Slip Op. 04-30
UNITED STATES COURT OF INTERNATIONAL TRADE
BEFORE: GREGORY W. CARMAN, JUDGE
:
HYNIX SEMICONDUCTOR, INC., :
HYNIX SEMICONDUCTOR :
AMERICA, INC., :
:
Plaintiffs, :
:
v. :
: Court No. 01-00988
UNITED STATES, :
:
Defendant, :
:
and :
:
MICRON TECHNOLOGY, INC., :
:
Defendant-Intervenor. :
:
[The Department of Commerce’s Final Results of Redetermination Pursuant to Court
Remand is affirmed in its entirety and this case is dismissed.]
Dated: April 1, 2004
Willkie, Farr & Gallagher LLP (James P. Durling, Daniel L. Porter, Carrie L.
Owens), Washington, D.C., for Plaintiffs.
Peter D. Keisler, Assistant Attorney General; David M. Cohen, Director,
Commercial Litigation Branch, Civil Division, U.S. Department of Justice; Jeanne E.
Davidson, Deputy Director, Commercial Litigation Branch, Civil Division, U.S.
Department of Justice, Ada E. Bosque, Trial Attorney, Commercial Litigations Branch,
Civil Division, U.S. Department of Justice; Patrick V. Gallagher, Jr., Senior Attorney,
Office of Chief Counsel for Import Administration, U.S. Department of Commerce, of
Counsel, for Defendant.
Hale & Dorr LLP (Gilbert B. Kaplan, Michael D. Esch, Cris R. Revaz),
Washington, D.C., for Defendant-Intervenor.
Court No. 01-00988 Page 2
OPINION
CARMAN , JUDGE: Pursuant to 28 U.S.C. § 1581(c) (2000), this Court has
jurisdiction to review the United States Department of Commerce’s (“Commerce”) Final
Results of Redetermination Pursuant to Court Remand (Dec. 17, 2003) (“Remand Results
II”), filed with the Court in response to its opinion and order in Hynix Semiconductor,
Inc. v. United States, 295 F. Supp. 2d 1365 (Ct. Int’l Trade 2003) (“Hynix II”). This
Court will sustain Remand Results II unless it is “unsupported by substantial evidence on
the record, or otherwise not in accordance with law.” 19 U.S.C. § 1516a(b)(1)(B)(i).
BACKGROUND
In Hynix II, this Court directed Commerce to reconsider and further explain its
decisions in Final Results of Redetermination Pursuant to Court Remand (June 6, 2003)
(“Remand Results I”): (1) to reject Hynix’s reported and verified amortized research and
development (“R&D”) costs; (2) to recalculate Hynix’s product-specific R&D costs by
applying a theory of cross-fertilization; and (3) to reject Hynix’s accounting adjustments
for the average useful lives (“AULs”) of its semiconductor equipment. In particular, this
Court ordered Commerce to:
1. [P]rovide a reasoned explanation, supported by substantial evidence, if
it is able, [in support of its assertion] that distortions in the cost of
production calculations for this period of review necessarily arise,
where Plaintiffs’ R&D costs[,] which were previously accounted for
through expensing, are now accounted for through amortization[; . . .]
to consider and explain whether Plaintiffs’ R&D costs prior to the
Fifth Administrative Review were accounted for through the
expensing of these costs, and if this expensing of R&D costs would
leave nothing to carry forward to subsequent review periods. Hynix II,
295 F. Supp. 2d at 1371.
2. [E]stablish, if it can, through substantial evidence on the record[, not
just through the mere recitation of the titles of Plaintiffs’ R&D
Court No. 01-00988 Page 3
projects,] that the six non-subject merchandise projects [on a list of
projects occurring in Plaintiffs’ non-memory lab] or other non-subject
merchandise projects provide benefits to the R&D activities of the
subject merchandise [or] to recalculate Plaintiffs’ R&D costs,
excluding R&D costs for no-subject merchandise. Id. at 1372.
