[Federal Register Volume 76, Number 172 (Tuesday, September 6, 2011)]
[Notices]
[Pages 55044-55055]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-22716]


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DEPARTMENT OF COMMERCE

International Trade Administration

[C-580-866]


Bottom Mount Combination Refrigerator-Freezers From the Republic 
of Korea: Preliminary Negative Countervailing Duty Determination and 
Alignment of Final Determination With Final Antidumping 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 bottom mount combination refrigerator-
freezers (bottom mount refrigerators) from the Republic of Korea 
(Korea).

DATES: Effective Date: September 6, 2011.

FOR FURTHER INFORMATION CONTACT: Justin M. Neuman or Myrna L. Lobo, AD/
CVD Operations, Office 6, Import Administration, International Trade 
Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue, NW., Washington, DC 20230; telephone: (202) 482-
0486 and (202) 482-2371, respectively.

SUPPLEMENTARY INFORMATION:

Case History

    On April 19, 2011, the Department initiated a countervailing duty 
(CVD) investigation of bottom mount refrigerators from Korea.\1\ In the 
Initiation Notice, the Department set aside a period for all interested 
parties to raise issues regarding product coverage. The comments we 
received are discussed in the ``Scope Comments'' section below.
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    \1\ See Bottom Mount Combination Refrigerator-Freezers From the 
Republic of Korea: Initiation of Countervailing Duty Investigation, 
76 FR 23298 (April 26, 2011) (Initiation Notice). The petitioner in 
this investigation is Whirlpool Corporation.
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    In the Initiation Notice, the Department identified Samsung

[[Page 55045]]

Electronics Co., Ltd. (SEC) and LG Electronics, Inc. (LGE) as 
respondents in this investigation. As we noted in the Initiation 
Notice, it is the Department's usual practice to rely on import data 
from U.S. Customs and Border Protection (CBP) to select respondents in 
CVD investigations. However, because the Harmonized Tariff Schedule of 
the United States (HTSUS) categories under which bottom mount 
refrigerators may be entered are basket categories, which include many 
other types of refrigerators and freezers, we could not rely on CBP 
data. Because the petition identified SEC and LGE as the only producers 
in Korea that exported bottom mount refrigerators to the United States, 
and because we knew of no other producers that exported subject 
merchandise to the United States, we initially selected for examination 
the respondents that were identified in the petition. However, we 
invited interested parties to comment on our respondent selection 
within five days of the publication of the initiation notice (i.e., by 
May 2, 2011).
    We received no comments regarding our selection of SEC and LGE 
within the period designated in the Initiation Notice. However, on May 
9, 2011, subsequent to the comment period, the petitioner requested 
that Daewoo Electronics Corporation (DWE) be included as a respondent 
in the instant CVD investigation. The petitioner made this request 
because, separately, on the last day of the comment period, DWE made a 
submission in the parallel antidumping duty (AD) investigation 
identifying itself as an exporter and producer of the subject 
merchandise and requesting that it be designated as a mandatory 
respondent in the AD investigation, in addition to LGE and SEC. The 
petitioner stated that, if DWE's request to be included in the AD 
investigation was granted, the Department should also include DWE in 
the CVD investigation. The petitioner argued that a foreign producer 
should not be permitted to choose to participate in the AD 
investigation but not in the companion CVD investigation, which would 
allow DWE to take full advantage of the AD analysis of cost reductions 
associated with subsidies.\2\ On May 10, 2011, DWE submitted a letter 
stating that the Department should reject the petitioner's request. On 
May 13, 2011, the petitioner submitted a second letter emphasizing that 
the statute directs the Department to investigate all known producers 
and exporters and affords the Department no discretion to do otherwise. 
The petitioner argued that the Department, having concluded in the AD 
investigation that three known producers is not an impracticably large 
number, must reach the same conclusion in the CVD investigation.
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    \2\ The Department included DWE as a mandatory respondent in the 
AD investigation. See ``Memorandum to the File from David M. 
Goldberger, Inclusion of Daewoo as Mandatory Respondent,'' dated May 
9, 2011.
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    On May 18, 2011, the Department decided to include DWE in the CVD 
investigation, consistent with the statutory requirement under section 
777A(e)(1) of the Tariff Act of 1930, as amended (the Act), which 
directs the Department to determine an individual countervailable 
subsidy rate for each known exporter or producer of the subject 
merchandise.\3\
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    \3\ See ``Memorandum from Myrna L. Lobo to Barbara E. Tillman, 
Countervailing Duty Investigation of Bottom Mount Combination 
Refrigerator-Freezers from the Republic of Korea: Inclusion of 
Daewoo as a Mandatory Respondent,'' dated May 18, 2011.
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    On May 9, 2011, the Department issued the CVD questionnaire 
(including government and company sections) to the Government of Korea 
(GOK). On May 18, 2011, the Department provided a copy of the 
questionnaire to DWE. In the initial questionnaire, we requested that 
certain information from company respondents regarding affiliation and 
cross-ownership be submitted prior to the response to the remainder of 
the questionnaire. On May 23, 2011, SEC submitted the first part of its 
questionnaire response (SEC Initial Questionnaire Response Part 1). LGE 
submitted the first part of its questionnaire response on June 1, 2011 
(LGE Initial Questionnaire Response Part 1). DWE submitted the first 
part of its questionnaire response on June 1, 2011 (DWE Initial 
Questionnaire Response Part 1). On June 14, 21, and 23, 2011, the 
Department issued supplemental questionnaires to SEC, LGE, and DWE, 
respectively. On July 1, 5, and 7, 2011, responses to these 
questionnaires were submitted by DWE, SEC, and LGE, respectively.
    On June 29, 2011, SEC and LGE submitted the remainder of their 
questionnaire responses (SEC Initial Questionnaire Response Part 2 and 
LGE Initial Questionnaire Response Part 2, respectively); the GOK also 
submitted its questionnaire response on this day (GOK Initial 
Questionnaire Response). On July 7, 2011, DWE submitted the remainder 
of its questionnaire response (DWE Initial Questionnaire Response Part 
2).
    On June 2 and 9, and July 12 and 14, 2011, the Department received 
comments from the petitioner regarding these questionnaire responses. 
On July 26, 2011, the Department issued supplemental questionnaires to 
SEC, LGE, and DWE. Responses to these questionnaires were received on 
August 9, 2011 (SEC Supplemental Questionnaire Response Part 1; LGE 
Supplemental Questionnaire Response Part 1; and DWE Supplemental 
Questionnaire Response, respectively). On August 19 and 23, 2011, 
respectively, SEC and LGE submitted the second part of their responses. 
On August 1, 2011, the Department issued a supplemental questionnaire 
to the GOK (GOK Supplemental Questionnaire). A response to this 
questionnaire was received on August 15, 2011 (GOK Supplemental 
Questionnaire Response). On August 22, 2011, the petitioner submitted 
comments on the responses to these questionnaires for the Department's 
consideration. On August 23, SEC submitted comments related to the 
calculation of its ad valorem subsidy rate for the purposes of this 
preliminary determination. On August 29, 2011, LGE filed comments in 
response to the petitioner's August 23, 2011 submission.
    On July 15, 2011, the Department received new subsidy allegations 
from the petitioner. On August 16, 2011, we issued our decision to 
initiate on eight of these newly alleged subsidy programs, to defer 
initiation on two programs, and not to initiate on one program.\4\ On 
August 29, 2011, we issued questionnaires related to the new subsidy 
allegations to the respondents and to the GOK. The programs on which we 
initiated include equity infusions through debt-to-equity conversions 
and preferential lending provided by the GOK to DWE, as well as 
additional tax deductions, loans, and grant programs available to 
companies in specific sectors or industries. Because we will not 
receive responses to these questionnaires until after the preliminary 
determination, an analysis of whether these programs are 
countervailable will be provided in a post-preliminary analysis, and 
the parties will have an opportunity to comment on our analysis.
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    \4\ See ``Memorandum from Dana S. Mermelstein to Barbara E. 
Tillman, Countervailing Duty Investigation of Bottom Mount 
Combination Refrigerator-Freezers from the Republic of Korea: July 
15, 2011 New Subsidy Allegations,'' dated August 16, 2011 (``NSA 
Initiation Memorandum'').
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    On June 3, 2011, the Department postponed the preliminary 
determination until August 27, 2011. However, since that date is a 
Saturday, the Department stated that its

[[Page 55046]]

determination would be issued on the next business day, August 29, 
2011.\5\
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    \5\ See Bottom Mount Combination Refrigerator-Freezers From the 
Republic of Korea: Postponement of Preliminary Determination in the 
Countervailing Duty Investigation, 76 FR 32142 (June 3, 2011).
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Alignment of Final CVD Determination With Final AD Determination

