Samsung Electronics Co. v. United States , 973 F. Supp. 2d 1321 ( 2014 )

Slip Op. 14-
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
:
and :
:
WHIRLPOOL CORPORATION, :
:
Defendant-Intervenor. :
:
OPINION and ORDER
[Plaintiff’s motion for judgment on the agency record is granted in
part and denied in part.]
Dated:
Warren E. Connelly, Akin Gump Strauss Hauer & Feld LLP, of
Washington, DC, for plaintiff. With him on the brief were J. David
Park, Jarrod M. Goldfeder, Nazakhtar Nikakhtar, and Phyllis L.
Derrick.
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 Stuart F. Delery,
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, Cassidy Levy Kent USA LLP, of Washington, DC, for
defendant-intervenor. With him of the brief were John D.
Greenwald, Myles S. Getlan, Matthew Frumin, Thomas M. Beline, and
Jonathan M. Zielinski.
Tsoucalas, Senior Judge: Plaintiff Samsung Electronics
Co., Ltd. (“Samsung”), moves for judgment on the agency record
Court No. 13-00099 Page 2
contesting defendant United States Department of Commerce’s
(“Commerce”) determination in Large Residential Washers From the
Republic of Korea: Final Affirmative Countervailing Duty
Determination, 77 Fed. Reg. 75,975 (Dec. 26, 2012) (“Final
Determination”). Commerce and defendant-intervenor Whirlpool
Corporation, oppose Samsung’s motion. For the following reasons,
Samsung’s motion is granted in part and denied in part.
BACKGROUND
In January 2012, Commerce initiated a countervailing duty
(“CVD”) investigation of large residential washers (“LRWs”) from
Korea. See LRWs From the Republic of Korea: Initiation of CVD
Investigation, 77 Fed. Reg. 4279 (Jan. 27, 2012). The period of
investigation (“POI”) covered the 2011 calendar year. Id. Samsung
was one of three companies Commerce investigated. Id. at 4281.
In the Final Determination, Commerce found 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 the instant action, Commerce found that Samsung
received countervailable benefits through its receipt of tax
credits under the Restriction of Special Taxation Act (“RSTA”)
Articles 10(1)(3) and 26. Also at issue is Commerce’s calculation
of the sales value it used to determine Samsung’s ad valorem rate.
Under RSTA Art. 10(1)(3), the GOK provides a tax credit
Court No. 13-00099 Page 3
to companies making eligible investments in research and human
resources development (“R&D”). 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) (“Preliminary Determination”).
The GOK introduced Art. 10(1)(3) in 1982 and during the POI
approximately 11,000 companies received tax credits under the
program. Id. 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. Id. Commerce found
that Samsung’s Art. 10(1)(3) tax credits were de facto specific
because Samsung received a disproportionately large share of the
total benefit the GOK conferred under this program. See Issues and
Decision Memorandum for the Final Determination in the CVD
Investigation of LRWs from the Republic of Korea at 11–13 (Dec. 18,
2012) (“IDM”). 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.
196,1 Att. 7 at 1.
1
Hereinafter, documents in the public record will be
designated “PR” and documents in the confidential record designated
Court No. 13-00099 Page 4
Under RSTA Art. 26, the GOK provides a tax credit for
eligible investments in “business assets out of overcrowding
control region of the Seoul Metropolitan Area.” Preliminary
Determination, 77 Fed. Reg. at 33,188. Companies can receive a tax
credit of 7% of their eligible investments. Id. Commerce found
that Samsung’s Art. 26 tax credits were “regionally specific”
because the GOK “established a designated geographical region to
which th[e] program is available.” Id.
Finally, the ad valorem rate of 1.85% for the Final
Determination was greater than the 1.20% rate Commerce calculated
for the Preliminary Determination. See Final Determination, 77
Fed. Reg. at 75,977; Preliminary Determination, 77 Fed. Reg. at
33,193. For the Preliminary Determination, Commerce calculated the
ad valorem rate using Samsung’s total worldwide sales value.2 See
Calculations for Samsung for the Preliminary Determination
Memorandum (May 29, 2012), CR 114 at 2. However, Commerce adjusted
the sales value in the Final Determination, excluding revenue from
the sale of merchandise produced by Samsung’s foreign subsidiaries
and from non-production related activities. Id. These adjustments
“CR” without further specification except where relevant.
