Bethlehem Steel Corp. v. United States

Slip Op. 02-97

UNITED STATES COURT OF INTERNATIONAL TRADE
BEFORE: CARMAN, CHIEF JUDGE

__________________________________________
:
BETHLEHEM STEEL CORPORATION, et al., :
:
Plaintiffs, :
:
v. :
:
UNITED STATES, : Court No. 00-03-00116
:
Defendant, :
:
and :
:
POHANG IRON AND STEEL CO., LTD., :
:
Defendant-Intervenor. :
__________________________________________:

[Remand Redetermination Pursuant to Bethlehem Steel Corporation et al. v. United States,
December 6, 2001 is sustained.]

Dewey Ballantine LLP (John A. Ragosta, Jennifer Danner Riccardi, Navin Joneja),
Washington, D.C., for Plaintiffs.

Robert D. McCallum, Jr., Assistant Attorney General; David M. Cohen, Director,
Commercial Litigation Branch, Civil Division, United States Department of Justice; A. David
Lafer, Senior Trial Counsel, Commercial Litigation Branch, Civil Division, United States
Department of Justice; William L. Olsen, Trial Attorney, Commercial Litigation Branch, Civil
Division, United States Department of Justice; Michele D. Lynch, Attorney, Office of the Chief
Counsel for Import Administration, United States Department of Commerce, Of Counsel,
Washington, D.C., for Defendant.

Kaye Scholer LLP (Donald B. Cameron, Julie C. Mendoza, Brady W. Mills), Washington,
D.C., for Defendant-Intervenor.

Dated: August 27, 2002
Court No. 00-03-00116 Page 1

OPINION

CARMAN , CHIEF JUDGE: Bethlehem Steel Corporation and U.S. Steel Group, a Unit of

USX Corporation (“Plaintiffs”) and Pohang Iron and Steel Co., Ltd. (“POSCO” or “Defendant-

Intervenor”) challenge the Department of Commerce’s (“Commerce”) determination in Remand

Determination Pursuant to Bethlehem Steel Corporation, et al. v. United States, Slip-Op. 01-95

(August 8, 2001) (“Remand Redetermination”). This Court has jurisdiction to hear this case

pursuant to 28 U.S.C. 1581(c) (2000). For the reasons that follow, this Court sustains

Commerce’s Remand Redetermination in its entirety.

BACKGROUND

On August 8, 2001, this Court remanded this case for Commerce to further investigate

and explain whether two programs by the Government of Korea (“GOK”) provided

countervailable subsidies to POSCO: 1) the direct provision of infrastructure at Asan Bay and 2)

the reduction of import duties on steel slab by the GOK. See Bethlehem Steel Corp. v. United

States, 162 F. Supp. 2d 639, 645, 648 (Ct. Int’l Trade 2001). In the Remand Redetermination,

Commerce determined that the infrastructure at Asan Bay does not provide a countervailable

benefit to POSCO and that although the import duty reduction program is countervailable,

POSCO received no measurable benefit from it. See Remand Redetermination at 4-5, 9.

I. Commerce’s determination as to infrastructure benefits

This Court remanded the issue of whether POSCO received infrastructure subsidies at
Court No. 00-03-00116 Page 2

Asan Bay due to Commerce’s failure to properly address this issue, focusing instead upon

whether POSCO’s lease terms constituted a countervailable subsidy. See Bethlehem Steel, 162 F.

Supp. 2d at 644. Commerce was instructed to investigate Plaintiffs’ subsidy allegations as to

roads, industrial water facilities, distribution depots and electric power stations at Asan Bay. See

Bethlehem Steel, 162 F. Supp. 2d at 645. Commerce accordingly solicited and verified additional

information on this issue. See Remand Redetermination at 2. With regard to POSCO’s presence

in Asan Bay, Commerce had previously discovered that POSCO leased a port berth and

maintained a warehouse at Asan Bay. See id. Commerce verified that 1) the port berth “is not

part of the Poseung Industrial Complex, which is one of five industrial sites within Asan Bay”;

and 2) the Inchon Port Authority, rather than the government agencies responsible for

construction in the industrial site, was responsible for the port berths at Asan Bay. Id. at 3 (citing

Remand Verification Report for the Government of Korea (GOK) in the Court of International

Trade (CIT) Remand of the Countervailing Duty Investigation of Certain Cut-to-Length Carbon-

Quality Steel Plate from the Republic of Korea (Nov. 26, 2001) at 5-6, Pub. Doc. 258, POSCO’s

Jan. 22, 2002 Pub. Attach. 4 at 4-5 (“GOK Verification Report”)).

