68 FR 16766, April 7, 2003
DEPARTMENT OF COMMERCE
International Trade Administration
[C-580-851]
Preliminary Affirmative Countervailing Duty Determination:
Dynamic Random Access Memory Semiconductors From the Republic of Korea
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
ACTION: Notice of preliminary affirmative countervailing duty
determination.
SUMMARY: The Department of Commerce preliminarily determines that
countervailable subsidies are being provided to producers or exporters
of dynamic random access memory semiconductors from the Republic of
Korea. For information on the estimated countervailing duty rates, see
infra section on ``Suspension of Liquidation.''
EFFECTIVE DATE: April 7, 2003.
FOR FURTHER INFORMATION CONTACT: Melani Miller, Ryan Langan, Jesse
Cortes, or Daniel J. Alexy, Office of Antidumping/Countervailing Duty
Enforcement, Group 1, Import Administration, U.S. Department of
Commerce, Room 3099, 14th Street and Constitution Avenue, NW.,
Washington, DC 20230; telephone (202) 482-0116, (202) 482-2613, (202)
482-3986, and (202) 482-1540, respectively.
[[Page 16767]]
Petitioner
The petitioner in this investigation is Micron Technology, Inc.
(``the petitioner'').
Period of Investigation
The period for which we are measuring subsidies, or period of
investigation (``POI''), is January 1, 2001 through June 30, 2002.
Case History
The following events have occurred since the publication of the
Department of Commerce's (``the Department'') notice of initiation in
the Federal Register. See Notice of Initiation of Countervailing Duty
Investigation: Dynamic Random Access Memory Semiconductors from the
Republic of Korea, 67 FR 70927 (November 27, 2002) (``Initiation
Notice'').
On December 6, 2002, we issued countervailing duty questionnaires
to the Government of the Republic of Korea (``GOK'') and the two major
producers/exporters of dynamic random access memory semiconductors
(``DRAMS'' or ``subject merchandise'') in the Republic of Korea
(``ROK''), Samsung Electronics Co., Ltd. (``SEC'') and Hynix
Semiconductor Inc. (``Hynix'') (formerly, Hyundai Electronics
Industries Co., Ltd. (``HEI'')).
On January 13, 2003, we published a postponement of the preliminary
determination in this investigation until March 31, 2003. See Dynamic
Random Access Memory Semiconductors from the Republic of Korea:
Extension of Time Limit for Preliminary Determination of Countervailing
Duty Investigation, 68 FR 1597 (January 13, 2003).
We received the companies' responses to the Department's
questionnaire on January 27, 2003, and the GOK's response on February
3, 2003. On February 5 and 11, 2003, the petitioner submitted comments
regarding these questionnaire responses. We issued supplemental
questionnaires to the companies and the GOK on February 11 and 19,
2003, and received responses to those supplemental questionnaires on
February 25 and March 4, 10, and 14, 2003. We issued a second
supplemental questionnaire to SEC on March 25, 2003, and received a
response to this questionnaire on March 28, 2003.
On February 20, 2003, the petitioner submitted several new subsidy
allegations. The petitioner made further submissions regarding these
new allegations on February 24 and 28, 2003. Hynix, SEC, and the GOK
filed comments on these new subsidy allegations on February 25, 26, and
28, respectively. SEC filed additional comments on March 4, 2003. We
addressed these new subsidy allegations in a March 7, 2003, memorandum
to Susan Kuhbach, New Subsidy Allegations (``New Subsidy Allegations
Memo''), which is on file in the Department's Central Records Unit in
Room B-099 of the main Department building (``CRU''). Because we
initiated an investigation of two of these newly-alleged programs (as
discussed in the New Subsidy Allegations Memo), we issued a
questionnaire to the each of the respondents with respect to these new
programs on March 7, 2003. We received a response to these
questionnaires on March 28, 2003.
Finally, both the petitioner and the respondents, as well as other
interested parties, submitted comments on the preliminary determination
on March 10, 14, 18, 21, 24, 27, and 28, 2003.
Scope of Investigation
The products covered by this investigation are DRAMS from the ROK,
whether assembled or unassembled. Assembled DRAMS include all package
types. Unassembled DRAMS include processed wafers, uncut die, and cut
die. Processed wafers fabricated in the ROK, but assembled into
finished semiconductors outside the ROK are also included in the scope.
Processed wafers fabricated outside the ROK and assembled into finished
semiconductors in the ROK are not included in the scope.
The scope of this investigation additionally includes memory
modules containing DRAMS from the ROK. A memory module is a collection
of DRAMS, the sole function of which is memory. Memory modules include
single in-line processing modules, single in-line memory modules, dual
in-line memory modules, small outline dual in-line memory modules,
Rambus in-line memory modules, and memory cards or other collections of
DRAMS, whether unmounted or mounted on a circuit board. Modules that
contain other parts that are needed to support the function of memory
are covered. Only those modules that contain additional items which
alter the function of the module to something other than memory, such
as video graphics adapter boards and cards, are not included in the
scope. This investigation also covers future DRAMS module types.
The scope of this investigation additionally includes, but is not
limited to, video random access memory and synchronous graphics RAM, as
well as various types of DRAMS, including fast page-mode, extended
data-out, burst extended data-out, synchronous dynamic RAM, Rambus
DRAM, and Double Data Rate DRAM. The scope also includes any future
density, packaging, or assembling of DRAMS. Also included in the scope
of this investigation are removable memory modules placed on
motherboards, with or without a central processing unit, unless the
importer of the motherboards certifies with the Customs Service that
neither it, nor a party related to it or under contract to it, will
remove the modules from the motherboards after importation. The scope
of this investigation does not include DRAMS or memory modules that are
re-imported for repair or replacement.
The DRAMS subject to this investigation are currently classifiable
under subheadings 8542.21.8005 and 8542.21.8021 through 8542.21.8029 of
the Harmonized Tariff Schedule of the United States (``HTSUS''). The
memory modules containing DRAMS from the ROK, described above, are
currently classifiable under subheadings 8473.30.10.40 or 8473.30.10.80
of the HTSUS. Although the HTSUS subheadings are provided for
convenience and customs purposes, the Department's written description
of the scope of this investigation remains dispositive.
Injury Test
Because the ROK is a ``Subsidies Agreement Country'' within the
meaning of section 701(b) of the Tariff Act of 1930, as amended by the
Uruguay Round Agreements Act effective January 1, 1995 (``the Act''),
the International Trade Commission (``ITC'') is required to determine
whether imports of the subject merchandise from the ROK materially
injure, or threaten material injury to, a U.S. industry. On December
13, 2002, the ITC made its preliminary determination that there is a
reasonable indication that an industry in the United States is being
materially injured by reason of imports from the ROK of the subject
merchandise. See Drams and Dram Modules from Korea, 67 FR 79148
(December 27, 2002).
Subsidies Valuation Information
Allocation Period
Pursuant to 19 CFR 351.524(b), non-recurring subsidies are
allocated over a period corresponding to the average useful life
(``AUL'') of the renewable physical assets used to produce the subject
merchandise. Section 351.524(d)(2) of the Department's regulations
creates a rebuttable presumption that the AUL will be taken from the
U.S. Internal Revenue Service's
[[Page 16768]]
1977 Class Life Asset Depreciation Range System (the ``IRS Tables'').
For DRAMS, the IRS Tables prescribe an AUL of 5 years. None of the
responding companies or interested parties disputed this allocation
period. Therefore, we have used the 5-year allocation period for all
respondents. See, also, February 24, 2003 memorandum to the file
entitled ``Average Useful Life,'' which is on file in the Department's
CRU.
Discount Rates and Benchmarks for Loans
Pursuant to 19 CFR 351.524(d)(3)(i), the Department will use, when
available, the company-specific cost of long-term, fixed-rate loans
(excluding loans deemed to be countervailable subsidies) as a discount
rate for allocating non-recurring benefits over time. Similarly,
pursuant to 19 CFR 351.505(a), the Department will use the actual cost
of comparable borrowing by a company as a loan benchmark, when
available. Section 351.505(a)(2) of the Department's regulations
defines a comparable commercial loan as one that, when compared to the
loan being examined, has similarities in the structure of the loan
(e.g., fixed interest rate v. variable interest rate), the maturity of
the loan (e.g., short-term v. long-term), and the currency in which the
loan is denominated. In instances where no applicable company-specific
comparable commercial loans are available, 19 CFR 351.505(a)(3)(ii)
allows the Department to use a national average interest rate for
comparable commercial loans.
Hynix and SEC reported that they had the following types of loans
outstanding from the GOK or GOK-owned banks, ROK financial
institutions, overseas creditors, or foreign banks with branches in the
ROK during the POI: (1) Long-term fixed- and variable-rate foreign
currency loans; (2) Long-term fixed- and variable-rate won-denominated
loans; (3) short-term fixed-rate won-denominated loans; and (4) short-
term fixed-rate foreign currency loans. Some of these loans were
received prior to 1992. Hynix also received non-recurring benefits
during the POI, as discussed in the ``Analysis of Programs'' section,
below.
We are using the following benchmarks and discount rates for this
preliminary determination:
Discount Rates and Benchmarks for Long-Term Loans
The Department has previously determined that the GOK directed the
lending practices of financial institutions in the ROK through 1991.
See, e.g., Final Affirmative Countervailing Duty Determinations and
Final Negative Critical Circumstances Determinations: Certain Steel
Products from Korea, 58 FR 37338, 37339 (July 9, 1993) (``Certain
Steel''); Final Affirmative Countervailing Duty Determination:
Structural Steel Beams from the Republic of Korea, 65 FR 41051 (July 3,
2000) (``Structural Beams''); and 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
Steel''). Given the GOK's direction of banks, we determined that the
best indicator of the commercial, long-term borrowing rate in the ROK
through 1991 was the three-year corporate bond rate on the secondary
market. No party in this proceeding has submitted new evidence that
would lead us to reconsider this benchmark. Therefore, for the
preliminary determination, we are using the three-year corporate bond
rate on the secondary market as our benchmark to calculate the benefits
which the respondent companies received from domestic won-denominated
loans obtained prior to 1992 that were still outstanding during the
POI.
In subsequent determinations, the Department found that the GOK
controlled directly or indirectly the lending practices of most sources
of credit in the ROK between 1992 and 2000. See, e.g., Final Negative
Countervailing Duty Determination: Stainless Steel Plate in Coils from
the Republic of Korea, 64 FR 15530 (March 31, 1999) (``Plate in
Coils''); Final Affirmative Countervailing Duty Determination: Certain
Cut-to-Length Carbon-Quality Steel Plate from the Republic of Korea, 64
FR 73276 (December 29, 1999) (``CTL Plate''); and Structural Beams. In
Plate in Coils, the Department further determined that the GOK does not
exercise direct or indirect control over ROK branches of foreign
commercial banks. Also, in Cold-Rolled Steel, we found that, subsequent
to April 1999, companies no longer needed approval from the GOK to
access direct foreign loans or issue foreign securities. Thus, we found
that these types of loans were not countervailable and, thus, also
normally represented an appropriate benchmark.
As explained below in the ``Direction of Credit and Other Financial
Assistance'' discussion in the ``Analysis of Programs'' section, based
upon these earlier findings and updated information, we have
preliminarily determined in this investigation that: (1) The GOK still
exercised substantial control over most lending institutions in the ROK
from 1992 through 1998, and (2) that the GOK directed credit to Hynix
during the period January 1999 through June 30, 2002. Moreover,
consistent with our determinations in Plate in Coils and Cold-Rolled
Steel, we continue to find that the government did not exercise direct
or indirect control over ROK branches of foreign commercial banks,
direct foreign loans obtained after April 1999, and foreign securities
issued after April 1999. Thus, we have generally continued to utilize
such loans as benchmarks for SEC and Hynix, when available.
Based on the above, we are using the following benchmarks for the
preliminary determination to calculate the benefits conferred by GOK-
directed long-term loans obtained since 1992 which are still
outstanding during the POI:
For countervailable foreign-currency denominated long-term
loans for creditworthy companies, we used, where available, the
company-specific, weighted-average interest rates on the companies'
comparable commercial foreign currency loans from foreign bank branches
in the ROK. If this type of benchmark was unavailable, then, consistent
with past cases (see, e.g., Cold-Rolled Steel), we relied on lending
rates as reported by the International Monetary Fund's (``IMF'')
International Financial Statistics Yearbook.
