[Federal Register Volume 62, Number 66 (Monday, April 7, 1997)]
[Notices]
[Pages 16544-16547]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-8766]
[[Page 16544]]
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DEPARTMENT OF COMMERCE
International Trade Administration
[A-588-841]
Notice of Preliminary Determination of Sales at Less Than Fair
Value: Vector Supercomputers from Japan.
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
EFFECTIVE DATE: April 7, 1997.
FOR FURTHER INFORMATION CONTACT: Edward Easton or Sunkyu Kim, Office of
AD/CVD Enforcement II, Import Administration, International Trade
Administration, U.S. Department of Commerce, 14th Street and
Constitution Avenue, N.W., Washington, D.C. 20230; telephone: (202)
482-1777 or (202) 482-2613.
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 current regulations, as amended by the interim regulations
published in the Federal Register on May 11, 1995 (60 FR 25130).
Preliminary Determination
We preliminarily determine that there is a reasonable basis to
believe or suspect that vector supercomputers from Japan are being, or
are likely to be, sold in the United States at less than fair value
(``LTFV''), as provided in section 733(b) 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 on August 19, 1996
(Notice of Initiation of Antidumping Duty Investigation: Vector
Supercomputers from Japan, 61 FR 43527, August 23, 1996), the following
events have occurred.
On September 12, 1996, the United States International Trade
Commission (``ITC'') notified the Department of Commerce (``the
Department'') of its affirmative preliminary determination (see ITC
Investigation No. 731-TA-750). The ITC found that there is a reasonable
indication that an industry in the United States is threatened with
material injury by reason of imports of vector supercomputers from
Japan.
Based on the information available to the Department, the following
two companies were named as mandatory respondents in this
investigation: Fujitsu Limited (``Fujitsu'') and NEC Corporation
(``NEC''). On September 30, 1996, we presented Section A of the
Department's questionnaire 1 to Fujitsu and NEC. In this case,
Section A of the questionnaire was designed specifically to elicit the
technical information necessary for determining whether a constructed
value analysis rather than a comparison to vector supercomputers sold
in the home market or to third countries was appropriate in this
investigation. NEC did not respond to the Department's Section A
questionnaire. Instead, on October 15, 1996, counsel for NEC sent a
letter to the Secretary of Commerce, enclosing a complimentary copy of
its request that the U.S. Court of International Trade (``CIT'') enjoin
the Department's antidumping investigation. Because NEC did not respond
to Section A of our questionnaire, we were unable to prepare the
remaining sections of the questionnaire for NEC. For a further
discussion, see Memorandum to File from Edward Easton dated November
27, 1996, and the Facts Available section of the notice. Fujitsu's
response to Section A was received on October 25, 1996.
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\1\ Section A of the questionnaire requests information
concerning a company's corporate structure and business practices,
the merchandise under investigation that it sells, and the sales of
the merchandise in all of its markets. Sections B and C of the
questionnaire request home market sales listings and U.S. sales
listings, respectively.
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At the Department's request, Cray Research, Inc. (the petitioner),
and Fujitsu filed comments on the appropriate product model matching
criteria to be used in this investigation on October 16 and 17, 1996,
respectively. On November 13, 1996, we issued Sections B and C of the
Department's questionnaire to Fujitsu. On December 17, 1996, Fujitsu
requested that it be allowed to limit its reporting of home market
sales to only those sales most comparable to Fujitsu's single sale to
the United States made during the period of investigation (``POI'').
The Department, in a letter dated December 26, 1996, permitted Fujitsu
to report data only for those home market sales with the same number of
processing elements as its U.S. sale. Fujitsu submitted its Sections B
and C responses on January 8, 1997. Based on the information received
in Fujitsu's Sections A, B and C responses, the Department issued a
supplemental questionnaire on January 16, 1997. Fujitsu's response to
the supplemental questionnaire was received on January 27, 1997.
