[Federal Register Volume 76, Number 169 (Wednesday, August 31, 2011)]
[Notices]
[Pages 54209-54216]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-22325]


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

DEPARTMENT OF COMMERCE

International Trade Administration

[C-580-818]


Corrosion-Resistant Carbon Steel Flat Products From the Republic 
of Korea: Preliminary Results of Countervailing Duty Administrative 
Review

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

SUMMARY: The Department of Commerce (the Department) is conducting an 
administrative review of the countervailing duty (CVD) order on 
corrosion-resistant carbon steel flat products (CORE) from the Republic 
of Korea (Korea) for the period of review (POR) January 1, 2009, 
through December 31, 2009. For information on the net subsidy for 
Hyundai HYSCO Ltd. (HYSCO), the company reviewed, 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.

DATES: Effective Date: August 31, 2011.

FOR FURTHER INFORMATION CONTACT: Gayle Longest, AD/CVD Operations, 
Office 3, Import Administration, International Trade Administration, 
U.S. Department of Commerce, Room 4014, 14th Street and Constitution 
Ave., NW., Washington, DC 20230; telephone: (202) 482-3338.

SUPPLEMENTARY INFORMATION:

Background

    On August 17, 1993, the Department published in the Federal 
Register the CVD order on CORE from Korea. See Countervailing Duty 
Orders and Amendments of Final Affirmative Countervailing Duty 
Determinations: Certain Steel Products from Korea, 58 FR 43752 (August 
17, 1993). On August 2, 2010, the Department published a notice of 
opportunity to request an administrative review of this CVD order. See 
Antidumping or Countervailing Duty Order, Finding, or Suspended 
Investigation: Opportunity to Request Administrative Review, 75 FR 
45094 (August 2, 2010).
    On August 31, 2010, we received timely requests for review and 
partial revocation of the countervailing duty order from Dongbu Steel 
Co., Ltd. (Dongbu) and Pohang Iron and Steel Co., Ltd. (POSCO); we also 
received a timely request for review from Hyundai HYSCO Ltd. On 
September 29, 2010, the Department published a notice of initiation of 
the administrative review of the CVD order on CORE from Korea covering 
the period January 1, 2009, through December 31, 2009. See Initiation 
of Antidumping and Countervailing Duty Administrative Reviews and 
Requests for Revocation in Part (Initiation), 75 FR 60076 (September 
29, 2010).
    On September 27, 2010, and October 1, 2010, Dongbu and POSCO, 
respectively, withdrew their requests for review and partial revocation 
of the CVD order on CORE from Korea. On January 25, 2011, we rescinded, 
in part, this review of the CVD order of CORE from Korea with regard to 
Dongbu and POSCO. See Corrosion-Resistant Carbon Steel Flat Products 
From the Republic of Korea: Partial Rescission of Countervailing Duty 
Administrative Review, 76 FR 4291 (January 25, 2011).
    On October 18, 2010, the Department issued the initial 
questionnaire to HYSCO, and the Government of Korea (GOK). On December 
15, 2010, the Department received questionnaire responses from HYSCO 
and the GOK. On February 17, 2011, March 25, 2011,

[[Page 54210]]

and April 27, 2011, the Department issued supplemental questionnaires 
to the GOK and HYSCO. On March 17, 2011, April 22, 2011, and May 25, 
2011, the Department received supplemental questionnaire responses from 
the GOK and HYSCO. On April 14, 2011, the Department published in the 
Federal Register an extension of its preliminary results of the instant 
administrative review. See Corrosion-Resistant Carbon Steel Flat 
Products from the Republic of Korea: Notice of Extension of Preliminary 
Results of Countervailing Duty Administrative Review, 76 FR 20954 
(April 14, 2011). On July 18, 2011, the Department issued an additional 
supplemental questionnaire to the GOK. On August 4, 2011 the Department 
received the supplemental questionnaire response for the GOK.
    In accordance with 19 CFR 351.213(b), this review covers only those 
producers or exporters for which a review was specifically requested. 
The company that continues to be subject to this review is HYSCO.

Scope of Order

    Products covered by this order are certain corrosion-resistant 
carbon steel flat products from Korea. These products include flat-
rolled carbon steel products, of rectangular shape, either clad, 
plated, or coated with corrosion-resistant metals such as zinc, 
aluminum, or zinc-, aluminum-, nickel- or iron-based alloys, whether or 
not corrugated or painted, varnished or coated with plastics or other 
nonmetallic substances in addition to the metallic coating, in coils 
(whether or not in successively superimposed layers) and of a width of 
0.5 inch or greater, or in straight lengths which, if of a thickness 
less than 4.75 millimeters, are of a width of 0.5 inch or greater and 
which measures at least 10 times the thickness or if of a thickness of 
4.75 millimeters or more are of a width which exceeds 150 millimeters 
and measures at least twice the thickness. The merchandise subject to 
this order is currently classifiable in the Harmonized Tariff Schedule 
of the United States (HTSUS) at subheadings: 7210.30.0000, 
7210.31.0000, 7210.39.0000, 7210.41.0000, 7210.49.0030, 7210.49.0090, 
7210.49.0091, 7210.49.0095, 7210.60.0000, 7210.61.0000, 7210.69.0000, 
7210.70.6030, 7210.70.6060, 7210.70.6090, 7210.90.1000, 7210.90.6000, 
7210.90.9000, 7212.20.0000, 7212.21.0000, 7212.29.0000, 7212.30.1030, 
7212.30.1090, 7212.30.3000, 7212.30.5000, 7212.40.1000, 7212.40.5000, 
7212.50.0000, 7212.60.0000, 7215.90.1000, 7215.9030, 7215.90.5000, 
7217.12.1000, 7217.13.1000, 7217.19.1000, 7217.19.5000, 7217.20.1500, 
7217.22.5000, 7217.23.5000, 7217.29.1000, 7217.29.5000, 
7217.30.15.0000, 7217.32.5000, 7217.33.5000, 7217.39.1000, 
7217.39.5000, 7217.90.1000 and 7217.90.5000. Although the HTSUS 
subheadings are provided for convenience and customs purposes, the 
Department's written description of the merchandise is dispositive.

