US Used Legal Remuneration Standard in Not Countervailing Electricity Provision, US Tells CAFC

The Commerce Department properly found that the South Korean government did not provide a countervailable subsidy via the provision of electricity below cost, the U.S. argued in a Sept. 12 reply brief at the U.S. Court of Appeals for the Federal Circuit in the case's second visit to the appellate court. Replying to countervailing duty petitioner and plaintiff-appellant Nucor Corp., the government said that it carried out a lawful "Tier 3" less than adequate remuneration (LTAR) analysis, looking at whether the Korean government sets its tariffs pursuant to market principles, and that it did not violate the Federal Circuit's prior ruling in the case since it did not undertake a preferentiality analysis. Nucor ignored the "lion's share of Commerce's actual determination," when arguing that the agency did carry out a preferentiality analysis, the brief said (POSCO v. United States, Fed. Cir. #22-1525).

The case concerns the CVD investigation into carbon and alloy steel cut-to-length plate from South Korea. In the investigation, Commerce found that South Korean steel producers hadn't been treated differently from other users by the Korean Electric Power Corp. (KEPCO), the country's only electricity generator, and did not benefit from the provision of electricity.

After the final determination was sustained by the Court of International Trade, Nucor appealed to the Federal Circuit for the first time. The appellate court held that the use of a preferential-rate standard isn't sufficient to establish the adequacy of remuneration and that Commerce failed to address the role of the Korean Power Exchange (KPX), a KEPCO-owned entity, in the South Korean electricity market. CIT ultimately remanded the case to Commerce, but the agency again found KEPCO didn't provide electricity for LTAR.

Nucor challenged multiple aspects of Commerce's remand again at CIT, including whether Commerce found that the actual price that South Korean electricity customers paid recouped costs plus profit. Nucor said Commerce used a preferential rate analysis rather than an LTAR analysis. Judge Gary Katzmann sided with Commerce, though, holding that Nucor mischaracterized Commerce's analysis (see 2201130038). The agency looked at both the relationship between KEPCO's standard pricing mechanisms and its cost of production along with the presence of preferential pricing. Now seeking to poke holes in Commerce's remand again at the Federal Circuit, Nucor argued that the remand does not properly apply a remuneration standard.

In its reply, the U.S. said Nucor ignored Commerce's detailed analysis which clearly shows that the agency used a "'cost-plus-profit' adequate remuneration" standard since KEPCO's standard pricing mechanism -- the basis for its tariff schedule and classifications -- is based on KEPCO's costs. Commerce gave specifics as well, detailing how KEPCO calculated the cost for each electricity tariff classification and showing how KEPCO "considered prevailing market conditions such as those identified in" Section 1677(5)(E) in calculating its tariff classifications.

After establishing that KEPCO covered its costs, Commerce then looked to whether the respondents were charged the appropriate tariff rate per KEPCO's industrial tariff classifications. "Thus, Commerce explained, considering whether the producer paid the same tariffs as another user with the same contract demand 'is not a ‘preferential price’ analysis' but rather an analysis of whether the tariffs paid were in accordance with 'prevailing market conditions,'" the brief said.

The U.S. further railed against Nucor's argument that Commerce again failed to investigate KPX. The appellee said that it has an obligation to investigate a potential subsidy when it has evidence that the would-be subsidy is 1) a financial contribution, 2) that confers a benefit, 3) which is specific. Since the evidence did not satisfy all three of these elements, the Korean government's questionnaire responses did not trigger Commerce's obligation to look more into the KPX, the brief said.

The government then defended its use of its 2017 administrative reviews of hot- and cold-rolled steel from South Korea, since Nucor had said its use of the reviews was "legally irrelevant." The U.S. argued that Commerce did not base its finding in the present case on the 2017 reviews but rather looked to them to confirm its findings. "Commerce is not barred from drawing parallels between identical programs as examined in different years in reaching its determination, as long as it explains its basis for doing so," the brief said. "Indeed, the trial court examined whether Commerce conflated the two analyses -- the investigation and the upstream-subsidy analysis -- concluding that it did not."