[Federal Register Volume 64, Number 109 (Tuesday, June 8, 1999)]
[Notices]
[Pages 30636-30664]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-13769]


-----------------------------------------------------------------------

DEPARTMENT OF COMMERCE

International Trade Administration
[C-580-835]


Final Affirmative Countervailing Duty Determination: Stainless 
Steel Sheet and Strip in Coils From the Republic of Korea

AGENCY: Import Administration, International Trade Administration, 
Department of Commerce

EFFECTIVE DATE: June 8, 1999.

FOR FURTHER INFORMATION CONTACT: Eva Temkin or Richard Herring, 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.

Final Determination

    The Department of Commerce (the Department) determines that 
countervailable subsidies are being provided to certain producers and 
exporters of stainless steel sheet and strip in coils from the Republic 
of Korea. For information on the estimated countervailing duty rates, 
please see the ``Suspension of Liquidation'' section of this notice.

Petitioners

    The petition in this investigation was filed by Allegheny Ludlum 
Corporation, Armco, Inc., J&L Specialty Steel, Inc., Washington Steel 
Division of Bethlehem Steel Corporation, United Steelworkers of 
America, AFL-CIO/CLC, Butler Armco Independent Union, and Zanesville 
Armco Independent Organization, Inc. (collectively referred to 
hereinafter as the petitioners).

Case History

    Since the publication of our preliminary determination in this 
investigation on November 17, 1998 (Preliminary Affirmative 
Countervailing Duty Determination and Alignment of Final Countervailing 
Duty Determination With Final Antidumping Duty Determination: Stainless 
Steel Sheet and Strip in Coils from the Republic of Korea, 63 FR 63884 
(Preliminary Determination)), the following events have occurred:

[[Page 30637]]

    We conducted verification of the countervailing duty questionnaire 
responses from February 2 through February 12, 1999. In addition, 
portions of the questionnaire responses were verified from December 3 
through December 18, 1998, during our verification of the 
countervailing duty investigation of Stainless Steel Plate in Coils 
from Korea. Because the final determination of this countervailing duty 
investigation was aligned with the final antidumping duty determination 
(see 63 FR at 63885), and the final antidumping duty determination was 
postponed (see 64 FR 137), the Department on January 13, 1999, extended 
the final determination of this countervailing duty investigation until 
no later than May 19, 1999 (see 64 FR 2195). On January 27, February 2, 
10, and 12, April 12 and 13, 1999, the Department released its 
verification reports to all interested parties.
    The Department issued decision memoranda on the issue of direction 
of credit by the Government of Korea (GOK) and the operations of the 
Korean domestic bond market on March 4 and March 9, 1999, respectively, 
during the countervailing duty investigation of Stainless Steel Plate 
in Coils from the Republic of Korea. See Final Negative Countervailing 
Duty Determination: Stainless Steel Plate in Coils from the Republic of 
Korea, 64 FR 15530, 15533 (March 31, 1999) (Stainless Steel Plate from 
Korea). These memoranda were placed on the record in this investigation 
on March 31, 1999. Petitioners and respondents filed case briefs on 
April 21, 1999, and rebuttal briefs were filed on April 28, 1999.

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 CFR Part 351 (April 1998).

Scope of Investigation

    We have made minor corrections to the scope language excluding 
certain stainless steel foil for automotive catalytic converters and 
certain specialty stainless steel products in response to comments by 
interested parties.
    For purposes of this investigation, the products covered are 
certain stainless steel sheet and strip 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 sheet and strip is a flat-rolled product in coils that is 
greater than 9.5 mm in width and less than 4.75 mm in thickness, and 
that is annealed or otherwise heat treated and pickled or otherwise 
descaled. The subject sheet and strip may also be further processed 
(e.g., cold-rolled, polished, aluminized, coated, etc.) provided that 
it maintains the specific dimensions of sheet and strip following such 
processing.
    The merchandise subject to this investigation is classified in the 
Harmonized Tariff Schedule of the United States (HTS) at subheadings: 
7219.13.00.30, 7219.13.00.50, 7219.13.00.70, 7219.13.00.80, 
7219.14.00.30, 7219.14.00.65, 7219.14.00.90, 7219.32.00.05, 
7219.32.00.20, 7219.32.00.25, 7219.32.00.35, 7219.32.00.36, 
7219.32.00.38, 7219.32.00.42, 7219.32.00.44, 7219.33.00.05, 
7219.33.00.20, 7219.33.00.25, 7219.33.00.35, 7219.33.00.36, 
7219.33.00.38, 7219.33.00.42, 7219.33.00.44, 7219.34.00.05, 
7219.34.00.20, 7219.34.00.25, 7219.34.00.30, 7219.34.00.35, 
7219.35.00.05, 7219.35.00.15, 7219.35.00.30, 7219.35.00.35, 
7219.90.00.10, 7219.90.00.20, 7219.90.00.25, 7219.90.00.60, 
7219.90.00.80, 7220.12.10.00, 7220.12.50.00, 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, 
7220.20.70.05, 7220.20.70.10, 7220.20.70.15, 7220.20.70.60, 
7220.20.70.80, 7220.20.80.00, 7220.20.90.30, 7220.20.90.60, 
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 Department's written description of the merchandise under 
investigation is dispositive.
    Excluded from the scope of this investigation are the following: 
(1) Sheet and strip that is not annealed or otherwise heat treated and 
pickled or otherwise descaled, (2) sheet and strip that is cut to 
length, (3) plate (i.e., flat-rolled stainless steel products of a 
thickness of 4.75 mm or more), (4) flat wire (i.e., cold-rolled 
sections, with a prepared edge, rectangular in shape, of a width of not 
more than 9.5 mm), and (5) razor blade steel. Razor blade steel is a 
flat-rolled product of stainless steel, not further worked than cold-
rolled (cold-reduced), in coils, of a width of not more than 23 mm and 
a thickness of 0.266 mm or less, containing, by weight, 12.5 to 14.5 
percent chromium, and certified at the time of entry to be used in the 
manufacture of razor blades. See Chapter 72 of the HTS, ``Additional 
U.S. Note'' 1(d).
    In response to comments by interested parties, the Department has 
determined that certain specialty stainless steel products are also 
excluded from the scope of this investigation. These excluded products 
are described below.
    Flapper valve steel is defined as stainless steel strip in coils 
containing, by weight, between 0.37 and 0.43 percent carbon, between 
1.15 and 1.35 percent molybdenum, and between 0.20 and 0.80 percent 
manganese. This steel also contains, by weight, phosphorus of 0.025 
percent or less, silicon of between 0.20 and 0.50 percent, and sulfur 
of 0.020 percent or less. The product is manufactured by means of 
vacuum arc remelting, with inclusion controls for sulphide of no more 
than 0.04 percent and for oxide of no more than 0.05 percent. Flapper 
valve steel has a tensile strength of between 210 and 300 ksi, yield 
strength of between 170 and 270 ksi, plus or minus 8 ksi, and a 
hardness (Hv) of between 460 and 590. Flapper valve steel is most 
commonly used to produce specialty flapper valves in compressors.
    Also excluded is a product referred to as suspension foil, a 
specialty steel product used in the manufacture of suspension 
assemblies for computer disk drives. Suspension foil is described as 
302/304 grade or 202 grade stainless steel of a thickness between 14 
and 127 microns, with a thickness tolerance of plus-or-minus 2.01 
microns, and surface glossiness of 200 to 700 percent Gs. Suspension 
foil must be supplied in coil widths of not more than 407 mm, and with 
a mass of 225 kg or less. Roll marks may only be visible on one side, 
with no scratches of measurable depth. The material must exhibit 
residual stresses of 2 mm maximum deflection, and flatness of 1.6 mm 
over 685 mm length.
    Certain stainless steel foil for automotive catalytic converters is 
also excluded from the scope of this investigation. This stainless 
steel strip in coils is a specialty foil with a thickness of between 20 
and 110 microns used to produce a metallic substrate with a honeycomb 
structure for use in automotive catalytic converters. The steel 
contains, by weight, carbon of no more than 0.030 percent, silicon of 
no more than 1.0 percent, manganese of no more than 1.0 percent, 
chromium of between 19 and 22 percent, aluminum of no less than 5.0 
percent, phosphorus of no more than 0.045 percent, sulfur of no more 
than 0.03 percent, lanthanum of less than

[[Page 30638]]

0.002 or greater than 0.05 percent, and total rare earth elements of 
more than 0.06 percent, with the balance iron.
    Permanent magnet iron-chromium-cobalt alloy stainless strip is also 
excluded from the scope of this investigation. This ductile stainless 
steel strip contains, by weight, 26 to 30 percent chromium, and 7 to 10 
percent cobalt, with the remainder of iron, in widths 228.6 mm or less, 
and a thickness between 0.127 and 1.270 mm. It exhibits magnetic 
remanence between 9,000 and 12,000 gauss, and a coercivity of between 
50 and 300 oersteds. This product is most commonly used in electronic 
sensors and is currently available under proprietary trade names such 
as ``Arnokrome III.'' 1
---------------------------------------------------------------------------

    \1\ ``Arnokrome III'' is a trademark of the Arnold Engineering 
Company.
---------------------------------------------------------------------------

    Certain electrical resistance alloy steel is also excluded from the 
scope of this investigation. This product is defined as a non-magnetic 
stainless steel manufactured to American Society of Testing and 
Materials (``ASTM'') specification B344 and containing, by weight, 36 
percent nickel, 18 percent chromium, and 46 percent iron, and is most 
notable for its resistance to high temperature corrosion. It has a 
melting point of 1390 degrees Celsius and displays a creep rupture 
limit of 4 kilograms per square millimeter at 1000 degrees Celsius. 
This steel is most commonly used in the production of heating ribbons 
for circuit breakers and industrial furnaces, and in rheostats for 
railway locomotives. The product is currently available under 
proprietary trade names such as ``Gilphy 36.'' 2
---------------------------------------------------------------------------

    \2\ ``Gilphy 36'' is a trademark of Imphy, S.A.
---------------------------------------------------------------------------

    Certain martensitic precipitation-hardenable stainless steel is 
also excluded from the scope of this investigation. This high-strength, 
ductile stainless steel product is designated under the Unified 
Numbering System (``UNS'') as S45500-grade steel, and contains, by 
weight, 11 to 13 percent chromium, and 7 to 10 percent nickel. Carbon, 
manganese, silicon and molybdenum each comprise, by weight, 0.05 
percent or less, with phosphorus and sulfur each comprising, by weight, 
0.03 percent or less. This steel has copper, niobium, and titanium 
added to achieve aging, and will exhibit yield strengths as high as 
1700 Mpa and ultimate tensile strengths as high as 1750 Mpa after 
aging, with elongation percentages of 3 percent or less in 50 mm. It is 
generally provided in thicknesses between 0.635 and 0.787 mm, and in 
widths of 25.4 mm. This product is most commonly used in the 
manufacture of television tubes and is currently available under 
proprietary trade names such as ``Durphynox 17.'' 3
---------------------------------------------------------------------------

    \3\ ``Durphynox 17'' is a trademark of Imphy, S.A.
---------------------------------------------------------------------------

    Finally, three specialty stainless steels typically used in certain 
industrial blades and surgical and medical instruments are also 
excluded from the scope of this investigation. These include stainless 
steel strip in coils used in the production of textile cutting tools 
(e.g., carpet knives).4 This steel is similar to AISI grade 
420 but containing, by weight, 0.5 to 0.7 percent of molybdenum. The 
steel also contains, by weight, carbon of between 1.0 and 1.1 percent, 
sulfur of 0.020 percent or less, and includes between 0.20 and 0.30 
percent copper and between 0.20 and 0.50 percent cobalt. This steel is 
sold under proprietary names such as ``GIN4 Mo.'' The second excluded 
stainless steel strip in coils is similar to AISI 420-J2 and contains, 
by weight, carbon of between 0.62 and 0.70 percent, silicon of between 
0.20 and 0.50 percent, manganese of between 0.45 and 0.80 percent, 
phosphorus of no more than 0.025 percent and sulfur of no more than 
0.020 percent. This steel has a carbide density on average of 100 
carbide particles per 100 square microns. An example of this product is 
``GIN5'' steel. The third specialty steel has a chemical composition 
similar to AISI 420 F, with carbon of between 0.37 and 0.43 percent, 
molybdenum of between 1.15 and 1.35 percent, but lower manganese of 
between 0.20 and 0.80 percent, phosphorus of no more than 0.025 
percent, silicon of between 0.20 and 0.50 percent, and sulfur of no 
more than 0.020 percent. This product is supplied with a hardness of 
more than Hv 500 guaranteed after customer processing, and is supplied 
as, for example, ``GIN6''.5
---------------------------------------------------------------------------

    \4\ This list of uses is illustrative and provided for 
descriptive purposes only.
    \5\ ``GIN4 Mo,'' ``GIN5'' and ``GIN6'' are the proprietary 
grades of Hitachi Metals America, Ltd.
---------------------------------------------------------------------------

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 August 9, 1998, the 
ITC announced its preliminary 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 Sheet and 
Strip from France, Germany, Italy, Japan, the Republic of Korea, 
Mexico, Taiwan and the United Kingdom, 63 FR 41864 (August 9, 1998)).

Period of Investigation

    The period of investigation for which we are measuring subsidies 
(the POI) is calendar year 1997.

Use of Facts Available

    As discussed in our preliminary determination, both Sammi Steel 
Co., Ltd. (Sammi) and Taihan Electric Wire Co., Ltd. (Taihan), two 
producers of subject merchandise, failed to respond to the Department's 
questionnaire. See Preliminary Determination. Since the preliminary 
determination in this investigation we have not been presented with new 
information on this issue. Therefore, we have continued to find that 
Sammi and Taihan each have failed to cooperate to the best of their 
abilities, and, in accordance with 776(b) of the Act, have continued to 
apply an adverse facts available (AFA) rate to these two companies. 
This rate was based on the petition, as well as our findings 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), and 
additional findings in this proceeding.
    In Steel Products from Korea, we determined a country-wide ad 
valorem subsidy rate of 4.64 percent based on many of the same programs 
alleged in this case. Therefore, we are using the highest published ad 
valorem rate of 4.64 percent that was calculated in Steel Products from 
Korea as representative of the benefits from the industry-wide 
subsidies alleged in this petition, and received by the other 
respondents in this investigation. In addition, we are also applying a 
facts available rate to Sammi and Taihan for a subsidy program newly 
examined in this investigation, POSCO's two-tiered pricing structure to 
domestic customers. We found this program to be countervailable, and 
calculated company-specific program rates for Dai Yang and Inchon; as 
discussed below, we used Inchon's calculated rate for this program as 
adverse facts available for Sammi and Taihan. (A detailed discussion of 
this program can be found in the ``Programs Determined to be 
Countervailable'' section of this notice.)
    Therefore, in Taihan's case, we used the 4.64 rate from Steel 
Products from Korea because the subsidy programs alleged in this 
investigation, with the exception of the one new allegation, are

[[Page 30639]]

virtually identical to the programs for which the 4.64 rate in Steel 
Products from Korea was calculated. In addition, in accordance with 
section 776(b)(4) of the Act, for the two-tiered pricing program, we 
are applying the highest calculated company-specific rate for this 
program to Taihan as adverse facts available, 2.36 percent ad valorem, 
the company-specific program rate for Inchon. We added this 2.36 
percent rate to the 4.64 percent rate (representing the program rates 
of the other subsidy allegations) to arrive at a total ad valorem rate 
of 7.00 percent as adverse facts available for Taihan.
    In Sammi's case, in addition to applying the 4.64 rate from Steel 
Products from Korea for most of the programs covered in this 
investigation and the 2.36 rate for POSCO's two-tiered pricing 
structure, we calculated a rate for one other program that was not 
previously investigated: POSCO's purchase of Sammi Specialty Steel. 
This program is addressed below in the ``Programs Determined to be 
Countervailable'' section of this notice. We used information provided 
in the petition, in the verification reports of POSCO and the 
Government of Korea, in POSCO's questionnaire responses, and additional 
information placed on the record of this investigation, for the 
calculation of the program rate for POSCO's purchase of Sammi Specialty 
Steel. We then added the rate calculated for this program and the rate 
representing the subsidy conferred by POSCO's two-tiered pricing 
structure to the other programs' rate of 4.64 percent ad valorem 
calculated in Steel Products from Korea, which is representative of the 
benefits from the other industry-wide subsidies alleged in the petition 
and received by the other respondents. We thus arrived at a total ad 
valorem rate of 59.30 percent as adverse facts available for Sammi.
    Petitioners also alleged that Sammi benefitted from two other 
company-specific subsidies: (1) A ``national subsidy'' and (2) 1992 
emergency loans. With respect to the alleged ``national subsidy,'' we 
have not deviated from the methodology established in the Preliminary 
Determination. We continue to treat this ``national subsidy'' as a 
grant bestowed upon Sammi, and employ the Department's grant 
methodology. See the General Issues Appendix, which is appended to the 
Final Affirmative Countervailing Duty Determination: Certain Steel 
Products from Austria, 58 FR 37225, 37227 (July 9, 1993) (GIA). Because 
the total amount of the national subsidy is less than 0.50 percent of 
Sammi's 1993 sales, the subsidy was expensed in the year of receipt. 
Thus, there is no benefit under this program during the POI.
    The petitioners also alleged that in 1992 the GOK directed a 
package of 132 billion won in ``emergency loans'' to Sammi in order to 
save the company from bankruptcy. In our preliminary determination we 
calculated a separate subsidy rate for this allegation. However, we 
have reconsidered this facts available calculation in this final 
determination. In Steel Products from Korea, we investigated the 
allegation that the GOK directs banks in Korea to provide loans to the 
steel industry. This program was determined to be countervailable, and 
a calculated subsidy rate for this program is included as part of the 
facts available rate applied in this determination. Because we have 
already accounted for the subsidy provided by the GOK's direction of 
credit in our facts available rate taken from Steel Products from 
Korea, we have not calculated an additional subsidy rate for this 
allegation.
    The Statement of Administrative Action accompanying the URAA 
clarifies that information from the petition and prior segments of the 
proceeding is ``secondary information.'' See Statement of 
Administrative Action, accompanying H.R. 5110 (H.R. Doc. No. 103-316) 
(1994) (SAA), at 870. If the Department relies on secondary information 
as facts available, section 776(c) of the Act provides that the 
Department shall, to the extent practicable, corroborate such 
information using independent sources reasonably at its disposal. The 
SAA further provides that to corroborate secondary information means 
simply that the Department will satisfy itself that the secondary 
information to be used has probative value. However, where 
corroboration is not practicable, the Department may use uncorroborated 
information.
    With respect to the programs for which we did not receive 
information from uncooperative respondents, the information was 
corroborated either through the exhibits attached to the petition or by 
reviewing determinations in other proceedings in which we found 
virtually identical programs in the same country to be countervailable. 
Specifically, with respect to Taihan, the programs alleged in the 
current investigation were virtually identical to those found to be 
countervailable in Steel Products from Korea. We were unable to 
corroborate the rate we used for Taihan, because the petition did not 
contain countervailing duty rate information for these programs. 
Therefore, it was not practicable to corroborate such a rate. However, 
we note that the SAA at 870 specifically states that where 
``corroboration may not be practicable in a given circumstance,'' the 
Department may nevertheless apply an adverse inference. Further, in 
Sammi's case (in addition to the programs from Steel Products from 
Korea discussed above), we corroborated the newly-alleged programs with 
the information provided in the petition, i.e., Sammi's financial 
statements for years 1993 through 1996, and numerous public press 
articles. Specifically, Sammi's financial statements show a line item 
entitled ``national subsidy.'' The financial statements further 
indicate that Sammi's debt burden was very high and that the company 
was not making interest payments that reflected the significant debt 
load. This demonstrates that the GOK may have entrusted or directed 
government and/or commercial banks to provide the type of emergency 
loan package to Sammi in 1992 that was alleged in the petition. 
Moreover, news articles indicate that the GOK was trying to rescue 
Sammi, and that this effort included both the emergency loans in 1992 
and POSCO's purchase of Sammi Specialty Steel.
    Additionally, the Department initiated an investigation with 
respect to a fourth new allegation, ``Financial Assistance in 
Conjunction with the 1997 Sammi Steel Company Bankruptcy.'' The 
petitioners alleged that the GOK mitigated the effects of Sammi's 
bankruptcy with the use of countervailable subsidies. According to 
petitioners, when Sammi filed for receivership in March 1997, the GOK: 
(1) Provided grants and other rescue aid which were directed through a 
consortium of Sammi's rivals, and (2) rescheduled Sammi's debt through 
a combination of loan forgiveness and reduced interest rate loans.
    We requested information concerning this program from the GOK and 
Sammi. While Sammi chose not to cooperate in this investigation, the 
GOK responded to the Department's questionnaires, stating that there 
was no consortium and that no grants were provided to Sammi. The GOK 
further stressed that Sammi's debt was addressed in the context of 
normal bankruptcy proceedings. In our preliminary determination we 
calculated no benefit from this program, but we stated we would 
continue to seek information that would enable us to make a facts 
available determination about this program in our final determination. 
Therefore, during our verification of POSCO, we examined various 
accounts of POSCO to determine whether POSCO provided any assistance to 
Sammi

[[Page 30640]]

similar to that alleged by petitioners. We did not find a provision of 
assistance to Sammi or write-off of Sammi's debt by POSCO. In addition, 
during our verification of the Government of Korea, we examined Sammi's 
Bankruptcy Reorganization Plan, which included Sammi's 1997 balance 
sheet and income statement. Our examination of these documents revealed 
no government assistance to Sammi in the form of grants or write-off of 
debt. Therefore, we have not calculated a subsidy rate for this 
allegation. However, because Sammi did not respond to our request for 
information, we will continue to examine this allegation in any 
subsequent administrative review.