As part of its investigation of roads at Asan Bay, Commerce verified that the bridge and

major highway at Asan Bay are part of the West Coast Highway system connecting two cities,

thus constituting part of Korea’s general highway and road system. Remand Redetermination at

3. The government agency Ministry of Construction and Transportation (“MOCAT”) is

responsible for the road system. See id. (quoting GOK Verification Report at 4, POSCO’s Jan.

22, 2002 Pub. Attach. 4 at 3). With respect to the roads within the industrial complex,

Commerce verified they are public roads used by the general public. Furthermore, Commerce
Court No. 00-03-00116 Page 3

verified that “POSCO does not use most of the roads within the complex; rather, it uses the

country’s general road system.” Remand Redetermination at 4. Commerce concluded POSCO

did not receive a financial contribution from the GOK with regard to the highway and bridge at

Asan Bay and did not receive a countervailable benefit as to the roads within the industrial

complex. See id.

With regard to the electric power stations, Commerce verified that the electricity is

supplied by the national utility company KEPCO and the power plant is located near Kia in Asan

Bay. See GOK Verification Report at 6, POSCO’s Jan. 22, 2002 Pub. Attach. 4 at 5. It found

that POSCO pays for electricity services based upon the applicable general tariff schedule

charged to all electricity customers. See Remand Redetermination at 5. The same is true as to

telephone and water services, even though POSCO receives water from a treatment center within

the industrial estate. See id. It also verified that there are no distribution depots constructed by

the GOK at Asan Bay that could provide a benefit to POSCO. See Remand Redetermination at 5.

Commerce therefore concluded POSCO did not receive a financial contribution or

countervailable benefit from water facilities, distribution depots, and electric power stations at

Asan Bay. See id.

II. Commerce’s determination as to reduction of import duties on slab

The import duty reduction program at issue in this case works as follows: Interested

parties request reductions in import duties generally in response to market conditions. If they

meet the criteria established in Korea’s statutes and regulations, the government may approve a

tariff reduction upon import. See CTL Plate Remand Questionnaire Response of the Government
Court No. 00-03-00116 Page 4

of Korea (Sept. 7, 2001), at 11-13, Pub. Doc. 250, Def.’s Pub. Ex. 6 (“GOK Questionnaire

Response”). In the case of slab, “the Korean government monitors the domestic supply of slab.

When either the domestic supply drops below a certain threshold or the domestic industry so

requests, the Korean government reduces the tariff rate on steel slab. This reduced tariff rate is

available to the entire steel industry, irrespective of the manner in which the individual

companies ultimately use the slab[.]” Bethlehem Steel, 162 F. Supp. 2d at 647 (footnote

omitted). Commerce had found in the final results and first remand redetermination that the

program is not countervailable, but this Court remanded the issue a second time because

Commerce had failed to investigate the program. See id. at 641, 646.

Upon solicitation and verification of additional information, Commerce found that the

program could not be classified as an export subsidy because the applicability of the reduced rate

was not conditioned upon the use of the slab in a product to be exported. See Remand

Redetermination at 6. However, Commerce concluded that the program is specific under section

771(5A) of the Tariff Act of 1930 . See id. at 7. It verified that the reduced rate of one percent

had been applied to imports during the first part of 1998 but that the general tariff rate of three

percent had been applied during the second half of 1998. See id. at 8. POSCO had imported slab

during the first half of 1998 at the one percent tariff rate. See id. Based on this information,

Commerce found POSCO received a financial contribution and countervailable benefit for the

first half of 1998. See id. at 8-9. However, Commerce found “POSCO did not receive a

measurable benefit from this program as the calculated benefit under this program was less than

0.005 percent and therefore had “no impact on the ad valorem subsidy rate calculated in the final

determination.” Id. at 9.
Court No. 00-03-00116 Page 5

STANDARD OF REVIEW

This Court will sustain a final determination of Commerce unless it is 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). The same standard of review applies to the review of a remand

determination as to the review of the original determination. See Laclede Steel Co. v. United

States, 125 F. Supp. 2d 525, 530 (Ct. Int’l Trade 2000); see also Viraj Group, Ltd. v. United

States, 193 F. Supp. 2d 1331, 1335 (Ct. Int’l Trade 2002) (applying the substantial evidence

standard to review a remand determination). “Substantial evidence is more than a mere scintilla.

It means such relevant evidence as a reasonable mind might accept as adequate to support a

conclusion. . . . Moreover, [t]he court may not substitute its judgment for that of the [agency]

when the choice is between two fairly conflicting views, even though the court would justifiably

have made a different choice had the matter been before it de novo.” Transcom, Inc. v. United

States, 121 F. Supp. 2d 690, 693 (Ct. Int’l Trade 2000) (internal quotations and citations

omitted). In examining statutes, the Court applies the two-part analysis of Chevron U.S.A. Inc. v.

