Corrosion-Resistant Carbon Steel Flat Products From the Republic of Korea: Preliminary Results of Countervailing Duty Administrative Review, 46100-46110 [E9-21614]

Agencies

• DEPARTMENT OF COMMERCE
• International Trade Administration

[Federal Register Volume 74, Number 172 (Tuesday, September 8, 2009)]
[Notices]
[Pages 46100-46110]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-21614]


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DEPARTMENT OF COMMERCE

International Trade Administration

[C-580-818]


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

AGENCY: Import Administration, International Trade Administration, 
Department of Commerce.
SUMMARY: The Department of Commerce (the Department) is conducting an 
administrative review of the countervailing duty (CVD) order on 
corrosion-resistant carbon steel flat products (CORE) from the Republic 
of Korea (Korea) for the period of review (POR) January 1, 2007, 
through December 31, 2007. For information on the net subsidy for each 
company reviewed, see the ``Preliminary Results of Review'' section of 
this notice. Interested parties are invited to comment on these 
preliminary results. See the ``Public Comment'' section of this notice.

DATES: Effective Date: September 8, 2009.

FOR FURTHER INFORMATION CONTACT: Robert Copyak or Gayle Longest, AD/CVD 
Operations, Office 3, Import Administration, International Trade 
Administration, U.S. Department of Commerce, Room 4014, 14th Street and 
Constitution Ave., NW., Washington, DC 20230; telephone: (202) 482-2209 
and (202) 482-3338, respectively.

SUPPLEMENTARY INFORMATION:

Background

    On August 17, 1993, the Department published in the Federal 
Register the CVD order on CORE from Korea. See Countervailing Duty 
Orders and Amendments of Final Affirmative Countervailing Duty 
Determinations: Certain Steel Products from Korea, 58 FR 43752 (August 
17, 1993). On August 1, 2008, the Department published a notice of 
opportunity to request an administrative review of this CVD order. See 
Antidumping or Countervailing Duty Order, Finding, or Suspended 
Investigation: Opportunity to Request Administrative Review, 73 FR 
44966 (August 1, 2008).
    On August 29, 2008, we received a timely request for review from 
petitioners \1\ with regard to Pohang Iron and Steel Co., Ltd. (POSCO) 
and Dongbu Steel Co., Ltd. (Dongbu). On August 29, 2008, we also 
received a timely request for review from Hyundai HYSCO Ltd. (HYSCO). 
On September 30, 2008, the Department published a notice of initiation 
of the administrative review of the CVD order on CORE from Korea 
covering the period January 1, 2007, through December 31, 2007. See 
Initiation of Antidumping and Countervailing Duty Administrative 
Reviews and Requests for Revocation in Part, 73 FR 56794, 56796 
(September 30, 2008). On October 2, 2008, the Department issued the 
initial questionnaire to Dongbu, HYSCO, and POSCO as well as the 
Government of Korea (GOK). On November 24, 2008, the Department 
received questionnaire responses from POSCO, POSCO Steel Service & 
Sales Co., Ltd. (POSTEEL, a trading company for POSCO), Pohang Steel 
Co., Ltd. (POCOS, a production affiliate of POSCO),\2\ Dongbu, and 
HYSCO. On November 25, 2008, the Department received the GOK's 
questionnaire response. On February 25 and February 26, 2009, the 
Department received supplemental questionnaire responses from the GOK 
and HYSCO, respectively. On March 27, 2009, the Department received 
supplemental questionnaire responses from the GOK and POSCO. On April 
3, 2009, the Department received a supplemental questionnaire response 
from the GOK. On April 15, 2009, the Department received a second 
supplemental questionnaire response from HYSCO. On April 16, 2009, the 
Department issued a third supplemental questionnaire to HYSCO and 
received the company's response on April 30, 2009. On May 8, 2009, and 
May 13, 2009, the Department issued additional supplemental 
questionnaires to POSCO and the GOK, respectively. On May 22, 2009, and 
May 27, 2009, the Department received responses from POSCO and the GOK, 
respectively.
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    \1\ Petitioners are Nucor Corporation and United States Steel 
Corporation.
    \2\ In these preliminary results, unless otherwise stated, we 
use POSCO to collectively refer to POSCO, POCOS, and POSTEEL.
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    In accordance with 19 CFR 351.213(b), this review covers only those 
producers or exporters for which a review was specifically requested. 
The companies subject to this review are Dongbu, HYSCO, and POSCO (and 
its affiliates POCOS and POSTEEL).

Affiliated Companies

    In this administrative review, record evidence indicates that POCOS 
is a majority-owned production affiliate of POSCO. Under 19 CFR 
351.525(b)(6)(iii), if the firm that received a subsidy is a holding 
company, including a parent company with its own operations, the 
Department

[[Page 46101]]

will attribute the subsidy to the consolidated sales of the holding 
company and its subsidiaries. Thus, we attributed any subsidies 
received by POCOS to POSCO and its subsidiaries, net of intra-company 
sales. Dongbu reported that it is the only member of the Dongbu group 
in Korea that was involved with the production and sale of subject 
merchandise to the United States. HYSCO reported that it is the only 
company within the Hyundai Motor Group that produces and sells the 
subject merchandise.

Scope of Order

    Products covered by this order are certain corrosion-resistant 
carbon steel flat products from Korea. These products include flat-
rolled carbon steel products, of rectangular shape, either clad, 
plated, or coated with corrosion-resistant metals such as zinc, 
aluminum, or zinc-, aluminum-, nickel- or iron-based alloys, whether or 
not corrugated or painted, varnished or coated with plastics or other 
nonmetallic substances in addition to the metallic coating, in coils 
(whether or not in successively superimposed layers) and of a width of 
0.5 inch or greater, or in straight lengths which, if of a thickness 
less than 4.75 millimeters, are of a width of 0.5 inch or greater and 
which measures at least 10 times the thickness or if of a thickness of 
4.75 millimeters or more are of a width which exceeds 150 millimeters 
and measures at least twice the thickness. The merchandise subject to 
this order is currently classifiable in the Harmonized Tariff Schedule 
of the United States (HTSUS) at subheadings: 7210.30.0000, 
7210.31.0000, 7210.39.0000, 7210.41.0000, 7210.49.0030, 7210.49.0090, 
7210.60.0000, 7210.61.0000, 7210.70.6030, 7210.70.6060, 7210.70.6090, 
7210.90.1000, 7210.90.6000, 7210.90.9000, 7212.20.0000, 7212.21.0000, 
7212.29.0000, 7212.30.1030, 7212.30.1090, 7212.30.3000, 7212.30.5000, 
7212.40.1000, 7212.40.5000, 7212.50.0000, 7212.60.0000, 7215.90.1000, 
7215.90.3000, 7215.90.5000, 7217.12.1000, 7217.13.1000, 7217.19.1000, 
7217.19.5000, 7217.20.1500, 7217.22.5000, 7217.23.5000, 7217.29.1000, 
7217.29.5000, 7217.30.15.0000, 7217.32.5000, 7217.33.5000, 
7217.39.1000, 7217.39.5000, 7217.90.1000 and 7217.90.5000. Although the 
HTSUS subheadings are provided for convenience and customs purposes, 
the Department's written description of the merchandise is dispositive.