Subsidies Valuation Information

    Benchmarks for Long-term Loans and Discount Rates: During the POI, 
the respondent companies had both won-denominated and foreign currency-
denominated long-term loans outstanding which had been received from 
government-owned banks, Korean commercial banks, overseas banks, and 
foreign banks with branches in Korea. A number of these loans were 
received prior to 1992. In the 1993 investigation of Steel Products 
from Korea, the Department determined that, through 1991, the GOK 
influenced the practices of lending institutions in Korea and 
controlled access to overseas foreign currency loans. See Certain Steel 
Products from Korea, 58 FR at 37338, and the ``Direction of Credit'' 
section below. In that investigation, we determined that the best 
indicator of a market rate for long-term loans in Korea was the three-
year corporate bond rate on the secondary market. Therefore, in the 
final determination of this investigation, we used the three-year 
corporate bond rate on the secondary market as our benchmark to 
calculate the benefits which the respondent companies received from 
direct foreign currency loans and domestic foreign currency loans 
obtained prior to 1991, and still outstanding during the POI. These 
rates were reported by the GOK in its September 10, 1998, questionnaire 
response (public version on file in the Department's Central Records 
Unit, Room B-099).
    For years in which the companies under investigation have been 
deemed uncreditworthy, we calculated the discount rates according to 
the methodology described in the GIA. Specifically, due to the 
necessary use of adverse facts available with regard to Sammi, we used 
the highest commercial bank loan interest rates available, and added a 
risk premium equal to 12 percent of the commercial lending rate, in 
accordance with the methodology outlined in the GIA.
    In this investigation, the Department also examined whether the GOK 
continued to control and/or influence the practices of lending 
institutions in Korea between 1992 and 1997. Based on our findings, 
discussed below in the ``Direction of Credit'' section of this notice, 
we are using the following benchmarks to calculate the companies' 
benefit from long-term loans obtained in the years 1992 through 1997: 
(1) For countervailable, foreign-currency denominated loans, we are 
using, where available, company-specific, weighted-average U.S. dollar-
denominated interest rates on the companies' loans from foreign bank 
branches in Korea; and (2) for countervailable won-denominated loans, 
where available, we are using company-specific three-year corporate 
bond rates. Where unavailable, we continue to use a national average 
three-year corporate bond rate on the secondary market, consistent with 
our preliminary determination. We are also using three-year company-
specific corporate bond rates, where applicable, as discount rates to 
determine the benefit from non-recurring subsidies received between 
1992 and 1997.
    We continue to find that the Korean domestic bond market was not 
controlled by the GOK during the period 1992 through 1997, and that 
domestic bonds serve as an appropriate benchmark interest rate. See 
Analysis Memorandum on the Korean Domestic Bond Market, dated March 9, 
1999 (public document on file in the Department's Central Records Unit, 
Room B-099 (CRU)). On February 5, 1999, POSCO, Inchon, and Dai Yang 
submitted information in response to the Department's request for the 
companies' average interest rate on corporate bonds for each year 1992 
through 1997. See POSCO's February 5, 1999 questionnaire response, 
Inchon's February 5, 1999 questionnaire response, and Dai Yang's 
February 5, 1999 questionnaire response (public versions on file in the 
CRU). Dai Yang had no corporate bonds (other than a previously reported 
convertible bond) issued during the period 1992-1997; therefore, we 
continue to use the national-average three-year corporate bond rate as 
a benchmark for this company. Additionally, Inchon had not issued any 
bonds prior to 1997; thus, we continue to use the national-average 
three-year corporate bond rates as a benchmark for Inchon between 1992 
and 1996. Because POSCO was unable to retrieve data on the bond 
issuance fees the company paid in the years 1992 through 1996, we have 
added to the average interest rate for each of those years the bond 
issuance fees that POSCO paid in 1997.
    Dai Yang did not have U.S. dollar loans from foreign bank branches 
in Korea. Therefore, we had to rely on a dollar loan benchmark that is 
not company-specific, but provides a reasonable representation of 
industry practice, to determine whether a benefit was provided to Dai 
Yang from dollar loans received from government banks and Korean 
domestic banks. Our first alternative was to use a national-average 
benchmark, but we were unable to identify a national-average dollar 
benchmark from foreign bank branches in Korea. Therefore, we used the 
interest rates on dollar loans from foreign bank branches in Korea 
received by another respondent in this investigation, Inchon, as a 
benchmark for Dai Yang's dollar loans from government banks and Korean 
domestic banks. For a further discussion on our selection of a dollar-
loan benchmark for Dai Yang, see Comment 9.
    Benchmarks for Short-Term Financing: For those programs which 
require the application of a short-term interest rate benchmark, we 
used as our benchmark company-specific weighted-average interest rates 
for commercial won-denominated loans for the POI. Each respondent 
provided to the Department its respective company-specific, short-term 
commercial interest rate.
    Allocation Period: In the Preliminary Determination, we allocated 
nonrecurring subsidies received by POSCO and Sammi over 15 years. (No 
other company received nonrecurring subsidies.) We invited interested 
parties to comment on this allocation period. We received no objections 
from the interested parties on the use of a 15 year allocation period. 
Therefore, for the reasons specified in the Preliminary Determination 
and in the Final Negative Countervailing Duty Determination: Stainless 
Steel Plate in Coils From the Republic of Korea, 64 FR 15530, 15531 
(March 31, 1999), we continue to determine that the appropriate 
allocation period is 15 years for this investigation.
    Treatment of Subsidies Received by Trading Companies: 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 of the subject merchandise. Subsidies conferred on the 
production and exportation of subject merchandise benefit the subject 
merchandise even if the merchandise is exported to the

[[Page 30641]]

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. During 
the POI, POSCO and Inchon exported subject merchandise to the United 
States through trading companies. We required that the trading 
companies provide responses to the Department with respect to the 
export subsidies under investigation.
    We continue to find that 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 trading companies are not affiliated with POSCO. 
Additionally, according to its response, Inchon is affiliated with one 
of the trading companies, Hyundai. This reported affiliation is based 
upon cross-shareholdings and common board members within the Hyundai 
group. The trading company, Hyundai, responded to the Department's 
questionnaire concerning subsidies that it had received during the POI. 
In the current proceeding, the status of affiliation does not affect 
the inclusion of subsidies provided to trading companies in the 
respondents' calculated subsidy rates. Therefore, we are not making a 
determination of affiliation of Inchon and Hyundai within the meaning 
of section 771(33) of the Act.
    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 the Preliminary Determination of this investigation, we 
determined that it was not appropriate to establish combination rates. 
This determination was based on two main facts: first, the majority of 
the subsidies conferred upon the subject merchandise were received by 
the producers; second, the difference in the levels of subsidies 
conferred upon individual trading companies with regard to the subject 
merchandise is insignificant. Combination rates would serve no 
practicable purpose because the calculated subsidy rate for a producer 
and a combination of any of the trading companies would effectively be 
the same rate. As no new information has been presented since the 
Preliminary Determination which would cause us to reconsider this 
methodology, we are not calculating combination rates in the final 
determination of this investigation.
    Instead, we have continued to calculate rates for the producers of 
subject merchandise that include the subsidies received by the trading 
companies. To reflect those subsidies that are received by the 
exporters of the subject merchandise in the calculated ad valorem 
subsidy rate, we used the following methodology: for each of the seven 
trading companies, we calculated the benefit attributable to the 
subject merchandise. We then factored that amount into the calculated 
subsidy rate for the relevant producer. In each case, we determined the 
benefit received by the trading companies for each export subsidy, and 
weighted the average of the benefit amounts by the relative share of 
each trading company's value of exports of the subject merchandise to 
the United States. These calculated ad valorem subsidies were then 
added to the subsidies calculated for the producers of subject 
merchandise. Thus, for each of the programs below, the listed ad 
valorem subsidy rate includes countervailable subsidies received by 
both the producing and trading companies.

Creditworthiness

    As discussed in the Preliminary Determination, we initiated an 
investigation of Inchon's creditworthiness from 1991 through 1997, and 
of Sammi's creditworthiness from 1990 to 1997, to the extent that 
nonrecurring grants, long-term loans, or loan guarantees were provided 
in those years. In the Preliminary Determination, we found Inchon to be 
creditworthy, but we found Sammi to be uncreditworthy for the years 
1990 through 1997. We received no comments from the interested parties 
relating to our analysis of Inchon's and Sammi's creditworthiness. 
Thus, for the reasons specified in the Preliminary Determination, we 
determine that Inchon is creditworthy and that Sammi is uncreditworthy 
for the years 1990 through 1997. See Preliminary Determination, 63 FR 
at 63888.

I. Programs 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) that the GOK regulated long-term 
loans provided to the steel industry on a selective basis; and (3) that 
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. See 58 FR at 37339.
    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 the conferral of countervailable 
benefits 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 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

[[Page 30642]]

determination in Steel Products from Korea. Therefore, we 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 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 
at 925. 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 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 
consistent with our determination in Steel Products from Korea. See 58 
FR at 37342.
    POSCO, Inchon and Dai Yang all received long-term loans prior to 
1992 that remained outstanding during the POI. These included loans 
with both fixed and variable interest rates for all three responding 
companies. To determine the benefits 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 
the 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 all of the loans attributable to the POI and divided the 
total benefit by each company's total sales. On this basis, we 
determine the countervailable subsidy rates to be 0.17 percent ad 
valorem for POSCO, 0.06 percent ad valorem for Inchon, and 0.04 percent 
ad valorem for Dai Yang.
    2. The GOK's Credit Policies From 1992 Through 1997.
    The Department's preliminary analysis of the GOK's credit policies 
from 1992 through 1997 is contained in the March 4, 1999, Memorandum 
Re: Analysis Concerning Post 1991 Direction of Credit, on file in the 
CRU (Credit Memo). As detailed in the Credit Memo, the Department 
preliminarily determined that the GOK continued to control directly and 
indirectly the lending practices of most sources of credit in Korea 
through the POI. The Department also preliminarily determined that GOK-
regulated credit from domestic commercial banks and government-
controlled banks such as the Korea Development Bank (KDB) was specific 
to the steel industry. This credit conferred a benefit on the producer/
exporters of the subject merchandise in accordance with section 
771(5)(E)(ii) of the Act, because the interest rates on the 
countervailable loans were less than the interest rates on comparable 
commercial loans. See Credit Memo at 15-17. Finally, we preliminarily 
found that access to government-regulated foreign sources of credit in 
Korea did not confer a benefit to the recipient, as defined by section 
771(5)(E)(ii) of the Act, and, as such, credit received by respondents 
from these sources was found not countervailable. This determination 
was based on the fact that credit from Korean branches of foreign banks 
were not subject to the government's control and direction. Thus, 
respondents' loans from these banks served as an appropriate benchmark 
to establish whether access to regulated foreign sources of funds 
conferred a benefit on the respondents. On the basis of that 
comparison, we found that there was no benefit. See id. at 18. The 
comments we received from the parties have not led us to change the 
basic findings detailed in the Credit Memo.
    In the preliminary determination we examined, as a separate 
program, loans provided under the Energy Savings Fund, and found that 
these loans were countervailable. See Preliminary Determination, 63 FR 
at 63890. However, on the basis of our findings detailed in the Credit 
Memo, we now determine that these loans are countervailable as directed 
credit, rather than as a separate program. These loans are policy loans 
provided by banks that are subject to the same GOK influence that is 
described in the Credit Memo. Accordingly, they are countervailable as 
directed credit, and we have included these loans in our benefit 
calculations. Thus, on the basis of our finding in the credit memo, and 
the modifications to the calculations discussed in the comments 
section, below, for the GOK's post-1991 credit policies, we determine 
the countervailable subsidy rates to be less than 0.005 percent ad 
valorem for POSCO, less than 0.005 percent ad valorem for Inchon, and 
0.08 percent ad valorem for Dai Yang.
B. Purchase of Sammi Specialty Steel Division by POSCO
    In February 1997, POSCO purchased the specialty steel bar and pipe 
division of Sammi for 719.4 billion won. This division became POSCO's 
Changwon facility. Petitioners alleged that POSCO was directed by the 
government to purchase the Sammi Specialty Steel Division as a matter 
of national interest as opposed to one of economic merit. Petitioners 
alleged that the GOK used its ownership in POSCO as a vehicle for the 
subsidization of Sammi. Thus, petitioners allege that POSCO's purchase 
of the Sammi Specialty Steel Division provided a countervailable 
benefit to Sammi.
    As noted in the ``Use of Facts Available'' section of this notice, 
Sammi did not respond to the Department's questionnaires. POSCO has 
provided certain documents relevant to this purchase, but Sammi's lack 
of response to our questionnaires means that significant portions of 
information required by the Department to analyze this program have not 
been provided. Thus, in making this determination, we have relied, in 
part, on both information provided by POSCO and information provided in 
the petition with respect to this allegation. In accordance with 
section 776(b) of the Act, the Department may use an inference that is 
adverse to the interest of a party when selecting from facts otherwise 
available when the party has failed to cooperate with a request for 
information. As discussed in the ``Use of Facts Available'' section, we 
determined that Sammi has failed to cooperate by not answering the 
Department's questionnaire.
    Based on the information on the record, we determine that the 
actions of POSCO should be considered as an action of the GOK because 
POSCO is a government-controlled company. During the POI, the GOK was 
the largest shareholder of POSCO. The shareholdings of the GOK are 
approximately ten times larger than the next largest shareholder. 
Indeed, the next two largest shareholders of POSCO are domestic banks, 
the credit of which has been determined to be directed by the GOK (see 
the ``Direction of Credit'' section of this notice). In order to 
further maintain its control over POSCO, the GOK has enacted a law, as 
well as placed into the Articles of Incorporation of POSCO, a 
requirement that no individual shareholder except the GOK can exercise 
voting rights in excess of three percent of the company's common stock. 
According to POSCO, the GOK intends to maintain the individual 
ownership limit of three percent until the end of 2001.
    In addition, the Chairman of POSCO is appointed by the GOK. The 
Chairman of POSCO during the POI was the former Deputy Prime Minister 
and the Minister of the GOK's Economic

[[Page 30643]]