National Res. Def. Council, Inc., 467 U.S. 837 (1984). See Fabrique de Fer de Charleroi, SA v.

United States, 166 F. Supp. 2d 593, 598 (Ct. Int’l Trade 2001). Under Chevron, the Court

examines whether the relevant statute addresses the specific question at issue, and if not, whether

the agency’s statutory interpretation is reasonable in light of the overall statutory scheme. See

Chevron U.S.A., Inc., 467 U.S. 842-43.
Court No. 00-03-00116 Page 6

DISCUSSION

I. Contentions as to Countervailability of Infrastructure Benefits

A. Plaintiffs’ Contentions

Plaintiffs argue Commerce’s decision as to the countervailability of infrastructure

subsidies should be reversed and remanded. (Pl.’s Dec. 17, 2001 Br. at 2.) They present three

contentions in support of their argument.

First, Plaintiffs argue Commerce based its conclusion upon irrelevant factors. (Id. at 8.)

They assert that the fact “that POSCO’s facilities . . . are not located within a specific location

within the Asan Bay site is irrelevant to the inquiry of whether POSCO received infrastructure

subsidy benefits at Asan Bay.” (Id. at 9.) Plaintiffs also assert it is irrelevant whether the Inchon

Port Authority or some other government agency is responsible for the port berths; in either case

POSCO is being provided a benefit from the GOK. (Id.) In addition, Plaintiffs state Inchon Port

Authority is a division of the Ministry of Maritime Affairs and Fisheries, which does play a role

in the development of the Poseung Industrial Complex, but Commerce did not investigate its

involvement. (Id. at 9-10.)

Second, Plaintiffs assert faulty reasoning led to Commerce’s determination that POSCO

did not receive a benefit from the provision of roads at Asan Bay. (Id. at 10.) They contend that

Commerce only referred to a MOCAT report to support its finding that the highway and bridge at

Asan Bay are part of the general infrastructure, and Commerce did not address the issue of the

use of other roads “in and around” Asan Bay. (Id.) Plaintiffs state, “The mere fact that these

secondary roads, intended to benefit only a few, appear on a national roads plan does not

demonstrate that they were in fact intended to benefit society as a whole. . . . That the roads
Court No. 00-03-00116 Page 7

appear on a national roads plan also has no implications for whether or not their provision was de

facto specific.” (Id. at 11 (citing 19 U.S.C. § 1677(5A)(D)(1995)).) Plaintiffs maintain that

while Commerce found the GOK recovers the cost of constructing the roads by including it in the

price of the land sold in the industrial estate, POSCO does not own land there and therefore

benefitted from use of the roads without payment. (Id. at 11-12.) Plaintiffs maintain that

Commerce improperly relied upon the rationale that the public could, in theory, use the roads

while they allege the public does not, in fact, use the roads. (Id. at 12.) They maintain the roads

were not constructed for the public welfare but rather to develop industrial sites for sale to

individual companies. (Id. at 13.)

Third, Plaintiffs argue that this Court previously rejected Commerce’s reasoning as to the

countervailability of provisions of industrial water facilities, distribution depots, and electric

power stations. Plaintiffs note that in reviewing the first remand, this Court stated the fact that

POSCO paid comparable leasing fees was not dispositive of whether there was a countervailable

subsidy. (Id. at 14 (citing Bethlehem Steel, 162 F. Supp. 2d at 644).) Plaintiffs maintain

Commerce is again mistakenly focusing upon the fact that POSCO paid market rates for water,

electric, and telephone services. (Id.) Plaintiffs argue instead that the salient issue is whether the

particular infrastructure was built for the public welfare. (Id. at 15.) Plaintiffs distinguish

discounts on services from infrastructure benefits by noting “an infrastructure subsidy benefit

inquiry relates to the benefit received from the construction of the infrastructure. . . .” (Id. at 17.)

Plaintiffs reason that whether the facilities in question were specifically built for POSCO is

irrelevant because for there to be a financial contribution, all that is required is that the

infrastructure not be for the public welfare. (Id. at 15.)
Court No. 00-03-00116 Page 8

In light of these three arguments, Plaintiffs request a remand directing Commerce to

apply a .74 percent countervailing duty rate, the rate Commerce calculated as to the infrastructure

benefits received by POSCO at Kwangyang Bay. (Id. at 18.)

B. Defendant’s and Defendant-Intervenor’s Contentions

Defendant and Defendant-Intervenor support Commerce’s determination as to non-

countervailability of infrastructure subsidies with four contentions. First, to demonstrate that

Commerce made its decision after a detailed investigation, Defendant-Intervenor points to the

remand questionnaires issued to the GOK and POSCO that address this Court’s concerns and

Commerce’s four-day “exhaustive” verification. (POSCO’s Jan. 22, 2002 Pub. Br. at 9-11.)

