b) Response by the United States

1.363 The United States made the following arguments in response to Korea's submission:

1.364 DRAMs are a type of semiconductor.²³⁴ They are used in computers and many other electronic devices that require high-density, random access memory.²³⁵

1.365 The first commercial shipment of a DRAM occurred in 1971.²³⁶ Back then, the technology was primarily 16 kilobits ("K"). By 1990, the technology was transitioning from its fifth generation (4 megabits ("Meg")) to its sixth (16 Meg).²³⁷

1.366 As technology and industry standards have matured, DRAMs have become a commodity product.²³⁸ Thus, customers tend to distinguish between products primarily on the basis of price. During significant downturns in the market, the pressure on prices can become acute, forcing producers/resellers to price aggressively in order to stay competitive and maintain their customer base.²³⁹ An examination of historical data on DRAM pricing reveals that foreign producers often dump (i.e., sell at "less than normal value" within the meaning of the AD Agreement) during significant market downturns. For example, various producers were found to have dumped DRAMs in the United States during the dramatic downturn that occurred in the mid-1980s.²⁴⁰

1.367 The DRAM industry experienced another, although milder, downturn in 1990 which lasted well into 1991.²⁴¹ Faced with what it believed were injurious imports at unfair prices, Micron, a U.S. manufacturer of DRAMs, filed an anti-dumping petition on behalf of the U.S. industry covering imports of DRAMs from Korea. The petition, which was properly filed with the DOC and the Commission, alleged that Korean manufacturers were dumping DRAMs in the United States.²⁴² The petition also contained information which indicated that unfairly priced imports from Korea were causing material injury to the DRAM industry in the United States.²⁴³

1.368 Both the ITC and the DOC conducted investigations into the allegations presented by Micron. Hyundai and LG Semicon participated in those investigations.²⁴⁴ The DOC's investigation examined a six-month period in accordance with section 353.42(b)(1) of its regulations (19 C.F.R. � 353.42(b)(1) (1991)) which began on 1 November 1991.²⁴⁵

1.369 In its final determination published on 23 March 1993, the DOC found that Hyundai and LG Semicon had been making less-than-normal-value sales in the United States. For Hyundai, the DOC determined a dumping margin of 11.16 percent.²⁴⁶ For LG Semicon, the margin was 4.97 percent.²⁴⁷ An affirmative injury determination by the ITC led to the publication of an anti-dumping duty order on 10 May 1993.²⁴⁸

1.370 In 1994 and 1995, during the anniversary months of the order, the DOC received requests from the respondents to conduct administrative reviews of the order in accordance with section 751(a) of the Tariff Act of 1930, as amended ("the Act").²⁴⁹ The request made in 1994 covered sales between 1 May 1993 and 30 April 1994. The request made in 1995 covered the twelve months ending 1 May 1995.

1.371 Contrary to Korea's assertion, the 1993-1995 period was a good one for DRAM producers. "DRAMs prices stabilized in mid-1992, and the industry experienced growth until late 1995."²⁵⁰ Some industry observers have even described 1995 as "incredibl[y]" good.²⁵¹ Indeed, the economic consultant retained by Hyundai, Kenneth Flamm (author of the "Flamm Study"), characterized 1993-95 as an "unusual period of relatively stable prices"²⁵² and at one point marveled at its "unprecedented string of near zero or slightly positive price changes."²⁵³ Within this environment, Hyundai and LG Semicon were able to ship to the United States without dumping.²⁵⁴ Accordingly, they were not levied any duties on their DRAM imports and the cash deposit rate for future shipments was set at zero.²⁵⁵

1.372 The 1995-1996 period was the subject of a request for an administrative review by respondents on 29 and 31 May 1996.²⁵⁶ In addition, the DOC was asked by LG Semicon and Hyundai to revoke (in part) the order on DRAMs from Korea pursuant to section 353.25(a)(2) of its regulations. That regulation provided the DOC with the authority to revoke an order, in part, whenever:

1.373 As a result of respondents' request, the DOC initiated a review pursuant to section 751(a) of the Act on 25 June 1996.²⁵⁸ During the review, the DOC compiled an extensive factual record which contained, in the words of Korea, "reams of current data regarding pricing trends, inventory levels and various other aspects of market conditions for DRAMs." The DOC issued the preliminary results of its third review on 18 March 1997.²⁵⁹ In the notice, the DOC informed the respondents of its intention not to revoke the order pursuant to section 353.25. In particular, the DOC determined that the administrative record "does not support a conclusion at this time that there is no likelihood of future dumping by the Korean respondents."²⁶⁰