2
Commerce calculates the ad valorem CVD rate by dividing the
“amount of the benefit” the respondent received by the sales value
of the product or products to which Commerce attributes the
subsidy. 19 C.F.R. § 351.525(a). Accordingly, in the ad valorem
rate calculation, the benefit the respondent received is the
numerator and the sales value is the denominator.
Court No. 13-00099 Page 5
reduced the sales value from approximately [[ ]] Korean
Won to approximately [[ ]] Korean Won and, as a result,
increased Samsung’s ad valorem CVD rate. See Calculations for
Samsung (Dec. 18, 2012), CR 196 at 2.
Samsung now moves for judgment on the agency record
contesting several aspects of the Final Determination. See Pl.’s
Mem. Supp. R. 56.2 Mot. J. Agency. R. at 1–2. Oral Argument was
held on January 30, 2014. Oral Argument, Samsung Electronics Co.
v. United States, Ct. No. 13-00099 (Ct. Int’l Trade Jan. 30, 2014).
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
1930 (the “Act”),3 as amended, 19 U.S.C. § 1516a(a)(2)(B)(I)
(2006). The court will uphold Commerce’s final determination 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).
3
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 6
DISCUSSION
The following issues are before the court: (1) Whether
Commerce properly determined that Samsung received specific
benefits under RSTA Arts. 10(1)(3) and 26; (2) Whether Commerce
properly determined that Samsung failed to demonstrate that the
benefits it received were tied to products other than LRWs; and (3)
Whether Commerce properly excluded certain sources of revenue from
Samsung’s sales value when calculating the ad valorem CVD rate.
I. Specificity
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).
Here, as noted above, Commerce found that Samsung’s Art.
10(1)(3) tax credits were specific as a matter of fact because
Samsung received a “disproportionately large amount” of the total
benefit the GOK conferred under that program. See IDM at 34.
Additionally, Commerce found that Samsung’s Art. 26 tax credits
were regionally specific because the GOK limited benefits to
companies that made investments within a “designated geographical
area.” Id. at 46. Samsung contests both of these findings.
Court No. 13-00099 Page 7
A. RSTA Article 10(1)(3)
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 (“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 disproportionality finding was reasonable given the
facts of the instant case. Id.Here, Commerce determined disproportionality by comparing
“the average amount of the tax credits provided to companies in
Korea that used [the Art. 10(1)(3)] program during 2010, to the
actual amount of the tax credits received by Samsung . . . in that
same year.” IDM at 35. Commerce found that Samsung received a
disproportionate benefit because it received [[ ]]% of the total
benefit the GOK conferred under Art. 10(1)(3), while the average
recipient received [[ ]]%. See CR 196, Att. 7 at 1.
Samsung argues that its Art. 10(1)(3) tax credits were
large but proportionate to its eligible R&D expenditures.4 See
4
Alternatively, Samsung argues that Commerce should have
measured disproportionality by comparing the use of Art. 10(1)(3)
Court No. 13-00099 Page 8
Pl.’s Br. at 9. Samsung argues that Commerce simply equated the
larger benefit with disproportionality, but failed to provide any
additional evidence indicating that the benefit was
disproportionate. Id. According to Samsung, the Art. 10(1)(3) tax
credits were based on a standard mechanism as each participant
received the same benefit relative to its eligible investments.
Id. Samsung contends that both case precedent and prior
administrative determinations indicate that a large benefit is
proportionate where the respondent receives the same benefit as all
other beneficiaries relative to its expenditures. Id. at 10–13.
There is no dispute that Samsung’s share of the Art.
10(1)(3) tax credits was larger than that of the average
beneficiary. See CR 196, Att. 7 at 1. The issue is whether this
comparison was sufficient to support a finding of
disproportionality given the facts of the instant case. See AK
Steel, 192 F.3d at 1385. The court finds that it was not.
In focusing solely on Samsung’s relative share of the
total benefit, Commerce failed to consider aspects of the Art.
10(1)(3) program relevant to disproportionality. Specifically, the
tax credits by other Korean companies with the use of Art. 10(1)(3)
credits by its Home Appliance Unit alone. Pl.’s Br. at 10 n.9.