Second, Defendant-Intervenor posits Commerce addressed whether POSCO received a

benefit from use of the roads in and around Asan Bay. (Id. at 13.) It cites Commerce’s

verification that POSCO did not use most of the roads in the industrial complex and that the

roads within the industrial estate are public roads. (Id. (citing Remand Redetermination at 4).)

As to the secondary roads, Defendant and POSCO assert Commerce found those roads to be part

of the country’s national highway system and that they were built prior to the development of the

industrial estates at Asan Bay. (POSCO’s Jan. 22, 2002 Pub. Br. at 13; Def.’s Br. at 7.) The

bridge and highway used to access Asan Bay were found to be part of the general highway and

road system as well and are therefore exempt from the definition of a financial contribution.

(Def.’s Br. 5-6.) POSCO states Commerce found that the public did in fact use the roads.

(POSCO’s Jan. 22, 2002 Pub. Br. at 14.)

Third, Defendant and Defendant-Intervenor argue Commerce’s decision that POSCO did
Court No. 00-03-00116 Page 9

not benefit from industrial water facilities, distribution deports, and electric power stations at

Asan Bay is supported by substantial evidence. Commerce verified that the water lines servicing

Asan Bay also service the populations to the west and northeast of Asan Bay and that the water is

being provided in the region between the towns of Daesan and DanJim. (Id. at 15-16.)

Defendant and Defendant-Intervenor argue the water facilities clearly were not specifically built

to service POSCO or the steel industry. (Id. at 16; Def.’s Br. at 10.) As to the electric power

stations, Commerce verified that the electric power plant is not located at Asan Bay and that the

plant was built many years before the industrial estates at Asan Bay were developed. Therefore,

Defendant and Defendant-Intervenor argue the plant was not built to service only POSCO.

(POSCO’s Jan. 22, 2002 Pub. Br. at 16-17; Def’s. Br. at 9.) In addition, because POSCO paid

market rate fees for water and electricity, they argue Commerce correctly concluded that POSCO

received no benefit. (POSCO’s Jan. 22, 2002 Pub. Br. at 16, 17; Def.’s Br. at 9-10.)

Fourth, Defendant-Intervenor argues Plaintiffs’ request for a directed remand to apply the

subsidy rate of .74 percent is unsupported by record evidence and is contrary to law. Defendant-

Intervenor considers this a “facts available” rate for which Plaintiffs have not offered any

evidence to justify its application. (Id. at 18-19.)

II. Commerce’s determination that POSCO did not receive a financial contribution and
countervailable benefit from infrastructure subsidies is supported by substantial evidence
or otherwise in accordance with law.

In order for Commerce to assess countervailing duties upon investigation of a subsidy, it

must find that the subsidy is one in which an authority 1) provides a financial contribution to a

person, 2) a benefit is thereby conferred, and 3) the subsidy is specific. See 19 U.S.C. §
Court No. 00-03-00116 Page 10

1677(5)(A)-(B). In the present case, Commerce found that POSCO did not receive a financial

contribution from the highway and bridge over Asan Bay or from the industrial water facilities,

distribution depots, and electric power stations, and it did not receive a benefit from the roads

within Asan Bay. See Remand Redetermination at 3-5. Therefore, Commerce concluded that the

provision of infrastructure at Asan Bay was not a countervailable subsidy. This Court finds

Commerce’s determination to be supported by substantial evidence or otherwise in accordance

with law.

The definition of a “financial contribution” includes “providing goods or services, other

than general infrastructure.” 19 U.S.C. § 1677(5)(D)(iii) (emphasis added). Commerce’s

regulations define “general infrastructure” as “infrastructure that is created for the broad societal

welfare of a country, region, state or municipality.” 19 C.F.R. § 351.511(d)(1999). The

definition of a “benefit” includes a “case where goods or services are provided, if such goods or

services are provided for less than adequate remuneration. . . .” 19 U.S.C. § 1677(5)(E)(iv); see

also 19 C.F.R. § 351.511(a)(1).

Commerce properly determined that POSCO did not receive a countervailable benefit

from the roads within Asan Bay. As noted earlier, Commerce has verified that POSCO is not

located within the industrial estates at Asan Bay. See Remand Redetermination at 4 (citing

Remand Verification Report for Pohang Iron and Steel Co., Ltd. (POSCO) in the CIT Remand of

the Countervailing Duty Investigation of Certain Cut-to-Length Carbon-Quality Steel Plate from

the Republic of Korea (Nov. 26, 2001), at 2, 3, Prop. Doc. 257, available at Def.’s Conf. Ex. 3 at

2-3). In response to Commerce’s questionnaire, the GOK explained, “Up through 1998, the

GOK’s major expenditures in and around the Asan Bay area were for the development of land for
Court No. 00-03-00116 Page 11

industrial sites that would be sold to individual companies, but it also constructed basic

infrastructure such as roads, industrial water conduits and sewage disposal facilities. . . . The

infrastructure provided by the GOK . . . was constructed for the use of all companies located in

the Asan Bay area. . . . [T]he roads and industrial water supply systems . . . were constructed to

cover all companies as well as the population located in Asan Bay area.” CTL Plate Remand

Questionnaire Response of the Government of Korea (Sept. 7, 2001) at 2, Prop. Doc. 249,

POSCO’s Jan. 22, 2002 Pub. Attach. 1 at 4 (emphasis added) (“GOK Questionnaire Response”).

