(65 FR 12214, March 8, 2000) A-583-827 NSR 10/97-9/98 Public Document MEMORANDUM TO: Robert S. LaRussa Assistant Secretary for Import Administration FROM: Richard W. Moreland Deputy Assistant Secretary for Import Administration SUBJECT: Issues and Decision Memorandum for the New Shipper Review on Static Random Access Memory Semiconductors from Taiwan – October 1, 1997, through September 30, 1998 Summary We have analyzed the comments of the interested parties in the 1997-1998 new shipper review of the antidumping duty order covering static random access memory semiconductors from Taiwan. As a result of the acceptance of revised cost data, we have made changes in the margin calculations as discussed in the "Margin Calculations" section of this memorandum. We also recommend that you approve the positions we have developed in the "Discussion of the Issues" section of this memorandum. Below is the complete list of the issues in this new shipper review for which we received comments by parties: 1. Facts Available 2. Rejection of Post-Verification Cost Data 3. Constructed Export Price Offset Background On October 12, 1999, the Department of Commerce (the Department) published the preliminary results of the new shipper review of the antidumping duty order on static random access memory semiconductors (SRAMs) from Taiwan. See Static Random Access Memory Semiconductors from Taiwan; Preliminary Results of Antidumping Duty New Shipper Review, 64 FR 55251 (Oct. 12, 1999) (Preliminary Results). The products covered by this order are synchronous, asynchronous, and specialty SRAMs from Taiwan, whether assembled or unassembled. The period of review (POR) is October 1, 1997, through September 30, 1998. We invited parties to comment on our preliminary results of review. In addition, in October 1999, we requested and received revised cost databases from the sole respondent, GSI Semiconductor, Inc. (GSI Technology). We have used these databases and have changed the results from those presented in the preliminary results of review. Margin Calculations At the time of the preliminary results, we found that the respondent’s cost data was unuseable. Accordingly, pursuant to section 776(a)(2)(B) of the Tariff Act of 1930, as amended (the Act), we based the margin for all U.S. sales for which either a difference in merchandise adjustment or constructed value would be required on facts available. For further discussion, see Preliminary Results at 64 FR 55252. As noted in the preliminary results, we afforded the respondent an opportunity to submit revised cost databases which incorporated certain changes identified at verification. Because the company has done so, we have used this data for purposes of the final results. For further discussion, see Comment 1 and Comment 2 in the "Discussion of Issues" section of this memorandum. Consequently, we have revised our margin calculations as follows: 1. Calculation of Constructed Value In accordance with section 773(e) of the Act, we calculated constructed value for each quarter of the POR, based on the sum of GSI Technology’s cost of materials, fabrication, selling, general and administrative expenses (SG&A), and profit. In accordance with section 773(e)(2)(A) of the Act, we based SG&A on the amounts incurred and realized by GSI Technology in connection with the production and sale of the foreign like product in the ordinary course of trade, for consumption in the foreign country. Regarding profit, we have based the amount of profit on the one of the three alternative methods set forth in section 773(e)(2)(B) of the Act. Specifically, we calculated profit using the financial statements of the respondent’s affiliated reseller in the home market, in accordance with section 773(e)(2)(B)(3) of the Act, because: 1) we do not have the actual profit for home market sales of the same general category of merchandise as SRAMs (i.e., alternative one); and 2) there are no other respondents in this segment of the proceeding from which to derive profit data (i.e., alternative two). Furthermore, in applying section 773(c)(2)(B)(3) of the Act, we have not determined a "profit cap" due to the absence of data. Therefore, we have used the affiliated reseller’s financial statements as the facts available (see the Statement of Administrative Action accompanying the Uruguay Round Agreements Act, H.R. Doc. 103-316, Vol. 1 (1994) (SAA) at 171). 2. Margin Calculations To determine whether sales of SRAMs from Taiwan were made in the United States at less than normal value, we compared the constructed export price (CEP) to normal value in the same quarter as the U.S. sale. For those U.S. sales of SRAMs for which there were no comparable home market sales in the ordinary course of trade made in the same quarter, we compared CEP to the appropriate quarterly constructed value, in accordance with section 773(a)(4) of the Act. We calculated CEP and normal value using the same methodology stated in the preliminary results, except as follows: 1. We based testing expenses on the amounts reported in the revised cost databases; 2. In accordance with section 772(f) of the Act, we calculated the CEP profit rate using the expenses incurred by GSI Technology and its affiliate on their sales of the subject merchandise in the United States and the foreign like product in the home market and the profit associated with those sales; and 3. Where appropriate, we made adjustments to normal value to account for differences in physical characteristics of the merchandise, in accordance with section 773(a)(6)(C)(ii) of the Act and 19 CFR 351.411. We made price-to-price comparisons using the same methodology stated in the preliminary results. Regarding price-to-constructed value comparisons, we deducted home market credit expenses and testing expenses, pursuant to sections 773(a)(6)(C)(iii) and 773(a)(8) of the Act. We also 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. Where applicable, in accordance with 19 CFR 351.410(e), we offset any commission paid on a U.S. sale by reducing the constructed value by any home market indirect selling expenses remaining after the deduction of the CEP offset. 