[Federal Register Volume 63, Number 172 (Friday, September 4, 1998)]
[Notices]
[Pages 47253-47262]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-23913]
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DEPARTMENT OF COMMERCE
International Trade Administration
[C-580-832]
Preliminary Negative Countervailing Duty Determination and
Alignment of Final Countervailing Duty Determination With Final
Antidumping Duty Determination: Stainless Steel Plate in Coils From the
Republic of Korea
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
EFFECTIVE DATE: September 4, 1998.
FOR FURTHER INFORMATION CONTACT: Christopher Cassel or Kristen Johnson,
Office of CVD/AD Enforcement VI, Import Administration, U.S. Department
of Commerce, Room 4012, 14th Street and Constitution Avenue, N.W.,
Washington, D.C. 20230; telephone (202) 482-2786.
Preliminary Determination
The Department of Commerce (the Department) preliminarily
determines that countervailable subsidies are not being provided to
producers and exporters of stainless steel plate in coils from the
Republic of Korea.
Petitioners
The petition in this investigation was filed by Allegheny Ludlum
Corporation, Armco Inc., J&L Specialty Steel, Inc., Lukens Inc., United
Steel Workers of America, AFL-CIO/CLC, Butler Armco Independent Union,
and Zanesville Armco Independent Organization, Inc. (the petitioners).
Case History
Since the publication of the notice of initiation in the Federal
Register (see Initiation of Countervailing Duty Investigations:
Stainless Steel Plate in Coils from Belgium, Italy, the Republic of
Korea, and the Republic of South Africa, 63 FR 23272 (April 28, 1998)
(Initiation Notice)), the following events have occurred. On May 4,
1998, we issued countervailing duty questionnaires to the Government of
Korea (GOK), and the producers/exporters of the subject merchandise. On
June 1, 1998, we postponed the preliminary determination of this
investigation until no later than August 28, 1998. See Notice of
Postponement of Time Limit for Countervailing Duty Investigations:
Stainless Steel Plate in Coils from Belgium, Italy, the Republic of
Korea, and the Republic of South Africa, 63 FR 31201 (June 8, 1998).
We received responses to our initial questionnaires from the GOK
and Pohang Iron & Steel Company, Ltd. (POSCO), the producer of the
subject merchandise, on July 1, 1998. In addition, we also received
responses from five trading companies which are involved in exporting
the subject merchandise to the United States: POSCO Steel Service &
Sales Company, Ltd. (POSTEEL), Hyosung Corporation (Hyosung), Samsun
Corporation (Samsun), Samsung Corporation (Samsung), and Sunkyong Ltd.
(Sunkyong) on July 1, 1998. On July 22, 1998, we issued supplemental
questionnaires to all of the responding parties and received their
responses on August 3, 6, and 7, 1998. We also issued supplemental
questionnaires on August 11, 1998 and August 19, 1998, and received the
responding parties' responses on August 19, 1998, and August 24 and 25,
1998, respectively.
The Applicable Statute and Regulations
Unless otherwise indicated, all citations to the statute are
references to the provisions of the Tariff Act of 1930, as amended by
the Uruguay Round Agreements Act (URAA) effective January 1, 1995 (the
Act). In addition, unless otherwise indicated, all citations to the
Department's regulations are to the current regulations as codified at
19
[[Page 47254]]
CFR Part 351 and published in the Federal Register on May 19, 1997 (62
FR 27295).
Scope of Investigation
For purposes of this investigation, the product covered is certain
stainless steel plate in coils. Stainless steel is an alloy steel
containing, by weight, 1.2 percent or less of carbon and 10.5 percent
or more of chromium, with or without other elements. The subject plate
products are flat-rolled products, 254 mm or over in width and 4.75 mm
or more in thickness, in coils, and annealed or otherwise heat treated
and pickled or otherwise descaled. The subject plate may also be
further processed (e.g., cold-rolled, polished, etc.) provided that it
maintains the specified dimensions of plate following such processing.
Excluded from the scope of this petition are the following: (1) Plate
not in coils, (2) plate that is not annealed or otherwise heat treated
and pickled or otherwise descaled, (3) sheet and strip, and (4) flat
bars.
The merchandise subject to this investigation is currently
classifiable in the Harmonized Tariff Schedule of the United States
(HTS) at subheadings: 7219.11.00.30, 7219.11.00.60, 7219.12.00.05,
7219.12.00.20, 7219.12.00.25, 7219.12.00.50, 7219.12.00.55,
7219.12.00.65, 7219.12.00.70, 7219.12.00.80, 7219.31.00.10,
7219.90.00.10, 7219.90.00.20, 7219.90.00.25, 7219.90.00.60,
7219.90.00.80, 7220.11.00.00, 7220.20.10.10, 7220.20.10.15,
7220.20.10.60, 7220.20.10.80, 7220.20.60.05, 7220.20.60.10,
7220.20.60.15, 7220.20.60.60, 7220.20.60.80, 7220.90.00.10,
7220.90.00.15, 7220.90.00.60, and 7220.90.00.80. Although the HTS
subheadings are provided for convenience and Customs purposes, the
written description of the merchandise under investigation is
dispositive.
Injury Test
Because the Republic of Korea (Korea) is a ``Subsidies Agreement
Country'' within the meaning of section 701(b) of the Act, the
International Trade Commission (ITC) is required to determine whether
imports of the subject merchandise from Korea materially injure, or
threaten material injury to, a U.S. industry. On May 28, 1998, the ITC
published its preliminary determination finding that there is a
reasonable indication that an industry in the United States is being
materially injured, or threatened with material injury, by reason of
imports from Korea of the subject merchandise (See Certain Stainless
Steel Plate in Coils From Belgium, Canada, Italy, Korea, South Africa,
and Taiwan, 63 FR 29251).
Alignment With Final Antidumping Duty Determination
On May 27, 1998, the petitioners submitted a letter requesting
alignment of the final determination in this investigation with the
final determination in the companion antidumping duty investigation.
See Initiation of Antidumping Investigations: Stainless Steel Plate in
Coils From Belgium, Canada, Italy, Republic of South Africa, Republic
of Korea, and Taiwan, 63 FR 20580 (April 27, 1998). In accordance with
section 705(a)(1) of the Act, we are aligning the final determination
in this investigation with the final determinations in the antidumping
investigations of stainless steel plate in coils.
Period of Investigation
The period for which we are measuring subsidies (the POI) is
calendar year 1997.
Subsidies Valuation Information
Benchmarks for Long-term Loans and Discount Rates: In the Final
Affirmative Countervailing Duty Determinations and Final Negative
Critical Circumstances Determinations: Certain Steel Products from
Korea, 58 FR 37338 (July 9, 1993) (Steel Products from Korea), we
stated that the three-year corporate bond yield ``was the best
indicator of a market rate in Korea.'' See 58 FR at 37346. In
conformance with that prior decision, we have used as our long-term
benchmark the three-year corporate bond yield. For variable rate loans
for which the benefit is calculated on the interest payment during the
POI, we have used as our benchmark the three year over-the-counter
corporate bond rate, as reported by the GOK in its August 19, 1998,
questionnaire response (public version on file in the Department's
Central Records Unit, Room B-099). We have also used the three-year
corporate bond yield to calculate the benefit from fixed rate loans
provided under the Energy Savings Fund.
