Royal Thai Government v. United States

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.