POSCO, Plaintiff, NUCOR CORPORATION, Consolidated Plaintiff, ARCELORMITTAL USA LLC and SSAB ENTERPRISES LLC, Plaintiff-Intervenors, v. UNITED STATES, Defendant, and SSAB ENTERPRISES LLC, NUCOR CORPORATION, ARCELORMITTAL USA LLC and POSCO, Defendant-Intervenors.
Consol. Court No. 17-00137
UNITED STATES COURT OF INTERNATIONAL TRADE
December 6, 2018
Before: Gary S. Katzmann, Judge
Slip Op. 18-169 PUBLIC VERSION
[Plaintiff‘s motion for judgment on the agency record is granted in part and Commerce‘s Final Results are remanded consistent with this opinion.]
Dated: December 6, 2018
Brady W. Mills and Ragan W. Updegraff, Morris, Manning & Martin LLP, of Washington, DC, argued for plaintiff and defendant-intervenor POSCO. With them on the brief were Donald B. Cameron, Julie C. Mendoza, R. Will Planert, Mary S. Hodgins, Eugene Degnan, and Sarah S. Sprinkle.
Christopher Weld and Adam M. Teslik, Wiley Rein, LLP, of Washington, DC, argued for consolidated plaintiff and defendant-intervenor Nucor Corporation. With them on the joint brief was Alan H. Price and John Herrmann, Kelley Drye & Warren, LLP, of Washington, DC, for plaintiff-intervenor & defendant-intervenor ArcelorMittal USA LLC; Roger B. Schagrin and
Stephen C. Tosini, Trial Attorney, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, DC, argued for defendant United States. With him on the brief were Chad A. Readler, Acting Assistant Attorney General, Jeanne E. Davidson, Director, Tara K. Hogan, Assistant Director, and Vito S. Solitro, Attorney. Of counsel on the brief was Rezza Karamloo, Attorney, Office of the Chief Counsel for Trade Enforcement and Compliance, U.S. Department of Commerce, of Washington, DC.
Katzmann, Judge: The issue of the provision of electricity and other benefits by foreign government entities to producers without adequate remuneration and the resulting lower price of imports has generated intense heat in the ongoing litigation under American laws designed to promote a level playing field for American goods in the domestic marketplace. More generally, the Department of Commerce‘s (“Commerce“) adequate remuneration and adverse facts available methodologies have been at the center of such fair trade remedy disputes. Before the court is the challenge to Commerce‘s final affirmative determination in the countervailing subsidy investigation of certain carbon and alloy steel cut-to-length (“CTL“) plate1 from Korea. Certain Carbon and Alloy Steel Cut-To-Length Plate From the Republic of Korea: Final Affirmative Countervailing Duty Determination and Final Negative Critical Circumstances Determination, 82 Fed. Reg. 16,341 (Dep‘t Commerce Apr. 4, 2017), P.R. 505 and accompanying Issues and Decision Memorandum (“IDM“) (Mar. 29, 2017), P.R. 497. Plaintiff POSCO, a producer and exporter of CTL plate from Korea, contests multiple aspects of Commerce‘s application of adverse facts available (“AFA“) and asks the court to remand the Final Determination. POSCO‘s Br., Nov. 9, 2017, ECF Nos. 42, 45. Consolidated Plaintiff Nucor Corporation (“Nucor“), an American steel
BACKGROUND
I. Legal Background.
To empower Commerce to offset economic distortions caused by countervailable subsidies and dumping, Congress enacted the Tariff Act of 1930.2 Sioux Honey Ass‘n v. Hartford Fire Ins. Co., 672 F.3d 1041, 1046 (Fed. Cir. 2012); ATC Tires Private Ltd. v. United States, 42 CIT __, __, 322 F. Supp. 3d 1365, 1366 (2018). Under the Tariff Act‘s framework, Commerce may -- either upon petition by a domestic producer or of its own initiative -- begin an investigation into potential countervailable subsidies and, if appropriate, issue orders imposing duties on the subject merchandise. Sioux Honey, 672 F.3d at 1046; ATC Tires, 322 F. Supp. 3d at 1366–67;
Commerce‘s regulations set forth three ways to measure the adequacy of remuneration.
When either necessary information is not available on the record, or a respondent (1) withholds information that has been requested by Commerce, (2) fails to provide such information by Commerce‘s deadlines for submission of the information or in the form and manner requested, (3) significantly impedes an antidumping proceeding, or (4) provides information that cannot be verified, then Commerce shall “use the facts otherwise available in reaching the applicable determination.”
