[Federal Register Volume 67, Number 175 (Tuesday, September 10, 2002)]
[Notices]
[Pages 57395-57404]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-22997]


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DEPARTMENT OF COMMERCE

International Trade Administration

[C-580-835]


Preliminary Results, Intent to Partially Rescind and Postponement 
of Final Results of Countervailing Duty Administrative Review: 
Stainless Steel Sheet and Strip in Coils from the Republic of Korea

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

ACTION: Notice of preliminary results, intent to partially rescind and 
postponement of final results of countervailing duty administrative 
review.

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SUMMARY: The Department of Commerce (the Department) is conducting an 
administrative review of the countervailing duty (CVD) order on

[[Page 57396]]

stainless steel sheet and strip in coils from the Republic of Korea for 
the period January 1, 2000, through December 31, 2000. For information 
on the net subsidy for the reviewed company, see the ``Preliminary 
Results of Review'' section of this notice. Interested parties are 
invited to comment on these preliminary results. (See the ``Public 
Comment'' section of this notice).

EFFECTIVE DATE: September 10, 2002.

FOR FURTHER INFORMATION CONTACT: Tipten Troidl or Carrie Farley, Office 
of AD/CVD Enforcement VI, Group II, Import Administration, U.S. 
Department of Commerce, Room 4012, 14th Street and Constitution Avenue, 
NW., Washington, DC 20230; telephone (202) 482-2786.

SUPPLEMENTARY INFORMATION:

Background

    On August 6, 1999, the Department published in the Federal Register 
the CVD order on stainless steel sheet and strip in coils from the 
Republic of Korea. See Amended Final Determination: Stainless Steel 
Sheet and Strip in Coils From the Republic of Korea; and Notice of 
Countervailing Duty Orders: Stainless Steel Sheet and Strip From 
France, Italy and the Republic of Korea, 64 FR 42923 (August 6, 1999). 
On August 1, 2001, the Department published an opportunity to request 
an administrative review of this CVD order. See Antidumping or 
Countervailing Duty Order, Finding, or Suspended Investigation; 
Opportunity to Request an Administrative Review, 66 FR 39729 (August 1, 
2001). We received a timely request for review of Inchon Iron and Steel 
Co. (Inchon) and Sammi Steel Co. (Sammi), from petitioners. On October 
1, 2001, the Department published in the Federal Register a notice 
initiating an administrative review of the countervailing duty order on 
stainless steel sheet and strip in coils from the Republic of Korea, 
covering the period of review (POR) January 1, 2000 through December 
31, 2000. See Initiation of Antidumping and Countervailing Duty 
Administrative Reviews and Requests for Revocation in Part, 66 FR 49924 
(October 1, 2001). On December 20, 2001, the Department received 
questionnaire responses from the Government of Korea (GOK), Inchon and 
Sammi. On April 24, 2002, the Department published in the Federal 
Register, an extension of the preliminary results deadline. See 
Stainless Steel Sheet and Strip in Coils From the Republic of Korea: 
Extension of Preliminary Results of Countervailing Duty Administrative 
Review, 67 FR 20093. On August 12 and 19, 2002, we received 
supplemental responses from respondents.
    In accordance with 19 CFR 351.213(b), this review covers only those 
producers or exporters for which a review was specifically requested. 
The companies subject to this review are Inchon and Sammi. This review 
covers 17 programs.

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 
regulations are references to the provisions codified at 19 CFR part 
351 (2001).

Extension of Time Limits for Final Results

    Under 19 CFR 351.213(h)(2), the Department finds that it is not 
practicable to complete the review within the normal time period 
allocated under 19 CFR 351.213(h)(1); therefore, we are extending the 
final results from 120 days to 180 days after the publication of the 
preliminary results. The reason for this extension is due to 
extenuating circumstances related to the complexity of this case. 
Specifically, the additional time will be needed to examine the change 
of fixed-rate loan methodology, the issue of cross-ownership of Inchon 
and Sammi, and Inchon's purchase of POSCO's inputs for less than 
adequate remuneration. As we cannot fully resolve these issues until 
after verifying the submitted information and examining comments 
submitted by interested parties, we will be unable to complete the 
final results by December 29, 2002. Therefore, the Department will 
issue its final results no later than 180 days after the publication of 
the preliminary results of this review.