Planning Board, and was appointed as POSCO's chairman by the Korean 
president. Half of POSCO's outside directors are appointed by the GOK 
and the Korean Development Bank (three by the GOK and one by the 
government-owned KDB.) During the POI, the appointed directors of POSCO 
included a Minister of Finance, the Vice Minister of the Ministry of 
Commerce and Industry, the Minister of the Ministry of Science and 
Technology, and a Member of the Bank of Korea's Monetary Board. POSCO 
is also one of three companies designated a ``Public Company'' by the 
GOK. One of the other ``Public Companies'' is the state-run utility 
company, KEPCO.
    Over the course of this investigation, we have reviewed numerous 
documents that relate to this purchase, including the valuation studies 
and the purchase contract between POSCO and Sammi. The purchase price 
of 719.4 billion won agreed upon by POSCO and Sammi included money both 
for the assets that POSCO was purchasing and for the repayment of debt 
associated with these assets. Ostensibly, Sammi used the proceeds from 
the sale to pay debts owed by its other divisions.
    Because no information was provided by Sammi with respect to this 
program, as facts available the determination of the countervailability 
of this program was based upon information gathered from POSCO, the 
GOK, information provided in the petition, and from public documents 
regarding POSCO's purchase of Sammi which have been placed on the 
record of this investigation. This information indicates that POSCO 
purchased the speciality steel division of Sammi Steel as the result of 
government pressure. The current Chairman of POSCO has confirmed that 
the POSCO purchase of Sammi's speciality steel division was the result 
of outside political pressure. The Chairman characterized POSCO's 
decision in 1997 to purchase the production facilities from Sammi in an 
attempt by the government to prevent Sammi's bankruptcy as ``a 
mistake.'' At the time of the Sammi purchase, the Chairman of POSCO had 
been appointed by the former president. In addition, at the time of the 
purchase, a POSCO director stated that the decision to purchase Sammi's 
speciality steel division ``transcends economic merit.'' Internal 
proprietary documents of POSCO (which are on the record in this 
investigation) echo this statement. At the time of the purchase, the 
company was operating at less than 60 percent of its capacity. In 
addition, Sammi had shown a profit only once since 1991 and lacked 
strong future prospects. See Memorandum to the File Re: Source 
Documents on Government Control of POSCO, Sammi Purchase by POSCO, and 
POSCO Pricing (Source Document Memo).
    Internal government auditors also examined POSCO's purchase of the 
Sammi speciality steel division. A report issued by the Board of Audit 
and Inspection (BAI) criticized POSCO's purchase of the Sammi plant. 
The BAI found fault with POSCO's investment decision resulting from 
poor feasibility studies. The BAI noted that, according to POSCO's own 
internal business plan, the internal rate of return (IRR) of new 
investments should be over 10 percent. However, the BAI noted that 
POSCO did not even examine Sammi's IRR when it decided to purchase the 
Sammi plant. The BAI concluded that Sammi's IRR is much lower than the 
minimum required by POSCO's own internal regulations for new 
investments. The BAI also stated that, in estimating the future profits 
and losses of an investment, POSCO's own internal regulations state 
that it should assume an investment's prices would remain constant for 
15 years. However, as the BAI noted with respect to the Sammi purchase, 
POSCO assumed that prices would increase two percent a year. Thus, 
profit from the purchase was overestimated. POSCO's deviation from its 
own internal regulations on estimating future profit and loss resulted 
in calculations that anticipated profits from the Sammi investment 
within four years of the purchase date. If POSCO had followed its own 
internal regulations, it would have expected to incur losses on its 
purchase of Sammi for an additional 14 years.
    In addition to noting that POSCO failed to follow its own internal 
regulations in its purchase of Sammi's speciality steel division, the 
BAI found other fundamental problems with the purchase of Sammi's 
Changwon facility. The BAI stated that at the time of the purchase of 
the Changwon plant, there was both oversupply and overproduction in the 
speciality steel industry. The BAI noted that, while supply at the time 
of the purchase was 240 million tons, the demand for speciality steel 
was only 110 million tons. Therefore, the BAI concluded that there was 
no reason for POSCO's ``hasty'' undertaking of Sammi's ``old 
equipment.'' The BAI also stated that because POSCO contracted to 
purchase the Sammi facility without clarifying the state of the 
equipment and labor force, the Changwon Tax Office and Labor Committee 
may require POSCO to pay an additional 80 billion won for both Sammi 
employees' retirement, and unforeseen tax consequences and 
administrative litigation. The BAI report also stated that POSCO paid 
Sammi 21.4 billion won for steel-making techniques that were already 
either developed by POSCO or widely used in the steel industry.
    The information on the record demonstrates that POSCO is a 
government-controlled entity; that POSCO's decision to purchase the 
Sammi speciality steel division was the result of government pressure; 
that Sammi was in poor financial straits; that POSCO failed to follow 
its own internal regulations regarding new investments when making the 
investment decision to purchase Sammi; and that, overall, the purchase 
of Sammi did not make good economic sense. For these reasons, the 
Department determines that POSCO's purchase of the Sammi speciality 
steel division provided a countervailable benefit and a financial 
contribution to Sammi under section 771(5)(D) of the Act. In accordance 
with section 771(5A)(D)(i) of the Act, we also find that this program 
is specific to Sammi.
    During verification of POSCO's questionnaire response, POSCO 
officials stated that Sammi was also trying to sell its specialty steel 
division to other companies. However, as Sammi has refused to cooperate 
in this investigation, we have no information as to whether any 
potential investor expressed an interest in purchasing Sammi's 
speciality steel division for any price. As adverse facts available, we 
are assuming that were it not for POSCO's purchase, Sammi's Changwon 
facility would not have been sold to a commercial investor due to the 
poor financial condition of the company and the overcapacity in the 
stainless steel market at the time of the POSCO purchase. In addition, 
according to POSCO's own internal guidelines regarding new investments, 
POSCO should not have purchased Sammi's Changwon facility. Further 
information on the record also demonstrates that the decision to 
purchase the stainless steel facility from Sammi was based upon 
political and government influence in order to provide funds to Sammi 
to forestall its eventual bankruptcy. The information on the record 
indicates that, absent the GOK's control of POSCO and its influence on 
POSCO's decision to purchase the Changwon facility, Sammi would not 
have been able to sell its stainless steel division; therefore, we 
consider the full amount of the purchase price paid to Sammi by POSCO 
to constitute a countervailable benefit.
    To calculate the benefit to Sammi from this purchase, we treated 
the amount of the purchase price, 719.4 billion won, as a non-recurring 
grant

[[Page 30644]]

and allocated it over the average useful life of assets in the 
industry. For a discussion of the AUL, see the ``Subsidies Valuation'' 
section of this notice. Based on this methodology, we calculated a 
countervailable subsidy of 52.30 percent ad valorem for Sammi for this 
program during the POI.
C. GOK Pre-1992 Infrastructure Investments at Kwangyang Bay
    In Steel Products from Korea, the Department investigated the GOK's 
infrastructure investments at Kwangyang Bay over the period 1983-1991. 
We determined that the GOK's provision of infrastructure at Kwangyang 
Bay was countervailable because 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.
    To calculate the benefit conferred during the POI, we applied the 
Department's standard grant methodology and allocated the GOK's 
infrastructure investments over a 15-year period. 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, the same rate 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 1983-1991. We 
then divided the total benefit attributable to the POI by POSCO's total 
sales for 1997. On this basis, we determine a net countervailable 
subsidy of 0.29 percent ad valorem for the POI.
D. Export Industry Facility Loans
    In Steel Products from Korea, 58 FR at 37328, the Department 
determined that export industry facility loans (EIFLs) are contingent 
upon export, and are therefore export subsidies to the extent that they 
are provided at preferential rates. In this investigation, we provided 
the GOK with the opportunity to present new factual information 
concerning these EIFLs, 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 continue to find that EIFLs are 
provided on the basis of export performance and are export subsidies 
under section 771(5A)(B) of the Act. We also determine that the 
provision of loans under this program results in a financial 
contribution within the meaning of section 771(5)(D)(i) of the Act. In 
accordance with section 771(5)(E)(ii) of the Act, a benefit has been 
conferred on the recipient to the extent that the EIFLs are provided at 
interest rates less than the benchmark rates described under the 
``Subsidies Valuation'' section, above. We note that this program is 
also countervailable due to the GOK's direction of credit; however, we 
have separated this program from direction of credit because it is an 
export subsidy, and therefore requires a different benefit calculation.
    Dai Yang was the only respondent with outstanding loans under this 
program during the POI. To calculate the benefit conferred by this 
program, we compared the actual interest paid on the loan with the 
amount of interest that would have been paid at the applicable dollar-
denominated long term benchmark interest rate as discussed in the 
``Subsidies Valuation'' section, above. When the interest that would 
have been paid at the benchmark rate exceeds the interest that was paid 
at the program interest rate, the difference between those amounts is 
the benefit. We divided the benefits derived from the loans by total 
export sales. On this basis, we determine that Dai Yang received from 
this program during the POI a countervailable subsidy of 0.08 percent 
ad valorem.
E. Short-Term Export Financing
    The Department determined that the GOK's short-term export 
financing program was countervailable in Steel Products from Korea (see 
58 FR at 37350). During the POI, POSCO and Dai Yang were the only 
producers or exporters of the subject merchandise that used export 
financing.
    In accordance with section 771(5A)(B) of the Act, this program 
constitutes an export subsidy because receipt of the financing is 
contingent upon export performance. A financial contribution is 
provided under this program within the meaning of section 771(5)(D)(i) 
of the Act in the form of a loan. To determine whether this export 
financing program confers a countervailable benefit to POSCO and Dai 
Yang, we compared the interest rate POSCO and Dai Yang paid on the 
export financing received under this program during the POI with the 
interest rate each company 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 and Dai Yang on their export financing is a discounted 
rate. Therefore, it was necessary to derive a discounted benchmark 
interest rate from POSCO's and Dai Yang's company-specific weighted-
average interest rate for short-term won-denominated commercial loans. 
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 rate. In accordance with 
section 771(5)(E)(ii) of the Act, we determine that this program 
confers a countervailable benefit because the interest rates charged on 
the loans were less than what POSCO and Dai Yang 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 and Dai 
Yang were unable to segregate their export financing applicable only to 
subject merchandise exported to the United States, we divided the 
benefit derived from the loans by total exports. On this basis, we 
determine a net countervailable subsidy of less than 0.005 percent ad 
valorem for POSCO, and 0.04 percent ad valorem for Dai Yang.

[[Page 30645]]

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, Dai Yang, Inchon, Samsun, Samsung, Sunkyong, and Daewoo 
used this program. Although POSCO did not use this program during the 
POI, its exports of the subject merchandise were shipped through 
trading companies which did use this program during the POI (Samsun, 
Samsung, Sunkyong, and Daewoo). Neither Inchon nor Dai Yang shipped 
through any trading companies that received benefits from this program, 
although both Inchon and Dai Yang received benefits as exporters.
    We 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 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, we calculated 
the tax savings by multiplying the balance amounts of the reserves as 
of December 31, 1996, by the corporate tax rate for 1996. We treated 
the tax savings on these funds as short-term interest-free loans. 
Accordingly, to determine the benefits, the amounts of tax savings were 
multiplied by the companies' weighted-average interest rates 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 determine a countervailable subsidy of less 
than 0.005 percent ad valorem attributable to POSCO, a subsidy of 0.15 
percent ad valorem for Inchon, and a countervailable subsidy of 0.01 
percent ad valorem attributable to Dai Yang.
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: Dai 
Yang, Hyosung, Hyundai, POSTEEL, Samsun, Samsung, and Sunkyong, and 
Daewoo. Although Inchon and POSCO did not use this program during the 
POI, these companies' exports of the subject merchandise were shipped 
through trading companies which did use this program during the POI: 
Inchon shipped through Hyundai, and POSCO shipped through Hyosung, 
POSTEEL, Samsun, Samsung, and Sunkyong, and Daewoo. Dai Yang did not 
ship through trading companies during the POI.
    We 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 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 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 calculate a countervailable subsidy of 0.01 
percent ad valorem for this program during the POI for POSCO, 0.01 
percent ad valorem for Inchon, and 0.01 percent ad valorem for Dai 
Yang.
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, the company is authorized to 
carry them forward for use in later tax years. During the POI, the 
respondents used various investment tax credits received under the 
TERCL to reduce their net tax liability. In Steel Products from Korea, 
we found that investment tax credits were not countervailable (see 58 
FR at 37351); however, changes in the statute effective in 1995 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 which was filed during the POI: (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. Inchon 
claimed or used: (1) Tax credits for investments in technology and 
human resources under Article 9; and (2) tax credits for investment in 
productivity improvement facilities under Article 25. Dai Yang also 
claimed or used tax credits under Articles 9 and 25.
    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

[[Page 30646]]

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 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 determine that a financial contribution is 
provided under section 771(5)(D)(ii) of the Act. Therefore, we 
determine this program to be countervailable.
    To calculate the benefit from this tax credit program, we examined 
the amount of tax credit the companies deducted from their taxes 
payable for the 1996 fiscal year. In its fiscal year 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 in addition to POSCO's 1996 deduction. 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 than 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. Neither Inchon nor Dai 
Yang carried forward any tax credits from previous years. Therefore, to 
calculate their rates we calculated the additional amount of the tax 
savings earned on investments in domestically-produced facilities and 
divided that amount by each company's total sales for the POI. On this 
basis, we determine a countervailable subsidy of 0.18 percent ad 
valorem to POSCO, 0.06 percent ad valorem to Inchon, and 0.41 percent 
ad valorem to Dai Yang from this program during the POI.
I. Electricity Discounts Under the Requested Load Adjustment Program
    Petitioners alleged that the respondents are receiving 
countervailable benefits in the form of utility rate discounts. The GOK 
reported that during the POI the government-owned electricity provider, 
KEPCO, provided the respondents 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 
Determined To Be Not Countervailable'' with respect to the Power Factor 
Adjustment and Summer Vacation and Repair Adjustment discount programs.
    The GOK introduced the Requested Load Adjustment (RLA) 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. During the POI, both POSCO and Inchon participated in this 
program.
    The RLA discount is provided based upon a contract of two months, 
normally July and August when the demand for electricity is greatest. 
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 request 
these companies to reduce their respective loads. The GOK reported 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 had entered into RLA contracts with 232 
companies.
    At the preliminary determination, 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. Therefore, we determined that 
the RLA program is de facto specific under section 771(5A)(D)(iii)(I) 
of the Act. We also stated in the preliminary determination that, 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 would further investigate the de facto specificity of this 
discount program at verification. We stated that it was the GOK's 
responsibility to demonstrate to the Department on what basis KEPCO 
chose the 44 customers with which it entered into RLA contracts during 
the POI.
    Based on the information which we obtained at verification, we 
analyzed whether this electricity discount program is specific in fact 
(de facto specificity), within the meaning of section 771(5A)(D)(iii) 
of the Act. We find that the GOK failed to demonstrate to the 
Department a systematic procedure through which KEPCO selects those 
customers with which it enters into RLA contracts. The GOK simply 
stated that KEPCO enters into contracts with those companies which 
volunteer for the discount program. If KEPCO does not reach its 
targeted adjustment capacity with those companies which volunteered for 
the program, then KEPCO will solicit the participation of large 
companies. We note that KEPCO was unable to provide to the Department 
the percentage of 1997 RLA recipients which volunteered for the program 
and the percentage of those recipients which were persuaded to 
cooperate in the program. Therefore, we continue to find that the 
discounts provided under the RLA were distributed to a limited number 
of users. Given the data with respect to the small number of companies 
which received RLA electricity discounts during the POI, we determine 
that the RLA program is de facto specific under section 
771(5A)(D)(iii)(I) of the Act. The benefit provided under this program 
is a discount on a company's monthly electricity charge. A financial 
contribution is provided to POSCO and Inchon under this program within 
the meaning of section 771(5)(D)(ii) of the Act in the form of revenue 
foregone by the government.
    Because the electricity discounts are not ``exceptional'' benefits 
and are received automatically on a regular and predictable basis 
without further government approval, we determine that these discounts 
provide a recurring benefit to POSCO and Inchon. 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 and Inchon received from KEPCO under 
the RLA program during the POI. We then divided that amount by POSCO's 
and Inchon's total sales value for 1997.

[[Page 30647]]

On this basis, we determine a net countervailable subsidy of less than 
0.005 percent ad valorem for both POSCO and Inchon.
J. Loans From the National Agricultural Cooperation Federation
    According to Dai Yang's September 10, 1998, questionnaire response, 
the company received a loan administered by the National Agricultural 
Cooperation Federation (NACF). The loan was given at an interest rate 
which is below the benchmark interest rate described in the ``Subsidies 
Valuation'' section of the notice. Moreover, under the terms of this 
loan, the regional government (that of Ansan City) paid a portion of 
the interest. Although this Ansan City-administered program is only 
available to small- and medium-sized enterprises, the loan approval 
criteria indicates that export performance is also an important 
criterion for approval. Applications for these loans are evaluated on a 
point system. The applicant receives 10 out of a possible 100 
``points'' if it is a promising small and medium size business. 
However, the applicant can also receive 10 points if its exports 
comprise over twenty percent of its total sales. In addition, an 
applicant can garner 10 points if it is involved in overseas market 
development. Therefore, two of the criteria of loan approval are based 
upon export performance.
    Under section 771(5A)(B) of the Act, an export subsidy is a subsidy 
that is, in law or in fact, contingent upon export performance, alone 
or as one of two or more conditions. Dai Yang did meet the criteria of 
having over twenty percent of sales in export markets, and so may have 
qualified based on these export criteria. Further, pursuant to section 
351.514 of the Department's regulations (63 FR at 65381), Dai Yang did 
not demonstrate that it was approved to receive these benefits solely 
under non-export criteria. Thus, after examination of this program, we 
determine that Dai Yang's receipt of this loan to be a de facto export 
subsidy pursuant to section 771(5A)(B) of the Act. In addition, by 
paying a portion of the interest on the loan, the actions of the Ansan 
City government confer a benefit in accordance with section 
771(5)(E)(ii) of the Act. Therefore, we determine this program to be 
countervailable.
    In the Preliminary Determination, we treated this loan as a short-
term loan because it is rolled over annually with a revised interest 
rate. However, record evidence indicates that all of the interest rates 
for the life of the loan were set at the time the loan was approved. 
Thus, we believe that it is more reasonable to measure the benefit from 
this loan using the Department's long-term fixed rate loan methodology. 
We used as our benchmark the rate described in the ``Subsidies 
Valuation'' section of the notice, above. We divided the benefit 
calculated in the POI by Dai Yang's total exports during 1997. On this 
basis, we determine the countervailable subsidy attributable to Dai 
Yang during the POI to be 0.04 percent ad valorem.
K. POSCO's Two-Tiered Pricing Structure to Domestic Customers
    In our supplemental questionnaire, we requested information from 
POSCO and the other respondents regarding an allegation that the GOK 
mandates POSCO to subsidize local manufacturers by selling them steel 
at 30 percent below the international market price. In response to this 
allegation, POSCO stated that no such program exists. However, in its 
response, POSCO provided information regarding its pricing structure in 
the domestic and export markets.
    We verified that POSCO maintains three different pricing systems 
which serve different markets: domestic prices in Korean won for 
products that will be consumed in Korea; direct export prices in U.S. 
dollars or Japanese yen; and, local export prices in U.S. dollars. 
POSCO's local export prices are provided to those domestic customers 
that purchase steel for further processing into products that are 
exported. During the POI, POSCO sold hot-rolled stainless steel coil, 
which is the main input in the subject merchandise, to Dai Yang and 
Inchon, which used the coil to produce subject merchandise sold both as 
exports and in the domestic market. POSCO is the only Korean producer 
of hot-rolled stainless steel coil.
    As noted earlier, POSCO is a government-controlled company. (See 
the discussion relating to government control of POSCO in the program 
``Purchase of Sammi Speciality Steel Division by POSCO''.) POSCO sets 
different prices for the identical product for domestic purchases based 
upon the purchasers' anticipated export performance. Therefore, when 
POSCO sells hot-rolled stainless steel coil to Dai Yang and Inchon to 
be used to manufacture subject merchandise which is exported, POSCO 
charges a lower price than the price charged on the identical hot-
rolled stainless steel coil sold to the companies for manufacturing 
subject merchandise to be sold in the domestic market. Because POSCO 
charges a lower price based upon export performance, this pricing 
policy constitutes an export subsidy under section 771(5A)(B) of the 
Act. Because exporters are charged a lower price, this program also 
provides a financial contribution to the exporters under section 
771(5)(D).
    The benefit from this type of export subsidy is based upon the 
difference in the price charged to exporters and the price charged for 
domestic consumption. The only exception is for pricing programs which 
fall under Item (d) of the Illustrative List of Export Subsidies, which 
is provided for in Annex I of the Agreement on Subsidies and 
Countervailing Measures.6 Item (d) allows governments to 
maintain a program which provides different prices based upon export or 
domestic consumption if certain strict criteria are met by the 
government. However, POSCO's dual pricing policy does not fit within 
the parameters of the Item (d) exception. Therefore, the benefit from 
this program is based upon the difference between the prices charged by 
POSCO for export and the prices charged by POSCO for domestic 
consumption.
---------------------------------------------------------------------------

    \6\ A subsidy arises under Item (d) from the provision by 
governments or their agencies either directly or indirectly through 
government-mandated schemes, of imported or domestic products or 
services for use in the production of export goods, on terms or 
conditions more favourable than for provision of like or directly 
competitive products or services for use in the production of goods 
for domestic consumption, if (in the case of products) such terms or 
conditions are more favorable than those commercially available on 
world markets to their exporters.
---------------------------------------------------------------------------

    To determine the value of the benefit under this program, we 
compared the monthly weighted-average price charged by POSCO to Dai 
Yang and Inchon for domestic production to the monthly weighted-average 
price charged by POSCO to respondents for export production, by grade 
of hot-rolled coil. We then divided the amount of the price savings by 
the value of exports of the subject merchandise during the POI. On this 
basis, we determine that Dai Yang received a countervailable subsidy of 
0.87 percent ad valorem from this program, and that Inchon received a 
countervailable subsidy of 2.36 percent ad valorem from this program 
during the POI.

