Notice of Final Results of Antidumping Duty Administrative Review and Determination Not To Revoke the Antidumping Duty Order: Brass Sheet and Strip From the Netherlands

DEPARTMENT OF COMMERCE

International Trade Administration

(A-421-701)

Notice of Final Results of Antidumping Duty Administrative Review

and Determination Not To Revoke the Antidumping Duty Order: Brass Sheet

and Strip From the Netherlands

AGENCY: Import Administration, International Trade Administration,

Department of Commerce

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SUMMARY: On September 8, 1999, the Department of Commerce (the

Department) published the preliminary results of its administrative

review of the antidumping duty order on brass sheet and strip from the

Netherlands and its notice of intent to revoke the antidumping duty

order. We gave interested parties an opportunity to comment on the

preliminary results. We have analyzed the comments received and have

made certain changes for the final results.

This review covers shipments by one respondent during the period

August 1, 1997, through July 31, 1998. For our final results, we have

found that sales of the subject merchandise have not been made below

normal value. We will instruct the Customs Service not to assess

antidumping duties on the subject merchandise exported by this company.

Furthermore, we are not revoking the antidumping duty order given that

shipments of subject merchandise to the United States by Outokumpu

Copper Strip B.V. (OBV), the sole producer and exporter of subject

merchandise from the Netherlands, have not been made in commercial

quantities for each of the three consecutive review periods that formed

the basis of the revocation request. See Determination Not To Revoke

Order section of this notice.

EFFECTIVE DATE: January 6, 2000.

FOR FURTHER INFORMATION CONTACT: John Brinkmann or Jarrod Goldfeder,

Office of AD/CVD Enforcement VI, Group II, Import Administration,

International Trade Administration, U.S. Department of Commerce, 14th

Street and Constitution Avenue, N.W., Washington, D.C. 20230;

telephone: (202) 482-4126 or (202) 482-2305, respectively.

SUPPLEMENTARY INFORMATION:

Applicable Statute and Regulations

Unless otherwise indicated, all citations to the statute are

references to the provisions effective January 1, 1995, the effective

date of the amendments made to the Tariff Act of 1930 (the Act), by the

Uruguay Round Agreements Act (URAA). In addition, unless otherwise

indicated, all citations to the Department's regulations refer to the

regulations codified at 19 CFR part 351 (1999).

Case History

This review covers OBV, the sole manufacturer/exporter of

merchandise subject to the antidumping duty order on brass sheet and

strip from the Netherlands.

On September 8, 1999, the Department published the preliminary

results of this review. See Notice of Preliminary Results of

Antidumping Duty Administrative Review and Intent To Revoke Order:

Brass Sheet and Strip from the Netherlands, 64 FR 48760 (Preliminary

Results). On October 20, 1999, we received case briefs from OBV and the

petitioners. We received rebuttal briefs from OBV and the petitioners

on October 29, 1999. A public hearing was held on November 2, 1999.

Scope of Review

Imports covered by this review are brass sheet and strip, other

than leaded and tin brass sheet and strip, from the Netherlands. The

chemical composition of the products under review is currently defined

in the Copper Development Association (CDA) 200 Series or the Unified

Numbering System (UNS) C2000 series. This review does not cover

products the chemical compositions of which are defined by other CDA or

UNS series. The physical dimensions of the products covered by this

review are brass sheet and strip of solid rectangular cross section

over 0.006 inch (0.15 millimeter) through 0.188 inch (4.8 millimeters)

in gauge, regardless of width. Included in the scope are coiled, wound-

on-reels (traverse wound), and cut-to-length products. The merchandise

under investigation is currently classifiable under item 7409.21.00 and

7409.29.20 of the Harmonized Tariff Schedule of the United States

(HTSUS). Although the HTSUS subheading is provided for convenience and

customs purposes, the written description of the merchandise under

investigation is dispositive.

Determination Not To Revoke Order

The Department ``may revoke, in whole or in part'' an antidumping

duty order upon completion of a review under section 751 of the Act.

While Congress has not specified the procedures that the Department

must follow in revoking an order, the Department has developed a

procedure for revocation that is described in 19 CFR 351.222. This

regulation requires, inter alia, that a company requesting revocation

must submit the following: (1) A certification that the company has

sold the subject merchandise at not less than normal value (NV) in the

current review period and that the company will not sell at less than

NV in the future; and (2) a certification that the company sold the

subject merchandise in each of the three years forming the basis of the

request in commercial quantities. See 19 CFR 351.222(e)(1). Upon

receipt of such a request, the Department may revoke an order if it

concludes that each exporter and producer covered at the time of

revocation: (1) sold subject merchandise at not less than NV for a

period of at least three consecutive years; and (2) is not likely in

the future to sell the subject merchandise at less than NV; see 19 CFR

351.222(b)(1)); 19 CFR 351.222(b)(2); see, e.g., Final Results of

Antidumping Duty Administrative Review and Determination Not To Revoke

Order in Part: Pure Magnesium from Canada (Pure Magnesium from Canada),

64 FR 12977, 12982 (March 16, 1999).

In our Preliminary Results, we preliminarily determined that OBV

sold in commercial quantities during the period of review (POR) and

that it is not likely that OBV will sell at less than NV in the future

(see Preliminary Results, 64 FR at 48765-48766). However, upon review

of the criteria outlined at section 351.222(b) of the Department's

regulations, the comments of the parties, and the evidence on the

record, we have determined that the Department's requirements for

revocation have not

[[Page 743]]

been met. Based on the final results in this review and the final

results of the two preceding reviews, OBV has demonstrated three

consecutive years of sales at not less than NV. However, we find that

OBV's aggregate sales to the United States have not been made in

commercial quantities during each of the three review periods that

formed the basis of OBV's revocation request. See Comment 5 for a

discussion of the basis for this decision. The abnormally low level of

sales activity does not provide a reasonable basis for determining that

the discipline of the antidumping duty order is no longer necessary.

Consequently, we find that OBV does not qualify for revocation of the

order on brass sheet and strip under 19 CFR 351.222(e)(1)(ii).

Comparisons

We calculated export price (EP) and NV based on the same

methodology used in the Preliminary Results.

Cost of Production

As discussed in the Preliminary Results, we conducted an

investigation to determine whether OBV made home market sales of the

foreign like product during the POR at prices below its cost of

production (COP) within the meaning of section 773(b)(1) of the Act.

We found 20 percent or more of OBV's sales of a given product

during the 12 month period were at prices less than the weighted-

average COP for the POR and thus determined that these below cost sales

were made in ``substantial quantities'' within an extended period of

time, and that such sales were not made at prices which would permit

recovery of all costs within a reasonable period of time, in accordance

with section 773(b)(2) (B), (C), and (D) of the Act. Therefore, for

purposes of these final results, we disregarded the below-cost sales

and used the remaining sales as the basis for determining NV, pursuant

to section 773(b)(1) of the Act.

We calculated the COP for these final results following the same

methodology as in the preliminary results, with the following

exceptions:

A. OBV had claimed a nine-month startup period for January 1998

through September 1998 for its new continuous strip casting mill. For

the final results, we have allowed OBV the startup adjustment. However,

we found that the startup period ended on May 31, 1998 and not

September 30, 1998. As a result, we decreased the amount of OBV's

startup adjustment. In addition, we amortized the capitalized startup

costs and included a portion of the amortized costs in the calculation

of COP. See Comment 1.

B. We have calculated weighted-average monthly metal costs based on

metal fix prices, which were confirmed at verification. See Cost

Verification Exhibit (CVE) 18. For fabrication costs, we have used

weighted-average annual costs based on the data reported in the COP and

constructed value (CV) data files. See Comment 2.

C. OBV purchased major inputs from an affiliate and used the

transfer prices in the calculation of its COP and CV. For the final

results, we have increased the transfer prices to the affiliate's COP

in calculating OBV's cost of manufacture. See Comment 3.

Analysis of Comments Received

We gave interested parties an opportunity to comment on the

preliminary results. As noted above, we received comments and rebuttal

comments from OBV and the petitioners.

