[Federal Register: September 10, 2007 (Volume 72, Number 174)]
[Notices]
[Page 51602-51609]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr10se07-18]
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DEPARTMENT OF COMMERCE
International Trade Administration
(C-580-818)
Corrosion-Resistant Carbon Steel Flat Products 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 (the Department) is conducting an
administrative review of the countervailing duty (CVD) order on
corrosion-resistant carbon steel flat products from the Republic of
Korea (Korea) for the period of review (POR) January 1, 2005, through
December 31, 2005. For information on the net subsidy for each of the
reviewed companies, see 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: Robert Copyak or Gayle Longest, AD/CVD
Operations, Office 3, Import Administration, U.S. Department of
Commerce, Room 4014, 14th Street and Constitution Avenue, NW,
Washington, DC 20230; telephone: (202) 482-2209 or (202) 482-3338,
respectively.
SUPPLEMENTARY INFORMATION:
Background
On August 17, 1993, the Department published in the Federal
Register the CVD order on corrosion-resistant carbon steel flat
products from Korea. See Countervailing Duty Orders and Amendments to
Final Affirmative Countervailing Duty Determinations: Certain Steel
Products from Korea, 58 FR 43752 (August 17, 1993). On August 1, 2006,
the Department published a notice of opportunity to request an
administrative review of this CVD order. See Antidumping or
Countervailing Duty Order, Finding, or Suspended Investigation;
Opportunity to Request Administrative Review, 71 FR 43441 (August 1,
2006). On August 31, 2006, we received a timely request for review from
Pohang Iron and Steel Co. Ltd. (POSCO) and Dongbu Steel Co., Ltd.
(Dongbu). On September 29, 2006, the Department published a notice of
initiation of the administrative review of the CVD order on corrosion-
resistant carbon steel flat products from Korea covering the POR
January 1, 2005, through December 31, 2005. See Initiation of
Antidumping and Countervailing Duty Administrative Reviews, 71 FR 57465
(September 29, 2006). On October 16, 2006, the Department sent its
initial questionnaire to POSCO, Dongbu, and the Government of Korea
(GOK). On December 21, 2006, the Department received questionnaire
responses from POSCO, Pohang Steel Co., Ltd. (POCOS, a production
affiliate of POSCO), POSCO Steel Service & Sales Co., Ltd. (POSTEEL, a
trading company for POSCO),\1\ Dongbu, and the GOK. On March 30, 2007,
we issued supplemental questionnaires to POSCO and the GOK. On April
16, 2007, we received the responses to these supplemental
questionnaires.
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\1\ In these preliminary results, unless otherwise stated, we
use POSCO to collectively refer to POSCO, POCOS, and POSTEEL.
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On May 9, 2007, the Department published in the Federal Register a
notice of extension of the time period for issuing the preliminary
results. See Corrosion-Resistant Carbon Steel Flat Products from the
Republic of Korea: Extension of Time Limit for Preliminary Results of
Countervailing Duty Administrative Review, 72 FR 26338 (May 9, 2007).
In accordance with 19 CFR 351.213(b), this review covers only those
producers or exporters for which a review was specifically requested.
The companies subject to this review are POSCO (and its affiliates
POCOS and POSTEEL) and Dongbu.
Affiliated Companies
In the present administrative review, record evidence indicates
that POCOS is a majority-owned production affiliate of POSCO. Under 19
CFR 351.525(b)(6)(iii), if the firm that received a subsidy is a
holding company, including a parent company with its own operations,
the Department will attribute the subsidy to the consolidated sales of
the holding company and its subsidiaries. Thus, we attributed subsidies
received by POCOS to POSCO and its subsidiaries, net of intra-company
sales. Dongbu reported that it is the only member of the Dongbu group
in Korea that was involved with the sale of subject merchandise to the
United States.
Scope of Order
Products covered by this order are certain corrosion-resistant
carbon steel flat products from Korea. These products include flat-
rolled carbon steel products, of rectangular shape, either clad,
plated, or coated with corrosion-resistant metals such as zinc,
aluminum, or zinc-, aluminum-, nickel- or iron-
[[Page 51603]]
based alloys, whether or not corrugated or painted, varnished or coated
with plastics or other nonmetallic substances in addition to the
metallic coating, in coils (whether or not in successively superimposed
layers) and of a width of 0.5 inch or greater, or in straight lengths
which, if of a thickness less than 4.75 millimeters, are of a width of
0.5 inch or greater and which measures at least 10 times the thickness
or if of a thickness of 4.75 millimeters or more are of a width which
exceeds 150 millimeters and measures at least twice the thickness. The
merchandise subject to this order is currently classifiable in the
Harmonized Tariff Schedule of the United States (HTSUS) at subheadings:
7210.30.0000, 7210.31.0000, 7210.39.0000, 7210.41.0000, 7210.49.0030,
7210.49.0090, 7210.60.0000, 7210.61.0000, 7210.69.0000, 7210.70.6030,
7210.70.6060, 7210.70.6090, 7210.90.1000, 7210.90.6000, 7210.90.9000,
7212.20.0000, 7212.21.0000, 7212.29.0000, 7212.30.1030, 7212.30.1090,
7212.30.3000, 7212.30.5000, 7212.40.1000, 7212.40.5000, 7212.50.0000,
7212.60.0000, 7215.90.1000, 7215.9030, 7215.90.5000, 7217.12.1000,
7217.13.1000, 7217.19.1000, 7217.19.5000, 7217.20.1500, 7217.22.5000,
7217.23.5000, 7217.29.1000, 7217.29.5000, 7217.30.15.0000,
7217.32.5000, 7217.33.5000, 7217.39.1000, 7217.39.5000, 7217.90.1000
and 7217.90.5000. Although the HTSUS subheadings are provided for
convenience and customs purposes, the Department's written description
of the merchandise is dispositive.
