[Federal Register Volume 62, Number 190 (Wednesday, October 1, 1997)]
[Notices]
[Pages 51442-51449]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-25943]


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DEPARTMENT OF COMMERCE

International Trade Administration
[A-583-827]


Notice of Preliminary Determination of Sales at Less Than Fair 
Value and Postponement of Final Determination: Static Random Access 
Memory Semiconductors From Taiwan

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

EFFECTIVE DATE: October 1, 1997.

FOR FURTHER INFORMATION CONTACT: Shawn Thompson or David Genovese, 
Import Administration, International Trade Administration, U.S. 
Department of Commerce, 14th Street and Constitution Avenue, N.W., 
Washington, D.C. 20230; telephone: (202) 482-1776 or (202) 482-0498, 
respectively.

The Applicable Statute

    Unless otherwise indicated, all citations to the Tariff Act of 
1930, as amended (the Act), are references to the provisions effective 
January 1, 1995, the effective date of the amendments made to the Act 
by the Uruguay Round Agreements Act (URAA). In addition, unless 
otherwise indicated, all citations to the Department's regulations are 
to the regulations codified at 19 CFR part 353 (April 1, 1996).

Preliminary Determination

    We preliminarily determine that static random access memory 
semiconductors (SRAMs) from Taiwan are being, or are likely to be, sold 
in the United States at less than fair value (LTFV), as provided in 
section 733 of the Act. The estimated margins of sales at LTFV are 
shown in the ``Suspension of Liquidation'' section of this notice.

Case History

    Since the initiation of this investigation (Notice of Initiation of 
Antidumping Duty Investigations: SRAMs from the Republic of Korea and 
Taiwan (62 FR 13596, March 21, 1997)), the following events have 
occurred:
    During March and April 1997, the Department obtained information 
from the American Institute in Taiwan identifying potential producers 
and/or exporters of the subject merchandise to the United States. Based 
on this information, in April 1997, the Department issued antidumping 
questionnaires to 22 companies.<SUP>1</SUP>
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    \1\ These companies are as follows: (1) Advanced 
Microelectronics Products Inc. (Advanced Microelectronics); (2) 
Alliance Semiconductor Corp. (Alliance); (3) Asia Specific 
Technology Limited; (4) Best Integrated Technology, Inc. (BIT); (5) 
Chia Hsin Livestock Corp.; (6) E-CMOS Technology Corporation; (7) 
Etron Technology, Inc.; (8) G-Link Technology Corp.; (9) Holtek 
Microelectronics Inc.; (10) Hualon Microelectronics Corporation; 
(11) Integrated Silicon Solution (Taiwan) Inc. (ISSI); (12) Kes Rood 
Technology Taiwan Ltd.; (13) Lien Hsing Integrated Circuits (Lien 
Hsing); (14) Macronix International Co., Ltd.; (15) Mosel-Vitelic, 
Inc.; (16) Taiwan Memory Technology, Inc.; (17) Taiwan Semiconductor 
Manufacturing Corporation (TSMC); (18) Texas Instruments-Acer Inc. 
(Texas Instruments); (19) United Microelectronics Corporation (UMC); 
(20) Utron Technology, Inc.; (21) Vanguard International 
Semiconductor Corporation; and (22) Winbond Electronics Corporation 
(Winbond).
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    Also in April 1997, the United States International Trade 
Commission (ITC) issued an affirmative preliminary injury determination 
in this case (see ITC Investigation No. 731-TA-761-762).
    In May 1997, the Department received responses to Section A of the 
questionnaire from 18 of the 22 companies. Three of the remaining 
companies, Advanced Microelectronics, BIT, and Texas-Instruments, did 
not submit responses to Section A. Therefore, we have assigned a margin 
to these companies based on facts available. (See the ``Facts 
Available'' section below, for further discussion.) Regarding the 
fourth company, Lien Hsing, we were notified by one of the respondents 
in this investigation that it had received the questionnaire addressed 
to Lien Hsing, but that it was unaware of the existence of this 
company. Because Lien Hsing never received the Department's 
questionnaire and we found no way in which to locate and serve it with 
the questionnaire, no adverse inference is warranted with respect to 
it.
    Based on the information received from the 18 responding companies, 
in May 1997, the Department determined that it did not have the 
administrative resources to investigate all known producers and/or 
exporters of SRAMs

[[Page 51443]]

during the period of investigation (POI). Accordingly, we decided to 
limit the number of mandatory respondents in this investigation to the 
five companies that we believed had the largest sales volumes of SRAMs 
to the United States during the POI, pursuant to section 777A(c) of the 
Act. These companies are Alliance, ISSI, TSMC, UMC, and Winbond 
(hereinafter ``respondents''). For a more detailed discussion regarding 
this issue, see the memorandum to Louis Apple from the Team, dated May 
21, 1997.
    Respondents submitted questionnaire responses in June 1997. We 
issued supplemental questionnaires to these companies in July 1997, and 
received responses to these questionnaires in August 1997. Based on a 
review of these responses, we have excluded TSMC from our analysis in 
this investigation. For a discussion of this issue, see the memorandum 
to Louis Apple from the Team, dated September 23, 1997.
    Pursuant to section 735(a)(2)(A) of the Act, on August 14, 1997, 
one of the respondents, Winbond, requested that, in the event of an 
affirmative preliminary determination in this investigation, the 
Department postponed its final determination until no later than 135 
days after the publication of this notice in the Federal Register. For 
further discussion, see the ``Postponement of Final Determination and 
Extension of Provisional Measures'' section of this notice.
    In September 1997, Alliance submitted revised sales and cost 
databases at the Department's request.