Comment 1: Startup Adjustment

The petitioners contend that the Department should deny OBV's

request for a startup adjustment because it is not eligible for such an

adjustment. To be eligible for a startup adjustment, the petitioners

state that a respondent must either be starting up a completely new

production facility, retooling an existing facility, or producing a new

product. The petitioners argue, however, that OBV's new strip caster

does not meet any of these eligibility requirements because the company

merely installed an expensive piece of equipment used in a single stage

of the manufacturing process. In such situations, the petitioners claim

that the Department has typically found that replacing or rebuilding

only part of an operation, despite a substantial level of investment,

does not result in a new facility and does not warrant a startup

adjustment to cost. To support this claim, the petitioners cite to

several recent cases in which the Department has denied similar

requests. For example, the petitioners cite Final Results of

Antidumping Administrative Reviews: Certain Cold Rolled and Corrosion

Resistant Carbon Steel Flat Products From Korea, 64 FR 12927, 12950

(March 16, 1999) (Flat Products from Korea); Final Determination of

Sales at Less Than Fair Value: Stainless Steel Wire Rod from Spain, 63

FR 40391, 40401 (July 29, 1998) (SSWR from Spain); Final Determination

of Sales at Less Than Fair Value: Certain Preserved Mushrooms from

Chile, 63 FR 56613, 56618 (October 22, 1998) (Mushrooms from Chile);

Final Results of Antidumping Duty Administrative Review: Small Diameter

Circular Seamless Carbon and Alloy Steel Standard, Line and Pressure

Pipe from Germany, 63 FR 13217, 13220 (March 18, 1998) (Pressure Pipe

from Germany); and Final Determination of Sales at Less Than Fair

Value: Certain Preserved Mushrooms from India, 63 FR 72246, 72253

(December 31, 1998) (Mushrooms from India). In each of these cases, the

petitioners contend, the Department disallowed the startup adjustment

because the applicants failed to undergo ``substantially complete

retooling'' or the improvements did not result in a ``near new

facility.''

To further their position that the Department should disallow OBV's

startup adjustment, the petitioners also assert that the respondent has

not met the Department's burden of proof requirements for receiving

such an adjustment. Citing Mushrooms from Chile, the petitioners claim

that the Department normally denies the startup adjustment when the

respondent has not sufficiently supported its claim for such an

adjustment. In this case, the petitioners claim OBV failed to

adequately provide, completely omitted, or miscalculated the following

information in their startup request.

First, according to the petitioners, OBV's investment in the new

strip caster was not significant in comparison to its total property,

plant, and equipment value. Moreover, the petitioners argue that OBV

overstated the relative investment made in the strip caster mill by

relying on historical, rather than inflation-adjusted costs, to

calculate its reported investment percentages. As a result, the

analysis provided by the respondent leads to the erroneous conclusion

that the amount invested was significant. The petitioners contend that

without a significant investment, OBV does not qualify for a startup

adjustment.

Second, according to the petitioners, the Department should

disallow OBV's startup claim because the company's data demonstrates

that technical factors related to the new strip caster did not

constrain the company's production levels. The petitioners contend that

the production limitations that existed during the POR were the result

of the company's conscious decision to run both the old and new casters

simultaneously. This, according to the petitioners, is not a technical

problem. More importantly, the petitioners claim, OBV's production

volume approached maximum capacity during the POR. Thus, the

petitioners conclude that OBV experienced no reduction in its

production levels while installing the

[[Page 744]]

new strip caster and, therefore, consistent with its determination in

Mushrooms from India, the Department must disallow the adjustment. In

addition, the petitioners point out that an analysis of OBV's yield

data also demonstrates that technical factors did not hinder its

production levels.

Third, the petitioners argue that OBV did not provide complete

information concerning technical difficulties. According to the

petitioners, OBV failed to provide sufficient information on the types

and frequency of technical problems that the industry generally incurs

in operating casting equipment. In other words, the company should have

distinguished between normal repairs and technical difficulties related

to startup. Without this information, the petitioners argue that it is

impossible for the Department to draw a meaningful comparison between

the operation of the ring caster and the strip caster. In prior

determinations, the petitioners claim that the Department has relied

upon this type of failure as sufficient grounds to deny a startup

adjustment (see, e.g., Mushrooms from Chile).

Finally, according to the petitioners, OBV's reported costs after

the startup adjustment were not consistent with common industry

knowledge. Specifically, the petitioners contend that the startup

adjustment distorts costs because it shifts costs away from thinner

gauged merchandise.

If for some reason the Department determines that it should adjust

OBV's production costs, the petitioners claim that the Department

should account for the adjustment as a non-recurring cost adjustment.

Moreover, in making such an adjustment, the petitioners believe that

the Department should specifically limit the adjustment only to non-

recurring variable costs (i.e., direct labor and variable overhead).

OBV, on the other hand, believes that it is entitled to a startup

adjustment. OBV explains that the Department normally grants this

adjustment when a producer is using a new production facility and the

production levels are limited by technical factors associated with the

initial phase of commercial production. According to OBV, the company's

new continuous strip caster meets these qualifications because it

qualifies as a new production facility and evidence on the record

demonstrates that production levels were limited by technical factors

associated with the initial phase of commercial production.

On the issue of whether a separate facility is required by law, OBV

counters that the statute does not require that a respondent's new

production facility encompass all the steps in the production process

(see, e.g., Notice of Final Determination of Sales at Less Than Fair

Value: Static Random Access Memory Semiconductors From Taiwan, 63 FR

8909 (February 23, 1998) (SRAMs from Taiwan)). Instead, OBV claims, the

statute only directs that the startup adjustment not be the result of

making an ``on-going'' or ``mere improvement'' to an existing facility.

To support its claim that its new casting facility is more than just an

improvement, OBV notes that the evidence provided demonstrates that the

new continuous strip casting mill constitutes a wholesale replacement

of the old ring casting mill. To complete this replacement, OBV states

that the new facility required significant investment and was a

substantial undertaking. OBV emphasizes that it had to invest in an

entirely new technology which required the installation of new

equipment. Furthermore, the company had to construct a new building to

house the operation.

In addition, OBV, in its rebuttal brief, specifically addresses

each of the petitioners' arguments for disallowing the startup

adjustment, as follows:

First, OBV states that it realizes that the burden of demonstrating

the entitlement to a startup adjustment rests with the party making the

claim (see, e.g., SSWR from Spain). OBV further notes that the standard

of proof for a start-up adjustment is no greater than that for any

other adjustment claimed by respondent. In this case, OBV states that

it has met this requirement by providing evidence which demonstrates

that the new mill meets the statutory criteria for a startup

adjustment.

Second, OBV refutes the petitioners' contention that the level of

investment was not significant by countering that it has not overstated

the size of its investment in the new caster. According to OBV, the

record in this case demonstrates that it has substantially increased

the value of its property, plant, and equipment base. OBV further notes

that the level of investment is significant whether one measures the

investment using historical or inflation-adjusted costs.

Third, regarding production levels, OBV argues that they were

limited by technical factors and that the company's overall output used

in the petitioners' analysis is not the appropriate benchmark for

determining limitations. OBV claims that the critical factor in

measuring commercial quantities and determining the length of the

startup period is the number of units processed, i.e., ``production

throughput'' of the strip caster. On this measure, the record

demonstrates that the startup period continued at least through

September 1998. In addition, OBV argues that the company's decision to

operate its new and old caster at the same time was based on sound

business reasons that does not result in an overstatement of the

company's startup adjustment.

Fourth, OBV asserts that the strip caster had lower production

volumes in the beginning of commercial production because specific

categories of technical difficulties caused production delays and

interruptions. Moreover, the respondent states that it provided all the

necessary information to allow the Department to evaluate these

specific categories of technical difficulties. OBV further claims that

the type of difficulties relied upon to support its claim are distinct

from the company's ordinary repairs. According to OBV, production

personnel tracked and recorded these difficulties as they occurred in

an effort to resolve the problems quickly and to continually develop

procedures to avoid similar difficulties in the future.

Finally, OBV believes that the Department should adjust OBV's

production costs related to the new caster as ``startup'' and not as a

``non-recurring'' cost adjustment. If the Department were to treat the

adjustment as a non-recurring cost, OBV believes that the startup

adjustment should not be limited to non-recurring variable costs.

According to OBV, the Statement of Administrative Action (SAA) section

describing non-recurring costs does not state that only variable cost

should be adjusted.

