[Federal Register: September 10, 2007 (Volume 72, Number 174)]
[Notices]
[Page 51609-51614]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr10se07-19]
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DEPARTMENT OF COMMERCE
International Trade Administration
C-580-851
Dynamic Random Access Memory Semiconductors from the Republic of
Korea: Preliminary Results of Countervailing Duty Administrative Review
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
SUMMARY: The Department of Commerce is conducting an administrative
review of the countervailing duty order on dynamic random access memory
semiconductors from the Republic of Korea for the period January 1,
2005, through December 31, 2005. We preliminarily find that Hynix
Semiconductor, Inc. received countervailable subsidies during the
period of review. If these preliminary results are adopted in our final
results of this review, we will instruct U.S. Customs and Border
Protection (``CBP'') to assess countervailing duties as detailed in the
``Preliminary Results of Review'' section of this notice. Interested
parties are invited to comment on these preliminary results. See the
``Public Comment'' section of this notice.
EFFECTIVE DATE: September 10, 2007.
FOR FURTHER INFORMATION CONTACT: David Neubacher or Shane Subler,
Office of Antidumping/Countervailing Duty Operations, Office 1, Import
Administration, International Trade Administration, U.S. Department of
Commerce, Room 3069, 14th Street and Constitution Avenue, NW,
Washington, DC 20230; telephone: (202) 482-5823 and (202) 482-0189,
respectively.
SUPPLEMENTARY INFORMATION:
Background
On August 11, 2003, the Department of Commerce (``the Department'')
published a countervailing duty order on dynamic random access memory
semiconductors (``DRAMS'') from the Republic of Korea (``ROK''). See
Notice of Countervailing Duty Order: Dynamic Random Access Memory
Semiconductors from the Republic of Korea, 68 FR 47546 (August 11,
2003) (``CVD Order''). On August 1, 2006, the Department published a
notice of ``Opportunity to Request Administrative Review'' for this
countervailing duty order. See Antidumping or Countervailing Duty
Order, Finding, or Suspended Investigation; Opportunity To Request
Administrative Review, 71 FR 43441 (August 1, 2006). On August 30,
2006, we received a request for review from the petitioner, Micron
Technology, Inc. (``Micron''). On August 31, 2006, we received a
request for review from Hynix Semiconductor, Inc. (``Hynix''). In
accordance with 19 CFR 351.221(c)(1)(i) (2004), we published a notice
of initiation of the review on September 29, 2006. See Initiation of
Antidumping and Countervailing Duty Administrative Reviews, 71 FR 57465
(September 29, 2006) (``Initiation Notice'').
On October 18, 2006, we issued countervailing duty questionnaires
to the Government of the Republic of Korea (``GOK'') and Hynix. We
received responses to these questionnaires on November 21, 2006. On
April 24, 2007, we issued supplemental questionnaires to the GOK and
Hynix. We received responses to these supplemental questionnaires on
May 15, 2007. We issued additional supplemental questionnaires to the
GOK and Hynix on July 2, 2007, and received responses on July 16, 2007.
We received new subsidy allegations from Micron on December 11,
2006.\1\ On March 28, 2007, we initiated an investigation of one of the
two new subsidies that Micron alleged in this administrative review. In
addition, we stated our intention to examine the timing of the benefit
of a previously countervailed debt-to-equity swap (``DES'') for the
preliminary results. See Third Countervailing Duty Administrative
Review: Dynamic Random Access Memory Semiconductors from Korea: New
Subsidy Allegations Memorandum (March 28, 2007) (``New Subsidy
Allegations--DOC Memorandum''), available in the Central Records Unit
(``CRU''), Room B-099 of the main Department building.
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\1\ See submission from Micron to the Department, Re: Dynamic
Random Access Memory Semiconductors From South Korea/Petitioner's
New Subsidies Allegation And New Issues Presented (December 11,
2006) (``New Subsidy Allegations'').
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On April 19, 2007, we published a postponement of the preliminary
results in this review until August 31, 2007. See Dynamic Random Access
Memory Semiconductors from the Republic of Korea: Extension of Time
Limit for Preliminary Results of the Countervailing Duty Review, 72 FR
19694 (April 19, 2007).
Scope of the Order
The products covered by this order are DRAMS from the ROK, whether
assembled or unassembled. Assembled DRAMS include all package types.
Unassembled DRAMS include processed wafers, uncut die, and cut die.
Processed wafers fabricated in the ROK, but assembled into finished
semiconductors outside the ROK are also included in the scope.
Processed wafers fabricated outside the ROK and assembled into finished
semiconductors in the ROK are not included in the scope.
