[Federal Register Volume 64, Number 109 (Tuesday, June 8, 1999)]
[Notices]
[Pages 30481-30487]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-14511]
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DEPARTMENT OF COMMERCE
International Trade Administration
[A-580-812]
Dynamic Random Access Memory Semiconductors of One Megabit or
Above From the Republic of Korea: Preliminary Results of Antidumping
Duty Administrative Review and Notice of Intent Not To Revoke Order in
Part
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
ACTION: Notice of preliminary results of antidumping duty
administrative review and notice of intent not to revoke order in part.
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SUMMARY: In response to requests from one manufacturer/exporter and one
U.S. producer, the Department of Commerce (the Department) is
conducting an administrative review of the antidumping duty order on
dynamic random access memory semiconductors of one megabit or above
(DRAMs) from the Republic of Korea (Korea). The review covers two
manufacturers/exporters and one exporter of subject merchandise to the
United States during the period of review (POR), May 1, 1997 through
April 30, 1998. Based upon our analysis, the Department has
preliminarily determined that dumping margins exist for both
manufacturers/exporters and the exporter during the POR. If these
preliminary results are adopted in our final results of administrative
review, we will instruct the United States Customs Service (Customs) to
assess antidumping duties as appropriate. Interested parties are
invited to comment on these preliminary results. Parties who submit
arguments in this proceeding are requested to submit with the argument
(1) A statement of the issue, and (2) a brief summary of the argument.
EFFECTIVE DATE: June 8, 1999.
FOR FURTHER INFORMATION CONTACT: Alexander Amdur or John Conniff, AD/
CVD Enforcement, Group II, Office 4, Import Administration,
International Trade Administration, U.S. Department of Commerce, 14th
and Constitution Avenue, NW., Washington, DC. 20230; telephone: (202)
482-5346 or (202) 482-1009, respectively.
SUPPLEMENTARY INFORMATION:
Applicable Statute and Regulations
Unless otherwise stated, all citations to the Tariff Act of 1930,
as amended (the Act), are references to the provisions as of January 1,
1995, the effective date of the amendments made to the Act by the
Uruguay Round Agreements Act (URAA). In addition, unless otherwise
indicated, all references to the regulations of the Department are to
19 CFR part 351 (1998).
Background
On May 10, 1993, the Department published in the Federal Register
(58 FR 27250) the antidumping duty order on DRAMs from Korea. On May
12, 1998, the Department published a notice of ``Opportunity to Request
an Administrative Review'' of this antidumping duty order for the
period May 1, 1997 through April 30, 1998 (63 FR 26143). We received
timely requests for review from one manufacturer/exporter of subject
merchandise to the United States; LG Semicon Co., Ltd. (LG). The
petitioner, Micron Technology Inc., requested an administrative review
of LG and Hyundai Electronics Industries, Co., Ltd. (Hyundai), also a
Korean manufacturer of DRAMs, and The G5 Corporation (G5), a Korean
exporter of DRAMs. Moreover, the petitioner requested a cost
investigation of LG and Hyundai pursuant to section 773(b) of the Act.
On June 29, 1998, the Department initiated a review of LG, Hyundai, and
G5, including cost investigations of Hyundai and LG (63 FR 35188). The
POR for all respondents is May 1, 1997 through April 30, 1998. The
Department is conducting this review in accordance with section 751 of
the Act.
On January 20, 1999, the Department published in the Federal
Register (64 FR 3065) a notice extending the time for the preliminary
results from January 30, 1999, until May 31, 1999.
Scope of the Review
Imports covered by the review are shipments of DRAMs from Korea.
Included in the scope are assembled and unassembled DRAMs of one
megabit and above. Assembled DRAMs include all package types.
Unassembled DRAMs include processed wafers, uncut die, and cut die.
