[Federal Register Volume 74, Number 127 (Monday, July 6, 2009)]
[Notices]
[Pages 31919-31922]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-15967]



[[Page 31919]]

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

DEPARTMENT OF COMMERCE

International Trade Administration

(C-580-862)


Ni-Resist Piston Inserts from the Republic of Korea: Preliminary 
Negative Countervailing Duty Determination

AGENCY: Import Administration, International Trade Administration, 
Department of Commerce.
SUMMARY: The Department of Commerce (the Department) preliminarily 
determines that countervailable subsidies are not being provided to 
producers and exporters of Ni-resist piston inserts from the Republic 
of Korea (Korea).

EFFECTIVE DATE: July 6, 2009.

FOR FURTHER INFORMATION CONTACT: John Conniff, AD/CVD Operations, 
Office 3, Operations, Import Administration, U.S. Department of 
Commerce, Room 4014, 14th Street and Constitution Avenue, NW, 
Washington, DC 20230; telephone: (202) 482-1009.

SUPPLEMENTARY INFORMATION:

Case History

    On January 26, 2009, the Department received a countervailing duty 
(CVD) petition concerning Ni-resist piston inserts from Korea filed in 
proper form by Korff Holdings, LLC, doing business as Quaker City 
Castings (Petitioner). This investigation was initiated on February 17, 
2009. See Ni-Resist Piston Inserts from Argentina and the Republic of 
Korea: Initiation of Countervailing Duty Investigations, 74 FR 8054 
(February 23, 2009) (Initiation Notice), and accompanying Initiation 
Checklist..\1\ On March 20, 2009, the Department postponed the deadline 
for the preliminary determination by 65 days to no later than June 29, 
2009. See Ni-Resist Piston Inserts from Argentina and the Republic of 
Korea: Notice of Postponement of Preliminary Determination in the 
Countervailing Duty Investigations, 74 FR 11910 (March 20, 2009).
---------------------------------------------------------------------------

    \1\ A public version of this and all public Departmental 
memoranda is on file in the Central Records Unit (CRU), room 1117 in 
the main building of the Commerce Department.
---------------------------------------------------------------------------

    On March 4, 2009, the Department selected Incheon Metal Co., Ltd. 
(Incheon Metal) as the mandatory respondent in this investigation. See 
Memorandum from the Team through Melissa Skinner, Director, Office 3, 
Operations, to John M. Andersen, Acting Deputy Assistant Secretary for 
Antidumping and Countervailing Duty Operations, regarding ``Respondent 
Selection'' (March 4, 2009).\2\
---------------------------------------------------------------------------

    \2\ A public version of this memorandum is available in the CRU.
---------------------------------------------------------------------------

    On March 6, 2009, we issued the initial CVD questionnaire to the 
Government of Korea (GOK) and Incheon Metal. On April 8, 2009, the GOK 
submitted its response to the initial CVD questionnaire. On April 28, 
2009, Incheon Metal submitted its initial questionnaire response. On 
April 17, 2009, we issued a supplemental questionnaire to the GOK, to 
which it responded on April 28, 2009. On May 1, 2009, we issued a 
supplemental questionnaire to Incheon Metal, to which it submitted a 
response on May 29, 2009. On May 11, 2009, we issued a second 
supplemental questionnaire to the GOK, which submitted its response on 
May 18, 2009. On June 2, 2009, we issued a third supplemental 
questionnaire to the GOK. On June 11, 2009, the GOK submitted its 
response to the third supplemental questionnaire.
    On April 20, 2009, petitioner submitted new subsidy allegations 
regarding six programs. On May 13, 2009, the Department initiated 
investigations of the six newly alleged subsidy programs pursuant to 
section 775 of the Tariff Act of 1930, as amended (the Act). See 
Memorandum to Melissa G. Skinner, Director, Office 3 Operations, 
regarding ``New Subsidy Allegations'' (May 13, 2009). Questionnaires 
regarding these newly alleged subsidies were sent to the GOK and 
Incheon Metal on May 13, 2009. The GOK and Incheon Metal submitted 
their response to the questionnaires on the new subsidy allegations on 
June 10, 2009.
    On May 11, 2009, petitioner submitted additional new subsidy 
allegations regarding one program. On May 27, 2009, the Department 
initiated an investigation of the one newly alleged subsidy program 
pursuant to section 775 of the Act. See Memorandum to Melissa G. 
Skinner, Director, Office 3 Operations, regarding ``Additional New 
Subsidy Allegations'' (May 27, 2009). Questionnaires regarding this 
newly alleged subsidy were sent to the GOK and Incheon Metal on May 29, 
2009. The GOK and Incheon Metal submitted their responses to the 
questionnaires on the additional new subsidy allegation on June 12, 
2009.

