Dynamic Random Access Memory Semiconductors of One Megabit or Above From the Republic of Korea; Final Results of Antidumping Duty Administrative Review

DEPARTMENT OF COMMERCE

International Trade Administration

[A-580-812]

Dynamic Random Access Memory Semiconductors of One Megabit or

Above From the Republic of Korea; Final Results of Antidumping Duty

Administrative Review

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

ACTION: Notice of final results of antidumping duty administrative

review.

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SUMMARY: On July 9, 1996, the Department of Commerce (the Department)

published the preliminary results of administrative review of the

antidumping duty order on dynamic random access memory semiconductors

(DRAMs) of one megabit or above from the Republic of Korea (61 FR

36029). The review covers two manufacturers/exporters of the subject

merchandise to the United States for the period May 1, 1994 through

April 30, 1995. These manufacturers/exporters are LG Semicon Co., Ltd.

(LGS, formerly Goldstar Electron Co., Ltd.) and Hyundai Electronics

Industries, Inc. (HEI/Hyundai).

As a result of our analysis of the comments received, the

antidumping margins have changed from those presented in our

preliminary results.

EFFECTIVE DATE: January 7, 1997.

FOR FURTHER INFORMATION CONTACT: Thomas F. Futtner, AD/CVD Enforcement

Office 4, Import Administration, International Trade Administration,

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

Washington, D.C. 20230, telephone: (202) 482-3814.

SUPPLEMENTARY INFORMATION:

Background

On May 10, 1995, the Department published a notice of ``Opportunity

to Request an Administrative Review'' of this antidumping duty order

for the period of May 1, 1994, through April 30, 1995 (60 FR 24831). We

received timely requests for review from three manufacturers/exporters

of subject merchandise to the United States: Hyundai Electronics

Industries, Co. (Hyundai), LG Semicon Co., Ltd. (LGS, formerly Goldstar

Electron Co., Ltd.), and Samsung Electronics Co. (Samsung). The

petitioner, Micron Technologies Inc., requested an administrative

review of these same three Korean manufacturers of DRAMs. On June 15,

1995, the Department initiated a review of the above Korean

manufacturers (60 FR 31447). The period of review (POR) for all

respondents was May 1, 1994, through April 30, 1995.

On June 26, 1995, in accordance with section 773(b)(2)(A)(ii) of

the Tariff Act of 1930, we also initiated an investigation to determine

if Hyundai and LGS made sales of the subject merchandise below the cost

of production (COP) during the POR based upon the fact that we

disregarded sales found to have been made below the COP in the original

less-than-fair-value (LTFV) investigation.

Samsung, formerly a respondent in this administrative review, 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

Megabit and Above From the Republic of Korea, 61 FR 4765 (February 8,

1996). Accordingly, we terminated this review with respect to Samsung.

On July 9, 1996, the Department published the preliminary results

(61 FR 36029) of administrative review of the antidumping duty order on

DRAMs of one megabit or above from the Republic of Korea. We received

timely comments from the petitioner and both respondents.

Scope of the Review

Imports covered by the review are shipments of DRAMs of one megabit

and above from the Republic of Korea (Korea). For purposes of this

review, DRAMs are all one megabit and above, whether assembled or

unassembled. 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 of this review.

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 HTSUS. Although the HTSUS subheadings are provided for

convenience and customs purposes, the written description of the scope

of this review remains dispositive.

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 the

current regulations, as amended by the interim regulations published in

the Federal Register on May 11, 1995 (60 FR 25130).

United States Price

We calculated U.S. price according to the methodology described in

our preliminary results.

Normal Value

We calculated normal value (NV) according to the methodology

described in our preliminary results.

[[Page 966]]

Analysis of Comments Received

We invited interested parties to comment on the preliminary results

of this administrative review. We received timely comments from the

petitioner and both respondents.

General Comments

Comment 1

The petitioner argues (1) that the Department should not have

allowed a level of trade adjustment for both respondents, and (2) that

the Department inappropriately applied a constructed export price (CEP)

offset to respondents' CEP sales for this level of trade adjustment.

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 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).

According to the petitioner, the Act and the SAA do not permit the

Department to use a ``constructed'' level of trade for 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 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 a more advanced stage of distribution

than the level of trade of the CEP and that the data available will

never provide an adequate basis to determine a level of trade

adjustment, and thus that the CEP offset will always be used. The SAA,

according to the petitioner, intended the application of the CEP offset

to be an exception, rather than the rule. The Department's acceptance

of a constructed level of trade, the petitioner argues, contradicts the

SAA's intent and the intent of the statute in section 773(a)(7)(A).

The petitioner argues further 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 in the 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 able to be 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 of the Act. LGS maintains that the Department has consistently

followed this approach and has explicitly stated in the antidumping

questionnaire that constructed level of trade will be used.

