Corrosion-Resistant Carbon Steel Flat Products From the Republic of Korea: Preliminary Results of Countervailing Duty Administrative Review, 58512-58524 [2012-23399]
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Federal Register / Vol. 77, No. 184 / Friday, September 21, 2012 / Notices
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Thomas L. Mesenbourg, Jr.,
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* * * of foreign-trade zones in ports of
entry of the United States, to expedite
and encourage foreign commerce, and
for other purposes,’’ and authorizes the
Foreign-Trade Zones Board to grant to
qualified corporations the privilege of
establishing foreign-trade zones in or
adjacent to U.S. Customs and Border
Protection ports of entry;
Whereas, the Midcoast Regional
Redevelopment Authority (the Grantee)
has made application to the Board (FTZ
Docket 49–2011, filed 07/26/11)
requesting the establishment of a
foreign-trade zone in Brunswick, Maine,
adjacent to the Portland U.S. Customs
and Border Protection port of entry;
Whereas, notice inviting public
comment has been given in the Federal
Register (76 FR 45772, 08/01/11) and
the application has been processed
pursuant to the FTZ Act and the Board’s
regulations; and,
Whereas, the Board adopts the
findings and recommendations of the
examiner’s report, and finds that the
requirements of the FTZ Act and
Board’s regulations are satisfied, and
that approval of the application is in the
public interest;
Now, therefore, the Board hereby
grants to the Grantee the privilege of
establishing a foreign-trade zone,
designated on the records of the Board
as Foreign-Trade Zone No. 282, as
described in the application, and subject
to the FTZ Act and the Board’s
regulations, including Section 400.13,
and to the Board’s standard 2,000-acre
activation limit for the overall generalpurpose zone.
Signed at Washington, DC, this 7th day of
September 2012.
Rebecca Blank,
Acting Secretary of Commerce, Chairman and
Executive Officer, Foreign-Trade Zones
Board.
[FR Doc. 2012–23333 Filed 9–20–12; 8:45 am]
Attest:
Andrew McGilvray,
Executive Secretary.
BILLING CODE 3510–07–P
[FR Doc. 2012–23362 Filed 9–20–12; 8:45 am]
BILLING CODE 3510–DS–P
DEPARTMENT OF COMMERCE
DEPARTMENT OF COMMERCE
Foreign-Trade Zones Board
[Order No. 1845]
International Trade Administration
Grant of Authority; Establishment of a
Foreign-Trade Zone, Brunswick, ME
[C–580–818]
Pursuant to its authority under the ForeignTrade Zones Act of June 18, 1934, as
amended (19 U.S.C. 81a–81u), the ForeignTrade Zones Board (the Board) adopts the
following Order:
Whereas, the Foreign-Trade Zones Act
provides for ‘‘* * * the establishment
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Corrosion-Resistant Carbon Steel Flat
Products From the Republic of Korea:
Preliminary Results of Countervailing
Duty Administrative Review
Import Administration,
International Trade Administration,
Department of Commerce.
AGENCY:
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Federal Register / Vol. 77, No. 184 / Friday, September 21, 2012 / Notices
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, 2010, through
December 31, 2010. For information on
the net subsidy for Dongbu Steel Co.,
Ltd. (Dongbu), Hyundai HYSCO Ltd.
(HYSCO), and Pohang Iron & Steel Co.
Ltd. (POSCO), for the companies
reviewed, see the ‘‘Preliminary Results
of Review’’ section of this notice.
Interested parties are invited to
comment on these preliminary results.1
DATES: Effective Date: September 21,
2012.
SUMMARY:
FOR FURTHER INFORMATION CONTACT:
Gayle Longest, AD/CVD Operations,
Office 3, Import Administration,
International Trade Administration,
U.S. Department of Commerce, Room
4014, 14th Street and Constitution Ave.
NW., Washington, DC 20230; telephone:
(202) 482–3338.
SUPPLEMENTARY INFORMATION:
Background
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On August 17, 1993, the Department
published in the Federal Register the
CVD order on CORE from Korea.2 On
August 1, 2011, the Department
published a notice of opportunity to
request an administrative review of this
CVD order.3
On August 31, 2011, we received
timely requests for review of the
countervailing duty order from HYSCO.
We also received a timely request for
review of Dongbu, HYSCO, and POSCO,
from United States Steel Corporation,
petitioner. On October 3, 2011, the
Department published a notice of
initiation of the administrative review of
the CVD order on CORE from Korea
covering the period January 1, 2010,
through December 31, 2010.4
On October 5, 2011, the Department
issued the initial questionnaire to
Dongbu, HYSCO, POSCO, and the
Government of Korea (GOK). On
November 23, 2011, November 28, 2011,
November 29, 2011, and November 30,
1 See the ‘‘Public Comment’’ section of this
notice.
2 See Countervailing Duty Orders and
Amendments of Final Affirmative Countervailing
Duty Determinations: Certain Steel Products from
Korea, 58 FR 43752 (August 17, 1993).
3 See Antidumping or Countervailing Duty Order,
Finding, or Suspended Investigation: Opportunity
to Request Administrative Review, 76 FR 45771
(August 1, 2011).
4 See Initiation of Antidumping and
Countervailing Duty Administrative Reviews and
Requests for Revocation in Part (Initiation), 76 FR
61076 (October 3, 2011).
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2011, the Department received
questionnaire responses from HYSCO,
Dongbu, POSCO, and the GOK,
respectively. On March 2, 2012, July 16,
2012, and July 24, 2012 the Department
issued supplemental questionnaires to
HYSCO. On March 30, 2012, July 20,
2012, and August 7, 2012, the
Department received supplemental
questionnaire responses from HYSCO.
On March 22, 2012, the Department
published in the Federal Register an
extension of its preliminary results of
the instant administrative review.5 On
July 18, 2011, the Department issued an
additional supplemental questionnaire
to the GOK. On August 4, 2011 the
Department received the supplemental
questionnaire response for the GOK.
On December 20, 2011, petitioner
submitted new subsidy allegations
against Dongbu, HYSCO, and POSCO.
On April 24, 2012, the Department
initiated an investigation of the new
subsidies allegations against Dongbu,
HYSCO, and POSCO.6 On April 25,
2012, and April 27, 2012, we issued
new subsidies questionnaire to Dongbu
and POSCO, respectively. On May 7,
2012, we issued new subsidy
questionnaires to HYSCO and the GOK.
On May 18, 2012, the Department
received a response from POSCO. On
May 25, 2012 and June 19, 2012, the
Department received responses from
HYSCO and Dongbu. The Department
issued additional questionnaires to
HYSCO regarding the new subsidy
allegations on July 16, 2012 and July 24,
2012, and received responses from
HYSCO on July 20, 2012, and August 2,
2012. The Department issued an
additional supplemental questionnaire
to the GOK regarding the new subsidy
allegations on July 24, 2012, and August
3, 2012, and received responses from
the GOK on August 7, 2012, and August
15, 2012. The Department issued an
additional supplemental questionnaire
to Dongbu regarding the new subsidy
allegations on July 17, 2012, and
received Dongbu’s response on July 27,
2012.
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.
5 See Corrosion-Resistant Carbon Steel Flat
Products from the Republic of Korea: Notice of
Extension of Preliminary Results of Countervailing
Duty Administrative Review, 76 FR 20954 (April 14,
2011).
6 See Memorandum to Melissa G. Skinner,
Director, Office 3, through Eric B. Greynolds,
Program Manager, from Gayle Longest, Case
Analyst, regarding New Subsidy Allegations (April
24, 2012). This public document is available on IA
ACCESS.
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Affiliated Companies
In the present administrative review,
record evidence indicates that Pohang
Steel Co., Ltd. (POCOS) is a majorityowned production facility 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
will attribute the subsidy to the
consolidated sales of the holding
company and its subsidiaries. Thus, we
attributed 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 sale of subject merchandise to the
United States. HYSCO reported that it is
a member of the Hyundai Motor Group
and is affiliated with members of that
group.7 Under 19 CFR Section
351.525(b)(6)(vi), if an input supplier
and a downstream producer are crossowned, and the production of the input
product is primarily dedicated to
production of the downstream product,
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 net of
intra-company sales. HYSCO reported
that there are no companies that own
HYSCO shares which meet the standard
for cross-ownership in 19 CFR
351.525(b)(6)(vi), and all of the
companies in which HYSCO owns the
majority of shares are located outside of
Korea. Id.
Scope of the 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 corrosionresistant metals such as zinc, aluminum,
or zinc-, aluminum-, nickel- or ironbased 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
7 See HYSCO’s November 23, 2012, questionnaire
response (HYSCO’s November QR) at 4.
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Federal Register / Vol. 77, No. 184 / Friday, September 21, 2012 / Notices
the Harmonized Tariff Schedule of the
United States (HTSUS) at subheadings:
7210.30.0000, 7210.31.0000,
7210.39.0000, 7210.41.0000,
7210.49.0030, 7210.49.0090,
7210.49.0091, 7210.49.0095,
7210.60.0000, 7210.61.0000,
7210.69.0000, 7210.70.6030,
7210.70.6060, 7210.70.6090,
7210.90.1000, 7210.90.6000,
7210.90.9000, 7212.20.0000,
7212.21.0000, 7212.29.0000,
7212.30.1030, 7212.30.1090,
7212.30.3000, 7212.30.5000,
7212.40.1000, 7212.40.5000,
7212.50.0000, 7212.60.0000,
7215.90.1000, 7215.9030, 7215.90.5000,
7217.12.1000, 7217.13.1000,
7217.19.1000, 7217.19.5000,
7217.20.1500, 7217.22.5000,
7217.23.5000, 7217.29.1000,
7217.29.5000, 7217.30.15.0000,
7217.32.5000, 7217.33.5000,
7217.39.1000, 7217.39.5000,
7217.90.1000 and 7217.90.5000.
Although the HTSUS subheadings are
provided for convenience and customs
purposes, the Department’s written
description of the merchandise is
dispositive.
Subsidies Valuation Information
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A. Benchmarks for Short-Term
Financing
For those programs requiring the
application of a won-denominated,
short-term interest rate benchmark, in
accordance with 19 CFR
351.505(a)(2)(iv), we used as our
benchmark the company-specific
weighted-average interest rate for
commercial won-denominated loans
outstanding during the POR. This
approach is in accordance with 19 CFR
351.505(a)(3)(i) and the Department’s
practice.8
B. Benchmark for Long-Term Loans
During the POR, HYSCO had
outstanding countervailable long-term
won-denominated loans from
government-owned banks and Korean
commercial banks. We used the
following benchmarks to calculate the
subsidies attributable to respondents’
countervailable long-term loans
obtained through 2009:
(1) For countervailable, wondenominated long-term loans, we used,
where available, the company-specific
interest rates on the company’s
8 See, e.g., Corrosion–Resistant Carbon Steel Flat
Products from the Republic of Korea: Final Results
of Countervailing Duty Administrative Review, 74
FR 2512 (January 15, 2009) (Final Results of CORE
from Korea 2006), and accompanying Issues and
Decision Memorandum (CORE from Korea 2006
Decision Memorandum) at ‘‘Benchmarks for ShortTerm Financing.’’
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comparable commercial, wondenominated loans. If such loans were
not available, we used, where available,
the company-specific corporate bond
rate on the company’s public and
private bonds, as we have determined
that the GOK did not control the Korean
domestic bond market after 1991.9 The
use of a corporate bond rate as a longterm benchmark interest rate is
consistent with the approach the
Department has taken in several prior
Korean CVD proceedings.10 Specifically,
in those cases, we determined that,
absent company-specific, commercial
long-term loan interest rates, the wondenominated corporate bond rate is the
best indicator of the commercial longterm borrowing rates for wondenominated loans in Korea because it
is widely accepted as the market rate in
Korea.11 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.12
In accordance with 19 CFR
351.505(a)(2)(i), our benchmarks take
into consideration the structure of the
government-provided loans. For
countervailable fixed-rate loans,
pursuant to 19 CFR 351.505(a)(2)(iii),
we used benchmark rates issued in the
same year that the government loans
were issued.
Average Useful Life
Pursuant to 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
9 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).
10 See Id.; see also Final Affirmative
Countervailing Duty Determination: Structural Steel
Beams from the Republic of Korea, 65 FR 41051
(July 3, 2000) (H Beams Investigation), 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.’’
11 See Final Affirmative Countervailing Duty
Determinations and Final Negative Critical
Circumstances Determinations: Certain Steel
Products from Korea, 58 FR at 37328, 37345–37346
(July 9, 1993) (Steel Products from Korea).
12 See, e.g., CORE from Korea 2006 Decision
Memorandum at ‘‘Benchmark for Long Term
Loans.’’
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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 companyspecific and/or country-wide AUL and
the AUL from the IRS tables is
significant. According to the IRS tables,
the AUL of the steel industry is 15
years. No interested party challenged
the 15-year AUL derived from the IRS
tables. Thus, in this review, we have
allocated, where applicable, all of the
non-recurring subsidies provided to the
producers/exporters of subject
merchandise over a 15-year AUL.
I. Programs Determined To Be
Countervailable
A. Promotion of Specialized Enterprises
for Parts and Materials
Under the Act on Special Measures
for the Promotion of Specialized
Enterprises for Parts and Materials
(Promotion of Specialized Enterprises
Act), the GOK shares the costs of
research and development (R&D)
projects with companies or research
institutions. The goal of the program is
to support technology development for
core parts and materials necessary for
technological innovation and
improvement in competitiveness.13 The
program is administered by the Ministry
of Knowledge Economy (MKE) and
Korea Evaluation Institute of Industrial
Technology (KEIT).14
In accordance with Articles 3 and 4 of
the Promotion of Specialized
Enterprises Act, MKE prepares a base
plan and a yearly execution plan for the
development of the parts and materials
industry.15 Under the execution plan,
MKE announces to the public a detailed
business plan for the development of
parts and materials technology.16 This
business plan includes support areas,
qualifications, and the application
process.17 According to the GOK, any
person or company can participate in
the program by preparing an R&D
business plan that conforms with the
requirements set forth in the MKE
business plan.18 The completed
application must then be submitted to
KEIT, which evaluates the application
and selects the projects eligible for
13 See GOK’s November 30, 2011, questionnaire
response (GOK’s November QR) at Exhibit P–1.
14 Id.
15 See GOK’s November QR at Exhibit P–1.
16 Id. at 2.
17 Id.
18 Id.
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Federal Register / Vol. 77, No. 184 / Friday, September 21, 2012 / Notices
government support.19 After the
selected application is finally approved
by MKE, MKE and the participating
companies enter into an R&D agreement
and then MKE provides the grant.20
R&D project costs are shared by the
GOK and companies or research
institutions as follows: (1) When the
group of companies involved in the
research is made up of a ratio above
two-thirds small to medium-sized
companies, the GOK provides a grant up
to three-fourths of the project cost; (2)
When the group of companies involved
in the research is made up of a ratio
below two-thirds small to medium-sized
companies, the GOK provides a grant up
to one-half of the project cost.21
Upon completion of the project, if the
GOK evaluates the project as
‘‘successful’’, the participating
companies must repay 40 percent of the
R&D grant to the GOK over five years.22
However, if the project is evaluated by
the GOK as ‘‘not successful’’, the
company does not have to repay any of
the grant amount to the GOK.23
In the final results of administrative
review of the CVD order on CORE From
Korea covering the period January 1,
2008, through December 31, 2008, the
Department determined that the
Promotion of Specialized Enterprises
Act was de jure specific under section
771(5A)(D)(i) of the Act, because it is
expressly limited to (1) enterprises
specializing in components and
materials and (2) enterprises
specializing in development of
technology for components and
materials.24 No information on the
record of this review leads us to
reconsider that determination and, thus,
we continue to find, preliminarily, that
this program is de jure specific within
the meaning of 771(5A)(D)(i) of the Act.
We also preliminarily find that a
financial contribution was provided
within the meaning of section
771(5)(D)(i) of the Act because the
GOK’s payments constitute a direct
transfer of funds.25
19 Id.
20 Id.
at 3.
GOK’s November QR, Exhibit P–1.
22 See GOK’s November QR, Exhibit P–1 at 2.
23 Id.
24 See Corrosion-Resistant Carbon Steel Flat
Products from the Republic of Korea: Final Results
of Countervailing Duty Administrative Review, 76
FR 3613 (January 20, 2011) (Final Results of CORE
from Korea 2008), and accompanying Issues and
Decision Memorandum (CORE 2008 Decision
Memorandum) at ‘‘The Act on Special Measures for
the Promotion of Specialized Enterprises for Parts
and Materials.’’
25 See Corrosion-Resistant Carbon Steel Flat
Products from the Republic of Korea: Preliminary
Results and Partial Rescission of Countervailing
Duty Administrative Review, 75 FR 55745; 55750
(September 14, 2010).
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21 See
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HYSCO reported that during the POR,
it was involved in one R&D project
under this program. See HYSCO’s
November QR at 17. In the Final Results
of CORE From Korea 2008, we treated a
portion of the subsidy that does not
have to be repaid as a grant and the
remaining portion of the subsidy that
may have to be repaid as a long-term,
interest-free contingent liability loan.26
This approach is consistent with the
Department’s regulation and practice.27
We have adopted the same approach in
these preliminary results.
To determine the benefit from the
GOK funds HYSCO received under the
Specialized Enterprises Act program, we
calculated the GOK’s contribution for
the assistance that was apportioned to
HYSCO. See 19 CFR 351.504(a). As
described immediately above, we
treated a portion of this benefit as a
grant. In accordance with 19 CFR
351.524(b)(2), we determined whether
to allocate the non-recurring benefit
from the grants over a 15-year AUL by
dividing the GOK-approved grant
amount by the company’s total sales in
the year of approval. Because the
approved amount was less than 0.5
percent of the company’s total sales, we
expensed the grant to the year of receipt,
i.e., to 2010, the POR in this review.
