Royal Thai Government v. United States

Slip Op. 07-119

UNITED STATES COURT OF INTERNATIONAL TRADE

ROYAL THAI GOVERNMENT, SAHAVIRIYA
STEEL INDUSTRIES PUBLIC COMPANY
LIMITED, Before: Richard W. Goldberg,
Senior Judge
Plaintiffs,
Consol. Court No. 02-00026
v.

UNITED STATES,

Defendant,

and

UNITED STATES STEEL CORP.,

Defendant-
Intervenor.

OPINION

[Commerce’s remand results further remanded with instructions]

Date: August 6, 2007

Vinson & Elkins LLP (Kenneth J. Pierce, Robert Edward
DeFrancesco, and Victor S. Mroczka) for Plaintiffs the Royal Thai
Government and Sahaviriya Steel Industries Public Company
Limited.

Peter D. Keisler, Assistant Attorney General, David M. Cohen,
Director, Commercial Litigation Branch, Civil Division, United
States Department of Justice (Claudia Burke and David S.
Silverbrand); Mykhaylo A. Gryzlov, International Attorney-
Advisor, Office of the Chief Counsel for the Import
Administration, United States Department of Commerce, for
Defendant United States.

Skadden, Arps, Slate, Meagher & Flom LLP (John J. Mangan) for
Defendant-Intervenor United States Steel Corporation.

Goldberg, Senior Judge: This matter is before the Court following

a court-ordered remand on July 26, 2006. See Royal Thai Gov’t v.
Court No. 02-00026 Page 2

United States, 30 CIT ___, 441 F. Supp. 2d 1350 (2006) (“Royal

Thai III”).

I. BACKGROUND

A. Procedural History of This Case

In December 2000, Commerce initiated an investigation into

whether the Thai steel industry received various countervailable

subsidies. See Certain Hot-Rolled Carbon Steel Flat Products

from Argentina, India, Indonesia, South Africa, and Thailand, 65

Fed. Reg. 77580 (Dep’t Commerce Dec. 12, 2000) (notice of

initiation of countervailing duty investigation). At the

conclusion of this investigation, Commerce determined inter alia

that the Royal Thai Government (“RTG”) provided countervailable

subsidies to the Thai steel industry in the form of import duty

exemptions under Sections 30 and 36(1) of the Investment

Promotion Act of 1977 (“the duty exemption programs”). See

Certain Hot-Rolled Carbon Flat Products from Thailand, 66 Fed.

Reg. 50410 (Dep’t Commerce Oct. 3, 2001) (final results of

countervailing duty investigation). The duty exemption programs

permitted Thai steel manufacturers to import free of duty charges

raw materials consumed in production and raw materials

incorporated into goods for export. See Issues and Decision

Memorandum in the Final Affirmative Countervailing Duty

Determination: Certain Hot-Rolled Carbon Steel Flat Products from

Thailand, C-549-818 (Sept. 21, 2001), Parts II.A.2 & II.A.3,
Court No. 02-00026 Page 3

available at http://ia.ita.doc.gov/frn/summary/thailand/01-24753-

1.txt (“Issues and Decision Mem.”). Ultimately Commerce

calculated the benefit from the duty exemption programs by using

a 1% benchmark rate and found, respectively, 0.58 percent and

0.07 percent countervailable subsidy rates. See id.

Two court cases were filed challenging the final results of

the investigations. These cases were later consolidated. In one

case, Plaintiffs RTG and Sahaviriya Steel Industries Public

Company Limited (“SSI”) challenged Commerce’s decision to

countervail the entire amount of the duty exemption programs.

Compl. ¶ 12 (Court No. 02-00027). In the other case, domestic

party United States Steel Corp. (“U.S. Steel”) objected to

Commerce’s use of the 1% tariff rate as a benchmark to measure

the benefit from the duty exemption programs.1 Compl. ¶ 13

(Court No. 02-00026). Specifically, U.S. Steel argued that the

1% rate was itself a countervailable subsidy and therefore an

inappropriate benchmark. See U.S. Steel’s Mem. Support Mot. J.

Agency Record 43-44.

