[Federal Register Volume 74, Number 172 (Tuesday, September 8, 2009)]
[Notices]
[Pages 46100-46110]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-21614]
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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 (CORE) from the Republic
of Korea (Korea) for the period of review (POR) January 1, 2007,
through December 31, 2007. For information on the net subsidy for each
company reviewed, 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.
DATES: Effective Date: September 8, 2009.
FOR FURTHER INFORMATION CONTACT: Robert Copyak or Gayle Longest, AD/CVD
Operations, Office 3, Import Administration, International Trade
Administration, U.S. Department of Commerce, Room 4014, 14th Street and
Constitution Ave., NW., Washington, DC 20230; telephone: (202) 482-2209
and (202) 482-3338, respectively.
SUPPLEMENTARY INFORMATION:
Background
On August 17, 1993, the Department published in the Federal
Register the CVD order on CORE from Korea. See Countervailing Duty
Orders and Amendments of Final Affirmative Countervailing Duty
Determinations: Certain Steel Products from Korea, 58 FR 43752 (August
17, 1993). On August 1, 2008, 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, 73 FR
44966 (August 1, 2008).
On August 29, 2008, we received a timely request for review from
petitioners \1\ with regard to Pohang Iron and Steel Co., Ltd. (POSCO)
and Dongbu Steel Co., Ltd. (Dongbu). On August 29, 2008, we also
received a timely request for review from Hyundai HYSCO Ltd. (HYSCO).
On September 30, 2008, the Department published a notice of initiation
of the administrative review of the CVD order on CORE from Korea
covering the period January 1, 2007, through December 31, 2007. See
Initiation of Antidumping and Countervailing Duty Administrative
Reviews and Requests for Revocation in Part, 73 FR 56794, 56796
(September 30, 2008). On October 2, 2008, the Department issued the
initial questionnaire to Dongbu, HYSCO, and POSCO as well as the
Government of Korea (GOK). On November 24, 2008, the Department
received questionnaire responses from POSCO, POSCO Steel Service &
Sales Co., Ltd. (POSTEEL, a trading company for POSCO), Pohang Steel
Co., Ltd. (POCOS, a production affiliate of POSCO),\2\ Dongbu, and
HYSCO. On November 25, 2008, the Department received the GOK's
questionnaire response. On February 25 and February 26, 2009, the
Department received supplemental questionnaire responses from the GOK
and HYSCO, respectively. On March 27, 2009, the Department received
supplemental questionnaire responses from the GOK and POSCO. On April
3, 2009, the Department received a supplemental questionnaire response
from the GOK. On April 15, 2009, the Department received a second
supplemental questionnaire response from HYSCO. On April 16, 2009, the
Department issued a third supplemental questionnaire to HYSCO and
received the company's response on April 30, 2009. On May 8, 2009, and
May 13, 2009, the Department issued additional supplemental
questionnaires to POSCO and the GOK, respectively. On May 22, 2009, and
May 27, 2009, the Department received responses from POSCO and the GOK,
respectively.
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\1\ Petitioners are Nucor Corporation and United States Steel
Corporation.
\2\ In these preliminary results, unless otherwise stated, we
use POSCO to collectively refer to POSCO, POCOS, and POSTEEL.
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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 Dongbu, HYSCO, and POSCO (and
its affiliates POCOS and POSTEEL).
Affiliated Companies
In this 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
[[Page 46101]]
will attribute the subsidy to the consolidated sales of the holding
company and its subsidiaries. Thus, we attributed any 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 production and sale of subject
merchandise to the United States. HYSCO reported that it is the only
company within the Hyundai Motor Group that produces and sells the
subject merchandise.
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-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, 7210.70.6030, 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,
7215.90.3000, 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 tables 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.
Creditworthiness
In their February 9, 2009, submission petitioners allege that
Dongbu was uncreditworthy during 2004 through 2007. The examination of
creditworthiness is an attempt to determine if the company in question
could obtain long-term financing from conventional commercial sources.
See 19 CFR 351.505(a)(4). According to 19 CFR 351.505(a)(4)(i), the
Department will generally consider a firm to be uncreditworthy if,
based on information available at the time of the government-provided
loan, the firm could not have obtained long-term loans from
conventional commercial sources. In making this determination,
according to 19 CFR 351.505(a)(4)(i), the Department normally examines
the following four types of information: (1) The receipt by the firm of
comparable commercial long-term loans; (2) present and past indicators
of the firm's financial health; (3) present and past indicators of the
firm's ability to meet its costs and fixed financial obligations with
its cash flow; and (4) evidence of the firm's future financial
position.
As explained in the Department's memorandum dated August 31, 2009,
we find that Dongbu obtained comparable loans from commercial lending
institutions that coincide with the time period during which
petitioners allege Dongbu was uncreditworthy. See Memorandum to Melissa
G. Skinner, Director, AD/CVD Operations, Office 3, titled
``Uncreditworthiness Allegation Regarding Dongbu Steel Co., Ltd.''
(August 31, 2009) (Creditworthy Memorandum), of which a public version
is on file in Room 1117 of the main Commerce building in the Central
Records Unit (CRU). Therefore, in accordance with 19 CFR
351.505(a)(4)(i), we preliminarily determine that Dongbu was
creditworthy during 2004 through 2007. For further information see the
Creditworthy Memorandum.
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 the 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., See
Corrosion--Resistant Carbon Steel Flat Products from the Republic of
Korea: Final Results of Countervailing Duty Administrative Review, 74
FR 2512 (January 15, 2009) (CORE from Korea 2006), and accompanying
Issues and Decision Memorandum (CORE from Korea 2006 Decision
Memorandum) at ``Benchmarks for Short-Term Financing.''
For document acceptance (D/A) loans rediscounted under the Korean
Export Import Bank's (KEXIM's) rediscount program, in accordance with
19 CFR 351.505(a)(2)(ii), we used, for benchmark purposes, usance loans
issued by commercial banks to the respondent firms. This approach is in
accordance with 19 CFR 351.505(a)(2)(ii) and the Department's practice.
