893 F.Supp. 21 (CIT. 1995), 93-06-00318, Micron Technology, Inc. v. United States

Docket Nº:93-06-00318.
Citation:893 F.Supp. 21
Party Name:MICRON TECHNOLOGY, INC., Plaintiff, v. The UNITED STATES, Defendant, and Hyundai Electronics Industries Co., Ltd., et al., Defendants-Intervenors. Slip Op. 95-107.
Case Date:June 12, 1995
Court:Court of International Trade
 
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893 F.Supp. 21 (CIT. 1995)

MICRON TECHNOLOGY, INC., Plaintiff,

v.

The UNITED STATES, Defendant, and

Hyundai Electronics Industries Co., Ltd., et al., Defendants-Intervenors.

Slip Op. 95-107.

No. 93-06-00318.

United States Court of International Trade.

June 12, 1995

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Hale and Dorr, Washington, DC (Gilbert B. Kaplan, Paul W. Jameson, Cris R. Revaz), for plaintiff Micron Technology, Inc.

Frank W. Hunger, Asst. Atty. Gen., David M. Cohen, Director, Commercial Litigation Branch, Civ. Div., U.S. Dept. of Justice (A. David Lafer, Marc E. Montalbine); Office of Chief Counsel for Import Admin., U.S. Dept. of Commerce (Patrick v. Gallagher, Jr., Paul A. Ortiz), Washington, DC, of counsel, for defendant.

Graham & James, Washington, DC (Lawrence R. Walders, Jeffrey L. Snyder, Andrea Fekkes Dynes, Matthew E. Marquis, James C. Allard), for defendants-intervenors Hyundai Electronics Industries Co., Ltd. and Hyundai Electronics America, Inc.

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

Akin, Gump, Strauss, Hauer, & Feld, L.L.P., Washington, DC (Sukhan Kim,

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Spencer S. Griffith, D. Michael Kaye, Susan M. Erickson) for defendants-intervenors Samsung Electronics Co., Ltd. and Samsung Semiconductor, Inc.

MEMORANDUM and OPINION

GOLDBERG, Judge:

This matter is before the court on the parties' motions for judgment on the agency record made pursuant to USCIT Rule 56.2. Petitioner, Micron Technology, Inc. ("Micron") and respondents: Hyundai Electronics Industries Co., Ltd. and Hyundai Electronics America, Inc. (collectively, "Hyundai"); LG Semicon Co., Ltd. and LG Semicon America, Inc. (collectively, "Semicon"); and Samsung Electronics Co., Ltd. and Samsung Semiconductor, Inc. (collectively, "Samsung"), contest various aspects of the final determination of sales at less than fair value issued and amended by the United States Department of Commerce, International Trade Administration ("Commerce"), concerning dynamic random access memory semiconductors ("DRAMs") of one megabit ("1M") and above from the Republic of Korea. Dynamic Random Access Memory Semiconductors of One Megabit and Above from the Republic of Korea, 58 Fed.Reg. 15,467 (Mar. 23, 1993) (" Final Determination "); Dynamic Random Access Memory Semiconductors of One Megabit and Above from the Republic of Korea, 58 Fed.Reg. 27,520 (May 10, 1993) (" Amended Final Determination "). The court exercises its jurisdiction pursuant to 28 U.S.C. § 1581(c) (1988).

I. BACKGROUND

On April 22, 1992, Micron filed with Commerce a petition alleging, inter alia, that Korean DRAMs of one megabit and above were being sold in the United States at less than fair value, and that home market sales of the DRAMs were taking place at prices less than the cost of production. See Dynamic Random Access Memory Semiconductors of One Megabit and Above From the Republic of Korea, 57 Fed.Reg. 21,231 (May 19, 1992) (" Initiation of Investigation "). In response to Micron's petition, Commerce initiated an investigation of Korean DRAMs covering the period from November 1, 1991 through April 30, 1992. Final Determination, 58 Fed.Reg. 15,467, 15,468. On March 23, 1993, Commerce published its Final Determination of sales at less than fair value. Final Determination, 58 Fed.Reg. at 15,467. To correct errors contained in the Final Determination, Commerce issued an amended final determination on May 6, 1993. Amended Final Determination, 58 Fed.Reg. at 27,520.

II. DISCUSSION

In deciding a motion for judgment on the agency record, the court assesses whether Commerce's determination is "unsupported by substantial evidence on the record, or otherwise not in accordance with law." 19 U.S.C.§ 1516a(b)(1)(B) (1988). Substantial evidence is something more than a mere scintilla. Ceramica Regiomontana, S.A. v. United States, 10 CIT 399, 405, 636 F.Supp. 961, 966 (1986) (citations omitted), aff'd, 5 Fed.Cir. (T) 77, 810 F.2d 1137 (1987). Substantial evidence consists of "such relevant evidence as a reasonable mind might accept as adequate to support a conclusion." Matsushita Elec. Indus. Co. v. United States, 3 Fed.Cir. (T) 44, 51, 750 F.2d 927, 933 (1984) (citation omitted).