For countervailable won-denominated long-term loans for
creditworthy companies, we used the company-specific corporate bond
rate on the companies' won-denominated public and private bonds, where
available. Use of this benchmark is consistent with Plate in Coils, 64
FR at 15531, in which we determined that the GOK did not control the
ROK domestic bond market after 1991. 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''). We note that the use of the three-year corporate bond rate
from the BOK follows the approach taken in Plate in Coils, 64 FR at
15532, in which we determined that, absent company-specific interest
rate information, the won-denominated corporate bond rate is the best
indicator of the commercial long-term borrowing rate for won-
denominated loans in the ROK.
Finally, because we have preliminarily determined that
Hynix was uncreditworthy from January 1, 2000 through June 30, 2002 in
accordance with 19 CFR 351.524(d)(3)(ii) (see, infra section on
``Creditworthiness''), we have calculated
[[Page 16769]]
for Hynix only long-term uncreditworthy benchmarks and discount rates
for 2000 through June 30, 2002. According to 19 CFR 351.505(a)(3)(iii),
in order to calculate these rates, the Department must specify values
for four variables: (1) The probability of default by an uncreditworthy
company; (2) the probability of default by a creditworthy company; (3)
the long-term interest rate for creditworthy borrowers; and (4) the
term of the debt. For the probability of default by an uncreditworthy
company, we have used the average cumulative default rates reported for
the Caa-to C-rated category of companies as published in Moody's
Investors Service, ``Historical Default Rates of Corporate Bond
Issuers, 1920-1997'' (February 1998). For the probability of default by
a creditworthy company, we used the cumulative default rates for
investment grade bonds as published in Moody's Investor Service,
``Statistical Tables of Default Rates and Recovery Rates'' (February
1998). For the long-term interest rate that would be paid by a
creditworthy company, we are using (1) the national average of the
three-year ROK won corporate bond rate as published by the BOK for won-
denominated foreign currency loans and for the discount rate, and (2)
the IMF's International Financial Statistics Yearbook for foreign-
currency denominated long-term loans. For the term of the debt, we used
5 years because all of the non-recurring subsidies examined were
allocated over a 5-year period, as discussed in the ``Allocation
Period'' section, above.
Benchmarks for Short-Term Loans
As discussed below in the ``Direction of Credit and Other Financial
Assistance'' section, we have found that the GOK directed credit for
all loans to Hynix during the POI. Thus, we cannot rely on Hynix''
company-specific commercial won-or foreign currency-denominated loans
outstanding during the POI as our benchmark. Instead, for those
programs requiring the application of a short-term, fixed, won-or
foreign currency-denominated interest rate benchmark, we used the money
market rates as reported in the IMF's International Financial
Statistics in accordance with 19 CFR 351.505(a)(3)(ii).
Equityworthiness
Section 771(5)(E)(i) of the Act and 19 CFR 351.507 state that, in
the case of a government-provided equity infusion, a benefit is
conferred if an equity investment decision is inconsistent with the
usual investment practice of private investors. According to 19 CFR
351.507, the first step in determining whether an equity investment
decision is inconsistent with the usual investment practice of private
investors is examining whether, at the time of the infusion, there was
a market price for similar, newly-issued equity. If so, the Department
will consider an equity infusion to be inconsistent with the usual
investment practice of private investors if the price paid by the
government for newly-issued shares is greater than the price paid by
private investors for the same, or similar, newly-issued shares.
If actual private investor prices are not available, then, pursuant
to 19 CFR 351.507(a)(3)(i), the Department will determine whether the
firm funded by the government-provided infusion was equityworthy or
unequityworthy at the time of the equity infusion. In making the
equityworthiness determination, pursuant to 19 CFR 351.507(a)(4), the
Department will normally determine that a firm is equityworthy if, from
the perspective of a reasonable private investor examining the firm at
the time the government-provided equity infusion was made, the firm
showed an ability to generate a reasonable rate of return within a
reasonable time. To do so, the Department normally examines the
following factors: (1) Objective analyses of the future financial
prospects of the recipient firm; (2) current and past indicators of the
firm's financial health; (3) rates of return on equity in the three
years prior to the government equity infusion; and (4) equity
investment in the firm by private investors.
Section 351.507(a)(4)(ii) of the Department's regulations further
stipulates that the Department will ``normally require from the
respondents the information and analysis completed prior to the
infusion, upon which the government based its decision to provide the
equity infusion.'' Absent an analysis containing information typically
examined by potential private investors considering an equity
investment, the Department will normally determine that the equity
infusion provides a countervailable benefit. This is because, before
making a significant equity infusion, it is the usual investment
practice of private investors to evaluate the potential risk versus the
expected return, using the most objective criteria and information
available to the investor.
The equityworthiness analysis relating to Hynix' debt-to-equity
conversions as part of the Hynix October 2001 Restructuring program is
located in the ``Analysis of Programs'' section, below.
Creditworthiness
The examination of creditworthiness is an attempt to determine if
the company in question could obtain long-term financing from
conventional commercial sources. See 19 CFR 351.505(a)(4). According to
19 CFR 351.505(a)(4)(i), the Department will generally consider a firm
to be uncreditworthy if, based on information available at the time of
the government-provided loan, the firm could not have obtained long-
term loans from conventional commercial sources. In making this
determination, according to 19 CFR 351.505(a)(4)(i), the Department
normally examines the following four types of information: (1) The
receipt by the firm of comparable commercial long-term loans; (2)
present and past indicators of the firm's financial health; (3) present
and past indicators of the firm's ability to meet its costs and fixed
financial obligations with its cash flow; and (4) evidence of the
firm's future financial position.
With respect to item number one, above, pursuant to 19 CFR
351.505(a)(4)(ii), in the case of firms not owned by the government,
the receipt by the firm of comparable long-term commercial loans,
unaccompanied by a government-provided guarantee (either explicit or
implicit), will normally constitute dispositive evidence that the firm
is not uncreditworthy. However, according to the Preamble to the
Department's regulations, in situations, for instance, where a company
has taken out a single commercial bank loan for a relatively small
amount, where a loan has unusual aspects, or where we consider a
commercial loan to be covered by an implicit government guarantee, we
may not view the commercial loan(s) in question to be dispositive of a
firm's creditworthiness. (See Countervailing Duties; Final Rule, 63 FR
65348, 65367 (November 28, 1998) (``Preamble'').)
In the Initiation Notice, we indicated that we would investigate
Hynix'' creditworthiness in 2000 through 2002. As discussed in the
March 31, 2003 memorandum entitled ``Creditworthiness''
(``Creditworthiness Memo'') (which is on file in the Department's CRU),
we have found Hynix to be uncreditworthy in 2000 through June 2002.
Therefore, we have used an uncreditworthy benchmark rate in calculating
the benefit from loans received during this time period, and have also
used an uncreditworthy discount rate in calculating any non-
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recurring benefits received by Hynix that were allocable to the POI.
Analysis of Programs
Based upon our analysis of the petition and the responses to our
questionnaires, we determine the following:
I. Programs Preliminarily Determined to Be Countervailable
A. Direction of Credit and Other Financial Assistance
The GOK's Credit Policies Through 1998
As discussed above in the ``Discount Rates and Benchmarks for
Loans'' section, the Department has examined the issue of whether the
GOK controlled the lending practices of banks in the ROK in past cases.
For the period through 1991, we determined that the GOK's direction of
credit policies resulted in countervailable subsidies to the ROK steel
industry. See, e.g., Certain Steel, CTL Plate, and Structural Beams. In
subsequent determinations, the Department found that the GOK continued
to control, directly and indirectly, the long-term lending practices of
most sources of credit in the ROK through 1998. See Plate in Coils and
CTL Plate for our findings regarding 1997 and 1998, respectively.
Although we determined that the GOK directed the provision of loans
by ROK banks in Plate in Coils and the Final Affirmative Countervailing
Duty Determination: Stainless Steel Sheet and Strip in Coils from the
Republic of Korea, 64 FR 30636, 30639 (June 8, 1999) (``Sheet and
Strip''), we concluded that loans from Korean branches of foreign banks
(i.e., branches of U.S. and foreign-owned banks operating in Korea) did
not confer countervailable subsidies. This determination was based upon
our finding that credit from ROK branches of foreign banks was not
subject to the government's control and direction. Additionally,
because these loans were not directed or controlled by the GOK, we used
them as benchmarks to establish whether loans from domestic banks
conferred a benefit upon respondents.
We provided the respondents in the current proceeding an
opportunity to present new factual information concerning the GOK's
direction of long-term lending during this previously-examined period.
No party contested or provided new information challenging the
Department's findings prior to 1998. Moreover, although certain
respondents indicated that they were challenging the Department's
finding for 1998, the respondents have not provided any new information
that has not already been closely examined in past proceedings (e.g.,
CTL Plate and Structural Beams). Therefore, we preliminarily determine
that the GOK controlled, directly and indirectly, the long-term lending
practices of most sources of lending in the ROK through 1998, with the
exception of loans from Korean branches of foreign banks, as noted
above, and, consequently, that the GOK entrusted and directed these
banks to make loans as directed by the GOK.
Specificity
In the above-cited proceedings, we determined that government-
directed loans provided a countervailable subsidy to the ROK steel
industry. For the reasons explained below, we have preliminarily
determined in this proceeding that the GOK also directed loans to the
semiconductor industry through 1998.
In Structural Beams and CTL Plate, the Department found that the
GOK directed credit to ``strategic'' industries, such as steel,
automobiles, and consumer electronics, throughout the 1970s, 1980s, and
1990s. In 1976, it was clear that the semiconductor industry was one of
the GOK's ``strategic'' industries and was designated to receive
special treatment from the GOK, including loans. For example, in its
Fourth Five-Year Plan, the GOK stated that ``the electronics industry
will be promoted as a major export industry through the development of
new technology products and the expansion of overseas sales activities
* * * Semiconductors, computers and related items have been selected as
strategic products.''
This plan gave rise to the publicly financed Korea Institute of
Electronics Technology (``KIET''). The KIET's primary function was to
plan and coordinate semiconductor research and development; import,
assimilate, and disseminate foreign technologies; provide technical
assistance to Korean firms; and conduct market research. According to
an October 1991 study, KIET essentially jump-started the semiconductor
industry in the ROK and paved the way for SEC, HEI, and Goldstar
Electron to enter the market as major DRAMS producers. In addition, the
Heavy and Chemical Industry plans of 1974 and 1976 identified six
strategic industries (chemicals, electronics, machinery, non-ferrous
metals, and steel) which the GOK would support financially to ``raise
the selected industries'' competitiveness and, consequently, to
increase their exports.''
For the next two decades, the semiconductor industry was repeatedly
identified in national economic and development plans, as well as in
industry promotion plans, as a ``strategic'' industry that would
receive ``a wide range of fiscal and financial investment incentives.''
Other examples of such policies include the Fifth Five-Year Economic
and Social Development Plan (1981) and the Sixth Five-Year Economic and
Social Development Plan (1986).
In Structural Beams, we found that, after the removal of the de
jure preferences for ``strategic'' industries in 1985, the GOK
continued to channel billions of dollars in lending into sectors
favored by the government's industrial policies. We also found that,
throughout the 1990s, ``bankers in Korea {believed{time} that the
{Korea Development Bank (``KDB''){time} is still known for preferring
the semiconductor, shipbuilding, and steel industries.'' (See
Structural Beams June 7, 2000 memorandum to the file, ``Direction of
Credit in Korea: Structural Steel Beams from the Republic of Korea,''
the public version of which is included as an appendix to the March 31,
2003 memorandum entitled ``Direction of Credit Citations'' (``Direction
Citations Memo''), which is on file in the Department's CRU.)
In this investigation, there is substantial evidence illustrating
the GOK's continued favoritism toward the semiconductor industry well
after 1985. The GOK's Seven Year High Technology Development Plan
(1990) (``Seven Year Plan'') called for U.S. Dollar (``USD'') 1.83
billion for the development of semiconductors, tax incentives to
encourage private-sector investment, and the building of an industrial
estate for the assembly of semiconductors, computers, and optical
equipment. The Seven Year Plan also identified 16 and 64 megabit DRAMS
for development through government-industry cooperation. Under the
Seven Year Plan, the Highly Advanced National program (``HAN'') was
established to support the production of 256 megabit DRAMS by 1996 and
one gigabit DRAMS by 2000 with USD 4.9 billion in government
expenditures through 2001.
In 1994, the Ministry of Trade, Industry, and Energy (``MOTIE'')
announced its selection of five strategic investment sectors
(semiconductors, liquid crystal displays (``LCD''), aircraft,
satellites, and machine tools) to receive government support. ``As for
the semiconductor industry, 46.9 billion won will be spent on {research
and development (``R&D''){time} for a 256-{megabit{time} DRAM this
year and 20
[[Page 16771]]
billion won for LCD research. Of these amounts, 19.2 billion won and 10
billion won, respectively, will be extended from the government budget.
