COUNCIL REGULATION (EEC) No 611/93 of 15 March 1993 imposing a definitive anti-dumping duty on imports into the Community of certain electronic microcircuits known as DRAMs originating in the Republic of Korea and exported by companies not exempted from this duty, and collecting definitively the provisional anti-dumping duty

THE COUNCIL OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European Economic Community,

Having regard to Council Regulation (EEC) No 2423/88 of 11 July 1988 on protection against dumped or subsidized imports from countries not members of the European Economic Community (1) (hereinafter referred to as the 'basic Regulation`), and in particular Article 12 thereof,

Having regard to the proposal presented by the Commission after consultation within the Advisory Committee as provided for by the above Regulation,

Whereas:

A. PROVISIONAL MEASURES

(1) By Regulation (EEC) No 2686/92 (2) (hereafter referred to as the 'provisional duty Regulation`), the Commission imposed a provisional anti-dumping duty on imports into the Community of certain types of electronic micro-circuits known as DRAMs (dynamic random access memories) originating in the Republic of Korea and falling within CN codes 8542 11 12, 8542 11 14, 8542 11 16 and 8542 11 18 for finished DRAMs, within CN code ex 8542 11 01 for DRAM wafers, within CN code ex 8542 11 05 for DRAM dice or chips and within CN code ex 8473 30 10 or ex 8548 00 00 for DRAM modules. By Regulation (EEC) No 53/93 (3), the Council extended the validity of this duty for a period not exceeding two months.

B. SUBSEQUENT PROCEDURE

(2) Following the imposition of the provisional anti-dumping duty, two Korean producers,

- Goldstar Electron Co., Ltd, Seoul,

- Samsung Electronics Co., Ltd, Seoul,

and one DRAM-user company located in the Community,

- Hewlett Packard, Les Ulis, France,

submitted comments in writing. Parties who so requested were granted an opportunity to be heard by the Commission.

(3) The parties were informed of the essential facts and considerations on the basis of which it was intended to recommend the imposition of definitive anti-dumping measures and the definitive collection of amounts secured by way of provisional duty. They were also granted a period within which to make representations subsequent to the disclosure.

(4) The parties' comments were considered, and the Commission altered its conclusions where deemed justified.

(5) The investigation overran the normal duration of one year provided for in Article 7 (9) (a) of the basic Regulation due to the complexity of the investigation, in particular, in the light of the numerous DRAM types, the number of sales transactions and the calculation of the normal value on a quarterly basis.

C. PRODUCT UNDER INVESTIGATION, LIKE PRODUCT

(6) In its provisional duty Regulation (see recitals 12 to 16) the Commission had established that all types of DRAM wafers, DRAM dice and chips, finished DRAMs, variations of DRAMs and DRAM modules, regardless of density and package were to be considered as one product.

(7) One Korean producer continued to argue that DRAM wafers and DRAM dice on the one hand, and finished DRAMs on the other, could not be considered as one product since DRAM wafers and DRAM dice were not identical to finished DRAMs. In its submission, this producer raised no other new arguments as compared with those raised at the provisional stage, and the Council, for the reasons given in recitals 14 to 16 of the provisional duty Regulation, confirms the Commission's conclusion contained therein.

(8) Another Korean producer argued that finished DRAMs of densities higher than 16M should not be viewed as one product with DRAMs of lower densities, because higher density DRAMs, e.g. 64M DRAMs, were not yet on the market. It was argued, in this context, that it could not be determined whether these DRAMs could be considered like products.

(9) In this respect, the Commission concluded in recital 15 of the provisional duty Regulation that all DRAMs, regardless of density and package, were covered by the present proceeding. Past experience confirmed, indeed, that there was a clear continuity between the physical characteristics and use of DRAMs of succeeding generations, and the Commission did not find any indication which would justify different conclusions, e.g. for 64M DRAMs. The Commission noted, however, that, should sufficient evidence of changed circumstances regarding future DRAM densities become available, a review in accordance with Article 14 (1) of the basic Regulation could be requested by any interested party.

(10) The Commission therefore concluded that, for the purpose of the present proceeding, all types, densities and variations of DRAM products, as detailed in recitals 11 and 12 of the provisional duty Regulation, were to be viewed as one product, i.e. the product under consideration.

