[Federal Register Volume 64, Number 239 (Tuesday, December 14, 1999)]
[Notices]
[Pages 69694-69718]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-32399]


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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: Final Results of Antidumping Duty 
Administrative Review and Determination Not To Revoke the Order in Part

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

ACTION: Notice of final results of antidumping duty administrative 
review and determination not to revoke the order in part.

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SUMMARY: On June 8, 1998, the Department of Commerce (``the 
Department'') published the preliminary results of its 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 of the 
subject merchandise to the United States and one reseller for the 
period May 1, 1997, through April 30, 1998. The two manufacturers/
exporters are Hyundai Electronics Industries, Co. (``Hyundai''), and LG 
Semicon Co., Ltd. (``LG''). The reseller is the G5 Corporation 
(``G5'').
    As a result of our analysis of the comments received, we have 
changed the results from those presented in our preliminary results of 
review.

EFFECTIVE DATE: December 14, 1999.

FOR FURTHER INFORMATION CONTACT: Thomas Futtner, Alexander Amdur 
(``Hyundai''), or John Conniff (``LG''), AD/CVD Enforcement, Group II, 
Office IV, Import Administration, International Trade Administration, 
U.S. Department of Commerce, 14th Street and Constitution Avenue, N.W., 
Washington, D.C. 20230; telephone: (202) 482-3814, (202) 482-5346, and 
(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 Department's regulations are 
to 19 CFR 351 (1998).

Background

    On June 8, 1999, the Department published in the Federal Register 
(64 FR 30481) the preliminary results of its administrative review of 
the antidumping duty order on DRAMs from Korea. On September 13, 1999, 
we released information to interest parties pertaining to possible 
unreported sales by LG. On October 7, 1999, LG and an interested party 
submitted factual information relevant to this issue. We also gave 
interested parties an opportunity to comment on this information and 
our preliminary review results.
    The petitioner, Micron Technology, Inc. (``Micron''), Hyundai, and 
LG submitted case briefs on October 21, 1999, and rebuttal briefs on 
October 28, 1999. We held both public and closed hearings on November 
4, 1999. We have now completed this administrative review in accordance 
with section 751(a) of the Act.

Scope of Review

    Imports covered by the review are shipments of DRAMs from Korea. 
Included in the scope are assembled and unassembled DRAMs. 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; and, removable memory modules placed on 
motherboards, with or without a central processing unit (``CPU''), 
unless the importer of motherboards certifies with the Customs Service 
that neither it nor a party related to it or under contract to it will 
remove the modules from the motherboards after importation. The scope 
of this review does not include DRAMs or memory modules that are 
reimported for repair or replacement.
    The DRAMS and modules subject to this review are currently 
classifiable under subheadings 8471.50.0085, 8471.91.8085, 
8542.11.0024, 8542.11.8026, 8542.13.8034, 8471.50.4000, 8473.30.1000, 
8542.11.0026, 8542.11.8034, 8471.50.8095, 8473.30.4000, 8542.11.0034, 
8542.13.8005, 8471.91.0090, 8473.30.8000, 8542.11.8001, 8542.13.8024, 
8471.91.4000, 8542.11.0001, 8542.11.8024 and 8542.13.8026 of the 
Harmonized Tariff Schedule of the United States (``HTSUS''). Although 
the HTSUS subheadings are provided for convenience and customs 
purposes, the

[[Page 69695]]

Department's written description of the scope of this review remains 
dispositive.

Determination Not To Revoke

    LG submitted a request for revocation 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: (1) [o]ne or more producers or resellers 
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 (``NV''); 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 Secretary concludes that the producer or reseller, subsequent to 
the revocation, sold the merchandise at less than NV. See 19 CFR 
351.222(b)(2). In this case, LG does not meet the first criterion for 
revocation. The Department found that LG sold the subject merchandise 
at less than NV during the previous review period. See DRAMs from the 
Republic of Korea: Final Results of Antidumping Duty Administrative 
Review, 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 other criteria. Therefore, 
on this basis, we have determined not to revoke the Korean DRAM 
antidumping duty order with respect to LG. In light of this decision, 
interested party comments on revocation are moot and will not be 
addressed further in these final results.

Facts Available (``FA'')

    In accordance with section 776(a) of the Act, we have determined 
that the use of adverse FA is warranted for LG and G5 for these final 
results of review.

1. Application of FA

    Section 776(a) of the Act provides that, if an interested party 
withholds information that has been requested by the Department, fails 
to provide such information in a timely manner or in the form or manner 
requested, significantly impedes a proceeding under the antidumping 
statute, or provides information which cannot be verified, the 
Department shall use, subject to sections 782(d) and (e), facts 
otherwise available in reaching the applicable determination. In this 
review, as described in detail below, the above-referenced companies 
failed to provide the necessary information in the form and manner 
requested, and, in some instances, the submitted information could not 
be verified. Thus, pursuant to section 776(a) of the Act, the 
Department is required to apply, subject to section 782(d), facts 
otherwise available.
    Section 782(d) of the Act provides that, if the Department 
determines that a response to a request for information does not comply 
with the request, the Department will inform the person submitting the 
response of the nature of the deficiency and shall, to the extent 
practicable, provide that person the opportunity to remedy or explain 
the deficiency. If that person submits further information that 
continues to be unsatisfactory, or this information is not submitted 
within the applicable time limits, the Department may, subject to 
section 782(e), disregard all or part of the original and subsequent 
responses, as appropriate.
    Pursuant to section 782(e) of the Act, notwithstanding the 
Department's determination that the submitted information is 
``deficient'' under section 782(d) of the Act, the Department shall not 
decline to consider such information if all of the following 
requirements are satisfied: (1) The information is submitted by the 
established deadline; (2) the information can be verified; (3) the 
information is not so incomplete that it cannot serve as a reliable 
basis for reaching the applicable determination; (4) the interested 
party has demonstrated that it acted to the best of its ability; and 
(5) the information can be used without undue difficulties.

2. Selection of FA

    In selecting from among the facts otherwise available, section 
776(b) of the Act authorizes the Department to use an adverse inference 
if the Department finds that an interested party failed to cooperate by 
not acting to the best of its ability to comply with the request for 
information. See, e.g., Certain Welded Carbon Steel Pipes and Tubes 
From Thailand: Final Results of Antidumping Duty Administrative Review, 
62 FR 53808, 53819-20 (Oct. 16, 1997) (Pipe and Tubes From Thailand). 
In this segment of the proceeding, the Department has determined that 
it is appropriate to apply in these final review results total adverse 
facts available to both LG and G5.

G5

    For purposes of the preliminary results, the Department concluded 
that, because G5 failed to respond to the Department's questionnaire, a 
determination based on total adverse FA was warranted for this company. 
We, accordingly, assigned an adverse FA rate and articulated detailed 
reasons for our decision in 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, 64 FR 30481 (June 8, 1999) (``Preliminary 
Results'').
    For the final results, no interested party comments were submitted 
regarding this issue and we continue to find that G5's failure to 
respond to the Department's questionnaire in this review demonstrates 
that it failed to cooperate by not acting to the best of its ability. 
Thus, consistent with the Department's practice in cases where a 
respondent fails to respond to the Department's questionnaire, in 
selecting FA for G5 in this review, an adverse inference is warranted. 
Therefore, we are assigning G5 an adverse FA rate of 10.44 percent, the 
rate calculated for Hyundai in this review and the highest margin from 
any segment of the proceeding related to DRAMS from Korea.

LG

    Based on information obtained from Customs, the Department 
preliminarily determined, as it had in the prior review, that numerous 
sales which LG had reported as third-country sales, were in fact sales 
to the United States. See Preliminary Results. For the final results, 
we have considered interested party comments (see the Department 
Position to LG Comment 1) and continue to find that sales which LG had 
reported as third-country sales, were in fact sales to the United 
States. See Memorandum for Holly A. Kuga, from John Conniff regarding 
Dynamic Random Access Memory Semiconductors of One Megabit and Above 
(DRAMs) from the Republic of Korea--LG Sales through Mexico, December 
3, 1999.
    Similarly, on January 4, 1999, the Department received an e-mail 
from a former LG employee stating that LG was shipping subject 
merchandise from Korea to the United States through a customer in 
Europe and these shipments were being made with the knowledge and 
support of LG's senior management.

[[Page 69696]]

    At verification, LG submitted information related to these sales 
which had been made by its German subsidiary, LG Germany (``LGSG''). 
Subsequently, the Department queried Customs to determine if any of the 
sales by LGSG to the European customer in question had entered the 
United States. Customs data revealed entries covering Korean DRAMs 
imports into the United States by the European customer's affiliate in 
the United States. The quantities and values of DRAMs shown in the 
entries were substantially identical to the quantities and values of 
DRAMs reflected on the invoices between LGSG and the European customer 
in question. Documentation from randomly selected sample entries 
covering transactions between the European customer and its U.S. 
operation confirm that the DRAMs in question were manufactured in Korea 
by LG.
    In August 1999, information was provided to the Department by a 
former LG employee familiar with and responsible for worldwide sales to 
the customer in question during the period of review (``POR''). He 
stated that at the time that he sold DRAMs to the customer in question 
in Europe, he had knowledge the DRAMS were ultimately destined for the 
customer's operation in the United States. See Memorandum for Holly A. 
Kuga, from John Conniff regarding Dynamic Random Access Memory 
Semiconductors of One Megabit and Above (DRAMs) from the Republic of 
Korea--LG Sales Through Germany, December 6, 1999 (``LG Sales Through 
Germany Memo'').
    On September 13, 1999, LG was provided with information collected 
by the Department related to this matter and on September 22, 1999, LG 
was provided an opportunity to submit factual information and comments 
concerning this issue. See Letter from the Department to Michael House, 
Esq. regarding Dynamic Random Access Memory Semiconductors of One 
Megabit (DRAMs) from the Republic of Korea, September 22, 1999 
(``September 22, 1999, letter''). On October 7, 1999, LG submitted 
factual information and on October 21, 1999, and October 28, 1999, LG 
also presented comments and arguments on this matter in its case briefs 
and rebuttal briefs.
    Based on the record evidence the Department concluded that LG knew 
at the time it sold the subject DRAMS, that the merchandise was 
destined for consumption in the United States. See LG Sales Through 
Germany Memo. As LG did not report these sales, in accordance with 
section 782(d) of the Act, the Department provided LG with the 
opportunity to explain its deficiencies with respect to unreported U.S. 
sales. See September 22, 1999, letter. However, LG failed to correct 
these deficiencies. Thus, the Department is required, under section 
782(d) to apply, subject to section 782(d) of the Act, FA.
    We further determine that LG failed to satisfy several of the 
requirements enunciated by 782(e) of the Act. First, LG failed to 
report a significant portion of the company's U.S. sales data. Second, 
because the unreported sales are significant, LG's U.S. sales data is 
so incomplete that it cannot serve as a reliable basis for reaching the 
applicable determination pursuant to subsection (e)(3). Third, LG did 
not demonstrate that it acted to the best of its ability in providing 
the necessary information under subsection (e)(4). Fourth, given the 
incompleteness of LG's responses, the information could not be used 
without undue difficulties, as required by subsection (e)(5). We thus 
find that LG did not act to the best of its ability to comply with the 
request for information under section 776(b) and that, under section 
776(b), an adverse inference is warranted. Therefore, we are assigning 
LG an adverse FA rate of 10.44 percent, the rate calculated for Hyundai 
in this review, which is the highest margin from any of the proceedings 
related to DRAMS from Korea.

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 importers that are affiliated within the meaning of sections 
751(a)(4) and 771(33) 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. For further 
discussion, see DOC position to general comment 5.

Fair Value Comparisons

    Unless otherwise noted, to determine whether sales of subject 
merchandise from Korea to the United States were made at less than fair 
value, we compared the Constructed Export Price (``CEP'') to the NV, as 
described in the ``Constructed Export Price'' and ``Normal Value'' 
sections of the preliminary results of review notice. See Dynamic 
Random Access Memory Semiconductors (``DRAMs'') of One Megabit or Above 
from the Republic of Korea, 64 FR 40481, (June 8, 1999) (``Preliminary 
Results'').

Interested Party Comments

General Comments

    Comment 1: Deferral of Research and Development (``R&D'') Expenses. 
Hyundai and LG argue that the Department erred in rejecting their 
accounting methodology for the amortization and deferral of R&D 
expenses. Hyundai and LG, citing to Micron Technology v. United States, 
893 F. Supp. 21, 28 (U.S. Court of International Trade (``CIT'') 1995) 
(``Micron I''), The Thai Pineapple Public Co., Ltd. v. United States, 
187 F.3d 1362, 1366 (Fed. Cir. 1999), NTN Bearing Corp. v. United 
States, 17 CIT 713, 826 F. Supp. 1435, 1441 (1993), Ipsco, Inc. v. 
United States, 12 CIT 384, 687 F. Supp. 633, 636 & n.3 (1988), Color 
Television Receivers from Korea, 53 FR 24975, 24982 (July 1, 1988) 
(``CTVs from Korea''), and Gilbert B. Kaplan, Marie Parker, et. al., 
Cost Analysis Under the Antidumping Law, 21 George Wash. J. Int'l L. & 
Econ. 357, 373-74 (1988), contend that the accounting methodology at 
issue is in conformity with Article 70.5 of Korean generally accepted 
accounting principles (``GAAP''), and under section 773(f)(1)(A) of the 
Act, the Department must accept this methodology unless it finds that 
the reported costs are distortive. Hyundai contends that the Act's 
preference for the exporting

[[Page 69697]]

country GAAP reflects Article 2.2.1.1 of the WTO Antidumping Agreement, 
and that the Department has followed such a preference in numerous 
cases, including Steel Wire Rod from Canada, 63 FR 9182 (February 28, 
1998), Collated Roofing Nails from Korea, 62 FR 51420, 51423 (October 
1, 1997); Ferrosilicon from Brazil, 62 FR 43504, 43511 (August 14, 
1997); Polyethylene Terephthalate Film, Sheet, and Strip from the 
Republic of Korea, 61 FR 35177, 35179 (July 5, 1996); Certain 
Corrosion-Resistant Carbon Steel Flat Products from Korea, 61 FR 18547, 
18568 (April 26, 1996); and Industrial Nitrocellulose from France, 48 
FR 21615, 21617 (May 13, 1983).
    Hyundai and LG further contend that there is no basis for finding 
that Hyundai's reported R&D costs are distortive. Hyundai and LG state 
that in Micron I, 893 F. Supp. at 29, the CIT specifically held that, 
for the DRAM industry, the amortization of R&D expenses, as allowed by 
Korean GAAP, is not distortive, and that the three to five-year 
amortization period allowed by Korean GAAP was more reasonable than the 
Department's expensing methodology. LG states that the Court's logic in 
Micron I applies to LG's deferral of certain R&D expenses until the 
related projects achieve commercial realization, as this methodology 
allows R&D costs to be allocated over the commercial life of the 
product. Hyundai also states that, in DRAMs from Korea, 61 FR 20216, 
20219 (May 6, 1996) (``Final Results 1996''), the first administrative 
review of this proceeding, the Department complied with this ruling in 
its treatment of LG's R&D expenses.
    Hyundai points out that, in CTVs from Korea, 53 FR at 24982, 
Certain Welded Stainless Steel Pipe from the Republic of Korea, 57 FR 
53693 (November 12, 1992) (``Pipe from Korea''), and Polyethylene 
Terephthalate Film, Sheet, and Strip from the Republic of Korea, 56 FR 
16305 (April 22, 1991) (``PET Film from Korea''), the Department 
explicitly allowed the amortization of R&D expenses pursuant to Korean 
GAAP. Hyundai maintains that amortizing R&D expenses is just as 
appropriate in the present case as it was in those cases.
    Hyundai also maintains that the Department, in Steel Wire Rod from 
Canada, 63 FR 9182, 9187 (February 24, 1998), recognized that it is not 
distortive for a company to defer expenses that will benefit future 
operations. Hyundai states that, in much the same manner, it is 
reasonable for Hyundai to spread R&D costs over future periods because 
Hyundai's R&D expenses for the development of new generations of 
products will benefit future periods by providing sales revenues for 
improved products.
    Hyundai further argues that the amortization and deferral of R&D 
expenses under Korean GAAP conforms to the principles of International 
Accounting Standard (``IAS'') No. 9, which is intended to match costs 
with products that benefit from those expenditures, and not, as the 
Department suggests, to ``alleviate losses listed on a company's 
financial statement.'' Hyundai states that the Department explicitly 
endorsed IAS No. 9 as the basis for amortizing R&D expenses for 
products, including semiconductors, in Erasable Programmable Read Only 
Memories (EPROMs) from Japan, 51 FR 39680, 39682 (October 30, 1986), 
and Cellular Mobile Telephones and Subassemblies from Japan, 50 FR 
45447, 45453 (October 31, 1985) (``Cell Phones from Japan''), and did 
not rely upon U.S. GAAP to reject amortization of R&D until it issued 
its decision (which was subsequently overturned by the CIT) in Dynamic 
Random Access Memory Semiconductors of One Megabit and Above from 
Korea, 58 FR 15467, 15472 (March 23, 1993) (``Final Determination''). 
Hyundai also notes that the principles of IAS No. 9 are recognized in 
Canadian and British accounting standards.
    Hyundai contends that, in view of its ``virtual isolation,'' the 
treatment of R&D under U.S. GAAP should not be automatically accepted 
as the standard for determining whether costs are distorted under 
section 773(f)(1)(A) of the Act. Hyundai notes that U.S. GAAP requires 
the expensing of R&D expenditures because of the ``presumed'' absence 
of a relationship between R&D expenditures and subsequent benefits, 
whereas Hyundai's own experience demonstrates the direct link between 
R&D expenditures and the revenues derived from the sale of later 
generations of DRAMs. Hyundai also notes that the U.S. practice of 
expensing R&D in Financial Accounting Standards Board (``FASB'') 
Standard No. 2 has been criticized by accounting experts, such as 
Baruch Lev and Theodore Sougiannis in ``The Capitalization, 
Amortization, and Value-Relevance of R&D,'' 21 Journal of Accounting & 
Economics, 107, 134 (1996), and is under review by the FASB. Hyundai 
states that the FASB has proposed to abandon the U.S. GAAP requirement 
for expensing in-process R&D acquired in a corporate acquisition in the 
year of acquisition, and require the amortization of such R&D. Hyundai 
maintains that although the FASB subsequently tabled this proposal, the 
FASB has plans to eventually consider the treatment of all R&D, and the 
Department cannot use a standard with such an uncertain future to judge 
the validity of Korean GAAP.
    Hyundai also argues that its method of recognizing R&D is 
consistent with both accounting theory and the SAA. Hyundai notes that 
Eiden Hendricksen, in Accounting Theory, (Irwin 1992), at 650, endorses 
the matching of R&D expenses with ``the period benefitted,'' and the 
SAA, at 835, specifically condones allocating R&D costs over current 
and future production in order to match the expenditures with the 
production that benefits from the expenditures. Hyundai contends that 
its R&D methodology is particularly appropriate for the semiconductor 
industry in general, and Hyundai in particular. Hyundai states that the 
nature of its R&D activities, its emphasis on development of specific 
products, and the steady flow of next generation products, contrary to 
the rationale of FASB No. 2, produce ``direct and immediate'' benefits. 
Hyundai argues that a large part of its 1997 R&D expenditures were for 
products that were to be sold in 1998 and 1999, while the other part of 
its R&D expenditures involves products that are expected by the 
Semiconductor Industry Association to be available within the next five 
years. Hyundai concludes that its treatment of R&D reasonably reflects 
the cost of producing the subject merchandise.
    Hyundai additionally contends that the Department improperly 
rejected Hyundai's accounting treatment of R&D expenses on the grounds 
that Hyundai, under the SAA at 834, had not demonstrated that it had 
historically utilized such a methodology. Hyundai states that behind 
this statement in the SAA is the need to justify the appropriate period 
for amortizing expenses that benefit future production. Hyundai, citing 
to the Micron I decision, contends that there is a history in the 
Korean semiconductor industry of amortizing R&D expenses over five 
years. Hyundai also adds that the SAA at 834 is directed at changes in 
depreciation, and not R&D, methodology.
    Hyundai further maintains that, in accordance with other standards 
stated by the Department, its new R&D methodology better reflects the 
actual costs incurred in producing the subject merchandise than the 
prior methodology because it matches the cost of R&D with the products 
that benefit from the R&D. Hyundai also

