Hyundai Electronics Industries Co. v. United States

Slip Op. 05-105
UNITED STATES COURT OF INTERNATIONAL TRADE
BEFORE: RICHARD W. GOLDBERG, SENIOR JUDGE
HYUNDAI ELECTRONICS INDUSTRIES
CO., LTD. and HYUNDAI
ELECTRONICS AMERICA, INC.,
Plaintiffs,
v. PUBLIC VERSION
UNITED STATES, Cons. Court No. 00-01-00027
Defendant,
and
MICRON TECHNOLOGY, INC.,
Defendant-
Intervenor.
[Commerce antidumping duty remand determination sustained in part
and remanded in part.]
Dated: 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., Of
Counsel, Office of the Chief Counsel for Import Administration,
United States Department of Commerce, for Defendant United
States.
King & Spalding LLP (Gilbert B. Kaplan and Daniel L.
Schneiderman) for Defendant-Intervenor Micron Technology, Inc.
Cons. Court No. 00-01-00027 Page 2
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
1
After the fifth administrative review was completed,
respondent Hyundai acquired respondents LG Semicon Co., Ltd. and
LG Semicon America, Inc. (collectively “LG Semicon”). In this
opinion, Hyundai-as-successor-in-interest-to-LG Semicon is
referred to as LG Semicon.
Cons. Court No. 00-01-00027 Page 3
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
2
In addition to these holdings relevant to the issues
considered here, the Court in Hyundai I also found that: (1)
Commerce did not violate LG Semicon’s right to a fair and honest
proceeding; (2) Commerce’s calculation of Hyundai’s R&D cost
allocation ratio was reasonable; (3) Hyundai did not provide
sufficient evidence of double counting by Commerce; and (4)
Commerce’s treatment of Hyundai’s interest earned on severance
deposits was reasonable. See Hyundai I, 28 CIT at __, __, __,
__, 342 F. Supp. 2d at 1149-53, 1159-60, 1160, 1161-62.
Cons. Court No. 00-01-00027 Page 4
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
Cons. Court No. 00-01-00027 Page 5
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
Cons. Court No. 00-01-00027 Page 6
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.Cons. Court No. 00-01-00027 Page 7
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
3
Calculated rates ranging as high as 223 percent were
actually available for LG Semicon on remand. See Remand Results
at 4.
Cons. Court No. 00-01-00027 Page 8
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, the Court finds that Commerce did adequately explain
in the Remand Results why the 89.10 percent rate is non-
aberrational: “[T]he margin selected falls in a range of margins
for a large portion of LG [Semicon]’s review period transactions
that decrease steadily by small amounts.” Remand Results at 8.
The record evidence clearly shows that the selected 89.10 percent
margin is within a grouping of sales whose margins differ by very
Cons. Court No. 00-01-00027 Page 9
small amounts (e.g., 89.10 percent, [ ] percent, [ ]
percent, and [ ] percent), while several sales margins ([
]) above 89.10 percent range from [ ] percent to 223 percent
and do not form a cluster. See Confidential Administrative
Record (“Conf. Admin. R.”) at Ex. 8 (SAS Margin Program Log and
Output dated Aug. 28, 2004) at 54. In contrast to this record
evidence supporting Commerce’s determination, Plaintiffs did not
provide any evidence showing how the 89.10 percent rate is
aberrational, or otherwise unreflective of LG Semicon’s selling
practices. As a result, the Court finds that the 89.10 percent
rate selected by Commerce on remand is non-aberrational.
2. The 89.10 Percent Rate Is Not Unduly Punitive.
Plaintiffs also argue that the 89.10 percent rate is unduly
punitive and excessive. Pls.’ Br. at 3. Plaintiffs assert that
this new rate is sixteen times greater than Hyundai’s previous
dumping margin and almost eighteen times greater than LG
Semicon’s previous margin. See id. at 4. Additionally,
Plaintiffs note that while LG Semicon’s weighted-average dumping
margin was 10.44 percent under total AFA, this margin rose to
15.87 percent upon Commerce’s application of only partial AFA to
LG Semicon’s German sales. See id. at 3-4. Concluding that LG
Semicon has been made worse off with partial AFA than with total
AFA, Plaintiffs argue that Commerce has failed to create an
incentive for foreign companies to cooperate in administrative
Cons. Court No. 00-01-00027 Page 10
reviews, and that Congress’s intention to strike “a balance
between deterrence for non-compliance and assuring a reasonable
margin” has not been achieved. Id. at 4 (quoting F.lli De Cecco
di Filippo Fara S. Martino S.p.A. v. United States, 216 F.3d
1027, 1032 (Fed. Cir. 2000)).