    On the same day the Department initiated this CVD investigation, 
the Department also initiated AD investigations of bottom mount 
refrigerators from Korea and Mexico.\6\ The CVD investigation and the 
AD investigations have the same scope with regard to the merchandise 
covered. On August 22, 2011, in accordance with section 705(a)(1) of 
the Act, the petitioner requested alignment of the final CVD 
determination with the final AD determination of bottom mount 
combination refrigerators from Korea. Therefore, in accordance with 
section 705(a)(1) of the Act and 19 CFR 351.210(b)(4), we are aligning 
the final CVD determination with the final AD determination. 
Consequently, the final CVD determination will be issued on the same 
date as the final AD determination, which is currently scheduled to be 
issued no later than January 9, 2012, unless postponed.
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    \6\ See Bottom Mount Combination Refrigerator-Freezers From the 
Republic of Korea and Mexico: Initiation of Antidumping Duty 
Investigations, 76 FR 23281 (April 26, 2011).
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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 May 23, 2011, the ITC published its 
affirmative 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.\7\
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    \7\ See Bottom Mount Combination Refrigerator-Freezers From 
Korea and Mexico, 76 FR 29791 (May 23, 2011); and USITC Publication 
4232 entitled Bottom Mount Combination Refrigerator-Freezers From 
Korea and Mexico: Investigation Nos. 701-TA-477 and 731-TA-1180-1181 
(Preliminary) (May 2011).
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Scope of the Investigation

    The products covered by the investigation are all bottom mount 
combination refrigerator-freezers and certain assemblies thereof from 
Korea.
    For purposes of the investigation, the term ``bottom mount 
combination refrigerator-freezers'' denotes freestanding or built-in 
cabinets that have an integral source of refrigeration using 
compression technology, with all of the following characteristics:
     The cabinet contains at least two interior storage 
compartments accessible through one or more separate external doors or 
drawers or a combination thereof;
     The upper-most interior storage compartment(s) that is 
accessible through an external door or drawer is either a refrigerator 
compartment or convertible compartment, but is not a freezer 
compartment; \8\ and
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    \8\ The existence of an interior sub-compartment for ice-making 
in the upper-most storage compartment does not render the upper-most 
storage compartment a freezer compartment.
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     There is at least one freezer or convertible compartment 
that is mounted below the upper-most interior storage compartment(s).
    For purposes of the investigation, a refrigerator compartment is 
capable of storing food at temperatures above 32 degrees F (0 degrees 
C), a freezer compartment is capable of storing food at temperatures at 
or below 32 degrees F (0 degrees C), and a convertible compartment is 
capable of operating as either a refrigerator compartment or a freezer 
compartment, as defined above.
    Also covered are certain assemblies used in bottom mount 
combination refrigerator-freezers, namely: (1) Any assembled cabinets 
designed for use in bottom mount combination refrigerator-freezers that 
incorporate, at a minimum: (a) an external metal shell, (b) a back 
panel, (c) a deck, (d) an interior plastic liner, (e) wiring, and (f) 
insulation; (2) any assembled external doors designed for use in bottom 
mount combination refrigerator-freezers that incorporate, at a minimum: 
(a) an external metal shell, (b) an interior plastic liner, and (c) 
insulation; and (3) any assembled external drawers designed for use in 
bottom mount combination refrigerator-freezers that incorporate, at a 
minimum: (a) an external metal shell, (b) an interior plastic liner, 
and (c) insulation.
    The products subject to the investigation are currently 
classifiable under subheadings 8418.10.0010, 8418.10.0020, 
8418.10.0030, and 8418.10.0040 of the Harmonized Tariff System of the 
United States (HTSUS). Products subject to the investigation may also 
enter under HTSUS subheadings 8418.21.0010, 8418.21.0020, 8418.21.0030, 
8418.21.0090, and 8418.99.4000, 8418.99.8050, and 8418.99.8060. 
Although the HTSUS subheadings are provided for convenience and customs 
purposes, the written description of the merchandise subject to this 
scope is dispositive.

Scope Comments

    In accordance with the preamble to the Department's regulations, in 
our Initiation Notice, we set aside a period of time for parties to 
raise issues regarding product coverage, and encouraged all parties to 
submit comments within 20 calendar days of publication of that 
notice.\9\ We received a number of comments concerning the scope of the 
AD and CVD investigations of bottom mount refrigerators from Korea.
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    \9\ See Antidumping Duties; Countervailing Duties, 62 FR 27296, 
27323 (May 19, 1997), and Initiation Notice, 76 FR at 23299.
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    Timely comments were filed by SEC on May 9, 2011, requesting that 
the Department alter the scope language by adopting the Association of 
Home Appliance Manufacturers (AHAM) definition of combination 
refrigerator-freezer. Specifically, according to SEC, the AHAM 
definition would more accurately define a ``freezer'' in accordance 
with industry standards as a compartment which is ``designed for the 
freezing and storage of frozen foods at temperatures of 8 degrees F (-
13.3 degrees C) average or below, and typically capable being adjusted 
by the user to a temperature of 0 degrees F (-17.8 degrees C) or 
below.'' \10\ SEC also requested that the Department determine that a 
certain type of refrigerator with four compartments known as ``Quatro 
Cooling Refrigerators'' be excluded from the scope of the 
investigations due to its upper left non-convertible freezer 
compartment.\11\ On May 18 and 19, 2011, respectively, LGE and DWE 
indicated their support for SEC's preference for using the industry 
definition of ``freezer.'' \12\ LGE also requested that the Department 
amend the scope language by using the AHAM definition to exclude 
refrigerators referred to as ``kimchi refrigerators'' that are 
incapable of hard-freezing foods (i.e., storing foods at a temperature 
of 8 degrees F (-13.3 degrees Celsius)).\13\ On May 18, 2011, the 
petitioner filed comments objecting to SEC's request to

[[Page 55047]]

narrow the scope language by using the AHAM definition and also 
opposing SEC's request to exclude Quatro Cooling Refrigerators.\14\ On 
June 30, 2011, the petitioner also filed comments opposing LGE's 
request to exclude kimchi refrigerators.\15\ On June 30, officials from 
Whirlpool Corporation, along with counsel, met with Department 
officials to explain why kimchi refrigerators are covered under the 
scope of the investigations and why there should be no scope exclusion 
for this type of merchandise.\16\ On July 25, 2011, SEC submitted 
further comments explaining why it believes SEC's Quatro models are 
outside the scope of the investigations.
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    \10\ See ``Letter to Secretary Locke from Samsung Electronics 
Co., Ltd., Re: Bottom Mount Combination Refrigerator-Freezers from 
Korea and Mexico: Scope Exclusion Request and Scope Comments,'' 
dated May 9, 2011, at Attachment 2.
    \11\ See id.
    \12\ See ``Letter to Secretary Locke from LG Electronics Inc., 
Re: Bottom Mount Combination Refrigerator-Freezers from the Republic 
of Korea and Mexico: Rebuttal Comments on Product Characteristics 
and Scope of the Investigation,'' dated May 18, 2011 at 2-3, and 
``Letter to Secretary Locke from Daewoo Electronics Corporation, Re: 
Countervailing Duty Investigation of Bottom Mount Combination 
Refrigerator-Freezers from Korea; Rebuttal Comments on Scope,'' 
dated May 19, 2011.
    \13\ See id.
    \14\ See ``Letter to Secretary Locke from Whirlpool Corporation, 
Re: Bottom Mount Combination Refrigerator-Freezers from the Republic 
of South Korea and Mexico; Petitioner's Rebuttal Comments on Product 
Scope and Product Characteristics,'' dated May 18, 2011.
    \15\ See ``Letter to Secretary Locke from Whirlpool Corporation, 
Re: Bottom Mount Combination Refrigerator-Freezers from Mexico and 
the Republic of Korea,'' dated June 30, 2011.
    \16\ See ``Memorandum to the File from Brandon Custard, Re: 
Meeting with Petitioner on Scope and Kimchi Refrigerators,'' dated 
July 6, 2011; see also ``Memorandum to the File from David 
Goldberger, Re: Addendum to July 6 Memo on Scope Issues Meeting with 
Petitioner,'' dated July 19, 2011.
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    The Department is currently evaluating these scope comments, and 
will issue its decision regarding the scope of the investigations no 
later than the date of the preliminary determination in the companion 
AD investigation. That decision will be placed on the record of this 
CVD investigation, and all parties will have the opportunity to 
comment.

Period of Investigation

    The period for which we are measuring subsidies, i.e., the period 
of investigation (POI), is January 1, 2010, through December 31, 2010.