Samsung raises this argument in a footnote and does not identify
any authority supporting its position. See id. Accordingly, this
argument is waived. See SmithKline Beecham Corp. v. Apotex Corp.,
439 F.3d 1312, 1320 (Fed. Cir. 2006) (“[A]rguments raised in
footnotes are not preserved”).
Court No. 13-00099 Page 9
record indicated that the GOK confers Art. 10(1)(3) tax credits
based on usage and pursuant to a standard pricing mechanism. See
CR 40 at 108. Accordingly, the GOK did not exercise discretion in
awarding Samsung’s tax credit, but simply conferred the benefit
relative to the eligible expenditures. Id.This Court previously 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. In
Bethlehem Steel v. United States, the Korean steel industry
received 51% of the total benefit the GOK awarded under an
electricity rate reduction subsidy. See 25 CIT 307, 322, 140 F.
Supp. 2d 1354, 1369 (2001). 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. Commerce
insists that Bethlehem Steel is distinguishable from the instant
case given the Korean steel industry’s electricity use. See IDM at
37. The Court recognized, however, 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[,]” and
therefore concluded that the fact that one group received more
benefits is not, on its own, indicative of disproportionality.
Court No. 13-00099 Page 10
Bethlehem Steel, 25 CIT at 322, 140 F. Supp. 2d at 1369.
Similarly, in AK Steel, the respondent received 75% of
the total benefit the GOK provided under an asset revaluation
program, but Commerce found that this large benefit was
proportionate because the respondent revalued its assets 0.2% lower
than the average participant. See AK Steel, 192 F.3d at 1385. The
Federal Circuit recognized that Commerce need not always consider
the relative share of the total benefit to determine
disproportionality because that method “could produce an untenable
result, i.e., that a benefit conferred on a large company might be
disproportionate merely because of the size of the company.” Id.Neither the Federal Circuit in AK Steel nor this Court in
Bethlehem Steel required Commerce to consider whether the benefit
awarded was proportionate relative to a beneficiary’s use of the
program. See AK Steel, 192 F.3d at 1384–85; Bethlehem Steel, 25
CIT at 322–23, 140 F. Supp. 2d at 1369–70. However, both courts
found that Commerce’s method must account for the facts of the
case, including aspects of the subsidy program itself. Commerce’s
explanation fails to meet this standard.
Commerce claimed that its method was reasonable in light
of the evidence on the record. IDM at 36. Specifically, Commerce
insists that it compared Samsung’s share of the total benefit with
the share an average beneficiary received because the GOK did not
provide data on individual beneficiaries. Id. at 36–37. However,
Court No. 13-00099 Page 11
Commerce’s questionnaire did not request information on individual
beneficiaries other than the mandatory respondents. See CR 40 at
114. Furthermore, as noted above, the GOK provided information
detailing the Art. 10(1)(3) tax credit program and Samsung provided
its tax return detailing its expenditures. Id.; Resp. of Samsung
to Commerce’s Sept. 10, 2012 Supplemental Questionnaire (Sep. 17,
2012), CR 156 at 1–3.
Commerce also noted that it previously found that a
benefit was disproportionate where the respondent’s share of the
total benefit was greater than the share an average beneficiary
received. See IDM at 36 n.139 (citing Final Affirmative CVD
Determinations: Pure Magnesium and Alloy Magnesium From Canada, 57
Fed. Reg. 30,946 (Jul. 13, 1992) (“Magnesium From Canada”);
Corrosion-Resistant Carbon Steel Flat Products From the Republic of
Korea: Preliminary Results and Partial Rescission of CVD
Administrative Review, 75 Fed. Reg. 55,745 (Sep. 14, 2010) (“CSFP
From Korea - Preliminary”); and Final Affirmative CVD
Determination: Certain Stainless Steel Wire Rod From Italy, 63 Fed.
Reg. 40,474 (Jul. 29, 1998) (“Wire Rod from Italy”)). However,
these determinations are not analogous to the instant case.
Neither Magnesium from Canada nor Wire Rod From Italy concerned a
subsidy based on a standard pricing mechanism, but rather involved
grants and interest-savings programs awarded at the discretion of
the administering authority. See Magnesium from Canada, 57 Fed.
Court No. 13-00099 Page 12
Reg. at 30,949–50; Wire Rod From Italy, 63 Fed. Reg. at 40,485–86.
