65 FR 18973, April 10, 2000
C-580-818
Sunset Reviews
Public Document
MEMORANDUM TO: Robert S. LaRussa
Assistant Secretary
for Import Administration
FROM: Jeffrey A. May
Director
Office of Policy
SUBJECT: Issues and Decision Memo for the Sunset Reviews of the
Countervailing Duty Orders on: Certain Cold-Rolled and
Corrosion-Resistant Carbon Steel Flat Products from
Korea; Final Results
Summary
We have analyzed the substantive responses of interested parties in
the expedited sunset reviews of the countervailing duty orders
covering certain cold-rolled and corrosion-resistant carbon steel
flat products from Korea. We recommend that you approve the positions
we have developed in the Discussion of the Issues section of this
memorandum for these final results. Below is the complete list of the
issues in these expedited sunset reviews for which we received
substantive responses by parties:
1. Likelihood of continuation or recurrence of a countervailable
subsidy
A. Programs from the Investigation
B. Programs found countervailable in other determinations
C. New Subsidy Allegations
2. Net Countervailable Subsidy
A. Net countervailable subsidy from the investigation
B. Adjustments to subsidies
3. Nature of the Subsidy
History of the Orders:
On, July 9, 1993, the Department issued its final affirmative
countervailing duty determinations on certain cold-rolled and
corrosion-resistant carbon steel flat products from Korea.(1) In the
investigations, the Department determined that benefits which
constitute subsidies within the meaning of section 701 of the Tariff
Act of 1930, as amended (the "Act"), were being provided by the
Government of Korea ("GOK") to Korean manufacturers, producers, and
exporters. The following is the list of programs found to provide a
countervailable subsidy in the investigations and the estimated net
ad valorem subsidies.(2)
_____________________________________________________________________
Subsidy Program Subsidy Rate (%) Cold- Subsidy Rate (%)
Rolled Carbon Steel Flat Corrosion-Resistant
Products Carbon Steel Flat
Products
_____________________________________________________________________
Government Equity 0.13 0.07
Infusions in POSCO
_____________________________________________________________________
Loans Inconsistent with 2.94 1.83
Commercial Consideration/
Preferential Access
to Foreign Loans
_____________________________________________________________________
Government Infrastructure 0.58 0.30
Assistance for POSCO's
Integrated Steel Mill at
Kwangyang Bay
_____________________________________________________________________
Dockyard Fees 0.01 less than 0.005
_____________________________________________________________________
Reserve for Export Loss 0.03* 0.06*
_____________________________________________________________________
Reserve for Overseas 0.04 0.09
Market Development
_____________________________________________________________________
Unlimited Deduction of less than 0.005 less than 0.005
Overseas Entertainment
Expenses
_____________________________________________________________________
Reserve for Investment 0.03 0.02
_____________________________________________________________________
Duty Drawback 0.01 0.01
_____________________________________________________________________
Preferential Utility Rate 0.03 0.02
_____________________________________________________________________
Short-term Export Financing less than 0.005 less than 0.005
_____________________________________________________________________
* See Preliminary Affirmative Countervailing Duty Determinations and
Alignment of Final Countervailing Duty Determinations with Final
Antidumping Duty Determinations: Certain Steel Products from Korea,
57 FR 57761 (December 7, 1992)
In the investigation, the Department determined the total net
subsidy of these programs to be 3.76 percent ad valorem for all
Korean manufacturers, producers and exporters, with respect to
certain cold-rolled carbon steel flat products, and 2.34 percent with
respect to certain corrosion-resistant carbon steel flat products.(3)
On August 17, 1993, the Department published in the Federal Register
an amendment to the final affirmative countervailing duty
determinations of the subject merchandise. In the amendment to the
final countervailing duty determination, the Department established a
country-wide rate ad valorem rate of 3.95 percent, with respect to
certain cold-rolled carbon steel flat products, and 2.69 percent ad
valorem with respect to certain corrosion-resistant carbon steel flat
products.(4) Since the issuance of these orders there have been no
completed administrative reviews.(5) The countervailing duty orders
on certain cold-rolled and corrosion-resistant carbon steel flat
products remain in effect for all Korean producers and exporters.