By 1997, a total of 195.4 billion won * * * are to be invested in
{semiconductors{time} .'' In a July 1997 interview, the Director
General of the Electronics, Textile, and Chemical Industry Bureau of
MOTIE stated, ``{t{time} he government's long-term strategy calls for
{the ROK{time} becoming the world's largest producer of semiconductor
chips in the year 2010.''
Moreover, in Structural Beams, we found that the KDB provided a
significant amount of the lending to ``strategic'' industries, such as
steel, throughout the 1990s. Therefore, as in Structural Beams, in the
instant investigation we reviewed a list of the largest recipients of
KDB financing within the manufacturing sector in 1992 through 1997 as
part of our specificity analysis. For this investigation, we requested
similar information regarding the distribution of loans to industry
sectors by specific institutions, including the KDB, and the Korean
financial sector as a whole. The GOK provided information for 1997 and
1998 for broad industry sectors such as ``Pulp, Paper, and Paper
Products,'' and ``Radio, Television, and Communication Equipment,''
which includes semiconductors. The GOK stated that it was unable to
provide loan information on a more specific basis. Because this
information does not cover the period we are examining in full, and
because it is overly broad to use in our normal specificity analyses
under 771(5A) of the Act, we intend to seek more detailed information
during verification with respect to lending distribution in the ROK.
Notwithstanding the limited KDB lending data, we find that there is
sufficient information on the record demonstrating the GOK's
designation of the semiconductor industry as a ``strategic'' industry.
Specifically, the GOK's national economic and development plans, as
well as industry promotion plans, from the late 1970s through 1998,
identified the semiconductor industry as a ``strategic'' industry.
Therefore, based on the above information, we preliminarily
determine that the GOK directed credit specifically to the
semiconductor industry through 1998 within the meaning of section
771(5A) of the Act.
The GOK's Involvement in the ROK Lending Sector from 1999
Through June 30, 2002
The Department has also addressed GOK direction of credit in the
years subsequent to 1998. In the Final Results and Partial Rescission
of Countervailing Duty Administrative Review: Stainless Steel Sheet and
Strip in Coils From the Republic of Korea, 67 FR 1964 (January 15,
2002) and Cold-Rolled Steel, we provided the respondents with an
opportunity to present new factual information concerning the
government's credit policies in 1999 and 2000, respectively. No party
provided any new information on the GOK lending policies for domestic
banks in either case. Therefore, we determined in those cases that
long-term lending from domestic commercial banks and from specialized
banks, such as the KDB, was directed by the GOK in 1999 and 2000,
respectively.
Additionally, with respect to direct foreign loans (i.e., loans
from offshore banks) and offshore foreign securities issued by ROK
companies, we found that, subsequent to April 1999, companies no longer
needed approval from the GOK to access direct foreign loans or to issue
foreign securities. See Cold-Rolled Steel. Thus, we determined that
these loans were not directed or controlled by the GOK, and could serve
as benchmarks. No party has challenged this past finding.
In the instant investigation, the petitioner has alleged that the
GOK continued to influence and direct the practices of lending
institutions in the ROK through the POI, and that the semiconductor
sector received a disproportionate share of the benefits provided
pursuant to this direction, resulting in the conferral of
countervailable benefits on the producers/exporters of the subject
merchandise. The petitioner has also alleged that, if the Department
does not find that the semiconductor industry received a
disproportionate share of financing during this period, this directed
credit was specific to Hynix. The petitioner asserts, therefore, that
the Department should countervail all loans and benefits from GOK
owned/controlled/directed institutions that were received by the
producers/exporters of the subject merchandise, or all loans and
benefits received specifically by Hynix, obtained during this period
that were outstanding during the POI.
We provided the respondents in this proceeding an opportunity to
present new factual information concerning the GOK's credit practices
from 1999 through June 30, 2002 which we would consider along with our
findings in the above-noted prior investigations. Certain respondents
challenged the Department's prior direction of credit findings for 1999
and 2000. Parties in this investigation also presented information
concerning the GOK's role in the ROK financial lending sector from 2001
through June 30, 2002.
Because of the Department's prior determinations that the GOK
controlled and directed credit provided by most ROK banks through 2000,
discussed above, the burden of demonstrating that the GOK has changed
its practices is placed, in large part, upon the respondents. Moreover,
with respect to 1999 and 2000, because the Department has previously
found that the GOK directed credit provided by most ROK banks in those
years, new information or evidence of changed circumstances must be
presented before the Department will revise or change its previous
findings.
In its response, the GOK argued that the post-1997 financial
reforms instituted following the ROK financial crisis have led to the
liberalization of the ROK financial sector, and that the GOK did not
direct credit provided by domestic and government-owned banks from 1998
through the end of the POI. The GOK has also placed new information on
the record to support its claim. As noted above, the Department has
already addressed the impact of these reforms in 1998 in CTL Plate and
Structural Beams. However, for the subsequent period, the GOK has
submitted new information which we have analyzed to determine whether
the GOK continued to direct credit from 1999 through June 30, 2002.
In our analysis, we have distinguished between banks that are
themselves government authorities within the meaning of section
771(5)(B) of the Act and commercial banks that are not considered to be
government authorities. In CTL Plate and Structural Beams, we found
that, although changes had been made to the legislation regulating
government-controlled specialized banks, such as the KDB, in the
aftermath of the financial crisis, the respondents did not provide any
evidence to demonstrate that the KDB has discontinued its practice of
selectively making loans to specific firms or activities to support GOK
policies.
Record evidence from the instant investigation indicates that the
KDB and other specialized banks, such as the Industrial Bank of Korea
(``IBK''), continue to be government authorities within the meaning of
section 771(5)(B)
[[Page 16772]]
of the Act. The term ``authority'' is defined in section 771(5)(B) of
the Act as ``a government of a country or any public entity within the
territory of the country.'' As stated in the Preamble to the
Department's regulations, ''* * * we intend to continue our
longstanding practice of treating most government-owned corporations as
the government itself.'' See Preamble, 63 FR 65402.
In order to assess whether an entity such as the KDB should be
considered to be the government for purposes of countervailing duty
investigations, the Department has in the past considered the following
factors to be relevant: (1) Government ownership; (2) the government's
presence on the entity's board of directors; (3) the government's
control over the entity's activities; (4) the entity's pursuit of
governmental policies or interests; and (5) whether the entity is
created by statute. See, e.g., Final Affirmative Countervailing Duty
Determinations: Pure Magnesium and Alloy Magnesium from Canada, 57 FR
30946, 30954 (July 13, 1992); Final Affirmative Countervailing Duty
Determination: Certain Fresh Cut Flowers from the Netherlands, 52 FR
3301, 3302, 3310 (February 3, 1987); and Sheet and Strip, 64 FR 30642-
43.
According to the BOK in a February 2002 report on ROK financial
institutions, most of the specialized banks are government-controlled
banks. With regard to the KDB, all of the KDB's shares are held by the
GOK. Additionally, according to the KDB Act, the KDB's purpose is ``the
supply and management of major industrial funds to promote industrial
development and the advancement of the national economy.'' All of KDB's
senior management and its auditor are appointed by the ROK President or
the Ministry of Finance and Economy (``MOFE''). KDB's annual business
plan must be approved on an annual basis by the MOFE, and the KDB is
supervised by the MOFE (except for prudential supervision, which is
carried out by the Financial Supervisory Commission (``FSC'')). Any net
losses suffered by the KDB are covered by the GOK according to Article
44 of the KDB Act.
The purpose of the IBK is ``to promote independent economic
activities for small and medium enterprises and to enhance their
economic status in the national economy.'' The majority of the IBK's
shares are held by the GOK. The IBK's top officials are appointed by
the ROK President or by a GOK ministry. According to the IBK Act, one
of the IBK's activities is to ``perform business entrusted by the
Government and public entities,'' and to ``achieve the purpose of the
bank {as noted above{time} with the approval of the relevant
Minister.'' The IBK's annual business plan and operations manual
(including its lending methods) must be approved by the relevant
minister. Any annual losses suffered by the IBK are covered by the GOK.
Based on this information and our past findings, we preliminarily
determine that the KDB and the other specialized banks, such as the
IBK, are government authorities. Hence, the financial contributions
they made fall within section 771(5)(B)(i) of the Act.
As for the commercial banks in which the GOK owned a majority or
minority stake, there is no evidence currently on the record that these
entities are GOK authorities within the meaning of section 771(5)(B) of
the Act. These banks act as commercial banks, and temporary GOK
ownership of the banks due to the financial crisis is not, by itself,
indicative that these banks are GOK authorities. Therefore, we must
determine whether these banks, as well as other ROK lenders, were
directed or entrusted by the GOK to provide funds to the respondents
during the period 1999 through the end of the POI. See section
771(5)(B)(iii) of the Act.
In late 1997, the financial crisis that had been plaguing many
countries in Asia came to a head in the ROK. A severe foreign exchange
crisis, coupled with a sharp increase in interest rates and a drop in
economic output, caused many large companies to be unable to meet their
debt obligations and liquidity needs. As a result, many companies
experienced serious financial difficulties, and many banks were
weakened by the rapid increase in non-performing loans, a situation
that threatened the stability of the financial system itself.
According to the GOK, this financial crisis in late 1997 brought
about many market-oriented changes in the financial sector in the ROK.
For example, as discussed in CTL Plate and Structural Beams, in January
1998, the GOK announced closure of some banks, and in April 1998, it
launched the FSC which, according to the GOK, is a central government
organization established for the purpose of consolidating and improving
the GOK's monitoring and supervision of financial institutions. (The
FSC's authority was later expanded to also cover specialized banks.)
According to the GOK, these changes were part of a larger package of
reforms including legal, regulatory, and policy changes intended to
transform the ROK financial sector into a better managed, better
supervised, and more market-oriented sector of the economy.
As part of these reforms, in the period 1999 through 2002, several
commercial banks in the ROK were closed or merged with other banks. The
closure of weak financial institutions was, according to the GOK, one
of the most dramatic policy changes in the ROK. The GOK also points to
the opening of the financial markets to foreign ownership and
investment as another major change. For example, majority ownership of
Korea First Bank (``KFB'') was sold to a foreign investor, and shares
in other banks, such as Korea Exchange Bank (``KEB''), were sold to
foreign investors. Additionally, the GOK worked to tighten rules on
accounting and best practices by applying international standards.
Finally, as noted above, the GOK implemented many new laws,
regulations, and practices with regard to the financial system. In May
1999, the KDB Act was amended to entrust the FSC with regulatory
oversight of KDB's financial prudentiality. In January 2000, the
Depositor Protection Act was revised to ensure that officers and
employees of financial institutions that are responsible for financial
troubles of their employer can be required to compensate the financial
institution for damages. The Bank Act was also revised to set forth
procedures for the licensing and supervision of banks. In March 2000,
the KDB enforcement decree was amended to expand to the KDB the loan
exposure limits that applied to other banks. In October 2000, the
Corporate Restructuring Vehicle Act was enacted to facilitate the
resolution of bad loans held by financial institutions. The Financial
Holding Company Act was also enacted, which established financial
holding companies in the ROK for the first time. In November 2000,
Prime Minister's Decree, Instruction No. 408 (``Prime Minister's
Decree''), was issued, stating that government officials at financial
supervisory organizations, such as the MOFE and the FSC, were not to
interfere in the operations of commercial and specialized banks.
In December 2000, the Public Funds Management Act was enacted to
enhance transparency in the use of public funds. The Depositor
Protection Act was also revised to allow the Korea Deposit Insurance
Corporation (``KDIC'') to request information directly from banks, and
to request assistance from the FSC if a financial institution looks as
if it may become insolvent. In September 2001, the Corporate
Restructuring Promotion Act (``CRPA'') was enacted to allow creditor
banks to initiate prompt restructuring measures against potentially
insolvent companies and to provide a more formal framework
[[Page 16773]]
for creditor financial institutions to work together. In April 2002,
the Banking Act was revised to relax restrictions placed on bank
ownership.
As is evidenced by the above-noted changes in the ROK financial
system since the 1997 financial crisis, the GOK has taken many steps to
reform the financial system in the ROK, steps for which the GOK has
been widely praised. However, despite the changes noted above, events
in the ROK financial system have led the GOK to continue its
involvement there. Specifically, in the aftermath of the financial
crisis, many corporations have suffered from liquidity problems,
especially as loans and other debt incurred during or after the
financial crisis have begun to mature. These financial problems in the
corporate sector necessarily have had a great impact on the creditors
holding the outstanding liabilities of these corporations. Because many
banks have suffered their own liquidity crises in light of the troubles
in the corporate sector due to their debt holdings in these troubled
companies, record evidence indicates that the GOK has inevitably had to
stay closely involved in the financial system in order to ensure
stability while corporate restructuring continues, and that the GOK's
role exceeded the understandable function of financial supervision.
