Slip Op. 06-117
UNITED STATES COURT OF INTERNATIONAL TRADE
ROYAL THAI GOVERNMENT, ET AL.,
Plaintiffs, Before: Richard W. Goldberg,
Senior Judge
v.
Consol. Court No. 02-00026
UNITED STATES,
Defendant,
and
UNITED STATES STEEL CORP.,
Defendant-
Intervenor.
OPINION
[Motions for reconsideration granted. Commerce’s final
affirmative countervailing duty determination remanded with
instructions.]
Date: July 26, 2006
Willkie Farr & Gallagher 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 (Patricia M. McCarthy); 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.
Consol. Court No. 02-00026 Page 2
Goldberg, Senior Judge: In Royal Thai Government v. United
States, 436 F.3d 1330 (Fed. Cir. 2006) (“Royal Thai II”), the
United States Court of Appeals for the Federal Circuit (the
“Federal Circuit”) remanded this case for further proceedings
following that court’s reversal-in-part of Royal Thai Government
v. United States, 28 CIT ___, 341 F. Supp. 2d 1315 (2004)
(“Royal Thai I”), familiarity with which is presumed. Pending
before the Court are motions for reconsideration which seek
review of two issues previously considered moot as a result of a
now overturned holding in Royal Thai I. The Court has
jurisdiction over this case pursuant to 28 U.S.C. § 1581(c).
I. BACKGROUND
In Royal Thai I, the Court reviewed the final affirmative
countervailing duty determination made by the U.S. Department of
Commerce (“Commerce”) with respect to certain hot-rolled carbon
steel flat products from Thailand (“subject imports”). See
Certain Hot-Rolled Carbon Steel Flat Products From Thailand, 66
Fed. Reg. 50410 (Dep’t Commerce Oct. 3, 2001) (final
determination) (“Final Determination”); 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), available at
http://ia.ita.doc.gov/frn/summary/thailand/01-24753-1.txt
(“Decision Memo”).
Consol. Court No. 02-00026 Page 3
The Court affirmed Commerce’s decision not to countervail a
debt restructuring program administered by Plaintiff the Royal
Thai Government (“RTG”), as well as Commerce’s decision not to
investigate alleged equity infusions in Plaintiff Sahaviriya
Steel Industries Public Company Limited (“SSI”) made by RTG.
Royal Thai I, 28 CIT at ___, 341 F. Supp. 2d at 1317-23.
However, the Court reversed Commerce’s decision to countervail
the entire amount of duty exemptions, or drawbacks, provided by
RTG for SSI’s imports of steel slab used as the sole raw
material in the manufacture of hot-rolled steel coil for export.
See id. at ___, 341 F. Supp. 2d at 1323-26. As a result of this
holding, the countervailing duty rate applicable to SSI was
rendered de minimis and, accordingly, the Court instructed
Commerce to find that no countervailable subsidies were provided
to SSI. See id. at ___, 341 F. Supp. 2d at 1326-27. Also as a
result of this holding, the Court declined to address two
additional issues raised by the parties with respect to (1) the
sustainability of Commerce’s determination that SSI (and its
subsidiary, Prachuab Port Company (“PPC”)) received a
countervailable regional subsidy from RTG through the provision
of electricity at less than adequate remuneration and (2) the
appropriate benchmark to be used in calculating the alleged
countervailable benefit received from the imported steel slab
duty exemptions. See id. at ___, 341 F. Supp. 2d at 1326. The
Consol. Court No. 02-00026 Page 4
Court reasoned that these issues had been rendered moot by the
calculation of a de minimis countervailing duty rate and the
corresponding, legally-compelled finding that no countervailable
subsidies were provided to SSI. 1 Id.
On appeal, however, the Federal Circuit reversed this
Court’s holding with respect to RTG’s provision of duty
exemptions to SSI for steel slab imports. Royal Thai II, 436
F.3d at 1339-41. The Federal Circuit instead upheld Commerce’s
decision to countervail the entire amount of these import duty
exemptions received by SSI. Id. In light of this reversal, the
Federal Circuit remanded the case for this Court to conduct
further proceedings consistent with Royal Thai II.
Shortly thereafter, on March 20, 2006, Plaintiffs RTG and
SSI filed a motion for reconsideration, requesting that the
Court reexamine their claim that Commerce erroneously concluded
that SSI received a countervailable regional subsidy from RTG
through the provision of electricity at less than adequate
remuneration. On April 20, 2006, Defendant-Intervenor United
1
That is, with respect to issue (1), it was unnecessary to
review Commerce’s decision to countervail the provision of
electricity because, even if the provision of electricity was
countervailable, the resulting cumulative countervailing duty
rate would still be de minimis and thus non-actionable under
U.S. countervailing duty law. With respect to issue (2), it was
unnecessary to resolve the dispute concerning the appropriate
calculation of the benefit received from the imported steel slab
duty exemptions, since the Court determined that these
exemptions were not countervailable.
Consol. Court No. 02-00026 Page 5
States Steel Corporation (“U.S. Steel”) filed a second motion
for reconsideration, requesting that the Court also reassess its
claim that Commerce had selected an incorrect benchmark when
calculating the countervailable benefit received by SSI from the
steel slab duty exemptions. This case is now properly 2 before
the Court upon Plaintiffs’ and Defendant-Intervenor’s motions,
consolidated for purposes of this opinion.
II. STANDARD OF REVIEW
With respect to the motions for reconsideration, the Court
will not exercise its discretion to disturb a previous decision
unless it is “manifestly erroneous.” Former Employees of
Quality Fabricating, Inc. v. United States, 28 CIT ___, ___, 353
F. Supp. 2d 1284, 1288 (2004) (quotation marks omitted). “The
major grounds justifying reconsideration are an intervening
change of controlling law, the availability of new evidence, or
the need to correct a clear error or prevent manifest
injustice.” Doe v. New York City Dep’t of Social Servs., 709
F.2d 782, 789 (2d Cir. 1983) (quotation marks omitted).
2
As Defendant the United States (“U.S.”) correctly notes, the
Court was initially without jurisdiction to consider Plaintiffs’
motion. The motion was filed seven days before the issuance of
the Federal Circuit’s mandate in this case – the date upon which
this Court regained jurisdiction. See Tronzo v. Biomet, Inc.,
318 F.3d 1378, 1380 (Fed. Cir. 2003) (“[T]he district court
regains jurisdiction when the appellate mandate issues.”). The
Court now possesses jurisdiction to consider Plaintiffs’ motion.
Consol. Court No. 02-00026 Page 6
With respect to the underlying Final Determination, the
Court must uphold a determination made by Commerce if it is
supported by substantial evidence and otherwise in accordance
with law. 19 U.S.C. § 1516a(b)(1)(B)(i) (1999). Concerning the
substantial evidence requirement, the U.S. Supreme Court has
defined this term to mean “such relevant evidence as a
reasonable mind might accept as adequate to support a
conclusion,” taking into account the record as a whole. Pierce
v. Underwood, 487 U.S. 552, 565 (1988) (quoting Consol. Edison
Co. v. NLRB, 305 U.S. 197, 229 (1938)). It requires “more than
a mere scintilla” but is satisfied by “something less than the
weight of the evidence . . . .” Luoyang Bearing Factory v.
