Commerce Sticks By Decision Not to Deduct Compliance Costs in German CVD Investigation
The Commerce Department stuck by its decisions not to account for compliance costs in its countervailing duty calculations for programs under the Electricity Tax Act and Energy Tax Act and to find that Germany's KAV program is de jure specific, in remand results filed with the Court of International Trade on Jan. 10. Commerce said that it did not make any changes to the CVD rates in the investigation for respondent BGH Edelstahl Siegen (BGH Edelstahl Siegen v. United States, CIT # 21-00080).
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The case concerns the CVD investigation on forged steel fluid end blocks from Germany. BGH originally challenged the final determination on three grounds: the legality of the decision to start the investigation, Commerce's alleged failure to include ex-parte communications in the record, and the determination that seven programs used by BGH were countervailable subsidies. In the case's first opinion, the trade court said that the investigation was properly started and that Commerce did not fail to add the ex-parte communications to the record (see 2210200071).
Parts of the remaining issue over whether the programs were countervailable were, however, sent back to Commerce. Looking at the Electricity and Energy tax acts, which impose taxes on electricity and energy while also providing exemptions from those taxes, the court said that Commerce erred in failing to consider the cost of complying with the acts. On remand, Commerce said that the Tariff Act of 1930, its own regulations, the 1998 preamble to the countervailing duties final rule and Commerce's case precedent "establish that Commerce will not incorporate offsets for compliance costs into its subsidy rate calculations."
The agency said it does not incorporate offsets for costs of compliance with laws and regulations, including climate change measures. For instance, Section 771(6) of the Tariff Act only permits three types of offsets: application fees, losses due to deferred receipt of the subsidy, and export taxes. "Congress and the courts have affirmed that the statute permits only these specific types of offsets," the remand results said.
As part of the KAV program, municipalities must make public transport routes available for the laying and operation of power and gas pipelines by local network operators. Use of the routes is governed by a concession agreement between the operator and the municipality that sets the concession fee the operator must pay the municipality for such use. The operators can pass these concession fees on to their customers. However, German law says that these concession fees may not be agreed to or be paid for electricity given to certain special contract customers. By blocking operators from paying concession fees from these customers, the German government makes sure that this select group of customers are relieved of paying concession fees that would otherwise be passed to the operators.
CIT ruled that was not specific. Commerce argued that it was de jure specific since it limits relief to special contract customers whose average price per kWh in the calendar year is lower than the average revenue per kWh from the supply of electricity to all special contract customers. The court said that Commerce didn't explain how this program favors certain industries over others or limits who may apply for the program. On remand, the agency said that "only special contract customers are eligible for the program" and that the program favors certain contract customers: "those applicants with electricity prices that are lower than the Marginal Price agreed upon by the [operator] and the municipality."