Notice of Preliminary Determination of Sales at Less Than Fair Value and Postponement of Final Determination: Static Random Access Memory Semiconductors From Taiwan

DEPARTMENT OF COMMERCE

International Trade Administration

[A-583-827]

Notice of Preliminary Determination of Sales at Less Than Fair

Value and Postponement of Final Determination: Static Random Access

Memory Semiconductors From Taiwan

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

EFFECTIVE DATE: October 1, 1997.

FOR FURTHER INFORMATION CONTACT: Shawn Thompson or David Genovese,

Import Administration, International Trade Administration, U.S.

Department of Commerce, 14th Street and Constitution Avenue, N.W.,

Washington, D.C. 20230; telephone: (202) 482-1776 or (202) 482-0498,

respectively.

The Applicable Statute

Unless otherwise indicated, all citations to the Tariff Act of

1930, as amended (the Act), are references to the provisions effective

January 1, 1995, the effective date of the amendments made to the Act

by the Uruguay Round Agreements Act (URAA). In addition, unless

otherwise indicated, all citations to the Department's regulations are

to the regulations codified at 19 CFR part 353 (April 1, 1996).

Preliminary Determination

We preliminarily determine that static random access memory

semiconductors (SRAMs) from Taiwan are being, or are likely to be, sold

in the United States at less than fair value (LTFV), as provided in

section 733 of the Act. The estimated margins of sales at LTFV are

shown in the ``Suspension of Liquidation'' section of this notice.

Case History

Since the initiation of this investigation (Notice of Initiation of

Antidumping Duty Investigations: SRAMs from the Republic of Korea and

Taiwan (62 FR 13596, March 21, 1997)), the following events have

occurred:

During March and April 1997, the Department obtained information

from the American Institute in Taiwan identifying potential producers

and/or exporters of the subject merchandise to the United States. Based

on this information, in April 1997, the Department issued antidumping

questionnaires to 22 companies.1

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\1\ These companies are as follows: (1) Advanced

Microelectronics Products Inc. (Advanced Microelectronics); (2)

Alliance Semiconductor Corp. (Alliance); (3) Asia Specific

Technology Limited; (4) Best Integrated Technology, Inc. (BIT); (5)

Chia Hsin Livestock Corp.; (6) E-CMOS Technology Corporation; (7)

Etron Technology, Inc.; (8) G-Link Technology Corp.; (9) Holtek

Microelectronics Inc.; (10) Hualon Microelectronics Corporation;

(11) Integrated Silicon Solution (Taiwan) Inc. (ISSI); (12) Kes Rood

Technology Taiwan Ltd.; (13) Lien Hsing Integrated Circuits (Lien

Hsing); (14) Macronix International Co., Ltd.; (15) Mosel-Vitelic,

Inc.; (16) Taiwan Memory Technology, Inc.; (17) Taiwan Semiconductor

Manufacturing Corporation (TSMC); (18) Texas Instruments-Acer Inc.

(Texas Instruments); (19) United Microelectronics Corporation (UMC);

(20) Utron Technology, Inc.; (21) Vanguard International

Semiconductor Corporation; and (22) Winbond Electronics Corporation

(Winbond).

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Also in April 1997, the United States International Trade

Commission (ITC) issued an affirmative preliminary injury determination

in this case (see ITC Investigation No. 731-TA-761-762).

In May 1997, the Department received responses to Section A of the

questionnaire from 18 of the 22 companies. Three of the remaining

companies, Advanced Microelectronics, BIT, and Texas-Instruments, did

not submit responses to Section A. Therefore, we have assigned a margin

to these companies based on facts available. (See the ``Facts

Available'' section below, for further discussion.) Regarding the

fourth company, Lien Hsing, we were notified by one of the respondents

in this investigation that it had received the questionnaire addressed

to Lien Hsing, but that it was unaware of the existence of this

company. Because Lien Hsing never received the Department's

questionnaire and we found no way in which to locate and serve it with

the questionnaire, no adverse inference is warranted with respect to

it.

Based on the information received from the 18 responding companies,

in May 1997, the Department determined that it did not have the

administrative resources to investigate all known producers and/or

exporters of SRAMs

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during the period of investigation (POI). Accordingly, we decided to

limit the number of mandatory respondents in this investigation to the

five companies that we believed had the largest sales volumes of SRAMs

to the United States during the POI, pursuant to section 777A(c) of the

Act. These companies are Alliance, ISSI, TSMC, UMC, and Winbond

(hereinafter ``respondents''). For a more detailed discussion regarding

this issue, see the memorandum to Louis Apple from the Team, dated May

21, 1997.

Respondents submitted questionnaire responses in June 1997. We

issued supplemental questionnaires to these companies in July 1997, and

received responses to these questionnaires in August 1997. Based on a

review of these responses, we have excluded TSMC from our analysis in

this investigation. For a discussion of this issue, see the memorandum

to Louis Apple from the Team, dated September 23, 1997.

Pursuant to section 735(a)(2)(A) of the Act, on August 14, 1997,

one of the respondents, Winbond, requested that, in the event of an

affirmative preliminary determination in this investigation, the

Department postponed its final determination until no later than 135

days after the publication of this notice in the Federal Register. For

further discussion, see the ``Postponement of Final Determination and

Extension of Provisional Measures'' section of this notice.

In September 1997, Alliance submitted revised sales and cost

databases at the Department's request.

Facts Available

Three interested parties in this investigation, Advanced

Microelectronics, BIT, and Texas Instruments, failed to respond to the

Department's requests for information. Specifically, these companies

did not provide a response to the Department's questionnaire issued in

April 1997.

