Court Opinion

ID: 9391010
Source: CourtListenerOpinion
Date Created: 2023-04-28 21:02:32.766411+00
Date Added: 2024-06-11T17:18:38.805179
License: Public Domain

Slip Op. 23-

               UNITED STATES COURT OF INTERNATIONAL TRADE

 NUCOR CORPORATION,

           Plaintiff,

                  v.

 UNITED STATES,                              Before: Mark A. Barnett, Chief Judge
                                             Court No. 22-00070
           Defendant,

                and

 GOVERNMENT OF THE REPUBLIC OF
 KOREA,

           Defendant-Intervenor.

                                       OPINION

[Sustaining the U.S. Department of Commerce’s final results in the 2019 administrative
review of the countervailing duty order on certain carbon and alloy steel cut-to-length
plate from the Republic of Korea.]

                                                             Dated: April 28, 2023

Adam M. Teslik, Wiley Rein LLP, of Washington, DC, argued for Plaintiff Nucor
Corporation. With him on the brief were Alan H. Price, Christopher B. Weld, and Tessa
V. Capeloto.

Augustus Golden, Trial Attorney, Civil Division, Commercial Litigation Branch, U.S.
Department of Justice, of Washington, DC, argued for Defendant United States. With
him on the brief were Brian M. Boynton, Principal Deputy Assistant Attorney General,
Patricia M. McCarthy, Director, and Tara K. Hogan, Assistant Director. Of Counsel on
the brief was W. Mitch Purdy, Attorney, Office of the Chief Counsel for Trade
Enforcement and Compliance, U.S. Department of Commerce, of Washington, DC.

Sarah S. Sprinkle, Akin Gump Strauss Hauer & Feld LLP, of Washington, DC, argued
for Defendant-Intervenor Government of the Republic of Korea. With her on the brief
were Yujin K. McNamara, Daniel M. Witkowski, Devin S. Sikes, Sung Un K. Kim, and
Sydney L. Stringer.
Court No. 22-00070                                                                    Page 2

       Barnett, Chief Judge: Plaintiff Nucor Corporation (“Nucor”) challenges the U.S.

Department of Commerce’s (“Commerce” or “the agency”) final results in the 2019

administrative review of the countervailing duty (“CVD”) order on certain carbon and

alloy steel cut-to-length plate (“CTL plate”) from the Republic of Korea (“Korea”).

Compl., ECF No. 8; see also Certain Carbon and Alloy Steel Cut-to-Length Plate From

the Republic of Korea, 87 Fed. Reg. 6,842 (Dep’t Commerce Feb. 7, 2022) (final results

and partial rescission of [CVD] admin. review, 2019) (“Final Results”), ECF No. 19-4,

and accompanying Issues and Decision Mem., C-580-888 (Jan. 31, 2022) (“I&D

Mem.”), ECF No. 19-5. 1 Nucor seeks judgment on the agency record pursuant to U.S.

Court of International Trade (“CIT”) Rule 56.2 and requests the court to remand

Commerce’s determination that the Government of the Republic of Korea (“Government

of Korea” or “GOK”) does not provide a countervailable subsidy to the Korean steel

industry through the provision of electricity for less than adequate remuneration. See

Confid. Pl. Nucor Corp.’s Rule 56.2 Mot. for J. on the Agency R. and accompanying

Mem. in Supp. of Rule 56.2 Mot. for J. on the Agency R. (“Pl.’s Mem.”), ECF No. 30;

Confid. Pl. Nucor Corp.’s Reply Br. (“Pl.’s Reply”), ECF No. 35.

1The administrative record for the Final Results is contained in a Public Administrative
Record (“PR”), ECF No. 19-1, and a Confidential Administrative Record (“CR”), ECF
No. 19-2. Nucor submitted joint appendices containing record documents cited in
Parties’ briefs and requested by the court. See Confid. J.A. (“CJA”), ECF Nos. 37 (Tab
1–Tab 10 (Part 1)), 37-1 (Tab 10 (Part 2)), 37-2 (Tab 10 (Part 3)–Tab 17); Public J.A.,
ECF No. 38; First Suppl. Confid. J.A. (“1st Suppl. CJA”), ECF Nos. 44–44-4 (replacing
Tabs 4 and 5 previously filed), First Suppl. Public J.A., ECF Nos. 45, 45-1; Second
Suppl. Confid. J.A. (“2nd Suppl. CJA”), ECF No. 47 ; 2nd Suppl. Public J.A., ECF No.
48. The court references the confidential record documents unless otherwise specified.
Court No. 22-00070                                                                      Page 3

         Defendant United States (“the Government”) and Defendant-Intervenor the

Government of Korea urge the court to sustain the Final Results. Def.’s Resp. to Pl.’s

Mot. for J. upon the Agency R. (“Def.’s Resp.”), ECF No. 32; Confid. Def.-Int. [Gov’t of

Korea’s] Mem. in Opp’n to Pl.’s Mot. for J. on the Agency R. (“Def-Int.’s Resp.”), ECF

No. 33.