United States, 27 CIT ___, ___, 288 F. Supp. 2d 1369, 1370
(2003).
III. DISCUSSION
A. The Motions for Reconsideration Are Well-Founded in Light
of the Federal Circuit’s Decision in Royal Thai II
Plaintiffs’ and Defendant-Intervenor’s unopposed motions
both argue that the Federal Circuit’s reversal of a key holding
in Royal Thai I had the effect of resurrecting two issues in
this case which were previously considered moot.
The Court agrees. Because Commerce’s decision to
countervail the entire amount of the import duty exemptions
received by SSI has been sustained by the Federal Circuit, the
Consol. Court No. 02-00026 Page 7
Court can no longer say with certainty that SSI’s countervailing
duty rate is de minimis. Rather, if sustained, Commerce’s
decision to countervail RTG’s provision of electricity to SSI
would result in a combined countervailing duty rate of 2.38
percent. This exceeds the two percent de minimis (and thus non-
actionable) rate afforded developing countries like Thailand
under U.S. countervailing duty law. See 19 U.S.C. §
1671b(b)(4)(B) (1999); Developing and Least-Developed Country
Designations under the Countervailing Duty Law, 63 Fed. Reg.
29945, 29948 (USTR June 2, 1998) (interim final rule). In
addition, SSI’s countervailing duty rate could be increased even
more if, as contended by U.S. Steel, Commerce erred in its
calculation of the benefit received by SSI with respect to the
steel slab import duty exemptions.
As such, it is clear that, in light of the intervening
decision in Royal Thai II, it is “manifestly erroneous” to view
the issues raised by Plaintiffs and Defendant-Intervenor in
their respective motions as moot. Former Employees of Quality
Fabricating, 28 CIT at ___, 353 F. Supp. 2d at 1288. The
motions for reconsideration are therefore granted and the Court
now proceeds to its substantive analysis of these two issues.
Consol. Court No. 02-00026 Page 8
B. With Regard to Plaintiffs’ Claim, Commerce’s Decision to
Countervail RTG’s Provision of Electricity to SSI Is
Supported by Substantial Evidence and in Accordance with Law
During the period of investigation, the provision of
electricity to residential and commercial consumers in Thailand
was largely controlled by RTG through various government
entities. Decision Memo at 11. The National Energy Policy
Council developed electricity rate-setting policy, which was
then implemented by the National Energy Policy Office (“NEPO”).
NEPO accomplished its mission through three additional RTG
authorities: (1) the Electricity Generating Authority of
Thailand (“EGAT”), which was responsible for generation and
transmission; (2) the Metropolitan Electricity Authority
(“MEA”), which was responsible for distribution in and around
Bangkok; and (3) the Provincial Electricity Authority (“PEA”),
which was responsible for distribution in the remainder of
Thailand. Id. PEA’s delivery costs were higher than MEA’s.
Id. at 12. Nonetheless, “RTG maintain[ed] a ‘uniform national
tariff policy’ which provide[d] that consumers in the same
customer category [paid] the same rate regardless of whether
they [were] in MEA’s distribution area or PEA’s distribution
area.” Id. at 11. In order to implement this uniform tariff
policy, EGAT gave a discount to PEA and applied a surcharge to
MEA for their respective electricity purchases (the “internal
cross-subsidy”). Id. at 12.
Consol. Court No. 02-00026 Page 9
In the Final Determination, Commerce concluded that SSI’s
receipt of electricity from PEA under RTG’s uniform tariff
policy constituted a countervailable subsidy. Final
Determination, 66 Fed. Reg. at 50412. To reach this conclusion,
Commerce found that the statutory criteria establishing the
existence of a countervailable subsidy had been met: (1) a
financial contribution was provided by a government entity (19
U.S.C. § 1677(5)(B)(i)); (2) the financial contribution was
specific to an enterprise or industry (19 U.S.C. § 1677(5A)(D));
and (3) the financial contribution resulted in a benefit to its
recipient (19 U.S.C. § 1677(5)(B)). See Decision Memo at 13-16.
Plaintiffs argue that Commerce’s determination with respect
to each of these criteria was flawed. For the reasons set forth
below, the Court upholds this aspect of the Final Determination.
1. Commerce Reasonably Determined that RTG’s Provision of
Electricity to SSI Constituted a Potentially
Countervailable Financial Contribution and Not
“General Infrastructure”
Plaintiffs initially contend that Commerce erred in finding
that RTG’s provision of electricity to SSI constituted a
potentially countervailable financial contribution. Plaintiffs’
Memorandum in Support of Motion for Judgment on the Agency
Record (“Pls.’ Br.”) at 21. Instead, Plaintiffs insist that the
governmental provision of electricity to SSI properly should
have been considered “general infrastructure,” and therefore
Consol. Court No. 02-00026 Page 10
exempt from U.S. countervailing duty law. Id. at 22 (quoting 19
U.S.C. § 1677(5)(D)(iii)). Plaintiffs advance three arguments
in support of this position. First, Plaintiffs argue that
Commerce’s past practice, authoritative sources, and common
sense dictate that the provision of electricity is
infrastructure. Id. at 22-25. Second, Plaintiffs argue that
the record evidence demonstrates that RTG’s provision of
electricity to SSI was clearly undertaken to benefit the “public
welfare,” the standard employed by Commerce to identify non-
countervailable general infrastructure. Id. at 26 (quoting
Countervailing Duties, 63 Fed. Reg. 65348, 65378 (Dep’t Commerce
Nov. 25, 1998) (final rule) (“CVD Preamble”)). Third,
Plaintiffs argue that nothing in the CVD Preamble, the
countervailing duty regulations, 3 or past court cases concerning
electricity preclude a finding that the provision of electricity
may constitute general infrastructure. Id. at 27-30.
The Court finds that Commerce reasonably considered RTG’s
provision of electricity to SSI to be a potentially
countervailable financial contribution and not general
infrastructure. “General infrastructure” is a term of art in
U.S. countervailing duty law. The relevant statute directs that
goods or services which constitute general infrastructure may
3
References to the countervailing duty regulations are to 19
C.F.R. § 351.101 et seq.
Consol. Court No. 02-00026 Page 11
not be countervailed. See 19 U.S.C. § 1677(5)(D)(iii)(1999).
Commerce has interpreted this statutory language to encompass
“infrastructure that is created for the broad societal welfare
of a country, region, state or municipality.” 19 C.F.R. §
351.511(d) (2006). Commerce elaborated on this interpretation
by noting that “the type of infrastructure per se is not
dispositive of whether the government provision constitutes
‘general infrastructure.’ Rather, the key issue is whether the
infrastructure is developed for the benefit of society as a
whole.” CVD Preamble, 63 Fed. Reg. at 65378. Commerce refers
to this analysis as the “public welfare concept.” Id.
Plaintiffs do not dispute the reasonableness of Commerce’s
methodological approach to identifying general infrastructure
for purposes of 19 U.S.C. § 1677(5)(D)(iii); rather, they
contend that Commerce misapplied the public welfare concept to
the facts of this case.
