Hyundai Steel Co. v. United States

2023 CIT 142

Opinion

Slip Op. 23-142

UNITED STATES COURT OF INTERNATIONAL TRADE

Court No. 21-00304

HYUNDAI STEEL CO., Plaintiff, v. UNITED STATES, Defendant, and NUCOR CORPORATION, Defendant-Intervenor.

Before: M. Miller Baker, Judge

OPINION

[The court grants judgment on the agency record to Plaintiff as to port-usage fees and sustains Com- merce’s uncontested remand determination about sewerage fees.]

Dated: September 26, 2023

Brady W. Mills, Donald B. Cameron, Julie C. Men- doza, R. Will Planert, Mary S. Hodgins, Eugene Degnan, Edward J. Thomas III, Jordan L. Fleischer, and Nicholas C. Duffey, Morris, Manning & Martin, LLP, of Washington, DC, on the briefs for Plaintiff. Ct. No. 21-00304 Page 2

Brian M. Boynton, Principal Deputy Assistant Attor- ney General; Patricia M. McCarthy, Director; Claudia Burke, Assistant Director; and Elizabeth Anne Speck, Senior Trial Counsel, Commercial Litigation Branch, Civil Division, U.S. Department of Justice of Washing- ton, DC, on the brief for Defendant. Of counsel on the brief for Defendant was Ayat Mujais, Attorney, Office of the Chief Counsel for Trade Enforcement & Compli- ance, U.S. Department of Commerce of Washington, DC.

Alan H. Price, Christopher B. Weld, Maureen E. Thor- son, Tessa V. Capeloto, and Adam M. Teslik, Wiley Rein LLP of Washington, DC, on the brief for Defend- ant-Intervenor.

Baker, Judge: In this case, Hyundai Steel Company challenges the Department of Commerce’s determina- tion that the company’s receipt of port-usage rights from the South Korean government was a countervail- able benefit. The court remands because Commerce’s decision is contrary to law. 1

I

The Tariff Act of 1930, as amended, provides that when Commerce determines that a foreign

1 The court previously granted the government’s request

for a voluntary remand as to a sewerage-fees program. ECF 26. The Department then determined that the program is not countervailable and reduced Hyundai’s overall subsidy rate by 0.01 percent to reflect that decision. See generally ECF 27-1 (remand results). No party challenges that find- ing, which the court accordingly sustains. Ct. No. 21-00304 Page 3

government is providing a “countervailable subsidy” to imported goods, and the International Trade Commis- sion further determines that such imports materially injure U.S. domestic industry, the former will impose a “countervailing duty” on the relevant merchandise “equal to the amount of the net countervailable sub- sidy.” 19 U.S.C. § 1671(a).

A countervailable “subsidy exists when (1) a foreign government provides a financial contribution (2) to a specific industry and (3) a recipient within the indus- try receives a benefit [from] that contribution.” Fine Furniture (Shanghai) Ltd. v. United States, 748 F.3d 1365, 1369 (Fed. Cir. 2014) (citing 19 U.S.C. § 1677(5)(B)). As relevant here, the statute defines “fi- nancial contribution” as including the foreign govern- ment “foregoing or not collecting revenue that is oth- erwise due, such as granting tax credits or deductions from taxable income.” 19 U.S.C. § 1677(5)(D)(ii). It de- fines “benefit” as “including” the provision of “goods or services . . . for less than adequate remuneration . . . .” id. § 1677(5)(E)(iv). 2

2 Section 1677(5)(E), titled “Benefit conferred,” provides:

A benefit shall normally be treated as conferred when there is a benefit to the recipient, including— (i) in the case of an equity infusion, if the investment decision is inconsistent with the usual investment practice of private investors, including the practice re- garding the provision of risk capital, in the country in which the equity infusion is made, Ct. No. 21-00304 Page 4

II

This case arises from a countervailing duty order on certain steel products from four countries includ- ing, as relevant here, South Korea. See Certain Corro- sion-Resistant Steel Products from India, Italy, Repub- lic of Korea and the People’s Republic of China: Coun- tervailing Duty Order, 81 Fed. Reg. 48,387 (Dep’t Com- merce July 25, 2016). In 2019, several domestic steel producers requested an administrative review of that

(ii) in the case of a loan, if there is a difference between the amount the recipient of the loan pays on the loan and the amount the recipient would pay on a compara- ble commercial loan that the recipient could actually obtain on the market, (iii) in the case of a loan guarantee, if there is a differ- ence, after adjusting for any difference in guarantee fees, between the amount the recipient of the guaran- tee pays on the guaranteed loan and the amount the recipient would pay for a comparable commercial loan if there were no guarantee by the authority, and (iv) in the case where goods or services are provided, if such goods or services are provided for less than ade- quate remuneration, and in the case where goods are purchased, if such goods are purchased for more than adequate remuneration. For purposes of clause (iv), the adequacy of remunera- tion shall be determined in relation to prevailing mar- ket conditions for the good or service being provided or the goods being purchased in the country which is sub- ject to the investigation or review. Prevailing market conditions include price, availability, marketability, transportation, and other conditions of purchase or sale. 19 U.S.C. § 1677(5)(E). Ct. No. 21-00304 Page 5

order for calendar year 2018. Appx01000–01001, Appx01004. Commerce obliged and selected Hyundai, a South Korean producer, as a mandatory respondent. Appx01002.

