FINAL RESULTS OF REDETERMINATION ON REMAND
LACLEDE STEEL CO., ET AL. V. UNITED STATES
Slip. Op. 00-36 (Ct. Int'l Trade, April 5, 2000)
On October 1, 1999, the Court of Appeals for the Federal Circuit (CAFC) issued its opinion in AK Steel Corp., v United States, 193 F.3d 1367 (Fed. Cir. 1999) (AK Steel), affirming-in-part and reversing-in-part the Court of International Trade's (CIT) decision, British Steel P.L.C. v. United States, 941 F. Supp. 119 (CIT 1996) (British Steel). In British Steel, the CIT upheld the Department of Commerce's (the Department) final determinations in Final Affirmative Countervailing Duty Determinations and Final Negative Critical Circumstances Determinations: Certain Steel Products from Korea, 58 Fed. Reg. 37338 (July 9, 1993) (Steel Products from Korea).
On April 5, 2000, the CIT remanded the matter to the Department to implement the CAFC's decision in AK Steel. In accordance with the CIT's order in Laclede Steel Co. v United States, Slip Op. 00-36, Consol. Court No. 93-09-00569 (April 5, 2000) (Laclede Steel), the Department has prepared these final results of redetermination on remand with respect to the final results of the countervailing duty investigations of Steel Products from Korea. Pursuant to the Court's remand instructions, the Department has recalculated the program rates and the company-specific total ad valorem rates. In conformity with the CAFC's opinion in AK Steel, we have recalculated the rates using a methodology which ensures that countervailing duties are not based on domestic credit provided to the Korean steel industry by private Korean lenders and are not based on preferential access to foreign credit. Finally, consistent with the CAFC's opinion, we have recalculated the country-wide rate and determined the company-specific total ad valorem rates.
Petitioners provided initial comment regarding the scope and substance of the remand proceeding on April 13, 2000 with follow up comments on May 5, 2000 and May 19, 2000. Respondents submitted initial comments on May 2, 2000 and follow up comments on June 5, 2000. The Department issued the Draft Remand on June 5, 2000. Petitioners (1) and Respondents (2) provided case briefs to the Department on June 9, 2000 and rebuttal briefs on June 13, 2000.
In AK Steel, the CAFC acknowledged that the Korean government exercised de jure control of the financial system to benefit the steel industry through 1984. AK Steel, 193 F.3d at 1371. However, the CAFC went on to determine that the Department's conclusion that there is a causal nexus between the Korean government's control of the financial system and the domestic loans received by the steel industry from private sources after 1985 is unsupported by substantial evidence. Id. at 1376. The CAFC thus reversed the portion of the CIT's judgement in British Steel sustaining the imposition of countervailing duties based on domestic credit provided to the Korean steel industry by private Korean lenders. Id. In addition, the CAFC determined that loans from foreign lenders are not countervailable subsidies under the terms of the then existent statute. Id. at 1378. The CAFC, therefore, reversed the portion of the CIT's judgment affirming the assessment of countervailing duties based on preferential access to foreign credit. Id. In Laclede Steel, the CIT instructed the Department to recalculate the countervailing duty rates in conformity with the CAFC's decision. Laclede Steel Co. v United States, Slip Op. 00-36 (CIT April 5, 2000) ("Remand Order").
We have considered the comments of the parties, including the comments raised by the parties in their June 9, 2000 and June 13, 2000 case and rebuttal briefs submitted in response to the draft results of redetermination issued by the Department on June 5, 2000. We determine that in AK Steel the CAFC's holding clearly related only to foreign loans and domestic loans received by the steel industry from private sources during the de facto period. Therefore, pursuant to the CIT's instructions and in conformity with the CAFC's opinion, we have amended our calculations. We have recalculated the subsidy conferred by the Government of Korea's (GOK's) direction of credit program by removing any loans from private Korean lenders, made after 1984, and by removing all direct foreign loans from the net subsidy rate calculations. We have not excluded from the recalculation loans provided to the steel industry from the following government banks: the Korean Development Bank (KDB), the Korean Exchange Bank (KEB), the Export-Import Bank of Korea (ExIm), and the Korea Development Finance Corporation, (KDFC). Nor have we excluded from the recalculation loans made pursuant to the following government programs: the National Investment Fund (NIF), the Energy Saving Fund (ESF), the Petroleum Business Fund (PBF), and the Export Industry Facility Loans (EIFL). Finally, all domestic loans made prior to 1985 continue to be included in the subsidy calculation. For more information on our treatment of the loans from private lenders and a description of the government controlled or owned banks that issued the countervailable loans, see the memorandum to Melissa G. Skinner, Director of the Office of AD/CVD Enforcement VI, "Memorandum and Accompanying Calculations for the Remand: Certain Steel Products from Korea," a public document on file in the Department's Central Records Unit, Room B-099.
