[Federal Register Volume 67, Number 42 (Monday, March 4, 2002)]
[Notices]
[Pages 9685-9696]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-5107]


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DEPARTMENT OF COMMERCE

International Trade Administration

[C-580-849]


Notice of Preliminary Affirmative Countervailing Duty 
Determination and Alignment of Final Countervailing Duty Determination 
With Final Antidumping Duty Determination: Certain Cold-Rolled Carbon 
Steel Flat Products From the Republic of Korea

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

ACTION: Notice of Preliminary Affirmative Countervailing Duty 
Determination.

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EFFECTIVE DATE: March 4, 2002.

FOR FURTHER INFORMATION CONTACT: Tipten Troidl at (202) 482-1767 and 
Darla Brown at (202) 482-2849, Office of AD/CVD Enforcement VI, Import 
Administration, U.S. Department of Commerce, Room 4012, 14th Street and 
Constitution Avenue, NW., Washington, DC 20230.

Preliminary Determination The Department of Commerce (the Department) 
preliminarily determines that countervailable subsidies are being 
provided to certain producers and exporters of certain cold-rolled 
carbon steel flat products (subject merchandise) from the Republic of 
Korea. For information on the estimated countervailing duty rates, see 
the ``Suspension of Liquidation'' section of this notice.

SUPPLEMENTARY INFORMATION:

Petitioners

    The petition in this investigation was filed by Bethlehem Steel 
Corp., United States Steel LLC, LTV Steel Company, Inc., Steel 
Dynamics, Inc., National Steel Corp., Nucor Corp., WCI Steel, Inc., and 
Weirton Steel Corp (collectively, petitioners).

Case History

    Since the publication of the notice of initiation in the Federal 
Register (see Notice of Initiation of Countervailing Duty 
Investigations: Certain Cold-Rolled Carbon Steel Flat Products from 
Argentina, Brazil, France, and the Republic of Korea, 66 FR 54218 
(October 26, 2001) (Initiation Notice)), the following events have 
occurred. On November 1, 2001, we issued countervailing duty 
questionnaires to the Government of Korea (GOK).\1\ On December 20, 
2001, we received responses to our initial questionnaires from the GOK, 
Dongbu Steel Co., Ltd. (Dongbu), Hyundai Hysco (Hysco), and Pohang Iron 
& Steel Co., Ltd.\2\ (POSCO) (collectively, respondents), the 
producers/exporters of the subject merchandise. On January 16, 2002, 
the Department initiated an investigation of two additional subsidy 
allegations made by petitioners. See Memorandum to Melissa G. Skinner, 
Director of Office of AD/CVD Enforcement VI, through Richard Herring, 
Program Manager of Office of AD/CVD Enforcement VI; Re: Additional 
Subsidy Allegations in the Investigation of Certain Cold-Rolled Steel 
Flat Products from Korea dated January 16, 2002, which is on public 
file in the Central Records Unit (CRU), Room B-099 of the Department of 
Commerce. Supplemental questionnaires were issued to the GOK, Dongbu, 
POSCO, and Hysco on January 16, 2002 and January 18, 2002. We received 
supplemental questionnaire responses from respondents on February 5, 
2002.
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    \1\ Upon the issuance of the questionnaire, we informed the GOK 
that it was the government's responsibility to forward the 
questionnaires to all producers/exporters that shipped subject 
merchandise to the United States during the period of investigation.
    \2\ Pohang Coated Steel Co., Ltd. (POCOS), a wholly-owned 
subsidiary of POSCO which also produces and exports subject 
merchandise submitted a questionnnaire response. Because POCOS is a 
whollyu-owned subsidiary of POSCO, we have included the beneifts 
received by POCOS in our calculation of POSCO's rate and have used 
POSCO's consolidated sales as our denominator. Reference to POSCO 
throughout this notice will also include POCOS.
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    On December 7, 2001, we issued a partial extension of the due date 
for this preliminary determination from December 22, 2001, to no later 
than January 28, 2002. See Certain Cold-Rolled Carbon Steel Flat 
Products From Argentina, Brazil, France and the Republic of Korea: 
Extension of Time Limit for Preliminary Determinations in 
Countervailing Duty Investigations, 66 FR 63523 (December 7, 2001) 
(Extension Notice). On January 24, 2002, we amended the Extension 
Notice to take the full amount of time to issue this preliminary 
determination. The extended due date is February 25, 2002. See Certain 
Cold-Rolled Carbon Steel Flat Products From Argentina, Brazil, France 
and the Republic of Korea: Extension of Time Limit for Preliminary 
Determinations in Countervailing Duty Investigations, 67 FR 3482 
(Second Extension Notice).
    The GOK's December 20, 2001 questionnaire response stated that 
Union Steel Manufacturing Co., Ltd. (Union) shipped subject merchandise 
to the United States during the POI; however, the GOK stated that Union 
would not be responding to the Department's questionnaire for this 
investigation. On January 16, 2002, we provided Union with another 
opportunity to respond to the questionnaire. Union, again, declined to 
participate in this investigation. For the treatment of Union in this 
preliminary determination, see the ``Use of Facts Available'' section 
of this notice.

Scope of the Investigation

    For purposes of this investigation, the products covered are 
certain cold-rolled (cold-reduced) flat-rolled carbon-quality steel 
products. For a full description of the scope of this investigation, 
please see the Scope Appendix attached to the Notice of Preliminary 
Negative Countervailing Duty Determination and Alignment of Final 
Countervailing Duty Determination with Final Antidumping Duty 
Determinations: Certain Cold-Rolled Carbon Steel Flat Products from 
Argentina, published concurrent with this preliminary determination.

Scope Comments

    In the Initiation Notice, we invited comments on the scope of this 
proceeding. On November 15, 2001, we received a request from Emerson 
Electric Company (``Emerson'') to amend the scope of this 
investigation, as well as the concurrent countervailing and antidumping 
duty investigations pertaining to subject merchandise. Specifically, 
Emerson requested that the scope be amended to exclude all types of 
nonoriented coated silicon electrical steel, whether fully-or semi-
processed, because such products are not treated in the marketplace as 
carbon steel products.
    On February 22, 2002, we received a response to the Emerson request 
from the petitioners. The petitioners objected to excluding these 
products from the scope and have explained that the scope language is 
not overly inclusive with respect to these products. Therefore, we 
determine that nonoriented coated silicon electric steel is within the 
scope of these proceedings.
    The Department has also received several other scope exclusion 
requests in the cold-rolled steel investigations. We are continuing to 
examine these exclusion requests, and plan to reach a decision as early 
as possible in the proceedings. Interested parties will be advised of 
our intentions prior to the final determinations and will have the 
opportunity to comment.

[[Page 9686]]

Applicable Statute and Regulations

    Unless otherwise indicated, all citations to the statute are 
references to the provisions effective January 1, 1995, the effective 
date of the amendments made to the Tariff Act of 1930 (the Act) by the 
Uruguay Round Agreements Act (URAA). In addition, unless otherwise 
indicated, all citations to the Department's regulations are references 
to the provisions codified at 19 CFR Part 351 (2001).

Injury Test

    Because Korea is a ``Subsidy 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 November 19, 2001, the ITC published its preliminary 
determination finding that there is a reasonable indication that an 
industry in the United States is being materially injured, or 
threatened with material injury, by reason of imports from Korea of 
subject merchandise. (66 FR 57985). The views of the Commission are 
contained in the USITC Publication 3471 (November 2001), Certain Cold-
Rolled Steel Products from Argentina, Australia, Belgium, Brazil, 
China, France, Germany, India, Japan, Korea, the Netherlands, New 
Zealand, Russia, South Africa, Spain, Sweden, Taiwan, Thailand, Turkey 
and Venezuela; Investigation Nos. 701-TA-422-425 (Preliminary) and 731-
TA-964-983 (Preliminary).

Alignment With Final Antidumping Duty Determination

    On February 21, 2002, petitioners submitted a letter requesting 
alignment of the final determination in this investigation with the 
final determination in the companion antidumping duty investigation. 
Therefore, in accordance with section 705(a)(1) of the Act, we are 
aligning the final determination in this investigation with the final 
determinations in the antidumping duty investigations of cold-rolled 
carbon steel flat products.

Period of Investigation

    The period of investigation (POI) for which we are measuring 
subsidies is calendar year 2000.