In its review, the Department examined a program under which the South Korean government grants port-usage rights to private-sector entities. To summa- rize, South Korean law requires that certain infra- structure—including, as relevant here, port facili- ties—be government-owned. To encourage the private sector to develop such facilities, the program author- izes participating entities to construct government- owned infrastructure at their expense. In return for their investment, such entities may collect certain us- age fees from third-party users. Appx01022–01023.

Under that program, Hyundai built a wharf at North Incheon Harbor between 2003 and 2006. Appx01023. Commerce found that the company and the South Korean government agreed that the former would pay the bulk of the construction costs and then transfer ownership to the latter in 2007. Id. Under the agreement, “Hyundai Steel was granted the right to operate and use the port for its own operations freely, as well as collect fees from third-party users, for a specified time period.” Id. The Department found that the “specified time period” was “about 41 years.” Appx01058.

Additionally, “Hyundai Steel reported it collected berth occupancy charges (or berthing income) from shipping companies and reported those amounts for each of the years from 2007 through 2018.” Ct. No. 21-00304 Page 6

Appx01023. The company further disclosed that “it had a service contract with an unaffiliated private ter- minal operating company. . . . While Hyundai Steel paid the terminal operating company for its services, Hyundai Steel was entitled to harbor facility usage fees from the terminal operating company.” Id.

The Department preliminarily determined the port-usage program represented a financial contribu- tion to Hyundai by the South Korean government. Ab- sent their agreement, the latter would have collected the fees in question, which “represent revenue fore- gone by the [government] within the meaning of sec- tion 771(5)(D)(ii) of the Act.[3] The berthing income and the harbor facility usage fees are revenue foregone by the [South Korean government] as [the company] did not pay [the government] the fees it collected.” Appx01023–01024.

Commerce also found that the program provided Hyundai a benefit under 19 U.S.C. § 1677(5)(E) “in the amount of the fees exempted reported by Hyundai Steel.” Appx01024. “To calculate the benefit, [the De- partment] summed up the berthing income and the harbor facility usage fees that Hyundai Steel reported and divided this amount by [the company]’s total sales which resulted in a rate of 0.01 percent ad valorem.” Appx01031. 4

3 19 U.S.C. § 1677(5)(D)(ii).

4 Commerce also determined the program was specific “be-

cause the actual recipients are limited in number.” Appx01024. Ct. No. 21-00304 Page 7

Commerce preliminarily assigned Hyundai an overall countervailable subsidy rate of 0.51 percent ad valorem that included other matters not at issue here. Appx01033; Appx01035. The final determination reaf- firmed that finding. See Appx01057–01061 (conclu- sions); Appx01081 (rate).

III

Hyundai brought this action under 19 U.S.C. §§ 1516a(a)(2)(A)(i)(I) and (a)(2)(B)(iii) to contest Com- merce’s final determination. See ECF 9 (complaint). 5 The Court has subject-matter jurisdiction under 28 U.S.C. § 1581(c).

Nucor Corporation intervened as of right to support the government. See ECF 20. The court then granted the government’s request for a voluntary remand to al- low Commerce to reconsider or clarify its decision on the sewerage-fees program. ECF 26.

The Department’s remand results found the sewer- age-fees program not countervailable and reduced Hyundai’s subsidy margin by 0.01 percent to 0.50 per- cent. ECF 27; see also above note 1. The company now moves for judgment on the agency record except as to that issue. ECF 34 (confidential); ECF 35 (public); see also USCIT R. 56.2. The government and Nucor op- pose. ECF 37 (government, confidential); ECF 38

5 In actions such as this brought under 19 U.S.C. § 1516a(a)(2), “[t]he court shall hold unlawful any determi- nation, finding, or conclusion found . . . to be unsupported by substantial evidence on the record, or otherwise not in accordance with law.” 19 U.S.C. § 1516a(b)(1)(B)(i). Ct. No. 21-00304 Page 8

(government, public); ECF 41 (Nucor, confidential); ECF 42 (Nucor, public). The court decides the motion on the papers.

IV

Hyundai’s motion raises one question: Whether the Department’s determination that the port-usage pro- gram provided the company with a “benefit” under 19 U.S.C. § 1677(5)(E) is unsupported by substantial evidence or otherwise contrary to law. 6 The company’s central contention is that the South Korean govern- ment provided port-usage rights “as repayment of a debt” rather than as “a gift-like transfer of funds,” ECF 35-2, at 11, and as a result, Commerce has not identified any countervailable “benefit.”

