On Remand, Commerce Again Finds Korean Cap-and-Trade Program de Jure Specific to Exporter

The Commerce Department on April 16 once again found, on remand, that the South Korean government’s cap-and-trade carbon emissions program was de jure specific to one of the program’s users, a steel exporter (Hyundai Steel Co. v. U.S., CIT #22-00029).

In the new final results of an administrative review of a countervailing duty order on cut-to-length carbon-quality steel plate from South Korea, the department again said that the program is specific to exporter Hyundai Steel because it, as part of an industry that meets certain government requirements, received 100% of its carbon emissions allotment instead of 97%.

The Court of International Trade remanded Commerce’s initial results because it found the department hadn’t responded properly to the exporter’s arguments regarding the program’s specificity (see 2312190051). Hyundai argues that the program is not a subsidy because the Korean government does not forgo revenue under it. It’s uncertain, the exporter said, whether companies that need more emissions allotments will purchase them from other program users or the government.

Commerce said that it still finds that the Korean government’s provision of an additional 3% of emissions allotments to companies in certain industry sectors is de jure specific to Hyundai.

To prove it isn’t de jure specific, a program has to fulfill three criteria, the department said: Eligibility for it must be automatic, the eligibility conditions must be both objective and “strictly followed” and, finally, those conditions must be “clearly set forth” in the relevant regulations “so as to be capable of verification.” But, Commerce said, not all large businesses could qualify for the additional 3% allocation. Rather, only businesses in 37 industry subsectors found by the Korean government to sell at a certain international trade intensity could be eligible, while those in another 26 could not, it said.

These criteria “inherently favor certain industrial subsectors, including those covering primary steel producers like Hyundai Steel, over other subsectors,” it said. It said that the 37 industries whose businesses can receive full program benefits are generally similar: industries for manufacture of iron and steel, semiconductors, basic chemicals and aircraft, as well as “a variety of other internationally-oriented manufacturing subsectors.” On the other hand, the remaining 26 industries cover everything from electricity and computer programming to hospital activities and insurance, it said.

Even the Korean government itself admits it singles out certain industries for a reason, the department said. It said that in one official document, the Korean government said that the extra allocation was needed because, in the international market, “companies that are subject to this or similar carbon emission programs are disadvantaged from [a] market competition perspective, and equal opportunity to compete in the market becomes broken.”

Truly objective criteria, Commerce said, would “apply to subsectors across an economy.”