[Federal Register Volume 62, Number 142 (Thursday, July 24, 1997)]
[Notices]
[Pages 39809-39824]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-19552]
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DEPARTMENT OF COMMERCE
International Trade Administration
[A-580-812]
Notice of Final Results of Antidumping Duty Administrative Review
and Determination Not To Revoke Order In Part: Dynamic Random Access
Memory Semiconductors of One Megabyte or Above From the Republic of
Korea
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
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SUMMARY: On March 18, 1997, the Department of Commerce (the Department)
published the preliminary results of its administrative review of the
antidumping duty order and notice of intent not to revoke, in part, the
antidumping duty order on dynamic random access memory semiconductors
(DRAMs) of one megabyte or above from the Republic of Korea (61 FR
36029). The review covers exports of the subject merchandise to the
United States by LG Semicon Co., Ltd. (LGS, formerly Goldstar Electron
Co., Ltd.) and Hyundai Electronics Industries, Inc. (Hyundai). The
period of review (POR) is May 1, 1995 through April 30, 1996. This is
the third review period.
As a result of our analysis of the comments received, the
antidumping margins have changed from those presented in our
preliminary results.
EFFECTIVE DATE: July 24, 1997.
FOR FURTHER INFORMATION CONTACT: Thomas F. Futtner, AD/CVD Enforcement,
Group II, Office 4, Import Administration, International Trade
Administration, U.S. Department of Commerce, 14th Street and
Constitution Avenue, NW., Washington, DC 20230, telephone: (202) 482-
3814.
SUPPLEMENTARY INFORMATION:
The Applicable Statute and Regulations
Unless otherwise indicated, all citations to the statute are
references to the provisions effective January 1, 1995, the effective
date of the amendments made to the Tariff Act of 1930 (the Act) by the
Uruguay Round Agreements Act (URAA). In addition, unless otherwise
indicated, all citations to the Department's regulations are to 19 CFR
Part 353 (1997).
Background
On May 10, 1993, the Department published in the Federal Register
(58 FR 27250) the antidumping duty order on DRAMs from the Republic of
Korea. On May 8, 1996, the Department published a notice of
``Opportunity to Request an Administrative Review'' of this antidumping
duty order for the period May 1, 1995, through April 30, 1996 (61 FR
20791). In accordance with 19 CFR 353.22(a)(2), in May 1996, LGS and
Hyundai (collectively the respondents) requested that the Department
conduct an administrative review of their shipments of DRAMs to the
United States during this period. In addition, both respondents
requested that the Department revoke the antidumping order, in part,
pursuant to section 353.25(a)(2) of the Department's regulations. We
also received a request from the petitioner, Micron Technologies Inc.,
that an administrative review of these same two Korean manufacturers of
DRAMs be conducted. On June 25, 1996, the Department published a notice
of initiation of administrative review (61 FR 32771). Based upon the
fact that we disregarded sales found to have been made below the cost
of production (COP) in the original less-than-fair-value (LTFV)
investigation, which was the most recent period for which final results
were available when this review was initiated, on the same date we
automatically initiated an investigation to determine whether Hyundai
and LGS made sales of subject merchandise below the COP during the POR.
On March 18, 1997, the Department published a notice of preliminary
results of administrative review and intent not to revoke the order on
DRAMs of one megabyte or above from the Republic of Korea (62 FR
12794). Case and rebuttal briefs were submitted on April 18, 1997, and
April 29, 1997, respectively, by the petitioner, both respondents and
the following interested parties: (1) Compaq Computer Corporation
(Compaq); (2) Digital Equipment Corporation (Digital), and (3) Dell
Computer Corporation (Dell). At the request of LGS and Hyundai, a
public hearing was held on May 5, 1997. The Department has now
completed its administrative review in accordance with section 751 of
the Act.
Scope of the Review
Imports covered by the review are shipments of DRAMs of one
megabyte and above from the Republic of Korea (Korea). Included in the
scope are assembled and unassembled DRAMs of one megabyte 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 the Customs
Service 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 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
[[Page 39810]]
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 in Part
Section 751(d)(1) of the Act provides that the Department ``may
revoke'' an antidumping order, in whole or in part, after conducting an
appropriate review. 19 U.S.C. 1675(d)(1) (1995). The Department's
regulations elaborate upon this standard. Section 353.25(a)(2) provides
that the Department may revoke an order, in part, if the Secretary
concludes: (1) ``One or more producers or resellers covered by the
order have sold the merchandise at not less than foreign market value
for a period of at least three consecutive years;'' (2) ``it is not
likely that those persons will in the future sell the merchandise at
less than foreign market value;'' and (3) * * * ``the producers or
resellers agree in writing to their immediate reinstatement in the
order as long as any producer or reseller is subject to the order, if
the Secretary concludes under section 353.22(f) that the producer or
reseller, subsequent to the revocation, sold the merchandise at less
than foreign market value.''
As noted above, this administrative review is being conducted
pursuant to the Tariff Act, as amended by the URAA. The URAA revised
certain terminology in the Act, including substituting the term
``normal value'' for ``foreign market value'' and ``exporter'' for
``reseller.'' However, because this review was initiated prior to the
date the revised regulations became final, the 1996 regulations are
still applicable. These regulations use the previous terminology. We
note that the new regulations do not alter the substantive requirements
for revocation. See Antidumping Duties; Countervailing Duties; Final
Rule, 62 FR 27296, 27399 (May 19, 1997) (section 351.222(b)(2)).
In this case, the first and third criteria for revocation have been
met. The Department found that LGS and Hyundai did not sell at less
than foreign market value in the first and second reviews under this
order. Also, in this administrative review, the respondents were found
not to have made sales at less than normal value. Further, both
respondents have certified to their immediate reinstatement in the
order pursuant to the third criterion noted above. Accordingly, the key
question is whether the Department is satisfied that it is ``not
likely'' the respondents will sell at prices below normal value in the
future.
In evaluating the ``not likely'' issue in numerous cases, Commerce
has considered three years of no dumping margins, plus a respondent's
certification that it will not dump in the future, plus its agreeing to
immediate reinstatement in the order all to be indicative of expected
future behavior. In such instances, this was the only information
contained in the record regarding the likelihood issue. See, e.g.,
Fresh Cut Flowers from Mexico, 61 FR 63822, 63825 (December 2, 1996);
Polyethylene Terephthalate Film from Korea, 61 FR 58374, 58376
(November 14, 1996); Tapered Roller Bearings and Parts Thereof from
Japan, 61 FR 57629, 57651 (November 7, 1996).
In other cases, when additional evidence is on the record
concerning the likelihood of future dumping, Commerce is, of course,
obligated to consider that evidence. In this regard, in evaluating such
record evidence to determine whether future dumping is not likely, the
Department has a longstanding practice of examining all relevant
economic factors and other information on the record in a particular
case. In particular, depending upon the facts of a case, we 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].'' Brass Sheet and Strip from Germany, 61 FR 49727, 49730
(September 23, 1996) (Brass Sheet and Strip); accord Frozen
Concentrated Orange Juice from Brazil, 56 FR 52510, 52511 (October 21,
1991) (FCOJ); and Titanium Sponge from Japan, 53 FR 26099, 26100 (July
11, 1988) (Titanium Sponge).
In summary, the Department engages in an impartial, balanced
analysis of all of the information on the record. Pursuant to the
Department's regulations, the Department cannot revoke this order
unless it concludes that it is not likely that the respondents will
dump in the future. As we fully explain below, the Department is not
satisfied, based on the evidence on the record, that the not likely
standard has been made.
Prior to issuing the preliminary results in this administrative
review, the Department, at the request of the parties, established a
procedure for the submission of factual information regarding
revocation. The petitioner and both respondents made several
submissions of information relevant to whether future dumping is not
likely, including various in-depth economic analyses. Accordingly, at
the time of its preliminary results, the Department had an extensive
factual record before it.
Based on an analysis of that record, the Department preliminarily
determined that the likelihood criterion for revocation had not been
met. Therefore, on March 18, 1997, the Department published a notice of
intent not to revoke the order concerning DRAMs from Korea (62 FR
12794) with respect to LGS and Hyundai. Thereafter, the Department
received a number of comments on the Department's preliminary results
from the petitioner, LGS, Hyundai, Compaq, Digital and Dell in the case
and rebuttal briefs. The case and/or rebuttal briefs of the petitioner,
LGS, Hyundai and Compaq contained additional factual information, which
the Department had previously requested. The data presented in these
briefs was therefore taken into consideration in the Department's final
analysis, as well as publicly available data regarding current market
conditions.
The DRAM industry is highly cyclical in nature with periods of
sharp upturn and downturn in market prices. In the past, the DRAM
industry has been characterized by dumping during periods of
significant downturn. For instance, various foreign producers were
found to have dumped during the downturn in the mid-1980s (see Dynamic
Random Access Memory Devices from Japan, 51 FR 15943 (April 29, 1986)),
and the Korean respondents in this proceeding were found to have dumped
in the less than fair value investigation during 1991-1992, the last
period when there was a significant downturn in the DRAM industry.
Because DRAMs are a commodity product, DRAM producers/resellers must
price aggressively during a downturn period in order to stay
competitive and maintain their customer base. This is especially true
during the lowest point in the downturn. Therefore, it is reasonable to
conclude that information regarding the selling activities and pricing
practices of respondents, as well as other market conditions, during
periods of significant downturn are relevant to whether dumping is not
likely to occur in the future. Thus, as discussed further in comment 3,
below, we found the January through December 1996 time period to be
particularly relevant to the ``not likely'' issue because it
corresponded with a significant ``downturn'' in the DRAM industry.
In its April 18, 1997, case brief, Compaq proposed that the
respondents participate in a DRAM data collection program. In its
proposal, Compaq presumed that the antidumping order
[[Page 39811]]
would be revoked, and that under such a program, respondents would
agree to maintain cost and pricing data which the respondents would
submit to the Department should an antidumping petition be filed in the
future. On June 17, 1997, the Government of Korea submitted a similar
proposal. On the same date, the respondents stated their willingness to
participate in such a program, and argued that this proposal should be
taken into consideration in the Department's likelihood determination
in this proceeding. The petitioner submitted its opposition to any such
data collection program on June 14, 1997, and July 3, 1997.
Other than Compaq's April 18, 1997, submission, all submissions
regarding the proposed data collection program were received late in
the proceeding, after the deadline for submitting new information. We
note further that the proposal itself is precatory in nature. No such
data collection program is currently in place. Therefore, while we have
considered this proposed data collection program, we find that this
program has no bearing on the likelihood issue.
As discussed further in comment 4, below, based on our analysis of
the DRAM industry generally and, in particular, during the 1996 time
frame, we find that the likelihood standard has not been met.
Therefore, we have not revoked the antidumping duty order on DRAMs from
Korea with respect to LGS and Hyundai.
Analysis of Comments Received
We invited interested parties to comment on the preliminary results
of this administrative review. As noted above, we received timely
comments from the petitioner, LGS, Hyundai, Compaq, Digital and Dell.
I. Revocation Comments
Comment 1: Whether the Department Erred when it Issued a
Preliminary Intent Not to Revoke the Order In Part.
