Provision of Additional Carbon Emissions Permits Not Countervailable, Hyundai Tells Trade Court

South Korean manufacturer Hyundai Steel Co. launched a challenge at the Court of International Trade to contest the Commerce Department's final results in the administrative review of the countervailing duty order on cut-to-length carbon-quality steel plate from South Korea. In the review, Commerce said that Hyundai received a countervailable benefit through the issuance of carbon emissions permits for less than adequate remuneration (Hyundai Steel Company v. United States, CIT #22-00029).

In South Korea, companies that emit certain volumes of carbon dioxide are subjected to the Korean Emission Trading Scheme (KETS) and are then given carbon emissions permits that limit the amount of emissions a company can produce. The South Korean government said that it gives entities permits up to 97% of their applicable emissions allocations. To unlock the remaining 3%, the companies must buy permits from third companies or a government-run auction. However, 100% of a company's permits are given to companies that meet minimum production costs and international trade exposure thresholds, the complaint said.

In the review's preliminary results, Commerce said that the South Korean government "relieved companies who received the additional three percent allocation from the financial burden of purchasing the additional permits" through the government-run auctions. Commerce also said that this program was de jure specific since "companies that meet the trade intensity or production cost criteria automatically qualify for the additional three percent allocation." Hyundai contested this at Commerce, arguing that it had to buy additional credits to meet its level of emissions "at a significant financial burden."

Hyundai also said that the additional 3% allocation to Hyundai didn't amount to a financial contribution since no revenue would have been otherwise due to the government, seeing as this additional 3% would've been bought from third parties. In fact, 80% of additional permits are acquired from third parties, the complaint said. Nevertheless, Commerce stuck with its position that the provision of the 3% of carbon emissions permits was countervailable, finding that the South Korean government was forgoing revenue that was otherwise due from this 3% of permits. Seeing as certain industries get additional credits that others do not, Commerce also held that the provision of the permits was specific to the CTL carbon-quality steel plate industry. The final CVD rate for Hyundai in the review was 0.56%.