[[Page 69698]]

states that there is no risk that its R&D costs will never be reflected 
in the dumping calculations. Hyundai notes that Korean GAAP provides 
for the unamortized, deferred balance of R&D costs to be expensed 
immediately if the possibility of realizing revenue from an R&D project 
is remote. Hyundai asserts that the Department's statement that, under 
this provision, Hyundai ``could potentially . . . never recognize any 
of the R&D expenses'' deferred implies that Hyundai's auditors would 
allow the company to violate GAAP by deferring R&D expenses 
indefinitely, and ignores the fact that Hyundai stated in its 
questionnaire response that it is following this requirement. Hyundai 
adds that all R&D costs that were incurred in prior years have already 
been captured by the Department in the cost calculations of this review 
and prior reviews, and all current R&D expenditures will be captured in 
this review and subsequent reviews.
    LG contends that the Department's decision at issue is also 
inconsistent with the CIT's decision after remand in Micron Technology 
v. United States, Slip Op. 99-51 (June 16, 1996) (``Micron II''). LG, 
citing to Micron II, Slip Op. 99-51 at 5, states that Court found that 
the Department's concern over costs that would never be included in any 
review was a ``red herring,'' and that such concerns in the present 
case are similarly misplaced, as the R&D costs that are deferred and 
amortized in this review period will be captured in subsequent periods. 
LG also states that the Court, in the same decision, found that the 
Department's concern that LG would change its accounting procedures to 
achieve favorable antidumping treatment made ``little, if any, business 
sense'' (see Id. at 6), and in this review, the Department has even 
acknowledged that LG did not change its R&D accounting method for 
antidumping purposes.
    LG also states that, since it changed its accounting methodology 
for R&D expenses in the normal course of business, it must show only, 
as in PET Film from Korea, 56 FR at 16312-13, that its methodology is 
not distortive, and does not have to justify its change in methodology. 
In this regard, LG points out that the CIT ruled in Micron I that 
amortization of DRAM R&D costs is not distortive, and is more 
reasonable than expensing R&D costs in the year incurred.
    LG further states that its R&D expense is lower in 1997, as noted 
by the Department, purely as a result of the transition in 
methodologies from expensing to amortizing, since in the transition 
year there are no prior years' R&D expenses subject to amortization. LG 
notes that all prior years' R&D expenses have already been included by 
the Department in prior review periods, and argues that the CIT, in the 
Micron II decision, ruled that the Department may not penalize LG for 
changing accounting methodologies in the normal course of business. LG 
states that, under the Department's reasoning, a company would never be 
able to change from expensing any cost to amortizing that cost, because 
the cost in a transition year would always be reduced from prior years 
as a result of the transition.
    LG also points out that the Department's concerns about its 
complete deferral of certain R&D expenses are misplaced. LG states that 
all of the deferred R&D projects are those of which there was no 
current production, and no related revenue. LG also asserts that the 
Department's position that R&D related to these future generation 
projects' benefits current production is not supported by the record.
    Micron contends that the Department correctly rejected Hyundai and 
LG's accounting method for R&D expenses as distortive of costs, and 
issued a legally sound determination on this issue. Micron, citing to 
the SAA at 834, Certain Small Business Telephone Systems and 
Subassemblies Thereof From Korea, 54 FR 53141, 53149 (December 27, 
1989), Certain Cold-Rolled and Corrosion-Resistant Carbon Steel Flat 
Products From Korea, 64 FR 12927, 12944 (March 16, 1999), and Foam 
Extruded PVC and Polystyrene Framing Stock From the United Kingdom, 61 
FR 51411, 51418 (October 2, 1996), states that the issue is not whether 
the Department has allowed R&D to be expensed or amortized in other 
cases, but whether a company's own records, even when kept in 
accordance with local GAAP, distort costs. Micron, citing to the SAA at 
834, Mechanical Transfer Presses From Japan, 55 FR 335 (January 4, 
1990), and Static Random Access Memory Semiconductors From Taiwan, 63 
FR 8909, 8921-22 (February 23, 1998) (``SRAMs from Taiwan''), further 
states that the Department determines whether costs are distortive by 
looking to U.S. GAAP for the industry in question, and the Department, 
in the instant case, fully explained how the respondents' accounting 
for R&D was distortive under U.S. GAAP.
    Micron maintains that the Court, in Micron I, 893 F. Supp. at 29, 
did not rule as a matter of law either that the Department must 
amortize R&D costs, or that Korean GAAP reasonably reflects R&D costs; 
rather, Micron points out that the Court ruled that Department had 
failed to articulate a reasoned analysis in support of its decision to 
expense R&D. Micron also states that the respondents' claim that they 
amortize R&D over the period of the DRAM ``life cycle'' noted by the 
Court in Micron I in order to correspond to the life cycle of their 
products is a ``post-hoc rationalization'' that is not supported by 
documents prepared by the respondents in the normal course of business. 
Micron adds that Korean GAAP does not specifically relate the 
amortization period to the life cycle of the product, and notes that a 
company could be conducting R&D on a product with a much shorter life 
cycle than DRAMs, amortize the costs over five years, and still be 
within Korean GAAP. Micron also notes, that, in any case, FASB No. 2 
clearly states there is no direct relationship between R&D expenditures 
and future benefits.
    Micron further distinguishes the present case from Micron I. First, 
Micron maintains that, unlike the situation in Micron I, the 
respondents, in addition to amortization, adopted a new, ``inherently 
uncertain'' accounting approach to R&D by completely deferring R&D 
costs until they ``arbitrarily foresee any possibility of realizing 
revenue.'' Micron also notes that the Department fully explained how 
this approach affected the respondent's reported costs. Second, Micron 
argues that, unlike the situation in Micron I, the respondents have 
repeatedly changed their accounting methodologies for R&D throughout 
the course of this proceeding, and distorted costs, in order to affect 
their apparent profitability. In specific regards to Hyundai, Micron 
states that Hyundai offered no substantive reason for this accounting 
change, and simply changed its methodology without any change in the 
nature of its R&D. Third, in Micron I, because the history of the 
respondent's accounting changes was not before the Court, the Court had 
no basis to consider, as it would now, the respondent's inability to 
show that they have ``historically utilized'' such allocations, as 
required by the SAA at 834.
    Micron disagrees with LG that the Department's treatment of LG's 
R&D expenses conflicts with the Micron II decision. Micron states that 
this decision is irrelevant to LG's situation because it only concerned 
R&D that was previously incurred but not expensed, and prior to this 
review period, LG had no such R&D expenses.
    Micron further argues, notwithstanding the issue of whether the 
Department, under the Act, should

[[Page 69699]]

defer to international accounting standards over U.S. GAAP when the two 
standards differ, that the international standards Hyundai discusses 
are not inconsistent with the Department's analysis. Micron states that 
both U.S. GAAP, under FASB No. 2, and international standards, under 
IAS 9, both recognize that R&D expenses, in at least some instances, 
cannot be matched to revenues because the benefits of R&D cannot be 
discerned at the time the costs are incurred. In relating this 
guideline to Hyundai and LG, Micron states that neither respondent 
demonstrated during 1996 and 1997 that they could have associated 
future revenues and current revenue with any reasonable certainty, 
especially in light of the downturn in the DRAM market and the economic 
crisis in South Korea at that time. Micron further generally states 
that R&D may benefit future generations, but at the time that R&D is 
incurred, one cannot tell when or whether R&D will produce a 
commercially successful result; and amortizing R&D expense over a 
number of years is a ``self-serving guess.''
    DOC Position: Section 773(f)(1)(A) of the Act, directs to the 
Department to rely ``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.'' Section 773(f)(1)(A) of the Act also states that the 
Department will consider whether ``such allocations have been 
historically used by the exporter or the producer.'' 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 SAA at 834. See also 
Final Results 1998, 63 FR at 50871.
    We agree with Hyundai and LG that their method of amortizing and 
deferring R&D costs is permissible with Korean GAAP, and that their 
previous method of expensing all current period R&D expenses in the 
year incurred is also in accordance with Korean GAAP. However, 
Hyundai's and LG's practice of continually changing between these 
methods distorts the cost calculation in an antidumping analysis. As 
explained in the Department's Memorandum on ``Whether to Accept the 
Reported Research & Development Expenses of Hyundai Electronics 
Industries Co., Ltd. and LG Semicon, Ltd.,'' dated June 1, 1999 (``R&D 
Memo''), Hyundai and LG have repeatedly changed their accounting method 
for R&D expenses throughout the course of these proceedings (i.e., from 
capitalizing and amortizing, to expensing in the year incurred, and now 
back to capitalizing and amortizing) and are now deferring certain R&D 
expenses indefinitely. See R&D Memo at 2. As a result, the respondents 
recognize, in relation to amounts that would be recognized if either 
method was constantly applied, aberrationally high amounts of R&D 
expense in some years, and aberrationally low amounts of R&D expense in 
other years, that do not reasonably reflect the costs of producing the 
subject merchandise. For example, in the first administrative review of 
this proceeding, LG changed its method for recognizing R&D expenses 
from capitalizing and amortizing R&D expenses over five years to 
expensing in full in the current year. See DRAMs from Korea, 61 FR 
20216, 20219 (May 6, 1996) (``Final Results 1996'') and Micron II, Slip 
Op. 99-551. In that year, LG recognized, in addition to its current 
year R&D expense, R&D expenses from its balance sheet which it had 
capitalized in prior years (as part of its capitalizing and amortizing 
methodology) and not yet amortized and recognized on its income 
statement. Consequently, in that year, LG recognized the full amount of 
R&D expenses incurred in that current year (under its expensing 
methodology) as well as all of the previously unamortized and 
unrecognized amounts of R&D expenses remaining on its balance sheet 
from prior years. LG thus recognized in that year significantly higher 
than normal amounts of R&D expenses than it would have under the 
consistent application of either methodology.
    In the current review period, Hyundai and LG have changed their 
accounting methodology for R&D expenses once again, this time back to 
capitalizing and amortizing their R&D expenses over five years. As a 
result, the respondents recognize (and have reported to the Department) 
less than one-fifth of their current year's R&D costs. With the 
adoption of this new methodology, the respondents next year will 
recognize approximately one-fifth of that year's R&D expense and 
approximately one-fifth from the current review period, and will not 
recognize the equivalent of a full year's R&D expense until at least 
the fifth year. Thus, because of inconsistent accounting treatment, the 
respondents are recognizing an aberrationally low amount of R&D 
expenses.
    A second methodology that further distorts Hyundai's and LG's 
reported costs is their new practice of indefinitely capitalizing 
certain R&D costs. Apart from R&D costs that are amortized over five 
years, Hyundai and LG are now completely deferring R&D costs for 
certain long-term projects until they realize revenues from these 
projects, or until they foresee no possibility of realizing revenue 
from these projects. While in prior years, the respondents recognized 
all of this type of R&D expense in the year incurred, under the new 
methodology, none of this R&D expense is recognized in the current 
year. Moreover, this methodology is contrary to the principle of 
conservatism in accounting where an expense is recognized when incurred 
if the probability of associated revenue is remote or uncertain. 
Therefore, we find that, for dumping purposes, this methodology does 
not reasonably reflect the cost of producing the subject merchandise.
    Hyundai and LG, by continually changing their R&D accounting 
methodologies, are manipulating the magnitude of the R&D expenses that 
they are recognizing, and reporting to the Department. This switching 
of methodologies can lead to distortions for antidumping purposes 
because the fluctuating costs tend to overstate per unit amounts in one 
period and understate these amounts in other periods. The CIT has noted 
the distortion that such changes in R&D accounting methodologies can 
cause. In Micron II (which relates to the first review of this 
proceeding, when LG switched from amortizing to expensing R&D costs 
currently), the Court ruled that it was distortive for the Department 
to include in its calculations, as LG included in its own books and 
records, both the current year's R&D expenses and the unamortized 
amount of prior years R&D expenses. See Micron II, Slip Op. 99-551. In 
the same manner that the CIT believes that the amount of R&D expenses 
that LG recognized, and the Department included in its calculations in 
the first review (i.e., one full current year amount, plus prior 
capitalized amounts), was overstated, the amount of R&D expenses that 
Hyundai and LG recognized in the current review (i.e., less than one-
fifth of one year's R&D expense) is understated.
    The Court, in Micron II, specifically stated that ``the object of 
the cost of production exercise is*** to capture***those expenses that 
reasonably and accurately reflect a respondent's actual production 
costs for

[[Page 69700]]

a period of review.'' Micron II, Slip Op. 99-551, at 6. However, by 
abruptly switching to amortizing and deferring R&D expenses, Hyundai 
and LG are not capturing those expenses that reasonably and accurately 
reflect their actual R&D costs for this POR. As a result of their 
constantly changing of R&D methodologies, their latest method of 
capitalization of R&D produces a distorted and meaningless (for the 
cost of production exercise) result that does not reasonably reflect 
the actual cost of producing the subject merchandise.
    We have therefore determined that is appropriate to recognize for 
antidumping purposes all of Hyundai's and LG's 1997 R&D expenses in 
order to reasonably and accurately reflect their actual R&D costs for a 
given year. The Department also believes that, in general, recognizing 
the current year's R&D expenses is a reasonable method to recognize R&D 
expenses. This methodology is consistent with both Korean and U.S. 
GAAP, and is the same methodology that Hyundai and LG have been 
following for the past several years.
    Moreover, as Hyundai recognizes, the Department's practice is to 
consider, among other factors, international accounting standards for 
determining the reasonableness of a cost accounting methodology. While 
IAS No. 9 principally provides for the amortization of R&D expenses, 
IAS No. 9 also states that costs should be recognized as an expense on 
a systematic basis, which directly contradicts Hyundai's and LG's 
practice of continually changing how they recognize R&D expenses.
    We disagree with Hyundai that the SAA at 835 (on non-recurring 
costs) specifically supports Hyundai's argument that SAA prefers the 
amortization of R&D expenses. The SAA at 835 states that Commerce 
associates expenditures with all production benefitting from the 
expenditure, and gives R&D costs as an example of an expenditure that 
Commerce may allocate over current and future production. In some 
limited instances, consistent with the SAA at 835, it may be 
appropriate to allocate certain R&D costs for items that have 
alternative future uses (and benefits) over future production. The 
Department, in specific reference to the section of the SAA at issue, 
stated in the preamble to its final regulations that ``the allocation 
of nonrecurring costs, such as R&D costs, for purposes of computing COP 
and CV is dependent on case-specific factors.'' Antidumping Duties; 
Countervailing Duties; Final Rule, 62 FR 27296, 27362 (May 19, 1997) 
(``Final Rule''). Moreover, in its proposed rules, the Department, also 
in reference to the SAA at 835, specifically stated that:

* * *there is no guarantee that * * * [R&D] * * * costs, if incurred 
to develop a new product or production process, would hold any 
future benefit to a company. To the contrary, after many months of 
costly research, a manufacturer could find its new product 
technologically useless due to the efforts of its competitors. In 
that case, the amounts incurred for R&D would not benefit the 
producer in terms of future product sales. Under these 
circumstances, the R&D expenditures must be recognized as a expense 
in the year incurred rather than amortized to some future periods.

See Antidumping Duties; Countervailing Duties; Notice of Proposed Rule 
Making and Request for Public Comments, 61 FR 7308, 7342 (February 27, 
1996) (``Proposed Rule'') (emphasis added).
    We also disagree with Hyundai that it has demonstrated, pursuant to 
the SAA, that it has historically utilized its new R&D accounting 
methodologies. While both Hyundai and LG previously amortized R&D, they 
have not done so consistently, and for the last several years have been 
expensing R&D currently. See Final Results 1996, DRAMs from Korea, 62 
FR 965 (January 7, 1997) (``Final Results 1997 (I)'') (final results of 
second review), DRAMs from Korea, 62 FR 39809 (July 24, 1997) (``Final 
Results 1997 (II)'') (final results of third review), and Final Results 
1998. Moreover, there is no evidence on the record that LG or Hyundai 
(prior to 1996) ever completely deferred R&D expenses. Additionally, 
the SAA at 834 is not, as Hyundai claims, directed at changes in 
depreciation, but only discusses depreciation as an example of how a 
company's records might not fairly allocate costs.
    We disagree with both Hyundai and LG that the Department's decision 
to reject their R&D accounting methodologies is contrary to the Micron 
I decision. First, in Micron I, the Court ruled that the Department 
``failed to articulate a reasoned analysis justifying the departure 
from its established practice of amortizing those R&D expenses.'' See 
Micron I at 28. In contrast, in the present case, the Department has 
specifically articulated how amortizing and deferring R&D expenses is 
distortive. Second, the Department's methodology of expensing R&D is no 
longer a ``departure from its established practice.'' The Department's 
established practice is to expense semiconductor R&D currently. While 
the Department, prior to the Final Determination, in the cases cited by 
Hyundai and LG (i.e., CTVs from Korea, Pipe from Korea, and PET Film 
from Korea), allowed respondents to amortize R&D, the Department, for 
at least the last six years, and throughout the course of this 
proceeding, has constantly required that respondents recognize R&D 
expenses currently. See, e.g., Final Determination, 58 FR at 15472 
(Department rejected amortization of R&D), Final Results 1996, Final 
Results 1997 (I), Final Results 1997 (II), and Final Results 1998 
(Department accepted expensing of R&D currently). See also SRAMs from 
Korea, 63 FR 8934 (February 23, 1998) and SRAMs from Taiwan (Department 
accepted expensing of R&D currently) and Dynamic Random Access Memory 
Semiconductors of One Megabit or Above from Taiwan, 64 FR 56308, 56319 
(October 19, 1999) (Department agreed that ``R&D costs should be 
expensed as incurred''). Third, the substance of the issues in Micron I 
and the present case are different. The Micron I decision concerned 
only the respondents' amortization of R&D expenses, while the present 
case also involves the respondents' practice of continually changing 
how they recognize R&D expenses.
    Hyundai's citation to Steel Wire Rod from Canada also is misplaced. 
Steel Wire Rod from Canada, 63 FR at 9187, concerned the amortization 
of certain costs relating to a furnace conversion, and not the 
amortization and deferral of R&D costs, as in the present case.
    We disagree with LG that the Department would never allow a company 
to change from expensing any cost to amortizing that cost because of 
the reduced cost recognized in the transition year. The Department 
evaluates any such change on a case by case basis. In the present case, 
as explained above, we found that the reduced R&D cost recognized by 
Hyundai and LG through the amortization and deferral of their R&D 
expenses, and resulting allocation of R&D expenses to merchandise, does 
not reasonably reflect the cost of producing the subject merchandise.
    Comment 2: Cross-Fertilization of R&D. Hyundai and LG argue that 
the Department erred in including the cost of R&D performed for non-
memory and non-DRAM semiconductor products, respectively, in the cost 
of their DRAMs. Hyundai, citing section 773(e) of the Act, and LG, 
citing section 773(f)(1)(A) of the Act, argue that this decision 
violates the statutory requirements under the Act that Commerce 
calculates constructed value (``CV'') based on the production and 
general expenses related to the subject merchandise only. Hyundai, 
citing High-Tenacity Rayon Filament Yarn from Germany, 60 FR