The scope of this order additionally includes memory modules
containing DRAMS from the ROK. A memory module is a collection of
DRAMS, the sole function of which is memory. Memory modules include
single in-line processing modules, single in-line memory modules, dual
in-line memory modules, small outline dual in-line memory modules,
Rambus in-line memory modules, and memory cards or other collections of
DRAMS, whether unmounted or mounted on a circuit board. Modules that
contain other parts that are needed to support the function of memory
are covered. Only those modules that contain additional items which
alter the function of the module to something other than memory, such
as video graphics adapter boards and cards, are not included in the
scope. This order also covers future DRAMS module types.
The scope of this order additionally includes, but is not limited
to, video random access memory and synchronous graphics random access
memory, as well as various types of DRAMS, including fast page-mode,
extended data-out, burst extended data-out, synchronous dynamic RAM,
Rambus DRAM, and Double Data Rate DRAM. The scope also includes any
future density, packaging, or assembling of DRAMS. Also included in the
scope of this order are removable memory modules placed on
motherboards, with or without a central processing unit, unless the
importer of the motherboards certifies with CBP that neither it, nor a
party related to it or under contract to it, will remove the modules
from the motherboards after importation. The scope of this order does
not include DRAMS or memory modules that are re-imported for repair or
replacement.
[[Page 51610]]
The DRAMS subject to this order are currently classifiable under
subheadings 8542.21.8005 and 8542.21.8020 through 8542.21.8030 of the
Harmonized Tariff Schedule of the United States (``HTSUS''). The memory
modules containing DRAMS from the ROK, described above, are currently
classifiable under subheadings 8473.30.10.40 or 8473.30.10.80 of the
HTSUS. Removable memory modules placed on motherboards are classifiable
under subheadings 8471.50.0085, 8517.30.5000, 8517.50.1000,
8517.50.5000, 8517.50.9000, 8517.90.3400, 8517.90.3600, 8517.90.3800,
8517.90.4400, and 8543.89.9600 of the HTSUS. Although the HTSUS
subheadings are provided for convenience and customs purposes, the
Department's written description of the scope of this order remains
dispositive.
Scope Rulings
On December 29, 2004, the Department received a request from Cisco
Systems, Inc. (``Cisco''), to determine whether removable memory
modules placed on motherboards that are imported for repair or
refurbishment are within the scope of the CVD Order. The Department
initiated a scope inquiry pursuant to 19 CFR 351.225(e) on February 4,
2005. On January 12, 2006, the Department issued a final scope ruling,
finding that removable memory modules placed on motherboards that are
imported for repair or refurbishment are not within the scope of the
CVD Order provided that the importer certifies that it will destroy any
memory modules that are removed for repair or refurbishment. See Final
Scope Ruling Memorandum from Stephen J. Claeys to David M. Spooner,
dated January 12, 2006.
Period of Review
The period for which we are measuring subsidies, i.e., the period
of review (``POR''), is January 1, 2005, through December 31, 2005.
Changes in Ownership
Effective June 30, 2003, the Department adopted a new methodology
for analyzing privatizations in the countervailing duty context. See
Notice of Final Modification of Agency Practice Under Section 123 of
the Uruguay Round Agreements Act, 68 FR 37125 (June 23, 2003)
(``Modification Notice''). The Department's new methodology is based on
a rebuttable ``baseline'' presumption that non-recurring, allocable
subsidies continue to benefit the subsidy recipient throughout the
allocation period (which normally corresponds to the average useful
life (``AUL'') of the recipient's assets). However, an interested party
may rebut this baseline presumption by demonstrating that, during the
allocation period, a change in ownership occurred in which the former
owner sold all or substantially all of a company or its assets,
retaining no control of the company or its assets, and that the sale
was an arm's-length transaction for fair market value.
Hynix's ownership changed during the AUL period as a result of
debt-to-equity conversions in October 2001 and December 2002, and
various asset sales. However, during the current administrative review,
Hynix has not rebutted the Department's baseline presumption that the
non-recurring, allocable subsidies received prior to the equity
conversions and asset sales continue to benefit the company throughout
the allocation period. See Hynix's November 21, 2006, supplemental
questionnaire response at page 10; see also Dynamic Random Access
Memory Semiconductors from the Republic of Korea: Preliminary Results
of Countervailing Duty Administrative Review, 71 FR 46192, 46193
(August 11, 2006) (``AR2 Preliminary Results'').
