DOJ Further Backs Commerce Remand Finding No Benefit in South Korean Electricity Market

Plaintiff Nucor Corp. ignored the "thorough explanation" that the Commerce Department gave in its remand results showing how the agency conducted its less-than-adequate remuneration (LTAR) analysis regarding the electricity market in South Korea, the U.S. said in a Sept. 7 reply brief. Further backing its remand at the Court of International Trade, the Department of Justice argued that Commerce's remand complies with the mandate issued by the U.S. Court of Appeals for the Federal Circuit by properly analyzing whether the Korean Electricity Corp. (KEPCO) recovered its costs of production plus a profit (POSCO, et al. v. United States, CIT #17-00137).

The case stems from the countervailing duty investigation into carbon and alloy steel cut-to-length plate from South Korea. The case's petition alleged that South Korean steelmakers were receiving a countervailable benefit through the provision of low-cost electricity. To investigate, the agency questioned the South Korean government about the South Korean electricity industry and market, which included KEPCO and the Korean Power Exchange, a KEPCO-owned entity. KEPCO did not treat South Korean producers differently from other electricity users and charged the producers a tariff rate in line with their customer classification level by including costs and return on investment in its electricity prices, Commerce said (see 2106140051).

Nucor challenged multiple aspects of Commerce's remand, including whether Commerce found that the actual price that South Korean electricity customers paid recouped costs plus profit. Nucor said Commerce used a preferential rate analysis rather than an LTAR analysis.

In fact, Commerce examined whether the tariff charged to the respondent covers the cost of production plus a profit and whether the tariff actually charged is in accordance with the tariff established, it said. These are two elements that Nucor ignored in its critique, the U.S. responded.

"Because KEPCO considered prevailing market conditions such as those identified in § 1677(5)(E) in establishing its tariff classifications, Commerce determined that KEPCO had developed a tariff schedule that adequately enabled recovery of costs, in addition to obtaining a profitable return on investment," the brief said. "Thus, Commerce did not treat KEPCO’s tariff classifications as “coextensive with” the prevailing market conditions in Korea, as Nucor claims."

Nucor's argument that Commerce failed to account for KPX's role in the electricity market also falls flat, the government said. The plaintiff's brief "oversimplifies" the remand and fails to examine the evidence in the full context of the benefit analysis. Rather, Commerce looked at whether KEPCO established a tariff classification schedule based on market principles. "This is not, as Nucor argues, evidence strictly related to KEPCO in the aggregate being profitable on all sales to all users, but rather it demonstrates that the electricity market, at each step in the chain of electricity distribution, operated based on prices that ensured a recovery of costs plus a return on investment," the brief said.

The plaintiff also tried to find to fault in Commerce's remand by pointing out how the agency didn't address the issue of market principle in prior administrative determinations. However, those prior findings used tier one and tier two analyses rather than the tier three analysis used by Commerce in the case of the South Korean steel industry, the U.S. said.

"Neither the administrative determinations nor the Court’s precedent cited by Nucor are relevant to the type of benchmark analysis that Commerce performed in the remand redetermination, nor do they show that Commerce somehow erred in its tier-three benchmark analysis to determine whether government prices were consistent with market principles," DOJ said. Nucor did attempt to also argue that Commerce did not in fact use a tier three analysis -- a point not directly addressed by Commerce.