Furthermore, Commerce’s reliance on CSFP From Korea - Preliminary
is misplaced because Commerce found that the subsidy in question
was specific as a matter of law in the final results of that
review.5 See Corrosion-Resistant Carbon Steel Flat Products From
the Republic of Korea: Decision Memorandum: Final Results of CVD
Administrative Review at 2–3 (Jan. 12, 2011).
Finally, Commerce insists that its method was consistent
with the purpose of CVD law. IDM at 37. According to Commerce,
“[t]he very purpose for the analysis of de facto specificity . . .
is to ensure that companies that qualify and receive more benefits
under a government subsidy program do not escape redress of the
[CVD] law simply because the law implementing the subsidy program
does not explicitly limit the benefits to a group of enterprises or
industries.” Id. (underscoring in original). To that end,
Commerce rejected Samsung’s assertion that it should measure the
benefit relative to the size of the beneficiary or to the amount of
qualifying investments. Id.
The court acknowledges Commerce’s concern and the purpose
of de facto specificity within the Act. However, this concern does
not obviate Commerce’s responsibility to determine whether a large
5
Commerce did not review specificity as a matter of law
during the preliminary results because it did not have a full
translation of the law in question. CSFP From Korea - Preliminary,
75 Fed. Reg. at 55,745.
Court No. 13-00099 Page 13
benefit is disproportionate based on the facts of the case. See AK
Steel, 192 F.3d at 1385. Although Commerce’s method indicated that
Samsung received a large benefit, more was required to determine
whether the benefit was disproportionate. See 19 U.S.C. §
1677(5A)(D)(iii)(III). Simply reciting a concern that applies
equally to all broadly-worded subsidy provisions is insufficient to
show that, on the facts of this case, the subsidy was
disproportionate. See AK Steel, 192 F.3d at 1384–85.
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.
Accordingly, the court must remand this case to Commerce with
directions to reconsider its determination. On 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.
B. RSTA Article 26
“Where a subsidy is limited to an enterprise or industry
located within a designated geographical region within the
jurisdiction of the authority providing the subsidy, the subsidy is
specific.” 19 U.S.C. § 1677(5A)(D)(iv). As noted above, under
Art. 26, the GOK provided tax credits for eligible investments in
“business assets” outside the “overcrowding control region of the
Court No. 13-00099 Page 14
Seoul Metropolitan Area.” Preliminary Determination, 77 Fed. Reg.
at 33,188. Commerce found that Samsung’s Art. 26 tax credits were
regionally specific because they were limited to a “designated
geographical region.” See IDM at 46.
Samsung’s primary argument is that Commerce’s
determination was erroneous because the area “outside the Seoul
Metropolitan Area” was too broad to constitute a designated
geographical region. Pl.’s Br. at 24–27. According to Samsung,
“[t]he tax credit benefits available under Article 26 encompassed
the entire country minus just [2%] of its land mass.” Id. at 24.
Therefore, Samsung insists that Art. 26 tax credits were “generally
available” and not of a type contemplated by the regional
specificity standard. Id. at 25–26. Instead, Samsung suggests
that regional specificity should be limited to “administrative
jurisdictions such as provinces or states.” Id. at 26.
This argument is unpersuasive. The Act requires that the
authority providing the subsidy limit the subsidy’s availability to
a “designated geographical area.” 19 U.S.C. § 1677(5A)(D)(iv).
Contrary to Samsung’s insistence, there are no limitations on the
size or administration of the designated area. Id. This Court
previously upheld Commerce’s finding that a subsidy providing
cheaper electricity rates to all areas in Thailand outside the
Bangkok metropolitan area was regionally specific. See Royal Thai
Government v. United States, 30 CIT 1072, 1079, 441 F. Supp. 2d
Court No. 13-00099 Page 15
1350, 1358 (2006). The Court held that Commerce’s finding was
reasonable because “[a]ccess to this relatively cheaper electricity
was expressly contingent upon only one factor: a company’s regional
location within Thailand.” Id., 441 F. Supp. 2d at 1358.
Similarly, the GOK limited the availability of Art. 26 tax credits
to companies making investments in a designated region: the area
outside the Seoul Metropolitan Area. See IDM at 46. Because
access to Art. 26 tax credits was conditioned upon investment in a
“designated geographical region,” Commerce’s regional specificity
determination was reasonable. See 19 U.S.C. § 1677(5A)(D)(iv);
Royal Thai, 30 CIT at 1079, 441 F. Supp. 2d at 1358.
