[Federal Register Volume 64, Number 173 (Wednesday, September 8, 1999)]
[Notices]
[Pages 48760-48767]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-23327]
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DEPARTMENT OF COMMERCE
International Trade Administration
[A-421-701]
Notice of Preliminary Results of Antidumping Duty Administrative
Review and Intent To Revoke Order: Brass Sheet and Strip From the
Netherlands
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
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SUMMARY: The Department of Commerce is conducting an administrative
review of the antidumping duty order on brass sheet and strip from the
Netherlands. This review covers imports of brass sheet and strip from
one producer/exporter during the period of review (POR), August 1, 1997
through July 31, 1998.
We preliminarily determine that sales of the subject merchandise
have not been made below normal value. If these preliminary results are
adopted in the final results, we will instruct the Customs Service not
to assess antidumping duties on the subject merchandise exported by
this company. If these preliminary results are adopted in our final
results of this administrative review, we will revoke the antidumping
duty order, based on three consecutive review periods of sales at not
less than normal value by Outokumpu Copper Strip B.V., the sole
producer and exporter of subject merchandise from the Netherlands (see
19 CFR 351.222(b)(i)). See Intent to Revoke section of this notice.
EFFECTIVE DATE: September 8, 1999.
FOR FURTHER INFORMATION CONTACT: John Brinkmann or Jarrod Goldfeder,
Office of AD/CVD Enforcement, 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) 482-4126r (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 of Commerce's (the
Department's) regulations refer to the regulations codified at 19 CFR
Part 351 (1999).
Background
On August 12, 1988, the Department published in the Federal
Register the antidumping duty order on brass sheet and strip from the
Netherlands (53 FR 30455). On August 11, 1998, we published in the
Federal Register the notice of ``Opportunity to Request an
Administrative Review'' of this order, for the period August 1, 1997
through July 31, 1998 (63 FR 42821). On August 31, 1998, in accordance
with 19 CFR 351.213(b), Outokumpu Copper Strip B.V. (OBV), the sole
producer/exporter requested an administrative review of its exports of
the subject merchandise to the United States for the POR August 1, 1997
through July 31, 1998. In addition, OBV requested that the Department
revoke the antidumping duty order against brass sheet and strip from
the Netherlands, pursuant to 19 CFR 351.222(b), based on the absence of
dumping and the fact that OBV is not likely to sell the subject
merchandise at less than normal value in the future. On September 23,
1998, in accordance with 19 CFR 351.221, the Department initiated this
administrative review (see Initiation of Antidumping and Countervailing
Duty Administrative Reviews and Requests for Revocation in Part, 63 FR
51893 (September 29, 1998)).
On October 2, 1998, the Department issued an antidumping
questionnaire 1 to OBV. After several extensions, OBV
submitted its response to sections A, B, and C in October and November
1998. The Section D questionnaire response was received in December
1998. The Department issued and received responses to Sections A, B,
and C supplemental questionnaires in January 1999. On February 5, 1999,
the Department extended the time limit for completion of the
preliminary results of this administrative review by 120 days, or until
August 31, 1999. See Brass
[[Page 48761]]
Sheet and Strip from the Netherlands: Notice of Extension of Time
Limits for the Sixth Antidumping Duty Administrative Review, 64 FR
5766. In April 1999, the Department issued a Section D supplemental
questionnaire. The response to the supplemental cost questionnaire was
received by the Department in May 1999.
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\1\ Section A of the questionnaire requests general information
concerning a company's corporate structure and business practices,
the merchandise under review that it sells, and the sales of the
merchandise in all of its markets. Sections B and C of the
questionnaire request comparison market sales listings and U.S.
sales listings, respectively. Section D requests additional
information about the cost of production of the foreign like product
and constructed value of the merchandise under review.
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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.
Verification
As provided in section 782(i) of the Act, the Department verified
sales and cost information provided by OBV. The cost verification was
conducted from May 31 to June 6, 1999 and the sales verification was
conducted from July 12 to July 16, 1999. The Department used standard
verification procedures, including on-site inspection of the
manufacturer's facilities and examination of relevant sales and
financial records. Verification results are outlined in the
verification reports placed in the case file.
Product Comparisons
In accordance with section 771(16) of the Act, the Department first
attempted to match contemporaneous sales of products sold in the U.S.
and home markets that were identical with respect to the following
characteristics: (1) type (alloy); (2) gauge (thickness); (3) width;
(4) temper; (5) coating; and (6) packed form. Where there were no sales
of identical merchandise in the home market to compare with U.S. sales,
we compared U.S. sales with the most similar product based on the
characteristics listed above, in descending order of priority.