Background
On September 1, 1999, the Department initiated sunset reviews of the
countervailing duty orders on certain cold-rolled and corrosion-
resistant carbon steel flat products from Korea, pursuant to section
751(c) of the Act.(6) On September 10, 1999, the Department received
a Notice of Intent to Participate in both of these reviews on behalf
of domestic interested parties, within the deadline specified in
section 351.218(d)(1)(i) of the Sunset Regulations. We received a
complete substantive response to the notice of initiation on October
1, 1999, on behalf of Bethlehem Steel Corporation, Ispat Inland Inc.,
LTV Steel Flat Rolled Co., National Steel Corporation, and US Steel
Group, a unit of USX Corporation (collectively "the domestic
interested parties"). The domestic interested parties state that one
or two of its members have participated in these proceedings since
the petition was filed, and continued to participate in each
segment.(7) Pursuant to section 771(9)(C) of the Act, the domestic
interested parties claimed interested party status as U.S. producers
of the domestic like product. On October 1, 1999 the Department
receive a letter on behalf of the Government of Korea ("GOK"), Korea
Iron & Steel Assoiation ("KOSA"), and the following individual
manufacturers/exporters of the subject merchandise: Pohang Iron &
Steel Company, Ltd. ("POSCO"), Pohang Coated Steel Co., ("POCOS"),
Union Steel Manufacturing Company, Ltd. ("Union") and Dongbu Steel
Company, Ltd. ("Dongbu"). In accordance with 19 CFR 351.218(d)(2)(i),
the GOK, KOSA, POSCO, POCOS, Union and Dongbu waived their right to
participate in these proceedings. As a result, and in accordance with
our regulations (19 CFR 351.218(e)(1)(ii)(C)(2)), we determined to
conduct expedited sunset reviews of these countervailing duty orders.
In accordance with section 751(c)(5)(C)(v) of the Act, the
Department may treat a review as extraordinarily complicated if it is
a review of a transition order (i.e., an order in effect on January
1, 1995). These reviews concern transition orders within the meaning
of section 751(c)(6)(C)(i) of the Act. Therefore, on December 22,
1999, the Department determined that the sunset review of the
countervailing duty orders on certain cold-rolled and corrosion-
resistant carbon steel flat products from Korea are extraordinarily
complicated and extended the time limit for completion of the final
results of these reviews until not later than, March 29, 2000, in
accordance with section 751(c)(5)(B) of the Act. (8)
Discussion of the Issues
In accordance with section 751(c)(1) of the Act, the Department
conducted these reviews to determine whether revocation of the
countervailing duty orders would be likely to lead to continuation or
recurrence of a countervailable subsidy. Section 752(b) of the Act
provides that, in making this determination, the Department shall
consider the net countervailable subsidy determined in the
investigation and subsequent reviews, and whether any change in the
program which gave rise to the net countervailable subsidy has
occurred and is likely to affect that net countervailable subsidy.
Pursuant to section 752(b)(3) of the Act, the Department shall
provide to the Commission the net countervailable subsidy likely to
prevail if the order is revoked. In addition, consistent with section
752(a)(6), the Department shall provide to the Commission information
concerning the nature of the subsidy and whether it is a subsidy
described in Article 3 or Article 6.1 of the 1994 WTO Agreement on
Subsidies and Countervailing Measures ("Subsidies Agreement").
Below we address the comments of interested parties.
Likelihood of continuation or recurrence of a countervailable subsidy
Interested Party Comments:
The domestic interested parties state that revocation of the
countervailing duty orders on certain cold-rolled and corrosion-
resistant carbon steel flat products is likely to lead to continued
unfair subsidization by the Government of Korea ("GOK"), as well as
material injury to the U.S. industry. In their substantive responses,
the domestic interested parties argue that the GOK continues to
provide Korean steel producers with subsidies from previously
countervailed programs.(9) They argue that of the ten programs
countervailed in the investigation, all programs continue to exist,
except two.(10) The domestic interested parties argue that they
submitted substantial new subsidy allegations in what would have been
the fifth administrative reviews of these orders.(11) However,
because Korean producers of the subject merchandise withdrew the
request for reviews on both orders, and the Department terminated
these reviews, the newly alleged programs were not investigated.(12)
Citing to the Department's Sunset Policy Bulletin 98:3, the domestic
interested parties note that if good cause is shown, the Department
will consider subsidy programs found to confer subsidies in other
investigations or reviews. The domestic interested parties argue that
in recent investigations the Department has found that numerous new
subsidy programs have developed and these programs are being used by
the Korean steel industry and by producers of the subject
merchandise.(13) The domestic interested parties urge the Department
to consider the new subsidies found in recent investigations in the
course of these proceedings.(14) They note that in the Department's
Sunset Policy Bulletin 98.3, section III.C.1, the Department, upon
good cause, will consider in a sunset review, subsidy programs found
to confer countervailable benefits in other investigations or
reviews, if the programs could be used by respondents, and the
programs did not exist when the order was issued. In their
substantive response, the domestic interested parties discuss, (1)
subsidy programs reviewed in the original investigation,(15) (2)
subsidy programs determined to be countervailable in other cases,(16)
and (3) new subsidy allegations.(17)
1. With respect to the countervailable subsidies found in the
original investigation, the domestic interested parties state that
Korean steel producers will continue to benefit from these programs
if the orders were revoked. In their substantive response, the
domestic interested parties list several programs found to confer
subsidies:
(a) The Government Infrastructure at Kwangyang Bay subsidy program -
Benefits provided by this program were allocated over a fifteen
years. Therefore, the benefit is scheduled to expire in 2004. Because
the benefit stream goes beyond the sunset reviews, this program
continues to provide countervailable subsidies.