[[Page 69701]]

15897, 15899 (March 28, 1995), Large Power Transformers from Japan, 57 
FR 45767, 45768 (October 5, 1992), Sweaters Wholly or in Chief Weight 
of Man-Made Fiber from the Republic of Korea, 55 FR 32659, 32671 
(August 10, 1990), Antifriction Bearings (Other Than Tapered Roller 
Bearings) and Parts Thereof from France, et al., 61 FR 66472, 66491 
(December 17, 1996)), Oil Country Tubular Goods from Argentina, 60 FR 
33539, 33549 (June 28, 1995), High Information Content Flat Panel 
Displays and Display Glass Therefor from Japan, 56 FR 32376, 32386 
(July 16, 1991), and Certain Small Business Telephone Systems and 
Subassemblies Thereof from Taiwan, 54 FR 42543, 42548 (October 17, 
1989); and LG, additionally citing Lightweight Polyester Filament 
Fabrics from Korea, 48 FR 49,679, 49,681 (Oct. 27, 1983), Shop Towels 
from Bangladesh, 57 FR 3996, 3998-99 (Feb. 3, 1992), Erasable 
Programmable Read Only Memories from Japan, 51 FR 39,680, 39,685 (Oct. 
30, 1986) and Nippon Pillow Block Sales Co. v. United States, 17 CIT 
276, 820 F. Supp. 1444 (1993); further argue that, consistent with the 
statute, the Department's long-standing practice has been to calculate 
the R&D expense component of CV on the most product-specific basis 
possible, and to exclude those R&D expenses that do not relate to the 
production of subject merchandise. LG, citing Cost Analysis Under the 
Antidumping Law, 21 George Wash. J. Int'l L. & Econ. at 389, notes that 
the Department has applied this practice without distinction to 
semiconductor cases, including 64K DRAMs From Japan, 51 FR 15,943, 
15,948 (April 29, 1986)
    Hyundai and LG add that, in Micron I, 893 F. Supp. 21, 27, the CIT 
reversed the same decision to include non-subject R&D in the 
investigation of this case because it was unsupported by substantial 
evidence. Hyundai and LG contend that nothing has changed in this 
review that would justify a different result. Hyundai and LG maintain 
the Department has provided no factual support for its cross-
fertilization theory that ``the subject merchandise benefits from R&D 
expenditures earmarked for non-subject merchandise.'' Hyundai and LG 
also maintain that the only cross-fertilization that may occur is that, 
for Hyundai, non-memory, and for LG, SRAM, semiconductor R&D may 
benefit from more advanced DRAM R&D.
    Hyundai and LG state the Memorandum from Dr. Murzy Jhabvala to U.S. 
Department of Commerce/Office of Antidumping Compliance regarding 
Cross-Fertilization of R&D of Semiconductor Memory Devices (``September 
1997 Jhabvala Memo''), on file in the CRU, provides no substantial 
evidence to justify the Department's decision. Hyundai and LG contend 
that the September 1997 Jhabvala Memo is general and conclusory, and 
argue that the September 1997 Jhabvala Memo provides no evidence 
specific to their R&D and operations. Hyundai specifically states that 
its R&D for non-memory devices in its System IC Laboratory does not 
benefit memory devices because of the fundamental differences in 
function, design, and production between non-memory and memory 
products. LG specifically argues that it demonstrated to the Department 
at verification that its DRAM production operations do not derive any 
benefit from the R&D conducted for other products. LG also argues that 
Mr. Jhabvala's qualifications as set forth in his letter do not reveal 
any experience in DRAM R&D and production, and that other letters by 
actual experts on the record contradict his opinion.
    Micron argues that the Department properly accounted for the cross-
fertilization of semiconductor R&D. Micron, citing to Final Results 
1996, 61 FR at 20217-18, Final Results 1997 (2), 62 FR at 967, Final 
Results 1997 (3), 63 FR at 39823, Final Results 1998, 63 FR at 50870, 
SRAMs from Korea, 63 FR at 8938, SRAMs from Taiwan, 63 FR at 8925, and 
DRAMs from Taiwan, 64 FR at 56319, states that the Department has found 
that semiconductor industry R&D has a significant ``cross-fertilizing'' 
effect for R&D relating to all semiconductor products. Micron further 
argues that all of the respondents' arguments, including those relating 
to the Micron I decision, were rejected previously by the Department in 
Final Results 1998 and SRAMs from Korea.
    Micron also states that the September 1997 Jhabvala Memo, and 
information that Micron placed on the record, support the Department's 
finding on this matter. Micron also notes that the respondents have not 
included in their case briefs any direct citations to any expert 
opinion to support their arguments since the record evidence supports 
the Department's position.
    Micron contends that the Department has not departed from its 
practice, or its statutory obligations, in this issue. Rather, as the 
Department explained in SRAMs from Korea, 63 FR at 8940, the cost 
calculations in the present review are product-specific. Micron further 
points out that Hyundai, by proposing to allocate R&D on broad product 
lines, memory and non-memory, has acknowledged that its R&D expenses 
cannot be allocated on a model-specific or subject merchandise-specific 
basis. Moreover, Micron notes that the Department stated in Final 
Results 1998, 63 FR at 50870, that it is not bound by the way a company 
such as Hyundai categorizes its costs.
    DOC Position: We disagree with Hyundai and LG and have allocated 
all semiconductor R&D expenses over the total semiconductor cost of 
goods sold. This allocation methodology is fully consistent with the 
antidumping statute and the R&D calculations we have used throughout 
the Korean and Taiwan DRAMs and SRAMs proceedings.
    In SRAMs from Korea, we noted that, as a result of the forward-
looking nature of R&D activities, we could not predict every instance 
where SRAM R&D may influence logic products or where logic R&D may 
influence SRAM products. As a result, we requested that Dr. Murzy 
Jhabvala, a semiconductor device engineer at the National Aeronautics 
and Space Administration with twenty-four years of experience, state 
his views regarding any potential overlap or cross-fertilization of R&D 
efforts in the semiconductor industry. In fact, Dr. Jhabvala had 
identified in another semiconductor proceeding before the Department 
areas where R&D from one type of semiconductor product influenced 
another semiconductor product. These statements, including the 
September 1997 Jhabvala Memo, are on the record of this review. In a 
statement prepared for the SRAMs Final Determination, Dr. Jhabvala 
stated that:

    SRAMs represent along with DRAMs the culmination of 
semiconductor research and development. Both families of devices 
have benefitted from the advances in photo lithographic techniques 
to print the fine geometries (the state-of-the-art steppers) 
required for the high density of transistors * * * In addition to 
achieve higher access speeds bipolar (ECL or TTL) output amplifiers 
are incorporated directly on chip with the CMOS SRAM memory array, a 
process known as BiCMOS. Further efforts to improve speed have 
resulted in the combination of the bipolar ECL technology with CMOS 
technology with silicon on insulator (SOI) technology.
    Clearly, three distinct areas of semiconductor technology are 
converging to benefit the SRAM device performance. There are other 
instances where previous technology and the efforts expended to 
develop that technology occurs in the SRAM technology. Some examples 
of these are the use of thin film transistors (TFTs) in SRAMs, 
advanced metal interconnect systems, anisotropic etching and filling 
techniques for trenching and planarization (CMP) and implant 
technology for retrograde wells.

See September 8, 1997, Memorandum from Murzy Jhabvala to U.S. 
Department of Commerce regarding ``Cross Fertilization of Research and

[[Page 69702]]

Development of Semiconductor Memory Devices'' (``September 1997 
Jhabvala Memo'').
    In SRAMs from Korea, we disagreed with Hyundai's contention that we 
must follow Hyundai's normal accounting records which categorize R&D 
expenses by project and product. See SRAMs from Korea, 63 FR at 8940. 
We disagree with similar contentions from LG and Hyundai in this 
review. As we have said in the past (see, e.g., Final Results 1998, 63 
FR at 50870), we are not bound by the way a company categorizes its 
costs, R&D projects, or laboratory facilities, or by the company's 
accounting records that we review at verification if they do not 
reasonably reflect the costs attributable to production of the subject 
merchandise. Moreover, the mere fact that R&D projects for memory and 
non-memory products may be run in different laboratories, the fact that 
process and product research for memory and non-memory products may be 
distinguished, and the fact that each of the respondents may account 
for these R&D projects separately in their respective books and 
records, does not address the issue of cross-fertilization in 
semiconductor R&D. The existence of cross-fertilization in 
semiconductor R&D is the central theme of Dr. Jhabvala's many 
statements to the Department. Dr. Jhabvala offers various examples in 
those statements to illustrate that, regardless of the accounting or 
laboratory arrangements, the research results or developments in the 
processes and technologies used in the production and development of 
one semiconductor family can be (and are) used in the production and 
development of other semiconductor families. Dr. Jhabvala goes so far 
as to state that it would be ``unrealistic to expect researchers to 
work in complete technical isolation constantly reinventing technology 
that might already exist.'' See September 1997 Jhabvala Memo. Hyundai, 
in contrast to LG, does not contest the Department's position that all 
R&D for memory semiconductor projects, including SRAMs, benefits DRAMs. 
Given these facts, we do not believe that the reported expenses for 
DRAM R&D projects reasonably reflect the appropriate cost of producing 
the subject merchandise. As a result, we have continued to allocate all 
semiconductor R&D expenses over the total semiconductor cost of goods 
sold, a methodology which does not overstate costs, but which we 
believe reasonably and accurately identifies the R&D expenses 
attributable to subject merchandise. 1
---------------------------------------------------------------------------

    \1\ In SRAMs from Korea, 63 FR at 8940, and SRAMs from Taiwan, 
63 FR at 8925, we also disagreed with those same expert opinions 
regarding semiconductor R&D that LG submitted in this review, and 
for the reasons stated above, continue to disagree with those 
opinions.
---------------------------------------------------------------------------

    This methodology is not a change in the Department's approach to 
this issue. It is the Department's long-standing practice where costs 
benefit more than one product to allocate those costs to all the 
products which they benefit. See, e.g., SRAMs from Korea, 63 FR at 
8940. This methodology results in the calculation of product-specific 
costs consistent with sections 773(e) and 773(f)(1)(A) of the Act 
because we have determined that DRAM-specific R&D account entries do 
not by themselves reflect all costs associated with the production and 
sale of subject merchandise.
    Comment 3: Level of Trade (``LOT'')/CEP Offset. Micron argues that 
in two recent decisions the CIT held that the Department must perform 
its LOT analysis based on unadjusted starting prices both for the U.S. 
sales used to calculate CEP as well as the home market sales used to 
calculate NV. See Borden, Inc. v. United States, 22 CIT __, 4 F. Supp. 
2d 1221 (1998); Micron Technology, Inc. v. United States, 23 CIT __, 40 
F. Supp. 2d 481, 485-86 (1999). In the Preliminary Results, the 
Department failed to do this, and instead analyzed the LOT of the home 
market sales based on the unadjusted starting prices of those sales, 
while analyzing the LOT of the U.S. sales based on the ``level of the 
constructed sale from the exporter to the [affiliated] importer,'' 
i.e., the prices after adjustment for U.S.-related selling expenses.
    Using this analysis, the Department determined, for both Hyundai 
and LG, that the home market and U.S. sales were made at different 
LOTs. In the absence of sales at more than one LOT in the comparison 
market, the Department found it could not quantify a LOT adjustment, 
and granted a CEP offset adjustment to each of the three respondents. 
See id. The Department declines to follow Borden on the grounds that it 
``is not a final decision.'' See Level of Trade Memorandum, dated May 
27, 1999. However, as the Borden and Micron decisions both establish, 
the Department's current practice is in conflict with the requirements 
of the statute. When the Department conducts a corrected LOT analysis, 
based on unadjusted starting prices in both the U.S. and the comparison 
markets, it will find that the comparison market sales made by Hyundai 
and LG were not made at a more advanced LOT than their sales in the 
United States, and therefore there is no basis for granting either a 
LOT adjustment or a CEP offset.
    Hyundai argues that the Department has ruled that Hyundai has been 
entitled to a CEP offset in each administrative review and argues that 
there are no factual reasons why the Department should reverse its 
long-standing practice. The Department has consistently ruled that the 
LOT of CEP sales must be based on the adjusted CEP price, not on the 
CEP starting price as advocated by Micron. See DRAMs from Taiwan 64 FR 
at 56313 (October 19, 1999). Hyundai argues that Petitioner's reliance 
on Borden is based on an incorrect interpretation of the statute. The 
court in Borden stated that the adjustments to CEP must be disregarded 
in defining the LOT of the CEP for purposes of the offset. However, the 
adjustments authorized under section 772(b) are an integral part of the 
definition of the statute and must be adhered to when determining the 
adjusted CEP price for comparisons and conducting the LOT analysis. 
Hyundai argues that the adoption of the court's reasoning in the Borden 
case would result in an unfair and distorted price comparison that is 
contrary to Congressional intent.
    Hyundai argues that it has established that there is a difference 
between the LOT in the home market and the CEP LOT. All of Hyundai's 
U.S. sales are on a CEP basis and its home market sales are at a more 
advanced stage of distribution than the CEP sales. Therefore, a CEP 
offset is appropriate under the provisions of the statute.
    LG asserts that the Department made a CEP offset correctly. LG also 
maintains that the Department should not apply the Borden case to the 
instant review. According to LG, the court held mistakenly that the 
Department's adjustments to CEP starting prices (by removing certain 
expenses) are inconsistent with section 773(a)(7) of the Act. LG claims 
that the court believed that such adjustments distort the LOT analysis 
and that this ``pre-adjustment'' creates an automatic CEP offset in 
addition to any CEP offset or LOT adjustment made after a comparison of 
adjusted CEP to HM price. LG contends that the Department's methodology 
does not create a ``pre-adjustment'' and correctly removes from the 
starting U.S. price only those expenses related to the resale 
transaction between the U.S. affiliate and the unaffiliated U.S. 
customer.
    DOC Position: The Department agrees with Hyundai and LG. We have

[[Page 69703]]

consistently stated that the statute and the SAA support analyzing the 
LOT of CEP sales at the constructed level after expenses associated 
with economic activities in the United States have been deducted, 
pursuant to section 772(d) of the Act. In the preamble to our proposed 
regulations, we stated:

    With respect to the identification of levels of trade, some 
commentators argued that, consistent with past practice, the 
Department should base level of trade on the starting price for both 
export price EP and CEP sales . . . The Department believes that 
this proposal is not supported by the SAA. If the starting price is 
used for all U.S. sales, the Department's ability to make meaningful 
comparisons at the same level of trade (or appropriate adjustments 
for differences in levels of trade) would be severely undermined in 
cases involving CEP sales. As noted by other commentators, using the 
starting price to determine the level of trade of both types of U.S. 
sales would result in a finding of different levels of trade for an 
EP sale and a CEP sale adjusted to a price that reflected the same 
selling functions. Accordingly, the regulations specify that the 
level of trade analyzed for EP sales is that of the starting price, 
and for CEP sales it is the constructed level of trade of the price 
after the deduction of U.S. selling expenses and profit.

See Proposed Rule, 61 FR at 7347.
    Consistent with the above position, in those cases where a LOT 
comparison is warranted and possible, the Department normally evaluates 
the LOT for CEP sales based on the price after adjustments are made 
under section 772(d) of the Act. See, e.g., Large Newspaper Printing 
Presses and Components Thereof, Whether Assembled or Unassembled, From 
Japan: Notice of Final Determination of Sales at Less Than Fair Value, 
61 FR 38139, 38143 (July 23, 1996). We note that, in every case decided 
under the revised antidumping statute, we have consistently adhered to 
this interpretation of the SAA and of the Act. See, e.g., Aramid Fiber 
Formed of Poly Para-Phenylene Terephthalamide from the Netherlands; 
Preliminary Results of Antidumping Duty Administrative Review, 61 FR 
15766, 15768 (April 9, 1996); Certain Stainless Steel Wire Rods from 
France; Preliminary Result of Antidumping Duty Administrative Review, 
61 FR 8915, 8916 (March 6, 1996); and Antifriction Bearings (Other Than 
Tapered Roller Bearings) and parts Thereof from France, et al., 
Preliminary Results of Antidumping Duty Administrative Review, 61 FR 
25713, 35718-23 (July 8, 1996).
    In this case, in accordance with the above precedent, our 
instructions in the questionnaire issued to respondents stated that 
constructed LOT should be used. All respondents adequately documented 
the differences in selling functions in the home and in the U.S. 
markets. Therefore, the Department's decision to grant a CEP offset to 
Hyundai and LG was consistent with the statute and the Department's 
practice, and was supported by substantial evidence on the record.
    We disagree with the petitioner's interpretation of Borden and of 
its impact on our current practice. In Borden, the Court held that the 
Department's practice to base the LOT comparisons of CEP sales after 
CEP deductions is an impermissible interpretation of section 772(d) of 
the Act. See Borden, 4 F. Supp. 2d at 1236-38; see also Micron, 40 F. 
Supp. 2d at 485-86. The Department believes, however, that its practice 
is in full compliance with the statute, and that the court decision 
does not contain a persuasive statutory analysis. Because Borden is not 
a final and conclusive decision, the Department has continued to follow 
its normal practice of adjusting CEP under section 772(d) of the Act, 
prior to starting a LOT analysis, as articulated in the regulations at 
section 351.412. Accordingly, consistent with the Preliminary 
Determination, we will continue to analyze the LOT based on adjusted 
CEP prices, rather than the starting CEP prices.
    Comment 4: Exchange Rate Methodology. Hyundai and LG argue that the 
Department failed to consider the rapid decline in the value of the 
Korean won during the POR when it converted won to U.S. dollars. The 
respondents state that, in Policy Bulletin 96-1, the Department 
acknowledged the need to apply daily exchange rates in administrative 
reviews as well as investigations during periods of substantial 
exchange rate depreciation. The respondents further point out that in 
two recent administrative reviews, Steel Wire Rope from Korea, 63 FR 
67662, 67665 (December 8, 1998), (unchanged at Steel Wire Rope from the 
Republic of Korea, 64 FR 17995 (April 13, 1999)) (``Steel Wire Rope 
from Korea''), and Certain Cold-Rolled and Corrosion-Resistant Carbon 
Steel Flat Products from Korea, 64 FR 48767, 48774 (September 8, 1999), 
and several investigations, specifically Stainless Steel Sheet and 
Strip in Coils from the Republic of Korea, 64 FR 30664, 30670 (June 8, 
1999), Stainless Steel Round Wire from Korea, 64 FR 17342, 17343 (April 
9, 1999), Stainless Steel Plate in Coils (``SSPC'') from the Republic 
of Korea, 64 FR 15444, 15446 (March 31, 1999), and Emulsion Styrene-
Butadiene Rubber from the Republic of Korea, 64 FR 14865, 14867-8 
(March 29, 1999) (``ESBR from Korea''), the Department applied the 
modified exchange rate methodology. The respondents contend that the 
same circumstances in these cases apply to this case because the POR 
includes the period (at the end of 1997) when the won lost over 40 
percent of its value, and there is no reason why the Department should 
adopt any different treatment in this case. Hyundai specifically 
maintains that the Department should use daily won-dollar exchange 
rates for home market sales matched to U.S. sales occurring between 
November 1 and December 31, 1997; and should also use the average of 
the January 1 through February 28, 1998 exchange rate as a benchmark 
for U.S. sales occurring between those dates.
    Micron states that the Department properly applied its standard 
exchange rate methodology in the preliminary results of the review, and 
it should adhere to that standard methodology in the final results.
    DOC Position: We agree with the respondents, in part. Section 
773A(a) of the Act directs the Department to use a daily exchange rate 
to convert foreign currencies into U.S. dollars unless the daily rate 
involves a fluctuation. The Department considers a ``fluctuation'' to 
exist when the daily exchange rate differs from the benchmark rate by 
2.25 percent or more. The benchmark is defined as the moving average of 
rates for the past 40 business days. When we determine a fluctuation to 
have existed, we generally substitute the benchmark rate for the daily 
rate, in accordance with established practice. (An exception to this 
rule is described below.) (For an explanation of this method, see 
Policy Bulletin 96-1: Currency Conversions (61 FR 9434, March 8, 
1996).)
    Our analysis of dollar-Korean-won exchange rates demonstrates that 
the Korean won declined rapidly in November and December 1997. 
Specifically, the won declined more than 40 percent over this two-month 
period. The decline was, in both speed and magnitude, many times more 
severe than any change in the dollar-won exchange rate during recent 
years, and it did not rebound significantly in a short time. As such, 
we determine that the decline in the won during November and December 
1997 was of such magnitude that the dollar-won exchange rate cannot 
reasonably be viewed as having simply fluctuated at that time, i.e., as 
having experienced only a momentary drop in value relative to the 
normal benchmark. Accordingly, the Department used actual daily 
exchange rates exclusively in November and

