How can I correctly provide the following functionally from C# in Java?
[C#]
#define PRODUCTION //Change from sandbox to production to switch between both systems.
#if SANDBOX
using NetSuite.com.netsuite.sandbox.webservices;
#endif
#if PRODUCTION
using NetSuite.com.netsuite.webservices;
#endif
Java doesn't have a preprocessor - so the simple answer is that you can't.
This sort of thing is normally handled in Java using Dependency Injection - which is both more powerful and more flexible.
http://www.vogella.com/articles/DependencyInjection/article.html