Maverick Tube Corp. v. United States

• Decision Date: 27 October 2017
• Docket Number: Court No. 15–00303,Slip Op. 17–146
• Citation: 273 F.Supp.3d 1293
• Parties: MAVERICK TUBE CORPORATION, Plaintiff, v. UNITED STATES, Defendant, and SeAH Steel Corporation, Defendant–Intervenor.
• Court: U.S. Court of International Trade

273 F.Supp.3d 1293

MAVERICK TUBE CORPORATION, Plaintiff,

v. UNITED STATES, Defendant,andSeAH Steel Corporation, Defendant–Intervenor.

Slip Op. 17–146

Court No. 15–00303

United States Court of International Trade.

Dated: October 27, 2017

Robert E. DeFrancesco and Brett A. Shumate, Wiley Rein, LLP, of Washington, DC, for plaintiff. With them on the brief were Alan H. Price, Tessa V. Capeloto, Adam M. Teslik.

Loren M. Preheim, Assistant Director, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, DC, for defendant. With him on the brief were Benjamin C. Mizer, Principal Deputy Assistant Attorney General, Jeanne E. Davidson, Director, Claudia Burke, Assistant Director, and Ryan M. Majerus, Trial Attorney. Of counsel on the brief was Khalil Gharbieh, Attorney, Office of the Chief Counsel for Trade Enforcement & Compliance, U.S. Department of Commerce, of Washington, DC.

Daniel E. Parga, Law Office of Jeffrey M. Winton PLLC, of Washington, DC, for defendant-intervenor. With him on the brief was Jeffrey M. Winton.

OPINION

Eaton, Judge:

Before the court is Maverick Tube Corporation's ("Maverick" or "plaintiff") motion for judgment on the agency record challenging the final determination of the United States Department of Commerce ("Commerce" or the "Department") in Welded Line Pipe From the Republic of Korea: Final Negative Countervailing Duty Determination , 80 Fed. Reg. 61,365 (Dep't Commerce Oct. 13, 2015), P.R. 457 and accompanying Issues and Decision Memorandum, P.R. 450 ("Final Determination").

Plaintiff objects to the Final Determination on three grounds, claiming that (1) Commerce acted contrary to law by concluding that the Government of the Republic of Korea's ("Korean Government") provision of electricity to defendant-intervenor SeAH Steel Corporation ("SeAH") did not benefit the company; (2) Commerce's conclusion that the Korean Government's provision of electricity did not benefit SeAH was unsupported by substantial evidence; and (3) Commerce's determination not to apply adverse facts available¹ ("AFA") to the Korean Government was unsupported by substantial evidence. Pl.'s Mem. Supp. Mot. J. Agency R., ECF No. 32 ("Pl.'s Br.") 3. Additionally, plaintiff asks the court to "remand the issue of specificity^{[2 ]} to the agency" because Commerce's failure to reach a final determination on specificity "was contingent on its unlawful and unreasonable finding of no benefit." Pl.'s Br. 4.

Defendant the United States (the "Government" or "defendant"), on behalf of Commerce, argues that Commerce's determination that the Korean Government's provision of electricity "provides no benefit to [respondent] SeAH ... because the prices charged to [SeAH] ... were consistent with [the Korea Electricity Power Corporation's ("KEPCO") ] standard pricing mechanism," is both in accordance with law and supported by substantial evidence. Final Determination at 18; see Def.'s Resp. Pl.'s Mot. J. Agency R., ECF No. 39 ("Def.'s Br.") 10. Specifically, defendant maintains that, under the regulatory framework, Commerce properly determined that KEPCO's electricity prices "were set in accordance with ... market principles" based on Commerce's "analysis of the [KEPCO's] price-setting philosophy [i.e. , standard pricing mechanism]." Def.'s Br. 10. In addition, the Government maintains that Commerce did not apply AFA lawfully because the Korean Government "was fully cooperative" by "respond[ing] to Commerce's multiple, detailed questionnaires. ..." Def.'s Br. 23. Defendant's papers do not address the issue of specificity. Because the Government argues that Commerce properly determined that a benefit was not conferred, however, the Government presumably believes the issue of specificity need not be addressed. This court has jurisdiction pursuant to 28 U.S.C. § 1581(c) (2012) ; 19 U.S.C. § 1516a (a)(1)(A).

Defendant–Intervenor SeAH states that defendant "has provided sufficient justification for denying Maverick's motion," and therefore, determined "it [was] not necessary ... to explain its own views of the issues ... or the reasons that Maverick's motion should be denied." Def.-Int.'s Resp. Pl.'s Mot. J. Agency R., ECF No. 40, 1.

Because the court finds that Commerce's Final Determination was supported by substantial evidence and in accordance with law, plaintiff's motion for judgment on the agency record is denied.