Scope of Review

    For purposes of this review, 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 review is classified in the 
Harmonized Tariff Schedule of the United States (HTSUS) 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 HTSUS subheadings are provided for convenience and U.S. 
Customs Service (Customs) purposes, the Department's written 
description of the merchandise is dispositive.
    Excluded from the scope of this review 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 HTSUS, ``Additional 
U.S. Note'' 1(d).
    The Department has determined that certain specialty stainless 
steel products are also excluded from the scope of this order. These 
excluded products are described below:

[[Page 57397]]

    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 review. 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 between 0.002 and 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 order. 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\
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    \1\ ``Arnokrome III'' is a trademark of the Arnold Engineering 
Company.
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    Certain electrical resistance alloy steel is also excluded from the 
scope of this order. 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\
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    \2\ ``Gilphy 36'' is a trademark of Imphy, S.A.
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    Certain martensitic precipitation-hardenable stainless steel is 
also excluded from the scope of this order. 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\
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    \3\ ``Durphynox 17'' is a trademark of Imphy, S.A.
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    Finally, three specialty stainless steels typically used in certain 
industrial blades and surgical and medical instruments are also 
excluded from the scope of this review. 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 ASTM grade 440F, 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 HI-C.'' 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 square micron. 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.''
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    \4\ This list of uses is illustrative and provided for 
descriptive purposes only.
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Sammi Steel Company and Cross-ownership with Inchon

    According to section 351.525(b)(6)(vi) of the CVD Regulations, 
cross ownership exists between two corporations where one corporation 
can use or direct the individual assets of the other corporation in 
essentially the same ways it can use its own assets. Normally, this 
standard will be met where there is a majority voting ownership 
interest between two corporations. On December 6, 2000, Inchon became 
the majority shareholder of Sammi with 68 percent of Sammi's shares. 
However, Sammi remained under court receivership throughout the POR, 
and until March 23, 2001.
    The CVD Regulations acknowledge that control can be exercised by 
one corporation over another even when that one corporation does not 
hold majority voting ownership. See Countervailing Duties; Final Rule, 
63 FR 65348, 65401 (November 25, 1998), preamble to CVD Regulations. 
The percentage of shares, therefore, is not a dispositive indicator of 
cross ownership between companies. Accordingly, it is also possible, 
under certain

[[Page 57398]]

extraordinary circumstances, that a corporation holding majority 
ownership in another corporation may not be in a position to exercise 
control over that corporation's assets. We therefore requested 
additional information from the GOK, Inchon and Sammi, to determine 
whether Inchon was in a position to control and direct the use of 
Sammi's assets during the POR.
    Sammi filed for bankruptcy prior to the POR and came under court 
receivership prior to and throughout the POR. Under Korea's Company 
Reorganization Act, the authority for management control, the right to 
operate the company's business, management, and disposition of the 
company's property rests exclusively with the court or with the 
receiver appointed by the court. The information on the record 
demonstrates that the control of Sammi and the ability to use and 
direct the company's assets were held by the court and the court 
appointed receiver throughout the POR. Therefore, while Inchon held 68 
percent of Sammi's shares, it was not in the position to control 
Sammi's assets until March 23, 2001, when Sammi's court receivership 
ended. Therefore, we find preliminarily that cross ownership as defined 
under section 351.525(b)(6)(vi) of the CVD Regulations did not exist 
between Inchon and Sammi during the POR.

Partial Rescission

    As noted above, we initiated an administrative review of Sammi. 
According to the response, Sammi produced subject merchandise but did 
not export subject merchandise to the United States during calendar 
year 2000, the POR. However, Sammi provided a complete response to the 
Department's questionnaire because it was affiliated with Inchon. An 
affiliated company must provide a questionnaire response if cross-
ownership exists and the affiliated company produces the subject 
merchandise. It is the Department's practice not to review a 
respondent, in this case Sammi, that has not exported subject 
merchandise to the United States during the POR. Therefore, because we 
preliminarily find no cross ownership between Sammi and Inchon, in 
accordance with 19 CFR 351.213(d)(3), we intend to rescind the review 
with respect to Sammi because it made no sales or shipments of subject 
merchandise to the United States during the review period. If, in the 
final determination, we find that Sammi is not cross owned by Inchon, 
See Sammi Steel Company and Cross Ownership with Inchon above, we will 
rescind the administrative review of Sammi.

