[Congressional Record Volume 147, Number 130 (Tuesday, October 2, 2001)]
[Extensions of Remarks]
[Pages E1760-E1761]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


                  SECRETARY DON EVANS REGARDING KAMCO

                                 ______
                                 

                        HON. STEVE C. LaTOURETTE

                                of ohio

                    in the house of representatives

                        Tuesday, October 2, 2001

  Mr. LaTOURETTE. Mr. Speaker, I was heartened by the response that I 
received from the Honorable Donald Evans, Secretary of the U.S. 
Department of Commerce, regarding the Korean Asset Management 
Corporation (KAMCO) and its relationship with Dongkuk Steel Mills of 
South Korea. Secretary Evans' statement is indicative of a genuine 
commitment on the part of the Administration to ensure that a fair and 
equitable environment is prevalent for American steelworkers. I look 
forward to working with Secretary Evans in the near future to help 
safeguard and protect our domestic steel industry.

                                         The Secretary of Commerce
                                  Washington, DC, August 17, 2001.
     His Excellency Chang, Che Shik,
     Minister of Commerce, industry, and Energy of the Republic of 
         Korea, Seoul.
       Dear Mr. Minister: I enjoyed meeting President Kim and 
     Minister Hwang at the CBCD Ministerial earlier this year. I 
     felt we had good meetings and very productive discussions, 
     and I look forward to continuing those discussions with you.
       One of the first issues I would like to discuss regards the 
     upcoming September auction of Hanbo Iron and Steel by the 
     Korea Assett Management Corporation (KAMCO). As you know, the 
     United States has long term concerned about financial support 
     for Hanbo from the Government of Korea. To put this issue in 
     its proper context, in a 1998 exchange of letters with our 
     government, the Korean Government stated that the sale of 
     Hanbo would take place under a transparent process following 
     international customs and practices. There were also 
     assurances that Hanbo's creditors were committed to selling 
     Hanbo through international competitive bidding that would 
     ``provide equal opportunities for all potential purchasers 
     and that the market will dictate the terms of the assets 
     sales and disposition.'' In addition, the Korean Government 
     has assured the United States that POSCO would not bid on 
     Hanbo and that the Korean Government would not provide 
     financial support for the purchase of Hanbo.
       I am encouraged by KAMCO's commitment to auction the 
     company, in whole or in part, as well as its refusal to enter 
     into private, non-transparent negotiations with companies 
     before the open bidding process has begun. As KAMCO prepare 
     to complete the sale of Hanbo, I would like to emphasize that 
     it is important that the auction be conducted in the most 
     open and transparent manner possible.
       Toward this end, I believe it is imperative that (1) the 
     Korean Government only accept market-based bids, from 
     financially sound firms; (2) financing from Korean 
     Government-owned or controlled banks not be used to secure 
     any sale; and (3) the bid selection process be based on 
     commercial, not political factors. I feel strongly that by 
     implementing these guidelines the Korean Government will 
     fulfill its previous assurances that Hanbo will not receive 
     any further government support and will be sold through a 
     market-based process.
       I appreciate your concern and continued cooperation in 
     ensuring that the sale of Hanbo is completed as efficiently 
     and expeditiously as possible. I look forward to working with 
     you in the future.
           Warm regards,

                                              Donald L. Evans.

                                  ____
                                  

                                                    July 10, 2001.
     Hon. Donald Evans,
     Secretary, U.S. Department of Commerce, Washington, DC.
       Dear Secretary Evans: Both domestic and foreign steelmakers 
     generally acknowledge the worldwide excess production 
     capacity has seriously harmed U.S. steelmakers. There may be 
     differences in various studies about how much excess capacity 
     exists, but all involved seem to agree that much of the 
     excess has been caused by market distorting subsidies and 
     that these should be stopped.
       Dongkuk Steel Mills of South Korea is an excellent example 
     of a financially weak company that has used political muscle 
     to get government loans at subsidized interest rates to 
     survive and expand. During the last three years Dongkuk 
     earnings have failed to equal its interest expense. This 
     should be measured against a benchmark articulated by 
     McKinsey & Co., a highly respected international consulting 
     company, which provides that a company with less than two 
     times interest coverage is likely to fail. Generally, even 
     ``junk'' quality coverage ratio, Dongkuk has apparently just 
     been granted an $80 million credit facility by Korea 
     Development Bank (KDB), an agency of the Korean government 
     which is funded indirectly

[[Page E1761]]

     by the IMF. The loan is at an interest rate well below what 
     the company could get in the normal course of business. We 
     have been critical in the past of Korean government loans of 
     this type which have been used to build additional steel 
     capacity and have indirectly come from IMF funds.
       By all measures, Dongkuk is the weakest of the (non-
     bankrupt) steel mills in Korea and should not have been 
     eligible for the KDB loan due to its size (larger than 
     allowed) and poor credit standing. It has arranged for 
     stories in the Korean press claiming that it has been 
     profitable in 2001. However, its financial filings with the 
     Korean government Financial Supervisory Service shows a large 
     loss. Dongkuk has also been found guilty of dumping both 
     steel plate and rebars in the U.S. market. It appears that 
     the company has dumped its products in the U.S. to generate 
     high gross sales numbers to support its campaign for a 
     government subsidy to help bail out an unprofitable company, 
     even though these sales were unprofitable.
       Dongkuk's public campaign has been extended to the U.S. 
     where a recent delegation of Korean steel industry leaders 
     that came to the U.S. to lobby various trade officials was 
     composed of nearly only officials of Dongkuk and its 
     subsidiary, Union Steel.
       I am writing to request that your office initiate an 
     investigation into Dongkuk's financial arrangements, 
     including its use of IMF funds through the Korean Development 
     Bank to provide subsidies to the Korean steel industry. 
     Please also advise us whether these arrangements violate any 
     of the U.S. trade laws and please also take such actions as 
     they may be appropriate to ensure that Dongkuk is barred from 
     acquiring any additional steel assets, either directly or 
     indirectly, in Korea as long as it continues to obtain 
     subsidized funds from the Korean Development Bank.
       I want to thank you in advance for your kind consideration 
     of my request and I look forward to hearing from you in the 
     near future. I remain
           Very Truly Yours,
                                             Steven C. LaTourette,
                                               Member of Congress.

     

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