LGS and Hyundai also reject the petitioner's argument that

respondents have not adequately documented differences in selling

functions in the home and in the U.S. markets. Respondents point out

that the petitioner only referenced the brief discussion of the selling

function differences contained in the notice of preliminary results and

ignores the detailed analysis presented in its questionnaire response

and in the Department's preliminary analysis memorandum. LGS and

Hyundai argue that, because respondents' home market sales were at

levels of trade more advanced than its 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) to adjust for the differences of trade in

the two markets.

DOC Position

We agree with respondents. We have consistently determined that the

statute and the SAA both support analyzing the level of trade of CEP

sales at the constructed level, after expenses associated with economic

activities in the United States (section 772(d) of the Act) have been

deducted. We believe that it is neither reasonable nor logical to base

level of trade on the starting price for both EP and CEP sales. We

stated in Antidumping Duties; Countervailing Duties; Notice of Proposed

Rulemaking and Request for Public Comments, 61 FR 7308, 7347 (February

27, 1996), the following:

With respect to the identification of levels of trade, some

commentators argued that, consistent with past practice, the

Department should base level of trade on the starting price for both

export price (``EP'') and CEP sales...The Department believes that

this position is not supported by the SAA...If the starting price is

used for all U.S. sales, the Department's ability to make meaningful

comparisons at the same level of trade (or appropriate adjustments

for differences in levels of trade) would be severely undermined in

cases involving CEP sales. As noted by other commentators, using the

starting price to determine the level of trade of both types of U.S.

sales would result in a finding of different levels of trade for an

EP sale and a CEP sale adjusted to a price that reflected the same

selling functions. Accordingly, the regulations specify that the

level of trade analyzed for EP sales is that of the starting price,

and for CEP sales it is the constructed level of trade of the price

after the deduction of U.S. selling expenses and profit.

We have consistently stated that, in those cases where a level of

trade comparison is warranted and possible, then for CEP sales the

level of trade will be evaluated based on the price after adjustments

are made under section 772(d) of the Act (see Large Newspaper Printing

Presses and Components Thereof, Whether Assembled or Unassembled, From

Japan; Notice of Final Determination of Sales at Less Than Fair Value,

61 FR 38139, 38143 (July 23, 1996). In every case decided under the

revised antidumping statute, we have consistently adhered to this

interpretation of the SAA and of the Act. See, e.g., Aramid Fiber

Formed of Poly para-Phenylene Terephthalamide from the Netherlands;

Preliminary Results of Antidumping Duty Administrative Review, 61 FR

15766, 15768 (April 9, 1996); Certain Stainless Steel Wire Rods from

France; Preliminary Result of Antidumping Duty Administrative Review,

FR 8915, 8916 (March 6, 1996); Antifriction Bearings (Other Than

Tapered Roller Bearings) and parts Thereof from France, et. al.,

Preliminary Results of Antidumping Duty Administrative Review, 61 FR

25713, 35718-23 (July 8, 1996). In accordance with this clear

precedent, our instructions in the questionnaire response issued to

respondents in this administrative review stated that constructed level

of trade should be used.

We disagree that respondents have not adequately documented the

differences in selling functions in the home and in the U.S. markets.

As noted by respondents, the petitioner based this argument solely upon

the content of the preliminary results of review and ignored the

detailed data on the record of this proceeding in respondents'

questionnaire responses and in our preliminary analysis memorandum

concerning the differences in selling functions. These data contained

detailed

[[Page 967]]

information and descriptions of the differences in selling functions in

the two markets (for example, the differences in shipments per month

from respondents to U.S. and home market customers is described in

detail).

Comment 2

The petitioner maintains that the Department's preliminary

calculations contained the following clerical errors with respect to

both respondents: (1) the preliminary calculations double counted

interest expenses by including both reported interest expense and

imputed home market credit and inventory carrying expenses in its

calculation of total cost of production for purposes of calculating

profit for home market, CEP, and further-processed U.S. sales; (2) the

preliminary calculations failed to add U.S. packing expenses to the

foreign unit price in dollars for comparisons of U.S. sales to CV; and,

(3) the Department erred in computing profit for CV based upon all home

market sales, including those with negative profits, maintaining that

section 773(e)(2)(A) of the Act, as amended by the URAA, has changed

the calculation of profit to consider only profitable sales and to

exclude sales below the cost of production.

DOC Position:

We agree with the petitioner that our preliminary calculations

inadvertently double counted interest expense in the computation of the

total cost of production for purposes of calculating profit for home

market, CEP, and further-processed U.S. sales. We also agree that U.S.

packing expenses should have been added to the foreign unit price in

dollars. We have revised our calculations accordingly.