The Court, however, finds that the 89.10 percent rate
selected by Commerce upon remand is neither unduly punitive nor
excessive. First, Commerce acts within its discretion and does
not “overreach reality” so long as the “selected . . . dumping
margin [is] within the range of [the respondent’s] actual sales
data[.]” See Ta Chen, 298 F.3d at 1340. Here, because Commerce
selected an AFA rate from a range of margins calculated using LG
Semicon’s own sales data, Commerce did not abuse its discretion.
Moreover, the new rate of 89.10 percent is in fact lower than
several ([ ]) other margins Commerce calculated for LG
Semicon, and therefore is not excessive.
Second, the 89.10 percent rate is not rendered unduly
punitive simply because it is higher than the previous rate
calculated using total AFA. As the Court has already noted, new
margins ranging as high as 223 percent became available for LG
Semicon’s sales practices after the Court ordered the
recalculation in Hyundai I. See Remand Results at 4. Since 19
U.S.C. § 1677e(b) does not prohibit Commerce from including such
new sales in its remand calculations, Commerce was free to select
Cons. Court No. 00-01-00027 Page 11
an AFA rate incorporating these new margins, even though that
meant assigning a higher rate to LG Semicon under partial AFA
than under total AFA.
Finally, the Court rejects Plaintiffs’ assertion that
Commerce failed to create an incentive to cooperate in
administrative reviews, and also failed to strike a balance
between deterrence and assuring a reasonable margin. If LG
Semicon had correctly reported certain sales it knew or should
have known were destined for the United States, Commerce would
not have applied AFA at all, and the mere fact that LG Semicon
received a higher rate on remand does not diminish its incentive
to cooperate more fully in future reviews in an effort to avoid
the application of AFA. In addition, the issue of whether
Commerce properly balanced deterrence with providing a reasonable
margin is inapposite, because the Court has already determined
that Commerce did provide LG Semicon with a reasonable margin.
The 89.10 percent rate is a non-aberrational rate that was
derived from LG Semicon’s own sales data. Consequently, the
margin was within Commerce’s discretion to select and must be
considered reasonable. See Ta Chen, 298 F.3d at 1339.
Accordingly, Commerce’s decision on remand to apply an AFA
rate of 89.10 percent is supported by substantial evidence and
otherwise in accordance with law.
Cons. Court No. 00-01-00027 Page 12
B. Commerce’s Treatment of Plaintiffs’ R&D Costs Is Sustained
in Part and Reversed and Remanded in Part.
In Hyundai I, the Court found that Commerce did not offer
substantial evidence in support of its cross-fertilization
theory. Hyundai I, 28 CIT at __, 342 F. Supp. 2d at 1157. The
Court also held that Commerce’s decision to reject Plaintiffs’
amortization of R&D costs was not supported by substantial
evidence. See id. at __, 342 F. Supp. 2d at 1157-59. In
addition, the Court found that Commerce failed to provide
specific record evidence showing how deferred R&D costs actually
affect production and revenue for the period of review. Id. at
__, 342 F. Supp. 2d at 1159.
On remand, Commerce (1) provided additional factual
information in support of its cross-fertilization theory; (2)
recalculated Plaintiffs’ R&D costs to allow for amortization; and
(3) continued to find that Plaintiffs’ R&D costs should be
expensed in the period incurred, instead of being deferred. See
Remand Results at 4-6. Plaintiffs challenge Commerce’s findings
with respect to cross-fertilization and deferral of R&D expenses,
while Micron challenges Commerce’s finding with respect to
amortization of R&D expenses.
