Korea 06-828

71 FR 50886

DEPARTMENT OF COMMERCE

International Trade Administration

(C-580-835)

Preliminary Results of Countervailing Duty Administrative Review:
Stainless Steel Sheet and Strip in Coils from the Republic of Korea

AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
SUMMARY: The Department of Commerce (the Department) is conducting an
administrative review of the countervailing duty (CVD) order on
stainless steel sheet and strip in coils from the Republic of Korea
(Korea) for the period January 1, 2004, through December 31, 2004. We
preliminarily find that the net subsidy rate for the producer/exporter
under review is de minimis. See the ``Preliminary Results of Review''
section of this notice. Interested parties are invited to comment on
these preliminary results. (See the ``Public Comment'' section of this
notice).

EFFECTIVE DATE: August 28, 2006.

FOR FURTHER INFORMATION CONTACT: Preeti Tolani or Darla Brown, AD/CVD
Operations, Office 3, Import Administration, U.S. Department of
Commerce, Room 4012, 14th Street and Constitution Avenue, NW,
Washington, DC 20230; telephone: (202) 482-0395 or (202) 482-2849,
respectively.

SUPPLEMENTARY INFORMATION:

Background

On August 6, 1999, the Department published in the Federal Register
the CVD order on stainless steel sheet and strip in coils from Korea.
See Amended Final Determination: Stainless Steel Sheet and Strip in
Coils from the Republic of Korea; and Notice of Countervailing Duty
Orders: Stainless Steel Sheet and Strip from France, Italy and the
Republic of Korea, 64 FR 42923 (August 6, 1999) (Amended Sheet and
Strip). On August 1, 2005, the Department published a notice of
opportunity to request an administrative review of this CVD order. See
Antidumping or Countervailing Duty Order, Finding, or Suspended
Investigation; Opportunity to Request Administrative Review, 70 FR
44085 (August 1, 2005). On August 31, 2005, we received a timely
request for review from Dai Yang Metal Co., Ltd. (DMC). On September
28, 2005, the Department published a notice of initiation of the
administrative review of the CVD order on stainless steel sheet and
strip in coils from the Republic of Korea covering the period of review
(POR) January 1, 2004, through December 31, 2004. See Initiation of
Antidumping and Countervailing Duty Administrative Reviews and Requests
for Revocation in Part, 70 FR 56631 (September 28, 2005). On October
19, 2005, the Department sent questionnaires to DMC and the Government
of Korea (GOK). On December 21, 2005, the Department received
questionnaire responses from DMC and the GOK. On March 31, 2006, DMC
and the GOK submitted responses to the Department's March 17, 2006,
supplemental questionnaires. On April 26, 2006, the Department
published in the Federal Register an extension of the preliminary
results deadline. See Stainless Steel Sheet and Strip in Coils from the
Republic of Korea: Extension of Preliminary Results of Countervailing
Duty Administrative Review, 71 FR 24644. On July 14, 2006, DMC and the
GOK submitted responses to the Department's June 30, 2006, supplemental
questionnaires.
In accordance with 19 CFR 351.213(b), this review covers only those
producers or exporters for which a review was specifically requested.
The only company subject to this review is DMC.