However, even assuming arguendo that RTG’s provision of
electricity was necessarily infrastructure (as urged by
Plaintiffs), substantial evidence supports Commerce’s conclusion
that it was not “general infrastructure” under U.S.
countervailing duty law. Commerce verified that RTG’s uniform
tariff policy was intended to serve three purposes: (1) provide
electricity to low-income consumers; (2) ensure rural
electrification; and (3) promote economic activity outside of
Consol. Court No. 02-00026 Page 12
the congested Bangkok metropolitan area. Decision Memo at 36-
37. Although these three purposes could be fairly characterized
as “broad social goals,” id. at 35, Commerce reasonably found
that they nonetheless did not satisfy the public welfare
concept. On their face, the purposes underlying the uniform
tariff policy did not “benefit society as a whole,” CVD
Preamble, 63 Fed. Reg. at 65378, but instead primarily benefited
only a portion of Thai society. While it perhaps could be
argued that these purposes, if fulfilled, would have bestowed a
residual benefit to the greater Thai society, there was no
record evidence supporting such speculation about the attenuated
effects of the uniform tariff policy.
In addition, it is noteworthy that the alleged
infrastructure at issue here was the electricity itself and “not
the physical plant associated with the generation, transmission
and distribution of the electricity.” Decision Memo at 35.
This is an important distinction. Commerce generally views
electricity facilities – but not their issue – as constituting
general infrastructure. See Bethlehem Steel Corp. v. United
States, 26 CIT 1003, 1011, 223 F. Supp. 2d 1372, 1379 (2002)
(upholding Commerce’s finding of no financial contribution from
electricity facilities constituting general infrastructure).
This is because an electric power facility or distribution grid
is used repeatedly by the entire consuming public; in contrast,
Consol. Court No. 02-00026 Page 13
once used by a single consumer, a kilowatt of electricity is
gone forever. Plaintiffs counter that, for each kilowatt of
electricity charged by RTG through PEA, SSI paid a pro rata
portion of the costs associated with maintaining the electricity
facilities. Pls.’ Br. at 25. Plaintiffs essentially argue that
this overhead charge included in the electricity’s price
transformed the electricity into general infrastructure. In the
Court’s view, this factor alone cannot support a finding of
general infrastructure. After all, a certain amount of overhead
is included in the price of virtually every good or service
available to consumers. It is difficult to imagine a
government’s provision of goods or services which could not be
connected to recognized general infrastructure, however
marginally, through overhead charges. Because Plaintiffs’
position would eviscerate Commerce’s public welfare concept and
the underlying statutory directive, the Court finds it
unpersuasive. Viewed in this light, Commerce’s decision to
consider RTG’s provision of electricity to SSI as non-general
infrastructure is reasonable.
Moreover, as noted briefly supra, Commerce’s decision is
consistent with the agency’s past practice. Since the passage
of the Uruguay Round Agreements Act (“URAA”), from which the
existing definition of financial contribution derives, Commerce
has uniformly viewed the provision of electricity as a financial
Consol. Court No. 02-00026 Page 14
contribution, subject to specificity and benefit analysis to
determine actual countervailability. See, e.g., Stainless Steel
Sheet and Strip in Coils from the Republic of Korea, 69 Fed.
Reg. 2113, 2116 (Dep’t Commerce Jan. 14, 2004) (final
determination); Steel Wire Rod from Venezuela, 62 Fed. Reg.
55014, 55021-22 (Dep’t Commerce Oct. 22, 1997) (final
determination); Steel Wire Rod from Trinidad and Tobago, 62 Fed.
Reg. 55003, 55006-07 (Dep’t Commerce Oct. 22, 1997) (final
determination). This is in keeping with Commerce’s pre-URAA
practice. See, e.g., Oil Country Tubular Goods from Argentina,
62 Fed. Reg. 32307, 32309-11 (Dep’t Commerce June 13, 1997)
(preliminary determination); Certain Steel Products from Spain,
58 Fed. Reg. 37374, 37380-81 (Dep’t Commerce July 9, 1993)
(final determination); Ferrosilicon from Venezuela, 58 Fed. Reg.
27539, 27539-40 (Dep’t Commerce May 10, 1993) (final
determination). 4
Nonetheless, Plaintiffs argue that nothing in these and
other sources necessarily precludes a finding of general
4
It is noteworthy that the Statement of Administrative Action
(“SAA”) accompanying the URAA indicated that the new definition
of financial contribution was intended to “encompass the types
of subsidy programs generally countervailed by Commerce in the
past.” SAA, H.R. Doc. No. 103-465, at 927 (1994), as reprinted
in 1994 U.S.C.C.A.N. 4040, 4240, 1994 WL 761793. Congress has
mandated that the SAA “shall be regarded as an authoritative
expression by the United States concerning the interpretation
and application of . . . [the URAA] in any judicial proceeding
in which a question arises concerning such interpretation or
application.” 19 U.S.C. § 3512(d) (2005).
Consol. Court No. 02-00026 Page 15
infrastructure with respect to the provision of electricity.
Unfortunately for Plaintiffs, this observation, even if true, is
of no moment. Plaintiffs’ burden as movant requires more than a
showing that their desired alternative to Commerce’s
determination is theoretically permissible under existing law.
Rather, Plaintiffs must demonstrate that Commerce’s
determination is actively contrary to that law. See 19 U.S.C. §
1516a(b)(1)(B)(i) (1999). Plaintiffs have not met that burden
here.
Accordingly, the Court upholds Commerce’s determination
that RTG’s provision of electricity to SSI constituted a
potentially countervailable financial contribution as in
accordance with law and supported by substantial evidence.
2. Commerce Reasonably Determined That RTG’s Provision of
Electricity Satisfied the Requirements of Regional
Specificity
Plaintiffs next contend that Commerce erred in finding that
RTG’s provision of electricity was specific to SSI as required
by 19 U.S.C. § 1677(5)(A) to establish countervailability.
Pls.’ Br. at 30. In particular, Plaintiffs claim that the
requirements of regional specificity, a sub-set of specificity
analysis under U.S. countervailing duty law, were not met in
this case. Id. Plaintiffs argue that RTG’s provision of
electricity under the uniform tariff policy was plainly not
“limited to an enterprise or industry located within a
Consol. Court No. 02-00026 Page 16
designated geographical region” in Thailand, the statutory
standard for a finding of regional specificity. Id. at 30-31
(quoting 19 U.S.C. § 1677(5A)(D)(iv) (1999)). Rather,
Plaintiffs insist that “regional specificity cannot exist” here
because the uniform tariff policy ensured that “[i]ndustrial
companies in the same customer categories located anywhere in
Thailand [paid] the same electricity rates.” Pls.’ Br. at 31.