See, e.g., Coated Free Sheet Paper from the Republic of Korea: Notice
of Final Affirmative Countervailing Duty Determination, 72 FR 60639
(October 25, 2007) (CFS Paper Investigation), and accompanying Issues
and Decision Memorandum at ``Comment 18'' (CFS Paper Decision
Memorandum).
B. Benchmark for Long-Term Loans
During the POR, Dongbu, HYSCO, and POSCO had outstanding
[[Page 46102]]
countervailable long-term won-denominated and foreign-currency
denominated loans from government-owned banks and Korean commercial
banks. We used the following benchmarks to calculate the subsidies
attributable to respondents' countervailable long-term loans obtained
through 2007:
(1) For countervailable, foreign-currency denominated loans, we
used 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. Where no such benchmark instruments were 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., CORE from Korea
2006 and CORE from Korea 2006 Decision Memorandum at ``Benchmarks for
Long-Term Loans.''
(2) For countervailable, won-denominated long-term loans, we used,
where available, the company-specific interest rates on the company's
comparable commercial, won-denominated loans. If such loans were not
available, we used, where available, 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. 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) (Stainless Steel Investigation) and ``Analysis
Memorandum on the Korean Domestic Bond Market'' (March 9, 1999). The
use of a corporate bond rate as a long-term benchmark interest rate is
consistent with the approach the Department has taken in several prior
Korean CVD proceedings. See Id.; see also Final Affirmative
Countervailing Duty Determination: Structural Steel Beams from the
Republic of Korea (H Beams Investigation), 65 FR 41051 (July 3, 2000),
and accompanying Issues and Decision Memorandum at ``Benchmark Interest
Rates and Discount Rates;'' and Final Affirmative Countervailing Duty
Determination: Dynamic Random Access Memory Semiconductors from the
Republic of Korea, 68 FR 37122 (June 23, 2003) (DRAMS Investigation),
and accompanying Issues and Decision Memorandum at ``Discount Rates and
Benchmark for Loans.'' Specifically, in those cases, we determined
that, absent company-specific, commercial long-term loan interest
rates, the won-denominated corporate bond rate is the best indicator of
the commercial long-term borrowing rates for won-denominated loans in
Korea. Where company-specific rates were not available, we used the
national average of the yields on three-year, won-denominated corporate
bonds, as reported by the Bank of Korea (BOK). This approach is
consistent with 19 CFR 351.505(a)(3)(ii) and our practice. See, e.g.,
CORE from Korea 2006 Decision Memorandum at ``Benchmark for Long Term
Loans.''
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), we used the interest rates of variable-rate lending
instruments issued during the year in which the government loans were
issued. Where such benchmark instruments were unavailable, we used
interest rates from debt instruments issued during the POR as such
rates also reflect a variable interest rate that would be in effect
during the POR. See 19 CFR 351.505(a)(5)(ii).
I. Programs Determined To Be Countervailable
A. 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
Tariff Act of 1930, as amended (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 Final Affirmative Countervailing
Duty Determination: Certain Cut-to-Length Carbon-Quality Steel Plate
from the Republic of Korea, 64 FR 73176, 73183 (December 29, 1999) (CTL
Plate Investigation). 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 or evidence of changed circumstances was
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. 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 free on board (f.o.b.) sales. See 19 CFR 351.525(b)(3).
On this basis, we preliminarily determine the net countervailable
subsidy to be 0.02 percent ad valorem for POSCO. Dongbu and HYSCO did
not use this program during the POR.
B. Research and Development Grants Under the Industrial Development Act
(IDA)
The GOK, through the Ministry of Knowledge Economy (MKE),\3\
provides research and development (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
Association of New Iron and Steel Technology (KANIST),\4\ 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 as well as 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
[[Page 46103]]
under the Notice of Industrial Basic Technology Development Plan. If
the R&D project is not successful, the company must repay the full
amount of the grants provided by the GOK.
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\3\ MKE was formerly known as the Ministry of Commerce,
Industry, and Energy (MOCIE).
\4\ Also known as Korea New Iron & Steel Technology Research
Association (KNISTRA).
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In the H Beams Investigation, the Department determined that
through KANIST, the Korean steel industry receives funding specific to
the steel industry. Therefore, given the nature of KANIST, the
Department found projects under KANIST to be specific. See Preliminary
Negative 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 the final results, 65 FR
69371 (July 3, 2000), and accompanying Issues and Decision Memorandum
at ``R&D Grants Under the Korea New Iron & Steel Technology Research
Association (KNISTRA)''). Further, we found that the grants constitute
a financial contribution under section 771(5)(D)(i) of the Act in the
form of a grant, and bestow 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 continue to
find 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.
HYSCO and POSCO were the only responding companies that benefitted
from this program during the POR. Both HYSCO and POSCO participated in
projects indirectly through KANIST. POSCO also participated indirectly
through the Korea Construction Equipment Research Association (KCERA).
Both companies claim that projects for which grants were received from
the government were not related to subject merchandise.
Upon review of the information submitted by HYSCO, we preliminarily
determine that certain grants pertain specifically to production of a
product that is not subject merchandise. See Memorandum to the File
titled ``HYSCO's R&D Grants Under the IDA'' (August 31, 2009) (HYSCO
Grants Memorandum), of which a public version is on file in the CRU. In
addition, based on our review of the information submitted by POSCO, we
preliminarily determine that certain grants pertain to non-subject
merchandise that involves a production process that is downstream from
the production process for subject merchandise. See Memorandum to the
File titled ``POSCO's R&D Grants Under the IDA'' (August 31, 2009)
(POSCO Grants Memorandum), of which a public version is on file in the
CRU. Therefore, consistent with 19 CFR 351.525(b)(5)(i) and our past
practice, we preliminarily determine that these grants are tied to non-
subject merchandise. Hence, we did not include these grants in our
benefit calculations.
