67 FR 1964, January 15, 2002 C-580-835 AR 1 Public Document DAS II/Office VI January 8, 2002 MEMORANDUM TO: Faryar Shirzad Assistant Secretary for Import Administration FROM: Bernard T. Carreau Deputy Assistant Secretary for AD/CVD Enforcement II SUBJECT: Issues and Decision Memorandum: Final Results of Countervailing Duty Administrative Review: Stainless Steel Sheet and Strip in Coils from the Republic of Korea; POR: 11/17/1998-12/31/1999 ------------------------------------------------------------------------- Summary We have analyzed the briefs and other submissions by the interested parties in the administrative review of the countervailing duty order on stainless steel sheet and strip in coils from the Republic of Korea. The "Subsidies Valuation Methodology" and "Analysis of Programs" sections below describe the decisions made in this review. Also below is the "Analysis of Comments" section which contains the Department of Commerce's (Department) response to the issues raised in the briefs. We recommend that you approve the positions we have developed in this memorandum. Subsidies Valuation Methodology Benchmarks for Long-term Loans and Discount Rates During the period of review (POR), Inchon Iron and Steel Co. (Inchon) had both won-denominated and foreign currency-denominated long-term loans outstanding which had been received from government-owned banks, Korean commercial banks, overseas banks, and foreign banks with branches in Korea. In the Final Negative Countervailing Duty Determination: Stainless Steel Plate in Coils from the Republic of Korea, 64 FR 15530 (March 31, 1999) (Plate in Coils) and the Final Affirmative Countervailing Duty Determination: Stainless Steel Sheet and Strip in Coils from the Repubic of Korea, 64 FR 30636 (June 8, 1999) (Sheet and Strip), the Department, for the first time, examined the Government of Korea (GOK)'s direction of credit policies for the period 1992 through 1997. During the course of those investigations, the Department determined that the GOK controlled directly or indirectly the lending practices of most sources of credit in Korea between 1992 and 1997. In the Final Affirmative Countervailing Duty Determination: Certain Cut-to Length Carbon-Quality Steel Plate from the Republic of Korea, 64 FR 73176, 73180 (December 29, 1999) (CTL Plate) the Department determined that the GOK still exercised substantial control over lending institutions in Korea during 1998. In addition, as no new factual information has been placed on the record of this review, we continue to find direction of credit countervailable through 1999, which is the POR of the current administrative review. Based on our findings on this issue in prior investigations, we are using the following benchmarks to calculate the subsidies attributable to respondents' long-term loans obtained in the years 1992 through 1999: (1) For countervailable, foreign-currency denominated loans, we used, where available, the company-specific weighted-average U.S. dollar- denominated interest rates on the company's loans from foreign bank branches in Korea. (See Comment 3: U.S. Dollar Interest Rate Benchmark for Inchon's Loans). (2) For countervailable won-denominated long-term loans, where available, we used the company-specific corporate bond rate on the company's public and private bonds. We note that this benchmark is based on the decision in Plate in Coils in which 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). 2. Allocation Period In Sheet and Strip, the Department used for the industry-specific average useful life (AUL) of assets in determining the allocation period for non- recurring subsidies using the IRS Tables, which in this case is 15 years for the steel industry. However, Inchon did not have any non-recurring subsides during the POR. Thus, allocation has not been necessary in this review. 3. Attribution (Treatment of Subsidies Received by Trading Companies) Hyundai Corporation (Hyundai) is a trading company which sells subject merchandise, including Inchon's merchandise. In accordance with section 351.525(c) of the regulations, we have cumulated the benefits received by Hyundai and Inchon to calculate the countervailing duty rate applicable to Inchon. II. Analysis of Programs A. Programs Previously Determined to Confer Subsidies The GOK's Direction of Credit Inchon received long-term fixed and variable rate loans from GOK owned/controlled institutions during the years 1993 through 1999 that were outstanding during the POR. In order to determine whether these GOK directed loans conferred a benefit, we compared the interest rates on the directed loans to the benchmark interest rates detailed in the "Subsidies Valuation Information" section of this notice. The repayment schedules of these loans did not remain constant during the lives of the respective loans. Therefore, for the final results, we have calculated the benefit from these loans using the Department's variable rate methodology. We