Notices. Notice

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BILLING CODE 6116-01-M DEPARTMENT OF AGRICULTURE Agricultural Marketing Service [AMS-TM-07-0035; TM-07-07] Nominations for Member of the National Organic Standards Board AGENCY: Agricultural Marketing Service, USDA. ACTION: Notice. SUMMARY: The Organic Foods Production Act

(OFPA)of 1990, as amended, requires the establishment of a National Organic Standards Board (NOSB). The NOSB is a 15-member board that is responsible for developing and recommending to the Secretary a proposed National List of Allowed and Prohibited Substances. The NOSB also advises the Secretary on all other aspects of the National Organic Program. The U.S. Department of Agriculture

(USDA)is requesting nominations to fill one Environmentalist position on the NOSB. The Secretary of Agriculture will appoint a person to serve a 5-year term of office that will commence on January 24, 2008, and run until January 24, 2013. USDA encourages eligible minorities, women, and persons with disabilities to apply for membership on the NOSB. DATES: Written nominations, with resumes, must be post-marked on or before August 17, 2007. ADDRESSES: Nomination cover letters and resumes should be sent to Ms. Katherine E. Benham, Advisory Board Specialist, USDA-AMS-TMP-NOP, 1400 Independence Avenue, SW., Room 4008-So., Ag Stop 0268, Washington, DC 20250. FOR FURTHER INFORMATION CONTACT: Ms. Katherine E. Benham,

(202)205-7806; E-mail: *katherine.benham@usda.gov* ; Fax:

(202)205-7808. SUPPLEMENTARY INFORMATION: The OFPA of 1990, as amended (7 U.S.C. 6501 *et seq.* ), requires the Secretary to establish an organic certification program for producers and handlers of agricultural products that have been produced using organic methods. In developing this program, the Secretary is required to establish an NOSB. The purpose of the NOSB is to assist in the development of a proposed National List of Allowed and Prohibited Substances and to advise the Secretary on other aspects of the National Organic Program. The current NOSB has made recommendations to the Secretary regarding the establishment of the initial organic program. It is anticipated that the NOSB will continue to make recommendations on various matters, including recommendations on substances it believes should be allowed or prohibited for use in organic production and handling. The NOSB is composed of 15 members; 4 organic producers, 2 organic handlers, a retailer, 3 environmentalists, 3 public/consumer representatives, a scientist, and a certifying agent. Nominations are being sought to fill an Environmentalist vacancy. Individuals appointed to this NOSB position must demonstrate expertise in areas of environmental protection and resource conservation as they relate to organic agricultural production. To nominate yourself or someone else please submit, at a minimum, a cover letter stating your interest and a copy of the nominee's resume. You may also submit a list of endorsements or letters of recommendation, if desired. Nominees will be supplied with an AD-755 background information form that must be completed and returned to USDA within 10 working days of its receipt. Resumes and completed background information forms are required for a nominee to receive consideration for appointment by the Secretary. Equal opportunity practices will be followed in all appointments to the NOSB in accordance with USDA policies. To ensure that the members of the NOSB take into account the needs of the diverse groups that are served by the Department, membership on the NOSB will include, to the extent practicable, individuals who demonstrate the ability to represent minorities, women, and persons with disabilities. The information collection requirements concerning the nomination process have been previously cleared by the Office of Management and Budget

(OMB)under OMB Control No. 0505-0001. Dated: April 3, 2007 Lloyd C. Day, Administrator, Agricultural Marketing Service. [FR Doc. E7-6532 Filed 4-6-07; 8:45 am] BILLING CODE 3410-02-P DEPARTMENT OF AGRICULTURE Animal and Plant Health Inspection Service [Docket No. APHIS-2007-0040] Notice of Request for Extension of Approval of an Information Collection; Export Health Certificate for Animal Products AGENCY: Animal and Plant Health Inspection Service, USDA. ACTION: Extension of approval of an information collection; comment request. SUMMARY: In accordance with the Paperwork Reduction Act of 1995, this notice announces the Animal and Plant Health Inspection Service's intention to request an extension of approval of an information collection associated with the export of animal products from the United States. DATES: We will consider all comments that we receive on or before June 8, 2007. ADDRESSES: You may submit comments by either of the following methods: Federal eRulemaking Portal: Go to *http://www.regulations.gov* , select “Animal and Plant Health Inspection Service” from the agency drop-down menu, then click “Submit.” In the Docket ID column, select APHIS-2007-0040 to submit or view public comments and to view supporting and related materials available electronically. Information on using Regulations.gov, including instructions for accessing documents, submitting comments, and viewing the docket after the close of the comment period, is available through the site's “User Tips” link. Postal Mail/Commercial Delivery: Please send four copies of your comment (an original and three copies) to Docket No. APHIS-2007-0040, Regulatory Analysis and Development, PPD, APHIS, Station 3A-03.8, 4700 River Road Unit 118, Riverdale, MD 20737-1238. Please state that your comment refers to Docket No. APHIS-2007-0040. *Reading Room:* You may read any comments that we receive on this docket in our reading room. The reading room is located in room 1141 of the USDA South Building, 14th Street and Independence Avenue SW., Washington, DC. Normal reading room hours are 8 a.m. to 4:30 p.m., Monday through Friday, except holidays. To be sure someone is there to help you, please call

(202)690-2817 before coming. *Other Information:* Additional information about APHIS and its programs is available on the Internet at *http://www.aphis.usda.gov* . FOR FURTHER INFORMATION CONTACT: For information on an information collection associated with the export of animal products from the United States, contact Dr. Joyce Bowling-Heyward, Assistant Director, Technical Trade Services-Products, National Center for Import and Export, VS, APHIS, 4700 River Road Unit 40, Riverdale, MD 20737;

(301)734-3278. For copies of more detailed information on the information collection, contact Mrs. Celeste Sickles, APHIS' Information Collection Coordinator, at

(301)734-7477. SUPPLEMENTARY INFORMATION: *Title:* Export Health Certificate for Animal Products. *OMB Number:* 0579-0256. *Type of Request:* Extension of approval of a new information collection. *Abstract:* The export of agricultural commodities, including animals and animal products, is a major business in the United States and contributes to a favorable balance of trade. To facilitate the export of U.S. animals and products, the Animal and Plant Health Inspection Service (APHIS), U.S. Department of Agriculture (USDA), maintains information regarding the import health requirements of other countries for animals and animal products exported from the United States. Many countries that import animal products from the United States require a certification from APHIS that the United States is free of certain diseases. These countries may also require that our certification statement contain additional declarations regarding the U.S. animal products being exported. This certification must carry the USDA seal and be endorsed by an APHIS representative (e.g., a Veterinary Medical Officer). Veterinary Services Form 16-4, Health Certificate-Export Certificate-Animal Products, is used to meet these requirements. Regulations pertaining to export certification of animals and animal products are contained in 9 CFR parts 91 and 156. We are asking the Office of Management and Budget

(OMB)to approve our use of this form for an additional 3 years. The purpose of this notice is to solicit comments from the public (as well as affected agencies) concerning our information collection. These comments will help us:

(1)Evaluate whether the collection of information is necessary for the proper performance of the functions of the Agency, including whether the information will have practical utility;

(2)Evaluate the accuracy of our estimate of the burden of the information collection, including the validity of the methodology and assumptions used;

(3)Enhance the quality, utility, and clarity of the information to be collected; and

(4)Minimize the burden of the information collection on those who are to respond, through use, as appropriate, of automated, electronic, mechanical, and other collection technologies, e.g., permitting electronic submission of responses. *Estimate of burden:* The public reporting burden for this collection of information is estimated to average 0.5 hours per response. *Respondents:* U.S. exporters of animal products. *Estimated annual number of respondents:* 33,000. *Estimated annual number of responses per respondent:* 4. *Estimated annual number of responses:* 132,000. *Estimated total annual burden on respondents:* 66,000 hours. (Due to averaging, the total annual burden hours may not equal the product of the annual number of responses multiplied by the reporting burden per response.) All responses to this notice will be summarized and included in the request for OMB approval. All comments will also become a matter of public record. Done in Washington, DC, this 3rd day of April 2007. Kevin Shea, Acting Administrator, Animal and Plant Health Inspection Service. [FR Doc. E7-6596 Filed 4-6-07; 8:45 am] BILLING CODE 3410-34-P DEPARTMENT OF COMMERCE Bureau of the Census Census Advisory Committees AGENCY: Bureau of the Census, Department of Commerce. ACTION: Notice of public meeting. SUMMARY: The Bureau of the Census (U.S. Census Bureau) is giving notice of a joint meeting, followed by separate and concurrently held meetings of the Census Advisory Committees

(CACs)on the African American Population, the American Indian and Alaska Native Populations, the Asian Population, the Hispanic Population, and the Native Hawaiian and Other Pacific Islander Populations. The Committees will address issues related to the 2010 Decennial Census Program. Last-minute changes to the schedule are possible, which could prevent advance notification. DATES: The five Census Advisory Committees on Race and Ethnicity will meet in plenary and concurrent sessions on May 3-4, 2007. On May 3, the meetings will begin at 9 a.m. and end at 5:15 p.m. On May 4, the meetings will begin at 8:30 a.m. and end at 3:30 p.m. *Location:* The meeting will be held at the U.S. Census Bureau, 4600 Silver Hill Road, Suitland, Maryland 20746. FOR FURTHER INFORMATION CONTACT: Ms. Jeri Green, Committee Liaison Officer, U.S. Census Bureau, Room 8H153, 4600 Silver Hill Road, Suitland, Maryland 20746, telephone

(301)763-2070; TTY

(301)457-2540. SUPPLEMENTARY INFORMATION: The CACs on the African American Population, the American Indian and Alaska Native Populations, the Asian Population, the Hispanic Population, and the Native Hawaiian and Other Pacific Islander Populations are comprised of nine members each. The Committees provide an organized and continuing channel of communication between the representative race and ethnic populations and the Census Bureau. The Committees represent an outside-user perspective about how research and design plans for the 2010 Decennial Census, the American Community Survey, and other related programs achieve goals and satisfy needs associated with these communities. The Committees also recommend to the Census Bureau how data can best be disseminated to diverse race and ethnic populations and other users. The Committees are established in accordance with the Federal Advisory Committee Act (Title 5, United States Code, Appendix 2, Section 10(a)(b)). All meetings are open to the public, with a brief period set aside for public comment. However, individuals with extensive questions or statements must submit them in writing to Ms. Jeri Green at least three days before the meeting. Seating is available to the public on a first-come, first-served basis. These meetings are physically accessible to people with disabilities. Requests for sign language interpretation or other auxiliary aids should be directed to the Committee Liaison Officer as soon as possible, preferably two weeks prior to the meeting. Dated: April 3, 2007. Charles Louis Kincannon, Director, Bureau of the Census. [FR Doc. E7-6615 Filed 4-6-07; 8:45 am] BILLING CODE 3510-07-P DEPARTMENT OF COMMERCE International Trade Administration [A-570-894] Certain Tissue Paper from the People's Republic of China: Preliminary Results and Preliminary Rescission, In Part, of Antidumping Duty Administrative Review AGENCY: Import Administration, International Trade Administration, Department of Commerce. SUMMARY: In response to requests from interested parties, the Department of Commerce (the Department) is conducting the first administrative review of the antidumping duty order on certain tissue paper (tissue paper) from the People's Republic of China (PRC). The period of review

(POR)is September 21, 2004, through February 28, 2006. We have preliminarily determined that two of the three respondents made sales of the subject merchandise at prices below normal value. EFFECTIVE DATE: April 9, 2007. FOR FURTHER INFORMATION CONTACT: Kristina Horgan or Bobby Wong, AD/CVD Operations, Office 9, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW, Washington, DC 20230; telephone:

(202)482-8173 or

(202)482-0409, respectively. SUPPLEMENTARY INFORMATION: Background On March 30, 2005, the Department published in the **Federal Register** an antidumping duty order covering tissue paper from the PRC. *See Notice of Amended Final Determination of Sales at Less than Fair Value and Antidumping Duty Order: Certain Tissue Paper Products from the People's Republic of China* , 70 FR 16223 (March 30, 2005) ( *Tissue Paper Order* ). On March 2, 2006, the Department published a *Notice of Opportunity to Request Administrative Review of Antidumping or Countervailing Duty Order, Finding, or Suspended Investigation* , 71 FR 10642 (March 2, 2006). On March 30, 2006, Cleo Inc., an importer of subject merchandise, requested, in accordance with 19 CFR 351.213(b), an administrative review of the antidumping duty order on tissue paper from the PRC for China National Aero-Technology Import & Export Xiamen Corp. (China National), Putian City Hong Ye Paper Products Co., Ltd. (Hong Ye), and Putian City Chengxiang Qu Li Feng (Chengxiang) covering the POR. On March 31, 2006, Seaman Paper Company of Massachusetts, Inc., petitioner, requested, in accordance with 19 CFR 351.213(b), an administrative review of the antidumping duty order on tissue paper from the PRC for 16 companies. The companies are: AR Printing and Packaging (AR P&P); China National; Fujian Naoshan Paper Industry Group Co., Ltd. (Naoshan); Fuzhou Magicpro Gifts Co., Ltd. (Magicpro); Giftworld Enterprise Co., Ltd. (Giftworld); Guilin Qifeng Paper Co., Ltd. (Guilin Qifeng); Goldwing Co., Ltd. (Goldwing); Kepsco, Inc. (Kepsco); Max Fortune Industrial Limited; Foshan Sansico Co., Ltd., PT Grafitecindo Ciptaprima, PT Printec Perkasa, PT Printec Perkasa II, PT Sansico Utama, Sansico Asia Pasific Limited (collectively, the Sansico Group); and Vietnam Quijiang Paper Co., Ltd. (Quijiang). On March 31, 2006, Samsam Productions Ltd. (Samsam) requested, in accordance with 19 CFR 351.213(b), an administrative review of the antidumping duty order on tissue paper from the PRC for itself and its affiliated Chinese supplier Guangzhou Baxi Printing Products Co., Ltd., as did Max Fortune Industrial Limited and Max Fortune (FETDE) Paper Products Co., Ltd. (collectively, Max Fortune). On April 28, 2006, the Department initiated an administrative review of the above-mentioned 20 companies. *See Initiation of Antidumping and Countervailing Duty Administrative Reviews* , 71 FR 25145 (April 28, 2006) ( *Initiation Notice* ). On May 10, 2006, Naoshan submitted a letter to the Department claiming it had no shipments of subject merchandise to the United States during the POR. On May 10, 2006, the Department issued quantity and value questionnaires to 18 companies for which the review was initiated, and on May 11, 2006, the Department issued quantity and value questionnaires to the remaining two companies, Naoshan and Magicpro. On May 15, 2006, the Department sent another quantity and value questionnaire to PT Printec Perkasa II using an alternate address. On May 22, 2006, Samsam and Max Fortune submitted separate quantity and value questionnaires, as requested by the Department, indicating that each company had sales of subject merchandise during the POR. On May 24, 2006, Naoshan stated again that it had no shipments of subject merchandise during the POR. On May 30, 2006, petitioner submitted comments on Naoshan's May 10, 2006, submission, requesting that the Department seek further information regarding its claims of no shipments of subject merchandise during the POR. On June 5, 2006, the Department sent a second quantity and value questionnaire to Kepsco, China National, Guilin Qifeng, Hong Ye, Giftworld, MagicPro, and Chengxiang, asking them to respond and informing the companies that, in failing to respond, the Department might find them uncooperative and use facts available with an adverse inference to determine the appropriate antidumping duty margins. On June 23, 2006, the Department issued a letter to the Chinese Ministry of Commerce requesting its assistance in finding a correct address for MagicPro; however, the Department received no response. On July 3, 2006, the Department stated in a memorandum to the file that only three companies had replied to its quantity and value questionnaires indicating that they had sales of subject merchandise during the POR; therefore, the Department issued questionnaires to these companies: Guilin Qifeng and Quijiang, 1 Max Fortune, and Samsam. *See* Memorandum to The File, through Carrie Blozy, Program Manager, AD/CVD Operations, Office 9, from Bobby Wong, Case Analyst, AD/CVD Operations, Office 9, regarding *Certain Tissue Paper Products from the People's Republic of China: Respondent Questionnaires* (July 3, 2006). On July 17, 2006, Naoshan reiterated on the record that it had no shipments of subject merchandise during the POR and replied to petitioner's May 30, 2006, comments. On July 18, 2006, the Department outlined, in a memorandum to the file, the various steps it took to attempt to deliver the quantity and value questionnaire to Magicpro, and indicated that it had not succeeded in its various attempts. On July 18, 2006, the Department placed letters from Goldwing and AR P&P on the record, in which each company stated that it had no shipments of subject merchandise during the POR. On July 20, 2006, the Department sent a letter to Naoshan stating that our research had indicated that Naoshan had shipments of subject merchandise during the POR and requested that the company respond to the research finding. 1 We note that Guilin Qifeng and Quijiang are affiliated parties. *See* Section A Questionnaire Response from Guilin Qifeng (July 31, 2006) at 9. The Department issued one questionnaire addressed to both companies. On July 24, 2006, petitioner requested that the Department extend the deadline for withdrawing requests for specific producers and exporters in the instant review. On July 26, 2006, in accordance with 19 CFR 351.213(d)(1), the Department granted an extension for withdrawing requests until August 25, 2006. On July 31, 2006, Guilin Qifeng submitted a Section A response to the Department's questionnaire. On August 15, 2006, Naoshan replied to the Department's July 20, 2006, request for further information. On August 23, 2006, Guilin Qifeng submitted Section C and D responses to the Department. On August 25, 2006, petitioner filed a letter withdrawing its request for review of five companies: Naoshan, Magicpro, Guilin Qifeng, Goldwing, and AR P&P. On September 11, 2006, we invited interested parties to comment on the Department's surrogate country selection and/or to submit publicly available information to value the factors of production. On September 29, 2006, the Department rescinded this review with respect to Naoshan, Magicpro, Guilin Qifeng, Goldwing, and AR P&P because the only requesting party withdrew its request for review in a timely manner. *See Certain Tissue Paper Products from the People's Republic of China: Notice of Partial Rescission of Antidumping Duty Administrative Review* , 71 FR 57471 (September 29, 2006). On October 10, 2006, petitioner submitted comments with regard to surrogate country selection. On October 24, 2006, in accordance with section 751(a)(3)(A) of the Tariff Act of 1930, as amended (the Act), and 19 CFR 351.213(h)(2), the Department extended the deadline for the preliminary results of review until February 16, 2007. *See Certain Tissue Paper Products from the People's Republic of China: Extension of Time Limit for Preliminary Results of the First Administrative Review* , 71 FR 62249 (October 24, 2006). On October 27, 2006, the Department extended the time limit for submitting surrogate country and surrogate value comments. On November 6, 2006, the Department, in response to petitioner's November 3, 2006, request to reopen the record of the review to submit new factual information, extended the opportunity to submit new factual information. On November 27, 2006, the Department received a letter from the law firm of Grunfeld, Desiderio, Lebowitz, Silverman, and Klestadt LLP, notifying the Department that it had withdrawn its representation of Samsam. On December 6, 2006, we received surrogate value comments from Max Fortune. Petitioner commented on surrogate values on December 11, 2006. On January 4, 2007, the Department received a letter from Grunfeld, Desiderio, Lebowitz, Silverman, and Klestadt LLP notifying the Department that it was again representing Samsam in the instant review. On January 23, 2007, in accordance with section 751(a)(3)(A) of the Act and 19 CFR 351.213(h)(2), the Department further extended the deadline for the preliminary results of review until April 2, 2006. *See Certain Tissue Paper Products from the People's Republic of China: Extension of Time Limit for Preliminary Results of the First Administrative Review* , 72 FR 2859 (January 23, 2007). On March 22, 2007, petitioner submitted comments on Max Fortune's dye and ink factors of production allocation. On March 23, 2007, petitioner submitted comments on the *bona fides* nature of Samsam's POR sales. On March 30, 2007, petitioner also submitted comments on Max Fortune paper making division's financial statements. On April 2, 2007, Samsam replied to petitioner's March 23, 2007, comments. 2 2 Because these parties submitted these comments just before the preliminary results, the Department was not able to consider these comments for the preliminary results. However, the Department will consider these comments for the final results. During the course of the administrative review, the Department also received timely filed original and supplemental questionnaire responses from Max Fortune and Samsam. Quijiang In response to the Department's quantity and value questionnaire, on May 25, 2006, Quijiang stated that it had no shipments of subject merchandise during the POR. After the Department issued a full questionnaire to Guilin Qifeng and Quijiang on July 3, 2006, Quijiang asked the Department on July 12, 2006, to clarify how it should reply to the antidumping duty questionnaire, as it stated it had no shipments of subject merchandise during the POR on May 25, 2006. On July 18, 2006, the Department informed Quijiang, in a memorandum to the file, that “to the extent that it did not sell or resell the subject merchandise to the United States during the POR, {it}is not required to submit a response to the Department's July 3, 2006, antidumping questionnaire.” *See* Memorandum to The File, through Carrie Blozy, Program Manager, AD/CVD Operations, Office 9, from Kristina Boughton, Senior International Trade Compliance Analyst, AD/CVD Operations, Office 9, regarding *First Antidumping Duty Administrative Review of Certain Tissue Paper Products from the People's Republic of China: Clarification of Respondent Selection* (July 18, 2006). As noted above, while Guilin Qifeng submitted responses to the Department's questionnaire before the review was rescinded for Guilin Qifeng, it did so only on behalf of itself and not on behalf of its affiliate, Quijiang. The Sansico Group In response to the Department's quantity and value questionnaire, on May 22, 2006, the Sansico Group submitted a letter to the Department claiming each of its affiliated companies had no shipments of subject merchandise during the POR. On May 30, 2006, petitioner submitted comments on the Sansico Group's May 22, 2006, submission, requesting that the Department seek further information from the Sansico Group regarding its claims of no shipments of subject merchandise during the POR. On June 7, 2006, the Sansico Group responded to the petitioner's comments on its claim of no shipments during the POR. In response to the Department's opening of the record to new factual information, as mentioned above, on November 13, 2006, petitioner submitted comments analyzing the Sansico Group's production and export activities. On December 22, 2006, petitioner resubmitted, at the Department's request, the November 13, 2006, submission with revised bracketing. On January 3, 2007, the Sansico Group responded to the petitioner's comments on its export and production activities, restating that it did not export Chinese-origin tissue paper to the United States. On January 8, 2007, the Department issued a supplemental questionnaire to the Sansico Group regarding its POR export and production activities. On January 29, 2007, the Sansico Group submitted its response to the Department's supplemental questionnaire. On February 8, 2007, the Department received petitioner's comments on the Sansico Group's supplemental response. On March 23, 2007, petitioner submitted additional comments on the Sansico Group and its claims of no shipments. On April 2, 2007, the Sansico Group replied to petitioner's March 23, 2007, comments. 3 3 Because parties submitted these comments just before the preliminary results, the Department was not able to consider these comments for the preliminary results. However, the Department will consider these comments for the final results. China National, Hong Ye, Chengxiang, Kepsco, and Giftworld In its first quantity and value questionnaire, the Department established a deadline of May 22, 2006, for submitting such responses; however, the Department did not receive responses from China National, Hong Ye, Chengxiang, Kepsco, and Giftworld. The Department sent follow-up quantity and value questionnaires to each of the above-referenced firms on June 5, 2006, requesting a response within five days of the receipt of the June 5 letter. The Department also noted in this letter that it might resort to facts available with an adverse inference if the companies failed to file a response. *See* Letters to China National, Hong Ye, Chengxiang, Kepsco, and Giftworld from Carrie Blozy, Program Manager, AD/CVD Operations, Office 9, regarding *Certain Tissue Paper from the People's Republic of China: Quantity and Value Follow-Up Questionnaire* (June 5, 2006). Although China National, Hong Ye, Chengxiang, Kepsco, and Giftworld received the initial questionnaire and the follow-up letter, which included the quantity and value questionnaire, Hong Ye, Chengxiang, Kepsco, and Giftworld did not reply to the Department. *See* Memorandum to the File, from Bobby Wong, International Trade Compliance Analyst, AD/CVD Operations, Office 9, regarding *Antidumping Duty Administrative Review of Certain Tissue Paper Products from the People's Republic of China: Proof of Delivery to China National, Hong Ye, Chengxiang, Kepsco, and Giftworld* (April 2, 2007). On June 28, 2006, the Department placed a facsimile it received from China National on the record, in which the company stated that it would not participate in the review. *See* Memorandum to the File, from Bobby Wong, International Trade Compliance Analyst, AD/CVD Operations, Office 9, regarding *Antidumping Duty Administrative Review of Certain Tissue Paper Products from the People's Republic of China: Notice of non-participation by China National Aero-Technology Import & Export Xiamen Corporation* (June 28, 2006). Scope of the Order The tissue paper products subject to this order are cut-to-length sheets of tissue paper having a basis weight not exceeding 29 grams per square meter. Tissue paper products subject to this order may or may not be bleached, dye-colored, surface-colored, glazed, surface decorated or printed, sequined, crinkled, embossed, and/or die cut. The tissue paper subject to this order is in the form of cut-to-length sheets of tissue paper with a width equal to or greater than one-half (0.5) inch. Subject tissue paper may be flat or folded, and may be packaged by banding or wrapping with paper or film, by placing in plastic or film bags, and/or by placing in boxes for distribution and use by the ultimate consumer. Packages of tissue paper subject to this order may consist solely of tissue paper of one color and/or style, or may contain multiple colors and/or styles. The merchandise subject to this order does not have specific classification numbers assigned to them under the Harmonized Tariff Schedule of the United States (HTSUS). Subject merchandise may be under one or more of several different subheadings, including: 4802.30; 4802.54; 4802.61; 4802.62; 4802.69; 4804.31.1000; 4804.31.2000; 4804.31.4020; 4804.31.4040; 4804.31.6000; 4804.39; 4805.91.1090; 4805.91.5000; 4805.91.7000; 4806.40; 4808.30; 4808.90; 4811.90; 4823.90; 4820.50.00; 4802.90.00; 4805.91.90; 9505.90.40. The tariff classifications are provided for convenience and customs purposes; however, the written description of the scope of this order is dispositive. 4 4 On January 30, 2007, at the direction of U.S. Customs and Border Protection (CBP), the Department added the following HTSUS classifications to the AD/CVD module for tissue paper: 4802.54.3100, 4802.54.6100, and 4823.90.6700. However, we note that the six-digit classifications for these numbers were already listed in the scope. Excluded from the scope of this order are the following tissue paper products:

(1)tissue paper products that are coated in wax, paraffin, or polymers, of a kind used in floral and food service applications;

(2)tissue paper products that have been perforated, embossed, or die-cut to the shape of a toilet seat, *i.e.* , disposable sanitary covers for toilet seats;

(3)toilet or facial tissue stock, towel or napkin stock, paper of a kind used for household or sanitary purposes, cellulose wadding, and webs of cellulose fibers (HTSUS 4803.00.20.00 and 4803.00.40.00). Preliminary Partial Rescission of Administrative Review Pursuant to 19 CFR 351.213(d)(3), we have preliminarily determined that Quijiang 5 and the Sansico Group made no shipments of subject merchandise during the POR of this administrative review. In making this determination, the Department examined PRC tissue paper shipment data maintained by CBP. Based on the information obtained from CBP, we found no entries of subject merchandise during the POR manufactured and/or exported by Quijiang or the Sansico Group to the United States. The Department also issued no-shipment inquiries to CBP in March 2007 asking CBP to provide any information contrary to our findings of no entries of subject merchandise for Quijiang and the Sansico Group during the POR. We received no response from CBP. *See* Memorandum to The File, from Kristina Horgan, Senior International Trade Analyst, AD/CVD Operations, Office 9, regarding *2004-2006 Administrative Review of Certain Tissue Paper Products from the People's Republic of China: CBP No Shipment E-mail Inquiries* (April 2, 2007). 5 We note that Quijiang is the respondent in a concurrent anti-circumvention inquiry in tissue paper from the PRC. *See Certain Tissue Paper Products from the People's Republic of China: Notice of Initiation of Anti-circumvention Inquiry* , 71 FR 53662 (September 12, 2006). Petitioner has alleged that the Sansico Group is selling Chinese-origin tissue paper via its Indonesian facilities. The Sansico Group has stated on the record, and provided supporting evidence, that none of its companies exported Chinese-origin subject merchandise to the United States during the POR. The Department has analyzed record information and preliminarily finds that the Sansico Group did not export subject merchandise to the United States during the POR. However, the Department may solicit additional information prior to the final results of this review from the Sansico Group to confirm the veracity of its no shipment claims. Therefore, based on the results of our corroborative CBP query, indicating no shipments of subject merchandise by Quijiang or the Sansico Group during the POR, as well as Quijiang's and the Sansico Group's claim that each had no subject shipments, we are preliminarily rescinding the administrative review, in accordance with 19 CFR 351.213(d)(3), with respect to Quijiang and the Sansico Group. Separate Rates In proceedings involving non-market economy

(NME)countries, the Department begins with a rebuttable presumption that all companies within the country are subject to government control and, thus, should be assigned a single antidumping duty rate unless an exporter can affirmatively demonstrate an absence of government control, both in law ( *de jure* ) and in fact ( *de facto* ), with respect to its export activities. *See Notice of Final Determination of Sales at Less Than Fair Value: Sparklers from the People's Republic of China* , 56 FR 20588 (May 6, 1991) (Sparklers). In this review Max Fortune and Samsam submitted information indicating that they are both wholly owned Hong Kong-registered companies in support of their claims for company-specific rates. *See* Letter to the Department of Commerce from Samsam, regarding *Certain Tissue Paper from the People's Republic of China: Samsam Productions Ltd. Section A Questionnaire Response* (August 2, 2006); *see also* Letter to the Department of Commerce from Max Fortune, regarding *Certain Tissue Paper from the People's Republic of China: Max Fortune's Section A Questionnaire Response* (July 31, 2006). Consequently, because evidence on the record indicates an absence of government control, both in law and in fact, over each respondent's export activities, we preliminarily determine that Max Fortune and Samsam have each met the criteria for the application of a separate rate consistent with past practice. *See* , *e.g.* , *Notice of Preliminary Determination of Sales at Less Than Fair Value and Postponement of Final Determination: Synthetic Indigo From the People's Republic of China* , 64 FR 69723 (December 14, 1999), unchanged in *Synthetic Indigo From the People's Republic of China; Notice of Final Determination of Sales at Less Than Fair Value* , 65 FR 25706 (May 3, 2000). Use of Facts Otherwise Available and the PRC-Wide Rate For the reasons outlined below, we have applied total adverse facts available to China National, Hong Ye, Chengxiang, Kepsco, and Giftworld. Section 776(a)(2) of the Act provides that, if an interested party:

(A)withholds information that has been requested by the Department;

(B)fails to provide such information in a timely manner or in the form or manner requested subject to sections 782(c)(1) and

(e)of the Act;

(C)significantly impedes a proceeding under the antidumping statute; or

(D)provides such information but the information cannot be verified, the Department shall, subject to section 782(d) of the Act, use facts otherwise available in reaching the applicable determination. By failing to respond to the Department's requests for information ( *i.e.* , responding to the quantity and value questionnaire) and by not allowing the Department to conduct verification, China National, Hong Ye, Chengxiang, Kepsco, and Giftworld, respectively, have not proven they are free of government control and are, therefore, not eligible to receive a separate rate. In the *Initiation Notice* , the Department stated that if one of the companies on which we initiated a review does not qualify for a separate rate, all other exporters of tissue paper from the PRC who have not qualified for a separate rate are deemed to be covered by this review as part of the single PRC-wide entity of which the named exporter is a part. *See Initiation Notice* at n.1. For these preliminary results, China National, Hong Ye, Chengxiang, Kepsco, and Giftworld will all be considered part of the PRC-wide entity, subject to the PRC-wide rate. According to section 776(b) of the Act, if the Department finds that an interested party “has failed to cooperate by not acting to the best of its ability to comply with a request for information,” the Department may use information that is adverse to the interests of the party as facts otherwise available. Adverse inferences are appropriate “to ensure that the party does not obtain a more favorable result by failing to cooperate than if it had cooperated fully.” *See* Statement of Administrative Action

(SAA)accompanying the Uruguay Round Agreements Act (URAA), H.R. Rep. No. 103-316, Vol. 1 at 870 (1994). As explained above, the PRC-wide entity (including China National, Hong Ye, Chengxiang, Kepsco, and Giftworld) did not respond to the Department's requests for information. Therefore, the PRC-wide entity did not cooperate to the best of its ability. Because the PRC-wide entity did not cooperate to the best of its ability in the proceeding, the Department finds it necessary, pursuant to sections 776(a)(2)(A),(B) and

(C)and 776(b) of the Act, to use adverse facts available

(AFA)as the basis for these preliminary results of review for the PRC-wide entity. Selection of AFA Rate In deciding which facts to use as AFA, section 776(b) of the Act and 19 CFR 351.308(c)(1) authorize the Department to rely on information derived from

(1)the petition,

(2)a final determination in the investigation,

(3)any previous review or determination, or

(4)any information placed on the record. In reviews, the Department normally selects, as AFA, the highest rate on the record of any segment of the proceeding. *See* , *e.g.* , *Freshwater Crawfish Tail Meat from the People's Republic of China: Notice of Final Results of Antidumping Duty Administrative Review* , 68 FR 19504 (April 21, 2003). The Court of International Trade

