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Daily Rules, Proposed Rules, and Notices of the Federal Government

DEPARTMENT OF COMMERCE

International Trade Administration

[C-580-818]

Corrosion-Resistant Carbon Steel Flat Products From the Republic of Korea: Preliminary Results of Countervailing Duty Administrative Review

AGENCY: Import Administration, International Trade Administration, Department of Commerce.
SUMMARY: The Department of Commerce (the Department) is conducting an administrative review of the countervailing duty (CVD) order on corrosion-resistant carbon steel flat products (CORE) from the Republic of Korea (Korea) for the period of review (POR) January 1, 2010, through December 31, 2010. For information on the net subsidy for Dongbu Steel Co., Ltd. (Dongbu), Hyundai HYSCO Ltd. (HYSCO), and Pohang Iron & Steel Co. Ltd. (POSCO), for the companies reviewed, see the "Preliminary Results of Review" section of this notice. Interested parties are invited to comment on these preliminary results.1

1 Seethe "Public Comment" section of this notice.

DATES: Effective Date:September 21, 2012.
FOR FURTHER INFORMATION CONTACT: Gayle Longest, AD/CVD Operations, Office 3, Import Administration, International Trade Administration, U.S. Department of Commerce, Room 4014, 14th Street and Constitution Ave. NW., Washington, DC 20230; telephone: (202) 482-3338.
SUPPLEMENTARY INFORMATION: Background

On August 17, 1993, the Department published in theFederal Registerthe CVD order on CORE from Korea.2 On August 1, 2011, the Department published a notice of opportunity to request an administrative review of this CVD order.3

2 See Countervailing Duty Orders and Amendments of Final Affirmative Countervailing Duty Determinations: Certain Steel Products from Korea,58 FR 43752 (August 17, 1993).

3 See Antidumping or Countervailing Duty Order, Finding, or Suspended Investigation: Opportunity to Request Administrative Review,76 FR 45771 (August 1, 2011).

On August 31, 2011, we received timely requests for review of the countervailing duty order from HYSCO. We also received a timely request for review of Dongbu, HYSCO, and POSCO, from United States Steel Corporation, petitioner. On October 3, 2011, the Department published a notice of initiation of the administrative review of the CVD order on CORE from Korea covering the period January 1, 2010, through December 31, 2010.4

4 See Initiation of Antidumping and Countervailing Duty Administrative Reviews and Requests for Revocation in Part(Initiation), 76 FR 61076 (October 3, 2011).

On October 5, 2011, the Department issued the initial questionnaire to Dongbu, HYSCO, POSCO, and the Government of Korea (GOK). On November 23, 2011, November 28, 2011, November 29, 2011, and November 30, 2011, the Department received questionnaire responses from HYSCO, Dongbu, POSCO, and the GOK, respectively. On March 2, 2012, July 16, 2012, and July 24, 2012 the Department issued supplemental questionnaires to HYSCO. On March 30, 2012, July 20, 2012, and August 7, 2012, the Department received supplemental questionnaire responses from HYSCO.

On March 22, 2012, the Department published in theFederal Registeran extension of its preliminary results of the instant administrative review.5 On July 18, 2011, the Department issued an additional supplemental questionnaire to the GOK. On August 4, 2011 the Department received the supplemental questionnaire response for the GOK.

5 See Corrosion-Resistant Carbon Steel Flat Products from the Republic of Korea: Notice of Extension of Preliminary Results of Countervailing Duty Administrative Review,76 FR 20954 (April 14, 2011).

On December 20, 2011, petitioner submitted new subsidy allegations against Dongbu, HYSCO, and POSCO. On April 24, 2012, the Department initiated an investigation of the new subsidies allegations against Dongbu, HYSCO, and POSCO.6 On April 25, 2012, and April 27, 2012, we issued new subsidies questionnaire to Dongbu and POSCO, respectively. On May 7, 2012, we issued new subsidy questionnaires to HYSCO and the GOK. On May 18, 2012, the Department received a response from POSCO. On May 25, 2012 and June 19, 2012, the Department received responses from HYSCO and Dongbu. The Department issued additional questionnaires to HYSCO regarding the new subsidy allegations on July 16, 2012 and July 24, 2012, and received responses from HYSCO on July 20, 2012, and August 2, 2012. The Department issued an additional supplemental questionnaire to the GOK regarding the new subsidy allegations on July 24, 2012, and August 3, 2012, and received responses from the GOK on August 7, 2012, and August 15, 2012. The Department issued an additional supplemental questionnaire to Dongbu regarding the new subsidy allegations on July 17, 2012, and received Dongbu's response on July 27, 2012.

6 SeeMemorandum to Melissa G. Skinner, Director, Office 3, through Eric B. Greynolds, Program Manager, from Gayle Longest, Case Analyst, regarding New Subsidy Allegations (April 24, 2012). This public document is available on IA ACCESS.

In accordance with 19 CFR 351.213(b), this review covers only those producers or exporters for which a review was specifically requested. The companies subject to this review are Dongbu, HYSCO, and POSCO.

Affiliated Companies

In the present administrative review, record evidence indicates that Pohang Steel Co., Ltd. (POCOS) is a majority-owned production facility of POSCO. Under 19 CFR 351.525(b)(6)(iii), if the firm that received a subsidy is a holding company, including a parent company with its own operations, the Department will attribute the subsidy to the consolidated sales of the holding company and its subsidiaries. Thus, we attributed subsidies received by POCOS to POSCO and its subsidiaries, net of intra-company sales. Dongbu reported that it is the only member of the Dongbu group in Korea that was involved with the sale of subject merchandise to the United States. HYSCO reported that it is a member of the Hyundai Motor Group and is affiliated with members of that group.7 Under 19 CFR Section 351.525(b)(6)(vi), if an input supplier and a downstream producer are cross-owned, and the production of the input product is primarily dedicated to production of the downstream product, the Department will attribute the subsidies received by the input producer to the combined sales of the input and downstream products produced by both corporations net of intra-company sales. HYSCO reported that there are no companies that own HYSCO shares which meet the standard for cross-ownership in 19 CFR 351.525(b)(6)(vi), and all of the companies in which HYSCO owns the majority of shares are located outside of Korea.Id.

