Commerce Properly Found Indonesian Loan Program Was Not Upstream Subsidy, CIT Says

The Court of International Trade on Dec. 28 sustained a remand redetermination from the Commerce Department that reverses the outcome of Commerce's countervailing duty investigation on utility scale wind towers from Indonesia, which had resulted in a CV duty order in 2020, but post-remand finds no countervailable subsidization.

Commerce properly found that PT. Krakatu POSCO -- a joint venture between a private South Korean steel company and an Indonesian government-owned firm -- wasn't an authority nor directed by an authority and thus couldn't dole out countervailable benefits, Judge Jane Restani said in the opinion. Further, the trade court held that Indonesia's Rediscount Loan Program wasn't export contingent and thus not an upstream subsidy, she said.

Restani noted that while Commerce's decisions may be "disappointing" to the Wind Tower Trade Coalition -- the investigation's petitioner -- they represent proper applications of the law.

In the investigation, PT. Kenertec Power System served as the sole mandatory respondent as it was the only company with U.S. exports. Prior to the investigation, WTTC alleged that an Indonesian wind tower manufacturer had bought cut-to-length steel plate for less than adequate remuneration. Kenertec said in the investigation that it only bought CTL plate from Krakatau POSCO. Preliminarily, Commerce said that Kenertec received countervailable subsidies through its purchase of CTL plate at a 20.29% subsidy rate.

This determination boiled down to Commerce finding that the purchases were a countervailable benefit since the Indonesian government had "entrusted and directed" Krakatau POSCO to sell CTL plate for LTAR. WTTC later alleged that CTL plate producers in Indonesia received countervailable upstream subsidies that had passed through Kenertec. However, in its final determination, Commerce said that Krakatau POSCO wasn't an authority since "the record evidence on balance showed that neither the Indonesian government itself nor Krakatau Steel exerted meaningful control over the venture."

During litigation, Commerce eventually requested a voluntary partial remand to reconsider whether the Rediscount Loan Program was export contingent, in which case it can't find that it's an upstream subsidy (see 2107200061). The trade court granted the request. On remand, Commerce said that the loan program wasn't export contingent and thus "not cognizable as an upstream subsidy."

In the decision, the court found that Commerce was right in the face of both challenges by WTTC: that Krakatau POSCO is neither an authority nor directed or entrusted by an authority to sell CLT plate for LTAR and that a proper negative upstream subsidy determination was reached. On the question of Krakatau POSCO, Commerce looked at the venture's ownership structure, finding that it was 70% owned by the Korean company POSCO, dubbing it a private company and not of the Indonesian government.

WTTC said that Commerce disregarded record evidence and failed to properly address the role of the Board of Commissioners, arguing that Krakatau Steel's presence on the board gave it meaningful control over the venture. "Here, the petitioner’s argument fails primarily because it overstates the role of the BOC, and it is plainly incorrect regarding the lack of record evidence to support Commerce’s final determination," Restani said. "Commerce preliminarily determined that the BOC was the 'ultimate supervisory organ of the company.'"

As it pertains to the upstream subsidy determination, the trade court said that WTTC actually didn't give any evidence contrary to the facts Commerce relied on and instead made "strained arguments." These arguments said that Commerce can essentially "cherry-pick the facts as long as it reaches a positive CVD rate." The judge replied by finding that "Commerce reasonably relied on a neutral assessment of the facts on hand to determine that the Redistrict Loan Program was export contingent, and properly excluded the program from the upstream subsidy rate calculation."

(PT. Kenertec Power System v. U.S., Slip Op. 21-175, CIT Consol. #20-03687, dated 12/28/21, Judge Jane Restani. Attorneys: Daniel Wilson of Arnold & Porter for plaintiff PT. Kenertec; Elizabeth Speck for defendant U.S. government; Robert DeFrancesco of Wiley Rein for defendant-intervenor Wind Tower Trade Coalition)