Nucor Corp. v. United States

• Decision Date: 21 June 2019
• Docket Number: 2018-1787
• Citation: 927 F.3d 1243
• Parties: NUCOR CORPORATION, Plaintiff-Appellant Arcelormittal USA LLC, AK Steel Corporation, United States Steel Corporation, Plaintiffs v. UNITED STATES, Government of Korea, Defendants-Appellees Dongkuk Steel Mill Co., Ltd., Defendant
• Court: U.S. Court of Appeals — Federal Circuit

927 F.3d 1243

NUCOR CORPORATION, Plaintiff-AppellantArcelormittal USA LLC, AK Steel Corporation, United States Steel Corporation, Plaintiffs

v. UNITED STATES, Government of Korea, Defendants-AppelleesDongkuk Steel Mill Co., Ltd., Defendant

2018-1787

United States Court of Appeals, Federal Circuit.

Decided: June 21, 2019

Robert E. Defrancesco, III, Wiley Rein, LLP, Washington, DC, argued for plaintiff-appellant. Also represented by Timothy C. Brightbill, Tessa V. Capeloto, Laura El-Sabaawi, Alan H. Price, Adam Milan Teslik, Maureen E. Thorson, Christopher B. Weld.

Loren Misha Preheim, Commercial Litigation Branch, Civil Division, Department of Justice, Washington, DC, argued for defendant-appellee United States. Also represented by Elizabeth Anne Speck, Claudia Burke, Jeanne Davidson; Catherine D. Miller, Office of Chief Counsel for Trade Enforcement and Compliance, Department of Commerce; Chad A. Readler, Civil Division, U.S. Department of Justice.

Jeffrey M. Winton, Law Office of Jeffrey M. Winton PLLC, Washington, DC, argued for defendant-appellee Government of Korea. Also represented by Youngjae Kim, Economic Section, Embassy of the Republic of Korea.

Before Lourie, Reyna, and Taranto, Circuit Judges.

Opinion dissenting filed by Circuit Judge Reyna.

Taranto, Circuit Judge.

In 2016, the U.S. Department of Commerce issued its final determination in its investigation into whether the Government of Korea had provided, to Korean producers and exporters of certain corrosion-resistant steel products (CORE), subsidies warranting imposition of countervailing duties on the products when imported into the United States. Nucor Corporation and other U.S. producers of CORE, which had requested the investigation, alleged that the Korean government, during the period of investigation (Jan. 1, 2014–Dec. 31, 2014), had provided subsidies to Korean CORE producers through its sale of electricity to them. Commerce found no such electricity-sale subsidy, while finding some other subsidies. The Court of International Trade affirmed Commerce’s finding as to electricity sales. Nucor Corp. v. United States , 286 F. Supp. 3d 1364 (Ct. Int’l Trade 2018). In this appeal by Nucor, we reject a broad legal position advanced by Commerce in defending its decision, but we find no reversible error in the Commerce decision. We therefore affirm.

I

In June 2015, acting on petitions from Nucor and other U.S. producers of CORE, Commerce initiated a countervailing-duty investigation under 19 U.S.C. § 1671 et seq. into certain CORE products from Korea. See Certain Corrosion-Resistant Steel Products from the People’s Republic of China, India, Italy, the Republic of Korea, and Taiwan , 80 Fed. Reg. 37,223 (Dep’t of Commerce June 30, 2015) (Initiation Decision ).¹ In November 2015, Commerce issued a Preliminary Affirmative Determination supporting de minimis or small subsidy rates, Countervailing Duty Investigation of Certain Corrosion-Resistant Steel Products From the Republic of Korea: Preliminary Affirmative Determination , 80 Fed. Reg. 68,842 (Dep’t of Commerce Nov. 6, 2015), based on the analysis set forth in its Decision Memorandum for the Preliminary Affirmative Determination, J.A. 8889-917 (Preliminary Determination Memo ). Commerce issued its final determination in June 2016, continuing to assign de minimis or small subsidy rates. Countervailing Duty Investigation of Certain Corrosion-Resistant Steel Products from the Republic of Korea , 81 Fed. Reg. 35,310 (Dep’t of Commerce June 2, 2016) ( Final Determination ). The Final Determination relies for its reasoning on Commerce’s Issues and Decision Memorandum for the Final Determination, J.A. 9006-45 (Final Determination Memo ).

