[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