Subsidies Valuation Information

A. Benchmarks for Short-Term Financing

    For those programs requiring the application of a won-denominated, 
short-term interest rate benchmark, in accordance with 19 CFR 
351.505(a)(2)(iv), we used as our benchmark the company-specific 
weighted-average interest rate for commercial won-denominated loans 
outstanding during the POR. This approach is in accordance with 19 CFR 
351.505(a)(3)(i) and the Department's practice. See, e.g., Corrosion-
Resistant Carbon Steel Flat Products from the Republic of Korea: Final 
Results of Countervailing Duty Administrative Review, 74 FR 2512 
(January 15, 2009) (Final Results of CORE from Korea 2006), and 
accompanying Issues and Decision Memorandum (CORE from Korea 2006 
Decision Memorandum) at ``Benchmarks for Short-Term Financing.''

B. Benchmark for Long-Term Loans

    During the POR, HYSCO had outstanding countervailable long-term 
won-denominated loans from government-owned banks and Korean commercial 
banks. We used the following benchmarks to calculate the subsidies 
attributable to respondents' countervailable long-term loans obtained 
through 2009:
    (1) For countervailable, won-denominated long-term loans, we used, 
where available, the company-specific interest rates on the company's 
comparable commercial, won-denominated loans. If such loans were not 
available, we used, where available, the company-specific corporate 
bond rate on the company's public and private bonds, as we have 
determined that the GOK did not control the Korean domestic bond market 
after 1991. See, e.g., Final Negative Countervailing Duty 
Determination: Stainless Steel Plate in Coils from the Republic of 
Korea, 64 FR 15530, 15531 (March 31, 1999) (Stainless Steel 
Investigation) and ``Analysis Memorandum on the Korean Domestic Bond 
Market'' (March 9, 1999). The use of a corporate bond rate as a long-
term benchmark interest rate is consistent with the approach the 
Department has taken in several prior Korean CVD proceedings. See Id.; 
see also Final Affirmative Countervailing Duty Determination: 
Structural Steel Beams from the Republic of Korea (H Beams 
Investigation), 65 FR 41051 (July 3, 2000), and accompanying Issues and 
Decision Memorandum at ``Benchmark Interest Rates and Discount Rates;'' 
and Final Affirmative Countervailing Duty Determination: Dynamic Random 
Access Memory Semiconductors from the Republic of Korea , 68 FR 37122 
(June 23, 2003) (DRAMS Investigation), and accompanying Issues and 
Decision Memorandum at ``Discount Rates and Benchmark for Loans.'' 
Specifically, in those cases, we determined that, absent company-
specific, commercial long-term loan interest rates, the won-denominated 
corporate bond rate is the best indicator of the commercial long-term 
borrowing rates for won-denominated loans in Korea because it is widely 
accepted as the market rate in Korea. See Final Affirmative 
Countervailing Duty Determinations and Final Negative Critical 
Circumstances Determinations: Certain Steel Products from Korea, 58 FR 
at 37328, 37345-37346 (July 9, 1993) (Steel Products from Korea). Where 
company-specific rates were not available, we used the national average 
of the yields on three-year, won-denominated corporate bonds, as 
reported by the Bank of Korea (BOK). This approach is consistent with 
19 CFR 351.505(a)(3)(ii) and our practice. See, e.g., CORE from Korea 
2006 Decision Memorandum at ``Benchmark for Long Term Loans.''
    In accordance with 19 CFR 351.505(a)(2)(i), our benchmarks take 
into consideration the structure of the government-provided loans. For 
countervailable fixed-rate loans, pursuant to 19 CFR 
351.505(a)(2)(iii), we used benchmark rates issued in the same year 
that the government loans were issued.

Average Useful Life

    Under 19 CFR 351.524(d)(2), 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) 1997 Class Life Asset Depreciation 
Range System, as updated by the Department of the Treasury. The 
presumption will apply unless a party claims and establishes that the 
IRS tables do not reasonably reflect the

[[Page 54211]]

company-specific AUL or the country-wide AUL for the industry under 
examination and that the difference between the company-specific and/or 
country-wide AUL and the AUL from the IRS tables is significant. 
According to the IRS tables, the AUL of the steel industry is 15 years. 
No interested party challenged the 15-year AUL derived from the IRS 
tables. Thus, in this review, we have allocated, where applicable, all 
of the non-recurring subsidies provided to the producers/exporters of 
subject merchandise over a 15-year AUL.

