[Federal Register Volume 69, Number 142 (Monday, July 26, 2004)]
[Notices]
[Pages 44491-44506]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-16947]



[[Page 44491]]

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

DEPARTMENT OF COMMERCE

Bureau of Industry and Security

[Docket No. 040719211-4211-01]


Determination by the Department of Commerce on the Petition 
Submitted by the Copper & Brass Fabricators Council, Inc. and the Non-
Ferrous Founders' Society, Requesting the Monitoring and Control of 
U.S. Copper Scrap and Copper-Alloy Scrap Exports in Accordance With the 
Short Supply Provisions of the Export Administration Act of 1979, as 
Amended

AGENCY: Bureau of Industry and Security, Department of Commerce.

ACTION: Notice of determination.

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

SUMMARY: On April 7, 2004, the Bureau of Industry and Security received 
a written petition requesting the imposition of export monitoring and 
export controls on copper scrap and copper-alloy scrap. The Department 
of Commerce reviewed this petition in accordance with Sections 3(2)(C) 
and 7(c) of the Export Administration Act (``EAA'') (50 U.S.C. app. 
Sections 2402(2)(c) and 2406(c)), as implemented by Section 754.7 of 
the Export Administration Regulations (``EAR'') (15 CFR 754.7), and has 
determined that neither monitoring nor controls is necessary in order 
to carry out the policy set forth in Section 3(2)(C) of the EAA.

FOR FURTHER INFORMATION CONTACT: Daniel O. Hill, Director of the Office 
of Strategic Industries and Economic Security, Bureau of Industry and 
Security, who may be reached at (202) 482-4506.

SUPPLEMENTARY INFORMATION:

The Petition

    On April 7, 2004, the Department of Commerce (``Department'') 
received a petition from the Copper & Brass Fabricators Council, Inc., 
and the Non-Ferrous Founders' Society (the ``petitioners'') requesting 
that the Department impose monitoring and controls on exports of 
recyclable metallic materials containing copper (``copper-based 
scrap''), in accordance with the short supply provisions of Section 
7(c) of the Export Administration Act of 1979, as amended, and Section 
754.7 of the Export Administration Regulations.
    Although the EAA expired on August 20, 2001, Executive Order 13222 
of August 17, 2001 (3 CFR, 2001 Comp., p. 783 (2002)), as extended by 
the Notice of August 7, 2003 (3 CFR, 2003 Comp., p. 328 (2004)) 
continues in effect, to the extent permitted by law, the provisions of 
the EAA and its implementing regulations under the International 
Emergency Economic Powers Act.
    The petitioners identified four commodities by the Census Bureau's 
Schedule B numbers as those for which monitoring and export controls 
were requested: 7404.00.0020 (waste and scrap of refined copper), 
7404.00.0045 (waste and scrap of copper-zinc base alloys (brass) 
containing more than 0.3 percent lead), 7404.00.0062 (waste and scrap 
of brass containing 0.3 percent or less lead), and 7404.00.0080 (other 
copper alloy waste and scrap, NESOI).
    As a remedy, the petitioners requested that export monitoring be 
imposed on a weekly basis for copper-based scrap, with the publication 
of weekly reports on anticipated exports, and that export controls be 
imposed that limit the monthly total of copper-based scrap exports to 
31,678 metric tons (``MT''), the monthly average of total exports for 
the five-year period of 1996-2000, to be allocated among destinations 
in an historically based manner for an initial period of one year.
    In a Federal Register notice published on April 22, 2004 (60 FR 
21815), the Department acknowledged receipt of and requested public 
comments on the petition and, at the request of the petitioners, on May 
19, 2004 held a public hearing concerning the petition. The Department 
heard testimony from 12 witnesses at the public hearing, and received 
several written comments in response to the request for public comment. 
Interested parties may review the Bureau of Industry and Security's 
(``Bureau'') Web site, http://www.bis.doc.gov, for the complete text of 
the petition, pertinent Federal Register notices, written public 
comments, and the transcript of the public hearing.
    During the review of the petition, the Bureau consulted with other 
U.S. Government departments and agencies, including the Departments of 
State and the Treasury, the Council of Economic Advisors, the Office of 
the United States Trade Representative, the Department of the 
Interior's U.S. Geological Survey, and the Department of Commerce's 
Economics and Statistics Administration, and International Trade 
Administration.

The Statutory Determinations for Short Supply Actions

    The Department of Commerce reviewed this petition in accordance 
with Sections 3(2)(C) and 7(c) of the EAA (50 U.S.C. app. Sections 
2402(2)(c) and 2406(c)), as implemented by Section 754.7 of the EAR (15 
CFR 754.7).
    Section 3(2) of the EAA, states:
    It is the policy of the United States to use export controls only 
after full consideration of the impact on the economy of the United 
States and only to the extent necessary
    * * *
    (C) To restrict the export of goods where necessary to protect the 
domestic economy from the excessive drain of scarce materials and to 
reduce the serious inflationary impact of foreign demand.
    In Section 7(c)(3)(A), the EAA sets forth five determinations that 
the Secretary of Commerce shall make in determining whether short 
supply action is warranted.\1\ The Secretary is to determine whether:
---------------------------------------------------------------------------

    \1\ Pursuant to Section 4.01(b) of Department Organizational 
Order 10-16 (March 19, 2004), the Secretary of Commerce has 
delegated to the Under Secretary of Commerce for Industry and 
Security the authority to make these determinations.
---------------------------------------------------------------------------

    (i) There has been a significant increase, in relation to a 
specific period of time, in exports of such material in relation to 
domestic supply and demand;
    (ii) There has been a significant increase in domestic price of 
such material or a domestic shortage of such material relative to 
demand;
    (iii) Exports of such material are as important as any other cause 
of a domestic price increase or shortage relative to demand found under 
clause (ii);
    (iv) A domestic price increase or shortage relative to demand found 
under clause (ii) has significantly adversely affected or may 
significantly adversely affect the national economy or any sector 
thereof, including a domestic industry; and
    (v) Monitoring or controls, or both, are necessary in order to 
carry out the policy set forth in section 3(2)(C) of the EAA.