This Court ordered Commerce to reverse its decision to

countervail the entire amount of the duty exemptions. See Royal

Thai Gov’t v. United States, 29 CIT ___, 341 F. Supp. 2d 1315

(2004) (“Royal Thai I”). As a result, U.S. Steel’s argument

relating to the benchmark was moot. See id., 29 CIT at ___, 341

1
Other domestic parties jointly commenced this case with U.S.
Steel, but at this point in the proceedings all other domestic
plaintiffs have ceased involvement with the litigation and only
U.S. Steel remains.
Court No. 02-00026 Page 4

F. Supp. 2d at 1326. The U.S. Court of Appeals for the Federal

Circuit (“Federal Circuit”) reversed Royal Thai I’s holding and

upheld Commerce’s decision to countervail the entire amount. See

Royal Thai Gov’t v. United States, 436 F.3d 1330, 1337-41 (Fed.

Cir. 2006) (“Royal Thai II”).

After Royal Thai II, the only thing remaining for this

Court to do with respect to the duty exemption programs was to

address U.S. Steel’s challenge to the 1% benchmark. Commerce

initially had found that since a 1% rate would have applied to

the steel slab imports, that 1% rate was the correct benchmark to

use. See Issues and Decision Mem. Parts II.A.2 & II.A.3. The

Court remanded that matter back to Commerce, explaining that the

countervailing duty laws required Commerce to use a non-

countervailable benchmark. See Royal Thai III, 30 CIT at ___,

441 F. Supp. 2d at 1364-68. The Court then instructed Commerce

to determine whether the 1% rate it had initially used in

calculating the benefit of the duty exemptions was itself a

countervailable subsidy. See id., 30 CIT at ___, 441 F. Supp. 2d

at 1368.

B. Commerce’s May 4, 2007 Remand Determination

A component of countervailability analysis is specificity;

a subsidy is only countervailable if it is a specific subsidy.

See id. at 1366 (discussing 19 U.S.C. § 1677(5A)(D)’s de facto

specificity requirement). A de facto specificity analysis will

require Commerce to examine the actual “use” of the subsidy and
Court No. 02-00026 Page 5

the “amount” of the subsidy that various industries received.2

See 19 U.S.C. § 1677(5A)(D)(iii) (2000). In order to compare the

“use” and “amount” of the 1% rate across various Thai industries,

the RTG claimed on remand that the specificity analysis should

examine the relative benefits resulting from the 1% rate. The

RTG proposed that Commerce calculate the duty savings resulting

from the 1% rate by subtracting the duties actually paid on

merchandise subject to the 1% rate from what would have been paid

otherwise. The RTG proposed further that the “Normal” rates be

used to calculate the import duties that would otherwise be due.

According to the nomenclature of the Thai tariff system, the

“Normal” rates were higher than the “Reduced” rates. See

Verification Report 3-5. During the period of investigation,

steel slab had a 1% “Reduced” rate and a 10% “Normal” rate. See

RTG’s Supp. Quest. Resp. 6.

Commerce rejected the RTG’s proffered “relative benefit

analysis,” insisting that it was inappropriate to use the

“Normal” rates as benchmarks in calculating the precise amount of

benefits flowing from the 1% rate.3 See Results of

2
A subsidy is specific under 19 U.S.C. § 1677(5A) if it is de
facto or de jure specific. No party to this litigation has ever
argued that the 1% rate could be de jure specific. Instead, the
litigation has focused on whether the 1% rate is de facto
specific.
3
For sake of clarity, it may be helpful to provide some
explanation of the two types of benchmarks at issue in this case.
First, Commerce must select a benchmark to calculate the economic
value of the duty exemption programs. Originally, Commerce had
determined the 1% rate was an appropriate benchmark. Second, the
RTG sought to have Commerce consider the “Normal” rates as a
Court No. 02-00026 Page 6

Redetermination on Remand Pursuant to Royal Thai Government, et

al. v. United States, Slip Op. 04-91 (Ct Int’l Trade July 27,

2004) (May 4, 2007) at 7 & 18-19 (“Remand Determination”).4

Commerce explained that the “Normal” rates were unsuitable

benchmarks because the “Normal” rates in the Thai tariff system

“are not usually applied in assessing duties upon imports under

the vast majority of the HTS categories.” Id. at 18. Commerce

explained further that the RTG implemented “Normal” rates as part

of Thailand’s negotiations with the WTO to fulfill its

obligations to cap its import duties at certain agreed-upon

levels. Id.