HYSCO and POSCO, however, did report receiving certain grants
related to new technologies that are applicable to both inputs of
subject merchandise as well as subject merchandise. See HYSCO Grants
Memorandum and POSCO Grants Memorandum. Some of these R&D grants were
examined in previous reviews of this order and were found to provide
countervailable benefits for the same reasons. See Corrosion-Resistant
Carbon Steel Flat Products from the Republic of Korea: Final Results of
Countervailing Duty Administrative Review, 73 FR 2444 (January 15,
2008) (2005 CORE from Korea), and accompanying Issues and Decision
Memorandum at Comment 1 (2005 CORE from Korea Decision Memorandum); see
also CORE from Korea 2006 Decision Memorandum, at ``Research and
Development Grants Under the Industrial Development Act.'' In this
administrative review, there is no information on the record that
demonstrates that the R&D projects in question could not be used in the
production of subject merchandise or that this new technology is
limited to the development of non-subject merchandise. Therefore, we
find in these preliminary results, as in prior reviews, that the R&D
grants in question provide a countervailable benefit to HYSCO and POSCO
during the POR.
To determine the benefit from the grants that HYSCO and POSCO
received through KANIST, we calculated the GOK's contribution for each
R&D project that was apportioned to each company. See 19 CFR
351.504(a). Next, in accordance with 19 CFR 351.524(b)(2), we
determined whether to allocate the non-recurring benefit from the
grants over a 15-year AUL by dividing the GOK approved grant amount by
each company's total sales in the year of approval. Because the
approved amounts were less than 0.5 percent of each company's total
sales, we expensed the grants to the year(s) of receipt. Next, to
calculate the net subsidy rate, we divided the portion of the benefit
allocated to the POR by HYSCO's and POSCO's total f.o.b. sales for
2007, respectively. See 19 CFR 351.525(b)(3). On this basis, we
preliminarily determine net subsidy rates under this program to be 0.02
percent ad valorem for HYSCO and 0.01 percent ad valorem for POSCO.
With respect to POSCO's project with KCERA, we performed the grant
calculation applying the same methodology described above for the
grants received through KANIST. For the POR, we preliminarily determine
the net subsidy rate for the grant received through KCERA under this
program to be less than 0.005 percent ad valorem which, consistent with
the Department's practice, does not confer a measurable benefit and is
not included in the calculation of the net countervailable rate. See,
e.g., CORE from Korea 2006 Decision Memorandum, at ``Long-Term Lending
Provided by the KDB and Other GOK-Owned Institutions from 2002-2006.''
Consequently, we preliminarily determine that it is unnecessary for the
Department to make a finding with regard to the countervailability of
the R&D grants under IDA through KCERA.
C. R&D Grants Under the Promotion of Industrial Technology Innovation
Act
The GOK, through the MKE, provides R&D grants to promote a
company's productivity and industrial competitiveness using industrial
technology (IT) infrastructure under the Promotion of Industrial
Technology Innovation Act (PITIA), which was established in 2006. The
funding of an R&D project under the PITIA is shared by the company and
the GOK, with the government contributing up to 50 percent of the
project's costs. To be eligible to participate in this program, the
applicant must meet the qualifications set forth in the basic plan
issued by MKE and perform R&D as set forth in the Notice of IT
Innovation Network Organization Business. Applications are submitted to
the Korea E-Business Association. If a company's application is
approved, MKE and the company enter into an R&D contract and MKE
provides the grants. R&D grants under the PITIA are provided with
respect to specific projects, which are generally multi-year projects,
where the amount of funds to be received each year from the GOK is set
out in the original contract.
During the POR, HYSCO was the only responding company that
benefitted from this program. HYSCO reported that it led a consortium
of several companies in a project for IT network innovation and that
the project was unrelated to the production of subject merchandise.
In its response, the GOK provided a copy of the ``Notice for
Recruiting Participating Industries in IT Innovation Network
Organization Business for
[[Page 46104]]
2006.'' See GOK's November 25, 2008, Questionnaire Response, at Exhibit
G-15. The notice states that grants for IT new technology were limited
to certain industries, i.e., motor, steel, shipbuilding, textile,
distribution, and others. The notice further states that ``one
consortium from each industry applicable for applying'' for grants in
2006 would be selected. Id. The ``Application Form for IT Innovation
Network Organization Business'' also contains the eligibility
limitation stating that the ``application'' industry is ``one of
automobile, steel, fabric, paper, others.'' See GOK's November 25,
2008, Questionnaire Response, at Exhibit G-14. The GOK further reported
that during 2006, 13 consortia applied for benefits under the PITIA and
just four consortia received approval for financial assistance. See
GOK's February 25, 2009, Supplemental Questionnaire Response, at 3.
Because R&D grants under the PITIA were expressly limited to
certain industries in 2006, we preliminarily find that this program is
de jure specific within the meaning of section 771(5A)(D)(i) of the
Act. We further preliminarily find that grants provided under the PITIA
constitute a financial contribution and confer a benefit under sections
771(5)(D)(i) and 771(5)(E) of the Act, respectively.
With respect to HYSCO's statement that the R&D grants are unrelated
to the production of subject merchandise, we preliminarily find that
the information on the record demonstrates that the grants for IT
network innovation benefit the company's business processes and all of
its product lines and, therefore, the grants are not limited to non-
subject merchandise. See Memorandum to the File titled ``HYSCO's R&D
Grants Under the PITIA'' (August 31, 2009), of which a public version
is on file in the CRU. To determine the benefit from the grants that
HYSCO received under the PITIA, we first calculated the GOK's total
contribution to the project that was apportioned to HYSCO. Next, in
accordance with 19 CFR 351.524(b)(2), we determined whether to allocate
the non-recurring benefit from the grant over HYSCO's AUL by dividing
the total amount of the GOK's contribution by HYSCO's total sales in
the year the total grant amount was approved. Because the approved
amount was less than 0.5 percent of HYSCO's total sales, we expensed
the grants in the year of receipt. Next, to calculate the net subsidy
rate, we divided the portion of the benefit allocated to the POR by
HYSCO's total f.o.b. sales for 2007. See 19 CFR 351.525(b)(3). On this
basis, we preliminarily determine the net subsidy rate under this
program to be 0.02 percent ad valorem for HYSCO.