With respect to the portion of the
subsidy that we are treating as a longterm, interest-free contingent liability
loan, pursuant to 19 CFR 351.505(d)(1)
for the reasons described above, we find
the benefit to be equal to the interest
that HYSCO would have paid during the
POR had it borrowed the full amount of
the contingent liability loan during the
POR. Pursuant to 19 CFR 351.505(d)(1),
we used a long-term interest rate as our
benchmark to calculate the benefit of a
contingent liability interest-free loan
because the event upon which
repayment of the duties depends (i.e.,
the completion of the R&D project)
occurs at a point in time more than one
year after the date in which the grant
was received. Specifically, we used the
long-term benchmark interest rates as
described in the ‘‘Subsidies Valuation’’
section of these preliminary results.
To calculate the total net subsidy
amount for this program, we summed
the benefits provided under this
program. Next, to calculate the net
58515
subsidy rate, we divided the portion of
the benefit allocated to the POR by
HYSCO’s total f.o.b. sales for 2010.28 On
this basis, we preliminarily determine
the net subsidy rate under this program
to be 0.02 percent ad valorem for
HYSCO.
B. Restriction of Special Taxation Act
(RSTA) Article 26
Under RSTA Article 26, a company
can claim a tax credit equal to a certain
percentage of its investments in its
facilities.29 According to the GOK, the
goal of this program is to boost general
national economic activity.30 In its
response to the Department’s October 5,
2011, questionnaire, the GOK submitted
information which indicated that these
tax credits are expressly limited to a
corporation’s investments in facilities
located outside the ‘‘Overcrowding
Control Region’’ of the Seoul
Metropolitan Area (‘‘SMA’’).31
Specifically, the GOK provided a
complete translation of Article 23(1) of
the Enforcement Decree of the RSTA in
its November QR eligibility for the
program is limited to investments made
outside the Overcrowding Control
Region of the SMA.32 Moreover, the
GOK also stated that corporate
investments in facilities located within
the Overcrowding Control Region of the
SMA are not eligible for credits under
this tax program.33
Because information provided by the
GOK indicates that the tax credit under
this program is 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 Tariff Act of 1930,
as amended (‘‘the Act’’).34 The tax credit
is a financial contribution in the form of
revenue foregone by the government
within the meaning of section
771(5)(D)(ii) of the Act, which provides
a benefit to the recipient equal to the
difference between the taxes actually
paid and the taxes otherwise payable in
28 See
29 See
19 CFR 351.525(b)(3).
GOK’s November QR at Exhibit B–3.
30 Id.
31 Id.
at Exhibit B–4.
32 Id.
26 See Final Results of CORE from Korea 2008, 76
FR at 3613 and CORE 2008 Decision Memorandum
at ‘‘The Act on Special Measures for the Promotion
of Specialized Enterprises for Parts and Materials.’’
27 See 19 CFR 351.505(d)(1); see also Certain HotRolled Carbon Steel Flat Products from India: Final
Results of Countervailing Duty Administrative
Review, 73 FR 40295 (July 14, 2008), and
accompanying Issues and Decision Memorandum at
‘‘Export Promotion Capital Goods Scheme
(EPCGS).’’
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33 Id.
at Exhibit B–3.
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 ‘‘Provision of Electricity for Less
than Adequate Remuneration’’ (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(5(a)(D)(iv) of
the Act).
34 See,
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the absence of this program within the
meaning of 19 CFR 351.509(a)(1). These
findings are consistent with the
determinations in Bottom Mount
Refrigerators From Korea, and 2009
Review of the Countervailing Duty Order
on Corrosion-Resistant Carbon Steel Flat
Products From Korea: Post-Preliminary
Analysis Memorandum for Hyundai
HYSCO Ltd.35
HYSCO and POSCO indicated that
their companies used RSTA Article 26
credits during the 2010 POR.36
To calculate the subsidy rate for
HYSCO and POSCO during the POR, we
divided each company’s benefit, which
is the tax credit claimed by the company
under this program in its tax return filed
in 2010, by the company’s total sales
during the POR. On this basis, we
preliminarily determine the
countervailable subsidy provided under
this program to be 0.06 percent ad
valorem for HYSCO and 0.08 percent ad
valorem for POSCO.
C. Asset Revaluation (TERCL Article
56(2) of the Tax Reduction and
Exemption Control Act (TERCL)
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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.37
35 See Bottom Mount Combination RefrigeratorFreezers from the Republic of Korea: Preliminary
Negative Countervailing Duty Determination and
Alignment of Final Determination With Final
Antidumping Determination, 76 FR 55044
(September 6, 2011) unchanged in Bottom Mount
Combination Refrigerator-Freezers from the
Republic of Korea: Final Affirmative Countervailing
Duty Determination, 77 FR 17410 (March 26, 2012);
see also Memorandum to Ronald K. Lorentzen from
Melissa G. Skinner, Re: 2009 Review of the
Countervailing Duty Order on Corrosion-Resistant
Carbon Steel Flat Products From Korea: Post
Preliminary Analysis Memorandum for Hyundai
HYSCO Ltd. (September 27, 2011) unchanged in
Corrosion-Resistant Carbon Steel Flat Products from
Korea: Final Results of Administrative Review, 77
FR 13093 (March 5, 2012) (Final Results of CORE
From Korea 2009).
36 See HYSCO’s November QR at 10 and Exhibit
B–3 and POSCO’s November 29, 2011 QR at 12 and
Exhibits B–2, B–3, and B–4.
37 See Final Affirmative Countervailing Duty
Determination: Certain Cut-to-Length CarbonQuality Steel Plate from the Republic of Korea, 64
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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.38 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 lower
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 0.01 percent ad valorem
for POSCO. Dongbu and HYSCO did not
use this program during the POR.
presented in this review to warrant any
reconsideration of the countervailability
of 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 because it is limited, constitutes a
financial contribution in the form of
forgone revenue under section
771(5)(D)(ii) of the Act, and confers a
benefit in the amount of the revenue
foregone within the meaning of
771(5)(E) of the Act.
Dongbu and HYSCO reported that
their companies did not use the program
during the POR.40 POSCO imported
anthracite coal during the POR and,
therefore, received a benefit in the
amount of the VAT that it should have
otherwise paid if not for the exemption.
To determine POSCO’s benefit from the
VAT exemption on these imports, we
calculated the amount of VAT that
would have been due absent the
program on the total value of anthracite
coal POSCO imported during the POR.
We then divided the amount of this tax
benefit by POSCO’s total f.o.b. sales.
Based on this methodology, we
preliminarily determine the POSCO
received a countervailable subsidy of
0.07 percent ad valorem.
D. Exemption of VAT on Imports of
Anthracite Coal
As explained in the Cold-Rolled
Investigation, 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.41
The Korea Land Development
Corporation (Koland) is a government
investment corporation that is
responsible for purchasing, developing,
and selling land in the industrial sites.42
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
Under Article 106 of Restriction of
Special Taxation Act (RSTA), imports of
anthracite coal are exempt from the
value added tax (VAT). In the ColdRolled Investigation, we determined that
the program is de jure specific under
section 771(5A)(D)(i) of the Act. Because
the GOK allows for only a few items to
be exempt from VAT, the items allowed
to be imported without paying VAT are
limited.39 We also determined that the
VAT exemptions under the program
constitute a financial contribution under
section 771(5)(D)(ii) of the Act, as the
GOK is not collecting revenue otherwise
due, and that the exemptions confer a
benefit under section 771(5)(E) of the
Act equal to the amount of the VAT that
would have otherwise been paid if not
for the exemption. No new information,
evidence of changed circumstances, or
comments from interested parties was
FR 73176, 73183 (December 29, 1999) (CTL Plate
Investigation).
38 Id.
39 See Cold-Rolled Decision Memorandum at
‘‘Exemption of VAT on Imports of Anthracite Coal.’’
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E. Other Subsidies Related to
Operations at Asan Bay: Provision of
Land and Exemption of Port Fees Under
Harbor Act
1. Provision of Land
40 See HSYCO’s November QR at 14 and Dongbu’s
November 28, 2011, questionnaire response at 14.
41 See 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 ‘‘Provision of Land at Asan Bay.’’
42 Id.
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charged to Dongbu.43 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 prepayments.44 HYSCO and POSCO
reported that their companies did not
use this program.45
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 prepayments 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.46
Further, the Department found the price
discount and the price adjustment for
‘‘interest earned’’ constituted financial
contributions in the form of grants
under section 771(5)(D)(i) of the Act and
conferred benefits in the amount of
grants within the meaning of section
771(5)(E) of the Act. Id. No new
information, evidence of changed
circumstances, or comments from
interested parties was presented in this
review to warrant any reconsideration of
the countervailability of this program.
Therefore, we preliminarily continue to
find that this program is de facto
specific within the meaning of section
771(5A)(D)(iii)(I) of the Act because it is
limited to Dongbu, constitutes a
financial contribution in the form of
grants under sections 771(5)(D)(i), and
confers a benefit in the amount of the
price discount and the price adjustment
within the meaning of 771(5)(E) of the
Act.
Consistent with the Cold-Rolled
Investigation, we have treated the land
price discount and the interest earned
refund as non-recurring subsidies.47 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
43 Id.
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 0.09 percent ad valorem for the POR.
2. Exemption of Port Fees Under the
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.48 The Department also determined
that Dongbu received an exemption of
harbor fees for a period of almost 70
years under this program.49
In the Cold-Rolled Investigation, the
Department found the exemption from
the fees to be a countervailable subsidy.
No new information, evidence of
changed circumstances, or comments
from interested parties was presented in
this review to warrant any
reconsideration of the countervailability
of this program. Thus, we preliminarily
continue to find that the program is
countervailable and is specific under
section 771(5A)(D)(iii)(I) of the Act
because the excessive exemption period
of 70 years is limited to Dongbu.
Moreover, we preliminarily determine
that the GOK is foregoing revenue that
it would otherwise collect by allowing
Dongbu to be exempt from port charges
for up to 70 years and, thus, the program
constitutes a financial contribution
44 Id.
45 See HYSCO’s November QR at 15 and POSCO’s
November QR at 17.
46 Id.
47 Id.
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48 See Cold-Rolled Decision Memorandum at
‘‘Dongbu’s Excessive Exemptions under the Harbor
Act.’’
49 Id.
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58517
within the meaning of section
771(5)(D)(ii) of the Act. Further, we
preliminarily determine that the
exemptions confer a benefit under
section 771(5)(E) of the Act in the
amount of the port charges that were not
collected.
In the Cold-Rolled Investigation, the
Department treated the program as a
recurring subsidy and determined that
the benefit is equal to the average yearly
amount of harbor fee exemptions
provided to Dongbu.50 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. Research and Development Grants
Under the Industrial Technology
Innovation Promotion Act (ITIPA)
The GOK’s Industrial Technology
Innovation Promotion Act program is
designed to foster future new industries
and enhance the competitiveness of
primary industries through fundamental
technology development.51 The program
is administered by MKE and the Korean
Evaluation Institute of Industrial
Technology (KEIT).52
Under the Industrial Technology
Innovation Promotion Act, GOK
provides R&D grants to support the
areas of transportation system,
industrial materials, robots, biomedical
equipments, clean manufacturing
foundation, knowledge services and
industry convergence technology.53
Pursuant to Article 11 of the
Industrial Technology Innovation
Promotion Act, KEIT prepares a basic
plan for the development of technology,
on behalf of MKE.54 This plan includes
the R&D projects that are eligible,
describes the application process, and
designates the supporting
documentation required.55 The plan is
announced to the public.56 According to
50 Id.
51 See Corrosion-Resistant Carbon Steel Flat
Products from the Republic of Korea: Preliminary
Results of Countervailing Duty Administrative
Review, 76 FR 54209, 54213 (August 31, 2011)
(Preliminary Results of CORE from Korea 2009)
unchanged in Final Results of CORE from Korea
2009, 77 FR at 13093.
52 Id.
53 Id.
54 Id.
55 Id.
56 Id.
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the GOK, any person who wishes to
participate in the program prepares an
R&D business plan that meets the
requirements set forth in the basic plan
and then submits the application to the
GOK’s Application Review Committee,
which then evaluates the application to
determine if it conforms to the terms
and conditions set forth in the basic
plan.57 If the application is approved,
MKE and the company enter into an
R&D agreement and then MKE provides
the grant.58
The costs of the R&D projects under
this program are shared by the company
(or research institution) and the GOK.59
Specifically, the grant ratio for project
costs are as follows: (1) For projects
with one small/medium-sized enterprise
(SME), the GOK provides grants up to
three-fourths of the project costs, (2) for
projects with one conglomerate, the
GOK provides grants up to one-half of
the project costs, (3) for projects with
more than two participants of which
SMEs comprise more than two-thirds of
the participant ratio, the GOK provides
up to three-fourths of the project costs,
and (4) for projects with more than two
participants of which SMEs comprise
less than two-thirds of the participant
ratio, the GOK provides up to one-half
of the project costs.60
When the project is evaluated as
‘‘successful’’ upon completion, the
participating companies must repay 40
percent of the R&D grant to the GOK
over five years.61 However, when the
project is evaluated as ‘‘not successful,’’
the company does not have to repay the
GOK any of the grant amount.62 Id.
Prior to and during the POR, HYSCO
and POSCO received grants under the
Industrial Technology Innovation
Promotion Act for R&D projects in
which the companies participated with
other firms.63
Concerning HYSCO, the nature of the
projects for which it received the grants
is business proprietary and cannot be
discussed in this public notice.64 Based
upon our review of program documents
submitted in the response, we
preliminarily determine that one grant
received is related to the second step of
57 Id.
58 Id.
59 Id.
60 Id.
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61 Id.
62 See
Preliminary Results of CORE from Korea
2009, 76 FR at 54213 and HYSCO’s November QR
at Exhibit Q–4.
63 See GOK’s November QR at 16 and Q–1;
HYSCO’s November QR at 17, Q–1, Q–2, and Q–3,
and POSCO’s November 30, 2011, QR at Exhibit Q–
2.
64 See Memorandum to the File titled ‘‘HYSCO’s
R&D Grants Under the ITIPA’’, (August 30, 2012),
of which a public version is on file in IA Access.
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the project discussed in the section
‘‘Research and Development Grants
Under the Industrial Development Act
(IITPA)’’ in Preliminary Results of CORE
from Korea 2009, in which the
Department determined that grants
received for this particular project under
this program are attributable to nonsubject merchandise.65 Upon review of
the information submitted by HYSCO
and the GOK, we find that the terms and
conditions of this grant project remain
unchanged from the Preliminary Results
of CORE from Korea 2009 and
preliminarily determine that this grant
pertains specifically to production of a
product that is not subject
merchandise.66 Therefore, consistent
with 19 CFR 351.525(b)(5) and our past
practice, we preliminarily determine
that this grant was bestowed in
connection with the production of a
product that is not subject merchandise.
Hence we did not include this grant in
our benefit calculations. In addition,
HYSCO reported receiving another grant
during the POR for a project that is
being performed under the ITIPA.67
Dividing the amount of this grant by
HYSCO’s total sales, results in a net
subsidy rate that is less than 0.005
percent ad valorem and, thus, is not
numerically significant.
POSCO also reported receiving grants
under the ITIPA prior to and during the
POR.68 Dividing the sum of POSCOs
total grants in each year by POSCO’s
total sales in the corresponding year
results in a net subsidy rate that is less
than 0.005 percent ad valorem.
Consistent with the Department’s
practice, we find that the grants
received by HYSCO and POSCO under
this program are not measurable.69
Consequently, we preliminarily
determine that it is not necessary for the
Department to make a finding as to the
countervailability of the grants POSCO
received under this program. If a future
administrative review of this proceeding
is requested, we will further examine
grants provided under ITIPA.
65 See Preliminary Results of CORE from Korea
2009, in which the Department found the grant in
question to be tied to the production of non-subject
merchandise, unchanged in Final Results of Core
from Korea 2009 and HYSCO’s November QR at
Exhibit Q–4.
66 See Memorandum to the File titled ‘‘HYSCO’s
R&D Grants Under the ITIPA’’ (August 31, 2012), of
which a public version is on file in IA Access.
67 See HYSCO’s November QR at 18.
68 See POSCO’s November 30, 2011, QR at Exhibit
Q–2.
69 See, e.g., CORE from Korea 2006 Decision
Memorandum at ‘‘GOK’s Direction of Credit’’ and
Preliminary Results of CORE from Korea 2009, 76
FR at 54213.
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B. R&D Grants Under the Act on the
Promotion of the Development, Use, and
Diffusion of New and Renewable Energy
The GOK’s Development of Use, and
Diffusion of New and Renewable Energy
program (formerly the Development of
Alternative Energy program) is
reportedly designed to contribute to the
preservation of the environment, the
sound and sustainable development of
the national economy, and the
promotion of national welfare by
diversifying energy resources through
promoting technological development,
the use and diffusion of alternative
energy, and reducing the discharge of
gases harmful to humans or the
environment by activating the new and
renewable energy industry.70 The
program is administered by the Ministry
of Knowledge Economy (MKE), Korea
Energy Management Corporation
(KEMCO), and the Korea Institute of
Energy Technology Evaluation and
Planning (KETEP).71
Under the Act on the Promotion of the
Development, Use, and Diffusion of
New and Renewable Energy (New and
Renewable Energy Act), the GOK
provides R&D grants to support the
following businesses: (1) Electric and
Nuclear Power Development, (2) Energy
and Resources Technology
Development, and (3) New and
Renewable Energy Technology
Development.72
Pursuant to Articles 5 and 6 of the
New and Renewable Energy Act, MKE
prepares a base plan and a yearly
execution plan for the development of
new and renewable energy.73 The base
and execution plans are announced to
the public.74 According to the GOK, any
person who wishes to participate in the
program prepares an R&D business plan
and then submits the application to the
KETEP, which then evaluates the
application and selects the projects
eligible for government support.75 After
the selected application is finally
approved by MKE, KEMCO, and the
general supervising institute of the
consortium enter into an R&D agreement
and then MKE provides the grant
through KEMCO.76
The costs of the R&D projects under
this program are shared by the company
(or research institution) and the GOK.77
Specifically, the grant ratio for project
70 See Preliminary Results of CORE from Korea
2009, 76 FR at 54209, 54213–54214, unchanged in
Final Results of CORE from Korea 2009.
