Hyundai Steel: Commerce Erred in Finding Provision of Carbon Emission Permits Countervailable

The Commerce Department's finding that the South Korean government provided a countervailable subsidy via the provision of carbon emission permits to exporter Hyundai Steel violates the law, Hyundai argued in a July 5 complaint at the Court of International Trade. Since the requirement to buy carbon emission permits places a cost on the company, and the Korean government didn't forgo revenue by providing an additional permit allocation to Hyundai, the provision of the permits doesn't constitute a countervailable benefit, the complaint said (Hyundai Steel v. U.S., CIT #22-00170).

The case concerns the administrative review of the countervailing duty order on hot-rolled steel flat products from South Korea in which Hyundai was the sole mandatory respondent. In South Korea, companies that emit certain volumes of carbon dioxide are subjected to the Korean Emission Trading Scheme (KETS) and given permits limiting the amount of emissions they can produce. The South Korean government said it gives entities permits for 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.

In the review's preliminary results, Commerce said the South Korean government relieved companies that received the additional 3% allocation from the financial burden of buying the additional permits through the government-run auctions. Hyundai told CIT that to meet its level of emissions, it had to buy additional credits "at a significant financial burden." It said the additional 3% permit allocation to Hyundai wasn't a financial contribution because no revenue would have been otherwise due to the government, given that the credits would have been bought from third parties.

Nevertheless, Commerce assessed Hyundai a 0.10% subsidy rate for the emissions program and a total 0.56% dumping rate -- a mark that exceeds the de minimis threshold. The agency held that the provision of the credits was de jure specific because the criteria establish that some industries may get the additional credits while others do not, rejecting Hyundai's argument that the allocation doesn't limit access to the additional credits to an individual industry. Hyundai has contested this determination from Commerce in other reviews (see 2203020042).