first derived the benefit amounts attributable to the POR for the company's fixed and variable rate loans, and then summed the benefit amounts from the loans and divided the total benefit by Inchon's total f.o.b. sales value during the POR. On this basis, we determine the net countervailable subsidy to be 1.83 percent ad valorem for Inchon. Article 17 of the Tax Exemption and Reduction Control Act (TERCL): Reserve for Overseas Market Development The Department found this program to constitute a countervailable export subsidy under section 771(5A)(B) of the Act, in CTL Plate, 64 FR at 73181 and in the Preliminary Results and Partial Rescission of Countervailing Duty Administrative Review: Stainless Steel Sheet and Strip in Coils from the Republic of Korea, 66 FR 47008, 47012 (September 10, 2001) (Preliminary Results). No new information has been provided by respondents to warrant a change since the preliminary results. Using the methodology for calculating subsidies received by the trading company, as detailed in the "Subsidies Valuation Information" section above, we calculate a countervailable subsidy of less than 0.005 percent ad valorem for Inchon. Electricity Discounts under the Requested Loan Adjustment Program (RLA) In the original investigation of Sheet and Strip, the Department found this program specific under section 771(5A)(D)(iii)(I) of the Act, as the discounts were distributed to a limited number of customers. (See 64 FR at 30646). No new information has been provided to warrant reconsideration of this determination. In addition, we found that a benefit is provided. Therefore, we continue to find this program countervailable. As the electricity discounts are recurring benefits, we have expensed the benefit from this program in the year of receipt. To calculate the benefit provided under this program we summed the electricity discounts which Inchon received from KEPCO under the RLA program during the POR. We then divided this amount by Inchon's total f.o.b. sales values for 1999. On this basis, we determine a net countervailable subsidy of less than 0.005 percent ad valorem for Inchon. POSCO's Provision of Steel Inputs for Less than Adequate Remuneration In the Preliminary Results, the Department determined that POSCO charged Inchon less than adequate remuneration for hot-rolled coils, an input used to produce subject merchandise. (See 66 FR 47012). No new information has been provided since the preliminary results to warrant a change in this determination. As the Department continues to find this program specific to Inchon, and that the government through POSCO provided a financial contribution the Department calculated the benefit received by Inchon consistent with section 351.511(a)(2) of the CVD Regulations. As noted in the Preliminary Results, we continue to compare the price that Inchon paid to POSCO for hot-rolled coils to the prices that it paid for imports of the input. (Id.). The Department determines that there was an error in the preliminary calculations and corrected this error for the final results. (See Comment 1: Ministerial Errors). We compared Inchon's quarterly delivered weight-average price it paid to POSCO for the hot-rolled coils to the quarterly delivered weight-average price it paid for imported hot- rolled coils, by grade and making due allowances for factors affecting comparability. We multiplied this price difference by the total amount of hot-rolled coil that Inchon purchased from POSCO during the POR. We then divided this amount by the f.o.b. value of merchandise produced using hot- rolled coils. On this basis we determine that Inchon received a countervailable subsidy of 2.38 percent ad valorem rate for this program. B. Programs Determined to Be Not Used 1. Article 16 of the TERCL: Reserve for Export Loss 2. Investment Tax Credits under Article 10, 18, 25, 26, 27 and 71 of TERCL 3. Loans from the National Agricultural Cooperation Federation 4. Tax Incentives for Highly-Advanced Technology Businesses under the 5. Foreign Investment and Foreign Capital Inducement Act 6. Reserve for Investment under Article 43-5 of TERCL 7. Export Insurance Rates Provided by the Korean Export Insurance Corporation 8. Special Depreciation of Assets on Foreign Exchange Earnings 9. Excessive Duty Drawback 10. Short-Term Export Financing 11. Export Industry Facility Loans No new information, evidence of changed circumstances, or comments from interested parties were received on these programs. Therefore, we continue to determine that these programs were not used by the respondents in this review. Analysis of Comments Comment 1: Ministerial Errors Respondents argue that the Department made two ministerial errors in its Preliminary Results when calculating the benefit from Inchon's purchases of hot-rolled stainless steel coil from POSCO. First, respondents maintain that with respect to the second quarter of 1999, the Department failed to compare quarterly weighted-average