Average Useful Life
Under 19 CFR 351.524(d)(2), we will presume the allocation period
for non-recurring subsidies to be the average useful life (AUL) of
renewable physical assets for the industry concerned as listed in the
Internal Revenue Service's (IRS) 1997 Class Life Asset Depreciation
Range System, as updated by the Department of the Treasury. The
presumption will apply unless a party claims and establishes that the
IRS tables do not reasonably reflect the company-specific AUL or the
country-wide AUL for the industry under examination and that the
difference between the company-specific and/or country-wide AUL and the
AUL from the IRS table is significant. According to the IRS Tables, the
AUL of the steel industry is 15 years. No interested party challenged
the 15-year AUL derived from the IRS tables. Thus, in this review, we
have allocated, where applicable, all of the non-recurring subsidies
provided to the producers/exporters of subject merchandise over a 15-
year AUL.
Subsidies Valuation Information
A.Benchmarks for Short-Term Financing
For those programs requiring the application of a won-denominated,
short-term interest rate benchmark, in accordance with 19 CFR
351.505(a)(2)(iv), we used as our benchmark an annual average company-
specific weighted-average interest rate for commercial won-denominated
loans outstanding during the POR. Where no such benchmark instruments
are available, we used national average lending rates for the POR, as
reported in the International Monetary Fund's (IMF) International
Financial Statistics Yearbook. This approach is in accordance with 19
CFR 351.505(a)(3)(ii) and the Department's practice. See, e.g., Final
Affirmative Countervailing Duty Determination: Structural Steel Beams
From the Republic of Korea, 65 FR 41051 (July 3, 2000) (H Beams
Investigation), and the accompanying Issues and Decision Memorandum (H
Beams Decision Memorandum), at ``Benchmarks for Short-Term Financing.''
B. Benchmark for Long-Term Loans Issued Through 2005
During the POR, POSCO and Dongbu had outstanding long-term won-
denominated and foreign-currency denominated loans from government-
owned banks and Korean commercial banks. Based on our findings on this
issue in prior investigations and administrative reviews, we are using
the following benchmarks to calculate the subsidies attributable to
respondents' countervailable long-term loans obtained though 2005:
(1) For countervailable, foreign-currency denominated loans,
pursuant to 19 CFR 351.505(a)(2), and consistent with our past
practice, our preference is to use the company-specific, weighted-
average foreign currency-denominated interest rates on the company's
loans from foreign bank branches in Korea, foreign securities, and
direct foreign loans outstanding during the POR. See, e.g., Final
Affirmative Countervailing Duty Determination: Stainless Steel Sheet
and Strip in Coils from the Republic of Korea, 64 FR 30636, 30640 (June
8, 1999). Where no such benchmark instruments are available, and
consistent with 19 CFR 351.505(a)(3)(ii), as well as our practice, we
relied on the national average lending rates as reported by the IMF's
International Financial Statistics Yearbook. See, e.g., Final Results
and Partial Rescission of Countervailing Duty Administrative Review:
Stainless Steel Sheet and Strip in Coils from the Republic of Korea, 69
FR 2113 (January 14, 2004), and the accompanying Issues and Decision
Memorandum, at ``Subsidies Valuation Information; B. Benchmarks for
Long-Term Loans and Discount Rates.''
(2) For countervailable, won-denominated, long-term loans, our
practice is to use the company-specific corporate bond rate on the
company's public and private bonds, as we determined that the GOK did
not control the Korean domestic bond market after 1991 and that
domestic bonds may serve as an appropriate benchmark interest rate.
See, e.g., Final Negative Countervailing Duty Determination: Stainless
Steel Plate in Coils from the Republic of Korea, 64 FR 15530, 15531
(March 31, 1999) (Plate in Coils Investigation); see also 19 CFR
351.505(a)(2)(ii). Where no such benchmark instruments are available,
we used the national average of the yields on three-year corporate
bonds, as reported by the Bank of Korea (BOK), consistent with 19 CFR
351.505(a)(3)(ii). We note that the use of the three-year corporate
bond rate from the BOK follows the approach taken in the Plate in Coils
Investigation, in which we determined that, absent company-specific
interest rate information, the corporate bond rate is the best
indicator of a market rate for won-denominated long-term loans in
Korea. See Plate in Coils Investigation, 64 FR at 15531; see also 19
CFR 351.505(a)(3)(ii).
In accordance with 19 CFR 351.505(a)(2)(i), our benchmarks take
into consideration the structure of the government-provided loans. For
countervailable fixed-rate loans, pursuant to 19 CFR
351.505(a)(2)(iii), we used benchmark rates issued in the same year
that the government loans were issued. For countervailable variable-
rate loans outstanding during the POR, pursuant to 19 CFR
351.505(a)(5)(i), our preference is to use the interest rates of
variable-rate lending instruments issued during the year in which the
government loans were issued. Where such benchmark instruments are
unavailable, we used interest rates from debt instruments issued during
the POR as our benchmark, as such rates better reflect a variable
interest rate that would be in effect during the POR. This approach is
in accordance with the Department's practice. See, e.g., Final Results
and Partial Rescission of Countervailing Duty Administrative Review:
Stainless
[[Page 51604]]
Steel Sheet and Strip From the Republic of Korea, 68 FR 13267 (March
19, 2003), and accompanying Issues and Decision Memorandum, at Comment
8; see also 19 CFR 351.505(a)(5)(ii).
