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Kimberley Hunt at (202) 482–1272 Production and Constructed Value Data Submitted and Mark Hoadley; Magnesium Metal From The
by Solikamsk Magnesium Works, December 30, Russian Federation: Verification Report for JSC
(Avisma); and Josh Reitze at (202) 482– 2004 (SMW Cost Verification Report), on file in the AVISMA Titanium-Magnesium Works, December
0666 (SMW); AD/CVD Operations, Central Records Unit, Room B–099 of the Main 30, 2004 (Tirus Verification Report), on file in the
Office 6, Import Administration, Commerce building (‘‘CRU’’). CRU.
2 Petitioners in this investigation are U.S. 5 Memorandum to the File, from Joshua Reitze
International Trade Administration,
Magnesium Corporation, LLC; United Steelworkers and Kimberley Hunt, Magnesium Metal From The
U.S. Department of Commerce, 14th of America, Local 8319; and Glass, Molders, Russian Federation: U.S. Sales Verification
Street and Constitution Avenue, NW., Pottery, Plastics and Allied Workers International, (Cometals), December 30, 2004 (Cometals
Washington, DC 20230. Local 374. Verification Report), on file in the CRU.
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9042 Federal Register / Vol. 70, No. 36 / Thursday, February 24, 2005 / Notices
January 21, 2005, Avisma and SMW calcium carbonate, carbon, slag Federation, 69 FR 15293 (March 25,
both filed rebuttals to Petitioners’ coagulants, fluorspar, nephaline syenite, 2004) (‘‘Initiation Notice’’), the
January 18, 2005, comments. feldspar, alumina (Al203), calcium Department recognized the complexity
A public hearing was held on January aluminate, soda ash, hydrocarbons, of valuing energy costs and stated its
21, 2005. On January 26, 2005, Alcoa graphite, coke, silicon, rare earth intention to examine this issue during
made a submission, requested at the metals/mischmetal, cryolite, silica/fly the course of this investigation. On July
hearing by the Department, stating that, ash, magnesium oxide, periclase, 30, 2004, Petitioners submitted
in its view, the information presented at ferroalloys, dolomite lime, and additional information to support their
the hearing had already been placed on colemanite.6 claim that Russian government
the record of the proceeding. The magnesium subject to this involvement resulted in gas and
investigation is classifiable under item electricity prices that do not reflect
Period of Investigation
numbers 8104.11.00, 8104.19.00, ‘‘economic reality.’’ Petitioners again
The period of investigation (‘‘POI’’) is 8104.30.00, and 8104.90.00 of the argued that the Department has the legal
January 1, 2003, through December 31, Harmonized Tariff Schedule of the authority to disregard or adjust the
2003. See 19 CFR § 351.204(b)(1). United States (‘‘HTSUS’’). The HTSUS energy costs reported by Respondents to
Scope of Investigation item numbers are provided for account for this distortion, and
convenience and customs purposes suggested options for correcting the
For the purpose of this investigation, only. The written description of the effects of this distortion. On September
the product covered is magnesium metal merchandise under investigation is 1 and 3, 2004, Avisma responded that
(also referred to as magnesium) from dispositive. the Department does not have the
Russia. The products covered by this
Verification authority to disregard Respondents’
investigation are primary and secondary
pure and alloy magnesium metal, reported costs and that there is no
As provided in section 782(i) of the precedent for doing so. Furthermore,
regardless of chemistry, raw material Act, we verified the information
source, form, shape or size. Magnesium Avisma argued that there is no evidence
submitted by Avisma and SMW for use that the prices Avisma pays for energy
is a metal or alloy containing, by weight, in this final determination. We used
primarily the element of magnesium. are distorted. In Avisma’s view, all of
standard verification procedures the analyses of the Russian energy
Primary magnesium is produced by including examination of relevant
decomposing raw materials into prices which had been submitted by
accounting and production records, and Petitioners for the record were based on
magnesium metal. Secondary original source documents provided by
magnesium is produced by recycling speculation about future capital costs,
the Respondents. and were not relevant to this
magnesium-based scrap into magnesium
metal. The magnesium covered by this Energy Costs antidumping investigation. SMW
investigation includes blends of primary In the original petition for the submitted comments on September 15,
and secondary magnesium. imposition of antidumping duties on 2004, which endorsed Avisma’s legal
The subject merchandise includes the U.S. imports of magnesium from Russia, analysis.