D. Short-Term Export Financing
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 that
manufacture 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
Final Affirmative Countervailing Duty Determinations and Final Negative
Critical Circumstances Determinations: Certain Steel Products From
Korea, 58 FR 37338, 37350 (July 9, 1993) (Steel Products From Korea);
see also Notice of 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 ``Short-Term Export Financing.'' No new information or
evidence of changed circumstances was 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 export financing
constitutes a financial contribution in the form of a loan within the
meaning of section 771(5)(D)(i) of the Act and confers a benefit within
the meaning of section 771(5)(E)(ii) of the Act to the extent that the
amount of interest the respondents paid for export financing under this
program was less than the amount of interest that would have been paid
on a comparable short-term commercial loan. See discussion above in the
``Subsidies Valuation Information'' section with respect to short-term
loan benchmark interest rates. In addition, we preliminarily determine
that the program is specific, pursuant to section 771(5A)(A) of the
Act, because receipt of the financing is contingent upon exporting.
Dongbu, HYSCO, and POCOS, POSCO's affiliate, 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 to be 0.01 percent ad valorem
for Dongbu. In the case of HYSCO and POSCO, we find the net subsidy
rate to be less than 0.005 percent ad valorem, which consistent with
the Department's practice, does not confer a measurable benefit and is
not included in the calculation of the net countervailable rate. See,
e.g., CORE from Korea 2006 Decision Memorandum at ``GOK's Direction of
Credit.''
E. Reduction in Taxes for Operation in Regional and National Industrial
Complexes
Under Article 46 of the Industrial Cluster Development and Factory
Establishment Act (Industrial Cluster Act), a state or local government
may provide tax exemptions as prescribed by the Restriction of Special
Taxation Act. In accordance with this authority, Article 276 of the
Local Tax Act provides that an entity that acquires real estate in a
designated industrial complex for the purpose of constructing new
buildings or enlarging existing facilities is exempt from the
acquisition and registration tax. In addition, the entity is exempt
from 50 percent of the property tax on the real estate (i.e., the land,
buildings, or facilities constructed or expanded) for five years from
the date the tax liability becomes effective. The exemption is
increased to 100 percent of the relevant land, buildings, or facilities
that are located in an industrial complex outside of the Seoul
metropolitan area. The GOK established the tax exemption program under
Article 276 in December 1994, to provide incentives for companies to
relocate from populated areas in the Seoul metropolitan region to
industrial sites in less populated parts of the country. The program is
administered by the local tax officials of the county where the
industrial complex is located.
[[Page 46105]]
During the POR, pursuant to Article 276 of the Local Tax Act, HYSCO
received exemptions from the acquisition tax, registration tax, and
property tax based on the location of its manufacturing facilities,
Suncheon Works, in the Yulchon Industrial Complex, a government-
sponsored industrial complex designated under the Industrial Cluster
Act. In addition, HYSCO received an exemption from the local education
tax during the POR. The local education tax is levied at 20 percent of
the property tax. The property tax exemption, therefore, results in an
exemption of the local education tax. Dongbu and POSCO did not receive
tax exemptions under Article 276 during the POR.
In the CFS Paper Investigation, the Department determined that the
tax exemptions under Article 276 of the Local Tax Act are
countervailable subsidies. See CFS Paper Decision Memorandum at
``Reduction in Taxes for Operation in Regional and National Industrial
Complexes.'' No new information or evidence of changed circumstances
from HYSCO or the GOK was presented in this review to warrant a
reconsideration of the countervailability of this program. We,
therefore, continue to find this program countervailable. Specifically,
we preliminarily find that the tax exemptions that HYSCO received
constitute a financial contribution and confer a benefit under sections
771(5)(D)(ii) and 771(5)(E) of the Act, respectively. We further
preliminarily find that the tax exemptions are regionally specific
under section 771(5A)(D)(iv) of the Act because the exemptions are
limited to an enterprise or industry located within designated
geographical regions in Korea.
To calculate the benefit, we divided HYSCO's total tax exemptions
by the company's total f.o.b. sales value for 2007. On this basis, we
preliminarily determine the net subsidy rate to be less than 0.005
percent ad valorem, which consistent with the Department's practice,
does not confer a measurable benefit and is not included in the
calculation of the net countervailable rate. See, e.g., CORE from Korea
2006 Decision Memorandum at ``GOK's Direction of Credit.''
F. Other Subsidies Related to Operations at Asan Bay: Provision of Land
and Exemption of Port Fees Under the Harbor Act
1. Provision of Land
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, e.g., Cold-Rolled Decision
Memorandum, at ``Provision of Land at Asan Bay.'' See also Preliminary
Results of Countervailing Duty Administrative Review: Corrosion-
Resistant Carbon Steel Flat Products from the Republic of Korea, 71 FR
53413, 53418 (September 11, 2006) (Preliminary Results of CORE from
Korea 2004), unchanged in Final Results of Countervailing Duty
Administrative Review: Corrosion-Resistant Carbon Steel Flat Products
from the Republic of Korea, 72 FR 119 (January 3, 2007) (CORE from
Korea 2004). 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. See Cold-Rolled Decision Memorandum, at ``Provision of Land
at Asan Bay.'' 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 and HYSCO 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 and conferred benefits under sections
771(5)(D)(i) and 771(5)(E) of the Act, respectively. Id. No new
information or evidence of changed circumstances from Dongbu or the GOK
was presented in this review to warrant a reconsideration of the
countervailability of this program. Therefore, we continue to find this
program countervailable in this case.
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 described 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 0.18 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. Id. In
the Cold-Rolled Investigation, the Department found the exemption from
the fees to be a countervailable subsidy. No new evidence or
information of changed circumstances was presented in this review to
warrant any reconsideration of the countervailability
[[Page 46106]]
of this program. Consistent with the Cold-Rolled Investigation, we
preliminarily find that the exemption of port fees constitutes a
financial contribution in the form of revenue foregone and confers a
benefit within the meaning of sections 771(5)(D)(ii) and 771(5)(E) of
the Act, respectively. Further, we preliminarily find that the program
is specific under section 771(5A)(D)(iii)(I) of the Act because the
excessive exemption period of 70 years is limited to Dongbu. Thus, for
purposes of these preliminary results, we continue to find this aspect
of the program countervailable.