Processed wafers produced in Korea, but packaged or assembled into
memory modules in a third country, are included in the scope; wafers
produced in a third country and assembled or packaged in Korea, are not
included in the scope. The scope of this review includes memory
modules. A memory module is a collection of DRAMs, the sole function of
which is memory. Modules include single in-line processing modules
(SIPs), single in-line memory modules (SIMMs), or other collections of
DRAMs, whether unmounted or mounted on a circuit board. Modules that
contain other parts that are needed to support the function of memory
are covered. Only those modules which contain additional items which
alter the function of the module to something other than memory, such
as video graphics adapter (VGA) boards and cards, are not included in
the scope. The scope of this review also includes video random access
memory semiconductors (VRAMs), as well as any future packaging and
assembling of DRAMs. The scope of this review also includes removable
memory modules placed on motherboards, with or without a central
processing unit (CPU), unless the importer of motherboards certifies
with Customs that neither it, nor a party related to it or under
contract to it, will remove the modules from the motherboards after
importation. The scope of this review does not include DRAMs or memory
modules that are reimported for repair or replacement. The DRAMs
subject to this review are currently classifiable under subheadings
8542.11.0001, 8542.11.0024, 8542.11.0026, and 8542.11.0034 of the
Harmonized Tariff Schedule of the United States (HTSUS). Also included
in the scope are those removable Korean DRAMs contained on or within
products classifiable under subheadings 8471.91.0000 and 8473.30.4000
of the HTSUS. Although the HTSUS subheadings are provided for
convenience and Customs purposes, the written description of the scope
of this review remains dispositive.
Intent Not To Revoke
LG submitted a request to revoke it from the order covering DRAMs
from Korea pursuant to 19 CFR 351.222(b)(2). Under the Department's
regulations, the Department may revoke an order, in part, if the
Secretary concludes that, among other things: (1) ``[O]ne or more
exporters or producers covered by the order have sold the merchandise
at not less than normal value for a period of at least three
consecutive years''; (2) ``[i]t is not likely that those persons will
in the future sell the merchandise at less than normal value''; and (3)
``the producers or resellers agree in writing to the immediate
reinstatement of the order, as long as any producer or reseller is
subject to the order, if the
[[Page 30482]]
Secretary concludes that the producer or reseller, subsequent to the
revocation, sold the merchandise at less than (normal) value.'' See 19
CFR 351.222(a)(2). In this case, LG does not meet the first criterion
for revocation. In the previous segment of this proceeding the
Department found that LG sold subject merchandise at less than normal
value. See Notice of Final Results of Antidumping Administrative
Review: Dynamic Random Access Memory Semiconductors (DRAMs) of One
Megabit or Above from the Republic of Korea, 63 FR 50867, September 23,
1998) (Final Results 1998). Since LG has not met the first criterion
for revocation, i.e., zero or de minimis margins for three consecutive
reviews, the Department need not reach a conclusion with respect to the
second and third criteria. Therefore, on this basis, we have
preliminarily determined not to revoke the Korean DRAM antidumping duty
order with regard to LG.
Verification
As provided in section 782(i) of the Act, we verified information
provided by LG and Hyundai. We used standard verification procedures,
including on-site inspection of the respondents' facilities,
examination of relevant sales, financial, and/or cost records, and
selection of original documentation containing relevant information. G5
was not verified because the company refused to permit verification to
take place.
Facts Available
Facts Available
1. Application of Facts Available
Section 776(a)(2) of the Act provides that if any interested party:
(A) Withholds information that has been requested by the Department;
(B) fails to provide such information in a timely manner or in the form
or manner requested; (C) significantly impedes an antidumping
investigation; or (D) provides such information but the information
cannot be verified, the Department shall use facts otherwise available
in making its determination.
Based on information obtained from Customs, we have determined that
a number of sales that LG reported as third-country sales were actually
sales to the United States. Moreover, the Department has determined
that at the time LG made these sales, it knew, or should have known,
that the DRAMs were destined for consumption in the United States. This
is the same issue the Department addressed in the prior review period.
See the May 27, 1999 Memorandum regarding `` Dynamic Random Access
Memory Semiconductors of One Megabit or Above (DRAMs) from the Republic
of Korea--Total Unreported Sales''. Thus, we have determined that LG
withheld information we requested and significantly impeded the
antidumping proceeding.
On July 15, 1998, the Department sent G5 a Section A questionnaire
requesting that G5 provide information regarding any sales that it made
to the United States during the POR. On August 10, 1998, G5 stated that
it had not sold any of the subject merchandise to the United States
during the POR. On December 1, 1998, the Department issued a
supplemental questionnaire to G5 again requesting information regarding
any sales that were made to the United States during the POR.
Specifically, the Department requested that G5 examine the scope of the
review and state whether it had any shipments, or knowledge, directly
or indirectly, of sales to the United States of the subject merchandise
during the POR. The Department also requested that G5 state whether
they had any knowledge, directly or indirectly, of sales to business
entities in third countries in which the final destination of the sale
of the subject merchandise was the United States. In a December 17,
1998, letter, G5 stated that it has not sold or delivered DRAMs to the
United States during the POR.