C. Benchmark Discount Rates
Certain programs examined in this administrative review require the
allocation of won-denominated benefits over time. Thus, we have
employed the allocation methodology described under 19 CFR 351.524(d).
Pursuant to 19 CFR 351.524(d)(3)(i), we based our discount rate on data
for the year in which the government agreed to provide the subsidy.
Under 19 CFR 351.524(d)(3)(i)(A), our preference is to use the cost of
long-term, fixed-rate loans of the firm in question.\2\ Thus, where
available, we used company-specific corporate bond rates on public and
private bonds. See, e.g., Plate in Coils Investigation, 64 FR at 15531.
Where no such benchmark instruments are available, pursuant to 19 CFR
351.524(d)(3)(i)(B), we used the national average of the yields on
three-year corporate bonds, as reported by the BOK, because we have
determined that the GOK did not control the Korean domestic bond market
after 1991.
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\2\ Pursuant to 19 CFR 351.505(a)(2)(ii), a ``commercial loan''
is defined as a loan taken out by the firm from a commercial lending
institution or a debt instrument issued by the firm in a commercial
market. Because we have determined that the GOK controlled and
directed lending, we are unable to use the cost of loans for
discount rate purposes. However, as explained above, we determined
that the GOK did not control the Korean domestic bond market after
1991.
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I. Program Preliminarily Determined to Confer Subsidies
A. The GOK's Direction of Credit
1. Loans Received Through 2005
In the most recently completed CVD proceeding involving Korea, the
Department reaffirmed earlier determinations that the GOK controlled
and directed lending to Korean steel producers through 2005. See Final
Results of Countervailing Duty Administrative Review: Certain Cut-to-
Length Carbon-Quality Steel Plate from Republic of Korea, 72 FR 38565
(July 13, 2007) (2005 CTL Plate Final Results), and accompanying Issues
and Decision Memorandum, at ``GOK's Direction of Credit'' (2005 CTL
Plate Decision Memorandum). In addition, in that review, the Department
noted that neither the respondent nor the GOK provided any new
information that would warrant a change in the Department's
determination. Finding that the GOK did not act to the best of its
ability, the Department employed an adverse inference and determined
that the GOK continued its direction-of-credit policies with respect to
the Korean steel industry for the period 2002 through 2005. Id.
During the POR, POSCO and Dongbu had outstanding loans that were
received prior to and/or during the 2005 period. As in the prior
proceedings, we asked the GOK for information pertaining to the GOK's
direction-of-credit policies through 2005. The GOK did not provide any
new information that would warrant a departure from these prior
findings, stating instead that: ``The Department has consistently found
that long-term loans received by the steel industry were the result of
GOK direction, despite the GOK's repeated objections and demonstrations
to the contrary. While the GOK strongly disagrees with the Department's
position, the legal costs to further contest this issue in the current
review overshadow any possible benefit to the participating Korean
companies.''
See the GOK's Questionnaire Response, at 8 (December 21, 2006).
Because the GOK withheld the requested information on its lending
policies, the Department does not have the necessary information on the
record to determine whether the GOK has continued its direction-of-
credit policies with respect to the Korean steel industry through 2005;
therefore, the Department must base its determination on facts
otherwise available. See Section 776(a)(2)(A) of the Tariff Act of
1930, as amended (the Act).
Section 776(b) of the Act further provides that the Department may
use an adverse inference in applying the facts otherwise available when
a party has failed to cooperate by not acting to the best of its
ability to comply with a request for information. Section 776(b) of the
Act also authorizes the Department to use as adverse facts available
(AFA) information derived from the petition, the final determination in
the investigation, a previous administrative review, or other
information placed on the record. For the reasons discussed below, we
determine that, in accordance with sections 776(a)(2) and 776(b) of the
Act, the use of AFA is appropriate for the final results for the
determination of direction of credit for loans received through 2005.
In this case, the GOK refused to supply requested information that
was in its possession, even though the GOK had provided similar
information in prior proceedings. See, e.g., Final Affirmative
Countervailing Duty Determination: Certain Cut-to-Length Carbon-Quality
Steel Plate from the Republic of Korea, 64 FR 73176, 73178-180
(December 29, 1999) (CTL Plate Investigation). Therefore, consistent
with section 776(a)(2)(A) and (B) of the Act, we find that the GOK did
not act to the best of its ability in this case and, therefore, we are
employing an adverse inference in selecting from among the facts
otherwise available. As AFA, we find that the GOK's direction-of-credit
policies for the steel industry continued through 2005. Accordingly,
the GOK's direction-of-credit policies with respect to the Korean steel
industry provide a financial contribution in the form of the provision
of loans pursuant to section 771(5)(D)(i) of the Act, confer a benefit
in the amount of the difference between the amount that firm paid for
the countervailable loan and the amount the firm would pay on a
comparable commercial loan within the meaning of section 771(5)(E)(ii)
of the Act, and are specific pursuant to section 771(5A)(D)(iii) of the
Act because they are limited to the steel industry. Therefore, we find
that lending to Korean steel producers from domestic banks and
government-owned banks through 2005 is countervailable. Thus, any loans
received by Korean steel producers through 2005 from domestic banks and
government-owned banks that were outstanding during the POR are
countervailable, to the extent that the interest amount paid on the
loan is less than what would have been paid on a comparable commercial
loan. The Department's decision to rely on adverse inferences when
lacking a response from the GOK regarding the direction-of-credit
issue, as it applies to the Korean steel industry, is also in
accordance with its practice. See 2005 CTL Plate Decision Memorandum at
``GOK's Direction of Credit.''
