Hyundai Electronics Industries Co. v. U.S.

• Decision Date: 25 August 2005
• Docket Number: Court No. 00-01-00027.,Slip Op. 05-105.
• Citation: 395 F.Supp.2d 1231
• Parties: HYUNDAI ELECTRONICS INDUSTRIES CO., LTD. and Hyundai Electronics America, Inc., Plaintiffs, v. UNITED STATES, Defendant, and Micron Technology, Inc., Defendant-Intervenor.
• Court: U.S. Court of International Trade

395 F.Supp.2d 1231

HYUNDAI ELECTRONICS INDUSTRIES CO., LTD. and Hyundai Electronics America, Inc., Plaintiffs, v. UNITED STATES, Defendant, and Micron Technology, Inc., Defendant-Intervenor.

Slip Op. 05-105.

Court No. 00-01-00027.

United States Court of International Trade.

August 25, 2005.

Willkie, Farr & Gallagher LLP (James P. Durling and Daniel L. Porter) for Plaintiffs Hyundai Electronics Industries Co., Ltd. and Hyundai Electronics America, Inc.

Peter D. Keisler, Assistant Attorney General, David M. Cohen, Director, Jeanne E. Davidson, Deputy Director Commercial Litigation Branch, Civil Division, United States Department of Justice (Kenneth S. Kessler); Patrick V. Gallagher, Jr., Office of the Chief Counsel for Import Administration, United States Department of Commerce, for Defendant United States, of counsel.

King & Spalding LLP (Gilbert B. Kaplan and Daniel L. Schneiderman) for Defendant-Intervenor Micron Technology, Inc.

OPINION

GOLDBERG, Senior Judge.

This case is before the Court following remand to the United States Department of Commerce ("Commerce"). In Hyundai Electronics Industries Co. v. United States, 28 CIT ___, 342 F.Supp.2d 1141 (2004) ("Hyundai I"), familiarity with which is presumed, the Court sustained in part and remanded in part Commerce's determination in the fifth administrative review regarding Dynamic Random Access Memory semiconductors of one megabit or above ("DRAMs") from the Republic of Korea produced by Hyundai Electronics Industries Co., Ltd. and Hyundai Electronics America, Inc. (collectively "Hyundai") and LG Semicon Co., Ltd. ("LG Semicon").¹ See Dynamic Random Access Memory Semiconductors of One Megabit or Above From the Republic of Korea: Final Results of Antidumping Duty Administrative Review and Determination Not To Revoke the Order in Part, 64 Fed.Reg. 69694 (Dec. 14, 1999) ("Final Results").

In Hyundai I, the Court found that Commerce was justified in applying only partial adverse facts available ("AFA") against LG Semicon in determining its dumping margin. See Hyundai I, 28 CIT at ___, 342 F.Supp.2d at 1155. The Court concluded that while Commerce was correct in applying AFA against LG Semicon for its German sales to [] ("the customer") because LG Semicon knew or should have known that DRAMs sold to the customer were destined for the United States, the use of total AFA was not warranted because Commerce erred in using AFA for LG Semicon's Mexican sales to [ ]. Id. With respect to Plaintiffs' research and development ("R & D") costs, the Court held that Commerce had not adduced substantial evidence to support its theory of cross-fertilization, which allowed the inclusion of R & D expenditures for non-subject merchandise in calculating the cost of producing the subject merchandise. See id. at ___, 342 F.Supp.2d at 1157. Additionally, the Court found that Commerce had not provided specific evidence demonstrating why Plaintiffs' amortized R & D costs did not reasonably account for their actual R & D costs during the period of review, or how Plaintiffs' currently deferred R & D costs affected production and revenue for the review period. Id. at ___, 342 F.Supp.2d at 1159.²

The Court remanded the matter to Commerce with instructions to: (1) recalculate LG Semicon's dumping margin using the data provided by LG Semicon for its Mexican sales, and applying AFA only for LG Semicon's sales to the customer's German subsidiary; (2) provide additional information specifically pointing to the effect of non-subject merchandise R & D on the R & D for the subject merchandise, or in the alternative, recalculate R & D costs on the most product-specific basis possible; (3) provide specific evidence explaining how Plaintiffs' actual R & D costs for the review period are not reasonably accounted for in their amortized R & D costs, or in the alternative, accept Plaintiffs' amortization methodology; and (4) present substantial evidence demonstrating how R & D costs for Plaintiffs' long-term projects affect their current projects for the period of review, or in the alternative, accept Plaintiffs' deferral methodology. See id. at ___, ___, ___, ___, 342 F.Supp.2d at 1155, 1157, 1159, 1159.

