No Changes on Remand in Corrosion-Resistant Steel Goods From South Korea CVD Case

The Commerce Department made no changes to the final results of the 2019 administrative review of the countervailing duty order on corrosion-resistant steel goods from South Korea, in its Oct. 5 remand results. Commerce said that, in accordance with the court's July remand order (see 2307100028), it further explained its decision-making process for finding that three debt-to-equity restructurings provided a countervailable benefit, that a benefit passed to the new ownership, and that the uncreditworthy benchmark rate and unequityworthy discount rate were correctly calculated and applied (KG Dongbu Steel Co. v. U.S., CIT # 22-00047).

Commerce said that it continued to find that KG Dongbu Steel was not equityworthy at the time of its first, second and third debt-to equity conversions, and that the equity infusions were "inconsistent with usual investment practice" and conferred a countervailable benefit.

The agency admitted a mistake in the prior review, which was only realized when it reevaluated the benefit conferred. The mistake necessitated a reappraisal of the total benefit conferred under the four debt-to-equity infusions in order to calculate a single subsidy rate for the program, Commerce said. During that reevaluation, Commerce said it realized that its previous finding of no conferred benefit was inconsistent with its statutory duty because all of KG Dongbu Steel's creditor banks, including the private banks, "were obligated to participate in the debt restructuring." That obligation provided the Chinese government-owned and -controlled banks with the ability to establish the financial terms of the restructurings.

Commerce said that it further explained its determination that a countervailable subsidy was conferred to KG Dongbu Steel through the first to third debt-to-equity restructurings, and that its departure from its earlier determination was consistent with department practice. "It would be inconsistent for Commerce to find on the one hand that the GOK-controlled policy banks have significant influence over the loan portion of the debt restructuring, and on the other hand that the same banks did not have such influence over the debt-to-equity portion of the debt restructuring."

Commerce also continued to find that countervailable subsidies “passed through” to KG Dongbu Steel after ownership of the company changed. Commerce explained that its baseline presumption is that non-recurring subsidies can benefit the recipient over a period of time. That presumption can be rebutted, but KG Dongbu Steel "explicitly declined" to do so in its questionnaire responses. Without a response to the Change-in-Ownership Appendix, Commerce said it followed its practice "to presume that any benefit to the company will also pass through as a benefit to the new owners."

On the benchmark rate issue, Commerce explained that the statute includes an exception for uncreditworthy firms and directs Commerce to use a discount rate. Because there were no usable six-year loans available on the record, the department said it correctly continued to use three years for the term of the loan variable and the three-year creditworthy default and uncreditworthy default rates.

Commerce again cited KG Dongbu Steel’s debt having been overseen by Chinese government-controlled banks through the Creditor Bank Committee, saying that the loans issued couldn't have been construed as commercial loans or used as a commercial benchmark. It further explained that it relied on the only long-term rate available on the record, the long-term interest rate used by the Bank of Korea.

Finally, Commerce said that because it continued to use the uncreditworthy benchmark rate calculated using three-year corporate bonds, it also would continue to find that the use of the same discount rate, calculated using three-year corporate bonds, is appropriate for the allocation of the benefit conferred by the equity infusions. The agency cited its regulations dictating that benefits conferred by an equity infusion must be allocated over the same period as a non-recurring subsidy.