CIT Says Commerce Must Reconsider Electricity LTAR in Korea CVD Case

The Commerce Department must reconsider or further explain its decision not to investigate off-peak electricity provided for less than adequate remuneration, the Court of International Trade held in an Oct. 5 opinion made public Oct.12. Judge Mark Barnett also sent back Commerce's failure to attribute subsidies to a respondent that had been given to the respondent's affiliate in connection with the purchase of steel scrap and a fixed asset. However, Barnett did uphold the agency's decision not to attribute the affiliate's subsidies in connection with the provision of services, raw materials and other fixed assets.

The case concerns the 2018 administrative review of the countervailing duty order on carbon and alloy steel cut-to-length plate from South Korea. 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 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, but the price of the electricity is set through a formula with a variable and fixed cost component along with an adjustment coefficient factor to prevent overpayment.

The CVD petitioner, Nucor Corp., alleged that the Korean government cross-subsidized large industrial electricity consumers such as POSCO, a respondent in the review, that shift their consumption to off-peak hours by charging below-cost prices during that time while charging above-cost prices to on-peak consumers. Commerce said that Nucor failed to give enough evidence to start an investigation into the provision of off-peak electricity for LTAR. Nucor took to the trade court to contest this finding.

At CIT, the petitioner found a sympathetic ear in Barnett. Nucor raised two questions at the trade court: whether the pricing of off-peak electricity could constitute a subsidy program distinct from past allegations over the sale of electricity for LTAR and whether the allegation met the threshold for starting an investigation into such a program. Commerce focused on the latter, finding that Nucor failed to put forth a suitable benchmark to compare the off-peak electricity prices paid by POSCO. Barnett ruled that Commerce's discussion of the propriety of looking into a segment of Korea's time-of-use system "is cursory." The agency did not address whether the off-peak supply of electricity within this system can constitute a distinct subsidy program, the judge said.

Commerce also rejected Nucor's evidence on this claim, preferring instead actual cost data. The petitioner claimed that this data was not readily accessible. Barnett agreed. "While the KPX pricing data may not be a perfect benchmark, Commerce failed to address whether the time-period-specific data that Commerce preferred was 'reasonably available' to Nucor," the opinion said. "… Given the substantial amount of information Nucor provided and the typically 'low' bar 'for launching a CVD inquiry,' Commerce’s determination is unsupported by substantial evidence and lacking reasoned explanation."

The agency also decided not to attribute to POSCO subsidies that were received by its affiliate POSCO Plantec related the respondent's purchase of steel scrap. Commerce held that Plantec's primary function was the construction of industrial plants and not a downstream product, meaning the agency could not attribute subsidies related to the sale of scrap to POSCO. Barnett held that Commerce's reliance on Plantec's primary function was not further explained and that the agency has previously said that the primary business activity of the affiliate is not a relevant factor in most cases.

Commerce had also declined to attribute Plantec's scrap-related subsidies since the volume of the sales was small in relation to the total sales by Plantec to POSCO, but the judge deemed this explanation "impermissibly post hoc." Commerce based its decision on a distinction between producing scrap and generating it as a byproduct. Barnett said Commerce's decision could not be sustained on these grounds. "[W]ithout some basis for finding the distinction between producing scrap and generating scrap relevant here, Commerce’s decision in this segment of the proceeding appears impermissibly arbitrary," the judge ruled. As a result, the agency must reconsider its decision not to attribute Plantec's scrap-based subsidies to POSCO.

The judge, though, did uphold Commerce's decision not to attribute Plantec's subsidies to POSCO for the provision of raw materials, fixed assets and services. The agency argued that the materials, assets and services are not specifically tied to the production of any steel goods but are used in a typical manufacturing process. Beyond relying on an inapplicable administrative proceeding, Nucor failed to point to evidence undermining Commerce's findings, the judge ruled. However, one exception did apply, and that was for an unnamed fixed asset. Barnett ruled that this asset was clearly used to make steel products, meaning subsidies for its production would likely be attributed to POSCO.

(Nucor Corporation v. United States, Slip Op. 22-116, CIT #21-00182, dated 10/05/22, Judge Mark Barnett. Maureen Thorson of Wiley Rein for plaintiff Nucor; Kelly Krystyniak for defendant U.S. government; Donald Cameron of Morris Manning for defendant-intervenor POSCO)