(CIT)and the Federal Circuit have consistently upheld the Department's practice in this regard. *See Rhone Poulenc, Inc. v. United States* , 899 F.2d 1185, 1190 (Fed. Circ. 1990) ( *Rhone Poulenc* ); *NSK Ltd. v. United States* , 346 F. Supp. 2d 1312, 1335 (CIT 2004) (upholding a 73.55 percent total AFA rate, the highest available dumping margin from a different respondent in a LTFV investigation); *see also Kompass Food Trading Int'l v. United States* , 24 CIT 678, 689

(2000)(upholding a 51.16 percent total AFA rate, the highest available dumping margin from a different, fully cooperative respondent); and *Shanghai Taoen International Trading Co., Ltd. v. United States* , 360 F. Supp 2d 1339, 1348 (CIT 2005) (upholding a 223.01 percent total AFA rate, the highest available dumping margin from a different respondent in a previous administrative review). The Department's practice when selecting an adverse rate from among the possible sources of information is to ensure that the margin is sufficiently adverse “as to effectuate the purpose of the facts available role to induce respondents to provide the Department with complete and accurate information in a timely manner.” *See Static Random Access Memory Semiconductors from Taiwan; Final Determination of Sales at Less than Fair Value* , 63 FR 8909, 8932 (February 23, 1998). The Department's practice also ensures “that the party does not obtain a more favorable result by failing to cooperate than if it had cooperated fully.” *See SAA* at 870; *see also Final Determination of Sales at Less than Fair Value: Certain Frozen and Canned Warmwater Shrimp from Brazil* , 69 FR 76910 (December 23, 2004); *D&L Supply Co. v. United States* , 113 F. 3d 1220, 1223 (Fed. Cir. 1997). In choosing the appropriate balance between providing respondents with an incentive to respond accurately and imposing a rate that is reasonably related to the respondent's prior commercial activity, selecting the highest prior margin “reflects a common sense inference that the highest prior margin is the most probative evidence of current margins, because, if it were not so, the importer, knowing of the rule, would have produced current information showing the margin to be less.” *Rhone Poulenc* , 899 F.2d at 1190. Consistent with the statute, court precedent, and its normal practice, the Department has assigned the rate of 112.64 percent, the highest rate on the record of any segment of the proceeding, to the PRC-wide entity (including China National, Hong Ye, Chengxiang, Kepsco, and Giftworld) as AFA. *See* , *e.g.* , *Tissue Paper Order* . As discussed further below, this rate has been corroborated. Corroboration of Secondary Information Used as AFA Section 776(c) of the Act requires that the Department corroborate, to the extent practicable, a figure which it applies as AFA. To be considered corroborated, information must be found to be both reliable and relevant. We are applying as AFA the highest rate from any segment of this proceeding, which is the rate currently applicable to all exporters subject to the PRC-wide rate. The AFA rate in the current review ( *i.e.* , the PRC-wide rate of 112.64 percent) represents the highest rate from the petition in the LTFV investigation. *See Tissue Paper Order* . For purposes of corroboration, the Department will consider whether that margin is both reliable and relevant. The AFA rate we are applying for the current review was corroborated in the LTFV investigation. *See Notice of Final Determination of Sales at Less Than Fair Value: Certain Tissue Paper Products from the People's Republic of China* , 70 FR 7475 (February 14, 2005). Moreover, no information has been presented in the current review that calls into question the reliability of this information. With respect to the relevance aspect of corroboration, the Department will consider information reasonably at its disposal to determine whether a margin continues to have relevance. Where circumstances indicate that the selected margin is not appropriate as AFA, the Department will disregard the margin and determine an appropriate margin. For example, in *Fresh Cut Flowers from Mexico; Final Results of Antidumping Administrative Review* , 61 FR 6812, 6814 (February 22, 1996), the Department disregarded the highest margin in that case as adverse best information available (the predecessor to facts available) because the margin was based on another company's uncharacteristic business expense resulting in an unusually high margin. The information used in calculating this margin was based on sales and production data submitted by the petitioner in the LTFV investigation, together with the most appropriate surrogate value information available to the Department chosen from submissions by the parties in the LTFV investigation. Furthermore, the calculation of this margin was subject to comment from interested parties in the proceeding. As there is no information on the record of this review that demonstrates that this rate is not appropriate for use as AFA, we determine that this rate has relevance. As the 112.64 percent rate is both reliable and relevant, we determine that it has probative value and is corroborated to the extent practicable, in accordance with section 776(c) of the Act. Therefore, we have assigned this AFA rate to exports of the subject merchandise by the PRC-wide entity. Normal Value Comparisons To determine whether the respondents' sales of the subject merchandise were made at prices below normal value, we compared their United States prices to normal values, as described in the “U.S. Price” and “Normal Value” sections of this notice. U.S. Price Export Price For Max Fortune, we based U.S. price on export price

(EP)in accordance with section 772(a) of the Act, because the first sale to an unaffiliated purchaser was made prior to importation, and constructed export price

(CEP)was not otherwise warranted by the facts on the record. We calculated EP based on the packed price from the exporter to the first unaffiliated customer in the United States. Where applicable, for Max Fortune, we deducted foreign inland freight, insurance, foreign brokerage and handling expenses, ocean freight, and marine insurance from the starting price (gross unit price), in accordance with section 772(c) of the Act. Constructed Export Price For Samsam, we calculated CEP in accordance with section 772(b) of the Act, because sales were made on behalf of the PRC-based company by its U.S. affiliate to unaffiliated purchasers. We based CEP on FOB prices to the first unaffiliated purchaser in the United States. Where appropriate, for Samsam, we made deductions from the starting price (gross unit price) for movement expenses in accordance with section 772(c)(2)(A) of the Act, which included foreign inland freight, international freight, U.S. freight from the port to the warehouse, and U.S. duties. In accordance with section 772(d)(1) of the Act, we also deducted for Samsam those selling expenses associated with economic activities occurring in the United States, including credit expenses, inventory carrying costs, and indirect selling expenses. We also made an adjustment for profit in accordance with section 772(d)(3) of the Act. For both Max Fortune and Samsam, where foreign inland freight, insurance, or foreign brokerage and handling were provided by PRC service providers or paid for in renminbi, we valued these services using Indian surrogate values ( *see* “Factors of Production” section below for further discussion). For those expenses that were provided by a market-economy provider and paid for in market-economy currency, we used the reported expense, pursuant to 19 CFR 351.408(c)(1). Normal Value NME Country In every case conducted by the Department involving the PRC, the PRC has been treated as an NME country. *See, e.g., Honey from the People's Republic of China: Final Results and Final Rescission, in Part, of Antidumping Duty Administrative Review* , 71 FR 34893 (June 16. 2006). Pursuant to section 771(18)(C)(i) of the Act, any determination that a foreign country is an NME country shall remain in effect until revoked by the administering authority. *See, e.g., Freshwater Crawfish Tail Meat from the People's Republic of China: Notice of Final Results of Antidumping Duty Administrative Review* , 71 FR 7013 (February 10, 2006). None of the parties to this proceeding have contested such treatment. Accordingly, we calculated normal value

(NV)in accordance with section 773(c) of the Act, which applies to NME countries. Surrogate Country Section 773(c)(4) of the Act requires the Department to value an NME producer's factors of production, to the extent possible, in one or more market-economy countries that

(1)are at a level of economic development comparable to that of the NME country, and

(2)are significant producers of comparable merchandise. India is among the countries comparable to the PRC in terms of overall economic development. *See* Letter to All Interested Parties from Carrie Blozy, Program Manager, AD/CVD Operations, Office 9, regarding *Certain Tissue Paper from the People's Republic of China: Request for Comments on Surrogate Country and Surrogate Values* (September 11, 2006). In addition, based on publicly available information placed on the record ( *e.g.* , production data), India is a significant producer of comparable merchandise. *See* Memorandum to The File, through James C. Doyle, Director, AD/CVD Operations, Office 9, Import Administration, and Christopher D. Riker, Program Manager, AD/CVD Operations, Office 9, from Catherine Bertrand, Senior International Trade Analyst, AD/CVD Operations, Office 9, regarding *Antidumping Duty Administrative Review of Certain Tissue Paper from the People's Republic of China: Selection of a Surrogate Country* (April 2, 2007). Accordingly, we have selected India as the surrogate country for purposes of valuing the factors of production because it meets the Department's criteria for surrogate-country selection. *See Id* . Where Indian import statistics were unavailable, *i.e.* , paraffin oil, the Department has used Indonesian import statistics, as published by the World Trade Atlas (WTA), based on the fact that Indonesia is economically comparable and a producer of comparable merchandise. *See Id* . Factors of Production In accordance with section 773(c) of the Act, we calculated NV based on the factors of production which included, but were not limited to:

(A)hours of labor required;

(B)quantities of raw materials employed;

(C)amounts of energy and other utilities consumed; and

(D)representative capital costs, including depreciation. We used the factors of production reported by the producer for materials, energy, labor, and packing. To calculate NV, we multiplied the reported unit factor quantities by publicly available Indian surrogate values. Certain of Max Fortune's inputs into the production of the merchandise under review were purchased from market economy suppliers and paid for in market economy currencies. We used the reported weight-averaged market economy prices to value the appropriate input when the item was paid for in a market economy currency and accounted for a significant portion of the total purchases of that input. For purposes of the preliminary results, we have determined that only two of Max Fortune's reported market economy purchases accounted for a significant portion of total purchases of that input and, therefore, have used the reported purchase prices for those two inputs in our calculation. *See* Memorandum to the File, through Christopher D. Riker, Program Manager, AD/CVD Operations, Office 9, from Kristina Horgan, Senior International Trade Analyst, AD/CVD Operations, Office 9, regarding *Max Fortune Industrial Limited and Max Fortune (FETDE) Paper Products Co., Ltd. (collectively, Max Fortune) Analysis Memorandum for the Preliminary Results of Review* (April 2, 2007). Max Fortune also reported by-product sales. With respect to the application of the by-product offset to normal value, consistent with the Department's determination in *Diamond Sawblades from the PRC* , because our surrogate financial statements refers to income from by-product sales and because Max Fortune reported that it sold its by-product, we will deduct the surrogate value of the by-product from normal value. This is consistent with accounting principles based on a reasonable assumption that if a company sells a by-product, the by-product necessarily incurs expenses for overhead, SG&A, and profit. *See Final Determination of Sales at Less Than Fair Value and Final Partial Affirmative Determination of Critical Circumstances: Diamond Sawblades and Parts Thereof from the People's Republic of China* , 71 FR 29303 (May 22, 2006), and accompanying Issues and Decision Memorandum at Comment 9 (unchanged in *Notice of Amended Final Determination of Sales at Less Than Fair Value: Diamond Sawblades and Parts Thereof from the People's Republic of China* , 71 FR 35864 (June 22, 2006)). Normally, the Department prefers to use factors of production data that accurately represent the quantity of inputs consumed on a control number (CONNUM)-specific basis. In the present case, however, Max Fortune has indicated that its records for dye and ink consumption in the papermaking and paper printing stages of production do not permit it to report the FOP data in a manner consistent with the Department's requests. While we prefer greater specificity in the reporting of these factors of production, for these preliminary results, we have used Max Fortune's reported aggregate consumption in the calculation of normal value, subject to verification. In selecting the surrogate values, we considered the quality, specificity, and contemporaneity of the data, in accordance with our normal practice. *See* , *e.g.* , *Fresh Garlic From the People's Republic of China: Final Results of Antidumping Duty New Shipper Review* , 67 FR 72139 (December 4, 2002), and accompanying Issues and Decision Memorandum at Comment 6; and *Final Results of First New Shipper Review and First Antidumping Duty Administrative Review: Certain Preserved Mushrooms From the People's Republic of China* , 66 FR 31204 (June 11, 2001), and accompanying Issues and Decision Memorandum at Comment 5. When we used publicly available import data from the Ministry of Commerce of India (Indian Import Statistics) for September 2004 through February 2006, as published by the WTA, to value inputs sourced domestically by PRC suppliers, we added a surrogate cost for freight using the shorter of the reported distance from the domestic supplier to the factory or the distance from the closest seaport to the factory. *See Sigma Corp. v. United States* , 117 F.3d 1401, 1408 (Fed. Cir. 1997). When we used non-import surrogate values for factors sourced domestically by PRC suppliers ( *e.g.* , coal, market economy purchased inputs), we based freight for this input on the actual distance from the input supplier to the site at which the input was consumed. Additionally, in instances where we relied on Indian import data to value inputs, in accordance with the Department's practice, we excluded imports from both NME countries and countries deemed to maintain broadly available, non-industry-specific subsidies which may benefit all exporters to all export markets ( *i.e.* , Indonesia, South Korea, and Thailand) from our surrogate value calculations. *See* , *e.g.* , *Tapered Roller Bearings and Parts Thereof, Finished and Unfinished, From the People's Republic of China; Final Results of 1999-2000 Administrative Review, Partial Rescission of Review, and Determination Not to Revoke Order in Part* , 66 FR 57420 (November 15, 2001) and accompanying Issues and Decision Memorandum at Comment 1; *see also* Memorandum to the File, through James C. Doyle, Director, Office 9, and Christopher D. Riker, Program Manager, AD/CVD Operations, Office 9, from Bobby Wong, International Trade Analyst, AD/CVD Operations, Office 9, and Kristina Horgan, Senior International Trade Analyst, AD/CVD Operations, Office 9, regarding *Factors of Production Valuation Memorandum for the Preliminary Results of Antidumping Administrative Review of Certain Tissue Paper from the People's Republic of China* (April 2, 2007) (Factor Valuation Memo). This memorandum is on file in the Central Records Unit (CRU), room B-099 of the Department building. Where we could not obtain publicly available information contemporaneous with the POR to value factors of production, we inflated the surrogate value using the Indian Wholesale Price Index (WPI), as published in the *International Financial Statistics* of the International Monetary Fund, for those surrogate values in Indian rupees to be contemporaneous with the POR. We also made currency conversions, where necessary, pursuant to 19 CFR 351.415, to U.S. dollars using the daily exchange rate corresponding to the reported date of each sale. We relied on the daily exchanges rates posted on the Import Administration Web site ( *http://www.trade.gov/ia/* ). See Factor Valuation Memo. Specifically, the Department used Indian Import Statistics to value the raw material 6 and packing material inputs that Max Fortune and Samsam used to produce the merchandise under review during the POR, except where listed below. For a detailed description of all surrogate values used for respondents, *see* Factor Valuation Memo. 6 Regarding the surrogate value for dyes and inks, the Department used an average of three types of dyes and inks as there was not more specific information regarding the types of dyes and inks used by respondents' on the record. The Department intends to ask respondents for more specific information on the composition of the dyes and inks used in the production process after the preliminary results. To value paraffin oil, also known as kerosene, we used Indonesian import statistics, as published by the WTA, instead of Indian Import Statistics, because India did not import this input during the POR. To value water, we calculated the average water rates from various regions as reported by the Maharashtra Industrial Development Corporation, *http://midcindia.org* , dated June 1, 2003. We inflated the value for water using the POR average WPI rate. *See* Factor Valuation Memo. We valued diesel, electricity and coal using the rates provided by the OECD's International Energy Agency's publication: *Key World Energy Statistics* from 2004 and 2005. For diesel, the prices are based on 2004 and 2005 first quarter prices of automotive diesel fuel retail prices. For electricity, the prices are based on 2002 fourth quarter prices; we inflated the value for electricity using the POR average WPI rate. For coal, the prices are based on 2004, 2005, and 2006 first quarter prices. *See* Factor Valuation Memo. Consistent with the determination in the LTFV investigation, to value the surrogate financial ratios of factory overhead, selling, general & administrative expenses, and profit, the Department relied on the publicly available information in the financial statements for Pudumjee Pulp & Paper Mills Ltd. (Pudumjee) for fiscal year 2005-2006, submitted by petitioner on December 11, 2006. The annual report covers the period April 1, 2005, to March 31, 2006 and includes data for the 2004-2005 fiscal year as well, covering the entire POR. We determine that Pudumjee's financial statements are appropriate for use in these preliminary results because Pudumjee is a producer of comparable merchandise and its financial data are contemporaneous with the POR. *See* Factor Valuation Memo. Because of the variability of wage rates in countries with similar levels of per capita gross national product, 19 CFR 351.408(c)(3) requires the use of a regression-based wage rate. Therefore, to value the labor input, we used the PRC's regression-based wage rate published by Import Administration on its Web site, *http://www.trade.gov/ia/* . We note that this wage rate is calculated in accordance with the Department's revised methodology. *See Expected Non Market Economy Wages: Request for Comments on 2006 Calculation* , 72 FR 949 (January 9, 2007) and *Antidumping Methodologies: Market Economy Inputs, Expected Non Market Economy Wages, Duty Drawback, and Request for Comments* , 71 FR 6176 (October 19, 2006). *See also* Factor Valuation Memo. To value truck freight, we calculated a weighted-average freight cost based on publicly available data from *www.infreight.com* , an Indian inland freight logistics resource Web site. See Factor Valuation Memo. To value brokerage and handling, we used a simple average of the publicly summarized version of the average value for brokerage and handling expenses reported in the U.S. sales listings in Essar Steel Ltd.'s (Essar) February 28, 2005, Section C submission in the antidumping duty review of certain hot-rolled carbon steel flat products from India, for which the POR was December 1, 2003, through November 30, 2004; information from Agro Dutch Industries Ltd.'s (Agro Dutch) May 25, 2005, Section C submission, taken from the administrative review of preserved mushrooms from India, for which the POR was February 1, 2004, through January 31, 2005; and information from Kejriwal Paper Ltd.'s (Kejriwal) January 9, 2006, Section C submission, taken from the investigation of certain lined paper from India, for which the POR was July 1, 2004, through June 30, 2005. *See Certain Hot-Rolled Carbon Steel Flat Products From India: Preliminary Results of Antidumping Duty Administrative Review* , 71 FR 2018 (January 12, 2006); *Certain Preserved Mushrooms From India: Final Results of Antidumping Duty Administrative Review* , 71 FR 10646 (March 2, 2006); and *Notice of Final Determination of Sales at Less Than Fair Value, and Negative Determination of Critical Circumstances: Certain Lined Paper Products from India* , 71 FR 45012 (August 8, 2006). *See also* Factor Valuation Memo. In accordance with 19 CFR 351.301(c)(3)(ii), for the preliminary results of this administrative review, interested parties may submit publicly available information to value the factors of production until 20 days following the date of publication of these preliminary results. Preliminary Results of Review We preliminarily determine that the following antidumping duty margins exist: Individually Reviewed Exporters Max Fortune Ltd. 0.15%% Samsam Productions Ltd. 115.24%% PRC-Wide Rate PRC-Wide Rate (including China National, Hong Ye, Chengxiang, Kepsco, and Giftworld) 112.64%% For details on the calculation of the antidumping duty weighted-average margin for each company, see the respective company's analysis memorandum for the preliminary results of the first administrative review of the antidumping duty order on tissue paper from the PRC, dated April 2, 2007. Public versions of these memoranda are on file in the CRU. Assessment Rates Pursuant to 19 CFR 351.212(b), the Department will determine, and CBP shall assess, antidumping duties on all appropriate entries. The Department intends to issue appropriate assessment instructions directly to CBP 15 days after publication of the final results of this review. For assessment purposes, where possible, we calculated importer-specific assessment rates for tissue paper from the PRC via *ad valorem* duty assessment rates based on the ratio of the total amount of the dumping margins calculated for the examined sales to the total entered value of those same sales. We will instruct CBP to assess antidumping duties on all appropriate entries covered by this review if any assessment rate calculated in the final results of this review is above *de minimis* . The final results of this review shall be the basis for the assessment of antidumping duties on entries of merchandise covered by the final results of these reviews and for future deposits of estimated duties, where applicable. Cash Deposit Requirements The following cash deposit requirements will be effective upon publication of the final results of this administrative review for all shipments of the subject merchandise entered, or withdrawn from warehouse, for consumption on or after the publication date, as provided for by section 751(a)(2)(C) of the Act:

(1)for the exporters listed above, the cash deposit rate will be established in the final results of this review (except, if the rate is zero or *de minimis* , *i.e.* , less than 0.5 percent, no cash deposit will be required for that company);

(2)for previously investigated or reviewed PRC and non-PRC exporters not listed above that have separate rates, the cash deposit rate will continue to be the exporter-specific rate published for the most recent period;

(3)for all PRC exporters of subject merchandise which have not been found to be entitled to a separate rate, the cash deposit rate will be the PRC-wide rate of 112.64 percent; and

(4)for all non-PRC exporters of subject merchandise which have not received their own rate, the cash deposit rate will be the rate applicable to the PRC exporters that supplied that non-PRC exporter. These deposit requirements, when imposed, shall remain in effect until publication of the final results of the next administrative review. Schedule for Final Results of Review The Department will disclose calculations performed in connection with the preliminary results of this review within five days of the date of publication of this notice in accordance with 19 CFR 351.224(b). Any interested party may request a hearing within 30 days of publication of this notice in accordance with 19 CFR 351.310(c). Any hearing will normally be held 37 days after the publication of this notice, or the first workday thereafter, at the U.S. Department of Commerce, 14 th Street and Constitution Avenue, NW, Washington, DC 20230. Individuals who wish to request a hearing must submit a written request within 30 days of the publication of this notice in the **Federal Register** to the Assistant Secretary for Import Administration, U.S. Department of Commerce, Room 1870, 14 th Street and Constitution Avenue, NW, Washington, DC 20230. Requests for a public hearing should contain:

(1)the party's name, address, and telephone number;

(2)the number of participants; and

(3)to the extent practicable, an identification of the arguments to be raised at the hearing. Unless otherwise notified by the Department, interested parties may submit case briefs within 30 days of the date of publication of this notice in accordance with 19 CFR 351.309(c)(ii). As part of the case brief, parties are encouraged to provide a summary of the arguments not to exceed five pages and a table of statutes, regulations, and cases cited in accordance with 19 CFR 351.309(c)(2)(ii). Rebuttal briefs, which must be limited to issues raised in the case briefs, must be filed within five days after the case brief is filed in accordance with 19 CFR 351.309(d). The Department will issue the final results of this review, which will include the results of its analysis of issues raised in the briefs, not later than 120 days after the date of publication of this notice in accordance with section 751(a)(2)(B)(iv) of the Act and 19 CFR 351.213(h)(1). Notification to Importers This notice also serves as a preliminary reminder to importers of their responsibility under 19 CFR 351.402(f) to file a certificate regarding the reimbursement of antidumping duties prior to liquidation of the relevant entries during these review periods. Failure to comply with this requirement could result in the Secretary's presumption that reimbursement of antidumping duties occurred and the subsequent assessment of double antidumping duties. This administrative review and this notice are published in accordance with sections 751(a)(1) and 777(i)(1) of the Act. Dated: April 2, 2007. Stephen J. Claeys, Deputy Assistant Secretary for Import Administration. [FR Doc. E7-6635 Filed 4-6-07; 8:45 am] BILLING CODE 3510-DS-S DEPARTMENT OF COMMERCE International Trade Administration [C-570-907] Coated Free Sheet Paper From the People's Republic of China: Amended Preliminary Affirmative Countervailing Duty Determination AGENCY: Import Administration, International Trade Administration, Department of Commerce. SUMMARY: The Department of Commerce preliminarily determines that countervailable subsidies are being provided to producers and exporters of coated free sheet paper from the People's Republic of China. For information on the estimated subsidy rates, see the “Suspension of Liquidation” section of this notice. The version released on Friday, March 30, 2007, contained a “Benchmarks” section that was intended to be deleted from the final version because it was duplicative, so this amended preliminary determination corrects that error. This error was discovered prior to publication in the **Federal Register** , consequently, this amendment is being published in its place. EFFECTIVE DATE: April 9, 2007. FOR FURTHER INFORMATION CONTACT: David Layton or David Neubacher, AD/CVD Operations, Office 1, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW., Washington, DC 20230; telephone:

(202)482-0371 or

(202)482-5823, respectively. SUPPLEMENTARY INFORMATION: Case History The following events have occurred since the publication of the Department of Commerce's (the Department) notice of initiation in the **Federal Register** . *See Notice of Initiation of Countervailing Duty Investigations: Coated Free Sheet Paper From the People's Republic of China, Indonesia and the Republic of Korea* , 71 FR 68546 (November 27, 2006) ( *Initiation Notice* ). On December 1, 2006, the Department selected the two largest Chinese producers/exporters of coated free sheet paper, Gold East Paper (Jiangsu) Co., Ltd. (Gold East) and Shandong Chenming Paper Holdings Ltd. (Chenming) as mandatory respondents. *See* Memorandum to Stephen J. Claeys, Deputy Assistant Secretary for Import Administration, “Respondent Selection” (December 1, 2006). This memorandum is on file in the Department's Central Records Unit in Room B-099 of the main Department building (CRU). On December 4, 2006, we issued the countervailing duty

(CVD)questionnaire to the Government of the People's Republic of China (GOC), Gold East and Chenming. On December 29, 2006, the International Trade Commission

(ITC)issued its affirmative preliminary determination that there is a reasonable indication that an industry in the United States is materially injured by reason of allegedly subsidized imports of coated free sheet paper

(CFS)from China, Indonesia, and Korea. *See Coated Free Sheet Paper China, Indonesia, and Korea* , Investigation Nos. 701-TA-444-446 (Preliminary) and 731-TA-1107-1109 (Preliminary), 71 FR 78464 (December 29, 2006). Also on December 29, 2006, we published a postponement of the preliminary determination of this investigation until March 30, 2007. *See Coated Free Sheet Paper From Indonesia, the People's Republic of China, and the Republic of Korea: Notice of Postponement of Preliminary Determinations in the Countervailing Duty Investigations* , 71 FR 78403 (December 29, 2006). We received responses from the GOC on December 11, 2006 and January 31, 2007, Gold East on January 31, 2007, and Chenming on February 2, 2007. On February 9, 2007, the petitioner, New Page Corporation, and the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union, AFL-CIO-CLC (USW), a domestic interested party, submitted comments regarding these questionnaire responses. We issued supplemental questionnaires to Gold East and Chenming on February 15, 2007, and to the GOC on February 21, 2007. We received responses to these supplemental questionnaires from the GOC on March 15, 2007, Chenming on March 12, 2007, and Gold East on March 9 and 13, 2007. We issued a second supplemental questionnaire to the GOC, Gold East and Chenming on February 22, 2007, and received responses to these questionnaires from Chenming on March 12, 2007, and the GOC and Gold East on March 15, 2007. On February 20, 2007, the USW submitted two new subsidy allegations. These allegations were timely as they were filed 40 days prior to the scheduled date of the preliminary determination, in accordance with 19 CFR 351.301(d)(4)(i)(A). We decided to include both of these newly alleged programs in our investigation. *See* Memorandum to Susan Kuhbach, Office Director, “New Subsidy Allegation” (March 5, 2007). On March 7, 2007, we issued a questionnaire to each of the respondents with respect to the new programs. We received responses to these questionnaires from Gold East on March 15, 2007, and from the GOC and Chenming on March 19, 2007. On March 8, 2007, the petitioner submitted comments for consideration in the preliminary determination. The USW filed comments on March 14, 2007. We also received comments from Gold East on March 20, 2007, and March 22, 2007. On March 26, 2007, petitioner requested that the final determination of this countervailing duty investigation be aligned with the final determinations in the companion antidumping duty investigations in accordance with section 705(a)(1) of the Act. We will address this request in a separate **Federal Register** notice. Period of Investigation The period for which we are measuring subsidies, or the period of investigation (POI), is calendar year 2005. Scope of the Investigation The merchandise covered by this investigation includes coated free sheet paper and paperboard of a kind used for writing, printing or other graphic purposes. Coated free sheet paper is produced from not more than 10 percent by weight mechanical or combined chemical/mechanical fibers. Coated free sheet paper is coated with kaolin (China clay) or other inorganic substances, with or without a binder, and with no other coating. Coated free sheet paper may be surface-colored, surface-decorated, printed (except as described below), embossed, or perforated. The subject merchandise includes single- and double-side-coated free sheet paper; coated free sheet paper in both sheet or roll form; and is inclusive of all weights, brightness levels, and finishes. The terms “wood free” or “art” paper may also be used to describe the imported product. Excluded from the scope are:

(1)Coated free sheet paper that is imported printed with final content printed text or graphics;

(2)base paper to be sensitized for use in photography; and

(1)cross-ownership exists between the companies, and

(2)the cross-owned companies produce the subject merchandise, are a holding or parent company of the subject company, produce an input that is primarily dedicated to the production of the downstream product, or transfer a subsidy to a cross-owned company. The Court of International Trade

(CIT)has upheld the Department's authority to attribute subsidies based on whether a company could use or direct the subsidy benefits of another company in essentially the same way it could use its own subsidy benefits. *See Fabrique de Fer de Charleroi* v. *United States* , 166 F. Supp. 2d. 593, 604 (CIT 2001). According to 19 CFR 351.525(b)(6)(vi), cross-ownership exists between two or more corporations where one corporation can use or direct the individual assets of the other corporation(s) in essentially the same ways it can use its own assets. This section of the Department's regulations states that this standard will normally be met where there is a majority voting interest between two corporations or through common ownership of two (or more) corporations. *Chenming:* Chenming reported that it is the only producer of CFS among the companies affiliated with Shandong Chenming Paper Holdings, Ltd. Chenming further reported that its pulp supplier did not receive subsidies from the GOC. Therefore, we are attributing the subsidies received by Chenming to its sales of CFS or total sales, as appropriate. *Gold East:* Gold East has responded to the Department's original and supplemental questionnaires on behalf of itself, its parent company and Gold Huasheng Paper Co., Ltd. (GHS). Gold East reported that GHS produces CFS, but that GHS did not produce CFS that is subject to investigation during the POI. Gold East has also acknowledged that it and GHS are affiliated with a domestic pulp supplier that provides inputs to both companies. Gold East asserts, however, that the pulp supplied by this company cannot be considered an “input product” within the meaning of 19 CFR 351.525(b)(6)(iv) because the pulp provided by this supplier is not suitable for use in the CFS paper that is exported to the United States. Instead, this pulp was used exclusively in the production of lower-end paper products that were sold in the PRC and would not meet the specifications of its U.S. customers. Furthermore, Gold East states that it and GHS strictly segregate the pulp provided by the domestic supplier and the pulp used in export sales. Gold East claims that its situation is analogous to that in *Cold-Rolled Steel Flat Products from Korea* , 1 where the Department did not find a subsidy because the input allegedly sold for less than adequate remuneration was not used to produce subject merchandise. Therefore, Gold East argues that the pulp provided by the domestic supplier is not an input product that is primarily dedicated to the production of the subject merchandise. 1 *See Notice of Preliminary Affirmative Countervailing Duty Determination and Alignment of Final Countervailing Duty Determination with Final Antidumping Duty Determination: Certain Cold-Rolled Carbon Steel Flat products From the Republic of Korea* , 67 FR 9685, 9683 (March 4, 2002) ( *Cold-Rolled Steel Flat Products from Korea* ). Based on information currently on the record, we preliminarily determine that because of common ownership, cross-ownership exists between Gold East, GHS, the parent company, the affiliated pulp supplier and other affiliated companies, in accordance with 19 CFR 351.525(b)(6)(vi). We further preliminarily determine that Gold East and GHS are cross-owned producers of the subject merchandise, as addressed in 19 CFR 351.525(b)(6)(ii). Although Gold East has claimed that GHS did not produce subject merchandise during the POI, there is no evidence indicating that GHS could not produce subject merchandise. Therefore, the subsidies received by Gold East and GHS have preliminarily been attributed to the combined sales of the two companies. Although we have combined Gold East and GHS in this manner, we have continued to refer the respondent as “Gold East” in this notice. Additionally, we preliminarily determine that subsidies received by Gold East's parent company should be attributed to the consolidated sales of the parent company and its subsidiaries. *See* 19 CFR 351.525(b)(6)(iii). Finally, we preliminarily determine that subsidies received by Gold East's cross-owned pulp supplier should be attributed to the combined sales of the input and the downstream products produced from those inputs. This is consistent with the Department's prior determination that pulp is “primarily dedicated” to the production of paper, as required by 19 CFR 351.525(b)(6)(iv). *See Final Affirmative Countervailing Duty Determination and Final Negative Determination of Critical Circumstances: Certain Lined Paper Products from Indonesia,* 71 FR 47174 (August 16, 2006), and accompanying Issues and Decision Memorandum at Comment 3. Moreover, absent a showing that the domestic pulp cannot be used to produce CFS sold to the United States, there is no basis to tie subsidies bestowed on these input products exclusively to sales in the domestic Chinese market. Certain other of Gold East's affiliated companies are discussed in a separate, proprietary memorandum, Memorandum to Susan Kuhbach, “Gold East: Cross-owned Companies” (March 29, 2007) (memorandum is on file in Department's CRU). Benchmarks *Summary:* The Department is investigating loans received by respondents from Chinese banks, including state-owned commercial banks (SOCBs), which are alleged to have been granted on a preferential, non-commercial basis. Section 771(5)(E)(ii) of the Act explains that the benefit for loans is the “difference between the amount the recipient of the loan pays on the loan and the amount the recipient would pay on a comparable commercial loan that the recipient could actually obtain on the market.” Normally, the Department uses comparable commercial loans reported by the company for benchmarking purposes. *See* 19 CFR 351.505(a)(2)(i). However, the Department does not treat loans from government banks as commercial if they were provided pursuant to a government program. See 19 CFR 351.505(a)(2)(ii). Because the loans provided to the respondents by SOCBs are under the “Government Policy Lending Program,” explained below, these loans are the very loans for which we require a suitable benchmark. Additionally, if respondents received any loans from foreign banks, these would be unsuitable for use as benchmarks because, as explained in greater detail below, the GOC's intervention in the banking sector creates significant distortions, even restricting and influencing foreign banks within the PRC. If the firm did not have any comparable commercial loans during the period, the Department's regulations provide that we “may use a national interest rate for comparable commercial loans.” *See* 19 CFR 351.505(a)(3)(ii). However, the Chinese national interest rates are not reliable as benchmarks for these loans because of the pervasiveness of the GOC's intervention in the banking sector. Loans provided by Chinese banks reflect significant government intervention and do not reflect the rates that would be found in a functioning market. The statute directs that the benefit is normally measured by comparison to a “loan that the recipient could actually obtain on the market.” Section 771(5)(E)(ii) of the Act. Thus, the benchmark should be a market-based benchmark, yet, there is not a functioning market for loans within the PRC. Therefore, because of the special difficulties inherent in using a Chinese benchmark for loans, the Department is selecting a market-based benchmark that is a simple average of the national lending rates for countries with comparable gross national income (GNI), as explained below. The use of an external benchmark is consistent with the Department's practice. For example, in *Softwood Lumber* , the Department used U.S. timber prices to measure the benefit for government provided timber in Canada. *See Final Results of the Countervailing Duty Investigation of Certain Softwood Lumber Products from Canada,* 67 FR 15545 (April 2, 2002), and accompanying Issues and Decision Memorandum, at “Provincial Stumpage Programs” (“ *Softwood Lumber* ”). In the current proceeding, as described in detail, below, the GOC plays a predominant role in the banking sector resulting in significant distortions that render the lending rates in the PRC unsuitable as market benchmarks. Therefore, as in lumber, where domestic prices are not reliable, we have resorted to prices outside the PRC. *Discussion:* In its analysis of the PRC as a non-market economy in the recent lined paper investigation, the Department found that the PRC's banking sector does not operate on a commercial basis and is subject to significant distortions, primarily arising out of the continued dominant role of the government in the sector. *See* “the People's Republic of China