The Remand Determination reflects Commerce’s understanding

that the “Normal” rates were generally used as a form of import

protection, and were only applied to imports competing with

domestic industries specifically targeted for protection. Id. at

18-19. According to Commerce, they served merely to memorialize

Thailand’s GATT and WTO commitments in the Thai HTS and were

irrelevant for purposes of the actual assessment of duties for

the vast majority of HTS designations receiving the 1% rate.

Commerce reasoned that since the “Normal” rates would under no

benchmark to measure the benefits, if any, resulting from the 1%
rate itself, which was being examined for countervailability on
remand.
4
The reference in the title of the Remand Determination to USCIT
Slip Opinion 04-91 is incorrect. Commerce’s Remand Determination
responded to the Court’s order in USCIT Slip Opinion 06-117.
Court No. 02-00026 Page 7

circumstances have been applied, it made no sense to use them as

benchmarks.5

Instead, Commerce analyzed specificity by measuring the

total CIF values6 of imported merchandise under the various HTS

subheadings receiving the 1% rate. Relying on the data culled

from the total CIF value analysis, it then made a twofold

determination: (1) a group of industries including the steel

industry was a predominant user of the 1% rate; and (2) the steel

industry itself received a disproportionate amount of the

benefits flowing from the 1% rate. Id. at 6-8. Since either one

of these findings would necessitate a finding of specificity,

Commerce then concluded that the 1% rate was a specific subsidy

and therefore was not suitable as a benchmark to measure the

benefits resulting from the importing duty exemption programs.

Id. at 30-31. Nowhere in the Remand Determination did Commerce

present any analysis of why the 1% rate constitutes a subsidy.

Finally, Commerce identified without explanation the 10% “Normal”

rate as an acceptable benchmark and calculated the “estimated net

countervailable subsidy rates under these [duty exemption]

5
Commerce also considered alternative benchmarks, but ultimately
rejected those as well. See Remand Det. 7-8 & 19. The RTG has
never suggested that any alternative rates exist or would be
appropriate benchmarks. In fact, in its comments to the Remand
Determination, the RTG states that “[t]here are no such
‘alternative’ reduced rates as claimed by [Commerce], nor would
it be proper for [Commerce] to try to create them.” Pls.’
Comments Dep’t Commerce’s Remand Results Pursuant to Slip Op. 06-
117 at 8 (“Pls.’ Br.”).
6
“CIF value” refers to the total price of an import shipment
including (1) cost of the goods, (2) insurance, and (3) freight.
Court No. 02-00026 Page 8

programs to be 5.85 percent and 0.91 percent, respectively.” Id.

at 31.

II. STANDARD OF REVIEW

The Court must sustain any determination, finding, or

conclusion made by Commerce in the Remand Determination unless it

is “unsupported by substantial evidence on the record, or

otherwise not in accordance with law.” 19 U.S.C. §

1516a(b)(1)(B)(i).

With respect to the substantial evidence requirement, the

U.S. Supreme Court has defined this term to mean “more than a

mere scintilla. It means such relevant evidence as a reasonable

mind might accept as adequate to support a conclusion.” Consol.

Edison Co. v. NLRB, 305 U.S. 197, 229 (1938); accord Matsushita

Elec. Indus. Co. v. United States, 750 F.2d 927, 933 (Fed. Cir.

1984).