Hyundai and Compaq argue that the Department's failure to publish a
notice of ``Intent to Revoke Order (In Part)'' with its preliminary
results is contrary to case precedent. Both parties contend that,
barring extremely unusual circumstances not present in this proceeding,
it is the Department's practice to revoke orders whenever a respondent
has established three consecutive years of no dumping and has furnished
a written statement agreeing to the immediate reinstatement of the
order in the event the Secretary concludes that the respondent sells at
less than normal value in the future. Hyundai and Compaq cite numerous
cases where the Department has granted revocation, including Steel Wire
Rope from the Republic of Korea, 62 FR 17171 (April 9, 1997) (Steel
Wire Rope); Certain Forged Steel Crankshafts from the United Kingdom,
62 FR 16768, 16771 (April 8, 1997) (Crankshafts); and Fresh Cut Flowers
from Mexico, 61 FR 63825 (December 2, 1996).
Hyundai further claims that the Department's failure to issue a
preliminary intent to revoke the order, in part, despite three
consecutive years of de minimis margins, is in conflict with the intent
of Article 11 of the WTO Antidumping Agreement, which states that an
antidumping duty order ``shall remain in force only as long and to the
extent necessary to counteract the dumping which is causing injury,''
and that an order must be terminated ``immediately'' if the authorities
determine that the order is no longer warranted.
Finally, Hyundai argues that the Department's reliance on Brass
Sheet and Strip as case precedent for its preliminary finding regarding
the ``not likely'' issue was misplaced. Specifically, Hyundai asserts
that the facts in Brass Sheet and Strip differ from the facts in this
proceeding in the following ways: (1) In contrast to Brass Sheet and
Strip where the respondent's exports had fallen to commercially
insignificant levels, Hyundai's shipments of DRAMs have increased
substantially since the order was put in place; (2) unlike the
respondent in Brass Sheet and Strip, the ability of the Korean
respondents to sell at fair value in the United States has not been
impaired by a strengthening currency; (3) in contrast to Brass Sheet
and Strip where the respondent was planning to use the imported product
as an input for a plant located in the United States (making increased
imports of the subject merchandise in the future almost certain),
Hyundai will not use the subject merchandise as an input product; and
(4) in contrast to Brass Sheet and Strip where the worldwide demand for
the product was declining, the worldwide demand for DRAMs is strong and
is predicted to increase in the future.
The petitioner argues that the Department's preliminary
determination not to revoke was correct and in accordance with the law.
The petitioner claims that section 353.25(a)(2) of the Department's
regulations specify that before an antidumping duty order can be
revoked, the Department must be satisfied that future dumping by the
respondents is not likely. Therefore, the petitioner contends that
although three consecutive years of de minimis margins and the
respondents' certification regarding the immediate reinstatement of the
order if dumping resumes are requirements for revocation, these factors
alone are not a sufficient basis for revocation. The petitioner claims
that because the Department's preliminary results found no basis to
conclude that it is not likely that the Korean respondents will resume
dumping in the future, the Department had a ``reasonable basis'' to
believe that the requirements for revocation had not been met.
Therefore, the petitioner asserts that the order continues to be
warranted in order to counteract injurious dumping. Accordingly, the
petitioner contends that the Department's preliminary decision not to
revoke the order in part was in compliance with the law and the
international obligations of the United States under Article 11 of the
WTO Antidumping Agreement.
The petitioner further argues that although the cases differ with
regard to certain facts, the Department's reliance on Brass Sheet and
Strip was not misplaced. The petitioner contends that the factors
identified by Hyundai do not diminish the relevance of Brass Sheet and
Strip as important case precedent on the issue of revocation. In
particular, the petitioner contends that factual similarities between
this proceeding and Brass Sheet and Strip, such as the relationship
between global oversupply and declining prices and the relative size of
the U.S. market, are more probative than the differences cited by
Hyundai.
DOC Position
We disagree with respondents' interpretation both of the proper
revocation standard and the Department's previous determinations.
Regarding the proper revocation standard, 19 C.F.R. 353.25(a)(2)
requires not only a showing of three years of no dumping and a
respondent's certification and agreement to immediate reinstatement in
the order, but also a determination that future dumping is not likely.
This ``second requirement for revocation, that the respondent is not
likely to resume dumping, necessarily involves an exercise of
discretion and judgment.'' Tatung Co. v. United States, 18 CIT 1137,
1144 (1994). In certain cases, the record may only contain evidence
regarding the parties' history of no dumping, which ``[o]rdinarily * *
* would constitute substantial evidence of expected future behavior.''
Id.; see also Antifriction Bearings (Other Than Tapered Roller
Bearings) and Parts Thereof From Italy, 60 FR 10950, 10967
[[Page 39812]]
(Feb. 28, 1995). In other cases, respondents are able to produce
additional evidence demonstrating that future dumping is not likely.
See Steel Wire Rope From Korea, 62 FR at 17174; FCOJ From Brazil, 56 FR
at 52510.
In still other cases, the Department has not been satisfied, based
on the record before it, that future dumping is not likely. Contrary to
respondents' argument, these cases do not necessarily only involve
``extremely unusual circumstances.'' The Department reaches its
revocation determinations on a case-by-case basis, depending upon the
industry in question, the relevant market conditions and the evidence
submitted on the record. See, e.g., Brass Sheet and Strip from Germany,
61 FR at 49730; Certain Circular Welded Carbon Steel Pipes and Tubes
From Taiwan, 56 FR 8741, 8742 (March 1, 1991). The Court of
International Trade (``CIT'') has upheld several determinations by the
Department denying revocation. See Sanyo Elec. Co. v. United States, 15
CIT 609 (1991); Toshiba Corp. v. United States, 15 CIT 597 (1991).
While the Court distinguished cases granting revocation based upon the
absence of evidence regarding the likelihood of future dumping, in
neither case did the Court indicate that revocation should be the rule
and denying revocation the exception. See Toshiba at 601. Like the
Department, the Court properly focused instead upon the facts at issue
and the ``predictive nature of the revocation proceeding.'' Id. at 603;
see also Matsushita Elec. Indus. Co. v. United States, 750 F.2d 927,
933 (Fed. Cir. 1984). In the end, the Court concluded that because
respondents requested revocation ``it was for [respondents] to come
forward with `real evidence' to persuade Commerce to revoke the
order.'' Toshiba at 603 (citation omitted).
We also disagree with Hyundai's assertion that the Department erred
by relying on Brass Sheet and Strip as support for its preliminary
determination not to revoke. The Department did not rely upon Brass
Sheet and Strip as support for each of the elements addressed in the
Department's preliminary determination regarding the ``not likely''
issue. Rather, the Department relied upon Brass Sheet and Strip
primarily to confirm the legal standard for the type of factors the
Department has considered relevant in the past (e.g., conditions and
trends in the industry, currency movements and the ability of the
foreign entity to compete in the U.S. without dumping).
Finally, we disagree with Hyundai's interpretation of the
revocation standard under the Antidumping Agreement. We note at the
outset that all parties agree that the revocation standard, as set
forth in the Department's regulations, does not violate the Antidumping
Agreement. See e.g., LGS Case Brief at 15 (April 18, 1997). The sole
issue involves how this standard is applied to the facts and
circumstances of this case. The Department believes that its likelihood
determination, given the facts of this case, is entirely consistent
with Article 11.2 of the Antidumping Agreement, which establishes a
broad based standard under which revocation is warranted if the
authorities determine that the order ``is no longer warranted.''
Comment 2: Whether the Department Applied a Proper and Fair
Revocation Standard in its Preliminary Results.
LGS, Hyundai, Compaq and Dell argue that in its preliminary results
the Department improperly used the phrase ``no likelihood'' in lieu of
``not likely'' in determining whether the requirements for revocation
under section 353.25(a)(2) of the Department's regulations had been
met. These parties contend that the Department's use of a ``no
likelihood'' standard was unlawful under the Antidumping Agreement
because it altered the meaning of the regulation and created a
revocation standard which is virtually impossible for respondents to
attain. Specifically, LGS, Hyundai, Compaq and Dell contend that the
phrase ``not likely'' connotes only a lack of probability but the
phrase ``no likelihood'' creates a much higher standard which implies
that the respondents must demonstrate that there is almost zero
probability of dumping in the future. LGS further claims that ``not
likely'' means a probability of 51 percent or greater while ``no
likelihood'' means a probability of 99 percent or greater that the
respondent will not dump in the future.
Hyundai and LGS further contend that the Department's use of the
``no likelihood'' standard is particularly insupportable given that the
Department amended its regulations in 1989 to specifically change the
phrase ``no likelihood'' to ``not likely.'' Hyundai asserts that this
change was made to clarify the regulation to avoid imposing an
impossible burden on respondents seeking revocation. Accordingly, LGS
and Hyundai argue that in its final results the Department should
follow the ``not likely'' standard outlined in its current regulations,
not the ``no likelihood'' standard abolished a decade ago.
In addition, LGS argues that the Department's preliminary finding
that LGS ``may have dumped in the post 1996 period'' is irrelevant to
the ``not likely'' test. LGS asserts that the relevant question is not
whether LGS ``may'' have dumped but whether the company is ``not
likely'' to dump. LGS cites Crankshafts to argue that the Department's
reliance on something that ``may'' happen is tantamount to sheer
speculation, a standard prohibited by the Department's regulations and
explicitly rejected by the Department in practice.
The petitioner counters stating that the Department properly
applied the long-standing and judicially recognized ``no likelihood''
standard. Specifically, the petitioner contends that the Department's
long-standing administrative practice has been to use the terms ``not
likely'' and ``no likelihood'' interchangeably. The petitioner cites
Brass Sheet and Strip, Elemental Sulphur from Canada, 56 FR 5391
(February 11, 1991) (Sulphur) and FCOJ from Brazil, 56 FR 52510, in
support of its argument. In addition, the petitioner claims that
because the Department has used the terms ``no likelihood'' and ``not
likely'' interchangeably in the past, the regulatory change in 1989 was
simply to clarify the revocation standard, not change it. In support of
this contention the petitioner cites the CIT's decision in Toshiba in
which the Court found that the ``no likelihood test'' does not impose
an unattainable standard.
DOC Position
The Department has applied the proper revocation standard,
consistent with our longstanding practice, throughout the proceeding.
Despite the potential difference in meaning between the phrases ``not
likely'' and ``no likelihood'' as used in the revocation provisions of
the 1988 regulations and the regulations applicable to this proceeding,
the Department has consistently applied the same likelihood standard
under both sets of regulations. As our practice shows, and as we
explain below, the Department has never applied the likelihood standard
to require the degree of certainty that dumping will not recur that the
respondents claim the phrase ``no likelihood'' implies.
Prior to 1989, the applicable regulation expressly conditioned
revocation upon a finding of ``no likelihood'' of future dumping. See
19 CFR 353.54(a) (1988). When the Department first proposed the
amendment to the regulation in 1986, the Department offered no
explanation for substituting ``not likely'' for ``no likelihood,''
stating only that revocation ``is premised on the Secretary's finding
that it is not likely that the person or
[[Page 39813]]
persons will in the future sell the merchandise at less than foreign
market value.'' 51 FR 29046, 29052 (1986) (Preamble to Proposed
Regulations) (emphasis added). The one comment received regarding this
regulatory provision argued only that the Department should not
consider the issue of future dumping at all. Id. Antidumping Duties;
Final Rule, 54 FR 12742, 12758 (March 28, 1989) (Preamble) (emphasis
added). The Department disagreed, retained the proposed amendment
without revision, and responded to the comment as follows:
The statute gives the Secretary broad discretion in deciding
when to revoke an order. The Secretary has determined that a pre-
condition to revocation under this paragraph is that the Secretary
be satisfied that there is no likelihood of future sales at less
than foreign market value.