In the Cold-Rolled Investigation, the Department determined that
the benefit from the program is equal to the average yearly amount of
harbor fees 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.
II. Programs Preliminarily Determined Not to Confer a Benefit During
the POR
A. Energy Savings Fund Program
The Energy Savings Fund (ESF) program provides financing for
investment in projects and equipment that use energy efficiently. In
the DRAMS Investigation, the Department analyzed ESF loans separately
from the direction of credit allegation and found that the loans were
not specific within the meaning of section 771(5A) of the Act during
the period of investigation (POI), which was January 1, 2001, through
June 30, 2002. See Final Affirmative Countervailing Duty Determination:
Dynamic Random Access Memory Semiconductors from the Republic of Korea,
68 FR 37122 (June 23, 2003) (DRAMS Investigation), and accompanying
Issues and Decision Memorandum (DRAMS Investigation Decision
Memorandum) at ``ESF Program'' and ``Comment 24.'' In the instant
review, HYSCO reported that, during the POR, the company had
outstanding balances for ESF loans that were received in 2000. The
Department's specificity finding in the DRAMS Investigation did not
cover the year 2000. See Preliminary Affirmative Countervailing Duty
Determination: Dynamic Random Access Memory Semiconductors from the
Republic of Korea, 68 FR 16766, 16775 (April 7, 2003) (unchanged in
final results, 68 FR 37122 (June 23, 2003)). However, because there is
no measurable benefit for this program, we preliminarily determine that
it is unnecessary for the Department to make a determination on the
countervailability of ESF loans that were issued in 2000 as explained
below.
We performed the loan benefit calculation applying the long-term
benchmark interest rates described above in the ``Subsidies Valuation
Information'' section. For the POR, we preliminarily determine the net
subsidy rate under the ESF loan program to be less than 0.005 percent
ad valorem, which, consistent with the Department's practice, does not
confer a measurable benefit and is not included in the calculation of
the net countervailable rate. See, e.g., CORE from Korea 2006 Decision
Memorandum at ``GOK's Direction of Credit.'' This program was not used
by Dongbu or POSCO.
B. R&D Grants Under the Act on the Promotion of the Development of
Alternative Energy
During the POR, HYSCO received energy-related grants under the Act
on the Promotion of the Development of Alternative Energy (Alternative
Energy Act) for an R&D project in which the company participated with
other firms.\5\ HYSCO reported that R&D grants under the Alternative
Energy Act are provided with respect to specific projects, which are
generally multi-year projects where the amount of funds to be provided
by the GOK is set out in the project contract. The cost of R&D projects
under this program is shared by the participating companies and the
GOK.
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\5\ In the initial questionnaire responses, both HYSCO and the
GOK reported that HYSCO received these grants related to energy use
under the Energy Use Rationalization Act. See HYSCO's November 24,
2008 Questionnaire Response, at 17; and GOK's November 25, 2008
Questionnaire Response, at Exhibit G-8. In their supplemental
questionnaire responses, HYSCO and GOK corrected their earlier
statements and reported that the energy grants were provided under
the Act on the Promotion of Development of Alternative Energy. See
HYSCO's February 26, 2009 Supplemental Questionnaire Response, at
Exhibit G-7 and Exhibit G-16; and GOK's February 25, 2009
Supplemental Questionnaire Response, at 1.
---------------------------------------------------------------------------
We calculated the GOK's contribution to the project that was
apportioned to HYSCO and then, in accordance with 19 CFR 351.524(b)(2),
determined whether to allocate the non-recurring benefit from the grant
over HYSCO's AUL by dividing the total amount of the GOK's contribution
by HYSCO's total sales in the year the grants were approved. Because
the amount of the grants is less than 0.5 percent of the relevant
sales, we expensed the benefits from the grants to the year of receipt.
We preliminarily determine the subsidy rate under this program to be
less than 0.005 percent ad valorem, which, consistent with the
Department's practice, does not confer a measurable benefit and is not
included in the calculation of the net countervailable rate. See, e.g.,
CORE from Korea 2006 Decision Memorandum at ``GOK's Direction of
Credit.'' Consequently, we preliminarily determine that it is
unnecessary for the Department to make a finding as to the
countervailability of this program in this review. If a future
administrative review of this proceeding is requested, we will further
examine grants provided under the Alternative Energy Act.
C. Export Loans by Commercial Banks Under KEXIM's Trade Bill
Rediscounting Program
The GOK enacted KEXIM's Trade Bill Rediscount program in July 1998.
From July 1998 to May 2004, KEXIM rediscounted the actual D/A and
export letter of credit (L/C) (e.g., export usance loans) financing of
exporters that had first been discounted by commercial banks. However,
after May 18, 2004, KEXIM switched to a rediscount ceiling method with
Korean commercial banks. Under the ceiling method, KEXIM calculates the
rediscount ceiling for participating commercial banks on a quarterly
basis based on the total D/A or export L/C financing provided by the
banks during the previous period, the banks' projected rediscounts, and
the banks' credit rating. Under the trade bill rediscounting program,
exporters first discount their D/As and export L/Cs with banks that are
participating in the program. The banks, in turn, discount promissory
notes with KEXIM. Dongbu had D/A loans outstanding under the program
during the POR from banks that participated in the KEXIM rediscount
program. We preliminarily determine that HYSCO and POSCO did not use
the program during the POR.
The Department found this program countervailable in the CFS Paper
Investigation. See CFS Paper Decision Memorandum at ``Export Loans by
Commercial Banks Under KEXIM's Trade Bill Rediscounting Program.'' For
purposes of these preliminary results, we find that no information was
submitted in this review that warrants reconsideration of our finding
in the CFS Paper Investigation regarding this program.
