Samsung Elecs. Co. v. United States , 37 F. Supp. 3d 1320 ( 2014 )

Slip Op.
UNITED STATES COURT OF INTERNATIONAL TRADE
SAMSUNG ELECTRONICS CO., LTD.,
Plaintiff,
Before: Nicholas Tsoucalas,
v.
Senior Judge
UNITED STATES,
Court No. 13-00099
Defendant.
PUBLIC VERSION
WHIRLPOOL CORPORATION,
Defendant-Intervenor.
OPINION
[The Department of Commerce’s remand determination is sustained.]
Dated: 'HFHPEHU
Warren E. Connelly, J. David Park, and Nazak Nikakhtar, Akin Gump
Strauss Hauer & Feld LLP, of Washington, DC, for Plaintiff.
Phyllis L. Derrick, Akin Gump Strauss Hauer & Feld LLP, of
Washington, DC, consultant for Plaintiff.
Douglas G. Edelschick, Trial Attorney, Commercial Litigation
Branch, Civil Division, U.S. Department of Justice, of Washington,
DC, for defendant. With him on the brief were Joyce R. Branda,
Acting Assistant Attorney General, Jeanne E. Davidson, Director,
and Franklin E. White, Jr., Assistant Director. Of counsel on the
brief was Whitney Rolig, Attorney, Office of the Chief Counsel for
Trade Enforcement & Compliance, U.S. Department of Commerce, of
Washington, DC.
Jack A. Levy, John D. Greenwald, Myles S. Getlan, Thomas M. Beline,
and Jonathan M. Zielinski, Cassidy Levy Kent (USA) LLP, of
Washington, DC, for Defendant-Intervenor.
Tsoucalas, Senior Judge: This action involves a
challenge contesting subsidy calculations that were made by
Court No. 13-00099 Page 2
defendant Department of Commerce (“Commerce”) in the final results
of a countervailing duty (“CVD”) investigation covering large
residential washers (“LRWs”) from the Republic of Korea. See Large
Residential Washers From the Republic of Korea: Final Affirmation
Countervailing Duty Determination, 77 Fed Reg. 75,975 (Dec. 26,
2012)(“Final Determination”); See also Issues and Decision
Memorandum for the Final Determination in the CVD Investigation of
LRWs from the Republic of Korea (Dec. 18, 2012) (“IDM”). Before
the court are the Final Results of Redetermination Pursuant to
Court Order, ECF No. 50 (Apr. 11, 2014) (“Remand Results”), filed
by Commerce pursuant to Samsung Electronics Co., Ltd. v. United
States, 38 CIT __, 973 F.Supp.2d 1321 (2014)(“Samsung I”). The
relevant facts and procedural history are set forth in Samsung I.
Familiarity with the court’s decision in Samsung I is presumed.
Plaintiff Samsung Electronics Co., Ltd. (“Samsung” or
“Plaintiff”) contests the Remand Results. Defendant-intervenor
Whirlpool Corporation supports Commerce’s findings in its Remand
Results. For the reasons discussed below, the court sustains the
Remand Results.
JURISDICTION and STANDARD OF REVIEW
The Court has jurisdiction pursuant to 28 U.S.C.
§ 1581(c) (2006) and section 516A(a)(2)(B)(I) of the Tariff Act of
Court No. 13-00099 Page 3
1930 (the “Act”), 1 as amended, 19 U.S.C. § 1516a(a)(2)(B)(I)
(2006). The court will uphold Commerce’s remand redetermination
in a CVD investigation unless it is “unsupported by substantial
evidence on the record, or otherwise not in accordance with law.”
19 U.S.C. § 1516a(b)(1)(B)(I).
Additionally, “an agency's interpretation of its own
regulations is entitled to broad deference from the courts.”
Cathedral Candle Co. v. U.S. Int’l Trade Comm’n, 400 F.3d 1352,
1363 (Fed. Cir. 2005).
Discussion
In the original proceeding, Commerce determined that the
Government of Korea (“GOK”) provided countervailable subsidies to
Samsung, warranting the application of a 1.85% ad valorem CVD rate.
See Final Determination, 77 Fed. Reg. at 75,977. Of particular
relevance to this instant action, Commerce found that Samsung’s
tax credits under the Republic of Korea Restriction of Special
Taxation Act (RSTA) Article 10(1)(3) were de facto specific
because Samsung received a disproportionately large share of the
total benefit the GOK conferred under this program. See IDM at
1 Further citations to the Tariff Act of 1930 are to the relevant
portions of Title 19 of the U.S. Code, 2006 edition, and all
applicable amendments thereto.
Court No. 13-00099 Page 4
11–13. The GOK provides RSTA Art. 10(1)(3) tax credits to
companies making eligible investments in research and human
resources development (“R&D”). See Remand Results at 3–4.
