US, Turkish Exporter Defend Decision Not to Attribute Scrap Metal Maker's Subsidies to Exporter

The U.S. and exporter Kaptan Demir told the U.S. Court of Appeals for the Federal Circuit that the Commerce Department "is afforded substantial deference in interpreting" whether an input is "primarily dedicated" to the production of its downstream product for purposes of assigning subsidies given to the input supplier to the downstream product maker (Kaptan Demir Celik Endustrisi ve Ticaret v. United States, Fed. Cir. # 24-1431).

The government noted that neither Commerce's regulations nor the preamble to the countervailing duty statute define "primarily dedicated" or provide the agency with "specific criteria" for the agency to rely on in finding whether an affiliate is a cross-owned input supplier. As a result, Commerce laid out a non-exhaustive list of five factors to guide its analysis.

The U.S. said Commerce gets "tremendous deference" when it "exercises its technical expertise to select and apply methodologies to implement the dictates of the trade statute." In the present case, the agency was tasked with finding whether subsidies given to shipbuilding company Nur Gemicilik ve Tic, an affiliate of Kaptan Demir's, should be attributed to Kaptan, since Nur supplied the exporter with scrap metal.

On remand at the Court of International Trade, Commerce said Nur isn't Kaptan's cross-owned input supplier, refusing to attribute Nur's subsidies to Kaptan (see 2311270059). CVD petitioner Rebar Trade Action Coalition appealed, claiming that it "matters little whether a supplying affiliate's business activities focused on generating a particular input, where those activities nonetheless generate the input, and the respondent uses the input to produce the subject merchandise, as was the case here" (see 2404030035).

In response, the government and Kaptan defended Commerce's approach to the question and its ultimate conclusion. The U.S. said that while some of the factors in the analysis bend toward the petitioner's argument, Commerce reasonably said Nur's steel scrap is not primarily dedicated to the production of Kaptan's downstream product such that the point of Nur's subsidies is to benefit both Nur's input production and Kaptan's manufacturing.

Unprocessed scrap is a "common" input used in a variety of industries instead of existing as just a "link in the overall production chain," the government said. The U.S. added that Commerce also "lawfully considered Nur’s overall business activity as a shipbuilder, determining, based on record evidence, that Nur’s shipbuilding business was far removed from Kaptan’s production of downstream steel product, and that the nature of the transactions between Nur and Kaptan were extremely limited."

In its brief, the government noted the challenges the petitioner didn't raise. Notably, the coalition didn't challenge "the regulation itself" nor Commerce's list of factors to consider, "except with regard to whether Commerce can lawfully consider an input supplier's business activities." The petitioner also didn't challenge "Commerce's weighing of the various factors" and instead claims that Commerce's decision on the "common input" factor is "inadequately explained and supported."

Kaptan added that the petitioner made "fundamental errors in addressing Commerce's treatment of Nur's steel scrap." The coalition argued that steel scrap isn't just a "common input" but rather only used for "steelmaking." The exporter said that this "simplicity" was "rightly rejected by both Commerce in its remand and by the Trial Court." Steel products aren't always made from scrap, making scrap more like plastic, which "sometimes can and sometimes cannot be a primarily dedicated input based on the totality of the circumstances and the specifics of a given case."