Trade Court Says Korea's Provision of Port-Usage Rights May Not Be Countervailable
The Commerce Department incorrectly found that the South Korean government's provision of port-usage rights to countervailing duty respondent Hyundai Steel Co. was a countervailable benefit, the Court of International Trade ruled in a Sept. 26 opinion. Judge M. Miller Baker said that Hyundai built the port in exchange for the right to collect third-party fees, so the provision of port-usage rights might not be a benefit but rather a payment for "consideration," as used in contract law terms.
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"We are pleased with the decision and believe the judge gave careful consideration to Hyundai Steel’s arguments about what constitutes a countervailable benefit," Brady Mills, counsel for Hyundai, said in an email.
Hyundai built a wharf at the North Incheon Harbor, completing the project in 2006. The company paid most of the port's construction costs then transferred ownership to the Korean government in 2007. Hyundai was allowed to use the port freely and collect berthing income from third-party users for a period of 41 years.
As part of the 2018 review of the CVD order on corrosion-resistant steel products from South Korea, Commerce said that because the Korean government forewent the revenue it would have gained from collecting the fees itself, the provision of port-use rights amounted to a benefit for Hyundai. The result was a 0.5% CVD rate for the program, with a total CVD rate, including another program rate for sewerage fees, totalling 0.51%.
Baker ruled that the port-usage program may not have provided Hyundai with a benefit. "The plain and obvious import of the statute is that a countervailable 'benefit' 'normally' requires, well, 'a benefit to the recipient.'" Turning to the Oxford English Dictionary, the court defined "benefit" as an "[a]dvantage, profit, good." If none of these factors is provided to the recipient from the government program, "then there's no countervailable benefit for purposes of the statute, unless an applicable exception applies (and the government makes no such contention here)," the opinion said.
Commerce said a benefit is conferred where a company pays less for its inputs than it otherwise would have without the government program or receives more revenues than it otherwise would earn. Baker noted that in normal market conditions, companies do not "gratuitously build government-owned infrastructure; they demand something in return." If the value of Hyundai's port-usage rights did not exceed the firm's construction costs, then the respondent did not receive an advantage.
Commerce said it didn't need to consider Hyundai's construction costs, while Hyundai said the value of its port-usage rights did not exceed its construction costs. Baker remanded the issue "for the Department to make that determination."
The court also sustained Commerce's remand decision regarding the sewerage-fees program, which went uncontested. As part of that analysis, the agency dropped its finding that Hyundai benefited from the program after learning more about it (see 2204120028).
(Hyundai Steel Co. v. U.S., Slip Op. 23-142, CIT # 21-00304, dated 09/26/23; Judge: M. Miller Baker; Attorneys: Brady Mills of Morris Manning for plaintiff Hyundai Steel; Brian Boynton for defendant U.S. government; Alan Price of Wiley for defendant-intervenor Nucor Corp.)