(PRC)Status as a Non-Market Economy,” May 15, 2006 (“May 15 Memorandum”); and “China's Status as a Non-Market Economy,” August 30, 2006 (“August 30 Memorandum”) (collectively, the “memoranda”). The PRC's stated goal for banking sector reforms since 1994 has been to develop banks that operate on a commercial basis. *See* May 15 Memorandum at 4; and August 30 Memorandum at 56-58. Despite ongoing efforts made by the GOC to move toward this goal, SOCBs in the PRC continue to be plagued by functional and operational problems that have necessitated repeated, large government capital injections and debt write-offs to stave off insolvency. In addition to a chronic problem of non-performing loans, the Department discussed in its memoranda the aspects of the PRC's banking sector that led International Monetary Fund

(IMF)economists to conclude in 2006 that, despite a decade of reform, “it is difficult to find solid empirical evidence of a strong shift to commercial orientation by the SOCBs.” *See* August 30 Memorandum at 58, citing “Progress in China's Banking Sector Reforms: Has Bank Behaviour Changed?,” Washington, DC: International Monetary Fund Working Paper, at 4 (March 2006). For example, the Department found that funds continue to be allocated in a “manner consistent with the general policy to maintain the state-owned industrial sector” and loan pricing remains undifferentiated, despite liberalization of lending caps. *See* May 15 Memorandum at 5; and August 30 Memorandum at 58. As one commentator notes, the PRC's banking sector has “fallen short in its task of allocating credit to the most productive players in the economy,” which is the hallmark of a banking system operating on a commercial basis. *See* August 30 Memorandum at 54, citing “Putting China's Capital to Work: The Value of Financial System Reform,” McKinsey & Company, at 25 (May 2006). The Department concluded that the PRC's banks are “still in the process of developing the institutional underpinnings and human resources necessary to operate on a fully commercial basis.” *See* August 30 Memorandum at 52. In addition, “the various levels of government in the PRC, collectively, have not withdrawn from the role of resource allocator in the financial sector, principally the banking sector.” *See* May 15 Memorandum at 3. The GOC's continued ownership of virtually all of the banking sector assets is “the fundamental gap in banking sector's reform” inhibiting the sector from operating on a commercial basis. *Id.* at 3-4. In fact, the PRC has the highest level of state ownership of banks of any major economy in the world. The four largest SOCBs, the Bank of China (“BOC”), the China Construction Bank (“CCB”), the Agricultural Bank of China (“ABC”) and the Industrial and Commercial Bank of China (“ICBC”), (collectively, the “Big Four”), represent over 50 percent of the formal sector's assets and deposits. Small state-owned institutions, such as rural credit cooperatives, which are characterized by extremely poor performance, account for 9-10 percent of banking assets. Foreign banks account for approximately 2 percent of total assets. Although limited ownership diversification has been introduced through minority foreign shareholdings in the BOC, CCB and the joint-stock commercial banks (with the latter category of banks accounting for 13 percent of the sector's assets), the GOC continues to control the vast majority of financial intermediation in the banking sector. A further portion of the PRC's banking sector is accounted for by smaller entities, such as city banks and credit cooperatives, which are likewise government-owned, albeit on a sub-central level. *See* August 30 Memorandum at 54-55, citing “Economic Survey of China,” Paris: Organization for Economic Cooperation and Development, at 139 (2005). While foreign banks have recently been permitted to purchase minority stakes in a number of state-owned domestic Chinese banks, such investment does not signal a decisive shift towards putting the banks on a fully commercial footing. This is because foreign investment in PRC banks is tightly constrained, and the GOC has signaled its intentions to preserve its control over the banking sector indefinitely. *See* August 30 Memorandum at 61, citing “Go Away, Crocodiles?,” the Economist Intelligence Unit, Business China (March 27, 2006). Continued GOC control of the Chinese banking sector is possible because, while foreign banks have recently been allowed to purchase minority stakes in certain banks in the PRC, total foreign purchases of shares in existing SOBCs have been limited to 25 percent. *See* August 30 Memo at 60, citing “It's so Far, so Good for China's Banking Sector,” the Economist Intelligence Unit, Business China (March 27, 2006). Similarly, some domestic banks in the PRC are now listed on foreign stock exchanges, but majority control remains with the GOC. Foreign interests have acquired approximately 10 percent of the CCB, ICBC and BOC, and are afforded just one place on the board at each bank. *See* August 30 Memo at 61, citing “What are the Prospects for Foreign Banks in China,” the Economist Intelligence Unit, Viewswire, China Finance (March 15, 2006). These investments bring market expertise to the management and board of the state-owned banks, but the foreign-owned shares remain small, thereby limiting the degree of influence over bank operations. *See* August 30 Memo at 61, citing Overmyer, Michael, “WTO: Year Five,” the US-China Business Council, The China Business Review, at 2 (January—February 2006). Therefore, the constrained degree of foreign investment that the GOC has permitted in the domestic Chinese banking sector does not alter the Department's preliminary conclusion that the domestic PRC banking sector does not operate on a commercial basis. Because the GOC still dominates the domestic Chinese banking sector and prevents banks from operating on a fully commercial basis, the Department preliminarily determines that the interest rates of the domestic Chinese banking sector do not provide a suitable basis for benchmarking the loans provided to respondents in this proceeding. Moreover, while foreign-owned banks do operate in the PRC, they are subject to the same restrictions as the SOCBs, including a government-imposed cap on deposit rates, which puts downward pressure on lending rates. In addition, foreign banks' share of assets and lending is negligible compared with the SOCBs. SOCBs issue most of the credit in the PRC and lend at rates close to the Central Bank's announced base lending rate. *See* “Economic Survey of China,” Paris: Organization for Economic Cooperation and Development, at 153

(2005)(“Economic Survey of China”). Accordingly, foreign banks participating in this system are inevitably influenced by this broader environment in the rates at which they issue loans. Additionally, while foreign banks are slowly increasing their participation in the domestic PRC banking sector, the OECD has observed that foreign banks, in addition to providing only a tiny share of credit in the PRC, still operate mostly in niche markets, rather than compete directly with the state-owned commercial banks. *See* August 30 Memorandum at 60, citing “Economic Survey of China,” at 150-151. Therefore, foreign bank lending does not provide a suitable benchmark. The Department's conclusion that the lending rates offered by foreign banks do not offer a suitable benchmark because of the market-distorting behavior of the GOC is consistent with the Department's determination in the countervailing duty investigation in *Softwood Lumber* . That case dealt with the provision of goods for less than adequate remuneration. The Department explained that, “if there is no market benchmark price available in the country of provision, it is obviously impossible to determine adequacy of remuneration except by reference to sources outside the country.” *See Softwood Lumber* at “Provincial Stumpage Programs.” Further, “a valid benchmark must be independent of the government price being tested; otherwise the benchmark may reflect the very market distortion the comparison is intended to detect.” *Id.* In that proceeding, the Department determined that the small private market for timber in Canada was not a suitable basis for comparison because of the dominant position of the government in the marketplace. *Id.* This is quite similar to the fact pattern in the current proceeding, where a small private (foreign) sector exists alongside a vastly larger state-owned sector where a considerable portion of lending is not conducted on terms and conditions consistent with commercial considerations. Just as the prices in the private market for timber were found to be distorted by the presence of a largely state-controlled sector, lending rates by foreign banks in the PRC would be affected by the non-commercial lending rates of the much larger and dominant state-owned banks. On March 22, 2007, Gold East cited to the PRC's Accession Protocol and argued that before rejecting benchmarks within the PRC, the Department should “adjust such prevailing terms and conditions before considering the use of terms and conditions prevailing outside China.” However, it is not practical to adjust internal PRC lending rates for benchmarking the loans made by respondents. The distortions in the Chinese banking sector cannot be attributed to a single factor or set of factors that the Department could account for by adjusting an internal lending figure. Rather, this distorted sector is due to the PRC's history of government domination of the banking system and continuing ownership of the sector. Under these circumstances, for the purposes of this preliminary determination, it is necessary for the Department to disregard all internal benchmark data for loans. We now turn to the issue of choosing an external benchmark. Selecting an appropriate external interest rate benchmark is particularly important in this case because, unlike prices for certain commodities and traded goods, lending rates vary significantly across the world. Nevertheless, there is a broad inverse relationship between income levels and lending rates. In other words, countries with lower per capita gross national income

(GNI)tend to have higher interest rates than countries with higher per capita GNI, a fact demonstrated by the lending rates across countries reported in *International Financial Statistics.* There are several possible explanations for this phenomenon. High-income countries generally have stronger market-supporting institutions, which reduce the risk and transaction costs associated with lending. High income countries may also be more stable, further reducing perceived risk, and have high levels of credit in the economy, which helps to achieve economies of scale. For these reasons, the Department has determined that it is appropriate to use income level as a criterion for choosing the external lending rate to use as a benchmark. Nevertheless, relying on a single country's figure could introduce distortions in the benchmark calculation if, for example, the country's central bank temporarily tightened monetary policy to reduce inflationary pressures. Because such factors, and their effect on interest rates vary across countries, the Department has preliminarily determined that a cross-country average lending rate is the most appropriate benchmark rate in this proceeding. A lending rate averaged across countries with similar income levels to the PRC captures the broad relationship between income and interest rates, as well as the institutional and macroeconomic factors that affect interest rates. Moreover, a large number of the world's countries report comparable lending rates to *International Financial Statistics* , providing a suitable basis for calculating a cross-country average. The Department has used the country classifications of the World Bank to determine which countries to include in the benchmark average. The World Bank divides the world's economies into four categories, based on per capita GNI: Low income, lower-middle income, upper-middle income, and high income. The PRC, with its 2005 per capita GNI of $1740, falls into the lower-middle income category, a group that includes 58 countries as of July 2006. The Department then calculated an average of the lending rates that these countries reported to *International Financial Statistics* in 2005. This calculation excludes those economies that the Department considered to be non-market economies for antidumping purposes in 2005: the PRC, Armenia, Azerbaijan, Belarus, Georgia, Moldova, Turkmenistan, and Ukraine. The average necessarily also excludes any economy that did not report lending data to International Financial Statistics in 2005. The Department also excluded two aberrational countries, Angola, with a rate of 67.72 percent, and Brazil, with a rate of 55.38 percent. The Department then computed a simple average of 13.147 percent of the remaining 37 lending rates and used this average to determine whether a benefit existed for the loans received by Chenming and Gold East on their short-term loans in 2005. The resulting average provides an appropriate benchmark because the loan figures reported to *International Financial Statistics* represent base short-term lending rates in each reporting country. The lending rates reported in *International Financial Statistics* represent short-term lending, and there is no publicly available long-term interest rate data. To identify and measure any benefit from long-term loans, the Department developed a ratio of short-term and long-term lending for 2005. The Department then applied this ratio to the benchmark short-term lending figure (using the methodology explained above) to impute a long-term lending rate. For example, for loans issued in 2000, the Department calculated an average of the 37 lower-middle income countries' short-term lending rates in 2000. To convert the resulting short-term interest rate into a long-term rate, the Department calculated a ratio between short-term lending drawn from London Interbank Offered Rate (LIBOR) data and long-term interest rates from in the interest rate swap market. The ratio of the two figures provides an indication of the varying cost of money over different time periods. In this case, the Department computed a ratio of the average short-term LIBOR rate in 2005 and the prevailing interest rates on long-term (five-year) interest rate swaps reported by the Federal Reserve for the year in question. That is, if the long-term swap rate were 25 percent higher than the short-term LIBOR rate, the Department would inflate the average short-term lending rate by 25 percent to arrive at a long-term interest rate benchmark. This methodology is appropriate because the interest rate swap rates are based on short-term LIBOR rates, and the ratio between them offers an estimate of the market consensus premium that borrowers would pay on a long-term loan over a short-term loan. Creditworthiness The examination of creditworthiness is an attempt to determine if the company in question could obtain long-term financing from conventional commercial sources. *See* 19 CFR 351.505(a)(4). According to 19 CFR 351.505(a)(4)(i), the Department will generally consider a firm to be uncreditworthy if, based on information available at the time of the government-provided loan, the firm could not have obtained long-term loans from conventional commercial sources. In making this determination, according to 19 CFR 351.505(a)(4)(i)(A)-(D), the Department normally examines the following four types of information:

(1)Receipt by the firm of comparable commercial long-term loans;

(2)present and past indicators of the firm's financial health;

(3)present and past indicators of the firm's ability to meet its costs and fixed financial obligations with its cash flow; and

(4)evidence of the firm's future financial position. If a firm has taken out long-term loans from commercial sources, this will normally be dispositive of the firm's creditworthiness. However, if the firm is government-owned, the existence of commercial borrowings is not dispositive of the firm's creditworthiness. This is because, in the Department's view, in the case of a government-owned firm, a bank is likely to consider that the government will repay the loan in the event of a default. *See Countervailing Duties; Final Rule,* 63 FR 65348, 65367 (November 28, 1998). For government-owned firms, we will make our creditworthiness determination by examining this factor and the other factors listed in 19 CFR 351.505 (a)(4)(i). *Chenming:* The Shouguang State-Owned Asset Administration owned 31.24 percent of Chenming during the POI. Therefore, for purposes of the creditworthiness determination, we are preliminarily treating Chenming as government-owned and are not considering the existence of commercial borrowing to be dispositive of the company's creditworthiness. Chenming's consolidated financial statements show that the Group had negative working capital in 2003 through 2005, and its cash flow was negative in 2005. In addition, the current and quick ratios were less than 1 during the same time period and have consistently declined since 2001. 2 Chenming's 2005 financial statements indicate that the Group has a large amount of short-term debt, and that working capital was applied in the expansion and construction of production facilities in the Group. Indeed, its annual reports show that the Group completed several large projects in 2004 and 2005 (fixed assets increased by 83% from the end of 2003 to the end of 2005), including new facilities. While the net profit margin, times interest earned, return on assets, and return on equity have decreased since 2003, they are comparable to or greater than the Group's 2001 ratios. The “times interest earned” ratio calculates the extent to which pre-tax income covers interest expense and creditors monitor it to gauge the risk of default. Cash flow to liabilities, which indicates bankruptcy risk, has been very variable since 2001. Debt-to-equity and debt-to-assets, two solvency ratios, have increased since 2001, and demonstrate that the Group has become more leveraged. Turnover, however, has increased by at least 20 percent each year since 2001. In addition, despite the negative working capital and negative net cash flow, the company continued to pay dividends in 2004 and 2005. 2 *See* Memorandum to File, “Creditworthiness Determination for Chenming,” (March 29, 2007) (“Chenming Creditworthy Memo”) (providing the calculation of the financial ratios for 2001 through 2005). It is the Department's standard practice to examine ratios for the years in which a creditworthiness determination is to be made and the three preceding years. In Chenming's consolidated 2005 financial statements, the auditors explained that the Group is exposed to liquidity risk because a significant percentage of the Group's capital funding requirements are financed through short-term bank borrowing. The company acknowledged this risk and intended to convert a significant portion of such short-term debt to long-term debt in the near future. A December 2, 2005 article in *Euroweek* , indicated that Sumitomo Mitsui Banking Corporation (a foreign bank) was arranging an $80 million three-year term-loan for Chenming. The article explains that the deal is the company's debut international loan, although the company was in the market in 2005 as a sponsor of an affiliated company project. 3 The group also had a five-year convertible bond issue in September 2004. 3 *See* Chenming Creditworthy Memo. We note that the financial statements, upon which the above ratios have been calculated, are for the consolidated Chenming Group. In its response, Chenming submitted financial ratios based on the unconsolidated parent company, which is the responding company and, according to its response, the sole producer within the consolidated group of the merchandise under investigation. These ratios show that the parent company's current ratios for 2004 and 2005 are more than 1 and its quick ratios are nearly 1, which indicate that the parent company is in a more liquid position. In addition, the time interest earned ratios for these years are stronger for the parent than for the Group. While Chenming has not submitted the unconsolidated financial statements upon which these ratios are based, the Department has found publicly available financial statements for Chenming for the first half 2005, which show the financial information for the parent and the Group. These statements confirm that the current ratio for the parent company is greater than 1 and the quick ratio is substantially better for the parent than the Group. In addition, the parent had positive working capital, although its cash flow in the first half 2005 was negative. We find the ratios for the Chenming Group provide varying indications of the firm's financial creditworthiness. While working capital is negative, working capital is only a rough indication of changes in liquidity and supplemental analysis with other ratios is required. Working capital in this case is negative due in large part to the large amount of short-term liabilities. The liabilities in this case were used to finance Group expansion, which should provide for future sales increases. While a company with excellent long-term prospects could fail to realize them if forced into bankruptcy because it could not pay its short-term liabilities, there is no indication that this is the case for the Chenming Group. Indeed, Chenming acknowledges this risk and states its intention to mitigate it through the acquisition of long-term debt. The December 2005 article cited above demonstrates that the company was likely to be successful in carrying out this intention. Moreover, there is no information on the record that Chenming has defaulted on any of its debt or failed to meet any of its financial obligations. To the contrary, it has even continued to pay dividends. Also, the record shows that Chenming has continued to borrow from private parties, as evidenced by the 2004 convertible bond issue. We note that while we have performed this analysis for the Chenming Group, the unconsolidated financial situation for the parent company, the respondent in this case, appears to be even better. 4 4 *See* Chenming Creditworthiness Memo. In summary, while certain financial ratios indicate some degree of financial distress, there are several factors that weigh against finding Chenming uncreditworthy, such as: Continuing annual sales growth, its positive net income in 2005, and its ability to meet its interest expenses and issue convertible bonds. Therefore, we preliminarily determine Chenming to be creditworthy in 2004 and 2005. *Gold East:* On March 8, 2007, the petitioner alleged that the APP companies, including Gold East, should be considered uncreditworthy beginning in 2001. On March 20, 2007, Gold East objected to petitioner's allegation on the grounds that it was untimely filed. Specifically, Gold East argues that any new subsidy allegation, including an allegation of uncreditworthiness, is due no later than 40 days before the scheduled date of the preliminary determination, citing 19 CFR 351.301(d)(4)(i)(A). We disagree with Gold East that uncreditworthiness allegations must be filed within the same timeframe established for new subsidy allegations in 19 CFR 351.301(d)(4)(i)(A). Uncreditworthiness in and of itself is not a countervailable subsidy. Instead, it is a valuation issue that is properly addressed in the course of an investigation as long as parties have ample time to submit information and argument on the point. In this case, adequate time exists. Therefore, we have analyzed petitioner's allegation. According to 19 CFR 351.505(a)(6), the Department “will not consider the uncreditworthiness of a firm absent a specific allegation by petitioner that is supported by information establishing a reasonable basis to believe or suspect that the firm is uncreditworthy.” The petitioner has submitted financial ratios for the companies and has pointed to other evidence on the record. (Because this allegation is based almost exclusively on proprietary information, it is described in a separate memorandum, Memorandum to Susan Kuhbach, “Uncreditworthiness Allegation for APP Companies” (March 29, 2007) (“APP Creditworthiness Allegation Memo”) (memorandum is on file in the Department's CRU). Based on our review of the allegation, we find that the petitioner has provided a reasonable basis to believe or suspect that the APP companies were uncreditworthy in 2001-2005. *See* APP Creditworthiness Allegation Memo. Therefore, we intend to investigate the creditworthiness of the APP companies for those years between 2001 and 2005 in which the companies received subsidies under investigation in this case. We intend to make a preliminary finding on the companies' creditworthiness prior to our final determination and will provide the parties with an opportunity to comment on that finding. Denominator In its March 20, 2007 filing, Gold East asks the Department to adjust its subsidy rate to reflect the fact that the company's exports to the United States are invoiced by an affiliate. Gold East claims that the Department previously made such an adjustment in *Ball Bearings and Parts Thereof from Thailand; Final Results of Countervailing Duty Administrative Review,* 57 FR 26646 (June 15, 1992) ( *“Ball Bearings from Thailand”* ). Based upon our review of *Ball Bearings from Thailand* and the information submitted by Gold East in support of its claim, it appears that the pattern of transactions differ in the two situations, and it is not clear that the adjustment is appropriate for Gold East's situation. However, we intend to seek further information and analyze this claim further for our final determination. Analysis of Programs Based upon our analysis of the petition and the responses to our questionnaires, we determine the following: I. Programs Preliminarily Determined To Be Countervailable A. Grant Programs The petitioner alleged that the GOC, including local and provincial authorities, provide grants to CFS producers and their cross-owned companies, pursuant to five-year plans for the pulp and paper industry. The GOC has identified two grant programs that relate to this allegation: The State Key Technology Renovation Fund, and the Clean Production Technology Fund. The former is discussed below, and the latter is addressed under “Programs Preliminarily Determined to be Not Used.” The State Key Technology Renovation Project Fund The State Key Technology Renovation Project Fund program (“Key Technology Program”) was created pursuant to state circular GUOJINGMAOTOUZI

(1999)No. 886 (Circular No. 886), and operates under the regulatory guidelines provided in Circular No. 886, including “Measures for the Administration of National Debt Special Fund for National Key Technological Renovation Project” (“Special Fund Measures”), GUOJINGMAOTOUZI

(1999)No. 122, GUOJINGMAOTOUZI

(1999)No. 1038 and state circular GUOJINGMAOTOUZI

(2000)No. 822. The purpose of this program is to promote:

(1)Technological renovation in key industries, key enterprises, and key products;

(2)facilitation of technology upgrade;

(3)improvement of product structure;

(4)improvement of quality;

(5)increase of supply;

(6)expansion of domestic demand; and

(7)continuous and healthy development of the state economy. Under the Key Technology Program, companies can apply for funds to cover the cost of financing specific technological renovation projects. Under Article 9 of the Special Fund Measures, Key Technology Program grants are disbursed in the form of “project investment facility” grants covering two years' worth of interest payable on loans to fund the project, or up to three years for enterprises located in certain regions. Under Article 11 of the Special Fund Measures, Key Technology Program funds may also be disbursed as “loan interest grants,” which are calculated with reference to the amount of the project loans and prevailing interest rates during a period of one to two years. Pursuant to Article 4 of Circular No. 886, the recipients of these funds will mainly be selected from large-sized state-owned enterprises and large-sized state holding enterprises among the 512 key enterprises, 120 pilot enterprise groups and the leading enterprises in industries. To be considered for funding, the enterprise files an application that is reviewed at various levels of government, with final approval given by the State Council. Once approved, the local finance bureaus appropriate the funds into the enterprise's account. The GOC has reported that Chenming was among the 512 key enterprises or 120 pilot enterprise groups, and that Gold East was not included in these groups. Also, the GOC reported approving funding for Chenming under the Key Technology Program in 2000, and that the funds were disbursed in 2001. The GOC has further reported that the Key Technology Program has not operated since 2003, although the implementing regulations remain in effect. This is due to institutional reform in the government—the implementing agency, the State Economic and Trade Commission, was dissolved and the program was not taken over by another agency. We preliminarily determine that the Key Technology Program provides countervailable subsidies to Chenming within the meaning of section 771(5) of the Act. We find that these grants are a direct transfer of funds within the meaning of section 771(5)(D)(i) of the Act, providing a benefit in the amount of the grant. *See* 19 CFR 351.504(a). We further preliminarily determine that the grants provided under this program are limited as a matter of law to certain enterprises, *i.e.* , large-sized state-owned enterprises and large-sized state holding enterprises among the 512 key enterprises, 120 pilot enterprise groups and the leading enterprises in industries, and, hence, are specific under section 771(5A)(D)(i) of the Act. According to the GOC, the program is intended to provide one-time assistance and each project funded by the a grant requires a separate application and approval. Therefore, consistent with 19 CFR 351.524(c)(1), we are treating the grant received under this program as “non-recurring.” We do not have the information needed to perform the “expensing” test described in 19 CFR 351.524(b)(2), and for purposes of this preliminary determination have allocated the benefit over the AUL. To calculate the countervailable subsidy, we used our standard grant methodology. Because the approved project was for CFS, we divided the benefits attributable to the POI by the total value of Chenming's sales of CFS during that period. On this basis, we preliminarily determine the countervailable subsidy to be 1.28 percent *ad valorem* for Chenming. As noted above, the grants provided under this program are to cover interest owed on loans. Our regulations provide differing allocation methodologies for interest assumptions, depending on whether the recipient knew of the assumption before taking out the loan. *See* 19 CFR 351.508(c)(2). We intend to seek further information on this issue for our final determination. B. Government Policy Lending Program Petitioner has alleged a GOC lending program to provide loans at a discount to the forestry and paper industry in accordance with the GOC's industrial policy, as set out, *inter alia* , in “The PRC Civilian Economy and Social Development 10th Five-Year Plan Outline” and “The Tenth Five-Year and 2010 Special Plan for the Construction of National Forestry and Papermaking Integration Project.” Petitioner further alleges that discounted loans, interest subsidies, and debt forgiveness are provided through policy banks and state-owned banks providing policy loans. Chenming and Gold East have stated that they did not receive any preferential policy loans. In its response, the GOC states that the Five-Year plans are a “projection of the {state-council's} economic work in the forthcoming years” and are “not necessarily translated into any specific action.” As such, the GOC asserts that it does not normally provide loans to industries; rather, banks provide loans and operate as independent commercial entities, typically basing their decision to provide a loan on commercial and risk assessment factors. To determine whether the program alleged by petitioner confers countervailable subsidies on the producers and exporters of the subject merchandise, the Department must first ascertain whether the GOC has a program in place to support the development of the paper industry. Specifically, the Department must determine whether record evidence supports the conclusion that the GOC carries out industrial policies that encourage and support the growth of the paper sector through the provision of preferential loans. Petitioner has claimed that the GOC has an explicit policy of supporting the paper industry with preferential loans. To support this assertion, petitioner cites to the “The PRC Civilian Economy and Social Development 10th Five-Year Plan Outline” (10th Five-Year Plan) and “The Tenth Five-Year and 2010 Special Plan for the Construction of National Forestry and Papermaking Integration Project” (10th Five-Year Plan for the Forestry and Paper Industry), among other administrative measures. One of the goals of the 10th Five-Year Plan is to “accelerate reform and renovation” of certain industries, including the “wood pulp, high quality paper and paperboard” industry. Subsequent Five-Year Plans have reaffirmed this goal. Taking into consideration the broad goals set out in the 10th Five-Year Plan, in March 2001 the GOC released the 10th Five-Year Plan for the Forestry and Paper Industry. This plan was developed “in order to ensure the smooth construction of our national forestry and papermaking integration project, to make comprehensive plans, to take actions according to local circumstances, to make decisions on scientific bases, and for the government to play the role of macroeconomic readjustment and control” (emphasis added). In addition, the government has established specific production capacity targets in this Plan, stating that “{w}e plan to construct pulp producing capacity of 1.13 million ton” and after 2010 “we can build a pulp producing capacity of more than 2.15 million ton * * * and a matching paper making capacity of about 2.3 million ton.” Further, the GOC estimates that the amount of investment required during the period of the 10th and 11th Five-Year Plans will be RMB 244.3 billion, stating that, “{t}herefore, investment has to be strengthened vigorously and financing channels are to be widened * * *” As such, this Plan specifically contemplates policy measures that are necessary to achieve these goals, including the provision of “appropriate financial support to the construction of forestry and papermaking integration in its early phase by way of infusing capital in cash or loans with discount.” In addition to the 10th Five-Year Plan and the 10th Five-Year Plan for the Forestry and Paper Industry, in August 2001, the State Economic and Trade Commission released the “10th Five-Year Plan in the Paper Production Industry.” The purpose of this Plan is to outline goals of the paper production industry over the next 5 years. A key policy recommendation addressed in the plan is increased access to financial resources, including:

(1)Opening essential financing channels for adjustment and development of the industry;

(2)encouraging the opening of multilateral investment and financing channels to increase technological restructuring and rapid growth; and

(3)providing discounted loans with special terms for environmental conservation projects. Beyond the various Five-Year Plans mentioned above, several additional administrative measures released by the GOC demonstrate a clear governmental policy or program of support to the forestry and paper industry. For example, in June 2000, The PRC's National Key Economy and Trade Committee released the National Key Technology Renovation “Shuang Gao Yi You” Project. The purpose of this measure was to outline key areas of economic structural adjustment needed by enterprises to increase technology renovation, technical and industrial advancement. One of the stated goals was to “emphatically select key paper enterprises which produce high quality newspaper, high class culture paper product (LWC), high class packaging paperboard (carton paperboard), and enterprises that produce paper making machine and other supporting networks; eliminate backward equipment and products which are not market suitable.” On the basis of the record information cited above, we preliminarily determine that the GOC has a specific and detailed policy to encourage and support the development of the domestic forestry and paper industry. The GOC itself has stated that Five-Year Plans are a “projection of the [state-council's] economic work in the forthcoming years.” In order to implement the policies enumerated in the Five-Year Plan, the GOC's policy specifically calls for the provision of discounted loans and other financing in order to support the growth and development of this industry. The GOC has further stated in its March 15 questionnaire response that “the administrative system ensures that provincial and local policy goals and objectives are in conformity with the central policy goals and objectives.” According to the 1979 Law of Local People's Congresses at Various Levels and Local People's Government at Various Levels of the PRC, as amended, local governments must follow the laws and regulations made by the central government. *See* Chinese Law and Legal Research, Wei Luo, at 31 (2005). Further, the State Council guides the local administration in terms of policies and assigns tasks to local governments in terms of plans. In doing so, the central government confers on the local governments the necessary authorities to carry out the policies of the central government. The central government also evaluates the local governments' application of policies, laws and plans made by the central government. *See* id. (emphasis added.) In other words, local governments must align their industrial policies with stated central government policies and carry out those polices to the extent that such measures affect their locality. As such, based on record statements, Five-Year Plans should be considered a central government policy or program that local governments adopt and implement through SOCBs. Having determined that the record evidence establishes a government policy or program to support the forestry and paper industry, the Department next turns to whether these policies were carried out by the central and local governments through the provision of loans extended by GOC policy banks and SOCBs. Under the Department's practice, loans provided by government policy banks, such as the China Development Bank, are considered government loans and, thus, constitute direct financial contributions under the Act. *See* , *e.g.* , * Dynamic Random Access Memory Semiconductors from the Republic of Korea: Final Results of Countervailing Duty Administrative Review * , 72 FR 7015, February 14, 2007, and accompanying Issues and Decision Memorandum, at 6. Loans by SOCBs, however, are not necessarily treated as government loans because these banks often operate on a commercial basis in many countries. *See Preamble* , 63 FR at 65363. However, as discussed below, the PRC's banking system presents a significantly different fact pattern than those in market economy countries that the Department has previously encountered and that were contemplated in the *Preamble* . Information on the record indicates that the PRC's banking system suffers from a legacy of complete state control, the vestiges of which allow for continued government control, especially at the local level, resulting in the allocation of credit in accordance with government policies. As discussed in the *Georgetown Memo* and the Department's memoranda from the investigation on *Certain Lined Paper Products from the PRC* regarding the PRC's status as a non-market economy, the PRC's banking system is more flexible than the Soviet-style banking sectors, where central banks directly allocated all credit in accordance with the wishes of the party and the central planners. The GOC abolished the mandatory credit plan in 1997, under which the People's Bank of China