Average Useful Life

    Under 19 CFR 351.524(d)(2), we will presume the allocation period 
for non-recurring subsidies to be the average useful life (AUL) of 
renewable physical assets for the industry concerned as listed in the 
Internal Revenue Service's (IRS) 1997 Class Life Asset Depreciation 
Range System, as updated by the Department of the Treasury. The 
presumption will apply unless a party claims and establishes that the 
IRS tables do not reasonably reflect the company-specific AUL or the 
country-wide AUL for the industry under examination and that the 
difference between the company-specific and/or country-wide AUL and the 
AUL from the IRS tables is significant. According to the IRS tables, 
the AUL of the steel industry is 15 years. No interested party 
challenged the 15-year AUL derived from the IRS tables. Thus, in this 
review, we have allocated, where applicable, all of the non-recurring 
subsidies provided to the producers/exporters of subject merchandise 
over a 15-year AUL.

Creditworthiness

    In their February 9, 2009, submission petitioners allege that 
Dongbu was uncreditworthy during 2004 through 2007. The examination of 
creditworthiness is an attempt to determine if the company in question 
could obtain long-term financing from conventional commercial sources. 
See 19 CFR 351.505(a)(4). According to 19 CFR 351.505(a)(4)(i), the 
Department will generally consider a firm to be uncreditworthy if, 
based on information available at the time of the government-provided 
loan, the firm could not have obtained long-term loans from 
conventional commercial sources. In making this determination, 
according to 19 CFR 351.505(a)(4)(i), the Department normally examines 
the following four types of information: (1) The receipt by the firm of 
comparable commercial long-term loans; (2) present and past indicators 
of the firm's financial health; (3) present and past indicators of the 
firm's ability to meet its costs and fixed financial obligations with 
its cash flow; and (4) evidence of the firm's future financial 
position.
    As explained in the Department's memorandum dated August 31, 2009, 
we find that Dongbu obtained comparable loans from commercial lending 
institutions that coincide with the time period during which 
petitioners allege Dongbu was uncreditworthy. See Memorandum to Melissa 
G. Skinner, Director, AD/CVD Operations, Office 3, titled 
``Uncreditworthiness Allegation Regarding Dongbu Steel Co., Ltd.'' 
(August 31, 2009) (Creditworthy Memorandum), of which a public version 
is on file in Room 1117 of the main Commerce building in the Central 
Records Unit (CRU). Therefore, in accordance with 19 CFR 
351.505(a)(4)(i), we preliminarily determine that Dongbu was 
creditworthy during 2004 through 2007. For further information see the 
Creditworthy Memorandum.

Subsidies Valuation Information

A. Benchmarks for Short-Term Financing

    For those programs requiring the application of a won-denominated, 
short-term interest rate benchmark, in accordance with 19 CFR 
351.505(a)(2)(iv), we used as our benchmark the company-specific 
weighted-average interest rate for commercial won-denominated loans 
outstanding during the POR. Where no such benchmark instruments are 
available, we used national average lending rates for the POR, as 
reported in the International Monetary Fund's (IMF) International 
Financial Statistics Yearbook. This approach is in accordance with 19 
CFR 351.505(a)(3)(ii) and the Department's practice. See, e.g., See 
Corrosion--Resistant Carbon Steel Flat Products from the Republic of 
Korea: Final Results of Countervailing Duty Administrative Review, 74 
FR 2512 (January 15, 2009) (CORE from Korea 2006), and accompanying 
Issues and Decision Memorandum (CORE from Korea 2006 Decision 
Memorandum) at ``Benchmarks for Short-Term Financing.''
    For document acceptance (D/A) loans rediscounted under the Korean 
Export Import Bank's (KEXIM's) rediscount program, in accordance with 
19 CFR 351.505(a)(2)(ii), we used, for benchmark purposes, usance loans 
issued by commercial banks to the respondent firms. This approach is in 
accordance with 19 CFR 351.505(a)(2)(ii) and the Department's practice. 
See, e.g., Coated Free Sheet Paper from the Republic of Korea: Notice 
of Final Affirmative Countervailing Duty Determination, 72 FR 60639 
(October 25, 2007) (CFS Paper Investigation), and accompanying Issues 
and Decision Memorandum at ``Comment 18'' (CFS Paper Decision 
Memorandum).

B. Benchmark for Long-Term Loans

    During the POR, Dongbu, HYSCO, and POSCO had outstanding

[[Page 46102]]

countervailable long-term won-denominated and foreign-currency 
denominated loans from government-owned banks and Korean commercial 
banks. We used the following benchmarks to calculate the subsidies 
attributable to respondents' countervailable long-term loans obtained 
through 2007:
    (1) For countervailable, foreign-currency denominated loans, we 
used the company-specific weighted-average foreign currency-denominated 
interest rates on the company's loans from foreign bank branches in 
Korea, foreign securities, and direct foreign loans outstanding during 
the POR. Where no such benchmark instruments were available, and 
consistent with 19 CFR 351.505(a)(3)(ii), as well as our practice, we 
relied on the national average lending rates as reported by the IMF's 
International Financial Statistics Yearbook. See, e.g., CORE from Korea 
2006 and CORE from Korea 2006 Decision Memorandum at ``Benchmarks for 
Long-Term Loans.''
    (2) For countervailable, won-denominated long-term loans, we used, 
where available, the company-specific interest rates on the company's 
comparable commercial, won-denominated loans. If such loans were not 
available, we used, where available, the company-specific corporate 
bond rate on the company's public and private bonds, as we determined 
that the GOK did not control the Korean domestic bond market after 
1991. See, e.g., Final Negative Countervailing Duty Determination: 
Stainless Steel Plate in Coils from the Republic of Korea, 64 FR 15530, 
15531 (March 31, 1999) (Stainless Steel Investigation) and ``Analysis 
Memorandum on the Korean Domestic Bond Market'' (March 9, 1999). The 
use of a corporate bond rate as a long-term benchmark interest rate is 
consistent with the approach the Department has taken in several prior 
Korean CVD proceedings. See Id.; see also Final Affirmative 
Countervailing Duty Determination: Structural Steel Beams from the 
Republic of Korea (H Beams Investigation), 65 FR 41051 (July 3, 2000), 
and accompanying Issues and Decision Memorandum at ``Benchmark Interest 
Rates and Discount Rates;'' and Final Affirmative Countervailing Duty 
Determination: Dynamic Random Access Memory Semiconductors from the 
Republic of Korea, 68 FR 37122 (June 23, 2003) (DRAMS Investigation), 
and accompanying Issues and Decision Memorandum at ``Discount Rates and 
Benchmark for Loans.'' Specifically, in those cases, we determined 
that, absent company-specific, commercial long-term loan interest 
rates, the won-denominated corporate bond rate is the best indicator of 
the commercial long-term borrowing rates for won-denominated loans in 
Korea. Where company-specific rates were not available, we used the 
national average of the yields on three-year, won-denominated corporate 
bonds, as reported by the Bank of Korea (BOK). This approach is 
consistent with 19 CFR 351.505(a)(3)(ii) and our practice. See, e.g., 
CORE from Korea 2006 Decision Memorandum at ``Benchmark for Long Term 
Loans.''
    In accordance with 19 CFR 351.505(a)(2)(i), our benchmarks take 
into consideration the structure of the government-provided loans. For 
countervailable fixed-rate loans, pursuant to 19 CFR 
351.505(a)(2)(iii), we used benchmark rates issued in the same year 
that the government loans were issued. For countervailable variable-
rate loans outstanding during the POR, pursuant to 19 CFR 
351.505(a)(5)(i), we used the interest rates of variable-rate lending 
instruments issued during the year in which the government loans were 
issued. Where such benchmark instruments were unavailable, we used 
interest rates from debt instruments issued during the POR as such 
rates also reflect a variable interest rate that would be in effect 
during the POR. See 19 CFR 351.505(a)(5)(ii).