DOC Position: We agree with OBV and have determined that the

company's new continuous strip casting mill is eligible for a startup

adjustment in accordance with section 773(f)(1)(C)(ii) of the Act. As

for the appropriate startup period, however, we have determined that

the period ended in May 1998, rather than September 1998, as claimed by

OBV. Specifically, section 773(f)(1)(C)(ii) of the Act states that the

Department will make an adjustment for startup costs where the

following two conditions are met: (1) A producer is using new

production facilities or producing a new product that requires

substantial additional investment, and (2) the production levels are

limited by technical factors associated with the initial phase of

commercial production. We have examined OBV's claim and determined that

the criteria for granting a startup adjustment have been satisfied in

this case.

[[Page 745]]

During the POR, OBV completed construction and began operating its

strip caster, which consists of a caster and a heavy gauge rolling

line. The caster melts copper and zinc into brass, and the heavy gauge

rolling line rolls the resulting molten brass into master coils. This

new casting line, which is based on new technology, allows the company

to continuously cast and roll master coils (a semi-finished product).

In contrast, the old ring caster required several more production steps

because OBV first had to cast large brass rings (i.e., ingots). The

company would then heat and roll these ingots into master coils. After

fabricating the master coil, OBV then re-rolls and slits the semi-

finished coil to make a finished product. To complete the new strip

casting line, OBV also constructed a new building to house the new

equipment. During part of the POR, OBV ran the old and new casting

lines simultaneously. OBV eventually shut down the ring caster, but

after the POR. For the instant proceeding, OBV claimed a startup

adjustment to costs pursuant to section 773(f)(1)(C)(ii) of the Act for

its new continuous strip casting line because it experienced abnormally

high costs for output produced on the strip caster. OBV's proposed

startup adjustment covered a nine-month startup period from January

1998 through September 1998.

In this case, under section 773(f)(1)(C)(ii) of the Act, we have

determined that OBV has satisfied the first condition of the test in

that it is using a new production facility. Specifically, OBV replaced

its old ring caster and began using its new strip casting facility

which was a wholesale replacement of the company's essential casting

production facility. The Department has recognized that a company may

satisfy the requirement for using new production facilities without

completing a top-to-bottom reconstruction. See, e.g., Notice of Final

Determination of Sales at Less Than Fair Value: Foam Extruded PVC and

Polystyrene Framing Stock From the United Kingdom, 61 FR 51412, 51419

(October 2, 1996). Moreover, our determination that the strip casting

facility in this instance is a new production facility is consistent

with past Department determinations. See Preliminary Results of

Antidumping Duty Administrative Reviews and Intent To Revoke in-Part:

Certain Corrosion-Resistant Carbon Steel Flat Products and Certain Cut-

to-Length Carbon Steel Plate From Canada, 63 FR 37320, 37325 (July 10,

1998).1 In that case, the Department determined that the

construction of the respondent's new Electric Arc Furnace (EAF)

facility, which is similar to the caster in this case, constituted a

new production facility under section 773(f)(1)(C)(ii) of the Act.

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\1\ This preliminary determination was upheld in the final

results. See Final Results of Antidumping Duty Administrative

Reviews and Determination To Revoke in Part Certain Corrosion-

Resistant Carbon Steel Flat Products and Certain Cut-to-Length

Carbon Steel Plate From Canada, 64 FR 2173, 2176 (January 13, 1999)

(Certain Corrosion-Resistant Carbon Steel Flat Products from

Canada). The Department denied the startup adjustment on other

grounds.

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As noted by the petitioners, the Department has disallowed some

startup adjustments in the past because we found that they resulted

from either making mere improvements to an existing facility or did not

entail the replacement (or rebuilding) of nearly all of the

respondent's production machinery in its claimed new facilities (see,

e.g., Flat Products from Korea, 64 FR at 12950; Pressure Pipe from

Germany, 63 FR at 13220). We find, however, that OBV's startup

situation differs from the determinations cited by the petitioners

because OBV documented that its new casting and rolling facility was

more than a ``mere'' or ``on-going'' improvement to the company's

manufacturing facility. The information on the record shows that the

new continuous strip casting mill was the result of a significant

undertaking and substantial investment. For an example of the

significant undertaking involved, OBV showed that its new continuous

strip casting mill constituted a wholesale replacement of the old ring

casting mill. Although not determinative, we further note that this

wholesale replacement required OBV to structurally modify its

production facility by constructing a new building and installing new

casting and heavy rolling equipment. See OBV's February 2, 1999 Startup

Memorandum, at Exhibit 4 (containing before and after plant diagrams

that identify the physical magnitude of the new facility). As for

substantial investment, record evidence of the fixed asset expenditures

in this case demonstrates that to construct the new strip casting

facility, OBV committed a significant amount of investment capital as

part of the renovation project. For example, OBV showed that it

purchased new equipment and that the final cost of the strip casting

facility makes up a sizable percentage of the company's total fixed

assets value.2 See OBV's February 2, 1999 Startup

Memorandum, at Exhibit 6A (containing a schedule identifying the

original cost basis of all of the fixed assets owned by OBV as reported

on the audited financial statements); Exhibit 20 of the Supplemental D

Questionnaire Response (containing a schedule identifying the level of

investment on a constant dollar basis); and CVEs 25 and 27 (containing

sample source documents that support the purchase of new equipment

casting and rolling equipment).

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\2\ To perform this analysis, we excluded the ring caster

investment from the total fixed asset amount reported on the

financial statement. See the proprietary Memorandum from Stan Bowen

to the File, ``Analysis of Investment,'' dated December 21, 1999.

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As for meeting the second condition of limited production due to

technical factors under section 773(f)(1)(C)(ii) of the Act, we found

that OBV's production levels were indeed limited by technical factors

associated with bringing the new facility online. See the proprietary

Memorandum from Stan Bowen to the File, ``Analysis of Technical Factors

Related to Startup Adjustment,'' dated December 21, 1999. OBV

identified the number of occurrences of production starts and provided

detailed descriptions on the technical restraints and problems that

limited the strip caster's production volumes. We cannot identify these

technical factors here due to their proprietary nature, see OBV's

February 2, 1999 Startup Memorandum, at 14-21 (containing detailed

descriptions and identifies the number of occurrences). At

verification, we reviewed these items with production personnel and

found no reason to consider them ordinary repairs and maintenance (see

Cost Verification Report, at 33). Based upon the information on the

record, we disagree with the petitioners that production levels were

not limited by technical factors; nor do we agree that OBV failed to

provide complete information concerning the types and frequency of

technical difficulties. Specifically, we found that the information on

the record does not lead to the conclusion that OBV's low production

volumes resulted from factors unrelated to startup (e.g., seasonal

demand, business cycle, etc). In fact, to meet its customers' demands

during the startup period, OBV continued to operate its old ring caster

while working out the technical problems which limited production at

the new strip caster facility. OBV actually maintained production

levels in total that were consistent with its past experience. During

this period, OBV incurred the extra cost of operating two casters

simultaneously. However, in

[[Page 746]]

evaluating OBV's startup adjustment, we focused upon when the new

caster achieved commercial production quantities and the operational

cost of this facility.

To determine when the new caster achieved commercial production

levels, we reviewed the number of units processed (i.e., starts) at the

facility from January 1998 through October 1998. The SAA directs the

Department to examine the units processed in determining the claimed

startup period. See SAA at 836. In SRAMs from Taiwan, we stated ``our

determination of the startup period was based, in large part, on a

review of the wafer starts at the new facility during the POI, which

represents the best measure of the facility's ability to produce at

commercial production levels.'' 63 FR at 8930. Consistent with the SAA

and the Department's practice, we continue to apply production starts

as the best measure of a facility's capability to produce at commercial

production levels. From this analysis, we find that the OBV had worked

out the majority of technical problems that had initially restricted

its production by May 1998 (see business proprietary information

contained in Exhibit 19 of the section D supplemental questionnaire

response and Cost Verification Exhibit 1). Thus, we identified May 1998

as the month in which OBV significantly increased the number of caster

starts. The decision to significantly increase the number of caster

starts is indicative of OBV's resolution of technical problems that had

initially restricted production.