Subsidies Valuation Information

Cross-Ownership and Attribution of Subsidies

    The Department's regulations state that cross-ownership exists 
between two or more corporations where one corporation can use or 
direct the individual assets of other corporation(s) in essentially the 
same ways it can use its own assets.\17\ This section of the 
Department's regulations states that this standard will normally be met 
where there is a majority voting ownership interest between two 
corporations or through common ownership of two (or more) corporations.
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    \17\ See 19 CFR 351.525(b)(6)(vi).
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    The preamble to the Department's regulations further clarifies the 
Department's cross-ownership standard.\18\ According to the preamble, 
relationships captured by the cross-ownership definition include those 
where the interests of two corporations have merged to such a degree 
that one corporation can use or direct the individual assets (including 
subsidy benefits) of the other corporation in essentially the same way 
it can use its own assets (including subsidy benefits). The cross-
ownership standard does not require one corporation to own 100 percent 
of the other corporation. Normally, cross-ownership will exist where 
there is a majority voting ownership interest between two corporations 
or through common ownership of two (or more) corporations. In certain 
circumstances, a large minority voting interest (for example, 40 
percent) or a ``golden share'' may also result in cross-ownership.\19\
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    \18\ See Countervailing Duties, 63 FR 65347, 65401 (November 25, 
1998) (preamble).
    \19\ See id.
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    As such, the Department's regulations make it clear that we must 
examine the facts presented in each case in order to determine whether 
cross-ownership exists. In accordance with 19 CFR 351.525(b)(6)(iv), if 
the Department determines that the suppliers of inputs primarily 
dedicated to the production of the downstream product are cross-owned 
with the producers/exporters under investigation, the Department will 
attribute the subsidies received by the input producer to the combined 
sales of the input and downstream products produced by both 
corporations (excluding the sales between the two corporations).
    SEC has reported a cross-ownership relationship with its subsidiary 
Samsung Gwangju Electronics Co., Ltd. (SGEC), the producer of bottom 
mount refrigerators subject to this investigation. We have examined the 
relationship to determine whether it meets the definition of cross-
ownership such that we will identify, measure, and attribute subsidies 
granted to the cross-owned companies to the entity exporting subject 
merchandise.
    As reported by SEC,\20\ during the POI, SGEC produced various home 
appliances including bottom mount refrigerators. At that time, SGEC was 
94.25 percent owned by its parent company, SEC. The physical assembly 
of the refrigerators was performed by SGEC, which also executed 
production plans in accordance with the sales plans provided by SEC, in 
addition to establishing input supply arrangements, and paying input 
suppliers. SGEC sold the vast majority of bottom mount refrigerators to 
SEC, which was responsible for sales in the domestic and export 
markets; SGEC did not retain any inventory. SEC performed all other 
refrigerator-related functions, including sales planning for the 
domestic and export markets; marketing, research and development; 
engineering and design; and finalization of specifications of raw 
material inputs. SEC also reported that effective January 1, 2011, 
after the POI, SGEC was merged into SEC.
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    \20\ See SEC Initial Questionnaire Response Part 1 at 1-2.
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    Based on the information provided by SEC, we conclude that SGEC and 
SEC are cross-owned within the definition provided in 19 CFR 
351.525(b)(6)(vi). SGEC was virtually wholly-owned by SEC during the 
POI, and therefore SEC was able to ``use and direct the individual 
assets of'' SGEC in ``essentially the same ways it can use its own 
assets.'' \21\ Furthermore, SEC was intrinsically involved with the 
production, sales, and marketing of the subject merchandise. As such, 
for purposes of this preliminary determination, we are examining 
subsidies to both SGEC, the producer of subject merchandise, and to 
SEC, its parent company. Consistent with 19 CFR 351.525(b)(6)(i), we 
are attributing the subsidies to the products produced by the 
corporation that received the subsidy. Therefore subsidies provided 
directly to SGEC are attributable to SGEC's total sales. In addition, 
consistent with 19 CFR 351.525(b)(6)(iii) we are attributing the 
subsidies conferred on SEC to SEC's consolidated sales, which include 
all of SGEC's sales.\22\
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    \21\ See 19 CFR 351.525(b)(6)(vi).
    \22\ See preamble at 65402.
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Cross-Ownership With Input Suppliers

    The petitioner has alleged that SEC, LGE, and DWE have 
relationships with their input suppliers that meet the definition of 
cross-ownership provided in 19 CFR 351.525(b)(6)(vi). Specifically, 
large companies exercise control over the actions of small and medium-
sized enterprises (SMEs) that provide inputs to the large companies, an 
important feature of what is known as the chaebol system in Korea.\23\ 
As a result of the petitioner's contention that SEC, LGE, and DWE are 
in a position to exercise effective control over their input suppliers, 
``to use the suppliers' assets as though they were its own, and have 
the ability to effectively dictate the

[[Page 55048]]

essential terms of trade,'' \24\ the petitioner has urged the 
Department to investigate subsidies provided to the input suppliers and 
to attribute those subsidies to respondents.
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    \23\ See the petition, dated March 30, 2011 at 33-35.
    \24\ See the petitioner's June 2, 2011 submission, ``Bottom 
Mount Combination Refrigerator-Freezers from the Republic of Korea: 
Submission of Further Evidence in Reply to Response of Samsung 
Electronics Co., Ltd.,'' at 5.
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    We are examining whether the respondent companies are cross-owned 
with their suppliers, and whether the inputs supplied are primarily 
dedicated to the production of the downstream product. In our initial 
questionnaire, we requested that the respondents identify all of their 
input suppliers, any suppliers that are affiliated in accordance with 
section 771(3) of the Act, and any suppliers that are cross-owned in 
accordance with 19 CFR 351.525(b)(6)(vi).\25\ Further, we asked them to 
describe in detail the nature of the relationships with their 
suppliers, including whether they are sole suppliers, whether there is 
a supply or purchase agreement, and whether there are financial 
relationships beyond the purchase or sale of goods.
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    \25\ See Initial Questionnaire at Section III. Question I.A.
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    In response, the respondents identified hundreds of input 
suppliers.\26\ SEC and DWE reported that none of those suppliers were 
cross-owned in accordance with 19 CFR 351.525(b)(6)(vi). LGE, however, 
reported several input suppliers as being cross-owned, but stated that 
the inputs provided by these suppliers were not primarily dedicated to 
the production of bottom mount refrigerators. In supplemental 
questionnaires, we asked additional questions about the companies' 
relationships with their suppliers, their supply agreements, and 
whether the inputs supplied account for a majority of the suppliers' 
business. We also requested additional information to assess whether 
the inputs were primarily dedicated to the production of the downstream 
product. The responses to these questionnaires provided additional 
information about the relationships with suppliers and the supply 
agreements.
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    \26\ See Samsung Initial Questionnaire Response Part 1 at 
Exhibit 2; LGE Initial Questionnaire Response Part 1 at Exhibit 2; 
DWE Initial Questionnaire Response Part 1 at Exhibit 2.
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    We issued additional supplemental questionnaires on July 26, 2011, 
to SEC, LGE, and DWE asking more detailed questions regarding family 
relationships, and common board members and managers between the 
respondents and their suppliers. DWE provided its response on August 9, 
2011; SEC and LGE provided the responses to these questions on August 
18 and August 23, 2011, respectively. We have not had sufficient 
opportunity to evaluate these questionnaire responses prior to this 
preliminary determination, and we have not requested questionnaire 
responses from the suppliers at this time. We will continue to examine 
the information submitted regarding the relationships between the 
respondent companies and their suppliers. If we conclude that there is 
sufficient information that the respondents may be in a position to use 
and control the assets of their input suppliers as though they were 
their own, as provided in 19 CFR 351.525(b)(6)(vi), and that the inputs 
they supply may be primarily dedicated to the production of the 
downstream product, then we will request the information we deem 
necessary to determine whether input suppliers received countervailable 
subsidies that are attributable to the production of subject 
merchandise in accordance with 19 CFR 351.525(b)(6)(iv). The Department 
will issue a post-preliminary analysis on this issue in sufficient time 
for the parties to submit comments for the final determination.