2. Calculation of the Benefit and Net Subsidy Rate Under the
Direction of Credit Program
In accordance with 19 CFR 351.505(c)(2) and (4), we calculated the
benefit for each fixed- and variable-rate loan received from GOK-owned
or -controlled banks to be the difference between the actual amount of
interest paid on the directed loan during the POR and the amount of
interest that would have been paid during the POR at the benchmark
interest rate. We conducted our benefit calculations using the
benchmark interest rates described in the ``Subsidies Valuation
Information'' section above. For foreign currency-denominated loans, we
converted the benefits into Korean won using exchange rates obtained
from the BOK. We then summed the benefits from each company's long-term
fixed-rate and variable-rate won-denominated loans.
To calculate the net subsidy rate, we divided the companies' total
benefits by
[[Page 51605]]
their respective total f.o.b. sales values during the POR, as this
program is not tied to exports or a particular product. In calculating
the net subsidy rate for POSCO, we removed from the denominator sales
made between affiliated parties.\3\ On this basis, we preliminarily
determine the net subsidy rate under the direction of credit program to
be less than 0.005 percent ad valorem for POSCO and 0.05 percent ad
valorem for Dongbu.
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\3\ For POSCO, we also removed intra-company sales from the
denominators of the net subsidy rate calculations of the other
programs found countervailable in these preliminary results. This
step was not necessary for Dongbu.
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B. Asset Revaluation Under Article 56(2) of the Tax Reduction and
Exemption Control Act (TERCL)
Under Article 56(2) of the TERCL, the GOK permitted companies that
made an initial public offering between January 1, 1987, and December
31, 1990, to revalue their assets at a rate higher than the 25 percent
required of most other companies under the Asset Revaluation Act. The
Department has previously found this program to be countervailable. For
example, in the CTL Plate Investigation, the Department determined that
this program was de facto specific under section 771(5A)(D)(iii) of the
Act because the actual recipients of the subsidy were limited in number
and the basic metal industry was a dominant user of this program. See
CTL Plate Investigation, 64 FR at 73182-183. We also determined that a
financial contribution was provided in the form of tax revenue foregone
pursuant to section 771(5)(D)(ii) of the Act. Id. The Department
further determined that a benefit was conferred within the meaning of
section 771(5)(E) of the Act on those companies that were able to
revalue their assets under TERCL Article 56(2) because the revaluation
resulted in participants paying fewer taxes than they would otherwise
pay absent the program. Id. No new information, evidence of changed
circumstances, or comments from interested parties were presented in
this review to warrant any reconsideration of the countervailability of
this program.
The benefit from this program is the difference that the
revaluation of depreciable assets has on a company's tax liability each
year. Evidence on the record indicates that, in 1989, POSCO made an
asset revaluation that increased its depreciation expense. Dongbu
reported that it did not use this program during the POR. To calculate
the benefit to POSCO, we took the additional depreciation listed in the
tax return filed during the POR, which resulted from the company's
asset revaluation, and multiplied that amount by the tax rate
applicable to that tax return. We then divided the resulting benefit by
POSCO's total f.o.b. sales. On this basis, we preliminarily determine
the net countervailable subsidy to be 0.02 percent ad valorem for
POSCO. This program was not used by Dongbu.
C. Research and Development (R&D) Grants Under the Industrial
Development Act (IDA)
The GOK, through the Ministry of Commerce, Industry, and Energy
(MOCIE), provides R&D grants to support numerous projects pursuant to
the IDA, including technology for core materials, components,
engineering systems, and resource technology. The IDA is designed to
foster the development of efficient technology for industrial
development. To participate in this program a company may: (1) perform
its own R&D project, (2) participate through the Korea New Iron and
Steel Technology Research Association (KNISTRA), which is an
association of steel companies established for the development of new
iron and steel technology, and/or (3) participate in another company's
R&D project and share R&D costs, along with funds received from the
GOK. To be eligible to participate in this program, the applicant must
meet the qualifications set forth in the basic plan and must perform
R&D as set forth under the Notice of Industrial Basic Technology
Development. If the R&D project is not successful, the company must
repay the full amount.
In the H Beams Investigation, the Department determined that
through KNISTRA the Korean steel industry receives funding specific to
the steel industry. Therefore, given the nature of KNISTRA, the
Department found projects under KNISTRA to be specific. See Preliminary
Negative Countervailing Duty Determination and Alignment of Final
Countervailing Duty Determination With Final Antidumping Duty
Determination: Structural Steel Beams From the Republic of Korea, 64 FR
69731, 69740 (December 14, 1999) (unchanged in final results), H Beams
Decision Memorandum, at ``R&D Grants Under The Korea New Iron & Steel
Technology Research Association (KNISTRA).'' Further, we found that the
grants constituted a financial contribution under section 771(5)(D)(i)
of the Act in the form of a grant, and bestowed a benefit under section
771(5)(E) of the Act in the amount of the grant. Id. No new factual
information or evidence of changed circumstances has been provided to
the Department with respect to this program. Therefore, we
preliminarily determine that this program is de jure specific within
the meaning of section 771(5A)(D)(i) of the Act and constitutes a
financial contribution and confers a benefit under sections
771(5)(D)(i) and 771(5)(E) of the Act, respectively.
