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

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