prices as stated in its Preliminary Results. Specifically, during the second quarter of 1999, there were no imports of 300 series products. Therefore, respondents argue that, as was done for 400 series products when there were no imports in the fourth quarter of 1999, the Department should compare the quarterly weighted- average price of Inchon's purchases of 300 series products in the second quarter with the quarterly weighted-average price of Inchon's imports of the same product in the previous quarter. Instead, the Department compared the quarterly weighted-average price of Inchon's purchases from POSCO in the second quarter with the weighted-average price of Inchon's imports in March 1999. Secondly, respondents argue that in the third quarter of 1999, the Department incorrectly calculated the quarterly weighted-average import price for 400 series products. In particular, respondents maintain that when the Department summed the total quantity of imports of 400 series products in July, it inadvertently included an amount for March imports. Respondents urge the Department to correct these ministerial errors when calculating the benefit to Inchon from purchases of hot-rolled stainless steel coil from POSCO for the final results. Petitioners reject respondents' argument that the Department made a ministerial error in its benefit calculation when it compared quarterly weighted-average prices in the second quarter of 1999. Petitioners argue that a review of the calculations reveals that the Department applied the same methodology for both 300 and 400 series products. Specifically, petitioners assert that the error Inchon refers to is not clerical in nature; instead, respondents disagree with the Department's calculation methodology. In support of their position, petitioners purport that the Department's methodology for the 300 and 400 series products used pricing data for the month closest to the quarter in which the data was missing as most representative of the pricing trend for the following quarter. For example, petitioners cite to page 45 of the August 31, 2001 Memorandum Accompanying the Calculations for the Preliminary Countervailing Duty Determination: Stainless Steel Sheet and Strip in Coils from the Republic of Korea (Period of Review 1999), in which the Department stated that it used the import data from March for the second quarter 300 series values because the March data is the closest month to the quarter and used the import data from July for comparison for the fourth quarter 400 series. Because pricing data for the month closet to the quarter in which the data was missing is most representative of the pricing trend for the following quarter, petitioners argue that this methodology appropriately measures adequacy of remuneration based on comparability. Department's Position: We agree with respondents that in the Preliminary Results we stated that we were comparing quarterly delivered weighted- average prices from POSCO to quarterly delivered weighted-average import prices, for both the 300 and 400 series. However, with respect to purchases of the 300 series during the second quarter, there was no comparison price available as Inchon did not have any imports of this series during that time period. The Department has revisited this calculation for the final results and has determined that the best surrogate value would be the quarter prior to the quarter in which a benchmark does not exist, rather than the month before. As the Department is using quarterly weight-averaged prices, it is most to compare those prices to quarterly, rather than monthly, benchmark prices. The fact that the benchmark is a best-available surrogate does not alter this conclusion. The Department also agrees with respondents' statement that it included an extra month in determining the third quarter value. We have corrected this ministerial error for the final calculation of this program. Comment 2: Program-wide Change Respondents maintain that POSCO's privatization after the POR and prior to the issuance of the Preliminary Results constitutes a program-wide change that should be taken into consideration when calculating the cash deposit rate for the final results. Respondents argue that the GOK provided abundant evidence that POSCO has eliminated its two-tiered pricing policy during the POR and that POSCO was fully privatized in October 2000. Respondents remind us that section 351.526(a)(1) of the Department's regulations states that a program-wide change is one which occurs subsequent to the POR and before the preliminary results of an administrative review. Respondents assert that POSCO's privatization, completed in October 2000, constitutes exactly such a change. Respondents further maintain that since POSCO is no longer government owned and POSCO is the only producer of hot-rolled coil in Korea, it follows that Inchon's purchases of hot-rolled coil from POSCO no longer involve a government provision of a