SecProbe.io

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

       DIVISION OF
CORPORATION FINANCE

Mail Stop 4631

January 8, 2010
 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 response letter s dated October 23, 2009 and November
17, 2009, and have the following additional comments.  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 expl anation.  In some of our
comments, we may ask you to provide us w ith information so we may better understand
your disclosure.  After reviewing this info rmation, we may raise additional comments.

5A.  Operating Results, page 55

Markets and Product Mix, page 55

1. We note your response to comment 1 in  our letter dated September 17, 2009.
Specifically, we note your reference to f ootnote 1 to the Net Operating Revenues
table on page 57 as representing the diffe rence between the total net operating
revenues presented in the table and net ope rating revenues for the steel reportable
segment in Note 19.  Based on the definition of net operating revenues from your consolidated statements of income, net ope rating revenues in Note  19 for fiscal year
2008 is $5.865 billion for the steel reportable segment.  Net operating revenues for the steel reportable segment per the ta ble on page 57, including the amount in
footnote 1, is $7.187 billion.  Give n the significant difference, we continue to request
that you revise your disclosures for ne t operating revenues on page 57 in an
amendment to your fiscal year 2008 Form 20-F to reconcile for investors the

Mr. Marques
National Steel Company
January 8, 2010 Page 2
differences between the table presented on pa ge 57 and the amounts disclosed in Note
19 for your steel reportable segment’s net operating revenues for each period presented.
 Results of Operations, page 63

 2. We note your response to comment 2 in our letter dated September 17, 2009.  As
previously requested, please revise your re sults of operations discussion and analysis
to include a discussion and analysis for your mining reportable segment, as this
reportable segment represented 27% of fiscal year 2008 consolidated operating income.  Based on the significance of the reportable segment to your fiscal year 2008 consolidated operating income, there is a concern that invest ors have not been
provided sufficient information to fully asse ss your historical operating results with a
view toward future operating result expecta tions to the extent known.  With regard to
the disclosure you provided in your response letter, please provid e investors with a
more detailed analysis.  For example, please provide some context of the 18.5 million tons of iron ore sales volume recorded in 2008 with the tons of iron ore sold in 2007
along with an explanation as to why there wa s an increase in capacity in the Itaguaí
Port.  Please also quantify the impact of the increase in average iron ore prices for fiscal year 2008 as compared to fiscal y ear 2007.  Further, the disclosures regarding
the amount of revenues, gross profit and ope rating income recognized in fiscal year
2008 for NAMISA provide investors with a mate rial insight as to the change in the
mining reportable segment’s revenues, gross profit and operating income in future periods, as required by Item 303( A)(3)(ii) of Regulation S-K.
 3. As previously requested, please include the additional disclosures you intend to
include in future filings in response to comment 3 in our letter dated September 17,
2009, in an amendment to your fiscal year 2008 Form 20-F.  There is a concern that
your current disclosures do not provide i nvestors with sufficient information to
understand your historical operati ng results with a view towa rd future operations as
seen through the eyes of management.  Refer to Item 303(A)(3) of Regulation S-K
and Section 501.12 of the Financial Re porting Codification for guidance.
 4. We note your response to comment 4 in our letter dated September 17, 2009.  As
previously requested, please revise your explanation for the income recognized in
fiscal year 2008 related to the change in fair value of your foreign exchange
derivative instruments as comp ared to the expense recognized in fiscal year 2007 in
an amendment to your fiscal year 2008 Form  20-F.  There continues to be a concern
that investors may not unders tand the income recognized for the change in fair value
of your foreign exchange derivative instrume nts.  Your disclosure currently appears
to attribute the income recognized in fiscal year 2008 to the slight appreciation of the

Mr. Marques
National Steel Company
January 8, 2010 Page 3
average exchange rate in fiscal year 2008 as compared to the averag e exchange rate in
fiscal year 2007 rather than the depreciati on of the exchange rate as of December 31,
2008, as compared to the excha nge rate as of December 31, 2007.
 5D.  Trend Information, page 82

