SecProbe.io

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-4631

       DIVISION OF
CORPORATION FINANCE

Mail Stop 4631

September 17, 2009
 via U.S. mail and facsimile

 Paulo Penido Pinto Marques, CFO National Steel Company  Av. Brigadeiro Faria Lima, 3,400 – 20
th floor
04.538-132, Sao Paulo - SP, Brazil
 RE: National Steel Company
  Form 20-F for the Fiscal Year Ended December 31, 2008
  Filed June 30, 2009
  File No. 1-14732

Dear Mr. Marques:

We have reviewed your filing and have the following comments. We have limited
our review to only your financia l statements and related disclosures and do not intend to
expand our review to other portions of your  document. Where indicated, we think you
should revise your document in response to these comments. If you disagree, we will
consider your explanation as to why our comment is inapplicable or a revision is unnecessary. Please be as deta iled as necessary in your e xplanation. In some of our
comments, we may ask you to provide us w ith information so we may better understand
your disclosure. After reviewi ng this information, we may raise additional comments.
 Please understand that the purpose of our re view process is to assist you in your
compliance with the applicable disclosure  requirements and to  enhance the overall
disclosure in your filing. We look forward to  working with you in these respects. We
welcome any questions you may have about our comments or on any other aspect of our review.  Feel free to call us at the telephone numbers listed at the end of this letter.
 5A.  Operating Results, page 55

Markets and Product Mix, page 55

1. We note your table of net operating revenues for your steel products.  Please revise
your disclosures in an amendment to your fiscal year 2008 Form 20-F to clarify why
net operating revenues do not appear to agre e to the financial information reported for
your steel reportable segment in Note 19.  In addition, we note that the table
presented on page 66 for your steel product costs also does not ag ree to the cost

Mr. Marques
National Steel Company
September 17, 2009 Page 2
information for your steel reportable segmen t in Note 19.  Please also clarify your
disclosures as to why in the amended filing.
 Results of Operations, page 63

 2. We note that your mining reportable segmen t represented 27% of fiscal year 2008
consolidated operating income .  As such, please provide a detailed discussion and
analysis of the material in crease in revenues and changes in profit margins for your
mining reportable segment in an amendment to your fiscal year 2008 Form 20-F.  Further, please disclose the expected im pact of de-consolidation on future operating
results of the mining reportable segment by quantifying Namisa’s 2008 operating revenues, gross profit, and operating income  and explaining how such results will be
presented under the equity method. Refer to Item 5 of Form 20-F and Section
501.06.a of the Financial Reporti ng Codification for guidance.
 3. We note your discussion and analysis of gross profit for your steel reportable segment.  Specifically, you attribute the increase to a 30.3% increase in net operating revenues offset by a 16.2% increase in cost of products sold.  Please revise your
disclosure in an amendment to your fisc al year 2008 Form 20-F to provide an
explanation as to why net ope rating revenues increased at a greater rate than cost of
products sold.
 4. We note that your foreign exchange derivative instruments generated income in fiscal year 2008 and a loss in fiscal year 2007.  Y ou attribute the recognition of income to
the slight appreciation in the real agains t the U.S. dollar in fiscal year 2008 as
compared to fiscal year 2007.  However, we also note that the real appreciated against
the U.S. dollar in fiscal year 2007 as compar ed to fiscal year 2006.  Please revise your
disclosure in an amendment to your fisc al year 2008 Form 20-F to explain to
investors why the appreciation of the real  in fiscal year 2008 resulted in the
recognition of income for your foreign exch ange derivative instruments but a loss in
fiscal year 2007 even though the real  appreciated in fiscal year 2007.

5D.  Trend Information, page 82

5. In an amendment to your fiscal year 2008 Fo rm 20-F, please incl ude the disclosures
required by Item 5.D. for material events, tre nds and uncertainties.  In this regard, we
note the applicable items in  the risk factors section, the known exposures in your
derivative portfolio, the February 2009 e xpiration of operational risk insurance
coverage, loss contingencies, etc.
 6. In an amendment to your fiscal year 2008 Fo rm 20-F, please disclose the expected
impact of market fluctua tions on your existing derivativ e positions.  For example,
disclose whether a significant increase in ma rket interest rates would be expected to

Mr. Marques
National Steel Company
September 17, 2009 Page 3
cause a material gain or loss on your existing interest rate derivative instruments.  For
your existing foreign currency ex change rate deriva tive instruments, please disclose
whether a significant gain or loss could result from a material appreciation in the real
against the U.S. dollar. Further, please di sclose whether a significant gain or loss on
your equity swap agreements would be expect ed if there was a material increase in
the trading price of the ADRs. See Item 5D of the form instructions and the guidance
in Section 501.02 of the Fina ncial Reporting Codification re garding the disclosure of
known uncertainties.
 Management’s annual report on internal c ontrol over financial reporting, page 116