Dongbu reported that it did not use the program during the POR.
POSCO reported receiving grants through KNISTRA during the POR;
however, it claims that the research grants it received under the
program are tied to non-subject merchandise. Upon review of the
information submitted by the GOK and POSCO, we preliminarily determine
that certain grants are tied to non-subject merchandise, and thus, we
did not include these grants in our benefit calculations. See the GOK's
December 21, 2006, Questionnaire Response, at Exhibit G-6. However,
POSCO also reported receiving certain other grants related to a
production process that can be used for an input into the production of
subject merchandise. See POSCO's December 21, 2006, Questionnaire
Response, at Exhibit 6. See Preliminary Results of Countervailing Duty
Administrative Review: Corrosion-Resistant Carbon Steel Flat Products
from the Republic of Korea, 71 FR 53413, 53417 (September 11, 2006)
(Preliminary Results of CORE from Korea (2004)) (unchanged final
results, 71 FR 119 (January 3, 2007)). Under 19 CFR 351.525(b)(5), if a
subsidy is tied to the production or sale of a particular product, the
Department will attribute the subsidy only to that product. But, under
sub-paragraph (ii), if a subsidy is tied to the production of an input
product, then the Department will attribute the subsidy to both the
input and downstream products produced by a corporation, where the
input is primarily dedicated to downstream products. Accordingly, we
have attributed the grant related to a production process that can be
used as an input into the production of subject merchandise to POSCO's
total sales.
To determine the benefit from the grants that POSCO received
through KNISTRA, we calculated the GOK's contribution for each R&D
project. Next, in accordance with 19 CFR 351.524(b)(2), we determined
whether to allocate the non-recurring benefit from the grants over
POSCO's AUL by dividing the approved amount by POSCO's total sales in
the year of approval. Because the approved amounts were less than 0.5
percent of POSCO's total sales in the year of receipt, we expensed the
grants to the year of receipt. Next, to calculate the net subsidy rate,
we divided the portion of the benefit allocated to the POR by
[[Page 51606]]
POSCO's total f.o.b. sales during the POR. On this basis, we
preliminarily determine POSCO's net subsidy rate under this program to
be 0.01 percent ad valorem.
D. Exemption of VAT on Imports of Anthracite Coal
Under Article 106 of Restriction of Special Taxation Act (RSTA),
imports of anthracite coal are exempt from the value added tax (VAT).
In the Cold-Rolled Investigation, we determined that the program is de
jure specific to the steel industry under section 771(5A)(D)(i) of the
Act, as the items allowed to be imported without paying VAT are limited
to the production of steel products. See Final Affirmative
Countervailing Duty Determination: Certain Cold-Rolled Carbon Steel
Flat Products From the Republic of Korea, 67 FR 62102 (October 3, 2002)
(Cold-Rolled Investigation), and accompanying Issues and Decision
Memorandum (Cold-Rolled Decision Memorandum), at ``Exemption of VAT on
Imports of Anthracite Coal.'' We also determined that the VAT
exemptions under the program constitute a financial contribution under
section 771(5)(D)(ii) of the Act, as the GOK is not collecting revenue
otherwise due, and that the exemptions confer a benefit under section
771(5)(E) of the Act equal to the amount of the VAT that would have
otherwise been paid if not for the exemption. No new information,
evidence of changed circumstances, or comments from interested parties
were presented in this review to warrant any reconsideration of the
countervailability of this program. Therefore, we preliminarily
determine that this program is de jure specific within the meaning of
section 771(5A)(D)(i) of the Act because it is limited to the steel
industry, constitutes a financial contribution in the form of foregone
revenue under section 771(5)(D)(ii) of the Act, and confers a benefit
in the amount of the revenue foregone within the meaning of 771(5)(E)
of the Act.
Dongbu reported that it did not use the program during the POR.
POSCO imported anthracite coal during the POR and, therefore, received
a benefit in the amount of the VAT that it would have otherwise paid if
not for the exemption. To determine POSCO's benefit from the VAT
exemption on these imports, we calculated the amount of VAT that would
have been due absent the program on the total value of anthracite coal
POSCO imported during the POR. We then divided the amount of this tax
benefit by POSCO's total f.o.b. sales. Based on this methodology, we
preliminarily determine that POSCO received a countervailable subsidy
of 0.05 percent ad valorem.
E. GOK Infrastructure Investment at Kwangyang Bay Through 1991
In Steel Products from Korea, the Department investigated the GOK's
infrastructure investments at Kwangyang Bay over the period 1983-1991.
We determined that the GOK's provision of infrastructure at Kwangyang
Bay was countervailable because POSCO was the predominant user of the
GOK's investments. See Final Affirmative Countervailing Duty
Determination and Final Negative Critical Circumstance Determinations:
Certain Steel Products from Korea, 58 FR 37338, 37346 (July 9, 1993)
(Steel Products from Korea). Dongbu did not use this program.