Facts Available

    Three interested parties in this investigation, Advanced 
Microelectronics, BIT, and Texas Instruments, failed to respond to the 
Department's requests for information. Specifically, these companies 
did not provide a response to the Department's questionnaire issued in 
April 1997.
    Section 776(a)(2) of the Act provides that if an interested party: 
(1) Withholds information that has been requested by the Department, 
(2) fails to provide such information in a timely manner or in the form 
or manner requested, (3) significantly impedes a determination under 
the antidumping statute, or (4) provides such information but the 
information cannot be verified, the Department shall, subject to 
subsections 782(c)(1) and (e) of the Act, use facts otherwise available 
in reaching the applicable determination. Because Advanced 
Microelectronics, BIT, and Texas Instruments failed to respond to the 
Department's questionnaire and because subsections (c)(1) and (e) do 
not apply with respect to these companies, we must use facts otherwise 
available to calculate their dumping margins.
    Section 776(b) of the Act provides that adverse inferences may be 
used against a party that has failed to cooperate by not acting to the 
best of its ability to comply with requests for information. See also 
Statement of Administrative Action accompanying the URAA, H.R. Rep. No. 
316, 103d Cong., 2d Sess. 870 (SAA). The failure of Advanced 
Microelectronics, BIT, and Texas Instruments to reply to the 
Department's questionnaires or to provide a satisfactory explanation of 
their conduct demonstrates that they have failed to act to the best of 
their ability in this investigation. Thus, the Department has 
determined that, in selecting among the facts otherwise available to 
these companies, an adverse inference is warranted. As facts otherwise 
available, we are assigning to Advanced Microelectronics, BIT, and 
Texas Instruments the highest margin stated in the notice of 
initiation, 113.85 percent.
    Section 776(c) of the Act provides that, when the Department relies 
on secondary information (such as the petition) in using the facts 
otherwise available, it must, to the extent practicable, corroborate 
that information from independent sources that are reasonably at its 
disposal. When analyzing the petition, the Department reviewed all of 
the data the petitioner relied upon in calculating the estimated 
dumping margins, and adjusted those calculations where necessary. See 
Initiation Checklist, dated March 17, 1997. These estimated dumping 
margins were based on a comparison of constructed value (CV) to U.S. 
price, the latter of which was based on price quotations offered by two 
Taiwanese companies. The estimated dumping margins, as recalculated by 
the Department, ranged from 93.54 to 113.85 percent. For purposes of 
corroboration, the Department re-examined the price information 
provided in the petition in light of information developed during the 
investigation and found that it has probative value. See the memorandum 
from the Team to Louis Apple dated September 23, 1997, for a detailed 
explanation of corroboration of the information in the petition.
    Therefore, as adverse facts available, we are assigning to Advanced 
Microelectronics, BIT, and Texas Instruments the highest margin stated 
in the notice of initiation, 113.85 percent. This margin is higher than 
the margin calculated for any respondent in this investigation.

Postponement of Final Determination and Extension of Provisional 
Measures

    Two of the respondents, Winbond and Alliance, requested on 
September 11 and 18, 1997, respectively, that, in the event of an 
affirmative preliminary determination in this investigation, the 
Department postpone its final determination until no later than 135 
days after the publication of this notice in the Federal Register, 
pursuant to section 735(a)(2)(A) of the Act. In accordance with 19 CFR 
section 353.20(b), because (1) our preliminary determination is 
affirmative, (2) Winbond and Alliance account for a significant 
proportion of exports of the subject merchandise, and (3) no compelling 
reasons for denial exist, we are granting respondents' request and are 
postponing the final determination until no later than 135 days after 
the publication of this notice in the Federal Register. Suspension of 
liquidation will be extended accordingly (see Preliminary Determination 
of Sales at Less Than Fair Value and Postponement of Final 
Determination: Open-End Spun Rayon Singles Yarn From Austria, 62 FR 
14399, 14400 (March 26, 1997); Final Determination of Sales at Less 
Than Fair Value: Certain Pasta From Italy, 61 FR 30326 (June 14, 
1996)).

Scope of Investigation

    The products covered by this investigation are synchronous, 
asynchronous, and specialty SRAMs from Taiwan, whether assembled or 
unassembled. Assembled SRAMs include all package types. Unassembled 
SRAMs include processed wafers or die, uncut die and cut die. Processed 
wafers produced in Taiwan, but packaged, or assembled into memory 
modules, in a third country, are included in the scope; processed 
wafers produced in a third country and assembled or packaged in Taiwan 
are not included in the scope.
    The scope of this investigation includes modules containing SRAMs. 
Such modules include single in-line processing modules (SIPs), single 
in-line memory modules (SIMMs), dual in-line memory modules (DIMMs), 
memory cards, or other collections of SRAMs, whether unmounted or 
mounted on a circuit board.
    The SRAMs within the scope of this investigation are classifiable 
under the subheadings 8542.13.8037 through 8542.13.8049, 8473.30.10 
through 8473.30.90, and 8542.13.8005 of the Harmonized Tariff Schedule 
of the United States (HTSUS). Although the HTSUS subheading is provided 
for convenience and customs purposes, our

[[Page 51444]]

written description of the scope of this investigation is dispositive.

Period of Investigation

    The POI is January 1, 1996, through December 31, 1996.