As for the petitioners' concern that OBV's reported costs were not

consistent with common industry averages due to the startup adjustment,

we disagree. After review of the record, we found that the startup cost

adjustment does not affect the costs incurred by the company at the

finished rolling and slitting stages which determine cost differences

for width and thickness. In fact, OBV separated its casting costs from

the costs that it incurred for finished rolling, slitting, and other

brass fabrication processes. Then, OBV isolated only the fabrication

costs associated with the new strip caster during the startup period

and applied the startup adjustment to only the CONNUMs processed on the

new caster. As for the costs OBV used to compute its startup

adjustment, we found that the company appropriately used the type of

unit production costs referenced in section 773(f)(1)(C)(iii) of the

Act (e.g., depreciation of equipment and plant, labor costs, insurance,

rent, lease expenses, material costs, and overhead). Likewise, we found

that OBV correctly excluded non-allowable costs (e.g., sales expenses,

other non-production costs, and up-front research and development

costs) that the Act states are ineligible for a startup adjustment.

Since we have accepted OBV's startup adjustment, we find the

arguments on accounting for the startup adjustment as a section

773(f)(1)(B) non-recurring cost adjustment to be moot.

Comment 2: Using Monthly or Quarterly Raw Material Costs Instead of an

Annual Weighted-Average

The petitioners argue that the Department should deny OBV's request

that raw material costs (i.e., metal costs) be calculated on a

quarterly or monthly basis. According to the petitioners, the

Department's standard practice is to calculate POR weighted-average

costs and OBV has provided no basis for deviating from this practice in

this review. For the Department to deviate, OBV would have to show that

the price declines it incurred were unusually significant and

consistent. The petitioners claim that the facts in this proceeding,

however, do not identify such a decline. Instead, the petitioners

characterize the changes in price as mere short-term fluctuations that

typically occur in the normal course of business. Since the Department

can characterize the price fluctuations as typical, the petitioners

conclude that the calculation of an annual weighted-average cost

adequately mitigates the effect of price changes because it is a

weighted-average of high and low prices.

The petitioners provide additional reasons as to why monthly or

quarterly costs should not be used. The petitioners claim that OBV has

not demonstrated that calculating costs on a quarterly basis would more

accurately portray OBV's total costs recorded during the POR. In fact,

the petitioners contend, given that OBV fixes the metal price at a much

earlier time than it actually records its metal cost, the use of

quarterly costs would distort the results of the Department's sales-

below-cost test. Specifically, the petitioners claim that a quarterly

cost methodology generates fictitious profits on some metal

transactions that would distort the Department's sales below cost

analysis. The petitioners further explain that OBV can realize these

fictitious profits on certain sales because the higher metal values

reflected on the sales invoice (fixed at a time prior to the date of

sale) will often be matched with a non-contemporaneous lower quarterly

weighted-average metal acquisition cost. Thus, the petitioners claim

OBV would realize a profit where none should exist because metal costs

are passed through to the customers. In addition, the petitioners argue

that the record does not support a truly contemporaneous comparison on

a quarterly basis because a number of OBV's home market sales have

metal fix dates outside the POR. In order to make proper comparisons,

the petitioners claim that the Department would need quarterly costs

that occurred before and after the POR. However, the petitioners note

that OBV has failed to provide this information. Likewise, the

petitioners claim that the use of monthly weighted-average costs will

result in similar comparisons of non-contemporaneous metal costs and

metal prices. Since OBV only provided monthly costs for the POR, rather

than monthly costs outside the POR, the information necessary to make

contemporaneous comparisons was not provided.

Furthermore, the petitioners argue that the declining metal costs

were not the only cause for declining sales prices in OBV's home

market. According to the petitioners, fabrication costs also declined.

Thus, the petitioners believe that associating the decline in home

market sales prices with metal fluctuations is inappropriate. The

petitioners additionally argue that OBV failed to provide monthly or

quarterly fabrication costs for comparison purposes. For these reasons,

the petitioners argue that the Department should deny OBV's request to

use monthly or quarterly costs for metal charges.

OBV counters that a POR weighted-average metal cost will not

counter the sharp decline in metal prices the company realized and that

the Department should instead use either monthly or quarterly metal

value costs. According to OBV, the Department has commonly used monthly

or quarterly costs in instances where there have been significant and

consistent price declines throughout a period of investigation or

review. In fact, OBV states, the Department has used this methodology

in several previous brass sheet proceedings due to the distortive

effects that metal price fluctuations would have had on the margin

calculations. For example, OBV states that in the original

investigation the Department made an adjustment for metal value by

dividing the period of investigation (POI) into three separate periods.

According to OBV, the Department selected three periods because, within

each period, metal prices were relatively stable (see Final

Determination of Sales at Less than Fair Value: Brass Sheet and Strip

From Netherlands, 53 FR 23431, 23432

[[Page 747]]

(June 22, 1988) (``Brass Sheet and Strip from the Netherlands'')). In

an Italian brass sheet proceeding, OBV claims that the Department used

monthly costs to resolve the distortive effects the fluctuating metal

prices had on the margin calculations (see Final Results of Antidumping

Administrative Review: Brass Sheet and Strip from Italy, 52 FR 9235,

9236 (March 17, 1992) (``Brass Sheet and Strip from Italy'')).

As for a preference toward using quarterly or monthly weighted-

average costs, OBV suggests that the Department use monthly metal costs

in this proceeding because they provide the most accurate reflection of

metal costs for the POR. According to OBV, customers purchase metals at

a market price on a specific date (i.e., metal fix date) prior to

fabrication and, therefore, the metal price is a direct pass-through to

the customer. OBV further notes that it maintains the information that

identifies each transaction-specific metal cost in its accounting

records and even submitted this information to Department. Thus, OBV

believes that the Department has the necessary data to accurately

measure the metal costs of any single sales transaction based on the

metal fix date. Moreover, and contrary to the petitioners' claims, OBV

states that this information (i.e., metal fix date and monthly metal

weighted-average costs since 1996) is on the record for all U.S. and

home market sales made during the POR.

If the Department does not wish to use monthly weighted-average

costs, then OBV suggests that quarterly weighted-average costs would

provide a reasonable basis for determining sales below cost. At a

minimum, OBV believes that this method is more appropriate than annual

costs. OBV also states that the Department should not be influenced by

the petitioners' position on the perceived time lag between metal fix

and invoice dates. OBV explains that its affiliated supplier ships

metals on a first-in, first-out basis. As a result of this practice,

the metal ordered in one month is not delivered to OBV until sometime

in the following months. According to OBV, it records the cost of metal

in its inventory ledgers when the metal is received. Thus, OBV claims

that any lag between the metal fix date and the invoice date is

mitigated by lag time between the metal fix date and the date on which

OBV recorded the cost of that metal in its books and records (i.e., the

date used by OBV to compute direct materials costs on a quarterly

basis). In any event, if the petitioners are truly concerned about

contemporaneity, OBV claims that they should support its position that

the Department use monthly average costs in this review.

In addition and contrary to the petitioners' position, OBV states

that the decline of metal prices during the POR was significant and

consistent. According to OBV, the cost of metal can fluctuate widely

depending on market conditions. In this case, OBV contends that prices

decreased dramatically for the first five months of, and declined

consistently throughout, the POR. To demonstrate this decline, OBV

states that the variation between the average review period metal

prices and the metal prices at the beginning and end of the review

period are dramatic. Furthermore, OBV notes that these declines were

not mere short-term fluctuations because the metal prices never

recovered.

OBV also disagrees with the petitioners' contention that its

fabrication costs declined significantly and consistently throughout

the POR and should be accounted for in the same manner as metal costs.

According to OBV, analysis of its fabrication costs shows that these

amounts remained stable throughout the POR. Therefore, OBV argues that

reporting quarterly or monthly fabrication costs are not necessary.

DOC Position: We agree with OBV that monthly weighted-average metal

costs should be used in the instant review for the calculation of COP

and CV. In the ordinary course of business, OBV accounts for metal as a

pass-through item. Specifically, OBV requires customers to purchase the

metals before it will fabricate the product. As a service to its

customers, OBV purchases the metals on the customer's behalf and then

bills the customer for the cost of metals, the terms of which are set

forth on the finished brass sales invoice. The parties determine the

price of the metals at a metal fix date, which occurs prior to the

invoice dates of finished brass. Since OBV purchases the metal and then

passes on the cost of the metal to the customer, the company must

record and recognize the cost of this purchased metal in its accounting

system.