Subsidies Valuation Information
Allocation Period
Pursuant to 19 CFR 351.524(b), non-recurring subsidies are
allocated over a period corresponding to the AUL of the renewable
physical assets used to produce the subject merchandise. Section
351.524(d)(2) of the Department's regulations creates a rebuttable
presumption that the AUL will be taken from the U.S. Internal Revenue
Service's 1977 Class Life Asset Depreciation Range System (the ``IRS
Tables''). For DRAMS, the IRS Tables prescribe an AUL of five years.
During this review, none of the interested parties disputed this
allocation period. Therefore, we continue to allocate non-recurring
benefits over the five-year AUL.
Discount Rates and Benchmarks for Loans
For loans that we found countervailable in the investigation or in
the first two administrative reviews, and which continued to be
outstanding during the POR, we have used the benchmarks from the first
and second administrative reviews. These benchmarks are described
below.
Long-term Rates
For long-term, won-denominated loans originating in 1986 through
1995, we used the average interest rate for three-year corporate bonds
as reported by the Bank of Korea (``BOK'') or the International
Monetary Fund (``IMF''). For long-term won-denominated loans
originating in 1996 through 1999, we used annual weighted-averages of
the rates on Hynix's corporate bonds, which were not specifically
related to any countervailable financing. We did not use the rates on
Hynix's corporate bonds for 2000-2003 for any calculations because
Hynix either did not obtain bonds or obtained bonds through
countervailable debt restructurings during those years.
For U.S. dollar-denominated loans, we relied on the lending rates
as reported in the IMF's International Financial Statistics Yearbook.
For the years in which we previously determined Hynix to be
uncreditworthy (2000 through 2003), we used the formula described in 19
CFR 351.505(a)(3)(iii) to determine the benchmark interest rate. For
the probability of default by an uncreditworthy company, we used the
average cumulative default rates reported for the Caa- to C- rated
category of companies as published in Moody's Investors Service,
``Historical Default Rates of Corporate Bond Issuers, 1920-1997''
(February 1998). For the probability of default by a creditworthy
company, we used the cumulative default rates for investment grade
bonds as published in Moody's Investors Service: ``Statistical Tables
of Default Rates and Recovery Rates'' (February 1998). For the
commercial interest rates charged to creditworthy borrowers, we used
the rates for won-denominated corporate bonds as reported by the BOK
and the U.S. dollar lending rates published by the IMF for each year.
Short-term Rates
Consistent with the methodology used in the first and second
administrative reviews, we used the money market rates as reported in
the IMF's International Financial Statistics Yearbook for short-term
interest rates. For countries (or currencies) for which a money market
rate was not reported, we used the lending rate from the same source.
Analysis of Programs
I. Programs Previously Determined to Confer Subsidies
We examined the following programs determined to confer subsidies
in the investigation and first two
[[Page 51611]]
administrative reviews and preliminarily find that Hynix continued to
receive benefits under these programs during the POR.
A. GOK Entrustment or Direction Prior to 2004
In the investigation, the Department determined that the GOK
entrusted or directed creditor banks to participate in financial
restructuring programs, and to provide credit and other funds to Hynix,
in order to assist Hynix through its financial difficulties. The
financial assistance provided to Hynix by its creditors took various
forms, including new loans, convertible and other bonds, extensions of
maturities and interest rate reductions on existing debt (which we
treated as new loans), Documents Against Acceptance (``D/A'')
financing, usance financing, overdraft lines of credit, debt
forgiveness, and debt-for-equity swaps. The Department determined that
these were financial contributions that constituted countervailable
subsidies during the period of investigation.
In the first and second administrative reviews, the Department
found that the GOK continued to entrust or direct Hynix's creditors to
provide financial assistance to Hynix throughout 2002 and 2003. The
financial assistance provided to Hynix during this period included the
December 2002 DES and the extensions of maturities and/or interest rate
deductions on existing debt.
In an administrative review, we do not revisit past findings unless
new factual information or evidence of changed circumstances has been
placed on the record of the proceeding that would compel us to
reconsider those findings. See, e.g., Certain Pasta from Italy:
Preliminary Results and Partial Rescission of Seventh Countervailing
Duty Administrative Review, 69 FR 45676 (July 30, 2004), unchanged in
Certain Pasta From Italy: Final Results of Seventh Countervailing Duty
Administrative Review, 69 FR 70657 (December 7, 2004). With the
exception of the 2002 DES discussed below, no such new information
regarding the financial contributions described above has been
presented in this review. Thus, we preliminarily find that a re-
examination of the Department's findings in the investigation, first
administrative review, and second administrative review with respect to
the debt forgiveness, 2001 DES, loans, and extensions of maturities
and/or interest rate deductions on existing debt is unwarranted.
