevail arguments are almost identical. 25. RGPCC and CDC argue that URAA-mandated changes in methodology -- from comparing the prices of individual U.S. sales transactions to a weighted- average home market price to comparing average-to-average prices or transaction- to-transaction prices -- in calculating dumping margins render the usage of the original margins obsolete. They also claim that the original margins do not reflect changes in the pricing structure and conditions of competition in the U.S. cement market since the imposition of the order. 26. According to RGPCC and CDC, new methodologies required by the North American Free Trade Area ("NAFTA") panel (especially, the portion which requires use of a bulk-to-bulk or bag-to-bag principle), severe devaluation of the peso and different rates of inflation between countries, severe cement shortage in the United States, and increasing Mexican ownership of U.S. production facilities (with their commitment in maintaining a fairly priced cement market in the United States) constitute extraordinary circumstances. 27. As noted above, Sunbelt is a wholly owned subsidiary of CEMEX and their substantive responses pertaining to likely-to-prevail arguments are almost identical. 28. See footnote 25, supra. RGPCC and CDC make the same argument. 29. CEMEX and Sunbelt raise the issues of shortages of cement in the U.S. market and of a fair-value price comparison; i.e., either a bulk-to-bulk or bag- to-bag price comparison should be used by the Department. 30. Substantive responses of CDC and RGPCC, with respect to duty-absorption argument, are basically identical. 31. Substantive responses of CEMEX and Sunbelt, with respect to duty- absorption argument, are basically identical. 32. According to the Committee, the factors CEMEX et al. delineate are not enough to constitute extraordinary circumstances. 33. But see footnote 19, supra. 34. CDC states that, since the imposition of the order, an independent Mexican Government agency, Comision Federal de Competencia (or Federal Competition Commission ("FCC")), responsible for administering a competition law, was created to investigate an allegation of monopolistic practices. Moreover, CDC indicates that it was subjected to an anti-competitive investigation by FCC but cleared of the charge. (See CDC's rebuttal comments, Exhibit 1 and 2.) 35. With respect to procedure, the Committee asserts that CDC's submission of purported evidence pertaining to duty absorption is untimely for two reasons: first, the evidence is excerpted from CDC's submission in the seventh administrative review, which was initiated in 1997, not 1996 or 1998 when a duty-absorption investigation was and is being conducted, respectively; second, the excerpt is filed in the sunset review in which the Department does not conduct any investigation regarding duty absorption. In regards to substance, the Committee argues that price quotes presented by CDC represent a transaction from one affiliate to another affiliate of CDC, not to the first unaffiliated customer, and that CDC did not put forth an irrevocable agreement between the affiliated U.S. importer(s) and the first unaffiliated customer. 36. See footnote 19, supra. Since the order, the weighted-average dumping margins have fluctuated rather substantially. 37. See footnote 17and 21, supra. 38. This point is illustrated in the Department's November 15, 1999, Final Results of Redetermination Pursuant to Panel Remand in the Matter of Gray Portland Cement and Clinker from Mexico. (See footnote 3, supra.) Although the Department acknowledged that the fifth administrative review (covering the period from August 1, 1994, through July 31, 1995) represents the first review of the order pursuant to the Act (i.e., the Tariff Act of 1930, as amended by the Uruguay Round Agreements Act), the Department did not (and the NAFTA Panel did not require the Department to) change retroactively previous weighted- average dumping margins determined by the Department in the investigation as well as in the first four administrative reviews. 39. See Gray Portland Cement and Clinker From Mexico: Amended Final Results of Antidumping Duty Administrative Review, 63 FR 24528 (May 4, 1998). Also see October 6, 1999, Memorandum for Richard W. Moreland Deputy Assistant Secretary AD/CVD Enforcement Group I, from Laurie Parkhill, Director AD/CVD Enforcement Group 1, Office 3. In this memorandum, the Department corrected the inadvertent omission in the results and analysis memo pertaining to the duty-absorption review in the preliminary results of eighth administrative review which was initiated in 1998. This memorandum states that the duty absorption rate was 99.5 percent and the finding was transmitted promptly to each interested party. 40. Although in a pending administrative review, which was initiated in 1998, the Department preliminarily determined that the duty-absorption rate by CEMEX to be 99.5 percent (see footnote 39, supra), because the rate found is only preliminary, we preliminarily determine to use the duty-absorption rate from the administrative review initiated in 1996. However, if the final results from the pending administrative review become available before our proposed case brief deadline, interested parties are invited to comment on the use of the final results of the current administrative review to the instant review in their respective case briefs. 41. With respect to methodology, see Preliminary Results of Sunset Review: Porcelain-on-Steel Cooking Ware from Mexico, 64 FR 46651 (August 26, 1999), and Final Results of Expedited Sunset Review: Brass Sheet and Strip from Germany, 64 FR 49767 (September 14, 1999).