 7. We note that you have identified a material weakness that relates to “monitoring controls over the process of  identification, accounting a nd disclosure of certain
foreign subsidiaries incorpor ated in prior fiscal years and related transactions
therein”.  It is unclear what exactly the ma terial weakness is in terms of the control
deficiency(ies) and the impact this mate rial weakness had to your consolidated
financial statements (i.e., what financial statement adjustments were required to be
made because of the control deficiency(ies)).  Please revise your disclosures in an amendment to your fiscal year 2008 Form  20-F, including the specific accounting
errors that were at risk of being undetecte d.  Please provide us with a more detailed
understanding of the circumstances that re sulted in the material weaknesses (e.g.,
what caused the control deficiency(ies), how  the issue was identified, etc.).  Please
also quantify each financial statement adjust ment that was required to be made as a
result of the control deficiency.  Please tell us whet her the control deficiency
impacted your consolidated financial statements for prior fiscal periods.  If there was no impact to previous fiscal years, please tell us how you arrived at this conclusion.
 8. We note that you identified a material weakness for the year ended December 31,
2007, concerning oversight and supervisory review related to the monitoring controls over the completeness and accuracy of lawsuits  substantially related to labor and civil
claims, which could impact your ability to estimate and record the corresponding
contingency provisions.  We further note your conclusion that this material weakness
was caused by the replacement of some key personnel in charge of these controls.
Please tell us the following regarding this material weakness:
• Explain why the “replacement of some ke y personnel” increa sed the probability
that a material misstatement would not be detected.
• Discuss the qualifications and expertise of the key personnel that discontinued
their employment such that they were uniquely qualified for the oversight and
supervision of the monitoring controls ove r the completeness of your contingency
accruals related to labor and civil claims, including when these key personnel
discontinued their employment.  Also, discuss how management determined that these key personnel were necessary to the proper function of this internal control

Mr. Marques
National Steel Company
September 17, 2009 Page 4
• Tell us about the replacement personnel, in cluding when they were hired and why
their qualifications did not include the ability to oversee and supervise the
monitoring controls over th is internal control.
• Explain how the material weakness did not result in an audit adjustment to the
consolidated financial statements for fiscal years 2006 and 2007, if there was
insufficient management review over the estimating and recording of contingency accruals.
 Changes in internal control over financial reporting, page 116

 9. Please disclose the actions you are taki ng to remediate the material weakness
identified as of December 31, 2008 in an amendment to your fiscal year 2008 Form
20-F.
 2  Summary of significant accountin g policies and practices, page FS-10

 (f)  Inventories, page FS-12

 10. Please revise your accounting policy to stat e your method for recognizing inventories
costs in your consolidated statements of in come in an amendment to your fiscal year
2008 Form 20-F.  Refer to Statement 4 of Chapter 4 of ARB 43 for guidance.
  (p)  Accrual for contingencies and disputed taxes payable, page FS-15

 11. We note that you have continued to rec ognize a $1.557 billion accrual for “disputed
taxes payable”, which is 47% of total stoc kholders’ equity.  It is unclear how your
stated policy complies with US GAAP, as it appears that the full amount of the loss
contingency has been recognized in the cons olidated financial st atements without
consideration of probability.  In this regard, paragraph 37 of SFAS 5 and paragraph 8 of FIN 48 require a probability assessment for the recognition of a liability.  Further, the FASB CON 6 accounting model appears to be inconsistent with the requirements
in paragraph 5 of SFAS 162, which became effective on November 15, 2008.  As such, please revise your acc ounting policies and other co rresponding disclosures (e.g.,
page 70 and note 17) to clarify that the liabi lities recognized for each of the disputed
taxes payable accruals have been made in  accordance with the guidance in SFAS 5 or
FIN 48, as applicable, (i.e., the amount recognized has been determined that payment is probable for liabilities recognized in acco rdance with SFAS 5) in an amendment to
your fiscal year 2008 Form 20-F.

