[Federal Register Volume 77, Number 108 (Tuesday, June 5, 2012)]
[Notices]
[Pages 33181-33194]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-13562]


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DEPARTMENT OF COMMERCE

International Trade Administration

[C-580-869]


Large Residential Washers From the Republic of Korea: Preliminary 
Affirmative 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 being provided to 
producers and exporters of large residential washers (washing machines) 
from the Republic of Korea (Korea). For information on the subsidy 
rates, see the ``Suspension of Liquidation'' section of this notice.

DATES: Effective Date: June 5, 2012.

FOR FURTHER INFORMATION CONTACT: Justin M. Neuman or Milton Koch, 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) 482-2584, respectively.

SUPPLEMENTARY INFORMATION:

Case History

    On January 19, 2012, the Department initiated a countervailing duty 
(CVD) investigation of washing machines from Korea.\1\ In the 
Initiation Notice, the Department selected Samsung Electronics Co., 
Ltd. (Samsung), LG Electronics, Inc. (LG), and Daewoo Electronics 
Corporation (Daewoo) as the company respondents in this investigation 
because the petition identified them as the producers in Korea that 
exported washing machines to the United States, and because there was 
no information indicating that there are other Korean producers/
exporters. We invited interested parties to comment on our respondent 
selection within five days of the publication of the initiation notice 
(i.e., by February 1, 2012). We received none.
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    \1\ See Large Residential Washers From the Republic of Korea: 
Initiation of Countervailing Duty Investigation, 77 FR 4279 (January 
27, 2012) (Initiation Notice). The petitioner in this investigation 
is Whirlpool Corporation.
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    On February 15, 2012, the Department issued the CVD questionnaire 
(including government and company sections) to the Government of Korea 
(GOK). On March 28, 2012, Daewoo submitted a letter to the Department 
stating that it would not participate in this investigation. On April 
9, 2012, the GOK, Samsung, and LG submitted their questionnaire 
responses. On April 13, 2012, Samsung submitted corrections to some 
tax-related information and translation errors submitted as part of its 
response to the initial questionnaire. On April 23, 2012, the 
Department received comments from the petitioner regarding these 
questionnaire responses, and on April 26, 2012, the petitioner filed 
comments regarding the letter submitted by Daewoo. On April 25, 2012, 
the Department issued supplemental questionnaires to Samsung and LG, 
followed by a supplemental questionnaire issued to the GOK on April 26, 
2012. Samsung and LG submitted responses to their supplemental 
questionnaires on May 10, 2012. The GOK submitted its response on May 
7, 2012. The petitioner submitted comments regarding the GOK's 
questionnaire response on May 14, 2012, and also submitted comments 
regarding the responses of Samsung and LG on May 21, 2012.
    On March 1, 2012, at the request of the petitioner,\2\ the 
Department postponed the preliminary determination until May 28, 
2012.\3\ On May 18, 2012, the Department issued a letter to the GOK, 
Samsung, and LG requesting that they place the verification reports and 
the Final Calculation Memoranda from Bottom Mount Refrigerators on the 
record of this investigation.\4\ On May 22, 2012, Samsung and LG 
submitted the requested documents. The GOK provided the requested 
documents on May 24, 2012.
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    \2\ See Letter from Whirlpool Corporation, ``Postponement of 
Preliminary Determination,'' dated February 28, 2012.
    \3\ See Large Residential Washers From the Republic of Korea: 
Postponement of Preliminary Determination in the Countervailing Duty 
Investigation, 77 FR 13559 (March 7, 2012) (because May 28 falls on 
a federal holiday, the determination is being issued on the next 
business day, May 29, 2012).
    \4\ See Bottom Mount Combination Refrigerator-Freezers From the 
Republic of Korea: Final Affirmative Countervailing Duty 
Determination, 77 FR 17410 (March 26, 2012) and accompanying Issues 
and Decision Memorandum (Bottom Mount Refrigerators).
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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 washing machines 
from Korea and Mexico.\5\ The CVD investigation and the AD 
investigations cover the same merchandise. On May 10, 2012, in 
accordance with section 705(a)(1) of the Tariff Act of 1930, as amended 
(Act), the petitioner requested alignment of the final CVD 
determination with the final AD determination of washing machines 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 October 10, 2012, unless 
postponed.
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    \5\ See Large Residential Washers From the Republic of Korea and 
Mexico: Initiation of Antidumping Duty Investigations, 77 FR 4007 
(January 26, 2012).
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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 February 10, 2012, 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.\6\
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    \6\ See Large Residential Washers From Korea and Mexico, 77 FR 
9700 (February 17, 2012); and USITC Publication 4306, Large 
Residential Washers from Korea and Mexico: Investigation Nos. 701-
TA-488 and 731-TA-1199-1200 (Preliminary) (February 2012).
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Scope of the Investigation

    The products covered by this investigation are all large 
residential washers and certain subassemblies thereof from Korea.
    For purposes of this investigation, the term ``large residential 
washers'' denotes all automatic clothes washing machines, regardless of 
the orientation of the rotational axis, with a cabinet width (measured 
from its widest point) of at least 24.5 inches (62.23 cm) and no more 
than 32.0 inches (81.28 cm).
    Also covered are certain subassemblies used in large residential 
washers, namely: (1) All assembled cabinets designed for use in large

[[Page 33182]]

residential washers which incorporate, at a minimum: (a) At least three 
of the six cabinet surfaces; and (b) a bracket; (2) all assembled tubs 
\7\ designed for use in large residential washers which incorporate, at 
a minimum: (a) A tub; and (b) a seal; (3) all assembled baskets \8\ 
designed for use in large residential washers which incorporate, at a 
minimum: (a) A side wrapper; \9\ (b) a base; and (c) a drive hub; \10\ 
and (4) any combination of the foregoing subassemblies.
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    \7\ A ``tub'' is the part of the washer designed to hold water.
    \8\ A ``basket'' (sometimes referred to as a ``drum'') is the 
part of the washer designed to hold clothing or other fabrics.
    \9\ A ``side wrapper'' is the cylindrical part of the basket 
that actually holds the clothing or other fabrics.
    \10\ A ``drive hub'' is the hub at the center of the base that 
bears the load from the motor.
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    Excluded from the scope are stacked washer-dryers and commercial 
washers. The term ``stacked washer-dryers'' denotes distinct washing 
and drying machines that are built on a unitary frame and share a 
common console that controls both the washer and the dryer. The term 
``commercial washer'' denotes an automatic clothes washing machine 
designed for the ``pay per use'' market meeting either of the following 
two definitions:
    (1)(a) It contains payment system electronics; \11\ (b) it is 
configured with an externally mounted steel frame at least six inches 
high that is designed to house a coin/token operated payment system 
(whether or not the actual coin/token operated payment system is 
installed at the time of importation); (c) it contains a push button 
user interface with a maximum of six manually selectable wash cycle 
settings, with no ability of the end user to otherwise modify water 
temperature, water level, or spin speed for a selected wash cycle 
setting; and (d) the console containing the user interface is made of 
steel and is assembled with security fasteners; \12\ or
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    \11\ ``Payment system electronics'' denotes a circuit board 
designed to receive signals from a payment acceptance device and to 
display payment amount, selected settings, and cycle status. Such 
electronics also capture cycles and payment history and provide for 
transmission to a reader.
    \12\ A ``security fastener'' is a screw with a non-standard head 
that requires a non-standard driver. Examples include those with a 
pin in the center of the head as a ``center pin reject'' feature to 
prevent standard Allen wrenches or Torx drivers from working.
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    (2)(a) It contains payment system electronics; (b) the payment 
system electronics are enabled (whether or not the payment acceptance 
device has been installed at the time of importation) such that, in 
normal operation,\13\ the unit cannot begin a wash cycle without first 
receiving a signal from a bona fide payment acceptance device such as 
an electronic credit card reader; (c) it contains a push button user 
interface with a maximum of six manually selectable wash cycle 
settings, with no ability of the end user to otherwise modify water 
temperature, water level, or spin speed for a selected wash cycle 
setting; and (d) the console containing the user interface is made of 
steel and is assembled with security fasteners.
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    \13\ ``Normal operation'' refers to the operating mode(s) 
available to end users (i.e., not a mode designed for testing or 
repair by a technician).
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    The products subject to this investigation are currently 
classifiable under subheading 8450.20.0090 of the Harmonized Tariff 
System of the United States (HTSUS). Products subject to this 
investigation may also enter under HTSUS subheadings 8450.11.0040, 
8450.11.0080, 8450.90.2000, and 8450.90.6000. 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.\14\ On May 17, 2012, the petitioner filed a request to exclude 
from the scope of the investigations top-load washing machines with a 
rated capacity less than 3.7 cubic feet. Although the petitioner's 
scope request fell outside of our prescribed window for the submission 
of scope comments, it is the Department's practice to consider such 
requests made by the petitioner when there appears to be no impediment 
to enforceability by U.S. Customs and Border Protection (CBP).\15\ 
Samsung and LG filed letters opposing the petitioner's position on the 
scope issue on May 23, 2012, and May 24, 2012, respectively.
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    \14\ See Antidumping Duties; Countervailing Duties; Final Rule, 
62 FR 27296, 27323 (May 19, 1997), and Initiation Notice, 77 FR at 
4279.
    \15\ See, e.g., Certain Steel Nails from the People's Republic 
of China: Final Determination of Sales at Less Than Fair Value and 
Partial Affirmative Determination of Critical Circumstances, 73 FR 
33977, 33979 (June 16, 2008). See also Notice of Preliminary 
Determination of Sales at Less Than Fair Value, Postponement of 
Final Determination, and Affirmative Preliminary Determination of 
Critical Circumstances in Part: Prestressed Concrete Steel Wire 
Strand from Mexico, 68 FR 42378, 42379-80 (July 17, 2003).
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    The Department is currently evaluating the petitioner's scope 
request, as well as the comments of Samsung and LG, 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, 2011, through December 31, 2011.