1. Commerce’s Decision Not to Calculate Costs on a
Product-Specific Basis Is Not Supported by Substantial
Evidence.
In Hyundai I, the Court rejected Commerce’s suggestion that
“intrinsic benefits . . . occur between R&D expenditures on non-
Cons. Court No. 00-01-00027 Page 13
subject merchandise and production of subject merchandise,” and
that “R&D costs for non-subject merchandise [therefore] should be
included in the cost of production analyses.” Hyundai I, 28 CIT
at __, 342 F. Supp. 2d at 1156. Specifically, the Court found
that Commerce failed to offer substantial evidence in support of
its cross-fertilization theory because the findings of its
expert, Dr. Murzy Jhabvala, were based on a prior antidumping
investigation that concerned “different products and different
parties” than those at issue in Hyundai I. Id. at __, 342 F.
Supp. 2d at 1156-57. Thus, the Court remanded for Commerce “to
provide additional information specifically pointing to the
effect of non-subject merchandise R&D on the R&D for the subject
merchandise, or alternatively, [to] recalculat[e] R&D costs on
the most product-specific basis possible for both LG Semicon and
Hyundai.” Id. at __, 342 F. Supp. 2d at 1157.
On remand, Commerce complied with the Court’s request for
additional information by providing three exhibits that were
originally submitted for the record of the fifth administrative
review by Micron. See Def.-Intvr.’s Br. at Ex. 2 (Micron’s
Submission of Factual Information dated Dec. 18, 1998) at Doc.
1(a) (Memorandum from Dr. Murzy Jhabvala dated Sept. 8, 1997)
(“Jhabvala Letter 1”); id. at Doc. 1(b) (World Technology
Evaluation Center Report on the Korean Electronics Industry dated
Oct. 1, 1997) (“WTEC Report”); id. at Doc. 2 (Memorandum to the
Cons. Court No. 00-01-00027 Page 14
File from Dr. Murzy Jhabvala dated Dec. 18, 1997) (“Jhabvala
Letter 2”); id. at Doc. 3 (Letter from Eugene Cloud dated Oct.
15, 1997) (“Cloud Letter”); id. at Doc. 3(a) (Attachment A
Articles dated Sept.-Oct. 1997) (“Attachment A Articles”); id. at
Doc. 3(b) (Attachment B Articles dated Oct. 1997) (“Attachment B
Articles”). Commerce also presented the names of certain
research projects that were conducted by Hyundai in non-memory IC
labs but featured the word “DRAM” in their titles. See Remand
Results at 14.
Plaintiffs maintain that the additional factual information
supplied by Commerce suffers from the same deficiencies as the
information on which Commerce initially relied – namely, the new
evidence does not relate to non-subject merchandise, and it does
not specifically address Plaintiffs’ operations. Pls.’ Br. at 5.
Moreover, Plaintiffs contend, simply because the word “DRAM” is
in a project does not provide substantial evidence that the R&D
actually relates to DRAM development. Id. at 7.
The Court agrees that the additional information provided by
Commerce on remand does not constitute substantial evidence of
cross-fertilization between DRAMs and non-DRAM merchandise with
respect to R&D costs in this case. First, as in Hyundai I, the
new evidence on which Commerce relies does not demonstrate
“direct contact or experience with Plaintiffs’ practices during
this review[,]” but rather concerns “different products and
Cons. Court No. 00-01-00027 Page 15
different parties to that of the current review[.]” Hyundai I,
28 CIT at __, 342 F. Supp. 2d at 1157. In fact, Jhabvala Letter
1 is the same document rejected by the Court in Hyundai I, while
Jhabvala Letter 2 is based on similar research from a prior
antidumping investigation that involved different parties and
products. See Jhabvala Letter 1 at 1-2; Jhabvala Letter 2 at 1-
2. Moreover, the WTEC Report referenced by Commerce only refers
to Plaintiffs’ DRAM market shares, and only mentions DRAM R&D in
the context of industry-wide research goals – it does not address
Plaintiffs’ specific R&D operations or production practices. See
WTEC Report at 4-9. Finally, the Cloud Letter, Attachment A
Articles, and Attachment B Articles all fail to mention
Plaintiffs by name, and none demonstrates direct contact with
Plaintiffs’ R&D practices during the review.4 See Cloud Letter
at 1-3; Attachment A Articles at 1-3; Attachment B Articles at 1-
14.