On January 20, 1999, the Department obtained information from
Customs indicating that there were entries for consumption into the
United States of Korean DRAMs shipped from G5 during the POR. In a
March 3, 1999, letter, G5 acknowledged that it did have sales of LG
DRAMs to the United States during the POR. Thus, we have determined
that G5 withheld information we requested and significantly impeded the
antidumping proceeding.
Because LG and G5 failed to respond in full to our questionnaire,
pursuant to section 776(a) of the Act, we have applied facts otherwise
available to calculate their dumping margins. Moreover, while we have
preliminarily determined that certain sales should have been reported
as sales to the United States, we will continue to examine Customs data
as well as other data sources to determine whether there are any
additional sales that have not been properly reported.
2. Selection of Adverse Facts Available
Section 776(b) of the Act provides that, in selecting from the
facts available, adverse inferences may be used against a party that
failed to cooperate by not acting to the best of its ability to comply
with requests for information. See also Statement of Administrative
Action (SAA) accompanying the URAA, H.R. Doc. No. 316, 103d Cong., 2d
Sess. 870 (1994).
Section 776(b) states further that an adverse inference may include
reliance on information derived from the petition, the final
determination, the final results of prior reviews, or any other
information placed on the record. See also Id. at 868.
LG's decision to report as third-country sales a substantial number
of U.S. sales that it knew, or should have known, were U.S. sales,
indicates that LG failed to cooperate to the best of its ability.
Similarly, G5's failure to provide information on its U.S. sales or
permit verification demonstrates that G5 has failed to cooperate to the
best of its ability in this review. Therefore, the Department has
determined that an adverse inference is warranted in selecting among
the facts otherwise available for LG and G5, in accordance with section
776(b) of the Act. Consequently, we have based the margin for G5 on
total adverse facts available and for LG on partial adverse facts
available.
As partial adverse facts available for LG, we have calculated a
dumping margin based on both LG's reported and unreported sales to the
United States, the latter of which we were able to identify from
Customs data. While LG disagrees with the Department's position, LG
provided the selling expenses for the sales transactions obtained from
Customs. However, because LG did not report these transactions as U.S.
sales, we are not using the expenses. Furthermore, the Department did
not verify these expenses as they related to unreported sales.
Therefore, since LG did not report these as U.S. sales, we are using as
adverse facts available the highest U.S. selling expenses from LG's
reported transactions involving identical products. Where there were no
reported transactions involving identical merchandise, we used the
highest U.S. selling expenses from LG's reported transactions involving
similar merchandise.
As total adverse facts available for G5, we have assigned the
highest company-specific margin in the history of this proceeding,
which is the rate calculated for Hyundai in the instant review.
Per Megabit Cash Deposit Rates for Certain Memory Modules
On February 4, 1999, Compaq requested that the Department establish
per megabit cash deposit rates for imports of certain memory modules
[[Page 30483]]
containing DRAMs from Korea. Consistent with the practice established
in the LFTV investigation of DRAMs from Korea, the Department is
establishing per megabit cash deposit rates to be applied to memory
modules containing subject and non-subject merchandise. For a detailed
discussion, see memorandum regarding Calculation of Per Megabit Rate,
May 28, 1999.
Duty Absorption
On July 27, 1998, the petitioner requested that the Department
determine whether antidumping duties had been absorbed during the POR.
Section 751(a)(4) of the Act provides for the Department, if requested,
to determine during an administrative review initiated two or four
years after the publication of the order, whether antidumping duties
have been absorbed by a foreign producer or exporter, if the subject
merchandise is sold in the United States through an affiliated
importer. In this case, both Hyundai and LG sold to the United States
through an importer that is affiliated within the meaning of section
751(a)(4) of the Act.
Section 351.213(j)(2) of the Department's regulations provides that
for transition orders (i.e., orders in effect on January 1, 1995), the
Department will conduct duty absorption reviews, if requested, for
administrative reviews initiated in 1996 or 1998. Because the order
underlying this review was issued prior to January 1, 1995, and this
review was initiated in 1998, we will make a duty absorption
determination in this segment of the proceeding.
On January 26, 1999, the Department requested evidence that
unaffiliated purchasers will ultimately pay the antidumping duties to
be assessed on entries during the review period. Neither Hyundai nor LG
provided any evidence in response to the Department's request.
Accordingly, based on the record, we cannot conclude that the
unaffiliated purchaser in the United States will ultimately pay the
assessed duty. Therefore, we find that antidumping duties have been
absorbed by the producer or exporter during the POR.