Benchmarks for Short-Term Financing: For those programs which
require the application of a short-term interest rate benchmark, we
used as our benchmark a company-specific weighted-average, short-term
interest rate for won-denominated loans for the POI. Each respondent
provided to the Department its respective company-specific interest
rate.
Allocation Period: In the past, the Department has relied upon
information from the U.S. Internal Revenue Service (IRS) for the
industry-specific average useful life of assets in determining the
allocation period for non-recurring subsidies. See the General Issues
Appendix (GIA), 58 FR at 37227, which is appended to the Final
Affirmative Countervailing Duty Determination: Certain Steel Products
from Austria, 58 FR 37225 (July 9, 1993). However, in British Steel plc
v. United States, 879 F. Supp. 1254 (CIT 1995) (British Steel I), the
U.S. Court of International Trade (the Court) held that the IRS
information did not necessarily reflect a reasonable period based on
the actual commercial and competitive benefit of the subsidies to the
recipients. In accordance with the Court's remand order, the Department
calculated a company-specific allocation period for non-recurring
subsidies based on the average useful life (AUL) of non-renewable
physical assets. This remand determination was affirmed by the Court on
June 4, 1996. See British Steel plc v. United States, 929 F. Supp. 426,
439 (CIT 1996) (British Steel II). Thus, we are determining the
allocation period for non-recurring subsidies using company-specific
AUL data where reasonable and practicable. See, e.g., Certain Cut-to-
Length Carbon Steel Plate from Sweden; Final Results of Countervailing
Duty Administrative Review, 62 FR 16551 (April 7, 1997).
In this investigation, the Department has followed the Court's
decision in British Steel I and II, and examined information submitted
by POSCO as to the AUL of its assets. In the course of this
examination, we found that POSCO included special accelerated
depreciation expenses and a depreciation of salvage value in its
calculated AUL. POSCO reported that the accelerated depreciation is
permitted in accordance with Korean GAAP for plant and equipment which
operate for a standard eight-hour work day, and for facilities and
equipment which operate longer than a standard eight-hour day. Since
POSCO is a producer of steel products, it appears to be the company's
normal course of business to operate its facilities longer than a
standard eight-hour day. Therefore, we disagree with POSCO's
calculation of its AUL, and have recalculated the company's AUL
excluding these adjustments to depreciation expenses. Because POSCO did
not break-out separately the accelerated depreciation and depreciation
of salvage value expenses which are reported under the category
``special charges to depreciation expense,'' we recalculated POSCO's
[[Page 47255]]
AUL excluding all of these adjustments. Based upon our recalculation of
the company's AUL, we calculated an AUL of 12 years for POSCO.
Treatment of Subsidies Received by Trading Companies: During the
POI, POSCO exported the subject merchandise to the United States
through five trading companies. We required that the five trading
companies provide responses to the Department with respect to the
export subsidies under investigation. One of the trading companies,
POSTEEL, is affiliated with POSCO within the meaning of section
771(33)(E) of the Act because POSCO owned 95.3 percent of POSTEEL's
shares as of December 31, 1997. The other four trading companies are
not affiliated with POSCO. We required responses from the trading
companies because the subject merchandise may be subsidized by means of
subsidies provided to both the producer and the exporter. All subsidies
conferred on the production and exportation of subject merchandise
benefit the subject merchandise even if it is exported to the United
States by an unaffiliated trading company rather than by the producer
itself. Therefore, the Department calculates countervailable subsidy
rates on the subject merchandise by cumulating subsidies provided to
the producer, with those provided to the exporter.
Under section 351.107 of the Department's Regulations, when the
subject merchandise is exported to the United States by a company that
is not the producer of the merchandise, the Department may establish a
``combination'' rate for each combination of an exporter and supplying
producer. However, as noted in the ``Explanation of the Final Rules''
(the Preamble), there may be situations in which it is not appropriate
or practicable to establish combination rates when the subject
merchandise is exported by a trading company. In such situations, the
Department will make exceptions to its combination rate approach on a
case-by-case basis. See Antidumping Duties; Countervailing Duties;
Final rule, 62 FR 27296; 27303 (May 19, 1997).
In this investigation, we preliminarily determine that it is not
appropriate to establish combination rates. This determination is based
on two main facts: First, the majority of the subsidies conferred upon
the subject merchandise were received by the producer, POSCO. Second,
the difference in the levels of subsidies conferred upon the subject
merchandise among the individual trading companies is insignificant.
Therefore, combination rates would serve no practicable purpose because
the calculated subsidy rate for POSCO/Hyosung or POSCO/Sunkyong or
POSCO and any of the other trading companies would effectively be the
same rate. For these reasons we are not calculating combination rates
in this investigation. Instead, we have only calculated one rate for
the subject merchandise, all of which is produced by POSCO.
To include the subsidies received by the trading companies, which
are conferred upon the export of the subject merchandise, in the
calculated ad valorem subsidy rate, we used the following methodology.
For each of the five trading companies, we calculated the benefit
attributable to the subject merchandise and factored that amount into
the calculated subsidy rate for the producer. In each case, we
determined the benefit received by the trading companies for each
export subsidy and weight-averaged the benefit amounts by the relative
share of each trading company's value of exports of the subject
merchandise to the United States. This calculated ad valorem subsidy
was then added to the subsidy calculated for POSCO. Thus, for each of
the programs below, the listed ad valorem subsidy rate is cumulative of
the countervailable subsidies received by both the trading companies
and POSCO.
I. Programs Preliminarily Determined To Be Countervailable
A. Direction of Credit
In the 1993 investigation of Steel Products from Korea, the
Department determined (1) that the GOK influenced the practices of
lending institutions in Korea; (2) regulated long-term loans were
provided to the steel industry on a selective basis; and (3) the
selective provision of these regulated loans resulted in a
countervailable benefit. Accordingly, all long-term loans received by
the producers/exporters of the subject merchandise were treated as
countervailable. The determination in that investigation covered all
long-term loans bestowed through 1991.
In this investigation, petitioners allege that the GOK continued to
control the practices of lending institutions in Korea through the POI,
and that the steel sector received a disproportionate share of low-
cost, long-term credit, resulting in countervailable benefits being
conferred on the producers/exporters of the subject merchandise.
Petitioners assert, therefore, that the Department should countervail
all long-term loans received by the producers/exporters of the subject
merchandise that were still outstanding during the POI.