[[Page 69704]]

December 1997. See Notice of Final Determination of Sales at Less Than 
Fair Value: Stainless Steel Sheet and Strip from the Republic of Korea, 
64 FR 30664, 30670 (June 8, 1999) (``SSSS from Korea'').
    We note, however, that we have refined our methodology somewhat 
from that applied in SSSS from Korea. We recognize that, following a 
large and precipitous decline in the value of a currency, a period may 
exist wherein it is unclear whether further declines are a continuation 
of the large and precipitous decline or merely fluctuations. Under the 
circumstances of this case, such uncertainty may have existed following 
the large, precipitous drop in November and December 1997. Thus, we 
devised a methodology for identifying the point following a precipitous 
drop at which it is reasonable to presume that rates, more than 2.25 
percent from the benchmark, were merely fluctuating. Following the 
precipitous drop in November and December 1997, we continued to use 
only actual daily rates until the daily rates were not more than 2.25 
percent below the average of the 20 previous daily rates for five 
consecutive days. At that point, we determined that the pattern of 
daily rates no longer reasonably precluded the possibility that they 
were merely ``fluctuating''. Using a 20-day average for this purpose 
provides a reasonable indication that it is no longer necessary to 
refrain from using the normal methodology, while avoiding the use of 
daily rates exclusively for an excessive period of time. Accordingly, 
from the first of these five days, we resumed classifying daily rates 
as ``fluctuating'' or ``normal'' in accordance with our standard 
practice, except that we began with a 20-day benchmark and on each 
succeeding day added a daily rate to the average until the normal 40-
day average was restored as the benchmark. See Notice of Final Results 
of Antidumping Duty Administrative Review: Certain Welded Carbon Steel 
Pipes and Tubes from Thailand, 64 FR 56759, 56763, October 21, 1999. 
See also Polyethylene Terephthalate Film, Sheet and Strip From Korea: 
Final Results of Antidumping Duty Administrative Review and Notice of 
Intent Not To Revoke in Part, 64 FR 62648, 62649 (November 17, 1999).
    Applying this methodology in the instant case, we used daily rates 
from November 3, 1997, through January 13, 1998. We then resumed the 
use of our normal methodology, starting with a benchmark based on the 
average of the 20 reported daily rates from January 14, 1998. We used 
the normal 40-day benchmark from February 12, 1998, to the close of the 
review period.
    Comment 5: Duty Absorption. Hyundai contends that the finding of 
duty absorption is null and void because the Department had no 
authority to conduct a duty absorption inquiry in this administrative 
review. Hyundai maintains that section 751(a)(4) of the Act 
``explicitly limits'' duty absorption inquiries to administrative 
reviews initiated 2 years or 4 years after the publication of an 
antidumping duty order, and that this review was initiated on June 29, 
1998, five years after publication of the antidumping duty order in 
this case. Hyundai also maintains that section 351.213(j)(2) of the 
Department's regulations, which provides for the Department to conduct 
duty absorption inquiries for transition orders (as defined in section 
751(c)(6) of the Act) in reviews initiated in 1996 or 1998, cannot 
authorize the conduct of a duty absorption inquiry. Hyundai states that 
this regulation is ``directly contradicted'' by section 751(a)(4) of 
the Act, which makes no exception for transition orders.
    Hyundai further argues that section 751(c)(6) of the Act, which 
defines transition orders, only applies to section 751(c) of the Act, 
which establishes procedures for the conduct of sunset reviews. Hyundai 
states that section 751(c)(6) of the Act has no relationship to 
administrative reviews conducted under section 751(a) of the Act, nor 
to duty absorption inquiries conducted under section 751(a)(4) of the 
Act.
    LG argues that the Department may not lawfully presume that duties 
have been absorbed by LG without record evidence to support this 
conclusion. LG, citing to Extruded Rubber Thread from Malaysia, 63 FR 
2752, 2757 (March 16, 1998) and Report to the House and Senate 
Appropriations Committees: The Efficacy of Antidumping Measures in 
Related Importer Situations (January 30, 1998), at 3, states that 
Department presumes that absorption is occurring where a dumping margin 
is found unless the U.S. affiliate's customers have promised in writing 
to pay any antidumping duties imposed on the merchandise. LG further 
states, citing to Id. at 4 and Certain Cut-to-Length Carbon Steel Plate 
from Belgium, 63 FR 2959, 2963-64 (January 20, 1998), that the 
Department has never found an instance of such a written agreement that 
is acceptable. LG argues that it defies commercial reality to expect a 
customer to agree to assume such a liability for antidumping duties, 
and the Department's establishment of an ``effectively irrebuttable'' 
presumption that duties are being absorbed ``makes a mockery'' of the 
duty absorption inquiry entrusted to the Department by Congress.
    Micron argues that the Department correctly made a finding of duty 
absorption for Hyundai and LG. Micron notes that both respondents 
imported the subject merchandise through their affiliated U.S. 
importers, and therefore, the antidumping duties assessed as a result 
of this review will be paid, in the first instance, by those affiliated 
importers. Micron also points out that the Department provided Hyundai 
and LG with an opportunity to submit evidence that unaffiliated 
purchasers will pay the antidumping duties to be assessed on entries 
during the review period, and neither party submitted such evidence. 
Micron maintains that, in the absence of any evidence, and in the light 
of the ``commercial reality'' noted by LG under which no unaffiliated 
customer would assume the liability for these assessments, the 
Department can only reasonably conclude, based on record evidence, that 
duties will be absorbed by Hyundai and LG.
    Micron argues that since LG explicitly declined to submit any 
evidence on this matter, it cannot now argue that the Department is 
employing an ``inappropriately high evidentiary standard.'' Micron also 
states, in reference to Hyundai's arguments, that section 751(a)(4) of 
the Act does not limit the Department's authority to make a duty 
absorption inquiry in the context of administrative reviews conducted 
in those years not referenced by this section. Micron further argues 
that, since Hyundai does not allege any harm arising out of the 
Department's conduct of this inquiry, it has no standing to complain 
that the Department's conduct is ultra vires.
    Micron contends that the Department explained in Final Regulations, 
62 FR at 27317-18, that its interpretation of section 751(a)(4) of the 
Act, under section 351.213(j)(2) of the Department's regulations, is 
necessary to carry out the legislative intent of the statute, i.e., to 
provide the relevant information to the International Trade Commission 
(``ITC'') in connection with its conduct of sunset reviews. Micron 
further contends that if the Department had adopted Hyundai's 
interpretation of the Act, then the Department would have had the 
option of conducting a duty absorption inquiry, pursuant to Micron's 
July 21, 1997 request, in the fourth review of this proceeding.
    DOC Position: We agree with Micron. With regard to the time frame 
in which we are conducting this review, section

[[Page 69705]]

351.213(j)(1) of our regulations, in accordance with section 751(a)(4) 
of the Act, provides for the conduct, upon request, of absorption 
inquiries in reviews initiated two and four years after the publication 
of an antidumping duty order. With respect to transition orders, the 
preamble to the proposed antidumping regulations explains that reviews 
initiated in 1996 will be considered initiated in the second year, and 
reviews initiated in 1998 will be considered initiated in the fourth 
year. Notice of Proposed Rulemaking and Request for Public Comments, 61 
FR 7308, 7317 (February 27, 1996). Because this order has been in 
effect since 1993, this is a transition order in accordance with 
section 751(c)(6)(C) of the Act. This being a review initiated in 1998 
and a request having been made, we have made a duty absorption 
determination as part of this administrative review.
    We believe that Congress intended that the ITC would consider the 
issue of duty absorption in all sunset reviews. In this regard, the 
statutory provision requiring the consideration of duty absorption does 
not distinguish between antidumping orders issued after January 1, 
1995, and transition orders. See section 752(a)(1)(D) of the Act. 
Moreover, in all of the legislative history, Congress explained the 
implications of affirmative duty-absorption findings and clearly 
contemplated that such findings would be considered in all sunset 
reviews. See S. Rep.103-412 at 50 (1994). See also H. Rep. 103-826 at 
60-61 (1994) (``Commerce will inform the Commission of its findings 
regarding duty absorption, and the Commission will take such findings 
into account in determining whether injury is likely to continue or 
recur if an order were revoked''). Thus, we have made a duty absorption 
determination as part of this administrative review. See Antifriction 
Bearings (Other Than Tapered Roller Bearings) and Parts Thereof From 
France, Germany, Italy, Japan, Romania, Sweden, and the United Kingdom: 
Final Results of Antidumping Duty Administrative Reviews, 64 FR 35590, 
35601 (July 1, 1999) (``AFBs'').
    In considering methodologies that might be used for a duty 
absorption inquiry, the Department sought to adopt one that would 
comply with the statute, as well as one that would be administrable 
within the time frame of a review period and still provide respondents 
with a sufficient opportunity to cure any deficiencies. The method the 
Department adopted accomplishes these goals. As the Department 
explained in AFBs, 64 FR at 35601, the ``existence of a margin raises 
an initial presumption that the respondent and its affiliated 
importer(s) are absorbing the duty.'' This is a reasonable presumption 
because the continued existence of dumping margins indicates that the 
producer and its affiliated U.S. importer have not adjusted their 
prices to eliminate dumping. If the producer has not set its price to 
the first unaffiliated U.S. customer high enough to eliminate dumping 
and the affiliated importer is liable for payment of the antidumping 
duties, it is reasonable to presume that the producer is absorbing the 
antidumping duties. The reasonableness of this presumption is also 
reflected in the SAA at 885, which states that ``the affiliated 
importer may choose to pay the antidumping duty rather than eliminate 
the dumping.'' In sum, the existence of dumping gives rise to a 
reasonable presumption that the affiliated importer is absorbing 
dumping duties.
    As in previous cases where the Department has found duty absorption 
(see, e.g., AFBs), this is an instance where the existence of a margin 
raises an initial presumption that the respondent and its affiliated 
importer(s) are absorbing the duty. As such, the burden of producing 
evidence to the contrary shifts to the respondent. See Creswell Trading 
Co., Inc. v. United States, 15 F.3d 1054 (CAFC 1994). Here the 
respondents have not placed evidence on the record, despite being given 
ample time to do so, in support of their position that they and their 
affiliated importer(s) are not absorbing the duties. In fact, as noted 
by Micron, LG explicitly refused to do so. Therefore, because Hyundai 
and LG submitted no information showing that their respective 
affiliated importer is not absorbing the duties for this POR, we find 
that duty absorption occurred.
    Comment 6: Cash Deposit Rate. Micron argues that the Department 
should establish a single cash deposit rate for both Hyundai and LG in 
the final results of this review, at a minimum, by weight averaging the 
combined dumping margins for Hyundai and LG. Micron asserts that, at 
the end of the current POR, LG was acquired by Hyundai and renamed 
Hyundai Microelectronics, and based on comments in a letter submitted 
by LG, the merger is to be completed in October 1999. Micron contends 
that one company will control both Hyundai and LG's fabrication 
facilities, and that company could choose to designate all of its 
exports to the United States as being from whichever respondent in the 
fifth review turns out to have the lower duty deposit rate.
    Hyundai argues that it is entitled to its own cash deposit rate 
based exclusively on the Department's calculations for Hyundai. Hyundai 
contends that the single rate advocated by Micron would incorporate any 
adverse FA margin that the Department might impose on LG, and Hyundai 
should not be penalized for any action taken with respect to LG. 
Hyundai maintains that, whatever decisions the Department may make 
concerning LG, Hyundai had no involvement in the matters alleged. 
Hyundai states that there has been no indication of any diversion or 
unreported sales by Hyundai in the six consecutive times that Hyundai 
has been verified since this case began.
    Hyundai further argues that the Department must disregard Micron's 
argument because it relates to ``matters that allegedly might occur 
well beyond'' the end of the current POR. Hyundai contends that 
Micron's speculation as to what might happen after the merger has no 
support on the record. Hyundai also contends that if one company 
controls both companies' fabrication facilities, the cash deposit rate 
would be the rate that applies to the controlling company, regardless 
of which fab produced the DRAMs or how the company chose to 
``designate'' the origin of the exports.
    DOC Position: We are concerned about the implications of the 
pending merger of Hyundai and LG on the efficacy of the antidumping 
duty order on DRAMs from Korea. However, pursuant to Micron's November 
12, 1999 request, we initiated a changed circumstances review under 
section 751(b) of the Act to address the cash deposit issue. Because we 
have initiated a separate segment of this proceeding to address the 
cash deposit issue, we will continue to issue Hyundai and LG their own 
cash deposit rates for these final results.
    Comment 7: All Others Rate. Micron claims that the Department 
should correct the ``all others'' rate to reflect the revised 4.55 
percent rate calculated by the Department following judicial review of 
the original less than fair value (``LTFV'') determination. See Micron 
Technology, Inc. v. United States, 117 F.3d 1386 (Fed. Cir. 1997). In 
its notice of the preliminary results of review the Department states 
that the ``all others'' cash deposit rate ``will be 3.85 percent, the 
`all others' rate established in the LTFV investigation.'' Preliminary 
Results, 64 FR at 30486. Therefore, the Department's revised ``all 
others'' rate of 4.55 percent has become final and should be reflected 
in these final results.

[[Page 69706]]

    No rebuttal briefs were filed in regards to this issue.
    DOC Position: We agree with the petitioner and have corrected the 
``all others'' rate to reflect the revised 4.55 percent rate calculated 
by the Department following judicial review of the original LTFV 
investigation.

Company-Specific Issues

A. Hyundai

    Comment 1: Use of Cost of Goods Sold to Calculate R&D Ratio. 
Hyundai states that the Department greatly overstated the per unit R&D 
costs allocated to each product by calculating Hyundai's R&D ratio as a 
percentage of cost of goods sold (``COGS'') rather than as a percentage 
of cost of manufacturing (``COM''). Hyundai, citing to High Information 
Content Flat Panel Displays and Display Glass Therefor from Japan, 56 
FR 32376, 32382 (July 16, 1991), contends that since the R&D ratio is 
applied to the COM, the denominator for the R&D ratio should also be 
the COM. Hyundai points out that although the Department has used COGS 
as the denominator for the R&D ratio in other proceedings including 
DRAMs, it has not stated any reason why COGS is a more acceptable 
denominator than COM.
    Hyundai maintains that it is inconsistent to apply a COGS-based 
percentage to calculate Hyundai's R&D cost since R&D is considered by 
the Department as an element of the COM, and the Department applies the 
R&D ratio to the total COM of each product. Hyundai notes that the 
Department used to classify certain R&D costs as G&A expenses, but now 
classifies all R&D costs as manufacturing costs. Hyundai states that, 
in contrast to R&D expenses, G&A expenses, which support both sales and 
production, could reasonably be compared to COGS to calculate the G&A 
ratio.
    Hyundai, citing the Department's Antidumping Manual at 48, and 
DRAMs from Taiwan, 64 FR at 56312, further notes that, in the G&A ratio 
calculation, the Department adjusts COGS to make it equivalent to COM 
in order to reflect the same category of costs as the per unit COM to 
which this ratio is applied. Hyundai argues that if it is appropriate 
to adjust the COGS, when COGS is used as the denominator for a ratio 
calculation, to align it more closely to the COM, then it is accurate 
and appropriate to use COM itself as the denominator, which has been 
calculated in the same manner as the per unit COM of each product. 
Hyundai also contends that the Department's minor distinction between 
COGS and COM indicate that the use of COGS as the denominator is merely 
for administrative convenience.
    Hyundai further argues that the propriety of the Department's 
practice of using COGS to represent COM depends entirely on the 
presumption that the COGS during a period is a reasonably close 
approximation of the COM. Hyundai contends that, in the DRAM industry, 
which has a consistent trend toward higher density products and strong 
learning curve effects on costs, this presumption does not hold. 
Hyundai explains that, during a period of ``rapid generational 
progress,'' the cost of (new generation) DRAMs that are produced during 
this period is higher than the cost of (old generation) DRAMs that are 
sold during this period. Hyundai states that consequently, when total 
current R&D expenses are calculated as a percentage of COGS rather than 
as a percentage of COM, the R&D ratio is inflated, and Hyundai's total 
R&D costs are overstated.
    Finally, Hyundai argues that the application of the Department's 
standard cost-of-production (``COP'') completeness test demonstrates 
that the use of COGS as the denominator in the R&D ratio calculation 
significantly overstates Hyundai's R&D expenses. Hyundai states that 
multiplying Hyundai's total semiconductor COM by the Department's 
calculated R&D ratio results in a total R&D expense that greatly 
exceeds Hyundai's actual R&D expense.
    Micron argues that the Department was correct to use the COGS 
instead of COM for its R&D calculation, as is the Department's 
practice. Micron contends that Hyundai never complained before about 
the Department's use of COGS instead of COM in its R&D calculation 
ratio, and is only complaining now because of the difference between 
its COGS and COM figures. Micron also contends that the difference in 
these figures is not due, as Hyundai claims, to the change in the 
density of the DRAMs that it produced, but is due to a certain 
proprietary item in its cost accounting records.
    DOC Position: We agree with the petitioner. The Department's 
practice, as we have carried out throughout this proceeding, is to 
calculate the R&D ratio by dividing a respondent's R&D expense by the 
respondent's COGS. See e.g., Final Determination, 58 FR at 15470, Final 
Results 1997 (I), 62 FR at 967, Final Results 1997 (II), 62 FR at 
39823, and Final Results 1998, 63 FR 50870. See also DRAMs from Taiwan, 
64 FR at 56312. We calculate this ratio based on the COGS, or a 
modified COGS, and not the COM, because R&D expenses, like G&A 
expenses, are incurred for the products sold during a period, rather 
than the products manufactured during a period. Furthermore, we believe 
that evaluating whether to use COGS or COM as the denominator in the 
R&D ratio from one review segment to the next would eliminate 
significant consistency and predictability in our calculations.
    We also agree with the petitioner that the record does not support 
Hyundai's assertions that the difference between its COGS and COM is 
due to the change in the densities that it produces. Rather, this 
difference is due, in part, to the proprietary accounting item 
referenced by Micron.
    Comment 2: Double-Counting of R&D. Hyundai argues that the 
Department double-counted certain R&D expenses incurred by Hyundai 
Electronics America, Inc. (``Hyundai America''). Hyundai states that 
the Department included Hyundai America's actual expense for certain 
R&D projects, as well the amount that Hyundai paid to Hyundai America 
to reimburse it for these expenses. Hyundai explains that it did not 
itself offset these expenses in its response because these expenses 
were classified as long-term R&D, and not included by Hyundai in the 
current year R&D calculation. Hyundai states that the double-counting 
occurred when the Department included all of Hyundai's expenditures on 
long-term projects in current year production costs. Consequently, 
Hyundai maintains that if the Department decides to continue expensing 
all of Hyundai's R&D expenses incurred in 1997, then the Department 
should either exclude the expenses at issue from Hyundai's R&D costs, 
or offset Hyundai America's R&D expenditures, to avoid double-counting.
    Micron did not comment on this issue.
    DOC Position: We disagree with Hyundai that the record evidence 
demonstrates that we double-counted certain R&D expenses incurred by 
Hyundai America, and reimbursed by Hyundai. Hyundai America's financial 
statement indicates that Hyundai America received revenue from Hyundai 
for R&D services (see exhibit 17 of Hyundai's October 8, 1998 section A 
response). However, the record evidence does not demonstrate that 
Hyundai's R&D expenses include any payments to Hyundai America. 
Therefore, we cannot confirm that any R&D expense has been double-
counted and have made no changes in our calculations with respect to 
this issue from our preliminary results.
    Comment 3: Offset for Long-Term Interest Income. Hyundai argues 
that the Department improperly denied an offset