3. Use of Partial Facts Available We determine that the use of partial facts available is appropriate for GSI Technology, in accordance with section 776(a) of the Act, in the following instances: 1. GSI Technology failed to report cost data in its revised cost submission for certain sales in its U.S. sales listing; and 2. We found at verification that GSI Technology failed to report certain U.S. sales made during the POR. For purposes of the final results, pursuant to section 776(a)(2)(B) of the Act, we based the margin for these U.S. sales on facts available. As facts available, we have used the highest non-aberrant margin calculated for any U.S. transaction, in accordance with our practice. See Notice of Final Determination of Sales at Less Than Fair Value: Static Random Access Memory Semiconductors From Taiwan, 63 FR 8909, 8912 (Feb. 23, 1998); Final Determination of Sales at Less Than Fair Value; Stainless Steel Sheet and Strip in Coils from Germany, 64 FR 30710, 30732 (June 8, 1999) (Sheet and Strip from Germany); Notice of Final Determination of Sales at Less Than Fair Value: Certain Cut-to-Length Carbon Steel Plate from South Africa, 62 FR 61731, 61747 (Nov. 19, 1997) (Carbon Steel Plate from South Africa); and Final Determination of Sales at Less Than Fair Value: Certain Helical Spring Lock Washers From the People’s Republic of China, 58 FR 48833, 48839 (Sept. 20, 1993) (Helical Spring Lock Washers From the PRC). For further discussion, see Comment 1, below. Discussion of the Issues 1. Comment 1: Facts Available The petitioner argues that the Department should base the final margin for GSI Technology on facts available. According to the petitioner, throughout the course of this review, the Department has found repeated inconsistencies and errors in the submitted data. The petitioner notes that the Department has been required to issue numerous, lengthy supplemental questionnaires which have resulted in substantially revised questionnaire responses. Moreover, the petitioner maintains that verification showed that these responses were neither complete nor accurate. According to the petitioner, the extent of the numerous errors, including a significant volume of unreported U.S. sales, unreported discounts on U.S. sales, and unsupported claims for adjustments to home market sales, requires the application of facts available. The petitioner asserts that GSI Technology should not be able to obtain a more favorable result by failing to provide a complete and accurate response than if it had cooperated fully. Department's Position: According to section 776(a) of the Act, the Department shall use the facts otherwise available in reaching a determination if: 1) necessary information is not available on the record, or 2) an interested party or any other person – A) withholds information that has been requested by the administering authority or the Commission under this title, B) fails to provide such information by the deadlines for submission of the information or in the form and manner requested, subject to subsections (c)(1) and (e) of section 782, C) significantly impedes a proceeding under this title, or D) provides such information but the information cannot be verified as provided in section 782(i). In this proceeding, none of these requirements is met in toto. Specifically, with the exception of the instances identified in the "Margin Calculations" section above, we find that all data necessary to perform our margin calculations was on the record of this proceeding prior to the date of the preliminary results. Although GSI Technology provided revised cost databases in October 1999 at our request, these new databases merely incorporated changes identified during the cost verification which were clearly set forth in the cost verification reports. Moreover, we find that GSI Technology did not withhold information or fail to provide its responses in a timely manner. Indeed, throughout the course of this review GSI Technology has demonstrated its willingness to cooperate with the Department’s requests for information, and it has attempted to answer each request for information to the best of its ability. Although its responses contained certain inaccuracies and omissions, we were otherwise able to verify the submitted information and are satisfied that complete and accurate information exists on the record of this review (except as noted in the "Use of Partial Facts Available" section, above). Contrary to the implication by the petitioner, we found no evidence of a pattern of misreporting of data nor any indication that the respondent attempted to mislead the Department or impede the proceeding. For example, we note that GSI Technology over-reported certain U.S. selling expenses (e.g., U.S. advertising and repacking), while it made minor errors in other areas (e.g., it misreported the date of shipment for one U.S. sale and the date of payment for four others, etc.). Nonetheless, regarding the unreported U.S. sales discovered at verification, we agree with the petitioner that the margin for those sales should be based on facts available because they were not reported to the Department in a timely manner. As facts available, we have used the highest non-aberrant margin calculated for any U.S. transaction, in accordance with our practice. See, e.g., Sheet and Strip from Germany, 64 FR at 30732; Carbon Steel Plate from South Africa, 62 FR 61747; and Helical Spring Lock Washers From the PRC, 58 FR at 48839. In selecting a facts available margin, we sought a margin that is sufficiently adverse so as to effectuate the statutory purposes of the adverse facts available rule, which is to induce respondents to provide the Department with complete and accurate information in a timely manner. We also sought a margin that is indicative of GSI Technology’s customary selling practices and is rationally related to the transactions to which the adverse facts available are being applied. To that end, we selected the highest margin on an individual sale in a commercial quantity that fell within the mainstream of GSI Technology’s transactions (i.e., transactions that reflect sales of products that are representative of the broader range of models used to determine normal value). In selecting this margin, we did not consider margins found on sales for which GSI Technology reported cost data affected by abnormally low yields, because we do not consider these transactions to be representative. 