We also find that companies do not know whether commercial banks
subsequently rediscount their D/A loans with KEXIM nor does KEXIM link
rediscounts to individual loans or exporters. Further, we find that
KEXIM's rediscount ceiling represents only a portion of participating
banks' total discounts on export loans during
[[Page 46107]]
the POR. Therefore, we are pro-rating benefits under this program by
the percentage of loans each bank rediscounted with KEXIM under the
program.
To determine whether a benefit was conferred, we first compared the
amount Dongbu paid on its D/A loans outstanding during the POR to the
amount it would pay on comparable commercial short-term financing that
it could obtain on the market. See 19 CFR 351.505(a). For our
benchmark, we have used Dongbu's weighted-average interest rate on its
foreign currency, commercial short-term loans outstanding during the
POR. See 19 CFR 351.505(a)(2)(iv). Where unavailable, in accordance
with 19 CFR 351.505(a)(3)(ii), we have used the short-term lending rate
for the POR, as published in the IMF's International Financial
Statistics Yearbook. Because loans under this program are discounted
(i.e., interest is paid up-front at the time the loans are received),
the effective rate paid by Dongbu on its D/A loans is a discounted
rate. Therefore, for benchmark interest rates that were not already
discounted, it was necessary to derive a discounted benchmark interest
rate from Dongbu's company-specific weighted-average interest rates for
short-term commercial loans. For Dongbu, we preliminarily determine
that there is no benefit during the POR because the benchmark interest
rate is lower than the interest rates that the company actually paid.
D. D/A Loans Issued by the Korean Development Bank and Other
Government-Owned Banks
Of the D/A loans rediscounted under KEXIM's trade bill rediscount
program, Dongbu received D/A loans from such government-owned banks as
the Korean Development Bank (KDB). In the CFS Paper Investigation, we
found this program countervailable. See CFS Paper Decision Memorandum
at ``D/A Loans Issued by the KDB and Other Government-Owned Banks.''
For purposes of these preliminary results, we find that no information
was submitted in this review that warrants reconsideration of our
finding in the CFS Paper Investigation regarding this program.
To calculate the benefit, we compared the amount of interest paid
on the government loan to the amount of interest that would have been
paid on comparable commercial short-term financing that could have been
obtained on the market. See 19 CFR 351.505(a). For our benchmark, we
have used the Dongbu's weighted-average interest rate on its commercial
short-term loans outstanding during the POR. See 19 CFR
351.505(a)(2)(iv). Where unavailable, in accordance with 19 CFR
351.505(a)(3)(ii), we have used the short-term lending rate for the
POR, as published in the IMF's International Financial Statistics
Yearbook. Because loans under this program are discounted (i.e.,
interest is paid up-front at the time the loans are received), the
effective rate paid by Dongbu on its D/A loans is a discounted rate.
Therefore, it was necessary to derive a discounted benchmark interest
rate from Dongbu's company-specific weighted-average interest rates for
short-term commercial loans, pursuant to 19 CFR 351.505(a)(2)(iv). See
the ``Subsidies Valuation Information'' section above at ``Benchmarks
for Short-Term Financing.'' For Dongbu, we preliminarily determine that
there is no benefit during the POR because the benchmark interest rate
is lower than the interest rates that the company actually paid.
We preliminarily determine that POSCO and HYSCO did not use this
program during the POR.
E. GOK's Direction of Credit for Loans Issued Prior to 2002
In CORE from Korea 2006, the Department determined the GOK ended
its practice of directing credit to the steel industry as of 2002.
However, during 2007, respondents had outstanding loans that were
provided prior to 2002.
In accordance with 19 CFR 351.505(c)(2) and (4), we calculated the
benefit for each fixed- and variable-rate loan received prior to 2002
as 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.
We then summed the benefits from each company's long-term fixed-rate
and variable-rate loans.
To calculate the net subsidy rate, we divided the companies' total
benefits by 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.\6\ For POSCO,
Dongbu, and HYSCO, we preliminarily determine the net subsidy rate
under the direction of credit program to be less than 0.005 percent ad
valorem, which pursuant to the Department's practice we find to be not
measurable. See, e.g., CORE from Korea 2006 Decision Memorandum at
``GOK's Direction of Credit.'' Because any benefits stemming from
respondents' outstanding loans issued prior to 2002 are not measurable
during the POR, we preliminarily determine that no benefit was received
under this program.
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\6\ 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 or HYSCO.
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F. Overseas Resource Development Program
The GOK enacted the Overseas Resource Development (ORD) Business
Act in order to establish the foundation for securing the long-term
supply of essential energy and major material minerals, which are
mostly imported because of scarce domestic resources. Pursuant to
Article 11 of this Act, the Ministry of Knowledge Economy (MKE)
annually announces its budget and the eligibility criteria to obtain a
loan from MKE. Any company that meets the eligibility criteria may
apply for a loan to MKE. The loan evaluation committee evaluates the
applications, selects the recipients and gets the approval from the
minister of MKE. For projects that are related to petroleum and natural
gas, the Korea National Oil Corporation (KNOC) lends the funds to the
company for foreign resources development. An approved company enters
into a borrowing agreement with KNOC for the development of the
selected resource. Two types of loans are provided under this program:
``General loans'' and ``success-contingent loans.'' For a success-
contingent loan, the repayment obligation is subject to the results of
the development project. In the event that the project fails, the
company will be exempted from all or a portion of the loan repayment
obligation. However, if the project succeeds, a portion of the project
income is payable to KNOC.
During the POR, POSCO reported in its 2006-2007 audited non-
consolidated financial statements that it had received a success-
contingent loan from KNOC. See POSCO's November 24, 2008 Questionnaire
Response, at Exhibit 7. Because the repayment of this liability is
contingent on subsequent events, the Department would treat the balance
on this unpaid liability as a contingent-liability interest-free loan,
pursuant to 19 CFR 351.505(d). We performed the loan benefit
calculation applying the
[[Page 46108]]
long-term benchmark interest rates described above in the ``Subsidies
Valuation Information'' section. For the POR, we preliminarily
determine that the net subsidy rate under the ORD loan program is less
than 0.005 percent ad valorem. Where the countervailable subsidy rate
for a program is less than 0.005 percent, the Department considers the
net subsidy rate to be not measurable and excludes the net subsidy rate
from the total CVD rate. See, e.g., CORE from Korea 2006 Decision
Memorandum at ``GOK's Direction of Credit.'' Hence, we preliminarily
find that this loan does not confer a measurable benefit to POSCO.