The metal cost included in OBV's audited financial statements

reflects the cost at the metal fix date of metal consumed to produce

the sold items. Rather than reporting the cost of the metals consumed,

OBV used the average quarterly metal cost at the metal fix date for

metals received. As a result, for any given month, the average metal

cost of metal physically received reflects a mix of metal prices from

differing time periods depending on how far in advance of receipt the

metals were purchased (in certain instances, this range varies from

less than one month to up to six months). We calculated an adjustment

factor to account for the differences between the reported purchase

cost and the consumption cost.

As for the costs of metals (i.e., copper and zinc) in this review,

we have found and verified that OBV's reported metal costs make up a

significant portion of the total cost of manufacturing brass sheet and

strip. See CVE 12 (identifying the portion metal costs make up of the

total cost of manufacturing). Moreover, after reviewing the information

on the record, we found that the market values of these inputs sharply

and consistently decreased from the beginning to the end of the POR.

Specifically, we reviewed monthly London Metal Exchange (LME)

3 prices, which we verified as being the basis for OBV's

metal cost. We found that the drop in metal prices did not affect OBV's

brass fabrication business as a result of the pass through of the cost

of metals to its customers. However, the drop in price does affect the

margin calculations because the Department normally calculates direct

material costs as a POR weighted-average. As a result of using the

normal POR average cost methodology, the decline in metal prices would

tend to create below-cost sales when the LME metal purchase price falls

below the weighted-average LME POR price. See, e.g., OBV's August 11,

1999 Letter (identifying OBV's sales that are above and below costs).

Hence, in this review, the method of calculating metal costs does have

an impact on the comparisons used in the margin calculations. For

example, and as noted by the petitioner, the normal cost methodology

could create fictitious profits (or losses) on home market sales.

---------------------------------------------------------------------------

\3\ The London Metal Exchange is an international commodity,

futures and options exchange that specializes in non-ferrous metals.

---------------------------------------------------------------------------

Our normal practice for a respondent in a country that is not

experiencing high inflation is to calculate a single weighted-average

cost for the entire POR except in unusual cases where this preferred

method would not yield an appropriate comparison. See, e.g., Brass

Sheet and Strip from the Netherlands (dividing POI into three periods

because of the effect metal price fluctuations had on the margin

calculations and finding that metal portion of price was a pass

through); Brass Sheet and Strip Italy (using monthly costs to resolve

the distortive effects the fluctuating metal prices had on the margin

calculations); Final Determination of Sales at Less Than Fair Value:

Stainless Steel Sheet and Strip in Coils from the Republic of

[[Page 748]]

Korea, 64 FR 30664, 30676 (June 8, 1999) (concluding that weighted-

average costs for two periods were permissible where major declines in

currency valuations distorted the margin calculations); Final

Determination of Sales at Less than Fair Value: Static Random Access

Memory Semiconductors from Taiwan, 63 FR 8909, 8925 (February 23, 1998)

(the Department will utilize shorter cost periods if markets experience

significant and consistent price declines); Final Determination of

Sales at Less than Fair Value: Dynamic Random Access Memory

Semiconductors of One Megabit and Above from the Republic of Korea, 58

FR 15467, 15476 (March 23, 1993) (determining that the Department may

use weighted-average costs of shorter periods where there exists a

consistent downward trend in both U.S. and home market prices during

the period); Final Determination of Sales at Less than Fair Value:

Erasable Programable Read Only Memories from Japan, 51 FR 39680, 39682

(October 30, 1986) (finding that significant changes in the COP during

a short period of time due to technological advancements and changes in

production process justified the use of weighted-average costs of less

than a year).

In applying these criteria to this case, we have reviewed the

information on the record and note that both OBV's sales prices for the

subject merchandise and the cost of metal used in the manufacture of

this merchandise correspondingly and consistently declined during the

POR. Specifically, our analysis of data from the LME identifies a

significant drop in metal values. In this case, we have determined that

computing a single POR weighted-average cost would distort the results

of the cost test because: (1) the cost of copper and zinc are treated

as pass-through items when brass is sold to customers; (2) these metal

costs represent a significant percentage of the total cost of producing

brass sheet and strip; and (3) the cost of the metal dropped

consistently and significantly throughout the POR. To avoid this

distortion, we have relied upon monthly weighted-average costs rather

than calculating quarterly or a single weighted-average POR cost for

metal. Moreover, the use of monthly costs for a pass-through item is

consistent with Brass Sheet and Strip from Italy, 52 FR 9235, 9236;

Brass Sheet and Strip from the Netherlands, 53 FR 23431, 23432; and

Final Results of Administrative Review: Brass Sheet and Strip from

Canada, 56 FR 57317, 57318 (November 8, 1991) (using monthly metal

costs to calculate differences in merchandise adjustments).

We find that using monthly weighted-average metal costs is the most

appropriate method in this proceeding for several reasons. First, the

record indicates that the monthly changes in selling prices and input

metal costs are significant. See the proprietary memorandum from

Geoffrey Craig to John Brinkmann, ``Analysis of Metal Costs,'' dated

December 28, 1999. In addition, we have the information on the record

to determine accurate monthly metal costs that reasonably correspond to

the amounts paid by the customer, which makes the petitioners' concerns

with quarterly costs moot. We also note that using monthly metal costs

calculated from the company's metal fix prices conforms with the

company's normal accounting records which are kept in accordance with

home market generally accepted accounting principles (GAAP). Finally,

by using weighted-average monthly price fixed metal cost, we are able

to make a contemporaneous comparison of metal values which results in a

more accurate calculation of the margin of dumping in this case than

using either the reported quarterly or POR weighted average costs.

We also agree with the respondent that calculating fabrication

costs on a monthly basis is unnecessary. After reviewing the

information on the record, we found no significant fluctuations in

OBV's fabrication costs that would require averaging periods of less

than a year.

For the final results, we recalculated OBV's COP and CV.

Specifically, we calculated monthly metal costs using metal fix date

information (see CVE 18) and calculated annual fabrication costs using

the reported costs in the section D data file.

Comment 3: Affiliated Purchases and the Major Input Rule

The petitioners state that the Department should adjust OBV's costs

for metals (i.e., copper and zinc) obtained from affiliated suppliers

to reflect the highest of market price, cost of production or transfer

price.

OBV believes that the Department should not make this adjustment.

According to OBV, the petitioners' argument reflects a lack of

understanding of the verified data on the record. OBV states that the

small differences between market price, cost of production and transfer

prices are not the result of non-arms length transactions, but simply

the result of timing differences and differences in purchase terms. To

make a proper comparison, the company argues that the timing

differences and the difference in purchase terms would have to be

accounted for. More important, OBV claims that the Department should

continue to use OBV's metal costs as reported since the differences are

slight.

DOC position: We agree with the petitioners. OBV submitted a

schedule which shows that, on average, its POR purchases of zinc and

copper from an affiliated party were made at prices lower than the cost

of production. We have adjusted the cost of metals to reflect the

affiliate's higher cost of production in accordance with section

773(f)(3) of the Act because the information provided by OBV supports

the conclusion that the purchases from the affiliated party were made

below the affiliate's cost. See CVE 28. We are unable to address OBV's

claim that timing differences and the differences in purchase terms may

account for the difference between the reported transfer price and the

affiliate's cost of production, since OBV did not submit any

information to support its contention.

Comment 4: Including Lower of Cost or Market Inventory Adjustment in

COM

The petitioners claim that the Department should include OBV's

lower of cost or market (LCM) adjustment in the calculation of COP and

CV. According to the petitioners, the SAA states that the Department

normally will calculate costs on the basis of records kept by the

producer of the merchandise, provided such records are kept in

accordance with GAAP of the producing country and reasonably reflect

the costs associated with production of the merchandise. See SAA at

834. According to the petitioners, OBV stated that its accounting

practices are in full compliance with GAAP in the Netherlands. The

petitioners, therefore, contend that the Department should revise OBV's

COP and CV data to include the lower of cost or market adjustment

reflected in OBV's accounting records and in OBV's financial

statements.