(b) Credit Allocation - In connection with the Loans Inconsistent
with Commercial Considerations/Preferential Access to Foreign Loan
program, the GOK controlled the lending practices of banks and other
lending institutions whereby the GOK allocates access to foreign and
domestic sources of credit.(18) In recent investigations (i.e.,
Stainless Sheet and Strip in Coils (64 FR at 30645)) covering Pohang
Iron & Steel Company ("POSCO"), the domestic interested parties
assert that the Department determined that the GOK continues to
provide this program to benefit Korean steel producers. Furthermore,
the domestic interested parties allege that the GOK has expanded this
program to provide Korean companies access to foreign bond markets in
addition to foreign loan markets.(19)
(c) Reserve for Export Loss program - The domestic interested
parties allege that as in the original investigation, this program
has been found to provide subsidies to POSCO in recent investigations
of other products.(20) In addition, the domestic interested parties
contend that they provided the Department evidence that Union Steel
benefitted from these subsidies during the administrative
reviews.(21) However, because the Department terminated both of these
reviews, the program was not investigated with respect to Union
Steel.(22) In the investigation, the Department determined a subsidy
rate of 0.03 percent, and 0.06 percent for certain cold-rolled and
certain corrosion-resistant carbon steel flat products,
respectively.(23)
(d) Reserve for Overseas Development program - The domestic
interested parties argue that in recent investigations of Stainless
Sheet and Strip in Coils (64 FR at 30645), and Stainless Plate in
Coils From the Republic of Korea (64 FR at 15530-34) the Department
found this program continues to provide benefits to POSCO. In
addition, the domestic interested parties argue that Union Steel has
also benefitted from these subsidies.(24)
(e) Investment Tax Credits - The domestic interested parties argue
that in recent investigations, the Department found that numerous
investment tax credits were providing specific benefits to the steel
industry, specifically for POSCO.(25) The domestic interested parties
allege that Dongbu and Union are also benefitting under this
program.(26)
(f) Preferential Utility Rates - The domestic interested parties
argue that in the recent investigations on Stainless Sheet and Strip
in Coils (64 FR at 60646) and Stainless Plate in Coils (64 FR 15533-
34), the Department again found that this program provided
countervailable subsidies for POSCO.
(g) Short-Term Export Financing program - The domestic interested
parties state that in the recent investigations on Stainless Sheet
and Strip in Coils (64 FR at 30644-46) and Stainless Plate in Coils
(64 FR at 15535), the Department again found that this program
provided countervailable subsidies.
(h) New Infrastructure Program - The domestic interested parties
argue that the infrastructure program was found to confer subsidies
in the original investigation in connection with the provision of
infrastructure at Kwangyang Bay, and they note that the Department is
currently investigating new infrastructure subsidies in another
investigation. See the Domestic Interested Parties Substantive
Response at 14.
2. In addition to their assertion that Korean steel producers
continue to benefit from numerous subsidy programs found
countervailable in the original investigation, the domestic
interested parties argue that in accordance with the Department's
Sunset Policy Bulletin 98:3 section III.C.1, the Department will
consider programs that have been found to provide countervailable
subsidies in other investigations or reviews, if the programs could
be used by respondents and those programs did not exist at the time
the order was issued. In their substantive response, the domestic
interested parties assert that the Department should consider the
subsidy programs found in other investigations, in making its
determination of whether subsidization is likely to continue or recur
if the countervailing duty orders on certain cold-rolled and
corrosion-resistant carbon steel flat products from Korea were
revoked. As stated above, the domestic interested parties contend
that in other investigations the Department found that the Korean
steel industry and Korean producers benefitted from numerous subsidy
programs.