Samsung also argues that Commerce’s determination
contradicts its prior finding in Initiation of CVD Investigation of
Live Cattle From Canada, 63 Fed. Reg. 71,889 (Dec. 30, 1998) (“LCC
Initiation”). Pl.’s Br. at 25–26. There, Commerce declined to
investigate the British Columbia Farm Product Industry Act because,
although the subsidy was available only in British Columbia, it was
not limited to an industry or entity within the province. See LCC
Initiation, 63 Fed. Reg. at 71,892. Samsung insists that the case
is instructive because the designation of British Columbia was not
sufficient to establish regional specificity. See Pl.’s Br. at 26.
Samsung’s reliance on this determination is misplaced.
There is no indication that the British Columbia Farm Product
Industry Act designated a geographical region. Although British
Court No. 13-00099 Page 16
Columbia is a region, all indications are that the authority
providing the subsidy in question was a provincial authority of
British Columbia, as was the case with the other Canadian subsidy
programs Commerce investigated. See Final Negative CVD
Determination; Live Cattle From Canada, 64 Fed. Reg. 57,040,
57,040–55 (Oct. 22, 1999) (recognizing that each of the subsidy
programs under review was administered by a provincial authority).
It is consistent with both the Act and the instant case that
Commerce found that a subsidy available throughout British Columbia
and administered by the province itself was not regionally
specific. See 19 U.S.C. § 1677(5A)(D)(iv). Accordingly, Samsung
fails to show that Commerce’s determination was unreasonable. Id.II. Tying to Non-Subject Merchandise
The next issue is whether Commerce properly disregarded
evidence indicating that Samsung used the tax credits in question
towards the production of merchandise other than LRWs. During the
review Samsung placed a document onto the record which detailed its
actual use of the tax credits under review. See Response of
Samsung to the Department’s Feb. 15, 2012 Questionnaire (Apr. 9,
2012), CR 85, Exh. 25 at 1 (“Exhibit 25”). Exhibit 25 indicated
that [[ ]]% of Samsung’s eligible investments under Art. 10(1)(3)
and [[ ]]% of its eligible investments under Art. 26 were tied to
products other than LRWs. Id. Commerce disregarded this evidence
because it did not demonstrate that the GOK was aware of or
Court No. 13-00099 Page 17
acknowledged Samsung’s intended use of the tax credits at the time
it provided them to Samsung. See IDM at 41–42.
Commerce “will attribute a domestic subsidy to all
products sold by a firm, including products that are exported.” 19
C.F.R. § 351.525(b)(3) (2014). However, “[i]f a subsidy is tied to
the production or sale of a particular product, [Commerce] will
attribute the subsidy only to that product.” 19 C.F.R. §
351.525(b)(5). Commerce explained that it will find that a subsidy
is tied to a certain product “when the intended use is known to the
subsidy giver and so acknowledged prior to or concurrent with the
bestowal of the subsidy.” See Countervailing Duties: Final Rule,
63 Fed. Reg. 65,348, 65,402 (Nov. 25, 1998) (“CVD Preamble”).
Commerce will not “trace the use of subsidies through a firm’s
books and records,” but rather will analyze whether a subsidy is
tied “based on information available at the time of bestowal.” Id.
at 65,403.
Samsung argues that Commerce’s decision to disregard
Exhibit 25 was unreasonable because its analysis was inapplicable
to tax credits. Pl.’s Br. at 19–23, 27. According to Samsung, its
tax credits operate retroactively — Samsung makes its eligible
investments during the tax year, claims a tax credit on its tax
return, and then the GOK awards the tax credit if it is properly
claimed. See id. at 19–20. Because Samsung made the eligible
investments well before the GOK awarded the tax credits, the GOK
Court No. 13-00099 Page 18
does not require a declaration of intended use. Id. at 20. In
fact, Samsung contends that Commerce’s insistence that Samsung
declare its intended use in its tax return contradicts Commerce’s
statement that it will not trace how a respondent uses a subsidy.