1.374 At the heart of the DOC's decision was evidence of a dramatic decline in DRAM prices throughout 1996 that was more severe than the market downturn in 1990-91²⁶¹ and only "a little less severe" than the one in 1985-86.²⁶² This downturn in the market caused U.S. and Korean producers to experience double-digit percentage declines in revenue on sales of DRAMS.²⁶³ Exacerbating the situation was the willingness of certain producers at this time to increase production and liquidate inventories of finished goods.²⁶⁴ As the DOC explained in its notice:

1.375 The DOC did not, however, view the 1996 market downturn in isolation. Instead, it analyzed all of the evidence on the record which bore on the likelihood issue. Thus, in addition to respondents' three years of no dumping, the DOC considered, inter alia, pricing practices and trends in prior market downturns. When it did this, the DOC discovered that there was a history of dumping in the United States during downturns in the DRAM market. In summarizing its conclusions, the DOC stated, in part:

1.376 "Case briefs," which commented on the DOC's preliminary results, were filed by respondents and Micron on 18 April 1997. "Rebuttal briefs" were filed by the parties on 29 April 1997. On 5 May 1997, the DOC held a public hearing at which respondents and Micron presented oral arguments.

1.377 In their comments on the preliminary results, respondents did not argue that the DOC's revocation standards or procedures were contrary to the AD Agreement. In fact, Hyundai stated just the opposite -- it acknowledged that United States law was "within the letter and spirit of Article 11."²⁶⁵ Instead, respondents argued, inter alia, that the DOC's use of the phrase "no likelihood" distorted the regulatory standard and allegedly forced them to prove the impossible -- that the likelihood of future dumping was "almost zero."²⁶⁶ Respondents also maintained that the DOC ignored data which supported a "not likely" determination. In particular, they pointed to (i) their lack of dumping between the 1991 and 1996 market downturns, and (ii) record evidence which, they believed, showed a dramatic improvement in the market by the end of 1996 that was characterized by decreases in production, increases in demand, and rising prices for DRAMs in the United States.²⁶⁷

1.378 In its final determination published on 24 July 1997, the DOC once again found that Hyundai and LG Semicon had not sold DRAMs in the United States at less than normal value during the period covered by the third review (i.e., 1 May 1995 through 30 April 1996).²⁶⁸ The agency also reaffirmed its preliminary finding that the evidence on the record of the review did not support a finding that a resumption of dumping was not likely under section 353.25(a)(2) of the regulations.²⁶⁹ In making this determination, the DOC emphasized several points it had made in its preliminary determination. First, the DOC discussed the cyclical nature of the DRAM industry and the pricing practices of DRAM producers during market downturns:

1.379 Next, the DOC addressed its findings regarding respondents' pricing practices and production levels during the market downturn that began toward the end of the third review period and continued throughout 1996 and into 1997:

1.380 At this point, the DOC turned its attention to evidence on the record concerning the possibility of sales at less than normal value in the United States. In particular, the agency summarized the company-specific data submitted by respondents as part of the third administrative review (i.e., data up to, and including, April 30, 1996) and the data received or obtained by the DOC regarding subsequent periods:

1.381 Lastly, after discussing LG Semicon's assertion that it has no economic incentive to dump in the United States,²⁷³ the DOC addressed respondents' argument that they did not dump subsequent to the third review period because their production costs were declining as fast as prices were falling:

1.382 As a result of the DOC's final determination, it did not revoke the anti-dumping order. However, entries covered by the challenged review were not assessed (or levied) anti-dumping duties and the cash deposit rate for subsequent entries (i.e., entries made after 30 April 1996) of respondents' merchandise was set at zero.²⁷⁵

To continue with Claims under Articles 2, 6 and 17 of the AD Agreement

²³⁴ Final Results Third Review, 62 Fed. Reg. at 39809 (Ex. USA-1)

²³⁵ Id.

²³⁶ Case Brief of Hyundai, 21 Apr. 1997, Ex. 2 at 4 (Ex. USA-12).

²³⁷ Case Brief of Hyundai, Ex. 2 at 16-17.