Time Period for Cost and Price Comparisons

    Section 777A(d) of the Act states that in an investigation, the 
Department will compare the weighted average of the normal values to 
the weighted average of the export prices/constructed export prices. 
Generally, the Department will compare sales and conduct the sales 
below cost test using annual averages. However, where prices have moved 
significantly over the course of the POI, it has been the Department's 
practice to use shorter time periods. See, e.g., Final Determination of 
Sales at Less Than Fair Value: Erasable Programmable Read Only Memories 
(EPROMs) from Japan, 51 FR 39680, 39682 (October 30, 1986), Final 
Determination of Sales at Less Than Fair Value: Dynamic Random Access 
Memory Semiconductors of One Megabit and Above From the Republic of 
Korea, 58 FR 15467, 15476 (March 23, 1993).
    We invited comments from interested parties regarding this issue. 
An analysis of these comments revealed that all parties agreed that the 
SRAMs market experienced a significant and consistent price decline 
during the POI. Accordingly, in recognition of the significant and 
consistent price declines in the SRAMs market during the POI, the 
Department has compared prices and conducted the sales below cost test 
using quarterly data.<SUP>2</SUP>
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    \2\ In accordance with section 773(b)(2)(D) of the Act, we 
conducted the recovery of cost test using annual cost data.
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Treatment of Foundry Sales and Elimination of TSMC as a Respondent

    During the course of this investigation, we found that two of the 
five companies we had selected to be respondents, UMC and TSMC, acted 
as foundries for SRAMs design houses. As foundries, they manufactured 
processed SRAMs wafers according to designs provided by the design 
houses. Two of these design houses, Alliance and ISSI, were also 
selected to be respondents. The design houses arranged for the probing, 
testing, and assembly of the processed wafers into individual SRAMs 
that were subsequently sold to unaffiliated downstream purchasers.
    At the time we selected respondents, we had not determined 
conclusively how the transaction between a design house and its foundry 
should be treated. See the memorandum from the Team to Louis Apple, 
dated May 15, 1997. We noted that, when the Department had had an 
opportunity to perform a thorough analysis of the respondents' 
responses to our questionnaire, the Department may conclude that the 
appropriate sales transaction to analyze is not the sale from the 
foundry to the design house, but the subsequent downstream sale of the 
encapsulated SRAMs to the United States.
    When considering this issue for purposes of this determination, we 
determined that it was necessary to decide which entity, the foundry or 
the design house, was the manufacturer of the subject merchandise, and 
which entity controlled the ultimate sale of it. For guidance in making 
this determination, we relied on the Department's policy expressed in 
our proposed regulations which, while they are not our final 
regulations, state our policy on this issue. The proposed regulations 
state that: ``[w]here a party owning the components of subject 
merchandise has a subcontractor manufacture or assemble that 
merchandise for a fee, the Department will consider the owner to be the 
manufacturer, because that party has ultimate control over how the 
merchandise is produced and the manner in which it is ultimately sold. 
The Department will not consider the subcontractor to be the 
manufacturer or producer regardless of the proportion of production 
attributable to the subcontracted operation or the location of the 
subcontractor or owner of the good.'' See Notice of Proposed Rulemaking 
and Request for Public Comment: Antidumping Duties; Countervailing 
Duties, 61 FR 7308, 7330 (February 26, 1996).
    We also reviewed section 351.401(h) of the Department's regulations 
which, while not applicable to this investigation, codifies past 
practice and current policy. Section 351.401(h) states that the 
Department ``will not consider a toller or subcontractor to be a 
manufacturer or producer where the toller or subcontractor does not 
acquire ownership, and does not control the relevant sale of, the 
subject merchandise or foreign like product.''
    In reviewing and analyzing the information submitted by respondents 
concerning the relationship between the design houses and their 
foundries, we have found the following: the design house performs all 
of the product research and development for the SRAMs that are to be 
produced. The design house produces, or arranges and pays for the 
production of, the design mask. At all stages of production, it retains 
ownership of the proprietary design and design mask. The design house 
then subcontracts the production of processed wafers with a foundry and 
provides the foundry with the design mask. Design houses tell the 
foundry what and how much to make. The foundry agrees to dedicate a 
certain amount of its production capacity to the production of the 
processed wafers for the design house. The foundry has no right to sell 
those wafers to any party other than the design house unless the design 
house fails to pay for the wafers. Once the design house takes 
possession of the processed wafers, it arranges for the subsequent 
steps in the production process (i.e., probing, testing, and assembly), 
then sells the encapsulated SRAMs to downstream customers.
    The design of the processed wafer is not only an important part of 
the finished product, it is a substantial element of production and 
imparts the essential features of the product. The design defines the 
ultimate characteristics and performance of the subject merchandise and 
delineates the purposes for which it can be used. The foundries 
manufactured processed SRAMs wafers using the proprietary designs of 
the design houses during the POI. As such, they did not control the 
production of the processed wafers in question, but rather merely 
translated the design of other companies into actual products.
    For purposes of this investigation, we have determined that the 
entity that controls and owns the SRAMs design, i.e., the design house, 
controls the production, and ultimate sale, of the subject merchandise. 
Consequently, we have determined to disregard the foundry sales of UMC 
and TSMC for purposes of this investigation. Moreover, because all of 
TSMC's sales during the POI were foundry sales, we have determined that 
it should no longer be considered a respondent in this investigation. 
For a more detailed analysis of this decision, see the memorandum from 
the Team to Louis Apple, dated September 23, 1997, concerning the 
Treatment of Foundry Sales and the Elimination of TSMC as a Respondent.

Fair Value Comparisons

    To determine whether sales of SRAMs from Taiwan to the United 
States were made at less than fair value, we compared the United States 
Price (USP) to the Normal Value (NV), as described in the ``United 
States Price'' and ``Normal Value'' sections of this notice, below. In 
accordance with section 777A(d)(1)(A)(i) of the Act, we

[[Page 51445]]

calculated weighted-average USPs for comparison to weighted-average 
NVs.
    In order to determine whether or not we should base price-averaging 
groups on customer types, we conducted an analysis of the prices 
submitted by respondents. This analysis does not indicate that there 
was a consistent and uniform difference in prices between customer 
types. Accordingly, we have not based price comparisons on customer 
types.
    In making our comparisons, in accordance with section 771(16) of 
the Act, we considered all products sold in the home market, fitting 
the description specified in the ``Scope of Investigation'' section of 
this notice, above, to be foreign like products for purposes of 
determining appropriate product comparisons to U.S. sales. Where there 
were no sales of identical merchandise in the home market to compare to 
U.S. sales, we compared U.S. sales to the next most similar foreign 
like product, based on the characteristics listed in Sections B and C 
of the Department's antidumping questionnaire.
    Regarding Alliance, because we found no home market sales at prices 
above the COP, we made no price-to-price comparisons. See the ``Normal 
Value'' section of this notice, below, for further discussion.
    Regarding ISSI, because this company did not report cost or 
difference in merchandise information for certain products sold in the 
United States, there is insufficient information on the record to 
calculate a margin for these products. Accordingly, we based the margin 
for the sales in question on facts available. As facts available, we 
used the highest non-aberrational margin calculated for any other 
product.

