[Federal Register Volume 61, Number 165 (Friday, August 23, 1996)]
[Notices]
[Pages 43527-43530]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-21560]


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

DEPARTMENT OF COMMERCE
International Trade Administration
[A-588-841]


Initiation of Antidumping Duty Investigation: Vector 
Supercomputers From Japan

AGENCY: Import Administration, International Trade Administration, 
Department of Commerce.

EFFECTIVE DATE: August 23, 1996.


[[Page 43528]]


FOR FURTHER INFORMATION CONTACT: Edward Easton at (202) 482-1777 or 
Sunkyu Kim at (202) 482-2613, Office of AD/CVD Enforcement II, Import 
Administration, International Trade Administration, U.S. Department of 
Commerce, 14th Street and Constitution Avenue, N.W., Washington, DC 
20230.

INITIATION OF INVESTIGATION:

The Applicable Statute

    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).

The Petition

    On July 29, 1996, the Department of Commerce (``the Department'') 
received a petition, filed, in proper form, by Cray Research, Inc., of 
Eagan, Minnesota (``the petitioner''). On August 9, 1996, Cray 
Research, Inc., provided supplemental information concerning assertions 
made in its petition.
    In accordance with section 732(b) of the Act, the petitioner 
alleges that vector supercomputers are being, or are likely to be, sold 
in the United States at less than their fair value within the meaning 
of section 731 of the Act, and that such imports are materially 
injuring, or threatening material injury to, an industry in the United 
States.
    The petitioner states that it has standing to file the petition 
because it is an interested party, as defined in section 771(9)(C) of 
the Act.

Scope of the Investigation

    The products covered by this investigation are all vector 
supercomputers, whether new or used, and whether in assembled or 
unassembled form, as well as vector supercomputer spare parts, repair 
parts, upgrades, and system software shipped to fulfill the 
requirements of a contract for the sale and, if included, maintenance 
of a vector supercomputer. A vector supercomputer is any computer with 
a vector hardware unit as an integral part of its central processing 
unit boards.
    The vector supercomputers imported from Japan, whether assembled or 
unassembled, covered by this investigation are classified under heading 
8471 of the Harmonized Tariff Schedules of the United States (HTS). 
Although the HTS heading is provided for convenience and customs 
purposes, our written description of the scope of this investigation is 
dispositive.

Determination of Industry Support for the Petition

    Section 732(b)(1) of the Act requires that petitions be filed on 
behalf of the domestic industry. Section 732(c)(4)(A) of the Act 
provides that a petition meets this requirement if the domestic 
producers or workers who support the petition account for (1) at least 
25 percent of the total production of the domestic like product; and 
(2) more than 50 percent of the production of the domestic like product 
produced by that portion of the industry expressing support for, or 
opposition to, the petition.
    On August 14, 1996, Fujitsu Limited (``Fujitsu'') made a submission 
challenging industry support for the petition. Fujitsu argues that the 
petitioner's definition of the ``domestic like product'' as limited to 
vector supercomputers is unreasonable and that the proper domestic like 
product definition would encompass additional high-performance computer 
platforms that compete with vector supercomputers for many of the 
applications with which vector supercomputers have been associated. 
Specifically, Fujitsu argues that massively parallel processors and 
networked workstations must also be included within the domestic like 
product. Fujitsu further argues that the Department ought to poll the 
domestic producers of these other high-performance computer platforms 
to determine whether there is a requisite percentage of support for the 
petition within this broader group of domestic producers. On August 16, 
1996, the petitioner submitted a rebuttal to Fujitsu's arguments. The 
basis of the petitioner's rebuttal is that much of the documentary 
information filed by Fujitsu, as well as other information, indicates 
that the characteristics and uses, as those terms are used in section 
771(10) of the Act, of vector supercomputers distinguish them from both 
massively parallel processors and networked workstations. On the basis 
of these distinctions, the petitioner asserts that vector 
supercomputers are the appropriate domestic like product for the 
petitioned-for antidumping investigation. On August 19, 1996, Fujitsu 
filed a second submission to take issue with petitioner's August 16, 
1996 arguments.
    Section 771(4)(A) of the statute defines the ``industry'' as the 
producers of a ``domestic like product.'' Thus, to determine whether 
the petition has the requisite industry support, the statute directs 
the Department to look to producers and workers who account for 
production of ``the domestic like product.'' The International Trade 
Commission (``ITC''), which is responsible for determining whether 
``the domestic industry'' has been injured, must also determine what 
constitutes a domestic like product in order to define the industry. 
However, while both the Department and the ITC must apply the same 
statutory definition of domestic like product, they do so for different 
purposes and pursuant to separate and distinct authority. Although this 
may result in different definitions of the like product, such 
differences do not render the decision of either agency contrary to the 
law. See Algoma Steel Corp., Ltd. v. United States, 688 F. Supp. 639, 
642-44 (CIT 1988); High Information Content Flat Panel Displays and 
Display Glass Therefor from Japan: Final Determination; Rescission of 
Investigation and Partial Dismissal of Petition, 56 Fed. Reg. 32376, 
32380-81 (July 16, 1991) (Flat Panel Displays).
    Because the domestic like product is an integral part of the 
definition of the industry and because Fujitsu has provided factual 
information challenging the definition of the domestic like product in 
the petition, we are examining the definition of the like product in 
the petition in light of the statutory provisions governing initiation 
and the facts of record.
    Section 771(10) of the Act defines domestic like product as ``a 
product that is like, or in the absence of like, most similar in 
characteristics and uses with, the article subject to an investigation 
under this title.'' Thus, the reference point from which the like 
product analysis begins is ``the article subject to an investigation,'' 
i.e., the class or kind of merchandise to be investigated, which 
normally will be the scope as defined in the petition.
    The scope of Cray's petition is limited specifically to vector 
supercomputers ``* * * with a vector hardware unit as an integral part 
of any of its central processing unit boards (``CPU'').'' The petition 
provides examples of both imported massively parallel processors, with 
vector hardware, which are included within this definition of a vector 
supercomputer and domestically-produced mainframe computers with a 
vector facility that is not an integral part of the mainframe CPU 
boards and, therefore, not considered within the ``domestic like 
product'' asserted in the petition. The key to petitioner's definition 
of the scope of the investigation is the physical characteristic that 
the vector facility be an integral part of any of the computer's CPU 
boards. This characteristic