good to Inchon for less than adequate remuneration. In this way, respondents argue, the Department cannot measure the change in the amount of the countervailable subsidy provided under the program, as specified in section 351.526(a)(2) of the Department's regulations. Respondents further argue that pursuant to section 351.526(b)(1), a program-wide change is not limited to an individual firm. Respondents point out that in one sense, the program only involved one firm, POSCO, but actually the Department treated POSCO not as a company, but as the equivalent of the GOK. Thus, respondents assert, the program ended when the government sold its shares in POSCO. On the other hand, respondents maintain that the program involved all of POSCO's domestic customers, and, therefore, the privatization of POSCO resulted in the termination of a program applicable to all of POSCO's domestic customers. Respondents point out that although the Department's regulations at section 351.526(b)(2) require that a program-wide change be effectuated by an official act, there was no official government act of the kind mentioned in the Department's regulations establishing the program in the first place. Thus, respondents argue, the official act required by the Department's regulations should be consistent with the nature of the program. In this case, they argue, the official act terminating the program (i.e., the government provision of a good for less than adequate remuneration) occurred when the KDB sold off the final portion of its shares of POSCO, ending the GOK's ownership and control of POSCO. After this event, respondents argue, POSCO's sales to its customers, including Inchon, can no longer be characterized as the government provision of a good. In addition, respondents argue that they have submitted on the record of the instant review substantial evidence, consisting of press articles, of POSCO's privatization. Respondents also state that the Department never issued a supplemental questionnaire to the GOK requesting any additional documentation regarding POSCO's privatization. Additionally, respondents remind the Department that the issue in front of it is not the privatization nor change in ownership that is subject to the Department's privatization methodology. Rather, it is the Department's finding that POSCO, through government ownership of a portion of POSCO's shares, was acting as the government and providing a good (i.e., hot- rolled stainless steel coil) to Inchon for less than adequate remuneration. Thus, respondents maintain, the fact that POSCO's privatization severed the link between POSCO and the government eliminated the potential provision of a good to Inchon for less than adequate remuneration. Petitioners, in their case brief, urge the Department to affirm its preliminary finding that POSCO sold hot-rolled coil to Inchon for less than adequate remuneration during the POR. As evidence, petitioners point to POSCO's delivered prices, which they profess were lower than the delivered prices of imported hot-rolled stainless steel coil as reported by Inchon, even after taking into account differences in edge finish and grade. Petitioners also maintain that the Department correctly determined that POSCO's privatization does not constitute a program-wide change and should uphold this conclusion in the final results. Petitioners cite to section 351.526(b)(1) of the Department's regulations, which state that a program- wide change is not limited to an individual firm or firms. Therefore, petitioners conclude, a change in the ownership or status of a company does not qualify as a program-wide change, as it relates only to the individual firm in question. On this basis alone, petitioners state, the regulations do not apply. Moreover, petitioners maintain that the evidence submitted by the GOK on the record is inadequate to support its claim that a program-wide change has occurred. Petitioners argue that press articles do not provide sufficient, official documentation to demonstrate a program-wide change. Petitioners assert that the facts in the instant review and the preceding investigation indicate that the influence of the GOK extends even to private enterprises in which the GOK holds no ownership, as reflected in the government's ability to direct credit through private banks in Korea. Finally, petitioners argue that to the extent that POSCO's privatization has any bearing on the Department's treatment of the provision of hot- rolled coil to Inchon, this should be addressed using the change in ownership analysis, and not through the regulation governing program-wide changes. Respondents counter that the program at issue is the government provision of a good, through POSCO, for less than adequate remuneration, which the Department found to exist because POSCO was a government-owned and controlled company and acted as the government when selling inputs to downstream customers. Moreover, respondents maintain