I. Programs Determined To Be Countervailable

A. Short-Term Export Financing

    Export-Import Bank of Korea (KEXIM) supplies two types of short-
term loans for exporting companies: short-term trade financing and 
comprehensive export financing. See the GOK's December 15, 2010, 
questionnaire response (QR) at Exhibit J-1. KEXIM provides short-term 
loans to Korean exporters that manufacture goods under export 
contracts. Id. The loans are provided up to the amount of the bill of 
exchange or contracted amount, less any amount already received. Id. 
For comprehensive export financing loans, KEXIM supplies short-term 
loans to any small or medium-sized company, or any large company that 
is not included in the five largest conglomerates based on their 
comprehensive export performance. Id. To obtain the loans, companies 
must report their export performance periodically to KEXIM for review. 
Id. Comprehensive export financing loans cover from 50 to 90 percent of 
the company's export performance. Id.
    In Steel Products from Korea, the Department determined that the 
GOK's short-term export financing program was countervailable. See 
Final Affirmative Countervailing Duty Determinations and Final Negative 
Critical Circumstances Determinations: Certain Steel Products From 
Korea, 58 FR 37338, 37350 (July 9, 1993) (Steel Products from Korea); 
see also Notice of Final Affirmative Countervailing Duty Determination: 
Certain Cold-Rolled Carbon Steel Flat Products From the Republic of 
Korea, 67 FR 62102, (October 3, 2002) (Cold-Rolled Investigation), and 
accompanying Issues and Decision Memorandum (Cold-Rolled Decision 
Memorandum) at ``Short-Term Export Financing'' section. No new 
information or evidence of changed circumstances was presented in this 
review to warrant any reconsideration of the countervailability of this 
program. Therefore, we continue to find this program countervailable. 
Specifically, we determine that the export financing constitutes a 
financial contribution in the form of a loan within the meaning of 
section 771(5)(D)(i) of the Act and confers a benefit within the 
meaning of section 771(5)(E)(ii) of the Act to the extent that the 
amount of interest the respondents paid for export financing under this 
program was less than the amount of interest that would have been paid 
on a comparable short-term commercial loan. See discussion in the 
``Subsidies Valuation Information'' section with respect to short-term 
loan benchmark interest rates. In addition, we preliminarily determine 
that the program is specific, pursuant to section 771(5A)(A) and (B) of 
the Act, because receipt of the financing is contingent upon exporting. 
HYSCO reported using short-term export financing during the POR.
    Pursuant to 19 CFR 351.505(a)(1), to calculate the benefit under 
this program, we compared the amount of interest paid under the program 
to the amount of interest that would have been paid on a comparable 
commercial loan. As our benchmark, we used the short-term interest 
rates discussed above in the ``Subsidies Valuation Information'' 
section. To calculate the net subsidy rate, we divided the benefit by 
the free on board (f.o.b.) value of the respective company's total 
exports. On this basis, we determine the net subsidy rate to be 0.09 
percent ad valorem for HYSCO.

B. Act on Special Measures for the Promotion of Specialized Enterprises 
for Parts and Materials

    Under the Act on Special Measures for the Promotion of Specialized 
Enterprises for Parts and Materials (Promotion of Specialized 
Enterprises Act), the GOK shares the costs of research and development 
(R&D) projects with companies or research institutions. The goal of the 
program is to support technology development for core parts and 
materials necessary for technological innovation and improvement in 
competitiveness. See GOK's December 15, 2010 QR at Exhibit P-1. The 
program is administered by the Ministry of Knowledge Economy (MKE) and 
Korea Evaluation Institute of Industrial Technology (KEIT). Id.
    In accordance with Articles 3 and 4 of the Promotion of Specialized 
Enterprises Act, MKE prepares a base plan and a yearly execution plan 
for the development of the parts and materials industry. See GOK's 
December 15, 2010 QR at Exhibit P-1. Under the execution plan, MKE 
announces to the public a detailed business plan for the development of 
parts and materials technology. Id. at 2. This business plan includes 
support areas, qualifications, and the application process. Id. 
According to the GOK, any person or company can participate in the 
program by preparing an R&D business plan that conforms with the 
requirements set forth in the MKE business plan. Id. The completed 
application must then be submitted to KEIT, which evaluates the 
application and selects the projects eligible for government support. 
Id. After the selected application is finally approved by MKE, MKE and 
the participating companies enter into an R&D agreement and then MKE 
provides the grant. Id. at 3.
    R&D project costs are shared by the GOK and companies or research 
institutions as follows: (1) When the group of companies involved in 
the research is made up of a ratio above two-thirds small to medium-
sized companies, the GOK provides a grant up to three-fourths of the 
project cost; (2) when the group of companies involved in the research 
is made up of a ratio below two-thirds small to medium-sized companies, 
the GOK provides a grant up to one-half of the project cost. See GOK's 
December 10, 2010 QR, Exhibit P-1.
    Upon completion of the project, if the GOK evaluates the project as 
``successful,'' the participating companies must repay 40 percent of 
the R&D grant to the GOK over five years. See GOK's December 10, 2010 
QR, Exhibit P-1 at 2. However, if the project is evaluated by the GOK 
as ``not successful,'' the company does not have to repay any of the 
grant amount to the GOK. Id.
    In the final results of administrative review of the CVD order on 
CORE from Korea covering the period January 1, 2008 through December 
31, 2008, the Department determined that the Promotion of Specialized 
Enterprises Act was de jure specific under section 771(5A)(D)(i) of the 
Act, because it is expressly limited to (1) enterprises specializing in 
components and materials and (2) enterprises specializing in 
development of technology for components and materials. See Corrosion-
Resistant Carbon Steel Flat Products from the Republic of Korea: Final 
Results of Countervailing Duty Administrative Review, 76 FR 3613 
(January 20, 2011) (Final Results of CORE from Korea 2008), and 
accompanying Decision Memorandum (CORE 2008 Decision Memorandum) at 
``The Act on Special Measures for the Promotion of Specialized 
Enterprises for Parts and Materials'' section. The Department