The Court finds that Commerce reasonably determined that
RTG’s provision of electricity satisfied the requirements of
regional specificity. Indeed, Plaintiffs’ own argument reveals
why a finding of regional specificity is justified here. As
noted supra, Commerce verified (and Plaintiffs do not contest)
that the cost of distributing electricity in PEA’s distribution
area was higher than the cost of distributing electricity in
MEA’s distribution area. Nonetheless, PEA-serviced companies
paid the same electricity rates as their MEA analogs. As a
result, PEA-serviced companies had access to something MEA-
serviced companies did not: relatively cheaper electricity than
RTG’s costs otherwise dictated. Access to this relatively
cheaper electricity was expressly contingent upon only one
factor: a company’s regional location within Thailand. As such,
it was regionally specific. 5 Plaintiffs are therefore correct
5
The Court notes that no additional showing of specificity as to
SSI is required under U.S. countervailing duty law because
Consol. Court No. 02-00026 Page 17
that “[i]f one producer subject to an investigation is located
within the PEA region and another is in the MEA region, only the
one in the PEA region will be countervailed even though both are
paying the exact same rate for electricity.” Pls.’ Br. at 31-
32. However, this result is not “absurd,” id. at 32; to the
contrary, it is the logical outcome of regional specificity
analysis under the facts of this case.
Accordingly, the Court upholds Commerce’s determination
that RTG’s provision of electricity to SSI satisfies the
requirements of regional specificity as in accordance with law
and supported by substantial evidence.
3. Commerce Reasonably Determined that RTG’s Provision of
Electricity to SSI Conferred a Countervailable Benefit
in the Amount Calculated in the Final Determination
Plaintiffs next contend that Commerce erred both in its
finding that RTG’s provision of electricity to SSI conferred a
countervailable benefit and in its calculation of that benefit.
Pls.’ Br. at 32-45. In support of this position, Plaintiffs
make two principal arguments, discussed separately below.
“subsidies provided by a central government to particular
regions (including a province or a state) are specific
regardless of the degree of availability or use within the
region.” SAA, H.R. Doc. No. 103-465 at 932, 1994 U.S.C.C.A.N.
at 4244.
Consol. Court No. 02-00026 Page 18
a. Commerce Reasonably Found that RTG Did Not
Receive Adequate Remuneration for Its Provision
of Electricity to SSI
First, Plaintiffs argue that Commerce erred in finding that
RTG provided electricity to SSI for less than adequate
remuneration, as required by 19 C.F.R. § 351.511 to establish
receipt of a countervailable benefit. Id. at 32. Plaintiffs
contend that, to the contrary, record evidence demonstrated that
(1) RTG’s price-setting philosophy was based on market
principles; (2) the electricity rates applicable to SSI and its
subsidiary, PPC, were in excess of market-based costs; and (3)
PEA made a significant operating profit in 1999. Id. at 32-39.
Plaintiffs argue that this evidence made clear that RTG did in
fact receive adequate remuneration from SSI and, consequently,
did not confer a countervailable benefit by the provision of
electricity. Id.
The Court finds that Commerce reasonably determined that
RTG provided electricity to SSI for less than adequate
remuneration. Pursuant to 19 U.S.C. § 1677(5)(E)(iv), “less
than adequate remuneration” is the standard used by Commerce to
measure the amount of countervailable benefit, if any, conferred
by a specific financial contribution consisting of goods or
services. See 19 U.S.C. § 1677(5)(E)(iv) (1999); 19 C.F.R. §
351.511(a)(1) (2006). To determine the adequacy of remuneration
of an investigated good or service, Commerce prefers to compare
Consol. Court No. 02-00026 Page 19
the government price to available country-specific or world
market prices. See 19 C.F.R. § 351.511(a)(2)(i)-(ii) (2006).
However, when such prices are unavailable, Commerce will resort
to an assessment of “whether the government price is consistent
with market principles.” Id. § 351.511(a)(2)(iii). This
“market principles” analysis is an examination “of such factors
as the government’s price-setting philosophy, costs (including
rates of return sufficient to ensure future operations), or
possible price discrimination.” CVD Preamble, 63 Fed. Reg. at
65378. In this case, Commerce concluded that the nature of
Thailand’s electricity market necessitated recourse to market
principles analysis. See Decision Memo at 14. Plaintiffs do
not dispute this methodological choice; rather, they contend
that Commerce misapplied market principles analysis to the facts
of this case.
However, substantial evidence supports Commerce’s
conclusion that the rate set by RTG for the provision of
electricity to SSI was not consistent with market principles.
In the Final Determination, Commerce conceded Plaintiffs’ first
argument - that, on its face, pricing under RTG’s uniform tariff
policy appeared to have been set in accordance with market
principles. Decision Memo at 14. This was because RTG (through
NEPO) required that the electricity rates underlying the uniform
tariff policy be sufficient to cover the marginal costs of EGAT,
Consol. Court No. 02-00026 Page 20
MEA, and PEA, as well as meet specified financial criteria for
each of these entities (i.e., a minimum self-financing ratio, a
maximum debt-to-equity ratio, and a minimum debt-service
coverage ratio). Id. At verification, Commerce asked RTG
officials to document that this market-based pricing philosophy
had in fact been implemented – i.e., to provide the most recent
analysis of whether the electricity rates were sufficient to
cover marginal costs and meet the specified financial criteria.
Id. This was a reasonable request for Commerce to make during
verification. See Bomont Indus. v. United States, 14 CIT 208,
209, 733 F. Supp. 1507, 1508 (1990) (noting that “verification
is like an audit, the purpose of which is to test information
provided by a party for accuracy and completeness”). 6
Surprisingly, RTG officials informed Commerce that copies of
this important analysis were not retained. Decision Memo at 14.
Instead, RTG sought to rely on a previously submitted
report prepared by PricewaterhouseCoopers (“PWC”) which
allegedly demonstrated that customers in the same categories as
SSI and PPC generated revenues well in excess of marginal costs.
Id. at 37. Although Commerce considered this report, the agency
found that it was not “probative of whether the RTG, through
PEA, [received] adequate remuneration for the electricity sold
6
Indeed, Plaintiffs admit that “these information requests were
not necessarily unreasonable.” Pls.’ Br. at 42.
Consol. Court No. 02-00026 Page 21
in the region” because “PWC did not examine the issue of what
rates PEA should or would charge to any of its customer classes
in the absence of [the internal cross-subsidy.]” Id. at 38-39.
Indeed, Commerce found that RTG expressly required PWC to assume
the continuation of the internal cross-subsidy in its review of
the electricity rates. Id. at 38. In the Court’s view,
Commerce reasonably discounted the probative value of the PWC
report because it assumed the very issue which lies at the heart
of the market principles analysis in this case: whether, absent
the internal cross-subsidy, PEA was able to cover its marginal
costs and meet RTG’s own specified financial criteria. 7
In contrast, Commerce reasonably found highly probative a
different report, issued directly by NEPO, which stated that
“the financial transfers from the MEA to the PEA are . . .
essential so that the financial status of the two utilities
would meet the specified criteria.” Decision Memo at 39
7
Because of the assumed continuation of the internal cross-
subsidy, the PWC report did not distinguish between customers
located in the PEA and MEA distribution areas. As a result,
PWC’s statement (reflected in the NEPO report) that “[customers
in SSI and PPC’s pricing categories] will generally pay for
electricity in excess of the marginal costs” cannot be taken to
mean, as Plaintiffs insist, that SSI, PPC, or any other customer
in the PEA distribution area necessarily overpaid for the
provision of electricity. App. to Pls.’ Br., App. 9 (RTG
Questionnaire Response dated Feb. 7, 2001), Ex. J-8 at 13.
