In this consolidated action, Plaintiff POSCO ("POSCO"), Plaintiff Nucor Corporation
POSCO (a Korean cold-rolled steel producer) challenges Commerce's use of the facts available with an adverse inference (referred to as "adverse facts available" or "AFA") for several reporting errors and its selection and corroboration of adverse facts available rates. See Confidential Mot. of Pl. POSCO for J. on the Agency R., ECF No. 53, and Confidential Pl. POSCO's Br. in Supp. of its Mot. for J. on the Agency R. ("POSCO Mot.") at 2-3, ECF No. 59-1. Nucor and Plaintiff-Intervenors (domestic cold-rolled steel producers) (collectively, "Nucor") challenge Commerce's finding that the Government of Korea ("GOK") did not provide electricity for less than adequate remuneration and its decision not to use adverse facts available with respect to the electricity program based on the GOK's questionnaire responses. See Confidential Pl. Nucor Corp. and Pl.-Ints. ArcelorMittal USA LLC, AK Steel Corp, and United States Steel Corp.'s Rule 56.2 Mot. for J. on the Agency R. ("Nucor Mot.") at 2-3, ECF No. 56. Defendant United States ("Defendant" or the "Government") supports Commerce's determination. See generally Confidential Def.'s Resp. to Pls.' Mots. For J. Upon the Agency R. ("Gov. Resp"), ECF No. 65.
For the following reasons, the court remands Commerce's selection of the highest calculated rate as POSCO's AFA rate and Commerce's selection of an AFA rate that is itself based on adverse facts available. Accordingly, the court grants, in part, POSCO's motion with respect to those issues,
BACKGROUND
I. Legal Framework
A. Basic CVD Principles
Commerce "impose[s] countervailing duties on merchandise that is produced with the benefit of government subsidies" when the various statutory criteria are met. Fine Furniture (Shanghai) Ltd. v. United States ,
B. Sales for Less than Adequate Remuneration
A countervailable benefit includes the provision of goods or services "for less than adequate remuneration."
Commerce's regulations prescribe a three-tiered approach for determining the adequacy of remuneration. See
In the Preamble to the final rule implementing Commerce's CVD regulations, Commerce explained that a Tier 3 analysis requires an examination of "such factors as the government's price-setting philosophy,[
In Magnesium from Canada , Commerce explained that examining the preferential provision of electricity first requires a comparison of "the price charged with the applicable rate on the power company's non-specific rate schedule."
C. Facts Available and Adverse Facts Available
When an interested party "withholds information" requested by Commerce, "significantly impedes a proceeding," "fails to provide [ ] information by the deadlines for submission of the information," or provides information that cannot be verified pursuant to 19 U.S.C. § 1677m(i), Commerce shall use the "facts otherwise available" (or "FA") in making its determination.
"Compliance with the 'best of its ability' standard is determined by assessing whether a respondent has put forth its maximum effort to provide Commerce with full and complete answers to all inquiries in an investigation." Nippon Steel Corp. v. United States,
must [ ] make a subjective showing that the respondent['s] ... failure to fully respond is the result of the respondent's lack of cooperation in either: (a) failing to keep and maintain all required records, or (b) failing to put forth its maximum efforts to investigate and obtain the requested information from its records.
"An adverse inference may not be drawn merely from a failure to respond."
When applying an adverse inference, Commerce may rely on information derived from the petition, a final determination in the investigation, a previous administrative review, or any other information placed on the record. See 19 U.S.C. § 1677e(b)(2) ;
D. Selecting an AFA Rate
Section 1677e(d) governs Commerce's selection of subsidy rates to apply as adverse facts available. In a CVD proceeding, Commerce may "use a countervailable subsidy rate applied for the same or similar program in a countervailing duty proceeding involving the same country; or [ ] if there is no same or similar program, use a countervailable subsidy rate for a subsidy program from a proceeding that the administering authority considers reasonable to use." 19 U.S.C. § 1677e(d)(1)(A). Commerce "may apply any of the countervailable subsidy rates ... specified under [ ] paragraph [1], including the highest such rate or margin, based on the evaluation by [Commerce] of the situation that resulted in [the agency] using an adverse inference in selecting among the facts otherwise available."
II. Prior Proceedings
In August 2015, Commerce initiated a CVD investigation of cold-rolled steel from several countries. See Certain Cold-Rolled Steel Flat Products from Brazil, India, the People's Republic of China, the Republic of Korea, and the Russian Federation ,
A. Questionnaire Responses
1. POSCO
During the investigation, Commerce issued to POSCO a series of questions regarding its affiliated companies. See POSCO CVD Questionnaire (Sept. 16, 2015) at 2-3, CJA Tab 6, PJA Tab 6, PR 77, ECF No. 77. POSCO submitted a joint response on behalf of itself and its affiliated trading company DWI. See generally POSCO Affiliated Companies Resp. (Sept. 30, 2015) ("POSCO AQR"), CJA Tab 7, CR 41, PJA Tab 7, PR 84, ECF No. 77. In particular, Commerce asked POSCO to "[s]pecify whether an affiliated company supplies inputs
Commerce also asked POSCO about subsidies to companies located in free economic zones ("FEZ"). See POSCO Initial Questionnaire Resp. (Oct. 23, 2015) ("POSCO IQR") at 52, CJA Tab 8, CR 58-102, PJA Tab 8, PR 120-138, ECF No. 77. POSCO reported that it "has no facilities located in a [FEZ] and thus was not eligible for and did not receive any tax reductions, exemptions, grants or financial support under any of the [ ] programs listed in [Commerce's] question."
Commerce inquired about loans to POSCO and DWI from the Korean Resources Corporation ("KORES") and the Korea National Oil Corporation ("KNOC").
2. The Government of Korea
Relevant here, Commerce requested that the GOK provide information regarding the Korean electricity industry and market generally, and the Korea Electric Power Corporation ("KEPCO") specifically. See GOK CVD Questionnaire (Sept. 16, 2015), Sect. II at 2-7, CJA Tab 5, PJA Tab 5, PR 76, ECF No. 77. KEPCO is a "state-owned entity," Decision Mem. for the Prelim. Neg. Determination (Dec. 15, 2015) ("Prelim. Mem.") at 30, CJA Tab 17, PJA Tab 17, PR 338, ECF No. 78 (citation omitted),
The GOK explained that electricity is generated by "[i]ndependent power generators, community energy systems, and KEPCO's six subsidiaries." GOK QR at
Commerce issued to the GOK a supplemental questionnaire asking it to clarify MOSF's review process. The Republic of Korea's Resp. to CVD Suppl. Questionnaire (Nov. 20, 2015) ("GOK Suppl. QR") at 9, CJA Tab 13, CR 369-377, PJA Tab 13, PR 300-304, ECF No. 78. The GOK responded that "MOSF normally does not engage in a detailed review of the proposed change to the tariff rate schedule, as long as the proposed changes are not inconsistent with general price trends in Korea."
As to FEZ-related benefits, the GOK stated that "[d]uring the investigation period, none of the respondents received tax reductions or exemptions, lease-fee reductions or exemptions, or grants or financial support due to their location in an FEZ." GOK QR at 108.
On the basis of the questionnaire responses, Commerce issued a preliminary negative determination, calculating a de minimis subsidy rate for POSCO of 0.18 percent. Countervailing Duty Investigation of Certain Cold-Rolled Steel Flat Products from the Republic of Korea ,
B. Verification
1. POSCO and DWI
Commerce conducted verification at POSCO from March 13 to March 17, 2017, in Seoul, Korea, and at DWI on March 18, 2016. Verification of POSCO and its Cross-Owned Affiliates' Questionnaire Resp. (March 7, 2016) ("POSCO Verification Agenda") at 1, CJA Tab 18, CR 394, PJA Tab 18, PR 376, ECF No. 78. Before verification, Commerce instructed POSCO to make available original records substantiating the information reported in its questionnaire responses, and to "[b]e prepared to demonstrate that none of POSCO's other affiliated companies provided inputs for the production of cold-rolled steel or otherwise would fall under our attribution regulations."
Cross-Owned Input Suppliers
At verification, a POSCO official reiterated that no raw material inputs were purchased from Korean affiliated companies. Verification Report: POSCO and Daewoo Int'l Corp. (Apr. 29, 2016) ("POSCO Verification Report") at 16, CJA Tab 29, CR 454, PJA Tab 29, PR 397, ECF No. 79.
