[Federal Register Volume 76, Number 169 (Wednesday, August 31, 2011)]
[Notices]
[Pages 54209-54216]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-22325]
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DEPARTMENT OF COMMERCE
International Trade Administration
[C-580-818]
Corrosion-Resistant Carbon Steel Flat Products From the Republic
of Korea: Preliminary Results of Countervailing Duty Administrative
Review
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
SUMMARY: The Department of Commerce (the Department) is conducting an
administrative review of the countervailing duty (CVD) order on
corrosion-resistant carbon steel flat products (CORE) from the Republic
of Korea (Korea) for the period of review (POR) January 1, 2009,
through December 31, 2009. For information on the net subsidy for
Hyundai HYSCO Ltd. (HYSCO), the company reviewed, see the ``Preliminary
Results of Review'' section of this notice. Interested parties are
invited to comment on these preliminary results. See the ``Public
Comment'' section of this notice.
DATES: Effective Date: August 31, 2011.
FOR FURTHER INFORMATION CONTACT: Gayle Longest, AD/CVD Operations,
Office 3, Import Administration, International Trade Administration,
U.S. Department of Commerce, Room 4014, 14th Street and Constitution
Ave., NW., Washington, DC 20230; telephone: (202) 482-3338.
SUPPLEMENTARY INFORMATION:
Background
On August 17, 1993, the Department published in the Federal
Register the CVD order on CORE from Korea. See Countervailing Duty
Orders and Amendments of Final Affirmative Countervailing Duty
Determinations: Certain Steel Products from Korea, 58 FR 43752 (August
17, 1993). On August 2, 2010, the Department published a notice of
opportunity to request an administrative review of this CVD order. See
Antidumping or Countervailing Duty Order, Finding, or Suspended
Investigation: Opportunity to Request Administrative Review, 75 FR
45094 (August 2, 2010).
On August 31, 2010, we received timely requests for review and
partial revocation of the countervailing duty order from Dongbu Steel
Co., Ltd. (Dongbu) and Pohang Iron and Steel Co., Ltd. (POSCO); we also
received a timely request for review from Hyundai HYSCO Ltd. On
September 29, 2010, the Department published a notice of initiation of
the administrative review of the CVD order on CORE from Korea covering
the period January 1, 2009, through December 31, 2009. See Initiation
of Antidumping and Countervailing Duty Administrative Reviews and
Requests for Revocation in Part (Initiation), 75 FR 60076 (September
29, 2010).
On September 27, 2010, and October 1, 2010, Dongbu and POSCO,
respectively, withdrew their requests for review and partial revocation
of the CVD order on CORE from Korea. On January 25, 2011, we rescinded,
in part, this review of the CVD order of CORE from Korea with regard to
Dongbu and POSCO. See Corrosion-Resistant Carbon Steel Flat Products
From the Republic of Korea: Partial Rescission of Countervailing Duty
Administrative Review, 76 FR 4291 (January 25, 2011).
On October 18, 2010, the Department issued the initial
questionnaire to HYSCO, and the Government of Korea (GOK). On December
15, 2010, the Department received questionnaire responses from HYSCO
and the GOK. On February 17, 2011, March 25, 2011,
[[Page 54210]]
and April 27, 2011, the Department issued supplemental questionnaires
to the GOK and HYSCO. On March 17, 2011, April 22, 2011, and May 25,
2011, the Department received supplemental questionnaire responses from
the GOK and HYSCO. On April 14, 2011, the Department published in the
Federal Register an extension of its preliminary results of the instant
administrative review. See Corrosion-Resistant Carbon Steel Flat
Products from the Republic of Korea: Notice of Extension of Preliminary
Results of Countervailing Duty Administrative Review, 76 FR 20954
(April 14, 2011). On July 18, 2011, the Department issued an additional
supplemental questionnaire to the GOK. On August 4, 2011 the Department
received the supplemental questionnaire response for the GOK.
In accordance with 19 CFR 351.213(b), this review covers only those
producers or exporters for which a review was specifically requested.
The company that continues to be subject to this review is HYSCO.
Scope of Order
Products covered by this order are certain corrosion-resistant
carbon steel flat products from Korea. These products include flat-
rolled carbon steel products, of rectangular shape, either clad,
plated, or coated with corrosion-resistant metals such as zinc,
aluminum, or zinc-, aluminum-, nickel- or iron-based alloys, whether or
not corrugated or painted, varnished or coated with plastics or other
nonmetallic substances in addition to the metallic coating, in coils
(whether or not in successively superimposed layers) and of a width of
0.5 inch or greater, or in straight lengths which, if of a thickness
less than 4.75 millimeters, are of a width of 0.5 inch or greater and
which measures at least 10 times the thickness or if of a thickness of
4.75 millimeters or more are of a width which exceeds 150 millimeters
and measures at least twice the thickness. The merchandise subject to
this order is currently classifiable in the Harmonized Tariff Schedule
of the United States (HTSUS) at subheadings: 7210.30.0000,
7210.31.0000, 7210.39.0000, 7210.41.0000, 7210.49.0030, 7210.49.0090,
7210.49.0091, 7210.49.0095, 7210.60.0000, 7210.61.0000, 7210.69.0000,
7210.70.6030, 7210.70.6060, 7210.70.6090, 7210.90.1000, 7210.90.6000,
7210.90.9000, 7212.20.0000, 7212.21.0000, 7212.29.0000, 7212.30.1030,
7212.30.1090, 7212.30.3000, 7212.30.5000, 7212.40.1000, 7212.40.5000,
7212.50.0000, 7212.60.0000, 7215.90.1000, 7215.9030, 7215.90.5000,
7217.12.1000, 7217.13.1000, 7217.19.1000, 7217.19.5000, 7217.20.1500,
7217.22.5000, 7217.23.5000, 7217.29.1000, 7217.29.5000,
7217.30.15.0000, 7217.32.5000, 7217.33.5000, 7217.39.1000,
7217.39.5000, 7217.90.1000 and 7217.90.5000. Although the HTSUS
subheadings are provided for convenience and customs purposes, the
Department's written description of the merchandise is dispositive.