(PBOC)directly allocated credit to specific sectors, often supporting the operations of loss-making state-owned enterprises (SOEs). The credit plan was replaced with non-binding targets, which were to serve as guidance for credit allocation. See August 30 Memorandum, at 51. SOCBs were afforded legal autonomy from the state in most matters, which allowed them to lend, at least in theory, on terms and conditions consistent with commercial considerations. Current law, however, remains contradictory with regard to the SOCB's independence from the state. Under the 1995 Commercial Banking Law of the People's Republic of China, commercial banks are responsible for their own profits and losses, must protect the interests of their depositors, and are protected from government influence. However, Article 34 of the Commercial Bank Law paradoxically states that banks are required to adhere to the PRC's “national industrial policies.” *See* August 30 Memorandum, at 53. Notwithstanding certain dictates that the SOCBs act independently of the government, as discussed in the “Benchmark” section of this notice, the near-complete state ownership over these banks enables the GOC to utilize SOCBs as policy instruments and, thus, to allocate credit in accordance with its policies, as enumerated in the Five-Year Plans. Specifically, the Department found that “{w}hile the Big Four (along with smaller regional banks and cooperatives) now have greater autonomy than in the past, government interests at both the central and local levels still exercise a great deal of control over banking operations and lending decisions.” *See* May 15 Memorandum, at 5. As noted by the IMF, “{r}ooting out the legacy of government directed lending, and training banks to make lending decisions based on purely commercial considerations, with adequate regard to viability and riskiness of projects remains a major reform challenge.” *See* August 30 Memorandum, at 52, n. 248, citing Finance and Development, Next Steps for China, Washington, DC: International Monetary Fund, (September 2005). State-direction of credit as well as protracted lending on a non-commercial basis has been evidenced by repeated cycles of the accumulation of a large number of non-performing loans and government bailouts of the banking sector. *See* “Benchmark” section above. For example, wholly- and partially-owned SOEs continue to receive a disproportionate share of credit, in line with industrial policy objectives to maintain a central role for the state-owned sector of the economy. *See* May 15 Memorandum, at 5; and August 30 Memorandum, at 59. Some of the misallocation of resources may be attributed to lack of experience or inertia. However, as discussed above in the “Benchmarks” section, the continued government intervention in bank operations, especially by local governments, acts as a significant impediment to true commercialization of the banks. Prior to reforms, local governments utilized SOCB branch offices as the main source of capital to fund policy-driven investment projects and support local SOEs, which in turn provided local employment and government revenue. Although SOCBs are no longer the sole instrument by which to allocate funds, local governments continue to guide and direct the allocation of credit through their local bank branches. *See* August 30 Memorandum, at 60. Third-party commentators have arrived at similar conclusions regarding the state's continued influence, especially at the local level, on SOCB operations. For example, a 2005 Organization for Economic Cooperation and Development

(OECD)report found that, The chief executives of the head offices of the SOCBs are government appointed and the party retains significant influence in their choice. Moreover, the traditionally close ties between government and bank officials at the local level have created a culture that has given local government officials substantial influence over bank lending decisions. *See* August 30 Memorandum, at 60, n. 294 and 301, citing to Economic Survey of China, Paris: Organization for Economic Cooperation and Development, at 140-141 (2005). A 2005 IMF Staff Report concurred, stating that, {t}he staff acknowledged the progress made in reducing government involvement in management and business operations of banks. However, more needs to be done, particularly with regard to local governments, to remove this serious impediment to fully commercializing banks.” *See* the August 30 Memorandum at 60, citing People's Republic of China: 2005 Article IV Consultation—Staff Report; Staff Supplement; and Public Information Notice on the Executive Board Discussion, Washington, DC, International Monetary Fund, at November 2005), p. 19. As the Department found in its May 15 Memorandum, “the continued significant government involvement in the PRC's banking sector reflects an assumption that the state, not markets, should determine the growth sectors or individual companies that deserve access to credit.” *See* May 15 Memorandum, at 8. On the basis of the evidence cited above, the Department determines for the purposes of this preliminary determination that the GOC continues to use its ownership of and influence over SOCBs to guide and direct the allocation of credit in accordance with its stated policy objectives, including those contained in the 10th Five-Year Plan for the Forestry and Paper Industry. In addition, evidence on the record also indicates that the above-mentioned Five-Year Plans are in fact implemented by paper companies. For example, Chenming's 2005 Annual Report states that, “{a}ll of the projects the Company had launched were those which satisfying the national industrial policy and to be replacing the imported products and high in value adding.” In addition, this report states that, “the Company will keep studying and following with the national policies to grasp the trend of overall planning, to make sure the Company's development is complying with the national policy on the industry.” As such, the Department preliminarily finds that the PRC's SOCBs should be considered extensions of the government and are the instruments by which the government implemented the preferential lending component of the program described above. For the reasons stated above, the Department preliminarily determines that loans provided by Policy Banks and SOCBs in the PRC constitute government-provided loans pursuant to section 771(5)(D)(i) of the Act. We further preliminarily determine that this loan program is specific in law because the GOC has a policy in place to encourage and support the growth and development of the forestry and paper industry. *See* section 771(5A)(D)(i) of the Act. Finally, this program provides a benefit to the recipients, equal to the difference between what the recipient paid on the loan and the amount the recipient would have paid on a comparable commercial loan. *See* section 771(5)(E)(ii) of the Act. Chenming, Gold East, and certain of Gold East's cross-owned companies had outstanding loans under this program during the POI. To calculate the benefit, we used the interest rates described in the “Benchmark” section above and the methodology described in 19 CFR 351.505(c)(1) and (2). On this basis, we preliminarily determine that a countervailable benefit of 3.15 percent *ad valorem* exists for Chenming and a countervailable benefit of 14.02 percent *ad valorem* exists for Gold East for this program. C. Income Tax Programs The “Two Free, Three Half” Program The Foreign Invested Enterprise and Foreign Enterprise Income Tax Law (FIE Tax Law), enacted in 1991, established the tax guidelines and regulations for FIEs in the PRC. The intent of this law is to attract foreign businesses to the PRC. According to Article 8 of the FIE Tax Law, FIEs that are “productive” and scheduled to operate not less than 10 years are exempt from income tax in their first two profitable years and pay half of their applicable tax rate for the following three years. FIEs are deemed “productive” if they qualify under Article 72 of the Detailed Implementation Rules of the Income Tax Law of the People's Republic of China of Foreign Investment Enterprises and Foreign Enterprises. This provision specifies a list of industries in which FIEs must operate in order to qualify for benefits under this program. The activities listed in the law are:

(1)Machine manufacturing and electronics industries;

(2)energy resource industries (not including exploitation of oil and natural gas);

(3)metallurgical, chemical and building material industries;

(4)light industries, and textiles and packaging industries;

(5)medical equipment and pharmaceutical industries;

(6)agriculture, forestry, animal husbandry, fisheries and water conservation;

(7)construction industries;

(8)communications and transportation industries (not including passenger transport);

(9)development of science and technology, geological survey and industrial information consultancy directly for services in respect of production and services in respect of repair and maintenance of production equipment and precision instruments;

(10)other industries as specified by the tax authorities under the State Council. The GOC, in its response, has stated that if a FIE meets the above conditions, eligibility is automatic and the amount exempted appears on the enterprise's tax return. Gold East reported that, during the POI, Gold East and certain of its cross-owned companies filed tax statements for a “free” year under this program. Chenming reported that its eligibility for participation in this program ended in 2001 and that the company did not receive any benefits under this program during the POI. We preliminarily determine that the exemption or reduction in the income tax paid by “productive” FIEs under this program confers a countervailable subsidy. The exemption/reduction is a financial contribution in the form of revenue forgone by the GOC and it provides a benefit to the recipients in the amount of the tax savings. *See* section 771(5)(D)(ii) of the Act and 19 CFR 351.509(a)(1). We further preliminarily determine that the exemption/reduction afforded by this program is limited as a matter of law to certain enterprises, “productive” FIEs, and, hence, is specific under section 771(5A)(D)(i) of the Act. The GOC claims that FIEs are a separate type of business operation under Chinese law, similar to partnerships, proprietorships, domestic corporations, for example, and that differences in tax liabilities for these different types of businesses do not make the income tax rate applicable to FIEs specific. The GOC further claims that the large number of FIEs and the vast number of industries they participate in further indicate that this program is not specific. However, we have preliminarily determined that limiting a program to “productive” FIEs is a sufficient basis to find specificity and, having found specificity as a matter of law, it is not necessary to reach the issue of whether the subsidy is specific in fact. *See* Statement of Administrative Action accompanying the Uruguay Round Agreements Act, H.R. Doc. No. 103-316, at 930

(1994)(“SAA”). To calculate the benefit from this program, we treated the income tax exemption enjoyed by Gold East its cross-owned companies as a recurring benefit, consistent with 19 CFR 351.524(c)(1). To compute the amount of tax savings, we compared the rate paid by the Gold East companies (zero percent) to the rate that would be paid by a domestic corporation in the PRC (30 percent). We attributed the tax savings received by Gold East and GHS to the combined sales of the two companies. Additional information on this calculation is provided in the Calculation Analysis memorandum for Gold East. On this basis, we preliminarily determine that a countervailable benefit of 2.88 percent *ad valorem* exists for Gold East for this program. Reduced Income Tax Rates for FIEs Based on Location FIEs are encouraged to locate in designated coastal economic development zones, special economic zones, and economic and technical development zones in the PRC through preferential income tax rates. This program was originally created in 1988 under the Provisional Rules on Exemption and Reduction of Corporate Income Tax and Business Tax of FIE in Coastal Economic Zone of the Ministry of Finance and is currently administered under the FIE Tax Law, and Decree 85 of the State Council of 1991 (Decree 85). Under Article 7 of the FIE Tax Law and Article 71 of Decree 85, “productive” FIEs located in the designated economic zones pay corporate income tax at a reduced rate of either 15 or 24 percent, depending on the zone. For the income tax return filed during the POI, Chenming paid income tax at a reduced rate of 24 percent, based on its location in a Economic and Technical Development Zone. Because Gold East and GHS did not pay income taxes during the POI (due to their participation in the Two Free, Three Half program), we are treating this program as not used by Gold East during the POI. We preliminarily determine that the reduced income tax rate paid by “productive” FIEs located in certain zones confers a countervailable subsidy. The reduced rate is a financial contribution in the form of revenue forgone by the GOC and it provides a benefit to the recipients in the amount of the tax savings. *See* section 771(5)(D)(ii) of the Act and 19 CFR 351.509(a)(1). We further preliminarily determine that the exemption/reduction afforded by this program is limited to enterprises located in designated geographical regions and, hence, is specific under section 771(5A)(D)(iv) of the Act. To calculate the benefit, we treated the income tax savings enjoyed by Chenming as a recurring benefit, consistent with 19 CFR 351.524(c)(1), and divided the company's tax savings received during the POI by Chenming's total sales during that period. To compute the amount of tax savings, we compared the rate paid by Chenming (24 percent) to the rate that would be paid by a domestic corporation in the PRC (30 percent). On this basis, we preliminarily determine that a countervailable benefit of 0.34 percent *ad valorem* exists for Chenming for this program. Local Income Tax Exemption and Reduction Program for “Productive” FIEs Under Article 9 of the FIE Tax Law, the governments of the provinces, the autonomous regions, and the centrally governed municipalities have been delegated the authority to provide exemptions and reductions of local income tax for industries and projects for which foreign investment is encouraged. As such, the local governments establish the eligibility criteria and administer the application process for any local tax reductions or exemptions. Therefore, the requirements and application procedures for this program may vary between jurisdictions. Chenming, Gold East, and GHS reported receiving local income tax exemptions under this program. Chenming's local tax authority granted the company an exemption because Chenming was an FIE located in a coastal economic zone, specifically, in an Economic and Technical Development Zone. Gold East references Article 3 of the Regulations for the Local Income Tax Exemption and Reduction of Jiangsu Province for Enterprises with Foreign Investment as the basis for its local tax exemption. Under these provincial regulations, productive FIEs in the Jiangsu Province are exempt from local income taxes during the period in which they use the “Two Free, Three Half” program. Because Gold East and GHS participated in the “Two Free, Three Half” program during the POI, they were exempt from the local income tax. We preliminarily determine that the local tax exemption and reduction program confers a countervailable subsidy. The exemption/reduction is a financial contribution in the form of revenue forgone by the local governments and it provides a benefit to the recipients in the amount of the tax savings. *See* section 771(5)(D)(ii) of the Act and 19 CFR 351.509(a)(1). We further preliminarily determine that the exemption afforded to Chenming by this program is limited to enterprises located in designated geographical regions and, hence, is specific under section 771(5A)(D)(iv) of the Act. In the case of Gold East, we preliminarily determine that the program is limited as a matter of law to certain enterprises, *i.e.* , productive FIEs, and is specific under section 771(5A)(D)(i) of the Act for the reasons explained above. To calculate the benefit, we treated the income tax savings enjoyed by the companies as a recurring benefit, consistent with 19 CFR 351.524(c)(1). To compute the amount of tax savings, we compared the zero percent rate paid by Chenming, Gold East and GHS to the rate that would otherwise be paid by a domestic corporation in the PRC (3 percent). For Chenming, we divided the income tax savings during the POI by Chenming's total sales. For Gold East, we attributed the tax savings received by Gold East and GHS to the combined sales of the two companies. On this basis, we preliminarily determine that a countervailable benefit of 0.17 percent *ad valorem* exists for Chenming and a countervailable benefit of 0.31 percent *ad valorem* exists for Gold East. Income Tax Credits on Purchases of Domestically Produced Equipment by FIEs Provisions in GUOSHUIFA

(2000)No. 90, Administrative Measures on Enterprise Income Tax Credits for Purchase of Domestic Equipment by FIEs and Foreign Enterprises, and CAISHUI

(2000)No. 49, Circular of the Ministry of Finance and the State Administration of Taxation on Enterprise Income Tax Credits for Purchase of Domestic Equipment by Foreign Invested Enterprises and Foreign Enterprises, permit FIEs to obtain tax credits of up to 40 percent of the purchase value of domestically produced equipment. Specifically, the tax credit is available to FIEs and foreign-owned enterprises whose projects are classified in either the Encouraged or Restricted B categories of the Catalog of Industrial Guidance for Foreign Investment. The credit applies to any domestically produced equipment so long as the equipment is not listed in the Catalog of Non-Duty-Exemptible Articles of Importation. The program has been in effect since 1999 and its purpose, according to the GOC, is to attract foreign investment. To receive a tax credit under this program, requesting enterprises must submit an application to the local tax authority within two months of purchasing the equipment. Once approved, the credit can be claimed on the enterprise's income tax return. The amount of the credit is limited to the lesser of 40 percent of the purchase price of the domestically produced equipment or the incremental increase in income taxes owed over the previous year. Chenming reported receiving tax credits under this program during the POI; Gold East did not. We preliminarily determine that income tax credits on the purchase of domestically produced equipment by FIEs are countervailable subsidies. The tax credits are a financial contribution in the form of revenue forgone by the local governments and they provide a benefit to the recipients in the amount of the tax savings. *See* section 771(5)(D)(ii) of the Act and 19 CFR 351.509(a)(1). We further preliminarily determine that these tax credits are contingent upon use of domestic over imported goods and, hence, are specific under section 771(5A)(C) of the Act. To calculate the benefit, we treated the income tax savings enjoyed by Chenming as a recurring benefit, consistent with 19 CFR 351.524(c)(1), and divided the benefit received during the POI by Chenming's sales of CFS during that period. On this basis, we preliminarily determine that a countervailable benefit of 2.98 percent *ad valorem* exists for Chenming for this program. D. VAT and Duty Exemptions VAT Rebates on Purchases of Domestically Produced Equipment As outlined in GUOSHUIFA

(1999)No. 171, Trial Administrative Measures on Purchase of Domestic Equipment by Projects with Foreign Investment (1999 VAT Measures), the GOC refunds the VAT on purchases by FIEs of certain domestically produced equipment. Article 3 of the 1999 VAT Measures specifies that this program is limited to FIEs including exclusively foreign-owned enterprises. Article 4 of the 1999 VAT Measures defines the type of equipment eligible for the VAT exemption, which includes equipment falling under the Encouraged and Restricted B categories listed in the Notice of the State Council Concerning the Adjustment of Taxation Policies for Imported Equipment (No. 37 (1997)) and equipment for projects listed in the Catalogue of Key Industries, Products and Technologies Encouraged for Development by the State. Based on the GOC's and companies' responses, the receipt of the VAT rebates on domestically produced equipment is granted to FIEs upon presentation of documents showing their FIE status. Chenming, Gold East, and certain of Gold East's cross-owned companies reported receiving VAT rebates on their purchases of domestically produced equipment during the POI. We preliminarily determine that the rebate of the VAT paid on purchases of domestically produced equipment by FIEs confers a countervailable subsidy. The rebates are a financial contribution in the form of revenue forgone by the GOC and they provide a benefit to the recipients in the amount of the tax savings. *See* section 771(5)(D)(ii) of the Act and 19 CFR 351.510(a)(1). We further preliminarily determine that the VAT rebates are contingent upon the use of domestic over imported goods and, hence, specific under section 771(5A)(C) of the Act. To calculate the benefit, we treated the VAT rebates as a recurring benefit, consistent with 19 CFR 351.524(c)(1). For Chenming, we divided the VAT rebates received during the POI by Chenming's sales of CFS in that period. For Gold East, we calculated the benefit in accordance with the attribution rules described in 19 CFR 351.525(b)(6). On this basis, we preliminarily determine that a countervailable benefit of 1.45 percent *ad valorem* exists for Chenming and a countervailable benefit of 0.35 percent *ad valorem* exists for Gold East for this program. The GOC has claimed that the goal of this program is to equalize the tax burden on the purchase of domestically produced and imported equipment by FIEs. (As explained below, FIEs are also exempt from paying the value added tax on imported equipment.) Thus, the GOC argues, the Department should not find the VAT rebates on domestically produced equipment to be an import substitution subsidy. Although the VAT rebates are available to FIEs on both domestically produced and imported equipment, the GOC has not demonstrated that both rebates are integrally linked. In accordance with 19 CFR 351.502(c), the Department will consider whether two programs are integrally linked for purposes of making its specificity determination, but the burden lies with the GOC to claim that the VAT exemptions/rebates are linked and to provide evidence in support of the claim. That burden has not been met. Moreover, as explained above, we are preliminarily determining that FIEs constitute a specific group of enterprises. Consequently, even if we were to treat the VAT rebate and exemption programs as integrally linked, we would still find the benefits to be specific. VAT and Tariff Exemptions on Imported Equipment Enacted in 1997, the Circular of the State Council on Adjusting Tax Policies on Imported Equipment (GUOFA No. 37) (Circular No. 37) exempts both FIEs and certain domestic enterprises from the VAT and tariffs on imported equipment used in their production. The objective of the program is to encourage foreign investment and to introduce foreign advanced technology equipment and industry technology upgrades. Chenming, Gold East and certain of Gold East's cross-owned companies received VAT and duty exemptions under this program due to their status as FIEs. Specifically, the companies are authorized to receive the exemptions based on their FIE status and the list of assets approved by the GOC at the time their FIE status was approved. Domestic enterprises eligible for the VAT and duty exemptions must have government-approved projects that are in line with the current “Catalog of Key Industries, Products, and Technologies the Development of Which is Encouraged by the State.” Whether an FIE or domestic enterprise, only equipment that is not listed in the Catalog on Non-Duty Exemptible Article for Importation is eligible for the VAT and duty exemptions. (Different Catalogs are prepared for FIEs and domestic enterprises.) To receive the exemptions, a qualified enterprise only has to show a certificate provided by the National Development and Reform Commission (“NDRC”), or its provincial branch, to the customs officials upon importation of the equipment. We preliminarily determine that VAT and tariff exemptions on imported equipment confer a countervailable subsidy. The exemptions are a financial contribution in the form of revenue forgone by the GOC and they provide a benefit to the recipients in the amount of the VAT and tariff savings. *See* section 771(5)(D)(ii) of the Act and 19 CFR 351.510(a)(1). With regard to specificity, certain domestic enterprises are eligible to receive VAT and tariff exemptions under this program as well as FIEs. Based on the information provided by the GOC, it does not appear that the addition of these domestic enterprises broadens the reach or variety of users sufficiently to render the program non-specific. For example, to be eligible, the domestic enterprise must have been involved in an investment project that was “in line with” the Current Catalog of Key Industries, Products and Technologies the Development of Which is Encouraged by the State. While this Catalog was reportedly revoked in 2005, the projects still must apparently be approved by the State Council, the NDRC, or an agency to which authority has been delegated ( *see* Certificates for State-Encouraged Foreign-or Domestically-Invested Projects for Domestically-Invested Enterprises FAGAIGUIHUA

(2003)900). Therefore, we preliminarily find the VAT and tariff exemptions to be specific under section 771(5A)(D)(iii)(I). To calculate the benefit, we treated the VAT and tariff exemptions as a recurring benefit, consistent with 19 CFR 351.524(c)(1). For Chenming, we divided the amount of the VAT and tariff exemptions enjoyed by Chenming during the POI by the company's sales in that period. For Gold East, we calculated the benefit in accordance with the attribution rules described in 19 CFR 351.525(b)(6). On this basis, we preliminarily determine that a countervailable benefit of 0.10 percent ad valorem exists for Chenming and a countervailable benefit of 2.60 percent ad valorem exists for Gold East for this program. E. Domestic VAT Refunds for Companies Located in the Hainan Economic Development Zone According to Yangpu local tax regulations, enterprises located in the Economic Development Zone of Hainan may enjoy several tax preferences. These preferences are described in Preferential Policies of Taxation, which includes the eligibility criteria needed to qualify for the preferences. Under “Preferential Policies Regarding Investment by Manufacturer,” high-tech or labor intensive enterprises with investment over RMB 3 billion and more than 1000 local employees may be refunded 25 percent of the VAT paid on domestic sales (the percentage of the tax received by the local government) starting in the first year the company has production and sales. The VAT refund can continue for five years. One of Gold East's cross-owned companies was a qualifying manufacturing enterprise in the Economic Development Zone of Hainan and reported that it received the VAT refund in the POI. The cross-owned company further added that becaue the capital and number of employees are registered with the local government, the tax refund is automatically granted. We preliminarily determine that the domestic VAT refunds confer a countervailable subsidy. The refund is a financial contribution in the form of revenue forgone by the local government and it provides a benefit to the recipient in the amount of the refunded taxes. *See* section 771(5)(D)(ii) of the Act and 19 CFR 351.510(a). In addition to the investment and employee eligibility criteria described above, it appears that recipients must be located in the Economic Development Zone because these enterprises also pay income tax at a regionally-reduced rate. *See* “Reduced Income Tax Rates for FIEs Based on Location,” above. Therefore, we preliminarily determine that the program is limited to enterprises located in a designated geographical region and, hence, is specific under section 771(5A)(D)(iv) of the Act. To calculate the benefit, we treated the VAT refund received by the cross-owned company as a recurring benefit, consistent with 19 CFR 351.524(c)(1). We then attributed the benefit to sales of the input and the downstream products. On this basis, we preliminarily determine that a countervailable benefit of 0.19 percent ad valorem exists for Gold East. F. Other Subsidies (Chenming) Chenming reported four additional programs in which it participated. These programs may be connected to programs discussed above, but the information on the current record does not allow us to decide that. Chenming cited municipal government circulars relevant to these programs, but neither Chenming nor the GOC provided copies of these documents. However, based on the information submitted by Chenming, we preliminarily determine that these programs constitute countervailable subsidies within the meaning of section 771(5) of the Act. Due to Chenming's request that the Department treat information about these four programs as business proprietary, we discuss these additional programs in more detail in the Proprietary Analysis Memorandum, at xx. As calculated in the Proprietary Analysis Memorandum, we determine the combined countervailable subsidy for these programs to be 1.45 percent *ad valorem* for Chenming. II. Programs Preliminarily Determined To Be Not Countervailable A. Debt-to-Equity Swap for APP China In 2001, Asia Pulp & Paper

(APP)defaulted on nearly $14 billion of debt. A portion of the debt was owed by one of APP's subsidiaries, APP China. According to petitioner, in 2003, APP China agreed to a debt-to-equity swap in which the Chinese creditors participated. The petitioner alleges that APP China was unequityworthy at the time of the equity infusion and that the transaction was at the discretion of the GOC state-owned banks, as well as being inconsistent with the usual investment practice of private investments. In response to our original and supplemental questionnaires, the GOC and Gold East have asserted that no GOC banks were involved in a debt-to-equity swap with APP or any of its Chinese subsidiaries, including Gold East. Furthermore, Gold East has provided additional proprietary information regarding the above allegation. Based on record information, we preliminarily determine that GOC state-owned banks were not involved in a debt-to-equity swap with APP China or any of its subsidiaries. Therefore, we do not find this program countervailable. Our analysis is presented in a separate memorandum because of the proprietary nature of the issue. *See* Memorandum to Susan Kuhbach, “APP Debt-to-Equity Analysis” (March 29, 2007) (memorandum is on file in Department's CRU). III. Programs Preliminarily Determined To Be Not Used Clean Production Technology Fund The purpose of this program is to provide incentives and rewards (monetary or non-monetary) to encourage enterprises to conduct clean production inspections, with the goal of protecting the environment. The program entered into force in October 2004, and was authorized by Decree No. 16 of the NDRC and the National Administration of Environmental Protection entitled Provisional Measures on Clean Production Inspection (Decree No. 16). Any payments under this program are made at the local level. Shouguang City, the relevant authority for Chenming, reported that it made no grants under this program during 2004 and 2005. Gold East reported that it received a grant under this program. Based on our analysis, any potential benefit to Gold East under this program is less than 0.005 percent. Where the countervailable subsidy rate for a program is less than 0.005 percent, the program is not included in the total countervailing duty rate. *See* , *e.g.* , *Final Results of Countervailing Duty Administrative Review: Low Enriched Uranium from France* , 70 FR 39998 (July 12, 2005), and the accompanying Issues and Decision Memorandum, at “Purchases at Prices that Constitute ‘More than Adequate Remuneration’ ” (citing *Final Results of Administrative Review: Certain Softwood Lumber Products from Canada* , 69 FR 75917 (December 20, 2004), and the accompanying Issues and Decision Memorandum, at “Other Programs Determined to Confer Subsidies”). Therefore, we do not plan to pursue this alleged subsidy further in this investigation. We preliminarily determine that the producers/exporters of CFS did not apply for or receive benefits during the POI under the programs listed below. A. *Direction Adjustment Tax on Fixed Assets* B. *Income Tax Exemption Program for Export-oriented FIEs* C. *Corporate Income Tax Refund Program for Reinvestment of FIE Profits in Export-oriented Enterprises* D. *Discounted Loans for Export-Oriented Enterprises* E. *Exemption from Payment of Staff and Worker Benefits for Export-oriented Enterprises* F. *Subsidies to Input Suppliers* 5 5 For a discussion of these programs, please see the “Input Products” section above. 1. *Preferential tax policies for FIEs engaged in forestry and established in remote underdeveloped areas.* 2. *Preferential tax policies for enterprises engaged in forestry* 3. *Special fund for projects for the protection of natural forestry* 4. *Compensation fund for forestry ecological benefits* For purposes of this preliminary determination, we have relied on the GOC's and respondent companies' responses to preliminarily determine non-use of the programs listed above. During the course of verification, the Department will examine whether these programs were used by respondent companies during the POI. Verification In accordance with section 782(i)(1) of the Act, we will verify the information submitted by the respondents prior to making our final determination. Suspension of Liquidation In accordance with section 703(d)(1)(A)(i) of the Act, we calculated an individual rate for each exporter/manufacturer of the subject merchandise. We preliminarily determine the total estimated net countervailable subsidy rates to be: Exporter/manufacturer Net subsidy rate (percent) Gold East Paper (Jiangsu) Co., Ltd. 20.35 Shandong Chenming Paper Holdings Ltd. 10.90 All Others 18.16 In accordance with sections 703(d) and 705(c)(5)(A) of the Act, for companies not investigated, we have determined an “all others” rate by weighting the individual company subsidy rate of each of the companies investigated by each company's exports of the subject merchandise to the United States, if available, or CFS exports to the United States. The all others rate does not include zero and *de minimis* rates or any rates based solely on the facts available. In accordance with sections 703(d)(1)(B) and

(2)of the Act, we are directing CBP to suspend liquidation of all entries of CFS from the PRC that are entered, or withdrawn from warehouse, for consumption on or after the date of the publication of this notice in the **Federal Register** , and to require a cash deposit or bond for such entries of merchandise in the amounts indicated above. ITC Notification In accordance with section 703(f) of the Act, we will notify the ITC of our determination. In addition, we are making available to the ITC all non-privileged and non-proprietary information relating to this investigation. We will allow the ITC access to all privileged and business proprietary information in our files, provided the ITC confirms that it will not disclose such information, either publicly or under an administrative protective order, without the written consent of the Assistant Secretary for Import Administration. In accordance with section 705(b)(2) of the Act, if our final determination is affirmative, the ITC will make its final determination within 45 days after the Department makes its final determination. Public Comment Case briefs for this investigation must be submitted no later than one week after the issuance of the last verification report. Rebuttal briefs must be filed within five days after the deadline for submission of case briefs, pursuant to 19 CFR 351.309(d)(1). A list of authorities relied upon, a table of contents, and an executive summary of issues should accompany any briefs submitted to the Department. Executive summaries should be limited to five pages total, including footnotes. Section 774 of the Act provides that the Department will hold a public hearing to afford interested parties an opportunity to comment on arguments raised in case or rebuttal briefs, provided that such a hearing is requested by an interested party. If a request for a hearing is made in this investigation, the hearing will tentatively be held two days after the deadline for submission of the rebuttal briefs, pursuant to 19 CFR 351.310(d), at the U.S. Department of Commerce, 14th Street and Constitution Avenue, NW., Washington, DC 20230. Parties should confirm by telephone the time, date, and place of the hearing 48 hours before the scheduled time. Interested parties who wish to request a hearing, or to participate if one is requested, must submit a written request to the Assistant Secretary for Import Administration, U.S. Department of Commerce, Room 1870, within 30 days of the publication of this notice, pursuant to 19 CFR 351.310(c). Requests should contain:

(1)The party's name, address, and telephone;

(2)the number of participants; and

(3)a list of the issues to be discussed. Oral presentations will be limited to issues raised in the briefs. This determination is published pursuant to sections 703(f) and 777(i) of the Act. Dated: April 2, 2007. Stephen J. Claeys, Deputy Assistant Secretary for Import Administration. [FR Doc. E7-6498 Filed 4-6-07; 8:45 am] BILLING CODE 3510-DS-P DEPARTMENT OF COMMERCE International Trade Administration C-560-821 Coated Free Sheet Paper from Indonesia: Notice of Preliminary Affirmative Countervailing Duty Determination AGENCY: Import Administration, International Trade Administration, Department of Commerce. SUMMARY: The Department of Commerce (the Department) preliminarily determines that countervailable subsidies are being provided to producers and exporters of coated free sheet paper

(CFS)in Indonesia. For information on the subsidy rates, see the “Suspension of Liquidation” section of this notice. EFFECTIVE DATE: April 9, 2007. FOR FURTHER INFORMATION CONTACT: Sean Carey, Jacqueline Arrowsmith, or Gene Calvert, AD/CVD Operations, Office 6, Import Administration, International Trade Administration, U.S. Department of Commerce, Room 7866, 14th Street and Constitution Avenue, NW, Washington, DC 20230; telephone:

(202)482-3964,

(202)482-5255, or

(202)482-3586, respectively. SUPPLEMENTARY INFORMATION: Background On November 20, 2006, the Department initiated a countervailing duty

(CVD)investigation of CFS from Indonesia. *See Notice of Initiation of Countervailing Duty Investigations: Coated Free Sheet Paper from the People's Republic of China, Indonesia, and the Republic of Korea* , 71 FR 68546 (November 27, 2006) ( *Initiation Notice* ) ( *CFS Investigations* ). In the *Initiation Notice* , the Department set aside a period for all interested parties to raise issues regarding product coverage. The comments we received are discussed in the “Scope Comments” section below. On November 30, 2006, the Department issued a CVD questionnaire to the Government of Indonesia (GOI). The questionnaire informed the GOI that it was responsible for forwarding the questionnaire to producers/exporters of CFS. The Department also provided courtesy copies of the questionnaire to PT. Pabrik Kertas Tjiwi Kimia Tbk.