DWI's Loans
At DWI's verification, POSCO presented "two new loans" under the KORES program as "minor corrections." POSCO Verification Report at 3. Commerce "did not explicitly state that [it] would accept the submission as a minor correction at the time of verification."
POSCO's Global R & D Center
While verifying that DWI was not located in an FEZ, Commerce learned that a POSCO facility, named POSCO Global R & D Center (the "R & D facility"), "was listed on the official Incheon FEZ government website as being located in the Incheon FEZ." I & D Mem. at 72-73; see also POSCO Verification Report at 2, 38-39. When asked about the R & D facility's "location and purpose," a POSCO official "presented a map printed from a Korean website [with] a hand-drawn border surrounding what they claimed to be the FEZ," which purported to show that the R & D facility was located outside the FEZ. I & D Mem. at 73. Commerce compared the hand-drawn map to the map from the Incheon government website and noted several discrepancies.
2. The Government of Korea
Commerce conducted verification of the GOK's questionnaire responses from March 14 to March 25, 2016. I & D Mem. at 2. Commerce did not, however, verify the GOK's provision of electricity for less than adequate remuneration; instead, the agency relied on the verification conducted as part of its investigation into corrosion-resistant steel ("CORE") from Korea. See
C. Final Determination and Amended Final Determination
In the Final Determination , Commerce announced a countervailing duty rate of
With regard to selecting rates to use for these programs, Commerce explained that "[i]t is the [agency's] practice in CVD proceedings to compute an AFA rate for non-cooperating companies using the highest calculated program-specific rates determined for a cooperating respondent in the same investigation, or, if not available, rates calculated in prior CVD cases involving the same country."
Specifically, [Commerce] applies the highest calculated rate for the identical subsidy program in the investigation if a responding company used the identical program, and the rate is not zero. If there is no identical program match within the investigation, or if the rate is zero, [Commerce] uses the highest non-de minimis rate calculated for the identical program in a CVD proceeding involving the same country. If no such rate is available, [Commerce] will use the highest non-de minimis rate for a similar program (based on treatment of the benefit) in another CVD proceeding involving the same country. Absent an above-de minimis subsidy rate calculated for a similar program, [Commerce] applies the highest calculated subsidy rate for any program otherwise identified in a CVD case involving the same country that could conceivably be used by the non-cooperating companies.
Commerce did not expressly state which hierarchical provision(s) it relied on in this proceeding. See
Commerce also affirmed its preliminary determination that the GOK's provision of electricity was not for less than adequate remuneration, and was not, therefore, countervailable. I & D Mem. at 45.
In response to ministerial error comments submitted by POSCO, Commerce selected a different program rate for certain of POSCO's programs. Resp. to Ministerial Error Cmts. Filed by Hyundai Steel Co. Ltd and POSCO (Aug. 24, 2016) ("Ministerial Error Mem.") at 3-4, CJA Tab 43, PJA Tab 43, PR 451, ECF No. 79. Instead of the 1.65 percent rate derived from Refrigerators from Korea , Commerce selected a 1.64 percent rate associated with a K-SURE Short-Term Export Insurance program found countervailable in that proceeding.
JURISDICTION AND STANDARD OF REVIEW
The court has jurisdiction pursuant to § 516A(a)(2)(B)(i) of the Tariff Act of 1930, as amended, 19 U.S.C. § 1516a(a)(2)(B)(i), and
The court will uphold an agency determination that is supported by substantial evidence and otherwise in accordance with law. 19 U.S.C. § 1516a(b)(1)(B)(i). "Substantial evidence is 'such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.' " Huaiyin Foreign Trade Corp. (30) v. United States ,
DISCUSSION
I. POSCO's Rule 56.2 Motion for Judgment upon the Agency Record
A. Commerce's AFA Determinations
POSCO challenged three applications of AFA. Each is discussed, in turn.
1. Inputs from Affiliated Suppliers
a. Parties' Contentions
POSCO contends that Commerce erred in finding that it had failed to cooperate to the best of its ability when it declined to report inputs from four affiliates because POSCO held an objectively reasonable belief that those inputs were not primarily dedicated to the production of the downstream product (hereinafter referred to as
The Government contends that Commerce's determination to rely on adverse facts available for POSCO's failure to report inputs it received from four cross-owned companies is adequately supported. See Gov. Resp. at 28-32. The Government argues that POSCO's reason for withholding the information is "irrelevant"; "[b]ecause POSCO was able to provide more information than it did, POSCO did not put forth its 'maximum' efforts to comply with Commerce's questionnaires."
Petitioner Defendant-Intervenors contend that POSCO may not withhold information requested based on legal conclusions it has drawn from that information. Pet'r Def.-Int. Resp. at 3-5. Petitioner Defendant-Intervenors note that POSCO did not inform Commerce that it was responding to its questionnaires based on its own "reasonable belief" that it need not provide the information, but instead stated unequivocally that it had no affiliated Korean companies supplying inputs to the production of the subject merchandise. Id. at 5-6 (citing POSCO AQR at 4, 5 & Ex. 1 at 1). Petitioner Defendant-Intervenors further contend that POSCO's arguments regarding "the merits of the 'primarily dedicated' issue should be foreclosed by its failure to disclose [the] requested information," and that they nevertheless "fail because they are based on a mischaracterization of Commerce's attribution rules and practice." Id. at 7.
b. Analysis
As an initial matter, substantial evidence supports Commerce's decision to apply facts available. The statute provides that Commerce shall rely on the facts available when a respondent withholds requested information, "significantly impedes a proceeding," or provides information after the deadline for submission. 19 U.S.C. § 1677e(a)(2). Here, Commerce relied on facts available on the basis of POSCO's inaccurate questionnaire responses and the "conflicting information discovered at verification." I & D Mem. at 10.
There is no dispute that POSCO withheld information regarding its cross-owned input suppliers in its questionnaire responses. See POSCO AQR at 4-5; POSCO 2nd Suppl. QR at 1. At verification, Commerce discovered that POSCO's affiliates supplied limestone, scrap, ferro-molybdenum, and high purity ferro-manganese for use in producing POSCO's cold-rolled steel. POSCO Verification Report at 5-17; POSCO Verification Ex. 3 at ECF pp. 92-94. POSCO's inaccurate questionnaire responses
Substantial evidence further supports Commerce's decision to apply an adverse inference, which was otherwise in accordance with law. Commerce "may use an inference that is adverse to the interests of [a respondent] in selecting from among the facts otherwise available" when the respondent "fail [s] to cooperate by not acting to the best of its ability to comply with a request for information." 19 U.S.C. § 1677e(b)(1)(A). Here, Commerce concluded that POSCO had failed to act to the best of its ability because it "failed to report the necessary information and only after discovery at verification did it report on the last day that some of the inputs provided by ... affiliated companies were, in fact, used in the production of the subject merchandise." I & D Mem. at 68-69 & nn.327-31 (citing Nippon Steel ,
Commerce's questionnaire was framed in general terms; it did not expressly limit POSCO's scope of response to only those suppliers that provided inputs POSCO considered primarily dedicated for purposes of Commerce's attribution regulation. See POSCO AQR at 4-5. Commerce reasonably expected POSCO to have provided the affiliated supplier information in its questionnaire response or to have informed Commerce of its basis for withholding the information so that Commerce could investigate POSCO's position. See I & D Mem. at 64 ("If POSCO had explained that it was not providing information on certain companies because they were not primarily dedicated in the affiliated questionnaire response, [Commerce] would have had the opportunity to follow-up on this claim."). Instead, POSCO unequivocally stated that no Korean affiliates supplied inputs for the production of subject merchandise. POSCO AQR at 5; see also POSCO 2nd Suppl. QR at 1 (affirming "that it believes it has provided responses for all cross-owned companies that fall within
POSCO acknowledges that it withheld information about its affiliated input suppliers on the basis of its own belief about the relevance of the information. See, e.g. , POSCO Mot. at 13-14, 19-22; POSCO Case Br. at 12. POSCO's conduct, therefore, may not precisely constitute a failure to exert "maximum efforts to investigate and obtain the requested information from its records," Nippon Steel ,
POSCO's reliance on its purported objectively reasonable belief about the irrelevance of the inputs is unavailing. See POSCO Mot. at 19-22; POSCO Reply at 8-9. Although Commerce's regulations speak to the attribution of subsidies obtained by a cross-owned "input supplier and a downstream producer" when "the input product is primarily dedicated to production of the downstream product,"
POSCO's related assertion that Commerce's reliance on adverse facts available is unsubstantiated because POSCO accurately responded to Commerce's questionnaire is also unavailing. See POSCO Mot. at 13-19 (arguing that evidence establishes that the unreported inputs were not primarily dedicated). First, it bears repeating that Commerce did not limit its inquiry to only those inputs POSCO deemed primarily dedicated. See, e.g. , POSCO AQR at 4. Second, as discussed below, POSCO's evidentiary argument also fails.