[[Page 69707]]

for long-term interest income earned on restricted bank deposits. 
Hyundai states that the interest income at issue was earned by Hyundai 
on (1) collateral that Hyundai is required to maintain on deposit at 
banks in order to obtain loans to finance current operations; and (2) 
deposits with insurance companies that can only be used to pay 
retirement benefits. Hyundai states that, in both cases, the income is 
not derived from long-term investments, but is directly tied to the 
current operations of the company. Citing to Final Determination, 58 FR 
at 15473, and The Timken Company. v. United States, 809 F. Supp. 121, 
at 125 (1992), Hyundai contends that the Department grants adjustments 
for interest income that is earned on compensating deposits because 
such income is related to current operations; and that the Department 
previously granted Hyundai an adjustment for interest income related to 
current operations. Hyundai maintains that, since the income derived 
from these deposits reduces the cost of the related loans, the interest 
earned from those deposits should be used to offset Hyundai's interest 
expense.
    Hyundai explains that some of the deposits at issue are not 
investments, but a prerequisite for receiving loans from the Korea 
Development Bank. Hyundai states that the use of compensating deposits 
enabled Hyundai to receive a lower effective interest rate from the 
banks, and thus directly affected the interest expense that Hyundai 
incurred for financing current operations during the POR. Hyundai 
maintains that, since these deposits are an integral part of the 
relevant loans, and since the Department considers all financing costs 
to be related to current operations, then the interest earned on the 
deposits is directly related to current operations, regardless of the 
period of time over which the deposits are maintained.
    Hyundai further explains that the other deposits at issue are held 
at life insurance companies to fund accrued severance benefits. Hyundai 
states that it makes these deposits in order to claim the total amount 
of severance benefits as a tax-deductible expense. Hyundai contends 
that, since the severance benefits themselves are included in the labor 
expense element of Hyundai's COM, the income earned from these deposits 
of severance benefits is directly related to current operations.
    Hyundai, citing to Gulf States Tube Div. Of Quanex Corp. v. United 
States, 981 F. Supp. 630, 643 (CIT 1997) and Recent Stitches in the 
Department of Commerce's Cost of Production Analysis: MMF Sweaters 
Antidumping Case and Commerce's Treatment of Interest Expense, 25 
George Wash. J. Int'l L (1991), also contends that the Department 
allows respondents an offset for interest income on long-term deposits 
that are related to current operations. Hyundai also notes that, in 
fact, the Department has granted offsets for long-term ``compensating'' 
deposits because such deposits are related to the cost of borrowing 
funds for current operations.
    Micron argues that the Department should not make any adjustment 
for Hyundai's claimed offset for interest income. Micron, citing to 
Final Determination, 58 FR at 15473, contends that the Department only 
previously granted Hyundai an offset for interest income earned on 
short-term assets. Micron further maintains that a respondent must show 
at verification that deposits are compensating balances tied to loans 
in order to receive an offset for interest earned on such deposits, and 
that the verification report and preliminary calculation memorandum 
indicate that the Department was not satisfied that Hyundai had shown 
this.
    Micron also contends that the severance insurance deposits are not 
connected to loans at all, but represent Hyundai's funding of accrued 
severance benefits. Micron states that the classification of the 
insurance balance as a restricted deposit does not qualify it as a 
compensating balance (for a loan). Micron concludes that Hyundai has 
not demonstrated that the interest earned on the insurance deposit is 
in any way tied to interest expense, and that the Department should 
continue to exclude the claimed interest income from the offset to 
Hyundai's interest expense rate.
    DOC Position: We agree with Hyundai in part, and with Micron in 
part. Upon further review of cost verification exhibit 2, and Hyundai's 
1997 consolidated financial statement, which specifically mentions that 
``certain bank deposits are pledged as collateral for long-term debt,'' 
we agree with Hyundai that its long-term restricted deposits at issue 
with the Korea Development Bank are an integral part of certain loans 
from that Bank. Since the income derived from these deposits are 
directly related to specific loans, the interest earned from those 
deposits should be used to offset Hyundai's interest expense for the 
same loans. Additionally, we agree with Micron that the severance 
insurance deposits are long-term investments that represent Hyundai's 
funding of accrued severance benefits. These severance insurance 
deposits are simply a source of funds from which Hyundai funds 
severance benefits, and are only held by Hyundai as restricted deposits 
to allow Hyundai to claim a tax deduction. Accordingly, we have only 
offset the interest from the deposits at issue with the Korean 
Development Bank against Hyundai's interest expense.

B. LG

    Comment 1: LG's Knowledge of U.S. Sales: Mexico. LG asserts that, 
in its relationship with a Mexican client, it requested a variety of 
proof of delivery (``POD's'') to determine that the DRAMs were actually 
destined for Mexico. LG states that it believed reasonably and in good 
faith that this customer was a legitimate third country purchaser of LG 
DRAMs with ample ability to consume them and to market LG's products in 
Mexico, Latin America, as well as in other third country markets.
    LG alleges that taken together, the facts on the record demonstrate 
that it was the unsuspecting victim of Customs fraud, including the 
alteration and falsification of LG invoices, and the unlawful diversion 
of LG products into the United States. LG claims that there is 
overwhelming evidence that it did not have knowledge. Thus, LG contends 
that the Department has no lawful basis to attribute the illegally 
diverted shipments to LG and to include such shipments as ``unreported 
U.S. sales'' in the calculation of LG's dumping margin.
    To support its argument, LG cites Tapered Roller Bearings from 
China, where the petitioner in the case argued that the Department 
should reclassify third country transactions, placed by a U.S. firm, as 
U.S. sales. The Department disagreed and considered these transactions 
as sales to a third country, stating ``the Act requires that the 
producer of the merchandise know, at the time of sale to the reseller, 
the country to which the reseller intends to export the merchandise in 
order for the Department to treat sales to a reseller as sales to the 
United States.'' LG points out that the Department made no inquiry as 
to whether the respondent ``should have known'' that the goods were 
destined for U.S. consumption.
    According to LG, the Department applies its knowledge test to a 
respondent at the time of sale, not later. For example, in Notice of 
Final Determination of Sales at Less Than Fair Value: Manganese Sulfate 
From the People's Republic of China, 60 FR 51255 (1995) (``Manganese 
Sulfate''), the Department determined that a transaction was not a U.S. 
sale where the respondent learned that the merchandise it sold to a 
third country trading company was ultimately destined for the United 
States ``at the time of shipment, after the sale had already been 
made.'' Similarly, in Pure

[[Page 69708]]

Magnesium from the Russian Federation (``Magnesium''), the Department 
treated certain sales as third country exports, even though the 
respondent later learned that some of these exports were sold to U.S. 
customers, because ``this knowledge always came after (the respondent) 
had sold the merchandise.'' LG maintains that in neither of these cases 
did the Department suggest that the sales could have been deemed U.S. 
sales by the respondent if the respondent ``should have known'' the 
ultimate destination was the United States, notwithstanding evidence on 
the record from which such a conclusion might have been drawn.
    According to LG, the CIT, in NSK Ltd. v. United States (``NSK''), 
explicitly confirmed that the antidumping law mandates the knowledge 
test as applied by the Department in these prior cases. In NSK, the 
Department classified Honda as a reseller after concluding that Honda's 
Japanese suppliers were unaware of the ultimate destination of the 
merchandise they sold to Honda. The Court agreed, emphasizing the 
statutory language and legislative history upon which the Department's 
knowledge test is based. Specifically, the Court quoted the portion of 
the statute which states that U.S. purchase price is ``the price at 
which merchandise is purchased, or agreed to be purchased, prior to the 
date of importation, from a reseller or the manufacturer or producer of 
the merchandise for exportation to the United States.'' The Court cited 
the legislative history to this provision:

    If a producer knew that the merchandise was intended for sale to 
an unrelated purchaser in the United States under terms of sale 
fixed on or before the date of importation, the producer's sale 
price to an unrelated middleman will be used as the purchase price.

    LG states that the NSK Court acknowledged that the Department's 
knowledge test requires a ``high standard'' which could possibly be 
exploited by ``the `perfect' scenario, where a reseller hides the 
ultimate destination of its purchases from its foreign suppliers,'' but 
found nevertheless that ``such a standard is necessary to fulfill the 
statutory intent that purchase price be based on sales of goods sold 
abroad with the intent of being exported to the U.S.'' According to LG, 
both the stress on the word ``knew'' in the quoted legislative history 
and the Court's emphasis on the ``intent'' of the seller make clear 
that the U.S. sales may not be attributed to the foreign producer if 
the producer did not actually know that the United States was their 
destination, even if in retrospect it appears to an outside observer 
that the producer should have known that the goods would reach the 
United States. The Court ruled that this sort of generalized suspicion 
is not sufficient: ``the suppliers must have knowledge that particular 
sales are destined for import into the U.S.''
    LG asserts that, in INA Walzlager-Schaeffler KG v. United States 
(``INA''), the CIT noted again the strict requirement for 
particularized knowledge before U.S. sales may be attributed to a 
foreign producer. After reviewing the Department's ``knew or should 
have known'' test, the Court reiterated that this test applies only 
under the NV section of the law:

    This decision is not intended to alter the standard for imputed 
knowledge pursuant to 19 U.S.C. 1677a(b). As both FAG and Commerce 
acknowledge, section 1677a(b) requires knowledge that the 
merchandise is purchased from a reseller for exportation to the 
United States * * *. Under 19 U.S.C. 1677b(a) it is not necessary 
for the respondent to have knowledge that all of the merchandise 
sold is destined for the United States in order to impute knowledge 
that the sales were not intended for home consumption.

    LG states that, in Tapered Roller Bearings and Parts Thereof from 
China (``TRBs II''), the Department had occasion to consider the 
``perfect'' scenario envisioned by the Court in NSK. In TRBs II, the 
petitioner argued that suppliers ``knew or had reason to know'' that 
sales to a reseller were destined for the United States because TRBs 
sold to the U.S. market were all identified with the supplier's trade 
name, constituting ``sufficient evidence on the record for the 
Department to impute knowledge on behalf of the suppliers.'' In 
response, the reseller argued that ``NSK requires the Department to 
find evidence of actual knowledge that particular sales were destined 
for importation into the United States.'' In response to these 
arguments, the Department held:

    Lacking evidence of actual knowledge that particular sales were 
destined for the United States, we cannot assume such knowledge, 
regardless of general knowledge that some merchandise was intended 
for exportation to the United States.

    LG argues that the Department in TRBs II recognized that even when 
a reseller hides the ultimate destination of its purchases from its 
foreign supplier, and there is no evidence that the foreign supplier 
had actual knowledge that particular sales were destined for the United 
States, the Department may not attribute the resulting U.S. sales to 
the supplier, regardless of whether the supplier ``should have known'' 
or ``had reason to know'' that the goods would be resold into the 
United States.
    Finally, in Certain Cut-to-Length Carbon Steel Plate from Ukraine, 
62 FR 61,754, 61,760 (Nov. 19, 1997) (``Ukraine Plate''), the 
Department excluded diverted sales where the respondent producer, 
Ilyich, argued that it made the sales ``believing they were destined to 
third countries and had no knowledge that these sales were ultimately 
destined for the United States.'' The Department stated ``[i]t is the 
Department's practice to include as U.S. sales only those sales known 
by the producer/exporter to be destined for the United States at the 
time of sale and delivery'' and determined that ``these originally non-
U.S. bound shipments were delivered to the U.S. without prior knowledge 
of Ilyich. Therefore, consistent with * * * Department practice, we 
have not included the pirated sales in the final margin calculation.''
    LG states that the Department cited Yue Pak, Ltd. v. United States, 
Slip Op. 96-65 at 9 (``CIT''), aff'd. 1997 U.S. App. LEXIS 5425 (Fed. 
Cir. 1997) (``Yue Pak'') in the fourth review final results in support 
of its contention that U.S. resales may be charged to a supplier that 
did not know, but should have known, that the United States was the 
ultimate destination of its shipments. But, according to LG, Yue Pak 
fails to support the Department's legal theory. First, no party in that 
case argued that under the antidumping law ``should have known'' is not 
a sufficient standard for attribution of U.S. sales, and the Court was 
thus not presented with the relevant issue. Second, from the facts 
cited by the Court, it is apparent that the record evidence established 
that the suppliers knew that the merchandise was destined for the 
United States; the Court's references to whether the suppliers should 
have known are thus dicta. Third, neither of the cases cited by the 
Court for its interpretation of section 772(b) of the Act, 19 U.S.C. 
1677a(b), see 20 CIT at 498, support the ``should have known'' theory; 
rather, both cases clearly state that the supplier must know that the 
merchandise is destined for the United States. Finally, to the extent 
that Yue Pak is contrary, it has been overruled by the CIT's later 
disposition of this issue in NSK and INA, both of which make clear that 
section 772(b) of the Act, 19 U.S.C. 1677a(b) and its legislative 
history allow U.S. sales to be charged to a producer only ``[i]f a 
producer knew that the merchandise was intended for sale to an 
unrelated purchaser in the United States.''

[[Page 69709]]

    In sum, LG asserts that the CIT has clearly and consistently held, 
in line with the consistent practice of the Department, that the 
Department may treat third country sales as U.S. sales of a producer 
only if the producer knew, at the time of sale, that those particular 
sales were destined for the United States. LG contends that there is no 
evidence on the record that they actually knew that its sales were 
destined for the United States. Thus, it was unlawful for the 
Department in the preliminary results to consider the diverted 
shipments to have been U.S. sales of LG.
    LG argues that the circumstances of the sales to its Mexican 
customer did not provide LG with knowledge that the diverted sales were 
destined for importation into the United States. According to LG, in 
the fourth review final results, as in other cases cited above, the 
Department suggested that the diverted transactions be deemed U.S. 
sales of LG, regardless of whether LG knew the shipments' final 
destination, because LG sometimes dealt directly with the customer's 
U.S. parent company and because it arranged for the DRAMs to be shipped 
in bond through the United States. This argument, LG maintains, is 
contrary to numerous Department precedents.
    LG contends that the shipment route chosen by LG's customer is 
simply not relevant to the question of whether LG knew the ultimate 
destination of the merchandise. According to LG, the relevant inquiry 
is what LG knew at the time of sale about the goods' final destination, 
not what route the goods traveled to get there.
    LG asserts that the Department has many precedents on this issue 
which uniformly hold that dealings with a U.S. company or a shipment 
route through the United States do not transform a third country sale 
into a U.S. sale. LG maintains that, in Magnesium, the Department 
``found nothing to indicate any unreported instances of merchandise 
being sold with the knowledge at the time of sale that the ultimate 
destination was the United States,'' and refused to reclassify as U.S. 
sales certain third-country sales with purchase orders placed by a U.S. 
firm, determining that purchase orders placed by a U.S. company do not 
constitute evidence that the respondent had knowledge the sale was 
destined for the United States. Likewise, in Manganese Sulfate from 
China, the Department determined that a transaction was not a U.S. sale 
even where (1) the bill of lading listed the destination as a U.S. 
port; (2) PRC Customs export statistics' printout of exports to the 
United States showed that this shipment was sent to the United States; 
and (3) correspondence from a New York company regarding this shipment 
was dated before the issuance of the sales contract.
    LG argues, contrary to the Department's conclusion that LG's sales 
to the Mexican customer ``were shipped by LG directly to the United 
States,'' that the undisputed facts on the record show that the 
customer's purchases from LG were transported by its freight forwarder 
from arrival in the United States in bond, just as the Mexican customer 
had agreed. LG asserts that the Department is prohibited from treating 
goods transported in bond as U.S. sales for purposes of the antidumping 
law because in-bond entries do not enter the Customs territory of the 
United States for consumption. LG maintains that in Titanium Metals 
Corp. v. United States, 19 CIT 1143, 901 F. Supp. 362, 364 (1995) 
(``Titanium Sponge''), the CIT has explicitly confirmed this point, 
holding that goods entered for transportation in bond are not entered 
for consumption, and thus cannot be included in the dumping margin 
calculation, because the law restricts the assessment of antidumping 
duties to merchandise entered or withdrawn from warehouse for 
consumption.
    Further, LG claims that the Department's interpretation of 
Persulfates from the PRC (``Persulfates'') is wrong and entirely 
contradicts the proposition that sales may not be considered to be U.S. 
sales by the supplier unless (i) the supplier had actual knowledge that 
the goods would be resold to the United States, and (ii) the goods 
actually entered the Customs territory of the United States.
    LG argues what dictated the result of Persulfates was not that the 
producer shipped the goods to the United States, but that the producer 
shipped the goods to the United States knowing that the customer 
planned to enter the goods into the United States, rather than ship 
them in bond to a third country. LG further asserts that the Department 
has described its decision in Persulfates as turning on the producer's 
knowledge, stating that ``in cases where evidence exists that a 
supplier had knowledge that the ultimate destination of the merchandise 
was the United States, such as * * * Persulfates, we have considered 
the sale by the supplier to the reseller as the starting price in our 
margin calculations.'' In direct contrast to Persulfates, LG claims 
that LG's customer was outside the United States, and LG's products 
were shipped to a bonded area, for further in-transit bonded shipment 
to a third country, and, so far as LG ever knew, the goods did not 
enter into the Customs territory of the United States. LG concludes 
that Persulfates thus squarely contradicts the Department's suggestion 
that the route of the shipments from LG to its third country customer 
renders irrelevant the question of whether LG knew that the goods would 
enter the United States.
    LG also argues that the Department should correct errors committed 
in its calculation of the dumping margin on the diverted sales. LG 
contends that the Department may not apply adverse FA ignoring the 
timely data submitted by LG concerning the unlawfully diverted 
shipments. LG contends that it submitted timely expense data concerning 
the Mexican sales, which the Department chose not to accept, instead 
opting for adverse FA to determine the selling expenses for the 
diverted sales. LG argues that the Department's action is an abuse of 
discretion and must be reversed in the final results.
    LG cites Olympic Adhesives, Inc. v. United States (``Olympic 
Adhesives''), where the Court ruled that if a company was sent and 
completely answered repeated questionnaires, and nothing in the record 
suggests that the company withheld information, the Department is not 
allowed to use best information available. LG additionally cites Ferro 
Union, Inc. v. United States and Borden, Inc. v. United States as 
particular examples where the Department must implement a narrower 
interpretation of when to use FA.
    LG contends that the Department's rejection of LG's reported 
expenses in conjunction with its sales to the Mexican customer cannot 
be justified and is clearly unlawful under the standard of Olympic 
Adhesives. LG contends that the Department has failed to show that LG 
withheld requested information, failed to provide information by the 
applicable deadlines or in the form and manner requested, significantly 
impeded this proceeding, or provided information that was not accurate 
or verifiable. Thus, the Department's use of adverse FA in this review 
does not meet even the minimum required statutory conditions for the 
use of non-adverse FA.
    Further, LG disputes the Department's two justifications for the 
use of adverse inferences with respect to the Mexican sales. First, LG 
disputes the reasoning that ``because LG did not report these sales as 
U.S. sales, we are not using the expenses.'' LG argues that the 
Department may not punish it simply for taking a position regarding the 
underlying sales--a position supported by Department and Court 
precedents--

