Royal Thai Government v. U.S.

• Decision Date: 06 August 2007
• Docket Number: Slip Op. 07-119.,Court No. 02-00026.
• Citation: 502 F.Supp.2d 1334
• Parties: ROYAL THAI GOVERNMENT, Sahaviriya Steel Industries Public Company Limited, Plaintiffs, v. UNITED STATES, Defendant, and United States Steel Corp., Defendant-Intervenor.
• Court: U.S. Court of International Trade

502 F.Supp.2d 1334

ROYAL THAI GOVERNMENT, Sahaviriya Steel Industries Public Company Limited, Plaintiffs, v. UNITED STATES, Defendant, and United States Steel Corp., Defendant-Intervenor.

Slip Op. 07-119.

Court No. 02-00026.

United States Court of International Trade.

August 6, 2007.

COPYRIGHT MATERIAL OMITTED

Vinson & Elkins LLP (Kenneth J. Pierce, Robert Edward DeFrancesco, and Victor S. Mroczka) for Plaintiffs the Royal Thai Government and Sahaviriya Steel Industries Public Company Limited.

Peter D. Keisler, Assistant Attorney General, David M. Cohen, Director, Commercial Litigation Branch, Civil Division, United States Department of Justice (Claudia Burke and David S. Silverbrand); Mykhaylo A. Gryzlov, International Attorney-Advisor, Office of the Chief Counsel for the Import Administration, United States Department of Commerce, for Defendant United States.

Skadden, Arps, Slate, Meagher & Flom LLP, Washington, DC (John. J. Mangan) for Defendant-Intervenor United States Steel Corporation.

OPINION

Goldberg, Senior Judge.

This matter is before the Court following a court-ordered remand on July 26, 2006. See Royal Thai Gov't v. United States, 30 CIT ___, 441 F.Supp.2d 1350 (2006) ("Royal Thai III").

I. BACKGROUND

A. Procedural History of This Case

In December 2000, Commerce initiated an investigation into whether the Thai steel industry received various countervailable subsidies. See Certain Hot-Rolled Carbon Steel Flat Products from Argentina, India, Indonesia, South Africa, and Thailand 65 Fed.Reg. 77580 (Dep't Commerce Dec. 12, 2000) (notice of initiation of countervailing duty investigation). At the conclusion of this investigation, Commerce determined inter alia that the Royal Thai Government ("RTG") provided countervailable subsidies to the Thai steel industry in the form of import duty exemptions under Sections 30 and 36(1) of the Investment Promotion Act of 1977 ("the duty exemption programs"). See Certain Hot-Rolled Carbon Flat Products from Thailand 66 Fed.Reg. 50410 (Dep't Commerce Oct. 3, 2001) (final results of countervailing duty investigation). The duty exemption programs permitted Thai steel manufacturers to import free of duty charges raw materials consumed in production and raw materials incorporated into goods for export. See Issues and Decision Memorandum in the Final Affirmative Countervailing Duty Determination: Certain Hot-Rolled Carbon Steel Flat Products from Thailand, 549-818 (Sept. 21, 2001), Parts II.A.2 & II.A.3, available at http://ia.i ta.doc.gov/frn/summary/thailand/01-24753-1.txt ("Issues and Decision Mem."). Ultimately Commerce calculated the benefit from the duty exemption programs by using a 1% benchmark rate and found, respectively, 0.58 percent and 0.07 percent countervailable subsidy rates. See id.

Two court cases were filed challenging the final results of the investigations. These cases were later consolidated. In one case, Plaintiffs RTG and Sahaviriya Steel Industries Public Company Limited ("SSI") challenged Commerce's decision to countervail the entire amount of the duty exemption programs. Compl. ¶ 12 (Court No. 02-00027). In the other case, domestic party United States Steel Corp. ("U.S.Steel") objected to Commerce's use of the 1% tariff rate as a benchmark to measure the benefit from the duty exemption programs.¹ Compl. ¶ 13 (Court No. 02-00026). Specifically, U.S. Steel argued that the 1% rate was itself a countervailable subsidy and therefore an inappropriate benchmark. See U.S. Steel's Mem. Support Mot. J. Agency Record 43-44.

This Court ordered Commerce to reverse its decision to countervail the entire amount of the duty exemptions. See Royal Thai Gov't v. United States, 29 CIT ___, 341 F.Supp.2d 1315 (2004) ("Royal Thai I"). As a result, U.S. Steel's argument relating to the benchmark was moot. See id., 29 CIT at ___, 341 F.Supp.2d at 1326. The U.S. Court of Appeals for the Federal Circuit ("Federal Circuit") reversed Royal Thai I's holding and upheld Commerce's decision to countervail the entire amount. See Royal Thai Gov't v. United States, 436 F.3d 1330, 1337-41 (Fed.Cir.2006) ("Royal Thai II").