Benchmark Interest Rate for Short-Term Loans

    Section 771(5)(E)(ii) of the Act states that the benefit for loans 
is the ``difference between the amount the recipient of the loan pays 
on the loan and the amount the recipient would pay on a comparable 
commercial loan that the recipient could actually obtain on the 
market,'' indicating that a benchmark must be a market-based rate. In 
addition, 19 CFR 351.505(a)(3)(i) stipulates that when selecting a 
comparable commercial loan that the recipient ``could actually obtain 
on the market'' the Department will normally rely on actual loans 
obtained by the firm. However, when there are no comparable commercial 
loans, the Department ``may use a national average interest rate for 
comparable commercial loans,'' pursuant to 19 CFR 351.505(a)(3)(ii). 
For the ``Korea Development Bank (KDB) and Industrial Bank of Korea 
(IBK) Short-Term Discounted Loans for Export Receivables'' program, an 
analysis of any benefit conferred by loans from KDB or IBK to the 
respondents requires a comparison of interest actually paid to interest 
that would have been paid using a benchmark interest rate.\27\
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    \27\ See 19 CFR 351.505(a)(1).
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    Pursuant to 19 CFR 351.505(a)(2)(iv), if a program under review is 
a government-provided short-term loan program, the preference would be 
to use a company-specific annual average of interest rates of 
comparable commercial loans during the year in which the government-
provided loan was taken out, weighted by the principal amount of each 
loan. LGE has reported receiving KDB and IBK short-term loans. LGE also 
reported receiving loans from commercial banks that are comparable 
commercial loans within the meaning of 19 CFR 351.505(a)(2)(i). We 
preliminarily determine that the information provided by LGE about its 
commercial loans satisfies the preference expressed in 19 CFR 
351.505(a)(2)(iv). As such, we have used LGE's commercial loans to 
calculate a benchmark interest rate that represents a company-specific 
annual average interest rate.\28\
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    \28\ See ``Memorandum to the File from Justin M. Neuman, Re: 
Calculations for LG Electronics Inc.,'' dated August 29, 2011.
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    SEC also received loans under the KDB and IBK short-term loan 
program. However, SEC/SGEC has not provided information about 
comparable commercial loans that would provide an appropriate basis for 
an interest rate benchmark. Pursuant to 19 CFR 351.505(a)(3)(ii), where 
a firm has not reported comparable commercial loans during the POI, the 
Department may use a national average interest rate for comparable 
commercial loans. In this instance, the GOK also did not provide usable 
information regarding national average interest rates. Because no such 
data were available, we relied on appropriate published sources for 
information regarding average commercial short-term interest rates to 
select benchmark interest rates to measure the benefit to SEC/SGEC from 
the KDB and IBK loans.\29\
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    \29\ See ``Memorandum to the File from Myrna Lobo, Re: 
Calculations for Samsung Electronics Co., Ltd./Samsung Gwangju 
Electronics Co., Ltd.,'' dated August 29, 2011 (SEC/SGEC Calculation 
Memorandum).
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Allocation Period

    Under 19 CFR 351.524(d)(2)(i), we presume the allocation period for 
non-recurring subsidies to be the average useful life (AUL) prescribed 
by the Internal Revenue Service (IRS) for renewable physical assets of 
the industry under consideration (as listed in the IRS's 1977 Class 
Life Asset Depreciation Range System, and as updated by the Department 
of the Treasury). This presumption will apply unless a party claims and 
establishes that these tables do not reasonably reflect the AUL of the 
renewable physical assets of the company or

[[Page 55049]]

industry under investigation. Specifically, the party must establish 
that the difference between the AUL shown in the tables and the 
company-specific AUL, or the country-wide AUL for the industry under 
investigation, is significant, pursuant to 19 CFR 351.524(d)(2)(i) and 
(ii). For assets used to manufacture bottom mount refrigerators, the 
IRS tables prescribe an AUL of 10 years. Neither the respondents nor 
the GOK has disputed the AUL of 10 years in this investigation. 
Therefore, the Department is using an AUL of 10 years in this 
investigation.

Analysis of Programs

I. Programs Preliminarily Determined To Be Countervailable

A. Korea Development Bank (KDB) and Industrial Bank of Korea (IBK) 
Short-Term Discounted Loans for Export Receivables
    The petitioner alleges that the GOK, through two government-owned 
policy banks, KDB and IBK, provided support to producers of bottom 
mount refrigerators by offering short-term export financing in the form 
of discounted Documents against Acceptance (D/A).
    According to the GOK, KDB and IBK operate both D/A and ``open 
account export transaction'' (O/A) financing. These types of financing 
are designed to meet the needs of KDB and IBK clients for early receipt 
of discounted receivables prior to their maturity. In a D/A 
transaction, the exporter first loads contracted goods for shipment as 
per the contract between the exporter and the importer, and then 
presents the bank with the bill of exchange and the relevant shipping 
documents specified in the draft to receive a loan from the bank in the 
amount of the discounted value of the invoice, repayable when the 
borrower receives payment from its customer. In an O/A transaction, the 
exporter effectively receives advance payment on its export receivables 
by selling them to the bank at a discount prior to receiving payment by 
the importer. The exporter pays the bank a ``fee'' that is effectively 
a discount rate of interest for the advance payment. In this 
arrangement, the bank is repaid when the importer pays the bank 
directly the full value of the invoice; the exporter no longer bears 
the liability of non-payment from the importer.
    Only LGE and SEC reported using this program during the POI. 
Because receipt of D/A and O/A loans is contingent upon export 
performance, we determine that D/A and O/A loans from KDB and IBK are 
specific within the meaning of sections 771(5A)(A) and (B) of the Act. 
The Department finds that D/A and O/A loans from KDB and IBK constitute 
a financial contribution in the form of a direct transfer of funds 
within the meaning of section 771(5)(D)(i) of the Act. In addition, we 
determine that such loans confer a benefit, in accordance with section 
771(5)(E)(ii) of the Act, to the extent of the difference between the 
amount of interest the recipient of the loan pays on the loan and the 
amount the recipient would pay on a comparable commercial loan that the 
recipient could actually obtain on the market.
    LGE reported having D/A loans outstanding during the POI on exports 
of subject merchandise to the United States. To calculate the benefit 
for LGE, for each KDB and IBK loan, we compared the amount of interest 
paid on the KDB and IBK loans to the amount of interest that would be 
paid on a comparable commercial loan in accordance with 19 CFR 
351.505(a).\30\ Where the interest actually paid on the KDB and IBK 
loans was less than the interest that would have been payable at the 
benchmark rate, the difference is the benefit. We summed all of the 
individual loan benefits and divided the difference by the company's 
exports of subject merchandise to the United States during the POI. On 
this basis, we preliminarily determine the countervailable subsidy to 
LGE under this program to be less than 0.005 percent ad valorem. 
Therefore, in accordance with the Department's practice, we find that 
the countervailable benefit to LGE is not measurable.\31\
---------------------------------------------------------------------------

    \30\ See ``Subsidies Valuation Information'' section, above.
    \31\ 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) (HRS from 
India), and the accompanying Issues and Decision Memorandum at 
``Exemption from the CST.''
---------------------------------------------------------------------------

    Although SEC reported using the program, it stated that these were 
not loans and that it did not pay interest. Rather SEC stated that it 
paid ``negotiation fees'' and it reported the fees it paid during the 
POI on a monthly basis. SEC did not provide information about 
individual loans. However, the GOK did provide information about all 
the loans KDB and IBK had provided to SEC that were outstanding during 
the POI.
    Because SEC did not provide information on its comparable 
commercial short-term loans, we calculated the benefit for SEC from the 
loans it received on an O/A basis during the POI by comparing the 
amount of interest paid on the KDB and IBK loans, as reported by the 
GOK, to the amount of interest that would have been paid using a 
benchmark selected according to the hierarchy discussed in the 
``Benchmark Interest Rate for Short-Term Loans'' section, above.\32\ 
Because these loans are made on a discounted basis (i.e., interest is 
paid up-front at the time the loans are received), where necessary, we 
converted the nominal short-term interest rate benchmark to an 
effective discount rate. We compared the interest paid by SEC, as 
reported by the GOK, to the interest payments, on a loan-by-loan basis, 
that SEC would have paid at the benchmark interest rate. Where the 
actual interest paid was less than the interest that would have been 
payable at the benchmark rate, the benefit is the difference. We then 
summed the differences for each loan and divided this aggregate benefit 
by the company's total export sales during the POI. On this basis, we 
preliminarily determine the countervailable subsidy to SEC/SGEC under 
this program to be 0.01 percent ad valorem.
---------------------------------------------------------------------------

    \32\ See the SEC/SGEC Calculation Memorandum.
---------------------------------------------------------------------------

B. Restriction of Special Taxation Act (RSTA) Article 25(2) Tax 
Deductions for Investments in Energy Economizing Facilities
    According to the petitioner, corporations making investments in one 
of four ``energy economizing facilities,'' are eligible for a tax 
deduction of 20 percent of such expenses in a taxation year; SMEs 
qualify for a tax deduction of 30 percent.
    According to the GOK, this program was introduced in the Korean tax 
code in the predecessor of the RSTA to facilitate Korean corporations' 
investments in the energy utilization facilities.\33\ The underlying 
rationale for the introduction and maintenance of the program is that 
the enhancement of energy efficiency in the business sectors may help 
enhance the efficiency in the general national economy. The eligible 
types of facilities are identified in Article 22(2) of the RSTA. The 
statutory basis for this program is Article 25(2) of the RSTA, Article 
22(2) of the Enforcement Decree of the RSTA, and Article 13(2) of the 
Enforcement Regulation of RSTA.
---------------------------------------------------------------------------

