[Federal Register Volume 64, Number 109 (Tuesday, June 8, 1999)]
[Notices]
[Pages 30481-30487]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-14511]


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DEPARTMENT OF COMMERCE

International Trade Administration
[A-580-812]


Dynamic Random Access Memory Semiconductors of One Megabit or 
Above From the Republic of Korea: Preliminary Results of Antidumping 
Duty Administrative Review and Notice of Intent Not To Revoke Order in 
Part

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

ACTION: Notice of preliminary results of antidumping duty 
administrative review and notice of intent not to revoke order in part.

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SUMMARY: In response to requests from one manufacturer/exporter and one 
U.S. producer, the Department of Commerce (the Department) is 
conducting an administrative review of the antidumping duty order on 
dynamic random access memory semiconductors of one megabit or above 
(DRAMs) from the Republic of Korea (Korea). The review covers two 
manufacturers/exporters and one exporter of subject merchandise to the 
United States during the period of review (POR), May 1, 1997 through 
April 30, 1998. Based upon our analysis, the Department has 
preliminarily determined that dumping margins exist for both 
manufacturers/exporters and the exporter during the POR. If these 
preliminary results are adopted in our final results of administrative 
review, we will instruct the United States Customs Service (Customs) to 
assess antidumping duties as appropriate. Interested parties are 
invited to comment on these preliminary results. Parties who submit 
arguments in this proceeding are requested to submit with the argument 
(1) A statement of the issue, and (2) a brief summary of the argument.

EFFECTIVE DATE: June 8, 1999.

FOR FURTHER INFORMATION CONTACT: Alexander Amdur or John Conniff, AD/
CVD Enforcement, Group II, Office 4, Import Administration, 
International Trade Administration, U.S. Department of Commerce, 14th 
and Constitution Avenue, NW., Washington, DC. 20230; telephone: (202) 
482-5346 or (202) 482-1009, respectively.

SUPPLEMENTARY INFORMATION:

Applicable Statute and Regulations

    Unless otherwise stated, all citations to the Tariff Act of 1930, 
as amended (the Act), are references to the provisions as of 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 references to the regulations of the Department are to 
19 CFR part 351 (1998).

Background

    On May 10, 1993, the Department published in the Federal Register 
(58 FR 27250) the antidumping duty order on DRAMs from Korea. On May 
12, 1998, the Department published a notice of ``Opportunity to Request 
an Administrative Review'' of this antidumping duty order for the 
period May 1, 1997 through April 30, 1998 (63 FR 26143). We received 
timely requests for review from one manufacturer/exporter of subject 
merchandise to the United States; LG Semicon Co., Ltd. (LG). The 
petitioner, Micron Technology Inc., requested an administrative review 
of LG and Hyundai Electronics Industries, Co., Ltd. (Hyundai), also a 
Korean manufacturer of DRAMs, and The G5 Corporation (G5), a Korean 
exporter of DRAMs. Moreover, the petitioner requested a cost 
investigation of LG and Hyundai pursuant to section 773(b) of the Act. 
On June 29, 1998, the Department initiated a review of LG, Hyundai, and 
G5, including cost investigations of Hyundai and LG (63 FR 35188). The 
POR for all respondents is May 1, 1997 through April 30, 1998. The 
Department is conducting this review in accordance with section 751 of 
the Act.
    On January 20, 1999, the Department published in the Federal 
Register (64 FR 3065) a notice extending the time for the preliminary 
results from January 30, 1999, until May 31, 1999.

Scope of the Review

    Imports covered by the review are shipments of DRAMs from Korea. 
Included in the scope are assembled and unassembled DRAMs of one 
megabit and above. 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. 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 Customs 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 currently 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.

Intent Not To Revoke

    LG submitted a request to revoke it from the order covering DRAMs 
from Korea pursuant to 19 CFR 351.222(b)(2). Under the Department's 
regulations, the Department may revoke an order, in part, if the 
Secretary concludes that, among other things: (1) ``[O]ne or more 
exporters or producers covered by the order have sold the merchandise 
at not less than normal value for a period of at least three 
consecutive years''; (2) ``[i]t is not likely that those persons will 
in the future sell the merchandise at less than normal value''; and (3) 
``the producers or resellers agree in writing to the immediate 
reinstatement of the order, as long as any producer or reseller is 
subject to the order, if the

[[Page 30482]]