Scope of Order

The products subject to this order are certain stainless steel
sheet and strip in coils. Stainless steel is an alloy steel containing,
by weight, 1.2 percent or less of carbon and 10.5 percent or more of
chromium, with or without other elements. The subject sheet and strip
is a flat-rolled product in coils that is greater than 9.5 mm in width
and less than 4.75 mm in thickness and that is annealed or otherwise
heat treated and pickled or otherwise descaled. The subject sheet and
strip may also be further processed (e.g., cold-rolled, polished,
aluminized, coated), provided that it maintains the specific dimensions
of sheet and strip following such processing.
The merchandise subject to this order is currently classifiable in
the Harmonized Tariff Schedule of the United States (HTSUS) at
subheadings: 7219.13.00.30, 7219.13.00.50, 7219.13.00.70,
7219.13.00.80, 7219.14.00.30, 7219.14.00.65, 7219.14.00.90,
7219.32.00.05, 7219.32.00.20, 7219.32.00.25, 7219.32.00.35,
7219.32.00.36, 7219.32.00.38, 7219.32.00.42, 7219.32.00.44,
7219.33.00.05, 7219.33.00.20, 7219.33.00.25, 7219.33.00.35,
7219.33.00.36, 7219.33.00.38, 7219.33.00.42, 7219.33.00.44,
7219.34.00.05, 7219.34.00.20, 7219.34.00.25, 7219.34.00.30,
7219.34.00.35, 7219.35.00.05, 7219.35.00.15, 7219.35.00.30,
7219.35.00.35, 7219.90.00.10, 7219.90.00.20, 7219.90.00.25,
7219.90.00.60, 7219.90.00.80, 7220.12.10.00, 7220.12.50.00,
7220.20.10.10, 7220.20.10.15, 7220.20.10.60, 7220.20.10.80,
7220.20.60.05, 7220.20.60.10, 7220.20.60.15, 7220.20.60.60,
7220.20.60.80, 7220.20.70.05, 7220.20.70.10, 7220.20.70.15,
7220.20.70.60, 7220.20.70.80, 7220.20.80.00, 7220.20.90.30,
7220.20.90.60, 7220.90.00.10, 7220.90.00.15, 7220.90.00.60, and
7220.90.00.80. Although the HTSUS subheadings are provided for
convenience and customs purposes, the Department's written description
of the merchandise is dispositive.
Excluded from the scope of this order are the following: (1) sheet
and strip that is not annealed or otherwise heat treated and pickled or
otherwise descaled, (2) sheet and strip that is cut to length, (3)
plate (i.e., flat-rolled stainless steel products of a thickness of
4.75 mm or more), (4) flat wire (i.e., cold-rolled sections, with a
prepared edge, rectangular in shape, of a width of not more than 9.5
mm), and (5) razor blade steel. Razor blade steel is a flat rolled
product of stainless steel, not further worked than cold-rolled (cold-
reduced), in coils, of a width of not

[[Page 50887]]