Level of Trade and Constructed Export Price (CEP) Offset

    In accordance with section 773(a)(1)(B) of the Act, to the extent 
practicable, we determined NV based on sales in the comparison market 
at the same level of trade as the export price (EP) or CEP. The NV 
level of trade is that of the starting-price sales in the comparison 
market or, when NV is based on CV, that of the sales from which we 
derive selling, general and administrative (SG&A) expenses and profit. 
For EP, it is also the level of the starting-price sale, which is 
usually from exporter to importer. 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 level of trade 
than EP or CEP, we examined stages in the marketing process and selling 
functions along the chain of distribution between the producer and the 
unaffiliated customer. If the comparison-market sales are at a 
different level of trade, and the difference affects price 
comparability, as manifested in a pattern of consistent price 
differences between the sales on which NV is based and comparison-
market sales at the level of trade of the export transaction, we make a 
level of trade adjustment under section 773(a)(7)(A) of the Act. 
Finally, for CEP sales, if the NV level is more remote from the factory 
than the CEP level and there is no basis for determining whether the 
difference in the levels between NV and CEP affects price 
comparability, we adjust NV under section 773(a)(7)(B) of the Act (the 
CEP offset provision). See Certain Welded Carbon Steel Standard Pipes 
and Tubes From India: Preliminary Results of New Shipper Antidumping 
Duty Administrative Review, 62 FR 23760, 23761 (May 1, 1997).
    Only one of the respondents in this investigation, UMC, claimed 
that its home market sales were made at different levels of trade. 
Specifically, UMC claimed that its sales of branded SRAMs products to 
original equipment manufacturers (OEMs) and distributors were made at 
two distinct levels of trade because it provided greater customer 
support to, and performed more significant marketing functions for, its 
OEM customers. In particular, UMC stated that it met with OEM customers 
to assist them in qualifying UMC's products for particular applications 
and to discuss how UMC's products may meet the customer's current and 
future needs. Regarding marketing functions, UMC stated that its 
salesmen make regular on-site visits to OEM customers and attend trade 
shows primarily targeted at OEMs. However, UMC does not attend similar 
shows targeted at distributors.
    We examined the selling activities at each reported marketing stage 
and found that there was no substantive difference in the selling 
functions performed by UMC at either of its claimed marketing stages. 
Consequently, we determine that only one level of trade exists with 
respect to sales made by UMC to all customers. For a detailed 
explanation of this analysis, see the memorandum from the Team to Louis 
Apple, dated September 23, 1997.
    Because we have found that only one level of trade existed in the 
home market for all respondents during the POI, we conducted an 
analysis to determine whether a CEP offset was warranted for each 
respondent. In order to determine whether NV was established at a level 
of trade which constituted a more advanced state of distribution than 
the level of trade of the CEP, we compared the selling functions 
performed for home market sales with those performed with respect to 
the CEP (i.e., excluding economic activities occurring in the United 
States). We found that all respondents performed most of the selling 
functions and services related to U.S. sales at their sales offices in 
the United States, and therefore, these selling functions are 
associated with those expenses which we deduct from the CEP starting 
price, as specified in section 772(d) of the Act. Regarding home market 
sales, respondents performed largely the same selling functions for 
sales to unaffiliated customers as were performed in the United States. 
Therefore, their sales in Taiwan were at a more advanced stage of 
marketing and distribution (i.e., more remote from the factory) than 
the constructed U.S. level of trade, which represents an ex-factory 
price after the deduction of expenses associated with U.S. selling 
activities. However, because the respondents sell at only one home 
market level of trade, the difference in the level of trade cannot be 
quantified. Because the difference in the level of trade cannot be 
quantified, but the home market is at a more advanced level of trade, 
we have granted a CEP offset to all respondents.

United States Price

    For UMC and Winbond, we based USP on EP, in accordance with section 
772(a) of the Act, when the subject merchandise was sold directly to 
the first unaffiliated purchaser in the United States prior to 
importation because CEP methodology was not otherwise indicated.
    In addition, for all companies, where sales to the first 
unaffiliated purchaser took place after importation into the United 
States, we based USP on CEP, in accordance with section 772(b) of the 
Act.
    We made company-specific adjustments as follows:
A. Alliance
    We calculated CEP based on packed, FOB U.S. warehouse prices, to 
unaffiliated purchasers in the United States. We corrected gross unit 
price for clerical errors identified in Alliance's narrative response. 
We made deductions from the gross unit price, where appropriate, for 
discounts. We also made deductions for international freight (including 
air freight and U.S. Customs merchandise processing fees), where 
appropriate, pursuant to section 772(c)(2)(A) of the Act.
    In accordance with section 772(d) (1) and (2) of the Act, we made 
additional