Second, Commerce’s additional information fails to
“specifically point[ ] to the effect of non-subject merchandise
R&D on the R&D for the subject merchandise[.]” Hyundai I, 28 CIT
4The Attachment A Articles fail to mention either
Plaintiffs or the subject merchandise, while the Attachment B
Articles only discuss how DRAM technology has been applied to
Application Specific Integrated Circuits (“ASICs”) by other
firms. See Attachment A Articles at 1-3; Attachment B Articles
at 3, 6-7, 9-10. Likewise, the Cloud Letter does not name
Plaintiffs once; instead, it was written in response to “letters
submitted by Dr. Bruce Wooley on behalf of ISSI and Dr. David
Angel on behalf of Samsung.” Cloud Letter at 1.
Cons. Court No. 00-01-00027 Page 16
at , 342 F. Supp. 2d at 1157. Both Jhabvala Letter 1 and
Jhabvala Letter 2 argue that cross-fertilization occurs within
the semiconductor industry, but the evidence and research
contained therein deal exclusively with SRAMs rather than the
subject merchandise DRAMs. See Jhabvala Letter 1 at 1-2;
Jhabvala Letter 2 at 1-2. Similarly, the WTEC Report discusses
only an industry-wide goal of utilizing DRAM R&D to improve SRAM
production; it does not establish that SRAM R&D actually benefits
DRAM R&D.5 See WTEC Report at 8-9. Moreover, Mr. Cloud’s focus
and expertise, like that of Dr. Jhabvala, is on SRAMs rather than
DRAMs, and the various technological developments discussed in
the Attachment A and B Articles fail to identify any specific
effect on R&D for the subject merchandise.6 See Cloud Letter at
1-3; Attachment A Articles at 1-3; Attachment B Articles at 1-14.
Finally, Commerce’s apparent reliance on the names of
Hyundai’s R&D projects is misplaced. According to Commerce, the
names of three research projects “[c]learly [show] Hyundai was
5
Furthermore, the WTEC Report does not indicate that
Plaintiffs have achieved, or even share, the industry-wide goal
of using DRAM technology to increase SRAM capacity. See WTEC
Report at 8-9.
6
The Attachment A Articles deal with copper metallization
technology and do not mention DRAMs. See Attachment A Articles
at 1-3. The Attachment B Articles merely note that DRAM
technology has been introduced into the design of ASICs. See
Attachment B Articles at 1-14. There is no specific explanation
of how these various advancements directly impact DRAM R&D. See
id.Cons. Court No. 00-01-00027 Page 17
conducting [memory] research during the POR in its [non-memory]
IC Lab[, which] clearly indicate[s] that in the semiconductor
industry, there is enough similarity among semiconductor products
and process technology objectives, that advances from R&D for one
type of semiconductor product can benefit other semiconductor
products.” Remand Results at 14. However, as the Court has
previously explained, the simple recitation of R&D project titles
does not constitute substantial evidence of cross-fertilization.
Hynix Semiconductor, Inc. v. United States, 28 CIT __, __, 295 F.
Supp. 2d 1365, 1372 (2003). Thus, the Court holds that
Commerce’s presentation of the names of Hyundai’s R&D projects
does not establish that non-subject merchandise R&D benefits
subject merchandise R&D.
Accordingly, the Court finds that Commerce failed to provide
substantial evidence to support its theory of cross-
fertilization. The Court therefore remands this issue to
Commerce with instructions to recalculate Plaintiffs’ R&D costs
on the most product-specific basis possible.
2. Commerce’s Decision to Accept Plaintiffs’ Amortization
of R&D Expenses Is Supported by Substantial Evidence
and Otherwise in Accordance with Law.