[[Page 54212]]

preliminarily determines in this administrative review that the 
Promotion of Specialized Enterprises Act is specific for the same 
reasons. We also preliminarily find that a financial contribution was 
provided within the meaning of section 771(5)(D)(i) of the Act because 
the GOK's payments constitute a direct transfer of funds. See 
Corrosion-Resistant Carbon Steel Flat Products from the Republic of 
Korea: Preliminary Results and Partial Rescission of Countervailing 
Duty Administrative Review, 75 FR 55745; 55750.
    HYSCO reported that during the POR, it was involved in one R&D 
project under this program. See HYSCO's December 15, 2010 QR at 18. In 
a prior review, we found that the R&D grants HYSCO received under this 
program are for the development of specialized technologies associated 
with the production of subject merchandise. See Preliminary Results of 
CORE from Korea 2008, 75 FR at 55749, unchanged in Final Results of 
CORE from Korea 2008, 76 FR 3613 and CORE 2008 Decision Memorandum at 
``The Act on Special Measures for the Promotion of Specialized 
Enterprises for Parts and Materials'' section. We have reached the same 
conclusion in these preliminary results.
    In the Final Results of CORE from Korea 2008, we treated a portion 
of the subsidy that does not have to be repaid as a grant and the 
remaining portion of the subsidy that may have to be repaid as a long-
term, interest-free contingent liability loan. See Final Results of 
CORE from Korea 2008, 76 FR 3613 and CORE 2008 Decision Memorandum at 
``The Act on Special Measures for the Promotion of Specialized 
Enterprises for Parts and Materials'' section. This approach is 
consistent with the Department's regulation and practice. See 19 CFR 
351.505(d)(1); see also Certain Hot-Rolled Carbon Steel Flat Products 
From India: Final Results of Countervailing Duty Administrative Review, 
73 FR 40295 (July 14, 2008) and accompanying Issues and Decision 
Memorandum at ``Export Promotion Capital Goods Scheme (EPCGS).'' We 
have adopted the same approach in these preliminary results.
    To determine the benefit from the GOK funds HYSCO received under 
the Specialized Enterprises Act program, we calculated the GOK's 
contribution for the assistance that was apportioned to HYSCO. See 19 
CFR 351.504(a). As described immediately above, we treated a portion of 
this benefit as a grant. In accordance with 19 CFR 351.524(b)(2), we 
determined whether to allocate the non-recurring benefit from the 
grants over a 15-year AUL by dividing the GOK-approved grant amount by 
the company's total sales in the year of approval. Because the approved 
amount was less than 0.5 percent of the company's total sales, we 
expensed the grant to the year of receipt, i.e., to 2009, the POR in 
this review.
    With respect to the portion of the subsidy that we are treating as 
a long-term, interest-free contingent liability loan, pursuant to 19 
CFR 351.505(d)(1) for the reasons described above, we find the benefit 
to be equal to the interest that HYSCO would have paid during the POR 
had it borrowed the full amount of the contingent liability loan during 
the POR. Pursuant to 19 CFR 351.505(d)(1), we used a long-term interest 
rate as our benchmark to calculate the benefit of a contingent 
liability interest-free loan because the event upon which repayment of 
the duties depends (i.e., the completion of the R&D project) occurs at 
a point in time more than one year after the date in which the grant 
was received. Specifically, we used the long-term benchmark interest 
rates as described in the ``Subsidies Valuation'' section of these 
preliminary results.
    To calculate the total net subsidy amount for this program, we 
summed the benefits provided under this program. Next, to calculate the 
net subsidy rate, we divided the portion of the benefit allocated to 
the POR by HYSCO's total f.o.b. sales for 2009. See 19 CFR 
351.525(b)(3). On this basis, we preliminarily determine the net 
subsidy rate under this program to be 0.02 percent ad valorem for 
HYSCO.

II. Programs Preliminarily Determined Not To Confer a Benefit During 
the POR

A. Research and Development Grants Under the Industrial Development Act 
(IDA)

    The GOK, through the Ministry of Knowledge Economy (MKE),\1\ 
provides R&D grants to support numerous projects pursuant to the IDA, 
including technology for core materials, components, engineering 
systems, and resource technology. See Corrosion-Resistant Carbon Steel 
Flat Products From the Republic of Korea: Preliminary Results of 
Countervailing Duty Administrative Review (Preliminary Results of CORE 
from Korea 2007), 74 FR 46100, 46102 (September 8, 2009) unchanged in 
Corrosion-Resistant Carbon Steel Flat Products From the Republic of 
Korea: Final Results of Countervailing Duty Administrative Review 
(Final Results of CORE from Korea 2007), 74 FR 55192 (October 27, 
2009). The IDA is designed to foster the development of efficient 
technology for industrial development.\2\ See Preliminary Results of 
CORE from Korea 2007, 74 FR at 46102. To participate in this program a 
company may: (1) Perform its own R&D project, (2) participate through 
the Korea Association of New Iron and Steel Technology (KANIST),\3\ 
which is an association of steel companies established for the 
development of new iron and steel technology, and/or (3) participate in 
another company's R&D project and share R&D costs as well as funds 
received from the GOK. Id. 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 Plan. Id. If the R&D project is 
not successful, the company must repay the full amount of the grants 
provided by the GOK. Id.
---------------------------------------------------------------------------

    \1\ Prior to February 29, 2008, MKE was known as the Ministry of 
Commerce, Industry, and Energy (MOCIE).
    \2\ The exact nature of the IDA projects are proprietary and 
therefore cannot be revealed in this public notice. Details on these 
projects may be found at HYSCO's December 15, 2010 QR at Exhibit G-
2.
    \3\ Also known as Korea New Iron & Steel Technology Research 
Association (KNISTRA).
---------------------------------------------------------------------------

    In the H Beams Investigation, the Department determined that 
through KANIST, the Korean steel industry receives funding specific to 
the steel industry. Therefore, given the nature of KANIST, the 
Department found projects under KANIST to be specific. See Preliminary 
Negative Countervailing Duty Determination with Final Antidumping Duty 
Determination: Structural Steel Beams From the Republic of Korea, 64 FR 
69731, 69740 (December 14, 1999) (unchanged in the final results, 65 FR 
69371 (July 3, 2000), and accompanying Issues and Decision Memorandum 
at ``R&D Grants Under the Korea New Iron & Steel Technology Research 
Association (KNISTRA)''). Further, we found that the grants constitute 
a financial contribution under section 771(5)(D)(i) of the Act in the 
form of a grant, and bestow a benefit under section 771(5)(E) of the 
Act in the amount of the grant. Id. No new factual information or 
evidence of changed circumstances has been provided to the Department 
with respect to this program. Therefore, we preliminarily continue to 
find that this program is de jure specific within the meaning of 
section 771(5A)(D)(i) of the Act and this program constitutes a 
financial contribution and confers a benefit under sections 
771(5)(D)(i) and 771(5)(E) of the Act, respectively.