The Council confirms this conclusion.

(11) As regards the question whether DRAM products sold on the Korean market and those sold by the Community industry on the Community market constituted like products to the product under consideration, no new comments were received. Therefore the Council confirms that the DRAMs sold on the Korean market, those sold by the Community industry on the Community market and those exported to the Community (all hereinafter referred to as DRAMs) are alike in all respects within the meaning of Article 2 (12) of the basic Regulation.

D. DUMPING

1. Normal value (12) No comments relating to the determination of normal values on a quarterly basis were received. Therefore the Council confirms the approach taken by the Commission as set out in recital 19 of the provisional duty Regulation.

(13) In determining the cost of manufacturing at the provisional stage, the Commission had taken into account the long production cycle time for DRAMs. In order to establish the effective manufacturing costs of DRAMs sold in a given quarter in these circumstances, the Commission considered that the cost of manufacturing for DRAMs sold in one quarter was that incurred in the preceding quarter. The cost accounting data submitted by the Korean producers concerned were adjusted accordingly.

(14) One Korean producer claimed that this approach was not justified because its own accounting system took account of the production cycle time.

The methodology used by this company in order to determine the total actual per unit cost of production for finished DRAMs sold in a given quarter, i.e. based on stock valuation of work in progress did not, however, properly reflect the length of the DRAM production process which consisted of a number of consecutive production steps.

The Commission therefore considered this methodology inappropriate and maintained its approach taken for the provisional findings.

The Council confirms this view.

(15) The aforementioned producer also argued that an adjustment made by the Commission concerning its depreciation expenses to ensure comparability between the investigation and preceding periods was not appropriate. The Korean producer claimed that the Commission should have used the data submitted since they were based on its cost accounting data.

(16) The approach taken by the Commission for the calculation of the constructed normal value at the provisional stage ensured, however, the consistent allocation of this producer's costs of production over time and avoided a distorted allocation of the depreciation expenses in the investigation period compared with prior periods. This approach was fully in line with the provisions of Korean accounting rules.

The Commission, therefore, considered it necessary to maintain its approach and the Council confirms this view.

(17) Two Korean producers claimed that the approach taken by the Commission with respect to the constructed normal value was not appropriate in particular with regard to the amount of research and development (hereinafter 'R& D`) costs and other selling, general and administrative (hereinafter 'SG& A`) costs.

(18) With respect to R& D, the Korean producers claimed that R& D costs incurred in the past and deferred to the period of investigation should be the basis for the determination of the cost of production. In recital 22 of the provisional duty Regulation, the Commission set out its approach with respect to R& D costs. Given the nature of these costs, in particular the uncertainty of their recoverability, of the timing of such recoverability and of relating R& D costs incurred in the past to sales carried out during the period of investigation, the Commission, in line with consistent practice as regards the sector of integrated circuits, had considered it appropriate, from both an economic and an accounting point of view, that all R& D expenses actually incurred in the period of investigation and related to DRAMs, be it current or future products, should be allocated to DRAMs sold in the period of investigation. It should be noted that the approach taken by the Commission was fully in line with the provisions of Korean accounting rules.

In conclusion, the Commission maintained and the Council confirms this approach with respect to R& D costs.

(19) With respect to SG& A costs incurred in relation to foreign currency exchange transactions, the Commission took account of submissions from two Korean producers and allowed the deferral of such costs, which related mainly to long-term foreign currency debt. The Commission adjusted its cost calculations accordingly.

The Council confirms this approach.

(20) Furthermore, one Korean producer, which had no profitable sales on the domestic market, claimed that there were sufficient profitable sales on the domestic market of another Korean producer, which had cooperated during the investigation, for this latter producer's SG& A and profit information to be used in the calculation of the first producer's constructed normal value.

(21) In this context, the Commission had established that, for two Korean producers, all sales of DRAMs and, for the remaining Korean producer, significantly more than 90 % of the sales of DRAMs on the domestic market were made at prices which did not permit recovery of all costs reasonably allocated. After the adjustment described in recital 19, above unprofitable domestic sales of the producer concerned remained at a level significantly higher than 90 % of total sales. Therefore, as detailed in recital 20 of the provisionsl duty Regulation, the Commission considered that, in view of the small volume of sales on the domestic market in the ordinary course of trade, domestic sales could not form the basis for the determination of the profit rate used for the calculation of the constructed normal value.