Hence, even in the preamble to the regulation, which substituted ``not
likely'' for ``no likelihood,'' the Department continued to describe
the standard using the phrase ``no likelihood.'' Similarly, the
Department substituted ``not likely'' for ``no likelihood'' when it
amended the countervailing duty regulations in 1988. Compare 19 CFR
355.42(a) (1988) with 19 CFR 355.25(a) (1996). Again, the Department
gave no explanation.
Thus, in amending the revocation regulation, the Department used
the phrases ``not likely'' and ``no likelihood'' interchangeably, and
consistently failed to draw a legal distinction between the two. The
Department has also used the two phrases interchangeably in its
administrative practice. See Silicon Metal From Brazil, 62 FR 1954,
1957 (Jan. 14, 1997) (Silicon Metal); Fresh Cut Flowers From Colombia,
61 FR 42833, 42838 (Aug. 19, 1996). In many determinations since
amending the regulation in 1989, the Department has described the
future dumping standard in terms of ``no likelihood'' just as it did in
this proceeding. See, e.g., Brass Sheet and Strip, 61 FR at 49730;
FCOJ, 56 FR at 52511.
Moreover, contrary to the assertions of LGS and Hyundai, the
Department has never interpreted ``no likelihood,'' in practice, to
mean a zero probability of dumping, either before the regulations were
amended in 1989 or after. The very fact that the Department has revoked
numerous orders, in whole or in part, before and after the 1989
amendments, confirms this conclusion. Never once has the Department
indicated that it was 100 percent certain there was ``no likelihood''
of future dumping in any of these cases. As stated by the CIT in
Toshiba, ``rarely, if ever, will Commerce be able to predict with
certainty what will occur upon revocation.'' 15 CIT at 599 (citing
Matsushita, 750 F. 2d at 933). Hence, it is clear that the standard is
not an impossibly high one, as the respondents suggest.
Contrary to the assertions of LGS, evidence indicating that a
respondent ``may have dumped'' in the period following the third
administrative review is relevant to the Department's ``not likely''
test. As the Department's practice and the decisions of the courts make
clear, the determination regarding the likelihood issue is ``inherently
predictive'' in nature. See, e.g., Matsushita, 750 F.2d at 933. The
Department ordinarily does not have actual sales and cost data to
examine. Therefore, in assessing the likelihood of future dumping, as
discussed in more detail in comment 3, below, the Department examines
all available record evidence.
Likewise, we are not persuaded by LGS' contention that the ``not
likely'' standard implies that revocation is appropriate if the
Department finds at least a 51 percent chance that the respondent will
not dump in the future. The Department's regulations and administrative
practice properly do not establish a specific, quantifiable standard
for determining whether revocation is appropriate. As noted above, in
most cases, the presence of three years of no dumping margins and a
respondent's certification and agreement to immediate reinstatement in
the order are indicative that future dumping is not likely because, in
most cases, this is the only record evidence regarding likelihood. Here
the facts of record, reasonably interpreted, lead us to a contrary
conclusion.
Based on the foregoing, we therefore find that when the Department
amended the revocation regulation in 1989 to change the phrase ``no
likelihood'' to ``not likely,'' the purpose of the regulatory change
was simply to clarify the revocation standard, not amend it. Therefore,
the Department has applied the proper revocation standard throughout
this proceeding.
Comment 3: What Time Frame Should be Considered When Determining
Whether Future Dumping is Not Likely.
LGS and Hyundai argue that the Department improperly focused on the
period immediately following the third administrative review in
conducting its preliminary ``not likely'' analysis. LGS and Hyundai
assert that section 353.25(a)(2)(ii) of the Department's regulations
instruct the Department to examine whether it is not likely that a
respondent will in the future sell the merchandise at less than normal
value. LGS and Hyundai interpret this reference to a period ``in the
future'' as being a time period after revocation of the order.
Therefore, LGS and Hyundai assert that in the final results the
Department should conduct its ``not likely'' analysis for the time
period beginning the day after the Department issues a revocation
determination (i.e., beginning in second quarter 1997).
In addition, LGS and Hyundai argue that because the DRAM industry
is highly cyclical, the Department must take into account a
respondent's behavior over the long term (i.e., during both market
upturns and downturns). In addition, the respondents contend that the
Department's preliminary conclusion that DRAM producers ``dump during
periods of significant downturn'' is flawed. If this were true,
respondents argue, antidumping duty orders could never be revoked in
cases involving cyclical industries.
Hyundai further argues that by implying that respondents must prove
they were not dumping after the end of the third administrative review,
the petitioner is essentially seeking to restore the old ``gap period''
reviews which the Department conducted under the former regulations
during the 1980's. As Hyundai explains, under the Department's old
regulations, a respondent could qualify for revocation on the basis of
two years of zero or de minimis margins if the respondent was also
found not to have dumped during a period of at least nine months after
the completion of the second administrative review. Hyundai claims that
upon amending the regulations in 1988, the Department eliminated the
need for ``gap period'' reviews, stating instead that revocation would
become effective the day after the three-year period.
The petitioner asserts that in conducting its preliminary ``not
likely'' analysis the Department properly examined the period
immediately following the end of the third review period. The
petitioner claims that the period immediately following the close of
the third review period must be examined because any evidence
indicating that dumping was likely to have occurred anytime after this
period demonstrates the continued need for the protection afforded by
the antidumping duty order. The petitioner cites Silicon Metal and
Brass Sheet and Strip as recent cases where the Department examined the
period immediately following the third POR to determine whether the
requirements for revocation had been met.
[[Page 39814]]
DOC Position
We disagree with Hyundai and LGS. While 19 CFR 353.25(a)(2)(ii)
requires the Department to assess whether the evidence supports a
conclusion that it is not likely the respondents will dump ``in the
future,'' respondents are incorrect to interpret this provision as
requiring the Department to consider only a time period beginning after
the date the Department would issue a revocation determination. Rather,
this provision requires the Department to examine all of the evidence
available on the record. There is nothing in the Act, the Department's
regulations or case precedent that defines the relevant time period in
considering the likelihood issue. Common sense, however, dictates that
the Department should, as always, base its determination on all record
evidence.
In this revocation proceeding the Department considered all
publicly available data and information placed on the record by all
parties (including data regarding the January 1997 through April 1997
time period, which respondents characterize as a market upturn). We
agree that a respondent's past conduct is relevant, including a showing
of three years of de minimis margins. Market trends and forecasts
beyond the possible revocation date may also be relevant. In this case
we find the January through December 1996 period to be particularly
probative because it corresponded with a significant downturn in the
DRAM industry. The DRAM industry is highly cyclical, market prices for
DRAMs are generally lower during periods of downturn and there is a
history of dumping in the DRAM industry during such periods. It is
therefore reasonable to conclude that an examination of the selling
activities and pricing practices of respondents during such downturn
periods will provide the Department with a reasonable indication as to
whether dumping is not likely to occur in the future. Further, the 1996
period is not only the most recent downturn, but one which occurred
since the order has been in place.
As discussed further in comment 4, below, based on our analysis of
the DRAM industry during the 1996 downturn and other factors, we find
that the likelihood standard for revocation set forth in section
353.25(a)(2) of the regulations has not been met. Although we agree
with the respondents that market conditions in the DRAM industry have
recovered somewhat in 1997 (though not to the extent that respondents
argue), neither this fact nor any other evidence regarding future
conditions in the DRAM industry contradicts or significantly detracts
from other record evidence indicating that dumping may have taken place
during the 1996 downturn. Such evidence suggests that the not likely
criterion for revocation has not been satisfied in this case.
For much the same reasons, we disagree with Hyundai that the
Department's approach effectively reinstates the ``gap period'' reviews
disavowed when the regulations were amended in 1989. See Preamble to
1989 Regulations, 54 FR at 12758 (discussing ``gap period'' reviews).
At that time, the regulations required only two years of no dumping
before the Department would consider revocation. Pursuant to the so-
called ``gap period'' reviews, however, the Department would not revoke
the order until after determining that no dumping had occurred during
the gap period. This required that the Department conduct an additional
administrative review of the respondent's data, involving at least nine
months. As discussed above, in evaluating whether future dumping is not
likely, the Department may find that the market conditions and trends
during a certain period or periods are probative. In this case we found
the January through December 1996 time frame to be particularly
important to our consideration of the ``not likely'' issue because it
corresponded with a significant downturn in the DRAM industry. We
consider it merely coincidental that this time frame coincided with the
end of the third administrative review and the period immediately
following. Had the most recent downturn occurred during a different
time frame, it may have been appropriate to take that period into
account in our analysis.
Comment 4: Whether Record Evidence Indicates that Future Dumping by
the Korean Respondents is Not Likely.
The petitioner argues that in its preliminary results, the
Department drew upon an extensive record, including submissions on
market conditions, pricing trends, econometric analyses, newspaper
articles and market studies and properly concluded, based on the
totality of data, that there was no basis on which to conclude that
future dumping by the Korean respondents was not likely.
LGS and Hyundai argue that the Department's preliminary conclusion
regarding the ``not likely'' issue was contrary to law and based on
incorrect and outdated data that do not reflect current market
conditions. LGS and Hyundai contend that when current market conditions
are viewed, the record indicates that future dumping is not likely.
Hyundai submits that in order to make a reasonable prediction of the
future, the Department's final decision must be based on the most
recent information available. LGS adds that the Court of Appeals for
the Federal Circuit has found it be ``reversible error'' for the
Department, in a revocation proceeding, to fail to obtain and consider
the most up-to-date information available. See Freeport Minerals Co. v.
United States, 776 F.2d 1029, 1032 (Fed. Cir. 1985).
In addition to the general comments concerning the Department's
preliminary revocation determination noted above, the petitioner and
respondents make a number of arguments regarding the specific data
relied upon by the Department in its preliminary ``not likely''
analysis. These arguments are summarized according to topic, below.
A. Pricing Trends in the DRAM Industry
The petitioner argues that during 1996 the DRAM market was in a
downturn, with steep worldwide price declines. Citing to data obtained
from publicly available reports, the petitioner claims that these price
declines are forecasted to continue throughout 1997.
LGS, Hyundai, Compaq, Digital and Dell argue that the worldwide
price decline noted in the Department's preliminary results has ended
and that current market information indicates that DRAM prices have
rebounded significantly in 1997. LGS, Hyundai and Dell further contend
that the recent trend towards an equilibrium between supply and demand
in the DRAM industry indicates that higher prices are likely in the
future. In support of these arguments, LGS, Hyundai, Compaq, Digital
and Dell reference actual prices paid in the U.S. market for DRAMs,
public statements made by the company officials at Micron, average U.S.
prices reported by Dataquest and the American IC Exchange, studies by
independent analysts and numerous newspaper and magazine articles. LGS
further asserts that because costs in the DRAM industry are constantly
declining, in the event that market prices were stable, rather than
rising, the likelihood that a respondent would have to sell below cost
in order to remain competitive in the U.S. market decreases over time.