Use of Facts Otherwise Available and Adverse Inferences

    Sections 776(a)(1) and (2) of the Act provide that the Department 
shall apply ``facts otherwise available'' if, inter alia, necessary 
information is not on the record or an interested party or any other 
person: (A) Withholds information that has been requested; (B) fails to 
provide information within the deadlines established, or in the form 
and manner requested by the Department, subject to subsections (c)(1) 
and (e) of section 782 of the Act; (C) significantly impedes a 
proceeding; or (D) provides information that cannot be verified as 
provided by section 782(i) of the Act.
    Section 776(b) of the Act further provides that the Department may 
use an adverse inference in applying the facts otherwise available when 
a party has failed to cooperate by not acting to the best of its 
ability to comply with a request for information. For purposes of this 
preliminary determination, we find it necessary to apply facts 
available, with an adverse inference to Daewoo.
    As explained above in the ``Case History'' section, the Department 
selected Daewoo as a mandatory company respondent. As a result of 
Daewoo's declared intention not to participate in this investigation 
and its decision not to respond to the initial questionnaire, we find 
that Daewoo has withheld information that has been requested and has 
failed to provide information within the deadlines established. 
Further, by not responding to the questionnaire, Daewoo significantly 
impeded this proceeding. Thus, in reaching our preliminary 
determination, pursuant to sections 776(a)(1), (2)(A), (B) and (C) of 
the Act, we are basing the CVD rate for Daewoo on facts otherwise 
available.
    We further preliminarily determine that an adverse inference is 
warranted,

[[Page 33183]]

pursuant to section 776(b) of the Act because by deciding not to 
respond to the initial questionnaire, Daewoo did not cooperate to the 
best of its ability in this investigation. Accordingly, we 
preliminarily find that adverse facts available (AFA) is warranted to 
ensure that Daewoo does not obtain a more favorable result than had it 
fully complied with our request for information.
    In deciding which facts to use as AFA, section 776(b) of the Act 
and 19 CFR 351.308(c)(1) and (2) authorize the Department to rely on 
information derived from: (1) The petition; (2) a final determination 
in the investigation; (3) any previous review or determination; or (4) 
any other information placed on the record. The Department's practice 
when selecting an adverse rate from among the possible sources of 
information is to ensure that the rate is sufficiently adverse ``as to 
effectuate the statutory purposes of the adverse facts available rule 
to induce respondents to provide the Department with complete and 
accurate information in a timely manner.'' \16\ The Department's 
practice also ensures ``that the party does not obtain a more favorable 
result by failing to cooperate than if it had cooperated fully.'' \17\
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    \16\ See, e.g., Drill Pipe From the People's Republic of China: 
Final Affirmative Countervailing Duty Determination, Final 
Affirmative Critical Circumstances Determination, 76 FR 1971 (Jan. 
11, 2011); see also Notice of Final Determination of Sales at Less 
Than Fair Value: Static Random Access Memory Semiconductors From 
Taiwan, 63 FR 8909, 8932 (February 23, 1998).
    \17\ See Statement of Administrative Action accompanying the 
Uruguay Round Agreements Act, H.R. Rep. No. 103-316, Vol. I, at 870 
(1994), reprinted at 1994 U.S.C.C.A.N. 4040, 4199.
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    It is the Department's practice in CVD proceedings to compute a 
total AFA rate for the non-cooperating company using the highest 
calculated program-specific rates determined for the cooperating 
respondents in the instant investigation, or, if not available, rates 
calculated in prior CVD cases involving the same country.\18\ 
Specifically, the Department applies the highest calculated rate for 
the identical program in the investigation if a responding company used 
the identical program, and the rate is not zero.\19\ If there is no 
identical program match within the investigation, or if the rate is 
zero, the Department uses the highest non-de minimis rate calculated 
for the same or for a similar program (based on treatment of the 
benefit) in another CVD proceeding involving the same country. Absent 
an above-de minimis subsidy rate calculated for the same or for a 
similar program, the Department applies the highest calculated subsidy 
rate for any program otherwise identified in a CVD case involving the 
same country that could conceivably be used by the non-cooperating 
companies.\20\
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    \18\ See, e.g., Certain Tow-Behind Lawn Groomers and Certain 
Parts Thereof from the People's Republic of China: Preliminary 
Affirmative Countervailing Duty Determination and Alignment of Final 
Countervailing Duty Determination with Final Antidumping Duty 
Determination, 73 FR 70971, 70975 (November 24, 2008) (unchanged in 
Certain Tow-Behind Lawn Groomers and Certain Parts Thereof From the 
People's Republic of China: Final Affirmative Countervailing Duty 
Determination, 74 FR 29180 (June 19, 2009), and accompanying Issues 
and Decision Memorandum at ``Application of Facts Available, 
Including the Application of Adverse Inferences''). See also 
Aluminum Extrusions From the People's Republic of China: Final 
Affirmative Countervailing Duty Determination, 76 FR 18521 (April 4, 
2011), and accompanying Issues and Decision Memorandum (Aluminum 
Extrusions from the PRC Decision Memorandum) at ``Application of 
Adverse Inferences: Non-Cooperative Companies.''
    \19\ There is an exception to this approach for income tax 
exemption and reduction programs; because there are no such programs 
in this investigation, the exception is not applicable here.
    \20\ See Aluminum Extrusions from the PRC Decision Memorandum at 
``Application of Adverse Inferences: Non-Cooperative Companies''; 
see also, e.g., Lightweight Thermal Paper From the People's Republic 
of China: Final Affirmative Countervailing Duty Determination, 73 FR 
57323 (October 2, 2008), and accompanying Issues and Decision 
Memorandum at ``Selection of the Adverse Facts Available Rate.''
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    On this basis, we preliminarily determine the AFA subsidy rate for 
Daewoo to be 70.58 percent ad valorem. This rate does not include a 
rate for either the ``Korea Trade Insurance Corporation (K-SURE)--
Short-Term Export Credit Insurance'' or ``GOK Supplier Support Fund Tax 
Deduction'' programs because we have preliminarily determined that the 
K-SURE program is not countervailable during the POI, and that the 
``GOK Supplier Support Fund Tax Deduction'' program cannot be used 
until 2012, after the POI. For a detailed discussion of the AFA rates 
selected for each program under investigation, see ``Memorandum to the 
File from Milton Koch, Re: Application of Adverse Facts Available to 
Daewoo Electronics Corporation,'' dated May 29, 2012.

Subsidies Valuation Information

A. 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.\21\ 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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    \21\ 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.\22\ According to the CVD 
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.\23\
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    \22\ See Countervailing Duties; Final Rule, 63 FR 65348, 65401 
(November 25, 1998) (CVD Preamble).
    \23\ 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).
    Samsung has reported that, prior to the POI, the production of 
washing machines was performed by its cross-owned subsidiary, Samsung 
Gwangju Electronics Co., Ltd. (SGEC), in which Samsung held a 94.25 
percent ownership interest.\24\ Effective January 1, 2011, SGEC was 
merged into Samsung and all washing machines are now produced directly 
within Samsung. When SGEC was merged into Samsung, Samsung assumed all 
of the assets and liabilities of SGEC, including SGEC's tax liability 
for the 2010 tax year that was identified in the tax return filed in 
2011. Samsung explained that, although the SGEC tax return filed in 
2011 was

[[Page 33184]]

prepared and filed under the name of SGEC, the tax liability was borne 
by Samsung. As well, we must determine whether any non-recurring 
benefits that SGEC received over the average useful life (AUL) period 
are attributable to Samsung. We have previously examined the 
relationship between Samsung and SGEC 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, and concluded that Samsung and SGEC are 
cross-owned within the definition provided in 19 CFR 
351.525(b)(6)(vi).\25\ In that investigation, we found that SGEC was 
virtually wholly-owned by Samsung during 2010, and therefore Samsung 
was able to ``use and direct the individual assets of'' SGEC in 
``essentially the same ways it can use its own assets.'' \26\ 
Furthermore, Samsung was intrinsically involved with the production, 
sales, and marketing of the subject merchandise. As such, we find that 
over the AUL period preceding the POI, Samsung and SGEC were cross-
owned, and all non-recurring subsidies to SGEC are properly 
attributable to Samsung pursuant to 19 CFR 351.525(b)(6)(i). As such, 
for purposes of this preliminary determination, we are examining 
subsidies received by SGEC over the AUL and attributing any benefits 
allocated to the POI to the total sales of Samsung.
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    \24\ See Samsung's April 9, 2012 response at footnote 6.
    \25\ See Bottom Mount Refrigerators and accompanying Issues and 
Decision Memorandum at 3.
    \26\ See 19 CFR 351.525(b)(6)(vi).
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    In addition, Samsung has also identified two domestic cross-owned 
companies that provide it with services related to the production of 
subject merchandise. Samsung Electronics Logitech (SEL) is a wholly-
owned non-producing subsidiary of Samsung that provides logistics 
management and transportation services for Samsung's merchandise, 
including washing machines. Samsung Electronics Service (SES) is a non-
producing subsidiary of Samsung which provides after-sale warranty 
services in Korea. Based on the information provided by Samsung, we 
preliminarily determine that SEL and SES are cross-owned with Samsung 
in accordance with 19 CFR 351.525(b)(6)(vi). These companies were 
wholly- or virtually wholly-owned by Samsung during the POI, and 
therefore Samsung was able to ``use and direct the individual assets 
of'' these companies in ``essentially the same ways it can use its own 
assets.'' \27\ As such, any countervailable subsidies that we identify 
and measure as conferred on SEL or SES are being treated as a subsidy 
to Samsung. This approach is consistent with the analysis contemplated 
by the CVD Preamble:
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    \27\ See id.