Consequently, the profit rate to be used for the constructed normal value had to be determined on another reasonable basis in accordance with Article 2 (3) (b) (ii) of the basic Regulation.

With respect to the SG& A costs, the Commission used, for the determination of normal value, the costs incurred by each Korean producer on the domestic market. These costs were indeed considered reliable since all three Korean producers had substantial sales on the domestic market and were therefore added to manufacturing costs in accordance with the abovementioned Article.

The Council confirms these conclusions.

(22) In recital 23 of the provisional duty Regulation, the Commission detailed the factors taken into account in the determination of the profit rate used in the constructed normal values. Two Korean producers, while not questioning the method used by the Commission, argued that this profit margin was set at too high a level. Taking particular account of the high future R& D costs and the large capital investment requirements of this industry, the Commission maintained its conclusion that, for the purpose of the present proceeding, a profit margin of 13,5 % on turnover was reasonable and representative for the product concerned and for the market conditions in Korea.

The Council confirms this view.

2. Export prices (23) Export prices were determined for the purpose of the preliminary findings on the basis of the prices actually paid or payable for the products sold for export to the Community.

The Council confirms this approach.

(24) With regard to exports to related importers, for which the export prices were constructed in accordance with Article 2 (8) (b) of the basic Regulation one Korean producer disagreed with an adjustment made by the Commission at the provisional stage with respect to two types of costs incurred between importation and resale.

(25) With respect to one of the cost items in question, i.e. advertising costs, the Commission had made an assessment, at the provisional stage, on the basis of the facts available following the provisions of Article 7 (7) (b) of the basic Regulation since this producer's related importers in the Community had submitted incomplete information. In its new submission, the Korean producer concerned had not supplied any information on actual costs incurred by the importers with respect to their advertising activities. The Commission therefore maintained the approach taken at the provisional stage.

Furthermore, with respect to a second item, i.e. costs incurred in relation to foreign currency exchange transactions, the Korean producer claimed that only the part of these costs corresponding to realized gains and losses should be included. In this context, the Commission maintained its approach that all costs resulting from foreign currency exchange operations should be taken into consideration, since they were related to this importer's purchase and sales activities and were short-term in nature in comparison with the investigation period. In addition, this approach was reflected in this importer's treatment of these costs in its income statement.

The Council confirms these conclusions.

3. Comparison (26) Comments concerning the comparison of export prices with normal value were received with respect to allowances requested by two Korean producers. These producers claimed that allowances for differences in payment terms should be made for the full period of credit actually granted to domestic customers, even though no credit period was agreed with customers at the time of sale. These requests for allowance had not been accepted by the Commission in its provisional determination.

One producer claimed that the allowance should be calculated on the basis of the average period of credit granted and the other claimed such calculation should be done on the basis of the credit periods specifically established for each sales transaction to its domestic customers. In both cases, the producers requested that the interest rate applicable in Korea for short-term borrowing should be used for this purpose.

(27) The Commission noted, however, that in accordance with Article 2 (9) (a) of the basic Regulation, allowance for differences in payment terms can be granted only to the extent that they affect price comparibility. Payment terms can affect prices paid by a customer only where these are agreed at the date of sale (i.e. date of the conclusion of the sales contract or the date of the invoice at the latest) because only then can the cost of credit associated with the payment terms be considered to have influenced the buyer's decision. Consequently, any costs resulting from a period of credit not agreed at the date of sale have to be considered as a general cost for the selling company.

With respect to the claim of the two Korean producers, no fixed period of credit was specified at the date of sale. Moreover, one producer could not establish the link between payments received and individual sales transactions, whereas for the other producer credit periods varied considerably across different customers and for individual customers across different sales transactions. In such circumstances the Commission would normally have rejected these claims. In this case however, and in conformity with the approach taken in previous proceedings, the Commission granted an adjustment for these sales on the basis of 30 days of credit, which was considered a reasonable estimate of the period of credit for the buyer.

The Council confirms this approach.

4. Dumping margins (28) The definitive examination of the facts showed the existence of dumping in respect of imports of the product concerned originating in Korea.

