Just Because Germany's KAV Program Is Limited Doesn't Make It Specific, Trade Court Says

The Commerce Department again failed to establish that Germany's KAV program is de jure specific as part of the countervailing duty investigation on forged steel fluid end blocks from Germany, the Court of International Trade ruled in a Nov. 14 opinion. Judge Claire Kelly said that just because the subsidy program is limited, in this case to certain customers based on energy usage, doesn't mean that it is de jure specific. Commerce didn't explain how the program limits usage to certain industries or enterprises and failed to consider the program's economic and horizontal properties and application, the opinion said.

In the KAV program, German 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.

Commerce claimed, both in the investigation and now in two remand results, that this limitation means the program is de jure specific. As was the case after the first remand order, Kelly didn't buy it. In rejecting the claim, the judge explained the guidelines for establishing specificity. Citing the Statement of Administrative Action for the Uruguay Round Agreements Act (SAA), Kelly said that if "objective criteria are publicly and clearly set forth, and those criteria provide for automatic eligibility and are strictly followed, a subsidy awarded pursuant to those criteria is not specific as a matter of law."

Criteria rooted in the size or number of employees could lead to the exclusion of entire categories of industries, but that doesn't mean the program is de jure specific "because it is horizontal (operating throughout the economy), and is economic in nature," the opinion said. The KAV program limits itself based on energy usage to "special contract customers." However, "Commerce fails to explain how this limitation renders the program de jure specific," the opinion said. The agency must conclude that the criteria set is not objective, the judge said.

The agency acknowledged that the criteria in the program "are economic in nature and horizontal in application," Kelly noted. "Nowhere does Commerce explain why energy usage is not objective criteria in the same way the size of an enterprise or number of employees would be."

Commerce argued that where the implementing language of the program expressly limits access to a group that the legislation itself created, the subsidy is de jure specific. Kelly rejected this claim, finding that Commerce's implies that all industries "must be capable of taking advantage of a program for the program to be horizontal in application." This claim "runs counter to the example provided in the SAA indicating that a category based upon the size or number of employees would be horizontal."

(BGH Edelstahl Siegen GMBH v. United States, Slip Op. 23-159, CIT # 21-00080, dated 11/14/23; Judge: Claire Kelly; Attorneys: Marc Montalbine of deKieffer & Horgan for plaintiff BGH Edelstahl Siegen; Kelly Geddes for defendant U.S. government; Nicole Brunda of Cassidy Levy for defendant-intervenors led by Ellwood City Forge Co.)