[[Page 54213]]

    HYSCO benefitted from this program during the POR. See HYSCO's 
December 15, 2010, QR at 13. HYSCO participated in a project indirectly 
through KANIST. Id. However, according to HYSCO, the project for which 
grants were received from the government was not related to subject 
merchandise. Id. at 14. The nature of the project for which HYSCO 
received the grant is business proprietary and cannot be discussed in 
this public notice. For information on this project, see Memorandum to 
the File titled ``HYSCO's R&D Grants under the IDA/ITIPA'' (August 31, 
2011) (HYSCO IDA/ITIPA Grant Memorandum), of which a public version is 
on file in the Central Records Unit (CRU).
    The Department has previously determined that grants HYSCO received 
for this particular project under this program are attributable to the 
production of non-subject merchandise. See Corrosion-Resistant Carbon 
Steel Flat Products From the Republic of Korea: Preliminary Results of 
Countervailing Duty Administrative Review (Preliminary Results of CORE 
from Korea 2007), 74 FR 46100; 46102 (September 8, 2010) unchanged in 
Corrosion-Resistant Carbon Steel Flat Products From the Republic of 
Korea: Final Results of Countervailing Duty Administrative Review 
(Final Results of CORE from Korea 2007), 74 FR 55192 (October 27, 
2008); and Memorandum to the File titled ``HYSCO's R&D Grants Under the 
IDA Memorandum to the file in the Countervailing Duty Administrative 
Review for the period of review (POR) January 1, 2007 through December 
31, 2007'' (August 31, 2009) (HYSCO IDA Grants Memorandum), of which a 
public version is on file in the CRU. See also HYSCO's December 10, 
2010, QR at Exhibit G-5. Therefore, consistent with 19 CFR 
351.525(b)(5) and our past practice, we preliminarily determine that 
these grants for the project in question are tied to non-subject 
merchandise and, thus, did not confer a benefit to HYSCO's production 
or sales of subject merchandise during the POR.

B. Research and Development Grants Under the Industrial Technology 
Innovation Promotion Act (ITIPA)

    The GOK's Industrial Technology Innovation Promotion Act program is 
designed to foster future new industries and enhance the 
competitiveness of primary industries through fundamental technology 
development. See GOK's December 15, 2010, QR at Exhibit G-3. The 
program is administered by MKE and the Korean Evaluation Institute of 
Industrial Technology (KEIT). Id.
    Under the Industrial Technology Innovation Promotion Act, GOK 
provides R&D grants to support the areas of transportation system, 
industrial materials, robots, biomedical equipment, clean manufacturing 
foundation, knowledge services and industry convergence technology. See 
GOK's December 15, 2010, QR at Exhibit G-3 at 1-2.
    Pursuant to Article 11 of the Industrial Technology Innovation 
Promotion Act, KEIT prepares a basic plan for the development of 
technology, on behalf of MKE. Id. at 3. This plan includes the R&D 
projects that are eligible, describes the application process, and 
designates the supporting documentation required. Id. The plan is 
announced to the public. Id. According to the GOK, any person who 
wishes to participate in the program prepares an R&D business plan that 
meets the requirements set forth in the basic plan and then submits the 
application to the GOK's Application Review Committee, which then 
evaluates the application to determine if it conforms to the terms and 
conditions set forth in the basic plan. Id. If the application is 
approved, MKE and the company enter into an R&D agreement and then MKE 
provides the grant. Id.
    The costs of the R&D projects under this program are shared by the 
company (or research institution) and the GOK. See GOK's December 15, 
2010, QR at Exhibit G-3 at 2. Specifically, the grant ratio for project 
costs are as follows: (1) For projects with one small/medium-sized 
enterprise (SME), the GOK provides grants up to three-fourths of the 
project costs, (2) for projects with one conglomerate, the GOK provides 
grants up to one-half of the project costs, (3) for projects with more 
than two participants of which SMEs comprise more than two-thirds of 
the participant ratio, the GOK provides up to three-fourths of the 
project costs, and (4) for projects with more than two participants of 
which SMEs comprise less than two-thirds of the participant ratio, the 
GOK provides up to one-half of the project costs. Id.
    When the project is evaluated as ``successful'' upon completion, 
the participating companies must repay 40 percent of the R&D grant to 
the GOK over five years. Id. at 2. However, when the project is 
evaluated as ``not successful,'' the company does not have to repay the 
GOK any of the grant amount. Id.
    During the POR, HYSCO received grants under the Industrial 
Technology Innovation Promotion Act for two R&D projects in which the 
company participated with other firms. See GOK's December 15, 2010, QR 
at 10 and G-3; see also HYSCO's December 15, 2010, QR at 13, G-3, and 
G-4. Based upon our review of program documents submitted in the 
response, we preliminarily determine that one grant received is related 
to the first step of the project discussed above in the section 
``Research and Development Grants Under the Industrial Development Act 
(IDA).'' See HYSCO's December 15, 2010, QR at 14. Therefore, we 
preliminarily determine that this grant is attributable to the 
production of non-subject merchandise. See the HYSCO IDA/ITIPA Grant 
Memorandum.
    The second step of this project is being performed under the 
auspices of the ITIPA. Id. at 13 and G-3. Upon review of the 
information submitted by HYSCO, we preliminarily determined that this 
grant pertains specifically to production of a product that is not 
subject merchandise. See Memorandum to the File titled ``HYSCO's R&D 
Grants Under the IDA/ITIPA.'' (August 31, 2011), of which a public 
version is on file in the CRU. Therefore, consistent with 19 CFR 
351.525(b)(5) and our past practice, we preliminarily determine that 
this grant is tied to non-subject merchandise. Hence we did not include 
this grant in our benefit calculations.
    In addition, HYSCO reports receiving another grant during the POR 
for a project that is being performed under the ITIPA. See HYSCO's 
December 15, 2010, QR at 14. Dividing this grant amount by HYSCO's 
total sales results in a net subsidy rate that is less than 0.005 
percent ad valorem. Thus, consistent with the Department's practice, we 
find that the benefit received in connection with this grant is not 
measurable. See, e.g., CORE from Korea 2006 Decision Memorandum at 
``GOK's Direction of Credit'' section. Consequently, we preliminarily 
determine that it is not necessary for the Department to make a finding 
as to the countervailability of this program in this review. If a 
future administrative review of this proceeding is requested, we will 
further examine grants provided under ITIPA.