more than 23 mm and a thickness of 0.266 mm or less, containing, by
weight, 12.5 to 14.5 percent chromium, and certified at the time of
entry to be used in the manufacture of razor blades. See Chapter 72 of
the HTSUS, ``Additional U.S. Note'' 1(d).
The Department has determined that certain specialtystainless steel
products are also excluded from the scope of this order. These excluded
products are described below:
Flapper valve steel is defined as stainless steel strip in coils
containing, by weight, between 0.37 and 0.43 percent carbon, between
1.15 and 1.35 percent molybdenum, and between 0.20 and 0.80 percent
manganese. This steel also contains, by weight, phosphorus of 0.025
percent or less, silicon of between 0.20 and 0.50 percent, and sulfur
of 0.020 percent or less. The product is manufactured by means of
vacuum arc remelting, with inclusion controls for sulphide of no more
than 0.04 percent and for oxide of no more than 0.05 percent. Flapper
valve steel has a tensile strength of between 210 and 300 ksi, yield
strength of between 170 and 270 ksi, plus or minus 8 ksi, and a
hardness (Hv) of between 460 and 590. Flapper valve steel is most
commonly used to produce specialty flapper valves in compressors.
Also excluded is a product referred to as suspension foil, a
specialty steel product used in the manufacture of suspension
assemblies for computer disk drives. Suspension foil is described as
302/304 grade or 202 grade stainless steel of a thickness between 14
and 127 microns, with a thickness tolerance of plus-or-minus 2.01
microns, and surface glossiness of 200 to 700 percent Gs. Suspension
foil must be supplied in coil widths of not more than 407 mm, and with
a mass of 225 kg or less. Roll marks may only be visible on one side,
with no scratches of measurable depth. The material must exhibit
residual stresses of 2 mm maximum deflection, and flatness of 1.6 mm
over 685 mm length.
Certain stainless steel foil for automotive catalytic converters is
also excluded from the scope of this order. This stainless steel strip
in coils is a specialty foil with a thickness of between 20 and 110
microns used to produce a metallic substrate with a honeycomb structure
for use in automotive catalytic converters. The steel contains, by
weight, carbon of no more than 0.030 percent, silicon of no more than
1.0 percent, manganese of no more than 1.0 percent, chromium of between
19 and 22 percent, aluminum of no less than 5.0 percent, phosphorus of
no more than 0.045 percent, sulfur of no more than 0.03 percent,
lanthanum of between 0.002 and 0.05 percent, and total rare earth
elements of more than 0.06 percent, with the balance iron.
Permanent magnet iron-chromium-cobalt alloy stainless strip is also
excluded from the scope of this order. This ductile stainless steel
strip contains, by weight, 26 to 30 percent chromium, and 7 to 10
percent cobalt, with the remainder of iron, in widths 228.6 mm or less,
and a thickness between 0.127 and 1.270 mm. It exhibits magnetic
remanence between 9,000 and 12,000 gauss, and a coercivity of between
50 and 300 oersteds. This product is most commonly used in electronic
sensors and is currently available under proprietary trade names such
as ``Arnokrome III.''\1\
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\1\ ``Arnokrome III'' is a trademark of the Arnold Engineering
Company.
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Certain electrical resistance alloy steel is also excluded from the
scope of this order. This product is defined as a non-magnetic
stainless steel manufactured to American Society of Testing and
Materials (ASTM) specification B344 and containing, by weight, 36
percent nickel, 18 percent chromium, and 46 percent iron, and is most
notable for its resistance to high temperature corrosion. It has a
melting point of 1390 degrees Celsius and displays a creep rupture
limit of 4 kilograms per square millimeter at 1000 degrees Celsius.
This steel is most commonly used in the production of heating ribbons
for circuit breakers and industrial furnaces, and in rheostats for
railway locomotives. The product is currently available under
proprietary trade names such as ``Gilphy 36.''\2\
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\2\ ``Gilphy 36'' is a trademark of Imphy, S.A.
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Certain martensitic precipitation-hardenable stainless steel is
also excluded from the scope of this order. This high-strength, ductile
stainless steel product is designated under the Unified Numbering
System (UNS) as S45500-grade steel, and contains, by weight, 11 to 13
percent chromium and 7 to 10 percent nickel. Carbon, manganese, silicon
and molybdenum each comprise, by weight, 0.05 percent or less, with
phosphorus and sulfur each comprising, by weight, 0.03 percent or less.
This steel has copper, niobium, and titanium added to achieve aging,
and will exhibit yield strengths as high as 1700 Mpa and ultimate
tensile strengths as high as 1750 Mpa after aging, with elongation
percentages of 3 percent or less in 50 mm. It is generally provided in
thicknesses between 0.635 and 0.787 mm, and in widths of 25.4 mm. This
product is most commonly used in the manufacture of television tubes
and is currently available under proprietary trade names such as
``Durphynox 17.''\3\
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\3\ ``Durphynox 17'' is a trademark of Imphy, S.A.
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Finally, three specialty stainless steels typically used in certain
industrial blades and surgical and medical instruments are also
excluded from the scope of this order. These include stainless steel
strip in coils used in the production of textile cutting tools (e.g.,
carpet knives).\4\ This steel is similar to ASTM grade 440F, but
containing, by weight, 0.5 to 0.7 percent of molybdenum. The steel also
contains, by weight, carbon of between 1.0 and 1.1 percent, sulfur of
0.020 percent or less and includes between 0.20 and 0.30 percent copper
and between 0.20 and 0.50 percent cobalt. This steel is sold under
proprietary names such as ``GIN4 HI-C.'' The second excluded stainless
steel strip in coils is similar to AISI 420-J2 and contains, by weight,
carbon of between 0.62 and 0.70 percent, silicon of between 0.20 and
0.50 percent, manganese of between 0.45 and 0.80 percent, phosphorus of
no more than 0.025 percent and sulfur of no more than 0.020 percent.
This steel has a carbide density on average of 100 carbide particles
per square micron. An example of this product is ``GIN5'' steel. The
third specialty steel has a chemical composition similar to AISI 420 F,
with carbon of between 0.37 and 0.43 percent, molybdenum of between
1.15 and 1.35 percent, but lower manganese of between 0.20 and 0.80
percent, phosphorus of no mor than 0.025 percent, silicon of between
0.20 and 0.50 percent, and sulfur of no more than 0.020 percent. This
product is supplied with a hardness of more than Hv 500 guaranteed
after customer processing, and is supplied as, for example, ``GIN6.''
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\4\ This list of uses is illustrative and provided for
descriptive purposes only.
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Subsidies Valuation Information