With respect to the DES that Hynix recorded in 2002, however, we
are revisiting the findings of the previous administrative reviews
based on new factual information placed on the record by the
petitioner. See New Subsidy Allegations at page 8. In the first
administrative review, the Department found that Hynix received a
benefit from its December 2002 restructuring and associated DES in
2002. See Dynamic Random Access Memory Semiconductors from the Republic
of Korea: Final Results of Countervailing Duty Administrative Review,
71 FR 14174 (March 21, 2006), and accompanying Issues and Decision
Memorandum at Comment 13, pages 73-77 (``AR1 Decision Memorandum''). In
the New Subsidy Allegations, in pre-preliminary comments dated August
7, 2007, and in follow-up comments dated August 24, 2007, Micron
requested that the Department reallocate the benefit stream from the
DES over the five-year period beginning in 2003.\2\
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\2\ See New Subsidy Allegations at pages 1-25; see also
submission from Micron to the Department, Re: Dynamic Random Access
Memory Semiconductors from South Korea: Petitioner's Pre-Preliminary
Comments (August 7, 2007), at pages 1-9; see also submission from
Micron to the Department, Re: Dynamic Random Access Memory
Semiconductors from South Korea: Petitioner's Reply In Support Of
Its Pre-Preliminary Comments (August 24, 2007).
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Citing new information on the record, Micron contends that Hynix's
creditors continued to treat their claims owed by Hynix as debt as of
the end of 2002, which contrasted with Hynix's treatment of the DES as
a capital adjustment on its 2002 financial statements. Contesting
Hynix's assertion that the Department measures subsidies in terms of
benefit to the recipient, Micron contends that the issue with Hynix's
DES concerns timing, not benefit. Furthermore, Micron argues that
Korean accounting standards and the Korean tax authority required Hynix
to account for the DES as a 2003 event. Also, citing new record
evidence, Micron argues that shareholder approval of the capital
reduction was not ``pro forma.'' As support for its contention that
Hynix's board could have rejected the recommendations of Hynix's
Creditors' Council, Micron notes that Hynix's board rejected a
creditors' recommendation in April 2002 to sell the company to Micron.
Finally, Micron argues that the Department should reconsider the legal
significance it granted to Hynix's accounting treatment in light of its
treatment of debt-to-equity swaps in previous cases such as GOES from
Italy.\3\
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\3\ See Final Affirmative Countervailing Duty Determination:
Grain-Oriented Electrical Steel from Italy, 59 FR 18357, 18360-66
(April 18, 1994) (``GOES from Italy'').
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In submissions dated January 5, 2007, and August 14, 2007, Hynix
contends that the Department's treatment of the DES in the first
administrative review was consistent with its treatment of another DES
during the original investigation, with its regulations at 19 CFR
351.507(b), and with its benefit-to-recipient standard.\4\ Hynix also
rejects the significance of the new information on the record. First,
Hynix argues that the Korean accounting standard cited by Micron did
not exist at the time of the DES. Second, Hynix claims the tax
standards cited by Micron related to a convertible bond transaction,
not a DES. Third, Hynix argues that creditors' treatment of the claims
as debt at the end of 2002 is irrelevant because the Department
measures subsidies in terms of benefits to the recipient. Finally,
Hynix states that the Department already considered information about
minority shareholder opposition to the capital reduction and Hynix's
accounting treatment in the first administrative review.
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\4\ See submission from Hynix to the Department, Re: Dynamic
Random Access Memory Semiconductors from Korea: Response to Micron's
New Subsidies Allegation and New Issues Presented (January 5, 2007),
at pages 1-7; see also submission from Hynix to the Department, Re:
Dynamic Random Access Memory Semiconductors from Korea: Rebuttal of
Hynix Semiconductor Inc. and the Government of Korea to Micron's
Pre-Preliminary Comments (August 14, 2007), at pages 1-3.
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We preliminarily find, consistent with our decision in the first
administrative review, that Hynix received the benefit from the
December 2002 restructuring and the associated DES in 2002. On page 77
of the AR1 Decision Memorandum, the Department stated,
Although these events might be significant in other instances, we
find that the facts of this case deem these events pro forma. Instead,
the Creditors' Council's approval on December 30, 2002, is the singular
factor in effectuating the restructuring. This is because the
Creditors' Council controlled Hynix and because those creditors were
entrusted or directed by the GOK to carry out the December 2002
restructuring.
Furthermore, in the Investigation Decision Memorandum,\5\ we stated
the following with regard to a separately countervailed DES:
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\5\ See Final Affirmative Countervailing Duty Determination:
Dynamic Random Access Memory Semiconductors from the Republic of
Korea, 68 FR 37122 (June 23, 2003), and accompanying Issues and
Decision Memorandum at Comment 11, pages 95-96 (``Investigation
Decision Memorandum'').