I. Programs Determined To Be Countervailable

A. Asset Revaluation Under Article 56(2) of the Tax Reduction and 
Exemption Control Act (TERCL)

    Under Article 56(2) of the TERCL, the GOK permitted companies that 
made an initial public offering between January 1, 1987, and December 
31, 1990, to revalue their assets at a rate higher than the 25 percent 
required of most other companies under the Asset Revaluation Act. The 
Department has previously found this program to be countervailable. For 
example, in the CTL Plate Investigation, the Department determined that 
this program was de facto specific under section 771(5A)(D)(iii) of the 
Tariff Act of 1930, as amended (the Act), because the actual recipients 
of the subsidy were limited in number and the basic metal industry was 
a dominant user of this program. See Final Affirmative Countervailing 
Duty Determination: Certain Cut-to-Length Carbon-Quality Steel Plate 
from the Republic of Korea, 64 FR 73176, 73183 (December 29, 1999) (CTL 
Plate Investigation). We also determined that a financial contribution 
was provided in the form of tax revenue foregone pursuant to section 
771(5)(D)(ii) of the Act. Id. The Department further determined that a 
benefit was conferred within the meaning of section 771(5)(E) of the 
Act on those companies that were able to revalue their assets under 
TERCL Article 56(2) because the revaluation resulted in participants 
paying fewer taxes than they would otherwise pay absent the program. 
Id. No new information or evidence of changed circumstances was 
presented in this review to warrant any reconsideration of the 
countervailability of this program.
    The benefit from this program is the difference that the 
revaluation of depreciable assets has on a company's tax liability each 
year. Evidence on the record indicates that, in 1989, POSCO made an 
asset revaluation that increased its depreciation expense. To calculate 
the benefit to POSCO, we took the additional depreciation listed in the 
tax return filed during the POR, which resulted from the company's 
asset revaluation, and multiplied that amount by the tax rate 
applicable to that tax return. We then divided the resulting benefit by 
POSCO's total free on board (f.o.b.) sales. See 19 CFR 351.525(b)(3). 
On this basis, we preliminarily determine the net countervailable 
subsidy to be 0.02 percent ad valorem for POSCO. Dongbu and HYSCO did 
not use this program during the POR.

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

    The GOK, through the Ministry of Knowledge Economy (MKE),\3\ 
provides research and development (R&D) grants to support numerous 
projects pursuant to the IDA, including technology for core materials, 
components, engineering systems, and resource technology. The IDA is 
designed to foster the development of efficient technology for 
industrial development. To participate in this program a company may: 
(1) Perform its own R&D project, (2) participate through the Korea 
Association of New Iron and Steel Technology (KANIST),\4\ which is an 
association of steel companies established for the development of new 
iron and steel technology, and/or (3) participate in another company's 
R&D project and share R&D costs as well as funds received from the GOK. 
To be eligible to participate in this program, the applicant must meet 
the qualifications set forth in the basic plan and must perform R&D as 
set forth

[[Page 46103]]

under the Notice of Industrial Basic Technology Development Plan. If 
the R&D project is not successful, the company must repay the full 
amount of the grants provided by the GOK.
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    \3\ MKE was formerly known as the Ministry of Commerce, 
Industry, and Energy (MOCIE).
    \4\ Also known as Korea New Iron & Steel Technology Research 
Association (KNISTRA).
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    In the H Beams Investigation, the Department determined that 
through KANIST, the Korean steel industry receives funding specific to 
the steel industry. Therefore, given the nature of KANIST, the 
Department found projects under KANIST to be specific. See Preliminary 
Negative Countervailing Duty Determination with Final Antidumping Duty 
Determination: Structural Steel Beams From the Republic of Korea, 64 FR 
69731, 69740 (December 14, 1999) (unchanged in the final results, 65 FR 
69371 (July 3, 2000), and accompanying Issues and Decision Memorandum 
at ``R&D Grants Under the Korea New Iron & Steel Technology Research 
Association (KNISTRA)''). Further, we found that the grants constitute 
a financial contribution under section 771(5)(D)(i) of the Act in the 
form of a grant, and bestow a benefit under section 771(5)(E) of the 
Act in the amount of the grant. Id. No new factual information or 
evidence of changed circumstances has been provided to the Department 
with respect to this program. Therefore, we preliminarily continue to 
find that this program is de jure specific within the meaning of 
section 771(5A)(D)(i) of the Act and constitutes a financial 
contribution and confers a benefit under sections 771(5)(D)(i) and 
771(5)(E) of the Act, respectively.
    HYSCO and POSCO were the only responding companies that benefitted 
from this program during the POR. Both HYSCO and POSCO participated in 
projects indirectly through KANIST. POSCO also participated indirectly 
through the Korea Construction Equipment Research Association (KCERA). 
Both companies claim that projects for which grants were received from 
the government were not related to subject merchandise.
    Upon review of the information submitted by HYSCO, we preliminarily 
determine that certain grants pertain specifically to production of a 
product that is not subject merchandise. See Memorandum to the File 
titled ``HYSCO's R&D Grants Under the IDA'' (August 31, 2009) (HYSCO 
Grants Memorandum), of which a public version is on file in the CRU. In 
addition, based on our review of the information submitted by POSCO, we 
preliminarily determine that certain grants pertain to non-subject 
merchandise that involves a production process that is downstream from 
the production process for subject merchandise. See Memorandum to the 
File titled ``POSCO's R&D Grants Under the IDA'' (August 31, 2009) 
(POSCO Grants Memorandum), of which a public version is on file in the 
CRU. Therefore, consistent with 19 CFR 351.525(b)(5)(i) and our past 
practice, we preliminarily determine that these grants are tied to non-
subject merchandise. Hence, we did not include these grants in our 
benefit calculations.
    HYSCO and POSCO, however, did report receiving certain grants 
related to new technologies that are applicable to both inputs of 
subject merchandise as well as subject merchandise. See HYSCO Grants 
Memorandum and POSCO Grants Memorandum. Some of these R&D grants were 
examined in previous reviews of this order and were found to provide 
countervailable benefits for the same reasons. See Corrosion-Resistant 
Carbon Steel Flat Products from the Republic of Korea: Final Results of 
Countervailing Duty Administrative Review, 73 FR 2444 (January 15, 
2008) (2005 CORE from Korea), and accompanying Issues and Decision 
Memorandum at Comment 1 (2005 CORE from Korea Decision Memorandum); see 
also CORE from Korea 2006 Decision Memorandum, at ``Research and 
Development Grants Under the Industrial Development Act.'' In this 
administrative review, there is no information on the record that 
demonstrates that the R&D projects in question could not be used in the 
production of subject merchandise or that this new technology is 
limited to the development of non-subject merchandise. Therefore, we 
find in these preliminary results, as in prior reviews, that the R&D 
grants in question provide a countervailable benefit to HYSCO and POSCO 
during the POR.
    To determine the benefit from the grants that HYSCO and POSCO 
received through KANIST, we calculated the GOK's contribution for each 
R&D project that was apportioned to each company. See 19 CFR 
351.504(a). Next, in accordance with 19 CFR 351.524(b)(2), we 
determined whether to allocate the non-recurring benefit from the 
grants over a 15-year AUL by dividing the GOK approved grant amount by 
each company's total sales in the year of approval. Because the 
approved amounts were less than 0.5 percent of each company's total 
sales, we expensed the grants to the year(s) of receipt. Next, to 
calculate the net subsidy rate, we divided the portion of the benefit 
allocated to the POR by HYSCO's and POSCO's total f.o.b. sales for 
2007, respectively. See 19 CFR 351.525(b)(3). On this basis, we 
preliminarily determine net subsidy rates under this program to be 0.02 
percent ad valorem for HYSCO and 0.01 percent ad valorem for POSCO.
    With respect to POSCO's project with KCERA, we performed the grant 
calculation applying the same methodology described above for the 
grants received through KANIST. For the POR, we preliminarily determine 
the net subsidy rate for the grant received through KCERA under this 
program to be less than 0.005 percent ad valorem which, consistent with 
the Department's practice, does not confer a measurable benefit and is 
not included in the calculation of the net countervailable rate. See, 
e.g., CORE from Korea 2006 Decision Memorandum, at ``Long-Term Lending 
Provided by the KDB and Other GOK-Owned Institutions from 2002-2006.'' 
Consequently, we preliminarily determine that it is unnecessary for the 
Department to make a finding with regard to the countervailability of 
the R&D grants under IDA through KCERA.

