[Federal Register Volume 65, Number 4 (Thursday, January 6, 2000)]
[Notices]
[Pages 742-752]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-286]
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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.
---------------------------------------------------------------------------
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