The Department of Commerce's Review of the Statutory Determinations

    Determination 1: Whether there has been a significant increase, in 
relation to a specific period of time, in exports of such material in 
relation to domestic supply and demand.
    For the reasons set forth below, the Department has determined that 
there has been a significant increase, in relation to the specific 
period of time (1999-2003), in exports of copper-based scrap in 
relation to domestic supply and demand of such commodity. The increase 
in exports should be considered in the context of substantially 
decreased U.S. domestic

[[Page 44492]]

consumption, as well as the record showing that some copper-based scrap 
cannot be directly consumed by the petitioners.
    The petitioners allege that exports of copper-based scrap have 
increased by 138 percent during the 1999-2003 period, and that the 
volume of copper-based scrap exports has increased in both an absolute 
sense and as a percentage of the U.S. copper-based scrap supply in 
relation to U.S. demand.\2\ See Petition for the Imposition of 
Monitoring and Controls with Respect to Exports from the United States 
of Copper Scrap and Copper-Alloy Scrap (``Petition''), pp. 10-13. The 
petitioners also allege that ``[e]ssentially all the growth in U.S. 
exports of copper-based scrap in recent years [1999-2003] has been 
attributable to rising demand in China.'' See Petition, p. 13.
---------------------------------------------------------------------------

    \2\ The petitioners are part of the U.S. copper and copper-based 
scrap consuming (melting) industry, which includes approximately 35 
primary brass mills, 15 wire rod mills, 23 ingot makers, 600 
foundries, and three fire-refiners. Brass mills melt and alloy 
feedstock to make metal strip, sheet, plate, tube, rod, bar, 
mechanical wire, forgings, and extrusions. The brass mills employ 
fabricating processes, such as hot-rolling, cold-rolling, extrusion, 
and drawing to convert the melted and cast feedstock into mill 
products. Ingot-makers produce a wide range of cast copper alloys in 
the form of ingots. These ingots are small enough (30 pounds) to fit 
into their customers' (foundries and brass mills) furnaces. 
Foundries make shaped castings for industrial and consumer goods, 
the most important of which are plumbing products and industrial 
valves.
---------------------------------------------------------------------------

Copper-Based Scrap Exports

    The Department has found that U.S. exports of copper-based scrap 
increased by 119 percent from 1999-2003, rising from 315,000 MT in 1999 
to 689,000 MT in 2003.\3\ See Chart 1. During the first five months of 
2004 (the most recent data available), exports have increased 11 
percent compared to the same period in 2003, rising from 269,000 MT in 
January-May 2003 to 298,000 MT in January-May 2004.
---------------------------------------------------------------------------

    \3\ All export data presented in this determination are based on 
the Bureau of the Census' reporting of ``U.S. Domestic Exports'' of 
copper-based scrap. The record does not demonstrate that re-exports 
of foreign-origin copper-based scrap, as recorded in ``U.S. Total 
Exports,'' and cited by the petitioners, could be used in the 
domestic market.
[GRAPHIC] [TIFF OMITTED] TN26JY04.000

    The People's Republic of China (``PRC'') has been the leading 
destination of U.S. copper-based scrap exports since 1999, accounting 
for 68 percent of U.S. copper-based scrap exports in 2003. U.S. copper-
based scrap exports to the PRC increased by 447 percent from 1999-2003, 
rising from 86,000 MT in 1999 to 470,000 MT in 2003. See Chart 2. 
During the first five months of 2004, exports to the PRC have increased 
14 percent compared to the same period in 2003, rising from 169,000 MT 
in January-May 2003 to 192,000 MT in January-May 2004. While exports to 
the PRC have increased during the 1999-2003 period, exports to all 
other countries have remained relatively stable.

[[Page 44493]]

[GRAPHIC] [TIFF OMITTED] TN26JY04.001

Domestic Consumption

    Trends in U.S. consumption of copper-based scrap must be evaluated 
because the statute requires a determination of whether exports have 
increased significantly ``in relation to domestic supply and demand.''
    The Department has found that U.S. consumption of copper-based 
scrap decreased by 30 percent from 1999-2003, falling from 1,631,000 MT 
in 1999 to 1,152,000 MT in 2003.\4\ During the first four months of 
2004, U.S. consumption of copper-based scrap increased 3 percent 
compared to the same period in 2003, rising from 397,000 MT in January-
April 2003 to 410,000 MT in January-April 2004 (the most recent data 
available).
---------------------------------------------------------------------------

    \4\ Copper-based scrap can be distributed into three categories 
based on its origins and processing. (1) ``Home scrap'' or ``run 
around scrap'' is material generated during manufacturing 
(clippings, off-spec material) that never leaves the plant of origin 
and is recycled (remelted) internally. (2) ``New scrap'' is 
manufacturing scrap (grindings, turnings, webbing, skimmings, off-
spec material) generated downstream from the primary mill that is 
not recycled internally, but rather enters into commerce and is 
traded back to the source primary mill or marketed through scrap 
yards and brokers. New scrap is particularly valuable to the primary 
mills in that its origins and exact composition are known, it is 
compatible with their alloy product output, and it requires little 
or no processing before consumption. (3) ``Old scrap'' is material 
recovered from items that have been placed in service and have 
become obsolete or otherwise removed from service. Old scrap, such 
as used water tubing, valves, auto radiators, and harnesses is 
collected through a tier of scrap processors and may be processed or 
upgraded before marketing to consumers or brokers for domestic use 
or export.
    In 2003, new scrap accounted for approximately 96 percent of 
U.S. brass mills' scrap consumption according to U.S. Geological 
Survey data. See Table 9, U.S. Geological Survey, Copper in December 
2003 (March 2004). The U.S. Geological Survey estimates that old 
scrap accounted for approximately 75 percent of U.S. ingot makers' 
scrap consumption and 51 percent of U.S. foundries' scrap 
consumption in 2003. Id.
---------------------------------------------------------------------------

    Over the past five years, U.S. consumption of copper-based scrap 
has decreased more than the rise in U.S. exports during the same 
period. See Chart 3. From 1999-2003, U.S. exports of copper-based scrap 
increased by 374,000 MT, while U.S. consumption decreased by 479,000 
MT.

[[Page 44494]]

[GRAPHIC] [TIFF OMITTED] TN26JY04.002

    The domestic copper-based scrap processing industry underwent 
significant restructuring during the 1999-2003 period, including the 
closure of the last operating independent U.S. secondary smelter in 
2001.\5\ Historically, a significant portion of the scrap processed by 
the secondary smelters was material containing certain impurities that 
prevented copper and brass mills from directly consuming the scrap. 
During the 1999-2003 period, consumption of copper-based scrap by U.S. 
smelters, refiners, and ingot makers (including secondary smelters) 
decreased by 55 percent, falling from 501,000 MT in 1999 to 224,000 MT 
in 2003. See Chart 4.
---------------------------------------------------------------------------

    \5\ The petitioners allege that increased exports of copper-
based scrap were a major cause that contributed to the demise of the 
U.S. secondary smelting industry. See petitioners' supplemental 
comments (May 27, 2004), p. 9. The record does not demonstrate that 
the increase in exports was a major cause of the closure of the U.S. 
secondary smelters. The last two operating secondary smelters closed 
in may 2000 (Southwire co., Carrollton, Georgia) and October 2001 
(Chemetco Inc., Hartford, Illinois). The closure of both smelters 
was linked to the costs associated with environmental regulations 
compliance and the low price of copper. See U.S. geological survey, 
minerals yearbook--2000, p. 23.3; U.S. geological survey, minerals 
yearbook--2001, p. 22.2; and copper development association, 
technical report: the U.S. copper-base scrap industry and its by-
products--2002 (July 2002), p. 14.