C. R&D Grants Under the Promotion of Industrial Technology Innovation 
Act

    The GOK, through the MKE, provides R&D grants to promote a 
company's productivity and industrial competitiveness using industrial 
technology (IT) infrastructure under the Promotion of Industrial 
Technology Innovation Act (PITIA), which was established in 2006. The 
funding of an R&D project under the PITIA is shared by the company and 
the GOK, with the government contributing up to 50 percent of the 
project's costs. To be eligible to participate in this program, the 
applicant must meet the qualifications set forth in the basic plan 
issued by MKE and perform R&D as set forth in the Notice of IT 
Innovation Network Organization Business. Applications are submitted to 
the Korea E-Business Association. If a company's application is 
approved, MKE and the company enter into an R&D contract and MKE 
provides the grants. R&D grants under the PITIA are provided with 
respect to specific projects, which are generally multi-year projects, 
where the amount of funds to be received each year from the GOK is set 
out in the original contract.
    During the POR, HYSCO was the only responding company that 
benefitted from this program. HYSCO reported that it led a consortium 
of several companies in a project for IT network innovation and that 
the project was unrelated to the production of subject merchandise.
    In its response, the GOK provided a copy of the ``Notice for 
Recruiting Participating Industries in IT Innovation Network 
Organization Business for

[[Page 46104]]

2006.'' See GOK's November 25, 2008, Questionnaire Response, at Exhibit 
G-15. The notice states that grants for IT new technology were limited 
to certain industries, i.e., motor, steel, shipbuilding, textile, 
distribution, and others. The notice further states that ``one 
consortium from each industry applicable for applying'' for grants in 
2006 would be selected. Id. The ``Application Form for IT Innovation 
Network Organization Business'' also contains the eligibility 
limitation stating that the ``application'' industry is ``one of 
automobile, steel, fabric, paper, others.'' See GOK's November 25, 
2008, Questionnaire Response, at Exhibit G-14. The GOK further reported 
that during 2006, 13 consortia applied for benefits under the PITIA and 
just four consortia received approval for financial assistance. See 
GOK's February 25, 2009, Supplemental Questionnaire Response, at 3.
    Because R&D grants under the PITIA were expressly limited to 
certain industries in 2006, we preliminarily find that this program is 
de jure specific within the meaning of section 771(5A)(D)(i) of the 
Act. We further preliminarily find that grants provided under the PITIA 
constitute a financial contribution and confer a benefit under sections 
771(5)(D)(i) and 771(5)(E) of the Act, respectively.
    With respect to HYSCO's statement that the R&D grants are unrelated 
to the production of subject merchandise, we preliminarily find that 
the information on the record demonstrates that the grants for IT 
network innovation benefit the company's business processes and all of 
its product lines and, therefore, the grants are not limited to non-
subject merchandise. See Memorandum to the File titled ``HYSCO's R&D 
Grants Under the PITIA'' (August 31, 2009), of which a public version 
is on file in the CRU. To determine the benefit from the grants that 
HYSCO received under the PITIA, we first calculated the GOK's total 
contribution to the project that was apportioned to HYSCO. Next, in 
accordance with 19 CFR 351.524(b)(2), we determined whether to allocate 
the non-recurring benefit from the grant over HYSCO's AUL by dividing 
the total amount of the GOK's contribution by HYSCO's total sales in 
the year the total grant amount was approved. Because the approved 
amount was less than 0.5 percent of HYSCO's total sales, we expensed 
the grants in the year of receipt. Next, to calculate the net subsidy 
rate, we divided the portion of the benefit allocated to the POR by 
HYSCO's total f.o.b. sales for 2007. See 19 CFR 351.525(b)(3). On this 
basis, we preliminarily determine the net subsidy rate under this 
program to be 0.02 percent ad valorem for HYSCO.

D. Short-Term Export Financing

    KEXIM supplies two types of short-term loans for exporting 
companies, short-term trade financing and comprehensive export 
financing. KEXIM provides short-term loans to Korean exporters that 
manufacture goods under export contracts. The loans are provided up to 
the amount of the bill of exchange or contracted amount less any amount 
already received. For comprehensive export financing loans, KEXIM 
supplies short-term loans to any small or medium-sized company, or any 
large company that is not included in the five largest conglomerates 
based on their comprehensive export performance. To obtain the loans, 
companies must report their export performance periodically to KEXIM 
for review. Comprehensive export financing loans cover from 50 to 90 
percent of the company's export performance; however, the maximum loan 
amount is restricted to 30 billion won.
    In Steel Products From Korea, the Department determined that the 
GOK's short-term export financing program was countervailable. See 
Final Affirmative Countervailing Duty Determinations and Final Negative 
Critical Circumstances Determinations: Certain Steel Products From 
Korea, 58 FR 37338, 37350 (July 9, 1993) (Steel Products From Korea); 
see also Notice of Final Affirmative Countervailing Duty Determination: 
Certain Cold-Rolled Carbon Steel Flat Products From the Republic of 
Korea, 67 FR 62102, (October 3, 2002) (Cold-Rolled Investigation), and 
accompanying Issues and Decision Memorandum (Cold-Rolled Decision 
Memorandum) at ``Short-Term Export Financing.'' No new information or 
evidence of changed circumstances was presented in this review to 
warrant any reconsideration of the countervailability of this program. 
Therefore, we continue to find this program countervailable. 
Specifically, we preliminarily determine that the export financing 
constitutes a financial contribution in the form of a loan within the 
meaning of section 771(5)(D)(i) of the Act and confers a benefit within 
the meaning of section 771(5)(E)(ii) of the Act to the extent that the 
amount of interest the respondents paid for export financing under this 
program was less than the amount of interest that would have been paid 
on a comparable short-term commercial loan. See discussion above in the 
``Subsidies Valuation Information'' section with respect to short-term 
loan benchmark interest rates. In addition, we preliminarily determine 
that the program is specific, pursuant to section 771(5A)(A) of the 
Act, because receipt of the financing is contingent upon exporting. 
Dongbu, HYSCO, and POCOS, POSCO's affiliate, reported using short-term 
export financing during the POR.
    Pursuant to 19 CFR 351.505(a)(1), to calculate the benefit under 
this program, we compared the amount of interest paid under the program 
to the amount of interest that would have been paid on a comparable 
commercial loan. As our benchmark, we used the short-term interest 
rates discussed above in the ``Subsidies Valuation Information'' 
section. To calculate the net subsidy rate, we divided the benefit by 
the f.o.b. value of the respective company's total exports. On this 
basis, we determine the net subsidy rate to be 0.01 percent ad valorem 
for Dongbu. In the case of HYSCO and POSCO, we find the net subsidy 
rate to be less than 0.005 percent ad valorem, which consistent with 
the Department's practice, does not confer a measurable benefit and is 
not included in the calculation of the net countervailable rate. See, 
e.g., CORE from Korea 2006 Decision Memorandum at ``GOK's Direction of 
Credit.''

