Commerce Argues Size Doesn't Matter in CVD Disproportionality Analyses
After a remand by Court of International Trade Judge Claire Kelly (see 2412170041), the Commerce Department again found in a countervailing duty administrative review’s final results that South Korea’s provision of off-peak electricity for less than adequate remuneration was specific to the country’s steel industry (Hyundai Steel Co. v. United States, CIT # 23-00211).
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It argued that the trade court shouldn't require Commerce to consider the size of a subsidy recipient in the disproportionality analyses of de facto specificity determinations.
The department said April 11 it had initially found the Korean electricity subsidy to be specific because the steel industry, combined with three other industries, disproportionately benefited from it. Now, it said, it has reached the same conclusion by combining the steel industry with two other industries. It found that the three were similar because they were the three largest consumers of electricity in Korea and because each used a “relatively comparable percentage" of electricity.
After those three industries, there was a “precipitous drop” in industrial electricity usage by the next seven largest electricity consumers, it noted.
Kelly told the department in her order that it had failed to justify its prior grouping of industries that received the subsidy. Under the department’s own regulations, she said, it must explain how such grouped industries are related -- unless the number of subsidy recipients is limited, which isn’t the case here.
Commerce said that, on remand, its rationale for grouping the industries is that all three consumed a “relatively comparable percentage of total industrial electricity consumption in Korea” during the review period. It said this was consistent with its long-standing practice of grouping the “relatively large recipients” of a subsidy in CVD investigations and reviews.
Distinguishing the cases AK Steel and Bethlehem Steel, it said that, “here, electricity consumption is directly tied to the amount of subsidy conferred through the pricing of electricity,” so there isn’t a need to determine whether the amount of an electricity subsidy an industry received was proportionate to overall electricity use.
More generally, Commerce argued that section 771(5A)(D)(iii)(III) of the Tariff Act doesn’t require that a disproportionality analysis consider the size of a company or industry compared with the amount of benefit it received. This would be at odds with the reason Commerce conducts a specificity test, “which is to determine the extent to which the benefit of a subsidy is spread throughout an economy and to remedy those subsidies that are limited or unevenly distributed among the recipients,” it said.
And if CIT took the position that a subsidy recipient’s size was a factor in specificity analyses, this “could lead to the absurd result that the largest recipients of subsidies under a program, and thus those with the largest ability to distort trade and harm U.S. enterprises and industries, would be excluded from the application of remedial countervailing duties,” it said.
Further, it could also “create the perverse situation” in which the statutory specificity considerations predominant use and disproportionate use could conflict, it said.
“For example, predominant use could be found if in year x, Industry A and Industry B received 30 percent and 25 percent of a program’s benefits, respectively. However, if in year y, Industry A and Industry C each received 10 percent of the same program’s benefits, and Industry B again received 25 percent, Industry B could not be found to have received a de facto specific subsidy based on disproportionate use if Industry B received an expected amount of the subsidy due to its large size or without further examination of an external comparator,” it said.