In accordance with the Court's instructions, we have recalculated Respondents' net subsidy rates using the methodology described above. In addition, we have recalculated the country-wide rate by taking the weighted-average of all of the companies' company-specific program rates. We then determined whether each company's individual company-specific rate was significantly different from the country-wide rate. In the event a company's rate was significantly different, we assigned it an individually-calculated rate. Otherwise, we assigned the company the country-wide rate. The rates in the first table below are the original rates consisting of domestic and foreign loans and the recalculated rates consisting of domestic loans from government banks and loans from government funds. The rates set forth in the second table are the original and recalculated total ad valorem rates for each company. An error in Dongbu's benefit calculation was discovered after the issuance of the draft remand and was corrected for the final remand redetermination subsidy calculation.
Direction of Credit Ad Valorem Rate Comparison
|Original Program Rate
|Recalculated Remand Program Rate Ad Valorem|
|Pohang Iron & Steel Co., Ltd. (POSCO)||3.84||0.76|
|Dongbu Steel Co., Ltd (Dongbu)||1.97||1.31|
|Union Steel Manufacturing Co., Ltd. (Union)||0.38||0.06|
Total Ad Valorem Rate Comparison
|Original Ad Valorem Rate||Recalculated Company-Specific Ad Valorem Rate||Final Ad Valorem Rate|
|Pohang Iron & Steel Co., Ltd. (POSCO)||4.84||1.76||1.45|
|Dongbu Steel Co., Ltd (Dongbu)||2.13||1.47||1.45|
|Union Steel Manufacturing Co., Ltd. (Union)||0.54||0.22||De minimis|
Ad Valorem Rate
Final Ad Valorem
Rate Pohang Iron & Steel Co.,
1.15 Dongbu Steel Co., Ltd
1.15 Union Steel
Manufacturing Co., Ltd.
De minimis Country- Wide Rate
The Korean steel producer Union Steel Manufacturing, Co., Ltd. is excluded from the orders because it received a de minimis net subsidy rate of 0.22 percent ad valorem.
As noted above, we issued draft results of this redetermination on June 5, 2000, and provided the parties on opportunity to comment on these results. We address these comments below:
Petitioners interpret the CAFC's decision and the CIT's Remand Order to require that the subsidy calculation only exclude private loans from private banks, post-1985. Petitioners further argue that a distinction has been made between public and private lenders through the course of the case and its subsequent proceedings. Petitioners note that in Steel Products from Korea, 58 FR at 37339, the Department stated that "we have investigated whether the GOK directs commercial banks and or other Korean lending institutions to extend credit to the steel industry . . . ." Petitioners also cite to the Department's method of categorizing the different banks and government-funded programs throughout the course of the investigation, i.e. original questionnaire, supplemental questionnaires, and in the final determination. Petitioners also cite both parties' briefs and oral comments in separating private and public lenders in the course of their arguments, and the CAFC's distinction between direct and indirect lending. Petitioners state that the CAFC's reversal only applies to privately funded, indirect subsidies. Petitioners assert that a causal nexus is only required for indirect subsidies, such as private loans from private banks, and is not necessary for direct subsides such as direct government loans.
Respondents argue that the scope of the remand order is limited, not general. They contend that the CAFC reversed the CIT's decision upholding the Department's findings with respect to domestic and foreign loans in its entirety. Therefore, Respondents maintain that the draft remand incorrectly interpreted the CAFC's decision by making a distinction between private loans and government loans.
Furthermore, Respondents maintain that the Department treated all loans given to the steel industry as a singular nationwide program, not as separate programs, throughout the proceedings. To support this claim, they cite Steel Products from Korea 58 FR at 37343. They point out that the Department found in Steel Products from Korea that the GOK uses a variety of formal and informal means to control the lending practices of government-owned and private commercial banks. Respondents further state that nowhere in AK Steel, British Steel I, British Steel II, Steel Products from Korea, or the Remand Determination was a distinction made between private and government banks; rather, they were treated as a single entity. Respondents do acknowledge that the Department and parties discussed the different categories of loans throughout the investigation. Respondents point out that the CAFC did not expressly find any loans to be countervailable apart from the de jure loans made prior to 1985. Respondents also believe that the Petitioners' attempt to narrow the CAFC's holding is based upon a distinction that departs from the Department's prior analysis.