Secretary concludes that the producer or reseller, subsequent to the 
revocation, sold the merchandise at less than (normal) value.'' See 19 
CFR 351.222(a)(2). In this case, LG does not meet the first criterion 
for revocation. In the previous segment of this proceeding the 
Department found that LG sold subject merchandise at less than normal 
value. See Notice of Final Results of Antidumping Administrative 
Review: Dynamic Random Access Memory Semiconductors (DRAMs) of One 
Megabit or Above from the Republic of Korea, 63 FR 50867, September 23, 
1998) (Final Results 1998). Since LG has not met the first criterion 
for revocation, i.e., zero or de minimis margins for three consecutive 
reviews, the Department need not reach a conclusion with respect to the 
second and third criteria. Therefore, on this basis, we have 
preliminarily determined not to revoke the Korean DRAM antidumping duty 
order with regard to LG.

Verification

    As provided in section 782(i) of the Act, we verified information 
provided by LG and Hyundai. We used standard verification procedures, 
including on-site inspection of the respondents' facilities, 
examination of relevant sales, financial, and/or cost records, and 
selection of original documentation containing relevant information. G5 
was not verified because the company refused to permit verification to 
take place.

Facts Available

Facts Available

1. Application of Facts Available
    Section 776(a)(2) of the Act provides that if any interested party: 
(A) Withholds information that has been requested by the Department; 
(B) fails to provide such information in a timely manner or in the form 
or manner requested; (C) significantly impedes an antidumping 
investigation; or (D) provides such information but the information 
cannot be verified, the Department shall use facts otherwise available 
in making its determination.
    Based on information obtained from Customs, we have determined that 
a number of sales that LG reported as third-country sales were actually 
sales to the United States. Moreover, the Department has determined 
that at the time LG made these sales, it knew, or should have known, 
that the DRAMs were destined for consumption in the United States. This 
is the same issue the Department addressed in the prior review period. 
See the May 27, 1999 Memorandum regarding `` Dynamic Random Access 
Memory Semiconductors of One Megabit or Above (DRAMs) from the Republic 
of Korea--Total Unreported Sales''. Thus, we have determined that LG 
withheld information we requested and significantly impeded the 
antidumping proceeding.
    On July 15, 1998, the Department sent G5 a Section A questionnaire 
requesting that G5 provide information regarding any sales that it made 
to the United States during the POR. On August 10, 1998, G5 stated that 
it had not sold any of the subject merchandise to the United States 
during the POR. On December 1, 1998, the Department issued a 
supplemental questionnaire to G5 again requesting information regarding 
any sales that were made to the United States during the POR. 
Specifically, the Department requested that G5 examine the scope of the 
review and state whether it had any shipments, or knowledge, directly 
or indirectly, of sales to the United States of the subject merchandise 
during the POR. The Department also requested that G5 state whether 
they had any knowledge, directly or indirectly, of sales to business 
entities in third countries in which the final destination of the sale 
of the subject merchandise was the United States. In a December 17, 
1998, letter, G5 stated that it has not sold or delivered DRAMs to the 
United States during the POR.
    On January 20, 1999, the Department obtained information from 
Customs indicating that there were entries for consumption into the 
United States of Korean DRAMs shipped from G5 during the POR. In a 
March 3, 1999, letter, G5 acknowledged that it did have sales of LG 
DRAMs to the United States during the POR. Thus, we have determined 
that G5 withheld information we requested and significantly impeded the 
antidumping proceeding.
    Because LG and G5 failed to respond in full to our questionnaire, 
pursuant to section 776(a) of the Act, we have applied facts otherwise 
available to calculate their dumping margins. Moreover, while we have 
preliminarily determined that certain sales should have been reported 
as sales to the United States, we will continue to examine Customs data 
as well as other data sources to determine whether there are any 
additional sales that have not been properly reported.
2. Selection of Adverse Facts Available
    Section 776(b) of the Act provides that, in selecting from the 
facts available, adverse inferences may be used against a party that 
failed to cooperate by not acting to the best of its ability to comply 
with requests for information. See also Statement of Administrative 
Action (SAA) accompanying the URAA, H.R. Doc. No. 316, 103d Cong., 2d 
Sess. 870 (1994).
    Section 776(b) states further that an adverse inference may include 
reliance on information derived from the petition, the final 
determination, the final results of prior reviews, or any other 
information placed on the record. See also Id. at 868.
    LG's decision to report as third-country sales a substantial number 
of U.S. sales that it knew, or should have known, were U.S. sales, 
indicates that LG failed to cooperate to the best of its ability. 
Similarly, G5's failure to provide information on its U.S. sales or 
permit verification demonstrates that G5 has failed to cooperate to the 
best of its ability in this review. Therefore, the Department has 
determined that an adverse inference is warranted in selecting among 
the facts otherwise available for LG and G5, in accordance with section 
776(b) of the Act. Consequently, we have based the margin for G5 on 
total adverse facts available and for LG on partial adverse facts 
available.
    As partial adverse facts available for LG, we have calculated a 
dumping margin based on both LG's reported and unreported sales to the 
United States, the latter of which we were able to identify from 
Customs data. While LG disagrees with the Department's position, LG 
provided the selling expenses for the sales transactions obtained from 
Customs. However, because LG did not report these transactions as U.S. 
sales, we are not using the expenses. Furthermore, the Department did 
not verify these expenses as they related to unreported sales. 
Therefore, since LG did not report these as U.S. sales, we are using as 
adverse facts available the highest U.S. selling expenses from LG's 
reported transactions involving identical products. Where there were no 
reported transactions involving identical merchandise, we used the 
highest U.S. selling expenses from LG's reported transactions involving 
similar merchandise.
    As total adverse facts available for G5, we have assigned the 
highest company-specific margin in the history of this proceeding, 
which is the rate calculated for Hyundai in the instant review.