7 SeeHYSCO's November 23, 2012, questionnaire response (HYSCO's November QR) at 4.

Scope of the Order

Products covered by this order are certain corrosion-resistant carbon steel flat products from Korea. These products include flat-rolled carbon steel products, of rectangular shape, either clad, plated, or coated with corrosion-resistant metals such as zinc, aluminum, or zinc-, aluminum-, nickel- or iron-based alloys, whether or not corrugated or painted, varnished or coated with plastics or other nonmetallic substances in addition to the metallic coating, in coils (whether or not in successively superimposed layers) and of a width of 0.5 inch or greater, or in straight lengths which, if of a thickness less than 4.75 millimeters, are of a width of 0.5 inch or greater and which measures at least 10 times the thickness or if of a thickness of 4.75 millimeters or more are of a width which exceeds 150 millimeters and measures at least twice the thickness. The merchandise subject to this order is currently classifiable inthe Harmonized Tariff Schedule of the United States (HTSUS) at subheadings: 7210.30.0000, 7210.31.0000, 7210.39.0000, 7210.41.0000, 7210.49.0030, 7210.49.0090, 7210.49.0091, 7210.49.0095, 7210.60.0000, 7210.61.0000, 7210.69.0000, 7210.70.6030, 7210.70.6060, 7210.70.6090, 7210.90.1000, 7210.90.6000, 7210.90.9000, 7212.20.0000, 7212.21.0000, 7212.29.0000, 7212.30.1030, 7212.30.1090, 7212.30.3000, 7212.30.5000, 7212.40.1000, 7212.40.5000, 7212.50.0000, 7212.60.0000, 7215.90.1000, 7215.9030, 7215.90.5000, 7217.12.1000, 7217.13.1000, 7217.19.1000, 7217.19.5000, 7217.20.1500, 7217.22.5000, 7217.23.5000, 7217.29.1000, 7217.29.5000, 7217.30.15.0000, 7217.32.5000, 7217.33.5000, 7217.39.1000, 7217.39.5000, 7217.90.1000 and 7217.90.5000. Although the HTSUS subheadings are provided for convenience and customs purposes, the Department's written description of the merchandise is dispositive.

Subsidies Valuation Information A. Benchmarks for Short-Term Financing

For those programs requiring the application of a won-denominated, short-term interest rate benchmark, in accordance with 19 CFR 351.505(a)(2)(iv), we used as our benchmark the company-specific weighted-average interest rate for commercial won-denominated loans outstanding during the POR. This approach is in accordance with 19 CFR 351.505(a)(3)(i) and the Department's practice.8

8 See, e.g., Corrosion-Resistant Carbon Steel Flat Products from the Republic of Korea: Final Results of Countervailing Duty Administrative Review,74 FR 2512 (January 15, 2009) (Final Results of CORE from Korea 2006), and accompanying Issues and Decision Memorandum (CORE from Korea 2006 Decision Memorandum) at “Benchmarks for Short-Term Financing.”

B. Benchmark for Long-Term Loans

During the POR, HYSCO had outstanding countervailable long-term won-denominated loans from government-owned banks and Korean commercial banks. We used the following benchmarks to calculate the subsidies attributable to respondents' countervailable long-term loans obtained through 2009:

(1) For countervailable, won-denominated long-term loans, we used, where available, the company-specific interest rates on the company's comparable commercial, won-denominated loans. If such loans were not available, we used, where available, the company-specific corporate bond rate on the company's public and private bonds, as we have determined that the GOK did not control the Korean domestic bond market after 1991.9 The use of a corporate bond rate as a long-term benchmark interest rate is consistent with the approach the Department has taken in several prior Korean CVD proceedings.10 Specifically, in those cases, we determined that, absent company-specific, commercial long-term loan interest rates, the won-denominated corporate bond rate is the best indicator of the commercial long-term borrowing rates for won-denominated loans in Korea because it is widely accepted as the market rate in Korea.11 Where company-specific rates were not available, we used the national average of the yields on three -year, won-denominated corporate bonds, as reported by the Bank of Korea (BOK). This approach is consistent with 19 CFR 351.505(a)(3)(ii) and our practice.12

9 See, e.g., Final Negative Countervailing Duty Determination: Stainless Steel Plate in Coils from the Republic of Korea,64 FR 15530, 15531 (March 31, 1999) (Stainless Steel Investigation) and “Analysis Memorandum on the Korean Domestic Bond Market” (March 9, 1999).

10 See Id.; see also Final Affirmative Countervailing Duty Determination: Structural Steel Beams from the Republic of Korea,65 FR 41051 (July 3, 2000) (H Beams Investigation), and accompanying Issues and Decision Memorandum at “Benchmark Interest Rates and Discount Rates;” andFinal Affirmative Countervailing Duty Determination: Dynamic Random Access Memory Semiconductors from the Republic of Korea, 68 FR 37122 (June 23, 2003) (DRAMS Investigation), and accompanying Issues and Decision Memorandum at “Discount Rates and Benchmark for Loans.”

11 See Final Affirmative Countervailing Duty Determinations and Final Negative Critical Circumstances Determinations: Certain Steel Products from Korea,58 FR at 37328, 37345-37346 (July 9, 1993) (Steel Products from Korea).