Fair Value Comparisons
To determine whether sales of DRAMs from Korea to the United States
were made at less than fair value (LTFV), we compared the constructed
export price (CEP) to the normal value (NV), as described in the
``Constructed Export Price'' and ``Normal Value'' sections of this
notice, below. When making comparisons in accordance with section
771(16) of the Act, we considered all products as described in the
``Scope of Review'' section of this notice, above, that were sold in
the home market in the ordinary course of trade for purposes of
determining appropriate product comparisons to U.S. sales. Where there
were no sales of the identical or the most similar merchandise in the
home market that were suitable for comparison, we compared U.S. sales
to sales of the next most similar foreign like product, based on the
characteristics listed in Section B and C of our antidumping
questionnaire.
CEP
For LG and Hyundai, in calculating United States price, the
Department used CEP, as defined in section 772(b) of the Act, because
the merchandise was first sold to an unaffiliated U.S. purchaser after
importation. We calculated CEP based on delivered prices to
unaffiliated customers in the United States. We made deductions from
the starting price, where appropriate, for discounts, rebates, foreign
brokerage and handling, foreign inland insurance, air freight, air
insurance, U.S. duties and direct and indirect selling expenses to the
extent that they are associated with economic activity in the United
States in accordance with sections 772(c)(2) and 772(d)(1) of the Act.
These included credit expenses, commissions, as applicable, and
inventory carrying costs incurred by the respondents' U.S.
subsidiaries. We added duty drawback paid on imported materials in the
home market, where applicable, pursuant to section 772(c)(1)(B) of the
Act.
For Hyundai DRAMs that were further manufactured into memory
modules after importation, we deducted all costs of further
manufacturing in the United States, pursuant to section 772(b)(2) of
the Act. These costs consisted of the costs of the materials,
fabrication, and general expenses associated with further manufacturing
in the United States. Pursuant to section 772(d)(3) of the Act, we also
reduced the CEP by the amount of profit allocated to the expenses
deducted under section 772(d)(1) and (2).
For Hyundai modules that were imported by U.S. affiliates of
Hyundai and then further processed into computer workstations before
being sold to unaffiliated parties in the United States, we determined
that the special rule for merchandise with value added after
importation under section 772(e) of the Act applied. Section 772(e) of
the Act provides that, where the subject merchandise is imported by an
affiliated person and the value added in the United States by the
affiliated person is likely to exceed substantially the value of the
subject merchandise, we shall determine the CEP for such merchandise
using the price of identical or other subject merchandise sold in the
United States if there is a sufficient quantity of sales to provide a
reasonable basis for comparison. If there is not a sufficient quantity
of such sales or if we determine that using the price of identical or
other subject merchandise is not appropriate, we may use any other
reasonable basis to determine the CEP.
To determine whether the value added is likely to exceed
substantially the value of the subject merchandise, we estimated the
value added based on the difference between the averages of the prices
charged to the first unaffiliated purchaser for the merchandise as sold
in the United States and the averages of the prices paid for the
subject merchandise by the affiliated person. Based on this analysis,
we determined that the estimated value added in the United States by
Hyundai's U.S. affiliates accounted for at least 65 percent of the
price charged to the first unaffiliated customer for the merchandise as
sold in the United States. See 19 CFR 351.402 for an explanation of our
practice on this issue. Therefore, we determined that the value added
is likely to exceed substantially the value of the subject merchandise.
We also determined that there was a sufficient quantity of sales
available to provide a reasonable basis for comparison and that the use
of such sales is appropriate in accordance with 772(e). Accordingly,
for purposes of determining dumping margins for these sales, we have
used the weighted-average dumping margins calculated on sales of
identical or other subject merchandise sold to unaffiliated persons in
the United States. For further discussion, see Memorandum on Whether to
Determine the Constructed Export Price for Certain Further-Manufactured
Sales Sold by Hyundai Electronics Industries Co., Ltd. in the United
States During the Period of Review Under Section 772(e) of the Act
dated June 1, 1999.
Level of Trade
In accordance with section 773(a)(1(B) of the Act, to the extent
practical, we determined NV based on sales in the comparison market at
the same level of trade as the CEP sales. The NV level of trade is that
of the starting-price sales in the comparison market or, when NV is
based on constructed value (CV), that of the sales from which we derive
selling, general, and administrative (SG&A) expenses and profit. For
CEP, it is the level of the constructed sale from the exporter to the
importer.