In disapproving Commerce’s initial refusal to accept
Plaintiffs’ amortization of R&D costs, the Court in Hyundai I
rejected Commerce’s finding that “Plaintiffs’ practice of
‘continually changing’ [accounting] methodologies produces
Cons. Court No. 00-01-00027 Page 18
‘aberrationally high amounts of R&D expense in some years, and
aberrationally low amounts of R&D expense in other years, that do
not reasonably reflect [production] costs.’” Hyundai I, 28 CIT
at __, 342 F. Supp. 2d at 1158 (quoting Final Results, 64 Fed.
Reg. at 69699). The Court stated that “Plaintiffs’ previous
changes in accounting methodology are not relevant in this case
as the Court is concerned with the actions of the parties with
respect to their R&D costs only for this period of review.” Id.
The Court also dismissed Commerce’s concern that the inadvertent
result of the change in accounting practice would allow
Plaintiffs to recognize less than one-fifth of the current year’s
R&D costs. Id. (citing Final Results, 64 Fed. Reg. at 69699).
According to the Court, “in switching from expensing to
amortization, a difference in costs will likely occur, as
amortization by definition permits the allocation of costs over
the market life of the product, while expensing costs during the
period incurred necessarily implies a one-time charge.” Id.
Therefore, the Court remanded to Commerce “to provide specific
evidence regarding how Plaintiffs’ actual R&D costs for this
period of review are not reasonably accounted for in its
amortized R&D costs.” Id. at __, 342 F. Supp. 2d at 1159.
On remand, Commerce stated:
We believe that in the Final Results, we fully
explained, and supported with substantial evidence, our
positions regarding the amortization of LG [Semicon]’s
and Hyundai’s R&D costs. Nevertheless, the Court has
Cons. Court No. 00-01-00027 Page 19
found that the information cited by the Department does
not constitute substantial evidence supporting this
determination. Therefore, although we disagree with
the Court’s findings, we have recalculated LG
[Semicon]’s and Hyundai’s R&D costs to allow for
amortization.
Remand Results at 5.
Micron urges that, although Commerce conceded it was unable
to comply with the Court’s request that it provide additional
evidence in support of its determination regarding amortization,
Commerce actually did point to such evidence in the Remand
Results.7 See Def.-Intvr.’s Br. at 1. The Court, however, has
carefully reviewed Commerce’s discussion of the amortization
issue in the Remand Results, see Remand Results at 5, 17-19, and
finds that it is noticeably void of any “specific evidence
regarding how Plaintiffs’ actual R&D costs for this period of
review are not reasonably accounted for in its amortized R&D
costs[,]” which is what the Court instructed Commerce to provide
7
In addition to this argument, the Court notes that
Micron’s Memorandum Addressing the Final Results of
Redetermination Pursuant to Court Remand, which was filed on
September 30, 2004, is largely comprised of arguments regarding
the alleged incompatibility between the Court’s decision in the
instant proceeding and the Court’s decision in Micron Technology,
Inc. v. United States, 23 CIT 380 (1999), as well as a section
explaining why portions of the Court’s reasoning in Hyundai I
are, in Micron’s view, “irrelevant.” See Def.-Intvr.’s Br. at
10-15, 16. As such, Micron’s brief is more akin to a motion for
rehearing and reconsideration of the Court’s April 16, 2004
decision in Hyundai I – something the Court declines to entertain
at this late stage. See USCIT R. 59(b) (“A motion for a . . .
rehearing shall be served and filed not later than 30 days after
the entry of the judgment or order.”).
Cons. Court No. 00-01-00027 Page 20
on remand. Hyundai I, 28 CIT at __, 342 F. Supp. 2d at 1159(emphasis added). Moreover, the concerns expressed by Commerce
in the Remand Results were already considered and rejected by the
Court in Hyundai I.
Accordingly, the Court sustains Commerce’s decision to
accept Plaintiffs’ amortization of R&D expenses for purposes of
calculating the cost of production.
3. Commerce’s Rejection of Plaintiffs’ Deferral of R&D
Expenses Is Not Supported by Substantial Evidence.
In Hyundai I, the Court held that Commerce failed to provide
specific evidence demonstrating why Plaintiffs’ deferred R&D
costs should be allocated into the cost of production
calculation. Hyundai I, 28 CIT at __, 342 F. Supp. 2d at 1159.
