Korean Steel Exporter Argues Cap-and-Trade Permits Not 'Direct Transfer of Funds'
In remand comments, exporter POSCO continued to challenge the Commerce Department’s decision to find that South Korea’s emissions cap-and-trade program provided it a financial benefit, saying the program’s emissions permits were “restriction[s],” not benefits (POSCO v. United States, CIT # 24-00006).
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POSCO said the department’s new angle on remand -- that a subsidy was bestowed by a direct transfer of funds rather than revenue forgone -- likewise failed because the program didn’t result in any funds being transferred.
The Court of International Trade remanded the results of Commerce’s countervailing duty review on carbon and alloy steel cut-to-length plate from South Korea in August (see 2508080026). In her opinion, Judge Jane Restani sent back the department’s choice to countervail the cap-and-trade program, explaining that, to countervail a subsidy as revenue forgone, Commerce has to determine that a government actually failed to collect revenue from the exporter under review.
Commerce therefore switched to analyzing the program as providing a “direct transfer of funds,” saying that the extra permits that the program bestows on certain exporters can be used in a “variety” of ways, “all of which the record illustrates effectively convey a financial value to the entity” that received them.
But “permits are not ‘funds’ but instead set limits on the amount of carbon emissions a company can emit,” POSCO argued. For comparison, it cited the Oxford Dictionary’s definition of a “fund”: “an amount of money that has been saved or made available for a particular purpose.”
Further, it said, the Korean government didn't directly transfer anything of value to POSCO when it issued permits. Even assuming that the permits did offer a financial benefit, “[a]ny value or revenue that may be generated from, for example, selling permits in the market, would not come ‘directly’ from the Government pursuant to 19 U.S.C. § 1677(5)(B) and (D)(i),” it said.
It also challenged Commerce’s finding that the program was an export subsidy that was de jure specific to POSCO.
To be specific, an export subsidy must be contingent upon export performance, it noted. But, here, receipt of extra permits isn’t necessarily contingent on exporting activity at all, it said.
Exports are only one of the considerations the Korean government takes into account when determining which companies are eligible for the additional permits, it said, and they go only to the total “trade intensity” of an economic sector. Under the same calculation, Korea might also deem eligible a sector that “has no exports and $17 million in imports,” it said.