[[Page 43529]]

identifies both the Japanese vector supercomputers that the petitioner 
would have subject to the antidumping investigation and the 
domestically-produced products that would define the domestic industry.
    There is no dispute that the vector supercomputers produced by the 
petitioner are like the Japanese vector supercomputers which are the 
subject of the petition, i.e., that the petitioner produces a domestic 
like product. Fujitsu argues, however, that there are other types of 
supercomputers and that the producers of those supercomputers are part 
of the industry as well. In this regard, Fujitsu argues that all 
supercomputers constitute a single domestic like product. We disagree.
    As a starting point, the scope of the petition is not all 
supercomputers, but rather is limited solely to vector supercomputers. 
The relevant ``like product'' inquiry must begin by identifying the 
domestic product(s) which is ``like'' the vector supercomputer, the 
merchandise subject to investigation. Fujitsu effectively seeks to 
disregard this fact by using all supercomputers, not vector 
supercomputers, as its starting point. While respondents may comment on 
the issue of industry support, including the definition of the domestic 
like product, they may not seek to expand the scope of the petition, 
i.e., the benchmark for the analysis of the domestic like product.
    When properly analyzed, the evidence of record demonstrates that 
there are clear dividing lines between the characteristics and uses of 
the vector supercomputers subject to investigation and the various 
other types of supercomputers. Significantly, the vector supercomputer 
has a different computer architecture than the non-vector computer 
technologies and, consequently, it processes information differently. 
The close physical proximity of the vector hardware to the computer's 
central processing boards and high memory bandwidth (with limited 
parallelism) contribute to the high speeds with which vector 
supercomputers process information. These differences give vector 
supercomputers different performance characteristics than non-vector 
supercomputers. For example, vector supercomputers are more efficient 
dealing with linear and matrix algebra equations than are non-vector 
supercomputers. Given the states of the different supercomputer 
technologies today, there are computer modeling applications where only 
the vector supercomputers are used. For example, only vector 
supercomputer bids met the technical requirements (which involved 
weather forecasting and climate modeling applications) in the 
University Corporation for Atmospheric Research (``UCAR'') procurement 
from which this petition derives the export price. In sum, based on the 
evidence submitted, we find that the domestic like product, like the 
scope of the investigation, is limited to vector supercomputers.
    Our review of the data provided in the petition and other 
information readily available to the Department indicates that the 
petitioner accounts for more than 50 percent of the total domestic 
production of vector supercomputers, thus meeting the standard of 
section 732(c)(4)(A) of the Act and requiring no further action by the 
Department pursuant to section 732(c)(4)(D) of the Act. Accordingly, 
the Department determines that the petition is supported by the 
domestic industry.