With respect to subsidy programs determined to be countervailable in
other cases, the domestic interested parties argue that in other
investigations, the Department has determined that new subsidy
programs benefitted the Korean producers of the subject merchandise,
specifically the following programs, (a) POSCO's Two Tiered Pricing
Structure, (b) Research and Development Subsidies Pursuant to the
Technology Development Promotion Act, and (c) the Asset Revaluation
pursuant to Article 56(2) of the TERCL. With respect to POSCO's Two
Tiered Pricing Structure, the domestic interested parties point to
the 2.36 percent rate determined in the recent investigation on the
Stainless Sheet and Strip in Coils case.(27) The domestic interested
parties assert that because POSCO is the only domestic producer of
hot-rolled steel, Dongbu and Union have also benefitted from this
program because they purchase this product from POSCO.(28) With
regard to the Research and Development Subsidies Pursuant to the
Technology Development Promotion Act, the domestic interested parties
assert that the Department is currently investigating some of these
programs, and programs under the Technology Development Promotion Act
("TDPA") in the Cut-To-Length Plate Carbon Quality Steel Plate from
the Republic of Korea (64 FR 40445-52) investigation. The domestic
interested parties assert that the Korean steel industry benefits
from numerous research and development subsidy programs under the
TDPA.(29) The domestic interested parties state that POSCO admitted
that if they received benefits through its participation in KNISRRA
(another research and development program). With respect to the Asset
Revaluation pursuant to Article 56(2) of the TERCL, the domestic
interested parties note that this program was not investigated in the
original investigation, however, in the Cut-to-Length Carbon Quality
Steel Plate preliminary investigation (64 FR at 40452), the
Department calculated a subsidy benefit of 0.50 percent for
POSCO.(30) The domestic interested parties argue that this rate
should be included in the rate that will be reported to the
Commission. In addition, the domestic interested parties argue that
the GOK has awarded Dongbu with 90,652,000 won for Government Grants
as evidence by information found in the Dongbu 1996 Annual Report.
Therefore, according to the domestic interested parties, the
Department should consider this subsidy program in its determination
of whether subsidization is likely to continue or recur if the
countervailing duty orders were revoked. With respect to Loans from
the Energy Savings Fund, the domestic interested parties assert that
although the Energy Use Act was repealed in 1995, the new Energy Use
Rationalization Act continues to provide financing for this program
from special government accounts.(31) Furthermore, the domestic
interested parties state that in recent cases, this program was found
to provide a countervailable subsidy.(32)
3. New Subsidy Allegations - The domestic interested parties note
that apart from Korean steel producers benefitting from funds under
the old subsidy money, Korean producers may be benefitting under the
new subsidy programs. For example, (1) in the Overseas Resource
Development Act, the domestic interested parties contend that in
1997, financial assistance for overseas resource development projects
was increased by the GOK. They state that this program is designed to
assist Korean producers to finance domestic developers' investments
in production facilities and mining concessions overseas.(33) The
domestic interested parties assert that this program benefits Korean
companies and not the overseas affiliates. In 1998, the Department
investigated POSCO in the Cut-To-Length Plate Carbon Quality Steel
Plate from the Republic of Korea (64 FR 40445-52) investigation to
determine if POSCO had received countervailable subsidies under this
program.(34) In this investigation, the Department preliminarily
determined that POSCO had not used this program. Lastly, with respect
to the Export Insurance program, the domestic interested parties
argue that this program demonstrates the likelihood that
subsidization will continue or recur should the order be revoked
because of the additional funds being allocated, specifically to
KEIC. In the preliminary results of of Steel Plate, the Department
found that POSCO did not use this program and that Union and Dongbu
were not subject to an investigation in this program.
