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DISSENTING VIEWS OF MORTON POMERANZ The International Trade Commission (�the Commission�) has determined, under section 751(c) of the Tariff Act of 1930 as amended (�the Act�), that revocation of the countervailing duty orders covering pure magnesium and alloy magnesium from Canada would be likely to lead to continuation or recurrence of material injury to an industry in the United States within a reasonably foreseeable time. In a companion decision, the Commission determined that revocation of the antidumping duty on pure magnesium from Canada would be likely to lead to a continuation or recurrence of material injury to an industry in the United States within a reasonable time. The record demonstrates that these are appropriate conclusions to the Commission�s investigations. Basic to this conclusion is the fact that the standard in five-year reviews is not the same as that applied in original antidumping or countervailing duty investigations, notwithstanding that some of the same fundamental economic elements must be examined by the Commission in both instances. The Congress, in its Statement of Administrative Action (�SAA�) accompanying the Uruguay Round Agreements, states that, �under the likelihood standard, the Commission will engage in a counter-factual analysis; it must decide the likely impact in the reasonably foreseeable future of an important change in the status quo - the revocation [of the order]...and the elimination of its restraining effects on volumes and prices of imports.�1 Thus, the likelihood standard is prospective in nature, rather than focused on current material injury. This standard has here been applied to the magnesium industry which has its own unique aspects. The Industry Pure magnesium and alloy magnesium, the two products of this investigation, can be produced in the same factory, on the same line, by the same employees, differentiated only by the non-magnesium element added to the pure magnesium to obtain the desired alloy. The basis of this case arose a decade ago when the Canadian Company, Norsk Hydro Canada, Inc. (�NHCI�), a new market entrant, needed to price aggressively in order to capture market share in the United States. The result was prompt imposition of dumping duties on pure magnesium which has virtually shut the door on Canadian shipments to the United States of the pure metal. Subsidies granted to NHCI by the government resulted in countervailing duties, as well. Magnesium is essentially a commodity product. As long as magnesium products meet the same American Society for Testing Materials (ASTM) specifications, the market will consider them commercially equivalent and substitutable. In the past decade, Canada and the United States produced almost half the world production of magnesium, with the U.S. being by far the larger consumer of the two. Recent Changes The last decade has witnessed a number of important developments in the magnesium industry: Producers in China, Russia, the Ukraine and Israel have provided substantial new production to world markets. Large amounts of that production have been sold at price levels which have prompted dumping actions in major consuming nations (e.g, the EU and the US). Dow Chemical, once the largest U.S. producer, exited the magnesium production business in 1998. Magnesium Corporation of America (Magcorp), currently the largest U.S. producer, is engaged in a program of improving its electrolytic cell line, thereby increasing capacity. Magnola Metallurgy, Inc. (Magnola), a new greenfield plant in Canada, is coming on stream with a reported ultimate capacity exceeding total U.S. imports from the world. Magnesium purchase contracts have, in recent years, increasingly included pricing arrangements requiring producers to meet competitors� prices. There has also been a trend toward shorter-term contracts, further increasing price sensitivity in the market. Elements of Record Supporting the Likelihood of Recurrence 1. Excess capacity resulting from Magnola�s entrance into the market and NHCI�s planned expansion can only lead to price cutting in search of market share, thereby repeating the injurious conditions that prevailed during 1990-1991. 2. During the period of review, prices for alloy magnesium were falling even prior to Magnola�s achievement of full commercial production. (See Majority Views at 38). 3. Magnola has already made sales approaches to U.S. purchasers, including current customers of U.S. producers. 4. The likelihood that Magnola will offer low prices to obtain customers is increased by the stated intentions of some U.S. purchasers to seek out new suppliers.2 5. The likelihood of price depression in the market is accentuated by contract provisions that require producers to meet competitors� prices. 6. Under present circumstances, Magnola�s shipments to the United States would be subject to the �all other� countervailing duty rate of 4.48 percent.3 Revocation of this penalty duty would be a considerable advantage to Magnola in this narrow margin commodity product business. The effect will be considerably greater in the case of the 21 percent dumping duty on pure magnesium. 7. Due to the U.S. industry�s financial condition, Magcorp has been unable to speed up completion of improvements in its electrolytic cell line and thereby increase production. 8. In September, 1999, Magcorp laid off approximately 54 workers due to a decline in sales. In January, 1999, eligible workers at Northwest Alloys (the other U.S. producer) were certified for adjustment assistance under Section 223 of the Trade Act of 1974.4 Question of Non-Subject Imports As indicated above, in these sunset reviews, the Commission must predict the
future impact of subject imports on the domestic industries if the constraints
of the orders are removed. The record evidence is overwhelming that if the
orders are revoked, unfairly priced imports from Canada, where excess capacity
is about to spike, will increase substantially, leading to the injurious
conditions that occurred during 1990-1991. Thus, the subject imports will be a
significant and substantial cause of material injury if the orders are revoked.
This conclusion of the Commission was reached with full record knowledge of
non-subject imports. Even if it were applicable to a prospective sunset review
analysis, Gerald Metals5 requires nothing more. In fact, the Congress, in
its statement of Administrative Action, cites with approval the U.S. practice
�that the Commission need not isolate the injury caused by other factors from
injury caused by unfair imports.� 6 This is consistent with United States Steel
Group, 96 Fed 3d 1352. Conclusion Under controlling U.S. law, the Commission is presumed to have considered all
evidence in the record and need not address every argument advanced by a party
to the investigation.7 Implicit in the Commission�s view of the future is a world with an oversupply of magnesium, resulting in constant pressure for price depression. We have earlier seen that so long as products meet the same ASTM specifications, the market will consider them commercially equivalent and substitutable. As a result, they are exceedingly price-sensitive. A large measure of the oversupply will originate in the new production from Magnola and the expansion of production by NHCI. These Canadian producers, with only a limited Canadian magnesium consumption, have depended to a large extent on sales to consuming countries outside of North America. In the world envisaged by the Commission, these markets may be lost to Canadian producers by the press of other supplier price competition. The normal pressures for the Canadian producers to direct sales to the proximate U.S. market will be greatly increased if these other country sales are foreclosed. Logic alone would clearly dictate that removal of the U.S. penalty duties could only result in a continuation or recurrence of material injury to U.S. industry in the reasonably foreseeable future. Respectfully submitted on July 15, 2002 by:
Notes:
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