Domestic producers of CTL3 filed petitions with Commerce and the United States International Trade Commission on April 7, 2016, alleging that an industry in the United States was materially injured or threatened with material injury due to certain carbon and alloy steel CTL plate product imports that were being subsidized or sold at less than fair value. Certain Carbon and Alloy Steel Cut-to-Length Plate from Austria, Belgium, Brazil, the People‘s Republic of China, France, the Federal Republic of Germany, Italy, Japan, the Republic of Korea, South Africa, Taiwan, and Turkey: Petitions for the Imposition of Antidumping and Countervailing Duties (Apr. 8, 2016), P.R. 1–29, C.R. 1–30. Commerce initiated a countervailing duty investigation of CTL plate from Korea on April 28, 2016. Certain Carbon and Alloy Steel Cut-to-Length Plate from Brazil, the People‘s Republic of China, and the Republic of Korea: Initiation of Countervailing Duty Investigations, 81 Fed. Reg. 27,098 (Dep‘t Commerce May 5, 2016), P.R. 59. Commerce selected POSCO and POSCO Daewoo Corporation (collectively, “POSCO“) as mandatory respondents.4 Respondent Selection Memorandum (Dep‘t Commerce May 31, 2016), P.R. 102,
Commerce subsequently required the unaffiliated company Hyundai Corporation (“Hyundai“) and two of POSCO‘s cross-owned supply companies -- POSCO M-Tech (“M-Tech“) and POSCO Chemtech (“Chemtech“) -- to submit questionnaire responses. First Suppl. Questionnaire for POSCO (Dep‘t Commerce June 28, 2016), P.R. 142; Second Suppl. Questionnaire for POSCO (Dep‘t Commerce July 8, 2016), P.R. 155. The questionnaire requested information on government subsidies received by Chemtech, M-Tech, and Hyundai. All three companies responded to Commerce‘s questionnaires. Hyundai Corp.‘s Initial Questionnaire Resp. (July 13, 2016), P.R. 156–58; POSCO Chemtech‘s Initial Questionnaire Resp. (July 18, 2016),
(ii) exporters and producers accounting for the largest volume of the subject merchandise from the exporting country that the administering authority determines can be reasonably examined; or
(B) determine a single country-wide subsidy rate to be applied to all exporters and producers.
Nucor also filed deficiency comments on the GOK‘s initial questionnaire response regarding Commerce‘s previous investigations of the GOK‘s provision of electricity for less than adequate remuneration. Nucor alleged that previous investigations improperly ignored the role of the Korean Power Exchange (“KPX“) in the Korean electricity market and this failure, according to Nucor, negatively impacted any analysis of whether Korean electricity prices were set in accordance with market principles. Letter from Wiley Rein LLP to Sec‘y Commerce, re: Certain Carbon and Alloy Steel Cut-to-Length Plate from the Republic of Korea: Comments on the Government of Korea‘s Initial Questionnaire Response (Aug. 3, 2016) at 1–15, P.R. 278–80, C.R. 291–93. Pertinent to this appeal, Nucor urged Commerce to request a full questionnaire from a company called POSCO Energy to determine whether a cross-owned supplier relationship between POSCO and POSCO Energy existed.
On September 14, 2016, Commerce issued its Preliminary Determination. Certain Carbon and Alloy Steel Cut-to-Length Plate From the Republic of Korea: Preliminary Negative Determination, 81 Fed. Reg. 63,168 (Dep‘t Commerce Sept. 14, 2016), P.R. 373, and accompanying Preliminary Decision Memorandum (“PDM“), P.R. 360. The Preliminary Determination found “no information on the record that POSCO is treated differently from other industrial users of electricity that purchase comparable amounts of electricity because the rates
On November 2, 2016, Commerce released the verification agenda for the GOK, which stated that the deadline for filing factual information was November 2, 2016. Verification Agenda for the Government of Korea (Nov. 2, 2016) at 4 n.2, P.R. 444. POSCO submitted additional factual information that same day, stating that Chemtech had received a small amount of port usage grants from the Pohang Youngil Port. POSCO‘s Submission of Additional Factual Information (Rejected & Retained Document) (Nov. 2, 2016) at 2, P.R. 447, C.R. 424. Two days later, Commerce rejected this submission but indicated that POSCO could resubmit the information “accompanied by a written explanation identifying the subsection of 19 CFR 351.102(b)(21) under which the information is being submitted.”5 Rejection of POSCO‘s Submission of Additional Factual Information (Nov. 4, 2016), P.R. 452. POSCO resubmitted the Chemtech port usage grant information on November 7, 2016. POSCO‘s Resubmission of Factual Information (Rejected Document) (Nov. 7, 2016), P.R. 456. Commerce rejected this resubmission on November 10, 2016, stating that it “contain[ed] untimely filed new factual information relating to a previously unreported subsidy program received by POSCO Chemtech” and further noted that “this new factual information falls under 19 CFR 351.102(b)(21)(i) as being responsive to the Department‘s initial questionnaire, and should have been submitted by July 18, 2016,” the due date for POSCO‘s initial questionnaire response.6 Rejection of POSCO‘s Resubmission of Additional Factual Information (Nov. 10, 2016), P.R. 459.
