                         Slip. Op. 99 - 51


           UNITED STATES COURT OF INTERNATIONAL TRADE

               BEFORE:   RICHARD W. GOLDBERG, JUDGE


                                        
MICRON TECHNOLOGY, INC.,                
                                        
                    Plaintiff,          
                                        
               v.                       
                                        
THE UNITED STATES,                      
                                            Court No. 96-06-01529
                     Defendant,         
                                        
               and                      
                                        
LG SEMICON CO., LTD., and               
LG SEMICON AMERICA, INC.,               
                                        
                Defendant-Intervenors. 
                                        

[Remand Results of the U.S. Department of Commerce remanded.]


                                         Dated: June 16, 1999



     Hale & Dorr, LLP (Gilbert B. Kaplan, Michael D. Esch, Paul W.
Jameson, and Cris R. Revaz), for plaintiff Micron Technology, Inc.

     David W. Ogden, Acting Assistant Attorney General; David M.
Cohen, Director, Commercial Litigation Branch, Civil Division,
United States Department of Justice (Velta A. Melnbrencis); Office
of the Chief Counsel for Import Administration, United States
Department of Commerce (Patrick V. Gallagher, Jr.), of counsel, for
defendant.
Court No. 96-06-01529                                  Page   2


     Kaye, Scholer, Fierman, Hays & Handler, LLP (Michael P. House
and Raymond Paretzky), for defendant-intervenors LG Semicon Co.,
and LG Semicon America, Inc.


                      MEMORANDUM OPINION & ORDER

GOLDBERG, Judge: The Court reviews the Department of Commerce’s

("Commerce") Final Results of Redetermination Pursuant to Court

Remand (Mar. 31, 1999) ("Remand Results"),1 filed with the Court

in accordance with its opinion and order in Micron Technology,
Inc. v. United States, No. 99-12 (CIT Jan. 28, 1999).2     The Court

found in Micron that it was unclear whether Commerce used the

same methodology to calculate total R&D expenses for LG Semicon

Co., and LG Semicon America, Inc. (collectively, "LG Semicon"),

as it used to calculate purchased R&D expenses.    Therefore, the

Court remanded in part, with instructions that Commerce

articulate "the precise methodology it . . . used to calculate

total R&D expenses."    Micron, No. 99-12, slip op. at 10-11 (CIT

Jan. 28, 1999).    Importantly, when crafting its remand
instruction, the Court cautioned that "Commerce should ensure

that its clarified methodology is non-distortive and that it


     1
      See Remand Redeterminations (visited June 8, 1999)
<http://www.ita.doc.gov/import_admin/records/remand.html>.
     2
         Familiarity with the Court’s earlier opinion is presumed.
Court No. 96-06-01529                                     Page   3


accurately and reasonably reflects costs.    In particular, the

Court notes that if Commerce continues to base its total R&D

figure on those costs expensed in 1993, it should refrain from

including in this figure those R&D costs expensed in 1993, yet

incurred prior to 1993.    Basing the total R&D figure on costs

actually incurred and expensed in 1993 plus costs expensed in

1993, yet incurred prior to 1993 conflates the amortizing and

expensing methodologies and is plainly distortive.    It

effectively results in double counting and, as such, should be

rejected."     Id., slip op. at 11 (CIT Jan. 28, 1999).
     On remand, Commerce clarified its methodology for

calculating R&D expenses and recalculated LG Semicon’s dumping

margin in accordance with this methodology.    As a result, LG

Semicon’s margin remained at 0.00% for the first review period.

Substantively, however, Commerce ignored the Court’s remand

instruction.    In its revised total R&D figure, Commerce included

R&D costs actually incurred and expensed in 1993 and R&D costs
expensed in 1993, though incurred and amortized prior to 1993.

Commerce is wrong.

     The court will sustain Commerce’s remand determination if it

is supported by substantial evidence on the record and is
Court No. 96-06-01529                                 Page     4


otherwise in accordance with law.   See 19 U.S.C. § 1516a(b)(1)(B)

(1994).

     As the Court plainly emphasized in Micron, it is distortive

and, indeed, punitive to base LG Semicon’s total R&D figure on

those costs that were expensed and incurred in 1993 plus those

costs that were expensed in 1993, though incurred prior to 1993.

This approach "effectively results in double counting" costs

incurred by LG Semicon.   Micron, No. 99-12, slip op. at 11 (CIT
Jan. 28, 1999) (emphasis added).