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In accordance with 19 CFR 351.507(b), the receipt of benefit occurs
on the date on which the
[[Page 51612]]
firm received the equity infusion. Because Hynix recognized the equity
infusion in its 2001 audited financial statement and the convertible
bonds that were agreed to and issued carried an obligation to convert
as of June 1, 2002, we find that the date on which Hynix received the
equity infusion occurred in 2001.
We preliminarily find that the new record information cited by
Micron does not warrant reversal of our conclusion from the AR1
Decision Memorandum that the Creditors' Council controlled Hynix with
respect to the restructuring and was entrusted or directed by the GOK
to carry out the restructuring. Although Micron cited new factual
information to demonstrate that Hynix's board of directors does not
automatically approve all recommendations by creditors, we
preliminarily find that the circumstances behind Hynix's 2002
restructuring and those behind the potential sale of the company are
not comparable.
Furthermore, we preliminarily find that the new information cited
by Micron does not warrant reversal of our conclusion from the
Investigation Decision Memorandum that the receipt of benefit resulting
from a DES occurs on the date on which a firm receives the equity
infusion, as recognized on the firm's audited financial statements. The
fact that certain Hynix creditors continued to treat the amounts as
debt after December 2002 does not outweigh the evidence that Hynix
received a benefit in 2002, when it recorded the transaction as a
capital adjustment. Focusing on when the recipient formally recorded
the capital infusion in its books is in accordance with our regulatory
provision that we will consider the benefit to have been received ``on
the date on which the firm received the equity infusion.'' See 19 CFR
351.507(b). The Department's regulation does not direct us to examine
the date on which the provider of the financial contribution considered
the equity infusion to be complete. Further, with respect to Korean
accounting standards, we note that the statement principally relied
upon by Micron was not in effect at the time of the December 2002
restructuring. Additionally, even if Hynix should not have recognized
the benefit until 2003, this does not mean that it did not, in fact,
receive the benefit in 2002.
Therefore, we are including in our benefit calculation the
financial contributions countervailed in the investigation, the first
administrative review, and the second administrative review: bonds,
debt-to-equity swaps, debt forgiveness, and long-term debt outstanding
during the POR. In calculating the benefit, we have followed the same
methodology used in the first and second administrative reviews.
Because we found Hynix to be unequityworthy at the time of the
debt-for-equity swaps in 2001 and 2002, we have treated the full amount
swapped as grants and allocated the benefit over the five-year AUL. See
19 CFR 351.507(a)(6) and (c). We used a discount rate that reflects our
finding that Hynix was uncreditworthy at the time of the debt-to-equity
conversions. For the loans, we have followed the methodology described
at 19 CFR 351.505(c) using the benchmarks described in the ``Subsidies
Valuation Information'' section of this notice.
We divided the total benefits from the various financial
contributions by Hynix's POR sales to calculate a countervailable
subsidy rate of 23.73 percent ad valorem for the POR.
B. Operation G-7/HAN Program
Implemented under the Framework on Science and Technology Act, the
Operation G-7/HAN Program (``G-7/HAN Program'') began in 1992 and ended
in 2001. The purpose of this program was to raise the GOK's technology
standards to the level of the G-7 countries. The Department found that
the G7/HAN Program ended in 2001. See Investigation Decision Memorandum
at 25. However, during the POR, Hynix had outstanding interest-free
loans that it had previously received under this program. See Hynix's
November 21, 2006, questionnaire response at page 16 and Exhibit 12. We
found that the Operation G-7/Han Program provided countervailable
subsidies in the investigation. No interested party provided new
evidence that would lead us to reconsider our earlier finding.
Therefore, we have calculated a benefit for these loans.
To calculate the benefit of these loans during the POR, we compared
the interest actually paid on the loans during the POR to what Hynix
would have paid under the benchmark described in the ``Subsidy
Valuation Information'' section of this notice. Next, we divided the
total benefit by Hynix's total sales of subject merchandise for the POR
to calculate the countervailable subsidy. On this basis, we
preliminarily determine that countervailable benefits of .05 percent ad
valorem existed for Hynix.
C. 21st Century Frontier R&D Program
The 21st Century Frontier R&D Program (``21st Century Program'')
was established in 1999 with a structure and governing regulatory
framework similar to those of the G-7/HAN Program, and for a similar
purpose, i.e., to promote greater competitiveness in science and
technology. The 21st Century Program provides long-term interest-free
loans in the form of matching funds. Repayment of program funds is made
in the form of ``technology usance fees'' upon completion of the
project, pursuant to a schedule established under a technology
execution, or implementation contract.