Benchmark for Long-Term Loans issued through 2004: During the POR,
DMC had both won-denominated and foreign currency-denominated long-term
loans outstanding which it received from government-owned banks and
Korean commercial banks. Based on our findings on this issue in prior
investigations and reviews, we are using the following benchmarks to
calculate the subsidies attributable to respondent's long-term loans
obtained in the years 1991 through 2004:
(1) For countervailable foreign currency-denominated loans,
pursuant to 19 CFR 351.505(a)(2)(i), and consistent with our practice
to date, our preference is to use the company-

[[Page 50888]]

specific weighted-average foreign currency-denominated interest rates
on the company's loans from foreign bank branches in Korea, foreign
securities, and direct foreign loans received after April 1992. See
Final Affirmative Countervailing Duty Determination: Stainless Steel
Sheet and Strip in Coils from the Republic of Korea, 64 FR 30636, 30642
(June 8, 1999) (Stainless Steel Sheet and Strip). See also Final
Negative Countervailing Duty Determination: Stainless Steel Plate in
Coils from the Republic of Korea, 64 FR 15530, 15533 (March 31, 1999)
(Plate in Coils). For variable-rate loans outstanding during the POR,
pursuant to 19 CFR 351.505(a)(2)(i), our preference is to use, as the
benchmark, an interest rate of a variable-rate lending instrument
issued during the POR; and for long-term fixed-rate loans, pursuant to
19 CFR 351.505(a)(2)(iii), our preference is to use a benchmark rate
issued in the same year that the loan was issued. However, no such
benchmark instruments were available, and consistent with our
methodology in the prior administrative review, we relied on the
lending rates as reported by the IMF's International Financial
Statistics Yearbook. See Final Results and Partial Rescission of
Countervailing Duty Administrative Review: Stainless Steel Sheet and
Strip in Coils from the Republic of Korea, 69 FR 2113 (January 14,
2004) (2001 Sheet and Strip), and the ``Subsidies Valuation
Information'' section of the accompanying Issues and Decision
Memorandum (2001 Sheet and Strip Decision Memorandum).
(2) For countervailable won-denominated long-term loans, our
practice is to use the company-specific corporate bond rate on the
company's public and private bonds, as we determined that the GOK did
not control the Korean domestic bond market after 1991, and that
domestic bonds may serve as an appropriate benchmark interest rate. See
Plate in Coils, 64 FR at 15531. Where unavailable, we use the national
average of the yields on three-year 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, in
which we determined that, absent company-specific interest rate
information, the corporate bond rate is the best indicator of a market
rate for won-denominated long-term loans in Korea. Id.