II. Programs Determined To Be Not Countervailable

A. Electricity Discounts Under the Power Factor Adjustment and Summer 
Vacation and Repair Adjustment Programs
    KEPCO provided three types of discounts under its tariff schedule 
during the POI. These three discounts were based on the following rate

[[Page 30648]]

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 
reported 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.
    We verified that the PFA is not a special program, but a normal 
factor used in the calculation of a customer's 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 automatically receives a PFA 
discount on its monthly electricity invoice. During the POI, over 
600,000 customers were recipients of PFA discounts.
    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 
program (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.
    The VRA discount program is available to all industrial and 
commercial customers with a contract demand of 500 KW or more. 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. We verified that over eight hundred customers, from a wide 
and diverse range of industries, received VRA discounts during the POI.
    We analyzed whether these 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 identify 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. 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, based on our analysis of the law, we 
determine that the PFA and VRA electricity programs are not de jure 
specific under section 771(5A)(D)(i) of the Act.
    We also examined evidence regarding the usage of the discount 
electricity programs and found no predominant use by the steel 
industry. The information on the record demonstrates that discounts 
under the PFA and VRA are distributed to a large number of firms in a 
wide variety of industries. Therefore, after analyzing the data with 
respect to the large number of companies and diverse number of 
industries which received electricity discounts under these programs 
during the POI, we determine that the PFA and VRA programs are not de 
facto specific under section 771(5A)(D)(iii) of the Act. Accordingly, 
we determine that the PFA and VRA discount programs are not 
countervailable.
B. GOK Infrastructure Investments at Kwangyang Bay Post-1991
    The GOK has made the following 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 stated 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. The GOK provides services to companies through the use 
of the infrastructure facilities and charges fees for the 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 reported that 
the purpose of developing the Jooam Dam 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, cannot meet the 
area's water needs and, therefore, a second dam in the Kwangyang Bay 
area was built. The GOK further reported that the Jooam Dam does not 
benefit POSCO because POSCO receives all of its water supply from the 
Sueochon Dam. At verification, we obtained information which 
demonstrates that the Jooam Dam's water pipe line connects neither to 
the Sueochon Dam nor to POSCO's steel mill at Kwangyang Bay. 
Accordingly, POSCO cannot source any of its water supply from the Jooam 
Dam and, therefore, the company is not benefiting from the GOK's 
construction of the Jooam Dam.
    The GOK also constructed a container terminal at Kwangyang Bay to 
relieve congestion at the Pusan Port and to encourage the further 
commercial development of the region. The GOK stated 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 of the GOK and POSCO and the 
information obtained at verification, neither steel inputs nor steel 
products can be shipped through the container terminal at Kwangyang 
Bay. Given the nature of steel inputs (e.g., bulk products like scrap) 
and finished steel products (e.g., bundled bars and plate), products 
such as these would or could not be loaded or unloaded from a ship 
through a container terminal and, therefore, the facility is not used 
by steel producers.
    The road from Kwangyang to Jinwol was constructed in 1993. The GOK 
stated 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, 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 and to 
relieve a transportation bottleneck. At verification, we obtained 
information on the road and learned that, in fact, it is utilized by 
both industries in the area to transport goods and by residents living 
in the Kwangyang Bay area.
    Based on the information obtained at verification regarding the 
GOK's infrastructure investments at

[[Page 30649]]

Kwangyang Bay since 1991, we determine that the GOK's investments in 
the Jooam Dam, the container terminal, and the public highway were not 
made for the benefit of POSCO. Therefore, we find that these 
investments are not providing countervailable benefits to POSCO.
C. Port Facility Fees
    In the 1993 investigation of Steel Products from Korea, the 
Department found that POSCO, which built port berths at Kwangyang Bay 
but, by law, was required 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 subsidy. 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 which the company would have otherwise incurred. See Steel 
Products from Korea, 58 FR at 37347-348.
    With respect to the instant investigation, since 1991, POSCO, at 
its own expense, has built new port facilities at Kwangyang Bay. 
Because title to port facilities must be deeded to the GOK in 
accordance with the Harbor Act, POSCO transferred ownership of the 
facilities to the GOK. In return, POSCO received the right to use the 
port facilities free of charge, and the ability to charge other users a 
usage fee until the company recovers all of its investment costs. At 
the preliminary determination, we determined that because POSCO is 
exempt from paying port facility fees, which it otherwise would have to 
pay, and the government is foregoing revenue that is otherwise due, 
POSCO's free usage of the port facilities provided a financial 
contribution to the company within the meaning of section 771(5)(D)(ii) 
of the Act. We also found that the exemption from paying port facility 
charges is specific under section 771(5A)(D)(iii) of the Act, because 
POSCO was the only company exempt from paying these port facility fees 
during the POI. During verification, we discovered that Inchon also 
participated in this program.
    Since our preliminary determination, we have gathered further 
information with respect to the Harbor Act and the number and types of 
companies which have built infrastructure which, as required by law, 
were subsequently transferred to the government. At verification, we 
learned that, because the government does not have sufficient funds to 
construct all of the infrastructure a company may need to operate its 
business, the GOK allows a company to construct, at its own expense, 
such infrastructure. However, the Harbor Act prohibits a private 
company from owning certain types of infrastructure, such as ports. 
Therefore, the company, upon completion of the project, must deed 
ownership of the infrastructure to the government pursuant to Article 
17-1 of the Harbor Act. Because a company must transfer to the 
government its infrastructure investment, the GOK, under Articles 17-3 
and 17-4 of the Harbor Act, grants the company free usage of the 
facility and the right to collect fees from other users of the facility 
until the company recovers its investment cost. Once a company has 
recovered its cost of constructing the infrastructure, the company must 
pay the same usage fees as other users of the infrastructure facility.
    We verified that under the Harbor Act, any company within any 
industrial sector is eligible to construct infrastructure necessary for 
the operation of its business provided that it receives approval by the 
Administrator of the Maritime and Port Authority to build the facility. 
We learned that if the ownership of the infrastructure, which the 
company built, must transfer to the government, then the company, by 
law, has the right to free usage of that facility and the ability to 
collect fees from other users of the facility. The right of free usage 
and the ability to collect user fees are granted to every company which 
has to deed facilities to the GOK. The free usage and collection of 
user fees continues only until the company which built the facility 
recaptures its cost of constructing the facility.
    Further, at verification we learned that in permitting a company to 
build infrastructure subject to the Harbor Act requirements, the GOK 
has in place a procedure for approving a company's investment costs and 
for monitoring the company's free usage and collection of user fees. 
Because the GOK allows a company, for a period of time, to use for free 
the infrastructure it built, the GOK, through the respective port 
authority, reviews each infrastructure project to assess the cost. The 
port authority then approves a certain monetary amount for the 
infrastructure through a settlement process with the company. A company 
can only receive free usage of a facility up to the monetary amount 
approved by the port authority.
    At verification, we obtained documentation which indicates that 
since 1991, a diverse grouping of private sector companies across a 
broad range of industrial sectors have made a number of investments in 
infrastructure facilities at various ports in Korea, including at 
Kwangyang Bay. In each case, the company which built the infrastructure 
was required to transfer it to the GOK, and received free usage of the 
infrastructure and the ability to collect user fees from other 
companies until they recover their respective investment costs. POSCO 
and Inchon were not the only companies entitled to use a particular 
port facility infrastructure, which it built, free of charge.
    As a result of the information obtained at verification, we have 
revisited our preliminary determination that POSCO's exemption from 
paying port facility charges is specific under section 771(5A)(D)(iii) 
of the Act. As discussed above, we verified that since 1991, a diverse 
grouping of private sector companies representing a wide cross-section 
of the economy have made a large number of investments in 
infrastructure facilities at various ports in Korea, including numerous 
investments at Kwangyang Bay. Those companies which built 
infrastructure that was transferred to the GOK, as required by the 
Harbor Act, received free usage of the infrastructure and the ability 
to collect user fees from other companies which use the facilities, 
until they recover their respective investment costs. POSCO and Inchon 
are only two of a large number of companies from a diverse range of 
industries to use this program. Accordingly, we determine that this 
program is not specific under section 771(5A)(D)(iii) of the Act. 
Therefore, we find that this program is not countervailable.

III. Programs Determined To Be Not Used

    Based on the information provided in the responses and the results 
of verification, we determine that the companies under investigation 
either did not apply for or receive benefits under the following 
programs during the POI:

[[Page 30650]]

A. Tax Incentives for Highly-Advanced Technology Businesses under the 
Foreign Investment and Foreign Capital Inducement Act
B. Reserve for Investment under Article 43-5 of TERCL
C. Export Insurance Rates Provided by the Korean Export Insurance 
Corporation
D. Special Depreciation of Assets on Foreign Exchange Earnings
E. Excessive Duty Drawback
    Petitioners alleged that under the Korean Customs Act, Korean 
producers/exporters may have received 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 consumed in the production of the exported item and, 
therefore, the amount of duty drawback is excessive. In Steel Products 
from Korea, we determined that certain Korean steel producers/exporters 
received excessive duty drawback because they received duty drawback at 
a rate that exceeded the rate at which imported inputs were actually 
used. See Steel Products from Korea, 58 FR at 37349.
    At verification, we learned that the refund of duties only applies 
to imported raw materials that are 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. We confirmed that the National Technology Institute 
(NTI) maintains a materials list for each product, and only materials 
that are physically incorporated into the final product are eligible 
for duty drawback.
    We verified that the NTI routinely conducts surveys of producers of 
exported products to obtain their raw material input usage rate for 
manufacturing one unit of output. With this information, the NTI 
compiles a standard usage rate table for imported raw material inputs 
which is used to calculate a producer/exporter's duty drawback 
eligibility. 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. 
At verification, the GOK confirmed that the factoring of reusable scrap 
into usage rates is done routinely for all products under Korea's duty 
drawback regime.
    We also confirmed during our verification 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. The companies pay import duties 
based on the rate applicable to and the price of the imported raw 
material. The companies then receive duty drawback based on the amount 
of that material consumed in the production of the finished product 
according to the standard input usage rate. Accordingly, the rate at 
which the respondents receive duty drawback is the amount of import 
duty paid on the amount of input consumed in producing the finished 
exported product.
    Based on the information on the record, we determine that the 
respondents have not received duty drawback on imported raw materials 
that were not physically incorporated in the production of exported 
merchandise. As in Steel Products from Korea, we also determine that 
the respondents appropriately factored recovered scrap into its 
calculated usage rates and that the duty drawback rate applicable to 
the respondents takes into account recoverable scrap. See Steel 
Products from Korea, 58 FR at 37349. Therefore, we determine that the 
respondents have not received excessive duty drawback.

IV. Programs Determined To Be Terminated

    Based on information provided by the GOK, we 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.

Interested Party Comments

Comment 1: The GOK's Pre-1992 Credit Policies: New Factual Information 
Concerning Foreign Currency-Denominated Loans

    Respondents assert that the Department ignored new factual 
information on the record of this proceeding concerning domestic 
foreign currency loans. Specifically, respondents submitted information 
indicating that from 1986 through 1988, interest rates on domestic 
foreign currency loans were only subject to an interest rate ceiling, 
and that after 1988, banks and other financial institutions were free 
to set the interest rates on these loans subject only to the ceiling 
established by the Interest Limitation Act. Respondents claim that the 
Department ignored this information and incorrectly assumed that the 
reimposition of interest rate ceilings on Korean won loans after a 
failed attempt at liberalization in 1988 also applied to domestic 
foreign currency loans.
    Respondents further state that the Department found at verification 
that the interest rate liberalization program applied solely to lending 
rates in Korean won. Therefore, for all domestic foreign currency loans 
received prior to 1992, there is no basis for the Department's 
determination that interest rates on these loans were regulated and 
that these loans provided countervailable subsidies.
    According to petitioners, the Department's finding that pre-1992 
direct foreign loans provided a countervailable subsidy was correct and 
supported by the evidence on the record. Petitioners contend that the 
issue at hand is the GOK's control over access to the foreign loans, 
not control of the interest rate. Petitioners further state that 
respondents have provided no new evidence to disprove this finding and 
nothing in the new law is contrary to either the Department's 1993 
determination, or the determination in Stainless Steel Plate from 
Korea.
    Department's Position: The alleged ``new'' information cited by 
respondents in their brief concerning interest rates on domestic 
foreign currency loans was considered by the Department in Steel 
Products From Korea, and again in Stainless Steel Plate from Korea. The 
discussion addressing the GOK's strict control of interest rates 
specifically states that ``[i]nterest rate ceilings on domestic foreign 
currency loans were

[[Page 30651]]

also maintained until 1988.'' See Steel Products From Korea, 58 FR at 
37341. Thus, the Department considered the fact that the de jure 
controls over domestic foreign currency loans were removed after 1988 
in reaching its conclusion that these loans continued to be subject to 
indirect GOK influence. Respondents' contention that ``window 
guidance'' (i.e., the GOK's indirect control over interest rates) 
applied only to domestic won loans is also without merit.
    The Department examined this question and reached the opposite 
conclusion in Steel Products From Korea. The Department reiterated this 
conclusion in Stainless Steel Plate from Korea, where it also noted 
that independent bankers had stated that ``interest rates were once 
again regulated until the early 1990s, through a system of ``window 
guidance.'''' Under this system commercial banks were effectively 
directed by the government not to raise interest rates above a certain 
level. While this statement is contained within the discussion of the 
failed 1988 liberalization plan, the bankers did not distinguish 
between domestic and foreign rates of lending by domestic commercial 
banks. Finally, in calling for the prohibition of ``window guidance'' 
over financial institutions'' loan rates, the Presidential Commission 
did not refer only to won-denominated rates. As noted above, the 
Department's findings in Steel Products From Korea took into account 
respondents' ``new'' information. This finding has since been upheld by 
the Court in British Steel plc v. United States, 941 F. Supp 119 (CIT 
1996) (British Steel II), and by the Department in its final 
determination of Stainless Steel Plate from Korea. For these reasons 
our finding concerning the countervailability of pre-1992 foreign 
currency denominated loans from domestic sources remains unchanged in 
this final determination.

Comment 2: Post-1991 GOK Credit Policies: Whether POSCO Received Long-
Term Loans From Korean Banks At Favorable Interest Rates

    Respondents contend that, according to the Department's own 
calculations in Stainless Steel Plate from Korea, POSCO did not receive 
a benefit from favorable interest rates from regulated and directed 
sources of credit during the 1992-1997 period, and hence there is no 
countervailable subsidy in this time period. Respondents propose that 
the ``minuscule benefits'' found are merely a result of rounding errors 
caused by the use of weighted-average benchmarks during a period of 
fluctuating interest rates. Alternatively, the insignificant benefit 
found in the Stainless Steel Plate from Korea determination may have 
resulted from variations in the LIBOR base rate on all of these loans. 
Respondents do not argue with the Department's use of three-year 
corporate bonds as representative of the long-term market rate for won 
loans in Korea.
    Petitioners rebuttal argument is twofold. As an initial matter, the 
calculations from Stainless Steel Plate from Korea that are cited by 
respondents contain an error. When this error is corrected, it becomes 
apparent that there was a benefit to POSCO from its long-term won-
denominated loans. Secondly, even if this benefit is minimal, it falls 
within the rubric of the GOK's direction of credit, and was therefore 
properly countervailed.
    Department's Position: As detailed in the Credit Memo, we have 
determined that access to government-regulated foreign sources of 
credit did not confer a benefit to POSCO, as defined by section 
771(5)(E)(ii) of the Act, and, as such, credit received by respondents 
from these sources was found not countervailable. Petitioners' argument 
that this decision was based on a calculation error is based on an 
incorrect characterization of these loans as fixed rate loans. Because 
these loans have variable interest rates, our methodology is to 
calculate the benefit at the time the interest on the loan is paid. For 
these reasons, we find that there was no benefit from direct foreign 
loans received by POSCO in 1997.

Comment 3: The GOK's Pre-1992 Credit Policies: Whether Direct Foreign 
Loans Constitute a Financial Contribution Within the Meaning of the Act

    According to respondents, the only government regulation of direct 
foreign loans consisted of an interest rate ceiling. Respondents state 
that the GOK could not, under its regulations, direct or induce foreign 
lenders to provide loans to POSCO; nor could it regulate (and reduce) 
the interest rates these lenders would charge on such loans. Rather, 
these loans were negotiated directly between foreign banks and POSCO 
without the GOK's direct or indirect involvement. As such, respondents' 
state that the Department's preliminary finding that direct foreign 
loans are countervailable is in conflict with the ``financial 
contribution'' standard of section 771(5)(D)(i) of the Act. Respondents 
assert that direct foreign loans from foreign banks do not constitute 
countervailable subsidies because there is no government financial 
contribution. Respondents further claim that the Department did not 
explain in its preliminary determination how loans from foreign sources 
could constitute a financial contribution by the GOK.
    Moreover, respondents state that these loans do not meet the 
``entrusts or directs'' standard of the Act, because (1) they can not 
be characterized as a contribution that ``would normally be vested in 
the government,'' and (2) the requirement that the practice of lending 
by the foreign entity ``does not differ in substance from practices 
normally followed by the government'' is not met in this instance. 
Furthermore, because access to direct foreign loans was restricted by 
the GOK on the basis of a borrowers' ability to access the market 
without a government or bank guarantee, POSCO would have been able to 
receive direct foreign loans at the interest rates obtained on its own 
and without government involvement.
    Respondents also address the Department's assertion in the new 
countervailing duty regulations (and the Statement of Administrative 
Action) that its indirect subsidy standard remains unchanged under the 
``financial contribution'' standard of the Post-Uruguay Round law, 
specifically referring to the indirect subsidy practices countervailed 
in Steel Products from Korea.7 Respondents state that to 
simply subsume direct foreign loans from foreign entities within the 
broad claim of an unchanged indirect subsidy standard (and the 
endorsement in the SAA of Steel Products From Korea) is ``overly 
simplistic and legally in error.''
---------------------------------------------------------------------------

    \7\ Countervailing Duties; Final Rule, 63 FR 65348, 65349 
(November 25, 1998) (CVD Final Rule); SAA at 926.
---------------------------------------------------------------------------

    Petitioners dispute respondents' assertion that the GOK's control 
over access to direct foreign loans does not constitute a financial 
contribution, within the meaning of the Act. Petitioners state that 
this question has been addressed by the SAA, which specifically 
references the Department's indirect subsidy findings in Steel Products 
From Korea to illustrate that the indirect subsidy standard includes 
the GOK's control over access to direct foreign loans. Petitioners 
contend that to accept respondents' argument would be to repudiate the 
interpretation of the statute in the SAA. Petitioners note, moreover, 
that the Department preliminarily found in the Credit Memo that the 
GOK's control over the Korean financial system continued through the 
POI and included the control of access to direct foreign loans.
    Department's Position: As petitioners correctly note, respondents' 
arguments concerning this issue have been fully

[[Page 30652]]

addressed by the Congress through its approval of the SAA and the CVD 
Final Rule.8 In Steel Products From Korea, the finding of 
government control was determined to be sufficient to constitute a 
government program and government action, as defined by the Act. 
Moreover, in the preliminary determination, we did not revisit that 
prior determination, and also found that the subsidy identified meets 
the standard for a subsidy as defined by the post-URAA Act. Preliminary 
Determination, 63 FR at 63890.
---------------------------------------------------------------------------

    \8\ Although the CVD Final Rule is not controlling in this 
investigation, it does represent a statement of the Department's 
practice and interpretations of the Act, as amended by the URAA.
---------------------------------------------------------------------------

    While respondents contend that subsuming GOK-controlled access to 
direct foreign loans from foreign entities within the SAA's claim of an 
unchanged indirect subsidy standard is ``overly simplistic and legally 
in error,'' the clear and unambiguous language of the SAA is that 
Congress intended the specific types of indirect subsidies found to be 
countervailable in Steel Products From Korea to continue to be covered 
by the Act, as amended by the URAA. The Department's final 
countervailing duty regulations are equally clear on this issue: the 
preamble confirms that the standard for finding indirect subsidies 
countervailable under the URAA-amended law ``is no narrower than the 
prior U.S. standard for finding an indirect subsidy as described in 
Steel Products from Korea.'' See CVD Final Rule, 63 FR at 65349. For 
these reasons, we have not changed our preliminary determination 
concerning the countervailability of pre-1992 direct foreign loans.