    \33\ See GOK Initial Questionnaire Response at 246 of the 
Appendices Volume.
---------------------------------------------------------------------------

    Under the program, the GOK explained that corporations that have 
made investments in facilities to enhance energy utilization efficiency 
or produce renewable energy resources, in accordance with the RSTA 
decree and regulation, are entitled to a credit

[[Page 55050]]

toward taxes payable in the amount of 10 percent of the eligible 
investment. Once it is established that the requirements under the laws 
and regulations are satisfied, the provision of support under this 
program is automatic. If a company is in a tax loss situation in a 
particular tax year, the company is permitted to carry forward the 
applicable credit under this program for five years. The relevant tax 
law pertaining to loss carry-forward is Article 144(1) of the RSTA. The 
GOK agency that administers this program is the Ministry of Strategy 
and Finance. SEC and SGEC both claimed credits under this program on 
their tax returns filed during the POI. LGE and DWE did not claim the 
tax credits available under this program on their tax returns filed 
during the POI.
    In its response, the GOK provided the 2010 Statistical Yearbook of 
National Tax which provides the number of corporate taxpayers that 
claimed tax credits under Article 25(2). This information demonstrates 
that the actual recipients of tax credits under this program are 
limited in number. Therefore, this program is de facto specific within 
the meaning of section 771(5A)(D)(iii)(I) of the Act. This program 
results in a financial contribution from the GOK to recipients in the 
form of revenue foregone, as described in section 771(5)(D)(ii) of the 
Act. The benefit conferred on the recipient is the difference between 
the amount of taxes it paid and the amount of taxes that it would have 
paid in the absence of this program, as described in 19 CFR 351.509(a), 
effectively, the amount of the tax credit claimed. Consistent with 19 
CFR 351.525(b)(6)(i) and 19 CFR 351.525(b)(6)(iii), to calculate the 
benefit to SEC from the tax credits used by SEC and SGEC, for each 
corporate entity, we divided the tax credit claimed under this program 
during the POI by each company's total sales during the POI. We added 
together the two resulting rates to preliminarily determine a 
countervailable subsidy that is less than 0.005 percent ad valorem. 
Therefore, in accordance with the Department's practice, we find that 
the countervailable benefit is not measurable.\34\
---------------------------------------------------------------------------

    \34\ See, e.g., HRS from India and the accompanying Issues and 
Decision Memorandum at ``Exemption from the CST.''
---------------------------------------------------------------------------

C. RSTA Article 26 Tax Deduction for Facilities Investment
    The petitioner alleges that the GOK provides direct support to 
producers of bottom mount refrigerators investing in facilities by 
allowing a tax deduction of 10 percent of the total investment amount. 
Although the Department had found this program not countervailable in a 
past case,\35\ the petitioner provided new information in the petition 
\36\ to indicate that benefits under this tax deduction program are de 
facto specific because recipients of the tax deduction are limited in 
number on an enterprise or industry basis, or because an enterprise or 
industry is a predominant user of the program or receives a 
disproportionately large amount of the benefit.\37\ Therefore, in the 
Initiation Notice and the accompanying CVD Investigation Initiation 
Checklist, we determined that it was appropriate to investigate this 
program because evidence in the petition indicated de facto specificity 
may exist.
---------------------------------------------------------------------------

    \35\ See Final Affirmative Countervailing Duty Determination: 
Dynamic Random Access Memory Semiconductors from the Republic of 
Korea, 68 FR 37122 (June 23, 2003), and the accompanying Issues and 
Decision Memorandum (DRAMS Final Determination).
    \36\ See Exhibits C-8-FF and C-8-GG in the March 30, 2011 
petition.
    \37\ See section 771(5A)(D)(iii)(I)-(III) of the Act.
---------------------------------------------------------------------------

    In the initial questionnaire, we asked the GOK to describe the 
program, and to provide the relevant laws authorizing the program. In 
addition, we asked for information relating to the number of recipient 
companies and industries that used the tax program, as well as the 
amount of assistance provided. The GOK reported that the program does 
not provide a deduction from taxable income, but allows companies to 
take a credit toward taxes payable of seven percent of eligible 
investments in facilities. The GOK provided the relevant law 
authorizing the credit, Article 26 of the RSTA, as well as the 
implementing law, Article 23 of the Enforcement Decree of the RSTA. 
According to the GOK, eligible investments are determined by 
presidential decree.\38\ The GOK response indicated that although 
Article 26 of the RSTA specifies a 10 percent credit toward taxes 
payable, the 10 percent is a cap on the total amount of the credit; the 
actual tax credit is prescribed in Article 23(4) of the Enforcement 
Decree of the RSTA as seven percent.\39\ In addition, the GOK provided 
data showing the total number of corporations that received the tax 
credit during the POI, as well as the total value of the credits taken. 
The GOK also reported that it ``does not compile the data of recipients 
in terms of sectors or industries.'' However, SEC reported that only 
``{c{time} ompanies which are located outside the Seoul Metropolitan 
Area (SMA) are eligible'' for the tax credit provided by this 
program.\40\
---------------------------------------------------------------------------

    \38\ See GOK Initial Questionnaire Response at 203-4 of the 
Appendices Volume. In addition, the GOK explained that the term 
``presidential decree'' refers to the Enforcement Decree of the 
RSTA. See GOK Supplemental Questionnaire Response.
    \39\ See GOK Initial Questionnaire Response at 204-5 of the 
Appendices Volume.
    \40\ See SEC Initial Questionnaire Response Part 2 at Exhibit 
13.
---------------------------------------------------------------------------

    Therefore, in the GOK Supplemental Questionnaire, we asked the GOK 
to confirm whether this tax credit is limited to companies outside the 
SMA, and that investments made within the SMA are not eligible for this 
program. In its response, the GOK confirmed that tax credits under 
Article 26 of the RSTA are, in fact, limited to the investment of a 
corporation in facilities located outside the ``Overcrowding Control 
Region'' of the SMA. The GOK further confirmed that corporate 
investments in facilities located within the Overcrowding Control 
Region of the SMA are not eligible for credits under this tax 
program.\41\ The GOK explained that the copy of the text of Article 
23(1) of the Enforcement Decree of the RSTA that it submitted as part 
of the GOK Initial Questionnaire Response inadvertently omitted the 
lines referring to the regional limitation on eligibility. The GOK 
submitted a complete translation of Article 23(1) of the Enforcement 
Decree of the RSTA, which confirmed that eligibility for the tax credit 
under Article 26 is limited to investments made outside the 
Overcrowding Control Region of the SMA.
---------------------------------------------------------------------------

    \41\ See GOK Supplemental Questionnaire Response at 29.
---------------------------------------------------------------------------

    Because information provided by the GOK indicates that the tax 
credits under this program are limited by law to enterprises or 
industries within a designated geographical region within the 
jurisdiction of the authority providing the subsidy, we preliminarily 
find that this program is regionally specific in accordance with 
section 771(5A)(D)(iv) of the Act.\42\ The tax credits are financial 
contributions in the form of revenue foregone by the government under 
section 771(5)(D)(ii) of the Act, and provide a benefit to the 
recipient in the amount of the difference between the taxes it paid and 
the amount of taxes that it would have paid in the absence of this 
program,

[[Page 55051]]

effectively, the amount of the tax credit, pursuant to 19 CFR 
351.509(a)(1).
---------------------------------------------------------------------------

    \42\ See, e.g., Final Affirmative Countervailing Duty 
Determination: Certain Hot-Rolled Carbon Steel Flat Products From 
Thailand, 66 FR 50410 (October 3, 2001) and the accompanying Issues 
and Decision Memorandum at the ``Provision of Electricity for Less 
than Adequate Remuneration'' section (where eligibility for a 
program was limited to users outside the Bangkok metropolitan area, 
we found the subsidy to be regionally specific under section 
771(5A)(D)(iv) of the Act).
---------------------------------------------------------------------------