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

[[Page 44495]]

[GRAPHIC] [TIFF OMITTED] TN26JY04.003

    The Institute of Scrap Recycling Industries, Inc. (``ISRI'') has 
stated that ``the vast majority of the material being exported is 
copper scrap that would otherwise not be consumed domestically'' due to 
the closure of the domestic secondary smelters. See ISRI Final Comments 
(June 7, 2004), p. 17. The petitioners acknowledge that not all the 
copper-based scrap being exported can be consumed by the domestic 
industry, noting that ``some element of the product exported is not of 
sufficient quality for use by the brass mill industry'' and that 
``there is no means of discerning how much of the exported product 
could actually be used by the U.S. brass mill industry.'' See Petition, 
pp. 11-12, footnote 14. Thus, the Department concludes that the 
information on the record shows that at least some of the copper-based 
scrap being exported cannot be consumed by the domestic industry.
    Thus, the increase in exports should be considered in the context 
of substantially decreased U.S. domestic consumption, as well as the 
record evidence showing that some copper-based scrap cannot be directly 
consumed by the petitioners.
    Determination 2: Whether there has been a significant increase in 
domestic price of such material or a domestic shortage of such material 
relative to demand.
    For the reasons set forth below, the Department has determined that 
there has been a significant increase in the domestic price of copper-
based scrap. The Department has not determined that there is a domestic 
shortage of copper-based scrap relative to the demand for such 
material.
    The petitioners allege that ``U.S. prices for copper-based scrap 
have increased significantly * * *'' See Petitioners' Initial Comments 
(May 13, 2004), p. 2. The petitioners cite increases in copper-based 
scrap prices since 2001, in particular the dramatic increases that 
occurred during the first four months of 2004 when the prices of Brass 
Mill Scrap, No. 1 copper (``No. 1 copper scrap'') and Refiners'' Copper 
Scrap, No. 2 copper, (``No. 2 copper scrap'') rose 66.7 percent and 
73.8 percent, respectively, compared to the same period in 2003.\6\ Id.
---------------------------------------------------------------------------

    \6\ Copper-based scrap is defined in as many as 43 different 
categories based on its copper purity-level. For many of these 
categories, there is no universal agreement among the copper scrap 
consuming and producing industries on definitions. No. 1 copper 
scrap is one of the scrap designations on which most members of the 
copper consuming and producing industries can agree. It is comprised 
of at least 99 percent copper. No. 2 copper scrap is considered by 
most industrial consumers/producers to be scrap with 94-98 percent 
copper content. However, some in the scrap consuming industry view 
No. 2 copper scrap as any scrap not classified as No. 1 copper 
scrap. Sequential definitions beyond No. 2 scrap indicate material 
with ever-decreasing percentages of copper and increasing 
percentages of other metals, such as lead, tin, and zinc.
---------------------------------------------------------------------------

    The petitioners also allege that increased exports of copper-based 
scrap have reduced U.S. supplies and have caused shortages of the 
material. The petitioners state that shortages of copper-based scrap 
have not been reflected in widespread production interruptions to date, 
but in the increased substitution of copper cathode (99.9 percent pure 
copper) for copper-based scrap and reduced stocks of copper-based 
scrap. See Petition, pp.

[[Page 44496]]

15-16, and Petitioners' Initial Comments (May 13, 2004), p. 3.

Domestic Prices

    The Department has found that the average annual prices for No. 1 
copper scrap and No. 2 copper scrap increased by 13 and 22 percent, 
respectively, from 1999-2003.\7\ The price for No. 1 copper scrap rose 
from 70.88 cents per pound in 1999 to 79.86 cents per pound in 2003. 
The price for No. 2 copper scrap rose from 57.53 cents per pound in 
1999 to 70.15 cents per pound in 2003. See Chart 5. During the first 
six months of 2004 (the latest monthly data published), the prices for 
No. 1 copper scrap and No. 2 copper scrap have increased 65 percent and 
64 percent, respectively, compared to the same period in 2003.\8\
---------------------------------------------------------------------------

    \7\ The petitioners and ISRI have each utilized American Metal 
Market published pricing data for copper scrap in their submissions 
for the record. Because the petitioners and ISRI used this source, 
the Department determined it was appropriate to utilize American 
Metal Market pricing data during the course of the review. Copper 
scrap prices presented in this determination are based on the 
American Metal Market's published daily estimates of dealer buying 
prices for carload lots delivered to a buyer's works.
    \8\ The comparison of year-on-year periods is appropriate 
because scrap prices and supplies are influenced by seasonal demand 
for copper products. See Wolverine Tube, Inc., Quarterly 10-Q Report 
to the Securities and Exchange Commission (August 13, 2003); ``Essex 
cites wire market for earnings cut,'' Copper News, American Metal 
Market (May 22, 1998); ``Higher Cost of Steel Scrap Boosting Price 
of Finished Steel,'' Buffalo News (February 15, 2004).
[GRAPHIC] [TIFF OMITTED] TN26JY04.004

    The prices for No. 1 copper scrap and No. 2 copper scrap each rose 
32 percent during the first quarter of 2004 compared to the fourth 
quarter of 2003, before falling during the second quarter of 2004. 
Comparing prices in March 2004 to June 2004, the average monthly prices 
for No. 1 and No. 2 copper scrap decreased 10 percent and 18 percent, 
respectively. The price for No. 1 copper scrap fell from 132.89 cents 
per pound in March 2004 to 120.33 cents per pound in June 2004. The 
price for No. 2 copper scrap fell from 118.57 cents per pound in March 
2004 to 96.90 cents per pound in June 2004. In addition, the Department 
has found that the price increase for copper scrap that occurred from 
1999-2003 occurred at a slower rate than previous price increases 
(e.g., 1986-1989 and 1993-1995). See Chart 6.