Comment 4: The GOK's Pre-1992 Credit Policies: Benchmark Applied to 
Determine the Benefit From Foreign Currency-Denominated Loans

    Respondents challenge the Department's use of a won-denominated 
benchmark to calculate the countervailable benefit from POSCO's 
outstanding pre-1992 long-term foreign currency-denominated loans. 
According to respondents, the Department's long established methodology 
is to compare countervailable loans with a benchmark in the same 
currency. Respondents cite the Final Affirmative Countervailing Duty 
Determination: Certain Apparel from Thailand, 50 FR 9818, 9824 (1985), 
which states that, the ``benchmark must be applicable to loans 
denominated in the same currency as the loans under consideration.'' 
Respondents also note that this standard was articulated in the Final 
Affirmative Countervailing Duty Determination: Cold-rolled Carbon Steel 
Flat-rolled Products from Argentina, 49 FR 18006 (April 26, 1984) 
(Cold-Rolled Steel From Argentina). In that case, the Department 
stated:

[f]or loans denominated in a currency other than the currency of the 
country concerned in an investigation, the benchmark is selected 
from interest rates applicable to loans denominated in the same 
currency as the loan under consideration (where possible, interest 
rates on loans in that currency in the country where the loan was 
obtained; otherwise, loans in that currency in other countries, as 
best evidence). The subsidy for each year is calculated in the 
foreign currency and converted at an exchange rate applicable for 
each year. Id. at 18019.

Respondents contend that this policy was reiterated in the Department's 
new regulations, the preamble to which refers to the currency of the 
loans as one of ``the three most important characteristics'' in 
determining the benchmark. CVD Final Rule, 63 FR at 65363. Thus, 
respondents assert that the Department (1) did not consider any other 
commercially-viable alternatives (such as those rates ``in other 
countries''); (2) ignored any reference to its long-standing policy of 
comparing loans in the same currency; and (3) provided no explanation 
for abandoning that policy. Accordingly, respondents state that the 
Department must revise its calculation of the benefit from foreign 
currency-denominated loans, using a benchmark that is in conformance 
with its policy and regulations.
    Petitioners dispute respondents' benchmark argument, stating that 
the Department clearly rejected this argument in Stainless Steel Plate 
from Korea. While petitioners do not dispute that it is the 
Department's preference to use a benchmark in the same currency, the 
Department made clear in the final determination of Stainless Steel 
Plate from Korea that such a comparison was not appropriate when it 
reaffirmed its determination from Steel Products from Korea.
    Department's Position: Respondents' arguments concerning the 
Department's methodology for measuring benefits from countervailable 
foreign currency-denominated long-term loans are partially correct. As 
stated in the Stainless Steel Plate from Korea determination, it is 
true that in most instances we measure the benefit from countervailable 
foreign currency loans by comparing such loans with a benchmark 
denominated in the same currency, provided the borrower would otherwise 
have had access to such foreign currency loans. However, in the context 
of the Korean financial system prior to 1992, this methodology is not 
appropriate. 64 FR at 15540. Specifically, in Steel Products From 
Korea, the Department found that all sources of foreign currency-
denominated credit were subject to the government's control and 
direction, and were countervailable. Therefore, these sources of 
foreign currency credit, including overseas markets, could not serve as 
an appropriate benchmark, and the Department had to determine the rate 
that companies would have had to pay absent government control. That 
rate was the corporate bond yield on the secondary market. See Steel 
Products From Korea, 58 FR at 37346; and Stainless Steel Plate from 
Korea, 64 FR at 15540.
    Respondents assert that the Department did not consider any other 
commercially viable alternatives. Respondents ignore, however, the fact 
that the corporate bond yield on the secondary market was the only 
alternative, unregulated, and commercially viable source of financing 
in Korea. Accordingly, this was the only viable benchmark with which to 
measure the benefit from government-regulated sources of credit. None 
of respondents' arguments in this investigation have led us to change 
our determination in Steel Products From Korea, which was reiterated in 
Stainless Steel Plate from Korea. Therefore, our finding concerning 
POSCO's pre-1992 foreign currency-denominated long-term loans remains 
unchanged in this final determination.

Comment 5: The GOK's Pre-1992 Credit Policies: Whether Direct Foreign 
Loans Are Not Countervailable Pursuant to the Transnational Subsidies 
Rule

    Respondents assert that pursuant to the so-called ``transnational 
subsidies rule,'' funds provided from sources outside a country under 
investigation are not countervailable. Specifically, respondents state 
that section 701(a)(1) of the Act applies only to subsidies provided by 
the government of the country in question or an institution located in, 
or controlled by, that country. In support of this contention, 
respondents cite North Star Steel v. United States, 824 F. Supp. 1074 
(CIT 1993) (North Star), in which the Court upheld the Department's 
determination that an Inter-American Development Bank loan guaranteed 
by the Government of Argentina on behalf of the recipient was not 
subject to the countervailing duty law. In particular, the CIT stated 
that ``[t]his determination is consistent with the purpose of the 
countervailing duty law, which is `intended to offset the unfair 
competitive advantage that foreign

[[Page 30653]]

producers would otherwise enjoy from * * * subsidies paid by their 
government.' '' North Star, 824 F. Supp. at 1079 (quoting Zenith Radio 
Corp. v. United States, 437 U.S. 443, 456 (1978)). Respondents also 
cite a case in which the Department refused to initiate an 
investigation of private, foreign co-financing of a World Bank project, 
stating that ``[f]or the same reasons [applicable to funds from the 
World Bank], a loan granted by a group of Japanese banks and insurance 
companies [in the Philippines] * * *  would not be countervailable.'' 
See Initiation of Countervailing Duty Investigation: Certain Textiles 
and Textile Products from the Philippines, 49 FR 34381 (August 30, 
1984).
    Petitioners assert that the Department's determination does not 
contravene the transnational subsidy rule because the subsidy in this 
case is based on controlled access to credit, and not on a differential 
in interest rates. The fact that the payment of the funds comes from a 
private source outside of Korea is irrelevant. According to 
petitioners, the case law cited by respondents does not involve 
situations in which a foreign government conferred countervailable 
subsidies by controlling access to third country financial sources. In 
addition, petitioners note that these cases predate the changes in the 
statute that expressly recognize indirect subsidies provided through 
private actors.
    Department's Position: Respondents' assertion concerning the 
transnational subsidies rule is incorrect. Respondents made this same 
argument in Steel Products From Korea (see 58 FR at 37344) and in 
Stainless Steel Plate from Korea (see 64 FR at 15539). In upholding the 
Department's determination in Steel Products From Korea, the Court did 
not find in any way that the Department's determination with respect to 
direct foreign loans was in conflict with the transnational subsidies 
rule, as argued by respondents in that prior investigation. The cases 
cited by respondents are also not relevant to the facts of this 
investigation because those cases deal with funds from foreign 
governments or international lending or development institutions. This 
investigation, however, concerns the Korean government's control over 
access to funds from overseas private sources of credit.
    More specifically, however, the Department rejected respondents' 
argument both in Steel Products From Korea and in Stainless Steel Plate 
from Korea because the benefit alleged was not the actual funding of 
direct foreign loans, but rather the ``preferential access to loans 
that are not generally available to Korean borrowers.'' Steel Products 
From Korea, 58 FR at 37344; Stainless Steel Plate from Korea, 64 FR at 
15539. The GOK was found to control this access and because the steel 
industry received a disproportionate share of these low-cost funds, 
this preferential access was found to confer a countervailable benefit 
on the steel industry. Nothing argued by respondents in this 
investigation would lead us to change these prior determinations 
concerning direct foreign loans. Therefore, our preliminary 
determination remains unchanged.

Comment 6: Post-1991 GOK Credit Policies: Whether Foreign Currency 
Loans from Domestic Branches of Foreign Banks are Countervailable

    Petitioners argue that, contrary to its decision in Stainless Steel 
Plate from Korea, the Department should find countervailable access to 
foreign currency loans extended by foreign bank branches located in 
Korea. Petitioners contend that the same conditions which led the 
Department to find the existence of direction of credit for domestic 
bank sources are present in the case of foreign currency loans extended 
by foreign bank branches in Korea. Moreover, there is no affirmative 
evidence to justify overturning the 1993 determination of GOK control 
over domestic branches of foreign banks. Petitioners assert that the 
Department mistakenly relied on a lack of any substantive discussion in 
the record concerning the influence of the GOK on foreign banks as 
affirmative evidence that no such controls exist. According to 
petitioners, there is little, if any, meaningful discussion about the 
direct or indirect influence of GOK regulations and policies on the 
operation of foreign banks in Korea in the record, including the 
verification reports. Thus, petitioners argue that the Department does 
not have a basis for its determination in Stainless Steel Plate from 
Korea that foreign currency loans from branches of foreign banks in 
Korea are not countervailable.
    Petitioners argue that pursuant to the Court of International 
Trade's (CIT) recent ruling in Al Tech Specialty Steel Corp. v. United 
States, the Department may not infer the truth of certain facts from 
lack of any contradictory evidence on the record, and so may not 
conclude that, absent evidence to the contrary, the GOK did not exert 
improper controls or influence over foreign commercial 
banks.9 Rather, petitioners argue that the Department is 
required to support or authenticate with record evidence (i.e., verify) 
any factual assertion on which it relies. Slip Op. 98-136 at 9 (CIT 
1998). Petitioners state that, in this case, the Department has 
violated that principle by failing to gather and verify the necessary 
facts in support of the conclusion reached.
---------------------------------------------------------------------------

    \9\ Slip Op. 98-136 at 9, 1998 WL 661461 (Ct. Int'l Trade Sept. 
24, 1998)(``After having failed to uncover evidence to corroborate 
Isibar's statement on the industry standard, Commerce should then 
have either concluded that the claim was unverifiable or continued 
the investigative process until corroborating evidence was 
obtained'').
---------------------------------------------------------------------------

    Moreover, petitioners assert that what little record evidence is 
available demonstrates that GOK control over foreign banks in Korea is 
equivalent to that over Korean domestic banks. The petitioners argue 
that, according to record evidence, foreign commercial banks and 
domestic banks are on an ``equal footing,'' and must therefore be 
subject to the same controls. In particular, petitioners cite to the 
General Bank Act, the Bank of Korea Act, and the Foreign Exchange 
Management Law, noting that foreign banks are also subject to the 
provisions of these laws. Petitioners also refer to the Department's 
finding that the BOK and MOFE have equal authority to control and 
monitor all banks, and acted a manner such that, ``[t]o a significant 
extent, these institutions [BOK and MOFE] continued to intervene 
directly and indirectly in the lending activities of commercial 
banks.'' Directed Credit Memo at 6.
    Petitioners assert that because the Department found that foreign 
banks were controlled indirectly by the GOK in Steel Products from 
Korea, and because the Department did not find any practical changes in 
the GOK's indirect role on lending rates and appointment of bank 
officials between 1991 and 1997, there is no evidence to support the 
conclusion that these controls ceased to exist for foreign banks. 
Specifically, petitioners argue that the GOK maintained indirect 
control over foreign banks in two ways: (1) By influencing lending 
rates; and (2) by influencing the appointment of bank officials. With 
regard to lending rates, petitioners argue that (as indicated in the 
Presidential Report) foreign commercial banks must be subject to the 
same ``window guidance'' as domestic commercial banks to prevent 
interest rates from increasing. See Presidential Report at 29. 
According to petitioners, risk-averse, profit-motivated foreign 
commercial banks would only charge such low interest rates in the 
Korean

[[Page 30654]]

market if GOK policies restricted either the interest rates or 
borrowers' access to credit from those banks. Moreover, petitioners 
maintain instead that there is not sufficient evidence to determine 
that foreign banks were without GOK influence in the selection of bank 
officials at Korean branches.
    In rebuttal, respondents argue that the petitioners' cite to Al 
Tech is not pertinent. The reasoning of Al Tech does not logically 
extend to this case because there is no evidence to support a 
conclusion of direction and control over Korean branches of foreign 
banks. Respondents advance that the record evidence, including meetings 
with commercial bankers, incontrovertibly indicates that there is no 
Korean government control of these banks. Rather, petitioners resort to 
using generalities and speculation about the operation of the Korean 
banking system and its provisions, which pertain neither to direction 
of credit to the steel industry, nor to the Department's de facto 
finding of direction of credit. Respondents also reject petitioners 
argument because petitioners do not present any evidence of the means 
by which the GOK controlled or directed the lending practices of these 
foreign bank branches, in contrast to the Department's findings 
regarding the domestic commercial banks. Rather, foreign banks' most 
important source of funds is their head offices; this provides them 
with both greater autonomy from the Korean banking system and a lower 
cost of funds than that available to Korean commercial banks. 
Respondents note that petitioners' focus on government controls on the 
inflow of foreign funds is misplaced, as the GOK is primarily concerned 
with the domestic money supply, while the inflow of foreign currency is 
linked to the use of these funds.
    Finally, respondents point out that the GOK does not, and does not 
need to, influence these banks to lend to POSCO. Respondents reiterate 
that POSCO is one of the best companies in Korea, and, given POSCO's 
strong credit rating and reputation, most commercial banks would like 
to lend to the company.
    Department's Position: First, we note that petitioners make the 
statement that because the Department found government control over 
domestic branches of foreign banks in our 1993 decision in Steel 
Products from Korea that it is incumbent on the Department to rely on 
affirmative evidence that this control has been repealed. Petitioners 
argue that the record evidence in this investigation provides no 
affirmative evidence of any such repeal. Petitioners are incorrect. 
First, we must make the basic point that the specific GOK control of 
domestic branches of foreign banks during the period 1992 through 1997, 
which is at issue here, was not examined in Steel Products from Korea. 
As such, there is no ``affirmative evidence'' to ``repeal.'' In 
addition, in Steel Products from Korea, our determination of GOK 
control was based on the entirety of the financial system in Korea as 
existed pre-1992. In this current investigation, we determined that the 
more appropriate basis of examination of direction of credit after 1991 
is an analysis of GOK control with respect to each aspect of the 
different types of commercial banks in Korea, including domestic banks 
and foreign bank branches.
    More importantly, with respect to petitioners' argument on this 
issue, as a matter of law, the countervailability of the GOK's control 
over domestic branches of foreign banks during the period 1992 through 
1997, which was not examined in the 1993 decision in Steel Products 
from Korea, can only be based upon the information on the record in 
this current investigation. As detailed above and explained in the 
Credit Memo, the information on the record in this investigation 
demonstrates that while the GOK controls domestic commercial banks it 
does not control branches of foreign banks in Korea.
    Petitioners' contention that record evidence establishes that the 
Korean branches of foreign banks were subject to the same GOK controls 
and direction that applied to domestic commercial banks is not 
supported by the record. The record evidence cited by petitioners does 
not amount to GOK control and direction of these institutions' 
operations and lending practices.
    The 1996 and 1998 OECD reports do not support petitioners' 
arguments. While the 1996 OECD report discusses funding levels by 
foreign banks in Korea, nowhere does that report state that these banks 
were subject to the GOK's control or direction. Moreover, the 1998 OECD 
Report, in discussing the weakness of the Korean banking system, and in 
attributing responsibility for that weakness partly to the government's 
direct and indirect intervention in the operations of commercial banks, 
mentions only domestic commercial banks, not foreign banks. In fact, 
the report discusses the inability of domestic commercial banks, after 
their privatization, to ``develop the autonomy [from the government] 
needed in a market economy.''
    Contrary to their arguments, petitioners' reliance on the reports 
issued by the Presidential Commission for Financial Reform, quoted by 
the Department in the Credit Memo, is equally misplaced. The section of 
the Presidential Report titled ``Deregulation of Access to Foreign 
Capital Markets,'' cited by petitioners, refers to regulations 
governing access to foreign capital markets, not regulations governing 
foreign currency-denominated loans from domestic branches of foreign 
banks in Korea.10 Regulations governing access to foreign 
capital markets are quite separate from those governing domestic 
branches of foreign banks in Korea. To the extent that the Presidential 
Commission addressed domestic foreign currency loans, it addressed the 
lifting of restrictions on the usage of these funds, which is limited 
mostly to the importation of machinery from abroad. This has nothing to 
do with any GOK controls over the operations of domestic branches of 
foreign banks.
---------------------------------------------------------------------------

    \10\ Financial Reform in Korea: The First Report (Presidential 
Report I) at 22 (April 1997), Exhibit MOFE-9 of the MOFE 
Verification Report, on file in the CRU.
---------------------------------------------------------------------------

    Petitioners also support their argument with the contention that 
foreign banks are subject to some of the same regulatory provisions 
contained in the General Bank Act that govern domestic commercial 
banks. However, the Department's analysis in the Credit Memo did not 
rely on these regulatory provisions but on the record evidence that the 
GOK continued to influence the lending practices of these domestic 
commercial banks indirectly, in part because these banks did not 
develop autonomy from the government. As we explained in the Credit 
Memo, the weakness of domestic banks vis-a-vis the government was in 
part an outgrowth of the government's historical role in allocating 
credit in accordance with policy objectives. Also, the corporate 
governance structure of Korea's commercial banks (weak ownership 
structure, lack of autonomy in appointing banking officials) 
contributed to their weakness vis-a-vis the government. The fact that 
the GOK's indirect involvement in commercial banking operations 
continued into the 1990s exacerbated this problem. See Credit Memo at 
8-9. Foreign banks in Korea, however, were not subject to this same 
influence. Their sources of funds were their head offices and, as 
respondents correctly illustrate, appointment of their senior officials 
was not subject to influence by the GOK. Moreover, there is no evidence 
that the GOK played a role in the distribution of these funds by the 
Korean branches. Petitioners proffer no evidence that foreign banks in 
Korea were

[[Page 30655]]

``inescapably influenced by the controls on every other sector of the 
banking industry.'' Rather, they speculate that these banks would be no 
less influenced than their Korean counterparts by the lead of the 
Korean Development Bank and the Bank of Korea to extend credit to 
certain government-favored projects. This is not a conclusion reached 
by any of the commercial bankers at verification, and petitioners do 
not point to any evidence that would support this contention. We also 
note that petitioners' view of the GOK's motivation to control foreign 
sources of money to keep interest rates from falling is not consistent 
with one of the alleged methods of control, i.e., limits on interest 
rates through ``window guidance.''
    The fact that foreign banks in Korea did not account for a 
significant amount of total lending in Korea is not sufficient evidence 
to lead us to conclude that POSCO would not have been able to raise 
sufficient funds from this source. Rather, the record shows that loans 
from foreign banks in Korea were a significant source of POSCO's 
borrowing, and credit from these banks was not controlled by the GOK.
    Petitioners have correctly argued that the Department is required 
to support or authenticate with record evidence factual assertions 
relied upon in our final determinations. Indeed, section 782(i) of the 
Act requires the Department to verify the information used in making a 
final determination. In this investigation, petitioners alleged that 
the GOK controlled the allocation of credit in Korea during the years 
1992 through 1997. Therefore, once a credible allegation was made, the 
responsibility of the Department was to solicit and develop factual 
information to determine whether the GOK was directing credit during 
those years. In this investigation, the Department properly examined 
individually the various sources of long-term credit in Korea. This 
examination included, among other sources, loans from foreign banks 
with branches in Korea.
    Because of the complexity of this issue, a government's control and 
its allocation of credit within its borders, the Department conducted 
four days of meetings with commercial and investment banks and with 
economic and financial research institutes in Korea. During this 
intensive four-day period with experts in the operation of the 
commercial credit market in Korea, we focused on all aspects of the 
alleged GOK control of banks in Korea, including its alleged control of 
foreign banks. In these meetings we sought information on the aspects 
and measures used by the government in its control of credit and 
financial institutions in Korea. Information provided to us by these 
banking and financial experts on the measures used by the GOK to 
control banks and allocate credit in the Korean financial market was 
summarized in our Bankers Report.
    Based in large part on the information which was gathered during 
these meetings, we determined that the actions of the GOK in the Korean 
financial system support the conclusion that the GOK controls credit 
through both government-owned banks, such as the Korean Development 
Bank, and Korean domestic banks; however, no similar control was found 
for foreign banks operating in Korea. As noted in the facts detailed 
above, and in the Credit Memo, our determination that the GOK does not 
control the lending decisions and allocation of credit of foreign banks 
operating in Korea is supported by the information on the record in 
this investigation.

