Trade Court Says Commerce Need Not Offset Compliance Costs in CVD Case

The Commerce Department reasonably found that it doesn't need to incorporate offsets for the costs of complying with Germany's Electricity and Energy Tax Acts in countervailing duty rate calculations for respondent BGH Edelstahl Siegen, the Court of International Trade said. Ruling on Commerce's remand results in a case on the CVD investigation into forged steel fluid end blocks from Germany, Judge Claire Kelly also remanded the agency's finding of de jure specificity for Germany's KAV program. The judge said Commerce failed to explain how the criteria for the program are economic in nature and horizontal in application.

CIT had remanded to Commerce so the agency could consider the cost of complying with the Electricity and Energy Tax Acts, which impose taxes on electricity and energy while providing exemptions from those taxes. The law says that an agency can offset "any application fee, deposit, or similar payment paid in order to qualify for, or to receive, the benefit of the countervailable subsidy." The key question was whether compliance costs qualify as an "application fee or similar payment."

Kelly upheld Commerce's finding that they don't qualify (see 2301100054). The judge said that since the law specifies that "fees" and "deposits" can be offset, "it is reasonable to interpret the subsequent phrase 'or similar payment paid' as restricting offsets to payments of the same type -- direct payments to the agency providing the benefit." Kelly added that this was also reasonable because Commerce views a subsidy as distinct from measures taken to qualify for the subsidy.

CIT previously also remanded the agency's finding that the KAV program is de jure specific. In this program, municipalities must make public transport routes available for the laying and operation of power and gas pipelines by local network operators. Use of the routes is governed by a concession agreement between the operator and the municipality that sets the concession fee the operator must pay. The operators can pass these fees on to their customers, though the KAV program favors customers with electricity prices that are lower than the marginal price agreed to by the parties. These special customers are the only ones eligible to receive an exemption from the concession fee.

The law says that a subsidy is not specific where the program provides neutral, objective criteria governing its eligibility. CIT said that in this context, this means the subsidy must be economic in nature and horizontal in application to not be considered specific. On remand, Commerce held that this program was not economic in nature or horizontal in nature.

Kelly said the court "does not understand the basis for Commerce's conclusion" since the agency "fails to explain how the amount of electricity consumed or the electricity prices paid by companies are not economic in nature. If economic in nature relates to the consumption of goods and services, prices paid and resources consumed seem to fit the plain meaning of economic in nature."

The judge also did not buy Commerce's explanation for its horizontal application finding, ruling that the agency failed to explain how criteria based solely on electricity consumption and pricing is not horizontally applied. "It may be the case that there are a limited numbers of industries that consume large amounts of electricity, but such a fact would be relevant to the question of whether a subsidy was de facto specific, not whether it was specific as a matter of law," the opinion said.

(BGH Edelstahl Siegen v. United States, Slip Op. 23-71, CIT #21-00080, dated 05/09/23; Judge: Claire Kelly; Attorneys: Marc Montalbine of deKieffer & Horgan for plaintiff BGH Edelstahl Siegen GmbH; Sarah Kramer for defendant U.S. government; and Nicole Brunda of Cassidy Levy for defendant-intervenors led by Ellwood City Forge Co.)