For purposes of the preliminary results, we have used differences
in merchandise adjustments based on the difference in the variable cost
of manufacturing between each U.S. model and its most similar home
market model.
Date of Sale
During the POR, OBV reported making sales in the home market
pursuant to frame agreements, which are non-binding arrangements with
customers containing estimates of the types and quantities of
merchandise the customer expects to order over a certain period of
time. See Response to Section A of the Department's Questionnaire,
dated October 23, 1998, at A-16. In addition, although the frame
agreements contain a fabrication price, which is the price charged by
companies such as OBV to transform raw materials into finished brass
sheet and strip, such agreements do not contain the price OBV charges
for the necessary raw materials (i.e., the ``metal price''). As such,
the quantity to be purchased and the total price to be paid by the
customer are not established in the frame agreements.
In the immediately preceding review, the Department used the
invoice date as the date of sale rather than the frame agreement date
because we found in that review that the invoice date was the first
date on which all material terms of sale (i.e., quantity, metal price,
and fabrication price) were established. See Brass Sheet and Strip from
the Netherlands: Notice of Preliminary Results of Antidumping Duty
Administrative Review, 63 FR 25821, 25822 (May 11, 1998); see also
Brass Sheet and Strip from the Netherlands: Final Results of
Antidumping Duty Administrative Review, 63 FR 49544 (September 16,
1998) (Final Results 96/97). The record in this review, including our
findings at the sales verification of OBV's submitted data, supports
the same conclusion. Therefore, in accordance with 19 CFR 351.401(i)
and Department practice, we have preliminarily determined that the
invoice date is the appropriate date of sale for OBV.
Comparisons to Normal Value
To determine whether OBV's sales of brass sheet and strip were made
to the United States at less than normal value, the Department compared
the export price (EP) to the normal value (NV), as described in the
``Export Price'' and ``Normal Value'' sections of this notice. In
accordance with section 771A(d)(2) of the Act, the Department
calculated monthly weighted-average prices for NV and compared these to
individual U.S. transactions.
Export Price
For the price to the United States, we used EP in accordance with
section 772(a) of the Act, because the subject merchandise was sold to
an unaffiliated U.S. purchaser prior to the date of importation and CEP
methodology was not otherwise warranted.
We calculated EP based on the packed, delivered prices to
unaffiliated purchasers in the United States. In accordance with
section 772(c)(2) of the Act, where appropriate, we deducted from the
starting price international freight expense, marine insurance, U.S.
brokerage and handling expenses, and U.S. Customs duties.
We made corrections to the U.S. packing costs and recalculated U.S.
credit expenses based on our verification findings. See Sales
Verification Report, dated August 31, 1999 (Sales Verification Report).
In addition, per the Department's instructions, OBV reported a
transaction to the United States which the company characterized as a
sample sale to a non-U.S. customer. Based on the evidence on the record
of this review, including our findings at verification, we
preliminarily determine that this transaction constitutes a sample sale
to a non-U.S. customer and, therefore, have removed this sale from our
calculations. See Sales Verification Report.
Normal Value
In order to determine whether there was a sufficient volume of
sales in the home market to serve as a viable basis for calculating NV,
we compared OBV's volume of home market sales of the foreign like
product to the volume of its U.S. sales of the subject merchandise.
Pursuant to sections 773(a)(1)(B) and (C) of the Act, since OBV's
aggregate volume of home market sales of the foreign like product was
greater than five percent of its aggregate volume of U.S. sales of the
subject merchandise, we determined that the home market was viable
pursuant to section 773(a) of the Act. Therefore, in accordance with
section 773(a)(1)(B)(i) of the Act, we based NV on the price at which
the foreign like products were first sold in the home market, in the
usual commercial quantities and in the ordinary course of trade.
Where appropriate, the Department deducted early-payment discounts
and
[[Page 48762]]
rebates. We also deducted inland freight expense (plant-to-customer),
inland insurance, and packing expense from the home market price in
accordance with section 773(a)(6)(B) of the Act. We used the revised
packing expenses provided to us at verification. We made adjustments,
where appropriate, for differences in credit expenses between the U.S.
and home market sales in accordance with section 773(a)(6)(C)(iii) of
the Act.
We increased normal value by U.S. packing expenses in accordance
with section 773(a)(6)(A) of the Act. To the extent there were
comparisons of U.S. merchandise to home market merchandise that was not
identical but similar, the Department made adjustments to NV for
differences in physical characteristics of the merchandise pursuant to
section 773(a)(6)(C)(ii) of the Act.
