TED Case Studies

Cemex Case


          CASE NUMBER:     133 
          CASE MNEMONIC: CEMEX 
          CASE NAME:     Cement Exports from Mexico

A.        IDENTIFICATION

1.        The Issue

     The United States is one of the world's largest markets for
portland cement and cement clinker.  Because U.S. producers do
not provide enough portland cement and clinker to meet the U.S.
demands, imported portland cement and clinker supply a share of
the U.S. needs.  The unusually low price of portland cement and
clinker imported from Mexico, primarily from CEMEX the largest
cement company in Mexico, has allegedly allowed CEMEX to obtain
a disproportionate share of the U.S. market.  U.S. producers have
accused CEMEX of selling its portland cement and clinker below
fair market value in a predatory business manner.  The loss of
market share has motivated southern-tier U.S. producers of
portland cement and clinker to petition the U.S. government for
antidumping relief under the Tariff Act of 1930.  The term
"southern-tier" refers to the eight most southern U.S. states
from California to Florida.  The United States in 1995 decided to
postpone liberalization of trucking under NAFTA due to suspected
lax laws on the Mesxican side.
 
2.        Description

     In 1989, the year the antidumping case was initiated against
CEMEX, the U.S. consumed approximately 80 million metric tons of
cement.  Approximately 15 million metric tons were imported. 
 In that year, "U.S. imports of Mexican cement and cement clinker
totaled $124 million, accounting for nearly half of all cement
and clinker imports in the southern United States."

     The U.S. demand for cement rose steadily between 1980 and
1987 before leveling-off at 80 million metric tons at the end of
the decade.  Overall imports of portland cement from Mexico
increased 25 percent from 1986 to 1989 while imports of clinker
dropped 61 percent.  However, "Mexican exports of portland
cement to the southern-tier increased by only 22 percent from
1986 to 1989."  The increase in Mexican imports occurred in
years when total U.S. consumption had leveled off.  In 1988,
Mexico had 29 percent of the total U.S. cement import market, the
highest percentage of any individual country." 

     An overview of U.S. domestic cement production shows that
there were 141 active cement manufacturing plants operating in
the U.S. in 1986.  By 1989, the number had decreased to 134. 
Many of the U.S. cement plants are foreign owned.  "In 1989, 67
of the plants in the United States were operated by foreign
ownership or joint ventures with foreign-owned participants." 
Between 1986 and 1990, the total American cement and cement
clinker production combined remained steady.  However, the
increase in portland cement production was irregularly high.  It
rose from 67.8 percent in 1986 to 71.4 percent in 1989 while
clinker production was declining.   The same pattern was evident
for producers in the southern-tier of the U.S.  The trend for net
sales and operating income of U.S. cement producers declined by
11 percent from 1986 to 1988 and rose by 4 percent in 1989. 
Profit margins for U.S. producers dropped from 7 percent in 1986
to 2.4 percent in 1988 and increased to 3.1 percent in 1989. 
As with production, the profit margins of the southern-tier were
similar to the country as a whole.

     The Mexican cement industry is made up of nine corporations
operating 26 cement plants.  Four of these corporate groups
account for approximately 90 percent of the Mexican market. 
CEMEX is the largest producer and exporter of cement in Mexico. 
CEMEX owns or has interest in 17 cement plants and controlled
just over 71 percent of all Mexican cement production in 1989. 
At the time the antidumping case was filed, CEMEX was building a
new plant in Hermosillo, Sonora which is in northern Mexico.  The
size of the new facility and the intended markets for its
production were contentious issues throughout the course of the
antidumping investigation.  CEMEX owns Southwestern Sunbelt, a
U.S. importer with import terminals across the southern-tier of
the U.S.  

