Posco v. United States

• Decision Date: 15 October 2020
• Docket Number: 2019-1213
• Citation: 977 F.3d 1369
• Parties: POSCO, Plaintiff v. UNITED STATES, Defendant Steel Dynamics, Inc., AK Steel Corporation, ArcelorMittal USA LLC, United States Steel Corporation, Intervenor-Defendants Nucor Corporation, Intervenor-Defendant-Appellant Nucor Corporation, Plaintiff-Appellant AK Steel Corporation, ArcelorMittal USA LLC, United States Steel Corporation, Intervenor-Plaintiffs v. United States, Defendant-Appellee Hyundai Steel Company, POSCO, Government of Korea, Intervenor-Defendants
• Court: U.S. Court of Appeals — Federal Circuit

977 F.3d 1369

POSCO, Plaintiff

v.UNITED STATES, Defendant

Steel Dynamics, Inc., AK Steel Corporation, ArcelorMittal USA LLC, United States Steel Corporation, Intervenor-Defendants

Nucor Corporation, Intervenor-Defendant-Appellant

Nucor Corporation, Plaintiff-Appellant

AK Steel Corporation, ArcelorMittal USA LLC, United States Steel Corporation, Intervenor-Plaintiffs

v.United States, Defendant-Appellee Hyundai Steel Company, POSCO, Government of Korea, Intervenor-Defendants

2019-1213

United States Court of Appeals, Federal Circuit.

Decided: October 15, 2020

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

Kelly A. Krystyniak, Commercial Litigation Branch, Civil Division, United States Department of Justice, Washington, DC, argued for defendant-appellee. Also represented by Jeffrey B. Clark, Jeanne Davidson, Patricia M. McCarthy ; Emma T. Hunter, Office of the Chief Counsel for Trade Enforcement & Compliance, United States Department of Commerce, Washington, DC.

Before Reyna, Taranto, and Stoll, Circuit Judges.

Reyna, Circuit Judge.

This appeal comes to us from the U.S. Court of International Trade. The Trade Court affirmed the U.S. Department of Commerce's final affirmative determination in the countervailing duty investigation on certain cold-rolled steel flat products from the Republic of Korea. Plaintiff-Appellant Nucor Corporation challenges Commerce's final determination, raising two issues: first, whether Commerce's reliance on a preferential-rate standard to determine whether a conferred benefit is a countervailable subsidy is contrary to law and, second, whether Commerce's determination that the Government of Korea did not confer a benefit to Korean producers of cold-rolled steel flat products for less than adequate remuneration is contrary to law and unsupported by substantial evidence. We conclude that Commerce's final determination is contrary to law and unsupported by substantial evidence. We vacate and remand.

BACKGROUND

A. Countervailable Subsidies

Foreign governments subsidize their domestic industries when they provide financial assistance for the production, manufacture, or exportation of goods. 19 U.S.C. § 1677(5)(B). Generally, goods that have been provided countervailable subsidies are assessed countervailing duties upon their entry into the U.S. Customs territory. 19 U.S.C. § 1671(a). A subsidy becomes countervailable when an "authority," or the government of a country or any public entity within the territory of the country, provides a financial contribution in the form of goods or services that results in a "benefit" conferred to the recipient. See § 1677(5)(B). The U.S. trade statute provides that a "benefit shall normally be treated as conferred" when those goods or services "are provided for less than adequate remuneration ." § 1677(5)(E)(iv) (emphasis added). The statute provides that Commerce determines the "less than adequate remuneration" question by evaluating "prevailing market conditions for the good or service being provided" in the country that is subject to the investigation. § 1677(5)(E). Prevailing market conditions include "price, quality, availability, marketability, transportation, and other conditions of purchase or sale." Id.

When Congress enacted the Uruguay Round Agreements Act ("URAA") in 1994, it changed the definition of what constitutes a benefit conferred. Pub. L. No. 103-465, § 101, 108 Stat. 4809, 4814 (codified as 19 U.S.C. § 3511 ). Prior to the enactment of the URAA, the statute provided that an authority conferred a benefit when it provided a good or service at a "preferential rate." § 1677(5)(A)(ii)(II) (1988). "Preferential rate" means "more favorable to some within the relevant jurisdiction than to others within that jurisdiction."¹ As a result of the Uruguay Round negotiations and subsequent enactment of the URAA, Congress amended the statute and changed the standard for determining whether a benefit is conferred by expressly replacing "preferential rate" with "less than adequate remuneration." See § 1677(5)(E)(iv). Specifically, the amended statute provides that "a benefit shall normally be treated as conferred" where in the case of goods or services, such services (here, electricity) "are provided for less than adequate remuneration." Id. (emphasis added).