On December 12, 1996, at the request of the petitioner, we
postponed the preliminary determination to February 25, 1997. (See
Notice of Postponement of Preliminary Determination: Antidumping
Investigation of Vector Supercomputers from Japan, 61 FR 66653,
December 18, 1996.)
In connection with NEC's appeal to the CIT, on February 18, 1997,
the court, with the consent of the parties to the litigation, enjoined
the Department from issuing its preliminary determination in this
investigation until March 28, 1997. On March 21, 1997, the CIT denied
NEC's request for a preliminary injunction to further enjoin issuance
of the preliminary determination.
Cost of Production Allegation
On November 27, 1996, the petitioner alleged that there are
reasonable grounds to believe or suspect that Fujitsu's home market
sales during the POI were made at prices below the cost of production
(``COP''). We rejected this allegation because it was untimely filed
pursuant to 19 CFR 353.31(c)(i)(i.e., filed less than 45 days prior to
the scheduled date of the preliminary determination). On December 17,
1996, subsequent to the above-cited postponement of the preliminary
determination, the petitioner submitted a second sales-below-cost
allegation concerning Fujitsu's home market sales. We determined that
the second allegation was inadequate for purposes of initiating a cost
investigation. In a letter dated January 2, 1997, we informed the
petitioner of our determination and provided the petitioner with an
outline of supplementary information that would be needed for the
Department to further consider its allegation. On January 14, 1997, the
petitioner refiled its sales-below-cost allegation. The petitioner
supplemented that allegation with additional information on January 24,
1997. Fujitsu submitted rebuttal comments to the petitioner's
allegations in January 1997. Fujitsu's comments are addressed in
memorandums to Richard W. Moreland dated February 13 and 14, 1997.
Based on our examination of the petitioner's January 14, 1997,
allegation, we determined that there are reasonable grounds to believe
or suspect that Fujitsu sold vector supercomputers in the home market
at prices which were below their COP. Accordingly, on January 28, 1997,
we initiated a COP investigation with respect to Fujitsu's home market
sales. See Memorandum to
[[Page 16545]]
Barbara R. Stafford, dated January 28, 1997.
Section D of the Department's questionnaire requesting cost of
production and constructed value (``CV'') data was issued to Fujitsu on
February 12, 1997. On March 13, 1997, the Department extended Fujitsu's
time to respond to Section D of the questionnaire to April 14, 1997.
Accordingly, we are not able to include a COP analysis in our
preliminary determination. We will analyze Fujitsu's COP and CV data
for our final determination.
Postponement of Final Determination and Extension of Provisional
Measures
Pursuant to section 735(a)(2)(A) of the Act, on March 13, 1997,
Fujitsu requested that in the event of an affirmative preliminary
determination in this investigation, the Department postpone its final
determination until not later than 135 days after the publication of an
affirmative preliminary determination in the Federal Register. Our
preliminary determination is affirmative. In addition, Fujitsu accounts
for a significant proportion of exports of the subject merchandise, and
as we are not aware of the existence of any compelling reasons for
denying this request, we are granting Fujitsu's request (under 19 CFR
353.20 (b) (1995)) and postponing the final determination. Suspension
of liquidation will be extended accordingly. See Preliminary
Determination of Sales at Less Than Fair Value: Large Newspaper
Printing Presses and Components Thereof, Whether Assembled or
Unassembled from Japan (61 FR 8029, March 1, 1996).
Scope of 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.
Period of Investigation
The POI is July 1, 1995 through June 30, 1996.
Facts Available
As discussed above, NEC failed to answer the Department's
questionnaire. On October 15, 1996, NEC sent a letter to the Secretary
of Commerce, enclosing a complimentary copy of its request that the
U.S. Court of International Trade (``CIT'') enjoin the Department's
antidumping investigation. In this letter, counsel stated that ``* * *
my clients will respectfully withhold their response to the
Department's questionnaire until such time as a qualified independent
party * * * is appointed as a ``special master'' to conduct the
investigation.'' We have placed this letter on the record of this
proceeding and it is the last communication we have had with NEC on
that record. NEC's decision not to respond to the Department's request
for information has left the Department with no alternative other than
to proceed on the basis of the facts available.