following pure and alloy magnesium In its Preliminary Determination, the
Petitioners alleged that Russian energy
metal products made from primary and/ Department did not adjust Respondents’
costs are distorted by excessive Russian
or secondary magnesium, including, reported electricity costs, but indicated
government involvement in the energy
without limitation, magnesium cast into that it would be willing to consider new
sector. Citing section 773(f)(1)(A) of the
ingots, slabs, rounds, billets, and other or updated factual information on the
Act, Petitioners requested that the
shapes, and magnesium ground, issue of whether electricity prices in
Department adjust Respondents’
chipped, crushed, or machined into Russia are distorted such that the
reported energy costs to account for the
raspings, granules, turnings, chips, Department should make an adjustment
effects of this government involvement
powder, briquettes, and other shapes: to the specific prices charged to
and to reflect better what they
(1) Products that contain at least 99.95 Respondents for purposes of the final
considered to be true, market-based
percent magnesium, by weight determination.7 On November 8, 2004,
energy costs. Petitioners argued that the
(generally referred to as ‘‘ultra-pure’’ Petitioners submitted additional
use of the qualifying word ‘‘normally’’
magnesium); (2) products that contain information in support of their
demonstrates that the Department has
less than 99.95 percent but not less than arguments for disregarding or adjusting
the authority to disregard reported costs
99.8 percent magnesium, by weight Respondents’ reported electricity costs.
under certain circumstances.
(generally referred to as ‘‘pure’’ In the Notice of Initiation of On November 9, 2004, USEC argued that
magnesium); and (3) chemical Antidumping Duty Investigations: the Department should adjust Russian
combinations of magnesium and other Magnesium Metal From the People’s electricity prices in this proceeding and
material(s) in which the magnesium Republic of China and the Russian should consider similar adjustments in
content is 50 percent or greater, but less future proceedings. On November 12,
that 99.8 percent, by weight, whether or 6 This second exclusion for magnesium-based 2004, USEC further argued that the
not conforming to an ‘‘ASTM reagent mixtures is based on the exclusion for Department should proceed with
Specification for Magnesium Alloy.’’
reagent mixtures in the 2000–2001 investigations of caution in accepting reported input
magnesium from China, Israel, and Russia. See purchase prices in countries that have
The scope of this investigation Final Determination of Sales at Less Than Fair
excludes: (1) Magnesium that is in Value: Pure Magnesium in Granular Form From the recently been graduated to market-
liquid or molten form; and (2) mixtures People’s Republic of China, 66 FR 49345 economy status. On November 18, 2005,
containing 90 percent or less (September 27, 2001); Final Determination of Sales Avisma submitted a rebuttal to
at Less Than Fair Value: Pure Magnesium From Petitioners’ claims, arguing that the
magnesium in granular or powder form Israel, 66 FR 49349 (September 27, 2001); Final
by weight and one or more of certain Determination of Sales at Not Less Than Fair Value: Department has no authority to make an
non-magnesium granular materials to Pure Magnesium From the Russian Federation, 66
FR 49347 (September 27, 2001). These mixtures are 7 In the Preliminary Determination, the
make magnesium-based reagent not magnesium alloys because they are not Department focused on electricity costs because
mixtures, including lime, calcium chemically combined in liquid form and cast into electricity is the energy input that is significant in
metal, calcium silicon, calcium carbide, the same ingot. the production of magnesium.