²³⁸ Final Results Third Review, 62 Fed. Reg. at 39810 (Ex. USA-1).

²³⁹ Final Results Third Review, 62 Fed. Reg. at 39810 (Ex. USA-1); see also Charts from Agency Analyst to File at 34-35 (hereinafter "Prelim. Analysis") (Ex. USA-13). During upturns in the market, prices stabilize or rise. The length and intensity of these business "cycles" is influenced by a variety of factors, including customer demand, overall economic growth, and technological developments. A similar phenomenon occurs in the agricultural industry where "seasonal" cycles are influenced by a variety of factors, including weather and crop disease. See Letter from LG Semicon Co., Ltd. and LG Semicon America, Inc. to Secretary of Commerce, 15 Jan. 1997, at 13-14 (hereinafter "LGS Ltr.-2") (Ex. USA-14)

Korea concedes that DRAMs is a cyclical industry. The "cyclicality" of the industry was also a point repeatedly made by the respondents before the DOC in the underlying administrative proceeding. See, e.g., Case Brief of LG Semicon, 21 Apr. 1997, at 16-17 (Ex. USA-15).

²⁴⁰ See, e.g., 64K Dynamic Random Access Memory Components (64K DRAM's) From Japan: Final Determination of Sales at Less Than Fair Value, 51 Fed. Reg. 15943 (1986) (Ex. USA-16); Case Brief of LG Semicon, Ex. B (VLSI Research ) (Ex. USA-15).

²⁴¹ Prelim. Analysis at 27 & 34 (Ex. USA-13); Case Brief of LG Semicon, Ex. B (Merrill Lynch) (Ex. USA-15).

²⁴² Initiation of Antidumping Duty Investigation: Dynamic Random Access Memory Semiconductors of One Megabit and Above From the Republic of Korea, 57 Fed. Reg. 21231 (1992) (Ex. USA-17).

²⁴³ Id.

²⁴⁴ See, e.g., DRAM LTFV, 58 Fed. Reg. 15467 (Ex. USA-4).

²⁴⁵ Id.

²⁴⁶ DRAM Order, 58 Fed. Reg. 27520 (Ex. USA-2). This amount was subsequently reduced to 5.18 percent as a result of municipal judicial proceedings in Micron Technology, Inc. v. United States, 893 F. Supp. 21 (Ct. Int'l Trade 1995) (Ex. USA-18).

²⁴⁷ DRAM Order, 58 Fed. Reg. at 27520 (Ex. USA-2).

²⁴⁸ Id. As the United States noted above, Samsung eventually was found not to be dumping during the period covered by the DOC's original investigation. Therefore, it was (and is) excluded from the anti-dumping order..

²⁴⁹ 19 U.S.C. � 1675 (Ex. USA-19).

²⁵⁰ Dynamic Random Access Memory Semiconductors of One Megabit or Above from the Republic of Korea; Preliminary Results of Antidumping Duty Administrative Review and Notice of Intent Not to Revoke Order, 62 Fed. Reg. 12794, 12796-97 (1997) (hereinafter "Preliminary Results Third Review") (Ex. USA-20).

²⁵¹ See, e.g., Letter from LG Semicon Co., Ltd. and LG Semicon America, Inc. to Secretary of Commerce, 2 Jan. 1997 (hereinafter "LGS Ltr.-1"), at App. 1 (article on history of semiconductors by T. J. Rodgers for Austin American-Statesman) (Ex. USA-21).

²⁵² LG Semicon Case Br., Ex. B (VLSI Research) (Ex. USA-15); Hyundai Case Br., Ex. 2 at 5 and Fig. 3 ("Flamm Study") (Ex. USA-12).

²⁵³ Id. at 5.

²⁵⁴ Dynamic Random Access Memory Semiconductors of One Megabit or Above From the Republic of Korea; Final Results of Antidumping Duty Administrative Review, 61 Fed. Reg. 20216 (1996) (final results first review) (hereinafter "First Review") (Ex. USA-22); Dynamic Random Access Memory Semiconductors of One Megabit or Above From the Republic of Korea; Final Results of Antidumping Duty Administrative Review, 62 Fed. Reg. 965 (1997) (final results second review) (Ex. USA-23). The First Review was amended on October 2, 1996. See Dynamic Random Access Memory Semiconductors From the Republic of Korea; Amended Final Results of Antidumping Duty Administrative Review, 61 Fed. Reg. 51410 (1996).