[[Page 30484]]
To determine whether NV sales are at a different level of trade
than the CEP sales, we examined stages in the marketing process and
selling activities along the chain of distribution between the producer
and the unaffiliated customer. If the comparison-market sales are at a
different level of trade, and the difference affects 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 level of trade of the export transaction, we make a
level of trade adjustment under section 773(a)(7)(A) of the Act.
Finally, for CEP sales, if the NV level is more remote from the factory
than the CEP level and there is no basis for determining whether the
difference in the levels between NV and CEP affects price
comparability, we adjust NV under section 773(a)(7)(B) of the Act (the
CEP offset provision). See Notice of Final Determination of Sales at
Less Than Fair Value: Certain Cut-to Length Carbon Steel Plate from
South Africa, 62 FR 61731 (November 19, 1997).
We reviewed the questionnaire responses of Hyundai and LG to
establish whether there were sales at different levels of trade based
on the distribution system, selling activities, and services offered to
each customer or customer category. For both respondents, we identified
one level of trade in the home market with direct sales by the parent
corporation to the domestic customer. These direct sales were made by
both respondents to original equipment manufacturers (OEMs) and to
distributors. In addition, all sales, whether made to OEM customers or
to distributors, included the same selling functions. For the U.S.
market, all sales for both respondents were reported as CEP sales. The
level of trade of the U.S. sales is determined for the sale to the
affiliated importer rather than the resale to the unaffiliated
customer. We examined the selling functions performed by the Korean
companies for U.S. CEP sales (as adjusted) and preliminarily determine
that they are at a different level of trade from the Korean companies'
home market sales because the companies' CEP transactions were at a
less advanced stage of marketing. For instance, at the CEP level, the
Korean companies did not engage in any general promotion activities,
marketing functions, or price negotiations for U.S. sales. Because we
compared CEP sales to home market sales at a more advanced level of
trade, we examined whether a level of trade adjustment may be
appropriate. In this case, both respondents only sold at one level of
trade in the home market. Therefore, there is no basis upon which
either respondent can demonstrate a pattern of consistent price
differences between levels of trade. Further, we do not have
information which would allow us to examine pricing patterns based on
the respondents' sales of other products and there is no other record
information on which such an analysis could be based. Because the data
available do not provide an appropriate basis for making a level of
trade adjustment and the level of trade in the home market is at a more
advanced stage of distribution than the level of trade of the CEP
sales, a CEP offset is appropriate. Both respondents claimed a CEP
offset. We applied the CEP offset to adjusted home market prices or CV,
as appropriate. The CEP offset consisted of an amount equal to the
lesser of the weighted-average U.S. indirect selling expenses and U.S.
commissions or home market indirect selling expenses. See the
Memorandum on Level of Trade for LG, dated May 27, 1999 and Memorandum
on Level of Trade for Hyundai, dated May 28, 1999.
NV
Home Market Viability
In order to determine whether there were a sufficient sales of
DRAMs in the home market to serve as a viable basis for calculating NV,
we compared the respondents' volume of home market sales of the foreign
like product to the volume of U.S. sales of the subject merchandise, in
accordance with section 773(a)(1)(C) of the Act. Because the aggregate
volume of home market sales of the foreign like products for both
Hyundai and LG was greater than five percent of the respective
aggregate volume of U.S. sales of the subject merchandise, we
determined that the home market provides a viable basis for calculating
NV for all respondents.
Cost of Production (COP)
We disregarded Hyundai's and LG's sales found to have been made
below the COP in the Notice of Final Results of Antidumping
Administrative Review: Dynamic Random Access Memory Semiconductors
(DRAMs) of One Megabit or Above from the Republic of Korea, 62 FR
39809, July 24, 1997), the most recent segment of this proceeding for
which final results were available at the time of the initiation of
this review. Accordingly, the Department, pursuant to section 773(b) of
the Act, initiated COP investigations of both respondents for purposes
of this administrative review.
We calculated the COP based on the sum of the costs of materials
and fabrication employed in producing the foreign like product, SG&A
expenses, and the cost of all expenses incidental to placing the
foreign like product in condition, packed, ready for shipment, in
accordance with section 773(b)(3) of the Act. We compared weighted-
average quarterly COP figures for each respondent, adjusted where
appropriate (see below), to home market sales of the foreign like
product, as required under section 773(b) of the Act, in order to
determine whether these sales had been made at prices below the COP. In
determining whether to disregard home market sales made at prices below
the COP, we examined whether such sales were made: (1) Within an
extended period of time in substantial quantities, and (2) at prices
which permitted the recovery of all costs within a reasonable period of
time in the normal course of trade, in accordance with sections
773(b)(1)(A) and (B) of the Act. In accordance with section
773(b)(2)(D) of the Act, we conducted the recovery of cost test using
annual cost data.
