December 22, 1998 5:40 PM PST
Supercomputer squabble heats up
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NEC supercomputer challenges U.S.January 22, 1998
As with nearly every issue in the case--which revolved around whether Japanese supercomputer makers violated trade agreements by allegedly selling machines for less than cost--the review of the ruling is generating vastly different interpretations.
Japanese companies have rushed to claim that the mandated review means that the trade sanctions could be overturned. U.S. computer makers, meanwhile, are claiming that the review is more procedural in nature.
Judge Donald C. Pogue of the Court of International Trade in New York ruled that the U.S. International Trade Commission re-examine the evidence supporting the verdict. Pogue ruled that the ITC failed to show a causal connection between the small number of Japanese supercomputers sold in the U.S. and the deteriorating business performance of the Cray supercomputer, according to a statement from NEC.
As a result, the ITC will have the to re-examine its August 1997 findings. Among the findings are that NEC was injuring the U.S. supercomputer industry by selling supercomputers for less than cost in the U.S., NEC said.
The ruling opens the door to the possible lifting of a 454 percent U.S. tariff on NEC, at least according to NEC. Penalties against other Japanese vendors, which are smaller than tariffs imposed on NEC, are also subject to review.
The ITC found that other Japanese manufacturers, including Fujitsu, had dumped supercomputers for less than cost in the U.S., but had shaved less off their bottom line.
"It is obvious to everyone in the industry that Cray's inability to supply the U.S. supercomputer market has nothing to do with imports. Cray has virtually withdrawn from the high-end vector supercomputer market, and U.S. supercomputer users have no source of supply for the supercomputers," NEC said.
"We hope that Judge Pogue's decision will lead to the elimination of the dumping order," said a statement from HNSX Supercomputers, a U.S. subsidiary of NEC.
Silicon Graphics, parent company of Cray, which originally brought the complaint, says the review of the earlier finding was only required by a recent change in U.S. law regarding the standard of proof in such cases. The appeals court did not dispute the ITC's findings. Rather, the appeals court is merely requiring it to tighten the casual connection between the harm and the injury. And SGI says there is plenty more where that came from.
"We are confident that the ITC will reach the same conclusion in this review that it reached earlier," an SGI spokesman said. "In the meantime, the duties imposed as a result of the original decision remain in effect."
The SGI spokesman also noted that the review will apply only to one portion of the International Trade Commission finding and that Pogue upheld all the other parts.
The antidumping ruling resulted in a 454 percent tariff being added to the price tag of NEC supercomputers sold in the U.S., effectively shutting the company's supercomputer products out of the U.S. market.
After NEC won a $35 million contract to supply the National Center for Atmospheric Research with NEC SX-4 supercomputers, Cray accused NEC of selling machines below cost on the U.S. market. In March 1997, the Department of Commerce issued a preliminary ruling that agreed with Cray's perspective.
Then, in September 1997, the Court of International Trade agreed with the Department of Commerce, levying the tariffs against NEC and Fujitsu proportional to the amount it said the companies had undersold their products in the bid for the NCAR deal.
NEC, meanwhile, countered the tariff by offering supercomputer calculation services overseas.