1 See Final Affirmative Countervailing Duty Determination: Structural Steel Beams From the Republic of
Korea, 65 FR 41051 (July 3, 2000).

70 FR 53167, September 7, 2005

C-580-842

Sunset Review

Public Document

O3/MGS

August 30, 2005


MEMORANDUM TO: Joseph A. Spetrini

Acting Assistant Secretary

for Import Administration


FROM: Barbara E. Tillman

Acting Deputy Assistant Secretary

for Import Administration


SUBJECT: Issues and Decision Memorandum for the Final Results of the Expedited Sunset
Review of the Countervailing Duty Order on Structural Steel Beams from South
Korea

Summary

We have analyzed the substantive response of the interested parties in the sunset review
of the countervailing duty (“CVD”) order covering structural steel beams from South Korea. We
recommend that you approve the positions we have developed in the Discussion of the Issues
section of this memorandum. Below is the complete list of the issues in this sunset review for
which we received a substantive response:

1. Likelihood of continuation or recurrence of a countervailable subsidy

2. Net countervailable subsidy likely to prevail

3. Nature of the subsidy


History of the Order

The Department of Commerce (“the Department”) published its final affirmative
countervailing duty determination on structural steel beams from South Korea in the Federal
Register on July 3, 2000.1 In the final determination the Department found estimated net subsidy
rates of 3.88 percent for Kangwon Industries (“Kangwon”), 1.34 percent for Dongkuk Steel Mill
Co., Ltd. (“DSM”), 0.15 percent for Inchon Iron and Steel Co., Ltd. (“Inchon”) and 3.87 percent
for All Others. In the investigation, the Department found that

2 Domestic interested parties include: the Committee for Fair Beam Imports and its individual members
including Nucor Corp. (“Nucor”), Nucor-Yamato Steel Co. (“Nucor-Yamato”), Steel Dynamics, Inc. (“SDI”), and
TXI-Chaparral Steel, Inc. (“TXI”) (collectively “domestic interested parties”).

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manufacturers/producers/exporters of structural steel beam received benefits under the following
programs: the Government of Korea’s (“GOK”) direction of credit, Reserve for Export Loss
under Article 16 of the Tax Exemption and Reduction Control Act (“TERCL”), Reserve for
Overseas Market Development under TERCL Article 17, Investment Tax Credits under TERCL
Article 25, Asset Revaluation under TERCL Article 56(2), Electricity Discounts under the
Requested Loan Adjustment, Scrap Reserve Fund, Export Industry Facility Loans, Special Cases
of Tax for Balanced Development in selected areas under TERCL Article 43, Price Discount for
DSM Land purchase at Asan Bay, and R&D Grants under the Korea New Iron & Steel
Technology Research Association.

On August 14, 2000, the Department issued the CVD order, utilizing the subsidy rates
found in the original investigation. Because Inchon’s net subsidy was de minimis, Inchon was
excluded from the order. See Notice of Countervailing Duty Order: Structural Steel Beams from
the Republic of Korea, 65 FR 49542 (August 14, 2000). The Department has not conducted an
administrative review on this order.

Discussion of Issues

In accordance with section 751(c)(1) of the Tariff Act of 1930, as amended (“the Act”)
the Department is conducting this review to determine whether revocation of the CVD order
would be likely to lead to continuation or recurrence of a countervailable subsidy. Section
752(b) of the Act provides that, in making this determination, the Department shall consider the
net countervailable subsidy determined in the investigation and subsequent reviews, and whether
any change in the programs which gave rise to the net countervailable subsidy has occurred that
is likely to affect that net countervailable subsidy. Pursuant to section 752(b)(3) of the Act, the
Department shall provide to the International Trade Commission (“the ITC”) the net
countervailable subsidy likely to prevail if the order is revoked. In addition, consistent with
section 752(a)(6) of the Act, the Department shall provide to the ITC information concerning the
nature of the subsidy and whether it is a subsidy described in Article 3 or Article 6.1 of the 1994
WTO Agreement on Subsidies and Countervailing Measures (“SCM”).

Below we address the substantive responses of the interested parties.

1. Continuation or Recurrence of a Countervailable Subsidy

Interested Parties’ Comments

In its substantive response, domestic interested parties2 argue that revocation of the CVD
order on structural steel beams from South Korea will result in the continuation or recurrence of

3 See June 1, 2005, Substantive Response of domestic interested parties at page 5-6.

4 See June 1, 2005, Substantive response of domestic interested parties response at page 6.

5 See June 1, 2005, Substantive response of domestic interested parties response at page at 7.

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a countervailable subsidy. The domestic interested parties assert that continuation, or temporary
or partial termination, of a subsidy program is highly probative of the likelihood of continuation
or recurrence of countervailable subsidies, absent significant evidence to the contrary.3 Domestic
interested parties contend that many of the programs found to be countervailable are allocated
over a 15-year allocation stream, which would continue to provide a benefit through at least 2006
for long-term loans and 2013 for government-directed credit.4 Therefore, domestic interested
parties argue that revocation of the countervailing duty order would likely lead to continuation or
recurrence of subsidies of subject merchandise.