3. [P]rovide a reasoned explanation for rejecting Plaintiffs’ revised
AULs, [which included:] (1) a discussion of why Commerce accepted
Plaintiffs’ 1996 AUL revision, and whether Commerce characterized
the 1996 AUL revision and this period of review’s AUL revisions
differently; (2) a clarification of what information Commerce
evaluated in reaching its determination to reject Plaintiffs’ revised
AULs; (3) a clarification of whether Commerce did, in fact, consider
Plaintiffs’ information demonstrating industry-wide AUL ranges, and
if not, to do so now; (4) an explanation addressing why Commerce
accepted Plaintiffs’ appraisers’ report for asset revaluation, while
rejecting the same report for AUL revision; this explanation should
compare the quality of the two sections of the report, including
whether all pages of the asset revaluation section were translated and
why the qualifications of the appraisers were acceptable for the asset
revaluation and not for the AUL section. Id. at 1375.
In Remand Results II, Commerce “recalculated Hynix’s R&D costs and the AULs
used for depreciation costs in this review period,” although it expressed disagreement
with the Court’s finding in Hynix II that its decisions in Remand Results I were
unsupported by substantial evidence and otherwise not in accordance with law. Remand
Results II at 1. Commerce arrived at a dumping margin of 2.07% for Hynix as a result of
the recalculations. Id.
First, on the issue of amortization of R&D costs, Commerce stated, as it did in
Remand Results I, that it is of the view that changing accounting methods from expensing
to amortization creates distortions in cost of production calculations. Id. at 3-4.
Commerce noted that Hynix’s change in accounting methodologies produces different
R&D ratios and “the difference in the R&D amounts that result from these different
methodological approaches can never be picked up as a production cost in antidumping
Court No. 01-00988 Page 4
calculations.” Id. at 4 (citing Mar. 5, 2001, supplemental resp. at Ex. 24). Nevertheless,
Commerce noted that in Hynix II, this Court found that Commerce’s explanation was not
supported by substantial evidence on the record, and, as a result, Commerce “recalculated
Hynix’s R&D costs to allow for amortization.” Id.
Second, Commerce asserted that its finding of cross-fertilization of R&D in
Remand Results I was reasonable given “the fact that Hynix has memory projects listed
in its non-memory lab, coupled with expert advice [in the form of the memorandum of
Dr. Murzy Jhabvala in support of the theory of cross-fertilization].” Id. Commerce
noted that in Hynix II, the Court ordered it “to establish through record evidence that the
projects cited in [Remand Results I], or other non-subject merchandise projects, provided
benefits to [the] subject merchandise” or, if it was unable to do so, Commerce was to
recalculate the costs “excluding R&D costs for non-subject merchandise.” Id. at 4-5.
Commerce stated that it was “unable to make the connection the Court requested in
Hynix II based on existing record evidence [because] R&D, by its nature, does not always
produce new knowledge or products and the results of Hynix’s ongoing R&D efforts
were not known during the review period.” Id. at 5. As a result, Commerce recalculated
Hynix’s R&D costs, excluding R&D costs incurred for non-subject merchandise. Id.
Third, in addressing the Court’s remand of its decision to reject Hynix’s revised
AULs, Commerce referred to Hynix’s “continual change [of] the treatment of its
depreciation methodology” as providing reasonable justification for its decision to use
Hynix’s pre-1998 AULs to calculate the cost of production for this period of review. Id.
Citing the Court’s determination in Hynix II that Commerce’s explanation was not
Court No. 01-00988 Page 5
supported by substantial evidence on the record, Commerce “recalculated Hynix’s AULs
to allow for its reported accounting adjustment” in Remand Results II. Id.
Plaintiffs submitted comments to Remand Results II, asking that Commerce’s
redetermination be sustained and reaffirming its position that Commerce’s prior
determinations on the issues above were not supported by substantial evidence. (Pls.’
Cmts. on the Dep’t. of Commerce’s Second Re-Determination (“Pls.’ Cmts.”) at 2, 4.)