    Analogous to the situation of a holding or parent company is the 
situation where a government provides a subsidy to a non-producing 
subsidiary (e.g., a financial subsidiary) and there are no 
conditions on how the money is to be used. Consistent with our 
treatment of subsidies to holding companies, we would attribute a 
subsidy to a non-producing subsidiary to the consolidated sales of 
the corporate group that includes the non-producing subsidiary. See, 
e.g., Certain Steel Products from Belgium, 58 FR 37273, 37282 (July 
9, 1993).\28\
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    \28\ See CVD Preamble, 63 FR at 65402.

    With regard to holding companies, the regulations permit the 
attribution of subsidies conferred on a holding company to the 
consolidated sales of the holding company (that includes the respondent 
producer).\29\ Similarly, the regulations permit the attribution of 
subsidies to cross-owned, non-producing subsidiaries like SEL or SES. 
Accordingly, the subsidies received by these companies have been 
appropriately attributed to Samsung.
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    \29\ See 19 CFR 351.525(b)(6)(iii).
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    LG has reported that two of its input producers, LG Chemical and 
Kum Ah Steel, are cross-owned via their shared membership in the LG 
Group. The LG Group, in turn, is headed by a holding company, LG 
Corporation, which owns 33.2 percent of LG. According to LG, LG 
Chemical is an input producer and a member of the LG Group as a 
subsidiary of LG Corporation, its largest shareholder, which holds 
33.53 percent of the company's outstanding shares. LG identified Kum Ah 
Steel as a producer and seller of steel products. Kum Ah Steel is 51 
percent owned by LG International (LGI), of which LG Corporation owns 
27.6 percent.
    LG has acknowledged that LG, LG Chemical, and Kum Ah Steel share 
common ownership through LG Corporation, the holding company of the LG 
Group, and information on the record substantiates this claim. 
Furthermore, LG has reported that LGI is Kum Ah Steel's majority 
shareholder. Based on this information, we preliminarily determine that 
LG Chemical and Kum Ah Steel are cross-owned with LG, through LG 
Corporation, in accordance with 19 CFR 351.525(b)(6)(vi). According to 
LG, LG Corporation is only a holding company with no sales of its own, 
and it received no assistance from the programs under 
investigation.\30\
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    \30\ See LG's April 9, 2012 response at 12.
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    In response to our initial questionnaire, LG reported that ``(n)o 
company with which LGE shares cross-ownership supplied LGE with any 
input that is primarily dedicated to the production of the downstream 
product, i.e., large residential washers.'' \31\ In its initial 
questionnaire response, LG reported that LG Chemical's and Kum Ah 
Steel's sales of inputs to LG, as a proportion of their total sales, 
are not large and the majority of LG Chemical's and Kum Ah Steel's 
products are sold to companies other than LG.\32\ Moreover, information 
on the record does not indicate that the input products provided by LG 
Chemical and Kum Ah Steel are primarily dedicated to the production of 
the downstream product. On this basis, we preliminarily determine that 
the inputs produced by LG Chemical and Kum Ah Steel are not primarily 
dedicated to the production of the downstream product within the 
meaning of 19 CFR 351.525(b)(6)(iv). In the CVD Preamble, the 
Department indicates that ``it would not be appropriate to attribute 
subsidies to a plastics company to the production of cross-owned 
corporations producing appliances and automobiles.'' \33\ Analogous to 
this example from the CVD Preamble, we find it would not be appropriate 
to attribute subsidies provided to LG Chemical and Kum Ah Steel to LG 
because the materials they produce are used in the production of many 
different products in different industries, and because LG is not their 
primary or sole customer.
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    \31\ See LG's April 9, 2012 response at 16.
    \32\ See LG's April 9, 2012 response at Exhibit 24.
    \33\ See CVD Preamble, 63 FR at 65401.
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    In addition, LG has identified two cross-owned services providers: 
ServeOne Inc. (ServeOne), a cross-owned company that purchases goods 
from input producers and resells them to LG for use in the production 
of subject merchandise; and Hi Business Logistics Co., Ltd. (HBL), 
which is responsible for arranging and coordinating the transportation 
of subject merchandise destined for export. According to information 
provided by LG, ServeOne is a wholly-owned non-producing subsidiary of 
LG Corporation. ServeOne's Maintenance, Repair, Operation business unit 
is the division of ServeOne responsible for selling inputs to LG. 
ServeOne does not produce these inputs, instead purchasing them from 
other suppliers/producers and then reselling them to LG. HBL is a 
wholly-owned subsidiary of LG.
    LG has acknowledged that LG and ServeOne share common ownership

[[Page 33185]]

through their parent company LG Corporation, and information on the 
record substantiates this claim.\34\ In addition, LG identified HBL as 
its wholly-owned non-producing subsidiary. Based on this information, 
we preliminarily determine that ServeOne and HBL are cross-owned with 
LG in accordance with 19 CFR 351.525(b)(6)(vi). As such, any 
countervailable subsidies that we identify and measure as conferred on 
ServeOne or HBL will be treated as a subsidy to LG. This approach is 
consistent with the analysis contemplated by the CVD Preamble, as 
discussed above.
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    \34\ LG has reported that ``all companies in the LG Group are 
ultimately controlled by LG Corporation or its majority 
shareholders, and all companies in the LG Group are affiliated and 
cross-owned.'' See LG's April 9, 2012 response at 15.
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    LG has reported that ServeOne used some of the programs under 
investigation, but that HBL did not receive subsidies under any of the 
programs under investigation during the POI or AUL. Accordingly, we 
have attributed to LG the subsidies received by its non-producing 
subsidiary, ServeOne.

B. Cross-Ownership With Input Suppliers

    As we did in Bottom Mount Refrigerators, we have examined, based on 
information on the record, whether Samsung and LG are in a position to 
exercise effective control over their input suppliers such that cross-
ownership arises within the meaning of 19 CFR 351.525(b)(6)(vi), and 
whether subsidies received by those input suppliers are attributable to 
the respondents.\35\
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    \35\ See Bottom Mount Refrigerators and accompanying Issues and 
Decision Memorandum at ``Cross-Ownership and Attribution of 
Subsidies.'' See also the Initiation Checklist.
---------------------------------------------------------------------------

    We are examining whether the respondent companies are cross-owned 
with their input suppliers, and whether the inputs supplied are 
primarily dedicated to the production of the downstream product. In our 
questionnaires, we requested that the respondents identify all of their 
input suppliers, any suppliers that are affiliated in accordance with 
section 771(33) of the Act, and any suppliers that are cross-owned in 
accordance with 19 CFR 351.525(b)(6)(vi). 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. Our questionnaires 
also asked 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 detailed 
information regarding family relationships, and common board members 
and managers between the respondents and their suppliers.
    Samsung reported that it was not cross-owned with any of its 
domestic input suppliers in accordance with 19 CFR 351.525(b)(6)(vi). 
In its initial questionnaire response Samsung provided a copy of the 
standard supply agreement that it uses with its suppliers. We have 
reviewed this standard supply agreement and find that the language in 
the clauses therein provides no clear indication of the type of control 
by Samsung over its input suppliers that would rise to the level of 
cross-ownership. The definition of control in the regulations provides 
a high standard of control, akin to the control normally vested when 
there is majority voting ownership interest between two 
corporations.\36\ The CVD Preamble recognizes that this type of control 
can also be vested in entities that hold a large minority voting 
interest or ``golden share.'' \37\ Thus, while we recognize that 
control as defined by our regulations can be exercised by means other 
than ownership, the definition of what constitutes control does not 
change regardless of how that control is exercised. Cross-ownership 
exists where one corporation has the ability to use or direct the 
individual assets of the other corporation in essentially the same ways 
it can use its own assets. Our review of the language in the agreement 
between Samsung and its suppliers does not indicate that Samsung has 
this level of control over its suppliers' assets.
---------------------------------------------------------------------------

    \36\ See 19 CFR 351.525(b)(6)(vi).
    \37\ See CVD Preamble, 63 FR at 65401.
---------------------------------------------------------------------------

    In its initial questionnaire response, Samsung also provided 
extensive information about its input suppliers' sales to Samsung. In a 
few instances, Samsung's purchases accounted for a significant majority 
of a particular supplier's sales. In addition, in some cases, Samsung 
has provided technical assistance to its suppliers. As well, some 
Samsung suppliers have also received loans from a joint fund between 
the Industrial Bank of Korea (IBK) and Samsung worth Korean won one 
trillion. Samsung has also identified the members of its board of 
directors and stated that ``no member of the Samsung founding family 
and no director, executive or senior manager of a Samsung Group company 
holds a director, executive or senior manager position or an ownership 
stake in a supplier company that is not a cross-owned company.'' \38\ 
While there appear to be close supplier relationships between Samsung 
and some of its suppliers, as evidenced by the provision of technical 
assistance and of loans in conjunction with its purchases, and, in a 
few circumstances, purchases of a significant majority of the 
suppliers' production, we find that these factors do not give rise to 
the type or level of control required by our regulations to find cross-
ownership because they do not demonstrate that Samsung can use or 
direct the assets of these suppliers as if they were Samsung's own 
assets. Thus, we preliminarily determine that Samsung is not cross-
owned with any of its non-Samsung Group input suppliers within the 
meaning of 19 CFR 351.525(b)(6)(vi).
---------------------------------------------------------------------------

