Micron Technology, Inc. v. United States

Slip. Op. 99 - 29

UNITED STATES COURT OF INTERNATIONAL TRADE

BEFORE: RICHARD W. GOLDBERG, JUDGE



MICRON TECHNOLOGY, INC.,

Plaintiff,

v.

THE UNITED STATES,

Court No. 97-02-00205
Defendant,

and

LG SEMICON CO., LTD., and
LG SEMICON AMERICA, INC.,

Defendant-Intervenors.


[Final Results in the second administrative review of an
antidumping duty order of the U.S. Department of Commerce is
sustained in part, and remanded in part.]

Dated: March 25, 1999

Hale & Dorr, LLP (Gilbert B. Kaplan, Michael D. Esch, Paul W.
Jameson, and Cris R. Revaz), for plaintiff Micron Technology, Inc.

David W. Ogden, Acting Assistant Attorney General; David M.
Cohen, Director, Commercial Litigation Branch, Civil Division,
United States Department of Justice (Michele D. Lynch); Office of
the Chief Counsel for Import Administration, United States
Court No. 97-02-00205 Page 2

Department of Commerce (Jeffrey C. Lowe), of counsel, for
defendant.

Kaye, Scholer, Fierman, Hays & Handler, LLP (Michael P. House
and Raymond Paretzky), for defendant-intervenors LG Semicon Co.,
and LG Semicon America, Inc.

OPINION

GOLDBERG, Judge: In this action, the Court reviews two challenges

to the Department of Commerce’s ("Commerce") Notice of Final

Results of Antidumping Administrative Review: Dynamic Random

Access Memory Semiconductors of One Megabit or Above From the

Republic of Korea, 62 Fed. Reg. 965 (Jan. 7, 1997) ("Final

Results"). More specifically, plaintiff, Micron Technology, Inc.

("Micron"), petitioner in the underlying administrative review,

contests (1) Commerce’s decision not to deduct from constructed

export price ("CEP") an amount for indirect selling expenses

incurred by respondent, LG Semicon Co., Ltd. and LG Semicon

America, Inc. (collectively "LG Semicon"), in its home market;

and (2) Commerce’s methodology for the level of trade ("LOT")

analysis in CEP cases.

The Court exercises jurisdiction to review this motion for

judgment on the agency record pursuant to 28 U.S.C. § 1581(c)

(1994). The Court sustains the Final Results in part, and
Court No. 97-02-00205 Page 3

remands in part.

I.
BACKGROUND

Micron, a U.S. manufacturer of dynamic random access memory

semiconductors ("DRAMS"), filed a petition with Commerce on April

22, 1992, alleging that Korean producers of DRAMS were selling

subject merchandise in the United States at less than fair value.

Following an antidumping investigation, Commerce published an

antidumping order on DRAMS from Korea in May, 1993. See 58 Fed.

Reg. 27520 (May 10, 1993).

During the first anniversary month of the order, Micron and

three Korean respondents, including LG Semicon, requested an

administrative review of the DRAMS order. As a result of the

first administrative review, Commerce assigned a dumping margin

of 0.00% to LG Semicon.1 See 61 Fed. Reg. 20,216, 20,222 (May 6,

1996). In the second anniversary month of the order, the parties

again requested an administrative review of the order. Commerce

1
Micron appealed several aspects of Commerce’s decision
with respect to LG Semicon for the first review period. In
January of this year, the Court sustained part of Commerce’s
decision and remanded one issue to Commerce for further review.
See Micron Technology, Inc. v. United States, Slip Op. 99-12 (CIT
Jan. 28, 1999).
Court No. 97-02-00205 Page 4

initiated its second administrative review of the Korean DRAMS

order on June 15, 1995, covering the period from May 1, 1994

through April 30, 1995. See 60 Fed. Reg. 31,448 (June 14, 1995).

At the close of the second review, Commerce assigned a de minimis

dumping margin to LG Semicon. See Final Results, 62 Fed. Reg. at

968. Micron again appealed these results, and it is this second

administrative review that is the subject of the case at bar.2

Two aspects of Commerce’s Final Results are of particular

relevance to this appeal. First, Commerce determined that

certain indirect selling expenses incurred by LG Semicon in Korea

"do not result from or bear relationship to selling activities in

the United States." 62 Fed. Reg. at 968 (cmt. 4). As a result,

Commerce decided that LG Semicon’s indirect selling expenses

incurred outside the United States should not be deducted from LG

Semicon’s CEP.3 The practical effect of

2
Because Commerce initiated the review after January 1,
1995, the applicable law in the instant case is the antidumping
code as amended by the Uruguay Round Agreements Act ("URAA"),
Pub. L. No. 103-465, tit. II, 108 Stat. 4809 (1994). See
Torrington Co. v. United States, __ Fed. Cir. (T) __, __, 68 F.3d
1347, 1352 (1995).
3
Constructed export price or "CEP," along with exporter’s
price or "EP," is the statutory mechanism used to calculate what
has traditionally been known as U.S. price. In turn, U.S. price
anchors one end of the U.S. price to normal value comparison,
Court No. 97-02-00205 Page 5