Under the statutes governing Commerce’s investigation, Congress is to impose a countervailing duty on merchandise imported into the United States if "a government is providing, directly or indirectly, a countervailable subsidy with respect to the manufacture, production, or export of that merchandise." Delverde, SrL v. United States , 202 F.3d 1360, 1365 (Fed. Cir. 2000) ; see 19 U.S.C. § 1671(a)(1). The key statutory language for present purposes is language that originated in the Uruguay Round Agreements Act [URAA], Pub. L. No. 103-465, 108 Stat. 4809 (1994). The relevant provisions declare: first , one form of "countervailable subsidy" exists when a government "authority" sells "goods or services" on terms such that "a benefit is thereby conferred"; second , a "benefit shall normally be treated as conferred" when the goods or services sold "are provided for less than adequate remuneration"; and third , "the adequacy of remuneration shall be determined in relation to prevailing market conditions for the good or service being provided ... in the country which is subject to the investigation," with "[p]revailing market conditions include[ing] price, quality, availability, marketability, transportation, and other conditions of purchase or sale." 19 U.S.C. § 1677(5)(A)–(B), (D)–(E) ; see Delverde , 202 F.3d at 1365–66.²

Commerce addressed several issues in the proceeding. The issue in dispute here involves Nucor’s assertion that an authority of the Korean government was selling electricity to Korean CORE producers for "less than adequate remuneration," the standard of 19 U.S.C. § 1677(5)(E)(iv). Commerce rejected that contention.

Commerce focused on the Korea Electric Power Corporation (KEPCO) as the seller of electricity to users in Korea, including the CORE producers at issue. Commerce found that KEPCO is an "authority" of the Government of Korea, citing the Korean government’s ownership of and control over KEPCO and the Korean government’s regulation and approval of KEPCO’s prices. Preliminary Determination Memo , J.A. 8906-07. Commerce also found that KEPCO is "the primary utility company in Korea providing electricity to Korean consumers" and that only "a minimal amount of electricity is supplied directly to consumers on a localized basis by independent power producers." J.A. 8907.

In determining whether KEPCO sold electricity to the Korean CORE producers for "less than adequate remuneration," Commerce applied a regulation, 19 C.F.R. § 351.511, that it had adopted in 1998 to guide application of that statutory standard. See Countervailing Duties , 63 Fed. Reg. 65,348 (Nov. 25, 1998) (final rule). The regulation states that "where goods or services are provided, a benefit exists to the extent that such goods or services are provided for less than adequate remuneration." 19 C.F.R. § 351.511(a)(1) (citing 19 U.S.C. § 1677(5)(E)(iv) ). It then sets forth three methods of answering the question, in order of preferred approach, under the heading " ‘Adequate Remuneration’ defined." Id. § 351.511(a)(2).

The first two methods call for inquiry into how the sale prices at issue compare to either of two "market" prices: either (i) a "market-determined price" based on actual transactions in the country or (ii) a "world market price" that would be available to the purchasers in the country. Id. , § 351.511(a)(2)(i)–(ii).³ Commerce found that neither of those potential bases of comparison was available here—the first, which looks for competitive -market prices, because KEPCO’s dominant market role means that "prices within the country are distorted and cannot be used for benchmark purposes," J.A. 8907; the second because "there is no cross-border transmission or distribution of electricity in Korea," J.A. 8908. The absence of the two regulatory market-price bases for comparison is not disputed in this court.

Commerce therefore turned to the regulation’s residual provision, which applies when the specified market prices are not available for comparison and which requires assessment of "whether the government price is consistent with market principles ." 19 C.F.R. § 351.511(a)(2)(iii) (emphasis added).⁴ Both in the Preliminary Determination Memo and in the Final Determination Memo , Commerce found that KEPCO’s prices to the Korean CORE producers met that standard. J.A. 8908-10,9023-31. In particular, in the Final Determination Memo , Commerce found that KEPCO uses a tariff schedule and that the CORE producers paid prices consistent with that tariff schedule, so they were not the beneficiaries of preferential price treatment. J.A. 9023–25. Significantly, Commerce then also addressed KEPCO’s costs, concluding that Nucor had "failed to adequately support a claim that KEPCO’s costs of electricity used in developing its tariff schedule do not fully reflect its actual costs of the electricity that it transmits and distributes to its customers in Korea." J.A. 9028. Commerce found that "KEPCO’s standard pricing mechanism used to develop its tariff schedule was based upon its costs." Id. It elaborated:

To develop the electricity tariff schedules that were applicable during the [period of investigation], KEPCO first calculated its overall cost, including an amount for investment return. This cost includes the operational cost for generating and supplying electricity to the consumers as well as taxes. The cost for each electricity classification was calculated by (1) distributing the overall cost according to the stages of providing electricity (generation, transmission, distribution, and sales); (2) dividing each cost into fixed cost, variable cost, and the consumer management fee; and (3) then calculating the cost by applying the electricity load level, peak level, and the patterns of consuming electricity. Each cost was then distributed into the fixed charge and the variable charge. KEPCO then divided each cost taking into consideration the electricity load level, the usage pattern of electricity, and the volume of the electricity consumed. Costs were then distributed according to the number of consumers for each classification of electricity. For the [period of investigation], KEPCO more than fully covered its cost for the industry tariff applicable to [the Korean producer] respondents.

Id. (...