Hyundai Says It Didn't Benefit From Port Usage Rights, Challenges CVD Rate at CAFC

The South Korean government's provision of port usage rights to exporter Hyundai Steel Co. is not a countervailable benefit since it is the repayment of a debt, Hyundai told the U.S. Court of Appeals for the Federal Circuit in a Dec. 29 opening brief. Because the port usage rights allowed Hyundai to "recoup its costs" from building the Incheon North Harbor port, the rights did not provide a "gift-like transfer of funds that provided an advantage or profit to Hyundai Steel," the brief said (Hyundai Steel Co. v. U.S., Fed. Cir. # 24-1100).

In addition, Commerce's treatment of the port usage rights ignored its past practice of finding that the provision of port usage rights in South Korea may be countervailable only if the resulting benefit were "excessive," the brief said. The agency has applied this practice across various Korean countervailing duty cases but failed to do so in the 2018 CVD review of hot-rolled steel flat products from South Korea -- the proceeding at issue here.

The South Korean government contracted with Hyundai Steel to build the Incheon North Harbor port, stipulating that the company gets the right to collect from third-party users of the port as payment for constructing the port. The Court of International Trade initially remanded Commerce's countervailability finding on the port usage rights due to the agency's failure to review the nonpayment of port usage fees "in terms of adequacy of remuneration" (see 2302100052).

Commerce returned to the court and said an LTAR analysis was not needed but a revenue foregone analysis was (see 2304100033). The trade court sustained that explanation, finding that the non-payment of the port usage fees did not involve a provision of a good or service but a type of contribution from forgone revenue due to Hyundai's right to collect fees from third parties (see 2308220031).

At the Federal Circuit, Hyundai said that Commerce erroneously refused to consider Hyundai Steel's costs incurred in building the port, "ownership of which was reverted to the" Korean government. The CVD statute clearly says that a countervailable benefit normally requires "well, a 'benefit to the recipient,'" the brief claimed. Citing the dictionary, the exporter said a benefit is an "advantage, profit, good," meaning if there is no advantage, profit or good issued to the respondent from the foreign government, there's no countervailable benefit.

It was only by looking at the program "in isolation, and disregarding the undisputed fact that the port usage rights were being provided to reimburse Hyundai Steel for construction costs, that Commerce was able to find that this program provides a countervailable benefit," the brief said.

In support for ignoring the context in which the rights were provided, Commerce cited 19 U.S.C. § 1677(5)(C), which says it is not required to consider the effect of the subsidy in finding if one exists, along with one of its regulations, which says the agency need not consider the effect of the government action on a company's performance. "This is a red herring," Hyundai Steel claimed, because the company said it didn't make any argument that Commerce is required to consider the effect of the port rights on the company.

Hyundai Steel also railed against Commerce's reliance on a 1999 CAFC decision to back its finding. The opinion, AK Steel Corp. v. U.S., concerned Korean exporter POSCO's construction of various port berths and the company's exemption from dockyard fees that other companies using the port were required to pay. Commerce said POSCO received a countervailable benefit from the fee exemptions.

Hyundai Steel said while the case appears similar, changes to the statute and Commerce's practice shows that it is irrelevant. AK Steel was decided before the Uruguay Round Agreements Act, which amended the CVD statute by creating a statutory definition of "benefit conferred," the exporter noted. Applying this definition now leads to the conclusion that Hyundai Steel did not receive a countervailable benefit, the brief said.