[[Page 44497]]

[GRAPHIC] [TIFF OMITTED] TN26JY04.005

Domestic Shortage

    During the process of the review, the Department found no 
convincing evidence of the existence of a shortage of copper-based 
scrap. After reviewing the statute, the Department has determined that, 
as used in Section 7(c) of the EAA, a shortage of copper-based scrap 
exists if the domestic industry's demand exceeds the supply at 
prevailing market prices. In addition to the fact that the information 
submitted by the petitioners did not establish that a shortage of 
copper-based scrap exists, as discussed below there are no signs of any 
consequences of a shortage. There is conflicting evidence as to whether 
the industry has had difficulties purchasing copper-based scrap. 
Petitioners stated that they have had trouble getting their required 
supply of copper-based scrap. See Hearing Transcript, pp. 9, 12, 39-41, 
52-53, 55, 74-76, 92-95, 107, 112, 124-127, 131-132, 137, 154, 156-157, 
and 159-161. The petitioners stated that one unnamed brass mill 
reported that ``delays in sourcing input material resulted in a 
cumulative equivalent of 11 days of lost production'' during the first 
quarter of 2004, and at the hearing three witnesses for the petitioners 
stated that supply availability had affected their companies' 
production schedules. See Petitioners' Supplemental Comments (May 13, 
2004), p. 15 and Hearing Transcript, pp. 107, 112, and 161.
    In response, ISRI stated that many scrap processors reported that 
brass mills were delaying receipt of purchased scrap due to excess 
inventories of raw materials at the mills. See ISRI Initial Comments 
(May 13, 2004), p. 7; Hearing Transcript, pp. 177, 191; and ISRI Final 
Comments (June 7, 2004), pp. 23-24. ISRI provided information stating 
that brass mills have slowed down their acceptances of shipments of 
copper-based scrap. ISRI identified ten brass mills or ingot makers by 
name that it states have extended delivery dates by as long as six-to-
eight weeks. See ISRI Final Comments (June 7, 2004), pp. 23-24.
    The petitioners disagreed with ISRI's statements that mills were 
delaying deliveries. The petitioners surveyed their members (133 
companies according to membership lists attached as Exhibit 1 to the 
petition) to ascertain if any company had requested that deliveries be 
delayed, and advised the Department that, of the eight producers 
responding to their inquiry, none reported delaying ``purchasing 
copper-based scrap offered by scrap dealers because such scrap was not 
needed.'' See Petitioners' Final Comments (June 7, 2004), p. 10. After 
the closing of the public comment period, the petitioners also provided 
additional statements from officials with five of the ten companies 
identified by ISRI, stating that these companies had not delayed 
shipment of scrap for `` ``six to eight weeks'' because of an ``excess 
inventory'' of scrap on hand.'' See Petitioners'' Statements from Brass 
Mills (July 13, 2004).\9\ While the Department has accepted this 
submission, we note that due to the late filing other parties have not 
had an opportunity to respond. The Department concludes that there is 
unrebutted record evidence that at least five companies have delayed 
scrap deliveries.
---------------------------------------------------------------------------

    \9\ One of the company officials noted that his company may have 
delayed some scrap deliveries in April 2004 due to the shutdown of a 
furnace for regular maintenance. See Statement of Edward Kerins, 
Jr., Cambridge-Lee Industries (July 12, 2004), p. 2.
---------------------------------------------------------------------------

    In addition, there were no signs of significant consequences that 
would normally result from a shortage. The record does not reflect that 
the industry is laying off workers or shutting down plants due to an 
inability to obtain scrap. The record also does not reflect that the 
industry has been unable to satisfy customer orders to date. See 
Hearing Transcript, pp. 23-24, 112-113, 126-127, and 161.

[[Page 44498]]

    ISRI also suggests that there are extensive potential reserves of 
obsolete copper-based scrap in the United States. See Nathan Associates 
Inc., The National Inventory of Obsolete Copper Scrap: Accumulation and 
Availability, 1982-2003 (May 2004) (``Nathan Associates Study''). 
However, the Department has not relied on this study because the study 
does not demonstrate that these ``potential reserves'' are readily 
available for use by copper scrap consuming industries. The study's 
definition of obsolete copper scrap ``consists of copper contained in 
installed or in-place products in the U.S. economy.'' See Nathan 
Associates Study, p. i.
    As discussed above, the petitioners state that shortages of copper-
based scrap have been reflected in the increased substitution of copper 
cathode for copper-based scrap. The Department has found that there is 
no quantitative evidence suggesting that U.S. brass mills have been 
extensively switching to cathode in response to an alleged copper-based 
scrap shortage. According to U.S. Geological Survey data, there has 
been only a marginal increase in brass mill consumption of cathode as a 
percentage of total feedstock since 1999, with cathode accounting for 
28.3 percent of total brass mill feedstock consumption in 1999 and 30.8 
percent in 2003. During the first four months of 2004 (the most recent 
data available), cathode has accounted for 27 percent of brass mill 
feedstock consumption. See Table 1.
[GRAPHIC] [TIFF OMITTED] TN26JY04.006


[[Page 44499]]


    As discussed above, the petitioners also state that shortages of 
copper-based scrap have been reflected in the decrease of copper-based 
scrap stock levels. The Department has found that the domestic copper-
based scrap stock level at brass mills; smelters, refiners, and ingot 
makers; and foundries has declined 36 percent from 1999-2003. However, 
the level of copper-based scrap stocks has remained relatively constant 
as a percent of consumption of copper-based scrap during this period. 
According to U.S. Geological Survey data, copper-based scrap stocks 
were equal to 5.5 percent of domestic consumption in 1999, 5.1 percent 
in 2000, 4.9 percent in 2001, 5.3 percent in 2002, and 5.0 percent in 
2003.\10\
---------------------------------------------------------------------------

    \10\ See Table 10, U.S. Geological Survey, Minerals Yearbook: 
Copper, 2000-2002. Preliminary 2003 data provided by U.S. Geological 
Survey.
---------------------------------------------------------------------------

    Determination 3: Whether exports of such material are as important 
as any other cause of a domestic price increase or shortage relative to 
demand found under clause (ii).
    For the reasons set forth below, the Department has determined that 
exports of copper-based scrap are not as important as any other cause 
of the domestic price increase relative to demand found under 
Determination 2, above.
    The petitioners allege that ``there are no factors other than 
exports that serve to explain domestic shortages and increased prices 
for copper-based scrap in the United States.'' See Petitioners' Initial 
Comments (May 13, 2004), p. 14. The petitioners state that foreign 
buyers are ``paying above market-levels and agreeing to preferential 
sales terms to U.S. scrap dealers in order to obtain'' copper-based 
scrap. See Petition, pp. 19-20. The petitioners provided testimony and 
articles from the trade press to substantiate these claims. The 
petitioners also state that increased copper-based scrap exports have 
led to higher domestic copper-based scrap prices by reducing available 
domestic supplies. Id., p. 20. The petitioners provided testimony and 
written comments to substantiate their assertions.
    During the public hearing, the Department requested a copy of the 
petitioners' analysis that there were no factors, other than exports, 
that have caused the alleged shortage. See Hearing Transcript, pp. 83-
84. The petitioners have not provided the requested data.
    ISRI counters the petitioners' assertions by stating that ``[a]ny 
impact that the increase in exports might have had on scrap prices is 
marginal at best and impossible to quantify.'' See ISRI Final Comments 
(June 7, 2004), p. 4. ISRI also states that ``[t]he domestic price for 
copper scrap typically mirrors the world market price for such scrap, 
which is dictated by the global market price for copper metal.'' See 
ISRI Initial Comments (May 13, 2004), p. 2.
    Based on evidence gathered during the course of the review, the 
Department concluded that the overall price of copper scrap tracks the 
price of copper cathode, as traded on global commodity exchanges. See 
Chart 7.\11\ While the rise in exports in copper-based scrap has been a 
factor influencing the increase in domestic copper scrap prices, it is 
the world supply and demand for copper that has been the most important 
cause of any increase in the price of copper-based scrap.
---------------------------------------------------------------------------