To support its argument, POSCO points to two categories of information: (1) the respective proportion of each affiliates' sales of their inputs to POSCO as a percentage of their total sales, and (2) the respective proportion of each affiliates' total sales to POSCO as a portion of their total sales. See POSCO Mot. at 16-18; POSCO Case Br. at 13-19; POSCO's Rebuttal Br. (May 25, 2016) at 10-19, CJA Tab 35, CR 462-63, PJA Tab 35, PR 424-25, ECF No. 79. Commerce addressed the first category of information, but not the latter. See I & D Mem. at 66-67. The court will discuss both.
In the Issues and Decision Memorandum, Commerce explained its rejection of POSCO's reliance on the amount of each input sold to POSCO on the basis that POSCO had untimely attempted to submit that factual information at verification. See I & D Mem. at 66-67 & nn.315-318 (citing POSCO Verification Report at 5-17; POSCO Verification Ex. 3 at ECF pp. 92-94; Countervailing Duty Investigation of Certain Corrosion-Resistant Steel Products From India ,
First, Commerce had notified POSCO that "verification is not intended to be an opportunity for the submission of new factual information." POSCO Verification Agenda at 2. Indeed, "[v]erification is intended to test the accuracy of data already submitted, rather than to provide a respondent with an opportunity to submit a new response." Tianjin Mach. Import & Export Corp. v. United States ,
Second, POSCO misconstrues OCTG from Turkey . Therein, Commerce chose not to verify information the Government of Turkey ("GOT") submitted before verification because it had accepted the "accuracy of th[at] information ... on its face." OCTG from Turkey , I & D Mem. at 54. Commerce explained that "unless the GOT planned to provide new factual information at verification or claim that its own submissions were false, then verification would have no effect on the final determination."
Third, in CORE from India , although Commerce explained that its attribution regulations "do not contemplate the amount of the input provided by a supplier as a gauge for whether that company should submit a response," as here, Commerce applied adverse facts available for the respondent's failure to report an affiliated input supplier. CORE from India , I & D Mem. at 33. In so doing, Commerce rejected the respondent's argument "that the amount of the input involved is small" because Commerce did "not consider the data collected to be complete and verified."
Fourth, POSCO's reliance on Washers from Korea and Lumber from Canada is unavailing. In Washers from Korea , Commerce based its primary dedication determination on the small amount of the affiliates' sales of inputs to the respondent as a proportion of their total sales, and that most of the affiliates' products are used to produce a variety of products that are sold to customers other than the respondent. See Washers from Korea , I & D Mem. at 3 (citing CVD Preamble ,
Finally, POSCO's reliance on Changzhou Trina Solar is also unavailing. See POSCO Mot. at 18-19 (citing Changzhou Trina Solar ,
Changzhou Trina Solar involved the countervailability of the alleged subsidies.
The quantity of the respective inputs sold by the affiliates to POSCO (in absolute terms and as a proportion of the affiliates' sales) does not " 'fairly detract' from the reasonableness of [Commerce's] conclusion[ ]." Changzhou Trina Solar ,
As to POSCO's second category of information, data regarding each affiliate's total material sales to POSCO as a percentage of its total sales was on the record from the time of POSCO's initial questionnaire response. See POSCO IQR, Ex. 12 (POSCO's 2013-2014 Audited Non-Consolidated Financial Statements), Note 37(a) (supplying POSCO's total purchases of material from its subsidiaries) and Ex. 20 (POSCO's
The facts available provisions of the statute allow Commerce to fill gaps in the record and, when necessary conditions have been met, to do so with an adverse inference. "When key data are missing from the record ... Commerce can take proof from the far reaches of the record to close evidentiary gaps that the parties never filled." RZBC ,
POSCO essentially argues that Commerce should have filled the primary dedication gap by way of an inference drawn from its proffered and potentially favorable facts. See, e.g. , POSCO Mot. at 16-18.
2. POSCO's R & D Facility
a. Parties' Contentions
POSCO contends that Commerce wrongly decided to apply adverse facts available for its failure to report a facility located in an FEZ because the Government of Korea reported that POSCO did not receive any benefits from having such a facility during the "investigation period." POSCO Mot. at 36-39 (citing GOK QR at 108); POSCO Reply at 17-19. POSCO asserts that the GOK's reference to "investigation period" reasonably means "the entire [average useful life ("AUL") period of
The Government contends that Commerce's decision to apply adverse facts available for POSCO's failure to report this R & D facility is supported by substantial evidence, as is Commerce's decision to draw the adverse inference that POSCO benefitted from the FEZ program. Gov. Resp. at 38-39, 41. The Government further contends that Commerce correctly determined that the reference to "investigation period" was ambiguous, and record evidence demonstrates that the phrase may have been limited to the POI, undermining POSCO's argument that the GOK's response demonstrated that POSCO received no benefit from having a facility located in an FEZ. Id. at 40.
Petitioner Defendant-Intervenors contend that record evidence demonstrates the FEZ program's countervailability. Pet'r Def.-Int. Resp. at 16 (citing CVD Investigation Initiation Checklist (Aug. 17, 2015) at 28, CJA Tab 2, CR 25-29, PJA Tab 2, PR 46-50, ECF No. 77). Petitioner Defendant-Intervenors further contend that the GOK's response "cannot remedy POSCO's inaccurate reporting of its own facilities and benefits." Id. at 17.
b. Analysis
Commerce's determination to apply adverse facts available for POSCO's failure to report the R & D facility is supported by substantial evidence and is otherwise in accordance with law. Here, POSCO reported that it "has no facilities located in a [FEZ] and thus was not eligible for and did not receive any tax reductions, exemptions, grants or financial support under any of the [ ] programs listed in [Commerce's] question." POSCO IQR at 52. However, at verification, Commerce learned that POSCO's R & D facility is listed on an official GOK website as being located in an FEZ. I & D Mem. at 73-74; POSCO Verification Report at 38. When asked to clarify the purpose and location of the R & D facility, POSCO provided a hand-drawn map contradicting the official map, and refused to accompany Commerce to the R & D facility so that it could gather additional information. I & D Mem. at 73; POSCO Verification Report at 39. Accordingly, Commerce reasonably determined that POSCO had failed to put forth its maximum efforts to provide the requested information. Cf. Essar Steel I ,
Commerce's adverse inference that POSCO benefitted from the FEZ program is also supported by substantial record evidence. Commerce relied on evidence that POSCO had a facility within an FEZ. POSCO Verification Report at 38-39. Commerce further explained that because the GOK did not clarify whether its reference to the "investigation period" in its response meant the POI or the entire 15-year AUL of the subject merchandise, I & D Mem. at 73-74, POSCO does "not have an affirmative claim of non-use for [the FEZ] program for the remainder of the 15-year AUL period from the GOK." Id. at 81 (noting that the GOK uses "investigation period" to refer to the POI "throughout its initial questionnaire response").
3. DWI's Loans
POSCO contends that Commerce erred in rejecting the additional KORES loans as minor corrections and in applying adverse facts available for DWI's failure to report the loans. POSCO Mot. at 40-44; POSCO Reply at 20-22. The Government contends that Commerce properly rejected DWI's corrections because the information significantly altered the amount of reported lending and properly applied adverse facts available because DWI "categorically withheld the information" regarding one type of loan. Gov. Resp. at 43-48; see also Pet'r Def.-Int. Resp. at 17-18. Parties agree, however, that this issue is mooted in the event the court affirms Commerce's use of adverse facts available with regard to POSCO's affiliated input suppliers. See Gov. Resp. at 42; Oral Arg. at 2:05:53-2:06:05. Because the court affirms Commerce's use of adverse facts available with regard to POSCO's affiliated input suppliers, the court need not and does not further address this issue.