With regard to the roads in Asan Bay, the GOK informed Commerce that the Korean

Land Development Corporation (“Koland”), a government investment company, is responsible

for the land in the industrial estates and that the cost of roads constructed by Koland within the

industrial estates is included in the sales price of land sold within the estate. See id. at 4, 8-9,

POSCO’s Jan. 22, 2002 Pub. Attach. 1 at 6, 10-11. Where the GOK has constructed roads

outside the industrial estates but still within the Asan Bay area, the cost is either recovered

through tolls or, in some cases, the road is toll free. See id. at 9, POSCO’s Jan. 22, 2002 Pub.

Attach. 1 at 11. The GOK indicated that in addition to any harbor usage fees and leasing fees,

“POSCO paid fees or charges for the usage of facilities such as electricity, water, roads, etc.” Id.

at 8, POSCO’s Jan. 22, 2002 Pub. Attach. 1 at 10. The GOK emphasized that “all roads are part

of the country’s road and highway system.” Id. at 10, POSCO’s Jan. 22, 2002 Pub. Attach. 1 at

12. Commerce “verified that POSCO does not use most of the roads within the complex; rather,

it uses the country’s general road system” and that “the roads within the industrial estate are

public roads[.] . . . These roads are publicly traveled roads and are used by the public and not just

by POSCO.” Remand Redetermination at 4 (citing GOK Verification Report at 6, available at
Court No. 00-03-00116 Page 12

POSCO’s Jan. 22, 2002 Pub. Attach. 4 at 5). It further verified that the “secondary roads” in

Asan Bay are part of the national road and highways system. See Remand Redetermination at

11-12 (citing GOK Verification Report at Ex. GOK Remand 5, available at POSCO’s Jan. 22,

2002 Pub. Attach. 5 at 5-11). Based on this information, this Court holds Commerce’s decision

that infrastructure subsidies from use of roads at Asan Bay are not countervailable is supported

by substantial evidence or otherwise in accordance with law.

Commerce’s decision as to benefits from industrial facilities, distribution depots, and

electric power stations is also supported by substantial evidence. As noted, the GOK informed

Commerce that the industrial water supply system was constructed for use by all companies as

well as the general population in the Asan Bay area. See GOK Questionnaire Response at 2,

POSCO’s Jan. 22, 2002 Pub. Attach. 1 at 4. It submitted a map of the Asan Industrial Water

Supply System which Commerce verified. See GOK Questionaire Response Ex. G-1 at 5-6,

available at POSCO’s Jan. 22, 2002 Pub. Attach. 1 at 18-19 (“Water System Map”); GOK

Verification Report at 6, POSCO’s Jan. 22, 2002 Pub. Attach. 4 at 5. The map shows that the

system provides water in the region between the towns of Daesan and DangJim. See Water

System Map, POSCO’s Jan. 22, 2002 Pub. Attach. 1 at 18-19; GOK Verification Report at 6,

POSCO’s Jan. 22, 2002 Pub. Attach. 4 at 5. The Korea Water Resource Corporation, which

services the water, is under the administration of MOCAT, which is also responsible for

construction of the water lines. See GOK Verification Report at 6, POSCO’s Jan. 22, 2002 Pub.

Attach. 4 at 5. Based on the evidence submitted, it was reasonable for Commerce to conclude

that the water system was not built specifically for POSCO and served to benefit all entities in

the industrial estates as well as the population in the surrounding area. Therefore Commerce
Court No. 00-03-00116 Page 13

properly found there was no financial contribution by provision of the water facilities.

Commerce’s determination that there was also no countervailable benefit to POSCO because it

paid usage fees at the market rate, thus providing adequate remuneration for the benefit received,

was also supported by substantial evidence. See POSCO Verification Report at 4, POSCO’s Jan.

22, 2002 Pub. Attach. 3 at 5; CTL Plate Remand Questionnaire Response of Pohang Iron & Steel

Co., Ltd. (POSCO) (Sept. 7, 2001) at 3, Prop. Doc 249, POSCO’s Jan. 22, 2002 Pub. Attach. 2 at

5 (POSCO Questionnaire Response).