In their rebuttal briefs, Petitioners disagree with Respondents' position that the Department incorrectly separated the loans into different categories. Petitioners state that the Respondents were factually and legally incorrect in their analysis. Petitioners provided their claim of factual incorrectness in their briefs, and discussed their legal stance in the rebuttal briefs. Petitioners note that changing one element of a subsidy program does not cancel out other elements of the subsidy. Petitioners state that just because the CIT's Remand Order required the exclusion of certain loans from the subsidy calculation, it does not require the exclusion of all loans not implicated by the CAFC's opinion or the CIT's Remand Order, as Respondents have argued.
The Department's Position
Respondents' contention that the CAFC ruled that loans from government banks and government funds are not countervailable is clearly in contradiction not only with the express ruling of the CAFC, but also is in conflict with the rationale used by the CAFC in AK Steel. Furthermore, the fact that the Department may have treated directed credit as a single program in the earlier proceedings does not prevent us from separating private and government-funded loans on remand based on the CAFC's opinion in AK Steel.
The CAFC found that:
Commerce's conclusion that there is a causal nexus between the Korean government's control of the financial system and the domestic loans received by the steel industry from private sources is unsupported by substantial evidence. While it is clear that the Korean government exercised control to benefit the steel industry at one time, Commerce has not pointed to evidence from which it is reasonable to infer that the government's control continued into the period of investigation. The portion of the Court of International Trade's judgment sustaining the imposition of countervailing duties based on domestic credit provided to the Korea steel industry by private Korean lenders therefore must be reversed.
The CIT's Remand Order specifically states that (1) "the Court of Appeals having reversed '[t]he portion of the Court of International Trade's judgment sustaining the imposition of countervailing duties based on domestic credit provided to the Korean steel industry by private Korean lenders, '" AK Steel, 192 F.3d at 1376; and (2) the Court of Appeals having reversed 'the portion of the Court of International Trade's judgment affirming the assessment of countervailing duties based on preferential access to foreign credit,'" ordered the Department to "recalculate duties owed in conformity with the decision of the Court of Appeals Remand Order." As is clearly demonstrated by the Remand Order, the CIT instructed the Department on remand to recalculate the CVD rate by excluding the domestic credit provided by private Korean lenders and by excluding foreign credit. The language and remand instructions of the CIT are unambiguous.
Respondents, in an attempt to have the Department ignore the clear language of the Court, state that government loans are not countervailable because the Department considered all directed lending in Korea to be one single program. However, the fact that the Department considered both government loans and commercial bank loans to be directed to the steel industry does not preclude the Department from continuing to countervail government loans on the basis of the CAFC's decision in AK Steel. It appears that Respondents may be confusing the issue of specificity with the issue of demonstrating the provision of an indirect subsidy. The issue addressed by the CAFC in AK Steel was whether the Department provided sufficient evidence to demonstrate a "causal nexus" with respect to the provision of an indirect subsidy.
As the CAFC clearly stated, in order for the Department to find a program countervailable, "Commerce must determine whether a government program provided a benefit to a specific industry. Moreover, in the case of an indirect subsidy, evidence of a causal nexus between the program and the benefit is also required." AK Steel, 193 F. 3d at 1372. Thus, the issue before the CAFC, with respect to the countervailability of domestic credit, was whether the Department provided sufficient evidence to demonstrate a causal nexus with respect to an indirect subsidy. A direct government subsidy, such as a loan made under a specific government loan program or made directly to a recipient by a government bank, does not require the demonstration of a causal nexus.
Therefore, based upon the specific language of the CAFC's decision in AK Steel and the instructions of the CIT, the Department rejects Respondents' argument that loans from government programs and government banks are not countervailable. Both the CIT's and the CAFC's instructions refer specifically to loans from private sources. Furthermore, the issue in AK Steel was whether the Department had sufficient evidence to demonstrate the existence of a causal nexus for an indirect subsidy. This issue is not relevant to the countervailability of a direct government subsidy.
All parties concede that de jure loans, i.e., loans provided before 1985, should remain in the benefit calculation. However, petitioners argue that one loan provided during this period was not included in our recalculations. Respondents state that this loan was not included in the original loan calculations in Steel Products from Korea; therefore, it should not be included in the recalculations.
We agree with Respondents. Because this loan was not included in the original loan calculations, we are not including it in our recalculations. Based on the information on the record, we cannot tell whether the omission of this loan was intentional or inadvertent. Moreover, the omission of this loan in Steel Products from Korea was not raised in any clerical error allegation subsequent to the initial final determinations nor in the challenge to those determinations. Therefore, we determine it is not appropriate to include this particular loan in our recalculations at this stage.