Section 776(a)(2) of the Act provides that if an interested party:

(1) Withholds information that has been requested by the Department,

(2) fails to provide such information in a timely manner or in the form

or manner requested, (3) significantly impedes a determination under

the antidumping statute, or (4) provides such information but the

information cannot be verified, the Department shall, subject to

subsections 782(c)(1) and (e) of the Act, use facts otherwise available

in reaching the applicable determination. Because Advanced

Microelectronics, BIT, and Texas Instruments failed to respond to the

Department's questionnaire and because subsections (c)(1) and (e) do

not apply with respect to these companies, we must use facts otherwise

available to calculate their dumping margins.

Section 776(b) of the Act provides that adverse inferences may be

used against a party that has failed to cooperate by not acting to the

best of its ability to comply with requests for information. See also

Statement of Administrative Action accompanying the URAA, H.R. Rep. No.

316, 103d Cong., 2d Sess. 870 (SAA). The failure of Advanced

Microelectronics, BIT, and Texas Instruments to reply to the

Department's questionnaires or to provide a satisfactory explanation of

their conduct demonstrates that they have failed to act to the best of

their ability in this investigation. Thus, the Department has

determined that, in selecting among the facts otherwise available to

these companies, an adverse inference is warranted. As facts otherwise

available, we are assigning to Advanced Microelectronics, BIT, and

Texas Instruments the highest margin stated in the notice of

initiation, 113.85 percent.

Section 776(c) of the Act provides that, when the Department relies

on secondary information (such as the petition) in using the facts

otherwise available, it must, to the extent practicable, corroborate

that information from independent sources that are reasonably at its

disposal. When analyzing the petition, the Department reviewed all of

the data the petitioner relied upon in calculating the estimated

dumping margins, and adjusted those calculations where necessary. See

Initiation Checklist, dated March 17, 1997. These estimated dumping

margins were based on a comparison of constructed value (CV) to U.S.

price, the latter of which was based on price quotations offered by two

Taiwanese companies. The estimated dumping margins, as recalculated by

the Department, ranged from 93.54 to 113.85 percent. For purposes of

corroboration, the Department re-examined the price information

provided in the petition in light of information developed during the

investigation and found that it has probative value. See the memorandum

from the Team to Louis Apple dated September 23, 1997, for a detailed

explanation of corroboration of the information in the petition.

Therefore, as adverse facts available, we are assigning to Advanced

Microelectronics, BIT, and Texas Instruments the highest margin stated

in the notice of initiation, 113.85 percent. This margin is higher than

the margin calculated for any respondent in this investigation.

Postponement of Final Determination and Extension of Provisional

Measures

Two of the respondents, Winbond and Alliance, requested on

September 11 and 18, 1997, respectively, that, in the event of an

affirmative preliminary determination in this investigation, the

Department postpone its final determination until no later than 135

days after the publication of this notice in the Federal Register,

pursuant to section 735(a)(2)(A) of the Act. In accordance with 19 CFR

section 353.20(b), because (1) our preliminary determination is

affirmative, (2) Winbond and Alliance account for a significant

proportion of exports of the subject merchandise, and (3) no compelling

reasons for denial exist, we are granting respondents' request and are

postponing the final determination until no later than 135 days after

the publication of this notice in the Federal Register. Suspension of

liquidation will be extended accordingly (see Preliminary Determination

of Sales at Less Than Fair Value and Postponement of Final

Determination: Open-End Spun Rayon Singles Yarn From Austria, 62 FR

14399, 14400 (March 26, 1997); Final Determination of Sales at Less

Than Fair Value: Certain Pasta From Italy, 61 FR 30326 (June 14,

1996)).

Scope of Investigation

The products covered by this investigation are synchronous,

asynchronous, and specialty SRAMs from Taiwan, whether assembled or

unassembled. Assembled SRAMs include all package types. Unassembled

SRAMs include processed wafers or die, uncut die and cut die. Processed

wafers produced in Taiwan, but packaged, or assembled into memory

modules, in a third country, are included in the scope; processed

wafers produced in a third country and assembled or packaged in Taiwan

are not included in the scope.

The scope of this investigation includes modules containing SRAMs.

Such modules include single in-line processing modules (SIPs), single

in-line memory modules (SIMMs), dual in-line memory modules (DIMMs),

memory cards, or other collections of SRAMs, whether unmounted or

mounted on a circuit board.

The SRAMs within the scope of this investigation are classifiable

under the subheadings 8542.13.8037 through 8542.13.8049, 8473.30.10

through 8473.30.90, and 8542.13.8005 of the Harmonized Tariff Schedule

of the United States (HTSUS). Although the HTSUS subheading is provided

for convenience and customs purposes, our

[[Page 51444]]

written description of the scope of this investigation is dispositive.

Period of Investigation

The POI is January 1, 1996, through December 31, 1996.

Time Period for Cost and Price Comparisons

Section 777A(d) of the Act states that in an investigation, the

Department will compare the weighted average of the normal values to

the weighted average of the export prices/constructed export prices.

Generally, the Department will compare sales and conduct the sales

below cost test using annual averages. However, where prices have moved

significantly over the course of the POI, it has been the Department's

practice to use shorter time periods. See, e.g., Final Determination of

Sales at Less Than Fair Value: Erasable Programmable Read Only Memories

(EPROMs) from Japan, 51 FR 39680, 39682 (October 30, 1986), Final

Determination of Sales at Less Than Fair Value: Dynamic Random Access

Memory Semiconductors of One Megabit and Above From the Republic of

Korea, 58 FR 15467, 15476 (March 23, 1993).

We invited comments from interested parties regarding this issue.