With respect to the in-accordance-with-law requirement, the

Court must defer to an agency’s reasonable construction of an

ambiguous statute. See Allegheny Ludlum Corp. v. United States,

367 F.3d 1339, 1343 (Fed. Cir. 2004) (citing Chevron U.S.A., Inc.

v. NRDC, 467 U.S. 837, 843 (1984)). Further, “the deference

granted to the agency’s interpretation of the statutes it

administers extends to the methodology it applies to fulfill its

statutory mandate.” GMN Georg Muller Nurnberg AG v. United

States, 15 CIT 174, 178, 763 F. Supp. 607, 611 (1991) (citations

omitted).
Court No. 02-00026 Page 9

The segregation of the two standards of review (supported-

by-substantial-evidence and in-accordance-with-law) serves to

focus courts’ attention on the dual agency function of legal

interpretation and factual investigation. Ultimately, the two

standards of review are both iterations of the broad requirement

that an agency must not act arbitrarily or capriciously. See

Bangor Hydro-Elec. Co. v. Fed. Energy Reg. Comm’n, 78 F.3d 659,

663 n.3 (D.C. Cir. 1996); accord Fujian Mach. and Equip. Imp. &

Exp. Corp. v. United States, 178 F. Supp. 2d 1305, 1314, 25 CIT

1150, 1156 (2001). An agency acts arbitrarily and capriciously

when it fails to “examine the relevant data and articulate a

satisfactory explanation for its action including a ‘rational

connection between the facts found and the choice made.’” Motor

Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S.

29, 43 (1984) (quoting Burlington Truck Lines, Inc. v. United

States, 371 U.S. 156, 168 (1962)).

III. DISCUSSION

A. Commerce’s Treatment of the “Normal” Rates Must Be
Internally Consistent

Countervailing duties are imposed on foreign products that

are imported, sold, or likely to be sold in the United States,

where the foreign government is directly or indirectly

subsidizing the manufacture, production, or export of that

merchandise. See 19 U.S.C. § 1671(a); Kajaria Iron Castings Pvt.

Ltd. v. United States, 156 F.3d 1163, 1165-66 (Fed. Cir. 1998).
Court No. 02-00026 Page 10

The purpose of countervailing duties is to level the playing

field in international trade by offsetting the unfair advantage

that a foreign exporter receives through subsidies. See Kajaria,

156 F.3d at 1166; Wolff Shoe Co. v. United States, 141 F.3d 1116,

1117 (Fed. Cir. 1998).

To achieve this purpose, Commerce must approximate the

economic value that the foreign subsidy provides. See Royal Thai

III, 441 F. Supp. 2d at 1365. In order to gauge the economic

value of a countervailable import duty exemption, as in this

case, Commerce must determine the tariff rate that the enterprise

would have paid absent the duty exemption. Id. at 1364. It is

difficult to measure the benefit conferred by a duty exemption

because import tariffs are inherently government constructions,

and so there is no “prevailing market rate” for Commerce to use

as a benchmark. Id. at 1365. Nonetheless, Commerce’s analysis

must be aimed at ascertaining the economic value of the benefit

conferred.

In its Remand Determination, Commerce used the 10% “Normal”

rate as a benchmark to calculate the countervailable subsidy rate

with respect to the duty exemption programs. Earlier in that

determination, though, Commerce had determined that looking to

“Normal” rates was improper when analyzing the specificity of the

allegedly countervailable 1% rate. As noted in Part I.B,

Commerce found that the “Normal” rates would not apply in the

vast majority of cases. In other words, Commerce has determined

that the “Normal” rate is an appropriate benchmark to calculate
Court No. 02-00026 Page 11

SSI’s countervailable subsidy rate; but at the same time, and

under the very same system of financial contribution, Commerce

has determined that the “Normal” rates are not appropriate

benchmarks to gauge the specificity of the 1% reduced tariff

rate.

By using the “Normal” rate for steel slab, but rejecting

the “Normal” rates for all other Thai industries, Commerce has

created a distinction that requires explanation. See Gen. Chem.