I. Program Preliminarily Determined to Confer Subsidies: The GOK's
Direction of Credit
In the 1993 investigation of steel products from Korea, the
Department determined (1) that the GOK influenced the practices of
lending institutions in Korea; (2) that the GOK regulated long-term
loans provided to the steel industry on a selective basis; and (3) that
the selective provision of these regulated loans resulted in a
countervailable benefit. See Final Affirmative Countervailing Duty
Determination and Final Negative Critical Circumstances Determination:
Certain Steel Products from Korea, 58 FR 37338 (July 9, 1993) (Steel
Products). Accordingly, all long-term loans received by the producers/
exporters of the subject merchandise were treated as countervailable.
The determination in that investigation covered all long-term loans
bestowed through 1991. See id., 58 FR at 37339. This finding of control
was determined to be sufficient to constitute a government program and
government action. See id., 58 FR at 37342. We also determined that (1)
the Korean steel sector, as a result of the GOK's credit policies and
control over the Korean financial sector, received a disproportionate
share of regulated long-term loans, so that the program was, in fact,
specific, and (2) that the interest rates on those loans were
inconsistent with commercial considerations. Id., 58 FR at 37343. Thus,
we countervailed all long-term loans received by the steel sector from
all lending sources. As a result of subsequent litigation, the
Department submitted final results of redetermination on remand
pursuant to Laclede Steel Co. v. United States, 93 F. Supp. 2d. 1276
(CIT, April 5, 2000), finding that only government-owned or -controlled
lending institutions directed credit to the steel industry.
In Stainless Steel Sheet and Strip, 64 FR at 30641-2, we determined
that the provision of long-term loans to DMC resulted in a financial
contribution within the meaning of section 771(5)(D)(i) of the Tariff
Act of 1930, as amended (the Act). We also determined that all
regulated long-term loans provided to the producers/exporters of the
subject merchandise, including DMC, were provided to a specific
enterprise or industry, or group thereof, within the meaning of section
771(5A)(D)(iii)(III) of the Act. See also Final Affirmative
Countervailing Duty Determination: Structural Steel Beams from the
Republic of Korea, 65 FR 41051 (July 3, 2000) (H-beams), and
accompanying Issues and Decision Memorandum (H-Beams Decision
Memorandum) at ``The GOK's Credit Policies through 1991'' section
(finding loans made via the GOK's direction of credit policies provided
a financial contribution that resulted in the conferral of a benefit,
within the meaning of sections 771(5)(D)(i) and 771(5)(E)(ii) of the
Act, respectively, and was specific to the Korean steel industry within
the meaning of section 771(5A)(D)(iii) of the Act.)
In proceedings subsequent to the investigation, with regard to
subsequent periods through 2001, the Department has consistently found
that the GOK's control over lending practices of domestic commercial
banks and government-owned banks continued to be specific to the steel
industry and that such loans conferred a benefit on the producer of the
subject merchandise to the extent that the interest rates on these
loans were lower than the interest rates on comparable commercial
loans, within the meaning of section 771(5)(E)(ii) of the Act. See
Stainless Steel Sheet and Strip, 64 FR at 30641 (covering 1992 through
1997); Plate in Coils, 64 FR at 15332 (regarding 1992 through 1997); H-
beams, 65 FR at 41051 and H-Beams Decision Memorandum at ``The GOK's
Credit Policies from 1992 through 1998'' section (regarding 1998);
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) (1999 Sheet and
Strip) and accompanying Issues and Decision Memorandum (1999 Sheet and
Strip Decision Memorandum) at ``The GOK's Direction of Credit'' section
(regarding 1999); Final Affirmative Countervailing Duty Determination:
Certain Cut-to-Length Carbon-Quality Steel Plate From the Republic of
Korea, 64 FR 73176 at 73180, (December 29, 1999) (CTL Plate) (regarding
1999); Notice of Final Affirmative Countervailing Duty Determination:
Certain Cold-Rolled Carbon Steel Flat Products From the Republic of
Korea, 67 FR 62102 (October 3, 2002) (Cold-Rolled), and accompanying
Issues and Decision Memorandum (Cold-Rolled Decision Memorandum) at
``The GOK Directed Credit'' section (regarding 2000); 2001 Sheet and
Strip, 69 FR 2113 and 2001 Sheet and Strip Decision Memorandum at ``The
GOK's Direction of Credit'' section (regarding 2001).
During the POR, DMC continued to have outstanding loans that were
received prior to the 2001 period. DMC also received a loan during the
POR, but no interest payments were due until after the POR. As stated
above, the Department has found direction of

[[Page 50889]]

credit by the GOK of domestic commercial banks and government-owned
banks to be countervailable through 2001. DMC has not provided any new
information that would warrant a change in these prior findings;
therefore, we continue to find that DMC benefitted from this program
which provides a countervailable subsidy of loans made by government-
owned or -controlled banks through 2001. With regard to the loan
received in 2004, because no interest payments were due during the POR,
it is not necessary for the Department to make any finding on the
direction of credit issue, as it pertains to loans made from 2002
through 2004.

Won-Denominated Loans:

DMC did not have won-denominated loans outstanding during the POR
which could be used for benchmark purposes. For the won-denominated
loans we used the national average of the yields on three-year
corporate bonds, as reported by the BOK, as a benchmark. See
``Subsidies Valuation Information'' section above. To determine the
subsidy amount for the POR from the fixed-rate loans received from GOK-
owned or -controlled banks, we used the difference between the interest
payments made during the POR on the directed loans and the benchmark
interest payments, in accordance with 19 CFR 351.505(c)(2). We then
summed the amounts from all of DMC's long-term fixed-rate won-
denominated loans.

