POSCO v. United States

The U.S. Court of International Trade sustained the U.S. Department of Commerce’s (Commerce’s) remand redetermination finding that the Government of Korea’s provision of additional emissions permits to a company exporting carbon and alloy steel cut-to-length plate was “de facto specific” and therefore satisfied requirements for imposing countervailing duties. The permits were used for compliance with the Korea Emissions Trading System (K-ETS). Commerce found that 494 companies received the additional permits under the K-ETS, that more than 900,000 companies operated in the Government of Korea’s jurisdiction, and that the additional permit subsidy therefore could not be considered “widely used.” The court rejected the company’s contention that the number of companies receiving the subsidy should have been compared to the much smaller number of companies subject to the K-ETS.

The U.S. Court of International Trade rejected aspects of the U.S. Department of Commerce’s determination that the Republic of Korea’s provision of subsidized electricity and the country’s carbon emission credit system constituted countervailable subsidies to POSCO, a producer and exporter of carbon and alloy steel. First, the court found that the Commerce Department unreasonably found that the provision of electricity was “de facto specific” to the steel industry. The court said it was arbitrary to group the steel industry with two other unrelated industries when determining that they were disproportionate recipients of subsidized electricity; the court also found that substantial evidence did not support the conclusion that the three industry groups received a “disproportionate share” of the subsidized electricity, which the court said was the type of ‘widely … used public infrastructure’ that countervailing duties will ordinarily not cover.” Second, regarding the carbon emission credit system, the court found that substantial evidence did not support the Commerce Department’s determination that extra permits for carbon emissions received each year by POSCO under the system constituted a countervailable subsidy. The court said the finding that the finding that the extra permits constituted a “financial contribution” was contrary to law. Although the court found that the Commerce Department’s determination that the extra permits conferred a benefit on POSCO was reasonable, the court said the finding that the extra permits were “de jure specific” to an industry or enterprise was unreasonable, given that the Cap and Trade Law criteria governing the carbon emission credit system did not single out enterprises or industries and result in nearly one-third of regulated industries receiving extra permits. The court also found that substantial evidence did not support the determination that the criteria for entitlement to the extra credits—which were based on how emissions-intensive an industry is and its exposure to international trade—did not qualify for a safe harbor provision. The court remanded to the Commerce Department for reconsideration of the determination.