Despite Plaintiffs’ assertions to the contrary, the Court finds
that the PWC report simply does not allow for this level of
analytical precision.
Consol. Court No. 02-00026 Page 22
(quoting NEPO report at 23). Like Commerce, the Court views
this admission by RTG as supporting the conclusion that, without
the internal cross-subsidy, PEA could not have satisfied the
market principles ostensibly underlying the uniform tariff
policy. See id. Plaintiffs attempt to rebut this evidence by
noting that PEA’s financial reports paint a different picture –
that PEA actually turned a profit in 1999 even without the
internal cross-subsidy. 8 Pls.’ Br. at 38. However, Commerce was
not able to determine the accuracy of this financial information
at verification due to chronic inconsistencies in the data
presented and its late submission. 9 See App. to Pls.’ Br., App.
8
It is noteworthy that Plaintiffs’ observation is true only if
PEA’s financials are adjusted to exclude foreign exchange losses
recognized in 1999. Pls.’ Br. at 38. Like Commerce, the Court
is not fully convinced that such an adjustment is appropriate in
evaluating PEA’s financial status for purposes of market
principles analysis in this case. See Decision Memo at 40.
Nevertheless, the Court need not resolve this dispute in order
to dispose of this issue.
9
Plaintiffs argue that Commerce should have provided additional
time for RTG’s non-Anglophone officials to respond to Commerce’s
allegedly confusing information requests concerning the
electricity authorities’ finances. See Pls.’ Br. at 42.
However, the Court finds nothing unusually complicated or
confusing about the conduct of verification here. Commerce’s
verification outline and preliminary determination in this case
clearly put Plaintiffs on notice of the importance of the
operation of the internal cross-subsidy to Commerce’s analysis
of the adequacy of remuneration. See Certain Hot-Rolled Carbon
Steel Flat Products From Thailand, 66 Fed. Reg. 20251, 20259-60
(Dep’t Commerce Apr. 20, 2001) (preliminary determination).
Even if Plaintiffs were not fully prepared for Commerce’s
specific information requests, Commerce afforded Plaintiffs
multiple opportunities during verification to produce the
Consol. Court No. 02-00026 Page 23
5 (RTG Verification Report dated Aug. 17, 2001) at 17.
Undaunted, Plaintiffs note that Commerce was able to at least
verify the fact that PEA was required to pay a large remittance
to RTG’s Ministry of Finance in 1999, which Plaintiffs contend
was a clear demonstration that PEA in fact made a profit for
that year. Pls.’ Br. at 38. However, the record evidence does
not demonstrate that this remittance was at all related to PEA’s
relative profitability. Although expressly provided the
requested information. Plaintiffs were unable to do so,
notwithstanding the fact that this information was very similar
to analyses regularly performed by RTG. Under these
circumstances, Commerce did not err by refusing to allow
Plaintiffs to submit additional financial information after
verification. Although Commerce’s regulations provide that
“factual information requested by the verifying officials from a
person normally will be due no later than seven days after the
date on which the verification of that person is completed,” 19
C.F.R. § 351.301(b)(1) (2006), Commerce is also statutorily
mandated to verify all information relied upon in a final
determination. See 19 U.S.C. § 1677m(i)(1) (1999). Read
together, these requirements mean that Commerce may consider
information received after verification only when it
corroborates, reinforces, explains, or expands on already
verified questionnaire responses or other data. The post-
verification information offered by Plaintiffs failed to meet
this standard, as Commerce was consistently unable to confirm
the electricity authorities’ finances during verification.
Although it was within Commerce’s discretion to extend the time
limit of verification, see Fujian Mach. & Equip. Imp. & Exp.
Corp. v. United States, 25 CIT 1150, 1161, 178 F. Supp. 2d 1305,
1319 (2001), Commerce was under no obligation to do so here
because the agency had already “give[n] respondents a reasonable
opportunity to participate in the review and verification
process.” Id. (quotation marks omitted); see also Tianjin Mach.
Imp. & Exp. Corp. v. United States, 28 CIT ___, ___, 353 F.
Supp. 2d 1294, 1303-1304 (2004) (noting Commerce’s discretion in
“forc[ing] parties to submit information within a specified time
frame in the interests of fairness and efficiency”).
Consol. Court No. 02-00026 Page 24
opportunity by Commerce to make this point with respect to
profitability during verification, RTG officials “did not
elaborate on the reasoning” behind PEA’s remittance. App. to
Pls.’ Br., App. 5 (RTG Verification Report dated Aug. 17, 2001)
at 14. As such, this evidence fails to rebut Commerce’s
conclusion that the internal cross-subsidy was necessary for PEA
to meet RTG’s specified financial criteria.
Nonetheless, Plaintiffs contend that, even if the internal
cross-subsidy was necessary, record evidence demonstrates that
this was true only because of the high costs associated with
servicing agricultural and rural consumers (i.e., not consumers
in SSI and PPC’s customer categories). Pls.’ Br. at 36 n.129,
37. Plaintiffs argue that the adequacy of remuneration should
be judged on the government costs and prices involved in
providing electricity to the particular customer categories
associated with the investigated companies. Id. This is a
correct statement of the law and Commerce’s past practice, see,
e.g., Carbon and Certain Alloy Steel Wire Rod from Trinidad and
Tobago, 67 Fed. Reg. 6001, 6008 (Dep’t Commerce Feb. 8, 2002)
(preliminary determination); Steel Wire Rod from Venezuela, 62
Fed. Reg. at 55021-22; however, Commerce’s ability to make such
a particularized determination may be limited by the information
uncovered during an investigation. As noted supra, despite
multiple requests, Commerce was not able to verify here the true
Consol. Court No. 02-00026 Page 25
costs associated with servicing companies like SSI and PPC
absent the internal cross-subsidy. Moreover, at verification,
Commerce took the extra step of exploring this line of analysis
in a non-quantitative manner, asking RTG to simply explain why
the uniform tariff policy applied to consumers like SSI and PPC
if its purpose was to ensure the provision of electricity to
underserved agricultural and rural consumers. RTG officials
responded that “the goal was also to promote economic activity
outside of the Bangkok area.” App. to Pls.’ Br., App. 5 (RTG
Verification Report dated Aug. 17, 2001) at 15. Based on this
telling response and the other factual findings noted supra,
Commerce concluded that RTG had given social criteria precedence
over market principles, resulting in the receipt of less than
adequate remuneration from PEA-serviced companies like SSI and
PPC. 10 See Decision Memo at 38. There is ample evidentiary
10
Plaintiffs also argue that Commerce’s conclusion that social
criteria took precedence over market principles is inconsistent
with Commerce’s separate finding that RTG’s provision of
electricity did not constitute general infrastructure for
purposes of financial contribution analysis. See Pls.’ Br. at
34. The Court disagrees. This is not an example of Commerce
trying to “have it both ways.” Id. A government program may
well be motivated by social criteria which do not provide the
broad societal benefits necessary to constitute general
infrastructure under U.S. countervailing duty law. Indeed, the
Court imagines that some sort of social objective underlies most
programs which give rise to countervailing duties.
