Commerce Drops Specificity Finding for Korean Electricity Subsidy on Remand
The Commerce Department dropped its finding that a South Korean electricity subsidy is de facto specific on remand in a case at the Court of International Trade concerning the 2021 administrative review of the countervailing duty order on carbon and alloy steel cut-to-length plate from South Korea (POSCO v. U.S., CIT # 24-00006).
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The trade court sent the finding back to the agency on the basis that it improperly grouped the steel industry with two unrelated industries to find these three industries received a disproportionate share of subsidized electricity (see 2508080026). On remand, Commerce said it didn't have "sufficient alternative information on the record of the underlying review to further consider a basis for the grouping of industries or enterprises, to establish a different baseline, or to otherwise further substantiate a de facto specificity determination."
The agency also reconsidered its decision to countervail South Korea's cap and trade program, under which respondent POSCO gets an extra share of carbon trading permits. CIT remanded the agency's findings that the extra permits constituted a "financial contribution" and are de jure specific.
On remand, the agency reconfigured its analysis, finding the full allotment of trading permits "provided a financial contribution in the form of a direct transfer of funds" and that the provision of the permits "is contingent upon export performance." Ultimately, Commerce stuck with its decision to countervail the full allotment of the credits, imposing a 1.53% CVD rate on POSCO for the subsidy and a total 1.72% CVD rate.
The agency said on remand it's switching its finding that the full permit allotment amounts to revenue forgone for the South Korean government to a finding that the full allotment amounts to a "direct transfer of funds." Companies that receive the allotment "have a variety of options for use, all of which the record illustrates effectively convey a financial value to the entity," the remand results said.
For instance, companies can use the permits to "pay for the cost of compliance for carbon emissions that the entity would have otherwise had to pay for by purchasing [permits] or by paying a fine," pay for compliance in future years, "sell via private transactions," or sell on a public market that operates in a manner "similar to a stock exchange," Commerce said. The permits "constitute an instrument of monetary value that are fungible due to the creation of a public trading market," the remand results said.
Commerce argued that the trade court "has previously sustained Commerce’s financial contribution in the form of a direct transfer of funds finding with respect to this program," adding that the agency has "previously found that similar government credits can constitute a direct transfer of funds, for example, in the context of the Government of India’s (GOI) renewable energy program."
As for the specificity finding for the cap and trade program, Commerce said it finds the program to be de jure specific, since it "meets the criteria for the export subsidy, i.e., 'a subsidy that is, in law or in fact, contingent upon export performance, alone or as 1 or 2 or more conditions.'"
To assess who gets the full allotment of the permits, the South Korean government multiplies two factors, international trade intensity and production cost incurrence rate. Commerce found that, as a result, meeting the eligibility criteria "is dependent on the exports of the subsector."