CAFC Judges Ask If 'AK Steel' Applies to Hyundai's Collection of Berthing Fees From Port It Built
Judges at the U.S. Court of Appeals for the Federal Circuit pressed counsel for respondent Hyundai Steel Co. during May 9 oral argument on whether the company's collection of berthing fees from third parties on a port it built in South Korea can be considered countervailable subsidies. Judges Raymond Chen, Tiffany Cunningham and Kimberly Moore repeatedly asked whether Hyundai's case is precluded by the court's 1999 decision in AK Steel v. U.S. (Hyundai Steel Co. v. United States, Fed. Cir. # 24-1100).
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In AK Steel, the court said exporter POSCO's exemptions from dockyard fees and collection of third-party fees at the Kwangyang Bay Industrial Estate port facility, which it built then transferred ownership to the Korean government, was a countervailable benefit (see 2404080057).
At issue in the present case, Hyundai contracted with the South Korean government to build the Incheon North Harbor port, reverting ownership back to the government after construction was complete but receiving the right to collect fees from third-party users of the port as payment. Commerce countervailed the program, and the decision was sustained by the Court of International Trade (see 2308220031).
On appeal, Hyundai tried to distinguish its case from AK Steel, arguing that it's a "decades-old" decision that was issued prior to the contemporary version of the applicable statute governing what constitutes a benefit (see 2404300059).
During oral argument, Chen repeatedly pressed Brady Mills, counsel for Hyundai, on whether the exporter's case can be distinguished from AK Steel. The judge said despite the fact that the right to collect the fees was offered to reimburse construction costs, the AK Steel court agreed with Commerce "that a benefit was being provided because it was very much akin to the provision of a specific infrastructure benefit." Chen said if the only distinction is that Hyundai is still paying for the right to use the port, while POSCO got to use the port for free, "I think AK Steel would control here again, assuming that there isn't something about the statute that changes everything."
Mills argued that the statute does change the legal landscape in the case, adding that the government must clear the statute's definition of what constitutes a benefit. He said Commerce is "myopically" just looking at the Korean government letting Hyundai collect these fees without considering the broader context and the respondent's construction of the port.
Cunningham asked Mills, if the court finds AK Steel covers the same issue today, would the right outcome be to affirm the Court of International Trade's decision. To this, Mills agreed that affirmance would be the right move, but he urged the court to consider the distinctions between his case and AK Steel.
DOJ attorney Chris Berridge argued that "AK Steel is still good law and does control in this case," claiming that AK Steel presents the "same basic facts and same basic law." Chen asked Berridge if the fact pattern of AK Steel does now fit under a new statutory scheme that "seems more 'subtle and nuanced'" than simply asking whether a company is collecting fees the government would otherwise be collecting.
The judge pressed Berridge on this point, asking if the same outcome would be reached if, instead of constructing the port, the Korean government let Hyundai collect berthing fees from third parties in exchange for 1,000 free cars. The DOJ attorney said he still thinks a countervailable subsidy would exist under those facts.
During rebuttal, Mills said that since the AK Steel decision, Commerce developed a new framework for assessing situations such as these, which looks to the length of the right to collect fees in exchange for large infrastructure projects. In a separate case, the agency said an exporter's right to collect similar fees for a 70-year period was tantamount to ownership of that port and wasn't the same as reimbursement for construction costs.
Mills added that no benefit should be found, since Hyundai "is never going to even come close to recovering the costs that it incurred in constructing this wharf." Looking at the berthing income the company has received thus far under its contract with the Korean government and extrapolating it over the remaining period, Hyundai will only recover less than half of its construction costs, the attorney said.