Corp. v. United States, 817 F.2d 844, 857 (D.C. Cir. 1987)

(remanding agency determination where agency’s internally

inconsistent analysis was never explained). Commerce has

provided no reason for treating steel slab imports differently

than all other Thai industries receiving the 1% rate. Remand

Det. 2, 18-19. Steel slab, like the “vast majority” of Thai

industries, is not a vulnerable industry to which the “Normal”

rate would likely apply. Verification Report 5. Nevertheless,

Commerce applied the “Normal” rate to steel slab in reliance on

the RTG’s representation that the “Normal” rate would apply to

steel slab in the absence of the 1% rate. Id. Without a formal

notification from the Thai Ministry of Finance7, all HTS tariff

designations would receive the “Normal” rate by default. See

Verification Report 5; RTG Resp. 21 (citing Exs. 9 & 10 in

response to Question 4). So all merchandise — not just steel

slab — would revert to their “Normal” rates if their applicable

7
The Ministry of Finance could impose tariff rates lower than
the “Normal” rates by means of ministerial promulgations, which
are known as “MOF Notifications.” See Verification Report 4.
Court No. 02-00026 Page 12

reduced rates were suspended, or if the MOF notification for that

rate expired. Verification Report 5; RTG Resp. 21 (citing Exs. 9

& 10 in response to Question 4). It is thus unclear why Commerce

has decided to use steel slab’s “Normal” rate to calculate the

countervailing duty on SSI, but cannot use the “Normal” tariff

rates to calculate the benefit conferred to Thai industries

importing other merchandise at the 1% reduced tariff rate.

Commerce must decide whether the “Normal” tariff rates

meaningfully relate to the economic value of the subsidy, or

whether they are so irrelevant to the actual functioning of the

Thai tariff regime that they must be excluded entirely from the

benefit analysis. It is clear that the Thai system of import

tariffs is complex and technical; it is for Commerce, and not

this Court, to make a supported determination regarding the use

of the “Normal” rates as benchmarks. See 19 U.S.C. §§ 1671d &

1677(1); 19 C.F.R. §§ 351.210 & 351.503(d) (2006). But Commerce

may not treat two like situations differently without

explanation. Cf. NSK Ltd. v. United States, 390 F.3d 1352, 1357-

58 (Fed. Cir. 2004) (rejecting as internally inconsistent a

Commerce regulation interpreting “the price used to establish

export price” in antidumping law); Husteel Co., Ltd. v. Seah

Steel Corp., Ltd., 31 CIT ___, ___, Slip Op. 07-74 at 18 (May 15,

2007) (applying the NSK holding to Commerce’s findings in a

single antidumping proceeding).

Defendant-intervenor U.S. Steel offers the following

explanation for the apparently inconsistent determinations: “At
Court No. 02-00026 Page 13

verification, RTG officials specifically stated with respect to

slab, and only slab, that if the 1% reduced import duty rate was

rescinded, the ‘normal’ rate of 10% would apply.” Def.-Int. U.S.

Steel Corp.’s Resp. Pl.’s Comments to Dep’t Commerce Remand Det.

7 (“Def.-Int.’s Reply”) (citing Verification Report 5). The

cited Verification Report provides in pertinent part that:

RTG officials explained that slab would have
automatically reverted to its “Normal” rate of ten
percent if these MOF Notifications had not been issued
or had expired, since any “Reduced” rate other than
one percent would require action on the part of the
MOF to initiate and implement a new MOF Notification.

Verification Report 5. U.S. Steel is only half correct in its

summation of this passage. While it is true that the passage can

be read to support the proposition that the 10% “Normal” rate

would apply to steel slab if the 1% rate were rescinded, Commerce

addresses only steel slab in the passage, and never limits that

analysis as applying “with respect to slab, and only slab.”

Def.-Int.’s Reply 7.

In fact, Commerce notes in the same paragraph that “RTG

officials explained that an MOF Notification must be issued

before a product can receive a ‘Reduced’ rate.” Verification

Report 5. Since steel slab was the only industry about which

Commerce specifically inquired, Commerce only responded with

respect to the steel industry. However, in formulating that

response, the RTG was simply applying the general principle that

since MOF Notifications alone operate to reduce tariff rates from

the “Normal” rates, the “Normal” rate would have been the legally

operative rate if no MOF Notification had ever implemented the 1%
Court No. 02-00026 Page 14

reduced rate. See Pls.’ Br. 8-9 (“Indeed, [in the Verification

Report] the Department verified that if [the] 1% rate was not

available, the legally operative rate would be the normal rate

clearly set forth in the tariff schedule.”). Thus, U.S. Steel

correctly asserts that the “Normal” rate would be legally

operative for slab, but incorrectly asserts that slab is unique

in this regard. Accordingly, the Court remands the issue so that

Commerce may reconcile its findings regarding the applicability

vel non of the “Normal” rates as benchmarks in Commerce’s

analysis.8 As it stands, the disparate treatment of the “Normal”

rates is arbitrary.

