Hyundai Steel Co. v. United States

Slip Op. 25-6

UNITED STATES

COURT OF INTERNATIONAL TRADE

Court No. 22-00029 Court No. 22-00032

HYUNDAI STEEL COMPANY, DONGKUK STEEL MILL

Plaintiff, CO., LTD.,

v. Plaintiff,

UNITED STATES, v.

Defendant, UNITED STATES,

and Defendant,

SSAB ENTERPRISES LLC and and

NUCOR CORPORATION, NUCOR CORPORATION,

Defendant-Intervenors. Defendant-Intervenor.

Before: M. Miller Baker, Judge

OPINION

[The court sustains Commerce’s redetermination.]

Dated: January 16, 2025

Brady W. Mills, et al., Morris, Manning & Martin,

LLP, Washington, DC, on the comments for Hyundai

Steel Company.

Jeffrey M. Winton and Vi N. Mai, Winton & Chapman

PLLC, Washington, DC, on the comments for Dongkuk

Steel Mill Co., Ltd.

Ct. Nos. 22-00029, 22-00032 Page 2

Brian M. Boynton, Principal Deputy Assistant Attor-

ney General; Patricia M. McCarthy, Director; L. Misha

Preheim, Assistant Director; and Elizabeth Anne

Speck, Senior Trial Counsel, Commercial Litigation

Branch, Civil Division, U.S. Department of Justice,

Washington, DC, on the comments for Defendant. Of

counsel for Defendant was Jared M. Cynamon, Office

of the Chief Counsel for Trade Enforcement & Compli-

ance, U.S. Department of Commerce, Washington, DC.

Alan H. Price, Christopher B. Weld, Derick G. Holt,

and Paul A. Devamithran, Wiley Rein LLP, Washing-

ton, DC, on the comments for Nucor Corporation.

Baker, Judge: These countervailing duty cases in-

volving South Korea’s greenhouse gas regulatory sys-

tem return from the Department of Commerce. Ac-

cording to the agency’s original determination, that

country’s provision of 100 percent of carbon trading

units—things with economic value—to some emitters,

including Plaintiff Hyundai in Case 22-29, is a coun-

tervailable subsidy when others receive only 97 per-

cent.

To so conclude, Commerce needed to find that

“(1) [the South Korean] government provide[d] a finan-

cial contribution (2) to a specific industry and (3) a re-

cipient within the industry receive[d] a benefit as a re-

sult of that contribution.” Fine Furniture (Shanghai)

Ltd. v. United States, 748 F.3d 1365, 1369 (Fed. Cir.

2014) (citing 19 U.S.C. § 1677(5)(B)); see also 19 U.S.C.

§ 1677(5)(A).

Ct. Nos. 22-00029, 22-00032 Page 3

In its previous decision, the court sustained the De-

partment’s affirmative findings on the first and third

of those elements. See Hyundai Steel Co. v. United

States, Ct. Nos. 22-00029 and 22-00032, Slip Op.

23-182, at 10–11 (financial contribution), 11–13 (bene-

fit), 2023 WL 8715732, at **4–5 (CIT Dec. 18, 2023).

As to the second (specificity), however, the court found

the agency’s explanation conclusory and remanded.

See id. at 20–21, 2023 WL 8715732, at **7–8. 1

On redetermination, Commerce explained its find-

ing that the provision of an extra three percent of trad-

ing units to only some carbon emitters is specific. As

explained below, the court sustains that conclusion.

I

These cases involve what the Tariff Act of 1930, as

amended, calls a “domestic subsidy.” 19 U.S.C.

§ 1677(5A)(D). 2 Such subsidies are specific when they

are “narrowly focused” and “provided to or used by dis-

crete segments of an economy.” Statement of Adminis-

trative Action Accompanying the Uruguay Round

Agreements Act (SAA), H.R. Rep. No. 103–316, vol. 1,

1 Dongkuk’s companion action, Case 22-32, rises or falls

with Hyundai’s. See Slip Op. 23-182, at 8 n.1, 2023 WL

8715732, at *3 n.1. Docket citations in this opinion refer to

the latter case.

2 In addition to domestic subsidies, the statute recognizes

“export” and “import substitution” subsidies. See id.

§ 1677(5A)(B), (C). All ensuing references to “subsidy” in

this opinion mean a domestic subsidy.

Ct. Nos. 22-00029, 22-00032 Page 4

at 930, 1994 U.S.C.C.A.N. 4040, 4242. 3 But “govern-

ment assistance that is both generally available and

widely and evenly distributed throughout the jurisdic-

tion of the subsidizing authority is not an actionable

subsidy.” SAA at 913, 1994 U.S.C.C.A.N. at 4230.