Accordingly, it is unnecessary to make a finding as to the
countervailability of this program for this POR. We will include an
examination of this program in future administrative reviews.
Dongbu and HYSCO did not use this program during the POR.
III. Programs Preliminarily Determined To Be Not Countervailable
A. GOK's Direction of Credit for Loans Issued After 2001
In CORE from Korea 2006, the Department determined that the GOK no
longer has a systemic practice of directing credit within the Korean
financial sector and that directed credit within the Korean steel
industry ended as of 2002. See CORE from Korea 2006 Decision Memorandum
at ``GOK's Direction of Credit.'' As there has been no information
submitted in this review to warrant reconsideration of our finding in
CORE from Korea 2006, we continue to find that there is no directed
credit to the Korean steel industry from 2002.\7\ As in CORE from Korea
2006, our decision is restricted to the post-2001 period.\8\ Because
this program was found not countervailable in CORE from Korea 2006, we
will no longer review this program in any further administrative review
absent evidence of changed circumstances or new information.
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\7\ See, e.g., Preliminary Results of Countervailing Duty
Administrative Review: Corrosion-Resistant Carbon Steel Flat
Products from France, 71 FR 52770, 52772 (September 7, 2006)
(unchanged in final results, Corrosion-Resistant Carbon Steel Flat
Products From France: Final Results of Countervailing Duty
Administrative Review, 71 FR 68549 (November 26, 2006)): ``If a
program is determined to be non-countervailable in a previous
proceeding, the Department will not normally reconsider such a
determination in future proceedings absent evidence potentially
contradicting that determination. We preliminarily find that there
is no information on the record of the instant case, including this
segment of the proceeding, that warrants a change to our earlier
finding that this program is not specific and, therefore, not
countervailable.''
\8\ Our determination in this regard does not change the
decision that was made by the Department in DRAMS Investigation that
there may still be instances in which the GOK may attempt to
influence bank decisions on an ad hoc basis such as the government-
led financial restructuring of Hynix. See, e.g, DRAMS Investigation
and DRAMS Investigation Decision Memorandum at ``Direction of Credit
and Other Financial Assistance.''
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B. Long-Term Loans From the KDB Issued in Years 2002 Through 2007
HYSCO, Dongbu, and POSCO had long-term loans that were issued by
the KDB, a government policy bank, in years 2002 through 2007 on which
they made interest payments during the POR. Therefore, in these
preliminary results, we have analyzed whether the long-term KDB loans
are countervailable. First, we analyzed whether the KDB issued long-
term loans to respondents and/or the Korean steel industry in a manner
that was specific within the meaning of section 771(5A) of the Act.
The Department has previously determined that long-term loans
issued by the KDB during the period 2002 through 2006 are not de jure
specific within the meaning of sections 771(5A)(D)(i) and (ii) of the
Act because: (1) They are not based on exportation; (2) they are not
contingent on the use of domestic goods over imported goods; and (3)
the legislation and/or regulations do not expressly limit access to the
subsidy to an enterprise or industry, or groups thereof, as a matter of
law. See CFS Paper Decision Memorandum at ``Long-Term Lending Provided
by the KDB and Other GOK-Owned Institutions.'' The Department's finding
in the CFS Paper Investigation that long-term loans issued by the KDB
during the period 2002 through 2006 are not de jure specific was not
limited to a particular industry or industries. Id. Therefore, in
regard to this issue, we find that the Department's determination in
the CFS Paper Investigation is applicable to the instant review.
Further, concerning this program, there is no information on the record
of the instant review that warrants reconsideration of the Department's
prior finding of the absence of de jure specificity during the 2002
through 2006 period. On this basis, we preliminarily determine that the
KDB's issuance of long-term loans during the 2002 through 2007 period
are not de jure specific within the meaning of sections 771(5A)(D)(i)
and (ii) of the Act.
Where the Department finds no de jure specificity, section
771(5A)(D)(iii) of the Act also directs the Department to examine
whether the benefits provided under the program are de facto specific--
that is, whether the benefits are specific as a matter of fact.
Subparagraphs (I) through (IV) of section 771(5A)(D)(iii) of the Act
stipulate that a program is de facto specific if one or more of the
following factors exist:
(I) The actual recipients of the subsidy whether considered on
an enterprise or industry basis are limited in number.
(II) An enterprise or industry is a predominant user of the
subsidy.
(III) An enterprise or industry receives a disproportionately
large amount of the subsidy.
(IV) The manner in which the authority providing the subsidy has
exercised discretion in the decision to grant the subsidy indicates
that an enterprise or industry is favored over others.
In response to the Department's request, the GOK provided the
Department with a breakdown of the issuance of long-term lending by the
KDB, by industry, for the years 2001 through 2007. See GOK's April 3,
2009 Questionnaire Response, at Exhibit A-7. In conducting our de facto
specificity analysis, we identified all long-term loans issued by the
KDB to POSCO, Dongbu, and HYSCO on which interest payments were made
during the POR. We then analyzed the distribution of all long-term
loans issued by the KDB across industry groups in the year in which
HYSCO's outstanding loans were issued as well as the two preceding
years.\9\ Specifically, we compared the amount of long-term KDB loans
issued to the ``Base Metal Industry'' (e.g., the steel industry) to the
amount of long-term KDB loans issued to other industries.
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\9\ The GOK was able to provide information concerning the
amount of loans the KDB issued to each industry during the period
2001 through 2007. Therefore, when analyzing whether loans issued in
2002 were specific, we were only able to analyze lending patterns
during the period 2001 and 2002.