Use of Facts Available

    Union failed to respond to the Department's questionnaire. Sections 
776(a)(2)(A) and 776(a)(2)(B) of the Act require the use of facts 
available when an interested party withholds information that has been 
requested by the Department, or when an interested party fails to 
provide the information requested in a timely manner and in the form 
required. Union failed to provide information explicitly requested by 
the Department; therefore, we must resort to the facts otherwise 
available. Because Union failed to provide any requested information, 
sections 782(d) and (e) of the Act are not applicable.
    Section 776(b) of the Act provides that in selecting from among the 
facts available, the Department may use an inference that is adverse to 
the interests of a party if it determines that a party has failed to 
cooperate to the best of its ability. In this investigation, the 
Department requested that all producers/exporters in Korea that shipped 
subject merchandise to the United States during the POI submit the 
information requested in our initial questionnaire. However, Union, a 
producer/exporter that shipped subject merchandise to the United States 
during the POI, did not participate in the investigation.
    The Department finds that by not providing the necessary 
information specifically requested by the Department and by failing to 
participate in any respect in this investigation, Union has failed to 
cooperate to the best of its ability. Therefore, in selecting facts 
available, the Department determines that an adverse inference is 
warranted.
    Section 776(b) of the Act indicates that, when employing an adverse 
inference, the Department may rely upon information derived from (1) 
the petition; (2) a final determination in a countervailing duty or an 
antidumping investigation; (3) any previous administrative review, new 
shipper review, expedited antidumping review, section 753 review; or 
(4) any other information placed on the record. See also 19 CFR 
Sec. 351.308(c). As adverse facts available in this preliminary 
determination, we have calculated Union's net subsidy rate by using a 
subsidy rate from Final Affirmative Countervailing Duty Determination: 
Stainless Steel Sheet and Strip in Coils from the Republic of Korea, 64 
FR 30636 (June 8, 1999), (Sheet and Strip), this rate was used as 
adverse facts available for a company in that final determination. 
Therefore, we preliminarily determine a total ad valorem rate of 7.00 
percent as adverse facts available for Union. See Sheet and Strip, 64 
FR 30638-39. We note that, in determining Union's adverse facts 
available rate, we did not include in our calculations any net subsidy 
rates stemming from programs that would not be available to Union. For 
example, there was a higher adverse facts available rate that was used 
in Sheet and Strip, however, a portion of that rate was based upon 
company-specific allegations, unique to a specific producer. We further 
note that none of the company-specific program rates used to derive the 
7.00 percent net subsidy rate were determined on the basis of facts 
available.

Subsidies Valuation Information

    Allocation Period: Under section 351.524(d)(2) of the CVD 
Regulations, we will presume the allocation period for non-recurring 
subsidies to be the average useful life (AUL) of renewable physical 
assets for the industry concerned, as listed in the Internal Revenue 
Service's (IRS) 1977 Class Life Asset Depreciation Range System, as 
updated by the Department of Treasury. The presumption will apply 
unless a party claims and establishes that these tables do not 
reasonably reflect the AUL of the renewable physical assets for the 
company or industry under investigation, and the party can establish 
that the difference between the company-specific or country-wide AUL 
for the industry under investigation is significant.
    In this investigation, no party to the proceeding has claimed that 
the AUL listed in the IRS tables does not reasonably reflect the AUL of 
the renewable physical assets for the firm or industry under 
investigation. Therefore, in accordance with section 351.524(d)(2) of 
the CVD Regulations, we will allocate non-recurring subsidies over 15 
years, the AUL listed in the IRS tables for the steel industry.
    Benchmarks for Long-Terms Loans and Discount Rates: During the POI, 
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. Some loans were received prior to 
1992. In the 1993 investigation of Steel Products from Korea, and in 
Structural Beams, 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 Final 
Affirmative Countervailing Duty Determinations and Final Negative 
Critical Circumstances Determinations: Certain Steel Products from 
Korea, 58 FR 37338, 37339 (July 9, 1993) (Steel Products from Korea), 
and Final Affirmative Countervailing Duty Determination: Structural 
Steel Beams from the Republic of Korea, 65 FR 41051

[[Page 9687]]

(July 3, 2000) (Structural Beams). In both investigations, 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 preliminary 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 1992, and still 
outstanding during the POI.
    In the Final Negative Countervailing Duty Determination: Stainless 
Steel Plate in Coils from the Republic of Korea, 64 FR 15530 (March 31, 
1999) (Plate in Coils), Sheet and Strip, and in the Benchmark Interest 
Rates and Discount Rates section of the Issues and Decision Memorandum 
that accompanied Structural Beams, we examined the GOK's direction of 
credit policies for the period 1992 through 1998. Based on information 
gathered during the course of those investigations, the Department also 
determined that the GOK controlled directly or indirectly the lending 
practices of most sources of credit in Korea between 1992 and 1998. In 
the current investigation, based upon these earlier findings and 
updated information, we preliminarily determine that the GOK still 
exercised substantial control over lending institutions in Korea during 
the POI.
    Based on our findings on this issue in prior investigations, as 
well as in the instant investigation, discussed below in the 
``Direction of Credit'' section of this notice, we are using the 
following benchmarks to calculate respondents' long-term loans obtained 
since 1992, and which are still outstanding during the POI:
    (1) For countervailable, foreign-currency denominated long-term 
loans, we used, where available, the company-specific weighted-average 
foreign-denominated interest rates on the companies' loans from foreign 
bank branches in Korea. If such a benchmark was not available, then, as 
facts available, we had to rely on the lending rates as reported by the 
IMF's International Financial Statistics Yearbook. We will attempted to 
gather additional data on lending rate during verification.
    (2) For countervailable won-denominated long-term loans, where 
available, we used the company-specific corporate bond rate on the 
companies' won denominated public and private bonds. We note that this 
benchmark is based on the decision in Plate in Coils, 64 FR 15530, 
15531, in which we determined that the GOK did not control the Korean 
domestic bond market after 1991, and that domestic bonds may serve as 
an appropriate benchmark interest rate. Where unavailable, we used the 
national average of the yields on three-year won-denominated corporate 
bonds as reported by the Bank of Korea (BOK). We note that the use of 
the three-year corporate bond rate from the BOK follows the approach 
taken in Plate in Coils, 64 FR 15530, 15532, in which we determined 
that, absent company-specific interest rate information, the won-
denominated corporate bond rate is the best indicator of a market rate 
for won-denominated long-term loans in Korea.
    We are also using, where available, the company-specific won-
denominated corporate bond rate as the discount rate to determine the 
benefit from non-recurring subsidies received between 1992 and 2000. 
Where unavailable, we are using the national average of the three-year 
Korean won corporate bond rate.
    Benchmarks for Short-Term Financing: For those programs that 
require the application of a short-term won-denominated interest rate 
benchmark, we used as our benchmark a company-specific weighted-average 
interest rate for commercial won-denominated loans outstanding during 
the POI.
    Treatment of Subsidies Received by Trading Companies: We required 
responses from trading companies with respect to the export subsidies 
under investigation because the subject merchandise may be subsidized 
by means of subsidies provided to both the producer and the exporter of 
the subject merchandise. All subsidies conferred on the production and 
exportation of subject merchandise benefit the subject merchandise even 
if it is exported to the United States by an unaffiliated trading 
company rather than by the producer itself. Therefore, the Department 
calculates countervailable subsidy rates on the subject merchandise by 
cumulating subsidies provided to the producer with those provided to 
the exporter. See 19 CFR 351.525.
    During the POI, Dongbu exported the subject merchandise to the 
United States through one trading company, Dongbu Corporation (Dongbu 
Corp). POSCO exported subject merchandise through two trading 
companies, Daewoo International Corporation (Daewoo) and POSCO Steel 
Service & Sales Co., Ltd. (Posteel). Dongbu Corp, Daewoo, and Posteel 
responded to the Department's questionnaires with respect to the export 
subsidies under investigation.
    Under 19 CFR 351.107, when subject merchandise is exported to the 
United States by a company that is not the producer of the merchandise, 
the Department may establish a ``combination'' rate for each 
combination of an exporter and supplying producer. However, as noted in 
the ``Explanation of the Final Rules'' (the Preamble), there may be 
situations in which it is not appropriate or practicable to establish 
combination rates when the subject merchandise is exported by a trading 
company. In such situations, the Department will make exceptions to its 
combination rate approach on a case-by-case basis. See Antidumping 
Duties; Countervailing Duties; Final Rule, 62 FR 27296, 27303 (May 19, 
1997).
    In this investigation, we preliminarily determine that it is not 
appropriate to establish combination rates. This preliminary 
determination is based on two main facts: first, the majority of 
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 subject merchandise is 
insignificant. Thus, combination rates would serve no practical purpose 
because the calculated subsidy rate for any of the producers and a 
combination of any of the trading companies would effectively be the 
same rate. 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 
trading companies, we calculated the benefit attributable to the 
subject merchandise. In each case, we determined the benefit received 
by the trading companies for each of the export subsidies, next we 
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 to the relative share of direct exports of the 
producer of 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.