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Federal Register / Vol. 70, No. 36 / Thursday, February 24, 2005 / Notices 9043
adjustment to the costs reflected in criteria are met: (1) Those records are reiterated its concern over the reliability
Respondents’ books and records. kept in accordance with the of costs related to Russia’s energy sector,
On January 4, 2005, Petitioners respondent’s home country’s Generally stating that ‘‘(e)xamples of possible
submitted information on the sale of a Accepted Accounting Principles areas in which adjustments may be
privately-held Russian energy firm to a (GAAP), and (2) those recorded costs necessary include, but are not limited
state-controlled Russian energy firm. On reasonably reflect the costs associated to, costs related to energy * * *’’ 10
January 6, 2005, the Department notified with the production and sale of the At the time the NME Memorandum
parties that it would allow this new subject merchandise. However, the and the Suspension Agreement were
information to remain on the record and statute’s explicit use of the word issued, the most current information on
permitted interested parties to rebut ‘‘normally’’ indicates that there may be the Russian energy sector was from
such information in accordance with circumstances where the Department 2002. During the course of this
section 351.301(c)(1) of its regulations. could reasonably determine that the use investigation, parties have submitted
On January 12, 2005, the Department of the respondent’s recorded costs is information that has allowed the
issued a memorandum outlining two inappropriate. In such cases, the Department to examine the state of the
possible adjustments that could be made Department has the discretion to Russian energy sector, particularly the
to Respondents’ reported electricity calculate the costs of production by electricity sector, in 2003. After
purchases, in the event the Department some other reasonable means. examining the data on the record of this
decided that an adjustment was In its June 6, 2002, memorandum case at the macroeconomic level, the
appropriate. See Memorandum to the graduating Russia from non-market Department finds substantial evidence
File from Lawrence Norton, Energy economy (‘‘NME’’) status, the of continuing distortions. While
Pricing in the Antidumping Duty Department specifically stated that it electricity prices have been increasing
Investigation on Magnesium from the retained its statutory authority to as of late, and while small trading
Russian Federation (January 12, 2005). evaluate the underlying usefulness of exchanges have been allowed to
The Department invited interested particular costs involved in normal develop, significant aspects of the
parties to comment on the possible value calculations: electricity sector remain distorted and
adjustments. On January 14, 2005, Alcoa are not subject to market forces. The
Accordingly, the Department will examine
responded, arguing that an adjustment prices and costs within Russia, utilizing them
World Bank argued in 2003 that ‘‘the
would neither be warranted nor for the determination of normal value when government needs to develop a
consistent with the statute. On January appropriate or disregarding them when they medium-term tariff policy * * * that is
18, 2005, Avisma responded stating that are not. In this regard, the Department retains designed to bring utility tariffs up to full
neither the Department’s proposed its authority to disregard particular prices economic levels.’’ 11 Elsewhere, the
adjustments, nor any other adjustments when the prices are not in the ordinary World Bank defines ‘‘full economic
would be appropriate in this course of trade, the costs are not in levels’’ as long-run marginal cost. In
antidumping investigation. Avisma accordance with generally accepted addition, in their latest report, the
argued that there is no legal basis for accounting principles, the costs do not Organization for Economic Cooperation
reasonably reflect the costs associated with
making such an adjustment and the the production or sale of the merchandise, or
and Development (‘‘OECD’’) states that
Department has no authority to do so. in other situations provided for in the Act or the Russian electricity sector is
Also on January 18, 2005, USEC in the Department’s regulations.8 dominated by a state-controlled
responded to the proposed adjustments, monopoly, and that ‘‘there is neither
reiterating again that the Department The Department further highlighted competition in the wholesale market
should preserve maximum flexibility for its concern regarding prices in the (which in any case is not really a
future proceedings. On the same date, Russian energy sector in particular: market) nor choice of supplier for
Petitioners submitted an argument in The State no longer controls resource consumers.’’ 12
favor of one of the possible adjustments, allocations or prices, with the notable Information on the record shows that,
but also argued that the adjustment exception of energy prices, which remain a at the macroeconomic level, the Russian
significant distortion in the economy, as they energy sector has yet to be significantly
should be inflated to make it
encourage the wasteful use (misallocation) of
contemporaneous with the POI. Russia’s energy resources and slow the
restructured, and that state ownership is
After carefully analyzing all of the adoption of more efficient production still pervasive, in some cases even
evidence and arguments on the record methods. * * * While some market increasing. Prices are still generally set
of this proceeding, the Department has distortions and resource misallocations by the government and overall remain at
determined that, while such characterize most market economies, energy uneconomic levels that often do not
adjustments are permissible, based on is of such significance to the Russian cover the long-run cost of production.13
the specific facts of this case, for economy that continuation of the Russian Near-monopoly conditions still prevail
purposes of this final determination, it government’s current energy price regulatory in production, while production
will not make an adjustment to the policies may warrant careful consideration of
Respondents’ reported electricity costs. energy price data in future trade remedy 10 See Suspension of Antidumping Duty
cases.9 Investigation of Certain Cut-to-Length Carbon Steel
Our analyses and specific arguments Subsequent to Russia’s graduation to Plate from the Russian Federation, 68 FR 3859
presented by the parties with respect to
market-economy status, the Department (January 27, 2003) (hereafter, the ‘‘Suspension
this issue are set forth below. Agreement’’).