Cost of Production Analysis
Because we disregarded sales that failed the cost test in the most
recently completed review, we had reasonable grounds to believe or
suspect that sales of the foreign like product under consideration for
determining NV in this review may have been made at prices below the
cost of production (COP), as provided in section 773(b)(2)(A)(ii) of
the Act. See Final Results 96/97. Therefore, pursuant to section
773(b)(1) of the Act, we initiated a COP investigation of sales by OBV.
A. Calculation of COP
In accordance with section 773(b)(3) of the Act, we calculated COP
based on the sum of the respondent's cost of materials and fabrication
employed in producing the foreign like product, plus the costs for
selling, general, and administrative expenses (SG&A), including
interest expense, and packing costs.
We relied on the home market sales and COP information that OBV
provided in its questionnaire responses, except as follows:
1. Use of Quarterly Cost Data
OBV calculated and reported quarterly per-unit manufacturing costs
because of the significant and consistent decline in metal prices
(i.e., copper and zinc) throughout the POR. On August 11, 1999,
however, OBV requested that the Department calculate weighted-average
costs on a monthly basis for use in the sales-below-cost test.
According to OBV, in this case the Department should deviate from its
preferred method of calculating a single weighted-average POR cost in
order to prevent distortions in the margin calculations that would
result from the metal price fluctuations, since these metal inputs
account for approximately 70 percent of the cost of manufacturing brass
sheet and strip.
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 period of review except in unusual cases where this
preferred method would not yield an appropriate comparison in the
margin calculation. See, e.g., Final Determination of Sales at Less
Than Fair Value: Stainless Steel Sheet and Strip in Coils from the
Republic of 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) (calculating quarterly weighted-average costs due to a
significant and consistent price and cost decline in the market); 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 quarterly weighted-average costs 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 quarterly weighted-average
costs).
We have reviewed the information on the record of this case 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 on a quarterly basis
throughout the POR. Since the metal costs represent a significant
percentage of the total cost of producing brass sheet and strip and the
cost of the metal dropped consistently throughout the POR, computing a
single POR weighted average cost would distort the results of the cost
test. In order to avoid this distortion, we have preliminarily relied
upon the submitted quarterly weighted-average costs rather than
calculating single weighted-average POR costs. We did not recalculate
OBV's submitted COP and constructed value (CV) data on a monthly
weighted-average basis because the monthly changes in selling prices
and input metal costs do not appear significant enough to require such
a short averaging period. As such, we compared weighted-average
quarterly COP figures for OBV, adjusted where appropriate (see below),
to home market sales of the foreign like product in the same quarter,
as required under section 773(b) of the Act, in order to determine
whether these sales had been made at prices below the COP.
2. Startup Adjustment
OBV claimed a startup adjustment to costs pursuant to section
773(f)(1)(C)(ii) of the Act, covering a nine-month startup period from
January 1998 through September 1998 for its new continuous strip
casting line, which replaced OBV's ring casting mill. We preliminarily
determine that OBV's new continuous strip casting mill constitutes a
new facility and that the new production facility required substantial
additional investment, within the meaning of section
773(f)(1)(C)(ii)(I) of the Act. The new vertical continuous strip
casting mill represents an investment in a new technology for the
production of brass sheet and strip. Consequently, the continuous strip
casting mill, which entirely replaced the former ring casting mill,
required the construction of an addition to OBV's plant containing
mostly new equipment that was custom made for OBV for installation in
this new mill, thereby also requiring considerable investment.
Secondly, we preliminarily determine that OBV's production levels at
the new facility have been limited due to technical factors associated
with the initial phase of commercial production, as required under
section 773(f)(1)(C)(ii)(II) of the Act. OBV specifically identified
these limiting technical factors in a proprietary memorandum to the
Department in support of its startup cost adjustment dated February 2,
1999. We examined these factors at the verification of OBV's submitted
cost data (see Cost Verification Report, dated August 2, 1999) and have
preliminarily determined that OBV has satisfied the criteria for
receiving a startup adjustment.
Regarding the startup period, we have accepted for the preliminary
results the submitted startup period that ends on September 30, 1998.
We based this preliminary finding, in large part, on a review of the
quantity of material input (i.e., production starts) at the new
facility during the POR. Specifically, the production starts represent
the best
[[Page 48763]]
measure of the facility's ability to produce at commercial production
levels. Based upon our analysis of OBV's production starts, we
preliminarily find that OBV attained commercial production levels in
October 1998. Accordingly, we have accepted OBV's submitted startup
cost adjustment.
3. General and Financial Expenses
We used the revised general and administrative (G&A) and financial
expense rates that OBV provided on the first day of the cost
verification, which the company revised to correct for clerical errors
made in originally calculating these items. In addition, we included in
G&A expenses the loss OBV recognized in the ordinary course of business
from holding metals in inventory.