1. The GOK's Credit Policies Through 1991
As noted above, we previously found significant GOK control over
the practices of lending institutions in Korea through 1991, the period
investigated in Steel Products From Korea. This finding of control was
determined to be sufficient to constitute a government program and
government action. See Steel Products from Korea, 58 FR at 37342. We
also determined that (1) the Korean steel sector, as a result of the
GOK's credit policies and control over the Korean financial sector,
received a disproportionate share of regulated long-term loans, so that
the program was, in fact, specific, and (2) that the interest rates on
those loans were inconsistent with commercial considerations. Id. at
37343. Thus, we countervailed all long-term loans received by the steel
sector from all lending sources.
In this investigation, we provided the GOK with the opportunity to
present new factual information concerning the government's credit
policies prior to 1992, which we would consider along with our finding
in the prior investigation. The GOK has not provided new factual
information that would lead us to change our determination in Steel
Products from Korea. Therefore, we preliminarily determine that the
provision of long-term loans in Korea through 1991 results in a
financial contribution within the meaning of section 771(5)(D)(i) of
the Act. This finding is in conformance with the Statement of
Administrative Action (SAA), which states that ``section 771(5)(B)(iii)
encompasses indirect subsidy practices like those which Commerce has
countervailed in the past, and that these types of indirect subsidies
will continue to be countervailable.'' SAA, accompanying H.R. 5110
(H.R. Doc. No. 316, Vol. 1, 103d Cong., 2d Sess.) (1994), at 926. In
accordance with section 771(5)(E)(ii) of the Act, a benefit has been
conferred to the recipient to the extent that the regulated loans are
provided at interest rates less than the benchmark rates described
under the ``Subsidies Valuation'' section, above.
We also preliminarily determine that all regulated long-term loans
provided to the producers/exporters of the subject merchandise through
1991 were provided to a specific enterprise or industry, or group
thereof, within the meaning of section 771(5A)(D)(iii)(III) of the Act.
This finding is in conformance with our determination in Steel
[[Page 47256]]
Products from Korea. See, 58 FR at 37342.
POSCO was the only producer of the subject merchandise, and POSCO
received long-term loans prior to 1992 that were still outstanding
during the POI. These included loans with both fixed and variable
interest rates. To determine the benefit from the regulated loans with
fixed interest rates, we applied the Department's standard long-term
loan methodology and calculated the grant equivalent for the loans. For
POSCO's variable-rate loans, we compared the amount of interest paid
during the POI on the regulated loans to the amount of interest that
would have been paid at the benchmark rate. We then summed the benefit
amounts from the loans attributable to the POI and divided the total
benefit by POSCO's total sales. On this basis, we determine the
countervailable subsidy to be 0.15 percent ad valorem.
2. The GOK's Credit Policies From 1992 Through 1997
We have also examined the GOK's credit policies during the period
1992 through 1997. Because of the complexity of this issue and the
conflicting information on the record, which we discuss below, we will
continue to seek additional information on whether the GOK's practices
during this period confer a countervailable subsidy. After we collect
additional information and conduct verification, we will prepare an
analysis memorandum addressing the countervailability of the GOK's
credit policies during this period and provide all parties with an
opportunity to comment on our analysis.
In its questionnaire responses, the GOK asserts that there was no
government policy to direct long-term credit to the Korean steel
industry during the period 1992 through 1997, and that it was not
involved in the lending activities of Korean financial institutions.
The GOK states that the lending decisions and loan distributions of
financial institutions in Korea reflect commercial considerations. The
GOK states that its role in the financial sector is limited to monetary
and credit policies as well as bank supervision and examination.
Evidence submitted to the Department by the GOK indicates that some
deregulatory measures affecting the Korean financial sector have been
taken since 1991. These include a four-stage interest rate deregulation
plan that, according to the GOK, virtually eliminated all government
control over deposit and lending rates in Korean won. For example,
rates on corporate bonds and all bank loans, other than those assisted
by Bank of Korea (BOK) rediscounts, were deregulated by November 1993.
Also, information submitted to the Department by the GOK indicates that
there have been reforms to the process by which commercial bank
presidents are selected. The reforms include a procedure, implemented
in 1993, whereby bank chairmen are selected by committees consisting of
shareholder representatives, corporate clients, and ex-bank presidents.
In 1997, the GOK further amended the Banking Act to prescribe that a
candidate for bank president, recommended by a candidate recommendation
committee, must be elected by an affirmative vote of a two-thirds
majority of the non-permanent directors of the bank.
However, other information in the record indicates that the GOK may
still exert substantial influence over the lending decisions of
financial institutions. For example, recent GOK policies appear to be
aimed, in part, at promoting certain sectors of the economy, such as
high technology and small and medium sized enterprises (SMEs). See,
e.g., ``KDB Financial Support for Korean Industries,'' from the Korea
Development Bank's appended to ``Memorandum From Case Analyst to File,
Re: Articles on Korean Financial System,'' (on file in the public file
of the Central Records Unit of the Department of Commerce, Room B-099)
(``Korean Financial System Memo''). Other official information on the
record appears to suggest that the GOK may have continuted the practice
of directing credit after 1991. Independent commentators have also
noted the GOK's continued involvement in the financial system. See,
e.g., Deep Pockets, ``The Economist,'' (May 3, 1997), appended to
Korean Financial System Memo; Financing Foreign Operations, South
Korea, The Economist Intelligence Unit, 1997, page 20, appended to
Korean Financial System Memo; The Korean Economy in 1997: Crisis and
Response, by Thomas Byrne, appended to Korean Financial System Memo.
As noted above, in light of this conflicting information, at
verification and during the course of this proceeding, we will gather
additional information on this issue in order to make a determination
as to whether credit provided after 1991 is countervailable. During
verification, we plan to meet with various individuals knowledgeable
about the financial sector in Korea in order to gather information on
the differences between the GOK's credit policies in the 1980s and the
1990s; the lending practices of government-owned banks and of
commercial lending institutions; the role of securities (public and
corporate bonds) in the financial system; and the impact of the GOK's
financial liberalization on the lending practices of Korean banks after
1991.
B. Loans from the Energy Savings Fund
Established in accordance with Article 51 of the ``Rationalization
of Energy Utilization Act'' (Energy Use Act), the Energy Saving Fund
provides financing at below-market interest rates for investment by
businesses in facilities that rationally and efficiently use energy.
Overall responsibility for the program lies with the Ministry of
Industry and Energy (MIE), but the operation and management of the
program is entrusted to the Korea Energy Management Corporation (KEMC).
While the Energy Use Act was repealed in 1995, the MIE, under the new
``Energy Use Rationalization Act,'' provides financing for this program
from special government accounts.
Korean companies obtain financing under this program by submitting
an application to the KEMC. If the KEMC is satisfied that the
applicant's business plans are intended for the rationalization of
energy use, it will then issue a recommendation, and forward the
company's application to a bank. The KEMC will transfer funds to the
bank, which will in turn provide the funds to the applicant. The
interest rate charged under the Energy Saving Fund was set at 7.0
percent. POSCO paid interest on two Energy Saving Fund loans during the
POI, both of which were received in 1994, and the interest rates paid
by POSCO were less than the 7.0 percent rate prescribed by the program.
