Dynamic Random Access Memory Semiconductors from the Republic of Korea: Preliminary Results of Countervailing Duty Administrative Review, 51609-51614 [E7-17759]

Agencies

• DEPARTMENT OF COMMERCE
• International Trade Administration

[Federal Register Volume 72, Number 174 (Monday, September 10, 2007)]
[Notices]
[Pages 51609-51614]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-17759]


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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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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'').
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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