[[Page 9688]]

I. Programs Preliminarily Determined To Be Countervailable

A. GOK Directed Credit

    We determined in Plate in Coils that the provision of long-term 
loans via the GOK's direction of credit policies was specific to the 
Korean steel industry through 1991 within the meaning of section 
771(5A)(D)(iii) of the Act, and resulted in a financial contribution, 
within the meaning of sections 771(5)(E)(ii) and 771(5)(D)(i) of the 
Act, respectively.
    In Plate in Coils, the Department also determined that the GOK 
continued to control directly and indirectly the lending practices of 
most sources of credit in Korea through 1997. In CTL Plate, the 
Department continued to find that the GOK's regulated credit from 
domestic commercial banks and government-controlled banks such as the 
Korea Development Bank (KDB) was specific to the steel industry. In the 
final determination of CTL Plate, the Department determined that the 
GOK continued to control, directly and indirectly, the lending 
practices of sources of credit in Korea in 1998. See CTL Plate, 64 FR 
at 73180. Further, the Department determined in this investigation that 
these regulated loans conferred a benefit on the producer of the 
subject merchandise to the extent that the interest rates on these 
loans were less than the interest rates on comparable commercial loans 
within the meaning of section 771(5)(E)(ii) of the Act. In 1999 Sheet 
and Strip, we determined that the GOK continued to control credit 
through 1999. See Final Results and Partial Rescission of 
Countervailing Duty Administrative Review: Stainless Steel Sheet and 
Strip in Coils From the Republic of Korea, 67 FR 1964 (January 15, 
2002) (1999 Sheet and Strip). Based upon the determinations in these 
cited cases, we continue to find lending from domestic banks and from 
government-owned banks such as the KDB to be countervailable. In 
addition, we also continue to find access to offshore lending and 
credit sources countervailable.
    We provided the GOK with the opportunity to present new factual 
information concerning the government's credit policies in 2000, the 
POI, which we would consider along with our finding in the prior 
investigations. We note that with respect to access to direct foreign 
loans (i.e., loans from offshore banks) and the issuance of offshore 
foreign securities by Korean companies, the GOK has replaced the 
Foreign Investment and Foreign Capital Inducement Act, with the Foreign 
Investment Promotion Act. While this information indicates that the GOK 
is making strides in its reforms of the financial sector, at present, 
this additional information is not sufficient to warrant a 
reconsideration of our determination that the GOK has directed access 
to foreign credit to the Korean steel industry. During verification, we 
will closely examine this issue with respect to the 2000 period.
    With respect to foreign sources of credit, in Plate in Coils and 
Sheet and Strip, we determined that access to foreign currency loans 
from Korean branches of foreign banks (i.e., branches of U.S. and 
foreign-owned banks operating 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 the respondent from these sources was found not 
countervailable. This determination was based upon the fact that credit 
from Korean branches of foreign banks was not subject to the 
government's control and direction. Thus, in Plate in Coils and Sheet 
and Strip, we determined that respondent's loans from these banks could 
serve as an appropriate benchmark to establish whether access to 
regulated foreign sources of credit conferred a benefit on respondents. 
As such, lending from this source is not countervailable, and, where 
available, loans from Korean branches of foreign banks continue to 
serve as an appropriate benchmark to establish whether access to 
regulated foreign currency loans from domestic banks confers a benefit 
upon respondents.
    Dongbu, Hysco, and POSCO received long-term fixed and variable rate 
loans from GOK owned/controlled institutions that were outstanding 
during the POI. In order to determine whether these GOK-directed loans 
conferred a benefit, we compared the interest rates on the directed 
loans to the benchmark interest rates detailed in the ``Subsidies 
Valuation Information'' section of this notice.
    For variable-rate loans the repayment schedules of these loans did 
not remain constant during the lives of the respective loans. 
Therefore, in these preliminary results, we have calculated the benefit 
from these loans using the Department's variable rate methodology. For 
fixed-rate loans, we calculated the benefit from these loans using the 
Department's fixed-rate methodology. Next we summed the benefit amounts 
from the loans and divided the total benefit by the respective 
company's total f.o.b. sales value during the POI. On this basis, we 
preliminarily determine the net countervailable subsidy to be 0.20 
percent ad valorem for Dongbu, 0.24 percent ad valorem for Hysco, and 
0.08 percent ad valorem for POSCO.

B. GOK Infrastructure Investment at Kwangyang Bay Through 1991

    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 allocation time period. See 
the allocation period discussion under the ``Subsidies Valuation 
Information'' section, above. Using the 15 year allocation period, 
POSCO is still receiving benefits under this program from GOK 
investments made during the years 1986 through 1991. To calculate the 
benefit from these grants, we used as our discount rate the three-year 
corporate bond rate on the secondary market as used in Steel Products 
from Korea. We then summed the benefits received by POSCO during the 
POI from each of the GOK's yearly investments over the period 1986-
1991. We then divided the total benefit attributable to the POI by 
POSCO's total f.o.b. sales for the POI. On this basis, we preliminarily 
determine a net countervailable subsidy of 0.15 percent ad valorem for 
the POI.

[[Page 9689]]

C. Research and Development (R&D)

    The GOK, through the Ministry of Commerce, Industry, and Energy 
(MOCIE), provides R&D grants to support numerous projects pursuant to 
the Industrial Development Act (IDA), including technology for core 
materials, components, engineering systems, and resource technology. 
Petitioners also allege that R&D grants are provided to the steel 
industry through the Ministry of Science and Technology (MOST).
    The IDA is designed to foster the development of efficient 
technology for industrial development. A company may participate in 
this program in several ways: (1) A company may perform its own R&D 
project, (2) it may participate through the Korea New Iron and Steel 
Technology Research Association (KNISTRA), which is an association of 
steel companies established for the development of new iron and steel 
technology, and/or (3) a company may participate in another company's 
R&D project and share R&D costs, along with funds received from the 
GOK. To be eligible to participate in this program, the applicant must 
meet the qualifications set forth in the basic plan and must perform 
R&D as set forth under the Notice of Industrial Basic Technology 
Development. Upon completion of the R&D project, the participating 
company must repay 50 percent of the R&D grant (30 percent in the case 
of Small and Medium Enterprises (SME)'s established within 7 years) to 
the GOK, in equal payments over a five-year period. If the R&D project 
is not successful, the company must repay the full amount. In CTL 
Plate, we determined that this program is countervailable. See CTL 
Plate, 64 FR 73185. No new factual information or evidence of changed 
circumstances has been provided to the Department with respect to this 
program. Therefore, we continue to determine that this program is 
countervailable.
    To determine the benefit from the grants received through KNISTRA, 
we first calculated the percent of each company's contribution to 
KNISTRA and applied that percent to the GOK's contribution for each R&D 
project. We then summed the grants received by each company through 
KNISTRA and divided the amount by each company's respective total 
sales. To determine the benefit from the grants provided directly to 
the companies, we divided the amount of the grant by each company's 
respective total f.o.b. sales. Based upon this methodology, we 
preliminarily determine that POSCO received a countervailable subsidy 
of 0.08 percent ad valorem and that Dongbu received a countervailable 
subsidy of less than 0.005 percent ad valorem. Hysco did not use this 
program.

