CIT Says No Countervailable Benefit in Provision of Electricity in South Korea

The Court of International Trade upheld for the second time the Commerce Department's decision that no benefit was conferred to South Korean steel companies through the provision of electricity. In a decision written on Jan. 21 but made public on Feb. 1, Judge Mark Barnett sustained Commerce's decision after the U.S. Court of Appeals for the Federal Circuit remanded it for unlawfully relying on price discrimination instead of a thorough fair-market principles evaluation. Barnett said Commerce has now addressed the Federal Circuit's concerns.

The case concerns the countervailing duty investigation into cold-rolled steel products from South Korea, as petitioned for by the Nucor Corporation. It was alleged that South Korean steel companies were receiving a countervailable benefit through the provision of electricity for less than adequate remuneration. Electricity is generated in South Korea through independent power generators, community energy systems and the state-owned Korea Electric Power Corporation's (KEPCO's) six subsidiaries. Electricity must also be bought and sold through the Korean Power Exchange (KPX), an authority run through KEPCO.

In the original investigation, using a Tier 3 analysis, Commerce found that electricity's standard pricing mechanism was based on KEPCO's costs and that the corporation fully recovered its costs plus a profit. While CIT sustained this, the Federal Circuit did not, finding that Commerce improperly relied on price discrimination instead of an evaluation of fair-market principles, especially where the agency's analysis was limited to KEPCO's costs. For a legal analysis of electricity provision, Commerce had to include KPX's role in the electricity market, the Federal Circuit said.

So the agency did just that. Commerce said it looked at the prevailing market conditions for electricity and did not conduct a preferential price analysis. Agreeing, Barnett sustained Commerce's position. "Commerce fully addressed the prevailing market conditions, including the KPX’s impact on the electricity market, and substantial evidence supports its determination that the KPX’s prices to KEPCO do not provide a countervailable benefit," the opinion said. "Nucor’s arguments to the contrary are unpersuasive."

Nucor launched a series of challenges to this position, though, including the arguments that Commerce violated the Federal Circuit's mandate by failing to request data regarding the actual costs of electricity generation. In response, Barnett said that Commerce did not need to reopen the record. Nucor also argued that Commerce's analysis of KEPCO's overall profitability fails to find that its prices reflect the "full cost of generation and supply plus an amount for profit." The judge said that Commerce cited record evidence showing that KPX's pricing allowed KEPCO's generators to recover the cost of fuel to make electricity.

(POSCO v. United States, Slip Op. 22-4, CIT Consol. #16-00225, Judge Mark Barnett, dated 01/21/22. Attorneys: Alan Price of Wiley Rein for consolidated plaintiff Nucor Corporation; Patricia McCarthy for defendant U.S. government)