Subsidies Valuation Information
A. Benchmarks for Short-Term Financing
For those programs requiring the application of a won-denominated,
short-term interest rate benchmark, in accordance with 19 CFR
351.505(a)(2)(iv), we used as our benchmark the company-specific
weighted-average interest rate for commercial won-denominated loans
outstanding during the POR. This approach is in accordance with 19 CFR
351.505(a)(3)(i) and the Department's practice. See, e.g., Corrosion-
Resistant Carbon Steel Flat Products from the Republic of Korea: Final
Results of Countervailing Duty Administrative Review, 74 FR 2512
(January 15, 2009) (Final Results of CORE from Korea 2006), and
accompanying Issues and Decision Memorandum (CORE from Korea 2006
Decision Memorandum) at ``Benchmarks for Short-Term Financing.''
B. Benchmark for Long-Term Loans
During the POR, HYSCO had outstanding countervailable long-term
won-denominated loans from government-owned banks and Korean commercial
banks. We used the following benchmarks to calculate the subsidies
attributable to respondents' countervailable long-term loans obtained
through 2009:
(1) For countervailable, won-denominated long-term loans, we used,
where available, the company-specific interest rates on the company's
comparable commercial, won-denominated loans. If such loans were not
available, we used, where available, the company-specific corporate
bond rate on the company's public and private bonds, as we have
determined that the GOK did not control the Korean domestic bond market
after 1991. See, e.g., Final Negative Countervailing Duty
Determination: Stainless Steel Plate in Coils from the Republic of
Korea, 64 FR 15530, 15531 (March 31, 1999) (Stainless Steel
Investigation) and ``Analysis Memorandum on the Korean Domestic Bond
Market'' (March 9, 1999). The use of a corporate bond rate as a long-
term benchmark interest rate is consistent with the approach the
Department has taken in several prior Korean CVD proceedings. See Id.;
see also Final Affirmative Countervailing Duty Determination:
Structural Steel Beams from the Republic of Korea (H Beams
Investigation), 65 FR 41051 (July 3, 2000), and accompanying Issues and
Decision Memorandum at ``Benchmark Interest Rates and Discount Rates;''
and Final Affirmative Countervailing Duty Determination: Dynamic Random
Access Memory Semiconductors from the Republic of Korea , 68 FR 37122
(June 23, 2003) (DRAMS Investigation), and accompanying Issues and
Decision Memorandum at ``Discount Rates and Benchmark for Loans.''
Specifically, in those cases, we determined that, absent company-
specific, commercial long-term loan interest rates, the won-denominated
corporate bond rate is the best indicator of the commercial long-term
borrowing rates for won-denominated loans in Korea because it is widely
accepted as the market rate in Korea. See Final Affirmative
Countervailing Duty Determinations and Final Negative Critical
Circumstances Determinations: Certain Steel Products from Korea, 58 FR
at 37328, 37345-37346 (July 9, 1993) (Steel Products from Korea). Where
company-specific rates were not available, we used the national average
of the yields on three-year, won-denominated corporate bonds, as
reported by the Bank of Korea (BOK). This approach is consistent with
19 CFR 351.505(a)(3)(ii) and our practice. See, e.g., CORE from Korea
2006 Decision Memorandum at ``Benchmark for Long Term Loans.''
In accordance with 19 CFR 351.505(a)(2)(i), our benchmarks take
into consideration the structure of the government-provided loans. For
countervailable fixed-rate loans, pursuant to 19 CFR
351.505(a)(2)(iii), we used benchmark rates issued in the same year
that the government loans were issued.
Average Useful Life
Under 19 CFR 351.524(d)(2), we will presume the allocation period
for non-recurring subsidies to be the average useful life (AUL) of
renewable physical assets for the industry concerned as listed in the
Internal Revenue Service's (IRS) 1997 Class Life Asset Depreciation
Range System, as updated by the Department of the Treasury. The
presumption will apply unless a party claims and establishes that the
IRS tables do not reasonably reflect the
[[Page 54211]]
company-specific AUL or the country-wide AUL for the industry under
examination and that the difference between the company-specific and/or
country-wide AUL and the AUL from the IRS tables is significant.
According to the IRS tables, the AUL of the steel industry is 15 years.
No interested party challenged the 15-year AUL derived from the IRS
tables. Thus, in this review, we have allocated, where applicable, all
of the non-recurring subsidies provided to the producers/exporters of
subject merchandise over a 15-year AUL.
I. Programs Determined To Be Countervailable
A. Short-Term Export Financing
Export-Import Bank of Korea (KEXIM) supplies two types of short-
term loans for exporting companies: short-term trade financing and
comprehensive export financing. See the GOK's December 15, 2010,
questionnaire response (QR) at Exhibit J-1. KEXIM provides short-term
loans to Korean exporters that manufacture goods under export
contracts. Id. The loans are provided up to the amount of the bill of
exchange or contracted amount, less any amount already received. Id.
For comprehensive export financing loans, KEXIM supplies short-term
loans to any small or medium-sized company, or any large company that
is not included in the five largest conglomerates based on their
comprehensive export performance. Id. To obtain the loans, companies
must report their export performance periodically to KEXIM for review.
Id. Comprehensive export financing loans cover from 50 to 90 percent of
the company's export performance. Id.