This program provides a financial contribution within the meaning
of section 771(5)(D)(i) of the Act and, in accordance with section
771(5)(E)(ii) of the Act, provides a benefit to the recipient based on
the difference between the interest rate on the program loan and the
benchmark rate described in the ``Subsidies Valuation'' section, above.
We preliminarily determine that the loans provided to POSCO were
specific within the meaning of section 771(5A)(D)(iii)(IV) of the Act,
because the interest rate charged to POSCO was less than the program
interest rate prescribed by the program's regulations.
To calculate the benefit from the Energy Savings Loans, we employed
the Department's standard long-term loan methodology, using as our
benchmark the rate described in the ``Subsidies Valuation'' section of
the notice, above.
[[Page 47257]]
We divided the benefit attributable to the POI by POSCO's total sales
during 1997. On this basis, we preliminarily determine the
countervailable subsidy to be less than 0.005 percent ad valorem.
C. Kwangyang Bay
Petitioners requested that the Department investigate whether the
GOK's infrastructure development at Kwangyang Bay continues to provide
a countervailable subsidy to POSCO's steel production. The Department
previously determined that the Korean government's infrastructure
development at Kwangyang Bay constituted a specific countervailable
subsidy to POSCO, because POSCO was found to be the predominant user of
the infrastructure. See Steel Products from Korea, 58 FR at 37346-47.
Because POSCO still produces steel products at Kwangyang Bay, we
requested information on this program to determine whether the GOK has
made additional investments since 1991, at Kwangyang Bay.
1. GOK Infrastructure Investments at Kwangyang Bay Pre-1992
In Steel Products from Korea, the Department investigated the GOK's
infrastructure investments at Kwangyang Bay over the period 1983-1991.
During this period of time, the GOK's investments at Kwangyang Bay
included: construction of an industrial waterway, construction of a
railroad station, construction of a road to Kwangyang Bay, dredging of
the harbor, and construction of three finished goods berths. We
determined that the GOK's provision of infrastructure to POSCO at
Kwangyang Bay was countervailable because we found POSCO to be the
predominant user of the GOK's investments. The Department has
consistently 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 Steel Products from Korea, 58 FR at 37346.
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, to determine the benefit from the GOK's investments to POSCO
during the POI, we relied on the calculations performed in the 1993
investigation of Steel Products from Korea, which were placed on the
record of this investigation by POSCO. In measuring the benefit from
this program in the 1993 investigation, the Department 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. The Department used as its discount rate the three-year
corporate bond rate on the secondary market, which was the average cost
of long-term fixed rate debt in Korea at that time.
To determine the benefit conferred to POSCO during the POI, we
applied the Department's standard grant methodology and allocated the
GOK's infrastructure investments over a 12-year time period using the
AUL which we calculated for POSCO in this investigation. See the
allocation period discussion under the ``Subsidies Valuation
Information'' section above. We used as our discount rate the three-
year corporate bond rate on the secondary market used in Steel Products
from Korea. We then summed the benefits received by POSCO during 1997,
from each of the GOK's yearly investments over the period 1986-1991. We
then divided the total benefit attributable to the POI by POSCO's total
sales for 1997. On this basis, we preliminary determine a
countervailable subsidy of 0.23 percent ad valorem for the POI.
2. GOK Infrastructure Investments at Kwangyang Bay Post-1991
The GOK has made the following additional infrastructure
investments at Kwangyang Bay since 1991: construction of a road from
Kwangyang to Jinwol, construction of a container terminal, and
construction of the Jooam Dam. The GOK states that pursuant to Article
29 of the Industrial Sites and Development Act, it is the national and
local governments' responsibility to provide basic infrastructure
facilities throughout the country, and the nature of the infrastructure
depends on the specific needs of each area and/or the types of
industries located in a particular area. Depending upon the type of
infrastructure built, the GOK provides services to companies through
the use of the infrastructure facilities and charges fees for these
services based on published tariff rates applicable to all users.
With respect to the GOK's post-1991 infrastructure investments at
Kwangyang Bay, the GOK argues that the construction of the
infrastructure was not for the benefit of POSCO. The GOK reports that
the purpose of developing the Jooam Dam, which was fully constructed in
1993, was to meet the rising demand for water by area businesses and
households. The supply capacity of the Sueochon dam, which was
constructed prior to 1991, could not meet the area's water needs and
therefore a second dam at Kwangyang Bay was built. The GOK further
reports that the construction of the Jooam Dam did not benefit POSCO
because POSCO receives all of its water supply from the Sueochon Dam.
In Steel Products from Korea, we determined that POSCO was the
predominant user of the Sueochon Dam, and on this basis treated the
government's full investment costs for constructing that dam as
countervailable subsidies benefitting POSCO.
The GOK developed the container terminal according to the Kwangyang
Container Terminal Development Plan. The purpose of the container
terminal was to provide another major southern port with a container
terminal in order to relieve congestion at Pusan, and to encourage the
further commercial development of the region. The GOK states that,
given the nature of the merchandise imported, produced, and exported by
POSCO at Kwangyang Bay, this container terminal cannot be used by
POSCO's operations. According to the responses from the GOK and POSCO,
neither steel products nor steel inputs are shipped through the
container terminal at Kwangyang Bay, nor, given the nature of those
products, would they be shipped through the container terminal.
The road from Kwangyang to Jinwol was constructed in 1993. The road
between the two cities is a by-pass route constructed to relieve a
transportation bottleneck in the area. The GOK states that this is a
general service, public access road available for, and used by, all
residents and businesses in the area of Kwangyang Bay. According to the
GOK response, the reason for building the public highway was not to
serve POSCO, but to provide general infrastructure to the area as part
of the GOK's continuing development of the country.
Based on the information on the record regarding the GOK's
infrastructure investments at Kwangyang Bay since 1991, we
preliminarily determine that these investments are not providing
countervailable benefits to POSCO. However, we will further investigate
the GOK's infrastructure investments at verification to ascertain
whether, in fact, the facilities were built for POSCO's benefit.
D. Port Facility Fees
The GOK reports in its August 7, 1998, questionnaire response that,
since 1991, POSCO has built new port facilities at Kwangyang Bay, at
the company's own expense. However,
[[Page 47258]]
since title to port facilities must be transferred to the GOK in
accordance with Article 17-1 of the Harbor Act, POSCO had to revert
these facilities to the GOK. In return, POSCO has the right to use the
port facilities free of charge, and can charge other users a usage fee
until the company recovers all of its investment costs.
In the 1993 investigation of Steel Products from Korea, the
Department found that POSCO, which built port berths at Kwangyang Bay,
but, by law, had to deed them to the GOK, was exempt from paying fees
for use of the berths. POSCO was the only company entitled to use the
berths at the port facility free of charge. The Department determined
that because this privilege was limited to POSCO, and because the
privilege relieved POSCO of costs it would otherwise have had to pay,
POSCO's free use of the berths at Kwangyang Bay constituted a
countervailable benefit. The Department stated that each exemption from
payment of the fees, or ``reimbursement'' to POSCO, creates a
countervailable benefit because the GOK is relieving POSCO of an
expense the company would have otherwise incurred. See Steel Products
from Korea, 58 FR at 37347-348.