Id. at 21. Despite Commerce’s policy, Samsung insists that the
Federal Circuit upheld Commerce’s use of post-bestowal evidence in
Kajaria Iron Castings Pvt. Ltd. v. United States, 156 F.3d 1163,
1176 (Fed. Cir. 1998). See Pl.’s Br. at 22. Accordingly, Samsung
insists that Commerce should have considered its documentation of
actual use as evidence of tying. Id.Samsung’s argument is unpersuasive. First, Samsung
failed to identify any authority compelling Commerce to adjust its
tying methodology based on the nature of the subsidy in question.
Kajaria predated the CVD Preamble and therefore did not analyze
Commerce’s interpretation of 19 C.F.R. § 351.525(b). See Kajaria,
156 F.3d at 1176 (Fed. Cir. Sep. 8, 1998); CVD Preamble, 63 Fed.
Reg. 65,348 (Nov. 25, 1998). Moreover, Kajaria did not mandate
that Commerce rely on post-bestowal evidence, it merely upheld
Commerce’s decision to do so. Id. Furthermore, insofar as Samsung
contests Commerce’s interpretation of the regulation, this argument
is unavailing. As noted above, the Court grants broad deference to
Commerce’s interpretation of its own regulations. See Cathedral
Candle, 400 F.3d at 1363. Commerce’s concern with what the
government providing the subsidy knew at the time it provided the
Court No. 13-00099 Page 19
subsidy is entirely consistent with the regulation, regardless of
whether a subsidy operates prospectively or retroactively. See CVD
Preamble, 63 Fed. Reg. at 65,403; 19 C.F.R. § 351.525(b)(5).
Ultimately, the record indicates that the GOK was not
aware of and did not acknowledge Samsung’s intended use of the tax
credits. Samsung’s tax returns did not indicate that its eligible
investments benefitted the production of particular merchandise.
See CR 85, Exh. 22 at 3–5. And, as Samsung admits, Exhibit 25 did
not establish the GOK’s awareness of Samsung’s intended use of the
benefits at the time of bestowal. See CR 85, Exh. 25 at 1.
Finally, the GOK indicated that it intended the tax credits in
question to “boost the general national economic activities in all
sectors.” See CR 40 at 108. Because Samsung cannot demonstrate
that at the time of bestowal the GOK was aware of its intended use
of the tax credits, Commerce reasonably concluded that the tax
credit benefitted domestic production generally. See 19 C.F.R. §
351.525(b)(3); CVD Preamble, 63 Fed. Reg. at 65,402.
III. The Sales Value
The final issue before the court is whether Commerce
properly adjusted Samsung’s sales value when calculating the ad
valorem CVD rate. Commerce calculates an ad valorem CVD rate by
“by dividing the amount of the benefit allocated to the period of
investigation or review by the sales value during the same period
of the product or products to which [Commerce] attributes the
Court No. 13-00099 Page 20
subsidy.” 19 C.F.R. § 351.525(a).
Here, Commerce did not include certain sources of revenue
in Samsung’s sales value because they were not derived from the
sale of products to which Samsung’s tax credits were attributable.
See IDM at 52–53. Of particular relevance in the instant case are
revenue generated from the production of merchandise by Samsung’s
foreign subsidiaries and revenue from royalty payments.6 See Pl.’s
Br. at 29. According to Samsung, these sources of revenue were
derived from products that benefitted from the tax credits Samsung
received. Id. at 28–42. Samsung continues that Commerce’s
decision to remove them was wrongful because the benefit and the
revenue figures Commerce used to calculate the ad valorem rate did
not reflect the same universe of products. Id. at 29–31.
Furthermore, Samsung insists that Commerce did not provide Samsung
with an opportunity to submit evidence demonstrating this fact.
A. Foreign Production
Commerce declined to include revenue from sales of
merchandise produced by Samsung’s foreign subsidiaries because
Samsung failed to demonstrate that, at the time of bestowal, the
GOK expressly intended the tax credits in question to benefit
6
Samsung also claims that Commerce wrongfully excluded
revenue from sales of scrap. See Pl.’s Br. at 35–36 n.26.
However, this argument is waived because Samsung raises it in a
footnote without citing any legal or record support. See
SmithKline Beecham, 439 F.3d at 1320.