12 See, e.g.,CORE from Korea 2006 Decision Memorandum at “Benchmark for Long Term Loans.”

In accordance with 19 CFR 351.505(a)(2)(i), our benchmarks take into consideration the structure of the government-provided loans. For countervailable fixed-rate loans, pursuant to 19 CFR 351.505(a)(2)(iii), we used benchmark rates issued in the same year that the government loans were issued.

Average Useful Life

Pursuant to 19 CFR 351.524(d)(2), we will presume the allocation period for non-recurring subsidies to be the average useful life (AUL) of renewable physical assets for the industry concerned as listed in the Internal Revenue Service's (IRS) 1997 Class Life Asset Depreciation Range System, as updated by the Department of the Treasury. The presumption will apply unless a party claims and establishes that the IRS tables do not reasonably reflect the company-specific AUL or the country-wide AUL for the industry under examination and that the difference between the company-specific and/or country-wide AUL and the AUL from the IRS tables is significant. According to the IRS tables, the AUL of the steel industry is 15 years. No interested party challenged the 15-year AUL derived from the IRS tables. Thus, in this review, we have allocated, where applicable, all of the non-recurring subsidies provided to the producers/exporters of subject merchandise over a 15-year AUL.

I. Programs Determined To Be Countervailable A. Promotion of Specialized Enterprises for Parts and Materials

Under the Act on Special Measures for the Promotion of Specialized Enterprises for Parts and Materials (Promotion of Specialized Enterprises Act), the GOK shares the costs of research and development (R&D) projects with companies or research institutions. The goal of the program is to support technology development for core parts and materials necessary for technological innovation and improvement in competitiveness.13 The program is administered by the Ministry of Knowledge Economy (MKE) and Korea Evaluation Institute of Industrial Technology (KEIT).14

13 SeeGOK's November 30, 2011, questionnaire response (GOK's November QR) at Exhibit P-1.

14 Id.

In accordance with Articles 3 and 4 of the Promotion of Specialized Enterprises Act, MKE prepares a base plan and a yearly execution plan for the development of the parts and materials industry.15 Under the execution plan, MKE announces to the public a detailed business plan for the development of parts and materials technology.16 This business plan includes support areas, qualifications, and the application process.17 According to the GOK, any person or company can participate in the program by preparing an R&D business plan that conforms with the requirements set forth in the MKE business plan.18 The completed application must then be submitted to KEIT, which evaluates the application and selects the projects eligible forgovernment support.19 After the selected application is finally approved by MKE, MKE and the participating companies enter into an R&D agreement and then MKE provides the grant.20

15 SeeGOK's November QR at Exhibit P-1.

16 Id.at 2.

17 Id.

18 Id.

19 Id.

20 Id.at 3.

R&D project costs are shared by the GOK and companies or research institutions as follows: (1) When the group of companies involved in the research is made up of a ratio above two-thirds small to medium-sized companies, the GOK provides a grant up to three-fourths of the project cost; (2) When the group of companies involved in the research is made up of a ratio below two-thirds small to medium-sized companies, the GOK provides a grant up to one-half of the project cost.21

21 SeeGOK's November QR, Exhibit P-1.

Upon completion of the project, if the GOK evaluates the project as “successful”, the participating companies must repay 40 percent of the R&D grant to the GOK over five years.22 However, if the project is evaluated by the GOK as “not successful”, the company does not have to repay any of the grant amount to the GOK.23

22 SeeGOK's November QR, Exhibit P-1 at 2.

23 Id.

In the final results of administrative review of the CVD order on CORE From Korea covering the period January 1, 2008, through December 31, 2008, the Department determined that the Promotion of Specialized Enterprises Act wasde jurespecific under section 771(5A)(D)(i) of the Act, because it is expressly limited to (1) enterprises specializing in components and materials and (2) enterprises specializing in development of technology for components and materials.24 No information on the record of this review leads us to reconsider that determination and, thus, we continue to find, preliminarily, that this program isde jurespecific within the meaning of 771(5A)(D)(i) of the Act. We also preliminarily find that a financial contribution was provided within the meaning of section 771(5)(D)(i) of the Act because the GOK's payments constitute a direct transfer of funds.25

24 See Corrosion-Resistant Carbon Steel Flat Products from the Republic of Korea: Final Results of Countervailing Duty Administrative Review,76 FR 3613 (January 20, 2011) (Final Results of CORE from Korea 2008), and accompanying Issues and Decision Memorandum (CORE 2008 Decision Memorandum) at “The Act on Special Measures for the Promotion of Specialized Enterprises for Parts and Materials.”

25 See Corrosion-Resistant Carbon Steel Flat Products from the Republic of Korea: Preliminary Results and Partial Rescission of Countervailing Duty Administrative Review,75 FR 55745; 55750 (September 14, 2010).

HYSCO reported that during the POR, it was involved in one R&D project under this program.SeeHYSCO's November QR at 17. In theFinal Results of CORE From Korea 2008,we treated a portion of the subsidy that does not have to be repaid as a grant and the remaining portion of the subsidy that may have to be repaid as a long-term, interest-free contingent liability loan.26 This approach is consistent with the Department's regulation and practice.27 We have adopted the same approach in these preliminary results.

26 See Final Results of CORE from Korea 2008,76 FR at 3613 and CORE 2008 Decision Memorandum at “The Act on Special Measures for the Promotion of Specialized Enterprises for Parts and Materials.”

27 See19 CFR 351.505(d)(1);see also Certain Hot-Rolled Carbon Steel Flat Products from India: Final Results of Countervailing Duty Administrative Review,73 FR 40295 (July 14, 2008), and accompanying Issues and Decision Memorandum at “Export Promotion Capital Goods Scheme (EPCGS).”