B. Commerce Must Make Further Findings

A reconciliation of the inconsistency discussed in Part

III.A will not complete Commerce’s calculation of SSI’s

countervailable subsidy rate. In this section, the Court will

endeavor to explain the consequences of Commerce’s adoption or

rejection of the “Normal” rates as benchmarks, and delineate the

additional findings that the Court will require as a result of

Commerce’s findings.

1. If the “Normal” Rates Are Meaningful Benchmarks, Then
Commerce Must Revise Its Specificity Methodology.

8
Commerce itself has offered no explanation for its disparate
treatment of the 10% “Normal” rate for steel slab and the
“Normal” rates for other imported merchandise.
Court No. 02-00026 Page 15

If Commerce determines that the “Normal” tariff rates are

meaningful benchmarks then it must reverse its methodological

decision to use CIF values instead of duty savings as a means of

comparing the distribution of the 1% rate across industries.

Otherwise, Commerce must explain its reasons for departing from

its preferred policy.

As a preliminary matter, the deference due to Commerce’s

selected methodology is unaffected by the Federal Circuit’s

previous decision in Royal Thai II. In Royal Thai II, the court

granted Commerce latitude to measure the benefit conferred by a

debt restructuring program. See 436 F.3d at 1336. The program,

created in response to the Asian financial crisis of 1997, sought

to identify major corporate debtors and offer a voluntary forum

for restructuring negotiations that would bind all creditors.

Royal Thai I, 29 CIT at ___, 341 F. Supp. 2d at 1317-18.

Commerce determined that the program was non-specific by

measuring the distribution of the value of the debts being

restructured. Royal Thai II, 436 F.3d at 1336. The Federal

Circuit recognized that more favorable terms would confer greater

benefits, but ultimately did not require Commerce to inquire into

the specific terms of each loan because acquiring that

information was “impracticable.” Id. Indeed, the RTG did not

have access to the terms of the private loans. Pls.’ Br. 5.

In contrast, the current controversy is not over the

practicability of conducting the proposed alternative analysis.

The RTG has already provided the data necessary to analyze the
Court No. 02-00026 Page 16

duty savings. See RTG Resp., Ex. 9. Rather, the parties

disagree over whether the “Normal” tariff rates provide a

meaningful benchmark against which the reduced 1% tariff rate may

be measured. Royal Thai II thus has no bearing on the present

matter. The issue is then whether Commerce, having found that

the “Normal” rates are appropriate benchmarks for the purposes of

calculating the countervailable subsidy rate, is compelled to use

the “Normal” rates in its specificity analysis, or if it may

continue to use the CIF values as a proxy for its proportional

benefit analysis.

It is Commerce’s own policy to use the relative level of

actual benefits conferred to various industries when conducting a

specificity analysis. See Royal Thai II, 436 F.3d at 1336

(“‘[A]nalysis of whether an enterprise or industry or group

thereof is a dominant user of, or has received disproportionate

benefits under, a subsidy program should normally focus on the

level of benefits provided,’ even if sometimes ‘it may be

impracticable or impossible to determine the relative level of

benefits.’” (quoting Countervailing Duties: Final Rule, 63 Fed.

Reg. 65348, 65359 (Dep’t Commerce Nov. 25, 1998) (final rule)).

As applied to the present controversy, the policy would require

Commerce to measure the actual savings provided by the import

tariff reduction, unless acquiring that information is

“impracticable.”