Per Megabit Cash Deposit Rates for Certain Memory Modules

    On February 4, 1999, Compaq requested that the Department establish 
per megabit cash deposit rates for imports of certain memory modules

[[Page 30483]]

containing DRAMs from Korea. Consistent with the practice established 
in the LFTV investigation of DRAMs from Korea, the Department is 
establishing per megabit cash deposit rates to be applied to memory 
modules containing subject and non-subject merchandise. For a detailed 
discussion, see memorandum regarding Calculation of Per Megabit Rate, 
May 28, 1999.

Duty Absorption

    On July 27, 1998, the petitioner requested that the Department 
determine whether antidumping duties had been absorbed during the POR. 
Section 751(a)(4) of the Act provides for the Department, if requested, 
to determine during an administrative review initiated two or four 
years after the publication of the order, whether antidumping duties 
have been absorbed by a foreign producer or exporter, if the subject 
merchandise is sold in the United States through an affiliated 
importer. In this case, both Hyundai and LG sold to the United States 
through an importer that is affiliated within the meaning of section 
751(a)(4) of the Act.
    Section 351.213(j)(2) of the Department's regulations provides that 
for transition orders (i.e., orders in effect on January 1, 1995), the 
Department will conduct duty absorption reviews, if requested, for 
administrative reviews initiated in 1996 or 1998. Because the order 
underlying this review was issued prior to January 1, 1995, and this 
review was initiated in 1998, we will make a duty absorption 
determination in this segment of the proceeding.
    On January 26, 1999, the Department requested evidence that 
unaffiliated purchasers will ultimately pay the antidumping duties to 
be assessed on entries during the review period. Neither Hyundai nor LG 
provided any evidence in response to the Department's request. 
Accordingly, based on the record, we cannot conclude that the 
unaffiliated purchaser in the United States will ultimately pay the 
assessed duty. Therefore, we find that antidumping duties have been 
absorbed by the producer or exporter during the POR.

Fair Value Comparisons

    To determine whether sales of DRAMs from Korea to the United States 
were made at less than fair value (LTFV), we compared the constructed 
export price (CEP) to the normal value (NV), as described in the 
``Constructed Export Price'' and ``Normal Value'' sections of this 
notice, below. When making comparisons in accordance with section 
771(16) of the Act, we considered all products as described in the 
``Scope of Review'' section of this notice, above, that were sold in 
the home market in the ordinary course of trade for purposes of 
determining appropriate product comparisons to U.S. sales. Where there 
were no sales of the identical or the most similar merchandise in the 
home market that were suitable for comparison, we compared U.S. sales 
to sales of the next most similar foreign like product, based on the 
characteristics listed in Section B and C of our antidumping 
questionnaire.