With respect to the present investigation, because POSCO remains
exempt from paying port facility fees which it otherwise would have to
pay, and therefore the government is not collecting revenue that it is
otherwise due, we preliminarily determine that POSCO's free use of the
port facilities provides a financial contribution to the company within
the meaning of section 771(5)(D)(ii) of the Act. We also preliminarily
find that the exemption from paying port facility charges is a specific
subsidy under section 771(5A)(D)(iii)(IV) of the Act, because POSCO was
the only company exempt from paying port facility fees during the POI.
Because the exemption of the port facility fees are not
``exceptional'' benefits and are received automatically on a regular
and predictable basis without further government approval, we
preliminarily determine that this fee exemption provides a recurring
benefit to POSCO. Therefore, we have expensed the benefit from this
program in the year of receipt. See GIA, 58 FR at 37226. To measure the
benefit which POSCO received during the POI for the free use of the
facilities, we calculated the amount of the fees which POSCO would have
had to pay for the use of the facilities during the POI. We then
divided this benefit amount by POSCO's total sales for the POI. On this
basis, we preliminarily determine that POSCO received a countervailable
subsidy of 0.03 percent ad valorem during the POI.
E. Short-Term Export Financing
The Department determined that the GOK's short-term export
financing program was countervailable in Steel Products from Korea, 58
FR at 37350. Petitioners allege that this program may also benefit the
producers and/or exporters of the subject merchandise. In this
investigation, the GOK reports that the BOK, under the ``Detailed Rules
of Trade Financing Related to the Aggregate Ceiling Loans'' (Detailed
Rules), provides discounts on foreign trade bills to commercial banks,
which, in turn, extend short-term loans to exporters. Under the
aggregate credit ceiling system established in 1994, the BOK allocates
a credit ceiling every month to each commercial bank, including
branches of Korean and foreign banks. This ceiling is based on each
bank's loan performance i.e., each bank's discounting of commercial
loans, foreign trade financing, and loans for the production of parts
and material. These banks then provide loans to exporters using the
funds received from the BOK and funds generated from their own sources
to discount trade bills.
There are two types of trade financing: production financing and
raw material financing. A bank provides production financing when a
company needs funds for the production of export merchandise or the
production of raw materials used in the production of exported
merchandise. A bank extends raw material financing to exporters which
require financing for the importation or local purchase of raw
materials used in the production of exported merchandise.
During the POI, POSCO was the only producer/exporter of the subject
merchandise that received export financing. POSCO reports that the
company entered into a credit ceiling loan agreement with a commercial
bank in accordance with Articles 12 and 13 of the Detailed Rules to
receive production financing. The loan agreement outlines the maximum
amount of credit which POSCO is eligible to receive, the period covered
by the loan agreement, the applicable interest rate, and the penalty
interest rate. POSCO states that when the company purchases raw
materials from a supplier on a letter of credit basis, the supplier
presents the letter of credit to POSCO's bank for payment. The bank, in
turn, pays the purchase price to the supplier and debits the trade loan
against POSCO's line of credit. POSCO pays the full amount of each
trade loan after about 90 days, which is the average period from
production to sales. Interest is paid by POSCO against each trade loan
at the time the loans are received. POSCO reported that the company
paid all of its export financing during the POI in a timely manner and
incurred no overdue interest penalties. In accordance with section
771(5A)(B) of the Act, we preliminary determine that this program
constitutes an export subsidy because receipt of the financing is
contingent upon export performance. A financial contribution is
provided to POSCO under this program within the meaning of section
771(5)(D)(i) of the Act. In order to determine whether this export
financing program confers a countervailable benefit to POSCO, we
compared the interest rate POSCO paid on the export financing received
under this program during the POI with the interest rate POSCO would
have 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.
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 POSCO on its export financing is a discounted rate. Therefore,
it was necessary to derive from POSCO's company-specific weighted-
average interest rate for short-term won-denominated commercial loans,
a discounted benchmark interest rate. We compared this discounted
benchmark interest rate to the interest rates charged on the export
financing and found that the program interest rates were lower than the
benchmark rates. Therefore, in accordance with section 771(5)(E)(ii) of
the Act, we preliminarily determine that this program confers
countervailable benefits because the interest rates charged on the
loans were less than what POSCO would have had to pay on a comparable
short-term commercial loan.
To calculate the benefit conferred by this program, we compared the
actual interest paid on the loans with the amount of interest that
would have been paid at the applicable discounted benchmark interest
rate. When the interest that would have been paid at the benchmark rate
exceeded the interest that was paid at the program interest rate, the
difference between those amounts is the benefit. Because POSCO was
unable to segregate its production financing applicable to only subject
merchandise exported to the United States, we divided the benefit
derived from the loans by total exports. On this basis, we
preliminarily
[[Page 47259]]
determine that POSCO received from this program during the POI a
countervailable subsidy of less than 0.005 percent ad valorem.
F. Reserve for Export Loss--Article 16 of the TERCL
Under Article 16 of the Tax Exemption and Reduction Control Act
(TERCL), a domestic person engaged in a foreign-currency earning
business can establish a reserve amounting to the lesser of one percent
of foreign exchange earnings or 50 percent of net income for the
respective tax year. Losses accruing from the cancellation of an export
contract, or from the execution of a disadvantageous export contract,
may be offset by returning an equivalent amount from the reserve fund
to the income account. Any amount that is not used to offset a loss
must be returned to the income account and taxed over a three-year
period, after a one-year grace period. All of the money in the reserve
is eventually reported as income and subject to corporate tax either
when it is used to offset export losses or when the grace period
expires and the funds are returned to taxable income. The deferral of
taxes owed amounts to an interest-free loan in the amount of the
company's tax savings. This program is only available to exporters.
During the POI, Samsun was the only exporter of the subject merchandise
which received benefits under this program.
We preliminarily determine that the Reserve for Export Loss program
constitutes an export subsidy under section 771(5A)(B) of the Act
because the use of the program is contingent upon export performance.
We also preliminarily determine that this program provides a financial
contribution within the meaning of section 771(5)(D)(i) of the Act in
the form of a loan.
To determine the benefit conferred by this program, we calculated
the tax savings by multiplying the balance amount of the reserve as of
December 31, 1996, by the corporate tax rate for 1996. We treated the
tax savings on these funds as a short-term interest-free loan.
Accordingly, to determine the benefit, the amount of tax savings was
multiplied by the company's weighted-average interest rate for short-
term won-denominated commercial loans for the POI, described in the
``Subsidies Valuation Information'' section, above. Using the
methodology for calculating subsidies received by trading companies,
which also is detailed in the ``Subsidies Valuation Information''
section of this notice, we preliminarily determine a countervailable
subsidy of less than 0.005 percent ad valorem.