    \38\ See Samsung's April 9, 2012 response at 16-17.
---------------------------------------------------------------------------

    As discussed above, LG identified two input suppliers, LG Chemical 
and Kum Ah Steel, as being cross-owned, but stated that the inputs 
provided by these suppliers are not primarily dedicated to the 
production of washing machines. Our findings with respect to these two 
cross-owned input suppliers are discussed above. In addition, LG 
identified its unaffiliated input suppliers and provided a copy of the 
standard supply agreement that governs its relationships with its 
suppliers. We have reviewed this standard supply agreement and find 
that the language in the clauses therein provides no clear indication 
of the type of control by LG over its input suppliers that would rise 
to the level of cross-ownership. There is no language in the agreement 
between LG and its suppliers that supports a conclusion LG has met the 
high threshold for control over its suppliers' assets that is required 
by our regulations for the agreement to demonstrate cross-ownership.
    LG also provided information showing the portion of each of the 
supplier's sales that is made to LG (LG researched the total sales of 
its suppliers using public information to comply with our request for 
this information).\39\ In a few instances, LG's purchases accounted for 
a significant majority of a particular supplier's sales. In addition, 
in some cases, LG has provided direct financial support to its 
suppliers, in the form of loans for production facility 
improvements.\40\ Certain record information indicates that close 
supplier relationships may exist between LG and

[[Page 33186]]

some of its suppliers, such as the provision of loans in conjunction 
with LG's purchases, which, in a few circumstances, constitute a 
significant majority of the suppliers' production. However these 
factors do not give rise to control as required by our regulations 
because there is no evidence that these factors allow LG to use or 
direct the assets of these suppliers as if they were LG's own assets.
---------------------------------------------------------------------------

    \39\ See LG's May 10, 2012 response at Exhibit 43.
    \40\ See LG's May 10, 2012 response at 12.
---------------------------------------------------------------------------

    Finally, we are not finding cross-ownership to exist between LG and 
its unaffiliated input suppliers based on any common ownership, 
management or family ties. LG stated in reference to its unaffiliated 
input suppliers accounting for 80 percent of its input purchases by 
value that no directors, officers or executives from any LG Group 
company serve as directors, officers or executives on any of these 
unaffiliated companies. LG provided information on the family ties 
between LG and these companies indicating that distant relations of the 
LG Group's founding Koo family held executive positions in these 
companies.\41\ However, we find that these family relationships are too 
attenuated from the current ownership of the LG Group to find that they 
are indicative of cross-ownership between LG and these input suppliers. 
Thus, we preliminarily determine that LG is not cross-owned with any of 
its non-LG Group input suppliers within the meaning of 19 CFR 
351.525(b)(6)(vi).
---------------------------------------------------------------------------

    \41\ See LG's April 9, 2012 response at Exhibit 26.
---------------------------------------------------------------------------

C. 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)/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.\42\
---------------------------------------------------------------------------

    \42\ See 19 CFR 351.505(a)(1).
---------------------------------------------------------------------------

    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. LG has reported receiving KDB and IBK short-term loans. LG 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 LG about its 
commercial loans satisfies the preference expressed in 19 CFR 
351.505(a)(2)(iv). As such, we have used LG's commercial loans to 
calculate a benchmark interest rate that represents a company-specific 
annual average interest rate.\43\
---------------------------------------------------------------------------

    \43\ See ``Memorandum to the File from Justin M. Neuman, Re: 
Calculations for LG Electronics, Inc. for the Preliminary 
Determination,'' dated May 29, 2012 (LG Preliminary Calculation 
Memorandum).
---------------------------------------------------------------------------

    Samsung also received loans under the KDB and IBK short-term loan 
program. We requested that Samsung provide us with information on its 
short-term loans that are comparable to the government program loans. 
Samsung provided information about commercial loans from only one bank. 
Based on the information in its financial statement, the company 
apparently received comparable loans from more than one commercial 
bank. Because information on the record indicates that Samsung had 
other comparable short-term loans during the POI, Samsung has not 
provided all of the information about comparable commercial loans that 
would provide an appropriate basis for an interest rate benchmark as 
provided in 19 CFR 351.505(a)(2). Therefore, for purposes of this 
preliminary determination, we have selected a national average interest 
rate as a benchmark for Samsung using appropriate public sources 
pursuant to 19 CFR 351.505(a)(3)(ii).\44\ We intend to gather 
additional information on all of Samsung's comparable short-term 
commercial loans and will reconsider the benchmark issue in our final 
determination.
---------------------------------------------------------------------------

    \44\ See ``Memorandum to the File from Justin M. Neuman, Re: 
Calculations for Samsung Electronics Co., Ltd. for the Preliminary 
Determination'' dated May 29, 2012 (Samsung Preliminary Calculation 
Memorandum).
---------------------------------------------------------------------------

Allocation Period

    Under 19 CFR 351.524(d)(2)(i), we presume the allocation period for 
non-recurring subsidies to be the 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 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 washing machines, the IRS tables prescribe an AUL 
of 10 years. Because neither the respondent companies nor the GOK has 
disputed the AUL of 10 years, the Department is using an AUL of 10 
years in this investigation.

Analysis of Programs

I. Programs Preliminarily Determined To Be Countervailable

A. Income Tax Programs Under the Restriction of Special Taxation Act 
(RSTA) Article 10

1. Research, Supply, or Workforce Development Investment Tax Deductions 
for ``New Growth Engines'' Under RSTA Article 10(1)(1)
    The GOK 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 (R&D) 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. 
According to the GOK, the goal of the New Growth Engine program is to 
boost general national economic activities. RSTA Article 10(1)(1) 
offers a credit towards taxes payable by a corporation with respect to 
the costs of researchers and administrative personnel engaged in R&D 
activities related to eligible technologies listed in Appendix 7 of the

[[Page 33187]]

Enforcement Decree and for samples, parts, and raw materials used in 
the course of such R&D activities.
    Only Samsung reported receiving a tax credit under Article 10(1)(1) 
of the RSTA during the POI. The language of the implementing provisions 
and the related appendices for this tax program limits eligibility for 
the use of this program to a limited list of ``new growth engines.'' 
Therefore, we preliminarily determine that the provision of this tax 
benefit is de jure specific pursuant to section 771(5A)(D)(i) of the 
Act to companies investing in ``new growth engines'' technology.
    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, effectively, the amount of the tax 
credit claimed on the tax return filed during the POI, pursuant to 19 
CFR 351.509(a)(1).
    The tax credit provided under this program is a recurring benefit, 
because income taxes are due annually. Thus, the benefit is allocated 
to the year in which it is received.\45\ To calculate the benefit to 
Samsung from the tax credit under this program, we divided the tax 
credit claimed under this program on the tax return filed during the 
POI by the company's total sales during the POI. However, the 
calculation of the subsidy from this tax credit results in a rate that 
is less than 0.005 percent and, as such, this rate does not have an 
impact on Samsung's overall subsidy rate. Consistent with our past 
practice, we therefore have not included this program in our net 
subsidy rate calculations for Samsung.\46\
---------------------------------------------------------------------------

    \45\ See 19 CFR 351.524(a).
    \46\ 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 accompanying Issues and Decision Memorandum at 
``Exemption from the CST.''
---------------------------------------------------------------------------

2. Research, Supply, or Workforce Development Expense Tax Deductions 
for ``Core Technologies'' Under RSTA Article 10(1)(2)
    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 R&D activities relating to core technologies covered by the 
New Growth Engine program. 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. The program is designed to facilitate the R&D activities 
within the context of the New Growth Engine program. According to the 
GOK, the goal of the New Growth Engine program is to boost general 
national economic activities. RSTA Article 10(1)(2) offers a credit 
towards taxes payable by a corporation with respect to the costs of 
researchers and administrative personnel engaged in R&D activities 
related to ``core technologies'' listed in Appendix 8 of the 
Enforcement Decree and for samples, parts, and raw materials used in 
the course of such R&D activities.
    Only Samsung reported receiving a tax credit under Article 10(1)(2) 
of the RSTA on the tax return filed during the POI. The language of the 
implementing provisions and the related appendices for this tax program 
limits eligibility for the use of this program to a limited list of 
``core technologies.'' Therefore, we preliminarily determine that the 
provision of this tax benefit is de jure specific pursuant to section 
771(5A)(D)(i) of the Act to companies investing in ``core 
technologies.''
    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, effectively, the amount of the tax 
credit claimed on the tax return filed during the POI, pursuant to 19 
CFR 351.509(a)(1).
    The tax credit provided under this program is a recurring benefit, 
because income taxes are due annually. Thus, the benefit is allocated 
to the year in which it is received.\47\ To calculate the benefit to 
Samsung from the tax credit used, we divided the tax credit claimed 
under this program during the POI by the company's total sales during 
the POI. However, the calculation of the subsidy from this tax credit 
results in a rate that is less than 0.005 percent and, as such, this 
rate does not have an impact on Samsung's overall subsidy rate. 
Consistent with our past practice, we therefore have not included this 
program in our net subsidy rate calculations for Samsung.\48\
---------------------------------------------------------------------------

