[Federal Register Volume 65, Number 109 (Tuesday, June 6, 2000)]
[Notices]
[Pages 35886-35892]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-14204]


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DEPARTMENT OF COMMERCE

International Trade Administration

[A-580-812]


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

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

ACTION: Notice of Preliminary Results of Antidumping Duty 
Administrative Review and Notice of Intent Not to Revoke Order in Part.

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SUMMARY: In response to requests from one manufacturer/exporter and one 
U.S. producer of the subject merchandise, the Department of Commerce 
(``the Department'') is conducting an administrative review of the 
antidumping duty order on dynamic random access memory semiconductors 
of one megabit or above (``DRAMs'') from the Republic of Korea 
(``Korea''). The review covers two manufacturers/exporters and four 
resellers of subject merchandise to the United States during the period 
of review (``POR''), May 1, 1998 through April 30, 1999. Based upon our 
analysis, the Department has preliminarily determined that dumping 
margins exist for both manufacturers/exporters and the four resellers 
during the POR. If these preliminary results are adopted in our final 
results of administrative review, we will instruct the United States 
Customs Service (``Customs'') to assess antidumping duties as 
appropriate. Interested parties are invited to comment on these 
preliminary results. Parties who submit arguments in this proceeding 
are requested to submit with the argument (1) a statement of the issue, 
and (2) a brief summary of the argument.

EFFECTIVE DATE: June 6, 2000.

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

SUPPLEMENTARY INFORMATION:

Applicable Statute and Regulations

    Unless otherwise stated, all citations to the Tariff Act of 1930, 
as amended (``the Act''), are references to the provisions as of 
January 1, 1995, the effective date of the amendments made to the Act 
by the Uruguay Round Agreements Act (``URAA''). In addition, unless 
otherwise indicated, all references to the regulations of the 
Department are to 19 CFR part 351 (1999).

Background

    On May 10, 1993, the Department published in the Federal Register 
(58 FR 27250) the antidumping duty order on DRAMs from Korea. On May 
28, 1999, the petitioner, Micron Technology Inc., (``Micron'') 
requested an administrative review of Hyundai Electronics Industries 
Co., Ltd. (``Hyundai'') and LG Semicon Co., Ltd. (``LG''), Korean 
manufacturers of DRAMs, and four Korean resellers of DRAMs, the G5 
Corporation (``G5''), Kim's Marketing, Jewon Trading (``Jewon''), and 
Wooyang Industry Co., Ltd. (``Wooyang''), for the period May 1, 1998 
through April 30, 1999. Additionally, the petitioner requested a cost 
investigation of LG and Hyundai pursuant to section 773(b) of the Act. 
On May 28, 1999, LG requested that the Department conduct a review of 
its exports of the subject merchandise to the United States. On May 28, 
1999, LG also submitted a timely request that the order be revoked with 
respect to LG. LG based its revocation request on its appeal of the 
Department's inclusion of unreported sales in the fourth review which, 
LG claimed, if successful, would result in a de minimis margin in the 
fourth review for LG; and the final results of the fifth review, which 
had not been issued at the time of LG's revocation request. On June 30, 
1999 (64 FR 35124), the Department initiated an administrative review 
of Hyundai, LG, G5, Kim's Marketing, Jewon, and Wooyang, including cost 
investigations of Hyundai and LG, covering the POR. On November 17, 
1999, Micron submitted a request for postponement of the preliminary 
results. On December 20, 1999, the Department published in the Federal 
Register (64 FR 7111) a notice extending the time for the preliminary 
results from January 30, 2000, until May 30, 2000. The Department is 
conducting this review in accordance with section 751 of the Act.