Court No. 13-00099 Page 21
foreign production. See IDM at 52. Samsung insists that Commerce
ignored two prior antidumping duty proceedings involving bottom
mount combination refrigerator-freezers (“BMCRFs”) in which it
found that Samsung’s R&D expenditures benefitted foreign
production. See Pl.’s Br. at 31–35 (citing Notice of Final
Determination of Sales at Less Than Fair Value and Negative
Critical Circumstances Determination: BMCRFs From the Republic of
Korea, 77 Fed. Reg. 17,413 (Mar. 26, 2012) (“BMCRFs Korea”) and
Notice of Final Determination of Sales at Less Than Fair Value and
Affirmative Critical Circumstances Determination: BMCRFs From
Mexico, 77 Fed. Reg. 17,422 (Mar. 26, 2012) (“BMCRFs Mexico”)).
Samsung insists that this evidence demonstrated that its tax
credits were tied to foreign production and was consistent with the
GOK’s intent to benefit foreign production. Id. at 35–38.
Samsung’s argument is unpersuasive.
Where a respondent is a multinational company, Commerce
“will attribute the subsidy to products produced by the firm within
the country of the government that granted the subsidy.” 19 C.F.R.
§ 351.525(b)(7). However, Commerce allows a respondent to rebut
this presumption and will attribute a subsidy to multinational
production “if it is demonstrated that the subsidy was tied to more
than domestic production.” Id.The regulations are silent as to how such a showing can
be made, but Commerce has stated that “[r]espondents must show
Court No. 13-00099 Page 22
that, in the authorization and/or approval documents, the
government explicitly stated that the subsidy was being provided
for more than domestic production.” CVD Preamble, 63 Fed. Reg. at
65,404. “The documentation must show that, at the point of
bestowal, one of the express purposes of the subsidy was to provide
assistance to the firm’s foreign subsidiaries.” Id. And,
“[a]bsent such a demonstration, all subsidies, whether tied or
untied, will be attributed to . . . domestically-produced sales.”
Id. The Federal Circuit has approved this methodology. See Inland
Steel Indus., Inc. v. United States, 188 F.3d 1349, 1360 (Fed. Cir.
1999) (“Commerce acted correctly in performing its tying
determination by assessing the likely effects of the subsidies at
issue at the time of their bestowal.”).
Here, Samsung failed to provide evidence demonstrating
that its tax credits were tied to foreign production. Samsung
itself noted that there were no approval or authorization documents
expressing the GOK’s intent to benefit foreign production. See
Pl.’s Br. at 36. Furthermore, BMCRFs Mexico and BMCRFs Korea do
not demonstrate that the GOK intended the subsidies to benefit
foreign production at the time of bestowal and, therefore, they are
insufficient evidence that the tax credits were tied to foreign
production under the regulation. See CVD Preamble, 63 Fed. Reg. at
65,404. Finally, the statements of the GOK did not indicate that
the “express purpose” of the subsidy was to benefit foreign
Court No. 13-00099 Page 23
production. See CR 40 at 108 (stating that the tax credits were
intended to “boost the general national economic activities in all
sectors”). Because Samsung did not provide evidence indicating
that, at the time it bestowed the tax credits, the GOK intended to
benefit foreign production, Commerce reasonably concluded that the
tax credits were not tied to foreign production. See Inland Steel,
188 F.3d at 1360.
B. Royalty Payments
Commerce did not include revenue Samsung generated from
its receipt of royalty payments from its subsidiaries in the sales
value because such revenue is non-production related income. See
IDM at 52–53. Samsung insists that royalty payments are
reimbursements for R&D expenditures that benefitted production of
merchandise and therefore constitute an “integral” component of
Samsung’s sales revenue. Pl.’s Br. at 37. According to Samsung,
Commerce recognized this fact in BMCRFs Mexico and BMCRFs Korea,
and included such payments in Final Affirmative CVD Determination:
Dynamic Random Access Memory Semiconductors from the Republic of
Korea, 68 Fed. Reg. 37,122 (Jun. 23, 2003) (“DRAMS Korea”). See
Pl.’s Br. at 31–35, 40–41. Samsung analogizes the royalty payments
at issue with processing fees, noting that Commerce included such
fees in the sales value in previous CVD proceedings involving tax
credits. Id. at 41.