In Steel Products from Korea, the Department determined that the
GOK's short-term export financing program was countervailable. See
Final Affirmative Countervailing Duty Determinations and Final Negative
Critical Circumstances Determinations: Certain Steel Products From
Korea, 58 FR 37338, 37350 (July 9, 1993) (Steel Products from Korea);
see also Notice of Final Affirmative Countervailing Duty Determination:
Certain Cold-Rolled Carbon Steel Flat Products From the Republic of
Korea, 67 FR 62102, (October 3, 2002) (Cold-Rolled Investigation), and
accompanying Issues and Decision Memorandum (Cold-Rolled Decision
Memorandum) at ``Short-Term Export Financing'' section. No new
information or evidence of changed circumstances was presented in this
review to warrant any reconsideration of the countervailability of this
program. Therefore, we continue to find this program countervailable.
Specifically, we determine that the export financing constitutes a
financial contribution in the form of a loan within the meaning of
section 771(5)(D)(i) of the Act and confers a benefit within the
meaning of section 771(5)(E)(ii) of the Act to the extent that the
amount of interest the respondents paid for export financing under this
program was less than the amount of interest that would have been paid
on a comparable short-term commercial loan. See discussion in the
``Subsidies Valuation Information'' section with respect to short-term
loan benchmark interest rates. In addition, we preliminarily determine
that the program is specific, pursuant to section 771(5A)(A) and (B) of
the Act, because receipt of the financing is contingent upon exporting.
HYSCO reported using short-term export financing during the POR.
Pursuant to 19 CFR 351.505(a)(1), to calculate the benefit under
this program, we compared the amount of interest paid under the program
to the amount of interest that would have been paid on a comparable
commercial loan. As our benchmark, we used the short-term interest
rates discussed above in the ``Subsidies Valuation Information''
section. To calculate the net subsidy rate, we divided the benefit by
the free on board (f.o.b.) value of the respective company's total
exports. On this basis, we determine the net subsidy rate to be 0.09
percent ad valorem for HYSCO.
B. Act on Special Measures for the Promotion of Specialized Enterprises
for Parts and Materials
Under the Act on Special Measures for the Promotion of Specialized
Enterprises for Parts and Materials (Promotion of Specialized
Enterprises Act), the GOK shares the costs of research and development
(R&D) projects with companies or research institutions. The goal of the
program is to support technology development for core parts and
materials necessary for technological innovation and improvement in
competitiveness. See GOK's December 15, 2010 QR at Exhibit P-1. The
program is administered by the Ministry of Knowledge Economy (MKE) and
Korea Evaluation Institute of Industrial Technology (KEIT). Id.
In accordance with Articles 3 and 4 of the Promotion of Specialized
Enterprises Act, MKE prepares a base plan and a yearly execution plan
for the development of the parts and materials industry. See GOK's
December 15, 2010 QR at Exhibit P-1. Under the execution plan, MKE
announces to the public a detailed business plan for the development of
parts and materials technology. Id. at 2. This business plan includes
support areas, qualifications, and the application process. Id.
According to the GOK, any person or company can participate in the
program by preparing an R&D business plan that conforms with the
requirements set forth in the MKE business plan. Id. The completed
application must then be submitted to KEIT, which evaluates the
application and selects the projects eligible for government support.
Id. After the selected application is finally approved by MKE, MKE and
the participating companies enter into an R&D agreement and then MKE
provides the grant. Id. at 3.
R&D project costs are shared by the GOK and companies or research
institutions as follows: (1) When the group of companies involved in
the research is made up of a ratio above two-thirds small to medium-
sized companies, the GOK provides a grant up to three-fourths of the
project cost; (2) when the group of companies involved in the research
is made up of a ratio below two-thirds small to medium-sized companies,
the GOK provides a grant up to one-half of the project cost. See GOK's
December 10, 2010 QR, Exhibit P-1.
Upon completion of the project, if the GOK evaluates the project as
``successful,'' the participating companies must repay 40 percent of
the R&D grant to the GOK over five years. See GOK's December 10, 2010
QR, Exhibit P-1 at 2. However, if the project is evaluated by the GOK
as ``not successful,'' the company does not have to repay any of the
grant amount to the GOK. Id.
In the final results of administrative review of the CVD order on
CORE from Korea covering the period January 1, 2008 through December
31, 2008, the Department determined that the Promotion of Specialized
Enterprises Act was de jure specific under section 771(5A)(D)(i) of the
Act, because it is expressly limited to (1) enterprises specializing in
components and materials and (2) enterprises specializing in
development of technology for components and materials. See Corrosion-
Resistant Carbon Steel Flat Products from the Republic of Korea: Final
Results of Countervailing Duty Administrative Review, 76 FR 3613
(January 20, 2011) (Final Results of CORE from Korea 2008), and
accompanying Decision Memorandum (CORE 2008 Decision Memorandum) at
``The Act on Special Measures for the Promotion of Specialized
Enterprises for Parts and Materials'' section. The Department
[[Page 54212]]
preliminarily determines in this administrative review that the
Promotion of Specialized Enterprises Act is specific for the same
reasons. We also preliminarily find that a financial contribution was
provided within the meaning of section 771(5)(D)(i) of the Act because
the GOK's payments constitute a direct transfer of funds. See
Corrosion-Resistant Carbon Steel Flat Products from the Republic of
Korea: Preliminary Results and Partial Rescission of Countervailing
Duty Administrative Review, 75 FR 55745; 55750.
HYSCO reported that during the POR, it was involved in one R&D
project under this program. See HYSCO's December 15, 2010 QR at 18. In
a prior review, we found that the R&D grants HYSCO received under this
program are for the development of specialized technologies associated
with the production of subject merchandise. See Preliminary Results of
CORE from Korea 2008, 75 FR at 55749, unchanged in Final Results of
CORE from Korea 2008, 76 FR 3613 and CORE 2008 Decision Memorandum at
``The Act on Special Measures for the Promotion of Specialized
Enterprises for Parts and Materials'' section. We have reached the same
conclusion in these preliminary results.