For example, record evidence indicates that the GOK had to inject
trillions of won into ROK banks to keep them solvent following the
financial crisis. According to an August 2001 Bank for International
Settlements paper, this type of support was ``inevitable and necessary
in order to ensure the soundness of the financial system and to prevent
systematic risk in the process of financial sector restructuring.'' As
a result of these recapitalizations, many commercial banks have been
nationalized by the GOK, and the GOK has become (and continued to be
throughout the POI) the majority owner of several of the large ROK
commercial banks, including Seoul Bank, the banks under the Woori
Financial Holding Company umbrella (including Peace, Kwangju, and
Kyongnam banks), Woori Bank (formerly Hanvit Bank), and Cho Hung Bank
(although we note that there is conflicting information on the record
with respect to bank ownership by the GOK during the POI). Moreover, in
2001, the BOK increased the aggregate credit ceiling in order to
provide more funds to financial institutions to encourage the financial
institutions to provide loans to the corporate sector. In doing so, the
BOK also adjusted the method of allocation in such a way as to supply
more aggregate credit at low interest rates to financial institutions
that expanded corporate lending.
While we do not contend that the GOK's ownership of ROK banks is by
itself dispositive of the GOK's involvement in the banks' lending
decisions, banks that are owned, in whole or in part, by the GOK are
subject to the influence of their majority or minority shareholders.
This point was made, for example, by a Morgan Stanley executive
director and ROK chief, who stated in a September 2001 Asiamoney
article regarding ongoing discussions relating to a potential debt-for-
equity swap involving Hynix and its creditors (which eventually took
place in Hynix's October 2001 restructuring) that ``if creditor banks
go down that road, there would be speculation that the decision was
made in conjunction with the government.'' He continued,
``{a{time} lthough Hynix argues that the creditors arrived at their
decision {to participate in the debt-to-equity conversion{time} purely
on economic grounds, the fact that most of them are state-owned does
infer government intervention.'' Thus, the GOK's ownership position in
certain banks indicates that the GOK does have an impact on lending
decisions of certain government-owned banks.
Along with its increased ownership in the banks, the GOK's dual
role as owner and regulator can also be seen as evidence of the GOK's
influence over bank lending decisions. For instance, in July 2001
articles in the International Herald Tribune and the New York Times,
Stanley Fischer, an IMF official who was an architect of the IMF's
restructuring plan in the ROK, was quoted as saying that the GOK needed
to get itself out of the financial sector and should stop supporting
failing banks and corporations. With regard to the GOK, he stated that
``they have got to get themselves out of the financial sector'' and
that ``{t{time} here is a conflict of interest between the government
as an owner and the government as a supervisor.'' This view was also
reflected in the August 2, 2001 IMF Public Information Notice (No. 01/
79), which is included as an appendix to the Direction Citations Memo
on file in the Department's CRU. In the notice, which was prepared as
part of the IMF's post-crisis monitoring program, IMF directors
expressed concern that ``the role of the government as part-owner and
supervisor of financial institutions, coupled with a significant role
as guarantor of corporate debt, would hinder the pace of restructuring
and risk impeding the development of a sound commercial banking system
and a thriving capital market.'' There is also evidence on the record
that the GOK has given authoritative instructions to financial
institutions, including those involved in supporting Hynix. According
to a November 2001 paper prepared by a World Bank employee, ``press
reports that the {Financial Supervisory Service (``FSS'') (the FSC's
enforcement body){time} had instructed creditor banks to classify
Hynix loans as normal further highlight the conflicts of interest that
can arise when a financial supervisor is tasked with managing
corporate/financial sector restructuring in a systemic crisis.'' The
same World Bank report states that ``it is reported in the press that
the FSS--in contravention of its duty to safeguard the soundness of
{the ROK's{time} financial sector--has been pressuring financial
institutions to extend credits to distressed companies as promised in
{out-of-court{time} workout {Memoranda of Understanding
(``MOU''){time} .''
Additional information on the record suggests that the corporate
restructuring mechanism for distressed firms in the ROK would continue
to require additional reforms to ensure that corporate workouts are
conducted on commercial terms and without government intervention. In
particular, the IMF took issue with the ROK's record with ``out-of-
court'' workouts, suggesting that greater reliance should be put on
court-supervised insolvency in order to accelerate the restructuring of
distressed companies, and stressing the need for additional insolvency
reform. In this context, the IMF directors ``urged the authorities to
refrain from pushing creditors into bailing out troubled companies * *
*.'' See February 1, 2001 IMF Public Information Notice (No. 01/8),
which is included as an appendix to the Direction Citations Memo on
file in the Department's CRU. The directors noted that some government
intervention in the financial markets may have been justified as long
as these measures were transitory, kept distortions to a minimum, were
limited to viable firms with temporary problems, and avoided the
perception that some companies are ``too big too fail.'' Id. The
Directors concluded that the basic restructuring framework was largely
in place, but that it was now critical ``for the government to step
back from intervening in the operation of markets and economic decision
making, and instead rely in the future on markets in imposing
discipline.'' Id.
Even a year later, the IMF directors found that, while some
progress in corporate restructuring had been made,
[[Page 16774]]
the corporate sector remained ``beleaguered'' by the continued
operation of loss-making companies. In particular, the directors
``stressed that the orderly exit of nonviable companies should be
accelerated, and that state-owned banks, in particular, need to accept
reductions on their claims, including by allowing a company to be
liquidated if losses become unmanageable.'' See February 12, 2002 IMF
Public Information Notice (No. 02/09), which is included as an appendix
to the Direction Citations Memo on file in the Department's CRU.
The GOK has claimed that the GOK-owned banks make their lending and
credit decisions based on commercial criteria. However, there is
information on the record indicating that the GOK continues to direct,
and otherwise apply pressure to, certain ROK lenders with regard to
their lending and credit decisions. Specifically, there are numerous
reports on the record that indicate that the GOK was involved in
certain bank lending and credit decisions during the POI to ensure that
debt-ridden companies, particularly Hynix and other current or former
Hyundai Group affiliates, would have access to financing or other funds
provided by the banks.
For example, in September 2002, an ROK National Assembly member
chastised the GOK in a press statement for compelling financial
institutions to support the Hyundai Group and Hynix since the beginning
of Hyundai's liquidity crisis in mid-2000. The report stated
``{f{time} or two years following the outbreak of liquidity crisis in
the Hyundai Group, the government of Dae-Joong Kim has provided
astronomical sums of special support to the Hyundai Group, amounting to
a total of 33.6 trillion won by mobilizing the resources of financial
and government-run institutions.''
A January 2001 Wall Street Journal article states that ROK banks
have ``been more accustomed to following government orders than making
sound credit decisions.'' It further states that, when KFB (a bank that
is 51 percent foreign-owned) refused to participate in a GOK debt
restructuring program (that was focused primarily on Hyundai Group
companies) at the request of the FSS, the FSS applied pressure to KFB
and ``strongly urged'' KFB to participate in the plan lest it risk
losing some of its clients. Commenting on this, an executive at a GOK-
owned bank said that the nationalized banks were ``green with envy,''
as ``nobody wants to increase their exposure to these corporations that
still have a long way to get their acts together.'' The article states
that the FSS asked creditor banks to participate in this program, and
only KFB refused.
An April 2001 Korea Herald article notes that the FSS threatened to
fine Hana Bank if it failed to provide emergency liquidity to Hyundai
Petrochemical, which was a part of the Hyundai Group that was going
through the corporate workout process. In a June 2001 Dow Jones
International news article, it was reported that KorAm Bank reversed
its decision not to participate in the Hynix June 2001 convertible bond
offering after the FSS warned of a possible sanction against KorAm if
it did not participate. In February 2001, the managing director at UBS
Warburg in Seoul stated that ``the impression that we get is that while
the government claims {the banks{time} are totally independent,
behind-the-scenes pressure is being applied so that they lend to
certain entities.'' In July 2001, with regard to corporate
restructuring packages, an official at the MOFE stated that ``we've
decided to force all creditor financial institutions {both local and
foreign{time} to take part in {creditor{time} meetings in order to
prevent some of them from refusing to attend and pursuing their own
interests by taking advantage of bailout programs.''
According to a July 2002 Institutional Investor International
article, ``{{time} among the biggest concerns is the true extent of
banking independence. Yes, there are plenty of signs that this autonomy
holds sway--notably, KFB's stance toward the chaebol.'' The article
continues, stating that although GOK officials state that there is no
government pressure at all, not everyone is convinced. ``The government
has changed its policies quite a bit, but it still may assert
influence,'' said a Credit Suisse First Boston (``CSFB'') senior
economist in Hong Kong. ``Nobody can rule out intervention.'' According
to a March 2002 New York Times article, ``{m{time} any analysts say
that privatization is needed to foster management independence and
lending discipline. ``There's a suspicion that the government mucks
around with the banks,'' said an analyst at the IMF. With one-quarter
of Korean companies losing money, he said, banks often face political
pressure to keep them on life support.'' Finally, an April 2001 Korea
Times article notes: ``{W{time} hether the Kim administration likes it
or not, the Korean banks are now under tight state control. The
government jawboned banks to bail out insolvent firms, including
Hyundai Engineering and Construction {(``HEC''){time} . The
independence of the central bank was compromised, as the {BOK{time}
must get approval for its budget from the {MOFE{time} .''
(For a more detailed list of record information on the issue of
direction, see Direction Citations Memo, noted above, which is on file
in the Department's CRU.)
Moreover, although the GOK states that it has taken affirmative
measures, such as the Prime Minister's Decree, to ensure that
government officials at financial supervisory organizations do not
interfere in the operations of commercial and specialized banks, record
evidence indicates that GOK interference has continued, in some
instances, and that the de jure measures contain sufficient ambiguities
which would allow the GOK to become involved in the banking system. For
instance, the Prime Minister's Decree at Article 5 states that the
financial supervisory agencies can request cooperation from financial
institutions for the purpose of the stability of the financial market,
or to attain the goals of financial policies. As noted above, the
financial system in the ROK has been going through a crisis that could
be the type of situation in which this exception would be applied. A
further exception that would allow GOK influence over the banks is
included in Article 6 of the Prime Minister's Decree. Article 6 states
that ``the Minister of MOFE and KDIC shall, unless they exercise their
rights as shareholders of any of the Financial Institutions, procure
that the Financial institution, which was invested by the {GOK{time}
or KDIC, can be operated independently under the direction of the Board
of Directors thereof'' (emphasis added). As noted above, because the
GOK is part-owner in many commercial banks, an exercise of its
shareholder rights could allow the GOK an opportunity to become
involved in the operations of the banks.
Finally, Article 17 of the Public Fund Oversight Special Act
stipulates that when the GOK provides public funds to a financial
institution (such as the recapitalization of a bank as occurred several
times during this period), the GOK will enter into an MOU which will
set financial soundness, profitability, and asset quality targets, and
will consist of a detailed implementation plan for implementation of
these targets. Pursuant to Article 14, the GOK will review the
implementation of this plan on a quarterly basis. The GOK in this
manner can be directly involved in the fiscal operations of the bank.
Thus, although record evidence does indicate that the GOK's
financial system reforms have been positive and are beginning to take
hold, evidence on the
[[Page 16775]]
record indicates that, in certain instances, these reforms have yet to
fully erase the GOK's direction of the banks, nor have they prevented
the GOK from acting, through financial institutions involved in the ROK
market, to ensure that Hynix received necessary financing. Therefore,
based on the above, we preliminarily find that the GOK directed the
lending and credit practices of certain sources of credit in the ROK
from 1999 through June 2002 in limited situations, including the case
of Hynix, as discussed below.
Before addressing the issue of whether credit is directed to a
specific enterprise or industry in the ROK, we note that, in past
cases, we have found that loans from ROK branches of foreign banks are
not subject to the direction of the GOK. (See, e.g., Plate in Coils and
Cold-Rolled Steel.) Specifically, we found that loans from Citibank
were not directed by the GOK. (See, e.g., Plate in Coils memorandum
dated March 4, 1999, ``Analysis Concerning Post 1991 Direction of
Credit,'' which is included as an appendix to the Direction Citations
Memo on file in the Department's CRU.) Based on these past findings, we
have preliminarily determined that the lending and credit practices of
Citibank are not directed by the GOK. However, we intend to seek
further information with regard to Citibank prior to the final
determination.