Additionally, subsequent to the Preliminary Determination, Commerce placed facts on the record and issued a supplemental questionnaire to POSCO regarding its relationship with POSCO Energy. Memorandum from Yasmin Bordas, Sr. Int‘l Trade Compliance Analyst, AD/CVD Operations, Off. VI, to the File, re: Countervailing Duty Investigation of Certain Carbon and Alloy Steel Cut-to-Length Plate from the Republic of Korea: Placing Information on the Record (Sept. 21, 2016), P.R. 390; Letter from Morris, Manning & Martin, LLP to Sec‘y Commerce, re: Certain Carbon and Alloy Steel Cut-to-Length Plate from the Republic of Korea, Case No. C-580-888: Sixth Supplemental Questionnaire Response (Oct. 4, 2016), P.R. 415, C.R. 417. POSCO‘s response provided details about POSCO and POSCO Energy‘s relationship.7 Commerce
either in response to initial and supplemental questionnaires, or, to rebut, clarify, or correct such evidence submitted by any other interested party.”
Commerce issued its Final Determination on April 4, 2017. Applying a “standard pricing mechanism” analysis drawn from the 1993 investigation of Magnesium from Canada, Commerce found that no benefit was conferred by the provision of electricity. IDM at 32–33. Specifically, Commerce did not attribute electricity subsidies received by POSCO Energy to POSCO, “because the electricity is sold to KPX, and not to POSCO directly.”
POSCO subsequently commenced this action challenging Commerce‘s Final Determination, and Commerce‘s application of AFA in particular. Compl., June 2, 2017, ECF No.
JURISDICTION AND STANDARD OF REVIEW
The court has jurisdiction over this action pursuant to
DISCUSSION
I. Provision of Electricity.
A. Standard Pricing Mechanism Analysis.
Nucor contends that Commerce‘s determination that the provision of electricity conferred no benefit is not supported by substantial evidence and is contrary to law. Specifically, Nucor argues that Commerce‘s use of the standard pricing mechanism analysis from Magnesium from Canada is inconsistent with the Uruguay Round Agreements Act (“URAA“) amendments to United States countervailing duties law. Nucor‘s Br. at 9. Furthermore, Nucor alleges that
As discussed above, Commerce‘s regulations set forth three ways to measure the adequacy of remuneration.
Nucor alleges that Commerce‘s use of this framework was impermissible because the Magnesium from Canada analysis relies on evidence of preferential pricing (i.e., pricing discrimination among recipients), and the URAA makes clear that adequacy of remuneration “replaces” preferential pricing as the standard for determining provision of a benefit. Nucor‘s Br. at 11 (citing the Statement of Administrative Action, H.R. Doc. No. 103-316, col. 1 (1994) at 927, reprinted in 1994 U.S.C.C.A.N. 4040, 4240 (“SAA“)). According to Nucor, Commerce recognizes that “it may not rely on the preferentiality standard alone to determine adequacy of remuneration.”
These arguments are unpersuasive. When reviewing Commerce‘s construction of the trade statute, this court follows the two-step Chevron framework. See Apex Frozen Foods Private Limited v. United States, 862 F.3d 1337, 1344 (Fed. Cir. 2017); Maverick Tube Corporation v. United States, 41 CIT __, __, 273 F. Supp. 3d 1293, 1305 (2017) (quoting Xiping Opeck Food Co. v. United States, 38 CIT __, __, 34 F. Supp. 3d 1331, 1342 (2014)). Under the first step, if Congress’ intent under the statute is clear, then the court “must give effect to the unambiguously expressed intent of Congress.” Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842–43 (1983). If “the statute is silent or ambiguous with respect to the specific issue, the question for the court is whether the agency‘s answer is based on a permissible construction of the statute.”
“Furthermore, the court affords Commerce significant deference in ‘[a]ntidumping and [CVD] determinations involv[ing] complex economic and accounting decisions of a technical
Congress’ intent regarding the use of preferential pricing as part of Commerce‘s analysis is unclear. Aside from a non-exhaustive list of “prevailing market conditions,” which include “price, quality, availability, marketability, transportation, and other conditions of purchase or sale,” the statute gives no guidance as to how Commerce should interpret the adequacy of remuneration language, and neither the Statement of Administrative Action (“SAA“)9 nor legislative history elucidate this issue. See
The statute directs Commerce to evaluate adequate remuneration based on “prevailing market conditions . . . in the country which is subject to the investigation or review,” which is what Commerce did here. While the first two prongs of
In a state-controlled monopolistic market, it is reasonable to determine the adequacy of remuneration by first examining how the state sets its rates, as the state (and not necessarily supply-and-demand) controls price and availability. If the state does use a standard pricing mechanism to set its rates (i.e., if its prices are set by a consistent discernable method), it is also reasonable for Commerce to determine the adequacy of remuneration by examining whether respondents received a preferential rate when compared to those entities receiving a rate set by the standard pricing mechanism.