B. Test of Home Market Prices
After calculating COP, we tested to see whether home market sales
of subject brass sheet and strip were made at prices below COP within
an extended period of time in substantial quantities and whether such
prices permitted the recovery of all costs within a reasonable period
of time. We compared model-specific COP to the reported home market
prices less any applicable movement charges, discounts and rebates,
where appropriate.
C. Results of COP Test
Pursuant to section 773(b)(2)(C) of the Act, where less than 20
percent of OBV's home market sales for a model were at prices less than
the COP, we did not disregard below-cost sales of that model because
the Department determined that the below cost sales were not made
within an extended period of time in ``substantial quantities.'' Where
20 percent or more of OBV's home market sales of a given product were
at prices less than the COP, we determined that such sales were made
within an extended period of time in substantial quantities in
accordance with section 773(b)(2)(C) of the Act. To determine whether
such sales were at prices which would not permit the full recovery of
all costs within a reasonable period of time, in accordance with
section 773(b)(2)(D) of the Act, we compared home market prices to the
weighted-average COP for the POR. When we found that below-cost sales
had been made in ``substantial quantities'' and were not at prices
which would permit recovery of all costs within a reasonable period of
time, we disregarded the below-cost sales in accordance with section
773(b)(1) of the Act.
Since there were sufficient sales that passed the cost test, it was
unnecessary to calculate CV in this case.
Level of Trade
In accordance with section 773(a)(1)(B) of the Act, to the extent
practicable, the Department determines NV based on sales in the
comparison market at the same level of trade (LOT) as the EP or, if
applicable, CEP transaction. The NV LOT is that of the starting-price
sales in the comparison market or, when NV is based on CV, that of the
sales from which we derive selling, general and administrative expenses
(SG&A) and profit. For EP, the U.S. LOT is also the level of the
starting-price sale, which is usually from the exporter to the
importer.
To determine whether comparison market sales are at different LOT's
than EP, the Department examines stages in the marketing process and
selling functions along the chain of distribution between the producer
and the unaffiliated (or arm's length) customers. If the comparison-
market sales are at a different LOT, and the differences affect price
comparability, as manifested in a pattern of consistent price
differences between the sales on which NV is based and comparison-
market sales at the LOT of the export transaction, the Department makes
a LOT adjustment under section 773(a)(7)(A) of the Act.
OBV claims that the Department can match U.S. sales to identical
sales at the same LOT in the home market and that a LOT adjustment is
therefore not necessary. OBV manufactures to order and ships directly
to original equipment manufacturers (OEMs) in the United States and
home market, and also ships directly to a home market trading company.
In order to determine whether U.S. sales were made at the same LOT as
sales in the home market, we examined OBV's questionnaire responses
with regard to its distribution system, including selling functions,
class of customer and selling expenses. We examined the chain of
distribution and the selling activities associated with sales reported
by OBV to its two home market customer categories (i.e., OEMs and
trading company). We found that the two home market customer categories
did not differ significantly from each other with respect to selling
activities, although there were slight differences between them for
sales process/marketing support and freight and delivery. Based on our
overall analysis, we found that the two home market categories
constituted one LOT.
OBV reported EP sales to its unaffiliated customers in one customer
category, OEM's, and therefore only had one level of trade for U.S.
sales. We examined the channel of distribution and the selling
activities associated with sales reported by OBV to the single LOT in
the Netherlands and in the United States and found that the LOT in
these two markets were similar. Therefore, all price comparisons are at
the same LOT and a LOT adjustment pursuant to section 773(a)(7)(A) of
the Act is unwarranted.
Currency Conversion
For purposes of these preliminary results, we made currency
conversions in accordance with section 773A(a) of the Act, based on the
official exchange rates published by the Federal Reserve. Section
773A(a) of the Act directs the Department to use a daily exchange rate
in order to convert foreign currencies into U.S. dollars, unless the
daily rate involves a ``fluctuation.'' In accordance with the
Department's practice, we have determined as a general matter that a
fluctuation exists when the daily exchange rate differs from a
benchmark by 2.25 percent. The benchmark is defined as the rolling
average of rates for the past 40 business days. When we determine that
a fluctuation exists, we substitute the benchmark for the daily rate.