An analysis of these comments revealed that all parties agreed that the

SRAMs market experienced a significant and consistent price decline

during the POI. Accordingly, in recognition of the significant and

consistent price declines in the SRAMs market during the POI, the

Department has compared prices and conducted the sales below cost test

using quarterly data.2

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\2\ In accordance with section 773(b)(2)(D) of the Act, we

conducted the recovery of cost test using annual cost data.

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Treatment of Foundry Sales and Elimination of TSMC as a Respondent

During the course of this investigation, we found that two of the

five companies we had selected to be respondents, UMC and TSMC, acted

as foundries for SRAMs design houses. As foundries, they manufactured

processed SRAMs wafers according to designs provided by the design

houses. Two of these design houses, Alliance and ISSI, were also

selected to be respondents. The design houses arranged for the probing,

testing, and assembly of the processed wafers into individual SRAMs

that were subsequently sold to unaffiliated downstream purchasers.

At the time we selected respondents, we had not determined

conclusively how the transaction between a design house and its foundry

should be treated. See the memorandum from the Team to Louis Apple,

dated May 15, 1997. We noted that, when the Department had had an

opportunity to perform a thorough analysis of the respondents'

responses to our questionnaire, the Department may conclude that the

appropriate sales transaction to analyze is not the sale from the

foundry to the design house, but the subsequent downstream sale of the

encapsulated SRAMs to the United States.

When considering this issue for purposes of this determination, we

determined that it was necessary to decide which entity, the foundry or

the design house, was the manufacturer of the subject merchandise, and

which entity controlled the ultimate sale of it. For guidance in making

this determination, we relied on the Department's policy expressed in

our proposed regulations which, while they are not our final

regulations, state our policy on this issue. The proposed regulations

state that: ``[w]here a party owning the components of subject

merchandise has a subcontractor manufacture or assemble that

merchandise for a fee, the Department will consider the owner to be the

manufacturer, because that party has ultimate control over how the

merchandise is produced and the manner in which it is ultimately sold.

The Department will not consider the subcontractor to be the

manufacturer or producer regardless of the proportion of production

attributable to the subcontracted operation or the location of the

subcontractor or owner of the good.'' See Notice of Proposed Rulemaking

and Request for Public Comment: Antidumping Duties; Countervailing

Duties, 61 FR 7308, 7330 (February 26, 1996).

We also reviewed section 351.401(h) of the Department's regulations

which, while not applicable to this investigation, codifies past

practice and current policy. Section 351.401(h) states that the

Department ``will not consider a toller or subcontractor to be a

manufacturer or producer where the toller or subcontractor does not

acquire ownership, and does not control the relevant sale of, the

subject merchandise or foreign like product.''

In reviewing and analyzing the information submitted by respondents

concerning the relationship between the design houses and their

foundries, we have found the following: the design house performs all

of the product research and development for the SRAMs that are to be

produced. The design house produces, or arranges and pays for the

production of, the design mask. At all stages of production, it retains

ownership of the proprietary design and design mask. The design house

then subcontracts the production of processed wafers with a foundry and

provides the foundry with the design mask. Design houses tell the

foundry what and how much to make. The foundry agrees to dedicate a

certain amount of its production capacity to the production of the

processed wafers for the design house. The foundry has no right to sell

those wafers to any party other than the design house unless the design

house fails to pay for the wafers. Once the design house takes

possession of the processed wafers, it arranges for the subsequent

steps in the production process (i.e., probing, testing, and assembly),

then sells the encapsulated SRAMs to downstream customers.

The design of the processed wafer is not only an important part of

the finished product, it is a substantial element of production and

imparts the essential features of the product. The design defines the

ultimate characteristics and performance of the subject merchandise and

delineates the purposes for which it can be used. The foundries

manufactured processed SRAMs wafers using the proprietary designs of

the design houses during the POI. As such, they did not control the

production of the processed wafers in question, but rather merely

translated the design of other companies into actual products.

For purposes of this investigation, we have determined that the

entity that controls and owns the SRAMs design, i.e., the design house,

controls the production, and ultimate sale, of the subject merchandise.

Consequently, we have determined to disregard the foundry sales of UMC

and TSMC for purposes of this investigation. Moreover, because all of

TSMC's sales during the POI were foundry sales, we have determined that

it should no longer be considered a respondent in this investigation.

For a more detailed analysis of this decision, see the memorandum from

the Team to Louis Apple, dated September 23, 1997, concerning the

Treatment of Foundry Sales and the Elimination of TSMC as a Respondent.

Fair Value Comparisons

To determine whether sales of SRAMs from Taiwan to the United

States were made at less than fair value, we compared the United States

Price (USP) to the Normal Value (NV), as described in the ``United

States Price'' and ``Normal Value'' sections of this notice, below. In

accordance with section 777A(d)(1)(A)(i) of the Act, we

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calculated weighted-average USPs for comparison to weighted-average

NVs.

In order to determine whether or not we should base price-averaging

groups on customer types, we conducted an analysis of the prices

submitted by respondents. This analysis does not indicate that there

was a consistent and uniform difference in prices between customer

types. Accordingly, we have not based price comparisons on customer

types.

In making our comparisons, in accordance with section 771(16) of

the Act, we considered all products sold in the home market, fitting

the description specified in the ``Scope of Investigation'' section of

this notice, above, to be foreign like products for purposes of

determining appropriate product comparisons to U.S. sales. Where there

were no sales of identical merchandise in the home market to compare to

U.S. sales, we compared U.S. sales to the next most similar foreign

like product, based on the characteristics listed in Sections B and C

of the Department's antidumping questionnaire.

Regarding Alliance, because we found no home market sales at prices

above the COP, we made no price-to-price comparisons. See the ``Normal

Value'' section of this notice, below, for further discussion.

