US Defends Decision Not to Account for Compliance Costs in CVD Case at Trade Court
The Court of International Trade did not direct the Commerce Department to account for compliance costs incurred by countervailing duty respondent BGH Edelstahl Siegen in the agency's subsidy calculations, the U.S. argued in defense of its decision not to consider BGH's costs of compliance with Germany's Electricity Tax Act and Energy Act Act (BGH Edelstahl Siegen v. U.S., CIT # 21-00080).
The DOJ brief responded to arguments from BGH that Commerce's remand results in the case on the countervailing duty investigation into forged steel fluid end blocks from Germany did not comply with the court's orders since the costs to operate the company's energy management system should have been considered as offsets in the subsidy calculation. The government said this claim was "without merit" since these costs are not "application fees, deposits" or related payments that can be used as offsets under the countervailing duty laws. Rather, these costs are requirements of the programs.
The U.S. said that under this interpretation, "any cost that a firm incurred would constitute a 'similar payment,'" and thus runs against the statute's "explicit limitation on allowable subsidy offsets."
Although Commerce acknowledged that the German government's requirements for receiving tax savings under the Electricity and Energy Tax Acts altered BGH’s behavior, the agency was not required to consider BGH’s cost of complying "when considering whether these programs had conferred a benefit and the amount of that benefit," the U.S. said.
The government also defended Commerce's decision to continue finding that the Concession Fee Ordinance (KAV program) is de jure specific, telling the court that, contrary to BGH's claims, criteria based on energy usage are not economic in nature and horizontal in application. As identified in the Statement of Administrative Action accompanying the Uruguay Round Agreements Act, these criteria are "number of employees or the size of the enterprise."
BGH had said that Commerce did not include record evidence showing that the Concession Fee Ordinance is "narrowly focused on discrete segments of the German economy." The government countered by telling the court that "it is not clear why evidence that the KAV Program is narrowly focused on discrete segments of the economy was necessary for a determination that the program is specific."
Under Germany's 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. The operators can pass these fees on to their customers.However, the KAV program favors customers with electricity prices that are lower than the marginal price agreed to by the network operators and the municipality. These special customers are the only ones eligible to receive an exemption of the concession fee, the brief said.
CIT had ruled that the subsidy was not specific (see 2210200071), remanding the issue. Commerce came back and said that it was 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 (see 2301100054).