In the Final Results of CORE from Korea 2008, we treated a portion
of the subsidy that does not have to be repaid as a grant and the
remaining portion of the subsidy that may have to be repaid as a long-
term, interest-free contingent liability loan. See Final Results of
CORE from Korea 2008, 76 FR 3613 and CORE 2008 Decision Memorandum at
``The Act on Special Measures for the Promotion of Specialized
Enterprises for Parts and Materials'' section. This approach is
consistent with the Department's regulation and practice. See 19 CFR
351.505(d)(1); see also Certain Hot-Rolled Carbon Steel Flat Products
From India: Final Results of Countervailing Duty Administrative Review,
73 FR 40295 (July 14, 2008) and accompanying Issues and Decision
Memorandum at ``Export Promotion Capital Goods Scheme (EPCGS).'' We
have adopted the same approach in these preliminary results.
To determine the benefit from the GOK funds HYSCO received under
the Specialized Enterprises Act program, we calculated the GOK's
contribution for the assistance that was apportioned to HYSCO. See 19
CFR 351.504(a). As described immediately above, we treated a portion of
this benefit as a grant. In accordance with 19 CFR 351.524(b)(2), we
determined whether to allocate the non-recurring benefit from the
grants over a 15-year AUL by dividing the GOK-approved grant amount by
the company's total sales in the year of approval. Because the approved
amount was less than 0.5 percent of the company's total sales, we
expensed the grant to the year of receipt, i.e., to 2009, the POR in
this review.
With respect to the portion of the subsidy that we are treating as
a long-term, interest-free contingent liability loan, pursuant to 19
CFR 351.505(d)(1) for the reasons described above, we find the benefit
to be equal to the interest that HYSCO would have paid during the POR
had it borrowed the full amount of the contingent liability loan during
the POR. Pursuant to 19 CFR 351.505(d)(1), we used a long-term interest
rate as our benchmark to calculate the benefit of a contingent
liability interest-free loan because the event upon which repayment of
the duties depends (i.e., the completion of the R&D project) occurs at
a point in time more than one year after the date in which the grant
was received. Specifically, we used the long-term benchmark interest
rates as described in the ``Subsidies Valuation'' section of these
preliminary results.
To calculate the total net subsidy amount for this program, we
summed the benefits provided under this program. Next, to calculate the
net subsidy rate, we divided the portion of the benefit allocated to
the POR by HYSCO's total f.o.b. sales for 2009. See 19 CFR
351.525(b)(3). On this basis, we preliminarily determine the net
subsidy rate under this program to be 0.02 percent ad valorem for
HYSCO.
II. Programs Preliminarily Determined Not To Confer a Benefit During
the POR
A. Research and Development Grants Under the Industrial Development Act
(IDA)
The GOK, through the Ministry of Knowledge Economy (MKE),\1\
provides R&D grants to support numerous projects pursuant to the IDA,
including technology for core materials, components, engineering
systems, and resource technology. See Corrosion-Resistant Carbon Steel
Flat Products From the Republic of Korea: Preliminary Results of
Countervailing Duty Administrative Review (Preliminary Results of CORE
from Korea 2007), 74 FR 46100, 46102 (September 8, 2009) unchanged in
Corrosion-Resistant Carbon Steel Flat Products From the Republic of
Korea: Final Results of Countervailing Duty Administrative Review
(Final Results of CORE from Korea 2007), 74 FR 55192 (October 27,
2009). The IDA is designed to foster the development of efficient
technology for industrial development.\2\ See Preliminary Results of
CORE from Korea 2007, 74 FR at 46102. To participate in this program a
company may: (1) Perform its own R&D project, (2) participate through
the Korea Association of New Iron and Steel Technology (KANIST),\3\
which is an association of steel companies established for the
development of new iron and steel technology, and/or (3) participate in
another company's R&D project and share R&D costs as well as funds
received from the GOK. Id. To be eligible to participate in this
program, the applicant must meet the qualifications set forth in the
basic plan and must perform R&D as set forth under the Notice of
Industrial Basic Technology Development Plan. Id. If the R&D project is
not successful, the company must repay the full amount of the grants
provided by the GOK. Id.
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\1\ Prior to February 29, 2008, MKE was known as the Ministry of
Commerce, Industry, and Energy (MOCIE).
\2\ The exact nature of the IDA projects are proprietary and
therefore cannot be revealed in this public notice. Details on these
projects may be found at HYSCO's December 15, 2010 QR at Exhibit G-
2.
\3\ Also known as Korea New Iron & Steel Technology Research
Association (KNISTRA).
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In the H Beams Investigation, the Department determined that
through KANIST, the Korean steel industry receives funding specific to
the steel industry. Therefore, given the nature of KANIST, the
Department found projects under KANIST to be specific. See Preliminary
Negative Countervailing Duty Determination with Final Antidumping Duty
Determination: Structural Steel Beams From the Republic of Korea, 64 FR
69731, 69740 (December 14, 1999) (unchanged in the final results, 65 FR
69371 (July 3, 2000), and accompanying Issues and Decision Memorandum
at ``R&D Grants Under the Korea New Iron & Steel Technology Research
Association (KNISTRA)''). Further, we found that the grants constitute
a financial contribution under section 771(5)(D)(i) of the Act in the
form of a grant, and bestow a benefit under section 771(5)(E) of the
Act in the amount of the grant. Id. No new factual information or
evidence of changed circumstances has been provided to the Department
with respect to this program. Therefore, we preliminarily continue to
find that this program is de jure specific within the meaning of
section 771(5A)(D)(i) of the Act and this program constitutes a
financial contribution and confers a benefit under sections
771(5)(D)(i) and 771(5)(E) of the Act, respectively.
