South Korean Emissions Cap and Trade Program Provided No Benefit, Hyundai Argues at Trade Court

The Korean Emission Trading Scheme (KETS) provided no benefit to Hyundai Steel for the purposes of a countervailing duty review and, in fact, imposed costs, Hyundai said in its June 16 brief in support of a motion for judgment. Hyundai asked the court to remand the review to the Commerce Department, arguing the department's decision to countervail the KETS program was a "perversion of the CVD law" and ignored that the program benefits the South Korean government and operates to Hyundai Steel’s detriment (Hyundai Steel v. U.S., CIT # 22-00170).

South Korean companies that emit certain volumes of carbon dioxide are subjected to KETS and given permits capping the amount of carbon emissions they can produce. Instead of viewing the KETS program in its entirety and "reaching the obvious conclusion" it imposed burdens on Hyundai, Commerce instead "myopically focused" on the carve-out for trade intensive and high-production cost companies, which do not have 3% of their emissions permit allocation deducted, Hyundai said.

The KETS program is also not de jure specific because it does not expressly limit emissions permit allocations to specific enterprises or industries. KETS uses "objective criteria" related to trade intensity and production costs that could be met by any business or sector that qualifies, Hyundai said.

Commerce determined that the 3% of permits that South Korea did not deduct from Hyundai's permit allocation was a financial contribution because it constituted revenue forgone. Retaining the “ability to collect" the 3% allocation from Hyundai is not the same as the company owing the allocation to the South Korean government as an obligation or debt, which is required for the allocation to qualify as revenue forgone, Hyundai argued.

DOJ had argued that Commerce was not required to consider the burdens imposed by KETS because the department “is not required to consider the effect of the subsidy in determining whether a subsidy exists" (see 2305020052). Hyundai countered it was not in accordance with the statute for Commerce to selectively analyze benefit payments in isolation from an overarching program.