Consistent with section 771(5A)(D)(iii) of the Act, the Department has
held that a countervailable subsidy exists when benefits under a
program are provided, or are required to be provided, in law or in
fact, to a specific enterprise or industry or group of enterprises or
industries. See, e.g., Steel Products from Korea, 58 FR at 37346; and
Preliminary Results of CORE from Korea (2004), 71 FR 53418. No new
factual information or evidence of changed circumstances has been
provided to the Department with respect to the GOK's infrastructure
investments at Kwangyang Bay over the period 1983-1991. Therefore, we
preliminarily determine the infrastructure investments the GOK provided
to POSCO are de facto specific within the meaning of section
771(5A)(D)(iii)(II) of the Act. Further, we preliminarily determine
that the infrastructure investments constitute a financial contribution
in the form of a grant, pursuant to section 771(5)(D)(i) of the Act,
and confer a benefit in the amount of the grant within the meaning of
section 771(5)(E) of the Act.
To determine the benefit from the GOK's investments to POSCO during
the POR, we utilized the approach adopted in prior proceedings. See,
e.g., CTL Plate Investigation, 64 FR at 73180. In measuring the benefit
from this program, we treated the GOK's costs of constructing the
infrastructure at Kwangyang Bay as untied, non-recurring grants in each
year in which the costs were incurred. To calculate the benefit
conferred during the POR, we applied the Department's standard grant
methodology and allocated the GOK's infrastructure investments over a
15-year allocation period. See the ``Average Useful Life'' section,
above. Using the 15-year allocation period, POSCO is still receiving
benefits under this program from the GOK investments made during the
year 1991. To calculate the benefit from these grants, we used as our
discount rate the rate describe above in the ``Subsidies Valuation
Information'' section. We then divided this total benefit attributable
to the POR by POSCO's total f.o.b. sales for the POR. On this basis, we
preliminarily determine POSCO's net countervailable subsidy rate to be
0.01 percent ad valorem for the POR.
F. Other Subsidies Related to Operations at Asan Bay: Provision of
Land and Exemption of Port Fees Under Harbor Act
1.Provision of Land
As explained in the Cold-Rolled Investigation, the GOK's overall
development plan is published every 10 years and describes the
nationwide land development goals and plans for the balanced
development of the country. Under these plans, the Ministry of
Construction and Transportation (MOCAT) prepares and updates its Asan
Bay Area Broad Development Plan. See Cold-Rolled Decision Memorandum,
at ``Provision of Land at Asan Bay.'' The Korea Land Development
Corporation (Koland) is a government investment corporation that is
responsible for purchasing, developing, and selling land in the
industrial sites. Id.
In the Cold-Rolled Investigation, we verified that the GOK, in
setting the price per square meter for land at the Kodai industrial
estate, removed the 10 percent profit component from the price charged
to Dongbu. Id. In the Cold-Rolled Investigation, we further explained
that companies purchasing land at Asan Bay must make payments on the
purchase and development of the land before the final settlement.
However, in the case of Dongbu, we found that the GOK provided an
adjustment to Dongbu's final payment to account for ``interest earned''
by the company for the pre-payments. Id. POSCO reported that it did not
use this program.
In the Cold-Rolled Investigation, we determined that the price
discount and the adjustment of Dongbu's final payment to account for
``interest earned'' by the company on its pre-payments were
countervailable subsidies. Specifically, the Department determined that
they were specific under section 771(5A)(D)(iii)(I) of the Act, as they
were limited to Dongbu. Id. Further, the Department found the price
discount and the price adjustment for ``interest earned'' constituted
financial contributions in the form of grants under section
771(5)(D)(i) of the Act and conferred benefits in the amount of grants
within the meaning of section 771(5)(E) of the Act. Id. No new
information, evidence of changed
[[Page 51607]]
circumstances, or comments from interested parties were presented in
this review to warrant any reconsideration of the countervailability of
this program. Therefore, we preliminarily determine that this program
is de facto specific within the meaning of section 771(5A)(D)(iii)(I)
of the Act because it is limited to Dongbu, constitutes a financial
contribution in the form of grants under sections 771(5)(D)(i), and
confers a benefit in the amount of the price discount and the price
adjustment within the meaning of 771(5)(E) of the Act.
Consistent with the Cold-Rolled Investigation, we have treated the
land price discount and the interest earned refund as non-recurring
subsidies. Id. In accordance with 19 CFR 351.524(b)(2), because the
grant amounts were more than 0.5 percent of the company's total sales
in the year of receipt, we applied the Department's standard grant
methodology, as described under 19 CFR 351.524(d)(1), and allocated the
subsidies over a 15-year allocation period. See the ``Average Useful
Life'' section, above. To calculate the benefit from these grants, we
used as our discount rate the rates describe above in the ``Subsidies
Valuation Information'' section. We then summed the benefits received
by Dongbu during the POR. We calculated the net subsidy rate by
dividing the total benefit attributable to the POR by Dongbu's total
f.o.b. sales for the POR. On this basis, we determine a net
countervailable subsidy rate for Dongbu of 0.19 percent ad valorem for
the POR.
2. Exemption of Port Fees Under Harbor Act
Under the Harbor Act, companies are allowed to construct
infrastructure facilities at Korean ports; however, these facilities
must be deeded back to the government. Because the ownership of these
facilities reverts to the government, the government compensates
private parties for the construction of these infrastructure
facilities. Because a company must transfer to the government its
infrastructure investment, under the Harbor Act, the GOK grants the
company free usage of the facility and the right to collect fees from
other users of the facility for a limited period of time. Once a
company has recovered its cost of constructing the infrastructure, the
company must pay the same usage fees as other users of the
infrastructure.