To determine the benefit from the GOK funds HYSCO received under the Specialized Enterprises Act program, we calculated the GOK's contribution for the assistance that was apportioned to HYSCO.See19 CFR 351.504(a). As described immediately above, we treated a portion of this benefit as a grant. In accordance with 19 CFR 351.524(b)(2), we determined whether to allocate the non-recurring benefit from the grants over a 15-year AUL by dividing the GOK-approved grant amount by the company's total sales in the year of approval. Because the approved amount was less than 0.5 percent of the company's total sales, we expensed the grant to the year of receipt, i.e., to 2010, the POR in this review.

With respect to the portion of the subsidy that we are treating as a long-term, interest-free contingent liability loan, pursuant to 19 CFR 351.505(d)(1) for the reasons described above, we find the benefit to be equal to the interest that HYSCO would have paid during the POR had it borrowed the full amount of the contingent liability loan during the POR. Pursuant to 19 CFR 351.505(d)(1), we used a long-term interest rate as our benchmark to calculate the benefit of a contingent liability interest-free loan because the event upon which repayment of the duties depends (i.e.,the completion of the R&D project) occurs at a point in time more than one year after the date in which the grant was received. Specifically, we used the long-term benchmark interest rates as described in the “Subsidies Valuation” section of these preliminary results.

To calculate the total net subsidy amount for this program, we summed the benefits provided under this program. Next, to calculate the net subsidy rate, we divided the portion of the benefit allocated to the POR by HYSCO's total f.o.b. sales for 2010.28 On this basis, we preliminarily determine the net subsidy rate under this program to be 0.02 percentad valoremfor HYSCO.

28 See19 CFR 351.525(b)(3).

B. Restriction of Special Taxation Act (RSTA) Article 26

Under RSTA Article 26, a company can claim a tax credit equal to a certain percentage of its investments in its facilities.29 According to the GOK, the goal of this program is to boost general national economic activity.30 In its response to the Department's October 5, 2011, questionnaire, the GOK submitted information which indicated that these tax credits are expressly limited to a corporation's investments in facilities located outside the “Overcrowding Control Region” of the Seoul Metropolitan Area (“SMA”).31 Specifically, the GOK provided a complete translation of Article 23(1) of the Enforcement Decree of the RSTA in its November QR eligibility for the program is limited to investments made outside the Overcrowding Control Region of the SMA.32 Moreover, the GOK also stated that corporate investments in facilities located within the Overcrowding Control Region of the SMA are not eligible for credits under this tax program.33

29 SeeGOK's November QR at Exhibit B-3.

30 Id.

31 Id.at Exhibit B-4.

32 Id.

33 Id.at Exhibit B-3.

Because information provided by the GOK indicates that the tax credit under this program is limited by law to enterprises or industries within a designated geographical region within the jurisdiction of the authority providing the subsidy, we preliminarily find that this program is regionally specific in accordance with section 771(5A)(D)(iv) of the Tariff Act of 1930, as amended (“the Act”).34 The tax credit is a financial contribution in the form of revenue foregone by the government within the meaning of section 771(5)(D)(ii) of the Act, which provides a benefit to the recipient equal to the difference between the taxes actually paid and the taxes otherwise payable inthe absence of this program within the meaning of 19 CFR 351.509(a)(1). These findings are consistent with the determinations inBottom Mount Refrigerators From Korea,and2009 Review of the Countervailing Duty Order on Corrosion-Resistant Carbon Steel Flat Products From Korea: Post-Preliminary Analysis Memorandum for Hyundai HYSCO Ltd. 35

34 See, e.g., Final Affirmative Countervailing Duty Determination: Certain Hot-Rolled Carbon Steel Flat Products from Thailand,66 FR 50410 (October 3, 2001), and accompanying Issues and Decision Memorandum at “Provision of Electricity for Less than Adequate Remuneration” (where eligibility for a program was limited to users outside the Bangkok metropolitan area, we found the subsidy to be regionally specific under section 771(5(a)(D)(iv) of the Act).

35 See Bottom Mount Combination Refrigerator-Freezers from the Republic of Korea: Preliminary Negative Countervailing Duty Determination and Alignment of Final Determination With Final Antidumping Determination,76 FR 55044 (September 6, 2011) unchanged inBottom Mount Combination Refrigerator-Freezers from the Republic of Korea: Final Affirmative Countervailing Duty Determination,77 FR 17410 (March 26, 2012);see alsoMemorandum to Ronald K. Lorentzen from Melissa G. Skinner, Re: 2009 Review of the Countervailing Duty Order on Corrosion-Resistant Carbon Steel Flat Products From Korea: Post Preliminary Analysis Memorandum for Hyundai HYSCO Ltd. (September 27, 2011) unchanged inCorrosion-Resistant Carbon Steel Flat Products from Korea: Final Results of Administrative Review,77 FR 13093 (March 5, 2012) (Final Results of CORE From Korea 2009).

HYSCO and POSCO indicated that their companies used RSTA Article 26 credits during the 2010 POR.36

36 SeeHYSCO's November QR at 10 and Exhibit B-3 and POSCO's November 29, 2011 QR at 12 and Exhibits B-2, B-3, and B-4.

To calculate the subsidy rate for HYSCO and POSCO during the POR, we divided each company's benefit, which is the tax credit claimed by the company under this program in its tax return filed in 2010, by the company's total sales during the POR. On this basis, we preliminarily determine the countervailable subsidy provided under this program to be 0.06 percentad valoremfor HYSCO and 0.08 percentad valoremfor POSCO.