 5. We note your response to comment 5 in  our letter dated September 17, 2009,
including the disclosure you intend to incl ude in future filings.  As the trend
information is required disclosure by Item 5.d. of Form 20-F, we continue to request
that you amend your fiscal year 2008 Form 20- F to provide the required disclosures.
In addition, please revise the disclosure  you provided in your response letter to
specifically state each of the most signifi cant recent trends in production, sales and
inventory, the state of the order book and co sts and selling prices since the latest
financial year and any known trends, uncer tainties, demands, commitments or events
that are reasonably likely to have a mate rial effect on the company's net sales or
revenues, income from continuing operat ions, profitability, liquidity or capital
resources, or that would cause reported fi nancial information not necessarily to be
indicative of future operating results or fi nancial condition with a cross-reference of
the more detailed discussion of each item noted  that is located elsewhere in the Form
20-F.
 6. We note your response to comment 6 in our  letter dated September 17, 2009.  It is
unclear how you determined that a significant variation in interest rates and/or in
currency exchange rates would not result in  a material impact to your financial
statements, including your resu lts of operations.  In this  regard, we note that the
depreciation of the Real as compared to the US Dollar as of December 31, 2008, as
compared to December 31, 2007, did result in  a material impact to income before
income taxes and equity in results of aff iliated companies for fiscal year 2008.  We
further note that you paid R1.1 b illion in the third quarter of fiscal year 2009 to settle
equity, foreign exchange, and interest deri vative instruments, which appear to be
material to your cash flows.  As such, we  continue to request that you revise your
Item 11 disclosures to include  the expected impact of market fluctuations on your
existing derivative positions (i.e., what mark et change would cause you to recognize a
loss on your derivative positions).  Refer to Items 5D and 11 of Form 20-F for guidance.
 Management’s annual report on internal c ontrol over financial reporting, page 116

 7. We note your response to comment 7 in our letter dated September 17, 2009.  We note that one of the implications from th e material weakness identified was that you
were not consolidating Intern ational Investment Fund (I.I. F.), which has an equity
interest in an entity that is recogniz ed under the equity method of accounting.  We
further note your assessment of materiality for fiscal years 2006 and 2007.  However,

Mr. Marques
National Steel Company
January 8, 2010 Page 4
we note that this entity was formed in fis cal year 1999.  Please confirm to us that the
equity investment held by I.I.F. was ac quired during fiscal year 2006 and that no
other assets, liabilities or revenue and/or  expense-generating ac tivities were present
until fiscal year 2006.  Otherwise, please provide us with the amounts that should
have been recognized during fiscal years 1999 – 2005 for I.I.F.  Please also provide
us with your full assessment of materiality based on the guidance in SAB Topic 1:N.
Please also tell us how you corrected the pr ior period misstatements identified during
fiscal year 2008.  Refer to SFAS 154 for guidance.
 8. We note that you did not provide  investors with a more de tailed understanding of the
material weakness in terms of your intern al control over financial reporting and your
consolidated financial statements because the material weakness you identified had no material impact on your consolidated financial statements.  We also note your conclusion and KPMG’s conclusion that if the material weakness is not remediated,
there is a potential that a material misstatem ent may occur in the future.  As such, we
continue to request that y ou provide investors with a mo re detailed discussion of the
material weakness such that they will be ab le to evaluate the impact of the material
weakness on your internal control over fina ncial reporting and cons olidated financial
statements in an amendment to your fiscal year 2008 Form 20-F.  As previously requested, please provide investors with a mo re descriptive explan ation of the control
deficiency and the impact the control de ficiency may have on your consolidated
financial statements and internal control ove r financial reporting.  Please also revise
your definition of a material weakness to conform to the definition in Rule 1-02 of
Regulation S-X and AS No. 5.
 9. As requested in comment 20 in our letter  dated September 17, 2009, please include a
discussion of the amendment and the facts and circumstances surrounding it; how the amendment impacted the CEO and CFO’s original conclusions regarding the
effectiveness of your disclosure controls and procedures and internal control over
financial reporting; and anticipated changes to disclosure controls and procedures and internal control over financial reporting to prevent future di sclosure deficiencies of a
similar nature.

Changes in internal control over financial reporting, page 116

10. In an amendment to your fiscal year 2008 Form  20-F, please disclose the changes that
were made to your internal control over financial reporting that you implemented during fiscal year 2008 to remediate the fiscal year 2007 material weakness, as
discussed in your response to comment 8 in our letter dated September 17, 2009.
Refer to Item 15(d) of Form 20-F for guidance.