B. Commerce's Use of the Highest Calculated Rates
1. Parties' Contentions
POSCO contends that Commerce applied the highest calculated subsidy rate without evaluating the circumstances that led the agency to apply an adverse inference, which it further contends did not merit the highest calculated rate. POSCO Mot. at 22-26; POSCO Reply at 12-14.
The Government contends that 19 U.S.C. § 1677e(d)(2)-(3)"codif[ied] Commerce's practice of using an adverse facts available hierarchy in countervailing duty cases when selecting adverse facts available rates for subsidy programs," and that in "selecting the adverse facts available rates, Commerce was guided by its well-established methodology." Gov. Resp. at 49 (citations omitted). The Government further contends that the Federal Circuit has affirmed its practice,
In reply, POSCO asserts that the statute "tempers Commerce's ability to use the highest ... rates" by requiring an evaluation of the underlying circumstances that resulted in the adverse inferences. POSCO Reply at 12 (citing 19 U.S.C. § 1677e(d)(2) ). POSCO notes that the Federal Circuit decided Essar Steel II before § 1677e was amended to include subsection (d)(3) and did not directly address Commerce's adverse facts available methodology, but rather involved a challenge to Commerce's corroboration of the selected rates.
2. Analysis
In addressing its selection of adverse facts available rates, Commerce explained that it relied on its "practice" to select the highest calculated rates within its hierarchical methodology. See I & D Mem. at 12 & nn. 41-42.
In considering whether Commerce's determination is in accordance with law, the court's review of the agency's statutory interpretation is guided by the two-step framework provided in Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc. ,
In their written submissions, none of the parties address § 1677e(d)(2) under the Chevron framework. The Government asserts that Commerce considered the circumstances that gave rise to the use of adverse facts available-and thereby complied with § 1677e(d)(2) -when it "thoroughly explained the multiple discoveries at verification of previously unreported information." Gov. Resp. at 50 (citing I & D Mem. at 9-12); see also Pet'r Def.-Int. Resp. at 19-21. In other words, according to the Government, the evaluation contemplated by § 1677e(d)(2) is encompassed by Commerce's decision to rely on adverse facts available, and no further analysis is required. At oral argument, the Government stated that, pursuant to a Chevron step two analysis, Commerce reasonably exercised its discretion in selecting the
To be clear, the issue is not whether Commerce's hierarchical methodology as a whole complies with the statute, but whether Commerce's unexplained selection of the highest rates within each prong of its hierarchy complies with § 1677e(d)(2) ; the answer is no.
Section 1677e(d)(1) codifies Commerce's hierarchy for selecting a rate in an adverse facts available situation. Section 1677e(d)(2) both elaborates that the application of the hierarchy provides Commerce with the discretion to apply the highest countervailing duty rate, and limits Commerce's exercise of that discretion. Congress has directed Commerce to base its selection of the subsidy rate-highest or not-on an "evaluation ... of the situation that resulted in the [agency] using an adverse inference." 19 U.S.C. § 1677e(d)(2) (emphasis added). Thus, the statute contemplates a case-specific evaluation as part of Commerce's selection from among a range of rates. Moreover, because the requirement for this evaluation was added to the pre-existing statutory requirements for using adverse facts available, clearly some additional evaluation is required beyond that which justified the adverse inference. Otherwise, Congress could simply have stated that Commerce "may apply any of the countervailable subsidy rates or dumping margins specified under that paragraph, including the highest such rate or margin," and omitted the remaining text. See
The Government's attempt to rely on the factual circumstances meriting the application of adverse facts available as evidence of Commerce's evaluation pursuant to § 1677ed)(2) is unavailing. That the facts merited the use of an adverse inference does not necessarily mean that those same facts merited selection of the highest rate. Moreover, the court may not weigh the evidence justifying a particular decision in the first instance; that is Commerce's province. See Bowman Transp., Inc. v. Ark.-Best Freight System, Inc. ,
Likewise, the court is not persuaded by the Government's argument that Commerce's practice properly "ensure[s] that Commerce applies a sufficiently adverse rate to ensure that a party does not achieve a better rate by not cooperating than if it had cooperated fully." Gov. Resp. at 49 (citing SAA at 870) (emphasis added). Although the SAA permits Commerce to "employ adverse inferences ... to ensure that the party does not obtain a more
In sum, § 1677e(d)(2) contemplates the selection of the highest rate when the situation merits the highest rate. See 19 U.S.C. § 1677e(d)(2). Commerce failed to evaluate whether the circumstances in this case merited the highest rate. Accordingly, its determination is remanded for reconsideration and further explanation.
C. Corroboration of the Selected Rates
1. Parties' Contentions
POSCO contends that Commerce's discussion of the corroboration requirement in the Issues and Decision Memorandum reflects a misinterpretation of its statutory obligation. POSCO Mot. at 27-30. POSCO further contends that, to the extent that Commerce's discussion of its corroboration of the 1.64 percent rate from Refrigerators from Korea in the Ministerial Error Memorandum supersedes the Issues and Decision Memorandum, "POSCO's statutory argument remains as to the 1.05 percent rate" obtained from Washers from Korea . Id. at 31; POSCO Reply at 15-16. POSCO asserts, however, that Commerce's failure to corroborate the 1.05 percent rate renders the agency's reliance on that rate unsupported by substantial evidence, and "Commerce's attempt to corroborate the 1.64 percent rate is not supported by substantial evidence." POSCO Mot. at 31; see also id. at 31-36; POSCO Reply at 16.
The Government contends that Commerce's inability to corroborate the selected rates using independent data on company-specific benefits means that Commerce corroborated the rates "to the extent practicable." Gov. Resp. at 50-51; see also Pet'r Def.-Int. Resp. at 21 (concurring with the Government). According to the Government, because Commerce selected the rates pursuant to its established hierarchy, they are "properly corroborated under the statute." Gov. Resp. at 51 (citations omitted); see also id. at 52-54 (discussing the reliability and relevance of the selected rates).
POSCO responds that Commerce's reliance on its hierarchy to select rates does not obviate the corroboration requirement. POSCO Reply at 14-15 (citing Tai Shan City Kam Kiu Aluminium Extrusion Co. Ltd. v. United States , 39 CIT ----, ----,
2. Analysis
"Corroborat[ion] means that the [agency] will examine whether the secondary information to be used has probative value."
a. Corroboration Methodology
POSCO identifies the following language in the Issues and Decision Memorandum as evidence of Commerce's misinterpretation of its statutory obligation to corroborate secondary information:
However[,] [ 19 U.S.C. § 1677e ](c)(1) does not require corroboration when the information relied upon for adverse inferences is derived from the petition, a final determination in the investigation, any previous review under section 751 of the Act or determination under section 753 of the Act, or any other information placed on the record.
...
Additionally, as stated above, we are applying subsidy rates, which were calculated in this investigation or previous Korea CVD investigations or administrative reviews. Therefore, the corroboration exercise of section 776(c)(1) of the Act is inapplicable for purposes of this investigation .
POSCO Mot. at 28 (quoting I & D Mem. at 15). POSCO has, however, omitted two key sentences from Commerce's explanation.
First, immediately before the first sentence of the first paragraph quoted above, Commerce explains that § 1677e(c)(1)"provides that, when the [agency] relies on secondary information rather than on information obtained in the course of an investigation or review, it shall, to the extent practicable, corroborate that information from independent sources that are reasonably at its disposal." I & D Mem. at 15 (emphasis added). Additionally, immediately before the first sentence of the second paragraph quoted above, Commerce explains that, "[w]ith regard to the reliability aspect of corroboration, unlike other types of information, such as publicly available data on the national inflation rate of a given country or national average interest rates, there typically are no independent sources for data on company-specific benefits resulting from countervailable subsidy programs."