C. Asset Revaluation (TERCL Article 56(2) of the Tax Reduction and Exemption Control Act (TERCL)

Under Article 56(2) of the TERCL, the GOK permitted companies that made an initial public offering between January 1, 1987, and December 31, 1990, to revalue their assets at a rate higher than the 25 percent required of most other companies under the Asset Revaluation Act. The Department has previously found this program to be countervailable. For example, in theCTL Plate Investigation,the Department determined that this program wasde factospecific under section 771(5A)(D)(iii) of the Tariff Act of 1930, as amended (the Act), because the actual recipients of the subsidy were limited in number and the basic metal industry was a dominant user of this program.37 We also determined that a financial contribution was provided in the form of tax revenue foregone pursuant to section 771(5)(D)(ii) of the Act.38 The Department further determined that a benefit was conferred within the meaning of section 771(5)(E) of the Act on those companies that were able to revalue their assets under TERCL Article 56(2) because the revaluation resulted in participants paying lower taxes than they would otherwise pay absent the program.Id.No new information or evidence of changed circumstances was presented in this review to warrant any reconsideration of the countervailability of this program.

37 See Final Affirmative Countervailing Duty Determination: Certain Cut-to-Length Carbon-Quality Steel Plate from the Republic of Korea,64 FR 73176, 73183 (December 29, 1999) (CTL Plate Investigation).

38 Id.

The benefit from this program is the difference that the revaluation of depreciable assets has on a company's tax liability each year. Evidence on the record indicates that, in 1989, POSCO made an asset revaluation that increased its depreciation expense. To calculate the benefit to POSCO, we took the additional depreciation listed in the tax return filed during the POR, which resulted from the company's asset revaluation, and multiplied that amount by the tax rate applicable to that tax return. We then divided the resulting benefit by POSCO's total free on board (f.o.b.) sales.See19 CFR 351.525(b)(3). On this basis, we preliminarily determine the net countervailable subsidy to be 0.01 percentad valoremfor POSCO. Dongbu and HYSCO did not use this program during the POR.

D. Exemption of VAT on Imports of Anthracite Coal

Under Article 106 of Restriction of Special Taxation Act (RSTA), imports of anthracite coal are exempt from the value added tax (VAT). In theCold-Rolled Investigation,we determined that the program isde jurespecific under section 771(5A)(D)(i) of the Act. Because the GOK allows for only a few items to be exempt from VAT, the items allowed to be imported without paying VAT are limited.39 We also determined that the VAT exemptions under the program constitute a financial contribution under section 771(5)(D)(ii) of the Act, as the GOK is not collecting revenue otherwise due, and that the exemptions confer a benefit under section 771(5)(E) of the Act equal to the amount of the VAT that would have otherwise been paid if not for the exemption. No new information, evidence of changed circumstances, or comments from interested parties was presented in this review to warrant any reconsideration of the countervailability of this program. Therefore, we preliminarily continue to find that this program isde jurespecific within the meaning of section 771(5A)(D)(i) of the Act because it is limited, constitutes a financial contribution in the form of forgone revenue under section 771(5)(D)(ii) of the Act, and confers a benefit in the amount of the revenue foregone within the meaning of 771(5)(E) of the Act.

39 SeeCold-Rolled Decision Memorandum at “Exemption of VAT on Imports of Anthracite Coal.”

Dongbu and HYSCO reported that their companies did not use the program during the POR.40 POSCO imported anthracite coal during the POR and, therefore, received a benefit in the amount of the VAT that it should have otherwise paid if not for the exemption. To determine POSCO's benefit from the VAT exemption on these imports, we calculated the amount of VAT that would have been due absent the program on the total value of anthracite coal POSCO imported during the POR. We then divided the amount of this tax benefit by POSCO's total f.o.b. sales. Based on this methodology, we preliminarily determine the POSCO received a countervailable subsidy of 0.07 percentad valorem.

40 SeeHSYCO's November QR at 14 and Dongbu's November 28, 2011, questionnaire response at 14.

E. Other Subsidies Related to Operations at Asan Bay: Provision of Land and Exemption of Port Fees Under Harbor Act 1. Provision of Land

As explained in theCold-Rolled Investigation,the GOK's overall development plan is published every 10 years and describes the nationwide land development goals and plans for the balanced development of the country. Under these plans, the Ministry of Construction and Transportation (MOCAT) prepares and updates its Asan Bay Area Broad Development Plan.41 The Korea Land Development Corporation (Koland) is a government investment corporation that is responsible for purchasing, developing, and selling land in the industrial sites.42

41 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) (Cold-Rolled Investigation), and accompanying Issues and Decision Memorandum (Cold-Rolled Decision Memorandum) at “Provision of Land at Asan Bay.”

42 Id.

In theCold-Rolled Investigation,we verified that the GOK, in setting the price per square meter for land at the Kodai Industrial Estate, removed the 10 percent profit component from the pricecharged to Dongbu.43 In theCold-Rolled Investigation,we further explained that companies purchasing land at Asan Bay must make payments on the purchase and development of the land before the final settlement. However, in the case of Dongbu, we found that the GOK provided an adjustment to Dongbu's final payment to account for “interest earned” by the company for the pre-payments.44 HYSCO and POSCO reported that their companies did not use this program.45

43 Id.

44 Id.

45 SeeHYSCO's November QR at 15 and POSCO's November QR at 17.

In theCold-Rolled Investigation,we determined that the price discount and the adjustment of Dongbu's final payment to account for “interest earned” by the company on its pre-payments were countervailable subsidies. Specifically, the Department determined that they were specific under section 771(5A)(D)(iii)(I) of the Act, as they were limited to Dongbu.46 Further, the Department found the price discount and the price adjustment for “interest earned” constituted financial contributions in the form of grants under section 771(5)(D)(i) of the Act and conferred benefits in the amount of grants within the meaning of section 771(5)(E) of the Act.Id.No new information, evidence of changed circumstances, or comments from interested parties was presented in this review to warrant any reconsideration of the countervailability of this program. Therefore, we preliminarily continue to find that this program isde factospecific within the meaning of section 771(5A)(D)(iii)(I) of the Act because it is limited to Dongbu, constitutes a financial contribution in the form of grants under sections 771(5)(D)(i), and confers a benefit in the amount of the price discount and the price adjustment within the meaning of 771(5)(E) of the Act.

