CIT Says Commerce Properly Didn't Countervail Korean Company's D/E Restructurings

The court also sustained Commerce's recalculations of the uncreditworthy benchmark and unequityworthy discount rate on remand after none of the parties contested the analyses.

In 2015 and 2016, when it was just called Dongbu Steel, the South Korean company's creditors committee approved three debt-to-equity swaps by government-controlled and private banks. In the first review of the CVD order, Commerce said the swaps were in line with the typical investment practice of private investors and didn't amount to a countervailable benefit. The second and third reviews largely proceeded the same way.

In 2019, the KG Consortium acquired Dongbu Steel, which also received a fourth debt-to-equity swap and restructuring of its outstanding long-term loans and bonds. During the 2019 CVD review, Commerce changed course and said the fourth restructuring was "inconsistent with usual investment practices of private investors." The agency also re-examined the first three restructurings and said KG Dongbu was "unequityworthy at their respective placements," finding that the first three restructurings had actually given KG Dongbu a benefit.

The trade court previously rejected Commerce's reconsideration of these debt-to-equity infusions, finding that the agency can't change its position without a mistake of fact or analysis, neither of which were present here (see 2407030073). On remand, Commerce decided not to countervail the first three restructurings, though it said it disagreed with the court that "benefit cannot be re-evaluated during each" review period.

Choe-Groves sustained the agency's decision, first addressing Commerce's statement that it can re-evaluate a previous benefit decision. The court noted that the agency cited a 1992 U.S. Court of Appeals for the Federal Circuit decision, PPG Industries v. U.S., which considered whether parties to a suspension agreement received countervailable subsidies. Choe-Groves said Commerce's reason for relying on the case "is not clear."

While Commerce quoted the opinion as saying the "relevant inquiry is whether or not" the companies under review received any benefits during the review, the court said the agency ignored the beginning of this sentence, which crucially notes that it's reviewing compliance with the suspension agreement.

Even if the case weren't limited to suspension agreements, "nothing in PPG Industries, or any other case of which the Court is aware, stands for the broad proposition that Commerce has unfettered authority to revise its prior determinations without providing an adequate explanation or citing new evidence as required," the court said.

The petitioners, Nucor Corp.and Steel Dynamics Inc., argued on remand that Commerce failed to address evidence of a South Korean government policy to influence non-governmental financial institutions to engage in debt restructurings for South Korean companies. Choe-Groves held that while this evidence "might suggest a general government policy to pressure non-governmental institutions to participate in debt restructuring," it doesn't support a finding that this pressure "was actually exerted in KG Dongbu's" restructurings. The judge added that the court "presumes that Commerce considered the full record" and decided to reject the petitioners' evidence.

On remand, Commerce also reconsidered its calculation of the benchmark for calculating benefits derived from bonds and loans given by the Korean Creditor Bank Committee. The agency "revised its uncreditworthy benchmark interest rate calculations based on the duration of each bond or loan and applied the calculated interest rates to the bonds and loans that had remaining balances during the period of review." No party contested the move.

The agency also tweaked its unequityworthy discount rate after the court previously said Commerce's regulations require the agency to allocate the benefit amount conferred by an equity infusion over the same time period as the non-recurring subsidy when coming up with the unequityworthy discount rate. Commerce on remand recalculated the rate using a 15-year average useful life, applying it to the allocation of KG Dongbu's fourth debt-to-equity restructuring. The court said the decision was in line with the court's remand instructions.

(KG Dongbu Steel Co. v. United States, Slip Op. 25-7, CIT # 22-00047, dated 01/17/25; Judge: Jennifer Choe-Groves; Attorneys: Brady Mills of Morris Manning for plaintiffs led by KG Dongbu Steel Co.; Claudia Burke for defendant U.S. government; Alan Price of Wiley Rein for defendant-intervenor Nucor Corp.; Roger Schagrin of Schagrin Associates for defendant-intervenor Steel Dynamics Inc.)