As noted, the statute directs Commerce to determine if a benefit is present by determining whether a good or service is provided “for less than adequate remuneration.” Adequate remuneration is to be measured by “prevailing market conditions . . . in the country which is subject to the investigation or review.”
19 U.S.C. § 1677(5)(E) . The statute does not direct Commerce to create a fictional model market or (as shall be seen) to audit KEPCO‘s books to determine if it covers its costs. The statute directs Commerce to judge the adequacy of remuneration based on market conditions that actually exist in Korea. That the Korean electricity market is controlled by a state run monopoly does not change the statute.
Nucor contends that such an interpretation defeats Congress’ intent to shift the focus of inquiry from preferentiality to adequate remuneration. Nucor‘s Br. at 16–17. However, the court finds that “Commerce‘s tier-based approach to determining adequate remuneration ‘accomplishes
Nucor‘s argument10 that Commerce‘s regulations give identical words different meanings is also unpersuasive. As discussed above, neither the statute nor the legislative history provide a precise method for calculating “adequate remuneration” or dictate how Commerce should weigh the different factors that comprise the “prevailing market conditions . . . in the country which is subject to the investigation or review.” In light of the flexibility of the adequate remuneration standard, it is reasonable for Commerce to adjust how it evaluates “prevailing market conditions” and “adequate remuneration” based on the context of the relevant market and the information available to Commerce when conducting its analysis. See also Nucor, 268 F. Supp. 3d at 1372 (“The phrase ‘adequate remuneration’ is capacious enough to be viewed as a standard to be applied to given contexts. In a tier three benchmark analysis, Commerce specifically looks at market principles to assess adequate remuneration.“) (citing
Nucor also contends that Commerce failed to consider costs, as provided in
The cost for each electricity classification was calculated by (1) distributing the overall cost according to the stages of providing electricity (generation, transmission, distribution, and sales); (2) dividing each cost into fixed cost, variable cost, and the consumer management fee; and (3) then calculating the cost by applying the electricity load level, peak level, and the patterns of consuming electricity. Each cost was then distributed into the fixed charge and the variable charge. KEPCO then divided each cost taking into consideration the electricity load level, the usage pattern of electricity, and the volume of the electricity consumed. Costs were then distributed according to the number of consumers for each classification of electricity.
B. Attribution.
Nucor argues that Commerce‘s determination that subsidies received by POSCO Energy could not be attributed to POSCO was unreasonable, unsupported by substantial evidence, and contrary to law. Nucor‘s Br. at 31. Nucor notes that: POSCO and POSCO Energy are cross-owned; POSCO Energy supplies electricity to KPX for more than adequate remuneration; and POSCO then purchased electricity from KPX for a lower price.12 Nucor‘s Br. at 32–33. Therefore, according to Nucor, the electricity production subsidy received by POSCO Energy should be attributed to POSCO. The court finds this argument unpersuasive.
Commerce‘s focus on KEPCO‘s costs and rate-setting method is reasonable.” POSCO, 296 F. Supp. 3d at 1360 (citing Apex Frozen Foods, 862 F.2d at 1351) (internal quotations omitted).
(iv) Input suppliers. If there is cross-ownership between an input supplier and a downstream producer, and production of the input product is primarily dedicated to production of the downstream product, [Commerce] will attribute subsidies received by the input producer to the combined sales of the input and downstream products produced by both corporations (excluding the sales between the two corporations).
POSCO Energy is an affiliate of POSCO dedicated to energy generation. See Letter from Morris, Manning & Martin LLP to Sec‘y Commerce, re: Certain Carbon and Alloy Steel Cut-to-Length Plate from the Republic of Korea, Case No. C-580-888: Response to “Other Companies Subject to Investigation” Questions for Initial Questionnaire (June 17, 2016) at Ex. 4, p.1, P.R. 124-28, C.R. 45-49. POSCO Energy produces electricity, and POSCO consumes electricity during its manufacturing. However, at no point during the POI did POSCO Energy sell or otherwise provide electricity to POSCO; indeed, other than sales to KPX, POSCO Energy was prohibited by law from selling electricity to third parties.13 See POSCO Verification Report (Jan. 10, 2017) at 14-15, P.R. 469, C.R. 475. Commerce also verified that ownership of electricity was formally transferred from POSCO Energy to KPX when the electricity reached the KPX meter.