This understanding of Commerce's explanation is supported by the Ministerial Error Memorandum. Therein, Commerce explains that its ability to "use a countervailable subsidy rate applied for a similar program in a [CVD] proceeding involving the same country ... is significant[ ] because ... with regard to the reliability aspect of corroboration, ... there typically are no independent sources for data on company-specific benefits resulting from countervailable subsidy programs." Ministerial Error Mem. at 4. Under those circumstances, Commerce implements its duty to corroborate "to the extent practicable" by selecting "[a]ctual rates calculated based on actual usage by Korean companies" that were "calculated in the context of an administrative proceeding."
POSCO asserts that Commerce's reliance on its hierarchy to corroborate the selected rates permits the imposition of "punitive rates that 'render the corroboration requirement ... meaningless.' " POSCO Mot. at 34 (quoting Ministerial Error Mem. at 4; De Cecco ,
POSCO contends that the 1.64 percent rate is unreliable because it was calculated using an adverse inference that allowed Commerce to build estimates into its rate determination. POSCO Mot. at 33-34; POSCO Reply at 16. The Government contends that "the 1.64 percent rate is not ... wholly derived from [AFA]," but from estimations made using the respondent's reported data. Gov. Resp. at 53 (emphasis added). At oral argument, the Government sought to persuade the court that Commerce's reliance on the respondent's data means that the rate was sufficiently calculated for corroboration purposes. Oral Arg. at 1:39:40-1:41:58. The court disagrees.
In Refrigerators from Korea , Commerce explained that because the respondent failed to provide documentation demonstrating that its claim for benefits under the countervailable K-SURE Short-Term Export Insurance program did not cover subject merchandise, Commerce made the adverse inference "that the claim applied only to subject merchandise." Refrigerators from Korea , I & D Mem. at 16. Based on that adverse inference, Commerce then estimated the insurance premiums the respondent would have paid on the subject merchandise. Id. Next, to determine the benefit, Commerce compared its estimated premium to the payout the respondent received on its K-SURE claim during the POI. Id. Commerce arrived at the 1.64 percent rate by dividing the amount by which the payout exceeded the estimated premiums by the respondent's exports of subject merchandise to the United States. See id. Thus, the 1.64 percent rate is derived from estimates Commerce made on the basis of an adverse inference. See id. The rate is not as Commerce asserted, an "[a]ctual rate[ ] calculated based on actual usage " of a countervailable program by a Korean company. See Ministerial Error Mem. at 4 (emphasis added). Accordingly, Commerce's selection of this rate is unsupported by substantial evidence, and is remanded for reconsideration.
As to the 1.05 percent rate, Commerce's corroboration of that rate is discernible from the Ministerial Error Memorandum. See NMB Singapore ,
In sum, the court grants in part POSCO's motion with respect to Commerce's unexplained use of the highest calculated rates to determine POSCO's adverse facts available rate and Commerce's selection of the 1.64 percent rate for certain programs.
II. Nucor's Rule 56.2 Motion for Judgment upon the Agency Record
A. Commerce's Determination that the Provision of Electricity was not for Less than Adequate Remuneration
1. Parties' Contentions
Nucor contends that Commerce's determination that the provision of electricity was not for less than adequate remuneration is unlawful because Commerce (1) impermissibly examined preferentiality through its standard pricing mechanism analysis; (2) unreasonably interpreted "adequate remuneration" in a manner that excluded cost-recovery; and (3) ignored arguments and evidence demonstrating that Korean electricity price-setting does not comport with market principles. Nucor Mot. at 14-31; Nucor Reply at 2-12.
The Government contends that Commerce's analysis of KEPCO's standard pricing mechanism "is consistent with the statutory requirement that 'the adequacy of remuneration shall be determined in relation to prevailing market conditions.' "
Respondent Defendant-Intervenors dispute Nucor's contention that Commerce conflated a standard pricing mechanism analysis with preferentiality. Resp't Def.-
2. Analysis
a. The Standard Pricing Mechanism
Nucor argues that Commerce used a standard pricing mechanism analysis to measure preferentiality and, thus, failed to measure adequate remuneration in the post-URAA legal landscape. Nucor Mot. at 15, 16-20; Nucor Reply at 7. The statute directs Commerce to determine "the adequacy of remuneration ... in relation to prevailing market conditions for the good or service being provided or the goods being purchased in the country which is subject to the investigation or review."
The statutory meaning of "adequate remuneration" is ambiguous, and the statute does not state a particular method Commerce must use to determine the adequacy of remuneration. In two recent opinions, however, this court has affirmed Commerce's consideration of KEPCO's standard pricing mechanism to measure the adequacy of remuneration as a permissible interpretation of the statute. See Maverick Tube ,
Commerce's tier-based approach to determining adequate remuneration "accomplishes the post-URAA preference for market-based prices." Maverick Tube ,
Nucor also argues that Commerce failed to assess whether the standard pricing mechanism supplied a suitable benchmark. Nucor Mot. at 20; Nucor Reply at 8 (asserting Commerce should first have determined whether the government price is "the most reasonable surrogate for market-determined prices") (citing CVD Preamble ,
Nucor insists, however, that Commerce must analyze KEPCO's standard pricing
b. Commerce's Interpretation of Adequate Remuneration
Nucor contends that cost recovery is the sine qua non of adequate remuneration,
The CVD Preamble contemplates the consideration of costs as one possible factor in Commerce's determination whether a government price is consistent with market principles pursuant to a Tier 3 analysis; however, it is not required.
c. Consideration of the KPX
Nucor argues that the KPX's method of calculating its electricity prices distorts KEPCO's prices because it undercompensates electricity generators, such as nuclear generators, which have high fixed costs and low variable costs.
Commerce explained that the record does not show "that utility companies have separate tariff rates that are differentiated based upon the manner in which the electricity is generated," or that the costs KEPCO used to develop its tariff schedule did not reflect the actual costs of the electricity
because the costs of electricity to KEPCO are determined by the KPX. Electricity generators sell electricity to the KPX, and KEPCO purchases the electricity it distributes to its customers through the KPX. Thus, the costs for electricity are based upon the purchase price of electricity from the KPX, and this is the cost that is relevant for KEPCO's industrial tariff schedule.
Nucor seeks to undermine Commerce's determination by pointing to the GOK's explanation for the cheaper electricity prices applicable to industrial users. Nucor Mot. at 27 (citing GOK Suppl. QR at 7 n.3).
d. Substantial Evidence Supports Commerce's Determination
In making its benefit determination, Commerce relied on evidence that KEPCO used a standard pricing mechanism to develop its tariff schedule, which was based upon, and covered, its costs and an amount for investment return. I & D Mem. at 50 & nn.234-35 (citations omitted). In particular, the record shows that KEPCO more than covered its cost of supplying industrial electricity for the POI.
Nucor also attempts to dismiss evidence of KEPCO's pre-POI tariff rate increases on the basis of speculative forecasts contained in KEPCO's Form 20-F filed with the U.S. Securities and Exchange Commission. See Nucor Mot. at 32;
B. Commerce's Determination Not to Apply AFA to the GOK
1. Parties' Contentions
Nucor contends that Commerce should have relied on adverse facts available with regard to the GOK for its "repeated failure to provide complete, accurate, and verifiable information on KEPCO's price-setting procedures and electricity generation costs." Nucor Mot. 36. According to Nucor, the GOK failed to fully respond to Commerce's request "for documentation of KEPCO's 'lengthy deliberative process' [that occurs prior to its application for a tariff increase]," which is important because the GOK "has intervened to prevent KEPCO from implementing commercially sufficient tariff rate increases."
The Government contends that Commerce correctly determined not to rely on adverse facts available with regard to the GOK because it "was able to use verified information" and "fully analyzed" the allegedly subsidized program using the GOK's questionnaire responses. Gov. Resp. at 22 (quoting I & D Mem. at 42) (alteration omitted); see also Resp't Def.-Int. Resp. at 26-27. The Government further contends that it is for Commerce to decide "what information is relevant and necessary for its investigations." Gov. Resp. at 22 (citing Ansaldo Componenti,
Nucor responds that Commerce did determine that information regarding the GOK's interference was relevant and necessary, because it asked for it, and a post hoc finding that withheld information was not relevant or necessary cannot be sustained. Nucor Reply at 21-22.