D. Provision of Land at Asan Bay

    The GOK's overall development plan is published every 10 years and 
describes the nationwide land development goals and plans for the 
balanced development of the country. Under these plans, the Ministry of 
Construction and Transportation (MOCAT) prepares and updates its Asan 
Bay Area Broad Development Plan. The Korea Land Development Corporation 
(Koland) is a government investment corporation that is responsible for 
purchasing, developing, and selling land in the industrial sites.
    The Asan Bay area was designated as an Industrial Site Development 
Area in December 1979. The Asan Bay area consists of five development 
sites, (1) Kodai, (2) Wanjung, (3) Woojung, (4) Poseung, and (5) Bukok. 
Although Wanjung and Woojung are within the Asan National Industrial 
Estate, those properties are not owned by Koland.
    In CTL Plate, we found that steel companies received price 
discounts on purchases of land at Asan Bay, and found this program 
countervailable. See CTL Plate, 64 FR 73184. In addition, we found that 
the GOK provided additional savings to the companies by exempting them 
from the registration tax, education tax, and the acquisition tax which 
normally would be paid on purchases of land. Dongbu purchased land in 
the Kodai industrial estate at Asan Bay and received the tax exemptions 
on the purchase of this land at the industrial estate.
    To determine Dongbu's benefit from this program, we compared the 
GOK's published list price for land at the Kodai industrial estate, 
which was 134,966 won per square meter, to the discounted price per 
square meter paid by Dongbu. We adjusted the list price to account for 
land development costs undertaken by the company, rather than the GOK. 
We made this deduction because the GOK's costs for land development is 
included in the published 134,966 per square meter price. We then 
calculated this price discount by the number of square meters purchased 
by Dongbu. In addition to this price discount, the GOK provided an 
adjustment to Dongbu's final payment to account for ``interest earned'' 
by the company for pre-payments. Companies purchasing land at Asan Bay 
must make payments on the purchase and development of the land before 
the final settlement. The GOK provided a financial contribution to 
Dongbu under section 771(5)(D)(i) of the Act when it refunded the 
interest earned on the advanced payments. This interest earned refund 
is specific to Dongbu under section 771(5A)(D)(iii)(I) of the Act, as 
being limited to Dongbu. Therefore, we find that this additional credit 
on the final payment made by the GOK to Dongbu also provides a 
countervailable benefit to the company. The land price discount and the 
interest earned refund are non-recurring subsidies.
    Under section 351.524(b)(2) of the CVD Regulations, non-recurring 
benefits which are less than 0.5 percent of the company's relevant 
sales are expensed in the year of receipt. We performed the 0.5 percent 
test and we preliminarily find that the land price discount and the 
interest earned refund exceeded 0.5 percent of the sales for the 
respective year, therefore, to calculate the benefit conferred during 
the POI on the land price discount and the interest earned refund, we 
applied the Department's standard grant methodology and allocated the 
benefit provided by this program over a 15-year allocation time period. 
See the allocation period discussion under the ``Subsidies Valuation 
Information'' section, above. We then divided the total benefit 
attributable to the POI by Dongbu's total f.o.b. sales for the POI. On 
this basis, we preliminarily determine a net countervailable subsidy of 
0.62 percent ad valorem for the POI.
    With respect to the exemptions from the registration tax, education 
tax, and the acquisition tax which normally would be paid on purchases 
of land, we preliminarily determine that Dongbu did not receive a 
benefit from these tax exemptions during the POI. We make this 
determination because these tax exemptions were not received during the 
POI. Under section 351.509(b) of the CVD Regulations, the Department 
will normally consider that the benefit from a tax exemption is 
conferred in the year in which the exemption was received. We recognize 
that under certain circumstances, if a tax exemption is tied to capital 
goods, then the Department may consider the benefit from the tax 
exemption to be non-recurring. See Countervailing Duties; Final Rule, 
63 FR 65384, 65393 (November 25, 1998). Non-recurring benefits are 
normally allocated over time. However, under section 351.524(b)(2), 
non-recurring subsidy benefits will be expensed in the year of receipt, 
if the total benefit from the subsidy program is less than 0.5 percent 
of a company's sales. Therefore, even if the tax exemptions received by 
Dongbu were considered to have provided non-recurring benefits because 
they were tied to the purchase of capital assets, these benefits would 
still have

[[Page 9690]]

been expensed before the POI because of the Department's 0.5 percent 
test.

E. POSCO's Exemption of Bond Requirement for Port Use at Asan Bay

    As noted above, the GOK has developed industrial estates at Asan 
Bay. In CTL Plate, we determined that the GOK had built port berths #1, 
#2, #3, and #4 in the Poseung area. In September 1997, POSCO signed a 
three-year lease agreement with the Inchon Port Authority (IPA) for the 
exclusive use of port berth #1, which was constructed by the GOK. The 
GOK also entered into a lease agreement in 1997 for the exclusive use 
of port berths #2, #3, and #4, with a consortium of six companies. The 
consortium of companies was required to purchase bonds, which the GOK 
would repay without interest after the lease expired in 10 years. 
However, POSCO was not required to purchase a bond for the exclusive 
use of port berth #1.
    In CTL Plate, we found this program countervailable, see CTL Plate, 
64 FR 73183-73184. We determined that the waiver of the bond purchase 
was only provided to POSCO, and was therefore specific under section 
771(5A)(D) of the Act. In addition, we determined that the GOK's waiver 
of the bond purchase requirement for the exclusive use of port berth #1 
by POSCO conferred a financial contribution under section 771(5)(D)(ii) 
of the Act, because the GOK foregoes collecting revenue that it 
normally would collect. We also determined that because the GOK had to 
repay the bonds at the end of the lease term, the bond purchase waiver 
is equivalent to an interest free loan for three years, the duration of 
the lease. No new factual information or evidence of changed 
circumstances has been provided to the Department with respect to this 
program. Therefore, we continue to find this program countervailable.
    To determine the benefit from this program, we treated the amount 
of the bond waived as a long-term interest-free loan. We then applied 
the methodology provided for in section 351.505(c)(4) of the CVD 
Regulations for a long-term fixed rate loan, and compared the amount of 
interest that should have been paid during the POI on the interest free 
loan to the amount of interest that would have been paid based upon the 
interest rate on a comparable won-denominated benchmark loan. We then 
divided the benefit by the company's total sales. On this basis, we 
preliminarily determine the net countervailable subsidy to be less than 
0.005 percent ad valorem for POSCO.

F. Investment Tax Credits

    Under Korean tax laws, companies in Korea are allowed to claim 
investment tax credits for various kinds of investments. If the 
investment tax credits cannot all be used at the time they are claimed, 
then the company is authorized to carry them forward for use in 
subsequent years. Until December 28, 1998, these investment tax credits 
were provided under the Tax Reduction and Exemption Control Act 
(TERCL). On that date TERCL was replaced by the Restriction of Special 
Taxation Act (RSTA). Pursuant to this change in the law, investment tax 
credits received after December 28, 1998, were provided under the 
authority of RSTA.
    During the POI, Dongbu earned or used the following tax credits 
for: (1) Investments in Equipment to Develop Technology and Manpower 
(RSTA Article 11, previously TERCL Article 10); (2) Investments in 
Productivity Increasing Facilities (RSTA Article 24, previously TERCL 
Article 25); (3) Investments in Specific Facilities (RSTA Article 25, 
previously TERCL Article 26); and (4) Equipment Investment to Promote 
Worker's Welfare (RSTA Article 94, previously TERCL Article 88).
    POSCO used the following tax credits during the POI for: (1) 
Investments in Equipment to Develop Technology and Manpower (RSTA 11); 
(2) Investments in Productivity Increasing Facilities (RSTA 24); and 
(3) Investments in Specific Facilities (RSTA 25).
    Hysco had outstanding investment tax credits during the POI. 
However, due to the net tax loss for the income tax return filed during 
the POI, the company could not use and did not claim any investment tax 
credits during the POI.
    If a company invested in foreign-produced facilities (i.e., 
facilities produced in a foreign country), the company received a tax 
credit equal to either three or five percent of its investment. 
However, if a company invested in domestically-produced facilities 
(i.e., facilities produced in Korea), it received a 10 percent tax 
credit. Under the tax credit for Equipment Investment to Promote 
Worker's Welfare, a tax credit could only be claimed if a company used 
domestic machines and materials. Under section 771(5A)(C) of the Act, 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 received a higher tax credit for investments made in 
domestically-produced facilities, we determined that these investment 
tax credits constituted import substitution subsidies under section 
771(5A)(C) of the Act in CTL Plate. In addition, because the GOK 
forwent the collection of tax revenue otherwise due under this program, 
we determined that a financial contribution is provided under section 
771(5)(D)(ii) of the Act. The benefit provided by this program was a 
reduction in taxes payable. Therefore, we determined that this program 
was countervailable in CTL Plate. See CTL Plate at 73182.
    According to the response of the GOK, changes have been made in the 
manner in which these investment tax credits are determined. Pursuant 
to amendments made to TERCL which occurred on April 10, 1998, the 
distinction between investments in domestic and imported goods was 
eliminated for the tax credits for Investments in Equipment to Develop 
Technology and Manpower (RSTA 11), Investments in Productivity 
Increasing Facilities (RSTA 24), and Investments in Specific Facilities 
(RSTA 25). According to the response of the GOK, prior to April 10, 
1998, the tax credit for these investments was ten percent for 
domestic-made facilities and three percent for foreign-made facilities. 
However, for investments made after April 10, 1998, there is no 
difference between domestic-made and foreign-made facilities. The 
current tax credit is five percent for all of these investments.
    Because the distinction between investments in domestic and 
foreign-made goods was eliminated for investments made after April 10, 
1998, we preliminarily determine that the tax credits received pursuant 
to these investment programs for investments made after April 10, 1998 
to no longer be countervailable. However, companies can still carry 
forward and use the tax credits for investments earned under the 
countervailable aspects of the TERCL program before the April 10, 1998 
amendment to the tax law. In addition, the tax credits for Equipment 
Investment to Promote Workers' Welfare (RSTA 94) is still only 
available for companies using domestic machines and materials. 
Therefore, we continue to find the use of investment tax credits earned 
on Equipment Investment to Promote Workers' Welfare countervailable. We 
also continue to find countervailable the use of investment tax credits 
earned on investments made before April 10, 1998, under the other three 
investment tax programs.
    According to the response of Dongbu, the tax credits earned for 
Investments in Equipment to Develop Technology and Manpower, 
Investments in Productivity Increasing Facilities, and Investments in