G. Reserve for Overseas Market Development--Article 17 of the TERCL
Article 17 of the TERCL operates in a manner similar to Article 16,
discussed above. This provision allows a domestic person engaged in a
foreign trade business to establish a reserve fund equal to one percent
of its foreign exchange earnings from its export business for the
respective tax year. Expenses incurred in developing overseas markets
may be offset by returning from the reserve, to the income account, an
amount equivalent to the expense. Any part of the fund that is not
placed in the income account for the purpose of offsetting overseas
market development expenses must be returned to the income account over
a three-year period, after a one-year grace period. As is the case with
the Reserve for Export Loss, the balance of this reserve fund is not
subject to corporate income tax during the grace period. However, all
of the money in the reserve is eventually reported as income and
subject to corporate tax either when it offsets export losses or when
the grace period expires. The deferral of taxes owed amounts to an
interest-free loan equal to the company's tax savings. This program is
only available to exporters.
The following exporters of the subject merchandise received
benefits under this program during the POI: Hyosung, POSTEEL, Samsun,
Samsung, and Sunkyong.
We preliminarily determine that the Reserve for Overseas Market
Development program constitutes an export subsidy under section
771(5A)(B) of the Act because the use of the program is contingent upon
export performance. We also preliminarily determine that this program
provides a financial contribution within the meaning of section
771(5)(D)(i) of the Act in the form of a loan.
To determine the benefits conferred by this program during the POI,
we employed the same methodology used for determining the benefit from
the Reserve for Export Loss program. We used as our benchmark interest
rate, each trading company's respective weighted-average interest rate
for short-term won-denominated commercial loans for the POI, described
in the ``Subsidies Valuation Information'' section above. Using the
methodology for calculating subsidies received by trading companies,
which also is detailed in the ``Subsidies Valuation Information''
section of this notice, we preliminarily calculate a countervailable
subsidy of 0.01 percent ad valorem for this program during the POI.
H. Investment Tax Credits
Under the TERCL, companies in Korea are allowed to claim investment
tax credits for various kinds of investments. If the tax credits cannot
all be used at the time they are claimed, then the company is
authorized to carry them forward for use in later tax years. During the
POI, POSCO used various investment tax credits received under the TERCL
to reduce its net tax liability. In Steel Products from Korea, we found
that investment tax credits were not countervailable (see 58 FR at
37351); however, there were changes in the statute effective in 1995,
which have caused us to revisit the countervailability of the
investment tax credits.
POSCO claimed or used the following tax credits in its fiscal year
1996 income tax return: (1) Tax credits for investments in facilities
for research and experimental use and investments in facilities for
vocational training or assets for business to commercialize new
technology under Article 10; (2) tax credits for vocational training
under Article 18; (3) tax credits for investment in productivity
improvement facilities under Article 25; (4) tax credits for investment
in specific facilities under Article 26; (5) tax credits for temporary
investment under Article 27; and (6) tax credits for specific
investments under Article 71 of TERCL. For these specific tax credits,
a company normally calculates its authorized tax credit based upon
three or five percent of its investment, i.e., the company receives
either a three or five percent tax credit. However, if a company makes
the investment in domestically-produced facilities under these
Articles, it receives a 10 percent tax credit. Under section 771(5A)(C)
of the Act, which became effective on January 1, 1995, a program that
is contingent upon the use of domestic goods over imported goods is
specific, within the meaning of the Act. Because Korean companies
receive a higher tax credit for investments made in domestically-
produced facilities, we preliminarily determine that investment tax
credits received under Articles 10, 18, 25, 26, 27, and 71 constitute
import substitution subsidies under section 771(5A)(C) of the Act. In
addition, because the GOK foregoes collecting tax revenue otherwise due
under this program, we also preliminarily determine that a financial
contribution is provided under section 771(5)(D)(ii) of the Act.
Therefore, we preliminarily determine this program to be
countervailable.
To calculate the benefit from this tax credit program, we examined
the
[[Page 47260]]
amount of tax credits POSCO deducted from its taxes payable for the
1996 fiscal year. In its 1996 income tax return filed during the POI,
POSCO deducted from its taxes payable, credits earned in the years 1992
through 1995, which were carried forward and used in the POI. We first
determined the amount of the tax credits claimed which were based upon
the investment in domestically-produced facilities. We then calculated
the additional amount of tax credits received by the company because it
earned tax credits of 10 percent on investments in domestically-
produced facilities rather the regular three or five percent tax
credit. Next, we calculated the amount of the tax savings earned
through the use of these tax credits during the POI and divided that
amount by POSCO's total sales for the POI. On this basis, we
preliminarily determine a countervailable subsidy of 0.27 percent ad
valorem from this program during the POI.
I. Electricity Discounts Under the Requested Load Adjustment
Program
Petitioners alleged that POSCO is being charged utility rates at
less than adequate remuneration and, hence, the production of the
subject merchandise is receiving countervailable benefits from this
subsidy. Petitioners alleged that POSCO is receiving these
countervailable benefits in the form of utility rate discounts.
The GOK reports that during the POI the government-owned Korea
Electric Power Company (KEPCO) provided POSCO with three types of
discounts under its tariff schedule. These three discounts were based
on the following rate adjustment programs in KEPCO's tariff schedule:
(1) Power Factor Adjustment; (2) Summer Vacation and Repair Adjustment;
and (3) Requested Load Adjustment. (See the discussion below in
``Programs Preliminarily Determined To Be Not Countervailable'' with
respect to the Power Factor Adjustment and Summer Vacation and Repair
Adjustment discount programs.)
With respect to the Requested Load Adjustment (RLA) program, the
GOK introduced this discount in 1990, to address emergencies in KEPCO's
ability to supply electricity. Under this program, customers with a
contract demand of 5,000 KW or more, who can curtail their maximum
demand by 20 percent or suppress their maximum demand by 3,000 KW or
more, are eligible to enter into a RLA contract with KEPCO. Customers
who choose to participate in this program must reduce their load upon
KEPCO's request, or pay a surcharge to KEPCO.
Customers can apply for this program between May 1 and May 15 of
each year. If KEPCO finds the application in order, KEPCO and the
customer enter into a contract with respect to the RLA discount. The
RLA discount is provided based upon a contract for two months, normally
July and August. Under this program, a basic discount of 440 won per KW
is granted between July 1 and August 31, regardless of whether KEPCO
makes a request for a customer to reduce its load. During the POI,
KEPCO granted 44 companies RLA discounts even though KEPCO did not need
to request these companies to reduce their respective loads. The GOK
reports that because KEPCO increased its capacity to supply electricity
in 1997, it reduced the number of companies with which it maintained
RLA contracts in 1997. In 1996, KEPCO entered into RLA contracts with
232 companies.
We analyzed whether this electricity discount program is specific
in law (de jure specificity), or in fact (de facto specificity), within
the meaning of section 771(5A)(D)(i) and (iii) of the Act. First, we
examined the eligibility criteria contained in the law. The Regulation
on Electricity Supply and KEPCO's Rate Regulations for Electric Service
identified companies within a broad range of industries as being
eligible to participate in the electricity discount programs. The RLA
discount program is available to a wide variety of companies across all
industries, provided that they have the required contract demand and
can reduce their maximum demand by a certain percentage. We
preliminarily find that the RLA electricity program is not de jure
specific under section 771(5A)(D)(i) of the Act because the regulation
does not explicitly limit eligibility of the program.