Pursuant to section 773(b)(2)(C)(i) of the Act, where less than 20
percent of home market sales of a given model were at prices less than
the COP, we did not disregard any below-cost sales of that model
because the below-cost sales were not made in ``substantial
quantities''. Where 20 percent or more of home market sales of a given
model were at prices less than the COP, we disregarded the below-cost
sales because we determined that the below-cost sales were made in
``substantial quantities'' and at prices that would not permit recovery
of all costs within a reasonable period of time, in accordance with
section 773(b)(2)(D) of the Act.
We found that for both respondents, more than 20 percent of their
home market sales for certain products were made at prices that were
less than the COP. Furthermore, the prices did not permit the recovery
of costs within a reasonable period of time. We, therefore, disregarded
the below-cost sales and used the remaining above-cost sales as the
basis for determining NV, in accordance with section 773(b)(1). For
those sales for which there were no comparable home market sales in the
ordinary course of trade, we compared CEP to CV pursuant to section
773(a)(4) of the Act.
Adjustments to COP
Research & Development (R&D)
Consistent with our past practice in this case, the R&D element of
COP was based on R&D expenses related to all
[[Page 30485]]
semiconductor products, not product-specific expenditures. See
Memorandum Regarding Cross Fertilization of Research and Development in
the Semiconductor Industry, dated May 29, 1999.
In addition, Hyundai and LG both changed their accounting
methodologies for R&D expenses during this POR. Specifically, in 1997,
both Hyundai and LG changed their accounting methodology from
recognizing the R&D costs as expenses when incurred, to deferring such
costs and amortizing them over five years using the straight-line
method. Furthermore, in 1997, LG also began to completely defer certain
R&D costs for long-term R&D projects until the relevant revenue is
realized. While the Department did not become aware of this fact until
the current POR, Hyundai began to completely defer certain R&D costs in
the same manner in 1996. Both Hyundai and LG based the R&D expenses
that they reported to the Department for this POR on the amount of R&D
costs that they expensed in 1997.
Hyundai and LG have repeatedly changed their accounting
methodologies for R&D expenses throughout the course of this
proceeding. In their 1991 financial statements (which the Department
used, in part, in the original investigation to calculate R&D
expenses), both Hyundai and LG amortized R&D expenses. See Final
Determination of Sales at Less Than Fair Value: DRAMs from Korea, 58 FR
15467 (March 23, 1993) (``Final Determination''); and Micron Technology
v. United States, 893 F. Supp. 21, 28 (CIT 1995) (``Micron I''). In
their 1993 financial statements, LG changed its accounting methodology
for R&D expenses, and expensed R&D expenses in the year incurred. See
Notice of Final Results of Antidumping Administrative Review: Dynamic
Random Access Memory Semiconductors of One Megabit or Above from the
Republic of Korea, 61 FR 20216 (May 6, 1996); and Micron Technology v.
United States and LG Semicon Co., Ltd., and LG Semicon America, Inc.
(Slip Op. 99-12, January 28, 1999) (Micron II). Hyundai changed its R&D
accounting methodology, and also began to expense R&D expenses in the
year incurred, sometime between 1991 and 1996. In 1997, as explained
above, Hyundai and LG changed their accounting methodologies a second
time, switching back to the amortizing methodology they previously used
in 1991. Furthermore, in 1996 and 1997, Hyundai and LG, respectively,
began to use a third type of accounting methodology by completely
deferring certain R&D expenses until revenue is realized from the R&D
project.
Section 773(f)(1)(A) of the Act states that costs ``shall normally
be calculated based on the records of the exporter or producer of the
merchandise, if such records are kept in accordance with the GAAP of
the exporting country (or the producing country where appropriate) and
reasonably reflect the costs associated with production and sale of the
merchandise.'' The SAA states that, in determining whether a company's
records reasonably reflect costs, Commerce will consider U.S. GAAP
employed by the industry in question. See SAA at 834. Further, as
explained in the SAA, ``[t]he exporter or producer will be expected to
demonstrate that it has historically utilized such allocations,
particularly with regard to the establishment of appropriate
amortization and depreciation periods and allowances for capital
expenditures and other development costs.'' See Id. See also Final
Results 1998, 63 FR at 50871.