Mr. Marques
National Steel Company
January 8, 2010 Page 5   2  Summary of significant accountin g policies and practices, page FS-10

(f)  Inventories, page FS-12

11. We note your response to comment 10 in our  letter dated September 17, 2009.  Given
the significance of inventories to your c onsolidated financial statements, please
include the revised accoun ting policy included in your response letter in an
amendment to your fiscal year 2008 Fo rm 20-F, as previously requested.

(p)  Accrual for contingencies and disputed taxes payable, page FS-15

12. We note your response to comment 11 in our letter dated September 17, 2009.  As previously noted, we continue to have a concern as to how your stated accounting
policy regarding the disputed taxes payable fully complies with US GAAP, as the accounting policy references FASB CON 6 fo r the disputed taxes payable as opposed
to your other contingencies, which are recognized in accordance with SFAS 5 and based on an assessment that the loss is proba ble.  As previously noted, the reference
to FASB CON 6 appears to be inconsistent  with the requirements in paragraph 5 of
SFAS 162.  Therefore, we continue to reque st that you revise your disclosure to
provide an accounting policy that complies with US GAAP in an amendment to your
fiscal year 2008 Form 20-F.
 10  Investments in affiliated companies a nd companies under common control, page FS-
29
 13. We note your response to comment 2 in our letter dated November 3, 2009.  It
continues to remain unclear how you comply with the guidance in EITF 96-16 for the
deconsolidation of NAMISA as of Decem ber 30, 2008.  Please provide us with a
more detailed explanation as to the impact to NAMISA’s business operations for
those Major Decision Disagreements that are not subject to the Put and Call –
Disagreement Mechanism.  For example, we note that the approval of the annual
operating budget would qualify as a Major Deci sion Disagreement th at is not subject
to the Put and Call – Disagreement Mechanism.  Please provide us with a comprehensive discussion as to what ha ppens in terms of the operation of NAMISA
if there is a disagreement over the annual operating budget (i.e., would NAMISA continue with its normal operations if ther e is no approved annual operating budget?).
As another example, we note that approva l of the annual compensation for the eight
Board of Officers is also considered a Major Decision Disagreement that is not
subject to the Put and Call – Disagreement  Mechanism.  Please provide us with a
comprehensive explanation as to the imp act of a disagreement over the annual
compensation to these eight Board of Officer s (i.e., would they continue to receive
the previously approved annual compensa tion, or would their compensation cease
until approval is obtained?).

Mr. Marques
National Steel Company
January 8, 2010 Page 6    14. We note your response to comment 13 in our  letter dated September 17, 2009, that
the Casa de Pedra mine is your asset.  Pleas e further clarify the value of the Casa de
Pedra mine recognized in your consolidated financial statements, including the line
item the assets is recognized.  As previ ously requested, please include the additional
disclosures in an amendment to your fiscal year 2008 Form 20-F.
 15. We note your response to comment 14 in our  letter dated September 17, 2009.  While
we understand the earnings from NAMISA for the one day in fiscal year 2008 in which NAMISA was recognized as an equity method investee may be immaterial, it
is unclear how you determined that the asse ts and liabilities information is also
immaterial as of December 31, 2008.  Pleas e advise or provide the disclosures
required by Article 4-08(g) of Regulation S-X for NAMISA’s assets and liabilities as of December 31, 2008, in an amendment to your fiscal year 2008 Form 20-F.  Also, please request your auditors to consid er the guidance in AU Section 390 and
paragraphs .05-.09 of AU Sec tion 561 regarding the impact this excluded disclosure
has to their report date.
 16. We note your response to comment 16 in our letter dated September 17, 2009.  Please
confirm to us that no material amounts of AOCI related to NAMISA just prior to
NAMISA’s transaction with Big Jump on December 30, 2008 (i.e., amount of AOCI
for NAMISA on December 29, 2008 was immaterial).

13  Loans and financing, page FS-32

 17. As previously requested, please include the disclosure you provided  in your letter in
response to comment 17 in our letter da ted September 17, 2009, in the amendment to
your fiscal year 2008 Form 20-F.
 18. We note your response to comment 18 in our letter dated September 17, 2009.  Please
clarify for us and disclose in an amendm ent to your fiscal year 2008 Form 20-F the
payment terms for the interest on the perpetual notes in the amount of US$750
million.  Specifically, please clarify whether interest payments are mandatory.

*    *    *    *

As appropriate, please respond to these co mments within 10 busines