Foreign Currency-Denominated Loans:

DMC did not have foreign currency-denominated loans outstanding
during the POR which could be used for benchmark purposes. For the
foreign currency-denominated loans we used the lending rates as
reported by the IMF's International Financial Statistics Yearbook. See
``Subsidies Valuation Information'' section above. To determine the
subsidy amount for the POR from these loans, we used the difference
between the interest payments that DMC made and the benchmark interest
payments, in accordance with 19 CFR 351.505(c)(2). As the interest
payments were denominated in foreign currencies, we multiplied the
subsidy amount by the exchange rate to establish the subsidy amount in
terms of Korean won.
To calculate the total subsidy amount for all directed credit, we
added the subsidy amount related to foreign currency loans in Korean
won to the subsidy amount related to won-denominated loans. We then
divided the total subsidy amount by DMC's total f.o.b. sales value
during the POR, as this program is not tied to exports or a particular
product. On this basis, we preliminarily determine the countervailable
subsidy to be 0.02 percent ad valorem for DMC.
II. Program Preliminarily Determined Not to Confer a Benefit
A. Reserve Fund for Research and Manpower Development Fund under
Article 8 of TERCL (RSTA Article 9)
On December 28, 1998, the Tax Reduction and Exemption Control Act
(TERCL) was replaced by the Restriction of Special Taxation Act (RSTA).
Pursuant to this change in law, TERCL Article 8 is now identified as
RSTA Article 9. Apart from the name change, the operation of RSTA
Article 9 is the same as the previous TERCL Article 8 and its
Enforcement Decree.
This program allows a company operating in manufacturing or mining,
or in a business prescribed by the Presidential Decree, to appropriate
reserve funds to cover expenses related to the development or
innovation of technology. These reserve funds are included in the
company's losses and reduce the amount of taxes paid by the company.
Under this program, capital goods and capital intensive companies can
establish a reserve of five percent of total revenue, while companies
in all other industries are only allowed to establish a three percent
reserve.
In CTL Plate, 64 FR at 73181, we determined that this program is
specific because the capital goods industry is allowed to claim a
larger tax reserve under this program than all other manufacturers. We
also determined that this program provides a financial contribution
within the meaning of section 771(5)(D)(i) of the Act in the form of a
loan. Companies in the capital goods industry, which includes steel
manufacturers, are provided a benefit by this program to the extent
they enjoy differential tax savings when they contribute more than
three percent to the reserve fund. See CTL Plate, 64 FR at 73181. In
Cold-Rolled, we continued to find the program countervailable, but
found that the company under review did not contribute more than three
percent to the reserve fund and, therefore, did not receive a benefit.
See Cold-Rolled Decision Memorandum at ``Programs Determined to be Not
Used'' section. No new information, or evidence of changed
circumstances has been presented in this review to warrant
reconsideration of the countervailability of this program. DMC did use
this program, but record evidence indicates that DMC did not contribute
to the reserve fund in excess of three percent during the POR.
Therefore, we continue to find this program to be countervailable, but
as DMC did not enjoy any differential tax savings as a result, we do
not find a benefit.
III. Programs Preliminarily Determined To Be Not Used
A. Investment Tax Credits under RSTA Articles 11, 24, 25 and TERCL
Articles 24 and 71
B. Reserve for Export Loss under Article 16 of TERCL
C. Reserve for Overseas Market Development under Article 17 of
TERCL
D. Asset Revaluation under Article 56(2) of TERCL
E. Equipment Investment to Promote Worker's Welfare under Article
88 of TERCL
F. Special Cases of Tax for Balanced Development Among Areas under
Articles 41-45 of TERCL
G. Requested Loan Adjustment Program
H. Emergency Load Reduction Program
I. Export Industry Facility Loan
J. Special Facility Loans
K. Energy Saving Facility Program
L. Research and Development Grants
M. Local Tax Exemption on Land Outside of Metropolitan Area
N. Short-Term Export Financing
O. Exemption of VAT on Imports of Anthracite Coal
P. Excessive Duty Drawback
Q. Special Depreciation of Assets on Foreign Exchange Earnings
R. Export Insurance Rates Provided by the Korean Export Insurance Corporation
S.Loans from the National Agricultural Cooperation Federation
T. Tax Incentives for Highly-Advanced Technology Businesses under the Foreign Investment and Foreign Capital Inducement Act
III. Programs Preliminarily Determined To Be Not Countervailable
A. Electricity Discounts under the Direct Load Interruption Program
(DLI)\5\
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\5\ See Notice of Preliminary Results of Countervailing Duty
Administrative Review: Certain Cut-to-Length Carbon-Quality Steel
Plate from the Republic of Korea, 71 FR 11397, 11401 (March 7,
2006); see also Notice of Final Results of Countervailing Duty
Administrative Review: Certain Cut-to-Length Carbon-Quality Steel
Plate from the Republic of Korea, 71 FR 38861 (July 10, 2006).
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B. Tax Credit for Temporary Investments under Article 27 of TERCL
(RSTA Article 26)
Article 27 of TERCL was replaced by Article 26 of RSTA in 1998.
This article authorizes a tax credit equaling a maximum of ten percent
of the amount a domestic company temporarily invests in eligible
machinery and equipment. In