         For the following reasons, the court sustains the Final Results.

                                         BACKGROUND

    I.      CVD Overview

         A countervailable subsidy “exists when . . . a foreign government provides a

financial contribution . . . to a specific industry” that confers “a benefit” on “a recipient

within the industry.” Fine Furniture (Shanghai) Ltd. v. United States, 748 F.3d 1365,

1369 (Fed. Cir. 2014) (citing 19 U.S.C. § 1677(5)(B)). A countervailable benefit

includes the provision of goods or services “for less than adequate remuneration.” 19

U.S.C. § 1677(5)(E)(iv) (2018). 2 The statute directs Commerce to determine the

adequacy of remuneration “in relation to prevailing market conditions for the good or

service being provided or the goods being purchased in the [subject] country” and

explains that “[p]revailing market conditions include price, quality, availability,

marketability, transportation, and other conditions of purchase or sale.” Id.

2Further citations to the Tariff Act of 1930, as amended, are to Title 19 of the U.S.
Code. All references to the U.S. Code are to the 2018 edition unless otherwise
specified.
Court No. 22-00070                                                                   Page 4

       Commerce’s regulations prescribe a three-tiered approach for determining the

adequacy of remuneration. See 19 C.F.R. § 351.511. When, as here, both an in-

country market-based price and a world market price are unavailable, Commerce

examines “whether the government price is consistent with market principles,” referred

to herein as a “Tier 3 analysis.” Id. § 351.511(a)(2)(iii). 3 A Tier 3 analysis accounts for

“such factors as the government’s price-setting philosophy, costs (including rates of

return sufficient to ensure future operations), or possible price discrimination.”

Countervailing Duties, 63 Fed. Reg. 65,348, 65,378 (Dep’t Commerce Nov. 25, 1998)

(“CVD Preamble”). Those factors are not “in any hierarchy,” and Commerce “may rely

on one or more of these factors in any particular case.” Id.

       II.    Agency Proceedings

       On May 25, 2017, Commerce published the CVD order on CTL plate from Korea.

Certain Carbon and Alloy Steel Cut-to-Length Plate From the Republic of Korea, 82

Fed. Reg. 24,103 (Dep’t Commerce May 25, 2017) ([CVD] order) (“Korea CTL Order”).

On July 10, 2020, Commerce initiated the third administrative review of the Korea CTL

Order for the 2019 period of review (“POR”). Initiation of Antidumping and

Countervailing Duty Admin. Reviews, 85 Fed. Reg. 41,540, 41,548–49 (Dep’t

Commerce July 10, 2020), PR 20, CJA Tab 1. Commerce selected POSCO as the sole

3 Commerce first seeks to compare the government price to a market-based price for
the good or service under investigation in the country in question (a “Tier 1 analysis”).
19 C.F.R. § 351.511(a)(2)(i). When an in-country market-based price is unavailable,
Commerce will compare the government price to a world market price when the world
market price is available to purchasers in the country in question (a “Tier 2 analysis”).
Id. § 351.511(a)(2)(ii).
Court No. 22-00070                                                                 Page 5

mandatory respondent for the review. See Decision Mem. on New Subsidy Allegations

(Apr. 13, 2021) at 1 & n.2, PR 105, CJA Tab 3 (citation omitted).

       On November 19, 2020, Nucor timely filed a new subsidy allegation asserting

that the Government of Korea provided electricity to the steel industry for less than

adequate remuneration. New Subsidy Allegations (Nov. 19, 2020), CR 177–93, PR 68–

84, CJA Tab 2. On April 13, 2021, Commerce initiated a corresponding investigation.

Decision Mem. on New Subsidy Allegations at 2. On August 5, 2021, Commerce

published the preliminary results of the review. Certain Carbon and Alloy Steel Cut-to-

Length Plate From the Republic of Korea, 86 Fed. Reg. 42,788 (Dep’t Commerce Aug.

5, 2021) (prelim. results of [CVD] admin. review, and intent to rescind review, in part;

2019) (“Prelim. Results”), PR 183, CJA Tab 14, and accompanying Prelim. Decision

Mem. (“Prelim. Mem.”), PR 179, CJA Tab 12.

       In the preliminary decision memorandum, Commerce summarized key aspects of

the Korean electricity market. Commerce explained that “KEPCO[4] is the exclusive

supplier of electricity in Korea” and is majority-owned by the Government of Korea.

Prelim. Mem. at 27.5 Commerce noted that the Government of Korea “regulates the

rates that KEPCO charges for electricity by approving” changes to “the electricity tariff

rates.” Id. at 28. Electricity supplied by KEPCO is generated by “KEPCO’s six wholly-

owned subsidiary generators (GENCOs), independent power generation companies,

4KEPCO is the acronym for Korea Electric Power Corporation.
5There is an exception to KEPCO’s status as the exclusive electricity supplier for
certain “customers serviced by community energy systems.” Prelim. Mem. at 27. That
exception is not relevant here.
Court No. 22-00070                                                                   Page 6

and community energy systems.” Id. at 26 (internal footnote omitted). However,

Commerce explained, “all purchasing and selling of electricity is done through [the]

KPX.”6 Id. The KPX sets the price KEPCO pays for electricity, id., and is wholly owned

by KEPCO, id. at 27.