Comment 7: Post-1991 GOK Credit Policies: Whether POSCO's Access to 
Foreign Securities Markets Results in Countervailable Benefits

    According to petitioners, extensive record evidence, in particular 
the Department's findings at verification, shows that access to foreign 
sources of funds, including foreign securities, was strictly controlled 
by the GOK through the POI. Petitioners assert that, as recognized by 
POSCO, the MOFE restricted access to foreign securities markets with 
the purpose of maintaining low levels of cost of funds for certain 
companies. Petitioners state that interest rates on foreign credit 
markets were five to seven percentage points lower than those on 
domestic foreign currency loans, and petitioners charge that the GOK's 
goal of preventing inflationary effects necessitated the maintenance of 
this interest rate differential. In addition, petitioners claim that 
the GOK's control over access to foreign funds constitutes a financial 
contribution within the meaning of the Act, in particular, the 
``entrusts or directs'' standard of section 771(5)(B)(iii) of the Act.
    Respondents note that in the recent Stainless Steel Plate from 
Korea final determination, the Department determined that POSCO's 
alleged ``preferential access'' to regulated foreign sources of funds 
did not confer a benefit. They state that the record evidence in this 
case also supports a finding that access to foreign securities did not 
confer a benefit to POSCO. Respondents also dispute petitioners' claim 
that access to foreign securities constitutes a financial contribution 
within the meaning of the Act, stating that petitioners' interpretation 
of the ``entrust or directs'' standard is unreasonable. Respondents 
state that this standard cannot encompass private actions by 
independent foreign parties that are consistent with market-oriented 
behavior at market-determined interest rates.
    Department's Position: In the Credit Memo, we stated that there are 
three elements required to find a potential subsidy countervailable: 
(1) A financial contribution is made by a government or public body; 
(2) a benefit is conferred on the recipient; and (3) the subsidy is 
specific. If one of these three elements is not met, the subsidy is not 
countervailable. In accordance with section 771(5)(E)(ii) of the Act, 
we examined whether a benefit has been conferred on the recipient, 
POSCO, from foreign securities issued in overseas markets. We also 
preliminarily determined that POSCO's access to government-regulated 
foreign sources of credit did not confer a benefit to the recipient, as 
defined by section 771(5)(E)(ii) of the Act, and, as such, is not 
countervailable. See Credit Memo at 18. As discussed in Comment 5, 
above, we continue to find that branches of foreign banks are not 
subject to the GOK's control and direction. Therefore, we continue to 
find that access to government-regulated foreign sources of credit did 
not confer a benefit, because the rates obtained on foreign securities, 
even though access to them was limited, were not less than those on 
foreign currency loans available to respondent companies in Korea. As 
such, there is no need to address the additional comments raised by 
petitioners and respondents above.

Comment 8: Whether Lending From Domestic Branches of Foreign Commercial 
Banks Is an Appropriate Benchmark for Long-term Financing

    Petitioners dispute the Department's decision in Stainless Steel 
Plate from Korea that because the GOK did not control or direct credit 
provided by the domestic branches of foreign commercial banks, the 
interest rate on certain such loans is an appropriate benchmark for 
determining the benefit from (1) foreign currency loans from Korean 
commercial banks extended post-1991 and (2) foreign securities 
offerings. Petitioners argue that since record evidence establishes the 
GOK's control of credit from domestic branches of foreign commercial 
banks, the Department must use an alternative benchmark from an 
uncontrolled

[[Page 30656]]

domestic source. Petitioners assert that the Department should instead 
continue to apply the methodology established in Steel Products from 
Korea (1993), and use the domestic corporate bond rate.
    Respondents claim that there is substantial evidence on the record 
to support the Department's finding that the GOK neither controls nor 
directs the operations of foreign commercial banks. Therefore, loans 
from these banks are appropriate as benchmark commercial loans.
    Department's Position: We have determined that the GOK does not 
control credit from domestic branches of foreign banks. See Comments 5 
and 6, above. Because these uncontrolled foreign banks provided foreign 
currency loans, interest rates on these loans are the appropriate 
benchmarks to use in calculating the benefit from foreign currency 
loans provided to the respondents from government-owned banks and 
government-controlled domestic banks. For the reasons discussed in 
Comment 6, we disagree with petitioners' arguments that funding from 
domestic branches of foreign banks cannot serve as an appropriate 
benchmark to measure any potential benefit from regulated foreign 
currency-denominated sources of credit, e.g., foreign securities from 
abroad.

Comment 9: Dai Yang's Long-Term Interest Rate Benchmark for Dollar-
Denominated Loans

    Respondents argue that, absent loans by Korean branches of foreign 
banks, the Department should use the average interest rates charged on 
domestic foreign currency loans from Korean branches of foreign banks 
to POSCO and Inchon as a benchmark for calculating the benefit from Dai 
Yang's domestic foreign currency loans. Respondents note that the use 
of this industry-specific data would be in line with the Department's 
policy of using industry-specific benchmarks when company-specific 
benchmarks were not available. Alternatively, respondents assert that 
the Department may use data solely from Inchon if the Department 
determines that to be more appropriate.
    Petitioners reject the use of an ``industry-specific'' benchmark, 
as proposed by Dai Yang. While respondents cite to the Department's 
1989 Proposed Regulations in support of this practice, there is no such 
standard established in the 1997 Proposed Regulations, which indicates 
that the Department will use a national average rate absent company-
specific benchmark information. Moreover, petitioners suggest the 
impracticality of this suggestion, as the stated purpose of a benchmark 
rate is to reflect the ``amount the firm would pay on a comparable 
commercial loan(s) that the firm could actually obtain on the market.'' 
19 C.F.R. 351.505(a)(1) (emphasis added). Given the varied financial 
status of firms, there is no reason to believe that one firm's rates 
are an acceptable surrogate for another firm. Therefore, the Department 
should use the national average interest rate benchmark to determine 
the benefit on all long-term financing, loans and bonds.
    Department's Position: While petitioners are correct that it is the 
Department's practice to use a national average interest rate benchmark 
when company-specific rates are unavailable, we were unable to locate a 
national average rate for domestic branches of foreign banks, or any 
other appropriate surrogate national average rate in this case. 
Additionally, it is the Department's long-standing practice to compare 
countervailable foreign currency-denominated loans to a benchmark in 
the same currency, as discussed in Comment 7 above, making the use of 
the won-denominated interest rate benchmark, as suggested by 
petitioners, inappropriate in this circumstance. See e.g., CVD Final 
Rule, 63 FR at 65363; see also, Certain Apparel from Thailand, 50 FR at 
9824 (``benchmark must be applicable to loans denominated in the same 
currency as the loans under consideration),'' and Cold-Rolled Steel 
From Argentina, 49 FR at 18019 (``the benchmark is selected from 
interest rates applicable to loans denominated in the same currency as 
the loan under consideration'').
    In the past, where the Department has found that a company-specific 
factor is a reasonable representation of industry practice, we have 
used such information as the most appropriate surrogate. See Final 
Affirmative Countervailing Duty Determination: Certain Stainless Steel 
Wire Rod from Italy, 63 FR 40474, 40477 (July 29, 1998). As stated in 
the Department's CVD Final Rule, 63 FR at 65408, section 
351.505(a)(2)(i), ``* * * the Secretary normally will place primary 
emphasis on similarities in the structure of the loans (e.g., fixed 
interest rate v. variable interest rate), the maturity of the loans 
(e.g., short-term v. long-term), and the currency in which the loans 
are denominated.'' Based on the similarities in the circumstances and 
structure of Inchon's and Dai Yang's lending practices, we find that 
the rate calculated from Inchon's loans by Korean branches of foreign 
banks is the most appropriate benchmark.

Comment 10: Inchon's Long-Term Loan Benchmark

    Respondents propose that, consistent with the recent Stainless 
Steel Plate from Korea final determination and its regulations, the 
Department should use the interest rates on Inchon's long-term foreign 
currency loans from Korean branches of foreign banks to calculate a 
company-specific weighted-average U.S. dollar-denominated benchmark 
rate for Inchon. If the Department finds that Inchon's domestic foreign 
currency loans and direct foreign loans constitute directed credit, it 
should then use this calculated company-specific benchmark for 
calculating the benefits conferred upon Inchon.
    In rebuttal, petitioners contend that the methodology used to 
calculate POSCO's company-specific weighted average dollar denominated 
benchmark interest rate, which Inchon proposes to continue using in 
this investigation, deviates substantially from the Department's 
established policy. It is the Department's practice to use a benchmark 
that is based on the year in which a long-term loan obligation was 
assumed. However, the methodology used by the Department understated 
the benefit to producers of subject merchandise by failing to 
countervail certain loans.
    Department's Position: Consistent with the Department's long-term 
policy, and with the methodology established in the final determination 
of Stainless Steel Plate from Korea, it is appropriate to calculate a 
company-specific weighted-average U.S. dollar-denominated benchmark 
based on loans extended by Korean branches of foreign banks to 
calculate the benefit to Inchon from domestic foreign currency loans 
and direct foreign loans.
    Petitioners argue that this is inconsistent with the Department's 
practice of using a benchmark based on the year in which a loan was 
received. While petitioners are correct that this is the Department's 
standard practice, in this case, annual information was not available. 
Moreover, it is also the Department's standard practice to compare 
government-regulated credit to a benchmark denominated in the same 
currency, if such a benchmark is available, as discussed in Comment 7, 
above. This is in accordance with Department policy and past practice. 
See e.g., CVD Final Rule, 63 FR at 65363; see also, Certain Apparel 
from Thailand, 50 FR at 9824 (quoting, ``benchmark must be applicable 
to loans denominated in the same currency as the loans under 
consideration),'' and Cold-Rolled Steel From Argentina, 49

[[Page 30657]]

FR at 18019 (quoting, ``the benchmark is selected from interest rates 
applicable to loans denominated in the same currency as the loan under 
consideration''). Therefore, we believe that the benchmark calculation 
methodology determined in Stainless Steel Plate from Korea is the most 
reasonable surrogate.

Comment 11: Post-1991 GOK Credit Policies: Whether POSCO Received 
Disproportionate Benefits From GOK-Regulated Long-Term Loans

    Respondents argue the Department erred when it determined that all 
producers of the subject merchandise received a disproportionate share 
of long-term loans, in spite of POSCO's demonstration, according to the 
Department's own GDP test, that it did not. Respondents indicate that 
it is within the Department's authority to address, on a company-
specific basis, those companies that may have received a 
disproportionate share of long-term loans; however, it is not within 
the Department's authority to generalize the impact of benefits 
received by specific companies onto an entire industry, thereby finding 
disproportionality against a company whose loan shares were 
demonstrably not disproportionate.
    Respondents state that the appropriate legal standard is whether a 
domestic subsidy ``is a specific subsidy, in law or in fact, to an 
enterprise or industry * * *.'' (quoting section 771(5A)(D) of the 
Act). Because POSCO is ``an enterprise'' as defined by the statue, and 
constitutes ``the industry'' for which the Department must make a 
determination concerning the existence of a domestic subsidy from the 
purported directed credit, the Department must find that the subsidy is 
not specific to POSCO.
    According to petitioners, respondents' contention that the 
Department must examine whether disproportionate benefits have been 
provided to POSCO is a misinterpretation of the law. In particular, 
petitioners state that the statute dictates that the Department will 
find de facto specificity when either an enterprise or an industry 
receives disproportionate benefits. The record, petitioners note, shows 
that the Korean iron and steel industry received a disproportionate 
amount of a subsidy.
    Department's Position: We disagree with respondents' arguments. The 
fact that POSCO borrowed very little from those sources of credit that 
were found to be de facto specific to the steel industry during the 
relevant period is irrelevant. The clear language of the statute is 
that a subsidy is specific when ``an enterprise or an industry receives 
a disproportionately large amount of the subsidy.'' Section 
771(5A)(D)(iii)(III) of the Act (emphasis added). Thus, when a subsidy 
is specific to an industry, even if it is not specific to an enterprise 
that is part of that industry, the Department will find that subsidy to 
be countervailable, even if the actual subsidy to the enterprise is 
very small.
    While respondents may characterize this approach as ``collective 
guilt,'' the Department has in numerous cases found countervailable 
relatively small subsidies to a respondent firm on the basis of 
disproportionate use by the industry to which the respondent belongs. 
See, e.g., Final Affirmative Countervailing Duty Determination: Certain 
Steel Products from Brazil, 58 FR 37295, 37299 (July 9, 1993) (Certain 
Steel from Brazil). Indeed, this is not an unusual fact pattern for de 
facto specificity findings under, for example, large research and 
development programs. As such it is not surprising that under 
respondents' suggested approach, the Department would rarely find a 
subsidy to be de facto specific, because subsidies under a program are 
frequently not received on a disproportionate basis by a single 
enterprise. Finally, we agree with petitioners that respondents' 
attempt to link certain methodologies that are conducted on a company-
specific basis to the specificity analysis is also without merit. The 
quantification of the benefit is simply not germane to the Department's 
analysis concerning specificity.

Comment 12: Countervailability of POSCO's Two-Tiered Pricing System

    Respondents argue that POSCO's pricing decisions are not influenced 
by the GOK, and that the pricing structure in question is consistent 
with commercial considerations and is widely used by companies in 
numerous industries in Korea. RespondentsThey state that two-tiered 
pricing has evolved as a natural response to market competition: 
because the competing imports are eligible for duty drawback, companies 
in Korea must set local export prices to compete with duty-exclusive 
import prices. Otherwise, respondents claim, POSCO would lose business 
to competing importers. Further, respondents argue that the 
Department's methodology used in the preliminary determination was 
based upon the flawed assumption that there are no major differences 
between different hot-rolled stainless coils, and that the Department 
failed to consider quality and terms-of-sale differences in its price 
comparisons as required under section 771(5)(E)(iv) of the Act, which 
sets forth the standards for determining the adequacy of remuneration.
    Petitioners agree with the Department's preliminary determination 
that POSCO supplied exporters of subject merchandise with 
preferentially priced hot-rolled stainless steel coil, and that this 
practice constitutes a countervailable export subsidy. Petitioners 
state that the Department should continue to use import prices for hot-
rolled stainless steel coil as the benchmark for calculating the 
benefit conferred by this program, consistent with the Department's 
practice of using the world market price as a benchmark. As an 
alternative, petitioners propose the use of a weighted-average of the 
home market prices and import prices as the benchmark price.
    Petitioners rebut respondents' argument that POSCO's pricing system 
is consistent with commercial considerations, and disagree with 
respondents' claim that this pricing schemeystem is necessary in order 
for POSCO to compete with foreign competitors. Petitioners maintain 
that the attribution of commercial benefits to a subsidy program such 
as this one is irrelevant, as commercial considerations--such as the 
loss of business--do not mitigate the countervailability of such 
subsidies. Moreover, the language of the statute states that the 
adequacy of remuneration will be measured ``in relation to prevailing 
market conditions * * * for goods purchased in the country which is 
subject to the investigation.'' Therefore, POSCO's competition with 
imported material is also immaterial.
    Department's Position: Because POSCO, a government-owned entity, 
charged lower prices to respondent companies for inputs that were used 
to produce subject merchandise for export, this program constitutes an 
export subsidy in accordance with section 771(5A)(B) of the Act. We 
disagree with respondents' claim that there was no GOK control or 
intervention in POSCO's pricing decisions. As discussed in the 
``Programs Determined to be Countervailable'' section of this notice, 
we have determined that the actions of POSCO are the actions of the GOK 
because POSCO is a government-controlled company. Respondents also 
indicate that POSCO has no incentive to sell to its competitors at 
subsidized prices. However, as discussed above, POSCO is a government-
controlled company, and record evidence indicate that the GOK does 
influence POSCO's pricing decisions. See Source Document Memo.
    The parties have put forth numerous arguments explaining how the 
benefit

[[Page 30658]]

from this program should be determined under the guidelines of the 
adequacy of remuneration standard established in section 771(5)(E)(iv) 
of the Act. However, the adequacy of remuneration standard is not 
relevant to the program at issue. The program at issue is one in which 
POSCO charges different prices to Korean steel manufacturers based upon 
export performance. This type of dual pricing program is specifically 
addressed in the Illustrative List of Export Subsidies (the 
Illustrative List) which is provided as Annex I of the Agreement on 
Subsidies and Countervailing Measures. Because this type of program is 
specifically addressed under Item (d) of the Illustrative List, the 
criteria to be used to determine whether POSCO's dual pricing policy is 
a countervailable subsidy is the criteria set forth under Item (d), not 
the criteria used to determine the adequacy of remuneration as argued 
by the parties. Indeed, the adequacy of remuneration standard used for 
the provision of goods and services and the criteria used to determine 
the subsidy based upon price preferences for inputs used in the 
production of goods for exports are set forth in separate regulations. 
See section 351.511 and section 351.516 of the CVD Final Rules.
    Additionally, respondents discussed various other market 
conditions, e.g., quality, as factors which cause differences between 
POSCO's prices and those of POSCO's foreign competitors. However, as 
discussed in the ``Programs Determined to be Countervailable'' section 
of this notice, we have altered our methodology from the preliminary 
determination. Therefore, the products and pricing practices of only 
one supplier, POSCO, is considered in the Department's comparison. The 
Department is comparing POSCO's ``domestic'' prices to POSCO's ``local 
export'' prices. While factors such as quality may potentially create a 
price differential between different producers, these variables do not 
play a role in the different prices at which POSCO sells the same 
subject merchandise to its customers. Therefore, these arguments are 
not applicable.
    Respondents argued that if the Department mistakenly countervailed 
POSCO's two-tiered pricing policy, numerous adjustments should be made 
to the import prices which served as the benchmark in the preliminary 
determination. Petitioners also put forth numerous arguments with 
regard to these benchmark prices. However, as discussed in the 
``Programs Determined to be Countervailable'' section of this notice, 
we have stated the reasons for basing our comparison on prices charged 
by POSCO to respondents when producing for domestic sale and the prices 
charged by POSCO to respondents when producing for export. Therefore, 
the parties' arguments with regard to the use of import prices as a 
benchmark are not applicable.
    The parties argue about the date that should be considered the 
``date of sale'' by the Department. As indicated by both petitioners 
and respondents, this is not a dumping investigation, and the important 
question is when the prices being compared were set. Therefore, we 
based the comparison on the months in which the prices were set, which 
is the month in which the order was placed. Therefore, we believe that 
the most reasonable comparison is a monthly one, established by the 
order dates of the respondent firms.
    Finally, respondents argue that this pricing system is not unique 
to POSCO, but is used by numerous companies in a variety of industries 
as a market response to Korea's system of duty drawback. First we note 
POSCO's own statements indicate that POSCO sets local export prices at 
levels that are below the duty-exclusive price. See POSCO's October 21, 
1998 questionnaire response at 2. Under the countervailing duty law, a 
government pricing program which provides a lower price to exporters 
based upon export performance is a countervailable subsidy under 
section 771(5A)(B) of the Act. The statute and Item (d) of the 
Illustrative List provide the standard to be used by the Department to 
determine whether a countervailable subsidy has been provided by a 
pricing program of the type under examination in this investigation. 
Once the pricing program is determined to be an export subsidy under 
the statute, no further analysis on the countervailability of this 
program is required.