Department's Position
Drawing on the guidance provided in the legislative history
accompanying the Uruguay Round Agreement Act ("URAA"), specifically
the Statement of Administrative Action ("the SAA"), H.R. Doc. No. 103-
316, vol. 1 (1994), the House Report, H.R. Rep. No.103-826, pt.1
(1994), and the Senate Report, S. Rep. No. 103-412 (1994), the
Department issued its Sunset Policy Bulletin providing guidance on
methodological and analytical issues, including the basis
for likelihood determinations. The Department clarified that
determinations of likelihood will be made on an order-wide basis (see
section III.A.2 of the Sunset Policy Bulletin ). Additionally, the
Department normally will determine that revocation of a
countervailing duty order is likely to lead to continuation or
recurrence of a countervailable subsidy where (a) a subsidy program
continues, (b) a subsidy program has been only temporarily suspended,
or (c) a subsidy program has been only partially terminated (see
section III.A.3.a of the Sunset Policy Bulletin).
Exceptions to this policy are provided where a company has a long
record of not using a program (see section III.A.3.b of the Sunset
Policy Bulletin).
In addition to considering the guidance on likelihood cited above,
section 751(c)(4)(B) of the Act provides that the Department shall
determine that revocation of an order is likely to lead to
continuation or recurrence of a countervailable subsidy where a
respondent interested party waives its participation in the sunset
review. Pursuant to the SAA, at 881, in a sunset review of a
countervailing duty order, when the foreign government has waived
participation, the Department shall conclude that revocation of the
order would be likely to lead to a continuation or recurrence of a
countervailable subsidy for all respondent interested parties.(35) In
these reviews, the Department received a waiver of participation from
respondent interested parties, including the GOK.
The Department notes that after the issuance of the countervailing
duty orders on certain cold-rolled and corrosion-resistant carbon
steel flat products, the Government of Korea ("GOK"), continued to
provide subsidy programs to the Korean steel industry, and to the
producers of the subject merchandise. In the amended countervailing
duty determination, we determined that countervailing duty rates of
3.95 and 2.69 percent ad valorem for certain cold-rolled and
corrosion-resistant carbon steel flat product, respectively.
We agree with the domestic interested parties that in the original
investigations leading to both of these orders, countervailable
subsidies were found with respect to several subsidy programs.
Furthermore, with respect to both orders, given that no
administrative reviews were conducted, we cannot confirm that two of
the ten programs found to confer subsidies in the investigation were
terminated as suggested by the domestic interested parties.(36) With
respect to the domestic interested parties argument that
subsidization is likely to prevail should the orders be revoked,
section 752(b)(1) provides that the Department will first consider
the net countervailable subsidies in effect after the issuance of the
order, and whether the relevant subsidy programs have been continued,
modified, or eliminated.(37) As noted above, no administrative
reviews were conducted of these orders. Therefore, because there have
been no administrative reviews over the life of these orders, we
cannot determine whether there has been a change in the subsidy
programs, or whether any subsidy program has been modified, or
eliminated. Because countervailable subsides continue to exist, and
the foreign government and other respondent interested parties have
waived participation in these reviews, the Department concludes that
revocation of these orders would be likely to lead to a continuation
or recurrence of a countervailable subsidy for all respondent
interested parties.(38)
Net Countervailable Subsidy:
The domestic interested parties suggest that the Department should
report to the Commission a net countervailable subsidy of 5.20
percent ad valorem with respect to certain cold-rolled carbon steel
flat products, and 6.62 percent ad valorem with respect to certain
corrosion-resistant steel flat products. The domestic interested
parties calculate the 5.20 percent rate with respect to certain
corrosion-resistant carbon steel flat products as the sum of 2.34
percent originally calculated in the investigation (58 FR 37338),
plus 0.50 percent calculated for the asset revaluation program (not
countervailed in the investigation), and 2.36 percent, an estimated
rate for the two-tier pricing program found to be countervailable in
another case (64 FR 30636). The domestic interested parties suggested
6.62 percent rate for certain cold-rolled carbon steel flat products
is comprised of the rate from the original investigation, 3.95, plus
0.50 percent for the asset revaluation program, and 2.36 percent for
the two tier pricing program (64 FR 30636).
Department's Position
In the Sunset Policy Bulletin, the Department stated that, consistent
with the SAA and House Report, the Department normally will select a
rate from the investigation as the net countervailable subsidy likely
to prevail if the order is revoked, because that is the only
calculated
rate that reflects the behavior of exporters and foreign governments
without the discipline of an order in place. This rate may not be the
most appropriate rate if, for example, the rate was derived from
subsidy
programs which were found in subsequent reviews to be terminated,
there has been a program-wide change, or the rate ignores a program
found to be countervailable in a subsequent administrative review.