We next examined data on the distribution of assistance under the
RLA to determine whether the electricity discount program meets the
criteria for de facto specificity under section 771(5A)(D)(iii) of the
Act. We found that discounts provided under the RLA were distributed to
a limited number of customers, i.e., a total of 44 customers during the
POI. Given the data with respect to the small number of companies which
received RLA electricity discounts during the POI, we preliminarily
determine that the RLA program is de facto specific under section
771(5A)(D)(iii)(I) of the Act.
Because the electricity discounts are not ``exceptional'' benefits
and are received automatically on a regular and predictable basis
without further government approval, we preliminarily determine that
these discounts provide a recurring benefit to POSCO. Therefore, we
have expensed the benefit from this program in the year of receipt. See
GIA, 58 FR at 37226. To measure the benefit from this program, we
summed the electricity discounts which POSCO received from KEPCO under
the RLA program during the POI. We then divided that amount by POSCO's
total sales value for 1997. On this basis, we preliminarily determine
that POSCO received a countervailable subsidy of less than 0.005
percent ad valorem, from this discount program during the POI.
Given the information the GOK provided on the record regarding
KEPCO's increased capacity to supply electricity and the resulting
decrease in KEPCO's need to enter into a large number of RLA contracts
during the POI, we will further investigate the de facto specificity of
this discount program at verification. It is the GOK's responsibility
to demonstrate to the Department on what basis KEPCO chose the 44
customers with which it entered into the RLA contracts during the POI.
II. Program Preliminarily Determined To Be Not Countervailable
Electricity Discounts Under Power Factor Adjustment and Summer Vacation
and Repair Adjustment Programs
As noted above, the GOK reported that KEPCO provided POSCO with
three types of discounts under its tariff schedule during the POI.
These three discounts were based on the following rate adjustment
programs in KEPCO's tariff schedule: (1) Power Factor Adjustment; (2)
Summer Vacation and Repair Adjustment; and (3) Requested Load
Adjustment. (See the separate discussion above in regard to the
countervailability of the Requested Load Adjustment program.)
With respect to the Power Factor Adjustment (PFA) program, the GOK
reports that the goal of the PFA is to improve the energy efficiency of
KEPCO's customers which, in turn, provides savings to KEPCO in
supplying electricity to its entire customer base. Customers who
achieve a higher efficiency than the performance standard (i.e., 90
percent) receive a discount on their base demand charge. Therefore, any
customer who installs a proper facility to measure its power factor and
achieves a power factor greater than 90 percent receives a discount on
its demand charge.
The GOK states that the PFA is not a special program, but a normal
factor used in the calculation of a customer's
[[Page 47261]]
electricity charge which was introduced in 1989. The PFA is available
to all general, educational, industrial, agricultural, midnight power,
and temporary customers who meet the eligibility criteria. The
eligibility criteria are that a customer must: (1) Have a contract
demand of 6 KW or more, (2) have a power factor that exceeds the 90
percent standard power factor, and (3) have proper facilities to
measure its power factor. If these criteria are met, a customer always
receives a PFA discount on its monthly electricity invoice. According
to the response of the GOK, there are no limitations on the types of
customers or industries which can receive the PFA discounts from KEPCO
and there were over 600,000 recipients of the PFA discounts during the
POI.
With the aim of curtailing KEPCO's summer load by encouraging
customer vacations or the repair of their facilities during the summer
months, the GOK introduced the Summer Vacation and Repair Adjustment
(VRA) in 1985. Under this program, a discount of 550 won per KW is
given to customers, if they curtail their maximum demand by more than
50 percent, or 3,000 KW, through a load adjustment or maintenance
shutdown of their production facilities during the summer months.
Eligible customers apply for a VRA discount during the period June 1 to
June 15 of each year. If KEPCO finds the application in order, KEPCO
and the customer prepare a contract with respect to the discount.
The GOK states that this discount program is available to all
industrial and commercial customers with a contract demand of 500 KW or
more. The GOK states that the VRA is one of several programs that KEPCO
operates as part of its broad long-term strategy of demand-side
management which includes curtailing peak demand, and is the most
effective of these programs. The GOK submitted information
demonstrating that hundreds of KEPCO customers, from a wide and diverse
range of industries, received VRA discounts during the POI.
We analyzed whether these two electricity discount programs are
specific in law (de jure specificity), or in fact (de facto
specificity), within the meaning of section 771(5A)(D)(i) and (iii) of
the Act. First, we examined the eligibility criteria contained in the
law. The Regulation on Electricity Supply and KEPCO's Rate Regulations
for Electric Service identified companies within a broad range of
industries as eligible to participate in the electricity discount
programs. With respect to the PFA, all general, educational,
industrial, agricultural, midnight power, and temporary customers who
have the necessary contract demand are eligible to participate in the
discount program. Likewise, the VRA discount program is available to a
wide variety of companies across all industries, provided that they
have the required contract demand and can reduce their maximum demand
by a certain percentage. Therefore, we preliminarily determine that the
electricity programs are not de jure specific under section
771(5A)(D)(i) of the Act.
We then examined data on the distribution of assistance under these
programs to determine whether the electricity discount programs meet
the criteria for de facto specificity under section 771(5A)(D)(iii) of
the Act. We found that discounts provided under the PFA and VRA were
distributed to a large number of firms in a wide variety of industries.
Given the data with respect to the large number of companies and
industries which received electricity discounts under these programs
during the POI, we preliminarily determine that the PFA and VRA
programs are not de facto specific under section 771(5A)(D)(iii) of the
Act. Therefore, we preliminarily determine that the PFA and VRA
discount programs are not countervailable.
III. Programs Preliminarily Determined To Be Not Used
Based on the information provided in the questionnaire response, we
preliminarily determine that the companies under investigation either
did not apply for or did not receive benefits under the following
programs during the POI:
A. Excessive Duty Drawback
Petitioners alleged that under the Korean Customs Act, Korean
exporters may have been receiving an excessive abatement, exemption, or
refund of import duties payable on raw materials used in the production
of exported goods. The Department has found that the drawback on
imported raw materials is countervailable when the raw materials are
not physically incorporated into the exported item, and therefore, the
amount of duty drawback is excessive. In Steel Products from Korea, we
determined that certain Korean steel producers received excessive duty
drawback because they received duty drawback at a rate that exceeded
the rate at which imported inputs were actually used. See 58 FR at
37349.