In the Cold-Rolled Investigation, the Department found that Dongbu
received free use of harbor facilities at Asan Bay based upon both its
construction of a port facility as well as a road that the company
built from its plant to its port. See Cold-Rolled Decision Memorandum,
at ``Dongbu's Excessive Exemptions under the Harbor Act.'' The
Department also determined that Dongbu received an exemption of harbor
fees for a period of almost 70 years under this program. See id. In the
Cold-Rolled Investigation, the Department found the exemption from the
fees to be a countervailable subsidy. No new information of changed
circumstances, or comments from interested parties were presented in
this review to warrant any reconsideration of the countervailability of
this program. Thus, we preliminarily determine that the program is
countervailable and is specific under section 771(5A)(D)(iii)(I) of the
Act because the excessive exemption period of 70 years is limited to
Dongbu. Moreover, we preliminarily determine that the GOK is foregoing
revenue that it would otherwise collect by allowing Dongbu to be exempt
from port charges for up to 70 years and, thus, the program constitutes
a financial contribution within the meaning of section 771(5)(D)(ii) of
the Act. Further, we preliminarily determine that the exemptions confer
a benefit under section 771(5)(E) of the Act.
In the Cold-Rolled Investigation, the Department treated the
program as a recurring subsidy and determined that the benefit is equal
to the average yearly amount of harbor fee exemptions provided to
Dongbu. Id. For purposes of these preliminary results, we have employed
the same benefit calculation. To calculate the net subsidy rate, we
divided the average yearly amount of exemptions by Dongbu's total
f.o.b. sales for the POR. On this basis, we preliminarily determine
that Dongbu's net subsidy rate under this program is 0.02 percent ad
valorem.
G. Short-Term Export Financing
The Korean Export Import Bank (KEXIM) supplies two types of short-
term loans for exporting companies, short-term trade financing and
comprehensive export financing. KEXIM provides short-term loans to
Korean exporters who manufacture export goods under export contracts.
The loans are provided up to the amount of the bill of exchange or
contracted amount less any amount already received. For comprehensive
export financing loans, KEXIM supplies short-term loans to any small or
medium-sized company, or any large company that is not included in the
five largest conglomerates based on their comprehensive export
performance. To obtain the loans, companies must report their export
performance periodically to KEXIM for review. Comprehensive export
financing loans cover from 50 to 90 percent of the company's export
performance; however, the maximum loan amount is restricted to 30
billion won.
In Steel Products from Korea, the Department determined that the
GOK's short-term export financing program was countervailable. See
Steel Products from Korea, 58 FR at 37350; see also, Cold-Rolled
Decision Memorandum, at ``Short-Term Export Financing.'' No new
information, evidence of changed circumstances, or comments from
interested parties were presented in this review to warrant any
reconsideration of the countervailability of this program. Therefore,
we continue to find this program countervailable. Specifically, we
preliminarily determine that the program is specific, pursuant to
section 771(5A)(B) of the Act, because receipt of the financing is
contingent upon exporting. In addition, we preliminarily determine that
the export financing constitutes a financial contribution in the form
of a loan within the meaning of section 771(D)(i) of the Act and
confers a benefit within the meaning of section 771(E)(ii) of the Act.
POCOS, POSCO's affiliate, and Dongbu reported using short-term export
financing during the POR.
Pursuant to 19 CFR 351.505(a)(1), to calculate the benefit under
this program, we compared the amount of interest paid under the program
to the amount of interest that would have been paid on a comparable
commercial loan. As our benchmark, we used the short-term interest
rates discussed above in the ``Subsidies Valuation Information''
section. To calculate the net subsidy rate, we divided the benefit by
the f.o.b. value of the respective company's total exports. On this
basis, we determine the net subsidy rate for POSCO and Dongbu to be
0.01 percent ad valorem.
II. Program Preliminarily Determined Not to Confer a Benefit During
the POR
A. Reserve for Research and Manpower Development Fund Under RSTA
Article 9 (Formerly Article 8 of TERCL)
On December 28, 1998, the TERCL was replaced by the Tax Reduction
and Exemption Control Act (RSTA). Pursuant to this change in law, TERCL
Article 8 is now identified as RSTA Article 9. Apart from the name
change, the operation of RSTA Article 9 is the same as the previous
TERCL Article 8 and its Enforcement Decree.
This program allows a company operating in manufacturing or mining,
or in a business prescribed by the Presidential Decree, to appropriate
reserve funds to cover expenses related to the development or
innovation of technology. These reserve funds are
[[Page 51608]]
included in the company's losses and reduce the amount of taxes paid by
the company. Under this program, capital goods companies and capital
intensive companies can establish a reserve of five percent of total
revenue, while companies in all other industries are only allowed to
establish a three- percent reserve.
In a prior segment of this proceeding, we determined that this
program is specific under section 771(5A)(D) of the Act because the
capital goods industry is allowed to claim a larger tax reserve under
this program than all other manufacturers. See Preliminary Results of
CORE from Korea (2004), 71 FR 53419. We also determined that this
program provides a financial contribution within the meaning of section
771(5)(D)(ii) of the Act in the form of revenue forgone and that it
provides benefit under section 771(5)(E) of the Act to the extent that
companies in the capital goods industry, which includes steel
manufacturers, pay less in taxes than they would absent the program.