Specificity
As discussed above, we have preliminarily determined that the GOK
directed credit to the semiconductor industry through 1998. However,
for the period 1999 through June 30, 2002, record evidence in this
proceeding indicates that the GOK directed or provided loans and other
benefits to a specific company or group of companies. The group of
companies to which the GOK directed or provided loans during this
period comprises companies that continue to be or were part of the
Hyundai Group, including one of the respondents in this proceeding,
Hynix.
As evidenced by many of the articles cited above regarding GOK
direction of credit in this period, many of the statements that were
made relating to government instructions to, and pressure on, banks
related to financing for Hyundai Group companies or Hynix, or programs,
such as the Fast Track program, discussed below, that were directed to
Hyundai Group companies.
For example, as discussed above, in September 2002, a National
Assembly member spoke out against the GOK's direction of credit to the
Hyundai Group companies. However, National Assembly members were not
the only ones speaking of this practice. The official response to the
National Assembly Report from President Kim's office was as follows:
``{w{time} e are doing what is deemed necessary to save companies
leading the country's strategic industries.'' Another Blue House
official said in January 2001 that ``Hyundai is different from Daewoo.
Its semiconductors and constructions are Korea's backbone industries.
These firms hold large market shares of their industries, and these
businesses are deeply-linked with other domestic companies. Thus, these
firms should not be sold off just to follow market principles.''
In January 2001, the Korea Times stated that ``cash-starved
{Korean{time} companies claimed that the government's measures were
only aimed at certain larger companies such as {Hyundai Merchant
Marine, Co. Ltd (``HMM''){time} , HEI, and Korea Industrial
Development.'' According to a March 2001 article in the Korea Herald,
``{o{time} nce again, the government appears to have backtracked on
reform pledges, as it allegedly forced creditors to extend trillions of
won in fresh financial aid to three Hyundai Group firms--{HEI,
HEC{time} , and Hyundai Petrochemical.'' And in May 2001, a senior KEB
official stated that ``{i{time} f Hynix is placed under receivership,
Korea's exports will be severely battered {because{time} Hynix
accounts for 4 percent of exports. As far as I know, the government is
now working out a series of powerful measures to ensure the survival of
Hynix Semiconductor.''
The National Assembly member, quoted above, charged that the GOK
provided ``astronomical sums of special support to the Hyundai Group,
amounting to a total of 33.6 trillion won by mobilizing the resources
of financial and government-run institutions'' from May 2000 to June
2002. The National Assembly Report relied on data relating to the
corporate restructuring measures taken by the following Hyundai Group
companies from May 2000 through June 2002: HEC, Hynix, Hyundai
Petrochemical Co., Ltd., and HMM (collectively, ``Hyundai Group'').
During this period, ROK financial institutions participated in the
Hyundai Group's restructuring measures, which included new loans,
equity swaps, the acceleration of debt acquisition, the extension of
debt maturities, convertible bond purchases, and debt exemptions for a
total of 244,106 billion won; the total for Hynix was 120,017 billion
won. During the same period, GOK authorities (the KDB and the Export-
Import Bank of Korea, among others) provided support to the Hyundai
Group totaling 115,365 billion won (Hynix data is not reported
separately from these figures). Hynix' share of restructuring measures
from financial institutions accounted for nearly 50 percent of the
Hyundai Group's total.
In considering whether this program was de facto specific, we are
mindful of other scenarios where there have been debt restructuring
programs in situations of national financial difficulty. For example,
in the Final Affirmative Countervailing Duty Determination: Certain
Hot-Rolled Carbon Steel Flat Products From Thailand, 66 FR 50410
(October 3, 2001) (``Thai Hot-Rolled Steel''), the Department found
that a debt restructuring program was not specific to the respondent
steel company because it was not limited to an enterprise or industry.
There, the evidence showed that the program was broadly available
across many industries, and the Department's evaluation showed that
there was no predominant user or disproportionate share of the program,
as well as other factors. (See Thai Hot-Rolled Steel, 66 FR 50410 and
accompanying September 21, 2001 Decision Memorandum at Section
III.A.4.) By contrast, here we find a number of indicators of ROK
activity specifically focused on aiding Hynix and the Hyundai Group of
companies.
Because record evidence indicates that the GOK's actions with
respect to its direction of credit were specific to current or former
Hyundai Group companies, we preliminarily find that this program is
specific for Hynix pursuant to section 771(5A)(D)(iii)(I) of the Act.
Further, we preliminarily determine that the GOK did not direct credit
to SEC or the semiconductor industry as a whole during this period.
Therefore, we preliminarily determine that any loans or other benefits
provided to SEC during this period pursuant to the allegations of
direction of credit are not countervailable according to section 771(5)
of the Act.
Specific Financial Contributions Made Pursuant to the GOK's Direction
of Credit
Having preliminarily determined that the GOK directed credit to the
semiconductor industry through 1998, and to Hynix subsequently, we now
examine the financial contributions made by the directed financial
institutions and the benefits conferred by those financial
contributions.
[[Page 16776]]
1. Hynix Financial Restructuring and Recapitalization
In the fall of 2000, because of the weakness in the ROK financial
system in the wake of the 1997 financial crisis, many companies, like
HEI, were continuing to have trouble securing financing for their
operations or to refinance maturing debt. HEI, specifically, had
serious looming financial troubles, with several trillion won in short-
term debt that was coming due in 2001.
According to Hynix, and as further discussed below, the first step
taken by HEI and its financial advisors, Citibank and Salomon Smith
Barney (``SSB''), was to work with HEI's creditors to borrow funds to
meet immediate liquidity needs. These funds were arranged for in
December 2000 in the form of a won 800 billion syndicated bank loan,
which was organized by Citibank. Hynix reports that this was a stop-gap
measure to cover certain immediate financial needs while a more
comprehensive restructuring and recapitalization plan was being
developed and implemented. At the same time, HEI was also nominated by
its creditors to participate in a new GOK program starting in January
2001, the KDB Fast Track Debenture Program (discussed in greater detail
below). Also in January 2001, Hynix arranged with its creditors to
secure an increase in its documents against acceptance (``D/A'') line
of credit from USD 800 million to USD 1.4 billion.
In March 2001, as part of its corporate restructuring, HEI changed
its name to Hynix. This step was taken in advance of its official
August 2001 separation from the Hyundai chaebol. At the same time, a
group of Hynix' 17 major creditors formed the first Hynix Creditors'
Financial Institution Council (``Creditors'' Council''). According to
the GOK, this Creditors' Council was based on the corporate workout
process established by the GOK in June 1998 pursuant to the Corporate
Restructuring Act (``CRA''), which was an informal agreement that
comprised 210 ROK financial institutions. Under the CRA, the FSC would
identify the lead creditor of the troubled corporation (normally the
financial institution with the most outstanding debt). The lead
creditor, which would be responsible for negotiating any corporate
work-out terms, headed the Creditors' Council, a council made up of the
troubled corporation's creditor banks. (In September 2001, the CRA was
replaced by the CRPA, a more formal mechanism under ROK law which
codified the corporate workout methods that were being utilized under
the CRA.) However, although this Creditors' Council was based on the
CRA councils, according to the GOK, it was not part of the CRA program
but was a voluntary agreement among Hynix' creditors based on
experience acquired while pursuing other workout agreements.
Hynix and SSB presented this Creditors' Council with an overall
restructuring proposal for Hynix. This proposal included
recapitalization in the form of a won 1 trillion convertible bond
issuance and an issuance of USD 1.25 billion in common shares in the
form of Global Depository Shares (``GDS''), and rescheduling and
restructuring of Hynix' debt through maturity extensions and greater
availability of short-term debt instruments. Hynix and its creditors
formally agreed to this restructuring plan in May 2001. As a result, in
June 2001, Hynix issued won 994.1 billion in convertible bonds,
borrowed won 5.9 billion in the form of a separate loan, participated
in a successful USD 1.25 billion GDS issuance on foreign and domestic
capital markets, and had many of its maturing debts rescheduled or
refinanced. Hynix also was able to continue to access short-term usance
and overdraft financing.
Despite these restructuring efforts, by summer of 2001, it became
apparent that more restructuring would be necessary due to the
unexpectedly prolonged downturn in the DRAMS market and Hynix'
continuing financial troubles. Thus, Hynix and its advisors worked with
Hynix' creditors to develop a new restructuring package that was
adopted in October 2001. As part of this package, which was negotiated
pursuant to the new CRPA, Hynix' new CRPA Council developed three
options for Hynix' creditors: (1) For creditors that agreed to extend
new loans, the creditors could convert D/A balances to general long-
term loans, swap convertible bonds and unsecured loans to new
convertible bonds (which would be subsequently converted into equity),
and refinance or extend the remaining loans; (2) creditors that did not
agree to extend new loans, but did agree to the debt-to-equity
conversion, could convert all of their secured loans and 28 percent of
their unsecured loans into the convertible bonds that would
subsequently be swapped for equity, with the remainder of the unsecured
loans to be forgiven; (3) creditors that did not agree to either new
loans or the debt-to-equity conversion could exercise their appraisal
rights for all of their secured debt and 25 percent of their unsecured
debt based on Hynix' liquidation value as of September 31, 2001 (as
established by an external consultant), and have the remainder of the
debt forgiven. The various creditors of Hynix selected among these
options, with the result that won 2.993 trillion in debt was swapped
for equity on December 6, 2001, won 1.45 trillion in debt was forgiven,
some new loans were issued, and numerous loans were extended or
refinanced.
As discussed above in the ``Direction of Credit and Other Financial
Assistance section, we have preliminarily determined that the GOK
directed Hynix' creditor banks to participate in these restructuring
programs and to provide credit and other funds to Hynix in order to
assist it through its financial difficulties. As indicated in the
overview of the Hynix restructurings, the financial assistance provided
to Hynix by its creditors took various forms. We preliminarily
determine that these different means of supporting Hynix were financial
contributions as described in section 771(5)(D) of the Act.
Specifically, the loans, convertible bonds, extensions of maturities
(which we view as new loans), D/A financing, usance financing,
overdraft lines, debt forgiveness, and debt-for-equity swaps are direct
transfers of funds from the GOK-directed financial institutions to
Hynix. (See section 771(5)(D)(i) of the Act.)
We determined the benefits to Hynix from the various instruments as
follows:
For the long-term loans and new bonds that were issued as
part of the restructuring program, we compared the interest rates on
the directed long-term loans and new bonds to the benchmark interest
rates detailed in the ``Subsidies Valuation Information'' section,
above, in accordance with section 771(5)(E)(ii) of the Act. For the
period January 2000 through June 2002, we used an uncreditworthy
benchmark rate because we determined that Hynix was uncreditworthy
during this period (as discussed above in the ``Creditworthiness''
section and the accompanying Creditworthiness Memo). For long-term
variable-rate loans, the repayment schedules of these loans did not
remain constant during the lives of the respective loans. Therefore, we
have calculated the benefit from these loans using the Department's
variable rate methodology as described in 19 CFR 351.505(a)(5) and 19
CFR 351.505(c)(4). For long-term fixed-rate loans and bonds, consistent
with Cold-Rolled Steel, we calculated the benefit using the
Department's standard fixed-rate methodology specified in 19 CFR
351.505(c)(2). We summed these benefits to determine the total benefit
[[Page 16777]]
during the POI from the long-term loans and bonds.
For short-term loans, we calculated the benefit using the
methodology specified in 19 CFR 351.505(c)(1) and (2). We summed these
benefits to determine the total benefit during the POI from these
short-term loans.
We treated the D/A financing as short-term debt. According to
record information, this form of debt involved the discounting of
receivables. Because we did not have the imputed interest rate on this
type of debt, we assumed, as gap-filling facts available, that the
interest rate was the same as the short-term rate on Hynix' other
short-term debt that was denominated in the same currency. To calculate
the benefit, we compared this short-term rate to the benchmark short-
term rate.
Also, regarding the usance financing and overdraft lines, the
ceilings and terms for both types of credit are normally renegotiated
on an annual basis. However, as part of the May and October
restructuring packages, both the usance and overdraft ceilings were
extended for a longer period than the normal one-year agreement. For
instance, in the May package, both the usance and overdraft credit
lines were extended from December 2001 to June 30, 2003. The lines were
further extended in the October package to December 2004.
Because the ceilings and terms were extended beyond one year and it
is unclear at this point whether these loans could be outstanding for
greater than one year, we treated these loans as long-term loans on the
assumption that the loans could be outstanding for greater than one
year. For the period before the extensions (January through April
2001), we treated these loans as short-term loans.
Debt-to-Equity Swaps
As discussed above, as part of the October 2001 restructuring
package, certain of Hynix' creditors swapped some of their outstanding
debt for equity. To determine whether these equity purchases conferred
a benefit on Hynix, we followed the methodology described in 19 CFR
351.507.