Commerce “will attribute a domestic subsidy to all
Court No. 13-00099 Page 24
products sold by a firm, including products that are exported.” 19
C.F.R. § 351.525(b)(3). Accordingly, as noted above, Commerce
includes in ad valorem rate calculation the “sales value . . . of
the product or products to which [Commerce] attributes the
subsidy.” 19 C.F.R. § 351.525(a). Royalty payments are not
revenue generated by the sale of products. Id. Commerce’s
inclusion of royalty payments in DRAMS Korea is distinguishable
because the subsidy at issue in that case was not tied to the
production of merchandise. Issues and Decision Memorandum for the
Final Determination in the CVD Investigation of DRAMS from the
Republic of Korea at 114 (Jun. 16, 2003). However, as Commerce
noted and as Samsung acknowledges in its brief, the tax credits
here were tied to the production of merchandise. IDM at 53.
Furthermore, Samsung’s attempt to analogize its royalty
payments to processing fees is unavailing. In the cases in which
Commerce included processing fees in the sales value, those fees
generated the tax benefits in question. See, e.g., Final
Affirmative CVD Determination: Certain Carbon Steel Butt-Weld Pipe
Fittings From India, 60 Fed. Reg. 10,564, 10,568 (Feb. 27, 1995)
(finding that the fees for respondent’s refurbishing program
generated tax credits). There is no evidence that the royalty
payments Samsung received generated the tax credits at issue. IDM
at 53. Because Samsung’s royalty payments were not derived from
the sale of products to which the subsidy was attributable, it was
Court No. 13-00099 Page 25
reasonable for Commerce to exclude them from the ad valorem rate
calculation. 19 C.F.R. § 351.525(a).
C. Procedural Claims
Samsung also argues that it was not afforded an adequate
opportunity to rebut the presumption that its tax credits
benefitted solely domestic production. Pl.’s Br. at 39. According
to Samsung, Commerce altered its methodology for calculating the
sales value midway through the investigation without notifying
Samsung that it intended to do so. Id. Samsung compares the
instant case with Usinor Sacilor v. United States, 19 CIT 711, 893
F. Supp. 1112 (1995), in which this Court remanded Commerce’s
determination where it decided to alter its methodology for
calculating the sales value following the preliminary results.
Pl.’s Br. at 39–40.
Samsung’s argument is unpersuasive. Here, Commerce did
indicate to Samsung that it intended to exclude certain sources of
revenue. See CR 156 at 1. Samsung recognized that Commerce
planned to make these exclusions and protested in its questionnaire
response, insisting that Commerce include the sources of revenue at
issue in the sales value. Id. at 1–3.
Furthermore, Samsung’s reliance on Usinor is misplaced.
In Usinor, Commerce applied its newly-developed presumption that
domestic subsidies benefit domestic production midway through the
proceeding. See Usinor Sacilor, 19 CIT at 741–42, 893 F. Supp. at
Court No. 13-00099 Page 26
1138. However, section 351.525(b)(7) was long established at the
time of the underlying investigation. Samsung had the opportunity
to provide evidence that its tax credits were tied to foreign
production, but failed to do so. See CR 156 at 1-3.
CONCLUSION
Commerce erroneously determined that Samsung’s RSTA Art.
10(1)(3) tax credits constituted a disproportionately large
benefit. Commerce properly determined that Samsung’s RSTA Art. 26
tax credits were regionally specific and that Samsung failed to
demonstrate that its tax credits were tied to products other than
large residential washers. Additionally, Commerce properly
adjusted Samsung’s sales value when determining the ad valorem CVD
rate. Accordingly, Samsung’s motion for judgment on the agency
record is granted with regards to Commerce’s disproportionality
finding, but denied in all other respects.
Court No. 13-00099 Page 27
ORDER
In accordance with the above, it is hereby
ORDERED that the Final Determination is to be remanded to
the United States Department of Commerce, to reconsider its finding
that Samsung Electronics Co., Ltd., received a disproportionately
large benefit through its receipt of RSTA Art. 10(1)(3) tax
credits; and it is further
ORDERED that the Final Determination is sustained in all
other respects; and it is further
ORDERED that remand results are due within ninety (90)
days of the date this opinion is entered. Any responses or
comments are due within thirty (30) days thereafter. Any rebuttal
comments are due within fifteen (15) days after the date responses
or comments are due.
/s/ Nicholas Tsoucalas
Nicholas Tsoucalas
Senior Judge
Dated:
New York, New York