The court agrees with Hyundai. The plain and ob- vious import of the statute is that a countervailable “benefit” “normally” requires, well, “a benefit to the re- cipient.” 19 U.S.C. § 1677(5)(E) (emphasis added). A benefit is an “[a]dvantage, profit, good.” Oxford

6 Although only 0.01 percent of the company’s overall rate

stems from the port-usage program, it is the trade law ver- sion of the straw that broke the camel’s back. Following re- moval on voluntary remand of the 0.01 percent previously assigned to the sewerage-fees program, see above note 1, Hyundai’s total subsidy rate is 0.50 percent. Commerce treats any countervailable subsidy rate of less than 0.50 percent as de minimis and disregards it in imposing coun- tervailing duties. 19 C.F.R. § 351.106(c)(1). That means if the Department were to reverse its position on remand as to port-usage rights, the company would receive a refund of all its countervailing duty deposits under the applicable order, not just 0.01 percent. Ct. No. 21-00304 Page 9

English Dictionary (online edition). If there’s no ad- vantage, profit, or good to the recipient from the gov- ernment program at issue, then there’s no countervail- able benefit for purposes of the statute, unless an ap- plicable exception applies (and the government makes no such contention here). 7

The statutory context confirms the plain meaning of “benefit.” Section 1677(5)(E)’s four examples of countervailable benefits all involve the provision of some advantage, profit, or good. See 19 U.S.C. § 1677(5)(E)(i)–(iv); see also Gov’t of Sri Lanka, 308 F. Supp. 3d at 1381–82 (examining each example). Thus, making “interest-free loans” to a government is not a countervailable “benefit” because such loans are to the lender’s “detriment.” Gov’t of Sri Lanka, 308 F. Supp. 3d at 1382 (emphasis in original).

Similarly, Commerce’s “regulatory catch-all provi- sion” defining “benefit” states that “the Secretary nor- mally will consider a benefit to be conferred where a firm pays less for its inputs . . . than it otherwise would pay in the absence of the government program, or re- ceives more revenues than it otherwise would earn.” Id. at 1383 (quoting 19 C.F.R. § 351.503(b)(1)). “The

7 See Gov’t of Sri Lanka v. United States, 308 F. Supp. 3d

1373, 1381 n.7 (CIT 2018) (explaining that the statute’s use of “normally” merely “indicate[s] that in the case of certain types of subsidy programs, such as export insurance schemes, the use of the benefit-to-the-recipient standard may not be appropriate”) (quoting Uruguay Round Agree- ments Act, Statement of Administrative Action, H.R. Rep. No. 103–316, vol. 1, at 927 (1994), reprinted in 1994 U.S.C.C.A.N. 4040, 4240); see also id. at 1380 n.4. Ct. No. 21-00304 Page 10

touchstone of [§ 1677(5)(E)], from which this regula- tion is derived, is that what the company received somehow exceeded what [it] paid or should have paid,” which is often “tested by reference to what would oth- erwise be available under normal market conditions.” Id.

In normal market conditions, private companies don’t gratuitously build government-owned infrastruc- ture; they demand something in return—“considera- tion,” in contract law terms. 8 Hyundai argues that un- der its contract with the South Korean government, the value of its port-usage rights for 41 years, eight months, reflects its costs in building the port. ECF 35-2, at 25–26. Indeed, the company points to a detailed equation in the contract that is the basis for that cost calculation. See id. (citing Appx14766–14769; Appx14774–14778).

Commerce determined that it was not required to consider Hyundai’s costs in constructing the port facil- ities to determine whether the company received a benefit and refused to consider whether the company’s

8 In contract law, consideration does not have to involve ei-

ther party receiving a benefit, and courts do not typically consider the adequacy of consideration. See, e.g., Hamer v. Sidway, 27 N.E. 256, 257 (N.Y. 1891) (rejecting the argu- ment that “unless the promisor was benefited, the contract was without consideration”). In contrast, § 1677(5)(E) de- mands that the court consider the value of the considera- tion that the South Korean government received under the contract. So long as that consideration equaled or exceeded the value that Hyundai received, the company obtained no countervailable “benefit.” Ct. No. 21-00304 Page 11

port-usage rights accurately reflected the costs of con- structing the facility. See Appx01058–01060. In so do- ing, the Department erred as a matter of law. If, as Hyundai contends, the value of its port-usage rights did not exceed its construction costs, then the company received no “[a]dvantage, profit, [or] good,” and thus no countervailable benefit. The court accordingly re- mands for the Department to make that determina- tion.

* * *

For the foregoing reasons, the court GRANTS judg- ment on the agency record to Hyundai on whether the provision of port-usage rights at North Incheon Har- bor conferred a countervailable benefit and RE- MANDS that issue to Commerce for further consider- ation. The court further SUSTAINS the Department’s remand redetermination (ECF 27) as to the sewerage- fees program. A separate remand order will issue.

Dated: September 26, 2023 /s/ M. Miller Baker New York, NY Judge