Mr. Marques
National Steel Company
September 17, 2009 Page 5   10  Investments in affiliated companies a nd companies under common control, page FS-
29
 12. We note that you have deconsolidated Na misa as of December 30, 2008, due to the
sale of 40% of Namisa’s voting capital to  a consortium that you note has “effective
and significant participation rights.”  We also note your statement that the minority
shareholders have the right to effectively pa rticipate in decisions that are expected to
relate to Namisa’s ordinary course of busin ess.  We further note that if you and the
minority shareholders are “dead-locked” with  respect to a material issue under your
shareholders’ agreement, the minority shar eholders have the option to put their
interest in Namisa to you and you have th e option to call the mi nority interest in
Namisa.  Please provide us with a more  comprehensive understanding as to how you
determined to deconsolidate Namisa and r ecognize it as an equ ity method investee.
Specifically, please include in an amendmen t to your fiscal year 2008 Form 20-F the
acquisition agreement for the 40% interest in Namisa by Big Jump, the Shareholders’
Agreement, the long-term supply contracts for the supply of iron ore, and any other material agreement and/or contract signed in connection with the sale of 40% of
Namisa and your decision to deconsolidate Namisa.  Please also provide us with your
detailed analysis of the guidance in EITF  96-16 regarding your determination that the
rights granted to Big Jump in the Shareholders’ Agreement are substantive
participating rights.  Please ensure your an alysis includes a detail ed discussion of Big
Jump’s rights and how these rights result in Big Jump “effectively participate in
significant decisions that would be expected to be related to the investee’s ordinary
course of business”.

13. We note from the disclosures in Note 12 a nd Note 17 that substantially all of your
mines and reserves assets, which appears to include the Casa de Pedra mine, are part
of Namisa’s net assets and have been decons olidated with the sale of the 40% interest
in Namisa.  We further note the long-term iron ore supply agreement you have entered into with Namisa, in which you ar e required to provide high silica crude iron
ore ROM and low silica crude iron ore ROM.  As the mine appears to be an asset of
Namisa, please provide us with an explanat ion as to why Namisa would contract with
you for iron ore if Namisa owns an iron ore mi ne that is in production.  Please also
revise your disclosures in an  amendment to your fiscal year 2008 Form 20-F to clarify
the ownership of the Casa de Pedra mine , including where its is recognized on your
consolidated balance sheet, and the material terms of the long-term supply agreement
as it relates to supplying Namisa with iron ore.
 14. If de-consolidation is deemed appropriate, please provide the di sclosures required by
Article 4-08(g) of Regulation S-X for your investment in Namisa in an amendment to your fiscal year 2008 Form 20-F.

Mr. Marques
National Steel Company
September 17, 2009 Page 6   15. We note that you recognized a gain of $1.7 billion for the difference between the carrying value and the fair value of the 40%  interest in Namisa Big Jump acquired.
Please tell us how you accounted for this difference on your balance sheet (i.e., did
you recognized the difference as goodwill or as an increase in your investment in Namisa).  Refer to paragraph 19.b. of APB 18 for guidance.
 16. Please tell us the amount of accumulated other comprehensive income recognized for Namisa prior to the de-consolidation.  In th is regard, we did not note an adjustment to
other comprehensive income and/or accumula ted other comprehensive income for the
de-consolidation of Namisa as of December 30, 2008 in your statements of changes in
stockholders’ equity and comprehensive income.
 13  Loans and financing, page FS-32

 17. Please provide a description of the material  terms related to the advances on export
contracts line item, as it is  a substantial portion of your current assets, in an
amendment to your fiscal year 2008 Form 20-F.
 18. Please tell us why the $750 million perpetual not es are classified as a liability rather
than as equity given that there is no st ated maturity date. The guidance in SFAS 150
and EITF D-98 may be relevant.
 18  Guarantees, page FS-50

 19. Please revise your disclosure in an amendm ent to your fiscal year 2008 Form 20-F to
state your accounting policy for recogniz ing the fair value of guarantees in
accordance with FIN 45.

General

20. Based on the above comments to amend your fiscal year 2008 Form 20-F to address
disclosure deficiencies, please en sure you address the following items:
• For the exclusion of the equity met hod investee disclosure s in the audited
footnotes, auditors need to consid er the guidance in AU Section 390 and
paragraphs .05-.09 in AU Section 561 regard ing the impact to their report date;
• Updated Item 15 disclosures should include the following:

Mr. Marques
National Steel Company
September 17, 2009 Page 7
o A discussion of the amendment and the facts and circumstances surrounding it;
o How the amendment impacted the CE O and CFO’s original conclusions
regarding the effectiveness of their di sclosure controls and procedures and
internal control over fi nancial reporting; and
o Anticipated changes to disclosure contro ls and procedures an d internal control
over financial reporting to prevent future  disclosure deficiencies of a similar
nature.
•  Updated c