    \47\ See 19 CFR 351.524(a).
    \48\ See, e.g., HRS from India, and accompanying Issues and 
Decision Memorandum at ``Exemption from the CST.''
---------------------------------------------------------------------------

3. Tax Reduction for Research and Manpower Development: RSTA 10(1)(3)
    The GOK reported that this income tax reduction program aims to 
facilitate Korean corporations' investments in their respective R&D 
activities, and thus boost general national economic activities in all 
sectors. According to the GOK, this tax reduction provision was first 
introduced in 1982 under the Tax Exemption and Reduction Control Law. 
The GOK reported that all Korean corporations, both large companies and 
small and medium enterprises (SMEs), are eligible to use this program 
as long as they satisfy the requirements set forth in the statute.
    According to the GOK, an applicant corporation can take a credit 
toward corporate tax with respect to its investment for the purpose of 
general research and manpower development. Under this program, 
companies can claim a credit toward taxes payable for eligible 
expenditures on research and human resources development. Companies can 
calculate their tax credit as either 40 percent of the difference 
between the eligible expenditures in the tax year and the average of 
the prior four years, or a maximum of six percent of the eligible 
expenditures in the current tax year. The GOK provided the relevant law 
authorizing the credit: a copy of Article 10(1)(3) of the RSTA that was 
in effect during the 2010 tax year, as well as the implementing law, 
paragraphs 3, 4, 5 and 6 of Article 9 of the Enforcement Decree of the 
RSTA. The GOK stated that the selection of a recipient and provision of 
support under Article 10(1)(3) are not contingent upon export 
performance.
    Samsung reported that it, as well as SGEC, SES, and SEL received 
tax credits under Article 10(1)(3) of the RSTA on the tax returns filed 
during the POI. LG did not claim this tax credit on the tax return it 
filed during the POI, but reported that ServeOne claimed the credit on 
the tax return it filed during the POI.
    The GOK explained that the information we requested in order to 
analyze de facto specificity was not available for the POI. We 
therefore analyzed information from the prior year to evaluate de facto 
specificity and we preliminarily determine that the tax credits under 
this program were provided disproportionately to Samsung and LG 
pursuant to section

[[Page 33188]]

771(5A)(D)(iii)(III) of the Act.\49\ This is consistent with our 
finding in Bottom Mount Refrigerators.
---------------------------------------------------------------------------

    \49\ See the Samsung and LG Preliminary Calculation Memoranda at 
Attachments 7 and 5, respectively.
---------------------------------------------------------------------------

    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, effectively, the amount of the tax 
credit claimed on the tax return filed during the POI, pursuant to 19 
CFR 351.509(a)(1).
    The tax credits provided under this program are recurring benefits, 
because income taxes are due annually. Thus, the benefit is allocated 
to the year in which it is received.\50\ Consistent with 19 CFR 
351.525(b)(6)(i), to calculate the countervailable subsidy from the tax 
credits received by Samsung and SGEC, the tax credits for each 
corporate entity were summed and divided by Samsung's total sales 
during the POI. In calculating the rate for Samsung, we included the 
benefits to SES and SEL, consistent with the CVD Preamble.\51\ We 
therefore preliminarily determine a countervailable subsidy of 0.49 
percent ad valorem for Samsung. To calculate the benefit to LG, we 
divided ServeOne's tax credits by the sum of ServeOne's sales of 
products during the POI and LG's total FOB sales net of intercompany 
sales during the POI. However, the calculation of the subsidy from this 
tax credit results in a rate that is less than 0.005 percent and, as 
such, this rate does not have an impact on LG's overall subsidy rate. 
Consistent with our past practice, we therefore have not included this 
program in our net subsidy rate calculations for LG.\52\
---------------------------------------------------------------------------

    \50\ See 19 CFR 351.524(a).
    \51\ See CVD Preamble, 63 FR at 65402.
    \52\ See, e.g., HRS from India and accompanying Issues and 
Decision Memorandum at ``Exemption from the CST.''
---------------------------------------------------------------------------

B. RSTA Article 25(2) Tax Deductions for Investments in Energy 
Economizing Facilities

    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 energy utilization facilities.\53\ 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.
---------------------------------------------------------------------------

    \53\ See the GOK's April 9, 2012 questionnaire response at 121 
of the Appendices Volume.
---------------------------------------------------------------------------

    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. 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 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. Samsung claimed a tax 
credit under this program on its tax returns filed during the POI. LG 
reported that it did not use this program on the tax return filed 
during the POI.
    In Bottom Mount Refrigerators, we found this program de facto 
specific because information provided by the GOK indicated that the 
actual recipients that claimed tax credits under RSTA Article 25(2) 
were limited in number, pursuant to section 771(5A)(D)(iii)(I) of the 
Act.\54\ Similarly, the information provided by the GOK on this record 
shows that only a limited number of companies claimed this tax credit 
in 2010, for the 2009 tax year, the most recent year for which the GOK 
was able to provide information.\55\ Therefore, we find this program to 
be de facto specific within the meaning of section 771(5A)(D)(iii)(I) 
of the Act.
---------------------------------------------------------------------------

    \54\ See Bottom Mount Refrigerators, and accompanying Issues and 
Decision Memorandum, at ``RSTA Article 25(2) Tax Deductions for 
Investments in Energy Economizing Facilities.''
    \55\ See Samsung Preliminary Calculation Memorandum.
---------------------------------------------------------------------------

    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. 
To calculate the benefit to Samsung from the tax credit used, we 
divided the tax credit claimed under this program during the POI by the 
company's total sales during the POI. However, the calculation of the 
subsidy from this tax credit results in a rate that is less than 0.005 
percent and, as such, this rate does not have an impact on Samsung's 
overall subsidy rate. Consistent with our past practice, we therefore 
have not included this program in our net subsidy rate calculations for 
Samsung.\56\
---------------------------------------------------------------------------

    \56\ See, e.g., HRS from India, and accompanying Issues and 
Decision Memorandum at ``Exemption from the CST.''
---------------------------------------------------------------------------

C. GOK Facilities Investment Support: Article 26 of the RSTA

    The GOK reported that the program provides a credit towards taxes 
payable in the amount of seven percent of eligible investments in 
facilities. The GOK provided the relevant law authorizing the credit 
that was in effect during the 2010 tax year, Article 26 of the RSTA, as 
well as the implementing law, Article 23 of the Enforcement Decree of 
the RSTA. Article 23(1) of the Enforcement Decree limits eligibility 
for the program to ``business assets out of overcrowding control region 
of the Seoul Metropolitan Area'' (sic).
    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.\57\ 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, pursuant to 19 CFR 351.509(a)(1).
---------------------------------------------------------------------------

    \57\ See, e.g., Final Affirmative Countervailing Duty 
Determination: Certain Hot-Rolled Carbon Steel Flat Products From 
Thailand, 66 FR 50410 (October 3, 2001) and 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).
---------------------------------------------------------------------------

    Samsung reported that it, SGEC, and SEL received tax credits under 
Article 26 of the RSTA on the tax returns filed during the POI. In 
addition, LG reported that ServeOne received a tax credit under this 
program on the tax return filed during the POI. Consistent with 19 CFR 
351.525(b)(6)(i), to calculate the countervailable subsidy from the tax

[[Page 33189]]

credits received by Samsung and SGEC, the tax credits for each 
corporate entity were summed and divided by Samsung's total sales 
during the POI. In calculating the rate for Samsung, we included the 
benefit to SEL, consistent with the CVD Preamble.\58\ We preliminarily 
determine a countervailable subsidy of 0.71 percent ad valorem for 
Samsung. To calculate the benefit to LG from the tax credit received by 
ServeOne, we divided ServeOne's tax credits by the sum of ServeOne's 
sales of products during the POI and LG's total FOB sales net of 
intercompany sales during the POI. However, the calculation of the 
subsidy from this tax credit results in a rate that is less than 0.005 
percent and, as such, this rate does not have an impact on LG's overall 
subsidy rate. Consistent with our past practice, we therefore have not 
included this program in our net subsidy rate calculations for LG.\59\
---------------------------------------------------------------------------

    \58\ See CVD Preamble, 63 FR at 65402.
    \59\ See, e.g., HRS from India, and accompanying Issues and 
Decision Memorandum at ``Exemption from the CST.''
---------------------------------------------------------------------------

D. Gwangju Metropolitan City Production Facilities Subsidies: Tax 
Reductions/Exemptions Under Article 276 of the Local Tax Act

    According to the GOK, this tax program was introduced for the 
purpose of supporting the establishment of production facilities by 
corporations within the Gwangju City area so as to boost general 
economic activities in the region and to diversify the structure of the 
local economy by offering tax reductions and exemptions for certain 
companies located within designated industrial complexes. The current 
statutory basis for this program is Article 78 of the Special Local Tax 
Treatment Control Act, although it was previously administered under 
Article 276 of the Local Tax Act. Companies that newly establish or 
expand facilities within an industrial complex are exempt from 
property, education, 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. According to the GOK, liability for the education 
tax arises when the property tax is imposed and paid, and is set at 20 
percent of the property tax. Although this is a program authorized by 
national law, 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 
78 is administered by the Gwangju City government.
    The Department has previously determined that the tax exemptions 
under Article 276 of the Local Tax Act are specific in accordance with 
section 771(5A)(D)(iv) of the Act because this program limits these tax 
exemptions to enterprises located in specific regions; provides a 
financial contribution in the form of revenue foregone in accordance 
with section 771(5)(D)(ii) of the Act; and provides a benefit in the 
amount of the tax exemptions in accordance with 19 CFR 
351.509(a)(1).\60\ There is no new information or evidence of changed 
circumstances that warrants the reconsideration of that determination. 
Only Samsung reported receiving these exemptions.
---------------------------------------------------------------------------