Scope of the 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

[[Page 35887]]

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

Intent Not To Revoke

    LG submitted a request that the order be partially revoked with 
respect to itself pursuant to 19 CFR 351.222(e)(1). Under the 
Department's regulations, the Department may revoke an order, in part, 
if the Secretary concludes that, among other things: (1) ``[o]ne or 
more exporters or producers covered by the order have sold the 
merchandise at not less than normal value for a period of at least 
three consecutive years''; (2) ``[i]t is not likely that those persons 
will in the future sell the merchandise at less than normal value''; 
and (3) ``the exporter or producer agrees in writing to its immediate 
reinstatement in the order, as long as any exporter or producer is 
subject to the order, if the Secretary concludes that the exporter or 
producer, subsequent to the revocation, sold the merchandise at less 
than normal value.'' See 19 CFR 351.222(b)(2). In this case, LG does 
not meet the first criterion for revocation. In the two previous 
segments of this proceeding, the Department found that LG sold subject 
merchandise at less than normal value. See Dynamic Random Access Memory 
Semiconductors of One Megabit or Above from the Republic of Korea, 63 
FR 50867 (September 23, 1998) (``Final Results 1998'') and Dynamic 
Random Access Memory Semiconductors (DRAMs) of One Megabit or Above 
from the Republic of Korea, 64 FR 69694 (December 14, 1999) (``Final 
Results 1999''). Since LG has not met the first criterion for 
revocation, i.e., zero or de minimis margins for three consecutive 
reviews, the Department need not reach a conclusion with respect to the 
second and third criteria. Therefore, on this basis, we have 
preliminarily determined not to revoke the Korean DRAM antidumping duty 
order with regard to LG.

Verification

    As provided in section 782(i) of the Act, we verified information 
provided by LG and Hyundai. We used standard verification procedures, 
including on-site inspection of the respondents' facilities, 
examination of relevant sales, financial, and/or cost records, and 
selection of original documentation containing relevant information. 
G5, Jewon, Kim's Marketing and Wooyang were not verified because the 
companies did not respond to the Department's questionnaires.

Facts Available (``FA'')

1. Application of FA

    Section 776(a)(2) of the Act provides that if any interested party: 
(A) withholds information that has been requested by the Department; 
(B) fails to provide such information in a timely manner or in the form 
or manner requested; (C) significantly impedes an antidumping 
investigation; or (D) provides such information but the information 
cannot be verified, the Department shall use facts otherwise available 
in making its determination.
    On July 8, 1999, the Department sent Hyundai, LG, G5, Jewon, Kim's 
Marketing and Wooyang questionnaires requesting that they provide 
information regarding any sales that they made to the United States 
during the POR. We did not receive any replies from G5, Jewon, Kim's 
Marketing or Wooyang.
    On March 3, 2000, the Department sent letters informing G5, Jewon, 
Kim's Marketing and Wooyang that not responding to the Department's 
questionnaires could result in a determination based on FA. We did not 
receive any replies from the four companies.
    Because G5, Jewon, Kim's Marketing and Wooyang have failed to 
respond to our questionnaires, pursuant to section 776(a) of the Act, 
we have applied FA to calculate their dumping margins.

2. Selection of Adverse FA

    Section 776(b) of the Act provides that, in selecting from the 
facts available, adverse inferences may be used against a party that 
failed to cooperate by not acting to the best of its ability to comply 
with requests for information. See also Statement of Administrative 
Action (``SAA'') accompanying the URAA, H.R. Doc. No. 316, 103d Cong., 
2d Sess. 870 (1994).
    Section 776(b) states further that an adverse inference may include 
reliance on information derived from the petition, the final 
determination, the final results of prior reviews, or any other 
information placed on the record. See also Id. at 868. In addition, the 
SAA establishes that the Department may employ an adverse inference 
``to ensure that the party does not obtain a more favorable result by 
failing to cooperate than if it had cooperated fully.'' See SAA at 870. 
In employing adverse inferences, the SAA instructs the Department to 
consider ``the extent to which a party may benefit from its own lack of 
cooperation.'' Id.
    Because G5, Jewon, Kim's Marketing and Wooyang did not cooperate by 
complying with our request for information, and in order to ensure that 
they do not benefit from their lack of cooperation, we are employing an 
adverse inference in selecting from among the facts otherwise 
available. The Department's practice when selecting an adverse FA rate 
from among the possible sources of information has been to ensure that 
the margin is sufficiently adverse so ``as to effectuate the purpose of 
the FA rule to induce respondents to provide the Department with 
complete and accurate information in a timely manner.'' See Static 
Random Access Memory Semiconductors From Taiwan; Final Determination of 
Sales at Less Than Fair Value, 63 FR 8909, 8932 (February 23, 1998).
    In order to ensure that the rate is sufficiently adverse so as to 
induce future cooperation from G5, Jewon, Kim's Marketing and Wooyang, 
we have assigned these companies, as adverse FA, the highest calculated 
margin from any segment of this proceeding, 10.44 percent, which is the 
rate calculated for Hyundai in the fifth administrative review. See 
Final Results 1999.
    Information from prior segments of the proceeding, such as involved 
here, constitutes ``secondary information'' under section 776(c) of the 
Act. Section 776(c) of the Act provides that the Department shall, to 
the extent practicable, corroborate secondary information used for FA 
by reviewing independent sources reasonably at its disposal. The SAA 
provides that to ``corroborate'' means simply that the Department will 
satisfy itself that the secondary information to be used has probative 
value. See SAA at 870. As noted in Tapered Roller Bearings and Parts 
Thereof, Finished and Unfinished,