Commerce also found that to receive electricity service from KEPCO, all companies must

make arrangements with KEPCO. See GOK Verification Report at 6, POSCO’s Jan. 22, 2002

Pub. Attach. 4 at 5. During verification Commerce found “[t]here is a power plant that is located

up near Kia. It was not recently built.” Id. POSCO pays market rate usage fees for electric

services. Remand Redetermination at 5; POSCO Verification Report at 4, POSCO’s Jan. 22,

2002 Pub. Attach. 3 at 5. Commerce’s determination that there was no financial contribution or

countervailable benefit from infrastructure subsidies from electric power stations is therefore

supported by substantial evidence or otherwise in accordance with law.

III. Contentions as to Countervailability of Import Duty Reduction Program

For convenience, the Court first discusses the contentions of the Defendant-Intervenor as

to the import duty reduction program, followed by the contentions of the Plainitffs and

Defendant.

A. Defendant-Intervenor’s Contentions

Defendant-Intervenor contends this Court should reverse and remand Commerce’s
Court No. 00-03-00116 Page 14

decision that the import duty reduction program is countervailable for three reasons. (POSCO’s

Jan. 7, 2002 Pub. Br. at 1.) First, it argues the reduced tariff rate “does not constitute a ‘financial

contribution’ on exports of subject merchandise.” (Id. at 8.) POSCO argues that regardless of

the duty rate on slab, there is no benefit from the program due to the existence of duty drawback.

(Id. at 9.) Defendant-Intervenor insists Commerce failed to provide this Court with additional

factual findings to support its decision that this program is countervailable and asserts the only

effect of the program was to reduce the amount of duty paid at import and consequently to reduce

the amount of duty drawback claimed upon exportation. (Id. at 9-10.)

Second, Defendant-Intervenor points to duty drawback received by DSM, another steel

company under review, to show there was no “financial contribution.” (Id. at 10-12.) It asserts

Commerce incorrectly ignored the fact that duty drawback was received and found the existence

of a financial contribution and benefit despite the full refund of the duties. (Id. at 12-13.) It

maintains there was no financial contribution because “the GOK has no expectation of the

ultimate payment of import duties under either the general tariff rate or the reduced tariff rate.”

(Id. at 13.) Defendant-Intervenor therefore argues the GOK did not forego revenue that was

otherwise due. (Id.)

Third, Defendant-Intervenor posits the only benefit received from the import duty

reduction program was as to merchandise sold in the domestic market and that there was no

countervailable benefit upon the export of the subject merchandise. (Id. at 14.) Companies that

imported at the reduced duty rate and used the subject merchandise in products sold domestically

did not receive duty drawback and therefore benefitted from the lower rate, but the companies

that exported the product containing the subject merchandise gained no benefit because they
Court No. 00-03-00116 Page 15

received a refund of the duties they had paid upon import. (Id. at 14-15.) Thus Defendant-

Intervenor claims the benefit from the import duty reduction program is tied to the domestic

market of Korea. (Id. at 15-16.) It maintains that this Court’s opinion in Bethlehem Steel did not

instruct Commerce to find that the benefit from the program was not tied to a particular market

or industry and that Commerce erred in failing to find tying in light of the evidence on the record.

(Id. at 17.)

POSCO acknowledges this Court’s statement that where a benefit associated with a

domestic subsidy is not tied to a particular industry or market, Commerce will attribute the

benefit to all products produced by a company. (Id. at 13-14.) At the same time, POSCO argues

Commerce’s reliance upon the statement was mistaken in that the Court specifically stated it was

not drawing any conclusion about the countervailability of the program and that further

investigation upon remand demonstrated that duty drawback was actually received. (Id. at 14.)

B. Plaintiffs’ and Defendant’s Contentions

Plaintiffs and Defendant advance three arguments to demonstrate that Commerce

properly countervailed the import duty reduction program. First, Plaintiffs assert this Court

previously rejected POSCO’s claim and that the reduction of import duties on slab does

constitute a financial contribution. (Pls.’ Jan. 22, 2002 Br. at 3.) Defendant states this Court

provided explicit instructions concerning analysis of the program at issue and Commerce

followed those instructions. (Def.’s Br. at 12.) Plaintiffs note under 19 U.S.C. § 1677(5)(D), a

financial contribution includes “foregoing or not collecting revenue that is otherwise due,” and

they argue under the program at issue the GOK foregoes revenue that is otherwise due. (Pls.’
Court No. 00-03-00116 Page 16

Jan. 22, 2002 Br. at 4 (citing 19 U.S.C. § 1677(5A).)