Regarding ISSI, because this company did not report cost or

difference in merchandise information for certain products sold in the

United States, there is insufficient information on the record to

calculate a margin for these products. Accordingly, we based the margin

for the sales in question on facts available. As facts available, we

used the highest non-aberrational margin calculated for any other

product.

Level of Trade and Constructed Export Price (CEP) Offset

In accordance with section 773(a)(1)(B) of the Act, to the extent

practicable, we determined NV based on sales in the comparison market

at the same level of trade as the export price (EP) or CEP. The NV

level of trade is that of the starting-price sales in the comparison

market or, when NV is based on CV, that of the sales from which we

derive selling, general and administrative (SG&A) expenses and profit.

For EP, it is also the level of the starting-price sale, which is

usually from exporter to importer. For CEP, it is the level of the

constructed sale from the exporter to the importer.

To determine whether NV sales are at a different level of trade

than EP or CEP, we examined stages in the marketing process and selling

functions along the chain of distribution between the producer and the

unaffiliated customer. If the comparison-market sales are at a

different level of trade, and the difference affects price

comparability, as manifested in a pattern of consistent price

differences between the sales on which NV is based and comparison-

market sales at the level of trade of the export transaction, we make a

level of trade adjustment under section 773(a)(7)(A) of the Act.

Finally, for CEP sales, if the NV level is more remote from the factory

than the CEP level and there is no basis for determining whether the

difference in the levels between NV and CEP affects price

comparability, we adjust NV under section 773(a)(7)(B) of the Act (the

CEP offset provision). See Certain Welded Carbon Steel Standard Pipes

and Tubes From India: Preliminary Results of New Shipper Antidumping

Duty Administrative Review, 62 FR 23760, 23761 (May 1, 1997).

Only one of the respondents in this investigation, UMC, claimed

that its home market sales were made at different levels of trade.

Specifically, UMC claimed that its sales of branded SRAMs products to

original equipment manufacturers (OEMs) and distributors were made at

two distinct levels of trade because it provided greater customer

support to, and performed more significant marketing functions for, its

OEM customers. In particular, UMC stated that it met with OEM customers

to assist them in qualifying UMC's products for particular applications

and to discuss how UMC's products may meet the customer's current and

future needs. Regarding marketing functions, UMC stated that its

salesmen make regular on-site visits to OEM customers and attend trade

shows primarily targeted at OEMs. However, UMC does not attend similar

shows targeted at distributors.

We examined the selling activities at each reported marketing stage

and found that there was no substantive difference in the selling

functions performed by UMC at either of its claimed marketing stages.

Consequently, we determine that only one level of trade exists with

respect to sales made by UMC to all customers. For a detailed

explanation of this analysis, see the memorandum from the Team to Louis

Apple, dated September 23, 1997.

Because we have found that only one level of trade existed in the

home market for all respondents during the POI, we conducted an

analysis to determine whether a CEP offset was warranted for each

respondent. In order to determine whether NV was established at a level

of trade which constituted a more advanced state of distribution than

the level of trade of the CEP, we compared the selling functions

performed for home market sales with those performed with respect to

the CEP (i.e., excluding economic activities occurring in the United

States). We found that all respondents performed most of the selling

functions and services related to U.S. sales at their sales offices in

the United States, and therefore, these selling functions are

associated with those expenses which we deduct from the CEP starting

price, as specified in section 772(d) of the Act. Regarding home market

sales, respondents performed largely the same selling functions for

sales to unaffiliated customers as were performed in the United States.

Therefore, their sales in Taiwan were at a more advanced stage of

marketing and distribution (i.e., more remote from the factory) than

the constructed U.S. level of trade, which represents an ex-factory

price after the deduction of expenses associated with U.S. selling

activities. However, because the respondents sell at only one home

market level of trade, the difference in the level of trade cannot be

quantified. Because the difference in the level of trade cannot be

quantified, but the home market is at a more advanced level of trade,

we have granted a CEP offset to all respondents.

United States Price

For UMC and Winbond, we based USP on EP, in accordance with section

772(a) of the Act, when the subject merchandise was sold directly to

the first unaffiliated purchaser in the United States prior to

importation because CEP methodology was not otherwise indicated.

In addition, for all companies, where sales to the first

unaffiliated purchaser took place after importation into the United

States, we based USP on CEP, in accordance with section 772(b) of the

Act.

We made company-specific adjustments as follows:

A. Alliance

We calculated CEP based on packed, FOB U.S. warehouse prices, to

unaffiliated purchasers in the United States. We corrected gross unit

price for clerical errors identified in Alliance's narrative response.

We made deductions from the gross unit price, where appropriate, for

discounts. We also made deductions for international freight (including

air freight and U.S. Customs merchandise processing fees), where

appropriate, pursuant to section 772(c)(2)(A) of the Act.

In accordance with section 772(d) (1) and (2) of the Act, we made

additional

[[Page 51446]]

deductions for commissions, warranty and credit expenses, indirect

selling expenses, inventory carrying costs, U.S. repacking expenses and

U.S. further manufacturing costs. Regarding credit expenses, Alliance

reported that it had not received payment for certain sales as of the

date of its latest questionnaire response. As such, we based the date

of payment for those sales on the date of the preliminary determination

and recalculated credit expenses accordingly.

Pursuant to section 772(d)(3) of the Act, gross unit price was

further reduced by an amount for profit, to arrive at CEP. In

accordance with section 772(f) of the Act, the CEP profit rate was

calculated using the expenses incurred by Alliance on its sales of the

subject merchandise in the United States and foreign like product in

the home market and the profit associated with those sales.