[[Page 35888]]

from Japan, and Tapered Roller Bearings, Four Inches or Less in Outside 
Diameter, and Components Thereof, from Japan; Preliminary Results of 
Antidumping Duty Administrative Reviews and Partial Termination of 
Administrative Reviews, 61 FR 57391, 57392 (November 6, 1996) 
(``TRBs''), to corroborate secondary information, the Department will, 
to the extent practicable, examine the reliability and relevance of the 
information used. However, unlike other types of information, such as 
input costs or selling expenses, there are no independent sources from 
which the Department can derive calculated dumping margins; the only 
source for margins is administrative determinations. Thus, in an 
administrative review, if the Department chooses as total adverse FA a 
calculated dumping margin from a prior segment of the proceeding, it is 
not necessary to question the reliability of the margin for that time 
period.
    As to the relevance of the margin used for adverse FA, the 
Department stated in TRBs that it will ``consider information 
reasonably at its disposal as to whether there are circumstances that 
would render a margin irrelevant. Where circumstances indicate that the 
selected margin is not appropriate as adverse FA, the Department will 
disregard the margin and determine an appropriate margin.'' Id.; see 
also Fresh Cut Flowers from Mexico; Preliminary Results of Antidumping 
Duty Administrative Review, 60 FR 49567 (February 22, 1996), where we 
disregarded the highest margin in the case as best information 
available because the margin was based on another company's 
uncharacteristic business expense resulting in an extremely high 
margin.
    As stated above, the highest rate determined in any prior segment 
of the proceeding is 10.44 percent, a calculated rate from Final 
Results 1999.
    In the absence of information on the administrative record that 
application of the 10.44 percent rate to G5, Jewon, Kim's Marketing and 
Wooyang would be inappropriate as an adverse FA rate in the instant 
review, that the margin is not relevant, or that leads us to re-examine 
this rate as adverse facts available in the instant review, we have 
applied, as FA, the 10.44 percent margin from a prior administrative 
review of this order, and have satisfied the corroboration requirements 
under section 776(c) of the Act.

Third Country Transshipments

    In the fourth and fifth administrative reviews of this proceeding, 
we determined that LG had knowledge, or should have had knowledge, that 
a substantial amount of its sales to third country customers were 
destined for the United States. See Final Results 1998 and Final 
Results 1999. Furthermore, during the current review, the petitioner 
made several allegations that Hyundai's and LG's affiliates in other 
countries, such as Hong Kong, made sales during the POR to companies 
that shipped the merchandise to the United States. Consequently, we 
requested information from Hyundai and LG about their third country 
sales during the POR and, for the first time, conducted verifications 
of Hyundai's and LG's Hong Kong affiliates.
    LG did not report the requested third country sales through an 
affiliated party. However, LG subsequently provided clarifying 
information about these sales. As a result of this clarification, we 
have made no adjustment for these sales. For further discussion, See 
Memorandum on LG's Third Country Sales dated May 30, 2000.
    We also have made no adjustments in this review for Hyundai's or 
LG's reported third country sales because we did not find evidence that 
Hyundai or LG had knowledge, or should have had knowledge, that any of 
their sales to third country customers were destined for the United 
States. In the future, we intend to continue to closely monitor any 
transshipments of Korean DRAMs to the United States from all countries, 
and will particularly scrutinize transshipments of Korean DRAMs through 
Hong Kong.