    \11\ See also Exhibit 6 to Petitioners' Initial Comments (May 
27, 2004); testimony of Michael Kerwin, on behalf of petitioners 
(``the price of scrap essentially keys off of * * * the COMEX 
price''), Hearing Transcript, p. 61; testimony of Roy Allen, on 
behalf of petitioners (``these rising prices certainly reflect 
general increases in world copper prices that have taken place, as 
reflected by the commodity exchanges''), Hearing Transcript, p. 92; 
testimony of Jeffrey Burghardt, on behalf of petitioners (``copper-
based scrap in the U.S. is priced at a negotiated discount or 
premium relative to the COMEX price for copper cathode''), Hearing 
Transcript, p. 122.

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

[[Page 44500]]

[GRAPHIC] [TIFF OMITTED] TN26JY04.007

    The global market for copper cathode, in turn, is driven by factors 
such as copper mining developments (e.g., mine shutdowns or new 
investments), developments in the refining sector (e.g., changes 
secondary copper smelting and refining capacity), and copper demand. 
See ISRI Initial Comments (May 13, 2004), pp. 10-11. The supply from 
copper mines, in particular, has been a critical factor in recent price 
fluctuations. During the past several years, prices for copper have 
been low and production was reduced as a result. See ``Codelco sets 
copper production target of 1.6M tonnes, up 3.5%,'' American Metal 
Market (March 20, 2003). More recently, the mining companies have 
suffered from labor problems and natural disasters that have impeded 
supply. See ``A Strike here, a landslide there * * * behind the pinch 
in copper,'' American Metal Market (February 9, 2004). Thus, global 
copper supplies were unable to respond quickly to increased global 
copper demand resulting from rapid growth in Asia and increased demand 
in the United States. See International Copper Study Group (``ICSG''), 
Press Release: Forecast 2004-2005 (May 19, 2004).\12\ Accordingly, 
world market prices have seen a sharp increase that correlates to the 
increase in domestic prices. The ICSG also reports that Chile and the 
PRC are or will be releasing copper from stockpiles in 2004. In 2005, 
copper mines in Indonesia are anticipated to be operating at full 
capacity, and certain mines will be reopening in North America. Id.
---------------------------------------------------------------------------

    \12\ The International Copper Study Group, established in 1992, 
is an intergovernmental organization that serves to increase copper 
market transparency and promote internaitonal discussions and 
cooperation on issues related to copper.
---------------------------------------------------------------------------

    In addition, historically the rate of copper scrap price increases 
does not correspond closely to the rate at which copper scrap exports 
increased. While the rate of the recent 1999-2003 rise in copper scrap 
prices is less than that experienced in earlier periods (e.g., 1986-
1989 and 1993-1995), the rate of increase in export quantities from 
1999-2003 appears to have occurred at the same or greater level as the 
rate recorded in earlier periods. See Chart 8. This relationship 
undermines the claim that domestic copper scrap prices are highly 
related to the increase in export volumes and suggests that the 
recycling industry is searching for new markets for the scrap that can 
no longer be processed in the United States. Indeed, the overall level 
of global copper scrap consumption decreased approximately 15 percent 
from 1999-2003 according to unpublished ICSG data. Given the 
integration of global scrap trade, this decrease makes it unlikely that 
scrap consumption trends are responsible for the run-up in scrap 
prices.

[[Page 44501]]

[GRAPHIC] [TIFF OMITTED] TN26JY04.008

    Finally, there have been a number of foreign governmental actions 
that may have affected the price and supply of copper scrap, including 
Russia's export restriction on copper-based scrap. In 1998, Russia was 
the leading exporter of copper-based scrap, with exports totaling 
357,000 MT. See Copper Development Association Inc., Table 3, Technical 
Report: The U.S. Copper-based Scrap Industry and Its By-products--2003 
(December 2003). However, in 1999, the Russian government imposed an 
export tax on copper scrap that effectively removed the country from 
the copper scrap export market. This export tax may have had an impact 
on global copper scrap prices and supply. As the export tax was phased 
in, Russian exports of copper scrap dwindled. See ``Copper, nickel 
gains bring out supply,'' American Metal Market (February 11, 1999), 
and ``Unpredictable Behavior: The Story of Copper and Brass,'' 
Recycling Today (April 2000). The Russian export tax was imposed at the 
beginning of the 1999-2002 time period when global demand for copper 
scrap increased at a rate of approximately 20 percent. See Copper 
Development Association Inc., Table 4, Technical Report: The U.S. 
Copper-based Scrap Industry and Its By-products--2003 (December 2003). 
Russia's withdrawal from the copper scrap export market in 1999 may 
have influenced the global availability of copper-based scrap.
    The petitioners also have cited several Chinese government 
practices that they allege are spurring scrap exports to China. First, 
the petitioners state that it is their understanding that the PRC 
applies a value-added tax (``VAT'') of 17 percent on imports of copper-
based scrap and then rebates 30 percent of this VAT to the importer. 
See Petitioners' Final Comments (June 7, 2004), p. 20. Second, the 
petitioners claim that ``additional subsidies'' beyond the VAT rebate 
are provided to downstream Chinese products that incorporate copper-
based scrap. Id. Third, they claim that copper-based scrap is either 
undervalued and/or assessed at a lower duty rate due to mis-
classification when it is imported into China. Id., p. 21.
    The Department, working with the Office of the United States Trade 
Representative and the Department of State, is continuing to gather 
information regarding these alleged practices, to examine whether they 
constitute unfair trade practices, such as subsidies or discriminatory 
treatment, that may be addressed under U.S. law or international rules. 
We note that the PRC will require that all companies seeking to ship 
scrap to China be licensed by China's General Administration of Quality 
Supervision, Inspection and Quarantine (``AQSIQ''). AQSIQ has announced 
that it will bar non-licensed vendors from unloading scrap in China on 
November 1, 2004. The application deadline for exporters is August 1, 
2004. According to AQSIQ, the license requirement is intended to reduce 
the amount of dangerous contaminated scrap being imported into China.
    Determination 4: Whether a domestic price increase or shortage 
relative to demand found under clause (ii) has significantly adversely 
affected or may significantly adversely affect the

[[Page 44502]]

national economy or any sector thereof, including a domestic industry.
    For the reasons set forth below, the Department has determined that 
the domestic price increase relative to demand found under 
Determination 2, above, has not significantly adversely affected and 
likely will not significantly adversely affect the national economy or 
any sector thereof, including a domestic industry.
    The petitioners allege that the copper scrap price increase has 
caused higher material acquisition costs for primary brass mills and 
secondary fabricators of sheet, tube, plate, and rod. They state that 
these higher costs, in turn, reduce profit margins. See Petition, pp. 
28-29.