In particular, the Court was unconvinced by Commerce’s argument
that “the practice of indefinite deferral of R&D costs is
inconsistent with the conservatism principle in accounting[,]”
since “Plaintiffs point[ed] out that their [deferral]
methodology, which is in accordance with Korean GAAP, does follow
the principle of conservatism in accounting.”8 Id. Thus, after
observing that “[o]nly R&D costs that are related to the
production and revenue of the subject merchandise for the review
8
Conservatism in accounting calls for the recognition of
expenses when incurred if the probability of associated revenue
is remote or uncertain. Hyundai I, 28 CIT at __, 342 F. Supp. 2d
at 1159.
Cons. Court No. 00-01-00027 Page 21
period should be included in Commerce’s calculations[,]” see 19
U.S.C. § 1677b(f)(1)(A), the Court remanded to Commerce to
provide “specific evidence on the record to show that R&D costs
that are currently deferred actually affect production and
revenue for this review period.” Hyundai I, 28 CIT at __, 342 F.
Supp. 2d at 1159.
On remand, Commerce continues to rely upon general
accounting principles in support of its determination that R&D
expenditures for long-term projects should be included in the
current cost of production calculation.9 See Remand Results at
5, 22-23. In addition, Commerce faults Plaintiffs for failing to
offer any “reasonable evidence to indicate that their deferred
[R&D] costs will benefit future periods.” Id. at 6.
In response, Plaintiffs claim they did provide substantial
evidence demonstrating that “the future benefits of [DRAM]
research are both readily discernible and imminent at the time of
the expenditures.” Pls.’ Br. at 12 (citing Supplement to
Hyundai’s Appendix of the Administrative Record at CR 42 (Hyundai
Cost Verification Exhibit 10 and Report dated June 11, 1999) at
Ex. 10(a), 10(c)). Plaintiffs also note that Commerce failed on
remand to show even one example of how R&D for long-term projects
9
Specifically, Commerce cites to both International
Accounting Standard 9 and U.S. GAAP to assert that “R&D should
not be deferred because the future economic benefits cannot be
quantified and measured with a reasonable degree of certainty.”
Remand Results at 22.
Cons. Court No. 00-01-00027 Page 22
impacted projects for the current review period. Id. at 9.
Finally, Plaintiffs contend that Commerce erroneously shifted its
burden of providing additional information on remand to
Plaintiffs. Id.
The Court agrees that Commerce failed to provide specific
evidence in the Remand Results showing how Plaintiffs’ “R&D costs
that are currently deferred actually affect production and
revenue for this review period.” Hyundai I, 28 CIT at __, 342 F.
Supp. 2d at 1159 (emphasis added). By continuing to cite to
general accounting principles on remand, Commerce is merely
attempting to resurrect its previous argument, which the Court
already rejected in Hyundai I, that the future benefits of
deferred R&D costs are unquantifiable.10 The general accounting
principles on which Commerce relies do not directly address any
of Plaintiffs’ expenditures for long-term R&D projects, and they
do not explain how such R&D costs might affect revenue and
production for the current review period, which is what the Court
ordered Commerce to consider on remand. Moreover, since it was
the burden of Commerce – not Plaintiffs – to provide additional
10
In Hyundai I, Commerce claimed that Plaintiffs’ practice
of indefinite deferral of R&D costs was inconsistent with the
conservatism principle in accounting because the probability of
associated revenue was remote or uncertain. Hyundai I, 28 CIT at
__, 342 F. Supp. 2d at 1159. In the Remand Results, Commerce
again “conclude[s] that R&D should not be deferred because the
future economic benefits cannot be quantified and measured with a
reasonable degree of certainty.” Remand Results at 22.
Cons. Court No. 00-01-00027 Page 23
information on remand, Commerce’s assertion that Plaintiffs
failed to offer “reasonable evidence” in defense of R&D deferral
improperly shifts the burden of providing additional information
to Plaintiffs. See Remand Results at 6.