As explained above, it is not impracticable for Commerce to

incorporate the “Normal” rates into its specificity analysis.
Court No. 02-00026 Page 17

Having determined that they are appropriate benchmarks to measure

the economic value of the reduced tariff rate, Commerce must

either follow its preferred policy of conducting a relative

benefit analysis, or it must explain its departure from its own

precedent. See Atchison, Topeka & Santa Fe Ry. Co. v. Wichita

Bd. of Trade, 412 U.S. 800, 808 (1973); Shakeproof Assembly

Components Div. of Ill. Tool Works, Inc. v. United States, 29 CIT

___, ___, 412 F. Supp. 2d 1330, 1336 (2005); Allied Tube &

Conduit Corp. v. United States, 29 CIT ___, ___, 374 F. Supp. 2d

1257, 1262 (2005) (“Commerce must explain why it chose to change

its methodology and demonstrate that such change is in accordance

with law and supported by substantial evidence.”).

To be sure, the Court is mindful that it should not intrude

into an agency’s methodological prerogative without good reason.

However, adopting the “Normal” rates as benchmarks in the

specificity analysis will significantly transform the data and

the conclusions that it may support. If Commerce measures the

benefit conferred on Thai industries by the RTG’s “relative

benefits analysis,” the steel industry’s share of the benefit

drops considerably. According to that analysis, the steel

industry’s share of the benefits flowing from the 1% reduced rate

drops from 7.64 percent to 2.44 percent. Remand Det. 8; Pls.’

Br. 8. The Court does not speculate as to whether Commerce will

decide to group the steel industry with other industries to find

predominant use, or whether Commerce will find disproportionate

use despite steel’s decreased proportion of benefits received.
Court No. 02-00026 Page 18

However, it is clear that such a transformation of the benefit

distribution would merit further consideration from Commerce.

2. If the “Normal” Rates Are Not Meaningful Benchmarks, Then
Commerce Must Prove That the 1% Reduced Tariff Rate Is a
Subsidy.

If Commerce determines that the “Normal” tariff rates are

not meaningful benchmarks, then it will have rightfully excluded

them from its specificity analysis. However, under a finding of

specificity alone, Commerce may not, as it has done here, discard

the 1% reduced rate as a benchmark. Commerce must prove that the

1% reduced rate is a countervailable subsidy and it must do so

without reference to the rejected “Normal” rates.

A subsidy exists when “an authority . . . provides a

financial contribution . . . to a person and a benefit is thereby

conferred.” 19 U.S.C. § 1677(5)(B). As noted supra, such a

subsidy is countervailable only when it is specific. See id.

§ 1677(5)(A). There are thus three elements of a countervailable

subsidy: (1) financial contribution; (2) benefit conferred; and

(3) specificity. See Delverde, SrL v. United States, 202 F.3d

1360, 1365 (Fed. Cir. 2000); 19 U.S.C. §§ 1677(5)(D) (defining

“financial contribution”), 1677(5)(E) (defining “benefit

conferred”) & 1677(5A) (defining “specificity”).

Commerce has not yet made any finding that the 1% tariff

rate is a subsidy, nor did this Court in Royal Thai III express

any opinion as to whether the 1% tariff met the other statutory
Court No. 02-00026 Page 19

requirements of a countervailable subsidy.9 Thus, even if

Commerce finds specificity, it will have prematurely rejected the

1% rate as a benchmark if it does so without the requisite

finding that it is in fact a subsidy.

The consequence of rejecting the “Normal” rates as

benchmarks, however, is that Commerce must then show that the 1%

rate confers a benefit without reference to these now irrelevant

“Normal” rates. If the rates are not meaningful benchmarks, such

that their use would distort the specificity analysis, then any

calculations that result from their use will similarly distort

the calculation of SSI’s countervailable subsidy. And unless

Commerce can demonstrate that the 1% rate constitutes a benefit-

conferring financial contribution without reference to the

“Normal” tariff rates, it cannot find that the 1% rate is a

subsidy. Finally, if Commerce is somehow able to prove that the

1% reduced tariff rate confers a countervailable benefit without

reference to the “Normal” rates, and accordingly rejects the 1%

rate as a benchmark, Commerce must then find a non-

countervailable benchmark that is not the “Normal” rate.