The weighted average dumping margins definitively established for the producers concerned and expressed as a percentage of the total cif Community border value of imports, exceeded 50 % with the exception of Samsung Electronics Co., for which the weighted average dumping margin was established at 14,6 %.

(29) As far as any non-cooperating producers are concerned, no comments on the conclusions reached by the Commission in recital 28 of the provisional duty Regulation were received.

In these circumstances, the Council confirms these conclusions and the dumping margin determined for non-cooperating producers is set at a level of the highest dumping margin.

E. INJURY

(30) The Commisson had determinated in its preliminary conclusions that material injury had been sustained by the Community producers (recitals 36 to 48 of the provisional duty Regulation). No new arguments were subsequently put forward in this connection.

Therefore the Council confirms the above conclusions.

F. CAUSATION

(31) The Commission pointed out in its preliminary conclusions that the substantial injury sustained by Community producers had been caused by dumped Korean imports (recitals 49 to 61 of the provisional duty Regulation). No new arguments were put forward in this connection.

Therefore the Council confirms that the material injury sustained by Community producers has been caused by dumped Korean imports.

G. COMMUNITY INTEREST

(32) As stated in recital 70 of the provisional duty Regulation, the purpose of anti-dumping measures is to remedy the injurious effect of unfair trading practices and to re-establish a fair competitive situation which, as such, is in the general interest of the Community. Moreover, in recitals 62 to 77 of the provisional duty Regulation, the Commission, for the purspose of the provisional findings, had determined that, in accordance with Article 11 of the basic Regulation, the imposition of provisional anti-dumping measures was in the interests of the Community.

(33) One Korean producer argued that the adoption of anti-dumping measures would not be in the interest of the Community user industry. In support of this claim, the Korean producer argued in general terms that the mere fact that the user industry made a detailed submission prior to the imposition of provisional duties in this case showed that this user industry was concerned about the negative implications of this anti-dumping proceeding with respect to its competitive situation.

(34) With respect to the situation of the Community DRAM user industry in general, in recital 69 of the provisional duty Regulation it has been shown that only one of a number of existing user groups put forward such a claim without in any way quantifying it with respect to the effect of anti-dumping measures imposed on Korean DRAM imports. In support of its claim, this user group merely alleged that the anti-dumping measures imposed in the framework of the Japanese DRAM anti-dumping proceeding pursuant to Council Regulation (EEC) No 2112/90 (1) had had the effect of increasing DRAM prices in the Community. This claim, however, was in contrast with information obtained by the Commission from reliable market sources. Indeed, the Commission, in the framework of regular market monitoring after the coming into force of the anti-dumping measures with respect to Japanese DRAMs, had observed a positive impact in the Community market resulting from the anti-dumping measures concerning DRAMs of Japanese origin, in particular, an increase in the level of competition and a steadiness in the trend of prices. With respect to DRAM prices in the Community and in other world markets, the Commission had established that, while prices varied, price differences in the Community were not substantial compared with other markets.

(35) One company using DRAMs for the production of electronic goods inside the Community claimed that anti-dumping measures would have a negative effect on its position in comparison with competitors using DRAMs in their production outside the Community. This user company further argued and supplied supporting specific information that, after the provisional anti-dumping measures, the prices of one of the Korean producers had increased and that, as a consequence, its own input costs had risen.

(36) In general, it should be noted in this context that the situation of a single user company representing only a small fraction of total DRAM use in the Community could not be considered representative for the user industry in the Community as a whole.

Concerning the first argument put forward by the company, on the question of prices in other markets, the Commission noted the recent imposition of substantial anti-dumping duties by the authorities of the USA, which is one of the markets with the greatest world-wide DRAM consumption, with respect to DRAM's originating in Korea.

Moreover, it should be noted that the anti-dumping measures in the present proceeding were set at a level and in a form to minimize any negative effect on the DRAM user industry. Concerning the second argument of the company, and as discussed in recital 69 of the provisional duty Regulation, the fact that advantages have been gained in the past through unfair trade practices cannot be a justification for their continuation. This user company was, furthermore, operating in an industry facing general economic difficulties world-wide which were not attributable to high electronic component prices in the Community, nor specifically to high DRAM prices. Accordingly, the Commission considered that any increase in costs due to DRAM purchase price increases after the imposition of provisional duties, could not have been substantial.