       Commerce described the “cost-based pool system” the Korean electricity market

uses to allocate purchase orders. Id. at 26. That system has two components: the

marginal price, which represents variable costs of generating electricity, and the

capacity price, which represents the fixed costs. See id. The marginal price is based

on hourly sales of electricity. See id. “For nuclear generators, coal-power generators,

and GENCOs, an adjusted coefficient is also included in their KPX price . . . to prevent

over-payment to generators with low fuel costs (e.g., nuclear and coal) and to maintain

a differential between the expected rate of return between the GENCOs and KEPCO.”

Id. at 27.

       For its preliminary determination, Commerce applied a Tier 3 analysis that

examined whether the industrial tariff schedule in effect during the POR 7 allowed

KEPCO to recover its costs and earn profit “sufficient to ensure future operations.” Id.

at 29. Commerce examined KEPCO’s reported cost data for 2019 and detailed the

steps through which KEPCO accounts for its “operating costs and return on

investment.” Prelim. Mem. at 31; see also Prelim. Results Calculation Mem. for

6 KPX is the acronym for Korea Power Exchange.
7 Commerce noted that the tariff schedule that applied “during the POR came into effect
in November 2013.” Prelim. Mem. at 29.
Court No. 22-00070                                                                  Page 7

POSCO (July 30, 2021) (“Prelim. Calc. Mem.”) at 8–9, CR 323–24, PR 180–81, CJA

Tab 13 (discussing, inter alia, Resp. to New Subsidy Allegation Questionnaire (Apr. 27,

2021) (“GOK’s Resp. NSA”), Ex. E-18, CR 229–34, PR 115, CJA Tab 4, 1st Suppl. CJA

Tab 4). Commerce explained that “POSCO provided electricity usage that included

voltage, option, rates, and amount paid for the industrial classification.” Prelim. Mem. at

31 & n.215 (citing POSCO’s Electricity New Subsidy Allegation Questionnaire Resp.

(Apr. 27, 2021) (“POSCO’s Resp. NSA”), Ex. NSA-2, CR 235–44, PR 117, CJA Tab 5). 8

Commerce preliminarily found that “certain reported industrial rates recovered costs and

a rate of return and certain rates did not,” id. at 32 & n.216 (citing Prelim. Calc. Mem.).

Commerce thus found that although KEPCO has “a pricing mechanism in place that is

based on market principles, . . . the industrial rates did not always recover costs and a

rate of return.” Id.

       Commerce also considered whether KPX’s prices to KEPCO conferred a benefit.

Id. at 30. Commerce referenced recent administrative reviews involving CVD orders on

different Korean merchandise in which it considered upstream subsidy allegations and

found no such benefit. Id. at 30 & n.200 (citations omitted). In the underlying review,

Commerce preliminarily found that all six GENCOs recovered their costs; that “the

system marginal price includes consideration of the GENCOs and KEPCO’s rate of

8Exhibit NSA-2 consists of POSCO’s reporting of monthly electricity purchases for its
various facilities during off-peak, mid-peak, and on-peak hours. See POSCO’s NSA
Resp. at 2, Ex. NSA-2.
Court No. 22-00070                                                                 Page 8

return”; and that “the price paid by KEPCO through KPX is inclusive of a rate of return.”

Id. at 30. Commerce thus found no benefit from KPX’s prices to KEPCO. See id.

       Regarding the sales for which KEPCO did not recover its costs and a rate of

return, Commerce preliminarily calculated a de minimis net countervailable subsidy rate

for POSCO and the non-examined companies subject to the review. Prelim. Results,

86 Fed. Reg. at 42,789.

       On February 7, 2022, Commerce published the Final Results of the review. 87

Fed. Reg. at 6,842. For the Final Results, Commerce incorporated much of its

preliminary analysis. See I&D Mem. at 21–26. Commerce continued to use a Tier 3

analysis that examined whether KEPCO’s electricity prices covered KECPO’s costs and

an amount for profit. Id. at 22 & n.75 (citing Prelim. Mem. at 28–29). Commerce

explained that when KEPCO’s prices did not cover costs (and, thus, did not accord with

“market principles”), Commerce determined a benchmark price “that cover[ed] costs

plus a rate of recovery or profit[], with the difference between the price paid and the

benchmark being the benefit conferred.” Id. at 22 & n.78 (citing Prelim. Mem. at 29). 9

Using this methodology, Commerce calculated a de minimis net countervailable subsidy

rate in the amount of 0.42 percent for POSCO and the non-examined companies. Final

Results, 87 Fed. Reg. at 6,843.

