Korean Chemical Exporter Challenges First Transnational LTAR Subsidy
In a Dec. 2 motion for judgment, exporter Kukdo Chemical said the Commerce Department wrongly determined that China’s subsidization of the country’s own chemical industry conferred a transnational countervailable subsidy to it itself, an unrelated Korean producer (Kumho P&B Chemicals v. United States, CIT Consol. # 25-00143).
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This was "the first time" Commerce had considered the provision of an input for less-than-adequate remuneration in the context of transnational subsidies, the exporter said.
It said Commerce erred in using, as facts available, a petitioner’s estimate of the number of Chinese chemical input suppliers controlled by the Chinese government after the Chinese government refused to cooperate. And it said the claimed subsidy both wasn’t specific to Korean producers and wasn’t in line with Commerce’s own policy objectives.
It also took issue with Commerce’s use of adverse facts available in its benefit calculation of that transnational subsidy. And it defended another Korean program as not countervailable: the Chemical Substance Registration Support Program.
Kukdo, challenging Commerce’s countervailing duty investigation on epoxy resin from South Korea, explained that it purchased epichlorohydrin, an input of epoxy resin, from manufacturers in China. The department found that Kukdo received that epichlorohydrin for less-than-adequate remuneration because 60% of its suppliers were owned by the Chinese government.
It said it was unfair for Commerce to resort to facts otherwise available to reach that 60% figure based on “GOC’s failure to timely respond to Commerce’s questionnaire.”
The Chinese government has no incentive to respond to Commerce’s questionnaire when the company under investigation is Korean, it said. Kukdo cooperated fully in the investigation, it said, providing the names and addresses of all of its Chinese suppliers.
Also, it added, that 60% figure came from data dating back to 2004 covering fixed asset investment in the Chinese chemical industry, making it “essentially useless and unreliable” in the current context, especially under the “facts otherwise available” standard. The department got the figure from the petitioners and ignored the contemporaneous data Kukdo offered, it claimed.
The exporter went on to challenge the specificity finding Commerce reached regarding the transnational epichlorohydrin subsidy, saying the department’s analysis failed to explain how the Korean epoxy resin industry was a predominant user of a subsidy directed at Chinese epichlorohydrin manufacturing.
“[T]his analysis excludes the single largest consumer of Chinese-origin ECH: the Chinese epoxy resin industry,” it said.
A Chinese subsidy would be intended to assist its own chemical industry, not the chemical industry of Korea -- “a foreign competitor,” the exporter said.
Further, Kukdo said, at a minimum, Chinese and Korean epoxy resin manufacturers needed to be examined separately in the department’s analysis. It noted 19 U.S.C. 1677(4)(A) defines an industry as “the producers as a whole of domestic like product, or those producers whose collective output of a domestic like product constitutes a major proportion of the total domestic production of the product.
And Kukdo also said Commerce’s decision to countervail the input went against the department’s own policy directives, as laid out in its final rule lifting the regulatory bar against transnational subsidies.
When Commerce promulgated the rule, the department stated that it intended to subsidize “foreign aid where it benefits the grantor country or promotes the specific grantor country’s industry polices as well as the recipient’s country manufacturing capacities for a particular industry,” Kukdo said. But the department hadn’t demonstrated that “Chinese chemical companies selling their products to foreign competitors at allegedly low prices benefits the Chinese chemical industry,” it said.
Instead, Kukdo said, the department relied only on a 2015 “Memorandum of Understanding” between China and South Korea in regard to “the Eurasia Initiative and the Silk Road Economic Belt” -- the former a Korean program and the latter a Chinese one. This memorandum wasn’t binding, nor was it specific to the chemical industry, the exporter said.
Kukdo further argued that AFA shouldn’t have been applied to its inland freight costs for its epichlorohydrin purchases. The department resorted to the adverse inference after finding Kukdo hadn’t provided “complete ECH freight expenses ‘from the nearest seaport to Kukdo’s factory complexes,’” having not differentiated between purchases of epichlorohydrin from China and those from other countries. But the department’s prompt didn’t ask that, it argued.
Apart from the transnational subsidy issue, the exporter also challenged Commerce’s decision to countervail Korea’s Chemical Substance Registration Support Program, saying the program hadn’t provided it any financial benefit.
Under the program, it said, exporters of a particular chemical must “form a ‘consultative body’ ... to facilitate the registration” of that chemical. The program is administered by a “private, nonprofit entity” that pays private consultants for the work, it said.
Commerce wrongly countervailed the CSRSP for Kukdo because it found that the program worked as a “form of a funding mechanism” that resulted in certain government fees being exempt, Kukdo said. But the department didn’t explain what fees would have otherwise been due, it said.
Exporters led by Kumho P&B Chemicals also filed a brief Dec. 2 opposing the department’s decision to countervail Korea’s provision of off-peak electricity for less-than-adequate remuneration (see 2512020052).