[[Page 51446]]

deductions for commissions, warranty and credit expenses, indirect 
selling expenses, inventory carrying costs, U.S. repacking expenses and 
U.S. further manufacturing costs. Regarding credit expenses, Alliance 
reported that it had not received payment for certain sales as of the 
date of its latest questionnaire response. As such, we based the date 
of payment for those sales on the date of the preliminary determination 
and recalculated credit expenses accordingly.
    Pursuant to section 772(d)(3) of the Act, gross unit price was 
further reduced by an amount for profit, to arrive at CEP. In 
accordance with section 772(f) of the Act, the CEP profit rate was 
calculated using the expenses incurred by Alliance on its sales of the 
subject merchandise in the United States and foreign like product in 
the home market and the profit associated with those sales.
    With regard to modules which were further-manufactured in the 
United States, we have based USP on the net price of the modules rather 
than the net price of the individual SRAMs included in the modules.
B. ISSI
    We calculated CEP based on packed, FOB U.S. warehouse prices, to 
unaffiliated purchasers in the United States. We made deductions from 
the gross unit price, where appropriate, for discounts. We also made 
deductions for foreign inland freight, pre-sale warehousing expenses, 
foreign and U.S. inland insurance, foreign brokerage and handling, and 
international freight (including air freight, U.S. customs merchandise 
processing fees, and U.S. inland freight to ISSI's U.S. office), where 
appropriate, pursuant to section 772(c)(2)(A) of the Act.
    In accordance with section 772(d)(1) of the Act, we made additional 
deductions for commissions, credit expenses, indirect selling expenses, 
inventory carrying costs, and U.S. repacking expenses. We recalculated 
credit expenses using the interest rate paid by ISSI (Taiwan) on its 
borrowings denominated in U.S. dollars. In addition, where ISSI had not 
received payment for certain sales as of the date of its latest 
questionnaire response, we based the date of payment for those sales on 
the date of the preliminary determination and recalculated credit 
expenses accordingly.
    Pursuant to section 772(d)(3) of the Act, gross unit price was 
further reduced by an amount for profit, to arrive at CEP. In 
accordance with section 772(f) of the Act, the CEP profit rate was 
calculated using the expenses incurred by ISSI and its affiliate on 
their sales of the subject merchandise in the United States and foreign 
like product in the home market and the profit associated with those 
sales.
C. UMC
    We calculated EP and CEP based on packed, FOB prices, to 
unaffiliated purchasers in the United States. We adjusted the gross 
unit price for billing adjustments and freight charges. We made 
deductions from the gross unit price, where appropriate, for discounts. 
We also made deductions for foreign inland freight, foreign brokerage 
and handling, and international freight, where appropriate, pursuant to 
section 772(c)(2)(A) of the Act.
    Where USP was based on CEP, we made additional deductions, in 
accordance with section 772(d)(1) of the Act, for commissions, warranty 
and credit expenses, indirect selling expenses, and inventory carrying 
costs. Regarding credit expenses, UMC reported that it had not received 
payment for certain sales as of the date of its latest questionnaire 
response. Consequently, we based the date of payment for those sales on 
the date of the preliminary determination and recalculated credit 
expenses accordingly.
    Pursuant to section 772(d)(3) of the Act, gross unit price was 
further reduced by an amount for profit, to arrive at CEP. In 
accordance with section 772(f) of the Act, the CEP profit rate was 
calculated using the expenses incurred by UMC and its affiliates on 
their sales of the subject merchandise in the United States and foreign 
like product in the home market and the profit associated with those 
sales.
D. Winbond
    We calculated EP and CEP based on packed, delivered and FOB prices 
to unaffiliated purchasers in the United States. We made deductions 
from the gross unit price, where appropriate, for discounts. We also 
made deductions for foreign inland freight, pre-sale warehousing 
expenses, foreign inland insurance, foreign brokerage and handling, 
international freight (including air freight, U.S. inland freight from 
the port to Winbond's U.S. warehouse, U.S. brokerage and handling fees, 
and customs fees), international insurance, U.S. customs merchandise 
processing fees, and U.S. inland freight to customer, where 
appropriate, pursuant to section 772(c)(2)(A) of the Act.
    Where USP was based on CEP, we made additional deductions, in 
accordance with section 772(d)(1) of the Act, for commissions, credit 
expenses, advertising expenses, warranty expenses, technical service 
expenses, indirect selling expenses, inventory carrying costs, and U.S. 
repacking expenses.
    Pursuant to section 772(d)(3) of the Act, gross unit price was 
further reduced by an amount for profit, to arrive at CEP. In 
accordance with section 772(f) of the Act, the CEP profit rate was 
calculated using the expenses incurred by Winbond and its affiliates on 
their sales of the subject merchandise in the United States and foreign 
like product in the home market and the profit associated with those 
sales.

Normal Value

    In order to determine whether there is a sufficient volume of sales 
in the home market to serve as a viable basis for calculating NV (i.e., 
the aggregate volume of home market sales of the foreign like product 
is greater than five percent of the aggregate volume of U.S. sales), we 
compared each respondent's volume of home market sales of the foreign 
like product to the volume of U.S. sales of the subject merchandise, in 
accordance with section 773(a)(1)(C) of the Act. Because each 
respondent's aggregate volume of home market sales of the foreign like 
product was greater than five percent of its aggregate volume of U.S. 
sales for the subject merchandise, we determined that the home market 
was viable for each respondent.
    Because UMC and Winbond reported home market sales to an affiliated 
party during the POI, as defined by section 771(4)(B) of the Act, we 
tested these sales to ensure that the affiliated party sales were at 
``arm's length,'' in accordance with our practice. To conduct this 
test, we compared the gross unit prices of sales to affiliated and 
unaffiliated customers net of all movement charges, discounts and 
rebates, and packing, where appropriate. Based on the results of that 
test, we used the sales from UMC and Winbond to their affiliated 
parties because they were made at ``arm's length.''
    Based on the cost allegation contained in the petition, the 
Department found reasonable grounds to believe or suspect that sales in 
the home market were made at prices below the cost of producing the 
merchandise, in accordance with section 773(b)(1) of the Act. As a 
result, the Department initiated an investigation to determine whether 
the respondents made home market sales during the POI at prices below 
their respective COPs within the meaning of section 773(b) of the Act.