Scope of the Investigation

    The scope of this investigation includes all Ni-resist piston 
inserts regardless of size, thickness, weight, or outside diameter. Ni-
resist piston inserts may also be called other names including, but not 
limited to, ``Ring Carriers,'' or ``Alfin Inserts.'' Ni-resist piston 
inserts are alloyed cast iron rings, with or without a sheet metal 
cooling channel pressed and welded into the interior of the insert. Ni-
resist piston inserts are composed of the material known as Ni-resist, 
of the chemical composition: 13.5% - 17.5% Ni (nickel), 5.5% - 8.0% Cu 
(copper), 0.8% - 2.5% Cr (chromium), 0.5% - 1.5% Mn (manganese), 1.0% - 
3.0% Si (silicon), 2.4% - 3.0% C (carbon). The cast iron composition is 
produced primarily to the material specifications of the American 
Society for Testing and Materials (ASTM), ASTM A-436 grade 1.
    The scope of this investigation does not include piston rings nor 
did any other product manufacture using the Ni-resist material. The 
subject imports are properly classified under subheading 8409.99.91.90 
of the Harmonized Tariff Schedule of the United States (HTSUS), but 
have been imported under HTSUS 7326.90. The HTSUS subheadings are 
provided for convenience and customs purposes. The written description 
is dispositive of the scope of these investigations.

Injury Test

    Because Korea is a ``Subsidies Agreement Country'' within the 
meaning of section 701(b) of the Act, the International Trade 
Commission (ITC) is required to determine whether imports of the 
subject merchandise from Korea materially injure, or threaten material 
injury to, a U.S. industry. On March 25, 2009, the ITC published its 
preliminary determination that there is a reasonable indication that an 
industry in the United States is materially injured by reason of 
imports from Korea of subject merchandise. See Ni-Resist Piston Inserts 
from Argentina and Korea, USITC Pub.4066, Inv. Nos. 701-TA-460-461, 
(March 2009) (Prelim.).

Period of Investigation

    The period of investigation (the POI) for which we are measuring 
subsidies is January 1, 2008, through December 31, 2008, which 
corresponds to the most recently completed fiscal year for the two 
respondents. See 19 CFR 351.204(b)(2).

Allocation Period

    Under 19 CFR 351.524(b), non-recurring subsidies are allocated over 
a period corresponding to the average useful life (AUL) of the 
renewable physical assets used to produce the subject merchandise. 
Pursuant to 19 CFR 351.524(d)(2), there is a rebuttable presumption 
that the AUL will be taken

[[Page 31920]]

from the U.S. Internal Revenue Service's 1977 Class Life Asset 
Depreciation Range System (IRS Tables), as updated by the Department of 
Treasury. For the subject merchandise, the IRS Tables prescribe an AUL 
of 13 years. No interested party has claimed that the AUL of 13 years 
is unreasonable.