renegotiated a suspension agreement
First, we agree with Petitioners that 11 World Bank, Russia: Development Policy
concerning cut-to-length carbon steel
section 773(f) of the statute gives the Review, Report No. 26000–RU, June 9, 2003, p. 13.
plate from Russia. In the renegotiated 12 Organization for Economic Cooperation and
Department the legal authority to adjust
suspension agreement, the Department Development, OECD Economic Survey: Russian
prices recorded in a respondent’s books Federation, 2004, p. 162–163.
and records under certain 8 See Memorandum to Faryar Shirzad from Albert
13 Organization for Economic Cooperation and
circumstances. The statute specifies a Hsu et al, Inquiry into the Status of the Russian Development, OECD Economic Survey: Russian
standard: ‘‘normally’’ the Department Federation as a Non-Market Economy Country Federation, 2004, p. 165. Here the OECD states that
‘‘what {electricity tariffs} do not allow for is the
will use the costs as recorded in the Under the U.S. Antidumping Law (June 6, 2002)
recovery of capital cost, and estimates of the
respondent’s books and records in (hereafter, the ‘‘NME Memorandum’’).
sector’s capital investment needs vary widely
calculating the cost of production if two 9 Id. * * *.’’
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9044 Federal Register / Vol. 70, No. 36 / Thursday, February 24, 2005 / Notices
quantities are still being allocated by the ranging up to over a year difference Import Administration, ‘‘Issues and
government.14 Additionally, the between the actual payment date and Decision Memorandum for the
transparency of energy sector accounts the date reported to the Department, call Antidumping Duty Investigation of
and records is still very poor. Overall, into question the accuracy and Magnesium Metal from the Russian
the evidence on the record indicates reliability of Avisma’s payment dates as Federation (January 1, 2003–December
that the Russian electricity sector is still, reported. We therefore determine that 31, 2003),’’ (‘‘Decision Memorandum’’),
as a whole, in the early stages of reform, the payment dates reported could not be dated concurrently with this notice,
and is a sector where prices are based verified. Pursuant to section 776(a) of which is hereby adopted by this notice.
neither on market principles nor on the Act, the Department may resort to Parties can find a complete discussion
long-term cost recovery. facts otherwise available when the of the issues raised in this investigation
In addition to examining the studies ‘‘necessary information is not available in this public memorandum which is on
and other information documenting the on the record,’’ or an interested party file in the CRU. In addition, a complete
state of the Russian energy sector as a provides information ‘‘but that version of the Decision Memorandum
whole in 2003, the Department also information cannot be verified. * * *’’ can be accessed directly on the Internet
probed the specific experiences of each Accordingly, we find it appropriate to at: http://ia.ita.doc.gov/frn/index.html.