Id. at 12. Based on this record evidence showing POSCO Energy sold electricity directly to KPX, and not to POSCO, Commerce found POSCO Energy was not an input supplier to POSCO under
II. AFA Claims.
POSCO challenges Commerce‘s application of AFA on account of M-Tech‘s failure to report research and development (“R&D“) grants, POSCO‘s Br. at 10; Chemtech‘s initial failure to report certain port usage grants, id. at 20; and Hyundai‘s tax return reporting error, id. at 33. Nucor alleges Commerce abused its discretion in its treatment of Chemtech‘s R&D grants. Nucor‘s Br. at 38. POSCO further argues that Commerce erred in applying the highest AFA rates to POSCO, POSCO‘s Br. at 35, and that Commerce failed to corroborate the AFA rates applied to POSCO, id. at 38. The court determines that Commerce‘s application of AFA is supported by substantial evidence and in accordance with law, except for the application of AFA to the countervailability determination of POSCO M-Tech‘s R&D grants. There, the court finds that Commerce did not sufficiently justify its application of AFA to the benefit and specificity requirements of countervailability and remands the Final Determination on this issue for reconsideration. The court also finds that Commerce did not evaluate the application of the highest available AFA rates and remands the Final Determination for reconsideration on this issue.14
A. M-Tech.
1. Application of AFA for POSCO M-Tech Not Reporting Grants.
POSCO first argues that Commerce erred in applying AFA for POSCO M-Tech‘s failure to report certain R&D grants because the questionnaire did not require “that POSCO M-Tech report[] grants received by companies that no longer exist as ongoing entities.” POSCO‘s Br. at 11. Specifically, POSCO contends that Commerce‘s questionnaire did not require M-Tech “to report subsidies received by Ricco Metal and Nine-Digit prior to their acquisition by POSCO M-Tech.”
Commerce asked under Section D of its initial questionnaire, “Other Companies Subjection to Investigation,” for POSCO to report “alleged allocable, non-recurring subsidies that your company may have received during the AUL period” and provide a full response “if your company obtained all or substantially all the assets of another company during the AUL period and that company still exists as an ongoing entity.” Id. (citing Initial Countervailing Duty Questionnaire at 1-3). Ricco Metal and Nine-Digit ceased to exist as ongoing entities after their acquisition by M-Tech; therefore, according to POSCO, because that question called for subsidies provided to “ongoing entit(ies),” it did not include Ricco Metal or Nine-Digit subsidies. Id.
As discussed above,
POSCO contends that “POSCO M-Tech personnel at verification were not familiar with [the questionnaire] and thus initially responded incorrectly.” POSCO‘s Br. at 10. The “best of its ability” standard, however, “assumes that importers are familiar with the rules and regulations that apply to the import activities undertaken.” Nippon Steel, 337 F.3d at 1382. Because lack of familiarity is not a cognizable excuse for failure to report, it does not preclude the application of AFA. POSCO, moreover, also told Commerce that it exercised its discretion in not reporting the Ricco Metal and Nine-Digit subsidies because their value was small. “It is Commerce, not the respondent, that determines what information is to be provided for an administrative review.” Ansaldo Componenti, S.p.A. v. United States, 10 CIT 28, 37, 628 F. Supp. 198, 205 (1986). Commerce noted in the IDM that “M-Tech also explained that it exercised its discretion and did not report these subsidies because the value of the subsidies was small (internal citations omitted).” IDM at 42 (citing Verification Report at 28). Commerce thus made a factual finding that POSCO exercised discretion in not reporting the subsidies. Because Commerce asked for “any subsidies,” and M-Tech either neglected to fully respond to the questionnaire from lack of familiarity or improperly exercised its discretion in not reporting, which Commerce addressed in the IDM, this court finds that Commerce‘s application of AFA was supported by substantial evidence.
POSCO next contends that Commerce failed to “make the necessary factual findings to satisfy the requirements for countervailability.” POSCO‘s Br. at 15 (quoting Changzhou Trina Solar Energy Co., Ltd. v. United States, 40 CIT __, __, 195 F. Supp. 3d 1334, 1350 (2016) (citing
As has been noted, supra, p. 3, to determine that a countervailable subsidy exists, Commerce must find that the assistance provided by a government to the respondent “provide[s] a financial contribution,” is specific, and “confer[s] a benefit.”
Here, Commerce contends that because it had no information on the record, besides respondents’ own tax treatment of the grants as “government subsidies,” it permissibly applied
3. Rate Methodology.
POSCO contends that “Commerce‘s selection of the AFA rate is inconsistent with its
To calculate AFA rates in CVD investigations, Commerce uses a hierarchal methodology:
when selecting rates, we first determine if there is an identical program and take the highest calculated rate for the identical program. If there is no identical program above de minimis, we then determine if there is a similar/comparable program (based on treatment of the benefit) and apply the highest calculated rate for a similar/comparable program. Where there is no comparable program, we apply the highest calculated rate from any non-company specific program, but we do not use a rate from a program if the industry in the proceeding cannot use that program.