CEP

    For LG and Hyundai, in calculating United States price, the 
Department used CEP, as defined in section 772(b) of the Act, because 
the merchandise was first sold to an unaffiliated U.S. purchaser after 
importation. We calculated CEP based on delivered prices to 
unaffiliated customers in the United States. We made deductions from 
the starting price, where appropriate, for discounts, rebates, foreign 
brokerage and handling, foreign inland insurance, air freight, air 
insurance, U.S. duties and direct and indirect selling expenses to the 
extent that they are associated with economic activity in the United 
States in accordance with sections 772(c)(2) and 772(d)(1) of the Act. 
These included credit expenses, commissions, as applicable, and 
inventory carrying costs incurred by the respondents' U.S. 
subsidiaries. We added duty drawback paid on imported materials in the 
home market, where applicable, pursuant to section 772(c)(1)(B) of the 
Act.
    For Hyundai DRAMs that were further manufactured into memory 
modules after importation, we deducted all costs of further 
manufacturing in the United States, pursuant to section 772(b)(2) of 
the Act. These costs consisted of the costs of the materials, 
fabrication, and general expenses associated with further manufacturing 
in the United States. Pursuant to section 772(d)(3) of the Act, we also 
reduced the CEP by the amount of profit allocated to the expenses 
deducted under section 772(d)(1) and (2).
    For Hyundai modules that were imported by U.S. affiliates of 
Hyundai and then further processed into computer workstations before 
being sold to unaffiliated parties in the United States, we determined 
that the special rule for merchandise with value added after 
importation under section 772(e) of the Act applied. Section 772(e) of 
the Act provides that, where the subject merchandise is imported by an 
affiliated person and the value added in the United States by the 
affiliated person is likely to exceed substantially the value of the 
subject merchandise, we shall determine the CEP for such merchandise 
using the price of identical or other subject merchandise sold in the 
United States if there is a sufficient quantity of sales to provide a 
reasonable basis for comparison. If there is not a sufficient quantity 
of such sales or if we determine that using the price of identical or 
other subject merchandise is not appropriate, we may use any other 
reasonable basis to determine the CEP.
    To determine whether the value added is likely to exceed 
substantially the value of the subject merchandise, we estimated the 
value added based on the difference between the averages of the prices 
charged to the first unaffiliated purchaser for the merchandise as sold 
in the United States and the averages of the prices paid for the 
subject merchandise by the affiliated person. Based on this analysis, 
we determined that the estimated value added in the United States by 
Hyundai's U.S. affiliates accounted for at least 65 percent of the 
price charged to the first unaffiliated customer for the merchandise as 
sold in the United States. See 19 CFR 351.402 for an explanation of our 
practice on this issue. Therefore, we determined that the value added 
is likely to exceed substantially the value of the subject merchandise. 
We also determined that there was a sufficient quantity of sales 
available to provide a reasonable basis for comparison and that the use 
of such sales is appropriate in accordance with 772(e). Accordingly, 
for purposes of determining dumping margins for these sales, we have 
used the weighted-average dumping margins calculated on sales of 
identical or other subject merchandise sold to unaffiliated persons in 
the United States. For further discussion, see Memorandum on Whether to 
Determine the Constructed Export Price for Certain Further-Manufactured 
Sales Sold by Hyundai Electronics Industries Co., Ltd. in the United 
States During the Period of Review Under Section 772(e) of the Act 
dated June 1, 1999.

Level of Trade

    In accordance with section 773(a)(1(B) of the Act, to the extent 
practical, we determined NV based on sales in the comparison market at 
the same level of trade as the CEP sales. The NV level of trade is that 
of the starting-price sales in the comparison market or, when NV is 
based on constructed value (CV), that of the sales from which we derive 
selling, general, and administrative (SG&A) expenses and profit. For 
CEP, it is the level of the constructed sale from the exporter to the 
importer.

[[Page 30484]]