that the program does not involve a single firm, but rather all of POSCO's numerous domestic customers, rebutting petitioners' claim that the program only applies to one company. Furthermore, respondents dispute petitioners' idea that the Department's privatization methodology should be applied in this situation. Respondents argue that because the change in ownership methodology concerns subsidies to the company that was privatized, i.e., POSCO, this methodology has no bearing on the question of whether there is any remaining subsidy to Inchon through the government provision of a good for less than adequate remuneration. Respondents point out that since the Department was measuring the amount of the subsidy to Inchon, any subsidies that POSCO may have received were irrelevant to its calculations of the subsidy to Inchon. Respondents moreover rebut petitioners' statement that the influence of the GOK extends even to private enterprises in which the GOK holds no ownership. Respondents state that a private company cannot be found to act as the government in providing a good for less than adequate remuneration unless there is a specific determination that the government directed the company to act on its behalf. Therefore, respondents assert, there is no reason to continue to find that a program still exists simply because a privatized POSCO still sells hot-rolled stainless steel coil to Inchon. In their rebuttal brief, petitioners argue that the privatization of POSCO did not automatically end the ability of the GOK to influence POSCO's pricing practices. Petitioners maintain that although the ownership of POSCO may have changed during the POR, the facts demonstrate that POSCO's pricing practices did not. Moreover, petitioners assert that in no instance has the Department treated an ownership change as a program- wide change. Department's Position: In our Preliminary Results, we found that POSCO's elimination of its two-tiered pricing system did not impact the determination made in CTL Plate that the GOK, through its ownership and control of POSCO, set prices of steel inputs used by the Korean steel industry at prices less than adequate remuneration (see 66 FR at 47012). In the instant review, respondents provided information on the change in POSCO's pricing policy between its inputs sold for domestic consumption and inputs sold for exportation. This information regarding the two-tiered pricing system is not relevant to the analysis of whether POSCO sold inputs used to produce subject merchandise at less than adequate remuneration, under section 351.511 of the CVD Regulations. As determined in CTL Plate, the program at issue is the provision of inputs at less than adequate remuneration, not POSCO's two-tiered pricing system (see CTL Plate, 64 FR 73176 at 73185). Therefore, POSCO's elimination of its two- tiered pricing system does not qualify as a program-wide change as POSCO only eliminated the price difference between domestic and export prices and did not terminate or change its practice of selling inputs at less than adequate remuneration. Respondents also argue that POSCO's privatization constitutes a program- wide change. This is a complex issue that requires many layers of analysis. First, under section 351.526(b)(2) of the CVD Regulations, a program-wide change is effectuated by an official act, such as a statute, regulation or decree. Respondents have presented only newspaper articles of the sale, and not direct evidence of an official act. This information is insufficient to uphold section 351.526(b)(2) of the CVD Regulations. Second, the Department disagrees with respondents' contention that a change in government ownership signals a change in government control. Under section 771(5)(B)(iii) of the Act, a subsidy occurs when an authority "entrusts or directs a private entity to make a financial contribution, if providing the contribution would normally be vested in the government and the practice does not differ in substance from practices normally followed by governments". Despite the apparent sale by the GOK of a portion of its ownership in POSCO, there is insufficient evidence on the record to conclude that the GOK has not directed POSCO to make a financial contribution, i.e., a sale for less than adequate remuneration. The GOK has a long history in the creation and control of POSCO. The extensive GOK assistance in the construction of the integrated steel mills at Pohang and Kwangyang Bay is an example of the strong ties between the GOK and POSCO. Because of this history and ties between the GOK and POSCO, the recent partial change in ownership, as reported in the news articles, must be carefully analyzed. The record in this case does not contain sufficient evidence for us to analyze these complex issues. Moreover, because a government owned bank continues to own 3.11 percent of POSCO, there is evidence indicating that the GOK continues to maintain some ownership over POSCO. (See