[[Page 50890]]

the 1997 investigation for this case, the Department found this program
to constitute an import substitution subsidy, as the program was
contingent upon the use of domestic goods over imported goods. See
Stainless Steel Sheet and Strip, 64 FR at 30646. Since the 1997
investigation, the Department has found that the import substitution
advantage under this program was abolished in 1996 under the TERCL. See
Final Affirmative Countervailing Duty Determination: Dynamic Random
Access Memory Semiconductors from the Republic of Korea, 68 FR 37122
(June 23, 2003) (DRAMS), and accompanying Issues and Decision
Memorandum at Page 29 and at Comments 25 and 26. In DRAMS, the
Department found that the GOK no longer provides a favorable tax
treatment for domestic goods over imported goods. Id. Therefore, we
preliminarily determine this program to be not countervailable.
C. Tax Credit for Improving Enterprise's Bill System under Article
7-2 of RSTA
During the POR, DMC applied for a tax credit under Article 7-2 of
RSTA. The GOK states that the program permits any company that uses a
modern corporate billing/promissory note system to make payments for
its purchases from small or medium enterprises to claim a tax credit on
its income taxes. The GOK provided the Department with the language of
the regulation, which allows for three possible methods of payment: (a)
issuing a bill of exchange or settling a request for collection of sale
proceeds, (b) using an exclusive-use card for business purchase, or (c)
using a loan system against security of credit sales claims. The tax
credit is calculated as 0.3 percent of the total amount paid pursuant
to these methods described, but not to exceed 10 percent of a company's
corporate income tax amount.
In conducting the Department's investigation of this tax credit
program, the Department must determine whether the program is specific
within the meaning of section 771(5A) of the Act. We preliminarily
determine that the tax credit under Article 7-2 of RSTA is not de jure
specific within the meaning of sections 771(5A)(D)(i) and (ii) of the
Act, because (1) it is not based on exportation, (2) it is not
contingent on the use of domestic goods over imported goods, and (3)
the legislation and/or regulations do not expressly limit access to the
subsidy to an enterprise or industry, or groups thereof, as a matter of
law.
Where there are reasons to believe that a subsidy may be specific
as a matter of fact, the Department must then examine the program under
section 771(5A)(D)(iii) of the Act. If the Department finds that one of
the following factors exist, then the program is de facto specific.
(I) The actual recipients of the subsidy, whether considered on an
enterprise or industry basis, are limited in number.
(II) An enterprise or industry is a predominant user of the
subsidy.
(III) An enterprise or industry receives a disproportionately large
amount of the subsidy.
(IV) The manner in which the authority providing the subsidy has
exercised discretion in the decision to grant the subsidy indicates
that an enterprise or industry is favored over others.
Pursuant to section 771(5A)(D)(iii)(I) of the Act, the Department
preliminarily finds that under the tax credit under Article 7-2 of
RSTA, the actual recipients of the subsidy are not limited in number.
See the GOK's December 21, 2005, submission at Exhibit B-1.
Sections 771(5A)(D)(iii)(II) and (III) of the Act direct the
Department to examine whether an enterprise or an industry is a
predominant user of the subsidy or receives a disproportionately large
amount of the subsidy. There is nothing on the record to indicate that
the steel industry received a greater monetary benefit from the program
than did other participants or that the steel industry was a dominant
user or received disproportionate benefits. Rather, the GOK states that
the tax credit is widely available and can be used by any Korean
company, regardless of industry or location, by claiming the tax credit
on the tax return. See the GOK's December 21, 2005, submission at page
12.
Therefore, we preliminarily determine that the information on the
record does not support a finding that the percentage of the benefits
DMC or the steel industry received were disproportionately high or that
the company or the industry was a dominant user. Accordingly, we
preliminarily find that the tax credit under Article 7-2 of RSTA is not
de facto specific and is, therefore, not countervailable.