    \60\ See Coated Free Sheet Paper from the Republic of Korea: 
Notice of Final Affirmative Countervailing Duty Determination, 72 FR 
60639 (October 25, 2007) and accompanying Issues and Decision 
Memorandum at 12. See also Bottom Mount Refrigerators and 
accompanying Issues and Decision Memorandum at 22.
---------------------------------------------------------------------------

    Because certain of these exemptions 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, i.e., 2011, and the prior nine years), in which 
Samsung or SGEC 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 claimed by Samsung or SGEC over the AUL 
period met the prerequisite for allocation over time; as such, the only 
attributable benefits are those benefits received by Samsung during the 
POI. The exemptions from real property tax provided under this program 
are recurring benefits, because the property taxes are otherwise due to 
be paid on an annual basis, and the exemption is granted for a five-
year period. Thus, the benefit is allocated to the year in which it is 
received.\61\ The benefit to Samsung during the POI from the property 
tax exemption is the value of the real property tax that would have 
been due, as well as the related education tax, exempted during the 
POI.
---------------------------------------------------------------------------

    \61\ See 19 CFR 351.524(a).
---------------------------------------------------------------------------

    Samsung also reported that, as a result of the 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 
10 percent of the exempted acquisition tax amount and 20 percent of the 
exempted registration tax amount. We have examined the assessment of 
the Special Rural Development Tax in light of the provisions of section 
771(6) of the Act, which provides that the Department may subtract an 
amount from the countervailable subsidy amounts related to application 
fees, the loss of value of the subsidy resulting from a deferral 
required by the government, and any export taxes imposed by the 
government specifically to offset countervailing duties imposed by the 
United States. Because the statute explicitly limits recognizable 
offsets to those three items, 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.\62\
---------------------------------------------------------------------------

    \62\ See Bottom Mount Refrigerators and accompanying Issues and 
Decision Memorandum at 24.
---------------------------------------------------------------------------

    To calculate the countervailable subsidy from the four tax 
exemptions provided under this program to Samsung, we added the value 
of exemptions of acquisition and registration tax received during the 
POI to the value of exemptions of real property tax and education tax 
received during the POI. We divided the resulting benefit by Samsung's 
total sales during the POI. However, the calculation of the subsidy 
from these exemptions results in a rate that is less than 0.005 percent 
and, as such, this rate does not have an impact on Samsung's overall 
subsidy rate. Consistent with our past practice, we therefore have not 
included this program in our net subsidy rate calculations for 
Samsung.\63\
---------------------------------------------------------------------------

    \63\ See, e.g., HRS from India, and accompanying Issues and 
Decision Memorandum at ``Exemption from the CST.''
---------------------------------------------------------------------------

E. GOK Subsidies for ``Green Technology R&D'' and Its Commercialization

    According to the GOK, technology is a crucial factor in promoting 
and achieving green growth in all economic sectors and, thus, the 
development of relevant green technology has been regarded as the main 
pillar of the country's Green Growth policy. The technology development 
component is one of the important factors of the government's five-year 
Green Growth Plan, which was adopted by the GOK in

[[Page 33190]]

January 2009. Under the plan, the GOK has selected 27 core technologies 
for support. The Ministry of Knowledge Economy (MKE) is involved in 
this program and provides support to Green Technology R&D. This program 
provides for the establishment and enforcement of measures to 
facilitate research, development and commercialization of green 
technology, including financial support for these activities. Support 
is provided to approved applicants in the form of grants. The MKE 
determines the eligibility of the applicants for support under this 
program, consulting with affiliated research institutions when 
technological evaluation and confirmation are necessary. The GOK 
reported that the approval of the applicants is based on the merits of 
each application, which must be in accordance with the requirements set 
by the law and MKE's internal guidelines. According to the GOK, the 
provision of support under the program is automatic as long as the 
budgets earmarked for this program are available.
    Both Samsung and LG reported receiving grants under this program. 
Samsung reported receiving assistance for 10 R&D projects under this 
program, but stated that ``none of the projects involve subject 
merchandise directly or involves technologies related to subject 
merchandise or its production.'' \64\ Samsung has also provided the 
application and approval documents related to the projects for which it 
received assistance from 2009 through 2011.\65\ In Bottom Mount 
Refrigerators, we found that all but one project was tied to non-
subject merchandise. Based on the Samsung verification report that was 
submitted on the record of this investigation,\66\ and an examination 
of the application and approval documents provided by Samsung, we 
preliminarily determine that one project relates broadly to numerous 
types of products, including subject merchandise. Therefore, the grants 
provided for that project are not tied to any particular merchandise, 
subject or non-subject.\67\
---------------------------------------------------------------------------

    \64\ See Samsung's April 9, 2012 response at page 2 of Exhibit 
17.
    \65\ See Samsung's April 9, 2012 response at Exhibits 17C and 
17D, respectively.
    \66\ See Samsung's May 22, 2012 response.
    \67\ See 19 CFR 351.525(b)(5)(i).
---------------------------------------------------------------------------

    LG reported that from 2009 through 2011, it received a number of 
grants under the Green Technology R&D program. Of these grants, LG has 
identified the ``Development of Smart Grid Technology for Electronic 
Devices'' (Smart Grid) project, as being the only project for which it 
received grants that are applicable to subject merchandise. LG received 
grants for this project in 2009, 2010, and 2011. According to LG, the 
focus of this project is to make home appliances function in a more 
energy efficient manner. LG identified three of its business units that 
make products that can incorporate Smart Grid technology: Home 
Appliances, Air Conditioning, and Home Electronics. Because washing 
machines are classified as home appliances, we preliminarily determine 
that the grant LG received for the development of Smart Grid technology 
is tied at the point of approval to the development of home appliances, 
which include washing machines.\68\ For the remaining projects, LG has 
provided approval documentation from the GOK indicating that grants for 
these projects are tied at the point of approval to the development of 
non-subject merchandise. Therefore, we preliminarily determine that 
grants received under the Green Technology R&D program by LG for 
projects, other than the Smart Grid technology project, are not 
countervailable.
---------------------------------------------------------------------------

    \68\ See 19 CFR 351.525(b)(5)(i).
---------------------------------------------------------------------------

    The Department has previously determined that grants under the 
Green Technology R&D program are countervailable subsidies because 
financial assistance under this program is expressly limited by law to 
27 core technologies related to ``Green Technology,'' and is therefore 
de jure specific under section 771(5A)(D)(i) of the Act, while the 
grants constitute a direct transfer of funds under section 771(5)(D)(i) 
of the Act and provide a benefit in the amount of the grant, in 
accordance with 19 CFR 351.504(a).\69\ There is no new information or 
evidence of changed circumstances that warrants the reconsideration of 
that determination.
---------------------------------------------------------------------------

    \69\ See Bottom Mount Refrigerators and accompanying Issues and 
Decision Memorandum at 27.
---------------------------------------------------------------------------

    Although the GOK has indicated that this program should be 
considered to provide recurring benefits, we determine that the grants 
provided under this program are non-recurring, in accordance with 19 
CFR 351.524(c), which provides that the Department will normally treat 
grants as non-recurring subsidies; the GOK, Samsung, and LG have not 
provided any evidence that would warrant treating the grants as 
recurring. Accordingly, for Samsung, we examined the grants provided 
under the relevant project that Samsung received in years prior to the 
POI to determine whether they exceed 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.\70\ Since the grants received by 
Samsung did not meet the 0.5 percent test, the grants received in each 
year are appropriately expensed in the year of receipt. Therefore, the 
benefit under this program is the amount of the grant provided under 
the relevant project received by Samsung in 2011, the POI. However, the 
calculation of the subsidy from this grant results in a rate that is 
less than 0.005 percent and, as such, this rate does not have an impact 
on the overall subsidy rate for Samsung. Consistent with our past 
practice, we therefore have not included this program in our net 
subsidy rate calculations for Samsung.\71\
---------------------------------------------------------------------------

    \70\ See 19 CFR 351.524(b)(2).
    \71\ See, e.g., HRS from India, and accompanying Issues and 
Decision Memorandum at ``Exemption from the CST.''
---------------------------------------------------------------------------

    We also examined the Smart Grid technology grants that LG received 
in 2009, 2010, and 2011 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.\72\ Since the 
Smart Grid technology grants reported by LG did not meet the 0.5 
percent test, the grants received in each year are appropriately 
expensed in the year of receipt. Therefore, the benefit under this 
program is the amount of the Smart Grid technology grants received by 
LG in 2011, the POI. We divided the benefit received by LG in 2011 from 
the Smart Grid technology grant by LG's FOB sales of washing machines 
during the POI.\73\ On this basis, we preliminarily determine the 
countervailable subsidy provided to LG under this program to be 0.22 
percent ad valorem.
---------------------------------------------------------------------------

    \72\ See 19 CFR 351.524(b)(2).
    \73\ In LG's April 9, 2012 response, at Exhibit 28, LG stated 
that its ``Smart Grid'' technology grant is related to home 
appliances. However, when asked to provide a denominator based on 
LG's FOB sales of home appliances, LG provided a figure that 
includes the sales of its Home Appliance, Air Conditioning, and Home 
Electronics business units. See LG's May 10, 2012 response at 16. 
Since the documentation provided does not indicate the products to 
which this grant is related, and, even assuming arguendo, that the 
grant was provided to develop Smart Grid technology for home 
appliances, the denominator provided by LG includes more than home 
appliances, based on the common definition of home appliances (see 
the LG Preliminary Calculation Memorandum). Based on the information 
in the record to date regarding the applicability of Smart Grid 
technology, and the products to which the R&D grants may be tied, we 
do not agree with LG that this is the appropriate denominator. 
Therefore, for the purposes of this preliminary determination, we 
have used LG's total sales of washing machines as the denominator, 
and will continue to gather information about this grant and the 
products to which benefit may be tied and should be attributed.