²⁵⁵ Under United States law and practice, anti-dumping duty orders, in and of themselves, do not result in the levying (or "assessment") of anti-dumping duties. They also do not, as a rule, delay the entry of imports into the United States. The only thing the United States Customs Service typically holds are the entry documents and a cash deposit or bond covering the potential liability for anti-dumping duties. On the anniversary month of every order, the DOC publishes a notice in the Federal Register which reminds interested parties (including foreign exporters) of their right to request an "administrative review" pursuant to section 751(a) of the Act. In an administrative review, the DOC calculates the anti-dumping duties actually owed for merchandise exported to the United States during the previous twelve months and sets the deposit rate for estimated duties that might be owed on future entries. 19 U.S.C. � 1675 (Ex. USA-19). Because the actual duties levied may exceed or fall short of the deposits or bonds posted at the time of entry, the Customs Service either collects additional money or refunds the excess (with interest). 19 U.S.C. � 1677g (Ex. USA-19).

²⁵⁶ Preliminary Results Third Review, 62 Fed. Reg. at 12795 (Ex. USA-20). A request was also received from Micron. Id.

²⁵⁷ The URAA revised certain terminology in the Act, including substituting the term "normal value" for "foreign market value." However, because the instant review was initiated prior to the date the DOC's new regulations took effect on 1 July 1997, the 1996 regulations were still controlling and are, therefore, cited herein unless otherwise noted. These regulations used the previous terminology.

²⁵⁸ Initiation of Antidumping and Countervailing Duty Administrative Reviews and Requests for Revocation in Part, 61 Fed. Reg. 32771 (1996) (Ex. USA-25). The challenged administrative review was conducted pursuant to the Act, as amended by the Uruguay Round Agreements Act ("URAA"). Uruguay Round Agreements Act, Pub. L. No. 103-465, tit. II, 108 Stat. 4808, 4842 (1994).

²⁵⁹ Preliminary Results Third Review, 62 Fed. Reg. 12794 (Ex. USA-20).

²⁶⁰ Id. at 12796.

²⁶¹ Case Brief of LG Semicon, Ex. B (Merrill Lynch) (Ex. USA-15).

²⁶² Case Brief of Hyundai, Ex. 2 at 5 (conclusion of Dr. Flamm) (Ex. USA-12); but see Preliminary Results Third Review, 62 Fed. Reg. at 12797 (Ex. USA-20). Whether the 1996 downturn was more or less severe than prior downturns is unimportant. What is important is that the 1996 downturn was not unlike prior downturns and during those periods (including the milder one in 1990-91), DRAM producers were found to be dumping.

²⁶³ DRAMs from Korea: Micron's Third Review Rebuttal Brief, 30 Apr. 1997, Ex. 7 (hereinafter "Micron Rebuttal Brief") (Ex. USA-26); Case Brief of LG Semicon, Ex. B (VLSI Research ) (Ex. USA-15).

²⁶⁴ Prelim. Analysis at 24, 28, & 29 (Ex. USA-13); Case Brief of LG Semicon, Ex. B (Merrill Lynch: "With no recession, the more rapid decline was clearly a massive inventory correction. That is why it fell so quickly.") (Ex. USA-15).

²⁶⁵ See, e.g., Case Brief of Hyundai, at 5 (Ex. USA-12).

²⁶⁶ Final Results Third Review, 62 Fed. Reg. at 39812 (Ex. USA-1).

²⁶⁷ Id. at 39814-16.

²⁶⁸ Id. at 39824.

²⁶⁹ Id. at 39810, 39811, & 39816.

²⁷⁰ Id. at 39810.

²⁷¹ Id. at 39816-17.

²⁷² Id. at 39817 (emphasis added).

²⁷³ The relevant portion of the notice states:

Id. at 39819.

²⁷⁴ Id.

²⁷⁵ These entries are, in fact, the subject of an administrative review initiated by the DOC on 19 June 1997. As part of this review, respondents have renewed their requests for revocation pursuant to section 353.25(a) of the DOC's regulations. See Dynamic Random Access Memory Semiconductors of One Megabit or Above From Korea; Preliminary Results of Antidumping Duty Administrative Review and Notice of Intent not to Revoke Order, 63 Fed. Reg. 11411 (9 Mar. 1998) (Ex. USA-27).