CIT Sends Back Decisions to Countervail Korean Electricity, Cap, Trade Subsidies

Restani also sent back Commerce's finding that South Korea's cap and trade program, under which respondent POSCO gets an extra share of carbon trading permits, provides a countervailable subsidy. The judge remanded the agency's findings that the extra permits constituted a "financial contribution" and are de jure specific.

In the CVD administrative review on carbon and alloy steel cut-to-length plate from South Korea for the 2021 calendar year, Commerce countervailed the provision of electricity for less than adequate remuneration and the extra carbon emission trading permits received by POSCO. Regarding the provision of electricity, the agency grouped the steel industry with two "unrelated industries" to find that these industries received a disproportionate share of subsidized electricity.

In reviewing this decision, Restani first noted that the U.S. Court of Appeals for the Federal Circuit in PPG Industries v. U.S. has said that "the actual make-up of the eligible firms ... determines whether those firms comprise a specific industry or group of industries."

The judge held that "Commerce acted unreasonably when it grouped" the steel industry with the two other industries, since the agency "failed to consider the actual make-up of the firms." While the agency relied on its own regulations in declining to consider the "shared characteristics" of the industries, Commerce was still required by PPG Industries to consider the "actual make-up of the eligible firm" when creating the group.

"It did not do so," the judge said, adding that Commerce must provide a "logical basis for why these industries should be grouped together."

Restani then held that the statute precludes Commerce's finding that this group of industries received a "disproportionate" amount of the subsidy. The Statement of Administrative Action accompanying the Uruguay Round Agreements Act makes clear that subsidies that are generally available across industries aren't countervailable. The government claimed that the fact that these three industries use a majority of electricity in a "complex economy" is enough to establish disproportionality.

When a subsidy is "usage-based," an industry's usage of the subsidized good or service is ordinarily the "baseline for this comparison," the court noted. The baseline of comparison isn't the benefits received by others, since this would lead to the "untenable result" that a benefit given to a large company "might be disproportionate merely because of the size" of the company, Restani said. This result "is anathema to" the "purpose of the specificity requirement," the judge added.

The court noted that Commerce's only justification for its disproportionality analysis is that the "Korean steel industry uses a large amount of electricity." However, the agency was required by the "plain meaning of the statute to use a baseline that shows the Korean steel industry’s subsidy is out of line with the industry’s own usage," not just the benefits others received, the court said.

Restani said it's an "obvious fact of life that 'virtually every' generally available and widely used subsidy" will be used by some industries more than others. “Commerce must show more to support a finding of disproportionate subsidy use."

Regarding the cap and trade scheme, emitters are given carbon emissions permits that limit the amount of emissions a company can produce. The South Korean government provides permits up to 97% of an emitter's applicable allocations. To unlock the remaining 3%, the companies must buy permits from third companies or a government-run auction. However, 100% of a company's permits are given to companies that meet minimum production costs and international trade exposure thresholds.

The judge remanded Commerce's decision to countervail the additional 3% of permits received by POSCO, first sending back the agency's finding of a financial contribution. While Commerce said the South Korean government isn't collecting revenue it's otherwise due, thus conferring a financial contribution, Restani noted that this means the money not collected is money POSCO would have paid.

While the extra permits may drop South Korea's aggregate revenue, it's "not enough that Korea could have made more revenue from the entire group of regulated entities. The statute implies that the Korean government "must have failed to collect revenue from POSCO specifically," the decision said.

The CVD statute also requires that the South Korean government forgo revenue "that is otherwise due." While it's true that there's a greater chance POSCO would have covered the gap in its permits through "government-run auction or fines," this "increased probability of payment" doesn't translate into money that is "due," since it doesn't give South Korea the "right to collect any 'enforceable obligation or debt,'" the court said. The Korean government also doesn't collect revenue "'by requiring the surrender of a specific amount' of permits" from regulated entities, the judge said, noting that, if anything, South Korea increases the amount of taxes it expects to collect at the end of the year by giving POSCO more credits.

Restani also sent back Commerce's finding of de jure specificity for the scheme. The agency said the program's "intensity criteria" provide an "express limitation" on what industries qualify for the extra credits, adding that these criteria favor certain industries and thus can't qualify for the statute's "safe harbor provision," which exempts programs from the specificity requirement whereby they provide neutral criteria.

The judge noted that nearly one-third of regulated industries qualify for the extra permits and said the existence of eligibility requirements on its own isn't enough to create de jure specificity.

The court then concluded that Commerce failed to support its finding that the criteria don't qualify for the safe harbor provision. Industries with more emission-intensive production processes and that are more dependent on trade "are more likely to meet the intensity criteria." This fact "may be useful for a de facto specificity analysis, but it is not relevant for determining if a subsidy is 'uniformly available across industries,'" the judge said.

(POSCO v. U.S., Slip Op. 25-100, CIT # 24-00006, dated 08/08/25; Judge: Jane Restani; Attorneys: Brady Mills of Morris Manning for plaintiff POSCO; Yujin McNamara of Akin for plaintiff-intervenor Government of South Korea; Emma Bond for defendant U.S. government; Alan Price of Wiley Rein for defendant-intervenor Nucor Corp.)