Preliminary Results of Review

In accordance with 19 CFR 351.221(b)(4)(i), we calculated an
individual subsidy rate for the producer/exporter subject to this
administrative review. For the period January 1, 2004, through December
31, 2004, we preliminarily determine the net subsidy for DMC to be 0.02
percent ad valorem, which is de minimis. See 19 CFR 351.106(c)(1).
If the final results of this review remain the same as these
preliminary results, the Department intends to instruct U.S. Customs
and Border Protection (CBP), within 15 days of publication of the final
results, to liquidate shipments of certain stainless steel sheet and
strip in coils from DMC, entered, or withdrawn from warehouse, for
consumption from January 1, 2004, through December 31, 2004, without
regard to countervailing duties. Also, the Department intends to
instruct CBP to require a new cash deposit rate for estimated
countervailing duties of 0.00 percent for all shipments of certain
stainless steel sheet and strip in coils from DMC, entered, or
withdrawn from warehouse, for consumption on or after the publication
of the final results of this administrative review. The Department will
issue appropriate instructions directly to CBP within 15 days of the
final results of this review.
We will instruct CBP to continue to collect cash deposits for non-
reviewed companies at the most recent company-specific or country-wide
rate applicable to the company. Accordingly, the cash deposit rates
that will be applied to companies covered by this order, but not
examined in this review, are those established in the most recently
completed administrative proceeding for each company. These rates shall
apply to all non-reviewed companies until a review of a company
assigned these rates is requested.

Public Comment

Pursuant to 19 CFR 351.224(b), the Department will disclose to
parties to the proceeding any calculations performed in connection with
these preliminary results within five days after the date of the public
announcement of this notice. Pursuant to 19 CFR 351.309, interested
parties may submit written comments in response to these preliminary
results. Unless otherwise indicated by the Department, case briefs must
be submitted within 30 days after the publication of these preliminary
results. Rebuttal briefs, which are limited to arguments raised in case
briefs, must be submitted no later than five days after the time limit
for filing case briefs, unless otherwise specified by the Department.
Parties who submit arguments in this proceeding are requested to submit
with the argument: (1) a statement of the issue, and (2) a brief
summary of the argument. Parties submitting case and/or rebuttal briefs

[[Page 50891]]

are requested to provide the Department copies of the public version on
disk. Case and rebuttal briefs must be served on interested parties in
accordance with 19 CFR 351.303(f). Also, pursuant to 19 CFR 351.310,
within 30 days of the date of publication of this notice, interested
parties may request a public hearing on arguments to be raised in the
case and rebuttal briefs. Unless the Secretary specifies otherwise, the
hearing, if requested, will be held two days after the date for
submission of rebuttal briefs.
Representatives of parties to the proceeding may request disclosure
of proprietary information under administrative protective order no
later than 10 days after the representative's client or employer
becomes a party to the proceeding, but in no event later than the date
the case briefs, under 19 CFR 351.309(c)(ii), are due. The Department
will publish the final results of this administrative review, including
the results of its analysis of issues raised in any case or rebuttal
brief or at a hearing.
This administrative review is issued and published in accordance
with sections 751(a)(1) and 777(i)(1) of the Act and 19 CFR
351.221(b)(4).

Dated: August 21, 2006.
David M. Spooner,
Assistant Secretary for Import Administration.
[FR Doc. E6-14230 Filed 8-25-06; 8:45 am]

BILLING CODE 3510-DS-S