[[Page 51447]]

    We calculated the COP based on the sum of each respondent's cost of 
materials and fabrication for the foreign like product, plus amounts 
for SG&A and packing costs, in accordance with section 773(b)(3) of the 
Act.
    Where possible, we used the respondents' reported COP amounts, 
adjusted as discussed below, to compute quarterly weighted-average COPs 
during the POI. In cases where there was no production within the same 
quarter as a given sale, we referred to the most recent quarter, prior 
to the sale, for which costs had been reported. In cases where there 
was no cost reported for either the same quarter as the sale, or a 
prior quarter, we used the reported costs from the closest subsequent 
quarter in which production occurred.
    In their calculation of research and development expenses (R&D), 
three of the respondents, Alliance, ISSI, and Winbond, excluded from 
their calculation R&D incurred on certain semiconductor products. The 
fourth respondent, UMC, calculated R&D on a quarterly basis. For all 
respondents, we revised the R&D ratios to allocate the total amount of 
semiconductor R&D for the POI over the total cost of sales of 
semiconductor products sold during the POI, using an annual ratio. See 
the Concurrence memorandum from James Maeder to Louis Apple, dated 
September 23, 1997, for further discussion. We preliminarily determine 
that R&D related to semiconductors benefits all semiconductor products, 
and that allocation of R&D on a product-specific basis was not 
appropriate. In support of our methodology, we have placed on the 
record information regarding cross-fertilization of semiconductor R&D.
    We compared the weighted-average quarterly COP figures 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 COP. On a product-specific basis, we compared the 
COP to the home market prices, less any applicable movement charges and 
discounts.
    In determining whether to disregard home market sales made at 
prices below the COP, we examined (1) whether, within an extended 
period of time, such sales were made in substantial quantities, and (2) 
whether such sales were made at prices which permitted the recovery of 
all costs within a reasonable period of time in the normal course of 
trade.
    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 were such as to provide 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 
above the weighted-average per-unit cost of production for the POI, in 
accordance with section 773(b)(2)(D). If they were, we disregarded 
below cost sales in determining NV.
    In accordance with section 773(e) of the Act, we calculated CV 
based on the sum of each respondent's cost of materials, fabrication, 
SG&A, profit, and U.S. packing costs. In accordance with section 
773(e)(2)(A) of the Act, we based SG&A expenses and profit on the 
amounts incurred and realized by each respondent in connection with the 
production and sale of the foreign like product in the ordinary course 
of trade, for consumption in the foreign country. Where respondents 
made no home market sales in the ordinary course of trade (i.e., all 
sales were found to be below cost), we based profit and SG&A expenses 
on the weighted average of the profit and SG&A data computed for those 
respondents with home market sales of the foreign like product made in 
the ordinary course of trade.
    We deducted from CV weighted-average home market direct selling 
expenses incurred on sales made in the ordinary course of trade. Where 
a company had no sales above COP, we based home market direct selling 
expenses on the weighted average selling expense data computed for 
those respondents with home market sales of the foreign like product in 
the ordinary course of trade. Company-specific calculations are 
discussed below.
A. Alliance
    We relied on the reported COP and CV amounts except as noted above. 
Additionally, we did not rely on amounts reported by Alliance for SG&A 
and profit since all of Alliance's sales were made below the cost of 
production.
    Because all of Alliance's home market sales were sold below COP, we 
based NV on CV. In addition to the adjustments to CV reported above, in 
accordance with section 773(a)(7)(B) of the Act, we granted a CEP 
offset adjustment and reduced CV by the amount of weight-averaged home 
market indirect selling expenses and commissions incurred by 
respondents with sales above the COP up to the amount of indirect 
expenses deducted from the CEP under 772(d)(1)(D).
B. ISSI
    We relied on respondent's reported COP and CV amounts except as 
noted above. Additionally, we revised the reported general and 
administrative and R&D expense ratios to use the cost of sales figure 
from the audited financial statements as the denominator in these 
equations.
    For those comparison products for which there were sales at prices 
above the COP, we based NV on delivered prices to home market 
customers. We made deductions for discounts, foreign inland freight, 
and insurance, where appropriate, pursuant to section 773(a)(6)(B) of 
the Act. We also made deductions for credit expenses and bank charges, 
pursuant to section 773(a)(6)(C)(iii) of the Act. Regarding credit 
expenses, ISSI reported that it had not received payment for certain 
sales as of the date of its latest questionnaire response. As such, we 
based the date of payment for those sales on the date of the 
preliminary determination and recalculated credit expenses accordingly.
    We deducted home market indirect selling expenses, including 
inventory carrying costs and other indirect selling expenses, up to the 
amount of indirect selling expenses incurred on U.S. sales, in 
accordance with section 773(a)(7)(B) of the Act. In addition, we 
deducted home market packing costs and added U.S. packing costs, in 
accordance with section 773(a)(6) of the Act. Where appropriate, we 
made adjustments to NV to account for differences in physical 
characteristics of the merchandise, in accordance with 773(a)(6)(C)(ii) 
of the Act and 19 CFR 353.57. Where applicable, in accordance with 19 
CFR section 353.56(b)(1), we offset any commission paid on a U.S. sale 
by reducing the NV by any home market commissions and indirect selling 
expenses remaining after the deduction for the CEP offset.
    Where NV was based on CV, we deducted from CV the weighted-average 
home market direct selling expenses. In accordance with section 
773(a)(7)(B) of the Act, we granted a CEP offset adjustment and reduced 
normal value by the amount of commissions and indirect selling expenses 
incurred by ISSI in Taiwan on sales of SRAMs in Taiwan, up to the 
amount of commissions and indirect selling expenses incurred on U.S. 
sales deducted from the CEP, in accordance with section 773(a)(7)(B) of 
the Act.
C. UMC
    We relied on respondent's COP and CV amounts except as noted above.