The Department has preliminarily determined that Hyundai's and LG's
revised accounting methodologies for R&D expenses do not reasonably
reflect the costs associated with the production of DRAMs. These
revisions in accounting methodologies result in distortions in the
costs attributed to the POR and are not consistent with U.S. GAAP.
Furthermore, there is no information on the record to justify this
change in accounting methodologies. Therefore, the Department has
preliminary determined, consistent with Hyundai's and LG's historical
R&D accounting methodology and U.S. GAAP, to expense all R&D expenses
that Hyundai and LG incurred in 1997, and, consistent with Micron II
Remand, to expense any R&D expenses that Hyundai expensed in 1997,
which Hyundai had previously incurred but not previously expensed. For
further discussion of this issue, see Memorandum on Whether to Accept
the Reported Research & Development Expenses of Hyundai Electronics
Industries Co., Ltd. and LG Semicon, Ltd., dated June 1, 1999.
We also note that a number of the projects that LG classified as
R&D expenses apply to products which were being commercially produced
in 1997. The Department will examine these projects further to
determine whether they are more appropriately classified as part of
COM.
Company-Specific Adjustments
Hyundai
1. We excluded certain non-operating expenses from Hyundai's R&D
expenses.
2. We adjusted Hyundai's depreciation expenses to reflect the net
effect of increasing depreciation, consistent with Final Results 1998,
for special depreciation that would have been taken had the respondent
continued to take special depreciation on certain equipment for the
period of 1997 and the first half of 1998 and decreasing depreciation
expenses to reflect the amount of special depreciation which the
Department expensed in Final Results 1998, but which Hyundai expensed
in its own books and records, and reported in its response, for the
current POR.
3. We adjusted Hyundai's general and administrative (``G&A'')
expense rate by excluding foreign currency transaction gains and losses
related to account receivables.
4. We adjusted Hyundai's interest expense rate by excluding offsets
of long-term interest income.
See Memorandum on Hyundai Electronics Industries Co., Ltd.:
Calculations for the Preliminary Results, dated June 1, 1999.
LG
1. We included in COP certain costs for an operational new
fabrication facility which LG excluded from its COM by recording them
in a construction-in-progress account.
2. We adjusted LG's G&A expense rate by excluding foreign currency
transaction gains and losses related to account receivables.
3. We adjusted LG's interest expense rate by including translation
gains and losses and the amortized amounts of deferred foreign currency
translation gains and losses, consistent with the Department's practice
(see Final Results 1998, 63 FR at 50872). See Memorandum on LG Semicon
Co., Ltd.,: Preliminary Results of Review Analysis Memorandum, dated
June 1, 1999.
CV
In accordance with section 773(e) of the Act, we calculated CV
based on the respondents' cost of materials and fabrication employed in
producing the subject merchandise, SG&A expenses, the profit incurred
and realized in connection with the production and sale of the foreign
like product, and U.S. packing costs. We used the cost of materials,
fabrication, and SG&A expenses as reported in the CV portion of the
questionnaire response, adjusted as discussed in the COP section above.
[[Page 30486]]
We used the U.S. packing costs as reported in the U.S. sales portion of
the respondents' questionnaire responses. For selling expenses, we used
the average of the selling expenses reported for home market sales that
survived the cost test, weighted by the total quantity of those sales.
For actual profit, we first calculated the difference between the home
market sales value and home market COP, and divided the difference by
the home market COP. We then multiplied this percentage by the COP for
each U.S. model to derive an actual profit.
Price Comparisons
For price-to-price comparisons, we based NV on the price at which
the foreign like product is first sold for consumption in the exporting
country, in the usual commercial quantities and in the ordinary course
of trade, and to the extent practicable, at the same level of trade, in
accordance with section 773(a)(1)(B)(i) of the Act. We compared the
U.S. prices of individual transactions to the monthly weighted-average
price of sales of the foreign like product. In the case of LG, we
calculated NV based on delivered prices to unaffiliated customers and,
where appropriate, to affiliated customers in the home market.
With respect to LG, we tested those sales that LG made in the home
market to affiliated customers to determine whether they were made at
arm's length and could be used in our analysis. See 19 CFR 351.102(b).
To test whether these sales were made at arm's length prices, we
compared, on a model-specific basis, prices of sales to affiliated and
unaffiliated customers, net of discounts, all movement charges, direct
selling expenses, and packing. For tested models of the subject
merchandise, prices to an affiliated party were on average 99.5 percent
or more of the price to unaffiliated parties and we determined that
sales made to the affiliated party were at arm's length. See 19 CFR
351.403(c) and Preamble to the Department's regulations, 62 FR at
27355.