from which a dumping margin is derived. Typically, an EP sale
involves a direct sale from the foreign exporter to an unrelated
U.S. purchaser, whereas a CEP sale is made to a related U.S.
purchaser and then an unaffiliated party. All sales at issue in
this proceeding are CEP sales. More specifically, Congress
defined a CEP sale in Section 772(b) of the URAA as follows:

The term "constructed export price" means the price at which
the subject merchandise is first sold (or agreed to be sold)
in the United States before or after the date of importation
by or for the account of the producer or exporter of such
merchandise or by a seller affiliated with the producer or
exporter, to a purchaser not affiliated with the producer or
exporter, as adjusted under subsections (c) and (d).

19 U.S.C. § 1677a(b). As relevant here, subsection (d) of this
section provides that CEP shall be reduced by

the amount of any of the following expenses generally
incurred by or for the account of the producer or exporter,
or the affiliated seller in the United States, in selling
the subject merchandise (or subject merchandise to which
value has been added) %

(A) commissions for selling the subject merchandise in
the United States;

(B) expenses that result from, and bear a direct
relationship to, the sale, such as credit expenses,
guarantees and warranties;

(C) any selling expenses that the seller pays on behalf
of the purchaser; and

(D) any selling expenses not deducted under
subparagraph (A), (B), or (C).

19 U.S.C. § 1677a(d)(1). As discussed above, Commerce determined
the expenses at issue here do not bear a direct relationship to
U.S. sales and, hence, should not be deducted from CEP under
Court No. 97-02-00205 Page 6

Commerce’s decision was a higher CEP and, thereby, a lower

dumping margin.

Second, in accordance with the law as amended by the URAA,

Commerce requested information from LG Semicon in order to

conduct a level of trade analysis.4 To assess level of trade in

the second review period, Commerce first calculated a

"constructed" CEP by deducting indirect selling expenses.

section 1677a(d)(1).
4
In Section 773(a)(1)(B) of the URAA, Congress required
Commerce to establish normal value "to the extent practicable, at
the same level of trade as the export price or constructed export
price." 19 U.S.C. § 1677b(a)(1)(B). Importantly, Congress also
provided that when Commerce is unable to match sales at the same
level of trade, an adjustment to normal value should be made to
account for the differences in price that result from the
differences in level of trade. See 19 U.S.C. § 1677b(a)(7)(A).

But, most importantly for purposes here, Congress provided
that when the data indicate that normal value sales are at a more
advanced level of distribution, yet are insufficient to warrant
an adjustment under section 1677b(a)(7)(A), normal value still
should be reduced by what is known as the "CEP offset."
Specifically, Congress stated that when a level of trade
adjustment is not warranted, yet normal value sales are at a more
advanced level of distribution,

normal value shall be reduced by the amount of indirect
selling expenses incurred in the country in which normal
value is determined on sales of the foreign like product but
not more than the amount of such expenses for which a
deduction is made [to CEP].

19 U.S.C. § 1677b(a)(7)(B).
Court No. 97-02-00205 Page 7

Commerce then compared the "constructed" CEP sales to LG

Semicon’s normal value sales, which in this instance were home

market sales. In doing so, Commerce determined that the sales in

the two markets were at different levels of trade. Yet, because

there was no basis upon which to determine if price differences

existed between the two levels of trade, Commerce granted LG

Semicon a "CEP offset," thereby reducing normal value by an

amount for home market indirect selling expenses. See supra note

4.

Micron challenges both actions by Commerce. First, Micron

contends that Commerce erred as a matter of law when it declined

to deduct indirect selling expenses incurred outside the United

States from CEP. Second, Micron maintains that Commerce’s

decision to adjust LG Semicon’s CEP prior to making the level of

trade comparison was methodologically unsound and contrary to

law. Commerce and LG Semicon oppose both challenges to the Final

Results.

II.
STANDARD OF REVIEW
Commerce’s determination will be sustained if it is

supported by substantial evidence on the record and is otherwise
Court No. 97-02-00205 Page 8

in accordance with law. See 19 U.S.C. § 1516a(b)(1)(B) (1994).

III.
DISCUSSION
A. Commerce’s Decision Not to Deduct Indirect Selling Expenses
Incurred Outside the United States Was In Accordance With
Law.