The petitioner rebuts the arguments of LGS, Hyundai, Compaq,
Digital and Dell. The petitioner argues that the DRAM market is still
volatile and that price declines will continue throughout 1997. The
petitioner cites recent price
[[Page 39815]]
reports, newspaper and magazine articles and market reports which
suggest that the temporary rebound in DRAM pricing will soon be over
and that prices thereafter will continue to decline throughout 1997.
Finally, the petitioner attempts to demonstrate that the DRAM market is
still volatile and difficult to predict by pointing out that just 48
hours after the date the respondents cited recent price increases in
their case briefs, the worldwide market prices for DRAMs fell more than
10 percent.
B. Inventory Levels
The petitioner argues that, despite the 1996 ``glut in the global
DRAM market,'' publicly available data indicate that Korean producers
have continued to increase production by bringing new facilities on-
line. The petitioner claims that this additional increase in DRAM
production will add to the oversupply problem being experienced in the
marketplace and will keep DRAM prices depressed throughout 1997. In
support of this argument, the petitioner cites public studies by
independent analysts and numerous newspaper and magazine articles. In
addition, the petitioner cites Brass Sheet and Strip as a recent case
where the Department was unable to conclude that future dumping was not
likely, based, in part, on competitive conditions in an industry
characterized by oversupply.
LGS, Hyundai and Compaq argue that in its preliminary results the
Department incorrectly concluded that there is no evidence that the
announced DRAM production cutbacks ``have occurred.'' Specifically,
LGS, Hyundai and Compaq argue that numerous industry reports confirm
that the Korean producers have trimmed production and will continue to
reduce their operations in 1997 in order to bring supply and demand
into balance. In support of this argument LGS and Hyundai cite publicly
available reports and newspaper and magazine articles. The respondents
contend that these documents suggest that recent cutbacks in production
by Korean DRAM producers have led to market price increases. LGS
further argues that the Department's conclusion that ``there is a
significant DRAM oversupply'' and that ``the existing DRAM oversupply
is likely to cause prices to remain low or fall lower in the future''
was based on data which are now outdated. LGS, Hyundai, Compaq and Dell
claim that the oversupply conditions present in the DRAM industry in
1996 have disappeared and that the recent cutback in production by the
Korean producers, in conjunction with an exploding global demand, has
resulted in a market equilibrium between supply and demand.
Finally, as noted in comment 1 above, LGS contends that reliance on
Brass Sheet and Strip as case precedent is misplaced. LGS asserts that
unlike Brass Sheet and Strip, where the Department found that there had
been a decrease in demand in the European market and that the U.S.
market continued to be desirable for exporters, the DRAM demand is
booming worldwide. In addition, LGS and Hyundai contend that as a
result of the shrinking global supply of DRAMs many producers,
including the petitioner, are beginning to return to profitability.
The petitioner rebuts the arguments of LGS, Hyundai and Compaq.
According to the petitioner, Korean DRAM producers have not made
production cutbacks, but instead have shifted production increases to
64M DRAMs while continuing to produce other DRAM configurations at
prior levels and withholding them temporarily from the market. The
petitioner cites brokerage house, press and other recent market reports
as support for its argument. The petitioner claims that these articles
suggest that Korean DRAM producers will stockpile DRAMs long enough to
lift prices, but that the eventual release of this inventory into the
marketplace will result in continued price declines.
C. The Petitioner's Allegation That LGS and Hyundai Were Dumping in
1996
The petitioner argues that the sales and cost data submitted by
Hyundai and LGS in the third administrative review, when viewed in
conjunction with publicly available information regarding pricing
trends since the end of the third review period, demonstrate that LGS
and Hyundai made sales at less than normal value during the second half
of 1996 (i.e., the period immediately following the third review
period). Specifically, the petitioner contends that the home market
sales and cost data submitted by Hyundai and LGS in the present
administrative review demonstrate that the two respondents made sales
at prices which were below COP during the two months immediately
following the end of the third review period (i.e., May and June 1996).
In addition, the petitioner asserts that when the reported costs of
LGS and Hyundai are extrapolated through to the end of the fourth
quarter 1996 using the same rate of decline actually experienced by the
producers in 1995, and then compared to publicly available, average
U.S. DRAM price data (compiled by Dataquest and Lehman Brothers), there
is evidence that LGS and Hyundai made U.S. sales at prices below COP
during the third and fourth quarters of 1996 as well. Based on the
foregoing, the petitioner contends that the Korean respondents were
dumping during the second half of 1996.
LGS and Hyundai contend that the Department's preliminary
conclusion that the respondents made U.S. sales during the second half
of 1996 at prices that appeared to ``be near or below normal value and
production costs'' was based on incomplete and inaccurate data
presented by the petitioner. Specifically, regarding the data relied
upon in the preliminary results, LGS contends the following: (1)
Verified data demonstrate that LGS' actual contract prices with its
U.S. customers during 1996 were significantly higher than the average
U.S. spot prices provided in the petitioner's analysis; (2) the fact
that LGS may have made certain home market sales at prices below its
COP does not definitively demonstrate that dumping occurred; and (3)
the U.S. price quotes referred to in the petitioner's analysis cannot
be relied upon because neither the underlying data nor source for the
data were provided by the petitioner.
LGS further argues that the petitioner's analysis overstates the
degree to which DRAM prices declined in 1996 because the analysis was
based on quarterly prices calculated from prices which were averaged on
a simple, rather than a weighted-average basis. LGS claims that when
projections based on ``corrected'' price and cost data are used, the
data demonstrate that LGS continued to sell at prices above both the
average U.S. spot price and its COP during the second half of 1996. As
additional support for its claim that it was not dumping during the
second half of 1996, LGS provided what it claimed were actual price and
cost data for the post-April 1996 period.
Hyundai also asserts that there were distortions and inaccuracies
in the petitioner's data. First, Hyundai contends that the average U.S.
price calculated by the petitioner was based on spot prices, rather
than OEM contract prices. Hyundai asserts that verified data on the
record in the third administrative review indicate that Hyundai's
actual U.S. prices during the POR were higher than the average U.S.
prices for the first quarter 1996 presented by the petitioner.
Therefore, Hyundai claims that there is no correlation between
Hyundai's actual prices and the average spot prices provided by the
petitioner. In addition, Hyundai asserts that based on an econometric
analysis conducted by Dr.
[[Page 39816]]
Kenneth Flamm, the market price for DRAMs is expected to exceed
Hyundai's COP by substantial margins during 1997 and 1998. Hyundai
further attacks the petitioner's analysis stating that it mistakenly
compared the average spot price for all 16M DRAMs with the COP of only
the 1X16 configuration. Finally, Hyundai argues that the petitioner's
data failed to take into account the reductions in cost resulting from
the depreciation of the Korean won. Hyundai asserts that when
``corrected'' price and cost data are used, the average U.S. price
remains above Hyundai's COP during the second half of 1996.
The petitioner responds that the data LGS claimed in its case brief
were its actual price and cost data actually confirm that LGS was
dumping during the second half of 1996. The petitioner contends that
the costs reported by LGS are understated for the following reasons:
(1) LGS did not include foreign exchange losses on long-term foreign
debt in its reported COP; and (2) LGS lengthened its reported
depreciation schedule for the second half of 1996. The petitioner
claims that this one-time restatement of depreciation expenses caused
the sharp decline in costs in July 1996 reported by LGS. The petitioner
cites numerous publicly available reports and articles which state that
LGS, as well as other Korean DRAM producers, lengthened their
depreciation schedules during the second half of 1996 to avoid
reporting substantial losses for fiscal year 1996. The petitioner
argues that, had LGS not manipulated its costs for the second half of
1996, its reported (but unverified) U.S. prices would have been below
its reported COP.
The petitioner rebuts Hyundai's arguments as well. The petitioner
argues that the so-called ``corrected'' prices provided by Hyundai do
not reflect actual prices but are, instead, merely derived prices. The
petitioner contends that the actual prices paid were usually below the
average U.S. DRAM prices provided in the petitioner's analysis. In
addition, the petitioner asserts that its analysis correctly compared
cost and price data for the 1X16 configuration, not all DRAM models as
suggested by Hyundai.
D. Whether Korean DRAM Producers Can Remain Competitive in the U.S.
Market Without Dumping
The petitioner argues that due to the market conditions noted in
points B and C above, LGS and Hyundai cannot remain competitive in the
U.S. market without selling DRAMs at less than normal value.
LGS responds that, regardless of market circumstances, LGS is
likely to continue to sell DRAMs in the United States at fair value
prices. Specifically, LGS contends that in contrast to the respondents
in Brass Sheet and Strip and Steel Wire Rope, the U.S. market is not
LGS' principal export market and LGS is not a major supplier to the
United States. Therefore, LGS argues, it has no incentive to sell in
the United States unless it can make a reasonable profit. In addition,
LGS relies upon an economic study by the Law & Economics Consulting
Group (LECG study) to contend that LGS has no economic incentive to
dump in the United States for a number of reasons. In addition to the
argument that its share of the U.S. market is too small to make
predatory pricing appealing, LGS contends that, because its prices with
OEM customers are based on contracts, it is able to command higher
prices from OEM customers during market downturns. In support, LGS
asserts that actual, verified prices collected by the Department prove
that LGS' contract prices were higher than the spot market prices
during 1996. Moreover, the won is currently depreciating against the
dollar, negating the possibility of exchange rate dumping. LGS cites
Steel Wire Rope and Flowers as confirming the Department's view that
``devaluation of the home market currency makes dumping less likely.''
In addition, LGS argues that the Department incorrectly found that
``the history of the DRAM industry is one of dumping in periods of
significant downturn.'' Specifically, LGS asserts that the behavior of
Japanese DRAM producers in 1986 has no bearing on the pricing behavior
of unaffiliated Korean producers in 1996. In addition, LGS claims that
the fact that the Korean producers were found to be dumping in 1991 and
1992 is not indicative of future dumping. If this were true, LGS
asserts, no antidumping duty order could ever be revoked since
revocation findings can only exist once an antidumping duty order has
been issued.
Finally, LGS and Hyundai argue that the fact that neither
respondent has had dumping margins through a variety of market
conditions (including downturns) over the past three review periods is
indicative that future dumping during any market condition is not
likely. See, e.g., Steel Wire Rope (stating that because past
appreciation of the Korean won did not cause the respondents to dump,
the Department had no basis to conclude that a possible currency
appreciation in the future would cause the respondents to change their
pricing practices); Tatung 18 CIT at 1144 (finding that with regard to
the likelihood requirement for revocation ``ordinarily past behavior
would constitute substantial evidence of expected future behavior'').
The petitioner counters that LGS has the following compelling
reasons to dump: (1) OEM customers have leverage over the DRAM
suppliers; therefore, OEM customers will not pay significantly higher
prices for commodity products such as DRAMs; (2) because of the sheer
size of the DRAM market in the United States, LGS' market share
accounts for substantial revenues; and (3) LGS needs an outlet for the
additional DRAMs it has already committed to producing in 1997. The
petitioners contend that the United States is the logical outlet for
these additional DRAMs because Europe has recently ended a two-year
suspension of a reference price system on Korean DRAMs and Japan is
currently flooded with Japanese produced DRAMs.