Specifically, Commerce determined that Samsung received [[ ]]% of
the total benefit the GOK conferred under RSTA Art. 10(1)(3), while
the average beneficiary received [[ ]]%. See Calculations for
Samsung (Dec. 18, 2012), Confidential Rec. 196, Att. 7 at 1.
Under the Act, “a countervailable subsidy is a
subsidy . . . which is specific as described in [19 U.S.C.
§ 1677(5A)].” 19 U.S.C. § 1677(5)(A). Where the subsidy in
question is a domestic subsidy, as is the case here, Commerce may
find that the subsidy is specific as a matter of law or as a matter
of fact. 19 U.S.C. § 1677(5A)(D).
A domestic subsidy is specific in fact if “[a]n
enterprise or industry receives a disproportionately large amount
of the subsidy.” 19 U.S.C. § 1677(5A)(D)(iii)(III). The Court of
Appeals for the Federal Circuit held that “determinations of
disproportionality . . . are not subject to rigid rules, but rather
must be determined on a case-by-case basis taking into account all
the facts and circumstances of a particular case.” AK Steel Corp.
v. United States, 192 F.3d 1367, 1385 (Fed. Cir. 1999).
Accordingly, the court seeks to determine whether Commerce’s
Court No. 13-00099 Page 5
disproportionality finding in its Remand Results was reasonable
given the facts of the instant case. Samsung I, 973 F.Supp.2d at
1328.
In Samsung I, the Court remanded the Final Determination
with instructions to revisit its determination regarding the
disproportionality of Samsung’s Art. 10(1)(3) tax credits.
Samsung I, 973 F.Supp.2d at 1328. The Court held that “Commerce’s
determination was unreasonable because it did not adequately
address how Samsung’s Art. 10(1)(3) tax credit was
disproportionately large based on the facts in the case.” Id.
The Court stated that “[o]n remand, Commerce is not barred from
comparing Samsung’s share of the total benefit to the share an
average beneficiary received, but it must explain, with specific
reference to the facts of this case, why such a comparison is
indicative of disproportionality.” Id.
In its Remand Results, Commerce continued to find that
Samsung received a disproportionately large amount of the benefits
under the RSTA Art. 10(1)(3). See Remand Results at 4–5. On
remand, Commerce: (1) clarified its findings with respect to
whether RSTA Art. 10(1)(3) conferred benefits pursuant to a
“standard pricing mechanism”; (2) analyzed Samsung’s share of
benefits under Art. 10(1)(3) relative to the amount received by
Court No. 13-00099 Page 6
the other 99 largest recipients of benefits under the program; and
(3) analyzed Samsung’s tax savings under RSTA Art. 10(1)(3)
relative to the tax savings that the other 99 largest recipients
received in relation to their total tax liability.
I. Commerce Reasonably Concluded that RSTA Art. 10(1)(3) Does
Not Confer Benefits According to a Standard Pricing
Mechanism
Plaintiff argues that Commerce “continues to erroneously
rely on the very same method for determining disproportionality
that this Court initially found to be unreasonable ‘because it did
not adequately address how Samsung's Art. 10(1)(3) tax credit was
disproportionately large based on the facts in the case.’” Pl.’s
Br. at 1 (citing Samsung I, 973 F.Supp.2d. at 1328). Plaintiff
insists that Commerce incorrectly distinguishes the tax credit in
the instant case from the “standard pricing mechanism” which
conferred a benefit based on “usage levels” found in the
electricity benefit programs considered in Bethlehem Steel v.
United States. Id. at 4 (citing Bethlehem Steel v. United States,
25 CIT 307, 322, 140 F. Supp. 2d 1354, 1369 (2001), amended by, 25
CIT 627, 155 F.Supp.2d 7071 (2001)). Plaintiff also argues that
the fact that the amount a beneficiary may claim on their tax
returns differs from the amount of tax credits that beneficiary
Court No. 13-00099 Page 7
has earned “does not destroy the proportionality” of the subsidy.
Id. at 6.
Plaintiff’s arguments are unconvincing. In Samsung I,
the court noted that Commerce has previously applied the concept
of a “standard pricing mechanism” with regards to analyzing whether
a company received a disproportionate amount of benefits under to
a subsidy. See Final Affirmative CVD Determinations: Pure
Magnesium and Alloy Magnesium From Canada, 57 Fed. Reg. 30,946(Jul. 13, 1992); See also Samsung I, 973 F.Supp.2d at 1326–27.