Memorandum to the File, RE: Industrial Bank of Korea's Shares in POSCO, dated January 3, 2002.) Based upon the lack of sufficient evidence on the record and the GOK's ties to POSCO, we cannot determine, based upon the record before us, that there has been a program-wide change. We note that we are currently conducting the second administrative review of the original order of Sheet and Strip, and we will continue to examine developments in this program in that administrative review. Comment 3: U.S. Dollar Interest Rate Benchmark for Inchon's Loans Petitioners argue that although the Department correctly countervailed the GOK's direction of credit through the POR, it erred in its benefit calculation for this program by applying the wrong benchmark to certain of Inchon's long-term loans. Specifically, petitioners maintain that the Department calculated a composite benchmark for 1999 of U.S. dollar- denominated loans undertaken in several different years from foreign banks to compare with Inchon's U.S. dollar loans from Korean banks. For Inchon's won-denominated loans, on the other hand, the Department calculated an annual weighted-average benchmark to compare with the preferential loans. This methodology, petitioners assert, resulted in differing treatment of Inchon's won-denominated and U.S. dollar-denominated loans and is contrary to Department practice. Citing to section 351.505(a)(2)(iii) of the Department's regulations, petitioners state that for long-term loans, both fixed and variable rate, the Department normally compares the government loan with a benchmark loan, the terms of which were established during or immediately before the year in which the terms of the government-provided loan were established. Therefore, petitioners assert, even though the actual applied interest rate on variable rate loans fluctuates, the Department's practice recognizes that the term for the loan is essentially established at the time the loan is undertaken. For the final results of review, petitioners urge the Department to calculate a distinct U.S. dollar benchmark for each year in which U.S. dollar loans were undertaken from foreign banks to compare with the U.S. dollar loans provided under the GOK's direction of credit from Korean banks. For years in which Inchon received U.S. dollar-denominated loans from Korean banks, but not from foreign banks, petitioners urge the Department to use the average yield to maturity on selected long-term corporate bonds as reported by the U.S. Federal Reserve, as it did in the Final Affirmative Countervailing Duty Determination: Certain Stainless Steel Wire Rod from Italy, (Wire Rod from Italy) 63 FR 40474 (July 29, 1998). Moreover, petitioners argue that although Inchon reported that it had an A1 credit rating throughout most of the 1992-1999 period, Inchon did not indicate which years it received this rating and did not support its statements with any documentation. Therefore, petitioners advocate that the Department apply the Federal Reserve's BAA credit rating to calculate Inchon's benchmark. Respondents counter that the Department's regulations provide for some flexibility, on a case-by-case basis, to reasonably address circumstances such as these where all of the relevant factors are not found for every government loan received. Respondents maintain that, under these specific circumstances, the Department's use of a composite benchmark would be consistent with the Department's regulations concerning the calculation of the benefit from long-term variable interest rates loans, as set out in section 351.505(c)(4). Moreover, respondents point out that the methodology applied by the Department in the instant review is the same as that used in the final determination in the original investigation for the instant case as well as all of the countervailing duty investigations of Korean steel products that took place during 1998-2000. Furthermore, respondents argue that in comparing a government loan with a benchmark loan on the terms prescribed by petitioners, it would have been necessary for the Department to request data on the effective rates of both the government loans and the benchmark loans in the year of receipt of those loans, in order to determine the applicable interest rate differentials at the time of the receipt of the government loans which would then be applicable over the life of the government loans. However, the Department only requested and received data on the effective interest rates of the government loans and the benchmark loans during the POR. Respondents point out that the interest rates on all of those loans consist mostly of the variable base rate, plus a small fixed spread; therefore, they maintain, comparing the effective interest rates on government loans and the benchmark loans during the POR will not yield a substantially different result than from a comparison of the effective interest rates on the loans in the year of receipt. Respondents moreover