Consol. Court No. 02-00026 Page 26
support for this conclusion and, accordingly, the Court finds no
error here by Commerce. 11
b. Commerce Properly Calculated the Countervailable
Benefit Conferred on SSI by RTG’s Provision of
Electricity
Finally, Plaintiffs argue that Commerce erred in its
calculation of the countervailable benefit received as a result
of RTG’s provision of electricity for less than adequate
remuneration. Pls.’ Br. at 43. Plaintiffs contend that
Commerce should have adjusted the calculation to take into
account (1) “the lump-sum adjustment to the [MEA] surcharge and
[PEA] deduction that was made after” the period of
investigation, Decision Memo at 15, and (2) the resales of
electricity by SSI to companies not associated with production
of the subject imports during the period of investigation.
Pls.’ Br. at 43.
The Court finds that Commerce properly denied the
adjustments requested by Plaintiffs. First, in determining the
net amount of countervailable subsidy received by SSI, Commerce
appropriately refused to modify its calculations to take into
account the lump-sum adjustment to the internal cross-subsidy
11
Plaintiffs also argue that Commerce’s use of adverse facts
available to determine that RTG received less than adequate
remuneration was unwarranted. See Pls.’ Br. at 40-43. Because
the Court concludes that substantial evidence supported this
aspect of Commerce’s determination (thereby rendering
superfluous the agency’s recourse to adverse facts available),
the Court need not address this argument by Plaintiffs.
Consol. Court No. 02-00026 Page 27
retroactively made by RTG. 19 U.S.C. § 1677(6) provides that
Commerce may make only certain enumerated deductions from the
gross countervailable subsidy amount in order to arrive at the
net countervailable subsidy amount. See 19 U.S.C. § 1677(6)
(1999). Deductions may be made for:
(A) any application fee, deposit, or similar payment
paid in order to qualify for, or to receive, the
benefit of the countervailable subsidy,
(B) any loss in the value of the countervailable
subsidy resulting from its deferred receipt, if the
deferral is mandated by Government order, and
(C) export taxes, duties, or other charges levied on
the export of merchandise to the United States
specifically intended to offset the countervailable
subsidy received.
Id. § 1677(6)(A)-(C). Plaintiffs’ requested adjustment plainly
does not fall within any of these categories: RTG made a
retroactive adjustment to the internal cross-subsidy for
accounting purposes, not to offset or reduce the value of the
subsidy in any way. Indeed, as Commerce found, it would be
“inappropriate” to consider this retroactive adjustment because,
due to its timing, the adjustment clearly “did not affect the
actual rates paid” by SSI to RTG during the period of review.
Decision Memo at 16. As such, the unadjusted calculation of the
net countervailable subsidy is a more accurate reflection of the
amount of benefit received by SSI through RTG’s provision of
electricity and Commerce properly used it.
Consol. Court No. 02-00026 Page 28
Second, in calculating the ad valorem subsidy rate for the
subject imports, Commerce also properly included in its
calculation the subsidized electricity associated with the
resales of electricity made by SSI. It is uncontested that SSI
did resell some of its subsidized electricity to companies not
involved in the production or sale of subject imports during the
period of investigation. Id. at 41. Plaintiffs argue that the
electricity associated with the resales was “tied” to non-
subject merchandise and therefore, pursuant to Commerce’s
regulations, should have been excluded from the calculation of
the ad valorem subsidy rate for the subject imports. 19 C.F.R.
§ 351.525(b)(5) (2006) (requiring Commerce to attribute subsidy
tied to the production or sale of a particular product only to
that product).
However, Commerce has made clear that, in identifying a
tied subsidy, the agency looks to “the stated purpose of the
subsidy or the purpose we evince from record evidence at the
time of bestowal.” CVD Preamble, 63 Fed. Reg. at 65403
(emphasis added). Here, Commerce found that “at the point of
bestowal, PEA [did] not direct or require SSI to sell [the
electricity] or distribute [the electricity] to any other
entities.” Id. at 32 (emphasis added). Indeed, Commerce found
that “SSI [was] the only entity to which PEA [provided] the
electricity,” id., indicating that there was no way to know of
Consol. Court No. 02-00026 Page 29
SSI’s intended use for the subsidized electricity at the point
of bestowal. Although Plaintiffs counter that SSI had in place
separate meters calibrated by PEA which showed how much
electricity was ultimately resold, see Pls.’ Br. at 45, there is
no indication that this information was available at the time of
the bestowal of the subsidized electricity. Commerce has
indicated that the agency “will not trace the use of subsidies
through a firm’s books and records.” CVD Preamble, 63 Fed. Reg.
at 65403. This position is sound not only as a matter of
administrative economy, but also because it recognizes that “a
subsidy may provide benefits . . . not specifically named in a
government program,” id., including, for example, improved
business relations with other companies.
The Court thus finds that Commerce did not err in
determining that RTG provided SSI with an untied subsidy. Based
on this finding, Commerce correctly determined that the full
amount of subsidized electricity provided by RTG to SSI should
be used in the calculation of the ad valorem subsidy rate for
the subject imports. See 19 C.F.R. § 351.525(b)(3) (2006)
(requiring Commerce to attribute untied domestic subsidies “to
all products sold by a firm, including products that are
exported”).
Accordingly, the Court upholds Commerce’s determination
that RTG’s provision of electricity conferred a countervailable
Consol. Court No. 02-00026 Page 30
benefit to SSI in the amount calculated in the Final
Determination as supported by substantial evidence and in
accordance with law.
C. With Regard to Defendant-Intervenor’s Claim, Commerce’s
Calculation of the Countervailable Benefit Received by SSI
As a Result of Import Duty Exemptions Is Not Supported by
Substantial Evidence or in Accordance with Law
As noted in Royal Thai I, SSI enjoyed import duty
exemptions on steel slab which steeply reduced its import
tariffs. See Royal Thai I, 28 CIT at ___, 341 F. Supp. 2d at
1326. Commerce found that these exemptions constituted
countervailable subsidies. 12 Id. To calculate the resulting
countervailable benefit received by SSI, Commerce preliminarily
used as a benchmark (or point of comparison) the ten percent
ceiling tariff applicable to steel slab imports in Thailand,
presuming that the ten percent rate was the tariff SSI would
have paid but for the exemptions. See Decision Memo at 25.
However, in the Final Determination, Commerce altered its
benefit calculation by using a different tariff rate benchmark
identified at verification. Id. At verification, Commerce
determined that RTG had established a tariff schedule structured
12
Royal Thai I addressed the import duty exemptions received by
SSI pursuant to Section 36(1) of Thailand’s Investment Promotion
Act of 1977 (“IPA”); however, the Final Determination also
identified IPA Section 30 as the source of other countervailable
import duty exemptions received by SSI. See Decision Memo at 7.
