[Federal Register Volume 61, Number 165 (Friday, August 23, 1996)]
[Notices]
[Pages 43527-43530]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-21560]
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DEPARTMENT OF COMMERCE
International Trade Administration
[A-588-841]
Initiation of Antidumping Duty Investigation: Vector
Supercomputers From Japan
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
EFFECTIVE DATE: August 23, 1996.
[[Page 43528]]
FOR FURTHER INFORMATION CONTACT: Edward Easton at (202) 482-1777 or
Sunkyu Kim at (202) 482-2613, Office of AD/CVD Enforcement II, Import
Administration, International Trade Administration, U.S. Department of
Commerce, 14th Street and Constitution Avenue, N.W., Washington, DC
20230.
INITIATION OF INVESTIGATION:
The Applicable Statute
Unless otherwise indicated, all citations to the statute are
references to the provisions effective January 1, 1995, the effective
date of the amendments made to the Tariff Act of 1930 (the Act) by the
Uruguay Round Agreements Act (URAA).
The Petition
On July 29, 1996, the Department of Commerce (``the Department'')
received a petition, filed, in proper form, by Cray Research, Inc., of
Eagan, Minnesota (``the petitioner''). On August 9, 1996, Cray
Research, Inc., provided supplemental information concerning assertions
made in its petition.
In accordance with section 732(b) of the Act, the petitioner
alleges that vector supercomputers are being, or are likely to be, sold
in the United States at less than their fair value within the meaning
of section 731 of the Act, and that such imports are materially
injuring, or threatening material injury to, an industry in the United
States.
The petitioner states that it has standing to file the petition
because it is an interested party, as defined in section 771(9)(C) of
the Act.
Scope of the Investigation
The products covered by this investigation are all vector
supercomputers, whether new or used, and whether in assembled or
unassembled form, as well as vector supercomputer spare parts, repair
parts, upgrades, and system software shipped to fulfill the
requirements of a contract for the sale and, if included, maintenance
of a vector supercomputer. A vector supercomputer is any computer with
a vector hardware unit as an integral part of its central processing
unit boards.
The vector supercomputers imported from Japan, whether assembled or
unassembled, covered by this investigation are classified under heading
8471 of the Harmonized Tariff Schedules of the United States (HTS).
Although the HTS heading is provided for convenience and customs
purposes, our written description of the scope of this investigation is
dispositive.
Determination of Industry Support for the Petition
Section 732(b)(1) of the Act requires that petitions be filed on
behalf of the domestic industry. Section 732(c)(4)(A) of the Act
provides that a petition meets this requirement if the domestic
producers or workers who support the petition account for (1) at least
25 percent of the total production of the domestic like product; and
(2) more than 50 percent of the production of the domestic like product
produced by that portion of the industry expressing support for, or
opposition to, the petition.
On August 14, 1996, Fujitsu Limited (``Fujitsu'') made a submission
challenging industry support for the petition. Fujitsu argues that the
petitioner's definition of the ``domestic like product'' as limited to
vector supercomputers is unreasonable and that the proper domestic like
product definition would encompass additional high-performance computer
platforms that compete with vector supercomputers for many of the
applications with which vector supercomputers have been associated.
Specifically, Fujitsu argues that massively parallel processors and
networked workstations must also be included within the domestic like
product. Fujitsu further argues that the Department ought to poll the
domestic producers of these other high-performance computer platforms
to determine whether there is a requisite percentage of support for the
petition within this broader group of domestic producers. On August 16,
1996, the petitioner submitted a rebuttal to Fujitsu's arguments. The
basis of the petitioner's rebuttal is that much of the documentary
information filed by Fujitsu, as well as other information, indicates
that the characteristics and uses, as those terms are used in section
771(10) of the Act, of vector supercomputers distinguish them from both
massively parallel processors and networked workstations. On the basis
of these distinctions, the petitioner asserts that vector
supercomputers are the appropriate domestic like product for the
petitioned-for antidumping investigation. On August 19, 1996, Fujitsu
filed a second submission to take issue with petitioner's August 16,
1996 arguments.
Section 771(4)(A) of the statute defines the ``industry'' as the
producers of a ``domestic like product.'' Thus, to determine whether
the petition has the requisite industry support, the statute directs
the Department to look to producers and workers who account for
production of ``the domestic like product.'' The International Trade
Commission (``ITC''), which is responsible for determining whether
``the domestic industry'' has been injured, must also determine what
constitutes a domestic like product in order to define the industry.
