Steel Company Says Commerce Wrongly Found No Benefit for Provision of Electricity in South Korea

The Commerce Department erred by finding that South Korea's provision of electricity below cost "conferred a non-measurable benefit," countervailing duty petitioner Nucor Corp. argued in a June 6 complaint at the Court of International Trade. Nucor railed against the "evidentiary flaws" Commerce relied on from cost data from South Korea's sole supplier of electricity, the Korean Electric Power Corporation (KEPCO), but said that even using this data, it's clear that a benefit was conferred to the mandatory respondents (Nucor Corporation v. United States, CIT #22-00137).

The case contests Commerce's final results in the 2019 administrative review of the countervailing duty order on cold-rolled steel flat products from South Korea, in which Hyundai Steel Co. and POSCO served as mandatory respondents. In the review, it was alleged that the respondents received a countervailable benefit from the provision of electricity for less than adequate remuneration. This led to the South Korean government explaining how its electricity market works.

In South Korea, KEPCO is the sole supplier of electricity, but it doesn't generate electricity itself. It buys it through the Korean Power Exchange (KPX), which is a market for electricity generated by six generators that are all owned by KEPCO subsidiaries. KPX itself is owned by KEPCO and its subsidiaries. The price of electricity, though, is set through a formula with a variable and fixed cost component along with an adjustment coefficient factor to prevent overpayment.

In the review, U.S. Steel alleged that KEPCO's reported costs represent only its cost of buying electricity through KPX and not the actual costs of generating electricity. Commerce, in its preliminary determination, said that using a "tier three" benefit methodology it said that KEPCO gave electricity to the mandatory respondents for LTAR under certain tariff classes, but the agency ultimately calculated a non-measurable benefit amount. Commerce said that, after looking at past reviews, it found that any benefit from KPX would be an upstream subsidy and that no benefit was conferred by KPX's prices since the six generation companies recovered their costs.

Nucor filed its complaint to contest these findings, first arguing that there are evidentiary flows with the cost data since the data does not reflect market-based costs. Regardless of this fact, the data still shows that a benefit was conferred to the respondents, the brief said. "Nucor argued that the tier three standard for electricity programs as previously articulated by Commerce is that a benefit is conferred 'if the tariff charged to the respondent does not cover "cost of production" plus a "profitable return on investment..."'," Nucor said. "Nucor thus argued that Commerce erred by finding that no benefit was conferred under a particular tariff class when KEPCO covered its costs inclusive of investment return on all sales to all customers in the aggregate."