71 Id. at 54214.
72 Id.
73 Id.
74 Id.
75 Id.
76 Id.
77 Id.
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costs are as follows: (1) For large
companies, the GOK provides grants up
to one-half of the project costs, (2) for
small/medium-sized companies, the
GOK provides grants up to three-fourths
of the project costs, (3) for a
consortium,78 the GOK provides grants
up to three-fourths of the project costs,
and (4) for others, the GOK provides
grants up to one-half of the project
costs.79
When the project is evaluated as
‘‘successful’’ upon completion, the
participating companies must repay 40
percent of the R&D grant to the GOK.80
However, when the project is evaluated
as ‘‘not successful’’, the company does
not have to repay any of the grant
amount to the GOK.81
During the POR, HYSCO received an
energy-related grant under the New and
Renewable Energy Act for a project in
which the company participated with
other firms.82 HYSCO reported that the
R&D grant under the New and
Renewable Energy Act are provided
with respect to specific projects, which
are generally multi-year projects where
the amount of funds to be provided by
the GOK is set out in the project
contract.83 The cost of R&D projects
under this program is shared by the
participating companies and the GOK.84
HYSCO points to the Department’s prior
decision concerning this project in
Preliminary Results of CORE From
Korea 2009, and reiterates its claim that
the project for which the grant was
received from the government was not
related to subject merchandise.85
Upon review of the information from
HYSCO and the GOK, we preliminarily
determine that the grant was bestowed
specifically in connection with
production of a product that is not
subject merchandise and is related to
the project examined in the prior
administrative review.86 Therefore,
78 If the ratio of small to medium-sized companies
in a consortium is above two-thirds, the GOK
provides grants up to one-half of the project costs.
See GOK’s November QR, Exhibit R–1.
79 Preliminary Results of CORE from Korea 2009,
76 FR at 54214.
80 Id.
81 Id.
82 See GOK’s November QR at 17–18 and Exhibit
R–1.
83 See HYSCO’s November QR at Exhibit R–3.
84 Id.
85 Id. at 19 citing to Preliminary Results of CORE
from Korea 2009, 76 FR at 54214, in which the
Department found the grant in question to be tied
to non-subject merchandise, unchanged in the Final
Results of CORE from Korea 2009; see also
Memorandum to the File titled ‘‘HYSCO’s R&D
Grants under the Act on the Promotion of the
Development, Use and Diffusion of New and
Renewable Energy’’ (August 24, 2011), submitted as
Exhibit R–4 of HYSCO’s November QR.
86 See Memorandum to the File titled ‘‘HYSCO’s
R&D Grants under the Act on the Promotion of the
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consistent with 19 CFR 351.525(b)(5)
and our past practice, we preliminarily
determine that this grant is tied to nonsubject merchandise. Hence, we
preliminarily determine that the New
and Renewable Energy Act did not
confer a benefit during the POR.
C. Overseas Resource Development
Program: Loan From Korea Resources
Corporation (KORES)
In Final Results of CORE From Korea
2006, the Department found that the
GOK enacted the Overseas Resource
Development (ORD) Business Act in
order to establish the foundation for
securing the long-term supply of
essential energy and major material
minerals, which are mostly imported
because of scarce domestic resources.87
Pursuant to Article 11 of this Act, MKE
annually announces its budget and the
eligibility criteria to obtain a loan from
MKE.88 Any company that meets the
eligibility criteria may apply for a loan
to MKE.89 The loan evaluation
committee evaluates the applications,
selects the recipients and gets approval
from the minister of MKE.90 For projects
related to the development of strategic
mineral resources, the Korean Resources
Corporation (KORES) lends the funds to
the company for foreign resources
development.91
During the POR, as in the prior
administrative review, HYSCO had
outstanding loans from KORES for
investment in a copper mine in
Mexico.92 Based upon examination of
the loan documents and our prior
determination concerning these loans,
we preliminarily determine that the
KORES loans are tied to copper, which
is non-subject merchandise.93 Further,
we find that copper is not an input
primarily dedicated to the production of
Development, Use, and Diffusion of New and
Renewable Energy’’ (August 31, 2012) (HYSCO New
and Renewable Energy Grant Memorandum), of
which a public version is on file in IA Access.
87 See Corrosion-Resistant Carbon Steel Flat
Products from the Republic of Korea: Preliminary
Results of Countervailing Duty Administrative
Review, 73 FR 52315, 52326, (September 9, 2008)
(Preliminary Results of CORE from Korea 2006),
unchanged in Corrosion-Resistant Carbon Steel Flat
Products from the Republic of Korea: Final Results
of Countervailing Duty Administrative Review, 74
FR 2512 (January 15, 2009) (Final Results of CORE
from Korea 2006), and accompanying Issues and
Decision Memorandum at ‘‘Programs Determined
To Be Not Used’’.
88 See GOK’s November QR at Exhibit S–1.
89 Id.
90 Id.
91 Id.
92 See HYSCO’s November QR at 20, Exhibit 8 at
15 and HYSCO’s March 30, 2012 QR at Exhibits 15
and 16.
93 Preliminary Results of CORE from Korea 2009,
76 FR at 54214–54215, unchanged in Final Results
of CORE from Korea 2009.
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58519
subject merchandise.94 On this basis, we
find the KORES loans are tied and
attributable to non-subject
merchandise.95 Therefore, we
preliminarily determine that HYSCO
did not receive a benefit from this
program with respect to the subject
merchandise during the POR.
D. Overseas Resource Development
Program: Loan From Korea National Oil
Corporation (KNOC)
In Final Results of CORE From Korea
2007, the Department found that the
GOK enacted the Overseas Resource
Development (ORD) Business Act in
order to establish the foundation for
securing the long-term supply of
essential energy and major material
minerals, which are mostly imported
because of scarce domestic resources.96
Pursuant to Article 11 of this Act, the
MKE annually announces its budget and
the eligibility criteria to obtain a loan
from MKE.97 Any company that meets
the eligibility criteria may apply for a
loan to MKE.98 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.99 An
approved company enters into a
borrowing agreement with KNOC for the
development of the selected resource.100
Two types of loans are provided under
this program: ‘‘General loans’’ and
‘‘success-contingent loans’’. For a
success-contingent loan, the repayment
obligation is subject to the results of the
development project. In the event that
the project fails, the company will be
exempted for all or a portion of the loan
repayment obligation. However, if the
project succeeds, a portion of the project
income is payable to KNOC.101
During the POR, HYSCO had
outstanding loans from KNOC related to
petroleum exploration projects.102
Based upon examination of the loan
documents and our determinations
concerning these loans in the prior
94 Id.
95 See
19 CFR 351.525(b)(5).
Corrosion-Resistant Carbon Steel Flat
Products from the Republic of Korea: Preliminary
Results of Countervailing Duty Administrative
Review, 74 FR 46100; 46107–46108 (September 8,
2009) (Preliminary Results of CORE from Korea
2007), and unchanged in Corrosion-Resistant
Carbon Steel Flat Products from the Republic of
Korea: Final Results of Countervailing Duty
Administrative Review,74 FR 55192 (October 27,
2009) (Final Results of CORE from Korea 2007).
97 See GOK’s November QR at Exhibit T–1.
98 Id.
99 Id.
100 Id.
101 Id.
102 See HYSCO’s November QR at 20 and Exhibit
8 at 16 and HYSCO’s March 30, 2012, QR at 11 and
Exhibit 17.
96 See
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F. Document Acceptance (D/A)
Financing Provided Under KEXIM’s
Trade Rediscount Program and D/A
Loans issued by the KDB and Other
Government-Owned Banks
Under section 771(5)(B)(iii) of the Act,
a subsidy can be found whenever the
government ‘‘makes a payment to a
funding mechanism to provide a
financial contribution, or entrusts or
directs a private entity to make a
financial contribution * * * to a person
and a benefit is thereby conferred.’’ In
the CFS Investigation, we determined
that KEXIM’s trade bill rediscount
program constitutes a payment to a
funding mechanism because the
rediscount ceiling KEXIM provides to
banks participating under the program
is contingent on banks subsequently
lending the funds to exporters.106
Section 771(5)(B)(iii) of the Act also
states that financial contributions from
funding mechanisms can be a subsidy
only if providing the contribution
would normally be vested in the
government and the practice does not
differ in substance from practices
normally followed by the government.
This is the ‘‘government subsidy
function’’ prong of an indirect financial
contribution. As determined in the CFS
Investigation, under this program banks
are performing a government subsidy
function and, therefore, their loans can
qualify as subsidies.107 Therefore, we
find that loans from banks under the
rediscount program constitute financial
contributions within the meaning of
section 771(5)(D)(i) of the Act and
confer a benefit upon exporters, in
accordance with section 771(5)(E)(ii) of
the Act, to the extent the amount
exporters pay under the program is less
than the amount they would pay on
comparable commercial loans they
could obtain on the market. Because
receipt of the loans is contingent upon
export performance, we also determine
that KEXIM’s rediscount program is
specific within the meaning of section
771(5A)(B) of the Act.
In the CFS investigation, we further
determined that D/A Loans issued by
the KDB and other government-owned
banks 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.108 In addition,
we determined that such loans confer a
benefit, in accordance with section
771(5)(E)(ii) of the Act, to the extent the
amount exporters pay under the
program is less than the amount they
would pay on comparable commercial
loans they could obtain on the
market.109 Because receipt of D/A loans
is contingent upon export performance,
we also determined that D/A loans from
the KDB and other government-owned
banks are specific within the meaning of
section 771(5A)(B) of the Act.110
In the CFS Investigation, we further
found that subsidies on the loans under
KEXIM’s trade bill rediscount program
are tied to sales of subject merchandise
to the United States in accordance with
19 CFR 351.525(b)(4) and (5).
Accordingly, we limited our benefit
calculations to D/A loans issued on
sales of subject merchandise to the
United States.111 We preliminarily
determine that there is no information
on the record that warrants a
reconsideration of the Department’s
prior findings.
Dongbu reported receiving short-term
D/A financing from commercial banks
that participated in KEXIM’s Trade
103 Preliminary Results of CORE from Korea 2009,
76 FR at 54215 unchanged in Final Results of CORE
from Korea 2009.
104 See 19 CFR 351.525(b)(5).
105 See GOK’s November QR at 3 and POSCO’s
November QR at 9.
106 See CFS Decision Memorandum at ‘‘Export
Loans by Commercial Banks Under KEXIM’s Trade
Bill Rediscounting Program.’’
107 See CFS Decision Memorandum at ‘‘Export
Loans by Commercial Banks Under KEXIM’s Trade
Bill Rediscounting Program.’’
108 See CFS Decision Memorandum at ‘‘D/A
Loans Issued by the KDB and Other GovernmentOwned Banks.’’
109 Id.
110 Id.
111 Id.
administrative review, we preliminarily
determine that the KNOC loans are tied
to petroleum exploration, which does
not involve subject merchandise.103 On
this basis, we find the KNOC loans are
tied and attributable to non-subject
merchandise.104 Therefore, we
preliminarily determine that HYSCO
did not receive a benefit from this
program with respect to the subject
merchandise during the POR. We will
continue to examine this program in
future reviews.
pmangrum on DSK3VPTVN1PROD with NOTICES
E. Pre-1992 Direct Credit
During the POR, POSCO was the only
respondent company that had pre-1992
long-term loans outstanding during the
POR.105 Assuming, arguendo, that the
benefit under this program is equal to
the sum of POSCOs total interest
payments made during the POR, the
resulting net subsidy rate would be less
than 0.005 percent ad valorem when
attributed to POSCO’s total sales, which
is not numerically significant. Thus,
consistent with the Department’s
practice, we are excluding this amount
from the net countervailable subsidy
rate.
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Rediscount Program and D/A Loans
issued by the KDB and other
government-owned banks during the
POR. To calculate the benefits to
Dongbu under these programs, we
compared the amount that Dongbu paid
on all of its D/A loans from commercial
banks outstanding during the POI to the
amount Dongbu paid on comparable
commercial loans.112 Because loans
under these programs are discounted
(i.e., interest is paid up front at the time
the loans are received), the effective rate
paid by respondents on their D/A loans
is a discounted rate. The benefits
Dongbu received were less than 0.005
percent of its total export sales of
subject merchandise to the United
States during the POR, which is not
numerically significant. Therefore, we
are preliminarily excluding the amount
from the net countervailable subsidy
rate. HYSCO, POSCO and POCOS did
not report any D/A financing from
commercial banks during the POR.113
G. R&D Grants Under the Special Act on
Balanced National Development
During the POR, HYSCO reported that
it received a research and development
grant under the Special Act on Balanced
National Development (National
Development Act).114
Upon review of the information
submitted by HYSCO and the GOK, we
preliminarily determine that the grant
pertains specifically to the production
of a product that is not subject
merchandise.115 Therefore, consistent
with 19 CFR 351.525(b)(5), we
preliminarily determine that the
National Development Act did not
confer a benefit to the production or
export of subject merchandise during
the POR. If a future administrative
review of this proceeding is requested,
we will reconsider whether grants
provided under the National
Development Act confer a benefit.
H. Subsidies Related to HYSCO’s 2004
Purchase of Hanbo Steel (Hanbo)
In January 1997, Korea’s then second
largest steelmaker, Hanbo Steel,
collapsed under enormous debt and
entered into bankruptcy proceedings,
falling under the receivership of the
112 See
19 CFR 351.505(a)(2)(iv).
HYSCO’s November QR at 16 and
POSCO’s November QR at 18.
114 See HYSCO’s March QR at 2 and 5, see also
GOK’s August 7, 2012, questionnaire response
(August 7 QR) at Exhibit V–1.
115 The exact nature of the project for which the
R&D grant was received is business proprietary
information. See Memorandum to the File titled
‘‘HYSCO’s R&D Grants under the Act on the
Promotion of the Special Act on Balanced National
Development’’ (August 31, 2012) of which a public
version is on file in IA Access.
113 See
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pmangrum on DSK3VPTVN1PROD with NOTICES
Seoul Central District Bankruptcy Court
(Bankruptcy Court). Petitioner alleged
that from 1996 to 2000 the GOK
provided credit, and also compelled
Korean banks to provide credit, to
Hanbo at a time when Hanbo was
uncreditworthy.116 According to
petitioner, these loans continue to
benefit HYSCO during the POR.
Petitioner further alleged that in the
aftermath of Hanbo’s collapse, the GOK
paid off Hanbo’s debts to its small- and
medium-sized creditors in order to save
them from going into bankruptcy
themselves, resulting in debt forgiveness
to Hanbo. In September 2004, Hanbo
was purchased by a consortium
consisting of HYSCO and INI Steel Co.
through a public auction under the
Bankruptcy Court’s supervision.117 As a
result of this sale, HYSCO acquired
Hanbo’s cold-rolled facility.118
Petitioner alleged that the Korea Asset
Management Corporation, a GOK entity,
held the majority of Hanbo’s debt at the
time of its sale. Petitioner further
alleged that the 2004 acquisition was
not an arm’s-length, fair-market-value
transaction. Specifically, petitioner
alleged that the transaction was
contingent upon HYSCO/INI agreeing to
retain Hanbo’s workers for three years.
Petitioner pointed out that under the
Department’s change-in-ownership
methodology, there is a rebuttable
presumption that allocable subsidies to
a company will continue to benefit the
purchaser of the company or its assets
if the sales transaction was not at arm’s
length and for fair market value.
Consequently, petitioner alleged that the
2004 transaction did not extinguish the
benefit from the debt forgiveness that
had been provided to Hanbo, resulting
in an allocable benefit to HYSCO during
the POR.
The Department initiated an
investigation of petitioner’s
allegations.119 The Department’s
examination covers any GOK debt
forgiveness to Hanbo from 1996 (the
beginning of the 15-year AUL for this
review) through September 2004 (the
time of Hanbo’s purchase), which could
conceivably result in benefits allocable
to the 2010 POR, as well as any GOK
loans to Hanbo that are still outstanding
116 See Petitioners December 20, 2011,
submission at 12.
117 See HYSCO’s June 19, 2012, submission at 2–
3.
118 Id. at 7.
119 See Memorandum to Melissa G. Skinner,
Director, Office 3, through Eric B. Greynolds,
Program Manager, from Gayle Longest, Case
Analyst, regarding New Subsidy Allegations (April
24, 2012).
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during the POR, to the extent such loans
were assumed by HYSCO.
With regard to petitioner’s loan
allegations, the information submitted
by HYSCO and the GOK indicates that
INI/HYSCO’s 2004 purchase of Hanbo
was an asset-only purchase and, thus,
no liabilities were transferred to INI and
HYSCO as part of the sale, i.e., HYSCO
did not assume any of Hanbo’s debts.120
Therefore, we preliminarily find that, to
the extent that Hanbo may have
received GOK or GOK-directed loans,
any subsidy from such loans did not
benefit HYSCO during the POR.
With regard to petitioner’s debt
forgiveness allegations, the
questionnaire responses from HYSCO
and the GOK indicate that none of
Hanbo’s debt, including debts owed to
suppliers and small- and medium-sized
firms, was forgiven in 1996.121 Thus, we
preliminarily find that the only debt
forgiveness at issue is any debt
forgiveness resulting from Hanbo’s
bankruptcy beginning in 1997.
Concerning the period 1997 until
Hanbo’s purchase in 2004, the
questionnaire responses from the GOK
and HYSCO indicate that Hanbo’s debt
was restructured pursuant to a courtsupervised bankruptcy proceeding in
accordance with Korea’s Corporate
Reorganization Law.122 For example,
effective January 31, 1997, the
bankruptcy judge forbade Hanbo from
liquidating any of its outstanding debt,
transferring ownership, or engaging in
any settlement or waiver.123 During its
bankruptcy, Hanbo was overseen by a
court-approved trustee.124 Further, the
Bankruptcy Court’s approval was
required for all of Hanbo’s major
actions.125 Finally, the 2004 sale of
Hanbo through public auction was an
integral part of the bankruptcy process
and thus, as with all the other elements
in the bankruptcy, also subject to court
approval.