According to 19 CFR 351.507, the first step in determining whether
an equity investment decision is inconsistent with the usual investment
practice of private investors is examining whether, at the time of the
infusion, there was a market price paid by private investors for
similar newly-issued equity. However, pursuant to 19 CFR
351.507(a)(iii), if a private investor's purchases of newly issued
shares is not significant, the Department will not use the market price
paid by the private investor for comparison purposes.
According to record information, Hynix was involved in a GDS
issuance in June 2001 that was spearheaded by SSB. According to Hynix,
the GDS issuance was oversubscribed by 1.5 times, which is a testament
to its success. The GDSs were priced at twelve USD each and were
equivalent to five shares of Hynix common stock.
In April 2001, prior to the GDS issuance, SSB issued a report on
Hynix stating that it expected DRAMS prices to stabilize at USD 2.40 in
the second quarter of 2001 and begin to rebound in the third quarter of
2001. In addition, SSB touted, ``Hynix should offer tremendous
potential upside to new and existing equity holders as the market
improves this year.'' However, shortly thereafter, SSB's positive
forecasts proved to be the exact opposite of what happened to Hynix and
the worldwide DRAMS market.
By July 2001, DRAMS prices had fallen 75 percent from their July
2000 levels, reaching USD 1.10. Morgan Stanley Dean Witter (``MSDW'')
stated in a July 2001 equity report on Hynix, ``{i{time} n view of the
weakness in DRAMS fundamentals, the company's loss of competitiveness
in the DRAMS business by not investing effectively, and its huge debt,
which will likely continue to impair shareholders' value, we see no
reason to be positive on the stock.'' MSDW slashed its earnings per
share projections for Hynix by 51 percent for 2001, and 604 percent for
2002, based on this assessment.
Echoing MSDW's concerns, CSFB, in July 2001, increased its forecast
of Hynix' net losses from won 2.5 trillion to won 3.9 trillion for
2001, and from won 1.7 trillion to won 2.4 trillion for 2002. In August
2001, despite the worsening of the DRAMS market and Hynix' financial
state, SSB continued to see Hynix in a positive light. SSB, however,
revised its 2001 revenue estimates for Hynix to won 4.3 trillion, down
from Hynix' own revenue estimates of won 8.7 trillion made in April
2001.
By September of 2001, investors worldwide voiced their pessimism
towards the DRAMS market in the stock exchanges. According to Dow Jones
International, by September 2001, Hynix' GDSs had lost 72 percent of
their issuance value, a loss of USD 900 million to investors. By
October of 2001, the DRAMS market had changed dramatically from
January, and even June, 2001. According to the Wall Street Journal,
DRAMS prices were below cost industry-wide. In an October 8, 2001,
article, the Wall Street Journal stated, ``{a{time} lthough chip makers
worldwide are taking a loss with each chip they sell, Hynix, according
to industry analysts, is in the worst financial shape. In early
September, Hynix' future looked shaky. Now, as the global economic
outlook gets grimmer, {Hynix'{time} looks worse.''
Because of the extreme differences in the condition of the global
DRAMS market as a whole, and Hynix' financial state at the time of the
two equity infusions, we do not believe that the GDS issuance in June
2001 supports a conclusion that the October 2001 equity purchase (i.e.,
debt-to-equity conversion) was consistent with the usual investment
practices of private investors (see section 771 (5)(E)(i) of the Act).
Clearly, the earlier, rosy expectations for a rebound in DRAM demand
and prices, which were necessary for Hynix to improve its position,
were not bourne out. Therefore, we have not considered the GDS issuance
in our analysis of the usual investment practices of private investors.
Nor have we used the prices paid for the GDS as a measure of what a
private investor would pay for Hynix' stock in October 2001.
Citibank was one of Hynix' creditors that opted to swap debt for
equity in the October 2001 debt restructuring. As discussed above, we
have preliminarily determined that Citibank's participation in the
Hynix restructuring was not directed by the GOK. Therefore, we must
consider whether Citibank's decision to swap debt for equity
demonstrates that the other creditors' decision to swap their debt for
equity was consistent with the private investor standard in section 771
(5)(E)(i) of the Act.
Pursuant to 19 CFR 351.507(a)(2)(3), if a private investor's
purchases of newly issued shares are not significant, the Department
will not use the market price paid by the private investor for
comparison purposes. Although we cannot reveal the actual portion of
the equity purchase accounted for by Citibank because it is
proprietary, we preliminarily determine that Citibank's purchase was
insignificant.
In discussing the requirement in 19 CFR 351.507(a)(2)(3), ``the
amount of shares purchased by a private investor must be significant in
order to provide an appropriate benchmark,'' the Preamble refers to
Small Diameter Circular Seamless Carbon and Alloy Steel Standard, Line
and Pressure Pipe from Italy, 60 FR 31992, 31994 (June 19, 1995)
(``Pipe from Italy''). In Pipe from Italy, the Government of Italy
(``GOI''), and numerous private investors participated in the same
equity issuance. The GOI purchased 81.6
[[Page 16778]]
percent of the shares, while private investors purchased the remaining
18.4 percent, at the same price. The Department, in Pipe from Italy,
considered the private investors' participation in the equity issuance
significant and, therefore, did not find the GOI's equity infusion
inconsistent with the usual investment practice of private investors.
The portion of equity obtained by Citibank in Hynix' October
restructuring was less than the private investors' participation in
Pipe from Italy.
Because we did not have actual private investor prices to use as a
comparison to the price paid by Hynix' other creditors, we examined
other indicators of Hynix' equityworthiness, pursuant to 19 CFR
351.507(a)(4). From 1997 through 2001, Hynix reported losses in every
year except 1999. In 2000, Hynix' net income was negative 28 percent
and in 2001, its net income was negative 127 percent. Based on Hynix'
financial statements, its return on equity was negative in 1998
(negative 6 percent), 1999 (negative 3 percent), 2000 (negative 40
percent), and 2001 (negative 97 percent). MSDW estimated Hynix' return
on equity for 2002 at negative 76 percent. Additionally, for the years
1997 through 2001, Hynix' debt-to-equity ratios ranged from 688 percent
in 1997 to 129 percent in 2001. These figures clearly demonstrate
Hynix' poor condition throughout the late 1990s and through 2001.
Based on these indicators, we preliminarily determine that Hynix
was unequityworthy at the time of the October 2001 debt-to-equity swap.
In accordance with 19 CFR 351.507(a)(6), we have treated the amount of
equity purchased by Hynix' creditors, other than Citibank, as a grant.
As discussed above, Hynix' October restructuring package included
the conversion of won 2.99 trillion in convertible bonds, and secured
and unsecured loans into new convertible bonds which carried an
obligation to convert the bonds into equity. These bonds were issued on
December 6, 2001. Because the new convertible bonds carried a
conversion obligation, Hynix recorded the debt-to-equity swap as a
capital adjustment in its 2001 financial statements. Therefore, we have
treated the benefit as having been provided to Hynix in 2001.
In accordance with 19 CFR 351.507(c), we allocated the benefit of
the debt-to-equity conversion over the AUL using the uncreditworthy
discount rate as described in the ``Subsidies Valuation Information''
section, above.
Debt Forgiveness
Under 19 CFR 351.508(c), the benefit conferred by a debt
forgiveness is the amount of the debt forgiven. To calculate the
benefit to Hynix received during the POI from the October 2001 debt
forgiveness, we allocated the entire amount of debt forgiven over the
AUL using an uncreditworthy discount rate.
KDB ``Fast Track'' Debenture Program
In the aftermath of the 1997 financial crisis, many ROK companies
had to borrow heavily to service their USD-denominated debts, which
soared as the value of the won plummeted against the USD. Many
companies did so through corporate bond issues, most of which were set
to mature in late 2000 and 2001. However, when it came time for these
bonds to mature, difficulties in the financial market, including
unwillingness by investors to invest in the bond market due to
heightened risk, especially in companies with poor credit ratings, made
it difficult for many companies to refinance or service their maturing
bonds. Moreover, many financial institutions could not extend further
financing to companies because of loan exposure limits put in place
following the financial crisis.
Due to this situation, many ROK companies, especially those with
below-investment grade bond ratings, were left with serious liquidity
problems. Furthermore, the won 65 trillion in corporate bonds coming
due in 2001 threatened to overwhelm the capital markets. Therefore, the
GOK instituted several programs to try to address this situation. In
June 2000, the GOK established the Collateralized Bond Obligation
(``CBO'') and Collateralized Loan Obligation (``CLO'') programs in
order to support the refinancing of corporate bonds. Through these
programs, the GOK purchased debentures and loans from ROK companies,
repackaged them into portfolios that included many bonds from different
companies, and sold securities backed by those bonds and loans to
investors with a partial guarantee from the Korea Credit Guarantee Fund
(``KCGF''). No more than 10 percent of the debt of any one company
could be placed into a single bundle of bonds or loans. According to
the GOK, any company with maturing bonds was eligible to participate in
the CBO and CLO programs.
Because many companies had much greater debt than could be handled
by each CBO/CLO portfolio due to the 10 percent exposure limit, the GOK
created the KDB Fast Track or Debenture Program to address this
problem. Under the Fast Track program, which was administered by the
KDB, companies selected to participate in this program first had to
redeem 20 percent of their bonds that were maturing in 2001; the
remaining 80 percent of the maturing bonds were purchased by the KDB,
and were subsequently replaced with new bonds issued by the
participating companies. Of the bonds purchased by the KDB that were
replaced by new issues, 10 percent of the new bonds issued were kept by
the KDB, 20 percent of each new issue was purchased by the company's
creditors (a blanket waiver was issued by the GOK in order to allow the
creditors to surpass their loan exposure limits), and the remaining 70
percent of each new issue was bundled with other bonds and sold as CBOs
or CLOs (which were partially guaranteed by the KCGF). As part of the
agreement that had to be signed by the participating companies, each
company was required to purchase a certain percentage of its
subordinated bonds bundled with other bonds in the CBOs and CLOs (three
percent in the case of a CBO, and five percent for a CLO). The program
ceased to operate at the end of 2001.
According to the GOK, in order to participate in the Fast Track
program, companies had to be nominated by their Creditors' Councils.
Companies eligible to participate in this program, as established in
Article 8 of the Creditor Financial Institutions and Corporate Credit
Guarantee Fund Council Agreement to Facilitate Bond Offerings, are
those that (1) are experiencing temporary liquidity problems due to a
large-scale maturation of corporate bonds but have the ability to
redeem at least 20 percent of those bonds; (2) are nominated by their
Creditors' Council; and (3) that are not distressed companies that are
undergoing corporate reorganization or workout programs. According to
record evidence, only six companies participated in this program, four
of which were current or former Hyundai affiliates.
Hynix was selected to participate in the Fast Track program in
January 2001. According to Hynix, won 1.208 trillion of its bonds were
refinanced through this program. Of this total, the KDB purchased won
120.8 billion (or 10 percent) of the maturing bonds, the creditor banks
purchased won 241.6 billion (or 20 percent) of the maturing bonds, and
the CBO/CLO funds purchased 70 percent of the remaining new issues, won
845.6 billion. Upon incorporation into the CBO and CLO funds, Hynix
then repurchased back the specified proportion of the subordinate bonds
through the CBOs and CLOs.
[[Page 16779]]
Hynix participated in the program only until August 2001.
As discussed above, we have preliminarily determined that the GOK's
direction of credit was specific to Hynix and other current or former
Hyundai Group companies. Additionally, we preliminarily determine that
the Fast Track program was de facto specific within the meaning of
section 771(5A)(D)(iii)(I) of the Act because the participants in this
program were limited in number. However, we preliminarily determine
that the bonds that were placed in the CBO and CLO funds as part of
this program did not provide a countervailable subsidy to Hynix
because, according to record information, those programs were available
to anyone with maturing bonds that wanted to participate and we have
found no evidence of de jure or de facto specificity in the application
of the program.
To determine the benefit received by Hynix as a result of the Fast
Track program, we compared the interest rates on the directed bonds to
the benchmark interest rates detailed in the ``Subsidies Valuation
Information'' section, above. We calculated the benefit from these
bonds using the Department's standard fixed-rate methodology described
in 19 CFR 351.505(c)(2). We summed these benefits to determine the
total benefit during the POI.
2. Other Loans Provided From 1999 Through the POI
With the exceptions noted below, for all other loans obtained by
Hynix during this period that were outstanding during the POI, we
calculated the benefit using the methodology described above for the
Hynix restructuring loans.