9Commerce also noted that “POSCO reported paying electricity prices that are listed on
KEPCO’s electricity rate schedule, and . . . that POSCO’s operations were classified
under the correct electricity consumption categories.” I&D Mem. at 22 & n.80 (citations
omitted).
Court No. 22-00070                                                                    Page 9

       In reaching its decision, the agency analyzed and rejected Nucor’s argument that

Commerce should instead “compare the electricity prices paid by [POSCO] to the cost

plus profit rate of KEPCO to determine whether a benefit exists.” I&D Mem. at 22; see

also id. at 22–23. Commerce further explained that its “analysis is not based on

KEPCO’s total revenue,” but on KEPCO’s “financial performance” in relation to “each

electricity consumption category.” Id. at 24. Commerce explained that this method is

appropriate because “POSCO paid electricity prices” in accordance with the

“corresponding electricity consumption classifications” and, as such, its “analysis . . .

account[s] for whether the prices POSCO paid were covering KEPCO’s costs.” Id.

Referencing its preliminary analysis of the KPX, id. at 24–25, Commerce also rejected

Nucor’s argument that the cost information provided by the Government of Korea does

“not reflect actual costs of electricity generation and supply,” id. at 24. Lastly,

Commerce disagreed with Nucor that “subsidization is masked” by the Government of

Korea’s charging of “higher prices to other customers.” Id. at 26.

       This appeal followed, and the court heard oral argument on March 22, 2023.

Docket Entry, ECF No. 46.

                          JURISDICTION AND STANDARD OF REVIEW

       The court has jurisdiction pursuant to section 516A(a)(2)(B)(iii) of the Tariff Act of

1930, as amended, 19 U.S.C. § 1516a(a)(2)(B)(iii), and 28 U.S.C. § 1581(c).

       The court will uphold an agency determination that is supported by substantial

evidence and otherwise in accordance with law. 19 U.S.C. § 1516a(b)(1)(B)(i).
Court No. 22-00070                                                                  Page 10

                                         DISCUSSION

       Nucor argues that Commerce applied an unlawful methodology and that

Commerce’s determination is not supported by substantial evidence. The court

addresses each issue in turn.

       I.        Whether Commerce’s Determination is in Accordance with Law

            A.     Parties’ Contentions

       Nucor contends that Commerce erred in examining KEPCO’s cost recovery

based on sales to all users within the relevant tariff classification. Pl.’s Mem. at 14–15.

Instead, Nucor contends, Commerce was required to consider whether KEPCO

recovered its costs in connection with the specific prices paid by POSCO. Id. at 15–17.

       Nucor’s argument turns on its interpretation of the phrase “government price” in

the applicable regulatory provision. See id. at 16; Pl.’s Reply at 8–9 (citing, inter alia,

Kisor v. Wilkie, 139 S. Ct. 2400 (2019)). Nucor contends that Commerce impermissibly

based its benefit analysis on KEPCO’s annual average unit sales price for the relevant

industrial electricity groups and sub-groups, arguing that the sales price is “not a

government price at all” but instead “reflects the [GOK’s] total annual sales revenue.”

Pl.’s Mem. at 16; see also Pl.’s Reply at 11. Nucor further contends that its view on an

appropriate Tier 3 analysis is supported by agency precedent, surrounding regulatory

provisions, and Commerce’s statutory obligations. Pl.’s Mem. at 12–14, 16–17; Pl.’s

Reply at 4–10.

       The Government contends that Commerce’s Tier 3 analysis complied with

precedent from the U.S. Court of Appeals for the Federal Circuit (“Federal Circuit”)
Court No. 22-00070                                                               Page 11

through its examination of KEPCO’s costs and the impact of the KPX on the Korean

electricity market. Def.’s Resp. at 19–20.10 The Government also contends that

Commerce’s analysis in this review “is consistent with” the methodology used in prior

determinations involving the Korean electricity market. Id. at 21. The Government

asserts that, in a Tier 3 analysis, there are no “‘market-determined’ or ‘world-market’

prices to which [Commerce] can compare the prices ‘paid by the respondent,’” id. at 23,

and, as such, Commerce permissibly considered whether KEPCO’s tariff rates were

“set ‘in accordance with market principles’” and whether POSCO paid the applicable

tariff rates, id. (quoting 19 C.F.R. § 351.511(a)(2)(iii)).

       The Government of Korea contends that Commerce’s determination was

consistent with its statutory obligations and Commerce otherwise has discretion to

develop a method for assessing the adequacy of remuneration. See Def.-Int.’s Resp. at

9, 11. The Government of Korea further contends that a Tier 3 analysis is “more

complicated” than Tier 1 and Tier 2 analyses because Commerce is not simply

10 The Government cites Nucor Corp. v. United States, 927 F.3d 1243, 1254–55 (Fed.
Cir. 2019) (“Nucor CAFC”), and POSCO v. United States, 977 F.3d 1369 (Fed. Cir.
2020) (“POSCO CAFC”). See Def.’s Resp. at 19. In Nucor CAFC, the majority affirmed
Commerce’s determination that the sale of electricity was not for less than adequate
remuneration in the investigation concerning certain corrosion-resistant steel products
from Korea. 927 F.3d at 1249, 1256. The majority’s affirmance was, however, based
on the agency’s finding that KEPCO had recovered its costs during the investigation
period and Nucor’s failure to exhaust its arguments regarding the KPX’s costs and
prices before the agency. Id. at 1255. In POSCO CAFC, the appellate court remanded
Commerce’s determination that electricity was not sold for less than adequate
remuneration in the investigation concerning cold-rolled steel after finding that
Commerce failed to adequately investigate the role of the KPX in the Korean electricity
market. 977 F.3d at 1376–78.
Court No. 22-00070                                                               Page 12

comparing prices but must instead assess whether government price-setting accords

with market principles. Id. at 10 (citation and emphasis omitted).