Concerning the terms of the
bankruptcy itself, Hanbo’s final
reorganization plan, as approved by the
Bankruptcy Court, indicates that, for the
purposes of restructuring Hanbo’s debts,
Hanbo’s creditors were divided into five
categories depending on the type of
creditor and existence of security:
120 Questionnaire responses further indicate that
Hanbo received operating financing between 1998
and 2002, under court supervision, but that the debt
was gradually paid down by 2002 with operating
income.
121 See HYSCO’s August 2, 2012, submission at
1–2; see also the GOC’s August 15, 2012,
submission at 1.
122 See HYSCO’s June 19, 2012, submission at 1–
4.
123 Id. at Exhibit 3.
124 Id. at 2.
125 Id.
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58521
Secured creditors, unsecured creditors,
SME creditors, tax creditors, and
related-party creditors.126 The
documents further indicate that the
repayment terms varied depending on
the creditor group, but repayment terms
were applied equally to creditors within
the same creditor group.127 As a result
of this debt restructuring, Hanbo’s debts
were repaid at a discount with proceeds
from the sale of assets. This process
resulted in debt forgiveness to the extent
that the debts were not repaid in full.
The Department addressed the issue
of debt forgiveness in the context of
bankruptcy proceedings in the final
results of Stainless Steel from Korea, in
which the Department explained that, in
assessing the countervailability of the
debt forgiveness, it examines whether:
(1) The bankruptcy protection is
generally available in the country in
question, and (2) the bankruptcy in
question was inconsistent with the
typical practice in the country.128 In
Stainless Steel from Korea, the
Department found that where
bankruptcy proceedings are conducted
pursuant to law that is are generally
available to all companies, and the
particular company received no special
or differential treatment in its
bankruptcy process, debt forgiveness
resulting from the bankruptcy
procedures is not specific and, thus, not
countervailable.129 There is no
information on the record of the current
proceeding that warrants
reconsideration of the Department’s
finding that that bankruptcies are
generally available to all companies in
Korea.
In the case of Hanbo’s bankruptcy, we
preliminarily find that it was conducted
through legal proceedings generally
available to all Korean companies.130 As
126 See HYSCO’s June 19, 2012, submission at
Exhibit 2; see also HYSCO’s August 2, 2012,
submission at 1 and Exhibit 21.
127 Id.
128 See Final Results of Countervailing Duty
Administrative Review: Stainless Steel Sheet and
Strip in Coils from the Republic of Korea, 69 FR
2113 (January 14, 2004) (Stainless Steel from
Korea), and accompanying Issues and Decision
Memorandum (Stainless Steel from Korea
Memorandum) at Comment 4; see also Final
Affirmative Countervailing Duty Determination and
Final Negative Critical Circumstances
Determination: Carbon and Certain Alloy Steel Wire
Rod from Germany, 67 FR 55808, (August 30, 2002),
and accompanying Issues and Decision
Memorandum at Comment 6.
129 Id.
130 We find that the Hanbo bankruptcy, which
was essentially a liquidation process, differed from
debt workouts that the Department has examined in
other Korean CVD proceedings (e.g., DRAMS from
Korea Investigation and the CFS Investigation),
which involved out-of-court corporate restructuring
agreements (CRAs) implemented by a body of
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noted above, Hanbo entered into
bankruptcy pursuant to Korea’s
Corporate Reorganization Law, under
court receivership at the Bankruptcy
Court, with its management and
operations subject to supervision by a
court-approved trustee. Further, there is
no evidence that Hanbo received special
or differential treatment in its
bankruptcy process. Accordingly, the
Department finds that Hanbo’s debt
restructuring was not subject to
government influence resulting in
subsidies.131 Consequently, in
accordance with the Department’s
practice, we preliminary find that to the
extent the bankruptcy restructuring plan
for Hanbo resulted in debt forgiveness,
such debt forgiveness was not specific,
as described under section 771(5A)(D)
of the Act and, thus, not
countervailable.
Accordingly, absent any subsidy
benefits that would be allocable to the
POR, there is no need for the
Department to analyze whether the 2004
sale of Hanbo was an arm’s-length, fairmarket-value transaction pursuant to the
Department’s change-in-ownership
methodology.
I. RSTA 22: Corporation Tax Exemption
on Dividend Income From Investment in
Overseas Resource Development
pmangrum on DSK3VPTVN1PROD with NOTICES
Under RSTA Article 22, a domestic
corporation, whose income for each
business year ending before December
31, 2009, includes any dividend income
from its investment in overseas resource
development projects as prescribed by
Presidential Decree (Enforcement
Decree), is exempt from corporate tax
for the portion of such dividend income
that is exempted from the tax of the host
country where the investment occurred.
Article 19 of the Enforcement Decree of
the RSTA prescribes the following
investment projects as being eligible for
this tax exemption: Agricultural
products, Animal products, Fishery
products, Forest products, and Mineral
products.
creditors dominated by government-owned or
controlled entities. The Department found those
workouts to have been subject to government
influence resulting in subsidies specific to the
company or industry. See Final Affirmative
Countervailing Duty Determination: Dynamic
Random Access Memory Semiconductors from the
Republic of Korea, 68 FR 37122 (June 23, 2003)
(DRAMS from Korea Investigation), and
accompanying Issues and Decision Memorandum
(DRAMS Decision Memorandum) at ‘‘Hynix
Financial Restructuring and Recapitalization;’’ see
also CFS Decision Memorandum at ‘‘Poognman
Restructuring.’’
131 See DRAMS Decision Memorandum at ‘‘Hynix
Financial Restructuring and Recapitalization’’; see
also CFS Decision Memorandum at ‘‘Poognman
Restructuring.’’
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POSCO reported that it had
investments in overseas resource
development projects as prescribed by
the Enforcement Decree and received
tax exemptions in the host country for
these investments.132 The tax
exemptions were reflected in the tax
return that POSCO filed during the POR.
Dongbu and HYSCO reported that they
did not use this program.
We preliminarily determine that the
tax exemptions POSCO received under
this program constitute a financial
contribution in the form of revenue
forgone as described under section
771(5)(D)(ii) of the Act and confer a
benefit as described under section
771(5)(E) of the Act and 19 CFR
351.509(a). Further, we preliminarily
determine that tax exemptions received
under this program are specific under
section 771(5A)(D)(1) because benefits
are limited to firms with investment
projects concerning agricultural, animal,
fishery, forest, and mineral products.
Under this program, the benefit is
equal to the amount of added income
taxes that POSCO would have paid
absent the program. The benefits
POSCO received were less than 0.005
percent of its total sales. Therefore, we
are preliminarily excluding the amount
from POSCO’s net countervailable
subsidy rate.
J. 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.133 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
132 See POSCO’s December 2, 2011, QR at 12; see
also GOK’s November QR at 6.
133 Pursuant to the petitioner’s new subsidy
allegations, the Department initiated an
investigation of property, acquisition and
registration tax exemptions allegedly received by
POSCO, Dongbu, and HYSCO for their respective
facilities in various locations. The information
submitted by the respondent firms and the GOK
indicates that these tax exemptions were received
pursuant to a program under Article 276 of the
Local Tax Act, which the Department has
previously examined and found to be
countervailable.
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the tax liability becomes effective. The
exemption is increased to 100 percent of
the relevant land, buildings, or facilities
that are located in an industrial complex
outside of the Seoul metropolitan area.
The GOK established the tax exemption
program under Article 276 in December
1994, to provide incentives for
companies to relocate from populated
areas in the Seoul metropolitan region
to industrial sites in less populated
parts of the country. The program is
administered by the local tax officials of
the county where the industrial
complex is located.
During the POR, pursuant to Article
276 of the Local Tax Act, HYSCO
received exemptions from the
acquisition tax, registration tax, and
property tax based on the location of its
manufacturing facilities, Suncheon
Works, in the Yulchon Industrial
Complex, and its facilities in the Ulsan
Works industrial complex designated
under the Industrial Cluster Act.134
During the POR, POSCO and Dongbu
received property reductions in
connection with their facilities located
in the Gwangyang Industrial Complex
and Godae Industrial Complex,
respectively. In addition, HYSCO,
POSCO, and Dongbu 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.
We preliminarily determine that the
tax reductions constitute a financial
contribution in the form of revenue
forgone, as described under section
771(5)(D)(ii) of the Act, and a benefit
under section 771(5)(E) and 19 CFR
351.509(a). We further preliminarily
determine that the property tax
exemptions provided under this
program are specific under section
771(5A)(D)(iv) of the Act because
benefits are limited to enterprises
located within designated geographical
regions. Our findings in this regard are
consistent with the Department’s
practice.135
To calculate the benefit, we
subtracted the amount of taxes paid by
the firms from the amounts that would
have been paid absent the program. To
calculate the net subsidy rate, we
134 See HYSCO’s November QR at Exhibit H–2
and HYSCO’s May 25, 2012, questionnaire response
(HYSCO’s May QR) at 4 and Exhibit H–4.
135 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 Investigation), and
accompanying Issues and Decision Memorandum
(CFS Decision Memorandum) at ‘‘Reduction in
Taxes for Operation in Regional and National
Industrial Complexes.’’
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Federal Register / Vol. 77, No. 184 / Friday, September 21, 2012 / Notices
divided the total benefit by the firms’
total sales. In the case of HYSCO,
POSCO, and Dongbu, the resulting net
subsidy rates were less than 0.005
percent ad valorem. Consistent with the
Department’s practice, we find that the
benefits received under this program are
not measurable and, therefore, we have
not included any benefits under this
program in net subsidy rates of HYSCO
and POSCO.136
pmangrum on DSK3VPTVN1PROD with NOTICES
III. Programs Preliminarily Determined
To Be Not Used
The following programs were part of
the petitioner’s new subsidy allegations
on which the Department initiated an
investigation.137 Based on the
information submitted by the GOK and
the respondents, we preliminarily
determine that these programs were not
used during the POR.
• Corporate Tax Reduction for Facilities
Located in the Godae Complex
• Income Tax Reduction for Facilities
Located in the Godae Complex
• Cash Grants for Employees Working at
Facilities in Jeollanamdo
• Training and Education Subsidies at
Facilities in Jeollanamdo
• Support for New Investments in
Facilities in Jeollanamdo
• Reduction in Rent for Facilities
Located in Industrial Complexes
• Employment Subsidies for LargeScale Investment in Ulsan
• Special Support for Large-Scale
Investments in Ulsan
• Technology Development Loans for
Facilities in Gwangyang Complex
• Foundation Loans for Facilities in
Gwangyang Complex
The Department included the
following programs in its October 5,
2011, initial questionnaire. We
preliminarily determine that these
programs were not used by the reviewed
companies during the POR.
• Reserve for Research and Manpower
Development Fund Under RSTA
Article 9 (TERCL Article 8)
• RSTA Article 11: Tax Credit for
Investment in Equipment to
Development Technology and
Manpower (TERCL Article 10)
• Reserve for Export Loss Under TERCL
Article 16
• Reserve for Overseas Market
Development Under TERCL Article 17
• Reserve for Export Loss Under TERCL
Article 22
136 See, e.g., CORE from Korea 2006 Decision
Memorandum at ‘‘GOK’s Direction of Credit.’’
137 See Memorandum to Melissa G. Skinner,
Director, Office 3, through Eric B. Greynolds,
Program Manager, from Gayle Longest, Case
Analyst, regarding New Subsidy Allegations (April
24, 2012).
VerDate Mar<15>2010
15:05 Sep 20, 2012
Jkt 226001
• Exemption of Corporation Tax on
Dividend Income from Overseas
Resources Development Investment
Under TERCL Article 24
• Reserve for Investment (Special Cases
of Tax for Balanced Development
Among Areas Under TERCL Articles
42–45)
• Tax Credits for Specific Investments
Under TERCL Article 71
• RSTA Article 94: Equipment
Investment to Promote Workers
Welfare (TERCL Article 88)
• Electricity Discounts Under the
Requested Loan Adjustment Program
• Electricity Discounts Under the
Emergency Load Reductions Program
• Export Industry Facility Loans and
Specialty Facility Loans
• Short-Term Trade Financing Under
the Aggregate Credit Ceiling Loan
Program Administered by the Bank of
Korea
• Industrial Base Fund
• Excessive Duty Drawback
• Private Capital Inducement Act
• Scrap Reserve Fund
• Special Depreciation of Assets on
Foreign Exchange Earnings
• Export Insurance Rates Provided by
the Korean Export Insurance
Corporation
• Loans from the National Agricultural
Cooperation Federation
• Tax Incentives from Highly Advanced
Technology Businesses Under the
Foreign Investment and Foreign
Capital Inducement Act
• D/A Loans Issued by the Korean
Development Bank and Other
Government-Owned Banks
• Export Loans by Commercial Banks
Under KEXIM’s Trade Bill
Rediscounting Program
• Short-term Export Financing
• Research and Development Grants
Under the Industrial Development Act
(IDA)
Preliminary Results of Review
In accordance with 19 CFR
351.221(b)(4)(i), we calculated an
individual subsidy rate for each
producer/exporter subject to this
administrative review. For the period
January 1, 2010, through December 31,
2010, we preliminarily determine the
net subsidy rates for HYSCO, POSCO,
and Dongbu to be 0.08, 0.16, 0.11,
percent ad valorem, respectively, which
are de minimis rates. See 19 CFR
351.106(c)(1).
The Department intends to issue
assessment instructions to U.S. Customs
and Border Protection (CBP) 15 days
after the date of publication of the final
results of this review. If the final results
remain the same as these preliminary
results, the Department will instruct
PO 00000
Frm 00014
Fmt 4703
Sfmt 4703
58523
CBP to liquidate without regard to
countervailing duties all shipments of
subject merchandise produced by
HYSCO, POSCO, and Dongbu, entered,
or withdrawn from warehouse, for
consumption from January 1, 2010,
through December 31, 2010. The
Department will also instruct CBP to
collect cash deposits of zero percent on
shipments of the subject merchandise
produced by HYSCO, POSCO, and
Dongbu entered, or withdrawn from
warehouse, for consumption on or after
the date of publication of the final
results of this review.
We will instruct CBP to continue to
collect cash deposits for non-reviewed
companies at the most recent companyspecific or country-wide rate applicable
to the company. Accordingly, the cash
deposit rates that will be applied to
companies covered by this order, but
not examined in this review, are those
established in the most recently
completed administrative proceeding
for each company. These rates shall
apply to all non-reviewed companies
until a review of a company assigned
these rates is requested.
Disclosure and Public Comment
Pursuant to 19 CFR 351.224(b), the
Department will disclose to parties to
the proceeding any calculations
performed in connection with these
preliminary results within five days
after the date of the public
announcement of this notice. 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. Parties who submit
argument in this proceeding are
requested to submit with the argument:
(1) A statement of the issue; and (2) a
brief summary of the argument. Parties
submitting case and/or rebuttal briefs
are requested to provide the Department
copies of the public version on disk.
Case and rebuttal briefs must be served
on interested parties in accordance with
19 CFR 351.303(f). Pursuant to 19 CFR
351.310(c), within 30 days of the date of
publication of this notice, interested
parties may request a public hearing on
arguments to be raised in the case and
rebuttal briefs. Unless the secretary
specifies otherwise, the hearing, if
requested, will be held two days after
the date for submission of rebuttal
briefs.
Pursuant to 19 CFR 351.305(b)(4),
representatives of parties to the
proceeding may request disclosure of
proprietary information under
administrative protective order no later
than 10 days after the representative’s
client or employer becomes a party to
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Federal Register / Vol. 77, No. 184 / Friday, September 21, 2012 / Notices
the proceeding, but in no event later
than the date the case briefs, under 19
CFR 351.309(c)(i), are due. The
Department will publish the final
results of this administrative review,
including the results of its analysis of
issues raised in any case or rebuttal brief
or at a hearing.
These preliminary results of review
are issued and published in accordance
with sections 751(a)(1) and 777(i)(1) of
the Act and 19 CFR 351.221(b)(4).
comb, or chunk form, and whether
packaged for retail or in bulk form.
The merchandise covered by the
orders is currently classifiable under
subheadings 0409.00.00, 1702.90.90,
and 2106.90.99 of the Harmonized Tariff
Schedule of the United States (HTSUS).
Although the HTSUS subheadings are
provided for convenience and customs
purposes, the Department’s written
description of the merchandise under
the orders is dispositive.
Dated: September 17, 2012.
Paul Piquado,
Assistant Secretary for Import
Administration.
Background
The Department published
antidumping duty and countervailing
duty orders on honey from Argentina on
December 10, 2001.2 In the first sunset
reviews, the Department and the
International Trade Commission (ITC)
determined that continuation of the
orders was warranted.3
On July 2, 2012, the Department
initiated the current sunset reviews
pursuant to section 751(c) of the Tariff
Act of 1930, as amended (the Act), and
19 CFR 351.218. See Initiation Notice.
We received no response from the
domestic industry by the deadline date.
See 19 CFR 351.218(d)(1)(i). As a result,
the Department has determined that no
domestic interested party intends to
participate in the sunset reviews. See 19
CFR 351.218(d)(1)(iii)(A). On July 22,
2012, the Department notified the ITC in
writing that we intended to revoke the
antidumping duty and countervailing
duty orders on honey from Argentina.
See 19 CFR 351.218(d)(1)(iii)(B)(2).
[FR Doc. 2012–23399 Filed 9–20–12; 8:45 am]
BILLING CODE 3510–DS–P
DEPARTMENT OF COMMERCE
International Trade Administration
[A–357–812, C–357–813]
Honey From Argentina; Final Results
of Sunset Reviews and Revocation of
Antidumping Duty and Countervailing
Duty Orders
Import Administration,
International Trade Administration,
Department of Commerce.
SUMMARY: On July 2, 2012, the
Department of Commerce (the
Department) initiated sunset reviews of
the antidumping duty and
countervailing duty orders on honey
from Argentina.1 Because no domestic
interested party responded to the sunset
review notice of initiation by the
applicable deadline, the Department is
revoking the antidumping duty and
countervailing duty orders on honey
from Argentina.
DATES: Effective Date: August 2, 2012.
FOR FURTHER INFORMATION CONTACT: Elfi
Blum, 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) 482–0197.