Department’s Position

The continued use of a program is highly probative of the likelihood of continuation or
recurrence of countervailable subsidies if the order were revoked. Additionally, the presence of
programs that have not been used, but have also not been terminated, is also probative of the
likelihood of continuation or recurrence of a countervailable subsidy.

In the instant review, the Department did not receive a response from the foreign
government or from any other respondent interested party. Absent argument or evidence to the
contrary, we find that countervailable programs continue to exist and be used. In addition, we
agree with the domestic interested parties that the benefit stream of some programs continues
through 2006. Therefore, because countervailable programs continue to exist and be used, the
foreign government and other respondent interested parties did not participate in this review
before the Department, and absent argument to the contrary, the Department concludes that
revocation of the order would likely lead to a continuation or recurrence of a countervailable
subsidy for all respondent interested parties.

2. Net Countervailable Subsidy Likely to Prevail

Interested Parties’ Comments

The domestic interested parties assert that the rate from the investigation is the net
countervailable subsidy likely to prevail if the order is revoked, because that is the only
calculated rate that reflects the behavior of exporters and foreign governments without the
discipline of an order in place.5 Further, in the absence of an administrative review, there is no
basis to determine that any other rate would be appropriate. Therefore, domestic interested
parties argue that the Department should determine that the net countervailable subsidy likely to

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prevail is the rate from the original investigation: 3.88 percent for Kangwon, 1.34 percent for
DSM and 3.87 percent for all others.

Department’s Position

As noted above, the Department has not completed an administrative review of this order.
However, the Department has conducted administrative reviews on other Korean orders in which
several of the programs found to provide benefits in the investigation of structural steel beams
were reviewed. For example, the Department found that on December 28, 1998, the Tax
Reduction and Exemption Control Act (“TERCL”) was replaced by the Restriction of Special
Taxation Act (“RSTA”), which continued to provide countervailable benefits. See Final Results
of Countervailing Duty Administrative Review: Stainless Steel Sheet and Strip in Coils from the
Republic of Korea, 69 FR 2113 (January 14, 2004), as amended, Amended Final Results of
Countervailing Duty Administrative Review: Stainless Steel Sheet and Strip in Coils from the
Republic of Korea, 69 FR 7419 (February 17, 2004). See also, Final Results of Expedited Sunset
Review of Countervailing Duty Order: Stainless Steel Sheet and Strip in Coils from the
Republic of Korea, 68 FR 75513 (December 17, 2004) and referenced unpublished
memorandum. In addition, in Cold-Rolled from Korea we found that benefits under investment
tax credits, TERCL Article 25, were eliminated after April 10, 1998, as the difference in tax rate
between making domestic or foreign investment was eliminated. See Notice of Final Affirmative
Countervailing Duty Determination: Certain Cold-Rolled Carbon Steel Flat Products from the
Republic of Korea, 67 FR 62102 (October 3, 2002) and the accompanying Issues and Decision
Memorandum at page 12 (“Cold-Rolled from Korea”). Therefore, we find that this program no
longer will provide a benefit to producers/manufacturers or exporters of subject merchandise.
However, only Inchon, a company excluded from the order, used this program during the
investigation. Therefore, the elimination of this program is not relevant to the other companies’
rates or the “All Others” rate. As a result, the Department determines that the net countervailable
subsidy that would be likely to prevail in the event of revocation of the order would be 3.88
percent for Kangwon, 1.34 percent for DSM and 3.87 percent for all others.

3. Nature of the Subsidy

Consistent with section 752(a)(6) of the Act, the Department is providing the following
information to the ITC information concerning the nature of the subsidy, and whether the subsidy
is a subsidy as described in Article 3 or Article 6.1 of the SCM. We note that Article 6.1 of the
SCM expired effective January 1, 2000.

Reserve for Export Loss under TERCL Article 16: Under Article 16 of the TERCL, a
domestic person engaged in a foreign-currency earning business can establish a reserve
amounting to the lesser of one percent of foreign exchange earnings or 50 percent of net
income for the respective tax year. Losses accruing from the cancellation of an export
contract, or from the execution of a disadvantageous export contract, may be offset by
returning an equivalent amount from the reserve fund to the income account. Any

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amount that is not used to offset a loss must be returned to the income account and taxed
over a three-year period, after a one-year grace period. As we determined in the final
determination, this program is only available to exporters, thus, this program constitutes
an export subsidy because the use of the program is contingent upon export performance.