Subsidies Valuation Information

    Benchmarks for Long-term Loans: During the POR, Inchon had both 
won-denominated and foreign currency-denominated long-term loans 
outstanding which it received from government-owned banks, Korean 
commercial banks, overseas banks, and foreign banks with branches in 
Korea.
    In the Final Negative Countervailing Duty Determination: Stainless 
Steel Plate in Coils from the Republic of Korea, 64 FR at 15532 (March 
31, 1999) (Plate in Coils) and in the Final Affirmative Countervailing 
Duty Determination: Stainless Steel Sheet and Strip in Coils From the 
Republic of Korea, 64 FR at 30641 (June 8, 1999) (Sheet and Strip), the 
Department examined the GOK's direction of credit policies for the 
period 1992 through 1997. Based on new information gathered during the 
course of those investigations, the Department determined that the GOK 
controlled directly or indirectly the lending practices of most sources 
of credit in Korea between 1992 and 1997. In the Final Affirmative 
Countervailing Duty Determination: Certain Cut-to Length Carbon-Quality 
Steel Plate From the Republic of Korea, 64 FR at 73180 (December 29, 
1999) (CTL Plate) the Department determined that the GOK still 
exercised substantial control over lending institutions in Korea during 
1998. In the 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), and accompanying Issues and Decision Memorandum (1999 Sheet 
and Strip Decision Memo) at ``the GOK's Direction of Credit'' section, 
we found that the GOK had control over the lending institutions during 
1999. As such, because no new factual information has been placed on 
the record, we preliminarily find direction of credit countervailable 
through 2000, the POR of this current administrative review.
    Based on our findings on this issue in prior investigations, we are 
using the following benchmarks to calculate the subsidies attributable 
to respondent's long-term loans obtained in the years 1992 through 
2000:
    (1) For countervailable, foreign-currency denominated loans, we 
used, where available, the company-specific weighted-average U.S. 
dollar-denominated interest rates on the company's loans from foreign 
bank branches in Korea.
    (2) For countervailable won-denominated long-term loans, where 
available, we used the company-specific corporate bond rate on the 
company's public and private bonds. We note that this benchmark is 
based on the decision in Plate in Coils 64 FR at 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 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, in 
which we determined that, absent company-specific interest rate 
information, the corporate bond rate is the best indicator of a market 
rate for won-denominated long-term loans in Korea. Id.
    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 POR.
    Treatment of Subsidies Received by Trading Companies: We required 
responses from 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 United States by 
a 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 POR, Inchon exported subject 
merchandise to the United States through a trading company, Hyundai 
Corporation (Hyundai). We required the trading company to provide a 
response to the Department with respect to the export subsidies under 
review.
    Under section 351.107(b)(1) 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 Preamble to the 
regulations, there may be situations in which it is not appropriate or 
practicable to establish combination rates when the subject

[[Page 57399]]

merchandise is exported by a trading company. See Antidumping Duties; 
Countervailing Duties; Final Rule, 62 FR 27296, 27303 (May 19, 1997). 
In such situations, the Department will make exceptions to its 
combination rate approach on a case-by-case basis. Id.
    We preliminarily determine that it is not appropriate to establish 
combination rates, with respect to this review. This determination is 
based on two main facts: first, the majority of the subsidies conferred 
upon the subject merchandise were received by the producer; second, the 
level of subsidies conferred upon the individual trading company with 
regard to the subject merchandise is insignificant.
    Instead, we have continued to calculate a rate for the producer of 
subject merchandise that includes the subsidies received by the trading 
company. To reflect those subsidies that are received by the exporter 
of the subject merchandise in the calculated ad valorem subsidy rate, 
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 company from each export subsidy program, and weighted the 
average of the benefit amounts by the relative share of the trading 
company's value of exports of the subject merchandise to the United 
States. We then added these calculated ad valorem subsidies to the 
subsidies calculated for the producer of subject merchandise. Thus, for 
each of the programs below, the listed ad valorem subsidy rate includes 
countervailable subsidies received by both the producer and the trading 
company.