Pursuant to 19 U.S.C. § 1677e, Commerce "may use an inference that is adverse to the interests of [an uncooperative] party." 19 U.S.C. § 1677e(b)(1)(A) (emphasis added). The statute's use of the word "may" indicates that Commerce has discretion in this regard. See Cerro Flow Prods., LLC v. United States , Slip Op. 14-84,
Here, Commerce determined that the GOK submitted timely and complete responses to its extensive and detailed questionnaires. See I & D Mem. at 42; GOK QR; GOK Suppl. QR. The GOK's responses included information on "KEPCO's rate setting methodology, cost recovery rates, investment return, [ ] profit information[, and] ... usage data on all electricity users, including the top 100 industrial users of electricity." I & D Mem. at 42. Commerce explained that it was able to verify the pertinent information, including "the data underlying the calculations used by KEPCO to set the electricity prices in effect during the POI[, and] ... KEPCO's standard pricing mechanism and its application in the setting of industrial electricity tariffs."
Nucor points to the GOK's purported "refusal to provide any information regarding the 'informal' consultation process" that precedes KEPCO's submission of an application for a tariff rate increase. Nucor Mot. at 39. The GOK, however, responded to Commerce's inquiries regarding these consultations relevant to the tariff rate schedules and proposed tariff increases. See I & D Mem. at 42; GOK QR at 28-30, 34. Accordingly, the GOK did not withhold information, such that resort to the use of facts available was necessary, let alone adverse facts available. See 19 U.S.C. § 1677e(a)(2)(A), (b)(1)(A) ; Shandong Huarong Mach. Co., Ltd. v. United States ,
CONCLUSION AND ORDER
In accordance with the foregoing, it is hereby
ORDERED that Commerce's Final Determination is sustained with respect to Commerce's use of the facts available with an adverse inference for POSCO's failure to report cross-owned input suppliers and an FEZ-located R & D facility, as set forth in Discussion Section I.A.1 and I.A.2; it is further
ORDERED that POSCO's challenge to Commerce's Final Determination with respect to Commerce's use of adverse facts available in response to DWI's loan reporting is moot, as set forth in Discussion Section 1.A.3; it is further
ORDERED that Commerce's Final Determination is remanded with respect to Commerce's use of the highest calculated rates to determine POSCO's adverse facts available rate, as set forth in Discussion Section I.B; it is further
ORDERED that Commerce's Final Determination is sustained with respect to the agency's corroboration methodology, as set forth in Discussion Section I.C.2.a; it is further
ORDERED that, to the extent Commerce continues to use the 1.05 percent rate derived from Washers from Korea following reconsideration of its use of the highest rates as required by Discussion Section I.B, Commerce's Final Determination is sustained with respect to Commerce's corroboration of the 1.05 percent rate, as set forth in Discussion Section I.C.2.b; it is further
ORDERED that, in addition to Commerce's required reconsideration of the 1.64 percent rate derived from Refrigerators from Korea rate pursuant to Discussion Section I.B, Commerce's Final Determination is remanded with respect to Commerce's corroboration of the 1.64 percent rate, as set forth in Discussion Section I.C.2.b; it is further
ORDERED that Commerce's Final Determination is sustained with respect to all issues raised in Nucor's motion, as set forth in Discussion Section II; it is further
ORDERED that Commerce shall file its remand redetermination on or before June 6, 2018; it is further
ORDERED that the deadlines provided in USCIT Rule 56.2(h) shall govern thereafter; and it is further
ORDERED that any opposition or supportive comments must not exceed 6,000 words.
Notes
The administrative record is divided into a Public Administrative Record ("PR"), ECF No. 41-1, and a Confidential Administrative Record ("CR"), ECF No. 41-2. Parties submitted joint appendices containing all record documents cited in their briefs. See Public Joint App. ("PJA"), ECF No. 80; Confidential Joint App. ("CJA"), ECF Nos. 77-79; Supplemental Public Joint App., ECF No. 88-1; Supplemental Confidential Joint App., ECF No. 87-1. The court references the confidential versions of the relevant record documents, if applicable, unless otherwise specified.
Court Nos. 16-00225 and 16-00226 were consolidated under lead Court No. 16-00225. Order (Jan. 18, 2017), ECF No. 44. Defendant-Intervenors in 16-00225 (AK Steel Corporation, ArcelorMittal USA LLC, Nucor, and United States Steel Corporation (collectively, "Petitioner Defendant-Intervenors") ) filed a response to POSCO's motion for judgment on the agency record. See generally Confidential Resp. Br. of Def.-Ints. AK Steel Corp., Arcelor Mittal USA LLC, Nucor Corp., and United States Steel Corp. ("Pet'r Def.-Int. Resp."), ECF No. 70. Defendant-Intervenors in Court No. 16-00226 (the GOK, POSCO, and Hyundai Steel Company (collectively, "Respondent Defendant-Intervenors") ) filed a response to Nucor's motion for judgment on the agency record. See generally Confidential Def.-Ints.' Br. in Opp'n to Pl. and Pl.-Ints.' Mot. for J. on the Agency R. ("Resp't Def.-Int. Resp."), ECF No. 69.
All further citations to the Tariff Act of 1930, as amended, are to Title 19 of the U.S. Code, and all references to the United States Code are to the 2012 edition, unless otherwise stated. See infra , note 8 (explaining that references to 19 U.S.C. § 1677e are to the 2015 version of the statute enacted pursuant to The Trade Preferences Extension Act ("TPEA"), Pub. L. No. 114-27, § 502,
On December 8, 1994, Congress enacted the Uruguay Round Agreements Act. See Uruguay Round Agreements Act ("URAA"), Pub. L. No. 103-465, § 101,
Commerce also refers to a "price-setting philosophy" as a "standard pricing mechanism." See I & D Mem. at 46.
In Magnesium from Canada , the government-owned power company signed contracts with 14 large industrial consumers of its electricity.
Commerce's authority to use the facts otherwise available is subject to 19 U.S.C. § 1677m(d). See 19 U.S.C. § 1677e. Section 1677m(d) provides the procedures Commerce must follow when a party files a deficient submission. See
The 2015 TPEA made several amendments to the antidumping and countervailing duty laws. Specifically, subsections (b) and (c) of § 1677e were amended, and subsection (d) was added. See TPEA § 502; Özdemir Boru San. ve Tic. Ltd. Sti. v. United States ,
In making its determination, Commerce "is not required to determine, or make any adjustments to, a countervailable subsidy rate ... based on any assumptions about information the [respondent] would have provided if [it] had complied with the request for information." 19 U.S.C. § 1677e(b)(1)(B).
Nippon Steel predates the TPEA. However, the relevant statutory language discussed in that case remains unchanged. Compare 19 U.S.C. § 1677e(b)(2012), with 19 U.S.C. § 1677e(b)(1)(2015).
For a full description of the scope of the investigation, see Initiation Notice ,
Commerce used the terms "affiliated" and "cross-owned" interchangeably.
"There are two types of loans in the [KORES/KNOC] program: 'general loans' and 'success-contingent' loans." POSCO 2nd Suppl. QR, Ex. F-11 at 1. DWI's reported KORES and KNOC loans were [ [ ] ] loans. See id. , Ex. F-11 at 1-2.
Specifically, POSCO reported that DWI had [ [ ] ] KNOC and [ [ ] ] KORES [ [ ] ] loans. See POSCO 2nd Suppl. QR, Ex. F-12.
By law, the GOK must own "at least 51 percent of KEPCO's capital, which allows the GOK to control the approval of corporate matters relating to KEPCO." Prelim. Mem. at 30 (citation omitted).
KEPCO itself generally does not produce electricity but distributes electricity to customers. GOK QR at 11.
KEPCO and its subsidiaries own 100 percent of the KPX's shares. GOK QR, Ex. E-3 at 31.
MOTIE supervises certain of KEPCO's operations. See GOK QR at 7. In particular,
[t]o change electricity tariff rates, KEPCO files an application for rate changes with the MOTIE. Upon receipt of an application, the MOTIE consults with the MOSF [Ministry of Strategy and Finance] to measure the potential impact of proposed electricity tariff rate changes on the national consumer price index. After consultation with the MOSF, the MOTIE requests the Korean Electricity Regulatory Commission ("KOERC") to review the application and to provide its views on the proposed rate changes. The MOTIE then makes a final decision after considering the KOERC's input.