    To determine whether NV sales are at a different level of trade 
than the CEP sales, we examined stages in the marketing process and 
selling activities along the chain of distribution between the producer 
and the unaffiliated customer. If the comparison-market sales are at a 
different level of trade, and the difference affects price 
comparability, as manifested in a pattern of consistent price 
differences between the sales on which NV is based and comparison-
market sales at the level of trade of the export transaction, we make a 
level of trade adjustment under section 773(a)(7)(A) of the Act. 
Finally, for CEP sales, if the NV level is more remote from the factory 
than the CEP level and there is no basis for determining whether the 
difference in the levels between NV and CEP affects price 
comparability, we adjust NV under section 773(a)(7)(B) of the Act (the 
CEP offset provision). See Notice of Final Determination of Sales at 
Less Than Fair Value: Certain Cut-to Length Carbon Steel Plate from 
South Africa, 62 FR 61731 (November 19, 1997).
    We reviewed the questionnaire responses of Hyundai and LG to 
establish whether there were sales at different levels of trade based 
on the distribution system, selling activities, and services offered to 
each customer or customer category. For both respondents, we identified 
one level of trade in the home market with direct sales by the parent 
corporation to the domestic customer. These direct sales were made by 
both respondents to original equipment manufacturers (OEMs) and to 
distributors. In addition, all sales, whether made to OEM customers or 
to distributors, included the same selling functions. For the U.S. 
market, all sales for both respondents were reported as CEP sales. The 
level of trade of the U.S. sales is determined for the sale to the 
affiliated importer rather than the resale to the unaffiliated 
customer. We examined the selling functions performed by the Korean 
companies for U.S. CEP sales (as adjusted) and preliminarily determine 
that they are at a different level of trade from the Korean companies' 
home market sales because the companies' CEP transactions were at a 
less advanced stage of marketing. For instance, at the CEP level, the 
Korean companies did not engage in any general promotion activities, 
marketing functions, or price negotiations for U.S. sales. Because we 
compared CEP sales to home market sales at a more advanced level of 
trade, we examined whether a level of trade adjustment may be 
appropriate. In this case, both respondents only sold at one level of 
trade in the home market. Therefore, there is no basis upon which 
either respondent can demonstrate a pattern of consistent price 
differences between levels of trade. Further, we do not have 
information which would allow us to examine pricing patterns based on 
the respondents' sales of other products and there is no other record 
information on which such an analysis could be based. Because the data 
available do not provide an appropriate basis for making a level of 
trade adjustment and the level of trade in the home market is at a more 
advanced stage of distribution than the level of trade of the CEP 
sales, a CEP offset is appropriate. Both respondents claimed a CEP 
offset. We applied the CEP offset to adjusted home market prices or CV, 
as appropriate. The CEP offset consisted of an amount equal to the 
lesser of the weighted-average U.S. indirect selling expenses and U.S. 
commissions or home market indirect selling expenses. See the 
Memorandum on Level of Trade for LG, dated May 27, 1999 and Memorandum 
on Level of Trade for Hyundai, dated May 28, 1999.

NV

Home Market Viability
    In order to determine whether there were a sufficient sales of 
DRAMs in the home market to serve as a viable basis for calculating NV, 
we compared the respondents' volume of home market sales of the foreign 
like product to the volume of U.S. sales of the subject merchandise, in 
accordance with section 773(a)(1)(C) of the Act. Because the aggregate 
volume of home market sales of the foreign like products for both 
Hyundai and LG was greater than five percent of the respective 
aggregate volume of U.S. sales of the subject merchandise, we 
determined that the home market provides a viable basis for calculating 
NV for all respondents.
Cost of Production (COP)
    We disregarded Hyundai's and LG's sales found to have been made 
below the COP in the Notice of Final Results of Antidumping 
Administrative Review: Dynamic Random Access Memory Semiconductors 
(DRAMs) of One Megabit or Above from the Republic of Korea, 62 FR 
39809, July 24, 1997), the most recent segment of this proceeding for 
which final results were available at the time of the initiation of 
this review. Accordingly, the Department, pursuant to section 773(b) of 
the Act, initiated COP investigations of both respondents for purposes 
of this administrative review.
    We calculated the COP based on the sum of the costs of materials 
and fabrication employed in producing the foreign like product, SG&A 
expenses, and the cost of all expenses incidental to placing the 
foreign like product in condition, packed, ready for shipment, in 
accordance with section 773(b)(3) of the Act. We compared weighted-
average quarterly COP figures for each respondent, adjusted where 
appropriate (see below), to home market sales of the foreign like 
product, as required under section 773(b) of the Act, in order to 
determine whether these sales had been made at prices below the COP. In 
determining whether to disregard home market sales made at prices below 
the COP, we examined whether such sales were made: (1) Within an 
extended period of time in substantial quantities, and (2) at prices 
which permitted the recovery of all costs within a reasonable period of 
time in the normal course of trade, in accordance with sections 
773(b)(1)(A) and (B) of the Act. In accordance with section 
773(b)(2)(D) of the Act, we conducted the recovery of cost test using 
annual cost data.
    Pursuant to section 773(b)(2)(C)(i) of the Act, where less than 20 
percent of home market sales of a given model were at prices less than 
the COP, we did not disregard any below-cost sales of that model 
because the below-cost sales were not made in ``substantial 
quantities''. Where 20 percent or more of home market sales of a given 
model were at prices less than the COP, we disregarded the below-cost 
sales because we determined that the below-cost sales were made in 
``substantial quantities'' and at prices that would not permit recovery 
of all costs within a reasonable period of time, in accordance with 
section 773(b)(2)(D) of the Act.
    We found that for both respondents, more than 20 percent of their 
home market sales for certain products were made at prices that were 
less than the COP. Furthermore, the prices did not permit the recovery 
of costs within a reasonable period of time. We, therefore, disregarded 
the below-cost sales and used the remaining above-cost sales as the 
basis for determining NV, in accordance with section 773(b)(1). For 
those sales for which there were no comparable home market sales in the 
ordinary course of trade, we compared CEP to CV pursuant to section 
773(a)(4) of the Act.