Under these circumstances, the Department may make adjustments to the
net countervailable subsidy determined in the investigation.(39)
In these cases, the Department disagrees with the domestic
interested parties' suggestion of 6.62 percent ad valorem as the rate
to report to the Commission with respect to the order on certain cold-
rolled carbon steel flat products, and 5.20 percent ad valorem with
respect to the order on certain corrosion-resistant carbon steel flat
products. In the amended final countervailing duty determinations, we
established a net subsidy rate of 3.95 percent for all imports of
certain cold-rolled carbon steel flat products, and 2.69 percent for
all imports of certain corrosion-resistant carbon steel flat product
(58 FR 43752). As noted above, the Department will only consider
other factors under section 752(b)(2) of the Act where it determines
good cause for such consideration has been shown. Additionally, the
Sunset Regulations specify that the Department normally will consider
other factors only where it conducts a full sunset review. Although
the domestic interested parties argue that Korean producers of the
subject merchandise benefit from existing and new alleged programs in
other investigations and reviews, the orders at issue have not been
reviewed since their issuance in 1993. Because we do not have
information that exports of the subject merchandise at issue in these
cases actually benefit from these programs, we have not considered
other programs for the purpose of these reviews. The Department's
Sunset Policy Bulletin states that, where the Department has not
conducted an administrative review of the order, the Department
normally will not make adjustments to the net countervailable subsidy
determined in the original investigation. Therefore, absent
administrative reviews, the Department determines that a net
countervailable subsidy of 3.95 percent with respect to certain cold-
rolled carbon steel flat products, and 2.69 percent with respect to
certain corrosion-resistant carbon steel flat products, would be
likely to prevail if the orders were revoked.
Nature of the Subsidy:
In the Sunset Policy Bulletin, the Department states that,
consistent with section 752(a)(6) of the Act, the Department will
provide to the Commission information concerning the nature of the
subsidy, and whether the subsidy is a subsidy described in Article 3
or Article 6.1 of the Subsidies Agreement. Because the benefits
provided by some of the programs (as identified below) were
contingent on exports, these programs fall within the definition of
an export subsidy under Article 3.1(a) of the Subsidies Agreement.
The remaining programs could be found to be inconsistent with Article
6.(40) The Department, however, has no information with which to
calculate whether the net countervailable subsidy exceeds 5 percent,
as measured in accordance with Annex IV of the Subsidies Agreement,
nor do we believe it appropriate to attempt such a calculation in the
course of a sunset review. Therefore, we are providing the Commission
the following program descriptions.
(1) Government Equity Infusions in POSCO - Government equity
infusions bestow a countervailable benefit when they occur on terms
inconsistent with commercial considerations.
See 19 U.S.C § 1677(5)(A)(1988).
(2) Loans Inconsistent With Commercial Considerations/Preferential
Access to Foreign Loans -
This benefit is conferred through a disproportionately high volume
of loans to the steel industry at rates that are substantially below
Korea's generally available commercial interest rates.(41)
(3) Government Infrastructure Assistance for POSCO's Integrated
Steel Mill at Kwangyang Bay
The Korean government's infrastructure development at Kwangyang Bay
constitute a specific and countervailable subsidy to POSCO because
POSCO was found to be the predominant user of the infrastructure.
(4) Dockyard Fees - We determined the free use of 15 berths by POSCO
in the Kwangyang Bay Industrial Estate constitutes a countervailable
benefit.
(5) Reserve for Export Loss- Under Article 22 of the Tax Exemption
and Reduction Control Act (TERCL), a corporation engaged in export
activities can establish a reserve amounting to the lesser of one
percent of foreign exchange earnings or 50 percent of net income for
the respective tax year. This program confers a benefit that
constitutes an export subsidy because it provides a deferment,
contingent upon export performance, of direct taxes. In the period of
investigation, the Department determined that Dongbu, POSCO, and
Union received benefits under this program.
(6) Reserve for Overseas Market Development - A domestic person
engaged in a foreign trade business can establish a reserve fund
equal to one percent of its foreign trade business exchange earnings
from its export business for the respective tax year. Expenses
incurred in developing overseas markets may be offset by returning
from the reserve, to the income account, an amount equivalent to the
expense. Any part of the fund that is not placed in the income
account for the purpose of offsetting overseas market development
expenses must be returned to the income account over a three-year
period, after a one year grace period. This program constitutes an
export subsidy because the use of the program is contingent upon
export performance.