     The price of cement is largely determined by the
transportation costs involved in delivering the cement.  Because
of the relatively high cost of shipping cement, competition is
generally maintained on a regional level.  Average transportation
costs reported by U.S. producers for shipments within 50 miles of
the plant were $5.79 per ton.  Average shipping costs increased
to $9.86 for shipments within 51-100 miles, to $14.53 for 101-200
miles, and to $18.86 for 201-300 miles.  For shipments that are
500 miles or more from the plant, transportation costs increased
to $25.85 per ton.  The majority of cement produced in the U.S.
is sold within 200 miles of the plant or terminal of origin. 
This accounts for the southern-tier producers filing the
antidumping petition rather than the nationwide cement industry. 
Because of the seasonal nature of the cement market, prices
fluctuate dramatically within each year.  However, "The Mexican
product undersold the domestic product in all 24 months where
comparisons were possible; margins ranged from 7.2 to 18
percent."   

     As a result of the consistently lower price of portland
cement and cement clinker exported to the southern-tier of the
U.S. by CEMEX and the company's increasing share of the U.S.
cement market, members of the Ad Hoc Committee of Arizona, New
Mexico, Texas, and Florida Producers of Grey Portland Cement
filed an antidumping petition with the U.S. Department of
Commerce and the U.S. International Trade Commission (ITC).  An
antidumping investigation was initiated on September 26, 1989.  


     On April 6, 1990, the Department of Commerce advised the ITC
that it had made a preliminary determination that imports of
portland cement and cement clinker from Mexico were being sold in
the U.S. at less than fair market value (LTFV).  In accordance
with the Tariff Act of 1930, the ITC began an antidumping
investigation to determine if the U.S. portland cement industry
was materially threatened or injured by the Mexican imports.  On
August 13, 1990, after an investigation and public hearing, the
ITC voted 2-1 in favor of material injury.  The ITC normally
consists of a six-member board.  However, only four members had
been appointed at the time of the ruling and one did not
participate in the decision.

     The Commerce Department held that Mexican cement was being
sold in the U.S. at dumping margins ranging from 3.69 percent to
57.96 percent.  The Department of Commerce uses U.S. producer and
importer data in the southern-tier to establish a weighted-
average of delivered prices and the margins of under selling by
Mexican cement producers.  U.S. customs requires an antidumping
deposit be paid in accordance with the margins on all imports of
Mexican portland cement.  The Ad Hoc Committee of U.S. producers
appealed the Commerce Department's determination of the dumping
margins claiming that they were too low.  CEMEX also appealed the
ITC antidumping decision to the Court of International Trade in
New York.  The U.S. Court of International Trade refused to hear
the CEMEX appeal.  

     In response to a CEMEX petition, the General Agreement on
Tariffs and Trade (GATT) Committee on Antidumping Practices
established a Panel to examine whether or not the U.S.
antidumping investigation was consistent with the terms of the
GATT treaty.  In October, 1992, the Panel determined that the
investigation was inconsistent with GATT Article 5:1 because the
U.S. authorities had not established that prior to initiation
that the petition was on behalf of all or almost all of the
producers in the regional market.  Therefore, the Panel also
concluded that the antidumping duties were inconsistent with GATT
Article 1 which provides the guarantee of Most Favored Nation
status to all GATT members.  The Panel recommended that the
Committee on Antidumping Practices request that the U.S. revoke
the antidumping duties and reimburse any duties paid or
deposited.  The U.S. and Mexico informed the Committee that they
would work to find a mutually acceptable resolution to the
dispute.  On May 19, 1995, the Department of Commerce published
the results of its third administrative review of the antidumping
order against portland cement from Mexico.  The Department found
that CEMEX continues to dump into the U.S.  In addition, the
Department increased the antidumping duty deposit rate on future
entries from 43 to 62 percent.

3.        Related Cases

     BORDER case
     NAFTA case
     BASMEX case

     Keyword Clusters

     (1): Trade Product       = STONE
     (2): Bio-geography       = TEMPerate
     (3): Environmental Problem    = Pollution Land [POLL]

     In addition to the CEMEX case, the U.S. has initiated
portland cement and cement clinker antidumping investigations
against 14 countries since 1960.  They include Canada (1960,
1978), Sweden (1961), Belgium (1961), Portugal (1961), Dominican
Republic (1962, 1963), Mexico (1975, 1976), Australia (1983),
Japan (1983, 1986, 1989), Colombia (1986), France (1986), Greece
(1986), South Korea (1986), Spain (1986), and Venezuela (1986).