SUPPLEMENTARY INFORMATION:
AGENCY:
pmangrum on DSK3VPTVN1PROD with NOTICES
Scope of the Orders
The merchandise subject to the orders
is natural honey, artificial honey
containing more than 50 percent natural
honey by weight, preparations of natural
honey containing more than 50 percent
natural honey by weight, and flavored
honey. The subject merchandise
includes all grades and colors of honey
whether in liquid, creamed, comb, cut
1 See Initiation of Five-Year (‘‘Sunset’’) Review, 77
FR 39217 (July 2, 2012) (Initiation Notice).
VerDate Mar<15>2010
15:05 Sep 20, 2012
Jkt 226001
Revocation
Pursuant to section 751(c)(3)(A) of the
Act and 19 CFR 351.218(d)(1)(iii)(B)(3),
if no domestic interested parties
respond to a notice of initiation, the
Department shall, within 90 days after
the initiation of the review, revoke the
order. Because no domestic interested
party filed a notice of intent to
participate in these sunset reviews, we
are revoking the antidumping duty and
countervailing duty orders on honey
from Argentina.
Effective Date of Revocation
Pursuant to sections 751(c)(3)(A) and
751(c)(6)(A)(iii) of the Act, and 19 CFR
351.222(i)(2)(i), the Department will
instruct U.S. Customs and Border
Protection to terminate the suspension
of liquidation of the merchandise
2 See Notice of Antidumping Duty Order; Honey
From Argentina, 66 FR 63672 (December 10, 2001)
and Notice of Countervailing Duty Order: Honey
From Argentina, 66 FR 63673 (December 10, 2001).
3 See Continuation of Antidumping Duty Orders
on Honey from Argentina and the People’s Republic
of China, and Continuation of Countervailing Duty
Order on Honey From Argentina, 72 FR 42384
(August 2, 2007).
PO 00000
Frm 00015
Fmt 4703
Sfmt 4703
subject to these orders entered, or
withdrawn from warehouse, on or after
August 2, 2012, the fifth anniversary of
the date of publication of the last
continuation notice. Entries of subject
merchandise prior to the effective date
of revocation will continue to be subject
to suspension of liquidation and
antidumping duty and countervailing
duty deposit requirements. The
Department will complete any pending
reviews of these orders and will conduct
administrative reviews of subject
merchandise entered prior to the
effective date of revocation in response
to appropriately filed requests for
review.
These five-year (‘‘sunset’’) reviews
and this notice are issued and published
in accordance with sections 751(c) and
777(i)(1) of the Act.
Dated: September 17, 2012.
Paul Piquado,
Assistant Secretary for Import
Administration.
[FR Doc. 2012–23359 Filed 9–20–12; 8:45 am]
BILLING CODE 3510–DS–P
DEPARTMENT OF COMMERCE
International Trade Administration
Notice of Solicitation of Applications
for Allocation of Tariff Rate Quotas on
the Import of Certain Worsted Wool
Fabrics to Persons Who Cut and Sew
Men’s and Boys’ Worsted Wool Suits,
Suit-Type Jackets and Trousers in the
United States
Department of Commerce,
International Trade Administration.
ACTION: The Department of Commerce
(‘‘Department’’) is soliciting
applications for an allocation of the
2013 tariff rate quotas on certain
worsted wool fabric to persons who cut
and sew men’s and boys’ worsted wool
suits, suit-type jackets and trousers in
the United States.
AGENCY:
The Department hereby
solicits applications from persons
(including firms, corporations, or other
legal entities) who cut and sew men’s
and boys’ worsted wool suits, suit-type
jackets and trousers in the United States
for an allocation of the 2013 tariff rate
quotas on certain worsted wool fabric.
Interested persons must submit an
application on the form provided to the
address listed below by October 22,
2012. The Department will cause to be
published in the Federal Register its
determination to allocate the 2013 tariff
rate quotas and will notify applicants of
their respective allocation as soon as
possible after that date. Promptly
SUMMARY:
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]]>Agencies
[Federal Register Volume 77, Number 184 (Friday, September 21, 2012)]
[Notices]
[Pages 58512-58524]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-23399]
-----------------------------------------------------------------------
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.
[[Page 58513]]
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, 2010,
through December 31, 2010. For information on the net subsidy for
Dongbu Steel Co., Ltd. (Dongbu), Hyundai HYSCO Ltd. (HYSCO), and Pohang
Iron & Steel Co. Ltd. (POSCO), for the companies reviewed, see the
``Preliminary Results of Review'' section of this notice. Interested
parties are invited to comment on these preliminary results.\1\
---------------------------------------------------------------------------
\1\ See the ``Public Comment'' section of this notice.
---------------------------------------------------------------------------
DATES: Effective Date: September 21, 2012.
FOR FURTHER INFORMATION CONTACT: Gayle Longest, AD/CVD Operations,
Office 3, Import Administration, International Trade Administration,
U.S. Department of Commerce, Room 4014, 14th Street and Constitution
Ave. NW., Washington, DC 20230; telephone: (202) 482-3338.
SUPPLEMENTARY INFORMATION:
Background
On August 17, 1993, the Department published in the Federal
Register the CVD order on CORE from Korea.\2\ On August 1, 2011, the
Department published a notice of opportunity to request an
administrative review of this CVD order.\3\
---------------------------------------------------------------------------
\2\ See Countervailing Duty Orders and Amendments of Final
Affirmative Countervailing Duty Determinations: Certain Steel
Products from Korea, 58 FR 43752 (August 17, 1993).
\3\ See Antidumping or Countervailing Duty Order, Finding, or
Suspended Investigation: Opportunity to Request Administrative
Review, 76 FR 45771 (August 1, 2011).
---------------------------------------------------------------------------
On August 31, 2011, we received timely requests for review of the
countervailing duty order from HYSCO. We also received a timely request
for review of Dongbu, HYSCO, and POSCO, from United States Steel
Corporation, petitioner. On October 3, 2011, the Department published a
notice of initiation of the administrative review of the CVD order on
CORE from Korea covering the period January 1, 2010, through December
31, 2010.\4\
---------------------------------------------------------------------------
\4\ See Initiation of Antidumping and Countervailing Duty
Administrative Reviews and Requests for Revocation in Part
(Initiation), 76 FR 61076 (October 3, 2011).
---------------------------------------------------------------------------
On October 5, 2011, the Department issued the initial questionnaire
to Dongbu, HYSCO, POSCO, and the Government of Korea (GOK). On November
23, 2011, November 28, 2011, November 29, 2011, and November 30, 2011,
the Department received questionnaire responses from HYSCO, Dongbu,
POSCO, and the GOK, respectively. On March 2, 2012, July 16, 2012, and
July 24, 2012 the Department issued supplemental questionnaires to
HYSCO. On March 30, 2012, July 20, 2012, and August 7, 2012, the
Department received supplemental questionnaire responses from HYSCO.
On March 22, 2012, the Department published in the Federal Register
an extension of its preliminary results of the instant administrative
review.\5\ On July 18, 2011, the Department issued an additional
supplemental questionnaire to the GOK. On August 4, 2011 the Department
received the supplemental questionnaire response for the GOK.
---------------------------------------------------------------------------
\5\ See Corrosion-Resistant Carbon Steel Flat Products from the
Republic of Korea: Notice of Extension of Preliminary Results of
Countervailing Duty Administrative Review, 76 FR 20954 (April 14,
2011).
---------------------------------------------------------------------------
On December 20, 2011, petitioner submitted new subsidy allegations
against Dongbu, HYSCO, and POSCO. On April 24, 2012, the Department
initiated an investigation of the new subsidies allegations against
Dongbu, HYSCO, and POSCO.\6\ On April 25, 2012, and April 27, 2012, we
issued new subsidies questionnaire to Dongbu and POSCO, respectively.
On May 7, 2012, we issued new subsidy questionnaires to HYSCO and the
GOK. On May 18, 2012, the Department received a response from POSCO. On
May 25, 2012 and June 19, 2012, the Department received responses from
HYSCO and Dongbu. The Department issued additional questionnaires to
HYSCO regarding the new subsidy allegations on July 16, 2012 and July
24, 2012, and received responses from HYSCO on July 20, 2012, and
August 2, 2012. The Department issued an additional supplemental
questionnaire to the GOK regarding the new subsidy allegations on July
24, 2012, and August 3, 2012, and received responses from the GOK on
August 7, 2012, and August 15, 2012. The Department issued an
additional supplemental questionnaire to Dongbu regarding the new
subsidy allegations on July 17, 2012, and received Dongbu's response on
July 27, 2012.
---------------------------------------------------------------------------
\6\ See Memorandum to Melissa G. Skinner, Director, Office 3,
through Eric B. Greynolds, Program Manager, from Gayle Longest, Case
Analyst, regarding New Subsidy Allegations (April 24, 2012). This
public document is available on IA ACCESS.
---------------------------------------------------------------------------
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.
Affiliated Companies
In the present administrative review, record evidence indicates
that Pohang Steel Co., Ltd. (POCOS) is a majority-owned production
facility 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 will attribute the subsidy to
the consolidated sales of the holding company and its subsidiaries.
Thus, we attributed 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
sale of subject merchandise to the United States. HYSCO reported that
it is a member of the Hyundai Motor Group and is affiliated with
members of that group.\7\ Under 19 CFR Section 351.525(b)(6)(vi), if an
input supplier and a downstream producer are cross-owned, and the
production of the input product is primarily dedicated to production of
the downstream product, 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 net of intra-company
sales. HYSCO reported that there are no companies that own HYSCO shares
which meet the standard for cross-ownership in 19 CFR
351.525(b)(6)(vi), and all of the companies in which HYSCO owns the
majority of shares are located outside of Korea. Id.
---------------------------------------------------------------------------
\7\ See HYSCO's November 23, 2012, questionnaire response
(HYSCO's November QR) at 4.
---------------------------------------------------------------------------
Scope of the 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
[[Page 58514]]
the Harmonized Tariff Schedule of the United States (HTSUS) at
subheadings: 7210.30.0000, 7210.31.0000, 7210.39.0000, 7210.41.0000,
7210.49.0030, 7210.49.0090, 7210.49.0091, 7210.49.0095, 7210.60.0000,
7210.61.0000, 7210.69.0000, 7210.70.6030, 7210.70.6060, 7210.70.6090,
7210.90.1000, 7210.90.6000, 7210.90.9000, 7212.20.0000, 7212.21.0000,
7212.29.0000, 7212.30.1030, 7212.30.1090, 7212.30.3000, 7212.30.5000,
7212.40.1000, 7212.40.5000, 7212.50.0000, 7212.60.0000, 7215.90.1000,
7215.9030, 7215.90.5000, 7217.12.1000, 7217.13.1000, 7217.19.1000,
7217.19.5000, 7217.20.1500, 7217.22.5000, 7217.23.5000, 7217.29.1000,
7217.29.5000, 7217.30.15.0000, 7217.32.5000, 7217.33.5000,
7217.39.1000, 7217.39.5000, 7217.90.1000 and 7217.90.5000. Although the
HTSUS subheadings are provided for convenience and customs purposes,
the Department's written description of the merchandise is dispositive.
Subsidies Valuation Information
A. Benchmarks for Short-Term Financing
For those programs requiring the application of a won-denominated,
short-term interest rate benchmark, in accordance with 19 CFR
351.505(a)(2)(iv), we used as our benchmark the company-specific
weighted-average interest rate for commercial won-denominated loans
outstanding during the POR. This approach is in accordance with 19 CFR
351.505(a)(3)(i) and the Department's practice.\8\
---------------------------------------------------------------------------
\8\ See, e.g., Corrosion-Resistant Carbon Steel Flat Products
from the Republic of Korea: Final Results of Countervailing Duty
Administrative Review, 74 FR 2512 (January 15, 2009) (Final Results
of CORE from Korea 2006), and accompanying Issues and Decision
Memorandum (CORE from Korea 2006 Decision Memorandum) at
``Benchmarks for Short-Term Financing.''
---------------------------------------------------------------------------
B. Benchmark for Long-Term Loans
During the POR, HYSCO had outstanding countervailable long-term
won-denominated loans from government-owned banks and Korean commercial
banks. We used the following benchmarks to calculate the subsidies
attributable to respondents' countervailable long-term loans obtained
through 2009:
(1) For countervailable, won-denominated long-term loans, we used,
where available, the company-specific interest rates on the company's
comparable commercial, won-denominated loans. If such loans were not
available, we used, where available, the company-specific corporate
bond rate on the company's public and private bonds, as we have
determined that the GOK did not control the Korean domestic bond market
after 1991.\9\ 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.\10\ Specifically, in
those cases, we determined that, absent company-specific, commercial
long-term loan interest rates, the won-denominated corporate bond rate
is the best indicator of the commercial long-term borrowing rates for
won-denominated loans in Korea because it is widely accepted as the
market rate in Korea.\11\ 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.\12\
---------------------------------------------------------------------------
\9\ 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).
\10\ See Id.; see also Final Affirmative Countervailing Duty
Determination: Structural Steel Beams from the Republic of Korea, 65
FR 41051 (July 3, 2000) (H Beams Investigation), 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.''
\11\ See Final Affirmative Countervailing Duty Determinations
and Final Negative Critical Circumstances Determinations: Certain
Steel Products from Korea, 58 FR at 37328, 37345-37346 (July 9,
1993) (Steel Products from Korea).
\12\ See, e.g., CORE from Korea 2006 Decision Memorandum at
``Benchmark for Long Term Loans.''
---------------------------------------------------------------------------
In accordance with 19 CFR 351.505(a)(2)(i), our benchmarks take
into consideration the structure of the government-provided loans. For
countervailable fixed-rate loans, pursuant to 19 CFR
351.505(a)(2)(iii), we used benchmark rates issued in the same year
that the government loans were issued.
Average Useful Life
Pursuant to 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.
I. Programs Determined To Be Countervailable
A. Promotion of Specialized Enterprises for Parts and Materials
Under the Act on Special Measures for the Promotion of Specialized
Enterprises for Parts and Materials (Promotion of Specialized
Enterprises Act), the GOK shares the costs of research and development
(R&D) projects with companies or research institutions. The goal of the
program is to support technology development for core parts and
materials necessary for technological innovation and improvement in
competitiveness.\13\ The program is administered by the Ministry of
Knowledge Economy (MKE) and Korea Evaluation Institute of Industrial
Technology (KEIT).\14\
---------------------------------------------------------------------------
\13\ See GOK's November 30, 2011, questionnaire response (GOK's
November QR) at Exhibit P-1.
\14\ Id.
---------------------------------------------------------------------------
In accordance with Articles 3 and 4 of the Promotion of Specialized
Enterprises Act, MKE prepares a base plan and a yearly execution plan
for the development of the parts and materials industry.\15\ Under the
execution plan, MKE announces to the public a detailed business plan
for the development of parts and materials technology.\16\ This
business plan includes support areas, qualifications, and the
application process.\17\ According to the GOK, any person or company
can participate in the program by preparing an R&D business plan that
conforms with the requirements set forth in the MKE business plan.\18\
The completed application must then be submitted to KEIT, which
evaluates the application and selects the projects eligible for
[[Page 58515]]
government support.\19\ After the selected application is finally
approved by MKE, MKE and the participating companies enter into an R&D
agreement and then MKE provides the grant.\20\
---------------------------------------------------------------------------
\15\ See GOK's November QR at Exhibit P-1.
\16\ Id. at 2.
\17\ Id.
\18\ Id.
\19\ Id.
\20\ Id. at 3.
---------------------------------------------------------------------------
R&D project costs are shared by the GOK and companies or research
institutions as follows: (1) When the group of companies involved in
the research is made up of a ratio above two-thirds small to medium-
sized companies, the GOK provides a grant up to three-fourths of the
project cost; (2) When the group of companies involved in the research
is made up of a ratio below two-thirds small to medium-sized companies,
the GOK provides a grant up to one-half of the project cost.\21\
---------------------------------------------------------------------------
\21\ See GOK's November QR, Exhibit P-1.
---------------------------------------------------------------------------
Upon completion of the project, if the GOK evaluates the project as
``successful'', the participating companies must repay 40 percent of
the R&D grant to the GOK over five years.\22\ However, if the project
is evaluated by the GOK as ``not successful'', the company does not
have to repay any of the grant amount to the GOK.\23\
---------------------------------------------------------------------------
\22\ See GOK's November QR, Exhibit P-1 at 2.
\23\ Id.
---------------------------------------------------------------------------
In the final results of administrative review of the CVD order on
CORE From Korea covering the period January 1, 2008, through December
31, 2008, the Department determined that the Promotion of Specialized
Enterprises Act was de jure specific under section 771(5A)(D)(i) of the
Act, because it is expressly limited to (1) enterprises specializing in
components and materials and (2) enterprises specializing in
development of technology for components and materials.\24\ No
information on the record of this review leads us to reconsider that
determination and, thus, we continue to find, preliminarily, that this
program is de jure specific within the meaning of 771(5A)(D)(i) of the
Act. We also preliminarily find that a financial contribution was
provided within the meaning of section 771(5)(D)(i) of the Act because
the GOK's payments constitute a direct transfer of funds.\25\
---------------------------------------------------------------------------
\24\ See Corrosion-Resistant Carbon Steel Flat Products from the
Republic of Korea: Final Results of Countervailing Duty
Administrative Review, 76 FR 3613 (January 20, 2011) (Final Results
of CORE from Korea 2008), and accompanying Issues and Decision
Memorandum (CORE 2008 Decision Memorandum) at ``The Act on Special
Measures for the Promotion of Specialized Enterprises for Parts and
Materials.''
\25\ See Corrosion-Resistant Carbon Steel Flat Products from the
Republic of Korea: Preliminary Results and Partial Rescission of
Countervailing Duty Administrative Review, 75 FR 55745; 55750
(September 14, 2010).
---------------------------------------------------------------------------
HYSCO reported that during the POR, it was involved in one R&D
project under this program. See HYSCO's November QR at 17. In the Final
Results of CORE From Korea 2008, we treated a portion of the subsidy
that does not have to be repaid as a grant and the remaining portion of
the subsidy that may have to be repaid as a long-term, interest-free
contingent liability loan.\26\ This approach is consistent with the
Department's regulation and practice.\27\ We have adopted the same
approach in these preliminary results.