          B.     Analysis

       The statute directs Commerce to consider whether a benefit has been conferred

through the provision of a good or service “for less than adequate remuneration.” 19

U.S.C. § 1677(5)(E)(iv). While Congress directed Commerce to determine the

adequacy of remuneration “in relation to prevailing market conditions” and provided a

non-exhaustive list of conditions for Commerce consider, id., Congress otherwise left

the development of a suitable methodology for conducting this analysis to Commerce’s

discretion, Nucor, 927 F.3d at 1254 (stating that “the statutory standard of adequate

remuneration . . . leaves a large range of potential implementation choices”). In the

circumstances underlying this case, Commerce assesses “whether the government

price is consistent with market principles.” 19 C.F.R. § 351.511(a)(2)(iii). Commerce

adapts and applies this analysis on a case-by-case basis. See Preamble, 63 Fed. Reg.

at 65,378 (declining to place relevant factors “in any hierarchy” and noting that “one or

more of these factors” may be relevant “in any particular case”).

       Nucor does not dispute Commerce’s discretion to develop a suitable

methodology for carrying out a Tier 3 analysis. See Pl.’s Reply at 7–8. Instead, Nucor

argues that the phrase “government price” has but one meaning here, namely, the price

reflected in KEPCO’s industrial tariff and POSCO’s corresponding reported prices. See

Pl.’s Mem. at 15 (citing GOK’s Resp. NSA, Ex. E-10; POSCO’s Resp. NSA, Ex. NSA-2);

Pl.’s Reply at 9 (“Here, the regulation is unambiguous. Commerce’s tier three rule may
Court No. 22-00070                                                                  Page 13

not lay out an explicit methodology, but it is quite clear with respect to what must be

‘consistent with market principles.’ That is the ‘government price,’ and not the

government supplier’s revenues on all sales to all customers.”) (internal citation

omitted).

       Nucor is correct insofar as the regulation unambiguously uses the phrase

“government price.” As discussed below, however, Nucor fails to persuade the court

that ascertaining whether the government price is consistent with market principles

required Commerce to use KEPCO’s tariff rates as a comparator for cost recovery

purposes. Stated differently, Commerce was within its discretion to determine whether

KEPCO’s (i.e., the Government of Korea’s) tariff rates were set in accordance with

market principles through its evaluation of whether KEPCO’s “income from prices

charged for each electricity consumption category covers KEPCO’s costs, plus profit”

for those categories. I&D Mem. at 24.

       In seeking to make its case, Nucor relies on Commerce’s explanation of its

methodology in the agency’s remand results issued in connection with the investigation

underlying the Korea CTL Order. See Pl.’s Mem. at 12; Pl.’s Reply at 5–6. Nucor

emphasizes Commerce’s statement that “if the tariff charged to the respondent does not

cover ‘cost of production’ plus a ‘profitable return on the investment,’ . . . then the

respondent has received a countervailable benefit,” Pl.’s Mem. at 12 (quoting Final

Results of Redetermination Pursuant to Ct. Remand at 30, POSCO v. United States,
Court No. 22-00070                                                                Page 14

Consol. Court No. 17-cv-00137 (CIT July 6, 2021) (“POSCO Remand Results”)), 11 to

argue that Commerce has articulated—and should have applied—a cost recovery

standard based on the POSCO’s reported prices, Pl.’s Reply at 6–7. In the POSCO

Remand Results, however, consistent with Commerce’s determination here, Commerce

considered cost recovery in view of KEPCO’s industrial tariff classification schedule as a

whole. See POSCO Remand Results at 10–11, 13; cf. I&D Mem. at 23 (noting

consistency between Commerce’s analysis in this review and the investigation).

       Nucor next points to Commerce’s statutory duties to consider whether “there is a

benefit to the recipient,” Pl.’s Mem. at 17 (quoting 19 U.S.C. § 1677(5)(E)), and to

“determine individual countervailable subsidy rates,” id. at 12 (quoting 19 U.S.C.