    LGE, SEC, and SGEC reported receiving tax credits under Article 26 
of the RSTA during the POI. DWE did not receive tax credits under the 
program. For LGE, we divided the benefit, the tax credit claimed by LGE 
under this program during the POI, by the company's total sales during 
the POI. On this basis, we preliminarily determine the countervailable 
subsidy provided to LGE under this program to be 0.05 percent ad 
valorem. Consistent with 19 CFR 351.525(b)(6)(i) and 19 CFR 
351.525(b)(6)(iii), to calculate the countervailable subsidy from the 
tax credits used by SEC and SGEC, for each corporate entity, we divided 
the benefit, the tax credit claimed under this program during the POI, 
by each company's total sales during the POI. We added together the two 
resulting rates to preliminarily determine a countervailable subsidy of 
0.32 percent ad valorem for SEC/SGEC.
D. Gwangju Metropolitan City Production Facilities Subsidies: Tax 
Reductions/Tax Exemptions
    The petitioner alleges companies that newly establish or expand 
facilities within industrial complexes in Gwangju are exempt from 
acquisition and registration taxes. In addition, the petitioner states 
that capital gains on the land and buildings of such companies are 
exempt from property taxes for the first five years from the 
establishment or expansion of the facilities, and receive a 50 percent 
reduction of such taxes over the next three years.
    According to the GOK, under Article 276 of the Local Tax Act, 
companies that newly establish or expand facilities within an 
industrial complex are exempt from property, acquisition, and 
registration taxes. Further, capital gains on the land and buildings of 
such companies are exempt from property taxes for five years from the 
establishment or expansion of the facilities. DWE reported that because 
it was exempt from paying property tax, it also received an additional 
exemption on the local education tax.\43\ The GOK reported that, 
although Article 276 is a national program, it is administered at the 
local level by the Gwangju City government. The GOK provided the 
relevant sections of the City Tax Exemption and Reduction Ordinance of 
Gwangju City which shows Article 276 is administered by the Gwangju 
City government.
---------------------------------------------------------------------------

    \43\ See DWE Initial Questionnaire Response Part 2 at 5 and 
Exhibit D-2.
---------------------------------------------------------------------------

    The Department has previously determined that the tax exemptions 
under Article 276 of the Local Tax Act are countervailable 
subsidies.\44\ There is no new information or evidence of changed 
circumstances that warrants the reconsideration of that determination. 
Only SGEC and DWE reported receiving these exemptions. We preliminarily 
find that the tax exemptions received by SGEC and DWE constitute a 
financial contribution and confer a benefit under sections 
771(5)(D)(ii) and 771(5)(E) of the Act, respectively. Further, we 
preliminarily determine that the tax exemptions are regionally specific 
under section 771(5A)(D)(iv) of the Act because Article 276 of the 
Local Tax Act specifies that eligibility for the exemptions is limited 
to companies located within designated industrial complexes in Korea.
---------------------------------------------------------------------------

    \44\ See Coated Free Sheet Paper from the Republic of Korea: 
Notice of Final Affirmative Countervailing Duty Determination, 72 FR 
60639 (October 25, 2007) and the accompanying Issues and Decision 
Memorandum at 12. See also Corrosion-Resistant Carbon Steel Flat 
Products From the Republic of Korea: Preliminary Results and Partial 
Rescission of Countervailing Duty Administrative Review, 75 FR 55745 
(September 15, 2010), final results unchanged.
---------------------------------------------------------------------------

    Because they are triggered by a single event, the purchase of 
property, we consider the exemptions from acquisition and registration 
taxes to provide non-recurring benefits, in accordance with 19 CFR 
351.524(b). For each year over the 10-year AUL period (the POI, 2010, 
and the prior nine years), in which a respondent claimed exemptions 
from acquisition and registration taxes, we examined the exemptions 
claimed to determine whether they exceeded 0.5 percent of the company's 
sales in that year to determine whether the benefits should be 
allocated over time or to the year of receipt. For both SGEC and DWE, 
none of the exemptions claimed over the AUL period met the prerequisite 
for allocation over time, and the only benefits attributable to the POI 
are those benefits received during the POI.
    The exemptions from real property tax provided under this program 
are recurring benefits, because the taxes are otherwise due annually, 
and the exemption is granted for a five-year period. Thus, the benefit 
is allocated to the year in which it is received.\45\ The benefit to 
each company during the POI is the value of the real property tax 
exempted during the POI. Although DWE reported receiving an additional 
exemption of the education tax, we have not included the amount of that 
exemption during the POI in our benefit calculation. We will gather 
additional information about this exemption from the GOK and the 
respondents in order to conduct a full analysis for the final 
determination.
---------------------------------------------------------------------------

    \45\ See 19 CFR 351.524(a).
---------------------------------------------------------------------------

    Both SGEC and DWE reported that, as a result of their exemption 
from acquisition and registration taxes, they are subject to an 
additional tax under the Act on Special Rural Development. This tax is 
assessed at 20 percent of the value of the acquisition and registration 
tax exemption. SGEC and DWE contend that this additional tax should be 
treated as an offset to the real property tax exemption and subtracted 
from the exemption the Department recognizes as a benefit. We have 
examined the assessment of the Special Rural Development Tax in light 
of the provisions of section 771(6) of the Act, which limits the 
circumstances under which the Department may subtract an amount from 
the countervailable benefit to amounts related to application fees, to 
the loss of value of the subsidy from a deferral required by the 
government, and to any export taxes imposed by the government 
specifically to offset CVDs imposed by the United States. We find that 
the Special Rural Development Tax does not meet the statutory 
requirement to be recognized by the Department as an offset to the 
countervailable exemption of acquisition and registration taxes. 
Furthermore, as provided in 19 CFR 351.503(e), when calculating the 
amount of the benefit, the Department does not consider the tax 
consequences of the benefit.
    To calculate the countervailable subsidy from the three tax 
exemptions provided under this program to SGEC and to DWE, for each 
company, we added the value of exemptions of acquisition and 
registration tax received during the POI to the value of exemptions of 
real property tax received during the POI. We divided the resulting 
benefit by each company's total sales during the POI. On this basis we 
determine a countervailable subsidy of 0.01 percent ad valorem for SEC/
SGEC \46\ and 0.01 percent ad valorem for DWE.
---------------------------------------------------------------------------

    \46\ See 19 CFR 351.525(b)(6)(i) and 19 CFR 351.525(b)(6)(iii).
---------------------------------------------------------------------------

E. Gyeongsangnam Province Production Facilities Subsidies: Tax 
Reductions and Exemptions
    According to the petitioner, eligible companies moving to Changwon 
that meet certain criteria can receive a 50 percent reduction in 
corporate taxes for five years, a 100 percent reduction on property 
taxes for five years, and a full

[[Page 55052]]

exemption from land acquisition and registration taxes.
    The GOK explained that, under Article 276 of the Local Tax Act, 
companies that newly establish or expand facilities within an 
industrial complex are exempt from property, acquisition, and 
registration taxes. Further, capital gains on the land and buildings of 
such companies are exempt from property taxes for five years from the 
establishment or expansion of the facilities. The GOK reported that 
although Article 276 is a national program, it is administered at the 
provincial or local level, as appropriate. In this instance, according 
to the GOK, because Changwon City is not a metropolitan city, it does 
not have the authority to administer the provisions of the Local Tax 
Act; therefore, the program is administered by the Province of 
Gyeongsangnam. The GOK provided the relevant sections of the Province 
of Gyeongsangnam Ordinance Tax Reduction and Exemption, Ordinance No. 
3470, which shows that Article 276 is administered by the Province of 
Gyeongsangnam. LGE reported receiving tax exemptions under this 
program.
    The Department has previously determined that the tax exemptions 
under Article 276 of the Local Tax Act are countervailable 
subsidies.\47\ There is no new information or evidence of changed 
circumstances which would warrant reconsideration of that 
determination. We preliminarily find that the tax exemptions received 
by LGE constitute a financial contribution and confers a benefit under 
sections 771(5)(D)(ii) and 771(5)(E) of the Act, respectively. Further, 
we preliminarily determine that the tax exemptions are regionally 
specific under section 771(5A)(D)(iv) of the Act because Article 276 of 
the Local Tax Act specifies that eligibility for the exemptions is 
limited to companies located within designated industrial complexes in 
Korea.
---------------------------------------------------------------------------

    \47\ See supra note 44.
---------------------------------------------------------------------------

    Because they are triggered by a single event, the purchase of 
property, we consider the exemptions from acquisition and registration 
taxes to provide non-recurring benefits, in accordance with 19 CFR 
351.524(b). For each year over the 10-year AUL period (the POI, 2010, 
and the prior nine years), in which LGE claimed exemptions from 
acquisition and registration taxes, we examined the exemptions claimed 
to determine whether they exceeded 0.5 percent of the company's sales 
in that year to determine whether the benefits should be allocated over 
time or to the year of receipt. None of the exemptions LGE claimed over 
the AUL period met the prerequisite for allocation over time, and the 
only benefits attributable to the POI are those benefits received 
during the POI.
    The exemptions from real property tax provided under this program 
are recurring benefits, because the taxes are otherwise due annually, 
and the exemption is granted for a five-year period. Thus, the benefit 
is allocated to the year in which it is received.\48\ The benefit to 
LGE during the POI is the value of the real property tax exempted 
during the POI.
---------------------------------------------------------------------------