2. Comment 2: Rejection of Post-Verification Cost Data According to the petitioner, the Department should not accept the revised cost databases submitted by GSI Technology because the respondent did not act to the best of its ability in this review. As support for this assertion, the petitioner cites the concurrence memorandum issued for the preliminary results, which states that GSI Technology’s misallocation of rebates received from the company’s wafer supplier resulted from inadequate communication between the U.S. office (which received the rebates) and the Taiwan branch (which prepared the response). The petitioner contends that this lack of communication demonstrates that the respondent assigned preparation of the portion of the response in question to personnel that did not have the required information at hand, and that the preparers never communicated with the individuals who had access to the necessary information. Moreover, the petitioner maintains that it is evident from the verification report that GSI Technology made no attempt to match the rebates received to the products to which the rebates related. Nonetheless, the petitioner argues that, in the event that the Department were to accept the revisions to the cost database to reflect a revised allocation of the rebates appearing in the cost verification report, it should not accept all of GSI Technology’s revisions. Specifically, the petitioner asserts that GSI Technology requested an adjustment for an additional rebate which it was unable to substantiate at verification, and it notes that GSI Technology provided a computer printout which purportedly supports this adjustment. According to the petitioner, the Department’s verification procedures do not allow respondents to self-verify the data that they submit, especially on the basis of hand- written notations submitted six weeks after verification. Department's Position: As explained in response to Comment 1, above, we requested that GSI Technology submit these revised cost databases, which merely incorporated changes identified during verification. We note that, as a new shipper, GSI Technology has not participated in prior segments of this proceeding. Moreover, not only did it lack experience in preparing responses to antidumping questionnaires, but it also had little experience tracking cost data in its own accounting system. Indeed, the company did not have a formal cost accounting system until seven months after the beginning of the POR. See the GSI Taiwan cost verification report, dated August 26, 1999, at page 12. Thus, contrary to the petitioner’s assertions, inadequate communication between the two companies provides no evidence of a deliberate attempt to mislead the Department. Consequently, as noted above, we have accepted the revised databases for purposes of the final results. Regarding the additional rebate adjustment, however, we agree with the petitioner. GSI Technology was unable to support the amount of this rebate at verification. Specifically, the U.S. cost verification report at page 15 states the following: Company officials stated that they had no record of this credit, and we confirmed that it had not been entered into the general ledger. Moreover, we examined payment documentation for selected lots shown on the credit memo and confirmed that GSI USA had paid for them in full. Therefore, because we were unable to verify the accuracy of this adjustment, we have denied it for purposes of the final results. 3. Comment 3: Constructed Export Price Offset The Department granted a CEP offset to GSI Technology for purposes of the preliminary results. According to the petitioner, the Department should deny this offset for purposes of the final results because: 1) GSI Technology did not request such an offset; and 2) the Department’s analysis is contrary to law. The petitioner notes that, in two recent decisions, the Court of International Trade (CIT) has held that the Department must perform its level of trade (LOT) analysis based on unadjusted starting prices for both U.S. and home market sales. See Borden, Inc. v. United States, 4 F. Supp. 2d 1221 (1998) (Borden); and Micron Technology, Inc. v. United States, 40 F. Supp. 2d 481, 485-486 (1999) (Micron). The petitioner contends that the Department’s analysis is contrary to these rulings because the Department conducted its analysis based on the level of the constructed sale from the exporter to the importer (i.e., after adjustment for U.S. indirect selling expenses). According to the petitioner, when the Department conducts a corrected LOT analysis, it will find that the comparison market sales made by GSI Technology were not made at a more advanced LOT than its sales in the United States, and, therefore, there is no basis for granting a CEP offset. Department's Position: We recognize that the CIT has held that the Department’s practice of determining LOTs for CEP transactions after CEP deductions is an impermissible interpretation of section 772(d) of the Act. See Borden, 4 F. Supp. 2d at 1241- 1242. The Department