[[Page 69710]]

with which the Department disagrees. LG additionally disputes the 
contention that the Department was unable to verify these sales. 
Because none of the expenses in question are transaction-specific, none 
are in any way different for the diverted sales than for the U.S. 
sales, and the Department verified each expense.
    In conclusion, LG argues that the Department may not treat as U.S. 
sales third country sales for which there is no evidence of entry into 
the United States. LG contends that in the fourth review the Department 
did not include all the sales to the third country customer, but only 
sales for which there was corroborating Customs documentation which 
showed that the merchandise was entered into the United States. LG 
states that whether the error was intentional or inadvertent, however, 
the Department should correct this error in the final results. The law 
is clear that the Department may not treat as sales to the United 
States sales that did not enter the United States.
    In rebuttal, Micron argues that the Department properly determined 
that LG knew or should have known that the unreported sales to its 
customer in Mexico were destined for the United States. According to 
the petitioner, the volume and pattern of the sales, the circumstances 
of the placement of orders and payment by the customer's U.S.-based 
parent, and the delivery of the subject merchandise by LG to the 
customer's agent in the United States, all substantiate the 
Department's finding that LG knew or should have known that the 
ultimate destination of the sales was the United States.
    Micron disputes the ``facts'' submitted by LG. According to Micron, 
the declarations of Mr. Simon and Mr. Lee of LG, regarding LG's Mexican 
customer, are not ``facts,'' but simply statements from interested 
parties which do not square with neutral observers who claim something 
different. Micron cites a Dun & Bradstreet (``D&B'') Report which 
characterizes the company as a very small operation.
    Micron asserts that it is not credible that Mr. Simon or Mr. Lee, 
if they had actually inspected the facilities of LG's Mexican customer, 
would have concluded that the company could have consumed internally 
all of the merchandise that it purchased from LG.
    Micron also submits that the quantity of DRAMs that the company was 
buying makes it impossible for it to have been as small an operation as 
D&B and LG officials reported. Thus, according to Micron, if it really 
were an OEM consuming the merchandise it purchased from LG in its own 
production, the company evidently refurbished more computers than is 
possible for such a small company. (And this estimation does not take 
into account the fact that the computers being re-furbished would 
already contain some pre-existing DRAMs.)
    Further, Micron argues that this is an unheard of quantity for a 
second-hand computer vendor, and would put it among the top tiers of 
new computer vendors. Micron contends that if the Mexican customer had 
really shipped that many computers in a year, it would have been a much 
better known name. Furthermore, the story of refurbishing old computers 
is inconsistent with the type of modules purchased. The overwhelmingly 
vast majority of the sales are of newer model DRAMs the type that 
cannot be used in the older computers that the company was 
refurbishing. The more advanced DRAMs are for use in newer generation 
computers. In short, according to Micron, the company was buying 
modules for use in the newest PCs.
    With regard to manufacturing, Micron states that, during the POR, 
the company purchased a large amount of DRAMs for manufacturing. Micron 
points out that in his declaration, Mr. Simon stated that the facility 
in Tijuana had two manufacturing lines, with three or four workers 
each. These, Micron contends, are also evidently the same lines on 
which computers and other products, according to Daniel Lee's 
declaration, were being refurbished. Micron alleges that this means 
that Mr. Simon and Mr. Lee believed that it was reasonable that a small 
amount of workers could use a large amount of DRAMs to manufacture 
computer applications, while at the same time producing a great many 
computers. According to their declarations, both Mr. Simon and Mr. Lee 
had worked for LG for many years, and would have visited many computer 
manufacturing facilities while on sales calls. Micron contends that 
they would have noticed immediately the disparity between the quantity 
of merchandise purchased and the size of the companies facilities. 
Micron concludes that the statements that they thought the facilities 
could handle the quantity are extremely self-serving, but are just not 
credible.
    Micron argues that if LG really did not know what the company was 
doing, it would be because nobody had actually visited the Tijuana 
facilities. The fact that they described the Tijuana facilities in 
terms similar to those in the D&B report indicate that they had either 
visited the facilities or had read the D&B report. In either case, 
according to Micron, it would have been readily apparent that the 
Mexican company could not do what it said it was doing.
    During the POR, Micron alleges that the Mexican customer acted as a 
broker for LG's products. Micron states that most brokers have to take 
the risk, when they purchase DRAMs, that the price they can command on 
resale may fall below their own purchase price. LG, however, allowed 
the Mexican customer to distribute its DRAMs without such a risk. When 
the customer eventually sold the LG DRAMs, from several days to several 
weeks after it had bought them, LG reinvoiced the customer at a new 
price. Until near the end of the POR, when there was a temporary rise 
in market prices, the new price was always lower than LG's other 
customers. According to Micron, its research indicates that the price 
for the Mexican customer was always lower than the open market, or 
``spot'' market, at the time of the re-invoicing.
    Micron asserts that LG's Mexican customer buys the DRAMs, and 
immediately tries to sell them into the spot market, with LG's 
knowledge and assistance. When it has a buyer, it informs LG of the 
price, and based on the spot price, LG re-invoices the sale. Thus, 
Micron maintains that the facts indicate that LG always knew that it 
was dealing with a DRAM broker, not an OEM. The fact that LG felt 
compelled to come up with the thoroughly implausible story of this 
customer being a computer accessory manufacturer and refurbisher means 
that it had something to hide.
    Micron argues that LG continues to misinterpret the law regarding 
whether actual knowledge is required to impute sales. According to 
Micron, the standard for attributing U.S. sales to a foreign producer 
or exporter is not restricted to ``actual knowledge,'' but is whether 
the producer or exporter ``knew or had reason to know'' that such sales 
were destined for the United States. Micron argues that in attributing 
U.S. sales to a foreign producer or exporter, longstanding 
administrative practice and judicial rulings, consistent with the 
statute's legislative history, establish that the Department may find 
either direct evidence of knowledge, or impute such knowledge, provided 
in either event its finding rests on a reasonable factual foundation. 
While the Department can rely on direct evidence of actual knowledge, 
such evidence is rarely forthcoming. Therefore, Micron maintains that 
the Department is not restricted to an actual knowledge test, and may 
impute knowledge, as warranted, as was referenced in the Department's 
May 27, 1999,

[[Page 69711]]

memorandum in this review. The Department applied this standard here.
    Micron states that the statute's legislative history expressly 
supports the Department's ``knew or had reason to know'' standard. See 
section 772(a) of the Act, 19 U.S.C. 1677a(a). According to Micron, 
although the current statute does not directly address how the 
Department should determine attribution of sales ``for exportation'' to 
the United States, the legislative history to the term's predecessor 
provision, ``purchase price,'' does.
    Micron states that in the Trade Agreements Act of 1979, Congress 
modified the definition of ``purchase price'' in 19 U.S.C. 1677a(b) to 
provide statutory authority for the administrative practice of basing 
U.S. price on the transaction from a producer to an unrelated reseller 
if the producer knew that the product was destined for the United 
States. The statute did not indicate the degree of knowledge necessary 
to find that a producer knew the destination of the merchandise, but 
the SAA adopted with the Trade Agreements Act of 1979 (H.R. Doc. No. 
153, 96th Cong., 1st Sess., at 411 (1979)) states: ``The definition {of 
purchase price} makes clear that if the producer knew or had reason to 
know the goods were for sale to an unrelated U.S. buyer, and the terms 
of the sale were fixed or determinable from events beyond the control 
of the parties as of the date of importation, the producer's sales 
price will be used as the ``purchase price'' to be compared with that 
producer's foreign market value.'' The Department has explained that 
its application of the knowledge standard is based upon the House 
Report language cited in the 1979 SAA.
    Moreover, Micron asserts that, when Congress amended the statute in 
1994, changing ``purchase price'' to ``export price,'' it made clear 
that ``notwithstanding the change in terminology, no change is intended 
in the circumstances under which export price (formerly ``purchase 
price'') versus CEP (formerly ``exporters sales price'') are used.'' 
See 1994 SAA, H.R. Doc. 103-316, 103d Cong., 2d Sess. (1994), at 822-
23. Micron claims that Congress implicitly endorsed retention of the 
``knew or had reason to know'' standard under the old law when it 
changed purchase price to export price, and the Department continues to 
apply that standard to attribute to a foreign producer or exporter 
sales destined for the United States.
    Micron argues that the Department's administrative practice and 
judicial precedent support the ``knew or had reason to know'' standard. 
Micron maintains that consistent with the legislative history, the 
Department's longstanding and current practice is to determine whether 
the foreign producer ``knew or had reason to know'' that the sales in 
question were destined for the United States. The Department makes its 
knowledge finding on a case-by-case basis after assessing all of the 
information on the record. Micron alleges that the courts have 
repeatedly upheld the Department's practice. See, e.g., Federal Mogul 
Corp. v. United States, 17 CIT 1015 (1993) (``If the ITA finds that 
respondents knew, or should have known, that sales to Japanese OEMs 
with U.S. affiliates were destined for the U.S. market, the ITA will 
disregard those sales in calculating FMV''); Yue Pak. Micron argues 
that, in Yue Pak, the CIT expressly acknowledged that ``Commerce 
interprets the phrase ``for exportation to the United States'' to mean 
that the reseller or manufacturer from whom the merchandise was 
purchased knew or should have known at the time of the sale that the 
merchandise was being exported for the United States,'' and stated that 
it has upheld this interpretation. Yue Pak, 20 CIT at 498. The Court of 
Appeals affirmed the CIT decision in Yue Pak, adopting the holding and 
reasoning of the Court below. 111 F.3d 141-42.
    Micron alleges that LG ignores this longstanding practice, however, 
contending that several of the Department's determinations and certain 
judicial rulings require evidence of ``actual'' knowledge. LG, Micron 
argues, misreads these cases. They do not repudiate use of the ``knew 
or should have known'' standard. Rather, as discussed below, those 
cases turned on whether there was evidence of knowledge, actual or 
constructive, with respect to the destination of the sales in question. 
For example, Micron contends that LG's assertion that the Court, in 
NSK, implicitly rejected a reason to know standard is simply erroneous. 
The point of the Court's holding in NSK, according to Micron, is that 
knowledge of the ultimate destination of the goods, whether actual or 
constructive, must exist with respect to particular sales. The type of 
required knowledge does not, as LG asserts, limit the evidentiary basis 
to proof of actual knowledge, or some admission by the producer. Micron 
states that the Department may reasonably impute knowledge concerning 
the ultimate destination of particular sales if the facts support such 
an inference, as they clearly did here. Unlike the situation in NSK, in 
this case, the Department looked at a very specific group of sales, and 
compiled an extensive record on the distinct facts and circumstances 
bearing on LG's reason to know that these particular sales to this 
particular customer were destined for the United States.
    Similarly, according to Micron, LG contends that the CIT's ``knew 
or had reason to know'' test is relevant only to the issue of knowledge 
of sales in the home market under section 773(a) of the Act, 19 U.S.C. 
1677b(a), as opposed to knowledge of sales for export to the United 
States. LG Case Brief at 27. The INA case, Micron maintains, stands for 
no such proposition.
    Micron claims that in INA, the Court clarified the standard for 
determining whether sales of a respondent may be included in the home 
market database. The Court stated that the test was whether the 
respondent ``knew or should have known that the merchandise was not for 
home market consumption based upon the particular facts and 
circumstances surrounding the issues.'' The Court did not construe, and 
in fact, made clear it was not altering, the standard for imputed 
knowledge of U.S. sales. The Court merely noted that while knowledge 
(actual or imputed) of the U.S. destination must be established to 
treat an exporter's sales as sales to the United States, it was not 
necessary to find such knowledge of the ultimate destination in order 
to exclude sales for export from the home market database. The Court 
never suggested that imputed knowledge was only permissible in 
considering home market sales.
    According to Micron, LG's arguments regarding Yue Pak are 
incongruous because, as discussed above, NSK and INA no more directly 
address LG's contention that ``should have known'' is not a sufficient 
basis for attributing sales than does Yue Pak. Neither of these cases 
discredit, but instead clarify, the Department's constructive knowledge 
standard. Indeed, far from ``overruling'' Yue Pak, neither NSK nor INA 
even reference the Court's earlier decision in Yue Pak.
    Moreover, Micron claims that, LG inaccurately describes both the 
facts and the law under Yue Pak. According to Micron, the Department 
and the CIT considered extensive evidence that indicated knowledge by 
the PRC producers, but very little if any of the evidence could be 
considered the sort of direct evidence that would permit a finding that 
the PRC suppliers in question actually ``knew'' of the U.S. 
destination, such as when a producer is informed in advance of the U.S. 
destination, or otherwise admits its awareness. Rather, the bulk of the 
evidence was what might be considered

[[Page 69712]]

indirect, i.e., specific labeling instructions relaying DOT and OSHA 
requirements, special order purchase practices, and the percentage of 
shipments to the United States versus those to third countries. Such 
evidence, Micron asserts, is precisely the sort of evidence indicating 
that the producer had ``reason to know'' of the U.S. destination, and 
thus the CIT's affirmance of the Department's finding of knowledge is 
directly relevant here.
    Nor, according to Micron, does LG's citation to TRBs II support its 
theory of the knowledge standard. LG seizes on the Department's 
statement in that case that ``lacking evidence of actual knowledge that 
particular sales were destined for the United States, we cannot assume 
such knowledge, regardless of general knowledge that some merchandise 
was intended for exportation to the United States.'' However, Micron 
argues that the Department was merely noting that the proper 
evidentiary basis must exist in order to infer knowledge; it was not 
abandoning its longstanding knowledge standard. Indeed, the Department 
reaffirmed the ``knew or had reason to know'' formulation in the 
immediately following section of the decision, finding that respondent 
Premier's suppliers were unaware of the U.S. destination of their 
merchandise.
    Further, Micron alleges that other cases cited by LG similarly do 
not repudiate a constructive knowledge standard, but merely show that 
where there was no reasonably plausible evidence suggesting the 
producer had knowledge at the time of the sale that the particular 
sales were destined for the United States. Therefore, the Department 
need not consider, let alone impute, knowledge. Micron contends that 
such cases are a far cry from the situation here, where the record is 
replete with evidence establishing that the producer knew or had reason 
to know of the U.S. destination of the sales in question. In such 
cases, the Department can and does impute knowledge.
    For example, Micron alleges that in Tapered Roller Bearings from 
China, there was no indication that the goods ever entered the United 
States. In contrast, Micron argues, in the present case the record 
shows not only purchase orders issued directly by the U.S.-based 
purchaser to the producer's U.S.-based sales affiliate, but also 
delivery to the purchaser in the United States, entry of the goods for 
consumption in the United States, and payment by the purchaser from a 
U.S. bank. Thus, issuance of the purchase orders by a ``U.S. firm'' is 
only one piece of evidence among many.
    Similarly, Micron maintains that the Ukrainian Plate decision 
starkly differs from the instant case. There, the Department had no 
basis to entertain imputed knowledge, because the evidence in this 
regard was virtually nonexistent. The Department has vastly more 
information in support of its decision in the instant case.
    Micron alleges that in an attempt to side-step the collective 
impact of the multiple factors supporting the Department's preliminary 
decision here, LG addresses each factor in isolation, arguing that such 
factors as ``dealings with a U.S. company or a shipment route through 
the United States do not transform a third country sale into a U.S. 
sale.'' Aside from assuming the conclusion--that these were ``third 
country sales''--the decisions cited by LG can all be distinguished 
from the instant case.
    With respect to Magnesium, Micron contends that LG confuses the 
allegations by the petitioner with the findings made by the Department. 
There, the Department found that the producer did not know until after 
the time of sale that it was selling to a U.S. customer. Here, by 
contrast, the producer's U.S.-based sales outlet, LG, was very clearly 
dealing directly and repeatedly with the U.S.-based customer. 
Similarly, in Manganese Sulfate from China, it was not until after the 
date of sale that the shipping document showing the U.S. port as the 
destination of shipment was issued, and numerous other factors 
indicated lack of knowledge. And in Tapered Roller Bearings from China, 
purchase orders from a U.S. company were insufficient to impute 
knowledge because the shipments were to a third country and there was 
no other evidence that the producer was aware at the time of sale that 
the merchandise was destined for the United States.
    In this regard, Micron takes issue with LG's contention that after 
LG had arranged for delivery of the goods to its agent in the United 
States, they were transported away from the United States in bond, and 
in-bond entries are not considered to enter the Customs territory of 
the United States. Micron argues that, in fact, as the Department 
noted, LG shipped the DRAMs to its customer's agent in the United 
States, without requesting nor receiving assurance that the goods would 
be placed in Customs bond upon arrival and thereafter remain in bond 
until exported outside the United States. Moreover, as LG must 
acknowledge, the goods were in fact entered for consumption into the 
Customs territory of the United States.
    In the Persulfates determination, according to Micron, the 
``knowledge'' (or lack thereof) of the ultimate destination was not 
relevant; it was sufficient that the producer had knowledge that the 
goods were being shipped to an unaffiliated purchaser in the United 
States, and that the purchaser entered the goods for consumption. In 
this regard, Micron maintains that Persulfates offered an alternative 
basis for attributing the sales in question to LG, as the fact that the 
Mexican customer entered the merchandise for consumption in the United 
States rendered the knowledge issue irrelevant.
    Micron believes the Department's application of adverse FA in the 
calculation of the margins for the Mexican sales is appropriate. Micron 
states that the Department should apply a total adverse FA rate to all 
of LG's U.S. direct and indirect sales.
    Micron maintains, however, that if a calculation of the rate for 
the Mexican sales is required, the Department acted in accordance with 
law in using adverse FA to determine LG's dumping margin for the 
preliminary results, and should use the same methodology for the final 
results. Micron argues that LG withheld requested information, failed 
to provide information in the form and manner requested, significantly 
impeded the proceeding, and failed to act to the best of its ability to 
comply with the Department's request. See 19 U.S.C. 1677e. According to 
Micron, LG deliberately withheld important information requested by the 
Department concerning U.S. sales, and attempted instead to characterize 
that information as sales to third-countries. Not only did LG fail to 
provide information of its U.S. sales in the form and manner requested 
by the Department, but LG's willful attempt to mislead the Department, 
to LG's benefit, significantly impeded the proceeding. Micron argues 
that LG's failure to submit requested data constituted ``noncompliance 
with an information request'' within the meaning of Olympic Adhesives. 
In addition, LG's failure to produce requested information when it knew 
that these allegedly third-country sales were in fact sales to the 
United States, constituted a failure to cooperate. Therefore, LG failed 
to act to the best of its ability by knowingly withholding information 
requested by the Department. As a result, the Department appropriately 
applied an adverse inference under Section 1677e(b) in selecting from 
the facts otherwise available.
    Micron states that to facilitate its analysis under Section 1677e, 
the