(TK)and to PT. Pindo Deli Pulp and Paper Mills (PD), who the GOI identified as the sole producers/exporters of CFS from Indonesia. On December 29, 2006, the Department postponed the preliminary determination until March 30, 2007. *See Coated Free Sheet Paper from Indonesia, the People's Republic of China and the Republic of Korea: Notice of Postponement of Preliminary Determinations in the Countervailing Duty Investigations* , 71 FR 78403 (December 29, 2006). On January 25, 2007, TK and PD (collectively, respondents), and the GOI submitted their questionnaire responses. On February 2 and February 12, 2007, the Department received comments from the petitioner regarding these questionnaire responses. On February 16, 2007, the Department issued supplemental questionnaires to the GOI and to the respondents. The GOI and the respondents submitted their supplemental responses on March 6, 2007. On December 15, 2006, New Page Corporation, the petitioner, submitted two new subsidy allegations. The GOI and the respondents filed comments concerning these new allegations on December 26, 2006. On January 30, 2007, the petitioner submitted additional information regarding the December 15, 2006 new subsidy allegations. On February 7, 2007, the Department received additional comments from the respondents regarding the petitioner's January 30, 2007 submission. On March 15, 2007, the Department determined that the requirements of section 702 of the Tariff Act of 1930, as amended (the Act) were met, and initiated an investigation of the following new subsidy allegations:

(1)debt forgiveness through the GOI's acceptance of allegedly worthless shares in the Sinar Mas Group/Asia Pulp & Paper Company's (SMG/APP) affiliated bank as debt repayment; and,

(2)debt forgiveness through the GOI allowing SMG/APP to repurchase its own debt at a steep discount through an affiliated company. For a complete discussion on the Department's decision to initiate on these programs, *see* the Memorandum to Barbara E. Tillman, Director, Office of AD/CVD Enforcement VI, *Countervailing Duty Investigation: Coated Free Sheet Paper from Indonesia; New Subsidy Allegations* , dated March 15, 2007, which is on file in the Import Administration Central Records Unit (CRU), Room B-099 of the Commerce Department Building. The Department has not had sufficient time to gather the information necessary to analyze the countervailability of these two programs for purposes of this preliminary determination. However, after the Department has gathered and analyzed information from the GOI and respondents, we intend to issue an interim analysis describing our preliminary findings with respect to these programs before the final determination so that parties may have the opportunity to comment on our findings before the final determination. On March 9, 2007, the United Steel, Paper and Forestry, Rubber Manufacturing, Energy, Allied and Industrial Service Workers International Union, AFL-CIO-CLC (“USW”) and the Sierra Club filed an additional new subsidy allegation, contending that illegal logging in Indonesia results in additional countervailable subsidies to Indonesian producers/exporters of CFS. 1 In the submission, the USW acknowledges that the allegation is untimely in accordance with section 351.301(d)(4)(i)(A) of the Department's regulations. However, the USW cites section 351.311 of the Department's regulations, which addresses instances in which the Department discovers a practice that appears to provide a countervailable subsidy during a countervailing duty investigation. As noted by the USW, under section 351.311(b) of the Department's regulations, the Department may include such a subsidy program in its investigation as long as sufficient time remains before the scheduled final determination. On March 21, 2007, respondents submitted comments regarding the USW allegation, arguing that it should be rejected as untimely filed. 1 The Sierra Club does not have standing to file a subsidy allegation in accordance with sections 702(b) and 771(9) of the Act; however the USW is an interested party in this proceeding pursuant to section 771(9)(D) of the Act and may submit subsidy allegations. With respect to the USW allegation, although it is untimely, we note that we are already investigating the provision of standing timber for less than adequate remuneration. If, during the course of our investigation, we find that cross-owned companies in the CFS production chain harvested pulp logs for which no stumpage or reforestation fees were paid, or less than the required fees were paid, we would include any such subsidy benefits in the calculation of any subsidy rate for these pulp logs in accordance with our stumpage subsidy calculation methodologies. On March 19, 2007, the petitioner submitted comments for the Department to consider for purposes of the preliminary determination. On March 23, 2007, petitioner filed a few additional pre-preliminary determination comments. At the request of the Department, the petitioner refiled this submission on March 26, 2007. On March 26, 2007, petitioner requested that the final determination of this countervailing duty investigation be aligned with the final determination in the companion antidumping duty investigations in accordance with section 705(a)(1) of the Act. We will address this request in a separate **Federal Register** notice. On March 26, 2007, respondents filed pre-preliminary determination comments. With respect to these comments, they were filed too late to be fully considered for purposes of this preliminary determination, but we note that they identify a number of issues we are already addressing in the “Subsidies Valuation” and “Analysis of Programs” sections below. Respondents also filed rebuttal comments to petitioner's additional pre-preliminary determination comments on March 27 and 28, 2007. In addition, on March 28, 2007, the USW submitted additional comments concerning its March 9, 2007 new subsidy allegation and respondents' March 21, 2007 comments on its new subsidy allegation. We did not have sufficient time to review these submissions for purposes of this preliminary determination. Scope of the Investigation The merchandise covered by this investigation includes coated free sheet paper and paperboard of a kind used for writing, printing or other graphic purposes. Coated free sheet paper is produced from not-more-than 10 percent by weight mechanical or combined chemical/mechanical fibers. Coated free sheet paper is coated with kaolin (China clay) or other inorganic substances, with or without a binder, and with no other coating. Coated free sheet paper may be surface-coated, surface-decorated, printed (except as described below), embossed, or perforated. The subject merchandise includes single- and double-side-coated free sheet paper; coated free sheet paper in both sheet or roll form; and is inclusive of all weights, brightness levels, and finishes. The terms “wood free” or “art” paper may also be used to describe the imported product. Excluded from the scope are:

(1)Coated free sheet paper that is imported printed with final content printed text or graphics;

(2)base paper to be sensitized for use in photography; and

(ITC)is required to determine whether imports of the subject merchandise from Indonesia materially injure, or threaten material injury to a United States industry. On December 15, 2006, the ITC transmitted its preliminary determination to the Department. *See Coated Free Sheet Paper from China, Indonesia, and Korea: Investigation Nos. 701-TA-444-446 (Preliminary) and 731-TA-1107-1109 (Preliminary)* , USITC Publication 3900 (December 2006). On December 29, 2006, the ITC published its preliminary determination that there is a reasonable indication that an industry in the United States is materially injured by reason of allegedly subsidized imports from China, Indonesia, and Korea of subject merchandise. *See Coated Free Sheet Paper China, Indonesia, and Korea* , 71 FR 78464. Period of Investigation The period of investigation

(POI)for which we are measuring subsidies is January 1, 2005 through December 31, 2005, which corresponds to the most recently completed fiscal year for the respondents. See section 351.204(b)(2) of the Department's regulations. Subsidies Valuation Cross-Ownership Information on the record indicates the name SMG/APP is commonly used to refer to a group of forestry/logging companies, pulp producers, and paper producers linked by varying degrees of common ownership involving the Widjaja family. The respondents in this investigation, TK and PD, have reported affiliations with each other through a parent holding company Purinusa Ekapersada (Purinusa); with two pulp producers (PT. Lontar Papyrus Pulp and Paper Industry (Lontar) and PT. Indah Kiat Pulp and Paper Tbk. (IK)); and with five forestry/logging companies (Arara Abadi (AA), Wira Karya Sakti (WKS), PT. Satria Perkasa Agung (SPA), PT. Riau Abadi Lestrari (RAL), and PT. Finnantara Intiga (FI)). The Department's regulations at section 351.525(b)(6)(vi) state that cross-ownership exists between two or more corporations where one corporation can use or direct the individual assets of the other corporation(s) in essentially the same ways it can use its own assets. This section of the Department's regulations states that this standard will normally be met where there is a majority voting ownership interest between two corporations or through common ownership of two (or more) corporations. The *Preamble* to the Department's regulations further clarifies the Department's cross-ownership standard. *See Countervailing Duties* 63 FR 65347, 65401 ( *CVD Preamble* ). According to the *CVD Preamble* , relationships captured by the cross-ownership definition include those where the interests of two corporations have merged to such a degree that one corporation can use or direct the individual assets (including subsidy benefits) of the other corporation in essentially the same way it can use its own assets (including subsidy benefits). The cross-ownership standard does not require one corporation to own 100 percent of the other corporation. Normally, cross-ownership will exist where there is a majority voting ownership interest between two corporations or through common ownership of two (or more) corporations. In certain circumstances, a large minority voting interest (for example, 40 percent) or a “golden share” may also result in cross-ownership. *See CVD Preamble* at 63 FR 65401. As such, the Department's regulations make it clear that we must examine the facts presented in each case in order to determine whether cross-ownership exists. If we find that cross-ownership exists between TK and PD, the producers/exporters under investigation, and among and across the companies within the input supply chain, we will treat all companies as one company, and calculate a single rate for any countervailable subsidies that we identify and measure, in accordance with section 351.525(b)(6) of the Department's regulations. Further, in accordance with section 351.525(b)(6)(iv) of the Department's regulations, if the Department determines that the suppliers of inputs primarily dedicated to the production of paper products are cross-owned with the producers/exporters under investigation, then the Department treats subsidies provided to the input producers as subsidies conferred on the production of the finished product. In this investigation, we are examining whether the two producers/exporters of the subject merchandise, TK and PD, are cross-owned with one another, and with their input suppliers as outlined in section 351.352(b)(6)(iv) of the Department's regulations. The alleged subsidies we are investigating are conferred on the forestry/logging companies which harvest and sell pulp logs, which in turn are sold to the pulp producers that supply the paper producers/exporters. Therefore, we must examine whether cross-ownership exists among and across the suppliers of pulp logs, the pulp producers, and the CFS producers/exporters. Based on information on the record, we preliminarily determine that cross-ownership exists, in accordance with section 351.525(b)(6)(vi) of the Department's regulations, among and across the following companies involved in the production and sale of the subject merchandise: the respondent paper producers/exporters, TK and PD; pulp producers, Lontar and IK; and the forestry and logging companies, AA, WKS, RAL, SPA, and FI. Since much of our analysis supporting this conclusion involves business proprietary information, a full discussion of the bases for our preliminary determination is set forth in the Memorandum to Barbara E. Tillman, Director, AD/CVD Operations, Office 6, *Cross-Ownership* , dated March 29, 2007 ( *Cross-Ownership Memo* ), a public version of which is on file in the CRU. In addition to the five cross-owned forestry/logging companies identified above, we are also preliminarily finding that certain additional timber suppliers from which pulp logs were purchased during the POI are cross-owned. In the questionnaire responses, respondents reported that some of the five cross-owned forestry/logging companies identified above also purchased pulp logs from unaffiliated timber suppliers. The Department examined the information provided in the questionnaire responses about these reportedly unaffiliated timber suppliers, and conducted additional independent research concerning these timber suppliers. *See Cross-Ownership Memo* for a full discussion of the Department's analysis and research. In addition, the Department examined information about these reportedly unaffiliated timber suppliers, and supporting documentation, provided by petitioner. After analyzing all of this information and documentation, we find that the information and documentation supports a preliminary finding that certain of these timber suppliers are cross-owned with the SMG/APP Group. Since the names of these suppliers are business proprietary, a complete discussion of the bases for our preliminary finding that these additional timber suppliers are also cross-owned with the other companies in the production chain is provided in the *Cross-Ownership Memo* . Attribution of Subsidies Provided to Cross-Owned Input Suppliers As discussed above, the Department's regulations at section 351.525(b)(6)(iv) state that if there is cross-ownership between an input supplier and a downstream producer, and production of the input product is primarily dedicated to production of the downstream product, the Secretary will attribute subsidies received by the input producer to the combined sales of the input and downstream products produced by both corporations (excluding the sales between the two corporations). The respondents, TK and PD, have argued that they do not have to respond for AA, WKS, RAL, SPA, and FI because the input products in question, logs, are not “primarily dedicated to the production of CFS” and therefore, do not meet the standard in accordance with section 351.525(b)(6)(iv) of the Department's regulations. *See* respondents' March 2, 2007 response at page 3. The respondents state that they believe the Department should conduct its “primarily dedicated analysis” with respect to the Indonesian economy as a whole, and that its analysis should determine whether facts on the record support the conclusion that timber and other resources under the Forestry Program are primarily dedicated to the production of CFS. Additionally, the respondents state that the Department should give “proper weight and consideration to the word *primarily* ,” arguing that the word is defined as “chiefly” or “in the first place.” *See* respondents' March 6, 2007 response at page 28. The respondents claim that they, and their affiliated companies, produce a variety of products such as pulp, photocopier paper, and tissue, as well as CFS, and that timber accounts for roughly 25 percent of all Indonesian industry groupings, ranging from paper to furniture to chemical products. Therefore, the respondents conclude, the primarily dedicated test would not be met even if the Department were to perform its analysis specifically for the group of companies to which the respondents belong. *Id.* The Department has previously addressed the issue regarding pulp logs as input products in the production of pulp and paper products in the *Notice of Preliminary Affirmative Countervailing Duty Determination: Certain Lined Paper Products from Indonesia* , 71 FR 7524, 7527-28 (February 13, 2006) ( *Lined Paper Prelim* ). In *Lined Paper Prelim* , the Department determined that harvested pulp logs, and the pulp they are used to produce, are input products primarily dedicated to the downstream product within the meaning of section 351.525(b)(6)(iv) of the Department's regulations. In *Lined Paper Prelim* , the Department determined that “the issue is not whether the potentially subsidized inputs are used exclusively or nearly exclusively for the production of the subject merchandise. Rather, it is a question of whether the inputs are primarily dedicated to the production of the downstream product.” In *Final Affirmative Countervailing Duty Determination and Final Negative Critical Circumstances Determination: Certain Lined Paper Products from Indonesia* , 71 FR 47174 (August 16, 2006) ( *Lined Paper Final* ), and accompanying *Issues and Decision Memorandum* at *Comment 3* , the Department remained consistent with its preliminary determination, and determined that the logs harvested by the logging companies and sold to the pulp producers are primarily dedicated to the production of pulp and, thus, to the production of the downstream product, paper, which included certain lined paper products, the subject merchandise in that case. In the instant case, pulp logs harvested by the cross-owned forestry/logging companies are processed into pulp by pulp producers Lontar and IK. This pulp is consumed by the respondents, TK and PD, to make paper and paper products including the subject merchandise, CFS. Because the pulp logs are primarily dedicated to the production of pulp and, ultimately, to the production of paper products, it is reasonable to conclude that a subsidy to pulp logs also benefits pulp and paper production where all of the companies involved are cross-owned. Based on the information on the record, we preliminarily determine that the production of pulp logs are an input product that is primarily dedicated to the production of pulp and paper products, including CFS. *See Cross-Ownership Memo* . In accordance with section 351.525(b)(6)(iv) of the Department's regulations, any subsidies found will be attributed to the appropriate combined sales of the products produced by the cross-owned companies, excluding any inter-company sales. Loan Benchmarks In measuring the benefit from loan programs, section 351.505(a)(1) of the Department's regulations provides that a “benefit exists to the extent that the amount the firm pays on the government-provided loan is less than the amount the firm would pay on a comparable commercial loan(s) that the firm could actually obtain on the market.” In section 351.505(a)(2)(ii), the Department's regulations address the selection of a commercial loan as the appropriate basis for comparison, stating “the Secretary normally will use a loan taken out by the firm from a commercial lending institution or a debt instrument issued by the firm in a commercial market.” TK and PD have not provided sufficient information regarding actual financing they (or the other cross-owned companies) obtained at the same time that the loans under examination were obtained and thus we are unable to rely on the companies' own financing experience as the basis for our loan interest rate benchmark. Therefore, we are guided by section 351.505(a)(3)(ii) of the Department's regulations, which states, “{i}f the firm did not take out any comparable commercial loans during the period . . . the Secretary may use a national average interest rate for comparable commercial loans.” Accordingly, to measure the loan benefits, we have used as our benchmark the rate charged by private national banks for “Investment” (long-term loans) as shown in the Bank of Indonesia Interest Rates Table 39 “Commerical Bank Credits In Ruppiah by Group of Commercial Banks,” in Exhibit 19 of the GOI's January 24, 2007 response and in Exhibit 8 of the respondents' January 24, 2007 response, for the years in which the loans were approved. The petitioner alleged that the Indonesian companies were uncreditworthy beginning in 2001 and thereafter. The Department initiated on this allegation. *See Initiation Checklist: Coated Free Sheet Paper from Indonesia* , dated November 20, 2006 ( *Initiation Checklist* ), a public version of which is on file in the CRU. Because the loans under investigation were all approved prior to 2001 (the earliest year for which the Department initiated an uncreditworthiness investigation), we have not analyzed the creditworthiness of the respondents and their cross-owned suppliers and, consequently, we have not added a risk premium to the benchmark for long-term loans as provided for in section 351.505(a)(3)(iii) of the Department's regulations. Analysis of Programs I. Programs Preliminarily Determined To Be Countervailable A. GOI Provision of Standing Timber for Less than Adequate Remuneration According to the GOI, it controls and administers over 57 million hectares of public harvestable forest land, which accounts for virtually all the harvestable forest land in Indonesia. *See* GOI's January 25, 2007 response at pages 4 and 13. Record information shows that timber can be harvested from the GOI land under two main types of licenses: licenses to harvest timber in the natural forest, known as “HPH” licenses, and licenses to establish, and harvest from, plantations, which are known as “HTI” licenses. *See* the GOI's January 25, 2007 response at page 5. Respondents and the GOI reported that AA, WKS, SPA, RAL and FI are affiliated forestry/logging companies which harvested pulp logs during the POI from plantations under HTI licenses. *Id.* at page 11; *see also* respondents' January 25, 2007 response at pages 19-20. As discussed above in the “Cross-Ownership” section, the Department has preliminarily determined that these forestry/logging companies are cross-owned with pulp producers IK and Lontar, and with CFS producers/exporters TK and PD. In addition, as discussed above in the “Cross-Ownership” section, we have found, for purposes of this preliminary determination, certain forestry/logging companies from whom AA and WKS purchased pulp logs during the POI to be cross-owned with the companies in the production chain. As such, the Department is including all of these cross-owned forestry/logging companies in our analysis of whether the GOI has provided standing timber for less than adequate remuneration. The GOI provided the laws that outline the types of fees and royalties assessed for the harvest of standing public timber in Indonesia. *Id.* at Exhibit 7. Specifically, the GOI stated that HTI license holders pay an initial license fee at the granting of each concession. In addition, these HTI license holders pay “cash stumpage fees” known as PSDH royalty fees which are paid per unit of timber harvested (usually a per ton or per cubic meter unit of measure). The PSDH rate in effect during the POI for acacia harvested from plantations was five percent in accordance with Regulation 59/1998. *Id.* at Exhibit 7. Regulation 74/1999 increased the PSDH rate for all timber harvested from the natural forest from six percent to ten percent, the rate in effect during the POI. *Id.* ; *see also* GOI's March 6, 2007 response at page 5. These percentage rates are multiplied by the reference prices set by the GOI for each type of wood harvested to determine the PSDH fee a company should pay per unit of timber harvested. *See* the GOI's January 25, 2007 response at page 15. There were two sets of reference prices in effect during the POI. The first was in effect until February 3, 2005; the second published set of reference prices was put into effect on February 4, 2005. *Id.* at Exhibit 7 under Regulations 436/MPP/Kep/7/2004 and 18/M/Kep/2005, respectively. According to the GOI, the reference prices reflect the market prices for each type of log sold in Indonesia. *Id.* at page 15. In addition to the PSDH fee, a per unit Rehabilitation Fee (dana reboisasi or DR) is paid for timber harvested from the natural forest and remained the same throughout the POI. *Id.* at page 13; *see also* the GOI's January 25, 2007 response at Exhibit 7 for the fee paid during the POI under Regulation 92/1999. The GOI stated that HTI license holders are not subject to the DR when “the wood harvested comes from their own plantation assets.” *Id.* at page 6. However, respondents reported that for pre-existing timber that is cleared within the plantation boundaries to allow new planting on the plantations, they “pay PSDH and DR fees on timber that is harvested during clearing exercises.” *See* respondents' March 6, 2007 response at page 14. As stated above, all five of the forestry/logging companies reported in the questionnaire response as being affiliated with respondents, harvested from their own plantations. They harvested acacia, mixed tropical hardwood

(MTH)chipwood, and smaller volumes of MTH pulp logs. The GOI initially reported that numerous products, both timber and non-timber, are harvested from public land owned by the GOI. *See* GOI's January 25, 2007 response at page 4; however, the GOI did not report the number of industries that had rights to harvest standing timber. In our supplemental questionnaire, we requested that the GOI identify for the years 2002 through 2005, every company, and the industry in which it was classified, that applied for and was approved or rejected for either an HPH or HTI license. *See* the Department's February 16, 2007 Supplemental Questionnaire at 2. The GOI did provide a list of company names but did not identify the company's industry classification. We also requested that the GOI identify the Indonesian industrial classifications for companies that harvest timber and consume timber as a primary input. *Id.* at 2. In response, the GOI stated that the following five industries used standing timber either through consumption of timber as a primary input or through products that are produced with timber: the wood and wood products, paper and paper products, publishing and printing, chemical, and furniture industries. *See* GOI's March 6, 2006 response at page 6 and Exhibit Supp-5. Although we are concerned that in its supplemental questionnaire response the GOI broadened the scope of our question by adding in industries that do not harvest timber or consume timber as a primary input, we are relying on the GOI's statement that five industries are provided standing timber by the GOI for purposes of this preliminary determination. We also asked the GOI to identify the total number of industries in Indonesia at the same level of industrial classification in which the GOI placed the industries that harvest or consume timber. *See* the Department's February 16, 2007 Supplemental Questionnaire at 2. In response, the information provided by the GOI identifies a total of 23 industries at the level of large and medium manufacturing activities. *See* the GOI's March 6, 2006, response at page 6 and Exhibit Supp-5. Therefore, even relying on the GOI's statement that five industries use this program, these five industries constitute a limited group of industries within the universe of 23 industries identified by the GOI. Accordingly, we preliminarily determine that provision of standing timber by the GOI is *de facto* specific in accordance with section 771(5A)(D)(iii) of the Act. We also preliminarily determine that the provision of standing timber provides a financial contribution as described in section 771(5)(D)(iii) of the Act (provision of goods or services other than general infrastructure). Pursuant to section 771(5)(E)(iv) of the Act, a benefit is conferred when the government provides a good or service for less than adequate remuneration. Section 771(5)(E) of the Act further states that “the adequacy of remuneration shall be determined in relation to prevailing market conditions for the good or service being provided . . . in the country which is subject to the investigation or review. Prevailing market conditions include price, quality, availability, marketability, transportation, and other conditions of . . . sale.” Section 351.511(a)(2) of the Department's regulations sets forth the basis for identifying comparative benchmarks for determining whether a government good or service is provided for less than adequate remuneration. These potential benchmarks are listed in hierarchical order by preference:

(1)market prices from actual transactions within the country under investigation;

(2)world market prices that would be available to purchasers in the country under investigation; or

(3)an assessment of whether the government price is consistent with market principles. This hierarchy reflects a logical preference for achieving the objectives of the statute. The most direct means of determining whether the government required adequate remuneration is by comparison with private transactions for a comparable good or service in the country. Thus, the preferred benchmark in the hierarchy is an observed market price for the good, in the country under investigation, from a private supplier (or, in some cases, from a competitive government auction) located either within the country, or outside the country (the latter transaction would be in the form of an import). This is because such prices generally would be expected to reflect most closely the commercial environment of the purchaser under investigation. Thus, in accordance with the first preference in the hierarchy, to determine the existence and extent of the benefit, we would need to identify an observed market stumpage price from a private supplier in Indonesia. The GOI reported that there were only 233,811 hectares of private forest land and that it does not maintain information on the value of any private sales of standing timber in Indonesia. *See* the GOI's March 6, 2007 response at page 3. We preliminarily determine that there are no market-determined stumpage fees in Indonesia upon which to base a “first tier” benchmark. This is consistent with our finding in *Lined Paper Final* at “Benchmark for Stumpage” section. As noted above, the GOI has not provided any information on the sale of either privately-owned standing timber in Indonesia, or the stumpage fees charged by private timber companies. *See* the GOI's March 6, 2007 response at page 3. Nor has the Department been able to identify such information from any other available source. Accordingly, the Department has no private stumpage data in Indonesia that could even be evaluated for purposes of a “first tier” benchmark. The “second tier” benchmark, according to the regulations, relies on world market prices that would be available to the purchasers in the country in question, though not necessarily reflecting prices of actual transactions involving that particular producer. In selecting a world market price under this second approach, the Department will examine the facts on the record regarding the nature and scope of the market for that good to determine if that market price would be available to an in-country purchaser. As discussed in the *CVD Preamble* , the Department will consider whether the market conditions in the country are such that it is reasonable to conclude that a purchaser in the country could obtain the good or service on the world market. For example, a European price for electricity normally would not be an acceptable comparison price for electricity provided by a Latin American government, because electricity from Europe in all likelihood would not be available to consumers in Latin America. However, as another example, the world market price for commodity products, such as certain metals and ores, or for certain industrial and electronic goods commonly traded across borders, could be an acceptable comparison price for a government-provided good, provided that it is reasonable to conclude from record evidence that the purchaser would have access to such internationally traded goods. *See CVD Preamble* at 63 FR 65377. We have insufficient evidence of world market prices for standing timber on the record of this investigation. This finding is also consistent with *Lined Paper* . Respondents have provided information regarding stumpage rates in the United States and have argued that the Department should use U.S. stumpage rates as a benchmark, consistent with our determination in *Notice of Final Affirmative Countervailing Duty Determination and Final Negative Critical Circumstances Determination: Certain Softwood Lumber Products From Canada* , 67 FR 15545 (April 2, 2002) (“ *Lumber* ”) and accompanying *Issues and Decision Memorandum* at section “C.I.B.” However, respondents have not demonstrated that the types of U.S. timber they are suggesting for comparison purposes are grown in similar conditions as those in Indonesia and are similar to the species harvested in Indonesia as pulpwood. These were all important factors which supported the Department's decision to use U.S. stumpage prices in *Lumber* . *Id.* Based on the record in this investigation, we preliminarily determine that U.S. stumpage prices do not satisfy the “second tier” benchmark requirements. In the alternative, respondents have also provided information on Malaysian stumpage rates for acacia, one of the species used to produce pulp and paper products in Indonesia. However, the information respondents provided is a study commissioned by them for purposes of this investigation and consists of a statement of opinion that includes no supporting documentation to establish the authenticity of the figures used to calculate this benchmark rate. Even if this study were independent and the data in it supported, the respondents have not addressed how these Malaysian stumpage rates are representative of rates that would be available to a purchaser in Indonesia. Consequently, these data do not provide an appropriate basis for a “second tier” benchmark. Since we are not able to conduct our analysis under the “second tier” of the regulations, consistent with the hierarchy, we are preliminarily measuring the adequacy of remuneration by assessing whether the government price is consistent with market principles. This approach is set forth in section 351.511(a)(2)(iii) of the Department's regulations and is explained further in the *CVD Preamble* at 65378: “Where the government is the sole provider of a good or service, and there are no world market prices available or accessible to the purchaser, we will assess whether the government price was set in accordance with market principles through an analysis of such factors as the government's price-setting philosophy, costs (including rates of return sufficient to ensure future operations), or possible price discrimination.” The regulations do not specify how the Department is to conduct such a market principle analysis. By its nature the analysis depends upon available information concerning the market sector at issue and, therefore, must be developed on a case-by-case basis. The GOI has not provided information or documentation which demonstrates that the stumpage fees it charges are established in accordance with market principles. Although the PSDH rates are established as a percentage of the reference price of logs, we cannot conclude that the log reference price is reflective of market principles or is a market-determined price. The GOI reported that the reference price is normally determined by a weighted-average of both the Indonesian domestic and export prices for logs. However, since a log export ban is in place, the reference price is currently determined solely from domestic prices. *See* GOI's January 25, 2007 response at page 15. Through its ownership of virtually all of Indonesia's harvestable forests, the GOI has complete control over access to the timber supply. In addition, the ban on the export of logs affects the price for logs. *Id.* at Exhibit 7 under Regulations 1132/Kpts-II/2001 and 292/MPP/Kep/ 10/2001; *see also* GOI's March 6, 2007 response at Exhibit Supp-12 and the paper by the Centre for Strategic and International Studies on “Competitiveness and Efficiency of the Forest Product Industry in Indonesia” (noting a study on page 6 that the “stumpage value was reduced by 33%% under the log export ban policy.”). As such, the reference prices for logs cannot be considered market-based. Thus, we preliminarily determine that the stumpage fees charged by the GOI which are charged as a percentage of a non-market determined reference price are not based on market principles. Since the government price was not set in accordance with market principles, we looked for an appropriate proxy to determine a market-based stumpage benchmark. It is generally accepted that the market value of timber is derivative of the value of the downstream products. The species, dimension and growing condition of a tree largely determine the downstream products that can be produced from a tree; the value of a standing tree is derived from the demand for logs produced from that tree and the demand for logs is in turn derived from the demand for the products produced from these logs. *See e.g.* , *Notice of Final Results of Countervailing Duty Administrative Review and Rescission of Certain Company-Specific Reviews: Certain Softwood Lumber Products From Canada* , 69 FR 75917 (December 20, 2004), and accompanying *Issues and Decision Memorandum* at pages 16-18. As a result of the geographic proximity and the similarities of forest conditions, climate, and tree species between Indonesia and Malaysia, we have selected Malaysian pulp log export prices as the most appropriate basis for evaluating whether Indonesian stumpage is priced consistent with market principles. *See* section 351.511(a)(2)(iii) of the Department's regulations; *see also Preliminary Affirmative Countervailing Duty Determination on Coated Free Sheet Paper from Indonesia: Analysis Memorandum on Calculations for PT. Pabrik Kertas Tjiwi Kimia Tbk and PT. Pindo Deli Pulp and Paper Mills* ( *Preliminary Analysis Memo* ), dated March 29, 2007. This is consistent with our finding in *Lined Paper Final* . Furthermore, neither party has argued that Malaysian pulpwood is not suitable for comparison purposes. These export transactions reflect prices resulting from private transactions between Malaysian pulp log sellers and pulp log buyers in the international market; thus, they represent market-determined prices. Accordingly, we are using the value of pulp log exports from Malaysia during the POI, as reported in the “World Trade Atlas,” as the starting point for determining whether the GOI is providing standing timber for less than adequate remuneration. To determine which Malaysian export statistics to include in the benchmark, we evaluated the suggestions submitted by the parties regarding Malaysian log export prices for several types and species of logs. The respondents have reported that acacia and MTH are the types of timber that were harvested from HTI plantations for pulp and paper production in Indonesia and that AA, WKS, SPA, RAL, and FI harvested either one or both of these types of pulpwood from plantations. *See* respondents' March 6, 2007 questionnaire response at Exhibit Supp-10; *see also Cross-Ownership Memo* on timber purchased by AA and WKS from the suppliers that we have preliminarily determined are also cross-owned. For acacia, none of the parties suggested using anything other than the value of acacia pulp log exports from Malaysia. No record information suggests that exports of acacia pulp logs are not the appropriate basis to use as the starting point for determining whether the GOI is providing acacia pulpwood for less than adequate remuneration. For MTH, respondents suggested that we rely on export data for three categories of pulpwood, one of which is identified as light hardwood pulpwood and the other two as light hardwood pulpwood of the species batai and meransi. Petitioner has suggested that we use the same benchmark for MTH that we used in *Lined Paper Final* , which was based on the value of exports of sawlogs, veneer logs, and other wood of the species kapur, keruin, ramin, and other tropical woods. We do not find it appropriate to use the export values of the types of logs used in the *Lined Paper Final* , as suggested by petitioner, because those log types included saw logs and veneer logs, as adverse facts available in that case. In addition, we have preliminarily determined not to include the batai and meransi categories of pulp logs suggested by respondents because they have not demonstrated that these particular types of wood are harvested as pulpwood in Indonesia. If the GOI can demonstrate that these other types of wood are harvested as pulpwood in Indonesia, we will consider including them in any calculation of the Malaysian export values in the final determination. Therefore, for purposes of this preliminary determination, we have decided to use Malaysian exports of light hardwood pulpwood, of a type not elsewhere specified (HTS 4403.99.195) as the starting point for determining whether the GOI is providing MTH pulp logs and chipwood for less than adequate remuneration. Using the Malaysian export data for acacia and light hardwood pulpwood, we calculated two unit values: one to use for acacia pulp logs and one to use for MTH chipwood and pulp logs. *See Preliminary Analysis Memo* . To derive a market-based benchmark price for Indonesian stumpage, we then adjusted the Malaysian export log prices to remove the Indonesian costs of extraction (harvesting) of the standing timber. To determine the Indonesian harvesting costs (including a reasonable amount for profit associated with extraction), we used information contained in “Addicted to Rent: Corporate and Spatial Distribution of Forest Resources in Indonesia; Implications of Forest Sustainability and Government Policy.” This study, which was submitted as Exhibit V-8 of the October 31, 2006 petition, provided the only independent source that specifies extraction costs and profit in Indonesia. The amounts in this report are $17 for extraction costs and $5 for profit in connection with extraction. Both the petitioner and the respondents have argued (albeit for different reasons and for different adjustments) that the Department could use the forestry/logging companies' reported actual costs for harvesting to adjust the Malaysian log export prices. However, for purposes of this preliminary determination, we have decided not to use these actual costs. We may consider using these actual costs for the final determination if the GOI can demonstrate that it has a system in place to evaluate exactly which costs are legitimately considered to be harvesting and extraction costs, and that it has evaluated how to distinguish the types of costs relevant to harvesting on plantations versus the natural forest, and that it has a system in place to distinguish the costs of extraction on plantations versus other plantation development and maintenance costs. Based on our analysis of the information on the record, as well as our own research which shows that acacia is grown on plantations in Malaysia just as it is in Indonesia, we preliminarily determine that no other adjustments (other than the extraction costs and the profit associated with extraction) are necessary to the Malaysian export prices to derive a market-based stumpage price in Indonesia. *See Preliminary Analysis Memo* . We then compared this derived market-based stumpage price to the stumpage fees paid by respondents' cross-owned forestry/logging companies. 2 Where possible, we used the reported PSDH royalty fees and the relevant DR reforestation fees that the respondents' cross-owned forestry/logging companies reported paying during the POI for each of the types of Indonesian pulp logs (acacia and MTH) harvested during the POI. *See* respondents' March 6, 2007 response at Exhibit Supp-10. For MTH chipwood and pulp logs (the GOI defines chipwood as timber of any length whose diameter is less than 29 centimeters), respondents reported payments of both PSDH and DR; for acacia, respondents only reported payments of PSDH because DR fees are not required on these logs which are harvested from the plantation. *Id.* at page 16. 2 Because the Malaysian export values are reported in ringgits and the Indonesian stumpage fees are in rupiahs, and because the sales values reported by IK, Lontar, TK and PD were in U.S. dollars, we have converted all values into U.S. dollars using the annual average exchange rate for the POI reported in the International Monetary Fund Statistics. In addition, where it was necessary to convert between tons and cubic meters, we used a conversion factor reported in the Food and Agriculture Organization of the United Nations' “Forest Products Yearbook 2003” which we have placed on the record in the *Preliminary Analysis Memo* . To determine the existence and extent of the benefit for acacia and MTH on a per-unit basis, we compared the actual payment of PSDH fees by AA, WKS, SPA, RAL and FI on accacia to the benchmark stumpage fee derived from the Malaysian export prices for accacia pulp logs. We then compared, where possible, the actual PSDH fees and DR fees paid by AA, WKS, SPA, RAL and FI on MTH chipwood and pulp logs, to the corresponding derived stumpage benchmark for MTH pulpwood. Respondents claimed that the Department should make adjustments to these actual stumpage payments to the GOI for a number of harvesting costs, taxes and annual license fees that the companies incur. We have already factored in, as a deduction from the Malaysian export prices, an amount for total harvesting costs. The GOI has provided no basis for making an adjustment for taxes. While an adjustment for an annual licensing fee may be warranted, the GOI did not provide any information on what those annual licensing fees are and the companies did not report what they paid in annual licensing fees during the POI. Based on the comparison of the per-unit stumpage fees actually paid on each type of wood with the market-derived stumpage benchmark, we determine that the GOI provided standing timber for less than adequate remuneration. We then multiplied the difference between the actual fee paid on a per-unit basis and the benchmark stumpage rate, by multiplying this per-unit stumpage benefit for each type of wood by the reported volume of each type of wood that was harvested and sold to IK and Lontar during the POI for these five forestry/logging companies. For the pulp logs purchased by AA and WKS from the additional suppliers that we have preliminarily determined are cross-owned ( *see* “Cross-Ownership” section above), we did not have information about the actual stumpage and DR fees paid. We calculated the amount of the stumpage paid for acacia by multiplying the volume of acacia pulp logs produced by these suppliers which was purchased by AA and WKS, by the PSDH that would have been charged by the GOI during the POI. The MTH stumpage payments were calculated by multiplying the volume of MTH pulp logs produced by these suppliers which was purchased by AA and WKS, by the PSDH that would have been charged by the GOI during the POI, plus the DR fee charged on MTH pulp logs that would have been charged by the GOI during the POI. We compared the resulting calculated stumpage and DR fees paid by pulp log type, to the appropriate benchmark. We multiplied the resulting difference by the volume of pulp logs sold to AA and WKS by these cross-owned pulp log suppliers to determine the benefit. Since we have preliminarily determined that the forestry/logging companies are cross- owned with the pulp and paper producers and that the pulp logs produced by these cross-owned forestry/logging companies are primarily dedicated to the production of the downstream products ( *see* “Cross-Ownership” section above), we preliminarily find that the GOI's provision of timber for less than adequate remuneration provides a countervailable subsidy to TK/PD. To determine the subsidy rate, we first summed all of the benefit amounts calculated for the cross-owned forestry/logging companies. We then divided the aggregate benefit by the sum of the external sales values of TK, PD, IK, and Lontar ( *i.e.* , total FOB sales values minus any cross-owned inter-company sales), adjusted, where possible, for sales returns, claims, and discounts. We have not included in the denominator any external sales of the cross-owned forestry/logging companies because, as discussed above, we are capturing in the benefit calculation only pulp logs that were harvested/produced by the cross-owned forestry/logging companies that were sold to IK and Lontar. This calculation yields a countervailable subsidy rate of 21.23 percent *ad valorem* for the combined entity TK/PD. Although the Department initiated an investigation of whether the GOI ban on log exports provides a countervailable subsidy to the respondents, we determine that the issue of the countervailability of the log export ban need not be reached for purposes of this preliminary determination. First, the only source of pulp logs for IK and Lontar, the cross-owned pulp producers which supplied pulp to TK and PD during the POI, was from the cross-owned forestry/logging companies. Respondents stated that “IK and Lontar did not purchase timber from any supplier other than AA and WKS during the POI.” *See* respondents' March 6, 2007 response at page 10. Second, we have preliminarily found that IK's and Lontar's total supply of pulp logs is roughly equivalent to the total quantity of pulp logs harvested by AA and WKS, plus the quantity of pulp logs purchased by AA and WKS from cross-owned forestry/logging companies in the CFS production chain. As such, we find it reasonable to conclude for purposes of this preliminary determination that IK's and Lontar's supply of pulp logs was exclusively sourced from the production of these cross-owned companies. Because we would not attribute to the downstream cross-owned pulp and paper producers a benefit that encompasses a quantity of pulp logs that is greater than the quantity of pulp logs actually produced and sold by the cross-owned forestry/logging companies to the downstream producers, we need not evaluate whether the remaining purchases by AA and WKS of pulp logs from unaffiliated suppliers are benefitting from a subsidy through the log export ban. Furthermore, because we have used export prices of pulp logs from Malaysia as the starting point for deriving a market-based stumpage benchmark, the amount of any benefit to the combined entity TK/PD that might be found in an evaluation of the log export ban is included in the calculation for the provision of standing timber for less than adequate remuneration. Thus, because the total quantity of pulp logs produced by the cross-owned forestry logging companies in the production chain captures the total quantity of pulp logs sold by the cross-owned forestry/logging companies to IK and Lontar, the entire amount of any countervailable subsidy is subsumed under the “Provision of Standing Timber for Less than Adequate Remuneration” program, noted above. B. Subsidized Funding for Reforestation (Hutan Tanaman Industria or HTI Program): “Zero Interest” Rate Loans The GOI reported that “zero interest” rate loans were available to some holders of HTI licenses; such licenses are issued for harvesting timber from plantations. The GOI has reported that there are three types of plantations in Indonesia:

(1)Privately owned,

(2)voluntary HTI joint ventures, and

(3)compelled HTI joint ventures for the purpose of implementing transmigration policy. Of these three types of plantations, only HTI joint ventures could apply for zero-interest rate loans. The GOI reported that the loaned amounts came from the DR Fund. The HTI joint venture could apply for zero-interest loans from the DR Fund for the establishment phase of the plantation. According to the GOI, loan amounts were payable to the joint venture in increments based on the amount of harvesting done each year and the total amount of the loan could not exceed 32.5 percent of the calculated plantation costs. The GOI required that the private party guarantee the loan repayment in full. In 2000, the GOI discontinued funding joint ventures through the DR Fund loan programs, although existing joint ventures which had previously obtained loans through the DR Fund would receive loan disbursements and would be required to make loan payments as required by loan agreements finalized before 2000. The respondents reported that of the cross-owned forestry/logging companies (see “Cross-Ownership” section above), only RAL (a compelled joint venture) and FI (a voluntary joint venture) received “zero interest” loans prior to 2000 that remained outstanding during the POI. These loans provide a financial contribution as described in section 771(5)(D)(i) of the Act, as a direct transfer of funds in the form of loans. The loans give rise to a benefit in the amount of the difference between the amount of interest the borrowers actually paid and the amount of interest the borrowers would have paid on a comparable commercial loan under section 771(5)(E)(ii) of the Act. The loan program is specific within the meaning of section 771(5A)(D)(i) of the Act, because participation in the program is limited to HTI joint venture plantations. Therefore, we preliminarily determine that these loans confer countervailable subsidies. To calculate the benefit (the amount of the interest savings), we applied the benchmark interest rate described in the “Loan Benchmarks” section above to the average loan balance outstanding during the POI for both RAL and FI. We then divided the amount of interest savings by the total external sales values of all the cross-owned companies in the production chain ( *i.e.* , total FOB sales values minus any cross-owned inter-company sales), adjusted, where possible, for sales returns, claims, and discounts. Thus, we preliminarily determine the countervailable subsidy from the HTI zero-interest rate loan program to be 0.01 percent *ad valorem* for the combined entity TK/PD. II. Programs Preliminarily Determined To Be Not Used A. Subsidized Funding for Reforestation (Hutan Tanaman Industria or HTI Program): Commercial Rate Loans Neither TK, PD, nor any of their cross-owned suppliers reported receiving loans under this program. Therefore, we preliminarily determine that this program was not used. B. Subsidized Funding for Reforestation (Hutan Tanaman Industria or HTI Program): Government Capital Infusions into Joint Venture Forest Plantation The respondents reported that RAL and FI, both HTI joint ventures, received captial infusions in the 1990s under this program. However, petitioner's unequityworthiness allegation, and the Department's subsequent initiation, addressed the companies' unequityworthiness from 2001 through the POI ( *see Initiation Checklist* ). Because the capital infusions were provided prior to 2001, we have not examined whether the GOI provision of capital to joint venture forest plantations provides a countervailable subsidy. Therefore, we preliminarily determine that this program was not used. Verification As provided in section 782(i)(1) of the Act, we intend to conduct verification of the GOI's and respondents' questionnaire responses following the issuance of the preliminary determination. Suspension of Liquidation In accordance with section 703(d)(1)(A)(i) of the Act, we have calculated a single subsidy rate for the two cross-owned producers/exporters of the subject merchandise. We preliminarily determine the total countervailable subsidy rate to be: Producer/exporter Rate PT. Pabrik Kertas Tjiwi Kimia Tbk/ PT. Pindo Deli Pulp and Paper Mills 21.24 %% All Others 21.24 %% In accordance with sections 703(d) and 705(c)(5)(A) of the Act, we have set the “all others” rate as the rate for TK/PD because it is the only producer/exporter investigated. In accordance with sections 703(d)(1)(B) and

(2)of the Act, we are directing U.S. Customs and Border Protection

(CBP)to suspend liquidation of all entries of the subject merchandise from Indonesia, which are entered or withdrawn from warehouse, for consumption on or after the date of the publication of this notice in the **Federal Register** , and to require a cash deposit or the posting of a bond for such entries of the merchandise in the amounts indicated above. This suspension will remain in effect until further notice. ITC Notification In accordance with section 703(f) of the Act, we will notify the ITC of our determination. In addition, we are making available to the ITC all non-privileged and non-proprietary information relating to this investigation. We will allow the ITC access to all privileged and business proprietary information in our files, provided the ITC confirms that it will not disclose such information, either publicly or under an administrative protective order, without the written consent of the Assistant Secretary for Import Administration. In accordance with section 705(b)(2) of the Act, if our final determination is affirmative, the ITC will make its final determination within 45 days after the Department makes its final determination. Notification of Parties In accordance with section 351.224(b) of the Department's regulations, we will disclose to the parties the calculations for this preliminary determination within five days of its announcement. Unless otherwise notified by the Department, interested parties may submit case briefs within 50 days of the date of publication of the preliminary determination in accordance with section 351.309(c)(i) of the Department's regulations. As part of the case brief, parties are encouraged to provide a summary of the arguments not to exceed five pages and a table of statutes, regulations, and cases cited pursuant to section 351.309(c)(2) of the Department's regulations. Rebuttal briefs, which must be limited to issues raised in the case briefs, must be filed within five days after the case briefs are filed in accordance with section 351.309(d) of the Department's regulations. In accordance with section 351.310 of the Department's regulations, we will hold a public hearing, if requested, to afford interested parties an opportunity to comment on this preliminary determination. Individuals who wish to request a hearing of the Department's regulations must submit a written request pursuant to section 351.310(c) within 30 days of the publication of this notice in the **Federal Register** to the Assistant Secretary for Import Administration, U.S. Department of Commerce, Room 1870, 14th Street and Constitution Avenue, NW, Washington, DC 20230. Pursuant to section 351.310(c) of the Department's regulations, parties will be notified of the schedule for the hearing and parties should confirm by telephone the time, date, and place of hearing 48 hours before the scheduled time. Requests for a public hearing should contain:

(1)party's name, address, and telephone number;

(2)the number of participants; and,

(3)to the extent practicable, an identification of the arguments to be raised at the hearing. This determination is issued and published pursuant to sections 703(f) and 777(i) of the Act. Dated: March 29, 2007. David M. Spooner, Assistant Secretary for Import Administration. [FR Doc. E7-6499 Filed 4-6-07; 8:45 am] BILLING CODE 3510-DS-S DEPARTMENT OF COMMERCE International Trade Administration [C-580-857] Coated Free Sheet Paper From the Republic of Korea: Preliminary Affirmative Countervailing Duty Determination AGENCY: Import Administration, International Trade Administration, Department of Commerce. SUMMARY: The Department of Commerce (“the Department”) preliminarily determines that countervailable subsidies are being provided to producers and exporters of coated free sheet paper (“CFS paper”) from the Republic of Korea (“Korea”). For information on the estimated subsidy rates, see the “Suspension of Liquidation” section of this notice. EFFECTIVE DATE: April 9, 2007. FOR FURTHER INFORMATION CONTACT: Maura Jeffords or Kristen Johnson, AD/CVD Operations, Office 3, Import Administration, U.S. Department of Commerce, Room 4014, 14th Street and Constitution Avenue, NW., Washington, DC 20230; telephone:

(202)482-3146 and

(202)482-4793, respectively. SUPPLEMENTARY INFORMATION: Background On October 31, 2006, the Department received the petition filed in proper form by NewPage Corporation (“petitioner”). This investigation was initiated on November 20, 2006. *See Notice of Initiation of Countervailing Duty Investigations: Coated Free Sheet Paper from the People's Republic of China, Indonesia, and the Republic of Korea* , 71 FR 68546 (November 27, 2006) (“Initiation Notice”), and accompanying Initiation Checklist for CVD Petition on CFS paper from Korea (November 20, 2007) (“Initiation Checklist”). 1 On December 19, 2006, petitioner timely requested a 65-day postponement of the preliminary determination for this investigation. On December 22, 2006, the Department postponed the deadline for the preliminary determination by 65 days to no later than March 30, 2007, in accordance with section 703(c)(1)(A) of the Tariff Act of 1930, as amended (“the Act”). *See Coated Free Sheet Paper from Indonesia, the People's Republic of China and the Republic of Korea: Notice of Postponement of Preliminary Determinations in the Countervailing Duty Investigations* , 71 FR 78403 (December 29, 2006). 1 A public version of this and all public Department memoranda is on file in the Central Records Unit (“CRU”), room B-099 in the main building of the Commerce Department. Due to the large number of producers and exporters of CFS paper in Korea, we determined that it is not possible to investigate each producer or exporter individually and selected four producers/exporters of CFS paper to be mandatory respondents: EN Paper Mfg. Co., Ltd. (“EN Paper”) (formerly Shinho Paper Co., Ltd. (“Shinho Paper”)), Kyesung Paper Co., Ltd. (“Kyesung”), Moorim Paper Co. Ltd. (“Moorim”) (formerly Shinmoorim Paper Mfg. Co., Ltd.), and Hansol Paper Co., Ltd. (“Hansol”) (collectively, “respondents”). *See* Memorandum from the Team, through Office Director Melissa Skinner, to Deputy Assistant Secretary Stephen J. Claeys: Regarding Respondent Selection (December 4, 2006) (“Respondent Selection Memo”). 2 2 A public version of this memorandum is available in the CRU. On December 6 and 8, 2006, respondents submitted comments on our Respondent Selection Memo, in which they argued that the Department should select an additional mandatory respondent. On December 20, 2006, we responded to respondents' comments, stating that we would not deviate from our original decision to investigate four mandatory respondents in the instant investigation. *See* Memorandum from Program Manager Eric B. Greynolds, through Office Director Melissa Skinner, to Deputy Assistant Secretary Stephen J. Claeys: Regarding Response to Comments from Interested Parties Regarding Respondent Selection (December 20, 2006) (“Second Respondent Selection Memorandum”). On December 14, 2006, we issued our initial questionnaire to the Government of Korea (“the GOK”) and requested that the GOK forward the relevant sections of the initial questionnaire to the mandatory respondents. On December 14, 2006, petitioner submitted a new subsidy allegation. On January 3, 2007, we declined to initiate on petitioner's new subsidy allegation. *See* Memorandum from the Team through Program Manager Eric B. Greynolds, to Office Director Melissa Skinner: Regarding New Subsidy Allegation (January 3, 2007). On January 26, 2007, the GOK and respondents submitted their responses to our initial questionnaire. Also on January 26, 2007, Hankuk Paper Mfg. Co., Ltd. (“Hankuk”) submitted a voluntary response to the Department's December 14, 2006, initial questionnaire. Because Hankuk was not selected as a mandatory respondent, we have not considered the company's questionnaire response in reaching this preliminary determination and have not calculated a company-specific CVD rate for Hankuk. On February 2, 2007, EN Paper, Kyesung, 3 and the GOK submitted their responses to the company-specific allegations. Between February 23 and March 12, 2007, we issued supplemental questionnaires to the GOK and respondents. Between March 5 and 16, 2007, the GOK and respondents submitted responses to our supplemental questionnaires. 3 Kyesung's affiliated company, Namhan Paper Co., Ltd., submitted the company's response on February 2, 2007. *See* “Cross-Ownership” section, below, for more information on Namhan Paper Co., Ltd. On March 8, 2007, petitioner submitted pre-preliminary comments on a number of issues, which we have considered in reaching this preliminary determination. In particular, petitioner argues that, despite instructions from the Department to report all loan data, respondents failed to report any of their short-term loans. Petitioner discusses that in the initial questionnaire, referring to petitioner's allegations that members of the pulp and paper industry received a disproportionate share of loans from the Korea Development Bank (“KDB”) and other GOK-owned entities and that the GOK directed credit to the pulp and paper industry through its control of lending practices in Korea, the Department specifically requested the respondents to answer the items in the Standard Questions and Loan Benchmark and Loan Guarantee Appendices. Petitioner further claims that the unreported short-term loans were provided by the GOK for financing the importation of raw materials as well as the export of finished goods. Petitioner further claims that the Bank of Korea (“BOK”) administers the trade financing under the Aggregate Credit Ceiling Loan program. Respondents submitted rebuttal comments to petitioner's pre-preliminary comments on March 13 and 20, 2007. Respondents state that they did not report short-term loan data because petitioner did not make an allegation concerning short-term lending and the Department neither initiated on nor asked about short-term loans in the initial questionnaire. They claim that the Department's Initiation Checklist makes clear that the investigation on loans from the KDB and other GOK-owned entities and the GOK's direction of credit to the pulp and paper industry is limited to the allegation of subsidized long-term loans. *See* Initiation Checklist at 7-9, 16-18. We agree with respondents that the Department's examination of KDB lending and the GOK's direction of credit, in Korea CVD proceedings, has focused on long-term lending. However, we find that additional information regarding the respondents' short-term lending is required to fully analyze the GOK's provision of these loans. For more discussion of the short-term loan program, *see* the section “Program For Which More Information Is Required,” below. On March 23, 2007, petitioner submitted additional pre-preliminary comments. Respondents submitted a response to petitioner's additional comments on March 27, 2007. On March 26, 2007, petitioner submitted a request, pursuant to section 705(a)(1) of the Act to align the final determination in this investigation with the companion antidumping investigations. We will address this request in a separate **Federal Register** notice. Scope of the Investigation The merchandise covered by this investigation includes coated free sheet paper and paperboard of a kind used for writing, printing or other graphic purposes. Coated free sheet paper is produced from not-more-than 10 percent by weight mechanical or combined chemical/mechanical fibers. Coated free sheet paper is coated with kaolin (China clay) or other inorganic substances, with or without a binder, and with no other coating. Coated free sheet paper may be surface-colored, surface-decorated, printed (except as described below), embossed, or perforated. The subject merchandise includes single- and double-side-coated free sheet paper; coated free sheet paper in both sheet or roll form; and is inclusive of all weights, brightness levels, and finishes. The terms “wood free” or “art” paper may also be used to describe the imported product. Excluded from the scope are:

(1)Coated free sheet paper that is imported printed with final content printed text or graphics;

(2)base paper to be sensitized for use in photography; and

(3)paper containing by weight 25 percent or more cotton fiber. Coated free sheet paper is classifiable under subheadings 4810.13.1900, 4810.13.2010, 4810.13.2090, 4810.13.5000, 4810.13.7040, 4810.14.1900, 4810.14.2010, 4810.14.2090, 4810.14.5000, 4810.14.7040, 4810.19.1900, 4810.19.2010, and 4810.19.2090 of the Harmonized Tariff Schedule of the United States (“HTSUS”). While HTSUS subheadings are provided for convenience and customs purposes, our written description of the scope of this investigation is dispositive. Scope Comments In accordance with the preamble to the Department's regulations ( *see Antidumping Duties; Countervailing Duties* , 62 FR 27296, 27323 (May 19, 1997) (“Preamble”)), in our *Initiation Notice* we set aside a period of time for parties to raise issues regarding product coverage, and encouraged all parties to submit comments within 20 calendar days of publication of the *Initiation Notice* . On December 18, 2006, respondents in the antidumping duty investigation of CFS from Indonesia submitted timely scope comments on the administrative record of that investigation. On January 12, 2007, the Department requested that the respondents file these comments on the administrative records of all the CFS investigations. *See* Memorandum from Alice Gibbons to the File (January 12, 2007). On January 12, 2007, respondents re-filed these comments on the administrative record of all the CFS investigations. On January 19, 2007, petitioner filed a response to these comments. The respondents requested that the Department exclude from its investigations cast-coated free sheet paper. The Department analyzed this request, together with the comments from petitioner, and determined that it is not appropriate to exclude cast-coated free sheet paper from the scope of these investigations. *See* Memorandum to Stephen J. Claeys, Deputy Assistant Secretary for Import Administration: Regarding Request to Exclude Cast-Coated Free Sheet Paper from the Antidumping Duty and Countervailing Duty Investigations on Coated Free Sheet Paper (March 22, 2007). 4 4 A copy of this memorandum is available in the CRU. Injury Test Because Korea is a “Subsidies Agreement Country” within the meaning of section 701(b) of the Act, the International Trade Commission (“ITC”) is required to determine whether imports of the subject merchandise from Korea materially injure, or threaten material injury to, a U.S. industry. On December 29, 2006, the ITC published its preliminary determination that there is a reasonable indication that an industry in the United States is materially injured by reason of imports from China, Indonesia, or Korea of subject merchandise. *See Coated Free Sheet Paper from China, Indonesia, and Korea* , Investigation Nos. 701-TA-444-446 (Preliminary) and 731-TA-1107-1109 (Preliminary), 71 FR 78464 (December 29, 2006). Period of Investigation The period of investigation (“the POI”) for which we are measuring subsidies is January 1, 2005, through December 31, 2005, which corresponds to the most recently completed fiscal year for all of the respondents. *See* 19 CFR 351.204(b)(2). Cross-Ownership In the instant investigation, we are examining cross-owned companies within the meaning of section 771(33) of the Act, whose relationship may be sufficient to warrant treatment as a single company with a single, combined CVD rate. In the CVD questionnaire, consistent with our past practice, the Department defined companies as sufficiently related where one company owns five percent or more of the other company, or where companies prepare consolidated financial statements. The Department has also stated that companies may be considered sufficiently related where there are common directors or one company performs services for the other company. According to the questionnaire, where such companies produce the subject merchandise or where such companies have engaged in certain financial transactions with the company producing the subject merchandise, the affiliated parties are required to respond to the Department's questionnaire. In its questionnaire response, Kyesung identified Namhan Paper Co., Ltd. (“Namhan”) and Poongman Paper Co., Ltd. (“Poongman”) as its affiliated companies that produce and sell subject merchandise. Namhan and Poongman merged during the POI. Therefore, Namhan submitted a questionnaire response covering the POI that contained data for Namhan and Poongman before and after the merger (as one company). Similarly, in its questionnaire response, Moorim identified Moorim SP as its affiliate that produces and sells subject merchandise. Moorim SP submitted a questionnaire response to the Department. For the countervailable subsidy benefits enjoyed by Kyesung and Namhan/Poongman and Moorim and Moorim SP, we attributed those benefits in accordance with 19 CFR 351.525(b)(6)(ii), which states that if two (or more) corporations with cross-ownership produce the subject merchandise, the Department will attribute the subsidies received by either or both companies to the products produced by both companies. Therefore, we have preliminarily calculated a single CVD *ad valorem* rate for Kyesung and Moorim, respectively, by dividing the combined subsidy benefits for the cross-owned companies by the companies' consolidated total sales, or consolidated total export sales, as appropriate. Subsidies Valuation Information Benchmarks for Loans and Discount Rate A. Benchmark for Long-Term Loans Issued Through 2005 Pursuant to 19 CFR 351.524(d)(3)(i), the Department will use, when available, the company-specific cost of long-term, fixed rate loans (excluding loans deemed to be countervailable subsidies) as a discount rate for allocating non-recurring benefits over time. Similarly, pursuant to 19 CFR 351.505(a), the Department will use the actual cost of comparable borrowing by a company as a loan benchmark, when available. According to 19 CFR 351.505(a)(2), a comparable commercial loan is defined as one that, when compared to the loan being examined, has similarities in the structure of the loan ( *e.g.* , fixed interest rate vs. variable interest rate), the maturity of the loan ( *e.g.* , short-term vs. long-term), and the currency in which the loan is denominated. During the POI, EN Paper (formerly known as Shinho Paper), Hansol, Kyesung, and Moorim had outstanding long-term won-denominated and foreign-currency denominated loans from the KDB and other government-owned financial institutions. For this preliminary determination, we are using the following benchmarks to calculate the subsidies attributable to respondents' countervailable long-term loans obtained in the years 1993 through 2005:

(1)For countervailable, foreign-currency denominated loans for creditworthy companies, we used, where available, the company-specific interest rates on the companies' comparable commercial, foreign currency loans. Where no such benchmark instruments were available, consistent with 19 CFR 351.505(a)(3)(ii) as well as our methodology in prior Korea CVD cases, we relied on the prime lending rates as reported by the IMF's *International Financial Statistics Yearbook* (“ *IMF Yearbook* ”). *See Final 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 Loans” (“ *DRAMS Investigation Memorandum* ”).

(2)For countervailable, won-denominated long-term loans, we used, where available, the company-specific interest rates on the companies' comparable commercial, won-denominated loans. If such loans were not available, we used the company-specific corporate bond rate (for commercial debt preliminarily found not to be countervailable) on the companies' won-denominated public and private bonds. *See* 19 CFR 351.505(a)(3)(iii). 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 the Department's past practice. *See DRAMS Investigation Memorandum* , at “Discount Rates and Benchmark Loans.”

(3)For countervailable, won-denominated commercial debt issued by the KDB, we used, where available, the company-specific corporate bond rate on the companies' won-denominated public and private bonds. *See* 19 CFR 351.505(a)(3)(iii). 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 BOK. Further, in accordance with 19 CFR 351.505(a)(2), our benchmarks take into consideration the structure of the government-provided loans. For 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. For variable-rate loans outstanding during the POI, pursuant to 19 CFR 351.505(a)(5)(i), our preference is to use the interest rates of variable-rate lending instruments issued during the year in which the government loans were issued. Where such benchmark instruments were unavailable, we used interest rates from loans issued during the POI as our benchmark, as such rates better reflect a variable interest rate that would be in effect during the POI. This approach is in accordance with the Department's practice in cases with similar facts. *See* , *e.g.* , *Final Results and Partial Rescission of Countervailing Duty Administrative Review: Stainless Steel Sheet and Strip From the Republic of Korea* , 68 FR 13267 (March 19, 2003), and accompanying Issues and Decision Memorandum, at Comment 8; *see also* 19 CFR 351.505(a)(5)(ii). In addition, because we preliminarily determined that Poongman was uncreditworthy in 2004, in accordance with 19 CFR 351.524(d)(3)(ii) ( *see* “Creditworthiness” section, below), we have calculated for Poongman a long-term uncreditworthy benchmark and discount rate for 2004. According to 19 CFR 351.505(a)(3)(iii), in order to calculate these rates, the Department must specify values for four variables:

(1)The probability of default by an uncreditworthy company;

(2)the probability of default by a creditworthy company;

(3)the long-term interest rate for creditworthy borrowers; and

(4)the term of the debt. For the probability of default by an uncreditworthy company, we have used the average cumulative default rates reported for the Caa- to C-rated category of companies as published in Moody's Investors Service, “Historical Default Rates of Corporate Bond Issuers, 1920-1997” (February 1998). B. Benchmark Discount Rates Certain programs examined in this investigation require the allocation of benefits over time. Thus, we have employed the allocation methodology described under 19 CFR 351.524(d). Pursuant to 19 CFR 351.524(d)(3)(i), we based our discount rate upon data for the year in which the government agreed to provide the subsidy. Under 19 CFR 351.524(d)(3)(i)(A), our preference is to use the cost of long-term, fixed-rate loans of the firm in question. Thus, where available, we used company-specific long-term loan benchmark of corporate bond rates on public and private bonds. Where those benchmarks are unavailable, pursuant to 19 CFR 351.524(d)(3)(i)(B), we used the national average of the yields on three-year corporate bonds, as reported by the BOK. C. Benchmarks for Short-Term Financing The benefit calculation for the Export and Import Credit Financing from the Export-Import Bank of Korea requires the application of a won-denominated, short-term interest rate benchmark. Absent a company-specific interest rate, we used as our benchmark the lending rate for won-denominated loans for the POI, as reported in the *IMF Yearbook.* This approach is in accordance with 19 CFR 351.505(a)(3)(ii) and the Department's practice. See, *e.g.* , *Preliminary Results of Countervailing Duty Administrative Review: Corrosion-Resistant Carbon Steel Flat Products from the Republic of Korea* , 71 FR 53413, 53419 (September 11, 2006) (unchanged at the final results, *see Final Results of Countervailing Duty Administrative Review: Corrosion-Resistant Carbon Steel Flat Products from the Republic of Korea* , 72 FR 119 (January 3, 2007)). D. Allocation Period Under 19 CFR 351.524(d)(2)(i), 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”) 1977 Class Life Asset Depreciation Range System (“IRS tables”), as updated by the U.S. Department of the Treasury. The presumption will apply unless a party claims and establishes that these tables do not reasonably reflect the AUL of the renewable physical assets for the company or industry under investigation, and the party can establish that the difference between the company-specific or country-wide AUL for the industry under investigation is significant, pursuant to 19 CFR 351.524(d)(2)(ii). For assets used to manufacture products such as CFS paper, the IRS tables prescribe an AUL of 13 years. In their questionnaire responses, each respondent company stated that it would not attempt to rebut the regulatory presumption by meeting the criteria set forth in 19 CFR 351.524(d)(2)(iii). Thus, for respondents, we will use the IRS AUL of 13 years to allocate any non-recurring subsidies for purposes of this preliminary determination. Further, for non-recurring subsidies, we have applied the “0.5 percent expense test” described in 19 CFR 351.524(b)(2). Under this test, we compare the amount of subsidies approved under a given program in a particular year to sales (total sales or total export sales, as appropriate) for the same year. If the amount of subsidies is less than 0.5 percent of the relevant sales, then the benefits are allocated to the year of receipt rather than allocated over the AUL period. E. Creditworthiness The examination of creditworthiness is an attempt to determine if the company in question could obtain long-term financing from conventional commercial sources. *See* 19 CFR 351.505(a)(4). According to 19 CFR 351.505(a)(4)(i), the Department will generally consider a firm to be uncreditworthy if, based on information available at the time of the government-provided loan, the firm could not have obtained long-term loans from conventional commercial sources. In making this determination, according to 19 CFR 351.505(a)(4)(i), the Department normally examines the following four types of information:

(1)The receipt by the firm of comparable commercial long-term loans;

(2)present and past indicators of the firm's financial health;

(3)present and past indicators of the firm's ability to meet its costs and fixed financial obligations with its cash flow; and