Accordingly, because Commerce entirely failed to comply with
the Court’s instructions in Hyundai I to provide specific
evidence showing how deferred R&D costs actually affect
production and revenue for the current review period, the Court
remands to Commerce with instructions to accept Plaintiffs’
deferral methodology in calculating R&D expenses for the cost of
production.
C. Commerce Properly Decided to Correct an Error in the
Calculation of Hyundai’s Entered Value.
After Commerce issued the Draft Remand Results, Micron
raised a challenge to Commerce’s calculation of Hyundai’s total
entered value. See Conf. Admin. R. at Ex. 2 (Micron’s Comments
on the Draft Final Results of Redetermination dated Aug. 18,
2004) at 11-13. According to Micron, the margin program used by
Commerce to calculate Hyundai’s entered value improperly
multiplied quantity and value variables that were stated in
inconsistent units of measure, which led to an erroneously low
importer-specific assessment rate. See id. at 12. In response,
Plaintiffs agreed with Micron that Commerce should address the
miscalculation issue, but Plaintiffs further argued that
Hyundai’s entered value should also include all of the sales made
Cons. Court No. 00-01-00027 Page 24
by Hyundai Electronics America, Inc. (“HEA”) – not just the sales
that HEA resold to U.S. customers. See Conf. Admin. R. at Ex. 3
(Hynix’s Rebuttal to Micron’s Comments on the Draft Final Results
of Redetermination dated Aug. 23, 2004) at 7-8 (“Pls.’ Draft
Reply Br.”). In the Remand Results, Commerce made the
programming changes suggested by Micron, but did not address the
issue raised by Plaintiffs. Remand Results at 32.
Plaintiffs now contend that Commerce and Micron were time
barred from revisiting the calculation methodology for Hyundai’s
entered value. Pls.’ Br. at 15. In addition, Plaintiffs argue
that Commerce’s change to the entered value calculation did not
involve correcting “a mere clerical error.” Id. at 16. Finally,
Plaintiffs assert that if Commerce is permitted to change its
calculation of the entered value at all, then it should include
all of HEA’s sales transactions in the calculation. Id. at 17-
19.
1. Commerce Properly Corrected the Ministerial Error in
the Calculation of Hyundai’s Entered Value Identified
by Micron.
With respect to Plaintiffs’ first issue, the Court finds
that although Plaintiffs allege Commerce and Micron were time
barred from recalculating Hyundai’s entered value, in reality it
is Plaintiffs who are barred from objecting to the recalculated
entered value, because Plaintiffs have reversed their agency
position on appeal. After Commerce released the Draft Remand
Cons. Court No. 00-01-00027 Page 25
Results, Plaintiffs did not object to Micron’s argument regarding
the improper multiplication of the entered value, and in fact
“agree[d] that the Department should address this issue.” Pls.’
Draft Reply Br. at 7 (emphasis added). On appeal, Plaintiffs now
contend that Commerce and Micron were time barred from addressing
the miscalculation at all. See Pls.’ Br. at 15.
The Court has repeatedly held that “a party may not reverse
the position it took before the agency and raise contrary
arguments on appeal” because this “den[ies Commerce] the
opportunity to review plaintiffs’ arguments” and “deprive[s] the
other parties of their right to respond to plaintiffs’ position.”
Calabrian Corp. v. United States Int’l Trade Comm’n, 16 CIT 342,
347, 794 F. Supp. 377, 383 (1992). Plaintiffs have clearly
reversed their agency position on appeal; therefore, the Court
will not entertain Plaintiffs’ new objection to the calculation
of Hyundai’s entered value.
Moreover, even if Plaintiffs were not barred from reversing
their agency position on appeal, their objection to Hyundai’s
recalculated entered value would nonetheless fail on the merits.
First, Commerce “may, with or without a party’s request, correct
errors that it reasonably regards as ministerial in final
determinations.” Shandong Huarong Gen. Corp. v. United States,
25 CIT 834, 848, 159 F. Supp. 2d 714, 727 (2001) (quoting Aramide
Maatschappij V.o.F. v. United States, 19 CIT 1094, 1103, 901 F.