The petitioner further argues that, unlike in Steel Wire Rope
(where the Department concluded that there was no evidence of imported
production inputs) and Flowers (where there were ``virtually no fixed
costs''), Korean DRAM producers import raw materials that account for a
large portion of their costs. Therefore, the petitioner asserts that
the depreciation of the won increases the COP, making dumping more
likely in the United States.
DOC Position
We continue to find that the record supports a conclusion that the
not likely criterion for revocation has not been satisfied. In reaching
this decision, we have examined all the information on the record,
including publicly available data regarding current market conditions.
Based on this analysis, we found the January through December 1996 time
frame to be particularly relevant because of the significant downturn
in the DRAM industry during this period.
A. Pricing Trends in the DRAM Industry
The DRAM market has suffered periodic set-backs over the past 25
years. During the most recent downturn, industry revenues significantly
declined. For instance, according to Electronic Buyers News, total
worldwide market revenue plunged 38% to $25.13 billion in 1996. Both
Hyundai and LGS reported dramatic decreases in revenues in their 1996
publicly available financial statements. Therefore, as discussed above,
we find this time frame to be particularly relevant to the Department's
``not
[[Page 39817]]
likely'' analysis. Although we agree with the respondents that DRAM
prices have recovered somewhat during 1997, this does not detract from
the fact that prices fell significantly during the 1996 downturn. In
any case, it appears that pricing in the DRAM market has not yet fully
recovered. Current prices are still lower than in the years preceding
the 1996 market downturn, years in which the respondents were found not
to be dumping. Furthermore, prices have, in fact, decreased recently.
According to Dataquest (``The Semiconductor DQ MONDAY Report'', Issue
24, June 23, 1997, and Issue 25, June 30, 1997) the spot market price
for the 1Mx16 EDO DRAM decreased from the $7.45 to $8.09 range on June
13 to the $6.30 to $6.85 range on June 27. Similarly, the price for the
higher-density 64M DRAMs continues to fall. In fact, the average price
for a 64M DRAM is now in the mid $40 range, down from $55 earlier this
year. In sum, although the DRAM market has stabilized somewhat, prices
continue to fluctuate and a large degree of uncertainty about the
direction of the market remains.
B. Inventory Levels
In regard to inventory levels and the supply of DRAMs, the record
demonstrates that supply exceeded demand during 1996 and thus far in
1997. While there were conflicting reports as to whether respondents
were actually decreasing their DRAM production levels during the 1996
downturn period, prices fell dramatically during 1996 and have not yet
fully stabilized. In addition, although the respondents have made
public announcements regarding DRAM production cut-backs and it appears
that the market has reacted with higher prices, it is unclear how much
of an effect this will have on the overall supply of DRAMs. Similarly,
it is uncertain how long it will be before production returns to
previous levels in anticipation of increased demand in the marketplace.
According to Electronic Buyer's News (January 27, 1997, Issue 1042), an
upturn in demand in October, 1996, triggered a simultaneous increase in
production. As a result, the DRAM market was glutted, driving prices
down in December, 1996 to one of the lowest levels during the downturn.
A question in the DRAM industry today is whether another temporary
spike in demand will trigger a new flow of production, resulting in a
new round of market saturation. According to Dataquest (see ``When Will
the DRAM Market Turn?'', February 3, 1997), supply is expected to
moderate throughout 1997, but it may be 1998 before supply will come
into balance with demand.
C. The Petitioner's Allegation That LGS and Hyundai Were Dumping in
1996
Throughout this proceeding the petitioner has made a number of
submissions, including numerous charts and graphs using the sales and
cost data submitted by the respondents during the third administrative
review and publicly available information regarding pricing trends,
which the petitioner claims demonstrate that LGS and Hyundai made sales
at less than normal value during the 1996 downturn. The respondents
claim that the petitioner's analysis is flawed because it made a number
of erroneous assumptions and was based on incomplete and inaccurate
data. In addition, the respondents' contend that when current market
conditions are viewed, the record indicates that future dumping is not
likely.
We have reviewed the data submitted by the petitioner as well as
all arguments and information on the record regarding the veracity of
the data and the underlying assumptions. As discussed more fully below,
on the basis of that examination, we find that the not likely criterion
for revocation has not been satisfied for the following reasons: (1)
The respondents' own sales and cost data indicate that there were a
substantial number of home market sales made at prices below COP during
the two months immediately following the close of the third
administrative review; (2) the lowest point of the downturn, in terms
of DRAM pricing and other market conditions, did not occur until after
mid-1996 (well after the end of the third administrative review
period); (3) publicly available spot market pricing data, when viewed
in conjunction with the respondent's cost data, extrapolated to a
future point in time, indicate that LGS and Hyundai may have made U.S.
sales at prices below COP during 1996; (4) respondent's own pricing
data indicate that contract prices generally follow the same pricing
patterns as spot market prices; and (5) many of the respondents'
arguments concerning the alleged distortions and inaccuracies in the
petitioner's analysis lack merit. In addition, we find that the
respondents made several changes to their costs in the period
immediately following the third review period, including changes in
depreciation and foreign exchange loss write-offs. For a complete
analysis, see the Memorandum to the File from Tom Futtner to Jeffrey P.
Bialos, dated July 16, 1997, on file in room B-099 of the main Commerce
building.
As the petitioner points out, respondents' data indicate that
products were sold in the home market at prices below the COP during
May and June of 1996, the two months immediately following the end of
the third review period. According to the Department's standard
questionnaire for the third review, the respondents were required to
report costs and sales for May and June of 1996 to ensure that the
proper cost test and contemporaneous sales comparisons could be
performed. These data demonstrate that the sales made below cost for
both respondents increased in these two months, as the downturn in the
DRAM market worsened. We note that, according to the Department's cost
test methodology, these below cost sales were not sufficiently numerous
for the Department to reject as a basis for determining normal value in
this third review. We also agree with LGS that whether it made home
market sales at prices below the COP during the two months immediately
following the close of the third review period in and of itself does
not demonstrate that dumping occurred. However, in light of the market
conditions during the downturn and the fact that the months actually
examined during the POR did not include the lowest point in the
downturn, we find that the existence of below-cost sales during May and
June of 1996 suggests that the number of below-cost sales increased
following the end of the third review period as the DRAM market
worsened. As prices in the DRAM market fell, a substantial number of
sales were made below cost. This pattern is suggestive of deteriorating
market conditions that often give rise to dumping.
In order to derive the estimated COP for 4M and 16M DRAMs for the
third and fourth quarters of 1996, the petitioner took the respondent's
actual reported costs for the third administrative review and projected
these costs through the year using the same rate of decline experienced
in the industry during 1995. Given that costs typically decline over
time in the DRAM industry, we find the petitioner's approach to
estimating the respondents' COP to be reasonable.
We disagree with the respondents' assertion that the average U.S.
prices presented in the petitioner's analysis bear no relation to their
actual U.S. prices. We recognize that the petitioner based its analysis
upon average U.S. spot market prices instead of contract prices.
However, based upon the average gross unit prices calculated using
respondent's own data from the POR, it appears that contract prices
[[Page 39818]]
generally follow the same pricing patterns as spot market prices. There
is even evidence on the record indicating that the actual contract
prices were sometimes lower than the average spot prices presented in
the petitioner's analysis. We also disagree with LGS' claim that the
U.S. price quotes referred to in the petitioner's analysis cannot be
relied upon because the source documentation was not provided. The
record is clear that the petitioner used prices compiled by Lehman
Brothers. These data were similar to other pricing data submitted on
the record, including the pricing data obtained from the American
Integrated Chip Exchange (AICE) and Dataquest.
Regarding Hyundai's claim that the petitioner's data failed to take
into account reductions in cost resulting from the depreciation of the
won, we note that Korean DRAM producers import machinery and equipment
and many raw materials. In fact, both respondents recorded large
foreign exchange losses for fiscal year 1996. Therefore, the
depreciation of the won may have actually tended to increase the
respondent's COP, making dumping more likely in the United States. At
the very least, we find no basis in the record to conclude that this
exchange rate depreciation entirely favored the respondents.
Regarding LGS'' contention that the petitioner's analysis
overstated the degree of DRAM price decline because it was based on
monthly prices averaged on a simple, rather than weighted-average
basis, we note that petitioner's pricing data generally followed the
same downward trend of other pricing data on the record, including the
AICE data noted above. In fact, all pricing data on the record followed
the same downward trend throughout 1996, whether they were based on a
simple average or not. Finally, we disagree with Hyundai's assertion
that the preliminary analysis was flawed because it compared the
average spot price for all 16M DRAMs with the COP of only the 1X16
configuration. In fact, both the cost and sales data used for this
comparison were for the 1X16 configuration, not all DRAM models.
In its case brief, LGS submitted what it claimed were actual price
and cost data for the second half of 1996. Our review of this
information, however, indicates that there are serious questions
whether the reported costs were understated due to significant changes
in LGS' depreciation schedule and write-offs of foreign exchange
losses. Publicly available data indicate that, for their 1996 financial
statements, both LGS and Hyundai changed the useful life of fixed
assets from three years to five years. However, it is unclear exactly
to what extent this change reduced the reported costs. Similarly it is
unclear how the reported costs were affected by the losses on foreign
exchange. Moreover, the fact that LGS failed to identify these
adjustments to its costs significantly reduces the reliability of the
information. We are uncertain whether LGS made other adjustments to its
reported costs. Additionally, we note that LGS did not provide these
data until its April 18, 1997, case brief, despite having ample
opportunity to do so before the Department's March 10, 1997,
preliminary results. Although the Department accepted these data into
the record because of the extended deadline for submitting factual
information during this revocation proceeding, LGS' delay in submitting
the information greatly limits its usefulness. The Department was
unable to fully examine the data and perhaps question LGS concerning
the composition of the data.
In its case brief Hyundai presented a detailed econometric study
conducted by Dr. Kenneth Flamm. Senior Fellow, the Brookings
Institution. The cost projections in this analysis included assumptions
regarding certain production indices and yields and exchange rates.
Prices were projected using econometric techniques including various
scenarios for supply, economic growth, and technological change. The
study concluded that Hyundai's prices would exceed its cost of
production ``by a comfortable margin'' in all scenarios considered.
We find that the cost portion of the Flamm study was based on
several questionable premises including the assumption of certain
production yields and rates. The study utilizes a ``best case
scenario'' in terms of certain of these assumptions. Optimistic
capacity rates in particular are difficult to accept in a time when
major producers, Hyundai included, have announced major cutbacks in the
production of DRAMs. Furthermore, as the Flamm study itself points out,
the capacity scenario is based on the assumption that DRAM demand will
continue to strengthen. However, current market conditions do not bear
the strong demand assumption out. According to the AICE's Bulletin for
the Day (June 13th), activity in the U.S. market continues to be slow.
Similarly, according to Dataquest (``The Semiconductor DQ Monday
Report'', Issue 24, June 23, 1997), there continues to be a ``serious
oversupply or inventory excess'' in the DRAM market. Also,
technological shifts in demand are difficult to predict. For instance,
the study does not mention the rate at which the supply of competing
64M DRAMs can be expected to expand, and put downward pressure on the
prices for the 16M generation.