The description of Commerce’s benefit calculations in this Part,
as well as the Court’s analysis and remand instructions related
thereto, apply equally to both IPA Sections.
Consol. Court No. 02-00026 Page 31
to comply with Thailand’s obligations under the World Trade
Organization and the General Agreement on Tariffs and Trade.
App. to Pls.’ Br., App. 5 (RTG Verification Report dated Aug.
17, 2001) at 3-4. Under this structure, RTG created a ceiling
tariff of ten percent on imports such as steel slab. Id. RTG
also created a discount tariff rate of one percent usually
applied to any imported products and materials which were not
also produced domestically. Id. at 4. Commerce further
determined that, during the period of investigation, the steel
slab imported by SSI was not domestically produced in Thailand.
See Decision Memo at 5. Applying its newfound understanding of
Thailand’s tariff schedule, Commerce determined that, but for
the duty exemptions, SSI would have paid an import duty of one
percent on its imports of non-domestically produced steel slab.
Id. at 7. Therefore, in the Final Determination, Commerce used
the one percent tariff rate as a benchmark for its calculation
of the countervailable benefit received by SSI as a result of
the import duty exemptions. Id. at 25.
U.S. Steel objects to this calculation. U.S. Steel’s
Memorandum in Support of Motion for Judgment on the Agency
Record at 43-44. U.S. Steel argues that, in calculating the
benefit, Commerce used a tariff rate benchmark that itself was a
countervailable subsidy, rendering the calculation not in
accordance with law. Id. Specifically, U.S. Steel contends
Consol. Court No. 02-00026 Page 32
that Commerce’s determination that the one percent tariff rate
was non-specific and therefore not a countervailable subsidy is
unsupported by substantial evidence. Id. In U.S. Steel’s view,
Commerce must instead recalculate the benefit from SSI’s import
duty exemptions using the ten percent ceiling tariff rate. Id.
The Court first notes that the purpose of benefit analysis
under U.S. countervailing duty law is to determine the actual
market value of a financial contribution provided to a company
by a foreign government subsidy. See 19 U.S.C. § 1677(5)(E)
(1999). After all, placing a duty on such a company’s imports
in an amount equal to the countervailable benefit received is
intended to counteract any unfair advantage gained by government
intervention. See Kajaria Iron Castings Pvt. Ltd. v. United
States, 156 F.3d 1163, 1166 (Fed. Cir. 1998). It follows
logically that, when measuring the benefit derived from
countervailable government intervention, it is inappropriate to
use a benchmark that is similarly the product of government
intervention. This commonsense principle is reflected in
Commerce’s regulations 13 and judicial precedent. 14
13
See 19 C.F.R. § 351.503(d) (2006) (assessing benefit conferred
by government program offering varying levels of financial
contributions by using as benchmarks “financial contributions
provided at a non-specific level under the program”).
14
See, e.g., Hynix Semiconductor Inc. v. United States, 30 CIT
___, ___, 425 F. Supp. 2d 1287, 1308 (2006) (holding that
Commerce reasonably rejected as benchmarks private loans with
Consol. Court No. 02-00026 Page 33
However, analyzing the benefit received from import duty
exemptions presents unique difficulties. A tariff regime is an
inherently governmental construct. In determining the
appropriate tariff rate to use in benefit analysis, there is no
prevailing market rate available for comparison, only another
government-set rate that would be paid absent the
countervailable exemption. RTG and SSI appear to argue that
Commerce’s only obligation is to determine the rate that would
be applied but for the exemption, regardless of whether or not
this rate itself constitutes a countervailable subsidy.
Plaintiffs’ Memorandum In Opposition to U.S. Steel’s Motion for
Judgment on the Agency Record (“Pls.’ Resp. Br.”) at 38, 41. In
the Court’s view, however, concluding the inquiry at this early
stage has the potential to subvert the very purpose of U.S.
countervailing duty law: to counteract the unfair effects of
foreign government subsidies. That is, if Commerce’s analysis
stopped at the point suggested by RTG and SSI, a loophole would
be created through which a foreign government could manipulate
terms affected by government involvement with borrower);
Allegheny Ludlum Corp. v. United States, 29 CIT ___, ___, 358 F.
Supp. 2d 1334, 1338 (2005) (noting that presumption of subsidy
extinguishment which accompanies sale of government-owned
company for fair market value may be rebutted upon showing of
distortive government intervention in broader market); AL Tech
Specialty Steel Corp. v. United States, 28 CIT ___, Slip Op. 04-
114 at 26-27 (Sept. 8, 2004) (noting that, if proven, government
manipulation would render a real estate appraisal an unreliable
measure of market conditions).
Consol. Court No. 02-00026 Page 34
its tariff regime, layering one countervailable tariff rate upon
another, and thereby subsidize its domestic industries without
concern for retribution.
To prevent such unfairness, Commerce must make certain that
any tariff rate used to calculate the benefit received from a
countervailable tariff exemption is not itself countervailable.
In most cases, this inquiry is summary; however, where, as here,
at least two alternative tariff rates appear reasonably
available, a quick look does not suffice. Instead, Commerce
must affirmatively establish the non-countervailability of the
tariff rate selected for use as a benchmark in benefit analysis.
As a practical matter (and as Commerce apparently chose to do
here 15 ), this is likely to be accomplished through specificity
analysis. See Royal Thai I, 28 CIT at ___, 341 F. Supp. 2d at
1317-20 (first applying specificity analysis to determine non-
countervailability). This is because the specificity test
“function[s] as an initial screening mechanism to winnow out
only those foreign subsidies which truly are broadly available
15
See Decision Memo at 7 (the one percent duty “policy appears
to be uniformly applied”); id. at 25 (“Many products have had
their duty rate lowered to one percent, not just slab.”); see
also Defendant’s Memorandum in Opposition to U.S. Steel’s Motion
for Judgment upon the Administrative Record at 43 (“Commerce
made clear findings that the one percent rate was ‘generally
applied’ and therefore that it was not specific.”).
Consol. Court No. 02-00026 Page 35
and widely used throughout an economy.” SAA, H.R. Doc. No. 103-
465 at 929, 1994 U.S.C.C.A.N. at 4242. 16
Specificity analysis (which is non-regional in nature) has
two aspects. To be non-countervailable, a subsidy must be both
non-specific as a matter of law (de jure) and as a matter of
fact (de facto). Id. at 929-30, 1994 U.S.C.C.A.N. at 4242-43;
19 U.S.C. § 1677(5A)(D) (1999). A subsidy is non-specific as a
matter of law if: (1) eligibility is automatic; (2) the
conditions for eligibility are strictly followed; (3) the
conditions are clearly set forth in a relevant statute or
regulation so as to be capable of verification; and (4) the
authority providing the subsidy does not expressly limit access
to the subsidy to an enterprise or industry. 19 U.S.C. §
1677(5A)(D)(i)-(ii) (1999); see also AL Tech Specialty Steel
Corp. v. United States, 29 CIT ___, ___, 366 F. Supp. 2d 1236,
1238 n.3 (2005). A subsidy is non-specific as a matter of fact
if: (1) the actual recipients of the subsidy, whether considered
16
However, as discussed supra in Part III.B, there are multiple
statutory criteria for establishing the existence of a
countervailable subsidy. The absence of any one of these
criteria is sufficient to prove non-countervailability and
Commerce may freely select from among them in conducting its
analysis of potential tariff rate benchmarks. 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.