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

    Under Article 46 of the Industrial Cluster Development and Factory 
Establishment Act (Industrial Cluster Act), a state or local government 
may provide tax exemptions as prescribed by the Restriction of Special 
Taxation Act. In accordance with this authority, Article 276 of the 
Local Tax Act provides that an entity that acquires real estate in a 
designated industrial complex for the purpose of constructing new 
buildings or enlarging existing facilities is exempt from the 
acquisition and registration tax. In addition, the entity is exempt 
from 50 percent of the property tax on the real estate (i.e., the land, 
buildings, or facilities constructed or expanded) for five years from 
the date the tax liability becomes effective. The exemption is 
increased to 100 percent of the relevant land, buildings, or facilities 
that are located in an industrial complex outside of the Seoul 
metropolitan area. The GOK established the tax exemption program under 
Article 276 in December 1994, to provide incentives for companies to 
relocate from populated areas in the Seoul metropolitan region to 
industrial sites in less populated parts of the country. The program is 
administered by the local tax officials of the county where the 
industrial complex is located.

[[Page 46105]]

    During the POR, pursuant to Article 276 of the Local Tax Act, HYSCO 
received exemptions from the acquisition tax, registration tax, and 
property tax based on the location of its manufacturing facilities, 
Suncheon Works, in the Yulchon Industrial Complex, a government-
sponsored industrial complex designated under the Industrial Cluster 
Act. In addition, HYSCO received an exemption from the local education 
tax during the POR. The local education tax is levied at 20 percent of 
the property tax. The property tax exemption, therefore, results in an 
exemption of the local education tax. Dongbu and POSCO did not receive 
tax exemptions under Article 276 during the POR.
    In the CFS Paper Investigation, the Department determined that the 
tax exemptions under Article 276 of the Local Tax Act are 
countervailable subsidies. See CFS Paper Decision Memorandum at 
``Reduction in Taxes for Operation in Regional and National Industrial 
Complexes.'' No new information or evidence of changed circumstances 
from HYSCO or the GOK was presented in this review to warrant a 
reconsideration of the countervailability of this program. We, 
therefore, continue to find this program countervailable. Specifically, 
we preliminarily find that the tax exemptions that HYSCO received 
constitute a financial contribution and confer a benefit under sections 
771(5)(D)(ii) and 771(5)(E) of the Act, respectively. We further 
preliminarily find that the tax exemptions are regionally specific 
under section 771(5A)(D)(iv) of the Act because the exemptions are 
limited to an enterprise or industry located within designated 
geographical regions in Korea.
    To calculate the benefit, we divided HYSCO's total tax exemptions 
by the company's total f.o.b. sales value for 2007. On this basis, we 
preliminarily determine the net subsidy rate to be less than 0.005 
percent ad valorem, which consistent with the Department's practice, 
does not confer a measurable benefit and is not included in the 
calculation of the net countervailable rate. See, e.g., CORE from Korea 
2006 Decision Memorandum at ``GOK's Direction of Credit.''

F. Other Subsidies Related to Operations at Asan Bay: Provision of Land 
and Exemption of Port Fees Under the Harbor Act

1. Provision of Land
    The GOK's overall development plan is published every 10 years and 
describes the nationwide land development goals and plans for the 
balanced development of the country. Under these plans, the Ministry of 
Construction and Transportation (MOCAT) prepares and updates its Asan 
Bay Area Broad Development Plan. See, e.g., Cold-Rolled Decision 
Memorandum, at ``Provision of Land at Asan Bay.'' See also Preliminary 
Results of Countervailing Duty Administrative Review: Corrosion-
Resistant Carbon Steel Flat Products from the Republic of Korea, 71 FR 
53413, 53418 (September 11, 2006) (Preliminary Results of CORE from 
Korea 2004), unchanged in Final Results of Countervailing Duty 
Administrative Review: Corrosion-Resistant Carbon Steel Flat Products 
from the Republic of Korea, 72 FR 119 (January 3, 2007) (CORE from 
Korea 2004). The Korea Land Development Corporation (Koland) is a 
government investment corporation that is responsible for purchasing, 
developing, and selling land in the industrial sites. Id.
    In the Cold-Rolled Investigation, we verified that the GOK, in 
setting the price per square meter for land at the Kodai industrial 
estate, removed the 10 percent profit component from the price charged 
to Dongbu. See Cold-Rolled Decision Memorandum, at ``Provision of Land 
at Asan Bay.'' In the Cold-Rolled Investigation, we further explained 
that companies purchasing land at Asan Bay must make payments on the 
purchase and development of the land before the final settlement. 
However, in the case of Dongbu, we found that the GOK provided an 
adjustment to Dongbu's final payment to account for ``interest earned'' 
by the company for the pre-payments. Id. POSCO and HYSCO did not use 
this program.
    In the Cold-Rolled Investigation, we determined that the price 
discount and the adjustment of Dongbu's final payment to account for 
``interest earned'' by the company on its pre-payments were 
countervailable subsidies. Specifically, the Department determined that 
they were specific under section 771(5A)(D)(iii)(I) of the Act, as they 
were limited to Dongbu. Id. Further, the Department found the price 
discount and the price adjustment for ``interest earned'' constituted 
financial contributions and conferred benefits under sections 
771(5)(D)(i) and 771(5)(E) of the Act, respectively. Id. No new 
information or evidence of changed circumstances from Dongbu or the GOK 
was presented in this review to warrant a reconsideration of the 
countervailability of this program. Therefore, we continue to find this 
program countervailable in this case.
    Consistent with the Cold-Rolled Investigation, we have treated the 
land price discount and the interest earned refund as non-recurring 
subsidies. Id. In accordance with 19 CFR 351.524(b)(2), because the 
grant amounts were more than 0.5 percent of the company's total sales 
in the year of receipt, we applied the Department's standard grant 
methodology, as described under 19 CFR 351.524(d)(1), and allocated the 
subsidies over a 15-year allocation period. See the ``Average Useful 
Life'' section, above. To calculate the benefit from these grants, we 
used as our discount rate the rates described above in the ``Subsidies 
Valuation Information'' section. We then summed the benefits received 
by Dongbu during the POR. We calculated the net subsidy rate by 
dividing the total benefit attributable to the POR by Dongbu's total 
f.o.b. sales for the POR. On this basis, we determine a net 
countervailable subsidy rate for Dongbu of 0.18 percent ad valorem for 
the POR.
2. Exemption of Port Fees Under Harbor Act
    Under the Harbor Act, companies are allowed to construct 
infrastructure facilities at Korean ports; however, these facilities 
must be deeded back to the government. Because the ownership of these 
facilities reverts to the government, the government compensates 
private parties for the construction of these infrastructure 
facilities. Because a company must transfer to the government its 
infrastructure investment, under the Harbor Act, the GOK grants the 
company free usage of the facility and the right to collect fees from 
other users of the facility for a limited period of time. Once a 
company has recovered its cost of constructing the infrastructure, the 
company must pay the same usage fees as other users of the 
infrastructure. In the Cold-Rolled Investigation, the Department found 
that Dongbu received free use of harbor facilities at Asan Bay based 
upon both its construction of a port facility as well as a road that 
the company built from its plant to its port. See Cold-Rolled Decision 
Memorandum, at ``Dongbu's Excessive Exemptions under the Harbor Act.'' 
The Department also determined that Dongbu received an exemption of 
harbor fees for a period of almost 70 years under this program. Id. In 
the Cold-Rolled Investigation, the Department found the exemption from 
the fees to be a countervailable subsidy. No new evidence or 
information of changed circumstances was presented in this review to 
warrant any reconsideration of the countervailability