C. R&D Grants Under the Act on the Promotion of the Development, Use, 
and Diffusion of New and Renewable Energy

    The GOK's Development of Use, and Diffusion of New and Renewable 
Energy program (formerly the Development of Alternative Energy program) 
is reportedly designed to contribute to the preservation of the 
environment, the sound and sustainable development of the national 
economy, and the promotion of national welfare by diversifying energy 
resources through

[[Page 54214]]

promoting technological development, the use and diffusion of 
alternative energy, and reducing the discharge of gases harmful to 
humans or the environment by activating the new and renewable energy 
industry. See GOK's December 15, 2010, QR at Exhibit O-1. The program 
is administered by the Ministry of Knowledge Economy (MKE), Korea 
Energy Management Corporation (KEMCO), and the Korea Institute of 
Energy Technology Evaluation and Planning (KETEP). Id.
    Under the Act on the Promotion of the Development, Use, and 
Diffusion of New and Renewable Energy (New and Renewable Energy Act), 
the GOK provides R&D grants to support the following businesses: (1) 
Electric and Nuclear Power Development, (2) Energy and Resources 
Technology Development, and (3) New and Renewable Energy Technology 
Development. Id., at 2.
    Pursuant to Articles 5 and 6 of the New and Renewable Energy Act, 
MKE prepares a base plan and a yearly execution plan for the 
development of new and renewable energy. Id. at 3. The base and 
execution plans are announced to the public. Id. According to the GOK, 
any person who wishes to participate in the program prepares an R&D 
business plan and then submits the application to the KETEP, which then 
evaluates the application and selects the projects eligible for 
government support. Id. After the selected application is finally 
approved by MKE, KEMCO, and the general supervising institute of the 
consortium enter into an R&D agreement and then MKE provides the grant 
through KEMCO. Id.
    The costs of the R&D projects under this program are shared by the 
company (or research institution) and the GOK. Id. at 2. Specifically, 
the grant ratio for project costs are as follows: (1) For large 
companies, the GOK provides grants up to one-half of the project costs, 
(2) for small/medium-sized companies, the GOK provides grants up to 
three-fourths of the project costs, (3) for a consortium,\4\ the GOK 
provides grants up to three-fourths of the project costs, and (4) for 
others, the GOK provides grants up to one-half of the project costs. 
Id.
---------------------------------------------------------------------------

    \4\ If the ratio of small to medium-sized companies in a 
consortium is above two-thirds, the GOK provides grants up to one-
half of the project costs. See GOK's December 10, 2010, QR, Exhibit 
P-1.
---------------------------------------------------------------------------

    When the project is evaluated as ``successful'' upon completion, 
the participating companies must repay 40 percent of the R&D grant to 
the GOK. Id. at 2. However, when the project is evaluated as ``not 
successful'', the company does not have to repay any of the grant 
amount to the GOK. Id.
    During the POR, HYSCO received an energy-related grant under the 
New and Renewable Energy Act for a project in which the company 
participated with other firms. See GOK's December 15, 2010, QR at 14-15 
and Exhibit O-1. HYSCO reported that the R&D grant under the New and 
Renewable Energy Act are provided with respect to specific projects, 
which are generally multi-year projects where the amount of funds to be 
provided by the GOK is set out in the project contract. See HYSCO's 
December 15, 2010, QR at Exhibit O-3. The cost of R&D projects under 
this program is shared by the participating companies and the GOK. Id. 
HYSCO claims that the project for which the grant was received from the 
government was not related to subject merchandise. Id. at 18.
    Upon review of the information submitted by HYSCO, we preliminarily 
determine that the grant pertains specifically to production of a 
product that is not subject merchandise. See Memorandum to the File 
titled ``HYSCO's R&D Grants under the Act on the Promotion of the 
Development, Use, and Diffusion of New and Renewable Energy'' (August 
31, 2011) (HYSCO New and Renewable Energy Grant Memorandum), of which a 
public version is on file in the CRU. Therefore, consistent with 19 CFR 
351.525(b)(5), we preliminarily determine that this grant is tied to 
non-subject merchandise. Hence, we preliminarily determine that the New 
and Renewable Energy Act did not confer a benefit during the POR.