Adjustments to COP

Research & Development (R&D)

    Consistent with our past practice in this case, the R&D element of 
COP was based on R&D expenses related to all

[[Page 30485]]

semiconductor products, not product-specific expenditures. See 
Memorandum Regarding Cross Fertilization of Research and Development in 
the Semiconductor Industry, dated May 29, 1999.
    In addition, Hyundai and LG both changed their accounting 
methodologies for R&D expenses during this POR. Specifically, in 1997, 
both Hyundai and LG changed their accounting methodology from 
recognizing the R&D costs as expenses when incurred, to deferring such 
costs and amortizing them over five years using the straight-line 
method. Furthermore, in 1997, LG also began to completely defer certain 
R&D costs for long-term R&D projects until the relevant revenue is 
realized. While the Department did not become aware of this fact until 
the current POR, Hyundai began to completely defer certain R&D costs in 
the same manner in 1996. Both Hyundai and LG based the R&D expenses 
that they reported to the Department for this POR on the amount of R&D 
costs that they expensed in 1997.
    Hyundai and LG have repeatedly changed their accounting 
methodologies for R&D expenses throughout the course of this 
proceeding. In their 1991 financial statements (which the Department 
used, in part, in the original investigation to calculate R&D 
expenses), both Hyundai and LG amortized R&D expenses. See Final 
Determination of Sales at Less Than Fair Value: DRAMs from Korea, 58 FR 
15467 (March 23, 1993) (``Final Determination''); and Micron Technology 
v. United States, 893 F. Supp. 21, 28 (CIT 1995) (``Micron I''). In 
their 1993 financial statements, LG changed its accounting methodology 
for R&D expenses, and expensed R&D expenses in the year incurred. See 
Notice of Final Results of Antidumping Administrative Review: Dynamic 
Random Access Memory Semiconductors of One Megabit or Above from the 
Republic of Korea, 61 FR 20216 (May 6, 1996); and Micron Technology v. 
United States and LG Semicon Co., Ltd., and LG Semicon America, Inc. 
(Slip Op. 99-12, January 28, 1999) (Micron II). Hyundai changed its R&D 
accounting methodology, and also began to expense R&D expenses in the 
year incurred, sometime between 1991 and 1996. In 1997, as explained 
above, Hyundai and LG changed their accounting methodologies a second 
time, switching back to the amortizing methodology they previously used 
in 1991. Furthermore, in 1996 and 1997, Hyundai and LG, respectively, 
began to use a third type of accounting methodology by completely 
deferring certain R&D expenses until revenue is realized from the R&D 
project.
    Section 773(f)(1)(A) of the Act states that costs ``shall normally 
be calculated based on the records of the exporter or producer of the 
merchandise, if such records are kept in accordance with the GAAP of 
the exporting country (or the producing country where appropriate) and 
reasonably reflect the costs associated with production and sale of the 
merchandise.'' The SAA states that, in determining whether a company's 
records reasonably reflect costs, Commerce will consider U.S. GAAP 
employed by the industry in question. See SAA at 834. Further, as 
explained in the SAA, ``[t]he exporter or producer will be expected to 
demonstrate that it has historically utilized such allocations, 
particularly with regard to the establishment of appropriate 
amortization and depreciation periods and allowances for capital 
expenditures and other development costs.'' See Id. See also Final 
Results 1998, 63 FR at 50871.
    The Department has preliminarily determined that Hyundai's and LG's 
revised accounting methodologies for R&D expenses do not reasonably 
reflect the costs associated with the production of DRAMs. These 
revisions in accounting methodologies result in distortions in the 
costs attributed to the POR and are not consistent with U.S. GAAP. 
Furthermore, there is no information on the record to justify this 
change in accounting methodologies. Therefore, the Department has 
preliminary determined, consistent with Hyundai's and LG's historical 
R&D accounting methodology and U.S. GAAP, to expense all R&D expenses 
that Hyundai and LG incurred in 1997, and, consistent with Micron II 
Remand, to expense any R&D expenses that Hyundai expensed in 1997, 
which Hyundai had previously incurred but not previously expensed. For 
further discussion of this issue, see Memorandum on Whether to Accept 
the Reported Research & Development Expenses of Hyundai Electronics 
Industries Co., Ltd. and LG Semicon, Ltd., dated June 1, 1999.
    We also note that a number of the projects that LG classified as 
R&D expenses apply to products which were being commercially produced 
in 1997. The Department will examine these projects further to 
determine whether they are more appropriately classified as part of 
COM.

