Korean Exporter Challenges Defense of Specificity Finding for Electricity Provision Subsidy

Exporter POSCO argued on Nov. 5 that the Commerce Department's finding that the South Korean government's provision of electricity below costs is de facto specific is unsupported by substantial evidence. Filing a reply brief at the Court of International Trade, POSCO said Commerce's specificity finding "relies on a random grouping of the steel industry with two other unrelated industries" to find that the steel industry gets a disproportionate amount of the subsidy (POSCO v. United States, CIT # 24-00006).

The exporter said the fact that a "group of three unrelated industries" takes in most of the electricity doesn't show that the steel industry got a disproportionate amount of the alleged subsidy.

POSCO added that Commerce's specificity finding is "arbitrary," since the agency failed to explain why the three industries are being grouped together in the first place. "Instead of doing so it seems that Commerce’s method was to go down the list of industrial users from largest to smallest and to lump together the number of industries needed to reach a majority," the brief said. "This is the essence of arbitrary."

The U.S. said in its brief that the industries were grouped since they consumed most of industrial class electricity during the review period in the 2021 review of the countervailing duty order on carbon and alloy steel cut-to-length plate from South Korea (see 2409170033). POSCO said in response that this claim doesn't explain how the consumption percentage of the three unrelated industries combines to support the finding that the steel industry received a disproportionate amount of the subsidy.

"All this data shows is that a random group of three unrelated industries consumed a majority of industrial electricity," the brief said.

The government added that since there's a linkage between electricity consumption and the amount of the subsidy, the "electricity-intensive nature of the steel industry" backs the specificity finding. POSCO said this doesn't explain why the agency relied on the consumption numbers of three unrelated industries to find specificity with regard to the steel industry. The U.S. claim "is only logical if Commerce is relying on electricity consumption by the steel industry alone," the brief said.

On a more fundamental level, POSCO said "the existence of a standard pricing mechanism supports the conclusion that any alleged subsidy" isn't de facto specific. The statutory test isn't centered on disproportionate electricity consumption but instead on whether an industry received a "disproportionately large amount of the subsidy." The exporter said this is a key distinction since the agency's analysis is based on industrial users of electricity, and "it is undisputed that all industrial users pay the same rates based on a standard pricing mechanism."

While Commerce said its regulations don't require it to group industries by shared characteristics for purposes of assessing specificity, POSCO said it never claimed this was something the agency had to do. Instead, the exporter said the grouping was arbitrary "because Commerce did not identify or define what this group represented or explain how it showed that the steel industry received a disproportionate amount of the subsidy," the brief said.

POSCO additionally challenged the government's defense of Commerce's decision to countervail South Korea's cap-and-trade program. In all, the exporter challenged the agency's finding that the full allotment of traceable emissions credits provided a financial contribution and a countervailable benefit.