D. Reduction in Taxes for Operation in Regional and National Industrial 
Complexes

    Under Article 46 of the Industrial Cluster Development and Factory 
Establishment Act (Industrial Cluster Act), a state or local government 
may provide tax exemptions as prescribed by the Restriction of Special 
Taxation Act. In accordance with this authority, Article 276 of the 
Local Tax Act provides that an entity that acquires real estate in a 
designated industrial complex for the purpose of constructing new 
buildings or enlarging existing facilities is exempt from the 
acquisition and registration tax. In addition, the entity is exempt 
from 50 percent of the property tax on the real estate (i.e., the land, 
buildings, or facilities constructed or expanded) for five years from 
the date the tax liability becomes effective. The exemption is 
increased to 100 percent of the relevant land, buildings, or facilities 
that are located in an industrial complex outside of the Seoul 
metropolitan area. The GOK established the tax exemption program under 
Article 276 in December 1994, to provide incentives for companies to 
relocate from populated areas in the Seoul metropolitan region to 
industrial sites in less populated parts of the country. The program is 
administered by the local tax officials of the county where the 
industrial complex is located.
    During the POR, pursuant to Article 276 of the Local Tax Act, HYSCO 
received exemptions from the acquisition tax, registration tax, and 
property tax based on the location of its manufacturing facilities, 
Suncheon Works, in the Yulchon Industrial Complex, a government-
sponsored industrial complex designated under the Industrial Cluster 
Act. In addition, HYSCO received an exemption from the local education 
tax during the POR. The local education tax is levied at 20 percent of 
the property tax. The property tax exemption, therefore, results in an 
exemption of the local education tax.
    In the CFS Paper Investigation, the Department determined that the 
tax exemptions under Article 276 of the Local Tax Act are 
countervailable subsidies. See Coated Free Sheet Paper from the 
Republic of Korea: Notice of Final Affirmative Countervailing Duty 
Determination, 72 FR 60639 (October 25, 2007) (CFS Paper 
Investigation), and accompanying Issues and Decision Memorandum at 
``Reduction in Taxes for Operation in Regional and National Industrial 
Complexes'' (CFS Paper Decision Memorandum).
    Dividing the total tax exemptions received under this program 
during the POR by HYSCO's total sales for the POR results in a net 
subsidy rate of less than 0.005 percent ad valorem. Consistent with the 
Department's practice, we find that the benefits received under this 
program are not measurable and, therefore, we have not included any 
benefits under this program in the net subsidy rate. See, e.g., CORE 
from Korea 2006 Decision Memorandum at ``GOK's Direction of Credit'' 
section. We will continue to examine this program in future reviews.

E. Overseas Resource Development Program: Loan From Korea Resources 
Corporation (KORES)

    In Final Results of CORE from Korea 2006, the Department found that 
the GOK enacted the Overseas Resource Development (ORD) Business Act in 
order to establish the foundation for securing the long-term supply of 
essential energy and major material minerals, which are mostly imported 
because of scarce domestic resources.

[[Page 54215]]

See Preliminary Results of CORE from Korea 2006, 73 FR 52315; 52326 
(September 9, 2008) unchanged in Final Results of CORE from Korea 2006, 
74 FR 2512 (January 15, 2009), and accompanying Issues and Decision 
Memorandum at ``Programs Determined To Be Not Used'' section. Pursuant 
to Article 11 of this Act, MKE annually announces its budget and the 
eligibility criteria to obtain a loan from MKE. See GOK's May 25, 2011, 
QR at Exhibit A-9. Any company that meets the eligibility criteria may 
apply for a loan to MKE. Id. The loan evaluation committee evaluates 
the applications, selects the recipients and gets approval from the 
minister of MKE. Id. For projects related to the development of 
strategic mineral resources, the Korean Resources Corporation (KORES) 
lends the funds to the company for foreign resources development. Id.
    During the POR, HYSCO obtained loans from KORES for investment in a 
copper mine in Mexico. See HYSCO's December 22, 2009, QR at 11, Exhibit 
8 at 24, HYSCO's April 22, 2011 QR at Exhibit A-8 and HYSCO's May 25, 
2011, QR at Exhibit A-14. Based upon examination of the loan documents, 
we preliminarily determine that the KORES loans are tied to copper, 
which is non-subject merchandise. Further, we find that copper is not 
an input primarily dedicated to the production of subject merchandise. 
On this basis, we find the KORE loans are attributable to non-subject 
merchandise. See 19 CFR 351.525(b)(5). Therefore, we preliminarily 
determine that HYSCO did not receive a benefit from this program with 
respect to the subject merchandise during the POR.

F. Overseas Resource Development Program: Loan From Korea National Oil 
Corporation (KNOC)

    In Final Results of CORE from Korea 2007, the Department found that 
the GOK enacted the Overseas Resource Development (ORD) Business Act in 
order to establish the foundation for securing the long-term supply of 
essential energy and major material minerals, which are mostly imported 
because of scarce domestic resources. See Preliminary Results of CORE 
from Korea 2007, 74 FR 46100; 46107-46108 (September 8, 2010) unchanged 
in Final Results of CORE from Korea 2007) 74 FR 55192 (October 27, 
2008). Pursuant to Article 11 of this Act, the MKE annually announces 
its budget and the eligibility criteria to obtain a loan from MKE. See 
GOK's April 22, 2011, QR at Exhibit A-1. Any company that meets the 
eligibility criteria may apply for a loan to MKE. Id. For projects that 
are related to petroleum and natural gas, the Korea National Oil 
Corporation (KNOC) lends the funds to the company for foreign resources 
development. Id. An approved company enters into a borrowing agreement 
with KNOC for the development of the selected resource. Id. Two types 
of loans are provided under this program: ``General loans'' and 
``success-contingent loans.'' For a success-contingent loan, the 
repayment obligation is subject to the results of the development 
project. In the event that the project fails, the company will be 
exempted for all or a portion of the loan repayment obligation. 
However, if the project succeeds, a portion of the project income is 
payable to KNOC. Id.
    During the POR, HYSCO obtained loans from KNOC related to petroleum 
exploration projects. See HYSCO's December 22, 2009, questionnaire 
response (QR) at 11 and Exhibit 8 at 24, HYSCO's March 17, 2011, QR at 
11 and Exhibit A-2 and HYSCO's April 22, 2011, QR at Exhibits A-9 and 
A-12. Based upon examination of the loan documents, we preliminarily 
determine that the KNOC loans are tied to petroleum exploration, which 
does not involve subject merchandise. On this basis, we find the KNOC 
loans are attributable to non-subject merchandise. See 19 CFR 
351.525(b)(5). Therefore, we preliminarily determine that HYSCO did not 
receive a benefit from this program with respect to the subject 
merchandise during the POR. We will continue to examine this program in 
future reviews.