Company-Specific Adjustments

Hyundai
    1. We excluded certain non-operating expenses from Hyundai's R&D 
expenses.
    2. We adjusted Hyundai's depreciation expenses to reflect the net 
effect of increasing depreciation, consistent with Final Results 1998, 
for special depreciation that would have been taken had the respondent 
continued to take special depreciation on certain equipment for the 
period of 1997 and the first half of 1998 and decreasing depreciation 
expenses to reflect the amount of special depreciation which the 
Department expensed in Final Results 1998, but which Hyundai expensed 
in its own books and records, and reported in its response, for the 
current POR.
    3. We adjusted Hyundai's general and administrative (``G&A'') 
expense rate by excluding foreign currency transaction gains and losses 
related to account receivables.
    4. We adjusted Hyundai's interest expense rate by excluding offsets 
of long-term interest income.
    See Memorandum on Hyundai Electronics Industries Co., Ltd.: 
Calculations for the Preliminary Results, dated June 1, 1999.
LG
    1. We included in COP certain costs for an operational new 
fabrication facility which LG excluded from its COM by recording them 
in a construction-in-progress account.
    2. We adjusted LG's G&A expense rate by excluding foreign currency 
transaction gains and losses related to account receivables.
    3. We adjusted LG's interest expense rate by including translation 
gains and losses and the amortized amounts of deferred foreign currency 
translation gains and losses, consistent with the Department's practice 
(see Final Results 1998, 63 FR at 50872). See Memorandum on LG Semicon 
Co., Ltd.,: Preliminary Results of Review Analysis Memorandum, dated 
June 1, 1999.

CV

    In accordance with section 773(e) of the Act, we calculated CV 
based on the respondents' cost of materials and fabrication employed in 
producing the subject merchandise, SG&A expenses, the profit incurred 
and realized in connection with the production and sale of the foreign 
like product, and U.S. packing costs. We used the cost of materials, 
fabrication, and SG&A expenses as reported in the CV portion of the 
questionnaire response, adjusted as discussed in the COP section above.

[[Page 30486]]

We used the U.S. packing costs as reported in the U.S. sales portion of 
the respondents' questionnaire responses. For selling expenses, we used 
the average of the selling expenses reported for home market sales that 
survived the cost test, weighted by the total quantity of those sales. 
For actual profit, we first calculated the difference between the home 
market sales value and home market COP, and divided the difference by 
the home market COP. We then multiplied this percentage by the COP for 
each U.S. model to derive an actual profit.