With regard to modules which were further-manufactured in the

United States, we have based USP on the net price of the modules rather

than the net price of the individual SRAMs included in the modules.

B. ISSI

We calculated CEP based on packed, FOB U.S. warehouse prices, to

unaffiliated purchasers in the United States. We made deductions from

the gross unit price, where appropriate, for discounts. We also made

deductions for foreign inland freight, pre-sale warehousing expenses,

foreign and U.S. inland insurance, foreign brokerage and handling, and

international freight (including air freight, U.S. customs merchandise

processing fees, and U.S. inland freight to ISSI's U.S. office), where

appropriate, pursuant to section 772(c)(2)(A) of the Act.

In accordance with section 772(d)(1) of the Act, we made additional

deductions for commissions, credit expenses, indirect selling expenses,

inventory carrying costs, and U.S. repacking expenses. We recalculated

credit expenses using the interest rate paid by ISSI (Taiwan) on its

borrowings denominated in U.S. dollars. In addition, where ISSI had not

received payment for certain sales as of the date of its latest

questionnaire response, we based the date of payment for those sales on

the date of the preliminary determination and recalculated credit

expenses accordingly.

Pursuant to section 772(d)(3) of the Act, gross unit price was

further reduced by an amount for profit, to arrive at CEP. In

accordance with section 772(f) of the Act, the CEP profit rate was

calculated using the expenses incurred by ISSI and its affiliate on

their sales of the subject merchandise in the United States and foreign

like product in the home market and the profit associated with those

sales.

C. UMC

We calculated EP and CEP based on packed, FOB prices, to

unaffiliated purchasers in the United States. We adjusted the gross

unit price for billing adjustments and freight charges. We made

deductions from the gross unit price, where appropriate, for discounts.

We also made deductions for foreign inland freight, foreign brokerage

and handling, and international freight, where appropriate, pursuant to

section 772(c)(2)(A) of the Act.

Where USP was based on CEP, we made additional deductions, in

accordance with section 772(d)(1) of the Act, for commissions, warranty

and credit expenses, indirect selling expenses, and inventory carrying

costs. Regarding credit expenses, UMC reported that it had not received

payment for certain sales as of the date of its latest questionnaire

response. Consequently, we based the date of payment for those sales on

the date of the preliminary determination and recalculated credit

expenses accordingly.

Pursuant to section 772(d)(3) of the Act, gross unit price was

further reduced by an amount for profit, to arrive at CEP. In

accordance with section 772(f) of the Act, the CEP profit rate was

calculated using the expenses incurred by UMC and its affiliates on

their sales of the subject merchandise in the United States and foreign

like product in the home market and the profit associated with those

sales.

D. Winbond

We calculated EP and CEP based on packed, delivered and FOB prices

to unaffiliated purchasers in the United States. We made deductions

from the gross unit price, where appropriate, for discounts. We also

made deductions for foreign inland freight, pre-sale warehousing

expenses, foreign inland insurance, foreign brokerage and handling,

international freight (including air freight, U.S. inland freight from

the port to Winbond's U.S. warehouse, U.S. brokerage and handling fees,

and customs fees), international insurance, U.S. customs merchandise

processing fees, and U.S. inland freight to customer, where

appropriate, pursuant to section 772(c)(2)(A) of the Act.

Where USP was based on CEP, we made additional deductions, in

accordance with section 772(d)(1) of the Act, for commissions, credit

expenses, advertising expenses, warranty expenses, technical service

expenses, indirect selling expenses, inventory carrying costs, and U.S.

repacking expenses.

Pursuant to section 772(d)(3) of the Act, gross unit price was

further reduced by an amount for profit, to arrive at CEP. In

accordance with section 772(f) of the Act, the CEP profit rate was

calculated using the expenses incurred by Winbond and its affiliates on

their sales of the subject merchandise in the United States and foreign

like product in the home market and the profit associated with those

sales.

Normal Value

In order to determine whether there is a sufficient volume of sales

in the home market to serve as a viable basis for calculating NV (i.e.,

the aggregate volume of home market sales of the foreign like product

is greater than five percent of the aggregate volume of U.S. sales), we

compared each respondent's volume of home market sales of the foreign

like product to the volume of U.S. sales of the subject merchandise, in

accordance with section 773(a)(1)(C) of the Act. Because each

respondent's aggregate volume of home market sales of the foreign like

product was greater than five percent of its aggregate volume of U.S.

sales for the subject merchandise, we determined that the home market

was viable for each respondent.

Because UMC and Winbond reported home market sales to an affiliated

party during the POI, as defined by section 771(4)(B) of the Act, we

tested these sales to ensure that the affiliated party sales were at

``arm's length,'' in accordance with our practice. To conduct this

test, we compared the gross unit prices of sales to affiliated and

unaffiliated customers net of all movement charges, discounts and

rebates, and packing, where appropriate. Based on the results of that

test, we used the sales from UMC and Winbond to their affiliated

parties because they were made at ``arm's length.''

Based on the cost allegation contained in the petition, the

Department found reasonable grounds to believe or suspect that sales in

the home market were made at prices below the cost of producing the

merchandise, in accordance with section 773(b)(1) of the Act. As a

result, the Department initiated an investigation to determine whether

the respondents made home market sales during the POI at prices below

their respective COPs within the meaning of section 773(b) of the Act.

[[Page 51447]]

We calculated the COP based on the sum of each respondent's cost of

materials and fabrication for the foreign like product, plus amounts

for SG&A and packing costs, in accordance with section 773(b)(3) of the

Act.