With respect to both CV and home market prices, we made
adjustments, where appropriate, for inland freight, inland insurance,
and discounts. We also reduced CV and home market prices by packing
costs incurred in the home market, in accordance with section
773(a)(6)(B)(i) of the Act. In addition, we increased CV and home
market prices for U.S. packing costs, in accordance with section
773(a)(6)(A) of the Act. We made further adjustments to home market
prices, when applicable, to account for differences in physical
characteristics of the merchandise in accordance with section
773(a)(6)(c)(ii) of the Act. Finally, pursuant to section
773(a)(6)(C)(iii) of the Act, we made an adjustment for differences in
circumstances of sale by deducting home market direct selling expenses
(credit expenses and bank charges) and adding any direct selling
expenses associated with U.S. sales not deducted under the provisions
of section 772(d)(1) of the Act. For Hyundai and LG, we recalculated
the credit expense on home market sales using the interest rate of the
currency in which the sales were made.
Preliminary Results of Review
As a result of this review, we preliminarily determine that the
following weighted-average dumping margins exist for May 1, 1997
through April 30, 1998:
------------------------------------------------------------------------
Percent
Manufacturer/exporter margin
------------------------------------------------------------------------
The G5 Corporation......................................... 13.11
Hyundai Electronic Industries, Inc......................... 13.11
LG Semicon Co., Ltd........................................ 10.67
------------------------------------------------------------------------
Pursuant to 19 CFR 351.224(b), the Department will disclose to
parties to the proceeding any calculations performed in connection with
these preliminary results within 5 days of the date of publication of
this notice. Any interested party may request a hearing within 30 days
of the date of publication of this notice. Parties who submit arguments
in this proceeding are requested to submit with each argument: (1) A
statement of the issue and (2) a brief summary of the argument. All
case briefs must be submitted within 30 days of the date of publication
of this notice. Rebuttal briefs, which are limited to issues raised in
the case briefs, may be filed not later than seven days after the case
briefs are filed. A hearing, if requested, will be held two days after
the date the rebuttal briefs are filed or the first business day
thereafter.
The Department will publish a notice of the final results of this
administrative review, which will include the results of its analysis
of the issues raised in any written comments or at the hearing, within
120 days from the publication of these preliminary results.
The Department shall determine, and Customs shall assess,
antidumping duties on all appropriate entries. The Department will
issue appraisement instructions directly to Customs. The final results
of this review shall be the basis for the assessment of antidumping
duties on entries of merchandise covered by the determination and for
future deposits of estimated duties. We have calculated importer-
specific STD valorem duty assessment rates based on the ratio of the
total amount of dumping margins calculated for the examined sales made
during POR to the entered value of sales used to calculate those
duties. These rates will be assessed uniformly on all entries of each
particular importer made during the POR.
Furthermore, the following deposit requirements will be effective
upon completion of the final results of these administrative reviews
for all shipments of DRAMs from Korea entered, or withdrawn from
warehouse, for consumption on or after publication date of the final
results of these administrative reviews, as provided by section
751(a)(1) of the Act: (1) The cash deposit rate for the reviewed
companies will be the rate established in the final results of this
administrative review, except if the rate is less than 0.5 percent STD
valorem and, therefore, de minimis, no cash deposit will be required;
(2) for exporters not covered in this review, but covered in the
original LTFV investigation or a previous review, the cash deposit rate
will continue to be the company-specific rate published in the most
recent period; (3) if the exporter is not a firm covered in this
review, a previous review, or the original LTFV investigation, but the
manufacturer is, the cash deposit rate will be the rate established for
the most recent period for the manufacturer of the merchandise; and (4)
if neither the exporter nor the manufacturer is a firm covered in this
or any previous reviews or the LTFV investigation, the cash deposit
rate will be 3.85 percent, the ``all-others'' rate established in the
LTFV investigation. These deposit requirements, when imposed, shall
remain in effect until publication of the final results of the next
administrative review.
This notice serves as a preliminary reminder to importers of their
responsibility under 19 CFR 351.402(f) of the Department's regulations
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 administrative
review and this notice are in accordance with sections 751(a)(1) and
777(i)(1) of the Act.
[[Page 30487]]
Dated: June 1, 1999.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 99-14511 Filed 6-7-99; 8:45 am]
BILLING CODE 3510-DS-P