Reserve for Overseas Market Development under TERCL Article 17: A domestic person
engaged in a foreign trade business can establish a reserve fund equal to one percent of its
foreign trade business exchange earnings from its export business for the respective tax
year. Expenses incurred in developing overseas markets may be offset by returning from
the reserve, to the income account, an amount equivalent to the expense. Any part of the
fund that is not placed in the income account for the purpose of offsetting overseas
market development expenses must be returned to the income account over a three-year
period, after a one-year grace period. As we determined in the final determination, this
program is only available to exporters, thus, this program constitutes an export subsidy
because the use of the program is contingent upon export performance.

Export Industry Facility Loans: The loans were disbursed by the Korean Development
Bank, an institution that, according to information submitted on the record of the
investigation, had a policy of directing loans specifically to the Korean steel industry. As
stated in the final determination, we have determined that this program constitutes an
export subsidy.

The following programs do not fall within the meaning of Article 3.1 of the SCM.
However, they could be subsidies described in Article 6.1 of the SCM if the amount of the
subsidy exceeds five percent, as measured in accordance with Annex IV of the SCM. They also
could fall within the meaning of Article 6.1 if they constitute debt forgiveness or are subsidies to
cover operating losses sustained by an industry or enterprise. However, there is insufficient
information on the record for the Department to make such a determination.

We are providing the ITC with the following program descriptions.

GOK’s direction of Credit through 1991 and from 1992 through 1998: The GOK
controls the practices of lending institutions in Korea and the steel sector receives a
disproportionate share of low-cost, long-term credit, resulting in the conferral of
countervailable benefits.

Asset Revaluation under TERCL Article 56(2): TERCL Article 56-2 (Special Treatment
for Revaluation of Assets at the Time of Going Public) allows a company that is making
an initial public offering to revalue its assets without meeting the requirement in the Asset
Revaluation Act of a 25 percent change in the wholesale price index since the company's
last revaluation.

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Electricity Discounts under the Requested Loan Adjustment: The GOK introduced the
Requested Loan Adjustment (RLA) in 1990 to address emergencies in KEPCO's ability to
supply electricity. Under this program, customers with a contract demand of 5,000 KW
or more, who can curtail their maximum demand by 20 percent or suppress their
maximum demand by 3,000 KW or more, are eligible to enter into an RLA contract with
KEPCO. Under this contract, a basic discount of 440 won per KW is granted between
July 1 and August 31, regardless of whether KEPCO makes a request for a customer to
reduce its load. Because the electricity discounts were only provided to a small number
of customers, this program provides a countervailable benefit.

Scrap Reserve Fund: This program is administered by a GOK agency that purchases
certain industries’ inputs to production and then makes the inputs available to producers
on credit. In order to reduce the burden on Kangwon and DSM of holding large
inventories of scrap during the period of investigation, the GOK agency purchased steel
scrap on behalf of the companies and then provided them with a five-month repayment
option in the form of a loan.

Special Cases of Tax for Balanced Development in selected areas under TERCL Article
43: This tax article allows a company to claim a tax reduction or exemption for income
gained from relocating factory facilities from a large city to a rural area. DSM was
entitled to receive an exemption when it closed down its facility in Pusan and began
production at its Pohang plant. This program is regionally specific and is therefore
countervailable.

Price Discount for DSM Land purchase at Asan Bay: In 1995, DSM purchased land at
the Asan Bay Industrial Site, a GOK constructed industrial estate. We found that there
was a difference between the total cost of the land and the amount that DSM paid for the
land. This difference was the result of the GOK reducing the land amount by ten percent
and waiving of a management fee. This constitutes a benefit as foregone revenue to the
GOK.

R&D Grants under the Korea New Iron & Steel Technology Research Association: This
association supports R&D projects through private and public contributions. If the
research is deemed successful, then 50 percent of the GOK’s contribution will be repaid.

Final Results of Review

We determine that revocation of the countervailing duty order would be likely to lead to
continuation or recurrence of a countervailable subsidy at the rates listed below:

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Manufacturer/Exporter Margin (percent)

Kangwon Industries 3.88

Dongkuk Steel Mill Co., Ltd. 1.34

All Others 3.87


Recommendation

Based on our analysis of the substantive response received, we recommend adopting all
of the above positions. If these recommendations are accepted, we will publish in the final
results of review in the Federal Register.

AGREE: _____ DISAGREE: _____

Joseph A. Spetrini

Acting Assistant Secretary

for Import Administration

(Date)