Intent To Revoke
On August 31, 1998, OBV submitted a letter stating that OBV was the
sole producer of brass sheet and strip from the Netherlands, and
requested that pursuant to 19 CFR 351.222(b), the Department revoke the
antidumping duty order currently in place against certain brass sheet
and strip from the Netherlands. OBV submitted, along with its
revocation request, a certification stating that: (1) the company sold
subject merchandise at not less than NV during the POR, and that in the
future it would not sell such merchandise at less than NV (see 19 CFR
351.222(e)(1)(i)); and (2) the company has sold the subject merchandise
to the United States in commercial quantities during each of the past
three years. See 19 CFR 351.222(e)(1)(ii).2
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\2\ On September 1, 1999, OBV amended its request for revocation
to include a certification that, if the Department finds that OBV is
not the sole producer and exporter from the Netherlands, the company
agrees to immediate reinstatement in the order if, subsequent to
revocation, the Department concludes that the company sold the
subject merchandise at less than normal value (see 19 CFR
351.222(b)(iii)). Since the Department has concluded that OBV is the
sole producer and exporter from the Netherlands, the revocation
decision is whether to revoke the order on brass sheet and strip
from the Netherlands in whole.
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The Department ``may revoke, in whole or in part'' an antidumping
duty
[[Page 48764]]
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 each exporter and producer covered by the
order submit the following: (1) a certification that the company has
sold the subject merchandise at not less than 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)).
On February 2, 1999, the Department established a time frame for
parties to submit factual information relating to the Department's
consideration of OBV's request for the revocation of the antidumping
duty order on brass sheet and strip from the Netherlands. See Brass
Sheet and Strip From The Netherlands; Notice of Extension of Time
Limits for Sixth Antidumping Duty Administrative Review, 64 FR 5766
(Feb. 5, 1999). OBV and the petitioners submitted comments on April 1,
1999 and rebuttal comments on May 6, 1999.
Petitioners' Comments: The petitioners argue that the Department
should not revoke the order from the Netherlands because the factual
information presented by OBV does not support its position that (1) it
has sold subject merchandise in the United States in commercial
quantities during the last three annual review periods; and (2) it has
demonstrated that it is not likely to resume dumping in the future if
the antidumping order is revoked. The petitioners state that recent
determinations issued by the Department indicate that the ``commercial
quantities'' requirement applies with respect to both the volume of
sales as well as the number of sales made by a party requesting
revocation. See Pure Magnesium From Canada; Final Results of
Antidumping Duty Administrative Review and Determination Not to Revoke
Order in Part, 64 FR 12977, 12978 (Mar. 16, 1999) (Magnesium from
Canada). See also Certain Corrosion-Resistant Carbon Steel Flat
Products and Certain Cut-to-Length Carbon Steel Plate From Canada;
Final Results of Antidumping Duty Administrative Reviews and
Determination To Revoke in Part, 64 FR 2173, 2175 (Jan. 13, 1999)
(Certain Plate from Canada). The petitioners argue that the number and
quantity of sales of subject merchandise (radiator strip brass)
reported by OBV in the last three administrative reviews is a small
fraction of the volume and number of U.S. sales made prior to the
original investigation. They suggest that the only reasonable inference
that can be drawn from such a substantial decrease in sales is that OBV
withdrew from the U.S. market for the products that it was selling
during the original investigation (both radiator strip and electrical
connector strip) because it could not sell these products without
dumping. According to the petitioners, the fact that OBV has chosen to
source a large part of its radiator strip sales in the United States
from production by its American affiliate, Outokumpu American Brass
(American Brass), despite the fact that such merchandise currently
would be subject to a 0% ad valorem cash deposit rate, according to the
petitioner is further proof of OBV's inability to sell subject
merchandise in the United States without dumping. The petitioners argue
that in a similar situation, the Department denied revocation to a
German company who had shifted sourcing to its United States subsidiary
(see Brass Sheet and Strip From Germany; Final Results of Antidumping
Duty Administrative Review and Determination Not to Revoke in Part, 61
FR 49727, 49730 (Sept. 23, 1996) (Brass from Germany).
Finally, in order for the Department to make an objective
determination of the likelihood of future dumping if the order were
revoked, the petitioners requested that the Department undertake an
analysis of OBV's past practices as well as future competitive
conditions that would affect OBV's prices and costs in the United
States and the home market. Specifically, for both OBV and American
Brass, they requested that the Department obtain, for each product
category of subject merchandise, historical shipment data in both the
United States and the home market, production capacities, and
fabrication prices. The petitioners claim that this necessary
information was noticeably absent from OBV's otherwise voluminous
submission supporting revocation and that it is otherwise not available
to the petitioners.
Respondent Comments: OBV claims that it is a well-established past
practice of the Department to make revocation determinations on a case-
by-case basis, taking into consideration the industry in question,
relevant market conditions, and the record evidence. See Dynamic Random
Access Memory Semiconductors of One Megabyte or Above From the Republic
of Korea: Final Results of Antidumping Duty Administrative Review and
Determination Not To Revoke Order In Part, 62 FR 39809, 39812 (July 24,
1997) (DRAMS from Korea). In addition to three years of no dumping,
when evidence is placed on the record relating to the likelihood of
future dumping, the Department is required to consider the evidence.