Comment 13: The GOK's Pre-1992 Investments Constitute Non-
Countervailable ``General Infrastructure''

    Respondents state that in the preliminary determination, the 
Department relied exclusively upon its decision in Steel Products from 
Korea, to find that the GOK's investments at Kwangyang Bay during the 
period 1983-1991, provided countervailable subsidies to POSCO. 
Respondents note that the final determination of Steel Products from 
Korea, however, was made under the Pre-Uruguay Round law and on a 
different factual record. Therefore, in order to carry out its 
statutory mandate, the Department must apply the Post-Uruguay Round law 
to the facts presented in this instant investigation, and revisit its 
preliminary determination. Under section 771(5)(B) of the Act, there is 
now a requirement that a financial contribution must be provided by the 
government in order for a countervailable subsidy to exist. Respondents 
further argue that under section 771(5)(D)(iii) of the Act, the term 
``financial contribution'' does not include the provision of general 
infrastructure.
    Respondents state that, although the Department's administrative 
determinations, and the statute itself, are silent as to the definition 
of ``general infrastructure'' under the new law, the Department's new 
CVD regulations are instructive. Respondents note that section 
351.511(d) of the new regulations defines ``general infrastructure'' as 
``infrastructure that is created for the broad societal welfare of a 
country, region, state, or municipality.'' See CVD Final Rules. They 
argue that under the Post-Uruguay Round law and the basic standard for 
general infrastructure articulated in section 351.511(d) of the new 
regulations, the GOK's pre-1992 infrastructure investments at Kwangyang 
Bay constitute non-countervailable ``general infrastructure.''
    Petitioners note that the Department in the past has found that the 
Kwangyang Bay investments do not constitute general infrastructure, and 
urge the Department to continue this practice. See Stainless Steel 
Plate from Korea, 64 FR at 15547, and Steel Products from Korea, 58 FR 
at 37346-47.
    Department's Position: Respondents are correct when they assert 
that general infrastructure is not considered to be a financial 
contribution under 771(5)(D)(iii) of the Act. However, they are 
incorrect when they state that the infrastructure development at 
Kwangyang Bay constitutes general infrastructure. As respondents have 
acknowledged, the statute is silent as to the definition of ``general 
infrastructure;'' however, they note that the Department's new CVD 
regulations are instructive. See CVD Final Rules, 63 FR at 65412. While 
the new CVD regulations are not applicable to this case because this 
investigation was initiated before the effective date of these 
regulations, we are referring to them, in part, for guidance as to what 
constitutes ``general infrastructure.''
    The new CVD regulations define general infrastructure as 
``infrastructure that is created for the broad societal welfare of a 
country, region, state or municipality.'' Thus, any infrastructure that 
does not satisfy this public welfare

[[Page 30659]]

concept is not general infrastructure and is potentially 
countervailable. Therefore, the type of infrastructure per se is not 
dispositive of whether the government provision constitutes ``general 
infrastructure.'' Rather, the key issue is whether the infrastructure 
is developed for the benefit of the society as a whole. For example, 
interstate highways, schools, health care facilities, sewage systems, 
or police protection would constitute general infrastructure if we 
found that they were provided for the good of the public and were 
available to all citizens and members of the public. Infrastructure, 
such as industrial parks and ports, special purpose roads, and railroad 
spur lines that do not benefit society as a whole, does not constitute 
general infrastructure within the meaning of the new CVD regulations, 
and is countervailable if the infrastructure is provided to a specific 
enterprise or industry and confers a benefit.
    The infrastructure provided at Kwangyang Bay was not provided for 
the good of the general public; instead, it was built to support POSCO; 
therefore, it does not constitute ``general infrastructure.'' It is 
clear from the record that the infrastructure provided for POSCO's 
benefit at Kwangyang Bay is de facto specific, and that POSCO is the 
dominant user. See Steel Products From Korea, 53 FR at 37346-47. 
Therefore, the infrastructure at Kwangyang Bay is countervailable. 
Indeed, the ``Explanation of the Final Rules'' (the Preamble) to the 
new CVD regulations, which respondents assert are instructive on this 
issue, specifically cites to the infrastructure provided at Kwangyang 
Bay in Steel Product From Korea as an example of industrial parks, 
roads, rail lines, and ports that do not constitute ``general 
infrastructure,'' and which are countervailable when provided to a 
specific enterprise or industry. See CVD Final Rules, 63 FR at 65378-
79.

Comment 14: GOK's Pre-1992 Investments Are Not Countervailable Because 
They Are ``Tied'' to Kwangyang Bay

    Respondents state that, in the preamble to the new regulations, the 
Department has adopted the practice of attributing subsidies that can 
be ``tied'' to particular products to those products. See CVD Final 
Rules, 63 FR at 65400. With respect to the instant investigation, 
respondents argue that the alleged subsidies are ``tied'' to the 
products that are produced at POSCO's Kwangyang Bay facility. Since the 
subject merchandise is not produced at the Kwangyang Bay facility, the 
subject merchandise does not benefit in any way from the allegedly 
subsidized general infrastructure at Kwangyang Bay. Respondents contend 
that it would run counter to the Department's practice, and common 
sense, to attribute countervailable benefits to products that cannot 
benefit from the alleged subsidies. They also note that under the 
Department's past practice, where a subsidy is ``tied'' only to non-
subject merchandise, that subsidy is not attributed to the merchandise 
under investigation. See Final Results of Countervailing Duty 
Administrative Review: Certain Iron-Metal Castings from India, 62 FR 
32297, 32302 (June 13, 1997).
    Respondents argue that the Department was faced with a similar 
factual situation as the instant case in the Final Affirmative 
Countervailing Duty Determination: Iron Ore Pellets from Brazil, 51 FR 
21961, 21966 (June 17, 1986) (Iron Ore Pellets from Brazil). In that 
case, petitioners argued that infrastructure and regional tax benefits 
provided to the Carajas mine project should be attributed to the 
respondent even though respondent did not produce (or intend to 
produce) subject merchandise at the Carajas mine project. The 
Department rejected petitioners' argument finding that the 
infrastructure and tax benefits were, by definition, only for the 
Carajas mine project. Because the respondent did not produce subject 
merchandise at the Carajas mine project, the Department did not 
consider this program countervailable with respect to subject 
merchandise.
    Respondents contend that, rather than directly addressing the fact 
that the alleged subsidies are tied to Kwangyang Bay, the Department 
has instead mis-cited to its earlier finding in Steel Products from 
Korea. They note that in the preliminary determination of the instant 
investigation the Department claims that the alleged subsidy in Steel 
Products from Korea was treated as ``untied.'' However, respondents 
state that nowhere in Steel Products from Korea does it state that the 
alleged subsidy was being treated as ``untied.'' In fact, respondents 
state that the issue of whether the subsidies were tied or untied never 
arose in that investigation because the subject merchandise was 
produced at both of POSCO's steel facilities and, therefore, it was 
unnecessary for the Department to characterize the alleged subsidy as 
either ``tied'' or ``untied.'' They argue that in mischaracterizing its 
finding in Steel Products from Korea, the Department is attempting to 
bootstrap that finding into the instant investigation.
    In their rebuttal brief, petitioners reject the respondents' 
argument that the Department is attempting to bootstrap its finding in 
Steel Products from Korea into the instant investigation. In Steel 
Products from Korea, petitioners state that the Department, by dividing 
the benefit attributable to the POI by POSCO's total sales, clearly 
treated the grants as untied benefits. See Steel Products from Korea, 
58 FR at 37347. The Department clearly reiterated this position in 
Stainless Steel Plate from Korea, 64 FR 15549. Therefore, petitioners 
argue, the Department should continue to find Kwangyang Bay 
infrastructure investments ``untied'' in the final determination.
    Department's Position: First, we note that the attribution, or 
``tying,'' of a subsidy to a particular product or market is a long-
standing policy of the Department, not one recently adopted in the new 
CVD regulations. Also, it has been the practice of the Department to 
attribute the benefit conferred from an ``untied'' domestic subsidy to 
the recipient's total sales. (This is how the subsidy rate was 
calculated for the Kwangyang Bay subsidy in Steel Products from Korea.) 
By contrast, if the subsidy was, for example, tied to export 
performance, then the Department would only attribute the benefit of 
the subsidy to the recipient's export sales.
    Respondents' argument that the infrastructure subsidy provided to 
POSCO is tied to only certain of POSCO's production is flawed. Part of 
respondents' argument rests upon the premise that a regional subsidy 
can be tied to only the subsidy recipient's production in that region. 
If this allocation methodology were adopted and the Department tied 
regional subsidies to production in a particular region, the Department 
would essentially be forced to calculate factory-specific subsidy 
rates. In addition, if such a methodology were applied, then foreign 
companies could easily escape collection of countervailing duties by 
selling the production of a subsidized region domestically, while 
exporting from a facility in an unsubsidized region. This allocation 
methodology has been clearly rejected by the Department. See, e.g., 
Final Negative Countervailing Duty Determination: Fresh Atlantic Salmon 
from Chile, 63 FR 31437, 31445-46 (June 9, 1998) (stating, ``[T]he 
Department does not tie the benefits of federally provided regional 
programs to the product produced in the specified regions.'') Indeed, 
the Department has explicitly rejected this argument in the new CVD 
regulations cited by

[[Page 30660]]

respondents in support of their argument on this issue. See CVD Final 
Rules, 63 FR at 65404. The infrastructure development at Kwangyang Bay 
provided a benefit to POSCO and, as discussed further below, the 
benefit from the subsidy is untied and is attributed to POSCO's total 
sales.
    Respondents' argument is also flawed because respondents have 
misinterpreted the attribution methodology. Attribution of the benefit 
of a subsidy is based upon the information available at the time of 
bestowal. The concept of ``tying'' a subsidy at the time of bestowal 
can be traced back to Certain Steel Products from Belgium. See Final 
Affirmative Countervailing Duty Determination: Certain Steel Products 
from Belgium, 47 FR 39304, 39317 (September 7, 1982). At the time of 
bestowal of the subsidy conferred by the Kwangyang Bay infrastructure, 
the benefit of the subsidy was to POSCO, not to a specific product 
line. Thus, the benefit cannot be tied to any specific product, but 
instead, is an untied benefit provided by the GOK to POSCO. Once it is 
determined that an untied subsidy has been provided to a firm, the 
Department will attribute that untied subsidy to the firm's total 
sales, even if the products produced by the firm differ significantly 
from the time when the subsidy was provided. The Department will not 
examine whether product lines have been expanded or terminated since 
the time of the subsidy's bestowal.
    Finally, we note that respondents' reliance on Iron Ore Pellets 
from Brazil is misplaced. First, in both Iron Ore Pellets from Brazil 
and in the Kwangyang Bay subsidy at issue in this investigation, the 
determination of attribution of a subsidy was made at the time of 
bestowal, which is consistent with Department policy. Thus, in both 
cases, the Department applied the same standard in determining whether 
a subsidy was tied or untied. Second, the subsidy alleged in Iron Ore 
Pellets from Brazil was alleged to have been provided to an input into 
the subject merchandise, an issue distinct from the issue in the 
instant investigation. We further note that the treatment of input 
subsidies at issue in Iron Ore Pellets from Brazil has changed since 
1986. See e.g., section 351.525(b)(6)(iv) of the CVD Final Rules and 
Final Results of Countervailing Duty Administrative Review: Industrial 
Phosphoric Acid from Israel, 63 FR 13626 (March 20, 1998). Thus, if the 
identical subsidy issue cited in Iron Ore Pellets from Brazil were 
before the Department today, it is uncertain whether the same decision 
would be made in 1999 as was made in 1986.

Comment 15: The Department Erred in Treating the Alleged Benefit to 
POSCO as a Grant

    Respondents note that, in the preliminary determination, the 
Department determined that the GOK's costs of constructing the 
infrastructure at Kwangyang Bay constituted grants to POSCO. In 
treating these costs as grants to POSCO, respondents argue, the 
Department has ignored the fact that the GOK owns these facilities and 
charges POSCO the normal user fees for the services provided. They 
assert that it is erroneous as a matter of law and contrary to 
Department precedent to countervail as grants infrastructure that the 
respondent does not own and where normal user fees are paid to use the 
infrastructure services. (Citing, sections 771(5)(D)(i) and (E)(iv) of 
the Act, and the Final Affirmative Countervailing Duty Determination: 
Industrial Phosphoric Acid from Israel, 52 FR 25447, 25451 (July 7, 
1987) (IPA from Israel; Final Determination).)
    Respondents contend that rather than treating the infrastructure 
investments as grants, the Department should have analyzed the issue as 
one of whether the infrastructure services were provided ``for less 
than adequate remuneration,'' citing section 771(5)(E)(iv) of the Act. 
They note that adequacy of remuneration is the new statutory provision 
for determining whether the government's provision of a good or service 
constitutes a countervailable subsidy. According to section 771(5)(E) 
of the Act, the adequacy of remuneration with respect to a government's 
provision of a good or service shall be determined in relation to 
prevailing market conditions (i.e., price, quality, availability, 
marketability, transportation, and other conditions of purchase or 
sale) for the good or service being provided or the goods being 
purchased in the country which is subject to the investigation or 
review.
    Respondents state that the Department addressed a similar issue in 
IPA from Israel; Final Determination. At issue in that case were 
certain rail lines built (and owned) by the Israeli government for 
``the almost exclusive use of a few chemical companies. See IPA from 
Israel; Final Determination, 52 FR at 25447. The Department recognized 
that any benefit to be derived from the infrastructure was related to 
the use of that infrastructure, and since the respondent in question 
paid for such use, the question was whether the payments for such use 
were higher or lower than those paid by other users for similar 
services. The Department determined that the rates paid were not 
preferential and, therefore, that no benefit or subsidy existed.
    Respondents also state that in Certain Steel Products from Brazil, 
the Department applied a similar analysis. In that case, the Department 
determined that ``The fees charged * * * reflected standard fees 
applied to all users of port facilities, thus, they are non-specific.'' 
Certain Steel Products from Brazil at 37300. See also, Final 
Affirmative Countervailing Duty Determination: Carbon Steel Wire Rod 
from Trinidad and Tobago, 49 FR 480, 486 (Jan. 4, 1984) (Carbon Steel 
Wire Rod from Trinidad and Tobago).
    Respondents argue, in the alternative, that if the Department 
continues to treat these benefits as ``grants,'' then these grants must 
be pro-rated based upon the actual benefit to POSCO. They note that the 
GOK provided information on the use of these facilities and, where 
possible, POSCO's portion of the total usage during the POI. Since 
POSCO is not the only company that benefits from the infrastructure 
investments at Kwangyang Bay, the Department cannot simply attribute 
the entire benefit from the GOK's infrastructure investments to POSCO. 
The benefit found must be allocated proportionate to POSCO's use of 
these facilities at Kwangyang Bay during the POI.
    In their rebuttal brief, petitioners state that respondents are 
blurring the distinction between the original provision of specific 
infrastructure investments and the adequacy of remuneration of fees 
charged for the future use of the infrastructure. In addition, 
petitioners argue that the investment grants should not be ``pro-
rated'' based on POSCO's use of the facilities, because POSCO is the 
dominant beneficiary. Petitioners note that in Steel Products from 
Korea, the Department determined that Kwangyang Bay was specifically 
designed for POSCO. See Steel Products from Korea, 58 FR at 37347. 
Petitioners point out that the Department specifically clarified this 
point in the recent final determination of Stainless Steel Plate from 
Korea. See Stainless Steel Plate from Korea, 64 FR at 15,550.
    Department's Position: The Kwangyang Bay infrastructure subsidy 
under investigation in Steel Products from Korea, Stainless Steel Plate 
from Korea, and this investigation is not the fee charged by the 
government for use of rail and port facilities, as was the issue in the 
cases cited by respondents. Indeed, we found an alleged program

[[Page 30661]]

providing ``preferential'' port charges to the Korean steel industry 
not to exist in Steel Products from Korea. Therefore, the cases cited 
by respondents are not relevant to the treatment of the Kwangyang Bay 
subsidy.
    The benefit under this subsidy program to POSCO was the creation of 
Kwangyang Bay to support POSCO's construction of its second integrated 
steel mill. The building of this infrastructure to support POSCO's 
expansion, which was planned years before POSCO commenced production at 
Kwangyang Bay, was the benefit countervailed in Steel Products from 
Korea and in this investigation. Thus, the benefit conferred by this 
subsidy program to POSCO, and the benefit that must be measured, is the 
construction of these facilities, rather than the fees charged to POSCO 
for their use. Therefore, it is reasonable to measure the benefit from 
this program by treating the costs of constructing the Kwangyang Bay 
facilities for POSCO as nonrecurring grants.
    In addition, we also disagree with respondents' argument that we 
should pro-rate this subsidy between POSCO and to other companies 
currently located at Kwangyang Bay. Again, respondents have 
misinterpreted the nature of the benefit. The infrastructure at 
Kwangyang Bay was built to support POSCO's expansion and its creation 
of its second integrated steel mill. Therefore, the program is a 
subsidy provided to POSCO, and the benefit from the program is properly 
attributed to POSCO.

