CIT Says Commerce Failed to Conduct de Facto Analysis of Germany's KAV Program

The Court of International Trade last week remanded the Commerce Department's finding that Germany's Konzessionsabgabenverordnung (KAV) program, which exempts a fee for gas and power pipeline companies that sell electricity below a certain price point that would otherwise be passed onto consumers, wasn't a specific subsidy. Judge Claire Kelly sent the case back for the fourth time, finding that the agency must further investigate whether an alleged subsidy is de facto specific when facts give "reasons to believe" the subsidy may be de facto specific.

Commerce had said in its third remand results in the countervailing duty investigation on forged steel fluid end blocks from Germany that the KAV program wasn't de jure specific (see 2402130034). While it had prior to that ruled the subsidy is de jure specific since its limitations only make it accessible to a "group" of industries, the trade court disagreed since the agency hadn't proven the program was actually limited enough, nor had it considered its economic and horizontal properties.

After the latest remand, CVD petitioner Ellwood City Forge said the agency failed to look at whether the program is de facto specific. Kelly sided with Ellwood, noting that the applicable statute tells Commerce to conduct a de facto analysis when it has "reasons to believe the program is de facto specific." This language tells the agency to consider whether the actual recipients of the subsidy are limited in number, whether one industry is a predominant recipient, whether one industry obtains disproportionate benefits from the subsidy and whether the administration of the program favors a given industry.

The court said it's "unclear from the record whether the program is sufficiently limited to establish a finding of specificity," though it's enough to "create a reason to believe the program is de facto specific warranting further investigation." While further evidence may lead to a finding that the KAV program isn't specific, it's unclear why the KAV program provisions alone didn't give Commerce a reason to believe it may be specific as a matter of fact "in the absence of such evidence."

The U.S. said the record didn't have enough evidence to conduct the analysis and that trying to get the evidence would likely have been "futile" since Germany doesn't collect evidence on the KAV program.

Kelly said this "finding that the program is not de facto specific does not appear to be a finding at all, but a decision to abandon a de facto specificity analysis in light of its conclusion regarding de jure specificity." In addition, while the government blamed Ellwood for not gathering evidence, the petitioner "need not establish the existence of de facto specificity at this stage, but only reasons to believe that the program is de facto specific."

The respondent, BGH Edelstahl, said that a de facto specificity finding requires more than a provision limiting the users of a program and that it needs evidence of actual use. The court said it's "unclear" why the lack of this information on the record "rebuts the reasons to believe the KAV Program is de facto specific created by the terms of the program itself, at least without further investigation. Commerce has tools to confront instances where information is missing from the record."

(BGH Edelstahl Siegen GmbH v. United States, Slip Op. 24-60, CIT # 21-00080, dated 05/22/24; Judge: Claire Kelly; Attorneys: Marc Montalbine of deKieffer & Horgan for plaintiff BGH Edelstahl Siegen GmbH; Kelly Geddes for defendant U.S. government; and Thomas Beline of Cassidy Levy for defendant-intervenors led by Ellwood City Forge)