46 Id.

Consistent with theCold-Rolled Investigation,we have treated the land price discount and the interest earned refund as non-recurring subsidies.47 In accordance with 19 CFR 351.524(b)(2), because the grant amounts were more than 0.5 percent of the company's total sales in the year of receipt, we applied the Department's standard grant methodology, as described under 19 CFR 351.524(d)(1), and allocated the subsidies over a 15-year allocation period.Seethe “Average Useful Life” section above. To calculate the benefit from these grants, we used as our discount rate the rates described above in the “Subsidies Valuation Information” section. We then summed the benefits received by Dongbu during the POR. We calculated the net subsidy rate by dividing the total benefit attributable to the POR by Dongbu's total f.o.b. sales for the POR. On this basis, we determine a net countervailable subsidy rate for Dongbu of 0.09 percentad valoremfor the POR.

47 Id.

2. Exemption of Port Fees Under the Harbor Act

Under the Harbor Act, companies are allowed to construct infrastructure facilities at Korean ports; however, these facilities must be deeded back to the government. Because the ownership of these facilities reverts to the government, the government compensates private parties for the construction of these infrastructure facilities. Because a company must transfer to the government its infrastructure investment, under the Harbor Act, the GOK grants the company free usage of the facility and the right to collect fees from other users of the facility for a limited period of time. Once a company has recovered its cost of constructing the infrastructure, the company must pay the same usage fees as other users of the infrastructure.

In theCold-Rolled Investigation,the Department found that Dongbu received free use of harbor facilities at Asan Bay based upon both its construction of a port facility as well as a road that the company built from its plant to its port.48 The Department also determined that Dongbu received an exemption of harbor fees for a period of almost 70 years under this program.49

48 SeeCold-Rolled Decision Memorandum at “Dongbu's Excessive Exemptions under the Harbor Act.”

49 Id.

In theCold-Rolled Investigation,the Department found the exemption from the fees to be a countervailable subsidy. No new information, evidence of changed circumstances, or comments from interested parties was presented in this review to warrant any reconsideration of the countervailability of this program. Thus, we preliminarily continue to find that the program is countervailable and is specific under section 771(5A)(D)(iii)(I) of the Act because the excessive exemption period of 70 years is limited to Dongbu. Moreover, we preliminarily determine that the GOK is foregoing revenue that it would otherwise collect by allowing Dongbu to be exempt from port charges for up to 70 years and, thus, the program constitutes a financial contribution within the meaning of section 771(5)(D)(ii) of the Act. Further, we preliminarily determine that the exemptions confer a benefit under section 771(5)(E) of the Act in the amount of the port charges that were not collected.

In theCold-Rolled Investigation,the Department treated the program as a recurring subsidy and determined that the benefit is equal to the average yearly amount of harbor fee exemptions provided to Dongbu.50 For purposes of these preliminary results, we have employed the same benefit calculation. To calculate the net subsidy rate, we divided the average yearly amount of exemptions by Dongbu's total f.o.b. sales for the POR. On this basis, we preliminarily determine that Dongbu's net subsidy rate under this program is 0.02 percentad valorem.

50 Id.

II. Programs Preliminarily Determined Not To Confer a Benefit During the POR A. Research and Development Grants Under the Industrial Technology Innovation Promotion Act (ITIPA)

The GOK's Industrial Technology Innovation Promotion Act program is designed to foster future new industries and enhance the competitiveness of primary industries through fundamental technology development.51 The program is administered by MKE and the Korean Evaluation Institute of Industrial Technology (KEIT).52

51 See Corrosion-Resistant Carbon Steel Flat Products from the Republic of Korea: Preliminary Results of Countervailing Duty Administrative Review,76 FR 54209, 54213 (August 31, 2011) (Preliminary Results of CORE from Korea 2009) unchanged inFinal Results of CORE from Korea 2009,77 FR at 13093.

52 Id.

Under the Industrial Technology Innovation Promotion Act, GOK provides R&D grants to support the areas of transportation system, industrial materials, robots, biomedical equipments, clean manufacturing foundation, knowledge services and industry convergence technology.53

53 Id.

Pursuant to Article 11 of the Industrial Technology Innovation Promotion Act, KEIT prepares a basic plan for the development of technology, on behalf of MKE.54 This plan includes the R&D projects that are eligible, describes the application process, and designates the supporting documentation required.55 The plan is announced to the public.56 According tothe GOK, any person who wishes to participate in the program prepares an R&D business plan that meets the requirements set forth in the basic plan and then submits the application to the GOK's Application Review Committee, which then evaluates the application to determine if it conforms to the terms and conditions set forth in the basic plan.57 If the application is approved, MKE and the company enter into an R&D agreement and then MKE provides the grant.58

54 Id.

55 Id.

56 Id.

57 Id.

58 Id.

The costs of the R&D projects under this program are shared by the company (or research institution) and the GOK.59 Specifically, the grant ratio for project costs are as follows: (1) For projects with one small/medium-sized enterprise (SME), the GOK provides grants up to three-fourths of the project costs, (2) for projects with one conglomerate, the GOK provides grants up to one-half of the project costs, (3) for projects with more than two participants of which SMEs comprise more than two-thirds of the participant ratio, the GOK provides up to three-fourths of the project costs, and (4) for projects with more than two participants of which SMEs comprise less than two-thirds of the participant ratio, the GOK provides up to one-half of the project costs.60

59 Id.

60 Id.

When the project is evaluated as “successful” upon completion, the participating companies must repay 40 percent of the R&D grant to the GOK over five years.61 However, when the project is evaluated as “not successful,” the company does not have to repay the GOK any of the grant amount.62 Id.