Hynix stated in its questionnaire responses that it obtained Long-
Term Usance loans, as well as loans under the Fund for Promotion of
Informatization and the Fund for Promotion of Defense Industry, during
this period that were outstanding during the POI. Hynix reported that
these loans were for projects involving non-subject merchandise. Thus,
for the purposes of this preliminary determination, we have not
included these loans in our benefit calculations for Hynix. We note
that Hynix'' questionnaire responses on this matter will be subject to
verification.
3. Loans Provided Prior to 1999
As explained above, the Department has preliminarily determined
that the GOK directed credit to the semiconductor industry in the
period through 1998. We further determine that these GOK-directed loans
to Hynix and SEC are financial contributions as described in section
771(5)(D)(i) of the Act.
The directed loans received by Hynix and SEC through 1998 that were
outstanding during the POI were long-term fixed- and variable-rate
foreign currency loans and long-term fixed- and variable-rate won-
denominated loans. In order to determine whether a benefit was received
by Hynix or SEC as a result of the long-term loans that were received
through 1998 (with the exception of those noted below), we compared the
interest rates on the directed loans to the benchmark interest rates
detailed in the ``Subsidies Valuation Information'' section, above. For
long-term variable-rate loans, the repayment schedules of these loans
did not remain constant during the lives of the respective loans.
Therefore, we have calculated the benefit from these loans using the
Department's variable rate methodology as described in 19 CFR
351.505(a)(5) and 19 CFR 351.505(c)(4). For long-term fixed-rate loans,
consistent with Cold-Rolled Steel, we calculated the benefit using the
methodology specified in 19 CFR 351.505(c)(2). We summed the benefit
amounts during the POI to determine the total benefit for each company.
Hynix reported that it did not directly receive loans under the
Energy Savings Fund (``ESF'') (loans made from this fund are discussed
in Plate in Coils, 64 FR 15533, and Structural Beams, 65 FR 41051 and
accompanying July 3, 2000 Decision Memorandum at page 12, Section
I.A.2). The GOK, on the other hand, reports that Hynix did in fact
maintain an outstanding ESF loan balance during the POI. The basis for
Hynix' claim that it did not participate in the ESF program is that
funding for Hynix projects was disbursed to third-party energy savings
companies (``ESCOs''), which completed the Hynix ESF projects under
contract.
The record indicates that Hynix and the ESCOs submitted
applications jointly to the Korea Energy Management Corporation in
order to obtain ESF funding. Information concerning these transactions
is not on the record, and, accordingly, we are not making a
determination concerning Hynix ESF loans at this time. Instead, we will
request further information on this matter during the course of this
proceeding and will make a finding on this matter in the final
determination.
SEC reported that certain loans received under the Science and
Technology Promotion Fund prior to 1999 were tied to non-subject
merchandise (loans made from this fund are discussed in Structural
Beams, 65 FR 41051 and accompanying July 3, 2000 Decision Memorandum at
page 13). Furthermore, both Hynix and SEC stated in their questionnaire
responses that their loans from the Fund for Promotion of
Informatization and the Fund for Industrial Technology Development that
were obtained during this time period were for projects involving non-
subject merchandise. Thus, for the purposes of this preliminary
determination, we have not included these loans in our benefit
calculations. We note that Hynix'' and SEC's questionnaire responses on
this matter will be subject to verification.
Countervailable Subsidy Rates for Hynix and SEC
We used the above mentioned methodologies to calculate the benefit
from all of the financial contributions discussed above, and summed the
benefit amounts from all financial contributions. We then divided the
total benefit by each respective company's total sales values during
the POI. On this basis, we determine the net countervailable subsidy to
be 57.23 percent ad valorem for Hynix and 0.01 percent ad valorem for
SEC.
B. Tax Programs Under the Tax Reduction and Exemption Control Act
(``TERCL'') and/or the Restriction of Special Taxation Act (``RSTA'')
Under ROK tax laws, ROK companies are allowed to claim tax credits
for various kinds of investments. If the investment tax credits cannot
be used entirely during the year they are claimed, then the company may
carry them forward for use in subsequent years. Until December 28,
1998, these investment tax credits were provided under the TERCL. On
that date, the TERCL was replaced by the RSTA. Pursuant to this change
in the law, tax credits based on eligible investments made after
December 28, 1998 were provided under the authority of RSTA.
In past proceedings, the Department found that companies that
invested in domestically-produced facilities (i.e., facilities produced
in the ROK) received higher tax credits than companies that invested in
foreign-produced facilities under these programs. See CTL Plate, 64 FR
73182. Under section 771(5A)(C) of the Act, subsidies that are
contingent upon the use of domestic goods over imported goods are
specific. Accordingly, the Department determined that the higher tax
credits for investments made in domestically-produced facilities
constituted import substitution subsidies under section 771(5A)(C) of
the Act. In addition, because the GOK had foregone the collection of
tax revenue otherwise due
[[Page 16780]]
under this program, the Department determined that a financial
contribution was provided as described in section 771(5)(D)(ii) of the
Act, with a benefit to the recipients in the amount of the tax savings
pursuant to section 771(5)(E) of the Act and 19 CFR 351.509(a)(1).
Therefore, the Department determined that this program was
countervailable. See CTL Plate, 64 FR 73182.
In Cold-Rolled Steel, the Department found that changes had been
made in the manner in which at least some of these investment tax
credits are determined. See Cold-Rolled Steel, 67 FR 62102, and the
accompanying September 18, 2002 Decision Memorandum at page 12, Section
I.F. Pursuant to amendments made to the TERCL on April 10, 1998, the
distinction between investments in domestic and imported goods was
eliminated for certain programs, including the Tax Credit for
Investment in Facilities for Productivity Enhancement (Article 24 of
RSTA) and the Tax Credit for Investment in Specific Facilities (Article
25 of RSTA). Accordingly, the Department determined that tax credits
received under these programs for investments made after April 10, 1998
are no longer countervailable. However, companies can still carry
forward and use the tax credits for investments earned under the
countervailable aspects of the TERCL program before the April 10, 1998
amendment to the tax law. Consistent with Cold-Rolled Steel, the
Department continues to find countervailable the use of investment tax
credits earned on investments made before April 10, 1998.
The specific Articles under the TERCL and the RSTA that we are
investigating in the instant investigation are discussed separately
below:
Temporary Tax Credit for Investment (Article 26 of RSTA)
The tax credit program under Article 26 of RSTA was enacted to
promote investment in facilities during periods of economic slowdown.
It provides a tax credit equal to ten percent of the investments made
by companies in certain eligible industries specified in the
implementing Presidential Decree, which includes the computer industry.
Article 26 of RSTA was not among the programs found in Cold-Rolled
Steel to have eliminated the import substitution advantage for eligible
investments made after April 10, 1998.
Hynix reported no taxable income for the POI and, therefore,
claimed no credits and received no benefits under this tax program. SEC
claimed credits and received tax benefits under this program in its
2001 tax return for tax year 2000, but not in its 2002 tax return for
tax year 2001.
As discussed above, we found in CTL Plate that tax programs offered
as part of the RSTA and the TERCL bestowed a financial contribution in
the form of foregone revenue, as described in section 771(5)(D)(ii) of
the Act, with a benefit to the recipients in the amount of the tax
savings pursuant to section 771(5)(E) of the Act and 19 CFR
351.509(a)(1). Moreover, as discussed above, we determined in CTL Plate
and Cold-Rolled Steel that tax benefits offered through the RSTA and
the TERCL are de jure specific pursuant to section 771(5A)(C) of the
Act, to the extent that they are contingent upon the use of domestic
goods over imported goods. As noted above, this Article of the RSTA was
not one of the programs for which the distinction between domestic and
foreign-produced merchandise was eliminated. Therefore, because ROK
companies received a higher tax credit for investments made in
domestically-produced facilities, we preliminarily find that this
program is specific pursuant to section 771 (5A)(C) of the Act. Thus,
we preliminarily determine that this program conferred countervailable
subsidies upon SEC during the POI.
In calculating the benefit for SEC, consistent with 19 CFR
351.524(c)(1), we treated the tax savings as a recurring benefit and
divided the tax savings received by SEC during the POI by SEC's total
sales during the POI. On this basis, we preliminarily determine that a
countervailable benefit of 0.15 percent ad valorem exists for SEC under
this program.
C. Electricity Discounts Under the Requested Load Adjustment (``RLA'')
Program
The GOK introduced an electricity discount under the RLA program in
1990 to address emergencies in the Korea Electric Power Company's
(``KEPCO'') ability to supply electricity. Under this program,
customers with a contract demand of 5000 kilowatts or more who can
curtail their maximum demand by 20 percent or suppress their maximum
demand by 3000 kilowatts or more are eligible to enter into a RLA
contract with KEPCO. Customers who choose to participate in this
program must reduce their load upon KEPCO's request, or pay a surcharge
to KEPCO.
Customers can apply for this program between May 1 and May 15 of
each year. If KEPCO finds the application in order, KEPCO and the
customer enter into a contract with respect to the RLA discount. The
RLA discount is provided based upon a contract for two months, normally
July and August. Under this program, a basic discount of 440 won per
kilowatt is granted between July 1 and August 31, regardless of whether
KEPCO makes a request for a customer to reduce its load.
During the POI, SEC received an RLA discount for July and August
2001. Hynix did not participate in the program during the POI.
The Department has previously found this program to be
countervailable. See Sheet and Strip, 64 FR 30636, and Cold-Rolled
Steel, 67 FR 62102 and accompanying September 23, 2002 Decision
Memorandum at page 18, Section I.M. Specifically, we found this program
specific under section 771(5A)(D)(iii)(I) of the Act because the
discounts were distributed to a limited number of customers. A
financial contribution is provided within the meaning of section
771(5)(D)(ii) of the Act in the form of revenue foregone by the
government, with the benefit being a discount on the company's monthly
electricity charge. No party has provided any new information to
warrant reconsideration of this determination. Therefore, we
preliminarily determine this program to be countervailable pursuant to
section 771(5) of the Act.
Consistent with Sheet and Strip and Cold-Rolled Steel, because the
electricity discounts provide recurring benefits, we have expensed the
benefit from this program in the year of receipt. To measure the
benefit from this program, we summed the electricity discounts which
SEC received from KEPCO under the RLA program during the POI. We then
divided that amount by SEC's total sales value for the POI. On this
basis, we determine a net countervailable subsidy of 0.00 percent ad
valorem for SEC.
D. Operation G-7/HAN Program
Under the Framework Act on Science and Technology, the GOK made
direct financial contributions in the form of interest-free loans to
respondent companies under the Operation G-7/HAN Program. These loans
were provided as matching funds in support of the Next Generation
Semiconductor Technology Project from 1993 through 1997 through the
Ministry of Science and Technology (``MOST''), the Ministry of
Commerce, Industry, and Energy, and other administrative authorities.
Both Hynix and SEC report that they had loans that were outstanding
during the POI under this program.
We preliminarily determine that this program is specific within the
meaning of section 771(5A)(D)(i) of the Act because it is limited to
the
[[Page 16781]]
semiconductor industry. In addition, we preliminarily determine that a
financial contribution was provided under section 771(5)(D)(i) of the
Act in the form of direct loans from the GOK. Finally, pursuant to
section 771(5)(E) of the Act, we preliminarily determine that the
benefit conferred by this program is the difference between the amount
the companies paid on the loans and the amount the companies would pay
on comparable commercial loans.
Consistent with section 771(5)(D)(i) of the Act and 19 CFR
351.505(c)(2), we calculated the benefit from these loans by comparing
the interest actually paid on the loans during the POI to what the
companies should have paid during the POI. We used as our benchmarks
the rates described in the ``Discount Rates and Benchmarks for Loans''
section, above. We then divided the total benefit from the loans for
each company by the company's total sales in the POI to calculate the
total countervailable subsidy. On this basis, we preliminarily
determine that countervailable benefits of 0.14 percent ad valorem and
0.01 percent ad valorem exist for Hynix and SEC, respectively.
E. 21st Century Frontier R&D Program
The 21st Century Frontier R&D program is a GOK program established
in 2000 that provides loans to semiconductor manufacturers in the form
of matching funds for research and development to overcome the
technological limits of next-generation semiconductor technology, among
other goals. The GOK made direct financial contributions under this
program in the form of interest-free loans through the MOST and other
administrative authorities.
SEC claims that it did not receive any loans under this program.
Hynix reports that it had loans outstanding during the POI under this
program.
We preliminarily determine that this program is specific within the
meaning of section 771(5A)(D)(i) of the Act, because it is limited to
the semiconductor industry. In addition, we preliminarily determine
that a financial contribution was provided under section 771(5)(D)(i)
of the Act in the form of direct loans from the GOK. Finally, pursuant
to section 771(5)(E) of the Act, we preliminarily determine that the
benefit conferred by this program is the difference between the amount
the companies paid on the loan and the amount the companies would pay
on comparable commercial loans.