[[Page 9691]]

Specific Facilities were not based on a tax credit differential between 
purchasing domestic facilities and imported facilities. In addition, 
according to the company's response, the tax credit earned during the 
POI for Equipment Investment to Promote Workers' Welfare was not used 
to reduce taxes payable during the POI because the entire tax credit 
was carried forward to future years. The tax return provided in the 
company's response shows that the entire tax credit was, indeed, 
carried forward and was not used during the POI. Therefore, we 
preliminarily determine that Dongbu did not benefit from this program 
during the POI.
    POSCO did use investment tax credits under this program that 
originated from tax credits earned based upon the differential between 
purchasing domestic facilities and imported facilities. To calculate 
the benefit from these investment tax credits, we examined the amount 
of tax credits POSCO deducted from its taxes payable for the 1999 
fiscal year income tax return, which was filed during the POI. We first 
determined the amount of the tax credits claimed which were based upon 
investments 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 such investments instead of a 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 during the POI. On this 
basis, we preliminarily determine a net countervailable subsidy of 0.14 
percent ad valorem for POSCO.

G. Reserve for Export Loss--Article 16 of the TERCL

    Under Article 16 of the 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. According to information 
provided by respondents this program was terminated on April 10, 1998, 
and no new funds could be placed in this reserve after January 1, 1999. 
However, Dongbu still had an outstanding balance in this reserve during 
the POI. Dongbu Corp., a trading company used by Dongbu also had an 
outstanding balance in this reserve during the POI.
    In Sheet and Strip, 64 FR 30636, 30645, we determined that this 
program constituted an export subsidy under section 771(5A)(B) of the 
Act because the use of the program is contingent upon export 
performance. We also determined that this program provided a financial 
contribution within the meaning of section 771(5)(D)(i) of the Act in 
the form of a loan. No new information or evidence of changed 
circumstances has been presented to cause us to revisit this 
determination. Thus, we preliminarily determine that this program 
constitutes a countervailable export subsidy.
    To determine the benefit conferred by this program, we calculated 
the tax savings by multiplying the balance amount of the reserve as of 
December 31, 1999, as filed during the POI, by the corporate tax rate 
for 1999. We treated the tax savings on these funds as a short-term 
interest-free loan. See 19 CFR 351.509. Accordingly, to determine the 
benefit, we multiplied the amount of tax savings for Dongbu and Dongbu 
Corp by their respective weighted-average interest rate for short-term 
won-denominated commercial loans for the POI, as described in the 
``Subsidies Valuation Information'' section, above. We then divided the 
benefit by the respective total export sales. In addition, using the 
methodology for calculating subsidies received by trading companies, 
which is also detailed in the ``Subsidies Valuation'' section of this 
notice, we calculated a benefit for Dongbu Corp attributed to Dongbu. 
On this basis, we preliminarily calculated a countervailable subsidy of 
0.07 percent ad valorem for Dongbu.

H. Reserve for Overseas Market Development Under TERCL Article 17

    Article 17 of the TERCL 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 income 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. This program was terminated on April 10, 
1998, and no new funds could be placed in this reserve after January 1, 
1999. However, Dongbu still had an outstanding balance in this reserve 
during the POI. Dongbu Corp., a trading company used by Dongbu and 
Posteel, a trading company used by POSCO, also had outstanding balances 
in this reserve during the POI.
    In Sheet and Strip, 64 FR 30636, 30645, we determined that this 
program constituted 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 provided a financial 
contribution within the meaning of section 771(5)(D)(i) of the Act in 
the form of a loan. No new information or evidence of changed 
circumstances has been presented to cause us to revisit this 
determination. Thus, we preliminarily determine that this program 
constitutes a countervailable export subsidy.
    To determine the benefit conferred by this program during the POI, 
we employed the same methodology used for determining the benefit from 
the Reserve for Export Loss program under Article 16 of the TERCL. 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, as described in the ``Subsidies Valuation Section'' above. 
We then divided the benefit by the respective total export sales. In 
addition, using the methodology for calculating subsidies received by 
trading companies, which is also detailed in the ``Subsidies 
Valuation'' section of this notice, we calculated a benefit 
attributable to each respective producer. On this basis, we 
preliminarily calculated a countervailable subsidy of 0.02 percent ad 
valorem for Dongbu and a

[[Page 9692]]

countervailable subsidy of 0.02 percent ad valorem POSCO.

I. Asset Revaluation Under Article 56(2) of the TERCL

    Under Article 56(2) of the TERCL, the GOK permitted companies that 
made an initial public offering between January 1, 1987, and December 
31, 1990, to revalue their assets at a rate higher than the 25 percent 
required of most other companies under the Asset Revaluation Act. In 
CTL Plate, we found this program countervailable. See, CTL Plate, 64 FR 
73176, 73183. No new information, evidence of changed circumstances, or 
comments from interested parties were presented in this investigation 
to warrant any reconsideration of the countervailability of this 
program.
    The benefit from this program is the difference that the 
revaluation of depreciable assets has on a company's tax liability each 
year. To calculate the benefit under this program, we used the 
additional depreciation in the tax return filed during the POI, which 
resulted from the company's asset revaluation, and multiplied that 
amount by the tax rate applicable to that tax return. We then divided 
the resulting benefit for each company by their respective total sales. 
On this basis, we preliminarily determine a net countervailable subsidy 
of 0.04 percent ad valorem for POSCO. Hysco received no benefit from 
this program because it had a net tax loss. Dongbu did not use this 
program.