Where possible, we used the respondents' reported COP amounts,

adjusted as discussed below, to compute quarterly weighted-average COPs

during the POI. In cases where there was no production within the same

quarter as a given sale, we referred to the most recent quarter, prior

to the sale, for which costs had been reported. In cases where there

was no cost reported for either the same quarter as the sale, or a

prior quarter, we used the reported costs from the closest subsequent

quarter in which production occurred.

In their calculation of research and development expenses (R&D),

three of the respondents, Alliance, ISSI, and Winbond, excluded from

their calculation R&D incurred on certain semiconductor products. The

fourth respondent, UMC, calculated R&D on a quarterly basis. For all

respondents, we revised the R&D ratios to allocate the total amount of

semiconductor R&D for the POI over the total cost of sales of

semiconductor products sold during the POI, using an annual ratio. See

the Concurrence memorandum from James Maeder to Louis Apple, dated

September 23, 1997, for further discussion. We preliminarily determine

that R&D related to semiconductors benefits all semiconductor products,

and that allocation of R&D on a product-specific basis was not

appropriate. In support of our methodology, we have placed on the

record information regarding cross-fertilization of semiconductor R&D.

We compared the weighted-average quarterly COP figures to home

market sales of the foreign like product as required under section

773(b) of the Act, in order to determine whether these sales had been

made at prices below COP. On a product-specific basis, we compared the

COP to the home market prices, less any applicable movement charges and

discounts.

In determining whether to disregard home market sales made at

prices below the COP, we examined (1) whether, within an extended

period of time, such sales were made in substantial quantities, and (2)

whether such sales were made at prices which permitted the recovery of

all costs within a reasonable period of time in the normal course of

trade.

Where 20 percent or more of a respondent's sales of a given product

were at prices below the COP, we found that sales of that model were

made in ``substantial quantities'' within an extended period of time,

in accordance with section 773(b)(2) (B) and (C) of the Act. To

determine whether prices were such as to provide for recovery of costs

within a reasonable period of time, we tested whether the prices which

were below the per unit cost of production at the time of the sale were

above the weighted-average per-unit cost of production for the POI, in

accordance with section 773(b)(2)(D). If they were, we disregarded

below cost sales in determining NV.

In accordance with section 773(e) of the Act, we calculated CV

based on the sum of each respondent's cost of materials, fabrication,

SG&A, profit, and U.S. packing costs. In accordance with section

773(e)(2)(A) of the Act, we based SG&A expenses and profit on the

amounts incurred and realized by each respondent in connection with the

production and sale of the foreign like product in the ordinary course

of trade, for consumption in the foreign country. Where respondents

made no home market sales in the ordinary course of trade (i.e., all

sales were found to be below cost), we based profit and SG&A expenses

on the weighted average of the profit and SG&A data computed for those

respondents with home market sales of the foreign like product made in

the ordinary course of trade.

We deducted from CV weighted-average home market direct selling

expenses incurred on sales made in the ordinary course of trade. Where

a company had no sales above COP, we based home market direct selling

expenses on the weighted average selling expense data computed for

those respondents with home market sales of the foreign like product in

the ordinary course of trade. Company-specific calculations are

discussed below.

A. Alliance

We relied on the reported COP and CV amounts except as noted above.

Additionally, we did not rely on amounts reported by Alliance for SG&A

and profit since all of Alliance's sales were made below the cost of

production.

Because all of Alliance's home market sales were sold below COP, we

based NV on CV. In addition to the adjustments to CV reported above, in

accordance with section 773(a)(7)(B) of the Act, we granted a CEP

offset adjustment and reduced CV by the amount of weight-averaged home

market indirect selling expenses and commissions incurred by

respondents with sales above the COP up to the amount of indirect

expenses deducted from the CEP under 772(d)(1)(D).

B. ISSI

We relied on respondent's reported COP and CV amounts except as

noted above. Additionally, we revised the reported general and

administrative and R&D expense ratios to use the cost of sales figure

from the audited financial statements as the denominator in these

equations.

For those comparison products for which there were sales at prices

above the COP, we based NV on delivered prices to home market

customers. We made deductions for discounts, foreign inland freight,

and insurance, where appropriate, pursuant to section 773(a)(6)(B) of

the Act. We also made deductions for credit expenses and bank charges,

pursuant to section 773(a)(6)(C)(iii) of the Act. Regarding credit

expenses, ISSI reported that it had not received payment for certain

sales as of the date of its latest questionnaire response. As such, we

based the date of payment for those sales on the date of the

preliminary determination and recalculated credit expenses accordingly.

We deducted home market indirect selling expenses, including

inventory carrying costs and other indirect selling expenses, up to the

amount of indirect selling expenses incurred on U.S. sales, in

accordance with section 773(a)(7)(B) of the Act. In addition, we

deducted home market packing costs and added U.S. packing costs, in

accordance with section 773(a)(6) of the Act. Where appropriate, we

made adjustments to NV to account for differences in physical

characteristics of the merchandise, in accordance with 773(a)(6)(C)(ii)

of the Act and 19 CFR 353.57. Where applicable, in accordance with 19

CFR section 353.56(b)(1), we offset any commission paid on a U.S. sale

by reducing the NV by any home market commissions and indirect selling

expenses remaining after the deduction for the CEP offset.

Where NV was based on CV, we deducted from CV the weighted-average

home market direct selling expenses. In accordance with section

773(a)(7)(B) of the Act, we granted a CEP offset adjustment and reduced

normal value by the amount of commissions and indirect selling expenses

incurred by ISSI in Taiwan on sales of SRAMs in Taiwan, up to the

amount of commissions and indirect selling expenses incurred on U.S.

sales deducted from the CEP, in accordance with section 773(a)(7)(B) of

the Act.

C. UMC

We relied on respondent's COP and CV amounts except as noted above.