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

[[Page 33191]]

F. GOK 21st Century Frontier and Other R&D Programs

    The 21st Century Frontier R&D program was introduced by the GOK in 
1999 to facilitate development of core technologies that can be applied 
in a broad range of industries across all business sectors of Korea. 
According to the GOK, this program provides long-term loans to eligible 
companies in the form of a matching fund, i.e., the selected company 
first pledges the commitment of its own funds for the R&D projects that 
are covered by this program and then the GOK provides a matching fund. 
The matching fund is provided by the Ministry of Education, Science and 
Technology (MEST) or by the MKE, depending on the nature of the 
project. The GOK explained that, although the rule for the government's 
provision of the matching fund is to provide the same amount of money 
as pledged by the applicant, the specific amount of the government's 
matching funds varies depending upon the nature of the project and the 
financial condition of the applicant. The recipient company is given a 
three-, five- or 10-year development period which is stipulated in the 
contract with MEST or MKE. If the development is successfully 
completed, the recipient company is required to repay the amount of the 
original assistance from the government. There is no interest applied 
to the GOK's matching funds.
    The GOK reported that a total of 22 projects have been launched 
since 1999 under this program. Among these, the GOK identified only 
projects that could be relevant to washing machines, the Information 
Display R&D Center project that started in 2002 and is administered by 
the MKE.
    The Information Display R&D Center project has three sub-projects 
of which two, the LCD and PDP display projects, were completed in June 
2005. The third sub-project, the future display development project, is 
composed of two segments: the first segment was completed in March 
2008; the second segment started in June 2008 and is due to be 
completed in May 2012. The key criterion governing eligibility is 
whether the applicant possesses the research capability and adequate 
human resources sufficient to successfully carry out the task required 
by the research project. The MKE looks into the technological profiles 
and previous development records of the applicant in the information 
display area, which form the basis for the MKE's review and approval of 
applications. The statutory bases for this program are Article 7 of the 
Technology Development Promotion Act, and Article 15 of the Enforcement 
Decree of the Act.
    In DRAMS from Korea and Bottom Mount Refrigerators, the Department 
investigated the 21st Century Frontier R&D program and determined that 
the project area is the appropriate level of analysis for determining 
whether the program is specific. The Department has previously 
determined that grants under the ``Information Display R&D Center'' 
project area are de jure specific under section 771(5A)(D)(i) of the 
Act because assistance under this project is limited to information 
display technologies. Further, we have previously determined that such 
grants constitute a direct transfer of funds under section 771(5)(D)(i) 
of the Act and provide a benefit in the amount of the grant, in 
accordance with 19 CFR 351.504(a).\74\ There is no new information or 
evidence of changed circumstances that warrants the reconsideration of 
this determination, and we find our prior analysis equally applicable 
to the record of this POI.
---------------------------------------------------------------------------

    \74\ See, e.g., Final Affirmative Countervailing Duty 
Determination: Dynamic Random Access Memory Semiconductors from the 
Republic of Korea, 68 FR 37122 (June 23, 2003) (DRAMS from Korea) 
and accompanying Issues and Decision Memorandum at Comment 27. See 
also Bottom Mount Refrigerators and accompanying Issues and Decision 
Memorandum at 29.
---------------------------------------------------------------------------

    We consider the grants to be non-recurring benefits, in accordance 
with 19 CFR 351.524(c). Both Samsung and LG reported receiving grants 
under this project. For each year over the 10-year AUL period (the POI, 
i.e., 2011, and the prior nine years), in which Samsung received 
financial assistance, we checked whether the amounts received exceeded 
0.5 percent of the company's sales in that year in order to determine 
whether the benefits should be allocated over time or to the year of 
receipt. None of the grants reported over the AUL period met the 
prerequisite for allocation over time. Therefore, we expensed all 
grants to the year of receipt. Thus, to calculate the subsidy, we 
summed all grants received in the POI and divided the resulting benefit 
by the company's total sales during the POI. However, the calculation 
of the subsidy from these grants results in a rate that is less than 
0.005 percent and, as such, this rate does not have an impact on the 
overall subsidy rate for Samsung. Consistent with our past practice, we 
therefore have not included this program in our net subsidy rate 
calculations for Samsung.\75\
---------------------------------------------------------------------------

    \75\ See, e.g., HRS from India, and accompanying Issues and 
Decision Memorandum at ``Exemption from the CST.''
---------------------------------------------------------------------------

    We examined the documentation provided by LG regarding the grants 
received from 2002-2004, and find that the assistance is related to the 
development of plasma display televisions 70 inches or greater in size. 
Thus, we preliminarily determine that grants to LG under this program 
do not benefit the production of subject merchandise. This is 
consistent with our finding in Bottom Mount Refrigerators, where we 
examined grants for the same project.

G. Support for SME ``Green Partnerships''

    According to the GOK, the ``Support for SME `Green Partnerships''' 
program was first introduced in 2003 in an effort to introduce a 
mechanism through which large corporations could provide SMEs with 
their expertise and know-how regarding environmentally friendly 
business management, clean production technology, and cultivation of 
necessary human resources. These partnerships between large 
corporations and SMEs allow SMEs to accumulate expertise and 
technologies that enable them to produce parts and materials in an 
environmentally friendly manner. Partnerships are jointly funded by the 
MKE and participating large corporations on a project-by-project basis. 
Large corporations who participate in the program provide funds, to 
which the MKE provides a matching fund. Funds are deposited in the 
account of the large corporation, and it is from this account that a 
large corporation transfers funds to participating SMEs. According to 
the GOK, large corporations cannot themselves use or otherwise transfer 
funds in the account. It is the responsibility of the large corporation 
to take on the role of project manager, and to provide participating 
SMEs with its expertise and knowhow for establishing environmentally 
friendly business practices. The GOK reported that since the program 
began in 2003 and, through the POI, 35 large enterprises have 
participated in this program to provide assistance to 970 SMEs.
    LG reported receiving funds under this program during the POI, as 
well as in 2006 and 2007. Samsung reported that it did not use the 
program during the POI, but that it did receive funds under this 
program in 2006 and 2007. Because funds under the ``Support for SME 
`Green Partnerships' '' program are, according to the GOK, only 
provided to ``large corporations,'' we preliminarily determine that 
this program is de jure specific within the meaning of section 
771(5A)(D)(i) of the Act. Funds provided under the ``Support for SME 
`Green Partnerships' '' program constitute a financial contribution in 
the

[[Page 33192]]

form of a grant within the meaning of section 771(5)(D)(i) of the Act. 
A benefit exists in the amount of the grant provided in accordance with 
19 CFR 351.504(a).
    Furthermore, we determine that the grants provided under this 
program are non-recurring, in accordance with 19 CFR 351.524(c), which 
provides that the Department will normally treat grants as non-
recurring subsidies; the GOK, Samsung, and LG have not provided any 
information that would warrant treating the grants as recurring. 
Accordingly, we examined the grants that Samsung and LG received for 
the years 2006 and 2007 to determine whether they exceeded 0.5 percent 
of each company's sales in that year to determine whether the benefits 
should be allocated over time or to the year of receipt.\76\ Since the 
grants reported by Samsung and LG did not meet the 0.5 percent test, 
the grants received are appropriately expensed in the year of receipt. 
Because Samsung did not receive grants during the POI, there is no 
benefit to Samsung during the POI. To calculate the benefit to LG for 
the grant received by LG during the POI, we divided the amount of the 
grant received by LG during the POI by the company's total sales during 
that year. However, the calculation of the subsidy from this grant 
results in a rate that is less than 0.005 percent and, as such, this 
rate does not have an impact on LG's overall subsidy rate. Consistent 
with our past practice, we therefore have not included this program in 
our net subsidy rate calculations for LG.\77\
---------------------------------------------------------------------------

    \76\ See 19 CFR 351.524(b)(2).
    \77\ See, e.g., HRS from India, and accompanying Issues and 
Decision Memorandum at ``Exemption from the CST.''
---------------------------------------------------------------------------

H. Korea Development Bank (KDB) and Industrial Bank of Korea (IBK) 
Short-Term Discounted Loans for Export Receivables

    The KDB and the IBK provide support to exporters 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. D/A 
and O/A financing are based on the credit ratings of the exporter, as 
well as contracts between importers and exporters. In a D/A 
transaction, the exporter first loads contracted goods for shipment 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.
    The Department has previously determined that loans provided under 
this program are specific because they are contingent upon export 
performance, in accordance with sections 771(5A)(A) and (B) of the Act, 
that 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, and that such loans confer a benefit, in 
accordance with section 771(5)(E)(ii) of the Act, to the extent of any 
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.\78\
---------------------------------------------------------------------------