    \48\ See 19 CFR 351.524(a).
---------------------------------------------------------------------------

    To calculate the countervailable subsidy rate for LGE, we divided 
the sum of all taxes exempted during the POI by LGE's total sales on an 
FOB basis during the POI. On this basis we determine a countervailable 
subsidy that is less than 0.005 percent ad valorem. Therefore, in 
accordance with the Department's practice, we find that the 
countervailable benefit is not measurable.\49\
---------------------------------------------------------------------------

    \49\ See, e.g., HRS from India and the accompanying Issues and 
Decision Memorandum at ``Exemption from the CST.''
---------------------------------------------------------------------------

II. Programs Preliminarily Determined To Be Not Countervailable

A. Gyeongsangnam Province and Korea Energy Management Corporation 
Energy Savings Subsidies
    The petitioner alleges that Gyeongsangnam Province and the Korea 
Energy Management Corporation (KEMCO) provided grants as incentives to 
local companies that adopt energy savings technologies to reduce 
overall energy consumption. As support for its allegation, the 
petitioner provided information indicating that benefits under the 
program were only available to four ``strategic industries,'' including 
the ``Smart Home Industry,'' which includes home appliances such as 
refrigerators.
    Each of the respondents reported that they did not receive any 
benefits under this program.\50\ The GOK reported that Gyeongsangnam 
Province is not associated with the management of this program.\51\ 
Furthermore, the GOK stated that the program alleged by the petitioner 
is actually a program providing loans to fund the replacement of 
existing energy-consuming facilities. The GOK identified both SEC and 
LGE as having received loans under the program.\52\ Funds for this loan 
financing are provided by the ``Energy Savings Fund'' (ESF). KEMCO is 
responsible for the actual administration of the program in accordance 
with the ``Energy Use Rationalization Act,'' and disbursements from the 
fund are completed through independent financial institutions. 
Companies applying for disbursements under the fund first submit an 
application to KEMCO for financing; on the application the company will 
designate a bank through which it prefers to receive the financing once 
the application is approved. Once the application is approved by KEMCO, 
a recommendation letter is addressed to the designated bank. Applicant 
companies then submit a loan application to the bank, along with the 
recommendation letter from KEMCO; if approved, KEMCO transfers funds to 
the bank which uses them to extend financing to the applicant company.
---------------------------------------------------------------------------

    \50\ See LGE Initial Questionnaire Response Part 2 at 23, SEC 
Initial Questionnaire Response Part 2 at III-20, DWE Initial 
Questionnaire Response Part 2 at 26.
    \51\ See GOK Initial Questionnaire Response at 186 of the 
Appendices Volume.
    \52\ See GOK Supplemental Questionnaire Response at 25.
---------------------------------------------------------------------------

    In addition to providing the description of the program, the GOK 
notes that the Department has previously investigated this program and 
found it not countervailable, in the DRAMS Final Determination. In that 
investigation, the program was referred to as the ``ESF Program.'' In 
the DRAMS Final Determination, we determined that the ESF Program was a 
widely available program seeking to promote goals not specific to any 
industries or companies and that it was ``used by a significant number 
of companies in a wide range of industries,'' and was therefore not de 
facto specific.\53\
---------------------------------------------------------------------------

    \53\ See DRAMS Final Determination, and the accompanying Issues 
and Decision Memorandum at 34.
---------------------------------------------------------------------------

    According to section 775(1) of the Act, if, in the course of a 
proceeding, the Department discovers a practice which appears to be a 
countervailable subsidy, but was not included in the matters alleged in 
a CVD petition, then the Department shall include the practice, 
subsidy, or subsidy program in the proceeding if the practice, subsidy, 
or subsidy program appears to be a countervailable subsidy with respect 
to the merchandise which is the subject of the proceeding. As explained 
above, we have previously found this program to be not countervailable. 
However, because we examined whether the subsidies provided under the 
program were de facto specific to producers of DRAMS in the DRAMS Final 
Determination, and because the ESF loans outstanding during the POI are 
new loans granted to the respondents since the DRAMS Final 
Determination

[[Page 55053]]

in 2003, the facts underlying the Department's previous decision that 
the program is not specific are no longer applicable. Therefore, the 
Department is examining whether this program is de facto specific to 
producers/exporters of bottom mount refrigerators during the POI.\54\
---------------------------------------------------------------------------

    \54\ See Certain Hot-Rolled Flat-Rolled Carbon-Quality Steel 
Products From Brazil: Final Results of Countervailing Duty 
Administrative Review, 76 FR 22868 (April 25, 2011), and the 
accompanying Issues and Decision Memorandum at 9.
---------------------------------------------------------------------------

    In the GOK Initial Questionnaire Response, the GOK provided data 
regarding the total number of companies, by industry, that received 
financing under this program, as well as the total amount disbursed to 
each industry.\55\ The data provided by the GOK demonstrate that, 
within the meaning of sections 771(5A)(D)(iii)(I)-(III) of the Act, the 
actual recipients of the subsidy, whether considered on an enterprise 
or industry basis, are not limited in number; and that no enterprise or 
industry is a predominant user of the subsidy or receives a 
disproportionately large amount of the subsidy. In addition, there is 
no evidence that demonstrates that 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.\56\
---------------------------------------------------------------------------

    \55\ See GOK Initial Questionnaire Response at 193-196 of the 
Appendices Volume.
    \56\ See section 771(5A)(D)(iii)(III) of the Act.
---------------------------------------------------------------------------

    Because loans provided under this program are neither de jure nor 
de facto specific, we continue to find this program to be not 
countervailable within the meaning of section 771(5) of the Act.

III. Programs Preliminarily Determined Not to Confer a Benefit During 
the POI

A. Research, Supply, or Workforce Development Investment Tax Deductions 
for ``New Growth Engines'' Under RSTA Article 10(1)(1)
    According to information provided by the petitioner, large 
corporations making research, supply, or workforce development 
investments in any of 10 ``new growth engine'' technologies qualify for 
a tax deduction of 20 percent of such expenses in a taxation year; SMEs 
qualify for a tax deduction of 30 percent. The petitioner has provided 
information indicating that these ``new growth engines'' include 
certain technologies related to the production of subject merchandise, 
such as LED.
    The GOK has provided information showing that this program was 
first introduced in 2010, through the amendment of the RSTA, for the 
purpose of facilitating Korean corporations' investments in their 
respective research and development activities relating to the New 
Growth Engine program. The statutory basis for this program is Article 
10(1)(1) of the RSTA. Paragraph 1 of Article 9 of the Enforcement 
Decree is the implementing provision of Article 10(1)(1) of the RSTA 
and Appendix 7 of the Enforcement Decree sets forth a list of eligible 
technologies that are covered by the New Growth Engine program.
    Because this program came into existence in 2010, any benefits from 
this program would not be realized until the tax returns for 2010 are 
filed in 2011. In accordance with 19 CFR 351.509(b)(1), we recognize 
tax benefits as having been received the date that the recipient would 
otherwise have had to pay the taxes. Normally, this date will be the 
date on which the firm filed its tax return. The first time the tax 
benefits available under this program could be claimed is on the return 
for the 2010 tax year, which was filed in 2011. Therefore, we 
preliminarily determine that this program did not provide 
countervailable benefits to the respondents during the POI.
B. Research, Supply, or Workforce Development Expense Tax Deductions 
for ``Core Technologies'' Under RSTA Article 10(1)(2)
    According to information provided by the petitioner, large 
corporations making research, supply, or workforce development 
investments in any of 18 ``core technologies'' qualify for a tax 
deduction of 20 percent of such expenses in a taxation year; SMEs 
qualify for a tax deduction of 30 percent. These ``core technologies'' 
include certain technologies related to the production of subject 
merchandise.
    The GOK has provided information showing that this program was 
first introduced in 2010, through the amendment of the RSTA, for the 
purpose of facilitating Korean corporations' investments in their 
respective research and development activities relating to core 
technologies covered by the New Growth Engine program.\57\ The program 
is designed to facilitate the research and development (R&D) activities 
within the context of the New Growth Engine program. The program offers 
a credit toward taxes payable with respect to certain costs of 
personnel and equipment falling under the eligible category. The 
statutory basis for this program is Article 10(1)(2) of the RSTA. 
Paragraph 2 of Article 9 of the Enforcement Decree is the implementing 
provision of Article 10(1)(2) of the RSTA and Appendix 8 of the 
Enforcement Decree sets forth a list of core technologies that are 
covered by the New Growth Engine program.
---------------------------------------------------------------------------

    \57\ See GOK Initial Questionnaire Response at 231 of the 
Appendices Volume.
---------------------------------------------------------------------------

    Because this program came into existence in 2010, any benefits from 
this program would not be realized until the tax returns for 2010 are 
filed in 2011. In accordance with 19 CFR 351.509(b)(1), we recognize 
tax benefits as having been received the date that the recipient would 
otherwise have had to pay the taxes. Normally, this date will be the 
date on which the firm filed its tax return. The first time the tax 
benefits available under this program could be claimed is on the return 
for the 2010 tax year, which was filed in 2011. Therefore, we 
preliminarily determine that this program did not provide 
countervailable benefits to the respondents during the POI.