Price Comparisons

    For price-to-price comparisons, we based NV on the price at which 
the foreign like product is first sold for consumption in the exporting 
country, in the usual commercial quantities and in the ordinary course 
of trade, and to the extent practicable, at the same level of trade, in 
accordance with section 773(a)(1)(B)(i) of the Act. We compared the 
U.S. prices of individual transactions to the monthly weighted-average 
price of sales of the foreign like product. In the case of LG, we 
calculated NV based on delivered prices to unaffiliated customers and, 
where appropriate, to affiliated customers in the home market.
    With respect to LG, we tested those sales that LG made in the home 
market to affiliated customers to determine whether they were made at 
arm's length and could be used in our analysis. See 19 CFR 351.102(b). 
To test whether these sales were made at arm's length prices, we 
compared, on a model-specific basis, prices of sales to affiliated and 
unaffiliated customers, net of discounts, all movement charges, direct 
selling expenses, and packing. For tested models of the subject 
merchandise, prices to an affiliated party were on average 99.5 percent 
or more of the price to unaffiliated parties and we determined that 
sales made to the affiliated party were at arm's length. See 19 CFR 
351.403(c) and Preamble to the Department's regulations, 62 FR at 
27355.
    With respect to both CV and home market prices, we made 
adjustments, where appropriate, for inland freight, inland insurance, 
and discounts. We also reduced CV and home market prices by packing 
costs incurred in the home market, in accordance with section 
773(a)(6)(B)(i) of the Act. In addition, we increased CV and home 
market prices for U.S. packing costs, in accordance with section 
773(a)(6)(A) of the Act. We made further adjustments to home market 
prices, when applicable, to account for differences in physical 
characteristics of the merchandise in accordance with section 
773(a)(6)(c)(ii) of the Act. Finally, pursuant to section 
773(a)(6)(C)(iii) of the Act, we made an adjustment for differences in 
circumstances of sale by deducting home market direct selling expenses 
(credit expenses and bank charges) and adding any direct selling 
expenses associated with U.S. sales not deducted under the provisions 
of section 772(d)(1) of the Act. For Hyundai and LG, we recalculated 
the credit expense on home market sales using the interest rate of the 
currency in which the sales were made.

Preliminary Results of Review

    As a result of this review, we preliminarily determine that the 
following weighted-average dumping margins exist for May 1, 1997 
through April 30, 1998:

------------------------------------------------------------------------
                                                               Percent
                   Manufacturer/exporter                        margin
------------------------------------------------------------------------
The G5 Corporation.........................................        13.11
Hyundai Electronic Industries, Inc.........................        13.11
LG Semicon Co., Ltd........................................        10.67
------------------------------------------------------------------------

    Pursuant to 19 CFR 351.224(b), the Department will disclose to 
parties to the proceeding any calculations performed in connection with 
these preliminary results within 5 days of the date of publication of 
this notice. Any interested party may request a hearing within 30 days 
of the date of publication of this notice. Parties who submit arguments 
in this proceeding are requested to submit with each argument: (1) A 
statement of the issue and (2) a brief summary of the argument. All 
case briefs must be submitted within 30 days of the date of publication 
of this notice. Rebuttal briefs, which are limited to issues raised in 
the case briefs, may be filed not later than seven days after the case 
briefs are filed. A hearing, if requested, will be held two days after 
the date the rebuttal briefs are filed or the first business day 
thereafter.
    The Department will publish a notice of the final results of this 
administrative review, which will include the results of its analysis 
of the issues raised in any written comments or at the hearing, within 
120 days from the publication of these preliminary results.
    The Department shall determine, and Customs shall assess, 
antidumping duties on all appropriate entries. The Department will 
issue appraisement instructions directly to Customs. The final results 
of this review shall be the basis for the assessment of antidumping 
duties on entries of merchandise covered by the determination and for 
future deposits of estimated duties. We have calculated importer-
specific STD valorem duty assessment rates based on the ratio of the 
total amount of dumping margins calculated for the examined sales made 
during POR to the entered value of sales used to calculate those 
duties. These rates will be assessed uniformly on all entries of each 
particular importer made during the POR.
    Furthermore, the following deposit requirements will be effective 
upon completion of the final results of these administrative reviews 
for all shipments of DRAMs from Korea entered, or withdrawn from 
warehouse, for consumption on or after publication date of the final 
results of these administrative reviews, as provided by section 
751(a)(1) of the Act: (1) The cash deposit rate for the reviewed 
companies will be the rate established in the final results of this 
administrative review, except if the rate is less than 0.5 percent STD 
valorem and, therefore, de minimis, no cash deposit will be required; 
(2) for exporters not covered in this review, but covered in the 
original LTFV investigation or a previous review, the cash deposit rate 
will continue to be the company-specific rate published in the most 
recent period; (3) if the exporter is not a firm covered in this 
review, a previous review, or 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 reviews or the LTFV investigation, the cash deposit 
rate will be 3.85 percent, the ``all-others'' rate established in the 
LTFV investigation. These deposit requirements, when imposed, shall 
remain in effect until publication of the final results of the next 
administrative review.
    This notice serves as a preliminary reminder to importers of their 
responsibility under 19 CFR 351.402(f) of the Department's regulations 
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 administrative 
review and this notice are in accordance with sections 751(a)(1) and 
777(i)(1) of the Act.


[[Page 30487]]


    Dated: June 1, 1999.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 99-14511 Filed 6-7-99; 8:45 am]
BILLING CODE 3510-DS-P