DOJ Fends Off Nucor Attacks, Holds That South Korean Government Did Not Give Electricity for LTAR
Plaintiff Nucor Corporation mischaracterized, oversimplified and took the Commerce Department's remand results out of context in its comments on a submission in a case stemming from the agency's countervailing duty investigation on carbon and alloy steel cut-to-length plate from South Korea, the Department of Justice said in Aug. 18 comments at the Court of International Trade, backing the remand redetermination. DOJ continued to back Commerce's contention that the South Korean government did not provide a countervailable subsidy to producers of hot-rolled steel through cheap electricity. Contrary to what Nucor's comments assert, Commerce adhered to the statute when completing its less-than-adequate remuneration analysis in the CVD case and properly accounted for the Korean Power Exchange's role in the electricity market, DOJ said (POSCO, et al. v. U.S., CIT #16-00227).
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The original petition in the investigation had alleged that Korean steelmakers were receiving a countervailable benefit through the provision of low-cost electricity. To investigate, the agency questioned the Korean government about the Korean electricity industry and market, which included the Korean Electricity Corporation (KEPCO) and the KPE, an entity owned by KEPCO. Commerce claims it conducted a "tier three analysis" to examine how KEPCO calculated its electricity tariff prices for each classification of customer through its price setting system.
By including costs and return on investment in its electricity prices, KEPCO did not treat Korean producers differently from other electricity users and charged the producers a tariff rate that was in line with their tariff classification level, Commerce said. The agency issued a final determination saying as much and assigning 58.68% and 3.89% countervailing duty rates to the mandatory respondents, POSCO and Hyundai, respectively. CIT sustained this final determination in September 2018, after a challenge from POSCO. The case was then brought to the U.S. Court of Appeals for the Federal Circuit, where the appellate court held that Commerce's benefit analysis and failure to investigate the role of KPX in the Korean electricity market was contrary to law.
Despite this ruling, Commerce continued to hold that its LTAR analysis adhered to the statute and that it properly evaluated KPX's role in the energy market (see 2106140051). Nucor then argued that Commerce did not in fact conduct a tier three analysis but rather a preferential rates analysis and did not consider KPX's actual costs of generation and supply (see 2108090056).
DOJ backed Commerce's remand against Nucor's attacks, arguing that Nucor took multiple lines of the remand results out of context. For instance, with regard to Commerce's application, or lack thereof, of the "cost plus a return on investment" standard in the remand results, "Nucor ignores the thorough explanation in the second remand redetermination that details how Commerce performed its less-than-adequate remuneration analysis regarding electricity in Korea," DOJ said. "As Commerce explained in the second remand redetermination, KEPCO’s standard pricing mechanism, which serves as the basis for its tariff schedule and classifications, was based on KEPCO’s costs."
Commerce also found whether the price charged for electricity was consistent with market principles by analyzing KEPCO's tariff classifications since they are found "in a manner that considers typical prevailing market conditions," DOJ said. "Since KEPCO had considered prevailing market conditions, Commerce found that KEPCO had developed a tariff schedule that adequately enabled recovery of costs in addition to getting a profitable return on investment. "Thus, Commerce did not treat KEPCO’s tariff classifications as 'coextensive with' the prevailing market conditions in Korea, as Nucor claims."
Nucor also claimed that Commerce's analysis of KPX's role in the electricity market is only based on KEPCO's overall profitability, but this characterization "oversimplifies the second remand redetermination and fails to evaluate this evidence in the context of the full benefit analysis," DOJ said. Commerce did in fact include a step-by-step breakdown of the South Korean electricity market's profitability from the generators to KPX to KEPCO to the final user. At each step, the electricity was sold to recoup costs plus a profit. If this is the case through the whole chain in the market, then the record evidence indicates not only that KPX's role was properly considered but that electricity was sold through standard market principles, DOJ said.