OBV counters that the Department should not revise the reported

costs to include the company's LCM adjustment reflected in the

financial statements. According to OBV, this adjustment has no impact

on the actual cost of materials used in production because it makes a

monthly adjustment to the balance sheet reserve accounts. OBV further

argues that inclusion of the adjustment is not necessary because it did

not rely on inventory movement values to calculate its reported metal

costs. Instead of

[[Page 749]]

inventory movement values, OBV states that it used actual metal

acquisition costs paid during the review period to compute metal costs.

If the Department includes the entire LCM adjustment, OBV claims that

metal costs will be distorted.

DOC Position: We agree with the petitioners in part because our

general practice is to include the LCM adjustments associated with raw

materials and work-in-process (WIP) in the respondent's COP and CV. We

do not include the loss realized on holding finished goods (see, e.g.,

Notice of Final Determination of Sales at Less Than Fair Value: Dynamic

Random Access Memory Semiconductors of One Megabit and Above (DRAMs)

From Taiwan, 64 FR 56308, 56326 (October 19, 1999)); see also Notice of

Final Determination of Sales Less Than Fair Value: Stainless Steel Wire

Rod from Italy, 63 FR 40422, 40430 (July 29, 1998)).

As for OBV's concern that including the LCM adjustment distorts COP

and CV, we disagree. In OBV's normal course of business, the company

values its copper and zinc inventory at the lower of cost or market.

Since the market price of inventoried copper and zinc (i.e., metals)

fell below the acquisition costs, OBV had to recognize a loss on metals

held in inventory in accordance with home market GAAP. Company

officials noted that they did not include this loss in the calculation

of the reported costs and identified the loss as a reconciling item.

However, as noted above, we normally include this type of cost in the

calculation of COP and CV. Consistent with section 773(f)(1)(A) of the

Act, it is the Department's practice to rely upon a company's normal

books and records where they are prepared in accordance with the home

country's GAAP and reasonably reflect the cost of producing and selling

the subject merchandise. In this case, we found, consistent with the

Netherlands' GAAP, that OBV includes, in its normal books and records,

the write-downs of its raw material inventories as an element of its

current costs per its financial statements. See Cost Verification

Exhibit 17, which contains worksheets that reconcile reported direct

material costs to the corresponding amount reported on the audited

income statement. In addition, we disagree with OBV's position that

this cost should be excluded because it used acquisition cost to

compute metal cost. We note that the LCM adjustment is a separate and

unique expense associated with maintaining an adequate base stock of

goods to service daily operating needs. For the final results, we have

included a portion of OBV's LCM adjustment relating to raw material and

WIP in the calculation of COP and CV.

Comment 5: Commercial Quantities

The petitioners contend that OBV's request for revocation should be

denied because OBV did not sell in commercial quantities during each of

the three administrative reviews that formed the basis of OBV's

revocation request. According to the petitioners, the Department is

justified, under Sec. 351.222 of the Department's regulations, in

requiring OBV to have sold subject merchandise in the United States in

commercial quantities during the three review periods that form the

basis of OBV's revocation request. However, contrary to the

Department's methodology in the preliminary results, which focused on

OBV's shipments to the United States during the period covering the

last three administrative reviews, the petitioners assert that

commercial quantities should be evaluated in light of the entire

history of the proceeding, not just a few segments. A historical

overview of OBV's shipments to the United States, the petitioners

continue, demonstrates that OBV has not been making sales to the United

States in commercial quantities at prices above NV in the three review

periods in question.

The petitioners argue that subsequent to the antidumping duty order

and prior to the acquisition of Outokumpu American Brass (American

Brass) in 1990 by OBV's parent company, Outokumpu Oyj (Outokumpu), OBV

continued to export substantial quantities of subject merchandise to

the United States at prices below NV, as evidenced by the margins

calculated in each of the administrative reviews covering that period.

Rather than eliminating the dumping, the petitioners contend, the

Outokumpu Group shifted production from OBV to American Brass, thereby

allowing the Outokumpu Group to maintain its U.S. customer base while

avoiding the imposition of antidumping duties. The petitioners contend

that OBV has been able to avoid a finding of dumping in the last three

review periods by shipping a minimal amount of ``niche'' or

``specialty'' product to the United States at prices intended to result

in a de minimis dumping margin.

Moreover, the petitioners allege that: (1) OBV's current shipments

to the United States of the subject brass products are minuscule

compared to shipment levels both prior and immediately subsequent to

the imposition of the antidumping duty order; (2) OBV's current

shipments do not correspond to the current size of the U.S. market for

radiator strip; (3) OBV's current shipments of subject merchandise to

the United States are significantly lower than its level of exports of

non-subject brass products that have minimal physical differences from

subject merchandise; (4) OBV's current shipments of subject merchandise

to the United States are significantly lower than its current home

market shipments and its shipments of total shipments (i.e., both

subject and non-subject merchandise) to other industrial countries; and

(5) OBV's current shipments are not reflective of its projected

shipment levels to the United States, which OBV has acknowledged will

be at a level similar to the pre-order level and shipments during the

first three annual reviews, where the company was found to be dumping.

Based on the foregoing, the petitioners conclude that the Department

should find that OBV has not made sales to the United States in

commercial quantities and, accordingly, should deny OBV's request for

revocation.

OBV counters that its sales to the United States during the three

consecutive review periods that form the basis of its revocation

request have been in commercial quantities and at prices above NV.

According to OBV, the Department properly selected 1990, rather than

the pre-order period, as the benchmark for the commercial quantities

test because the commercial quantities test must be applied in light of

Outokumpu's acquisition of American Brass. OBV disputes the contention

that the company discontinued shipments to the United States because it

was unable to sell in the United States at prices above NV; instead,

OBV attributes its cessation of U.S. shipments in 1990 exclusively to

the purchase of American Brass, which OBV characterizes as a

``significant'' and ``unusual intervening event.'' Furthermore, OBV

states that its parent company forbids OBV from shipping subject

merchandise to the United States in order to prevent its products from

competing with those of American Brass. OBV resumed shipments in order

to service a niche market for certain U.S. customers of subject brass

products that could not be produced efficiently by American Brass or

where the customers specifically requested that the brass be produced

by OBV.

OBV further contends that the petitioners' proposed assortment of

alternative benchmarks are of no probative value in determining

commercial quantities, arguing that: (1)

[[Page 750]]

In light of American Brass' role in the U.S. market, a pre-order or

post-order comparison is not a reliable indicator of OBV's ability to

sell in the United States without dumping; (2) OBV did not need to

continue exporting subject merchandise in substantial volumes to

preserve its position in the U.S. market due to the fact that American

Brass produced the same merchandise for sale in the United States; (3)

shipment levels of non-subject merchandise do not provide a

demonstrable basis for determining what constitutes commercial

quantities of subject merchandise; (4) a comparison of OBV's U.S.

shipments to its shipments to other industrial countries' markets is

not of probative value because OBV's ability to sell in the U.S.

market, unlike its ability to sell in other industrial countries'

markets, is limited due to the presence of an affiliated company,

American Brass; and (5) the notion of comparing current shipment levels

to future shipment levels is flawed because the Department would be

required to defer revocation in order to conduct subsequent reviews.

Finally, OBV argues that a comparison of OBV's U.S. sales to third

country sales demonstrates that OBV's U.S. sales are not aberrational,

but instead reflect OBV's normal commercial activity. See, e.g., Pure

Magnesium from Canada, 64 FR 12977, 12979 (March 16, 1999) (recognizing

that comparisons of a respondent's U.S. sales to sales made in other

markets by that respondent is a reliable indicator of whether the U.S.

sales are in commercial quantities).

DOC Position: We agree with the petitioners that OBV's U.S. sales

during the three administrative reviews under consideration for

revocation purposes have not been made in commercial quantities. As we

explained in the Preliminary Results, ``the Department must be able to

determine that past margins are reflective of a company's normal

commercial activity.'' 64 FR 48760. Although OBV has demonstrated three

consecutive years of sales at not less than NV, we find that the

limited volume of exports to the United States of brass sheet and strip

from the Netherlands do not reflect OBV's normal commercial behavior.

Based on the facts on the record of this case, therefore, we find that

OBV's sales to the United States have not been made in commercial

quantities during any of the relevant administrative reviews considered

for revocation in this proceeding.