[[Page 51448]]

Additionally, we calculated 1996 bonuses to directors, supervisors, and

employees and included them in the cost of manufacturing. We revised

the reported general and administrative expense to exclude foreign

exchange gains. We revised the reported net financing expense ratio to

include net foreign exchange gains related to accounts payable.

UMC has claimed a startup adjustment for a new fabrication facility

under section 773(f)(1)(C)(ii) and (iii) of the Act. We conducted an

analysis of the facts and have preliminarily granted the claimed

startup adjustment. The SAA specifies two conditions for the

application of a startup cost adjustment:

(1) The company used new production facilities or was producing a

new product that required substantial additional investment; and

(2) Production levels were limited by technical factors associated

with the initial phase of commercial production.

UMC appears to have met these threshold criteria by opening and

using a new production facility whose production levels were limited by

technical factors associated with the initial phase of production. In

accordance with the Act, we replaced the unit production costs incurred

during the startup period with the unit production costs incurred at

the end of the startup period. This resulted in the exclusion of some

costs which were incurred during the startup period from the actual

cost calculation. The difference between the actual costs incurred and

the costs calculated for purposes of the startup adjustment was

amortized over the useful life of the machinery, subsequent to the

startup phase. We also capitalized certain pre-production costs which

were incurred before the new fabrication facility began production. We

amortized these pre-production costs, beginning with the first month in

which production took place, over the useful life of the machinery. See

the memorandum to Louis Apple from Chris Marsh, dated September 23,

1997, for a detailed discussion of this issue.

For those comparison products for which there were sales at prices

above the COP, we based NV on delivered and FOB prices to home market

customers. For home market price-to-EP comparisons, we made deductions,

where appropriate, for discounts, export duties, and foreign inland

freight, in accordance with section 773(a)(6)(B) of the Act. Pursuant

to section 773 (a)(6)(C)(iii) of the Act and 19 CFR section

353.56(a)(2), we made circumstance of sale adjustments, where

appropriate, for differences in warranty and credit expenses. We did

not allow an adjustment for home market commissions because we

determined that they were not at ``arm's length.'' See the memorandum

to Louis Apple from the Team dated September 23, 1997, for a detailed

explanation.

For home market price-to-CEP comparisons, we made deductions, where

appropriate, for discounts, export duties, and foreign inland freight,

pursuant to section 773(a)(6)(B) of the Act. We also made deductions

for warranty and credit expenses. We deducted home market indirect

selling expenses, including inventory carrying costs, and other

indirect selling expenses, up to the amount of indirect selling

expenses incurred on U.S. sales, in accordance with 773(a)(7)(B) of the

Act. Where applicable, in accordance with 19 CFR 353.56(b), we offset

any commission paid on a U.S. sale by reducing the NV by any home

market indirect selling expenses remaining after the deduction for the

CEP offset.

For all price-to-price comparisons, we deducted home market packing

costs and added U.S. packing costs, in accordance with section

773(a)(6) of the Act. In addition, where appropriate, we made

adjustments to NV to account for differences in physical

characteristics of the merchandise, in accordance with 773(a)(6)(C)(ii)

of the Act.

Where CV was compared to EP, we made circumstance of sale

adjustments, where appropriate, for credit and warranty expenses and

U.S. commissions in accordance with sections 773 (a)(6)(C)(iii) and

(a)(8) of the Act. In accordance with section 773(a)(7)(B) of the Act,

we granted a CEP offset adjustment and reduced normal value by the

amount of commissions and indirect selling expenses incurred by UMC in

Taiwan on sales of SRAMs in Taiwan, up to the amount of commissions and

indirect selling expenses incurred on U.S. sales deducted from the CEP.

Where CV was compared to CEP, we deducted from CV, where

appropriate, credit and warranty expenses. We also deducted indirect

selling expenses, including inventory carrying costs and other indirect

selling expenses, up to the amount of commissions and indirect selling

expenses incurred on U.S. sales, in accordance with 773(a)(7)(B) of the

Act.

D. Winbond

We relied on the reported COP and CV amounts except as noted above.

Additionally, we reclassified production technology royalty expenses

reported in the Sections B and C of our questionnaire as a cost of

manufacturing. We included 1996 bonuses to directors, supervisors, and

employees in the cost of manufacturing. We revised the reported general

and administrative expense to exclude foreign exchange gains and to

include miscellaneous income and expense. We revised the reported net

financing expense ratio to include net foreign exchange gains related

to accounts payable.

For those comparison products for which there were sales at prices

above the COP, we based NV on delivered prices to home market

customers.

For home market price-to-EP comparisons, we made deductions, where

appropriate, for discounts, import duties and development fees paid on

sales to customers outside of duty free zones, and home market movement

charges including pre-sale warehouse expenses, foreign inland freight,

brokerage and handling charges, and inland insurance. Pursuant to

section 773 (a)(6)(C)(iii) of the Act, we made circumstance of sale

adjustments, where appropriate, for differences in credit expenses

(offset by the interest revenue actually received by the respondent),

direct advertising expenses, warranty expenses, technical service

expenses, and post-sale payments to a third-party customer.

For home market price-to-CEP comparisons, we made deductions for

discounts, import duties and development fees paid on sales to

customers outside of duty free zones, and home market movement charges

including pre-sale warehouse expenses, foreign inland freight,

brokerage and handling charges, and inland insurance, where

appropriate, in accordance with section 773(a)(6)(B) of the Act. We

also made deductions for credit expenses (offset by the interest

revenue actually received by the respondent), direct advertising

expenses, warranty expenses, technical service expenses, and post-sale

payments to a third-party customer, pursuant to section

773(a)(6)(C)(iii) of the Act.