Fair Value Comparisons

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

CEP

    For Hyundai and LG, in calculating United States price, the 
Department used CEP, as defined in section 772(b) of the Act, because 
the merchandise was first sold to an unaffiliated U.S. purchaser after 
importation. We calculated CEP based on delivered prices to 
unaffiliated customers in the United States.
    We made deductions from the starting price, where appropriate, for 
discounts, rebates, billing adjustments, foreign and U.S. brokerage and 
handling, foreign inland insurance, export insurance, air freight, air 
insurance, U.S. warehousing expense, U.S. duties and direct and 
indirect selling expenses to the extent that they are associated with 
economic activity in the United States in accordance with sections 
772(c)(2) and 772(d)(1) of the Act. These deductions included credit 
expenses and commissions, as applicable, and inventory carrying costs 
incurred by the respondents' U.S. subsidiaries. We added duty drawback 
received on imported materials, where applicable, pursuant to section 
772(c)(1)(B) of the Act.
    For both respondents, for DRAMs that were further manufactured into 
memory modules after importation, we deducted all costs of further 
manufacturing in the United States, pursuant to section 772(d)(2) of 
the Act. These costs consisted of the costs of the materials, 
fabrication, and general expenses associated with further manufacturing 
in the United States. Pursuant to section 772(d)(3) of the Act, we also 
reduced the CEP by the amount of profit allocated to the expenses 
deducted under section 772(d)(1) and (2).
    We corrected for certain clerical errors found during verification, 
including corrections that Hyundai and LG identified in their responses 
in the course of preparing for verification.

Level of Trade (``LOT'')

    In accordance with section 773(a)(1)(B) of the Act, to the extent 
practical, we determined NV based on sales in the comparison market at 
the same LOT as the CEP sales. The NV LOT is that of the starting-price 
sales in the comparison market or, when NV is based on constructed 
value (CV), that of the sales from which we derive selling, general, 
and administrative (SG&A) expenses and profit. For CEP, it is the level 
of the constructed sale from the exporter to the importer.
    To determine whether NV sales are at a different LOT than the CEP 
sales, we examined stages in the marketing process and selling 
activities along the chain of distribution between the producer and the 
unaffiliated customer. If the comparison-market sales are at a 
different LOT, and the difference affects

[[Page 35889]]

price comparability, as manifested in a pattern of consistent price 
differences between the sales on which NV is based and comparison-
market sales at the LOT of the export transaction, we make a LOT 
adjustment under section 773(a)(7)(A) of the Act. Finally, for CEP 
sales, if the NV level is more remote from the factory than the CEP 
level and there is no basis for determining whether the difference in 
the levels between NV and CEP affects price comparability, we adjust NV 
under section 773(a)(7)(B) of the Act (the CEP offset provision). See 
Notice of Final Determination of Sales at Less Than Fair Value: Certain 
Cut-to Length Carbon Steel Plate from South Africa, 62 FR 61731 
(November 19, 1997).
    We reviewed the questionnaire responses of Hyundai and LG to 
establish whether there were sales at different LOTs based on the 
distribution system, selling activities, and services offered to each 
customer or customer category. For both respondents, we identified one 
LOT in the home market with direct sales by the parent corporation to 
the domestic customer. These direct sales were made by both respondents 
to original equipment manufacturers (``OEMs'') and to distributors. In 
addition, all sales, whether made to OEM customers or to distributors, 
included the same selling functions. For the U.S. market, all sales for 
both respondents were reported as CEP sales. The LOT of the U.S. sales 
is determined for the sale to the affiliated importer rather than the 
resale to the unaffiliated customer. We examined the selling functions 
performed by the Korean companies for U.S. CEP sales (as adjusted) and 
preliminarily determine that they are at a different LOT from the 
Korean companies' home market sales because the companies' CEP 
transactions were at a less advanced stage of marketing. For instance, 
at the CEP level, the Korean companies did not engage in any general 
promotion activities, marketing functions, or price negotiations for 
U.S. sales. Because we compared CEP sales to home market sales at a 
more advanced LOT, we examined whether a LOT adjustment may be 
appropriate. In this case, both respondents only sold at one LOT in the 
home market. Therefore, there is no basis upon which either respondent 
can demonstrate a pattern of consistent price differences between 
levels of trade. Further, we do not have information which would allow 
us to examine pricing patterns based on the respondents' sales of other 
products and there is no other record information on which such an 
analysis could be based. Because the data available do not provide an 
appropriate basis for making a LOT adjustment and the LOT in the home 
market is at a more advanced stage of distribution than the LOT of the 
CEP sales, a CEP offset is appropriate. Both respondents claimed a CEP 
offset. We applied the CEP offset to adjusted home market prices or CV, 
as appropriate. The CEP offset consisted of an amount equal to the 
lesser of the weighted-average U.S. indirect selling expenses and U.S. 
commissions or home market indirect selling expenses. See the 
Memorandum on LOT for LG, dated May 30, 2000, and Memorandum on LOT for 
Hyundai, dated May 30, 2000.