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 an antidumping
investigation, or (4) provides such information but the information
cannot be verified, the Department is required to use facts otherwise
available (subject to subsections 782(c)(1) and (e)) to make its
determination. Section 776(b) of the Act further provides that adverse
inferences may be used in selecting from the facts otherwise available
if the party 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,
103rd Cong., 2d Sess. 870 (``SAA''). NEC's decision not to participate
in the Department's investigation demonstrates that it failed to act to
the best of its ability in this investigation. Therefore, the
Department has determined that an adverse inference is appropriate.
Consistent with Departmental practice in cases where respondents decide
not to participate, as facts otherwise available, we are assigning to
NEC the margin stated in the petition, 454 percent.
Section 776(c) provides that if the Department relies upon
secondary information, such as the petition, when resorting to 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 examined the data
that the petitioner relied upon in calculating the estimated dumping
margin. This calculation was based on a comparison of the export price
of an NEC offer to the normal value of the NEC vector supercomputer
system. The export price was based on the ``best and final offer'' to
supply a U.S. customer with four vector supercomputers manufactured by
NEC. Normal value was based on the estimated constructed value of this
NEC system.
The Department examined the accuracy and adequacy of all of the
information from which the margin was calculated during our pre-
initiation analysis of the petition. For the purpose of this
preliminary determination, we re-examined the information provided in
the petition. The petition included a copy of NEC's English-language
brochure describing the company's SX-4 series vector supercomputer,
including the specifications of this model. The contract value of the
procurement relied upon for the U.S. sale is in the public domain. The
procurement negotiations for NEC's ``best and final offer'' to the U.S.
purchaser are described in an acquisition announcement released by the
University Corporation for Atmospheric Research on May 20, 1996. The
estimated cost build up for constructing the value of the NEC system
used as normal value was based upon the recent cost experience of the
petitioner in building similar supercomputer systems. Cray Research,
Inc. is the only U.S. manufacturer of vector supercomputer systems
comparable in performance to the NEC SX-4 system. We examined the
methodology for estimating the dumping margin on the SX-4 after the
filing of the petition and found it to be satisfactory.
Based on our review of the available evidence, we find that the
information in the petition continues to be of probative value. See SAA
at 870. Therefore, we determine that the petition is corroborated
within the meaning of section 776(c) of the Act.
Product Comparison
As noted above in the ``Case History'' section, the Department
granted Fujitsu's request to limit its reporting of home market sales
of vector supercomputers during the POI to those sales with the same
number of processing elements as the sale made in
[[Page 16546]]
the United States. We selected the home market sale most comparable to
the U.S. sale based on the six-model matching criteria proposed by
Fujitsu and the petitioner. For a further discussion, see Memorandum to
Richard W. Moreland, dated March 26, 1997.
Level of Trade and CEP Offset
As set forth in section 773(a)(1)(B)(i) of the Act and in the SAA
at 829-831, to the extent practicable, the Department will calculate
normal value (``NV'') based on sales at the same level of trade as the
U.S. sales. When the Department is unable to find sales in the
comparison market at the same level of trade as the U.S. sale(s), the
Department may compare sales in the U.S. and foreign markets at
different levels of trade.
Section 773(a)(7)(A) provides that if we compare a U.S. sale with a
home market sale made at a different level of trade, we will adjust the
NV to account for this difference if two conditions are met. First,
there must be differences between the actual selling functions
performed by the seller at the level of trade of the U.S. sale and at
the level of trade of the comparison market sale used to determine NV.
Second, the differences must affect price comparability, as evidenced
by a pattern of consistent price differences between sales at the
different levels of trade in the market in which NV is determined.