[[Page 51448]]

Additionally, we calculated 1996 bonuses to directors, supervisors, and 
employees and included them in the cost of manufacturing. We revised 
the reported general and administrative expense to exclude foreign 
exchange gains. We revised the reported net financing expense ratio to 
include net foreign exchange gains related to accounts payable.
    UMC has claimed a startup adjustment for a new fabrication facility 
under section 773(f)(1)(C)(ii) and (iii) of the Act. We conducted an 
analysis of the facts and have preliminarily granted the claimed 
startup adjustment. The SAA specifies two conditions for the 
application of a startup cost adjustment:
    (1) The company used new production facilities or was producing a 
new product that required substantial additional investment; and
    (2) Production levels were limited by technical factors associated 
with the initial phase of commercial production.
    UMC appears to have met these threshold criteria by opening and 
using a new production facility whose production levels were limited by 
technical factors associated with the initial phase of production. In 
accordance with the Act, we replaced the unit production costs incurred 
during the startup period with the unit production costs incurred at 
the end of the startup period. This resulted in the exclusion of some 
costs which were incurred during the startup period from the actual 
cost calculation. The difference between the actual costs incurred and 
the costs calculated for purposes of the startup adjustment was 
amortized over the useful life of the machinery, subsequent to the 
startup phase. We also capitalized certain pre-production costs which 
were incurred before the new fabrication facility began production. We 
amortized these pre-production costs, beginning with the first month in 
which production took place, over the useful life of the machinery. See 
the memorandum to Louis Apple from Chris Marsh, dated September 23, 
1997, for a detailed discussion of this issue.
    For those comparison products for which there were sales at prices 
above the COP, we based NV on delivered and FOB prices to home market 
customers. For home market price-to-EP comparisons, we made deductions, 
where appropriate, for discounts, export duties, and foreign inland 
freight, in accordance with section 773(a)(6)(B) of the Act. Pursuant 
to section 773 (a)(6)(C)(iii) of the Act and 19 CFR section 
353.56(a)(2), we made circumstance of sale adjustments, where 
appropriate, for differences in warranty and credit expenses. We did 
not allow an adjustment for home market commissions because we 
determined that they were not at ``arm's length.'' See the memorandum 
to Louis Apple from the Team dated September 23, 1997, for a detailed 
explanation.
    For home market price-to-CEP comparisons, we made deductions, where 
appropriate, for discounts, export duties, and foreign inland freight, 
pursuant to section 773(a)(6)(B) of the Act. We also made deductions 
for warranty and credit expenses. We deducted home market indirect 
selling expenses, including inventory carrying costs, and other 
indirect selling expenses, up to the amount of indirect selling 
expenses incurred on U.S. sales, in accordance with 773(a)(7)(B) of the 
Act. Where applicable, in accordance with 19 CFR 353.56(b), we offset 
any commission paid on a U.S. sale by reducing the NV by any home 
market indirect selling expenses remaining after the deduction for the 
CEP offset.
    For all price-to-price comparisons, we deducted home market packing 
costs and added U.S. packing costs, in accordance with section 
773(a)(6) of the Act. In addition, where appropriate, we made 
adjustments to NV to account for differences in physical 
characteristics of the merchandise, in accordance with 773(a)(6)(C)(ii) 
of the Act.
    Where CV was compared to EP, we made circumstance of sale 
adjustments, where appropriate, for credit and warranty expenses and 
U.S. commissions in accordance with sections 773 (a)(6)(C)(iii) and 
(a)(8) of the Act. In accordance with section 773(a)(7)(B) of the Act, 
we granted a CEP offset adjustment and reduced normal value by the 
amount of commissions and indirect selling expenses incurred by UMC in 
Taiwan on sales of SRAMs in Taiwan, up to the amount of commissions and 
indirect selling expenses incurred on U.S. sales deducted from the CEP.
    Where CV was compared to CEP, we deducted from CV, where 
appropriate, credit and warranty expenses. We also deducted indirect 
selling expenses, including inventory carrying costs and other indirect 
selling expenses, up to the amount of commissions and indirect selling 
expenses incurred on U.S. sales, in accordance with 773(a)(7)(B) of the 
Act.
D. Winbond
    We relied on the reported COP and CV amounts except as noted above. 
Additionally, we reclassified production technology royalty expenses 
reported in the Sections B and C of our questionnaire as a cost of 
manufacturing. We included 1996 bonuses to directors, supervisors, and 
employees in the cost of manufacturing. We revised the reported general 
and administrative expense to exclude foreign exchange gains and to 
include miscellaneous income and expense. We revised the reported net 
financing expense ratio to include net foreign exchange gains related 
to accounts payable.
    For those comparison products for which there were sales at prices 
above the COP, we based NV on delivered prices to home market 
customers.
    For home market price-to-EP comparisons, we made deductions, where 
appropriate, for discounts, import duties and development fees paid on 
sales to customers outside of duty free zones, and home market movement 
charges including pre-sale warehouse expenses, foreign inland freight, 
brokerage and handling charges, and inland insurance. Pursuant to 
section 773 (a)(6)(C)(iii) of the Act, we made circumstance of sale 
adjustments, where appropriate, for differences in credit expenses 
(offset by the interest revenue actually received by the respondent), 
direct advertising expenses, warranty expenses, technical service 
expenses, and post-sale payments to a third-party customer.
    For home market price-to-CEP comparisons, we made deductions for 
discounts, import duties and development fees paid on sales to 
customers outside of duty free zones, and home market movement charges 
including pre-sale warehouse expenses, foreign inland freight, 
brokerage and handling charges, and inland insurance, where 
appropriate, in accordance with section 773(a)(6)(B) of the Act. We 
also made deductions for credit expenses (offset by the interest 
revenue actually received by the respondent), direct advertising 
expenses, warranty expenses, technical service expenses, and post-sale 
payments to a third-party customer, pursuant to section 
773(a)(6)(C)(iii) of the Act.
    We deducted home market indirect selling expenses, including 
inventory carrying costs, other indirect selling expenses, up to the 
amount of indirect selling expenses incurred on U.S. sales, in 
accordance with section 773(a)(7)(B) of the Act. Where applicable, in 
accordance with 19 CFR section 353.56(b), we offset any commission paid 
on a U.S. sale by reducing the NV by any home market indirect selling 
expenses remaining after the deduction for the CEP offset.
    For all price-to-price comparisons, we deducted home market packing 
costs and added U.S. packing costs, in