This test “function[s] as an initial screening mech-

anism to winnow out only those foreign subsidies

which truly are broadly available and widely used

throughout an economy.” Id. at 929, 1994

U.S.C.C.A.N. at 4242. Thus, “a tax credit for expendi-

tures on capital investment” that is “available to all

industries and sectors” is not specific. Id. at 929–30,

1994 U.S.C.C.A.N. at 4242 (quoting Carlisle Tire &

Rubber Co. v. United States, 564 F. Supp. 834, 838

(CIT 1983) (Maletz, J.)); 4 see also id. at 930, 1994

U.S.C.C.A.N. at 4242 (“The specificity test” precludes

imposing countervailing duties where a subsidy enjoys

“widespread availability and use . . . throughout an

economy.”) (emphasis in original).

Subsidies are specific “as a matter of law” (de jure)

“[w]here the authority providing the subsidy, or the

legislation pursuant to which the authority operates,

expressly limits access to the subsidy to an enterprise

or industry.” 19 U.S.C. § 1677(5A)(D)(i). 5 A “corollary”

provision, SAA at 930, 1994 U.S.C.C.A.N. at 4243,

3 The SAA is an “authoritative expression” of the statute’s

meaning. 19 U.S.C. § 3512(d).

4 The SAA characterizes Carlisle as “the leading case” for

purposes of identifying specificity. Id.

5 For these purposes, “enterprise or industry” “includes a

group of such enterprises or industries.” Id. § 1677(5A)(D).

Ct. Nos. 22-00029, 22-00032 Page 5

states that a subsidy is not de jure specific when the

relevant foreign agency or law

establishes objective criteria or conditions gov-

erning the eligibility for, and the amount of, a

subsidy . . . if—

(I) eligibility is automatic,

(II) the criteria or conditions for eligibility are

strictly followed, and

(III) the criteria or conditions are clearly set

forth in the relevant statute, regulation, or other

official document so as to be capable of verifica-

tion.

19 U.S.C. § 1677(5A)(D)(ii).

The statute defines “objective criteria or conditions”

as ones “that are neutral and that do not favor one en-

terprise or industry over another.” Id. (emphasis

added). They must be “economic in nature and hori-

zontal in application, such as the number of employees

or the size of the enterprise.” SAA at 930, 1994

U.S.C.C.A.N. at 4243. Provided that the relevant

benchmarks are agnostic as to industry or sector type,

“a subsidy would not be deemed to be de jure specific

merely because it was bestowed pursuant to certain el-

igibility criteria.” Id.

In short, a subsidy is de jure specific when “a for-

eign government expressly limits access . . . to a suffi-

ciently small number of enterprises, industries[,] or

groups thereof,” id., whether by company names,

Ct. Nos. 22-00029, 22-00032 Page 6

industry types, or discriminatory criteria. There is no

“precise mathematical formula for determining when

the number of enterprises or industries eligible for a

subsidy is sufficiently small so as to properly be con-

sidered specific.” Id. “Commerce can only make this

determination on a case-by-case basis.” Id.

Even if not de jure specific, a subsidy may be spe-

cific “as a matter of fact” (de facto) if “one or more” enu-

merated factors “exist.” 19 U.S.C. § 1677(5A)(D)(iii).

Those factors are whether the “actual recipients of the

subsidy, whether considered on an enterprise or indus-

try basis, are limited in number”; “[a]n enterprise or

industry is a predominant user” or “receives a dispro-

portionately large amount of the subsidy”; and in prac-

tice the discretionary award of the subsidy “indicates

that an enterprise or industry is favored over others.”

Id. § 1677(5A)(D)(iii)(I)–(IV). 6

II

On remand, Commerce explained that the South

Korean Ministry of Environment imposes “interna-

tional trade intensity” and “production cost” conditions

“in an explicit manner to certain industries or ‘subsec-

tors.’୻” Appx16462. “Such an express, legal limitation

6 A third form of domestic subsidies are those that are “re-

gionally specific.” Canadian Solar, Inc. v. United States, 23

F.4th 1372, 1375 (Fed. Cir. 2022). These are provided by “a

central government to particular regions” and by “state

and provincial” authorities “to particular regions within”

those jurisdictions. SAA at 932, 1994 U.S.C.C.A.N. at 4244;

see also 19 U.S.C. § 1677(5A)(D)(iv); Carlisle, 564 F. Supp.

at 838 n.6.

Ct. Nos. 22-00029, 22-00032 Page 7

on eligibility for the additional three percent . . . allo-

cation” is de jure specific. Id.