I. Programs Conferring Subsidies

A. The GOK's Direction of Credit

    The Department previously determined in the Final Affirmative 
Countervailing Duty Determination: Structural Steel Beams from the 
Republic of Korea, 65 FR 41051 (July 3, 2000) (H-beams), and 
accompanying Issues and Decision Memorandum (H-Beams Decision Memo) at 
section ``The GOK's Credit Policies through 1991'', 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. Also in H-Beams, we determined 
that the provision of these long-term loans through 1991 provided a 
financial contribution that resulted in the conferral of a benefit, 
within the meaning of sections 771(5)(D)(i) and 771(5)(E)(ii) of the 
Act, respectively. Id.
    In H-beams, the Department also determined that the GOK continued 
to control directly and indirectly the lending practices of most 
sources of credit in Korea through 1998, and 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. Id. Furthermore, the Department determined in H-Beams 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. Id. In the 
final determination of CTL Plate, 64 FR at 73180, the Department 
determined that the GOK continued to control, directly and indirectly, 
the lending practices of sources of credit in Korea in 1998, and the 
Department continued to find this for 1999. See 1999 Sheet and Strip 
Decision Memo at section ``The GOK's Direction of Credit''.
    We provided the GOK with the opportunity to present new factual 
information concerning the government's credit policies through 2000, 
the POR, which we would consider along with our findings in the prior 
investigations. The GOK did not provide any new factual information on 
this program that would lead us to change our determination in the 
current administrative review. Therefore, for purposes of these 
preliminary results, we continue to find lending from domestic banks 
and from government-owned banks, such as the KDB, to be countervailable 
through 2000.
    With respect to foreign sources of credit, in Plate in Coils, 64 FR 
at 15533, and Sheet and Strip, 64 FR at 30642, we determined that 
access to foreign currency loans from Korean branches of foreign banks 
(e.g., branches of U.S.-owned banks operating in Korea) did not confer 
countervailable subsidies to the recipient as defined by section 771(5) 
of the Act, and, as such, credit received by respondents from these 
sources was found not to be countervailable. We based this decision 
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, we preliminarily determine that 
lending from this source continues to be 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.
    Inchon received long-term fixed and variable rate loans from GOK 
owned/controlled institutions that were outstanding during the POR. 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.
    Won-Denominated Loans: For certain loans, the repayment schedules 
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. 
Regarding the calculation of the benefit on countervailable, fixed-rate 
loans, in past cases the Department has employed the ``grant 
equivalent'' methodology, as described in section 351.505(c)(3) of the 
CVD Regulations, when the government-provided loan and the comparison 
loan have dissimilar grace periods or maturities, or where the 
repayment schedules have different shapes (e.g., declining balance 
versus annuity style). See, e.g., Sheet and Strip, CTL Plate, and H-
Beams.
    In these preliminary results, the Department is revising its 
application of the grant equivalent methodology discussed in 
351.505(c)(3) of the CVD Regulations. We note that section 
351.505(c)(2) of the CVD Regulations states that the Department ``will 
normally calculate the subsidy amount to be 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 the comparison loan).'' We also note that, in reference to 
paragraph (c)(2), the Preamble of the Department's CVD Regulations 
states that in situations where the benefit from a long-term, fixed 
rate loan stems solely from a concessionary interest rate, it is not 
necessary to engage in the grant equivalent methodology. See 63 FR at 
65369. Thus, the CVD Regulations and the Preamble direct the Department 
to default to a simple comparison of interest payments made during the 
POR when calculating the benefit from a long-term, fixed rate loan.

[[Page 57400]]

    The Preamble goes on to describe those situations in which the 
Department shall deviate from the ``simple, default methodology,'' and 
instead employ the grant equivalent methodology. The Preamble states 
that, ``[b]ecause a firm may derive a benefit from special repayment 
terms, in addition to any benefit derived from a concessional interest 
rate,'' the Department will calculate the benefit using the grant 
equivalent methodology. See 63 FR at 65369.
    There is no information on the record of these preliminary results 
that indicates that Inchon derived a benefit from any special repayment 
terms (i.e., abnormally long grace periods or maturities, etc.) on its 
long-term, fixed-rate loans. Therefore, in accordance with section 
351.505(c)(2) of the CVD Regulations, we are calculating the benefit 
that Inchon received on its long-term, fixed-rate loans by comparing 
the amount of interest paid on the loan during the POR to the amount of 
interest that would have been paid during the POR on a comparable, 
commercial loan. We invite parties to comment on this issue in the 
final results.
    To calculate the countervailable subsidy benefit, we first derived 
the benefit amounts attributable to the POR for the company's fixed and 
variable rate loans, and then summed the benefit amounts from the 
loans.
    Foreign-Currency Denominated Loans: We used the same methodology as 
set out in the won-denominated loan section above. We compared the 
interest rates on the directed loans to the benchmark interest rates 
detailed in the ``Subsidies Valuation Information'' section of this 
notice. Inchon had both variable and fixed rate long term loans.
    To determine the total benefit for all directed credit, we added 
the benefit derived from foreign currency loans to the benefit derived 
from won denominated loans and divided the total benefit by Inchon's 
total f.o.b. sales value during the POR. On this basis, we 
preliminarily determine the countervailable subsidy to be 0.76 percent 
ad valorem for Inchon.