[[Page 46106]]

of this program. Consistent with the Cold-Rolled Investigation, we 
preliminarily find that the exemption of port fees constitutes a 
financial contribution in the form of revenue foregone and confers a 
benefit within the meaning of sections 771(5)(D)(ii) and 771(5)(E) of 
the Act, respectively. Further, we preliminarily find that the program 
is specific under section 771(5A)(D)(iii)(I) of the Act because the 
excessive exemption period of 70 years is limited to Dongbu. Thus, for 
purposes of these preliminary results, we continue to find this aspect 
of the program countervailable.
    In the Cold-Rolled Investigation, the Department determined that 
the benefit from the program is equal to the average yearly amount of 
harbor fees exemptions provided to Dongbu. Id. For purposes of these 
preliminary results, we have employed the same benefit calculation. To 
calculate the net subsidy rate, we divided the average yearly amount of 
exemptions by Dongbu's total f.o.b. sales for the POR. On this basis, 
we preliminarily determine that Dongbu's net subsidy rate under this 
program is 0.02 percent ad valorem.

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

A. Energy Savings Fund Program

    The Energy Savings Fund (ESF) program provides financing for 
investment in projects and equipment that use energy efficiently. In 
the DRAMS Investigation, the Department analyzed ESF loans separately 
from the direction of credit allegation and found that the loans were 
not specific within the meaning of section 771(5A) of the Act during 
the period of investigation (POI), which was January 1, 2001, through 
June 30, 2002. See Final Affirmative Countervailing Duty Determination: 
Dynamic Random Access Memory Semiconductors from the Republic of Korea, 
68 FR 37122 (June 23, 2003) (DRAMS Investigation), and accompanying 
Issues and Decision Memorandum (DRAMS Investigation Decision 
Memorandum) at ``ESF Program'' and ``Comment 24.'' In the instant 
review, HYSCO reported that, during the POR, the company had 
outstanding balances for ESF loans that were received in 2000. The 
Department's specificity finding in the DRAMS Investigation did not 
cover the year 2000. See Preliminary Affirmative Countervailing Duty 
Determination: Dynamic Random Access Memory Semiconductors from the 
Republic of Korea, 68 FR 16766, 16775 (April 7, 2003) (unchanged in 
final results, 68 FR 37122 (June 23, 2003)). However, because there is 
no measurable benefit for this program, we preliminarily determine that 
it is unnecessary for the Department to make a determination on the 
countervailability of ESF loans that were issued in 2000 as explained 
below.
    We performed the loan benefit calculation applying the long-term 
benchmark interest rates described above in the ``Subsidies Valuation 
Information'' section. For the POR, we preliminarily determine the net 
subsidy rate under the ESF loan program to be less than 0.005 percent 
ad valorem, which, consistent with the Department's practice, does not 
confer a measurable benefit and is not included in the calculation of 
the net countervailable rate. See, e.g., CORE from Korea 2006 Decision 
Memorandum at ``GOK's Direction of Credit.'' This program was not used 
by Dongbu or POSCO.

B. R&D Grants Under the Act on the Promotion of the Development of 
Alternative Energy

    During the POR, HYSCO received energy-related grants under the Act 
on the Promotion of the Development of Alternative Energy (Alternative 
Energy Act) for an R&D project in which the company participated with 
other firms.\5\ HYSCO reported that R&D grants under the Alternative 
Energy Act are provided with respect to specific projects, which are 
generally multi-year projects where the amount of funds to be provided 
by the GOK is set out in the project contract. The cost of R&D projects 
under this program is shared by the participating companies and the 
GOK.
---------------------------------------------------------------------------

    \5\ In the initial questionnaire responses, both HYSCO and the 
GOK reported that HYSCO received these grants related to energy use 
under the Energy Use Rationalization Act. See HYSCO's November 24, 
2008 Questionnaire Response, at 17; and GOK's November 25, 2008 
Questionnaire Response, at Exhibit G-8. In their supplemental 
questionnaire responses, HYSCO and GOK corrected their earlier 
statements and reported that the energy grants were provided under 
the Act on the Promotion of Development of Alternative Energy. See 
HYSCO's February 26, 2009 Supplemental Questionnaire Response, at 
Exhibit G-7 and Exhibit G-16; and GOK's February 25, 2009 
Supplemental Questionnaire Response, at 1.
---------------------------------------------------------------------------

    We calculated the GOK's contribution to the project that was 
apportioned to HYSCO and then, in accordance with 19 CFR 351.524(b)(2), 
determined whether to allocate the non-recurring benefit from the grant 
over HYSCO's AUL by dividing the total amount of the GOK's contribution 
by HYSCO's total sales in the year the grants were approved. Because 
the amount of the grants is less than 0.5 percent of the relevant 
sales, we expensed the benefits from the grants to the year of receipt. 
We preliminarily determine the subsidy rate under this program to be 
less than 0.005 percent ad valorem, which, consistent with the 
Department's practice, does not confer a measurable benefit and is not 
included in the calculation of the net countervailable rate. See, e.g., 
CORE from Korea 2006 Decision Memorandum at ``GOK's Direction of 
Credit.'' Consequently, we preliminarily determine that it is 
unnecessary for the Department to make a finding as to the 
countervailability of this program in this review. If a future 
administrative review of this proceeding is requested, we will further 
examine grants provided under the Alternative Energy Act.