The court also noted that in Bethlehem Steel v. United States, the
Court found that it was reasonable for Commerce to consider an
enterprise or industry’s use of a subsidy program in determining
whether the benefit was proportionate. See Bethlehem Steel, 25
CIT at 322, 140 F. Supp. 2d at 1369. In that case, the Korean
steel industry received 51% of the discounts the GOK awarded under
an electricity rate reduction subsidy. Id. Nevertheless, Commerce
found that the benefit was proportionate because high electricity
usage was an inherent characteristic of the steel industry, all
recipients received an identical rate reduction based on a standard
mechanism, and the subsidy was not designed to benefit any one
industry over another. See id. at 321–23, 140 F. Supp. 2d at 1368–
70.
Court No. 13-00099 Page 8
Subsequently, on remand Commerce effectively
distinguished Art. 10(1)(3) from the standard pricing mechanism in
Bethlehem Steel. See id. at 322, 140 F. Supp. 2d at 1369. In
Samsung I, the Court was concerned with the notion that “[i]n
virtually every program that confers benefits based on usage levels
one or more groups will receive a greater share of the benefits[.]”
Samsung I, 973 F.Supp.2d at 1326 (citing Bethlehem Steel, 25 CIT
at 322, 140 F. Supp. 2d at 1369). This concern stemmed in part
from the fact that in the original proceeding, Commerce’s analysis
of the structure of Art. 10(1)(3) was limited to the following:
the GOK calculates a company's Art. 10(1)(3) tax credit in one of
two ways, either 40% of the difference between eligible
expenditures in the tax year and the average of eligible
expenditures in the prior four years, or a maximum of 6% of
eligible expenditures in the current tax year. See LRWs From the
Republic of Korea: Preliminary Affirmative CVD Determination and
Alignment of Final Determination With Final Antidumping
Determination, 77 Fed.Reg. 33,181, 33,187 (Jun. 5, 2012). Commerce
addressed the Court’s concern in its Remand Results by providing
evidence supporting its finding that RSTA Art. 10(1)(3) tax credits
are not based strictly on the basis of a company’s qualifying
investments in a given year. Remand Results at 6–7. Specifically,
Court No. 13-00099 Page 9
Commerce found that companies were permitted to claim RSTA Art.
10(1)(3) tax credits by “using one of two formulas: as a percentage
of the difference between qualifying research and development
expenses in the current tax year and the average of qualifying
expenditures from the previous four years, or using a maximum
percentage of total qualifying research and development expenses
for the current tax year.” Id. at 6. Commerce also found the tax
credits a company was eligible to receive varied due to the fact
that “RSTA Article 10(1)(3) establishes different rates for small-
and medium-sized enterprises [(“SMEs”)] versus larger companies.”
Id. at 7. Additionally, Commerce determined that, “under the first
formula, SMEs may claim up to 50 percent, while larger corporations
may claim only 40 percent; under the second formula, SMEs may claim
up to 25 percent, while larger corporations are limited to a
maximum of six percent.” Id. at 7-8. Based on these variations,
Commerce reasonably distinguished the subsidy program in the
instant case from the program present in Bethlehem Steel, which
conferred benefits based solely on a company’s qualifying
expenditures. Because under RSTA Art. 10(1)(3) companies with
identical amounts of eligible investments could receive different
amounts of the tax credits, Commerce reasonably concluded based on
the facts in the instant case that RSTA Art. 10(1)(3) tax credits
Court No. 13-00099 Page 10
are unlike the benefits conferred in Bethlehem Steel. See
Bethlehem Steel, 25 CIT at 321–23, 140 F. Supp. 2d at 1368–70;
See also Remand Results at 8.
Commerce also provided further data demonstrating that
it is inappropriate to classify RSTA Art. 10(1)(3) as a standard
pricing mechanism through its analysis of the GOK’s “Minimum Tax
Scheme.” Remand Results at 8. Commerce found that the GOK’s
Minimum Tax Scheme limits the amount of tax credits a beneficiary
may claim under the RSTA, effectively creating a “tax ceiling.”
Id.; See also Def.’s App. Accompanying Resp. to Pl.’s Comments
Concerning Remand Results, GOK’s May 30, 2014 Resp. at 2–4.
Specifically, Commerce determined that Samsung only claimed
[[ ]]% of its RSTA Art. 10(1)(3) tax credits earned in 2010,
while deferring the remainder. Remand Results at 8. As discussed
above, because a company’s RSTA Art. 10(1)(3) tax credits are based
on a number of variables, such as the formula used, prior years
eligible investments, and the application of Korea’s Minimum Tax
Scheme, Commerce reasonably concluded that RSTA Art 10(1)(3) did
not qualify as a “standard pricing mechanism” which is directly
proportionate to a company’s qualifying expenditures. See
Bethlehem Steel, 25 CIT at 321–23, 140 F. Supp. 2d at 1368–70;
See also Remand Results at 7–9.