Consistent with section 771(5)(D)(i) of the Act, we calculated the
benefit from these loans by comparing the interest actually paid on the
loans during the POI to what the companies should have paid during the
POI. We used as our benchmarks the benchmarks discussed in the
``Discount Rates and Benchmarks for Loans'' section above. We then
divided the total benefit from the loans for each company by the
company's total sales in the POI to calculate the total countervailable
subsidy. On this basis, we preliminarily determine that a
countervailable benefit of 0.00 percent ad valorem exists for Hynix.
II. Programs Preliminarily Determined to Be Not Countervailable
Tax Programs Under the TERCL and/or the RSTA
1. Reserve for Research and Human Resources Development (formerly
Technological Development Reserve) (Article 9 of RSTA/formerly, Article
8 of TERCL)
Article 8 of the TERCL permits an ROK company operating in
manufacturing or mining, or in a business prescribed by a Presidential
Decree, to set aside funds into a reserve account to cover a company's
planned expenditure for the ``development or innovation'' of
technology. These funds are reported as a loss in the current taxable
year, thus reducing the company's tax liability. Article 8 specifies
that capital goods producers and technology-intensive companies can
establish a reserve of up to five percent of revenue, while companies
in other industries are limited to a three percent reserve. After a
two-year grace period, funds set aside for the reserve must be
allocated as income over a three-year period.
Hynix established a fund in 1996, and evenly distributed the fund
as taxable income in years 1999 through 2001. SEC created a reserve
under this program in 1999; it did not allocate any portion of this
fund as taxable income through the end of the POI.
In CTL Plate, 64 FR 73181, we determined that this program was
countervailable for companies that could claim a five percent tax
reserve, but not for companies that could claim a three percent tax
reserve. Both Hynix and SEC claim that they are only eligible for the
three percent tax reserve. Therefore, we preliminarily determine that
this program is not countervailable with respect to Hynix and SEC
because neither was eligible for the countervailable reserve.
2. Tax Credit for Research and Human Resources Development Expenses
(Article 10 of RSTA/Article 9 of TERCL)
Article 10 of the RSTA replaced Article 9 of the TERCL at the
beginning of 2001. It provides a tax credit for certain qualifying
expenses related to research and human resources development
(``R&HRD''), deductible from individual or corporate income tax. Under
Article 9 of the TERCL, the credit was limited to certain mining,
manufacturing, or other businesses (including computer companies), as
specified by the implementing Presidential Decree. Under Article 10 of
the RSTA, however, eligibility was extended to all domestic businesses,
except for those in real estate or consumptive services. There are two
methods for calculating the credit, under which the amount is equal to
either (1) 50 percent of the amount by which the R&HRD expense incurred
for the relevant tax year exceeds the yearly average of R&HRD expenses
incurred over the four years preceding the tax year; or (2) 15 percent
of R&HRD expenses for the tax year. Persons other than small and medium
enterprises, however (e.g., large corporations) may claim credits only
pursuant to the first method.
Hynix claims it was not eligible for this program during the POI
and, hence, claimed no tax credits and received no benefits under the
program during the POI. SEC claimed credits and received tax benefits
under this program in its tax returns for 2000 and 2001, which were
applicable to its tax liabilities during the POI.
Based on the record evidence, we find no indication that this
program is specific on any basis under section 771(5A). Therefore, we
preliminarily determine that benefits received under this program are
not countervailable.
3. Tax Credit for Investment in Facilities for Productivity Enhancement
(Article 24 of RSTA/Article 25 of TERCL)
Article 24 of the RSTA, which is the Tax Credit for Investment in
Facilities for Productivity Enhancement, provides tax credits for
investments in specified capital equipment. We have previously
determined that tax credits received pursuant to these investment
programs for investments made after April 10, 1998 are not
countervailable because a distinction between investment in domestic
versus foreign-made goods was eliminated. See Final Results and Partial
Rescission of Countervailing Duty Administrative Review: Stainless
Steel Sheet and Strip From the Republic of Korea, 68 FR 13267 (March
19, 2003) and accompanying March 10, 2003 Decision Memorandum at page
11, Section III.A.8.
Both SEC and Hynix claimed exemptions under Article 24 of the RSTA.
All of SEC's tax credits resulted
[[Page 16782]]
from investments made after April 10, 1998. Therefore, we preliminarily
conclude that SEC did not receive countervailable benefits under this
program. Additionally, Hynix reported no taxable income for the POI
and, therefore, claimed no credits and received no benefits under this
tax program.
4. Tax Credit for Investment in Facilities for Special Purposes
(Article 25 of RSTA)
Article 25 of the RSTA provides tax credits equal to three percent
of the company's investment in specified facilities related to, among
other things, environmental and health and safety measures. The credits
are deducted from the company's corporate income tax liability. Article
25 of the RSTA was among the programs found in Cold-Rolled Steel to
have eliminated the import substitution tax advantage for eligible
investments made after April 10, 1998. Thus, tax credits based on
investments made after that date are not countervailable.
Hynix reported no taxable income for the POI and, therefore,
claimed no credits and received no benefits under this tax program. SEC
claimed credits under this program in its 2001 tax return for tax year
2000, but not in its 2002 tax return for tax year 2001. However, SEC
reports that all tax credits it earned under the program for the POI
were based on investments made after April 10, 1998. Moreover, SEC
reports that it did not carry forward any tax credits from years prior
to April 10, 1998. Therefore, we preliminarily find that neither Hynix
nor SEC received a benefit from this program during the POI.
III. Programs Preliminarily Determined Not To Have Been Used
Based on the information provided in the responses, we determine no
responding companies applied for or received benefits under the
following programs during the POI:
A. Short-Term Export Financing
B. Tax Programs Under the TERCL and/or the RSTA
1. Reserve for Overseas Market Development (formerly, Article 17 of
TERCL)
2. Reserve for Export Loss (formerly, Article 16 of TERCL)
3. Tax Exemption for Foreign Technicians (Article 18 of RSTA)
4. Reduction of Tax Regarding the Movement of a Factory That Has Been
Operated for More Than Five Years (Article 71 of RSTA)
C. Tax Reductions or Exemption on Foreign Investments under Article 9
of the Foreign Investment Promotion Act (``FIPA'')/FIPA (Formerly
Foreign Capital Inducement Law)
D. Duty Drawback on Non-Physically Incorporated Items and Excessive
Loss Rates
E. Export Insurance
The Korean Export Insurance Corporation (``KEIC'') was established
pursuant to the Export Insurance Act of 1968 for the purpose of
providing export insurance. Insurance policies issued to ROK companies
through this program provide protection from risks such as payment
refusal and buyer's breach of contract. Claims are paid from the Export
Insurance Fund, which is managed by the KEIC and is funded by
contributions from the GOK and the private sector via premium payments.
The KEIC determines premium rates by considering numerous factors,
including the creditworthiness of the importing party and the term of
the policy. Hynix and SEC both participated in this program during the
POI.
To determine whether an export insurance program provides a
countervailable benefit, we first examine whether premium rates charged
are adequate to cover the program's long-term operating costs and
losses. See 19 CFR 351.520(a)(1). In doing so, the Department will
analyze both the viability of the program and the overall commercial
health of the entity operating the program. In examining whether rates
are manifestly inadequate, the Department will examine a five-year
period, POI inclusive. See Preamble, 63 FR at 65385.
The GOK reports that the KEIC export insurance program has
experienced operating losses for all of these years, and that the GOK
has been covering the losses incurred by this program. Therefore, we
preliminarily determine that the premium rates that are being charged
are inadequate pursuant to 19 CFR 351.520(a)(1). If the Department
determines that premium rates are inadequate, pursuant to 19 CFR
351.520(a)(2), the benefit amount is calculated as the net amount of
compensation received (compensation received less premium fees paid).
Thus, consistent with the Final Affirmative Countervailing Duty
Determination: Carbon Steel Butt-Weld Pipe Fittings From Israel, 60 FR
10569, 10571 (February 27, 1995), we examined export insurance
expressly related to DRAMS exported to the United States. SEC did not
make any claims or receive any pay-outs from the KEIC related to DRAMS
during the POI; Hynix reported that it also did not receive any pay-
outs during the POI. Therefore, we preliminarily determine that neither
SEC nor Hynix received a countervailable benefit pursuant to this
program within the meaning of section 771(5)(E) of the Act during the
POI.
IV. Program Preliminarily Determined To Not Exist
Based on the information provided in the responses, we
preliminarily determine that the following program does not exist:
Won 680 Billion Bond Guarantee
V. Programs for Which We Did Not Make a Preliminary Determination
As noted above, because we received several new subsidy allegations
from the petitioner only 40 days prior to this preliminary
determination, and were not able to initiate an investigation of two of
these programs until four weeks before the preliminary determination
(as discussed in the New Subsidy Allegations Memo), we had insufficient
time prior to this preliminary determination to properly analyze the
data and information submitted in response to these new programs.
However, we will make a finding on the following new programs in the
final determination:
A. Import Duty Reduction for Cutting Edge Products
B. Permission for Hynix and SEC To Build in Restricted Area
Verification
In accordance with section 782(i)(1) of the Act, we will verify the
information submitted by the respondents prior to making our final
determination.
Suspension of Liquidation
In accordance with section 703(d)(1)(A)(i) of the Act, we
calculated an individual rate for each manufacturer of the subject
merchandise. We preliminarily determine the total estimated net
countervailable subsidy rates for Hynix and SEC to be the following:
Net subsidy
Producer/Exporter rate
(percent)
Samsung Electronics Co., Ltd............................... 0.16
Hynix Semiconductor Inc. (formerly, Hyundai Electronics 57.37
Industries Co., Ltd.).....................................
All Others................................................. 57.37
In accordance with sections 777A(e)(2)(B) and 705(c)(5)(A) of the
Act, we have set the ``all others'' rate as
[[Page 16783]]
Hynix' rate because the rate for SEC, the only other investigated
company, is de minimis.
Pursuant to section 703(d) of the Act, we are directing the U.S.
Customs Service to suspend liquidation of all entries of DRAMS from the
ROK (except for entries from SEC) that are entered, or withdrawn from
warehouse, for consumption on or after the date of the publication of
this notice in the Federal Register, and to require a cash deposit or
bond for such entries of the merchandise (except for entries from SEC)
in the amounts indicated above. Entries from SEC are not subject to
this suspension of liquidation because we have preliminarily determined
its rate to be de minimis. This suspension will remain in effect until
further notice.
ITC Notification
In accordance with section 703(f) of the Act, we will notify the
ITC of our determination. In addition, we are making available to the
ITC all nonprivileged and nonproprietary information relating to this
investigation. We will allow the ITC access to all privileged and
business proprietary information in our files, provided the ITC
confirms that it will not disclose such information, either publicly or
under an administrative protective order, without the written consent
of the Assistant Secretary for Import Administration.
In accordance with section 705(b)(3) of the Act, if our final
determination is affirmative, the ITC will make its final determination
within 45 days after the Department makes its final determination.
Public Comment
Case briefs for this investigation must be submitted no later than
one week after the issuance of the last verification report. Rebuttal
briefs must be filed within five days after the deadline for submission
of case briefs. A list of authorities relied upon, a table of contents,
and an executive summary of issues should accompany any briefs
submitted to the Department. Executive summaries should be limited to
five pages total, including footnotes.
Section 774 of the Act provides that the Department will hold a
public hearing to afford interested parties an opportunity to comment
on arguments raised in case or rebuttal briefs, provided that such a
hearing is requested by an interested party. If a request for a hearing
is made in this investigation, the hearing will tentatively be held two
days after the deadline for submission of the rebuttal briefs at the
U.S. Department of Commerce, 14th Street and Constitution Avenue, NW.,
Washington, DC 20230. Parties should confirm by telephone the time,
date, and place of the hearing 48 hours before the scheduled time.
Interested parties who wish to request a hearing, or to participate
if one is requested, must submit a written request to the Assistant
Secretary for Import Administration, U.S. Department of Commerce, Room
1870, within 30 days of the publication of this notice. Requests should
contain: (1) The party's name, address, and telephone number; (2) the
number of participants; and (3) a list of the issues to be discussed.
Oral presentations will be limited to issues raised in the briefs.
This determination is published pursuant to sections 703(f) and
777(i) of the Act.
Dated: March 31, 2003.
Joseph A. Spetrini,
Acting Assistant Secretary for Import Administration.
[FR Doc. 03-8409 Filed 4-4-03; 8:45 am]