Elaborating, the Department observed that the

South Korean greenhouse gas regulatory program

does not apply to every industry in that country. Id.

Instead, it “is limited to a subset of industries,” carbon

emitters. Id. 7 And only a part of that subset is eligible

for the three percent unit bonus—those entities “that

fulfilled the same trade intensity and production cost

criteria used by” the European Union and California

“in implementing their emissions trading system.”

Appx16463.

The Department found that these standards “are

not horizontal in application and, thus, are not neutral

. . . .” Appx16466. Unlike “examples of neutral criteria

in the SAA (i.e., the number of employees or size of the

enterprise),” the production cost factor “inherently fa-

vor[s] . . . more [greenhouse gas]-intensive (i.e., heavy

polluting) production processes” over less pollution-in-

tensive subsectors. Id. In the same way, the “interna-

tional trade intensity” criterion favors businesses that

“are more dependent on international markets for

sales and/or sourcing” over subsectors that rely less on

such markets. Id. By singling out “certain types of sub-

sectors,” the subsidy is “de jure specific.” Id. (citing 19

7 The South Korean greenhouse gas statute applies to “en-

tities” from which the average total amount of annual

greenhouse gas emissions during the preceding three-year

period is at least 125,000 tons of carbon dioxide equivalents

or that have a place of business that produced 25,000 tons

of CO2 equivalents during that same three-year period.

Appx16462–16463.

Ct. Nos. 22-00029, 22-00032 Page 8

U.S.C. § 1677(5A)(D)(i)). The agency observed this con-

clusion aligns with its previous determinations recog-

nizing that subsidies are de jure specific when they

target “enterprises or industries that perform certain

types of activities or use certain types of resources.”

Appx16473–16474. 8

III

Hyundai acknowledges that a foreign statute need

not name industries for a subsidy to be de jure specific.

ECF 75, at 14. But it asserts that the production cost

and trade intensity criteria do not “expressly limit ac-

cess to the subsidy to an enterprise or industry,” id.

(quoting 19 U.S.C. § 1677(5A)(D)(i)), as any entity may

satisfy them, id. at 9. And according to the company,

these conditions are “neutral and . . . do not favor one

enterprise or industry over another,” id. at 6 (quoting

8 The Department also noted that the South Korean green-

house gas regulatory program applies to 63 subsectors.

Appx16467. Of those, 37 receive the subsidy. Id. Nearly all

“are included because they satisfy the trade intensity cri-

teria.” Id. These subsectors “are related to ‘iron and steel,’

‘manufacture of semiconductors,’ ‘manufacture of basic

chemicals,’ ‘manufacture of aircraft,’ and a variety of other

internationally-oriented manufacturing subsectors.” Id.

The remainder “qualify based on the production cost crite-

ria, including ‘group energy’ and ‘waste treatment.’୻” Thus,

only the “trade and/or emission intensive subsectors” are

eligible. Id. In contrast, the ineligible subsectors “cover[ ] a

broader spectrum of manufacturing groupings in addition

to a broad set of service industries, such as ‘electricity,’ ‘tel-

ecommunications,’ ‘computer programming,’ ‘insurance,’

and ‘hospital activities.’୻” Id.

Ct. Nos. 22-00029, 22-00032 Page 9

19 U.S.C. § 1677(5A)(D)(ii)), because they “app[ly] to

all subsectors,” id. at 24 (emphasis in original).

The company relies heavily on Hyundai Steel Co. v.

United States, 701 F. Supp. 3d 1398 (CIT 2024) (Hyun-

dai III), where in the context of a different countervail-

ing duty order Commerce similarly found the three-

percent subsidy de jure specific. 9 As here, the Depart-

ment reasoned that production cost and trade inten-

sity criteria were proxies for the heaviest polluters and

most trade-reliant entities. 701 F. Supp. 3d at 1411.

The court held that this “rationale merely repack-

age[d] the language of the criteria into a statement

that certain subsectors are favored.” Id. at 1412. “Con-

verting the language of the criteria into subsector de-

scriptors is insufficient to demonstrate that a subsidy

may not operate throughout the economy.” Id. 10

The government “respectfully disagree[s]” with

Hyundai III. ECF 78, at 26. It argues the court should

instead follow BGH Edelstahl Siegen GmbH v. United

States, which held that the EU’s cap-and-trade scheme

was de jure specific because it provided a subsidy to a

subset of regulated entities based on their “risk of car-

bon leakage.” 600 F. Supp. 3d 1241, 1264 (CIT 2022).

9 Hyundai III involved a countervailing duty order on hot-

rolled steel. Id. at 1401. The one here covers certain steel

plate. Appx16457.