Court No. 13-00099 Page 11
II. Commerce Reasonably Determined that Samsung Received a
Disproportionate Amount of the RSTA Art. 10(1)(3) Benefits
Plaintiff argues that Commerce relied on exactly the
same methodology in its Remand Results, except here Commerce chose
to alter the following: (1) “instead of using the total tax credits
awarded to all 11,764 companies, [Commerce] used the tax credit
awarded to just 100 companies;” (2)”instead of dividing the total
credit by the total number of recipients to derive the average
percentage of the total benefit received by each company,
[Commerce] divided the tax credits received by 99 to get the
average percentage credit received by each of the 99 companies.”
Pl.’s Br. at 12–13. Since the methodology used by Commerce was
“identical in concept” to the original methodology, Plaintiff
therefore insists that Commerce’s findings are insufficient “as a
matter of fact or law to demonstrate disproportionality for the
reasons that this court has previously found.” Id. at 14.
Moreover, Plaintiff argues that Commerce improperly used
taxable income as an appropriate variable of comparison between
Samsung and the 99 companies because “the investments that are
eligible for RSTA Art. 10(1)(3) tax credit are not a function of
taxable income.” See id. at 14-15. Plaintiff notes that “the
ratio of each company’s R&D expenses that were eligible for tax
credit to its total expenses,” is a better variable of comparison
Court No. 13-00099 Page 12
because such ratio would “identify those companies that were
comparable in terms of their investment strategies.” Id. at 15.
Additionally, Plaintiff contends that Commerce improperly equated
taxable income with size of company. Id.at 14–15. Plaintiff
argues that Commerce should have compared companies similar to
Samsung on the basis of “gross sales revenue or, alternatively, by
asset value or number of employees,” as opposed to using “taxable
corporate income [which] is a direct function of gross revenue,
permissible adjustments to revenue, and deductible expenses.” Id.
at 16. Finally, Plaintiff insists that taxable income as a
variable is “unrelated” to disproportionately. Id. at 17.
The court is not persuaded by Plaintiff’s arguments. As
discussed above, in Samsung I, the court held that Commerce failed
to “adequately address how Samsung's Art. 10(1)(3) tax credit was
disproportionately large based on the facts in the case.” Samsung
I, 973 F.Supp.2d at 1328. The Court noted that “[o]n remand,
Commerce is not barred from comparing Samsung’s share of the total
benefit to the share an average beneficiary received, but it must
explain, with specific reference to the facts of this case, why
such a comparison is indicative of disproportionality.” Id.
In its Remand Results, Commerce continued to find that
Samsung received [[ ]]% of the total benefit the GOK conferred
Court No. 13-00099 Page 13
under RSTA Art. 10(1)(3), while the average beneficiary received
[[ ]]%. Remand Results at 2. Additionally, Commerce first
obtained data from the GOK allowing it to compare Samsung’s total
benefit under the subsidy with the 100 largest companies who
received the benefit by taxable income. Id. at 9–11. In doing
so, Commerce determined that “Samsung accounted for approximately
[[ ]]% of RSTA Art. 10 tax credits granted to the top 100
recipients, and by its credit was equal to [[ ]]% of the credits
received by the other 99 largest recipients.” Id. at 10-11.
Secondly, Commerce conducted an analysis of the data it
received from the GOK in order to allow it to account for company
size and total tax liability. This analysis allowed Commerce to
compare Samsung’s reduction in taxable income with the remaining
99 companies. Commerce found that the amount of RSTA Art. 10(1)(3)
tax credits Samsung received reduced its tax liability by
[[ ]]%. Id. at 14. Conversely, the tax credits reduced the
other 99 companies’ tax liability by [[ ]]%. Id. at 14.
Ultimately, Commerce found that Samsung received over [[ ]]
times greater amount of tax benefits than the other companies
analyzed. Id. at 14.
The court finds that Commerce’s Remand Results
reasonably addressed its concerns in Samsung I. At best, the
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Plaintiff’s arguments amount to another reasonable interpretation
of the data before the court. See Matsushita Elec. Indus. Co. v.
United States, 750 F.2d 927, 933 (Fed. Cir. 1984)(“[T]he
possibility of drawing two inconsistent conclusions from the
evidence does not prevent an administrative agency's finding from
being supported by substantial evidence.”). Accordingly, based on
the facts of the instant case, Commerce reasonably concluded that
Samsung received a disproportionately large benefit of the RSTA
Art. 10(1)(3) tax benefit.
Conclusion
For the foregoing reasons, Commerce’s remand
redetermination is sustained in its entirety. Judgment will be
entered accordingly.
/s/ Nicholas Tsoucalas
Nicholas Tsoucalas
Senior Judge
Dated: 'HFHPEHU
New York, New York