In addition, wholly apart from the data concerning the 1996
downturn, as discussed in sections B and C, above, our analysis
indicates that market conditions in the DRAM industry remain volatile.
As stated previously, while the plunge in prices began to stabilize
somewhat in early 1997, recent data indicate that prices are headed
downward again. For example, according to publicly available data, the
average U.S. price for a 16M DRAM fell from approximately $18.00 in May
1996 to approximately $7.00 in December 1996. According to Dataquest,
the price for the 16M as of June 30, 1997, is approximately $6.50. This
represents a 64 percent decline in prices between the end of the third
period of review (April 30, 1996) and June 1997. Since DRAMs are a
commodity product, it is reasonable to expect that Korean producers
will match prevailing market prices in the United States.
D. Whether Korean DRAM Producers Can Remain Competitive in the U.S.
Market Without Dumping
As noted above, LGS argues that it has no economic incentive to
dump DRAMs in the U.S. market. LGS' key arguments are that its share of
the U.S. market is too small for predatory pricing to be successful;
that the company's U.S. market share is, nevertheless, steady enough to
discourage ``promotional'' dumping; that dumping did not result from
exchange movements; and that LGS knows the U.S. antidumping laws well
enough to have avoided ``accidental'' dumping. LGS concludes its
analysis by forecasting increasing demand and price levels in 1997.
The antidumping law is designed to counteract price discrimination
by foreign producers and exporters which injures a domestic industry.
This requires only a comparison of U.S. prices and normal value and
does not allow for the Department to consider the intent of producers
and exporters who sell here. That being said, in determining whether it
is not likely parties will sell at less than normal value in the
future, the issue of whether those parties have an economic incentive
to dump is relevant to the Department's analysis. See Preliminary
Results, 62 FR at 12796 (citing Brass Sheet and Strip from Germany, 61
FR at 49730). However, it may not be an overriding factor, and must be
considered in conjunction with the remaining record evidence and in
light
[[Page 39819]]
of the Department's experience in administering the revocation
provisions. For instance, whether parties can price competitively
without dumping depends, among other things, upon short-term and long-
term market conditions. In this regard, LGS argues that it has a
relatively small share of the U.S. market, which decreases its economic
incentive to dump. However, the United States is part of the world's
largest regional market for DRAMs, with considerable growth potential.
Given the importance of the U.S. market, as a general matter, even a
producer with a relatively small market share would have an incentive
to ride out industry downturns. The fact that DRAM producers, including
the Korean respondents, have historically been found to have dumped
during downturns supports this conclusion.
LGS states that its OEM contract customers pay higher-than-spot
market prices in a market downturn, and lower-than-spot market prices
in a market upturn. In actuality, the record demonstrates that contract
prices to OEM customers, which are negotiated on a quarterly basis,
follow the direction of prices on the spot market. Dell and Digital
both noted such trends based on their own experience. Thus, according
to our record, changes in prices of OEM customers simply lagged behind
spot prices. In fact, even into 1997, prices to OEM customers remained
depressed, and below spot market prices, even as the spot market prices
began to show some increase.
Finally, LGS argues that the company did not dump subsequent to the
third review period because its production costs were also declining.
Historical data support the premise that both costs and prices of any
given generation of DRAM will decline over time. What respondents have
been unable to demonstrate, however, is that the decline in costs kept
up with the rapid rate of decline in prices during the second half of
1996.
In sum, the current condition of the DRAM market and the data on
the record supports a conclusion that the not likely criterion for
revocation has not been satisfied.
Comment 5: Whether the Antidumping Order is Constraining LGS and
Hyundai from Dumping in the U.S. Market.
The petitioner argues that during the third review period LGS and
Hyundai were constrained by the antidumping duty order in that both
companies took significant steps to minimize the size of their dumping
margins. Regarding LGS, the petitioner contends that the company's U.S.
sales volume and number of customers decreased dramatically during
1996, demonstrating that the antidumping duty order was constraining
LGS from dumping. In addition, the petitioner claims that LGS' average
U.S. DRAM price decline during 1996 was not as severe as the general
price declines experienced in the industry during the same period,
indicating that LGS was selecting the customers to which it would sell
DRAMs directly. Regarding Hyundai, the petitioner asserts that the
dumping order forced Hyundai to take measures to ensure that its home
market sales were used as the basis for normal value, and that its home
market sales prices were always higher than its United States sales
prices.
LGS argues that the Department's attempt to speculate as to whether
LGS' prices may have been at less than normal value ``in the absence of
the order'' is fundamentally flawed. LGS asserts that no amount of
speculation could produce a reliable conclusion as to what ``might have
happened'' if the dumping order had not been in effect during a
historical period when the dumping order did in fact exist. Hyundai
argues that the Department's findings that the majority of its United
States sales were at prices well above normal value in the preliminary
results demonstrates that Hyundai's prices were not constrained by the
order.
LGS rebuts the petitioner's arguments by arguing that the facts on
the record indicate that LGS maintained a consistent U.S. presence
during 1996. Specifically, LGS contends that publicly available data
indicate that the company's U.S. market share remained stable during
1995 and 1996. In addition, LGS asserts that the petitioner's analysis
was flawed because, first, it compared the volume of sales and customer
base from the middle of 1995 to the volume of sales and customer base
at the beginning of 1996. LGS asserts that such a comparison is not
fair, given the seasonal nature of DRAM prices. When prices and costs
are compared for the same time period, LGS asserts, verified data show
that direct sales in the United States actually increased during 1996.
Second, LGS contends that the petitioner's analysis compared unit
quantities rather than megabyte quantities. LGS asserts that by only
examining unit quantity declines, the petitioner failed to capture the
natural shift to higher DRAM generations with larger memory capability.
Regarding the petitioner's contention that LGS' price declines were not
in line with general industry declines, LGS maintains that during
market downturns, the company's OEM customers pay higher prices than
they would on the spot market.
The petitioner contests LGS' assertion that it is illogical to
attempt to determine what a respondent's pricing behavior ``may'' have
been if an antidumping duty were not in place. According to the
petitioner, it is entirely reasonable for the Department to analyze
what a respondent's pricing practices ``would have been'' in the
absence of an order.
DOC Position
We agree with respondents that in the circumstances of this case it
would be inappropriate for the Department to speculate as to whether or
to what degree, during the first three review periods, the antidumping
order on DRAMs from Korea constrained LGS and Hyundai from pricing at
less than normal value. At the same time, the Department does not have
to find that the order has had no effect on the parties' pricing
behavior. The more relevant question is whether the recent significant
downturn in the industry affects the likelihood that the Korean
respondents will dump in the future. As discussed in Comment 2, above,
this is not a question the Department can or needs to answer with
certainty. Rather, the Department must be satisfied that future dumping
is not likely in order to revoke an order. In this case, based upon the
evidence in the record, this standard has not been met and, therefore,
we conclude that there is a need for the order to remain in place.
Accordingly, we have determined not to revoke, in part, the antidumping
duty order on DRAMs from Korea.
II. General Comments
Comment 6: New Factual Information Allegation.
The petitioner argues that LGS, Hyundai, and Compaq submitted new
factual information in their April 18, 1997, case briefs. The
petitioner asserts that such information is untimely since the
established deadline for the submission of factual information
regarding revocation was January 27, 1997.
LGS, Hyundai and Compaq argue that the information submitted in
their case briefs was not untimely, but instead was responsive to the
Department's request in its preliminary results for views on ``current
and projected market circumstances'' regarding the issue of revocation.
The petitioner rebuts the respondents' argument stating that the
common meaning of ``views'' refers to opinions, arguments and
conclusions concerning
[[Page 39820]]
a given issue, not the submission of new factual information. In
addition, the petitioner asserts that in the event the Department
determines it is appropriate to accept the additional market
information presented in the respondents' case briefs, the data claimed
to be the actual price and cost information of LGS cannot be used to
support revocation because it is not accurate as discussed in comment
5, above, and was not verified.
DOC Position
We agree with LGS, Hyundai and Compaq. In our preliminary analysis
of the revocation issue, we cited trends in DRAM prices and costs as
part of our rationale for publishing a preliminary notice of intent not
to revoke the order, in part. Our preliminary results also specifically
invited comments from interested parties regarding ``current and
projected market circumstances.'' The information submitted by the
interested parties in their case and rebuttal briefs pertain to current
and projected market conditions directly relating to the factors
underlying the Department's preliminary ``not likely'' analysis.
Therefore, we agree with LGS, Hyundai and Compaq that this information
was solicited by the Department and may have a direct bearing on the
factors the Department will consider in making in its final ``not
likely'' analysis. Therefore, we find that this data was not untimely
filed.
Comment 7: Whether the Department Properly Applied the CEP Offset
in the Preliminary Results.
The petitioner argues that the Department should not have applied
the CEP offset in its preliminary results because neither LGS nor
Hyundai has demonstrated that they were entitled to an adjustment for
differences in level of trade. Specifically, the petitioner maintains
that the Department erred in determining that one level of trade
existed in the home market (direct sales by the parent corporation to
the domestic customer) and that a different level of trade existed in
the U.S. market, where the Department used the level of trade of the
sale to the affiliated importer rather than the resale to the
unaffiliated customer (i.e., a ``constructed'' level of trade). The
petitioner asserts that neither the Act nor the SAA permit the
Department to use a ``constructed'' level of trade for constructed
export price (CEP) sales when identifying the level of trade. The
petitioner argues that section 773(a)(7)(A) of the Act, which provides
for a level of trade adjustment, does not make any distinction between
export price (EP) sales and CEP sales, and that the distinction between
EP and CEP sales in subsections 772(a) and 772(b) of the Act also does
not warrant any different treatment when identifying levels of trade.
The petitioner argues that, in view of the sections of the Act
mentioned above, the Department's interpretation of the SAA as
permitting a constructed level of trade means that the home market
level of trade will always be at a more advanced stage of distribution
than the level of trade of the CEP, the data available will never
provide an adequate basis to quantify a level of trade adjustment, and
thus, the CEP offset will always be used. The petitioner contends that
the SAA intended the application of the CEP offset to be an exception,
rather than the rule. Therefore, the petitioner asserts that the
Department's acceptance of a constructed level of trade contradicts the
intent of the SAA and the intent of the statue in section 773(a)(7)(A).
The petitioner further argues that, even if the Department adheres
to the distinction between EP and CEP sales in determining the starting
price for determining the level of trade, neither respondent has
adequately demonstrated that it is entitled to a level of trade
adjustment. The petitioner argues that the simple enumeration of
selling functions in both the home market and U.S. market is not
sufficient to demonstrate the significance of the differing selling
functions in both markets.
LGS and Hyundai argue that the Department correctly applied the CEP
offset to adjust for differences in the levels of trade in the two
markets which were not capable of being quantified. Both respondents
assert that the Department's use of a ``constructed'' level of trade
when analyzing CEP sales is in accordance with past interpretation of
the SAA and the Act. In addition, LGS maintains that the Department has
consistently followed this approach and has explicitly stated in the
antidumping questionnaire that a constructed level of trade will be
used for CEP sales.