Defendant has filed nothing in regard to Remand Results II. Defendant-
Intervenor, Micron Technology, Inc. (“Micron”) submitted a reply to Plaintiffs’
comments, urging the Court to remand Remand Results II because Commerce did not
follow the Court’s instructions and asking the Court to order Commerce “to reinstate its
initial redetermination on remand with respect to each of the three issues.” (Reply of
Def.-Int. Micron Tech., Inc. to Pls.’ Cmts. on the Dep’t. of Commerce’s Second
Redetermination on Remand (“Def.-Int.’s Reply”) at 1.) Micron’s Reply repeats the
arguments that were offered in support of Commerce’s determination in Remand Results
I for the three issues again before the Court. Compare id. at 4-18, with Remand Results I
at 3-15, and Hynix II, 295 F. Supp. 2d. at 1368-71, 1372-75. Micron argues that Remand
Results II should be remanded because it contains a clerical error in the calculation of the
importer-specific assessment rate, “which determines the actual amount of antidumping
duties assessed and collected by the government on entries subject to the antidumping
duty order.” (Def-Int.’s Reply at 18.) Micron states Commerce corrected this clerical
error in the program language used to calculate the margin in Dynamic Random Access
Memory Semiconductors of One Megabit or Above From the Republic of Korea: Final
Results of Antidumping Administrative Review, 66 Fed. Reg. 52,097 (Oct. 12, 2001)
Court No. 01-00988 Page 6
(“Final Results”), but the correction was not carried forward to the margin calculations in
Remand Results II. (Id. at 19-20 (citing Mem. from Thomas F. Futtner, Program
Manager, Office of AD/CVD Enforcement to Holly A. Kuga, Office Director, Group II,
Office IV of 11/21/01, Ex. 3).) Micron argues that this error results a significantly
understated assessment rate. (Id.)
DISCUSSION
I. Commerce’s Decision to Recalculate Hynix’s R&D Costs is Affirmed.
Upon consideration of Remand Results II, the Court holds that Remand Results II
is supported by substantial evidence on the record and is otherwise in accordance with
law. Accordingly, Remand Results II is affirmed in its entirety.
The Court holds that Commerce’s decision to recalculate Hynix’s R&D costs
using Hynix’s reported amortized R&D costs is supported by substantial evidence and
otherwise in accordance with law. Title 19 U.S.C. § 1677b(f)(1)(A) provides that
Commerce will calculate cost of production
based on the records of the exporter or producer of the merchandise, if such
records are kept in accordance with the generally accepted accounting principles
of the exporting country . . . and reasonably reflect the costs associated with the
production and sale of the merchandise, . . . consider[ing] all available evidence
on the proper allocation of costs, including that which is made available by the
exporter or producer on a timely basis, if such allocations have been historically
used by the exporter or producer, in particular for establishing appropriate
amortization and depreciation periods, and allowances for capital expenditures
and other development costs.
19 U.S.C. § 1677b(f)(1)(A).
The Court has twice remanded this issue to Commerce, asking Commerce to
provide a reasoned explanation supported by substantial evidence on the record to
support its decision to reject Hynix’s reported amortized R&D costs. See Hynix
Court No. 01-00988 Page 7
Semiconductor, Inc. v. United States, 248 F. Supp.2d 1297, 1312 (Ct. Int’l Trade 2003)
(“Hynix I”); Hynix II, 295 F. Supp. 2d at 1370-71. In Hynix I, this Court found that the
record demonstrated that Hynix had applied Korean GAAP-consistent accounting
practices in reporting its amortized R&D costs and that Hynix’s reported costs had been
verified by Commerce. See Hynix I, 248 F. Supp. 2d at 1311. Commerce, however,
rejected Hynix’s reported costs in the administrative review, and again on the first
remand. See Hynix I, 248 F. Supp. 2d at 1310-12; Hynix II, 295 F. Supp. 2d at 1369.
This Court has observed that “[t]he object of the cost of production exercise is not to
capture all past expenses, but rather those expenses that reasonably and accurately reflect
a respondent’s actual production costs for a period of review.” Micron Tech., Inc. v.