[[Page 51449]]

accordance with section 773(a)(6) of the Act. In addition, where 
appropriate, we made adjustments to NV to account for differences in 
physical characteristics of the merchandise, in accordance with section 
773(a)(6)(C)(ii) of the Act.
    Where CV was compared to EP, we deducted from CV the weighted-
average home market direct selling expenses and added the weighted-
average U.S. product-specific direct selling expenses in accordance 
with section 773 (a)(6)(C)(iii) of the Act.
    Where CV was compared to CEP, we deducted from CV the weighted-
average home market direct selling expenses. In accordance with section 
773(a)(7)(B) of the Act, we granted a CEP offset adjustment and reduced 
normal value by the amount of indirect selling expenses, including 
inventory carrying costs and other indirect selling expenses, up to the 
amount of indirect selling expenses incurred on U.S. sales deducted 
from the CEP.

Currency Conversion

    We made currency conversions into U.S. dollars based on the 
official exchange rates in effect on the dates of the U.S. sales as 
certified by the Federal Reserve Bank.
    Section 773A(a) directs the Department to use a daily exchange rate 
in order to convert foreign currencies into U.S. dollars unless the 
daily rate involves a fluctuation. It is the Department's practice to 
find that a fluctuation exists when the daily exchange rate differs 
from the benchmark rate by 2.25 percent. The benchmark is defined as 
the moving average of rates for the past 40 business days. When we 
determine a fluctuation to have existed, we substitute the benchmark 
rate for the daily rate, in accordance with established practice. 
Further, section 773A(b) directs the Department to allow a 60-day 
adjustment period when a currency has undergone a sustained movement. A 
sustained movement has occurred when the weekly average of actual daily 
rates exceeds the weekly average of benchmark rates by more than five 
percent for eight consecutive weeks. (For an explanation of this 
method, see Policy Bulletin 96-1: Currency Conversions (61 FR 9434, 
March 8, 1996).) Such an adjustment period is required only when a 
foreign currency is appreciating against the U.S. dollar. The use of an 
adjustment period was not warranted in this case because the New Taiwan 
dollar did not undergo a sustained movement.

Verification

    As provided in section 782(i) of the Act, we will verify all 
information determined to be acceptable for use in making our final 
determination.

Suspension of Liquidation

    In accordance with section 733(d) of the Act, we are directing the 
Customs Service to suspend liquidation of all imports of subject 
merchandise that are entered, or withdrawn from warehouse, for 
consumption on or after the date of publication of this notice in the 
Federal Register. We will instruct the Customs Service to require a 
cash deposit or the posting of a bond equal to the weighted-average 
amount by which the NV exceeds the U.S. price, as indicated in the 
chart below. These suspension of liquidation instructions will remain 
in effect until further notice. The weighted-average dumping margins 
are as follows:

------------------------------------------------------------------------
                                                               Weighted-
                                                                average 
                    Exporter/manufacturer                       margin  
                                                              percentage
------------------------------------------------------------------------
Advanced Microelectronics...................................      113.85
Alliance....................................................       59.06
BIT.........................................................      113.85
ISSI........................................................       10.96
Texas Instruments...........................................      113.85
UMC.........................................................       63.36
Winbond.....................................................       94.10
All Others..................................................       41.30
------------------------------------------------------------------------

Pursuant to section 735(c)(5)(A) of the Act, the Department has 
excluded the margins determined entirely under section 776 of the Act 
from the calculation of the ``All Others Rate.''

ITC Notification

    In accordance with section 733(f) of the Act, we have notified the 
ITC of our determination. If our final determination is affirmative, 
the ITC will determine before the later of 120 days after the date of 
this preliminary determination or 45 days after our final determination 
whether these imports are materially injuring, or threaten material 
injury to, the U.S. industry.

Public Comment

    Case briefs or other written comments in at least ten copies must 
be submitted to the Assistant Secretary for Import Administration no 
later than December 18, 1997, and rebuttal briefs no later than 
December 22, 1997. A list of authorities used and an executive summary 
of issues should accompany any briefs submitted to the Department. Such 
summary should be limited to five pages total, including footnotes. In 
accordance with section 774 of the Act, we will hold a public hearing, 
if requested, to afford interested parties an opportunity to comment on 
arguments raised in case or rebuttal briefs. Tentatively, the hearing 
will be held on December 23, 1997, time and room to be determined, at 
the U.S. Department of Commerce, 14th Street and Constitution Avenue, 
N.W., Washington, D.C. 20230. Parties should confirm by telephone the 
time, date, and place of the hearing 48 hours before the scheduled 
time.
    Interested parties who wish to request a hearing, or to participate 
if one is requested, must submit a written request to the Assistant 
Secretary for Import Administration, U.S. Department of Commerce, Room 
1870, within ten days of the publication of this notice. Requests 
should contain: (1) The party's name, address, and telephone number; 
(2) the number of participants; and (3) a list of the issues to be 
discussed. Oral presentations will be limited to issues raised in the 
briefs. If this investigation proceeds normally, we will make our final 
determination by no later than 135 days after the publication of this 
notice in the Federal Register.
    This determination is published pursuant to section 733(d) of the 
Act.

    Dated: September 23, 1997.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 97-25943 Filed 9-30-97; 8:45 am]
BILLING CODE 3510-DS-P