IDM accompanying Certain Frozen Warmwater Shrimp from the People‘s Republic of China: Final Affirmative Countervailing Duty Determination, 78 Fed. Reg. 50,391 (Dep‘t Commerce Aug. 19, 2013) at 13-14 (“Shrimp IDM“); see also Essar Steel Ltd. v. United States, 753 F.3d 1368, 1371 (Fed. Cir. 2014). Commerce then must “corroborate that information from independent sources that are reasonably at [its] disposal.”
Here, Commerce, consistent with its practice, applied its hierarchal methodology to determine POSCO‘s AFA rate. POSCO argues that Commerce should have stopped at the first step in its methodology: “tak[ing] the highest calculated rate for the identical program.” POSCO‘s Br. at 12 (citing Shrimp IDM at 13-14). However, Commerce‘s practice is to continue to the
4. Arbitrary and Capricious.
Lastly, with respect to M-Tech‘s R&D grants, POSCO contends that Commerce acted in an arbitrary and capricious manner when it applied AFA to the Ricco Metal and Nine-Digit R&D grants, where it had not done so with other M-Tech R&D grants discovered at verification. POSCO‘s Br. at 19-20. POSCO argues that Commerce failed to justify its decision to treat the grants differently by only applying AFA to the Ricco Metal and Nine-Digit R&D and not to other M-Tech grants. Id.
“An agency action is arbitrary when the agency offers insufficient reasons for treating similar situations differently.” SKF USA Inc. v. United States, 263 F.3d 1369, 1382 (Fed. Cir. 2001) (quoting Transactive Corp. v. United States, 91 F.3d 232, 237 (D.C. Cir. 1996)). Here, however, the situations were different: the grants for which Commerce examined unreported benefit information were previously reported and included inconsistences which Commerce sought to reconcile. Verification Report at 32. The Ricco Metal and Nine-Digit grants, however, were unreported. The court thus concludes that Commerce did not act in an arbitrary and capricious manner regarding M-Tech‘s R&D grants.
B. Application of AFA for POSCO Chemtech‘s Port Usage Grants.
POSCO challenges Commerce‘s application of AFA rates to POSCO for Chemtech‘s port usage grants, arguing that (1) there was no factual basis for Commerce to find that Chemtech failed
1. Factual Basis for AFA Application.
With respect to Commerce‘s treatment of Chemtech, POSCO first contends that Commerce erred in applying AFA rates to port usage grants because POSCO Chemtech‘s failure to report its port usage grants in the initial questionnaire was inadvertent. Id. at 23. POSCO argues that “POSCO Chemtech‘s failure to report these port usage grants in its initial response was due to simple human error and POSCO Chemtech responsibly made two attempts to remedy this error.” Id. POSCO maintains that “[t]he statute does not support the use of AFA on the basis of an inadvertent failure to cooperate.” Id. (quoting Trina Solar, 195 F. Supp. 3d at 1346). POSCO argues that Commerce‘s actions contravened the intent of the statute, as “it amounted to nothing more than punishment for a company that had never participated in a U.S. CVD investigation not discovering and reporting in its initial questionnaire response miniscule amounts of other assistance.” Id. at 24.
The court finds Commerce‘s application of AFA to POSCO Chemtech‘s port usage grants to be supported by substantial evidence and in accordance with law. As discussed, supra, p. 5,
Here, POSCO does not refute the fact that it failed to report port usage grants for Chemtech by the original deadline required. POSCO‘s Br. at 22. POSCO objects to Commerce‘s subsequent rejection of its attempts to report these port usage grants but acknowledges that Commerce did so based on “strict interpretation of its factual regulations.” Id. at 23. Because there is no dispute over POSCO‘s initial failure to report the grants or over the regulations under which Commerce rejected POSCO‘s subsequent attempts to report, the court must only address whether Commerce reasonably found that Chemtech failed to act to the best of its ability. In the IDM, Commerce found not only that Commerce failed to report its port usage grants between 2011 and 2015, but also that POSCO failed to cooperate fully with respect to Commerce inquiries about other forms of assistance. IDM at 37-38. Commerce explained its decision to reject POSCO‘s additional information:
M-Tech timely reported its receipt of port usage grants from Pohang Youngil Port in its first U.S. CVD questionnaire response. Further, weeks after POSCO Chemtech submitted its initial questionnaire response, POSCO reported the port usage grants that it received during the POI. POSCO Chemtech did not report its receipt of port usage grants at that time. Thus, we disagree with POSCO‘s argument that the application of facts available with respect to POSCO Chemtech‘s failure to report receipt.