[[Page 69713]]

Department has developed several factors that it applies on a case-by-
case basis. See SAA at 870 (``In employing adverse inferences, one 
factor the agencies will consider is the extent to which a party may 
benefit from its own lack of cooperation.''); Antifriction Bearings 
(Other Than Tapered Roller Bearings) and Parts Thereof From France et 
al.; Final Results of Antidumping Duty Administrative Reviews, 62 FR 
2081, 2088 (Jan. 15, 1997) (considering (1) the experience of the 
respondent in antidumping duty proceedings, (2) whether the respondent 
was in control of the data which Commerce was unable to verify or rely 
upon, and (3) the extent the respondent might have benefitted from its 
own lack of cooperation); see also Extruded Rubber Thread from 
Malaysia; Final Results of Antidumping Duty Administrative Review, 63 
FR 12762 (Mar. 16, 1998) (using same criteria).
    Micron alleges that in applying these factors to this case, it is 
indisputable that the Department's use of total adverse FA to determine 
LG's dumping margin was warranted. Not only is LG an experienced 
respondent in the annual review processes, but LG was in control of the 
U.S. sales data requested, and due to its deceptive failure to report 
these sales, the Department was unable to verify such information. More 
important, however, LG stood to benefit from its lack of cooperation. 
Had the Department not known of LG's U.S. sales, its calculation of 
LG's dumping margin would be skewed in LG's favor. Micron contends that 
this is simply unacceptable. See SAA at 870.
    DOC Position. A full discussion of our final conclusion, which 
requires references to proprietary information, is included in the 
December 6, 1999, Memorandum from John Conniff to Holly Kuga regarding 
sales through a third country by LG contained in the official file for 
this case. Generally, however, we have found that the record evidence 
concerning unreported sales supports the conclusion that LG knew, or 
should have known, that at the time it sold the subject DRAMs, the 
merchandise was destined for consumption in the United States.
    With respect to knowledge, we do not agree with LG's contention 
that the Department may not assign a FA rate on the basis of the 
unreported sales since LG had no actual knowledge of the diversion of 
these sales. Numerous court decisions, including those by the U.S. 
Court of Appeals for the Federal Circuit, have held that the 
appropriate standard for making this decision is ``knew or should have 
known at the time of the sale that the merchandise was being exported 
for the United States.'' See Yue Pak. See also Peer Bearing Co. v. 
United States, 800 F. Supp. 959, 964 (CIT 1992), Certain Pasta From 
Italy: Termination of New Shipper Antidumping Duty Administrative 
Review, 62 FR 66602 (1997), and Manganese Sulfate. While the statute 
does not indicate the degree of knowledge necessary to find that the 
producer knew the destination of the merchandise, the courts have 
stated that even if a respondent denies knowledge of the destination of 
its sales, the Department may review all facets of a transaction, and 
based on extrinsic source data, determine that it is appropriate to 
impute knowledge in a given case. See INA 1997, 957 F. Supp. at 265.
    In the matter of these unreported sales, first we note that LG 
essentially dealt with a U.S. customer. When shipping the merchandise, 
LG took no steps itself to ensure that, when the merchandise was 
delivered to the United States, it was subsequently placed under 
Customs bond and transported to a third country, clearing Customs upon 
export from the United States. What the record shows is that LG sold an 
enormous amount of DRAMs to a very small company and turned the 
merchandise over to the customer in the United States. Consequently, in 
contrast to such cases as Ukraine Plate and Magnesium, LG knew for 
certain that it was shipping DRAMs into the United States.
    Moreover, this is not a situation where an exporter sells and ships 
a relatively small amount of subject merchandise to a third country and 
then, sometime much later, the customer reexports the merchandise to 
the United States. In this case, we are confronted with a staggering 
amount of merchandise that is being shipped by LG directly to the 
United States. The merchandise is subsequently being entered for 
consumption into the United States within days, if not hours, of it 
leaving the possession of LG.
    The relative size and nature of the purchaser's operations and the 
quantity of acquisitions it made are germane to this case in several 
respects. The amount of purchases this customer made are not modest. In 
fact, the entered value of these transactions was quite large. However, 
based on LG's description of the purchaser's operations, it is clear 
that this party was not equipped to absorb such a vast amount of DRAMs. 
In particular, LG should have known that the purchaser was buying more 
DRAMs than it reasonably could consume in the manufacture of modules or 
the refurbishment of computers and printers. Furthermore, the amounts 
the customer purchased were so enormous they had to appear inconsistent 
with the size of the third-country DRAM markets in question. Moreover, 
as Micron points out, this customer could be expected to sell the vast 
majority of its merchandise to the United States. Consequently, not 
only was it reasonable to assume that this firm would sell some or all 
the subject merchandise that it purchased, but that it would sell the 
merchandise to the United States.
    In summary, based on the nature and characteristics of these 
transactions, we conclude that LG knew, or should have known, that the 
merchandise was destined for the United States. Considering the above, 
and as more fully described in the above-mentioned agency memorandum, 
the Department has decided to include the unreported sales during the 
POR in the analysis conducted of LG's sales for these final review 
results. See the FA section of this notice for a discussion of the FA 
that were applied in the case of LG.
    Comment 2: LG's Knowledge of U.S. Sales: Germany. On September 13, 
1999, the Department placed on the record a memorandum and accompanying 
exhibits regarding certain LGSG sales to a customer in Europe that 
subsequently shipped the LG DRAMs in question to its related entity in 
the United States. The documents consisted of an anonymous e-mail from 
a former LG employee, LG verification exhibits, U.S. Customs data, and 
a signed declaration concerning this transaction chain from a former LG 
salesman. On October 7, 1999, LG submitted information in response to 
the Department's September 13, 1999, memorandum. Other interested 
parties also filed relevant factual information regarding this matter 
by letter dated October 7, 1999.
    LG questions the Department's placing these allegations on the 
record so late in the proceeding, and states that nothing in the 
September 13, 1999, memorandum or elsewhere in the record provides a 
lawful basis for the Department to treat sales of DRAMs by LG's German 
subsidiary to its European customer as ``U.S. sales'' of LG. To the 
contrary, LG argues that the record provides no evidence that any 
responsible official of LG knew, at the time of sale, that these 
particular shipments were ultimately destined for the United States.
    LG contends that the record before the Department provides 
overwhelming evidence that LG correctly considered these sales to 
Germany as third-country sales and accurately treated them as such in 
this proceeding. Furthermore,

[[Page 69714]]

LG claims that the evidence demonstrates that the transactions between 
LGSG and its European customer were motivated solely by legitimate 
business reasons and not by pricing differentials or the existence of 
an antidumping duty order.
    LG argues that, as a matter of law, because LG did not know that 
particular sales were destined for the United States, none of the sales 
can properly be treated as U.S. sales by LG. LG contends that it is 
well-established that an exporter may not report sales made to a third 
country as U.S. sales unless the exporter knew at the time of sale that 
particular sales were destined for the United States. LG believes that 
the NSK case is directly on point, because while LG had generalized 
knowledge that some of the DRAMs sold to its European customer might 
ultimately be shipped to the United States, LG did not know that any 
particular sales were destined for import into the United States.
    Similarly, LG argues that in INA, the CIT distinguished between the 
knowledge standard for treating sales to resellers as sales to the home 
market, and the standard for treating sales to export markets as sales 
to the United States. Thus, LG argues, only if the respondent had known 
which specific sales were destined for the United States could the 
Department have considered the sales to be U.S. sales under section 
772(b) of the Act. LG asserts that in this case too, where LG did not 
have such knowledge, the sales to Germany cannot be considered U.S. 
sales.
    Likewise, LG maintains that in Tapered Roller Bearings and Parts 
Thereof from China, the Department followed the holdings of NSK and INA 
in finding that generalized knowledge by suppliers that some sales to a 
reseller were destined for the United States was not adequate to treat 
the suppliers' sales as U.S. sales. Thus, according to LG, the 
Department has stated explicitly and unambiguously that the sort of 
general knowledge that some merchandise was intended for exportation to 
the United States that LG possessed with regard to the subject sales is 
insufficient for the sales to be treated as U.S. sales by LG.
    LG contends that the record in this case establishes that LG did 
not know, and had no way of knowing, that any particular sales by LGSG 
to Europe were destined for the United States. Indeed, LG does not know 
even now which of its sales to its European customer were destined for 
the United States because it distributed the DRAMs that it bought from 
LG both to the United States and elsewhere, and did not inform LG as to 
the destination of the goods either before or after the time of sale. 
In these circumstances, where LG lacked ``actual knowledge that 
particular sales were destined for the United States,'' LG maintains 
that the law is clear that the sales may not be considered as U.S. 
sales of LG.
    According to LG, the Department has placed on the record evidence 
obtained from the U.S. Customs Service that purports to ``indicate * * 
* the likelihood that all of LG['s] sales [to the European customer] 
entered the U.S.'' LG believes that there are numerous deficiencies, 
however, in the evidence provided by the Department and the conclusions 
that the Department draws from that evidence. LG states that from the 
Customs data, quite the opposite is true--all of LG's sales to its 
European customer did not enter the United States.
    First, according to LG, the undisputed evidence on the record shows 
that during the fifth review period, LGSG sold a great quantity of 
DRAMs to its European customer. The Customs data produced by the 
Department, however, shows that fewer DRAMs were sold to the United 
States by its European customer during this period. Thus, LG concludes 
that even if all DRAMs that Customs claims came into the United States 
were manufactured by LG, there are still almost a majority of DRAMs 
that were sold by LGSG to its European customer that were not resold by 
the customer into the United States.
    Second, LG maintains that there is no information contained in the 
Department's Exhibit 3a concerning the identity of the manufacturer of 
the DRAMs imported into the United States. LG alleges that the 
Department has placed on the record only two instances of underlying 
invoices in which LG is identified as the manufacturer, and these two 
imports cover an insignificant amount of units. Thus, LG contends that 
there is no way to determine, much less conclude that it is ``likely,'' 
that LG was the manufacturer of all of the DRAMs imported by its 
European customer into the United States. For all the record shows, the 
remaining DRAMs imported into the United States could all have been 
manufactured by Samsung or other DRAM suppliers.
    Finally, LG claims that, for more than half of the transactions 
between LGSG and its European customer, the Department is unable to 
provide any evidence linking these sales to the specific Customs data 
regarding U.S. entries of Korean DRAMs. For the remainder of the 
transactions between LGSG and the European customer, which the 
Department has purported to link to particular U.S. imports by the 
customer, the Customs data fail to identify a manufacturer or even a 
product code. Thus, this record provides no evidence, other than two 
individual import transactions, that the customer shipped to the United 
States any DRAMs that LGSG had sold to it.
    According to LG, the European customer's U.S. affiliate purchased 
DRAMs in Europe as a method in order to take advantage of various 
countries' Outward Processing Relief (``OPR'') provisions. Although 
DRAMs later went to a duty-free status in Europe and there was no 
longer a need to use the OPR provisions, the supply chain had been 
established. LG states that, because of the reliability of this 
transaction chain and the ``historic'' ties between the European 
customer and its U.S. affiliate, the sales continued through this 
channel.
    LG argues that it makes no sense for the Department to conclude 
that LG made sales through Europe in order to avoid reporting them as 
U.S. sales when these transactions would have lowered its dumping 
margin. In the Department's recent decision in DRAMs from Taiwan, the 
Department stated with regard to two separate incidents that no adverse 
action is warranted when a respondent has erroneously reported or 
failed to report sales but correcting the error would lower the 
respondent's dumping margin. Thus, even if the Department were to 
conclude that LG's failure to report these sales was an error, there 
would still be no cause for the Department to take adverse action 
against LG.
    LG claims that an e-mail sent by a former LG employee to the 
Department accusing LG of dumping DRAMs into the United States through 
its sales to the European customer is unreliable and has no evidentiary 
value. LG asserts that the employee left the company under unfavorable 
circumstances. LG submitted in its letter on October 7, 1999, a record 
of this individual's employment which documented his problems with the 
company. LG believes in light of the circumstances of his termination, 
the e-mail is wholly unreliable as evidence against LG. Additionally, 
LG argues that the evidence of an accountant who had no involvement in 
sales lacks probative value, particularly when that evidence is 
evaluated in light of his obvious bias and when that evidence is 
measured against abundant, reliable evidence that entirely contradicts 
it.
    LG also questions the veracity of the declaration by Mark 
Vecchiarelli, the LG manager responsible for sales LG to the customer 
in question during the POR. LG has registered its strenuous objections 
to the Department's conduct

[[Page 69715]]

with regard to Mr. Vecchiarelli, both in performing a ``secret'' 
interview with him and in drafting multiple versions of his 
declaration.
    LG disputes Mr. Vecchiarelli's claim that he ``was responsible for 
servicing all of the semiconductor requirements of [the customer in 
question] on a worldwide basis'' and that he was ``responsible for the 
pricing and supply decisions for all sales worldwide to the 
[company].'' LG claims that Mr. Vecchiarelli was responsible for all of 
LG's sales to the parent company worldwide, but he was not responsible 
for sales by other subsidiaries of LG to the branches of this company 
located outside the United States. His successor, Mr. Pizarev, 
confirmed this account in LG's October 7, 1999, submission to the 
Department.
    LG claims that during the time that Mr. Vecchiarelli worked for LG, 
it was Mr. Sung-Jung Woo of LGSG who was responsible for making sales 
from LGSG to Europe, not Mr. Vecchiarelli. LG also disputes Mr. 
Vecchiarelli's statement that he ``left LG on good terms for a more 
lucrative position and for the career advancement opportunities 
available at TranSwitch.'' LG claims that Mr. Vecchiarelli left his 
employment at LG to become the Western Area Sales Manager at Macronix 
America, a subsidiary of a well-known Taiwanese memory semiconductor 
producer and a direct competitor of LG. LG believes this omission 
obscures Mr. Vecchiarelli's credibility.
    Further, LG disputes Mr.Vecchiarelli's statement that he ``made 
sales to [the customer's] divisions located outside the United States 
and arranged for other LG entities to supply the semiconductors to 
these * * * divisions for ultimate delivery to [its] manufacturing 
facility in the United States.'' According to LG, Mr. Sung-Jung Woo of 
LGSG was responsible for making these sales, not Mr. Vecchiarelli. In 
addition, LG points out that Mr. Pizarev, who was trained by Mr. 
Vecchiarelli to be his permanent successor as the account manager, has 
attested to the fact that Mr. Vecchiarelli never mentioned that he sold 
DRAMS to this customer in the United States through other LG 
subsidiaries in third countries.
    Moreover, LG also claims a ``floor'' price, or minimum price for 
the sales of DRAMs in the United States, as compared to Europe, did not 
exist. This is documented by the fact that prices to the European 
customer in question were not in fact lower than LG's prices in the 
United States.
    In addition, LG argues that the customer in question claimed 
multiple uses for the discrete DRAMs it purchased, contradicting Mr. 
Vecchiarelli's statement that merchandise was ultimately destined for 
the United States, and that the parent ``did not subcontract, anywhere 
else in the world, the production of memory modules using the discrete 
DRAMs LG sold to [it].'' LG claims that Mr. Vecchiarelli was not in a 
position to know or supply the customer's global supply needs. 
According to LG, Mr. Vecchiarelli only had control of fulfilling the 
customer's supply requirements through LG.
    LG concludes its arguments by stating that even if every word in 
Mr. Vecchiarelli's declaration is truthful and accurate, nothing in Mr. 
Vecchiarelli's declaration indicates that LG knew that particular sales 
to its European customer were destined for the United States. While 
some specific orders from LGSG may have been shipped in their entirety 
to its U.S. affiliate, others clearly were not; some or all of the 
DRAMs in those other orders were sent elsewhere, to destinations 
outside the United States. Rather, LG maintains that the evidence on 
the record shows that while LG had generalized knowledge that some 
DRAMs sold to its European customer might end up in the United States, 
LG did not know that any particular sales were destined for the United 
States. Further, LG contends that the evidence on the record shows that 
there were no significant differentials between LG's prices in Europe 
and in the United States. LG also questions the credibility of the 
assertions made by the two ex-LG employees referred to in the materials 
released by the Department. For all of these reasons, LG states that it 
is clear that the Department in the final results should not treat 
LGSG's sales to the customer in question as U.S. sales of LG.
    Micron argues that LG engaged in multiple schemes to manipulate the 
calculation of its dumping margin by supplying the U.S. market with 
subject merchandise shipped through intermediaries and third countries. 
According to Micron, LG's attempts to explain away the unmistakable 
import of the record are unavailing. Two former employees of LG have 
come forward with direct evidence of an evasion scheme in which LG 
supplied the U.S. market by shipping DRAMs through its affiliate in 
Germany, knowing the DRAMs sold to the customer in question were 
destined for the customer's operations in the United States. Micron 
contends this deliberate evasion of the antidumping duty order has been 
fully substantiated by the sales data provided by LG at verification as 
well as the import records received by the Department from Customs. The 
egregious conduct demonstrated by respondent in this case demands that 
the Department apply total adverse FA to establish the dumping margin 
for LG.
    According to Micron, the information LG has submitted confirms that 
LG was well aware that the Korean-made DRAMs that it supplied through 
Europe were being shipped to the United States. Micron argues that the 
record evidence supports the finding that LG had more than its admitted 
``general knowledge'' regarding the U.S. destination of the LG DRAMs 
sold to the European customer in question. Micron maintains that the 
cumulative evidence of record--including the sworn statement of Mr. 
Vecchiarelli and the Department's corroborating data showing exact 
correspondence between individual LGSG sales to the customer in 
question and individual import transactions in the Customs data--
indicate that LG had actual knowledge that particular sales to its 
European customer were for export to the United States.
    Thus, Micron claims that, as LG itself points out, during the fifth 
review period LG sold a great amount of DRAMs to the European customer 
in question. According to Micron, the available Customs data show that, 
during the same period, the European customer's U.S. affiliate imported 
a large quantity of DRAMs that LG sold to the European customer in 
question. Moreover, Micron states that the available data show that a 
significant portion of these transactions were back-to-back, with the 
sale from LGSG to the European customer coinciding with a corresponding 
shipment (units and value) from its European customer to the U.S. 
affiliate. Micron contends that the correspondence of the sales volume 
admittedly sold from LGSG to the European customer to the available 
Customs import data provides sufficient evidence of LG's actual 
knowledge that particular sales were destined for the United States.
    Micron disputes LG's claim that the Department lacks sufficient 
information to conclude that all of the entries of Korean-made DRAMs 
shown on the Customs import listing were in fact made by LG. First, 
Micron claims that the Customs listing of DRAM import transactions in 
Exhibit 3a to the September 22, 1999, Memorandum indicates that all of 
the transactions were entered showing Korea as the country of origin 
and the customer in question as the importer. Further, the Department's 
September 22, 1999, Memorandum indicates that the attached import 
transaction