Petitioners argue that the Department failed to include loans from the Korea Technology Development Corporation, Korean International Merchant Bank and Foreign Investment Fund loans in our recalculations. They state that new information provided in their April 13, 2000 submission demonstrates that the Korea Technology Development Corporation and the Korean International Merchant Bank are government banks and that the Foreign Investment Fund is a government lending fund. Petitioners believe that the Department is permitted to take "judicial notice" of this information. They also expressed the view that if the Department does not take judicial notice then it should open the record.
Respondents state that the Department should reject new evidence which Petitioners have provided. They argue that providing new evidence is outside of the scope of the remand order.
In our remand redetermination, we have included loans from government banks and loans from government funds in our loan recalculations. To determine whether a bank is a government bank and whether a loan provided by a private bank is provided from a government fund, we have relied solely upon the information on the record of Steel Products from Korea. In our examination of the information on the record in Steel Products from Korea, we have not found any information that demonstrates that either the fund or the banks cited by petitioners are owned or administered by the Government of Korea; therefore, they have not been included in our recalculations. Therefore, although we believe we have the discretion to open the record on remand where appropriate, we determine that opening the record for solicitation of new information on this particular issue is not warranted.
Respondents argue that the de minimis rate found for Union should be included in the calculation of the country-wide rate. To support this argument, Respondents cite to Ceramica (3) and IPSCO (4). In both of these cases, the Courts stated that firms with de minimis subsidies should be included in the weighted-average calculation of the country-wide rate. Petitioners argue that the Department's calculation in the draft remand results was consistent with the 1989 Proposed Regulations, 54 FR at 23386, which governed this proceeding.
We agree with Respondents. In our draft results we did not include Union in the calculation of the country-wide rate because excluding de minimis firms from this calculation was the practice of the Department during the time of the final determination of Steel Products from Korea. However, upon further review of this issue we have decided to calculate the country-wide rate in a manner consistent with the cases cited by Respondents. We have done so because these cases changed the Department's methodology regarding the country-wide calculation. Although Respondents did not challenge the calculation of the country-wide rate in Steel Products from Korea, we recognize that this issue was not then present because none of the Korean companies had received de minimis subsidy rates. As a result of our remand redetermination, there is now one company with a de minimis rate. Thus, the issue is now before the Department. Therefore, to be consistent with this court precedent, we have included Union's de minimis rate in the calculation of the country-wide rate. (5)
Petitioners argue that we should countervail certain commercial bank loans because these banks may have benefitted from BOK rediscounts. In their April 13, 2000 submission, Petitioners provided loan lists for the respondent companies and stated that we should countervail these loans because they may have benefitted from preferential rediscount rates. Respondents support the Department's draft remand with respect to not including the cited loans in the recalculations.
We disagree with Petitioners. There is no information on the record to support Petitioners' contention that these loans are countervailable because the loans benefitted from BOK rediscounts. In Certain Steel Products, the Department stated that the GOK directly controls a majority of long-term lending in Korea through, inter alia, the financing of long-term loans through BOK rediscounts. However, in the GOK Verification Report, we stated that we did not find evidence of preferential rediscounting on loans to large industries, with the exception of export industry facility loans. See GOK Verification Report at 7. Furthermore, the GOK Verification Report shows that the loans eligible for BOK rediscounts include export industry facility loans and energy conservation loans. See GOK Verification Report at 7 and 10. We are already including these two types of GOK loans in our recalculations because they are loans made pursuant to government programs.
We hereby submit the final results of determination on remand pursuant to the CIT's order in Laclede Steel.
Richard W. Moreland
Acting Assistant Secretary
for Import Administration
1. 2. 3. 4. 5.
1.AK Steel Corp., Bethlehem Steel Corporation, Inland Steel Industries, Inc., LTV Steel Company, National Steel Corporation, and U.S. Steel Group-A Unit of USX corporation, Laclede Steel Company, Geneva Steel, Gulf States Steel, Inc. of Alabama, Lukens Steel Company, Sharon Steel Corporation, and WCI Steel Inc.
2.Dongbu Steel Co., Ltd., Pohang Iron & Steel Co., Ltd., Pohang Coated Steel Co., Ltd. Pohang Steel Industries Co., Ltd., and Union Steel manufacturing Co., Ltd.
3.Ceramica Regiomontana, S.A. v. United States, 853 F.Supp. 431(CIT 1994).
4.IPSCO, Inc. V. United States, 899 F.2d 1192 (Fed Cir., 1990).
5.Section 705(5)(A)(i) of the Tariff Act of 1930, as amended by the Uruguay Round Agreements Act (URAA) effective January 1, 1995, has since modified the calculation of the country-wide rate to exclude zero and de minimis rates; however, the URAA does not govern this remand redetermination.