Micron first contends that under the pre-URAA statute,

indirect selling expenses incurred outside the United States were

always deducted from U.S. price.5 See Pl.’s Br. In Supp. Of Mot.

for J. On Agency Rec., at 8-10. Indeed, Micron emphasizes that

the court explicitly sustained the pre-URAA practice in Silver

Reed America, Inc. v. United States, 12 CIT 39, 43-44, 679 F.

Supp. 12, 16 (1998) (holding that Commerce could deduct selling

expenses related to U.S. sales from ESP, regardless of where

geographically the expenses were incurred). Micron then argues

that because this section of the antidumping code was not amended

by the URAA, Commerce’s decision to deviate from its former

5
Under the pre-URAA statute, Commerce calculated a
respondent’s U.S. price using either the "purchase price" ("PP")
or "exporter’s sales price" ("ESP"). These designations were
amended under the URAA and are now referenced as "exporter’s
price" ("EP") and "constructed export price" ("CEP"),
respectively. See Statement of Administrative Action to the URAA
("SAA"), H.R. Doc. No. 103-316 (1994), at 822.
Court No. 97-02-00205 Page 9

practice and now exclude indirect selling expenses incurred

outside the United States was not in accordance with law.

Specifically, Micron notes that the URAA amendments had no

substantive effect on the definitions for the terms used to

calculate U.S. price. Compare 19 U.S.C. § 1677a(b) & (c) (1988)

(defining "purchase price" and "exporter’s sales price"), with 19

U.S.C. § 1677b(a) & (b) (1994 as amended) (defining "EP" and

"CEP"). Micron also points out the SAA makes clear that

"[n]otwithstanding the change in terminology, no change is

intended in the circumstances under which export price (formerly

‘purchase price’) versus constructed export price (formerly

‘exporter’s sales price’) are used." SAA at 822-23. Micron’s

syllogism thus runs, because Commerce always deducted indirect

selling expenses from ESP, whether incurred inside the United

States or not, and because the substantive provision governing

the deduction of indirect selling expenses was not changed by the

URAA amendments, Commerce’s decision to alter its practice here

was not in accordance with law.

Micron’s argument cannot withstand scrutiny. As all

parties concede, neither the pre-URAA statute, nor the statute as

amended by the URAA, defines those selling expenses that should
Court No. 97-02-00205 Page 10

be categorized as "indirect" selling expenses. Compare 19 U.S.C.

§ 1677a(d)(1) (1988), with 19 U.S.C. § 1677a(d)(1) (1994).

Because the statute is silent, the Court must look to see if

Commerce’s decision not to deduct the expenses at issue was

reasonable.

The Court finds Commerce’s decision was reasonable. It is

true that Commerce previously construed the statutory silence to

mean that all indirect expenses were "related to U.S. sales,"

regardless of where geographically they were incurred. And now,

Commerce interprets "expenses associated with economic activities

occurring in the United States" to mean only those expenses that

bear a direct relationship to sales made to unaffiliated U.S.

purchasers. Yet, Commerce’s decision to revise its practice is

reasonable in view of the SAA that accompanied the URAA. The SAA

provides that under 19 U.S.C. § 1677a, deductions from CEP are

limited to those expenses "associated with economic activities

occurring in the United States." SAA at 823 (emphasis added).

This language from the SAA plainly contemplates something more

than the practice sustained in Silver Reed. That is, it is not

enough simply to assert that the expenses are indirect selling

expenses and, therefore, must be deducted from CEP. Rather, the
Court No. 97-02-00205 Page 11

SAA explains that the expenses must be linked to or "associated

with" actual U.S. sales before they can be deducted from CEP.6
In addition, the Court finds that, contrary to Micron’s argument,

the relevant language from the SAA should not be dismissed as

mere legislative history. As Commerce notes, Congress expressly

approved the SAA as the authoritative expression governing

application of the URAA in judicial proceedings. See 19 U.S.C. §

3512(d) (1994) (stating that the SAA is approved by Congress and

that it is the authoritative expression of the United States

concerning application of the antidumping statute as amended

under the URAA). Thus, the Court finds that the SAA provided

Commerce a reasonable basis upon which to alter the practice

sustained by the court in Silver Reed.

Finally, and perhaps most importantly, in Timken Co. v.