4.        Draft Author: Robert Cook

B.        LEGAL Clusters

5.        Discourse and Status:  DISagreement and INPROGress

     A variety of U.S. national legal procedures established by
the Tariff Act of 1930 have been implemented since 1989. 
International mediation has been implemented through the GATT
ruling of October 1991.  Bilateral negotiations are ongoing. 
However, no satisfactory resolution has been found.

6.        Forum and Scope:  MEXICO

     U.S. Government procedures dictated the initial antidumping
order and appeals through that system continue.  The Mexican
Government is negotiating with the U.S. on behalf of Mexican
cement producers and represented them before GATT.  GATT provides
an international forum for mediation of the dispute.

7.        Decision Breadth:  15 

     The U.S. has initiated previous antidumping cases against
cement importers from 14 countries since 1960.  Seven have been
found in violation of U.S. antidumping laws.

8.        Legal Standing:  LAW, TREATY

     CEMEX was found to be in violation of U.S. antidumping laws. 
The U.S. Government's antidumping investigation was found to be
in violation of GATT.

C.        GEOGRAPHIC Clusters

9.        Geographic Locations

     a.   Geographic Domain        : North America [NAMER]
     b.   Geographic Site          : Western North America
                                        [WNAMER]
     c.   Geographic Impact        : USA

10.       Sub-National Factors:  NO

     The southern-tier states of the U.S. may have laws effecting
cement production.  However, it does not have an impact on
international trade.

11.       Type of Habitat:  DRY, TEMPerate

     The southwest U.S. and Northern Mexico are dry.  The
involvement of Florida includes a temperate region.

D.        TRADE Clusters

12.       Type of Measure:  Import Tax [IMTAX]

     The U.S. requires importers of Mexican cement to pay a
dumping duty assessed by the Commerce Department.

13.       Direct vs. Indirect Impacts:  DIRect

     The dumping duty is collected by the U.S. Customs Agency at
the border.

14.            Relation of Measure to Environmental Impact

     a.   Directly Related         : YES  CEMENT
     b.   Indirectly Related       : YES  CLINKER
     c.   Not Related              : NO
     d.   Process Related          : YES  Pollution Land [POLL]

15.       Trade Product Identification:  STONE, MOTH

     "Portland cement is a hydraulic cement consisting mainly of
compounds of calcium, silica, and iron oxide, which, when mixed
with water and aggregate, chemically react to form concrete." 
"Cement clinker is a pellet-like substance that is combined with
gypsum and other grinding agents to produce cement."   The
concrete that is derived from portland cement and clinker is used
primarily by the construction industry.  The finished products
made of concrete include highways, buildings, concrete blocks,
and precast concrete goods.  Concrete is often cast with steel as
a reinforcement to increase strength and durability. The U.S.
consumed approximately 80 million metric tons of cement in 1989. 
Approximately 15 million metric tons were imported.  Mexico and
Canada were the top exporters of cement to the U.S.  Canada
accounted for 21 percent of U.S. imports and Mexico accounted for
29 percent.

16.       Economic Data


17.       Impact of Measure on Trade Competitiveness: MEDIUM
     On May 19, 1995, the U.S. Department of Commerce increased
the CEMEX antidumping duty cash deposit rate on future entries
from 43 percent to 62 percent.  It is likely that the Mexican
Government will challenge the U.S. duties under NAFTA.  However,
the dispute settlement mechanisms have not yet been established
for a NAFTA ruling (see NAFTA case).