---------------------------------------------------------------------------
\26\ See Final Results of CORE from Korea 2008, 76 FR at 3613
and CORE 2008 Decision Memorandum at ``The Act on Special Measures
for the Promotion of Specialized Enterprises for Parts and
Materials.''
\27\ See 19 CFR 351.505(d)(1); see also Certain Hot-Rolled
Carbon Steel Flat Products from India: Final Results of
Countervailing Duty Administrative Review, 73 FR 40295 (July 14,
2008), and accompanying Issues and Decision Memorandum at ``Export
Promotion Capital Goods Scheme (EPCGS).''
---------------------------------------------------------------------------
To determine the benefit from the GOK funds HYSCO received under
the Specialized Enterprises Act program, we calculated the GOK's
contribution for the assistance that was apportioned to HYSCO. See 19
CFR 351.504(a). As described immediately above, we treated a portion of
this benefit as a grant. In accordance with 19 CFR 351.524(b)(2), we
determined whether to allocate the non-recurring benefit from the
grants over a 15-year AUL by dividing the GOK-approved grant amount by
the company's total sales in the year of approval. Because the approved
amount was less than 0.5 percent of the company's total sales, we
expensed the grant to the year of receipt, i.e., to 2010, the POR in
this review.
With respect to the portion of the subsidy that we are treating as
a long-term, interest-free contingent liability loan, pursuant to 19
CFR 351.505(d)(1) for the reasons described above, we find the benefit
to be equal to the interest that HYSCO would have paid during the POR
had it borrowed the full amount of the contingent liability loan during
the POR. Pursuant to 19 CFR 351.505(d)(1), we used a long-term interest
rate as our benchmark to calculate the benefit of a contingent
liability interest-free loan because the event upon which repayment of
the duties depends (i.e., the completion of the R&D project) occurs at
a point in time more than one year after the date in which the grant
was received. Specifically, we used the long-term benchmark interest
rates as described in the ``Subsidies Valuation'' section of these
preliminary results.
To calculate the total net subsidy amount for this program, we
summed the benefits provided under this program. Next, to calculate the
net subsidy rate, we divided the portion of the benefit allocated to
the POR by HYSCO's total f.o.b. sales for 2010.\28\ On this basis, we
preliminarily determine the net subsidy rate under this program to be
0.02 percent ad valorem for HYSCO.
---------------------------------------------------------------------------
\28\ See 19 CFR 351.525(b)(3).
---------------------------------------------------------------------------
B. Restriction of Special Taxation Act (RSTA) Article 26
Under RSTA Article 26, a company can claim a tax credit equal to a
certain percentage of its investments in its facilities.\29\ According
to the GOK, the goal of this program is to boost general national
economic activity.\30\ In its response to the Department's October 5,
2011, questionnaire, the GOK submitted information which indicated that
these tax credits are expressly limited to a corporation's investments
in facilities located outside the ``Overcrowding Control Region'' of
the Seoul Metropolitan Area (``SMA'').\31\ Specifically, the GOK
provided a complete translation of Article 23(1) of the Enforcement
Decree of the RSTA in its November QR eligibility for the program is
limited to investments made outside the Overcrowding Control Region of
the SMA.\32\ Moreover, the GOK also stated that corporate investments
in facilities located within the Overcrowding Control Region of the SMA
are not eligible for credits under this tax program.\33\
---------------------------------------------------------------------------
\29\ See GOK's November QR at Exhibit B-3.
\30\ Id.
\31\ Id. at Exhibit B-4.
\32\ Id.
\33\ Id. at Exhibit B-3.
---------------------------------------------------------------------------
Because information provided by the GOK indicates that the tax
credit under this program is 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 Tariff Act of 1930, as amended (``the
Act'').\34\ The tax credit is a financial contribution in the form of
revenue foregone by the government within the meaning of section
771(5)(D)(ii) of the Act, which provides a benefit to the recipient
equal to the difference between the taxes actually paid and the taxes
otherwise payable in
[[Page 58516]]
the absence of this program within the meaning of 19 CFR 351.509(a)(1).
These findings are consistent with the determinations in Bottom Mount
Refrigerators From Korea, and 2009 Review of the Countervailing Duty
Order on Corrosion-Resistant Carbon Steel Flat Products From Korea:
Post-Preliminary Analysis Memorandum for Hyundai HYSCO Ltd.\35\
---------------------------------------------------------------------------
\34\ 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 ``Provision of Electricity for Less than
Adequate Remuneration'' (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(5(a)(D)(iv) of the Act).
\35\ See Bottom Mount Combination Refrigerator-Freezers from the
Republic of Korea: Preliminary Negative Countervailing Duty
Determination and Alignment of Final Determination With Final
Antidumping Determination, 76 FR 55044 (September 6, 2011) unchanged
in Bottom Mount Combination Refrigerator-Freezers from the Republic
of Korea: Final Affirmative Countervailing Duty Determination, 77 FR
17410 (March 26, 2012); see also Memorandum to Ronald K. Lorentzen
from Melissa G. Skinner, Re: 2009 Review of the Countervailing Duty
Order on Corrosion-Resistant Carbon Steel Flat Products From Korea:
Post Preliminary Analysis Memorandum for Hyundai HYSCO Ltd.
(September 27, 2011) unchanged in Corrosion-Resistant Carbon Steel
Flat Products from Korea: Final Results of Administrative Review, 77
FR 13093 (March 5, 2012) (Final Results of CORE From Korea 2009).
---------------------------------------------------------------------------
HYSCO and POSCO indicated that their companies used RSTA Article 26
credits during the 2010 POR.\36\
---------------------------------------------------------------------------
\36\ See HYSCO's November QR at 10 and Exhibit B-3 and POSCO's
November 29, 2011 QR at 12 and Exhibits B-2, B-3, and B-4.
---------------------------------------------------------------------------
To calculate the subsidy rate for HYSCO and POSCO during the POR,
we divided each company's benefit, which is the tax credit claimed by
the company under this program in its tax return filed in 2010, by the
company's total sales during the POR. On this basis, we preliminarily
determine the countervailable subsidy provided under this program to be
0.06 percent ad valorem for HYSCO and 0.08 percent ad valorem for
POSCO.
C. Asset Revaluation (TERCL 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.\37\ 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.\38\ 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 lower 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.
---------------------------------------------------------------------------
\37\ 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).
\38\ Id.
---------------------------------------------------------------------------
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 0.01 percent ad valorem for POSCO. Dongbu and HYSCO did
not use this program during the POR.
D. Exemption of VAT on Imports of Anthracite Coal
Under Article 106 of Restriction of Special Taxation Act (RSTA),
imports of anthracite coal are exempt from the value added tax (VAT).
In the Cold-Rolled Investigation, we determined that the program is de
jure specific under section 771(5A)(D)(i) of the Act. Because the GOK
allows for only a few items to be exempt from VAT, the items allowed to
be imported without paying VAT are limited.\39\ We also determined that
the VAT exemptions under the program constitute a financial
contribution under section 771(5)(D)(ii) of the Act, as the GOK is not
collecting revenue otherwise due, and that the exemptions confer a
benefit under section 771(5)(E) of the Act equal to the amount of the
VAT that would have otherwise been paid if not for the exemption. No
new information, evidence of changed circumstances, or comments from
interested parties was presented in this review to warrant any
reconsideration of the countervailability of 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 because it is
limited, constitutes a financial contribution in the form of forgone
revenue under section 771(5)(D)(ii) of the Act, and confers a benefit
in the amount of the revenue foregone within the meaning of 771(5)(E)
of the Act.
---------------------------------------------------------------------------
\39\ See Cold-Rolled Decision Memorandum at ``Exemption of VAT
on Imports of Anthracite Coal.''
---------------------------------------------------------------------------
Dongbu and HYSCO reported that their companies did not use the
program during the POR.\40\ POSCO imported anthracite coal during the
POR and, therefore, received a benefit in the amount of the VAT that it
should have otherwise paid if not for the exemption. To determine
POSCO's benefit from the VAT exemption on these imports, we calculated
the amount of VAT that would have been due absent the program on the
total value of anthracite coal POSCO imported during the POR. We then
divided the amount of this tax benefit by POSCO's total f.o.b. sales.
Based on this methodology, we preliminarily determine the POSCO
received a countervailable subsidy of 0.07 percent ad valorem.
---------------------------------------------------------------------------
\40\ See HSYCO's November QR at 14 and Dongbu's November 28,
2011, questionnaire response at 14.
---------------------------------------------------------------------------
E. Other Subsidies Related to Operations at Asan Bay: Provision of Land
and Exemption of Port Fees Under Harbor Act
1. Provision of Land
As explained in the Cold-Rolled Investigation, 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.\41\ The Korea Land Development
Corporation (Koland) is a government investment corporation that is
responsible for purchasing, developing, and selling land in the
industrial sites.\42\
---------------------------------------------------------------------------
\41\ See 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 ``Provision of Land at Asan
Bay.''
\42\ 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
[[Page 58517]]
charged to Dongbu.\43\ 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.\44\ HYSCO and
POSCO reported that their companies did not use this program.\45\
---------------------------------------------------------------------------
\43\ Id.
\44\ Id.
\45\ See HYSCO's November QR at 15 and POSCO's November QR at
17.
---------------------------------------------------------------------------
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.\46\ Further, the Department found the price
discount and the price adjustment for ``interest earned'' constituted
financial contributions in the form of grants under section
771(5)(D)(i) of the Act and conferred benefits in the amount of grants
within the meaning of section 771(5)(E) of the Act. Id. No new
information, evidence of changed circumstances, or comments from
interested parties was presented in this review to warrant any
reconsideration of the countervailability of this program. Therefore,
we preliminarily continue to find that this program is de facto
specific within the meaning of section 771(5A)(D)(iii)(I) of the Act
because it is limited to Dongbu, constitutes a financial contribution
in the form of grants under sections 771(5)(D)(i), and confers a
benefit in the amount of the price discount and the price adjustment
within the meaning of 771(5)(E) of the Act.
---------------------------------------------------------------------------
\46\ Id.
---------------------------------------------------------------------------
Consistent with the Cold-Rolled Investigation, we have treated the
land price discount and the interest earned refund as non-recurring
subsidies.\47\ 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 0.09 percent ad valorem for
the POR.
---------------------------------------------------------------------------
\47\ Id.
---------------------------------------------------------------------------
2. Exemption of Port Fees Under the 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.\48\ The Department also determined
that Dongbu received an exemption of harbor fees for a period of almost
70 years under this program.\49\
---------------------------------------------------------------------------
\48\ See Cold-Rolled Decision Memorandum at ``Dongbu's Excessive
Exemptions under the Harbor Act.''
\49\ Id.
---------------------------------------------------------------------------
In the Cold-Rolled Investigation, the Department found the
exemption from the fees to be a countervailable subsidy. No new
information, evidence of changed circumstances, or comments from
interested parties was presented in this review to warrant any
reconsideration of the countervailability of this program. Thus, we
preliminarily continue to find that the program is countervailable and
is specific under section 771(5A)(D)(iii)(I) of the Act because the
excessive exemption period of 70 years is limited to Dongbu. Moreover,
we preliminarily determine that the GOK is foregoing revenue that it
would otherwise collect by allowing Dongbu to be exempt from port
charges for up to 70 years and, thus, the program constitutes a
financial contribution within the meaning of section 771(5)(D)(ii) of
the Act. Further, we preliminarily determine that the exemptions confer
a benefit under section 771(5)(E) of the Act in the amount of the port
charges that were not collected.
In the Cold-Rolled Investigation, the Department treated the
program as a recurring subsidy and determined that the benefit is equal
to the average yearly amount of harbor fee exemptions provided to
Dongbu.\50\ 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.
---------------------------------------------------------------------------
\50\ Id.
---------------------------------------------------------------------------
II. Programs Preliminarily Determined Not To Confer a Benefit During
the POR
A. Research and Development Grants Under the Industrial Technology
Innovation Promotion Act (ITIPA)
The GOK's Industrial Technology Innovation Promotion Act program is
designed to foster future new industries and enhance the
competitiveness of primary industries through fundamental technology
development.\51\ The program is administered by MKE and the Korean
Evaluation Institute of Industrial Technology (KEIT).\52\
---------------------------------------------------------------------------
\51\ See Corrosion-Resistant Carbon Steel Flat Products from the
Republic of Korea: Preliminary Results of Countervailing Duty
Administrative Review, 76 FR 54209, 54213 (August 31, 2011)
(Preliminary Results of CORE from Korea 2009) unchanged in Final
Results of CORE from Korea 2009, 77 FR at 13093.
\52\ Id.
---------------------------------------------------------------------------
Under the Industrial Technology Innovation Promotion Act, GOK
provides R&D grants to support the areas of transportation system,
industrial materials, robots, biomedical equipments, clean
manufacturing foundation, knowledge services and industry convergence
technology.\53\
---------------------------------------------------------------------------
\53\ Id.
---------------------------------------------------------------------------
Pursuant to Article 11 of the Industrial Technology Innovation
Promotion Act, KEIT prepares a basic plan for the development of
technology, on behalf of MKE.\54\ This plan includes the R&D projects
that are eligible, describes the application process, and designates
the supporting documentation required.\55\ The plan is announced to the
public.\56\ According to
[[Page 58518]]
the GOK, any person who wishes to participate in the program prepares
an R&D business plan that meets the requirements set forth in the basic
plan and then submits the application to the GOK's Application Review
Committee, which then evaluates the application to determine if it
conforms to the terms and conditions set forth in the basic plan.\57\
If the application is approved, MKE and the company enter into an R&D
agreement and then MKE provides the grant.\58\
---------------------------------------------------------------------------
\54\ Id.
\55\ Id.
\56\ Id.
\57\ Id.
\58\ Id.
---------------------------------------------------------------------------
The costs of the R&D projects under this program are shared by the
company (or research institution) and the GOK.\59\ Specifically, the
grant ratio for project costs are as follows: (1) For projects with one
small/medium-sized enterprise (SME), the GOK provides grants up to
three-fourths of the project costs, (2) for projects with one
conglomerate, the GOK provides grants up to one-half of the project
costs, (3) for projects with more than two participants of which SMEs
comprise more than two-thirds of the participant ratio, the GOK
provides up to three-fourths of the project costs, and (4) for projects
with more than two participants of which SMEs comprise less than two-
thirds of the participant ratio, the GOK provides up to one-half of the
project costs.\60\
---------------------------------------------------------------------------
\59\ Id.
\60\ Id.
---------------------------------------------------------------------------
When the project is evaluated as ``successful'' upon completion,
the participating companies must repay 40 percent of the R&D grant to
the GOK over five years.\61\ However, when the project is evaluated as
``not successful,'' the company does not have to repay the GOK any of
the grant amount.\62\ Id.
---------------------------------------------------------------------------
\61\ Id.
\62\ See Preliminary Results of CORE from Korea 2009, 76 FR at
54213 and HYSCO's November QR at Exhibit Q-4.
---------------------------------------------------------------------------
Prior to and during the POR, HYSCO and POSCO received grants under
the Industrial Technology Innovation Promotion Act for R&D projects in
which the companies participated with other firms.\63\
---------------------------------------------------------------------------
\63\ See GOK's November QR at 16 and Q-1; HYSCO's November QR at
17, Q-1, Q-2, and Q-3, and POSCO's November 30, 2011, QR at Exhibit
Q-2.
---------------------------------------------------------------------------
Concerning HYSCO, the nature of the projects for which it received
the grants is business proprietary and cannot be discussed in this
public notice.\64\ Based upon our review of program documents submitted
in the response, we preliminarily determine that one grant received is
related to the second step of the project discussed in the section
``Research and Development Grants Under the Industrial Development Act
(IITPA)'' in Preliminary Results of CORE from Korea 2009, in which the
Department determined that grants received for this particular project
under this program are attributable to non-subject merchandise.\65\
Upon review of the information submitted by HYSCO and the GOK, we find
that the terms and conditions of this grant project remain unchanged
from the Preliminary Results of CORE from Korea 2009 and preliminarily
determine that this grant pertains specifically to production of a
product that is not subject merchandise.\66\ Therefore, consistent with
19 CFR 351.525(b)(5) and our past practice, we preliminarily determine
that this grant was bestowed in connection with the production of a
product that is not subject merchandise. Hence we did not include this
grant in our benefit calculations. In addition, HYSCO reported
receiving another grant during the POR for a project that is being
performed under the ITIPA.\67\ Dividing the amount of this grant by
HYSCO's total sales, results in a net subsidy rate that is less than
0.005 percent ad valorem and, thus, is not numerically significant.
---------------------------------------------------------------------------
\64\ See Memorandum to the File titled ``HYSCO's R&D Grants
Under the ITIPA'', (August 30, 2012), of which a public version is
on file in IA Access.
\65\ See Preliminary Results of CORE from Korea 2009, in which
the Department found the grant in question to be tied to the
production of non-subject merchandise, unchanged in Final Results of
Core from Korea 2009 and HYSCO's November QR at Exhibit Q-4.
\66\ See Memorandum to the File titled ``HYSCO's R&D Grants
Under the ITIPA'' (August 31, 2012), of which a public version is on
file in IA Access.
\67\ See HYSCO's November QR at 18.
---------------------------------------------------------------------------
POSCO also reported receiving grants under the ITIPA prior to and
during the POR.\68\ Dividing the sum of POSCOs total grants in each
year by POSCO's total sales in the corresponding year results in a net
subsidy rate that is less than 0.005 percent ad valorem. Consistent
with the Department's practice, we find that the grants received by
HYSCO and POSCO under this program are not measurable.\69\
Consequently, we preliminarily determine that it is not necessary for
the Department to make a finding as to the countervailability of the
grants POSCO received under this program. If a future administrative
review of this proceeding is requested, we will further examine grants
provided under ITIPA.
---------------------------------------------------------------------------
\68\ See POSCO's November 30, 2011, QR at Exhibit Q-2.
\69\ See, e.g., CORE from Korea 2006 Decision Memorandum at
``GOK's Direction of Credit'' and Preliminary Results of CORE from
Korea 2009, 76 FR at 54213.