(4)evidence of the firm's future financial position. With respect to item number one above, pursuant to 19 CFR 351.505(a)(4)(ii), in the case of firms not owned by the government, the receipt by the firm of comparable long-term commercial loans, unaccompanied by a government-provided guarantee (either explicit or implicit), will normally constitute dispositive evidence that the firm is not uncreditworthy. However, according to the preamble to the Department's CVD regulations, in situations, for instance, where a company has taken out a single commercial bank loan for a relatively small amount, where a loan has unusual aspects, or where we consider a commercial loan to be covered by an implicit government guarantee, we may not view the commercial loan(s) in question to be dispositive of a firm's creditworthiness. *See Preamble* , at 65367. In the *Initiation Notice* , we indicated that we would investigate Shinho Paper's creditworthiness for the period 1998 through 2005, and Poongman's creditworthiness for 2004. As discussed in the March 29, 2007, memorandum entitled “Shinho Paper's Equityworthiness and Creditworthiness,” we preliminarily determined Shinho Paper to be creditworthy each year from 1998 through 2005 (a copy of this memorandum is available in the CRU). Regarding Poongman, we preliminarily determine Poongman to be uncreditworthy in 2004. *See* Memorandum to the File Regarding Poongman's Creditworthiness (March 29, 2007), which is available in the CRU. Therefore, pursuant to 19 CFR 351.505(a)(3)(iii), we derived an “uncreditworthy” benchmark interest rate and used it to calculate the benefit that Poongman received from debt that was forgiven in 2004. For information on Poongman, *see* the “Poongman's Restructuring” section below. F. Equityworthiness Section 771(5)(E)(i) of the Act and 19 CFR 351.507 state that, in the case of a government-provided equity infusion, a benefit is conferred if an equity investment decision is inconsistent with the usual investment practice of private investors. According to 19 CFR 351.507, the first step in determining whether an equity investment decision is inconsistent with the usual investment practice of private investors is examining whether, at the time of the infusion, there was a market price for similar, newly issued equity. If so, the Department will consider an equity infusion to be inconsistent with the usual investment practice of private investors if the price paid by the government for newly issued shares is greater than the price paid by private investors for the same, or similar, newly issued shares. *See* 19 CFR 351.507(a)(2)(i). If actual private investor prices are not available, then, pursuant to 19 CFR 351.507(a)(3)(i), the Department will determine whether the firm funded by the government-provided infusion was equityworthy or unequityworthy at the time of the equity infusion. In making the equityworthiness determination, pursuant to 19 CFR 351.507(a)(4), the Department will normally determine that a firm is equityworthy if, from the perspective of a reasonable private investor examining the firm at the time the government-provided equity infusion was made, the firm showed an ability to generate a reasonable rate of return within a reasonable time. To do so, the Department normally examines the following factors:

(1)Objective analyses of the future financial prospects of the recipient firm;

(2)current and past indicators of the firm's financial health;

(3)rates of return on equity in the three years prior to the government equity infusion; and

(4)equity investment in the firm by private investors. Section 351.507(a)(4)(ii) of the Department's regulations further stipulates that the Department will “normally require from the respondents the information and analysis completed prior to the infusion, upon which the government based its decision to provide the equity infusion.” Absent an analysis containing information typically examined by potential private investors considering an equity investment, the Department will normally determine that the equity infusion provides a countervailable benefit. This is because, before making a significant equity infusion, it is the usual investment practice of private investors to evaluate the potential risk versus the expected return, using the most objective criteria and information available to the investor. In the *Initiation Notice* , we indicated that we would investigate Shinho Paper's equityworthiness for the period 1998 through 2005, and Poongman's equityworthiness for 2004. As discussed in the March 29, 2007, memorandum entitled “Shinho Paper's Equityworthiness and Creditworthiness” (which is on file in the CRU), we preliminarily determine that Shinho Paper was equityworthy each year from 1998 through 2005. For information on Poongman, *see* the “Poongman's Restructuring” section, below. I. Programs Preliminarily Determined To Be Countervailable A. Long-Term Lending Provided by the KDB and Other GOK-Owned Institutions Petitioner alleges that lending by the KDB to the Korean paper sector was a financial contribution, which provided a benefit and was specific to the paper sector. Petitioner also argues that in addition to the KDB, the Industrial Bank of Korea, National Agricultural Cooperative Federation, the National Federation of Fisheries, and the Export-Import Bank be treated as governmental authorities, consistent with our approach in *DRAMS Investigation. See* Petition for the Imposition of Countervailing Duties from Petitioners to the Department at 15 (October 31, 2006) (“Petition”). Petitioner alleges that GOK lending by these various government entities was specific to the paper industry. In its allegation, petitioner suggests that the Department adopt a methodology under which the amount of the paper sector's share of KDB loans is compared to the paper sector's contribution to the total manufacturing output in Korea. According to petitioner, where this analysis shows that the amount of the paper sector's loans from the KDB exceeds that sector's share of Korean manufacturing output, the Department should find that the paper sector received a disproportionate share of KDB loans, *i.e.* , which is therefore specific under section 771(5A)(D)(iii) of the Act. *See* Petition, at 17-18. As explained above, the Department preliminarily agrees that KDB and other GOK lending institutions provide a financial contribution to the Korea paper sector under section 771(5)(D)(i) of the Act. We also preliminarily determine that KDB lending to the paper sector was specific in accordance with section 771(5A)(D)(iii)(III) of the Act because the paper sector received a disproportionate share of KDB loans between 1999 and 2005 when compared to that sector's contribution to the overall Korean Gross Domestic Product (“GDP”). 5 *See* Memorandum to the File Regarding Analysis of Korea Paper Sector's share of KDB Lending (March 29, 2007) (“KDB Memorandum”). While the record is not adequately developed regarding loans provided to the paper sector by other GOK lending institutions, there is no reason to believe that the lending patterns of these other government lending institutions would be different than the lending pattern of the KDB, the country's leading supplier of long-term funds to domestic corporations over the period. 5 In reporting economic activity that contributes to the Korean GDP, the BOK does not report a category particular just to the paper sector. The paper sector's contribution to GDP is contained within the category “wood, paper, publishing, and printing.” Therefore, to conduct our GDP analysis, we are using this broad category. To the extent that we could, we combined the lending data for “wood, paper, publishing, and printing” to achieve an “apples-to-apples” comparison between share of GDP and share of loans for this sector. See KDB Memorandum, for more discussion. With regard to KDB's lending to the paper sector in the years 1993 through 1998, we do not have on the record KDB-specific lending data for these years. The GOK reported that the KDB no loner maintains lending data for newly issued loans for this period either in electronic or paper form. *See* GOK's questionnaire response at 26 (January 26, 2007) and at 16 (March 6, 2007). However, for the years 1993 through 1998, we have on the record data on the total lending to the paper sector, encompassing loans from the KDB, other GOK financial institutions, and commercial banks. *See* GOK's questionnaire response at page 20 and Exhibits 6 and 7 (January 26, 2007). We, therefore, examined the paper sector's share of total lending to the paper sector's share of GDP in each of those years. We find that the record indicates that the paper sector received a disproportionate share of total lending in each year 1993 through 1998 when compared to the sector's contribution to the overall Korean GDP, and that this can serve as a reasonable proxy for the KDB-specific lending data. Given the finding that the paper sector received a disproportionate share of KDB loans in each year 1999 through 2005, and the lending trend identified for the paper sector 1993 through 1998, we also preliminarily determine that the paper sector received a disproportionate share of KDB loans between 1993 and 1998, and that this lending was specific in accordance with section 771(5A)(D)(iii)(III) of the Act. The comparison between KDB lending received by the paper sector and the paper sector's contribution to the GDP of Korea is consistent with the Department's approach in *Plate in Coils. See Final Negative Countervailing Duty Determination: Stainless Steel Plate in Coils From the Republic of Korea* , 64 FR 15530 (March 31, 1999) (“ *Plate in Coils* ”); *see also* Memorandum from David Mueller to Holly A. Kuga: Regarding Analysis Concerning Direction of Credit, Subject: Countervailing Duty Investigation (March 4, 1998). 6 6 A copy of this public document has been placed on the record of this review. In accordance with 19 CFR 351.505(c)(2) and (4), for each respondent, we calculated the benefit for each fixed- and variable-rate loan received from the KDB and other GOK lending institutions, as well as commercial debt issued by KDB where relevant, to be the difference between the actual amount of interest paid on the government loan during the POI and the amount of interest that would have been paid during the POI at the benchmark interest rate. We conducted our benefit calculations using the benchmark interest rates described in the “Subsidies Valuation Information” section, above. For foreign currency-denominated loans, we converted the benefits into Korean won using the appropriate exchange rate. For each company, we then summed the benefits from the long-term fixed-rate and variable-rate won-denominated loans, and commercial debt issued by KDB where relevant, and divided that amount by each company's total sales values for the POI. We preliminarily determine the net countervailable subsidy rates to be, for: Hansol 1.01 percent *ad valorem* , Kyesung 0.01 percent *ad valorem* , and Moorim 0.02 percent *ad valorem.* B. Poongman's Restructuring Petitioner alleges that Poongman, a CFS-producing affiliate of Kyesung, received countervailable benefits from the GOK through extensions of debt maturities in 2002 and 2004, and a debt-for-equity swap in 2004. *See* Petition, at 67-69. Petitioner states that the KDB, owned/controlled by the GOK, was the main participant in the debt-for-equity swap. Petitioner further alleges that Poongman was unequityworthy and uncreditworthy in 2004. They base their allegation of Poongman's unequityworthiness and uncreditworthiness on its financial statements and its creditors' assessments. Therefore, petitioner argues that the GOK conferred a benefit upon Poongman, within the meaning of sections 771(5)(E)(i) and

(ii)of the Act, in the form of a government equity infusion and a loan. Petitioner further alleges that the debt-for-equity swap and the extensions of debt maturities constitute government financial contributions within the meaning of section 771(5)(D)(i) of the Act. In addition, petitioner alleges that this program is specific under section 771(5A)(D)(iii) of the Act, as this transaction was limited to Poongman. Pursuant to the Corporate Restructuring Promotion Act (“CRPA”), Korea's statutory framework for debt restructurings, Poongman's creditors performed a biannual credit assessment of the company in 2001. 7 As a result of this assessment, Poongman received a ‘B’ rating, which allowed it to go through self-restructuring, rather than through the formal CRPA process. *See* GOK's questionnaire response at pages 2 and 19 (February 2, 2007). Pursuant to the self-restructuring, in 2002, Poongman was granted an extension on the debt maturities for some of its KDB loans that were coming due. No other creditors besides the KDB granted the extensions during this period. As discussed further below, the interest owed as a result of this extension was forgiven and resulted in the provision of a countervailable subsidy. 7 The CRPA was enacted in September 2001, to help stabilize the financial and corporate sectors recovering from the 1997 financial crisis by allowing for corporate restructurings with more transparency and promptness. Its intent is to give greater responsibility to the creditors in resolving the fate of non-performing debt in the market by implementing a corporate risk rating system and conducting regular credit risk assessments on companies receiving 50 billion won or more in credit. Following another credit assessment in 2002, the KDB classified Poongman as a credit risk company and demanded it perform self-restructuring in accordance with Article 10.3 of the CRPA. *See id.* at Exhibit K-1; *see also* GOK's questionnaire response at page 16 (March 16, 2007). As a result, Poongman engaged the services of a management consulting company to provide a financial analysis. The record facts further indicate that the management consulting company provided a report based on commercial considerations which served as the basis for the restructuring of Poongman and its merger with Namhan. *See* Namhan's questionnaire response at Exhibit L-20 (February 2, 2007) and Exhibit L-44 (March 13, 2007). In June 2004, Poongman's restructuring package was agreed to by Poongman's creditors and Namhan. This package included an agreement that Poongman would merge with Namhan, Poongman's creditors would swap Poongman's debt in exchange for shares in Namhan, and Poongman's creditors would extend Poongman's remaining debt maturities. Subsequently, Poongman's board of directors approved the restructuring package on June 8, 2004, and the debt-for-equity swap was made. Due to volatile market conditions, and not due to any changes to the terms of the merger, the merger did not take effect until July 31, 2005, when Poongman's stocks were swapped for Namhan's stocks. In a past review involving a Korean corporate restructuring, the Department found that in a debt-for-equity swap that was conditioned on a merger of a non-equityworthy company (Kangwon) with an equityworthy company (Inchon), the creditors of the non-equityworthy company were effectively exchanging their debt for equity in the equityworthy company. In that case, Kangwon merged into Inchon, with Inchon being the post-merger company. *See Final Results of Countervailing Duty Administrative Review: Stainless Steel Sheet and Strip in Coils from the Republic of Korea* , 69 FR 2113 (January 14, 2004) (“ *Stainless Steel* ”), and accompanying Issues and Decision Memorandum at Comment 3. In *Stainless Steel* , the Department found that the terms of the merger and the debt-for-equity swap were part of the same agreement and that the legal requirements for the agreement had been fulfilled before the debt-for-equity swap took place. *Id.* Moreover, there was no allegation that Inchon was not equityworthy, and the Department found that the record evidence regarding Inchon's financial status provided no reason to question its equityworthiness. *Id.* Consequently, the Department concluded that the equityworthiness of Kangwon, the non-equityworthy company, was not relevant to the determination of whether a benefit was conferred. *Id.* In this case, we find that the debt-to-equity swap was agreed to by Poongman's creditors on the condition that the merger with Namhan would occur, and that the share issuance price would be the market price. Moreover, we find that the terms of the merger and the swap were part of the same agreement that was approved by Poongman's board of directors. Based on record evidence, and consistent with *Stainless Steel* , we preliminarily find that, because the swap and the extension of debt maturities took place on the condition of Poongman's merger into Namhan, Poongman's creditors were effectively exchanging their debt for equity in Namhan, an equityworthy company. In looking to the post-merger entity as the reference for analyzing equityworthiness and creditworthiness, the Department takes due consideration of the specific facts of the case. In the instant investigation, the record evidence shows Namhan to be a larger, financially more stable company relative to Poongman. In addition, petitioner has not alleged that Namhan was an unequityworthy or uncreditworthy company during the relevant time period. Thus, in accordance with section 771(5)(E)(i) of the Act, we find that the decision by Poongman's creditors to swap debt for equity in Namhan was not inconsistent with the usual practice of private investors and did not confer a benefit to Poongman. Therefore, we preliminarily find that the debt-for-equity swap and the debt maturity extensions that occurred in 2004, on condition of the merger with Namhan are not countervailable. However, with regard to the forgiveness of interest owed as discussed earlier, we preliminarily find that this forgiveness of debt constitutes the provision of a financial contribution. In addition, we preliminarily find that it was specific to Poongman within the meaning of section 771(5A)(D)(iii) of the Act, in that it was limited to one company. As such, we preliminarily determine the net countervailable subsidy to be 0.49 percent ad valorem. C. Export and Import Credit Financing From the Export-Import Bank of Korea (“KEXIM”) The Department has previously determined that the GOK's short-term export financing program is countervailable. See *e.g., Preliminary Results of Countervailing Duty Administrative Review: Corrosion-Resistant Carbon Steel Flat Products from the Republic of Korea* , 71 FR 53413, 53419 (September 11, 2006), (unchanged at the final results, *see Final Results of Countervailing Duty Administrative Review: Corrosion-Resistant Carbon Steel Flat Products from the Republic of Korea* , 72 FR 119 (January 3, 2007)); *see also 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). No new information from interested parties has been presented in this investigation to warrant a reconsideration of the countervailability of this program. Therefore, we preliminarily find that this program is countervailable. We preliminarily determine that the program is specific, pursuant to section 771(5A)(B) of the Act, because receipt of the financing is contingent upon exporting. In addition, we preliminarily determine that the export financing constitutes a financial contribution in the form of a loan within the meaning of section 771(5)(D)(i) of the Act and confers a benefit within the meaning of section 771(5)(E)(ii) of the Act. During the POI, Hansol was the only respondent that received export financing from the KEXIM. Pursuant to 19 CFR 351.505(a)(1), to calculate the benefit under this program, we compared the amount of interest paid under the program to the amount of interest that would have been paid on a comparable commercial loan. As our benchmark, we used the short-term interest rates discussed above in the “Subsidies Valuation Information” section. To calculate the net subsidy rate, we divided the benefit by the f.o.b. value of Hansol's total exports for 2005. On this basis, we preliminarily determine the net countervailable subsidy rate for Hansol to be 0.13 percent *ad valorem* . D. Sale of Pulp for Less Than Adequate Remuneration Donghae Pulp Company (“DP”) is the sole domestic producer/supplier of chemical pulp to the Korean pulp and paper industry. DP sells one type of chemical pulp to CFS producers, specifically bleached woodcraft pulp from the broadleaf trees. The key input into the production of CFS paper is chemical pulp, which respondents either import or purchase domestically from DP. During the POI, all respondents purchased chemical pulp directly from DP. 8 8 DP sells chemical pulp directly to end-users. There are no distributors of chemical pulp in Korea. DP was originally Daehan Chemical Pulp (“DCP”), established in January 1974, under the laws of the Republic of Korea, as a government-funded enterprise to manufacture and sell chemical pulp. DCP changed its name to DP in June 1977, and in 1987, the GOK sold its interest in DP to several companies that were end users of chemical pulp. Since June 1989, the shares of DP have been listed on the Korea Stock Exchange. In April 1998, DP declared bankruptcy and applied to the court for company reorganization. Soon thereafter, DP began operating under court receivership. 9 In September 1999, as part of the reorganization, the shares of some companies were retired without compensation. 10 In November 1999, the shares of the remaining shareholders were consolidated and the creditors swapped their debt for equity shares in DP. As a result of this debt-to-equity conversion, KDB became DP's largest shareholder. Officials from the KDB are directors on DP's board of directors. 9 During the POI, DP remained in court receivership. 10 Specifically, as part of DP's reorganization, the shares of Kyesung, Namhan, Poongman, Moorim, Moorim SP, and Hankuk Paper Co., Ltd. were retired without any compensation. Respondents argue that, since DP is in court receivership, the GOK does not control DP or direct it to sell chemical pulp to Korean CFS producers for less than adequate remuneration. In support of their argument, respondents discuss that in an earlier Korean CVD administrative review, the Department found that because Sammi Steel Co., Ltd. (“Sammi”) was in court receivership, Inchon Iron & Steel Co., Ltd., although a major shareholder, was not able to control Sammi's assets. *See Final Results and Partial Rescission of Countervailing Duty Administrative Review: Stainless Steel Sheet and Strip from the Republic of Korea* , 68 FR 13267 (March 19, 2003), and accompanying Issues and Decision Memorandum at Comment 3 (“ *Sheet and Strip 2003* ”). However, contrary to respondents” argument concerning *Sheet and Strip 2003* , the facts of this instant investigation in which we are examining DP are distinct from the facts that we examined with regard to Sammi's court receivership. Specifically, in *Sheet and Strip 2003* , we examined Sammi's court receivership in the context of cross-ownership and the attribution of benefits, whereas, in this instant investigation, we are examining whether DP should be considered a GOK entity for purposes of examining whether a countervailable benefit is being provided. *Id.* In order to assess whether an entity such as DP should be regarded as the government for purposes of a CVD proceeding, the Department considers the following factors to be relevant:

(1)The government's ownership;

(2)the government's presence on the entity's board of directors;

(3)the government's control over the entity's activities;

(4)the entity's pursuit of governmental policies or interests; and

(5)whether the entity is created by statute. *See, e.g., Final Affirmative Countervailing Duty Determinations: Pure Magnesium and Alloy Magnesium from Canada* , 57 FR 30946, 30954 (July 13, 1992); *Final Affirmative Countervailing Duty Determination: Certain Fresh Cut Flowers from the Netherlands* , 52 FR 3301, 3302, 3310 (February 3, 1987); and *Final Affirmative Countervailing Duty Determination: Stainless Steel Sheet and Strip in Coils from the Republic of Korea* , 64 FR 30636, 30642-30643 (June 8, 1999) (“ *Sheet and Strip 1999* ”). We preliminarily find DP to be a government authority under section 771(5)(B)(i) of the Act. DP was established by the GOK in 1974 to address the government's interest in establishing a domestic manufacturer and supplier of chemical pulp to the paper industry. DP is majority-owned by the KDB, a government-owned financial institution that also has presence on DP's board of directors. We do not believe that DP's court receivership status overrides the factors considered by the Department, which are outlined above. Further, this finding that DP is a government authority is consistent with prior determinations by the Department. For example, the Department determined that the actions of Pohang Iron and Steel Company, Ltd. (“POSCO”) should be considered as actions of the GOK because POSCO was a government-owned company. At that time, the GOK was POSCO's largest shareholder. *See id.* , at 30642-30643. Further, we preliminarily find that DP's provision of chemical pulp constitutes a financial contribution because it is the provision of a good as defined in section 771(5)(D)(iii) of the Act. We also preliminarily find that the provision of chemical pulp is specific in accordance with section 771(5A)(D)(iii)(I) of the Act because it is limited to the pulp and paper industry. To determine whether there is a benefit from the provision of a good, the Act specifies that the Department must examine whether the good was provided for less than adequate remuneration. According to section 771(5)(E) of the Act, the adequacy of remuneration with respect to a government's provision of a good shall be determined in relation to prevailing market conditions for the good being provided or the goods being purchased in the country which is subject to the investigation or review. Prevailing market conditions include price, quality, availability, marketability, transportation, and other conditions of purchase or sale. Section 351.511 of the Department's regulations sets forth, in order of preference, the benchmarks that we will examine in determining the adequacy of remuneration. As discussed under 351.511(a)(2)(i), the first preference is to compare the government price to a market-determined price resulting from actual transactions within the country, including imports. In this case, as DP is the only domestic supplier of chemical pulp, there is no domestic price that can serve as a benchmark price. However, the respondents imported chemical pulp comparable, in terms of quality and quantity, to that purchased from DP during the POI. To calculate the benefit under this program, for each respondent, we compared the monthly delivered weighted-average price, after all discounts, paid to DP for chemical pulp to the calculated monthly delivered weighted-average import price paid to foreign suppliers of chemical pulp. We determined the monthly price difference and then multiplied the difference by the quantity of chemical pulp purchased from DP in each respective month of the POI. We next summed the price savings realized by each company and divided that amount by each company's total sales value for the POI. On this basis, we preliminarily determine the net countervailable subsidy from this program for the respondents to be: 0.08 percent *ad valorem* for EN Paper, 0.62 percent *ad valorem* for Hansol, 0.09 percent *ad valorem* for Kyesung, and 0.02 percent *ad valorem* for Moorim. E. Sales of Pulp From Raw Material Reserve for Less Than Adequate Remuneration The Korean Public Procurement Service (“PPS”), 11 established in January 1949, is a government procurement agency that stockpiles certain raw materials ( *e.g.* , aluminum, copper, and nickel), basic necessities ( *e.g.* , salt), and industrial use materials ( *e.g.* , chemical pulp and natural rubber) using government funds. PPS facilitates the short- and long-term supply of goods and seeks to stabilize consumer prices, pursuant to the Government Procurement Act. 11 The PPS is a subsidiary agency of the Ministry of Finance and Economy. Each year the PPS formulates a storage plan in accordance with the economic policies of the GOK. The release of stored items is carried out in accordance with the yearly plan. The GOK reported that prices for released items are determined based on the cost and market price at home and abroad and that in certain circumstances could be released for a price lower than the purchase price. The PPS publically announces the stockpile release sales via its website and sells directly to end users. During the POI, PPS sold chemical pulp, some of which was purchased by Moorim SP. We preliminarily find that PPS's provision of chemical pulp constitutes a financial contribution because it is the provision of a good as defined in section 771(5)(D)(iii) of the Act. We also preliminarily find this provision of chemical pulp to be specific in accordance with section 771(5A)(D)(iii)(I) of the Act because it is limited to end users of pulp or entities associated with end users of pulp. To determine whether there is a benefit from the provision of a good, the Act specifies that the Department must examine whether the good was provided for less than adequate remuneration. According to section 771(5)(E) of the Act, the adequacy of remuneration with respect to a government's provision of a good shall be determined in relation to prevailing market conditions for the good being provided or the goods being purchased in the country which is subject to the investigation or review. Prevailing market conditions include price, quality, availability, marketability, transportation, and other conditions of purchase or sale. Section 351.511 of the Department's regulations sets forth, in order of preference, the benchmarks that we will examine in determining the adequacy of remuneration. As discussed under 19 CFR 351.511(a)(2)(i), the first preference is to compare the government price to a market-determined price resulting from actual transactions within the country, including imports. As discussed above under “Sale of Pulp for Less Than Adequate Remuneration,” DP, a government-owned entity, is the only domestic producer of pulp. As such, there are no market-determined domestic prices for chemical pulp available to serve as a benchmark. Moorim SP, however, did have imports of chemical pulp during the POI. To calculate the benefit under this program, we compared the price that Moorim SP paid to PPS for chemical pulp and the import price that Moorim paid to a foreign supplier for comparable chemical pulp. We determined the price differential and then multiplied that differential by the quantity of pulp purchased from PPS. We next divided the price savings by the company's total sales value for the POI. On this basis, we preliminarily determine the net countervailable subsidy for Moorim to be less than 0.005 percent *ad valorem* . F. Reduction in Taxes for Operating in Regional and National Industrial Complexes Under Article 46 of the Industrial Cluster Development and Factory Establishment Act (“ICDFE Act”), a state or local government may provide tax exemptions as prescribed by the Restriction of Special Taxation Act. In accordance with this authority, Article 276 of the Local Tax Act provides that entities that acquire real estate in a designated industrial complex for the purpose of constructing new buildings or enlarging existing facilities are eligible for acquisition, registration, and property tax exemptions. Property taxes are reduced by either 50 or 100 percent for five years from the date the tax liability becomes effective. The 100 percent property tax exemption applies to land, buildings, or facilities located in industrial complexes outside of the Seoul metropolitan area. The GOK established the tax exemption program under Article 276 in December 1994, to provide incentives for companies to relocate from populated areas in the Seoul metropolitan region to industrial sites in less populated parts of the country. During the POI, Namhan received a property tax exemption under Article 276 for the enlargement of its manufacturing facility located in the Chongup Industrial Complex, which is designated under the ICDFE Act. In prior Korea cases, the Department has determined that local tax exemptions provide countervailable subsidies. *See, e.g., Final Results and Partial Rescission of Countervailing Duty Administrative Review: Stainless Steel Sheet and Strip in Coils from the Republic of Korea* , 68 FR 13267 (March 19, 2003), and accompanying Issues and Decision Memorandum at “Inchon's Local Tax Exemption;” and *Final Affirmative Countervailing Duty Determination: Certain Cold-Rolled Carbon Steel Flat Products from the Republic of Korea* , 67 FR 62102 (October 3, 2002), and accompanying Issues and Decision Memorandum at “Local Tax Exemption on Land Outside of Metropolitan Area.” No new information from interested parties has been presented in this investigation to warrant a reconsideration of the countervailability of this program. Consistent with those prior determinations, in the instant investigation, the Department preliminarily determines that the property tax exemption that Namhan received is regionally specific under section 771(5A)(D)(iv) of the Act, as being limited to an enterprise or industry located within a designated geographical region. We preliminarily determine that a financial contribution is provided under section 771(5)(D)(ii) of the Act, in the form of revenue foregone. A benefit is conferred in the form of a tax exemption. To calculate the benefit, we divided Namhan's property tax exemption by the company's total sales value for 2005. On this basis, we preliminarily determine the net countervailable subsidy under this program to be less than 0.005 percent *ad valorem* . II. Programs Preliminarily Determined To Not Provide Countervailable Benefits During the POI A. Duty Drawback on Non-Physically Incorporated Items and Excess Loss Rates The Korean duty drawback system is administered by the Customs Policy Division of the Ministry of Finance and Economy (“MOFE”). The Act on Special Cases Concerning the Refundment of Customs Duties, Etc., Levied on Raw Materials for Export (“Act on Customs Duties”) governs the duty drawback program. Under the Korean duty drawback system, for a company to receive duty drawback the imported material must be physically incorporated into merchandise that is exported within two years from the time the input material is imported. There is no import duty on chemical pulp, the most important raw material used to produce CFS paper. Therefore, CFS producers are not eligible to claim duty drawback on imports of chemical pulp. CFS producers, however, can seek duty drawback for import duties paid on other materials used in the production of CFS paper, *e.g.* , clay, latex, starch, pigment, and talcum. Each material has its own single import duty rate. The GOK states that under the duty drawback system only import duties can be refunded; no other import fees ( *e.g.* , value added tax, customs brokerage, unloading charges, etc.) are eligible for drawback. To seek a drawback of import duties, the company must file with its local Customs office an application, import permits, export permits, and a statement of accounts for the required amount (see below for a discussion of this statement). A company can seek a refund of duties through either a company-specific method or fixed amount refund method (see below for a discussion of the two duty drawback methods). If the documentation is in order, the Customs office refunds the applicable duty amount. Under section 351.519(a)(1)(i) of the Department's regulations, in the case of drawback of import charges, a benefit exists to the extent that the amount of the remission or drawback exceeds the amount of import charges on imported inputs that are consumed in the production of the exported product, making normal allowance for waste. Section 351.519(a)(4)(i) states that the entire amount of such remission or drawback will confer a benefit, unless the Department determines that the government in question has in place and applies a system or procedure to confirm which inputs are consumed in the production of the exported products and in what amounts, and the system or procedure is reasonable, effective for the purposes intended, and is based on generally accepted commercial practices in the country of export. The GOK submitted information on the system that Korean Customs has in place to monitor which inputs are consumed in the production of the exported products and in what amounts. As noted, there are two duty drawback methods used in Korea:

(i)The company-specific method, and

(ii)the fixed amount refund method. Under the company-specific method, a company's duty drawback is based upon its “statement of accounts for the required amount.” This statement, which contains a formula specific to each company, demonstrates the amounts of import duty paid on imports and the amount of imports used to produce the exported product. 12 12 Specifically, the duty drawback amount is calculated according to the following two-step formula:

(1)Required Quantity = Export Quantity * Required Per Unit Quantity. The “required per unit quantity” is determined by each company's production experience. This usage rate is determined based on the company's prior fiscal year experience. The GOK reported that if the usage rate changes from one year to the next, the company must repot its revised usage rate.