Second, Plaintiffs counter this Court previously rejected POSCO’s argument that duty

drawback obviates the existence of a benefit. Plaintiffs cite this Court’s statement that the

countervailability of the program depends upon whether it conferred a specific benefit on a

particular company or industry rather than upon whether the steel slab was used in the production

of subject merchandise. (Id. at 5 (citing Bethlehem Steel, 162 F. Supp. 2d at 647).)

Third, Plaintiffs maintain POSCO and DSM received a countervailable benefit from the

import duty reduction program. (Id. at 5.) Plaintiffs explain that absent a showing of tying, the

benefit from a domestic subsidy is attributable to all production, including exports and therefore

there was a countervailable benefit in the present case regardless of the availability of duty

drawback. (Id. at 6.) Plaintiffs provide “[d]omestic subsidies are countervailable because, even

though their availability is not contingent on export and they apply to products that may not be

exported, producers of the subject merchandise are given trade-distorting competitive advantages

that affect their entire operations.” (Id.) In addressing POSCO’s assertion that the benefits of the

import duty reduction program are tied to a particular market, i.e. the domestic market, Plaintiffs

contend “[t]ying . . . is an exception to the rule of fungibility and requires very particular

findings.” (Id. at 7.) Commerce did not find that such facts exist in this case. (Id.) Plaintiffs

also assert that “a countervailable benefit is conferred despite the availability of duty drawback

on exported products.” (Id. at 8.) Plaintiffs argue that rather than being concerned with the

existence of duty drawback, the issue of the second remand was the link between the exemption

of import duties and exportation. (Id. at 9.) They maintain the link does not exist in this case.

(Id.)
Court No. 00-03-00116 Page 17

IV. Commerce’s determination that the reduction of duty rates on the importation of slab is
countervailable is supported by substantial evidence or is otherwise supported by law.

Commerce found that 1) the import duty reduction program administered by the GOK is

specific within the meaning of 19 U.S.C. § 1677(5A)(D)(iii), 2) POSCO received a financial

contribution through the program, and 3) POSCO received a benefit but the benefit is not

measurable. See Remand Redetermination at 7, 9. This Court affirms Commerce’s

determination as to the program’s countervailability.

Under Korea’s tariff system, a foreign government, domestic industry or importer may

request a change in the general tariff rate. See GOK Verification Report at 2, Def.’s Pub. Ex. 12

at 2. For a reduction of a tariff rate to be approved, the requesting party must show that the

reduction meets at least one of the system’s three criteria of 1) stabilizing inflation, 2) stabilizing

supply and demand, and 3) adjusting imbalances in tariff rates among similar items. See id. at 3,

Def.’s Pub. Ex. 12 at 3. The application for reduction was granted for the first half of 1998 but

was rejected for the second half. See id. The GOK indicated to Commerce that as long as the

criteria of the system are met, “any imported product may be eligible for an import duty reduction

for a particular period of time.” GOK Questionnaire Response at 12, Def.’s Pub. Ex. 6 at 20.

Additionally, Commerce verified “[t]here are no restrictions on items which are eligible for the

quota reduction.” GOK Verification Report at 3, Def.’s Pub. Ex. 12 at 3. The availability of the

duty reduction was not based upon whether the slab was to be used in products that were

intended for export; rather, the reduced rate was applicable to all imports of slab. Remand

Redetermination at 6. Based upon this information, Commerce properly determined that the

program could not be considered an export subsidy. See Remand Redetermination at 6; see also
Court No. 00-03-00116 Page 18

19 U.S.C. § 1677(5A)(B) (“An export subsidy is a subsidy that is, in law or in fact, contingent

upon export performance, alone or as 1 of 2 or more conditions.”).1

However, Commerce properly determined that the program at issue provides a “financial

contribution” to POSCO in that the GOK received a lower tariff payment upon the importation of

slab than it would have received if the program were not in effect. See Remand Redetermination

at 8-9; see also 19 U.S.C. § 1677(5)(D)(ii) (providing that “financial contribution” includes

“foregoing or not collecting revenue that is otherwise due”). While POSCO claims there is no

financial contribution because the GOK has not foregone revenue due to the eligibility for duty

drawback (POSCO’s Jan. 7, 2002 Pub. Br. at 9), POSCO itself indicated in its responses to

Commerce’s questionnaires that “POSCO did not claim duty drawback.” POSCO Questionnaire

Response at 5, Def.’s Pub. Ex. 6.2 As previously noted by this Court, “[t]he mere availability of

drawback . . . does not resolve the issue of whether the import duty reduction program is

countervailable.” Bethlehem Steel, 162 F. Supp . 2d at 647. Commerce was reasonable in

finding that the GOK did forego the receipt of tariff duties at the three percent general rate which

it would otherwise have been entitled to, thus providing a financial contribution to POSCO.