ANALYSIS OF PROGRAMS

Program Preliminarily Determined To Be Countervailable

A. Tax Benefits under the Namdong National Industrial Complex Program

    During the POI Incheon Metal received tax benefits under the 
Namdong National Industrial Complex pursuant to the Framework Act on 
small and medium-sized enterprises (SMEs) from the GOK. Any SME 
involved in manufacturing, transportation, or information technology 
can locate inside the Namdong National Industrial Complex and receive 
assistance from the government. Under the program, firms inside the 
complex are eligible to receive exemptions from acquisition and 
registration taxes that are normally due on real estate transactions. 
Incheon Metal reported receiving such tax exemptions during the POI in 
connection with real estate transactions during the POI.
    We preliminarily determine that the Incheon Metal received a 
financial contribution in the form of revenue forgone from the GOK 
within the meaning of section 771(5)(D)(ii) of the Act and that the 
exemptions are specific within the meaning of section 771(5A)(D)(iv) of 
the Act, because they limited to enterprises located inside the Namdong 
National Industrial Complex. Incheon Metal is located within this 
complex.
    Pursuant to section 771(5)(E) of the Act, we find the tax exemption 
confers a benefit in the amount equal to the exemption during the POI. 
We divided the benefit under this program by Incheon Metal's total 
sales. The resulting net subsidy rate is less than 0.005 percent ad 
valorem. Therefore, in accordance with the Department's practice, we 
will find that the countervailable benefit is not measurable. See, 
e.g., Certain Hot-Rolled Carbon Steel Flat Products from India: Final 
Results and Partial Rescission of Countervailing Duty Administrative 
Review, 74 FR 20923 (May 6, 2009) (HRC from India), and accompanying 
Issues and Decision Memorandum (HRC from India Decision Memorandum) at 
``Exemption from the CST.''

II. Programs Preliminarily Determined To Be Not Countervailable

A. Technical Development for Innovation Production Environment (TDIPE)

    Incheon Metal's annual report indicates that it received grants 
from the GOK during the POI. See Incheon Metal's April 24, 2009 
response at Exhibit 5. Supplemental questionnaire responses from 
Incheon Metal and the GOK indicate that Incheon Metal received two 
grants from the GOK's Small and Medium Business Administration under 
the TDIPE. See Incheon Metal's May 29, 2009 response at 2-3. In the 
narrative of its supplemental questionnaire response, Incheon Metal 
indicated that SME's that purchase equipment classified under 
Harmonized Tariff System (HTS) Chapters 10 through 33 are eligible to 
receive grants under the TDIPE. The GOK's description of the program 
and the portions of the TDIPE regulations and sample application forms 
submitted by the GOK do not make any reference to the grants being 
limited to purchases of equipment under HTS chapters 10 through 33. See 
GOK's June 12, 2009 response at Exhibits S-29 and S-30. In response to 
our request, the GOK also submitted information concerning the 
enterprises and industries that received grants under the TDIPE program 
during the period 2005 through 2008. See GOK's June 12, 2009 response 
at 19.
    Based on our analysis of the information submitted by the GOK 
regarding the TDIPE program, including a copy of the relevant 
legislation, we preliminarily determine that the grants under the 
program are not de jure specific within the meaning of sections 
771(5A)(A), (B), (C) and (D)(i) and (ii) of the Act. See also 19 CFR 
351.502(e) and see also the GOK's June 12, 2009, response at Exhibits 
S-29 and S-30.
    Where the Department finds no de jure specificity, section 
771(5A)(D)(iii) of the Act also directs the Department to examine 
whether the benefits provided under the program are de facto specific, 
that is, whether the benefits are specific as a matter of fact. 
Subparagraphs under section 771(5A)(D)(iii) of the Act stipulate that a 
program is de facto specific if one or more of the following factors 
exist:
    (I) The actual recipients of the subsidy, whether considered on an 
enterprise or industry basis, are limited in number.
    (II) An enterprise or industry is a predominant user of the 
subsidy.
    (III) An enterprise or industry receives a disproportionately large 
amount of the subsidy.
    (IV) The manner in which the authority providing the subsidy has 
exercised discretion in the decision to grant the subsidy indicates 
that an enterprise or industry is favored over others.
    In response to the Department's request for information regarding 
these factors, the GOK provided the Department with a breakdown of the 
issuance of grants (both in terms of amounts and number of recipients), 
by industry, for the years 2005 through 2008. See GOK's June 12, 2009, 
questionnaire response at 19 and the Department's June 25, 2009, 
Memorandum to the File (Preliminary De Facto Specificity Analysis 
Memorandum), of which a public version is available in the Central 
Records Unit in Room 1117. In conducting our de facto specificity 
analysis, we examined the grant amounts issued by the GOK as well as 
the number of recipients, by industry, during the POI and each of the 
preceding three years. Specifically, we compared the amount of grants 
under the TDIPE program that were issued to the metals industry to the 
amount of grants that were issued to other industries under this 
program. We conducted the same analysis with regard to the number of 
recipients. See Preliminary De Facto Specificity Analysis Memorandum.
    Based on our analysis of the data for the TDIPE program, we 
preliminarily determine that the benefits received by Incheon Metal or 
the metals industry under this program were not de facto specific 
within the meaning of sections 771(5A)(D)(iii)(I) through (III) of the 
Act, i.e., we find no limitation as to the number of recipients, 
predominant use or disproportionate share, of the subsidy. Lastly, we 
preliminarily determine that there is no evidence on the record of the 
investigation indicating that the GOK exercised discretion in the 
decision to issue TDIPE grants which indicates that the metals industry 
was favored over other industries within the meaning of section 
771(5A)(D)(iii)(IV) of the Act.
    Consequently, the Department preliminarily determines that the 
grants received by Incheon Metal under this program are neither de jure 
nor de facto specific and, therefore, not countervailable. We will 
continue to examine this program in this proceeding.