(37) One Korean producer argued that any anti-dumping measures with respect to Korean producers would reduce competition in the Community DRAM market by eliminating some smaller competitors from the market.

(38) In recital 63 of the provisional duty Regulation it was stated, however, that, in view of the substantial and increasing financial losses incurred by the Community industry, not to take anti-dumping measures would threaten its viability and consequently eliminate companies from the DRAM market. Furthermore, taking into account that the definitive anti-dumping measures are imposed in a flexible form and at a level which will not prevent any Korean producer from continuing to sell on the Community market, the Commission considered that the anti-dumping measures would not reduce the level of competition in the Community DRAM market.

(39) In conclusion, in assessing the Community interest in recitals 64 and 65 of the provisional duty Regulation, the Commission had concluded that any possible increase in the input cost for the user industry would have to be viewed against the background of the situation of the Community industry which is operating in a key technological sector and which has, due to significant dumping by Korean companies, been incurring substantial financial losses which have threatened its viability. This assessment has also to be seen in light of the anti-dumping measures taken in the USA which may lead to increased Korean imports into the Community.

Finally, the Commission considered that not to impose anti-dumping measures with respect to dumped imports of DRAMs originating in Korea would undermine the beneficial effects of the anti-dumping measures in force with respect to DRAMs originating in Japan as mentioned in recital 34 and would be discriminatory towards the Japanese producers concerned. In these circumstances, the Commission considered that it is in the interests of the Community to impose anti-dumping measures concerning imports of DRAMs originating in Korea.

The Council confirms this conclusion.

H. ANTI-DUMPING MEASURES

(40) In establishing the level of the definitive anti-dumping measures to be imposed, given that the injury sustained by the Community industry was in the form of heavy financial losses due to substantial price undercutting by the Korean producers, the Commission considered it appropriate to ensure that prices of the Community industry can achieve a reasonable level and that any future price depression caused by dumped Korean imports can be prevented. In order to obtain this result, the export prices of the Korean producers should be at a level where dumping is eliminated and sales at prices below the Korean producers' costs of production are prevented, ensuring that the injury caused to the Community industry is eliminated to a satisfactory extent. At the same time, consideration was given, by the Commission, to setting the anti-dumping measures at a level which would not put the Community user industry at an undue competitive disadvantage towards its competitors in world markets.

(41) With respect to the form of the definitive anti-dumping measures, the Commission took into account the fact that the DRAM industry is a fact moving industry characterized by learning curve effects yielding substantial cost of production reductions over a relatively short time period, that there is also interdependence of sales and costs of DRAM products of succeeding generations which might result in substantial fluctuations in market prices and on increasing number of DRAM models, and concluded that the definitive anti-dumping measures should allow sufficient flexibility to follow these patterns.

(42) In these circumstances, it would be appropriate to impose an anti-dumping duty at the level sufficient to eliminate the effect of injurious dumping. The Korean producers, however, have offered undertakings on the basis of their resale prices for their products to the first independent customers in the Community. Pursuant to Commission Decision 93/157/EEC (1), the undertakings are deemed acceptable. These undertakings are based on the actual quarterly costs of DRAM production in Korea plus an amount for profit and therefore meet the objectives as set out in recital 40.

(43) In order to safeguard the effectiveness of the above undertakings and to avoid circumvention of the anti-dumping measures, a definitive anti-dumping duty should be imposed on any other imports originating in Korea.

(44) Given the special circumstances of this proceeding, in particular the fact that all known Korean DRAM producers exporting to the Community have offered acceptable undertakings, the Commission considered that a duty lower than the highest dumping margin established during the investigation was sufficient to achieve these objectives. Therefore the definitive anti-dumping duty should be set at a level of 24,7 %, which represents the highest individual level of price undercutting of any Korean producer. The Council confirms this conclusion.

(45) In the course of the investigation three companies located outside the Community, namely:

- Hitachi Ltd, Japan,

- Motorola Incorporated, USA, and - Motorola Malaysia SDN BHD., Malaysia,

have claimed and supplied supporting evidence that they have imported DRAMs originating in Korea to the Community having purchased the DRAMs concerned from Korean producers in the framework of general purchase contracts.