NV

Home Market Viability

    In order to determine whether there were sufficient sales of DRAMs 
in the home market to serve as a viable basis for calculating NV, we 
compared the respondents' volume of home market sales of the foreign 
like product to the volume of U.S. sales of the subject merchandise, in 
accordance with section 773(a)(1)(C) of the Act. Because the aggregate 
volume of home market sales of the foreign like products for both 
Hyundai and LG was greater than five percent of the respective 
aggregate volume of U.S. sales of the subject merchandise, we 
determined that the home market provides a viable basis for calculating 
NV for all respondents.

Cost of Production (``COP'')

    We disregarded Hyundai's and LG's sales found to have been made 
below the COP in Final Results 1998, the most recent segment of this 
proceeding for which final results were available at the time of the 
initiation of this review. Accordingly, the Department, pursuant to 
section 773(b) of the Act, initiated COP investigations of both 
respondents for purposes of this administrative review.
    We calculated the COP based on the sum of the costs of materials 
and fabrication employed in producing the foreign like product, SG&A 
expenses, and the cost of all expenses incidental to placing the 
foreign like product in condition, packed, ready for shipment, in 
accordance with section 773(b)(3) of the Act. We compared weighted-
average quarterly COP figures for each respondent, adjusted where 
appropriate (see below), to home market sales of the foreign like 
product, as required under section 773(b) of the Act, in order to 
determine whether these sales had been made at prices below the COP. In 
determining whether to disregard home market sales made at prices below 
the COP, we examined whether such sales were made (1) within an 
extended period of time in substantial quantities, and (2) at prices 
which permitted the recovery of all costs within a reasonable period of 
time in the normal course of trade, in accordance with sections 
773(b)(1)(A) and (B) of the Act. In accordance with section 
773(b)(2)(D) of the Act, we conducted the recovery of cost test using 
annual cost data.
    Pursuant to section 773(b)(2)(C)(i) of the Act, where less than 20 
percent of home market sales of a given model were at prices less than 
the COP, we did not disregard any below-cost sales of that model 
because the below-cost sales were not made in ``substantial 
quantities.'' Where 20 percent or more of a respondent's sales of a 
given product were at prices below the COP, we found that sales of that 
model were made in ``substantial quantities'' within an extended period 
of time, in accordance with section 773(b)(2)(B) and (C) of the Act. To 
determine whether prices provided for recovery of costs within a 
reasonable period of time, we tested whether the prices which were 
below the per-unit cost of production at the time of the sale were also 
below the weighted-average per-unit cost of production for the POR, in 
accordance with section 773(b)(2)(D) of the Act. If they were, we 
disregarded the below-cost sales in determining NV.
    We found that for both respondents, more than 20 percent of their 
home market sales for certain products were made at prices that were 
less than the COP. Furthermore, the prices did not permit the recovery 
of costs within a reasonable period of time. We, therefore, disregarded 
the below-cost sales and used the remaining above-cost sales as the 
basis for determining NV, in accordance with section 773(b)(1). For 
those sales for which there were no comparable home market sales in the 
ordinary course of trade, we compared CEP to CV pursuant to section 
773(a)(4) of the Act.

