Korean Steel Exporter Says New Ownership Extinguished Prior Government Subsidies in CV Case

A South Korean steel export company told the Court of International Trade that government intervention before and during its sale to new owners didn't constitute continuing government subsidies, saying the acquisition was still made at fair market value (KG Dongbu Steel v. U.S., CIT # 23-00055).

KB Dongbu Steel, a South Korean company whose exports include products made of corrosion-resistant steel, filed a brief Dec. 6 at CIT supporting its motion for judgment upon the agency record and pushing back against DOJ opposition.

Dongbu’s original complaint to CIT, filed in April, protested the Commerce Department’s fifth administrative review of the countervailing duty order on Korean corrosion-resistant steel products. In the review, Commerce found that Dongbu, a mandatory respondent, received a countervailing subsidy from the Korean government when it was rescued by four debt-to-equity conversions between 2015 and 2019 as part of a government financial restructuring program.

Dongbu continued to struggle after the conversions, and in 2019 it changed ownership. The final conversion occurred as part of that sale.

Dongbu’s new owners filed the April complaint arguing the subsidies had been erased when they acquired the company.

DOJ disagreed, saying the sale had not been made at fair market value, allowing the prior subsidies to “pass through.” It raised as evidence Commerce’s determination that Dongbu hadn't been sold in a way that maximized profit. Instead, it said, the sale was made by a government-controlled creditor’s council in order to “graduate Dongbu Steel from the debt restructuring program.”

The final debt-to-equity conversion, during which company shares were swapped by government creditors at a rate five times higher than they would be sold for to private purchasers, likewise constituted a government subsidy, DOJ said.

Fair market value analyses also require consideration of prevailing market conditions, Dongbu said. It argued that at the time of its sale, prevailing conditions, including the debt restructuring program itself, made profit maximization impossible. It said DOJ has no evidence Dongbu was sold for less than it was worth.

It added that concurrent government subsidies actually would have raised the company’s value and final purchase price, and that the final debt-to-equity conversion represented one such successful measure.

Dongbu’s other main argument has been that Commerce hadn't considered the debt-to-equity conversions to be subsidies in several prior administrative reviews, so it ignored established practice by retroactively doing so in more recent ones (see 2307210067).

Dongbu filed a similar case against Commerce concerning its fourth administrative review, the first to impose a CVD on Dongbu because of the conversions. CIT decided that case in July. In its opinion, it remanded the administrative review to Commerce, saying the agency didn't adequately explain its deviation from prior practice. Commerce more thoroughly explained its reasoning and admitted a mistake in a prior review, but upheld its determination (see 2310060006).