While we agree that our inclusion of all home market sales for

purposes of calculating profit for CV was an error, we do not agree

that it was a clerical error. Section 773(e)(2)(A) of the Act specifies

the addition of ``the actual amounts incurred and realized by the

specific exporter or producer * * * for selling, general, and

administrative expenses, and for profits, in connection with the

production and sales of a foreign like product in the ordinary course

of trade * * *'' Although the petitioner argues that sales below cost

are outside of the ordinary course of trade, section 773(b) of the Act

is clear that sales below cost may be disregarded as being outside the

ordinary course of trade only if made within an extended period of time

in substantial quantities and at prices which do not permit the

recovery of costs within a reasonable period of time. Section 771(15)

of the Act provides that sales which failed the cost of production test

provided for under section 773(b) of the Act are outside the ordinary

course of trade. However, section 771(15) of the Act does not provide

that sales made below the cost of production per se are outside the

ordinary course of trade. Thus, sales below cost are not in and of

themselves outside the ordinary course of trade, only those sales which

fail our cost of production test and are thus disregarded. Accordingly

for both respondents, as a result of this analysis, we have revised our

calculations to base profit on CV for both respondents upon those home

market sales which do not fail our cost of production test.

Company-Specific Comments

LGS

Comment 3

The petitioner argues that the Department erred in its preliminary

results in calculating research and development expenses for LGS by

allocating only a portion of LGS' semiconductor research and

development expenses over a portion of LGS' cost of sales. The

petitioner maintains that, in accordance with the precedent set in the

first administrative review, the Department should allocate all of LGS'

semiconductor research and development expenses over all of LGS' 1994

semiconductor cost of sales. The petitioner also maintains that the

Department erred in allocating LGS' purchased research and development

over the applicable contract periods. According to the petitioner, any

purchased research and development should be included with all

semiconductor research and development expenses allocated over LGS'

1994 cost of sales.

LGS agrees with the petitioner that purchased research and

development should be included in those research and development

expenses allocated over cost of sales for 1994. LGS contends that since

the Department rejected LGS' allocation of purchased research and

development over contract periods in the previous administrative

review, it should allocated research and development purchased in 1994

over 1994 cost of sales.

LGS disagrees with the petitioner that all semiconductor research

and development expenses should be allocated over all cost of sales.

LGS maintains that non-DRAM research and development does not benefit

LGS' DRAM production and that the Department should calculate a

product-specific research and development rate for LGS.

DOC Position

We agree with the petitioner that, in calculating a research and

development rate for LGS, all semiconductor research and development

expenses should be allocated over all of LGS' semiconductor cost of

sales reported in its audited 1994 financial statements. This method of

allocation is consistent with our practice in the last administrative

review, where we determined that sufficient evidence of cross-

fertilization exists in the semiconductor industry to rule out the use

of only product or DRAM-related research and development expenses. See

Dynamic Random Access Memory Semiconductors from the Republic of Korea;

Final Results of Antidumping Duty Administrative Review, 61 FR 20216,

20218 (May 6, 1996).

We agree with both the petitioner and LGS that research and

development purchased in 1994 should be included in those research and

development expenses allocated over LGS' 1994 cost of sales.

Comment 4

LGS argues that the Department erred in the preliminary

calculations by deducting indirect selling expenses and inventory

carrying costs incurred in Korea from U.S. price. LGS maintains that

under the revised antidumping law, such expenses which do not result

from or bear relationship to selling activities in the United States

should not be deducted from U.S. price. LGS argues that the SAA only

permits the deduction from U.S. price of selling expenses which result

from, and bear a direct relationship to, selling activities in the

United States.

The petitioner argues that the Department was correct in deducting

these Korean expenses from U.S. price for LGS. The petitioner maintains

that section 772(d) of the Act clearly requires the Department to

reduce CEP by all expenses generally incurred by or for the account of

the producer. According to the petitioner, the SAA is a clarification

of prior law and was not intended to change current law.

DOC Position

We agree with the respondent. Section 772(d)(1) provides for the

deduction of all expenses generally incurred by or for the account of

the producer or exporter, or the affiliated reseller in the United

States. However, the deductions under section 772(d) of the Act do not

involve all direct and indirect selling expenses. The deductions under

section 772(d) of the Act remove only expenses associated

[[Page 968]]

with economic activities in the United States. Thus, the CEP is not a

price necessarily exclusive of all selling expenses. Therefore, we have

not deducted indirect selling expenses and inventory carrying costs

incurred in Korea from U.S. price because these expenses do not result

from or bear relationship to selling activities in the United States.

Comment 5

LGS and the noted the following clerical errors in the Department's

computer program: (1) a programming error caused several home market

sale dates to be mistakenly changed; (2) the Department's preliminary

results failed to deduct home market packing expenses in its

calculations of net home market price; (3) the preliminary calculations

mistakenly double counted U.S. repacking expense; (4) the preliminary

calculations mistakenly included duty drawback and movement expenses in

the calculation of CEP profit; and, (5) the preliminary results

mistakenly excluded non-profitable sales when computing profit for CEP.