For constructed export price (``CEP'') sales, section
773(a)(a)(7)(B) establishes the procedure for making a ``CEP Offset''
when two conditions are met. First, the NV is established at a level of
trade which constitutes a more advanced stage of distribution than the
level of trade of the CEP and, second, the data available do not
establish an appropriate basis for calculating a level-of-trade
adjustment.
In its questionnaire response, Fujitsu reported that the following
functions were performed in the home market for sales to end users:
market research, sales activity, contract negotiations, warranty and
other after-sale service, technical services, installation services,
freight and delivery arrangements, and maintenance. Fujitsu reported
the same selling functions by Fujitsu America, Inc., for the U.S. sale,
which was also to an end user. Fujitsu asserts that should the
Department treat its U.S. sale as a CEP sale, the statutory adjustments
to arrive at CEP would place home market sales at a more advanced level
of trade than the level of trade of the CEP sale. This assertion is
based only on Fujitsu's assumption that a CEP sale is, by definition,
at a different level of trade than the NV level of trade. Fujitsu did
not provide sufficient factual information demonstrating a difference
in levels of trade that would affect price comparability or data to
quantify any such affect.
Based on Fujitsu's responses, we cannot establish that different
levels of trade were involved in the different markets. In response to
our original and supplemental questions concerning level of trade,
Fujitsu reported only very limited and general information on types of
selling functions, which is insufficient for a level-of-trade analysis.
Even if it were possible to determine differences in levels of trade
from this limited data, Fujitsu has not provided any information which
would justify a level-of-trade adjustment. The Department's practice is
to not rely on a presumption that there will be a level-of-trade
adjustment or a CEP offset in CEP price comparisons. The evidence must
establish that the comparison sales are at a more advanced level of
trade and that available data does not provide a sufficient basis for
an adjustment. Absent such information, the Department cannot find that
a CEP offset is authorized by section 773(a)(7)(B).
Fair Value Comparisons
To determine whether Fujitsu's single sale of a vector
supercomputer system to the United States during the POI was made at
less than fair value, we compared CEP to the normal value, as described
in the ``Constructed Export Price'' and ``Normal Value'' sections of
this notice.
Constructed Export Price
We calculated CEP for Fujitsu, in accordance with sections 772 (b),
(c) and (d) of the Act. We found that CEP is warranted because all U.S.
sales activities associated with the single U.S. sale took place in the
United States through a wholly-owned subsidiary of Fujitsu. We
calculated CEP based on the installed price to the first unaffiliated
customer in the United States. We made deductions from the starting
price for the following expenses: foreign inland freight, foreign
inland insurance, foreign brokerage and handling, international
freight, marine insurance, U.S. brokerage and handling, U.S. inland
freight, and U.S. Customs duties.
Pursuant to section 772(d) of the Act, we also made deductions for
direct selling expenses, including imputed credit, installation
service, and training expenses. In addition, we deducted indirect
selling expenses that related to economic activity in the United
States. These included inventory carrying costs and indirect selling
expenses incurred in the home market, and the indirect selling expenses
of the U.S. subsidiary. Finally, we made an adjustment for CEP profit
in accordance with section 722(d)(3) of the Act.
Normal Value
In order to determine whether there was a sufficient volume of
sales in the home market to serve as a viable basis for calculating NV,
we compared Fujitsu'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. Fujitsu'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 of the subject
merchandise. Accordingly, we determined that its home market was
viable. As noted above in the Product Comparison section of the notice,
we based NV on a home market sale of the product which we identified as
the most comparable to the U.S. sale.