III. Programs for Which Additional Information Is Required

Restriction of Special Taxation Act (RSTA) Article 26

    HYSCO indicated that it used Article 26 under the Restriction of 
Special Taxation Act (RSTA Article 26) during the 2009 POR. The 
Department issued supplemental questionnaires to the GOK to gather 
additional information needed for our analysis of the specificity of 
this program. The GOK submitted its latest questionnaire response 
regarding the RSTA Article 26 program shortly before the due date of 
the preliminary results. See the GOK's August 17, 2011, questionnaire 
response. As a result, we were unable to incorporate the information in 
the GOK's response into our preliminary findings. Therefore, we will 
address this program in a post-preliminary decision memorandum.

IV. Programs Preliminarily Determined To Be Not Used

    We preliminarily determine that the following programs were not 
used by HYSCO during the POR:
     Reserve for Research and Manpower Development Fund Under 
RSTA Article 9 (TERCL Article 8).
     RSTA Article 11: Tax Credit for Investment in Equipment to 
Development Technology and Manpower (TERCL Article 10).
     Reserve for Export Loss Under TERCL Article 16.
     Reserve for Overseas Market Development Under TERCL 
Article 17.
     Reserve for Export Loss Under TERCL Article 22.
     Exemption of Corporation Tax on Dividend Income from 
Overseas Resources Development Investment Under TERCL Article 24.
     Reserve for Investment (Special Cases of Tax for Balanced 
Development Among Areas Under TERCL Articles 42-45).
     Tax Credits for Specific Investments Under TERCL Article 
71.
     Asset Revaluation Under Article 56(2) of the Tax Reduction 
and Exemption Control Act (TERCL).
     RSTA Article 94: Equipment Investment to Promote Workers 
Welfare (TERCL Article 88).
     Electricity Discounts Under the Requested Loan Adjustment 
Program.
     Electricity Discounts Under the Emergency Load Reductions 
Program.
     Export Industry Facility Loans and Specialty Facility 
Loans.
     Exemption of VAT on Imports of Anthracite Coal.
     Short-Term Trade Financing Under the Aggregate Credit 
Ceiling Loan Program Administered by the Bank of Korea.
     Industrial Base Fund.
     Excessive Duty Drawback.
     Private Capital Inducement Act.
     Scrap Reserve Fund.
     Short-Term Document Acceptance (D/A) Financing Provided 
Under KEXIM's Trade Rediscount Program.
     Special Depreciation of Assets on Foreign Exchange 
Earnings.
     Export Insurance Rates Provided by the Korean Export 
Insurance Corporation.
     Loans from the National Agricultural Cooperation 
Federation.
     Tax Incentives from Highly Advanced Technology Businesses 
Under the Foreign Investment and Foreign Capital Inducement Act.
     Other Subsidies Related to Operations at Asan Bay: 
Provision of Land and Exemption of Port Fees Under the Harbor Act.

[[Page 54216]]

     D/A Loans Issued by the Korean Development Bank and Other 
Government-Owned Banks.
     R&D Grants under the Promotion of Industrial Technology 
Innovation Act.
     Export Loans by Commercial Banks Under KEXIM's Trade Bill 
Rediscounting Program.

Preliminary Results of Review

    In accordance with 19 CFR 351.221(b)(4)(i), we calculated an 
individual subsidy rate for each producer/exporter subject to this 
administrative review. For the period January 1, 2009, through December 
31, 2009, we preliminarily determine the net subsidy rate for HYSCO to 
be 0.11 percent ad valorem, a de minimis rate. See 19 CFR 
351.106(c)(1).
    The Department intends to issue assessment instructions to U.S. 
Customs and Border Protection (CBP) 15 days after the date of 
publication of the final results of this review. If the final results 
remain the same as these preliminary results, the Department will 
instruct CBP to liquidate without regard to countervailing duties all 
shipments of subject merchandise produced by HYSCO, entered, or 
withdrawn from warehouse, for consumption from January 1, 2009, through 
December 31, 2009. The Department will also instruct CBP to collect 
cash deposits of zero percent on shipments of the subject merchandise 
produced by HYSCO, entered, or withdrawn from warehouse, for 
consumption on or after the date of publication of the final results of 
this review.
    We will instruct CBP 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 companies covered by this order, but not 
examined in this review, are those established in the most recently 
completed administrative proceeding for each company. These rates shall 
apply to all non-reviewed companies until a review of a company 
assigned these rates is requested.

Disclosure and 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 30 days after the publication of these preliminary 
results. See 19 CFR 351.309(c)(1)(ii). 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. See 19 CFR 351.309(d)(1). 
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(c), 
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.
    Pursuant to 19 CFR 351.305(b)(4), 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)(i), 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.
    These preliminary results of review are issued and published in 
accordance with sections 751(a)(1) and 777(i)(1) of the Act and 19 CFR 
351.221(b)(4).

    Dated: August 24, 2011.
Ronald K. Lorentzen,
Deputy Assistant Secretary for Import Administration.
[FR Doc. 2011-22325 Filed 8-30-11; 8:45 am]
BILLING CODE 3510-DS-P