61 Id.

62 See Preliminary Results of CORE from Korea 2009,76 FR at 54213 and HYSCO's November QR at Exhibit Q-4.

Prior to and during the POR, HYSCO and POSCO received grants under the Industrial Technology Innovation Promotion Act for R&D projects in which the companies participated with other firms.63

63 SeeGOK's November QR at 16 and Q-1; HYSCO's November QR at 17, Q-1, Q-2, and Q-3, and POSCO's November 30, 2011, QR at Exhibit Q-2.

Concerning HYSCO, the nature of the projects for which it received the grants is business proprietary and cannot be discussed in this public notice.64 Based upon our review of program documents submitted in the response, we preliminarily determine that one grant received is related to the second step of the project discussed in the section “Research and Development Grants Under the Industrial Development Act (IITPA)” inPreliminary Results of CORE from Korea 2009,in which the Department determined that grants received for this particular project under this program are attributable to non-subject merchandise.65 Upon review of the information submitted by HYSCO and the GOK, we find that the terms and conditions of this grant project remain unchanged from thePreliminary Results of CORE from Korea 2009and preliminarily determine that this grant pertains specifically to production of a product that is not subject merchandise.66 Therefore, consistent with 19 CFR 351.525(b)(5) and our past practice, we preliminarily determine that this grant was bestowed in connection with the production of a product that is not subject merchandise. Hence we did not include this grant in our benefit calculations. In addition, HYSCO reported receiving another grant during the POR for a project that is being performed under the ITIPA.67 Dividing the amount of this grant by HYSCO's total sales, results in a net subsidy rate that is less than 0.005 percentad valoremand, thus, is not numerically significant.

64 SeeMemorandum to the File titled “HYSCO's R&D Grants Under the ITIPA”, (August 30, 2012), of which a public version is on file in IA Access.

65 See Preliminary Results of CORE from Korea 2009,in which the Department found the grant in question to be tied to the production of non-subject merchandise, unchanged inFinal Results of Core from Korea 2009and HYSCO's November QR at Exhibit Q-4.

66 SeeMemorandum to the File titled “HYSCO's R&D Grants Under the ITIPA” (August 31, 2012), of which a public version is on file in IA Access.

67 SeeHYSCO's November QR at 18.

POSCO also reported receiving grants under the ITIPA prior to and during the POR.68 Dividing the sum of POSCOs total grants in each year by POSCO's total sales in the corresponding year results in a net subsidy rate that is less than 0.005 percentad valorem.Consistent with the Department's practice, we find that the grants received by HYSCO and POSCO under this program are not measurable.69 Consequently, we preliminarily determine that it is not necessary for the Department to make a finding as to the countervailability of the grants POSCO received under this program. If a future administrative review of this proceeding is requested, we will further examine grants provided under ITIPA.

68 SeePOSCO's November 30, 2011, QR at Exhibit Q-2.

69 See, e.g.,CORE from Korea 2006 Decision Memorandum at “GOK's Direction of Credit” andPreliminary Results of CORE from Korea 2009,76 FR at 54213.

B. R&D Grants Under the Act on the Promotion of the Development, Use, and Diffusion of New and Renewable Energy

The GOK's Development of Use, and Diffusion of New and Renewable Energy program (formerly the Development of Alternative Energy program) is reportedly designed to contribute to the preservation of the environment, the sound and sustainable development of the national economy, and the promotion of national welfare by diversifying energy resources through promoting technological development, the use and diffusion of alternative energy, and reducing the discharge of gases harmful to humans or the environment by activating the new and renewable energy industry.70 The program is administered by the Ministry of Knowledge Economy (MKE), Korea Energy Management Corporation (KEMCO), and the Korea Institute of Energy Technology Evaluation and Planning (KETEP).71

70 See Preliminary Results of CORE from Korea 2009,76 FR at 54209, 54213-54214, unchanged inFinal Results of CORE from Korea 2009.

71 Id.at 54214.

Under the Act on the Promotion of the Development, Use, and Diffusion of New and Renewable Energy (New and Renewable Energy Act), the GOK provides R&D grants to support the following businesses: (1) Electric and Nuclear Power Development, (2) Energy and Resources Technology Development, and (3) New and Renewable Energy Technology Development.72

72 Id.

Pursuant to Articles 5 and 6 of the New and Renewable Energy Act, MKE prepares a base plan and a yearly execution plan for the development of new and renewable energy.73 The base and execution plans are announced to the public.74 According to the GOK, any person who wishes to participate in the program prepares an R&D business plan and then submits the application to the KETEP, which then evaluates the application and selects the projects eligible for government support.75 After the selected application is finally approved by MKE, KEMCO, and the general supervising institute of the consortium enter into an R&D agreement and then MKE provides the grant through KEMCO.76

73 Id.

74 Id.

75 Id.

76 Id.

The costs of the R&D projects under this program are shared by the company (or research institution) and the GOK.77 Specifically, the grant ratio for projectcosts are as follows: (1) For large companies, the GOK provides grants up to one-half of the project costs, (2) for small/medium-sized companies, the GOK provides grants up to three-fourths of the project costs, (3) for a consortium,78 the GOK provides grants up to three-fourths of the project costs, and (4) for others, the GOK provides grants up to one-half of the project costs.79

77 Id.

78If the ratio of small to medium-sized companies in a consortium is above two-thirds, the GOK provides grants up to one-half of the project costs.SeeGOK's November QR, Exhibit R-1.