Respondent in their purchases of rely on partial facts available to The paper copy and the electronic
electricity during the POI through determine payment date. version of the Decision Memorandum
questionnaire responses and at Section 776(b) of the Act provides are identical in content.
verification. We found that: (1) The that the Department may apply an
Respondents engage in regular adverse inference in selecting from the Changes Since the Preliminary
purchases of electricity; (2) the invoices facts otherwise available when ‘‘an Determination
they were issued matched the regional interested party has failed to cooperate Based on our findings at verification
utility’s rate schedule; and (3) they pay by not acting to the best of its ability. and on our analysis of the comments
these invoices on time and in full. See * * *’’ Avisma did discover one received, we have made certain
SMW Cost Verification Report and incorrect payment in the course of adjustments to the margin calculations
Avisma Cost Verification Report preparing for verification, a rather large used in the Preliminary Determination.
(December 30, 2004). While these error, which it reported as a minor These adjustments are discussed in
company-specific facts do not alter our correction prior to the start of detail in the Decision Memorandum and
conclusions about the meaningful verification. During verification, are listed below:
distortions in price at the however, the Department found
macroeconomic level, we find that the numerous other errors, some also AVISMA
information on the record of this significant in size, in reviewing the 1. We included ‘‘barter sales’’ in the
proceeding with respect to the documentation that was solely in home-market database.
macroeconomic distortions in the Avisma’s control. We determine that 2. We recalculated the credit period
Russian energy sector does not allow the Avisma had the ability to conduct a based on verification findings.
Department to discern and measure the more thorough evaluation of its own 3. We adjusted Avisma’s interest rate
effects of such distortions on records prior to verification, and could to accurately reflect the underlying loan
Respondents’ reported electricity costs. have discovered these errors on its own. documents, examined at verification.
Furthermore, the record evidence does Had Avisma done so, it would have 4. We recalculated U.S. repacking
not demonstrate to what extent local been alerted to the fact that there was a expenses based on verification findings.
and regional conditions do or do not problem with the method it used to 5. We recalculated inventory carrying
reflect country-wide distortions in the collect and report payment dates. costs to reflect the revised interest rate
Russian electricity sector. Moreover, Avisma could have reported and an error discovered at verification
In summary, because the record these problems to the Department before regarding the average number of days in
evidence of this investigation does not the commencement of verification. inventory.
enable us to ascertain the manner and Having failed to do so, the Department 6. We recalculated Avisma’s chlorine
the extent to which the macroeconomic finds that Avisma failed to cooperate to gas by-product offset for a restatement of
price distortions in the Russian the best of its ability and the application disposal quantities.
electricity sector affect Respondents’ of an adverse inference is warranted. 7. We adjusted Avisma’s reported
reported electricity costs, the As a result, the Department has depreciation expenses to account for the
Department has determined not to determined to replace the payment revaluation of fixed assets to reflect
adjust or disregard such costs for dates reported by applying the longest inflation.
purposes of this final determination. verified period between payment date 8. We adjusted Avisma’s general and
The Department reserves its discretion and shipment date for prepayment sales administrative (‘‘G&A’’) expense ratio to
to do so in future proceedings when (regardless of whether the payment was include certain other operating and non-
evidence of continuing significant received in one or multiple operating income and expenses.
distortions at the macroeconomic level installments), and the shortest verified
SMW
is accompanied by sufficient evidence period between payment date and
or analysis with respect to the impact of shipment date for all other sales. 1. We included ‘‘barter sales’’ in the
such distortions on energy prices paid home-market database.
Analysis of Comments Received 2. We disregarded SMW’s billing
by respondent firms.
All issues raised in the case and adjustments for exchange rate gains and
Application of Facts Available rebuttal briefs by parties to this losses on stockpile sales.
During verification, the Department proceeding are listed in the Appendix to 3. We adjusted SMW’s ‘‘zeroed out’’
discovered numerous errors in Avisma’s this notice and addressed in the credit expenses for prepaid sales to
payment dates as reported in Avisma’s Memorandum from Barbara E. Tillman, reflect negative credit expenses.
questionnaire responses. These errors, Acting Deputy Assistant Secretary for 4. We removed two observations from
Import Administration, to Joseph A. the SMW home-market dataset
14 Id., p. 163. Spetrini, Acting Assistant Secretary for erroneously reported as sales.
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Federal Register / Vol. 70, No. 36 / Thursday, February 24, 2005 / Notices 9045
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