    \78\ See Bottom Mount Refrigerators and accompanying Issues and 
Decision Memorandum at 13.
---------------------------------------------------------------------------

    LG and Samsung reported using this program during the POI. LG 
reported having loans from IBK outstanding during the POI that were 
tied only to exports of subject merchandise to the United States.\79\ 
Thus, to calculate the benefit for LG, for each IBK loan tied to 
subject merchandise, we compared the amount of interest paid on the IBK 
loans to the amount of interest that would be paid on a comparable 
commercial loan in accordance with 19 CFR 351.505(a).\80\ Where the 
interest actually paid on the IBK loans was less than the interest that 
would have been payable at the benchmark rate, the difference is the 
benefit. For all IBK loans, the interest that LG actually paid was 
greater than the interest that would have been paid at the benchmark 
interest rate. Therefore, there is no benefit to LG from the IBK loans 
it received during the POI. Samsung also reported using the program and 
provided information about individual KDB and IBK loans received during 
the POI. However, information provided by Samsung indicates that loans 
it received under this program are not tied at the point of bestowal to 
specific merchandise.
---------------------------------------------------------------------------

    \79\ LG reported that none of the KDB loans it received that 
were outstanding during the POI were tied only to exports of subject 
merchandise to the United States.
    \80\ See ``Subsidies Valuation Information'' section, above.
---------------------------------------------------------------------------

    Thus, we are measuring the benefit from all of Samsung's IBK and 
KDB loans, for exports of all products to all markets, and we are 
attributing that benefit to Samsung's total export sales. Because 
Samsung did not provide sufficient information on its comparable 
commercial short-term loans, we calculated the benefit for Samsung from 
the loans outstanding during the POI by comparing the amount of 
interest paid on the KDB and IBK loans, 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.\81\ 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 Samsung to the interest payments, on a loan-by-loan 
basis, that Samsung 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. However, 
the calculation of the subsidy from these loans results in a rate that 
is less than 0.005 percent and, as such, this rate does not have an 
impact on the overall subsidy rate for Samsung. Consistent with our 
past practice, we therefore have not included this program in our net 
subsidy rate calculations for Samsung.\82\
---------------------------------------------------------------------------

    \81\ See the Samsung Preliminary Calculation Memorandum.
    \82\ See, e.g., HRS from India, and accompanying Issues and 
Decision Memorandum at ``Exemption from the CST.''
---------------------------------------------------------------------------

II. Program Preliminarily Determined To Be Not Countervailable During 
the POI

A. Korea Trade Insurance Corporation (K-SURE)--Short-Term Export Credit 
Insurance

    The Korean Export Insurance Corporation (KEIC) was established in 
1992 to administer export and import insurance programs for the purpose 
of facilitating Korean manufacturers'

[[Page 33193]]

participation in global trade. The KEIC became K-SURE in 2010. The 
Department initiated on K-SURE's short-term export insurance program 
which is designed to cover an exporter or letter of credit-issuing bank 
from the non-payment risk in transactions that have a payment period of 
less than two years. Under this program, insurance policies issued to 
Korean companies provide protection from risks such as payment refusal 
and buyer's breach of contract. According to the GOK, K-SURE determines 
premium rates by considering numerous factors, including the 
creditworthiness of the importing party and the terms of the policy.
    To determine whether an export insurance program is 
countervailable, we must examine whether the premium rates charged are 
adequate to cover the program's long-term operating costs and 
losses.\83\ In its questionnaire response, the GOK provided a summary 
of K-SURE's income and expenses compiled from K-SURE's financial 
statements with respect to its short-term export credit insurance 
program. The data contained K-SURE's income comprising premiums charged 
and claims recovered, and its expenses comprising claims paid and 
managing/operating expenses of the program. The GOK provided these data 
for the POI and all years during the AUL.\84\ As required by the 
Department's regulation and discussed in the CVD Preamble, we have 
analyzed the data over the long term.\85\ These data demonstrate that 
over the five-year period ending with the POI, K-SURE's short-term 
export credit insurance program was profitable as a result of its 
operations. Because of the net profitability over the period of five 
years, we find that the premiums charged by K-SURE are adequate to 
cover the long-term operating costs and losses of the program within 
the meaning of 19 CFR 351.520(a)(1). Thus, we preliminarily determine 
that this program is not countervailable during the POI. We also note 
that both Samsung and LG reported that they had no claims paid under 
this program related to exports of subject merchandise to the United 
States during the POI.
---------------------------------------------------------------------------

    \83\ See Bottom Mount Refrigerators and accompanying Issues and 
Decision Memorandum at 13.
    \84\ See GOK's April 9, 2012 response at 79.
    \85\ See 19 CFR 351.520(a)(1) and the CVD Preamble, 63 FR at 
65385.
---------------------------------------------------------------------------

III. Programs Preliminarily Determined To Be Not Used by Participating 
Respondents

    We preliminarily determine that the participating respondents, 
Samsung and LG, did not apply for or receive any benefits during the 
POI under the following programs:

A. GOK Supplier Support Fund Tax Deduction

    We initiated an investigation of this program based on the 
petitioner showing that the GOK provides an income tax deduction under 
Article 8-3 of the RSTA in the amount of seven percent of contributions 
made by large corporations to supplier support funds, as well as income 
tax exemptions where a large enterprise makes cash or cash-equivalent 
payment to its SME suppliers to aid in their liquidity.
    The GOK provided documentation showing that this program went into 
effect on January 1, 2011 with the introduction of Article 8-3 of the 
RSTA. Because this program went into effect in 2011, any benefits from 
this program would not be realized until the tax returns for 2011 are 
filed in 2012. 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 2011 tax year, which is filed in 2012, after the POI. 
Therefore, we preliminarily determine that this program could not be 
used by any Korean producers/exporters during the POI.

B. Daewoo Restructuring

    1. GOK-Directed Equity Infusions under the Daewoo Workout.
    2. GOK-Directed Ongoing Preferential Lending under the Daewoo 
Workout.

C. Korean Export-Import Bank Export Factoring

D. IBK Preferential Loans to Green Enterprises

 Suspension of Liquidation
    In accordance with section 703(d)(1)(A)(i) of the Act, we have 
calculated separate subsidy rates for Samsung, LG, and Daewoo, the 
three producers/exporters of the subject merchandise. We have also 
calculated an all-others rate. Sections 703(d) and 705(c)(5)(A) of the 
Act state that for companies not investigated, we will determine an 
all-others rate by weighting the individual company subsidy rate of 
each of the companies investigated by each company's exports of the 
subject merchandise to the United States. However, the all-others rate 
may not include zero and de minimis rates or any rates based solely on 
the facts available. In this investigation, the only rate that is not 
de minimis or based entirely on AFA is the rate calculated for Samsung. 
Consequently, the rate calculated for Samsung is also assigned as the 
``all-others'' rate. For Daewoo, which did not participate in this 
investigation, we have determined a rate based solely on AFA, in 
accordance with sections 776(a) and (b) of the Act.\86\ The overall 
subsidy rates are summarized in the table below:
---------------------------------------------------------------------------

    \86\ See the ``Use of Facts Otherwise Available and Adverse 
Inferences'' section of this notice.

----------------------------------------------------------------------------------------------------------------
            Manufacturer/Exporter                                        Subsidy rate
----------------------------------------------------------------------------------------------------------------
Samsung Electronics Co., Ltd................  1.20 percent ad valorem.
LG Electronics Inc..........................  0.22 percent ad valorem (de minimis).
Daewoo Electronics Corporation..............  70.58 percent ad valorem.
All Others Rate.............................  1.20 percent ad valorem.
----------------------------------------------------------------------------------------------------------------

    In accordance with sections 703(d)(1)(B) and (2) of the Act, we are 
directing CBP to suspend liquidation of all entries of the subject 
merchandise from Korea, other than those exported by LG because LG's 
rate is de minimis, that are entered, or withdrawn from warehouse, for 
consumption on or after the date of the publication of this notice in 
the Federal Register, and to require a cash deposit for such entries of 
the merchandise in the amounts indicated above.\87\
---------------------------------------------------------------------------

    \87\ See Modification of Regulations Regarding the Practice of 
Accepting Bonds During the Provisional Measures Period in 
Antidumping and Countervailing Duty Investigations, 76 FR 61042 
(October 3, 2011).
---------------------------------------------------------------------------

ITC Notification
    In accordance with section 703(f) of the Act, we will notify the 
ITC of our

[[Page 33194]]

determination. In addition, we are making available to the ITC all non-
privileged and non-proprietary information relating to this 
investigation. We will allow the ITC access to all privileged and 
business proprietary information in our files, provided the ITC 
confirms that it will not disclose such information, either publicly or 
under an administrative protective order, without the written consent 
of the Assistant Secretary for Import Administration. In accordance 
with section 705(b)(2)(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.
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.
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 
discuss the arguments raised in case or rebuttal briefs, provided that 
such a hearing is requested by an interested party. 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. 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.
    This determination is issued and published pursuant to sections 
703(f) and 777(i) of the Act.

    Dated: May 29, 2012.
Paul Piquado,
Assistant Secretary for Import Administration.
[FR Doc. 2012-13562 Filed 6-4-12; 8:45 am]
BILLING CODE 3510-DS-P