The GOK reports that under Article 3 of The Act on Special Cases
concerning the Refundment of Customs Duties, etc. Levied on Raw
Materials for Export, the refund of duties only applies to imported raw
materials that are consumed, i.e., physically incorporated, into the
finished merchandise. Items used to produce a product, but which do not
become physically incorporated into the final product, do not qualify
for duty drawback. The GOK reports that POSCO was the only producer/
exporter of the subject merchandise which received duty drawback for
inputs consumed in the production of the subject merchandise which was
subsequently exported during the POI. The raw materials imported by
POSCO to produce the subject merchandise that were eligible for duty
drawback are nickel, chrome, and stainless steel scrap.
The GOK states that in order to determine the appropriate amount of
duty drawback a producer/exporter is eligible to receive, the National
Technology Institute (NTI) routinely conducts surveys of producers of
exported products to obtain their raw material input usage rate for
manufacturing one unit of output. In determining an input usage rate
for a raw material, the NTI factors recoverable scrap into the
calculation. In addition, the loss rate for each imported input is
reflected in the input usage rate. The GOK states that the factoring of
reusable scrap into usage rates is done routinely for all products
under Korea's duty drawback regime. The NTI maintains a materials list
for each product, and only materials and sub-materials that are
physically incorporated into the final product are eligible for duty
drawback. The NTI then compiles this information into a standard usage
rate table which is used to calculate a producer/exporter's duty
drawback eligibility. The NTI most recently completed a survey of POSCO
in 1993. The GOK reports that since POSCO is the only producer of the
subject merchandise, the standard input usage rate table for the
subject merchandise is based on POSCO's actual production data.
The GOK states that there is no difference in the rate of import
duty paid and the rate of drawback received. The rate of import duty is
based on the imported materials and the rate of drawback depends on the
exported merchandise and the usage rate of the imported materials.
POSCO pays import duties based on the rate applicable to and the price
of the imported raw material. POSCO then receives duty drawback based
on the amount of that material consumed in the production of the
finished product according to the
[[Page 47262]]
standard input usage rate. Accordingly, the rate at which POSCO
receives duty drawback is the amount of import duty paid on the amount
of input consumed in producing the finished product. In Steel Products
from Korea, we determined that POSCO appropriately factored recovered
scrap into its calculated usage rates. See 58 FR at 37349.
In the current investigation, the GOK and POSCO report that the
company has not received duty drawback on imported raw materials that
were not physically incorporated in the production of exported
merchandise. They also state that the duty drawback rate applicable to
POSCO is calculated in a manner which accounts for recoverable scrap.
Based on the duty drawback studies provided in the response, the GOK
has factored recoverable scrap into the calculation of input usage
rates. In Steel Products from Korea, we found that when recoverable
scrap is factored into the usage rate, the relevant loss and waste
rates are not excessive. Based on these factors, we preliminarily
determine that POSCO has not received excessive duty drawback.
B. Tax Incentives for Highly-Advanced Technology Businesses Under the
Foreign Investment and Foreign Capital Inducement Act
C. Reserve for Investment Under Article 43-5 of TERCL
D. Export Industry Facility Loans and Special Facility Loans
E. Export Insurance Rates Provided by the Korean Export Insurance
Corporation
IV. Program Preliminarily Determined Not To Exist
Based on information provided by the GOK, we preliminarily
determine that the following program does not exist:
Unlimited Deduction of Overseas Entertainment Expenses
In Steel Products from Korea, 58 FR at 37348-49, the Department
determined that this program conferred benefits which constituted
countervailable subsidies because the entertainment expense deductions
were unlimited only for export business activities. In the present
investigation, the GOK reported that Article 18-2(5) of the Corporate
Tax Law, which provided that Korean exporters could deduct overseas
entertainment expenses without any limits, was repealed by the
revisions to the law dated December 29, 1995. According to the GOK,
beginning with the 1996 fiscal year, a company's domestic and overseas
entertainment expenses are deducted within the same aggregate sum
limits as set by the GOK. As a result of the revision to the law,
overseas entertainment expenses are now treated in the same fashion as
domestic expenses in calculating a company's income tax. Therefore, we
determine that this program is no longer in existence.
Verification
In accordance with section 782(i)(1) of the Act, we will verify the
information submitted by respondents prior to making our final
determination.
Summary
In accordance with section 703(d)(1)(A)(i) of the Act, we
calculated an individual subsidy rate for POSCO, the sole manufacturer
of the subject merchandise. We preliminarily determine that the total
estimated net countervailable subsidy rate is 0.69 percent ad valorem,
which is de minimis. Therefore, we preliminarily determine that no
countervailable subsidies are being provided to the production or
exportation of stainless steel plate in coils in Korea.
We also note that pursuant to section 705(a)(1) of the Act, this
investigation is now aligned with the antidumping investigations of
stainless steel plate in coils.
ITC Notification
In accordance with section 703(f) of the Act, we will notify the
ITC of our determination. In addition, we are making available to the
ITC all nonprivileged and nonproprietary information relating to this
investigation. We will allow the ITC access to all privileged and
business proprietary information in our files, provided the ITC
confirms that it will not disclose such information, either publicly or
under an administrative protective order, without the written consent
of the Assistant Secretary, Import Administration.
In accordance with section 705(b)(3) of the Act, if our final
determination is affirmative, the ITC will make its final determination
within 75 days after the Department makes its final determination.
Public Comment
In accordance with 19 C.F.R. 351.310, we will hold a public
hearing, if requested, to afford interested parties an opportunity to
comment on this preliminary determination. The hearing is tentatively
scheduled to be held 57 days from the date of publication of the
preliminary determination at the U.S. Department of Commerce, 14th
Street and Constitution Avenue, N.W., Washington, D.C. 20230.
Individuals who wish to request a hearing must submit a written request
within 30 days of the publication of this notice in the Federal
Register to the Assistant Secretary for Import Administration, U.S.
Department of Commerce, Room 1870, 14th Street and Constitution Avenue,
N.W., Washington, D.C. 20230. Parties should confirm by telephone the
time, date, and place of the hearing 48 hours before the scheduled
time.
Requests for a public hearing should contain: (1) The party's name,
address, and telephone number; (2) the number of participants; and, (3)
to the extent practicable, an identification of the arguments to be
raised at the hearing. In addition, six copies of the business
proprietary version and six copies of the nonproprietary version of the
case briefs must be submitted to the Assistant Secretary no later than
50 days from the date of publication of the preliminary determination.
As part of the case brief, parties are encouraged to provide a summary
of the arguments not to exceed five pages and a table of statutes,
regulations, and cases cited. Six copies of the business proprietary
version and six copies of the nonproprietary version of the rebuttal
briefs must be submitted to the Assistant Secretary no later than 55
days from the date of publication of the preliminary determination. An
interested party may make an affirmative presentation only on arguments
included in that party's case or rebuttal briefs. Written arguments
should be submitted in accordance with 19 CFR 351.309 and will be
considered if received within the time limits specified above.
This determination is published pursuant to sections 703(f) and
777(i) of the Act.
Dated: August 28, 1998.
Joseph A. Spetrini,
Acting Assistant Secretary for Import Administration.
[FR Doc. 98-23913 Filed 9-3-98; 8:45 am]
BILLING CODE 3510-DS-P