B. Article 16 of the Tax Exemption and Reduction Control Act (TERCL): 
Reserve for Export Losses

    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, Inchon still had an outstanding balance in this reserve during 
the POR.
    In Sheet and Strip, 64 FR at 30645, we determined that this program 
was specific as it 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. See 64 FR 30645. 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 POR, 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 Inchon by its 
respective weighted-average interest rate for short-term won-
denominated commercial loans for the POR, as described in the 
``Subsidies Valuation Information'' section, above. We then divided the 
benefit by the respective total f.o.b. export sales. On this basis, we 
preliminarily calculated a countervailable subsidy of less than 0.005 
percent ad valorem for Inchon.
    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, 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.

C. Article 17 of the TERCL: Reserve for Overseas Market Development

    Under Article 17 of the TERCL, a domestic person engaged in a 
foreign trade business is allowed 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. 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. Although 
Inchon did not use this program during the POR, it exported subject 
merchandise through Hyundai, which used this program during the POR.
    In CTL Plate, 64 FR at 73181, we determined that the Reserve for 
Overseas Market Development program is specific under section 
771(5A)(B) of the Act because use of the program is contingent upon 
export performance. We also determined that this program provides a 
financial contribution within the meaning of section 771(5)(D)(i) of

[[Page 57401]]

the Act in the form of a loan. The benefit provided by this program is 
the tax savings enjoyed by the companies. Respondents have not provided 
any new information to warrant reconsideration of this determination. 
Therefore, we continue to find this program countervailable.
    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, by the corporate tax rate for 1999. We treated the 
tax savings on these funds as a short-term interest-free loan. 
Accordingly, to determine the benefit, we multiplied the amount of tax 
savings by Hyundai's weighted-average interest rate for short-term won-
denominated commercial loans for the POR. 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 less than 0.005 
percent ad valorem for Inchon.

D. 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 reduce 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, 64 FR 73181, we determined that this program is 
specific because the capital goods industry is allowed to claim a 
larger tax reserve under this program than all other manufacturers. We 
also determined 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. Id. No new information, 
or evidence of changed circumstances, were presented in this review to 
warrant any reconsideration of the countervailability of this program. 
Therefore, we continue to find this program to be countervailable. 
Record evidence indicated that Inchon did not contribute funds to this 
reserve during the POR, but it did carry a balance. Thus, to calculate 
the benefit on the balance, we compared the amount that it would have 
paid if it had only claimed the three percent tax reserve with the tax 
reserve amount as claimed under five percent. Next, we calculated the 
amount of the tax savings earned through the use of this tax reserve 
during the POR and divided that amount by Inchon's total f.o.b. sales 
during the POR. On this basis, we preliminarily determine a net 
countervailable subsidy of less than 0.005 percent ad valorem for 
Inchon.

E. Asset Revaluation: TERCL Article 56(2)

    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 64 FR at 73183. 
No new information, or evidence of changed circumstances, were 
presented in this review to warrant any reconsideration of the 
countervailability of this program.
    To calculate the benefit from the program we reviewed the effect 
that the difference of the revaluation of depreciable assets had on 
Inchon's tax liability each year. We multiplied the additional 
depreciation in the tax return filed during the POR, which resulted 
from the company's asset revaluation, by the tax rate applicable to 
that tax return. We then divided the benefit by Inchon's total f.o.b. 
sales. Accordingly, the net subsidy for this program is less than 0.005 
percent ad valorem for Inchon.

F. Electricity Discounts Under the Requested Load Adjustment Program 
(RLA)

    With respect to the Requested Load Adjustment (RLA) program, the 
GOK introduced this discount in 1990, to address emergencies in Korea 
Electric Power Company's (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 an RLA 
contract with KEPCO. Customers who choose to participate in this 
program must reduce their load upon KEPCO's request, or pay a surcharge 
to KEPCO.
    Customers can apply for this program between May 1 and May 15 of 
each year. If KEPCO finds the application in order, KEPCO and the 
customer enter into a contract with respect to the RLA discount. The 
RLA discount is provided based upon a contract for two months, normally 
July and August. Under this program, a basic discount of 440 won per kW 
is granted between July 1 and August 31, regardless of whether KEPCO 
makes a request for a customer to reduce its load. During the POR, 
KEPCO granted Inchon electricity discounts under this program.
    In Sheet and Strip, 64 FR at 30646, the Department found this 
program to be specific under section 771(5A)(D)(iii)(I) of the Act 
because the discounts were distributed to a limited number of 
customers. Inchon did receive discounts during the POR, therefore we 
find that a financial contribution is provided to 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. The benefit provided under 
this program is a discount on a company's monthly electricity charges. 
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 Inchon received from KEPCO under the RLA program during 
the POR. We then divided that amount by Inchon's total f.o.b. sales 
value for 2000. On this basis, we determine a net countervailable 
subsidy of 0.01 percent ad valorem for Inchon.