---------------------------------------------------------------------------
B. R&D Grants Under the Act on the Promotion of the Development, Use,
and Diffusion of New and Renewable Energy
The GOK's Development of Use, and Diffusion of New and Renewable
Energy program (formerly the Development of Alternative Energy program)
is reportedly designed to contribute to the preservation of the
environment, the sound and sustainable development of the national
economy, and the promotion of national welfare by diversifying energy
resources through promoting technological development, the use and
diffusion of alternative energy, and reducing the discharge of gases
harmful to humans or the environment by activating the new and
renewable energy industry.\70\ The program is administered by the
Ministry of Knowledge Economy (MKE), Korea Energy Management
Corporation (KEMCO), and the Korea Institute of Energy Technology
Evaluation and Planning (KETEP).\71\
---------------------------------------------------------------------------
\70\ See Preliminary Results of CORE from Korea 2009, 76 FR at
54209, 54213-54214, unchanged in Final Results of CORE from Korea
2009.
\71\ Id. at 54214.
---------------------------------------------------------------------------
Under the Act on the Promotion of the Development, Use, and
Diffusion of New and Renewable Energy (New and Renewable Energy Act),
the GOK provides R&D grants to support the following businesses: (1)
Electric and Nuclear Power Development, (2) Energy and Resources
Technology Development, and (3) New and Renewable Energy Technology
Development.\72\
---------------------------------------------------------------------------
\72\ Id.
---------------------------------------------------------------------------
Pursuant to Articles 5 and 6 of the New and Renewable Energy Act,
MKE prepares a base plan and a yearly execution plan for the
development of new and renewable energy.\73\ The base and execution
plans are announced to the public.\74\ According to the GOK, any person
who wishes to participate in the program prepares an R&D business plan
and then submits the application to the KETEP, which then evaluates the
application and selects the projects eligible for government
support.\75\ After the selected application is finally approved by MKE,
KEMCO, and the general supervising institute of the consortium enter
into an R&D agreement and then MKE provides the grant through
KEMCO.\76\
---------------------------------------------------------------------------
\73\ Id.
\74\ Id.
\75\ Id.
\76\ Id.
---------------------------------------------------------------------------
The costs of the R&D projects under this program are shared by the
company (or research institution) and the GOK.\77\ Specifically, the
grant ratio for project
[[Page 58519]]
costs are as follows: (1) For large companies, the GOK provides grants
up to one-half of the project costs, (2) for small/medium-sized
companies, the GOK provides grants up to three-fourths of the project
costs, (3) for a consortium,\78\ the GOK provides grants up to three-
fourths of the project costs, and (4) for others, the GOK provides
grants up to one-half of the project costs.\79\
---------------------------------------------------------------------------
\77\ Id.
\78\ If the ratio of small to medium-sized companies in a
consortium is above two-thirds, the GOK provides grants up to one-
half of the project costs. See GOK's November QR, Exhibit R-1.
\79\ Preliminary Results of CORE from Korea 2009, 76 FR at
54214.
---------------------------------------------------------------------------
When the project is evaluated as ``successful'' upon completion,
the participating companies must repay 40 percent of the R&D grant to
the GOK.\80\ However, when the project is evaluated as ``not
successful'', the company does not have to repay any of the grant
amount to the GOK.\81\
---------------------------------------------------------------------------
\80\ Id.
\81\ Id.
---------------------------------------------------------------------------
During the POR, HYSCO received an energy-related grant under the
New and Renewable Energy Act for a project in which the company
participated with other firms.\82\ HYSCO reported that the R&D grant
under the New and Renewable Energy Act are provided with respect to
specific projects, which are generally multi-year projects where the
amount of funds to be provided by the GOK is set out in the project
contract.\83\ The cost of R&D projects under this program is shared by
the participating companies and the GOK.\84\ HYSCO points to the
Department's prior decision concerning this project in Preliminary
Results of CORE From Korea 2009, and reiterates its claim that the
project for which the grant was received from the government was not
related to subject merchandise.\85\
---------------------------------------------------------------------------
\82\ See GOK's November QR at 17-18 and Exhibit R-1.
\83\ See HYSCO's November QR at Exhibit R-3.
\84\ Id.
\85\ Id. at 19 citing to Preliminary Results of CORE from Korea
2009, 76 FR at 54214, in which the Department found the grant in
question to be tied to non-subject merchandise, unchanged in the
Final Results of CORE from Korea 2009; see also Memorandum to the
File titled ``HYSCO's R&D Grants under the Act on the Promotion of
the Development, Use and Diffusion of New and Renewable Energy''
(August 24, 2011), submitted as Exhibit R-4 of HYSCO's November QR.
---------------------------------------------------------------------------
Upon review of the information from HYSCO and the GOK, we
preliminarily determine that the grant was bestowed specifically in
connection with production of a product that is not subject merchandise
and is related to the project examined in the prior administrative
review.\86\ Therefore, consistent with 19 CFR 351.525(b)(5) and our
past practice, we preliminarily determine that this grant is tied to
non-subject merchandise. Hence, we preliminarily determine that the New
and Renewable Energy Act did not confer a benefit during the POR.
---------------------------------------------------------------------------
\86\ See Memorandum to the File titled ``HYSCO's R&D Grants
under the Act on the Promotion of the Development, Use, and
Diffusion of New and Renewable Energy'' (August 31, 2012) (HYSCO New
and Renewable Energy Grant Memorandum), of which a public version is
on file in IA Access.
---------------------------------------------------------------------------
C. Overseas Resource Development Program: Loan From Korea Resources
Corporation (KORES)
In Final Results of CORE From Korea 2006, the Department found that
the GOK enacted the Overseas Resource Development (ORD) Business Act in
order to establish the foundation for securing the long-term supply of
essential energy and major material minerals, which are mostly imported
because of scarce domestic resources.\87\ Pursuant to Article 11 of
this Act, MKE annually announces its budget and the eligibility
criteria to obtain a loan from MKE.\88\ Any company that meets the
eligibility criteria may apply for a loan to MKE.\89\ The loan
evaluation committee evaluates the applications, selects the recipients
and gets approval from the minister of MKE.\90\ For projects related to
the development of strategic mineral resources, the Korean Resources
Corporation (KORES) lends the funds to the company for foreign
resources development.\91\
---------------------------------------------------------------------------
\87\ See Corrosion-Resistant Carbon Steel Flat Products from the
Republic of Korea: Preliminary Results of Countervailing Duty
Administrative Review, 73 FR 52315, 52326, (September 9, 2008)
(Preliminary Results of CORE from Korea 2006), unchanged in
Corrosion-Resistant Carbon Steel Flat Products from the Republic of
Korea: Final Results of Countervailing Duty Administrative Review,
74 FR 2512 (January 15, 2009) (Final Results of CORE from Korea
2006), and accompanying Issues and Decision Memorandum at ``Programs
Determined To Be Not Used''.
\88\ See GOK's November QR at Exhibit S-1.
\89\ Id.
\90\ Id.
\91\ Id.
---------------------------------------------------------------------------
During the POR, as in the prior administrative review, HYSCO had
outstanding loans from KORES for investment in a copper mine in
Mexico.\92\ Based upon examination of the loan documents and our prior
determination concerning these loans, we preliminarily determine that
the KORES loans are tied to copper, which is non-subject
merchandise.\93\ Further, we find that copper is not an input primarily
dedicated to the production of subject merchandise.\94\ On this basis,
we find the KORES loans are tied and attributable to non-subject
merchandise.\95\ Therefore, we preliminarily determine that HYSCO did
not receive a benefit from this program with respect to the subject
merchandise during the POR.
---------------------------------------------------------------------------
\92\ See HYSCO's November QR at 20, Exhibit 8 at 15 and HYSCO's
March 30, 2012 QR at Exhibits 15 and 16.
\93\ Preliminary Results of CORE from Korea 2009, 76 FR at
54214-54215, unchanged in Final Results of CORE from Korea 2009.
\94\ Id.
\95\ See 19 CFR 351.525(b)(5).
---------------------------------------------------------------------------
D. Overseas Resource Development Program: Loan From Korea National Oil
Corporation (KNOC)
In Final Results of CORE From Korea 2007, the Department found that
the GOK enacted the Overseas Resource Development (ORD) Business Act in
order to establish the foundation for securing the long-term supply of
essential energy and major material minerals, which are mostly imported
because of scarce domestic resources.\96\ Pursuant to Article 11 of
this Act, the MKE annually announces its budget and the eligibility
criteria to obtain a loan from MKE.\97\ Any company that meets the
eligibility criteria may apply for a loan to MKE.\98\ 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.\99\ An approved company enters into a borrowing agreement
with KNOC for the development of the selected resource.\100\ Two types
of loans are provided under this program: ``General loans'' and
``success-contingent loans''. For a success-contingent loan, the
repayment obligation is subject to the results of the development
project. In the event that the project fails, the company will be
exempted for all or a portion of the loan repayment obligation.
However, if the project succeeds, a portion of the project income is
payable to KNOC.\101\
---------------------------------------------------------------------------
\96\ See Corrosion-Resistant Carbon Steel Flat Products from the
Republic of Korea: Preliminary Results of Countervailing Duty
Administrative Review, 74 FR 46100; 46107-46108 (September 8, 2009)
(Preliminary Results of CORE from Korea 2007), and unchanged in
Corrosion-Resistant Carbon Steel Flat Products from the Republic of
Korea: Final Results of Countervailing Duty Administrative Review,74
FR 55192 (October 27, 2009) (Final Results of CORE from Korea 2007).
\97\ See GOK's November QR at Exhibit T-1.
\98\ Id.
\99\ Id.
\100\ Id.
\101\ Id.
---------------------------------------------------------------------------
During the POR, HYSCO had outstanding loans from KNOC related to
petroleum exploration projects.\102\ Based upon examination of the loan
documents and our determinations concerning these loans in the prior
[[Page 58520]]
administrative review, we preliminarily determine that the KNOC loans
are tied to petroleum exploration, which does not involve subject
merchandise.\103\ On this basis, we find the KNOC loans are tied and
attributable to non-subject merchandise.\104\ Therefore, we
preliminarily determine that HYSCO did not receive a benefit from this
program with respect to the subject merchandise during the POR. We will
continue to examine this program in future reviews.
---------------------------------------------------------------------------
\102\ See HYSCO's November QR at 20 and Exhibit 8 at 16 and
HYSCO's March 30, 2012, QR at 11 and Exhibit 17.
\103\ Preliminary Results of CORE from Korea 2009, 76 FR at
54215 unchanged in Final Results of CORE from Korea 2009.
\104\ See 19 CFR 351.525(b)(5).
---------------------------------------------------------------------------
E. Pre-1992 Direct Credit
During the POR, POSCO was the only respondent company that had pre-
1992 long-term loans outstanding during the POR.\105\ Assuming,
arguendo, that the benefit under this program is equal to the sum of
POSCOs total interest payments made during the POR, the resulting net
subsidy rate would be less than 0.005 percent ad valorem when
attributed to POSCO's total sales, which is not numerically
significant. Thus, consistent with the Department's practice, we are
excluding this amount from the net countervailable subsidy rate.
---------------------------------------------------------------------------
\105\ See GOK's November QR at 3 and POSCO's November QR at 9.
---------------------------------------------------------------------------
F. Document Acceptance (D/A) Financing Provided Under KEXIM's Trade
Rediscount Program and D/A Loans issued by the KDB and Other
Government-Owned Banks
Under section 771(5)(B)(iii) of the Act, a subsidy can be found
whenever the government ``makes a payment to a funding mechanism to
provide a financial contribution, or entrusts or directs a private
entity to make a financial contribution * * * to a person and a benefit
is thereby conferred.'' In the CFS Investigation, we determined that
KEXIM's trade bill rediscount program constitutes a payment to a
funding mechanism because the rediscount ceiling KEXIM provides to
banks participating under the program is contingent on banks
subsequently lending the funds to exporters.\106\ Section
771(5)(B)(iii) of the Act also states that financial contributions from
funding mechanisms can be a subsidy only if providing the contribution
would normally be vested in the government and the practice does not
differ in substance from practices normally followed by the government.
This is the ``government subsidy function'' prong of an indirect
financial contribution. As determined in the CFS Investigation, under
this program banks are performing a government subsidy function and,
therefore, their loans can qualify as subsidies.\107\ Therefore, we
find that loans from banks under the rediscount program constitute
financial contributions within the meaning of section 771(5)(D)(i) of
the Act and confer a benefit upon exporters, in accordance with section
771(5)(E)(ii) of the Act, to the extent the amount exporters pay under
the program is less than the amount they would pay on comparable
commercial loans they could obtain on the market. Because receipt of
the loans is contingent upon export performance, we also determine that
KEXIM's rediscount program is specific within the meaning of section
771(5A)(B) of the Act.
---------------------------------------------------------------------------
\106\ See CFS Decision Memorandum at ``Export Loans by
Commercial Banks Under KEXIM's Trade Bill Rediscounting Program.''
\107\ See CFS Decision Memorandum at ``Export Loans by
Commercial Banks Under KEXIM's Trade Bill Rediscounting Program.''
---------------------------------------------------------------------------
In the CFS investigation, we further determined that D/A Loans
issued by the KDB and other government-owned banks 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.\108\ In addition, we
determined that such loans confer a benefit, in accordance with section
771(5)(E)(ii) of the Act, to the extent the amount exporters pay under
the program is less than the amount they would pay on comparable
commercial loans they could obtain on the market.\109\ Because receipt
of D/A loans is contingent upon export performance, we also determined
that D/A loans from the KDB and other government-owned banks are
specific within the meaning of section 771(5A)(B) of the Act.\110\
---------------------------------------------------------------------------
\108\ See CFS Decision Memorandum at ``D/A Loans Issued by the
KDB and Other Government-Owned Banks.''
\109\ Id.
\110\ Id.
---------------------------------------------------------------------------
In the CFS Investigation, we further found that subsidies on the
loans under KEXIM's trade bill rediscount program are tied to sales of
subject merchandise to the United States in accordance with 19 CFR
351.525(b)(4) and (5). Accordingly, we limited our benefit calculations
to D/A loans issued on sales of subject merchandise to the United
States.\111\ We preliminarily determine that there is no information on
the record that warrants a reconsideration of the Department's prior
findings.
---------------------------------------------------------------------------
\111\ Id.
---------------------------------------------------------------------------
Dongbu reported receiving short-term D/A financing from commercial
banks that participated in KEXIM's Trade Rediscount Program and D/A
Loans issued by the KDB and other government-owned banks during the
POR. To calculate the benefits to Dongbu under these programs, we
compared the amount that Dongbu paid on all of its D/A loans from
commercial banks outstanding during the POI to the amount Dongbu paid
on comparable commercial loans.\112\ Because loans under these programs
are discounted (i.e., interest is paid up front at the time the loans
are received), the effective rate paid by respondents on their D/A
loans is a discounted rate. The benefits Dongbu received were less than
0.005 percent of its total export sales of subject merchandise to the
United States during the POR, which is not numerically significant.
Therefore, we are preliminarily excluding the amount from the net
countervailable subsidy rate. HYSCO, POSCO and POCOS did not report any
D/A financing from commercial banks during the POR.\113\
---------------------------------------------------------------------------
\112\ See 19 CFR 351.505(a)(2)(iv).
\113\ See HYSCO's November QR at 16 and POSCO's November QR at
18.
---------------------------------------------------------------------------
G. R&D Grants Under the Special Act on Balanced National Development
During the POR, HYSCO reported that it received a research and
development grant under the Special Act on Balanced National
Development (National Development Act).\114\
---------------------------------------------------------------------------
\114\ See HYSCO's March QR at 2 and 5, see also GOK's August 7,
2012, questionnaire response (August 7 QR) at Exhibit V-1.
---------------------------------------------------------------------------
Upon review of the information submitted by HYSCO and the GOK, we
preliminarily determine that the grant pertains specifically to the
production of a product that is not subject merchandise.\115\
Therefore, consistent with 19 CFR 351.525(b)(5), we preliminarily
determine that the National Development Act did not confer a benefit to
the production or export of subject merchandise during the POR. If a
future administrative review of this proceeding is requested, we will
reconsider whether grants provided under the National Development Act
confer a benefit.
---------------------------------------------------------------------------
\115\ The exact nature of the project for which the R&D grant
was received is business proprietary information. See Memorandum to
the File titled ``HYSCO's R&D Grants under the Act on the Promotion
of the Special Act on Balanced National Development'' (August 31,
2012) of which a public version is on file in IA Access.
---------------------------------------------------------------------------
H. Subsidies Related to HYSCO's 2004 Purchase of Hanbo Steel (Hanbo)
In January 1997, Korea's then second largest steelmaker, Hanbo
Steel, collapsed under enormous debt and entered into bankruptcy
proceedings, falling under the receivership of the
[[Page 58521]]
Seoul Central District Bankruptcy Court (Bankruptcy Court). Petitioner
alleged that from 1996 to 2000 the GOK provided credit, and also
compelled Korean banks to provide credit, to Hanbo at a time when Hanbo
was uncreditworthy.\116\ According to petitioner, these loans continue
to benefit HYSCO during the POR. Petitioner further alleged that in the
aftermath of Hanbo's collapse, the GOK paid off Hanbo's debts to its
small- and medium-sized creditors in order to save them from going into
bankruptcy themselves, resulting in debt forgiveness to Hanbo. In
September 2004, Hanbo was purchased by a consortium consisting of HYSCO
and INI Steel Co. through a public auction under the Bankruptcy Court's
supervision.\117\ As a result of this sale, HYSCO acquired Hanbo's
cold-rolled facility.\118\ Petitioner alleged that the Korea Asset
Management Corporation, a GOK entity, held the majority of Hanbo's debt
at the time of its sale. Petitioner further alleged that the 2004
acquisition was not an arm's-length, fair-market-value transaction.
Specifically, petitioner alleged that the transaction was contingent
upon HYSCO/INI agreeing to retain Hanbo's workers for three years.
