CAFC Hears Arguments Over Whether Joint Venture Was Gov't Authority in Wind Towers CVD Review

The U.S. Court of Appeals for the Federal Circuit heard claims over whether Krakatu POSCO -- a joint venture between a private South Korean steel company and an Indonesian government-owned firm -- was an authority or directed by an authority for the purposes of a countervailing duty investigation. During oral arguments Jan. 11 before Judges Alan Lourie, Timothy Dyk and Kara Stoll, counsel for CVD petitioner Wind Tower Trade Coalition, Kenertec Power System and the U.S. also argued over whether Indonesia's Rediscount Loan Program was an upstream subsidy and thus countervailable (Kenertec Power System v. U.S., CIT Consol. # 20-03687).

The case deals with the countervailing duty investigation on utility scale wind towers from Indonesia, which resulted in a CVD order. However, that was terminated in 2020 after a finding on remand from the Court of International Trade of no countervailable subsidization. In a December 2021 opinion, the trade court said that the Commerce Department properly found Kraktu POSCO was not an authority and that the Rediscount Loan Program was not export contingent and thus not an upstream subsidy (see 2112280046).

In its petition for the investigation, the Wind Tower Trade Coalition alleged that an Indonesian wind tower manufacturer had bought cut-to-length steel plate for less than adequate remuneration. Kenertec, the sole mandatory respondent, said that it only bought cut-to-length plate from Krakatau POSCO. Preliminarily, Commerce said that the joint venture was a government authority since the Indonesian government directed Krakatu POSCO to sell the plate below cost. However, in its final determination, Commerce said that the joint venture wasn't an authority since "the record evidence on balance showed that neither the Indonesian government itself nor Krakatau Steel exerted meaningful control over the venture."

During litigation, Commerce eventually requested a voluntary partial remand to reconsider whether the Rediscount Loan Program was export contingent, in which case it can't find that it's an upstream subsidy (see 2107200061). On remand, Commerce said that the loan program wasn't export contingent and thus "not cognizable as an upstream subsidy." In the decision, the court found that Commerce was right in the face of both challenges by domestic petitioner coalition: that Krakatau POSCO is neither an authority nor directed or entrusted by an authority to sell cut-to-length plate for less than adequate remuneration and that a proper negative upstream subsidy determination was reached.

Now before the Federal Circuit, WTTC, the U.S. and Kenertec made their claims during the Jan. 11 oral argument. Typically brimming with questions, the judges were noticeably more silent, only rarely interjecting with statements or queries. For instance, in response to arguments from Robert DeFrancesco, counsel for WTTC, over whether Krakatu POSCO was entrusted or directed by the Indonesian government to sell cut-to-length plate below cost, Lourie said that Commerce "did extensive fact finding and we owe them deference. And they concluded that Krakatu POSCO was making its own decisions."

To this, DeFrancesco said that indeed the fact finding did happen, and all of the facts Commerce relied on for its preliminary findings indicated that Krakatu is an authority and that Krakatu POSCO is influenced by its relationship with its parent steel company via the Indonesian government. The only piece of evidence the agency relied on was a correction to reverse its position, and then Commerce went through the evidence it previously relied on without actually grappling with the expressly detracting elements of the evidence on the record, DeFrancesco said. Elizabeth Speck, a DOJ attorney, countered that Commerce did address this detracting evidence.

The parties also argued over whether Commerce was obligated to conduct a CVD investigation once it initiates an upstream analysis. DeFrancesco claimed that it was due to the word "shall" in the statute and parts of the law that say that when Commerce identifies a possible subsidy program, it must investigate it. The agency is only allowed to defer an upstream subsidy analysis when there's going to be an administrative review, which means there must be an actual order. If there is no CVD order, then Commerce must conduct the investigation, which it failed to do in this instance, DeFrancesco said.

Both Speck and Daniel Wilson, counsel for Kenertec, railed against this point, with Wilson declaring that the petitioner filed the upstream subsidy allegation too late in the proceeding for Commerce to have investigated it. Speck, meanwhile, argued that it is not correct to say that Commerce did not carry out the investigation since it had enough information at the time to "make a call" over the requirements to look into the allegation and was able to find that there was a benefit affecting the cost of the merchandise.