C. Export Loans by Commercial Banks Under KEXIM's Trade Bill 
Rediscounting Program

    The GOK enacted KEXIM's Trade Bill Rediscount program in July 1998. 
From July 1998 to May 2004, KEXIM rediscounted the actual D/A and 
export letter of credit (L/C) (e.g., export usance loans) financing of 
exporters that had first been discounted by commercial banks. However, 
after May 18, 2004, KEXIM switched to a rediscount ceiling method with 
Korean commercial banks. Under the ceiling method, KEXIM calculates the 
rediscount ceiling for participating commercial banks on a quarterly 
basis based on the total D/A or export L/C financing provided by the 
banks during the previous period, the banks' projected rediscounts, and 
the banks' credit rating. Under the trade bill rediscounting program, 
exporters first discount their D/As and export L/Cs with banks that are 
participating in the program. The banks, in turn, discount promissory 
notes with KEXIM. Dongbu had D/A loans outstanding under the program 
during the POR from banks that participated in the KEXIM rediscount 
program. We preliminarily determine that HYSCO and POSCO did not use 
the program during the POR.
    The Department found this program countervailable in the CFS Paper 
Investigation. See CFS Paper Decision Memorandum at ``Export Loans by 
Commercial Banks Under KEXIM's Trade Bill Rediscounting Program.'' For 
purposes of these preliminary results, we find that no information was 
submitted in this review that warrants reconsideration of our finding 
in the CFS Paper Investigation regarding this program.
    We also find that companies do not know whether commercial banks 
subsequently rediscount their D/A loans with KEXIM nor does KEXIM link 
rediscounts to individual loans or exporters. Further, we find that 
KEXIM's rediscount ceiling represents only a portion of participating 
banks' total discounts on export loans during

[[Page 46107]]

the POR. Therefore, we are pro-rating benefits under this program by 
the percentage of loans each bank rediscounted with KEXIM under the 
program.
    To determine whether a benefit was conferred, we first compared the 
amount Dongbu paid on its D/A loans outstanding during the POR to the 
amount it would pay on comparable commercial short-term financing that 
it could obtain on the market. See 19 CFR 351.505(a). For our 
benchmark, we have used Dongbu's weighted-average interest rate on its 
foreign currency, commercial short-term loans outstanding during the 
POR. See 19 CFR 351.505(a)(2)(iv). Where unavailable, in accordance 
with 19 CFR 351.505(a)(3)(ii), we have used the short-term lending rate 
for the POR, as published in the IMF's International Financial 
Statistics Yearbook. Because loans under this program are discounted 
(i.e., interest is paid up-front at the time the loans are received), 
the effective rate paid by Dongbu on its D/A loans is a discounted 
rate. Therefore, for benchmark interest rates that were not already 
discounted, it was necessary to derive a discounted benchmark interest 
rate from Dongbu's company-specific weighted-average interest rates for 
short-term commercial loans. For Dongbu, we preliminarily determine 
that there is no benefit during the POR because the benchmark interest 
rate is lower than the interest rates that the company actually paid.

D. D/A Loans Issued by the Korean Development Bank and Other 
Government-Owned Banks

    Of the D/A loans rediscounted under KEXIM's trade bill rediscount 
program, Dongbu received D/A loans from such government-owned banks as 
the Korean Development Bank (KDB). In the CFS Paper Investigation, we 
found this program countervailable. See CFS Paper Decision Memorandum 
at ``D/A Loans Issued by the KDB and Other Government-Owned Banks.'' 
For purposes of these preliminary results, we find that no information 
was submitted in this review that warrants reconsideration of our 
finding in the CFS Paper Investigation regarding this program.
    To calculate the benefit, we compared the amount of interest paid 
on the government loan to the amount of interest that would have been 
paid on comparable commercial short-term financing that could have been 
obtained on the market. See 19 CFR 351.505(a). For our benchmark, we 
have used the Dongbu's weighted-average interest rate on its commercial 
short-term loans outstanding during the POR. See 19 CFR 
351.505(a)(2)(iv). Where unavailable, in accordance with 19 CFR 
351.505(a)(3)(ii), we have used the short-term lending rate for the 
POR, as published in the IMF's International Financial Statistics 
Yearbook. Because loans under this program are discounted (i.e., 
interest is paid up-front at the time the loans are received), the 
effective rate paid by Dongbu on its D/A loans is a discounted rate. 
Therefore, it was necessary to derive a discounted benchmark interest 
rate from Dongbu's company-specific weighted-average interest rates for 
short-term commercial loans, pursuant to 19 CFR 351.505(a)(2)(iv). See 
the ``Subsidies Valuation Information'' section above at ``Benchmarks 
for Short-Term Financing.'' For Dongbu, we preliminarily determine that 
there is no benefit during the POR because the benchmark interest rate 
is lower than the interest rates that the company actually paid.
    We preliminarily determine that POSCO and HYSCO did not use this 
program during the POR.

E. GOK's Direction of Credit for Loans Issued Prior to 2002

    In CORE from Korea 2006, the Department determined the GOK ended 
its practice of directing credit to the steel industry as of 2002. 
However, during 2007, respondents had outstanding loans that were 
provided prior to 2002.
    In accordance with 19 CFR 351.505(c)(2) and (4), we calculated the 
benefit for each fixed- and variable-rate loan received prior to 2002 
as the difference between the actual amount of interest paid on the 
directed loan during the POR and the amount of interest that would have 
been paid during the POR at the benchmark interest rate. We conducted 
our benefit calculations using the benchmark interest rates described 
in the ``Subsidies Valuation Information'' section above. For foreign 
currency-denominated loans, we converted the benefits into Korean won. 
We then summed the benefits from each company's long-term fixed-rate 
and variable-rate loans.
    To calculate the net subsidy rate, we divided the companies' total 
benefits by their respective total f.o.b. sales values during the POR, 
as this program is not tied to exports or a particular product. In 
calculating the net subsidy rate for POSCO, we removed from the 
denominator sales made between affiliated parties.\6\ For POSCO, 
Dongbu, and HYSCO, we preliminarily determine the net subsidy rate 
under the direction of credit program to be less than 0.005 percent ad 
valorem, which pursuant to the Department's practice we find to be not 
measurable. See, e.g., CORE from Korea 2006 Decision Memorandum at 
``GOK's Direction of Credit.'' Because any benefits stemming from 
respondents' outstanding loans issued prior to 2002 are not measurable 
during the POR, we preliminarily determine that no benefit was received 
under this program.
---------------------------------------------------------------------------

    \6\ For POSCO, we also removed intra-company sales from the 
denominators of the net subsidy rate calculations of the other 
programs found countervailable in these preliminary results. This 
step was not necessary for Dongbu or HYSCO.
---------------------------------------------------------------------------

F. Overseas Resource Development Program

    The GOK enacted the Overseas Resource Development (ORD) Business 
Act in order to establish the foundation for securing the long-term 
supply of essential energy and major material minerals, which are 
mostly imported because of scarce domestic resources. Pursuant to 
Article 11 of this Act, the Ministry of Knowledge Economy (MKE) 
annually announces its budget and the eligibility criteria to obtain a 
loan from MKE. Any company that meets the eligibility criteria may 
apply for a loan to MKE. The loan evaluation committee evaluates the 
applications, selects the recipients and gets the approval from the 
minister of MKE. For projects that are related to petroleum and natural 
gas, the Korea National Oil Corporation (KNOC) lends the funds to the 
company for foreign resources development. An approved company enters 
into a borrowing agreement with KNOC for the development of the 
selected resource. Two types of loans are provided under this program: 
``General loans'' and ``success-contingent loans.'' For a success-
contingent loan, the repayment obligation is subject to the results of 
the development project. In the event that the project fails, the 
company will be exempted from all or a portion of the loan repayment 
obligation. However, if the project succeeds, a portion of the project 
income is payable to KNOC.
    During the POR, POSCO reported in its 2006-2007 audited non-
consolidated financial statements that it had received a success-
contingent loan from KNOC. See POSCO's November 24, 2008 Questionnaire 
Response, at Exhibit 7. Because the repayment of this liability is 
contingent on subsequent events, the Department would treat the balance 
on this unpaid liability as a contingent-liability interest-free loan, 
pursuant to 19 CFR 351.505(d). We performed the loan benefit 
calculation applying the