B. Reserve for Research and Manpower Development Fund Under RSTA 
Article 9 (Formerly Article 8 of TERCL)

    This program allows a company operating in manufacturing or mining,

[[Page 31921]]

or in a business prescribed by the Presidential Decree, to appropriate 
reserve funds to cover expenses related to the 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 goods companies and capital intensive 
companies can establish a reserve of five percent of total revenue, 
while companies in all other industries are only allowed to establish a 
three-percent reserve.
    The Department has previously determined that firms that are 
entitled to establish a reserve up to the three percent level do not 
receive a countervailable subsidy. See e.g., Preliminary Results of 
Countervailing Duty Administrative Review: Corrosion Resistant Carbon 
Steel Flat Products from the Republic of Korea, 71 FR 53413, 53419 
(September 11, 2006) (unchanged in final results). Incheon Metal 
indicated in its questionnaire response that it established its reserve 
up to the three percent level. Consequently, we preliminarily determine 
that Incheon Metal's use of the program is not countervailable.

C. Programs Preliminarily Determined To Have Been Terminated

1. Energy Rate Reductions Under the Request Load Adjustment Program

    Petitioner contends that the GOK provides reduced energy rates to 
companies that reduce their demand by twenty percent. Businesses are 
eligible for a discount of 440 won per kW under the Requested Load 
Adjustment program. The GOK reported in its response that the program 
had been terminated as of January 1, 2005, by the Korean Electric Power 
Corporation and did not provide any residual benefits. See GOK's April 
8, 2009, response at 5. Information submitted by the GOK, including 
translated copies of the relevant regulation, shows that the regulation 
covering the program has been abolished. See GOK's April 28, 2009, 
supplemental response at 3 and Exhibits S-1 and S-2. The GOK also 
stated that it has not implemented a successor program. Therefore, 
subject to verification, we preliminarily determine that this program 
has been terminated.
2. Reserve for Investment Funds
    Petitioner alleged that this program allowed Korean firms engaged 
in manufacturing and mining outside of Seoul to establish a tax 
reserve. Petitioner further contended that the tax reserve allows 
eligible firms to reduce their taxable income in a given year and that 
the program is limited to a geographic area outside of Seoul. The GOK 
reported that the program was terminated on August 31, 1999, and that 
the relevant portion of the Restriction of Special Taxation Act was 
deleted. The GOK provided documentation demonstrating its assertion. 
See GOK's April 8, 2009, response at 7 and Exhibit 7. Therefore, 
subject to verification, we preliminarily determine that this program 
has been terminated.