LGS and Hyundai also reject the petitioner's argument that
respondents have not adequately documented differences in selling
functions in the U.S. and home markets. The respondents claim that in
its case brief, the petitioner only referenced the brief discussion of
the selling function differences contained in the notice of preliminary
results and ignored the detailed analysis presented in the respondents'
questionnaire responses and in the Department's preliminary analysis
memorandum. Hyundai and LGS contend that the Department's preliminary
analysis memorandum shows that the selling functions actually performed
by the respondents on home market sales are much more significant than
the selling functions performed for U.S. sales. LGS and Hyundai contend
that, because their home market sales were at levels of trade more
advanced than their U.S. sales and it was not possible to quantify the
price differential caused by these differences, the Department should
continue to allow a CEP offset to NV or to constructed value (CV) in
order to adjust for the differences in levels of trade between the two
markets.
DOC Position
We agree with LGS and Hyundai. We do not base the level of trade on
the starting price for both EP and CEP sales. While the petitioner is
correct in noting that the starting price for calculating the CEP is
that of the subsequent resale by the affiliated importer to an
unaffiliated buyer, the Act, as amended by the URAA, and the SAA
clearly specify that the relevant sale for our level of trade analysis
is the constructed export price transaction between the exporter and
the importer.
While the starting price for CEP is that of a subsequent resale to
an unaffiliated buyer, the calculation of the CEP results in a price
that corresponds, as closely as possible, to an export price between
non-affiliated exporters and importers, as explained in the SAA. See H.
Doc. No. 316, 103d Con., 2d Ses., Vol. I, at 823 (1994). In other
words, constructing an export price removes a link from a respondent's
U.S. distribution chain--the link between the affiliated U.S. importer
and its customers. Thus, the CEP is a price exclusive of all expenses
and profit associated with economic activates occurring in the United
States. The expenses specified in section 772(d) of the Act and the
profit associated with those expenses represent activities undertaken
in the United States to support U.S. resales to unaffiliated customer.
Generally these activities are undertaken by the affiliated importer
and occur after the transaction between the exporter and the importer.
Because the expenses and profit deducted under section 772(d) represent
activities undertaken to support the U.S. resale, the deduction of
these expenses normally yields a different level of trade for the CEP
than for the later resale. Movement charges, duties and taxes deducted
under section 772(c) do not represent activities of the affiliated
importer, and we do not remove them from starting price to obtain the
CEP level of trade. See, e.g., Antifriction Bearings (Other than
Tapered Roller
[[Page 39821]]
Bearing) and Parts Thereof from France, et. al.; Final Results of
Antidumping Administrative Review, 62 FR 2083, 2105 (January 15, 1997);
Roller Chain, other than Bicycle from Japan; Preliminary Results of
Antidumping Duty Administrative Review, 62 FR 25165, 25168 (May 8,
1997); and Certain Corrosion-Resistant Carbon Steel Flat Products and
Certain Cut-to-Length Carbon Steel Plate from Canada; Final Results of
Administrative Review, 62 FR 18448, 18466 (April 15, 1997). In
accordance with our practice, the instructions in the questionnaire
issued to respondents in this administrative review properly stated
that a constructed level of trade would be used for our level of trade
analysis.
We also disagree with the petitioner's assertion that LGS and
Hyundai have not adequately documented their respective differences in
selling functions in the home and U.S. markets so as to warrant level
of trade adjustments (or a CEP offset, as was actually calculated). As
noted by respondents, the petitioner referred primarily to the
Department's preliminary results of review as published, and
disregarded the more detailed data and analysis on the record
concerning the differences in selling functions and other factors
contained in the Department's preliminary analysis memoranda for both
respondents.
In addition to the analysis contained in the preliminary results,
these memoranda contain more detailed descriptions of the information
provided by respondents and the differences in selling functions
between the two markets. Based on this analysis, we concluded that U.S.
and home market sales made by both respondents were at different points
in the channel of distribution and that the selling functions performed
by the respondents for home market sales were sufficiently different
from those performed by the respondents for U.S. sales. Therefore, the
Department properly determined that the sales made by Hyundai and LGS
in the home market were at a different level of trade than the sales
made in the United States. As explained in the preliminary results of
review, however, we also determined that it was not possible to
quantify the price differences resulting from the differing levels of
trade, thus justifying a CEP offset to normal value for both
respondents pursuant to section 773(a)(7)(B) of the Act. See
Preliminary Results, 62 FR at 12798-99.
III. Company Specific Comments
A. Hyundai
Comment 8: Whether Hyundai's Reported Home Market Sales Constitute
a Fictitious Market.
The petitioner argues that Hyundai's reported home market sales
constitute a fictitious market and cannot be used as a basis for normal
value. Specifically, the petitioner contends that beginning in February
1996, Hyundai created a fictitious market by manipulating its home
market sales prices in the following manner: (1) Hyundai essentially
quit making sales to OEM customers and instead made sales only to a
small number of distributors. The petitioner asserts that this allowed
Hyundai to control its home market prices; (2) Hyundai stopped making
sales at different times throughout the month, and instead only made
sales at the end of the month. The petitioner claims that this practice
allowed Hyundai to determine the necessary price to charge for those
home market sales that would be matched to the U.S. sales prior to
making the sale; (3) although the number of home market customers
decreased, the quantity of DRAMs sold in the home market increased as
the price collapsed. The petitioner asserts that Hyundai did not
explain how the Korean market was able to absorb the surge in DRAMs;
(4) the Department did not conduct a thorough verification of this
issue; and (5) the average unit prices for home market sales which were
used as matches to U.S. sales were significantly lower than the average
unit prices for DRAM sales not matched to U.S. sales. The petitioner
contends that in most instances, the price difference was not warranted
because the products which were not used as matches for U.S. sales
generally had only one characteristic (e.g., speed) different from
those sales that were matched to U.S. sales. Based on these assertions,
the petitioner contends that in the final results, the Department
should find that a fictitious market exists, disregard Hyundai's
reported home market sales and base normal value on facts available.
Hyundai argues that the petitioner's arguments hold no merit and
are based on a distorted analysis of the record. Specifically, Hyundai
asserts the following: (1) The Department's verification report
confirms that the sales made to home market distributors were in fact
real sales made to real customers. In addition, Hyundai contends that
the Department examined numerous home market sales, including receipts
and other documents verifying delivery of the merchandise, at
verification. Therefore, Hyundai asserts that the record indicates that
Hyundai's home market sales were bona fide sales; (2) Hyundai contends
that the petitioner's assertion that the company priced its home market
sales which were matched to U.S. sales at prices that were lower than
the prices it charged on sales not used for comparison purposes is
factually incorrect and based on a flawed analysis. In addition,
Hyundai claims that given that 99.9 percent of its home market sales
were used as comparison sales, the petitioner's apparent assumption
that Hyundai made up for the revenues sacrificed on lower-priced
matched sales with the revenues earned on higher priced non-matched
sales is mathematically impossible; (3) Hyundai asserts that the
petitioner's claim that the company began making sales only at the end
of the month is inaccurate. Hyundai asserts that throughout the POR,
its home market sales were usually made during the last 10 days of the
month, although on occasion, Hyundai made sales earlier in the month
(e.g., in March 1996, Hyundai made sales at various times during the
beginning, middle and end of the month); (4) Hyundai argues that its
reported home market sales information demonstrates that most of
Hyundai's sales throughout the entire POR were to distributors.
Therefore, Hyundai asserts that there was nothing unusual about its
sales to distributors, as alleged by the petitioner; (5) Hyundai claims
that the petitioner's contention that the quantity of DRAMs sold in the
home market increased fails to demonstrate anything other than that
price reductions stimulate demand; and (6) the petitioner's
presentation of pricing patterns in the home market does not satisfy
the statutory definition of fictitious market in that it only shows
prices moving in tandem, not ``differences in movements.''
Specifically, Hyundai asserts that the petitioner's pricing data do not
show that prices for non-matched sales increased while prices for
matched sales decreased. Instead, Hyundai asserts that the petitioner's
data show that prices for both types of sales declined over time, a
pricing pattern entirely consistent with the normal pricing patterns
for the DRAM industry. For all of these reasons, Hyundai argues that
the Department should reject the petitioner's assertion that Hyundai's
home market is fictitious.
DOC Position
The petitioner failed to raise its fictitious market allegation
until filing its case brief following the preliminary results of
review. Therefore, the
[[Page 39822]]
petitioner's allegation was untimely filed and not adequate to warrant
determining that Hyundai's home market sales constitute a fictitious
market.
A fictitious market analysis is extraordinary. As the Department
stated recently in the preamble to its final regulations implementing
the URAA, the Department typically does not engage in a fictitious
market analysis under section 773(a)(2) of the Act, or a variety of
other analyses called for by section 773, ``unless it receives a timely
and adequately substantiated allegation from a party.'' Antidumping
Duties; Countervailing Duties; Final Rule, 62 FR 27296, 27357 (May 19,
1997) (Final Regulations) (citing Tubeless Steel Disc Wheels from
Brazil, 56 FR 14083 (1991); Porcelain-on-Steel Cooking Ware from
Mexico, 58 FR 32095 (1993)). The various provisions of section 773,
including section 773(a)(2), ``call for analyses based on information
that is quantitatively and/or qualitatively different from the
information normally gathered by the Department as part of its standard
antidumping analysis.'' Final Regulations, 62 FR at 27357. The
Department must determine, as a threshold matter, whether such an
analysis is warranted based upon the adequacy of the allegation. See
Porcelain-on-Steel Cooking Ware, 58 FR at 32096; Electrolytic Manganese
Dioxide From Japan, 56 FR 28551, 28555 (May 14, 1993).
The untimely nature of petitioner's allegation during this review
prevented the Department from making this threshold determination at an
appropriate point in the proceeding. Therefore, we reject petitioner's
allegation on this basis alone.
Comment 9: Whether the Normal Value of Further-Manufactured Models
Should be Based on Constructed Value.
Hyundai argues that in its preliminary results, the Department
improperly compared the prices of its further-manufactured sales of
memory modules to the CV of the imported merchandise. Hyundai asserts
that this approach is inconsistent with the Department's standard
practice of comparing the U.S. price of the product as imported, to the
normal value of the identical product. Hyundai cites Certain Internal-
Combustion, Industrial Fork Lift Trucks from Japan, 53 FR 12552, 12559
(1988), as case precedent for this practice. Hyundai contends that in
its final results, the Department should make price-to-price
comparisons for all further manufactured models using the net price of
the imported product. Alternatively, in the event the Department
determines that it is too complicated to determine the net price for
mixed modules (i.e., modules that include two types of DRAMs), Hyundai
argues that the Department could use CV for the mixed modules. Hyundai
notes that sales of mixed modules accounted for less than ten percent
of its further manufactured sales during the POR.
The petitioner argues that the Department was correct in comparing
all of Hyundai's further manufactured U.S. sales to CV. The petitioner
asserts that in the first administrative review, the Department stated
that ``there were no comparable home market sales for U.S. sales of
mixed modules and that the configuration and application of mixed
memory modules are critical factors in determining the foreign market
value of these modules.'' Based on these facts, the petitioner claims
that the Department was compelled to use CV in its preliminary results.