[[Page 69716]]

documentation in Exhibit 3c are provided as ``two examples'' 
demonstrating that the entries of DRAMs at issue were in fact 
manufactured by LG.
    Second, Micron states that the back-to-back transactions listed in 
Exhibit 3b to the Department's September 22, 1999, Memorandum, 
identical as to quantity and value, further confirm that LG was the 
manufacturer of these DRAMs. Finally, Micron alleges that the customer 
in question never contended that the imports entered by its U.S. 
affiliate were manufactured by any party other than LG. Since the 
customer does not dispute that all imports consist of LG-made DRAMs, 
and the sample import documentation establishes that LG was the 
manufacturer, it is reasonable to conclude that all of the listed 
entries consist of LG DRAMs.
    Further, Micron alleges that the customer's manufacturing 
operations reinforce LG's knowledge of the U.S. destination of its 
sales. Micron argues that the statement of Mr. Vecchiarelli establishes 
that LG had actual knowledge of the U.S. destination of the discrete 
DRAMs that LG was supplying to the customer in question through third 
countries. Mr. Vecchiarelli describes the particular types of DRAMs 
that LG was selling to the customer in question, and the operations in 
which those DRAMs were being utilized. Micron contends that any vendor 
supplying a large multinational OEM with a large volume of product will 
not remain so ignorant of the OEM's operations as LG contends to be. 
See DRAMs from the Republic of Korea--Revision of Exhibit 3 of the 
Department's September 13, 1999 Memorandum from John Conniff to the 
File.
    Micron notes that LG places great reliance on the very generalized 
denials of the customer in question. According to Micron, the customer 
claimed that it uses discrete DRAMs in many manufacturing locations 
other than the United States, but makes the most generalized claim of 
alternative uses and fails to identify even one specific location where 
the purchased LG DRAMs were being used. Moreover, Micron maintains, the 
denial is set forth in a compound form that lumps the LG-supplied DRAMs 
with DRAMs purchased from all other vendors: ``DRAM sold to the 
European IPO by L.G. Semicon and other vendors went to a variety of 
[sites throughout Europe].''
    Micron states that LG attempts to buttress its story by attributing 
to the arrangement some unsubstantiated, and internally inconsistent, 
business justifications. According to Micron, LG also places great 
emphasis on the second-hand statements of Mr. Sung-Jung Woo, an LG 
employee who had previously served as sales manager of LGSG. These 
statements are not provided directly by Mr. Woo, but instead through 
the declaration of Mr. Jae-Byung Kim, another LG employee.
    Micron maintains that the unexplained second-hand nature of the 
statements attributed to Mr. Woo casts significant doubt on their 
reliability. Micron contends that, since Mr. Woo continues to be 
employed by LG, there appears to be absolutely no reason why LG could 
not have provided a first-hand account by Mr. Woo. For that reason, the 
conclusory denials of LG's knowledge of the destination of the sales 
should be given little weight.
    Micron argues that the prices charged by LG to its European 
customer confirm LG's intent to evade the antidumping order. According 
to Micron, the prices charged by LG through its alternative sales 
through LG and LGSG confirm the critical facts contained in the 
statement of Mr. Vecchiarelli that LG maintained a ``floor price'' on 
its sales through LG to the United States, and that LG made sales 
through LGSG when the price needed to make the sales to its European 
customer was below that ``floor price''.
    Micron asserts that, in a market in which prices are continually 
declining, prices averaged over twelve months can be significantly 
skewed by the volumes sold at different times; and this was 
particularly true with sales by LGSG to the customer in question. 
Indeed, Micron states that when prices are examined on a daily basis, 
there is a clear pattern confirming Mr. Vecchiarelli's statement that 
LG was selling through LGSG in order to continue to supply its European 
customer's U.S. affiliate.
    According to Micron, LG also points to the statement of Mr. Vlad 
Pizarev, Mr. Vecchiarelli's successor, as indicating that pricing is 
the one function that is centralized worldwide. Micron states that LG 
emphasizes the statement: ``Prices were usually the same worldwide.'' 
Micron argues that, as noted, this statement very pointedly does not 
dispute, and the establishment of a single world-wide price for this 
customer only confirms, LG's need to supply this customer in the United 
States through an alternative route when the agreed-upon world-wide 
price is set.
    Micron argues that Mr. Vecchiarelli's statement is corroborated by 
other evidence of record and provides every indication of reliability. 
According to Micron, LG makes an attack on Mr. Vecchiarelli's integrity 
in an attempt to discredit his testimony. Those claims, Micron argues, 
are misplaced and should be rejected. First, the Department employees 
who spoke directly with Mr. Vecchiarelli had a first-hand basis on 
which to judge his credibility and reliability. LG acknowledges that 
Mr. Vecchiarelli left LG on good terms, and can proffer no substantial 
reason why Mr. Vecchiarelli should harbor any bias towards LG. Second, 
Mr. Vecchiarelli's apparent employment at Macronix America immediately 
after leaving LG's employment provides absolutely no basis for 
inferring any bias against LG. Mr. Vecchiarelli was no longer employed 
at Macronix at the time he provided his statement to the Department, so 
the basis for any potential ``bias'' had already been eliminated. 
Moreover, LG by its own actions has indicated that it did not consider 
Mr. Vecchiarelli's employment at Macronix to constitute a disqualifying 
bias against LG. As related in the Statement of Mr. Pizarev, Mr. 
Vecchiarelli continued to be engaged by LG as a consultant ``on a 
retainer from LG for a couple of months'' after he left LG to work at 
Macronix.
    Third, LG grossly mischaracterizes the supposed discrepancies in 
Mr. Vecchiarelli's statement. Thus, LG first contests his statement 
that he was responsible for the pricing and supply decisions for all 
sales worldwide to the customer in question. Yet LG's own submissions 
confirm this statement. As already discussed above, LG submitted the 
statement of another LG employee (Mr. Pizarev), who confirmed that the 
parent company's pricing is ``centralized'' worldwide. And the 
organization charts submitted by LG at verification quite plainly 
indicate that Mr. Vecchiarelli was in charge of worldwide sales to the 
customer in question. In fact, Mr. Vecchiarelli is shown at the top of 
the chart, with the title ``WW Act. Mgr''. Furthermore, this document 
from the Department's sales verification report clearly reviews the 
customer in question's DRAM product needs on a worldwide basis, with 
information on products manufactured at each location.
    Micron reiterates that nowhere does LG deny that LG maintained a 
``floor price'' system, as Mr. Vecchiarelli described it in his 
statement.
    In sum, Micron contends that Mr. Vecchiarelli's statement 
describing LG's evasion scheme is credible, corroborated by the Customs 
documents as well as by LG's own sales documents, and confirmed in many 
respects both by LG's and the customer in question's admissions and by 
their failure to deny critical aspects of the arrangement.

[[Page 69717]]

    Micron submits that LG's complaints regarding the Department's 
procedures should be summarily rejected. According to Micron, it did 
not respond to the summary arguments in LG's October 7 letter because 
they appeared to be nothing more than a preview of legal arguments to 
be presented in LG's case brief. Micron contends that it now appears 
that LG is resting on the arguments as summarily stated in the October 
7 letter. Those arguments are entirely baseless and, like so many of 
LG's assertions in this proceeding, not worthy of serious 
consideration.
    Micron maintains that LG's allegations that the Department (1) 
failed to ``promptly'' place information on the record, (2) conducted 
``secret'' interviews, and (3) failed to afford respondent with a 
``meaningful'' opportunity to respond to allegations, thereby denying 
LG's ``fundamental right to due process,'' totally lack merit.
    First, according to Micron, LG ignores the fundamental nature of an 
antidumping proceeding. Second, LG's allegation with respect to the 
Department's ``secret interviews'' with Mr. Vecchiarelli goes against 
the statute, which affirmatively authorizes the conduct of ex parte 
meetings. Third, LG's ``strenuous'' objections to these meetings, and 
to the proffer of information by a former employee concerning 
fraudulent conduct by the employer, are totally baseless.
    Finally, the Department is afforded great discretion in conducting 
its proceedings. E.I. Dupont de Nemours & Co. v. United States, Slip 
Op. 98-7, 1998 WL 42598, at *11 (CIT Jan. 29, 1998) (``Commerce enjoys 
broad discretion in conducting investigations and reviews under the 
antidumping statute''). As the Court of International Trade has 
previously recognized:

    Commerce regularly balances its interest in conducting an 
efficient, uniform and expeditious administrative investigation 
against its equally compelling interest in conducting accurate fact-
finding. Such a weighing of competing interests involves choices of 
administrative practice and procedure which Commerce, in its 
specialized role as administrator of antidumping investigations, is 
uniquely qualified to make.

See Union Camp Corp. v. United States, 53 F. Supp. 2d 1310, 1328 (CIT 
1999); see also NEC Corp. v. United States Dept. of Commerce, 978 F. 
Supp. 314, 327 (CIT 1997), aff'd, 151 F.3d 1361 (Fed. Cir. 1998), cert. 
denied, 119 S.Ct. 1029 (1999) (noting that the Assistant Secretary for 
Import Administration ``enjoy(s) a presumption of honesty and integrity 
which must be overcome''). In short, Micron contends that LG has failed 
to provide any legal foundation for its allegations concerning the 
Department's investigative procedures, and the Department should 
dismiss these claims as groundless.
    DOC Position: A full discussion of our final conclusion, which 
requires references to proprietary information, is included in the 
December 3, 1999, Memorandum from John Conniff to Holly Kuga regarding 
sales through a third country by LG contained in the official file for 
this case.
    In sum, an employee in a significant position of LG stated for the 
record that he set up a sales channel for one of LG's major customers 
to procure DRAMs for the United States through LG's subsidiary in 
Germany. LG has not submitted anything for the record of the instant 
review that would lead us to believe that the employee's 
responsibilities were any less than he described. LG itself 
acknowledges that it knew that ``some of the merchandise'' sold through 
Germany was destined for the United States. The record contains ample 
information to document the fact that the overwhelming majority of the 
merchandise sold through Germany did, in fact, ultimately enter the 
United States for consumption during the POR. Therefore, we believe the 
record evidence supports the conclusion that LG knew, or should have 
known, at the time it sold the subject DRAMs, that the merchandise was 
destined for consumption in the United States.
    Comment 3: Adjustments to LG's Reported Cost of Manufacturing. LG 
claims that the Department should not adjust its cost of manufacturing 
by including certain costs from LG's construction-in-progress (``CIP'') 
account.
    Micron argues that the Department properly adjusted LG's reported 
cost of manufacture for certain production expenses that LG had 
excluded from cost of manufacture and instead relegated to a CIP 
account.
    DOC Position: Given that the Department is rejecting LG's reported 
sales and cost information to calculate LG's margin, and is applying 
total FA, the issue of whether the Department should adjust LG's 
reported COM is moot.
    Comment 4: Adjustment to LG's Reported G&A Expense. In its 
preliminary results, the Department adjusted LG's reported G&A expense 
by excluding foreign currency transaction gains and losses related to 
accounts receivables. See Preliminary Results, 64 FR at 30,485; 
Analysis Memorandum at 4 & Attachments 7, 9, 10. LG alleges that the 
Department's calculations contain a significant error that should be 
corrected in the final results. Specifically, the Department 
inadvertently added three zeros to three of the figures in the tables 
contained in Attachments 9 and 10: accounts receivable, long-term 
accounts payable, and bank deposits. Thus, the Department should use a 
revised G&A ratio percent in the Final Results.
    No rebuttal briefs were filed with regard to this issue.
    DOC Position. Given that the Department is rejecting LG's reported 
sales and cost information to calculate LG's margin, and is applying 
total FA, the issue of whether the Department should adjust LG's 
reported G&A expense is moot.
    Comment 5: The Department Should Use the Data Submitted by LG in 
Its March 26, 1999 Supplemental Response. In the preliminary results, 
the Department used the sales and cost data submitted by LG with its 
original October 8, 1998, questionnaire response. However, LG submitted 
revised cost and sales data with its March 26, 1999, supplemental 
response. LG argues that this data was timely submitted and was used as 
the basis for the Department's verification in April 1999, and the 
Department should, therefore, use LG's March 26, 1999, data in the 
final results.
    No rebuttal briefs were filed with regard to this issue.
    DOC Position: Given that the Department is rejecting LG's reported 
sales and cost information to calculate LG's margin, and is applying 
total FA, the issue of whether the Department should use LG's March 26, 
1999, data submission is moot.
    Comment 6: The Department Should Correct Programming Errors in the 
Calculation of G&A and Interest Expense for Modules LG argues that the 
Department made programming errors in its application of the revised 
G&A and interest expenses for memory modules.
    No rebuttal briefs were filed with regard to this issue.
    DOC Position: Given that the Department is rejecting LG's reported 
sales and cost information to calculate LG's margin, and is applying 
total FA, the issue of whether the Department revises LG's G&A and 
interest expenses for memory modules is moot.
    Comment 7: The Department Should Correct a Programming Error in the 
Calculation of LG's COP and CV for DRAMs. LG claims that the Department 
should correct a programming error in the calculation of COP and CV for 
DRAMs.
    No rebuttal briefs were filed with regard to this issue.

[[Page 69718]]

    DOC Position: Given that the Department is rejecting LG's reported 
sales and cost information to calculate LG's margin, and is applying 
total FA, the issue of whether the Department corrects the programming 
error in the calculation of COP and CV for DRAMs is moot.
    Comment 8: The Department Should Correct a Programming Error that 
Significantly Overstates the Duty Assessment Rates Covering LG Imports. 
LG claims that, due to a computer programming error, the Department's 
duty assessment rates by importer are significantly overstated.
    No rebuttal briefs were filed with regard to this issue.
    DOC Position: Given that the Department is rejecting LG's reported 
sales and cost information to calculate LG's margin, and is applying 
total FA, the issue of whether the Department has the duty assessment 
programming error is moot.
    Comment 9: The Department Should Calculate LG's CV Selling Expenses 
Based on Density. LG claims that the Department erroneously calculated 
a single weighted-average home market selling expense figure for CV-
based on sales of all products. To correct this distortion in the 
dumping margin calculation, the Department should calculate CV selling 
expenses based on density.
    No rebuttal briefs were filed with regard to this issue.
    DOC Position: Given that the Department is rejecting LG's reported 
sales and cost information to calculate LG's margin, and is applying 
total FA, the issue of whether the Department calculates CV selling 
expenses based on density is moot.

Final Results of Review

    As a result of this review, we have determined that the following 
margins exist for the period May 1, 1997 through April 30, 1998:

------------------------------------------------------------------------
                                             Weighted-       Weighted-
          Manufacturer/Exporter           average margin    average per
                                            percentage     megabit rate
------------------------------------------------------------------------
Hyundai Electronics Industries, Co.,               10.44             .03
 Ltd....................................
LG Semicon Co., Ltd.....................           10.44             .03
G5 Corporation..........................           10.44             .03
------------------------------------------------------------------------

    The Department shall determine, and the Customs Service shall 
assess, antidumping duties on all appropriate entries. The Department 
will issue appraisement instructions directly to the Customs Service. 
These final results of review shall be the basis for the assessment of 
antidumping duties on entries of merchandise covered by this review. 
For Hyundai, for duty-assessment purposes, we calculated an importer-
specific assessment rate by aggregating the dumping margins calculated 
for all U.S. sales to each importer and dividing this amount by the 
total estimated entered value reported by Hyundai of those sales. 
Hyundai, in accordance with the Department's questionnaire, estimated 
the entered value of its sales by calculating the average of the 
entered value of each control number for the POR. For all other 
respondents, we based the importer-specific assessment rate on the 
facts available margin percentage.
    Furthermore, the following deposit requirements will be effective 
upon publication of this notice of final results of review for all 
shipments of DRAMs from Korea entered, or withdrawn from warehouse, for 
consumption on or after the publication date, as provided for by 
section 751(a) of the Act: (1) for the companies named above, the cash 
deposit rates will be the rates listed above; (2) for merchandise 
exported by manufacturers or exporters not covered in this review but 
covered in a previous segment of this proceeding, the cash deposit rate 
will continue to be the company-specific rate published in the most 
recent final results which covered that manufacturer or exporter; (3) 
if the exporter is not a firm covered in this review or in any previous 
segment of this proceeding, but the manufacturer is, the cash deposit 
rate will be that established for the manufacturer of the merchandise 
in these final results of review or in the most recent final results 
which covered that manufacturer; and (4) if neither the exporter nor 
the manufacturer is a firm covered in this review or in any previous 
segment of this proceeding, the cash deposit rate will be 4.55 percent, 
the all others rate established in the LTFV investigation. These 
deposit requirements shall remain in effect until publication of the 
final results of the next administrative review.
    This notice serves as a final reminder to importers of their 
responsibility under 19 CFR 351.402 (f) 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 doubled antidumping duties.
    This notice also serves as the only reminder to parties subject to 
APO of their responsibility concerning the disposition of proprietary 
information disclosed under APO in accordance with section 351.305 (a) 
of the Department's regulations. Timely notification of return/
destruction of APO materials or conversion to judicial protective order 
is hereby requested. Failure to comply with the regulations and the 
terms of an APO is a sanctionable violation.
    We are issuing and publishing this in accordance with sections 
751(a)(1) and 777(i)(1) of the Act.

    Dated: December 6, 1999.
Richard W. Moreland,
Acting Assistant Secretary for Import Administration.
[FR Doc. 99-32399 Filed 12-13-99; 8:45 am]
BILLING CODE 3510-DS-P