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“SECRETARY DON EVANS REGARDING KAMCO” mentioning the U.S. Dept. of Commerce was published in the Extensions of Remarks section on pages E1760-E1761 on Oct. 2, 2001.
The publication is reproduced in full below:
SECRETARY DON EVANS REGARDING KAMCO
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HON. STEVE C. LaTOURETTE
of ohio
in the house of representatives
Tuesday, October 2, 2001
Mr. LaTOURETTE. Mr. Speaker, I was heartened by the response that I received from the Honorable Donald Evans, Secretary of the U.S. Department of Commerce, regarding the Korean Asset Management Corporation (KAMCO) and its relationship with Dongkuk Steel Mills of South Korea. Secretary Evans' statement is indicative of a genuine commitment on the part of the Administration to ensure that a fair and equitable environment is prevalent for American steelworkers. I look forward to working with Secretary Evans in the near future to help safeguard and protect our domestic steel industry.
The Secretary of Commerce
Washington, DC, August 17, 2001.His Excellency Chang, Che Shik,Minister of Commerce, industry, and Energy of the Republic of
Korea, Seoul.
Dear Mr. Minister: I enjoyed meeting President Kim and Minister Hwang at the CBCD Ministerial earlier this year. I felt we had good meetings and very productive discussions, and I look forward to continuing those discussions with you.
One of the first issues I would like to discuss regards the upcoming September auction of Hanbo Iron and Steel by the Korea Assett Management Corporation (KAMCO). As you know, the United States has long term concerned about financial support for Hanbo from the Government of Korea. To put this issue in its proper context, in a 1998 exchange of letters with our government, the Korean Government stated that the sale of Hanbo would take place under a transparent process following international customs and practices. There were also assurances that Hanbo's creditors were committed to selling Hanbo through international competitive bidding that would
``provide equal opportunities for all potential purchasers and that the market will dictate the terms of the assets sales and disposition.'' In addition, the Korean Government has assured the United States that POSCO would not bid on Hanbo and that the Korean Government would not provide financial support for the purchase of Hanbo.
I am encouraged by KAMCO's commitment to auction the company, in whole or in part, as well as its refusal to enter into private, non-transparent negotiations with companies before the open bidding process has begun. As KAMCO prepare to complete the sale of Hanbo, I would like to emphasize that it is important that the auction be conducted in the most open and transparent manner possible.
Toward this end, I believe it is imperative that (1) the Korean Government only accept market-based bids, from financially sound firms; (2) financing from Korean Government-owned or controlled banks not be used to secure any sale; and (3) the bid selection process be based on commercial, not political factors. I feel strongly that by implementing these guidelines the Korean Government will fulfill its previous assurances that Hanbo will not receive any further government support and will be sold through a market-based process.
I appreciate your concern and continued cooperation in ensuring that the sale of Hanbo is completed as efficiently and expeditiously as possible. I look forward to working with you in the future.
Warm regards,
Donald L. Evans.
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July 10, 2001.Hon. Donald Evans,Secretary, U.S. Department of Commerce, Washington, DC.
Dear Secretary Evans: Both domestic and foreign steelmakers generally acknowledge the worldwide excess production capacity has seriously harmed U.S. steelmakers. There may be differences in various studies about how much excess capacity exists, but all involved seem to agree that much of the excess has been caused by market distorting subsidies and that these should be stopped.
Dongkuk Steel Mills of South Korea is an excellent example of a financially weak company that has used political muscle to get government loans at subsidized interest rates to survive and expand. During the last three years Dongkuk earnings have failed to equal its interest expense. This should be measured against a benchmark articulated by McKinsey & Co., a highly respected international consulting company, which provides that a company with less than two times interest coverage is likely to fail. Generally, even
``junk'' quality coverage ratio, Dongkuk has apparently just been granted an $80 million credit facility by Korea Development Bank (KDB), an agency of the Korean government which is funded indirectly by the IMF. The loan is at an interest rate well below what the company could get in the normal course of business. We have been critical in the past of Korean government loans of this type which have been used to build additional steel capacity and have indirectly come from IMF funds.
By all measures, Dongkuk is the weakest of the (non-bankrupt) steel mills in Korea and should not have been eligible for the KDB loan due to its size (larger than allowed) and poor credit standing. It has arranged for stories in the Korean press claiming that it has been profitable in 2001. However, its financial filings with the Korean government Financial Supervisory Service shows a large loss. Dongkuk has also been found guilty of dumping both steel plate and rebars in the U.S. market. It appears that the company has dumped its products in the U.S. to generate high gross sales numbers to support its campaign for a government subsidy to help bail out an unprofitable company, even though these sales were unprofitable.
Dongkuk's public campaign has been extended to the U.S. where a recent delegation of Korean steel industry leaders that came to the U.S. to lobby various trade officials was composed of nearly only officials of Dongkuk and its subsidiary, Union Steel.
I am writing to request that your office initiate an investigation into Dongkuk's financial arrangements, including its use of IMF funds through the Korean Development Bank to provide subsidies to the Korean steel industry. Please also advise us whether these arrangements violate any of the U.S. trade laws and please also take such actions as they may be appropriate to ensure that Dongkuk is barred from acquiring any additional steel assets, either directly or indirectly, in Korea as long as it continues to obtain subsidized funds from the Korean Development Bank.
I want to thank you in advance for your kind consideration of my request and I look forward to hearing from you in the near future. I remain
Very Truly Yours,
Steven C. LaTourette,
Member of Congress.
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