In KEPCO's Form 20-F filed with the U.S. Securities and Exchange Commission, KEPCO characterized the process the GOK may undertake to approve a tariff rate increase as "lengthy" and "deliberate." GOK QR, Ex. E-3 at 5. KEPCO explained that tariff rates "may not be adjusted to a level sufficient to ensure a fair rate of return ... in a timely manner or at all," and that KEPCO "cannot assure that any future tariff increase by the [GOK] will be sufficient to fully offset the adverse impact on our results of operation from the current or potential rises in fuel costs." Id.
In the underlying administrative proceeding POSCO disputed this statement on the basis that the relevant official would not have understood the question or had access to the necessary information. See POSCO's Case Br. (May 16, 2016) ("POSCO Case Br.") at 12 n. 2, CJA Tab 33, CR 459, PJA Tab 33, PR 410, ECF No. 79. However, POSCO has not contested this statement in the instant litigation.
In the Issues and Decision Memorandum and briefs before the court, Commerce and the parties cite to pages 73-75 of POSCO's Verification Exhibit 3 for this information. Because the embedded page numbers have been partially omitted from the copy provided to the court, for ease of reference, the court cites to the electronic page numbers that appear at the top of each page.
POSCO Chemtech produces limestone. See POSCO Verification Report at 10; see also POSCO Verification Ex. 3 at ECF p. 93. When asked why POSCO had not reported this information, POSCO stated that "trace amounts" of limestone are used. POSCO Verification Report at 10. Commerce did not verify the amount of limestone purchased for POSCO's cold-rolled steel production. Id. at 11.
POSCO P & S provides steel scrap. Id. at 12; POSCO Verification Ex. 3 at ECF p. 93.
POSCO M-Tech supplies ferro-molybdenum to POSCO. POSCO Verification Report at 13; POSCO Verification Ex. 3 at ECF p. 94. When asked why POSCO had not reported POSCO M-Tech's supply of ferro-molybdenum, POSCO officials stated that it "was minimally used in subject merchandise production." POSCO Verification Report at 13. Commerce did not verify the amount of ferro-molybdenum used to produce POSCO's cold-rolled steel. Id.
POS-HiMetal supplies high purity ferro-manganese to POSCO. POSCO Verification Report at 14; POSCO Verification Ex. 3 at ECF p. 94. POSCO had not reported this information in its questionnaire response because the input is "minimally used" in cold-rolled steel. POSCO Verification Report at 14.
POSCO had reported POSCO Chemtech, POSCO P & S, and POS-HiMetal as cross-owned companies on the basis of its 60 percent share of ownership. I & D Mem. at 65; POSCO AQR, Ex. 1 at 1. POSCO reported a 48.85 percent share of ownership in POSCO M-Tech. POSCO AQR, Ex. 1 at 1. At verification, Commerce determined that "POSCO exercises significant control" over POSCO M-Tech, and that, therefore, POSCO M-Tech is cross-owned. I & D Mem. at 66; see also POSCO Verification Report at 12-13 (noting that [ [ ] ] ) (citation omitted).
POSCO attempted to submit [ [ ] ] additional loans in this minor correction. See POSCO Verification Report at 3.
At oral argument, the Government clarified that, depending on the program at issue in this investigation, these rates fulfill one of the three remaining hierarchical prongs. Oral Arg. at 1:02:20-1:04:40.
POSCO does not contend that Commerce has failed to make the requisite "objective showing that a reasonable and responsible importer would have known that the requested information was required to be kept and maintained under the applicable statutes, rules, and regulations." Nippon Steel ,
At oral argument, the court asked the Government whether the phrasing of Commerce's second supplemental questionnaire to POSCO and its verification agenda undermine the Government's argument that POSCO withheld information. See Letter to Counsel (Nov. 21, 2017) ¶ 1(c), ECF No. 86; POSCO 2nd Suppl. QR at 1 (directing POSCO to "confirm [that is has] provided responses for all cross-owned companies that fall within 19 CFR [§] 351.525(b)(6)"); POSCO Verification Agenda at 6 (directing POSCO to "[b]e prepared to demonstrate that none of POSCO's other affiliated companies provided inputs for the production of cold-rolled steel or otherwise would fall under our attribution regulations "). The Government responded that it prepared the second supplemental questionnaire and verification agenda in light of POSCO's affiliated questionnaire response. See Oral Arg. at 36:33-37:13. The Government also noted that, in contrast, POSCO did inform Commerce about affiliated input suppliers located outside Korea and thereby demonstrated some analysis of the attribution regulation. See id. at 36:05-36:32; POSCO AQR at 5. The court agrees. POSCO's qualified response regarding non-Korean input suppliers supports Commerce's understanding that POSCO's response regarding Korean input suppliers was unqualified. Accordingly, the phrasing of the second supplemental questionnaire and verification agenda does not fairly detract from the evidence supporting Commerce's determination. See Nippon Steel ,
For this reason, POSCO's argument that Commerce's narrative explanation potentially supported the application of facts available, but without an adverse inference, is also unavailing. See POSCO Mot. at 21-22. POSCO contends that its failure to report information "does not alone demonstrate that POSCO failed to act to the best of its ability," and that Commerce "does not explain how this reporting deficiency constitutes 'circumstances in which it is reasonable to conclude that less than full cooperation has been shown.' " Id. at 21-22 (quoting Nippon Steel ,
POSCO asserts that Petitioner Defendant-Intervenors "read too much into the language of the questionnaire." POSCO Reply at 10. According to POSCO,
[u]nder [Petitioner] Defendant-Intervenors' interpretation, even [when] the evidence indisputably shows that the inputs ... are not primarily dedicated ..., the respondent should be hit with AFA if it failed to disclose the existence of the cross-owned input supplier in its questionnaire response. That is an absurd result, and one that is squarely at odds with the regulation and Commerce's obligation to calculate margins as accurately as possible. A sin of omission should not trump the actual facts.
Commerce characterizes POSCO's argument as asserting that the inputs "were not primary dedicated to [the] subject merchandise because only a small amount of the inputs were used in the production of the subject merchandise ." I & D Mem. at 67 (emphasis added). Commerce explains that the issue "is not whether an input is primarily dedicated to the subject merchandise, but to the downstream product," which may be "an intermediate input to the subject merchandise." Id. at 67-68. In fact, however, POSCO argued that the inputs were not primarily dedicated to the production of the downstream product , not the subject merchandise. See, e.g. , POSCO Case Br. at 10-12.
POSCO disputes Commerce's assertion that a "large amount of analysis" was "required to verify the [new] data." POSCO Mot. at 16 n. 2 (quoting I & D Mem. at 67). Particularly in light of the fact that Commerce did not obtain this new information until the last day of verification, see I & D Mem. at 67, Commerce did not abuse its discretion in declining to verify the information, see, e.g. , Micron Tech., Inc. v. United States ,
At oral argument, POSCO sought to distinguish the respondent's decision to report its affiliate's sales of timber in Lumber from Canada on the basis that primary dedication was at issue in that case. See Oral Arg. at 50:07-50:57. In contrast, here, POSCO asserted, primary dedication was not at issue because its affiliates supplied only trace elements. Id. at 54:00-54:13 (comparing the 30 percent figure in Lumber from Canada to the much smaller amount of POS HiMetal's sales of high purity ferro-manganese to POSCO as a percentage of its total sales). POSCO's distinction is speculative; there is nothing in Lumber from Canada to suggest that the respondent premised its decision to submit a questionnaire response on the affiliate's proportion of sales, or to otherwise support POSCO's decision to withhold information on that basis. Moreover, the issue here is not whether POSCO's affiliates' inputs were primarily dedicated, but whether Commerce's decision to draw that adverse inference as a result of POSCO presenting inaccurate and incomplete information about its affiliated suppliers is supported by substantial evidence.
The court in Changzhou Trina Solar distinguished the facts of that case from another case involving the use of adverse facts available.
POSCO argues that Commerce cannot accept at verification an exhibit detailing the inputs its affiliates sold to POSCO and "rely upon that information as the basis for its AFA determination," while refusing to consider the specific information because it was unverified. POSCO Reply at 4 ("Commerce cannot have it both ways."). There is a difference, however, between relying on the existence of the evidence to conclude that adverse facts available is merited, i.e., information demonstrating that POSCO withheld information showing that the affiliates supplied the inputs, and the specific content thereof , i.e., the input amounts. Commerce explained that it did not verify the input amounts provided. See I & D Mem. at 67.