Consol. Court No. 02-00026 Page 36
on an enterprise or industry basis, are not limited in number;
(2) no one enterprise or industry is a predominant user of the
subsidy; (3) no one enterprise or industry receives a
disproportionately large amount of the subsidy; or (4) the
authority granting the subsidy has not exercised its discretion
in a manner indicating that a particular enterprise or industry
is favored over others. 19 U.S.C. § 1677(5A)(D)(iii) (1999);
see also AK Steel Corp. v. United States, 192 F.3d 1367, 1384
(Fed. Cir. 1999). Commerce’s regulations require a sequential
analysis of these factors. See 19 C.F.R. § 351.502(a) (2006).
Applying these principles to this case, Commerce must
demonstrate that the one percent tariff rate used to calculate
the benefit received by SSI under the duty exemption program is
both de jure and de facto non-specific. Turning first to de
jure specificity, the Court finds that Commerce reasonably
selected the one percent tariff rate. 17 Commerce, upon
discovering the two alternative rates, inquired about the nature
of the one percent rate. App. to Pls.’ Resp. Br., App. 9 (RTG
Verification Report dated Aug. 17, 2001) at 3-4. In response to
Commerce’s questionnaires, RTG provided the Thai tariff schedule
as well as a government publication explaining the tariff
17
Although not specifically discussed in the Final
Determination, the Court concludes that Commerce relied on
record evidence, particularly the RTG Verification Report and
exhibits related thereto, as demonstrating the absence of de
jure specificity. Accord AK Steel, 192 F.3d at 1384.
Consol. Court No. 02-00026 Page 37
structure and its implementation (the “Guide to Thai Taxation”).
Id., App. 25 (RTG Verification Report dated Aug. 17, 2001) at
MOF Ex. 1, 3. The tariff schedule showed a normal rate of ten
percent and a reduced rate of one percent. Id. at MOF Ex. 1.
The Guide to Thai Taxation explained that the reduced duty rate
was applied to all imports which were not also produced
domestically. Id. at MOF Ex. 3. Based on this verified
information, it was clear that the eligibility criteria for the
reduced duty rate were set out in a government record (i.e., the
Guide to Thai Taxation). Decision Memo at 25. Further, based
upon RTG’s stated procedure for determining the tariff rate, it
was also clear that the eligibility criteria were strictly
followed and that eligibility was automatic when those criteria
were met. Id.; App. to Pls.’ Resp. Br., App. 9 (RTG
Verification Report dated Aug. 17, 2001) at 4, MOF Ex. 6 (noting
that slab was eligible for one percent tariff rate solely
because it satisfied criteria, while other products were denied
rate because they did not). In addition, record evidence showed
that the reduction itself was not expressly limited to any
particular industry or enterprise because RTG’s policy was to
apply the rate to all industries. Decision Memo at 25; App. to
Pls.’ Resp. Br. dated Nov. 6, 2002, App. 9 (RTG Verification
Report dated Aug. 17, 2001) at MOF Ex. 1. U.S. Steel does not
point to any evidence to the contrary and the Court is aware of
Consol. Court No. 02-00026 Page 38
no record evidence otherwise suggesting de jure specificity. As
such, the record evidence substantially supports the finding
that the one percent tariff rate was not de jure specific.
Accord Geneva Steel v. United States, 20 CIT 7, 47-48, 914 F.
Supp. 563, 598 (1996) (sustaining negative finding of de jure
specificity based on similar evidence).
However, turning to de facto specificity, the Court is
unable to similarly sustain Commerce’s selection of the one
percent tariff rate. Commerce maintains that, because the one
percent tariff rate was applied to several different industries
and companies, the one percent tariff rate must be non-specific
as a matter of fact. See Decision Memo at 7. However, Commerce
did not inquire as to the quantity of imports made by each of
the industries/companies benefiting from the reduced tariff
rate. As noted supra, the de facto prong of specificity
analysis requires Commerce to determine the actual use of the
tariff rate by sequentially analyzing the four applicable
statutory criteria. A hypothetical example from this case
demonstrates why de facto specificity analysis must look to
actual use: while the one percent tariff rate was generally
available, it may be that the Thai steel industry was the only
industry actually importing significant amounts of goods at this
reduced rate during the period of investigation. If so, then
the trade distorting effects would be exactly the same as if RTG
Consol. Court No. 02-00026 Page 39
were reducing the tariff rate for only the Thai steel industry
or SSI specifically. 18
In the Final Determination, Commerce failed to make any
findings with respect to imports at the one percent tariff rate
made by industries or companies other than the Thai steel
industry. This constituted clear error by Commerce. See Roses,
Inc. v. United States, 14 CIT 444, 454-55, 743 F. Supp. 870, 879
(1990) (finding flawed application of de facto specificity
analysis sufficient basis for remand when error not otherwise
harmless). The Court therefore remands this issue for Commerce
to conduct a more thorough de facto specificity analysis. On
remand, Commerce must demonstrate, if it is able, that the one
percent tariff rate was non-specific as a matter of fact – i.e.,
Commerce must address each of the four statutory criteria
enumerated in 19 U.S.C. § 1677(5A)(D)(iii). There are no rigid
rules for determining whether a subsidy satisfies these
criteria. See SAA, H.R. Doc. No. 103-465 at 930, 1994
U.S.C.C.A.N. at 4242 (characterizing specificity analysis as a
18
Further, to end de facto specificity analysis with mere
appearances would again serve to create a loophole through which
foreign governments could easily subsidize selected industries
or companies. A foreign government would only need to make
available an ostensibly universal subsidy which is in actuality
used by a single favored industry or company. See Cabot Corp.
v. United States, 9 CIT 489, 495, 620 F. Supp. 722, 730 (1985)
(observing that U.S. countervailing duty law is not “concerned
with the nominal availability of a governmental program” but
with “what aid or advantage has actually been received”).
Consol. Court No. 02-00026 Page 40
“rule of reason”). However, Commerce must point to substantial
record evidence supporting a finding of non-specificity with
respect to each statutory criterion. 19 See 19 U.S.C. §
1516a(b)(1)(B)(i) (1999). If Commerce is unable to do so, then
Commerce must either: (1) establish the non-countervailability
of the one percent tariff rate benchmark through alternative
analysis, see supra note 16, or (2) revise the Final
Determination by appropriately identifying and using a
different, non-countervailable benchmark for measuring the
countervailable benefit received by SSI as a result of import
duty exemptions.
IV. CONCLUSION
For the foregoing reasons, the Court remands the Final
Determination. A separate order will be entered accordingly.
/s/ Richard W. Goldberg
Richard W. Goldberg
Senior Judge
Date: July 26, 2006
New York, New York
19
If necessary, Commerce may reopen the administrative record in
order to obtain information inadvertently overlooked as a result
of applying an erroneous specificity analysis.