National Economy

    The primary industries that use copper-based scrap include four 
industries with the following North American Industry Classification 
System (``NAICS'') codes: (1) Copper rolling, drawing, and extruding 
(NAICS 331421); (2) copper wire (except mechanical) drawing (NAICS 
331422); (3) secondary smelting, refining, and alloying of copper 
(NAICS 331423); and (4) copper foundries (NAICS 331525). According to 
data published in the Census Bureau's Annual Survey of Manufactures 
(2003), the sum of the value added by these four industry sectors was 
$3 billion in 2001 (the most recent data available). These primary 
industries appear to have accounted for less than 1 percent of the 
$10.1 trillion Gross Domestic Product of the United States. These 
economic data do not demonstrate that a significant increase in price 
or a shortage of copper-based scrap relative to demand has 
significantly or will significantly affect the national economy.\13\
---------------------------------------------------------------------------

    \13\ Supporters of the petition note that copper-based scrap 
shortages could affect U.S. industry's ability to support U.S. 
national security, citing copper's use by the ammunition industry as 
an example. See Petitioners' Final Comments (June 7, 2004), p. 16 
and Letter from Senator Arlen Spector to Donald L. Evans, Secretary 
of Commerce (June 14, 2004), p. 2. The record does not demonstrate 
that the U.S. defense industry has been unable to satisfy national 
defense requirements to date due to a shortage of copper-based 
scrap. The department administers the Defense Priorities and 
Allocations Systems (``DPAS'') regulations to ensure the timely 
availability of industrial products and materials to meet current 
national defense and emergency preparedness requirements. See 15 CFR 
Part 700. The DPAS is maintained under the authority of Titles I and 
VII of the Defense Production Act of 1950, as amended (50 U.S.C. 
app. 2061, et. seq.); Title VI of the Robert T. Stafford Disaster 
Relief and Emergency Assistance Act (42 U.S.C. 5195, et. seq.); 
Section 18 of the Selective Service Act of 1948 (50 U.S.C. app. 
468);10 U.S.C. 2538; 50 U.S.C. 82; Executive Order 12919, as amended 
(3 CFR, 1994 Comp. 901); Executive Order 12742, as amended (3 CFR, 
1991 Comp. 309); and Executive Order 12656, as amended (3 CFR, 1988 
Comp. 585).
---------------------------------------------------------------------------

Sectoral Analysis

    To demonstrate the adverse effect on their industry, the 
petitioners focus on trends in the price differentials (or 
``discounts'') that exist between copper scrap and copper cathode. This 
issue is of particular importance to the petitioners because the 
``pricing of copper and copper-alloy finished products by brass mills 
generally takes account of prevailing market prices for copper 
cathode.'' See Petition, p. 28. This pricing mechanism, in part, limits 
the brass mills' ability to ``pass through'' the increased costs of 
manufacturing associated with the rise in copper scrap prices. Brass 
mill products are often made with copper-based scrap, not just cathode, 
and if the price for copper scrap increases and the price for copper 
cathode does not exhibit a commensurate increase, profit margins are 
narrowed via a cost-price squeeze. Id., pp. 28-29.
    The petitioners argue that the industry faced such a scenario from 
2001-2003. The petitioners state that the discount for No. 1 copper 
scrap, relative to copper cathode prices, decreased from 2.95 cents per 
pound in 2001 to 1.21 cents per pound in 2003, a difference of 1.74 
cents per\14\ pound. See Petition, p. 28. The petitioners note that 
this decrease in discounts was due to ``increased exports and reduced 
scrap supply.'' Id. Furthermore, the petitioners state that this 
narrowing discount ``resulted in a direct cost to the brass mill 
industry of $32,306,135 annually,'' based on 2003 consumption levels. 
Id.
---------------------------------------------------------------------------

    \14\ According to U.S. Geological Survey data, No. 1 copper 
scrap accounted for approximately 45 percent of U.S. brass mills' 
scrap consumption in 2003. See Table 10, U.S. Geological Survey, 
Copper in December 2003 (March 2004).
---------------------------------------------------------------------------

    In its evaluation of this issue, the Department reviewed the change 
in price differentials between 1999-2003 and the first two quarters of 
2004. The Department chose these periods for review due to the fact 
that the petitioners have argued that the overall increase in copper-
based scrap exports began in 1999. See Petition, p. 10. For the 1999-
2003 period, the Department determined that the price differential for 
No. 1 copper scrap decreased by only 3 percent, falling from 1.23 cents 
per pound in 1999 to 1.19 cents per pound in 2003. This period shows a 
significantly smaller decline in discounts than the 2001-2003 period 
highlighted by the petitioners (from 2001-2003 the discount for No. 1 
copper scrap declined by 59 percent).
    Further, during the first six months of 2004, the price 
differential for No. 1 copper scrap decreased by only 3 percent 
compared to the same period in 2003, falling from 1.21 cents per pound 
in January-June 2003 to 1.18 cents per pound in January-June 2004. See 
Table 2.
    Moreover, there is insufficient evidence that the current discount 
levels for No. 1 copper scrap are caused by increased exports. 
Petitioners submitted data regarding historical discount levels. See 
Petitioners' Final Comments (June 7, 2003), pp. 4-7 and Exhibit 1. A 
decline in discount levels for No. 1 copper scrap occurred from the 
mid-1990s to the late-1990s. However, U.S. exports of unalloyed copper 
scrap did not increase significantly during this period. See Chart 9. 
The Department compared No. 1 copper scrap discounts with unalloyed 
copper scrap exports from 1983-2003 and determined that the discount 
for No. 1 copper scrap does not track U.S. exports of unalloyed copper 
scrap. Accordingly, the decline in discount levels does not appear to 
have been caused by any increase in exports, but by other factors.