DOC Position
The Act sets forth a preference for basing normal value on the
price of the foreign like product and for making price-to-price
comparisons, whenever possible. See 19 U.S.C. 1677 (b)(1); 19 CFR
353.46(2)(1996). Therefore, for single memory modules, because there
were home market sales of merchandise identical to the merchandise
imported into the United States, we agree with Hyundai that, rather
than resorting to CV, the Department should have followed its practice
of comparing the U.S. price of the imported product (i.e., the DRAM) to
the weighted-average price of the comparison product sold in the home
market for single memory modules. We have made this correction in the
final results.
With regard to mixed memory modules, we agree with the petitioner
that the Department correctly applied CV. Mixed memory modules are
modules which contain more than one type of DRAM. In order to determine
the net imported price for each type of DRAM, it would be necessary to
allocate the net price of all DRAMs included in the mixed module to the
individual DRAM types on the basis of relative costs. Due to the small
quantity of mixed module sales in the United States and the complexity
of such a calculation, we find that the use of CV is reasonable for
mixed memory modules.
Comment 10: Clerical Errors.
The petitioner argues that the Department made the following
clerical errors in its preliminary margin calculation for Hyundai: (1)
The Department calculated CV profit on the basis of all home market
sales, instead of using only those sales that were found to be above
cost; and (2) the Department improperly excluded imputed credit and
inventory carrying costs from the calculation of total U.S. expenses
for the CEP profit calculation.
Hyundai agrees that the Department incorrectly calculated CV profit
using all home market sales, rather than only those sales that were
found to be above COP. With respect to CEP profit, Hyundai argues that
the Department properly excluded imputed credit and inventory carrying
costs from both the calculation of the profit percentage and the
calculation of total U.S. expenses used in the CEP profit calculation.
DOC Position
We agree with the petitioner that the Department inadvertently
included those home market sales which did not pass the COP test in the
pool of sales used to calculate CV profit. We have corrected this error
in these final results. In reviewing the margin calculation program it
was noted that in the calculation of CEP profit duty drawback was
inadvertently subtracted, rather than added. In addition, we noted that
imputed credit and inventory carrying costs were inadvertently included
in the pool of expenses used to calculate the selling expenses for CV.
We have corrected these errors. Regarding the calculation of CEP
profit, we agree with the petitioner that imputed credit and inventory
carrying costs should have been included in the calculation of total
U.S. expenses used to calculate CEP profit, although this did not
necessarily constitute a clerical error. Including these expenses is
consistent with section 772(f)(2)(B) of the Act. This provision defines
the term ``total United States expenses'' as those expenses described
under sections 772(d)(1) and (2) of the Act, which in turn include
these imputed credit and inventory carrying costs. We have corrected
this error in the final results.
However, the Department properly excluded imputed credit and
inventory carrying costs from the pool of selling expenses used to
calculate the company's actual profit percentage. Because Hyundai's
actual interest expense (as reported in the CV database) is accounted
for in the calculation of profit there is no need to include imputed
interest amounts. ``Although the actual and imputed amounts may differ,
if we were to account for imputed expenses in the denominator of the
CEP allocation ratio, we would double count the interest expense
incurred for credit and inventory carrying costs because these expenses
are already included in the denominator.'' Certain Cold-Rolled
[[Page 39823]]
and Corrosion-Resistant Carbon Steel Flat Products from Korea, 62 FR
18404, 18440 (April 15, 1997); accord Preliminary Determination of
Sales at Less Than Fair Value: Fresh Tomatoes from Mexico, 61 FR 56612
(November 1, 1996).
B. LGS
Comment 11: Research and Development Expenses.
The petitioner argues that the Department erred in its preliminary
results by accepting LGS' reported DRAM research and development (R&D)
expenses which allocated DRAM R&D expenses over DRAM cost of sales. The
petitioner maintains that, in accordance with the first and second
administrative reviews, the Department should allocate LGS' R&D
expenses related to all semiconductors over its 1995 total cost of
sales for all semiconductors.
LGS responds that the Department did revise LGS' reported R&D
expenses in the preliminary results. However, LGS takes issue with the
Department's recalculation. Specifically, LGS contends that the
Department erroneously included R&D costs for products other than
subject DRAMs in its calculation. LGS asserts that the same methodology
was used in the less than fair value investigation and was reversed by
the CIT, which found that the record evidence did not support a
departure from the Department's practice of assigning research and
development as specifically as possible to individual products. LGS
argues that in the final results the Department should calculate the
research and development rate by dividing the company's total DRAM
research and development expenses for 1995 by its total DRAM cost of
sales.
In its rebuttal brief the petitioner states that if the Department,
in fact, re-calculated the research and development expense ratio in
its preliminary results by allocating the company's 1995 R&D expenses
for all semiconductors over its 1995 total cost of sales, the
petitioner fully supports the Department's preliminary calculation.
DOC Position
In the preliminary results we properly calculated a R&D rate for
LGS by allocating all semiconductor R&D expenses over the company's
cost of sales for all semiconductors as reported in its audited 1995
financial statements. This method of allocation is consistent with our
practice in the last two administrative reviews, where we determined
that sufficient evidence of cross-fertilization exists in the
semiconductor industry to rule out the use of product or DRAM-specific
research and development expenses. See Dynamic Random Access Memory
Semiconductors from the Republic of Korea; Final Results of Antidumping
Duty Administrative Review, 62 FR 965, 967 (January 7, 1997); 61 FR
20216, 20218 (May 6, 1996). We have included in the record of this
review a memorandum from a non-partisan expert relied upon in previous
reviews, which describes the cross-fertilization and includes relevant
pages from verification exhibits. See Memorandum regarding cross-
fertilization of research and development costs for DRAMs, August 14,
1995.
Comment 12: Clerical Errors.
The petitioner argues that the Department made the following
clerical errors in its preliminary margin calculation for LGS: (1) The
Department failed to deduct early payment discounts from the
calculation of the net price used in the cost test; (2) the
Department's preliminary margin program used the wrong customer codes
to identify sales made to home market customers which failed the
Department's arm's-length test; as a result, the petitioner contends
that sales to these customers were improperly included in the
calculation of normal value; (3) although the preliminary margin
calculation properly recalculated G&A and interest expenses for DRAMs,
the Department failed to similarly recalculate G&A and interest
expenses for modules; (4) the Department inadvertently double counted
home market indirect selling expenses, bank fees and packing expenses
in its calculation of total costs for the CEP profit calculation; and
(5) the Department improperly excluded imputed credit expenses from the
calculation of total U.S. expenses used to calculate CEP profit.
LGS rebuts the petitioner's first alleged clerical error. LGS
states that the Department should not deduct early payment discounts
from the net price used in the cost test because these discounts were
included in the build-up of the COP to which the net price was
compared.
LGS alleged the following clerical errors in the Department's
preliminary margin calculations: (1) The Department inadvertently
double counted home market indirect selling expenses in its calculation
of COP; (2) the Department improperly excluded U.S. imputed credit
expenses from the calculation of total expenses used to calculate the
CEP profit percentage; and (3) the Department improperly calculated a
single, weighted-average home market direct selling expense and
indirect selling expense for CV based on the quantity of sales. LGS
asserts that because direct and indirect selling expenses are allocated
to sales based on value, and products with a relatively higher sales
value carry a proportionately higher share of selling expenses, the
Department should calculate weighted-average indirect and direct
selling expenses based on density, not quantity.
The petitioner argues that LGS did not explain why basing the
calculation of the weighted-average selling expenses for CV on sales
volume is inherently wrong or a clerical error. Therefore, the
petitioner argues that there is no need for the Department to make the
proposed change in allocation in its margin calculations. In addition,
the petitioner asserts that the Department correctly deducted U.S.
imputed credit expenses from the calculation of total expenses used to
calculate the actual CEP profit percentage.
DOC Position
We agree that the Department committed all five clerical errors
alleged by the petitioner and the first clerical error alleged by LGS.
These errors have been corrected in the final results. In addition, in
reviewing the margin calculation program we discovered that U.S. re-
packing expenses had been deducted twice in the calculation of the CEP
profit rate, that imputed credit and inventory carrying costs were
inadvertently included in the pool of expenses used to calculate
selling expenses for CV, and that the weighted-average direct and
indirect selling expenses for CV had been calculated based on all home
market sales, rather than just those sales which passed the COP test.
We have corrected these errors. Finally, in response to LGS' concern,
we have ensured that the calculation of the net price and COP used in
the cost test were on the same basis.
We disagree with LGS that the Department should have calculated the
weighted-average direct and indirect selling expenses to be included in
the calculation of CV based on density not quantity. LGS has not
explained why it would be more accurate to calculate selling expenses
for DRAMs based on density. In addition, based on information on the
record it does not appear that selling expenses are incurred by LGS
based on the density of different products. Finally, it is the
Department's practice to calculate weighted-average selling expenses
for CV based on the quantity of sales.
We disagree with LGS' contention that the Department improperly
[[Page 39824]]
excluded imputed credit expenses from the pool of expenses used to
calculate the actual CEP profit percentage. Because the actual interest
expense of LGS was captured in the profit calculation there is no need
to include an amount for imputed interest. See Comment 10, above.
Final Results of the Review
As a result of this review, we determine that the following
weighted-average dumping margins exist for the POR:
------------------------------------------------------------------------
Percent
Manufacturer/exporter Margin
------------------------------------------------------------------------
Hyundai Electronic Industries, Inc........................... 0.00
LG Semicon Co., Ltd.......................................... 0.01
------------------------------------------------------------------------
The U.S. Customs Service shall assess antidumping duties on all
appropriate entries. Individual differences between United States price
and normal value may vary from the percentages stated above. The
Department will issue appraisement instructions concerning each
respondent directly to the U.S. Customs Service.
Furthermore, the following deposit requirements will be effective
for all shipments of the subject merchandise entered, or withdrawn from
warehouse, for consumption on or after the publication date of these
final results of administrative review, as provided for by section
751(a)(1) of the Act: (1) The cash deposit rate for the reviewed firms
will be zero percent; (2) for previously reviewed or investigated
companies not listed above, the cash deposit rate will continue to be
the company-specific rate published for the most recent period; (3) if
the exporter is not a firm covered in this review, a prior review, or
in 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
review conducted by the Department, the cash deposit rate will be 3.85
percent, the all others rate established in the LTFV investigation.
Samsung Electronics Co., Ltd. (Samsung), formerly a respondent in
previous administrative reviews, was excluded from the antidumping duty
order on DRAMs from Korea on February 8, 1996. See Final Court Decision
and Partial Amended Final Determination: Dynamic Random Access Memory
Semiconductors of One Megabyte and Above From the Republic of Korea, 61
FR 4765 (February 8, 1996).
These deposit requirements shall remain in effect until publication
of the final results of the next administrative review.
This notice serves as the final reminder to importers of their
responsibility under 19 CFR 353.26 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 notice also serves as a reminder to parties subject to
administrative protective order (APOs) of their responsibility
concerning the disposition of proprietary information disclosed under
APO in accordance with 19 CFR 353.34(d). Timely written notification of
the return/destruction of APO materials or conversion to judicial
protective order is hereby requested. Failure to comply with the
regulations and terms of an APO is a violation which is subject to
sanction.
This administrative review and notice are in accordance with
section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)) and 19 CFR 353.22.
Dated: July 16, 1997.
Robert S. LaRussa,
Acting Assistant Secretary for Import Administration.
[FR Doc. 97-19552 Filed 7-23-97; 8:45 am]
BILLING CODE 3510-DS-U