See Steel Wire Rope From the Republic of Korea: Final Results of
Antidumping Duty Administrative Review and Revocation in Part of
Antidumping Duty Order, 63 FR 17986, 17988 (April 13, 1998) (Wire Rope
from Korea). In Wire Rope from Korea, the Department considered
information placed on the record which included conditions and trends
in the domestic and home market industries, currency movements, and the
ability of the respondent to compete in the U.S. market without
dumping. OBV argues that the information it has placed on the record,
as supported by an economic report that it commissioned from LECG, Inc.
(LECG Report), demonstrates that its sales have in fact been made in
commercial quantities,3 and that it is not likely to sell at
below normal value in the future if the order were revoked.
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\3\ OBV further argued that the ``commercial quantities'' factor
cited in 19 C.F.R. 351.222 (d)(1) applies only to antidumping
reviews in which the ``middle'' year does not involve a review. In
that regard, it contends that the Department's reliance upon
``commercial quantities'' in Magnesium From Canada notwithstanding,
it is OBV's position that the quantity of imports is only one of
many factors the Department may consider in making a ``likelihood''
determination.
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OBV notes that in Certain Plate from Canada the Department stated
that ``the Department must be able to determine that the company has
continued to participate meaningfully in the U.S. market during each of
the three years at issue.'' OBV claims that in fact the company shipped
at historical levels over the period covered by the first three
administrative reviews, i.e., February 8, 1988 through July 31, 1991,
discontinued shipments from 1992 until 1995, but resumed shipments when
it to began servicing certain niche markets in the United States. Upon
review and consideration of the ``unusual occurrences which might
affect the potential for production and exportation'' in deciding
commercial quantities (see Notice of Proposed
[[Page 48765]]
Rulemaking and Request for Public Comment, 61 FR 7308, 7320 (February
27, 1996) (Proposed Regulations)), OBV contends that the Department
will find that the shipments made during this and the previous two
administrative reviews were made in commercial quantities.
In evaluating the question of ``commercial quantities'' and
``likelihood,'' OBV argues that it is essential to understand that
OBV's decision to discontinue shipments of subject merchandise to the
United States in 1991 was not because OBV was unable to sell in the
United States at above normal value prices. Rather, it was due to the
acquisition of American Brass, a major United States producer of brass
sheet and strip products (and supporter of the revocation of this
order), by OBV's parent company, Outokumpu Oyj (Outokumpu). OBV claims
that this event caused a significant and permanent structural change in
the U.S. industry, vis-a-vis OBV, which makes it unlikely that OBV
would resume dumping in the United States.
OBV states that following the acquisition of American Brass,
production of subject merchandise was shifted from the Netherlands to
American Brass for a variety of management reasons unrelated to
pricing. Due to its obvious proximity to OBV's customers in the United
States, and the need to address the uncertainty brought about by the
on-going antidumping order, American Brass was required by Outokumpu to
produce in-scope brass radiator strip, while OBV continued to supply
thinner gauge radiator strip not covered by the scope of the order. 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. OBV claims that as a result of
a significant investment made in innovating radiator strip production
at its facilities, which has strengthened OBV's position as the world
cost leader in the production of radiator strip, Outokumpu intends to
shift production of in-scope radiator strip for its United States
customers back to the Netherlands This shift in production would also
allow American Brass, in which Outokumpu has also made significant new
investment in equipment, to focus on non-radiator strip production,
where it has its best efficiency, and away from radiator strip which is
not suited to its production process.
OBV claims that the LECG economic report clearly shows that it is
unlikely that OBV will resume pricing in-scope radiator strip, or any
other subject brass, in the United States market at less than normal
value even as it increases its shipments of radiator strip from the
Netherlands, for the following reasons: (1) The recent investment in
the vertical strip caster at OBV has made OBV the world cost leader in
radiator strip; (2) there is no direct competition to drive-down prices
from any integrated United States mill for in-scope radiator strip; (3)
the parent company to both OBV and American Brass would never allow OBV
to compete with American Brass in non-radiator strip where American
Brass has a comparative advantage. Thus, OBV will not export any
product to the United States except radiator strip; (4) OBV is already
operating at full capacity servicing its worldwide customer base.