[[Page 54213]]
HYSCO benefitted from this program during the POR. See HYSCO's
December 15, 2010, QR at 13. HYSCO participated in a project indirectly
through KANIST. Id. However, according to HYSCO, the project for which
grants were received from the government was not related to subject
merchandise. Id. at 14. The nature of the project for which HYSCO
received the grant is business proprietary and cannot be discussed in
this public notice. For information on this project, see Memorandum to
the File titled ``HYSCO's R&D Grants under the IDA/ITIPA'' (August 31,
2011) (HYSCO IDA/ITIPA Grant Memorandum), of which a public version is
on file in the Central Records Unit (CRU).
The Department has previously determined that grants HYSCO received
for this particular project under this program are attributable to the
production of non-subject merchandise. See Corrosion-Resistant Carbon
Steel Flat Products From the Republic of Korea: Preliminary Results of
Countervailing Duty Administrative Review (Preliminary Results of CORE
from Korea 2007), 74 FR 46100; 46102 (September 8, 2010) unchanged in
Corrosion-Resistant Carbon Steel Flat Products From the Republic of
Korea: Final Results of Countervailing Duty Administrative Review
(Final Results of CORE from Korea 2007), 74 FR 55192 (October 27,
2008); and Memorandum to the File titled ``HYSCO's R&D Grants Under the
IDA Memorandum to the file in the Countervailing Duty Administrative
Review for the period of review (POR) January 1, 2007 through December
31, 2007'' (August 31, 2009) (HYSCO IDA Grants Memorandum), of which a
public version is on file in the CRU. See also HYSCO's December 10,
2010, QR at Exhibit G-5. Therefore, consistent with 19 CFR
351.525(b)(5) and our past practice, we preliminarily determine that
these grants for the project in question are tied to non-subject
merchandise and, thus, did not confer a benefit to HYSCO's production
or sales of subject merchandise during the POR.
B. Research and Development Grants Under the Industrial Technology
Innovation Promotion Act (ITIPA)
The GOK's Industrial Technology Innovation Promotion Act program is
designed to foster future new industries and enhance the
competitiveness of primary industries through fundamental technology
development. See GOK's December 15, 2010, QR at Exhibit G-3. The
program is administered by MKE and the Korean Evaluation Institute of
Industrial Technology (KEIT). Id.
Under the Industrial Technology Innovation Promotion Act, GOK
provides R&D grants to support the areas of transportation system,
industrial materials, robots, biomedical equipment, clean manufacturing
foundation, knowledge services and industry convergence technology. See
GOK's December 15, 2010, QR at Exhibit G-3 at 1-2.
Pursuant to Article 11 of the Industrial Technology Innovation
Promotion Act, KEIT prepares a basic plan for the development of
technology, on behalf of MKE. Id. at 3. This plan includes the R&D
projects that are eligible, describes the application process, and
designates the supporting documentation required. Id. The plan is
announced to the public. Id. According to the GOK, any person who
wishes to participate in the program prepares an R&D business plan that
meets the requirements set forth in the basic plan and then submits the
application to the GOK's Application Review Committee, which then
evaluates the application to determine if it conforms to the terms and
conditions set forth in the basic plan. Id. If the application is
approved, MKE and the company enter into an R&D agreement and then MKE
provides the grant. Id.
The costs of the R&D projects under this program are shared by the
company (or research institution) and the GOK. See GOK's December 15,
2010, QR at Exhibit G-3 at 2. Specifically, the grant ratio for project
costs are as follows: (1) For projects with one small/medium-sized
enterprise (SME), the GOK provides grants up to three-fourths of the
project costs, (2) for projects with one conglomerate, the GOK provides
grants up to one-half of the project costs, (3) for projects with more
than two participants of which SMEs comprise more than two-thirds of
the participant ratio, the GOK provides up to three-fourths of the
project costs, and (4) for projects with more than two participants of
which SMEs comprise less than two-thirds of the participant ratio, the
GOK provides up to one-half of the project costs. Id.
When the project is evaluated as ``successful'' upon completion,
the participating companies must repay 40 percent of the R&D grant to
the GOK over five years. Id. at 2. However, when the project is
evaluated as ``not successful,'' the company does not have to repay the
GOK any of the grant amount. Id.
During the POR, HYSCO received grants under the Industrial
Technology Innovation Promotion Act for two R&D projects in which the
company participated with other firms. See GOK's December 15, 2010, QR
at 10 and G-3; see also HYSCO's December 15, 2010, QR at 13, G-3, and
G-4. Based upon our review of program documents submitted in the
response, we preliminarily determine that one grant received is related
to the first step of the project discussed above in the section
``Research and Development Grants Under the Industrial Development Act
(IDA).'' See HYSCO's December 15, 2010, QR at 14. Therefore, we
preliminarily determine that this grant is attributable to the
production of non-subject merchandise. See the HYSCO IDA/ITIPA Grant
Memorandum.
The second step of this project is being performed under the
auspices of the ITIPA. Id. at 13 and G-3. Upon review of the
information submitted by HYSCO, we preliminarily determined that this
grant pertains specifically to production of a product that is not
subject merchandise. See Memorandum to the File titled ``HYSCO's R&D
Grants Under the IDA/ITIPA.'' (August 31, 2011), of which a public
version is on file in the CRU. Therefore, consistent with 19 CFR
351.525(b)(5) and our past practice, we preliminarily determine that
this grant is tied to non-subject merchandise. Hence we did not include
this grant in our benefit calculations.