10 As here, see note 8, in Hyundai III Commerce also relied

on the list of qualifying subsectors to find de jure specific-

ity. See 701 F. Supp. 3d at 1412. The court held that

“[t]hese considerations are [only] relevant to a de facto

specificity analysis.” Id. (citing 19 U.S.C.

§ 1677(5A)(D)(iii)).

Ct. Nos. 22-00029, 22-00032 Page 10

In so holding, BGH apparently reasoned that this cri-

terion was not neutral for purposes of 19 U.S.C.

§ 1677(5A)(D)(ii).

Recall the relevant first principles. Absent statu-

tory or regulatory language “expressly limit[ing] ac-

cess to the subsidy to an enterprise or industry” by

company name or industry type, 19 U.S.C.

§ 1677(5A)(D)(i), eligibility standards are a necessary,

but not sufficient, condition to establish de jure speci-

ficity. See SAA at 930, 1994 U.S.C.C.A.N. at 4243

(stating that a subsidy is not de jure specific “merely

because it [is] bestowed pursuant to certain eligibility

criteria”). The question in such cases is whether the

conditions “are neutral and . . . do not favor one enter-

prise or industry over another.” 19 U.S.C.

§ 1677(5A)(D)(ii).

As Commerce has repeatedly and correctly recog-

nized, see Appx16474–16475, metrics that select enter-

prises based on the substantive character of their op-

erations—whether their inputs, outputs, customers, or

externalities—are not neutral. That’s because they’re

not “economic in nature and horizontal in application,

such as the numbers of employees or the size of the

enterprise.” SAA at 930, 1994 U.S.C.C.A.N. at 4243.

Here, as the Department explained on remand, the

South Korean regulatory program facially limits the

subsidy to entities that are the heaviest carbon emit-

ters, the most dependent upon international trade, or

both. Appx16466. Because a company’s eligibility thus

turns on what it does, the criteria are not content-neu-

tral, as it were. Cf. Ward v. Rock Against Racism, 491

U.S. 781, 791 (1989) (stating that “even in a public

Ct. Nos. 22-00029, 22-00032 Page 11

forum the government may impose reasonable re-

strictions on the time, place, or manner of protected

speech, provided the restrictions ‘are justified without

reference to the content of the regulated speech’୻”).

Hyundai’s argument that emissions and interna-

tional trade criteria are neutral because they “app[ly]

to all subsectors,” ECF 75, at 24 (emphasis in original),

is wordplay. Of course selection standards apply uni-

versally. That doesn’t mean they’re evenhanded for

countervailing duty purposes. Consider Judge

Maletz’s example of “a tax credit for expenditures on

capital investment.” Carlisle, 564 F. Supp. at 838.

Such a credit would be neutral if eligibility were based

on company revenues or employee head count. But if

eligibility turned on emissions intensity or export-

market dependency, the credit would discriminate ac-

cording to operational characteristics and so be de jure

specific.

The court thus agrees with BGH and—like the gov-

ernment—respectfully disagrees with Hyundai III. In

both cases, subsidy eligibility turned on the nature of

an enterprise’s operations and was therefore de jure

specific. The latter decision characterized the Depart-

ment’s analysis as “[c]onverting the language of the

criteria into subsector descriptors . . . .” 701 F. Supp.

3d at 1412. But what the agency did was to describe

the substantive industry attributes that the criteria

pick. Selection on such an impermissible basis is pre-

cisely what makes the subsidy discriminatory rather

than neutral because it “favor[s] one enterprise or in-

dustry over another.” See 19 U.S.C. § 1677(5A)(D)(ii).

Ct. Nos. 22-00029, 22-00032 Page 12

Finally, it is of no moment that Commerce went fur-

ther than needed by comparing the numbers of ineligi-

ble and eligible subsectors. See note 8. Insofar as these

considerations are only relevant to a de facto specific-

ity analysis as Hyundai III found, see 701 F. Supp. 3d

at 1412, this merely demonstrates that a de jure–spe-

cific subsidy is also necessarily de facto–specific in its

operation. 11 At worst this was harmless error.

* * *

The South Korean greenhouse gas program pro-

vides a subsidy, based not on company name or indus-

try type, but rather on an entity’s operational charac-

teristics. Commerce’s original decision simply labeled

those criteria as de jure specific without any meaning-

ful discussion. On remand, the Department explained

that operational characteristics are not neutral eligi-

bility standards. The court accordingly sustains the

agency’s redetermination. Separate judgments will en-

ter in both actions. See USCIT R. 58(a).

Dated: January 16, 2025 /s/ M. Miller Baker

New York, NY Judge

11 A de facto–specific subsidy, however, is not necessarily

de jure specific.