We calculated NV based on the installed price to an unaffiliated
customer and made deductions from the starting price for inland freight
and inland insurance. We made adjustments for differences in the
merchandise in accordance with section 773(a)(6)(C)(ii) of the Act. For
the purposes of this preliminary determination, we recalculated the
difference-in-merchandise adjustment based on the costs of hardware
reported by Fujitsu. In recalculating the adjustment, we included the
cost of software as well as hardware. In addition, in accordance with
section 773(a)(6)(C)(iii) of the Act, we made circumstance-of-sale
adjustments for direct expenses including imputed credit, warranty
expenses, installation and technical service expenses. Finally, we
deducted home market packing costs and added U.S. packing costs in
accordance with section 773(a)(6)(B) of the Act.
Currency Conversion
We made currency conversions into U.S. dollars based on the
official exchange rates in effect on the date of the U.S. sale as
certified by the Federal Reserve Bank.
Section 773A(a) of the Act directs the Department to convert
foreign currencies based on the dollar exchange rate in effect on the
date of sale of the subject merchandise, except if it is established
that a currency transaction on forward markets is directly linked to an
export sale. When a company demonstrates that a sale on forward markets
is directly linked to a particular export sale in order to minimize its
exposure to exchange rate losses, the
[[Page 16547]]
Department will use the rate of exchange in the forward currency sale
agreement.
Section 773A(a) also 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 rolling average of rates for the past 40 business days. When we
determine a fluctuation existed, we substitute the benchmark 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 Japanese yen did not undergo
a sustained movement, nor were there any currency fluctuations during
the POI.
Verification
As provided in section 782(i) of the Act, we will verify all
information used 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 entries of vector
supercomputers from Japan, as defined in the ``Scope of Investigation''
section of this notice, that are entered, or withdrawn from warehouse
for consumption, on or after the date of publication of this notice in
the Federal Register. For these entries, the Customs Service will
require a cash deposit or posting of a bond equal to the estimated
amount by which the normal value exceeds the export price as shown
below.
The entries must be accompanied by documentation provided by both
the foreign manufacturer/exporter and the U.S. importer which discloses
the following information: (1) The vector supercomputer contract
pursuant to which the merchandise is imported, (2) a description of the
merchandise included in the entry, (3) the actual or estimated price
(agreed to as of the time of importation) of the complete vector
supercomputer system, and (4) a schedule of all shipments to be made
pursuant to a particular vector supercomputer contract, if more than
one shipment is involved. We will also request that the Japanese
manufacturer/exporter(s) submit to the Department the contracts
pursuant to which subject merchandise is imported. These suspension of
liquidation instructions will remain in effect until further notice.
The scope of this investigation includes both complete and
unassembled shipments. Given that vector supercomputer systems may be
entered into the United States in different shipments, it is important
to ensure that the subject merchandise, particularly parts, components,
and subassemblies, be readily identifiable to the U.S. Customs Service
and to the Department. To ensure that any antidumping order which may
issue as a result of this investigation is clear, we are requesting
interested parties to submit their comments on this subject to the
Department by May 5, 1997. Reply comments will be due by May 19, 1997.
The weighted-average dumping margins are as follows:
------------------------------------------------------------------------
Weighted-
average
Exporter/manufacturer margin
percentage
------------------------------------------------------------------------
Fujitsu.................................................... 27.17
NEC *...................................................... 454.00
All Others................................................. 27.17
------------------------------------------------------------------------
* Facts Available Rate.
Pursuant to section 735(c)(5)(A) of the Act, the Department has
excluded the margin 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 July 7, 1997, and rebuttal briefs, no later than July 10,
1997. A list of authorities used and an executive summary of issues
should accompany any briefs submitted to the Department. The 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 give interested parties an opportunity to comment on
arguments raised in case or rebuttal briefs. Tentatively, the hearing
will be held on July 14, 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 135 days after the date of the preliminary
determination.
This determination is published pursuant to section 733(f) of the
Act.
Dated: March 28, 1997.
Robert S. LaRussa,
Acting Assistant Secretary for Import Administration.
[FR Doc. 97-8766 Filed 4-4-97; 8:45 am]
BILLING CODE 3510-DS-P