Commerce duly complied with the Court's order. Commerce issued draft Redetermination Results (Aug. 12, 2004) ("Draft Remand Results") and then, after receiving comments from Plaintiffs and Defendant-Intervenor Micron Technology, Inc. ("Micron"), the Final Results of Redetermination Pursuant to Court Remand (Aug. 31, 2004) ("Remand Results"). In the Remand Results, Commerce recalculated LG Semicon's dumping margin and applied a new rate of 89.10 percent, which Commerce concluded was "the highest non-aberrational margin calculated for any U.S. transaction for LG [Semicon] in the period of review[.]" Remand Results at 4. Commerce also complied with the Court's request for more information regarding its theory of cross-fertilization by providing scientific articles, new expert testimony, and the titles of some of Hyundai's development projects. Id. at 4-5, 11-14. In addition, although it expressed disagreement with the Court's findings regarding amortization in Hyundai I, Commerce stated that it could not provide specific evidence showing how amortization did not reasonably account for Plaintiffs' actual R & D costs incurred during the period of review. Id. at 5. Thus, Commerce recalculated Plaintiffs' R & D costs to allow for amortization. Id. Finally, Commerce continued to find that Plaintiffs' deferred R & D costs should be expensed in the period incurred because Plaintiffs did not offer any reasonable evidence demonstrating how their deferred costs would have discernible future benefits. Id. at 6, 22.

Plaintiffs submitted Comments on the Final Results of Redetermination ("Pls.' Br."), and Micron submitted a Memorandum Addressing the Final Results of Redetermination Pursuant to Court Remand ("Def.-Intvr.'s Br."). Commerce then submitted its Response to Plaintiffs' and Defendant-Intervenor's Comments. Plaintiffs subsequently submitted Response Comments on the Final Results of Redetermination, and Micron submitted a Response Brief Addressing Plaintiffs' Comments.

The Court has jurisdiction under 28 U.S.C. § 1581(c). The Court must uphold Commerce's determination if it is supported by substantial evidence and otherwise in accordance with law. 19 U.S.C. § 1516a(b)(1)(B)(i). After due consideration of the parties' submissions, the administrative record, and all other papers had herein, and for the reasons that follow, the Court sustains in part and reverses and remands in part.

I. DISCUSSION

A. Commerce's Decision to Apply a Margin of 89.10 Percent as Partial AFA Is Supported by Substantial Evidence and Otherwise in Accordance with Law.

In Hyundai I, the Court held that Commerce was justified in applying partial AFA to LG Semicon's German sales, but not in applying total AFA to LG Semicon's entire U.S. sales database. See Hyundai I, 28 CIT at ___, 342 F.Supp.2d at 1153-55. With respect to LG Semicon's German sales, the Court sustained Commerce's finding that LG Semicon knew or should have known that the DRAMs it sold to the customer's German subsidiary were destined for the U.S. market, and that its failure to submit these German sales as U.S. sales justified the use of AFA under 19 U.S.C. § 1677e(b). Id. at ___, 342 F.Supp.2d at 1155. However, with respect to LG Semicon's Mexican sales, the Court found that Commerce did not meet the requisite standard for applying AFA. Id. Thus, the Court ordered Commerce to recalculate LG Semicon's dumping margin using AFA only for LG Semicon's sales to the customer's German subsidiary. Id.

Commerce complied with the Court's instructions and calculated a new AFA rate of 89.10 percent. See Remand Results at 2-4. In choosing this rate, Commerce stated that it selected the highest non-aberrational margin calculated for any of LG Semicon's U.S. transactions during the period of review.³ See id. at 4. Commerce also noted that the 89.10 percent rate fell within "a range of margins for a large portion of LG [Semicon]'s review period transactions that decrease[d] steadily by small amounts." Id. Finally, Commerce observed that the new rate was sufficiently adverse to ensure that LG Semicon would not have obtained a more favorable result by failing to cooperate than if it had cooperated fully, and also furthered the statutory purpose underlying the AFA rule to induce respondents to provide Commerce with complete and accurate information in a timely manner. See id.

1. The 89.10 Percent Rate Is Non-Aberrational.

Plaintiffs argue that Commerce failed to explain why the 89.10 percent rate is non-aberrational, while the other margins above it are aberrational. Pls.' Br. at 3. According to Plaintiffs, Commerce's discretion in applying AFA is not unlimited; rather, Commerce must demonstrate why a particular AFA rate is indicative of a respondent's selling practices and rationally related to its sales. Id. Here, Plaintiffs contend, Commerce failed to demonstrate in the Remand Results that the 89.10 percent rate is indicative of LG Semicon's sales, and therefore non-aberrational. Id.

The Court disagrees for two reasons. First, the Court finds that the 89.10 percent rate is inherently indicative of LG Semicon's selling practices because it was derived from LG Semicon's "own sales data from the instant review segment." Remand Results at 8. When Commerce utilizes a respondent's own sales data, it is afforded broad discretion in the selection of the adverse rate, and this is true even if the selected rate is reflective of only a small proportion of the respondent's sales. See Ta Chen Stainless Steel Pipe, Inc. v. United States, 298 F.3d 1330, 1339 (Fed.Cir.2002). Thus, although the 89.10 percent rate chosen by Commerce may be higher than other calculated margins, this fact alone does not render the AFA rate aberrational or unrelated to LG Semicon's sales practices.

Second...