[[Page 44503]]

[GRAPHIC] [TIFF OMITTED] TN26JY04.009

    The Department also reviewed the petitioners' claim that the 
decrease in discounts has ``resulted in a direct cost to the brass mill 
industry of $32,306,135 annually.'' See Petition, p. 28. In order to 
reach this number, the petitioners calculated the difference between 
the 2001 and 2003 discounts for No. 1 copper scrap (1.74 cents per 
pound) and multiplied that by the 2003 consumption level of copper-
based scrap (1,856,674,437 pounds). Id. When this approach is applied 
to the differences between 1999 and 2003 discounts (0.04 cents per 
pound), this number declines to $742,669 annually.\15\
---------------------------------------------------------------------------

    \15\ Brass mills also negotiate arrangements with their 
customers to purchase new scrap generated during the customers' 
manufacturing operations through buy-back arrangements. There is no 
information in the record concerning the pricing structure for the 
brass mills' repurchase of new scrap from their customers. See 
Hearing Transcript, pp. 86-87, 146-150. Testimony of George 
Dykhuizen, on behalf of petitioners (``[t]here's a published price 
for the price of the mill return scrap which is not related to the 
COMEX. * * * Every mill has just a different, different arrangement, 
a different price for that buying arrangement, buy-sell arrangement, 
if you will.''), Hearing Transcript, pp. 147-148. There are no 
published data on the volume of buy-back arrangements.
---------------------------------------------------------------------------

    The Department also evaluated the discount for No. 2 copper scrap, 
as No. 2 copper scrap is an input for refiners and ingot makers. From 
1999-2003, the discount for No. 2 copper scrap decreased by 25 percent, 
falling from 14.58 cents per pound in 1999 to 10.9 cents per pound in 
2003. However, during the first six months of 2004, the price 
differential has increased by 62 percent compared to the same period in 
2003, rising from 11.32 cents per pound from January-June 2003 to 18.36 
cents per pound from January-June 2004. See Table 2. The current 
discount for No. 2 copper scrap is near the peak of average annual 
discount levels from 1999-2003. Id.

[[Page 44504]]

[GRAPHIC] [TIFF OMITTED] TN26JY04.010

    The Department also concluded that price discounts for copper scrap 
have been determined not only by domestic supply, which can be 
influenced by exports, but also by domestic demand and transportation 
costs.\16\ Accordingly, the changes in the margins for No. 1 and No. 2 
copper scrap exhibited between 1999-2003 and during the first two 
quarters of 2004 were caused not only by changes in domestic supply of 
scrap, but also by fluctuations in U.S. demand and transportation 
costs.
---------------------------------------------------------------------------

    \16\ The American Metal Market scrap prices include the cost of 
transportation of the scrap from the recycling facility to the 
processing facility's yard, ``[e]stimated dealer buying prices, in 
[cent]/lb, delivered to yard.'' See American Metal Market Nonferrous 
Scrap Prices.
---------------------------------------------------------------------------

    In addition to addressing the impact of declining discounts, the 
petitioners provided aggregate financial information on six major brass 
mills (17 percent of the 35 brass mills operating in the United States) 
to help quantify the impact of increased exports and reduced supplies 
of copper-based scrap on the industry. This information partially 
responded to the Department's request for detailed information 
regarding such adverse effects. See Hearing Transcript, pp. 72, 133. 
The information supported the petitioners' allegations that declining 
sales values and rapidly increasing material input costs have reduced 
the operating profits for the six companies from 11 percent in 1999 to 
2 percent in 2003. See Petitioners' Final Comments (June 7, 2004), 
Exhibit 5.
    Accordingly, as to a specific sector of the national economy, there 
appears to be some evidence of reduced profits at the primary producer 
level. However, this evidence is from a limited sample that may not be 
representative of the entire industry. It is possible that other 
members of the industry have become more profitable over this time 
period. In addition, the petitioners did not estimate the six brass 
mills' share of the industry's total net sales. The Department has 
calculated that the 1999 revenues of the six brass mills accounted for 
12.7 percent of the total shipments (revenues) for the four primary 
industries that used copper-based scrap, based on the Census Bureau's 
Annual Survey of Manufactures.\17\ Although the Census Bureau has 
published data through 2001, the petitioners only provided a summary of 
financial data for 1999, 2002, and 2003. Accordingly, the Department 
was unable to perform further calculations. Moreover, petitioners have 
not provided information that the companies have been forced to shut 
down, or reduce employment, or have been unable to satisfy customer 
orders. Indeed, their responses indicate that these effects have not 
occurred. Thus, the evidence does not demonstrate the requisite adverse 
effects to satisfy the requirements of this determination.
---------------------------------------------------------------------------

    \17\ Copper rolling, drawing, and extruding (NAICS 331421); 
copper wire (except mechanical) drawing (NAICS 331422); secondary 
smelting, refining, and alloying of copper (NAICS 331423); and 
copper foundries (NAICS 331525).
---------------------------------------------------------------------------

    Equally important, the evidence does not demonstrate that the 
reduced profitability experienced by some members of the brass mill 
industry was caused by a domestic price increase or shortage, as the 
statute requires. The

[[Page 44505]]

reduced profitability may be due, in part, to other factors, such as a 
significant decline in sales values. In 1999, the year when the six 
brass mills' operating profits were 11 percent of net sales, their net 
sales value was $1,263.4 million. See Petitioners' Final Comments (June 
7, 2004), p. 17. In 2003, when their operating profits dropped to 2 
percent of net sales, their net sales value was only $1,012.7 million--
a drop of over $250 million, or approximately 20 percent. A 20 percent 
drop in sales may reduce operating profits, as it becomes more 
difficult for a company to cover its fixed costs. In addition, higher 
energy and transportation costs appear to have burdened the industry. 
Accordingly, the Department has insufficient data to determine the 
extent to which the reduced profitability is due to a domestic price 
increase or shortage, versus other factors.
    Petitioners further allege adverse effect to a sector of the 
national economy to the extent that they have been able to pass along 
higher material acquisition costs to their customers. They claim that 
such increases are resulting in higher prices for copper-based 
products. They allege that these higher prices for copper-based 
products are causing economic harm that calls into question the 
economic viability of their customers' continuing production in light 
of competition from lower cost imports and possible substitution of 
lower cost alternatives for copper products. See Petition, p. 29.
    According to the Bureau of Labor Statistics, there have been 
increases in the prices for copper products (i.e., rod, bar, sheet, 
strip, and plate), but the data are insufficient to determine the 
percentage of such increases attributable to the rise in copper-based 
scrap prices as distinguished from other factors. See Bureau of Labor 
Statistics, Producer Price Indices, Copper & Alloy Rod, Bars & Shapes 
(NAICS 3314213); Copper & Alloy Sheet, Strip & Plate (NAICS 3314217); 
and Copper & Alloy Pipe and Tube (NAICS 3314219). These findings and 
the information available on the record do not demonstrate that 
material acquisition costs for copper-based scrap have translated into 
U.S. companies and consumers purchasing lower cost imported brass/
copper fittings and related products or substituting lower cost 
alternatives for copper products.
    Accordingly, while at least some petitioners have experienced 
reduced profit margins over the past several years, they have not 
established that the higher prices of copper-based scrap have had a 
significant adverse impact on their activities or those of their 
customers.
    The statute also requires that the Department consider whether 
increased prices or shortages may, in the future, significantly 
adversely affect the domestic industry. As noted, exports of copper-
based scrap are not as important as any other determinant in these 
current price increases and supply levels, and there are no indications 
at this time, based on the record, that significant adverse effects may 
result from current trends. Moreover, given the inherently predictive 
nature of this analysis, it is appropriate to proceed with caution.\18\
---------------------------------------------------------------------------