(2)Duty Drawback Amount = Total Import Duty Paid * Required Quantity/Total Import Quantity. The Customs Services' Examination Department, which is located in the five local Customs offices, examines the reasonableness and accuracy of the required quantity reported in the company's statement. The GOK reported that this process is an examination of the documents submitted because there is no issue regarding the usage rate for the imported raw materials. The GOK explained that all of the imported inputs for which the respondents claimed and received duty drawback are consumed in the production process ( *i.e.* , clay, latex, starch, pigment, and talcum) and, therefore, there is no loss rate regarding the usage of these inputs in the claims for duty drawback. The GOK also reported that the company-specific formula is subject to verification by the local Customs authority if, for example, the ratio calculated by the company is higher than the ratio calculated by other companies in the same industry for the same product. During the POI, EN Paper, Hansol, Moorim Paper, Moorim SP, and Namhan used the company-specific method. Under the fixed amount refund method, the Korea Customs Service sets a fixed amount refund rate by harmonized schedule (“HS”) code number of items for export. 13 This fixed refund amount is calculated on the basis of the average refund amount of duties or the average paid tax amount on the raw materials for export, in accordance with Article 16 (simplified fixed amount refund) of the Act on Customs Duties. The GOK reported that Korean Customs reviews the fixed amount of refund annually based on the prior year's experience. Specifically, Korean Customs calculates and determines the fixed duty refund rates each year based on its company-specific duty drawback application database. To that end, Korean Customs collects all duty drawback applications for the prior 12 months and calculates the per-unit duty drawback amount by each HS code. Korean Customs then selects the duty drawback applications for which the per-unit duty drawback amount is less than the average calculated in order to prevent the fixed amount refund from exceeding the company-specific methods. Korean Customs recalculates an average duty drawback amount based on these below-average applications. Korean Customs then determines and announces the per-unit fixed amount refund after rounding upwards. The GOK provided the calculation performed to set the fixed amount of duty refund for the subject merchandise. 14 *See* GOK's questionnaire response at Exhibit E-7 (March 16, 2007). During the POI, Kyesung and Poongman used the fixed amount refund method. 13 The Korean Customs Service calculates a fixed refund rate when it is necessary to simplify the refund procedure for customs duties on certain export items having an extraordinary production process ( *e.g.* , when two or more products are produced simultaneously using one raw material or export or when the exported goods are produced by a small and medium enterprise). 14 The fixed amount of duty refunded per 10,000 KRW of FOB export value is 70 (which is the per-unit duty refund) for subject merchandise. The HS code is 4810.19-1000. Each respondent submitted to the Department documentation demonstrating a sample calculation of duty drawback, which was applied for during the POI. Based on that information, there is no evidence, at this time, to suggest that the duty drawback program provided to the respondent companies a refund of import duties on materials that were not physically incorporated into exported products or excessive refund amounts. Therefore, we preliminarily determine that respondents did not receive, under the duty drawback program, countervailable benefits during the POI. However, at verification we will further examine each company's duty drawback applications and refunded amounts to ensure that a countervailable benefit was not conferred under the program. In addition, we will further examine the system at verification to determine whether it adequately meets the standards for non-countervailability set forth in 19 CFR 351.519(a)(4). B. Cleaner Production Development Project 15 The Cleaner Production Development Project (“CPDP”) of the Korea National Cleaner Production Center (“KNCPC”) is a research and development (“R&D”) program. The GOK reported that the government and companies make cash and in-kind contributions to a research institution and then share the results of the project. The CPDP was established in 1995, under the Act on the Promotion of the Conversion into Environment-Friendly Industrial Structure and its Enforcement Decree. The KNCPC, with the support of the Ministry of Commerce, Industry and Energy (“MOCIE”), finances and manages the cleaner production technology development projects that seek to prevent or reduce the generation of waste during product designing, manufacture, delivery, use, and disposal. Specifically, MOCIE decides which projects will be approved and the level of the GOK's contribution to the project, according to criteria specified in the Guidelines for the CPDP Operation. The GOK's monetary contribution depends on the type of project (general or common), the entity in charge (company, research institution, or university), and whether the project is a collaboration of companies and research institutions or a project being conducted by a single entity. The GOK states that the purpose of this collaboration is to allow for the sharing of the results of the R&D project. 15 In its allegation concerning the “Funding for Technology Development and Recycling Program,” petitioner alleged that the GOK provides support to the pulp and paper industry for clean technology development and enhancement of used-paper recycling systems. *See* Initiation Checklist at “Funding for Technology Development and Recycling Program.” Also, in its allegation, petitioner alleged a connection between the IBF and the CPDP. The GOK reported, however, that the IBF is a loan program and the CPDP is an R&D support program. We preliminarily find no relationship between the IBF and CPDP and, therefore, are treating them as two separate programs. The GOK reported that a diverse grouping of industries has participated in the CPDP and received R&D funds from the GOK, including paper companies. Specifically, Namhan participated with another company and a research institution in a project. Namhan reported that the GOK approved the R&D funding for the project prior to the POI. We preliminarily determine that this funding is a non-recurring grant under 19 CFR 351.524(c)(2)(ii) because receipt of the assistance is not automatic, requiring the express approval of the GOK. Therefore, in accordance with 19 CFR 351.524(b)(2), we have applied the “0.5 percent expense test.” 16 The calculation demonstrates that the total funding amount approved ( *i.e.* , GOK's total contribution to the project) is less than 0.5 percent of Namham's 2003 total sales. As such, we have expensed the benefit in the year of receipt, 2003. Therefore, because the CPDP did not confer a benefit to Namhan during the POI, we preliminarily find that we need not conduct a specificity analysis of this program. 16 for more information, *see* “Allocation Period,” above. III. Programs Preliminarily Determined To Not Be Countervailable A. Direction of Credit to the Pulp and Paper Sector Petitioner alleges that the GOK directed credit to the pulp and paper sector using various means. *See Initiation Notice.* Petitioner cites prior countervailing duty cases where the Department has found direction of credit to the steel 17 and semiconductor 18 industries as well as to an individual semiconductor producer 19 to support its allegation that the GOK similarly directed credit to the paper sector because, petitioner argues, the paper sector was a strategic sector like steel and semiconductors. * See Initiation Notice* , at 40. 17 *See Final Affirmative Countervailing Duty Determination: Structural Steel Beams From the Republic of Korea* , 65 FR 41051, (July 3, 2000) (” *S-Beams* ”) (from 1985 through 1991); *Final Negative Countervailing Duty Determination: Stainless Steel Plate in Coils From the Republic of Korea* , 64 FR 15530 (March 31, 1999) (” *Steel Plate in Coils* ”) (from 1992 through 1997); *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) (” *Sheet and Strip* ”) (for 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* ”) (for 2000); *Final Results of Countervailing Duty Administrative Review: Stainless Steel Sheet and Strip in Coils from the Republic of Korea* , 69 FR 2113, (January 14, 2004) (” *Sheet and Strip 2001 Review* ”) (for 2001). 18 See DRAMS Investigation Memorandum (through 1998). 19 *See* DRAMS Investigation Memorandum, at 14-15 (through June 30, 2002); and Issues and Decision Memorandum for the *Final Results in the First Administrative Review of the Countervailing Duty Order on Dynamic Random Access Memory Semiconductors from the Republic of Korea* , 71 FR 14174 (March 21, 2006) (“DRAMS First Review Memorandum”) (through 2003). In prior determinations, the Department found that the GOK continued to control, directly and indirectly, the long-term lending practices of most sources of credit in Korea through 1998. *See Plate in Coils* and *Final Affirmative Countervailing Duty Determination: Certain Cut-to-Length Carbon-Quality Steel Plate From the Republic of Korea* , 64 FR 73176 (December 29, 1999) (” *CTL Plate* ”) for our findings. Although we determined that the GOK directed the provision of loans by Korean banks in *Plate in Coils* and *Sheet and Strip* , we concluded that loans from Korean branches of foreign banks ( *i.e.* , branches of U.S. and foreign-owned banks operating in Korea) did not confer countervailable subsidies. This determination was based upon our finding that credit from branches of foreign banks was not subject to the government's control and direction. Additionally, because these loans were not directed or controlled by the GOK, we used them as benchmarks to establish whether loans from domestic banks conferred a benefit upon respondents. In *S-Beams* and *CTL Plate* , the Department found that the GOK directed credit to “strategic” industries, such as steel, automobiles, and consumer electronics, throughout the 1970s, 1980s, and 1990s. In *S-Beams* , we found that, after the removal of the *de jure* preferences for “strategic” industries in 1985, the GOK continued to direct a disproportionate amount of lending to steel sector by examining the percentage of loans received by the steel sector in proportion to the steel sector's contribution to GDP. In *DRAMS Investigation* , we determined that the GOK continued to direct credit through 1998 to the semiconductor sector because it was a strategic sector. The Department has also addressed GOK direction of credit in the years subsequent to 1998. The GOK argued in the *DRAMS Investigation* that the post-1997 financial reforms instituted following the Korean financial crisis led to the liberalization of the Korean financial sector, resulting in the GOK not directing credit provided by domestic and government-owned banks since 1998. The GOK placed new information on the record during the *DRAMS Investigation* to support its claim that the GOK did not direct credit between 1999 and June 30, 2002. In *DRAMS Investigation* , the Department distinguished between banks that are themselves government authorities within the meaning of section 771(5)(B) of the Act and commercial banks that are not considered to be government authorities. In *CTL Plate* and *S-Beams* , we found that, although changes had been made to the legislation regulating government-controlled specialized banks, such as the KDB, in the aftermath of the financial crisis, the respondents did not provide any evidence to demonstrate that the KDB has discontinued its practice of selectively making loans to the steel sector. Record evidence from those investigations indicate that the KDB and other specialized banks, such as the Industrial Bank of Korea, continue to be government authorities within the meaning of section 771(5)(B) of the Act. Hence, the financial contributions they made fall within section 771(5)(B)(i) of the Act. As for the commercial banks in which the GOK owned a majority or minority stake, the Department determined that these entities are not GOK authorities within the meaning of section 771(5)(B) of the Act. These banks act as commercial banks, and temporary GOK ownership of the banks due to the financial crisis is not, by itself, indicative that these banks are GOK authorities. Direction of Credit Specific to the Pulp and Paper Sector A significant amount of evidence has been placed on the record by petitioner to support its allegation. In addition to the evidence contained in the petition filed on October 31, 2006, the Department sought and received additional information on direction of credit from petitioner. **See** Submissions on behalf of NewPage on November 6 and 9, 2006. Petitioner alleges that “directed lending to the Korean coated free sheet producers was specific because the GOK targeted the Korean paper industry as an industry selected for export growth and competitiveness * * * within the meaning of section 771(5A)(D)(iii)(I-IV).” *See* Petition, at 43. Under section 771 (5A)(D)(iii)(I-IV) of the Act, a subsidy is de facto specific where

(1)the actual recipients, either on an enterprise or industry basis are limited in number;

(2)a recipient, on an enterprise or industry level, is a predominant user of the subsidy;

(3)a recipient, on an enterprise of industry level, receives a disproportionately large amount of the subsidy; or

(4)the manner in which the authority provides the subsidy involves discretion which indicates that the recipient industry or enterprise is favored over others. Petitioner cites to various news articles, GOK/KDB publications and KDB's status as a government lender to support its direction of credit allegation. *See* Petition, at 39-43. In *S-Beams* , the Department found that direction of credit was specific to the steel industry because the Korea steel sector received a disproportionate amount of directed credit. *See Final Affirmative Countervailing Duty Determination: Structural Steel Beams from the Republic of Korea* , 65 FR 41051 (July 3, 2000), and accompanying Issues and Decision Memorandum, at “Direction of Credit,” section (POI 1998). In the *DRAMS Investigation* , the Department found direction of credit specific to Hynix and the Hyundai Group companies from 1999 through mid-2002. See DRAMS Investigation Memorandum, at “Comment 2: Specificity Relating to Direction of Credit.” In the first administrative review of DRAMS, the Department continued to find direction of credit specific to Hynix through 2003. *See* DRAMS First Review Memorandum. In the second administrative review of DRAMS, based on record facts particular to Hynix, the Department found that the GOK no longer directed credit to Hynix in 2004. *See Dynamic Random Access Memory Semiconductors from the Republic of Korea: Final Results of Countervailing Duty Administrative Review* , 72 FR 7015 (February 14, 2007), and accompanying Issues and Decision Memorandum at “GOK Entrustment or Direction of Debt Reductions,” section. In this investigation, the Department is analyzing whether the GOK directed credit to the paper sector during the relevant time periods as it had done earlier to the steel and semiconductor sectors. We preliminarily determine that there was no GOK direction of credit specific to the paper industry that would provide a benefit during the POI. As noted above, the Department has found that the GOK exerted broad control of lending in Korea through 1998 and that this resulted in credit being directed specifically to such “strategic” sectors as the steel and semiconductor industries. However, although the paper industry was an important part of the Korean economy, we find that the record evidence in the instant investigation is not sufficient to support a conclusion that the paper industry was likewise a “strategic” sector to which, consequently, credit was specifically directed by the GOK through its wide control of lending. For the period subsequent to 1998, we examined the paper sector using the two-part test articulated in the *DRAMS Investigation, i.e.* , whether the GOK had a governmental policy favoring that sector and, whether record evidence establishes a pattern of practices by the GOK to act upon that policy to entrust or direct creditors to provide financial contributions to the paper sector. In evaluating the record in this investigation, we do not find that the evidence supports a finding that a GOK policy existed favoring the paper sector during the relevant period. There are no government statements stating that the paper sector is a critical or strategic economic sector of the Korean economy. There are also no statements by Korean officials claiming any paper company was “too big to fail.” Nor do we find sufficient evidence to support a finding that the GOK acted on any policy to entrust or direct the paper sector's creditors to make financial contributions to the paper sector. Consequently, we preliminarily determine that there was no government entrustment or direction of private creditors, and no direction of credit, specific to the paper sector that is comparable to the earlier direction of credit to the steel and semiconductor sectors. B. Restructuring of Shinho Paper As outlined in the *Initiation Notice* and the Initiation Checklist, the Department is examining the various forms of financial assistance provided to Shinho Paper through restructuring of Shinho Paper from 1998 to 2005. This financial assistance included debt-to-equity swaps, conversions of convertible bonds to equity, the extension of debt maturities, reductions of interest obligations, and new loans. Because Shinho Paper received assistance directly from GOK-owned public lending institutions, we preliminarily determine that these institutions provided Shinho Paper financial contributions. EN Paper reported that its predecessor company, Shinho Paper, was a member of the Shinho Group, a conglomerate of 28 companies that were engaged in the manufacture of paper, steel pipes, petrochemicals, electronics, and machinery, as well as financing, transportation, and construction. In late 1997, during Korea's financial crisis, the Shinho Group began experiencing financial difficulties and applied for emergency loans from its creditor banks. On February 23, 1998, the Shinho Group and Korea First Bank (“KFB”), the main creditor bank of the Shinho Group, entered into an agreement, undertaking to reduce the Shinho's Group's debt-to-equity ratios by mergers or disposition/liquidation of member companies or other assets. On July 9, 1998, the Shinho Group applied to the KFB for a “corporate workout” program pursuant to the Corporate Restructuring Agreement (“CRA”). On July 14, 1998, a Creditors Council was formed for the purpose of overseeing the restructuring of the Shinho Group. On July 16, 1998, the Creditors Council held its first meeting and composed three Creditors Councils—one for Shinho Paper, one for Shinho Petrochemical Co., Ltd., and one for Dongyang Steel Pipe Ltd. On July 17, 1998, Samil Accounting Corporation and PricewaterhouseCoopers were appointed to conduct separate “workout” plans for these three core companies. On September 17, 1998, Samil Accounting Corporation and PricewaterhouseCoopers submitted the “workout” plan for Shinho Paper. On October 24, 1998, the Creditors Council approved a restructuring plan that was based on that evaluation. On December 11, 1998, the KFB and the Shinho Group entered into an Agreement of Corporate Restructuring to implement the plan. The KFB proposed a second restructuring plan for Shinho Paper to the Creditors Council on November 2, 1999. Santong Accounting Corporation was hired to conduct an evaluation of the company, and on January 14, 2000, a second “workout” plan was submitted to the Creditors Council. After some revisions, the committee approved the plan on March 4, 2000. On September 15, 2001, Korea's Corporate Restructuring Promotion Act came into effect. Younghwa Accounting Corporation was then appointed to evaluate the financial condition of Shinho Paper and the progress it was making under its “workout” plan. On January 3, 2002, the accounting firm submitted its review to the Creditors Council. The Creditors Council approved the plan in early 2002. EN Paper reported that, as of December 21, 2002, Shinho Paper faced de-listing from the Korea Stock Exchange because its stock price had fallen below the required minimum level. As a result, on June 11, 2003, Shinho Paper conducted a reverse stock conversion to reduce the number of shares and increase the price per remaining share. On November 3, 2002, the Creditors Council decided to sell the shares of Shinho Paper and appointed KDB-Lone Star as the financial advisor to evaluate the value of the company and conduct the sale. In April 2004, Aram Financial Service Inc. was selected as the winner of the bidding process, and on November 15, 2004, a Stock Purchase Agreement for Shinho Paper was signed. Thereafter, Shinho Paper secured a new large syndicated loan and a new credit ceiling for letters of credit. EN Paper reported that the funds from this new syndicated loan were used to repay outstanding loans in full, and that, with the takeover by Aram Financial Service Inc. and the repayment of its outstanding loans, Shinho Paper graduated from the restructuring plan in December 2004. Financial Contribution As discussed above, we preliminarily determine there was not direction of credit to the paper industry during these periods. *See* the Direction of Credit to the Pulp and Paper Industry section, above. We also preliminarily determine that information on the record does not support a finding that the GOK entrusted or directed other creditor banks to participate in financial restructuring plans, which involved providing credit and other financial assistance to Shinho Paper, in order to assist Shinho Paper through its financial difficulties. We reach this preliminary determination on the basis of a two-part test. First, we examined whether the GOK had in place a governmental policy to support Shinho Paper's financial restructuring and to prevent the company's failure. Among the evidence cited by petitioners was an article from the Korea Herald indicating that the GOK promoted mergers and acquisitions in seven “overcrowded” industries, including petrochemicals and steel. *See* Petitioner's submission of pre-preliminary comments, at 91 (March 8, 2007) (“Pre-Prelim Comments), and Petitioner's submission at Exhibit B-12 (November 6, 2007). Although these two industries are two of the “core businesses” of the Shinho Group for which “workout” plans were undertaken, there is no indication from the articles provided by petitioner that restructuring the Shinho Group or Shinho Paper was a policy goal. Additionally, petitioners argued that KFB, one of Shinho's lead creditors, was instructed to keep Shinho Bank from liquidation. Although the article provided by petitioners in support of this argument states that Shinho Paper is in the process of normalization through debt restructuring, it does not provide evidence of the entrustment or direction. *See* Pre-Prelim Comments, at 91 and Exhibit 25. At this point in the investigation, the record does not support a finding that the GOK had a governmental policy in place with respect to either the Shinho Group or Shinho Paper. We next examined whether the GOK engaged in a pattern of practices to entrust or direct Shinho Paper's creditors to provide financial contributions to Shinho Paper. In undertaking this examination, as we did in *DRAMs Investigation* , we considered whether there was evidence that the GOK influenced financial dealings through entrustment or direction of Shinho Paper's creditors. One of the many factors we considered in making this decision in *DRAMs Investigation* was whether the Creditors Council established to oversee and administer the bailouts was dominated by GOK-owned or -controlled lending institutions. We preliminarily do not find the same dominance here that we did in *DRAMs Investigation* . Therefore, we preliminarily determine that the record does not support a conclusion that the Creditors Councils established to oversee and administer the bailouts of Shinho Paper were dominated by GOK-owned or -controlled lending institutions. Additionally, we preliminarily determine that the GOK did not engage in the various types of actions that we found indicative of entrustment or direction in *DRAMs Investigation.* For example, there is insufficient evidence that GOK officials attended meetings of Shinho's creditors, that the GOK coerced or threatened Shinho's creditors to participate in the restructurings, or that the GOK used Shinho's lead bank to effectuate a policy of bailing out Shinho, among other things. *See DRAMS Investigation Memorandum* , at Comment 1. Thus, the evidence on the record is insufficient to demonstrate the existence of a GOK policy or pattern of practices to entrust or direct creditors to provide financial assistance to Shinho Paper. Benefit a. Debt-to-Equity Swaps and Conversion of Convertible Bonds to Equity Under the first Shinho Paper “workout” plan, the Creditors Council authorized for Shinho Paper debt-to-equity swaps and conversion of debt to convertible bonds. Under the second “workout” plan, the Creditors Council authorized for Shinho Paper additional debt-to-equity swaps and approved conversion of convertible bonds to equity. Under the third “workout” plan, the Creditors Council again authorized debt-for-equity swaps. EN Paper reported the total amount of debt, convertible bonds, and unpaid interest bonds that was swapped for equity. To determine whether these conversions of debt and convertible bonds to equity conferred a benefit on Shinho Paper, we followed the methodology described in 19 CFR 351.507. According to 19 CFR 351.507, the first step in determining whether an equity investment decision is inconsistent with the usual investment practice of private investors is examining whether, at the time of the infusion, there was a market price paid by private investors for similar newly issued equity. Because private banks that participated in the restructuring converted debt to equity at the same time and terms as the GOK lending institutions, we preliminarily determine that there is evidence on the record that the price paid by the GOK lending institutions was a market price paid by private investors. *See* 19 CFR 351.507(a)(2). Consequently, we preliminary determine that the debt-to-equity swaps by the GOK lending institutions were conducted consistent with usual investment practice of private investors and thus do not provide a benefit to Shinho Paper. *See* 19 CFR 351.507(a). We note that, as outlined in the Initiation Checklist, petitioner alleged Shinho Paper received additional debt forgiveness from reductions or eliminations of interest obligations and debt writeoffs which respondents explain are accounting adjustments pertaining to the numerous debt-for-equity swaps and conversions of convertible bonds to equity. As noted above, EN Paper reported that, in additional to unpaid principal, unpaid interest was also converted to equity. However, EN Paper also reported that the total amount of debt, convertible bonds, and unpaid interest that was converted to equity was less than the total amount approved for conversion by the Creditors Council. At verification, we will examine whether any unpaid interest was forgiven as a result of Shinho Paper's restructuring process and whether EN Paper provided a complete reporting of its debt and bond conversions. Accordingly, it is unnecessary to reach findings with regard to financial contribution or specificity. b. Extension of Debt Maturities As tenets of the “workout” plans, the Creditors Council approved reductions in interest rates for Shinho Paper's outstanding loans and bonds, and evidence on the record indicates that Shinho Paper also received such extensions of debt maturities. However, most of Shinho Paper's debt and bond obligations was either forgiven through the equity conversions described above or paid off prior to the POI with funds from the syndicated loan that Shinho Paper received in late 2004. EN Paper reported GOK lending institution long-term capital leases outstanding during the POI which had been restructured as a result of decrees by the Creditors Council. For these long-term leases, we followed the methodology described at 19 CFR 351.505 to determine whether the amount a firm pays on a government-provided loan is less than the amount the firm would pay on a comparable commercial loan that the firm could actually obtain on the market. As indicated in the Initiation Checklist, petitioners alleged that Shinho was uncreditworthy from 1998 to 2005. To determine whether use of an uncreditworthy benchmark interest rate was necessary, we examined whether there was evidence on the record indicating that Shinho Paper could not have obtained comparable long-term loans from conventional commercial sources. We preliminarily determine that, because the terms and rate structure decreed by the Creditors Council applied to long-term capital leases held by all of the lenders that participated in the restructuring, including lenders that are not GOK lending institutions, Shinho Paper was creditworthy during the year that the new loan structure was applied. *See* 19 CFR 351.505(a)(4)(ii). The record evidence indicates that, upon the decree of the Creditors Council, both the government and commercial creditors received the same interest rate and structure for their long-term capital leases. Further, the record evidence does not indicate that the lending provided by the commercial creditors was accompanied by a government guarantee. Therefore, pursuant to 9 CFR 351.505(a), we preliminarily determine that the GOK lending institution capital leases outstanding during the POI do not provide a benefit to Shinho Paper. Accordingly, it is unnecessary to reach findings with regard to financial contribution or specificity. c. New Loans For the large syndicated loan received by Shinho Paper during 2004, which was used to repay Shinho's creditors, including GOK lending institutions, we followed the methodology described at 19 CFR 351.505 to determine whether the amount Shinho paid on the government-provided loans was less than the amount Shinho would otherwise have to pay on a comparable commercial loan that Shinho could actually obtain on the market. The record evidence indicates that all lenders, *i.e.* , both the government and commercial creditors, participated in the syndicated loan on the same terms, such as the interest rate and structure of the loan. Further, the record evidence does not indicate that the lending provided by the commercial creditors was accompanied by a government guarantee. Consequently, we preliminarily find that the participation of commercial creditors in the syndicated loan provides sufficient indication that Shinho received the loan on commercial terms. Therefore, we preliminarily determine that the contributions provided by the GOK lending institutions in the syndicated loan do not provide a benefit to Shinho Paper. Accordingly, it is unnecessary to reach findings with regard to financial contribution or specificity. IV. Programs for Which More Information Is Required A. Industrial Base Fund 20 20 In its allegation concerning the “Funding for Technology Development and Recycling Program,” petitioner alleged that the GOK provides support to pulp and paper producers through the Industrial Base Fund. *See* Initiation Checklist at “Funding for Technology Development and Recycling Program.” The Industrial Base Fund (“IBF”), established in 1986, 21 provides policy loans pursuant to the:

(1)Promotion of Small and Medium Enterprises and Encouragement of Purchase of their Products Act,

(2)Industrial Development Act, and

(3)Guidelines for IBF Operation. The purpose of the IBF is to contribute to strengthening the competitiveness and productivity of national industries through the development of a strong industrial base in Korea. IBF funding is provided to companies that expand their facilities and make investments in projects as provided in the IBF Plan. MOCIE manages and supervises the operation of the IBF. 21 The IBF was originally named the “Manufacturing Industry Development Fund.” The name of the fund was changed in 1999, because the Manufacturing Industry Development Act was amended to become the Industrial Development Act. The IBF consists of eight separate parts, 22 one of which, the Promotion of Industrial Parts and Material, provided loans to Namhan. No other respondent received loans from the IBF. The GOK reported that the goal of the Promotion of Industrial Parts and Material is to provide long-term loans to companies in order to support the enhancement of the capacity of the facility, productivity, factory automation, and product development. Namhan received loans for the purchase of equipment applicable to both subject and non-subject merchandise. 22 IBF program consists of the following eight parts:

(1)Promotion of Industrial Parts and Material;

(2)Rationalization of Logistics;

(3)Establishment of Environment-Friendly Industrial Base;

(4)Development of Intellectual Industry;

(5)Activation of Industrial Complex;

(6)Development of Regional Industry;

(7)Cooperation among Large, Medium, and Small Enterprises; and

(8)Establishment of Information System. The GOK reported that, to apply for a loan, a company must submit a business plan application, which requests information on the company and the investment project. The GOK provided a copy of a blank application with some English translation. *See* GOK questionnaire response at Exhibit I-4 (January 26, 2007). Petitioner submitted to the Department their translation of the “effects of investment” section of the business plan application. *See* Pre-Prelim Comments, at Exhibit 128. Petitioner states that the complete translation of the “effects of investment” section of the application includes a request for information on the project's “export effects” and “saleable effect of import substitution.” *See id.* at page 81 and Exhibit 128. Petitioner, therefore, argues that the IBF program is an export subsidy under section 771(5A)(B) of the Act. We note that the IBF program could also be considered an import substitution subsidy under section 771(5A)(C) of the Act. The Department was able to verify independently that the respondent did not provide a complete translation of this section of the application and that petitioner's translation is accurate with respect to the request for information on exports and import substitution in the “effects of investment” section of the application. *See* Memorandum to the File Regarding the IBF (March 29, 2007). 23 23 A copy of this memorandum is available in CRU. While the application form may request such information, we find that the record is not adequately developed with information on how the GOK uses that information in its decision-making and whether the GOK, either in whole or in part, approves IBF loans based on a project's “export effects” and “saleable effect of import substitution.” Therefore, we will be seeking more information about the IBF program from the GOK and Namhan. However, we note that the burden is on the respondents to demonstrate that approval to receive benefits was made solely under non-export-related criteria. Therefore, the application materials themselves may be dispositive, although we will seek further information before making such a determination. *See Preamble* , 63 FR 65381. B. Short-Term Financing Under the Aggregate Credit Ceiling Loan As discussed in the “Background” section, petitioner, in its pre-preliminary comments, claims that respondents have received a significant amount of short-term lending, which was provided by the GOK for financing the importation of raw materials as well as the export of finished goods. Petitioner further claims that the BOK administers the trade financing under the Aggregate Credit Ceiling Loan (“ACCL”) program. Because the Department did not initiate on the ACCL program, there is limited information on the record of this investigation concerning respondents' use of the program and short-term loans outstanding during the POI. Therefore, we find that additional information regarding the respondents' short-term lending is required to fully analyzed the GOK's provision of these loans. Therefore, we will issue soon after this preliminary determination a supplemental questionnaire to respondent companies and the GOK concerning the ACCL and short-term lending during the POI. V. Programs Preliminarily Determined To Be Not Used We preliminarily determine that the producers/exporters of CFS paper did not apply for or receive benefits during the POI under the programs listed below: A. Export Industry Facility Loans 24 24 In the *Final Affirmation Countervailing Duty Determination: Stainless Steel Sheet and Strip in Coils from the Republic of Korea* , the Department found that the GOk terminated the Export Industry Facility Loan program in 1994 (64 FR 30636,, 30662 (June 8, 1999), at Comment 19). However, this long-term loan program can provide residual benefits. B. Tax Programs under Restriction of Special Taxation Act (“RSTA”) 1. RSTA Article 71. 2. RSTA Article 60. 3. RSTA Article 63-2. For purposes of this preliminary determination, we have relied on the GOK and respondents' responses to preliminarily determine non-use of these programs. During the course of verification, the Department will examine whether these programs were, in fact, used by respondents during the POI. Verification In accordance with section 782(i) of the Act, we will verify the information submitted prior to making our final determination. Suspension of Liquidation In accordance with section 703(d)(1)(A)(i) of the Act, we have determined individual rates for EN Paper, Hansol, Kyesung, and Moorim. The “All Others” rate is Hansol's CVD subsidy rate, because all other company rates are below *de minimis* . Pursuant to 705(c)(5)(A)(i) of the Act, we do not include *de minimis* subsidy rates in the “All Others” calculation. The rates are summarized below: Producer/Exporter Subsidy rate EN Paper 0.08 *ad valorem.* Hansol 1.76 *ad valorem.* Kyesung (and its affiliate Namhan) 0.59 *ad valorem.* Moorim (and its affiliate Moorim SP) 0.04 *ad valorem.* All Others Rate 1.76 *ad valorem.* In accordance with section 703(d)(1)(B) of the Act, we are directing U.S. Customs and Border Protection (“CBP”) to suspend liquidation of all entries of the subject merchandise from Korea, which are entered or withdrawn from warehouse, for consumption on or after the date of the publication of this notice in the **Federal Register** , and to require a cash deposit or the posting of a bond for such entries of the merchandise in the amounts indicated above. This suspension will remain in effect until further notice. ITC Notification In accordance with section 703(f) of the Act, we will notify the ITC of our determination. In addition, we are making available to the ITC all non-privileged and non-proprietary information relating to this investigation. We will allow the ITC access to all privileged and business proprietary information in our files, provided the ITC confirms that it will not disclose such information, either publicly or under an administrative protective order, without the written consent of the Assistant Secretary for Import Administration. In accordance with section 705(b)(2) of the Act, if our final determination is affirmative, the ITC will make its final determination within 45 days after the Department makes its final determination. Notification of Parties In accordance with 19 CFR 351.224(b), the Department will disclose to the parties the calculations for this preliminary determination within five days of its announcement. Unless otherwise notified by the Department, interested parties may submit case briefs within 50 days of the date of publication of the preliminary determination in accordance with 19 CFR 351.309(c)(i). As part of the case brief, parties are encouraged to provide a summary of the arguments not to exceed five pages and a table of statutes, regulations, and cases cited. Rebuttal briefs, which must be limited to issues raised in the case briefs, must be filed within five days after the case brief is filed. *See* 19 CFR 351.309(d). In accordance with 19 CFR 351.310(c), we will hold a public hearing, if requested, to afford interested parties an opportunity to comment on this preliminary determination. Individuals who wish to request a hearing must submit a written request within 30 days of the publication of this notice in the **Federal Register** to the Assistant Secretary for Import Administration, U.S. Department of Commerce, Room 1870, 14th Street and Constitution Avenue, NW., Washington, DC 20230. Parties will be notified of the schedule for the hearing and parties should confirm by telephone the time, date, and place of the hearing 48 hours before the scheduled time. Requests for a public hearing should contain:

(1)Party's name, address, and telephone number;

(2)the number of participants; and,

(3)to the extent practicable, an identification of the arguments to be raised at the hearing. This determination is issued and published pursuant to sections 703(f) and 777(i) of the Act. Dated: March 29, 2007. David M. Spooner, Assistant Secretary for Import Administration. [FR Doc. E7-6500 Filed 4-6-07; 8:45 am] BILLING CODE 3510-DS-P DEPARTMENT OF COMMERCE International Trade Administration Exporters' Textile Advisory Committee (ETAC); Notice of Open Meeting; Addition to the Agenda As stated in the notice published in the **Federal Register** on March 9, 2007 (72 FR 10709), a meeting of the Exporters' Textile Advisory Committee will be held on Thursday, April 12, 2007 from 1:00-4:00 at the Ronald Reagan Building, Trade Information Center, 1300 Pennsylvania Avenue, NW, Washington, DC, 20004, Training Room A. Addition to the Agenda There has been a change to the agenda. Mr. Dan Tannebaum, OFAC, U.S. Treasury will be briefing the ETAC Committee on Textile and Apparel Exporter Responsibilities in Complying with the Office of Foreign Asset Control

(OFAC)Requirements Relating to Specially Designated Nationals: What Exporters Need to Know About their Customers and Suppliers. The ETAC is a national advisory committee that advises Department of Commerce officials on the identification of export barriers, and on market expansion activities. With the elimination of textile quotas under the WTO agreement on textiles and clothing, the Administration is committed to encouraging U.S. textile and apparel firms to export and remain competitive in the global market. The meeting will be open to the public with a limited number of seats available. For further information or copies of the minutes, contact Rachel Alarid at

(202)482-5154. Dated: April 4, 2007. R. Matthew Priest, Deputy Assistant Secretary for Textiles and Apparel. [FR Doc. E7-6637 Filed 4-6-07; 8:45 am] BILLING CODE 3510-DS-S DEPARTMENT OF DEFENSE Office of the Secretary Transformation Advisory Group Meeting of the U.S. Joint Forces Command AGENCY: Department of Defense. ACTION: Notice of closed meeting. SUMMARY: The Transformation Advisory Group

(TAG)will meet in closed session on 6-8 June 2007. The establishment date was already published in the **Federal Register** on 28 May 2003, in accordance with 41 CFR 102-3.150. The mission of the TAG is to provide timely advice on scientific, technical and policy-related issues to the Commander, U.S. Joint Forces Command as he develops and executes the DOD transformation strategy. Full development of the topics will require discussion of information classified in accordance with Executive Order 12958, dated 17 April 1995, as amended March 2003. Access to the information must be strictly limited to personnel having the requisite clearances and specific need-to-know. Unauthorized disclosure of the information to be discussed at the TAG meetings could cause serious damage to our national defense. The meeting will be closed for security reasons, pursuant to 5 U.S.C. 552, Exemption(b)1, Protection of National Security, and Exemption(b)3 regarding information protected under the Homeland Security Act of 2002. In accordance with Section 10(d) of the Federal Advisory Committee Act and 41 CFR 102-3.155 this meeting will be closed. DATES: 6-8 June 2007. *Location:* United States Joint Forces Command, 1562 Mitscher Avenue Suite 200, Norfolk, VA 23551-2488. FOR FURTHER INFORMATION CONTACT: Ms. Tammy R. Van Dame, Designated Federal Officer,

(757)836-5365. SUPPLEMENTARY INFORMATION: Mr. Floyd March, Joint Staff,

(703)697-0610. Dated: April 3, 2007. L.M. Bynum, Alternate OSD Federal Register Liaison Officer, DoD. [FR Doc. 07-1729 Filed 4-6-07; 8:45 am]

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