We have developed a procedure for revocation that is described in

19 CFR 351.222. This regulation requires that a company requesting

revocation must submit a certification that the company sold the

subject merchandise in commercial quantities in each of the three years

forming the basis of the request. Therefore, we must determine, as a

threshold matter, in accordance with our regulations, whether the

company requesting revocation sold the subject merchandise in

commercial quantities in each of the three years forming the basis of

the request. In examining commercial quantities for purposes of

revocation, the Department must be able to determine that past margins

are reflective of the company's normal commercial activity. See Certain

Corrosion-Resistant Carbon Steel Flat Products from Canada, 64 FR 2175.

Sales during a POR which, in the aggregate, are of an abnormally small

quantity, either in absolute terms or in comparison to an appropriate

benchmark period, do not generally provide a reasonable basis for

determining that the discipline of the order is no longer necessary to

offset dumping. Id.; see also Pure Magnesium From Canada, 64 FR 12977

(March 16, 1999). However, the determination as to whether or not sales

volumes are made in commercial quantities is made on a case-by-case

basis, based on the unique facts of each proceeding. Neither the

statute nor the Department's regulations prescribes a specific standard

for determining whether sales have been made in commercial quantities.

See section 751(d) of the Act; 19 CFR 351.222.

When determining whether a company's sales have been made in

commercial quantities we must look at each case on an individual basis.

In many instances, we will use the original period of investigation

(i.e., pre-order shipment levels) as a benchmark for a company's normal

commercial behavior. The period of investigation generally provides a

valid benchmark for assessing whether sales have been made in

commercial quantities. As we stated in the Preliminary Results,

however, where a company has experienced a substantial and unusual

change in business practice since the imposition of the order that may

explain a substantial sales drop-off in U.S. sales, a more recent POR

that is reflective of the company's normal commercial experience may

provide a more appropriate benchmark. See Pure Magnesium from Canada,

64 FR at 50489; Professional Electric Cutting Tools from Japan:

Preliminary Results of Antidumping Administrative Review and Intent to

Revoke in Part, 64 FR 43346, 43351 (August 10, 1999).

In this case, the quantity and number of OBV's U.S. sales of

subject merchandise have decreased since the imposition of the

antidumping duty order, as evidenced by the volume of sales in the

three reviews forming the basis of OBV's revocation request. In the

Preliminary Results, however, we found that OBV's aggregate sales to

the United States were made in commercial quantities during the

relevant proceedings examined for purposes of the revocation

determination. We based this finding on the fact that Outokumpu's

acquisition of American Brass and the subsequent transfer of in-scope

radiator strip production to the United States represented the type of

``unusual occurrence'' contemplated by the Department in promulgating

its regulations as an acceptable explanation of why exports of subject

merchandise have declined. See Proposed Regulations, 61 FR 7307, 7320

(Feb. 27, 1996). Specifically, we explained that:

Prior to this acquisition, in 1989 and 1990, OBV continued to

ship in similar quantities to the pre-order period and the

subsequent cessation of shipments until 1995 was an immediate result

of the 1991 acquisition. Based upon these circumstances, it is

reasonable to conclude that the company's commercial practices were

permanently changed in 1991, and that 1991, rather than the pre-

order period, should be the benchmark for measuring whether the

company's sales during the three years without dumping were made in

commercial quantities.

64 FR 48760. Thus, we preliminarily determined that the zero margins

calculated for OBV in each of the last three administrative reviews

were reflective of the company's normal commercial experience.

Accordingly, we preliminarily determined that OBV met the requirements

for revocation of the order on brass sheet and strip from the

Netherlands with respect to three consecutive years of sales in

commercial quantities at not less than NV.

Upon review of the comments of the parties, all of the evidence on

the record, and the Department's past practice, we have determined that

OBV's sales were not made in commercial quantities during the three

years upon which OBV is relying to support its request for revocation.

We agree that OBV's commercial practices changed subsequent to the 1990

purchase 4 of American Brass by OBV's ultimate parent

company, Outokumpu.

[[Page 751]]

Contrary to our preliminary assessment of the effects of Outokumpu's

purchase of American Brass on OBV, however, we now find that it is not

reasonable to conclude that OBV's commercial practices were

``permanently'' changed or that OBV's current selling practice is

reflective of the company's normal commercial experience.

---------------------------------------------------------------------------

\4\ As discussed in a memorandum to the file dated December 20,

1999, we cited June 1991 in the Preliminary Results as the month and

year of Outokumpu's acquisition of American Brass based on

statements made on the record by OBV. However, after a thorough

review of the responses and exhibits submitted by OBV, we confirmed

with OBV that American Brass was acquired by Outokumpu in June 1990,

rather than June 1991.

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First, following Outokumpu's 1990 purchase of American Brass, OBV

did not maintain consistent export volumes of its ``niche'' products,

but instead ceased selling to the United States altogether for over

three years while American Brass provided subject merchandise entirely

to Outokumpu's U.S. customer base. OBV reentered the U.S. market in

1995 when it began selling what it termed ``niche products.'' Our

preliminary finding regarding commercial quantities was based, in part,

on the presumption that ``OBV resumed shipments of in-scope radiator

strip in 1995 to service a niche market for certain United States

customers who prefer brass strip with more exacting tolerances, which

for a variety of reasons cannot be produced efficiently by American

Brass.'' See Preliminary Results, 64 FR at 48765. However, as stated by

OBV at the public hearing, during the three year period in which OBV

was shipping radiator strip to the United States, American Brass was

also producing and selling the same products to the same customers. See

Public Transcript of the Hearing on Brass Sheet and Strip from the

Netherlands, dated November 2, 1999, at 183-85 (Hearing Transcript).

Furthermore, in a prior submission OBV made the following statement

with respect to the company's resumption of shipments to the United

States:

In addition to the superior position of OBV, vis-a-vis American

Brass, in terms of the production of quality radiator strip, OBV has

resumed exporting subject radiator strip in order to accommodate the

ability of American Brass to focus upon the production of brass

strip for electrical connectors (i.e., ``electrostrip'' or

``connector strip''). As explained by [American Brass' president]

Mr. Bartel, the production of radiator strip is interfering with the

ability of American Brass to focus on production ``for the fastest

growing segment of the brass strip market, i.e., brass strip used to

manufacture electrical connectors.''

See OBV's Memorandum in Support of Revocation, dated April 1, 1999, at

22-23. These statements further indicate that when OBV resumed shipping

to the United States in 1995, its participation in the U.S. market was

not limited to servicing unique customers with needs specially suited

to OBV's abilities. Rather, for whatever considerations, it was

determined by Outokumpu that the U.S. customers who were purchasing

certain subject brass products from American Brass would be supplied by

OBV. Thus, we cannot reasonably conclude that OBV's participation in

the U.S. market during the three year period under consideration has

been meaningful.

Second, this case is distinguished from Professional Electric

Cutting Tools from Japan, where respondent Makita made a substantial

investment in a U.S. manufacturing facility, and subsequently shifted

production of subject merchandise to that facility while maintaining

consistent export volumes of its low-sales-volume ``specialty'' cutting

tools. In that case, we found that the significant change in business

practice provided a logical commercial explanation for Makita's

relative drop in subject merchandise sales. Further, we noted that the

U.S. production facility now manufactures comparable volumes of non-

specialty merchandise that was previously being manufactured by Makita

in Japan. Thus, regardless of any decrease in shipments during the

course of that proceeding, we determined that Makita was selling in

commercial quantities. Contrary to Makita, where less dependence was

being placed on the home market manufacturing facilities, Outokumpu has

recently made a substantial investment in OBV's manufacturing facility.

It is Outokumpu's stated intention to shift production of brass

radiator strip products from American Brass to OBV's manufacturing

facilities in order to supply the U.S. market with subject merchandise

from the Netherlands. See Hearing Transcript, at 167-70. As confirmed

at the sales verification:

OBV officials stated that due to recent investment in both

American Brass and OBV, OBV will begin to take over production of

the approximate 7200 metric tons 5 of subject radiator

strip currently produced and sold in the U.S. by American Brass.

Since OBV is currently producing to capacity, this additional demand

would be met by adjusting their current product mix and cutting back

on shipment to other export markets.