18.       Industry Sector:  STONE

19.       Exporters and Importers:  MEXICO and USA

     The primary exporter in the case is CEMEX, the largest
cement exporter in Mexico.  The antidumping duty also affects
three other cement producers in Mexico that export significantly
less cement to the U.S.  The primary importer is Southwestern
Sunbelt, a U.S. cement import company owned by CEMEX.  The three
other Mexican cement producers use a variety of small private
importers.

E.        ENVIRONMENT Clusters

20.       Environmental Problem Type:   HABITAT, POLL

     Although the environment is not the focus of this case,
extracting the stone necessary to produce cement often results in
the destruction of some habitat.  Limestone is the raw material
used to produce cement.  It is dug out of open quarries and
refined in kilns to make clinker.  The clinker is combined with
gypsum to produce cement.  At the time the CEMEX case was filed,
the U.S. had few environmental regulations effecting cement
production. Differences in environmental regulation did not
provide Mexican producers with a significant cost advantage.  The
Environmental Protection Agency has only recently begun to
investigate the affects of kiln dust created during production of
cement on employees.  However, no regulations have been issued.

21.       Name, Type, and Diversity of Species 

     Name:          Many
     Type:          Many
     Diversity:     2,036 higher plants per 10,000 km/sq (US)

22.       Resource Impact and Effect: LOW and PRODuct

23.       Urgency and Lifetime:    LOW and 100s of years

24.       Substitutes: LIKE 

     There are no adequate substitutes for cement for the making
of concrete.  However, there are several substitutes for
concrete.  Steel is a primary substitute for concrete in the
nonresidential construction market.  Wood is often used as a
substitute in the residential market.  Other substitutes include
asphalt, brick, metals, glass, and plastic.

F.        OTHER Factors

25.       Culture:       NO

26.       Human Rights:  NO

27.       Trans-Boundary:     NO

28.       Relevant Literature

"A Solid Scenario," The Wall Street Journal, February, 2, 1995.

Bicknell, Stan, and Grogan, Tim, "Supplies Caught Short by
     Recovery," Engineering News Record, June 27, 1994.

"CEMEX S.A. v. U.S., U.S. Court of International Trade," BNA
     International Trade Daily, April 17, 1992.

"CIT Refuses to Assign Three-Judge Panel to Hear Appeal of
     Mexican Cement Ruling," BNA International Trade Daily,
     June 10, 1991.

Determination of the Commission in Investigation No. 731-TA-451
     (Final), USITC Publication 2305, Washington, D.C.,
     United States Trade Commission, August 1990.

Green, Paula, "U.S. Trade Court Gets CEMEX Case," Journal of
     Commerce, October 9, 190, 4A.

Hall, Kevin, "5-Year Old Trade Dispute with U.S. is Brick Wall
     for Export Plans," Journal of Commerce, October 31,
     1994, 5A.

"Import Briefs," Journal of Commerce, April 9, 1990, 4A.

Levinson, Marc, "Trade Policy Set in Concrete," Journal of
     Commerce, August 13, 1990, 4A.

Low, Sui Pheng, The Global Cement Industry, Singapore, Singapore
     University Press, National University of Singapore,
     1993.

"Mexican Cement Imports Found Injuring U.S. Firms," Journal of
     Commerce, August 15, 1990, 5A.

"Mexican Cement Producers Will Diversify Into New Markets as a
     Result of ITC Ruling," BNA International Trade Daily,
     August 31, 1990.

"Mexico/U.S.: Anti-Dumping Duties on Grey Portland Cement and
     Cement Clinker," GATT Activities Report 1992, 34.

"Mexico/U.S.: Anti-Dumping Duties on Grey Portland Cement Clinker
     Imported from Mexico," GATT Activities Report 1993,
     p.42.

Moukwa, Monsonso, Cement Based Materials: Present, Future, and
     Environmental Aspects, Westerville, OH, American
     Ceramic Society, 1993.

Muniak, Monica, U.S. Regional Outlook for Cement and Ready Mix
     Concrete Markets, Cleveland Hts., OH, Leading Edge
     Reports, 1990.


                          References


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