Adjustments to COP

Research & Development (``R&D'')

    Consistent with our past practice in this case, the R&D element of 
COP was based on R&D expenses related to all semiconductor products, 
not product-specific expenditures. See, e.g., Final Results 1999, 64 FR 
at 69701-69702.
    In addition, Hyundai and LG, in 1998, completely deferred certain 
R&D costs and amortized other R&D costs over five years using the 
straight-line method. This is the same methodology for recognizing R&D 
costs that Hyundai and

[[Page 35890]]

LG began to use in 1997, after previously expensing all R&D costs as 
incurred (except for Hyundai, which began to defer certain R&D costs in 
1996). Both Hyundai and LG based the R&D expenses that they reported to 
the Department for this POR on the amount of R&D costs that they 
expensed in 1998.
    Section 773(f)(1)(A) of the Act directs 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.'' Hyundai's and LG's methodology for recognizing R&D 
costs is in accordance with Korean GAAP. However, the legacy of 
Hyundai's and LG's inconsistency in R&D accounting practices continues 
to distort the cost calculation for antidumping purposes, in a similar 
manner to the distortions that we noted in 1997 in the fifth 
administrative review. See Final Results 1999, 64 FR at 69696-69700.
    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). When Hyundai and LG do not 
consistently expense or amortize R&D costs, they will 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. In 1998, as in 1997, Hyundai and LG, as a consequence of 
their change in accounting methods for R&D costs in 1997, in only their 
second consecutive year of amortizing R&D costs, recognized, and 
reported to the Department, an aberrationally low amount of R&D 
expenses.
    Also in 1998, as in 1997, Hyundai and LG completely deferred 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. This practice exacerbates the low level of 
R&D expenses that the respondents recognize in relation to the amount 
of expenses actually incurred. As we found in Final Results 1999, 64 FR 
at 69699, we find that, for dumping purposes, this methodology does not 
reasonably reflect the cost of producing the subject merchandise.
    The Court of International Trade, in Micron Technology v. United 
States, Slip Op. 99-51 (June 16, 1999), at 6, 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 period of review.'' However, as a result of 
their recent change 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. Rather, because of their 
change in R&D accounting 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 it is appropriate to recognize 
for antidumping purposes all of Hyundai's and LG's 1998 current R&D 
costs incurred in order to reasonably and accurately reflect their 
actual R&D costs for a given year. The Department also continues to 
believe that, in general, recognizing the current year's R&D costs 
incurred 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 had followed prior to 1997.

Foreign Translation Gains & Losses

    In 1998, both Hyundai and LG changed how they recognized their 
long-term foreign currency translation gains and losses. In 1998, 
Hyundai and LG recognized all of their long-term translation gains and 
losses, while in 1997, the previous year, they had capitalized such 
gains and losses and amortized the amounts over the lives of the 
corresponding liabilities. In addition, in 1998, these two companies 
offset the vast majority of their respective consolidated deferred 
translation losses (part of which were due to be expensed in 1998) with 
the revaluation increment from the revaluation of their physical 
assets. The revaluation increment is an equity type adjustment on the 
statement of retained earnings. As a result, the deferred translation 
losses are never reflected on the companies' income statement. While 
these accounting changes are in accordance with Korean GAAP, the 
Department considers the new accounting treatment of these gains and 
losses to be distortive.
    Hyundai's and LG's changed treatment of their long-term translation 
gains and losses results in the diminution of the impact of their 
translation losses, and the exaggeration of the impact of their 
translation gains. In 1997, Hyundai and LG incurred significant long-
term translation losses when the Korean Won dropped precipitously. By 
offsetting much of these translation losses in 1998 with the 
revaluation increment, Hyundai and LG avoided recognizing almost all of 
the deferred losses from 1997, while still recognizing gains (including 
deferred gains from 1997) in 1998 on those same liabilities that 
experienced the 1997 losses. In addition, by switching from amortizing 
over the life of the liabilities in 1997, to expensing as incurred in 
1998, when Hyundai and LG experienced net long-term translation gains, 
Hyundai and LG heightened the impact of those 1998 gains by recognizing 
all of the gains immediately.
    In order to neutralize the effect of the changed treatment of the 
long-term translation gains and losses, we consider it appropriate to 
amortize all long-term translation gains and losses over the life of 
the loans. This treatment is consistent with Hyundai's and LG's 
accounting treatment in 1997, and is the same method the Department 
followed in the fourth administrative review covering 1996, when both 
Hyundai and LG did not recognize in their income statements any of 
their long-term translation gains and losses. See Final Results 1998, 
63 FR at 50872.
    Hyundai, for the first time in 1997, and again in 1998, capitalized 
in its construction in progress (``CIP'') account a part of its long-
term translation gains and losses. LG also capitalized in its CIP 
account a part of its long-term translation gains and losses in 1997 
and 1998. The Department considers this distortive, since the gains and 
losses generated by the same debt are amortized over different periods 
(the life of the corresponding financial liabilities and, for the part 
capitalized to CIP, the life of physical assets). We therefore included 
the capitalized translation gains and losses in the amount of 
translation gains and losses that we amortized over the life of the 
loans.