6
The Court notes that under Commerce’s current practice, it
is possible that indirect selling expenses incurred outside the
United States may be deducted from CEP. Indeed, Commerce has
deducted indirect selling expenses that, geographically, were
incurred outside the United States, yet still bore a relationship
to unaffiliated party sales in the United States; the court has
sustained this practice. See Mitsubishi Heavy Indus., Ltd. v.
United States, 22 CIT __, __, 15 F. Supp.2d 807, 818 (1998)
(sustaining Commerce’s decision to deduct indirect selling
expenses incurred in Japan from CEP because the expenses were
incurred to support U.S. sales and, hence, were "associated with"
economic activities occurring in the United States).
Court No. 97-02-00205 Page 12

United States, 22 CIT __, 16 F. Supp.2d 1102 (1998), the court

upheld Commerce’s current practice on this precise issue. In

Timken, the court also noted that neither the pre-URAA statute

nor the statute as amended address whether indirect selling

expenses incurred outside the United States should be deducted

from CEP. The Timken court similarly found Commerce’s altered

practice reasonable in light of the specific language in the SAA

that only expenses "associated with economic activities occurring

in the United States" should be deducted from CEP. Id. at __, 16

F. Supp.2d at 1106. The Court here endorses the Timken analysis.

Accordingly, the Court finds Commerce’s decision not to

deduct the indirect selling expenses incurred by LG Semicon

outside the United States from CEP was reasonable and in

accordance with law.

B. Commerce’s Methodology Used to Conduct The Level of Trade
Analysis for CEP Sales Was Not In Accordance With Law.

Micron next argues that the methodology Commerce used to

make the threshold level of trade analysis7 was internally

inconsistent. More precisely, Micron claims that Commerce

7
See supra note 4.
Court No. 97-02-00205 Page 13

applies one standard in EP situations and another in CEP

situations without any statutory basis: (1) in EP situations,

Commerce compares unadjusted EP sales (i.e., U.S. sales) to

unadjusted normal value sales (e.g., home market sales) to assess

level of trade; and (2) in CEP situations, Commerce compares the

level of trade of "adjusted" or "constructed" CEP sales (i.e.,

U.S. sales) to unadjusted normal value sales to assess level of

trade. In the CEP scenario, Commerce "adjusts" or "constructs"

CEP sales by deducting the indirect selling expenses from CEP

prior to making the level of trade comparison. Micron claims

that there is no basis in the statute for the distinction between

EP and CEP level of trade methodology and, hence, there is no

legal basis to "adjust" or "construct" CEP prior to making the

level of trade comparison. See 19 U.S.C. § 1677b(a)(7)(A).

According to Micron, the tangible result of this unwarranted

methodological distinction is a deflated dumping margin. That

is, Micron argues that because indirect selling expenses are

"stripped" from CEP prior to the level of trade comparison, the

home market level of trade will always be deemed more advanced in

CEP situations, which in turn will result in a CEP offset and a

downward adjustment to normal value. And, in sum, the potential
Court No. 97-02-00205 Page 14

dumping margin will decrease in CEP situations as a result of

Commerce’s current methodology.

Once again, the court addressed this precise issue in

Borden, Inc. v. United States, 22 CIT __, 4 F. Supp.2d 1221

(1998), appeal docketed, No. 99-__ (Fed. Cir. Feb. 12, 1999).

The Borden court first observed that there is no statutory

ambiguity in 19 U.S.C. § 1677b(a)(7), the level of trade

provision. "The statute clearly provides for a conditional level

of trade adjustment, instructing Commerce to make the adjustment

to normal value if various conditions obtain[]. By contrast, the

methodology employed by Commerce amounts to an unconditional

adjustment in every CEP case." Id. at __, 4 F. Supp.2d at 1240

(citation omitted). The court then specifically pointed out that

the statute never mentions that adjustments for selling expenses

should be made to CEP prior to the LOT analysis. Id. at __, 4 F.

Supp.2d at 1241. Importantly, the Borden court determined that,

notwithstanding the statutory silence, Commerce could not inject

its own view of the LOT provision because "Commerce’s limited

adjustment to price before the LOT analysis contravenes the

purpose of the statute. The statute leaves no room for

Commerce’s ostensible discretion to pre-adjust for selling
Court No. 97-02-00205 Page 15

expenses in the United States through the automatic deduction of

[indirect] selling expenses prior to the LOT analysis in all CEP

cases." Id. The Borden court thus rejected the same methodology

as that used in the instant case.

On this issue, the Court finds the reasoning articulated in

Borden well developed and correct. The Court adopts that

reasoning here and, in line with the Borden precedent, continues

to hold that the methodology Commerce employed to conduct the

level of trade analysis in this CEP case is contrary to law. The

Court therefore remands this issue to Commerce for further review

in light of its opinion.
Court No. 97-02-00205 Page 16

IV.
CONCLUSION
For the foregoing reasons, the Court remands the Final

Results to Commerce for further consideration as to the

methodology to be used when it conducts the level of trade

analysis in CEP situations. In all other respects, the Court

sustains the Final Results. A separate Order will be entered

accordingly.

_________________________________
Richard W. Goldberg
JUDGE

Dated: March 25, 1999
New York, New York.