(7) Unlimited Deduction of Overseas Entertainment Expense - Under
Article 18-2 of the Corporation Tax Act and supporting legislation,
entertainment expenses for domestic clients and foreign clients are
eligible to be deducted from taxable income. The amount that can be
deducted for domestic entertainment expenses is subject to a ceiling
according to an established formula and depending on the amount of
any overseas entertainment expenses claimed. There is no cap on
overseas entertainment expenses. Because entertainment expense
deductions are unlimited only for overseas clients, this program
confers benefits which constitute export subsidies, to the extent
that the overseas expenses claimed are greater than those which would
have been allowed using the domestic cap formula.
(8) Reserve for Investment - Industries that engage in manufacturing
and mining using production facilities outside of metropolitan Seoul
are allowed to establish a reserve amounting to ten percent of the
value of their assets used in these activities. The reserve operates
in the same manner as the reserves for export loss and overseas
market development, i.e., any amounts in the reserve must be returned
to income over a three-year period. Because this program provides
benefits only to those industries that use certain production
facilities outside of metropolitan Seoul, this program is a regional
subsidy.
(9) Duty Drawback - The Government of Korea establishes an
authorized loss rate for raw materials used in the manufacture of
exported goods. Duty drawback includes the amount of duty remitted on
the loss or wastage for the raw materials. The Government of Korea
reduces the amount of duty drawback received on the exported product
to account for the sale produced from the excess raw materials used
in the production of the exported goods. Duty drawback for loss or
wastage only becomes countervailable when the allowance for this loss
or wastage is unreasonable or excessive. Here, we found the duty
drawback was not excessive and, therefore, was not countervailable
with regard to POSCO. However, Union Steel was found to benefit from
this program.
(10) Preferential Utility Rates - In the investigation, the
Department determined that countervailable benefits were provided to
the steel industry only with respect to certain discounts applied to
electricity charges for certain firms.
(11) Short-term Export Financing - The Department determined that
during the period of investigation, Pohang Coated Steel Company
("POCOS"), was the only respondent to receive short-term loans
contingent on exports. We found this program to be countervailable
because the interest rates charged on the loans were less than what a
firm would have had to pay on a comparable short-term commercial loan.
Final Results of Review:
As a result of these reviews, the Department finds that revocation
of the countervailing duty orders would likely lead to continuation
or recurrence of a countervailable subsidy at the following weighted-
average margins:
-------------------------------------------------------------------
Producer/Exporter Net Countervailable
Subsidy (%)
-------------------------------------------------------------------
Certain Cold-Rolled Carbon Steel Flat Products
Country-Wide Rate 3.95
Certain Corrosion-Resistant Carbon Steel Flat Products
Country-Wide Rate 2.69
-------------------------------------------------------------------
Recommendation
Based on our analysis of the comments received, we recommend
adopting all of the above positions. If these recommendations
are accepted, we will publish the Final Results of Review in
the Federal Register.
AGREE ___________ DISAGREE ___________
1. On August 17, 1993, the Department issued amended final
affirmative countervailing duty determinations on these products. See
Final Affirmative Countervailing Duty Determinations and final
Negative Critical Circumstances Determinations: Certain Steel
Products From Korea, 58 FR 37338 (July 9, 1993)(Final Determination).
2. For the amended final results on both of these orders, see
Countervailing Duty Orders and Amendments to Final Affirmative
Countervailing Duty Determinations: Certain Steel Products From
Korea, 58 FR 43752 (August 17, 1993).
3. See Final Determination, 58 FR 37338 (July 9, 1993).
4. See Countervailing Duty Orders and Amendments to Final
Affirmative Countervailing Duty Determinations: Certain Steel
Products From Korea, 58 FR 43752 (August 17, 1993).
5. The Department received a request by foreign respondents for an
administrative review covering January 1, 1997 through December 31,
1997. On September 29, 1998, the Department published a notice of
initiation for an administrative review on both of these orders. See
Initiation of Antidumping and Countervailing Duty Administrative
Reviews and Requests for Revocation in Part, 63 FR 51893 (September
29, 1998). Because no other interested parties requested a review
covering this time period, and foreign respondents withdrew their
request for these reviews, the Department terminated the reviews. See
Cold-Rolled Carbon Steel Flat Rolled Products and Corrosion-Resistant
Carbon Steel Flat Resistant Carbon Steel Flat Products from the
Republic of Korea; Termination of Countervailing Duty Administrative
Reviews, 63 FR 69045 (December 15, 1998). On September 24, 1999, the
Department, in response to a request from petitioners and
respondents, initiated an administrative review of these orders
covering January 1, 1998 through December 31, 1998. Because the
petitioners and respondents withdrew their requests for reviews, the
Department terminated these reviews. See Cold
Rolled and Corrosion-Resistant Carbon Steel Plate From the Republic
of Korea: Rescission of Countervailing Duty
Administrative Review, 65 FR 6162 (February 8, 2000).