Hynix reported that it had loans from the 21st Century Program
outstanding during the POR. See Hynix's November 21, 2006,
questionnaire response at page 17 and Exhibit 12.
In the investigation, we determined that this program conferred a
countervailable benefit on Hynix. No interested party provided new
evidence that would lead us to reconsider our earlier finding.
Therefore, we have calculated a benefit for these loans.
To calculate the benefit of these loans during the POR, we compared
the interest actually paid on the loans during the POR to what Hynix
would have paid under the benchmark described in the ``Subsidy
Valuation Information'' section of this notice. We then divided the
total benefit by Hynix's total sales in the POR to calculate the
countervailable subsidy rate. On this basis, we calculated a
preliminarily subsidy rate of zero ad valorem for this program. Because
the rate is de minimis, we did not include this program in our
preliminary net countervailing duty rate, which is consistent with our
past practice. See, e.g., Notice of Preliminary Results of
Countervailing Duty Review: Certain Softwood Lumber Products from
Canada, 70 FR 33088, 33091 (June 7, 2005).
II. New Subsidy Allegation--Import Duty Reduction Program for Certain
Factory Automation Items
On page 63 of its New Subsidy Allegations, Micron stated that
Article 95(1).4 of the Korean Customs Act provides for import duty
reductions on imports of ``machines, instruments and facilities
(including the constituent machines and tools) and key parts designated
by the Ordinance of the Ministry of Finance and Economy (``MOFE'') for
a factory automatization applying machines, electronics or data
processing techniques.'' Micron alleged that this program has been used
by the GOK as a policy tool to support
[[Page 51613]]
investments in capital goods by Korea's major strategic industries,
including the semiconductor industry. According to Micron, nearly 20%
of the items designated by MOFE as eligible for reduced import duties
were directly related to semiconductor production. To the extent these
items were not already subject to duty reduction or elimination through
operation of the Information Technology Agreement or other preferential
tariff programs, Micron argued that Hynix benefitted significantly from
this program, particularly in 2005.
We initiated a review of this program in the New Subsidy
Allegations--DOC Memorandum.\6\ On January 17, 2007, the GOK submitted
a list of the companies that received duty reductions under the program
between 2002 and 2005.\7\ In supplemental questionnaires issued to the
GOK on April 24, 2007, and July 2, 2007, we requested information on
the general background of the program, the industries and imported
products eligible for the program, the translated names of the
recipients and industries using the program, and the amount of the duty
savings. The GOK provided this information in responses dated May 15,
2007,\8\ and July 16, 2007.\9\
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\6\ See New Subsidy Allegations--DOC Memorandum at pages 6-8.
\7\ See submission from the GOK to the Department, Re: Dynamic
Random Access Memory Semiconductors from Korea: Response to Micron's
New Subsidies Allegation and New Issues Presented (January 17,
2007), at Exhibit 2.
\8\ See submission from the GOK to the Department, Re: Dynamic
Random Access Memory Semiconductors from Korea: Response of the
Government of Korea to the Department of Commerce's First
Supplemental Questionnaire (May 15, 2007).
\9\ See submission from the GOK to the Department, Re: Dynamic
Random Access Memory Semiconductors from Korea: Response of the
Government of Korea to the Department of Commerce's Second
Supplemental Questionnaire (July 16, 2007).
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Based on our analysis of the GOK's submissions, we preliminarily
find that the Import Duty Reduction Program provided a countervailable
subsidy to Hynix during the POR. Specifically, we determine that the
import duty reductions provide a financial contribution in the form of
revenue forgone by the GOK and a benefit in the amount of the duty
savings. See section 771(5)(D)(ii) of the Act and 19 CFR 351.510(a).
Regarding specificity, information submitted by the GOK shows that
the import duty reductions under the program are available to any
company importing factory automation equipment eligible for the duty
reduction. Therefore, there is no basis to find this program de jure
specific under section 771(5A)(D)(i) of the Act. However, we have gone
on to review usage data submitted by the GOK and preliminarily find
that Hynix received a disproportionately large amount of the subsidy.
See Third Countervailing Duty Administrative Review: Dynamic Random
Access Memory Semiconductors from Korea: Analysis Memorandum for
Business Proprietary Information on Korean Import Duty Reduction
Program (August 31, 2007).
Therefore, we preliminarily find that the Import Duty Reduction
Program is de facto specific under section 771(5A)(D)(iii)(III) of the
Act.
To calculate the benefit, we divided the total duty savings Hynix
received by Hynix's total sales during the POR. On this basis, we
preliminarily determine the countervailable subsidy to be .04 percent
during the POR.
