BGH Edelstahl Siegen GmbH v. United States

663 F.Supp.3d 1378

BGH EDELSTAHL SIEGEN GMBH, Plaintiff, v. UNITED STATES, Defendant,andEllwood City Forge Company, et al., Defendant-Intervenors.

Slip Op. 23-159 Court No. 21-00080

United States Court of International Trade

November 14, 2023

Marc E. Montalbine, deKieffer & Horgan, PLLC, of Washington, DC, for plaintiff BGH Edelstahl Siegen GmbH. Also on the brief were Gregory S. Menegaz, Alexandra H. Salzman, and Merisa A. Horgan.

Kelly M. Geddes, Trial Attorney, Sarah E. Kramer, Trial Attorney, and Patricia M. McCarthy, Director, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, DC, for defendant United States. Also on the brief was Brian M. Boynton, Principal Deputy Assistant Attorney General. Of counsel on the brief was Ayat Mujais, Attorney, and Joseph Grossman, Attorney, Office of the Chief Counsel for Trade Enforcement & Compliance, U.S. Department of Commerce.

Nicole Brunda, Cassidy Levy Kent (USA) LLP, of Washington, DC, for defendant intervenors Ellwood City Forge Co., Ellwood National Steel Co., Ellwood Quality Steels Co., and A. Finkl & Sons. Also on the brief were Thomas M. Beline, Jack A. Levy, Myles S. Getlan, and Chase J. Dunn.

OPINION AND ORDER

Kelly, Judge:

Before the Court is the U.S. Department of Commerce's ("Commerce") remand redetermination pursuant to the Court's second remand order, see BGH Edelstahl Siegen GmbH v. United States, 639 F. Supp. 3d 1237 (Ct. Int'l Trade 2023) ("BGH II"), on Commerce's final determination in its countervailing duty ("CVD") investigation of forged steel fluid end blocks ("fluid end blocks") from the Federal Republic of Germany ("FRG"). See Final Results of Redetermination Pursuant to Court Remand, C-428-848 (Aug. 7, 2023), ECF No. 60-1; see generally [Fluid End Blocks] from the People's Republic of China, [FRG], India, and Italy, 86 Fed. Reg. 7,535 (Dep't Commerce Jan. 29, 2021) ([CVD] orders, and am. Final affirmative [CVD] determination for the People's Republic of China) and accompanying Issues and Decision Mem., C-428-848, PD 293, bar code 4062827-01 (Dec. 7, 2020), ECF No. 15-2; [Fluid End Blocks] from the People's Republic of China, [FRG], India, and Italy, 86 Fed. Reg. 10,244 (Dep't Commerce Feb. 19, 2021) (correction to [CVD] orders). For the following reasons, the Court remands Commerce's redetermination.

BACKGROUND

The Court presumes familiarity with the facts of this case as set out in its previous opinions ordering remand to Commerce, see BGH Edelstahl Siegen GmbH v. United States, 600 F. Supp. 3d 1241, 1248 (Ct. Int'l Trade 2022) ("BGH I"); BGH II, 639 F. Supp. 3d at 1237, and now recounts only those facts relevant to the court's review of the Remand Results. Commerce selected plaintiff BGH Edelstahl Siegen GmbH ("BGH") during its CVD investigation of fluid end blocks from the FRG between the period of January 1, 2018 to December 31, 2018. Resp't Selection Mem. at 1, C-428-848, PD 54, bar code 3938815-01 (Feb. 4, 2020). The investigation concluded that the Government of Germany offered countervailable subsidies through multiple programs, including the Konzessionsabgaben-verordung Program ("KAV Program").¹ Issues and Decision Mem. at 6-8, C-428-848, PD 293, bar code 4062827-01 (Dec. 7, 2020), ECF No. 15-2; see also Post-Prelim. Analysis [CVD] Investigation: [Fluid End Blocks] from [FRG] at 6-19, C-428-848, PD 271, bar code 4043279-01 (Oct. 21, 2020); Decision Mem. Prelim. Affirmative Determination [CVD] Investigation of [Fluid End Blocks] from [FRG] at 19-27, C-428-848, PD 220, bar code 3975458-01 (May 18, 2020). BGH filed its complaint and sought judgment on the agency record, challenging Commerce's final determination. Compl., Mar. 29, 2021, ECF No. 7; [BGH] Mot. J. Agency R., Oct. 26, 2021, ECF No. 21. The Court sustained in part and remanded in part Commerce's final determination after briefing. BGH I, 600 F. Supp. 3d at 1248. The Court held that Commerce's finding that the KAV Program was a specific countervailable subsidy as a matter of law was unsupported by the record because Commerce did not explain how the program limits usage to certain industries or enterprises and failed to consider its economic and horizontal properties and application. Id. at 1269. The Court also remanded Commerce's CVD rate calculation for the Electricity Tax Act and the Energy Tax Act. Id. at 1258.