§ 1677f-1(e)); see also Pl.’s Reply at 10 (arguing that the statutory “provisions are

necessary context for Commerce’s rule” and relevant to its proper interpretation). Nucor

does not dispute that Commerce complied with the statute insofar as Commerce

calculated an individual subsidy rate for POSCO, though one resulting in a non-

measurable benefit. See Final Results, 87 Fed. Reg. at 6,843. Nucor argues, however,

that Commerce’s analysis failed to measure the existence of a benefit to POSCO (i.e.,

the recipient) and instead measured whether KEPCO was “able to recoup losses on

sales to some customers with excess returns on sales to other customers.” Pl.’s Mem.

at 17. Nucor appears to suggest that the GOK is “engag[ing] in harmful cross-

11Commerce issued the POSCO Remand Results pursuant to POSCO CAFC. See
POSCO Remand Results at 1 & n.1 (citation omitted). The CIT sustained Commerce’s
redetermination. POSCO v. United States, 46 CIT __, 556 F. Supp. 3d 1364 (2022),
appeal filed, Court No. 22-1525 (Fed. Cir. Nov. 23, 2022).
Court No. 22-00070                                                                    Page 15

subsidization” within the industrial tariff classification schedule. Id. POSCO, however,

paid the same tariff rates as other industrial users that purchased electricity during off-

peak, mid-peak, and on-peak hours. See POSCO’s Resp. NSA, Ex. NSA-2. 12

       Nucor further contends that comparing the prices paid by the respondent directly

to an underlying cost pursuant to a Tier 3 analysis is consistent with Commerce’s

approach in Tier 1 and Tier 2 analyses. See Pl.’s Mem. at 12. 13 Nucor argues that the

phrase “government price” in the Tier 1 and Tier 2 provisions indisputably “refers to the

government price actually paid by the respondent,” and, thus, the phrase must carry the

same meaning here. Pl.’s Reply at 5. It is not the meaning of the phrase that differs in

a Tier 3 analysis, however. What differs is Commerce’s method for determining the

adequacy of remuneration based on the government price. Commerce’s Tier 1 and Tier

2 analyses involve comparisons between the government price and either a market-

12  To prove its point, Nucor relies on Commerce’s benefit calculation for the industrial
tariff rates that did not recover costs and a rate of return. See Pl.’s Mem. at 17–18.
Nucor asserts that Commerce calculated benchmark prices that were “less than
KEPCO’s cost of supply for the industrial tariff class.” Id. at 18 (emphasis omitted).
Nucor, however, compared the lowest off-peak benchmark to the annual average unit
cost of supply. See id. (citing GOK’s Resp. NSA, Ex. E-18; Prelim. Calc. Mem., Attach.
II, ECF p. 630). Nucor thus failed to account for the fact that KEPCO’s annual average
unit of supply includes the cost to supply electricity during mid-peak and on-peak time
periods, for which Commerce calculated higher benchmarks. See id.
13 Nucor also relies on 19 C.F.R. § 351.503, Commerce’s regulation governing the

benefit for programs not addressed elsewhere, which provides that Commerce “will
consider a benefit to be conferred where a firm pays less for its inputs . . . than it
otherwise would pay.” Pl.’s Mem. at 12–13 (quoting 19 C.F.R. § 351.503(b)) (alteration
in original); see also Pl.’s Reply at 5. In addition to its lack of application here in light of
19 C.F.R. § 351.511, section 351.503(b) does not explain how Commerce is to
determine whether a firm has paid less for an input than it would have in the absence of
a government program, and thus does not address the issues presented in this case.
Court No. 22-00070                                                               Page 16

based price, or, when available to purchasers in the subject country, a world market

price, respectively. 19 C.F.R. § 351.511(a)(2)(i)–(ii). By contrast, Commerce conducts

a Tier 3 analysis when such comparators are unavailable, and that analysis necessarily

is directed at “whether the government price is consistent with market principles.” Id.

§ 351.511(a)(2)(iii).

       For these reasons, decisions cited by Nucor involving benchmark comparisons

for Tier 1 and Tier 2 analyses are inapposite. See Pl.’s Mem. at 13–14. 14 Nucor’s

citations to other Tier 3 determinations are also misplaced. See id. (citing Issues and

Decision Mem. for Coated Free Sheet Paper from Indonesia, C-560-821 (Oct. 17, 2007)

(“Paper from Indonesia Mem.”) at 23, https://access.trade.gov/Resources/frn/summary

/indonesia/E7-21040-1.pdf (last visited Apr. 28, 2023); Issues and Decision Mem. for

14 Citing U.S. Steel Corp. v. United States, 33 CIT 1935, 1944 n.10 (2009), Nucor
argues that “the broader financial performance of the government supplier” is an
impermissible method of determining the adequacy of remuneration. Pl.’s Mem. at 17.
U.S. Steel, a Tier 1 case, does not foreclose Commerce’s methodology in this Tier 3
case. In U.S. Steel, one plaintiff argued that Commerce should have used transaction
prices between the government of India and Japanese customers as a Tier 1
benchmark. 33 CIT at 1943. Commerce instead used prices at which the plaintiff
“purchased iron ore lumps from an unaffiliated private supplier outside of India as the
benchmark” for transactions between the plaintiff and the government supplier. Id. The
court sustained Commerce’s decision, reasoning that the proffered alternative did not
reflect “a market-determined price for the good resulting from actual transactions in
India.” Id. at 1944. The court also noted that the supplier, “as a government authority,
is free from normal profit-maximization pressures, and it may make pricing decisions
based on other, non-commercial criteria.” Id. (emphasis added). It is in this context that
the court rejected the argument that “overall profitability” of the government supplier
alone demonstrated that its prices were market-based. 33 CIT at 1944 n.10. Here,
however, in contrast to U.S. Steel, Commerce examined KEPCO’s costs, see Prelim.
Mem. at 31, and based its decision regarding the adequacy of remuneration on
KEPCO’s cost recovery for each relevant industrial classification, see id. at 32; I&D
Mem. at 22. Thus, Nucor’s reliance on U.S. Steel is misplaced.
Court No. 22-00070                                                              Page 17