In addition, HYSCO reports receiving another grant during the POR
for a project that is being performed under the ITIPA. See HYSCO's
December 15, 2010, QR at 14. Dividing this grant amount by HYSCO's
total sales results in a net subsidy rate that is less than 0.005
percent ad valorem. Thus, consistent with the Department's practice, we
find that the benefit received in connection with this grant is not
measurable. See, e.g., CORE from Korea 2006 Decision Memorandum at
``GOK's Direction of Credit'' section. Consequently, we preliminarily
determine that it is not necessary for the Department to make a finding
as to the countervailability of this program in this review. If a
future administrative review of this proceeding is requested, we will
further examine grants provided under ITIPA.
C. R&D Grants Under the Act on the Promotion of the Development, Use,
and Diffusion of New and Renewable Energy
The GOK's Development of Use, and Diffusion of New and Renewable
Energy program (formerly the Development of Alternative Energy program)
is reportedly designed to contribute to the preservation of the
environment, the sound and sustainable development of the national
economy, and the promotion of national welfare by diversifying energy
resources through
[[Page 54214]]
promoting technological development, the use and diffusion of
alternative energy, and reducing the discharge of gases harmful to
humans or the environment by activating the new and renewable energy
industry. See GOK's December 15, 2010, QR at Exhibit O-1. The program
is administered by the Ministry of Knowledge Economy (MKE), Korea
Energy Management Corporation (KEMCO), and the Korea Institute of
Energy Technology Evaluation and Planning (KETEP). Id.
Under the Act on the Promotion of the Development, Use, and
Diffusion of New and Renewable Energy (New and Renewable Energy Act),
the GOK provides R&D grants to support the following businesses: (1)
Electric and Nuclear Power Development, (2) Energy and Resources
Technology Development, and (3) New and Renewable Energy Technology
Development. Id., at 2.
Pursuant to Articles 5 and 6 of the New and Renewable Energy Act,
MKE prepares a base plan and a yearly execution plan for the
development of new and renewable energy. Id. at 3. The base and
execution plans are announced to the public. Id. According to the GOK,
any person who wishes to participate in the program prepares an R&D
business plan and then submits the application to the KETEP, which then
evaluates the application and selects the projects eligible for
government support. Id. After the selected application is finally
approved by MKE, KEMCO, and the general supervising institute of the
consortium enter into an R&D agreement and then MKE provides the grant
through KEMCO. Id.
The costs of the R&D projects under this program are shared by the
company (or research institution) and the GOK. Id. at 2. Specifically,
the grant ratio for project costs are as follows: (1) For large
companies, the GOK provides grants up to one-half of the project costs,
(2) for small/medium-sized companies, the GOK provides grants up to
three-fourths of the project costs, (3) for a consortium,\4\ the GOK
provides grants up to three-fourths of the project costs, and (4) for
others, the GOK provides grants up to one-half of the project costs.
Id.
---------------------------------------------------------------------------
\4\ If the ratio of small to medium-sized companies in a
consortium is above two-thirds, the GOK provides grants up to one-
half of the project costs. See GOK's December 10, 2010, QR, Exhibit
P-1.
---------------------------------------------------------------------------
When the project is evaluated as ``successful'' upon completion,
the participating companies must repay 40 percent of the R&D grant to
the GOK. Id. at 2. However, when the project is evaluated as ``not
successful'', the company does not have to repay any of the grant
amount to the GOK. Id.
During the POR, HYSCO received an energy-related grant under the
New and Renewable Energy Act for a project in which the company
participated with other firms. See GOK's December 15, 2010, QR at 14-15
and Exhibit O-1. HYSCO reported that the R&D grant under the New and
Renewable Energy Act are provided with respect to specific projects,
which are generally multi-year projects where the amount of funds to be
provided by the GOK is set out in the project contract. See HYSCO's
December 15, 2010, QR at Exhibit O-3. The cost of R&D projects under
this program is shared by the participating companies and the GOK. Id.
HYSCO claims that the project for which the grant was received from the
government was not related to subject merchandise. Id. at 18.
Upon review of the information submitted by HYSCO, we preliminarily
determine that the grant pertains specifically to production of a
product that is not subject merchandise. See Memorandum to the File
titled ``HYSCO's R&D Grants under the Act on the Promotion of the
Development, Use, and Diffusion of New and Renewable Energy'' (August
31, 2011) (HYSCO New and Renewable Energy Grant Memorandum), of which a
public version is on file in the CRU. Therefore, consistent with 19 CFR
351.525(b)(5), we preliminarily determine that this grant is tied to
non-subject merchandise. Hence, we preliminarily determine that the New
and Renewable Energy Act did not confer a benefit during the POR.
D. Reduction in Taxes for Operation in Regional and National Industrial
Complexes
Under Article 46 of the Industrial Cluster Development and Factory
Establishment Act (Industrial Cluster Act), a state or local government
may provide tax exemptions as prescribed by the Restriction of Special
Taxation Act. In accordance with this authority, Article 276 of the
Local Tax Act provides that an entity that acquires real estate in a
designated industrial complex for the purpose of constructing new
buildings or enlarging existing facilities is exempt from the
acquisition and registration tax. In addition, the entity is exempt
from 50 percent of the property tax on the real estate (i.e., the land,
buildings, or facilities constructed or expanded) for five years from
the date the tax liability becomes effective. The exemption is
increased to 100 percent of the relevant land, buildings, or facilities
that are located in an industrial complex outside of the Seoul
metropolitan area. The GOK established the tax exemption program under
Article 276 in December 1994, to provide incentives for companies to
relocate from populated areas in the Seoul metropolitan region to
industrial sites in less populated parts of the country. The program is
administered by the local tax officials of the county where the
industrial complex is located.
During the POR, pursuant to Article 276 of the Local Tax Act, HYSCO
received exemptions from the acquisition tax, registration tax, and
property tax based on the location of its manufacturing facilities,
Suncheon Works, in the Yulchon Industrial Complex, a government-
sponsored industrial complex designated under the Industrial Cluster
Act. In addition, HYSCO received an exemption from the local education
tax during the POR. The local education tax is levied at 20 percent of
the property tax. The property tax exemption, therefore, results in an
exemption of the local education tax.
