Hyundai Says Commerce Failed to Show Recipients of Korean Cap-and-Trade Program Limited in Number

South Korean exporter Hyundai Steel Co. opposed the Commerce Department's finding on remand that the Korean government's full allocation of carbon emission permits under the Korean Emissions Trading System (K-ETS) during the 2019 review of the countervailing duty order on hot-rolled steel flat products from South Korea was de facto specific. On remand, Commerce switched from a de jure to a de facto specificity finding (Hyundai Steel Co. v. United States, CIT # 22-00170).

Hyundai argued that Commerce improperly defended its de facto analysis by finding that the program was limited since only 504 companies received the full allocation of permits and there were 787,438 companies operating within South Korea during the review period. The exporter dubbed this rationale an "apples-to-oranges" comparison, claiming that it's "meaningless to compare the number of companies that receive the 100 percent permit allocation with all companies in Korea."

K-ETS is a program that caps the amount of greenhouse gas emissions large corporate emitters are allowed to release for a compliance year. The Korean government uses baseline emissions data to set a company's maximum allotment. Each company receives 97% of their allotment, though certain subsectors that meet trade intensity or production cost requirements get the full 100% of their permits.

CIT sent back Commerce's finding that the program is de jure specific on the grounds that the agency hadn't explained why the "international trade intensity" or "production cost" criteria underlying the 3% allotments establish specificity (see 2405020073). After the agency stuck by its de jure specificity conclusion and the court again rejected it, Commerce flipped to a de facto specificity finding based on the number of companies that received the full allocation (see 2407310039).

Hyundai argued that comparing the number of companies that get the full allocation with all the companies in Korea is "irrelevant to whether the recipients of the additional allocations are limited in number." Only companies that are large emitters are subject to K-ETS, meaning the only relevant comparison should be companies that receive the full allocation vs. companies that get the 97% allocation, the brief said.

The exporter said Commerce's reference to the Statement of Administrative Action, which says the purpose of the specificity test is to be an initial screen to winnow only those foreign subsidies that are truly broadly available and widely used throughout an economy, doesn't render the "apples-to-oranges comparison reasonable or consistent with the statute." Hyundai noted that the SAA says that the specificity test was meant as a "rule of reason and to avoid the imposition of countervailing duties in situations where, because the widespread availability and use of a subsidy, the benefit of the subsidy is spread throughout an economy.'"

Thus, to be de facto specific under the statute and the SAA, the subsidy must be "limited in number," the brief said.

Hyundai said, contrary to Commerce's characterization of its claims, it's not arguing that Commerce must explain why the K-ETS is allegedly limited in number. The company said the agency's analysis is faulty since it doesn't show that the "actual recipients of the subsidy are limited in number."