Id. In the Preliminary Results of CORE from Korea (2004), we continued
to find the program countervailable, but found that the companies under
investigation only contributed to the reserve at the lower three-
percent rate. Therefore, we found no countervailable benefit because
the companies contributed at the lower rate, which was available to any
Korean company. Id. No new information, or evidence of changed
circumstances, was presented in this review to warrant reconsideration
of the approaches adopted in the Preliminary Results of CORE from Korea
(2004).
In this administrative review, POSCO and POCOS each reported
contributing to the reserve at the three-percent rate during the POR.
We continue to find this program to be potentially countervailable.
However, as each company contributed to the reserve at the lower three-
percent rate, and in light of the Department's approach in the
Preliminary Results of CORE from Korea (2004), we preliminarily
determine that no countervailable benefits were conferred under this
program during the POR. Dongbu reported that it did not use this
program during the POR.
III. Programs Preliminarily Determined To Be Not Used
A. Reserve for Investment (Special Cases of Tax for Balanced
Development Among Areas Under TERCL Articles 41-45)
B. Electricity Discounts Under the Requested Loan Adjustment (RLA)
Program
C. Electricity Discounts Under the Emergency Load Reductions (ELR)
Program
D. Export Industry Facility Loans (EIFL) and Specialty Facility Loans
E. Reserve for Overseas Market Development Under TERCL Article 17
F. Equipment Investment to Promote Worker's Welfare Under TERCL Article
88
G. Emergency Load Reduction Program
H. Local Tax Exemption on Land Outside of a Metropolitan Area
I. Excessive Duty Drawback
J. Private Capital Inducement Act (PCIA)
K. Social Indirect Capital Investment Reserve Funds (Art. 28)
L. Energy-Savings Facilities Investment Reserve Funds (Art. 29)
M. Scrap Reserve Fund
N. Special Depreciation of Assets on Foreign Exchange Earnings
O. Export Insurance Rates Provided by the Korean Export Insurance
Corporation
P. Loans from the National Agricultural Cooperation Federation
Q. Tax Incentives for Highly Advanced Technology Businesses Under the
Foreign Investment and Foreign Capital Inducement Act
Preliminary Results of Review
In accordance with 19 CFR 351.221(b)(4)(i), we calculated an
individual subsidy rate for each of the producer/exporters subject to
this administrative review. For the period January 1, 2005, through
December 31, 2005, we preliminarily determine the net subsidy rate for
POSCO to be 0.10 percent ad valorem and for Dongbu to be 0.27 percent
ad valorem, both of which are de minimis. See 19 CFR 351.106(c)(1).
The Department intends to issue assessment instructions to U.S.
Customs and Border Protection (``CBP'') 15 days after the date of
publication of the final results of this review. If the final results
remain the same as these preliminary results, the Department will
instruct CBP to liquidate without regard to countervailing duties all
shipments of subject merchandise produced by POSCO and Dongbu, entered,
or withdrawn from warehouse, for consumption from January 1, 2005,
through December 31, 2005. The Department will also instruct CBP not to
collect cash deposits of estimated countervailing duties on shipments
of the subject merchandise produced by POSCO and Dongbu, entered, or
withdrawn from warehouse, for consumption on or after the date of
publication of the final results of this review.
We will instruct CBP to continue to collect cash deposits for non-
reviewed companies at the most recent company-specific or country-wide
rate applicable to the company. Accordingly, the cash deposit rates
that will be applied to companies covered by this order, but not
examined in this review, are those established in the most recently
completed administrative proceeding for each company. These rates shall
apply to all non-reviewed companies until a review of a company
assigned these rates is requested.
Public Comment
Pursuant to 19 CFR 351.224(b), the Department will disclose to
parties to the proceeding any calculations performed in connection with
these preliminary results within five days after the date of the public
announcement of this notice. Pursuant to 19 CFR 351.309, interested
parties may submit written comments in response to these preliminary
results. Unless otherwise indicated by the Department, case briefs must
be submitted within 30 days after the publication of these preliminary
results. See 19 CFR 351.309(c)(1)(ii). Rebuttal briefs, which are
limited to arguments raised in case briefs, must be submitted no later
than five days after the time limit for filing case briefs, unless
otherwise specified by the Department. See 19 CFR 351.309(d)(1).
Parties who submit argument in this proceeding are requested to submit
with the argument: (1) a statement of the issue; and (2) a brief
summary of the argument. Parties submitting case and/or rebuttal briefs
are requested to provide the Department copies of the public version on
disk. Case and rebuttal briefs must be served on interested parties in
accordance with 19 CFR 351.303(f). Also, pursuant to 19 CFR 351.310(c),
within 30 days of the date of publication of this notice, interested
parties may request a public hearing on arguments to be raised in the
case and rebuttal briefs. Unless the Secretary specifies otherwise, the
hearing, if requested, will be held two days after the date for
submission of rebuttal briefs.
Representatives of parties to the proceeding may request disclosure
of proprietary information under administrative protective order no
later than 10 days after the representative's client or employer
becomes a party to the proceeding, but in no event later than the date
the case briefs, under 19 CFR 351.309(c)(ii), are due. The Department
will publish the final results of this administrative review, including
the results of its analysis of
[[Page 51609]]
issues raised in any case or rebuttal brief or at a hearing.
These preliminary results of review are issued and published in
accordance with sections 751(a)(1) and 777(i)(1) of the Act and 19 CFR
351.221(b)(4).
Dated: August 31, 2007.
David M. Spooner,
Assistant Secretary for Import Administration.
[FR Doc. E7-17746 Filed 9-7-07; 8:45 am]
BILLING CODE 3510-DS-S