CIT Says Commerce Properly Found No Benefit in Provision of Electricity in South Korea

The Commerce Department properly found that electricity was not provided below cost in South Korea in a countervailing duty investigation, the Court of International Trade said in a June 13 opinion. Following a remand from the Court of Appeals for the Federal Circuit, Judge Jennifer Choe-Groves said that both of the remanded issues -- Commerce's reliance on the preferential-rate standard and its failure to address the Korean Power Exchange's (KPX's) impact on the South Korean electricity market as rendering cost-recovery analysis -- now comply with the appellate court's ruling.

The case concerns the CVD investigation into carbon and alloy steel cut-to-length plate from South Korea in which the lead plaintiff, POSCO, and Hyundai Steel Co. served as the two mandatory respondents. In South Korea, the Korean Electric Power Corporation (KEPCO) is the sole supplier of electricity, but it doesn't generate electricity itself. It buys it through 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.

The original petition in the investigation had alleged that Korean steelmakers were receiving a countervailable benefit through the provision of low-cost electricity. To investigate, the agency questioned the Korean government about the Korean electricity industry and market, which included KEPCO and KPX. Commerce claims it conducted a "tier three analysis" to examine how KEPCO calculated its electricity tariff prices for each classification of customer through its price setting system.

By including costs and return on investment in its electricity prices, KEPCO did not treat Korean producers differently from other electricity users and charged the producers a tariff rate that was in line with their tariff classification level, Commerce said. The agency issued a final determination saying as much and assigning 58.68% and 3.89% countervailing duty rates to the mandatory respondents, POSCO and Hyundai, respectively. CIT sustained this final determination in September 2018, after a challenge from POSCO. The case was then brought to the Federal Circuit, where the appellate court held that Commerce's benefit analysis and failure to investigate the role of KPX in the Korean electricity market was contrary to law.

Despite this ruling, Commerce continued to hold that its LTAR analysis adhered to the statute and that it properly evaluated KPX's role in the energy market (see 2106140051). The agency said that the Federal Circuit mischaracterized many of the facts of the case, including the fact that Commerce supposedly did request information about KPX's electricity generation costs and the fact that it didn't actually rely on a preferential price analysis.

Now back at CIT, Choe-Groves upheld Commerce's remand. The judge said that the agency's "re-articulated standard" as it relates to its adequate remuneration analysis is in line with the law.

"The CAFC POSCO court faulted Commerce for relying on price discrimination, namely 'that [a] producer is being discriminatorily favored compared to others in the exporting country,'" the opinion said. "... Commerce re-articulated its standard without the language 'treated no differently than other companies,' which the CAFC POSCO court held was an unlawful preferential-rate standard. The Court notes Commerce’s assertion that 'in assessing the price charged for electricity by KEPCO to the respondents, [it] did not compare the price charged to other customers in Korea.' Commerce removed the offending preferential-rate language and did not conduct a price-discrimination analysis."

As for the second remanded issue, the role of KPX, Choe-Groves said that this too is in line with the Federal Circuit's opinion and the law. Nucor, the CVD petitioner, argued that Commerce didn't look at the actual costs of generating electricity in South Korea since it only looked at KEPCO's costs and KEPCO itself does not generate electricity.

"Commerce found [that] KEPCO, through its six subsidiaries, generates the ‘substantial majority of the electricity produced in Korea,'" the opinion said. "Therefore, it was reasonable for Commerce to use the average fuel costs of KEPCO’s electricity-generating subsidiaries as reflected in KEPCO’s 2015 Form 20-F for the costs of generating electricity. The Court concludes that Commerce complied with CAFC POSCO in considering additional information from the record regarding the costs of generating electricity."

(POSCO v. United States, Slip Op. 22-65, CIT #16-00227, dated 06/13/22, Judge Jennifer Choe-Groves. Attorneys: Donald Cameron of Morris Manning for plaintiffs POSCO, Hyundai and Government of Korea; Alan Price of Wiley Rein for defendant-intervenor Nucor; Patricia McCarthy for defendant U.S. government)