LEGAL FRAMEWORK

A countervailable subsidy exists where "an authority [i.e. a government or governmental actor] ... provides a financial contribution ... to a person and a benefit is thereby conferred." 19 U.S.C. § 1677(5)(B). When the financial contribution consists of a provision of goods or services, a benefit is found when "such goods or services are provided for less than adequate remuneration," with the adequacy of remuneration determined "in relation to prevailing market conditions for the good or service being provided ... in the country which is subject to the investigation or review." 19 U.S.C. § 1677(5)(E)(iv). Examples of prevailing market conditions include "price, quality, availability, marketability, transportation, and other conditions of purchase or sale." 19 U.S.C. § 1677(5)(E).

Importantly for plaintiff, § 1677(5)(E)(iv) reflects a change in definition of what amounts to a "benefit" following the passage of the Uruguay Round Agreements Act ("URAA").³ See Certain Softwood Lumber Prods. From Canada , 66 Fed. Reg. 43,186, 43,196 (Dep't Commerce Aug. 17, 2001) (preliminary affirmative countervailing duty determination). Prior to the URAA, a subsidy would have been found present when goods or services were provided "at preferential rates." 19 U.S.C. § 1677(5)(A)(ii)(II) (1988). Under the former preferentiality standard, "preferential" meant "more favorable treatment to some within the relevant jurisdiction than to others within that jurisdiction," but not that preferential treatment was necessarily "inconsistent with commercial considerations." Countervailing Duties , 54 Fed. Reg. 23,366, 23,372 (Dep't Commerce May 31, 1989) (notice of proposed rulemaking and request for public comments) ("1989 Proposed Rule")⁴ ; see also Final Negative Countervailing Duty Determinations; Certain Softwood Prods. From Canada , 48 Fed. Reg. 24,159, 24,167 (Dep't Commerce May 31, 1983).

Following the passage of the URAA and the adoption of the "adequate remuneration" language, Commerce concluded that it wished to "acquire some experience with the new statutory provision before codifying [its] methodology [for determining the adequacy of remuneration] in the form of a regulation." Countervailing Duties: Final Rule , 63 Fed. Reg. 65,348, 65,377 (Dep't Commerce Nov. 25, 1998) ("Preamble"). In 1997, Commerce sought guidance as to how to conform its regulations with the language of the URAA. See Countervailing Duties: Proposed Rule , 62 Fed. Reg. 8818 (Dep't Commerce Feb. 26, 1997) (notice of proposed rulemaking and request for public comments) ("1997 Proposed Rule"). In response to the 1997 request, Commerce received comments emphasizing the importance of basing the adequate remuneration benchmark on market prices that have not been distorted by a government's involvement in the market. Commerce also received comments regarding its stated intention to continue employing a preferentiality analysis when the government is the sole provider of goods or services (e.g. , for provisions of electricity, water, or natural gas).⁵ One commenter urged Commerce to codify a preferentiality-type analysis for such situations; others argued that this approach would not "adequately measure the differential between the price paid for the input and the full market value of the input." Preamble, 63 Fed. Reg. at 65,377.

Thereafter, based on its experience and the comments it received, Commerce noted that "[p]articular problems can arise in applying [the adequate remuneration] standard when the government is the sole supplier of the good or service in the country or within the area where the respondent is located." Steel Wire Rod From Trinidad and Tobago , 62 Fed. Reg. 55,003, 55,006 (Dep't Commerce Oct. 22, 1997) (final affirmative countervailing duty determination). Commerce reached this conclusion because, when the government is the sole supplier of the good or service, "there may be no alternative market prices available" to use as a benchmark against which to measure the supplier's price. Steel Wire Rod From Trinidad and Tobago , 62 Fed. Reg. at 55,006 ; see also Steel Wire Rod From Germany , 62 Fed. Reg. 54,990, 54,994 (Dep't Commerce Oct. 22, 1997) (final affirmative countervailing duty determination). Thus, when there is no market-based benchmark to compare the government price to, Commerce found that it was necessary to "examine other options" for determining whether the goods or services were provided for adequate remuneration. Steel Wire Rod From Germany , 62 Fed. Reg. at 54,994.

In early investigations under the new statute, Commerce's "other options" included an examination of such factors as "whether the government has followed a consistent rate making policy, whether it has covered its costs, whether it has earned a reasonable rate of return in setting its rates, and/or whether it applied market principles in determining its rates." Steel Wire Rod From Trinidad and Tobago , 62 Fed. Reg. at 55,007 ; see also Steel Wire Rod From Germany , 62 Fed. Reg. 54,994. Commerce made it clear, however, that such considerations "in no way indicate[d] a departure from [its] preference for relying on market conditions in the relevant country ...." Steel Wire Rod from Trinidad and Tobago , 62 Fed. Reg. at 55,007.

After gaining some further experience with the adequate remuneration standard, Commerce codified its methodology. See 19 C.F.R. § 351.511 (1999). To conform to the URAA, and its preference for market-based benchmark prices, Commerce adopted a three-tiered, hierarchical approach for determining the adequacy of remuneration of an...