After Royal Thai II, the only thing remaining for this Court to do with respect to the duty exemption programs was to address U.S. Steel's challenge to the 1% benchmark. Commerce initially had found that since a 1% rate would have applied to the steel slab imports, that 1% rate was the correct benchmark to use. See Issues and Decision Mem. Parts II.A.2 & II.A.3. The Court remanded that matter back to Commerce, explaining that the countervailing duty laws required Commerce to use a noncountervailable benchmark. See Royal Thai III, 30 CIT at ___, 441 F.Supp.2d at 1364-68. The Court then instructed Commerce to determine whether the 1% rate it had initially used in calculating the benefit of the duty exemptions was itself a countervailable subsidy. See id., 30 CIT at ___, 441 F.Supp.2d at 1368.

B. Commerce's May 4, 2007 Remand Determination

A component of countervailability analysis is specificity; a subsidy is only countervailable if it is a specific subsidy. See id. at 1366 (discussing 19 U.S.C. § 1677(5A)(D)'s de facto specificity requirement). A de facto specificity analysis will require Commerce to examine the actual "use" of the subsidy and the "amount" of the subsidy that various industries received.² See 19 U.S.C. § 1677(5A)(D)(iii) (2000). In order to compare the "use" and "amount" of the 1% rate across various Thai industries, the RTG claimed on remand that the specificity analysis should examine the relative benefits resulting from the 1% rate. The RTG proposed that Commerce calculate the duty savings resulting from the 1% rate by subtracting the duties actually paid on merchandise subject to the 1% rate from what would have been paid otherwise. The RTG proposed further that the "Normal" rates be used to calculate the import duties that would otherwise be due. According to the nomenclature of the Thai tariff system, the "Normal" rates were higher than the "Reduced" rates. See Verification Report 3-5. During the period of investigation, steel slab had a 1% "Reduced" rate and a 10% "Normal" rate. See RTG's Supp. Quest. Resp. 6.

Commerce rejected the RTG's proffered "relative benefit analysis," insisting that it was inappropriate to use the "Normal" rates as benchmarks in calculating the precise amount of benefits flowing from the 1% rate.³ See Results of Redetermination on Remand Pursuant to Royal Thai Government, et al. v. United States, Slip Op. 04-91 (Ct Int'l Trade July 27, 2004) (May 4, 2007) at 7 & 18-19 ("Remand Determination").⁴ Commerce explained that the "Normal" rates were unsuitable benchmarks because the "Normal" rates in the Thai tariff system "are not usually applied in assessing duties upon imports under the vast majority of the HTS categories." Id. at 18. Commerce explained further that the RTG implemented "Normal" rates as part of Thailand's negotiations with the WTO to fulfill its obligations to cap its import duties at certain agreed-upon levels. Id.

The Remand Determination reflects Commerce's understanding that the "Normal" rates were generally used as a form of import protection, and were only applied to imports competing with domestic industries specifically targeted for protection. Id. at 18-19. According to Commerce, they served merely to memorialize Thailand's GATT and WTO commitments in the Thai HTS and were irrelevant for purposes of the actual assessment of duties for the vast majority of HTS designations receiving the 1% rate. Commerce reasoned that since the "Normal" rates would under no circumstances have been applied, it made no sense to use them as benchmarks.⁵

Instead, Commerce analyzed specificity by measuring the total CIF values⁶ of imported merchandise under the various HTS subheadings receiving the 1% rate. Relying on the data culled from the total CIF value analysis, it then made a twofold determination: (1) a group of industries including the steel industry was a predominant user of the 1% rate; and (2) the steel industry itself received a disproportionate amount of the benefits flowing from the 1% rate. Id. at 6-8. Since either one of these findings would necessitate a finding of specificity, Commerce then concluded that the 1% rate was a specific subsidy and therefore was not suitable as a benchmark to measure the benefits resulting from the importing duty exemption programs. Id. at 30-31. Nowhere in the Remand Determination did Commerce present any analysis of why the 1% rate constitutes a subsidy. Finally, Commerce identified without explanation the 10% "Normal" rate as an acceptable benchmark and calculated the "estimated net countervailable subsidy rates under these [duty exemption] programs to be 5.85 percent and 0.91 percent, respectively." Id. at 31.

II. STANDARD OF REVIEW

The Court must sustain any determination, finding, or conclusion made by Commerce in the Remand Determination unless it is "unsupported by substantial evidence on the record, or otherwise not in accordance with law." 19 U.S.C. § 1516a (b)(1)(B)(i).

With respect to the substantial evidence requirement, the U.S. Supreme Court has defined this term to mean "more than a mere scintilla. It means such relevant evidence' as a reasonable mind might accept as adequate to support a conclusion." Consol. Edison Co. v. NLRB, 305 U.S. 197, 229, 59 S.Ct. 206, 83 L.Ed. 126 (1938); accord Matsushita Elec. Indus. Co. v. United States, 750 F.2d 927, 933 (Fed. Cir.1984).

With respect to the in-accordance-with-law requirement, the Court must defer to an agency's reasonable construction of an ambiguous statute. See Allegheny Ludlum Corp. v. United States, 367 F.3d 1339, 1343 (Fed.Cir.2004) (citing Chevron U.S.A., Inc. v. NRDC, 467 U.S. 837, 843, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984)). Further, "the deference granted to the agency's interpretation of the statutes it administers extends to the methodology it applies to fulfill its...