Depreciation

    Hyundai and LG, in another accounting change in 1998, increased the 
useful lives over which they depreciate certain assets. Our practice, 
pursuant to section 773(f)(1)(A) of the Act and the SAA at 834, is to 
use those accounting methods and practices that

[[Page 35891]]

respondents have historically used. As this is the sixth review of this 
order, we do not consider it appropriate for the respondents to 
dramatically change the useful lives of their assets for antidumping 
purposes. We find that the useful lives that both Hyundai and LG 
adopted for certain assets in 1998 greatly exceed the useful lives that 
they have employed for these assets in the past. This is the second 
time since 1996 that the respondents have extended the useful lives of 
their assets. While the Department accepted the respondents' 1996 minor 
useful life adjustment (see Final Results 1998, 63 FR at 50870-50871), 
the useful lives that Hyundai and LG adopted in 1998 are in some 
instances greater than fifty percent longer than the previous useful 
lives. Moreover, we do not believe that the useful lives Hyundai and LG 
previously employed were unreasonable, especially considering that 
these two companies themselves argued that the previous useful lives 
were reasonable in Final Results 1998. We therefore adjusted Hyundai's 
and LG's reported depreciation expense using the pre-1998 useful lives.

Company-Specific Adjustments

Hyundai
    1. We adjusted Hyundai's reported interest expense rate by 
recalculating the long-term translation gains and losses, as explained 
above, and excluding offsets of long-term interest income related to 
certain restricted long-term deposits, consistent with Final Results 
1999, 64 FR at 69707.
    2. We adjusted Hyundai's reported general and administrative 
(``G&A'') expense rate by excluding the foreign currency transaction 
gains and losses that we accounted for in the interest expense 
calculation, and all unspecified foreign currency transaction gains and 
losses; and including foreign currency gains and losses related to 
account payables.
    3. We excluded certain non-operating expenses from Hyundai's R&D 
expenses.
    4. In addition to the adjustments for depreciation noted above, we 
adjusted Hyundai's depreciation expenses to reflect the net effect of 
increasing depreciation, consistent with Final Results 1998, for 
special depreciation that would have been taken had the respondent 
continued to take special depreciation on certain equipment for the 
period of the first half of 1998, and decreasing depreciation expenses 
to reflect the amount of special depreciation which the Department 
expensed in Final Results 1998, but which Hyundai expensed in its own 
books and records, and reported in its response, for the current POR.
    See Memorandum on Hyundai Electronics Industries Co., Ltd.: 
Calculations for the Preliminary Results, dated May 30, 2000.
LG
    1. We adjusted LG's reported interest expense rate by recalculating 
the long-term translation gains and losses, as explained above.
    2. We adjusted LG's reported G&A expense rate by excluding the 
foreign currency transaction gains and losses that we accounted for in 
the interest expense calculation, foreign currency transaction gains 
and losses related to account receivables, and unspecified foreign 
currency transaction gains and losses; and including foreign currency 
gains and losses related to account payables.
    See Memorandum on LG Semicon Co., Ltd.: Calculations for the 
Preliminary Results, dated May 30, 2000.

CV

    In accordance with section 773(e) of the Act, we calculated CV 
based on the respondents' cost of materials and fabrication employed in 
producing the subject merchandise, SG&A expenses, the profit incurred 
and realized in connection with the production and sale of the foreign 
like product, and U.S. packing costs. We used the cost of materials, 
fabrication, and G&A expenses as reported in the CV portion of the 
questionnaire response, adjusted as discussed in the COP section above. 
We used the U.S. packing costs as reported in the U.S. sales portion of 
the respondents' questionnaire responses. For selling expenses, we used 
the average of the selling expenses reported for home market sales that 
survived the cost test, weighted by the total quantity of those sales. 
For actual profit, we first calculated, based on the home market sales 
that survived the cost test, the difference between the home market 
sales value and home market COP, and divided the difference by the home 
market COP. We then multiplied this percentage by the COP for each U.S. 
model to derive an actual profit.