Id. at 37. This court, therefore, determines that Commerce‘s finding that POSCO did not act to the best of its ability, as it did not “conduct prompt, careful, and comprehensive investigations of all relevant records,” to be supported by substantial evidence and in accordance with law. Nippon Steel, 337 F.3d at 1382. This action, moreover, was not arbitrary and capricious, as Commerce
2. Countervailable Benefit.
POSCO argues that even if Commerce had a factual and legal basis to apply AFA, “it failed to point to any record evidence to demonstrate that POSCO Chemtech received a countervailable benefit from the port usage grants because it has refused to accept for the official record any information that was submitted by POSCO Chemtech.” POSCO‘s Br. at 26. POSCO argues that Commerce failed to make the necessary findings regarding the benefit requirement in determining whether a subsidy is countervailable. Id. at 27. The court finds that Commerce supported its “benefit” determination with substantial evidence.
As discussed above, for a subsidy to be countervailable, it must provide the respondent a financial contribution, be specific, and provide a benefit.
The court finds that Commerce reasonably relied on AFA for purposes of finding benefit. Because Chemtech failed to timely report the port usage grants, Commerce lacked information on the record to determine whether the port usage grants provided a benefit. While Commerce could have re-opened the record “to make the prerequisite factual findings,” it was not required to do so. Id. In the IDM, Commerce explained the complete lack of information on the record, POSCO Chemtech‘s failure to cooperate, and its subsequent decision to apply adverse facts to the benefit
3. Arbitrary and Capricious.
POSCO also contends that Commerce‘s treatment of Chemtech was arbitrary and capricious because Commerce did not apply AFA and found that M-Tech‘s grants provided no benefit, but did apply AFA to find that Chemtech‘s port usage grants provided a benefit. POSCO‘s Br. at 28. “An agency action is arbitrary when the agency offers insufficient reasons for treating similar situations differently.” SKF USA Inc. v. United States, 263 F.3d 1369, 1382 (Fed. Cir. 2001) (quoting Transactive Corp. v. United States, 91 F.3d 232, 237 (D.C. Cir. 1996)). Here, however, Commerce provided sufficient reasons for treating M-Tech and Chemtech‘s port usage grants differently. As the Government explained in its brief, “POSCO Chemtech‘s port usage grants did not constitute a previously reported program, but rather new information.” Def.‘s Br. at 43. In the case of POSCO M-Tech, the grants had previously been reported, but Commerce “noted certain inconsistencies during [its] examination of POSCO M-Tech‘s grants with respect to ‘R&D Grants under ITIPA,‘” POSCO Verification Report at 32, and was reconciling certain inconsistences observed at verification for a previously reported program, id. Thus, the court concludes that Commerce did not act in an arbitrary and capricious manner because it offered sufficient reasons for treating M-Tech and Chemtech differently with regards to determining whether their respective grants provided a benefit.
C. Treatment of Chemtech‘s R&D Grant.
Nucor challenges Commerce‘s decision to treat Chemtech‘s R&D grants as recurring, as well as its decision not to apply AFA to Chemtech for failure to report these grants. Nucor‘s Br. at 38. In particular, Nucor argues that Commerce abused its discretion by “treating the exact same
“[I]f Commerce has a routine practice for addressing like situations, it must either apply that practice or provide a reasonable explanation as to why it departs therefrom.” Save Domestic Oil, Inc. v. United States, 357 F.3d 1278, 1283-84 (Fed. Cir. 2004). The analysis thus becomes whether Commerce had a standard practice, whether it deviated from this practice, and whether it provided a reasonable explanation for the deviation.
The agency record shows that POSCO and Chemtech reported R&D grants as recurring, but Commerce found in its Preliminary Determination that they were non-recurring. PDM at 27 n.149. Commerce issued supplemental questionnaires but “inadvertently addressed this questionnaire only to POSCO and not to any other firm which submitted a complete questionnaire response to the Department.” IDM at 47. In other words, Commerce addressed a supplemental questionnaire to POSCO but not to POSCO Chemtech.
As Commerce explained in the IDM:
Given that the Department did not address the supplemental questionnaire to POSCO Chemtech and that in the course of this investigation the Department issued questionnaires directly to POSCO‘s cross-owned companies, the Department determines that POSCO Chemtech did not have notice that it was required to respond to the supplemental questionnaire concerning the ITIPA program. Consequently, consistent with section 782(d) of the Act, we determine that the application of AFA in this instance is unwarranted. As discussed above, POSCO, POSCO M-Tech, and POSCO Chemtech timely responded to the Department‘s initial questionnaire to state that they considered grants received under the ITIPA to be recurring. For example, each company stated that the grants under this program span multiple years and that the funds received each year from the government are set out in the original contract. Because there is no other information on the record with respect to POSCO Chemtech‘s use of the ITIPA program, the Department finds that, with respect to POSCO Chemtech only, it is appropriate to treat these grants as recurring.