Petitioner pointed out that under the Department's change-in-ownership
methodology, there is a rebuttable presumption that allocable subsidies
to a company will continue to benefit the purchaser of the company or
its assets if the sales transaction was not at arm's length and for
fair market value. Consequently, petitioner alleged that the 2004
transaction did not extinguish the benefit from the debt forgiveness
that had been provided to Hanbo, resulting in an allocable benefit to
HYSCO during the POR.
---------------------------------------------------------------------------
\116\ See Petitioners December 20, 2011, submission at 12.
\117\ See HYSCO's June 19, 2012, submission at 2-3.
\118\ Id. at 7.
---------------------------------------------------------------------------
The Department initiated an investigation of petitioner's
allegations.\119\ The Department's examination covers any GOK debt
forgiveness to Hanbo from 1996 (the beginning of the 15-year AUL for
this review) through September 2004 (the time of Hanbo's purchase),
which could conceivably result in benefits allocable to the 2010 POR,
as well as any GOK loans to Hanbo that are still outstanding during the
POR, to the extent such loans were assumed by HYSCO.
---------------------------------------------------------------------------
\119\ See Memorandum to Melissa G. Skinner, Director, Office 3,
through Eric B. Greynolds, Program Manager, from Gayle Longest, Case
Analyst, regarding New Subsidy Allegations (April 24, 2012).
---------------------------------------------------------------------------
With regard to petitioner's loan allegations, the information
submitted by HYSCO and the GOK indicates that INI/HYSCO's 2004 purchase
of Hanbo was an asset-only purchase and, thus, no liabilities were
transferred to INI and HYSCO as part of the sale, i.e., HYSCO did not
assume any of Hanbo's debts.\120\ Therefore, we preliminarily find
that, to the extent that Hanbo may have received GOK or GOK-directed
loans, any subsidy from such loans did not benefit HYSCO during the
POR.
---------------------------------------------------------------------------
\120\ Questionnaire responses further indicate that Hanbo
received operating financing between 1998 and 2002, under court
supervision, but that the debt was gradually paid down by 2002 with
operating income.
---------------------------------------------------------------------------
With regard to petitioner's debt forgiveness allegations, the
questionnaire responses from HYSCO and the GOK indicate that none of
Hanbo's debt, including debts owed to suppliers and small- and medium-
sized firms, was forgiven in 1996.\121\ Thus, we preliminarily find
that the only debt forgiveness at issue is any debt forgiveness
resulting from Hanbo's bankruptcy beginning in 1997. Concerning the
period 1997 until Hanbo's purchase in 2004, the questionnaire responses
from the GOK and HYSCO indicate that Hanbo's debt was restructured
pursuant to a court-supervised bankruptcy proceeding in accordance with
Korea's Corporate Reorganization Law.\122\ For example, effective
January 31, 1997, the bankruptcy judge forbade Hanbo from liquidating
any of its outstanding debt, transferring ownership, or engaging in any
settlement or waiver.\123\ During its bankruptcy, Hanbo was overseen by
a court-approved trustee.\124\ Further, the Bankruptcy Court's approval
was required for all of Hanbo's major actions.\125\ Finally, the 2004
sale of Hanbo through public auction was an integral part of the
bankruptcy process and thus, as with all the other elements in the
bankruptcy, also subject to court approval.
---------------------------------------------------------------------------
\121\ See HYSCO's August 2, 2012, submission at 1-2; see also
the GOC's August 15, 2012, submission at 1.
\122\ See HYSCO's June 19, 2012, submission at 1-4.
\123\ Id. at Exhibit 3.
\124\ Id. at 2.
\125\ Id.
---------------------------------------------------------------------------
Concerning the terms of the bankruptcy itself, Hanbo's final
reorganization plan, as approved by the Bankruptcy Court, indicates
that, for the purposes of restructuring Hanbo's debts, Hanbo's
creditors were divided into five categories depending on the type of
creditor and existence of security: Secured creditors, unsecured
creditors, SME creditors, tax creditors, and related-party
creditors.\126\ The documents further indicate that the repayment terms
varied depending on the creditor group, but repayment terms were
applied equally to creditors within the same creditor group.\127\ As a
result of this debt restructuring, Hanbo's debts were repaid at a
discount with proceeds from the sale of assets. This process resulted
in debt forgiveness to the extent that the debts were not repaid in
full.
---------------------------------------------------------------------------
\126\ See HYSCO's June 19, 2012, submission at Exhibit 2; see
also HYSCO's August 2, 2012, submission at 1 and Exhibit 21.
\127\ Id.
---------------------------------------------------------------------------
The Department addressed the issue of debt forgiveness in the
context of bankruptcy proceedings in the final results of Stainless
Steel from Korea, in which the Department explained that, in assessing
the countervailability of the debt forgiveness, it examines whether:
(1) The bankruptcy protection is generally available in the country in
question, and (2) the bankruptcy in question was inconsistent with the
typical practice in the country.\128\ In Stainless Steel from Korea,
the Department found that where bankruptcy proceedings are conducted
pursuant to law that is are generally available to all companies, and
the particular company received no special or differential treatment in
its bankruptcy process, debt forgiveness resulting from the bankruptcy
procedures is not specific and, thus, not countervailable.\129\ There
is no information on the record of the current proceeding that warrants
reconsideration of the Department's finding that that bankruptcies are
generally available to all companies in Korea.
---------------------------------------------------------------------------
\128\ See Final Results of Countervailing Duty Administrative
Review: Stainless Steel Sheet and Strip in Coils from the Republic
of Korea, 69 FR 2113 (January 14, 2004) (Stainless Steel from
Korea), and accompanying Issues and Decision Memorandum (Stainless
Steel from Korea Memorandum) at Comment 4; see also Final
Affirmative Countervailing Duty Determination and Final Negative
Critical Circumstances Determination: Carbon and Certain Alloy Steel
Wire Rod from Germany, 67 FR 55808, (August 30, 2002), and
accompanying Issues and Decision Memorandum at Comment 6.
\129\ Id.
---------------------------------------------------------------------------
In the case of Hanbo's bankruptcy, we preliminarily find that it
was conducted through legal proceedings generally available to all
Korean companies.\130\ As
[[Page 58522]]
noted above, Hanbo entered into bankruptcy pursuant to Korea's
Corporate Reorganization Law, under court receivership at the
Bankruptcy Court, with its management and operations subject to
supervision by a court-approved trustee. Further, there is no evidence
that Hanbo received special or differential treatment in its bankruptcy
process. Accordingly, the Department finds that Hanbo's debt
restructuring was not subject to government influence resulting in
subsidies.\131\ Consequently, in accordance with the Department's
practice, we preliminary find that to the extent the bankruptcy
restructuring plan for Hanbo resulted in debt forgiveness, such debt
forgiveness was not specific, as described under section 771(5A)(D) of
the Act and, thus, not countervailable.
---------------------------------------------------------------------------
\130\ We find that the Hanbo bankruptcy, which was essentially a
liquidation process, differed from debt workouts that the Department
has examined in other Korean CVD proceedings (e.g., DRAMS from Korea
Investigation and the CFS Investigation), which involved out-of-
court corporate restructuring agreements (CRAs) implemented by a
body of creditors dominated by government-owned or controlled
entities. The Department found those workouts to have been subject
to government influence resulting in subsidies specific to the
company or industry. See Final Affirmative Countervailing Duty
Determination: Dynamic Random Access Memory Semiconductors from the
Republic of Korea, 68 FR 37122 (June 23, 2003) (DRAMS from Korea
Investigation), and accompanying Issues and Decision Memorandum
(DRAMS Decision Memorandum) at ``Hynix Financial Restructuring and
Recapitalization;'' see also CFS Decision Memorandum at ``Poognman
Restructuring.''
\131\ See DRAMS Decision Memorandum at ``Hynix Financial
Restructuring and Recapitalization''; see also CFS Decision
Memorandum at ``Poognman Restructuring.''
---------------------------------------------------------------------------
Accordingly, absent any subsidy benefits that would be allocable to
the POR, there is no need for the Department to analyze whether the
2004 sale of Hanbo was an arm's-length, fair-market-value transaction
pursuant to the Department's change-in-ownership methodology.
I. RSTA 22: Corporation Tax Exemption on Dividend Income From
Investment in Overseas Resource Development
Under RSTA Article 22, a domestic corporation, whose income for
each business year ending before December 31, 2009, includes any
dividend income from its investment in overseas resource development
projects as prescribed by Presidential Decree (Enforcement Decree), is
exempt from corporate tax for the portion of such dividend income that
is exempted from the tax of the host country where the investment
occurred. Article 19 of the Enforcement Decree of the RSTA prescribes
the following investment projects as being eligible for this tax
exemption: Agricultural products, Animal products, Fishery products,
Forest products, and Mineral products.
POSCO reported that it had investments in overseas resource
development projects as prescribed by the Enforcement Decree and
received tax exemptions in the host country for these investments.\132\
The tax exemptions were reflected in the tax return that POSCO filed
during the POR. Dongbu and HYSCO reported that they did not use this
program.
---------------------------------------------------------------------------
\132\ See POSCO's December 2, 2011, QR at 12; see also GOK's
November QR at 6.
---------------------------------------------------------------------------
We preliminarily determine that the tax exemptions POSCO received
under this program constitute a financial contribution in the form of
revenue forgone as described under section 771(5)(D)(ii) of the Act and
confer a benefit as described under section 771(5)(E) of the Act and 19
CFR 351.509(a). Further, we preliminarily determine that tax exemptions
received under this program are specific under section 771(5A)(D)(1)
because benefits are limited to firms with investment projects
concerning agricultural, animal, fishery, forest, and mineral products.
Under this program, the benefit is equal to the amount of added
income taxes that POSCO would have paid absent the program. The
benefits POSCO received were less than 0.005 percent of its total
sales. Therefore, we are preliminarily excluding the amount from
POSCO's net countervailable subsidy rate.
J. 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.\133\ 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.
---------------------------------------------------------------------------
\133\ Pursuant to the petitioner's new subsidy allegations, the
Department initiated an investigation of property, acquisition and
registration tax exemptions allegedly received by POSCO, Dongbu, and
HYSCO for their respective facilities in various locations. The
information submitted by the respondent firms and the GOK indicates
that these tax exemptions were received pursuant to a program under
Article 276 of the Local Tax Act, which the Department has
previously examined and found to be countervailable.
---------------------------------------------------------------------------
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, and its facilities
in the Ulsan Works industrial complex designated under the Industrial
Cluster Act.\134\ During the POR, POSCO and Dongbu received property
reductions in connection with their facilities located in the Gwangyang
Industrial Complex and Godae Industrial Complex, respectively. In
addition, HYSCO, POSCO, and Dongbu 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.
---------------------------------------------------------------------------
\134\ See HYSCO's November QR at Exhibit H-2 and HYSCO's May 25,
2012, questionnaire response (HYSCO's May QR) at 4 and Exhibit H-4.
---------------------------------------------------------------------------
We preliminarily determine that the tax reductions constitute a
financial contribution in the form of revenue forgone, as described
under section 771(5)(D)(ii) of the Act, and a benefit under section
771(5)(E) and 19 CFR 351.509(a). We further preliminarily determine
that the property tax exemptions provided under this program are
specific under section 771(5A)(D)(iv) of the Act because benefits are
limited to enterprises located within designated geographical regions.
Our findings in this regard are consistent with the Department's
practice.\135\
---------------------------------------------------------------------------
\135\ 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 Investigation),
and accompanying Issues and Decision Memorandum (CFS Decision
Memorandum) at ``Reduction in Taxes for Operation in Regional and
National Industrial Complexes.''
---------------------------------------------------------------------------
To calculate the benefit, we subtracted the amount of taxes paid by
the firms from the amounts that would have been paid absent the
program. To calculate the net subsidy rate, we
[[Page 58523]]
divided the total benefit by the firms' total sales. In the case of
HYSCO, POSCO, and Dongbu, the resulting net subsidy rates were less
than 0.005 percent ad valorem. Consistent with the Department's
practice, we find that the benefits received under this program are not
measurable and, therefore, we have not included any benefits under this
program in net subsidy rates of HYSCO and POSCO.\136\
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\136\ See, e.g., CORE from Korea 2006 Decision Memorandum at
``GOK's Direction of Credit.''
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III. Programs Preliminarily Determined To Be Not Used
The following programs were part of the petitioner's new subsidy
allegations on which the Department initiated an investigation.\137\
Based on the information submitted by the GOK and the respondents, we
preliminarily determine that these programs were not used during the
POR.
\137\ See Memorandum to Melissa G. Skinner, Director, Office 3,
through Eric B. Greynolds, Program Manager, from Gayle Longest, Case
Analyst, regarding New Subsidy Allegations (April 24, 2012).
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Corporate Tax Reduction for Facilities Located in the Godae
Complex
Income Tax Reduction for Facilities Located in the Godae
Complex
Cash Grants for Employees Working at Facilities in Jeollanamdo
Training and Education Subsidies at Facilities in Jeollanamdo
Support for New Investments in Facilities in Jeollanamdo
Reduction in Rent for Facilities Located in Industrial
Complexes
Employment Subsidies for Large-Scale Investment in Ulsan
Special Support for Large-Scale Investments in Ulsan
Technology Development Loans for Facilities in Gwangyang
Complex
Foundation Loans for Facilities in Gwangyang Complex
The Department included the following programs in its October 5,
2011, initial questionnaire. We preliminarily determine that these
programs were not used by the reviewed companies during the POR.
Reserve for Research and Manpower Development Fund Under RSTA
Article 9 (TERCL Article 8)
RSTA Article 11: Tax Credit for Investment in Equipment to
Development Technology and Manpower (TERCL Article 10)
Reserve for Export Loss Under TERCL Article 16
Reserve for Overseas Market Development Under TERCL Article 17
Reserve for Export Loss Under TERCL Article 22
Exemption of Corporation Tax on Dividend Income from Overseas
Resources Development Investment Under TERCL Article 24
Reserve for Investment (Special Cases of Tax for Balanced
Development Among Areas Under TERCL Articles 42-45)
Tax Credits for Specific Investments Under TERCL Article 71
RSTA Article 94: Equipment Investment to Promote Workers
Welfare (TERCL Article 88)
Electricity Discounts Under the Requested Loan Adjustment
Program
Electricity Discounts Under the Emergency Load Reductions
Program
Export Industry Facility Loans and Specialty Facility Loans
Short-Term Trade Financing Under the Aggregate Credit Ceiling
Loan Program Administered by the Bank of Korea
Industrial Base Fund
Excessive Duty Drawback
Private Capital Inducement Act
Scrap Reserve Fund
Special Depreciation of Assets on Foreign Exchange Earnings
Export Insurance Rates Provided by the Korean Export Insurance
Corporation
Loans from the National Agricultural Cooperation Federation
Tax Incentives from Highly Advanced Technology Businesses
Under the Foreign Investment and Foreign Capital Inducement Act
D/A Loans Issued by the Korean Development Bank and Other
Government-Owned Banks
Export Loans by Commercial Banks Under KEXIM's Trade Bill
Rediscounting Program
Short-term Export Financing
Research and Development Grants Under the Industrial
Development Act (IDA)
Preliminary Results of Review
In accordance with 19 CFR 351.221(b)(4)(i), we calculated an
individual subsidy rate for each producer/exporter subject to this
administrative review. For the period January 1, 2010, through December
31, 2010, we preliminarily determine the net subsidy rates for HYSCO,
POSCO, and Dongbu to be 0.08, 0.16, 0.11, percent ad valorem,
respectively, which are de minimis rates. See 19 CFR 351.106(c)(1).
The Department intends to issue assessment instructions to U.S.
Customs and Border Protection (CBP) 15 days after the date of
publication of the final results of this review. If the final results
remain the same as these preliminary results, the Department will
instruct CBP to liquidate without regard to countervailing duties all
shipments of subject merchandise produced by HYSCO, POSCO, and Dongbu,
entered, or withdrawn from warehouse, for consumption from January 1,
2010, through December 31, 2010. The Department will also instruct CBP
to collect cash deposits of zero percent on shipments of the subject
merchandise produced by HYSCO, POSCO, and Dongbu entered, or withdrawn
from warehouse, for consumption on or after the date of publication of
the final results of this review.
We will instruct CBP to continue to collect cash deposits for non-
reviewed companies at the most recent company-specific or country-wide
rate applicable to the company. Accordingly, the cash deposit rates
that will be applied to companies covered by this order, but not
examined in this review, are those established in the most recently
completed administrative proceeding for each company. These rates shall
apply to all non-reviewed companies until a review of a company
assigned these rates is requested.
Disclosure and Public Comment
Pursuant to 19 CFR 351.224(b), the Department will disclose to
parties to the proceeding any calculations performed in connection with
these preliminary results within five days after the date of the public
announcement of this notice. 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. Parties who submit
argument in this proceeding are requested to submit with the argument:
(1) A statement of the issue; and (2) a brief summary of the argument.
Parties submitting case and/or rebuttal briefs are requested to provide
the Department copies of the public version on disk. Case and rebuttal
briefs must be served on interested parties in accordance with 19 CFR
351.303(f). Pursuant to 19 CFR 351.310(c), within 30 days of the date
of publication of this notice, interested parties may request a public
hearing on arguments to be raised in the case and rebuttal briefs.
Unless the secretary specifies otherwise, the hearing, if requested,
will be held two days after the date for submission of rebuttal briefs.
Pursuant to 19 CFR 351.305(b)(4), representatives of parties to the
proceeding may request disclosure of proprietary information under
administrative protective order no later than 10 days after the
representative's client or employer becomes a party to
[[Page 58524]]
the proceeding, but in no event later than the date the case briefs,
under 19 CFR 351.309(c)(i), are due. The Department will publish the
final results of this administrative review, including the results of
its analysis of issues raised in any case or rebuttal brief or at a
hearing.
These preliminary results of review are issued and published in
accordance with sections 751(a)(1) and 777(i)(1) of the Act and 19 CFR
351.221(b)(4).
Dated: September 17, 2012.
Paul Piquado,
Assistant Secretary for Import Administration.
[FR Doc. 2012-23399 Filed 9-20-12; 8:45 am]
BILLING CODE 3510-DS-P