Certain Cold-Rolled Steel Flat Prods. from the Russian Federation, C-821-823 (July 20,

2016) (“CRS from Russia Mem.”) at 19, https://access.trade.gov/Resources/frn

/summary/russia/2016-17937-1.pdf (last visited Apr. 28, 2023); Issues and Decision

Mem. for Supercalendered Paper from Canada, C-122-854 (Oct. 13, 2015) (“Paper from

Canada Mem.”) at 48, https://access.trade.gov/Resources/frn/summary/canada/2015-

26634-1.pdf (last visited Apr. 28, 2023)). Nucor cites these determinations to support

the view that a market principles analysis required Commerce to compare POSCO’s

rates to some other value. See Pl.’s Mem. at 13–14. In each case, however,

Commerce first found that the government price was not demonstrably set in

accordance with market principles and, in the pages cited by Nucor, derived a

benchmark in order to calculate the benefit conferred, much as Commerce did here for

certain electricity purchases. See Paper From Indonesia Mem. at 20, 23; CRS From

Russia Mem. at 18–19, 67–68; Paper from Canada Mem. at 48; cf. Prelim. Calc. Mem.

at 9.

        While Nucor might prefer Commerce to have used a different approach, Nucor’s

disagreement is not a basis to remand Commerce’s determination. “Commerce has

considerable prima facie leeway to make a reasonable choice within the permissible

range,” Nucor CAFC, 927 F.3d at 1255, and has done so here. Accordingly, the court

will sustain Commerce’s method of determining the adequacy of remuneration.
Court No. 22-00070                                                                Page 18

       II.        Whether Substantial Evidence Supports Commerce’s Determination

             A.      Parties’ Contentions

       Nucor contends that substantial evidence does not support Commerce’s

determination that certain electricity prices were consistent with market principles. Pl.’s

Mem. at 18. Nucor argues that Commerce should have rejected GOK pricing data

based on governmental control over the electricity market and instead collected

information directly from the GENCOs. Id. at 18–22. Nucor further contends that, even

accepting KEPCO’s reported cost of supply, record evidence demonstrates that

“KEPCO subsidizes large industrial users that can operate primarily during off-peak

hours” and recoups those losses on sales to users that “primarily operate during on-

peak hours.” Id. at 23; see also Pl.’s Reply at 15–16 (advancing similar arguments).

       The Government contends that Commerce’s determination is supported by

substantial evidence. Def.’s Resp. at 11–14. The Government further contends that

evidence cited by Nucor does “not undermine the substantiality of Commerce’s factual

findings.” Id. at 17.

       The Government of Korea contends that “[r]ecord evidence establishes that

KEPCO and the GENCOs cover their costs plus a sufficient rate of return” and, thus,

“Commerce’s conclusion is supported by substantial evidence.” Def.-Int.’s Resp. at 16–

17. The GOK further contends that Nucor cherry picks data points in its attempt to

demonstrate that prices paid by POSCO did not cover KEPCO’s costs. Id. at 19–20

Lastly, the Government of Korea contends that Nucor has not shown that KEPCO’s

prices operate to subsidize large industrial users. Id. at 21–23.
Court No. 22-00070                                                                Page 19

          B.     Analysis

       Nucor’s characterization of the Korean electricity market as “a government-

owned, -operated, and -directed monopoly,” Pl.’s Mem. at 19, fails to carry the day.

Commerce’s Tier 3 analysis exists to address circumstances such as those present in

the Korean electricity market. See Preamble, 63 Fed. Reg. at 65,348 (stating that, “in

situations where the government is clearly the only source available to consumers in the

country, we normally will assess whether the government price was established in

accordance with market principles”) (emphasis added). The key question is whether

substantial record evidence supports Commerce’s determination that the Korean

government’s electricity prices were consistent with market principles. Nucor’s

arguments fail to persuade the court to answer this question in the negative.

       Nucor first asserts that the values that comprise the system marginal price are

not determined “by the generators themselves” and, thus, Commerce should have

requested relevant information from the GENCOs. Pl.’s Mem. at 21.        Commerce found

it unnecessary to do so, however, explaining that “KEPCO is obligated to pay the

GENCOs for the total cost of generating electricity, including interest on loans, even if

KEPCO is not profitable.” I&D Mem. at 24 & n.93 (citing GOK’s Resp. NSA at 34).