9
In Royal Thai III, the Court included the following
qualification to its remand:
Because the Court's discussion herein is necessarily
limited to specificity analysis (i.e., the apparent
basis for agency decision-making), the Court expresses
no opinion on whether the other statutory criteria for
establishing the existence of a countervailable
subsidy (including the presence of a financial
contribution) have otherwise been met in this case.
441 F. Supp. 2d at 1366 n.16.
Court No. 02-00026 Page 20

IV. CONCLUSIONS

The Court holds that Commerce’s disparate treatment of the

“Normal” rates is unsupported and arbitrary. Since the

conclusions of the Remand Determination depended on that

disparate treatment, the matter is remanded to the agency for

reconsideration consistent with this opinion. On remand,

Commerce must make one of three findings: (1) determine that the

“Normal” rates are meaningful benchmarks to determine the

economic value of the benefit conferred by any import tariff rate

reduction or exemption; (2) determine that the “Normal” rates are

not meaningful benchmarks to determine the benefit conferred by

the tariff rate reductions or exemptions; or (3) distinguish

steel slab from other Thai industries that receive the 1% reduced

rate, to show that steel slab’s “Normal” tariff rate of 10% is a

meaningful benchmark to calculate the benefit conferred by the

tariff rate reductions or exemptions, but that the other Thai

industries’ “Normal” rates are not similarly meaningful

benchmarks. If Commerce makes the first finding, then it must

accordingly adjust its specificity methodology or state its

reasons for abandoning its precedent. If Commerce makes the

second finding, then Commerce must prove the existence of a

subsidy without reference to the “Normal” tariff rates. If,

under this second finding, it cannot prove the existence of

benefit, then it cannot prove that the reduced rate is a

countervailable subsidy, and it must use the 1% tariff rate as a

benchmark to calculate the countervailable subsidy that SSI
Court No. 02-00026 Page 21

received through its import duty exemption programs. If Commerce

makes the third finding, then it must make an affirmative finding

that that the 1% tariff rate is a subsidy, and use the 10% rate

to calculate SSI’s countervailing duty.

/s/ Richard W. Goldberg
Richard W. Goldberg
Senior Judge

Dated: August 6, 2007
New York, New York
 UNITED STATES COURT OF INTERNATIONAL TRADE

ROYAL THAI GOVERNMENT, SAHAVIRIYA
STEEL INDUSTRIES PUBLIC COMPANY
LIMITED, Before: Richard W. Goldberg,
Senior Judge
Plaintiffs,
Consol. Court No. 02-00026
v.

UNITED STATES,

Defendant,

and

UNITED STATES STEEL CORP.,

Defendant-
Intervenor.

ORDER

Upon consideration of the Results of Redetermination on
Remand Pursuant to Royal Thai Government, et al. v. United
States, Slip Op. 04-91 (Ct Int’l Trade July 27, 2004) (May 4,
2007) (“Remand Determination”), Plaintiffs’ Comments on the
Remand Results, and the Responses to Plaintiffs’ Comments filed
by the Defendant and the Defendant-Intervenor, and upon all other
papers and proceedings had herein, and upon due deliberation, it
is hereby

ORDERED that the Remand Determination is further REMANDED
to Commerce; and it is further

ORDERED that on remand Commerce must make one of the
following three findings based on substantial evidence:

(1) The “Normal” rates are meaningful benchmarks to
determine the economic value of the benefit conferred by
any import tariff rate reduction or exemption;
(2) The “Normal” rates are not meaningful benchmarks to
determine the benefit conferred by the tariff rate
reductions or exemptions; or
(3) Steel slab may be distinguished from other Thai
industries that receive the 1% reduced rate, such that
steel slab’s “Normal” tariff rate of 10% is a meaningful
benchmark to calculate the benefit conferred by the tariff
rate reductions or exemptions, but that the other Thai
Court No. 02-00026 Page 2

industries’ “Normal” rates are not similarly meaningful
benchmarks.
And it is further

ORDERED that Commerce must consider and explain the
implications of the aforementioned findings as indicated in Part
IV of the Court’s August 6, 2007 Slip Op. 07-119.

IT IS SO ORDERED.

/s/ Richard W. Goldberg
Richard W. Goldberg
Senior Judge

Dated: August 6, 2007
New York, New York