DOC Position

We agree with LGS on each of these points and have revised our

calculations accordingly.

Hyundai

Comment 6

The petitioner maintains that Hyundai misclassified its advertising

expenses in the home market as direct selling expenses. Insofar as

Hyundai did not submit samples of these advertisements, the petitioner

maintains that Hyundai did not meet the burden of demonstrating that

these home market advertising expenses were direct in nature. The

petitioner urges the Department to reclassify all of Hyundai's home

market advertising expenses as indirect expenses.

Hyundai argues that its home market advertising classification is

correct. Hyundai notes that its home market advertising classification

methodology remains unchanged from the previous administrative review

where the Department accepted Hyundai's classification of home market

advertising expenses. Hyundai maintains that there is no justification

for reclassifying its home market advertising expenses.

DOC Position

We agree with Hyundai. Hyundai fully complied with our instructions

in the antidumping questionnaire issued for this administrative review

with respect to information requested for home market advertising

expenses. Because Hyundai's methodology remained unchanged from the

previous administrative review, we chose not to require Hyundai to

submit further documentation on its home market advertising expenses

during the POR. Therefore, we have accepted Hyundai's classification of

its home market advertising expenses as direct selling expenses.

Comment 7

The petitioner maintains that the Department's preliminary results

did not include Hyundai's sales of DRAMs sold by the ISD and Axil

divisions of Hyundai's U.S. subsidiary Hyundai Electronics America,

Inc. (HEA) in its dumping margin calculations. These DRAMs were further

processed by ISD and Axil in the production of personal computers and

computer workstations, some of which were sold with the memory modules

separately invoiced (option sales) and some of which were sold without

separately invoiced memory modules (embedded sales). The petitioner

argues that the Department should include these sales in its margin

analysis by setting the margin for these sales equal to the margin

found on other further-processed sales and averaging the two margins

together to derive one margin for all further-processed sales of DRAMs.

Hyundai agrees with the petitioner that these further-processed

sales should be included in the Department's margin analysis, but

disagrees with the petitioner on the method of including them. Hyundai

maintains that, since there are other U.S. sales of merchandise

identical to the ISD/Axil sales, the Department should apply the margin

found on U.S. sales of identical merchandise to these ISD/Axil sales.

DOC Position

We agree with the petitioner and with Hyundai that the further-

processed sales of DRAMs by ISD and Axil should be included in the

dumping analysis of U.S. sales in the POR because it is the

Department's longstanding practice to include all U.S. sales in its

dumping calculations except in instances where title does not transfer

to the U.S. customer or in the case of statistical sampling (see Color

Television Receivers from the Republic of Korea, 58 FR 50333 (1993)).

We agree with Hyundai that, because Hyundai had other U.S. sales

identical models of DRAMs, the margins on these identical sales should

be applied to the ISD/Axil sales. We revised our final calculations for

Hyundai's ISD/Axil sales by applying the margin found on the other U.S.

sales of models identical to those sold by ISD/Axil to Hyundai's ISD/

Axil further-processed U.S. sales.

Comment 8

Hyundai asserts that the Department's preliminary calculations

contained a clerical error in the computation of Hyundai's antidumping

margin on sales of DRAMs in the United States further processed into

memory modules. Hyundai maintains that the preliminary calculations

incorrectly compared the U.S. price of these memory modules to NV,

rather than to the foreign unit price in dollars.

DOC Position

We agree with Hyundai and have adjusted our final calculations

accordingly.

Final Results of Review

Upon review of the comments submitted, the Department has

determined that the following margins exist for the period of May 1,

1994 through April 30, 1995:

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

Percent

Manufacturer/exporter margin

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

May 1, 1994 through April 30, 1995:

LG Semicon Co., Ltd.......................................... 0.01

Hyundai Electronic Industries, Inc........................... 0.10

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

The Customs Service shall assess antidumping duties on all

appropriate entries. Individual differences between USP and NV 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

[[Page 969]]

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 this administrative review, 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 Megabit 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 (APO) of their responsibility

concerning the disposition of proprietary information disclosed under

APO in accordance with 19 CFR 353.34(d). Timely written notification or

conversion to judicial protective order is hereby requested. Failure to

comply with the regulations and the terms of the APO is a sanctionable

violation.

This administrative review and notice are in accordance with

section 751(a)(1) of the Tariff Act (19 U.S.C. 1675(a)(1)) and 19 CFR

353.22.

Dated: December 24, 1996.

Jeffrey P. Bialos,

Acting Assistant Secretary for Import Administration.

[FR Doc. 97-295 Filed 1-6-97; 8:45 am]

BILLING CODE 3510-DS-P