Korean Exporter Challenges Commerce's Ability to Countervail Transnational Subsidies
The Commerce Department cannot investigate "transnational" subsidies, countervailing duty respondent Kukdo Chemical argued in a July 25 complaint at the Court of International Trade. Challenging the countervailing duty investigation on epoxy resins from South Korea, Kukdo said it's challenging "any and all substantive aspects of Commerce's" finding that the company received a countervailable subsidy via the provision of Epichlorohydrin (ECH) for less than adequate remuneration from China (Kukdo Chemical v. United States, CIT # 25-00146).
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In the CVD investigation, Commerce decided to analyze whether Kukdo's receipt of ECH from China for LTAR was a countervailable subsidy. Preliminarily, the agency said it was based on the Chinese government's failure to respond to a questionnaire from the agency. Specifically, Commerce used facts available to find that Kukdo's ECH purchases were from Chinese authorities whose sales constitute a financial contribution and that the transnational provision of ECH was "de facto specific to Korean epoxy resins producers."
Commerce established a benchmark for the value of ECH purchases using Kukdo's input purchase template, specifically comparing the prices Kukdo paid to non-Chinese unaffiliated ECH suppliers with the price Kukdo paid for ECH from Chinese suppliers.
The agency then adjusted the benchmark to get the "delivered price" by including delivery charges and import duties, using adverse facts available to fill Kukdo's per-unit delivery charges for freight from port-to-destination within Korea. Commerce also added a value-added tax of 10% to the material cost of ECH for all imports reported in Kukdo's input purchase table as facts available.
In its final determination, however, Commerce included the VAT amount for domestic ECH purchases as an expression of AFA, despite only including the VAT amounts for imported ECH purchases in its preliminary findings, Kukdo said. Commerce assigned a 0.06% CVD rate for the program.
Taking to the trade court, Kukdo said it's challenging all aspects of Commerce's analysis for the program, including the agency's decision that it can address transnational subsidies. The agency only recently altered its regulations to allow it to target these subsidies (see 2403210070). Kukdo's challenge marks the first of its kind against a transnational subsidy finding.
Specifically, Kukdo said it's challenging Commerce's use of facts available to find that the respondent's purchases of ECH amounted to a financial contribution and the agency's finding that the transnational provision of ECH for LTAR is de facto specific to the Korean epoxy resin industry. "Commerce’s conclusion that it could investigate subsidies allegedly conferred by the Government of China was also contrary to law," the respondent added.
Kukdo is also challenging Commerce's benefit calculation for Korea's Chemical Substance Registration Support Project, which is another novel issue to arise in a countervailing duty case. The respondent also is challenging the use of AFA for calculating the benchmark price for the company's ECH inland freight expenses and the calculation of benefits for the provision of electricity for LTAR.
Exporter Kumho P&B Chemicals filed its own complaint challenging the investigation, though its case will solely focus on Commerce's finding that the provision of electricity for LTAR was de facto specific (Kumho P&B Chemicals v. United States, CIT # 25-00143).