79 Preliminary Results of CORE from Korea 2009,76 FR at 54214.

When the project is evaluated as “successful” upon completion, the participating companies must repay 40 percent of the R&D grant to the GOK.80 However, when the project is evaluated as “not successful”, the company does not have to repay any of the grant amount to the GOK.81

80 Id.

81 Id.

During the POR, HYSCO received an energy-related grant under the New and Renewable Energy Act for a project in which the company participated with other firms.82 HYSCO reported that the R&D grant under the New and Renewable Energy Act are provided with respect to specific projects, which are generally multi-year projects where the amount of funds to be provided by the GOK is set out in the project contract.83 The cost of R&D projects under this program is shared by the participating companies and the GOK.84 HYSCO points to the Department's prior decision concerning this project inPreliminary Results of CORE From Korea 2009,and reiterates its claim that the project for which the grant was received from the government was not related to subject merchandise.85

82 SeeGOK's November QR at 17-18 and Exhibit R-1.

83 SeeHYSCO's November QR at Exhibit R-3.

84 Id.

85 Id.at 19 citing toPreliminary Results of CORE from Korea 2009,76 FR at 54214, in which the Department found the grant in question to be tied to non-subject merchandise, unchanged in theFinal Results of CORE from Korea 2009; see alsoMemorandum to the File titled “HYSCO's R&D Grants under the Act on the Promotion of the Development, Use and Diffusion of New and Renewable Energy” (August 24, 2011), submitted as Exhibit R-4 of HYSCO's November QR.

Upon review of the information from HYSCO and the GOK, we preliminarily determine that the grant was bestowed specifically in connection with production of a product that is not subject merchandise and is related to the project examined in the prior administrative review.86 Therefore, consistent with 19 CFR 351.525(b)(5) and our past practice, we preliminarily determine that this grant is tied to non-subject merchandise. Hence, we preliminarily determine that the New and Renewable Energy Act did not confer a benefit during the POR.

86 SeeMemorandum to the File titled “HYSCO's R&D Grants under the Act on the Promotion of the Development, Use, and Diffusion of New and Renewable Energy” (August 31, 2012) (HYSCO New and Renewable Energy Grant Memorandum), of which a public version is on file in IA Access.

C. Overseas Resource Development Program: Loan From Korea Resources Corporation (KORES)

InFinal Results of CORE From Korea 2006,the Department found that the GOK enacted the Overseas Resource Development (ORD) Business Act in order to establish the foundation for securing the long-term supply of essential energy and major material minerals, which are mostly imported because of scarce domestic resources.87 Pursuant to Article 11 of this Act, MKE annually announces its budget and the eligibility criteria to obtain a loan from MKE.88 Any company that meets the eligibility criteria may apply for a loan to MKE.89 The loan evaluation committee evaluates the applications, selects the recipients and gets approval from the minister of MKE.90 For projects related to the development of strategic mineral resources, the Korean Resources Corporation (KORES) lends the funds to the company for foreign resources development.91

87 SeeCorrosion-Resistant Carbon Steel Flat Products from the Republic of Korea: Preliminary Results of Countervailing Duty Administrative Review, 73 FR 52315, 52326, (September 9, 2008) (Preliminary Results of CORE from Korea 2006),unchanged inCorrosion-Resistant Carbon Steel Flat Products from the Republic of Korea: Final Results of Countervailing Duty Administrative Review,74 FR 2512 (January 15, 2009) (Final Results of CORE from Korea 2006),and accompanying Issues and Decision Memorandum at “Programs Determined To Be Not Used”.

88 SeeGOK's November QR at Exhibit S-1.

89 Id.

90 Id.

91 Id.

During the POR, as in the prior administrative review, HYSCO had outstanding loans from KORES for investment in a copper mine in Mexico.92 Based upon examination of the loan documents and our prior determination concerning these loans, we preliminarily determine that the KORES loans are tied to copper, which is non-subject merchandise.93 Further, we find that copper is not an input primarily dedicated to the production of subject merchandise.94 On this basis, we find the KORES loans are tied and attributable to non-subject merchandise.95 Therefore, we preliminarily determine that HYSCO did not receive a benefit from this program with respect to the subject merchandise during the POR.

92 SeeHYSCO's November QR at 20, Exhibit 8 at 15 and HYSCO's March 30, 2012 QR at Exhibits 15 and 16.

93 Preliminary Results of CORE from Korea 2009,76 FR at 54214-54215, unchanged inFinal Results of CORE from Korea 2009.

94 Id.

95 See19 CFR 351.525(b)(5).

D. Overseas Resource Development Program: Loan From Korea National Oil Corporation (KNOC)

InFinal Results of CORE From Korea 2007,the Department found that the GOK enacted the Overseas Resource Development (ORD) Business Act in order to establish the foundation for securing the long-term supply of essential energy and major material minerals, which are mostly imported because of scarce domestic resources.96 Pursuant to Article 11 of this Act, the MKE annually announces its budget and the eligibility criteria to obtain a loan from MKE.97 Any company that meets the eligibility criteria may apply for a loan to MKE.98 For projects that are related to petroleum and natural gas, the Korea National Oil Corporation (KNOC) lends the funds to the company for foreign resources development.99 An approved company enters into a borrowing agreement with KNOC for the development of the selected resource.100 Two types of loans are provided under this program: “General loans” and “success-contingent loans”. For a success-contingent loan, the repayment obligation is subject to the results of the development project. In the event that the project fails, the company will be exempted for all or a portion of the loan repayment obligation. However, if the project succeeds, a portion of the project income is payable to KNOC.101

96 See Corrosion-Resistant Carbon Steel Flat Products from the Republic of Korea: Preliminary Results of Countervailing Duty Administrative Revie