However, while both the Department and the ITC must apply the same
statutory definition of domestic like product, they do so for different
purposes and pursuant to separate and distinct authority. Although this
may result in different definitions of the like product, such
differences do not render the decision of either agency contrary to the
law. See Algoma Steel Corp., Ltd. v. United States, 688 F. Supp. 639,
642-44 (CIT 1988); High Information Content Flat Panel Displays and
Display Glass Therefor from Japan: Final Determination; Rescission of
Investigation and Partial Dismissal of Petition, 56 Fed. Reg. 32376,
32380-81 (July 16, 1991) (Flat Panel Displays).
Because the domestic like product is an integral part of the
definition of the industry and because Fujitsu has provided factual
information challenging the definition of the domestic like product in
the petition, we are examining the definition of the like product in
the petition in light of the statutory provisions governing initiation
and the facts of record.
Section 771(10) of the Act defines domestic like product as ``a
product that is like, or in the absence of like, most similar in
characteristics and uses with, the article subject to an investigation
under this title.'' Thus, the reference point from which the like
product analysis begins is ``the article subject to an investigation,''
i.e., the class or kind of merchandise to be investigated, which
normally will be the scope as defined in the petition.
The scope of Cray's petition is limited specifically to vector
supercomputers ``* * * with a vector hardware unit as an integral part
of any of its central processing unit boards (``CPU'').'' The petition
provides examples of both imported massively parallel processors, with
vector hardware, which are included within this definition of a vector
supercomputer and domestically-produced mainframe computers with a
vector facility that is not an integral part of the mainframe CPU
boards and, therefore, not considered within the ``domestic like
product'' asserted in the petition. The key to petitioner's definition
of the scope of the investigation is the physical characteristic that
the vector facility be an integral part of any of the computer's CPU
boards. This characteristic
[[Page 43529]]
identifies both the Japanese vector supercomputers that the petitioner
would have subject to the antidumping investigation and the
domestically-produced products that would define the domestic industry.
There is no dispute that the vector supercomputers produced by the
petitioner are like the Japanese vector supercomputers which are the
subject of the petition, i.e., that the petitioner produces a domestic
like product. Fujitsu argues, however, that there are other types of
supercomputers and that the producers of those supercomputers are part
of the industry as well. In this regard, Fujitsu argues that all
supercomputers constitute a single domestic like product. We disagree.
As a starting point, the scope of the petition is not all
supercomputers, but rather is limited solely to vector supercomputers.
The relevant ``like product'' inquiry must begin by identifying the
domestic product(s) which is ``like'' the vector supercomputer, the
merchandise subject to investigation. Fujitsu effectively seeks to
disregard this fact by using all supercomputers, not vector
supercomputers, as its starting point. While respondents may comment on
the issue of industry support, including the definition of the domestic
like product, they may not seek to expand the scope of the petition,
i.e., the benchmark for the analysis of the domestic like product.
When properly analyzed, the evidence of record demonstrates that
there are clear dividing lines between the characteristics and uses of
the vector supercomputers subject to investigation and the various
other types of supercomputers. Significantly, the vector supercomputer
has a different computer architecture than the non-vector computer
technologies and, consequently, it processes information differently.
The close physical proximity of the vector hardware to the computer's
central processing boards and high memory bandwidth (with limited
parallelism) contribute to the high speeds with which vector
supercomputers process information. These differences give vector
supercomputers different performance characteristics than non-vector
supercomputers. For example, vector supercomputers are more efficient
dealing with linear and matrix algebra equations than are non-vector
supercomputers. Given the states of the different supercomputer
technologies today, there are computer modeling applications where only
the vector supercomputers are used. For example, only vector
supercomputer bids met the technical requirements (which involved
weather forecasting and climate modeling applications) in the
University Corporation for Atmospheric Research (``UCAR'') procurement
from which this petition derives the export price. In sum, based on the
evidence submitted, we find that the domestic like product, like the
scope of the investigation, is limited to vector supercomputers.
Our review of the data provided in the petition and other
information readily available to the Department indicates that the
petitioner accounts for more than 50 percent of the total domestic
production of vector supercomputers, thus meeting the standard of
section 732(c)(4)(A) of the Act and requiring no further action by the
Department pursuant to section 732(c)(4)(D) of the Act. Accordingly,
the Department determines that the petition is supported by the
domestic industry.