J. Tax Reserve for Balanced Development Under TERCL Article 41/ RSTA 
Article 58

    TERCL Article 41 allowed a company who planned to relocate its 
facility from a large city to a local area to establish a reserve equal 
to 15 percent of the facility's value. The balance in the reserve was 
not subject to corporate income tax in that year but all monies in the 
reserve must eventually be returned to the income account and are then 
subject to tax at the expiration of the grace period. The reserve 
amount equivalent to the amount incurred from the relocation of its 
facilities from the large city to a local area will be included in 
taxable income after a two-year grace period and over a three-year 
period. If the reserve amount is not used for the payment of 
relocation, this unused amount is included in the company's taxable 
income, after the two-year grace period. This program was replaced by 
Article 58 of RSTA. Subsequent to the establishment of Article 58 of 
RSTA, the program was terminated and the last date that this reserve 
could be established was August 31, 1999. Dongbu was the only company 
which established a reserve under this program before the program's 
August 31, 1999 termination. Dongbu still had an outstanding balance 
under this reserve during the POI.
    We preliminary determine that this program is specific within the 
meaning of section 771(5A)(D)(iv) of the Act, because the program is 
limited to enterprises or industries located within a designated 
geographical region. Because the deferral of taxes owed provided under 
this program amounts to an interest-free loan equal to the company's 
tax savings, we also preliminarily determine that this program provided 
a financial contribution within the meaning of section 771(5)(D)(i) of 
the Act in the form of a loan.
    To determine the benefit conferred by this program to Dongbu, we 
calculated the tax savings by multiplying the balance amount of the 
reserve as of December 31, 1999, by the corporate tax rate for 1999. We 
treated the tax savings on these funds as a short-term interest-free 
loan. See 351.509 of the CVD Regulations. Accordingly, to determine the 
benefit, we multiplied the amount of tax savings by Dongbu's weighted-
average interest rate for short-term won-denominated commercial loans 
for the POI, as described in the ``Subsidies Valuation Information'' 
section, above. We then divided the benefit by the company's total 
sales. On this basis, we preliminarily calculated a countervailable 
subsidy of 0.02 ad valorem for Dongbu.
    For our final determination, we will consider whether the 
methodology the Department has traditionally applied to these types of 
Korean tax programs accurately quantifies the benefit conferred by 
these tax reserves. As noted above, the Department has treated these 
tax reserve programs as providing a deferral of tax liability. That is, 
in Year X a company places funds into a reserve account and these funds 
are, therefore, not taxed in Year X. However, three years later when 
the funds in the tax reserve are returned to taxable income, then 
income taxes are paid on these funds in Year X plus three. Therefore, 
we have considered the tax savings on these funds to benefit the 
company in the form of an interest-free loan. However, if the company 
is in a tax loss situation and does not pay any taxes on income in the 
year in which the funds are refunded to the income account the funds 
placed into the tax reserve are never taxed. Under this scenario, the 
company, instead of being provided with a deferral of tax liability on 
these reserve funds, may have been provided with a complete exemption 
of tax liability on these funds. Therefore, we will carefully analyze 
this methodological issue for the final determination. We also invite 
interested parties to comment on this issue.

K. Short-Term Export Financing

    In Steel Products from Korea, the Department determined that the 
GOK's short-term export financing program was countervailable (see 58 
FR at 37350). Respondents have not provided any new information to 
warrant reconsideration of this determination. Therefore, we continue 
to find this program countervailable. During the POI, Hysco and POSCO 
were the only producers/exporters of the subject merchandise that used 
export financing.
    To determine whether this export financing program confers a 
countervailable benefit, we compared the interest rate Hysco and POSCO 
paid on the export financing received under this program during the POI 
with the interest rate they 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.
    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 benchmark interest rate. We then 
divided the benefit derived from all of Hysco's and POSCO's export 
loans by the value of the companies' total exports. On this basis, we 
determine a net countervailable subsidy of 0.08 percent ad valorem for 
Hysco and 0.04 percent ad valorem for POSCO.

L. Electricity Discounts Under the Requested Load Adjustment Program

    The GOK introduced an electricity discount under the Requested Load 
Adjustment (RLA) program in 1990, to address emergencies in the Korea 
Electric Power Company (KEPCO's) ability to supply electricity. Under 
this program, customers with a contract demand of 5,000 kW or more, who 
can curtail their maximum demand by 20 percent or suppress their 
maximum demand by 3,000 kW or more, are eligible to enter into a RLA 
contract with KEPCO. Customers who choose to participate in this 
program must reduce their load upon KEPCO's request, or pay a surcharge 
to KEPCO.
    Customers can apply for this program between May 1 and May 15 of 
each year. If KEPCO finds the application in order, KEPCO and the 
customer enter into a contract with respect to the RLA

[[Page 9693]]

discount. The RLA discount is provided based upon a contract for two 
months, normally July and August. Under this program, a basic discount 
of 440 won per kW is granted between July 1 and August 31, regardless 
of whether KEPCO makes a request for a customer to reduce its load. 
During the POI, KEPCO granted POSCO electricity discounts under this 
program.
    In Sheet and Strip, the Department found this program specific 
under section 771(5A)(D)(iii)(I) of the Act because the discounts were 
distributed to a limited number of customers. Respondents have not 
provided any new information to warrant reconsideration of this 
determination. Therefore, we continue to find this program 
countervailable.
    Because the electricity discounts provide recurring benefits, we 
have expensed the benefit from this program in the year of receipt. To 
measure the benefit from this program, we summed the electricity 
discounts which POSCO received from KEPCO under the RLA program during 
the POI. We then divided that amount by POSCO's total f.o.b. sales 
value for the POI. On this basis, we determine a net countervailable 
subsidy of less than 0.005 percent ad valorem for POSCO.

M. POSCO's Provision of Steel Inputs at Less Than Adequate Remuneration

    POSCO is the only Korean producer of hot-rolled stainless steel 
coil (hot-rolled coil), which is the main input into the subject 
merchandise. During the POI, POSCO sold hot-rolled coil to Dongbu to 
produce subject merchandise. According to the response of Hysco, it 
purchased hot-rolled coil from POSCO, but it did not purchase hot-
rolled coil from POSCO to produce subject merchandise. In CTL Plate, 
the Department determined that the GOK, through its ownership and 
control of POSCO, set prices of steel inputs used by the Korean steel 
industry at prices at less than adequate remuneration, and also found 
this program countervailable. See CTL Plate, 64 FR at 73184.
    Under section 351.511(a)(2) of the CVD Regulations, the adequacy of 
remuneration is to be determined by comparing the government price to a 
market determined price based on actual transactions in the country in 
question. Such prices could include prices stemming from actual 
transactions between private parties, actual imports, or, in certain 
circumstances, actual sales from competitively run government auctions. 
During the POI, Dongbu imported hot-rolled coil; therefore, we are 
using Dongbu's actual imported prices of hot-rolled coil as our basis 
of comparison to the price at which POSCO sold hot-rolled coil to 
Dongbu. Based upon this comparison, we preliminarily determined that 
POSCO sold hot-rolled coil to Dongbu at less than adequate 
remuneration. As a result, a benefit is conferred to Dongbu under 
section 771(5)(E)(iv); therefore, we continue to find this program 
countervailable. Because Hysco did not purchase hot-rolled coil from 
POSCO to produce subject merchandise, we preliminarily determine that 
Hysco did not receive a benefit under this program. However, we are 
reviewing the issue of whether this program is an untied domestic 
subsidy. As this is the first time that this issue has been raised, the 
Department will collect additional information prior to the final 
determination; however, for the preliminary determination we continue 
to find this program tied to subject merchandise. We invite comments 
from interested parties.
    To determine the value of the benefit under this program, we 
compared the monthly delivered weighted-average price charged by POSCO 
to Dongbu for hot-rolled coils to the monthly delivered weighted-
average price Dongbu paid for imported hot-rolled coils. We made due 
allowances for the different specifications of hot-rolled coils, thus 
allowing the Department to compare a single product. We then multiplied 
this price difference by the quantity of hot-rolled coil that Dongbu 
purchased from POSCO during the POI. We then divided the amount of the 
price savings by the f.o.b. sales value of subject merchandise. On this 
basis, we preliminarily determine that Dongbu received a 
countervailable subsidy of 1.91 percent ad valorem from this program 
during the POI.
    In 1999 Sheet and Strip, the GOK argued that POSCO underwent 
privatization in September 2000, which constituted a program-wide 
change pursuant to section 351.526 of the CVD Regulations. In that 
administrative review, the Department determined that the information 
on the record in 1999 Sheet and Strip was insufficient to determine 
whether a program-wide change occurred with respect to this program. We 
also noted that because of the long history and ties between the GOK 
and POSCO, the September 29, 2000 partial change in ownership must be 
carefully analyzed. In this current investigation, the respondents have 
made a similar claim that POSCO's change in ownership removes the GOK's 
control of POSCO which was found for this program in CTL Plate and in 
Sheet and Strip. The respondents have placed additional information on 
the record of this investigation regarding a program-wide change under 
section 351.526 of the CVD Regulations.
    In Sheet and Strip, the Department relied upon a number of factors 
to determine that the GOK controlled POSCO. For example, we found that 
the GOK was the largest shareholder of POSCO and that the GOK's 
shareholdings of POSCO were ten times larger than the next largest 
shareholder. In order to further maintain its control over POSCO, the 
GOK enacted a law, as well as placed into the Articles of Incorporation 
of POSCO, a requirement that no individual shareholder except the GOK 
could exercise voting rights in excess of three percent of the 
company's common stock. In addition, the Chairman of POSCO was 
appointed by the GOK. The Chairman of POSCO was also a former Deputy 
Prime Minister and Minister of the GOK's Economic Planning Board, and 
was appointed as POSCO's president by the Korean President. Half of 
POSCO's outside directors were appointed by the GOK. 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 was also only one of three companies designated a ``Public 
Company'' by the GOK. See Sheet and Strip, 64 FR 30642-43.
    In this current investigation, the GOK and POSCO have placed 
information on the record indicating that many of the elements of 
control cited to in Sheet and Strip have changed. According to this 
information, the GOK through the government-owned Industrial Bank of 
Korea currently holds only 3.02 percent of POSCO's shares. According to 
the GOK, all of POSCO's shares are common shares and have equal voting 
rights. The GOK also reports that the Seoul Bank holds 1.47 percent of 
POSCO's shares. The Seoul Bank became government-owned as a result of 
the financial crisis in Korea. However, the GOK states that the shares 
listed for Seoul Bank are shares the bank holds on behalf of its 
customers in trust accounts. Shares held in these trust accounts are 
not in the possession of, or controlled by, the bank but belong to its 
customers.
    POSCO also states that the restrictions that no individual other 
than the GOK can exercise voting rights in excess of three percent has 
been removed. Under the Securities and Exchange Act, a company 
designated as a ``public company'' was not permitted to have individual 
shareholders exercising voting rights in excess of three percent of the 
company's common shares.