III. Programs Previously Found Not to Have Been Used or Provided No
Benefits
We preliminarily determine that the following programs were not
used during the POR:
A. Short-Term Export Financing
B. Reserve for Research and Human Resources Development (formerly
Technological Development Reserve) (Article 9 of RSTA / formerly,
Article 8 of TERCL)
C. Tax Credit for Investment in Facilities for Productivity
Enhancement (Article 24 of RSTA /Article 25 of TERCL)
D. Tax Credit for Investment in Facilities for Special Purposes
(Article 25 of RSTA)
E. Reserve for Overseas Market Development (formerly, Article 17 of
TERCL)
F. Reserve for Export Loss (formerly, Article 16 of TERCL)
G. Tax Exemption for Foreign Technicians (Article 18 of RSTA)
H. Reduction of Tax Regarding the Movement of a Factory That Has
Been Operated for More Than Five Years (Article 71 of RSTA)
I. Tax Reductions or Exemption on Foreign Investments under Article
9 of the Foreign Investment Promotion Act (``FIPA'')/ FIPA (Formerly
Foreign Capital Inducement Law)
J. Duty Drawback on Non-Physically Incorporated Items and Excessive
Loss Rates
K. Export Insurance
L. Electricity Discounts Under the RLA Program
M. Import Duty Reduction for Cutting Edge Products
See Hynix's November 21, 2006, questionnaire response at pages 21-22
and the GOK's November 21, 2006, questionnaire response at pages 12-13.
In the first administrative review, the Department found that ``any
benefits provided to Hynix under the System IC 2010 Project are tied to
non-subject merchandise'' and, therefore, that ``Hynix did not receive
any countervailable benefits under this program during the POR,'' in
accordance with 19 CFR 351.525(b)(5). See AR1 Decision Memorandum at
page 15. No new information has been provided with respect to this
program. Therefore, we preliminarily find that Hynix did not receive
any countervailing benefits from the System IC 2010 Project during the
POR.
Preliminary Results of Review
In accordance with 19 CFR 351.221(b)(4)(i), we calculated an
individual subsidy rate for Hynix Semiconductor, Inc., the producer/
exporter covered by this administrative review. We preliminarily
determine that the total estimated net countervailable subsidy rate for
Hynix for calendar year 2005 is 23.82 percent ad valorem.
If these preliminary results are adopted in our final results of
this review, fifteen days after publication of the final results of
this review the Department will instruct CBP to liquidate shipments of
DRAMS by Hynix entered or withdrawn from warehouse, for consumption
from January 1, 2005, through December 31, 2005, at 23.82 percent ad
valorem of the F.O.B. invoice price.
The Department will also instruct CBP to collect cash deposits of
estimated countervailing duties at 23.82 percent ad valorem of the
F.O.B. invoice price on all shipments of the subject merchandise from
Hynix, entered, or withdrawn from warehouse, for consumption on or
after the date of publication of the final results of this
administrative review.
We will instruct CBP to continue to collect cash deposits for non-
reviewed companies covered by this order at the most recent company-
specific rate applicable to the company. Accordingly, the cash deposit
rate that will be applied to non-reviewed companies covered by this
order will be the rate for that company established in the
investigation. See Notice of Amended Final Affirmative Countervailing
Duty Determination: Dynamic Random Access Memory Semiconductors from
the Republic of Korea, 68 FR 44290 (July 28, 2003). The ``all others''
rate shall apply to all non-reviewed companies until a review of a
company assigned this rate is requested. The Department
[[Page 51614]]
has previously excluded Samsung Electronics Co., Ltd. from this order.
Id.
On August 13, 2007, Hynix requested that the Department adjust the
deposit rate to more accurately reflect CVD liability. Hynix asserts
that the record of this proceeding demonstrates a substantial change to
and termination of known non-recurring subsidy benefit streams in 2005
and 2006, as well as termination of the program related to GOK
entrustment or direction prior to 2004. Citing 19 CFR 351.526, Hynix
claims that the Department has regulations involving program-wide
changes that allow it to adjust the deposit rate, as well as the
discretion to effect changes in the deposit rate where circumstances do
not fit the more formal program-wide change criteria.\10\ Hynix asserts
that under 19 CFR 351.526, the Department may make an adjustment to the
CVD deposit rate where: 1) the Department determines that a program-
wide change has occurred, which encompasses any change effectuated by
an official act not limited to an individual firm or firms; and 2) the
Department is able to measure the change in the amount of the
countervailable subsidies provided under the program in question. Hynix
alleges that the facts of this case, even if they do not technically
fit all aspects of 19 CFR 351.526, are sufficient to warrant a deposit
rate adjustment because an unadjusted CVD deposit rate will not
remotely reflect anticipated CVD liability.