After enactment of the URAA, Commerce sought to develop a methodology for determining "adequacy of remuneration."² Commerce noted "[p]articular problems ... 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."³ Commerce found that these problems arise because "there may be no alternative market prices available" to use as a benchmark in its analysis. Steel Wire Rod from Trinidad and Tobago , 62 Fed. Reg. at 55,006. To address these problems, Commerce developed a three-tier methodology to evaluate adequacy of remuneration. 19 C.F.R. § 351.511. In Tier 1, Commerce compares the government price to a market-based price for the good or service under investigation in the country in question (a "Tier 1" analysis). § 351.511(a)(2)(i). When an in-country, market-based price is unavailable, Commerce will compare the government price to a world-market price if the world-market price is available to purchasers in the country in question (a "Tier 2" analysis). § 351.511(a)(2)(ii). When both an in-country, market-based price and a world-market price are unavailable, Commerce considers "whether the government price is consistent with market principles" (a "Tier 3" analysis). § 351.511(a)(2)(iii). Under a Tier 3 analysis, if Commerce determines that government pricing is not consistent with market principles, then "a benefit shall normally be treated as conferred." 19 U.S.C. § 1677(5)(E)(iv). Only Tier 3 is at issue in this appeal.

B. The Investigation

On July 28, 2015, Commerce received requests for initiation of countervailing duty ("CVD") investigations on imports of certain cold-rolled steel flat products ("cold-rolled steel" or "CRS") from several countries including the Republic of Korea ("Korea"). See J.A. 1269. Countervailing duty petitions were filed on behalf of AK Steel Corporation, ArcelorMittal USA EEC, Nucor Corporation, Steel Dynamics, Inc., and United States Steel Corporation (collectively, "Petitioners"). See id. Petitioners alleged that the Government of Korea provided countervailable subsidies to Korean producers of CRS, and that imports of CRS from Korea were materially injuring, or threatening material injury to, an industry in the United States.⁴ J.A. 1269. Petitioners alleged, inter alia, that the Korean government conferred a specific benefit on Korean CRS producers through the provision of a good or service—electricity—for less than adequate remuneration. J.A. 353–76.

In August 2015, Commerce initiated a CVD investigation on CRS from Korea. See J.A. 1269-1274; see also J.A. 109, J.A. 346-376. The period of investigation encompassed January 1 to December 31, 2014. J.A. 1269. Commerce selected POSCO and Hyundai Steel Co., Ltd., as mandatory "respondents" for the investigation. J.A. 13034. Commerce issued questionnaires requesting that the Korean government provide information about the Korean electricity industry and market, including the Korea Electric Power Corporation ("KEPCO"), which is a state-owned entity and the sole provider of electricity in Korea. J.A. 13075, J.A. 1293, J.A. 12769.

In its questionnaire responses, the Korean government explained that electricity is generated by "[i]ndependent power generators, community energy systems, and KEPCO's six subsidiaries." See J.A. 18. The Korean government further explained that all electricity generated in Korea, including that of private generators, must be sold to KEPCO in a wholesale market known as the Korea Power Exchange ("KPX"), which is wholly owned by KEPCO and its six subsidiaries. J.A. 1300, J.A. 3137. KEPCO then sells electricity to end users based on a tariff schedule that provides different rates for classes of consumers including industrial, residential, agricultural, and business users. J.A. 4437-4449. The Korean government noted that the prices in KEPCO's tariff schedule are established in consultation with other Korean-government agencies, through a "lengthy deliberative process" that seeks the approval of the Ministry of Trade, Industry, and Energy, the Ministry of Strategy and Finance, and the Korea Energy Regulatory Commission. J.A. 1296, J.A. 3111. While KEPCO and other government entities establish the ultimate prices to end users, the basis of these prices is the cost of KEPCO's purchases from the KPX. J.A. 13083. The Korean government reported in its questionnaire response that KPX is a wholly owned subsidiary of KEPCO and that all sales of electricity in Korea are administered by KPX. See J.A. 18 n.17 (citing the Korean government's questionnaire response, Ex. E-3 at 31); see also J.A. 3111 (Ex. E-3, KEPCO Form 20-F, explaining that KEPCO "wholly own[s]" KPX).

In its preliminary determination, Commerce found that KEPCO, through its six subsidiaries, generates the "substantial majority of the electricity produced in Korea." J.A. 12769. Commerce found that the Korean government regulates and approves electricity tariffs charged by KEPCO. Id. Commerce further found that the Korean government "exercises significant control over KEPCO through its majority ownership and pursues government policy objectives through KEPCO's business and operations." Id. Commerce therefore determined that KEPCO is an authority of the Korean government and that the Korean government is providing to producers of CRS "a financial contribution in the form of the provision of a good or service." Id. To determine whether that financial contribution constitutes a "...