Trade Court Remands Benefit Decisions on Port Usage Rights, Sewerage Fee Reductions in CVD Case

The Commerce Department must reconsider its benefit determination on the South Korean government's provision of port usage rights to countervailing duty respondent Hyundai Steel Co., the Court of International Trade held in a Feb. 10 opinion. Judge Jennifer Choe-Groves said that Commerce failed to consider information relating to prevailing market conditions, such as price, quality and other conditions of the purchase or sale, when deciding whether a benefit was conferred. Choe-Groves also granted Commerce's voluntary remand request on sewerage usage fees after it said it learned more about the program.

"Hyundai Steel is very pleased that the court recognized that Commerce had not taken into account the particular circumstances that resulted in the Government of Korea providing Hyundai Steel with certain port usage rights as compensation for building the port and ceding ownership to the government," said Brady Mills, counsel for Hyundai. "Those facts are essential to any determination about whether the provision of these port usage rights provided Hyundai Steel with a countervailable benefit. The court also appropriately granted Commerce a voluntary remand on the sewerage fee issue so that it could reconsider its decision in light of its better understanding of the program."

The case deals with the final results of the 2018 administrative review of the countervailing duty order on hot-rolled steel flat products from South Korea in which Hyundai served as the sole mandatory respondent. In the review, Commerce countervailed two programs: the respondent's port usage rights and sewerage fee reductions.

On the port usage rights, Hyundai explained that, between 2003 and 2007, it paid for and built a port facility at North Incheon Harbor, receiving reimbursement from the Korean government. The port changed hands after it was finished, officially reverting to the Korean government. But, since it built the facility, Hyundai Steel obtained the right to operate and use the port for its own operations, along with collecting fees from third-party users. The respondent told Commerce of the arrangement, also noting that it received berthing income from shipping companies. The agency said that the provision of port usage rights amounted to a countervailable subsidy.

Commerce relied on a 1999 U.S. Court of Appeals for the Federal Circuit decision, AK Steel Corp. v. U.S., in which the court upheld the agency's benefit decision based on exporter POSCO's exemption from dockyard fees. Like in the present matter, POSCO built 15 port berths in South Korea, then ceding ownership of the berths to the Korean government when construction was completed. The government then did not collect dockyard fees from POSCO. Choe-Groves said that while the facts in the case are similar, "the standard of review is whether Commerce's benefit determination is supported by substantial evidence, and the instant case differs from AK Steel Corp. in the evidence" on the record.

The judge ruled that Commerce failed to review Hyundai's non-payment of port usage fees "in terms of adequacy of remuneration," which is determined as it relates to "prevailing market conditions," which includes "price, quality, availability, marketability, transportation, and other conditions of purchase or sale." Without these components, "Commerce’s determination that the provision of port usage rights constituted a benefit is not supported by substantial evidence," the opinion said.

Regarding the sewage fee reductions, Hyundai told Commerce that since it uses a lot of water for cooling machinery, a lot of water it consumes becomes vaporized in the cooling process, thus reducing its volume of wastewater. Because of this, Hyundai got a reduction in its sewerage usage fees from the Incheon City government. The company was only charged for the wastewater that it puts in the Incheon City sewerage system, rather than being charged under a proportional system where a company is charged an equal amount to how much water it consumes. Rather than being a Hyundai-specific policy, the Korean government corroborated with Commerce that any company can opt to be charged in proportion to how much waste it produces rather than how much water it consumes.

After learning more about the program, Commerce requested a remand, which Choe-Groves granted. "Because a remand will allow Commerce to cure its own mistakes and reconsider two substantive issues raised by Plaintiff, as well as preserve court resources, the Court remands Commerce’s benefit determination and financial contribution determination related to the Sewerage Usage Fees Program," the judge ruled.

(Hyudai Steel Co. v. United States, Slip Op. 23-15, CIT #21-00536, dated 02/10/23, Judge Jennifer Choe-Groves. Attorneys: Brady Mills of Morris Manning for plaintiff Hyundai Steel Co.; Kelly Krystyniak for defendant U.S. government; Alan Price of Wiley Rein for defendant-intervenor Nucor Corp.; Roger Schagrin of Schagrin Associates for defendant-intervenors SSAB Enterprises and Steel Dynamics)