believes, however, that its practice is in full compliance with the statute. On June 4, 1999, the CIT entered a final judgement in Borden on the LOT issue. See Borden, Inc., v. United States, Court No. 96-08-01970, Slip Op. 99-50 (CIT June 4, 1999). The government has filed an appeal of Borden which is pending before the U.S. Court of Appeals for the Federal Circuit. Consequently, the Department has continued to follow its normal practice of adjusting CEP under section 772(d) of the Act prior to starting a LOT analysis, as articulated in the Department’s regulations at section 351.412. The Department has consistently stated that the Act and the SAA support analyzing the level of trade of CEP sales at the constructed level, after expenses associated with economic activities occurring in the United States have been deducted pursuant to section 772(d) of the Act. In the preamble to our proposed regulations, we stated: With respect to the identification of levels of trade, some commentators argued that, consistent with past practice, the Department should base level of trade on the starting price for both export price EP and CEP sales... The Department believes that this proposal is not supported by the SAA. If the starting price is used for all U.S. sales, the Department’s ability to make meaningful comparisons at the same level of trade (or appropriate adjustments for differences in levels of trade) would be severely undermined in cases involving CEP sales. As noted by other commentators, using the starting price to determine the level of trade of both types of U.S. sales would result in a finding of different levels of trade for an EP sale and a CEP sale adjusted to a price that reflected the same selling functions. Accordingly, the regulations specify that the level of trade analyzed for EP sales is that of the starting price, and for CEP sales it is the constructed level of trade of the price after the deduction of U.S. selling expenses and profit. See Antidumping Duties; Countervailing Duties; Notice of Proposed Rule Making and Request for Public Comments, 61 FR 7308, 7347 (Feb. 27, 1996). Consistent with the above position, in those cases where a level of trade comparison is warranted and possible, the Department evaluates the level of trade for CEP sales based on the price after adjustments are made under section 772(d) of the Act. See, e.g., Large Newspaper Printing Presses and Components Thereof, Whether Assembled of Unassembled, From Japan: Notice of Final Determination of Sales at Less Than Fair Value, 61 FR 38139, 38143 (July 23, 1996). We note that, in every case decided under the revised antidumping statute, we have consistently adhered to this interpretation of the SAA and of the Act. See, e.g., Extruded Rubber Thread From Malaysia; Final Results of Antidumping Duty Administrative Review, 65 FR 6140, 6141 (Feb. 8, 2000); Notice of Final Determination of Sales at Less Than Fair Value: Dynamic Random Access Memory Semiconductors of One Megabit and Above ("DRAMs") from Taiwan, 64 FR 56308, 56313 (Oct. 19, 1999); Antifriction Bearings (Other Than Tapered Roller Bearings) and Parts Thereof from France, Germany, Italy, Japan, Singapore, and the United Kingdom; Final Results of Antidumping Duty Administrative Reviews, 62 FR 2081, 2106 (Jan. 15, 1997); and Aramid Fiber Formed of Poly Para- Phenylene Terephthalamide from the Netherlands; Final Results of Antidumping Administrative Review, 61 FR 51406, 51408 (Oct. 2, 1996). In this case, in accordance with the above precedent, our instructions in the questionnaire issued to GSI Technology stated that the constructed level of trade should be used. We verified the differences in selling functions in the home and in the U.S. markets, after all selling expenses incurred in the United States were deducted from the CEP. Specifically, we found that all of the selling functions related to all U.S. and certain home market sales occurred in the United States, as did a number of the selling functions related to the remaining home market sales. See the GSI USA sales verification report, dated September 29, 1999, at pages 28 and 31. As stated in the SAA, a constructed export price offset adjustment will be made only where: 1) the data available do not form an appropriate basis for determining an LOT adjustment under section 773(a)(7)(A)(ii) of the Act; and 2) normal value is established at a level of trade more remote from the factory than the level of trade of the CEP. Because we find that only one level of trade existed in the home market during the POR, we are unable to make an LOT adjustment under section 773(a)(7)(A)(ii) of the Act. See Preliminary Results at 64 FR 55252. Moreover, because normal value is based on a price which reflects full selling activities, while the CEP after adjustment is based on a price which reflects none, we find that the normal value is at a level of trade more remote from the factory than the level of trade of the CEP. Accordingly, we find that the Department’s decision to grant a CEP offset to GSI Technology is consistent with the statute and the Department’s practice and is supported by substantial evidence on the record. Indeed, to deny a CEP offset under these factual circumstances would result in comparisons which are not meaningful. Consequently, consistent with our preliminary results, we have continued to analyze the level of trade based on adjusted CEP prices, rather than the starting CEP prices, and we have continued to grant a CEP offset to GSI Technology. Recommendation Based on our analysis of the comments received, we recommend adopting all of the above positions. If these recommendations are accepted, we will publish the final results of review and the final weighted-average dumping margin for the reviewed firm in the Federal Register. Agree____ Disagree____ Joseph A. Spetrini Acting Assistant Secretary for Import Administration (Date)