Commerce further found that the GOK’s electricity “pricing is based on price-setting

methodologies that aim to ensure companies in the chain are able to cover their costs,

as well as a rate of profit.” Id. at 24–25 & n.95 (citing Prelim. Mem. at 27–32). Record

evidence indicates that each of the GENCOs covered its cost of electricity sales for the

POR. See GOK’s Suppl. Questionnaire Resp. (June 22, 2021) (“GOK’s 1SQR”), Ex. E-
Court No. 22-00070                                                                  Page 20

26, CR 282–90, 2nd Suppl. CJA Tab 2 (the GENCOs’ unconsolidated financial

statements); GOK’s Second Suppl. Questionnaire Resp. (July 21, 2021) (“GOK’s

2SQR”), Ex. E-41, CR 311–14, 316–20, PR 170–73, CJA Tab 10 (Parts 2 and 3) (the

GENCOs’ consolidated financial statements). 15

       Nucor next compares the annual average off-peak and mid-peak prices paid by

POSCO to KEPCO’s annual average cost of supply for the industrial rate classification.

See Pl.’s Mem. at 22 (citing POSCO’s NSA Resp., Ex. NSA-2; GOK’s NSA Resp., Ex.

E-18). Nucor seeks to support the validity of this comparison through the amount of

electricity purchased during the respective time periods. See id. (citing POSCO’s NSA

Resp., Ex. NSA-2). From this information, Nucor infers that “KEPCO has structured its

electricity prices to maintain subsidies to large industrial users like steel producers,

while recouping losses on those sales through higher prices to other users.” Pl.’s Mem.

at 22–23 (emphasis added). That inference, however, is unsupported; KEPCO’s annual

average unit cost includes the cost of supplying electricity during on-peak hours, for

which POSCO paid higher prices. See POSCO’s NSA Resp., Ex. NSA-2. Thus, to the

15 In the preliminary memorandum, Commerce cited to the GENCOs consolidated
financial statements. See Prelim. Mem. at 30 & n.203 (citing GOK’s 2SQR, Ex. E-41).
A review of those statements shows that while the GENCOs each earned a gross profit
for the POR, only three of six GENCOs were profitable overall. See GOK’s 2SQR, Ex.
E-41. Following the hearing, Nucor also placed the unconsolidated financial statements
on the record. See GOK’s 1SQR, Ex. E-26. Those statements likewise reflect a gross
profit for the POR for all six GENCOs. See id. Nucor did not, however, raise arguments
concerning any distinction between gross profit on sales and total profit either before
Commerce or in its moving brief before the court; thus, any such arguments are waived.
See Novosteel SA v. United States, 284 F.3d 1261, 1274 (Fed. Cir. 2002); see also 28
U.S.C. § 2637(d) (“[T]he Court of International Trade shall, where appropriate, require
the exhaustion of administrative remedies.”).
Court No. 22-00070                                                                 Page 21

extent Nucor argues that consumers of electricity during on-peak hours are subsidizing

users during off-peak and mid-peak hours, Nucor must include POSCO within that

group of on-peak consumers given POSCO’s purchase of electricity during this time as

well. See id.

       Nucor also references news reports discussing analyses by the Korean National

Assembly and the Korea Energy Economics Institute. Pl.’s Mem. at 23 (citing Cmts.

and Rebuttal Factual Info. on New Subsidy Allegation Questionnaire Resps. (May 11,

2021) (“Nucor’s Rebuttal Cmts.”), Exs. 5–6, CR 256–65, PR 129–38, CJA Tab 6); see

also Pl.’s Reply at 18. 16 Both reports claim that off-peak electricity prices should be

raised to cover the costs of meeting the demand for electricity that is provided by

higher-cost generators. See Nucor’s Rebuttal Cmts., Ex. 5 at ECF p. 272, Ex. 6 at ECF

pp. 282–83. The data underlying these assertions are not, however, on the record and

the reports do not address the information KEPCO provided for the industrial

classification as a whole, except to note that the “cost recovery rate of current industrial

electricity rates is higher than that of other contract types.” Id., Ex. 6 at ECF p. 283; see

also GOK’s Resp. NSA, Ex. E-18 (listing cost recovery rates for different contract

types). Additionally, Nucor’s focus on the comparative cost of providing electricity

during different time periods is another iteration of Nucor’s argument that Commerce

16 Nucor raised similar arguments in its case brief and Commerce acknowledged those
arguments. See Case Br. (Dec. 15, 2021) at 7–8 & nn.27, 30–31, CR 360, PR 221,
CJA Tab 15; I&D Mem. at 16 & n.40. While Commerce did not respond specifically to
the cited reports, they do not undermine Commerce’s determination such that a remand
is required for Commerce to address them explicitly.
Court No. 22-00070                                                           Page 22

should have used a different benchmark to measure the adequacy of remuneration, an

argument which the court has rejected. See supra, Discussion Section I.B.

                                     CONCLUSION

      For the reasons discussed above, the court will sustain Commerce’s Final

Results. Judgment will enter accordingly.

                                              /s/   Mark A. Barnett
                                              Mark A. Barnett, Chief Judge

Dated: April 28, 2023
      New York, New York