     Commerce maintains its approach does not result in double

counting because Commerce "has never before included these

particular R&D expenses [i.e., those expensed in 1993, yet

incurred prior to that year] in [LG Semicon’s] costs."   Remand

Results, at 5.   Commerce is literally correct in that under its

proposed methodology, the same expenses are not double counted,

but this hyper-technical analysis misses the point.   Commerce has

taken a fully inclusive set of current period costs and lumped on
a set of prior period costs.   And, importantly, the prior period

costs constitute a substantial portion of the total revised R&D

figure because the remainder of amortized costs were expensed in

full in 1993 due to an accounting change.   Indeed, Commerce
Court No. 96-06-01529                                 Page    5


acknowledges that by adding the prior period costs "[t]his

appreciably increases total R&D expenses."   Remand Results, at 6.

The Court’s review of the confidential Remand Results confirms

this statement to be absolutely true.   The increase in total R&D,

resulting from the shift in methodology, is significant.     On the

facts of this case, the Court continues to find that by combining

the costs that were currently expensed and the costs that were

amortized, though expensed in full due to the accounting change,

Commerce in effect double counted LG Semicon’s total R&D costs.

Commerce’s approach distorts LG Semicon’s total R&D beyond what

might be considered historically accurate for a given period of

time and, hence, does not remotely, much less reasonably, reflect

the company’s actual costs of production.

     Commerce’s principal concern in adopting the methodology

used in the Remand Results appears to be that if previously
incurred amounts are not included in the total R&D figure here,

they will never be included in any review.   This is a red
herring.   Many past expenses, including past production costs,

might not be captured in any given review.   To validate

Commerce’s reasoning would allow the agency to include past

expenses simply because they were not captured in a previous
Court No. 96-06-01529                                  Page   6


review or investigation.   The object of the cost of production

exercise is not to capture all past expenses, but rather those

expenses that reasonably and accurately reflect a respondent’s

actual production costs for a period of review.

     In the Remand Results, Commerce also expresses its concern

that if it were to follow the Court’s instruction, LG Semicon

might again switch its accounting procedures to achieve favorable

treatment for antidumping purposes.   Commerce’s concern in this

regard is overstated.   It makes little, if any, business sense to

switch accounting systems on an annual basis; the Court is

skeptical that a company might engage in such practice solely to

ensure that more beneficial dumping calculations might inure.

     Finally, plaintiff Micron argues that the revised

methodology should be sustained because to do otherwise would

result in an approach inconsistent with the methodology used to

calculate purchased R&D.   The Court does not agree.   Review of

the record shows that all of the purchased R&D LG Semicon

expensed in 1993 was also incurred in 1993.   See Remand Results,
at 4 n.1; see also Micron, No. 99-12, slip op. at 10 n.3 (CIT

Jan. 28, 1999).

     To remedy Commerce’s error, LG Semicon urges the Court to
Court No. 96-06-01529                                  Page   7


vacate the Remand Results and, instead, to reinstate and sustain

the Notice of Final Results of AD Administrative Review: DRAMs

from the Republic of Korea, 61 Fed. Reg. 20,216 (May 6, 1996).

The Court recognizes that additional delay will result from a

further remand and sympathizes with LG Semicon’s frustration on

this issue.   Commerce’s decision on remand has wasted the Court’s

time as well as that of the litigants.   But, the proper course of

action is to have the agency rectify its error in an expedited

fashion.   Therefore, Commerce shall conduct its second remand

according to the following Order.

     Upon consideration of Commerce’s Remand Results, and the
comments filed by parties to this action, upon all other papers

and proceedings had herein, and upon due deliberation; it is

hereby

     ORDERED that the Remand Results are remanded to Commerce,

which should revise its total R&D methodology to exclude R&D

costs that were incurred prior to 1993, yet expensed in 1993 and,
if necessary, recalculate the margin for LG Semicon;

     ORDERED that Commerce shall file its Remand Results with the

Clerk of the Court within thirty (30) days from the date of this

Order.   Any comments or responses by the parties to the Remand
Court No. 96-06-01529                                 Page   8


Results are due on or before five (5) days thereafter, and shall

be limited to fifteen (15) pages.   Any rebuttal comments are due

on or before five (5) days thereafter, and shall again be limited

to fifteen (15) pages; and it is further

     ORDERED that no extensions of time to this schedule will be

granted.




                                 _________________________________
                                        Richard W. Goldberg
                                               JUDGE

Dated:     June 16, 1999
           New York, New York.