D. Programs Preliminarily Determined To Be Not Used

1. Short-Term Export Financing
2. Loans under the Industrial Base Fund
3. Export Loans by Commercial Banks Under KEXIM's Trade Bill 
Rediscounting Program
4. Subsidized Loans and Guarantees through the Korea Development Bank
5. Export Insurance and Guarantees through the Korea Export Insurance 
Corporation
6. SME Financing through the Industrial Bank of Korea
7. Export and Import Credit Financing and Guarantees from the Korean 
Export-Import Bank
8. Export and Import Credit Financing and Guarantees from the Korean 
Export-Import Bank
9. Financial Aid, Training Assistance and Export Services through the 
Small and Medium Business Administration
10. Free Economic Zone of Incheon

Verification

    In accordance with section 782(i)(1) of the Act, we intend to 
verify the information submitted by Incheon Metal and the GOK prior to 
making our final determination.

Suspension of Liquidation

    In accordance with section 703(d)(1)(A)(i) of the Act, we have 
calculated an individual rate for each producer/exporter of the subject 
merchandise. We preliminarily determine the total estimated net 
countervailable subsidy rates to be:

------------------------------------------------------------------------
             Producer/Exporter                      Subsidy Rate
------------------------------------------------------------------------
Incheon Metal Co., Ltd....................         de minimis percent ad
                                                                 valorem
All Others................................         de minimis percent ad
                                                                 valorem
------------------------------------------------------------------------

    Therefore, we preliminarily determine that no countervailable 
subsidies are being provided to the production or exportation of Ni-
resist pistons in Korea. Further, we will direct U.S. Customs and 
Border Patrol (CBP) not to require suspension of liquidation of all 
entries of Ni-resist pistons from Korea.

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 non-proprietary 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.

Disclosure and Public Comment

    In accordance with 19 CFR 351.224(b), the Department will disclose 
to the parties the calculations for this preliminary determination 
within five days of its announcement. Case briefs for this 
investigation must be submitted no later than one week after the 
issuance of the last verification report. See 19 CFR 351.309(c) (for a 
further discussion of case briefs). Rebuttal briefs, which must be 
limited to issues raised in the case briefs, must be filed within five 
days after the deadline for submission of case briefs. See 19 CFR 
351.309(d). A list of authorities relied upon, a table of contents, and 
an executive summary of issues should accompany any briefs submitted to 
the Department. Executive summaries should be limited to five pages 
total, including footnotes.
    In accordance with 19 CFR 351.310(c), we will hold a public 
hearing, if requested, to afford interested parties an opportunity to 
comment on this preliminary determination. 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

[[Page 31922]]

Assistant Secretary for Import Administration, U.S. Department of 
Commerce, Room 1870, 14th Street and Constitution Avenue, NW, 
Washington, DC 20230. Parties will be notified of the schedule for the 
hearing and parties should confirm the time, date, and place of the 
hearing 48 hours before the scheduled time. Requests for a public 
hearing should contain: (1) 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.
    This determination is issued and published pursuant to sections 
703(f) and 777(i) of the Act and 19 CFR 351.221(b)(4).

    Dated: June 29, 2009.
John M. Andersen,
Acting Deputy Assistant Secretary for Antidumping and Countervailing 
Duty Operations.
[FR Doc. E9-15967 Filed 7-2-09; 8:45 am]
BILLING CODE 3510-DS-S