G. POSCO's Provision of Steel Inputs for 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 POR, POSCO sold hot-rolled coil to Inchon for 
products that were consumed in Korea, as well as hot-rolled coil, to 
produce exports of the subject merchandise. In CTL Plate, which covered 
calendar year 1998, the Department determined that the GOK, through its 
ownership and control of POSCO, set prices of steel inputs used

[[Page 57402]]

by the Korean steel industry for less than adequate remuneration. See 
64 FR at 73184. Thus, in CTL Plate, the Department found this program 
to be countervailable.
    Prior to 1999, POSCO set different prices depending on whether the 
input was to be used to produce products for domestic consumption or 
export consumption. Respondent claims that in May 1999, POSCO 
eliminated its two-tiered pricing system and established unit prices 
applicable for sales to all customers, thereby removing the aspect of 
the program that constituted a countervailable subsidy. However, we 
find that this change in pricing policies does not impact the 
determination made by the Department in CTL Plate, 64 FR at 73184-85. 
In CTL Plate, the Department did not determine that the difference in 
pricing between domestic and export consumption constituted a 
countervailable subsidy. Instead, the Department found that the prices 
charged by POSCO were for less than adequate remuneration. Id. at 
73185. Therefore, the fact that POSCO now only charges one price to the 
Korean steel industry for steel inputs does not affect the 
determination as to whether a good or service has been provided for 
less than adequate remuneration. The Department must still examine the 
prices charged to Inchon by POSCO for hot rolled coil to determine 
whether the prices are still for less than adequate remuneration.
    Under section 351.511(a)(2) of the CVD Regulations, the adequacy of 
remuneration is 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 POR, Inchon also imported hot-rolled coil; therefore, we are 
using Inchon's actual import prices of hot-rolled coil as our basis of 
comparison to the price at which Inchon purchased hot-rolled coil from 
POSCO. Based upon this comparison, we preliminarily determine that 
POSCO sold hot-rolled coil to Inchon for less than adequate 
remuneration.
    In the 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, 67 FR at 9693, (March 
4, 2002), we stated that we are reviewing the issue of whether this 
program is an untied domestic subsidy. However, for purposes of these 
preliminary results, we continue to find this program tied to subject 
merchandise. The Department will collect additional information prior 
to the final results. We invite comments from interested parties on 
this issue.
    The GOK has argued in this proceeding that POSCO underwent 
privatization in September 2000, and, thus, cannot possibly sell HR 
coil to Inchon at less than adequate remuneration at the behest of the 
GOK. It further contends that POSCO's privatization constitutes a 
program-wide change pursuant to section 351.526 of the CVD Regulations. 
In 1999 Sheet and Strip, the Department determined that the information 
on the record 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 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 which required that no individual shareholder except 
the GOK could exercise voting rights in excess of three percent of the 
company's common stock. This same requirement was placed into POSCO's 
Articles of Incorporation. In addition, 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 (i.e., by the GOK). 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 Commerce and Industry, the 
Minister 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 at 30642-43.
    In this current administrative review, 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 review regarding a program-wide change under section 
351.526 of the CVD Regulations. In particular, the GOK and POSCO have 
placed information on the record which they claim indicates 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 (IBK), 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 have 
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. 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 POSCO, although its Articles of Incorporation had 
not been implemented during the POR, once the GOK eliminated the 
restrictions on the acquisition of shares, POSCO was in effect no 
longer a public company.
    According to information on the record, POSCO 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. Further, 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 include the IBK and Seoul 
Bank, and three candidates were recommended by the Board of Directors. 
There were changes to the Board of Directors during