Further, OBV could not significantly increase its production of non-
radiator strip brass, or shift production to other types of subject
merchandise, without significant additional investment; (5) many United
States customers of radiator strip are multinational producers who
would not tolerate price discrimination among their worldwide
affiliated entities; (6) the Dutch guilder has been weaker against the
U.S. dollar and is more likely to continue to fall rather than to
appreciate; (7) any increase in radiator strip exports beyond servicing
the current OBV/American Brass customer base would be moderated by the
limited market for radiator brass, given the ongoing advance of
aluminum as the preferred substitute for brass. OBV's conclusion based
on the LECG report is that selling at prices below normal value in the
future would be irrational and self-injurious.
Department Position: In determining whether to revoke an
antidumping order, we must conclude, pursuant to 19 CFR 351.222(b)(1),
that: (1) all producers and exporters have sold the subject merchandise
at not less than normal value to the United States in commercial
quantities for three consecutive reviews; and (2) it is not likely that
those persons will in the future sell the subject merchandise at less
than NV.
In the present case, the Department preliminarily finds that OBV is
the only exporter or producer of subject merchandise shipped to the
United States. This determination was based on an examination of 1997
and 1998 United States import statistics for the HTSUS item numbers
(7409.21 and 7409.29) which cover the subject merchandise as well as
information obtained during verification. See ``memorandum of
``Shipments of Brass Sheet & Strip from the Netherlands,'' dated August
31, 1999, from John Brinkmann to the file (OBV Shipment Memorandum);
see also Verification Report, dated August 31, 1999. The Department
also preliminarily finds that OBV had zero or de minimis dumping
margins for three consecutive reviews. Further, in determining whether
three years of no dumping establish a sufficient basis to make a
revocation determination, the Department must be able to determine that
the company continued to participate meaningfully in the U.S. market
during each of the three years at issue. See Certain Plate from Canada,
64 FR at 2175; see also Magnesium from Canada, 64 FR at 12979. This
practice has been codified in section 351.222(d)(1) of the Department's
regulations, which states that, ``before revoking an order or
terminating a suspended investigation, the Secretary must be satisfied
that, during each of the three (or five) years, there were exports to
the United States in commercial quantities of the subject merchandise
to which a revocation or termination will apply.'' 19 CFR 351.222(d)(1)
(emphasis added); see also 19 CFR 351.222(e)(1)(ii). For purposes of
revocation, the Department must be able to determine that past margins
are reflective of a company's normal commercial activity. Sales during
the POR which, in the aggregate, are an abnormally small quantity do
not provide a reasonable basis for determining that the discipline of
the order is no longer necessary to offset dumping.
With respect to the threshold matter of whether OBV made sales of
subject merchandise to the United States in commercial quantities, we
find that OBV's aggregate sales to the United States were made in
commercial quantities during all segments of this proceeding. Although
both the quantity and number of OBV's shipments to the United States of
subject merchandise have decreased since the imposition of the
antidumping duty order, we find that the Outokumpu acquisition of
American Brass and the subsequent transfer of in-scope radiator strip
production to the United States is reflective of 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). Prior to this acquisition, in 1989 and 1990, OBV
continued to ship in similar quantities to the pre-order period and the
subsequent
[[Page 48766]]
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. Examination of shipments of subject merchandise from OBV
from 1991 to the present shows that shipments began again in 1995 and
increased in quantity and number of sales each year through 1998 (see
OBV Shipment Memorandum). Thus, we can reasonably conclude that the
``zero'' margins calculated for OBV in each of the last three
administrative reviews are reflective of the company's normal
commercial experience.
With respect to 19 CFR 351.222(b)(1)(ii), the likelihood issue,
``when additional evidence is on the record concerning the likelihood
of future dumping, the Department is, of course obligated to consider
the evidence by the parties which relates to the likelihood of future
dumping.'' In doing so, the Department may consider such ``factors as
conditions and trends in the domestic and home market industries,
currency movements, and the ability of the foreign entity to compete in
the U.S. marketplace without [sales at less than normal value].'' Wire
Rope from Korea, 63 FR at 17988 (citing Brass from Germany, 61 FR at
49730); see also Proposed Regulation Concerning the Revocation of
Antidumping Duty Orders, 64 FR 29818, 29820 (June 3, 1999) (explaining
that when additional evidence as to whether the continued application
of an antidumping duty order is necessary to offset dumping is placed
on the record, ``the Department may consider trends in prices and
costs, investment, currency movements, production capacity, as well as
all other market and economic factors relevant to a particular
case.''); and Brass Sheet and Strip from Canada: Preliminary Results of
Antidumping Duty Administrative Review and Notice of Intent to Revoke
Order in Part, 63 FR 6519, 6523 (Feb. 9, 1998). Thus, based upon three
consecutive reviews of zero or de minimis margins, the Department
presumes that dumping is not likely to resume unless the Department has
been presented with evidence to demonstrate that dumping is likely to
resume if the order were revoked.