In the CFS Paper Investigation, the Department determined that the
tax exemptions under Article 276 of the Local Tax Act are
countervailable subsidies. See Coated Free Sheet Paper from the
Republic of Korea: Notice of Final Affirmative Countervailing Duty
Determination, 72 FR 60639 (October 25, 2007) (CFS Paper
Investigation), and accompanying Issues and Decision Memorandum at
``Reduction in Taxes for Operation in Regional and National Industrial
Complexes'' (CFS Paper Decision Memorandum).
Dividing the total tax exemptions received under this program
during the POR by HYSCO's total sales for the POR results in a net
subsidy rate of less than 0.005 percent ad valorem. Consistent with the
Department's practice, we find that the benefits received under this
program are not measurable and, therefore, we have not included any
benefits under this program in the net subsidy rate. See, e.g., CORE
from Korea 2006 Decision Memorandum at ``GOK's Direction of Credit''
section. We will continue to examine this program in future reviews.
E. Overseas Resource Development Program: Loan From Korea Resources
Corporation (KORES)
In Final Results of CORE from Korea 2006, the Department found that
the GOK enacted the Overseas Resource Development (ORD) Business Act in
order to establish the foundation for securing the long-term supply of
essential energy and major material minerals, which are mostly imported
because of scarce domestic resources.
[[Page 54215]]
See Preliminary Results of CORE from Korea 2006, 73 FR 52315; 52326
(September 9, 2008) unchanged in Final Results of CORE from Korea 2006,
74 FR 2512 (January 15, 2009), and accompanying Issues and Decision
Memorandum at ``Programs Determined To Be Not Used'' section. Pursuant
to Article 11 of this Act, MKE annually announces its budget and the
eligibility criteria to obtain a loan from MKE. See GOK's May 25, 2011,
QR at Exhibit A-9. Any company that meets the eligibility criteria may
apply for a loan to MKE. Id. The loan evaluation committee evaluates
the applications, selects the recipients and gets approval from the
minister of MKE. Id. For projects related to the development of
strategic mineral resources, the Korean Resources Corporation (KORES)
lends the funds to the company for foreign resources development. Id.
During the POR, HYSCO obtained loans from KORES for investment in a
copper mine in Mexico. See HYSCO's December 22, 2009, QR at 11, Exhibit
8 at 24, HYSCO's April 22, 2011 QR at Exhibit A-8 and HYSCO's May 25,
2011, QR at Exhibit A-14. Based upon examination of the loan documents,
we preliminarily determine that the KORES loans are tied to copper,
which is non-subject merchandise. Further, we find that copper is not
an input primarily dedicated to the production of subject merchandise.
On this basis, we find the KORE loans are attributable to non-subject
merchandise. See 19 CFR 351.525(b)(5). Therefore, we preliminarily
determine that HYSCO did not receive a benefit from this program with
respect to the subject merchandise during the POR.
F. Overseas Resource Development Program: Loan From Korea National Oil
Corporation (KNOC)
In Final Results of CORE from Korea 2007, the Department found that
the GOK enacted the Overseas Resource Development (ORD) Business Act in
order to establish the foundation for securing the long-term supply of
essential energy and major material minerals, which are mostly imported
because of scarce domestic resources. See Preliminary Results of CORE
from Korea 2007, 74 FR 46100; 46107-46108 (September 8, 2010) unchanged
in Final Results of CORE from Korea 2007) 74 FR 55192 (October 27,
2008). Pursuant to Article 11 of this Act, the MKE annually announces
its budget and the eligibility criteria to obtain a loan from MKE. See
GOK's April 22, 2011, QR at Exhibit A-1. Any company that meets the
eligibility criteria may apply for a loan to MKE. Id. For projects that
are related to petroleum and natural gas, the Korea National Oil
Corporation (KNOC) lends the funds to the company for foreign resources
development. Id. An approved company enters into a borrowing agreement
with KNOC for the development of the selected resource. Id. Two types
of loans are provided under this program: ``General loans'' and
``success-contingent loans.'' For a success-contingent loan, the
repayment obligation is subject to the results of the development
project. In the event that the project fails, the company will be
exempted for all or a portion of the loan repayment obligation.
However, if the project succeeds, a portion of the project income is
payable to KNOC. Id.
During the POR, HYSCO obtained loans from KNOC related to petroleum
exploration projects. See HYSCO's December 22, 2009, questionnaire
response (QR) at 11 and Exhibit 8 at 24, HYSCO's March 17, 2011, QR at
11 and Exhibit A-2 and HYSCO's April 22, 2011, QR at Exhibits A-9 and
A-12. Based upon examination of the loan documents, we preliminarily
determine that the KNOC loans are tied to petroleum exploration, which
does not involve subject merchandise. On this basis, we find the KNOC
loans are attributable to non-subject merchandise. See 19 CFR
351.525(b)(5). Therefore, we preliminarily determine that HYSCO did not
receive a benefit from this program with respect to the subject
merchandise during the POR. We will continue to examine this program in
future reviews.
III. Programs for Which Additional Information Is Required
Restriction of Special Taxation Act (RSTA) Article 26
HYSCO indicated that it used Article 26 under the Restriction of
Special Taxation Act (RSTA Article 26) during the 2009 POR. The
Department issued supplemental questionnaires to the GOK to gather
additional information needed for our analysis of the specificity of
this program. The GOK submitted its latest questionnaire response
regarding the RSTA Article 26 program shortly before the due date of
the preliminary results. See the GOK's August 17, 2011, questionnaire
response. As a result, we were unable to incorporate the information in
the GOK's response into our preliminary findings. Therefore, we will
address this program in a post-preliminary decision memorandum.