[[Page 57403]]

the General Meeting of Shareholders which occurred during the POR; two 
outside directors that were former government officials resigned and 
were replaced.
    For the purposes of this preliminary determination, we continue to 
countervail POSCO's sales of hot-rolled coil as in the 1999 Sheet and 
Strip review. In that review, we compared monthly delivered weighted-
average prices. However, due to the lack of complete monthly data or 
quarterly data on this record, we find that it is more appropriate to 
only compare prices in the months in which Inchon had both domestic and 
import purchases. We compared Inchon's import prices to prices charged 
by POSCO to find the price differential (per month). In our comparison 
we used delivered weighted-average prices charged by POSCO to Inchon 
for hot-rolled coils and delivered weighted-average prices Inchon paid 
for imported hot-rolled coil, by grade of hot-rolled coil, making due 
allowance for factors affecting comparability. We then weight averaged 
the price differentials by the quantity of imports to derive a single 
weight averaged price differential. To derive the benefit we multiplied 
the single weight averaged price differential by the total quantity of 
inputs purchased from POSCO during the POR. Next, we divided the amount 
of the price savings by the f.o.b. sales value of merchandise produced 
using hot-rolled coils. On this basis, we determine that Inchon 
received a countervailable subsidy of 4.32 percent ad valorem from this 
program during the POR.
    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. We invite interested parties to 
comment on this issue.

H. Tax Credit for Investments in Productivity Improvement Facilities 
Under Restriction of Special Taxation (RSTA) Article 24

    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 POR, Inchon earned or used tax credits for investments 
in productivity increasing facilities (RSTA Article 24, previously 
TERCL Article 25). 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 ten percent tax 
credit. 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, in CTL Plate, 63 FR at 73182, we determined that 
these investment tax credits constituted import substitution subsidies 
under section 771(5A)(C) of the Act. In addition, because the GOK 
forewent 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.
    According to the response of the GOK, the government has changed 
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 productivity 
increasing facilities (RSTA 24). According to the response of the GOK, 
for investments made after April 10, 1998, there is no longer a 
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, 
are no longer countervailable. However, record evidence indicates that 
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. Therefore, 
we continue to find the use of investment tax credits earned on 
domestic investments made before April 10, 1998, to be countervailable.
    Inchon claimed tax credits under RSTA 24 that originated when there 
was a distinction between purchasing domestic facilities and imported 
facilities. To calculate the benefit from this investment tax credit, 
we examined the amount of tax credits Inchon deducted from its taxes 
payable for the 1999 fiscal year income tax return, which was filed 
during the POR. 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 ten 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 
this tax credit during the POR and divided that amount by Inchon's 
total f.o.b. sales during the POR. On this basis, we preliminarily 
determine a net countervailable subsidy of 0.12 percent ad valorem.

II. Programs Preliminarily Determined To Be Not Used

A. Investment Tax Credits Under RSTA Article 10, 18, 26, 27 and 71 of 
TERCL
B. Loans From the National Agricultural Cooperation Federation
C. Tax Incentives for Highly-Advanced Technology Businesses Under the 
Foreign Investment and Foreign Capital Inducement Act
D. Reserve for Investment Under Article 43-5 of TERCL
E. Export Insurance Rates Provided by the Korean Export Insurance 
Corporation
F. Special Depreciation of Assets on Foreign Exchange Earnings
G. Excessive Duty Drawback
H. Short-Term Export Financing
I. Export Industry Facility Loans

Preliminary Results of Review

    In accordance with 19 CFR 351.221(b)(4)(i), we calculated an 
individual subsidy rate for the producer/exporter subject to this 
administrative review. For the period January 1, 2000 through December 
31, 2000, we preliminarily determine the net subsidy for Inchon to be 
5.21 percent ad valorem.
    If the final results of this review remain the same as these 
preliminary results, the Department intends to instruct Customs to 
assess countervailing duties as indicated above. The Department also 
intends to instruct Customs to collect cash deposits of estimated 
countervailing

[[Page 57404]]