[[Page 46108]]

long-term benchmark interest rates described above in the ``Subsidies 
Valuation Information'' section. For the POR, we preliminarily 
determine that the net subsidy rate under the ORD loan program is less 
than 0.005 percent ad valorem. Where the countervailable subsidy rate 
for a program is less than 0.005 percent, the Department considers the 
net subsidy rate to be not measurable and excludes the net subsidy rate 
from the total CVD rate. See, e.g., CORE from Korea 2006 Decision 
Memorandum at ``GOK's Direction of Credit.'' Hence, we preliminarily 
find that this loan does not confer a measurable benefit to POSCO. 
Accordingly, it is unnecessary to make a finding as to the 
countervailability of this program for this POR. We will include an 
examination of this program in future administrative reviews.
    Dongbu and HYSCO did not use this program during the POR.

III. Programs Preliminarily Determined To Be Not Countervailable

A. GOK's Direction of Credit for Loans Issued After 2001

    In CORE from Korea 2006, the Department determined that the GOK no 
longer has a systemic practice of directing credit within the Korean 
financial sector and that directed credit within the Korean steel 
industry ended as of 2002. See CORE from Korea 2006 Decision Memorandum 
at ``GOK's Direction of Credit.'' As there has been no information 
submitted in this review to warrant reconsideration of our finding in 
CORE from Korea 2006, we continue to find that there is no directed 
credit to the Korean steel industry from 2002.\7\ As in CORE from Korea 
2006, our decision is restricted to the post-2001 period.\8\ Because 
this program was found not countervailable in CORE from Korea 2006, we 
will no longer review this program in any further administrative review 
absent evidence of changed circumstances or new information.
---------------------------------------------------------------------------

    \7\ See, e.g., Preliminary Results of Countervailing Duty 
Administrative Review: Corrosion-Resistant Carbon Steel Flat 
Products from France, 71 FR 52770, 52772 (September 7, 2006) 
(unchanged in final results, Corrosion-Resistant Carbon Steel Flat 
Products From France: Final Results of Countervailing Duty 
Administrative Review, 71 FR 68549 (November 26, 2006)): ``If a 
program is determined to be non-countervailable in a previous 
proceeding, the Department will not normally reconsider such a 
determination in future proceedings absent evidence potentially 
contradicting that determination. We preliminarily find that there 
is no information on the record of the instant case, including this 
segment of the proceeding, that warrants a change to our earlier 
finding that this program is not specific and, therefore, not 
countervailable.''
    \8\ Our determination in this regard does not change the 
decision that was made by the Department in DRAMS Investigation that 
there may still be instances in which the GOK may attempt to 
influence bank decisions on an ad hoc basis such as the government-
led financial restructuring of Hynix. See, e.g, DRAMS Investigation 
and DRAMS Investigation Decision Memorandum at ``Direction of Credit 
and Other Financial Assistance.''
---------------------------------------------------------------------------

B. Long-Term Loans From the KDB Issued in Years 2002 Through 2007

    HYSCO, Dongbu, and POSCO had long-term loans that were issued by 
the KDB, a government policy bank, in years 2002 through 2007 on which 
they made interest payments during the POR. Therefore, in these 
preliminary results, we have analyzed whether the long-term KDB loans 
are countervailable. First, we analyzed whether the KDB issued long-
term loans to respondents and/or the Korean steel industry in a manner 
that was specific within the meaning of section 771(5A) of the Act.
    The Department has previously determined that long-term loans 
issued by the KDB during the period 2002 through 2006 are not de jure 
specific within the meaning of sections 771(5A)(D)(i) and (ii) of the 
Act because: (1) They are not based on exportation; (2) they are not 
contingent on the use of domestic goods over imported goods; and (3) 
the legislation and/or regulations do not expressly limit access to the 
subsidy to an enterprise or industry, or groups thereof, as a matter of 
law. See CFS Paper Decision Memorandum at ``Long-Term Lending Provided 
by the KDB and Other GOK-Owned Institutions.'' The Department's finding 
in the CFS Paper Investigation that long-term loans issued by the KDB 
during the period 2002 through 2006 are not de jure specific was not 
limited to a particular industry or industries. Id. Therefore, in 
regard to this issue, we find that the Department's determination in 
the CFS Paper Investigation is applicable to the instant review. 
Further, concerning this program, there is no information on the record 
of the instant review that warrants reconsideration of the Department's 
prior finding of the absence of de jure specificity during the 2002 
through 2006 period. On this basis, we preliminarily determine that the 
KDB's issuance of long-term loans during the 2002 through 2007 period 
are not de jure specific within the meaning of sections 771(5A)(D)(i) 
and (ii) of the Act.
    Where the Department finds no de jure specificity, section 
771(5A)(D)(iii) of the Act also directs the Department to examine 
whether the benefits provided under the program are de facto specific--
that is, whether the benefits are specific as a matter of fact. 
Subparagraphs (I) through (IV) of section 771(5A)(D)(iii) of the Act 
stipulate that a program is de facto specific if one or more of the 
following factors exist:

    (I) The actual recipients of the subsidy whether considered on 
an enterprise or industry basis are limited in number.
    (II) An enterprise or industry is a predominant user of the 
subsidy.
    (III) An enterprise or industry receives a disproportionately 
large amount of the subsidy.
    (IV) The manner in which the authority providing the subsidy has 
exercised discretion in the decision to grant the subsidy indicates 
that an enterprise or industry is favored over others.

    In response to the Department's request, the GOK provided the 
Department with a breakdown of the issuance of long-term lending by the 
KDB, by industry, for the years 2001 through 2007. See GOK's April 3, 
2009 Questionnaire Response, at Exhibit A-7. In conducting our de facto 
specificity analysis, we identified all long-term loans issued by the 
KDB to POSCO, Dongbu, and HYSCO on which interest payments were made 
during the POR. We then analyzed the distribution of all long-term 
loans issued by the KDB across industry groups in the year in which 
HYSCO's outstanding loans were issued as well as the two preceding 
years.\9\ Specifically, we compared the amount of long-term KDB loans 
issued to the ``Base Metal Industry'' (e.g., the steel industry) to the 
amount of long-term KDB loans issued to other industries.
---------------------------------------------------------------------------

    \9\ The GOK was able to provide information concerning the 
amount of loans the KDB issued to each industry during the period 
2001 through 2007. Therefore, when analyzing whether loans issued in 
2002 were specific, we were only able to analyze lending patterns 
during the period 2001 and 2002.
---------------------------------------------------------------------------

    Based on our analysis of the long-term KDB lending data coupled 
with the KDB lending data reported by POSCO, Dongbu, and HYSCO in their 
respective questionnaire responses, we preliminarily determine that 
respondent firms, as individual enterprises, did not receive