United States, 23 Ct. Int’l Trade 380, 382 (1999) (emphasis added). This Court held that
Commerce failed to provide an adequate explanation for its decision to reject Hynix’s
reported amortized R&D costs that were consistent with Korean GAAP and had been
verified by Commerce. Hynix I, 248 F. Supp. 2d at 1312-13; Hynix II, 295 F. Supp. 2d at
1370-71. This Court noted that, while Hynix changed R&D accounting methods from
amortizing to expensing during the First through Fourth Administrative Reviews and
back to amortizing during the Fifth Administrative Review of the subject merchandise,
Hynix stopped expensing R&D costs in the year incurred in 1997, and since then has
utilized amortization as its R&D accounting method. Hynix I, 248 F. Supp. 2d at 1312
(citing Final Decision Memorandum at 8-11 (Pub. Doc. No. 72); Hynix Semiconductor,
Inc. v. United States, No. 01-00988 (Ct. Int’l Trade May 21, 2002) (Pls.’ Mot. for J.
Upon the Agency R. at 21)). Moreover, prior to the initiation of administrative reviews,
Plaintiffs, while operating as Hyundai, historically amortized R&D costs. Hynix II, 295
Court No. 01-00988 Page 8
F. Supp. 2d at 1369-70 & n.2 (citing Hynix I, 248 F. Supp 2d at 1306; Micron Tech., Inc.
v. United States, 893 F. Supp. 21, 28-29 (Ct. Int’l Trade 1995)). The Court held that
Commerce “failed to establish through evidence on the record that an understatement of
R&D costs has occurred in this period of review [based upon] the change of accounting
methods, such that Plaintiffs’ reported and verified amortized R&D costs do not
‘reasonably reflect the costs associated with production and sale of the merchandise.’” Id.
(quoting 19 U.S.C. § 1677b(f)(1)(A)).
In Remand Results II, Commerce appears to be unwilling or unable to articulate a
reasoned explanation, supported by substantial evidence on the record, that a change
from one permissible accounting method to another necessarily creates a distortion in the
cost of production calculation for this period of review. Based upon the fact that Hynix’s
reported and verified amortized R&D costs for this period of review are consistent with
Korean GAAP and the fact that Commerce has not established through substantial
evidence on the record that these reported costs do not reasonably reflect the cost of
production, this Court affirms Commerce’s decision to recalculate Hynix’s cost of
production, using Hynix’s reported amortized R&D costs in Remand Results II.
II. Commerce’s Decision to Exclude Non-Subject Merchandise R&D Costs is
Affirmed.
The Court holds that Commerce’s decision to exclude non-subject merchandise
R&D costs from calculations of the cost of production for the subject merchandise is
supported by substantial evidence on the record and is otherwise in accordance with law.
As the Court held in Hynix I and Hynix II, the memorandum of Dr. Jhabvala, which was
prepared for a different administrative review evaluating different products produced by
Court No. 01-00988 Page 9
different parties under conditions that were not established to be similar to those of this
case, and the listing of the names of six R&D projects in Hynix’s non-memory R&D
laboratory, with nothing more, were not substantial evidence to support Commerce’s
theory of cross-fertilization in this case. See Hynix I, 248 F. Supp. 2d at 1316 (noting
that Dr. Jhabvala’s memorandum was originally prepared for use in Notice of Final
Determination of Sales at Less Than Fair Value: Static Random Access Memory
Semiconductors From the Republic of Korea, 63 Fed. Reg. 8,934, 8,939-40 (Feb. 23,
1998) (citing Mem from Dr. Murzy Jhabvala’s to Thomas Futtner of 9/8/97, “Cross
Fertilization of Research and Development of Semiconductor Memory Devices”)); Hynix
II, 295 F. Supp. 2d at 1372. Commerce has historically excluded R&D expenses for non-
subject merchandise where a respondent maintains product-specific R&D costs and the
expenses benefitted non-subject merchandise. See, e.g., High-Tenacity Rayon Filament
Yarn From Germany, 60 Fed. Reg 15,897, 15,899 (Mar. 28, 1995); Large Power
Transformers from Japan; Final Results of Antidumping Duty Review, 57 Fed. Reg.