duties as indicated above as a percentage of the f.o.b. invoice price 
on all shipments of the subject merchandise from reviewed companies, 
entered, or withdrawn from warehouse, for consumption on or after the 
date of publication of the final results of this review.
    Because the URAA replaced the general rule in favor of a country-
wide rate with a general rule in favor of individual rates for 
investigated and reviewed companies, the procedures for establishing 
countervailing duty rates, including those for non-reviewed companies, 
are now essentially the same as those in antidumping cases, except as 
provided for in section 777A(e)(2)(B) of the Act. The requested review 
will normally cover only those companies specifically named. See 19 CFR 
351.213(b). Pursuant to 19 CFR 351.212(c), for all companies for which 
a review was not requested, duties must be assessed at the cash deposit 
rate, and cash deposits must continue to be collected, at the rate 
previously ordered. As such, the countervailing duty cash deposit rate 
applicable to a company can no longer change, except pursuant to a 
request for a review of that company. See Federal-Mogul Corporation and 
The Torrington Company v. United States, 822 F.Supp. 782 (CIT 1993) and 
Floral Trade Council v. United States, 822 F.Supp. 766 (CIT 1993) 
(interpreting 19 CFR 353.22(e), the antidumping regulation on automatic 
assessment, which is identical to 19 CFR 351.212(c)(ii)(2)). Therefore, 
the cash deposit rates for all companies except those covered by this 
review will be unchanged by the results of this review.
    We will instruct Customs to continue to collect cash deposits for 
non-reviewed companies at the most recent company-specific or country-
wide rate applicable to the company. Accordingly, the cash deposit 
rates that will be applied to non-reviewed companies covered by this 
order will be the rate for that company established in the most 
recently completed administrative proceeding conducted under the URAA. 
If such a review has not been conducted, the rate established in the 
most recently completed administrative proceeding pursuant to the 
statutory provisions that were in effect prior to the URAA amendments 
is applicable. See Final Affirmative Countervailing Duty Determination: 
Stainless Steel Sheet and Strip in Coils from the Republic of Korea, 64 
FR 30636 (June 8, 1999). These rates shall apply to all non-reviewed 
companies until a review of a company assigned these rates is 
requested. In addition, for the period January 1, 2000 through December 
31, 2000, the assessment rates applicable to all non-reviewed companies 
covered by this order are the cash deposit rates in effect at the time 
of entry.
    Upon completion of this administrative review, the Department will 
determine, and the Customs Service shall assess, countervailing duties 
on all appropriate entries. In accordance with 19 CFR 351.212(b)(2), we 
have calculated a company-specific assessment rate for merchandise 
subject to this review. The Department will issue appropriate 
assessment instructions directly to the Customs Service within 15 days 
of publication of the final results of review. If these preliminary 
results are adopted in the final results of review, we will direct the 
Customs Service to assess the resulting assessment rates against the 
entered customs values for the subject merchandise on each of the 
company's entries during the review period.

Verification

    We find that there are numerous issues that require verification; 
such as, the allegation of a program-wide change and Inchon's possible 
cross-ownership of Sammi. Therefore, the Department will verify the 
information submitted by respondents in accordance with section 
782(i)(3) of the Act and 351.307(b)(iv) of the CVD Regulations.

Public Comment

    Pursuant to 19 CFR 351.224(b), the Department will disclose to 
parties to the proceeding any calculations performed in connection with 
these preliminary results within five days after the date of the public 
announcement of this notice. Pursuant to 19 CFR 351.309, interested 
parties may submit written comments in response to these preliminary 
results. Unless otherwise indicated by the Department, case briefs must 
be submitted within 14 days after the release of the verification 
reports. Rebuttal briefs, which are limited to arguments raised in case 
briefs, must be submitted no later than five days after the time limit 
for filing case briefs, unless otherwise specified by the Department. 
Parties who submit argument in this proceeding are requested to submit 
with the argument: (1) A statement of the issue, and (2) a brief 
summary of the argument. Parties submitting case and/or rebuttal briefs 
are requested to provide the Department copies of the public version on 
disk. Case and rebuttal briefs must be served on interested parties in 
accordance with 19 CFR 351.303(f). Also, pursuant to 19 CFR 351.310, 
within 30 days of the date of publication of this notice, interested 
parties may request a public hearing on arguments to be raised in the 
case and rebuttal briefs. Unless the Secretary specifies otherwise, the 
hearing, if requested, will be held two days after the date for 
submission of rebuttal briefs.
    Representatives of parties to the proceeding may request disclosure 
of proprietary information under administrative protective order no 
later than 10 days after the representative's client or employer 
becomes a party to the proceeding, but in no event later than the date 
the case briefs, under 19 CFR 351.309(c)(ii), are due. The Department 
will publish the final results of this administrative review, including 
the results of its analysis of issues raised in any case or rebuttal 
brief or at a hearing.
    This administrative review is issued and published in accordance 
with sections 751(a)(1) and 777(i)(1) of the Act (19 U.S.C. 1675(a)(1) 
and 19 U.S.C. 1677f(i)(1)).

    Dated: September 3, 2002.
Faryar Shirzad,
Assistant Secretary for Import Administration.
[FR Doc. 02-22997 Filed 9-9-02; 8:45 am]
BILLING CODE 3510-DS-P