Commerce also properly found that POSCO received a benefit from this program. Under

19 C.F.R. § 351.510(a)(1), “[i]n the case of a program, other than an export program, that

provides for the full or partial exemption or remission of an indirect tax or an import charge, a

1
The program is also not an import substitution subsidy, which is defined as “ a subsidy
that is contingent upon the use of domestic goods over imported goods, alone or as 1 of 2 or
more conditions.” 19 U.S.C. § 1677(5A)(C).
2
In its brief, POSCO refers only to the duty drawback received by DSM as evidence that
drawback was in fact received. (POSCO’s Jan. 7, 2002 Pub. Br. at 10-12.)
Court No. 00-03-00116 Page 19

benefit exists to the extent that the taxes or import charges paid by a firm as a result of the

program are less than the taxes the firm would have paid in the absence of the program.” 19

C.F.R. § 351.510(a)(1) (emphasis added). As to this regulation, this Court has already stated that

“when a government foregoes otherwise lawful taxes or import charges it is providing a

countervailable benefit. The only exception contained in the regulation applies to export

programs – i.e., programs that establish exportation of a finished product as a prerequisite to

receiving an exemption of indirect taxes or import charges.” Bethlehem Steel, 162 F. Supp. 2d at

648. POSCO had the burden to present evidence demonstrating a link between eligibility for the

import duty reduction and exportation of the product in which the slab was used. See RHP

Bearings v. United States, 875 F. Supp. 854, 857 (Ct. Int’l Trade 1995) (stating respondents bear

the burden of providing accurate information in a timely manner). It presented no such evidence,

and based upon the information it did present, Commerce found that the reduction applied to all

imports of slab regardless of whether the slab was used in an exported finished product. Remand

Redetermination at 6.

Commerce determined that the import duty reduction program is a domestic subsidy and

is specific pursuant to 19 U.S.C. § 1677(5A)(D)(iii). See Remand Redetermination at 7-8. The

statute provides as follows:

Where there are reasons to believe that a subsidy may be specific as a matter of fact, the
subsidy is specific if one or more of the following factors exist:

(I) The actual recipients of the subsidy, whether considered on an enterprise
or industry basis, are limited in number.

(II) An enterprise or industry is the predominant user of the subsidy.

(III) An enterprise or industry receives a disproportionately large amount of the
Court No. 00-03-00116 Page 20

subsidy.

(IV) The manner in which the authority providing the subsidy has exercised
discretion in the decision to grant the subsidy indicates that an enterprise
or industry is favored over others.

19 U.S.C. § 1699(5A)(D)(iii)(I)-(IV). In the present case, Commerce verified that 68 of the 105

requests for tariff reductions in the first half of 1998, and 51 of the 107 requests in the second

half of 1998, were approved by the GOK. Remand Redetermination at 7 (citing GOK

Verification Report at 3, Def.’s Pub. Ex. 12 at 3). Commerce reasonably interpreted this rate of

approval to show that the recipients of tariff reductions are limited in number. It also reviewed

lists of items receiving tariff reductions between 1996 and 1998 and found the reductions to be

“limited to certain industries, including the steel industry.” Id.; see also GOK Questionnaire

Response Ex. G-11, Def.’s Pub. Ex. 6. These findings, coupled with Commerce’s finding that

the steel industry is one of the few industries consistently granted tariff reductions, justify

Commerce’s determination that the import duty reduction program is specific. See Remand

Redetermination at 7.

POSCO argues that the only benefit from the import subsidy program comes from sales in

the domestic market that did not obtain duty drawback. (POSCO’s Jan. 7, 2002 Pub. Br. at 14-

17.) Therefore POSCO maintains the benefit in this case is tied only to a particular market -

Korea. (Id. at 16.) Despite POSCO’s argument, Commerce found, “the tariff reduction on slab

is applied to all imports regardless of whether the slab is used in the production of products sold

in the domestic or export markets.” Remand Redetermination at 6 (emphasis added). Thus

receipt of the subsidy is not conditioned or “tied” to the sale of the product in any particular

market. The link between eligibility and sale in the domestic market is absent in this case. When
Court No. 00-03-00116 Page 21

there is a domestic subsidy which is not tied to a particular market, the subsidy is attributed to all

products sold by a firm. See 19 C.F.R. § 351.525(b)(3). This Court holds that the determination

of Commerce that the subsidy is countervailable is supported by substantial evidence or

otherwise in accordance with law.

CONCLUSION

This Court finds Commerce properly determined that 1) the provision of infrastructure

benefits at Asan Bay by the GOK is not a countervailable subsidy and 2) the import duty

reduction program administered by the GOK is a countervailable subsidy. The Remand

Redetermination is affirmed in its entirety.

______________________________
Gregory W. Carman
Chief Judge

Dated: August 27, 2002
New York, New York