Commerce is not required to "make an explicit response to every argument made by a party"; however, it is required to discuss "issues material to [its] determination." Timken U.S. Corp. v. United States ,
None of the proceedings upon which POSCO seeks to rely discuss the total sales of an affiliate to the respondent as a percentage of the affiliate's total sales to all customers as a measure of primary dedication. See Washers from Korea , I & D Mem. at 3; Lumber from Canada , I & D Mem. at 23. Accordingly, any conclusion on primary dedication to be drawn from such information requires an inference that the total sales of all materials bears a relationship to the total sales of a particular input.
The SAA "shall be regarded as an authoritative expression by the United States concerning the interpretation and application of the Uruguay Round Agreements and this Act in any judicial proceeding in which a question arises concerning such interpretation or application."
The AUL of the subject merchandise is 15 years. Prelim. Mem. at 8; Gov. Resp. at 40.
There are two types of benefits associated with countervailable subsidies: recurring and non-recurring. Commerce allocates recurring benefits to the year in which they were received.
Commerce cites several prior rulings in support of its practice. See I & D Mem. at 12 n. 41. These rulings predate the TPEA's addition of subsection (d)(2) to § 1677e.
It is well settled "that a statute must, if possible, be construed in such a fashion that every word has some operative effect." United States v. Nordic Village Inc. ,
The court is mindful that Commerce may, pursuant to the remand ordered in Section I.B, select different rates on the basis of its evaluation of the situation that resulted in the use of an adverse inference. However, in the event that Commerce retains the current rates, for efficiency purposes, the court will address Parties' arguments regarding the corroboration of those rates.
At oral argument, the Government explained that Commerce corroborated the 1.05 percent rate "to the extent practicable." Oral Arg. at 1:35:35-1:36-35 (reiterating that when independent data is unavailable for purposes of corroboration, Commerce ensures reliability and relevance by selecting rates in accordance with its hierarchy).
Rather, the court opined that the imposition of an adverse dumping margin that was higher than any margin assigned to other producers would have "render[ed] the corroboration requirement of section 1677e(c) meaningless." De Cecco ,
POSCO also appears to contend that Commerce must corroborate the aggregate subsidy rate in addition to corroborating the individual rates. See POSCO Mot. at 35 (asserting that the aggregate rate is considerably less than its affiliates' total sales values); id. at 36 (asserting that the rates are not reliable or relevant because they result in a CVD rate that is three times greater than even a punitive rate that can be calculated using record information) (citing Gallant Ocean (Thailand) Co., Ltd. v. United States,
Nucor asserts that "Commerce unlawfully determined that the provision of electricity for less than adequate remuneration does not confer a benefit." Nucor Mot. at 14. Such a finding would be contrary to the statute, which states that the provision of a good or service for less than adequate remuneration does confer a benefit. See
The Government construes Nucor's arguments as advocating for the court to hold unlawful Commerce's regulation promulgating the three-tiered analysis. Gov. Resp. at 17. Nucor disagrees, arguing that "Commerce's application of its [three tier] regulation in this case was inconsistent with the statute because it relied on a preferentiality standard drawn from a pre-URAA investigation." Nucor Reply at 7.
Maverick Tube concerned Commerce's final negative determination in a CVD investigation of Korean welded line pipe.
Nucor concerned Commerce's final affirmative determination in a CVD investigation of Korean corrosion-resistant steel products.
Nucor asserts that the Maverick Tube court allowed Commerce to "take[ ] the market as it finds it, even if it is, for all practical purposes, a monopoly." Nucor Suppl. Br. at 6-7 (quoting Maverick Tube ,
Pointing to several Tier 3 cases where Commerce used external prices as a benchmark for adequate remuneration, Nucor urges the court to remand the instant matter for Commerce to clarify when government distortion is irrelevant. Nucor Suppl. Br. at 10-13 (discussing Certain Cold-Rolled Steel Flat Products from the Russian Federation ,
Commerce explained that
[t]o develop the electricity tariff schedules that were applicable during the POI, KEPCO first calculated its overall cost, including an amount for investment return. This cost includes the operational cost for generating and supplying electricity to the consumers as well as taxes. 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.
I & D Mem. at 50; see also GOK QR at 20-21 (containing a diagrammatical breakdown of the cost calculation).
KPX prices are based on a "marginal price" plus "capacity price" formulation. Nucor Mot. at 25 (citing GOK QR at 24, 26-27, Ex. E-3 at 33). The "marginal price" is the variable cost of producing electricity, which consists primarily of fuel costs. GOK QR, Ex. E-3 at 31. The "capacity price" represents the fixed costs of producing electricity, such as constructing facilities to generate electricity.
KEPCO had been asked to provide a report to the Korean National Assembly's Trade, Industry & Energy Committee on its "assistance to top 100 industrial electricity consumers through the supply of electricity from 2003 through 2012." GOK Suppl. QR at 6. To accurately respond, KEPCO "would have had to calculate the differences between the amount of the fees charged to those companies and the actual cost for supplying electricity to them for every year from 2003 through 2012."
The passage quoted by Nucor appears on page 32 of Hyundai Steel's Rebuttal Brief-not page 15.
At oral argument, POSCO asserted that Nucor's argument that KPX undercompensates nuclear generators must fail because the record shows those generators to be profitable. Oral Arg. at 2:32:31-2:34:10. The court may not accept "post hoc rationalizations for agency action" and may only sustain the agency's decision "on the same basis articulated in the order by the agency itself." Burlington Truck Lines, Inc. v. United States,
KEPCO's "cost recovery rate" for its industrial tariff was [ [ ] ] percent. GOK QR, Ex. E-23.
Nucor points to Commerce's statement that "cross-subsidization" has existed in the Korea electricity market and that "[c]heap power significantly helped the export-led growth of the Korean economy, while nurturing an industry structure which consumes too much power and which cannot survive with a price that would recover costs." Nucor Mot. at 31-32 (quoting Welded Line Pipe from Korea , I & D Mem. at 14-15). Notwithstanding its historical observation, therein, Commerce determined that the GOK's provision of electricity was not for less than adequate remuneration. Welded Line Pipe from Korea , I & D Mem. at 18; see also Maverick Tube ,
Nucor relies on the following statement by KEPCO:
[B]ecause the [GOK] regulates the rates we charge for the electricity we sell to our customers ... our ability to pass on fuel and other cost increases to our customers is limited.... [KEPCO] cannot assure that any future tariff increase by the Government will be sufficient to fully offset the adverse impact on our results of operations from the current or potential rises in fuel costs.
Nucor Mot. at 32 (quoting GOK QR, Ex. E-3 at 5).
Nucor also asserts that it presented an alternative calculation purportedly showing that, [ [ ] ] Nucor Mot. at 35 (citing Nucor Case Br. at 30). Nucor relied on [ [ ] ] Id. (citing same). Nucor asserts that Commerce dismissed its calculation as a possible benchmark because it was drawn from pre-POI data. Id. (citing I & D Mem. at 24). Nucor asserts, however, that it did not present the calculation for the purpose of providing an alternative benchmark, but to show that KEPCO had failed to cover its costs. Id. at 35-36. Page 24 of the Issues and Decision Memorandum does not discuss Nucor's alternative calculation. Commerce did discuss the National Assembly Report on pages 50-51, wherein the agency dismissed the relevance of the report as part of its discussion about cost recovery on the basis of its "flawed ... methodology," and because the information in the report predates the POI by two years. I & D Mem. at 50-51. Commerce further noted that KEPCO's electricity tariff rates have increased three times since the date of the report. Id. at 51 & n.236. Commerce therefore adequately addressed Nucor's argument.
Nucor contends that Commerce's refusal to use third-country or Korean benchmark data or reach the issue of specificity hinged on unlawful determinations, and, as such, the court should remand the matter with instructions to reconsider using a third-country benchmark and to address Nucor's specificity-related arguments. Nucor Mot. at 41. Because Commerce's determination that the GOK's provision of electricity was not for less than adequate remuneration is lawful and supported by substantial evidence, these issues are moot.