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\10\ See Stainless Steel Sheet and Strip in Coils from France:
Final Results of Countervailing Duty Administrative Review, 68 FR
53963 (September 15, 2003), and accompanying Issues and Decision
Memorandum at Comment 3; and Low Enriched Uranium from Germany, the
Netherlands, and the United Kingdom: Final Results of Countervailing
Duty Administrative Reviews, 69 FR 40869 (July 7, 2004), and
accompanying Issues and Decision Memorandum at Comment 3.
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Hynix notes that the Department, under 19 CFR 351.526, will only
refrain from such adjustments in cases when residual benefits may
continue under the terminated program or when a substitute program has
been introduced. Hynix asserts, however, that the Department has
departed from this narrow rule in certain instances. Citing the Pure
Magnesium Decision Memorandum,\11\ Hynix argues that the Department has
departed from the narrower rule when the only event at issue was the
termination of a known subsidy benefit stream during the POR. Hynix
claims that there is no statutory bar to further development of the
exception, and that the Department has the discretion to draw
distinctions on a case-specific basis and to adjust the deposit rate
where necessary.
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\11\ See Pure Magnesium and Alloy Magnesium from Canada: Final
Results of Countervailing Duty Administrative Review, 70 FR 54367
(September 14, 2005), and accompanying Issues and Decision
Memorandum at Comment 2 (``Pure Magnesium Decision Memorandum'').
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On August 21, 2007, petitioner submitted a letter objecting to
Hynix's request. Petitioner objects for the following reasons: 1) the
letter was too late for the Department to consider; 2) as Hynix admits,
the facts do not fit all aspects of 19 CFR 351.526, and the Department
has previously found that expiration of benefits from a non-recurring
subsidy does not qualify as a program wide change;\12\ 3) even in cases
cited by Hynix where the Department reduced the cash deposit rate to
reflect the expiration of non-recurring subsidies, the amortization
period ended during the POR, and the Department has made clear that
where the benefit is set to expire after the end of the POR, no
adjustment to the cash deposit is necessary;\13\ and 4) Hynix's
argument is premised on the assumption that the Department will not
revise the allocation period for the 2003 bailout.
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\12\ See Carbon and Ally Steel Wire Rod from Canada: Final
Affirmative Countervailing Duty Determination, 67 FR 55813 (August
30, 2002), and accompanying Issues and Decision Memorandum at
Comment 11.
\13\ See Pure Magnesium Decision Memorandum at Comment 2.
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We disagree with Hynix that the cash deposit rate should be revised
for expiry of the program related to GOK entrustment or direction prior
to 2004. It is the Department's general practice to adjust cash deposit
rates to reflect the expected discontinuation of future subsidy
benefits only where it has been demonstrated that a program-wide change
has occurred, pursuant to 19 CFR 351.526. As we stated in the Pure
Magnesium Decision Memorandum at Comment 2, the Department only
provided a narrowly circumscribed exception to this general practice in
light of certain, specific conditions; namely, the information needed
to make the adjustment was derived entirely from the POR and the expiry
of the subsidy meant the expected countervailing duty rate for entries
subject to the deposit rate set in that review was de minimis. These
circumstances do not apply in this review. Therefore, the rationale for
the limited exception in prior cases is not met in this review.
Accordingly, we are not revising the cash deposit rate for expiry of
the program related to GOK entrustment or direction prior to 2004.
Public Comment
Interested parties may submit written arguments in case briefs
within 30 days of the date of publication of this notice. Rebuttal
briefs, limited to issues raised in case briefs, may be filed not later
than five days after the date of filing the case briefs. Parties who
submit briefs in this proceeding should provide a summary of the
arguments not to exceed five pages and a table of statutes,
regulations, and cases cited. Copies of case briefs and rebuttal briefs
must be served on interested parties in accordance with 19 CFR
351.303(f).
Interested parties may request a hearing within 30 days after the
date of publication of this notice. Unless otherwise specified, the
hearing, if requested, will be held two days after the scheduled date
for submission of rebuttal briefs.
The Department will publish a notice of the final results of this
administrative review within 120 days from the publication of these
preliminary results.
We are issuing and publishing these results in accordance with
sections 751(a)(1) and 777(i)(1) of the Act.
Dated: August 31, 2007.
David M. Spooner,
Assistant Secretary for Import Administration.
[FR Doc. E7-17759 Filed 9-7-07; 8:45 am]
BILLING CODE 3510-DS-S