6. See Initiation of Five-Year ("Sunset") Reviews of Antidumping and
Countervailing Duty Orders or Investigations of Carbon Steel Plates
and Flat Products, 64 FR 47767 (September 1, 1999).
7. See The Domestic Interested Parties' Substantive Response at 3
and 4, October 1, 1999.
8. See Extension of Time Limit for Final Results of Five-Year
Reviews, 64 FR 71726 (December 22, 1999).
9. See The Domestic Interested Parties' Substantive Response at 5.
10. Id.
11. On November 20, 1998, in a letter from Dewey Ballantine LLP to
the Department, Case No. C-580-818, the domestic interested parties
submitted new subsidy allegations. The domestic interested parties
argue that because respondents withdrew their request for the
administrative review (covering January 1, 1997 through December 31,
1997) a few days after the letter was submitted, these allegations
were not investigated.
12. See The Domestic Interested Parties' Substantive Response at 5
13. The domestic interested parties cite to the recent investigation
on Stainless Sheet and Strip in Coils from Korea (64 FR 30636) as
evidence that the GOK continues to provide subsidies to Korean
producers of the subject merchandise and to the Korean steel
industry. See Final Affirmative Countervailing Duty Determination:
Stainless Sheet and Strip in Coils From the Republic of Korea, 64 FR
30636 (June 8, 1999)(Stainless Sheet and Strip in Coils).
14. See October 1, 1999, Domestic Interested Parties', Substantive
Response at 6-15
15. See October 1, 1999, Domestic Interested Parties', Substantive
Response at 6 -15.
16. Id. at 25-30.
17. Id. at 30-32.
18. On October 1, 1999, the Court of Appeals for the Federal Circuit
("CAFC") issued an opinion affirming-in-part and reversing-in-part
the Department's determination in this investigation. AK Steel Corp.
v. United States 192 F.3d 1367 (Federal Circuit). In its decision,
the court reviewed the Department's determination with respect to the
following programs: foreign and domestic loans and government
infrastructure assistance for POSCO's integrated steel mill at
Kwangyang Bay, including POSCO's exemption from the payment of
dockyard fees. The case has been remanded to the Court of
International Trade. Thus, the CAFC's decision is not yet final and
conclusive.
19. See Domestic Interested Parties' Substantive Response at 9.
20. Id. at 9 and 10.
21. Id. at 10.
22. See Termination of Countervailing Duty Administrative Review, 63
FR 69045 (December 15, 1998).
23. See Preliminary Affirmative Countervailing Duty Determinations
and Alignment of Final Countervailing Duty Determinations with Final
Antidumping Duty Determinations: Certain Steel Products from Korea,
57 FR 57761 (December 7, 1992).
24. See Domestic Interested Parties' Substantive Response at 11.
25. '
26. Id. at 12.
27. Id. at 16.
28. Id.
29. Id. at 17-20.
30. Id. at 27.
31. Id at 30.
32. Id. at 30.
33. Id at 31.
34. Id at 33.
35. See 19 CFR 351.218(d)(2)(iv).
36. See Final Results of Expedited Sunset Review: Top-of-the-Stove
Stainless Steel Cookware From South Korea, 64 FR 48374 (September 3,
1999). In this review, the Department notes that five of the six
programs found to provide subsidies in the original investigation,
however, given that no administrative reviews were conducted over the
history of this order, the Department applies the rates from the
original investigation.
37. See Final Results of Expedited Sunset Review: Top-of-the-Stove
Stainless Steel Cookware From South Korea, 64 FR 48374 (September 3,
1999).
38. See 19 CFR 351.218(d)(2)(iv).
39. See Policies Regarding the Conduct of Five-year ("Sunset")
Reviews of Antidumping and Countervailing Duty Orders; Policy
Bulletin, 63 FR 18871 (April 16, 1998), sections III.B.1 and III.B.2.
40. Serious prejudice in the sense of paragraph (c) of Article 5
shall be deemed to exist in the case of where ad valorem
subsidization of a product exceeds 5 percent.
41. See supra note 17.