D. Application of AFA for Hyundai Corporation‘s Reporting Error.
POSCO next challenges Commerce‘s application of AFA to Hyundai and its attribution of this rate to POSCO, arguing that Commerce‘s actions were not supported by substantial evidence and not in accordance with law. POSCO‘s Br. at 28. At issue here is Commerce‘s application of AFA to assistance received by Hyundai under Korea‘s Restriction on Special Taxation Act (“RSTA“) Article 22. Def.‘s Br. at 22. POSCO first argues that Commerce erred in applying AFA to Hyundai because Hyundai‘s reporting mistake was in an advertent error, and thus does not show that Hyundai “failed to cooperate by not acting to the best of its ability.” POSCO‘s Br. at 29 (quoting
As discussed above, intent is not relevant to whether Hyundai acted to the best of its ability; rather, importers are expected to understand the organization of their own records and to diligently search their records for the information requested by Commerce. Nippon Steel, 337 F.3d at 1382. Here, Hyundai provided the wrong year‘s tax returns, and explicitly asserted that it received no income tax deductions, exemptions, or benefits, other than a tax credit under Article 57 of the Corporate Tax Act. IDM at 51; Hyundai Initial Questionnaire Resp. at 26-27. Because Hyundai
POSCO next argues that “[e]ven if the Court concludes that Commerce‘s application of AFA to Hyundai Corporation was proper, which it should not, there is no lawful basis to have attributed the 1.05 percent AFA rate to POSCO [because] Hyundai [] is an unaffiliated trading company, POSCO has no ownership or control of it, and POSCO was not responsible for the inadvertent human error in Hyundai Corporation‘s separate response and had no ability to induce Hyundai Corporation not to make this inadvertent error.” POSCO‘s Br. at 30. The Government contends that Commerce was justified in attributing Hyundai‘s AFA rates to POSCO under its regulations, and that, in any event, “POSCO produced all of the subject merchandise exported through Hyundai” and “was in a position to induce the company to cooperate.” Def.‘s Br. at 48 (citing IDM at 53).
Under Mueller Comercial de Mexico, S. de R.L. De C.V. v. United States, Commerce may apply AFA rates when the respondent “could and should have induced [the unaffiliated party‘s] cooperation by refusing to do business . . . stating that [the unaffiliated party] could otherwise evade its antidumping rate by funneling its goods through [respondent].” Id. at 1233. In that case, the Federal Circuit “conclude[d] that Commerce may rely on such policies as part of a margin determination for a cooperating party . . . as long as the application of those policies is reasonable on the particular facts and the predominant interest in accuracy is properly taken into account as well.” Id.
While the Government and POSCO dispute whether POSCO had the power to induce Hyundai to comply fully with the investigation, the court concludes that the inducement analysis
E. CVD AFA Methodology.
POSCO next argues that Commerce failed to “explain[] the circumstances that justified its usage of the highest non-de minimis rates available and just applied its AFA CVD methodology” in violation of
The Government argues that, “[f]ar from acting ‘automatically’ to apply the highest calculated rates, Commerce thoroughly explained the discoveries of previously unreported information at verification which warranted an adverse inference.” Def.‘s Br. at 51 (internal
Because Commerce failed to evaluate -- beyond its adverse inference determination -- why the highest available rate should apply to POSCO, this court remands the final determination to Commerce. In its brief, the Government contends that
CONCLUSION
With the exceptions of the countervailability determination of M-Tech‘s R&D grants and the application of the highest AFA rates, the court concludes that the Final Determination is in accordance with law and supported by substantial evidence. The court remands Commerce‘s countervailability determination of M-Tech‘s grants and the application of the highest AFA rates for reconsideration consistent with this opinion. Commerce shall file with this court and provide to the parties its remand results within 90 days of the date of this order; thereafter, the parties shall have 30 days to submit briefs addressing the revised final determination to the court and the parties shall have 15 days thereafter to file reply briefs with the court.
SO ORDERED.
/s/ Gary S. Katzmann
Gary S. Katzmann, Judge
Dated: December 6, 2018
New York, New York
Notes
If [Commerce] determines that it is not practicable to determine individual countervailable subsidy rates [in investigations or administrative reviews] because of the large number of exporters or producers involved in the investigation or review, [Commerce] may—
(A) determine individual countervailable subsidy rates for a reasonable number of exporters or producers by limiting its examination to—
(i) a sample of exporters or producers that the administering authority determines is statistically valid based on the information available to the administering authority at the time of selection, or
]]. POSCO‘s Sixth Suppl. Questionnaire Resp. at 1, 4, Ex. 38.