IV. Programs Preliminarily Determined To Be Not Used

    We preliminarily determine that the respondents did not apply for 
or receive benefits during the POI under the following programs:
A. KEXIM Programs
    1. Korean Export-Import Bank (KEXIM) Export Factoring.
    KEXIM export factoring is a form of trade finance under which KEXIM 
provides short-term discounted loans against the trade receivables of 
Korean exporters resulting from open account transactions such as D/A. 
These loans are provided by KEXIM on a non-recourse basis, meaning that 
KEXIM, and not the exporter, assumes the risk of loss with respect to 
purchaser default. Although LGE and SGEC reported using this program 
during the POI, they both reported that their use of the program was 
unrelated to subject merchandise.\58\
---------------------------------------------------------------------------

    \58\ See LGE Initial Questionnaire Response Part 2 at Exhibit 
18B, and SEC Supplemental Questionnaire Response Part 1 at S2-3.
---------------------------------------------------------------------------

    2. KEXIM Short-Term Export Credit.
    3. KEXIM Export Loan Guarantees.
    4. KEXIM Trade Bill Rediscounting Program.
B. Korea Trade Insurance Corporation (K-SURE)--Export Insurance and 
Export Credit Guarantees
    1. Short-Term Export Insurance.
    The Korean Export Insurance Corporation (KEIC) was established 
pursuant to the Export Insurance Act of 1968 for the purpose of 
providing export insurance. KEIC became K-SURE during the POI. Among 
the services provided by K-SURE is a short-term export

[[Page 55054]]

insurance program. Under this program, insurance policies issued to 
Korean companies through this program provide protection from risks 
such as payment refusal and buyer's breach of contract. Claims are paid 
from the Export Insurance Fund, which is managed by K-SURE and is 
funded by contributions from the GOK and insurance premium payments 
paid by the private sector companies electing export insurance 
coverage. K-SURE determines premium rates by considering numerous 
factors, including the creditworthiness of the importing party and the 
term of the policy. LGE, SEC, and DWE reported electing short-term 
export insurance provided by K-SURE during the POI. However there were 
no benefits provided on exports of subject merchandise to the United 
States during the POI.
    2. Export Credit Guarantees.
C. Gwangju Metropolitan City Programs
    1. Relocation Grants.
    2. Facilities Grants.
    3. Employment Grants.
    4. Training Grants.
    5. Consulting Grants.
    6. Preferential Financing for Business Restructuring.
    7. Interest Grants for the Stabilization of Management Costs.
    8. ``Special Support'' for Large Corporate Investors.
    9. Research and Development and Other Technical Support Services.
D. Changwon City Subsidy Programs
    1. Relocation Grants.
    2. Employment Grants.
    3. Training Grants.
    4. Facilities Grants.
    5. Grant for ``Moving Metropolitan Area-Base Company to Changwon''.
    6. Preferential Financing for Land Purchase.
    7. Financing for the Stabilization of Business Activities.
    8. Special Support for Large Companies.
E. Other GOK Programs
    1. Targeted Facilities Subsidies through Korea Finance Corporation 
(KoFC), KDB, and IBK ``New Growth Engines Industry Fund''.
    2. GOK Green Fund Subsidies.

V. Programs for Which Additional Information Is Needed

    On August 16, 2011, the Department included eight new subsidy 
allegations as part of the investigation.\59\ On August 29, 2011, the 
Department issued a questionnaire to the GOK and to the respondents 
regarding these programs. Because there has not been sufficient time to 
receive responses regarding these new subsidy allegations, we have not 
included any analysis of these programs in this preliminary 
determination. The Department will provide a post-preliminary analysis 
of these programs, and all parties will have an opportunity to comment. 
The programs for which we need additional information are:
---------------------------------------------------------------------------

    \59\ See NSA Initiation Memorandum.
---------------------------------------------------------------------------

A. DWE Restructuring
    1. GOK Equity Infusions under the DWE Workout.
    2. GOK Preferential Lending under the DWE Workout.
B. Tax Reduction for Research and Manpower Development: RSTA Article 
10(1)(3)
C. GOK Subsidies for ``Green Technology R&D'' and Its Commercialization
D. IBK Preferential Loans to Green Enterprises
E. Support for ``Green'' Partnerships with SMEs
F. GOK 21st Century Frontier R&D Program/Information Display R&D Center 
Program
G. Gwangju ``Photonics Industry Promotion Project'' (PIPP) Product 
Development Support
    In addition, we deferred an examination of the following two 
programs, which are limited to SMEs, at this time. Although we found 
that the petitioner has made proper allegations based on reasonably 
available information, we have not yet decided whether there is 
sufficient information to determine that the respondents' SME input 
suppliers are cross-owned, and that the inputs they supply are 
primarily dedicated to the production of the downstream product, such 
that benefits to SME input suppliers could be attributable to the 
respondents within the meaning of 19 CFR 351.525(b)(6)(iv). However, we 
will continue to gather information to examine whether SME input 
suppliers are cross-owned with respondents, and whether the inputs 
provided are primarily dedicated to the downstream product.
H. IBK SME Supplier Support
I. Korea Electronics Technology Institute (KETI) ``Marketing Aid'' and 
``Product Development'' Support for Gwangju Digital Convergence 
Promotion Product

Verification

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

Preliminary Negative Determination

    In accordance with section 703(d)(1)(A)(i) of the Act, we have 
calculated separate subsidy rates for SEC/SGEC, LGE, and DWE, the three 
producers/exporters of the subject merchandise. The total 
countervailable subsidy rate for each of these respondents is de 
minimis. These rates are summarized in the table below:

------------------------------------------------------------------------
     Manufacturer/exporter                     Subsidy rate
------------------------------------------------------------------------
Samsung Electronics Co., Ltd./   0.34 ad valorem (de minimis).
 Samsung Gwangju Electronics
 Co., Ltd.
LG Electronics Inc.............  0.05 ad valorem (de minimis).
Daewoo Electronics Corporation.  0.01 ad valorem (de minimis)
------------------------------------------------------------------------

    Because all of the rates are de minimis, we preliminarily determine 
that no countervailable subsidies are being provided to the production 
or exportation of bottom mount refrigerators in Korea. As such, we will 
not direct U.S. Customs and Border Protection to suspend liquidation of 
entries of bottom mount refrigerators 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

[[Page 55055]]

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)(B) 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), we will disclose to the 
parties the calculations for this preliminary determination within five 
days of its announcement. We will notify parties of the schedule for 
submitting case briefs and rebuttal briefs, in accordance with 19 CFR 
351.309(c) and 19 CFR 351.309(d)(1), respectively. 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. Section 774 of the Act provides that the Department will 
hold a public hearing to afford interested parties an opportunity to 
comment on arguments raised in case or rebuttal briefs, provided that 
such a hearing is requested by an interested party. If a request for a 
hearing is made in this investigation, we intend to hold the hearing 
two days after the deadline for submission of the rebuttal briefs, 
pursuant to 19 CFR 351.310(d). Any such hearing will be held at the 
U.S. Department of Commerce, 14th Street and Constitution Avenue, NW., 
Washington, DC 20230. Parties should confirm, by telephone, the date, 
time, and place of the hearing 48 hours before the scheduled time.
    Interested parties who wish to request a hearing, or to participate 
if one is requested, must submit a written request to the Assistant 
Secretary for Import Administration, U.S. Department of Commerce, Room 
1870, within 30 days of the publication of this notice, pursuant to 19 
CFR 351.310(c). Requests should contain: (1) The party's name, address, 
and telephone number; (2) the number of participants; and (3) a list of 
the issues to be discussed. Oral presentations will be limited to 
issues raised in the briefs.
    This determination is issued and published pursuant to sections 
703(f) and 777(i) of the Act.

    Dated: August 29, 2011.
Ronald K. Lorentzen,
Deputy Assistant Secretary for Import Administration.
[FR Doc. 2011-22716 Filed 9-2-11; 8:45 am]
BILLING CODE 3510-DS-P