Price Comparisons

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

Preliminary Results of Review

    As a result of this review, we preliminarily determine that the 
following weighted-average dumping margins exist for May 1, 1998 
through April 30, 1999:

[[Page 35892]]



------------------------------------------------------------------------
                  Manufacturer/exporter                   Percent margin
------------------------------------------------------------------------
The G5 Corporation......................................           10.44
Hyundai Electronic Industries Co., Ltd..................            5.32
Jewon Microelectronics..................................           10.44
Kim's Marketing.........................................           10.44
LG Semicon Co., Ltd.....................................            3.08
Wooyang Industry Co., Ltd...............................           10.44
------------------------------------------------------------------------

    Pursuant to 19 CFR 351.224(b), the Department will disclose to 
parties to the proceeding any calculations performed in connection with 
these preliminary results within 5 days of the date of publication of 
this notice. Any interested party may request a hearing within 30 days 
of the date of publication of this notice. Parties who submit arguments 
in this proceeding are requested to submit with each argument: (1) a 
statement of the issue and (2) a brief summary of the argument. All 
case briefs must be submitted within 30 days of the date of publication 
of this notice. Rebuttal briefs, which are limited to issues raised in 
the case briefs, may be filed not later than seven days after the case 
briefs are filed. A hearing, if requested, will be held two days after 
the date the rebuttal briefs are filed or the first business day 
thereafter.
    The Department will publish a notice of the final results of this 
administrative review, which will include the results of its analysis 
of the issues raised in any written comments or at the hearing, within 
120 days from the publication of these preliminary results.
    The Department shall determine, and Customs shall assess, 
antidumping duties on all appropriate entries. The Department will 
issue appraisement instructions directly to Customs. The final results 
of this review shall be the basis for the assessment of antidumping 
duties on entries of merchandise covered by the determination and for 
future deposits of estimated duties. We have calculated importer-
specific ad valorem duty assessment rates based on the ratio of the 
total amount of dumping margins calculated for the examined sales to 
the entered value of sales used to calculate those duties. These rates 
will be assessed uniformly on all entries of each particular importer 
made during the POR.
    Furthermore, the following deposit requirements will be effective 
upon completion of the final results of these administrative reviews 
for all shipments of DRAMs from Korea entered, or withdrawn from 
warehouse, for consumption on or after publication date of the final 
results of these administrative reviews, as provided by section 
751(a)(1) of the Act: (1) the cash deposit rate for the reviewed 
companies will be the rate established in the final results of this 
administrative review, except if the rate is less than 0.5 percent ad 
valorem and, therefore, de minimis, no cash deposit will be required; 
(2) for exporters not covered in this review, but covered in the 
original LTFV investigation or a previous review, the cash deposit rate 
will continue to be the company-specific rate published in the most 
recent period; (3) if the exporter is not a firm covered in this 
review, a previous review, or the original LTFV investigation, but the 
manufacturer is, the cash deposit rate will be the rate established for 
the most recent period for the manufacturer of the merchandise; and (4) 
if neither the exporter nor the manufacturer is a firm covered in this 
or any previous reviews or the LTFV investigation, the cash deposit 
rate will be 4.55 percent, the ``all-others'' rate established in the 
LTFV investigation. These deposit requirements, when imposed, shall 
remain in effect until publication of the final results of the next 
administrative review.
    This notice serves as a preliminary reminder to importers of their 
responsibility under 19 CFR 351.402(f) of the Department's regulations 
to file a certificate regarding the reimbursement of antidumping duties 
prior to liquidation of the relevant entries during this review period. 
Failure to comply with this requirement could result in the Secretary's 
presumption that reimbursement of antidumping duties occurred and the 
subsequent assessment of double antidumping duties.
    This administrative review and this notice are in accordance with 
sections 751(a)(1) and 777(i)(1) of the Act.

    Dated: May 30, 2000.
Troy H. Cribb,
Acting Assistant Secretary for Import Administration.
[FR Doc. 00-14204 Filed 6-5-00; 8:45 am]
BILLING CODE 3510-DS-P