In this proceeding, the petitioners have not presented evidence
that would demonstrate that dumping is likely to resume if the order
were revoked. However, since the respondent placed information on the
record that addresses the types of factors considered by the
Department, we have considered this information in our determination of
whether dumping is likely to occur if the order on brass sheet and
strip from the Netherlands is revoked.
Based upon the evidence presented in this proceeding, we have
considered various factors in considering whether OBV is likely to sell
merchandise in the future at less than NV. We have reviewed the LECG
economic report and briefs presented by OBV and find no evidence that
indicates the likelihood of future dumping. Although OBV has indicated
that it intends to shift production of subject radiator strip from
American Brass back to the Netherlands, we find that there is no
evidence that this will lead to the reoccurrence of dumping in the
future. Further, the record shows that with the recent investment in
the new vertical strip caster, OBV has a considerable cost advantage
over American Brass in the production of radiator strip. Also, we
confirmed at verification that OBV is already producing to near
capacity and has limited capabilities to shift production from radiator
strip to other subject products, such as electrical connector strip,
where American Brass has a considerable cost advantage. Based on this
and other evidence presented by OBV as to the current structure of the
American market for brass radiator strip, and the relative weakness of
the Dutch guilder to the U.S. dollar, we find that it is not likely
that OBV will sell at less than normal value in the future.
Because both requirements under the regulation have been satisfied,
and the record establishes that OBV is the only known producer and
exporter of the subject merchandise from the Netherlands, we intend to
revoke the antidumping duty order on brass sheet and strip from the
Netherlands. If these preliminary findings are affirmed in our final
results, we will revoke the order with respect to brass sheet and strip
from the Netherlands. In accordance with 19 CFR 351.222(f)(3), we will
terminate the suspension of liquidation for any such merchandise
entered, or withdrawn from warehouse, for consumption on or after the
first day after the period under review, and will instruct Customs to
refund any cash deposit.
Preliminary Results of Review
As a result of our review, we preliminarily determine that the
following percentage weighted-average margin exists for the period
August 1, 1997 through July 31, 1998:
------------------------------------------------------------------------
Margin
Manufacturer/exporter (percent)
------------------------------------------------------------------------
OBV......................................................... Zero.
------------------------------------------------------------------------
We will disclose the calculations used in our analysis to parties
to this proceeding within five days of the publication date of this
notice. See 19 CFR 351.224(b). Any interested party may request a
hearing within 30 days of the date of publication of this notice. See
19 CFR 351.310(c). Any hearing, if requested, will be held 44 days
after the date of publication, or the first workday thereafter.
Interested parties may submit case briefs within 30 days of the date of
publication of this notice. Parties who submit case briefs in this
proceeding should provide a summary of the arguments not to exceed five
pages and a table of statutes, regulations, and cases cited. Rebuttal
briefs, limited to issues raised in the case briefs, may be filed not
later than 7 days after the date of filing of case briefs. The
Department will publish a notice of the final results of this
administrative review, which will include the results of its analysis
of issues raised in any such written comments, within 120 days from the
publication of these preliminary results.
Assessment Rate
Pursuant to 19 CFR 351.212(b), the Department calculated an
assessment rate for the importer of the subject merchandise. Upon
completion of this review, the Department will issue appraisement
instructions to the U.S. Customs Service. If these preliminary results
are adopted in our final results, we will instruct the U.S. Customs
Service to liquidate all entries subject to this review without regard
to antidumping duties.
If these preliminary results are not adopted in the final results,
we will instruct the U.S. Customs Service to assess antidumping duties
on all appropriate entries covered by this review if any importer-
specific assessment rates calculated in the final results of this
review are above de minimis (i.e., at or above 0.5 percent). For
assessment purposes, we intend to calculate importer-specific
assessment rates for the subject merchandise by aggregating the dumping
margins for all U.S. sales to each importer and dividing the amount by
the total entered value of the sales to that importer.
Cash Deposit Requirements
If the final results remain unchanged from these preliminary
results, no future
[[Page 48767]]
cash deposits will be required for the subject merchandise.
Notification to Importers
This notice serves as a preliminary reminder to importers of their
responsibility under 19 CFR 351.402 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 the subsequent
assessment of double antidumping duties.
This determination is issued and published in accordance with
sections 751(a)(1) and 777(i)(1) of the Act.
Dated: August 31, 1999.
Richard W. Moreland,
Acting Assistant Secretary for Import Administration.
[FR Doc. 99-23327 Filed 9-7-99; 8:45 am]
BILLING CODE 3510-DS-P