---------------------------------------------------------------------------

\5\ This is a range figure provided by the respondents.

Sales Verification Report at 39.

In determining whether a company's exports to the United States

constitutes ``normal'' commercial behavior for that company, where

appropriate, we will weigh other factors. In this case, Outokumpu made

a significant business decision to supply its U.S. customer base with

subject merchandise produced at American Brass' U.S. facilities rather

than from OBV's facilities in the Netherlands. However, the record

indicates that the current Outokumpu business plan is not intended to

be long-term or permanent in light of OBV's acknowledgment that its

projected shipment levels to the United States, should the order be

revoked, will be substantially greater than its current imports and at

a level similar to when the order was imposed and the first three

annual reviews were conducted. See Hearing Transcript, at 65-66. Given

the temporary nature of American Brass' role in the Outokumpu business

plan of servicing subject radiator strip customers in the U.S. market

and the decision to transfer radiator strip production for purposes of

servicing the U.S. market back to the Netherlands at pre-order levels,

we find that OBV's pre-order import level is the appropriate benchmark.

Finally, based on the current record and similar to our findings in

Pure Magnesium from Canada, we find that OBV's sales volume during the

three consecutive review periods that form the basis of the revocation

request are so small when compared to the pre-order benchmark that we

are not able to conclude that the reviews are reflective of what the

company's normal commercial experience would be without the discipline

of an antidumping duty order. See Pure Magnesium from Canada, 64 FR

12977, 12982. As discussed in the business proprietary memorandum from

Jarrod Goldfeder to John Brinkmann, ``Shipments of Brass Sheet and

Strip to the United States by Outokumpu Copper Strip B.V.,'' dated

December 28, 1999 (Commercial Quantities Memorandum), OBV sold only a

few tons of subject merchandise in the United States during the last

three review periods, respectively, whereas during the period covered

by the antidumping investigation, OBV made substantially greater sales.

For example, in their brief the petitioners, citing U.S. Census Bureau

data (which OBV did not contravene), state that OBV exported

approximately 7000 tons of subject merchandise in 1987, the year in

which the POI fell. See Petitioners' Case Brief, at Exhibit 8. In

calendar years 1997 and 1998, during which the current POR falls, OBV

exported to the United States approximately 110 tons of subject

merchandise (23 tons and 86 tons in 1997 and 1998, respectively). See

Commercial Quantities Memorandum, at Exhibit 1.

Thus, for the most recent review period under consideration for

revocation, the total volume of

[[Page 752]]

merchandise sold in calendar years 1997 and 1998 was approximately 1.6

percent of the volume of merchandise sold in 1987, i.e., in the period

preceding the imposition of the order. OBV's sales volume figures are

so small, both in absolute terms and in comparison with the period of

investigation, that we cannot reasonably conclude that the zero margins

OBV received are reflective of the company's normal commercial

experience. We further note that OBV's projected sales level to the

United States of 7200 tons, which is similar to the amount sold prior

to issuance of the order, is over 65 times greater than the amount sold

during the period covered by the current administrative review.

Consequently, this abnormally low level of sales activity during each

of the three review periods forming the basis of the revocation request

does not provide a reasonable basis for determining that the discipline

of the antidumping duty order is no longer necessary to offset dumping.

Based on the record evidence with respect to OBV's current sales

practices, we find that the de minimis margins calculated for OBV were

not based on sales volumes that are reflective of the company's normal

commercial experience.

Moreover, even if we continued to rely upon the 1990 benchmark,

rather than the pre-order period, for measuring whether the company's

sales during the three years without dumping were made in commercial

quantities, we would still conclude that OBV's total sales volume for

each review is ``abnormally small.'' In 1990, the last year in which

OBV made sales to the United States prior to the transfer of production

to American Brass, OBV sold approximately 4750 tons of subject

merchandise in the United States. See Petitioners' Case Brief, at

Exhibit 8. For each review period under consideration for revocation,

the volume of merchandise sold was still only a little more than two

percent of the volume of merchandise sold in 1990. Thus, by any

measure, OBV's sales did not meet the minimal requirement of sales in

commercial quantities that is necessary for the Department to rely on

the three administrative reviews of de minimis margins as a reflective

of normal business activity.

Finally, we disagree with OBV's argument that a comparison of OBV's

U.S. sales to third country sales demonstrates that OBV's U.S. sales

are not aberrational, but instead reflect OBV's normal commercial

activity. In Pure Magnesium from Canada, the Department concluded that

the respondent's number and volume sales were not made in commercial

quantities due, in part, upon an examination of the respondent's sales

of pure magnesium to other markets for the three years in question,

which showed that the respondent had maintained significant sales

volumes of subject merchandise in other markets that were ``markedly

smaller and more distant than the U.S. market.'' 64 FR at 12980.

However, the evidence placed on the record in this proceeding by OBV

details the total volume of shipments to third countries, inclusive of

both subject and non-subject brass merchandise. As such, we are unable

to make an accurate comparison of OBV's shipments of subject brass

products to the United States with its shipments of subject brass

products to third country markets.

Comment 6: Likelihood of Future Dumping

In addition to their arguments regarding the commercial quantities

threshold requirement, both OBV and the petitioners submitted comments

on the likelihood of future dumping.

DOC Position: Because we have determined that OBV is not eligible

for revocation, based on the fact that it did not make sales in

commercial quantities during the three year period being analyzed, we

do not reach the likelihood of future dumping issue.

Final Results of Review

As a result of our review, we determine that the following margins

exist for the period August 1, 1997 through July 31, 1998:

------------------------------------------------------------------------

Manufacturer/exporter Margin (percent)

------------------------------------------------------------------------

OBV....................................... zero.

------------------------------------------------------------------------

The Department shall determine, and the United States Customs

Service shall assess, antidumping duties on all appropriate entries. In

accordance with 19 CFR 351.212 (b)(1), we have calculated importer-

specific assessment rates by dividing the dumping margin found on the

subject merchandise examined by the entered value of such merchandise.

We will direct the United States Customs Service to assess antidumping

duties on appropriate entries by applying the assessment rate to the

entered value of the merchandise entered during the POR, except where

the assessment rate is zero or de minimis (see 19 CFR 351.106(c)(2)).

Cash Deposit Requirements

The following cash deposit requirements will be effective for all

shipments of the subject merchandise from the Netherlands entered, or

withdrawn from warehouse, for consumption upon publication of these

final results of administrative review, as provided by section

751(a)(2) (A) and (C) of the Act: (1) The cash deposit rate for OBV

will be zero; (2) for previously reviewed or investigated companies not

listed above, the cash deposit rate will continue to be the company-

specific rate published for the most recent period; (3) if the exporter

is not a firm covered in this review, a prior review, or the original

less-than-fair-value (LTFV) investigation, but the manufacturer is, the

cash deposit rate will be the rate established for the most recent

period for the manufacturer of the merchandise; and (4) if neither the

exporter nor the manufacturer is a firm covered in this review or in

any previous segment of this proceeding, the cash deposit rate will be

16.99 percent, the ``all others'' rate established in the LTFV

investigation. See Antidumping Duty Order of Sales at Less Than Fair

Value; Brass Sheet and Strip From the Netherlands, 53 FR 30455 (August

12, 1988).

These deposit requirements shall remain in effect until publication

of the final results of the next administrative review.

This notice serves as final reminder to importers of their

responsibility under 19 CFR 351.402 (f) to file a certificate regarding

the reimbursement of antidumping duties prior to liquidation of the

relevant entries during this review period. Failure to comply with this

requirement could result in the Secretary's presumption that

reimbursement of antidumping duties occurred, and in the subsequent

assessment of double antidumping duties.

This notice also serves as a reminder to parties subject to

administrative protective order (APO) of their responsibility

concerning the return or destruction of proprietary information

disclosed under APO in accordance with 19 CFR 351.305. Timely

notification of return/ destruction of APO materials or conversion to

judicial protective order is hereby requested. Failure to comply is a

violation of the APO.

This determination is issued and published in accordance with

sections 751(a)(1) and 777(i)(1) of the Act.

Dated: December 28, 1999.

Holly A Kuga,

Acting Assistant Secretary for Import Administration.

[FR Doc. 00-286 Filed 1-5-00; 8:45 am]

BILLING CODE 3510-DS-P