[[Page 9694]]

According to POSCO's response, this legal requirement applied to POSCO 
until September 26, 2000. As part of POSCO's privatization process, the 
GOK removed POSCO's designation as a ``public company'' on that date. 
Accordingly, any legal limits on individual shareholder's voting rights 
or ownership in POSCO ceased on September 26, 2000. POSCO's Articles of 
Incorporation also included this restriction on the acquisition of 
shares. According to the company's response, POSCO had to wait until 
March 26, 2001, the next General Meeting of Shareholders, to amend its 
Articles of Incorporation. According to POSCO, although its Articles of 
Incorporation had not been implemented, once the GOK eliminated the 
restrictions on the acquisition of shares, POSCO was in effect no 
longer a public company.
    According to POSCO's response, the company has seven standing 
directors and eight outside directors on its Board of Directors who are 
elected for terms of three years and may be re-elected. The directors 
are elected at the General Meeting of Shareholders, which usually take 
place in March of each year. According to the response, none of POSCO's 
current standing directors are either current or former government 
officials. With respect to the outside directors, five candidates were 
recommended by each of the five largest shareholders, which includes 
the IBK and Seoul Bank, and three candidates were recommended by the 
Board of Directors. There were changes to the Board of Directors during 
the General Meeting of Shareholders which occurred during the POI; two 
outside directors that were former government officials resigned and 
were replaced.
    During verification we plan to closely examine whether or not the 
GOK continues either directly or indirectly to control POSCO's pricing 
policy in the Korean domestic market.

II. Programs Preliminarily Determined To Be Not Countervailable

A. GOK Infrastructure Investments at Kwangyang Bay Post-1991

    Petitioners alleged that the GOK made infrastructure investments 
during the POI for POSCO at Kwangyang Bay. In Plate in Coils, we 
determined that the GOK's investments at Kwangyang Bay since 1991, in 
the Jooam Dam, the container terminal, and the public highway were not 
specific. See 64 FR 15536. According to the responses of the GOK and 
POSCO, the only GOK expenditures made at Kwangyang Bay during the POI 
were for the container terminal. We determined that the GOK's 
investments in the container terminal were not specific in Plate in 
Coils. No new factual information or evidence of changed circumstances 
has been provided to the Department with respect to this program. In 
addition, both the responses of the GOK and POSCO state that the GOK 
did not build any ports at Kwangyang during the POI. Therefore, we 
continue to determine that this program is not countervailable.

B. R&D Aid for Anthracite Coal Technology

    According to the GOK's response, this program refers to the project 
``Technology for Sintered Anthracite Coal'' in the August 1996 report 
prepared by the Korea Iron and Steel Association (KOSA). According to 
the GOK, this project was solely financed by POSCO from the company's 
own funds. Because the GOK did not provide any funds for this project, 
we preliminarily determine that this program is not countervailable.

C. Asan Bay Infrastructure Subsidies

    Petitioners alleged that the GOK provided infrastructure subsidies 
related to roads, piers, distribution facilities, and industrial water 
supplies to steel companies located at Asan Bay. Based upon the 
information on the record of this investigation, we preliminarily 
determine that no benefit was provided under this program. Therefore, 
we preliminarily find this program not countervailable.
    According to the GOK's response, the roads located in and around 
the Asan Bay area can be divided into three different categories. The 
first category are roads that are located within the industrial estates 
which were built by Koland, the government agency which developed and 
sells the land at the Asan Bay industrial estates. The construction 
costs incurred by Koland for these roads are included as part of the 
land purchase price charged to companies purchasing land in the 
industrial estates. The second category are roads that are built on an 
individual company's site within the industrial estate which are built 
and paid for by the companies themselves. The third category of roads 
are the main roads and highways that are located around the Asan Bay 
area and which are used by the general public. Generally, the 
construction of toll free roads are handled by the Ministry of 
Construction and Transportation (MOCAT) and are built using funds from 
the GOK budget. These roads are part of the country's general road and 
highway system. The costs for construction and operation of toll roads 
are paid from the GOK budget and by the Korea Road Corporation (KRC). 
The construction costs of the KRC are recovered through the collection 
of tolls from users. The major highway that serves the Asan Bay area is 
the West Coast Highway, which is part of the National Highway system.
    With respect to the allegation that companies located in Asan Bay 
industrial estates benefit from the GOK's provision of roads, we 
preliminarily determine that: (1) The roads build by the GOK within the 
industrial estate do not provide a benefit because the cost of road 
construction is included in the purchase price of the land; (2) the 
additional roads within the industrial estate on individual company 
sites do not provide a benefit because these roads are build and paid 
for by the company; and (3) the West Coast Highway and other national 
roads within the Asan Bay area are part of the country's national road 
system and thus constitute general infrastructure, and therefore do not 
provide a countervailable benefit.
    With respect to the allegation of industrial water facilities, 
sewage facilities, and electric power facilities, the GOK states in its 
response that the companies located in the Asan Bay industrial estates 
pay for these services. The fees charged to these companies for these 
services are based on the general published tariff rates for each of 
these services. In addition, the GOK states that connections from the 
main water pipe to the user are constructed and paid for by the user; 
individual lines from the main electricity transformers to each 
companies' individual facility are constructed and paid for by the 
company; and sewage facilities located within an individual company's 
facility as well as the connection to the main sewage facility is 
constructed and paid for by the individual company. Because companies 
within the industrial estate pay for the construction of these 
facilities and pay the published tariff rates for industrial services, 
we preliminarily determine that no benefit is provided by the GOK by 
the provision of these goods and services. The GOK also states that 
there are no distribution depots at Asan Bay.
    We note that with respect to this program, the Department was 
required to conduct verification of the provision of infrastructure at 
Asan Bay in a recent remand of CTL Plate. The Departments's remand 
redetermination of CTL Plate is in litigation, and thus, serves as no 
legal precedent in this instant investigation. However, factual 
information gathered in the course of the CTL Plate remand may be 
placed on the record of this investigation and considered in this

[[Page 9695]]

preliminary determination. Therefore, we have placed the public 
verification reports for both the GOK and POSCO from the CTL Plate 
remand on the record of this current investigation. See ``Remand 
Verification Report for the Government of Korea (GOK) in the Court of 
International Trade (CIT) Remand of the Countervailing Duty 
Investigation of Certain Cut-to-Length Carbon-Quality Steel Plate from 
the Republic of Korea'' and ``Remand Verification Report for Pohang 
Iron and Steel Co., Ltd. (POSCO) in the Court of International Trade 
(CIT) Remand of the Countervailing Duty Investigation of Certain Cut-
to-Length Carbon-Quality Steel Plate from the Republic of Korea.'' Both 
of these public verification reports are dated November 26, 2001, and 
have been placed in the public file in the CRU. The information in the 
verification reports substantiates the information provided in the 
responses.
    The petitioners also alleged that the companies located in the Asan 
Bay industrial estates benefit from the provision of port facilities. 
The port facilities at Asan Bay are not part of the industrial estates. 
The port facilities located at Asan Bay are owned and administered by 
the Inchon Port Authority (IPA), a division of the Ministry of Maritime 
and Fisheries (MOMAF). Furthermore, with respect to the provision of 
port facilities, we have previously found this program not 
countervailable in Sheet and Strip. No new factual information or 
evidence of changed circumstances has been provided to the Department 
with respect to this program. Therefore, we continue to determine the 
provision of port facilities to be not countervailable.