Export Price and Normal Value

    The petitioner based the export price on a ``best and final offer'' 
(BAFO) to supply UCAR with four vector supercomputers manufactured by 
NEC Corporation (``NEC''), to be imported from Japan. Deductions were 
made for the estimated costs of the U.S. computer systems integrator.
    Section 731 of the Act provides that the Department may impose 
antidumping duties if it determines that the subject merchandise has 
been sold or is ``likely to be sold'' in the United States at less than 
fair value. Accordingly, section 772 of the Act defines export price as 
the price at which the subject merchandise was ``sold (or agreed to be 
sold)'' in the United States. The irrevocable BAFO on which petitioner 
bases export price constitutes an offer for sale (or agreement to sell) 
and represents a price at which the merchandise is likely to be sold. 
Therefore, the BAFO is a reasonable basis for determining export price.
    The BAFO on which export price is based calls for a lease of the 
vector supercomputers. The term of the lease encompasses the useful 
life of the vector supercomputers. These vector supercomputers are not 
expected to have any residual value at the conclusion of the lease. By 
necessity, these supercomputers will be integrated into the climate 
modeling and weather forecasting operations of UCAR. It is a customary 
practice in the vector supercomputer industry effectively to transfer 
ownership through similar extended leases, rather than outright sales. 
Under these circumstances, generally accepted accounting principles 
(``GAAP'') classify such leases as equivalent to sales. These same 
circumstances that classify this lease under GAAP also establish the 
lease as equivalent to a sale within the meaning of section 771(19) of 
the Act.
    Although the Japanese home market is viable, the petitioner 
contends that vector supercomputers sold in Japan differ substantially 
from the system offered to UCAR in the United States. Consequently, the 
petitioner was unable to provide information concerning sales of 
identical or similar vector supercomputers sold by NEC in both markets. 
Since home market prices do not provide an appropriate basis for price 
comparisons, the petitioner based normal value on constructed value 
(``CV'') for estimating a dumping margin based on the offer to UCAR.
    CV includes the cost of manufacturing (``COM''), research and 
development costs (``R&D''), selling, general and administrative 
expenses (``SG&A''), interest expense, U.S. packing, and profit.
    The petitioner calculated the COM, R&D and SG&A on the basis of its 
own cost experience purchasing and manufacturing vector supercomputer 
components and on publicly available industry sources, including 
financial statement and other operational data for NEC. For calculating 
profit, the petitioner relied on a publicly available forecast of NEC's 
projected 1996 operating profit for computer sales other than personal 
computers. The petitioner did not include interest expenses or packing 
in its calculation.
    Based on the comparison of the export price to normal value, the 
petitioner alleges a margin of 454 percent.

Fair Value Comparisons

    Based on the information provided by the petitioners, there is 
reason to believe that vector supercomputers from Japan are likely to 
be sold at less than fair value. If it becomes necessary at a later 
date to consider the petition as a source of facts available under 
section 776 of the Act, we may further review the margin calculation in 
the petition.

Initiation of Investigation

    We have examined the petition on vector supercomputers and have 
found that it meets the requirements of section 732 of the Act, 
including the requirements concerning allegations of material injury or 
threat of material injury to the domestic producers of a domestic like 
product by reason of the likely sales at less than fair value. 
Therefore, we are initiating an antidumping duty investigation to 
determine whether vector supercomputers from Japan are being, or

[[Page 43530]]

are likely to be, sold at less than fair value. Unless extended, we 
will make our preliminary determination by January 6, 1997.

Distribution of Copies of the Petition

    In accordance with section 732(b)(3)(A) of the Act, a copy of the 
public version of the petition has been provided to the representatives 
of the Government of Japan. We will attempt to provide a copy of the 
public version of the petition to each exporter of vector 
supercomputers named in the petition.

International Trade Commission Notification

    We have notified the ITC of our initiation, as required by section 
732(d) of the Act.

Preliminary Determinations by the ITC

    The ITC will determine by September 12, 1996, whether there is a 
reasonable indication that imports of vector supercomputers from Japan 
are causing material injury, or threatening to cause material injury, 
to a U.S. industry. A negative ITC determination will result in the 
investigation being terminated; otherwise, the investigation will 
proceed according to statutory and regulatory time limits.

    Dated: August 19, 1996.
Jeffrey P. Bialos,
Acting Assistant Secretary for Import Administration.
[FR Doc. 96-21560 Filed 8-22-96; 8:45 am]
BILLING CODE 3510-DS-P