Cons. Court No. 00-01-00027 Page 26
Supp. 353, 361 (1995)), aff’d sub nom. Shandong Huarong Gen.
Group Corp. v. United States, Appeal No. 02-1095 (Fed. Cir. Jan.
10, 2003). Here, because the calculation of Hyundai’s entered
value involved multiplying quantity and value variables that were
stated in inconsistent units of measure, the calculation was
clearly an “error in addition, subtraction, or other arithmetic
function,” and Commerce therefore correctly regarded the
miscalculation as a ministerial error. See 19 C.F.R. §
351.224(f) (defining “ministerial error”).
Second, the Court itself has a responsibility to “exercise
its discretion to prevent knowingly affirming a determination
with errors.” Torrington Co. v. United States, 21 CIT 1079, 1082
(1997); see also Fed.-Mogul Corp. v. United States, 18 CIT 1168,
1172, 872 F. Supp. 1011, 1014 (1994). At various stages of this
review, all parties have agreed that the Draft Remand Results
contained a miscalculation of Hyundai’s entered value. See
Remand Results at 31-32; Pls.’ Draft Reply Br. at 7. Therefore,
the Court would be “knowingly affirming a determination with
errors” if it did not sustain the correction made by Commerce in
the Remand Results. Torrington, 21 CIT at 1082.
Accordingly, Commerce’s recalculation of Hyundai’s entered
value in the Remand Results is sustained.
Cons. Court No. 00-01-00027 Page 27
2. Commerce Properly Refused to Address Plaintiffs’
Challenge to the Calculation Methodology for Hyundai’s
Entered Value.
The Court also affirms Commerce’s decision not to address
Plaintiffs’ argument concerning the inclusion of all HEA’s sales
in Hyundai’s entered value. “While Commerce is required to allow
respondents to correct clerical errors discovered late in the
administrative process, clerical errors are distinguished from
substantive errors and do not encompass methodological
modifications.” Tianjin Mach. Imp. & Exp. Corp. v. United
States, 28 CIT ___, ___, 353 F. Supp. 2d 1294, 1304 (2004).
Clerical, or ministerial, errors are defined as “error[s] in
addition, subtraction, or other arithmetic function, clerical
error[s] resulting from inaccurate copying, duplication, or the
like, and any other similar type of unintentional error which the
Secretary considers ministerial.” 19 C.F.R. § 351.224(f); see
also Maui Pineapple Co. v. United States, 27 CIT ___, ___, 264
F. Supp. 2d 1244, 1261 (2003) (quoting Certain Fresh Cut Flowers
From Colombia; Final Results of Antidumping Duty Administrative
Reviews, 61 Fed. Reg. 42833 (Aug. 19, 1996)).
Although Plaintiffs claim that Commerce made an incorrect
entered value calculation, Commerce’s decision to use only HEA’s
U.S. sales in calculating Hyundai’s entered value was not an
“error in addition, subtraction, or other arithmetic function,”
did not involve “inaccurate copying [or] duplication,” and was
Cons. Court No. 00-01-00027 Page 28
not an “unintentional error.” 19 C.F.R. § 351.224(f). Rather,
the decision to exclude HEA’s non-U.S. sales involved many issues
of methodology and fact,11 and Commerce intentionally rejected
Plaintiffs’ alternative methodology because “the record does not
appear to contain the data necessary to support Hyundai’s claim.”
Remand Results at 33. Thus, unlike the miscalculation identified
by Micron, Plaintiffs’ challenge does not involve a clerical
error, and Commerce therefore properly refused to address this
issue in the Remand Results.
II. CONCLUSION
For the aforementioned reasons, the Remand Results are
sustained in part and reversed and remanded in part. A separate
order will be issued accordingly.
/s/ Richard W. Goldberg
Richard W. Goldberg
Senior Judge
Dated: August 25, 2005
New York, New York
11
These issues included (1) the extent of HEA’s
transshipped sales to third countries; (2) whether Customs could
distinguish between entries destined for the United States and
those destined for third countries; and (3) whether transshipped
entries should have been included in the assessment rate
calculation. See Pls.’ Br. at 17-19; Def.-Intvr.’s Br. at 17-19.