    \18\ By way of analogy, U.S. trade law provides that the U.S. 
International Trade Commission shall not base a finding of 
``threat'' of material injury on ``mere conjecture or supposition.'' 
19 U.S.C. 1677(7)(F)(2) (2004). See also Agreement on Implementation 
of Article VI of the General Agreement on Tariffs and Trade 1994, 
Annex 1A, Agreement Establishing the World Trade Organization, Apr. 
15, 1994, reprinted in H.R. Doc. No. 316, 103d Cong., 2d Sess. 1453 
(1994), Article 3.7 and Article 3.8 (threat cases ``shall be 
considered and decided with special care.'').
---------------------------------------------------------------------------

    In sum, the record does not indicate that the price increases have 
significantly adversely affected or may significantly adversely affect 
the national economy or any sector thereof.
    Determination 5: Whether monitoring or controls, or both, are 
necessary in order to carry out the policy set forth in section 3(2)(C) 
of this Act.
    For the reasons set forth below, the Department has determined that 
neither monitoring nor controls is necessary in order to carry out the 
policy set forth in Section 3(2)(C) of the EAA.
    Section 3(2) of the EAA states that:

    [i]t is the policy of the United States to use export controls only 
after full consideration of the impact on the economy of the United 
States and only to the extent necessary--
    * * *
    (C) to restrict the export of goods where necessary to protect the 
domestic economy from the excessive drain of scarce materials and to 
reduce the serious inflationary impact of foreign demand.
    As addressed in Determination 2, there is insufficient evidence to 
establish a shortage of copper-based scrap, and, as addressed in 
Determination 4, there is insufficient evidence to establish that 
exports of copper-based scrap are having a significant adverse effect 
on the domestic economy or a sector thereof. Accordingly, the 
Department has determined that it is not necessary to restrict exports 
of copper-based scrap in order to protect the domestic economy from the 
excessive drain of scarce materials and to reduce the serious 
inflationary impact of foreign demand. For the same reason, it is not 
necessary to monitor such exports.
    Furthermore, based on a review of the record, there is insufficient 
evidence to determine whether export controls would increase the supply 
of copper-based scrap or lower its domestic price.\19\ The Department 
therefore finds that it is appropriate to act with caution in imposing 
controls, absent a more precise understanding of the likely impact of 
these actions. We requested this information from interested parties, 
but did not receive any relevant analysis. See Bureau of Industry and 
Security, Copper and Brass Scrap Short Supply Petition: Additional 
Questions for Interested Parties, Supply and Demand Considerations, 
questions 15-19.\20\
---------------------------------------------------------------------------

    \19\ Indeed, there is some evidence that restricting exports 
will increase the price of copper-based scrap due to global supply 
and demand. See ISRI Final Comments, p. 20.
    \20\ We note that ISRI has argued that imposing export controls 
would be a violation of Article XI of the General Agreement on 
Tariffs and Trade (GATT) 1994. See, e.g., Supplemental Comments of 
Patton Boggs LLP (May 27, 2004), pp. 3-5. Petitioners argue the 
contrary. See, e.g., Petitioners' Final Comments (June 7, 2004), pp. 
21-24. Because the Department has determined that the standard for 
relief under U.S. law has not been met, we do not reach the issue of 
whether it would violate U.S. GATT 1994 obligations if export 
controls were imposed in this case. However, we consider it very 
important that the United States, and other countries that maintain 
or may consider imposing export controls for short supply reasons, 
act consistently with the relevant GATT 1994 obligations. GATT 
Article XI requires, in particular, that such controls (1) be 
``temporarily applied,'' (2) respond to ``critical shortages,'' and 
(3) involve ``products essential to the exporting contracting 
party.''
---------------------------------------------------------------------------

    Regarding monitoring, the Department is concerned that imposing 
monitoring would result in significant record-keeping and reporting 
burdens on U.S. industry. The imposition of monitoring would require 
that exporters of copper-based scrap report to the Department all 
actual and anticipated exports, the destination by country, and the 
domestic and worldwide price, supply, and demand for such scrap. The 
Department would then be required to aggregate the information 
submitted and publish the aggregated statistics on a weekly basis.
    Determinations:
    1. The volume of exports of copper-based scrap has increased 
significantly over the time period presented in the petition, 1999-2003 
and year-to-date 2004. Decreased domestic consumption, including the 
closure of the last independent U.S. secondary smelter, has been an 
important factor in the rise of exports. Accordingly, the increase in 
exports is somewhat less significant when it is considered in relation 
to

[[Page 44506]]

domestic demand, as required by the statute.
    2. Copper scrap prices have increased significantly during the time 
period presented in the petition, 1999-2003 and year-to-date 2004. 
However, the evidence does not demonstrate the existence of a shortage.
    3. The world market for copper cathode, not the level of U.S. 
exports of copper-based scrap, is the most important determinant in the 
fluctuation of domestic copper scrap prices.
    4. The evidence does not demonstrate a significant adverse effect 
on the national economy or any sector thereof resulting from the 
domestic copper scrap price increase.
    5. Monitoring, export controls, or both, are unnecessary at this 
time in order to achieve the policy of EAA Section 3(2)(C).
    Under Section 7(c)(3)(A) of the EAA, the Department has determined 
that, in light of the determinations set forth above, neither export 
controls nor monitoring is necessary in order to carry out the policy 
set forth in Section 3(2)(C) of the EAA.
    However, given the increase in prices and exports in the recent 
years, the Department will work with its Bureau of the Census to refine 
the Schedule B classifications for copper-based scrap in order to 
better delineate the varieties of scrap that are being exported. We 
will then review the new data in the coming year. Among other things, 
this data will allow us to determine the extent to which the copper-
based scrap being exported is of a variety that could otherwise be 
utilized by the U.S. copper-based scrap consuming industry. We note 
that the petitioners requested that this data be obtained. See Hearing 
Transcript, p. 41.
    In addition, the Department will work closely with the Office of 
the United States Trade Representative and the Department of State to 
address any foreign government practices that are distorting the trade 
in copper-based scrap. For instance, we will encourage Russia and 
Ukraine to remove their restrictions on copper-based scrap exports. We 
will monitor China's implementation of its new licensing system for 
scrap metal imports, and will also evaluate and, as appropriate, 
respond to Chinese government practices that may be spurring exports of 
U.S. copper-based scrap to China.

    Dated: July 21, 2004.
Kenneth I. Juster,
Under Secretary of Commerce for Industry and Security.
[FR Doc. 04-16947 Filed 7-23-04; 8:45 am]
BILLING CODE 3510-33-P