Commerce filed Remand Results in January 2023. After briefing was complete, the Court sustained in part and remanded in part. BGH II, 639 F. Supp. 3d at 1239. Specifically, the Court again found that Commerce's classification of the KAV Program as de jure specific was insufficient in light of the record. Id. at 1243. The Court remanded for further explanation or reconsideration as to the economic and horizontal nature of the subsidy. Id. at 1244. The Court sustained Commerce's CVD rate calculation for both the Electricity Tax Act and the Energy Tax Act. Id. at 1242.

Commerce filed its Second Remand Results on August 7, 2023. In the second redetermination, Commerce continues to find the KAV Program to be a specific countervailable subsidy. Second Remand Results at 2. BGH opposes Commerce's redetermination, asserting that Commerce failed to support its findings that the KAV Program constitutes a specific subsidy in light of the second remand order, the plain wording of the statute, and legislative history. [BGH] Comments Opp. [Second Remand Results] at 1-12, Sept. 6, 2023, ECF No. 63 ("BGH Comments"). Defendant and Defendant-Intervenors contend that the court should sustain Commerce's second remand redetermination because the KAV Program is specific as a matter of law due to its vertical eligibility criteria and access limitations to special contract customers. Second Remand Results at 2; Def.-Int.'s Reply on [Second Remand Results] at 2-6, July 19, 2023, ECF No. 62-4 ("Def-Int. Reply").

JURISDICTION AND STANDARD OF REVIEW

This Court has jurisdiction pursuant to section 516A of the Tariff Act,² as amended, 19 U.S.C. § 1516a(a)(2)(A)(i)(II) (2018), and 28 U.S.C. § 1581(c), which grant the Court authority to review actions contesting the final determination in an administrative review of a CVD order. "The court shall hold unlawful any determination, finding, or conclusion found . . . to be unsupported by substantial evidence on the record, or otherwise not in accordance with law." 19 U.S.C. § 1516a(b)(1)(B)(i). "The results of a redetermination pursuant to court remand are also reviewed for compliance with the court's remand order." Xinjiamei Furniture (Zhangzhou) Co. v. United States, 968 F. Supp. 2d 1255, 1259 (Ct. Int'l Trade 2014) (quotation marks omitted).

DISCUSSION

In its second remand redetermination, Commerce again argues that the KAV Program is specific as a matter of law. Second Remand Results at 5. Specifically, Commerce contends that the FRG has "limited" the KAV Program to a subset of enterprises and as a result the KAV Program is specific as a matter of law. Second Remand Results at 5. BGH argues that Commerce's explanation for its finding is insufficient to demonstrate specificity. BGH Comments at 1-4, 9-11. For the following reasons, the Court remands Commerce's second remand redetermination for further explanation or reconsideration.

A domestic subsidy may be countervailable either because it is specific as a matter of law (de jure specific) or specific as a matter of fact (de facto specific). 19 U.S.C. § 1677(5A)(D). Congress provided statutory guidelines³ to identify when a subsidy is (i) specific as a matter of law (ii) not specific as a matter of law, and (iii) specific as a matter of fact. Id. The guidelines identify a de jure specific subsidy as one that "expressly limits access to the subsidy to an enterprise or industry."⁴ Id. § 1677(5A)(D)(i); see also Statement of Administration Action for the Uruguay Round Agreements Act, H.R. Rep. No. 103-316 (1994), as reprinted in 1994 U.S.C.C.A.N. 4040, 4242 ("SAA"). "Thus, a subsidy is de jure specific when the authority providing the subsidy, or its operating legislation, expressly limits access to the subsidy to a business or industry, or to a group of businesses or industries." Risen Energy Co. v. United States, No. 22-00231, 658 F.Supp.3d 1364, 1373 (Ct. Int'l Trade Oct. 11, 2023); See 19 U.S.C. § 1677(5A)(D)(i).

The second guideline makes clear that the existence of criteria—that limits access—alone is insufficient to render a subsidy specific as a matter of law if the criteria is horizontal in application and economic in nature. See 19 U.S.C. § 1677(5A)(D)(ii); SAA at 4243. If objective criteria are publicly and clearly set forth, and those criteria provide for automatic eligibility and are strictly followed, a subsidy awarded pursuant to those criteria is not specific as a matter of law. 19 U.S.C. § 1677(5A)(D)(ii). The SAA's explication of permissible criteria makes clear that criteria may create objective categories of industries or enterprises which may benefit from the subsidy to the exclusion of others. SAA at 4243. The SAA provides:

Finally, the objective criteria or conditions must be neutral, must not favor certain enterprises or industries over others, and must be economic in nature and horizontal in application, such as the number of employees or the size of the enterprise.

Id. Criteria based on size or the number of employees could exclude entire categories of enterprises and industries, but such criteria would not render the subsidy de jure specific because it is horizontal (operating throughout the economy), and is economic in nature. Id.

Moreover, the SAA reveals that a subsidy will not be deemed de jure specific simply because it is available to fewer than all enterprises or industries. Id. at 4242. Indeed, the SAA elaborates that there is no "precise mathematical formula" for Commerce to invoke that can calculate when a number of enterprises or industries is "sufficiently small" to be specific as a matter of law.⁵ Id. The SAA's rejection of a ...