[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