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Based on our analysis of the long-term KDB lending data coupled
with the KDB lending data reported by POSCO, Dongbu, and HYSCO in their
respective questionnaire responses, we preliminarily determine that
respondent firms, as individual enterprises, did not receive KDB loans
in a manner that was de facto specific as described under sections
771(5A)(D)(iii)(I) through (III) of the Act. Further, based on these
comparisons, we preliminarily determine that the KDB did not issue
loans to the steel industry in a manner that was de facto specific as
described under sections 771(5A)(D)(iii)(II) and (III) of the Act.
Lastly, we preliminarily determine that there is no evidence on the
record of the instant review indicating that the GOK exercised
[[Page 46109]]
discretion in the decision to issue long-term KDB loans which indicates
that the steel industry was favored over other industries within the
meaning of section 771(5A)(D)(iii)(IV) of the Act. For further
information, see Memorandum to the File titled ``Analysis of KDB
Lending Data'' (August 31, 2009), which is a public document on file in
the CRU.
On this basis, we preliminarily determine that the long-term loans
that POSCO, Dongbu, and HYSCO received from the KDB during the years
2002 through 2007 are not specific within the meaning of section
771(5A) of the Act, and, therefore, we preliminarily determine that
they are not countervailable.
C. Restriction of Special Taxation Act (RSTA) Article 94: Equipment
Investment To Promote Worker's Welfare
Under Article 94 of the Restriction of Special Taxation Act and its
enforcement decree, a company that invests in facilities to promote
employees' welfare may deduct an amount equivalent to 7 percent of the
acquisition value of the facilities from its income tax. See GOK's
November 25, 2008, Questionnaire Response, at Exhibit B-1. In the Cold-
Rolled Investigation, the Department determined that the tax credit was
only available for companies using domestic machines and equipment and
was therefore countervailable. See Cold-Rolled Decision Memorandum at
``Investment Tax Credits.'' In this administrative review, POSCO
reported that it earned tax credits under RSTA Article 94 in fiscal
year 2006 and used the tax credit on the tax return filed during the
POR.
In its November 25, 2008, Questionnaire Response, the GOK explained
that the eligibility requirement for home-produced machines and
materials in the Tax Reduction and Control Act (TERCL) Article 88 (the
predecessor program to RSTA Article 94) was deleted through amendment
by Act No. 5534 of April 10, 1998 in compliance with eliminating
prohibited subsidies under the World Trade Organization (WTO). See
GOK's November 25, 2009, Questionnaire Response, at Exhibit B-5. The
GOK further explained that RSTA Article 94 in its current form provides
a tax credit of 7 percent, has no domestic content requirement, and the
program expires in 2009. See GOK's November 25, 2008, Questionnaire
Response, at 11. The GOK affirmed that POSCO claimed its tax credit
pursuant to the January 1, 2004 version of RSTA Article 94, which was
in effect from January 1, 2004, to December 31, 2006. See GOK's May 27,
2009, Questionnaire Response, at 1. Therefore, we preliminarily
determine that POSCO did not receive a countervailable benefit under
RSTA Article 94 because the program is no longer an import substitution
program. Furthermore, this program is available and used by all
companies and industries in Korea that invest in facilities that
promote employee welfare, and thus, is not specific under 771(5A)(D) of
the Act.
IV. Programs Preliminarily Determined To Be Not Used
Reserve for Research and Manpower Development Fund
Under RSTA Article 9 (TERCL Article 8);
RSTA Article 11: Tax Credit for Investment in Equipment
to Development Technology and Manpower (TERCL Article 10);
Reserve for Export Loss Under TERCL Article 16;
Reserve for Overseas Market Development Under TERCL
Article 17;
Reserve for Export Loss Under TERCL Article 22;
Exemption of Corporation Tax on Dividend Income from
Overseas Resources; Development Investment Under TERCL Article 24;
Tax Credits for Temporary Investments Under TERCL
Article 27;
Social Indirect Capital Investment Reserve Funds Under
TERCL Article 28;
Energy-Savings Facilities Investment Reserve Funds
Under TERCL Article 29;
Reserve for Investment (Special Cases of Tax for
Balanced Development Among Areas Under TERCL Articles 41-45);
Tax Credits for Specific Investments Under TERCL
Article 71;
Emergency Load Reduction Program;
Electricity Discounts Under the Requested Loan
Adjustment Program;
Electricity Discounts Under the Emergency Load
Reductions Program;
Export Industry Facility Loans and Specialty Facility
Loans;
Local Tax Exemption on Land Outside of a Metropolitan
Area;
Short-Term Trade Financing Under the Aggregate Credit
Ceiling Loan Program Administered by the Bank of Korea;
Industrial Base Fund;
Excessive Duty Drawback;
Private Capital Inducement Act;
Scrap Reserve Fund;
Special Depreciation of Assets on Foreign Exchange
Earnings;
Export Insurance Rates Provided by the Korean Export
Insurance Corporation;
Loans from the National Agricultural Cooperation
Federation;
Tax Incentives from 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 producer/exporter subject to this
administrative review. For the period January 1, 2007, through December
31, 2007, we preliminarily determine the net subsidy rate for Dongbu to
be 0.21 percent ad valorem, 0.04 percent ad valorem for HYSCO, and 0.01
percent ad valorem for POSCO, all of which are de minimis rates. 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 countervailable duties all
shipments of subject merchandise produced by Dongbu, HYSCO, and POSCO,
entered, or withdrawn from warehouse, for consumption from January 1,
2007 through December 31, 2007. The Department will also instruct CBP
not to collect cash deposits of estimated countervailing duties on
shipments of the subject merchandise produced by Dongbu, HYSCO, and
POSCO, 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
[[Page 46110]]
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.
Pursuant to 19 CFR 351.305(b)(4), 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)(i), are due. The Department will publish the final results
of this administrative review, including the results of its analysis of
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, 2009.
Ronald K. Lorentzen,
Acting Assistant Secretary for Import Administration.
[FR Doc. E9-21614 Filed 9-4-09; 8:45 am]
BILLING CODE 3510-DS-P