Given the nature of the undertakings offered by all the Korean producers concerned for their direct and indirect exports to the Community, the Commission considered it appropriate to exclude DRAM imports into the Community by the three purchasing companies mentioned above from the definitive anti-dumping duty on imports of DRAMs originating in Korea if the DRAMs thus imported were purchased in the framework of a general purchase contract from the Korean producers concerned under the terms of the respective undertakings and if the DRAMs purchased were destined for export to the Community.

The Council confirms this view.

I. COLLECTION OF PROVISIONAL DUTIES

(46) With respect to provisional duties, it is Community practice to collect these duties definitively if substantial injurious dumping provisionally determined is confirmed at the definitive stage and if the situation with respect to the injurious effect of the dumped imports to the Community market has not fundamentlly changed since the imposition of the provisional duties. In the present case, substantial injurious dumping was definitively confirmed. However, due to the specific aspects of the situation, in particular the fact that after acceptable undertakings had been offered by all three Korean producers which cover the entirety of imports originating in Korea, it was considered that the interest of the Community did not require the collection ofthese duties for their full period of validity but only for the initial period of validity of four months.

The Council confirms this approach,

HAS ADOPTED THIS REGULATION:

Article 1

1. A definitive anti-dumping duty is hereby imposed on imports into the Community of certain electronic microcircuits known as DRAMs (dynamic random access memories) originating in the Republic of Korea and falling within CN code 8542 11 12, 8542 11 14, 8542 11 16, 8542 11 18, ex 8542 11 01 (Taric code: 8542 11 01*10), ex 8542 11 05 (Taric code: 8542 11 05*30), ex 8473 30 10 (Taric code: 8473 30 10*40) or ex 8548 00 00 (Taric code: 8548 00 00*20).

2. For the purpose of this Regulation, DRAMs comprise all variations, types and densities including DRAM wafers and DRAM dice or DRAM chips, and multi-combinational forms of DRAMs such as stack DRAMs and DRAM memory modules.

3. The rate of duty shall be 24,7 % expressed as a percentage of the net free-at-Community-frontier price before duty (Taric additional code: 8699).

4. Imports of products referred to in paragraph 1 shall be exempt from the duty (Taric additional code: 8698), provided that:

(a) they are produced and exported to the Community by the following companies whose undertakings have been accepted by Commission Decision 93/157/EEC:

- Goldstar Electron Co., Ltd, Seoul,

- Hyundai Electronics Industries Co., Ltd, Icheon,

- Samsung Electronics Co., Ltd, Seoul; or (b) they are produced, and sold for subsequent exportation to the Community, by one of the companies listed in the first indent above to one of the following companies:

- Hitachi Ltd, Japan,

- Motorola Incorporated, USA,

- Motorola Malaysia SDN BHD., Malaysia.

In this case, exemption from the duty shall be conditional upon presentation to the customs authorities of documentation (the format is contained in Annex I) from the producer ('Issuing company`), confirming that it directly sold the products for which the exemption is sought for export to the Community to one of the three companies above ('Exporter`), which in turn exported them directly to a company located in the Community ('Consignee`). The documentation shall furthermore contain a clear description of the device type(s) sold, the total quantity per device type, the unit price per device type, a statement that the price was not lower than the applicable undertaking price, the invoice number and the confirmation that these products were produced and sold for export to the Community by the said company in accordance with the provisions of the undertakings referred to in Article 1 of Commission Decision 93/157/EEC. This documentation shall be issued by the Korean producer concerned at the time the invoice is issued.

5. The provisions in force concerning customs duties shall apply.

Article 2

The amounts secured by way of a provisional anti-dumping duty pursuant to Regulation (EEC) No 2686/92 shall be definitively collected for the period until and including 17 January 1993.

Article 3

This Regulation shall enter into force on the day following its publication in the Official Journal of the European Communities.

This Regulation shall be binding in its entirety and directly applicable in all Member States.

Done at Brussels, 15 March 1993.

For the Council The President M. JELVED

(1) OJ No L 193, 25. 7. 1990, p. 1. Regulation as last amended by Regulation (EEC) No 2967/92 (OJ No L 299, 15. 10. 1992, p. 4).

(1) See page 37 of this Official Journal.