US Tells CAFC 'AK Steel' Decision Settles Whether Exporter Benefited From Port Usage Rights

The U.S. told the U.S. Court of Appeals for the Federal Circuit on April 5 that the Commerce Department properly countervailed the Port of Incheon program in South Korea. Filing a response to respondent Hyundai Steel Co., the government said that key Federal Circuit precedent -- AK Steel Corp. v. U.S. -- controls in this instance in that the agency wasn't required to consider Hyundai's construction costs in building the port (Hyundai Steel Co. v. U.S., Fed. Cir. # 24-1100).

Hyundai contracted with the South Korean government to build the Incheon North Harbor port. Part of the agreement said the company gets the right to collect from third-party users of the port as payment for constructing the port. Commerce said this arrangement amounted to a countervailable benefit -- a decision eventually sustained by the Court of International Trade (see 2308220031). The trade court said Hyundai's collection of berthing income from third parties represented forgone revenue for the Korean government, amounting to a benefit to the exporter.

Hyundai appealed, claiming that Commerce should consider the company's construction costs in analyzing whether a benefit was conferred.

In response, the U.S. pointed to AK Steel, in which the Federal Circuit said that exporter POSCO's exemptions from dockyard fees, which the Korean government would normally charge for the use of berths in the Kwangyang Bay Industrial Estate port facility, was a countervailable benefit and that the agency didn't need to consider POSCO's construction costs. As is the case here, Commerce in AK Steel said that a benefit was conferred by the exemption from fees and right to collect usage fees "regardless of whether the port was built by the government of Korea or the respondent company," the brief said.

The U.S. argued that Hyundai didn't attempt to distinguish AK Steel but merely said that "changes in both the law and Commerce's practice render" the decision "inapposite to the port usage rights program at issue in this case." In particular, the exporter said an additional definition, provided by the Uruguay Round Agreements Act, on what constitutes a benefit conferred was added to the law after AK Steel was decided.

The government said this added definition just "reflects the 'benefit-to-the-recipient' standard which long has been a fundamental basis for identifying and measuring subsidies under U.S. CVD practice." Commerce's obligation to find whether a benefit has been conferred "remains as it was prior to the URAA-era amendments to the statute and regulations and, thus, the rationale of AK Steel remains good law," the brief said.

The U.S. also said it only needed to find that a "benefit existed," and not that the benefit was "excessive" or that Hyundai achieved a "net profit" after looking at the "relative costs and benefits."

Hyundai cited in its brief a September 2023 CIT decision finding that Commerce needed to consider the company's construction costs for support. The government told the Federal Circuit to disregard this decision since it didn't "address or consider AK Steel, which is controlling precedent on this discrete issue of construction costs offsetting countervailing determinations. The case, therefore, is of little persuasive value. Moreover, we respectfully disagree with the decision in that case."