assert that utilizing a composite benchmark allows the Department to use a benchmark based on actual variable-rate loans received by Inchon for all of the variable-rate government loans it received, rather than switching in some years (i.e., those when Inchon did not receive a U.S. dollar-denominated loan from a foreign bank in Korea) to an alternative benchmark where the rates are determined by numerous factors other than Inchon's own creditworthiness and its demonstrated ability to raise funds in the commercial market. Respondents also point out that in Wire Rod from Italy, the Department used a 1992 benchmark rate to compare to a loan whose terms were determined in 1992. Moreover, respondents state that there is no evidence in the Wire Rod from Italy determination indicating that, in using a fixed long-term bond rate as a benchmark, the Department was applying it to a variable interest rate long-term loan. Respondents further argue that for the years which Inchon had no long- term loan from a foreign bank in Korea to serve as a benchmark loan, petitioners propose that the Department depart from its regulations governing the selection of benchmarks, specifically that of using a comparable commercial loan that the firm could actually obtain on the market (see section 351.505(a)(1) of the Department's regulations). Additionally, respondents argue that by proposing a fixed-rate benchmark for variable-rate loans, petitioners ignore the fact that, over time, the variable component of the interest rate on the government loan may rise or fall substantially, producing a result that in some years may significantly overstate the benefit conferred at the time the loan was received and in other years may result in the Department finding no countervailable benefit when, in fact, at the time the government loan was received the commercial rates available were higher than the interest rate received on the government loan. Finally, respondents rebut petitioners' claim that Inchon's A1 credit rating is not supported on the record. Respondents point out that reports and data on Inchon's creditworthiness were provided on the record, including a public exhibit with a summary of Inchon's credit rating during the years 1992-1998 in Exhibit S-8 of Inchon's September 10, 1998 response to the instant order's investigation. Department's Position: The Department agrees with petitioners' contention that an incorrect benchmark was used to calculate the benefit of U.S. dollar denominated variable rate loans. To calculate the preliminary results, the Department used a single weight-average composite benchmark to compare all of Inchon's outstanding U.S. dollar denominated loans for the POR. The Department agrees with petitioners' argument that this approach is inconsistent with section 351.505(a)(2)(iii) of the CVD Regulations. For the years which the Department has company-specific variable interest rate information, a weight-averaged benchmark is used to compare like years. However, Inchon did not have company-specific benchmark information for all of the years in which it received loans and had outstanding balances during the POR. Therefore, consistent with section 351.505(a)(5)(ii) of the CVD Regulations, which states that, "if the Secretary is unable to make the comparison described in paragraph (a)(5)(i) of this section or if the comparison described in paragraph (a)(5)(i) of this section would yield an inaccurate measure of the benefit, the Secretary may modify the method described in paragraph (a)(5)(i) of this section." As the Department is unable to make an accurate comparison of loans with the same agreement years which also have outstanding balances, we calculated a weight-average of all benchmark loans outstanding during the POR as the benchmark rate for the years in which there is no company-specific information, consistent with 351.505(a)(5)(ii) of the CVD Regulations. Regarding petitioners' suggestion that the Department apply a similar practice as was used in Wire Rod from Italy, the Department disagrees. In Wire Rod from Italy, the Department used the average yield to maturity on selected long-term corporate bonds as reported by the U.S. Federal Reserve. In the instant review, the Department determines that using company-specific information provides a better commercial benchmark. Therefore, the Department is using as the benchmark Inchon's company- specific weight-averaged rate for those years in which Inchon did not have a comparable commercial loans. Recommendation Based on our analysis of the comments received, we recommend adopting all of the above positions. If these recommendations are accepted, we will publish the final results of review and the final net subsidy rates for the reviewed producers/exporters of the subject merchandise in the Federal Register. ________ ________ Agree Disagree _____________________ Faryar Shirzad Assistant Secretary for Import Administration ___________________ Date