III. Programs Preliminarily Determined Not Used

A. Anthracite Coal for Less Than Adequate Remuneration

    Petitioners allege that the GOK provides anthracite coal to steel 
producers at suppressed prices. Petitioners claim that these suppressed 
prices are part of a GOK price stabilization program where steel 
producers are receiving anthracite coal at less than adequate 
remuneration. According to the response of the GOK, this program is 
designed to support and maintain the domestic coal industry in Korea by 
managing anthracite and briquette prices and is administered by MOCIE 
and the Coal Industry Promotion Board (CIPB). The GOK fixes the highest 
selling price of anthracite and briquette and then provides funds to 
the mining companies and briquette manufacturing companies for the 
difference between their costs of production and sales prices through 
the coal industry stabilization fund. Thus, the GOK controls prices of 
anthracite coal mined in Korea.
    POSCO was the only respondent to state that it uses anthracite 
coal. However, POSCO stated that during the POI, it used only imported 
anthracite coal and thus did not use this program. Based on the fact 
that POSCO had no purchases of domestic anthracite coal, we 
preliminarily determine that POSCO did not use this program during the 
POI.

B. Grants to Dongbu

    These grants which were contained in Dongbu's 1996 Financial 
Statement related to R&D projects that Dongbu participated in between 
1991 and 1995. These grants equaled less than 0.5 percent of Dongbu's 
sales in 1996. Thus, under section 351.524(b)(2) of the CVD 
Regulations, these grants are expensed in the year of receipt. 
Therefore, because no benefit was conferred to Dongbu from these grants 
during the POI, we preliminary determine that this program was not 
used.

C. Technical Development Fund (RSTA Article 9, Formerly TERCL Article 
8)

    On December 28, 1998, the TERCL was replaced by the Tax Reduction 
and Exemption Control Act (RSTA). Pursuant to this change in law, TERCL 
Article 8 is now identified as RSTA Article 9. Apart from the name 
change, the operation of RSTA Article 9 is the same as the previous 
TERCL Article 8 and its Enforcement Decree.
    This program allows a company operating in manufacturing or mining, 
or in a business prescribed by the Presidential Decree, to appropriate 
reserve funds to cover the expenses needed for development or 
innovation of technology. These reserve funds are included in the 
company's losses and reduces the amount of taxes paid by the company. 
Under this program, capital good and capital intensive companies can 
establish a reserve of five percent, while companies in all other 
industries are only allowed to establish a three percent reserve.
    In CTL Plate, we determined that this program is countervailable 
because the capital goods industry is allowed to claim a larger tax 
reserve under this program than all other manufacturers. We also 
determine in CTL Plate 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. The benefit provided by this program is the 
differential two percent tax savings enjoyed by the companies in the 
capital goods industry, which includes steel manufacturers. See CTL 
Plate at 73181. While we continue to find this program countervailable, 
Dongbu only contributed funds to this reserve at the three percent 
rate; therefore, we find that the company did not benefit from this 
program. Thus, the countervailable aspect of this program was not used.

D. Special Depreciation for Energy-Saving Equipment

E. Export Insurance

Verification
    In accordance with section 782(i)(1) of the Act, we will verify the 
information submitted by respondents prior to making our final 
determination.
Suspension of Liquidation
    In accordance with 703(d)(1)(A)(i) of the Act, we have calculated 
individual rates for the companies under investigation. In addition, in 
accordance with section 705(c)(5)(A)(i) of the Act, we have calculated 
an all others rate which is ``an amount equal to the weighted-average 
countervailable subsidy rates established for exporters and producers 
individually investigated, excluding any zero and de minimis 
countervailable subsidy rates and any rates determined entirely under 
section 776.'' These rates are summarized in the table below:

------------------------------------------------------------------------
        Producer/exporter                     Net subsidy rate
------------------------------------------------------------------------
Dongbu Steel Co., Ltd. (Dongbu)..  2.84 percent Ad Valorem.
Hyundai Hysco (Hysco)............  0.32 percent Ad Valorem.
Pohang Iron & Steel Co., Ltd.      0.55 percent Ad Valorem.
 (POSCO).
Union Steel Manufacturing Co.,     7.00 percent Ad Valorem.
 Ltd. (Union).
All Others Rate..................  2.84 percent Ad Valorem.
------------------------------------------------------------------------


[[Page 9696]]

    In accordance with section 703(d) of the Act, we are directing the 
U.S. Customs Service to suspend liquidation of all entries of the 
subject merchandise from Korea, which are entered or withdrawn from 
warehouse, for consumption on or after the date of the publication of 
this notice in the Federal Register, and to require a cash deposit or 
bond for such entries of the merchandise in the amount indicated above. 
This suspension will remain in effect until further notice. Because the 
estimated preliminary countervailing duty rate for POSCO and Hysco are 
de minimis, these two companies will be excluded from the suspension of 
liquidation.
ITC Notification
    In accordance with section 703(f) of the Act, we will notify the 
ITC of our determination. In addition, we are making available to the 
ITC all non-privileged and nonproprietary information relating to this 
investigation. We will allow the ITC access to all privileged and 
business proprietary information in our files, provided the ITC 
confirms that it will not disclose such information, either publicly or 
under an administrative protective order, without the written consent 
of the Assistant Secretary for Import Administration.
    In accordance with section 705(b)(2) of the Act, if our final 
determination is affirmative, the ITC will make its final determination 
within 45 days after the Department makes its final determination.
Public Comment
    In accordance with 19 CFR 351.310, we will hold a public hearing, 
if requested, to afford interested parties an opportunity to comment on 
this preliminary determination. The hearing is tentatively scheduled to 
be held 57 days from the date of publication of the preliminary 
determination, at the U.S. Department of Commerce, 14th Street and 
Constitution Avenue, NW., Washington, DC 20230. Individuals who wish to 
request a hearing must submit a written request within 30 days of the 
publication of this notice in the Federal Register to the Assistant 
Secretary for Import Administration, U.S. Department of Commerce, Room 
1870, 14th Street and Constitution Avenue, NW., Washington, DC 20230. 
Parties should confirm by telephone the time, date, and place of the 
hearing 48 hours before the scheduled time.
    Requests for a public hearing should contain: (1) The party's name, 
address, and telephone number; (2) the number of participants; and, (3) 
to the extent practicable, an identification of the arguments to be 
raised at the hearing. In addition, six copies of the business 
proprietary version and six copies of the non-proprietary version of 
the case briefs must be submitted to the Assistant Secretary no later 
than 50 days from the date of publication of the preliminary 
determination. As part of the case brief, parties are encouraged to 
provide a summary of the arguments not to exceed five pages and a table 
of statutes, regulations, and cases cited. Six copies of the business 
proprietary version and six copies of the non-proprietary version of 
the rebuttal briefs must be submitted to the Assistant Secretary no 
later than 5 days from the date of filing of the case briefs. An 
interested party may make an affirmative presentation only on arguments 
included in that party's case or rebuttal briefs. Written arguments 
should be submitted in accordance with 19 CFR 351.309 and will be 
considered if received within the time limits specified above.
    This determination is published pursuant to sections 703(f) and 
777(i) of the Act.

    Dated: February 25, 2002.
Faryar Shirzad,
Assistant Secretary for Import Administration.
[FR Doc. 02-5107 Filed 3-1-02; 8:45 am]
BILLING CODE 3510-DS-P