Export Price and Normal Value
The petitioner based the export price on a ``best and final offer''
(BAFO) to supply UCAR with four vector supercomputers manufactured by
NEC Corporation (``NEC''), to be imported from Japan. Deductions were
made for the estimated costs of the U.S. computer systems integrator.
Section 731 of the Act provides that the Department may impose
antidumping duties if it determines that the subject merchandise has
been sold or is ``likely to be sold'' in the United States at less than
fair value. Accordingly, section 772 of the Act defines export price as
the price at which the subject merchandise was ``sold (or agreed to be
sold)'' in the United States. The irrevocable BAFO on which petitioner
bases export price constitutes an offer for sale (or agreement to sell)
and represents a price at which the merchandise is likely to be sold.
Therefore, the BAFO is a reasonable basis for determining export price.
The BAFO on which export price is based calls for a lease of the
vector supercomputers. The term of the lease encompasses the useful
life of the vector supercomputers. These vector supercomputers are not
expected to have any residual value at the conclusion of the lease. By
necessity, these supercomputers will be integrated into the climate
modeling and weather forecasting operations of UCAR. It is a customary
practice in the vector supercomputer industry effectively to transfer
ownership through similar extended leases, rather than outright sales.
Under these circumstances, generally accepted accounting principles
(``GAAP'') classify such leases as equivalent to sales. These same
circumstances that classify this lease under GAAP also establish the
lease as equivalent to a sale within the meaning of section 771(19) of
the Act.
Although the Japanese home market is viable, the petitioner
contends that vector supercomputers sold in Japan differ substantially
from the system offered to UCAR in the United States. Consequently, the
petitioner was unable to provide information concerning sales of
identical or similar vector supercomputers sold by NEC in both markets.
Since home market prices do not provide an appropriate basis for price
comparisons, the petitioner based normal value on constructed value
(``CV'') for estimating a dumping margin based on the offer to UCAR.
CV includes the cost of manufacturing (``COM''), research and
development costs (``R&D''), selling, general and administrative
expenses (``SG&A''), interest expense, U.S. packing, and profit.
The petitioner calculated the COM, R&D and SG&A on the basis of its
own cost experience purchasing and manufacturing vector supercomputer
components and on publicly available industry sources, including
financial statement and other operational data for NEC. For calculating
profit, the petitioner relied on a publicly available forecast of NEC's
projected 1996 operating profit for computer sales other than personal
computers. The petitioner did not include interest expenses or packing
in its calculation.
Based on the comparison of the export price to normal value, the
petitioner alleges a margin of 454 percent.
Fair Value Comparisons
Based on the information provided by the petitioners, there is
reason to believe that vector supercomputers from Japan are likely to
be sold at less than fair value. If it becomes necessary at a later
date to consider the petition as a source of facts available under
section 776 of the Act, we may further review the margin calculation in
the petition.
Initiation of Investigation
We have examined the petition on vector supercomputers and have
found that it meets the requirements of section 732 of the Act,
including the requirements concerning allegations of material injury or
threat of material injury to the domestic producers of a domestic like
product by reason of the likely sales at less than fair value.
Therefore, we are initiating an antidumping duty investigation to
determine whether vector supercomputers from Japan are being, or
[[Page 43530]]
are likely to be, sold at less than fair value. Unless extended, we
will make our preliminary determination by January 6, 1997.
Distribution of Copies of the Petition
In accordance with section 732(b)(3)(A) of the Act, a copy of the
public version of the petition has been provided to the representatives
of the Government of Japan. We will attempt to provide a copy of the
public version of the petition to each exporter of vector
supercomputers named in the petition.
International Trade Commission Notification
We have notified the ITC of our initiation, as required by section
732(d) of the Act.
Preliminary Determinations by the ITC
The ITC will determine by September 12, 1996, whether there is a
reasonable indication that imports of vector supercomputers from Japan
are causing material injury, or threatening to cause material injury,
to a U.S. industry. A negative ITC determination will result in the
investigation being terminated; otherwise, the investigation will
proceed according to statutory and regulatory time limits.
Dated: August 19, 1996.
Jeffrey P. Bialos,
Acting Assistant Secretary for Import Administration.
[FR Doc. 96-21560 Filed 8-22-96; 8:45 am]
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