IV. Programs Preliminarily Determined To Be Not Used
We preliminarily determine that the following programs were not
used by HYSCO during the POR:
Reserve for Research and Manpower Development Fund Under
RSTA Article 9 (TERCL Article 8).
RSTA Article 11: Tax Credit for Investment in Equipment to
Development Technology and Manpower (TERCL Article 10).
Reserve for Export Loss Under TERCL Article 16.
Reserve for Overseas Market Development Under TERCL
Article 17.
Reserve for Export Loss Under TERCL Article 22.
Exemption of Corporation Tax on Dividend Income from
Overseas Resources Development Investment Under TERCL Article 24.
Reserve for Investment (Special Cases of Tax for Balanced
Development Among Areas Under TERCL Articles 42-45).
Tax Credits for Specific Investments Under TERCL Article
71.
Asset Revaluation Under Article 56(2) of the Tax Reduction
and Exemption Control Act (TERCL).
RSTA Article 94: Equipment Investment to Promote Workers
Welfare (TERCL Article 88).
Electricity Discounts Under the Requested Loan Adjustment
Program.
Electricity Discounts Under the Emergency Load Reductions
Program.
Export Industry Facility Loans and Specialty Facility
Loans.
Exemption of VAT on Imports of Anthracite Coal.
Short-Term Trade Financing Under the Aggregate Credit
Ceiling Loan Program Administered by the Bank of Korea.
Industrial Base Fund.
Excessive Duty Drawback.
Private Capital Inducement Act.
Scrap Reserve Fund.
Short-Term Document Acceptance (D/A) Financing Provided
Under KEXIM's Trade Rediscount Program.
Special Depreciation of Assets on Foreign Exchange
Earnings.
Export Insurance Rates Provided by the Korean Export
Insurance Corporation.
Loans from the National Agricultural Cooperation
Federation.
Tax Incentives from Highly Advanced Technology Businesses
Under the Foreign Investment and Foreign Capital Inducement Act.
Other Subsidies Related to Operations at Asan Bay:
Provision of Land and Exemption of Port Fees Under the Harbor Act.
[[Page 54216]]
D/A Loans Issued by the Korean Development Bank and Other
Government-Owned Banks.
R&D Grants under the Promotion of Industrial Technology
Innovation Act.
Export Loans by Commercial Banks Under KEXIM's Trade Bill
Rediscounting Program.
Preliminary Results of Review
In accordance with 19 CFR 351.221(b)(4)(i), we calculated an
individual subsidy rate for each producer/exporter subject to this
administrative review. For the period January 1, 2009, through December
31, 2009, we preliminarily determine the net subsidy rate for HYSCO to
be 0.11 percent ad valorem, a de minimis rate. See 19 CFR
351.106(c)(1).
The Department intends to issue assessment instructions to U.S.
Customs and Border Protection (CBP) 15 days after the date of
publication of the final results of this review. If the final results
remain the same as these preliminary results, the Department will
instruct CBP to liquidate without regard to countervailing duties all
shipments of subject merchandise produced by HYSCO, entered, or
withdrawn from warehouse, for consumption from January 1, 2009, through
December 31, 2009. The Department will also instruct CBP to collect
cash deposits of zero percent on shipments of the subject merchandise
produced by HYSCO, entered, or withdrawn from warehouse, for
consumption on or after the date of publication of the final results of
this review.
We will instruct CBP to continue to collect cash deposits for non-
reviewed companies at the most recent company-specific or country-wide
rate applicable to the company. Accordingly, the cash deposit rates
that will be applied to companies covered by this order, but not
examined in this review, are those established in the most recently
completed administrative proceeding for each company. These rates shall
apply to all non-reviewed companies until a review of a company
assigned these rates is requested.
Disclosure and Public Comment
Pursuant to 19 CFR 351.224(b), the Department will disclose to
parties to the proceeding any calculations performed in connection with
these preliminary results within five days after the date of the public
announcement of this notice. Pursuant to 19 CFR 351.309, interested
parties may submit written comments in response to these preliminary
results. Unless otherwise indicated by the Department, case briefs must
be submitted within 30 days after the publication of these preliminary
results. See 19 CFR 351.309(c)(1)(ii). Rebuttal briefs, which are
limited to arguments raised in case briefs, must be submitted no later
than five days after the time limit for filing case briefs, unless
otherwise specified by the Department. See 19 CFR 351.309(d)(1).
Parties who submit argument in this proceeding are requested to submit
with the argument: (1) A statement of the issue; and (2) a brief
summary of the argument. Parties submitting case and/or rebuttal briefs
are requested to provide the Department copies of the public version on
disk. Case and rebuttal briefs must be served on interested parties in
accordance with 19 CFR 351.303(f). Also, pursuant to 19 CFR 351.310(c),
within 30 days of the date of publication of this notice, interested
parties may request a public hearing on arguments to be raised in the
case and rebuttal briefs. Unless the secretary specifies otherwise, the
hearing, if requested, will be held two days after the date for
submission of rebuttal briefs.
Pursuant to 19 CFR 351.305(b)(4), representatives of parties to the
proceeding may request disclosure of proprietary information under
administrative protective order no later than 10 days after the
representative's client or employer becomes a party to the proceeding,
but in no event later than the date the case briefs, under 19 CFR
351.309(c)(i), are due. The Department will publish the final results
of this administrative review, including the results of its analysis of
issues raised in any case or rebuttal brief or at a hearing.
These preliminary results of review are issued and published in
accordance with sections 751(a)(1) and 777(i)(1) of the Act and 19 CFR
351.221(b)(4).
Dated: August 24, 2011.
Ronald K. Lorentzen,
Deputy Assistant Secretary for Import Administration.
[FR Doc. 2011-22325 Filed 8-30-11; 8:45 am]
BILLING CODE 3510-DS-P