In moving for judgment on the agency record, the parties raise a total of fifteen issues for the court's review. Specifically, the parties contest the following aspects of Commerce's Final Determination, as amended: (1) whether Commerce properly allocated research and development costs on the basis of aggregate rather than product-specific data; (2) whether Commerce properly allocated interest expense based upon semiconductor fixed assets; (3) whether Commerce properly identified and corrected an error related to the allocation of Hyundai's interest expense; (4) whether Commerce properly applied a time lag when comparing cost of production and constructed value to sales; (5) whether Commerce properly included and expensed translation losses in calculating cost of production; (6) whether Commerce properly used BIA to adjust Samsung's reported depreciation expense; (7) whether Commerce's choice of best information

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available for calculating Samsung's depreciation expenses was proper; (8) whether Commerce properly deducted U.S. direct selling expenses from Hyundai's exporter's sales price; (9) whether Commerce properly reclassified Semicon's capitalized costs of facility construction and testing; (10) whether Commerce properly included a small volume of sales of "off-spec" merchandise in its calculations for Semicon; (11) whether Commerce treated Semicon's sales of "Product 12" properly; (12) whether Commerce properly included future generations of DRAMs within the scope of its investigation; (13) whether Commerce properly verified Hyundai's cost of production questionnaire response; (14) whether Commerce properly verified Semicon's cost of production questionnaire response; and (15) whether Commerce properly determined that Samsung and [ ] [*] are not related parties. Each will be addressed in turn.

1. Commerce's Allocation of Research and Development Costs:

Hyundai, Samsung, and Semicon ("respondents"), each challenge the methodology chosen by Commerce to allocate research and development ("R & D") costs for the purpose of calculating the cost of production ("COP") of the subject DRAMs. Respondents raise two objections to Commerce's allocation methodology; each will be considered in turn.

First, respondents challenge Commerce's decision to calculate the R & D costs related to the subject DRAMs by allocating the R & D costs related to all semiconductors over the total cost of sales for all semiconductors. Commerce allocated R & D costs using aggregate data rather than product-specific data based upon its determination that, "[b]ecause the general underlying technology is the same for all semiconductor products, the benefits from the results of R & D, even if intended to advance the design or manufacture of a specific product, provide an intrinsic benefit to other semiconductor products." Final Determination, 58 Fed.Reg. at 15,472. Respondents contend that the administrative record compiled in this case does not support Commerce's conclusion that R & D cross-fertilization in the semiconductor industry warrants the use of aggregate data to allocate R & D costs for the subject DRAMs. The court agrees.

To begin, the court recognizes that R & D cross-fertilization may justify allocating R & D costs on an aggregate, rather than product-specific, basis. Indeed, if substantial record evidence supports a determination that the subject merchandise benefits from R & D expenditures earmarked for non-subject merchandise, it would then be appropriate to account for such expenditures in calculating the cost of producing the subject merchandise. The court emphasizes, however, that the validity of Commerce's methodology cannot rest on intuitive appeal alone; rather, the factual premise upon which Commerce bases its choice of methodology must be supported by substantial evidence on the record. Upon review, the court finds that in this particular instance it is not.

Significantly, in defending its choice of methodology, Commerce fails to direct the court to any record evidence of R & D cross-fertilization in the semiconductor industry. See Defendant's Response Brief at 5-8. Instead, the defendant offers mere speculation, stating that "there is an overlap of technology between different semiconductors, the result of which is that R & D performed for one model may provide a benefit to another model." Id. at 6-7 (emphasis added). Micron attempts to justify Commerce's methodology by citing to a single remark offered by a Micron official at the hearing before Commerce, indicating that R & D related to one aspect of one particular product will likely benefit current and future generations of DRAMs. Micron's Opposition Brief at 22-23. If R & D cross-fertilization in the semiconductor industry is as widespread as defendant claims, one would expect an abundance of corroborating evidence which supports and expands upon the statement offered by the Micron official. Yet, there is none. Standing alone, this statement offered by a self-interested party after the record had been closed hardly constitutes substantial

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evidence upon which Commerce could base so sweeping a determination.

In contrast, respondents provide ample citation to verified record evidence tending to show that the subject merchandise did not derive an intrinsic benefit from R & D related to other semiconductor products. Most...

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