45,767, cmt.3 (Oct. 5, 1992). Here, Hynix maintained product-specific R&D costs, and
Commerce has not established through substantial evidence on the record that the subject
merchandise is benefitted from R&D activities conducted for non-subject merchandise
products. Therefore, this Court holds that substantial evidence supports Commerce’s
decision in Remand Results II to recalculate the cost of production for the subject
merchandise by excluding non-subject merchandise R&D expenses.
Court No. 01-00988 Page 10
III. Commerce’s Decision to Accept the Reported Average Useful Lives for
Hynix’s Fixed Assets is Affirmed.
Commerce’s decision to recalculate depreciation expenses using Hynix’s reported
AULs, which included an accounting adjustment revising Hynix’s AULs, is supported by
substantial evidence and otherwise in accordance with law. In Hynix II, the Court
concluded that Commerce did not provide a reasoned explanation, supported by
substantial evidence on the record, for accepting Plaintiffs’ 1996 AUL revision but
rejecting Plaintiffs’ AUL revision for this period of review. Hynix II, 295 F. Supp. 2d at
1373. Further, this Court found that Commerce’s decision to accept Plaintiffs’ appraisers
report with respect to revaluation of assets, while challenging the qualifications of the
same appraisers and the adequacy of the same report with respect to the revision of
Plaintiffs’ AULs, was not supported by substantial evidence on the record. Id. at 1374.
Commerce appears to be unwilling or unable to provide an explanation as to why
it characterized two AUL revisions differently in Remand Results II. See Remand Results
II at 5. The record established that Commerce accepted the quality of Hynix’s appraisers
and the adequacy of the appraisers report for the revaluation of Hynix’s assets in the
Final Results. See Hynix II, 295 F. Supp. 2d at 1373-74 (citing Final Results, 63 Fed.
Reg. at 50,871; Final Decision Memorandum at 15-18 (Pub. Doc. No. 72)). Commerce
has, however, failed to provide a reasonable explanation for rejecting the same appraisers
and the same report addressing Hynix’s revised AULs. The record, nevertheless,
demonstrates that Commerce verified the information contained in Hynix’s appraisers’
report addressing the AUL revision. See id. at 1375 (citing Final Decision Memorandum
at 17-18 (Pub. Doc. No. 72)). This Court holds that there is substantial evidence on the
Court No. 01-00988 Page 11
record to support Commerce’s decision to recalculate the cost of production using
Hynix’s revised AULs.
IV. Micron’s Request for Remand Based on a Possible Clerical Error is Denied.
The Court notes that Micron has pointed out a possible clerical error in the
calculation of the assessment rate. (Def.-Int.’s Reply at 18-20.) The Court has found no
indication that Micron brought this clerical error to Commerce’s attention prior to filing
its comments to Remand Results II, and Commerce made no mention of this error in
Remand Results II. See id.; see also, Remand Results II. Additionally, Plaintiffs have not
mentioned this clerical error in their comments to Remand Results II. (See Pls.’ Cmts.)
Micron did, however, notify Commerce of this same error three days after Commerce
issued the Final Results in October 2001. (See Def.-Int.’s Cmts. Conf. Ex. 3 at 1.) In a
memorandum addressing Micron’s notification, Commerce identified this error as a
ministerial error, “defined under 19 CFR 351.244(f) as ‘an error in addition, subtraction,
or other arithmetic function, clerical error resulting from inaccurate copying, duplication,
or the like, and any other similar type of unintentional error which [Commerce] considers
ministerial.’” (Id.) Commerce agreed with Micron and corrected the error, noting that
correction of the error “would have no impact on the dumping margin [and would not
require] publi[cation] [of] amended final results.” (Id. at 2-3.) The Court declines to
address this issue, but leaves it to Commerce to determine whether there is a clerical
error, as alleged by Micron, and to correct that error as it deems appropriate.
Court No. 01-00988 Page 12
CONCLUSION
The Court finds that Commerce’s Remand Results II is supported by substantial
evidence or otherwise in accordance with law. See 19 U.S.C. § 1516a(b)(1)(B)(i).
Accordingly, Remand Results II is affirmed in its entirety and this case is dismissed.
/s/ Gregory W. Carman
Gregory W. Carman,
Judge
Dated: April 1, 2004
New York, New York