We deducted home market indirect selling expenses, including

inventory carrying costs, other indirect selling expenses, up to the

amount of indirect selling expenses incurred on U.S. sales, in

accordance with section 773(a)(7)(B) of the Act. Where applicable, in

accordance with 19 CFR section 353.56(b), we offset any commission paid

on a U.S. sale by reducing the NV by any home market indirect selling

expenses remaining after the deduction for the CEP offset.

For all price-to-price comparisons, we deducted home market packing

costs and added U.S. packing costs, in

[[Page 51449]]

accordance with section 773(a)(6) of the Act. In addition, where

appropriate, we made adjustments to NV to account for differences in

physical characteristics of the merchandise, in accordance with section

773(a)(6)(C)(ii) of the Act.

Where CV was compared to EP, we deducted from CV the weighted-

average home market direct selling expenses and added the weighted-

average U.S. product-specific direct selling expenses in accordance

with section 773 (a)(6)(C)(iii) of the Act.

Where CV was compared to CEP, we deducted from CV the weighted-

average home market direct selling expenses. In accordance with section

773(a)(7)(B) of the Act, we granted a CEP offset adjustment and reduced

normal value by the amount of indirect selling expenses, including

inventory carrying costs and other indirect selling expenses, up to the

amount of indirect selling expenses incurred on U.S. sales deducted

from the CEP.

Currency Conversion

We made currency conversions into U.S. dollars based on the

official exchange rates in effect on the dates of the U.S. sales as

certified by the Federal Reserve Bank.

Section 773A(a) directs the Department to use a daily exchange rate

in order to convert foreign currencies into U.S. dollars unless the

daily rate involves a fluctuation. It is the Department's practice to

find that a fluctuation exists when the daily exchange rate differs

from the benchmark rate by 2.25 percent. The benchmark is defined as

the moving average of rates for the past 40 business days. When we

determine a fluctuation to have existed, we substitute the benchmark

rate for the daily rate, in accordance with established practice.

Further, section 773A(b) directs the Department to allow a 60-day

adjustment period when a currency has undergone a sustained movement. A

sustained movement has occurred when the weekly average of actual daily

rates exceeds the weekly average of benchmark rates by more than five

percent for eight consecutive weeks. (For an explanation of this

method, see Policy Bulletin 96-1: Currency Conversions (61 FR 9434,

March 8, 1996).) Such an adjustment period is required only when a

foreign currency is appreciating against the U.S. dollar. The use of an

adjustment period was not warranted in this case because the New Taiwan

dollar did not undergo a sustained movement.

Verification

As provided in section 782(i) of the Act, we will verify all

information determined to be acceptable for use in making our final

determination.

Suspension of Liquidation

In accordance with section 733(d) of the Act, we are directing the

Customs Service to suspend liquidation of all imports of subject

merchandise that are entered, or withdrawn from warehouse, for

consumption on or after the date of publication of this notice in the

Federal Register. We will instruct the Customs Service to require a

cash deposit or the posting of a bond equal to the weighted-average

amount by which the NV exceeds the U.S. price, as indicated in the

chart below. These suspension of liquidation instructions will remain

in effect until further notice. The weighted-average dumping margins

are as follows:

------------------------------------------------------------------------

Weighted-

average

Exporter/manufacturer margin

percentage

------------------------------------------------------------------------

Advanced Microelectronics................................... 113.85

Alliance.................................................... 59.06

BIT......................................................... 113.85

ISSI........................................................ 10.96

Texas Instruments........................................... 113.85

UMC......................................................... 63.36

Winbond..................................................... 94.10

All Others.................................................. 41.30

------------------------------------------------------------------------

Pursuant to section 735(c)(5)(A) of the Act, the Department has

excluded the margins determined entirely under section 776 of the Act

from the calculation of the ``All Others Rate.''

ITC Notification

In accordance with section 733(f) of the Act, we have notified the

ITC of our determination. If our final determination is affirmative,

the ITC will determine before the later of 120 days after the date of

this preliminary determination or 45 days after our final determination

whether these imports are materially injuring, or threaten material

injury to, the U.S. industry.

Public Comment

Case briefs or other written comments in at least ten copies must

be submitted to the Assistant Secretary for Import Administration no

later than December 18, 1997, and rebuttal briefs no later than

December 22, 1997. A list of authorities used and an executive summary

of issues should accompany any briefs submitted to the Department. Such

summary should be limited to five pages total, including footnotes. In

accordance with section 774 of the Act, we will hold a public hearing,

if requested, to afford interested parties an opportunity to comment on

arguments raised in case or rebuttal briefs. Tentatively, the hearing

will be held on December 23, 1997, time and room to be determined, at

the U.S. Department of Commerce, 14th Street and Constitution Avenue,

N.W., Washington, D.C. 20230. Parties should confirm by telephone the

time, date, and place of the hearing 48 hours before the scheduled

time.

Interested parties who wish to request a hearing, or to participate

if one is requested, must submit a written request to the Assistant

Secretary for Import Administration, U.S. Department of Commerce, Room

1870, within ten days of the publication of this notice. Requests

should contain: (1) The party's name, address, and telephone number;

(2) the number of participants; and (3) a list of the issues to be

discussed. Oral presentations will be limited to issues raised in the

briefs. If this investigation proceeds normally, we will make our final

determination by no later than 135 days after the publication of this

notice in the Federal Register.

This determination is published pursuant to section 733(d) of the

Act.

Dated: September 23, 1997.

Robert S. LaRussa,

Assistant Secretary for Import Administration.

[FR Doc. 97-25943 Filed 9-30-97; 8:45 am]

BILLING CODE 3510-DS-P