Comment 16: The Department Should Exclude Dai Yang's ``Merchandise'' 
Sales From its Reported Sales Denominator

    Petitioners argue that the Department should exclude the amount of 
``merchandise sales,'' or goods resold, from Dai Yang's sales 
denominator in its final analysis. Petitioners reason that these sales, 
which were discovered at verification, are sales of goods not produced 
by Dai Yang, and so should not be included in Dai Yang's sales figures.
    Respondents argue that it is hypocritical for petitioners to argue, 
on one hand, that the ``untied'' subsidies which POSCO allegedly 
received from the pre-1992 infrastructure investments at Kwangyang Bay 
should be attributed to the production of subject merchandise, while on 
the other hand Dai Yang's ``merchandise'' sales should be left out of 
the calculation because they are ``untied.''
    Department's Position: According to the GIA, it is the Department's 
aim to ``capture every part of the sales transaction that could benefit 
from subsidies'' in the total sales denominator. GIA, 58 FR at 37237. 
Moreover, it is the Department's long-standing position that production 
subsidies are tied to a company's domestic production. Following the 
approach outlined in Certain Steel from France (1993), we have applied 
the Department's ``tied'' analysis to this situation. See, GIA, 58 FR 
at 37236. The presumption that the subsidies at issue are tied to 
domestic production has not in any way been rebutted by respondents, 
and respondents have not attempted to show that Dai Yang's 
``merchandise'' sales should appropriately be included in the sales 
denominator. We therefore determine that the appropriate sales 
denominator is the total of Dai Yang's domestically produced 
merchandise, and we have excluded Dai Yang's ``merchandise'' sales, as 
these are not sales of goods produced by the company.
    Respondents argue that it is inconsistent to exclude ``untied'' 
sales while concurrently countervailing a subsidy which is ``untied'' 
to the production of subject merchandise. However, this position is not 
inconsistent. Subsidies received for infrastructure, for example, 
indirectly benefit production. Thus, it is reasonable to countervail 
such a subsidy. However, to include in the sales denominator sales of 
merchandise that were not produced by the particular respondent would 
be unreasonable, as this merchandise is clearly not part of the 
production process.

Comment 17: Countervailability of Long-Term Loans Where Dai Yang Did 
Not Have Interest Payments Due During the POI

    Respondents state that it is the Department's methodology to 
calculate the benefit from long-term variable rate loans at the time 
the interest on the loan would be paid; hence no benefit exists on a 
loan if no interest was due during the POI. Respondents argue that the 
Department's methodology for measuring the benefit from fixed rate 
loans requires the same result. Therefore, respondents conclude that 
there is no benefit from either fixed or variable rate long-term loans 
if no interest payments were due on those loans in 1997.
    Department's Position: We agree with respondents that it has been 
the Department's long-standing policy to calculate the benefit of a 
long-term fixed-rate loan assigned to a particular year by calculating 
the difference in interest payments for that year, i.e., the difference 
between the interest paid by the firm in that year on the government 
provided loan and the interest the firm would have paid on a comparable 
commercial loan. See section 771(5)(E)(ii) of the Act. Because our 
methodology is to calculate the benefit at the time the interest on the 
loan would be paid on the comparison loan, and because no interest 
payment would have been made during the POI, we find that there is no 
benefit to Dai Yang from these loans.

Comment 18: The Loan That Dai Yang Received From the National 
Agricultural Cooperation Foundation Was Not Specific and Is Thus Not 
Countervailable

    Respondents argue that the Department erred in its preliminary 
finding that the loan that Dai Yang received from the National 
Agricultural Cooperation Foundation was countervailable as an export 
subsidy because Dai Yang had provided the wrong evaluation criteria in 
its questionnaire response. Respondents assert that the record 
evidence, in particularly the evidence gathered at verification, 
indicates that this loan program was generally available to small and 
medium size enterprises (SMEs), and that companies were not evaluated 
for these loans based on export performance. Respondents conclude that 
this loan is not an export subsidy, is non-specific, and, hence is not 
countervailable.
    Petitioners argue that this loan should be countervailed as an 
export subsidy, or alternatively as a GOK policy loan. According to 
petitioners, the fact that this loan program was available only to SMEs 
is not pertinent. The evidence on the record supports the conclusion 
that export performance is a factor in the availability of NACF loans; 
that the loans are advertised as ``small and medium size company loan'' 
does not negate the fact that export status is a criteria for 
eligibility.
    Respondents disagree with the assertion that Dai Yang's loan from 
the NACF is countervailable as a GOK-directed policy loan. It is Ansan 
City, and not the GOK, which funds and administers this loan program. 
Respondents assert that since the GOK was not involved, this program 
lies outside the rubric of GOK direction of credit. Rather, respondents 
reiterate that the correct standard is whether the program was specific 
within Ansan City which, as discussed above, it was not.
    Department's Position: We disagree with respondents' assertion that 
the criteria for approval of lending under this program is not 
contingent upon

[[Page 30662]]

export performance. While new information was presented at verification 
which indicated that this program is available only to small- and 
medium-sized enterprises, the loan approval criteria indicates that 
export performance is also an important criterion for approval. 
According to the loan approval criteria, export performance and 
overseas market development are two of the factors considered in the 
approval process. As the Department has found this program to be a 
countervailable export subsidy, petitioners argument that it should be 
countervailed as direction of credit is moot.

Comment 19: The Department Should Not Include the Subsidy From Dai 
Yang's Export Industry Facility Loan in the Cash Deposit Rate

    Respondents argue that the Export Industry Facility Loan that Dai 
Yang had outstanding during the POI should not be countervailed 
because: (1) As verified, the program was terminated in 1994; and (2) 
Dai Yang's outstanding balance was paid off in early 1998. Hence, there 
can be no future benefit to Dai Yang. Respondents argue that according 
to the Department's regulations, such a program-wide change may be 
taken into account in establishing the estimated countervailing duty 
cash deposit rate.
    In their rebuttal brief, petitioners indicate that, as outlined in 
the Department's new regulations, the Department's policy is to make 
such an adjustment if the applicable events occurred during the POI, 
but before the preliminary determination. In this case, the program-
wide change occurred prior to the POI, and thus is inapplicable to the 
current investigation. Furthermore, since the benefits did not cease 
until after the POI, the Department should not adjust the cash deposit 
rate.
    Department's Position: Petitioners are correct in their contention 
that the Department should not adjust the cash deposit rate. Pursuant 
to section 355.50(d)(1) of the Department's 1989 Proposed Regulations, 
and codified in section 351.526 of the CVD Final Rule the Secretary 
will not adjust the cash deposit rate where a program is terminated 
and, ``the Secretary determines that residual benefits may continue to 
be bestowed under the terminated program.'' See CVD Final Rule, 63 FR 
at 65417. See also, e.g., Live Swine From Canada; Final Results of 
Countervailing Duty Administrative Review, 63 FR 2204. As reported by 
the GOK and verified by the Department, the Export Industry Facility 
Loan program was terminated in 1994. However, Dai Yang continued to 
receive countervailable benefits from this program throughout the POI.

Comment 20: The Department's Use of the Aggregate Rate Found in Steel 
Products From Korea for Determining a Subsidy Benefit to Sammi

    Respondents argue that the country-wide ad valorem rate from Steel 
Products from Korea which was used as facts available should be 
modified to reflect the fact that three of the programs found 
countervailable in Steel Products from Korea were applicable only to 
POSCO: government equity infusions, infrastructure at Kwangyang Bay, 
and the exemption from dockyard fees. Petitioners maintain that the 
Department should exclude these benefits because (1) the petition did 
not allege these subsidies were provided to Sammi; and (2) the 
Department recently determined that POSCO's exemption from port fees 
was not a countervailable subsidy.
    Petitioners rebut the suggestion that the facts available rate 
applied to Sammi be adjusted to account for POSCO-specific programs. 
Because the Department applied the rate from Steel Products from Korea 
as adverse facts available, the components of this rate are immaterial. 
None of the components of this rate are specific to Sammi; the 
Department chose to use this rate as an adequate surrogate for company-
specific information. In support of this opinion, petitioners cite 
Krupp Stahl A.G. v. United States, 822 F. Supp. 789, 792 (CIT 1993) 
(Krupp Stahl), quoting Asociacion Colombiana de Exportadores de Flores 
v. United States, 704 F. Supp. 1114,1126 (CIT 1989), aff'd, 901 F.2d 
1089 (Fed. Cir. 1990), which said that the appropriate facts available 
information ``is not necessarily accurate information, it is 
information which becomes usable because a respondent has failed to 
provide accurate information.''
    Because Sammi did not cooperate in this investigation, there is no 
evidence that they did not receive benefits from the ``POSCO-specific'' 
programs, nor can the Department know what subsidies may have been 
uncovered had Sammi cooperated in the investigation. The Department 
may, therefore, make the adverse assumption that unreported subsidies 
may exist. The Department has broad discretion to define facts 
available, as stated in Krupp Stahl and in Allied-Signal Aerospace Co. 
v. United States, 996 F.2d 1185,1191 (Fed. Cir. 1993), and should use 
the discretion to maintain the aggregate facts available rate for 
Sammi.
    Department's Position: Pursuant to section 776(b) of the Act, the 
Department chose to use the aggregate rate found in Steel Products from 
Korea as an adverse facts available representation of countervailable 
benefits conferred to Sammi by the GOK. Because this rate was based on 
many of the same programs alleged in this case, we consider it to be an 
appropriate basis for a facts available countervailing duty rate 
calculation.
    We disagree with respondents' argument that because some of the 
program rates incorporated in the aggregate rate were specific to 
POSCO, the Department should exclude these POSCO-specific benefits. As 
indicated by petitioners, because Sammi chose not to participate in 
this investigation, the Department has no basis for concluding that 
Sammi has not benefitted, at a minimum, from the level of subsidies 
found applicable to the Korean steel industry in Steel Products from 
Korea. According to section 351.308(c) of the Department's regulations, 
the Department may use the rates found in a previous countervailing 
duty investigation in an adverse facts available situation. Therefore, 
we have relied upon the final determination of Steel Products from 
Korea as an appropriate source for adverse facts available.

Comment 21: POSCO's Purchase of Sammi's Changwon Facility

    Respondents argue that the because the preliminary determination 
was based on a misplaced decimal in the translated version of the 
purchase contract, the amount of the final payment to Sammi for this 
facility was vastly overstated. In reality, respondents claim, the 
amount POSCO paid was based on the lower of the two independent third-
party valuation reports. POSCO did not pay more for this facility than 
this study concluded that it was worth, and there was no 
countervailable subsidy to Sammi.
    In rebuttal, petitioners point to record evidence which indicates 
that this sale was an attempt by the GOK to prevent Sammi's bankruptcy. 
Moreover, petitioners argue that the KDB's release of Sammi's 
collateral which enabled this purchase amounts to a grant and, hence, a 
financial contribution. Because this contribution was exclusive to 
Sammi, this subsidy meets the Department's definition of specificity. 
Therefore, the full purchase price paid by POSCO is countervailable as 
a grant.
    Department's Position: While respondents are correct in their 
statement that the ad valorem rate determined by the Department in its

[[Page 30663]]

preliminary determination was based on a misplaced decimal in POSCO's 
submission, we disagree with their contention that POSCO's purchase of 
Sammi's Changwon does not confer a countervailable benefit. Additional 
evidence acquired since the preliminary determination, however, 
indicates that POSCO made this purchase at the request of the GOK, and, 
in doing so, deviated substantially from its own internal regulations 
on purchasing. Therefore, we determine that POSCO's purchase of this 
facility provided a countervailable subsidy to Sammi. For a more 
detailed discussion of this program, please see the ``Programs 
Determined To Be Countervailable'' of this notice.

Comment 22: Government Financial Assistance as a Result of Sammi's 
Bankruptcy

    Respondents argue that, as verified by the Department, when Sammi 
declared bankruptcy its debts were restructured and payment schedules 
were established for each creditor, including the KDB. There is no 
evidence that Sammi received government assistance in the form of 
grants or debt write-offs in conjunction with its bankruptcy. Instead, 
the Department found at verification that the KDB ceased lending to 
Sammi after 1996, and that once Sammi declared bankruptcy, the KDB 
notified Sammi that it was closing its accounts. Respondents argue 
Sammi's bankruptcy was consistent with normal bankruptcy procedures; 
therefore, the Department should conclude in its final determination 
that there was no GOK financial assistance provided to Sammi in 
conjunction with its bankruptcy and, hence, no countervailable subsidy.
    Petitioners argue that, as shown by record evidence, the GOK forced 
POSCO to purchase Sammi's Changwon facility to either prevent or 
ameliorate the effects of bankruptcy on Sammi. Absent this rescue plan, 
and the massive equity infusion caused by the Changwon purchase, Sammi 
would have entered into bankruptcy earlier and have been liquidated. 
Alternatively, Sammi would have defaulted on loans and had its 
collateral seized. Petitioners propose that the Department should 
countervail the full value of the loan extensions to Sammi on its KDB 
loans.
    Department's Position: Petitioners argue that POSCO's purchase of 
Sammi's Changwon facility, and the KDB's corresponding release of 
collateral, constitutes emergency assistance in conjunction with 
Sammi's bankruptcy. While the Department agrees that the Changwon 
facility was purchased by POSCO at the behest of the GOK, we disagree 
that the KDB's release of collateral constituted bankruptcy assistance. 
As verified by the Department, the KDB released the collateral in 
question as a result of POSCO's agreement to purchase the assets held. 
The bulk of POSCO's payment for the Changwon facility went to pay off 
Sammi's outstanding loans with respect to this facility.
    While Sammi chose not to cooperate in this investigation, the GOK 
indicated that there was no consortium, there were no grants, and that 
Sammi's debt was addressed in the context of normal bankruptcy 
proceedings. During our verification, we examined the other 
respondents' accounts and financial records and did not find any 
provision of assistance to Sammi; nor did we find evidence of such 
assistance during our verification of the Government of Korea. Because 
our investigation revealed no government assistance to Sammi in the 
form of grants or write-off of debt, we have not calculated a subsidy 
rate for this allegation. However, because Sammi did not respond to our 
request for information, we will continue to examine this allegation in 
any subsequent administrative review. For more information regarding 
this program, please see the ``Use of Facts Available'' section of this 
notice.

Comment 23: Calculation of the Benefit From Sammi's 1992 ``Emergency 
Loans'

    Respondents argue that the Department made numerous mistakes in its 
calculation of the countervailable benefit from the ``emergency loans'' 
in the preliminary determination. The Department's premise that the 
entire amount of 132 billion won remained outstanding during the POI, 
and that these were interest-free loans, is flawed. Further, Sammi's 
1997 balance sheet indicates that there must have been little, if any, 
of these ``emergency loan'' funds outstanding during the POI, and that 
Sammi would have been unable to make payments on any loans from March 
to December 1997, since Sammi was under court receivership at this 
time. Respondents also argue that according to Sammi's 1996 balance 
sheet, Sammi had less than 132 billion won in outstanding long-term 
loans at the end of 1996, before the POI began.
    Petitioners claim that the Department should reject this suggestion 
and reaffirm the methodology used in the preliminary determination, 
because there is not enough information on the record to justify any 
other course of action. The Department has no way of knowing whether 
the loans in question were forgiven between 1992 and 1996, which would 
account for the 1997 balance sheet statement. Petitioners again cite 
Krupp Stahl (See Comment 22) to support the idea that whether Sammi was 
actually subject to a subsidy of the full amount of the loans is 
irrelevant because of Sammi's refusal to cooperate. Because Sammi chose 
not to participate in this investigation, and therefore the record 
contains insufficient and unverified evidence, the full amount of the 
emergency loans should be countervailed.
    Department's Position: As discussed in the ``Programs Determined to 
be Countervailable'' section of this notice, we determined that the 
aggregate rate from Steel Products from Korea which we have applied to 
Sammi as adverse facts available, includes a calculated subsidy rate 
for the GOK's direction of credit. Because the aggregate rate from 
Steel Products from Korea includes a calculated subsidy rate for the 
GOK's direction of credit to the Korean steel industry, we have not 
calculated an additional subsidy rate for this allegation that the GOK 
directed banks in Korea to provide loans to Sammi in 1992. Indeed, in 
the petition, this allegation of the provision of the 1992 loans to 
Sammi is included as part of petitioners' allegation of directed 
credit, and references our determination is Steel Products from Korea. 
Therefore, parties' comments with respect to the quantification of the 
benefit from the ``emergency loan'' package are not germane.

Verification

    In accordance with section 782(i) of the Act, we verified the 
information used in making our final determination. We followed 
standard verification procedures, including meeting with the government 
and company officials, and examining relevant accounting records and 
original source documents. Our verification results are outlined in 
detail in the public versions of the verification reports, which are on 
file in the CRU of the Department of Commerce (Room B-099).

Suspension of Liquidation

    In accordance with section 705(c)(1)(B)(i) of the Act, we have 
calculated an individual subsidy rate for each of the companies under 
investigation. We determine that the total estimated net 
countervailable subsidy rates are as follows:

------------------------------------------------------------------------
                                                            Net subsidy
                    Producer/exporter                          rate
                                                             (percent)
------------------------------------------------------------------------
POSCO...................................................            0.65
Inchon..................................................            2.64
Dai Yang................................................            1.58

[[Page 30664]]

 
Sammi...................................................           59.30
Taihan..................................................            7.00
All Others Rate.........................................            1.68
------------------------------------------------------------------------

    We determine that the total estimated net countervailable subsidy 
rates for POSCO is 0.65 percent ad valorem, which is de minimis. 
Therefore, we determine that no countervailable subsidies are being 
provided to POSCO for its production or exportation of stainless steel 
sheet and strip in coils. In accordance with section 705(c)(5)(A)(i) of 
the Act, we have calculate the all-others rate by averaging the 
weighted average countervailable subsidy rates determined for the 
producers individually investigated. On this basis, we determine that 
the all-others rate is 1.68 percent ad valorem.
    In accordance with our preliminary affirmative determination, we 
instructed the U.S. Customs Service to suspend liquidation of all 
entries of stainless steel sheet and strip in coils from the Republic 
of Korea which were entered, or withdrawn from warehouse, for 
consumption on or after November 17, 1998, the date of the publication 
of our preliminary determination in the Federal Register. Since the 
estimated net countervailing duty rates for POSCO and Dai Yang were de 
minimis, these companies were excluded from this suspension of 
liquidation. In accordance with section 703(d) of the Act, we 
instructed the U.S. Customs Service to discontinue the suspension of 
liquidation for merchandise entered on or after March 17, 1999, but to 
continue the suspension of liquidation of entries made between November 
17, 1998, and March 16, 1999.
    We will reinstate suspension of liquidation under section 706(a) of 
the Act if the ITC issues a final affirmative injury determination, and 
will require a cash deposit of estimated countervailing duties for such 
entries of merchandise in the amounts indicated above. Because the 
estimated net countervailing duty rate for POSCO is de minimis, this 
company will be excluded from the suspension of liquidation.

ITC Notification

    In accordance with section 705(d) of the Act, we will notify the 
ITC of our determination. In addition, we are making available to the 
ITC all non-privileged and non-proprietary information related 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 for Import Administration.
    If the ITC determines that material injury, or threat of material 
injury, does not exist, this proceeding will be terminated and all 
estimated duties deposited or securities posted as a result of the 
suspension of liquidation will be refunded or canceled. If, however, 
the ITC determines that such injury does exist, we will issue a 
countervailing duty order.

Destruction of Proprietary Information

    In the event that the ITC issues a final negative injury 
determination, this notice will serve as the only reminder to parties 
subject to Administrative Protective Order (APO) of their 
responsibility concerning the destruction of proprietary information 
disclosed under APO in accordance with 19 CFR 351.305(a)(3). Failure to 
comply is a violation of the APO.
    This determination is published pursuant to sections 705(d) and 
777(i) of the Act.

    Dated: May 19, 1999.
Richard W. Moreland,
Acting Assistant Secretary for Import Administration.
[FR Doc. 99-13769 Filed 6-7-99; 8:45 am]
BILLING CODE 3510-DS-P